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NO.  94-82306 


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Author: 


U.S.  Federal  Electric 
Railways  Commission 

Title: 

Proceedings  of  the 
Federal  Electric... 3V. 

Place: 

Washington,  D.C. 

Date: 

1920 


COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION  DIVISION 

BIBLIOGRAPHIC  MICROFORM  TARGET 


MASTER   NEGATIVE   # 


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U.  S.    Federal  electric  railways  commission. 

Rio^'"*' wtw"?^  w  *  u^  ^f  ^^•■?!  ^'^^t""  railways  commis- 
sion. Held  in  Washington,  D.  C,  during  the  months  of 
July  August,  September,  and  October,  1919,  togXr^th 
Final  report  of  the  commission  to  the  President  W^h- 
mgton,  Govt,  print,  off.,  1920 . 
8  V.  tables.  24"*. 
Charles  E.  Elmquist,  chairman. 

CH^rlfs^  Ei^Jn.  '^T^'-^,  litlf  Street-railroads-U.  S.        i.  Elmquist. 

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MAIN  ENTRY:    U.S.  Federal  Electric  Railways  Commission 

Proceedings  of  the  Federal  Electric  Railways...3V, 


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1 


for  Report  of  the  Commission,  see  pages  ^60-^289  of  Volume  3. 
For  General  Index  and  Digest,  see  pages  2291-23i9  of  Volume  S. 


PROCEEDINGS  OF 

T/ie  FEDERAL  ELECTRIC 
RAILWAYS  COMMISSION 


Held    in  WASHINGTON,  D.  C,  during  the    months 
of   July,    August,    September,    and    October,    1919 


together  with 


Final  Report  of  the 

Commission  to  the 

President 


IN  THREE  VOLUMES 

VOL.  1 


f^:^ 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1920 


INTENTIONAL  SECOND  EXPOSURE 


v_ 


P«r  Report  of  the  Commk»ion,  see  pages  m60-^89  of  Volume  S. 
For  Oenerd  Index  and  Digest,  see  pages  SS91-iSJ^  of  Volume  S. 


PROCEEDINGS  OF 

The  FEDERAL  ELECTRIC 
RAILWAYS  COMMISSION 


Held    in  WASHINGTON,  D.  C,  during  the    months 
of  July,    August,   September,   and   October,    1919 


together  with 


Final  Report  of  the 

Commission  to  the 

President 


IN  THREE  VOLUMES 

VOL.  1 


1 


%7i 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1920 


i 


t^  vJi^jwc^CA^ 


5  I/; 


J) 


540 

V    1 


INTRODUCTORY  STATEMENT. 

The  Federal  Electric  Eailways  Commission  was  appointe|^  by  the 

-  President  of  the  United  States  in  response  to  a  suggestion  outlining 

to  him  the  need  of  such  a  commission  in  the  following  letter  from  two 

members  of  his  Cabinet,  tlie  Secretaries  of  Commerce  and  of  Labor : 

Washington,  D.  C,  May  15,  1919. 

Dear  Mb.  President  :  The  electric-railway  problem  to  which  your  attention 
has  been  called  on  several  occasions  has  recently  assumetl  snch  serious  na- 
tional proportions  as  to  warrant  the  pi-ompt  attention  of  the  Federal  Govern- 
ment. Already  50  or  more  urban  systems,  representing  a  considerable  per- 
centage of  the  total  electric-railway  mileage  of  the  country,  are  in  the  hands 
of  receivers.  The  conimunties  affected  are  among  the  most  important — New 
York,  Providence,  Buffalo,  New  Orleans,  Denver,  St.  Louis,  Birmingham,  Mont- 
gomery, Pittsburgh,  Memphis,  Ft.  Wayne,  Des  Moines,  St.  Paul,  Spokane, 
Chattanooga. 

Other  large  systems  are  on  the  verge  of  insolvency,  for  the  industry  as  a 
whole  is  virtually  bankrupt..  The  continued  shrinkage  in  the  value  of 
2iundreds  of  millions  of  electric-railway  securities  held  by  savings  banks, 
national  banks,  life-insurance  companies  and  by  the  public  at  large  threatens 
to  emharrass  the  nation's  financial  operations.  Furthermore,  the  withdrawal 
of  this  industry's  buying  power,  which  is  said  to  rank  third  in  magniture, 
involves  the  unsettlement  of  collateral  industries,  naturally  entailing  labor 
dislocation  that  will  affect  hundreds  of  thousands  of  employees. 

The  return  to  normal  conditions  is  being  hampered  and  the  efforts  of  the 
Government  to  avert  strained  conditions  in  finance,  labor  and  commerce  are 
Iwing  less  fruitful  of  satisfactory  results  than  should  be  expected,  if  some 
solution  of  the  electric-railway  problem  were  in  view. 

What  the  solution  is,  may,  we  believe,  be  evolved  by  a  thorough  investiga- 
tion of  general  franchise  and  operating  conditions  in  their  relation  to  rates. 
Including  service-at-cost  plans.  State  and  municipal  taxation,  local  paving 
requirements,  and  internal  economies  that  may  be  effected. 

We  therefore  propose  and  recommend  the  appointment  by  you  of  a  Federal 
board  or  commission,  whose  duty  it  shall  be  to  study  and  report  uix)n  the  entire 
problem,  in  order  that  the  State  and  municipal  authorities  and  others  con- 
cerned may  have  the  benefit  of  full  information  and  of  any  conclusions  or 
recommendations  that  may  be  formulated.  Such  a  study  will,  in  our  opinion, 
exert  a  helpful  and  constructive  force  in  this  critical  period  of  the  industry's 
existence,  and  will  aid  in  the  readjustment.  If  you  would  make  such  an  ap- 
pointment before  June  30,  your  contingency  fund  could  be  used  to  defrav  the 
expenses,  which  would  be  about  $10,000. 

The  National  Association  of  State  Commissioners  has  always  invited  Federal 
aid  in  this  matter  and  the  recent  Conference  of  Governors  and  Mayors  adopted 
a  resolution  i-econmiending  Federal  consideration  of  the  problem  of  preventing 
the  financial  disaster  threatening  this  industry. 

We  propose  that  such  a  commission  shall  be  made  up  of  one  representative 
of  each  of  the  following  groups : 

Treasury  Department  or  War  Finance  Corporation,  Department  of  Com- 
merce, Department  of  Labor,  National  Association  of  State  Commissioners, 
American  Cities  League  of  Mayors,  Amalgamated  Association  of  Street  &  Elec- 
tric Railway  Employees,  American  Electric  Railway  Association,  Investment 
Bankers  Association  of  America. 

We  respectfully  urge  your  authorization  for  such  a  commission,  to  be  fol- 
lowed by  your  formal  proclamation  upon  the  selection  of  personnel. 
Cordially  yours, 

(Signed)  William  C.  Redfield, 

Secretary  of  Commerce 
(Signed)  W.  B.  Wilson, 

Secretary  of  Labor, 

m 


I  I 


ay  As- 


IV  PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

On  May  20,  1919,  the  President  cabled  his  approval  of  the  fore- 
g:oin^  plan  for  the  creation  of  a  Federal  commission  to  investigate 
and  report  on  the  condition  of  the  electric-railway  industry  of  the 
Ignited  States;  and  on  June  1,  1919,  the  commission  was  accordingly 
created  by  the  President  and  the  followin^g  members  appointed  to 
serve  thj^reon  without  compensation: 

Charles  E.  Elmquist,  representing  National  Association  of  State 
rublic  Utility  Commissioners. 

pAh\  in  F.  Sweet,  representing  Department  of  Commerce. 

Philip  H.  Gadsden,  representing- American  Electric  Railway 
sociation. 

Royal  Meeker,  representing  Department  of  Labor. 
Eugene  Meyer,  jr.  (alternate,  Louis  B.  Wehle),  representing  War 
iMnance  Corporation. 

Charles  W.  Beall,  representing  Investment  Bankers  Association 
of  America. 

William  D.  Mahon,  representing  Amalgamated  Association  of 
Street  &  Electric  Railway  Employees. 

Cieorge  L.  Baker,  representing  American  Cities  League  of  Mayors. 

Ihe  new  commission  met  on  June  4  and  organized  by  electing  Mr. 
Elmquist  as  chairman  and  Mr.  Sweet  as  vice  chairman.  The  an- 
nouncement was  at  once  made  that  the  commission  would  attempt 
to  determine  the  general  principles  Avhich  should  govern  the  regu- 
lation, operation,  and  service  of  electric  railwavs,  but  that  the  com- 
mission was  without  authority  to  hear  and  determine  specific  local 
controversies,  and  that  it  would  not  interfere  in  any  way  with  the 
functions  of  State  commissions  or  of  municipal  authorities.  The 
purpose  of  the  commission  is  rather  to  investigate  and  study  the  con- 
dition of  the  electric-railway  industry,  including  franchises,  rates, 
taxation  and  assessments,  economies  of  operation,  public  rela- 
tions, etc. 

The  commission  on  June  28  appointed  Charlton  Ogburn  as  its 
executive  secretary  under  a  contract  which  obligated  liim  "  to  conduct 
a  thorough  investigation  into  the  condition  of  the  electric-railway 
industiy  of  the  Ignited  States,  both  urban  and  interurban,"  employ- 
ing the  necessary  experts  to  aid  him. 

The  commission  gathered  its  evidence  in  three  ways:  First,  by 
means  of  public  hearings  at  which  large  numbers  of  witnesses  testi- 
fied; second,  by  a  series  of  questionnaires  sent  to  everv  city  in  which 
there  is  an  electric  or  interurban  railway,  addressed' to  the  electric 
railways,  the  mayors,  the  chambers  of  commerce,  and  the  central 
labor  unions,  and  also  to  all  of  the  State  public-utility  commissions; 
and  third,  by  a  personal  investigation  on  the  part  ot  the  executive 
secretary. 

The  first  public  hearing  was  held  in  New  York  on  June  19.  and  the 
first  witness  was  ex-President  William  Howard  Taft.  The  next  hear- 
ing was  held  in  Washington  on  July  15,  lasting  two  weeks,  during 
which  time  the  witnesses  on  behalf  of  the  railways  presented  the  evi*^ 
dence  under  the  direction  of  the  Committee  of  One  Hundred  of  the 
American  Electric  Railway  Association  and  its  counsel,  Mr.  Bentley 
W.  Warren.  The  next  hearing  was  held  in  Washington  beginning 
August  11  and  lasting  one  week,  at  which  time  testimony  was  offered 
on  behalf  of  the  public,  chiefly  by  representatives  of  the  municipali- 
ties and  of  State  public-utility  commissions.    The  last  hearing  began 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.  V 

in  Washington  on  September  29  and  lasted  one  week,  at  which  time 
testimony  was  offered  by  still  further  w  itnesses  representing  the  pub- 
lic and  by  witnesses  on  behalf  of  labor,  represented  by  the  Amalga- 
mated Association  of  Street  &  Electric  Railway  Employees  of  Amer- 
ica. All  of  these  hearings  ran  through  day  and  night  sessions,  be- 
ginning at  10  a.  m.  and  usually  running  until  10  or  11  p.  m. 

Three  sei:)arate  questionnaires  were  sent  out,  copies  of  which  are  in- 
cluded in  these  volumes.  The  first  was  a  general  questionnaire  deal- 
ing with  all  phases  of  the  situation.  The  last  two  were  special  ques- 
tionnaires seeking  traffic  figures,  month  by  month,  for  the  past  three 
years;  that  is,  number  of  revenue  passengers,  amount  of  passenger 
revenue,  fare  charged,  and  a  statement  of  any  occurrences  affecting 
traffic,  such  as  strikes,  influenza  epidemics,  etc. 

At  the  conclusion  of  the  final  public  hearing  the  commission  en- 
gaged the  services  of  Dr.  Delos  F.  Wilcox  to  aid  in  analyzing  the 
testimony  gathered  and  engaged  Dr.  Milo  R.  Maltbie  and  Dr.  Wilcox 
to  advise  Avith  the  commission  relative  to  its  report.  Dr.  AVilcox 
made  a  very  comprehensive  analysis  of  the  evidence.  The  final  meet- 
ing of  the  commission  was  held  in  June,  1920,  at  which  time  its 
report  was  made  to  the  President. 

All  of  this  work  was  done  on  an  appropriation  of  $10,000  allotted 
by  the  President  for  this  purpose. 

Charlton  Ogburn, 
Executive  Secretary. 


INDEX  TO  TESTIMONY. 


G. 
J. 
B. 
G. 


C. 
H. 
W. 
E. 


Willinm  H.  Taft i 

J.  H.  Pardee 28 

Cuniniin 31 

Pardee 62 

Warren 66,200 

Tripp 67 

James  W.  Welsh 70 

W.  J.  Clark 185 

G.  E.  Tripp 146 

Harold  L.  Stuart 184 

Henry  G.  Kradlee 2OI 

William  J.  Clark 228 

Mortimer  E.  Cooley 247 

^\'.   D.  George 289 

Francis  H.  Sisson 314 

A,  H.  Ford 354 

C.  L.  S.  Tiugley 364 

John  G.  Barry 3.S0 

M.  B.  Lambert 393 

William  H.  Heulings,  jr 395 

Henry  L.  Doherty 403 

Lucius  S.   Storrs 422 

Luther  R.  Nash ^qq 

W.  C.  Culkins 474 

Walter  A.  Draper :_  49s 

Louis  Pellissier 514 

Job  E.  Hedges 519 

Samuel  Reading  Bertron 537 

J.  K.  Newman 553 

Homer  L.  Ferguson 5so 

John  J.  Stanley 590 

Charles  A.   Fagan q\q 

W.  B.  Head 627 

Charles  J.  Bullock 637 

L.  R.  Nash 662 

Charles   L.    Henry qc^q 

Charles  W.  Kellogg 730 

Frank  J.  Sprague 750 

James  D.  Mortimer 764 

Eugene  N.  Foss 791 

James  D.  Mortimer 808 

James  L.  Quackenbush 817 

James  O.  Carr 843 

Richard    Schaddelee 857 

Henry  J.  Pierce 873 

Frederick  B.  de  Berard Z  875 

Joh?i  H.  Pardee _  88*^ 

W.  E.  Creed §83 

Harlow  C.  Clark 896 

Jeremiah  W.  Jenks 918 

Thomas  Conway,  jr 941 

Halford  Erickson 967 

Kewton  D.  Baker I  995 


Page. 

C.  W.  Kutz -_ 1037 

Roger  W.  Babson 1053 

John  P.   Fox 1073 

Carl   H.  Mote 1086 

Richard  T.  Higgins 1107 

Carl   H.   Mote 1118 

F.  F.  Ingram 1120 

James  Couzens 1134 

AVilliam  C.  Bliss 1166 

Zenas  W.  Bliss 1195 

Charles  P.  Gillen 1198 

Delos  F.  Wilcox 1202 

Lewis  Nixon 1277 

William  P.  Burr 1303 

Irving  Fisher 1319 

Grenville  S.  IMacFarland 1342 

Thomas  L.  Hall 1350 

Alexander  T.  Connell 1377 

William  D.  B.  Ainey 13^'4 

Dugald  C.  Jacksrm 1413 

Frederick  J.  MacLeod 1435 

Fielder  Sanders 1457 

John  J.  Walsh 1405 

Marion  M.  Jackson 1481 

C.  J.  Joyce 1513 

Thomas  L.  Sidlo 1585 

Walter  Jackson 15S9 

R.  S.  Bauer 1022 

Homer  Loring 1640 

John  A.  Beeler I66I 

Morris  L.  Cooke 16S7 

C.  L.  Delbridge 1703 

W.  Jett  Lauck 1731 

Carey  Ferguson 1733 

William  M.  Rea 1743 

Arthus  Sturgis 1767 

AVilliam  F.  Oghurn I  1795 

Leifur  Magnusson 1S32 

Stiles  P.  Jones 1842 

W.  Jett  Lauck 1877 

E.V.  Babcock I  1893 

Charles  K.  Robinson I  1913 

W.  Jett  Lauck 1927 

James  D.  Mortimer I 1970 

C.  J.  Joyce 2002 

Stiles  P.  Jones 2012 

Marion  M.  Jackson "  2014 

Joseph  B.  Eastman I"  2055 

Mile  R.  Maltbie— I  2O88 

Edward  W\  Bemis 2105 

Lawson  Purdy 2124 

C.  Oscar  Beasiey 212  2129 


VII 


f  I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


New  York  City,  June  19,  1019, 
The  commission  met,  pursuant  to  notice,  at  10  o'clock  a.  m 
Present:  Charles  E.  Elmquist  (chairman),  Edwin  F.  Sweet  (vice 
chairman).  Royal  Meeker,  C.  W.  Beall,  L.  B.  Wehle,  and  Philip  H. 
(jradsden,  commissioners. 

Appearances:  Lewis  Xixon,  commissioner,  Public-Service  Commis- 
sion, hrst  district.  State  of  New  York;  John  H.  Pardee,  represent- 
ing the  American  Electric  Railway  Association. 

PROCEEDINGS. 

The  Chairman.  This  hearing  is  called  by  the  Federal  Electric 
Kailways  Commission  for  the  purpose  of  hearing  evidence  bearino' 
upon  the  general  public-utility  problem.  A  number  of  witnessed 
Have  been  notified  to  be  present  and  the  commission  at  this  time  de- 
sires to  know  who  are  here  and  who  wish  to  be  heard. 
.1  ^^/- J'a^;  Mr.  Chairman,  I  am  here;  though  I  do  not  come  under 
the  latter  class,  I  am  here  very  willing  to  be  subjected  to  examina- 
tion on  what  I  know,  without  professing  to  know  much.  I  report, 
therefore,  here.  ^       ^ 

The  Chairman.  We  will  hear  from  you,  Mr.  Taft,  as  soon  as  the 
other  appearances  have  been  entered. 

Are  there  any  other  appearances  ? 

Mr.  Pardef  I  am  present,  Mr.  Chairman,  representing  the  Ameri- 
can  Electric  Railway  Association,  and  at  your  convenience  I  desire 
to  make  a  statement. 

The  Chairman.  Are  there  any  other  appearances  to  be  noted « 
[JNo  response.]  - 

Now,  Mr.  Taft,  we  shall  be  glad  to  hear  from  vou 

STATEMENT  OF  HON.  WHUAM  H.  TABT. 

^u  T"^""-  ,^^-  <^ha»™'in.  I  am  at  yoin-  disposition. 

I  had  a  call  from  Mr.  Wehle  saying  that  your  coirimission  ^ould 
like  to  have  an  expression  of  opinion  from  me  as  to  the  present  situ- 
"hem  "  transportation  public  utilities,  so  far  as  I  had  observed 

My  chief  opportunity  for  observing  the  condition  in  which  those 
utilities  now  are  has  arisen  from  the  work  of  the  National  War 
Labor  Board,  of  which  I  have  been  one  of  the  joint  chairmen.  That 
board  was  created  for  the  purpose  of  maintaining,  so  far  as  possible, 
maximum  production  in  war  supplies,  and  our  jurisdiction  extended 
by  the  proclamation  of  the  President,  to  mediation  in  controversies 
arising  in  all  fields  of  activity  which  would  affect  that  maximum 


2  PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

wUh^'f k";  J}a^  u  *'"®^*  railways  and  the  suburban  railways  came 
^>  ithin  that  field,  by  i-eason  of  the  dependence  of  many  of  the  large 
mnnition  plants  and  other  plants  for  making  war  supplies  upJn 
these  transportation  facilities  for  their  labor.  AVhere  the  stilet^ar 
systems  stop,  where  the  suburban  systems  stop,  the  workingmen 
h'hZI'}^^^  women  were  not  able  to  reach  their  places  of  work,  and 

,^n,1  in  fl  P''°;*'I^^'°n-    I»u*''''\  ^'"T  "  g'"'"'*  ""^ny  <=»«««  came  before 
us,  and  m  the  division  of  labor  by  the  board  the  cases  with  respect 

^Zu"  ;]*'""  '"'"•"  i-^f^'-^V"  ^••-  ^^"J^h,  my  colleague,  and 
mys^  t,  and  m  many  instances,  the  parties  submitted  the  cales  to  us 
as  sole  arbitratoi-s,  which  of  course,  fixed  our  attention,  in  the  dis- 
tribution of  work  in  the  board,  on  these  public  utilities. 

Une  of  the  great^arguments  which  was  made  to  avoid  the  increase 
m  wages  was  the  financial  condition  of  the  companies  which  made 
It  iinpossible  to  grant  any  increase  asked  by  the  men:  and  the  com- 
panies requested  that  we  take  that  matter  into  consideradon 

^■,I.T'%  "  r°  if"-  '^?^'^^  *^**  '^®  financial  condition  of  the  compa- 
nies  had  actua  ly  m  the  past-at  least,  that  was  my  inference  al?er 

o?7bel*i'  ''tTr^'t'l  "'*"""-^  I"  '^'  P'^«'  kept'^clQwn  th^,v'Ss 
of  the  men  quite  below  the  wages  that  were  paid  in  fields  of  later 
of  a  kindred  nature,  because  these  companies  were  in  a  condition 
where  their  backs  were  against  the  wall,  and  they  n.aintained  a  po 
s.tion  against  increase  of  wages  that  was  natural,  where  they  saw 
bankruptcy  m  front  of  them;  and  they  said,  "No;  we  will  not  do 
of  flJ  f  ^""sequence  was  that  we  thought,  from  our  consideration 
of  the  cases,  that  the  wages  m  the  public  utilities  were  generally 
quite  below  what  they  ought  to  have  been 

«n?"f^o^""'*'"I'""'^'  *''*"*  ?J''*,*^'*  '""■'^  referred  to  us  as  arbitrators, 
and  the  issue  then  arose:  Had  we  any  right,  in  considering  what 
wages  would  be  fair,  to  take  into  consideration  the  financial" coml1- 
^on  of  the  company  that  was  present  before  us  as  a  party?     And 
i!"^  no  hesitation  m  reaching  the  conclusion  that  laboV  waV  as 
much  entitled  to  an  independent  consideration  of  what  its  w'Les 
diould  be  as  a  coal  man  was  who  furnished  coal  or  a  materia    S 
who  furnished  iron;  that  that  question  must  be  determined  by  Xit 
was  being  paid  in  similar  fiel<ls  of  labor.     Therefore,  we  Refused 
flatly  from  the  first  to  consider  the  financial  condition  of  any  com 
pany  in  determining  the  rate  of  wages.    Of  course,  had  we  done  so 
we  would  have  been  put  m  the  further  absurd  position,  which  seemed 
i^nfZf-  '**?  ""*  correctness  of  our  original  conclusion,  thanhe 
man  working  for  a  company  that  had  been  badly  managed  and  w-  s 
carrying  on  the  business  under  conditions  that  rendered  it  unprofit,d>t^ 
for  other  reasons  should  be  paid  less,  for  the  same  work,  thai,  so    e 
company  that  had  a  profitable  arrangement  paid-less  than   he  Zn 
Tr^fifTr''  '^'*'*  ""  company  that  was  better  managed  and  had 

Ct^tVe^xSsio^:^  ^'''*'  ^"  ^" ''''''  ^*  --'» '« -  "-* 
waps  i:^ti:r^.^^::^i^:i^,  ^pii-^  ;stf . 

railway  employers  had  had  in  the  past-because  we  were  actin<r  at 
judges  and  as  arbitrators-that  we  might  bring  about  Tnasi3  as 
wages  formed  a  great  factor  in  the  cost  of  operation-that  ''4  mtht  , 
bring  about  financial  trouble.    Therefore  M^Wnhh  and  I  firsTrt 
ommended  to  the  President  that  he  apply  to  Congress  for  power  I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 


O 


to  appoint  a  commission  that  should  regulate  the  affairs,  taking  inta 
consideration  the  increase  in  the  wages,  and  submitted  a  statement 
to  the  President,  which,  however,  for  considerations  tliat  appealed 
to  him,  he  thought  it  unwise  to  grant. 

There  was  then  presested  a  request  hy  a  committee  of  the  rail- 
way employers — I  do  not  remember  the  name,  but  Mr.  Gadsden,  who 
is  one  of  you  members,  was,  I  think,  the  president  of  the  associa- 
tion— in  which  the  association  asked  that  an  advisory  commission 
be  appointed  that  should  go  about  and  relieve  the  public-utilities 
coivimissions  from  the  political  burden  of  granting  an  increase  in 
the  rates  of  fare  by  recommendation  from  a  Federal  source — a 
practical  method  of  relieving  the  situation  which  appealed  to  Mr. 
Walsh  and  to  me,  with  our  previous  political  experience;  and  w© 
urged  that,  too,  and  I  went  to  Mr.  McAdoo,  and  I  also  went  to  the 
Interstate  Commerce  Commission,  which  it  was  then  understood  the 
i  President  was  consulting  in  respect  to  the  action  that  should  be 
taken. 

There  was  one  other  consideration  I  wanted  to  add:  In  every 
award  that  we  made  we  encouraged  a  statement  as  to  the  financial 
condition  of  the  company,  not  with  a  view  of  influencing  our  con- 
clusion as  to  what  the  wages  ought  to  be,  which  was  the  concrete 
issue  before  us,  but  in  order  that  we  might  fully  justifv,  if  the  case 
required  it,  any  recommendation  to  the  local  authorities,  and  giving 
the  weight  of  our  recommendation,  at  least,  to  an  increase  in  fares. 

I  am  bound  to  say  that  that  recommendation  with  State  author- 
ities not  infrecjuently  had  weight.  But  when  it  came  to  local  coun- 
cils, or  to  referendum,  it  might  just  a8  well  have  been  written  in 
water. 

Take  the  case,  for  instance,  in  Buffalo,  if  I  may  be  pardoned  an 
illustration.     The  submission  to  us  there,  by  both  parties,  which 
gave  us  the  right  to  arbitrate,  was  on  condition  that  if  we  recom- 
mended an  increase  of  wages  there  nuist  be,  before  our  award  took 
effect,  an  increase  in  the  rate  of  fare;  and  the  State  public-utilities 
commission  gi-anted  an  increase  from  5  cents  to  6  cents.     Then  some 
gentleman  in  Buffalo  concluded  that  that  was  a  matter  that  ought  to 
be  referred  to  the  people  of  Buffalo,  and  he  filed  a  petition  with  the 
council  to  have  a  referendmn;  and  the  question  was  one  of  law  as 
to  whether  a  referendum  was  required,  and  the  case  went  to  the 
court  of  appeals,  and  the  court  of  appeals  held  that  a  referendum 
:  on  such  a  petition  must  be  granted,  and  it  was  granted.     Without 
:  being  exact  a.s  to  the  vote,  my  recollection  is  that  the  vote  was  4  or 
'  5  to  1  against  the  increase  from  5  to  6  cents. 

Then  they  appealed  to  us  to  intervene.  We  had  no  authority. 
The  men  struck  and  the  people  of  Buffalo  walked  for  a  month. 

I  think  it  had  some  effect  on  the  people,  but  I  do  not  know  that 
a  referendum  would  reach  any  different  result.  That  is  an  illus- 
tration, however,  of  the  difficulties  of  tlie  situation. 

They  did  not  pay  any  attention,  in  the  referendum  vote,  to  our 
recom  mendat  ion. 

All  this,  of  course,  brought  us  into  more  or  less  familiarity  with 
the  conditions  of  the  companies  who  were  parties  before  us;  and 
T\'ithout  being  an  expert  in  any  financial  matter,  and  certainly  with- 
out being  an  expert  in  street-railway  matters,  I  can  only  give  you 
my  general  impression  as  to  what  the  situation  is.    I  am  subject, 


4  PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

of  course,  to  correction  by  gentlemen  much  more  familiar  with  the 
neld. 

As  I  understand  it,  the  street-railway  situation  to-dav,  including 
suburban  railways,  represents  a  field  of  business  activity  in  which 
there  has  been  imested  at  least  $5,000,000,000. 

It  is  charged  that  there  has  been  a  good  deal  of  watered  stock,  and 
doubtless  there  has  been— not  of  very  recent  years,  I  should  think, 
because  watered  stock,  to  be  useful,  has  to  be  disposable;  and  I  do 
not  think  anybody  can  dispose  of  street-railway  stock  except  in 
banks  that  are  run  by  gentlemen  that  have  an  optimism  that  would 
justify  their  being  removed  from  the  bank  trust.  That,  of  course, 
makes  it  most  important  that  the  situation  should  be  considered  in 
a  large  way. 

The  lines  have  been  built  on  the  theory  that  the  business  for  short 
distances  with  a  fixed  fare  be  so  large  as  to  make  up  for  the  added 
expense  of  the  long  distance ;  and  I  do  not  think  that  has  worked 
out. 

^  The  motives  for  extending  the  lines  have  been  various.  The  build- 
ing up  of  suburbs,  the  building  up  of  subdivisions  and,  doubtless,  the 
pressure  of  local  authorities  have  all  figured  as  causes  for  the  exten- 
sion  of  street-railway  investments  far  beyond  business  justification 

7^!^  ^7^  ^^^  *^^®  automobile  have  greatly  reduced  the  business, 

Jr  Chairman.  You  say  the  Ford  and  the  automobile,  Mr.  Taft? 
^  Mr.  Taft.  1  es.  I  think  that  the  Ford  has  established  a  class  bv 
itself.    I  have  one,  and  I  never  refer  to  it  as  an  automobile. 

The  Chairman.  It  must  be  a  very  reliable  conveyance. 

Mr.  Tait-.  It  is  very  useful.  I  have  had  it  for  five  or  six  years,  and 
I  cherish  it  fondly. 

The  vast  increase  in  the  use  of  that  method  of  reaching  the  center 
of  business  from  the  suburbs  has  certainly  largely  interfered  with 
the  revenue  from  passengers  upon  whose  patronage  the  projectors 
of  those  enterprises  count.  Then  there  has  been,  growing  out  of  cor- 
ruption, the  watering  of  stock,  and  the  dealing  with  councils  and  the 
feeling  of  hostility  on  the  part  of  the  people  against  the  companies— 
the  development  of  a  condition  so  that  whatever  advantages  the  com- 
panies may  have  secured  by  sinister  means  earlier  have  been  more 
than  offset  by  the  injustices  that  the  people  have  done,  or  that  their 
representatives  have  done  growing  out  of  that  past  history,  to  the^(^ 
enterprises. 

The  truth  is,  gentlemen,  and  I  am  sure  you  Avill  agree  with  us 
that  the  condition  of  these  investments  and  of  this  general  transpor- 
tation business  of  an  urban  and  suburban  character  is  most  discour- 
aging. If  you  can  find  a  solution  for  it  you  will  be  entitled  to  the 
gratitude  of  the  whole  community. 

I  am  personally  much  against  government  ownership,  for  the 
reason  that  I  think  it  reduces  the  economy  of  operation  and  there- 
fore greatly  increases  the  cost  of  something  that  is  essential  to  the 
people.  On  the  other  hand,  the  public  have  grown  used  to  a  fixed 
tare  of  5  cents,  and  I  think  if  you  inquired  of  a  great  many  of  tliem 
you  would  find  some  such  idea— not  literally,  but  some  such  idea  as 
that  It  was  guaranteed  to  them  in  the  Constitution;  that  anvthino- 
above  5  cents  would  indicate  a  return  to  investoi-s  that  is  outrageous" 
It  IS  a  matter,  of  course,  that  can  be  demonstrated  mathematically 
by  the  cost  of  operation,  and  figured  out.    The  cost  of  operation  has 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.  5 

» 

increased,  of  course,  with  the  cost  of  commodities  and  the  increase 
in  the  price  of  labor,  and  it  is  mathematically  demonstrable.  If  you 
keep  the  fares  at  5  cents,  where  they  always  have  been — and  even  in 
some  cities  they  have  been  3  cents  and  4  cents ;  in  Detroit,  notably, 
and  in  Cleveland— if  you  keep  it  there,  the  red  balance  is  as  inevitable 
as  the  rising  of  the  sun  to-morrow  morning.  It  is  inescapable.  Then 
you  are  confronted  with  the  limitation  that  if  you  raise  tne  rate  of 
fare  you  are  likely  to  reduce  the  revenues  by  a  falling  off  in  your 
patronage.  I  think  perhaps  the  adyancing  to  6  cents  does  not  do 
that,  and  in  some  cases  the  advance  to  7  cents;  but  anything  beyond 
that  is  certain  to  reduce  revenues  by  a  loss  of  business. 

You  are  met,  of  course,  by  the  statement — and  I  do  not  wish  to 
escape  the  force  of  the  argument — that  these. transportation  facili- 
ties are  in  the  nature  of  roads.  The  public  spends  a  great  deal  of 
money  in  keeping  roads  in  condition,  and  those  who  do  not  have 
yehicles  do  not  use  the  roads.  It  is  contended  that  these  electric 
railways  only  fulfill  a  function  of  the  same  kind,  and  that  therefore 
the  public  ought  to  meet  the  deficit  by  taxation;  and  if  it  does  it 
will  naturally  take  over  the  management. 

My  feeling  in  respect  to  the  general  loss  that  is  certain  to  be  in- 
volved in  public  operation  still  makes  me  hope  for  some  other  so- 
lution than  that  of  government  ownership.  That  is  a  general  state- 
ment, and  I  am  ready  to  answer  any  questions,  if  I  can. 

Commissioner  Sweet.  I  would  like  to  ask  one  or  two  questions. 

Do  you  not  think  there  is  a  middle  ground  between  government 
ownership  and  the  present  basis,  or  the  condition  as  it  would  be  by 
merely  raising  the  fares?  In  other  words,  are  there  not  things  that 
could  be  done  as  regards,  for  instance,  paving  between  the  tracks, 
and  various  things  of  that  kind,  that  might  be  borne  by  the  general 
public  without  injustice,  and  at  the  same  time  relieve  the  corpora- 
tions operating  these  railroads  from  a  considerable  amount  of  ex- 
pense, and  thereby  help  them  to  live  and  pay  reasonable  wages  ? 

Mr.  Taft.  Yes;  that  means  reasonable  franchises — reasonable  in 
other  respects  than  the  amount  of  fare  allowed  to  be  charged.  Yes ; 
r  agree  to  that. 

Ihey  have  a  system  in  Cleveland  of  what  they  call  "service  at 
cost" — a  division  between  the  public  and  the  company  in  resi^sct 
of  profits.  I  do  not  know  that  they  go  so  far  as  losses,  but  the  fare 
goes  up  automatically  with  the  cost  of  operation.  I  am  not  suffi- 
ciently advised  as  to  the  details  of  that  method  to  say  much  about 
it,  except  that  the  principle  seems  to  be  a  wise  one,  except  that  you 
have  those  limitations  that  will  insert  themselves  whether  you  will 
or  not — that  you  can  not  charge  too  much  or  you  will  reduce  your 
business. 

Commissioner  Sweet.  Is  there  not  a  sort  of  injustice  in  the  pre- 
vailing method  in  requiring  street-railroad  companies  to  pave  be- 
tween the  tracks  and  for  a  foot  or  two  outside,  in  that  if  they  were 
able  to  make  ends  meet  it  would  mean,  in  the  final  analysis,  that 
that  paving  was  paid  for  by  those  who  patronized  the  street  rail- 
road and  paid  fares,  and  that  the  rest  of  the  community,  the  auto- 
mobile and  the  Ford  owners,  pay  nothing? 

Mr.  Taft.  Yes. 


Ii! 


6         PROCEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION. 

« 

^.ouu'f^t''Z''  ^''^'^'  Al^T^''  ?^?  ^^^  P^^*«  ^^  *^^  community, 
would  It  not  be  more  just  that  the  whole  community  should  bear  the 
entire  expense  of  paving?  ^ 

Mr.  Taft.  I  think  so.    But  I  do  not  know  how  large  a  proportion 
of  the  expense  that  constitutes.  ^       ^  "P«iiion 

Commissioner  Sweet.  That  is  something  we  will  have  to  discover? 
Mr.  lAFT.  les. 

mone'"?'^'^^"'''^'^  ^^^^'  Undoubtedly  it  amounts  to  a  great  deal  of 

Mr.  Taft.  I  have  no  doubt  that  it  is  a  heavy  expense,  but  how 

I  df  not  know  '^  ^"""^"^  ^  ^  making  the  investment  more  favorable 

Commissioner  Sweet.  It  would  help  some,  anvwav  ? 

Mr.  Taft.  Yes;  certainly.  ^      ^      y 

Commissioner  Sweet.  You  said  that  you  thought  perhaps  the  i^is- 
ing  of  fares  in  many  cases  would  result  in  the  loss  of  patronage. 

?f  'U*  """^  ^  feasible  to  make  a  distinction  between  a  short  nm-^ 

Mr.  Iaft.  lou  mean  the  zone  system? 

Commissioner  Sweet.  Yes. 

Mr.  Taft  I  have  always  thought  so.  I  thought  so  in  the  be- 
ginning,  and  theoretically  that  is  true,  and  perhaps  the  railroads 
may  devise  some  method;  but  they  have  gotten  so  used  to  the 
other  method,  and  the  complications  arising  from  the  zone  svstem 
are  so  many  that  a  good  many  practical  railroad  men  fear  that  thev 
can  not  put  it  into  effect.  -^ 

Commissioner  Sweet.  In  the  case  you  spoke  of,  of  the  extension 
of  street  railmads  into  the  suburbs,  where  the  business  is  rather 
Jight,  people  have  built  along  these  lines  with  a  view  of  getting  into 
the  business  center  by  the  use  of  them.  Would  it  not  be  inherently 
lusttliat  those  people  should  pay  both  in  accordance  with  the  greater 
length  of  haul  and  greater  service  they  receive  for  their  money? 
V\  ould  It  not  be  just,  and,  furthermore,  could  they  not  afford  to  do 
\t  ^')U^  of  their  living  where  the  taxes  are  less,  and  so  on? 

Mr.  Taft.  les;  I  agree  to  that.  Yet,  on  the  other  hand,  the  very 
plan  of  going  out  into  the  suburbs,  at  a  fixed  fare,  was  held  out  to 
these  people  who  went  out  there  and  promoted  that  avoidance  of 
congestion  or  removal  of  the  causes  for  congestion.  Of  course,  that 
is  a  public  matter.  It  is  a  housing  matter  that  you  would  perhaps 
not  wish  to  interfere  with  the  good  effects  of.  ^       ^ 

Commissioner  Sweet.  Is  it  your  idea  tliat  there  would  be  a  sort 
of  moral  obligation  or  a  kind  of  implied  contract  with  these  suburban 
purchasers  and  builders? 

Mr  Tak-t.  Well,  of  course,  that  depends  upon  the  character  of  the 
suburban  living.  I  mean  if  a  man  goes  out  to  live  there  cheaply, 
in  a  small  house,  the  matter  of  fare  in  and  out  is  a  considerable  item 
to  him.  Those  suburban  residents  who  go  out  to  get  the  air  and 
build  a  good  house  can  well  afford  to  pay.  But  the  greater  the  dis- 
tance that  a  workingman  can  ^o,  the  more  certain  it  is  that  he  is 
able  to  get  a  healthful  place  to  live. 

Commissioner  Sweet.  From  the  standpoint  of  the  revenues  of  a 
street-railroad  company,  raising  the  fares  on  a  long  haul,  as  we  say, 
would  be  less  likely,  of  course,  to  diminish  the  patronage ? 
Mr.  Taft.  Yes;  I  agree  to  that. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION".  7 

Commissioner  Sweet.  In  other  words,  people  would  not  walk  long 
distances.    They  would  rather  pay  a  cent  or  two  more  ? 

Mr.  Taft.  That  is  quite  true.    You  have  the  public  there. 

Commissioner  Sweet.  They  have  simply  got  to  ride  ? 

Mr.  Taft.  Yes. 

Commissioner  Sweet.  With  regard  to  the  short  hauls,  if  I  under- 
stand you  correctly,  you  think  that  it  is  a  serious. question  as  to 
whether  the  patronage  might  not  be  reduced  to  the  point  Avhere  the 
net  revenues  of  the  company  would  not  be  any  greater  by  increasing 
the  fare? 

Mr.  Taft.  Yes ;  if  you  have  a  fixed  fare.  I  think  in  the  zone  sys- 
tem you  might,  by  having  a  smaller  fare  for  the  inner  circle,  main- 
tain your  receipts  there,  perhaps,  dependent  upon  what  you  begin 
at;  and  then  by  increasing  it,  you  do  avoid,  in  the  zone  system,  the 
reduction  of  fare. 

Conunissioner  Sweet.  From  the  consideration  you  have  given  to 
the  subject,  do  a^ou  think  the  zone  system  is  a  good  system  ? 

Mr.  Taft.  I  think  it  should  be  tried  far  more  tlian  it  has  been. 

Commissioner  Sweet.  You  think  it  has  merits? 

Mr.  Taft.  I  think  the  other  system  was  begun  on  a  theory  that  has 
not  vindicated  itself.  It  has  tended  to  convenience  of  operation, 
and  it  has  accustomed  the  public  to  something  it  may  be  difficult  to 
get  over,  and  it  may  increase  complications;  but  I  think  in  the  end 
it  is  bound  to  come,  unless  you  have  government  ownership  and 
taxation  to  pay  the  deficit. 

Commissioner  Sweet,  If  a  public  accountant  were  permitted  access 
to  the  books  if  a  street-railroad  company  and  made  a  report  that  tlie 
public  would  have  every  reason  to  regard  as  honest  and  square,  and 
the  public  recognized  the  fact  that  the  earnings  of  the  company  were 
not  sufficient  to  pay  business  expenses  and  pay  a  reasonable  wage,  do 
you  not  think  then  there  would  be  a  somewhat  different  attitude  on 
the  part  of  the  patrons  of  the  railroad^companies. 

Mr.  Taft.  Yes,  I  do :  and  I  think  that  may  be  heightened  by  this 
arrangement  for  a  division  of  profits  when  profits  are  made,  and 
possibly  the  sharing  of  losses  when  losses  are  made;  that  a  thintr 
that  operates  automatically  like  that  is  just  like  law,  and  people  will 
follow  it,  yield  to  it. 

Commissioner  Sweet.  But  your  idea,  if  I  understand  you  cor- 
rectly, is  that  the  public  mind  must  he  convinced  of  the  need  of  it 
before  a  raise  of  rates  will  be  accepted? 

Mr.  Taft.  Yes.  In  Colorado  I  believe  they  had  a  riot  over  a 
rate  of  fare.  I  think  it  was  in  Denver.  The  fares  went  up  5  cents, 
and  for  a  time,  I  believe,  it  produced  a  condition  where  they  Avere 
not  able  to  run  their  street  railroads.  That  is  my  recollection  of 
the  case. 

Commissioner  Sweet.  If  I  understand,  Judge,  you  were  one  of 
the  original  projectors,  in  a  sense,  of  this  commission  that  is  here 
to-day? 

Mr.  Taft.  In  the  way  in  which  I  have  detailed  it  here.  I  am 
very  glad  it  has  been  appointed.  I  think  you  have  an  opportunity 
to  be  most  useful,  even  if  you  are  doubtful  of  your  own  con- 
clusions. You  can  accumulate  a  mass  of  evidence  from  men  who 
know  that  will  be  very  useful  for  the  solution  and  the  making  of 
the  public  to  know  what  the  difficulties  are. 


8 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Poinmissioner  Sweet.  I  think  that  all  the  members  of  the  com- 


II 


action  oiiglit  to  be  had  as  speedily  as  possible.  Yet,  on  the  other 
hand  we  recognize  the  need  of  thorough  action.  The  two  thincrs 
do  not  seem  to  .Jibe  exactly.  Now,  will  you  tell  us  just  about  what 
you  think  the  commission  ought  to  do? 

Mr.  Taft.  I  feel  very  certain  that,  no  matter  what  people  sav. 
It  is  your  business  to  find  out  the  facts.  Until  you  get  the  facts  you 
are  not  going  to  be  able  to  make  any  recommendations  that  'are 
worth  haying. 

Commissioner  Sweet.  Can  you  make  that  a  little  more  precise, 
as  to  what  facts  you  think  we  ought  to  ascertain? 

Mr.  Taft.  I  think  you  should  call  the  public-utility-commission 
representatiyes  through  the  country,  and  perhaps  the  mayors,  or, 
at  least,  those  officials  m  the  cities  who  haye  to  do  with  the  question 
ot  street  railways,  and,  doubtless,  you  can  call  accountants  wlio  have 
been  through  street-railway  accounts.  I  am  not  familiar  with  the 
details,  but  I  am  quite  sure  there  is  a  great  field  of  investigation 
that  would  be  most  useful  m  making  up  a  general  conclusion!  and, 
being  a  Federal  commission,  you  have  the  advantage  of  a  remote- 
ness from  the  subject  matter  in  actual  authority  that  gives  your 
conclusions  a  much  greater  weight  that  if  you  were  a  State  com- 
mission or  a  city  commission,  because  one  trouble  about  State  com- 
missions is  the  intervention  of  local  politics  and  the  doubt  as  to 
whether  their  conclusions  may  not  be  affected  by  other  than  the 
exact  facts. 

Commissioner  Sweet.  You  had  no  thought  originally  of  this  com- 
mission having  any  authority  to  interfere  at  all  in  local  problems 
did  you?  ^  ' 

Mr.  Taft.  Yes;  I  did;  but  that  was  under  the  pressure  of  war 

Commissioner  Sweet.  But  not  now? 

Mr  Taft.  I  thought,  for  instance,  that  if  the  bankruptcy  followed 
that  there  were  some  symptoms  of  coming,  it  would  be  a  very  serious 
interference  with  the  business  finances  of  the  country  in  time  of  war 
and,  therefore,  that  the  President  would  be  justifiecl  in  askinjr  Con- 
gress to  enable  him  to  take  hold  of  the  street  railways  that  were 
needed  to  run  the  factories  of  the  country  engaged  in  ^vav  work  and 
say  to  these  local  authorities:  "During  the  war  we  are  goino-  to  run 
these  railroads,  not  by  actual  operation,  but  we  are  goiuff'^to  sav 
as  a  \var  measure,  what  these  railroads  shall  have  a  right  to  charge  "' 
And  I  thought  It  would  be  quite  within  the  constitutional  power 
of  C  ongress.  I  did  not  think  the  President  had  the  power,  but  I 
thought  It  was  quite  within  the  constitutional  power  of  Congress 
to  give  the  President  that  power;  and  I  felt  certain  that,  in  the  gen- 
eral patriotic  spirit  that  prevailed  throughout  the  country,  even  the 
local  feeling  as  to  a  5-cent  fare  would  yield. 

Commissioner  Sweet.  But  as  the  matter  stands  now? 
Mr   Taft.  Now,  of  course,  while  we  are  still  in  a  legal  state  of 
war,  the  situation  is  not  such  as  to  justify  that  legislation,  and  Con- 
gress, I  am  sure,  would  not  feel  like  giving  such  a  power  in  a  mere 
nominal  state  of  war,  a  state  of  suspended  hostilities 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.         U 

Commissioner  Sweet.  In  that  event  our  function  would  be  to 
make  the  investigation  and  a  recommendation  as  a  result  of  it  which 
would  have  a  moral  effect  in  the  country  and  could  be  made  the  basis 
of  settling  local  troubles? 

Mr.  Taft.  Yes. 

Commissioner  Sweet.  Not  by  reason  of  authority  that  w.e  might 
have,  but  because  we  had  given  an  impaitial  investigation  and  made  a 
report  that  commended  itself  to  the  country  ? 

Mr.  Taft.  Exactly. 

Commissioner  Sweet.  That  would  be  your  idea,  would  it? 

Mr.  Taft.  Yes;  and  you  will  be  a  center  through  which  you  can 
interpret  the  general  views  of  the  public-utilities  commissions  and 
perhaps  bring  about  a  uniformity  in  dealing  with  the  situation  that 
would  be  most  useful. 

Commissioner  Sweet.  In  cases  that  can  e  before  you,  did  you  find 
that  there  were  certain  general  elements  that  pervaded  all  of  them, 
practically  ? 

Mr.  Taft.  About  all  of  them ;  yes.  This  matter  of  labor  was  one. 
Of  course,  the  expenses  of  materials  were  the  same  ever^nvhere,  tak- 
ing into  account  transportation;  and  the  element  of  human  nature 
\A  as  exactly  the  same  in  one  part  of  the  country  as  in  the  other. 

Perhaps  the  people  in  Massachusetts  were  more  reasonable,  and 
they  began  earlier  to  take  over  State  control  than  other  States ;  and 
there  they  have  gone  up  higher  in  their  rates  of  fare  than  anywhere 
else. 

Commissioner  Sweet.  Did  your  investigation  enable  you  to  de- 
termine what  proportion  of  the  street-railway  companies  had  watered 
stock  ? 

Mr.  Taft.  No.  I  think  that  they  have  been  through  a  period  in 
their  history  that  has  squeezed  a  good  deal  of  the  water  out,  and 
many  of  the  railroads  have  been  obliged,  in  their  dealings  with  cities, 
to  clear  their  skirts  in  that  respect.  There  were  a  good  many  that 
came  before  us  and  proved  what  they  had,  and  what  they  were  at- 
tempting to  pay  dividends  on  they  had  fully  invested  in  the  prop- 
erty; but  that  did  not  overcome  the  history  previously  of  dealing 
with  councils  and  so  on. 

Commissioner  Sweet.  That  prejudice  would  remain? 

Mr.  Taft.  Oh,  yes. 

Commissioner  Sweet.  Is  it  your  opinion.  Judge,  that  a  physical 
valuation  of  railroad  properties  would  be  necessary,  now,  to  satisfy 
the  public  before  the  patrons  of  the  railroad  companies  would  be 
satisfied  to  permit  a  raise  in  the  rates  of  fare  ?  ^ 

Mr.  Taft.  The  physical  valuation  of  a  steam  railroad,  where  the 
steam  railroad  owns  the  right  of  way  and  everything  on  it  is  one 
thing,  but  a  physical  valuation  of  franchises  and  of  the  right  to  pass 
over  streets,  which  can  be  withdrawn,  presents  so  many  difficult  prob- 
lems of  valuation  that  I  doubt  very  much  the  wisdom  of  it.  I  think 
the  investment  of  actual  money  in  what  has  been  done  is  the  only 
means  of  satisfying  the  public.  When  you  come  to  estimate  the  value 
of  a  franchise  which  runs  for  20  j^ears,  and  which  they  could  not 
get  to-day,  having  greater  value  on  account  of  its  provisions  given 
10  years  ago,  the  public  is  not  apt  to  be  satisfied  with  the  thought 
that  the  road  has  got  something  out  of  the  public  in  that  franchise 
that  is  of  high  value. 

160()43°— 20 2 


I 


10       PBOCEEDmcS  OF  FEDERAL  ELECTBIC  RAILWAYS  COMMISSION. 

be?t't^dief to'tl.pT''-  .^**  y?"  "nderstand  that  any  value  would 
ue  ciu.iciiecl  to  the  frtinchise  if  vou  were  seekino-  ft^  rr^f  fiw.       +      i 

%f  T"'-*K°  'T5  ^''''  *'»"  ^'=^"''1  investment  l-as?^'*  ""  """" 

Mr.  Taft.  Yes. 

be  on  a  payi„.>asS\„rdrtr,eTJhrt  c'Sl'air'  *'^^  '""^*'  ^'^-^ 
nftuL       "•     •?"  must;  you  must  have  reasonable  interest   in  view 

ro^n,?'-"'"^'"^'^"?."^  investment  that  history  sho^v? 
in'tS"omp:n'ifsr^-  ^«"  "''^  '^''^  ^-P^^  -^l^^  t^buy  stocks 

on^'hT.ryofciidr''"  ""*•    ^'*'"  '^^'^  P-^y  *--'  b»t  th«t  is  the 

payrnrbSr  ^"^"  ^'^  •"  "^^«'-  *«  li-  they  must  be  on  a 
Mr.  Taft.  Yes. 

they  would  be  or  not«  ^     ^"  *°  '"^  "^'"'"S'  whether 

public  utilitie^  and  Kferred  not  nnl  T'  ?^  T"?^  ^^^^^^^^^  ^^ 
referred  also  to  ffas  ™an[^^^^  fn  ,^^  >^  ^o .  «V'^^^  railways,  but  he 
watercompanil^43to'^^^  companies,  and  to 

his  leconimendation  to  the^^^^^^^^^    in  h  ^  I'^.r'?'"!"^'^"^ '"^^^^^  i^^'    ' 
the  President's  concurrence  fnt  ^^e^^^^^^^^^^^^^ 

public  utilities,  et^ttLsp^^^^^^^^^  ^  ^^  f^^^  bv 

ment  the  reason  is  psychological.  People  are' not  t^  7  l^myjudg- 
the  payment  of  bills  at  the  end  of  the  month  "T^,^  .^^''^'^''^^  about 
on  the  car  in  the  morning  to  rm  t.!  hif  k     •  '  ^"^  ^^^^"^  ^  '"^^  g^^^s 

or.his  wife  gets  on  the  cfr  ^o  f^  t  mLfit'and  sL'fi  ^.'  '."h  ri^' 
price  has  gone  up  from  5  r^Pnt«  i^  a  "^^J^®^'  ^nd  she  finds  that  the 
of  awkwafd  change  tndthpnthr  ""^""^l'  necessitating  the  making 
the  same  thinglj^f^bSiS^h  S^'aran^  '^''  "^^^^^  -^     * 

perhaps  the  diildren  go  to  sch^of  and  7hJ^  ^T'^""^  ^'^^^^'  ^""^ 
tmies  in  the  family  evfrv  dav  the  '.So  f     fix  '"?^  ^^PP^'^  ^^  «i'  l^ 

much  more  imtatbg  tlmn  ^^^he  L  ttlu,^'''  T''^''  ''  ""'^^''''^^^Y 
in  a  monthly  payment  "  ^  additional  cost  appears  only 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION^.       11 

Commissioner  Sweet.  Could  not  that  be  obviated  somewhat  by 
a  general  resort  to  the  ticket  system — selling  so  many  tickets? 

Mr.  Taft.  That  is  what  they  do  now,  I  think. 

Commissioner  Sweet.  They  do  in  some  places.  I  do  not  think 
they  do  in  all. 

Mr.  Tait.  I  do  not  think  they  do  in  all ;  no. 

Commissioner  Sweet.  Have  you  ever  considered  the  question  of 
the  Government  issuing,  say,  a  7-cent  piece,  or  something  of  that 
kind,  to  facilitate  the  payment  of  these  extra  fares? 

Mr.  Tai-t.  That  has  been  suggested — a  6-cent  piece  and  a  7-cent 
piece ;  but  it  would  be  difficult  to  make  them'  so  different  that  there 
would  not  be  confusion.  Perhaps  you  might  have  a  3-cent  piece 
that  could  be  used,  two  of  them  for  a  6-cent  fare;  I  don't  know. 

Commissioner  Sweet.  I  think  some  of  the  other  members  of  the 
commission  would  like  to  ask  you  some  questions.  I  do  not  want  to 
monopolize  you. 

Commissioner  Gadsden.  I  would  like  to  ask  something,  going 
back  to  the  question  of  the  increase  of  wages,  about  what  was  the 
percentage  of  increase  awarded  by  your  board  on  industry  as  a 
whole. 

Mr.  Taft.  Of  course,  the  places  differed  in  the  rates.  We  fixed 
48  cents  as  what  we  called  the  maximum  in  the  larger  cities,  and  we 
found  that  in  those  cities  they  ranged  from  35  to  39,  and  some  as 
high  as  40  cents,  as  I  recollect  it;  so  that  would  represent  the 
increase,  probably,  from  10  to  12  cents  in  48  cents. 

Commissioner  Gadsden.  On  40  cents,  was  it  not?  It  was  an  in- 
crease of  10  cents  on  the  original  40  cents? 

Mr.  Taft.  Yes ;  the  result  being  48  cents. 

Commissioner  Gadsden.  Do  you  happen  to  recall  what  were  the 
facts  in  connection  with  New  Orleans  ? 

Mr.  Taft.  That  was  very  low.  I  think  we  found  it  as  low  as  23 
or  24  cents,  or  perhaps  25. 

Commissioner  Gadsden.  And  the  board  put  it  up  to  about  42  or 
43,  did  it  not  ? 

Mr.  Taft.  Yes.    I  am  not  sure  but  what  it  was  45  cents. 

Commissioner  Gadsden.  About  65  per  cent  increase? 

Mr.  Taft.  Yes. 

Commissioner  Gadsden.  There  were  quite  a  number  of  cases  rang- 
I  ing  from  35  to  45  per  cent  increase,  were  there  not  ? 

Mr.  Taft.  Yes.  In  the  South,  where  the  range  of  wages  was 
lower,  generally,  we  made  a  minimum,  as  I  recollect  it,  of  40  cents — 
40,  43,  45,  and  48,  that  was  the  range.  In  second-class  cities  we 
made  it  45  cents. 

I  understand,  now,  that  the  Detroit  Street  Eailway  Co.  has 
granted  60  cents  to  its  men. 

(Commissioner  Gadsden.  Do  you  think,  from  your  experience 
in  the  study  of  street-railway  questions,  that  any  railroad  can  pay 
any  such  wage  scale  on  a  5-cent  fare? 

Mr.  Taft.  No;  I  should  think  not.  Of  course,  that  is  a  very 
general  statement,  and  I  would  not  like  to  be  held  to  exactness  in 
it. 

Commissioner  Gadsden.  I  mean  as  a  general  rule. 
Mr.  Taft.  But  our  experience  was,  when  we  looked  into  it,  that 
it  would  not  be  possible. 


I 


12       PKOC-EEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK. 

Commissioner  Gadsden.  Is  it  not  a  fnnf  fT.of  *i.     •    i    . 

co„?e"Sfd"a"/s:ri';-.f ^^^^  i?r"^-l  S-nt  fare  never 

Mr   Tavt   Ti/*-  ^?       "^  ^^  ^^  "^^^  necessary  to  be  Daid « 

?o„.„^f^JonIf  Gao^opTnL"\';,7  "•*  P"'^^  of  Iterl'lSer. 
vestn.ent:  The  siuXn '  to  dlV    „«^4  '  w'l"^  '°  ^'^'^  ^"''^tion  of  in- 

"  Mr!Tl^'1t1r"''*'  '^^  '^"""""^  credhM^ntSr^dl  '*  "''^ 

service  up?  e-^tensions  and  improvements  and  keep  the 

Mr.  Taft.  That  is  true. 

(- ommissioner  Gadsden.  That  beint'  =o   T  th■,r.^r  tui  ■    ■ 

■would  appreciate  verv  miicJi  vn,...  f^      '      1      ,    *"**  fommission 

'''ztb^  o/wLrf  h^:r.rer^tt  "^^^■^^'^^'  °^  - 

S£a^;rriii^^irm'^;o-  *Xlnt^eSr-  ^'^  ^^^^ 
"¥¥ir  \^^^^iJotL%^^  the  investment, 

investment  is  going  to  make  if  fnr  11;?  Vu  ^"Hy  who  makes  an 
business  is  bifsinefs  If  he  i^  goiS  lo  bI°P''  fTP^.^'  '^''*=''"«« 
?s  going  to  be  a  philanthroji' t  fn  his  oln  wav  Lfl^''^t''P''^'  ^^ 
invest  money,  if  the  investment  "s  to  teatlractivP  ^t"  fV"™'"  *** 
and  the  more  secure  it  is  th^  \ntl    °®  ^"'/ft'^e^  >t  must  be  secure, 

take;  and  the  precarious \ondit^rnn?"/f  **•  "''?'"^  ^^  '^  ^'"'"S  to 
rate  necessarv  in  order  to  i^ vifl  ?.?  {  ^  investment  makes  a  &igh 
this.  What  -I  mean  is  that  a  reason.!!]'"*  f  ^"'^^"  ^nt^prisels 
the  insecurity  of  the  investment  "'  '''**  '^  ^'^^'"^  because  of 

In'reg];::|S^i~  f -^^^^^^  to  -, 
were  quite  generally  based  u^^n^i^ef se's^if e^s^^^jli.^^^^^^^^^^^^ 
Mr.  Taft.  They  were ;  yes. 

tbeSr^Ta^L'Sl  elS'comr  ^V*  ^"^  ^'^'^  *«  '^^termine, 
crease  in  the  cost  of  IhingT      '^*'"™""'ty  ,n  accordance  with  the  in-' 

prfncipkHf  Il^'Nattn"!  War'l'nh  "*  i""''  f^'^^  '"*<>  ^t.     The 
goul/be  a  uiinimum-SlhTcl^Kl^foSfet^^^^^^^^^ 

es£n~- fc,1-  /.ink  the  ~si.  ..^^^^^^^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       13 

principles  of  arriving  at  a  reasonable  cost  of  living,  or  minimum  of 
comfort  standard. 

Mr.  Taft.  Well,  we  had  a  great  deal  of  evidence  before  us,  some 
taken  by  our  own  experts  and  others  presented  by  the  parties  who 
appeared  before  us,  and  we  had  evidence  to  show  that  a  family  of 
five  persons  should  have,  as  I  recollect  it,  an  income  of  $1,760  a  year 
to  live  in  reasonable  comfort.  That  was  put  in  by  the  Amalgamated 
Association. 

In  the  case  in  which  that  evidence  was  adduced — a  New  Jersey 
case — there  was  counterevidence  introduced  to  show,  by  actual  census 
of  the  men  in  the  employ  of  the  company,  that  25  per  cent  of  them 
were  unmarried  and  that  75  per  cent  who  were  married  only  had 
average  families  of  three  and  a  half  persons,  and  that  there  were 
supplemental  wages  from  other  membere  of  the  family  that  reduced 
the  ^necessity  for  the  full  wage  from  the  main  breadwinner. 

The  board  took  up  the  question  on  a  resolution  that  was  introduced, 
but  before  we  got  through  the  discussion  of  the  resolution  I  think  the 
whole  board  saw  a  great  lack  of  wisdom  in  our  attempting  to  fix  a 
minimum  wage  as  a  general  rule  of  decision.  We  were  acting  as  a 
quasi  court  and  followed  the  experience  of  most  courts  in  thinking 
it  very  unwise  to  attempt  to  lay  down  a  rule  of  decision  which  should 
apply  to  different  cases  until  we  had  heard  enough  cases  to  make  an 
announcement  safe,  and  therefore  we  never  made  one.  In  some  cases 
we  went  as  low,  I  think,  as  36  cents  an  hour,  and  from  that  up  to  42^ 
cents  per  hour  in  different  localities  for  the  minimum  wage. 

Commissioner  Meeker.  Do  I  understand  that  the  board  did  take 
account  of  supplemental  wages  in  making  wage  awards  ? 

Mr.  Taft.  No ;  we  did  not  pass  upon  the  question  at  all.  You  asked 
me  what  evidence  was  before  us.  The  argument,  of  course,  which  was 
made  with  respect  to  the  five  members  was  that  if  they  did  not  have 
five  members  they  ought  to  have  five  members,  and  that  the  rate 
ought  to  be  fixed  with  a  view  to  the  encouragement  of  families.  But 
our  function  was  merely  to  adjust  temporarily  the  situation  in  respect 
of  the  maximum  of  production,  and  as  it  would  take  longer  than  our 
jurisdiction  was  likely  to  last  to  have  any  effect  on  the  increase  in 
population,  that  element  was  not  pressed. 

Commissioner  Meeker.  I  think  I  have  brought  out  the  points  that 
I  wanted  for  the  record  in  that  regard. 

Now,  taking  up  service  at  cost,  I  understood  you  to  express  an 
opinion  against  the  physical  valuation  of  properties  of  street  rail- 
ways.   Do  you  mean  merely  to  exclude  consideration  of  franchises? 

Mr.  Taft.  Yes.  Of  course  in  service  at  cost — in  Cleveland,  at  least, 
and  that  is.  the  case  that  is  most  concrete  in  my  mind — I  think  they 
itrreed  on  valuation  of  the  actual  money  invested  by  the  company, 
{UkI  tlien  they  had  a  provision  for  the  borrowing  of  money  for  addi- 
tional improvements,  and  the  payment  of  a  fixed  rate  of  interest  on 
til  at,  and  then  the  raising  and  lowering  of  the  fares  as  the  result  of 
operation  justifies. 

Commissioner  Meeker.  I  am  a  little  bit  suspicious  of  automatic 
arrangements.  Perpetual  motion  does  not  seem  to  me  to  be  a  very 
practical  thing.  * 

Mr.  Taft.  I  may  say  that  Mr.  Squires,  who  is  the  counsel  for  the 
company,  did  not  give  us  any  great  encouragement  as  to  that,  because 
he  did  not  think  it  was  useful.    They  have  a  system  in  Chicago  in- 


14       PBOCKEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

aiigurated,  as  I  recall,  on  a  contract  drafted  bv  Mr  WqltP,-  Fi«l.„,. 

^entrh.''^  "*^  ''^  ^^""  ^"  P'^^'^'  '^"^  I  cw'^ttnlcSntl: 

i.l^n"?'"'""'""-'"  M^^K^»-  In  what  respect  would  a  service-it  cost 
plan  be  superior  to  jrovernment  or  public  ownersl.  io «     T«  w  ?i 

.ui.  lAi-T.  Uh,  no;  there  is  no  ^iiaianty,  except  in  the  re^^nlt  thnf 
com™  from  ,„  ,„e„,„  ,„  u,,  ,„,J,  .„j  /„„  i,iTpti-iZ  ^Smh  ', 

Commissioner  Meeker.  But  vou  think  thof  fl.o  efoKjr  •         i.  ., 

Mr.  Taft.  Yes. 

in?CSrt,^ndro„r  '^  '-P— '-t.s  in  the  .nanage.nent, 
Mr.  TAtT.  Yes. 

tnvi'^Hr''n°"*''  ^^:^f\  I  ^ould  like  to  ask  about  repeals  or  uniust 

Mr  tI.-PV"*''"'^!'?^  ''""''*  '•«"''^'e  the  companies  ^ 

otivingV  "  "'"''  ^"''"^^  ""*  "^«  '=«^*  •'f  P'^^W,  and  that  sort 

(Commissioner  Meeker.  Yes.    Do  vou  think  that  would  relipv»  th. 
street-railway  companies  to  any  great  extent?  ^^  *^'^ 

Air.   lAFT.  I  am  unable  to  answer  that.     I  question  it      Str.>Af 
railroad  men,  however,  know  about  that  and  T  <ln  ,mr  t  1'  i    . 
that  whenever  the  arg'ument  has  C   na3e  by  st^i-r  uSv  cnr 
pany  management,  that  plavs  a  good  deal  of  a  filmp  in  H,/ 
ment.    How  much  of  a  pirtit  wotdd  play  n  the  JcTual  calculatlofV 
have  not  investigated  sufficiently  to  answer  calculation  I 

findr.tT'''''"""  ^'''"''-  ^'''^*  ''  something  for  this  commission  to 
Mr.  Taft.  Yes. 

piwrti  take  if  that  voShinr  >^  "P"'",*?  *^  ^^^'''^^  V"'"'^"""  "* 
*;«^  „*  •''        T     tn*«t  yon  think  it  advisable  to  get  a  physical  valin 

Tir °*J"'0P";ty,  excluding  franchises,  of  course f        P^y""^*'  ' »'"i- 
Mr.  lAFT.  Yes:  the  actual  investment. 

H..    T/*^!?"^'"  M^^KJ-«-  St'Ppose  that  such  a  valuation  shows  thnt 
the  outstanding  capital,  including  bonds  and  stock  is  not  excessive  • 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       15 

put  in  in  improvements  on  the  property  instead  of  being  declared  in 
dividends?  Have  I  made  myself  clear?  In  other  words,  has  the 
public  already  paid  a  considerable  part  of  the  investment  in  the 
street-railway  corporations  ? 

Mr.  Taft.  I  do  not  see  how  that  view  can  be  justified.  They  pay 
fare,  and  the  company  earns  an  income  on  what  has  been  invested. 
I  assume  that,  naturally,  there  is  a  great  depreciation  in  the  value 
of  the  property  that  constantly  needs  repairs  and  renewals,  and 
therefore  I  should  think  that  the  fares  which  have  been  paid  should 
be  held  to  be  nothing  but  a  return  on  the  investment  from  year  to 
year. 

Commissioner  Meeker.  Might  not  the  fares  be  sufficient  to  return 
a  reasonable  return  upon  the  actual  investment  and  also  to  lay  aside 
a  renewal  fund  that  would  be  put  back  into  better  equipment,  better 
rails,  and  so  on,  which  would  be  paid  by  the  public  in  fares,  and 
w^hich  would  now  be  counted  as  a  part  of  the  actual  physical  prop- 
erty of  the  company? 

Sir.  Taft.  No;  I  do  not  think  that  would  belong  to  the  public. 
I  think  it  would  belong  to  the  man  who  made  the  original  invest- 
ment; because  in  any  business,  as  I  understand  it,  there  should  be  a 
renewal  fund,  what  is  called  a  depreciation  fund.  They  make  an 
allowance  for  depreciation  each  year,  in  order  to  maintain  the  level 
of  their  investment. 

Commissioner  Meeker.  I  do  not  think  I  have  yet  made  my  point 
clear.  Suppose  that,  in  addition  to  a  reasonable  depreciation  fund 
which  would  maintain  the  property  at  its  full  value,  its  full  effi- 
ciency, suppose  there  was  an  excess  over  that  that  w^as  put  into  new 
equipment,  and  even  extension  of  lines,  without  an  additional  in- 
vestment on  the  part  of  investors  at  all — stockholders  or  bond- 
holders— ^but  simply  taken  out  of  the  excess  earnings  of  the  com- 
pany; do  you  think  that  such  properties,  if  there  be  such,  in  your 
opinion,  are  to  be  justly  credited  as  the  property  of  the  company  ? 

Mr.  Taft.  I  should  assume  that  was  the  basis  of  the  original  con- 
tract, the  basis  of  the  investment.  I  should  also  assume  that  there 
are  not  many  instances  of  that  kind. 

Commissioner  Meeker.  That  is  what  I  am  trying  to  get  at. 

Mr.  Taft.  Perhaps  I  ought  to  go  on  and  say  if  there  were  that 
the  change  in  ownership  from  time  to  time  would  create  a  new  con- 
dition, back  of  which  you  ought  not  to  go,  in  equity.  I  think  you 
ought  to  take  into  consideration  that  these  properties  do  change 
hands,  and  that  the  people  who  are  now  sweating  are  not  the  people 
generally,  who  were  guilty  of  those  original  "rich"  investments 
that  have  so  reflected  on  the  character  of  the  investment,  in  stirring 
up  hostility  of  the  people. 

Those  statements  are  general  statements.  I  could  not  give  you  any 
details  to  justify  them ;  but  that  is  my  impression. 

Commissioner  Meeker.  I  think  you  amply  protected  yourself, 
Judge,  when  you  disclaimed  being  an  expert ;  but  I  would  like  to  ask 
you  another  question 

Mr.  Taft.  In  other  words,  I  think  that  those  people  who  water 
stock  and  engage  in  other  transactions  that  give  property  a  meretri- 
cious value,  get  out  from  under  the  load  as  promptly  as  possible,  and 
allow  others  to  bear  it.  I  think  that  is  generally  the  history  of  these 
transactions  that  can  not  be  defended. 


i! 


16       P.OCEEBIKGS  OP  PKDEBAI.  KLKCTKIC  KAH^WAVS  COMMrSSICV. 

in.proven.ents  in  the^ou  J2,  'f  fhT'^'^  more  hopef„l  to  look  to 
operating  expenses?  Do  vo^  thint  w«  i  "f^  T'  ""^^  *°  «"*  down 
of  the  street  rail wav  co.nD?nior?..fir  .k""'*!  ^'"J^^  *«  *•>«'  f"''  'elief 
taxation,  nnjnst  pav^nTStbns  /n  /h    /"  V^'  '"'^P™'  "^  ""i"«t 

Mr.  Takt.  To  i.v  th^  truH    T ?k;.  t   ^  '™nchises,  and  so  on? 
all  the  companies  ^an     the  Dower^^     -"^  '**P  '^  "  reorganization  of 
ought  never  to  have  been  b.^HTIv.f'"  "P  ""P^fitable  lines  that 
There  was  a  f.irore  at  one  tl^e  in  S?Hin'  ^T^  ?"  '«  Massachusetts, 
ought  to  have  been  buUra^dTf  the  ,fr?V' '•.'"*' °' ''"""^  *''''' "«^«- 
country  are  to  be  saved   I  think  fW         ^''''^h^^  ^•^^'^'^^  «f  this 
with  reference  to  nuinvinesh^fir^      '  ?  ^?*  t"  •'^"t  '"  «'c  quick 
that  it  is  now  unwk^^o  continL  r  H"T'ff '"  *^"''- P™^^^^^ 
solid  foundation,  and  then    from  V^f"'"'  "'T  ""'>'  ^^^  ''own" to  a 
public  which  shall  secure  a  'fai.^it,^f°";  ""'.S*  <'ontracts  with  the 
on  the  other;  but.  of  course     Lfllin  °      "^  '"^  ""^  P'"P«''  service 
there  is  not    he  busine^^o\-   'ff '  H   '"<^°«^'<^n'ence  quarters  where 
I^e^of  property  tlj^  tXft  S  Lt  l^  StT^iuf-  t 

ba^irrr-^i^isf i-iTS^  you  this,  ih  coning 

nnlways.  which  is  now  utterlv  destroved  ^  tK^l'T''*""  °'  •'^*'*«t 
money,  not  only  for  their  current  np!^«K'  ff  ^iu  '1"*^  ''""  "bttm 
n.ent  of  the  properties  from  time  to  ftn.e  n'  ^''^  ^"*"'"*;  "^^^'^'oP- 
any  plan  of  that  kind  has  t^be  «erm„ninf  •  ^.Z  ^'°"  ""*  **>ink  that 
and  in  the  view  of  the  men  to  whom Tn?,  '  ?  *^?  ''^^  "*  ^^^  P"blic 
is.  no  temporary  incre^^  in  We  f^^n"'/''*^"  •'^.^  ^''^ '""'!« ^  That 
that  for  a  morilent  as  a  Solution  will  c?^""'f;  '*  yo",^i«h  to  take 
that  the  investor  feels  is  Dermnnpnt    ♦     1°:  ■  ^^  """"^  ^  something 

but  that  it  is  a  phfn%TXL  JooS  fo  ,'t'U%ror  t  ^'""'  t^^'^' 
"  hen  you  go  to  an  investor  In,.  ^^„l       f    ^^  °V  ^^  y^'^rs  hence. 

never  .natures,  his  investme.'t  fs  pTZ-nent  ''Z  ''"  '^^V','?*'"^!^  '^^^ 
depending  on  the  financial  tpinic  if  ^*  y^"  ''^ll  him  bonds, 

to.  say,  30  or  40  oi  50  venr«  f  f\  ""y  /"""  ""J'^here  from  a  vear 
Jengtl.  of  t°me  Now  C' not  a'^nf '"  ^"T  "'^  """"^y  for  tl>a[ 
that  the  investor  fee7s  wHl  n?«tp  V,f  "  ''"'"  *°  P''o^'d«  something 
public  feel  they  are  going  under  \Z  tT"'"^P«'™""«""y'  that  tho 
sonable  service,  and  thTfirthpl'.KL-  P'""'  *°  •?*'*  P'""?"-  and  rea- 
?oing  to  be  taken  care  of «  In  ohp^'"^^'"*?  ^'^^  ^^^^  *'"'*  they  are 
to  be  in  a  permanent  form   t^A      ? ■^''J'^?'  ^^^  ""t  the  solution  got 

Mr.  Ta»4    I  agree .  burihe  1?'  J"«Vy"Ply  '^  n.akeshift  ?        ^ 
e-xatt  terra.s.        ^      '         "'^  Permanent  form  may  not  be  in  fixing 

Mr"S°'Cf^'^"'','-  >'•  ?  do  not  think  yon  can 

a  bJdy  ^fffi^ieJuy  remtSt  the'lT'^  '°  ''^«'.^^'"'^ "^  -*"«tion  in 
to  act  with  impartiamy  ^  mAuences  we  have  been  discussing 

rs^  /nis  J-]  It  sir  "T~dXtiaTioi^^^ 

affect  street-car  fares  and  irppf ""'"'  -condition  in  the  State  will  so 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       17 

Commissioner  Beall.  Do  you  favor  that,  Judge  ?  Of  course,  you 
have  always  got  to  have  a  supervising  body  and  regulation.  That 
is  just  and  proper.  We  all  recognize  that.  But  do  you  think  that 
the  determination  of  fares  from  time  to  time,  for  instance,  should 
be  left  to  the  State  commission  rather  than  to  some  such  arrange- 
ment as  they  have  in  Cleveland  and  Montreal  and  various  other 
cities  not  only  here  but  in  Canada,  where  their  fixed  return  is  given 
on  what  has  been  determined  to  be  the  money  investment  in  the 
propert}' — if  the  revenue  falls  below  that  amount  then  the  fare  is 
automatically  increased,  or  vice  versa,  and  if  your  receipts  exceed 
the  determined  return  on  your  capital,  then  they  fall  to  the  lower 
level  ? 

;Mr.  Taft.  That,  theoretically,  is  a  good  plan.  Before  I  adopted 
it,  however,  I  would  wish  to  examine  into  its  exact  operation  in  the 
cities  that  j^ou  have  named. 

Conmiissioner  Beall.  I  know  both  cities  very  well. 

Mr.  Taft.  I  think  you  will  find  a  difference  of  opinion  in  Cleve- 
land ;  and  that  is  the  only  one  that  we  have  before  us. 

Conmiissioner  Beall.  The  trouble  in  Cleveland  was — one  trou- 
ble— that  the  fare  was  limited? 

Mr.  Taft.  Yes. 

Commissioner  Beall.  That  was  the  trouble? 

Mr.  Taft.  I  agree. 

Commissioner  Beall.  When  you  get  to  a  certain  point,  you  could 
get  no  higher? 

Mr.  Taft.  When  you  got  up  to  4  cents,  you  could  not  get  any 
higher. 

Commissioner  Beall.  Tn  the  city  of  Montreal,  Canada,  there  is 
no  limit.  The  city  and  Province  recognize  the  right  of  an  investor 
or  a  man  in  the  public  who  chooses  to  put  his  money  into  street  rail- 
ways on  a  given  return,  and  no  matter  if  the  fare  has  to  be  10  cents, 
it  will  be  made  10  cents,  because  it  is  service  at  cost,  and  that  is  what 
it  costs  the  company  to  give  that. 

Mr.  Taft.  My  mind  inclines  in  that  direction. 

Commissioner  Beall.  You  have  had  such  vast  experience  in  look- 
ing into  these  things  that  we  would  like  to  get  your  views. 

Mr.  Taft.  I  have  been  fortunate  enough  never  to  have  had  any 
investment  in  street  raihvays. 

Commissioner  Beall.  But  you  know  the  experience  of  those  who 
have  ? 

Mr.  Taft.  Yes ;  I  do ;  I  do.  There  has  been  nothing  quite  so  try- 
ing to  me  in  the  last  year  as  meeting  gentlemen  whom  I  have  known 
well  and  for  whom  I  have  entertained  the  friendliest  feelings  and 
finding  that  they  were  interested  in  street-railway  property.  The 
subject  matter  was  not  exhilarating,  I  found. 

Commissioner  Sweet.  In  view  of  your  quasi-parental  relation  to 
tliis  commission,  would  you  recommend  that  we  should  go  at  all 
into  the  subject  of  past  profits  of  these  companies? 

Mr.  Taft.  If  you  do  you  will  never  get  down  to  business.  I  can 
tell  you  that. 

Commissioner  Sweet.  Can  you  see  any  profit  in  an  inquiry  of 
that  kind,  in  relation  to  the  question  that  we  are  really  to  consider? 

160643—20^ 2 


18       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS. pOMMKSIOlT. 

Mr.  Taft.  I  do  not  mean  to  say  that  there  may  not  be  instances 
in  which  you  ought  to  go  back,  just  to  determine  the  facte  tC  you 
are  trying  to  find  out ;1>ut  to  entertain  evidence  of  the  corruptC 
and  the  methods  of  10  years  ago,  or  20  years  ago,  and  the  history 
of  transactions  that  have  been  made  the  basis  for  hostUity  to  street 
railway  companies,  will  occupy  all  your  time,  so  thaf  you  wUl 
rTi^fFK^^T  *2  "?''  '•«'^'  qoestion;  and  I  think  you  <Luld  sem- 

tionTo^it^'^Zfi?'"'^''''-  '^^^  T^  ''r*^*'"  "''^  ^^  ^«^  Jittle  rela- 
pX-ticed  learago?"  """P'""  *^^*  "''^  ^^^«  been^received  or 

thfpubTfc!^"  ^'""'^*  '"  "^  psychological  effect  upon  the  attitude  of 

alo.S'"''^'""*'''  ^^^'^'  ^^  '*  "''*  ""  °^^  ^^  *''*'  ^""^  ^^^"^  I'e  left 
Mr.  Taft.  We  declined  to  go  into  it. 

Mr.  Taft.  Yes ;  I  do. 

Mr"Tl'i^°"T''''  ^'^^'''^\  ?  """"^^^  *"  set  y"""-  opinion  on  that, 
vo  nmav  w  LT  ^P^a^'ng  generally.  I  do  not  mean  to  say  that 
\ou  may  not  have  exceptional  cases  that  do  require  your  going  back 
1  hink  ,t  ,s  generally  accepted,  and  I  do  not  think  if  yoS  woidd 
call  upon  steam-railway  men  they  would  hesitate  to  admit,  iust 
as  It  IS  a  matter  of  which  you  can  take  judicial  notic6;Tat  "he 
steam  railways  of  the  country  abused  their  privileges  untilthpv 
roused  the  public,  and  now  tL  condition  has^bln  li  ought  aS 
,n  which  the  public  has  had-I  do  not  know  but  itlLhanSnow- 
but  they  have  had  a  feeling  of  hostility  that  has  led  them  tf  extremes 
m  dealing  with  the  steam  railroads,  and  to  injustices.  extremes 

(  ommissioner  Sweet.  But  the  great  problem  now,  and  the  one 
SluM^  contemplate  at  the  start,  does  not  practically  ivoZ 

Mr.  Taft.  ^o  ;  I  think  you  can  escape  it. 
C  ommissioner  Sweet.  I  think  so 

f.^^il'"."'f '""^^^^^^^'^^^^''^  y«^'  g^^^^^  tho"^^^t  to  the  question  as 
to  what  should  be  done  in  cases  where  the  frfl^ohil  iV^  i^    V? 

t  anchise  which  strictly  limits  the  c^L^ty  rt'Tower'  fe"£ 
It  sliouJd  economically  receive «  ^^ 

Itf. 1:2.1^'  '  ''""'■    ^'  ^'''^^  y-  <=-  I'-'d  the  company  to  it. 

Commissioner  Sweet.  Unless  it  dies 

Mr.  Taft.  The  public  can  hold  the  company.    But  a  bankrunt  ten 
ant  IS  not  a  very  useful  occupant  of  your  building,  Ld  a  coKnv" 

sei  Mte  which  the  franchise  was  granted  to  secure  is  of  no  use  to  tlie 
public,  ^ou  are  a  lawyer,  Mr.  Wehle,  and  understand  of  cmirse 
that  the  contract  does  not  work  both  ways.  What  I  mean  is  that  vou 
can  hold  a  company  to  a  franchise  and  the  company  can  hoW  Z 
f}f\Zh  V''  ^'•«"<:h'n««  Ipnff  as  the  term  fixed  in  t/e  co"tmct  bu? 
the  legislature,  acting  for  the  municipality  with  whom  the  fnmchi^ 
was  named  under  the  statute,  may  repear the  statute  or  may  destro^ 
the  contractual  effect  of  the  franchise  by  merely  waivin^k^  becS 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       19 

it  may  act  for  the  municipality  by  whom  the  franchise  was  granted 
and  Avith  whom  the  contract  of  the  franchise  was  made ;  so  that  there 
is  no  constitutional  difficulty. 

Commissioner  Wehle.  That  would  point  again,  would  it  not,  to  the 
State  public-utility  commission  being  vested  with  the  power  to  deal 
with  these  questions,  and  possibly  to  waive  conditions  in  franchises? 

Mr.  Taft.  Oh,  I  think  so.  If  you  are  going  to  have  any  reform  at 
all,  you  should  have  power  on  the  part  of  the  public  authority  to  act 
and  clean  the  situation  of  past  competitions.  Of  course,  I  would  not 
let  up  on  a  company  that  was  able  to  carry  out  a  contract  and  that 
had  made  it  in  the  face  of  conditions;  it  should  perform  its  contract. 
But  questions  of  public  expediency  enter  in  there. 

Commissioner  W™i-e.  And  as  a  general  proposition  you  would  say 
that  the  local  municipal  authorities  should  be  eliminated  with  respect 
to  the  power  either  to  enforce  franchises  or  to  waive  conditions  in 
franchises  ? 

Mr.  Taft.  I  think  at  least  there  ought  to  be  an  appellate  jurisdic- 
tion in  State  boards  of  public  utilities. 

Commissioner  Wehle.  We  have  had  some  reference  here  to  tlie 
service-at-cost  plan,  and  that  suggests  an  analysis  of  the  cost  of  the 
service;  and  there  has  been  some  reference  here  to  the  element  that 
taxation  plays  in  the  cost  to  the  street-railway  companies  in  conduct- . 
ing  their  business.  Would  you  state,  for  the  enlightenment  of  the 
commission,  something  of  your  views  with  respect  to  the  question.  On 
what  theory  should  the  street-railway  companies  be  taxed  ? 

Mr.  Taft.  I  never  have  been  able  to  see  why  street-railway  compa- 
nies should  be  taxed  by  any  other  rule  than  that  under  which  other 
invested  capital  is  taxed.  You  can  tax  them  by  income,  you  can  tax 
them  by  a  percentage  of  the  amount  invested.  Those  are  the  two 
methods ;  and  I  think  that  simplifies  the  methods. 

What  you  are  going  to  find,  if  you  have  this  percentage  tax,  is  that 
the  value  of  the  street  railways  will  be  taxed  at  a  higher  rate — I  mean 
the  property  of  the  street  railways  will  be  taxed  at  a  higher  assess- 
ment than  the  real  estate  of  the  ordinary  taxpayer — and  perhaps, 
therefore,  it  is  a  fairer  method  to  tax  by  income.  I  suppose  you 
could  not  tax  by  income  only.  You  would  have  to  have  both  systems 
of  taxation. 

Commissioner  Wehle.  Your  thought  on  this  subject  has  sug- 
gested to  me  that  possibly,  in  view  of  the  fact  that  you  regard  the 
street-railway  service  as,  in  a  way,  similar  to  the  service  of  conduct- 
ing a  public  road 

Mr.  Taft.  I  only  mention  that  as  an  argument  in  favor  of  tax- 
ation to  meet  the  deficit,  if  it  be  inevitable,  of  running  suitable  street 
railways. 

Commissioner  Wehle.  The  thought  was  suggested  to  me  that  pos- 
sibly you  would  view  any  tax  that  goes  beyond  the  necessity  of 
meeting  the  expense  of  the  State  with  reference  to  the  proi)erty  it- 
self as  poor  public  policy.    Is  that  your  view? 

Mr.  Taft.  Well  no;  because  I  think  those  who  get  any  profit  out 
of  it  ought  to  pay  the  same  taxation  that  men  who  make  a  profit  out 
of  other  businesses  pay. 

Commissioner  Wehle.  When  you  come  to  analyze  the  nickel  or 
the  7  cents  that  goes  into  the  conductor's  hands,  and  see  what  it  pays 
for,  does  it  seem  to  you  that  the  element  of  taxation  that  is  repre- 


20       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

sented  in  that  fare  should  go  beyond  paying  for  the  conducting  of 
the  property  itself,  as  it  affects  the  State  or  the  municipality? 

Mr.  Taft.  I  confess  that  if  a  man  owns  stock  in  a  street  railway 
and  tlie  stock  pays  him,  I  do  not  see  why  he  should  not  pay  taxes 
on  that  mcome,  or  on  the  value  of  the  stock,  just  as  if  he  had  an 
investment  anywhere  else. 

Commissioner  Wehle.  That  suggests  taxing  the  stock  or  the  in- 
come, rather  than  the  property  itself? 

Mr.  Taft.  Yes,  it  does;  and  I  think  the  greater  uniformity  you 
make  m  taxation  the  more  likely  you  are  to  reach  justice,  and  there- 
tore  if  you  treat  shares  of  stock  in  street  railways  just  as  you  do 
shares  of  stock  in  a  manufacturing  corporation,  or  in  any  kind  of 
an  enterprise,  I  think  vou  are  more  likely  to  do  justice;  and  you 
create  a  simplicity  which  is  merely  likely  to  lead  to  justice  or  a 
just  operation. 

Commissioner  Weiile.  That  is,  by  making  the  taxation  come  upon 
the  shareholder  or  the  bondholder,  who  obtains  income  out  of  the 
property,  rather  than  on  the  property  or  the  franchise  itself— you 
would  think  that  was  the  direction  in  which  to  go  in  the  matter  of 
taxing  public  utilities? 

Mr.  Taft.  You  are  there  confronted  with  a  lot  of  questions  of 
expediency  in  taxation— the  ability  to  find  the  bonds  and  tax  them, 
or  the  inability  to  find  the  bonds  and  tax  them,  is  one  thing.  You 
have  got  the  railroad  right  in  front  of  vou.  You  have  the  wires, 
you  have  the  electric-power  plant,  and  Avith  some  experience  in  levy- 
ing taxes,  I  do  not  think  that  clearness  of  view  that  the  State  has 
of  the  actual  property  ought  to  be  given  up  as  an  advantage.  I 
think  it  ought  to  be  reconciled,  as  it  seems  to  me  it  might  be,  with 
treating  that  property  just  as  you  treat  any  property  in  corporate 
ownership.  For  instance,  manufacturing  corporations  do  not  pay 
on  stock,  all  of  them,  but  both  on  the  property  they  own  and  on  the 
stock  they  own,  do  they  not? 

Commissioner  Wehle.  Yes. 

^•¥^\^'^^'  ^^  course,  taxes  vary  so  in  different  States  that  it  is 
difficult  to  state  generally. 

Commissioner  Wehle.  Do  you  think,  from  vour  observation,  that 
there  has  been  sufficient  control  of  stock  issues  by  public-utility  com- 
panies, and  particularly  electric-railway  companies? 

Mr.  Taft.  No,  sir;  I  do  not  know  but  there  is  now,  but  I  think 
that  has  been  one  of  the  sources  of  the  difficulties  in  which  we  have  ' 
found  the  situation.  I  have  always  been  in  favor  of  the  Federal 
incorporation  of  steam  railways  engaged  in  the  business  of  the  coun- 
try, and  if  you  have  Federal  incorporation,  I  think  you  ought  to 
have  a  limitation  of  the  power  to  issue  securities.  I  think  the  great 
abuses  that  have  arisen  in  the  management  have  been  in  the  unwise 
and  often  the  fraudulent  use  of  such  securities.  I  do  not  think  now 
that  that  is  the  case.  I  think  there  are  limitations  in  the  various 
States. 

Commissioner  Wehle.  Do  you  think  those  are  sufficient,  as  you 
have  seen  them? 

Mr.  TAF-r.  No;  I  think  there  ought  to  be  a  uniformity  produced 
by  putting  those  interstate  railroads  within  the  Federal  authority 

Commissioner  Wehle.  One  of  the  phases  of  the  present  situation 
seems  to  be  that  equities  have  been  created  in  innocent  holders  of 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       21 

stock  which  the  public  has  an  obligation  to  recognize  in  dealing 
with  the  company,  and  yet  the  stock  itself  was  not  legitimately  or 
justly  issued. 

Mr.  Taft.  That  is  very  true. 

Commissioner  Wehle.  Can  we  approach  the  situation  at  all  with- 
out having  that  condition  positively  prevented  in  the  future  ? 

Mr.  Taft.  I  should  think  you  ought  to  have  a  recommendation 
that  no  company  should  be  permitted  to  issue  either  stock  or  bonds 
without  a  certincate  issued  by  the  public-utilities  commission  justi- 
fying the  issue,  and  knowing  what  the  money  to  be  derived  from 
that  issue  is  to  be  devoted  to. 

Commissioner  Wehle.  One  more  question.  You  suggested  earlier 
in  the  hearing  that  it  seemed  to  you  that  possibly  7  cents  for  a 
maximum  fare,  beyond  which  the  companies  could  hardly  go  with- 
out incurring  a  diminution  in  business,  was  the  limitation  which 
would  be  found? 

Mr.  Taft.  That  is,  within  urban  limits. 

Commissioner  Wehle.  Yes. 

Mr.  Taft.  Of  course,  when  you  get  outside  of  the  city  into  what 
is  called  the  suburban  line  the  rate  goes  up  just  as  it  does  on  steam 
railroads. 

Commissioner  Wehle.  Yet  the  present  increase  in  costs  seems  to 
suggest  the  possibility  that  even  with  respect  to  urban  business  the 
7 -cent  fare  may  not  prove  economically  sufficient.  According  to  the 
contention  of  some  of  the  owners,  it  is  not  sufficient  to-day,  and  will 
not  remain  nearly  sufficient — or  even  8  cents. 

Mr.  Taft.  If  they  say  that,  then  I  would  ask  them  what  their 
suggestion  is. 

Commissioner  Wehle.  I  was  going  to  ask  you,  Mr.  Taft,  what 
your  suggestion  is. 

Mr.  Taft.  That  is  a  limitation  upon  your  useful  field.  You  are 
dealing  with  human  nature. 

Commissioner  Wehle.  But  at  that  point.  Judge  Taft,  comes  the 
place  where,  as  a  matter  of  public  policy,  we  must  avoid  conges- 
tion in  the  cities  ? 

Mr.  Taft.  Yes. 

Commissioner  Wehle.  Where  it  must  be  made  possible  for  these 
lines,  in  some  way,  to  give  this  service,  and  where  there  is  a  margin 
that  seems  to  be  almost  unabsorbable  by  private  initiative  in  order 
that  the  people  should  have  the  sort  of  service,  and  the  city  should 
have  the  sort  of  life  that  ought  to  be  produced. 

Mr.  Taft.  I  agree.  That  is  the  limitation  of  the  situation.  It  is 
part  of  the  problem  that  makes  it  very  difficult  to  solve. 

Commissioner  Wehle.  Is  that  the  point  at  which  you  stop — in 
that  area  of  the  unabsorbable  margin — where  you  believe  the  munici- 
pality or  the  State  should  come  in  and  assist  in  a  joint  partnership? 
Is  that  the  idea  that  you  were  expressing? 

Mr.  Taft.  Yes.  I  do  not  know  that  I  would  limit  it.  I  think  if 
the  system  proves  good  you  might  make  the  existence  of  that  a  con- 
dition— I  mean  the  service  at  cost;  because  the  effect  of  the  service 
at  cost  is  not  alone  to  meet  a  situation  such  as  you  describe,  but  it  is 
also  useful  in  dealing  with  the  public  and  reconciling  them  to  the 
result.  If  their  auditors  have  a  part  in  the  management,  so  far  as 
the  examination  of  accounts  is  concerned,  with  certain  restrictions 


" 


I! 


22       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIS". 

that  they  may  impose  as  to  the  operation  of  the  railway,  and  that  is 
done  through  their  own  officers,  they  are  much  more  likely  to  be 
reasonable  than  when  they  are  on  one  side  and  the  company  is  on 
the  other. 

Commissioner  Wehle.  At  that  point,  then,  you  Vould  suggest  that 
the  problems  of  administration,  in  such  a  way  as  to  insure  the  public 
the  proper  use  of  the  funds  which  the  public  might  come  to  invest 
in  street-railway  service,  could  be  solved,  by  having  a  joint  control 
or  a  joint  directorship?  . 

Mr.  Taft.  No;. I  would  not  call  it  joint;  but  I  would  call  it  a 
directorship  subject  to  the  complete  knowledge  and  certain  limited 
supervision  of  the  management  of  the  finances  of  the  company. 

Commissioner  Wehle.  That  is  all  I  have  to  ask. 

The  Chairman.  Commissioner  Nixon,  do  you  wish  to  ask  any  ques- 
tions of  Judge  Taft  ? 

Commissioner  Nixon.  No. 

The  Chairman.  Judge  Taft,  in  dealing  with  the  question  of  labor 
and  wages,  did  vou  find  that  an  effort  was  made  by  those  interested 
in  securing  higher  wages  to  demonstrate  that  the  street-car  com- 
panies could  effect  economies  in  operation  that  would  permit  them  to 
pa V  a  higher  wage  without  increasing  the  fare  ? 

Mr.  Taft.  No,  sir;  I  will  not  say  that  somebody  did  not  say  that 
in  argument,  because  it  would  be  unwise  to  say  that  the  argiiment 
did  not  have  a  very  wide  range;  but  there  was  no  serious  contention 
on  that  point. 

The  Chairman.  Was  any  effort  made  by  anyone  to  present  evidence 
to  your  board  to  show  how  that  can  be  done  ? 

Mr.  Taft.  No. 

The  Chairman.  In  determining  the  question  of  wage,  did  your 
board  consider  that  it  was  making  a  temporary  adjustment  only? 

Mr.  Taft.  Of  course^  we  were  making  a  temporary  adjustment, 
because  that  is  all  our  jurisdiction  was.  Our  orders  only  lasted  for 
SIX  months,  or  during  the  period  of  the  war;  that  is,  we  gave  the 
right  to  both  sides  to  come  before  us  and  ask  for  a  readjustment  at 
the  end  of  six  months. 

The  Chairman.  And  your  wage  was  based  upon  the  cost  of  living 
at  the  time  the  problem  Avas  before  your  board  ? 

Mr.  Taft.  Yes,  sir. 

The  Chairman.  How  far  back,  in  making  the  study  of  the  cost  of 
living,  did  your  board  go? 

Mr.  Taft.  We  had  the  benefit  of  the  findings  of  what,  for  lack  of 
a  better  recollection,  I  call  tlie  Secretary  Lane  Board,  which  fixed 
the  rates  of  wages  for  the  steam  railways,  and  I  think  that  went 
back  to  January,  1915.    I  think  it  was  January,  1915. 

The  Chairman.  Then  the  study  of  the  living  cost  was  continued 
just  during  the  war  oeriod  ? 

Mr.  Taft.  Yes.  Of  course,  one  war  period  differed  from  the 
other.  I  mean,  the  war  period  abroad,  and  the  war  period  with  us, 
after  we  got  into  the  war;  it  was  different,  of  course. 

Commissioner  Meeker.  May  I  make  a  suggestion  there,  Mr, 
Chairman?  I  think  your  board,  Mr.  Taft,  also  made  use  of  the 
cost-of-hvinjr  figures  which  the  Bureau  of  Labor  Statistics  collected 
m  shipbuilding  centers. 

Mr.  Taft.  Oh,  yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       23 

Commissioner  Meeker.  That  was  based  on  1914. 

Mr.  Taft.  Was  it?  It  went  back  to  1914,  did  it?  I  had  for- 
gotten. 

Commissioner  Meeker.  Yes. 

The  Chairman.  Did  your  board,  Judge  Taft,  consider  whether 
the  wages  which  existed  prior  to  the  European  war  were  just  and 
ample  to  meet  the  conditions? 

Mr.  Taft.  .  I  do  not  think  they  were ;  I  do  not  know  but  that  we  ex- 
pressed an  opinion  that  they  were  not.  I  think  we  did  express  the  opin- 
ion that  they  were  not,  for  the  reason  that  I  have  already  suggested, 
namely,  that  the  conditions  of  the  field  were  such  that  the  employers 
were  very  obstinate  in  viewing  an  increase  of  wages.  When  I  say 
"obstinate,"  you  understand  what  I  mean — they  felt  that  if  they 
went  on  they  would  seriouslv  injure  the  value  of  the  investment. 

The  Chairman.  What  influence  will  your  wage  adjustment  have 
upon  the  future  wages  of  employees  in  this  class  of  service  ? 

Mr.  Taft.  Well,  it  opened  the  subject  up;  and  I  haA^e  no  doubt 
that  it  has  established  a  more  or  less  permanent  standard  upward. 

The  Chairman.  Then,  that  being  so,  must  this  commission  con- 
clude that  the  operating  cost  of  the  street  railroads  would  be  upon 
a  higher  basis  in  the  future  than  it  has  been  in  the  past  ? 

Mr.  Taft.  I  have  not  a  bit  of  doubt  of  it.  Not  only  that,  but  I 
think  that  every  business  will  be. 

The  Chairman.  It  is  pretty  well  recognized  that  the  cost  of  mate- 
rial and  supplies  will  fall  in  the  course  of  time,  and  therefore  a 
large  element  of  the  operating  cost  will  be  on  a  lower  basis  than 
it  has  been  during  the  war  period. 

Mr.  Taft.  You  think  it  is  going  to  fall  a  gieat  deal ? 

The  Chairman.  I  hope  so.    It  always  has  in  the  past.  Judge  Taft. 

Mr.  Taft.  It  has,  when  they  have  had  a  panic ;  but  I  do  not  think 
the  cost  of  living  was  reduced  very  much  between  1865  and  1873. 

The  Chairman.  I  am  not  spealiing  of  the  cost  of  living.  I  was 
speaking  of  the  cost  of  material  and  supplies. 

Mr.  Taft.  That  is  what  I  am  speaking  of.  That  enters  into  the 
cost  of  living.    I  mean,  it  is  affected  by  the  same  reasons. 

Of  course,  I  am  no  prophet,  and  I  am  not  a  business  man,  but  as  I 
have  followed  the  general  opinion  of  men  who  have  been  in  busi- 
ness— say,  with  reference  to  the  building  trades — people  have  kept 
out  of  the  building  trades  because  the  cost  of  material  is  so  high; 
but  I  think  the  general  opinion  now  is  that  the  cost  of  building  is 
not  going  down  very  much,  and  that  people  are  going  on  to  build 
on  the  theory  that  that  is  a  level  more  or  less  fixed.  I  may  be  wrong 
about  that. 

The  Chairman.  The  function  of  this  commission,  if  it  has  any, 
is  to  offer  some  permanent  solution  of  the  street-railway  situation. 
That  being  so,  have  we  a  right  to  consider  that  the  present  operating 
cost,  including  wages,  price  of  material  and  supplies,  may  repre- 
sent the  average  normal  price  for  a  period  of  years  ? 

Mr.  Taft.  If  I  sat  upon  your  board  I  would  address  myself  to 
that  problem  on  that  basis. 

The  Chairman.  In  the  zoning  system,  should  the  commission 
consider  that  the  minimum  charge  should  be  5  cents,  or  a  less  sum, 
for  short  distances? 


I 


24       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Taft.  I  think  you  might  perhaps,  for  short  distances,  in  tho 
zone  system,  go  down  to  4  cents. 

The  Chairman.  If  there  is  to  be  a  zoning  system,  we  must  have 
a  charge  that  will  encourage  short-haul  traffic  as  well  as  long-haul 
traffic  to  get  the  revenue  for  the  company? 

Mr.  Tajt.  Yes.  I  think  we  ought  to  have  a  minimum,  but  I 
think  it  might  be  below  5  cents. 

The  Chairman.  This  commission  has  already  been  asked  to  offer 
suggestions  for  the  solution  of  the  local  problems;  there  are  a  num- 
ber of  utilities  that  have  already  sent  telegrams  and  communica- 
tions to  us  asking  how  to  settle  this  particular  problem  or  that  par- 
ticular problem. 

Mr.  Taft.  I  have  no  doubt  that  they  are  reaching  out  for  anythin<r 
that  will  .prevent  their  sinking.  ^ 

The  Chairman.  Do  you  think  this  commission  should,  prior  to 
the  iormulation  of  its  report,  attempt  to  interfere  or  even  venture 
suggestions  as  to  the  best  manner  of  determining  some  of  these 
local  problems? 

Mr.  Taft.  No  ;  I  do  not  think  that.  I  do  think,  however,  that  I 
would  give  them  a  chance  to  be  heard,  for  two  reasons:  First,  be- 
cause you  will  get  a  great  deal  of  information  from  particular  in- 
stances, and  second,  I  do  not  see  why  you  should  not  offer  your- 
selves, as  you  are  seeking  to  give  relief,  to  let  this  industrv,  if  you  can 
call  It  such,  have  a  safety  valve.  There  is  nothing  that  helps  the 
psychological  condition  of  a  man  so  much  as  to  have  an  opportunity 
to  let  out  what  is  in  him  in  respect  to  a  subject  where  he  thinks  ho 
is  not  being  treated  fairly  or  properly. 

The  Chairman.  While  the  street-car  problem  consists  of  a  ^^reat 
many  segregated  plants,  yet  their  difficulties  all  bear  upon  the'^gen- 
eral  problem? 

Mr.  Taft.  Yes;  they  do. 

The  Chairman.  For  that  reason  we  should  hear  them? 
Mr.  Taft.  I  think  you  ought  to  hear  them,  because  there  are 
common  facts  in  respect  to  all  the  companies. 

The  Chairman.  You  have  been  addressing  vourself  somewhat  to 
the  question  of  service  at  cost.  Service  at  cost,  if  I  understand  the 
plan  correctly,  represents  a  definite  understanding  that  the  investor 
shall  receive  a  return  upon  his  honest  investment,  and  also  the  public 
shall  receive  as  good  service  as  it  can  for  what  it  pays. 

Mr.  Taft.  What  he  receives  may  differ  in  rate,  as  to  the  permanent 
investment  already  made,  from  that  that  he  would  receive  on  subse- 
quent investments;  where  he  becomes  a  borrower  himself,  as  he  must 
^"r^*^"vi^^  ^^^^^^  plants,  he  will  pay  the  market  rate  for  the  money. 
1  he  Chairman.  Is  not  the  net  result  of  the  service-at-cost  plan 
a  public  guaranty  of  return? 

Mr.  Tait.  It  is  not  a  guaranty  of  the  payment  of  money  by  tho 
corporation  by  the  municipal  corporation,  but  is  an  arrangement  by 
which  the  fai;es  which  the  public  pay  shall  meet,  within  limits,  the 
cost  of  operation. 

The  Chairman.  In  other  words,  the  public  does  not  guarantee  to 
make  up  any  deficit  by  appropriation? 

Mr.  Taft.  No;  but  it  agrees  that,  within  certain  limits,  the  fares 
shall  rise  in  order  to  meet  the  necessity  for  an  income  on  the  in- 
vestment. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      25 

The  Chairman.  With  that  understanding,  do  you  believe  that  a 
service-at-cost  plan  would  remove  the  incentive  to  economy  in  the 
operation  of  these  plants? 

Mr.  Taft.  I  am  willing  to  concede  that  the  factor  'may  not  be  so 
strong  in  such  an  arrangement  as  it  is  where  the  company  has  com- 
plete control ;  but  I  think  there  is  quite  enough  motive  there  to  make 
the  management  far  more  economical  than  it  would  be  under  mu- 
nicipal management. 

The  Chairman.  How  do  you  differentiate  between  the  incentive 
toward  economy  under  the  service-at-cost  plan  and  under  municipal 
operation  ? 

Mr.  Taft.  The  man  who  is  running  the  company  has  to  see  to  it 
that  he  gets  his  income  within  the  limits. 

The  Chairman.  But  he  is  sure  of  his  income  ? 

Mr.  Taft.  No  ;  he  is  not ;  because  the  fares  are  not  certain  to  pay. 
It  is  a  very  different  guaranty,  if  you  call  it  such,  to  raise  the  fares 
than  to  pay  the  money  on  the  investment — very  different.  At  least, 
it  seems  so  to  me ;  and,  so  far  as  municipal  management  is  concerned, 
I  am  somewhat  familiar  with  that. 

The  Chairman.  Do  you  believe,  Judge  Taft,  that  a  service-at-cost 
plan,  with  a  certain  guaranty  of  the  term,  would  invite  the  demand  . 
for  municipal  ownership  of  these  plants? 

Mr.  Taft.  I  do  not  think  so;  I  think  it  would  allay  the  demand. 
I  think  it  would  allay  the  demand  in  the  sense  of  security  that  tho 
people  would  have  that  that  thing  was  being  run  under  their  eyes — 
that  the  game  was  played  with  the  cards  face  up  on  the  table.  That 
is  one  of  the  great  advantages  in  that  plan. 

The  Chairman.  Of  course,  the  plan  could  not  be  favored  at  all 
unless  it  meant  that 'the  public  had  a  very  strict  watch  over  the  ac- 
counting system  ?  • 

Mr.  Taft.  Oh,  yes;  and  had  their  accountants  there  all  the  time. 
I  understand  that  there  is  no  practical  difficulty  about  that.  At 
least,  in  Cleveland,  which  was  the  concrete  instance  before  us,  there 
was  not  the  slightest  suggestion  that  the  public  did  not  know  all 
that  was  being  done. 

The  Chairman.  Do  you  believe  that  the  street-car  situation  is 
such  that  franchises  could  be  adopted  throughout  the  States  carry- 
ing the  same  general  provisions? 

Mr.  Taft.  That  is  a  question  of  success.    If  one  State  adopted  it  • 
and  it  worked,  I  think  another  would ;  and  the  solution  is  so  difficult 
that  any  success  in  its  solution  would  lead  to  a  general  uniformity. 
Of  course  you  could  not  bring  it  about  by  national  legislation,  be- 
cause there  is  no  jurisdiction  to  do  that. 

The  Chairman.  Have  you  given  consideration  to  any  particular 
form  of  franchise  for  these  utilities? 

Mr.  Taft.  No,  sir. 

The  Chairman.  Whether  the  franchise  should  be  for  a  limited 
number  of  years  or  for  a  permanent  tenure  ? 

Mr.  Taft.  No;  I  would  not  venture  an  opinion.  I  may  answer 
that  bv  saying  that  that  was  not  my  job. 

The  Chairman.  You  do  state,  however,  that  from  your  experience 
upon  the  board,  you  found  that  State  commissions  were  more  will- 
ing to  recognize  new  operating  conditions  and  adjust  the  fares  ac- 
cordingly than  the  local  municipalities?  * 

160G43*'— 20 3 


26       PROCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSIOK". 

Mr.  Taft.  Oh,  I  think  there  is  no  doubt  about  that.  A  public- 
utility  conunission  comes  into  a  community  just  as  you  come  in  here, 
and  you  have  a  hearing  that  likens  itself  to  a  judicial  hearing;  and 
it  comes  from  the  center  of  the  State;  it  represents  the  State;  it  is 
separated  from  the  local  feeling.  You  go  before  a  common  council 
and — well,  it  isn't  so,  that  is  all ;  it  is  not  the  same  way. 

The  Chairman.  Do  you  believe  that  State  regulation  should  com- 
pletely dominate  the  field,  leaving  nothing  to  local  tribunals  to 
sunply  ? 

Mr.  Taft.  I  believe  in  local  self-government,  of  course,  as  far  as 
possible,  and  that  might  well  be  encouraged  by  an  original  hearing, 
and  then  an  ap}>ellate  proceeding,  so  that  it  comes  up  before  the 
board  with  the  finding  of  the  council  and  imposes  upon  the  com- 
pany the  burden  of  showing  that  tlie  council  was  wrong. 

The  Chairman.  There  seem  to  be  two  schools  of  thought  on  this 
question.  One  group  of  men  favor  centralizing  all  of  the  authority 
over  rates  as  well  as  service  and  capitalization  in  the  State  commis- 
sion; the  other  favor  leaving  it  with  the  local  nnuiicipalities,  sub- 
ject to  appeal,  both  as  to  service,  rates,  and  other  mattei-s,  to  the 
State  commission.     Which  plan  do  you  think  is  the  more  feasible? 

Mr.  Taft.  I  think  the  more  practical  plan  would  be  to  give  com- 
plete control  to  the  State  commission,  in  point  of  speed  of  action 
and  possibly  efficiency;  but  there  is  a  strong  feeling  among  the  peo- 
ple for  local  res^ulation,  and  I  do  not  think  it  would  interfere  w  ith 
efficiency  enough  or  create  so  much  delay  as  to  offset  the  advantage 
of  recognizing  local  interests  and  local  power,  thus  reconciling  mu- 
nicipalities to  having  such  a  system.  I  do  not  know  whether  I  make 
myself  plain. 

The  Chairman.  Do  you  Mieve  that,  under  any  circumstances,  the 
whole  jurisdiction,  botfi  over  service  and  rates, 'should  be  left  with 
municipalities? 

Mr.  Taft.  Are  you  speaking  of  fixing  wages? 

The  Chairman.  No ;  as  to  rates  and  service. 

Mr.  Taft.  I  think  the  w^hole  subject  should  be  under  the  control 
of  the  State  commission  and  of  the  local  authorities. 

The  Chairman.  But  I  asked  if  you  think  the  whole  question  should 
be  left  to  the  local  municipality,  without  right  of  appeal  to  the  State 
commission  ? 

Mr.  Taft.  No,  sir;  I  do  not  think  so. 

The  Chairman.  Do  you  believe  that  we  have  approached  the  time 
where  we  should  get  away  from  the  fixed  fare,  fixed  by  law  or  fran- 
chise ? 

Mr.  Taft.  Yes;  I  do.  I  think  a  fixed  fare  that  runs  for  20  years 
is  not  right  to  either  side. 

Commissioner  Sweet.  If  this  commission  should  be  requested  by 
any  local  authorities  that  might  agree,  perhaps  to  act  as  arbitrators 
in  the  settlement  of  local  troubles,  do  you  think  it  would  be  wise  for 
us  to  accept  that  responsibility  and  do  it,  or  would  it  lead  to  possible 
multiplication  of  our  work  to  such  an  extent  that  it  would  not  be 
feasible,  or  would  it  w^eaken  our  authority,  the  authority  of  what 
w^e  may  ultimately  put  forth  ? 

Mr.  Taft.  I  think  it  would  be  a  very  useful  bodv  to  tender  service 
in  settling  questions,  where  both  sides  are  willing  to  submit;  but 
I  think  it  will  involve  you  in  a  permanent  business. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      27 

■  The  Chairman.  And,  of  course,  our  compensation  is  even  less  than 
$1  a  year. 

Commissioner  Sweet.  I  have  one  more  question  that  I  would  like 
to  ask,  suggested  by  your  answer  to  the  chairman  with  regard  to  the 
general  advance  in  prices  of  commodities  and  labor  and  ever^i-hing 
else.  Is  it  such,  in  your  judgment,  as  to  justify  the  statement  that 
the  purchasing  power  of  the  dollar  has  been  very  materially  re- 
duced^ 

Mr.  Taft.  I  think  it  has.  I  think  that  as  soon  as  peace  comes 
Ave  are  likely  to  have  an  era  of  prosperity ;  and  an  era  of  prosperity 
usually  means  high  prices.    It  means  large  demand  for  everything. 

Commissioner  Sw^eet.  If  the  purchasing  power  of  the  dollar  is 
reduced,  the  purchasing  power  of  the  nickel  is  reduced  in  the  Siune 
proportion,  is  it  not? 

Mr.  Taft.  Oh,  yes. 

Commissioner  Sw^eet.  And  if  the  value  of  the  dollar  is  reduced 
to  60  cents,  the  value  of  the  nickel  is  reduced  to  3  cents,  is  it  not  ? 

Mr.  Taft.  Yes. 

Commissioner  Sw^eet.  Is  not  that  a  fact  that  the  public  should 
take  into  account  in  connection  with  their  paying  for  this  railway 
service  ? 

Mr.  Taft.  Yes. 

Commissioner  Sweet.  If  they  are  paying  in  nickels  that  are  actu- 
ally worth,  in  purchasing  power,  3  cents,  they  ought  not  to  expect 
to  get  as  much  for  that  nickel  as  for  a  nickel  that  was  worth  5  cents 
in  its  purchasing  power;  isn't  that  so? 

Mr.  Taft.  Yes. 

The  Chairman.  Suppose  that  the  improvements  in  the  art  of 
transportation  should  develop  to  a  condition  where  the  street-car, 
as  now  operated,  becomes  an  obsolete  institution:  should  there  be 
any  obligation  upon  the  public  to  protect  such  an  institution? 

Mr.  Tait'.  If  it  becomes  obsolete,  it  will  be  rejected,  and  then 
they  can  not  get  any  income.  I  think  that  will  w^ork  itself  out.  I 
think  the  suggestion,  however,  is  a  reason  why  these  fixed  fran- 
chises for  long  tei-ms  are  not  wdse  arrangements  now. 

Commissioner  Wehle.  Judge  Taft,  three  of  the  gentlemen  on  this 
commission  are  representatives  of  Government  departments,  and  I 
liappen  to  be  one  of  them,  representing  the  Treasury  Department, 
and  this  question  as  to  the  scope  of  the  commission's  activities  in- 
terests me  very  much.  I  think  it  is  proper  to  say  here,  because  the 
(juestion  has  been  brought  up,  that  in  Washington  it  is  strongly  felt, 
certainly  among  the  higher  officials  whom  I  have  had  contact  wMth 
in  connection  with  my  representation  on  this  commission,  that  the 
authority  and  influence  which  the  commission  can  exert  with  ref- 
erence to  the  street-railway  problem  must  be  purely  a  persuasive  in- 
fluence, based  on  the  balanced  character  of  the  personnel  of  the 
commission,  and  based  also  on  the  thought  that  the  Federal  Gov- 
ernment, in  having  been  instrumental  in  bringing  about  this  in- 
quiry, is  acting  really  as  a  mediator,  so  to  speak,  in  this  economic 
dispute;  and  that  this  authority  of  the  Government  and  the  in- 
fluence which  it  w^ould  have  through  this  commission  would  be 
greatly  lessened  if  it  undertook  in  any  way. to  interfere  or  to  sug- 
gest as  to  the  solution  of  any  local  difficulties. 


28       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

You  have  sii^r^ested  tlmt  these  gentlemen  who  are  involved  in  these 
difficulties  should,  if  they  apply  to  us,  be  heard  with  reference  even 
to  the  difficulty  itself.  Do  you,  may  I  ask,  conceive  that  that  sug- 
gestion would  carry  with  it,  if  adopted,  a  danger  that  the  functions 
of  this  commission  and  the  intentions  of  its  framers  would  be  mis- 
understood ? 

Mr.  Taft.  I  doubt  it.  I  believe  in  the  inductive  method  of  philos- 
ophy. I  believe  you  will  reach  generalizations  by  getting  particular 
cases,  safer  generalizations,  by  taking  up  a  series  of  particular  cases, 
than  you  will  by  generalizations  such  as  you  have  listened  to  this 
morning.  I  do  not  know  how  much  you  value  my  evidence,  but  I 
would  not  value  it  very  much. 

Comniissioner  Wehle.  We  do  value  it  very  highly.  Judge. 

Mr.  Taft.  I  think  the  evidence  of  particular  cases,*^  with  something 
concrete  before  you,  even  though  you  have  generalizations,  will  en- 
able you  to  test  those  generalizations  in  a  way  that  would  be  most 
useful  for  you. 

Commissioner  Weiile.  But  your  suggestion  that  we  hear  these 
men  from  troubled  localities  does  not  carry  with  it,  does  it,  the  idea 
that  we  should  make  suggestions  as  to  the  wav  in  which  the  dispute 
should  be  settled? 

Mr.  Taft.  No;  not  unless  both  sides  present  the  question  to  you 
and  ask  you  to  do  it.  Then,  if  they  do,  that  is  a  matter  of  discretion 
for  you  to  say  how  far  you  are  willing  to  go  in  tendering  services  that 
are  gratuitous  on  the  part  of  the  Government  and,  so  far  as  I  under- 
stand, gratuitous  on  the  part  of  the  members  who  represent  the 
Government. 

The  Chairman.  I  am  sure.  Judge  Taft,  that  the  commission  wishes 
to  thank  you  for  your  very  valuable  contribution  to  this  subject. 

Mr.  Taft.  I  am  very  glad  to  come  here,  gentlemen.  I  have  spoken 
with  great  freedom  on  issues  in  respect  to  which  I  do  not  claim  to 
have  any  expert  knowledge ;  but  we  are  all  in  together  in  the  solution 
of  these  problems,  or  all  affected  by  them,  and  if  anvthing  that  has 
happened  to  me  in  the  course  of  the  National  War' Labor  Board's 
experience  is  helpful  to  you,  I  am  delighted  to  give  it  to  you. 

The  Chairman.  I  have  a  telegram  from  Mr.  G.  S.  MacFarland, 
reading  as  follows : 

Call  to  Wasliinjiton  makes  it  Impossible  for  me  to  appear  before  you  to-day! 
Shall  be  glad  to  do  so  on  some  other  occasion. 

This  telegram  is  sent  from  Boston  June  19. 

Now%  Mr.  Pardee,  you  have  a  statement  to  make,  I  understand,  and 
we  shall  be  glad  to  hear  you. 

STATEMENT  OF  MR.  JOHN  H.  PARDEE. 

Mr.  Pardee.  I  appear  as  president  of  the  American  Electric  Rail- 
way Association,  which  of  course  is  vitally  interested  in  the  investi- 
gation which  this  commission  has  undertaken.  The  association  rep- 
resents a  very  large  majority  of  the  electric-railway  mileage  of  the 
United  States. 

It  has,  for  a  number  of  years,  be«n  fully  alive  to  the  alarming 
tendency  manifested  in  electric-railway  affairs,  and  through  its 
various  committees  has  been  seeking  for  remedies.     It  was  repro- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       29 

sented  at  Washington  during  the  war  by  a  war  board,  which,  for  a 
part  of  the  time  was  presided  over  by  Mr.  P.  H.  Gadsden,  one  of 
your  members,  and  it  constantly  endeavored  to  bring  to  the  attention 
of  the  country,  and  especially  to  the  national  administration,  the  situ- 
ation in  which  the  industry  has  been  plunged,  not  only  by  war  con- 
ditions, but  by  conditions  which  prevailed  before  the  war. 

The  association  believes  that  in  the  appointment  of  your  commis- 
sion a  very  decided  forward  step  has  been  taken  in  the  x:)rocess  of 
informing  the  country  of  the  very  unfortunate  state  of  affairs  exist- 
ing among  the  traction  companies,  and  of  arriving  at  some  solution 
of  the  difficulties.  As  its  president,  I  am  authorized  to  place  its 
facilities  at  your  command. 

At  a  recent  meeting  of  the  executive  committee  of  the  association 
a  committee  of  100  of  the  leading  owners,  operators,  and  bankers  in- 
terested in  the  electric-railway  securities,  and  others,  of  which  Gen. 
Guy  E.  Tripp  is  chairman,  was  appointed  for  the  purpose  of  prepar- 
ing a  presentation  of  the  situation  as  it  is  viewed  by  the  electric-rail- 
wa}^  interests.  We  hope  to  appear  before  you  commission  at  its  con- 
venience with  a  full  and  complete  presentation  and  with  such  sug- 
gestions for  the  correction  of  conditions  as  the  committee  may  decide 
upon. 

We  approach  this  subject  not  only  with  the  interest  of  the  railways 
in  mind,  but  also  with  the  interest  of  the  public,  which  we  firmly  be- 
lieve is  threatened  with  the  loss  of  an  essential  and  important  service, 
unless  measures  be  taken  to  check  the  present  tendency. 

We  believe,  with  the  President  of  the  United  States,  with  the  Sec- 
retaries of  Labor  and  Commerce,  that  the  situation  because  of  its 
effect,  not  only  upon  the  financial  structure  of  the  Nation,  but  upon 
its  commercial  and  civic  life,  has  national  aspects  which  can  not  be 
ignored. 

The  situation  of  which  we  complain  is  not  confined  to  one  locality 
but  extends  throughout  the  United  States. 

The  solution  in  our  opinion  depends,  in  the  first  instance,  upon  a 
complete  understanding  by  the  public  of  the  problems  as  they  now 
exist ;  and  in  the  education  of  the  public  to  the  importance  of  these 
problems,  as  w^ell  as  to  the  method  of  curing  them,  your  commission 
can  do  a  very  large  and  a  very  important  work. 

Please  consider  that  the  association  and  its  resources  are  at  your 
command  in  the  investigation  that  you  have  undertaken.  I  desire 
at  this  time  to  request  your  commission,  at  its  convenience,  to  ap- 
point a  date  at  which  our  committee  may  present  for  your  consid- 
eration the  facts  affecting  the  situation  which  3^ou  are  studying,  as 
they  appear  to  the  men  actively  interested  in  the  financing  and 
operation  of  electric  railways.  It  shall  be  our  endeavor  to  give  you 
as  comprehensive  a  picture  as  we  can  of  present  conditions  and  the 
causes  which  have  led  to  them,  as  well  as  to  the  remedies  to  be 
applied. 

The  Chairman.  How  soon,  Mr.  Pardee,  would  it  be  convenient 
for  your  committee  to  present  these  facts  to  the  commission? 

Mr.  Pardee.  Gen.  Tripp  has  called  a  meeting  of  the  members  of 
this  committee  who  are  quite  prominent  men  in  all  sections  of  the 
United  States,  and  he  has  called  a  general  meeting  of  the  committee 
for  Juno  26,  in  New  York,  at  which  we  hope  to  have  a  very  large 
proportion  of  the  members  of  the  committee  present.     Subcommit- 


30 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 


tees  are  now  working  on  a  definite  program  to  outline  to  the  general 
(•oinmittee,  and  we  hope  that  at  that  meeting,  on  June  26,  the  de- 
tailed arrangements  will  all  be  made  so  that  we  can  get  to  work 
immediately;  so  that  perhaps  a  week  later  we  would  be  prepared  to 
l>re8ent  some  particular  phase. 

Our  present  idea  is  that  we  shall,  at  these  various  hearings,  present, 
one  at  a  time,  definite  phases  of  the  situation:  for  instance,  taxation, 
in  one  comprehensive  plan;  franchises;  service-at-cost  plan;  and  va- 
rious other  phases  of  the  general  question. 

The  Chairman.  Would  it  be  convenient  for  the  utilities  to  present 
all  that  you  have  to  say  at  one  general  meeting  which  would  consume 
as  many  days  as  may  be  necessary,  or  would  you  prefer  to  have 
separate  hearings? 

Mr.  Pardee.  It  would  depend  entirely,  sir,  upon  whether  we  could 
prepare  it.  We  desire,  if  possible,  to  present  this  in  a  very  compre- 
hensive and  complete  way— each  section.  Some  phases  will  take 
longer  for  preparation  than  others,  and  I  do  not  know  that  I  can 
answer  that  question  just  now.  A  little  later,  however,  we  can  pre- 
sent, I  think,  at  a  general  meeting  consuming  one  or  more  days  all 
of  the  subjects.  ' 

The  Chairman.  The  commission  will  be  glad  to  consider  any  sug- 
gestion that  you  have  to  make  uix)n  that  subject.  Would  it  be  con- 
venient for  the  representatives  of  your  association  to  come  to  Wash- 
ington to  present  that  testimony? 

Mr.  Pardee.  Yes,  sir;  at  the  pleasure  of  the  commission. 

The  Chairman.  There  was  a  Mr.  Clark  who  was  to  appear  this 
morning  to  give  testimony. 

Mr.  Pardee.  Mr.  Clark  is  the  direct  representative  of  the  associa- 
tion, Mr.  Chairman,  and  I  am  speaking  for  Mr.  Clark,  as  I  conferred 
with  him  this  morning;  and  unless  it  is  the  earnest  desire  of  the  com- 
mission to  hear  Mr.  Clark  this  morning,  we  would  rather  have  his 
testimony  come  into  our  general  plan,  rather  than  take  part  of  it  at 
this  time. 

The  Chairman.  The  commission  will  hear  Mr.  Clark  later,  then. 
Is  there  a  Mr.  Cummin  in  the  room  ? 
Mr.  Cummin.  Yes. 

The  Chairman.  Will  you  be  at  liberty  to  present  your  statement 
this  afternoon? 

Mr.  Cummin.  Yes,  sir. 

The  Chairman.  Are  there  any  other  gentlemen  present  who  wish 
to  present  statements  before  this  commission  at  this  time,  or  at  any 
other  period  ?    If  so,  we  will  take  your  names  now.    [No  response.] 

Lot  it  be  understood  that  if  any  here  desire  to  present  testimony  to 
this  commission,  if  they  are  not  ready  to  do  so  now,  they  may  com- 
municate with  us  later  on.  We  want  to  hear  all  sides  of  the  question, 
and  get  all  the  information  that  can  be  gathered. 

We  now  stand  adjourned  until  half  past  2,  to  meet  in  this  room. 

(Whereupon,  at  12.40  o'clock  p.  m.,  a  recess  was  taken  until  2.30 
p.  m.) 

AFTER    recess. 

The  Chairman.  Is  Mr.  Cummin  present? 

Mr.  Cummin.  Yes. 

The  Chairman.  We  will  hear  you. 


PROQEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION".       31 

STATEMENT  OF  MR.  GAYLORD  C.  CUMMIN. 


The  Chairman.  Please  state  your  name,  address,  and  business,  Mr. 
Cummin. 

Mr.  Cummin.  I  represent  now  the  Institute  for  Public  Service,  at 
51  Chambers  Street,  New  York,  a  private  institution  that  has  on  its 
board  of  directors  such  men  as  Julius  Barnes,  of  the  Wheat  Corpora- 
tion, and  Mr.  W.  Hefflin,  manager  of  the  Allied  Grain  Export  Cor- 
poration; Dr.  L.  B.  Upson,  of  Bureau  of  Governmental  Research  in 
Detroit. 

The  Chairman.  Have  you  had  any  experience  in  the  handling  of 
public  utilities  ? 

Mr.  Cummin.  I  have  handled  them  six  years  from  the  public 
standpoint,  and  have  been  about  as  much  with  them  on  the  private 
side.  I  have  been  city  engineer  of  Dayton,  Ohio,  city  manager  of 
Jackson,  Miss.,  and  Grand  Rapids,  Mich. 

The  Chairman.  When  and  how  long  were  you  city  manager  of 
Jackson  ? 

Mr.  Cummin.  Two  years. 

The  Chairman.  And  at  the  other  place? 

Mr.  Cummin.  One  year. 

The  Chairman.  When  was  it? 

Mr.  Cummin.  Two  years  ago. 

The  Chairman.  You  may  proceed. 

Mr.  Cummin.  The  street-railway  situation,  as  I  see  it,  divides  itself 
into  two  parts.  I  might  say  that,  during  the  past  year,  I  have  been 
with  a  large  utility  group  and  have  had  opportunity  to  study,  at  first 
hand,  the  figures  and  the  number  of  street  railroads. 

The  street  railroads  seem  to  separate  themselves  into  two  groups 
for  purposes  of  treatment.  One  group  is  the  group  where  it  is  pos- 
sible for  them  to  stand  on  their  own  feet,  by  means  of  increased 
fares  and  decreased  expenses  of  various  kinds,  decreased  taxes 
perhaps,  and  so  on.  In  other  words,  the  earning  capacity  is  there, 
to  put  them  on  their  feet.  The  other  class  is  the  class  where  the 
earning  capacity  is  not  there;  I  mean,  the  rate  of  fare  that  is  fixed 
makes  absolutely  no  difference.  You  could  give  the  company  a  free 
hand  to  charge  any  thing  they  wanted  to  charge,  and  they  still  could 
not  raise  their  gross  revenue. 

It  is  rather  a  simple  problem  of  merchandising.  You  have  a 
problem  of  getting  the  greatest  gross  revenue,  and  you  can  get  it 
m  one  of  two  ways — ^by  selling  a  large  number  of  units  for  a  small 
price  or  a  small  number  of  units  for  a  large  unit  price.  There  is 
some  price  at  which  you  can  get  the  largest  gross  revenue.  That  is 
true  of  street-railway  fares  just  as  much  as  it  is  of  articles  of  mer- 
chandise. But  as  the  size  of  your  town  decreases,  speaking  gener- 
ally, the  price  per  fare  at  which  you  can  get  the  greatest  gross  reve- 
nue drops,  and  you  get  in  the  smaller  towns,  to  the  point  where  5 
cents  is  probably  larger,  or  might  be  larger  than  the  point  where 
you  could  get  the  greatest  gross  revenue.  Of  course,  the  habit  of 
paying  5  cents  might  not  make  that  true;  but  it  is  certainly  true 
that  a  6-cent  fare  in  the  smaller  towns  in  many  cases  will  give  no 
increase  in  gross  revenue,  and  in  some  cases  an  actual  decrease. 

Commissioner  Sweet.  Are  you  saying  that,  now,  from  actual  cases 
that  you  know  of  ? 


» « 


32       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Mr.  Cu-AiMiN.  I  am  saying  that  from  actual  cases. 

I  am  not  going  to  discuss,  very  much,  the  class  where  the  revenue 
floes  not  exist,  where  they  can  not  earn  the  revenue.  I  am  going  to 
try  to  discuss  the  ones  where  it  is  possible  to  get  the  revenue. 

The  Chairman.  Have  you  any  figures  to  show  in  what  cases  the 
increase  in  the  fare  from  5  to  6  cents  would  result  in  an  actual  loss 
in  gross  revenue? 

Mr.  Cummin.  No;  I  have  not  them  with  me,  Mr.  Chairman.  I 
know  of  two  small  street  railroads  that  I  was  watching  with  a  great 
deal  of  attention  and  when  the  increased  fare  was  put  into  effect 
they  fell  off  very  materially,  not  only  in  passengere  carried,  but  in 
actual  gros3  revenue  for  the  period  of  months  over  which  I  watched 
them,  about  some  seven  months. 

Commissioner  Gadsden.  Have  you  followed  up  the  experience 
since  that  time  ? 

Mr.  Cummin.  Since  that  time  I  happen  to  have  been  out  of  touch 
with  them. 

Commissioner  Sweet.  I  think  you  had  better  name  the  place. 

Mr.  Cummin.  Jackson,  Miss.,  was  one  of  those.  That  is  a  town  of 
30,000.    There  is  a  case  where  they  do  not  have  to  ride. 

Commissioner  Beall  That  is  because  the  distances  ai*e  so  short? 

Mr.  Cummin.  Yes. 

Commissioner  Beall.  If  there  are  any  others  that  j'^ou  may  have 
to  cite,  I  think  we  should  know  of  them. 

Mr.  Cummin.  That  was  the  plainest  case.  That  was  the  case  of 
an  increase  to  a  7-cent  fare,  which  resulted  in  a  decrease  in  gross 
earnings,  a  very  material  decrease,  too,  at  first. 

Commissioner  Gadsden.  What  was  their  average  ride  in  Jackson, 
do  you  know  ? 

Mr.  Cummin.  Xo. 

Commissioner  Gadsden.  Was  it  over  a  mile  and  a  half,  or  less? 

Mr.  Cummin.  Less  than  a  mile  and  a  half. 

Commissioner  Gadsden.  That  explains  it. 

Mr.  Cummin.  It  is  easy  enough  to  explain  why,  but  it  is  a  con- 
dition that  does  exist. 

In  the  cities  where  a  change  of  fare  promises  relief,  it  seems  to 
me,  from  what  I  have  seen  on  both  sides,  that  no  form  of  agreement 
which  has  been  made  at  present  is  satisfactory.  Perhaps  the  nearest 
approach  to  it  is  the  service-at-cost  plan.  That,  I  think,  has  in  it  a 
fundamental  weakness,  which  was  touched  upon  briefly  this  morn- 
ing, but  was  not  brought  out,  and  that  is — I  do  not  believe  that  by 
making  a  fixed  return,  which  a  utility  can  not  exceed,  you  can  keep 
that  utility  up  to  efficient  operation  or  that  you  can  keep  its  execu- 
tives and  managers  interested  in  cutting  its  costs  and  cutting  cor- 
ners and  keeping  things  as  low  as  possible.  That  simply  is  npt 
human  nature.  You  have  got  to  give  some  incentive  to  do  the  thing 
you  want  to  do,  if  you  want  to  do  it  for  any  length  of  time. 

Commissioner  Beall.  Suppose  the  maximum  is  not  fixed,  how 
then  ?  Suppose  there  is  no  maximum  there  fixed,  but  that  the  rates, 
as  in  Montreal,  rise  to  whatever  height  is  necessary  to  produce  a 
given  revenue  on  a  given  investment.  Are-  you  referring  to  a  case 
of  that  kind? 

Mr.  Cummin.  If  you  give  the  utility  a  fixed  return  only— that  is, 
if  it  is  allowed,  say,  7  per  cent  on  its  invested  capital,  or  6  per  cent 


PROCEEDHsTGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       33 

on  its  invested  capital — when  it  once  gets  up  to  6  per  cent,  it  is  not 
going  to  exert  itself  to  cut  its  costs,  because  it  does  not  make  any 
difference,  then,  what  the  earnings  are,  it  can  only  get  its  6  per  cent, 
or  its  7  per  cent  as  the  case  may  be.  You  are  taking  the  incentive 
away  from  the  utility.  That  it  actually  has  that  effect  I  have  seen  in 
other  cases  not  connected  with  street  railroads,  but  one  case  I  think 
of,  particularly,  where  an  electric-power  plant  in  a  small  town  had 
an  opportunity  to  buy  current  from  a  big  central  station  plant  at 
quite  advantageous  terms,  and  they  were  earning,  at  that  time,  the 
maximum  allowed  by  that  State  public-service  commission,  the 
maximum  percentage ;  and  when  they  signed  up  the  contract  with  the 
central-station  plant,  a  rate  controversy  was  inaugurated  by  some 
citizens  and  taken  up  by  the  public-service  commission,  and  they 
lost  all  the  advantage  they  had  gotten  by  signing  the  contract,  and 
came  back  to  whatever  it  was — 7^  per  cent,  I  think — ^that  they  were 
allowed. 

The  man  that  owned  that  utility  and  a  group  of  utilities  besides 
told  me  shortly  afterwards  that  that  had  cured  him  of  ever  trying 
to  save  anybody  any  money ;  and  you  can  see  how  that  would  happen. 

I  have  heard  one  other  manager  of  another  utilit}^  group  that  has 
specialized  on  efficient  operation  and  they  are  in  States  where  they 
are  governed  by  commissions,  and  where  they  have  a  fixed  rate  of 
return,  and  I  have  heard  him  explain,  on  several  occasions,  that  he 
could  not  see  any  reason  why  they  should  continue  exerting  them- 
selves to  hold  the  grade  of  efficiency  which  they  had  prided  them- 
selves on,  because  they  absolutely  got  nothing  out  of  it. 

Commissioner  Beall.  How  about  a  case  like  Dallas,  Tex.?     The 
electric-light   company   operates   under    a   franchise   whereby   the 
lower  the  rate  the  larger  return  they  are  permitted  to  earn  on  the 
fixed  value  recognized  by  the  franchise.     Does  not  that  cure  the 
thing  ? 

Mr.  Cummin.  I  had  not  heard  of  that.  That  is  pretty  much  the 
same  thing  I  was  about  to  speak  of. 

Commissioner  Beall.  Would  not  that  cure  it? 

Commissioner  Gadsden.  That  is  also  the  consideration  in  the  Cin- 
cinnati contract. 

Mr.  Cummin.  A  street-railway  contract? 

Commissioner  Gadsden.  Service  at  cost. 

Mr.  Cummin.  And  an  increasing  return? 

Commissioner  Gadsden.  An  increasing  portion  that  the  railway  re- 
ceives of  the  net  profit. 

Mr.  Cummin.  I  think  there  is  an  important  point  that  has  to  be 
watched,  that  the  utility,  as  it  decreases  its  cost  so  that  the  rate  of 
fare  can  be  dropped,  will  get  some  part  of  that  saving.  I  think  that 
is  most  important.  I  do  not  believe  that  otherwise  you  will  fret  the 
o]7eration  that  you  have  a  reason  to  expect  from  private  operations. 
I  tliink  that  incentive  must  be  there. 

Commissioner  Meeker.  You  believe  unless  you  have  that  money 
incentive  the  private  operation  has  no  advantages  over  a  public 
operation  ? 

Mr.  CuM^riN.  I  can  see  where  it  would  have  but  little,  if  any.  I 
can  not  see  any  incentive  there  for  them  to  continue  to  keep  their 
operation  efficient. 


34       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  At  any  rate,  it  would  not  reach  the  highest 
state  of  efficiency  ? 

Mr.  Cummin,  No. 

Commissioner  Beall,  Are  you  basing  that  on  any  actual  com- 
parison between  municipally  owned  and  privately  owned  plants? 

Mr.  Cummin.  Xo. 

Commissioner  Beall,  I  think  you  will  find  the  figures  the  other 
way,  if  you  take  the  operating  sheets  of  municipal  plants  in  this 
country  and  compare  them  with  those  privately  managed;  you  will 
find  the  private  companies  have  the  advantage. 

Mr.  Cummin.  I  am  speaking  on  the  average,  and  not  of  any  par- 
ticular company.    You  mean  the  private  companies 

Commissioner  Beall.  Are  operated  more  efficiently,  at  less  cost  ? 

Mr.  Cummin.  I  believe  so. 

Commissioner  Beall,  Where  you  can  get  the  figures.  In  many 
towns  they  will  not  give  them  to  you. 

Commissioner  Meeker.  You  mean,  even  without  the  economic  in- 
centive, private  management  is  more  efficient  than  public  manage- 
ment ? 

Commissioner  Beall.  Yes, 

Mr.  Cummin.  I  think  that  is  quite  possible.  There  are  other  diffi- 
culties in  public  ownership  which  do  not  generally  appear  to  the 
public. 

Commissioner  Gadsden.  Is  it  not  true,  also,  that  even  where  there 
is  no  incentive  to  the  private  operation  of  the  extra  profit,  that  the 
employees  and  officers  of  the  company  still  have  the  incentive  of 
producing  economic  results  in  that  industry  as  compared  with  the 
rtisults  which  their  friends  and  associates  are  obtaining  in  other 
plants? 

Mr.  Cummin.  Yes. 

Commissioner  Gadsden.  You  do  not  get  rid  of  that  incentive  ? 

Mr.  Cummin.  You  still  have  another  incentive,  too.  You  have  the 
incentive  that  urges  them  to  efforts  in  order  to  keep  the  percentage 
they  do  get. 

The  trouble  with  municipally  owned  or  publicly  owned  plants  is 
that  3^ou  are  liable  to  have  a  case  where  they  do  not  look  after  the 
financial  condition  of  their  plant  at  all.  Their  operating  statements 
may  be  one  thing  or  another,  but  the  actual  physical  condition  of 
their  plant  and  the  condition  of  their  finances  is  not  looked  after 
carefully. 

The  Chairman.  Do  you  prefer  to  complete  your  statement  before 
submitting  j^ourself  to  cross-examination? 

Mr.  Cummin.  I  think  this  is  probably  the  best  way,  Mr.  Chair- 
man, to  bring  out  any  points  that  I  can  cover. 

The  main  point  that  I  wanted  to  impress  was  the  point  of  not 
forgetting  that  you  must  put  the  incentive  in  front  of  the  utility  as 
well  as  in  front  of  the  people,  if  you  want  to  get  efficient  operating 
results.  You  put  an  incentive  in  front  of  the  people  by  lowerino" 
fares,  an  incentive  for  them  to  treat  the  utility  fairly; 'because  if 
they  treat  the  utility  unfairly,  they  spoil  its  chances  for  having  a 
good  year's  operation,  and  spoil  their  chances  for  getting  a  lower 
fare.  They  can  only  get  a  lower  fare  when  the  utility  is  prosperous, 
and  the  utility  can  only  get  a  greater  return  when  the  consumer  gets 
a  lower  fare.    I  think  that  is  the  thing,  boiled  down.    Psychologically 


PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION".       35 

that  is  correct.     On  both  sides  you  put  an  incentive  before  each 
party  to  do  the  thing  that  they  ought  to  do. 

The  great  point  in  the  whole  controversy,  the  big  job  that  is  before 
you  gentlemen,  as  I  see  it,  is  a  job  of  education.  The  public  are 
])rejudiced.  There  is  no  doubt  about  that.  They  have  known  of 
things  that  have  been  done  in  the  past,  and  they  labor  under  the 
delusion,  or  they  at  least  have  the  feeling  that  tremendous  profits 
have  been  made  out  of  the  operation  of  street  railroads — I  mean 
directly  out  of  the  operation  of  street  railroads — and  they  see  no 
reason  why  the  companies  that  in  times  past  have  made,  as  they 
feel,  tremendous  profits,  should  not  stand  the  temporary  setbacks 
also. 

Furthermore,  by  these  acts  of  the  past,  the  utilities  have  aroused 
the  suspicion  and  distrust  of  the  public  for  almost  anything  they 
say;  and  unfortunately  the  utilities  do  not  seem  to  have  learned  to 
handle  the  public  with  any  degree  of  good  sense  in  many  of  these 
disputes;  they  needlessly  arouse  the  distrust  and  suspicion  of  the 
public,  and  arouse  it  anew. 

Take  an  instance  that  occurred  in  Akron,  just  recently;  that  is, 
in  the  spring:  There  was  an  ordinance  in  the  city  council  asking  for  a 
6-cent  fare,  put  in  by  the  Northern  Ohio  Traction  Co.,  and  at  the 
same  time  that  that  was  in  the  council,  asking  for  increased  fare  on 
account  of  changed  conditions  due  to  the  war,  before  the  county 
commissioners  was  the  project  of  a  viaduct  which  had  been  designed 
before  the  war,  where  they  had  entered  into  a  contract  with  the 
street-railway  company  to  pay  a  certain  amount  based  on  a  per- 
centage of  the  cost  of  that  viaduct.  The  war  had  held  it  up.  After 
the  war,  they  had  got  together,  and  they  had  to  reestimate  it  at  a 
very  much  higher  cost,  on  account  of  the  increase  in  the  cost,  of 
materials. 

They  came  to  the  street-railway  company  to  modify  their  con- 
tract on  account  of  the  conditions  due  to  the  war,  the  changed  con- 
ditions due  to  the  war,  and  the  manager  said,  "  We  have  a  contract." 
And  then  they  wondered  why  there  was  a  public  explosion. 

There  is  an  instance  of  a  bone-headed  thing  that  a  utility  does. 
They  disavowed  it  in  two  or  three  days,  but  the  damage  was  done. 
That  was  not,  probably,  intentional.  The  man  that  that  came  up  to 
did  not  see  what  he  was  doing.  But  that  sort  of  thing  promptly 
makes  a  bad  impression  the  great  bulk  of  the  citizens,  who  say :  "  You 
can  not  rely  on  anything  these  fellows  say.  They  want  the  money, 
and  that  is  all  they  are  interested  in.  They  do  not  want  to  play  fair. 
They  want  simply  what  they  can  get  out  of  it." 

I  simply  cite  that  as  an  instance  of  a  thing  that  is  to  be  remedied 
if  present  conditions  are  to  be  improved.  The  utility  companies  have 
got  to  pay  a  little  more  attention  to  the  public  relations  than  they 
ever  have  before. 

There  are  many  instances,  as  you  look  over  one  dispute  after  an- 
other and  see  where  things  have  been  done  that  were  not  necessary, 
where  they  went  out  of  their  way,  apparently,  to  arouse  the  public. 
One  case  that  I  have  in  mind  occurred  in  Michigan — Michigan,  by 
the  way,  is  a  home-rule  State,  where  the  citizens  are  very  particular 
about  any  interference  with  local  self-government — and  in  one  of 
the  bills,  which  was  supposed  to  be  fathered  by  the  utilities,  that 
was  put  in  the  last  legislature,  for  a  public-service  commission— 


», 

t 


36       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISf  ION. 

which,  for  the  first  time,  has  a  chance  of  passing  in  Michigan— the 
public  mind  has  been  educated  to  the  point  where  they  saw  the  neces- 
sity, but  this  bill  came  in 

The  Chairman.  Did  that  bill  give  the  public-service  commission 
exclusive  control  over  the  rates  and  service  of  the  utilities? 

Mr.  Cummin.  Not  only  the  utilities,  but  over  the  municipal  util- 
ities, over  their  rates,  and  everything  connected  with  them. 

Well,  now,  that  promptly  brought  up  the  argument  that  that  will 
give  the  public-service  commission  the  power  to  say  how  much  you 
shall  pay  for  water,  for  instance,  which  may  be  very  much  above 
what  we  are  paying  now,  because  part  of  the  cost  is  being  carried 
out  of  general  taxation ;  and  the  way  the  bill  was  worded,  that  was 
perfectly  possible. 

It  is  very  advantageous,  it  is  a  good  thing,  a  good  protection  for 
the  public,  to  have  accounting  control,  to  have  the  State  public- 
service  commission  have  accounting  control  of  municipally  owned 
utilities.  They  should  have.  They  should  have  control  over  maxi- 
mum rates,  they  should  have  control  over  discriminations  in  rates; 
but  it  certainly  was  not  a  wise  thing  to  try  to  insist  upon  their  hav- 
ing absolute  control  of  ordering  what  rates  should  be  charged  by 
municipal  utilities  in  a  State  that  is  so  wedded  to  local  self-govern- 
ment. That  was  done,  and  it  aroused  a  great  deal  of  opposition — 
an  amount  of  opposition  that  was  not  at  all  necessary,  and  they  had 
quite  a  hard  fight  getting  any  bill  through. 

That  is  just  another  instance  of  a  perfectly  good  idea  being  carried 
too  far,  and  needlessly  arousing  public  distrust  and  suspicion. 

It  seems  to  me  that  that  is  the  big  job  that  you  have  got  on  your 
hands.  You  have  got  to  educate  the  utilities  to  tell  the  truth  to  the 
public,  so  that  they  will  believe  it.  There  are  a  lot  of  them  that  are 
trying  to  tell  the  truth,  but  a  good  many  of  them  do  not  seem  to 
know  how.    They  make  mistakes,  just  like  the  two  I  have  cited. 

It  is  also  necessary  to  teach  the  utilities  to  bring  out  their  infor- 
mation in  such  a  way  that  there  is  no  more  mystery  left  in  their  busi- 
ness. Mystery  is  a  great  thing  to  engender  suspicion,  and  the  more 
mysterious  you  make  the  financial  operations  of  a  utility,  whatever 
policy  may  have  to  do  with  it— I  am  talking  about  the  effect  on  the 
mind  of  the  public— you  must  bring  your  financial  operations  out 
into  the  open  if  you  ever  want  to  get  the  public  to  believe  you,  and 
you  have  got  to  submit  to  public-accounting  control — not  simply  an 
annual  audit,  but  real  control  of  your  accounting. 

As  everybody  knows  that  has  ever  run  any  kind  of  a  large  job, 
or  any  kind  of  a  business,  it  is  the  easiest  thin^  in  the  world  to  make 
operating  reports  do  all  kinds  of  funny  things.  You  can  juggle 
back  and  forth  between  capital  account  and  operating  account,  un- 
less it  is  being  carefully  watched.  I  do  not  believe  that  is  being 
done,  to  any  great  extent,  certainly,  and  it  certainly  is  not  being 
done  where  we  have  public-service  commission  control,  but  the  pub- 
lic thinks  it  is  being  done,  which  is  just  the  same  from  the  stand- 
point of  the  utilities;  that  is,  they  will  not  believe  the  financial  state- 
ments of  the  utilities. 

You  have  got  to  get  around  that  in  some  way,  and  the  best  way 
to  get  around  it  is  to  take  the  ammunition  out  of  the  public's  hands 
by  giving  them  abundant  chance  to  be  sure  that  their  figures  are 
right. 


•PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       37 

Commissioner  Gadsden.  I  want  to  ask  you  a  question.  What  are 
you  going  to  do  with  the  other  class  of  utilities  ? 

Mr.  Cummin.  The  other  class  of  utilities— you  simply  have  two 
questions,  two  things  you  can  do:  One  of  them  means — and  I  am 
looking  at  it  purely  from  the  standpoint  of  the  public;  the  public 
must  have  service— you  have  either  got  a  public  partnership,  a  part- 
nership with  the  public,  a  subsidy,  or  something  like  that,  or  you 
have  public  ownership.  There  are  two  things  you  can  do.  It  has 
to  be  subsidized  out  of  taxation  some  place. 

Commissioner  Gadsden.  The  public  has  to  absorb  the  loss? 

Mr.  Cummin.  The  public  has  to  absorb  the  loss.  They  are  neces- 
sary facilities.  Unfortunately,  they  have  nothing  to  look  forward 
to,  because  the  loss  that  they  have  suffered  now  is  a  loss  due  to  the 
automobile,  very  largely,  and  the  use  of  the  automobile  is  going  to 
increase,  and  not  decrease,  and  the  probable  passengers  per  unit  of 
population  served  will  probably  tend  to  decrease  and  not  increase. 

The  Chairman.  You  mean,  then,  that  the  street-car  utility  is  going 
to  become  a  diminishing  factor  in  transportation,  with  the  develop- 
ment of  communal  life  ? 

Mr.  Cummin.  Per  unit  of  population,  I  would  think  that  was  cor- 

rect. 

Commissioner  Gadsden.  I  want  to  bring  out  your  idea  of  what  is 
going  to  be  that  essential  service  that  could  not  pay  its  way. 

Mr.  Cummin.  The  effect  of  the  automobile  now  can  be  shown  by 
comparing  the  figures  on  gasless  Sundays  and  the  Sundays  that 
were  not  gasless.  On  a  number  of  lines  I  found  that  the  gasless 
Sundays  added  from  20  to  40  per  cent  to  the  gross  revenue,  and 
they  seemed  to  average  some  place  around  33 J  per  cent.  Now,  if 
the  street  railroads  had  33 J  per  cent  more  gross  revenue  than  they 
have  now,  it  would  go  a  long  way  toward  helping  the  solution  of 
the  difficulty,  even  under  present  prices. 

Commissioner  Beall.  You  do  not  refer  to  carrying  passengers  at 
a  loss,  and  where  the  more  they  carry  the  more  they  lose  ? 

Mr.  Cummin.  I  recognize  that  that  would  not  all  be  clear.  I 
mean  that  would  take  some  additional  expense.  But,  unfortunately, 
one  cause  of  the  street  railroad's  trouble  is  a  falling  off  in  travel  per 
unit  of  population  served. 

Commissioner  Gadsden.  Is  not  one  of  the  serious  consequences 
of  the  street-railway  situation  the  fact  that  they  are  called  upon 
to  do  their  maximum  service  in  a  limited  time,  morning  and  after- 
noon? 

Mr.  Cummin.  Yes;  that  is  very  serious. 

Commissioner  Gadsden.  And  that  that  requires  an  enormous  in- 
crease in  car  investment,  which  is  largely  idle  during  the  balance 
of  the  24  hours? 

I^Ir.  Cummin.  Yes. 

Commissioner  Gadsden.  Is  it  not  also  true  that  the  more  j'ou  in- 
crease that  peak  load  the  worse  the  financial  condition  of  the  com- 
pany will  get? 

Mr.  Cummin.  Yes;  unless  something  is  done  to  fill  up  those  val- 
leys. 

Commissioner  Sweet.  What  could  be  done? 

Mr.  Cummin.  I  think  that  is  a  case  that  entirely  depends  upon 
local  conditions.    I  mean  I  believe  it  can  be  worked  out,  that  loads 


88       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

can  be  furnished  for  street-railroad  cars,  under  some  situations, 
where  just  now  they  are  not.  I  mean  by  perhaps  making  particu- 
larly attractive  rates,  by  finding  on  study  that  a  certain  line  or 
cars  travel  in  a  certain  direction  at  a  certain  hour  of  the  day  that 
are  hardly  used,  that  it  might  be  possible  to  encourage  travel  tliat 
way. 

Commissioner  Gadsden.  Have  you  ever  made  a  study  of  the  effect 
on  that  situation  of  industry  in' general  stagger ii\g  its  hours? 

Mr.  Cu]MMiN.  I  never  have  made  a  study  of  it,  but  it  certainly 
should  have  an  effect. 

Mr.  Gadsden.  Would  not  that  relieve  it  ^eatly  ? 

Mr.  Cummin.  I  think  it  would  relieve  it  very  considerably. 

Commissioner  Gadsden.  If  industry  generally  would  sttigger  its 
hours  and  cut  that  peak  down? 

Mr.  Cummin.  Yes.  If  they  spread  the  peak  over  a  greater  number 
of  hours,  that  certainly  would  lower  the  cost  of  giving  the  service, 
and  probably  give  better  service  also. 

Commissioner  Sweet.  What  would  be  the  practical  method  of 
doing  that? 

Mr.  Cummin.  That  is  a  matter  of  the  education  of  the  industries 
to  the  point,  and  the  workmen  also — to  the  point  where  they  are  will- 
ing to  start  and  stop  at  different  houre  in  these  industries.  It  has  to 
be  done  by  agreement.  I  do  not  see  any  way  in  which  it  could  be 
done  by  law.  However,  it  certainly  would  add  very  considerably, 
especially  where  you  have,  say,  two' large  plants,  two  or  three  large 
plants  out  on  the  end  of  a  line,  and  they  are  all  let  go  at  the  same  time 
now,  if  they  separated  their  starting  and  stopping  time  by,  sa)%  half 
an  hour,  or  even  15  minutes,  it  would  certainly  add  a  great  deal  to  the 
relief  of  the  situation;  half  an  hour  would' probably  be  better.  It 
would  not  only  give  very  nmch  better  service  to  the  people  served, 
but  also  would  cut  down  the  cost  of  that  service. 

Commissioner  Sweet.  Something  of  that  kind  was  done  in  Wash- 
ington with  the  different  departments  during  the  war. 

Commissioner  Beall.  It  was  done  here  during  the  influenza  epi- 
demic, too,  and  had  a  good  effect. 

Commissioner  Sweet.  That  would  be  entirely  out  of  the  hands  of 
the  street-railroad  corporations? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  That  would  be  done  by  the  municipality  ? 

Mr.  Cummin.  That  is  a  matter  of  the  education  of  the  public.  The 
public  has  to  learn  that  they  are  vitally  interested  in  this  problem, 
which  they  do  not  seem  to  see  right  now. 

Commissioner  Sweet.  That  is  right. 

Mr.  Cummin.  That  is  they  are  bound  to  lose  as  long  as  the  contro- 
versy keeps  on,  or  as  long  as  the  utilities  can  not  live,  they  are  bound 
to  lose ;  they  are  bound  to  lose  in  service,  and  perhaps  in  money,  be- 
fore they  get  through. 

The  Chairman.  Had  you  finished  your  questions,  Mr.  Gadsden? 

Commissioner  Gadsden.  Yes. 

Conimissioner  Sweet.  You  said  something,  Mr.  Cummin,  about  the 
incentive  being  necessar}^  to  the  greatest  degree  of  efficiency,  and  I 
take  it  that  you  are  opposing,  in  a  way.  municipal  ownership  on  the 
ground  that  it  does  not  offer  a  monetary  inducement  to  the  highest 
degree  of  efficiency.    Is  that  right  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOl^.       39 

Mr.  Cummin.  No;  that  is  not  the  gi'ound  on  which  I  objected  to 
municipal  ownership.  I  think  the  question  of  municipal  ownership, 
as  I  see  it,  is  that  the  people  do  not  want  municipal  ownership;  that 
is,  in  general;  thei-e  are  local  instances  where  they  do.  I  believe 
that  it  is  unproven  as  to  whether  a  municipality  can  operate  a  street- 
railroad  company  as  efficiently  as  a  private  one  can  operate  it.  I 
will  not  say  that  it  is  not  possible  for  a  municipality,  but  I  will  say 
that  it  is  unproved  that  a  municipality  can.    I  think  it  is  a  last  resort, 

right  now.  .     .  .,  ,      , 

Commissioner  Sweet.  Do  you  think  it  is  possible  that  a  munici- 
pality might  operate  a  street*  railroad  as  efficiently  as  a  private  cor- 
poration? 

Mr.  Cummin.  I  think  most  anything  is  possible.     1  should  say 

it  was  very  improbable. 

Commissioner  Sweet.  Improbable? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  You  said  you  were  the  city  manager  of 

Grand  Rapids,  Mich."^ 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  As  city  manager  you  had  charge  /)f  the 
pumping  station,  waterworks,  and  of  the  lighting  plant  for  the  city 
lighting,  as  well  as  for  other  work  that  was  conducted  by  the  board 
of  public  works? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  Paving  and  construction  of  sewers  and  that 

kind  of  work? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  Do  you  think  that  your  work  would  have 
been  any  better  done  or  any  more  efficient  if  you  had  been  working 
for  a  private  corporation  instead  of  for  the  public  corporation  ? 

Mr.  Cummin.  Yes,  I  do ;  because  I  do  not  believe  the  thing  would 
have  been  in  the  financial  condition  it  was  in  if  it  had  been  a  private 
corporation,  because  it  would  have  been  in  a  receiver's  hands  a  long 

time  before. 

Commissioner  Beall.  They  had  a  rather  obsolete  plant,  did  they 

not  ? 
Mr.  Cummin.  The  water  plant  is  modern. 
Commissioner  Beall.  I  mean  the  electric-light  plant. 
Mr.  Cummin.  The  electric-light  plant  was  a  joke. 
Commissioner  Beall.  It  was,  when  I  saw  it.    I  do  not  know  what 

it  is  to-day. 

Mr.  Cummin.  They  had  a  number  of  brush-arc  motors  operated 
by  some  single-cylinder  Russell  engines  that  were  old  enough  to 
vote.    That,  however,  has  been  changed. 

Commissioner  Sweet.  Those  Russell  engines  had  been  defective 
almost  from  the  start,  had  they  not,  and  subjected  to  a  sort  of  partial 

repair  ? 

Mr.  Cummin.  Yes;  I  guess  they  were  not  very  good  in  the  first 
place,  but  they  were  certainly  steam  eaters  when  I  had  them.  That 
apparatus,  by  the  way,  has  been  replaced. 

Commissioner  Sweet.  Had  there  not  been  a  lateral  crack  or  break- 
age in  the  cylinders,  or  where  the  cylinders  connected  with  the  steam 
engine? 


40       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Cummin.  No;  they  seemed  to  have  been  in  good  enough  oper- 
ating shape  for  the  type  of  engines  they  were. 

Commissioner  Sweet.  But  they  were  not  economical  engines? 

Mr.  CuMMixX.  No;  they  were  not.  Running  beside  themrthev  were 
running  a  pump  and  filter  plant  with  the  turbogenerator  unit  that 
made  them  compare  very  unfavorably. 

Commissioner  Sweet.  You  think  an  up-to-date  private  corpora- 
tion would  have  discarded  engines  of  that  kind  and  put  in  good 
ones,  Mr.  Cummin  ?  ^ 

Mr.  Cummin  They  certainly  would  have  discarded  those,  be- 
cause they  could  not  have  operated  and  stayed  solvent 

Commissioner  Sweet.  When  you  were  conducting  the  business 
affairs  of  the  city  of  Grand  Rapids,  did  the  city  make  any  use  of 
hydroelectric  power?  "^ 

Mr.  Cummin.  No. 

Commissioned  Sweet.  There  was  electric  current  distributed  in 

^?r"^i^^P^^^  ^y  ^"^^  method  of  generation,  was  there  not? 
Mr.  Cummin.  Yes,  sir. 

Commissioner  Sweet.  But  the  city  did  not  use  it? 
Mr.  Cummin.  No,  sir. 

Commissioner  Sweet.  Could  it  have  used  it  to  advantage? 
1  .1  ^J^^i^",^-  Probably  not  economically.  We  had  a  very  excel- 
lT\  l?^^Jf^^«^  «n  th«  electric  part  of  that  plant,  for  the  reason 
that  the  filter  pumps  were  largely  in  use  during  the  day,  and  the 
same  motive  machinery  ran  the  street  lighting  at  night;  so  that  the 
load  factor  was  very  excellent,  and  we  could  operate— with  those 
iiussell  engines  replaced  by  turbogenerator  equipment,  we  could 
operate  very  efficiently.  ^    r-  ? 

Commissioner  Sweet.  Aside  from  the  fact  that  cities  are  verv 
conservative  oftentimes,  and  not  disposed  to  make  improvements 
upon  their  plants,  but  merely  bearing  upon  the  question  of  effort  or 
incentive  to  effort  on  the  part  of  the  management,  I  repeat  mv  ques- 
tion whether  your  management  in  Grand  Rapids,  as  the  city  man- 
ager,  was  not  as  efficient,  from  the  standpoint  of  effort  on  your  part 

;o4r  ^'is'Zttr ''  ^^^^  '^'  '^^^  ^-^^^^^^^  ^^  ^  ^--^^  -- 

Mr  Cummin.  Yes;  because  under  the  peculiar  municipal  situa- 
tion there,  my  incentive  was  my  own  reputation 

Commissioner  Sweet.  With  regard  to  the  securing  of  competent 
managers  in  a  city,  is  that  sometimes  to  your  knowledge,  influenced 
by  other  motives  than  those  of  efficiency  ?  '  mnuencea 

Mr.  Cummin.  Not  only  that,  but  the  municipalities,  as  a  rule,  pay 
such  ridiculous  prices  for  technical  help;  for  instance,  in  that  very 
same  large  water  plant  you  spoke  of,  the  chief  engineer  was  getting 
Jt)l,wOO  a  year.  ^         '^ 

Commissioner  Sweet.  What  was  your  salary « 

Mr.  Cummin.  My  salary  was  $10,000.  He  was  getting  $1,800 
There  is  not  a  private  plant  of  one-quarter  that  size  that  would 
not  have  been  paying  their  man  more  than  that.  They  happened  to 
have  a  good  man,  but  that  was  luck,  and  not  good  management. 
\\hen  they  have  to  compete  with  the  whole  field,  with  the  whole  in- 
dustrial field,  for  the  technical  men  that  they  need,  and  then  try  to 
get  them  for  one-quarter  to  one-third  of  what  is  paid  outside— well 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION".       41 

they  just  don't  get  them,  that  is  all.     That  is  one  reason  public  effi- 
ciency falls  off.    They  do  not  get  the  best  man. 

Commissioner  Sweet.  I  am  trying  to  get  your  reasons  for  think- 
ing that  street  railways  could  not  be  advantageously  operated  by 
municipalities. 

Mr.  Cummin.  Not  at  present.  • 

Commissioner  Sweet.  I  personally  do  not  believe  that  municipal 
operation  is  advisable;  at  least,  I  would  have  to  have  pretty  strong 
evidence  to  satisfy  me  that  it  is  advisable.  My  leaning  would  be 
the  other  way.  And  yet  my  own  observation  in  connection  with  city 
government  has  been  that,  as  a  rule,  much  better  men  are  obtained, 
better  talent,  and  a  greater  amount  of  energy  and  efficiency  than 
ought  to  be  expected  for  the  salaries  that  are  paid.    Isn't  that  true  ? 

Mr.  Cummin.  I  think  that  is  true ;  yes,  sir. 

Commissioner  Sweet.  Then,  if  cities  would  wake  up  to  the  idea 
that  they  have  got  to  pay  proper  compensation  for  their  work,  is  it 
not  possible  that  municipally  managed  railways  might  be  successful? 

Mr.  Cummin.  Absolutely.  I  think  it  is  entirely  possible.  But  I 
think  the  public  has  got  to  be  very  decidedly  rebuilt.  The  public  is 
a  poor  employer. 

Commissioner  Sweet.  It  is  a  stingy  employer  ? 

Mr.  Cummin.  Yes;  and  always  has  been  a  poor  employer.  They 
have  got  to  get  around  to  being  a  good  employer  if  they  want  to  be 
efficient.  They  have  got  to  quit  political  interference  with  the  man- 
agement of  their  public  utilities  if  they  want  to  make  them  a  success; 
and  they  have  got  to  get  them  on  a  sound  financial  basis.  Those  are 
the  things  they  do  not  do. 

Commissioner  Sweet.  The  man  who  preceded  3^011  in  the  manage- 
ment of  the  public  works  at  Grand  Rapids  was  Samuel  A.  Fresh- 
ney.    Did  you  know  him  ? 

Mr.  Cummin.  Yes;  very  well. 

Commissioner  Sweet.  The  public  paid  him  $4,000  a  year? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  And  he  left  the  public  employment  and  took 
a  position  with  the  Commonwealth  Co.  at  a  much  larger  salary,  did 

he  not  ? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  Do  you  know  what  he  got? 

Mr.  CuiMMiN.  No;  but  I  know  that  he  got  a  much  larger  salary. 

Commissioner  Sweet.  Six,  or  seven,  or  eight  thousand  dollars  ? 

Mr.  Cummin.  At  least,  to  start  with. 

Commissioner  Sweet.  The  public  lost  a  good  man  because  it  was 
not  willing  to  pay  him  a  good  salary  ? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  Is  that  general  throughout  the  country? 

Mr.  Cummin.  Yes;  it  is. 

Commissioner  Sweet.  That  is  something,  of  course,  that  could  be, 
by  proper  education  of  the  public,  corrected,  is  it  not? 

Mr.  Cummin.  It  is  an  educational  question  very  largely.  The  line 
of  demarcation  must  be  drawn  in  the  public  mind  between  politics 
in  the  legislative  side  and  politics  in  the  administrative  side  of  their 
governments.  That  is,  they  have  got  to  keep  politics  out  of  the 
actual  doing  of  the  things  they  want  done. 

160643"— .20 4 


42       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MMISSI02T. 

Commissioner  Sweet.  One  objection  that  is  raised  to  municipal 
ownership  is  the  political  objection?  iu^i^ipai 

Mr.  Cummin.  Yes. 

Coinmissioner  Sweet.  That  it  would  create  a  large  body  of  govern- 
mental-employed  individuals  who  would  be  a  disturbin/factoi  in  a 
certain  sense,  from  the  political  standpoint?  ^  ' 

Mr.  CuM3fiN.  Yes. 

Commissioner  S^v^ET.  Have  you  seen  evidences  of  that  kind  of 
tft      "'''  '^  connection  with  the  city  government-some  of 

Mr.  CuMMiN.  Not  to  any  serious  extent;  no.     I  have  known  of 
cases  of  a  police  force  being  active  in  politics  for  instance.    That  dki 
get  to  be  serious,  though.    I  undei-stand  in  some  Australian  publiclv 
owned  utility,  up  to  the  time  of  the  war,  one  Province  I  believe  dis 
franchized  all  their  public  employees.  ^«>"^^e,  i  Deiieve,  dis- 

Commissioner  Sweet.  If  I  understood  you  correctly,  the  solution 
of  this  problem,  from  your  standpoint,  is  to  make  it  an  incentive  to 
the  public  by  giving  lower  fares,  lower  rates,  an  incentive  to  use  the 
public  utilities,  and  to  desire  their  success,  and  to  have  no  limit  to 
what  the  management  or  the  corporation  itself  may  make,  so  as  to 
also  present  an  object  to  them  for  the  best  and  most  efficient  manage- 

Mr.  CuMMixV.  That  is  the  general  idea. 

Commissioner  Sweet.  In  other  words,  you  want  to  eat  your  cake 
and  have  it,  too?  How  can  you  have  lower  rates,  so  as  to  please  the 
public,  and  increase  the  earnings  so  as  to  please  the  management? 
Is  not  one  antagonistic  to  the  other  ?  ia^emeiu  f 

Mr.  Cummin.  No.    It  is  done  by  a  division. 

Commissioner  Sweet.  What  is  that  ? 

Mr.  Cummin  It  is  done  by  a  division.  Take  the  case  of  a  corpora- 
tion where  a  rate  is  fixed  which  is  computed  to  yield  it  6  per  cent  we 
will  say,  on  its  investment,  just  for  purposes  of  argument.  It  earns 
<  per  cent  m  the  next  year.  Its  actual  net  earnings  are  7  per  cent 
That  extra  per  cent  will  be  placed  aside,  because  it  was  only  allowed' 
to  earn  6  per  cent.  The  next  year  it  will  be  allowed  to  earn  (U  per 
cent,  and  the  consumer  will  get  a  discount,  or  an  extra  ticket,  deuend- 

n'J.fTtn  r^  ^''""l  ?^X''^'^l\^  V%\^^'  aggregate  of  which  is  com- 
puted to  be  equal  to  this  other  half  per  cent.     In  other  words   the 

next  year  the  return  allowed  will  be  6^  per  cent.  We  will  sav'that 
that  year  they  earn  7  per  cent.  All  right.  Still  divide  it  50-50  and 
you  get  up  to  a  return  to  the  utility  of  8  per  cent,  or  7  per  cent  and 
give  the  utility  one-quarter  beyond  that,  and  the  consumer  three- 
quarters— let  It  dmiinish  as  it  goes  up,  the  possible  return  to  the 
utility,  the  additional  return  to  the  utility. 

Commissioner  Meeker.  Why  diminish? 

Mr.  Cummin.  For  the  purpose  of  tlie  effect  on  the  public  mind 
As  a  matter  of  actual  fact,  I  do  not  think  it  makes  a  great  deal  of 
difference,  but  the  public  has  the  idea  that  it  is  possible  at  some  time 
to  earn  very  tremendous  earnings— 15  or  16  or  17  per  cent.  If  vou 
have  this  diminishing  scale  as  you  go  up,  you  can  remove  that  foar 
anTsuch'^'kn "^^  '^^"'"'''^  ^^'""^  argument  from  the  opponents  of 

Commissioner  Wemle.  That  plan  has  been  in  use  in  English  cities 
for  a  generation  or  so,  ha^  it  not,  in  connection  with  gas  rates? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       43 

Mr.  Cummin.  Not  that  I  know  of. 

Commissioner  Weiile.  And  is  there  not  a  plan  of  that  kind  in 
effect  in  Boston,  during  the  last  10  years — a  sliding  scale  of  rates? 

Mr.  Cummin.  That  means  an  actual  change  in  the  rate.  I  do  not 
want  to  get  off  on  the  gas  question,  because  that  is  another  question. 

Commissioner  Wehle.  It  is  the  principle — I  am  not  trying  to  get 
into  a  discussion  of  the  gas  question — but  simply  inquiring  whether 
the  principle  you  have  just  been  advocating  is  the  principle  which 
has  been  in  use  in  English  cities  with  reference  to  gas  and  in  Boston 
with  reference  to  gas;  is  that  true? 

Mr.  Cummin.  My  principle  goes  beyond  that.  I  did  not  explain 
that  point,  perhaps,  because  it  does  not  appear  so  prominently  in  a 
street  railway.  It  is  important  that  the  consumer,  in  whatever  utility 
it  is,  be  impressed  with  the  fact  that  he  is  getting  a  part  of  that 
profit.  The  way  you  have  to  handle  it  with  street  railways  is  to 
fix  the  cash  fare  that  is  high,  the  incidental  fare,  but  sell  so  many 
tickets  for  a  quarter  and  so  many  tickets  for  a  dollar,  in  order  to 
take  care  of  fractional  cents,  that  is  computed  to  be  the  correct  fare. 
Well,  now,  the  extra  tickets  that  go  on  for  a  quarter  and  go  on  for 
a  dollar  are  the  thing  that  impresses  that  fellow  with  the  fact  that 
he  is  getting  a  dividend  out  of  that  company  all  the  time.  The 
same  way,  the  important  thing  in  distributing  that  to  a  gas  con- 
sumer is  not  simply  giving  them  a  different  rate  the  next  year.  He 
sees  that  rate,  and  that  is  all  he  does  see.  But  put  a  discount  on  his 
bill  every  time,  an  extra  discount— that  is  what  he  gets  for  keeping 
the  company  prosperous,  and  that  is  staring  him  in  the  face  all  the 
time,  that  discount,  just  as  the  extra  ticket  will  stare  him  in  the  face 
in  the  other  case.  I  want  to  impress  it  on  the  consumer  in  every 
way  that  he  is  vitally  interested  in  the  well-being  of  the  company. 
The  only  way  you  can  do  it  is  to  put  it  in  such  shape  that  he  falls 
over  It  every  time  he  turns  around.  I  think,  from  the  psycholoo-ical 
standpoint,  that  is  of  vital  importance. 

Conunissioner  Wehle.  There  are  two  things  that  you  regard  as 
vitally  important,  if  I  understand  you :  One  is  that  the  user  of  the 
street  railroad,  the  rider,  shall  be  impressed  with  the  idea  that  the 
company  s  advantage  is  his  adviuitage? 
Mr.  Cummin.  Yes. 

Commissioner  Weiile.  And  the  more  prosperous  the  company  is 
the  lower  the  rate  is  going  to  be  to  him  the  succeeding  year« 

Mr.  Cummin.  Yes. 

Commissioner  Wehle.  But  also  that  the  knowledge  on  the  part 
of  the  community  m  general,  including  those  who  ride  on  the  street 
railroads,  that  the  investor  or  the  corporation  itself  is  not  makin«- 
an  undue  amount  ?  ^ 

Mr.  Cummin.  Yes. 

Commissioner  W^ehle.  And  that,  if  I  understand  you  correctlv, 
means  not  merely  having  their  books  audited  from  time  to  time 
but  hav'ing  them  open  all  the  time  to  the  public;  in  other  words 
\^'r"^J^"^'"  practically  kept  by  public  accountants  ? 

Mr.  Cummin.  Yes. 

Commissioner  Wehle.  Who  will  represent  the  public,  rather  than 
the  corporation  ?  ' 


44       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Cummin.  Yes;  perhaps  keep  it  in  parallel  with  them;  but  at 
least  I  think  it  is  necessary  for  public  control  of  the  entire  making 
of  those  accounts. 

Commissioner  Wehle.  The  idea  being  that  the  public  mind  must 
be  impressed  with  the  fact  that  there  is  no  underhanded  work 
about  it  ? 

Mr.  Cummin.  Absolutely.  It  must  be  made  clear  to  the  public 
that  there  is  absolutely  no  chance  for  anything  to  be  put  over.  That 
thing  has  been  overlooked  again  and  again.  Utilities  will  get  into 
a  rate  dispute  and  the  other  side  will  bring  up  some  perfectly  fool- 
ish arguments.  They  may  be  foolish  arguments,  but  people  be- 
lieve them,  and  the  utility  that  takes  the  stand  when  those  things 
come  im  and  tries  to  fight  them  by  simply  saying  they  are  foolish, 
and  refusing  to  pay  any  attention  to  them,  and  calling'the  man  who 
makes  them  names  of  various  kinds — they  are  not  getting  any  place; 
they  are  not  impressing  the  people  and  the  other  fellow  is  impress- 
ing the  people.  That  ammunition  can  be  taken  out  of  the  agitator's 
hands  entirely,  if  they  start  out  to  do  it.  For  instance,  if  the  leader 
of  an  agitation  against  an  increased  fare  disagi-ees  with  a  valuation 
that  has  been  made  upon  which  this  increased  fare  is  based,  and  says 
that  he  does  not  believe  that  is  the  value,  even  though  it  has  been 
made  by  a  competent  man,  the  very  obvious  thing  to  do,  from  a  sen- 
sible standpoint,  is  to  say  to  him :  "  Whom  would  you  believe  ?  Is 
there  some  man  who  specializes  in  this  work  that  you  would  be- 
lieve?" And  if  he  says,  "  Yes;  so  and  so."  "  All  right,  we  will  get 
him  in  here  to  check  that  valuation."  This  man  may  not  have 
known  at  all  what  he  was  talking  about,  but  you  will  kill  his  argu- 
ment if  you  get  in  the  man  he  says  he  will  trust  to  check  that  valua- 
tion. That  is  just  an  illustration  of  the  principle  that  has  to  be 
followed.  The  utility  gets  no  place  at  all  by  simply  saying  that 
these  arguments  are  foolish. 

Commissioner  Wehle.  How  do  you  think  the  valuation  of  street- 
railway  properties  ought  to  be  made?  Should  it  be  entirely  upon 
the  basis  of  physical  properties? 

Mr.  Cummin.  It  should  be  on  the  basis  of  the  investment,  if  that 
can  be  discovered. 

Commissioner  Wehle.  In  many  cases  is  not  that  absolutely  impos- 
sible ? 

Mr.  Cummin.  Yes;  a  valuation  is  always  a  case  of  getting  an  ap- 
proximation of  the  truth. 

Commissioner  Wehle.  I  think  you  said  you  had  been  employed 
part  of  your  life  for  private  corporations? 

Mr.  Cummin.  Yes. 

Commissioner  Wehle.  If  you  are  willing  to  make  a  statement  on 
that  point,  I  wish  you  would — as  to  whether  it  is  not  a  very  common 
thing,  and  from  your  own  experience  and  observation  you  do  not 
known  it  to  be  so,  for  these  street-railway  corporations  to  water  their 
stock,  as  we  say;  in  other  words,  to  issue  an  amount  of  stock  entirely 
out  of  proportion  to  the  actual  cash  investment. 

Mr.  Cummin.  There  is  no  question  but  for  a  number  of  years  the 
securities  were  issued  on  what  they  could  earn,  and  not  on  what  they 
had  in  them. 

Commissioner  Wehle.  Don't  you  know  cases  where  this  has  been 
done :  That  bonds  have  been  issued  and  sold  for  practically  the  entire 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      45 

investment,  and  the  stock  has  been  issued  on  nothing  that  was  ac- 
tually paid  for  ? 

Mr.  Cummin.  I  do  not  know;  I  do  not  believe,  at  the  present 

time • 

Commissioner  Wehle.  I  do  not  mean  at  the  present  time.    I  mean 

in  years  past. 
Mr.  Cummin.  Yes ;  I  do  not  doubt  that  at  all. 
Commissioner  Gadsden.  How  many  years  ago  since  that  practice 

has  stopped? 

Mr.  Cummin.  I  do  not  know  that  I  can  answer  that  question  di- 
rectly, because  I  think  it  is  very  largely  a  question — I  do  not  believe 
it  was  stopped  until  people  could  not  do  it.  It  is  possible  that  even 
up  to  late  years  people  could  have  done  it.  I  think  there  always 
were  some  people  who  were  willing  to  do  it. 

Commissioner  Gadsden.  Economically  it  has  been  impossible  for  a 
good  many  years,  has  it  not  ? 

Mr.  Cummin.  Theoretically. 

Commissioner  Wehle.  Practically  ? 

Mr.  Cummin.  For  street  railroads. 

Commissioner  Sweet.  Street  railroads  have  not  been  paying  divi- 
dends? 

Mr.  Cummin.  No. 

Commissioner  Sweet.  And  people  would  not  invest? 

Mr.  Cummin.  No. 

Commissioner  Sweet.  You  spoke  of  two  kinds  of  street  railroads ; 
one  kind  that  was  hopelessly  gone,  practically 

Mr.  Cummin.  Where  the  earning  capacity  is  not  there. 

Commissioner  Sweet.  Where  the  construction  has  been  in  locali- 
ties that  have  not  the  resources  upon  which  a  railroad  could  live  ? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  If  I  understand  you  aright,  you  do  not  pre- 
tend to  have  any  remedy  for  that  kind  of  a  street  railroad.  It  has 
simply  got  to  go  by  the  board  ? 

Mr.  Cummin.  No;  I  say  that  means  public  partnership,  public 
subsidy,  or  public  ownership. 

Commissioner  Sweet.  You  mean  that  the  public  has  to  be  taxed 
to  keep  it  alive  in  some  way  ? 

Mr.  Cummin.  The  community  need  must  be  met  by  taxing  the 
community,  that  is  all.  If  the  road  is  a  necessity  to  the  community, 
the  only  way  the  community  can  preserve  that  is  by  paying  the 
deficit.  I  do  not  care  how  they  do  it.  They  can  do  it  as  a  partner- 
ship, they  can  do  it  as  a  subsidy,  or  as  full  owner,  but  it  has  to  be 
paid. 

Commissioner  Sweet.  It  can  not,  in  your  judgment,  be  made  a 
paying  proposition  from  the  standpoint  of  a  business  operation  ? 

Mr.  Cummin.  No  ;  I  do  not  believe  so,  in  the  small  town. 

Commissioner  Sweet.  It  must  be  treated,  then,  as  merely  a  public 
convenience  ? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  And  paid  for  by  the  public  because  of  that 
fact  ? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  In  some  way,  either  by  taxation,  or  by 
some  sort  of  contribution  ? 


4^       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 


Mr.  Cummin,  Yes. 

Commissioner  Sweet.  You  spoke  of  another  class  of  street  rail- 
roads that  you  think  are  ^ood  business  propositions  and,  with  fair 
treatment,  or  with  the  right  kind  of  treatment,  would  not  need  any 
outside  help? 

Mr.  Cummin.  They  have  the  earning  capacity. 

Commissioner  Sweet.  They  have  the  earning  capacity  ? 

Mr.  Cummin.  Yes.  In  other  words,  an  increase  in  fares,  and  prob- 
ably some  lopping  off  of  unjust  burdens  in  the  way  of  street  paving 
and  undue  proportions  of  bridges  and  things  of  that  kind. 

Commissioner  Sweet.  1  want  to  ask  you  some  questions  about 
that  before  I  get  through,  but  right  on  this  point,  first:  Is  the  state- 
ment you  have  made  to  us  with  regard  to  such  an  arrangement  as 
would  make  it  an  object  for  the  general  public  to  use  tlie  railroads 
and  feel  an  interest  in  their  success  and  for  the  management  also 
to  be  interested  and  try  to  keep  expenses  down — do  you  regard  that 
as  a  sufficient  panacea  for  the  ills  of  what  you  would  rank  as  the 
better  class  of  railroads? 

Mr.  Cummin.  I  think  that  is  a  promising  solution.  I  do  not  say, 
in  any  particular  case,  that  it  would  be  a  complete  panacea.  I  think 
there  will  be  a  necessity,  probably,  under  present  prices,  which  are 
likely  to  continue  for  a  long  time,  to  use  every  method  which  can 
possibly  be  used. 

Commissioner  Saveet.  All  right.  Let  us  go  to  the  other  methods. 
^Yhflt  do  you  say  about  paving  between  the  tracks  and  for  a  foot  or 
so  outside? 

Mr.  Cummin.  The  cost  of  paving  between  the  tracks  and  for  a 
foot  or  two  outside  is  an  unjust  burden  on  the  street-railroad  com- 
panies at  present.  Our  street  paving  was  started  in  this  country 
when  we  had  horse-cars,  and  the  horses  did  wear  out  the  pavement, 
and  that  is  the  reason  it  started  in  that  way ;  and  it  has  been  put  in 
every  franchise,  or  almost  every  franchise,  ever  since,  because  the 
street  railroads  could  not  get  out  of  it  and  they  just  had  to  submit 
to  it.  There  is  an  undue  burden.  The  maintenance  of  it,  and  any 
extra  cost  due  to  the  track,  should  be  paid  by  the  street  railroad- 
that  is  perfectly  proper— but  the  pavement  itself  should  not. 

Commissioner  Weiile.  You  mean  that  part  of  the  cost  of  mainte- 
nance that  IS  not  duo  to  the  wear  and  tear  of  other  vehicles? 

Mr.  Cummin.  In  fact,  the  most  of  the  cost  of  maintenance  of  the 
pavement  between  the  car-tracks  is  due  to  the  rails  and  operation 
over  them.  They  have  to  be  cut  into  fairly  frequently— a  joint  goes 
down,  and  it  will  break  up  the  pavement  for  a  little  distance  around; 
soft  spots  develop  in  the  roadbed,  and  it  will  result  in  raises  and  de- 
pressions, etc.,  and  the  big  bulk  of  your  maintenance  is  main- 
tenance that  is  fairly  well  tFacenl)le  to  the  street  railroad.  The 
maintenance  is  a  proper  charge  against  the  street  railroad. 

Commissioner  Sweet.  But  the  original  construction  is  not? 

Mr.  Cummin.  The  original  pavement,  except  that  part  of  it  which 
may  be  an  extra  due  to  the  cost  of  paving  around  the  rails,  and 
things  of  that  kind,  if  it  should  exist,  should  not  be  paid  by  the  rail- 
roads. The  extra  cost,  of  course,  that  is  necessitated  by  reason  of 
the  pavement  being  laid  around  the  rails,  should  be  i)aid  by  the  road. 

Commissioner  Sweet.  Even  at  that,  bearing  in  mind  the  fact  that 
the  public  is  so  deeply  interested  in  having  the  advantage  of  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       47 

street  railroad  there,  is  there  any  unfairness  in  having  the  public 
pay  for  all  the  paving  ? 

Mr.  Cummin,  If  they  w^ant  to;  but  I  think  if  they  pay  the  main- 
tenance as  well — I  do  not  believe  it  is  going  to  be  a  practical  op- 
erating proposition,  because  a  large  part  of.  that  maintenance  may 
have  to  be  done  by  the  trackmen  of  the  street  railroad,  the  men  who 
are  taking  care  or  the  track. 

Commissioner  Sweet.  Can  you  give  us  any  definite  idea  as  to 
what  would  be  the  saving  to  the  electric  railways  of  the  country  if 
the  construction  of  the  pavement  betw^een  the  tracks  and  just  outside 
were  to  be  borne  by  the  public  instead  of  by  the  street-railway  com- 
pany ?    How  much  would  the  saving  be  ? 

Mr.  Cummin.  Of  course,  that  would  vary  very  widely.  I  know 
of  one  case  where  a  street  railroad  in  Dayton  had  an  expense  for 
pa^•ing  for  one  year  of  $200,000. 

The  Chairman,  What  per  cent  of  its  operating  cost  was  that? 

Mr.  Cummin.  I  would  not  have  any  idea. 

Commissioner  Sw^eet.  That  would  not  be  a  real  test  unless  you 
knew  that? 

Commissioner  Beall.  There  are  four  street  railways  in  Dayton, 
are  there  not? 

Mr.  Cummin.  Four  or  Gye. 

Commissioner  Beall.  None  of  the  four  are  very  large  properties; 
but  the  point  I  think  you  want  to  make  is  that  it  was  a  very  large 
cost? 

Mr.  Cummin.  It  was. 

Commissioner  Beall.  I  doubt  if  the  net  earnings  of  the  street- 
railway  company  were  as  big  as  $200,000? 

Mr.  Cummin.  They  were  not.    The  net  earnings  were  below  that. 

Commissioner  Sweet.  That  might  have  prevented  them  from  be- 
ing on  an  earning  basis  ? 

Mr.  Cummin.  Yes;  although  that  line,  I  think,  never  has  been  on 
an  earning  basis.  When  they  were  put  in,  they  dodged  the  paved 
streets.  They  were  the  newest  line  in  town,  and  ever  since  then  they 
have  been  paving  those  streets.  It  is  a  pretty  long  line,  and  I  guess 
they  have  spent  everything  they  could  get  together  in  paving. 

Commissioner  Sweet.  Could  you  give  us  any  idea  of  the  main- 
tenance cost  per  year  for  maintaining  the  paving  between  tracks 
and  just  outside? 

Mr.  Cummin.  That  varies  a  great  deal  with  your  subsoil,  with 
your  class  of  construction,  and  with  your  traffic  that  is  carried.  It 
would  be  pretty  hard  to  say  what  that  would  amount  to. 

Commissioner  Sweet.  If  you  are  not  in  a  position  to  give  us  fig- 
ures on  that  now,  could  you  prepare  them  and  give  them  to  us  later, 
or  get  ihem  ? 

Mr.  Cummin.  Well,  the  only  way  to  do  that  would  be  to  take  up 
a  special  case  and  get  the  figures.  It  is  a  local  issue.  Your  main- 
tenance in  one  town  may  not  bear  any  relation  to  the  maintenance 
in  the  next  town,  for  exactly  the  same  kind  of  paving. 

Commissioner  Sweet.  Or  in  the  same  town  next  year? 

Mr.  Cu3iMiN.  That  is  correct. 

Commissioner  Sweet.  But  still  it  would  be  possible,  would  it  not, 
to  reach  a  sort  of  a  general  average  or  estimate  that  would  be  fairly 
accurate  ? 


48       PROCEEPINGS  OF.  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Mr.  Cummin.  Probably  it  would,  scattered  around  in  different 
places. 

Commissioner  Sweet.  I  think  it  might  help  if  we  knew  rather 
definitely  what  the  cost  of  construction  and  of  maintenance  both  was, 
with  regard  to  this  paving,  because  that  question  has  been  raised, 
and  we  want  to  look  into  it. 

Mr.  Cummin  There  are  two  parts  in  the  paving  to  the  street  rail- 
road One  of  them  is  absolutely  charged  against  the  street  railroad, 
and  that  is  the  cost  of  preparing  the  roadbed  and  putting  in  the  new 
track  and  ties  and  concreting  in  the  ties.  They  concrete  them  in, 
getting  up  to  the  point  where  the  surface  is  to  go  on.  That  is  per- 
fectly all  right.  That  is  chargeable  actually  to  the  company.  Then 
the  rest  of  it  is  generally  charged  for  at  just  the  same  price  as  for 
the  rest  of  the  paving  job,  per  square  yard.  In  most  cases  the  con- 
tractor makes  no  difference  for  the  paving  between  the  rails  and  a 
loot  outside  as  compared  with  the  rest  of  the  paving. 

Commissioner  Sweet.  Is  the  paving  requirement  of  a  privately 
owned  street-railroad  company  universal  in  this  country,  or  does 
that  vary?  •'^ 

Mr.  Cummin.  As  far  as  I  know,  I  have  not  been  in  any  city  yet 
where  it  was  not  required,  and  in  my  experience  I  have  never  seen 
any  franchise  where  it  was  not  required. 

Commissioner  Sweet.  So  that  as  far  as  you  know  it  is  a  uniform 
requirement  ? 

Mr.  Cummin.  Yes;  and  that  is  an  unjust  burden.  That  is  some- 
thing that  can  be  taken  off.  I  think  the  same  thing  occurs  on  some 
bridge  rent  as.  In  some  cases  they  have  not  been  rentals,  but  they 
have  paid  a  lump  sum,  I  think,  in  some  cases,  and  that  has  been  too 

I  think  it  proper  that  a  street  railroad  should  compensate  for 
extra  cost  m  making  that  bridge  strong  enough  to  carry  the  addi- 
tional loads  put  on  it,  by  the  street-railroad  company.  It  perhaps 
should  pay  a  small  additional  rent,  but  I  think  in  some  instances  the 
amount  required  to  be  paid  has  been  unreasonable. 

Commissioner  Sweet  On  this  paving  proposition  I  asked  Judge 
latt  this  morning,  and  I  would  like  to  ask  you,  whether  there  is  not 
an  injustice  as  between  the  general  public  and  the  riding  public 
under  the  present  system;  whether,  in  the  final  analysis,  the  pay- 
ment for  the  expense  of  paving  and  maintenance  of  it,  for  that  mat- 
ter—although we  did  not  dwell  upon  that— is  not  borne,  assuming 
that  the  company  is  solvent,  by  those  who  use  the  street-cars,  those 
who  ride  on  the  street-cars ;  and  those  who  use  automobiles,  and  who 
are  very  much  interested  in  having  good  paving  between  the  tracks 
do  not  pay  a  penny  for  it;  is  that  true? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  Under  the  present  system  ? 

Mr.  Cummin.  Of  course,  in  a  great  many  States  they  do  not  pay 
anything  anyway,  because  the  property  owner  stands  most  of  the 
cost  of  paving,  and  not  the  city  at  large. 

Commissioner  Sweet.  That  is  assessed  against  the  property  ? 

Mr.  Cu:mmin.  That  is  assessed  against  the  property. 

Commissioner  Sweet.  But  inasmuch  as  wherever  the  street  is  im- 
proved it  is  assessed  against  each  propertv,  on  one  street,  and  then 
on  another,  it  balances  up  to  a  certain  extent? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      49 

Mr.  Cummin.  When  they  all  get  paid. 

Commissioner  Sweet.  But  in  Grand  Rapids,  and  in  many  other 
cities,  at  street  intersections  the  city  does  pay? 

Mr.  CuM3iiN.  Yes;  at  intersections. 

Commissioner  Sweet.  And  that  payment  is  made  out  of  public 
funds,  raised  by  taxation? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  So  that  the  city  pays  a  good  deal  of  it ;  quite 
a  considerable  amount? 

Mr.  Cummin.  About  25  per  cent. 

Commissioner  Sweet.  But  as  between  the  two  elements  in  the  com- 
munity, the  people  who  ride  on  street-cars  and  those  who  ride  in 
automobiles,  there  is  a  distinction? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  And  those  who  ride  on  street-cars,  under  the 
present  system,  we  are  trying  to  make,  or  it  has  been  the  custom 
actually  to  try  to  make  them  pay.  Ultimately  their  nickels  go  to  pay 
for  that  paving? 

Mr.  Cummin.  That  is  simply  an  illustration  of  the  public  being 
directly  unable  to  see  that  when  they  make  a  public-utility  corpora- 
tion pay  something  they  ought  not  to  pay,  that  it  is  not  the  public- 
utility  corporation  that  pays  it,  but  the  people  who  use  that  public- 
utility. 

Commissioner  Sweet.  That  is  exactly  it. 

Mr.  Cummin.  One  reason  why  they  do  not  see  that  is  because  we 
have  had  so  many  fixed  fares  and  so  many  fixed  rates  for  different 
kinds  of  services — rates  fixed  in  franchises — where  they  did  not 
change,  no  matter  what  happened. 

Commissioner  Sweet.  Then,  if  I  am  correct,  a  change  from  the 
present  system  with  regard  to  paving  between  the  tracks  and  to  the 
outside  would  probably  do  two  things,  or,  I  might  say,  would  certainly 
do  two  things :  one,  tend  at  least,  to  make  it  possible  for  the  street- 
railroad  companies  to  live,  which,  under  present  conditions,  they 
find  it  difficult  to  do,  and  the  other,  distribute  more  justly  over  the 
entire  community  the  expense  of  constructing  and  maintaining  this 
pavement? 

Mr.  Cummin.  It  would  certainly  be  a  proper  charge  on  the  rest  of 
the  community ;  yes. 

Commissioner  Sweet.  What  about  hydroelectric  current?  Are 
there  not  a  great  many  water  powers  in  'this  country  that  are  avail- 
able— that  might  be  developed? 

Mr.  Cummin.  Yes. 

Commissioner  Sweet.  And  furnish  cheap  power  for  the  operation 
of  street-railroad  companies  that  are  not  being  used? 

Mr.  Cummin.  I  doubt  that. 

Commissioner  Sweet.  You  doubt  it? 

Mr.  Cummin.  Yes.  I  am  a  constitutional  pessimist  on  water 
powers.  I  have  worked  with  too  many  rivers,  Mr.  Sweet.  I  doubt 
whether  50  per  cent  of  the  water-power  developm'ent- 1  am  speakin<r 
ot  the  larger  water-power  development  of  the  United  States— would 
ever  have  been  built  if  they  had  known  just  what  they  were  getting. 
I  hey  do  not  get  the  theoretical  power  out  of  it. 


50       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOliT. 

Commissioner  Beall.  Are  you  talking  of  ordinary  river  powers, 
or  where  they  have  a  high  head?  There  are  numerous  cases  of 
rivers  where  the  head  is  ver^  low  and  where  they  are  subject  to 
overflow, — like  the  Mississippi,  to  take  the  most  glaring  example,  of 
course,  where  it  is  almost  impossible  to  control  it,  and  that  is  a 
ditferent  i)roposition. 

Mr.  Cummin.  Yes.  The  point  is,  though,  that  a  lot  of  water- 
power  plants  have  been  built  and  they  have  never  gotten  the  cost 
they  expected  to  get.  In  other  words,  their  fixed  charges  were  con- 
siderably higher  than  they  thought  they  were  going  to  be  per 
kilowatt. 

Commissioner  Beall.  That  is  limited  to  a  very  small  class.  You 
will  find  the  average  water  power  in  this  country  is  pretty  profitable 
on  its  cost — the  average,  where  they  have  a  high  head. 

Mr.  Cummin.  Where  thev  have  a  high  head  ? 

Commissioner  Beall.  Where  they  have  a  high  head ;  yes.  I  mean 
anything  from  75  feet  up  to  1,800  or  2,200  feet. 

Mr.  Cummin.  Yes ;  I  agree  with  that. 

Commissioner  Sweet.  What  distance  is  it  feasible  to  convey  the 
electric  current  without  too  great  loss  to  justify  its  conveyance? 

Mr.  Cummin.  I  think  that  is  rather  a  broad  question.  I  believe  it 
is  being  transmitted  over  300  miles  in  California. 

Commissioner  Beall.  Yes;  it  is. 

Mr.  Cummin.  That  probably  is  not  economical  under  low  fuel 
costs.  That  is,  if  you  are  operating  against  a  steam  plant  with  rea- 
sonable fuel  costs  you  might  be  able  to  beat  that. 

Commissioner  Beall.  Even  in  normal  times  coal  in  most  sections 
of  California  is  $9  or  $10  a  ton,  so  that  you  can  understand  in  Cali- 
fornia you  can  have  water  that  cost,  even  on  prewar  prices,  $250  a 
horsepower  and  make  good  money  out  of  it.  In  New  York  if  you 
go  over  $100  you  want  to  be  very  careful  and  look  out  as  to  your 
proposition.  I  am  going  back  to  prewar  prices.  I  could  not  tell 
you  on  to-day's  prices. 

Commissioner  Sweet.  It  requires  copper  wire,  does  it  not,  or  at 
least  that  is  the  best  ? 

Mr.  CuaiMiN.  That  is  the  best ;  yes. 

Commissioner  Sweet.  And  alternating  current? 

IMr.  Cummin.  Yes. 

Commissioner  Sweet.  Is  it  not  a  fact  that  there  are  in  this  country 
a  great  many  practical  water  powers  that  have  not  been  used  at  all  ? 

Mr.  Cummin.  Oh,  yes. 

Commissioner  Sweet.  That  are  within,  say,  100  miles  of  cities, 
where  the  current  would  be  very  valuable  for  street -railroad  purposes 
or  for  interurban  purposes,  if  you  please? 

Mr.  Cummin.  "Well,  I  would  be  inclined  to  doubt  that. 

Commissioner  Beaix.  Not  in  this  section  of  the  country. 

Commissioner  Sweet.  Not  in  the  East,  you  mean  ? 

Commissioner  Beaix.  Yes.  Unfortunately  the  greatest  and  most 
valuable  water  powers  are  in  the  West. 

^Ir.  Cummin.  In  the  far  West  and  in  the  Southern  Appalachians 
tlioro  are  some  good  ones. 

Crmmissioner  Beall.  But  you  do  not  get  the  population  there. 

Mr.  Cummin.  No:  but  the  powers  are  there.  They  are  not  availa- 
ble to  markets,  however. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       51 

Commissioner  Sweet.  Some  steam  railroads  are  using  electric 
power  in  the  mountiiins,  like  the  Chicago,  Milwaukee  &  St.  Paul  ? 

Mr.  Cummin.  Yes;  but  you  take  the  States  where  you  can  not  get 
high  heads,  and  especially  the  great  Middle  Western  territory,  where, 
if  you  are  going  to  regulate  the  flow  of  the  rivers,  so  that  your  motor 
power  during  the  year  will  be  something  that  is  reasonable  at  all  to 
operate  under,  your  cost  per  kilowatt  will  run  out  of  all  reason,  and 
that  is  the  thing  that  malces  those  powers  so  very  expensive. 

For  instance,  it  is  perfectly  feasible,  to  i-eturn  to  parts  of  the  coun- 
try that  you  know,  to  get  power  out  of  Grand  River  at  Grand  Rapids 
and  above  Grand  Rapids;  it  would  be  a  matter  of  building  a  huge 
storage  reservoir^  perfectly  feasible  from  a  physical  standpoint,  but 
from  an  economical  standpoint  it  is  absolutely  not  feasible,  as  the 
development  of  that  storage  would  be  so  tremendously  expensive  that 
steam  power  would  not  cost  you  nearly  as  much. 

In  the  same  way  there  is  another  power  there  that  has  been  or  sup- 
posed to  be  before  the  public  up  the  Thorne  Apple  River,  and  an 
analysis  of  that  power  shows  that  by  any  reasonable  amount  of  money 
that  might  be  economically  spent  on  the  development  it  would  not 
gi\'e  you  sufficient  storage  to  give  you  a  flow  throughout  the  3'ear  that 
would  justify  you  in  building  that  at  all. 

That  is  the  situation  that  shows  up  about  90  per  cent  of  the  water 
powers  that  you  hear  about;  I  mean  the  water  powers  that  are  not 
being  utilized,  and  are  supposed  to  exist.  You  will  find,  on  analysis, 
that  they  are  not  an  economical  proposition.  When  they  get  to  be  an 
economical  proposition,  they  probably  will  be  developed  shortly, 
unless  there  are  some  outside  reasons  that  absolutely  prevent  it. 

Commissioner  Sweet.  Then  you  would  not  look  upon  that  as  a 
material  relief  for  the  street  railways  ? 

Mr.  Cummin.  No.  I  think  an  analysis  of  cost  will  show  that  sup- 
pose you  did  cut  the  cost  of  electricity  15  or  20  per  cent  to  them,  that 
would  not  help  them  out  a  great  deal. 

Conunissioner  Sweet.  Every  little  would  help. 
Mr.  Cummin.  I  know;  but  it  would  not  help  out  as  much  as  one 
might  think  at  first. 

Commissioner  Sweet.  From  your  acquaintance  with  the  operation 
of  electric  railways,  is  the  generation  of  current  by  the  present 
methods  the  most  economical  ?  Are  they  using,  in  other  words,  up-to- 
date  methods  as  a  rule  ? 

Mr.  Cu3f3iiN.  Of  course,  there  are  many  plants  that  are  using  tlie 
most  up-to-date  methods,  and  of  course,  there  are  others  that  are  not. 
^  ou  will  find  all  classes  of  machinery  scattered  over  the  countrv  in 
these  different  street-railway  plants.  Where  they  have  not  put  in 
modern  machinery  in  many  instances  it  has  been  simply  a  case  of 
where  it  Avas  impossible  to  finance  it.  You  may  know  that  you  c;ui 
save  money  by  spending  some  money,  but  if  you  can  not  set  that 
money  to  spend,  you  will  just  have  to  go  on  and  keep  wasting^  it. 

Commissioner  Sweet.  It  might  have  quite  a  bearing  upon  the  find- 
ings of  this  commission  if  we  w^ere  satisfied  that  the  reason  why  street- 
railway  companies  are  in  such  bad  financial  condition  is  that  thev  are 
using  machinery  that  ought  to  be  discarded  and  scrapped  instead  of 
being  used. 


52       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr  Cummin.  I  do  not  believe  that  you  will  find  that.  That  will' 
be  a  factor  more  or  less  in  different  cases,  but  I  do  not  believe  that  is- 
the  serious  thing. 

Commissioner  Beall.  That  is  one  of  the  smallest  parts  of  their 
operating  expenses,  is  it  not  ? 

Commissioner  Sweet.  The  coal? 

Mr.  Cummin.  No;  electricity. 

Commissioner  Sweet.  The  coal  required  to  produce  electricity? 
.Uv''lT'ir''r  Beall   There  is  a  big  difference,  though,  between  a 
city  like  Washington,  that  is  level,  and  Kansas  City,  which  is  all 
hjll— a  big  difference.  *^ 

Commissioner  Sweet.  In  what  way? 

Mr.  Cummin.  In  the  amount  of  power. 

Commissioner  Beall.  In  the  amount  of  power  required.  You  havo 
to  have  more  motors  in  the  car,  and  heavier. 

Commissioner  Sweet.  Heavier  motors? 

Commissioner  Beall.  Yes. 

Mr  Cummin.  That  would  be  a  hard  thing  to  generalize  on,  and  I 
do  not  believe,  as  I  say,  that  a  reduction  of  15  or  20  or  25  per  cent  in 
the  cost  of  electricity  would  make  any  serious  inroad  on  the  present 
aencits  of  the  companies. 

Commissioner  Sweet.  How  about  the  other  economies,  or  possible 
economies ;  can  you  suggest  any  ?  '       i  " 

Mr  Cummin.  A  possible  economy,  of  course,  not  practicable  for 
some  large  cities,  is  the  one-man  car.  That  is  a  practical  economy 
imder  a  great  many  conditions.  ^ 

Commissioner  Sweet.  The  motorman  practically  acting  as  con- 
ductor and  motorman,  you  mean  ?  j  fe  ^xi 

Mr.  Cummin.  The  motorman  operates  the  car  and  the  entrance  is 
at  tlie  front ;  the  people  have  to  come  in  and  go  out  at  the  front  of 
tlie  car. 

Cominissioner  Sweet.  Where  is  that  system  in  operation « 
Mr.  CuMMixX.  That  system  is  in  operation  in  a  number  of  the 
smaller  cities. 

Commissioner  Sweet.  Is  it  satisfactory? 

Mr.  Cummin.  They  have  not  gotten  the  reduction  in  cost  that  thev 
hoped;  or  rather,  costs  have  raised  the  value  of  things  so  that  it  has 
not  made  a  great  effect  upon  the  operating  expense. 

Commissioner  Beall.  Is  not  the  real  reason  for  this  that  it  is  used 
n  Imost  entirely  on  lines  that  never  were  profitable  anyway— it  is  an 
eftort  to  get  a  further  reduction  of  expense  on  something  that  always 
will  be  unprofitable?  ■  ^ 

Mr.  Cummin.  Yes. 

^  Commissioner  Sweet.  Do  you  think  that  would  be  a  feasible  plan 
m  a  city  of  40,000  or  50,000  ?  ^ 

Mr.  Cummin.  In  a  city  of  40,000  or  50,000,  yes. 

Commissioner  Beall.  But  only  on  their  outlying  lines;  not  where 
the  congestion  is?  ^     o  ? 

Commissioner  Sweet.  In  the  heart  of  the  city? 

Mr.  Cummin  In  a  town  of  40,000  or  50,000  people  I  think  it  is 
quite  possible  that  it  might  be  used.  It  would  depend  somewhat  on 
the  situation ;  but  I  should  say  in  most  towns  of  that  size  it  could  be 

Commissioner  Sweet.  Are  they  a  smaller  car,  or  a  standard  size  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       53 

/ 

Mr.  Cummin.  That  is  another  economy  that  has  been  practiced — 
the  use  of  a  lighter  car.  I  do  not  know  enough  about  the  compara- 
tive maintenance  costs  of  the  heavy  car  and  the  light  car  to  know 
whether  that  is  a  true  economy  or  not,  especially  on  heavy  traffic 
lines. 

Commissioner  Beall.  Is  not  the  answer  to  that  that  you  have 
really  got  to  have  the  expense  in  your  power  house  anyway,  and  the 
heavy  car  costs  more,  but  the  light  car  wears  out  faster  ? 

Mr.  Cummin.  Yes;  there  is  some  point  in  that. 

Commissioner  Beall.  There  is  a  balance? 

Mr.  CuM3iiN.  There  is  a  question  as  to  where  you  have  the  most 
economical  point;  but  that  is  suggested  as  a  possible  source  of 
economy. 

Commissioner  Sweet.  Have  you  had  any  experience  with  the  skip- 
stop,  so  termed,  that  has  been  tried  in  many  cities  during  the  war  ? 

Mr.  Cummin.  Yes;  in  the  smaller  cities  the  skip-stop  saves  noth- 

Commissioner  Sweet.  How  is  it  in  the  larger  cities  ? 

Mr.  Cummin.  In  the  larger  cities  I  am  not  familiar  with  the 
actual  figures,  but  I  should  say  that  there  was  a  possibility  that  it 
did  save  something.  That  is,  it  might  enable  them  to  take  out  a  car 
or  so  on  a  line  at  certain  times  by  increasing  the  speed  at  which  they 
can  get  over  the  route.  In  a  town  of  30,000  or  40,000  or  50,000  peo- 
ple it  does  not  do  it.  You  have  to  deal  in  car  units,  and  you  do  not 
save  enough  time  to  get  rid  of  one  car.  If  you  are  running  15  cars 
at  a  time  you  can  not  cut  it  to  14. 

Commissioner  Gadsden.  As  a  matter  of  fact,  is  not  the  greatest 
demand  for  power  in  the  starting  of  the  car  ? 

Mr.  Cummin.  Yes. 
•    Commissioner  Gadsden.  Does  not  the  car  use  two  or  three  times 
the  amount  of  power  in  starting  that  it  does  after  it  gets  its  head- 
way? 

Mr.  Cummin.  Yes. 

Commissioner  Gadsden.  Therefore,  every  stop  you  cut  out  saves 
that  appreciable  amount  of  power,  does  it  not? 

Mr.  Cummin.  It  saves  some  power,  yes. 

Commissioner  Gadsden.  An  appreciable  amount? 

Mr.  Cummin.  Yes. 

Commissioner  Gadsden.  And  that  reflects  itself  in  the  total  gen- 
eration at  the  power  station  and  is  appreciable,  if  it  is  a  big  enough 
system  ? 


extra  200— it  does  not  cost  you  one-fifth  more,  by  a  whole  lot. 

(Commissioner  Gadsden.  But  it  does  reduce  your  cost  per  kilo- 
watt ?  It  does  save  a  few  kilow^atts,  and  if  you  save  kilowatts,  you 
save  so  many  dollars,  do  you  not? 

Mr.  Cummin.  It  does  not  work  out  quite  that  wav.  For  instance, 
if  you  save  1,000  kilowatts  out  of  a  total  of  10,000  kilowatts,  you 
would  not  cut  your  cost  10  per  cent. 

Commissioner  Gadsden.  I  did  not  say  that,  but  you  would  save  a 
substantial  amount  of  money? 


54       PKOCEEWNGS  OF  FEDERAL,  KLECTBIC  RAILWAYS  C0M31ISSI0N. 

Mr.  Cummin.  They  miffht  save  a  little. 

Commissioner  Sweet.  You  said  that  the  automobile  was  having 
a  very  material  effect  in  diminishing  the  travel  upon  street  rail- 
ways, and  consequently  diminishing  their  earning  capacity.  Can 
you  see  any  remedy  for  that  from  the  street-railway  standpoint « 

Mr.  Cummin.  No;  I  do  not  know  that  I  can.  I  think  the  use 
ot  the  automobile  is  going  to  increase  rather  than  decrease,  and  the 
only  thing  I  can  see  is  for  the  street  raih'oads  to  try  to  work  out 
some  scheme  to  make  riding  on  street  railroads  more  attractive  than 
nding  m  Fords  If  they  can  do  that,  they  can  perhaps  make  in- 
mids  on  these  deficits.  But  there  is  the  situation :  A  man  owns  a 
car,  and  he  goes  back  and  forth  to  work  in  it,  and  he  used  to  ride 
m  a  street-car;  and  he  will  probably  seat  two  or  three  of  his  friends, 
or  at  least  one  friend,  probably  an  average  of  three  or  four  a  week; 
he  will  take  them  out  with  him  as  he  passes  them  on  the  street. 
1  hose  all  are  potential  street-railroad  fares,  that  would  be  street- 
railroiid  fares  if  it  were  not  for  that  automobile;  and  you  multiply 
that  by  thousands  and  thousands  of  cases,  and  you  make  a  very  de- 
cided inroad  on  the  earnings  of  the  street  railway. 

Commissioner  Sweet.  Of  the  two  kinds  of  street  railroads  you 
spoke  ot,  those  that  are  almost  hoixiless,  or  practically  so,  and  those 
that  are  not,  which  would  be  the  more  affected  by  the  automobile 
conipetition  ? 

Mr.  Cummin.  I  do  not  see  that  it  would  make  any  particular 

.1  ^'^^in^iissjoner  Sweet.  Don't  you  think  that  these  street  railroads 
that  I  think  you,  or  perhaps  Judge  Taft,  siiid  never  ought  to  have 
been  built,  that  there  was  no  logical  reason  for  building,  out  into 
the  suburbs,  would  be  more  affected,  in  proportion,  than  those  in  the 
center  of  the  city? 

Mr.  Cummin  Oh,  yes.  Take  a  line  that  is  built  into  a  hiffh- 
ciass  residential  district,  and  it  might  be  pretty  nearly  put  out  of 
business  by  the  automobile  traffic.  You  take  lines  in  the  city  of 
ISew  ^ork,  and  they  might  be  very  little  affected.  I  mean,  the 
percentage  is  probably  very  much  less  than  it  would  be  in  a  smaller 
city,  but  that  IS  taking  the  extremes,  of  course.  I  believe  if  you  take 
cities  the  size  of  Detroit  and  Cleveland  and  cities  of  that  general 
class,  you  will  find  that  the  automobile  has  cut  very,  very  heavily 
into  the  revenues  of  the  street-railway  companies.  It  is  easy  enouo-fi 
to  simply  go  out  m  the  street  and  count  them  up— what  would  T)o 
street-car  fares  if  it  were  not  for  the  automobiles. 

commissioner  Sweet;  In  the  cases  you  have  in  mind,  is  the  litney 
playing  any  part,  in  your  estimate  ?  '  J       J 

Mr  Cummin  Under  certain  circumstances  and  in  certain  cases 
the^ Jitney  may  be  a  very  serious  competitor;  but  taking  the  question 
and  generalizing  upon  it,  the  serious  thing  is  the  automobile  as  a 
whole— the  privately  owned  automobile  and  the  jitney  and  every- 
thing  all  together;  that  is  the  thing  that  the  street  railroads  must 
face,  the  competition  of  the  automobile.  The  jitney  competition  you 
can  contipl.      The  private-automobile  competition  you  can  not  control. 

Commissioner  Sweet.  That  is  likely  to  grow  worse,  rather  than 
better? 

Mr.  Cummin.  I  would  judge  so,  at  least  by  the  plans  that  the 
automobile  manufacturers  have. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 


O  I 


Commissioner  Meeker.  There  was  one  point  that  I  wanted  to 
bring  out — although  I  think  perhaps  it  has  already  been  covered  by 
questions  which  have  been  asked — and  that  was  in  reference  to  auto- 
mobile transportation,  either  by  jitney  or  automobile  bus.  As  a 
matter  of  fact,  is  transportation  by  automobile  bus  to-day  as  cheap 
as  transportation  by  street  railways,  in  reasonably  crowded  districts  ? 
Mr.  Cummin.  The  figures  that  I  have  seen  are  pretty  conflicting  on 
that  point.    I  do  not  know. 

Commissioner  Meeker.  But  that  is  a  serious  thing,  and  must  be 
considered  by  this  commission — ^the  competition  of  the  jitney  trans- 
portation or  the  automobile  bus. 

Mr.  Cummin.  As  I  say,  in  certain  local  situations  it  may  be  very 
serious.  I  would  judge,  for  instance,  in  Minneapolis  that  the  big 
automobile  buses  there  were  a  serious  factor  in  the  earnings  of  the 
Twin  Cities  Railroads. 

Commissioner  Meeker.  It  is  quite  possible  that  in  the  future  im- 
l^rovements  in  the  gas  engines  may  be  made  so  that  the  street  railway 
properties  in  some  districts  will,  as  suggested  by  the  chairman  this 
morning,  become  obsolete,  or  at  least  obsolescent,  so  that  the  street 
railway  companies  in  those  localities  will  have  to  prepare  to  write 
off  a  large  part  of  or  perhaps  the  entire  cost  of  their  investment. 
You  agree  with  that,  do  you? 
Mr.  Cummin.  Yes ;  that  is  possible. 

Commissioner  Beall.  You  probably  know  this — ^that  in  Dallas 
and  Los  Angeles,  Calif.,  until  the  jitneys  were  regulated  by  law, 
principally  by  compelling  the  furniohing  of  indemnity  bonds  against 
injuring  people  and  property — I  have  not  the  exact  figures  in  mind — 
but  it  affected  the  gross  earnings  of  those  properties  something  like  30 
or  40  ner  cent  or  more — not  less.  I'hat  is  how  serious  it  was. 
Mr.  Cummin.  Yes. 

Commissioner  Beall.  It  was  also  very  serious  in  Seattle ;  but  that 
has  been  almost  entirely  eliminated  in  those  places  by  a  new  law. 

Mr.  Cummin.  As  to  the  Minneapolis  situation,  they  are  regulated 
there,  but  they  have  these  great  big  buses  that  seem  to  be  operating 
pretty  frequently,  and  I  sliould  imagine  they  cut  into  the  street 
railway  revenues  considerably. 

Commissioner  Beall.  They  did  between  Dallas  and  Fort  Worth; 
they  almost  put  the  interurban  line  out  of  business — but  that  is  inter- 
urban.     I  was  speaking  of  the  cities'  lines. 

Mr.  Cummin.  The  same  thing  is  happening  to  interurban  lines  in 
the  Middle  West  where  good  roads  are  put  in.  Where  good  roads 
are  put  in,  the  jitney  buses  promptly  take  a  large  part  of  the  busi- 
ness away  from  them.  But  I  think  the  whole  question  goes  right 
back  to  the  automobile  generally ;  if  you  attempt  to  generalize,  you 
have  to  treat  it  as  the  automobile,  and  not  simply  as  the  jitney  bus; 
because  the  jitney  bus  is  local. 

Commissioner 'Wehle.  Has  any  study  of  costs  been  made  with 
reference  to  these  Minneapolis  buses  ? 

Mr.  Cummin.  Not  that  I  have  ever  seen.  The  few  costs  I  have 
ever  seen  on  buses  have  been  rather  conflicting. 

Commissioner  Wehle.  Has  the  engineering  proposition  ever  been 
made  that  street  railroads  might  be  propelled  by  gasoline  instead  of 
electricity  i 


56       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr  CuM.MiN.  Henry  Ford  has  proposed  it,  and  he  says  he  is  ffoing 
to  build  a  car.  ^  &      & 

Commissioner  Gadsden.  Nobody  else  has? 

Mr.  Cummin.  Oh,  it  has  been  proposed. 

Commissioner  Wehle.  Has  it  been  proposed  in  any  serious  way 
so  far,  so  that  there  might  be  data  on  it,  or  reliable  estimates  on  that 
subject? 

Mr.  Cummin.  There  is  no  data  that  I  know  of.  The  only  gasoline 
operation  of  a  car  was  some  few  years  ago,  when  they  operated  some 
gasoline  cars  on  some  branches  of  steam  railroads. 

Commissioner  Beall..  Yes. 

Mr.  Cummin.  Several  of  them  out  in  Oregon,  I  think. 

Commissioner  Beall.  Some  in  California,  too. 

Mr.  Cummin.  I  have  not  heard  much  about  them  lately,  so  I 
imagine  they  were  not  a  howling  success. 

Conimissioner  Wehle.  There  would  naturally  be  a  great  deal  of 
opposition  to  the  development  of  the  idea  from  those  who  are  in- 
terested in  the  investments  in  electric  properties,  would  there  not? 

Mr.  Cummin.  Oh,  I  don't  know. 

Commissioner  Wehle.  It  would  necessarily  mean  discarding  these 
electric  properties,  would  it  not,  if  that  idea  should  ever  come  to  the 
fore  ? 

Mr.  Cummin.  Yes,  of  course;  but  I  think  that  when  any  live 
business  realizes  a  situation  of  that  kind,  there  is  only  one  thing  for 
them  to  do,  and  that  is  to  accept  it  and  write  off  the'losses;  they  do 
not  have  to  write  off  all  the  losses  in  one  year. 

Commissioner  Wehle.  I  do  not  think  people  like  to  write  off 
losses. 

Mr.  Cummin.  No  ;  they  do  not.  They  do  not  like  to  write  off  losses, 
but  if  they  do  not  do  it,  somebody  else  will  get  the  business,  and  they 
know  that,  and  then  they  will  not  only  have  their  losses  to  write  otf, 
but  they  will  have  lost  their  chance  to  render  the  service  with  the 
new  thing. 

Commissioner  Beall.  That  is  what  did  occur  in  the  change  from 
horse  to  cable,  and  from  cable  to  electric  power,  is  it  not? 

Mr.  Cummin.  Yes. 

Commissioner  Wehle.  Exactly.  You  have  stated  that  there  is  a 
type  of  electric-railway  property  which  is  inherently  impossible  to 
successful  private  operation;  that  is,  a  small  town  property? 

Mr.  Cummin.  Yes. 

Commissioner  Wehle.  Have  j^ou  in  your  possession,  or  could  you 
file  in  this  record,  any  detailed  statement  specifying  the  properties 
which  come  within  that  description,  within  that  type?  You  have 
only  given  us  one  instance,  so  far — Jackson,  Miss. — have  vou  not  ? 

Mr.  Cummin.  Yes. 

Commissioner  Wehle.  Which,  in  your  opin-on,  illustrates  the 
type? 

Mr.  Cummin.  Yes. 

Commissioner  Wehle.  Do  you  think  that  your  information  is  suf- 
ficient to  enable  you  to  say  that  there  is  a  large  number  of  proper- 
ties which  conform  to  that  type? 

^n*.  Cummin.  Yes. 

Commissioner  Wehle.  And  which  can  never  be  operated  success- 
fully under  privat3  operation,  from  a  business  standpoint? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      57 


Mr.  Cummin.  They  probably  never  can.  In  fact,  I  imagine  you 
will  find  a  great  many  that  never  have  been  operated  at  a  profit. 

Commissioner  Wehle.  We  laiow  that  that  is  true,  of  course,  but 
that  msLj  easily  be  due  to  errors  in  management,  or  various  kinds  of 
special  circumstances.  But  3^ou  are  talking  now  in  the  abstract,  as  I 
understand  it? 

Mr.  Cummin.  Yes. 

Commissioner  Wehle.  And  you  are  assuming  that  the  founda- 
tions for  operation  have  been  laid  in  a  businesslike  way  to  begin  with, 
and  that  the  demonstration  is  that  these  properties  are  a  blind  alley, 
speaking  in  terms  of  business.  Can  you  give  instances  of  that,  be- 
sides Jackson,  Miss.,  if  you  would  be  willing  to  do  so? 

Mr.  Cummin.  Another  one  I  happen  to  know  about  is  Fond  du  Lac, 
Wis.,  and  Oshkosh,  Wis.  Those  are  two  that  I  happen  to  know  of. 
Oshkosh  is  a  case  where  they  have  got  a  large  part  of  their  mileage 
that  is  pretty  dead,  and  always  will  be,  possibly ;  at  least  for  a  great 
many  years  it  is  going  to  be  pretty  dead;  they  get  very  little  traffic 
from  it,  and  yet  they  have  got  to  operate. 

Commissioner  Wehle.  In  Jackson,  Miss.,  was  there  an  overbuild- 
ing of  the  property  there  into  territory  that  was  really  dead  ? 

Mr.  Cummin.  Not  to  any  serious  extent. 

Commissioner  Wehle.  So  that  you  think  that  the  conditions  at 
Jackson,  Miss.,  are  such  that  they  really  prove  your  proposition  ? 

Mr.  Cummin.  Oh,  I  think  it  is  utterly  hopeless  for  any  street  rail- 
road in  Jackson,  Miss.,  to  ever  earn  its'^salt.  It  has  got  to  be  helped 
along  by  a  stronger  sister,  which  it  always  has  been,  down  there ;  and, 
in  fact,  the  city  has  more  or  less  recognized  that,  and  the  street-rail- 
road franchise  is  concurrent  with  an  electric-light-and-power  fran- 
chise, so  that  evidently  the  situation  was  recognized. 

I  can  not  cite  you  a  lot  of  cases,  but  I  think  that  the  public-service 
commissioner  right  here  could  probably  give  you  a  dozen  of  them 
within  40  miles  of  the  city  of  New  York.  I  do  not  think  you  will 
have  to  go  any  further  away  than  that,  where,  if  you  allow^ed  them 
to  charge  anything — I  makethe  distinction  there  of  where  you  allow 
them  to  charge  any  rate  of  fare  they  want  to  charge — ^they  can  not 
stand  on  their  financial  feet,-  Take  the  lid  off,  and  let  them  charge 
anything  they  want— the  business  is  not  there.  In  other  words, 
they  can  not  increase  their  gross  revenue  appreciably,  no  matter 
what  they  make  their  fare. 

Commissioner  Sw^eet.  But  as  the  rate  goes  up,  the  patronage  goes 
down? 

Mr.  Cummin.  Yes ;  and  it  goes  down  in  the  smaller  cities  so  fast 
that  you  simply  can  not  gain  anything  by  putting  on  the  higher 
rate.  Let  them  charge  10,  15,  or  20  cents,  and  it  would  not  help 
matters  any.  There  is  a  case  where  regulation  of  fares  is  not  neces- 
sary by  a  public-service  commission.  It  does  not  make  any  dif- 
ference what  they  charge.  There  are  plenty  of  instances  o*^f  just 
that,  at  the  present  time. 

Commissioner  Meeker.  You  spoke  of  service  at  cost.  Of  course, 
it  would  be  necessary  to  have  a  physical  valuation  of  the  plant  to 
get  at  what  the  service  cost.  You  said,  as  I  understood  you  at  least, 
that  the  ideal  method  of  getting  at  the  value  of  the  plant  would  be 
to  fret  the  amount  invested  ? 

Mr.  Cummin.  Yes ;  if  you  can  get  it. 

160643"— 20- 


-5 


58       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Meeker.  Suppose  we  can  ^et  it.  Suppose  it  can 
be  gotten.  Suppose  the  investment  has  been  an  unwise  one,  as  it 
would  seem  the  investment  in  Jackson,  Miss.,  was  ? 

Mr.  CuMxMiN.  That  would  have  to  be  taken  into  consideration.  In 
that  particular  case,  as  I  say,  the  situation  was  recognized,  appar- 
ently, by  the  franchise.  It  was  recognized  that  the  electric-light 
plant  would  have  to  support  the  street  railroad,  more  or  less. 

Commissioner  Meeker.  Then  what  you  mean  really  is  to  get  at 
the  prudent  investment,  is  it  not  ? 

Mr.  Cummin.  Yes.  There  was  a  public  service  that  was  needed, 
ttie  town  wanted  it,  and  made  that  arrangement  in  order  to  get  it 
There  will  be  a  number  of  street  railroads,  I  think,  as  your  investi- 
gation goes  on,  where  you  will  find  there  probably  is  not  a  financial 
basis  to  justify  their  l>eing  there,  even  in  normal  times,  but  that  they 
are  a  real  community  need,  and  some  arrangement  has  been  entered 
into  whereby  that  community  need  can  be  filled.  That  has  to  be 
taken  into  consideration  as  well  as  the  lack  of  wisdom  as  a  straight 
business  investment.  That  is,  sometimes  the  community  need  has 
been  filled  at  an  actual  business  loss. 

Commissioner  Meeker.  And  there  must  be  some  arrangement, 
either  by  writing  off  the  capital  or  by  subsidy  of  public  ownership  or 
partnerehip,  in  order  to  maintain  this  service? 

^  Mr.  CuMMix.  Yes.  You  can  not  get  an  invest>or  to  put  any  money 
into  that  in  order  to  give  the  service  which  the  public  needs  unless 
you  let  it  stand  on  its  feet. 

Commissioner  Meeker.  You  said  getting  at  the  valuation  was  but 
an  approximation  in  any  case.    Do  you  think  it  is  possible  to  get  a 
physical  valuation  that  is  accurate  enough  to  base  their  fares  upon  ? 
Mr.   Cu3r]\riN.  You   face  this  situation  in  a  valuation— securing 
a  fair  value  or  physical  value  or  anything  else  of  that  kind— that 
you  can  not  get  the  exact  truth.    If  you  trv  to  get  the  exact  truth 
you  will  spend  so  much  time  in  splitting  hairs  over  things  that  are 
matters  of  opinion  and  have  to  be  based  on  hypotheses  that  your 
re^^ults  are  not  going  to  be  worth  the  amount  of  time  you  put  in 
VV  hat  you  must  expect  to  get  is  the  closest  possible  approximation 
to  the  truth.    You  probably  can  have  two  thoroughly  competent  en- 
gineers for  the  same  property  and  they  will  not  agree  even  with  the 
best  intention  in  the  world,  both  of  them  absolutely  trying  to  oret  at 
the  truth.    They  will  not  agree  and  they  may  not  agree  within'quite 
a  large  margin,  and  yet  both  of  them  have  an  approximation  of  the 
trutli     You  can  not  expect  to  get  any  better  than  an  approximation, 
and  the  thing  you  must  aim  at  is  to  get  the  best  approximation  that 
you  can  get.     You  have  to  start  from  some  point  in  makino-  your 
fares.    Well,  now,  there  is  only  one  thing  to  do  and  that  is  to  work 
^ut  some  way  of  agieeing  upon  that  basis.    It  may  not  be  the  truth, 
but  it  it  is  the  closest  approximation  of  the  truth  you  can  get  it  is 
satisfactory  as  a  starting  point.    After  that,  with  accounting  control 
you  can  see  that  your  books  are  kept  so  that  you  can  keep  right  on 
upon  that  basis.  ^ 

C(5mmissioner  Meeker.  You  think  the  deviation  from  the  mean  in 
these  engineers'  estimates  is  within  a  sufficiently  narrow  limit  so  that 
these  various  estimates  may  be  taken  as  the  basis  of  adjusting  faiv^s? 

Mr.  Cummin.  I  would  say  so  in  the  case  of  engineers  who  are 
recognized  as  being  disinterested.    Some  of  them  are^not. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       59 

Commissioner  ^Ieeker.  You  spoke  of  taxation  and  also  paving 
charges  as  coming  from  the  public.  Taxation  from  the  public,  pav- 
ing charges  from  the  riding  public.  That  would  not  necessarily  be 
true,  would  it?  In  fact,  were  not  those  charges — paving  charges  and 
taxation — resorted  to  by  the  public  because  the  street  railways  were 
making  a  good  deal  of  money,  and  they  were  charged  with  the  pav- 
ing charges  and  with  franchise  charges  in  order  to  take  some  of  their 
profits  av/ay  from  them? 

Mr.  Cummin.  That  was  the  original  idea.  I  think  you  misunder- 
stood my  statement  somewhat,  because  when  I  spoke  of  taxation  I 
meant  that  deficits  would  have  to  be  handled  by  the  public,  some 
through  taxation,  either  as  a  partner  or  as  operating  the  business 
themselves.  If  the  deficit  existed,  it  would  have  to  be  paid  for  by  the 
public,  and  paid  for  by  taxation.  I  entirely  agree  that  the  utility 
should  be  taxed  on  just  the  same  basis  as  anything  else.  I  think  that 
is  entirely  proper.  I  do  not  believe  there  should  be  any  change  made. 
If  you  stop  taxing  the  utility,  you  are  paying  it  a  subsidy ;  I  do  not 
care  what  3'ou  call  it  or  how  you  do  it. 

Commissioner  Meeker.  It  is  very  desirable  to  resort  to  indirect 
taxation  if  it  can  be  avoided;  that  is,  allowing  the  street-railway 
corporation  to  collect  in  fares  an  amount  that  does  give  them  an  in- 
come above  a  reasonable  income  on  the  investment  which  is  to  be 
taken  from  them  through  the  taxing  power  of  the  State.  It  is  better 
to  reduce  the  fares  and  reduce  income  in  that  way  ? 

Mr.  Cummin.  Yes. 

Commissioner  Meeker.  So  as  to  avoid  the  waste  of  pouring  water 
from  oniB  vessel  into  another  repeatedly? 

Mr.  Cummin.  Yes. 

Commissioner  Meeker.  Just  one  thing  more.  To  what  extent  is 
it  possible  in  your  experience  as  an  engineer  to  improve  the  imple- 
ments of  street-railway  transportation,  and  thereby  assist  to  put 
the  companies  back  on  their  feet?  Is  there  much  of  a  margin  to  be 
gained  in  that  direction  ? 

Mr.  Cummin.  Of  course,  there  is  quite  a  margin  in  some  cases. 
1  ou  will  find  some  roads  that  are  in  very  bad  physical  condition. 
I  hey  are  in  very  bad  physical  condition  in  many  cases  because  they 
have  not  been  able  to  get  the  money  to  keep  themselves  in  good  physi- 
cal condition,  and  now  their  operating  costs  and  maintenance  costs 
are  out  of  all  reason  on  account  of  their  physical  condition.  There 
IS  a  case  where,  if  the  money  could  be  put  into  it,  a  considerable 
amount  could  be  saved. 

As  far  as  new  devices  are  concerned,  I  should  say  that  these  gen- 
tlemen ot  the  Electric  Eailway  Association  can  tell  you  a  whole  lot 
more  about  them  than  I  can,  because  they  keep  in  very  close  touch 
with  them. 

I  think  that  anything  that  promised  a  saving  the  street-railway 
companies  would  be  only  too  glad  to  adopt. 

Commissioner  Meeker.  I  think  the  commission  would  be  inter- 
ested m  getting  your  views  of  how  money  can  be  obtained  by  these 
railways  of  which  you  spoke  when  you  said  if  they  could  put  more 
money  m  their  investment,  in  their  equipment,  they  could  cut  down 
their  operating  costs  and,  incidentally,  increase  their  income;  and 
they  can  not  borrow  the  money.     What  is  to  be  done  ? 


60       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Cummin.  Tliey  are  in  the  position  of  the  two  mining  partners, 
one  of  whom  stayed  out  West  to  develop  the  prospect  and  the  other 
came  East  to  sell  the  stock;  and  the  one  who  came  East  to  sell  the 
stock  could  not  sell  the  stock  because  the  other  fellow  could  not  dis- 
cover any  gold,  and  the  fellow  out  West  could  not  discover  any  gold 
because  the  fellow  in  the  East  could  not  sell  any  stock.  That  is  just 
the  situation  the  street  railroads  are  in.  They  can  not  get  any  earn- 
ings until  they  can  invest  some  more  money  in  their  plants  to  get 
them  in  shape,  and  they  can  not  get  any  more  money  to  invest  in 
their  claims  until  they  get  some  more  earnings. 

Commissioner  Meeker.  You  have  just  repeated  my  question  to  you 
to  me.     Now,  what  is  the  answer  ? 

Mr.  Cummin.  That  is  the  situation.  The  answer,  in  a  situation  of 
that  kind,  is  that  I  do  not  see  anything  can  be  done,  except  I 
think  if  an  agreement  can  be  secured  that  will  reasonably  assure  the 
company  of  being  able  to  get  back  upon  a  business  basis  that  possibly 
financial  arrangements  could  be  made. 

Commissioner  Meeker.  Do  you  suggest  the  loaning  of  public 
funds  ? 

Mr.  Cummin.  I  think  that  is  bad  public  policy. 

Commissioner  Meeker.  Why  ? 

Mr.  Cummin.  Because  if  it  is  done  once  it  is  likely  to  be  pretty 
hard  to  tell  where  it  will  stop. 

Commissioner  Sw^eet.  It  will  become  a  habit  ? 

Mr.  Cummin.  Yes. 

Commissioner  Meeker.  Guaranteeing  income  ? 

Mr.  Cummin.  I  think  there  might  be  something,  perhaps,  done 
along  that  line  of  where  the  city  would  borrow  upon  its  credit  and 
in  turn  lend  to  the  utility,  taking  proper  security  to  cover  its  advance- 
ment. I  think  something  of  that  kind  might  be  worked  out,  but  I 
do  not  believe  that  is  advisable  if  somethi;ig  else  can  be  done.  I  am 
a  little  jealous  of  diverting  the  public  funds  to  bolstering  up  private 
credit  on  anything.  It  is  bad  enough  to  have  to  do  it  directly  as  a 
subsidy.     I  doubt  its  policy  as  a  matter  of  loan. 

Commissioner  Meeker.  Just  one  question  more:  Who  is  to  deter- 
mine these  properties  that  would  pay  if  you  would  put  more  capital 
into  them? 

Mr.  Cummin.  Just  like  everything  else,  it  is  a  pure  matter  of  judg- 
ment. You  can  not  draw  up  any  formula  and  make  it  fit  all  cases. 
You  have  to  work  out  the  special  case  and  come  just  as  nearly  to  the 
truth  as  you  can  come  and  then  decide  as  may  seem  best  in  that  case. 
I  can  not  see  that  you  can  draw  up  any  formula  that  you  can  fit  to 
any  cases  that  may  arise. 

Commissioner  Wehle.  I  am  coming  back  to  that  subject  of  the 
small  town  that  you  spoke  about.  Is  there  any  way  in  which  you 
can  suggest  to  us  that  we  obtain  data  especially  on  that  kind  of  a 
town  ?  Because  there  are  a  great  many  towns  of  that  general  sort  in 
the  country,  and  they  would  all  be  interested. 

Mr.  Cummin.  I  should  imagine  that  the  Electric  Railway  Associa- 
tion could  furnish  you  a  very  large  number  of  instances* 

Commissioner  Wehle.  Is  there  any  person  outside  of  the  Electric 
Railway  Association,  or  is  there  any  source — any  statistical  source — 
that  you  know  of  outside  of  that  that  could  gw©  us  light  on  that 
subject? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       61 

Mr.  Cummin.  Perhaps  some  of  the  State  utility  commissions  could 
give  you  information  on  that.  For  instance,  tlie  statistician  of  the 
Wisconsin  Commission  could  probably  give  j^ou  considerable  in- 
formation on  just  that  point,  and  that  probably  w^ould  be  true  of  a 
number  of  the  other  State  commissions. 

Commissioner  Wehle.  You  made  one  rather  clear-cut  generali- 
zation that  I  should  like  to  have  a  little  examination  of.  We  were 
talking  about  the  cost  of  construction  of  streets  in  between  the  tracks 
and  on  both  sides,  and  your  view  seemed  to  be  that  no  part  of  that 
cost  should  be  borne  by  the  street-railway  company — that  is,  the  con- 
struction. What  would  you  say  to  this  sort  of  a  situation :  Suppos- 
ing that  a  street-railway  company,  in  order  to  reach  an  outlying 
suburb  which  promised  considerable  traffic,  extends  its  line  to  that 
suburb  in  order  to  bring  in  that  community  within  its  operations  and 
into  its  revenues,  and  thereby  necessitates  the  building  up  of  the  line 
through  the  opening  up  of  that  roadway  for  more  people,  necessi- 
tates the  paving  of  that  street.  In  view  of  the  fact  that  the  railway 
company  is  expecting  to  add  to  the  population  of  the  street  and  of  that 
suburb,  and  to  gain  a  considerable  profit  through  that  operation, 
can  we  say,  as  a  categorical  matter,  that  it  should  not  stand  any  part 
out  of  its  profits,  or  before  it  makes  its  profits,  we  might  say,  of 
the  cost  of  constructing  that  street  in  between  the  tracks  ? 

Mr.  Cummin.  No;  because  it  is  not  the  street  railroad  that  has 
made  that  paving  necessary.  The  street  railroad  may  have  built  out 
to  that  suburb  and  increased  the  population  of  it  very  materially, 
by  furnishing  transportation  facilities.  The  thing  that  makes  the 
street  paving  necessary  is  the  fact  that  the  people  who  live  out  there, 
and  the  people  who  want  to  ride  out  there  and  do  not  want  to  ride 
on  the  street  car,  want  to  use  the  street. 

Commissioner  Wehle.  Are  there  not  a  great  many  conveniences 
that  people  have  that  make  a  street  necessary  ? 

Mr.  Cummin.  Yes;  but  a  street  is  necessary  as  a  community  need. 
It  is  not  caused  by  the  building  of  a  railroad.  It  is  caused  by  the 
people  being  out  there  and  needing  the  street. 

Commissioner  Wehle.  Don't  you  think  it  rather  a  difficult  thing 
to  separate  that — I  am  not  ready  to  argue  with  you  or  disagree  with 
you— but  whenever  you  undertake  to  make  an  out-and-out  declara- 
tion of  where  the  right  is  and  where  the  wrong  is,  I  would  like  to 
see  whether  we  have  made  it  safely. 

Mr.  Cummin.  Your  basis  for  assessing  abutting  property  for  the 
pavement  of  a  street— that  is,  the  theoretical  basis  for  it,  anyway — is 
that  the  pavement  of  that  street  added  to  the  value  of  that  property, 
and  that  therefore  it  is  proper  to  tax  for  the  pavement  of  that  street; 
in  other  words,  a  special  benefit  is  derived. 

Commissioner  Wehle.  But  the  paving  of  the  street,  in  so  far  as  it 
leads  to  any  thicker  populating  of  that  part  of  the  town,  through 
making  it  more  acceptable  for  general  traffic,  adds  to  the  traffic  of 
the  street-railway  company,  does  it  not  ? 

Mr.  Cummin.  No  ;  it  may  not.    It  mav  do  just  the  opposite. 

Commissioner  Wehle.  But  it  may,  may  it  not  ? 

Mr.  Cummin.  You  take  the  case  I  cited  here  a  little  while  ago, 
where  an  mterurban  line  is  paralleled  by  a  hard-surfaced  road,  and 
the  business  is  taken  away  from  the  interurban  line  by  jitneys,  auto- 
mobiles, etc.    The  paying  of  that  street  may  be  an  actual  detriment. 


62       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

In  any  case,  I  can  not  see  why  it  is  brought  on  exeept  by  very  indi- 
rect methods  by  the  street-raih-oad  company  building  that 'exten- 
sion.   I  still  think  my  generalization  is  good. 

The  Chairman.  Isn't  it  a  fact  that  there  is  comparatively  heavier 
maintenance  on  the  paving  between  and  immediately  on  each  side  of 
the  tracks? 

Mr.  Cummin.  As  I  say,  the  maintenance  is  caused  very  often  by 
the  breaking  down  of  joints,  it  is  caused  by  having  to  cut  in  to  reixair 
bonds  and  by  conditions  in  the  subgrade  underneath  the  ties,  and  by 
the  failure  of  the  ties  and  the  rails,  etc,  and  the  maintenance  of 
pavement  in  street-car  tracks  is  always  very  much  heavier  than  it  is 
any  place  else.  If  you  go  out  and  go  over  a  street  that  has  been 
paved  a  number  of  years,  and  go  along  the  street- rail  road  tracks, 
you  can  see  the  condition  that  the  street-railroad  tracks  put  it  in 
Aniuerous  efforts  have  been  made  to  get  away  from  that  high  cost  of 
maintenance,  some  fairly  successful  and  some  not  so  successful,  in  the 
way  of  using  practically  monolithic  pieces  of  various  kinds. 

I  he  Chairman.  Are  there  any  further  questions  of  this  witness « 
[Ao  response.] 

Are  there  any  other  witnesses  who  wish  to  be  heard  by  the  com- 
mission this  afternoon?     [No  response.] 

The  commission  stands  adjourned,  then,  until  further  notice. 

(V\  hereupon,  at  4.30  o'clock  p.  m.,  an  adjournment  was  taken 
sme  die.) 

Washington,  D.  C,  July  15,  1919. 

The  commission  met,  pursuant  to  notice,  at  10  o'clock  a.  m. 

Present:  Charles  E.  Elmquist  (chairman),  Edwin  F.  Sweet  (vice 
chairman),  Royal  Meeker,  C.  W.  Beall,  L.  B.  Wehle,  and  Philip  H. 
(ladsden,  commissioners. 

Appearances:  Mr.  Bently  W.  Warren,  Boston,  Mass.,  and  John  H 
Pardee,  New  York,  N.  Y.,  representing  the  American  Electric  Rail- 
way Association. 

PROCEEDINGS. 

The  Chairman.  Mr.  Pardee,  the  commission  is  ready  to  hear  the 
Electric  Railway  Association. 

STATEMENT  OF  ME.  JOHN  H.  PARDEE. 

Mr.  Pardee.  Mr.  Chairman  and  gentlemen,  I  appear  before  you 
as  president  of  the  American  Electric  Railway  Association,  an 'or- 
ganization which  represents  a  very  large  part  of  the  electric-railway 
nnleage  of  this  country  and  a  very  large  paii;  of  the  capital  invested 
in  the  electric  railways  in  urban  and  rural  communities. 

This  organization  has  been  in  existence  since  1882  and  has  been 
the  spokesman  of  the  industiy  through  all  the  phases  of  its  develop- 
ment from  the  original  horse-car  lines  to  the  cable  road  and  throuo'h 
the  period  of  evolution  from  the  first  commercially  successful  electric 
railway  of  the  city  of  Richmond,  Va.,  in  1888,  to  the  present-day 
trolley  which  is  part  of  the  social  and  economic  life  and  industrial 
life  of  almost  every  city  of  any  size  in  this  country  and  in  many  of 
the  niral  communities.  I  feel,  therefore,  as  president  of  this  asso- 
ciation, and  speaking  with  the  authority  of  its  members,  I  am  pre- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       63 

senting  to  you  the  views  and  wishes  of  an  industry  representing  an 
invested  capital  of  over  $6,000,000,000  and  which  operates  more  than 
44,000  miles  of  electric-railway  track  in  the  cities  and  rural  districts 
of  the  United  States. 

We  are  before  your  commission  because  a  crisis  has  been  reached 
in  the  conduct  of  this  very  important  and  essential  enterprise.  It  is 
not  too  much  to  say  that  we  are  no  longer  able,  under  existing  condi- 
tions and  with  the  revenue  which  we  are  receiving,  to  continue  in 
the  performance  of  the  functions  which  the  electric  railways  are  de- 
signed to  perform.  It  is  no  longer  a  question  of  what  return  shall  be 
allowed  to  the  owners,  it  is  a  question  as  to  what  service,  if  any,  shall 
be  rendered  to  the  public.  It  is  a  situation  which  very  intimately 
concerns  these  three  classes: 

First,  and  most  important,  the  public,  which  is  threatened — and  I 
am  not  now  speaking  in  parables,  but  am  dealing  with  actual  facts — 
in  many  cases  with  the  entire  loss,  and  in  nearly  all  cases  with  a  very 
great  deterioration  of  the  service  which  it  requires. 

Second,  the  more  than  300,000  employees,  who,  in  the  end,  in  spite 
of  theories  or  pronouncements  of  arbitration  boards,  must  depend 
for  their  wages  upon  the  financial  ability  of  the  companies  to  pay. 

Third,  the  owners  of  the  properties  whose  investment— made,  it  is 
true,  with  the  object  of  legitimate  compensation,  but  made,  neverthe- 
less, in  the  interest  of  the  entire  people — is  now  jeopardized. 

The  peculiar  conditions  surrounding  the  operation  of  all  public 
utilities,  and  especially  of  transportation  utilities,  is  the  direct  cause 
of  our  being  before  you.  Owing  to  the  complete  system  of  control 
and  regulation  exerted  over  us  by  the  public  authorities,  which  both 
prescribe  our  service  and  control  our  rates,  we  are  unable  to  readjust 
ourselves  to  changing  conditions  as  every  other  industry  not  so  ham- 
pered IS  readjusting  itself.  On  the  one  liand,  we  can  neither  decrease 
to  any  considerable  extent  the  quantity  or  quality  of  our  product,  or, 
on  the  other  hand,  increase  the  price  of  this  product,  without  the 
consent  and  cooperation  of  the  public,  acting  through  the  constitutea 
authorities,  which  means  in  the  end  that  to  put  into  effect  measures 
lor  our  salvation  we  must  obtain  the  consent,  or  at  least  the  acquies- 
cence, of  the  public  itself. 

We  realize  fully  that  your  commission  is  without  power  to  take 
peremptory  action  or  to  directly  put  into  effect  any  recommendations 
which  you  may  make.  You,  however,  bear  the  commission  of  the 
I^resident  of  the  United  States;  you  were  appointed  at  the  joint  sug- 
gestion of  the  Secretaries  of  Commerce  and  of  Labor,  made  because 
these  gentlemen  realized  the  important  bearing  upon  the  national 
interests  intrusted  to  their  charge  of  the  precarious  situation  of  the 
electric  railways  and  saw  the  necessity  for  its  correction  in  the  na- 
tional interest.  Your  conclusions  and  recommendations  will  have 
t he  confadence  of  the  people  and  will  carry  with  them  the  wei<rht 
that  must  always  be  attached  to  the  wishes  and  conclusions'^of 
the  national  administration.  Your  appointment  gave  to  the  elec- 
tric-railway industry  an  opportunity  of  presenting  to  the  public, 
wliose  representatives  you  are,  a  true  picture  of  the  state  into  which 
It  has  fallen  through  no  fault  of  its  own.  We  have  no  desire  to 
make  a  technical  case"  in  the  legal  sense;  what  we  want  to  give 
you,  and  through  you  to  the  people  of  the  country,  are  the  facts,  and 


64       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

all  of  the  facts,  to  the  end  that  with  your  help  and  with  their  coop- 
eration a  solution  may  be  found. 

We  are  before  you  then,  because  we  believe  that  the  solution  of 
our  problem  is  as  much  a  matter  of  concern  to  the  people  as  it  is  to 
the  shareholders  and  operators  of  the  properties,  and  because  we 
believe  that  the  solution  can  only  be  properly  arrived  at  through  the 
cooperation  of  a  public  educated  to  the  needs  of  the  railways  as 
these  needs  affect  the  needs  of  the  communities. 

In  my  opinion,  and  I  am  confident  that  in  this  opinion  I  will  be 
supported  by  the  industry,  there  are  two  major  phases  of  the  situa- 
tion which  we  now  face.  The  first  concerns  the  absolutely  uneco- 
nomic and  unsatisfactory  basis  upon  which  the  relations  between  the 
electric  railways  and  the  public  have  rested  since  the  enterprise  was 
inaugurated ;  and  by  this  I  mean  that  there  has  never  been  a  proper 
conception  either  on  the  part  of  the  owners  of  these  properties  nor 
on  the  part  of  the  public  as  to  the  factors  which  should  govern  th9 
service  to  be  rendered  or  the  fares  to  be  charged  by  electric  railways 
Ihis  IS  a  situation  which  has  existed  during  the  entire  life  of  the 
industry  and  is  responsible  for  much  of  the  misunderstanding  be- 
tween the  companies  and  the  public.  It  existed  before  the  war  is 
entirely  unconnected  with  the  changes  wrought  by  the  war,  but  it  is 
one  ot  the  fundamental  reasons  why  the  war  has  helped  to  brinff  dis- 
aster upon  us.  ^  fe 

The  second  phase  was  the  direct  result  of  the  war.    It  first  de- 
veloped immediately  after  the  declaration  of  war  in  1914  and  was 
vastly  accentuated  by  the  entrance  of  the  United  States  into  the  war 
^n      u      -i    1  national  war  program,  to  which  we,  as  railway  men, 
all  subscribed,  and  to  the  fulfillment  of  which  we  lent  our  very  best 
endeavors,  involved  the  electric  railways  and  other  public  utilities 
to  an  extent  immeasurably  greater  than  that  in  which  any  other 
national  industry  was  involved.     The  Government  took  control  of 
our  labor    it  raised  the  wages  of  our  employees  in  many  cases  as 
much  as  100  per  cent;  it  took  command  of  our  fuel  supply,  and  fixed 
the  prices  which  ^ye  were  compelled  to  pay  for  coal ;  it  fixed  the  price 
of  every  commodity  that  entered  in  the  maintenance  and  operation 
of  electric  railways ;  m  a  vast  number  of  cases,  it  prescribed  the  serv- 
ice which  we  were  to  perform,  and  called  upon  us  companies  for  con- 
Btruction  involving  many  millions  of  dollars.    In  fact,  there  was  not 
a  phase  of  electric-railway  operation  in  which  the  Government  did 
not  interfere,  with  the  result  that  the  cost  of  operating  our  roads 
was  very  greatly  and  materially  increased.    Thus  it  did  to  add  to  our 
burdens;  to  assist  us  in  bearing  these  burdens  and  to  meet  these  obli- 
gations, it  did  nothing. 

We  are  not  here  to  claim  that  this  action  of  the  Government  was 
not  entirely  necessary  and  entirely  proper,  or  that  it  exclusively 
affected  our  industry.  But  we  do  say  that  its  effect  upon  the  rail- 
ways of  the  country  was  the  more  pronounced  and  the  more  disastrous 
because  alone  of  all  the  industries  affected,  the  public  utilities  were 
unable  to  apply  the  obvious  remedy— an  increase,  on  their  own 
volition,  m  the  price  of  their  product  to  meet  the  increase  in  its 
cost  thus  forced  upon  them. 

These  two  phases  of  the  situation  we  propose  to  lay  before  you  in 
detail,  showing  by  the  testimony  of  those  best  acquainted  with  the 
various  groups  of  facts,  what  is  the  present  condition  of  the  in- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       65 

dustry,  wliat  were  the  causes  of  this  condition,  and  what  are  the 
avenues  of  escape. 

We  believe  that  our  problem,  in  the  solution  of  which  we  claim 
your  assistance,  is  a  problem  of  readjusting  an  essential  industry  to 
conditions  that  have  materially  changed — ^first,  because  of  the  natural 
development  of  the  business  and  the  changing  civic  and  social  life  of 
the  communities;  and  second,  because  the  Great  War  has  wrought  a 
great  change  in  national  concepts  of  industrial  and  social  relations. 
As  I  see  it,  the  elements  that  go  to  make  up  these  changed  condi- 
tions as  they  directly  affect  electric  railways  are : 

First,  the  higher  price  level  upon  which  not  only  the  United  States 
but  the  entire  world  has  entered,  which  seems  bound  to  obtain  for 
an  indefinite  period  of  years. 

Second,  the  conditions  surrounding  the  employment  of  labor, 
which  is  a  larger  part  of  the  cost,  of  operation  of  electric  railways 
than  it  is  of  any  other  industry  with  which  I  am.  acquainted.  In 
this  connection,  I  believe  that  it  must  be  evident  to  any  unbiased  and 
unprejudiced  student  of  present-da}^  conditions  that  labor  is  demand- 
ing and  will  receive  a  greater  share  in  the  wealth  that  it  produces 
than  ever  before  in  the  history  of  the  world.  Everywhere  industry 
is  adjusting  itself  to  meet  these  demands,  and  no  lasting  solution  of 
the  railway  problem  can  be  reached  unless  this  industry  is  put  in  a 
financial  position  where  it  can  render  the  same  meed  of  justice  to  its 
employees  as  is  expected  from  industry  generally. 

Third,  the  introduction  of  a  new  competitive  factor  in  the  auto- 
mobile, not  only  the  so-called  "  jitney,"  but  more  especially  the 
privately  owned  automobile  and  the  motor  truck. 

Fourth,  the  enlarged  functions  of  street-railway  S3stems,  which 
w^ith  the  growth  of  the  communities  they  serve  have  ceased  to  be 
private  enterprises,  w^ith  the  sole  aim  of  adding  to  the  comfort  and 
convenience  of  the  public,  and  have  become  absolutely  essential  to  the 
community  growth,  development,  health,  and  w^elfare,  with  the  result 
that  it  is  no  longer  possible  to  consider  either  service  or  rates  from 
the  standpoint  of  business  principle  alone. 

The  association  which  I  represent,  and  the  Committee  of  One  Hun- 
dred, to  which  it  has  intrusted  the  presentation  of  its  case  before  your 
commission,  does  not  intend  to  impress  upon  you  in  detail  its  own 
views  as  to  the  remedies  which  should  be  applied  to  the  cure  of  the 
situation.  We  do  believe,  however,  that  there  are  two  fundamental 
ideas  which  will  inevitably  force  themselves  upon  you  for  your  con- 
sideration. The  first  of  these  is  that  the  cooperation  of  the  public  is 
sine  qua  non  to  the  stabilizing  of  electric-railway  conditions;  that 
ther^  must  be  impressed  upon  the  public  a  new  conception  of  the 
relations  between  the  communities  and  the  public  utilities  which  serve 
them ;  that  the  antagonism  which  has  hereto  prevailed  is  disastrous 
to  both  interests,  and  that  only  when  the  public  and  the  companies 
work  together  to  secure  efficiency  and  economy  in  operation  can  the 
desired  service  be  furnished  at  a  reasonable  price. 

The  second  is  that  in  order  to  provide,  through  the  employment  of 
private  capital,  proper  transportation  facilities  for  cities  and  for 
rural  districts,  the  basis  of  compensation  must  be  so  determined  as  to 
provide  an  assured,  reasonable  return  and  a  rate  of  fare  so  flexible 
as  to  readily  and  automatically  adjust  itself  to  the  cost  of  providing 
the  service. 


66       PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIs^ 

I  thank  you,  Mr.  Chairman.  The  association  Committee  of  One 
Hundred  has  asked  Mr.  Bently  Warren,  of  Boston,  to  represent  it 
in  the  presentation  of  this  case. 

The  Chairman.  You  may  proceed  in  the  method  which  you  desire. 

STATEMENT  OF  MR.  BENTLY  W.  WARREN. 

Mr.  Warren.  Mr.  Chairman  and  gentlemen  of  the  commission, 
Mr.  Pardee-  has  stated  our  purpose  and  hope  in  coming  before  the 
commission.  We  are  here,  as  he  said,  because  of  the  very  serious 
situation  confronting  this  industry.  We  expect,  and  shall  endeavor 
to  lay  before  the  commission,  a  very  full  statistical  statement  of  the 
present  condition  of  these  railways  and  of  the  causes  and  possible 
suggested  remedies  for  that  situation. 

That  the  situation  is  extraordinarily  serious  is  shown,  I  think,  by 
the  figures  which  happen  to  be  available  for  the  last  calendar  year 
in  one  State— my  own  State  of  Massachusetts.  In  Massachusetts, 
as  we  shall  show^  you  from  statements  from  our  public-service  com- 
mission, with  an  investment  of  almost  a  quarter  of  a  billion  dollars 
in  the  street-railway  industry-^xactly  $241,000,000  odd,  with  gross 
receipts  of  $45,000,000  last  year,  in  1918— the  combined  street  rail- 
ways of  that  Commonwealth  failed  by  $2,858,000— almost  $3,- 
000,000 — ^to  earn  their  operating  expenses  and  fixed  charges,  earn- 
ing not  a  cent  toward  a  dividend  upon  the  capitalization  of  $106,- 
000,000  and  paid-in  premium  of  $0,000,000,  or  a  total  of  $113,000,000 
of  paid-in  capital  and  paid-in  premium,  except  such  dividends  as 
were  paid  upon  leased  lines  under  lease  contract. 

I  mention  that  simply  as  an  illustration.  We  shall  not  be  able 
to  give  figures  for  1918  for  the  entire  country,  much  as  w^e  should 
like  to  do,  because  we  believe  that  those  Massachusetts  figures  are 
typical.  We  shall  be  able  to  give  you  estimates  of  various  operat- 
ing results  for  the  United  States  for  the  year  1918  through  reports 
from  special  companies  made  to  the  American  P^lectric  Railway  As- 
sociation. 

What  we  shall  try  to  do,  as  Mr.  Pardee  has  told  you,  is  to  lay 
before  you  the  general  situation  regarding  this  industry  over  the 
whole  country,  both  its  physical  condition,  its  extent,  and  its  financial 
condition.  We  shall  follow  that  by  endeavoring  to  show  you  the 
causes  which  have  produced  that  situation  and  its  effect  upon  vari- 
ous phases  of  the  industry,  such  as  the  cost  of  labor,  the  cost  of 
capital,  and  other  costs,  the  social  need  that  is  the  essential  character 
of  the  street  railways  to  the  communities,  some  defects  as  we  conceive 
them  in  the  application  of  public  regulation  to  these  utilities,  and 
finally,  the  theories  advanced  by  many  people  and  many  different 
theories  as  to  what  the  proper  remedies  are. 

I  should  like  first,  before  going  into  the  statistical  part  of  our 
presentation,  to  call  upon  Gen.  Tripp,  who  is  chairman  of  the  Com- 
mittee of  One  Hundred.  That  committee  is  serving  voluntarily,  as  I 
understand  it,  at  the  invitation  and  request  of  the  American  Elec- 
tric Railway  Association,  and  is  representative  of  all  the  industries 
directly  affected  by  the  street-railway  industry,  and  is  not  composed 
merely  of  street-railway  men,  but  of  representatives  of  insurance 
companies,  manufacturers,  and  various  industries  which  have  busi- 
ness relations  with  the  street-railway  industry.     I  should  like  now 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION'.      67 

i 

to  call  upon  Gen.  Tripp,  chairman  of  that  committee^  to  explain 
further  the  organization  of  the  committee  and  its  reason  for  being. 

STATEMENT  OE  GEN.  TRIPP. 

Gen.  Tripp.  Gentlemen  of  the  commission,  I  appear  before  you  as 
chairman  of  a  cominittee  of  one  hundred  which  was  appointed  by 
the  American  Electric  Railway  Association  to  present  to  you  on 
behalf  of  the  electric-railway  industry  the  present  conditions  of  it.    ' 

I  would  first  like  to  call  your  attention  to  the  character  of  the 
committee,  because  it  indicates  how  varied  are  the  interests  that  are 
affected  by  the  prosperity  or  lack  of  prosperity  of  the  industry. 

You  will  notice  by  examination  of  the  list  of  members  that  has 
been  handed  you  that  it  comprises  not  only  those  men  who  are  en- 
gaged in  the  administration  of  railways,  but  also  includes  officers  of 
insurance  companies,  bankers,  trust  companies,  and  manufacturers. 
So  we  appear  here  not  as  simply  representing  the  investor  in  street- 
railway  securities,  who  has  already  suffered  large  loss  and  is  in  great 
danger  of  suffering  further  loss,  but  as  manufacturers,  bankers, 
insurance  men,  to  present  this  case  to  you  in  its  broadest  aspects, 
.  and  as  representing  the  financial  and  industrial  elements  of  the 
Xation,  which  are  affected  by  an  industry  wiiich  has  an  investment 
capital  of  something  like  $7,000,000,000  and  an  annual  income  of  • 
$780,000,000,  and  which  is  in  extreme  danger  of  complete  collapse 
and  dissolution.  This  would  jeopardize  the  interests  not  only  of 
the  individual  investor  in  its  securities,  but  its  eft'ect  would  be  a 
j-eal  cause  for  alarm  on  the  part  of  insurance  companies,  bankers, 
trust  companies,  and  other  fiduciary  institutions  which,  with  sound 
judgment  at  the  time,  have  invested  the  savings  intrusted  to  their 
care  in  the  securities  of  the  electric  railways.  And  it  would  also  be 
a  matter  of  serious  moment  to  manufacturers  who  find  in  the  elec- 
tric railways  a  customer  which  consumes  annually  about  $200,000,- 
000  of  their  product. 

The  appointment  of  your  commission  is  evidence  that  the  present 
condition  in  which  the  street  railways  find  themselves  is  also  a  mat- 
ter of  concern  to  the  United  States  Government.  And  I  take  it  that 
that  concern  is  not  wholly  nor  perhaps  principally  on  account  of 
any  particular  regard  that  the  Government  has  for  the  street  railways 
themselves,  but  rather  that  the  effect  of  the  present  condition  of  the 
industry  upon  the  financial  and  industrial  fabric  of  the  country  was 
the  factor  uppermost  in  causing  the  appointment  of  your  commission. 
And  so  we  find  the  Treasury  Department,  the  Department  of  Labor, 
and  the  Department  of  Commerce  represented  on  your  commission. 
The  Treasury  Department  is  interested  because  an  industry  which 
requires  $200,000,000  of  new  capital  each  year  and  a  larger  simi  than 
that  for  its  refunding  operations  can  not  indefinitely  remain  in  its 
present  condition  without  an  effect  upon  the  financial  system  of  thQ 
country.  The  Department  of  Labor  is  concerned  because  the  ques- 
tion of  wages,  conditions  of  work  and  employment,  are  concerned  not 
only  as  it  affects  the  railways  themselves  but  as  it  affects  manufac- 
turers who  furnish  materials  and  supplies  to  the  railways.  The  De- 
partment of  Commerce  is  concerned  because  to  an  extent  seldom  real- 
ized until  a  strike  or  some  other  circumstances  operate  to  cause  a  ces- 
^   sation  of  service,  the  industrial  life  of  the  community  is  very  closely 


68       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

bound  up  with  the  local  transportation  facilities.    The  close  connec- 
tion between  the  industrial  life  of  the  communities  with  local  trans- 
portation service  was  amply  shown  by  the  experience  of  the  United 
fetates  Government  during  the  war.     Very  early  in  the  experience 
ot  those  departments  which  had  to  do  with  the  production  of  muni- 
tions and  supplies  It  was  found  impossible  to  secure  efficiency  and  to 
maintain  it  without  seeing  to  it  that  the  local  transportation  facili- 
ties were  efficient  and  ample  to  assist  in  the  housing  of  workmen. 
And  so  several  of  the  departments  instituted  independent  bureaus  for 
the  purpose  of  dealing  solely  with  that  problem. 
ihV'^^  ^'PP«^^*^"^^nt  of  your  commission   is  the   first   opportunity 
that  the  street  raihrays  have  had  to  present  their  problem  as  a  na- 
tional problem      The  present  methods  of  regulation  and  control 
have  failed.    It  requires  no  argument  to  prove  that.    The  fact  that 
an  industry  scattered  all  over  the  United  States  and  operating  un- 
der different  local  conditions— the  mere  fact  that  such  an  industry 
IS  as  a  whole  on  the  verge  of  bankruptcy  at  a  time  when  unregulated 
industry  is  at  the  height  of  prosperity— speaks  for  itself. 

Ihe  present  system  of  regulation  and  control  is  entirely  too  in- 
elastic to  respond  to  the  stress  of  changing  conditions,  particularly 
such  as  now  exist  and  they  do  not  permit  of  the  prompt  adjustment 
^t^e, price  of  the  product  or  the-  cost  of  the  product.  And  any 
method  of  control  or  regulation  which  does  not  permit  of  the  appli- 
cation of  this  simple  rule  will  always  fail.  I  have  no  doubt  that  this 
IS  a  fundamental  truth  which  is  recognized  by  everybody,  but  in 
the  case  of  electric  railways  a  peculiar  psychological  factor  has 
been  introduced  which  has  hindered  the  adjustment  of  electric-rail- 
way problems. 

The  old  system  of  contracts  between  a  municipality  and  a  rail- 
Tvay,  under  which  the  railway  agreed  for  a  certain  fixed  fare  to 
perform  certain  service,  raised  a  popular  belief  that  the  perform- 
ance of  a  railwa;^  service  through  the  medium  of  private  enterprise 
amounted  to  giving  away  public  privileges  to  private  individuals 
^•ui     I  ^i^^^^  enormous  profits  have  been  reaped.    It  has  been  impos- 
sible hitherto  to  eradicate  that  idea  from  the  public  mind      I  do 
not  believe  that  the  relations  between  municipalities  and  electric 
railways  can  be  satisfactorily  adjusted  upon  the  basis  of  a  simple 
contract  such  as  might  exist  between  two  individuals  or  corporations 
1  entirely  subscribe  to  the  theory  of  State  regulation  and  control  • 
and  that  theory  having  been  admitted,  I  believe  it  is  impossible  for 
the  parties  to  stand  in  simple  contractual  relations  with  each  other 
and  the  idea  should,  if  possible,  be  entirely  removed  from  the  pub- 
lic mmd  and  a  new  conception  of  the  functions  of  electric  railways 
substituted.     That  concept  I  believe  to  be  that  the  electric  rail- 
way IS  an  agent  of  the  public  to  furnish  it  service,  and  for  that 
service  It  IS  entitled  to  a  fair  and  just  return  upon  capital  honestly 
invested  in  the  service  and  upon  conditions  which  will  respond  to 
changing  conditions  of  operation  and  of  finance. 

I  think  the  electric-railway  industry  is  facing  three  alternatives 
and  that  the  issue  will  come  immediately :  First,  is  municipal  owner- 
ship ;  second,  private  ownership  and  operation  under  a  sound  funda- 
mental basis  of  regulation  and  control ;  and  third,  complete  disap- 
pearance of  the  service.  In  some  cases  the  service  has  already  dis- 
appeared and  the  tracks  have  been  taken  up,  but  I  believe  that  alter- 
native is  unthinkable  in  large  communities  except  perhaps  in  part. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       69 

I  believe  our  experience  in  the  governmental  operation  of  those 
utilities  which  are  more  or  less  complex  in  character  has  not  been 
reassuring,  and  I  further  believe  that  a  majority  of  the  people  be- 
lieve in  private  operation  under  proper  regulation  and  control. 

Your  commission  was  appointed  by  the  President,  and  as  I  read 
the  commission,  it  is  for  the  purpose  of  inquiring  into  and  making 
recommendations  as  to  ways  and  means  to  place  this  essential  indus- 
try upon  a  sound  basis,  upon  a  basis  which  will  permit  it  to  give 
proper  service  to  the  people,  insure  a  steady  flow  of  capital  into  the 
enterprise  and  safeguard  investment  that  has  already  honestly  been 
made. 

The  Committee  of  One  Hundred  will  present  to  you  through  the 
,  testimony  of  men  who  are  best  equipped  to  give  testimony  on  the  va- 
rious aspects  of  the  case  a  complete  picture  of  the  street-railway 
situation ;  and  we  believe  that  when  you  have  considered  it,  you  will 
realize  that  the  industry  is  in  dire  extremity  and  that  under  present 
conditions  nothing  can  save  it  from  complete  bankruptcy,  and  that 
you  will  also  agree  that  such  a  denouement  is  unnecessary,  unfair, 
and  un-American,  and  that  you  will  also  agree  that  such  a  debacle 
would  throw  the  larger  burden  not  upon  the  rich  but  upon  those  that 
are  not  rich. 

All  the  special  Committee  of  One  Hundred  ask  is  that  the  industry 
be  given  its  place  in  the  sun. 

Mr.  Warren.  Mr.  Chairman,  would  it  be  proper  at  this  point  to 
ask  for  information  from  the  commission  as  to  the  dates  of  the  hear- 
ings ?  The  association  has  invited  a  large  number  of  gentlemen  from 
various  parts  of  the  country  to  appear  before  the  commission  on  va- 
rious aspects  of  the  general  subject  and  it  is  very  desirable  that  we 
should  be  able  to  wire  them  as  to  when  we  expect  to  ask  them  to  ap- 
pear before  the  commission,  giving  them  as  nearly  an  exact  data  as 
possible. 

The  Chairman.  May  I  inquire  how  long  you  think  it  will  take  to 
present  your  case  ? 

Mr.  Warren.  We  believe  it  will  take  8  to  10  daj^s,  depending 
somewhat  necessarily  upon  the  questions  which  the  commission  mem- 
bers may  desire  to  ask  of  various  witnesses  who  will  appear. 

The  Chairman.  Is  it  your  pleasure  to  present  your  case  con- 
secutively ? 

Mr.  Warren.  We  should  prefer  to,  if  that  would'  suit  the  con- 
venience of  the  commission.  We  think  we  could  arrange  it  better 
with  the  witnesses. 

The  Chairman.  The  commission  announces  that  its  hearings  will 
continue  until  you  are  through  with  your  case.  The  hours  will  be 
from  10  to  1  o'clock  in  the  morning  and  from  2  to  5  o'clock  in  the 
afternoon.  If  it  is  necessary  to  hold  night  sessions  to  expedite  this 
work,  the  commission  will  consider  that  later  on. 

Mr.  Warren.  I  wish  to  say  that  we  appreciate  very  much  the 
kindness  and  consideration  of  the  commission. 

The  Chairman.  Unless  otherwise  advised,  the  commission  will 
not  sit  on  Saturday. 

Mr.  Warren.  Then,  I  will  proceed  now? 

The  Chairman.  You  may  proceed.. 

Mr.  Warren.  I  will  ask  Mr.  Welsh  to  take  the  stand. 


70       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

SXATEMENX  OF  MR.  JAMES  W.  WELSH. 

Mr.  Warren.  Your  full  name? 
Mr.  Welsh.  James  W.  Welsli. 
Mr.  Warren   And  what  is  your  occupation? 
ciaUon.  Statistician  of  the  American  Electric  Railway  Asso- 

Mr   wt^  «»''■  T?*^  ^\^^  T^"  ?°"  engaged  prior  to  that  ? 
Mr.  Wemh   Prior  to  that  I  was  connected  with  the  Emercencv 
Fleet  Corpoi-ation   in  charge  of  the  transportation  of  enTplovfr  to 

^uritJT''^'  '"  ^^^.^^y-'  ^'"'^  ^"«t"«t  for  a  period Tf  one  year 
during  the  war.    And  prior  to  that  I  was  connected  for  a  ^liod  of 

att"  c4fnaTv::^\V'*',  ''/'^^'^"^f'^  ^'^'^''^^^  ^o.,  which  fs^he^er- 

M?  W  vS   WW   ''*'"'  ""'^T^^  ■'"  "'«  '='*-^  °*  Pittsburg!,.  ^ 

Vll'  |J,t        V  ^'^'''^  educational  qualifications? 

TefhnoW  fn  LmU  ^  ,^''^l"''t«  .»*  tl»e  Massachusetts  Institute  of 

generafSe.  engineering  and  of  Harvard  University  in 

Mr.  Warren.  Now,  Mr.  Welsh,  in  preparation  for  this  hearinn- 
have  you  been  preparing  statistics  anS  charts  showing  the  condP 
raXay??  "^"'"''"^  ^*'"''^*^*'"^  ^^^^  g«"«'->  situation  "o^f  the  Xet 

Mr.  Welsh.  We  have. 

Mr    Warren.  And  what  have  been  the  sources  from  which  vo„ 

n.ptts^:rZ;^r;aSen"t'i?^:^^^^^^ 

reference  to  electric  railways,  from  the  reports  of  1800  to  m7  We 
me  ved  advance  copies  of  the  latter  report  through  special  courtesy 
of  the  Census  Department.     In  addition  to  that  we  ha  e  Xt  out 

rf'LT"doneTh,t'?r:  ''t"*^  I"  electric-railway  companiy^nc^ln 
lact.  na\e  clone  that  from  time  to  time  as  a  part  of  the  ro<rulir  wort 
of  the  association.  We  have  also  relied  „pon  other  s^rci;  of  In 
formation  with  reference  to  special  .ubjects,  but  in  everv  ca=e  we 
have,  in  our  pi-esentation  here,  attempted  to'  show  very  cTea rfy  the 
source  of  our  information.  •    ^"^'"v  me 

Mr.  Warren.  I  now  propose  to  take  up  vour  various  charts  in  the 

o Hler  in  which  you  think.they  should  be'  introduced.     Have  you    he 

X.  WelIil  Yes  •=°"""''^'°"  •     [Sec  charts  in  Appendix.]  '  " 

sho??  ^^'■"""'''-  ^'"'''  ^'-  ^''•'^'  "^"*  ''  «i«t  <^h«rt  designed  to 

»i?i''-  ^"^r-  ^h''  P"''P«^e  of  this  chart  is  to  illustrate  the  growth  of 
elee  ric  railways  from  1800  to  1018.    It  shows  the  principal  dements 

o    lineTnd'hl^iKff'  T^'  '%'"'''  P-se„ger'cars  a^d  the  mfe 

ctrt  thrnullrTf  :rpU;es  '  '''"'  "'  '''"'  ^'^°  ^""-^  "•'-  the 

The  point  of  special  interest  is  the  rate  of  increase  in  these  viriouq 

S'from  lOoTt"''  *'qI5"*„"P,"""'  '""^  '^^'^  was  a  rapfd  giwth 
and  from  1007  to  1012  all  elements  of  physical  property  declined 

somewhat  in  the  rate  of  increase  with  a  still  further  fallin"  off  In 
sfcof  the  iinT"  '"™  ''''  *°  ''''^  ^^  "^^'-'^^  ^y  ^^  '-- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       71 

These  same  facts  are  brought  down  in  the  table  which  accom- 
panies this  chart,  at  the  bottom  of  the  page,  where  the  percentage 
increase  for  each  of  these  items  is  shown  over  each  prior  census  year. 

It  is  notable,  for  example,  that  whereas  in  the  case  of  miles  of  line 
the  increase  was  15.6  per  cent  in  1^2  over  1890,  it  fell  to  10.7  in  1907, 
3.8  per  cent,  in  1912,  and  1.4  per  cent  in  1917. 

In  the  case  of  the  number  of  passenger  cars,  the  rate  of  increase 
fell  from  7.1  per  cent  in  1902  to  3.2  per  cent  in  1907,  1.8  per  cent  in 
1912,  and  1  per  cent  in  1917. 

Mr.  Warren.  Now,  I  notice  that  on  the  chart  you  show  certain  in- 
formation for  the  year  1918.  Beginning  with  those  years  at  the 
bottom  of  the  chart — are  they  census  years  or  special  street-railway 
census  reports?  * 

Mr.  Welsh.  Yes. 

Mr.  Warren.  For  1912,  1917,  etc.  How  did  you  arrive  at  your 
figures  for  1918  so  far  as  you  were  able  to  give  them  there  ? 

Mr.  Welsh.  The  1918  figures  in  all  of  these  charts  which  we  will 
present  hereafter  were  obtained  from  a  questionnaire  which  was 
sent  out  to  all  electric-railway  companies,  covering  various  items  for 
both  the  years  1917  and  1918.  In  that  way  a  comparison  was  ob- 
tained between  the  1917  values  for  this  group  of  companies  and  the 
census  value  for  1917  and  a  proportion  in  that  Avay  was  determined 
which  was  applied  to  the  1918  figures  of  the  same  group  of  companies 
to  determine  a  corresponding  estimated  1918  census  figure.  This 
group  of  companies,  I  may  say,  covered  345  in  number  and  repre- 
sented over  80  per  cent  of  the  operating  reveniies  of  the  country.  We 
believe  it  to  be  a  typical  group  of  companies  because  of  the  close 
checking  up  of  various  items  as  will  appear  hereafter. 

Mr.  Warrex.  Is  there  an^^thing  that  the  commission  would  like  to 
ask  about  either  that  chart  or  the  table  ? 

Commissioner  Beall.  Are  you  sure  of  that  number  of  employees? 
It  seems  to  me  that  is  too  low.  You  have  down  here  294.  I  think 
there  is  an  error.    It  is  around  340  or  350,  I  think. 

Mr.  Welsh.  That  is  in  thousands.  The  chart  is  represented  in 
thousands  of  employees. 

Commissioner  Beall.  But  you  have  here  294,000  on  j^our  statistics 
accompanying  the  map.  Is  not  that  pretty  low?  Are  there  not 
more  than  that  to-day? 

Mr.  Welsh.  That  is  the  figure  reported  by  the  1917  census. 

Mr.  Warren.  Do  you  know  from  the  census  reports,  Mr.  Welsh, 
whether  that  is  the  total  number  of  employees  including  trackmen, 
linemen,  car-house  men,  or  only  trainmen,  so-called? 

Mr.  Welsh.  I  understand  it  represents  the  total  number  of  em- 
ployees. 

Commissioner  Sweet.  The  principal  value  of  this,  I  take  it,  Mr. 
Welsh,  is  a  comparison  at  the  different  periods. 

Mr.  Welsh.  Yes, 

Commissioner  Sweet.  And  if  it  were  taken  *on  the  same  basis— it 
is  not  so  essential  that  the  absolute  number  should  be  correct,  if  it  is 
taken  on  the  same  basis  at  different  times. 

Mr.  Welsh.  That  is  true. 

Commissioner  Sweet.  That  is  your  main  purpose  in  presenting  it, 

is  It  not?  r      sr  f  to       J 

Mr.  Welsh.  That  is  true ;  yes. 


72       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  Have  you  any  reason  or  explanation  of  the  rapid 
increase  of  the  number  of  employees  between  1902  and  1912  ? 

Mr.  Welsh.  Of  course,  between  1902  and  1912  the  industry  at 
large  was  in  its  most  rapid  period  of  development.  However,  the 
number  of  employees  has  increased  more  rapidly  than  other  ele- 
ments. It  is  possibly  due  to  various  circumstances.  One  thing  may 
be  the  tendency  toward  shortening  of  the  hours  of  labor  and  requir- 
ing, therefore,  a  greater  number  of  employees. 

Commissioner  Gadsden.  Does  it  not  appear  on  this  table  that  be- 
tween the  same  dates  the  mileage  increased  100  per  cent  ? 

Commissioner  Beall.  The  latter  was  like  the  New  York  subways. 
Did  they  not  put  in  a  lot  of  additional  tracks?  I  think  a  good  deal 
of  that  came  in  during  those  years. 

Mr.  Welsh.  Yes;  Iwas  merely  comparing  the  rate  of  increase  of 
the  number  of  employees  with  the  rate  of  increase  in  miles  of  track 
and  passenger  cars,  which,  from  the  chart,  is  evidently  greater  owing 
to  the  higher  slope  of  the  line. 

Commissioner  Meeker.  I  do  not  think  you  can  depend  upon  the 
slope  of  the  line  on  an  arithmetic  chart ;  you  would  have  to  draw  it 
on  a  logarithmic  scale.  And  the  figures  of  your  table  do  not  sub- 
stantiate the  statement  that  the  number  of  employees  increased  by 
a  greater  percentage  than  the  mileage  of  line  or  even  the  miles  of 
single  track. 

Mr.  Welsh.  Well,  for  example,  you  can  compare  the  increase  in 
1912  over  1907,  which,  in  the  case  of  the  number  of  employees,  is 
5.5  j^er  cent,  and  in  the  case  of  the  number  of  passenger  cars  is  only 
1.8  per  cent.  There  is  an  excess  of  about  three  times  in  the  rate  of 
increase  for  the  number  of  employees  over  the  number  of  passenger 
ears. 

Commissioner  Meeker.  I  understood  the  question  was  ifsked  from 
1902  to  1912  and  not  from  1907  to  1912. 

Mr.  Welsh.  All  right,  in  the  case  of  1907  over  1902  the  rate  of 
increase  in  the  number  of  employees  is  11.4  per  cent,  and  in  the  num- 
ber of  passenger  cars,  3.2  per  cent. 

Commissioner  Meeker.  The  first  figures  refer  to  the  increase  from 
1890  to  1902. 

Mr.  Welsh.  That  is  true. 

Commissioner  Wehle.  In  connection  with  the  number  of  em- 
ployees, may  I  ask  you  whether  in  the  case  of  an  electric  railway  and 
power  company  where  some  employees  would  be  allocatable,  so  to 
speak,  to  the  power  activity  and  some  to  the  street-railway  activity, 
Avhether  such  allocation  has  been  made  in  arriving  at  these  esti- 
mates ? 

Mr.  Welsh.  I  believe  the  census  reports  attempt  to  do  that  very 
thing.  So  far  as  I  know,  even  where  there  is  the  combined  electric 
railway  and  power  company,  the  management  of  the  electric-railway 
end  is  distinct,  at  least  so  far  as  departmental  organization  is  con- 
cerned, from  the  power  business. 

Commissioner  AVehle.  But  you  are  not  certain  that  such  a  separa- 
tion has  been  made  ? 

Mr.  Welsh.  I  am  reasonably  certain ;  yes. 

Commissioner  Wehle.  Can  you  ascertain  that  and  put  it  in  the 
record  ? 

Mr.  Welsh.  I  will;  yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       73 

Mr.  Warren.  Do  you  know  as  to  the  relative  number  of  employees 
in  power  plants  as  compared  with  street  railways,  as  to  whether  it  is 
smaller  or  larger  generally  ? 

Mr.  Welsh.  Very  considerably  smaller. 

Mr.  Warren.  There  is  no  public  utility,  is  there,  in  which  the 
number  of  employees  is  so  large  in  proportion  to  the  income  as  in 
street  railways? 

Mr.  Welsh.  No  ;  I  believe  that  is  true. 

Mr.  Warren.  Barring  possibly  the  railroads,  but  I  mean  the  power 
industry. 

Mr.  Welsh.  No  ;  that  comes  about  from  the  great  number  of  men 
required  to  operate  the  cars. 

Mr.  Warren.  If  there  are  no  other  questions,  I  will  pass  to  the 

next. 

Commissioner  Wehle.  May  I  ask  another  question? 

Mr.  Welsh.  Yes. 

Commissioner  Wehle.  Will  there  be  any  way  of  finding,  with 
reference  to  these  years  that  you  have  listed  here,  the  actual  number 
of  passengers  carried  ? 

Mr.  Welsh.  We  will  show  that  in  a  later  chart. 

Commissioner  Wehle.  As  of  the  same  years  ? 

Mr.  Welsh.  Yes. 

Mr.  Warren.  That  is  in  the  next  chart. 

The  figures  in  the  table  accompanying  Chart  C-101  are  as  follows : 

Growth  of  electric  railways. 
(Chart  C-101 — Based  on  United  States  census  reports.) 


Year. 

•Miles  of  line. 

Miles  of      j  Number  of 
single  track,   employees. 

Number  of 

pa.ssenger 

cars. 

1890 » 

5,783.47 
16,645.34 
25,547.19 
30,437.86 
32,547.58 

8,123.02 
22,576.99 
34,381.51 
41,064.82 
44,835.37 
44,949.50 

70,764 
140,769 
221,429 
282,461 
294,826 

32,505 
60,290 
70,016 
76, 162 
79,914 

19021 

1907  2 

1912  « 

1917  2 

1918  8 ;"" 

» United  States  Census  Reports,  1912,  Table  4,  p.  184. 

2  Advance  Report,  Table  5. 

8  Data  sheet  No.  186  (estimated). 

Average  per  cent  increase  per  year  over  previous  census. 


Year. 


1902. 
1907. 
1912. 
1917. 
1918. 


Miles  of 
line. 


15.6 

10.7 

3.8 

1.4 


Miles  of 
single 
track. 


14.8 

10.5 

3.9 

1.8 

.3 


Number  of 
employees. 


8.2 

11.4 

5.5 

.9 


Number  of 

passenger 

cars. 


7.1 
3.2 
1.8 
1.0 


Mr.  Warren.  Now,  what  does  this  chart  show  ? 
Mr.  Welsh.  This  chart  shows  the  principal  traffic  statistics  of 
electric  railways,  namely,  the  revenue  car-miles  and  the  total  pas- 
160C43*'— 20 6 


I# 


74       PROCEEDIN-GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

sengers  carried.  At  the  same  time  a  comparison  is  made  between  the 
number  of  passengers  carried  and  the  population,  which  is  expressed 
as  the  riding  habit.  The  riding  habit  is  a  useful  measure  of  the 
growth  of  the  electric-railway  business.  It  is  determined  by  divid- 
ing the  annual  revenue  passengers  carried  by  the  total  population 
of  the  country  and  therefore  represents  the  average  number  of  rides 
per  year  for  each  inhabitant.     The  chart  indicates 

Commissioner  Weiile.  May  I  interrupt? 

Mr.  Welsh.  Yes. 

Commissioner  Wehle.  You  have  done  that  only  for  the  whole 
countr3\     You  have  not  done  it  in  particular  localities? 

Mr.  Welsh.  We  have  later  a  chart  for  the  cities.  The  chart  indi- 
cates an  increase  in  this  riding  habit  in  every  case,  but  it  is  notice- 
able that  the  i-ate  of  increase  has  been  falling  off  since  1907,  as  indi- 
cated by  the  decreasing  slope  of  the  line.  That  is  the  line  at  the 
lower  part  of  the  chart.  I  might  explain  that  chart  better  if  I 
pointed  out  the  lines. 

Mr.  Warren.  I  think  that  would  be  very  much  better. 

Mr.  Welsh  (referring  to  large  chart).  The  riding  habit  is  indi- 
cated by  this  line  here,  coming  along  in  this  way.  The  rate  of  in- 
crease from  1902  to  1907  is  indicated  by  this  slope  of  the  line  and 
represents  an  increase  of  about  25  rides  per  inhabitant.  From  1907 
to  1912  the  increase  is  about  15  rides  per  inhabitant,  and  from  1912 
to  1917  the  increase  is  9  rides  per  inhabitant. 

Mr.  Warren.  That  appears  also  on  the  table  accompanying  the 
chirt 

Mr.  Welsh.  On  the  accompanying  table  to  the  chart.  We  have 
also  plotted  the  relative  number  of  passengers  per  car-mile,  which 
is  a  measure  to  some  extent  of  the  necessary  traffic  and  to  some  ex- 
tent of  the  number  of  short  riders.  This  value,  however,  has  been 
approximately  constant  throughout  the  entire  period,  ranging  or 
averaging  about  5  per  cent,  although  as  noted  there  has  been  a 

gradual  increase. 

Mr.  Warren.  Can  you  tell  from  that  line,  the  relative  passengers 
per  car-mile,  anything  about  the  number  of  passengers  in  the  car 
at  any  one  time,  the  average  number? 

Mr.  Welsh.  In  this  way  you  can  estimate  about  what  the  average 
number  in  the  car  at  one  time  is.  The  average  length  of  ride  on  most 
electric-railway  properties  is  about  3  miles  per  passenger,  and  tak- 
ing five  passengers  per  car-mile  as  the  average  it  would  appear  as 
though  15  passengers  on  the  average  is  the  number  in  the  car  at  one 
time.  Compare  that  with  the  average  seating  capacity— it  is  possible 
to  determine  roughly  the  extent  to  which  the  equipment  is  used  on  the 
average.    This  is  really  an  expression  of  the  load  factor. 

Commissioner  Meeker.  Mr.  Chairman,  I  would  like  to  call  atten- 
tion to  a  rather  technical  point.  I  think  it  may  assist  the  commis- 
sion if  I  do  so.  Take  the  period  1907  to  1912  and  take  your  riding- 
habit  line  and  compare  that  slope  on  that  line  with  the  slope  on  the 
i-^e venue  car-miles  run,  you  can  see  at  a  glance  that  the  slope  is  very 
much  steeper  on  the  revenue  car-miles  line,  yet,  according  to  your 
tabular  statistics,  the  percentage  of  increase  in  revenue  car-miles 
from  1907  to  1912  was  3.7  per  cent,  whereas  the  per  cent  increase  in 
the  riding  habit  from  1907  to  1912  was  17.6  per  cent.  What  I  wish 
to  call  attention  to  is  that  you  can  not  trust  the  slope  of  the  line  as 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOlfT.       75 

indicating  anything  with  reference  to  percentage  increase  when  it  is 
drawn  on  an  arithmetic  scale.  If  the  chart  had  been  drawn,  as  I 
think  it  should  have  been,  on  the  logarithmic  scale,  the  slope  of  the 
line  would  show  exactly  the  per  cent  of  increase.  Now,  we  need  to 
confine  our  attention,  if  we  waiit  to  learn  anything  about  the  per- 
centa^^e  increase,  to  the  tabular  scale  and  not  to  the  lines  on  the  chart. 
I  think  it  would  be  well,  perhaps,  to  have  the  charts  redrawn  for 
the  purpose  of  showing  the  percentage  increase  to  the  main  line  in  all  • 
of  these.    I  just  wanted  to  make  that  point,  Mr.  Chairman. 

Mr.  Warren.  We  will  try  to  have  the  charts  redrawn. 

Mr.  Welsh.  Well,  I  would  just  like  to  say  that  the  charts  are 

drawn  to  a  scale. 

Commissioner  Meeker.  Oh,  yes. 

Mr.  Welsh.  In  other  words,  the  period  from  1890  to  1902,  repre- 
senting 12  years,  is  on  the  same  scale  as  the  period  from  1902  to  1907. 
In  other  words,  one  is  5  years  and  the  other  is  12  years,  and  the  dis- 
tances are  indicated. 

Commissioner  Meeker.  But  you  caught  my  point.  The  slope  of  the 
line  there  is  very  much  steeper  on  the  upper  line,  but  the  percentage 
increase  indicated  is  very  much  smaller,  because  you  have  so  much 
larger  base  to  measure  the  prior  line. 

Mr.  Welsh.  In  other  words,  each  percentage  is  figui*ed  on  the  prior 
census,  and  so  a  new  base  occurs  in  every  census  year.  In  other  words, 
the  base  for  the  1917  figures  in  the  table  is  1918 

Commissioner  Meeker.  No  question  is  raised  as  to  the  statistical 
accuracy  of  the  figures.  The  only  point  is  that  we  can  not  trust  the 
slope  or  the  line  to  represent  percentage  increase.  We  must  get  that 
from  3'our  statistical  data. 

Mr.  Warren.  If  the  commission  would  like  to  have  the  charts  re- 
drawn on  the  above  terms,  you  could  do  that? 

Mr.  Welsh.  We  could.  It  would  probably  take  some  time  to 
do  so. 

Commissioner  J^Ieeker.  I  do  not  think  that  is  at  all  necessary,  if 
"we  have  the  figures  before  us. 

Mr.  Warren.  That  is  really  all  you  need? 

Commissioner  Meeker.  Yes,  sir. 

Mr.  Warren.  I  suppose  there  is  no  question  but  what  each  line 
indicates  that  particular  item? 

Conmiissioner  Meeker.  What  the  lines  on  the  chart  show,  of 
course,  is  absolute  differentials.  It  shows  that  perfectly;  but  when 
you  come  to  show  i^ercentages,  you  will  have  to  be  very  careful  with 
your  charts. 

Mr.  Warren.  Yes.  It  does  not  show  the  percentage,  but  it  does 
show  the  growth  and  development. 

Mr.  Welsh.  Yes;  that  is  so.       . 

Mr.  Warren.  Is  there  anything  else  you  wish  to  call  attention  to, 
Mr.  Welsh,  on  that  chart  or  the  accompanying  table  ? 

Mr.  Welsh.  No;  I  think  not. 

Mr.  Warren.  Now,  Mr.  Welsh,  I  think  it  woul^  be  well  if  you 
take  your  papers  over  here,  where  you  will  be  near  the  chart  and 
Avhore  you  can  use  the  i:)ointer. 

Mr.  Welsh.  Very  well. 


I 


76       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  figures  on  the  table  accompanying  Chart  C-102  are  as  follows 

Electric  railway  traffic. 
(Chart  C-102. — Based  on  United  States  census  reports.) 


Revenue  car-miles 

Average  per  cent  increase  per  year  overprior  census. . 

Riding  habit 

Average  per  cent  increase  per  year  over  prior  census. . 

Total  passengers  carried 

Average  per  cent  increase  per  year  over  prior  census.. 

Revenue  passengers 

Average  per  cent  increase  per  vear  over  prior  census. . 

Revenue  passengers  per  car-mile 

Average  per  cent  increase  per  year  over  prior  census. . 


1912 


11,921,620,074 

3.7 

MOO 

17.6 

> 12,135,341,716 

»  9, 545, 554, 667 

5.6 

15.06 

1.5 


1917 


12,139,801,530 

2.2 

M09 

9.0 

114,506,914,573 

3.9 

111,304,660,462 

3.6 

15.41 

1.4 


1918 


2  2,051,355,560 
»4.1 


'14,243,415,830 
»1.8 

2  11,107,864.347 
•1.7 


1  Advance  Report,  Table  5. 

'  Data  sheet  No.  183  (estimated). 

»  Decrease. 

<  United  States  census  reports. 

'  Advance  report,  Table  11. 

•  Estimated  as  78  per  cent  of  total  passengers  as  estimated  by  American  Electric  Railway  Association 
for  1918  census.  Rates  of  revenue  to  total  passengers  (78  per  cent )  found  to  be  practically  constant  for  years 
1917, 1912,  and  1907. 

Electric  railicay  traffic. 
(Chart  C-102. — Based  on  United  States  census  reports.) 


Revenue  car-miles 

Average  per  cent  increase  per  year  over  prior  census. 

Riding  habit , 

A  verage  per  cent  increase  per  year  over  prior  census. . . 

Total  passengers  carried  « 

A  verage  per  cent  increase  per  year  over  prior  census. . . 

Revenue  passengers  • 

Average  per  cent  increase  per  year  over  prior  census... 

Revenue  passengers  per  car-niile 

A  verage  per  cent  increase  per  year  over  prior  census. . . 


1890 


1383,178,085 


♦32 

V2*623,'6i6,"262" 
V2,623,'6i6,"262" 


1902 


« 1,144, 430, 466 
16.5 

6  61 

90.6 
•5,836,615,296 

15.7 
•4,774,211,904 

11.3 
>4.26 


1907 


•1,617,731,300 

8.3 

85 

39.3 

•9,533,080,760 

12.7 

•7,441,114,508 

11.2 

•4.70 

2.1 


1  United  States  Census  Report,  1907,  p.  33,  text. 

•  United  States  Census  Report,  1912,  Table  156,  p.  293. 

•  Advance  Report,  Table  5. 

•  Umted  States  census  reports. 

•  Advance  Report,  Table  11. 

•  Transfer  and  free  passengers  not  noted. 

'  United  States  Census  Report,  1902,  Table  1,  p.  6. 

•  United  States  Census  Report,  1912,  Table  156,  p.  292. 

Mr.  Warren.  This  chart,  which  is  marked  "C  107,"  indicates 
what  ? 

Mr.  Welsh.  This  chart  supplements  the  preceding  chart,  and 
show^s  the  number  of  revenue  passengers  carried,  as  distinguished 
from  the  total  number  of  passengers  carried  on  the  previous  chart. 
We  have  again  plotted  the  number  of  revenue  passengers  per  inhab- 
itant, but  in  this  chart  have  included  the  year  1918,  as  well  as  the 
census  year. 

Mr.  Warren.  And  you  have  confined  this  to  the  revenue  passen- 
gers ? 

Mr.  Welsh.  Yes ;  this  chart  is  based  on  revenue  passengers. 

Mr.  Warren.  , Well,  the  revenue  passenger  is  the  one  who  really 
pays  a  fare,  is  he  not  ? 

Mr.  Welsh.  Yes,  sir. 

Mr.  'Warren.  As  distinguished  from  the  transfer  passenger  ? 

Mr.  Welsh.  Free  passengers  and  those  who  pay  for  transfers. 

Mr.  Warren.  That  is  an  account  of  these  passengers,  indicating 
whatever  the  revenue  will  be  at  the  rate  per  passenger  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        77 

Mr.  Welsh.  Yes. 

Mr.  Warren.  And  the  total  number  of  passengers  does  not  indicate 
that,  but  where  you  show  on  this  chart  the  revenue  passengers  per 
inhabitant,  a  more  simple  way  of  stating  it,  I  suppose,  would  be  the 
number  of  rides  per  inhabitant — the  average  number  of  rides  ? 

Mr.  Welsh.  That  would  be  a  little  better  expression. 

The  1918  figures  were  rather  interesting  as  indicating  an  actual 
falling  off,  both  in  the  total  number  of  revenue  passengers  carried 
and  also  in  the  number  of  revenue  passengers  per  inhabitant. 

The  1918  figures  have  been  based  on  the  same  345  companies  as  re- 
ferred to  before.  This  falling  off  in  riding  habit  is  probably  due  to  a 
number  of  causes — the  abnormal  winter  in  the  early  part  of  the  year 
1918 ;  the  operation  of  the  draft  law,  taking  away  a  number  of  million 
men  and,  at  the  same  time,  undoubtedly  reducing  the  pleasure  riding 
during  the  summer  months  by  people  generally;  and  the  influenza 
epidemic  in  the  fall,  on  account  of  which  in  many  cities  all  community 
life  was  more  or  less  interfered  with  and  in  many  cases  stores  were 
shut  up  and  theaters  closed. 

Mr.  AVarren.  And  the  public  was  advised  to  avoid  street-cars, 
like  all  other  places  of  congregating,  so  far  as  po.ssible — is  not  that 
so — in  many  places? 

Mr.  Welsh.  Yes,  sir. 

We  have  also  plotted  the  percentage  increase  in  revenue  passengers 
per  inhabitant  over  the  chart  for  the  previous  year,  and  that  per- 
centage indicates  a  falling  off  from  one  year  to  the  next.  That  per- 
centage is  a  comparison  of  each  census  period  to  the  preceding. 

Commissioner  Meeker.  In  1918,  the  percentage  decreased? 

Mr.  Welsh.  Yes;  that  is  due  to  the  actual  decrease  in  the  number 
of  passengers  per  inhabitant. 

Mr.  AVarren.  I  would  ask,  Mr.  Chairman,  that  the  figures  in 
these  tables  go  into  the  record,  without  taking  the  time  of  the 
commission  to  read  them,  and  I  am  handing  to  the  reporter  the 
figures  for  that  purpose,  if  that  is  satisfactory  to  the  commission. 

The  Chairman.  Very  well. 

Mr.  Warren.  I  think  we  will  save  considerable  time  by  doing 
that. 

The  figures  contained  on  the  chart  referred  to  (C-107),  are  as 
follows : 

Riding  hahit. 

(Chart  C-107.— Based  on  United  States  census  reports.) 


Revenue 

passengers 

per  innab- 

it^int. 

Number  of 

revenue 

passengers  carried. 

Increase  in 

revenue 
passengers 
per  inhab- 
itant over 
prior 
census. 

Source. 

18S0 

32 

61 

85 

100 

109 

106 

2,023,010,202 
4,774,211,904 
7,441,114,508 
9,545,554,667 
11,304,660,462 
•11,107,804,347 

Per  cent. 

Advance  report,  Table  11. 
Do. 
Do. 
Do. 
Do. 

1S02 

28 
25 
15 
9 
•3 

1907 

1912 

1917 

19181 

»  Kstimated  population  of  United  States  Julv  1, 1918 

«  Data  sheet  No.  1^6  (estimated). 

•  Revenue  passengers  per  inhabitant  1917  less  1918  (above);  decrease. 


^4' 


I 


78       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION", 

Commissioner  Gadsden.  Do  3^011  propose  to  put  in  evidence  the 
names  of  the  388  companies  used  in  making  these  estimates,  Mr. 
Welsh? 

Mr.  Welsh.  We  have  not  prepared  that  list.  We  can  readily 
do  so. 

Commissioner  Gadsden.  I  sugg^est  that  you  do  that,  together  with 
their  mileage.  You  said  that  they  did  represent  80  per  cent  of  tlie 
operating  revenues. 

Mr.  Welsh.  They  represent  80  per  cent  of  the  operating  revenues. 

Commissioner  Be.\ll.  Mr.  Welsh,  do  these  figures  include  the 
properties  in  all  of  the  large  cities,  or  any  of  the  big  cities  right 
now? 

Mr.  Welsh.  They  include  a  great  many  of  the  large  cities. 

Commissioner  Beall.  Well,  for  instance,  do  they  include  all  of 
the  larger  cities,  like  Washington,  New  York,  and  Boston? 

Mr.  Welsh.  They  do. 

Commissioner  Beall.  Chicago  and  San  Francisco? 

Mr.  Welsh.  I  believe  New  York  City  is  not  in.  We  have  Brook- 
lyn, but  New  York  is  not  in.     We  have  Philadelphia  and  Boston. 

Commissioner  Beall.  If  that  is  the  case,  you  have  left  out  one  of 
the  largest  and  most  important  of  the  properties.  Are  not  those 
figures  available? 

Mr.  Welsh.  I  will  have  to  check  that  up  as  to  whether  the  New 
York  City  lines  were  included.  I  am  not  quite  sure  about  that.  I 
know  practically  all  of  the  large  cities  are  included.  Of  course, 
some  of  the  smaller  cities  were  also  not  included.  So  we  believe  it 
represents  a  true  picture. 

Commissioner  Gadsden.  That  is  what  I  had  in  mind  in  requesting 
that  you  give  us  the  names  of  the  companies. 

Mr.  Welsh.  Yes. 

Mr.  Warren.  But  these  no  doubt  represent  80  per  cent  of  the 
operating  revenues? 

Mr.  Welsh.  Tliere  is  no  doubt  of  that. 

Mr.  Warren.  Whatever  companies  they  are. 

Commissioner  Beall.  I  think  you  have  left  out  some  companies, 
if  you  will  permit  me  to  say  so,  that  will  strengthen  your  case. 

Sir.  Warren.  How  is  that  ? 

Commissioner  Beall.  I  think  you  have  left  out  some  of  the  com- 
ipanies  that  will  strengthen  your  case  more  than  any  others. 

Mr.  Warren.  I  think  so,  too.  As  far  as  we  have  gone,  we  have 
not  exaggerated  the  situation. 

Is  there  anything  else  from  that  chart,  Mr.  Welsh,  that  you  want 
to  call  the  attention  of  the  commission  to  ? 

Mr.  Welsh.  I  think  not. 

^fr.  Warren.  Regarding  the  companies  that  we  have  used  in  these 
computations,  the  345  companies,  Mr.  Pardee  calls  my  attention  to 
the  fact  that  we  used  all  the  companies  from  which  we  can  get  re- 
ports. Some  companies,  for  some  reason  or  other,  do  not  respond 
to  the  inquiries  for  the  association.  The  345  companies  report 
regularly,  as  I  understand  it,  to  the  association,  their  earnings  and 
operating  expenses  and  other  items  of  interest;  so  that  the  asso- 
ciation is  able,  from  those  reports,  to  make  up  combined  exhibits 
for  the  companies.     Some  of  the  companies  do  not  report,  represont- 


PEOCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSION.       79 

ing  about  one-fifth  of  the  operating  revenue,  and  we  will  furnish 
the  commission  a  list  of  the  345  companies  here. 

The  Chairman.  Can  we  have  in  the  record  a  statement  showing 
how  you  proceed  to  get  the  average  riding  habit  for  a  year? 

Mr.  Welsh.  Those  figures  are  taken  directly  from  the  census 
tables.  The  reference  in  table  accompanying  Chart  Xo.  3,  I  be- 
lieve, gives  the  reference  to  the  census  report  in  which  is  quoted  the 
number  of  rides  per  total  inhabitants.  It  is  obtained,  I  might  say, 
by  dividing  the  annual  number  of  annual  passengers  carried  by 
the  total  population  of  the  country  in  each  year. 

The  Chakman.  That  is  what  I  wanted  to  get  into  the  record. 

Commissioner  Wehle.  The  passengers  carried  in  the  345  cities? 

Mr.  Welsh.  No;  I  am  referring  to  the  census  report,  reporting 
on  all  the  companies  in  the  country.  The  345  companies  refer  to 
1918  only,  the  estimate  for  1918. 

Mr.  Warren.  You  have  used  in  every  case  the  census  figures 
through  1917,  have  you  not? 

Mr.  Welsh.  Exactly. 

Mr.  Warren.  And  for  1918,  not  having  the  census  figures,  Mr. 
Welsh  has  made  an  estimate  for  all  the  companies  based  on  the  show- 
ing of  the  345  companies,  from  which  he  gets  monthly  returns. 

Commissioner  Wehle.  Taking  the  census  as  applied  to  the  figures 
prior  to  1918,  is  that  a  census  of  the  entire  population  of  the  coun- 
try, rural  and  urban? 

Mr.  Welsh.  The  figures  used  for  determining  the  average  rides 
per  total  inhabitants  are  those  figures,  but  the  census,  if  I  understand 

S)ur  question  correctly,  is  the  special  census  report  gotten  out  by  the 
epartment  of  Commerce  covering  electric  railways. 

Commissioner  Wehle.  Did  you  use  the  figures  that  co\^r  the  elec- 
tric railways  as  they  were  obtained  by  the  Department  of  Commerce 
specially,  where  there  are  electric  railways? 

Mr.  Welsh.  All  electric  railways  in  the  United  States  are  included. 

Commissioner  Wehle.  Then  you  used  the  population  figure,  which 
you  got  from  the  United  States  Census  reports  in  places  where  there 
are  and  where  there  are  not  electric  railways,  both  ? 

Mr.  Welsh.  In  the  United  States. 

Commissioner  Wf^ile.  Now,  is  fhere  anywhere  a  compilation  or 
comparison  such  as  you  worked  out  here  in  principle  using  the 
figures  of  population  in  those  places  where  there  are  electric  rail- 
wa  vs  ? 

Mr.  Welsh.  To  this  extent:  We  have  taken  the  population  of  the 
urban  districts,  which  is  shown  separately  in  the  census  reports,  and 
we  will  later  introduce  such  a  chart 

Commissioner  Wehle.  Will  those  charts  cover  the  same  ground 
as  the  chart  you  have  just  been  showing  us? 

Mr.  Welsh.  So  far  as  riding  and  traffic  statistics  are  concerned: 
yes,  sir. 

Mr.  Warren.  Mr.  Welsh,  this  computation  of  of  the  number  of 
rides  per  inhabitant  is  contained  in  the  census  report  itself,  is  it  not? 
Mr.  Welsh.  It  is. 

Mr.  Warren.  You  did  not  figui^  that? 
Mr.  Welsh.  Xo,  sir. 

Mr.  AVarren.  You  simply  took  the  census  figures? 
Mr.  Welsh.  Yes,  sir. 


M 


80       PROCEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION. 

£:  mr. 'TriHs^  ^a?ked  Sil;  ""^  ^''pp^^  "p  -  *^'^*- 

The  figures  accompanying  the  chart  referred  to,  C-145    are  i^ 
Toliows  :  '  '      ^  "^ 

Power  generated  and  capaHly  of  generating  and  snhsidiary  equipment. 
(Chart  C-145-Based  on  U.  S.  Census  Report  of  1912,  Table  17,  p.  196.) 


kilowatt  capacity kilowatts. . 

Subsiiiary  equipment kilowatts. . 

Power  gonorated kilowatts 


1902 


898,332 

ICOja'ia 

2,231,484,397 


1907 


1,723,416 

942,232 

4,759,130,100 


1912 


2,508,066 

1,637,230 

6,a)2,699,O0S 


1917 


2,924,779 

2,339,333 

7,290,502,789 


Mr.  -R  ELSH.  This  chart  is  another  indication  of  the  growth  of 
electric  rai  ways  based  upon  the  power  situation.  We  hafe  plotted 
hei-e  the  plant  capacity  in  the  middle  cur^e,  which  is  designated 
kilowatts  or  generators,  and  also  the  capac  ty  of  the  subsldkrv 
equipment  on  the  bottom  curve  f       J     ^  i"e  buusiaiaiy 

wS?^^""""^'''  ^^^"^  "^^  ^'''"  ™'^"  ^y  "subsidiary  equipment,"  Mr. 

Mr.   VVklsh.  The  subsidiary  equipment  covers  largely  the  sub 
station  apparatus;  that  is,  the  converting  machinery,  in  which  alter- 
nating current  is  transfomed  into  direct  current  for  us^  on  th^ 

St  Zcl'tha?  is  th''"'"'"'  ^^PT"'^  ''^  J^'-g^'y  the  purchase 
power,  since  that  is  the  way,  in  almost  every  case,  that  power  is 

purchased  from  the  power  companies,  for  the  reason  that  power 
companies  generate  alternating  current,  whereas  the  elecLic^rln- 
wavs,  m  their  own  power  stations,  generate  largely  direct  current 
Mr  Warrex  And  the  third  line  from  the  bottom,  >ower  ~- 
ated,  kilowatt-hours,"  represents  the ^ 

rai^Vs^^"'  ^^'^  *""""'  °"*^"*  '*'■  ^^^  ^^^"^  "'^'^  ^^  ^'^'^^''''^ 
Mr.  Warren.  Now,  turning  to  the  table  accompanying  this  chart 

SSg?  '""'  °*  "'"''  ^^"^^'  ^''"^^  ^hieh^ou^  co^nsider  most 
Mr.  Welsh.  In  the  first  place,  I  would  like  to  make  a  correction 

9  mn'nnn  nn'n'r ", ;  l^^!-n    ^^  ^^'^  "»«  "^^rked  "  Power  generated  " 
2.000,000,000  should  be  6,000,000,000.    It  is  a  typographifalerror 
The  significant  thing  in  this  table ^ 

r  I"  Y^««EN.  Just  a  moment.  Mr.  Welsh.    In  this  same  line  shonW 
not  the  "  Power  generated  HCW) "  be  «  KWH  "V  °"'** 

Mr.  Welsh.  That  correction  should  also  be  mkde. 
^-^w  ;#"""'''•  ?f/'?^?"  Jieu-is  on  the  last  line  of  the  page. 
£  Welsh"  Yes.  ^  °^  ^^"^  "«''*  """^^  ^'^^  page^ 

Mr.  AVarrex.  Showing  the  increases. 

me^t'ilTndkate?'  ""'""^  *"  ''"""^"  capacity  of  generating  .^^^. 
in^DirioiVng.^^^'^"''  '"  ^^"'  ^'^^^'*^^'  '"^^^2'  2'^0«'066;  and 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       81 

Commissioner  Meeker.  That  is  kilowatts,  not  kilowatt  hours? 

Mr.  Welsh.  That  is  kilowatt  capacity,  and  represents  the  station 
and  plant  equipment,  and  on  the  next  line,  marked  "Subsidiary 
equipment,"  it  likewise  represents  the  substation  capacity  or  equip- 
ment devoted  to  the  purchase  of  power.  It  has  increased  from 
160,053  in  1902  to  942,232  in  1907,  1,637,260  in  1912,  and  2.339,333 
in  1917.  ' 

It  is  notable  here  that  there  has  been  a  falling  off  in  the  rate  of 
increase  in  the  first  line;  that  is.  kilowatt  capacity  of  generated 
power  in  1917  as  compared  with  1912,  as  compared  with  a  similar 
increase  m  subsidiary  equipment.  This  is  due  to  the  increasing 
tendency  of  electric  railways  to  purchase  their  power  rather  than 
to  generate  it  themselves. 

:,3^\^^^^f^?'  ^"^  *^^^  ^^  partly  due,  perhaps,  to  the  increasing 
difticulty  of  the  electric  railways  to  receive  the  capital  necessary  to 
enlarge  their  power  plants? 

Mr.  AVelsh.  Undoubtedly. 

Mr.  Warren.  Now,  power  generated  in  kilowatt  hour.?. 

Mr.  Welsh.  Power  generated,  kilowatt  hours,  has  increased  from 
two  and  a  quarter  billion,  in  round  numbers,  in  1902  to  four  and 
three-quarter  billions  in  1907,  over  six  billion  in  1912,  and  seven  and 
a  quarter  billion  in  1917,  in  round  numbers. 

Mr.  Warren.  You  have  finished  that  line,  have  vou « 

Mr.  Welsh.  That  is  all.  '  ^ 

Mr.  Warren.  What  does  this  indicate  as  to  the  load  factor  of  the 
street  railways? 

Mr  Welsh  It  indicates  that  the  load  factor  has  been  decreasing. 
In  other  words,  it  indicates  that  the  railwavs  have  had  to  overload 
their  equipment  more  in  1917  than  they  had  in  previous  years,  owing 
to  the  fact  that  they  have  had  to  put  a  greater  output  into  the  same 
capacity. 

Mr.  Warren.  What  do  you  mean  by  "  load  factor  "  ?     Very  likely 

Af^^^x'?^'^^^'^  knows,  but  I  do  not  know  exactly  what  that  is. 

Mr.  Welsh.  The  load  factor  is  the  ratio  of  the  average  output  to 
the  maximum  output.  ^  ^ 

Mr.  Warren.  And  what  does  this  indicate  about  the  peaks? 

Mr  V\ELSH.  It  indicates  that  the  peaks  have  been  increasing  in 
extent;  in  other  words,  that  the  electric  railways  have  had  to  carry 
more  people  during  the  rush  hours  than  they  have  had  in  the  past, 
.mcl  that  the  increase  in  business  has  been  largely  during  the  rush 

Ji v II 1.  o« 

Mr.  Warren.  Well,  what  bearing  has  that  on  the  expense  of  op- 
oration  of  a  street  railway,  suppo«!  the  peak  load  does  increase? 
Air.  vvelsh.  The  peak  load  is,  from  all  standpoints,  the  most  ex- 

cnmcifv  in^'■^'^•  'S'^^^'r'  "'^  "'^  •'^  equipment,  in  power-plant 
capacity,  m  the  number  of  passenger  cars,  in  the  number  of  men 
m,|.,,ed  to  operate  the  system,  and  in  all  matters  of  plant  Tnd 

nient  can  not  be  used  at  any  other  time.  For  that  reason,  the  rush- 
averagJ!"'    ^  """"^  expensive  and  is  more  costly  than  the 

tabYe'^toThf"^''-  ''^"''  *'""•*  ''P^"'*'  '"  i-^ferring  to  this  particular 
table,  to  this  very  power  situation  here,  does  it  ? 


82       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  And  do  these  figures  fairly  show  that  the  peak  has 
increased,  notwithstanding  what  the  previous  figures  show,  that  the 
ti-affic  was  increasing  at  a  very  much  less  rate  and  an  actual  fallinof 
off  in  1918? 

Mr.  Welsh.  They  do;  yes,  sir. 
Mr.  Warrex.  They  do? 
Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  Is  there  anything  else  on  that  table  ? 
^fr.  Welsh.  I  think  not. 

Mr.  Warren.  Is  there  anything  that  the  commission  wishes  to 
ask  on  this? 

Commissioner  Meeker.  Nothing  is  shown  on  this  chart  or  in  that 
table  al)out  1918.    That  was  shown  on  the  previous  chart. 

Mr.  Warren.  I  spoke  of  1918  with  reference  to  the  traffic  falling 
off,  Mr.  Commissioner  Meeker,  and  I  asked  Mr.  Welsh  whether  the 
figures  regarding  power  shown  here  indicated  an  increase  of  the  peak 
load,  not  for  1918  but  for  all  recent  years. 

As  a  matter  of  fact,  Mr.  Welsh,  if  I  may  put  this  in  at  this  point, 
apart  from  the  chai*t  altogether,  apart  from  what  the  power  construc- 
tion shows,  do  you  happen  to  know  whether  it  is  a  fact  that  the  peak 
load  has  been  increasing  in  recent  years? 
Mr.  Welsh.  It  has. 

Mr.  Warren.  And  among  other  causes  is  one  that  is  particularly 
contributory  to  that  as  regards  the  hours  of  labor  generally  ? 

Mr.  Welsh.  Yes;  the  coming  together  or  tlie  coincidence  of  the 
peaks  in  the  matter  of  employment  has  had  a  great  deal  to  do  with 
that. 

That  same  thing  has  i)een  illustrated  in  the  reverse  way  here  in 
Washington  by  the  plan  which  was  in  operation  here  during  the  war 
of  staggering  hours  of  employment  for  the  very  purpose  of  spreading 
the  peak  and  avoiding  the  necessity  of  the  transportation  com])anies 
carrying  all  of  the  people  at  one  time  or  during  one  hour  in  the 
morning:  and  one  hour  in  the  evening. 

Mr.  Warren.  In  other  words,  the  more  general  adoption  of  the 
eight-hour  day  for  labor  has  brought  their  day  much  nearer  to  the 
dav  of  other  occupations  dependent  upon  street-car  service  ? 
Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  So  that  the  peaks  have  become  coincident? 
Mr.  Wei^h.  Yes,  sir. 

Commissioner  Wehle.  I  would  like  to  ask  you  a  question  similar 
to  the  one  I  asked  you  with  reference  to  the  employees  in  the  chart 
you  presented  earlier. 

This  table  which  refers  to  power  generated,  does  it  take  into  con- 
sideration the  power  generated  by  the  companies  which  are  both 
power  companies  and  electric  companies,  or  is  there  a  separation 
there  where  the  two  are  reported  in  the  same  report  ? 

Mr.  Welsh.  There  is  that  separation,  in  this  way :  There  are  some 
electric-railway  companies  who  sell  a  small  amount  of  power.  Those 
companies  are  not  sepai-ated  here,  and  there  is  a  separation  between 
combined  properties  Avhere  power  is  sold  for  general  lighting  and 
power  business  as  between  electric-power  companies  and  electric-rail- 
way companies. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       83 

Commissioner  Wehle.  In  getting  up  this  chart,  then,  there  has 
been  a  separation  as  to  such  power  as  is  used  for  power  purposes,  as 
distinguished  from  electric-railway  service,  where  the  proportion 
used  for  power  is  large? 

Mr.  Welsh.  Well,  that  is  entirely  in  the  hands  of  the  Census  De- 
partment. We  have  used  their  figures  in  both  cases — both  in  the  case 
of  the  power  and  in  the  case  of  the  number  of  emploj^ees  that  you 
spoke  of  before — and  I  am  confident  that  only  electric-railway  prop- 
erties as  such  have  been  included  in  each  case.  We  have  completed 
separately  the  power  and  lighting  departments  of  any  combined  com- 
panies, both  in  the  power  generated  and  in  the  number  of  em- 
ployees. 

Commissioner  Wehle.  Would  you  suggest  that  we  call  in  here  for 
the  record  those  of  the  officers  who  are  responsible  for  the  compiling 
of  these  figures  in  the  United  States  Census  and  have  that  point 
clarified  ? 

Mr.  Welsh.  It  might  be  very  helpful  to  do  so,  if  there  is  any 
question  about  that. 

Mr.  Warren.  Well,  what  do  you  understand  to  be  the  fact  about 
that  power  generated  ? 

Mr.  Welsh.  It  represents  largely  the  power  output  of  the  direct- 
current  stations  of  the  electric-railway  companies,  since  the  electric- 
railway  generating  stations  are  largely  of  that  type. 

Mr.  Warren.  And  to  that  would  be  added  such  power  as  was 
actually  purchased  for  street-railway  purposes  ? 

Mr.  Welsh.  Yes. 

Mr.  Warren.  And  you  understand  that  it  would  not  include  power 
that  was  sold  by  a  combined  electric-light  and  railway  company  for 
commercial  and  general  purposes  ? 

Mr.  Welsh.  It  would  not. 

Mr.  Warren.  Is  there  anything  else  in  the  census  report  which 
shows  clearly  how  they  arrived  at  that? 

i  Mr.  Welsh.  It  may  be  that  we  could  take  care  of  that  in  that  way 
by  just  reading  the  extract  from  the  census  report,  which  I  believe 
will  make  that  clear. 

Mr.  Warren.  I  seem  to  remember  that  in  previous  census  reports 
i  there  was  some  statement  about  that. 

Mr.  Welsh.  Yes. 

Mr.  Warren.  Now,  Mr.  Welsh,  this  chart  shows  what  ? 

Mr.  Welsh.  This  chai-t  shows  the  mileage  of  electric-railway  com- 
panies going  into  receivership  from  the  year  1909  to  1919*.     The 
I  curve  as  plotted  is  a  cumulative  curve,  and  each  year  includes  the 
mileage  of  the  previous  year. 

Mr.  Warren.  So  that 'it  diows  the  total  mileage  of  all  street  rail- 
ways that  have  gone  into  receivership,  whether  still  in  receivership 
or  not  since 

Mr.  Welsh.  Since  1909. 

Mr.  AVarren  (continuing).  Nineteen  hundred  and  nine? 

Mr.  Welsh.  Yes,  sir. 


I 


84       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  figures  on  the  statement  accompanying  this  chart  (Chart  143) 
are  as  follows: 

Growth  in  the  extent  of  receiverships, 
(Chart  143— As  repjrtei  in  the  Electric  Railway  Journal  for  Jan.  4, 1919.] 


Year. 

Miles 

of  single 

track. 

Year. 

Mi'.c:; 

ofsinKlo 

track. 

1909 

5.58 
697 
519 
374 
343 

1914 

3^»2 

1,1.')2 

a.»3 

1910 

1915 

1911 

1916 

1912 

1917 

1,177 
2,108 

1913 

1918 

Valufs  for  miles  of  track  are  cumulative  each  year,  including  amounts  for  previous 

Mr.  Welsh.  The  interesting  thinor  in  connection  with  this  chart 
is  the  rapid  increase  from  the  year  1918  to  1919  of  over  2,000  miles, 
which,  from  the  table,  will  be  seen  to  be  about  two  to  three  times 
the  average  mileage  during  the  entire  period. 

Mr.  Warren.  And  the  table  shows  what  ? 

Mr.  Welsh.  The  table  shows  2,108  miles  going  into  receivership 
in  the  year  1918. 

Mr.  Warken.  And  similarly,  the  number  that  have  gone  in  each 
year  ? 

Mr.  Welsh.  Yes,  sir. 

Commissioner  Meeker.  The  table  is  not  cumulative? 

Mr.  Welsh.  The  table  is  not  cumulative. 

Mr.  Warren.  No;  that  statement,  I  think,  is  wrong  on  the  table, 
is  it  not?  "'Values  for  miles  of  track  are  cumulative,  each  year 
including  amounts  for  previous  years." 

Mr.  AVelsh.  That  is  an  error.  Tliat  statement  was  put  on  the 
chart,  but  should  not  apply  to  the  table. 

Commissioner  Mbekeu.  It  should  be  stricken  off? 

Mr.  Welsh.  It  should  be  stricken  off. 

Mr.  Warren.  It  should  be  stricken  off  the  table. 

Commissioner  Gadsden.  Mr.  Welsh,  what  is  the  total  mileage  as 
of  this  date  in  the  hands  of  receivers? 

Mr.  Welsh.  We  will  show  that  in  the  next  chart,  Mr.  Gadsden. 

Commissioner  Gadsden.  All  right. 

^f r.  Warren.  Is  that  all  on  that  chart,  Mr.  Welsh  ? 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  Now,  Mr.  Welsh,  what  does  this  chart  show  ? 

Mr.  Welsh.  This  chart  shows  the  number  of  miles  of  track  of 
companies  in  receivership;  of  companies  whose  lines  haA'^e  been  dis- 
mantled and  junked;  and  of  companies  that  have  abandoned  portions 
of  their  trackage. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       85 

The  figures  accompanying  this  chart  (Chart  C-146)   are  as  fol- 
lows : 

Numhcr  of  receiverships,  abandonments,  and  lines  junked,  in  effect  as  of  May 

31, 1919. 

(Chart  C-146— Based  on  electric-railway  journals.) 


Receiverships 

Lines  dismantled  and  junked 
Abandonments 


Number  of 
companies. 


62 
61 
38 


Miles  of  sin- 
gle track. 


5,912 
791 
257 


Mr.  Welsh.  This  chart  is  based  on  the  situation  as  of  May  31, 
1919,  and  shows  thlit  at  that  time  there  were  62  companies  haying  a 
mileage  of  5,912  in  receivership,  61  companies  having  791  miles  of 
line  dismantled  and  junked,  and  38  companies  having  257  miles 
abandoned. 

Mr.  Warren.  Now,  those  last  two  items  do  not  mean  that  61  com- 
panies have  had  all  of  their  lines  dismantled  and  junked,  does  it  ? 

Mr.  Welsh.  No. 

Mr.  Warren.  But  that  61  companies  have,  together,  dismantled 
and  junked  791  miles? 

Mr.  Welsh.  Exactly. 

Mr.  Warren.  And  so  with  the  abandoned  ? 

Mr.  Welsh.  Yes,  sir. 

Commissioner  Beall.  Do  you  propose  to  file  the  names  of  those 
companies  with  us? 

Mr.  Welsh.  Yes,  sir. 

Commissioner  Beall.  And  will  the  person  who  has  made  this  ex- 
hibit furnish  the  names  of  the  companies  referred  to  on  this  chart? 

Mr.  Warren.  They  will  be  here  this  afternoon. 

Mr.  Welsh.  I  have  them  here  this  morning,  some  place. 

Commissioner  Meeker.  I  would  like  to  ask  a  question  about  the 
lines  dismantled  and  junked  and  the  lines  abandoned. 

Are  they,  in  any  instance  or  in  large  part,  lines  that  were  built  to 
accommodate  war  plants,  munition  plants,  shipyards,  etc.,  that  have 
ceased  to  maJfe  munitions  or  to  build  ships? 

Mr.  Welsh.  No  ;  I  believe  that  I  can  say  that  in  no  case  was  there 
any  of  those  included. 

Mr.  Warren.  I  can  answer  that  for  Massachusetts.  I  am  sure  that 
there  is  nothing  of  that  kind  in  Massachusetts. 

Mr.  Welsh.  The  list  will  indicate  that,  I  believe,  too. 

Commissioner  Meeker.  The  list  will  indicate  that? 

Mr.  Warren.  Yes. 

Mr.  Welsh.  Yes. 

Mr.  Warren.  We  will  get  out  that  list  and  give  it  to  you  as  soon  as 
possible. 

Commissioner  Wehle.  Would  the  figures  which  represent  the  dis- 
mantled and  junked  lines  represent  in  any  degree  lines  which  have 
been  substituted? 

Mr.  Welsh.  I  do  not  believe  I  know  what  you  mean  by  "sub- 
stituted." 


' 


86       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION-. 

Mr.  Warren.  Dismantling  10  miles  of  track  in  order  to  build  a 
shorter  line  5  miles,  or  another  line  of  10  miles  by  a  different  rout-, 
which  better  served  the  public. 

Mr.  Welsh.  I  think  not,  as  a  general  rule.  They  represent  largely 
some  unprofitable  extensions,  outer  ends  of  lines,  and  some  inter- 
urban  lines.  There  has  been  a  great  deal  of  mileage  in  the  Massachu- 
setts district  that  has  been  abandoned  and  dismantled  of  that  char- 
acter. 

Commissioner  Meeker.  Does  your  statement  show  anything  with 
reference  to  the  causes  for  the  abandonment  or  dismantling? 

Mr.  Welsh.  The  one  we  have  prepared  merely  shows  the  names  of 
the  companies  and  the  mileage  that  has  been  dismantled. 

Commissioner  Wehle.  Could  there  be  a  separation  made  there  in 
order  to  make  the  chart  more  serviceable? 

Mr.  Welsh.  I  think  it  would  be  possible  for  us.to  secure  the  cause 
in  each  case. 

ConuTiissioner  Wehle.  Well,  would  it  be  practicable? 

Mr.  Wfxsh.  I  would  say  that  we  could  get  that  in  the  majority 
of  cases.     We  might  not  in  every  case. 

Commissioner  Gadsden.  One  of  the  noted  cases  of  that  kind  is  the 
Bay  State. 

Mr.  Welsh.  Yes ;  I  had  that  in  mind. 

Commissioner  Gadsden.  If  the  receiver  of  the  Bay  State  were 
brought  before  the  commission,  he  might  be  able  to  give  the  reason 
for  the  abandonment  of  the  25  or  30  miles,  would  he  not? 

Mr.  Welsh.  I  should  say  so. 

Mr.  Warren.  I  was  to  have  later  the  chairman  of  the  trustees  of 
the  Bay  State  hero  on  this  very  subject  of  abandonment.  The  Bay 
State  has  abandoned  a  very  small  proportion  of  what  it  believes  it 
shall  be  obliged  to  abandon  unless  some  relief  is  obtained.  I  think 
the  receiver  proposes  to  abandon  something  like  200  miles,  but  that 
actually  abandoned,  as  shown  in  this  table,  as  I  recall  it,  is  only 
about  80  miles.  In  some  cases  the  companies  have  simply  abandoned 
the  whole  proposition.  On  the  theory  that  one  can  not  get  blood 
out  of  a  stone,  I  do  not  suppose  a  bankrupted  company  could  be 
forced  to  operate  a  losing  venture  indefinitely. 

The  Chairman.  If  that  is  convenient  for  you,  you  will  have  a 
witness  who  will  present  testimony  or  else  file  exhibits  on  that? 
Mr.  Warren.  On  these  abandonments? 
The  Chairman.  Giving  the  reasons  for  those  abandonments. 
Mr.  Warren.  Yes;  we  will  be  very  glad  to  do  that,  as  far  as 
possible. 

Have  you  anything  else  on  that  exhibit? 

Mr.  Welsh.  No,  sir;  except  that  I  might  state  that  the  total  mile- 
age represented  by  these  companies,  being  just  under  7,000,  is  ap- 
proximately 16  per  cent  of  the  total  mileage  of  the  electric  railways 
in  the  country,  or,  in  other  words,  about  one-sixth  of  the  mileage  of 
the  country  is  in  serious  difficulty  or  has  been  abandoned.  "^ 

Mr.  Warren.  The  next  exhibit  that  we  should  like  to  put  in,  but 
we  shall  not  have  it  ready  until  this  afternoon,  is  a  combined  balance 
sheet  of  the  street-railway  companies  of  the  country,  which  is  con- 
tained in  the  census  report,  is  it  not,  Mr.  Welsh? 

Mr.  Welsh.  Yes,  sir. 


^: 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIST.       87 

Mr.  Warren.  We  can  obtain  the  advance  census  sheets'  showing, 
and  we  propose  to  file  that. 

We  have  now  a  list  of  the  companies  in  receivership  and  those 
which  have  dismantled  and  which  have  abandoned  track,  and  we 
will  file  those  with  you  now. 

The  list  of  railways  thus  referred  to  is  as  follows: 


Electrio  raihoays  that  have  been  dismantled  and  sold  as  junk,  June  7,  1919. 

1915. 
Mountain  Railway,  West  Orange,  N.  J 

1916. 


Miles  of  track 
dismantled, 

2.0 


Lima  &  Honeoye  Light  &  Railroad  Co __ 

Elkins  Electric  Railway,  Elkins,  W.  Va I~__ 

Lalie  Erie,  Bowling  Green  &  Napoleon  Railway,  Bowling  Green,  Ohio__ 
Lancaster  &  Southern  Street  Railway,  Millersville,  Pa 

1917. 

Alton,  Jacksonville  Railway,  Alton,  111 

Arkansas  Northwestern  Railroad _  " 

Catskill  Traction  Co.,  Catskill,  N.  Y IZIIZZ I_I 

City  Railway,  Mount  Vernon,  111 Z I I 

Clebui-ne  Traction  Co ZZl ZZll'Jl 

Goshen,  South  Bend  &  Chicago  Railway,  Goshen,  N.  Y___I_I I__ 

Mexico  Investment  &  Construction  Co ~ 

Mount  Vernon  Railway,  Mount  Vernon,  Ohio 

Norfolk  City  &  Suburban  Railway,  Norfolk,  Va I" 

St.  Lawrence  International  Electric  Railroad  &  Land  Co.,  Alexandria 

Bay,  N.  Y 

Norfolk  &  Ocean  View  Railway,  Norfolk,  ~VaIII_Z I_~ 

Sacramento  Valley  Electric  Railroad,  Dixon,  Calif_     Z Z 

Waycross  Street  &  Suburban  Railway,  Waycross,  Ga Z>ZI- 

1918. 

Adirondack  Lakes  Traction  Co.,  Gloversville,  N.  Y_ 

Billings   Traction   Co.,   Billings,    Mont ~Z" 

Bliiffton,  Geneva  &  Celina  Traction  Co.,  Bluffton,  Ind Z_Z_ZI_Z 

Bristol  Traction  Co.,  Bristol,  Tenn 

Clarksville  Railroad,  Clarksville,  Ga _  _     __Z_" ZZ  _Z " 

Central  of  Florida  Railway,  Davtona,  Fla Z_  _  " Z Z 

Consolidated  Street  Railway,  Strong  City,  Kans ZZ 

Covington  &  Oxford  Street  Railway,  Oxford,  Ga    ~ Z_'  _        Z"" 

Dayton,  Springfield  &  Xenia  Southern  Railway,  Dayton,  Ohio 

Denton  Traction  Co.,  Denton,  Tex _  _    _Z      

Gettysburg  Railway,  Gettysburg,  Pa ZZZZ_ZZ__ZZZ_Z Z" 

interurban  Railway  &  Terminal  Co.,  Cincinnati,  Ohio Z 

Canada  ^^'^^  Railway  &  Transportation  Co.,  London,  Ontario, 

AH        i    ^  ^^F^'^  Railway,  Rugby,  Tenn 

A/nnfi^irii  ?l''^^*  Railway,  Middletown,  Ohio 

Montecito  Railroad,  Ix)s  Angeles,  Calif 

KnZ^^''^?  ^^r?^^  ^^«"«*t  Co.,  Sea  Isle  CityZN.lZZZZZZZ 

Northwestern  Traction  Co.,  Brazil  N  Dak        ZZZZZ 

™ionr^^^^^^^^^^      ^^^'''''  ^^'^^^  Railwa7rFo"xboro,"M;7sZTNon;oo5 
Oklahoma  Union  Railway,  Sapulpa,  Okla ZZZZZ" 


4.50 

9.00 

12.50 

7.30 


21.30 
2.13 

5.  50 

3.25 

8.00 

20.00 

16.00 

9.00 

14.50 

7.79 

10.00 

1.80 

7.20 


5.00 
6.00 

19.00 

15.  30 
L25 
5.00 
2.00 
6.00 

12,00 
4.50 
6.50 

23.00 

28.00 
LIO 
2.50 
LOO 
L46 
8.00 
5.00 


2.50 
6.47 
L50 


*Part  of  road. 


f 


t 


lll 


88       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

Miles  of  track 
dismantled. 

Richmond  &  Rappahannock  River  Railway,  Richmond,  Va 16.  30 

Rockland,  Thomaston  &  St.  George  Railway,  Rockland,  Me 5.  71 

Rutland  Railway,  Light  &  Power  Co.,  Rutland,  Vt ' 2.  50 

St.  Joseph  Valley  Traction  Co.,  Elkhart,  Ind.* :__ 7.50 

St.  Louis,  Lakewood  &  Grant  Park  Railway 4. 00 

St.  Simon  Railroad,  Brunswick,  Ga 1.  70 

San  Point  &  Interurban  Railway.  (Ltd.),  San  Point,  Idaho 6.00 

Sioux  City,  Crystal  Lake  &  Homer  Electric  Railway,  Dakota  City,  Nebr__  4.  00 

San  Jose  Traction  Co.,  Jacksonville,  Fla . 3.  00 

Taunton  &  Pawtucket  Street  Railway,  Taunton,  Mass 1^.  00 

Topeka  Railway,  Topeka,  Kans *  1.  50 

Yazoo  Municipal  Railway,  Yazoo,  Miss 4.  00 

Woodstock-Sycamore  Traction  Co.,  Sycamore,  111 25. 00 

Worcester  &  Warren  Street  Railway,  Brookfield,  Mass 20. 10 

Twin  *B'alls  Railroad,  Twin  Falls,  Idaho 12. 00 

Uvalde  &  Leona  Valley  Interurban  Railway,  Leona  Valley,  Tex 8.  00 

Ware  &  Brookfield  Street  Railway,  Ware,  Mass 11.  71 

Lincoln  Traction  Co.,  Lincoln,  Nebr 1.  00 

Cincinnati,  Bluffton  &  Chicago  Railroad,  Huntington,  Ind 58. 00 

1919. 
Lake  James  Railroad,  Angola,  Ind 3.  75 

Total  number  of  miles  of  track  dismantled  and  sold  as  junk 534. 12 

Total  number  of  miles  of  track  on  which  service  was  abandoned' 256.  58 

Grand    total 796.  70 

Electric  railways  that  have  abandoned  service,  June  7,  1019. 

1915.  Miles  of  track 

abandoned. 

Binghamton  Railway  Co.,  Binghamton,  N.  Y feet__        600 

1916. 
Forest  Grove  Transportation  Co.,  Oregon 2.  70 

1917. 

Amarilla   Street  Railway,  Amarillo,   Tex 8.20 

Fort  Smith,  Okla.,  Light  &  Traction  Co.,  Fort  Smith,  Ark 1.  21 

Richmond  &  Chesapeake  Bay  Railway,  Richmond,  Va 14. 80 

1918. 

Greenville  Railway  &  Light  Co.,  Greenville,  Tex 7.00 

Texas  City  Street  Railway  Co.,  Texas  City,  Tex 4. 00 

Bay   State  Street  Railway  Co.,  Boston,  Mass *30.40 

Berkshire    Street    Railway *  5. 05 

Bristol  &  Norfolk  Street  Railway,  Randolph,  Mass 6.44 

Columbus,  Magnetic   Springs  &  Northern   Railway,   Richwood,  Ohio__  18. 50 

Conway  Electric  Street  Railway,  Conway,  Mass 6.60 

Fernandina  Municipal  Railway,  Fernandina,  Fla 2. 00 

Fort  Scott  Gas  &  Electric  Co.,  Fort  Scott,  Kans 7. 00 

Fryeburg  Horse  Railroad,  Fryeburg,  Me —  3. 00 

Hamilton  Radical  Electric  Raihvay,  Hamilton,  Ontario,  Canada 29. 10 

Laconla  Street  Railway,  Laconia,  N.  H *  1.  30 

Lebanon  &  Franklin  Traction  Co.,  Dayton,  Ohio 10.  80 

Madison  Light  &  Railway  Co.,  Madison,  Ind 3.50 

Mount  Vernon  Railway,  Mount  Vernon,  Ohio 9.00 

Norwood,  Canton  &  Sharon  Street  Railway,  Foxboro,  Mass 4.00 

*  Part  of  road. 

»  Exclusive  of  companies  where  mileage  figures  were  not  available 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       89 

Miles  of  track 
abandoned. 

Ocean  City  Electric  Railroad,  Ocean  City,  N.  J 10. 00 

Oxford   Electric   Co.,   Norway,    Me 2.13 

Parkersburg  &  Ohio  Electric  Railway,  Parkersburg,  W.  Va 5.00 

Plymouth  &  Sandwich  Street  Railway,  Plymouth,  Mass 17.43 

Fresno  Interurban  Railway,  Fresno,  Calif.     (*  Lines  in  Fresno.) 

Norfolk  &  Bristol  Street  Railway,  Foxboro,  Mass 

Kansas  City  Railways,  Kansas  City,  Mo.     (Argentine,  Minn.,  line.) 

Indiana  Utilities  Co.,  Angola  to  Lake  James,  Ind 3.  75 

Babylon  Railroad,  Babylon,  N.  Y 8.00 

1919. 

Los  Angeles  &  San  Diego  Railway,  San  Diego,  Calif 21.  54 

Buffalo  &  Lackawanna  Traction  Co.,  Buffalo,  N.  Y 8.  80 

lola  Electric  Railroad,  lola,  Kans 

Tiffin,  Fostoria  &  Eastern  Traction  Co 

Yonkers  Railroad  Co.,  Yonkers,  N.  Y.   (Hastings) 3.30 

Pacific  Electric  Railway,  Los  Angeles,  Calif.     (Brockton  Avenue  Line 

in  Riverside) — 

Yakima    Valley    Transportation    Co.,    North    Yakima,    Wash.     (North 

Fourth  Street  Line) 

Bartlesvllle   Interurljan   Railway   Co.,   Bartlesville,   Okla.     (City   Loop 

Line) 2.  03 

Total  number  of  miles  of  track  on  which  service  was  abandoned 
exclusive  of  companies  where  mileage  "figures  were  not  avail- 
able  256.  58 

Electric  raihvays  in  the  hands  of  receivers,  June  7,  1919. 

Miles  of  single 
track  operated. 

Kansas  City,  Lawrence  &  Topeka  Railroad,  Kansas  City.  Mo 12.  00 

Birmingham  Railway,  Light  &  Power  Co.,  Birmingham,  Ala 153.  65 

Buffalo  Southern  Railway,  Buffalo,  N.  Y 25.35 

Interurban  Railway  &  Terminal  Co.,  Cincinnati,  Ohio 65.  60 

Atlantic  City  &  Shore  Railroad  Co.,  Atlantic  City,  N.  J 30. 05 

Atlantic  Shore  Railway,  Sanford,  Me 50.  00 

Buffalo  &  Lake  Erie  Traction  Co.,  Buffalo,  N.  Y 168.00 

North  Branch  Transit  Co.,  Bloomsburg,  Pa 30. 00 

Winona  Interurban  Railway,  Warsaw,  Ind 70.  00 

Bay  State  Street  Railway  Co.,  Boston,  Mass 955.  07 

Beech  Grove  Traction  Co.,  Beech  Grove,  Ind 6.  30 

Grafton  Light  &  Power  Co.,  Grafton,  W.  Va 7. 00 

Hornell  Traction  Co.,  Hornell,  N.  Y 10. 90 

Manhattan  &  Queens  Traction  Corporation,  New  York  City 22.  00 

Pennsylvania  &  Ohio  Railway,  Ashtabula,  Ohio 26.  00 

Plymouth  &  Shelby  Traction  Co.,  Norwalk,  Ohio J 6.  97 

Southern  &  Cambria  Railway,  Johnstown,  Pa 30.00 

Trans-St.  Marys  Traction  Co.,  Sault  Ste.  Marie,  Mich 7.  52 

Southern  Traction  Co.,  of  Illinois,  East  St.  Louis,  111 15.  00 

Binghamton  Railway,  Binghamton,  N.  Y 40.74 

Brooklyn  Rapid  Transit  Co.,  Brooklyn,  N.  Y 690.  89 

Buffalo  &  Depew  Railway,  Buffalo,  N.  Y 14.  00 

Buffalo  &  Lackawanna  Traction  Co.,  Erie,  Pa___ .- 8.  80 

Cumberland  Railway,  Carlisle,  Pa 21.  50 

Denver  &  Interurban  Railroad,  Denver,  Colo 5L  93 

Des  Momes  City  Railway,  Des  Moines,  Iowa 85.  00 

Evansville  Railways,  Evansville,  Ind 72  43 

Fort  Scott  Gas  &  Electric  Co.,  Fort  Scott,  Kans 7. 00 

Hartford  &  Springfield  Street  Railway,  Warehouse  Point,  Conn 48. 00 

lola  Electric  Railroad  Co.,  lola,  Kans 10  00 

Lewiston,  Augusta  &  Watervllle  Street  Railway,  Lewiston,  Me 165.  65 

>  Part  of  roiid  only.  «  City  lines  only. 

1(50643"— 20 T  - 


90      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      91 


Miles  of  single 
track  operated. 

l»a(iiicah  Traction  Co.,  Paducah,  Ky 19. 34 

l»enn  Yan  &  Lake  Shore  Railway  Co.,  Penn  Yan,  N.  Y 10.  60 

Pittsburj?li  Railways  Co.,  Pittsburgh,  Pa 605.25 

Plymouth  &  Sandwich  Street  Railway,  Plymouth,  Mass 17.  45 

St.  Paul  Southern  Electric  Co.,  St.  Paul,  Minn 17.  54 

St.  Petersburg  &  Gulf  Railway,  St.  Petersburg,  Fla 20. 11 

Scranton  &  Bingharaton  Railroad  Co.,  Scranton,  Pa 50.  00 

Southern  Oregon  Traction  Co.,  Medford,  Greg 8. 19 

S<»uthern  Traction  Co.,  Bowling  Green,  Ky 4.  50 

Springtieia  Electric  Railway  Co.,  Springfield,  Vt 9.  00 

Sandusky,  Norwalk  &  Manstteld  Electric  Railway,  Cincinnati,  Ohio 29.  50 

Cincinnati,  Lawrenceburg  &  Aurora  Electric  Street  Railway,  Cincin- 
nati, Ohio 32.  20 

Cincinnati  &  Columbus  Traction  Co.,  Cincinnati,  Ohio 53.  (X) 

Sunbury  &  Susquehanna  Railway,  Sunbury,  Pa 9.  00 

Memphis  Street  Railway  Co.,  Memphis,  Tenn 124.  00 

New  Orleans  Railway  &  Light  Co.,  New  Orleans,  La 218. 15 

Montgomery  Light  &  Traction  Co.,  Montgomery,  Ala 88.  00 

Spokane  &  Inland  Empire  Railroad,  Spokane,  Wash 290.  47 

Rhode  Island  Co.,  Providence,  R.  I 400.  04 

Jackson  Light  &  Traction  Co.,  Jackson,  Miss 13.  50 

Fort  Wayne  &  Northern  Indiana  Traction  Co.,  Fort  Wayne,  Ind 220.  00 

Tucson  Rapid  Transit  Co.,  Tucson,  Ariz 5.00 

•Ohio  River  Electric  Railway  &  I'ower  Co.,  Pomeroy,  Ohio 12.  70 

Philadelphia  Railways  Co.,  Philadelphia,  Pa 13.  29 

New^  York  Railways  Co.,  New  York  City 153.  60 

Pascagoula  Street  Railway  &  Power  Co.,  Pascagoula,  Miss 8.36 

United  Railways  Co.  of  St.  Louis,  St.  Louis,  Mo 458.  22 

Chattnnoopi  Railway  &  Light  Co.,  Clmttanooga,  Tenn 69.  31 

Blue  Hill  Street  Railway,  Canton,  Mass 19.  70 

Colorado  Springs  &  Cripple  Creek  District  Railway,  Colorado  Springs, 

Colo.   * 18.  50 

Portsmcmth,  Dover  &  York  Street  Railway,  Portsmouth,  N.  H 42.  00 


Total 5, 912. 25 

Mr.  Warren.  If,  then,  I  may  pass  over  for  the  moment  the  balance 
sheet,  I  iTTopose  to  take  up  the  income  accounts,  Mr.  Welsh,  which 
come  next  in  your  preparation. 

Mr.  Welsh.  Yes. 

Commissioner  Be  all.  Mr.  Welsh,  I  notice  that  yon  have  a  Cana- 
dian company  in  here.  I  take  it  that  all  of  these  figures  that  you 
have  given  us  are  for  electric  railways  in  the  United  States,  and  not 
those  in  Canada? 

Mr.  Welsh.  That  is  true,  with  the  exception  of  that  list  of  re- 
ceiverships. That  is,  our  figures  with  reference  to  these  income  ac- 
counts have  been  related  exclusively  to  the  United  States. 

Mr.  Warren.  And  your  figures  with  regard  to  passengers  ? 

Mr.  Welsh.  Yes. 

Mr.  Warren.  And  all  those  things? 

Mr.  Welsh.  Oh,  yes. 

Commissioner  Beall.  How  much  of  Canadian  figures  are  included 
here  ?  Is  there  anything  more  like  that  one  of  the  London  &  Lake 
Erie  Railway  &  Transportation  Co.  of  London,  Ontario,  Canada? 

Mr.  Welsh.  So  far  as  I  know,  that  is  the  only  one. 

Commissioner  Beall.  I  can  not  understand  why  you  put  that  in, 
because  it  might  raise  some  question. 

Mr.  Welsh.  Which  company  is  that^ 

Commissioner  Beall.  Why  not  take  that  out?  Because  you  will 
only  confuse  the  issues. 


Mr.  Welsh.  Which  company  is  that,  Mr.  Beall  ? 

Commissioner  Beall.  It  is  the  third  item  on  your  second  page, 
the  I^ndon  &  Lake  Erie  Railway  &  Transportation  Co.,  of  London, 
Ontario,  Canada. 

Commissioner  Gadsden.  That  company  has  been  dismantled  and 

sold. 
Commissioner  Beall.  That  is  in  that  last  statement  you  handed  up. 

Why  don't  you  just  take  that  out? 

Mr.  Warren.  Yes. 

Mr.  Welsh.  Yes. 

Mr.  Warren.  That  is  the  only  one,  is  it? 

Mr.  Welsh.  That  is  the  only  one. 

Mr.  Warren.  We  will  have  that  taken  out  and  have  the  figures 
corrected. 

Mr.  Welsh.  Yes. 

Commissioner  Wehle.  Mr.  Warren,  after  a  conference  with  the 
chairman,  I  should  like  to  ask  jrou  a  question  which  should  come  in 
in  connection  with  the  presentation  of  Chart  145. 

]Mr.  Warren.  That  is  the  chart  relative  to  power. 

Commissioner  Wehle.  Railway  and  power? 

Mr.  Warren.  Yes,  sir. 

Commissioner  Wehle.  Mr.  Welsh,  referring  to  the  line  on  Chart 
145,  which  is  entitled  "  subsidiary  equipment,"  is  the  railway  associa- 
tion prepared  to  show  how  that  line  has  been  made  up,  particularly 
with  reference  to  the  question  as  to  whether  or  not  there  have  been  an 
appreciable  number  of  instances  w^here  the  power-producing  function 
has  been  abandoned  by  the  street  railwaj^s  and  has  been  transferred 
to  an  indej)endent  company  which,  from  that  time  on,  furnishes 
power  back  to  the  street-railway  company,  and  also  performs  the 
function  of  furnishing  power  to  other  activities  in  the  comnumity  ? 

Mr.  Welsh.  Well,  I  should  say  we  can  do  it;  yes,  sir.  We  could 
give  you  a  number  of  typical  exanrples  of  that.  Of  course,  you  un- 
derstand, these  figures  have  been  taken  from  the  census  report,  and 
so  far  as  they  are  concerned,  we  do  not  know  how  they  have  been 
con^i piled  as  to  the  elements  and  details,  but  w^e  can  refer  to  the 
definite  census  tables  for  that. 

Commissioner  Wehle.  Well,  it  was  suggested  by  counsel  a  few 
moments  ago,  you  will  remember,  that  the  reason  for  the  increase  in 
the  amount  of  purchasing  power  that  is  done  by  the  street-railway 
companies  is  the  growing  difficulties  which  have  been  confronting  the 
street-railway  interests.  That ,  undoubtedly,  is  one  of  the  contribut- 
ing reasons,  but  it  occurred  to  us  that  possibly  the  whole  situation 
could  be  opened  up  and  clarified,  in  order  to  show  all  the  reasons,  or 
as  many  of  them  as  are  really  relevant  in  any  large  way. 

Mr.  Welsh.  I  had  in  mind  adding,  at  that  time,  that  the  one 
reason  given  is  undoubtedly  the  fact  that  the  power  companies  are  in  a 
position  to  make  power  and  sell  it,  and  at  an  economical  rate,  and 
undoubtedly  can,  on  account  of  the  introduction  of  the  steam  turbine, 
which  is  far  more  efficient  than  the  old  reciprocating  type  of  engine, 
generate  power  more  economically  and  sell  it  at  a  rate  which  is  ad- 
vantageous to  the  electric  railway  properties.  That,  undobutedly,  is 
an  element  that  should  be  taken  into  consideration. 

Commissioner  Wehle.  Could  the  association  amplify  that  point 
ny  charts  or  by  testimony,  you  think  ? 


f 


! 

Pi 


92       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Welsh.  We  could,  as  I  say,  for  some  typical  companies— as 
many  companies  as  we  might  be  able  to  get  a  report  for. 

Commissioner  Wehle.  Would  it  be  practicable  or  possible,  Mr. 
Chairman,  to  ask  the  gentlemen  to  show  all  instances  which  they  can 
easily  produce  where  the  electric-railway  company  has  turned  over 
the  function  of  producing  the  power  to  other  companies? 

The  Chairman.  Yes. 

Commissioner  Beall.  There  are  some  instances  where,  on  account 
of  water  power,  they  can  buy  it  cheaper  than  they  can  generate  it, 
on  account  of  the  cost  of  the  fuel.  They  might,  in  some  of  those 
instances  where  power  plants  are  built  at  the  mines,  where  enormous 
energies  are  generated  and  they  furnish  power  to  a  lot  of  other  com- 
panies in  a  large  area  throughout  the  country.     Is  that  what  you 

would  like?  .  ,       ,  .      *  ^i      -x     x- 

Commissioner  Wehle.  That  is  one  of  the  elements  of  the  situation. 

Commissioner  Beall.  That  is  the  reason  why  a  lot  of  electric  rail- 
ways buy  their  power— because  certain  companies  can  generate  it 
cheaper.  They  generate  a  larger  amount  than  their  competitors 
generate,  through  water  power  or  otherwise.  , 

The  Chairman.  We  wish  you  would  consider  that  and  advise  us 

as  to  the  results.  /,    ^  x        x  u 

Mr.  Warren.  We  certainly  will  make  every  effort  to  get  as  mucn 
information  along  that  line  as  we  can  and  file  it  at  a  later  date  with 
the  commission.  I  know  of  some  instances  where  it  can  be  furnished 
verv  readily.    I  think  we  can  get  it  in  a  number  of  instances. 

the  Chairman.  You  may  proceed  with  your  examination  of  Mr. 

Welsh. 

Mr.AVARREN.  Mr.  Welsh,  this  chart,  which  is  marked  "C-100," 

indicates  exactly  what?  i  ^^io     i! 

Mr.  Welsh.  This  is  a  comparison  of  the  years  1917  and  1918  ol: 

the    income    accounts    of    345   companies  referred   to  before.     It 

shows .  ,       '  .     - 

Mr.  Warren.  This  is  not  the  census  companies? 

Mr.  Welsh.  These  are  not  the  census  companies.  These  are  tho 
entire  gi'oup  of  companies  that  have  responded  to  the  association  s 
questionnaire  for  this  information. 

Mr.  Warren.  But  it  is  the  same  for  both  years? 

Mr.  Welsh.  The  same  for  both  years. 

Mr.  Warren.  1917  and  1918?  . 

Mr  Welsh.  It  shows  the  increase  in  operating  expense  m  1917, 
when  it  was  $361,000,000,  in  round  numbers,  to  $426,000,000  in  1918. 
It  shows  the  increase  in  taxes.    It  shows  the  increase  in  deductions 

from  income. 

Mr.  Warren.  Won't  you  give  the  figures  as  you  go  along  ^ 

Mr.  Welsh.  The  taxes  in  1917  were  $35,750,567,  and  m  1918,. 
$38,669,011.  The  gross  income  in  1917  was  $142,373,728,  and  in 
1918,  $146,652,347. 

Mr.  Warren.  That  is  deduction  from  gross  income? 

Mr.  Welsh.  That  is  deduction  from  gross  income. 

The  most  striking  feature  of  this  chart  is  the  comparison  of  the 

net  income.  ^     .^^«    ^i 

In  1917,  this  amounted  to  $41,800,394.    In  1918,  the  net  incomo 

was  $10,712,726,  or  about  25.7  per  cent  of  its  former  value. 
Commissioner  Gadsden.  Mr.  Welsh,  have  you  the  1916  figures? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       93 

Mr.  "Welsh.  No  ;  we  have  not. 

Commissioner  Gadsden.  Do  you  happen  to  know  what  they  were? 

Mr.  Welsh.  Do  j^ou  mean  for  the  same  group  of  companies? 

Commissioner  Gadsden.  For  all  of  the  companies. 

Mr.  Welsh.  Well,  we  do  have  the  figures  for  1916,  which  we  will 
produce  in  subsequent  charts. 

Mr.  Warren.  Do  you  happen  to  remember  whether  they  show  a 
larger  net  income  ? 

Mr.  Welsh.  They  show  less. 

Mr.  Warren.  Less? 

Mr.  Welsh.  They  show  larger;  j^es,  sir;  I  believe  they  do. 

Mr.  Warren.  They  show  larger? 

Mr.  Welsh.  Yes,  sir ;  based  on  a  per  car-mile  basis. 

Mr.  Warren.  Does  the  table,  then,  accompanying  this  chart, 
C-100,  show  that  while  the  operating  revenues  increased,  the  oper- 
ating expenses  increased  so  much  more  that  the  net  income  almost 
disappeared  for  the  345  companies? 

Mr.  Welsh.  That  is  true.  It  shows  that  whereas  it  was  increased 
to  about  6J  per  cent  in  operating  revenue,  operating  expenses,  on 
the  other  hand,  increased  18  per  cent,  and  taxes  increased  about  8 
per  cent. 

Commissioner  Gadsden.  What  proportion  is  the  revenue  of  these 
345  companies  there  of  the  total  revenue? 

Mr.  Welsh.  Over  80  per  cent  of  all  the  companies  in  the  country. 

Another  point  that  I  would  like  to  call  your  attention  to  is  the 
comparison  of  the  operating  ratio  in  the  two  years.  This  increased 
from  a  value  of  65.14  per  cent  in  1917  to  72.13  per  cent  in  1918.  The 
operating  ratio  is  to  a  large  extent  a  measure  of  the  prosperity  or 
the  expenses  of  operation  of  a  company.  It  is  determined  by  taking 
the  ratio  of  the  operating  expense  to  the  operating  revenues,  and, 
therefore,  the  higher  its  value,  the  less  amount  is  left  for' return  on 
investment. 

Commissioner  Gadsden.  Well,  the  net  income  shown  there  being  80 
per  cent  of  the  total,  that  would  indicate  that  the  net  income  of  the 
total  industry  for  1918  was  $12,500,000. 

Mr.  Warren.  For  the  entire  industry? 

Commissioner  Gadsden.  Yes;  if  that  is  80  per  cent  of  it. 

Mr.  Warren.  Yes. 

Mr.  Welsh.  Well,  I  do  not  believe  you  can  draw  that  conclusion, 
Mr.  Gadsden.  We  have  worked  out  these  values  for  1918,  on  a 
subsequent  chart. 

Commissioner  Gadsden.  All  right. 

Mr.  Welsh.  And  show  the  method  in  that  case. 

Commissioner  Meeker.  What  is  included  in  railway  operating 
expenses  ? 

Mr.  Welsh.  All  expenses  in  connection  with  the  operation  of  a 
railway  system ;  that  is  to  say,  all  cost  of  labor,  all  cost  of  material— 
anything  that  has  to  do  with  the  operation  and  maintenance  of  the 
electric-railway  property. 

Commissioner  Meeker.  Does  that  include  any  expense  for  renew- 
^^^/^"ipment  or  extensions  or  improvements? 

Mr.  Welsh.  Only  to  this  extent :  It  is  based  upon  the  Interstate 
(.ommerce  Commission  classification  of  accounts,  and  in  that  classi- 
ncation  there  is  an  item  for  depreciation  and  renewals,  but,  as  a 


94       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MMISSI03T. 

.natter  of  fact,  that  item  is  relatively  siiiall  as  actually  ejpndwi  by 
railway  properties,  and  is  a  rather  insignificant  proportion  of  the 

TotnLXr TtaKEK.  Would  it  not  be  well,  Mr.  niain„a|,  to 
have  a  statement  submitted  giving  the  items  mcludetl  under  iail«a> 
operating  expenses?     It  is  a  significant  item,  and  I  think  it  ^^ould 

lie  well  to  have  tlmt  presented.  .     .         «  i- 

Commissioner  BeatI.  Mr.  Welsh,  referring  to  the  term  operating 
i^xDenses  "  Avhere  vou  replace  one  car  that  is  worn  ont  with  anothei 
car  because  of  its  greater  carrying  capacity,  that  is  an  i"^P/<>];^;"^^f; 
and  is  not  charged  in  that  expense  of  operation.  Is  not  that  the 
basis  that  you  do  it  on? 

Mr.  Welsh.  Yes,  sir.  ,     .     ,       x    -n.    -i/r    i   « 

Commissioner  Beall.  I  wanted  to  make  it  clear  to  Dr.  Meekei. 

Mr  Welsh.  That  can  be  made  very  clear  if  we  introduce  a  copy  of 
the  interstate  Commerce  Commission  classification  of  accounts, 
which  explains  that  very  clearly.  * 

Mr.  Warren.  Are  there  any  more  questions  on  that  chart,  ^o.  lUU « 

Do  vou  want  to  say  anything  more  on  that,  Mr.  A\  elsh  ? 

Mr.'W^ELSH.  I  would  like  to  call  your  attention  to  one  thing. 

The  operating  ratio  of  this  group  of  companies  is  almost  exactly 
the  same  as  the  operating  ratio  for  the  entire  industry,  as  shown  by 
the  censu^iiports.    The^  operating  ratio  is  65.14  per  cent  for  this 

^^M?' Warren.  That  is  for  1917? 

Mr.  Welsh.  That  is  for  this  group  of  companies. 

Mr.  WEi^H^For  1917,  for  the  same  year,  while  for  the  entire  cen- 

sus  it  is  64.8  per  cent.  *•     .*  „  +i,^  i„c.+  in 

The  Chairman.  Have  you  got  the  operating  ratio  for  the  last  10. 

■^^Mr.*  Welsh.  I  believe  we  have  that  in  another  chart  back  in  1902— 

the  census  reports.  ^  i    _x  //-•  iaa\ 

Tlie  figures  on  the  statement  accompanying  this  chart  (C-100)  are 

as  follows: 

statement  of  income  accounts  and  operating  expenses  of  3J5  cornpames;  income 
accZlt  foi  12  months  ending  Dec.  SU  1918,  compared  wtth  the  12  months 
ending  Dec.  31,  1917.  ^ 


Items  follow  standard  classification. 


12  months  ended— 


Railway  operatinp  revenues  (201) 

Railway  operating  expenses  (213) 

Net  operating  revenue. .  ■-•■■■■■■•■  y^ 
Not  revenue  from  auxiliary  operations  (202 

minus  214) -  - 

Taxes  railway  operations  (215) 

Operating  income x;.--„v„v 

Nonoperating  income  (203  to  212) 

Grass  income  or  loss ... . - --•---•- 

Deductions  from  gross  mcome  (216  to  225) . . . 

Net  income  or  loss 

Total  car  mileage  operated 

Total  ixissougers  carried 

Total  miles  of  single  track -• 

Operating  ratio percent. 


Dec.  31,  1918. 


$590,710,837 
426,082,148 
164,628,691 

16,917,673 

38,669.011 

142,877.:^ 

14,487,720 

157,365,073 

146,6.>2,347 

10,712,726 

1,654,319,023 

11,969,256,764 

32,570.21 

72.13 


Dec.  31, 1917 


$554,674,718 
361,315,721 
193,358,997 

15,563,861 

35,750,567 

173,172,291 

11,001,832 

184,174,123 

142,373,728 

41,900,395 

1,722,369,093 

12,187,434,043 

32,476.64 

65.14 


Increase  or  decrease,  1918 
over  1917. 


Amount.      !  Per  cent. 


$36,086,119 

64,706,425 

128,730,306 

1,353,812 

2,918,444 
130,294,938 

3,485,8S8 
126,809,050 

4,278,619 

131,087,669 

168,050,070 

1218,177,279 

93.57 


6.50 
17.93 
14.86 

8.70 

8.16 

17.49 

31.68 

14.56 

3.01 

74.37 

3.95 

1.79 

.29 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       95 

Mr.  Warrex.  The  next  table,  Mr.  Welsh,  I  think  you  have  no  chart 
for,  although  the  table  is  referred  to  as  being  identified  as  a  chart, 
C-110,  operating  revenues  and  expenses.    Have  you  that  before  you? 

Mr.  Welsh.  We  have  a  large  chart  for  that. 

Mr.  Warren.  All  right.    Will  you  put  up  the  large  chart,  then  ? 

Mr.  Welsh.  This  chart  shows  the  railway  operating  revenue,  the 
railway  operating  expenses,  and  by  subtraction,  the  net  operating 
revenue,  also  the  taxes  and  the  operating  ratio,  this  question  just 
referred  to. 

Mr.  Warren.  The  table  shows  the  same  thing  in  the  figures,  does 
it  not  ? 

Mr.  Welsh.  The  table  shows  the  same  information. 

Probably  the  most  interesting  feature  of  this  chart  is  the  net  op- 
erating income.  It  has  increased  up  until  1912,  and  from  1912  to 
1917  the  rate  of  increase  fell  off  very  markedly,  and  in  1918  took  an 
actual  decrease.  This  is  seen  in  the  table  to  be  due  to  the  increase  in 
the  operating  expenses,  as  compared  with  the  operating  revenues. 

Mr.  Warren.  The  net  operating  revenues  means  the  amount  of 
money  that  is  left  of  all  the  money  that  you  take  in  after  you  have 
paid  the  expense  of  just  running  the  railway — operating  it  ? 

Mr.  Welsh.  That  is  it  exactly. 

Mr.  Warren.  That  has  nothing  to  do  with  the  return  on  investment 
or  anything  else,  has  it? 

Mr.  Welsh.  No;  it  has  not.  In  fact,  taxes  are  deducted  from  the 
net  operating  income. 

Mr.  Warren.  And  the  figures  show,  if  I  understand  them,  that  in 
1912  this  net  operating  revenue  was  two  hundred  and  seventeen  mil- 
lion-odd dollars,  and  that  five  years  later  it  had  increased  to  only 
$228,898,000 ;  is  not  that  so  ? 

Mr.  Welsh.  That  is  true. 

Mr.  Warren.  And  for  the  next  year  the  net  operating  revenue  was 
actually  considerably  less,  being  only  $192,000,000  in  1918  ? 

Mr.  Welsh.  That  is  true. 

Mr.  Warren.  Now,  the  1912  and  1917  and  other  earlier  figures  on 
this  table  are  the  census  figures,  are  they  not  ? 

Mr.  Welsh.  They  are. 

Mr.  Warren.  And  you  got  the  1918  figures  how  ? 

Mr.  Welsh.  They  are  estimated  from  the  gi-oup  of  the  345  com- 
panies shown  on  the  previous  chart. 

Mr.  Warren.  Which  represented  a  certain  per  cent  of  the  total  ? 

Mr.  Welsh.  Which  represented  over  80  per  cent  of  the  operatino- 
revenue.  ^ 

The  operating  ratio  is  shown  on  this  chart,  and  is  of  special  in- 
terest in  comparison  with  former  years.  It  is  seen  that  it  had  got- 
ten up  to  about  the  60  per  cent  line  up  to  1912.  At  that  time  it  in- 
ciTased  to  about  65  per  cent,  and  in  1918  it  was  increased  to  72  per 
cent.  ^ 

Mr.  Warren.  Is  there  any  figure  that  you  would  have  called  a 
'^^^^f^^al  operating  ratio  before  the  European  war  began  ? 

Mr.  Welsh.  I  think  the  average  figure  as  shown  by  the  census  of 
60  per  cent  would  represent  for  all  companies  a  normal  figure. 

Mr.  Warren.  A  normal  average? 


1  Decrease. 


f 


96       PROCEEDINGS  OF.  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Welsh.  A  normal  average. 

•*  ^f'  xir^??f  •  ^^^  operating  expense  does  not  include  taxes,  does 
]t,  Mr.  Welsh  ? 

Mr.  Welsh.  It  does  not. 

Mr.  Warren.  Is  there  anything  else  you  want  to  say  on  that  table? 

Mr.  Welsh.  No;  I  think  not. 

Mr.  Warren.  As  a  matter  of  fact,  the  taxes  show  an  increase, 
although  the  results  of  operating  the  railroad  show  a  very  larire  de- 
crease ;  is  not  that  so  ?  J'       t> 

Mr.  Welsh.  That  is  true. 

Mr.  Warren  Have  you  in  mind  what  the  total  taxes  of  the  street 
railways  would  amout  tt)  per  passenger;  have  you  any  figure  that 
would  give  you  that,  or  have  you  roughly  estimated  it? 

^€     })?^®"*  ^^^^  ^^^^^^  ^^^^^  P^^^  *o  the  governmental 

Mr.  VV  ARREN.  Yes;  all  taxes,  direct  and  indirect. 

Mr.  Welsh.  AVell,  they  amount  to  something  under  one-half  a 
cent.     Is  that  what  you  mean? 

Mr.  Warren.  Yes. 

Mr.  Welsh.  On  the  basis  of  a  fare. 

Mr.  Warren.  Yes. 

Mr.  Welsh.  They  amount  to  something  under  one-half  a  cent. 

Mr.  Warren.  Well,  it  is  pretty  close  to  half  a  cent. 

Mr.  Welsh.  It  is  pretty  close  to  half  a  cent. 

Mr.  Warren.  In  other  words,  if  it  were  possible  to  relieve  the  street 
railways  on  the  theory  that  the  other  public  utilities,  like  waterworks, 
are,  of  all  taxation,  it  would  represent  pretty  close  to  half  a  cent  per 
passenger,  would  it  not?  ^ 

Mr.  AVelsh.  That  is  true. 

Mr  Warren.  Are  there  any  further  questions  that  the  commission 
want  to  ask  on  that  table  ? 

Commissioner  Gadsden.  I  would  like  to  ask  Mr.  W^elsh  in  refer- 
ence to  the  net  operating  income :  Do  I  understand  that  the  net  op- 
erating income  is  the  amount  after  the  payment  of  operating  ex- 
penses and  before  any  interest  charges  are  paid  ? 

Mr.  Welsh.  Yes,  sir. 

Commissioner  Gadsden.  Now  capitalize  that  at  7  per  cent,  and 
what  would  that  indicate  as  the  value  of  the  industry  ? 

Mr.  Welsh.  It  would  be  about  fourteen  times  that,  would  it  not? 
It  would  represent  something  under  $3,000,000,000. 

Commissioner  Gadsden.  About  $2,700,000,000. 

Mr.  Welsh.  Yes;  $2,700,000,000 

Commissioner  Gadsden.  What  is  considered  a  fair  estimate  of  the 
total  investment,  or  what  was  the  association's  estimate  is  the  total 
investment  ? 

Mr.  Welsh.  Something  in  excess  of  $5,000,000,000. 
Commissioner  Gadsden.  So  that  this  net  return  in  1917  was  7  ner 
cent  on  less  than  half  of  that?  ^ 

Mr.  Welsh.  That  is  true. 

Commissioner  Gadsden.  Seven  per  cent  on  less  than  half  of  the 
investment. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       97 

The  figures  on  the  statement  accompanying  the  Chart  C-110  are 
as  follows: 

Operating  revenues  and  expenses. 

[Chart  C-110— based  on  U.  S.  census  reports.] 


Taxes 

Source 

Railway  operating  revenue 

Source 

Railway  operating  expense 

Source -  - 

Net  operating  revenue. . 

Source 

Operating  ratio 

Source 


1890 


$3,30«,I90 

0) 
90,617,211 

(*) 
62,011,185 

0) 
28,606,026 

(1,5) 

68.4 


1902 


$13,078,899 

(*) 
247,553,999 

(*) 
140,123,844 

(^) 

107,430,115 

« (Base). 

56.6 

M8(Base). 


1907 


1912 


$19,755,602 

e) 

40a,896,0M 

(3) 
245,140,379 

(«) 

155,755,655 

M  (Base). 

61.1 

3.«  (Base). 


$35,027,965 

(') 
535,996,122 

(») 
318, 700, 534 

(«) 

217,295,588 

M  (Base). 

59.5 

3>«  (Base) 


1917 


$45,756,695 

(^) 
650, 149, 806 

(') 
421, 250, 838 

(«) 

228,898,968 

M  (Base). 

64.9 

.6  (Base). 


19\^ 


549,496,334 

0) 
691,131,682 

(«) 
498, 516, 115 

(«) 
192,615,567 

(♦) 
72.13 

(«) 


»  United  States  census  1902,  p.  11,  Table  6. 
«  United  States  census  1912,  p.  186,  Table  5. 
»  Advance  report,  Table  5. 

4 1918  census  for  345  companies,  data  sheet  186. 

6  United  States  census  1902,  p.  20,  text,  receipts,  and  expenditures. 

•  Advance  report,  Table  162. 

»  United  States  Census  1912,  p.  6,  Table  1. 

•  United  States  census  1912,  p.  311,  Table  162. 

Mr.  Warren.  Now,  Mr.  Welsh,  we  will  pass  to  the  next  chart, 

No.  111. 

Mr.  Welsh.  We  have  no  big  chart  for  that — just  the  table. 

Mr.  Warren.  You  have  no  chart  for  this  next  table,  have  you? 

Mr.  Welsh.  No,  sir;  this  next  table  is  made  up  of  the  same  figures 
used  in  the  former  table,  but  upon  a  per  car-mile  basis. 

Mr.  Warren.  This  table  is  marked  "  Chart  C-111,"  to  identify  it. 
-    All  right,  go  ahead,  Mr.  Welsh. 

Mr.  Welsh.  It  shows  the  same  information  exactly,  except  that 
it  is  put  upon  a  per  car-mile  basis.  The  purpose  of  this  is  to  take 
account  of  any  increase  in  growth  and  extent  of  operations 
of  the  companies  throughout  the  census  periods.  However,  it  is 
notable  that  the  same  trend  and  relationship  are  found  between  the 
various  census  periods  and  1918,  on  a  per  car-mile  basis,  as  were 
shown  previously  on  a  gross  basis  of  dollars.  For  example,  the 
net  operating  revenue  was  highest  in  1912  at  11.3  cents  per  car- 
mile,  and  it  fell  to  10.7  cents  in  1917,  and  to  9.39  cents  in  1918. 

Mr.  Warren.  Mr.  Welsh,  that  means  that  for  each  mile  that  a 
car  was  run,  after  paying  the  expenses,  there  was  9^  cents,  roughly, 
in  1918,  earned  above  the  mere  running  expenses,  does  it  not? 

Mr.  Welsh.  That  is  true. 

Mr.  Warren.  And  from  that  you  had  to  pay  the  taxes,  and  what- 
ever else  came  afterwards? 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  You  may  go  right  on  with  your  tax  item. 

Mr.  Welsh.  It  also  shows  that  the  taxes  per  car-mile  have  in- 
creased up  to  1912. 

Mr.  Warren.  The  taxes  went  right  on  increasing.  That  is  the 
difference:  is  it  not? 

Mr.  Welsh.  The  taxes  increased  right  straight  through,  and 
reached  their  maximum  point  in  1918. 

Mr.  Warren.  So  that  m  1918  the  taxes  took  twice  as  much  out  of 
each  car-mile  receipts  as  they  did  in  1902 ;  is  that  right  ? 


96       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  Instead  of  taking  IJ  cents  as  in  1902,  they  took  2f 
cents  in  1918. 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  Is  there  anything  else  on  that? 

Commissioner  Meeker.  I  would  like  to  ask  whether  the  tax  for 
street  railways  increased  at  a  greater  ratio  than  for  other  industries? 

Mr.  Warren.  They  are  not  tied  down  to  quite  such  a  definite  in- 
come as  in  the  street-railway  business. 

Have  you  anything  alse  on  that,  Mr.  Welsh? 

Mr.  Welsh.  No;  that  is  all. 

The  figures  on  the  table  accompanying  the  Chart  C-111  are  as 
follows: 

Revenues  and  expenses  of  electric  rctilways. 

(Based  on  United  States  census  reports.) 


Railway  operating  revenue 

Source 

Railway  operating  expense 

Source 

Net  operating  revenue 

Source 

Taxes 

Source 


Cents  per  car  mile. 


1902 


21.63 

0) 
12.25 

9.38 

1.20 
0,») 


1907 


24.78 

15.15 

(».») 
9.63 

1.22 

(S«) 


1912 


27.89 

16.51 

11.30 

1.82 
0,«) 


1917 


30.39 

19.69 

10.70 

2.14 


1918 


33.69 

(*) 
24.28 

(«) 
9.39 

<*)     , 
2.41 

(«) 


»  United  States  census  1912,  p.  186,  Table  5. 
'  Advance  report,  Table  5. 
»  United  States  census  1912,  p.  311,  Table  162. 
*  Estimate  of  1918  census  for  345  companies,  data  sheet  186. 
6  Advance  report.  Table  162. 
United  States  census  typed  advance  summary  released  Apr.  21, 1919. 

Mr.  Warren.  Have  you  a  large  chart  on  this  next  one,  Cliart  No. 
120  f 

Mr.  Welsh.  Yes. 

Mr.  Warren.  We  will  pass,  then,  please,  to  Chart  Xo.  120. 

The  Chairman.  Have  you  available  the  per  cent  which  the  taxes 
bore  to  the  total  operating  cost  of  the  railroads? 

Mr.  Welsh.  We  will  introduce  that  later ;  yes,  sir. 

^Ir.  Warren.  This  chart,  Mr.  Welsh,  indicates  what? 

Mr.  Welsh.  Chart  No.  120  is  based  upon  the  reports  of  the  num- 
ber of  companies  who  sent  in  their  financial  statistics  to  the  Ameri- 
can Electric  Railway  Association,  and  it  has  been  prepared  for  four 
yeai-s,  from  1910  to  1919,  inclusive.  It  is  on  a  car-mile  basis,  and 
covers  the  pnncipal  items  of  income  accounts,  such  j^s  operating 
revenue,  operating  expenses,  net  operating  revemie,  and  operating 
ratio.  It  is  interesting  because  it  shows  the  trend  of  all  the.se  items 
for  this  i*ecent  period,  and  we  have  been  able  to  prepare  these  figures 
for  1919  by  estimating  the  amounts  on  the  basis  of  the  first  four 
months  of  the  year.  For  example,  it  shows  that  the  net  operating 
revenue  has  declined  consistently  from  1916,  when  it  amounted  to 
11.77  cents  per  car-mile,  to  1919,  when  it  was  8.87  cents  per  car-mile. 
I  believe  this  covers  Mr.  Gadsden's  question.    The  operating  ratio,  on 


.        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       99 

the  other  hand,  is  increased  from  a  value  of  60  in  1916  to  a  value  of 
76.43  in  1919,  showing  that  the  same  situation  for  the  year  1918  is 

^''Mr'^wli^EN.  That  operating  ratio,  Mr.  Welsh,  stated  in  dollar^ 
would  amount  to  this,  would  it?  That  where,  out  of  every  hundred 
dollars  in  1916  which  you  took  in,  $60  was  used  to  pay  merely  run- 
ning expenses  of  the  road ;  in  1919,  you  estimate  practically  $76  would 

be  used? 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  In  that  way  ? 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  Out  of  every  $100  ? 

TVTr  ^Velsh    Y^es  sir. 

Mr!  Warren.  So  that  out  of  every  $100  there  would  be  $16  less 
available  for  other  purposes,  like  tax'es,  interest,  etc.  ? 

Mr.  Welsh.  Yes,  sir.  ,.       ,  i 

Commissioner  Wehle.  What  standards  of  accounting  have  been 
used  in  reaching  the  figures  which  you  have  been  giving  us  here  in 
the  last  two  charts,  Mr.  Welsh?  .    . 

Mr  Welsh  The  Interstate  Commerce  Commission  classihcation 
of  accounts,  which  was  adopted  by  the  American  Electric  Railway 
Association  in  October,  1914,  and  has  been  m  use  since  that  time. 

Commissioner  Wehlf.  Has  there  been  a  special  regulation  with 
reference  to  this  method  of  accounting  issued  by  the  Interstate  Com- 
merce Commission  for  electric  railways? 

Mr.  Welsh.  There  has  been;  yes,  sir. 

Commissioner  Wehle.  Will  you  file  that  with  the  record  ? 

Mr.  Welsh.  We  will  do  so;  yes,  sir.       ^^^  ,  ,     ^  , 

Mr  Warren.  As  a  matter  of  fact,  Mr.  Welsh,  do  you  happen  to 
know  whether  most  of  the  supervisory  commissions  of  the  various 
States  have  also  adopted  that  system  ? 

Mr.  Welsh.  I  think  they  have  to  a  large  extent. 

Mr.  Warren.  I  know  th«at  they  have  in  Massachusetts. 

Mr.  Welsh.  Yes. 

Mr.  Warren.  And  I  suppose  others. 

Mr.  Welsh.  They  have.    Some  of  the  States  do  not,  however. 

Mr!  AVarren.  Yes.    Is  there  anything  else  on  that  chart? 

Mr.  Welsh.  No,  sir;  I  think  not.    I  think  that  is  all. 

The  figures  on  the  statement  accompanying  Chart  C-120,  are  as 
follows : 

Income  accounts  per  car-mile  of  electric  raiUcays. 

(Chart  C-120— Based  on  average  of  monthly  reports  to  American  Electric  Railway  Association.) 


Operating  revenue 

Operating  expenses . .  - 
Net  operating  revenue. 

Taxes 

Operat  ing  income 

Operating  ratio 


1916 


29.43 
17.66 
11.77 


1917 


1918 


60.01 


30.87 
20.06 
10.81 


64.98 


1919,  Jan- 
uary to 
April. 


34.00 

24.50 

9.50 

2.45 

7.05 

72.08 


37.63 
28.76 

8.87 

2.49 

6.38 

76.43 


1919  estimated  on  basis  of  four  months. 


100     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Mr.  Warren.  The  next  exhibit  that  we  want  to  put  in  is  the  March 
number  of  a  magazine  called  Aera,  which  is  published  by  the  Ameri- 
can Electric  Railway  Association,  and  gets  its  name  from  the  four 
initials  of  the  four  words  in  the  name.  We  will  put  that  in  for  the 
figures  which  appear  on  pages  808  and  809. 

The  figures  referred  to  are  as  follows: 

Table  I. — Comparison  of  revenues  and  expenses  of  electric  railways  for  12 

months,  January  to  December,  1918  and  1917. 

(Compiled  from  monthly  returns  of  electric  railways  to  the  American  Electric  Railway  Associaticn.) 


Account. 


Operating  revenues. 
Operating;  expenses. 
Net  earnings 


Operating  ratio,  per  cent: 

1918 

1917 .' 

Average  number  of  miles  of 
line  represented: 

1918 

1917 


United  States. 


Amount, 
January- 
December, 
1918. 


Per  mile  of  line. 


1918 


1917 


$111,688,563  $21,870 


81,192,846 
30,495,317 


15,889 
5,981 


$20,545 

13,728 

6,817 


In- 
crease 
over 

1917. 


Per  ct. 

6.45 

15.74 

> 12.26 


COMPANIES  REPORTINQ 
TAXES. 


Operating  revenues. 
Operating  expenses. 

Net  earnings 

Taxes 

Operating  income . . 


72.65 
66.82 


5,107 
5,107 


Operating  ratio,  per  cent: 

1918 

1917 

Average  number  of  miles  of 
line  represented: 

1918 

1917 


$100,014,301 

126, 325 

$24, 741 

73,074,000 

19,234 

16,827 

26,940,301 

7,091 

7,914 

6,761,245 

1,780 

1,765 

20,179,056 

5,311 

6,134 

6.40 

14.31 

U0.40 

.85 

U3.42 


73. 06 
68.01 


3,799 
3,800 


Eastern  district. 


Amount, 
January- 
December, 
1918. 


Per  mile  of  line. 


1918 


$54,  .554, 582   $19,222 


1917 


39, 793, 194 
14,581,388 


U,OSA 
5,138 


$17,955 

12,155 

5,800 


In- 
crease 
over 
1917. 


Per  ct. 
7.03 
15.87 
» 11.41 


73. 27 
67.70 


2,838 
2.838 


$49,059,914 
36,128,085 
12,931,829 

$24,033 

17, 698 

6,335 

$22,460 

15,611 

6,849 

3, 169, 712 
9,762,117 

1,5.53 
4,782 

1,596 
5,253 

7.00 
13.37 
»7.50 
12.69 
18.97 


73. 64 
69.50 


2,041 
2,042 


PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION.     101 

TABLE  I— Comparison  of  revenues  and  expenses  of  electric  railways  for  12 
months,  January  to  December,  1918  and  19i 7— Continued. 


Account. 


Southern  district. 


Western  district. 


Amount, 
January- 
December, 
1918. 


Operating  revenues. 
Operating  expenses. 
Net  earnings 


Operating  ratio,  per  cent* 

1918 

1917 

Average  number  of  miles  of 
line  represented: 

1918 

1917 


COMPANIES  REPORTING 
TAXES. 


Operating  revenues. 
Operating  expenses. 

Net  earnings 

T&xcs  .----.-..--••• 
Operating  income . . 


Operating  ratio,  i)er  cent: 

1918 

1917 

Average  number  of  miles  of 
line  represented: 

1918 

1917 


$11,407,529 
7,665,957 
3,741,572 


Per  mile  of  line. 


1918 


$15,  .343 

10, 311 

5,032 


1917 


$14, 136 
8,473 
5,663 


In- 
crease 
over 
1917. 


Per  ct. 

8.54 

21.69 

111.14 


67.20 
59.94 


743 
743 


$.5,346  149 

3,536,456 

1,809,693 

414,567 

1,395,126 


$20,354 

13,464 

6,890 

1,578 

5,312 


$18, 401 

10, 917 

7,484 

1,470 

6,014 


Amount, 
January- 
December, 
1918. 


$45, 726, 462 
33,  553, 695 
12, 172, 767 


Per  mile  of  line. 


1918 


$29,977 

21,997 

7,980 


1917 


$28, 486 

19,215 

9,271 


in- 
crease 
over 

1917. 


Per  a. 
5.23 
14.48 
113.92 


73.38 
67.45 


1,525 
1,525 


10.61 

23. 33 

17.94 

7.34 

I  11.67 


$45,608,248 

33, 409,  459 

12,198,789 

3, 177, 566 

9, 021, 223 


66.15 
59.33 


263 
263 


$30,505 

22, 346 

8,159 

2,125 

6,034 


$28,970 

19, 525 

9,445 

2,048 

7,397 


5.30 

14.44 

113.61 

3.76 
1 18.43 


73.25 
67.39 


1,495 
1,495 


1  Indicates  decrease. 


1  Indicates  decrease. 


102      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

TvBLE  II  —Conwarison  of  revenues  ami  expenses  of  electric  railtvavs,  DecemVer, 

1918  and  1917. 

(Compiled  from  monthly  returns  of  electric  railways  to  the  American  Electric  RaiHway  Associaticn.) 


United  States. 


Acoouat. 


Operating  revenues - 
Oixrating  expenses. 
Net  earnings 


Amoimt, 

December, 

1918. 


Per  mile  of  line. 


1018 


Operating  ratio,  per  cent: 
1918 

1917 y 

Average  number  of  miles  of 
line  represented: 

1»18 

1917 


COMPANIES  RtPORTma 
TAXES. 


Operating  re%'enues. 
OpervUing  expenses. 

Net  earnings 

Taxes 

Operating  Income.. 


$8,903,746 
7, 362,  468 
1,541,278 


$1,825 

1,509 

316 


1917 


$1,695 

1,231 

464 


In- 
crease 
over 

1917. 


Eastern  district. 


Amount, 

December, 

1918. 


Per  mile  of  line. 


1918 


Perct. 

7.67 

22.58 

» 31.90 


82. 68 
72.63 


4,878 

4,878 


Operating  ratio,  per  cent: 

1918.. 

1917 

Average  number  of  miles  of 
line  represented: 

1918 

1917 


$7,707,574 
6,472,219 
1,235,355 

486, 798 
748,557 


$2,159 

1,813 

346 

136 

210 


$2,007 

1,487 

520 

202 

318 


7.57 

21. 92 

133.46 

»  32. 67 

» 33.96 


$4, 805, 173 
3, 797, 060 
1,008,113 


$1,693 

1,338 

355 


1917 


In- 
crease 
over. 

1917. 


$1,538 

1,235 

303 


Pfr  et. 

10.08 

S.34 

17.18 


79.03 
80.30 


2,839 
2,839 


83. 97 
74.00 


3,569 
3,570 


$4, 330, 134 
3, 437, 317 

892,817 
295, 443 
597, 374 


$2,121 

$1,922 

1,684 

1,576 

'437 

346 

145 

179 

292 

167 

10.35 

6.86 

26.30 

» 18.99 

74.85 


79.40 
82.00 


2,041 
2,042 


>  Indicates  decrease. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  €OMMISSION.     103 

rr  Am  IT  IT  —Commrison  of  revenues  and  expenses  of  electric  railways,  December, 
I  ABLE  11.  f  ^^^g  ^^  I5i7— Continued. 


1 


Southern  district. 


Account. 


Operating  revenues. 
Operating  expenses. 
Net  earnings 


Operating  ratio,  per  cent: 

1918 

1917 

Average  number  of  miles  of 
line  represented: 

1918 

1917 


COMPANIES  REPORTING 
TAXES. 


Western  district. 


Amount, 

December, 

1918. 


Per  mile  of  line. 


1918 


$1,229,030 
881,531 
347,499 


$1,653 

1,186 

467 


1917 


$1,470 

886 
584 


In- 

rease 

over 

1917. 


Perct. 

12.45 

33. 86 

120.03 


71.75 
60.27 


743 
743 


Amount, 

December, 

1918. 


$2, 869, 543 

2, 683, 877 

185,666 


Per  mile  of  line. 


1918 


$2,215 

2,071 

144 


1917 


$2,167 
1,419 

748 


In- 
crease 
over 

1917. 


Perct. 
2.22 
45. 95 
180.75 


Operating  revenues. 
Operating  expenses. 

Net  earnings 

Taxes 

Operating  income . . 


Operating  ratio,  per  cent: 

1918.. 

1917 

Average  nvunber  of  miles  of 
line  represented: 

1918 

1917 


$517,803 

363,409 

154,394 

26, 527 

127,867 


$1,971 

$1,688 

1,384 

992 

587 

696 

101 

122 

486 

574 

16.77 

39.52 

115.66 

117.21 

115.33 


70.22 

58.77 


263 

263 


93.50 
65.48 


1,296 
1,296 


$2, 859, 637 

2, 671, 493 

188, 144 

164,828 

23,316 


$2,260 

$2,211 

2.22 

2,111 

1,445 

46.09 

149 

766 

180.55 

130 

256 

149.22 

19 

510 

162.75 

93. 41 
65. 36 


1,265 
1,265 


1  Indicates  decrease. 

Mr.  Warkex.  What  do  those  figures  show,  Mr.  Welsh?  I  do  not 
mejMi  the  results,  but,  first,  where  do  they  come  from  and  where  do 
you  want  those  put  in? 

]Mr.  Welsh.  The  table  shown  in  Aera  is  published  each  month  cov- 
ering all  the  electric-railway  properties  who  report  to  the  association, 
and  this  exhibit  is  introduced  to  show  the  character  of  these  reports 
or  a  summary  of  these  reports  that  are  prepared  each  month  from  the 
various  electric  railways  of  the  country.  This  table  is  for  the  years 
1918  and  1917  only. 

Mr.  Warren.  For  those  companies  that  report  to  the  association  ? 

Mr.  Welsh.  For  those  companies  that  report  to  the  association ; 
yes,  sir. 

Mr.  Warren.  And  they  show  the  actual  figures,  do  they? 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  They  are  not  on  a  per  car-mile  basis,  but  are  the 
total? 

Mr.  Welsh.  That  is  true. 

Mr.  Warren.  Is  there  anything  else  that  you  want  to  say  about 
that? 

Mr.  Welsh.  I  think  that  is  all. 

Mr.  Warren.  It  comes  along  following  the  last  chart  that  you  put 
in,  120,  which  was  the  per  car-mile  basis,  was  it  not? 


h! 


104     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Welsh.  Yes.  rinlrman    at  some  time,  and 

Mr.  Warren.  I  want  to  say,  Mr.  \n»>™.'  r  association  that 
perhaps  I  might  say  at  this  P°>«t°>\S\if«,tciatirn  began  ac- 
as  soon  as  your  commission  was  aPPo;nte«  ;„lther  as  much  data  as 
tively  to  put  its  whole  force  to  work  to  gf  t^f  ^^^^  ""^^^  almost 
possible  to  submit  to  the  co-nimssion^  ^^r  appointment.  ^But  the 

Exclusively  on  that  ^''TK^^T.f  corresSing  with  the  345  street- 
commission  will  realize  that  in  coriesponcung  ^^^.^ 

railway  companies  a  great  deal  of  time  is  1°^*  S;*'^ ^^n,  personal 
responds  of  some  of  the  comp«'»';^V«'^^i'f*riHhis  matter  that 
observation  that  I  have  had  since  a  f?^,  f  yf/f^  '"^^a  was  working 
the  organization  has  been  working  "f j^*  ^'''J^  ^^  s"„t  information 
ast  night  until  12  o'clock  in  an  «"f  a^^^i^i„^^^^^^^  work.  That 
«hich  might  be  of  use  and  v«l"e  *»  J^  ^~;^^?  ^era  in  instead  of 

"^^Z  c£::^'^%e  you  reached  a  good  stopping  point  here? 
Mr.  Warren.  Yes,  sir.  .,      ^vi<>ck 

p.  m.) 

^  AFTER  RECESS, 

JAMES  W.  WELSH— Resumed. 

Mr.  Wei^h.  The  P'^P^.^LinnSn^  expends ^^^^^^^  each  otthe 
of  operating  «-?«"-«' th«j°*t^r'ffi,frd  in  addition  to  that 

T^Z'ZZ'^^iJ^'X^^'^^^-  "-  various  operating  de- 

'^^^  notable  element  in  ^^^^^^^^^  ^£ 
conducting  transport^^^^^^  ^^^por  io2e  increas^e  during  the  cen- 
one  111  winch  theie  !^^^.,^^,^^''/!f,ro  rp.  pi-incipal  element  in  that 
sus  years  and  also  m  the  y^^;^  ^^^^^^^^^  Tmpo&  dement  is  the  cost 
is  trammen's  ,^;  f/' ,  ^\\'^^^^^^^^  increase. 

^'^rwlR^El'Saf  ^^^^^^  -1-t  you  call  conducting 

^^•^^^^to  principal  item  in  conducting  transportation  is 

''irtlZr'And  the  total  item  of  conducting  transpor^^^^^^^^ 

duftoTheTncS^n  the  cost  of  coal  as  well  as  increased  cost  of 

'"^Mr 'w^rEx'S;  way  and  structures.    AVhat  does  that  mean? 

Mr*  Wfi 'ifThat  ir  Judes  cost  of  maintenance  of  the  roadway,  the 
cost  of  the  track  and  overhead  line  constructions. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     105 

•Mr.  Warren.  Keeping  it  in  proper  condition  to  run  your  cars? 
Mr*  Welsh.  Exactly.  -    -^      ^o 

Mr  Warren.  And  that  is  all  it  means,  is  it  not «  ,         n- 

Mr'  Welsh.  Yes,  sir.  The  item  for  equipment  covers  the  rolling 
stock,*  the  cars  as  well  as  the  shop  expense  in  maintaining  the  equip- 

Mr.  Warren.  That  is  keeping  the  cars  in  condition  to  run? 

Mr!  Welsh.  Yes,  sir.  .       .^, 

Mr.  Warren.  It  does  not  include  new  cars,  does  its 

Mr.  Welsh.  It  does  not. 

Mr.  Warren.  And  traffic  and  miscellaneous. 

Mr.  Welsh.  Under  that  are  included  general  expenses  such  as 
office  expense  and  the  expense  of  injuries  and  damages  and  other 
items  of  a  general  nature. 

•  Mr.  Warren.  And  the  total  of  that  operating  expense  as  shown 
here  for  1918  is  how  much? 

Mr.  Welsh.  $498,000,000,  in  round  numbers. 
*    Mr  Warren.  And  the  year  before,  it  was  how  much? 

Mr.'  Welsh.  $421,000,000.  .  .  u  .     .•  n 

Mr.  Warren.  Now,  were  the  companies  operating  substantially 
more  mileage  or  more  tracks  in  1918  than  in  1917  ? 

Mr.  Welsh.  As  a  matter  of  fact,  they  were  operating  a  less  car- 
mileage  in  1918  than  in  1917. 

Mr.  Warren.  By  car-mileage  you  mean  they  ran  the  passenger 
cars  a  smaller  number  of  miles  in  1918  than  in  1917? 

Mr.  Welsh.  Yes,  sir.  .  .  . 

Mr.  Warren.  And  notwithstanding  that,  it  cost  them  something 
hke  $77,000,000  more  to  operate  their  roads  in  1918— is  that  right? 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  Now,  the  sum  of  those  operating  expenses,  as  you 
have  called  them,  has  to  come  out  of  the  total  receipts  first,  does 

it  not? 

^i.Y  AVelsh    Yes. 

Mr*  Warren.  And  you  stated  before  the  recess  that  the  ratio,  as 
you  call  itr— the  operating  ratio— was  about  76  per  cent  for  this 

current  year? 

Mr.  AVelsh.  Yes,  sir;  76  per  cent  for  the  year  1919,  based  upon 

the  first  four  months. 

Mr.  Warren.  That  means  that  $76  out  of  every  $100  goes  to  this 
operating  expense? 

Mr.  Welsh.  Yes. 

Mr.  Warren.  Does  that  operating  expense  include  the  taxes? 

Mr.  Welsh.  It  does  not. 

Mr.  Warren.  About  how  much  is  that? 

Mr.  Welsh.  The  direct  taxes,  exclusive  of  indirect  taxes,  amount 
to  about  7  per  cent  of  the  operating  revenues. 

Mr.  Warren.  That  would  have  to  be  added  to  the  76  per  cent  of 
operating  expenses,  would  it  not  ? 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  That  would  make  about  83  per  cent? 

Mr.  Welsh.  Yes. 

Mr.  Warren.  Or  $83  out  of  every  $100  for  operating  expense  and 
taxes? 


160G43*'— 20^ 


-8 


■^::^mm 


M 


106     PEOCEEDINGS  O^  FEDEEAL  ELECTEIC  RAILWAYS  COMMISSION. 

Mr.  Warrfn     \nd  if  such  a  reserve  were  set  up,  would  it  l^^'Ve  to 

be^dd^irthe  7;  ,t  ceat  of  of -"--«!  ti-i^-^^.r"  *''"^' 
or  the  total  of  83  per  cent,  ami  be  added  to  the  83  per  ceut . 

Mr.  Welsh.  Yes;  it  ^^0"^^^^  ,j  realize tlmt  there  is  no  agree- 

P^Mr'mKHS'^nd  why  has  not  that  been  set  up  a.  a  reserve  by 

these  Pr?i;";ti««?  ^^^^,.  ^,^,.^  „ot  had  the  money  to.  do  it.    . 

Mr.  A\  ELSii.  1  f  "PP"*^  ."'^,  "     jt  ^ouid  raise  these  prior  require- 

per  cent,  would  it  not? 

Mr.  AVelsh.  Ninety  per  cent. 
Mr  Warren.  Ninety  per  cent? 

?ir-  w':ZJ^  that  before  there  is  anytliing  availably  to  paY 
inte^st  on  funded  debt  on  the  ''"f  ^ J  .^J^^^  tte  \lTefand  taL^^c^^^^^ 

iV!nepS&n^T;-'x=ty^«rjfc^^^^^^^     *-  ^«« 

^*  .^E      ?^     .ivTr  <fcinn  will  be  expended  or  laid  aside? 

*^S  t^^^^^l^f^:^  Ke  street. 
Commissioner  MEE*u..^Jk  ou  sgoke^smne^t  me  ag  ^^^. 

railway  accounts  ^''f'l?^^^'SZme7c'corum\ss\on.     In  the  ac- 
rnrrWch  SLfbee^mmended  by  the  Interstate  Commerce 

«r  StS^Sbti  nofw£ti-=r.^-a  depreciation 

reserve.  j  fV»mk     There  is  a  provision  for 

Mr   Warren.  No  percentage,  1  think.     ^^^^^^ ^^  tint  think  it  has 

to  the  companies  what  that  percentage  should  be. 

£Sne;=»e?  IZS^^-^  -  -  -- 

SmSSr  m"kk.h.  As  a  -tt.r  of  practice  J^^^^^^^^ 
companies  have  not  set  aside  anythmg  for  depreciations 

make  a  nominal  reserve,  do  th^y  not,  Mr.  W  elsh  i 
Mr.  Welsh.  In  some  cases,  J^es. 
Mr.  Warren.  On  equipment  i 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     107 

Mr.  Welsh.  Yes.    ^    .     ^^         ,       ^^    _ ,  i.  ^  v  •      ^*    i    • 

Mi\  Warren.  We  do  in  Massachusetts  I  know,  but  it  is  utterly  in- 
adequate. I  know  some  companies  that  set  up  a  reserve  of  1  per  cent 
of  the  cost  of  the  equipment  per  annum,  which  would  assume  an 
equipment  life  of  100  years.     I  wish  that  they  did  last  100  years, 

but  they  do  not. 

Now,  is  there  anything  else  on  that  chart  that  I  have  overlooked  ? 

Mr.  Welsh.  I  think  not. 

The  fio-ures  in  the  tables  accompanying  Chart  C-155  are  as  follows : 

to 

Estimate  of  railway  operating  expenses  by  departments, 

(To  accompany  Chart  C-155.) 


Expense  accounts. 


Way  and  structures 

Eqiiipraent 

Power 

Conducting  transportation 

Traflac 

General  and  miscellaneous, 
Operating  expenses 


Year  ending 

Dec.  31, 1918 

Percent 

(115  com- 

of total. 

panies). 

«19,911,322 

12.80 

21,576,262 

13.87 

26,842,149 

17.26 

63,947,-529 

41.12 

629,080 

0.40 

22,607,326 

14.54 

155,513,668 

99.99 

Estimate  of 
census  for 
year  1918. 


$63,810,062 
69, 144, 186 
86,043,881 

204, 989, 828 

1,994,064 

72,534,094 

498,516,115 


Operating  expenses  Vy  accounts  for  United  States  street  and  electric  railways, 
(Chart  C-155 — Financial  and  tmffic  data  from  U.  S.  census  reports.) 


Conducting  transportation. 

Power 

W^ay  and  structwes 

Equipment 

Traffic  and  miscellaneous.. 


Total 140,123,844 


Census  of — 


1902 


$60,972,739 
23,062,328 
13,600,236 
16,676,532 
25,812,009 


Items  1  to  5,  inclusive. 
Items  1  to  4,  inclusive. 
Items  1  to  3,  inclusive. 
Items  1  to  2,  inclusive. 
Item  1 


140,123,844 
79, 151, 105 
56,088,777 
42,488,541 
25,812,009 


1907 


$97,122,681 
43,970,669 
28,520,925 
31,  ^5, 810 
44,038,294 


245,140,379 


245,140,379 

148,017,698 

104,045,029 

75,524,104 

44,038,294 


1912 


$129,204,515 
53,598,922 
44,270,582 
38,717,202 
52,909,313 


318,700,534 


1917 


$174,972,645 
76,958,461 
55,470,419 
48,981,5.54 
64,867,759 


421,250,838 


1918 
(estimated). 


$204,989,828 
86,043,881 
63,810,062 
69, 144, 186 
74,528,158 


498,516,115 


318,700,534 

189,496,019 

135,897,097 

91,626,515 

52,909,313 


421,250,838 
246,278,193 
169,319,732 
113,849,313 
64,867,759 


498,516,115 
293,526,287 
207, 482, 406 
143, 672, 344 
74,528,158 


Cumulative  fljrures  (from  above  data)  for  plotting  curves. 

Note.— Figures  taken  from  1917  advance  copies  U.  S.  Government  census  by  accounts  for  years  1917, 
1912,  and  1907  and  1912  census.  Table  162,  p.  311,  for  year  1902.  Figures  for  1918  estimated  by  American 
Electric  Hallway  Association  from  reports  from  115  companies, 

Mr.  Warren.  You  have  spoken  of  the  element  of  increased  wages 
in  conducting  transportation,  have  you  not,  as  largely  accounting 
for  the  increase  in  that  item? 

Mr.  AVelsh.  Yes,  sir. 

Mr.  Warren.  Would  that  also  be  true  of  the  major  item  o:f  ways 
and  structures? 

Mr.  Welsh.  Wages  enter  into  all  of  the  accounts  and  it  would  be 
true  in  practically  every  case. 

Mr.  Warren.  In  conducting  transportation,  it  would  be  princi- 
pally the  conductors  and  motormen,  the  men  who  operate  the  cars, 
would  it  not  ? 


108     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

IM'r  TVfLiSii    TTgs  sir. 

Mr.  Warren.  In  ways  and  structures,  it  would  be  the  laboring 
men  who  work  on  the  track  and  overhead  wire  men,  the  electricians  ( 

Mr.  Welsh.  Yes,  sir.  .  , ,  ,     .i.  i,     •  „i 

Mr.  Warren.  And  in  the  equipment,  it  would  be  the  mechanical 

men  in  the  repair  shops? 

Mr.  Wei^h.  Yes,  sir.  ^       ,        ..  a  a    ^\.^ 

Mr.  Warren.  Where  do  the  men  who  clean  the  cars  and  do  tne 
car-barn  work  appear,  under  what  head? 

Mr  Welsh.  Under  the  item  of  conducting  transportation. 

Mr.  Warren.  And  in  power,  again,  wages  enter  thei^;  do  they 

not? 

Mr.  Welsh.  Yes,  sir.  i  *i,-   ^ 

Mr.  Warren.  Do  you  happen  to  know  whether,  as  a  general  tnmg, 
when  there  is  a  wage  adjustment  made  with  the  men  or  with  the 
union  representing  the  men  on  unionized  roads,  the  settlement 
usually  applies  to  all  classes  of  labor?  ^  ^i      j 

Mr.  Welsh.  In  most  cases  it  follows  as  a  consequence  of  the  de- 
cision. While  the  agreement  may  apply  especially  to  the  trainmen, 
in  almost  every  case  it  applies  to  the  rest  of  the  employees  eventu- 

allv,  if  not  immediately.  j        -i-i     i-i, 

l^r  Warren.  In  cases  where  the  settlement  is  made  with  the 
Amalgamated  Association,  does  not  the  Amalgamated  Association 
include  in  its  membership  all  the  different  classes  of  labor  on  street 

^^i^Ir*  Welsh.  It  does,  but  all  the  various  classes  are  not  members  in 
every  case.     I  think  they  have  the  opportunity   for  membership 

^Mr.  W^\RREN.  Are  you  familiar  with  the  action  of  the  War  Labor 
Board  in  raising  wages? 

Mr.  Welsh.  Yes,  sir.  ,.   ^  ..  .      „    ,  jj  *u        ^f  > 

Mr.  Warren.  They  usually  applied  it  to  all  classes,  did  they  not  ? 

They  raised  all  classes? 

Mr.  Welsh.  They  did ;  yes,  sir. 

Mr.  Warren.  Not  simply  the  trainmen. 

Mr.  Welsh.  Yes,  sir.  , ,  .    ,  ., ,    ^        .     -.       i  .  -i  ^ 

Commissioner  Meeker.  Would  it  be  possible  to  submit  a  detailed 
account  separating  labor  costs  from  other  costs  in  conducting  trans- 
portation, maintenance  of  way  and  structures? 

Mr.  Warren.  I  think  we  have  that.    It  is  the  very  next  chart. 
Mr.  Welsh.  It  is  the  very  next  chart.  ,  .      ,      ,  •„ 

Mr.  Warren.  If  there  are  no  questions  on  this  chart  we  will  pass 

to  the  next  one.  ,     ,   .  ^         ,  j.     4.  4.         4. 

Commissioner  Wehle.  May  I  ask  if  you  have  a  separate  statement 

showing  to  what  extent  the  cost  of  actual  power  purchased  Irom 

other  companies  enters  mto  the  item  of  power  as  shown  on  this 

Mr.  Welsh.  It  does  not  enter  at  all  into  that  item. 

Mr.  Warren.  Yes;  it  does.  ,        .,     ,tt  i        ..i    * 

Mr.  Welsh.  I  beg  pardon ;  it  does  enter  into  it.    We  can  show  that. 

Commissioner  Wehle.  Would  some  chart  show  that? 

Mr.  Welsh.  We  do  not  have  that  chart ;  no ;  but  we  can  easily  get 

Mr.  Warren.  We  can  prepare  a  statement  if  you  would  lilvc  it. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     109 

Commissioner  Wehle.  Would  it  be  interesting  and  useful,  Mr. 

W^irren  * 

Mr  Warren.  Yes;  I  think  it  would.  There  is  something  to  be 
said  about  that,  and  it  is  something  which  is  to  be  said  about  every 
one  of  these  items,  and  which  I  think  the  commission  should  have  m 
mind.  You  take  in  the  case  of  purchased  power— a  company  may 
have  made  a  contract  for  three  years  for  power  at  a  certain  rate.  It 
may  still  this  year  be  getting  power  at  that  rate.  Next  year  the  con- 
tract may  expire,  and  there  will  be  an  immediate  large  increase  m  the 
cost  of  power,  and  the  same  increase  for  labor.  Now,  for  example, 
in  the  labor  situation,  the  maximum  wage  up  to  a  few  weeks  ago  was 
that  fixed  by  the  War  Labor  Board  of  48  cents,  was  it  not?  That  is 
the  highest  I  remember;  48  cents  for  cities  of  the  first  class.  Within 
two  or  three  weeks,  as  the  result  of  the  strike  in  Detroit,  the  Detroit 
scale  has  gone  to  60  cents  an  hour.  Following  that,  Cleveland  has 
<Tone  to  60  cents  an  hour,  and  in  Chicago,  I  learned  at  lunch  to-day. 
That  the  employees  had  gone  on  a  strike  for— 85  cents,  I  think,  was 
their  demand— 85  cents  an  hour.  ...  , 

In  Boston,  where  I  happen  to  come  from,  their  case  is  now  pend- 
ino-  before  the  War  Labor  Board,  and  they  have  asked— I  have  for- 
o-o'tten,  but  it  is  something  well  over  60  cents,  and  also  for  an  8-hour 
dav,  8  hours  platform  work  instead  of  9,  as  they  have  hitherto  per- 
formed ;  and  they  are  threatening  to  strike,  I  understand,  because  the 
decision  is  not  forthcoming  from  the  War  Labor  Board  as  promptly 

as  they  want  it.  .  /.  i.       i 

Now,  all  these  figures  which  we  are  putting  m  are  figures  based  on 
past  experience  and  past  operations,  are  they  not,  Mr.  Welsh? 

\T*.  \Velsh,  Yes  sir. 

Mr.  Warren.  And  the  result  of  these  various  changes  which  are 
imminent,  of  course,  is  going  to  make  the  showing  infinitely  more 
serious  than  it  is  to-day. 

You  spoke  of  the  power.  I  have  in  mind  one  company  in  Massa- 
chusetts which  had  a  five-year  power  contract  which  ran  mitil  the 
1st  of  July  a  year  ago.  Now,  during  the  first  years  of  the  European 
war  and  the  first  year  of  the  increased  cost  of  coal,  in  so  far  as  that 
company  was  buying  its  power — and  it  bought  two-thirds  of  it — its 
ix>wer  cost  did  not  reflect  the  changed  conditions  at  all.  The  minute 
the  1st  of  July  came,  however,  the  price  of  its  power  was  increased 
by  that  power  company  to  a  point  where  the  cost  of  its  power  was 
$150,000  more  per  year*  from  the  1st  of  July  than  it  had  been  for  the 
year  before,  and,  of  course,  that  is  happening  all  along  the  line  with 
power  companies. 

Now,  Mr.  Welsh,  will  yoii  pass  to  the  next  chart  ?  That  chart  was 
C-155.  The  next  chart  is  marked  for  identification,  "  C-134."  Now, 
Mr.  AVelsh,  this  chart  shows  the  cost  of  labor. 

Mr.  Welsh.  The  purpose  of  this  chart  is  to  show  the  relationship 
between  the  cost  of  labor  as  represented  by  wages  and  salaries  to  the 
railway  operating  expense.  The  increase  in  both  the  total  expense 
and  in  the  cost  of  labor  for  each  of  the  census  years  is  indicated  and 


110     PKOCEEDINGS  OF  FEDERAL  ELECTKIC  RAILWAYS  COMMISSION. 

vords,  the  total  expense  has  mcreased  at  a  uniform  rate  with  the 

'°Mr  *W™.  Now,  the  accompanying  stat«nent  to  the  chart  shows 
do^  it  notThe  salar  es  and  wages  for  1912,  as  well  as  other  census 
y^  and  for  1917.    Will  you  stote  what  they  were  in  1912  and  what 

*^liXiH^^The  cost  of  labor  amounted  to  ^00,000,000  in  round 
numb'ers  ^^1912  out  of  a  total  of  $318,000,000  railway  operating  ex- 
jr^e!  m  C3  per  cent  of  the  total.  In  1917  the  cost  of  labor  was 
$207,000,000  outof  $421,000,000  tota    or  G3.4  Per  cent 

Mr.  Wakken.  That  ineans,  does  it,  that  of  all  the  operating  ex 
penses  almost  two-thirds  was  to  pay  salaries  and  wages i        . 

m.  V^^ZJ^oi^yonv  table  also  showB  the  year  1918,  does  it 

not? 

Mr!  TviT. J  Ard'that  was  made  up  fi-om  your  returns  from 

the , 

Mr  Welsh.  From  the  memher  companies. 

Mr!  Warren.  From  tlie  345  companies,  and  then  estnnated  for  the 

remainder? 

Mr  W™-.^That  shows  a  slightly  smaller  proportion  of  the  total 
opVratiji^eipense  going  for  wages  and  salaries,  although  as  a  matter 
of  fact^goodTeal  more  money  went  to  wages  and  salaries.    How 

'T'wTn.^lhere'is'a  falling  off  of  about  half  a  per  cent  in  the 
rost  of  labw  as  compared  with  the  total  cost  of  operation.    Howex^r 
it  must  be  borne  in  mind  th«t  the  service  perfoiined  as  represented 
byX  car-mile  operated  in  1918  fell  off  .somewhat  as  compared  with 
191T  and  this  would  be  reflected  primarily  m  the.item  of  labor. 

Mr  Warren.  And  how  would  the  cost  of  materials  affect  it  ? 

Mr  wtwH  There  has  probably  been  a  slightly  greater  mcrease  in 
thf^^osToT^naterkk  than  in  the  cost  of  labor.  In  fact  there  has  been 
a  krS-  inc^eas^  in  the  cost  of  materials  than  in  the  c.^t  of  labor. 

Mr  Wakren.  8o  that  would  change  the  relationship  ? 

Mr  Welsh.  That  would  change  the  relationslup. 

Mr  Wa^^n.  Another  thing  about  the  cost  of  wages  last  year 
while'  there  were  very  great  increases  in  wages  last  year,  did  they 

"""'mI  wSZ'No.'TbL  should  be  borne  in  mmd,  because  the  de- 
cisions of  the  War  Labor  Board  occurred  at  various  interva  s 
roughout  the  year,  and  therefore  the  total  figures  for  the  year  do 
not  repi^ent  the  aiAounts  that  would  have  been  expended  had  the 
vntpcj  been  in  effect  for  the  entire  year.  ,    ,,  ^,  i, 

Mr.  W^^^-.  Koughly,  they  represent  less  than  half  the  year,  do 

Mr  AVelsh.  About  half,  or  less  than  half.         ,,.,.. 

M^"  wSn  And,  as  far  as  you  know,  was  the  highest  rate  per 
ho^'inw^  entering  into  thesi  figuws,  the  48  cents  which  I  men- 
tinned  as  the  War  Labor  Board's  award  5 

Mr  Welsh.  ThtU  is  true,  except,  I  believe,  in  one  western  company 

that  pays  50  cents. 


PROCEEDINGS  OF  FKDEEAL  ELECTKIC  RAILWAYS  COMMISSION.     HI 

Mr  Warren.  Two  cents  an  hour  more? 

Mr  WEI.8H.  I  think  an  interurban  western  company ;  yes,  sir. 

Commissioner  Meeker.  Would  it  not  be  possible  to  give  us  some  fig- 
ures as  applying  to  1919,  showing  the  labor  costs  and  the  percentage 
of  total  operating  expenses?  That  would  bring  it  down  more  to 
date.  It  would  bring  before  us  more  accurately  the  problem  that 
we  are  now  facing. 

Mr.  Welsh.  Our  next  chart  will  do  that. 

Mr.  Warren.  The  next  chart  will  do  that? 

Mr.  Welsh.  That  is,  in  rates  per  hour.  ,  ^,    ^ 

Mr.  Warren.  Is  there  anything  further  on  this  chart  that  you 
want  to  call  to  the  attention  of  the  commission? 

Mr.  Welsh.  I  think  not ;  no,  sir. 

Cost  of  labor— Ratio  of  salaries  and  wages  to  railway  operating  expense, 
(Chart  No.  134.— Based  on  United  States  census  reports.) 


1918. 
1917. 
1912. 
1907. 
1902. 


Railway 
operating 
expease. 


$498,516,115 
421,250,838 
318, 700, 534 
215,140.379 
140,123,844 


Salaries  and 
wages. 


$313,748,577 

267,240,362 

200.890,930 

150,991,099 

88,210,165 


Per  cent 

salaries 

and 

wages  is 
of  railway 
operating 

exx)enjse. 


62.9 
63.4 
63.0 
61.6 
63  0 


Source  of  information:  Tables  5  and  162  of  the  1917  ad^^ce  reports  and  the  1912  book  of  the  Census 
Bureau. 

Mr.  Warren.  Now,  Mr.  Welsh,  this  chart,  which  is  marked 
"C-133,"  indicates  what  as  regards  wages? 

Mr.  Welsh.  This  chart  is  based  upon  the  average  rate  per  hour 
paid  by  companies,  somewhat  over  60  companies  having  over  100 
miles  of  single  track  each.  It  is  on  a  percentage  basis  and  1906  is 
taken  as  100  per  cent  and  the  percentage  increase  over  1906  is  shown 
for  each  year  up  to  the  present  time. 

Mr.  Warren.  Is  that  also  shown  in  the  table  accompanying  the 

Mr.  Welsh.  The  table  accompanying  the  chart  shows  m  addition 
to  the  percentage  the  average  rates  per  hour  in  cents.  The  100  per 
cent  shown  for  the  year  1906  in  the  table  is  taken  arbitrarily  as  the 
basis.  This  chart  shows  that,  comparing  1919  with  1906,  there  has 
been  an  increase  in  wage  rates  of  about  93  per  cent,  the  most  rapid 
increase  having  occurred  from  1918  to  1919. 

Mr.  Warren.  Then  follows  a  summary  of  the  awards  of  the  Na- 
tional War  Labor  Board. 

Mr.  Welsh.  That  is,  a  part  of  this  exhibit  and  summary  as  well 
as  the  individual  have  been  prepared.  This  summary  shows  the  num- 
b(^r  of  awards  for  each  of  the  maximum  rates. 

Mr.  Warren.  It  shows  the  date  of  the  award,  the  scale  gitinted, 
the  pi-evious  scale,  and  the  per  cent  of  increase ;  does  it  not  ? 

Mr.  Welsh.  In  the  detailed  statement;  yes,  sir. 

Mr.  Warren.  For  each  company? 


112      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Mr.  SEN.^fthink  the  commission  will  find  that  fully  bears  out 
Mr.  Welsh's  statement  that  the  increased  wages  are  reflected  m  last 
year's  statements  for  only  a  relatively  smal  part  of  the  year. 

Have  vou  anything  else  on  that,  Mr.  Welsh  i 

Mr.  Welsh,  "i^o,  sir.  .       ^      .  ^  .00  ^^  i 

The  figures  in  the  tables  accompanying  Cliart  C-133  are  as  fol- 
lows : 

Summary  of  awards  affecting  trainmen  granted  hy  War  Labor  Board. 


Maximum  rate  per  hour  (cents). 


Number  of 

increases  in 

wage  rates 

awarded. 


Maximum  rate  per  hour  (cents). 


Number  of 

increases  in 

wage  rates 

awarded. 


5"oVl -In^fm^JK^Iw  cases  several  rates  were  made  in  one  award. 
Maxfmum  inSlaL.  71.4  per  cent;  minimum  increase,  7.5  per  cent. 

Trainmen' 8  icages. 
panies  t7)  American  Electric  Railway  Association.)  ^ 


Year. 


1906. 
1907. 
1908. 
1909. 
1910. 
1911. 
1912. 


Rate  per 
hour. 


Per  cent 
increase. 


Cents. 
23.03 
24.11 
24.75 
24.57 
25.85 
26.10 
26.89 


100.00 
104.69 
107. 47 
106.69 
112.24 
133.33 
116.76 


Year. 


1913 
1914 
1915 
1916 
1917 
1918 
1919 


Rite  per 
hour. 


Cents. 
27.74 
28.14 
28.62 
29.25 
31.57 
33.92 
44.43 


Per  cent 
increase. 


120.45 
122.23 
124. 27 
127.01 
137. 08 
147.29 
192.92 


rate  of  all  companies  reporting,  based  on  tliat  paid  to  men  oldest 


Note.— The  rate  per  hour  is  the  average 
in  the  service. 

Summary  of  awards  of  National  War  Labor  Board. 


Name  of  company. 


rate  of 
award. 


Scale 
granted. 


Atlanta  Northern  Rv.  Co. ,  Atlanta,  Ga.  •.•-■•-•  •  •  •  -^ 
Auburn  &  Syracuse  Electric  R.  R.  Co.,  Auburn,  N.  Y. 

Cit V  lines 

Int erurl lan  lines 

Express  and  freight  service — 

Bav  State  Street  Ry.  Co.,  Boston,  Mass 

Boston  Elevated  Ry.  Co.,  Boston,  Mass.-.. 

Surface  lines,  motormen  and  conductors 

Rapid  Transit  lines- 
Mot  ormcn 

Conductors 

Brakeraen a*  • '  ^T " '«'  "* V>«'J. 

Bo>ton  &  Worcester  Street  Ry  Co.,  Boiton,  Mass 

BulTalo  &  Lake  Erie  Traction  Co. .  Butf alo,  N.  Y 

Butte  Electric  Ry.  Co.,  Biitte,  Mont    .       ... ... 

Charleston  Consolidated  Railway  &  Lighting  Co 

ton,  S,  C 


Dec.     5, 1918 
Nov.  21, 1918 


Dec. 
Oct. 


4, 1918 
2, 1918 


Centx. 
40 


Charlcs- 


Jan.  15,1919 
Dec.  5, 1918 
Nov.  21,1918 

Nov.  20,1918 


42 
44 
47 
45 

"is" 

50 

44i 

42i 

47 

45 

65 


Previous 
scale. 


Cents. 


«.  1 


31 

33 

35J 

40i 

'37J' 

39i 

34 

301 

39| 

33 

53i 

28 


Per  cent 
increase. 


35.5 
33.3 


11.1 
'28.0 

26.6 
30.9 
40.5 
18.5 
36.4 
22.4 

42.9 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     113 
Summary  of  awards  of  National  War  Labor  Board-  -Continued. 


Name  of  company. 


Chicago  elevated  railways,  Chicago,  111 

Motormen,  regular 

Motormen,  extra 

Conductors,  regular 

Conductors,  extra 

Guards,  regular 

East  St.  Louis,  Coiuinla'ia  &'Wa"terioo  Ry.  Co.,  East  St. 

Eas^St.  Louis'  Tines'  (Ea^t  'st.'  'i/oiiis'  '&  'Subiirban  Rv 
\lton,  Granite  &  St.  Louis  Traction  Co.,  and  East  St. 

Louis  Rv.),  East  St.  Louis  and  Alton,  111 

City  lines 

Interurban  lines -  —  -  —  -  —  -  -  -  -  • 

Empire  State  Railroad  Corporation,  Syracuse,  N.  Y 

Citv  lines 

Interurban  lines 

Evanston  Ry .  Co.,  Evanston,  111. .............. ....  -  - . 

Galesburg  Railway,  Light  <fc  Power  Co.,  Galesburg,  111 

GcDrgia  Railway  &  Power  Co.,  Atlanta,  Ga 

City  lines • •••• 

Interurban  lines •• 

International  Ry.  Co.,  Buffalo,  N.Y 

Freight  service- 
Engineers 

Conductors 

Brakemen 

Joplin  &  Pittsburg  Ry.  Co.,  Pittsburg,  Kans 

Kansas  City  Rys.  Co.,  Kansas  City,  Mo 

K  ansas  division 

Missouri  division 

Knoxville  Railway  &  Light  Co..  Knoxville,  Term. .   ...... 

Lewiston,  Augusta  &  Watervllle  Street  Ry.  Co.,  Lewis- 
ton,  Me -  - 

Louisville  &  Interurban  R.  R.  Co.,  Louisville,  Ky 

Louis\'ille  Ry.  Co.,  Louisville,  Ky 

City  lines 

Suburban  lines 

Memphis  Street  Ry .  Co.,  Memphis,  Tenn 

Chicago  surface  lines ,  Chicago,  111 

Chicago  &  West  To\ntis  R v.  Co .,  Chicago  ,111 

Cincinnati  &  Columbus  Traction  Co.,  Cincinnati,  Ohio 

Cincinnati,  La^v^cnceburg  &  Aurora  Electric  Street  R.R. 

Co.,  Cinciimati,  Ohio 

Cincinnati,  Milford  &  Loveland  Traction  Co.,  Cincinnati, 
-  (Jnio ,....•••••-•-•••---•--••--••••••••---••••-••••-••"•' 

City  Rv.  Co.,  Dayton,  Ohio 

Cleveland  &  Eastern  Traction  Co.,  Cleveland,  Ohio 

Cleveland  <fe  Er ie  Ry .  Co . ,  G irard ,  Pa 

Cleveland,  Painesville  &  Eastern  R.  R.  Co.  and  Cleve- 
land, Pahaesville  &  Ashtabula  R.  R.  Co.,  Willoughby, 

Ohio 

Cleveland  Ry.  Co.,  Cleveland,  Ohio 

Cleveland,  Southwestern  &  Columbus  Ry.  Co.,  Cleve- 
land, Ohio 

,  Columbus  Railwav,  Power  &  Light  Co.,  Columbus, Ohio. 
Cumberland  County  Power  &  Light  Co.,  Portland, Me... 

Dayton  Street  Ry.  "Co.,  Dayton,  Ohio 

Day  men 

Night  men 

Denver  &  Inter-Moimtain  R.  R.  Co.,  Denver,Colo 

Denver  Tramway  Co.,  Denver,  Colo 

Detroit  United  Ry.  Co.,  Detroit,  Mich 

New  Orleans  Railway  &  Light  Co.,  New  Orleans,  La 

New  York  State  Railways,  Rochester ,  N.  Y 

City  lines 

Interurban  lines 

Oakwood  Street  Ry.  Co.,  Dayton,  Ohio 

.1-'  o»jf    lUt5ll  •  ■  •  ••  ••■••■••■■■•••••••••••■■•••••■■••••■■•• 

Night  men 

Ohio  Electric  Ry .  Co.,  Lima,  Ohio 

Lima  city  lines 

Lima  interurban  lines 

Ohio  Electric  Ry.  Co.,  Newark  lines,  Newark,  Ohio 

City  lines 

Interurban  lines 


rate  of 
award. 


July  31,1918 


Nov.  21,1918 


July  31,1918 


Nov.  21,1918 


July  31,1918 

do 

Dec.     5,1918 


July   31,1918 


Scale 
granted. 


Cents. 


60 
46 
43 
40 
40 
39 

48 


Previous 
scale. 


Cents. 


41 
39 
34 
34 
31 
31 


45 

47 


July  31,1918 
Oct,    24,1918 


Jan.    15,1919 

Nov.  20,1918 

Feb.     4,1919 

do 


Oct.  24,1918 
July  31,1918 
do 

Nov.  22,1918 


42 
45 
45 
42 

40 
48 

50 
49 
46 
42 


81 
33 


Per  cent 
increase. 


} 


48 
40 

43 
46 


{ 


.do. 


do 

Oct.    24,1918 

31,1918 

4,1919 


Julv 
Feb. 


July   31,1918 
do 


....do 

do 

Nov.  20,1918 
Oct.    24,1918 


Nov.  20,1918 

do 

July   31,1918 

do 

do 


Oct.    24,1918 


Jan.    15,1919 


Jan.    15, 1919 
do 


45 

40 
48 
48 
45 

45 

42 
45 
42 
43 


42 

48 

42 
45 
45 


31i 

39 
26 

"32" 
34 
34 

36 
35 
32 
35 


33 
38 
29 

31 


38 
39 
28 
39 
39 
37 

37 

32 
33 
35 
33 


35 
35 

32 
31 
33 


45 

48 
48 
48 
42 


45 
47 

45 

"42" 
45 


42 
45 


34 
33 
34 
40 
40 
24i 


37i 


34 
33 

"33" 
40 


33 
40 


22.0 
'26.5 
*29.6 


45.2 
42.4 


33.3 
34.3 
15.4 
6L5 


25.0 
17.6 
41.2 


20.0 


45.5 
26.3 
37.9 

38.7 


18.4 
15.4 
42.9 
23.1 
23.1 
2L6 

2L6 

31.3 
32.4 
20.0 
30.3 


20.0 
37.1 

3L3 
45.2 
36.4 


32.4 


4L2 
20.0 
20.0 
7L2 


20.0 
25.4 

*3i"4 


27.3 
12.5 


27.3 
12.5 


114     PKOCEEDINGS  OF  FEDEEAL  ELECTRIC  RAILWAYS  COMMISSION. 
aunimary  of  awaris  of  Jfatioiml  War  Labor  Board-CoiMuned. 


Name  of  company. 


Ohio  Electric  Railway  Co.,  Springfleld  interurban  lines, 
Ohfi' EfcSrIc  rIiW  CO.V  ZanosWlVe  Unes,  *  Zanc^viUe . 
oSha  &  C^"cYl  Bliifls  StVeoV  Ry.  Co.;  oiiahaVNebr. . . 


M  Rv  Co. .  Dayton,  Ohio •.•'•^" 

SlSa  Railways  C^.,  Philadolphia  Pa 
md  Railway,  Light  &  Power  Co.,  Porth 


ortland,  Oreg. 


Ottumwa  Railway  &  Light  Co 

pS  Gas  &  Electric  Co.,  Sacramento  C«d if        

Pcnnsvlvanifl-Now  Jersey  Ry.  Co.,  Trenton,  N.J . . . .  .^- -  • 
PeSSfesRy.  Co.,  Pennsylvania-New  Jersey  Ry.  Co.,  Tren- 
ton. N.  J 

People 
Phlladelt 
Portland  Railway, 

City  linos • 

Interurban  lines 

Passenger  trainmen - 

^'^txpiS^Slnreight.  and  day  yard  crows. . 

Night  yard  crews ■ 

Passenger  and  freight  brakemen 

Pay  yard  crews 

Night  yard  crews. -vf-i 

Public  Service  Ry.  Co.,  Newark,  N.  J 

One-man  car  operators  •••-••••:,-•••-,•, 

Reading  Transit  &  Light  Co.,  Reading,  1  a 
Bhode  Island  Co.^  Providence,  R.I 


Fate  of 
award. 


Soale      Previous 
granted.      scale. 


Jan.    15,1919 


....do 

July  31,191S 
Dec.  5,  Itns 
Apr.  10,1919 
July   31,1918 


,  •  •  •  .vlO.  ••••••■ 

Oct.    24,1918 
do 


do 

Nov.  21,1918 


sTj^eph  Ry.'LiR^t  &  Powef  Co  .  St.  Ja^eph.  Mo 

CitylUies 

Interurban  lines 

B  r  akemen '■■■■• u'nX 

Savannah  Electric  Co.,  Savannah  Ga. 

Schenectady  Ry.  Co.,  Schenectady,  N.  Y 

City  lines 

Interurban  lines........... ---•• 

Scranton  Railwav  Co.,  Scranton,  Pa. . . .  -^  -  -  ^-  .^- 
Syracusc  &  Northern  Elccjnc  Ry;^,  ^y^i^c"^®;  ^-  *  - 
Syracuse  &  Subu''^  •" 
Toledo,  Bowling 

Ohio 

City  lines 

ToirR^a»aA'"ri;iVMci:;To>od^ 


'S'i^B^is.^^i^'i^o^^l-^^^y. 


July  31,1918 
June  25,1919 
Feb.  4,1919 
Oct.  2, 1918 
Feb.  4,1919 
Apr.  10,1919 
do 


Dec.    17,1918 
July   31,1918 


July  31,1918 
Nov.  21, 1918 
....do 


Cents. 
45 

42 
45 
42 
46 
42 

42 
45 
45 

50 

54 

56 
60 
47 
59 
60 
45 
50 
43 
48 
42 
45 

■ 48" 

50 
48 
42 


Cents. 
40 

33 
40 
31 
34 


Per  cent 
increase. 


32 
37 

45 

4o^ 


12.5 

27.3 
12.5 
35.5 
35.3 


40.6 
21.6 

11.1 

ii.'s 


40 
45 

40 
37 
32 
38 

'42* 
45 


Dec.    5, 1918 


May  27,1919 
July  31,1918 
liar.  25,1919 


45 

46i 

45 

45 

42 


30 


12.5 
11.1 
7.5 
39.7 
31.3 
18.4 

*i4.3 
11.1 


40.0 


42 
43 
46 
40 

48 


37J 

39 

32 


32i 


32 

33 

38 

36i 

34 


20.0 
19.2 
40.6 


29.3 


3L2 

30.2 

21.1 

9.6 

23.1 


''S'miil"CLfwo„ld  it  not  be  useful  in  connection  with 
th£  sTatement  to  have  a  list  of  the  60  -rnpames? 

Mr.  Warken.  I  think  we  could  furnish  that. 

Mr.  Welsh.  Yes;  I  could  furnish  that. 

Mr.  WELSH.  A"^^/;*    .  ^hown  as  a  direct  item  m  the  census 

ducted  *^. ''^'"f'JX^^^y';,"^  of  power,  insurance,  and  other  mis- 

""comSoner  Meeker.  Will  you  restate  that,  please? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     115 

Mr  AVelsh.  I  will  state  this :  That  on  the  second  table  the  exact 
method  of  determining  this  estimated  amount  for  material  is  shown. 
It  consists  in  deducting  from  the  total  operating  expense  the  cost 
of  hibor  as  shown  by  salaries  and  wages,  purchased  power,  injuries, 
and  damages,  and  certain  other  miscellaneous  items  as  indicated, 
leaving  what  is  believed  to  be  a  net  result  containing  as  nearly  as 
ix)ssible  the  cost  of  inateriaL 

Mr.  Warren.  In  other  words,  you  have  endeavored  to  take  out  of 
your  operating  expense  everything  of  any  other  nature  than  ma- 
terials and  supplies? 

Mr.  Welsh.  Exactly. 

Mr.  Warren.  And  assuming  that  you  have  done  that  correctly, 

what  is  the  result  shown  ? 

Mr.  Welsh.  One  interesting  feature  is  the  falling  off  in  the  per- 
centage between  1907  and  1912  in  the  cost  of  materials,  as  compared 
with  the  total  cost.  This  is  probably  due  to  the  increased  purchase 
of  power  during  that  same  period  as  the  result  of  w^hich  the  cost  of 
coal,  which  previously  had  been  included  as  a  material  expense,  is  no 
longer  present.  This  chart  shows  that  at  the  present  time  about  23 
per'^cent  of  the  operating  expense  is  material. 

Mr.  Warren.  Where  does  the  cost  of  power  purchased  enter  in 
the  operating  expense,  Mr.  Welsh  ? 

Mr.  Welsh.  It  is  a  part  o2  the  total  item  of  cost  of  power. 

Mr.  Warren.  But  it  is  itemized  so  it  can  be  segregated? 

ISIr.  Wei^h.  Oh,  yes ;  it  is  segregated  in  the  census  report. 

Mr.  Warren.  You  have  not  the  cost  of  material  for  1918,  have  you  ? 

Mr.  Welsh.  No,  sir;  we  did  not  have  sufficient  data  to  make  an 

estimate. 

Mr.  Warren.  It  might  interest  the  commission,  if  I  may  refer,  not 
as  a  witness,  but  to  something  within  my  own  experience  in  a  recent 
mte  ease  in  Massachusetts  on  this  cost  of  material.  I  asked  the 
company  which  I  represented  to  take  their  material  and  supply 
quantities  for  last  year,  1918,  the  actual  quantities  of  various  sup- 
plies which  they  used,  with  the  cost  of  them,  iind  to  apply  to  those 
quantities  the  prices  prevailing  in  1914  and  then  to  take  the  per  cent 
of  the  increase.  They  gave  me  a  schedule  which  was  introduced  in 
the  case  and  which  was  not,  as  I  recall  it,  controverted  by  anybody, 
and  if  it  was  correct  it  indicated  an  increased  cost  of  the  materials 
actually  used  by  that  company  in  1918  over  what  they  would  have 
cost  in  1914  of  105  per  cent.  And  as  fa^r  as  I  w^as  able  to  ascertain, 
it  was  accurate ;  at  any  rate,  it  indicated  a  very  large  increase.  And 
I  think,  as  I  recall  it,  the  commission  in  its  decision  adopted  that 
figure  and  referred  to  it. 

Is  there  anything  else  on  that  chart? 

Mr.  Welsh.  I  thuik  not. 


! 


116     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Statement  accompanying  Chart  136  is  as  follows : 

Cost  of  materials. 
(Chart  136.— Based  on  U.  S.  census  reports.) 


Ratio  of  cost  of 
material  and 
supplies  to 
operating  ex- 
pense. 


Per  cent  increase 
in  cost  of  ma- 
terials and  sup- 
plies over  prior 
census. 


1917. 
1912. 
1907. 
1902. 


$104,613,415 
75,271,556 
67,025,418 
38,811,232 


Per  cent. 

23.12 
22.61 
26.67 
27.28 


38.9 
13.3 
72.7 


fi  MSEnlSmal^rs' m?"ur«  ^  item  I^-used  three^uart«s  ot  amounts  given  as  representing 
other  Items  than  materials  and  suppllra.  j     „      ^  ot  equipment"  (which  was  not 

in  1912  book.     (1907  book  .fig^ires  differ  )  j^^^^  ^jj^g  j^^nj  ^^s  probably  Included 

SS  miscellaSeous  which  Jf„n™'^f;J"samf  a^tl^^^  no  data  (or  1907  or  1902. 

t  g'ePiS  S!  ^u»- Sa^meS- iK  Ixiept  no  data'tor  1907  or  ,902. 

Detaim  n^ure,  showing  total  rcductionf^for  oltaimng  cost  of  material,  and 


1917. 
1912. 
1907. 
1902. 


Railway 

operating 

expense. 


Total 
deductions. 


$452,694,6.54 
332,896,356 
251,309,252 
142,312,597 


$347,981,239 
257,624,800 
184,283,834 
103,501,364 


Cost  of 

materials  and 

supplies. 


$104,613,415 
75,271,556 
67, 02.'),  418 
38,811,232 


Salaries 

and 
wages. 


$267,240,362 

200,890,939 

150,991,099 

88,210,165 


Purchased 
power. 


1  $37,757,963 

24,690,647 

12,342,258 

3,871,518 


Insurance. 


$3,101,407 
3,151,576 
3,137,071 
2,080,875 


1917. 
1912. 
1907. 
1902. 


Injuries  and 
damages  (three- 
quarters  of  total) 


$17,807,473 

17,530,970 

13,032,229 

7,016,659 


Total  rents 
(tracks,  facili- 
ties and 
equipment). 


Stationery 
and  printing. 


$7,152,823 
4,873,359 
3,342,615 

11,795,766 


» $1,284,000 
1,105,422 

838, 562 
496,381 


Depreciation 

of  ways  and 

structures. 


$6,800,348 
3,705,511 


Depreciation 
of  equipment. 


$8,836,863 
3,670,376 


1  See  notes  for  each  respective  item  on  sheet  accompanying  this. 

Mr  Warren.  The  next  exhibit  which  we  wish  to  introduce,  Mr 
c£nI:::^^oi  which  we  have  not  the  -t-  -P^^^^^^^^^ 
to  supply  the  members  of  the  commission,  I  will  read  ^^^  I^^^J^^^J^^ 
It  is  the  United  States  Department  of  Labor,  Bureau  of  Labor  bta- 
Jistics  mSv  Labor  Review,  volume  8,  No.  6,  page  97,  which  I 
wL  is^^^^^^  familiar  to  one  member  of  your  commission,  be- 
™  I  notice  h^  name  on  it  as  the  commissioner  under  whose  direc- 
ffoTit  was  prepared.  This  table  on  page  97  shows  wholesale  prices 
ii  the  SrC  and  certain  foreign  countries,  and  the  Bureau 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     117 

of  Labor  Statistics  treating  294  commodities  showed  for  March, 
1919  the  fitrure  200.  That  I  should  like  to  consider  as  m  the  case, 
and  we  will  endeavor  to  get  copies  of  that  publication  for  all  the 
members  of  the  commission.      ,    , ,     ^,  .    .  .„  .  ,      .    ,. 

Mr  Pardee  suggests  that  probably  the  commission  will  take  judi- 
cial notice  of  that  publication  anyway,  in  view  of  the  circumstances 

of  its  editorship.  ,  -,  ,      ^    j.^     j.  j 

Now  the  next  chart,  please.  The  next  chart  relates  to  the  taxes  and 
is  marked  for  identification  "  C-122."  .    ^  ^.      ,  ,  . 

Mr  Welsh.  This  chart  shows  the  total  amount  of  direct  taxes  for 
each  of  the  census  years  and  also  the  percentage  of  operating  ex- 
pense which  I  believe  is  in  answer  to  one  of  the  previous  inquiries. 
The  percentage  of  operating  expense  has  run  in  the  neighborhood  of 
10  per  cent,  fluctuating  somewhat  from  this  figure  with  a  very  slight 
decrease  in  1918  as  compared  with  1917.  This  may  be  accounted 
for  by  the  fact  that  while  the  taxes  in  amount  have  actually  in- 
creased in  1918  over  1917,  the  total  operating  expense  has  increased 
in  so  much  greater  proportion  that  the  percentage  of  taxes  com- 
pared to  the  total  operating  expense  is  somewhat  less  that  year.  We 
also  show  a  segregation  of  the  total  taxes  between  the  tax  on  earn- 
ings and  capital  and  the  tax  on  real  and  personal  property.  This 
is  as  shown  in  the  census  report.  .    .     x> 

Mr.  Warren.  And  as  it  appears  in  the  statement  annexed,  m  five 
years  from  1912  to  1917,  total  direct  taxes  went  up  from  about 
$35,000,000  to  $45,756,000  ? 

Mr.  Welsh.  Yes. 

Mr.  Warren.  And  you  have  estimated  them  for  1918  at  $49,- 

496,000? 

Air  AVelsh.  Yes  sir. 

Mr'  Warren.  They  have  gone  up  from  $35,000,000  in  1912  to  $45,- 
750,000  in  1917  and  to  about  $49,500,000  in  1918  ? 

Mr.  Welsh.  Yes. 

Mr.  Warren.  Does  that  total  take  in  any  of  the  indirect  taxes  or 
burdens  in  the  nature  of  paving,  repairing  bridges,  and  that  sort  of 
thing? 

Mr.  Welsh.  It  does  not.    That  is  shown  on  a  later  table, 

Mr.  Warren.  These  are  money  payments  paid  directly  as  taxes? 

Mr.  Welsh.  These  are  moneys  paid  to  the  Federal,  State,  and 
municipal  governments. 

Mr.  Warren.  Wa-s  there  anything  else  on  that  statement? 

Mr.  AVelsh.  No. 

The  statement  accompanying  Chart  No.  122  is  as  follows : 

Taxes  of  electric  railways. 
(Chart  No.  122— based  on  U  S.  census  reports.) 


Item. 

1902 

1907 

1912 

1917 

1918 

Taxes(total) 

$13,078,899 

$19,775,602 

$35,027,965 

$45,756,695 

$491,496 

On  real  and  personal  property 

5,835,542 

7,243,357 

9.19 

9,464,616 
10,310,986 

7.87 

15,658,239 

19,369,726 

10.55 

21,804,619 

23,952,076 

10.11 

On  earnings,  capital  and  other 

Percent  of  operating  expenses 

9.93 

V  S.  census  Table  113,  p.  254, 1912. 


•^amsmsmmeart 


™W 


118     PEOCEBDIHGS  OF  FEDKBAL  ELBCTEIC  RAILWAYS  COMMISSIOK. 

Com„.issioner  Wehi^.  How  «mch  of  the  Jf XtLVafcap^tlrin"- 
able  to  higher  valuations  and  how  much  to  additional  capital  m 

''tirWELSH.  It  would  appear  from  the  chart  as  half-roughly  they 

ni;^vilN"ff  really  would  not  be  so,  would  it,  MrJVel^  ? 

You  have  segregated  it  into  real  '^"^  P™aJ  ^Pf  lo^^^o^^ 
fhp  increase  for  1912  to  1917  is  from  $lo,658,000  to^^i,»^^^^^-    ^^ 
t  tliTnkTharin  those  five  years  the  conipan.^ added  ^n^h^P^^^^ 
eity  to  represent  such  an  inci-ease  as  that?    I  know  in  Massacnuseub 
tiJy  did  not,  because  they  could  not  get  the  money  to  do  it 

Afr  Welsh   That  rate  of  increase  is  apparently  higher  even  tuan 
in  the  ciTof  the  tax  on  earnings,  where  the  increase  was  from 

^^^rC^L'Tnfts  probably  the  explanation,  that  the  rate 
of  taxes  has  gone  up  in  neai-ly  all  the  communities < 

Mr.  Welsh.  I  think  that  is  undoubtedly  true. 

Mr.  Wakrex.  On  real  and  personal  property  I 

Mr  wI^N.^Thas  in  Boston.  In  Boston  the  city  has  had  to  go 
to  th;  eg^iure  both  last  y^vr  and  this  year  to  S^t  the  tax  Imnt 
which  is^permissible  under  the  statute  '''l^'  ^J\**  ^'^g^r^S 
assess  a  higher  percentage  on  property.    The  taxes  have  mcreasca 

''"comm'iiionerWEHLE.  Of  course  the  increase  in  rate  of  tax  cer- 
t.,in?v  would  account  for  part  of  this  increase  in  the  total  amount  ot 
taxi^Iid  but  would  it  not  perhaps  render  this  statement  more  val- 
mibTe^fl;  also  had  accompanying  it  a  statement  of  the  additional 
capital  that  had  been  invested  ? 

Mr  Wamien.  During  that  peiiod  *         .    ,        ,  . •      *        . 

Commitdoner  Wehi^.  Dui^ng  that  period,  and  some  estimates  per- 
haps, if  it  could  not  be  had  in  a  better  way.  than  '^n  estmiate  of  the 
increased  valuation  of  the  property  which  is  being  taxed  It  seems 
to  melhat  the  total  of  the  tax  itself  is  not  of  great  service  to  us  unles. 
it  k  analyzed  in  some  such  way.  , 

Mr  wIrL:n.  Yes,  I  think  that  suggestion  is  a  good  one  and  we 
will  try--Mr.  Welsh  thinks  he  can  furnish  it  and  we  wiU  endeavor 

^'^Novfihe  tax  on  earnings,  capital  ^^<i  «^^^V''"''^fl/;^^^^^^^ 
tween  1912  and  1917.    I  suppose  the  Federal  tax  is  reflected  in  theie 

almost  entirely,  is  it  not? 

Mr.  Welsh.  Yes,  sir.  .    ,  u  /•  j     „„;!  :*  ^« 

Mr  Warren.  1  think  that  the  commission  would  find— and  if  we 
can  get  the  information  we  shall  furnish  it---that  the  local  taxes  or 
tho  St^t«  taxes  on  capital  and  earnings  have  diminished  m  that  five- 
ytr  period.  I  hal^^  to  know  that  is  true  in  Massachusetts,  where 
our  taxation  on  capital  is  largely  a  franchise  tax.  It  is  based  on  he 
market  value  of  the  stock  in  the  aggregate  from  which  is  deducted 
ihJ^slves^te  amount  of  real  and  pei-sonal  property  taxed  m  the  dif- 
fereKmmm^  The  balance  Is  taxed  at  the  State  rate  and  paid 

£ougrtCs^  tax  authorities.  Now  in  those  five  years  the  securi- 
ties of  stock  of  the  street  railways  has  depreciated  to  such  an  extent 
thatTn  almost  no  case,  I  think  probably  not  m  any  case  whatever  ex- 


PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     119 

cept  some  leased  roads,  is  there  any  market  value  left  to  the  stock  suffi- 
cient to  produce  any  margin  between  the  aggregate  market  value  of 
the  stock  and  the  property  taxed  locally ;  and  various  companies 
Avhich  five  years  ago  paid  a  large  franchise  tax  to-day  are  bearing  no 
franchise  tax  because  it  is  based  on  that  market  value  of  the  stock, 
and  the  market  value  has  dropped  to  such  an  extent  that  stocks  which 
five  years  ago  were  sold  in  the  market  at  $100  or  $125  and  in  some 
cases  $150  to-day  are  selling  at  anywhere  from  $20  to  $72  a  share;  and 
of  course  that  drop  has  wiped  out  the  franchise  tax ;  but  m  the  mean- 
time the  Federal  tax  has  come  in  at  an  increased  rate. 

If  that  is  all  on  that  chart,  we  will  pass  to  the  one  marked  for 
identification,  "  C-132." 

That  last  chart  was  based  on  the  census,  was  it  not? 

]VIr.  Welsh.  Yes,  sir. 

Mr.  Warren.  With  the  exception  of  the  last  year,  1918  ? 

Mr.  Welsh.  Yes.  .  ,         ,  o 

Mr.  Warren.  And  that  was  estimated  as  you  have  explained  ? 

Mr.  Welsh.  Yes.  ,        ^       .,  .^9 

Mr.  Warren.  This  chart  is  not  based  on  the  census,  is  it  5 

Mr.  Welsh.  To  some  extent;  it  is  based  partly  on  the  census  and 
partly  in  response  to  an  inquiry  sent  out  to  all  companies  to  obtain 
the  cost  of  their  paving  and  other  imposts,  such  as  free  transportation 
of  employees,  cleaning  and  sprinkling  of  streets,  removal  of  snow 
and  ice  and  various  other  items 

Mr.  Warren.  Strengthening  bridges? 

Mr.  Welsh.  Strengthening  bridges. 

Mr.  Warren.  And  rebuilding  bridges  and  eliminating  crossings? 

Mr.  Welsh.  And  tolls  over  bridges  that  are  free  to  the  general 
public  and  other  imposts  of  a  general  character  that  are  imposed  upon 
electric  railways. 

Mr.  Warren.  When  you  say  free  transportation  of  employees  you 

mean  of  public  emploj^ees  ? 

]\Ir.  Welsh.  Or  municipal  employees.  This  questionnaire  covered 
the  period  from  1912  to  1916,  that  period  having  been  chosen  be- 
cause it  was  believed  to  be  more  typical  than  the  present  time  as 
representing  a  more  normal  situation  before  the  war.  The  result  of 
that  is  shown  in  this  curve  next  to  the  bottom  which  represents  the 
total  amoimt  of  these  various  imposts  in  dollars,  from  which  it  is 
seen  that  during  the  maximum  period  in  1914  they  amounted  to 
about  $22,000,000  or  about  SJ  per  cent  of  the  gross  earnings. 

Sinc^  1914  there  has  been  a  falling  off  in  these  expenditures  con- 
tinuously resulting  because  of  decreased  work  of  this  public  charac- 
ter since  the  war  started. 

This  chart  also  shows  the  direct  taxes  plotted  on  the  previous  chart 
and,  in  this  case,  the  percentage  of  direct  taxes  to  the  gross  earnings. 
From  this  chart  it  appears  that  the  total  imposts  and  taxes  amount 
to  about  10  per  cent ;  6^  per  cent  for  the  direct  taxes  and  about  3J  per 
cent  for  the  indirect. 

Commissioner  Beall.  Would  it  not  be  well  to  bring  out  before  the 
commission  the  fact  that  while  that  is  tlie  average  of  the  companies, 
in  the  bigger  cities  it  is  very  much  more  than  that?  That  is  one  of 
tlie  principal  troubles  of  the  large  companies — the  paving  and  other 
taxes  which  are  imposed,  which  are  very  much  greater  than  in  the 
smaller  communities.    And  I  want  to  ask  you,  does  it  not  run  up  as 


120     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

high  as  10  and  15  per  cent  of  the  gross  in  some  of  the  larger  com- 
panies in  the  big  cities?  .  ,  , 

Mr.  Welsh.  I  think  in  some  of  the  larger  companies  that  will  be 
found  to  be  the  case. 

Commissioner  Beall.  The  reason  I  want  to  make  that  statement 
is  so  the  commission  will  understand  in  some  of  the  small  companies 
the  paving  is  not  such  a  problem  but  in  the  big  companies  it  is  one 
of  the  principal  things  which  has  contributed  to  their  present  con- 
dition. ,  .  t       .  1 

Mr.  Welsh.  That  is  true,  and  of  course  another  thing  which  might 
be  properly  charged  here  is  the  return  on  additional  construction 
which  is  not  contained  here,  this  being  in  every  case  the  actual 
expenditures  of  the  companies.  Of  course,  you  will  underetand  these 
items  are  included  in  operating  expense.  This  is  the  only  additional 
item  from  operating  expense. 

Commissioner  Meeker.  Would  it  be  possible  to  submit  tables  show- 
ing the  paving  costs  and  these  other  imposts  in  railway  companies 
operating  in  large  urban  communities? 

Commissioner  Bealu  I  believe  that  is  very  advisable,  Mr.  Welsh. 
Take  cities  of  say  100,000  and  up. 

Mr.  Welsh.  I  may  say  that  this  is  based  upon  replies  from,  I  be- 
lieve, 214  companies. 

Commissioner  Beall.  Well,  a  great  many  of  those  companies  are 
interurban,  are  they  not?  They  have  practically  no  paving  at  all 
unless  they  also  have  an  urban  system. 

Mr.  Welsh.  Undoubtedly 

Commissioner  Beall.  Biit  a  great  many  of  those  companies  come 
into  big  centers  over  another  company's  lines. 

Mr.  Welsh.  Yes.    We  can  prepare  that,  can  we  not? 
Mr.  Warren.  I  think  we  can  prepare  that. 

Commissioner  Gadsden.  Make  a  table  of  certain  typical  companies 
in  certain  cities. 
Mr.  Welsh.  Yes. 

Commissioner  Beall.  In  making  up  this  chart  on  the  cost  of  pav- 
ing has  there  been  any  attempt  made  to  separate  the  cost  of  comply- 
ing with  the  requirements  of  the  contract  with  the  city  as  to  the  gen- 
eral street  improvement  from  the  cost  of  actually  maintaining  the 
structure  and  right  of  way  in  ways  that  the  railroad  company  would 
have  to  adopt  even  in  the  absence  of  any  such  agreement? 

Mr.  Warren.  I  understand  that  this  inquiry  was  confined  to  the 
paving  cost  which  was  not  incident  to  the  maintenance  of  the  rail- 
way.   Is  not  that  so,  Mr.  Welsh  ? 

Mr.  Welsh.  That  is  true,  and  we  should  and  can  submit  the  form 
of  questionnaire  which  will  show  in  detail  just  the  items  included  in 
this  total  cost  of  the  various  imposts. 

Commissioner  Wehle.  Then  this  curve  on  Chart  132  entitled 
"Paving  and  other  imposts,"  in  so  far  as  it  relates  to  paving, 
is  based  upon  estimates  in  which  the  cost  of  complying  with  that 
part  of  street  construction  which  has  no  reference  to  the  actual  main- 
tenance of  the  railroad  is  separated  from  such  part  of  the  cost  of 
street  construction  and  repair  as  has  reference  to  it  and  as  would 
necessarily  have  to  be  incurred  by  the  road  in  any  event  as  an  operat- 
ing proposition? 

Mr.  AVarren.  I  think  that  is  true  in  the  questionnaire. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     121 

Commissioner  Wehle.  I  wonder  whether — in  connection  with  that 
chart,  C-132 — if  it  is  convenient,  the  form  of  that  questionnaire 

could  be  filed  ?  . 

Mr.  Warren-  Yes;  we  can  file  it. 

Commissioner  Beall.  Why  not  read  it  right  now  ? 

Mr.  Warren.  While  Mr.  Welsh  is  looking  for  that  I  might  say 
that  this  item  properly  is  a  good  deal  larger  than  it  is  shown  here,  at 
least  as  indicated  by  one  of  the  commissioner's  questions. 

Commissioner  Beall.  Yes;  I  know  one  company  that  spent  $4,000,- 

000  in  one  year. 

Mr.  Warren.  Yes ;  you  see  this  includes  a  large  number  of  roads, 
some  of  them  interurban  lines  and  some  rural  roads  where  the  track 
is  not  laid  on  the  highway  but  out  on  the  side  in  the  grass  and  there 
is  no  paving  cost  whatever,  but  yet  the  paving  cost  averaged  over  all 
those  roads  amounts  to  this  amount. 

In  Massachusetts  we  have  a  tax  which  runs  approximately  2J  per 
cent  of  the  gross  receipts  which  is  called,  or  miscalled,  a  commutation 
tax.  It  is  levied  as  an  intended  substitute  for  this  highway  work 
not  incidental  to  taking  care  of  the  track  but  because  of  the  former 
imposition  or  requirement  of  the  law.  In  addition  to  that,  however, 
many  of  the  companies  have  spent  a  great  many  thousands  of  dol- 
lars a  year  on  this  very  same  kind  of  work,  because  the  local  authori- 
ties have  met  a  request  for  a  new  turn-out  or  for  a  shifting  of  tracks 
or  for  some  other  concession  which  the  company  w^anted  for  better 
service,  with  a  suggestion  that  they  would  grant  it  if  the  company 
would  pave  a  certain  piece  of  track  or  change  the  pavement  to  con- 
form to  something  that  the  city  had  been  putting  in.  So  there  is  no 
doubt  that  this  item — in  my  judgment — is  very  much  below  the  actual 
fact.  And  of  course,  as  Mr.  Welsh  said — and  you  will  correct  me  if 
this  is  not  right,  Mr.  Welsh — this  is  merely  the  annual  expenditure  on 
paving  from  year  to  year  and  does  not  include  the  paving  connected 
with  the  construction  of  track  at  all,  does  it? 

JNIr.  Welsh.  As  indicated  here;  yes,  sir. 

Mr.  Warren.  On  the  cost  of  which  the  company,  of  course,  is  pay- 
ing interest.  Years  ago  in  Boston  it  used  to  cost  about  $7,000  a  mile 
for  block  paving  the  track.  I  presume  now  it  costs  much  more.  That 
went  into  the  capital  and  is  one  of  the  reasons  why  the  capital  cost 
of  street  railways  is  so  high  as  compared  with  other  railroads. 

This  is  the  questionnaire  that  was  sent  out:  In  State  taxes — first 
the  kind,  then  the  basis,  then  the  cost  for  the  five  fiscal  yeai*s,  1912  to 
1916,  inclusive,  and  the  total.  City  taxes — franchise,  school,  gross  re- 
ceipts, car,  pole,  wire,  real  property,  cars  for  each  year,  and  the  total. 
Federal  taxes — left  blank  in  the  first  column.  Apparently  they 
thought  it  was  not  safe  to  specify,  because  they  could  not  tell  what 
they  would  be  from  day  to  day. 

Other  State,  county,  or  municipal  requirements — paving;  please 
check  extent  of  requirement;  construction  cost  between  tracks  only; 
blank  feet  outside  tracks,  full  width  of  street;  maintenance  cost; 
maintenance  cost  is  against  those  last  three  items;  cleaning  streets; 
sprinkling;  snow  and  ice  removal  from  surface  other  than  between 
tracks — in  other  words,  the  company  takes  that  as  part  of  its  oper- 
ating expenses — clearing  its  own  tracks — free  municipal  lighting; 
free  transportation,  State,  municipal,  or  Federal  employees;  bridge 
or  viaduct  tolls  or  repairs,  free  to  others ;  special  crossing  policemen ; 

160643"— 20 9 


122     PKOCEEMNGS  OF  FEDEHAL  ELECTRIC  RAILWAYS  COMMISSION. 

.rrosa  eaminc^,  railway  operation  only;  operating  expenses,  excluding 
K-™Sr^iles  operated.  If  company  is  subject  to  any  tax  or 
Sirement  not  listed  Itoveplea^  indicate  below  in  detail. 

I  will  ask  to  have  this  marked     i  iled. 

(The  paper  was  marked  "  Filed.  )        .  ^,  .  , 

Mr  Warren.  Have  you  extra  copies  of  this  f 

Mr  Welsh.  We  can  very  readily  get  them.    I  do  not  think  wc 

'"ilr  mf SeS!'!  'ilfC: this  one  now  before  the  Commission  and 
we  will  furnish  the  others  as  soon  as  we  can  obtain  them, 
irihere  anything  else  that  ought  to  be  called  to  the  attention  of 

the  board  on  that  chart? 

Mr.  Welsh.  I  do  not  think  so. 

The  statement  accompanying  Chart  C-132  is  as  follows: 

raving  and  "  other  imposts  "  and  taxes  for  all  electric  raihcays  of  the  United 
"  States. 

(Chart  C-132-Based  on  replies  from  214  companies  (D.  S.  182)  and  census  reports.) 


1912 


Paving  and  other  imposts. 


Total 

Gross  earnings ■ 

Taxes  of  percent  of  grossearnings. .. . . .  - 

Paving  and  other  imposts,  per  cent  of  gross 
earmngs 


$.'M,027,9<)5 
15,068,414 


1913 


40,086,379 

585,930,517 

5.98 

2.67 


$38,780,938 
21,372,414 


60,153,352 

640,857,949 

6.05 

3.33 


1914 


$41,139,955 
21,536,481 


62,676,436 

617,350,574 

6.36 

3.32 


1915 


$40,761,586 
20,442,519 


61,204,105 

636,719,681 

6.40 

3.21 


Taxes ■ -•• 

Paving  and  other  imposts. 


Total 

Gross  earnings 

Taxes  of  percent  of  grossearnings. •  -  ■- 

Paving  and  other  imposts,  percent  of  grossearnings. 


1916 


1917 


$43,633,934 
18,472,989 


62,106,923 

688,968,612 

6.35 

2.68 


$45, 756, 695 
17,522,593 


1918 


63,279,288 

730,108,040 

6.27 

2.40 


$49,496,334 
16,065,000 


65,561,334 

765,000,000 

6.47 

2.10 


Mr  Warren.  You  spoke  of  the  amount  of  this  paving  and  other 
imposts  falling  off  because  of  the  diminution  in  the  amount  of  public 
3  4ing  dSne.  You  mean  owing  to  the  war  the  municipalities 
themselves  have  been  doing  less  work? 

Mr.  ^rTen^  And  it  is  usually  in  connection  with  their  public 
work  that  this  requirement  increases  ? 

Mr.  Welsh.  Yes,  sir.  .    v  ^ 

Mr  W\rrex.  Now,  if  you  will,  pass  to  the  next  chart. 

The  Chmrm\n.  Will  you  follow  this  with  someone  who  will  tes- 
tify moVftScally  with  regard  to  the  different  forms  of  taxation 
and  the  cost^of  it  and  the  effect  it  has  on  the  stability  of  the  mdustry  ? 

Mr.  Warren.  The  different  forms  more  specifacally  f 

Mr%&'Sr  Yes^we  hope  to  call  an  expert  of  Pretty  wide  reputa- 
tion on  that  subject.  I  might  say  we  are  trying  to  get  these  statistics 
before  tbecor^  as  a^  basis  upon  which  we  can  call  the  experts 

for  the  various  specific  points  like  that.  ,  ^     ^  „    rp,  •     v     .  • 

Now  the  next  chart,  Mr.  Welsh,  is  marked  C-138  Ihis  cliart  is 
marked  "  Economies  in  Operation."    What  does  that  show  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     123 

Mr  Welsh.  We  ha\^  taken  three  measures  of  general  economies 
in  operation,  the  first  being  the  revenue  passengers  per  passenger  car 
based  upon  the  United  States  census  reports.     .      ,  .    ^  . 

There  has  been  a  very  remarkable  increase  m  this  from  the  year 
1902  to  1912.  That  represents  probably  a  number  of  different  things. 
The  thing  that  first  occurs  to  you  is  a  greater  crowd  in  the  cars.  L  n- 
doubtedly  to  some  extent  that  has  taken  place.  The  size  of  the  car 
body  has  also  increased  during  this  period,  making  a  larger  unit  m 
wliich  passengers  are  handled.  To  some  extent  there  has  undoubt- 
edly been  an  increase  in  traffic  at  other  times  during  the  day  to  take 
care  of  this,  so  that  it  represents  in  general  an  mcreased  u^  ot  the 
plant  and  equipment  of  electric-railway  properties  and  therefore  is  m 

the  nature  of  an  economy.  •     .i     u  *.. 

This  is  further  illustrated  in  a  different  way  in  the  bottom  curve, 
which  represents  the  service  performed  by  each  car  and  shows  the 
revenue  car-miles  per  passenger  car  increasing  at  an  approximately 
uniform  rate  from  the  earliest  period  to  1917.  This  in  some  measure 
may  be  accounted  for  by  fitting  the  service  more  accurately  to  the 
traffic  This  would  be  represented  by  an  improvement  in  car  sched- 
ules so  that  each  car  is  able  to  perform  more  effectively  its  service. 
The  introduction  of  such  plans  as  turn-back  service  would  result  m 
a  greater  car  mileage  per  car,  for  example.  And  therefore  this,  we 
believe,  is  indicative  of  an  improvement  in  operating  management 

throughout  this  period.  -^      £ 

The  middle  curve,  representing  the  revenue  car-miles  per  mile  ot 
track  is  possibly  a  measure  of  the  density  of  traffic  and  may  to  some 
extent  show  the  result  of  extensions  in  outer  districts  that  have  oc- 
curred during  this  middle  period  here,  over  which  portions  ot  track 
the  density  of  service  is,  of  course,  less  than  m  the  more  congested 
districts,  this  curve  here  being  practicaUy  uniform  throughout  the 

entire  period.  ,  _.  ijj.ua 

Mr.  Warren.  Summarizing  the  chart  generally,  you  would  say  that 
it  rebutted  the  suggestion  that  the  increase  in  your  expense  of  opera- 
tion was  due  to  extravagant  or  ill-considered  operation,  would  you  i 

Mr.  Wel&h.  Yes,,  sir.  . 

Mr.  Warren.  Because  it  shows  you  are  getting  more  out  of  your 

cars  ?  .   ' 

Mr.  Welsh.  It  shows  an  increased  use  of  plant  and  equipment. 

Mr.  Warren.  That  is  all  on  that,  Mr.  Welsh? 

"NTp  "Wkt  sh     jl  es 

The  statement  accompanying  Chart  138  is  as  follows: 

Economies  in  operation. 
(Accompanying  chart  138.) 


Year. 


1S90..... 
11M)2..... 

1907 

1912..... 

1917 

1918 


Revenue 
car-miles  per 
passenger  car. 


■1 


111,788 
1 18,982 
8  23, 10.5 
8  25,231 
3  26, 776 
« 26,241 


Revenue 
car-miles  per 
mile  of  track. 


Revenue 

passengers 

per  passenger 

car. 


147,172 

*  50, 701 
« 47, 053 
« 46, 796 
•47,726 

*  44, 930 


» 62, 206 
179,187 
» 106, 277 
8  125,332 
8  141,460 
♦142,048 


1  U.  8.  Census  Report,  1902,  p.  6,  Table  1. 

»U.  S.  Census  Report,  1912,  p.  186,  TableS. 

•Advance report,  Table  5. 

*  Estimate  of  capital,  etc.,  1918;  based  on  data  sheet  191,  American  Electric  Railway  Association. 


124     PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr  W^RKEN.  The  next  chart  is  marked  «  C-103,  Income  accounts 

J!    1    tVi^vTilwav.?  "    Now  Mr.  Welsh,  what  does  this  chart  show? 

1  s^'Sthauf/connectb;  wiih  the  chart  you  look  at  the  accom- 

paSnf table's"  you  can  give  the  figures  as  well  as  referring  to  the 

"  M'r'^wl^i^With  this  chart  we  start  at  the  net  operating  revenue, 
wh^ch  waTth;  point  which  we  left  off  in  comparing  the  income  ac- 

*^Tr1vAt\rSt  nS-the  money  which  is  mailable  ait.r  you 
inovP  naid  vour  operating  expenses  for  running  the  road,  does  it  not « 
Mr^wS  Etly.^  It 'represents  the  net  difference  by  deduct^ 
ing  the  operating  expense  from  the  operating  revenue.  This  shows  a 
uniform  increase  in  the  operating  revenue  up  *« J^^  .'„ Jilted^n  the 
i,;  icii 7  thp  rite  of  increase  has  notably  fallen  oflE  as  indicatea  in  ine 
cL,rt  ISre'f from  m7  to  1918  there'has  been  an  actual  decrease  m 

^^Sv^RHBrThltTcrease  is  from  $228,898,000  to  $192,615,000, 

is  it  not  ? 
Mr.  Welsh.  Yes,  sir.  ^,     ^  ui  9 

Mr.  Warren.  As  appears  on  the  table  5 

Mr  WARKKN^F^om  that  operating  revenue  under  the  system  of 

nrlviS^TS:  Ti  ^peSg^enue  is  available  fo^  the  fol- 
lowing items:  The  deductions  from  income-I  should  first  say  for 

^ll^r^r-T^rcrmTo^^fiSlnd  they  are  represented  as  in- 

-f  ird^dSTk^w^^^^^^^^^^ 

point  tl!f  Jf  *^i^^^;;^ho^ever,  that  inasmuch  as  this  is  the  net  operat- 

sources  of  income  ? 

Mr  wrBKK^WhS  are  not  the  result  of  operating  the  railroadi 
^l'  wtr  ^H   The  net  revenue  from  auxiliary  operations  is  shown 
.n't^:i::^r;Jl^^t^^r  in^restmg  to  note  f  at  it^has  through 

p^;inrtr ^h^Mhetfig^^^^^^^  explain  to  the  com- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     125 

mission  just  how  they  should  be  treated  to  reach  your  net  income. 
The  first  item  I  notice  here  is  net  operating  income,  $192,000,000.  Is 
that  before  or  after  the  taxes  have  been  deducted  ?  .0.1 

Mr.  Welsh.  That  is  before  the  taxes  have  been  deducted.  Ihe 
next  operation  is  the  deduction  of  taxes  amounting  to 

Mr.  Warren.  In  other  words,  subtract  $49,000,000  taxes  from 
$192,000,000  operating  revenue? 

Mr.  Welsh.  Yes. 

Mr.  Warren.  The  next  is  to  add  the  net  revenue  from  auxiliary 

operations  ? 
Mr.  Welsh.  Yes. 
Mr.  Warren.  $30,000,000  ? 

Mr.  Welsh.  Yes.  ,  , .       .  i 

Mr.  Warren.  And  then  from  that  result  you  subtract  your  de- 
ductions from  income;  is  that  right? 
Mr.  Welsh.  Before  that  you  also  add  the  nonoperating  income, 

which  is  not  shown  here.  ^.       0 

Mr.  Warren.  You  add  that  as  well  as  the  auxiliary  operations  i 

Mr.  Welsh.  Yes.  ,,.,..  o 

Mr.  Warren.  Then  you  subtract  your  deductions  from  income? 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  Which  is  $180,000,000  ? 

Mr.  Welsh.  Yes.  ,     ,      ,         ,  ,.  -, 

Mr.  Warren.  And  that  consists  of  rentals  for  leased  lines  and, 
principally,  of  interest  on  funded  and  unfunded  debt,  does  it? 

Mr.  AVelsh.  Yes,  sir. 

Mr.  Warren.  And  the  residuum  after  that  subtraction  is  what  is 
available  as  a  dividend  on  the  stock? 

Mr.  Welsh.  It  is  what  is  known  as  net  income  or  loss,  and  that 
item  is  usually  divided  into  either  dividends,  if  it  is  a  net  income, 
and  a  surplus,  or  it  may  be  a  loss. 

Mr.  Warren.  But  if  it  is  not  a  loss,  if  you  have  not  made  a  loss, 
at  that  point  that  is  the  only  fund  available  for  dividends  on  the 

stock? 
Mr.  Welsh.  Yes. 

Mr.  Warren.  And  in  this  case  in  1918  that  amount  was  $20,000,000. 
Mr.  Welsh.  Yes. 

Mr.  Warren.  For  all  the  street  railways  ? 
Mr.  Welsh.  Yes. 
Mr.  Warren.  As  against  $56,000,000  in  1917.    Do  you  know  what 

that  figure  was  in  1916  ? 
Mr.  Welsh.  No,  I  do  not. 
Mr.  Warren.  You  do  not  remember  that  it  was  about  $70,000,000. 

Mr  Welsh  No,  I  do  not. 

Mr.  Warren.  Have  you  anything  that  you  could  check  that  up  by? 

Mr.  Welsh.  We  could  get  it,  but  I  do  not  have  the  figure. 

Mr.  Warren.  Assuming  it  was  $70,000,000,  that  means  in  two 
years  the  net  income  or  the  amount  available  for  dividends  or  for 
surplus  or  reser\^  has  run  down  from  $70,000,000  to  $20,000,000? 

Mr.  Welsh.  Yes. 

Commissioner  Gadsden.  This  net  income  in  1918  of  $20,000,000 
does  not  include  more  than  about  50  per  cent  of  the  labor  increases 
growing  out  of  the  decisions  of  the  War  Labor  Board,  does  it? 

Mr.  Welsh.  I  think  that  is  true ;  yes,  sir. 


126     PKOCEEDmGS  OF  FEDEtlAL  ELECTRI€  RAILWAYS  COMMISSIOIJ, 

Commissioner  G^ujsden.  What  were  those  increases  estimated  at 

for  the  industry  ?         ,  ^^  . 

Mr.  Welsh.  Around  33  per  cent 
eonmiissioner  Gadsden.  In  dollars  and  cents  f 
Mr  WAHRE.N.  About  $100^000,000,  was  it  not? 

^J^^JS^'S^  'onl'  ^ndr^  and  a  hundred  and 
tweX  five  n^l  ion  dollars.  Therefore,  if  the  full  increase  had  boe„ 
tacluied  in  the  1918  report,  there  would  have  been  an  actual  deficit 
instead  of  a  net  income,  would  there  not « 

Mr.  Welsh.  Yes.  c-innnnnnm 

jCr^r  Y?s •To^r^'a  inl"^^^^^^^^^  also  increased. 

SmSo"ner  ilnlT'Thefndustry  would  have  failed  by  some 
$30,000,000  to  meet  its  interest  charges  i 

&S<rner^GAosnKX.  Is  not  that,  in  your  judgment,  what  is 

happening  right  now?     _    . 

Mr.  WtxsH.  I  believe  it  is.  . 

Mr  W  VRUEN.  That  is  what  this  year  is  up  against '. 

Mr.  wllsn.  That  is  what  we  are  up  against  this  year,  based  on 

''*M^' mZ^rAmfis  not  another  element  which  should  make  that 
«tm  worsTi^  so  faral  any  companies  which  had  supplies  on  hand 
^Ihthev  bought  before  the  latest  inci-ease  in  the  cost  of  sup- 
SitheT  are  ftill  putting  those  supplies  in  at  the  lower  prices, 
Uereas  this  year  thev  woufd  have  to  pay  the  high  price? 

M.-V™  Undoubtedly  many  PT  P'^"'"%^r''''fficTwrwe  ^ 
1<)18  on  the  basis  of  contracts  which  were  still  in  effect  and  weie 
undoubtedly  lower  than  anything  they  could  buy  at  this  time^ 

\r  Warken.  I  have  in  mind  one  company  m  Massachusetts  for 
exfmDle  wS  made  a  rail  contract,  1  think  in  1914  and  made  it 
for^ve^  large  quantity  of  rails  on  the  theory  that  the  P"ces  were 
lor  d  ^^'J  '*^6°  V  ,„„„-'i,..„e  been  iust  after  the  war  started.  Ihey 
C?bl^S  thSl^up  t^^^^^^^  this  time.  I  think  they  are  just 
^;  ttinrS  fast  deliveries^  under  that  contract,  and  the  contract 
See  fs  sSing  like  40  or  50  per  cent  below  what  they  would  have 
?o  Danrday  on  the  present  market  price  for  rails  So  that  the 
|loSo%0  Increase  in  wages  is  going  to  be  reflected  also  m  sup- 

^'Sm'mls'otefm         Those  rails  were  for  replacement? 

^  ??omS^^^^  The  scrap,  of  course,  is  more  valuable  than 

'^  Mr!  Warren.  It  was  during  the  war  yes;  and  it  may  be  more  valu- 

nhlP  now  than  it  was  before  the  war.    Is  it,  Mr.  Pardee ? 

'  Mr    Pardfe;\  ;m  not  sure.    I  do  not  think  so.    I  know  scrap 

^""mTwarren.  I  know  one  Maine  street  railway  where  I  am  on  the 
bondho™  committee  and*  we  expected  to  sell  it  for  scrap  and  we 
S  havTJtten  a  very  good  price  for  it  during  the  war.  Unfor- 
fi^^llv  tL  Swas  serving  the  navy  yard  down  at  Kittery,  down 
neaf  PoW^^^  ar^l  the  Gof  emmentU  only  objected  to  our  scrap- 
S  thfimd,  but  we  felt  as  patriotic  citizens  we  should  not,  so  we 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     127 

nroceeded  to  operate  it,  and  the  minute  the  armistice  came  there  was 
no  market  for  the  stuff  at  all.  We  could  have  gotten  quite  a  dividend 
on  our  bonds  if  we  could  have  sold  it  during  the  war. 

Commissioner  Wehle.  Is  there  some  way  by  which  we  could  have, 
in  connection  with  this  chart,  a  statement  of  what  elements  are  de- 
ducted from  the  income?  XI,     •  X      of  ;„ 

Mr  Welsh.  The  census  report  shows  three  items,  the  interest  m 
bonds,  the  rental  of  leased  property,  and  miscellaneous  deductions, 
which'  are  a  very  minor  amount.  . 

Mr.  AVarren.  That  balance  sheet  you  expect  to  get  copies  ot  trom 
the  Census  Department,  do  you  not? 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  They  have  not  come  yet? 

Mr.  Welsh.  No.    *I  expect  them  any  time.  i    ^    j  x     i.    * 

Commissioner  Meeker.  I  notice  that  reference  is  made  to  data  sheet 
No.  186.    What  does  that  refer  to?  ,   ,  ,,     ,^10      i  fi 

Mr.  Welsh.  Here  again,  we  have  estimated  the  1918  values  on  the 
basis  of  the  345  companies. 

Mr.  Warren.  If  there  are  no  further  questions  we  will  pass  to  the 
next.     You  have  nothing  more  to  say  on  that? 

Mr.  Welsh.  No. 

The  statement  accompanying  Chart  103  is  as  follows: 

Income  accounts  of  electric  railtcays. 
(Chart  C-103— Based  on  United  States  census  reports.) 


1902 


Net  operating  revenue 

Roductions  from  income 

Net  incjme 

Taxes 

Ntt  revenue  from  auxiliary  oper- 
ations  


1  $105, 241,420 
164,516,154 
130,596,977 
»  13,078,899 


1907 


1912 


» $155, 755,65.5   »t.217,295,588 

U18,339,114  i<  149,866,307 

4  40,340,286  \    ♦68,139,889 

4  19,755,602  I    4  35,027,965 

t 11,122,951  j    « 17,319,760 


1917 


«$228,898,968 

4  175,305,761 

4  56,450,930 

4  45,756,695 

> 28,331,470 


1918 


8 $192,615,567 

3  180,382,390 

» 20,183,413 

8  49,490,334 

8  30,790,165 


» Data  sheet  No.  186  (estimated). 
<  Advance  report.  Table  5. 


1 U.  S.  census  reports,  1912,  Table  5,  p.  188. 

« Advance  report,  Table  5,  less  advance  report,  Table  162. 

Mr.  Warren.  We  will  pass  to  the  next,  which  is  marked  for  identi- 
fication, "  C-154,  Net  income  of  electric  railways."    Will  you  explain 

what  that  shows  ?  ... 

Mr.  Welsh.  This  takes  up  the  distribution  of  operating  income 
from  the  point  where  it  was  left  on  the  previous  chart,  starting  with 
the  net  income,  and  shows  the  distribution  of  the  net  income  be- 
tween dividends  and  surplus  or  deficit. 

Mr.  Warren.  That  is,  this  is  the  income  available  after  you  have 
paid  interest  and  taxes  and  items  of  that  sort? 

Mr.  Welsh.  Yes ;  this  represents  the  net  income  after  the  interest 
on  bonded  indebtedness  has  been  paid  and  represents  the  amount 
available  for  dividends.  The  rapid  increase  from  1907  to  1912  is 
apparent  and  the  rapid  decrease  from  1912  to  1917  and  the  disas- 
trous decline  in  1918,  from  $56,000,000  to  approximately  $20,000,000, 
is  shown.  At  the  same  time  the  dividend  follows  very  closely  the 
curve  of  net  income  up  to  1912,  falling  off  somewhat  less  rapidly  to 
1917,  due,  however,  apparently  at  the  expense  of  the  surplus,  because 
the  surplus  has  fallen  off  at  a  higher  rate,  which  permitted  somewhat 


t  i 


128     PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

higher  dividends  to  be  paid  in  1917  in  proportion  than  were  paid  in 

^^Mr  Warrex.  But  those  were  paid  at  the  cost  of  the  surplus? 

Mr  Welsh   Of  the  surphis.    In  1918  the  surplus  changed  to  a 
deficii  of  about  $24,000,000.     At  the  same  time  f  i-'dends  were  paid 
This  iDDarentlv  nominally  can  be  explained  by  the  fact  we  are  aeai 
in-  wiU?  a  group  of  companies  and  not  with  one  business,  in  which 
Z  Jeficitomose  companies  operating  at  a  loss  far  exceeded  the  sur- 
t,  us  of  those  companiei  that  were  able  to  declare  some  dividends 
^  Commi  s^^^^^^^^  Meeker.  Would  it  not  be  better  to  segregate  the 

companies  showing  a  deficit  from  those.  -J^Vfcr^/thrcenst  re 
Mr  Welsh.  That  can  be  done,  I  believe.    I  believe  the  census  re 

P  Mihw^^.'The'cSfdoe^  not  make  the  segregation,  does  itt 

Mr  Welsh   It  makes  this  segregation;  it  shows  a  group  of  com- 

par^e^  that  have  a  net  income  and  it  shows  another  group  of  com- 

PX'wL'rYrifmS";  able  to  combine  those  two  to  answer 
Mr.  Meeker's  inquiry  in  that  way. 

SmmSer  Meeker.  If  the  data  as  presented  is  anomolous  as 
Mr  wTlXsavs  it  would  be  very  much  better  to  give  us  refined 
sLiiS  it  ^Ims  to  me.  Statistics  of  a  birth  rate  based  upon  popu- 
lation \ncludTngm^  and  babies  and  old  women  is  not  so  useful  as  a 
latwn  inciua  ng  me  ^         ^^^  child-bearing 

':!Zi  tmen  of  "hilXring  age^  and  the  same  principle  I  should 

^'^'2  t^n't^Zt^l'c^l'^^S^Xo^^^f^,  that  that  same 
•H,l;inn  existed  In  the  prior  census  years,  although  not  aggravated 
ff  he  same  way.  In  otLr  words,  in  1917  when  there  was  a  surplus 
„„,1  diScTs  were  declared,  there  was  a  group  of  «)me  three  hun- 
and  diviaenas  "  ^^  "  .  V         u  jj  ^]^[c\i  operated  at  a  deficit, 

S^^al^lVsffl^on^rs  trTe^  prior  years,\ut  this  represents 
the  situation  of  the  whole  industry. 

The  statement  accompanying  Chart  C-154  is  as  follows: 

v««  income  of  electric  railicavs,  im:luaing  1918  estimate,  of  diviaends  and 
^*^*  *  surplus. 


Capital  stock 

Net  income • 

Dividends ■ 

Surplus • 

Rate  of  return,  per  cent 


1902 


1  $1,967,300, 149 

4  30,696,977 

♦  15,882,110 

« 14,714,867 

•  1.61 


1907 


s  $1,543,269,002 

« 40, 340, 286 

« 26,454,732 

« 13,885,654 

7  1.78 


1912 


»  $1,957,300,149 

« 68, 139, 889 

«  61,650, 117 

»  16,489,772 

»2.64 


1917 


» $2,006,151,013 

»  56, 450, 930 

•48,337,435 

» 8, 113, 495 


»2.49 


1918 


»  $2,237,639,630 
6  20, 18:i,413 
•44,482,218 
•24,298,806 

a 


1  U  8.  censas  report,  1912,  p.  186,  Table  5. 
•  Advance  report,  Table  5. 

:  g"'I.Smur«po«,  1912,  p.  302,  Table  158. 


:  ^^^V^i:  Z^  report.  1912,  p.  223,  Table  58. 
»  Based  on  advance  report,  Table  6. 


Mr  Warren.  Turning  to  your  statement  accompanying  this  chart 
Mr  Welsh,  what  was  the  rate  of  return  on  the  capital  stock  for  the 

'InVErrXStSf"^^^^^^^  obtained  by  applying 

the  divi^e^ds  to  ^^^^  capital  stock  in  each  census  year.    The  rate  of 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      12^ 

return  in  1902  was  1.61  per  cent;  in  1907,  1.78  per  cent;  in  1912,  2.61 
S  cent;  in  1917,  2.49  per  cent;  and  in  1918,  0.9  of  1  per  cent. 
Mr.  Warren.  Less  than  1  per  cent? 

Mr  Welsh.  Less  than  1  per  cent.  tt  -.   i    o^  x 

Commissioner  Wehle.  Is  this  copied   from  the  United   States 

""^ Mr' Welsh.  No;  it  has  not  been-that  is,  that  value  for  the  rate 
of  return  has  been  determined  by  taking  the  dividends  shown  in  the 
TTnited  States  census  and  the  capitalization  shown  in  the  United 
States  census,  and  then  the  rate  of  return  is  based  upon  those  twa 

""Toni^nissioner  Wehle.  So  that  the  capitalization  is  not  based  upon 

any  assumption  of  the  railway  association,  but  that  is  taken  actually 

from  the  census  report? 
Mr.  Welsh.  Yes,  sir. 

Commissioner  Wehle.  Do  you  happen  to  know— - 
Mr  Welsh.  Pardon  me.    That  capitalization  is  the  capital  stock, 

not  the  total  capitalization.    It  is  the  rate  of  return  on  the  capital 

Mr  Warren.  That  seems  to  indicate  that  the  industry  has  not 
been  in  a  prosperous  condition  for  some  time,  Mr.  ^^  elsh ;  does  it  not  i 

Mr.  Welsh.  Yes,  sir.  ,,     ^^     ,         •  i  •    i.- 

Mr  Warren.  And  it  bears  out  what  Mr.  Pardee  said  in  his  open- 
ing statement  to  the  commission,  that  it  has  not  been  prosperous  for 
a  long  time,  and  that  the  war  has  greatly  increased  that  bad  situa- 
tion ? 

Mr.  Welsh.  Yes,  sir.  ,  -3-   -j     j     ^ 

Ui\  Warren.  As  shown  by  your  estimate  of  the  dividends  for 

1918? 

IVIr  Welsh    Yes  sir. 

Mr.  Warren.  Now,  the  next  charts  are  these  in  which  you  have 
divided  the  companies  into  groups,  beginning  with  that  marked 

"  C-126  ? " 

Mr.  Welsh.  I  do  not  have  the  last  chart. 

Mr.  Warren.  Have  vou  any  of  those? 

Mr.  Welsh.  I  have  ISTo.  129. 

Mr  Warren.  Well,  we  will  distribute  these  now.  We  will  take 
up  the  one  marked  "  C-126,"  of  which  you  have  no  large  chart,  Mr. 
Welsh? 

Mr.  Welsh.  Yes,  sir. 

Mr.  Warren.  But  the  commissioners  have  a  small  one. 

Mr.  Welsh.  Yes. 

Mr.  Warren.  Now,  will  you  explain  that? 

Mr.  Welsh.  The  census  reports  divide  the  electric-railway  com- 
panics  into  three  classes,  based  upon  their  operating  revenues.  Clas| 
A  are  those  companies  having  an  annual  operating  revenue  of 
$1,000,000  or  over;  class  B  are  those  companies  having  an  annual 
operating  revenue  of  $250,000  and  up  to  $1,000,000 ;  and  class  C  are 
those  companies  having  a  operating  i^venue  of  $250,000.  This  is 
the  Intel-state  Commerce  Commission  method  of  classification,  and 
the  census  report  show  the  income  accounts  upon  the  same  basis.  In 
addition  to  that,  the  census  reports  also  show  a  separation  of  the 
elevated  and  subway  lines. 


w 


H 


130     PROCEEDINGS  Or  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Wakkk..  How  do  you  mean  ^l-y --[;- ^/,,^^^^  S"ut 

take  the  Boston  E  evated  K«il^^*>/ J^ouid  that  be  class  A« 
^vaY  lines,  and  it  also  has  surface   inesWoumt  ^.^^^  ^^^ 

IVIr.  Wk.-sh.  I  understand  that  »•!  ^levaiea  "^  .r^     gurface 

classified   together,   -"4  \he>r  operat.c^n   dc^s  i^^^^^^  ^^^^ 

""^rr„;;:."  S?iut^  i^  ^^^^fXfour  classiLations,  is  it, 

and  the  elevated  in  Boston,  and  the  co'"Pa».)'       ,        .  ^ 
be  in  the  elevated  and  subway  class,  and  not  in  class  A 

£•  wXN.'^Nt'this  Chart  (M26  shows  the  net  operating  in- 
come of  the  electric  railways  by  cUsses^  ^^^^  ^^^^^  ^^  ^^^^         . 

Mr.  W  EL8H.  i  es,  su  .  .an«^ '"  "1"      u        plotted  on  a  per-mile-of- 
size  of  the  companies  ti^  charte  ha  J^^^  j^^,,,, 

l^SiS  th^  net^vS^^^  *^-  ^-^  ''^-^^^ 

£:  ^^rH^^'iro/;i^;Th^o^^^^^^^  ^^eat.  a— 
of  the  elevated  and  subway  lines  as  cow»Pa'ea^ '"  ^  ^^^  ^^ 

and  class  C,  in  all  the  census  years,  'sapparen^     1 1^  .^  ^^^ 

falling  off  in  the  net  operat^n^  ^TtSh  this  is  more  apparent  in 
three  classes  from  1912  to  1^1/,'  ^^^-^  ^nd  in  class  A  than  it  is 
^rothL't;:  w£  rtletXt'tCf  operating  revenue  per 
lllilfoftrckMsbeenabout^c^^^^^^^^^^^^ 

Mr.  Warren.  Have  you  anv  explication  ^^^^^  ^^^^  ^^^  ^^^^ 

SXyt^nS-ay,  oT^^'yS"  ^-bt  tg^  that  it  do^es  af- 
fect the  other  companies,  eompanies  are  apt  to  operate  in 
the^i™in- imaK^^^^  the^iding  is  more  uniform- 
Mr  Welsh.  Throughout  the  day. 
Mr  Wakkex.  Throughout  the  day? 

Mr.  wirEx'' And'that,  of  course,  reduces  their  operating  ex- 
pense  very  largely  ? 

class  C  which  you  say  has  net  earnings  of  what  < 

in  the  net  operating  revenue  between  1902  and  1917. 
Mr  Welsh.  Yes,  sir ;  a  slight  increase. 
Commissioner  Gadsden.  What  is  class  A I 


PEOCEEDtNGS  OF  FEDERAL  ELECTEIC  RAILWAYS  COMMISSION.     181 

Mr  Welsh.  Class  A  are  companies  having  an  operating  revenue  in 
excess  of  $1,000,000. 

Commissioner  Gadsden.  And  class  ±5 « 

Mr  Welsh.  From  $250,000  to  $1,000,000. 

Mr!  Warren.  You  have  not  figured  the  percentage  of  those  earn- 
ings,  have  you,  Mr.  Welsh  ? 

Sir.  Welsh.  In  what  way?  ^      .u    aa* 

Mr.  Warren.  The  per  cent  of  mcrease  and  decrease  tor  the  dit- 
ferent  census  periods. 

Mr.  Welsh.  No;  we  have  not.  ...  ^.  n 

Mr  Warren.  I  think  it  would  be  interesting  if  you  could  figure 
the  per  cent  of  decrease  on  that  class  A  from  1912  to  1917— that  is, 
the  large  city  companies  I  do  not  mean  now. 

The  figures  on  the  statement  accompanying  Chart  126  are  as  fol- 
lows: 

Net  operaHng  revenue  per  mile  of  track  by  classes  of  electric  railways. 
(Chart  126.— Based  on  United  States  census  reports.) 


Elevated 

and 
subway. 


1902. 
1907. 
1912. 
1917. 


$42,879 
53,727 
51,485 


Class  A. 


Class  B. 


$9,025 
8,036 
8,592 
7,893 


$3,408 
3,053 
3,420 
3,461 


Class  C. 


$1,443 
1,712 
1,835 
1,877 


Noxr  —All  above  figures  were  taken  directly  from  1012  census  table  No.  120,  p.  258, 
with  eaceptiL  of  those  duplicated  below,  together  with  figures  used  in  calculating  same 
and  source  of  figures  used 


Subway  and  elevated. 


Class  A. 
Class  B. 
Class  C. 


Year. 


1907 
1912 
1917 
1917 
1917 
1917 


Net  operating 
revenue. 


Miles  of  track. 


(90)  $18,745,029 
(90)28,625,860 
(90)36,867,482 

(85)205,743,098 
(85)35,507,354 
(85)  15,979,986 


(153)  437. 16 

(153)532.80 

(153)716.08 

(53)  26,065 

(53)10,259 

(53)8,512 


Net 

operating 

revenue 

per  mile 

of  track. 


$42,879^ 

53, 727 

51,485 

7,893 

3,461 

1,877 


XOTE.— Figures  in  parentheses  shown  above  are  census  table  numbers  giving  sourco  of 
information,  taken  from  the  1917  advance  sheets,  the  numbers  corresponding  to  similar 
numbers  of  1912  census. 

Mr.  Warren.  Now,  the  next  chart,  which  is  a  large  one. 

Mr.  Welsh.  No.  129  is  the  next. 

Mr.  AVarren.  You  have  not  a  large  chart  on  129,  either,  have  youf 

Mr.  Welsh.  No. 

Mr.  Warren.  That  shows  the  net  income  of  electric  railways  by 
classes  per  mile  of  track,  the  previous  one  having  shown  the  net 
operating  revenue.     This  is  the  same  classification,  is  it  not? 

Mr.  Welsh.  This  is  the  same  classification,  and  takes  up  the  next 
income  account.  It  shows  a  greater  falling  off  in  comparing  19 IT 
with  1912  for  all  classes  of  electric-railway  property. 

Mr.  Warren.  Bearing  out  the  general  result  on  tlie  figures  that 
you  put  in  earlier  on  the  income  ? 


132     PEOOEEDINGS.  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

SSone^MWtKR.  These  classes,  A,  B   and  C,  are  the  same 
clasps  n  and  C,  as  appear  in  the  previous  chart? 
Mr  AVarken.  The  same  classes. 
S^.Sner"fc=  cC  A  includes  those  lines  with  net  oper- 

■^^i^  '^K^L^  ^ofSterSfiSvenues. 

SnmSe;  Mp.kkbk.  f  otal  operating  revenues? 

Mr   Welsh.  Total  operating  re^enues. 

a'c^SiTrA^'Xri  -k  one  question  there  with  reference  to 
Chart  No.  126?  ,     *    .  |^|    |^  ^j^^  ^et  operating 

,.  ™  oS^sX-i^  n  £tSr?aSa?s^s  so  much  higher  tha. 

^^tlr^illir^T^^^^^^^^^ 

the  density  of  traffic  on  t^«  ^'^^jf  ,7;',\.  "«'nd  tL  n^^  of  ear- 

that  on  the  surface  lines,  the  number  «*  cais  ^^^^  ^^^^^^^  ^^ 

miles  operated  per  mile  of  track     and  seco      y,  ^^  ^^^^ 

passengei.  carried  perj^r^^^^^  F^^^^^^i  per  mile  of  track  is 

surface  lines.    9°"^ P^'^'^^he  s  irf ace  lines.    The  necessary  sequence 
very  much  greater  than  on  the  «  ^tace  nne  difference.       ^ 

is  that  that  should  be  so,  f^^*  ^here  shouw  oe  ^^^ 

The  Chairman.  Does  it  not  also  >"««««  jj     ^  ,3'^  furnished 
manding  quicker  transportation  than  that  ^nicn 

j    J:  wr„EN.  There  is  a  greater  volmne  of  traffic.  ^^^ 

■  '■   Mr.  Welsh,  in  that  first  *^l^''»^tvCM2C    ^appears  tua        ^^ 

t::^L  SaiT^cTLe  n:?  J^^^.  is  tU  right? 

Sr  W^E-N.^That  means,  after  paying  their  operating  expenses. 
they  earned  over  $50,000  a  mile? 

jyay  lines.  ..ndprstand  the  chart,  -which  appears  to 

I  '.    Gen.  Tripp.  I  do  not  q»>t«;3^^^^^  on  elevated  and  subway 

show  that  the  net  XT^^P^^^^^^^    ^if.tthe  chart,  is  holding  rea- 
hnes,  as  shown  by  tne  "^*y  "i7_._,„  „  slight  decrease, 
sonably  steady  for  the  year  IWT-only  a  sag  ^^  ^^^^^ 

I  am  a  director  in  Ae  Interborough  Kapid.  ira  ^^^  ^^ 

York,  which  operates  the  subways  and  the  elevatea  ^^^^ 

tcrborough  Rapid  Transit  Co.,  a  year  »§"'  "    J^  ,      ^o-dav  it  is  not 
a  year  a|o,  gai^  20  per  cent  dividends  onjssock^l^^^^^^^^  ^^^^ 

earning  its  lixed  charges,    therefore,  1  do  noiq  ^^^^^^^^  ^^^^ 

situation  as  set  out  by  these  charts    Feiha^s^i^^^  commission 

charts,  but  I  felt  tl^at  perhaps  tjie  g^nUemen  ^.^^  ^^^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      133 

are  in  a  still  more  critical  condition  than  the  subways  and  elevated 
in  New  York  city. 

Mr.  Warren.  How  is  that,  Mr.  Welsh? 

Mr.  Welsh.  Well,  we  have  no  figures  for  anything  moi^  recent 
than  that  given  by  the  census  report. 

Mr.  WAr.REN.  that  is  1917  ? 

Mr.  Welsh.  1917 ;  yes,  sir.  i    xi       ^i,       i       i 

Mr.  Warren.  Now,  do  you  happen  to  know  whether  there  has  been 
a  marked  change  in  the  elevated  and  subway  net  operations? 

Mr.  Welsh.  Utidoubtedly  there  has  been;  yes,  sir;  but  we  have  no 

figures  on  it. 

Mr.  Warren.  You  have  not  the  figures? 

Mr.  AVelsh.  No,  sir.  ,      .      ,  tt^^^  a 

Commissioner  Gadsden.  Well,  do  those  charts  show  any  1917  tig- 

ures . 

Mr.  Welsh.  It  only  shows  as  far  as  1917.    I  have  nothing  on  1918. 

Mr.  Warren.  Would  it  be  possible,  Mr.  Welsh,  for  you  to  get  the 
1918  figures  now  for  some  of  those  subway  and  elevated  lines  ? 

Mr.  Welsh.  I  presume  we  could  get  them ;  yes,  sir.    We  have  made 

no  attempt  to  get  them.  ,  .  ,    .  ^  ,         n  .    j 

Mr.  Warren.  If  we  could  get  them,  I  think  it  would  be  well  to  do 

so,  and  add  them  to  the  charts  which  we  have  filed. 
The  Brooklyn  Rapid  Transit  has  elevated  lines  also? 

A^fr  Welsh.  Yes  sir. 

Mr.  Warren.  As  a  matter  of  fact,  that  is  one  of  the  companies  that 
is  in  the  receiver's  hands  at  the  present  time;  is  it  not? 

IVTr  AVelsh    Y^es   sir. 

Commissioner  Gadsden.  Mr.  Warren,  I  would  suggest  that  it  would 
help  the  commission  to  take  up  one  or  more  of  those  large  properties 
and  have  somebody  fully  conversant  with  their  affairs  come  here  and 
tell  us  about  them,  as  an  illustration  of  what  these  charts  mean.  You 
might  get  someone  here  from  the  Brooklyn  Rapid  Transit  or  Inter- 
borough. 

"VTp   AVarren    Y^es. 

Commissioner  Gadsden.  And  let  him  testify  from  his  own  knowl- 
edge of  the  difficulties  of  the  industry. 

Mr.  AVarren.  AVe  expect  to  call  the  receivers  of  some  of  those  roads 
to  address  the  commission  on  their  condition.  Of  course,  it  is  a  fact, 
an  unfortunate  fact,  in  presenting  the  case,  and  it  is  still  a  more  un- 
fortunate fact  for  the  industry  itself,  that  every  year  and  every 
month,  and  every  week,  in  fact,  that  is  passing  over  our  heads,  is 
making  this  situation  very  much  more  desperate  than  we  can  possibly 
show  from  any  figures  for  any  past  period  of  time.  Gen.  Tripp's 
question  illustrates  that.  In  1917,  apparently,  if  our  chart  is  cor- 
rect, and  I  believe  it  to  be  right 

Mr.  AVelsh.  I  have  a  photostatic  advance  copy  here  to  check  it 
with. 

Mr.  AVarren.  You  have? 

Mr.  AA^elsh.  Yes,  sir. 

Mr.  AVarren.  And  if  our  chart  is  right,  it  shows  that^  these  sub- 
way and  elevated  lines  were  earning  a  net  income  in  1917.  Now,  as 
a  result  of  what  has  happened  since  1917,  one  of  the  largest  of  them, 
that  in  Brooklyn,  has  had  to  go  into  the  receiver's  hands,  and  one 


!t 


134     PBOCEEDINGS  OF  FEDEEAL  ELECTEIC  RA11.WAYS  COMMTSSIOK. 

•    M  „  v^rt  ha<5  had  to  default  on  some  of  its  bonds.    The  Boston 
ITnfiThS'gX'trd  sleddin,  an^^^^^^^^^^ 

derstand,  is  in  a  more  or  «^/^^-/Sf  all  ofihe  surface  cJ- 
of  those  companies,  but  it  is  true  oi  iied.ii.y  » 

^'tWs'sioner  Wkhi^.  How  many  companies  are  inclnded  in  that 
'' mT  WaL^.  It  is  a  census  report.  These  charts  that  we  are  now 
putting  in- —  ,„^„.  «„*  Ww  manv  companies  are  covered  in 
eoSon  S  the^XatandTlevated  part^f  Charts  C-1-2.  and 

'f  V-:'l'c:n  Z  =  l^^S^f^  not  sure  that  the 

^Tr^^«^!Xr:eventhe^^^^^^^^^ 

for  the  year  191J  are  J'^^'^'^^^^^f^S  to  emble  ns  to  make  up 
through  the  courtesy  of  the  V«'^S5,^fVrone  of  the  difficulties  of  the 
these  figtu-es  as  well  as  we  «>«l<i-    ^  'it  isone  ot  tne  „  ^  ^^^. 

sHuation    which^ue  -^-^at^o  tXtpast^j^ar,  and  the.con^ 

uZnTXng^ng  sTSclly  ^r  the  worst  that  a  past  year  is  of 

that  have  ^fZ^^tlii^'Zl^^rl^'^-^^^^^^^  -  -  --»  «1- 
railways.    1  do  not  tj»nk  there  are      y  .^  j^^.^^ 

vated  system  m  S>?f  ^^»^Jl''"*  Lw  York,  and  Philadelphia.    For 
ttZa^yoTSi^t^rAd^C^^^^^^^^^^   I  do  not  know  of  any 

«r;^  rht-e\li%-^.S  l^rTK  a^  seven  company 

in  1917,  classified  as  elevated  and  subway. 
Commissioner  Beall.  How  many  i 
Mr.  Welsh.  Seven.  , 

F^^^SSEr5r^»?"^  -are 
..^;Z:^TonnnhlxSZ^r^^A'i^^  one  in  Sioux  City.    They 

'X'mr^.' You'do  n?t  suppose  they  count  the  Manhattan  Ele- 

vaS-asoneandthe^EapidTra^^^^^^^^ 
Commissioner  15eall.  i  >>.is  spL<i«^*"^,  " 
W  W.nn..   T«o^n  New  York  anyhow.       ^^^^  ^^^^ 

^']iSfc''Tt^' -  the  so-called  McAdoo  tubes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     135 

Mr.  Warren.  I  think  that  is  classed  as  a  steam  road. 
Commissioner  Beall.  I  think  it  is.  ,        •  , 

Mr.  Warren.  It  was  taken  over  by  the  Government  when  it  took 

over  the  roads. 

The  figures  on  the  statement  accompanying  Chart   129,  are  as 
follows : 

Net  income  per  mile  of  track  by  classes  of  electric  railways. 

[Based  on  U.  S.  census  reports.] 
NET  INCOME  PER  MILE  OF  TRACK. 


Elevated  and  subway . 

Class  A 

Class  B 

ClassC 


1902 


S2,575 

1,134 

364 


1907 


$12,969 

1,780 

858 

520 


1912 


$17,326 

2,508 

1,132 

373 


i9i; 


$16,843 

1,821 

646 

277 


NET  INCOME. 1 


Elevated  and  subway. 

Class  A 

ClassB 

ClassC 


$21,666,551 
5,566,046 
3,364,380 


$5,669,738 

27,707,790 

7,207,076 

5,425,420 


$9,231,122 

53,442,502 

10,927,455 

3,769,932 


$12,060,843 

47, 466, 872 

6,623,496 

2,360,562 


MILES  OF  TRACK.* 


Elevated  and  subway . 

Class  A 

ClussB 

ClassC 


8,514.31 
4, 909. 88 
9, 252. 80 


437.16 

15,564.34 

8,396.00 

10,443.22 


532.80 

21,305.99 

9, 652. 09 

10, 106. 74 


716.08 

26,064.85 

10,258.75 

8,511.77 


» Tables  53  and  153, 1917  and  1912. 


»  Table  85, 1912  and  1917  census. 

Mr.  Warren.  That  concludes  the  charts  which  we  have  ready  for 
to-day,  Mr.  Chairman. 

The  Chairman.  Are  you  prepared  to  go  ahead  with  another  wit- 
ness ? 

Mr.  Warren.  Yes,  sir ;  I  would  like  to  call  Mr.  Clark. 

STATEMENT  OF  ME.  WILLIAM  J.  CLARK. 

Mr.  Warren.  Your  full  name,  Mr.  Clark  ? 

Mr.  Clark.  William  J.  Clark. 

Mr.  Warren.  You  are  connected  with  the  General  Electric  Co.  ? 

Mr.  Clark.  The  General  Electric  Co. 

Mr.  Warren.  And  you  have  been  for  how  long  ? 

Mr.  Clark.  Thirty-two  years. 

Mr.  Warren.  And  that  company,  I  suppose  it  is  unnecessary  to 
say,  has  been  very  closely  identified  with  the  development  of  the 
electric  transportation  ai*t? 

Mr.  Clark.  It  has. 

Mr.  Warren.  Will  you  state  to  the  commission  your  experience 
in  connection  with  electric  transportation  preparatory  to  going  ahead 
and  making  a  statement  to  them  about  the  development  of  the  art  ? 

Mr.  Clark.  To  begin  with,  my  first  practical  knowledge  of  elec- 
tricity— not  in  an  engineering  way — began  as  far  back  as  1876,  as  a 


136     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

boy,  throiiffh  William  Wallace,  the  pioneer  of  arc  lighting  and  the 
man  who  produced  the  first  modern  electric  motor.  However,  my 
first  active  participation  in  the  electric  or  street-railway  business 
was  with  my  associate,  the  late  H.  Holden  Wood,  in  securing  a  char- 
ter from  the  Connecticut  Legislature  for  what  was  the  first  electric 
street  railway  in  the  world— a  very  small  affair,  connecting  the  docks 
at  Derby  with  the  mills  at  Ansonia  and  what  is  now  known  as  West 
Derby.    It  was  at  that  time  known  as  Birmingham. 

In 'that  connection  I  became  intimate  with  Van  Depoele,  one  of 
the  earlier  producers  of  electric-railway  inventions,  and  the  manage- 
ment of  the  concern  at  Chicago  which  owned  these  inventions  of  his, 
and  it  was  in  a  bad  financial  way.  ,         ,    ,  i. 

At  the  urgent  request  of  Mr.  Van  Depoele  and  the  management 
of  the  company,  which  controlled  these  patents,  I  undertook  to  in 
some  way  raise  capital,  so  that  they  could  go  ahead  and  develop 
the  industry  under  those  patents.  That  resulted  finally  in  my  sell- 
ing the  same  to  the  Thomson-Houston  Electric  Co.,  one  of  the  prede- 
cessor interests  of  the  General  Electric  Co.,  and  ultimately,  in  my 
going  with  them  and  taking  charge  of  their  electric-railway  develop- 
ment in  the  field.  ,  .,  ,  .  j.  •* 
That  proposition  involved  more  detail  than  is  apparent  on  its 
face,  because  the  first  task  which  I  performed  was  the  purchase  of  a 
railway  where  thev  could  demonstrate  their  new  system. 

For  quite  a  number  of  years  I  averaged  over  70,000  miles  a  year 
travelintr  on  American  railways  in  connection  with  this  electric- 
railway  ^'development,  having  crossed  the  continent  some  14  times 
in  one  year,  during  all  of  which,  of  course,  I  was  obliged  to  familiar- 
ize myself  with  the  financial  and  operating  conditions  involved  m 
connection  with  the  entire  industry. 

I  am  afraid,  gentlemen,  as  I  have  had  no  chance  for  preparation, 
nor  to  talk  with  counsel,  I  might  get  into  things  that  are  not  rele- 
vant  and  I  hope  you  will  not  hestitate  to  so  inform  me,  if  I  do. 

Now,  the  history  of  the  street-railway  business  is  briefly  this: 
As  you  may  know,  as  early  as  1838,  there  was  one  experiment  on  the 
Baltimore  &  Ohio  Railway  right  out  here.  I  think  there  were 
scattered  experiments  throughout  the  world.  There  were  two  or 
three  more  in  this  country,  up  until  about  1879,  when  Siemenes  began 
his  experiments  at  Berlin,  and  immediately  after  followed  by  Mr. 
Edison's  famous  road  at  Menlo  Park,  experimental. 

For  the  next  seven  or  eight  years,  and  during  that  time,  there  were 
quite  a  number,  say  some  12  or  15.  I  could  give  you  the  list  if  I  had 
my  memoranda  here.  They  were  roads  of  different  character  con- 
structed in  this  country,  growing  in  size  and  importance,  when  the 
industry  was  given  a  tremendous  impetus  by  the  electrification  of 
new  lines  at  Richmond,  Va.,  by  my  good  friend,  Mr.  Sprague,  who, 
I  understand,  is  to  testify  here  to-morrow. 

Now,  digressing  for  a  moment,  as  I  see  the  situation  in  a  practical 
way,  it  was  the  development  of  three  things  of  an  engineering 
character  which  gave  the  tremendous  impetus  to  the  adoption  of 
electric  railways  which  began  early  in  1888.  I  think  it  was  February 
12,  1888,  that  the  Richmond  installation  started.  They  were  these 
things:  What  was  known  as  the  Sprague  motor  suspension,  the 
very  same  practice  as  is  followed  everywhere  on  street-cars  to-day ; 
the  carbon  commutator  brush,  which  is  used  on  motors  universally 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     137 

the  world  over  to-day,  which  created  a  great  saving;  and  what  was 
known   as   the   pivoting  underrunning  trolley.     Those   three   im- 
portant inventions,  developed  at  about  this  same  time,  were  incor- 
porated by  Sprague  in  his  development  at  Richmond.    The  Thomson- 
Houston  Co.  immediately  thereafter  proceeded  to  do  the  same  thing. 

Now,  perhaps,  I  had  better  continue  along  this  line,  although  I 
should  like  to  say  something  about  the  economics  of  the  street-rail- 
way situation  prior  to  electricity  coming  into  the  field. 

We  thought — we  in  the  industry — that  when  these  inventions  had 
l>een  produced  we  had  solved  the  great  problem;  in  other  words, 
that  a  car  equipment  produced  would  be  good  for  20  years;  that  a 
generator  or  dynamo  would  be  good  for  20  years;  tracks,  especially 
as  in  most  of  the  electric-railway  construction  the  best  of  engineer- 
ing advice  was  secured  from  others,  would  last  a  good  many  years. 
But  experience  demonstrated  otherwise ;  and  perhaps  I  can  not  better 
illustrate  it  specifically  than  to  refer  to  this  little  road  of  mine  in 
Connecticut. 

We  retained  the  man  who  was  then  the  chief  engineer  of  the 
Baltimore  &  Ohio  Railroad  to  advise  us  on  this  roadbed  construction 
especially.  We  laid  it  with  a  45-pound  rail.  Before  1896  it  had 
been  relaid  three  times,  and  heaven  only  knows  how  many  times 

since. 

We  will  turn  now  to  the  car  equipment  and  the  car  bodies.  Dur- 
ing this  same  period  it  was  found  necessary  to  change  the  car  bodies 
three  times  and  the  motors  were  changed  five  times,  as  well  as  the 
bn lance  of  the  car  equipment. 

These  same  things  occurred  in  connection  with  power  station.  We 
supposed  that  we  had  constructed  something  that  was  going  to  last 
for  a  great  many  years.  By  1896  the  third  power  station  had  been 
built  to  operate  that  system. 

I  am  citing  these  facts,  gentlemen,  to  try  to  make  clear  to  you 
that  to  better  serve  the  public  and  meet  its  demands,  the  losses  of 
depreciation  through  obsolescence  have  been  almost  beyond  estimate, 
in  connection  with  all  of  the  electric-railway  systems  of  importance, 
other  than  those  built  since,  we  will  say,  1896  or  1897. 

To  speak  plainly,  gentlemen — I  known  the  accusation  has  been 
made — there  is  far  less  water  in  the  capitalization  of  the  street 
railways  than  is  generally  supposed.  There  is  some,  but  what  now 
may  seem  excessive  capitalization  has  been  created  to  a  greater 
extent  through  this  continual  change,  change  and  change,  through 
advancement  in  the  art  to  better  meet  the  requirements  of  the  public 
in  the  way  of  service. 

Now,  turning  back,  electricity  did  not  bring  about  a  manipulation 
of  finance  into  the  electric-railway  field.  It  began  long  before  that, 
as  I  could  trace  for  you  if  I  had  certain  data,  which  I  will  have  here 
to-morrow.  A  very  large  part  of  what  may  be  considered  over- 
capitalization to-day  can  be  traced  back  to  those  periods. 

In  the  horse-railway  days  there  were  certain  contracting  concerns 
who  used  to  do  this  thing  in  a  sort  of  a  way.  They  disappeared,  al- 
most all  of  them,  with  the  advent  of  electricity.  They  were  the  fel- 
lows who  built  track  with  a  20  or  25  pound  rail.  As  long  as  they  had 
something  to  run  cars  over,  on  which  to  sell  securities,  bonds  espe- 
cially, they  were  contented. 

160643°— 20 10 


138     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

That,  as  I  »iid,  was  more  common  in  the  days  before  the  advent  of 
electricity  than  afterwards.  .      ,     ,  -^  r 

Now,  ^oing  on  with  this  question  of  the  seemnigly  large  capitaliza- 
tion, let  me  tell  you  how  much  of  that  was  brought  about— and  I  want 
to  siiy  this,  gentlemen,  that  I  personally  have  never,  directly  or  in- 
directly, participated  in  putting  a  dollar  of  water  mto  any  street  rail- 
way or  any  other  public-utility  property.  If  I  may  so  put  it,  there  is 
an  infatuation  about  doing  things  electrically.  It  seems  to  inspire 
people  with  a  public  spirit,  and  through  all  of  this  development  there 
has  been  this  tendency  to  go  fully  up  to  meet  the  public  demands,  and 
incidentally  to  give  the  public  advantages  beyond  what  they  had 

hoped  for.  .  i  •    i-.i.i    t         i  •  i 

Once  more  returning  to  my  own  experience  on  this  little  line  whicli 
we  built— that  was  the  nucleus  of  that  tremendous  system  which  now 
radiates  over  practically  the  whole  State  of  Connecticut.  AVe— that 
is,  I  mean  my  immediate  associates  and  myself— felt  that  we  had  con- 
ferred a  great  blessing  upon  the  public  where  we  operated.  We  ex- 
tended it'somewhat  before  we  sold  it.  We  made  no  profit  out  of  it. 
We  were  glad  to  get  out  alive.  We  lost  nothing  but  our  interests,  but 
owin<T  to  what  I  have  said,  and  I  hope  to  have  the  figures  here  to- 
morrow, we  sold  it,  if  I  i-ecollect  aright,  Mr.  Morgan,  about  189G  or 

1807 

Mr.  Morgan.  I  think  so. 

Mr.  Clark.  I  mean  that  property  up  in  Connecticut. 

Now,  Mr.  Morgan  and  his  associates  believed  that  they  could  afford 
to  pay  us  what  was  seemingly  a  large  price  for  that  property,  be- 
cause,' by  extending  it  as  they  did,  they  could  earn  a  larger  return. 
They  went  ahead,  and  as  I  said  before,  it  was  the  nucleus  of  their 
great  Connecticut  railway  and  lighting  property,  which  has  con- 
ferred a  great  many  benefits  on  that  little  State,  more  of  them  than 
you  can  estimate.  Now,  I  hope  that  they  have  made  some  money  out 
of  it  in  selling  out  that  property.  They  well  deserved  to;  but,  gentle- 
men, it  was  only  a  small  fraction  of  the  benefits  which  I  know  of— be- 
cause I  Htill  consider  myself-  a  Connecticut  man— which  it  conferred 
on  that  entire  State,  in  every  manner,  way,  shape,  and  form,  as  it  has 
elsewhere. 

Now,  in  continuing  that  illustration,  the  New  York,  New  Haven 
&  Hartford  interests,  as  you  know,  thought  that  they  could  buy  Mr. 
Morgan's  interests  and  those  of  his  associates  in  the  property,  and 
that  by  adding  on,  they  could  earn  a  return  upon  it.  They  were  not 
so  successful.  But  in  carrymg  this  illustration  into  almost  every 
community,  in  this  country \ve  find  the  same  thing.  It  is  not  the 
water  that  has  been  put  in,  you  understand.  It  is  upon  this  deprecia- 
tion through  obsolescence,  and  this  increasing  through  combinations, 
facilities,  in  the  belief  that  the  ones  holding  the  properties  will  be 
paid  a  large  price — ^}^ou  can  call  that  water  if  you  want  to,  but  the  in- 
tentions were  good,  and  the  public  derived  terrific  benefits  from  that 

Now,  gentlemen,  I  fear  that  I  have  rambled  greatly  and  have  not 
heon  very  i^levant  in  my  remarks. 

Are  there  any  questions  that  any  of  you  gentlemen  wish  to  ask  me? 
I  will  be  glad  to  answer  them  if  I  can. 

Commissioner  Gadsden.  Mr.  Clark,  are  you  familiar  with  the  re- 
port of  the  Connecticut  Commission  recently  on  those  properties? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     139- 

Mr.  Clark.  I  am  not,  I  am  sorry  to  say.  I  hav j  been  very  busy  for 
Uncle  Sam  for  nearly  two  years. 

Commissioner  Gadsden.  You  do  know  that  there  was  a  committee 
appointed 

Mr.  Clark.  Oh,  yes. 

Commissioner  Gadsden  (continuing).  To  investigate  those  prop- 
erties ? 

Mr.  Clark.  Yes. 

Commissioner  Gadsden.  Do  you  happen  to  know  that  they  re- 
ported that  every  mile  of  electric  railway  in  Connecticut,  except  12, 
was  bankrupt? 

Ml',  Clark.  Well,  I  am  not  surprised.    I  had  word  to  that  effect. 

Commissioner  Gadsden.  And  Uiere  is  over  1,000  miles  in  that 

State  ? 

Mr.  Clark.  Yes,  sir,  and  I  believe  Connecticut  to  be  enormously 
benefited. 

Commissioner  Gadsden.  That  is  the  same  proj^erty  that  you  have 
been  giving  us  the  history  of  ? 

Mr.  Clark.  Yes ;  my  little  baby  was  tlie  nucleus  of  it. 

The  Chairman.  You  have  grown  up  with  the  electric-railway  in- 
dustry.   What  is  the  future  ? 

Mr.  Clark.  I  wish  that  I  knew.  I  believe  tliat  if  temporary  relief 
is  afforded  them,  it  is  going  to  survive  and  continue  on  and  be  a 
great  public  blessing. 

Now,  in  addition  to  all  that  has  been  shown  you  to-day — ^and  more 
of  the  same  character  will  doubtless  be  presented  to  you — as  I  see 
it,  the  sti-eet-railway  industry  is  suffering  from  another  cause,  most 
acutely,  and  while  this  cause  is  going  to  be  continued,  I  think  you 
will  find,  looking  back  over  the  past  history,  a  situation  somewhat 
analogous  as  regards  the  effect  of  the  electric  railways  on  the  local 
traffic  on  steam  railroads.  I  mean  the  effect  of  the  cheap  auto — not 
of  the  jitney  per  se — ^but  the  cheap  auto — which  means  really,  as  near 
as  I  can  estimate  it,  after  a  good  deal  of  study,  the  loss  of  anywhere— 
an  average  loss,  we  will  say,  of  from  three  to  five  fares  a  day,  be- 
cause the  man  who  owns  the  cheap  auto  not  only  goes  back  and  forth 
himself,  to  and  from  his  employment,  but  carries  one  or  two  of  his 
neighbors.  Now,  the  effect  of  that  has  been  very,  very  acute,  as  you 
know,  during  the  last  few  yeai"s.  The  cheap  auto  is  going  to  con- 
tinue. There  is  no  mistake  about  that,  and  yet  I  think  ultimately 
you  will  find,  as  I  remarked  a  moment  ago,  that  in  time  the  travel 
which  is  now  taken  that  way  will  come  back  to  the  street  railways, 
just  the  same  as  the  travel  which  tlie  street  railways  took  from  the 
steam  i-ailroads  locally  has  come  back,  to  a  great  extent,  to  the  steam 
railroads. 

The  Chairman.  Is  there  any  evidence  of  that? 

Mr.  Clark.  No  ;  I  can  not  say  that  there  is  as  yet.  I  am  simply 
judging  by  past  experience  in  the  other  direction.  Well,  if  I  may 
qualify  my  remark — yes,  I  think  there  is,  as  shown  in  the  dropping 
off  of  jitney  traffic  in  certain  localities,  where  apparently  it  is  not 
as  popular  as  it  was.  At  the  outset,  everybody  wished  to  ride  in  an 
auto.    Now,  I  think  that  has  changed  very  materially. 

Commissioner  Gadsden.  Mr.  Clark,  don't  you  think  the  parking 
problem  is  going  to  bring  about  a  change  in  the  use  of  automobiles  ? 


140     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Clark.  I  do.  

Commissioner  Gadsden.  The  inability  to  park  cars  downtown. 
Mr.  Clark.  Yes,  sir ;  and  congestion  on  your  streets. 
Commissioner  Gadsden.  In  some  cities  they  are  now  stopping  them 

from  parking,  are  they  not?  ,  •*      «?    +     t 

Mr  Clark.  Yes ;  and  I  think  that  is  going  to  have  its  effect.  1 
think  you  will  have  a  great  deal  of  restriction  placed  on  the  use  of 
the  automobile.  ,  ,   .  . ,  ^ 

Commissioner  Beall.  When  you  say  that  you  can  not  foresee  the 
future  of  the  electric-railway  industry,  is  it  true  that  the  average 
street  railway  is  giving  practically  as  good  service  with  as  good 
equipment,  and  has  put  in,  in  the  past,  all  the  improvements  known 
to  the  art,  yet  the  trouble  is  due  to  various  reasons?  They  simply  are 
not  allowed  to  charge  a  proper  return.  There  is  nothing  else  to 
replace  it,  is  there? 

Mr.  Clark.  No.  , 

Commissioner  Beall.  When  you  say  that  you  can  not  foresee  the 
future,  I  just  wanted  to  get  it  into  the  record  that  you  do  not 
mean  to  say  that  their  situation  is  due  to  the  methods  they  have 
pursued,  and  that  there  is  a  better  and  cheaper  method  of  doing  it. 

Mr.  Clark.  No.  .nix 

Commissioner  Beall.  But  simply  that  they  are  not  allowed  to  earn 

enough  to  enable  them  to  live? 

Mr.  Clark.  Yes;  that  is  it  exactly.  . 

I  will  tell  you  two  stories,  if  you  will  permit  my  digression,  which 

I  think  are  apropos.  ,  •  ^    xv  •    •   j     *^„ 

As  I  remarked  earlier  in  my  testimony,  I  came  into  this  industry 
through  the  selling  to  the  Thomson-Houston  Co.  the  Van  Depoele 
railway  patents.  This  deal  was  consummated  on  Washingt^s 
Birthday  of  1888,  at  Boston.  It  being  a  holiday,  Mr  C.  A  Coffin, 
the  man  who  has  really  made  the  General  Electric  Co.,  and  is  its 
chairman  to-day,  took  more  time  than  usual  at  the  luncheon  table, 
and  he  turned  on  me  with  this  statement,  "  Clark,  I  never  would  have 
made  that  deal  which  I  did  make  with  you  this  morning,  if  I  did  not 
consider  the  possibilities  of  electric  lighting  exhausted  to-day.  Now, 
you  can  hardly  grasp  that  to-day,  but  there  were  grounds  for  his 
making  the  statement. 

Mr  Warren.  That  was  in  1888? 

Mr  Clark.  That  was  on  Washington's  Birthday,  1888. 
The  country  was  filled  with  series  of  arc-light ing  stations,  which 
meant  very  little  in  the  way  of  investment.  That  was  the  erecting 
of  a  central  station,  with  new  machines,  and  the  hanging  of  some 
wire  in  the  air  and  putting  out  some  arc  lamps.  The  possibility  of 
direct  current  low-tension  was  appreciated,  but  you  could  not  go 
great  distances  with  that,  probably  only  in  the  hearts  of  the  large 
cities.  The  alternating  current  had  not  come  along,  feo,  seemingly, 
he  had  good  grounds  for  making  that  statement. 

The  next  is  somewhat  akin  to  that.  -r  j 

In  that  depressed  condition  of  1896— that  awful  summer— I  caused 
a  careful  survey  of  the  activities  of  all  of  the  street  railways  m  the 
United  States  to  be  made,  delegating  our  own  men,  and  taking  men 
from  student  courses,  young  engineers,  supply  salesmen,  and  had  an 
actual  canvass  or  census  made  of  all  of  their  conditions. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     141 

The  net  result  I  was  able  to  get  together  in  August.     I  summar- 
ized it  on  a  half  sheet  before  I  sent  it  over  to  Mr   -— •  ^^fhere 

was  a  hurry  call  for  me  to  come  to  his  office  immediately  ^^/^^^^ 
cot  there,  he  was  pacing  up  and  down  the  floor,  and  he  said,  Clark 
I  can't  see  how  we  are  going  to  do  business."  You  gentlemen  will 
remember  that  that  was  a  very  dull  time,  along  about  August,  189b. 
"  You  show  that  90  per  cent  of  all  of  the  street  railways  ot  the 
United  States  are  alreadv  electrified.  Now,  look  at  those  two  big 
factories  at  Schenectady.     How  are  we  going  to  keep  them  gomg^ 

I  told  him  the  first  story  that  I  have  just  given  you.  He  thought 
for  a  moment,  and  then  he  burst  into  laughter,  and  he  said,     I  guess 

you  are  right."  ,        ,       ,     .   .        .,  •         •    ^ 

Now,  I  believe  most  thoroughly  that  the  electric  railway  is  going 
on,  and  not  only  in  its  present  form  upon  your  streets  and  other  local 
transportation  lines,  but  my  view  is  that  in  my  remaining  years  in 
this  industry,  I  will  see  the  electrification  of  steam  railroads.  I  have 
no  doubt  that,  when  conditions  are  adjusted  properly  in  this  country, 
that  form  of  electrification  is  going  to  come  like  a  whirlwind. 

Mr.  Warren.  Mr.  Clark,  you  spoke  about  obsolescence  and  the 
earlier  costs  of  equipment.  Do  you  remember  what  the  electric  equip- 
ment of  a  car  used  to  cost  in  the  early  nineties  around  1890  or  1888| 

Mr.  Clark.  I  hope  the  Lord  will  forgive  me  for  doing  it,  but  i 
sold  many  of  them  for  $4,500. 

Mr.  Warren.  I  think  you  did.  I  think  you  sold  some  of  my 
clients  up  there.  Lately,  before  the  war  began,  what  would  a  better 
equipment,  much  better  equipment,  have  cost? 

Mr  Cl\rk.  Well,  there  was  a  period  when  it  went  down— better 
equipment  than  that— when  we  sold  it  for  a  thousand  dollars,  during 
the  very  low  period  of  prices,  and  I  should  say  that  something  com- 
parable, before  the  war,  sold  for  about  $1,100  or  $1,200. 

Mr  Warren.  All  of  the  companies  which  were  organized  m  the 
earlier  years,  and  which  care  to  publish  the  early  benefit  of  this  im- 
proved traction  system,  bought  their  equipment  at  those  prices,  rang- 
ing from  $3,500  to  $4,500  per  car? 

Mr.  Clark.  Oh,  yes.  ,     -x-      x    u    •    * 

Mr.  Warren.  And,  of  course,  that  was  a  legitimate  basis  for  capi- 
talization at  that  time  ? 

Mr.  Clark.  It  surely  was.  ^         -r         « x     i      » 

Mr  Warren.  And  yet  for  equipment  to-day— I  say  to-day,  as- 
suming that  prewar  prices  were  still  in  effect— the  same  equipment, 
but  a  better  quality  or  better  character— better  suited  for  the  busi- 
ness of  to-day— it  would  be  figued  at  a  thousand  dollars  or  eleven 

hundred  ? 

Mr.  Clark.  Yes ;  about  that. 

Mr.  Warren.  And  that,  in  your  opinion,  accounts  for  a  great  deal 
of  the  so-called  over-capitalization  of  trolley  lines  ? 

Mr.  Clark.  Yes;  it  does.  i.  .i     ^i  •        xi,  wi 

Mr.  Warren.  And  that  is  merely  one  type  of  the  things  that  those 
pioneer  companies  purchased,  is  it  not? 

Mr  Clark.  One  type.  You  might  carry  that  illustration  fur- 
ther, in  connection  with  their  sources  of  current  supply  at  stations. 
If  I'le  gentleman  will  pardon  me,  we  began  with  dynamos  of  80- 
horsepower  capacity  to  operate  the  electric  railways.  There  were 
very  many  electric  engineers,  when  it  was  suggested  that  we  build 


142     PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

one  of  about  000  horsepower,  who  shook  thoir  heads,  saying  that  it 
would  not  l>e  feasible.  However,  this  was  successfully  done,  but 
there  were  other  street-railway  engineers  who  still  considered  it  im- 
practicable; and  if  I  recollect  right,  after  that  period,  there  was  a 
station  built  in  Cincinnati  where  there  were  sonie  80  of  these  little 
machines  put  in,  and  tlie  extent  of  the  building  to  put  them  m  was 
something  tremendous,  you  understand. 
Now,  all  of  this  has  no  direct  bearing,  and  yet  it  does  serve  some 

of  of  these  points.  , 

I  have  heard  some  curious  discussions  among  some  of  the  celebratecl 
cn<rineers.  I  referred  earlier  in  my  testimony  to  the  development  or 
the  carbon  commutator  brush.  I  might  state  that  the  copper  brushes 
used  befoi-e  used  to  cut  these  to  pieces— the  most  important  and  ex- 
i>ensive  part  of  the  machine— within  a  few  days.  But  the  carbon,  as 
vou  know,  m  a  good  preventive  of  that,  and  hence  its  great  advantage. 
i  heard  Prof.  Elihu  Townsend  tell  Mr.  Van  Depoele,  who  invented 
the  carbon  commutator  brush,  that  it  could  never  be  a  commercial 
success,  because  of  the  resistance  it  would  bring,  and  some  people 
were  furnislied  motors  witli  copper  brushes  for  a  little  while  after 

thtit,  as  a  result.  ,  .      ,     ,  i      ^    i       i 

Remember,  gentlemen,  that  this  deal  was  uncharteil  when  we 
started  off,  both  electric  lighting  and  electric  railway,  and  while  the 
evolution  was  rapid,  there  was  much  of  it— very,  very  many  changes. 
One  of  the  features  after  this  period  that  I  refer  to  of  the  thi'ee 
weat  inventions— no  one-Sprague,  or  any  of  the  rest  of  them  who 
were  in  the  field  during  any  of  those  days— had  a  satisfactory  con- 
troller. That  was  something  that  was  always  giving  out.  In  tliat 
connection,  I  heard  Prof.  Thompson  tell  Mr.  Potter  that  the  magnet 
which  was  invented  to  prevent  the  blowing  out  could  never  be  a  suc- 
cess That  did  not  come  along  until  about  1892,  or  perhaps  the  early 
l)ait  of  1801.  Now  that,  in  itself,  meant  the  change  of  the  control- 
ling apparatus  on  every  electric  car  then  in  operation. 

Mr.  Wauren,  Still,  that  change  was  justified  for  the  serviced 

^Ir.  Claiuv.  Certainly,  as  many,  many  others.  _ 

I  started  in  to  tell  you  about  the  power  stations,  and  1  might  go 

through  with  that.  ,  i.         i  •  i 

After  we  proceeded  to  build  the  big  dynamos,  for  which  we  must 
cive  very  much  credit  to  our  Westinghouse  friends  and  to  >\  ilham 
Stanley,*  now  dead,  the  utilization  of  alternating  current  for  trans- 
mission purposes,  and  then  inserting  a  substation,  so  that  you  could 
extend  vour  line,  was  another  great  step  forward.  In  those  days 
especially,  as  vou  may  know,  the  cost  of  that  apparatus  was  terrih- 
callv  hiffh:  and  I  might  say  in  that  connection,  as  I  have  stated  about 
the  $4,500  per  car  equipment,  the  profits  were  not  so  very  large,  either. 
Expenses  for  engineering  and  engineering  blunders  were  very  enor- 
mous in  both  cases.  ,  /»   -^  ,  i 

Commissioner  Sweet.  Mr.  Clark,  have  you  definitely  made  up  your 
mind  as  to  what  the  remedy  for  this  situation  is,  or  the  remedies, 

perhaps? 

Mr.  Clark.  I  have  not,  definitely. 

Commissioner  Sweet.  I  did  not  understand  you, 

Mr.  Clark.  I  say  I  have  not,  definitely,  . 

C/ommissioner  Sweet.  Of  course,  in  some  way  or  other,  the  income 
of  the  electric-railway  companies  must  be  increased,  or  their  ex- 
penses diminished,  must  they  not,  in  order  to  live  ? 


n 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     143 

Mr.  Clark.  They  must  be.  ,      ,  ^  i      i         •     v    ^i 

Commissioner  Sweet.  Perhaps  something  should  be  done  in  both 

directions. 

Mr.  Clark.  Exactly.  . 

Commissioner  Sweet.  Do  you  take  into  account,  m  connection  with 
this  whole  question,  the  fact  that  the  purchasing  power  of  a  nickel 
has  been  very  much  reduced  in  the  last  few  years? 

Mr.  Clark.  That  is  the  whole  story— not  the  whole  story,  but  a 
very  good  share  of  the  story,  of  course. 

Commissioner  Sweet.  The  people  generally  throughout  the  coun- 
try have  a  sort  of  traditional  idea  that  they  ought  to  get  a  ride  on  a 
street-car  for  a  nickel,  have  they  not? 

Mr.  Clark.  That  is  it.  .,,.-,  .  i      • 

Commissioner  Sweet.  And  yet  the  nickel  of  the  present  day  is  not 
the  nickel  of  even  five  years  ago. 

Mr.  Clark.  Oh,  no ;  it  is  only  about  half  of  it. . 

Commissioner  Sweet.  To  satisfy  the  people  in  the  country— the 
general  public— that  they  ought  to  pay  more  for  the  service  they  are 
petting,  don't  you  think  it  would  be  necessary  for  the  electric-railway 
companies  to  lay  their  cards  down  on  the  table,  practically,  and  show 
the  public  what  is  being  done  ?  ,  .  ^ 

Mr.  CL.VRK.  Surely  I  do;  and  I  think  they  have,  in  a  great  many 
cases;  and  the  more  thoroughly  that  is  done  the  better,  unquestion- 

ablv 

C/ommissioner  Sweet.  Of  course  you  understand  that  this  comm^- 

sion  is  very  anxious  to  render  a  real  service  in  solving  this  very  difli- 
cult  problem. 

Mr.  Clark.  I  appreciate  that  fully.         .  ,       •  ^ 

Commisfsioner  Sweet.  And  we  want  all  the  advice  and  assistance  in 
the  way  of  acquiring  facts  and  ideas  and  suggestions  that  we  can 
possibly  get.  I  suppose  it  would  be  natural  for  the  general  public 
to  say,  "  Can^t  the  railroad  companies  do  something  by  way  of  econ- 
omy to  cut  down  their  expenses? " 

Mr.  Clark.  Exactly.  ^ 

Commissioner  Sweet.  One  question  that  might  be  asked— one  ques- 
tion that  comes  into  my  mind  there— is  whether  the  alternating  cur- 
rent tliat  you  have  spoken  of  can  be  used  on  street-cars,  or  must  it  be 
transformed  into  direct  current  ?     Is  that  feasible  ? 

Mr.  Clark.  That  has  not  been  done  yet,  in  an  economical  way.  It 
can  be  done.  It  has  been  tried,  you  know,  but  it  is  not  nearly  as 
economical  as  the  direct  current.  j.       j.    nr 

Commissioner  Beall.  Well,  it  has  been  a  failure,  has  it  not,  Mr. 
Clark,  commercially,  on  every  road  that  has  ever  tried  it?  They 
have  always  lost  money  in  comparison  with  other  systems. 

Mr.  Clark.  Well,  as  our  people  have  no  advocated  that,  you  will 
pardon  me  for  not  answering  that  question. 

Commissioner  Sweet.  You  say  you  have  advocated  it? 

Mr.  Clark.  We  have  not. 

Commissioner  Sweet.  Oh !  There  are  probably  practical  reasons 
why  the  direct-current  motor  is  the  best  for  street-car  service? 

Mr.  Clark.  So  far  as  we  know  to-day. 

Commissioner  Sweet.  Is  the  element  of  reversal  one  that  enters 
into  the  problem? 

Mr.  Clark.  Oh,  yes. 


f 


144     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  They  have  not  succeeded  in  making  an  alter- 
nating motor  that  can  be  reversed? 

Mr.  Clark.  Oh,  yes;  it  can  be  done. 

Commissioner  Sweet.  It  can  be  done? 

Mr.  Clark.  It  can  be  done. 

Commissioner  Sweet.  Then,  what  is  the  objection  to  it? 

Mr.  Clark.  The  greater  expense  of  maintenance.  The  mainte- 
nance is  very,  very  much  higher. 

Mr.  Warren.  The  maintenance  of  the  motor? 

:Mr.  Clark.  Yes ;  the  whole  equipment. 

Commissioner  Beall.  They  do  not  pick  up,  either,  do  they?  You 
can  not  start  them?     It  takes  more  current f 

Mr.  Clark.  Yes,  it  takes  more  current  to  start  them,  but  the  great 
feature  is  the  maintenance,  and,  of  course,  you  have  more  than  the 
item  per  se.  For  instance,  if  you  have  a  hundred,  care  on  the  system, 
and  you  are  averaging  1  per  cent  out  of  commission,  you  understand, 
that  is  very  small,  but  if  you  have  10  or  15  per  cent  out  of  commission, 
you  see  the  expense  is  cast  on  that  item,  as  well  as  in  the  maintenance 

^^Commissioner  Sweet.  Then,  it  is  your  opinion  that  the  direct 
motor  is  less  likely  to  get  out  of  order  ?     ^      ,      ,        ^  ^    ^   , 

Mr.  Clark.  Oh,  yes,  unquestionably.     That  has  been  demonstrated. 

Commissioner  Sweet.  What  about  the  original  cost? 

Mr.  Clark.  The  direct  current  is  lower. 

Commissioner  Sweet.  So  that,  on  the  whole,  you  do  not  see  how 
anvthing  can  be  particularly  saved  by  a  change  in  that  direction? 

Mr.  Clark.  Oh,  no.  Of  course,  this  is  true,  that  as  long  as  your 
labor  item  is  the  great  big  one  in  your  operating  expense,  there  is  not 
verv  much  room  to  cut  down  otherwise.  Now,  your  current  costs  are 
small,  relatively.  Of  course,  it  is  entirely  possible.  I  have  ceased 
saying  that  anything  is  impossible.    I  have  seen  such  wonderful 

things  come.  ,^,  tx--        nx^- 

AVe  will  say,  for  instance,  Mr.  Ford  may  revolutionize  all  traction 
on  street  railways,  as  he  has  said  he  is  going  to  do.  I  don't  think 
he  will  be  able  to  do  it,  but  it  may  come  along  and  better  our  present 
form  of  electrification;  but,  as  I  remarked  a  moment  ago,  so  long  as 
you  have  to  have  platform  wages,  you  understand,  and  switchmen 
and  men  in  the  car-barn,  you  have  not  great  ways  to  go  in  the  way 

of  economy.  ,  .  i        u  nc 

Mr  AVarren.  Mr.  Clark,  right  at  that  pomtj  you  spoke  of  Mr. 
Ford  Do  you,  as  an  engineer,  think  that  a  carrier  on  tires  through 
the  highway  can  ever  be  as  satisfactory  economically  as  a  carrier  on 

rails  * 

:Mr.  Clark.  Well,  don't  designate  me  as  an  engineer.  I  am  only 
a  hedgerow  engineer.    I  am  a  plain  everyday  business  man. 

Mr.  Warren.  Well,  from  your  experience,  which  has  covered  a 
long  period,  do  you  think  it  can  ? 

Mr.  Clark.  xVs  a  wholesale  transportation  proposition,  something 
equivalent  in  transportation  facilities  to  that  given  by  the  street 

railway,  no.  .  ^         ,,  ..  ^  • 

Mr.  Warren.  Mr.  Ford's  suggestion,  as  I  recall  it,  was  to  equip 

an  automobile  car  which  would  run  on  rails,  was  it  not? 

]Mr.  Clark.  Yes.  ,  .      .     ^         o 

Mr.  Warren.  It  was  not  to  run  a  large  jitney,  for  instance? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     145 

Mr  Clark.  Oh,  that  was  not  his  idea,  but  if  you  will  let  me  finish  my 
answer,  of  course  it  does  appeal  to  the  average  person,  if  they  can  be 
nkked  up  at  their  own  curbstone,  you  understand,  and  delivered  at 
Ihe  curbstone  where  they  wish  to  go;  but  in  my  OP}?^^^^^' ^^.^^^  ^^^^ 
vphicle  nropelled  by  any  power,  not  operating  on  rails,  you  can  not 
care  for^l^^^^^^^^  requirements  of  the  American  public. 

^^  Commissfont  Iweet.  Don't  you  think,  Mr.  Clark,  that  if  it  should 
result  from  this  investigation  that  we  are  making  that  a  recommenda- 
tion be  made  for  higher  fares-an  increase  m  the  rates  ^harged  the 
general  public-that  we  ought  to  be  able  to  satisfy  the  public  that  we 
have  investigated  all  possible  economies  from  the  side  of  the  railioad 
companies? 

Mr.  Clark.  Surely.  .  ^    ,       ^i  •  i.    •  i 

Commissioner  Sweet.  And  that  we  are  satisfied  nothing  material 

can  be  done  in  that  direction  before  our  recommendation  would  have 

very  much  weight  with  the  general  public. 

Mr.  Clark.  Certainly  it  should,  gentlemen.  ,,    ,  .       ^^,^   .^ 

Commissioner  Beall.  Is  it  not  true,  Mr.  Clark,  that  for   say,  10 

vears,  there  has  not  been  any  great  new  invention  of  importance  of 

the  ak  of  electric-railway  equipment  for  propulsion  that  will  save 

any  great  amount  of  money,  although  there  has  been  in  electric 

lighting  and  power? 

Mr.  Clark.  That  is  true.  . 

Commissioner  Beall.  And  there  has  not  been  any  great  improve- 

ment  in  the  street-railway  business? 

cLmm^sloAer  Beall.  You  have  increased  the  size  of  the  car,  and 
you  have  used  more  power? 

Mr.  Clark.  Yes.  ,  ,  .  ,  . 

Commissioner  Beall.  But  there  has  been  no  great  improvement  m 
10  years,  that  is,  that  you  can  see  at  the  moment? 

Mr.  Clark.  No;  nothing  radical.  Of  course,  you  have  the  one- 
man  car  and  minor  improvements,  but  there  has  been  nothing  great  in 
connection  with  the  art,  like  in  .electric  lighting. 

Commissoner  Beall.  No  ;  electric  lighting  and  power  has  gone  for- 
ward with  great  strides. 

Mr.  Clark.  Yes;  certainly.  .„  ,     ,         ^ 

Commissioner  Sweet.  Mr.  Clark,  vou  will  be  here  to-morrow,  so 

that  is  we  wish  to  ask  you  anything  further  we  can « 

Mr.  Clark.  I  surely  will.  ,  ,    i  ^  ^^«« 

The  Chairman.  We  will  suspend  until  10  o'clock  to-morrow  morn- 

"'Tw&  at  5  o'clock  p.  m    the  further  hearing  ^  this  case 

was  adjourned  until  to-morrow,  Wednesday,  July  16,  1919,  at  10 
o'clock  a.  m.).  _^^_^^^ 

Washington,  D.  C,  July  16,  1919, 
The  commission  met  at  10  o'clock  a.  m.,  pursuant  to  adjournment 

""^A^S.^ Charles  E.  Elmquist  (chairman),  Edwin  F.  Swe^l^  (vice 
chairman).  Royal  Meeker,  C.  W.  Beall,  D.  B.  Wehle,  and  Philip  H. 
Gadsden,  commissioners. 
Appearances:  As  heretofore  noted. 


n 


146     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOST. 

Proceedings. 
The  Chairman.  You  may  proceed  whenever  you  are  ready,  Mi. 

^MrWABRBV    I  will  ask  Gen.  Tripp  to  take  the  stand. 

The  CHriRMix.  Mr.  Clark  was  on  t'he  stand  at  the  time  of  adjouin- 

"'Air'wvRS  Yes.  If  the  conunission  wiU  permit  us,  I  sho,nd 
likl^'to  defer  the  completion  of  Mr.  Clark^  testimony  He  wan^ 
some  fiLnu-es  which  have  not  yet  arrived,  and  Gen.  Tripp  is  heie  ana 
k  verv^inxious  to  get  away,  as  he  has  some  other  engagements. 

It  ^A^.3.t  An'd'wVhave  two  or  three  other  witnesses  in  the 
same  situation. 

STATEMENT  OF  GEN.  G.  E.  TEIPP. 

Mr  Warrex.  Your  full  name  is? 

S;^V^HHE  A?d  yoSre  chairman  of  the  board  of  the  Weeing- 
house  Electric  Co.? 

it-A^rR^K/G^f  Tripp,  you  have  had,  I  b«j}«-;. -^  «^^^^^^^^ 
ence  and  acquaintance  with  street  railways  and  electric  rail^aysf 

Mi"^v"rE  Jwili"  ou  kindly  state  to  the  commission  what  that 

-}-rT^S'Sr«S;^S&t  railways  began  as  early  as 
18W  at  Xh  tfme  I  was  in  the  employ  of  the  Thomson-Houston 
Flertrtc  Co  and  was  assigned  to  the  contract  for  the  equipment  of 
£e  West  End'su-eet  Kail  way  of  Boston  -ith  electrical^^^^^^^^^^^ 

Mr   AVarben.  That  was  one  of  the  first  of  the  larger  systems . 

Gen  Thu^  That  was  one  of  Ae  first  of  the  larger  systems. 

FoUowhig  that,  I  ^as  an  officer,  as  auditor  and  tff  "^^r- °*  f !; 
eral  street  i-ailwa;  systems  throughout  the  United  States,  notably  at 
T^wrence  and  Brockton,  Mass.,  and  AUentown,  i^a-  _ 

I  then  became  connected  with  Stone  &  Webster,  anfJ°'-„-bo^Vn 
ve'nV managed  several  of  their  street-railway  properties.    The  inan- 
'a^rs  at  Sle   Wash.;  Dallas,  Tex.;  Fort  ^Vorth,  Tex.;  and  Gal- 

^t^lso^duVTtti?  ,tiod,  acted  as  expert  on  behalf  of  Stone  & 
Webster'  in  various  examinations  of  street-railway  systems  and  re- 
organi.ations  of  sti^^^^^^^^  Co.,  and  in  that 

capacity  diJeSd'he^licy  of  the  various  street-railway  properties 

^°Du;t'£t;:riod  I  w^^tr-^^^^  of  the  West  Penn  Railways,  a 
BvS  oiie r  ting  ai^und  Pfttsburgh,  Pa.  I  was  president  of  the 
A^eSn  L  ght  &  Power  Co.  of  Colorado,  which  was  owned  by 
Wesi^hose  Church,  Kerr  &  Co.,  of  which  I  was  also  K^^'den*- 

T  was  and  am  a  director  in  the  Interborough  Rapid  1  rans.t  Co^ 
«f  xZ  York  C  tv,  and  the  Interlwrough  Metropolitan  Co.  of  New 
Yoi  City  and  I  was  until  about  two  and  a  half  or  three  years  ago, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     147 

a  director  in  tke  New  Yoi-k  Railways  Co.,  which  operates  a  large 
])ortion  of  the  surface  lines  in  Xew  York  City. 

Mr.  Warren.  Now,  Gen.  Tripp,  with  that  experience,  which  ap- 
parently has  been  continuous,  will  you  tell  the  commission  what  the 
tendency  in  the  street-railway  industry  has  been  during  the  last  tew 
years— say,  since  the  outbreak  of  the  European  war  m  1914  i 

Gen.  Tripp,  It  is  more  than  a  tendency.  It  has  been  a  rapid 
progress  toward  bankruptcy. 

Mr.  AVarren.  And  what  has  been  the  cause  of  that— or  causes/ 

(^en.  Tripp.  The  principal  cause—and  all  other  causes  are  minor 
in  importance— was  tlie  decreased  purchasing  power  of  the  dollar. 

Mr.  Warren.  And  as  regards  this  particular  industry,  w4iy  could 
not  that  be  met  bj;  an  increased  price  for  the  commodity  sold  by  tlie 
companies,  the  price  of  transportation  ? 

Gen.  Tripp.  Because  the  fares  had  been  fixed  either  by  franchise 
requiiements  or  by  popular  impression  that  such  a  fare  was  standard 

forever  at  5  cents.  ,    ,        ,         ^^    j.  *. 

Mr.  WARia^N.  And,  as  you  say,  the  result  has  been  that  a  great 
nuuiy  of  tlte  <.'ompanies  are  on  the  verge  of  baaikruptcy  ? 

Gen.  Tripp.  Not  only  on  the  verge  of  bankruptcy,  but  some  ot  the 
larger  companies  are  already  in  bankruptcy. 

Mr.  Warren.  Can  you  illustrate,  by  any  particular  company  with 
which  you  are  connected,  what  the  results  have  been  m  the  last  tew 

'  Geii.  Tripp.  There  is  only  one  company  c^ncernin^  which  I  feel  at 

liberty  to  speak  in  detail.  -     m-  ^ 

I  have  an  intimate  acquaintance  with  the  situation  m  Chicago,  be- 
cause  I  participated  in  the  reorganization  of  the  iSorth  bide  street 
railways  into  what  is  now  the  Chicago  Railways  System  I  also 
acted  for  the  bankers  in  the  consolidation  of  the  elevated  lines  m 
Chicago,  but  concerning  the  situation  regarding  those  companies  1 

do  noffeel  at  litei-tj^  to  speak.  ,,     i.  .i. 

There  is,  however,  one  company  which  presents  perhaps  all  ot  tne 
ano-los  of  the  question,  which  I  had  an  intimate  knowledge  of,  and 
winch  now  being  in  the  hands  of  a  receiver,  I  see  no  impropriety  m 
telling  the  story  about. 

Mr.  Warren*.  What  is  that  company? 

Gen.  Tripp.  That  is  the  New  York  Railways  Co.  ^  ,  - 

Mr.  Warren.  That  is  the  company  operating  certain  of  the  surface 
lines  in  New  York  City? 
Gen.  Tripp.  Yes,  sir.  j.  ^i    ^ 

Mr.  AVarren.  Now  ,  tell  the  commission  the  history  of  that  com- 
pany and  the  effect  upon  it  of  this  reduced  purchasing  value  of  tlie 
dollar. 

(ien.  Tripp.  Yes,  sir.  j^    ^^     ^^  ^ 

The  New  York  Railw^ays  Co.  is  a  successor  company  to  the  Metro- 
politan Street  Railway  Co.,  which  went  into  the  hands  of  a  receiver 
in  11)07.  The  Metropolitan  Street  Railway  Co.  operated  all  the  sur- 
face lines  on  Manhattan  Island  and  the  Bronx.  Receivers  were  ap- 
pointed, I  believe,  in  1907,  and  they  found  the  system  composed  to 
a  large  extent  of  leases,  among  which  w^re  the  Third  Avenue  lines, 
the  Second  Avenue  lines,  the  belt  lines,  and  i:>erhaps  one  other.  These 
leases  which  I  have  just  mentioned  the  receivers  dropped  fiom  the 


148     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

Metropolitan  receivei-ship ;  whereupon  they  also  went  into  the  hands 

°*ThrSrit'efwHch  were  defaulted  at  that  time  were  two  issues 
of  bonds;  one  a  4  per  cent  refunding  bond  and  a  5  per  cent  general 
mortgage  collateral  trust  bond.  Each  of  those  classes  of  securities 
organized  their  own  reorganization  committee.  It  seemed  wise  at 
an  early  date  in  that  receivership  for  them  to  join  issue,  and  a  joint 
conimittee  on  reorganization  of  the  Metropolitan  Street  Eailwav  was 
or<ranized;  and  I  became  chairman  of  that  reorganization  committee. 
In  1911,  a  reorganization  plan  was  promulgated  and  accepted, 
nnder  which  all  the  securities  which  were  issued,  both  of  the 
Metropolitan  company  itself  and  the  securities  of  the  leased  lines 
which  still  remained  in  the  system,  added  together,  made  an  aggregate 
amount  of  lei^s  than  the  physical  valuation  of  the  property  as  valued 
by  Ford,  Bacon  &  Davis,  and  as  verified  by  myself.  ,      .      , 

'  The  classes  of  new  securities  consisted  of  a  real-estate  and  refund- 
ino'  4  per  cent  bond.  I  do  not  just  recall  the  amount,  but  it  was  the 
onlv  fixed  charge  upon  the  new  property  and,  in  my  then  opinion 
and  in  the  opinion  of  all  those  connected  with  the  reorganization,  con- 
stituted a  security  which  would  be  safe  against  almost  anything  but 

""An'^issuTof 'income  bonds  was  also  put  out— those  bearing  interest 
at  5  per  cent-and  in  my  estimates  I  told  the  reorganization  com- 
mittee that  I  believed  that  those  bonds  would  pay  3  per  cent  for  the 
first  year,  4  per  cent  for  the  second  year,  and  5  per  cent  for  the  third 
year  of  the  operations  of  the  company. 

The  stock,  which  was  reduced  in  amount  from  $56,000,000  to  about 
$7,500,000,  was  issued  to  the  Interborough  Metropolitan  Co.,  which 
had  b^en  k  stockholder  of  the  Metropolitan  Co.  before  the  receiver- 
shin  unon  the  payment  by  them  of  an  assessment  of  cash.  1  do  not 
Sil  now  what  tLt  asseiment  was.  However,  the  tota  amoiint  of 
the  securities  was  not  scaled  by  a  figure  which  represented  the  dif- 
fef^^e  between  $7,500,000  and  $56,000,000,  but  it  was  something  ess 
Wuse  the  income  bonds  and  other  bonds  had  been  issued  to  other 
Ks  of  creditors,  notably  the  tort  c^^^^to-'^^ose  who  had  ckims 
affainst  the  system  for  personal  injuries.  Their  claim  was  paid  m 
?he  same  class  of  securities  and  in  the  same  amount  that  the  original 
4  percent  bondholders  of  the  Metropolitan  Street  Railway  Co.  re- 

''^  The' result  was  that  the  securities  of  the  Metropolitan  system  was 

Railways  system  was  less  than  the  physical  value  of  the  property  as 

"''^'^^iBKEV'Ge'n' Tripp,  may  I  interrupt  you  at  that  point  to  ask 
you^Did  tharappraisal  fn^c'lude^ny  value  for  the  franchises  of  any 

of  those  lines? 

Gen.  Tripp.  No,  sir.  . 

Mr.  AVarren.  That  made  up  the  new  company? 

m'""  W^RREN^  Tht^^  so-called  and  perhaps  actual  perpetual  fran- 
ch^es  in  them  received  on  value  in  that  capitalization? 
Gen.  Tripp.  They  received  no  value  in  that  capitalization. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     149 

Mr  Warren.  So  that  the  capitalization  was,  perhaps,  less  than  if 
the  property  had  been  then  built  for  the  first  time  and  capitalized  at 

that  time? 

Gen.  Tripp.  Yes.  , 

Mr.  Warren.  And  that  was  m  1911 . 

Gen.  Tripp.  That  was  in  1911.  ^    , 

As  I  recall  it,  the  properties  were  turned  over  to  the  iSew  loilr 

^milvZw^^ondfL  reorganization  agreement,  the  income 
bondholdei-s,  which  had  a  class  of  security  that  was  comparable  to 
tW  of  a  preferred  stock,  required  a  representation  on  the  board  of 
the  new  company  The.4  weVe  nine  directors,  and  the  income  bond- 
hokferl were  entitled  to  four  out  of  the  nine ;  and  I  went  on  t^ie  board 
of  cWtors  as  one  of  the  four  representing  the  income  bondholders. 
My  recoUection  is  that  we  did  pay  3  per  cent  on  the  income  bonds, 

"^Tll'e'directors,  of  which  I  was  one,  thought  it  wise  to  set  aside  cer- 
tain re^rvesoi-  to  build  up  certain  reserves,  against  accident  claims, 
?  T  ^v^n'p  nni^icided  with  the  instructions  that  had  been  given  us 
Wtl^SbUc'Se  V  e  Commission  of  New  Yoi*  to  either  expend  m 
maintena^e  or  set  aside  each  year  a  sum  which  would  equal  20  per 

""/f  IS^fhinls  haf  not  been  done,  the  result  would  have  shown 

^  S?oldei^"of°the^^^^^^^^^^  i-Patient  because  we  set 

asSrtKreUes  '^^^;!^^^'^^  Sf^S  UA 
ti'^^^.Zr^:rr^rc.:^S^^:^  &^^^  upon  me  and  oaier 
membe^  of  the  board  of  directors  representing  those  bonds,  and 
ri  that  we  pay  out  the  full  net  earnings.  We  declined  to  do  it 
r  SiS^d  t^iH  was  not  good  business,  althoi^h  -  syj^path-ed 
w  th  their  desire  to  receive  the  earnings  while  they  could.  Where 
in  a  campa  gn  for  proxies  was  instituted  at  the  next  annual  ineet- 
nTand  myself  and  three  associates  were  ousted  from  the  board 

The  IsC^York  Railways  Co.  would  have  gone  along  on  ?bout  the 
basis  we  esTimated  if  it  had  not  been  for  the  war.  Due  to  the  increased 
expenses  which  are  the  result,  in  my  opinion  of  the  decreased  pur- 
chS  Jer  of  curi-ency  all  over  the  wor  d-it  is  not  peculiar  to 
Hs  country  alone;  and  parenthetically,  I  might  say  I  believe  it  is  a 
condition  more  or 'less  p^rmanent-^ue  to  t^is,  the  ^ew  lork  Rad- 
W9v«  Co  was  unable  to  earn  the  interest  on  the  real-estate  ana  re 
7undin2  4  perTent  bonds,  which,  in  1912,  we  thought  were  proof 
Sin^anything  that  could  happen  to  the  street  radway  business  in. 

^Tthinf  that  is  a  fairly  complete  story,  except  something  might  be 

"&'e'w  Y^oitVallwaVs'stm  is  to-day  composed  of  perhaps  8  or 
10  different  corporations,  their  control  over  them  being  through  the 
ZfliiVm  of  leases  Some  of  those  leases  bear  a  high  rate  of  dividend. 
I  thh.™there  is  one  that  is  as  high  as  17  per  cent.  The  others  a^-erage 
I  belLve  about  9  per  cent,  but  the  capitalization  of  these  leased  lin^ 
is  comparatively  small.  They  were  leased  m  the  early  days  when  a 
comparatively  small  investment  had  been  made,  and  all  the  invest- 


i 


1.50    proceedi:ngs  of  federal  electric  railways  commission. 

ment  that  has  been  made  since  in  those  companies  has  been  made  out 
of  the  money  of  the  Metropolitan  system  or  the  New  \ork  K^il;^^;>^ 
and  expended  on  the  property  of  these  l?f  ^^ /»^^«-  ,  Tl^^^^^^/^N^^^^^ 
lease  rentals  are  of  a  character  which  would  make  no  difference  ^^  hat- 
ever  in  the  result,  because  they  are,  in  amount  of  money,  a  very  small 

proportion  of  the  whole.  .  ^        ^     i.    i.      i.      -i 

Mr  WARREN.  As  a  result  then,  of  the  increased  cost  of  street-i-ail- 
Tvav  operation,  all  the  securities  of  this  reorganized  company  bein<r 
capitalized  on  the  basis  that  you  have  stated,  that  is,  at  less  than  the 
physical  value  of  the  property  itself,  the  conipany  has  been  unable  to 
receive  recently  anything  upon  those  securities  m  the  way  of  return  ? 

Gen.  Tripp.  Yes,  sir.  -^        *  ^i    ^   «««i 

Mr.  Warren.  And  even  the  underlying  security  of  these  real- 
estate  bonds,  the  interest  on  those  has  been  defaulted  ? 

Oen.  Tripp.  Yes,  sir.       .       ,    ^  .   -.  ^  j         •        !,;,.« 

Mr.  Warren.  And  that  is  what  precipitated  receivership? 

Oen.  Tripp.  Yes,  sir. 

Mr  Warren.  Do  you  happen  to  know,  Gen.  Tripp,  whether  Judge 
Mayer  in  the  United  States  court  has  already  segregated  certain  ot 
the'leased  lines  from  the  system?        ,    .         ^  ,       ,  •       n « 

Gen.  Tripp.  He  has  within  a  week  issued  an  order  dropping  the 
Eighth  Avenue  Railroad  out  of  the  system.  a-    ^     ^  ^i    ^ 

Commissioner  Gadsden.  Wliat  is  going  to  be  the  effect  of  tliat, 

General?  ,         ,,     ^         •    •         o 

Gen.  Tripp.  Tlie  effet^t  on  whom,  Mr.  Commissioner? 

Commissioner  Gadsden.  On  the  public.  ... 

Gen  Tripp  The  effect  on  the  public  will  not  be  so  serious,  in  view 
of  the  fact  that,  as  I  read  in  the  newspapers,  the  Eighth  Avenue 
line  was  dropped  with  the  provision  that  the  transfer  privilege  or 
exchange  of  transfei*s  between  it  and  the  i-emaining  connections  of 
tiie  system  should  still  exist  on  the  same  terms.  ^  ,^    .    ^    .  , 

Mr  W\RREN.  If,  however,  the  courts  should  hold  that  the  cancel- 
lation of  that  lease  left  the  Eighth  Avenue  Co.  free  to  make  its  own 
rates  up  to  5  cents,  then  the  car-riding  public  would  lose  the  ad- 
vantage of  the  uniform  system? 

Gen.  Tripp.  Precisely.  ^ 

Mr  Warren.  So  far  as  that  line  is  concerned. 

Gen.  Tripp.  Precisely.     It  would  cost  them  moix3,  and  eveiybody 

would  be  greatly  inconvenienced. 

Mr.  Warren.  Yes.  ^.   ,    ,     *  ,♦  •        j  i. 

Commissioner  Gadsden.  Is  the  Eighth  Avenue  line  equipped  to 

crenerate  its  own  current  and  operate  its  own  road? 
^  Gen  Tripp.  It  has  no  power-house  of  its  own. 

Commissioner  Gadsden.  It  would  have  to  purchase  power,  then, 

from  the  Railways  Co.?  ,         .    .  .     _, .. 

(^len.  Tripp.  It  could  either  do  that  or  purchase  it  from  tiie  Edison 

Commissioner  Gadsden.  Do  you  think  they  will  be  able  to  get  it  on 
just  as  advantageous  terms  as  they  have  been  getting  it  as  an  integral 
part  of  the  New  Yoi4t  Railways  now  ? 

Gcji.  Tripp.  No.  ,         .^  4.9 

The  Chairman.  Does  that  company  have  its  own  equipment? 
Gen   Tripp.  It  has  no  equipment  left  of  tiie  original  equipment. 
My  recollection  is  that  the  lease  provides  that  the  equipment  shaU 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     151 

be  returned  in  as  good  condition  as  when  leased— which  might  operate 

to  force  the  New  York  Railways  to  equip  the  line  to  a  certain  extent. 

The  Chairman.  How  many  miles  are  there  on  the  Eighth  Avenue 

system  ? 

Gen.  Tripp.  How  many  what? 

The  Chairman.  How  many  miles. 

Gen.  Tripp.  It  is  a  double-track  line,  extending  the  whole  length 
of  Eighth  Avenue,  and  running  down  to  one  of  the  ferries— the 
Christopher  Street  ferry.     I  should  judge  there  were  12  miles  of 

^i'*ick 

Commissioner  Gadsden.  You  say  there  are  10  other  leases  of  that 

character— 8  or  10  ?  ^         , ,  xi 

Gen.  Tripp.  To  the  best  of  my  recollection,  I  would  say  there  are 
10  other  leases— not  of  that  character;  not  of  that  same  cliaracter, 

but  10  other  leases. 

Mr.  AVarren.  I  presume,  Gen.  Tripp,  that  the  rental  on  those 

leased  lines  also  was  stopped,  was  it  not?  .     . 

Gen.  Tripp.  No.  As  to  those  leased  lines  that  still  remain  m  the 
system,  the  rentals  are  being  paid  by  the  receiver. 

Mr.  Warren.  And  on  this  line  which  has  been  abandoned  the 
rental  has  been  dropped? 

Gen.  Tripp.  That  rental  ceases,  naturally. 

Ml-.  Warren.  Now,  under  an  order  of  the  public-service  commis- 
sion, a  2-cent  charge  was  pemiitted  on  transfer  recently,  was  it  not? 

Gen.  Tripp.  Yes,  sir. 

Mr.  Warren.  On  the  system? 

Gen.  Tripp.  Yes,  sir.  ,  .    x,  •    i- 

Mr.  Warren.  And  if  that  does  not  continue  as  respectvS  this  line 
which  has  been  sepai-ated,  then  the  transfer  passengers,  instead  of 
paying  7  cents,  will  be  obliged  to  pay  the  sum  of  the  two  independent 
fares,  which  at  the  present  time  would  be  10  cents? 

(xen.  Tripp.  Yes,  sir.  .        .       ,     ,  ,^   -, 

Mr.  Warren.  Would  you  say  that  that  situation  had  resulted  en- 
tirely from  the  reduced  purchasing  value  of  the  nickel,  or,  to  state  it 
in  another  way,  from  the  increai>ed  cost  of  labor  and  materials  and 
operating  expenses  generally? 

Gen.  Tripp.  Yes,  sir. 

Mr.  Warren.  And  which  was  something  which  was  entirely  un- 
foreseen when  the  reorganized  property  was  launched? 

Gen.  Tripp.  Yes,  sir.  Of  course,  we  acted— and  we  were  all  living 
in  a  fooPs  paradise  in  the  street-railway  business  and  we  suddenly 
woke  up,  when  the  war  woke  us  up,  to  find  that  no  business  which  can 
not  increase  its  revenue  under  anv  conditions  can  live  or  is  sound. 
The  street-railwav  credit,  in  mv  opinion,  can  never  be  restored  under 
the  present  system  of  relationship  l)etween  the  municipalities  and 
the  companies.  It  is  necessar\^  to  have  a  credit  on  a  basis  that  is  good 
not  for  two  years  or  three  years,  but  for  long  periods.  Capital  stock 
never  falls  due.  Bonds  usually  run  for  from  20  to  30  yeai*s,  and  in 
order  to  attract  private  capital  into  that  class  of  securities  hereafter, 
there  must  be  a  basis  of  relationship  which  will  reasonably  assui-e 
the  investor  that  for  the  period  for  which  they  are  to  use  his  money, 
there  is  a  reasonable  assurance  that  he  will  i-eceive  a  return,  and  that 
he  will  be  protected  against  unforeseen  and  unusual  things,  such  as 
this  war  has  brought  about. 


152      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr  Warren.  Would  you  say  that  the  experience  of  this  company 
which  you  have  given  as  an  ilhistration  of  your  general  statement  is 
Fairly  illustrativ!  of  the  probable  fat^  of  all  conservatively  capital- 
ized  street  railways,  limited  by  a  fixed  maximum  rate  of  fare,  or,  we 
will  sav,  a  fixed  maximum  rate  of  5  cents?  .-        ^    xi.  i. 

Gen  ^Tripp.  I  would  sav  that  while  there  may  be  exceptions  to  that 
rule  practically  all.  I  believe  that  while  this  commission  is  sitting 
here,  there  will  be  other  large  systems  in  large  cities  of  this  country 
ffoinff  into  the  hands  of  receivers.  -^        .      . 

I  was  familiar  with  the  Brooklyn  Rapid  Transit  situation  As  a 
matter  of  fact,  I  made  the  application  for  the  receiver  on  behalf  of 
the  Brooklyn  Rapid  Transit  Co.  .    -^      ^q 

Mr.  Warken.  That  is  an  elevated  company,  is  it  not  { 

There^rs\Iompany  which  had,  as  I  recollect  it,  $5,000,000  net 
surplus  for  its  stock  only  a  year  or  two  ago.    It  has  entirely  disap- 

^^Mr.^  Warren.  By  "  disappeared  "—these  increased  costs  have  ab- 
sorbed it,  you  mean  ? 

The'rapkUty  with  which  net  profits  on  electric-railway  companies 

have  gone  during  the  last  jear  is  the  most  ^E^^'"''  i^""^  XJ'^La 
have  ever  seen  in  my  business  experience.  They  have  melted  like 
snow  in  a  hot  sun,  and  the  process  is  still  going  on.  ^    ,      .  .. 

As  the  witnesses  have  told  you  yesterday,  the  full  effect  of  the 
raise  of  wage  by  the  War  Labor  Board-and  I  entirely  subscribe  to 
the  raise  of  wage  by  the  War  Labor  Board.  It  was  unavoidable; 
labor  must  get  more  wages;  it  can  not  be  avoided;  the  depreciation 
of  currency  has  made  it  necessary  that  those  who  have  no  margin 
upon  which  to  go,  like  labor,  at  once  receive  relief ,  and  the  situation 
is  here  to  stay  so  long  as  the  present  condition  of  depreciated  cur- 
rency exists-thei^fore  the  War  Labor  Board  acted  Properly  m 
raising  these  wages,  and  the  unfortunate  situation  of  the  street  rail- 
way which  is  unique  in  itself-probably  it  may  be  the  only  mdus- 
try  in  the  United  States  that  is  in  that  situation,  where  they  oould 
not  get  an  additional  cent  of  income  to  compensate  them  for  these 
increased  expenses-is  a  condition  for  which  no  one  is  to  blame  ex- 
cept  perhaps,  the  investors  or  early  promoters  of  these  companies, 
who  could  not  look  far  enough  into  the  future  to  see  that  it  was  a 
fallacy  and  a  fundamental  error  to  invest  money  m  a  project  where 
it  was  impossible  to  increase  your  income.  However,  that  was  uni- 
versally  done,  and  we  can  only  regret  it  now. 

Nor  can  the  public  utility  commissions  be  blamed  for  not  acting 

immediately.    They  require  evidence ;  they  move  slowly.    In  some 

cases,  they  have  afforded  relief.  ,    ^    j  ••*!,« 

Therefore  the  street-railway  industry  stands  to-day  unique  m  the 

United  States.    There  is  nothing  comparable  with  it 

To  illustrate  how  I  regard  the  value  of  street-railway  securities, 
Westinghouse,  Church,  Kerr  &  Co.,  a  company  of  which  I  am  the 
president,  owned  practically  all  of  the  securities  of  a  certain  com- 
pany in  Colorado,  and  I  sold  that  company,  or  rather,  gave  the  stock 
away,  without  the  payment  of  one  cent,  if  the  purchaser  would  pay 
the  notes  which  the  company  owed  Westinghouse,  Church,  Kerr  & 
Co.  for  borrowed  money. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     155 

Now,  when  you  consider  that  the  stock  represented  in  that  transac- 
tion physical  value,  you  can  see  that  we  had  reached  the  stage  where 
we  w^ere  willing  to  charge  it  off  our  books.  I,  for  one,  did  not  care 
to  go  into  the  fight  of  abandoning  street-railway  service  in  a  com- 
munity which  had  had  it  for  many  years;  nor  did  we  have  the  or- 
ganization to  handle  it.  We  were  not  street-railway  operators.  We 
acquired  it  because  we  had  to  acquire  it  for  a  debt.  This  was  a  com- 
bined company — electric  light  and  power  and  street  railway — and  if 
the  purchaser  of  those  securities,  or  if  the  man  who  accepted  the  gift 
of  that  stock  will  cut  out  the  sti-eet-railw  ay  system  and  abandon  the 
service,  he  will  have  a  profitable  property  on  his  hands,  and  will 
have  made  a  good  trade. 

Mr.  Warren.  Through  retaining  the  lighting  end  of  it? 

Gen.  Tripp.  Through  retaining  the  lighting  end  and  power  end 

of  it. 

Mr.  Warren.  Reverting  to  the  question  of  credit.  Gen.  Tripp,  do 
you  think  that  the  investing  public  is  now  aware  of  the  effect  of  this 
limitation  upon  income  to  such  an  extent  that  it  will  be  impossible 
in  the  future,  with  a  fixed  limit  substantially  higher  perhaps  than 
5  cents,  to  rehabilitate  the  credit  of  the  companies? 

Gen.  Tripp.  It  is  not,  to  my  mind,  so  much  a  question  of  what  the 
individual  investor  feels  about  it.  The  individual  investor  usually 
invests  upon  the  advice  of  his  bankers,  but  there  is  no  doubt  but  what 
the  bankers  of  the  country  are  thoroughly  familiar  with  and  thor- 
oughly aLrmed  over  the  situation. 

Mr.  Warren.  And  any  remedy  ought  to  involve  the  elimination  of 

the  fixed  maximum? 

Gen.  Tripp.  No  other  solution,  in  my  opinion,  would  be  adequate, 
even  if  cities  should  remit  all  taxes,  and  releve  the  street-railway 
companies  of  the  burdens  of  paving  and  all  charges  of  that  character. 
It  would  not  affect  the  real  situation.  In  the  first  place,  the  amount 
involved  is  not  sufficient  to  make  up  the  difference  and,  in  the  next 
place,  it  is  attacking  the  symptoms.  Even  permission  to  increase  the 
fare  on  the  basis  of  the  present  relationship  is  entirely  inadequate. 
That  does  not  solve  the  problem.  The  problem  is  one  which  requires 
a  sound  basis  upon  which  to  rest,  but  which  permits  of  different  solu- 
tions in  different  localities.  Some  communities  may  require  a  street- 
railway  service  that  the  population  in  itself  would  not  warrant,  and 
perhaps  it  would  be  impossible  to  assess  a  fare  high  enough  to  pro- 
duce sufficient  net.  In  those  particular  localities,  if  they  desire  such 
service,  the  remedy  is  through  taxation  to  support  it,  or  some  other 
methods.  Zone  systems  may  be  desirable  in  some  cases.  And  so, 
I  think,  the  basis'^must  be  fixed  upon  which  these  various  solutions 

1.1  ay  rest. 

Mr.  Warren.  So  it  is  not  only  a  matter  of  possibly  higher  fares, 
but  a  matter  of  relations  between  the  company  and  the  car-riding 
public  that  it  serves? 

Gen.  Tripp.  I  think  a  new  scheme  of  relationship  must  first  bo 

devised. 

Mr.  Warren.  Do  you  happen  to  know.  Gen.  Tripp,  whether  wiiat  I 
have  heard  this  morning  that  surface  lines  have  gone  into  the  hands 
of  a  receiver,  is  correct? 

Gen.  Tripp.  Yes,  sir;  but  as  I  understand  it,  there  are  some  lines 
that  have  not  gone  in.    I  have  forgotten  just  the  make-up  of  those 

160643**— 20 II 


■I 


151     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

corporations  over  there.    The  Brooklyn  Rapid  Transit  is  in  the  hands 

ot  a  receiver. 

Mr.  Warren.  That  does  not  involve  surface  lines? 

(ien.  Tripp.  That  involves  some  surface  lines. 

Mr.  Warren.  I  understood  that  some  more  surface  lines  had, 
within  a  day  or  two,  ^one  into  receivership.  ,     .  .^ 

Gen.  Tripp.  Well,  that  may  be.    I  have  not  heard  of  it. 

Mr  W^'Vrri-in.  I  think  that  is  all  I  want  to  ask  Gen.  Tripp.  If  anv 
of  the  commissionei^  wnsh  to  ask  him  any  questions.  I  hope  they  wiU, 
because,  if  I  do  not  undertake  to  cover  all  the  matters  that  ma,y  in- 
terest different  members  of  the  commission,  I  hope  they  wdl  feel  free 
to  ask  the  witness  any  questions  which  w  ill  help  them  to  study  this 

very  difficult  problem.  •  i  .1    ^  ..i 

Commissioner  Sweet.  Gen.  Tripp,  it  has  been  said  that  there  are 
three  parties  interested  very  deeply  in  this  question— the  public,  the 
employees,  and  the  company. 

Gen.  Tripp.  Yes,  sir.  .       xi 

Commissioner  Sweet.  Do  you  see  any  valid  reason  why  there 
should  be  any  antagonism  among  these  three  elements? 

Gen.  Tripp.  Not  if  a  proper  relationship  has  been  established. 

Commissioner  Sweet.  In  order  to  bring  about  the  condition  that 
Tou  think  is  the  only  one  that  will  guarantee  the  successful  operation 
of  the  roads  hereafter,  can  vou  see  any  other  possible  solution  of  this 
question  than  the  bringing  together  of  these  three  interested  elements 
in  a  full  spirit  of  cooperation? 

Gen.  Tripp.  There  is  no  other  solution. 

Commissioner  Sweet.  How  do  you  account  for  the  prejudice  m  the 
public  mind  against  these  railway  corporations?     There  is  such  a 

prejudice,  is  there  not?  ,      .     ,      ,1         j^     rrx. 

Gen.  Tripp.  Yes;  and  it  is  perfectly  clear  why  it  should  exist,  ihe 
Metropolitan  Street  Railway  Co.  was  largely  overcapitalizexl. 

Commissioner  Sweet.  And  overcapitalization  is  one  of  the  reasons 
why  the  public  is  prejudiced  against  these  companies? 

Gen.  Tripp.  Yes.    Large  fortunes  were  made. 

Commissioner  Sweet.  Yes?  .    v  •       ^i     ^ 

Gen.  Tripp.  Thev  were  made,  however,  out  of  capitalizing  tlie  tu- 
ture  and  selling  tlie  securities,  and  not  out  of  the  5-cent-fare  rider. 
The  5-cent  fare  never  produced  more  than  a  fair  return  upon  the  fair 
investment  of  the  propertv.  But  hopes  were  capitalized,  and  hopes 
were  sold,  and  the  investors  have  lost  money.     But  the  car  riders 

have  not  paid  for  it.  „        -    -,•  j  x    i 

Commissioner  Sweet.  As  another  element  of  prejudice  and  teei- 
in*'  on  the  pai-t  of  the  general  public  against  the  corporations,  has 
there  not  in  the  past  been  a  great  deal  of  dishonest  manipulation  of 
common  councils  and  public  officials  on  the  part  of  the  companies? 

Gen.  Tripp.  There  was  no  doubt  about  that,  in  the  early  days.  I 
think  of  late  vears  that  has  not  been  so. 

Commissioner  Sweet.  But  that  created  a  feeling  in  the  P"bhc 
mind  that  has  to  some  extent  remained  up  to  the  present  time;  did 

it  not? 

Gen.  Tripp.  Precisely.  . 

Commissioner  Sweet.  With  regard  to  the  discounting  of  the 
future  that  you  have  spoken  of,  the  overcapitalization,  that  is  what 
the  people  generally  speak  of  as  "  watered  stock";  is  it  not? 


PROCEEDITTGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      155 

Gen.  Tripp.  Precisely. 

Commissioner  Sweet.  The  individuals  who  were  chiefly  respon- 
sible for  that,  and  who  made  money  out  of  it — are  they  still  in  the 
business;  or,  for  the  most  part,  are  they  out  of  it;  and  have  they 
turned  over  the  capital  to  innocent  purchasers? 

Gen.  Tripp.  Of  course,  that  question  is  a  general  question,  and 
there  may  be  exceptions. 

Commissioner  Sweet.  Oh,  undoubtedly. 

Gen.  Tripp.  I  should  say  it  would  be  found  that  very  few  of  these 
electric-railway  securities  will  be  found  in  the  strong  boxes  of  the 
estates  of  the  men  who  originally  promoted  them. 

Commissioner  Sw^eet.  Who  are  the  present  owners  of  street-rail- 
way stocks? 

Gen.  Tripp.  The  public,  the  small  investor,  the  insurance  com- 
pany; in  Massachusetts,  to  some  extent,  the  savings  banks. 

Commissioner  Sweet.  You  are  speaking  now  of  stocks  exclusively, 
or  stoclcs  and  bonds? 

Gen.  Tripp.  No;  I  was  speaking  of  bonds,  principally. 

Commissioner  Sweet.  Of  bonds? 

Gen.  Tripp.  The  public  also  owns  the  stock. 

At  the  time  of  the  reorganization  of  the  Metropolitan  Co.,  I  met 
many  of  the  smaller  security  holders  and,  as  an  example  of  the 
deplorable  situation  that  has  been  brought  about  by  receiverships, 
I  remember  the  case  of  an  old  lady,  about  TO  years  of  age,  who  came 
into  my  office,  having  $10,000  of  the  5  per  cent  bonds  of  the  Metro- 
politan Street  Railway,  which  were  in  default,  and,  of  course,  she 
liad  received  no  interest. 

She  told  me  that  her  husband,  who  was  about  her  age,  had  been 
an  invalid  for  many  years.  They  had  lived  together  in  a  little  house 
out  in  the  country,  and  they  had  their  money  in  a  savings  bank,  on 
which  they  were  getting  $350  or  $400  a  year  income.  It  was  pretty 
close  manipulating  for  the  old  couple  io  get  along,  and  she  con- 
cluded that  she  would  invest  in  these  5  per  cent  bonds.  Her  hus- 
band was  an  invalid,  and  she  did  not  want  him  to  have  the  worry 
of  a  change  of  investment,  but  she  felt  sure  herself.  So  she  drew 
the  money  out  without  his  knowledge,  and  invested  in  these  bonds 
and  they  had  nothing  whatever  to  live  on. 

That  was  the  most  affecting  case  that  came  to  my  attention,  but 
I  met  many  people  who  could  not  afford  to  lose  the  money. 

Commissioner  Sweet.  Do  you  think,  General,  that  that  fact  is 
quite  commonly  understood  by  the  general  public  ? 

Gen.  Tripp.  No  ;  I  do  not  think  it  is. 

Commissioner  Sw  eet.  Now,  the  employees,  you  said  in  your  direct 
testimony,  were  entitled  to  the  raise  given  by  the  War  Labor  Board, 
in  your  judgment. 

Gen.  Tripp.  In  my  judgment  they  were. 

Commissioner  Sweet.  And  the  wages  can  not  reasonably  be 
reduced  ? 

Gen.  Tripp.  No,  sir. 

Commissioner  Sweet.  So  that,  as  far  as  the  employees  are  con- 
cerned, no  relief  can  be  expected  from  the  situation  that  exists  by 
reason  of  reducing  their  compensation? 

Gen.  Tripp.  No,  sir. 


156     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  And  it  would  not  be  right,  in  your  judg- 
ment, to  consider  it  from  that  standpoint? 

Gen.  Tripp.  No,  sir.  , ,  ,         xi.  ui  f 

Commissioner  Sweet.  That,  then,  would  leave  the  problem  one  to 
be  solved  between  the  general  public  and  the  corporation,  would  it 
not? 
Gen.  Tripp.  Yes,  sir.  .,  i    i_    x  i  *• 

Commissioner  Sweet.  And  there  would  possibly  be  two  solutions 
there— one  that  the  corporation  should  lay  down  entirely  and  go  out 
of  business,  and  let  the  general  public  do  what  it  saw  fit,  or  else  make 
some  arrangement  with  the  general  public^  the  municipalities,  by 
which  municipal  ownership  and  operation  might  take  place? 

Gen.  Tripp.  Yes,  sir.  ,  ,      .,  i       ur     + 

Commissioner  Sweet.  Or,  if  preferred  by  the  general  pwbjic,  to 
have  private  ownei^hip  and  operation,  then  arrangement  would  have 
to  be  made  between  the  corporation  and  the  general  public  that  would 
be  mutually  satisfactory;  and  that  would  contain  m  it  the  elements 
that  you  have  stated  as  essential  to  the  continued  success  of  private 
operation  of  these  companies.  Is  not  that  right  ? 
,     Gen.  Tripp.  That  is  exactly  as  I  believe,  sir.  ,  .   ,  ^, 

Commissioner  Sweet.  Now,  upon  what  basis  do  you  think  the  gen- 
eral public  and  the  corporation  can  meet  m  order  to  bring  about  the 
condition  that  would  permit  of  continued  private  ownership  and 
operation  of  these  companies?  ,       .     -         •        i 

Gen  Tripp.  I  believe  that  some  form  of  cost-of -service  plan 

Commissioner  Sweet.  Will  you  explain  that  term  "  cost  of  serv- 

ice?"     It  is  often  used.  .  *  •     xu 

Gen  Tripp.  Well,  Mr.  Commissioner,  I  am  not  an  expert  m  the 
various  plans  of  cost  of  service  which  have  been  submitted  but  it  is 
based  upon  this  theorv,  as  I  understand  it,  at  least,  that  is  the  kind  of 
cost  of  service  that  I  mean ;  I  do  not  know  whether  it  is  what  the  ex- 
perts call  "  cost  of  service."  It  is  that  the  income  of  electric  railways 
shall  be  sufficient  to  pay  a  proper  wage  to  the  workmen  and  the  cost 
of  operation,  properly  provide  for  depreciation  and  obsolescence,  and 
to  pav  for  the  money  actually  and  honestly  invested  m  the  property  a 
fair  and  just  return.  If  the  fare  is  fixed  so  that  a  larger  return  than 
that  is  received,  then  the  surplus  may  be  treated  m  various  ways.  1 
believe  that  in  order  to  get  efficient  operation,  to  have  personal  initia- 
tive and  to  have  proper  economv  in  operation,  it  will  be  necessary  to 
sav  toprivate  capital  "  If  there  is  a  surplus,  you  shall  receive  a  por- 
ti6n  of  it  for  an  incentive  to  do  good  work."    The  remainder  could  go 

to  the  public.  ^      ,      ,  i.      i       j  ^        f 

Commissioner  Sweet.  In  the  shape  of  reduced  fares? 
Gen  Tripp.  Yes:  but  that  would  not  operate  immediately  each 
year  As  the  surplus  was  accumulated  over  a  period  of  years,  it 
could  operate  to  reduce  fares.  Some  cost-of-service  plans,  as  I  un- 
derstand it,  make  the  participation  of  the  company  in  the  surplus 
larger  as  the  fare  is  decreased,  furnishing  an  incentive  to  them  to 
work  toward  decreasing  the  fare. 

Commissioner  Sweet.  Yes.  ,    ,       .  , ,  ,         .      ^  , 

Gen  Tripp.  I  do  not  myself  feel  that  it  would  be  wise  to  make  a 
direct  participation  for  labor  in  this  surplus,  because  it  is  too  uncer- 
tain    Labor  should  be  paid  for  it  all  that  can  fairly  be  paid  for  iL 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     157 

The  return  should  be  steady  and  fixed,  and  if  a  surplus  is  accumu- 
lated that  permits  an  increase  of  wages,  well  and  good;  but  to  have 
them  participate  in  an  uncertain  amount,  I  believe  would  prove 

"^Commissioner  Sweet.  By  what  method  could  this  arrangement 
that  you  speak  of  be  affedted-by  legislation.  State  laws,  or  some 
sort  of  agreement  between  the  companies  and.  the  municipalities,  or 

in  what  practical  way ?  .«   ,.  .    .        i,     ij 

Gen  Tripp.  Well,  I  have  believed  that  if  this  commission  should 
make  a  strong  and  unequivocal  recommendation  that,  in  their  opm- 
ion,  for  example-if  they  did  believe  it— some  fundamental  plan  of 
that  kind  was  necessary  to  save  the  industry,  that  with  that,  each 
company  could  go  before  their  properly  constituted  authorities— 
before  the  municipalities  in  some  States,  where  they  have  not  com- 
missions, or  before  the  commissions  where  they  have  commissions— 
and  a  satisfactory  arrangement  could  be  nriade  The  nj^ni^^^Pf ^^^^^^ 
and  the  public-service  commissions  would  be  glad  to  do  this  if  tii^y 
felt  that  public  opinion  was  behind  such  a  plan.  ,      ,   ,  •         . 

Commissioner  ^weet.  So,  in  your  judgment,  the  real  solution  of 
the  whole  problem  goes  back  to  the  matter  of  creating  a  sound  and 
correct  public  sentiment  on  the  subject? 

Gen.  Tripp.  Yes,  sir.  ,  _.      .        .        ^    , 

Commissioner  Sweet.  And  that  means  the  eradication  of  a  numbei 
of  ideas  that  have  come  down  from  the  past  in  the  way  of  prejudices 
that  might  be  removed  if  the  facts  were  fully  understood.    Is  that 

your  opinion? 

Gen.  Tripp.  Yes,  sir;  that  is  my  opinion. 

Commissioner  Sweet.  I  think  you  said  m  your  direct  testimony 
that  in  your  judgment,  the  elimination  of  taxes,  direct  and  indirect, 
we  will  say,  would  not  afford  a  proper  and  perpetual  solution  of  the 
problem. 

Gen.  Tripp.  Yes,  sir.  .  .  1 1  -x  i.     •    i.  j-i.  4.  ^i 

Commissioner  Sweet.  In  your  opinion,  would  it  be  just  that  the 
custom  in  regard  to  paving  between  the  tracks  and  little  outside 
should  be  changed  ?    Do  you  think  that  is  a- 

Gen.  Tripp.  I  think  that  is  an  unjust  burden,  per  se. 

Commissioner  Sweet.  An  unjust  burden? 

Gen.  Tripp.  On  the  properties ;  yes,  sir. 

Commissioner  Sweet.  How  did  that  originate?  When  was  the  be- 
srinning  of  that  asa  custom?  .     i  •  i.  .i,         i 

Gen  Tripp.  It  was  a  part  of  the  inducement  which  the  early  pro- 
moters, in  some  cases,  held  out,  and  it  was  also,  in  some  cases  a 
lequirement  on  the  part  of  the  mumcipalities  until  it  gradually, 
perhap&-no  one  can  say— became  an  established  policy.  . 

Commissioner  Sweet.  Was  there  not  a  certain  element  of  justice  in 
it  in  the  old  horse-car  days?  '.        j  -^  ^ 

Gen.  Tripp.  Yes;  there  was  to  that  extent,  and  it  was  to  some 
extent  a  relic  of  the  old  horse-car  days.  i    ..    .     ^ 

Commissioner  Sweet.  Have  you  not  found.  General,  that  office 
seekers— candidates  for  official  positions  in  cities— have  made  it  quite 
a  point  in  the  past  to  decry  the  public-service  corporations— the  pub- 
lic-utilities corporations— and  found  it  a  very  good  way  to  get  votes. 

Gen.  Tripp.  Oh,  yes;  undoubtedly. 


158     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  And,  as  a  corporation  man,  you  think  that 

is  all  wrong? 

Gen.  Tripp.  I  do,  yes,  sir ;  decidedly. 

Commissioner  Sweet.  That  situation,  however,  has  taken  into  ac- 
count the  prejudice  that  we  spoke  of  a  few  minutes  ago ;  has  it  not? 

Gen.  Tripp.  Exactly. 

Commissioner   Sweet.  Against  these  corporations? 

Gen.  Tripp.  Yes,  sir;  exactly.  ,       ,    •  i- 

Commissioner  Sweet.  Created  to  some  extent  by  their  own  dis- 
honest conduct  in  trying  to  influence  officials  to  do  what  is  wrong? 

Gen.  Tripp.  Yes.  sir. 

Commissioner  Sweet.  That  is  true;  is  it  not? 

Gen.  Tripp.  In  some  cases.     I  do  not  state • 

Commissioner  Sweet.  And  overcapitalization  in  other  cases? 

Gen  Tripp.  Yes  sir. 

Coinmissioner  Sweet.  If  the  general  public  and  the  corporations 
are  to  get  together,  there  is  no  doubt,  in  your  mind,  I  presume,  but 
that  every  single  fact  known  to  the  corporations  must  be  honestly 
and  squarelv  presented  to  the  public? 

Gen.  Tripp.  Oh,  it  must  be.     There  is  no  other  course. 

Commissioner  Sweet.  And  on  this  cost  proposition  there  would 
bo  perpetual  need,  would  there  not,  for  public  inspection  of  the  books 
of  the  corporation? 

(ien.  Tripp.  That  follows  naturally. 

Commissioner  Sweet.  The  public  would  have  to  know  exactly 
what  was  being  done  ? 

Gen.  Tripp.  Thev  would  have  to  know. 

Commissioner  Sweet.  By  way  of  receipts  and  expenditures? 

Gen.  Tripp.  Yes,  sir. 

Conmiissioner  Sweet.  And  you  would  have  a  representative  or 
representatives  of  the  public  on  the  board  of  directoi*s  of  the  com- 

Dunv 

*  Gen.  Tripp.  I  have  not  thought  that  far.  They  certainly  must 
know.  Mv  only  hesitancy  on  that  point  is  whether  a  representative 
of  the  public  on  the  board  would  perform  the  duties  in  such  a 
manner  as  to  expedite  and  encourage  the  efforts  of  the  management 
in  bringing  about  efficient  operation  and  economies,  or  whether  he 
would  regard  hfs  presence  on  the  board  as  representing  an  antago- 
nistic element.  But  there  must  be,  whether  it  is  a  representative  on 
the  board  of  directors  or  brought  about  in  some  other  way,  a  full 
Imowledge  of  the  affairs  of  the  company,  full  control  and  regula- 
tion, and  it  may  easily  be  that  a  careful  c<)nsideration  would  show 
that  in  this  new  relation  it  would  be  necessary  to  have  a  representa- 
tive of  the  public  on  the  board.  But,  as  I  say,  I  approached  that 
particular  thing  with  some  hesitancy.  Boards  which  are  divided 
among  themselves  and  do  not  arrive  at  a  unanimous  and  har- 
monious conclusion  upon  everything  that  is  brought  before  them 
certainly  harm  a  company  and  its  prosperity. 

Commissioner  Sweet.  iSoing  back  to  the  paving  proposition— m 
your  judgment  do  the  owners  of  automobiles  now,  under  the  present 
system,  pay  for  any  part,  directly  or  indirectly,  of  the  paving  be- 
tween the  street-railway  tracks? 

Gen.  Tripp.  No,  sir;  except  so  far  as  the  State  automobile  license 
tax  would  apply  to  that,  in  some  cases. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     159 

Commissioner  Swtjet.  How  is  it  with  regard  to  paving  with  the 
street-railway  companies?     Do  they  pa;^^  for  it? 
Gen.  Tripp.  Do  they  pay  for  the  paving? 
Commissioner  Sweet.  Yes,  sir.     In  other  words,  does  it  come  out 

of  their  nickels? 

Gen.  Tripp.  Yes;  it  comes  out  of  their  nickels. 

Commissioner  Sweet.  Is  it  a  fact,  then,  that  under  the  present 
system  one  part  of  the  community — the  part  least  able  to  bear  it — 
l^ays  for  that  paving  of  the  streets,  and  the  automobile  owners— the 
part  presumably  the  best  able  to  bear  it— are  relieved  of  that  burden? 

Gen.  Tripp.  Absolutely. 

Commissioner  Sweet.  Do  the  automobile  owners  get  any  beneht 
of  that  paving? 

Gen.  Tripp.  Yes;  they  do. 

Here  is  a  very  amusing  incident,  if  I  may  be  permitted  to  refer 
to  it.  I  am  told  that  in  Boston  the  automobile  owners  complained 
because  there  was  no  place  to  park  their  automobiles  on  Charles 
Street,  and  the  city  authorities  took  a  portion  of  the  common,  or 
of  the  public  ground — I  have  forgotten  which,  as  I  have  not  seen 
it— and  widened  the  street  at  that  point  to  about  20  feet— paving 
the  street— and  paid  for  it,  and  turned  it  into  a  place  where  auto- 
mobiles might  be  parked,  when  running  right  in  front  of  them 
along  the  same  street  is  the  street-railway  company,  which  is  paying 
for  the  maintenance  of  the  paving  over  which  it  runs. 

Commissioner  Sweet.  Do  you  regard  the  automobile  and  the  jitney 
as  responsible  to  some  extent  for  the  present  situation? 

Gen.  Tripp.  Yes.  . 

Commissioner  Saveet.  But,  if  I  understood  you  right  m  your  direct 
examination,  3^ou  do  not  regard  them,  by  any  means,  the  sole  culprits  ? 

Gen.  Tripp.  No.  . 

Conmiissioner  Sweet.  Now,  with  regard  to  the  increase  of  fare, 
if  I  understood  you  correctly,  you  think  that  that  would  not  be  a 

panacea  for  the  trouble  ?  -r       •  i 

Gen.  Tripp.  It  would  be  temporizing,  Mr.  Commissioner.  It  might 
solve  the  question  for  to-day  in  a  particular  case,  but  if  it  is  fixed, 
and  there  is  no  provision  for  prompt  readjustment  of  it  to  meet 
changed  conditions  of  finance  or  operation,  you  may  in  another 
year,  be  just  where  you  are  to-day,  with  a  new  rate  of  fare. 

Commissioner  Stveet.  In  other  words,  do  you  think  tliere  should 
be  greater  elasticity  in  the  system? 

Gen.  Tripp.  Yes,  sir.  .  ,.  .       , 

Commissioner  Sweet.  To  adapt  itself  to  changing  conditions? 

Gen.  Tripp.  Yes,  sir. 

Commissioner  Sweet.  Would  this  be  a  further  reason  why  the 
raise  of  fares  might  not  afford  the  necessary  remedy,  that  sometimes 
tlu^  raising  of  fares  diminishes  the  patronage  to  such  an  extent  that 
tile  income  received  is  not  really  increased  ? 

Gen.  Tripp.  Yes,  sir. 

Commissioner  Sweet.  Is  not  that  true? 

Gen.  Tripp.  Yes,  sir. 

Commissioner  Sweet.  Would  not  that  be  particularly  true  with  re- 
gard to  the  distances,  the  short  runs? 
Gen.  Tripp.  Yes,  sir. 


M^ 


130     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Where  people  could  walk  readily  if  they  de- 
sired to  do  so? 

Gen.  Tripp.  Yes,  sir.  , ,       .^       ^v  ^k^ 

Commissioner  Sweet.  And  perhaps  would,  rather  than  pa>  tlie 

increased  fare? 

Gen.  Tripp.  Yes,  sir.  ^   ^  ^  ...  . 

Commissioner  Sweet.  Do  you  regard  the  present  prevailing  systein 
of  charging  the  same  amount  for  short  hauls  and  long  hauls  as  justf 

Gen.  Tripp.  No;  I  do  not  regard  it  as  just. 

Commissioner  Sweet.  Is  it  good  business? 

Gen.  Tripp.  It  is  not  good  business. 

Commissioner  Sweet.  Well,  how  would  you  change  lU 

Gen,  Tripp.  Of  course,  the  only  change  that  I  know  about  would  be 
a  zone  system,  such  as  is  universally  used  almost  all  over  i.ngland 

and  the  Continent.  ^    ,  ,  .       xi.       « 

Commissioner  Sweet.  How  is  it  working  there  * 

Gen.  Tripp.  Working  perfectly  well. 

Commissioner  Sweet.  Will  you  describe  that  zone  system,  so  we 
will  understand  more  fully  what  it  is? 

Gen.  Tripp.  A  zone  system  simply  consists  in  certain  zones.    After 
vou  pass  out  of  one  zone  into  another  you  pay  an  additional  fare 
The  fare  in  England,  in  the  shorter  zone,  is  low.    I  ]ust  do  not  recall 
what  it  is,  but  it  is  less  than  5  cents,  or  its  equivalent. 

Commissioner  Sweet.  Yes.  .  .  ^     .,         u     u 

Gen    Tripp.  But  it  increases  as  you  go  out  into  the  suburbs. 

Commissioner  Sweet.  Would  not  that  necessitate  a  great  deal  of 
bother  and  annoyance  that  Americans  would  object  to? 

Gen  Tripp.  That  is  the  objection.  It  is  not  based  on  sound  eco- 
nomics and  it  is  not  just,  but  it  is  the  custom  in  this  country. 

Commissioner  Sweet.  You  mean  the  present  system  i 

Gen.  Tripp.  Yes ;  the  present  system.   . 

Commissioner  Sweet.  But  I  am  speaking  of  the  zone  system,  and 
I  am  askin^r  you  whether  Americans  would  not  rather  object  to 
pavinff  these  small  amounts  as  they  pass  from  one  zone  into  another. 

Gen  Tripp.  Well,  I  don't  know.  They  are  becoming  more  or  less 
educated  to  do  it  on  interurban  lines  and,  I  have  heard,  some  cities 
have  recently  adopted  it.  I  do  not  know  how  it  is  working.  My 
impression  has  always  been  that  they  would  object,  but  I  have  never 
known  of  its  being  'tried  in  a  large  communitj^ ;  so  I  do  not  know 
that  it  has  ever  been  proved  that  they  would  object.     .     ^       ,     ,      . 

Commissioner  Sweet.  But  you  think  that  that  is  a  just  and  a  busi- 
ness way  of  handling  it? 

Gen.  Tripp.  Yes,  sir.  ,  ^         o     -r.  +u-  i 

Commissioner  Sweet.  How  about  general  taxes?  Do  you  think 
that  the  street-railway  companies  ought  to  be  taxed  on  their  physical 

"DroDertv  ♦ 

G^n.  Tripp.  Under  the  present  theory  of  relationships,  there  is  no 

reason  why  they  should  be  taxed. 

Commissioner  Sweet.  Is  there  any  consideration,  do  you  think, 
which  should  be  taken  of  the  value  of  their  franchises  ? 

Gen.  Tripp.  For  purposes  of  taxation? 

Commissioner  Sweet.  Yes. 

Gen.  Tripp.  No,  sir.     ^^      ,^,       ,      •    i  ,-9 

Commissioner  Sweet.  Merely  the  physical  properties  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     161 

Gen.  Tripp.  Yes,  sir. 

Commissioner  Sweet.  That  should  be  assessed  on  the  same  gen- 
eral basis  as  other  properties  owned  by  private  individuals? 

Gen.  Tripp.  Yes,  sir.  i     •      i 

Commissioner  Gadsden.  General,  on  the  present  basis  do  you 
think  the  persent  franchises  have  any  value  on  which  to  base 
taxation? 

Gen.  Tripp.  No,  sir.  . 

Commissioner  Sweet.  They  are  rather  negative,  are  they  not  5 

Gen.  Tripp.  Precisely.    They  are  decidedly  negative. 

Commissioner  Sweet.  Do  you  see  any  practical  way  of  diminish- 
ing the  expense  of  operation  of  the  street  railways? 

Gen.  Tripp.  No,  sir;  I  can  not. 

Commissioner  Sweet.  Do  you  think  that  the  last  word  has  been 
said  on  that  subject,  practically? 

Gen.  Tripp.  So  far  as  I  can  see ;  y£s,  sir. 

Commissioner  Sweet.  The  charts  that  have  been  shown  us  have 
brought  out  a  rather  interesting  point  in  regard  to  the  peak  of  the 
load,  that  where  there  are  great  variations  at  different  times  of  the 
day,  a  problem  arises  that  is  hard  to  solve  and  results  in  less  profit 
to  the  company.    That  is  true,  is  it  not  ? 

Gen.  Tripp.* That  is  true;  yes,  sir. 

Commissioner  Sweet.  Can  you  think  of  any  way  that  might  be 
met  that  would  be  just  to  the  general  public  and  bring  about  better 
results  ? 

Gen.  Tripp.  No;  I  can  not  think  of  any  way.  Experiments  have 
been  tried  of  low  fares  during  nonrush  hours  to  fill  up  the  valleys 
but,  so  far  as  I  have  observed,  they  have  only  demonstrated  that 
people  won't  ride  unless  they  want  to.  They  won't  go  down  town 
unless  they  have  business  down  town,  and  those  experiments  have  been 
unsatisfactory ;  at  least  all  that  have  come  under  my  notice. 

Commissioner  Sweet.  So  it  is  necessary  for  the  companies  to 
have  the  equipment  required  by  the  highest  point,  and  then  at  other 
times  of  the  day  to  leave  that  practically  idle. 

Gen.  Tripp.  Yes,  sir. 

Commissioner  Sweet.  What  is  the  custom  in  regard  to  employees 
in  cases  of  that  kind?  Are  the  conductors  and  motormen  on  these 
cars  that  are  not  used  in  the  quiet  part  of  the  day  idle,  too? 

Gen.  Tripp.  No ;  there  is  a  great  deal  of  lost  time  that  is  paid  for. 
In  other  words,  time  that  is  not  represented  by  platform  service.  At- 
tempts are  made,  of  course,  to  put  in  swing  runs,  as  they  call  them, 
and  so  they  utilize  to  the  greatest  extent  possible  the  time  of  the  men. 
Commissioner  Sweet.  In  trying  to  show  the  general  public  that 
the  companies  were  doing  what  was  right  and  fair,  would  you  con- 
sider that  the  capital  stock  of  the  companies  as  it  now  stands  through- 
out the  country  should  be  the  basis  for  earnings  or  that  the  value  of 
the  physical  properties  should  be  the  basis  for  earnings? 

Gen.  Tripp.  I  do  not  think  you  can  take  the  stock  as  it  now  stands 
as  a  basis  for  earnings  allowed  under  a  new  relationship,  if  that  is 
what  you  mean. 
Commissioner  Sweet.  Yes. 

Gen.  Tripp.  However  obnoxious  it  may  be  to  some  of  us  who  are 
in  the  business,  I  see  no  other  method  than  to  base  it  on  the  in- 


j^ 


m 


162     PBOCEEDINGS  OF  FKDEBAL  ELECTRIC  RAILWAYS  COMMISSION. 

vestment  of  the  property,  regardless  almost  of  the  securities  that 

'ICSionfr  SwK^.  Would  you  mean  the  original  honest  in- 
vestment  or  the  present  value  of  the  property  ?       , 

^^^^■fr^^;^^  LZ.itThr(5oL^£e"o^f  oZ 

ClTed  on"h  s  'pot't^I  bdfeve'rhaTthe  fair  method  is  to  take  the 
.nnnpv  tlUt  has  been  honestly  invested  in  the  property. 

SSioner^S^^^^^^   Gofng  back  in  many  cases  to  the  horse-car 
days  and  then  through  the  various  systeins  up  to  the  present  tune, 

'^''(fZ  TmrV  Well   it  is  not  such  a  tremendous  job  as  that     I  do 
•  no  "iSiilv"  ««t  iAese  days  ^.u  would  find  J^einv^^^^^^^ 
horse-car  lines  ever  put  forward  as  a  part  of  the  cobt  ot  the  pieseni 

'•'commissioner   Swket.  Some  of  these  rpads,  however,  that  are 

onpiatinw  to-dav  started  as  horse-car  systems.  

^ien  fwpp  tes:  that  investnient  has  probably  been  written  off 
and  disap^IrecUn  the  tremendous  increase  in  investment  that  has 
^me  siShose  days.  I  could  determine  to  my  own  satisfaction  n 
rnTpropertyri  belfeve,  the  amount  of  investment  that  was  honestly 

'"  CommiSone'rW™.  AVould  vou  arrive  at  that  by  an  examination 
ofSemom"v  itself .  and  take  your  own  knowledge  of  the  transitions 
that  haCreen  gone  through,  and  peihaps  add  a  little  something  to  it, 

•n>fl  fix  the  amount  in  that  manner?  ^.     r^  •    •  ««,. 

Oen  Tripp  No;  I  would  not  do  it  that  way,  Mr.  Commissioner 
I  would  take  the  different  classes  of  securities  that  have  been  issn.ed 
on  a  sriven  propertv,  however  many  there  might  be,  and  it  would  be 
easilv  deterSd  how  much  money  was  received  for  an  issue  of 
^onfl«  and  wTat  became  of  the  money.  These  men  m  the  early  daj-s 
Ski  not  ste^l  the  moi'^y.  That  is  a  popular  fallacy.  There,  was  no 
™v  taken  The  money  went  into  the  property.  Securities  were 
^n,  htTver'cIn  "general  hopes".  They  issued  Wa  hopes  V 
if  vou  please,  for  which  no  cash  was  received.  Jsow,  it  is  eas>  to 
iej^-e-ate  tha  class  of  security  from  the  class  of  security  that  was 
hoSv  sold  for  cash,  and  it  does  not  i-equire  a  valuation  of  the 
nropertv  In  niinute  de  ail  to  arrive  in  any  given  case  at  a  fair  in- 
lestmeS  !n  a  gken  property  upon  which  to  rest  a  new  relationship 

^rormliX^'s^rC^rank  it  would  b-a^^tof^on 

-^^res^^LmpaXtn^^^^^ 

nrnnertv  that  was  not  liable  to  taxation «  „     ^ 

^  G^n^RiPP  I  do  not  quite  follow  that  question,  Mr.  Comm.^.oner 
CommiSer  S^^T.CT.  I  assume  fi-om  what  you  have  ]ust  said  that 
vnuH^  hod  of  arriving  at  the  value  of  a  street- i;ail way  property 
lo  lid  bring  about  the  Jsult  that  something  more  than  the  physical 
vXe  of  thi  propertv  would  be  allowed  to  the  company  upon  which, 
mder  tlie  phm  t'TatVou  have  suggested,  the  company  would  be  per- 

"■'S  W  f  havTnot  intended  to  convey  the  inipression  that  I 
niJant'  anyZng  more  than  the  physical  value  of  the  property,  or 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     163 

rather,  the  cost  of  this  property ;  it  may  not  be  the  physical  value 
today,  it  may  be  more  or  less. 

Commissioner  Sweet.  I  see.  I  got  the  idea  from  what  you  said 
that,  figuring  the  actual  amount  that  went  in  to  the  property 

Gen.  Tripp.  Yes.  ,  ,       xi       i      •     i 

Commissioner  Sweet.  Would  be  something  more  than  the  physical 

valuation  of  the  properties  at  the  present  time. 

Gen.  Tkipp.  No,  I  did  not  intend  to— I  do  not  think  so. 

Connnissioner  Sweet.  It  might  iust  at  the  present  time,  based 
upon  higher  priced  material  and  labor ;  perhaps  the  physical  value 
of  the  properties  would  exceed  the  cost,  figuring  on  the  basis  you 
have  in  mind. 

Gen.  Tripp.  Yes,  it  might. 

Connnissioner  Sweet.  In  some  cases. 

Mr.  Tripp.  Yes,  it  probably  would,  on  the  cost  of  reproduction  at 

present  prices.  i.     ^i 

Commissioner  Sweet.  Of  course  it  would  be  necessary  for  the  gen- 
eral public  to  be  satisfied  as  to  the  amomit  upon  which  dividends 
were  to  be  paid,  would  it  not  ? 

Mr.  Tripp.  Yes,  absolutely. 

Commissioner  Sweet.  What  plan  would  you  suggest  as  being  the 
most  satisfactory  for  the  determination  of  that  amount? 

Mr.  Tripp.  From  the  standpoint  of  the  general  public? 

Commissioner  Sweet.  You  have  to  satisfy  the  general  public  be- 
fore you  can  do  anything,  have  you  not? 

Gen.  Tripp.  Well,  I  believe  the  general  public  will  understand  the 
simple  proposition  that  the  amount  we  are  allowing  here  upon  which 
money  shall  be  earned  is  the  money  that  has  actually  gone  into  the 
property,  better  than  they  will  it  you  undei-take  to  explain  that 
this  vahiation  has  been  made  upon  a  complicated  cost-to-reproduce 
plan.  You  have  then  to  go  into  explanations :  What  prices  are  you 
using  in  your  value,  cost  to  reproduce,  existing  prices,  average 
prices,  prices  before  the  war;  and  you  get  into  such  a  maze  of  theories 
and  testimony  that  the  general  piiblic  throw  up  their  hands  at  and 
say  we  do  not  understand  anything  about  it.  But  they  do  under- 
stand they  are  entitled  to  a  return  upon  the  money  they  put  into 

the  property. 

Commissioner  Sweet.  You  think,  then,  the  public  would  be  satis- 
fied with  the  report  of  an  expert  accountant  who  might  examine 
the  books  of  the  company? 

Gen.  Tripp.  It  is  hard  to  say  what  the  public  would  be  satis- 
fied  with.  They  do  not  brieve  very  much  that  tlie  street-railway 
interests  tell  them,  unfortunately.    I  think 

Commissioner  Sweet.  How  would  it  do  for  the  municipal  authori- 
ties to  name  a  committee  either  of  their  own  members  or  of  citizens, 
or  both,  to  investigate  that  subject?  Because  it  is  one  that  would 
have  to  be  settled  before  any  basis  could  be  reached. 

Gen.  Tripp.  Well,  that  niight  be  a  way  to  do  it. 

Commissioner  Sweet.  You  said  you  thought  the  lower  purchasing 
power  of  money  was  a  somewhat  j^ermanent  condition  not  only 
in  this  country  but  throughout  the  world,  did  you  not? 

Gen.  Tripp*  Yes;  I  do  think  so. 

Commissioner  Sweet.  Consequently  you  think  that  the  price  of 
material  as  well  as  higher  wages  is  rather  permanent? 


lL 


164     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Gen  Tripp.  I  do;  yes  sir.  I  think  that  until  these  tremendous 
Tvar  debts  are  very  largely  liquidated  there  can  be  no  marked  re- 
duction in  prices,  or  rather  a  resumption  and  a  return  to  the  oia 
value  of  currency.  The  war  debts  are  half  Pff  to-day  by  a  de^ 
preciated  dollar.  In  the  very  depreciation  of  the  dollar  it  pays 
50  per  cent  of  the  war  debts,  and  it  may  be  a  very  wise  economic 
law  and  prevent  great  national  disaster  that  that  should  happen. 
And  until  these  debts  have  been  reasonably  well  liquidated  and  taken 
care  of  I  see  no  hope  for  lower  prices  to  any  particular  extent. 

Commissioner  Sweet.  So  that  the  street-railway  fares,  if  based 
upon  the  actual  purchasing  power  of  money,  would  to-day  be  con- 
siderably more  than  a  nickel;  would  they  not? 

(Jen.  Tripp.  Oh,  yes,  they  would  be  10  cents.         .  ,  ^   ^,    .  , . 

Commissioner  Sweet.  But  if  I  understand  you  ri^ht,  that  would 
not  solve  the  problem  entirely,  because  it  would  still  lack  the  ele- 
ment  of  elasticity? 

Gen.  Tripp.  Precisely.  .  ^     j         *i,  *     i  ^^^.f « 

Commissioner  Sweet.  How  would  you  introduce  that  element? 

How  would  the  various  changes  be  made  under  your  plan  to  meet 

the  varying  conditions  that  might  arise?  j..      n    .    2. 

Gen.  'Tripp.  You  would  have  to  increase  fares  as  the  hrst  step, 

and  then , ,  ,     .     ,  ^.       t 

Commissioner  Sweet.  That  would  be  tentative,  I  suppose. 

Gen.  Tripp.  Tentative.     And  then  the  surplus  account  of  the 

companies— the  accumulated  net  profits  of  the  companies— would  be 

the  governing 

Commissioner  Sweet.    The  barometer  ?,,,.,  , 

Gen.  Tripp.  The  barometer.     As  we  reached  a  higher  or  lower 

point  your  fares  would  be  adjusted,  not  at  frequent  periods  but 

often  enough  to  keep  the  thing  in  a  stable  equilibrium. 

Commissioner   Sw^eet.  So   that   whatever   arrangement   is  made 

would  in  your  judgment  need  to  include  the  ability  to  ad]ust  and 

readjust  and  then  readjust? 

Gen.  Tripp.  Yes,  sir.  *  ,   ,  ,       1         •  j- 

Commissioner  Sweet.  As  might  be  demanded  by  changing  condi- 

Gen.  Tripp.  Yes.  We  must  put  the  street-railway  industry  in  the 
position  that  every  other  business  is  in— that  it  can  adjust  the  price 
of  its  product  to  the  cost  of  the  product. 

Commissioner  Meeker.  You  were  on  the  subject  of  investment  as 
the  proper  basis  for  determining  the  amount  upon  which  earnings 
should  be  calculated.  Will  you  elucidate  that  a  little  more  fully? 
How  is  it  possible  to  get  at  the  actual  money  put  into  a  property  i 

Gen  Tripp.  I  think  the  most  feasible  method  would  be  an  examina- 
tion into  the  various  classes  of  securities  that  have  been  issued  upon 
an  electric-railwav  property  from  its  beginning  as  an  electric-railway 
propei-tv,  and  not  go  back  'into  the  horse-car  days— that  examination 
to  develop  what  disposition  was  made  of  the  securities,  whether  they 
were  sold  for  cash,  and  if  so,  at  what  price ;  or  to  state  it  in  another 
way,  at  what  discount.  I  think  the  history  of  each  company,  as  re- 
cards  its  security  issues,  would  be  readily  available  and  that  that 
method  would  be  more  feasible  than  an  examination  of  the  books. 
The  books  of  a  street-railway  company  show  on  its  asset  side  certain 
arbitrary  items  which  are  simply  used  to  offset  items  upon  the  credit 


,        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     165 

side  and  do  not  in  themselves  represent  in  all  cases  investment  in 
the  property.  And  since  these  systems  are  thirty  to  thirty-five  years 
old  and  many  of  them  have  been  through  receivers'  hands  and  have 
changed  hands,  it  would  be  almost  an  impossibility  to  trace  through 
the  books  of  account  the  investment  in  the  property.  While,  on  the 
other  hand,  as  I  have  just  stated,  evidence  regarding  the  different  is- 
sues of  securities  is  always  available. 

Commissioner  Meeker.  Would  it  not  be  necessary  to  take  account 
of  the  money  investment  in  the  original  horse-car  lines,  or  would  you 

write  that  off  as  a  loss? 

Gen.  Tripp.  Those  electric  railways  which  began  as  horse  railways 
and  were  equipped  and  developed  as  a  system  starting  with  horse 
railways,  like  the  West  End  of  Boston  for  example,  probably  have  as 
clear  a  record  in  regard  to  their  securities  issued  in  the  horse-car  days 
as  they  have  in  the  electric  days.     I  know  that  to  be  so  in  the  case  of 
the  West  End  Street  Railway,  at  least  as  far  back  as  1860,  because 
in  some  litigation  that  was  had  in  Massachusetts,  the  issue  being 
something  I  have  now  forgotten,  I  was  employed  to  report  upon  the 
security  issues  and  what  became  of  them— how  they  were  disposed 
of— from  1860.     That  went  back  into  the  Middlesex  Railway  time. 
And  I  had  no  difficulty  in  securing  information  and  getting  a  state- 
ment which  satisfied  the  court  as  to  the  disposition  of  all  of  those  se- 
curities back  to  I860.  *  ij  I      xi    X  •     i-i 

Commissioner  Meeker.  Then  your  answer  would  be  that  in  the 
horse-car  line  it  will  be  necessary  to  take  account  of  all  investments, 
even  in  the  horse-car  days  ?  . 

Gen  Tripp.  I  then  would  like  to  go  on  a  little  further  with  my 
answer.    There  are  some  companies,  however,  that  started  by  buying 
up  the  horse-railroad  system.     That  made  a  clean  start.     They  usu- 
ally bought  the  horse-railroad  system  for  less  than  it  cost.     And  I 
do  not  believe  that  in  those  cases  the  public  would  be  endangered  if 
thev  started  at  that  point.     So  where  an  electric  radway  started  by 
buying  up  an  existing  horse  railway  and  made  a  clean  start  I  would 
make  a  clean  start  there  also.      _  ,   .    .         .  ....  ,.      . 

Commissioner  Meeker.  You  think  it  is  easier  and  better  policy  to 
set  at  the  investment  in  the  way  that  you  have  indicated  rather  than 
to  make  a  physical  valuation  of  the  properties  now  existing? 

Gen  Tripp.  A  physical  valuation  of  the  property,  Mr.  Commis- 
sioner would  not  determine  the  investment.  It  would  determine  the 
value  'and  that  value  would  be  figured  on  some  basis  of  prices.  An 
arbitrary  assumption  would  have  to  be  made  as  to  what  period  they 
would  take  for  the  purpose  of  establishing  prices  on  such  a  valua- 
tion It  would  be  impossible  to  take  each  item  of  an  electric  railway 
and 'ascertain  what  the  original  price  paid  for  that  particular  piece 
of  apparatus  was,  because  in  the  first  place  it  does  not  represent 
the  whole  investment ;  it  may  have  been  replacement  of  an  original 
piece  of  apparatus  and  the  difference  between  the  cost  of  the  original 
piece  and  the  new  piece  charged  to  plant  account,  while  the  value 
of  the  old  piece  would  be  charged  to  operating  expense.  So  that 
there  is  no  method  of  valuation  which  will  determine  the  investment 

in  the  property.  ..      .  i  *         i 

Commissioner  Meeker.  Will  it  not  be  necessary  to  make  assump- 
tions and  hypotheses  in  getting  at  actual  investment  in  the  way  you 
have  indicated? 


166     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Gen.  Tripp.  No;  I  distinguish  between  investment  and  valuation. 
By  investment  I  mean  the  money  that  was  spent  on  the  property. 

Commissioner  Meeker.  By  that  you  mean  the  money  that  was 
turned  back  into  the  improvement  and  extension  of  the  road  out  of 

earnings?  ^  .       ^,         .,  ^  ,,  , 

Gen.  Tripp.  That  would  be  part  of  it.  The  other  part  would  be 
the  money  received  from  the  sale  of  bonds  and  expended  on  the 
property  f  the  money  received  from  the  sale  of  stock  and  expended 

on  the  property. 

Commissioner  [Meeker.  And  the  accounts  of  the  railways  will  show 
all  of  these  additions  to  investment,  whether  they  are  additions  in 
the  purchase  of  bonds  and  stocks  or  whether  they  are  additions  made 

out  of  earnings?  ,      ,      ,        -  x     x  ^i. 

Gen.  Tripp.  No,  I  do  not  think  that  the  books  of  account  of  the 
companies,  generally  speaking,  are  in  such  a  condition  as  to  show 
that  And  for  that  reason  I  have  suggested  that  the  books  of  ac- 
count be  ignored ;  that  evidence  be  taken  as  to  the  securities  that  have 
l)een  issued  fi'om  the  beginning  on  this  property— what  they  were 
sold  for  and  what  became  of  the  money.  The  mere  fact  only  would 
be  established— did  the  money  go  into  the  proi>erty  ?  Haying  estab- 
lished that  the  money  went  into  the  property,  that  would  be  sutti- 
cient  evidence  to  call  it  investment  upon  which  a  return  is  fair  and 

Commissioner  Meeker.  Pardon  me  for  my  persistence,  but  I  want 
to  get  this  perfectly  clear.  There  would  l>e  some  record  somewhere, 
would  there  not,  whether  it  be  on  the  books  of  the  company  or  where- 
soever,  showing  property  extensions  or  improvements  made  out  of 

earninfirs  ? 

Gen.  Tripp.  Yes,  the  books  of  these  companies  would  probably 

show  that,  but , ,  .     ,    i       i,     *.        i    • 

Commissioner  T^Ieeker.  You  would  include  all  of  such  increases 
in  the  value  of  the  property  of  the  company  made  from  earnings 
in  the  investment— capital  investment? 

Gen.  Tripp.  Yes.  ,      x  .i. 

Commissioner  [Meeker.  I  would  like  to  ask  you  about  the  economic 
iustification  for  including  as  part  of  the  investment,  upon  which 
stockholders  and  bondholders  are  entitled  to  receive  income,  invest- 
ments that  are  made  not  by  stockholders  and  bondholders  but  by  the 

ridinc:  public.  .       ,,     ^         .    •  ^    a.i 

Gen    Tripp.  Well,  if  you  refer,  Mr.  Commissioner,  to  the  money 

that  has  Iwen  turned  back  into  the  property  from  the  earnings,  I 

can  not  quite  subscribe  to  your  theory  that  that  is  an  invesinent. 

Conunissioner  Meeker.  I  have  not  expressed  any  theory.     I  beg 

Gen  Tripp.  Well,  I  can  not  quite  subscribe  to  the  idea,  I  will 
amend  that— I  can  not  quite  subscribe  to  the  idea  that  that  is  an 
investment  by  the  rider.  The  earnings  that  have  been  turned  back 
into  the  property  were  net  profits  that  the  stockholders  were  entitled 
to  They  chose,  instead  of  taking  those  in  cash,  to  put  them  back 
into  the  property.  There  is  no  difference  between  that  method  and  a 
method  where  they  had  collected  the  dividends,  put  them  m  then- 
pockets,  taken  the^  money  out  of  their  pocket  again  and  purchased 
additional  securities  of  the  street  railway  in  order  to  furnish  it  funds 
for  the  necessary  development. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     167 

Commissioner  Meeker.  Are  there  any  limitations  in  any  of  the 
municipalities  with  which  you  are  acquainted  upon  the  dividends 
that  may  be  paid  upon  stock? 

Gen.  Tripp.  There  are  some  of  the  recent  arrangements  ot  cost-ot- 
service  plans  which  have  such  limitations. 

Commissioner  Meeker.  You  see  the  drift  of  my  question  it 
there  were  a  limitation,  say  of  8  per  cent,  upon  stock  it  would  be 
l)ossible  for  the  company  to  earn  16  per  cent,  let  us  say,  and  still  pay 
8  per  cent  dividend.  This  is  merely  a  hypothetical  question,  under- 
stand. 

Gen.  Tripp.  Yes.  ,     ,    .         .,  ^       i?  i-i. 

Commissioner  Meeker.  And  put  back  into  the  property  ot  the 
company  8  per  cent.  And  I  do  not  think  I  need  to  explain  any 
further  how  that  would  be  a  subtle  way  of  doing  just  what  I  have 
suggested  might  be  done,  making  improvements  in  the  property  of 
the  street-railway  company  out  of  the  fares  paid  by  the  riding  public. 
Tq  riof  that  true  ? 

Gen.  Tripp.  Well,  Mr.  Commissioner,  where  such  a  limitation 
exists  provisions  are  also  made  as  to  what  shall  be  done  with  the 
surplus  over  the  8 'per  cent.  And  in  the  city  of  Chicago,  the  city 
entered  into  a  contract  with  the  Chicago  railways  by  which  a  surplus 
over  a  certain  dividend— I  do  not  remember  the  amount— should  be 
divided  between  the  city  and  the  company,  the  city  taking  55  per 
cent  and  the  company  taking  45  per  cent.  Now,  if  the  company  chose 
to  reinvest  its  45  per  cent,  I  think  it  fairly  belongs  to  the  company. 

Commissioner  Meeker.  Do  you  think  it  might  be  a  fair  way  of 
o-ettino-  at  the  property  upon  which  income  is  to  be  allocated  to  the 
bondholders  and  stockholders  by  taking  account  of  either  apprecia- 
tion or  depreciation  in  the  physical  properties  of  the  companies  ? 

Gen.  Tripp.  No,  sir.  My  theory  excludes  the  question  of  deprecia- 
tion or  appreciation.  •  ,,    ,    ,  ^  i       £ 

Commissioner  Meeker,  I  want  to  get  that  clear,  lou  spoke  ot 
the  New  York  Street  Railway  Co.  As  I  understood  you,  you  said 
there  were  11  leased  lines,  or  is  it  12  lines  leased? 

Gen.  Tripp.  Approximately  10,  I  think  I  stated,  at  the  present 

Commissioner  Meeker.  Ten,  all  told? 

Gen.  Tripp.  I  think  so.  ,      x.-  i  .i     4  to 

Commissioner  Meeker.  Including  the  Eighth  Avenue  line? 

Gen  Tripp.  I  would  like  to  say  I  would  not  like  to  be  held  too 
closely  to  those  figures.  I  am  testifying  from  memory  and  I  am 
only  approximating  the  figures.  .  ,     .  ,         ^     ^ 

Commissioner  Meeker.  \  es.  What  I  wished  to  get  at  was  ap- 
proximately the  proportion  of  the  lines  operated  by  the  New  York 
Street  Railway  Co.  that  are  leased  lines. 

Gen.  Tripp.  In  mileage  of  tracks?  ^   t  i-i,-   i 

Commissioner  Meeker.  Yes,  that  would  be  sulhcient,  1  think. 

Gen.  Tripp.  My  estunate  is  but  little  better  than  a  guess,  but  my 

guess  is  25  per  cent.  j       ^  •  i  4. 

Commissioner  Meeker.  Seventy-five  per  cent  are  owned  outright 

by  the  company? 

Gen.  Tripp.  Yes.  ^       -,      ^      i  i.  ^         * 

Commissioner  Meeker.  And  as  I  understand  your  statement,  some 

of  these  leased  lines  draw  high  dividends? 


168    raocEEDiNGS  of  federal  electric  railways  commission.  • 

Gen.  Tripp.  Yes.  ,  •  i    •  i.       i. 

Commissioner  Meeker.  Is  not  that  rather  a  high  interest  upon 

bonded  debt? 

Gen.  Tripp.  You  mean  does  not  that  produce 

Commissioner  Meeker.  Is  it  not  a  fixed  charge  on  the  ^ew  York 
Street  Railway  Co.  in  the  shape  of  a  bonded  debt? 

Gen  Tripp.  In  so  far  as  those  high  rentals  exist,  standing  by  thein- 
selves,  they  are  high.    There  are  only  two  or  three  which  are  high 
Those  two  or  three  constitute  such  a  small  proportion  of  the  total 
aeorreirate  fixed  charges  upon  the  whole  system  that  its  effect  is 
almost  negligible  in  the  whole.    But  viewed  as  a  property  standing 

by  itself,  the  return  is  high.  ,      .     -  -   t  *• 

Commissioner  Meeker.  Could  you  submit  for  our  information  a 
statement  or  some  printed  document  that  would  give  us  more  infor- 
mation about  this  particular  street-railway  line,  the  percentage  of 
leased  lines  and  what  that  obligates  the  company  to  ? 

Gen  Tripp.  I  will,  with  the  permission  of  the  receiver  of  the  New 
York  Railways.  I  am  not  an  officer,  I  am  not  now  a  director,  and  i 
think  I  should  have  to  get  his  permisison,  but  I  will  do  that ;  i  will 

^^Coimnissioner  Meeker.  You  also  made  the  statement,  as  I  under- 
stood it  that,  the  5-cent  fare,  generally  speaking,  was  only  sutticient 
to  pay  a  reasonable  return  upon  investment. 

Gen.  Tripp.  Yes.  ^  ,    ^  ^^        i       u 

Commissioner  Meeker.  So  that  as  a  matter  of  fact  there  has  been 
*  very  little  extension  and  improvement  work  done  out  of  the  earnings 
of  the  street-railway  companies  so  far  as  you  know  ? 

Gen  Tripp  Well,  the  stockholders  of  street  railways  have  fore- 
gone the  collection  of  dividends  to  quite  a  large  extent  and  that 
money  has  gone  back  into  the  property  and  constitutes,  m  my  judg- 
ment a  large  sum.  But  that  is  not  inconsistent  with  my  statement 
that  'a  5-cent  fare  has  yielded  only  a  fair  return,  because  they  have 

not  taken  the  return.  .        .   i    •  4. 

Commissioner  Meeker.  The  return  reinvested  in  property  was 
not  what  could  be  called  an  excessive  return  in  any  case? 

Gen.  Tripp.  No,  sir.  . , 

Commissioner  Meeker.  In  regard  to  the  zone  system,  you  said,  as 
I  understood,  that  you  were  not  aware  of  its  being  put  in  operation 

on  any  large  system.  ^  .^  T.r     o 

Gen  Tripp  No  ;  I  am  not  aware  of  it,  Mr.  Commissioner. 
Commissioner  Meeker.  Is  it  not  the  same  thing,  however— the 

extra  fares  that  are  charged  on  the  Massachusetts  mterurban  lines 

Gen.  Tripp.  Oh,  yes. 

Commissioner  Meeker.  Lines  that  extend  beyond  city  or  township 

"Cren.  Tripp.  Oh,  yes ;  that  is  in  universal  operation  throughout  the 
United  States— the  zone  system  on  interurban  lines. 

Commissioner  Meeker.  Is  not  the  evidence  then  pretty  conclusive 
that  the  American  peopde  have  paid  zone  fares  and  would  probably 
continue  to  pay  them  even  on  a  different  principle,  if  they  were 

^  Gen^  Tripp.  Yes,  they  might.     As  I  stated,  it  has  been  the  general 
opinion  of  street-railway  men  that  the  public  would  not  stand  for  it, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     169 

as  they  say,  but  I  do  not  know  how  they  arrived  at  that  opinion, 
because  it  never  has  been  tried.  ,     . 

Commissioner  Beall.  You  mean  within  the  limits  of  a  city  i 

Gen.  Tripp.  Within  the  limits  of  a  city;  yes. 

Commissioner  Meeker.  I  presume  that  they  argue  that  we  are 
different  from  Europe  and  because  they  do  it  in  Europe  we  can  not 
do  it  in  this  country. 

Gen.  Tripp.  That  may  be  so. 

Commissioner  Meeker.  I  ha*ve  been  very  greatly  puzzled  by  the 
very  great  difference  between  the  cities  in  the  earning  capacity  of  the 
street-railway  lines.  The  New  York  Street  Railway  Co.  is  m  bank- 
ruptcy. It  seems  to  me  that  there  is  a  company  that  should  make 
money,  if  any  company  could  make  money,  as  it  appears  to  me,  and 
I  have  read  in  the  newspapers  recently— I  do  not  know  that  that  can 
be  taken  as  evidence— but  I  have  read  in  the  newspapers  that  the 
street  railways  of  San  Francisco  are  very  prosperous.  Now  the 
traffic  conditions  are  somewhat  different,  as  I  conceive,  as  between 
New  York  City  and  San  Francisco,  yet  not  sufficiently  different  to 
account  in  my  "mind  for  the  enormous  difference.  Can  you  give  us 
any  explanation  of  these  differences,  if  they  exist ;  and  if  they  do  not 
exist,  will  you  tell  us  that  they  do  not?  , 

Commissioner  Beall.  Did  you  mean.  Commissioner  Meeker,  the 
lines  that  the  city  owns  in  San  Francisco  or  the  lines  that  the  private 

companv  owns?  , 

Commissioner  Meeker.  I  am  not  prepared  to  say,  because  the 

newspaper  articles  I  read  did  not  state- 

Commissioner  Beall.  The  lines  that  the  private  company  owns 
are  not  prosperous  but  the  lines  that  the  city  owns  are  short  lines 
with  heavy  densitv  of  traffic  and  have  a  high  fare  and  are  prosperous. 

Gen  Tripp.  Difterent  conditions  do  exist  in  different  cities.  There 
are  manv  factors  that  enter  into  it.  In  New  York  City  the  cost  of 
construction  was  tremendous.  They  have  an  underground  trolley 
svstem.  The  formation  of  the  island  is  largely  rock  foundation  In 
some  cases  they  had  to  move  the  Croton  water  mam.  It  cost  ^500,000 
to  go  through  Union  Square  alone  on  that  account.  The  ground 
under  New  York  City  is  a  perfect  network  of  gas  pipes,  water  pipes, 
electric  conduits  and  everything  you  can  imagine ;  so  the  construction 
of  an  underground  trolley  all  over  Manhattan  Island  was  a  tre- 
mendously expensive  proposition,  and  the  capitalization  in  that  case 
wa«  honestly  very  much  more  than  in  most  other  cities.  That  made  a 
large  capitalization.  Then  they  were  confronted  with  the  congestion 
in  those  narrow  streets  which  reduced  the  car-mile  speed;  1  have 
not  the  figures  now,  but  a  verv  marked  reduction  in  speed  over  what 
we  were  able  to  get  in  other  cities.  So  the  service  that  you  got  out 
of  a  car  was  much  less;  the  service  that  you  got  out  of  the  platform 
men  was  much  less.  Then  we  have  the  competition,  of  course,  m  that 
longitudinal  island— avenues  running  up  and  down  the  island,  the 
competition  of  the  subway  and  elevated  lines,  which  was  more  intense 

there  than  anywhere  else.  ,.      ,  .    ^r       a-    i  /i? 

The  street  railway  would  never  have  lived  in  New  1  ork  except  tor 
the  tremendous  earning  power  per  car-mile ;  and  that  offset  these  dis- 
advantages, but  it  left  it  with  a  narrow  margin.  As  a  matter  of  fact, 
the  street-railway  business  has  existed  on  a  narrow  margin  for  15 
years,  and  it  did  not  take  much  to  wipe  out  that  margin. 
lecKHS**— 20 12 


170     PROCEEDINGS  OF  VEDiLKAL  ELECTRIC  RAILWAYS  COMMISSION. 

Now,  there  are  other  cities  where  the  lines  have  not  properly  cov- 
ered the  city,  where  the  people  are  not  getting  the  service  that  they 
ou^ht  to  get  out  of  a  street-railway  system.  The  street-railway  sys- 
tem is  taking  the  cream.  And  those  lines,  wherever  they  exist,  may 
be  able  to  run  on  a  5-cent  fare.  i     j- 1    n    *    ^;^^  ^4 

The  situation  in  Washington  here  is  a  splendid  illustration  ot 
that  situation.  One  company  can  earn  a  return,  as  I  understand  it, 
on  a  5-cent  fare.  The  other  company^,  which  gives  a  service  out  into 
the  suburbs,  which  serves  the  people,  which  appears  to  me  better 
than  the  prosperous  company,  is  penalized;  it  can  not  make  a  tair 
i-eturn  because  it  gives  a  different  kind  of  service— it  sells  a  more 

expensive  produd:.  ,        ,      ,..  „„ ;i 

So  the  factors  that  enter  into  any  given  locality  are  numerous  and 

differ  in  each  locality.    But  even  the  pi^si>erous  ones,  if  there  are 

any  left,  are  operating  on  a  narrow  margin.  ,       . 

Commissioner  Meeker.  The  moral  for  the  commission  is  not  to 

indtilge  in  too  broad  generalizations? 

Gen.  Tripp.  Yes.  ,  .^  ,.  ^ 

Commissioner  Meeker.  But  deal  with  each  community  according 
to  the  pare  iciilar  conditions  in  that  community?         .      ,.     . 

Gen  Tin  pp.  Yes.  Generalizations  are  dangerous  in  this  inquiry, 
except  so  far  as  they  are  necessary  to  bring  out  a  condition  wliich 
can  be  shown  to  be  universal,  regardless  of  local  conditions.  Ihe 
street  railways  in  general  are  bankrupt  regardless  ot  local  condi- 
tions.  There  are  different  degrees  of  bankrui>tcy,  if  you  please. 
Some  are  worse  bankrupt  than  others;  some  are  just  skinnmg  along; 
some  will  be  bankrupt  within  a  week.  But  there  are  different  de- 
grees of  it.  ,  ,  .  .  n^^ 
Commissioner  Meeker.  As  I  understand  you,  in  answer  to  Com- 
missioner Sweet's  question  you  said  you  did  not  think  very  much 
improvement  in  street-car  equipment  and  organization  was  possible, 
at  least  it  is  not  at  present  in  sight,  so  that  we  can  not  look  for  tlie 
cutting  down  of  the  cost  of  the  service  to  any  great  extent,  so  tar 
as  we  are  able  to  see  ahead  now. 
Gen.  Tripp.  No,  sir;  you  can  not. 

Commissioner  Meeker.  In  regard  to  the  New  York  City  situation, 
would  it  be  at  all  feasible,  do  you  think,  to  adopt  i>erhaps  the  one- 
man  car  for  the  surface  lines— some  of  the  surface  lines  that  are 
comi>etinff  with  the  long-haul  subway  and  elevated  lines  ^  ,  ^  ,  ^ 
Gen  Tripp.  I  should  think  in  New  York  City  it  would  be  about 
the  worst  place  that  you  could  operate  a  one-man  car.  At  rush 
hours  a  one-man  car  simply  could  not  handle  some  of  the  traffic, 
particularly  on  the  downtown  cross-town  lines  leading  to  Brooklyn 
Bridge  and  to  the  various  ferries  and  Hudson  tubes. 

Commissioner  Meeker.  Pardon  me,  may  I  interrupt  there?  I  was 
si^aking  of  the  lines  that  are  running  in  competition  with  the  ele- 
^4ted  and  the  subway  lines— the  noith  and  south  hues  in  genei^l— 
and  may  I  add  here,  would  it  be  possible  to  run  them  at  frequent 
enough  intervals  merely  for  local  traffic  under  a  zone  system,  so  that 
it  might  relieve  the  elevated  and  subway  lines  and  might  perhaps 
contribute  toward  the  solution  of  the  transiwrtation  problem  ? 

(ien  Tripp.  Mv  judgment  would  be  that  it  would  not  generally 
speaking.     The  cars  are  already  operated  on  the  principal  longitudi- 


PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION.     171 

nal  lines  about  as  closely  as  they  ought  to  run  in  rush  hours  and 
they  could  not  get  them  any  closer.  And  of  course  a  car  that  seats 
40  or  50  people  will  carry  more  than  a  one-man  car. 

Commissioner  Gadsden.  You  mean  on  account  of  the  vehicular 

travel,  do  you  not  ?  ,  i   xi. 

Gen.  Tripp.  Well,  they  operate  all  the  cars  they  can  and  the 
vehicular  traffic  results  in  cutting  down  the  schedule,  which,  as  I 
have  already  stated,  prevents  their  getting  the  greatest  use  out  of 

their  equipment.  n  ti     ^       i 

Commissioner  Meeker.  Before  I  go  any  further  I  would  like  to  ask 
for  your  solution  of  the  New  York  situation. 

Gen.  Tripp.  Oh,  cost-of -service  plan,  as  I  have  just  outlined. 

Commissioner  Meeker.  Well,  would  that  involve  something  like 
Q  10-cent  fare  ? 

Gen.  Tripp.  That  of  course  I  can  not  state.  That  would  require 
an  analysis  of  how  much  the  deficit  really  is,  and  I  am  not  familiar 
with  it.  I  have  heard  it  stated  that  a  T^-cent  fare  might  do  it,  but 
it  was  doubtful.    I  do  not  know  that  of  my  own  knowledge. 

Commissioner  Meeker.  So  far  as  the  physical  matter  of  conduct- 
ing transportation  is  concerned,  you  do  not  see  much  chance  for 
improvement  over  the  present  situation  in  New  York? 

Gen.  Tripp.  No,  sir. 

Commissioner  Meeker.  According  to  your  present  knowledge? 

Gen.  Tripp.  No,  sir;  I  do  not  see  much  chance  for  improvement. 

Commissioner  Meeker.  It  is  a  rather  hopeless  situation  for  New 
York  then.  Now  just  one  more  question.  Do  you  think  that  the 
one-man  car  may  aid  in  the  solution  of  the  transportation  problems 
of  cities  other  than  New  York?     Do  you  think  it  has  possibilities? 

Gen.  Tripp.  A  one-man  car,  under  my  theory,  sliould  be  consid- 
ered only  from  the  standpoint  of  its  economy,  looked  at  from  the 
standpoint  of  the  public.  Will  it  properly  serve  the  public.  Is  it 
all  they  require?  And  if  it  is  a  satisfactory  service,  it  is  a  cheaper 
service;  and  the  public  ought  to  get  its  service  as  cheap  as  it  can. 
But  it  is  not  a  cure,  nor  is  it  fundamentally  proper  to  attempt  as  a 
step  in  the  solution  of  this  problem  to  force  a  one-man  car  into  a 
situation  that  economcially  requires  a  larger  car.  It  is  forcing  an 
economy  at  tlic  expense  of  the  public,  because  the  whole  situation  is 
set  up  on  an  erroneous  foundation. 

Commissioner  Meeker.  I  think  that  is  all,  Mr.  Chairman. 
Commissioner  Beall.  When  you  were  talking  of  investment  did 
you  bring  out  the  point  that  the  street-railway  company  sells  say 
a  million  dollars  of  bonds  for  $900,000  and  it  has  really  made, 
nevertheless  a  million-dollar  investment,  because  that  is  what  it  has 
eventually  to  pay. 
Gen.  Tripp.  I  agree  to  that  entirely. 
Commissioner  Beall.  Did  you  bring  that  out? 
Gen.  Tripp.  I  did  not. 

Commissioner  Beall.  I  wanted  the  commission  to  understand 
that  there  are  a  good  many  things  that  go  to  make  up  the  cost  of 
this  stivet-railway  property  that  we  are  apt  to  lose  sight  of. 

Gen.  Tripp.  Yes.  .  . 

Commissioner  Meeker.  Will  you  make  that  statement  so  it  will 
appear  in  the  record  as  your  statement? 


■■■» 


172      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Gen.  Tripp.  In  arriving  at  the  investment  in  a  property  there 
should  be  inchided  as  a  part  of  the  legitimate  investment  the  dis- 
count on  securities :  that  is  to  say,  securities  are  not  always  salable 
at  par,  and  they  are  sold  at  the  best  price  obtainable,  and  the  differ- 
ence between  the  price  so  obtained  and  par  represents  a  discount 
which  is  a  proper  investment  in  these  properties  upon  which  a 
return  should  be  allowed. 

Commissioner  Meeker.  Would  that  apply  to  stocks  as  well  as 

bonds?  .         ^  T  ^1  •   1    •  * 

Gen.  Tripp.  Stocks  are  usually  issued  at  par.  I  think  m  most 
cases,  and  perhaps  all,  stock  when  it  is  issued  is  fully  paid  at  100 
cents  on  the  dollar.  Now  it  may  be  paid  either  in  cash,  100  cents 
in  the  dollar,  or  it  may  be  paid  in  promotion  service  at  100  cents 
on  the  dollar,  and  between  those  two  classes  I  would  distinguish. 
Where  the  stock  is  sold  for  cash,  even  if  it  was  not  sold  at  100  cents 
-on  the  dollar,  if  some  law  permits  it,  but  if  it  was  the  best  price 
^^lat  could  be  received  for  that  stock,  the  discount  there  should  go 
'iito  the  cost  of  the  property. 

Commissioner  Meeker.  Then  what  would  be  the  difference  be- 
tween taking  the  total  bonded  debt  and  all  the  stock  outstanding,  ex- 
cept such  as  was  issued  for  promotion  services,  sum  them,  and  take 
that  sum  as  the  investment  upon  which  returns  must  be  paid  to  bond- 
holders and  stockholders? 

Gen.  Tripp.  That  is  precisely  what  happens.  Segregate  the  se- 
curities that  are  watered  securities,  so  called,  prove  that  the  rest  of 
the  securities  were  not  watered,  and  if  the  rest  of  the  securities  were 
not,  they  were  honestly  issued  for  value.     That  is  the  investment 

in  the  property.  .       .    ., 

Commissioner  Meeker.  If  that  were  done— turning  to  the  question 
Mr.  Sweet  asked— would  that  in  general  give  the  total  capitalization 
above  or  below  a  reasonable  physical  valuation?  I  use  reasonable 
physical  valuation  because  physical  valuations  are  made  and  they 
are  alleged  to  be  reasonable. 

Gen.  Tripp.  I  do  not  think  that  question  can  be  answered  by  say- 
in^  yes  or  no.  About  10  years  ago.  or  perhaps  a  little  earlier,  there 
came  a  period  of  readjustment  of  some  of  the  principal  railroad  prop- 
erties in  the  United  States— reorganizations.  At  that  time  I  was 
familiar  with  what  was  going  on  generally  over  the  United  States, 
and  as  to  those  properties  with  which  I  was  familiar  the  securities 
were  so  reduced  that  the  physical  valuation  of  the  property  in  al- 
most all  cases  exceeded,  and  in  all  cases  equaled  and  more  than 
equaled,  the  new  securities  that  were  issued— stocks,  bonds,  and  secu- 
rities of  every  character.  Now,  then,  the  statement  regarding  those 
properties  would  be  that  the  investment  in  the  property— determined 
by  the  methods  which  I  have  indicated,  perhaps,  are  the  more  feasi- 
ble methods— would  be  less  than  the  physical  valuation  of  the  prop- 
erty. There  are  undoubtedly  some  properties  where  this  operation 
has  not  gone  through  yet  that  such  a  method  would  determine  the 
amount  m  excess  of  the  physical  valuation. 

Commissioner  Meeker.  That  is  by  the  method  that  you  have  sug- 

^^Gen.  Tripp.  Yes,  that  is  to  say  this :  The  physical  valuation  of 
the  property  taken  at  prewar  prices  might  not  in  all  cases  equal  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     173 

investment  in  the  property  as  determined  by  the  method  I  have  sug- 
gested. But  even  if  it  did  not,  the  money  actually  went  into  the 
properties  for  the  service  of  the  people— that  is  the  test.  If,  m  oMer 
to  produce  that  service,  there  has  been  scrapped  an  overhead  trolley 
system,  and  an  underground  system  substituted  for  the  beautification 
of  the  city,  if  expensive  tunnels  have  been  built  and  the  company 
participated  in  them— if  many  of  those  things  which  you  might 
imagine  had  occurred,  that  would  form  a  part  of  the  legitimate  in- 
vestment  in  the  property  for  the  service  of  the  public,  but  might  not 
be  reflected  in  the  physical  value  of  the  property  as  it  exists  to-day. 
I  say  there  might  be  cases  of  that  kind..  I  doubt  if  there  would  be 
many,  and  perhaps  none;  and  I  would  say  further  that  I  do  not 
know  of  any  case  where  I  think  that  would  happen.  . 

Commissioner  Meeker.  Do  you  think  that  it  would  be  easier  to 
arrive  at  an  approximation  of  a  proper  valuation  through  the  method 
you  have  suggested  of  getting  at  investment  rather  than  by  the 
method  of  physical  valuation?  .  ,     ,        .     .,  ^  x       1 1 

Gen.  Tripp.  Yes ;  I  think  so.     I  think  that  is  the  most  feasible 

method,  as  I  have  suggested.  .i    i.         • 

Commissioner  Meeker.  It  would  be  easier  and  less  costly  to  arrive 

at? 

Commfss^oner^MEEKER.  And  you  think  that  the  public  would  be 
satisfied  by  your  method  qiiite  as  much  as  by  any  method  of  arriving 
at  physical  valuation?  c  i    .^^ 

Gen  Tripp.  Yes,  sir.  I  think  it  would  depend  upon  the  confidence 
that  the  public  placed  in  the  commission  or  individual  that  made  the 
inquiry  along  the  lines  I  have  suggested. 

Commissioner  Meeker.  That  is  all,  Mr.  Chairman.  .   . 

Commissioner  Gadsden.  General,  in  this  method  of  arriving  at 
values  you  have  been  talking  about,  is  it  not  true,  referring  to  the  de- 
preciation in  the  purchasing  price  of  money  that  you  have  referred 
to,  that  under. that  system  all  the  loss  would  fall  on  the  investor? 
In  other  words,  suppose  that  a  property  worth  a  million  dollars, 
costing  a  million  dollars  under  your  system  20  years  ago,  is  covered 
by  bonds  at  5  per  cent:  under  your  plan  that  property  to-day  would 
be  we  will  say,  valued  at  a  million  dollars  and  the  return  is  still 
5  per  cent  Now,  admitting  that  the  value  of  money  has  depreciated 
50  per  cent,  the  investor  is  getting  one-half  return  on  his  property, 

is  he  not  ? 
Gen.  Tripp.  Yes.  .    .  -       -         £ 

Commissioner  Gadsden.  Therefore  is  it  not  necessary,  m  view- of 
this  extraordinary  depreciation  in  the  purchasing  price  of  money, 
in  order  to  equalize  that  situation  either  to  increase  the  rate  ot  re- 
turn or  to  give  the  current  value  of  the  property  in  the  value  of 

^^Gen  Tripp.  I  do  not  believe  so,  Mr.  Commissioner.  It  would  be 
lifting  yourself  by  your  boot  straps.  Currency  has  depreciated.  It 
was  the  operation  in  my  opinion  of  a  natural  law  brought  about  by 
the  tremendous  war  debts  all  over  the  world.  Those  war  debts  have 
got  to  be  paid.  Now,  in  order  to  do  that,  the  natura  law  depre- 
ciated currency  by  about  50  per  cent  and  paid  off  half  this  debt. 
The  people  who  had  to  have  immediate  assistance  because  they  had 
no  margin  of  safety  to  go  on  were  labor.    Next  we  find  the  landlord 


I 


■i 


174    proceedi:ngs  of  federal  electric  railways  commission. 

who  had  less  margin  of  safety  to  go  on,  and  he  seai^hed  for  greater 
income,  and  he  gcJ  part  of  it,  but  he  had  trouble  m  domg  it.  Labor 
particularlv,  then,  is  not  in  a  position  to  Pay  any  portion  of  this 
war  debt,  it  had  no  margin  to  pay  it  with.  It  has  got  to  be  paid. 
The  people  who  have  got  to  pay  it  are  the  fund  owners,  the  owners 
of  fixed-income  securities.  And  if  you  adjust  their  incomes  by  the 
methml  you  have  suggested  so  they  are  relieved,  you  have  not  done 
anything— you  have  just  lifted  yourself  up  by  your  boot  straps  and 
veil  are  right  where  you  were  when  you  started.  ^ 

Commissioner  Gadsden.  Is  it  not  true  that  the  people  by  your  phin 

would  be  confined  solely  to  public  utilities 

Gen.  Tripp.  No.  ,  .^i    .       _x        • 

Commissioner  Gadsden.  Would  it  not  be  true  with  investors  m 
everv  line  of  business,  that  their  property  would  be  appreciated  i 

Gen  Tripp  No;  I  think  vou  are  mistaken,  Mr.  Comtaissioner. 
There 'are  billions  of  fixed  income  bonds  held  by  investors  through- 
out the  United  States  on  which  they  can  not  get  relief— railroad 
bonds  Now,  your  theoi-y  is  that  the  street  railway  company  could 
get  relief  if  it  had  a  5  per  cent  bond ;  it  ought  to  have  an  increase  in 
Return  because  of  the  decreased  purchasing  power  of  the  dollar. 
Under  my  theory,  thev  are  exactly  in  the  same  position:  the  owner 
of  a  railroad  boiid  is  jiist  in  the  siime  position 

Commissioner  Gadsden.  Unquestionably,  but  getting  outside  ot 
reindnte<l  properties,  getting  \o  textile  properties  and  the  value  of 
st^el  properties— is  not  the  value  of  a  steel  mill  to-day  based  upon 
current  prices  and  not  what  it  cost?  , 

(ien  Tripp.  Yes ;  but  when  you  get  into  the  question  of  return  on 
stock  in  industrials,  the  industrials  are  reaping  a  harvest  in  this  case. 

Commissioner  Gadsden.  But  if  you  were  asked  a  similar  question 
— ^Aliat  is  the  value  of  a  shoe  factory  in  Massachusetts  or  Connecti- 
cut to-dav?— you  would  give  its  current  value,  would  you  not?  \ou 
would  not  say  its  value  was  what  the  investors  put  into  it  m  the 
histoiT  of  the  plant?  '        ,       ^    ,  ^.i     i     •      ^ 

(leii.  Tripp.  Well,  I  would  not  buy  a  shoe  factor^^  on  the  basis  of 
present  earnings,  on  the  same  theoiy  that  I  would  have  purchaseil  it 
liefore  the  war.  I  would  have  to  have  a  wider  margin.  There  is  a 
distinction  between  regulated  and  unregulated  industries.  My 
theorv  asks  the  public  to  guarantee  a  return  upon  our  investment  m 
electric  railways.  The  industrials  ask  no  one  to  guarantee  their  re- 
turn When  liard  times  come  they  must  take  their  medicine.  Now, 
you  can  not  regard  the  investment  in  a  public  utility  which  is  prac- 
ticed ly  guaranteed  by  the  public  on  the  same  basis ^    ,     .    -,     ^ 

Commissioner  Ga'dsden.  Do  you  think  the  history  of  the  industry 
as  vou  have  shown  it  to-day  has  shown  a  guaranty  of  return  ? 

Gen.  Tripp.  No  ;  but  I  am  dii^cting  all  my  testimony  here  toward 
the  theory  which  I  have  promulgated 

Commissioner  Gadsden.  Toward  the  future?  .      ,     j.  ^ 

Gen  Tripp.  That  there  should  he  a  different  relation  m  the  tiiture. 

Commissioner  Gadsden.  Exactly.  Therefore  is  it  not  necessary  to 
bring  the  situation  up  to  date  to  rectify  the  values  of  these  properties 
from  now  on  up  to  date  and  tlien  keep  the  account? 


proceedings  or  federal  electric  railways  commission.    175 


Gen.  Tripp.  No  ;  I  do  not  think  so.  ,       .        , 

Commissioner  Sweet.  Gen.  Tripp,  to  put  your  idea  into  language, 
which  the  average  man  would  clearly  understand,  let  me  ask  you 
this  question :  Take  for  illustration  the  country  merchant  who  erects 
a  small  frame  building  in  which  to  conduct  his  business;  he  prospers 
and  later  on  finds  that  building  insufficient  for  his  needs  and  tears  it 
down  and  puts  up  a  fine  brick  structure  in  its  place.  The  original 
cost  to  the  frame  building  would  be  a  part  of  the  legitimate  invest- 
ment, according  to  your  theory? 

Gen.  Tripp.  Yes. 

Conimissioner  Sweet.  And  should  be  added  to  the  subsequent  cost 
of  the  brick  structure  and  together  with  other  moneys  actually  in- 
vested should  constitute  the  capital  upon  which  he  ought  to  make  a 
legitimate  j^rofit.     Is  that  cori-ect? 

Gen,  Tripp.  Yes;  I  think  he 

Commissioner  Sweet.  Let  me  ask  one  thing  further.  I  ani  present- 
ing this  now  in  order  to  bring  down  your  theory  to  the  mdiyidual-- 
not  saying  or  asking  you  to  express  an  opinion  as  to  whether  individ- 
uals would  or  ought  to  figure  their  profits  on  that  basis,  but  whether 
that  would  be  an  illustration  which  you  think  would  be  proper  for 
regulated  public  utilities. 

(len.  Tripp.  If  I  understood  your  question  correctly,  I  sliould  not 
think  it  was  quite  that  Avay.  I  understood  you  to  say  that  the  cost  of 
the  wooden  building  would  be  added  in  its  entirety  to  the  cost  of  the 
brick  building  and  that  the  sum  of  those  two  constituted  an  invest- 
ment on  which  he  is  entitled  to  a  return.    Was  that  your  question  ? 

Commissioner  Sweet.  Yes;  the  entire  investment. 

Gen.  Tripp.  Now,  however,  in  the  street-railway  field,  the  cost  of 
the  old  wooden  building  would  be  charged  off  against  the  properties 
and  the  cost  of  the  new  building  would  be  the  amount  that  it  would 
l^  entitled  to  a  i-eturn  on  under  the  system  of  bookkeeping  which  has 
been  adopted  by  the  Intei^tate  Commerce  Commission,  if  I  am  cor- 

rect. 

Commissioner  Sweet.  Then  if  money  had  been  expended  by  a 
sti-eet-railroad  company  for  the  purchase  of  a  horse-car  system  or  for 
changing  over  from  the  horse-car  system  to  the  cable  system  or  the 
cable  to  electricity — do  you  mean  to  say  all  that  money  should  be 
crossed  off  entii-ely  and  only  the  value  of  the  electric  system  taken  as 
representing  the  capital  upon  which  dividends  are  to  be  paid  ? 

Gen.  Tripp.  Yes,  speaking  generally ;  because  a  depreciation  item 
has  or  ought  to  have  been  set  up  to  care  for  depreciation  and  obso- 
lescence. Now  I  would  not  say  that  that  rule  ought  to  be  applied 
arbitrarilv  and  unjustly.  But  apparatus  that  has  disappeared  will 
o-enerally'^be  found  to  have  been  taken  care  of  out  of  the  earnings  of 
the  company  and  it  is  an  item  called  depreciation  or  obsolescence. 

Commissioner  Sweet.  In  answer  to  a  question  by  Dr.  Meeker,  did 
vou  not  say  that  earnings  legitimately  made  that  might  be  distrib- 
uted as  dividends,  if  not  so  distributed,  but  put  into  the  property  it- 
self constituted  a  legitimate  basis  for  future  dividends? 

Gen.  Tripp.  Yes;  but  earnings  legitimately  made,  as  I  meant  it 
in  that  sense,  was  after  providing  a  reasonable  amount  for  deprecia- 
tion which  covers  the  item  which  I  have  been  talking  about. 

Commissioner  Sweet.  In  other  words,  if  my  merchant  in  our  coun- 
try village  had  a  delivery  wagon  and  a  horse,  and  the  horse  died  and 


I 


i 


176     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

he  replaced  that  with  another  horse,  that  would  not  be  treated  as  a 
part  of  the  investment  but  merely  as  a  replacement  of  somethmg  that 
IS  liable  to  happen  in  the  regular  course  of  business. 

Gen.  Tripp.  Yes.  . 

Commissioner  Sweet.  I  get  your  idea  now  a  little  better.  Une 
thing  further:  In  answer  to  a  question  by  Dr.  Meeker,  you  said  there 
were  differences  in  the  problem  involving  street  railways  in  ditferent 
cities. 

Gen.  Tripp.  Yes.  ^.^       ^ 

Commissioner  Sweet.  Of  course  there  are.  Every  one  differs  from 
every  other  one — there  are  no  two  exactly  alike  any  more  than  there 
are  two  people  exactly  alike;  is  not  that  true? 

Gen.  Tripp.  That  is  true. 

Commissioner  Sweet.  But  is  there  not  running  through  all  of  them 
a  series  of  questions  or  propositions,  so  to  speak,  that  are  almost  ex- 
actly similar? 

Gen.  Tripp.  If  I  understand  your  question,  I  think  I  would  answer 
it  yes.     Now,  would  you  illustrate  for  example  what  you  have  in 

mind? 

Commissioner  Sweet.  I  mean  to  say,  in  taking  the  situation 
throughout  the  country  at  large  we  find  practically  all  of  the  street 
railways  in  a  distressed  condition,  do  we  not  ? 

Gen.'  Tripp.  AVe  do ;  yes. 

Commissioner  Sweet.  If  there  are  any  that  are  not,  they  are  ex- 
ceptions. 

Gen.  Tripp.  Yes. 

Commissioner  Sweet.  And  only  very  few  of  them. 

Gen.  Tripp.  Only  very  few. 

Commissioner  Sweet.  Now  then  it  would  naturally  seem  as  if  there 
are  certain  general  causes  that  were  bringing  about  this  general  re- 
sult. One  of  those  that  you  have  mentioned,  and  a  very  important 
one  undoubtedly,  is  the  lessened  purchasing  power  of  money  ? 

Gen.  Tripp.    Yes. 

Commissioner  Sweet.  That  goes  through  all  of  them.  Do  you  not 
consider,  then,  that  it  is  one  of  the  proper  functions  of  this  commis- 
sion to  endeavor  to  find  what  is  the  trouble  that  applies  to  all  of  them 
and  devote  its  efforts  to  recommending  remedies  for  those  general 
evils  rather  than  to  pry  into  separate  city  difficulties  with  a  view  of 
directly  applying  its  efforts  to  each  separate  case? 

(ien.  Tripp.  Oh,  by  all  means,  I  think  that  is  your  function  abso- 
lutely. ,  ,  1  ,       .    X  •       1  1     -i! 

Commissioner  Sweet.  Of  course  our.work  would  be  interminable  if 
we  took  up  the  cases  of  Buffalo,  Detroit,  Cleveland,  and  different 

cities. 

Gen.  Tripp.  Yes.    Those  are  only  valuable  as  they  illustrate  the 

general  condition.  ,  ,     .       ^^         ,  it 

Commissioner  Sweet.  That  is  exactly  it.  Now  then,  our  knowl- 
edge of  the  general  condition  must  be  based  upon  as  much  and  as 
accurate  information  as  possible  from  the  various  localities. 

Gen.  Tripp.  Precisely.  ^        .        .  .    , 

Commissioner  Sw^eet.  Then  is  it  not  oiir  function,  in  your  judg- 
ment, to  sift  and  analyze  and  finally  determine  what  are  the  general 
factors  that  are  practically  applicable  to  all  or  nearly  alLof  the  com- 
munities and  make  our  recommendations  in  accordance  with  what  our 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     177 

conclusions  may  be  as  to  those  common,  general,  all-pervading  fac- 
tors? 

Gen.  Tripp.  Yes,  sir.  .        ^  ^  •  i    •   ^ 

Commissioner  Sweet.  Right  on  that  point,  General,  considering 

your  familiarity  with  the  whole  subject  and  the  general  situation, 

will  you  tell  us  what  in  your  judgment  is  the  best  line  of  inquiry  and 

work  for  this  commission,  and  whether  you  think  we  can  do  any 

good  or  not  ? 

(leii.  Tripp.  I  think  you  can  do ,  -      ., 

Commissioner  Sweet.  I  do  not  mean  now  good  for  the  companies 
or  ffood  for  the  emplovees  or  good  for  the  communities  alone,  but  good 
foi^all,  upon  the  theory  that  you  expressed  here  a  little  while  ago,  that 
their  interests  were  in  common  and  not  in  conflict. 

Gen  Tripp.  I  could  not  express  so  well  as  you  have,  Mr.  Lommis- 
sioner  *  the  course  which  your  inquiry  ought  to  take.  It  exactly  coin- 
cides with  my  view.  The  fundamental  difficulty  should  be  inquired 
into  by  your  commission.  And  I  hope  that  you  will  find  a  funda- 
mental basis  upon  which  should  rest  all  local  ^7/^/^";,^^^^%^^^^^^^ 
municipality  and  company.  And  if  you  should  do  that,  ^  Uunk, 
speaking  from  the  standpoint  of  the  electric  railways,  that  >ou  are 
the  only  hope  that  the  industry  has  to  save  it  from  complete  bank- 
ruptcv.  I  think  the  general  bankruptcy  of  Uie  electric  railways 
would  have  an  effect  upon  the  public,  their  service  rendered  would  be 
reduced,  the  cost  of  service  would  bound  to  be  increased,  there  would 
be  tremendous  losses  to  small  individual  investors,  fiduciary  institu- 
tfons  would  find  the  assets  which  they  have  protecting  their  life  in- 
surance policies,  and  their  savings  bank  deposits  seriously  encroached 
on  •  and  all  this  is  unnecessary.  ^     t  i.     i  i  u 

Commission      Sweet.  Would  it  have  any  tendency  to  disturb  labor 

""'^Genl'^TRiPP.  Yes;  I  think  the  proper  solution  of  this  problem 
makes  for  industrial  peace.   ^    ^  ,  ...^    , 

Commissioner  Sweet.  xVnd  stability «  ,.  ,.    ,  , 

Gen  Tripp    And  stability.     It  makes  for  more  satisfied  employees. 

Commissioner  Sweet.  And  regular  employment,  I  suppose? 

Gen.  Tripp.  Yes,  and  more  regular  employment,  because  reduction 
of  service  means  unemployment  to  somebody.  .,    ^  ^i  •         . 

Now  there  is  no  .other  hope,  there  is  no  other  avenue  that  this  mat- 
ter can  be  put  before  the  public  as  a  national  problem  except  your 
commission!  And  I  have  great  hopes  that  ^^;llen  you  have  made  your 
recommendation,  the  press  in  the  interval  will  have  treated  this  case 
liberallv  and  fairly  and  that  the  public  will  be  ready  to  receive  your 
recomnJendation  and  will  be  interested  in  what  it  is,  and  when  that 
is  done  you  will  have  paved  the  way  for  us  to  approach  the^ parties 
to  the  other  side  of  the  contract  for  a  new  deal  which  will  be  bene- 

ficial  to  evervbody  concerned.  ..     o     t^  i  + 

Commissioner  Meeker.  May  I  ask  a  question  ?  It  seemed  to  me 
there  was  a  little  bit  of  confusion  involved  in  your  answer  to  my  ques- 
tion  as  to  what  was  the  proper  method  of  amving  at  the  capital  in- 
vestment upon  which  the  companies  were  entitled  to  receive  earnings 
and  the  answer  you  made  to  Mr.  Sweet's  question.  As  I  recall  you 
said  in  reply  to  my  question  that  all  outstanding  bonds  and  all  stocks 
not  issued  in  payment  of  promotion  services  would  constitute  the  sum 


I^al' 


178     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOl^. 

total  of  capital  fund  upon  which  income  should  be  paid  to  the  com- 
pany. 

(xen.  Tripp.  Yes,  sir. 

Commissioner  Meeker.  Now  if  a  company  purchases  an  old  horse- 
car  line  or  any  sui^rannuated  line— and  it  purchases  it  usually 
through  the  issuance  of  bonds  or  may  do  so  through  the  issuance  of 
stock— now,  how  can  vou  write  off  the  cost  or  investment  in  the^old 
horse-car  line  or  the  other  superannuated  line  in  such  a  case  as  that  ? 
How  can  vou  write  it  off  in  any  case  if  you  are  going  to  take  into  ac- 
count the  "bonds  and  stocks  that  represent  the  original  investments 

(^en.  Tripp.  AVell,  as  I  stated,  vou  would  not  write  it  oft  under  my 
method  except  that  it  would  be  found— I  understood  Commissioner 
Sweet's  question  to  be  based  on  this:  Would  the  phjrsical  valuation  of 
the  property  be  found  to  equal  or  exceed  the  securities  outside  of  pro- 
motion securities  which  you  have  just  mentioned;  and  my  answer  was 
that  in  most  cases  they  would  and  I  knew  of  no  case  w^liere  they 
would  not.  Then  the  question  came  as  to  what  had  been  done  ^^nth 
the  old  properties  in  its  bearing  upon  the  physical  valuation,  and  1 
think  there  I  stated  that  there  had  been  or  ought  to  have  been  set  up 
for  depreciation  an  amount  to  amortize  this  old  horse  railroad  that 

vou  speak  of.  .  ,        .  •   j      +      G„,r 

Commissioner  Meeker.  But  it  is  not  clear  in  my  mind  yet  bay 
$100,000  worth  of  bonds  have  been  issued  to  purchase  an  old  horse- 
car  line.  The  $100,000  bonds,  let  us  say.  are  not  amortized.  Ihey 
do  make  up  a  part  of  the  outstanding  securities.      ^      ^        .^  . 

Cxen  Tripp.  Well,  of  course  in  the  great  aggregate  of  capital  on  an 
electric  railway  you  have  sinking  funds  operating  all  the  time  to  re- 
duce your  funded  indebtedness.  During  the  last  30  years  is^sues  of 
bonds  have  fallen  due,  generally  speaking,  and  have  been  paid  or  re- 
funded I  suppose  there  are  very  few  bonds  outstanding  ^v^iich  were 
dated  iLs  long  ago  as  the  eighties.  Now  when  you  come  to  the  re- 
funding operation  of  those  bonds,  the  matt^j  of  taking  care  of  the 
depreciation  and  the  obsolescence  of  those  old  ^^^'^'^^l^^^f  P^'^f  )■ 
ik^s  all  adjusts  itself  because  the  question  that  presents  itself  then  to 
the  company  is  how  much  money  do  we  need ;  and  they  get  what  they 

"""^(inmissioner  Meeker.  So  that  the  process  is  not  a  cumulative 
pmcess  of  adding  the  brick  buikling  to  the  old  wooden  buildmg 

Somi^ssL^ncT  Meeker.  An  a  granite  building  to  the  brick  build- 
ing and  a  marble  building  to  the  granite  building? 

Gen.  Tripp.  Not  at  all.  ,  i,     i    -ij-       i-i,  *  •„ 

Commissioner  Meeker.  It  is  merely  the  marble  building  that  is 

^ettiner  the  return  ?  .  , 

Gen  Tripp.  Yes.  In  other  words,  a  properly  managed  company 
when  it  comes  to  renew  its  bonded  obligations  which  are  falling  due 
only  issues  sufficient  new  bonds  to  take  of  its  then  reqmrements.  Its 
then  requirements  reflect,  if  its  books  have  been  ke^.t  properly,  the 
effect  of  depreciation  charges  and  charging  off  this  ^bsolent  propeity. 
Commissioner  Gadsden.  Can  I  ask  a  question  right  there  ^-be- 
cause I  think  there  is  probably  a  little  misapprehension  about  it. 
You  are  discussing  this  on  the  basis  of  a  company  whose  income  has 
been  sufficient  to  set  up  these  reserves. 
Gen.  Tripp.  Yes. 


I    i 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     179 

Commissioner  Gadsden.  That  is  true,  is  it  not? 

Gen.  Tripp.  Yes.  ^  ^    ^  -     xi     i,-  *  4:  +i.^ 

Commissioner  Gadsden.  As  a  matter  of  fact  m  the  history  ot  the 

industry  have  these  companies  set  up  these  reserves  to  do  that  i 
Gen  Tripp.  Some  have  and  some  have  not  and  those  that  hare  not 

are  to-day  on  the  verge  of  bankruptcy,  and  you  will  have  no  difficulty 

in  dealing  with  those.  .  ,  •  1.  x  i.i,-   i        n 

Commissioner  Beall.  I^t  me  ask  a  question  which  I  think  will 
clarify  it.  Is  not  the  general  fact  this?  Take  in  New  York  for  m- 
stance,  wdiere  the  roads  have  changed  from  cable  to  electricity.  They 
did  not  do  it  because  the  cable  w^as  no  longer  able  to  take  care  ot  tlie 
traffic  or  because  it  was  absolutely  obsolent  because  it  was  so  old  it 
was  worn  out.  They  thought  they  had  a  better  method,  a  more  eco- 
nomical  method  to  the  public— cheaper  service  and  better  service  and 
more  carrying  capacity. 

Gen.  Tripp.  Yes.  •         xi         n 

Commissioner  Beall.  They  made  those  changes  from  the  cable 
roads  and  did  the  same  thing  in  Seattle  and  numerous  other  cities, 
when  those  cable  roads  still  had  a  life  of  a  good  many  years. 

Gen.  Tripp.  Yes.  ,  ^         j. 

Commissioner  Beall.  Some  of  them  had  only  run  for  a  few  years. 
If  they  had  run  for  20  yeai-s,  they  could  not  have  built  up  enough 
reserve  to  charge  it  off  at  once.  The  method  generally  pursued,  I 
understand,  was  this :  They  did  not  charge  them  off  in  one  fell  swoop, 
but  amortized  it  over  a  nufnber  of  years.  For  instance,  if  the  change 
cost  $3,000,000  and  they  lost  $3,000,000  for  the  junk  in  the  old  cable, 
they  amortized  that  over  20  or  30  years,  so  much  a  year.  Now  the 
fares  proved  insufficient  from  year  to  year  on  account  of  the  depreci- 
ated purchasing  power  of  the  nickel,  and  they  were  not  able  to  carry 
it  through  that  amortization ;  and  the  result  to-day  is  that  the  com- 
panies in  the  great  cities  are  carrying  a  big  investment  which  they 
have  not  been  able  to  amortize  and  wipe  out  and  that  came  about 
through  their  desire  to  give  better  service  to  the  public,  and  they 
junked  some  things  that  were  only  5  years  old.  Is  not  that  true 
in  a  gieat  many  cases ? 

Gen.  Tripp.  'Well 

Commis?;ioner  Beall.  Let  me  follow  that  up.  I  do  not  under- 
stand you  to  say,  do  I,  that  until  they  have  had  an  opportunity  to 
properly  take  care  of  that  amortization  of  past  investment  that  they 
junked  in  order  to  give  better  service— until  they  are  able  to  get 
that  out  of  the  way  ought  not  they  be  allowed  to  earn  on  it? 

Gen.  Tripp.  Cei-tainly.  .   ,      ,  ,         i- 

Commissioner  Beall.  I  do  not  think  that  was  clear  from  your 

•^t'ltement 

Gen.  Tripp.  But,  generally  speaking,  my  method  of  valuing  securi- 
ties would  result  in  that  very  thing.  ,  .   ,    ., 

C()mmissioner  Beall.  I  think  it  would,  but  I  do  not  think  the 
commission  quite  got  that  point— that  nearly  all  these  companies  m 
the  big  cities  are  still  carrying  a  great  big  investment  which  repre- 
sents things  which  they  junked,  which  still  had  a  long,  useful  life 
befoi-e  them,  in  order  to  give  better  service  to  the  public.^ 

Commissioner  S^veet.  There  is  just  one  question.  You  do  not 
mean  to  say.  General,  that  the  change  from  the  cable  to  electricity 
was  done  solely  to  render  better  service  to  the  public,  do  you? 


i 


180     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Gen.  Tripp.  Not  at  all.  ' 

Commissioner  Sweet.  Was  not  the  element  of  greater  economy  and 
greater  profit  to  the  companies  a  large  element? 
Gen.  Tripp.  Oh,  yes;  the  larger  element  of  course 
Commissioner  Beall.  It  was  a  combmation  of  both,     lliey  weie 
able  to  give  better  and  faster  service  and  carry  more  people. 
Commissioner  Sweet.  Yes.  ^.        xt. 

Commissioner  Meeker.  Then,  in  answer  to  my  question,  the  com- 
panies are,  in  some  instances,  carrying  stock  issues  or  bond  issues 
that  represent  the  obsolete  brick  building.    They  have  not  yet  had 

time  to  amortize  them?  ^  ..        ,  t  i    ;i 

Gen.  Tripp.  I  am  glad  you  asked  that  question,  because  I  had 
almost  forgotten  to  add  to  my  reply  to  Commissioner  Beall.  All  those 
companies  that  have  come  under  my  observation  that  have  changed 
from  cable  to  electricity  have  been  through  the  hands  of  a  receiver 
and  the  whole  thing  has  been  wiped  out. 

The  Chairman.  We  will  resume  at  2  o'clock,  gentlemen. 

Mr.  Warren.  May  I  excuse  Gen.  Tripp  ?         ,,,,,,. 

The  Chairman.  I  understand  Commissioner  Wehle  desires  to  re- 
sume the  cross-examination.    Is  it  convenient  for  you  to  be  here  this 

afternoon?  ,  ,  ,^^ 

Gen.  Tripp.  If  I  could  be  permitted  to  leave  as  early  as  a  quarter 

of  3  it  will  suit  my  purposes. 

The  Chairman.  That  will  be  all  right. 

(At  12.30  o'clock  p.  m.  a  recess  was  taken  to  2  o  clock  p.  m.) 

AFIER  recess. 

The  hearing  was  resumed  at  2  o'clock  p.  m. 
1  STATEMENT  OF  GEN.  G.  E.  TRIPP— Continued. 

The  Chairman.  Have  you  any  further  statement  to  make,  Mr. 

Tripp  ^ 

Gen.*  Tripp.  No,  Mr.  Commissioner;  I  have  nothing  more. 

The  Chairman.  You  had  been  discussing  the  question  of  capital- 
ization and  value  this  morning.  Do  you  believe  it  to  be  the  function 
of  this  committee  to  make  a  finding  as  to  the  existing  capitalization 
of  railroad  companies? 

Gen.  Tripp.  No,  sir.  .    .  . 

The  Chairman.  Do  you  think  that  the  commission  should  investi- 
gate the  capitalization  of  independent  or  individual  companies,  so 
that  it  could  reach  some  determination  upon  the  question  as  to 
^vhether  there  is  or  is  not  watered  stock  in  the  securities  of  these 

^^ Gen." Tripp.  No,  sir;  I  have  not  thought  that  that  would  be  a 
function  of  this  commission.  .  i    .  i 

The  Chairman.  How  should  the  commission  proceed  to  make 
such  an  investigation,  if  it  thought  advisable  to  do  so? 

Gen.  Tripp.  It  would  be  a  very  long  investigation  and  require 
a  minute  investigation  into  individual  companies.        ^     _ .  ,  .    , 

The  Chairman.  Could  you  outline  the  procedure?  If  we  tried 
to  find  out  the  amount  of  money  that  w^as  taken  from  the  sale  of 
stocks  and  bonds  and  invested  in  the  property,  and  if  we  undertook 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     181 

to  reach  the  original  cost  in  that  way,  how  long  would  it  take  to 
complete  that  investigation  for  the  New  York  system? 

Gen.  Tripp.  You  cited  the  most  difficult  one,  I  think.    It  would 

take  some  months.  ,       ,     ^      _  j-i.^  r<i.^^nrrr» 

The  Chairman.  How  long  would  it  take  to  clean  up  the  Chicago 

situation  ? 

Gen.  Tripp.  It  would  take  some  months.        .       ,         -  i 

The  Chairman.  Would  such  an  investigation  be  of  any  value, 

unless  a  sufficient  number  of  companies  were  looked  into,  so  that  tlie 

findings  would  be  regarded  as  reliable?   " 

Gen.  Tripp.  Will  you  please  ask  the  question  again  ^ 

The  Chairman.  Will  the  reporter  please  read  the  question?  - 

(The  reporter  read  the  question  as  above  recorded.) 

The*  Chairman!  Is  it  your  opinion  that  a  value  based  upon  cash 
securities  and  stocks  and  bonds  put  into  the  property  would  be 
regarded  as  a  safe  value  for  purchase? 

Gen.  Tripp.  For  purchase  ? 

The  Chairman.  Yes. 

Gen.  Tripp.  By  the  municipality  ? 

The  Chairman.  Yes,  sir.  .  -,      ,  i     . i        i  +  *^  fi.«f 

Gen.  Tripp.  I  should  have  to  give  considerable  thought  to  that 
question,  Mr.  Commissioner,  before  I  answered  it.  I  would  say  that 
there  should  be  added  to  the  items  you  have  mentioned  the  invest- 
ment in  propertv  out  of  the  net  earnings,  which  net  earnings  be- 
longed theoretically  to  the  stockholders.  .„.  ^  „  ... 
The  Chairman.  'Would  the  companies  be  willing  to  sell  upon  that 

basis  ?. 

Gen.  Tripp.  Sir?  ^  •      ,  n-       *^  ^«ii 

The  Chairman.  I  say,  would  the  companies  be  willing  to  sell 

upon  that  basis? 

Gen.  Tripp.  I  don't  know. 

The  Chairman.  What  is  that? 

Gen.  Tripp.  I  don't  know  whether  they  would  or  not. 

The  Chairman.  You  spoke  this  morning  about  establishing  a  new 
relationship  between  the  utilities  and  the  public  and  investors.  Ut 
course,  that  presumes  a  proper  form  of  regulation  i 

Gen.  Tripp.  Yes,  sir. 

The  Chairman.  What  should  that  be ^     , ,  ,     ^,  ,  .  .-       ^^ 

Gen.  Tripp.  Do  you  ask  whether  it  should  be  State  regulation  or 

^"^  The  Chair^^^      I  am  asking  you  what  should  be  the  proper  form 

^  Gen""  Tripp.  If  the  new  contract  between  the  municipality  and  the 
company  were  of  such  a  nature— and  I  think  it  should  be—that  it 
amounted  to  a  practical  guaranty  of  a  fair  return  upon  a  fair  in- 
vestment  in  the  property,  then  it  would  seem  safe  to  leave  the  i^gii- 
lation  of  the  local  utility  to  the  local  authorities  who  have  made  the 

^ThT  Chairman.  In  your  judgment,  will  the  service-at-cost  plan 
result  in  excluding  the  States  from  the  regulation  of  these  utilities  i 
Gen  Tripp.  It  is  difficult  for  me  to  say,  without  giving  the  matter 
much  consideration,  what  place  the  State  commissions  would  have  m 
such  a  relationship. 


182      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Under  a  proper  service-at-cost  plan  the  rates 
rise  or  fall  automatically,  according  to  the  earnings,  do  they  not? 

(ren.  Tripp.  Yes,  sir.  •       . 

The  Chairman.  Is  there  any  rule  for  a  regelating  commission  to 
exercise  judgment  in  determining  the  reasonableness  of  the  rate 
under  such  plan? 

(^en.  Tripp.  No  ;  I  should  think  not.  ^ 

The  Chairman.  That  being  so,  can  you  see  a  good  reason  for 
having  the  State  commissions  given  any  control  over  the  service  of 
these  utilities  where  the  cost-of -service  plan  has  been  adopted? 

Gen.  Tripp.  I  can  not  see  any  reason  now. 

The  Chairman.  Do  you  see  that  they  should  exercise  any  control 
over  extensions  of  the  properties? 

Gen.  Tripp.  I  do  not  see  any  reason  why  they  should. 

The  Chairman.  Or  the  capitalization? 

Gen.  Tripp.  No;  the  capitalization  in  that  case  would  be  a  matter 
of  no  moment  to  anyone  except  the  company. 

The  Chairman.  Do  you  believe  that  the  highest  quality  of  service 
and  Ixist  form  of  protection  to  the  public,  as  well  as  to  the  utilities, 
would  be  secured  through  local  regulation  rather  than  State  regu- 
lation? .  ,      .        1  •  1  •    U 

Gen.  Tripp.  Provided  always  that  there  is  a  relationship  which 
imposes  an  obligation  upon  the  municipality,  which  amounts  to  a 
guaranty  of  a  fair  return  on  the  fair  investment,  I  think  a  better 
administration  of  that  relationship  would  probably  lie  in  the  hands 

of  the  municipality.  ,      i.    ^  ..i    x  ^i 

The  Chairman.  But  it  presuppases,  does  it  not,  the  fact  tliat  the 
municipality  has  the  intelligence  to  properly  examine  the  operating 
sheet  of  a  railroad  to  see  that  the  accounts  are  properly  kept  and  to 
clearly  understand  how  to  i-egulate  such  a  utility  ? 

Gen.  Tripp.  It  presupposes  that,  but  the  test  comes  in  the  cash 
in  the  cash  drawer  to  pay  this  fair  return.  ,     ,  . 

The  Chairman.  Well,  from  the  experience  you  have  had  in  this 
work,  is  it  vour  opinion  that  municipalities,  generally  speaking,  give 
close  attention  to  the  operation  of  these  utilities  and  the  cont:rol  of 
their  securities  and  expenses  in  such  a  way  that  the  public  can 
safely  trust  them  w^ith  that  responsibility  ? 

Gen.  Tripp.  I  should  answer  that  by  saying  that  my  observation 
is  that  probably  not,  under  the  form  of  contract,  at  least,  which 
has  been  in  common  use.  .    . 

The  Chairman.  If  the  service-at-cost  plan  is  adopted,  is  it  not  pos- 
sible that  there  will  be  a  good  deal  of  irritation  between  the  utili- 
ties and  the  public  growing  out  of  a  shifting  charge  for  the  service? 

Gen.  Tripp.  Yes,  that  might  l>e  possible. 

The  Chairman.  What  will  that  lead  to? 

(xen.  Tripp.  It  will  probably  lead  to  municipal  ownership,  if  such 
an  irritation  did  arise  that  was  severe  enough. 

The  Chairman.  You  have  recently  gone  through  an  experience 
down  in  Cleveland.  Was  the  recent  settlement  there  satisfactory  to 
the  public  as  well  as  to  the  utility? 

(len.  Tripp.  I  am  not  familiar  enough  with  that  settlement  to 
state,  Mr.  Commissioner. 

Mr.  Warren.  Where  was  that,  Mr.  Chairman? 

The  Chairman.  In  Cleveland. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     183 

Gen.  Tripp.  I  heard  it  stated  by  my  CleveLind  friends  that  it  is 
satisfactory  neither  to  the  company  nor  to  the  public 

The  Chairman.  Should  this  commission  undertake  to  outline  a 
pro[)er  form  of  franchise  to  be  used  by  utilities? 

(xen.  Tripp.  I  do  not  think  your  commission  should,  sir. 

The  Chairman.  Should  it  outline  or  indicate  the  general  prin- 
ciples which  should  be  incorporated  in  such  a  franchise? 

Gen.  Tripp.  Only  the  most  basic  principles.  . 

The  Chairman.  At  the  present  time,  there  is  no  common  basis 

upon  which  franchises  are  made,  is  there  ? 

Gen.  Tripp.  No.  '  .  i  .      i   o 

The  Chairman.  They  usually  depend  upon  bargain  and  trade  ? 

Gen.  Tripp.  Yes.  .       ,  •     i  xi. 

The  Chairman.  Thei-efore  there  is  no  relationship'  between  them. 
Would  not  the  utilities,  as  well  as  the  public,  be  better  off  if  there 
was  some  standard  form  of  a  franchise  used?  ,  ^ 

(ien.  Tripp.  There  might  be  a  few  standard  fundamentals,  as,  tor 
example,  that  the  franchise  should  be  without  date  of  expiration,  or 
some  general  principle  of  that  kind.  ^    ^ 

The  Chairman.  But  you  do  not  think  the  commission  should  at- 
tempt to  prepare  a  form  of  franchise  and  submit  it  to  the  Public? 

Gen.  Tripp.  I  think  the  conditions  are  too  varied,  probably,  to 
w-rmit  such  a  standard  form  being  of  great  value. 

The  Chairman.  Would  it  not  be  helpful  as  a  giiide? 

Gen.  Tripp.  I  should  rather  see  more  danger  in  it  than  possible 

^^The  Chairman.  What  would  be  the  element  of  danger  to  be  found 
in  such  a  standard  form? 

Gen  Tripp.  That  any  standard  fonn  of  fnmchise  must  go  into 
considerable  detail,  and  those  details  would  be  rai^ely  found  to  fit 
in  with  completeness  the  local  situation.        .  ^    ,   . .     „      .    , 

The  Chairman.  But  you  would  feel  satisfied  if  all  of  the  mu- 
nicipalities in  the  country  would  adopt  the  service-at-cost  plan? 

Gen.  Tripp.  I  feel  that  is  about  the  only  hope  to  work  out  the 

situation.  .     ,       .        ,  .  ,  ,         •  i 

The  Chairman.  Well,  if  that  is  the  aim  which  you  have  in  mind, 
would  it  not  be  well  to  outline  the  kind  of  a  franchise  wluch  should 
be  entered  into  when  such  a  plan  is  adopted? 

Gen.  Tripp.  I  do  not  think  so,  Mr.  Commissioner,  because  the 
service-at-cost  plan  does  not  necessarily  mean  an  increase  of  fare, 
although  probably  it  would.  It  might  meiin  a  zone  system  in  some 
particular  places.  It  does  not  always  mean  relief  from  paving  taxes, 
although  it  might  be  desirable  in  some  places.  For  example,  a  com- 
munity which  require  street-railway  service  and  could  not  afford 
to  pay  say,  a  6  or  7-cent  fare,  might  relieve  the  company  in  that 
community  from  taxes  in  the  whole,  including  their  real-estate  and 
real-propertv  taxes,  and  I  could  imagine  a  community  going  so  far 
a^  to  subsidize  a  street  railway  in  order  to  retain  the  service  at  a 
price  which  would  make  it  useful  to  the  public.  Therefore,  I  think 
it  would  be  dangerous  to  outline  in  detail  the  kind  of  cost-of-service 
pljvn that  is,  any  universal  cost-of-service  plan.  I  think  the  com- 
mission should  and  ought  to  lay  down  the  basic  principles  upon  which 
any  cost-of-service  plan  should  rest,  and  that  should  be  broad  enough 
to  permit  of  various  plans. 


184     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Should  such  a  recommendation  suggest  the  wis- 
dom of  indeterminate  permit  franchises? 
Gen.  Tripp.  Yes. 
The  Chairman.  That  is  one  of  the  principles  that  you  would  ap- 

prove  ? 

Gen.  Tripp.  That  is  one  of  the  principles  which  should  be  decided 

upon.  '  .        1      1 1  V 

The  Chairman.  Now,  assume  that  the  commission  should  not  be 
willing  to  reach  the  conclusion  that  the  service-at-cost  plan  was  the 
proper  thing,  then  what  alternative  have  you  to  suggest? 

Gen.  Tripp.  I  have  no  alternative,  Mr.  Commissioner,  except  to 
recommend  that  fares  be  increased  to  remedy  the  existing  situation, 
and  let  the  future  take  care  of  itself.  , 

The  Chairman.  Has  your  association,  or  will  your  association,  pre- 
sent a  witness  who  will  outline  just  what  the  result  of  increased  fares 
has  been  in  the  different  communities  ? 

Gen.  Tripp.  Yes  sir. 

The  Chairman.  'That  will  be  gone  into  quite  completely? 

Gen.  Tripp.  That  will  be  gone  into  quite  completely.  And  I  would 
also  sav  it  is  intended  to  present  a  witness  who  is  thoroughly  familiar 
with  ail  the  different  cost-of -service  plans  which  have  been  put  into 
use,  or  even  contemplated. 

The  Chairman.  Will  there  be  a  witness  who  will  state  where  the 
money  comes  f i-om  and  where  it  is  held  and  the  extent  of  it  ? 

Gen.  Tripp.  Yes,  sir ;  there  will  be  a  witness  to  cover  that  point. 

The  Chairman.  I  have  no  other  questions. 

Mr.  Warren.  Gen.  Tripp,  just  one  question:  In  reply  to  Mr.  Gads- 
den's question  this  morning,  you  said  you  saw  no  reason  to  change 
the  rate  on  the  existing  securities  because  of  the  depreciated  purchas- 
ing value  of  the  nickel.  That,  of  course,  I  assume,  applied  only  to 
the  existing  securities. 

Gen.  Tripp.  Yes.  ,.      ,      ^ 

Mr.  Warren.  As  regards  securities  issued  m  the  future,  to  meet 
future  requirements,  capital  requirements,  the  money  would  have  to 
be  obtained  at  the  market  rates,  I  presume? 

Gen.  Tripp.  Yes,  sir. 

Mr.  AVarren.  That  is  all.     Thank  you  very  much,  General. 

Mr.  Warren.  Mr.  Chairman,  I  am  going  to  call  next  Mr.  H.  A. 
Stuart,  of  the  firm  of  Halsey,  Stuait  &  Co.,  of  Chicago,  bankers. 
Mr.  Stuart  has  an  engagement  which  makes  it  necessary  for  him  to 
take  the  Congressional  Limited,  leaving  in  an  hour.  I  hope  I  can 
finish  with  him  in  that  time,  but  if  not,  I  shall  have  to  ask  the  in- 
dulgence of  the  commission,  in  case  it  is  necessary  for  him  to  come 
back  and  finish  his  examination. 

The  Chairman.  You  may  proceed  without  interruption. 

Mr.  Warren.  Yes. 

STATEMENT  OF  MR.  HAEOLD  L.  STUART. 

Mr.  Warren.  Your  full  name,  Mr.  Stuart? 
Mr.  Stuart.  Harold  L.  Stuart. 
Mr.  Warren.  And  your  business? 

Mr.  Stuart.  I  am  president  of  Halsey,  Stuart  &  Co.,  investment 
bankers,  whose  principal  office  is  in  Chicago. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     185 

Mr.  Warren.  And  in  your  banking  business,  Mr.  Stuart,  have 
you  had  occasion  to  distribute  street-railway  securities  to  a  con- 
Ridprable  extent? 

Mr.  Stuart.  We  have  distributed  many  millions  of  street-railway 
securities.  In  one  case  alone,  in  Kansas  City,  I  think,  the  amount  is 
about  $15,000,000. 

Mr.  Warren.  On  that  one? 

Mr.  Stuart.  On  the  one  system. 

Mr.  Warren.  On  the  one  system? 

Mr.  Stuart.  Yes.  .  . 

Mr.  Warren.  And  you  have  distributed  such  securities  very  gen- 
erally, have  you  ?  ^  Ti! 

Mr.  Stuart.  Very  generally,  from  Maine  to  California.       • 

Mr.  Warren.  And  on  corporations  operating  from  Maine  to  Cali- 
fornia also?  .         1    .  x     • 

Mr.  Stuart.  Well,  a  great  many  different  corporations,  but  to  in- 
vestors of  all  kinds  residing  in  territory  from  Maine  to  California. 

Mr.  Warren.  But  you  have  also  handled  securities  of  companies 

all  over  the  country? 

Mr.  Stuart.  Pretty  generally,  yes;  throughout  the  country. 

Mr.  Warren.  You 'have  handled  some,  I  think,  in  Massachusetts? 

Mr.  Stuart.  Yes.  .  .    i  ^ 

Mr.  Warren.  Will  you  tell  the  commission  how,  m  your  judgment, 
those  securities  are  purchased  and  held— by  what  people,  by  what 
classes  of  investors,  and  in  what  amounts? 

Mr.  Stuart.  They  are  held  by  all  classes  of  investors— insurance 
companies,  savinjrs"^  banks,  trustees,  individual  investors,  insurance 
funds  of  all  kinds.  The  largest  holders  in  the  aggregate,  I  think, 
of  street-railway  securities  are  the  individual  investors  that  buy  not 
over  $5,000  at  a  time. 

Mr.  Warren.  That  is  what  might  be  called  the  ultimate  investor? 

Mr.  Stuart.  I  think  I  would  call  that  the  ultimate  investor  of 
street-railway  securities,  or  he  was  the  ultimate  investor  up  to  a 
couple  of  years  ago. 

Mr.  Warren.  And  that  applied  generally,  you  say,  all  over  the 
country  two  years  ago,  that  investors  of  that  kind  were  the  pur- 
chasers and  holders  of  these  securities? 

Mr.  Stuart.  Up  to  that  time  street-railway  bonds  were  generally 
considered  to  be  safe  investments. 

Mr.  Warren.  How  are  street-railway  securities  regarded  now  in 
investment  circles? 

Mr.  Stuart.  They  are  regarded  with  great  distrust  and  disfavor, 
to  such  an  extent  that  it  is  almost  impossible  to  distribute  street- 
railway  securities,  I  don't  care  how  good  they  are.  I  am  speaking 
now  about  bonds,  not  stocks. 

Mr.  Warren.  Yes;  bonds. 

Mr.  Stuart.  It  would  be  absolutely  impossible  to  distribute 
street-railway  stocks. 

Mr.  Warren.  And  how  long  has  that  been  true  ? 
Mr.  Stuart.  So  far  as  bonds  are  concerned,  as  I  say,  about  two 
years  ago.    For  some  time  back  of  that  street-railway  stocks  had  not 
teen  sought  for,  I  believe. 

Mr.  Warren.  But  the  market  for  bonds  disappeared  about  two 
years  ago? 

160643*— 20 13 


186     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Stuart.  Yes;  just  about.  ,  .      ,  ^  i.      t**i 

Mr,  Warren.  The  distributing  banking  house,  I  suppose,  has  little 
or  no  control  over  the  earnings  of  the  companies? 

Mr.  Stuart.  No;  the  distributing  banking  house  has  no  control 
over  the  earnings  of  the  company.  There  is  no  control  over  the 
management  of  the  company.  The  distributing  banking  house  makes 
i\  very  careful  investigation  of  the  value  of  the  property,  the  com- 
munitv,  the  franchise  situation,  and  the  management,  and  then  buys 
outright  bonds,  and  sells  them  though  its  selling  organization  to  the 
chiss  of  people  that  I  have  stated.  , 

Mr.  Warren.  And  to  what  extent  have  the  laws  of  any  particular 
jurisdiction  had  an  effect  upon  the  selling  quality  of  the  bonds  issued 
bv  utilities  in  that  jurisdiction? 
'  Mr.  Stuart.  They  have  cjuite  a  considerable  influence.  For  ex- 
ample, when  the  public-service  commissions  throughout  the  country 
began  to  be  formed  a  great  interest  was  aroused  on  the  part  of  in- 
Testoi-s,  and  I  think  that  the  very  fact  of  those  public-utility  com- 
missions being  formed  influenced  a  great  many  people  to  buy  street 
railway  and  other  public-utilities  securities  that  theretofore  were 
not  interested.  They  believed  that  the  public-service  commission 
would  be  a  disinterested  party,  in  so  far  as  any  local  situation  was 
concerned,  whereas  the  local  authorities  would  be  very  much  inter- 
ested, and  the  investor  felt  that  he  would  receive  better  and  fairer 
ti-eatment  from  the  disinterested  party  than  he  would  from  the 

interested  party. 

Mr.  Warren.  If,  for  any  i-eason,  in  any  particular  State  or  other 
jurisdiction,  a  system  exists,  wliether  of  law  or  franchise,  which  is 
antagonistic,  or  is  not  calculated  to  promote  the  development  and 
sei'urity  of  a  public  utility,  what  effect  has  that  on  the  bonds? 

Mr.  Stuart.  It  luus  the  effect  of  keeping  people  out  of  the  State 
entirely.  There  have  been  such  situations.  For  example,  I  recall 
a  few  yeai-s  ago,  in  both  Georgia  and  Texas,  the  sentiment  in  those 
States  was  such  that  it  was  very  difficult,  or  imi)ossible,  to  sell  public- 
utility  securities  that  came  "from  those  States.  The  investment 
bankers  have  no  control  over  what  their  client  does  with  the  money ; 
and  the  great  majority  of  clients  are  seekers  after  information,  and  if 
they  fiijd  that  in  any' given  community  or  State,  or  in  any  given  in- 
dustry, conditions  are  not  very  favorable,  their  money  will  go  else- 

W'l\ei*e. 

Mr.  Warren.  That  may  apply  to  all  kinds  of  securities  in  the 
State  and  the  securities  of  a  particular  industry,  if  for  any  reason 
a  pai-ticular  industry  is  under  this  disadvantage? 

iVfr   Stu\rt    Yes   sir 

Mr!  Warren.  As  the  result  of  your  ha^ang  placed  so  many  of  these 
street-railway  securities,  I  presume  you  have  followed  the  street- 
railway  situation  more  or  less  closely  in  the  last  few  years? 

Mr.  Stuart.  Yes,  sir. 

Mr.  Warren.  And  you  have  heard  Gen.  Tripp's  testimony  this 

morning  ? 

Mr.  Stuart.  I  have. 

Mr.  Warren.  Were  you  here  all  during  his  testimony? 

Mr.  Stuart.  I  heard  it  all. 

Mr.  Warren.  Do  you  agree  in  general  with  what  he  said  about  the 
street-railway  situation  to-day  in  this  country? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     187 

Mr.  Stuart.  I  do.  •  o 

Mr.  Warren.  About  its  extreme  seriousness  f 
Mr.  Stuart.  Exactly.  .  x-  vi 

Mr.  Warren.  Have  you  luid  occasion  in  connection  Avitli  any  par- 
ticular company  to  be  acquainted  with  such  a  situation  m  the  c^se  ot 
that  company  as  would  illustrate  the  tendency  which  Gen.  iripp 
referred  to  ?  You  mentioned  the  Kansas  City  company,  where  you 
had  distributed  some  $15,000,000  of  bonds.    Have  you  followed  tiiat 

^^Mi-f  Stuart.  I  have  and  I  should  like  to  say  something  about  that. 
The  Kansas  City  Eailway  &  Light  Co.  was  put  in  the  hands  ot  a 
receiver  in  1910.  Up  to  that  time  I  knew  nothing  about  the  com- 
pany. The  reason  for  its  being  put  in  the  hands  of  a  receiver  was 
not  due  to  lack  of  earning  capacity,  but  the  company  had  an  expiring 
franchise  and  expiring  bonds,  and  it  was  impossible  to  refund  those 
maturing  obligations  without  either  an  extension  of  the  franchise  or 

a  new  franchise.  .  ^. 

After  three  or  four  years  in  the  hands  of  a  receiver,  Kansas  City, 
Mo.,  in  consideration  of  divorcing  the  properties— I  mean  by  that 
separating  the  electric  light  fiom  the  street  railway  property— gave 
to  the  street-railway  company  a  30-year  franchise,  and  at  the  time 
it  was  gianted  it  was  considered  by  both  street  railway  experts  and 
investoS  to  be  a  model  basis  for  investment.  The  property  was  re- 
organized, and  the  bondholders  received  new  securities  of  a  market 
value  of  substantially  equal  to  the  full  principal  of  their  securities. 

In  the  meanwhile  interest  had  been  paid  right  along  through  re- 
ceivership. ,     ,        T     1        ^TTIT  i-(    XT       1  U^ 

This  reorganization  pkn  was  made  by  Judge  VV  illiam  C.  MooK:,  wno 
was  the  United  States  circuit  judge,  and  he  appointed  me  his  repre- 
sentative to  carry  out  his  financial  plan  of  reorganization. 

After  tlie  reorganization  was  completed,  then  my  firm  came  into 
the  situation  as  banker  for  tliie  railway  company,  and  it  is  since  that 
time  that  we  have  placed  and  sold  this  substantial  amount  ot  securi- 
ties The  people  who  took  those  securities  were  the  most  caretul 
investors  in  the  country— savings  baulks,  insurance  companies,  and 
other  investors.  There  were  thousands  of  individual  investors,  ihe 
securities  were  considered  to  be  so  good  that  one  of  the  largest  in- 
surance companies,  which  took  $500,000,  had  a  special  meeting  of 
their  finance  committee  to  decide  whether  or  not  they  should  take 
$1,000,000  instead  of  $500,000,  although  $500,000  was  their  full  quota 

^  The  baTifof  the  Kansas  City  fi^anchise  was  a  division  of  the  profits 
with  the  city.  There  was  a  valuation  there  m  the  franchise,  agreed 
to  by  the  city  through  their  own  experts,  and  afterwards  approved 
by  the  Public  Service  Commission  of  Missouri,  and  all  the  securities 
that  were  issued  were  approved  both  by  the  city  and  the  Public  Serv- 
ice Commission  of  Missouri.  The  valuation  was  largely  in  excess 
of  the  bonded  indebtedness,  and  the  company  was  to  have  a  6  per 
cent  interest  return  after  all  depreciation  on  the  capital  investment. 

The  fare  was  fixed  at  5  cents.  ^  •         i:  ^i.    - 

Time  went  on,  and  the  first  liappenmg  was  the  passmg  of  the  o  per 

cent  dividend  on  the  stock. 

Mr.  Warren.  About  when  was  tliat,  do  you  remember  S 


mmmmLjtL 


■WB1 


188     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Stuart.  As  I  recall  that,  it  was  about  in  June  or  July,  1917. 

The  costs  began  to  mount  until  what  we  considered— and  we  had 
our  judgment  backed  up  by  many,  many  people  who  know— on  July 
1  of  this  year,  the  railway  company  was  compelled  to  pass  its  inter- 
est.    It  had  not  earned  operating  expenses  for  the  past  six  months. 

Mr.  Warren.  Its  interest  on  these  bonds?  ^,      n    . 

Mr.  Stuart.  The  interest  on  all  bonds,  the  interest  on  the  hrst- 
mortgage  and  the  second-mortgage  bonds. 

Mr.  Warren.  Yes.  •  i   ,  ^        r       4-4...^ 

Mr.  Stuart.  I  stated  that  the  franchise  provided  for  a  5-cent  taie. 
The  situation  got  so  bad  that  there  was  a  great  deal  of  sentiment 
aroused  in  Kansas  City  by  the  public  themselves,  and  when  the  com- 
pany  made  an  application  to  the  Public  Service  Commission  of 
Missouri  for  an  increase  in  fare  to  6  cents,  there  was  a  great  deal  of 
sup]>ort  for  it  on  the  part  of  the  people  in  Kansas  City.  1  here  was 
some  newspaper— I  should  say  there  was  considerable  newspaper 
opposition.  The  public-service  commission,  however,  granted  the 
increase  in  fare  to  6  cents,  and  some  citizens  of  Kansas  City  ques- 
tioned the  right  of  the  commission  to  increase  this  rate  m  the  tace 
of  the  5-cent  fare  in  the  franchise ;  and  this  matter  was  taken  to  the 
supreme  court,  and  last  fall  the  Supreme  Court  of  Missouri  decided 
that  the  public-service  commission  did  have  a  right  to  raise"^ the  fare. 
In  this  particular  case,  the  matter  is  now  in  the  hands  ot  the 
public-service  commission  for  a  further  increase  in  fare,  and  the 
company  has  asked  for  a  10-cent  cash  fare,  or  2  tickets  for  lo  cents. 
That  is  now  pending,  and  is  to  be  decided,  I  believe,  withm  60  days. 
But  I  mention  this  as  showing  what  was  considered  to  be  a  mag- 
nificent investment,  which,  through  no  control  of  the  bankers,  no 
control  of  the  investors,  all  the  time  giving  first-class  service  to  the 
comnmnitv,  has  fallen  into  disrepute,  with  very  poor  prospects  in- 
deed,  unless  relief  is  given  by  the  public-service  commission 

Mr.  Warren.  Could  you  state  when  the  company  started  on  the 
new  organization? 

Mr.  Stuart.  The  date  was  July  1,  1914.  .    ,     ,    -, 

Mr.  Warren.  And  it  was  at  that  time  that  the  prospects  looked  so 

^^Mr.  Stuart.  Well,  even  later.    The  prospects  up  to  1916  were  ex- 

^^Mr.  Warren.  Were  these  bonds  distributed  after  July  1.  l^^^? 

Mr  Stuart.  Yes;  these  bonds  were  distributed  after  July  1,  1914^ 
or  really  after  July  1, 1915.    Some  of  them  before  that. 

Mr  Warren.  So^his  complete  overturnmg  and  change  m  situation 
has  been  within  the  last  five  years? 

Mr.  Stuart.  Exactly.         ,  .        .  -xi.    n    ^u       i     i  ,.« 

Now,  our  interest  in  this  thing,  in  common  with  all  other  dealeis 
in  public-service  securities,  is  that  we  want  to  protect  our  investors. 
The  investor  can  not  be  protected  unless  the  future  is  in  some  way 
taken  care  of,  for  a  public-service  corporation  in  a  growing  city 
needs  money  constantly ;  and  if  it  does  not  need  money,  it  is  not  in  a 
healthy  condition.  ^ 

Mr. 'Warren.  Do  vou  mean  capital  moneys 

Mr  Stuart.  I  mean  new  capital  money— it  is  not  m  a  healthy  con- 
dition, and  in  order  to  safeguard  and  protect  these  tens  of  thousands 
of  people  who  hold  public-utilities  securities,  it  is  necessary  to  not 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     189 

only  provide  for  their  investment  which  is  already  in,  but  to  further 
protect  it  by  making  it  safe  for  the  investors  of  to-morrow  who  have 
not  spent  their  money,  and  over  which  nobody  has  any  control,  to 

^^Mr.^  Warren.  Now,  did  I  understand  you  correctly— that  before 
the  new  securities  were  issued  of  which  you  distributed  such  a  large 
part,  the  property  was  valued  by  experts  on  behalf  of  the  city  ( 

Mr.  Stuart.  The  property  was  valued  by  experts  in  behalf  ot  the 
company,  by  a  number  of  experts  in  behalf  of  the  city,  and,  m  addi- 
tion to  that,  by  the  experts  of  the  Public  Utilities  Commission  of  the 

State  of  Missouri.  ^    ,  .    .  ,,^ -, 

Mr.  Warren.  On  behalf  of  the  city,  and  the  commission  approved 

the  valuation? 
Mr.  Stuart.  The  valuation— the  securities. 
Mr.  Warren.  The  securities? 

Mr.  Stuart.  Yes.  ,  .  .         ... 

Mr.  Warren.  And  that  applied  to  all  the  securities  which  were 

issued  * 

Mr.*  Stuart.  That  applied  to  all  of  the  securities  which  were 

issued.  M    £  j.\.  , 

Mr.  Warren.  And  the  valuation  was  equal  to  all  of  those  securi- 

^^Mr.  Stuart.  The  valuation  was  in  excess  of  all  of  those  securities. 

Mr.  Warren.  The  valuation  was  in  excess  of  all  of  those  securi- 
ties ? 

IVTp  Stt^art     jl  es 

Mr'  Warren.  So'that  in  that  particular  case,  unless  the  valuation 
was  faulty,  although  made  by  many  different  interests,  there  was  no 
question  whatever  of  stock  watering  as  affecting  the  result  which  has 
now  overtaken  the  company  ? 

Mr.  Stuart.  None  whatever.  .  x     tit     o*      4-     .i,^^u 

Mr.  Warren.  I  suppose  you  have  not  any  data,  Mr.  Stuart,  which 

will  enable  you  to  give  even  an  approximate  idea  of  the  number  ot 

street-railway  security  holders,  holders  of  bonds  m  the  country,  or 

^^^iirSix^RT' YthiS^^  would  be  impossible  to  find  out  except 
that  it  might  be  procured  from  the  street  railways  themselves,  all 
of  whom  get  income-tax  certificates  on  every  coupon  that  is  cashed. 
Collectively,  they  will  have  a  list  of  substantially  every  bondholder 
in  the  United  States.  I  believe  there  are  some  1,300  companies  most 
of  whom,  I  assume,  have  a  bonded  indebtedness,  and  you  could  there- 
fore  get  it  from  them.  But  the  average  distribution  of  street-rail- 
wav  securities  is  in  very  small  amounts.  . 

Ml    Warren.  That  would  include,  in  reaching  your  average,  the 
exceptionally  large  holder  like  the  insurance  company  that  you  men- 

^'m?  STUAirr.  If  I  am  not  mistaken,  the  average  holding  of  the 
Kansas  City  Railway  bonds,  including  some  very  large  amounts  held 
by  insurance  companies  and  banks,  is  about  ^7,uuu. 

Mr  Warren.  I  think  that  is  all,  Mr.  Chainnan,  I  want  to  ask  Mr. 

^^Commissioner  Sweet.  Mr.  Stuart,  are  many  of  these  bonds  held 
by  widows  and  orphans  ? 
Mr.  Stuart.  Yes,  sir. 


H'- 


m 


190      PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

Coiiiniissioner  Swekt.  Or  for  them  by  trustees? 

Mr.  Stuakt.  Yes,  sir;  both  ways. 

Commissioner  Swekt.  What  was  the  smallest  bond  issued  by  tlm 
Kansas  City  Co.? 

Mr.  Stuart.  A  hundred  dollars 

Commissioner  Sweet.  A  hundred  dollars? 

]\Ir.  Stuakt.  ^Vnd  there  were  many,  many  thousands  of  those  sold 
to  widows,  orphans,  and  wage  earners. 

Commissioner  Swket.  A  single  bond? 

Mr.  Stuart.  Single  bonds. 

Commissioner  Sweet.  Of  a  hundred  dollars? 

Mr.  Stuart.  Yes,  sir.  As  a  matter  of  fact,  we  considered  them 
so  good  that  to  the  pcM)ple  who  bought  small  denomination  bonds,  we 
o-ave  a  wage  earner  a  chance  to  buy  a  hundred  dollar  bond  by  paying 

$10  down  and  $5  a  month.  xi  j.a    ^q 

Commissioner  Sweet.  Did  many  take  advantage  of  thatf 

Mr.  Stuart.  Many.  ^  .   ^  .  .    ^ 

C\)mmissioner  Sweet.  Would  the  exact  data  or  infornuition  on  that 

subiect  be  available  so  that  we  might  have  it  ? 

Mr.  Stuakt.  In  that  particular  case,  yes,  sir.    We  can  have  that 

analyzed  for  you  in  a  little  time. 

Commissioner  Sweet.  Yes.  .  .      * 

Mr.  Stuart.  A  complete  list  of  the  bondholders,  giving  you  all 

the  different  classes  and  the  amounts— a  careful  analysis— so  that 

you  can  see  at  a  glance  the  class  of  people  who  hold  these  securities. 
Commissioner  Sweet.  Will  you  be  so  kind  as  to  do  that,  Mr. 

Stuai^t?  ,        .       .,,  ,   1         T.xi    X- 

Mv.  Stuart.  I  should  be  very  glad  to,  but  it  will  take  a  little  time. 

Commissioner  Sweet.  Yes.  ,        -.^  i 

Mr.  Stuart.  It  will  probably  take,  I  should  say,  a  week  or  10  clays. 
Commissioner  Sweet.  You  can  send  it  to  the  chairman,  Mr.  Elm- 

quist. 

Mr.  Stuart.  I  should  be  very  glad  to  do  that. 

Ommissioner  Sweet.  And  that  will  be  available  for  the  commis- 
sion ? 

Mr.  Stuart.  Yes,  sir.  ,     •     i,  ..  ^  i 

Commissioner  Sweet.  Upon  what  basis  did  the  expert  you  have 
mentioned  arrive  at  the  valuation  of  the  Kansas  City  properties  ? 

Mr  Stuart.  It  was  the  depreciated  physical  property,  plus  about 
15  per  cent  of  old  property  that  had  not  been  previously  amoi-tized. 
A  part  of  the  trade  was  that  the  city  was  going  to  contribute  its 
shai-e  of  earnings  toward  that  unamortized  part,  and,  as  a  matter 
of  fact,  under  the  franchise,  the  city  was  going  to  reinvest  its 
share  of  the  earnings  in  the  property  right  along  until,  in  some  20 
or  30  years,  thev  would  have  controlled  the  property.  The  city  would 
have  had  more  nionev  in  it  than  the  individuals  or  than  the  company. 

C^ommissioner  Sweet.  That  is,  if  the  business  had  gone  along  as 
was  anticipated  in  1914  and  1915? 

Mr.  Stuart.  Yes,  sir;  at  the  time  the  calculations  were  made.  It 
was  all  calculated  out  on  the  basis  of  the  earnings  as  they  were  at 

that  time.  ,     ,      .       .  .     ,  v . 

Commissioner  Sweet.  Do  you  know  whether  municipal  ownership 

and  operation  were  in  contemplation? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     191 

Mr.  Stuart.  Municipal  ownership  and  operation  may  have  been 
in  contemplation  to  some  extent,  but  not  entirely,  because  by  the 
time  the  franchise  would  have  expired  the  city  would  have  owned 
substantially  half  of  the  property,  and  I  take  it  that  if  municipal 
ownership  had  been  in  contemplation  it  would  have  been  so  arranged 
that  they  would  have  controlled  the  property  or  owned  it  all  by  tlie 
expiration  of  the  franchise.  But  in  connection  with  this  arrange- 
ment about  the  city  reinvesting  in  the  property,  that  was  another 
reason  why  the  securities  of  the  company  were  considered  to  be 
so  good,  because  we  were  permitted  to  say  in  our  circular  by  the 
city  counselor  of  Kansas  City  at  that  time— although  he  would  not 
sign  the  circular— that  this  franchise  was  really  a  partnership  agree- 
ment between  the  city  of  Kansas  City  and  the  railway  company. 

Commissioner  Sweet.  In  one  sense  it  was;  was  it  not? 

Mr.  Stuart.  It  was  a  partnership,  but  it  was  a  one-sided  partner- 
ship, I  am  afraid. 

Commissioner  Sweet.  As  it  turned  out. 

Mr.  Stuart.  As  it  turned  out. 

Commissioner  Sweet.  Because  the  profits  were  not  there? 

Mr.  Stuart.  Yes,  sir;  exactly.  . 

Commissioner  Sweet.  And  the  city  at  the  present  time,  and  for 
the  last  two  or  three  years,  has  not  been  getting  any,  has  it? 

Mr.  Stuart.  The  city  has  not  gotten  anything  for  over  two  years. 

Commissioner  Sweet.  Xo.  -j.    nr      'ch.       ^» 

Mr.  Warren.  The  company  has  not,  either,  has  it,  Mr.  btuart« 

Mr.  Stuart.  Not  for  dividends.  They  have  paid  interest  up 
until  July  1  of  this  year.  -      j 

Mr.  Warren.  But  they  defaulted  then? 

Mr.  Stuart.  Oh,  they  defaulted  on  July  1  of  this  year. 

Commissioner  Sweet.  Do  you  remember  whether  any  dilhculty 
was  experienced  in  reaching  a  harmonious  decision  as  to  the  valua- 
tion of  the  property  as  between  the  experts  representing  the  city 
and  those  representing  the  company? 

Mr.  Stuart.  My  recollection  is  that  there  was  very  little  dilhculty 
in  reaching  an  agreement  on  the  valuation.  The  real  difficulty  was  in 
trading  on  the  other  points  of  the  franchise,  the  rate  of  interest 
that  was  to  be  allowed,  the  division  of  profits  with  the  city,  the 
amount  that  was  to  be  charged  for  depreciation,  the  fact  that  the 
city  had  5  directors  in  the  company  out  of  11,  and  points  of  that 
kind  There  was  no  great  trade  in  the  valuation,  and  a  very  im- 
portant thing  in  connection  with  the  franchise,  really,  that  I  have 
not  mentioned,  was  the  fact  that  it  was  approved  by  referendum 
vote,  so  that  the  voters  all  had  a  chance  at  it ;  but  it  did  take,  from 
the  time  of  negotiations  of  this  franchise  began  up  until  the  final 
referendum  vote,  about  three  years.  In  the  meanwhile,  the  earn- 
ipcrs  of  the  property  were  good  enough,  so  that  the  receiver  paid  in- 
terest on  everything  right  along,  and  kept  the  property  up  in  first- 
class  physical* condition.  .        ,         r         ,  x  ^  i 

Commissioner  Sweet.  At  the  time  the  referendum  vote  was  taken, 
was  the  property  in  the  hands  of  a  receiver? 

Mr.  Stuart.  It  was;  yes,  sir.  .    ,  .      r  r  -.a 

Commissioner  Sweet.  And  still  the  people  voted  m  favor  of  it  ? 

Mr.  Stuart.  And  still  they  voted  in  favor  of  the  francb.is'-.     The 

property  was  not  taken  out  of  the  hands  of  the  receiver  until  about 


I 


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192     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

a  year  after  this  referendum  vote,  because,  after  the  franchise  on 
which  the  whole  reorganization  was  based,  then,  of  course,  it  took 
a  long  job  to  treat  with  all  the  different  security  holders  and  get  out 
the  new  securities  and  draw  .the  mortgages  and  do  all  the  many 
other  things  that  had  to  be  done  in  a  situation  of  that  knid. 

Commissioner  Sweet.  That  was  all  done  durmg  the  receiver- 
ship? .  rri     i. 

:Mr.  Stuart.  That  was  all  done  during  the  receivership,  liiat 
was  done  in  the  year  between  the  time  of  the  referendum  vote  and 
the  ending  of  the  receivership. 

Commissioner  Sweet.  The  receivership  then  had  no  reference  to 
the  defaulting  or  failure  of  income. 

Mr.  Stuart.  Not  failure  of  income;  but  the  receivership  was 
caused  by  a  default,  because  the  company  had  a  lot  of  securities,  sev- 
eral million  dollars'  worth  of  securities,  due  with  a  franchise  which 
ran  only  a  few  years. 

Commissioner  Sweet.  Yes. 

Mr.  Stuart.  And  with  the  principal  due? 

Commissioner  Sweet.  Yes. 

My.  Stuart.  Then  the  bankers  of  the  company  felt  that  they 
could  not  undertake  a  refund  with  this  expiring  franchise  in  sight. 

Commissioner  Sweet.  But  all  of  that  related  to  conditions  which 
had  existed  prior  to  the  making  of  this  new  arrangement  that  you 
have  bfen  telling  us  about. 

Mr.  Stuart.  Yes,  sir. 

Commissioner  Sweet.  Did  the  experts  come  to  an  agreement  in 
rejrard  to  the  addition  of  the  15  per  cent  that  you  speak  of? 

Mr.  Stuart.  The  experts  of  the  public-service  commission  came  to 
an  agreement  in  regard  to  the  items  that  made  up  that  15  per  cent. 

Commissioner  Sweet.  You  said  that  the  securities  issued  were  less 
than  the  value  placed  upon  the  property  by  the  experts. 

Mr.  Stuart.  Yes,  sir. 

Commissioner  Sweet.  Do  you  remember  how  much  less? 

Mr.  Stuart.  I  think  I  can  give  it  to  you  in  percentage.  I  should 
sav  between  15  and  20  per  cent. 

Commissioner  Sweet.  It  was  slightly  less,  then,  than  the  physical 
valuation  of  the  property?  ,      .    i       i 

Mr.  Stuart.  As  to  bonds;  yes.  The  depreciated  physical  value 
was  in  excess  of  all  of  the  bonds  outstanding,  including  both  first 
and  second  mortgage  bonds.  It  was  at  least  40  per  cent  in  excess  of 
the  first-mortgage  bonds  outstanding;  and  that  is  depreciated  physi- 
cal value.  .  . 

Commissioner  Sweet.  Have  you  ever  had  any  experience  with  any 

company  conducted  upon  the  service-at-cost  plan? 

ATi*   Stuart    N'o  sir. 

Commissioner  Sweet.  That  would  be  quite  different  from  the  Kan- 
sas City  plan,  would  it  not  ? 

Mr.  Stuart.  Very  different;  yes,  sir. 

Commissioner  Sweet.  Have  you  any  views  on  that  system,  as  to 
whether  it  will  work  any  better  than  the  Kansas  City  plan  did? 

Mr.  Stuart.  Yes,  sir*;  I  think  it  would.  As  an  investment  banker 
mv  idea  as  to  credit  on  which  a  street-railway  company  can  borrow 
money  in  the  future,  is  that  it  will  have  to  be  on  some  plan  where 
the  street-railway  company  will  be  permitted  to  earn  all  its  operating 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILV^AYS  COMMISSION.     193 

expenses,  proper  maintenance,  proper  depreciation,  and  a  rate  of  in- 
terest on  the  capital  invested  which  will  attract  capital. 

Commissioner  Sweet.  What  would  that  rate  be,  in  your  judgment, 

now  ^  1 

Mn  Stuart.  That  is  a  rather  difficult  question  to  answer  because 
the  street  railways  are  in  such  bad  repute  But  assuming  that  they 
were  brought  to  the  same  standard  m  public  estimation  that,  we  tmII 
say,  first-class  electric  companies  are  in——  . 

Commissioner  Sweet.  Do  you  mean  lighting  companies  now  ? 
Mr.  Stuart.  I  mean  lighting  and  power  companies. 

Commissioner  Sweet.  Yes.  •    4-^  c.;^  or^rl  « 

Mr.  Stuart.  The  rate,  I  should  say,  would  be  from  six  to  six  and  a 
half  per  cent  on  senior  securities.  By  "senior  securities"  I  mean 
first-mortgage  bonds. 

Commissioner  Sweet.  Yes.  «   , 

Mr.  Stuart.  Further,  my  idea  of  the  financial  arrangement  of  the 
future,  assuming  street-railway  companies  are  going  to  be  P^vateiy 
owned  and  give  first-class  service  and  make  extensions  when  needed 
is  that  the  relationship  between  the  municipality  and  the  railway 
company  will  have  to  be  such  as  that  it  will  be  attractive  for  a  stock- 
holder,  or  for  a  man  who  buys  stock,  to  invest  m  stocks,  because  it 
is  bad  finance,  and  will  never  work  out  for  any  corporation  to  keep 
on  borrowing  money,  always  putting  out  senior  securities.  It  must 
have  a  senio?  security,  which  will  necessarily  bear  a  comparatnely 
low  rate  of  interest,  and  a  junior  securtiy  furnishing  the  margin, 
which  would  bear  a  higher  rate  of  interest.  In  other  words,  the 
fii^t-mortgage  bonds  and  stock.  Unless  some  plan  for  safe  credit 
is  worked  out,  it  is  hopeless  for  street-railway  companies  to  expect 

to  get  money,  in  my  judgment.  .    .     i        nr     o^       4-    ;i:  r 

Commissioner  Sweet.  As  the  situation  is  to-day,  Mr.  Stuart,  it  i 

understand  you  right,  it  is  impossible  for  street-railway  companies 

to  get  any  new  capital,  practically. 
Mr.  Stuart.  Practically;  yes. 
Commissioner  Sweet.  Do  you  mean  taken  as  a  whole* 

Mr.  Stuart.  Practically  so.  -r  i.  n  •     ^  ^\.^4- 

If  you  will  let  me  interrupt  for  a  minute,  I  can  tell  you  ]ust  what 

the  exceptions  are.  .      ^     .  ,  i  j  j    xi.  i. 

Commissioner  Sweet.  Yes,  sir;  I  wish  you  would  do  that. 

Mr  Stuart.  The  exceptions .  are  only  those  properties  that  have 
been  financed  by  strong  banking  houses,  who  have  to  refund  a 
maturing  obligation  in  order  to  make  the  rest  of  the  securities  they 
have  sold  good.  Generally  speaking,  there  is  no  market  for  street- 
railway  securities  to-day.  ,       i.  u    '4. 

Commissioner  Sweet.  In  the  case  that  you  speak  of,  would  it 
mean  that  the  companies  are  not  earning  enough  to  ]ustity  investors 
in  putting  in  new  money,  but  that  they  are  being  held  up  by  bankers 
and  new  capital  that  comes  in  for  another  reason  than  that  of  invest- 

"^  Mr'  Stuart.  For  both  reasons.     There  are  few  properties  that  are 
making  any  kind  of  a  showing  on  their  senior  securities.     I  refer  to 
Kansas  City  again.     We  have  taken  securities   of  that  company 
My  firm  has  taken  securities  of  that  company  which  it  has  not  tried 
to  sell  and  won't  try  to  sell,  in  the  effort  to  make  all  the  millions  that 


194     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

v.e  have  sold  good,  and  we  nerer  will  market  those  securities,  we 
never  will  ask  anybody  to  buy  any  of  them  until  we  can  go  to  them 
and  sav,  "  These  securities  are  again  safe,  m  our  judgment. 

Commisisoner  Sweet.  You  are  doing  that  to  protect  your  patrons  i 
Mr    Sti^art.  We  are  doing  that  to  protect  our  patrons  and  the 
patrons,  the  widows  and  orphans,  the  insurance  companies,  and  the 
people  that  we  have  sold  these  securities  to. 

Commissioner  Sweet.  And  incidont^illy  to  protect  your  own  repu- 

^Mr.  Stuart.  Yes,  sir;  but  regardless  of  the  reputation,  every  bank- 
ing house  has  some  responsibility  in  connection  with  the  securities 

it  sells. 

Commissioner  Sweet.  Yes.  , 

Mr.  Stuart.  And  we  propose  to  live  up  to  our  responsibility  to  the 

"  Commissioner  Sweet.  That  is  taking  what  I  would  call  a  moral 
stand. 

Mr.  Stuart.  Yes,  sir.  .      .  ,     .     -^    ,i; 

Commissioner  Sweet.  That  is  right  m  itself. 

Mr.  Stuart.  Yes,  sir.  ,     ,     .      v      •    xv    i    '    ^„„ 

Commissioner  Sw^eet.  And  perhaps  the  best  policy  in  the  long  run 
for  those  who  want  to  keep  on  doing  business.  ,      ,  ^, 

Now  Mr  Stuart,  if  the  companies,  as  a  rule,  throughout  the  coun- 
try, can  not  get  new  capital,  they  can  not  make  extensions,  nor  keep 
up  repairs,  nor  really  continue  to  do  business  very  long,  can  they  i 

Mr.  Stuart.  They  can  not. 

(Commissioner  Sweet.  So  that,  as  you  see  it,  as  I  got  it  from  what 
vou  have  already  said,  the  general  public  has  got  to  sit  in,  m  some 
Khai^e  or  other,  either  as  owners  or  owners  and  operators  ot  these 
companies,  assuming  now  that  they  are  to  continue  to  oi)erate  and 
thereby  subject  the  general  taxpayer  to,  perhaps,  the  necepity  ot 
makincr  up  for  losses,  or  else  in  some  other  way  the  general  public 
nmst  c^ome  in  as  sort  of  guarantors  under  the  plan  that  has  been 
mentioned  here.  We  will  say  service  at  cost  If  that  were  carried 
out  properly,  I  suppose  the  burden  would  fall  upon  the  patrons  of 
the  company,  would  it  not,  instead  of  upon  the  general  community  i 

Mr.  Stuakt.  Yes,  sir.  •     i.  xi.  ^  ^^ 

Commissioner  Sweet.  Which  would  seem  to  be  more  ]ust  than  to 
have  it  fall  upon  the  whole  community,  would  it  not?  ^,      ^      ^      ., 
Mr  Stxtari.  That  has  always  been  my  opinion,  that  the  street  rail- 
way company  should  be  permitted  to  operate  so  that  its  patrons 

should  pay  the  cost.  .  .  .  . 

(Commissioner  Sweet.  But  under  the  supervision  of  the  munici- 
pality or  State  commission  of  some  kind — --  ^  ^  u     i 

Mr.  Stuart.  I  am  thoroughly  in  favor,  from  an  investment  bank- 
er's standpoint,  of  supervision  of  public  utilities. 

Commissioner  Sweet.  Would  you  make  a  distinction  there  betAveen 
its  being  done  by  the  municipality  itself  or  by  a  State  organization  ? 

Mr  Stuart.  Certainly,  I  would  much  rather  it  be  done  by  a  State 
public-utility  commission.  I  beliove  that  is  freer  from  local  preju- 
dices, and  it  is  in  a  position  to  render  a  fairer  judgment  on  any  ques- 
tion than  local  authorities  would  be. 

(Commissioner  Sweet.  Then  all  the  municipalities  of  the  State 
would  be  on  an  equal  basis,  and  under  the  supervision  of  the  btate 
organization. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     195 

Mr.  Stuart.  Yes,  sir. 

Commissioner  Sw  eet.  And  th6  interest  of  the  general  public  would 
be  looked  after  by  that  State  organization  or  commission,  and  the 
users  of  the  street  railways  would  be  the  ones  who  would  pay  more  or 
less,  according  to  the  needs,  thereby  getting  at  actual  cost— or  as  near 
as  may  be  at  actual  cost— the  conveniences  of  street  railway  service. 

Mr.  Stuart.  Yes,  sir;  I  think  that  is  just. 

Commissioner  Sweet.  Have  you  any  other  plan  than  that  to  sug- 
gest as  being  worthy  of  consideration  by  this  commission  ? 

Mr.  Stuart.  No,  sir.  My  general  idea  is  the  one  I  spoke  of  in  re- 
gard to  a  basis  of  credit.  As  to  just  what  in  detail  should  be  done 
generally,  I  have  no  definite  plan. 

Commissioner  Sweet.  In  regard  to  an  indeterminate  franchise, 
such  as  you  spoke  of,  would  there  be  any  means,  according  to  your 
pljvn— the  plan  which  is  in  your  mind — by  which  the  franchise  could 
be  terminated  at  all  ?  Would  the  public  have  any  control  over  it,  so 
that  on  the  happening  of  any  possible  event  the  public  might  step 
in  and  terminate  the  franchise,  or  would  it  be  absolutely  indeter- 
minate? . 

Mr.  Stuart.  I  should  say  that  it  should  be  an  indeterminate  tran- 
cliise,  the  company  to  be  regulated  by  public  authority. 

Commissioner  Beall.  May  I  ask  him  one  question  there,  Mr.  Com- 
missioner Sweet? 

Commissioner  Sweet.  Certainly. 

Commissioner  Beall.  Mr.  Stuart,  in  the  States  that  now  operate 
under  indeterminate  permits,  like  Wisconsin,  for  instance— and  there 
•are  a  number  of  States  that  have  that  plan  for  public  utilities— do 
not  all  of  those  permits  provide  that  the  continuance  of  the  permit  is 
subject  to  the  good  behavior  on  the  part  of  the  corporation? 

Mr.  Stuart.  They  do.  , ,  ,  •  -t  .,-x       ^ 

Commissioner  Sweet.  So  that  there  would  be  an  impossibility  of 

terminating  it  upon  the  happening  of  some  possible  event,  would 

there  ? 

Mr.  Stuart.  Yes,  sir;  as  a  basis  for  extending  credit,  I  should  say 
that  would  be  perfectly  proper,  because,  under  such  an  arrangement, 
practically  everything  would  be  agreed  to.  in  advance  as  to  what 
could  be  done  and  what  could  not  be  done. 

Commissioner  Sw^eet.  Yes.  . 

Mr.  Stuart.  And  it  would  be  some  very  flagrant  happening  under 
which  the  municipality  would  want  to  terminate  the  franchise.  I 
take  it  that  the  street  railway  corporation  is  a  necessity,  and  if  it  is 
not  operated  under  private  ownership,  then  it  must  be  operated  under 

public  ownership.  ,  .   ,    .  , ,  ,  -ui         j 

Commissioner  Sw^eet.  Don't  you  think  it  would  be  possible  under 
that  sort  of  a  contract  to  provide  that  the  municipality  might  purchase 
it,  if  it  saw  fit,  at  a  future  period? 

Mr.  Stuart.  Yes,  sir ;  I  think  that  would  be  quite  proper. 

Commissioner  Sw^eet.  Is  not  that  ordinarily  put  into  such  a  fran- 
chise?   Has  it  not  been  in  the  States  wdiere  they  have  them? 

Mr.  Stuart.  It  has  been  put  in  in-  a  number  of  special  cases  that 
I  know  about.  And,  if  I  am  not  mistaken,  in  Wisconsin,  w  hen  you 
take  out  an  indeterminate  permit,  the  municipality  has  the  right  to 
purchase  it  at  an  appraised  value. 


I 


196     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Where  receivers  have  been  appointed,  as 
they  have  been  in  many  instances,  have  the  results  been  generally 
more  favorable  than  under  the  control  of  the  companies  themselves? 

Mr.  Stuart.  Oh,  I  think  so. 

Commissioner  Sweet.  The  results  have  been • 

Mr.  Stuart.  From  every  standpoint. 

Commissioner  Sweet.  From  every  standpoint? 

Mr.  Stuart.  From  every  standpomt.  In  the  first  place,  a  receiver 
is  not  appointed  unless  the  property  is  in  trouble. 

Commissioner  Sweet.  Yes. 

Mr.  Stuart.  And  it  is  usually  in  trouble  on  account  of  earnmgs. 

Commissioner  Sweet.  Yes.  .  j.     t*.  • 

Mr.  Stuart.  The  receiver  has  a  job  representmg  the  court,  it  is 
usually  more  or  less  a  temporary  job. 

Coiumissioner  Sweet.  Yes.  ,     ^     i     •    i.        i. 

Mr.  Stuart.  And  one  of  the  first  things  he  seeks  to  do  is  to  cut 
down  service  and  cut  down  maintenance,  m  order  to  make  the  net 
ea'-nings  larger  and  make  a  little  better  showing.  My  observation 
is  that  propei-ties  in  receivers'  hands  are  not  nearly  so  etticiently 
operated  as  under  private  management. 

Commissioner  Sweet.  Not  as  efficiently  operated  ? 

Mr.  Stuart.  Not  as  efficiently  operated. 

Commissioner  Sweet.  That  would  depend  somewhat  upon  the 
ability  and  experience  of  the  receiver,  I  suppose;  would  it  not? 

Mr.  Stuart.  It  would  undoubtedly  depend  upon  the  ability  of 
the  receiver;  but  the  receiver  can  not  be  as  interested  to  operate  that 
property  for  the  benefit  of  the  community  and  for  the  future  as  the 
permanent  owners  of  the  property  would  be.    He  has  not  the  same 

interest.  ,  .        ,        ^      i         •     -j.       « 

Commissioner  Sweet.  Under  the  service-at-cost  plan,  is  it  cus- 
tomary, or  do  you  think  it  would  be  right,  that  there  should  be  a 
limitation  as  to  the  salaries  drawn  by  the  managing  officers  of  the 

^^Mr^^SruART.  I  have  not  thought  about  that  phase  of  it;  but  the 
public,  in  the  interest  of  the  public,  would  naturally  want  to  allow 
enough  salary  to  attract  the  kind  of  talent  that  would  efficiently 
administer  the  property. 

Commissioner  Sweet.  That  would  seem  to  be  essential,  and  yet 
vou  are  aware  of  the  fact,  are  you  not,  that  public  officials  m  most 
cities  are  not  very  well  compensated ;  in  other  words,  that  the  public 
is  rather  stingy  in  its  compensation  of  its  officers? 

Mr.  Stuart.  Shamefully  so,  I  think.  , ,.     .  ^       *    •    v       4.<t 

Commissioner  Sweet.  But  it  is  against  public  interest,  is  it  notf 
Would  it  not  pay  the  public  to  be  more  generous  in  the  payment  of 
sahiries  and  get  higher-grade  men? 

Mr.  Stuart.  Undoubtedly.  For  instance,  take  the  public  commis- 
sioners  of  States,  who  are  called  upon  to  pass  upon  enormous  in- 
vestments in  property,  and  to  use  their  time,  judgment,  and  experi- 
ence.  I  have  always  thought  that  the  pay  that  they  got  was  nowhere 
near  commensurate  with  the  judgment  and  experience  required. 

Commissioner  Sweet.  Have  you  had  experience  with  commission 
form  of  government  in  cities? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     197 
Mr.  Stuart.  Do  you  mean  have  we  handled  securities- 


Commissioner  Sweet.  Has  your  business  brought  you  m  contact 
with  cities  that  are  governed  under  the  commission  form  of  govern- 
ment—the newer  form  of  city  government?  The  city  of  Buffalo  is 
now  the  largest  city  in  the  United  States  governed  that  way,  1  think, 
but  there  are  Des  Momes,  Galveston,  and  a  great  many  other  cities 

that  are  governed  that  way.  ,  .^i   /-.  i      i^  t« 

Mr.  Stuart.  Yes ;  we  had  a  lot  of  experience  with  Oralveston.     in 

fact,  my  firm  bought  the  first  bonds  that  Galveston  issued  after  their 

earthquake  down  there.  . 

Commissioner  Sweet.  Yes;  I  wanted  to  ask  you  as  a  matter  ot 
information,  whether  you  are  familiar  with  cities  governed  in  that 
wav  and  whether  you  have  noticed  any  disposition  to  be  more  liberal 
in  the  payment  of  salaries  of  officials,  especially  of  city  managers. 

Mr  Stuart.  I  am  afraid  I  am  not  sufficiently  familiar  with  that, 
except  that  I  have  had  enough  experience  in  Galveston  to  believe 
that  everything  in  that  city  is  done  on  the  most  businesslike  basis. 

Commissioner  Sweet.  You  made  the  remark  that  all  healthy  com- 
panies needed  a  continual  increase  of  capital,  and  if  a  company  was 
not  needing  more  money— more  capital— then  it  was  not  in  a  healthy 
condition.     Did  you  not  say  that?  , 

Mr.  Stuart.  I  did ;  and  that  is  true,  in  my  opinion. 

Commissioner  Sweet.  Do  you  base  that  upon  the  gi'ound  that  a 
healthy  company  is  continually  expanding——       .    ^.   . .     ,        ... 

Mr  Stuart.  A  public-service  company,  like  an  individual  or  like 
anv  private  business,  can  not  stand  still.  It  either  has  to  go  for- 
ward or  go  backward.  If  it  goes  ahead,  it  needs  more  money ;  it 
needs  more  capital  all  the  time.  -j  j  i? 

Commissioner  Sweet.  And  that  could  not  be  properly  provided  for 

by  earnings  ?  ^  .  •  j      • 

Mr  Stuart.  Earnings  would  not  be  sufficient  to  provide,  m  my 
opinion,  for  the  additional  capital  required  by  any  growing  public- 
service  corporation. 

Commissioner  Sweet.  That  is  all.  ,    ,  t^  ^-^ 

Mr.  Warren.  Mr.  Stuart,  did  you  say  that  under  that  Kansas  City 
franchise  five  directors  were  named  by  the  city? 

Mr  Stuart.  Five  by  the  city  and  six  by  the  company. 

Mr  Warren.  You  spoke  of  a  rate,  from  6  to  ^  per  cent  on  senior 
securities  of  street  railways,  if  the  street  railways  were  now  enjoy- 
in  o^  the  same  position  in  public  confidence  that  the  electric-lightinff 
companies  enjoy,  and  of  a  higher  rate  for  the  junior  securities,  which 
I  suppose  is  ordinarily  stock. 

Mr.  Stuart.  Ordinarily  I  assume  to  be  stock. 

Mr.  Warren.  How  much  higher? 

Mr.  Stuart.  Well,  I  should  say  from  1  to  2  per  cent 

Mr.  Warren.  Higher  than ^  ^ 

Mr.  Stuart.  Higher  than  the  senior  securities. 

Mr.  Warren.  Is  there  any  general  rule  or  practice  m  investment 
banking  houses  respecting  the  earnings  which  a  utility  should  show 
in  excess  of  the  interest  required  on  the  bond  issues? 

Mr.  Stuart.  There  is  not  any  general  rule.  But,  as  I  said  in  the 
be^^inning,  the  investment  banker  has  no  control  over  money  of  his 
clients ;  and  unless  you  present  a  street-railway  security,  or  any  other 
security  with  a  proper  value  and  proper  earning  restriction,  proper 


I 


198     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

earnings  statement,  proper  depreciation  fund,  or  proper  sinking 
fund,  proper  escrow  provisions  in  the  mortgage,  the  investor  won  t 
buy  it.  Unless  he  thinks  he  is  well  protected,  the  buyer  of  bonds 
would  not  buy  bonds.  He  is  conservative,  and  unless  he  tlnnks  he  is 
well  protected,  he  won't  buy  bonds. 

Mr.  Warren.  As  far  as  the  earnings  are  concerned,  he  would  expect 
the  company  to  show  considerable  earnings  in  excess  of  the  money 
necessary  to  pay  the  interest  on  the  bonds  ? 

Mr.  Stuart.  The  general  rule,  without,  however,  bemg  a  rule,  is 
that  the  senior  security,  the  first-mortgage  bond,  to  be  considered 
a  safe  security  and  to  be  in  good  standing,  should  earn  twice  its  in- 
terest charges,  or  more.  ,  -r    i  •  i  -n  •     ^ 

Mr.  Warren.  You  want  to  get  a  train,  and  I  think  you  will  just 

have  time  to  do  it. 

Mr.  Stuart.  I  thank  you  very  much. 

Mr.  W^vrren.  I  am  very  much  obliged  to  you. 

Commissioner  Sweet.  At  the  service-at-cost  plan,  would  not  the 
senior  securities,  the  stock  and  everything,  be  substantially  on  the 
same  basis,  and  all  practically  guaranteed  by  the  public? 

Mr.  Stuart.  No.  They  would,  to  some  extent,  but  there  might  be 
conditions  that  would  come  up  in  any  one  year  that  would  make  the 
showino'  for  the  junior  securities  a  little  less  favorable,  perhaps,  than 
it  should  be.  Then,  another  thing:  The  buyer  of  the  senior  securi- 
ties, if  he  has  a  big  equity  Miind  him,  is  going  to  buy  those  securi- 
ties at  a  good  deal  less  rate  of  interest  than  he  would  were  he  furnish- 
ing all  the  money,  and  at  times  of  panic  or  times  of  stringent  money, 
when  the  street-railway  company  finds  it  necessary  to  borrow,  if  they 
have  a  senior  securitv  which  has  a  big  equity  behind  it  m  the  shape 
of  junior  securities,  they  can  always  raise  the  money  on  those  senior 
securities,  either  by  selling  the  securities,  or  by  hypothecation,  until 
such  time  as  money  conditions  ease  up.     For  instance,  the  avemge 


J 


senior  securiiic«,  luu  ti>t-iiif^c,  j^/u  »ixa  ov.v.,  ........  -v.  .  ^.^^  .,...,       -  ., 

much  better  financial  set-up,  and  if  a  corporation  is  always  m  a  posi- 
tion to  borrow  monev,  it  is  always  sure  of  serving  the  public  proi:>erlv. 

I  would  like  to  say  a  word  just  from  an  investment  banker  s  stand- 
point, and  I  know  most  of  the  investment  bankers  of  the  United 
States  We  look  upon  this  commission  almost  as  the  court  ot  last 
resort  in  this  matter.  We  feel  that  the  decision  of  this  commission 
is  ffoincr  to  have  the  same  effect  upon,  the  public  as  tlie  War  Labor 
Board's  decisions  had  on  the  public;  and  we  are,  therefore,  very,  very 
deeplv  interested,  and  all  of  us  are  anxious  to  do  everything  we  can ; 
but  we  think  that  this  is  about  the  last  chance,  and  that  whatever  you 
gentlemen  decide  is  going  to  go  a  very  long  way  toward  molding 
public  sentiment,  out  of  which  we  hope  for  better  things. 

Commissioner  Sweet.  Do  you  think,  Mr.  Stuart,  that  the  employees 
of  sti-eet-i-ailwav  companies  and  the  general  public  are  equally  inter- 
ested with  the  *^in vestment  bankers  and  the  companies  themselves, 

substantially?  ,         .,  .     •         *  *i,„<.  k»,*  t 

Mr  Stuart.  Well,  T  mav  not  have  the  correct  view  of  that,  but  1 
do^not  think  so.  I  think  the  solution  of  this  is  between  the  public 
and  the  railway  companies,  and  the  relations  between  the  employer 
and  employee  would  be  just  like  they  would  in  any  other  company. 


PROCEEDINGS  OF  I'EDEKAL  ELECTRIC  RAILWAYS  COMMISSION.     199 

The  employee  must  be  well  paid.     He  should  be  well  paid.    Every- 
body wants  him  well  paid.     But  the  public  should  see  that  the  em-   ; 
pi  oyer  gets  a  rate  with  which  he  can  afford  to  pay  those  wages. 

Commissioner  Sweet.  As  between  the  investor  and  the  general 
public,  the  advantages  of  settling  this  question  and  settlmg  it  right 
are  substantially  the  same. 

Mr.  Stuart.  Yes ;  I  agree  with  you.  ' 

The  Chairman.  You  will  be  excused,  Mr.  Stuart. 

Mr.  Warren.  Mr.  Chairman,  at  this  point  I  should  like  to  read  a 

letter  which  Mr.  Tripp  received  from  Mr.  Hurley,  who  was  asked  to 

come  before  the  commission  but  was  unable  to  attend,  and  if  I  may, 

I  would  like  to  read  it  now  before  I  call  my  next  witness : 

United  States  Shipping  Board, 

Washinyion^  July  15,  1919. 

Mr.  Guy  E.  Tkipp,  .  .    . 

Chairman  Federal  Electric  Railway  Commission, 

Washington,  D.  C. 

De\u  Mr  Tripp:  I  have  been  requested  to  appear  before  you  as  a  witness  in 
TOur' pending  investigation  of  the  problems  which  confront  electric  railways 
of  the  United  States.  It  is  impossible  for  me  to  appear  in  person  without 
neglecting  other  pijhlic  duties  to  which  I  am  committed,  and  I  trust  that  you 
will  permit  me  to  submit  and  record  for  your  consideration  the  following  facts 

In  written  form :  „  ,    ,  .  ,.^     xi.       ,j. 

The  United  States  has  been  developed  with  unparalleled  rapidity  through 
th<'  construction  of  transportation  facilities  by  men  of  vision  and  initiative. 
Thus  our  great  national  industry  has  been  built  up  by  transportation  which  has 
heretofore  preceiled,  leil,  and  actually  mnde  possible  and  brought  about  the 
wonderful  development  of  the  natural  resources  of  this  country  and  our  na- 
tional prosperity.  ,  .  .     ,       ^t.     -x.  ,-     ^  ^i,^ 

In  the  early  days  our  national,  State,  and  municipal  authorities  realized  the 
absolute  necessity" of  fostering  the  construction  of  transportation  facilities  as  an 
essential  factor  in  the  development  of  our  country,  and  subsidies  in  the  form  of 
land  and  money  were  granted,  thus  aiding  in  their  establishment 

Adequate  and  etlicient  electric  railway  facilities  are  just  as  essential  to  the 
proper  development,  welfare,  and  prosperity  of  our  cities  and  populous  com- 
munities as  the  transcontinental  trunk  lines  are  to  our  country  at  large.  They 
should  be  fostered  and  safeguarded  accordingly. 

Unfortunately  pioneers  who  promoted  the  construction  of  many  electric- 
railway  properties  pursued  practices  which  have  saddled  on  the  traveling 
public  excessive  charges  in  the  form  of  excessive  amount  for  promoters'  profits 
rather  than  for  construction  costs.  These  practices  naturally  brought  about 
public  antagonism.  \,        ^   ^ 

The  United  States  Shipping  Board  p:mergency  Fleet  Corporation  had  oc- 
casion during  the  war  to  reciuire  nuuiy  electric-railway  companies  to  enlarge 
their  facilities  sufficiently  to  carry  great  numbers  of  shipyard  workers  between 
their  homes  and  the  shipyards.  We  thus  were  brought  intimately  in  touch  with 
the  electric   railway   industry   and   its  requirements   on   all   seaboards  of   the 

United   States.  .  ^         •  „     •        ^    * 

We  fouml  in  many  instances  that  the  companies  were  financially  impotent, 
owing  to  their  having  been  prevented  increasing  their  rates  to  a  suflicient  ex- 
tent to  cover  the  increased  costs  of  operation  and  a  reasonable  return  on  the 

capital  already  invested.  .  r,     .  ^r. 

We  have  found  that  this  condition  applies  to  many  companies  throughout  the 
entire  country  and  is  mainly  responsible  for  the  unsettled  condition  of  the 
electri-c-railway  industry  to-day.  ,  .       ^ 

In  many  cases  the  War  Labor  Board  in  Washington,  in  endeavoring  to 
meet  war  conditions,  raise<l  tlie  wages  of  the  street-railway  employees  \vith 
the  thought  in  mind  of  preventing  widespread  strikes,  they  being  fearful  that 
strikes  might  spread  and  devek)p  a  serious  sltiuition.  But  in  their  anxiety 
to  settle  labor  difficulties  promptly  they  naturally  were  unable  in  tlie 
emergency  to  take  into  consideration  all  the  conditions,  as  it  was  their  task  to 
prevent  serious  labor  difficulties. 

Now  that  the  war  i«  over  an<l  it  is  recognized  that  wages  are  not  likely  to 
be  reduced,  when  the  facts  show  that  certain  street  railways  can  not  be  09- 


200     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

eratetl  under  the  present  high  cost  of  materials  and  hibor,  so  as  to  yield  a  just 
return  on  the  capital  invested,  it  api>ears  to  me  that  there  is  only  one  remedy 
and  that  is  authority  to  increase  the  fares.  The  public  interest  requires  first- 
class  service  and  the  public  is  willing  to  pay  additional  fare. 

With  the  whole  world  endeavoring  to  improve  its  transportation  services 
both  on  land  and  sea,  and  spending  millions  of  dollars  experimenting  on  trans- 
portation in  the  air,  it  is  most  important  to  the  future  prosperity  and  comfort 
of  our  people  that  the  street  railways  be  placed  in  a  position  where  first-class 
service  will  be  given  the  public  at  a  just  cost  under  the  supervision  of  broad 
minded,  sound  conunisslons.  If  State  and  National  Governments  are  to  deter- 
mine what  is  a  fair  street-railway  wage  scale,  then  they  should  also  assume 
the  responsibility  of  determining  and  establishing  what  is  an  adequate  strtH?t- 
railway  fare,  and  they  should  willingly,  when  the  facts  are  presented,  meet  the 
new  conditions  bv  authorizing  street-railway  companies  to  increase  their  fares. 

It  is  clear  that  everv  elwtric-railway  company  should  be  freely  accorde<l  the 
right  to  establish  such  rates  as  are  necessary  to  meet  operating  costs,  Including 
nminteuance  and  depreciation,  and  a  reasonable  return  on  the  capital  invested. 
If  they  are  to  be  denied  this  right,  it  is  perfectly  clear  that  no  additional 
capital  can  be  safelv  invested  in  electric-railway  securities,  that  our  electric 
railways  will  be  unable  to  meet  their  obligations  to  the  public  and  their  se- 
curity holders.  .,  ^.  ^  ,.  . 

As  soon  as  the  American  publi(,'  and  the  street-radway  corporations  of  this 
country  are  brought  to  a  settleil  understanding  of  what  constitutes  fairness  in 
their  mutual  relations,  your  problem  will  be  solve<l.  Caoital  already  legiti- 
mately invested  in  public  service  will  be  safeguarded,  the  credit  of  our  legiti- 
mate electric-railway  companies  will  be  restored,  new  capital  will  be  available 
to  them  as  requiretl  for  the  development  and  expansion  of  their  facilities  to 
meet  the  requirements  of  the  public,  and  the  public  will  enjoy  efficient,  safe 

service.  .  .  ^  , 

The  true  value  of  an  electric-railway  property  is  the  legitimate  cost  incurred 
in  establishing  and  developing  its  business,  and  that  any  method  of  valuation 
which  disregards  this  principle  is  not  fair.  ,  ,    ,  , 

The  capital  invested  in  an  electric-railway  property  Is  certainly  entitled  to 
a  profitable  return  from  the  time  it  is  placed  at  risk  in  the  enterprise  and  the 
public  interest  is  best  served  when  a  fair  return  is  paid  on  capital. 

An  electric  railway  is  entitled  to  include  in  its  cost  of  service  not  only  its 
current  operating  expenses  but  due  allowance  for  renewals  and  depreciation. 

Therefore,  these  are  all  elements  which  must  be  includeil  in  valuing  an  elec- 
tric-railwav  property  for  rate-making  purposes. 

If  you  can  clearly  and  firmly  establish  these  fundamental  principles,  you  will 
save  an  Important  industry  and  perform  a  great  service  to  the  American  public. 

Very  truly,  yours, 

Edward  N.  Hurley,  Chairman: 

Mr.  Warren.  I  think  I  mentioned  yesterday  morning  something 
about  Massachusetts  investments.  It  might  interest  the  commission 
at  this  point,  after  Mr.  Stuart's  testimony,  if  I  were  to  read  the 
figures  which  I  prepared  for  an  argument  before  the  Massachusetts 
commission  which  was  considering  this  same,  general  question  that 
your  commission  is  considering  here  for  the  whole  country.  They 
were  considering  it  merely  for  Massachusetts.  These  figures,  I  be- 
lieve, were  authentic.  They  were  made  up  from  the  reports  of  the 
various  street-railway  companies  as  regards  to  stockholders  and 
from  the  saving  bank  and  insurance  commissioners'  reports  for 
Massachusetts  as  regards  those  two  classes  of  securities,  and  they 
relate  to  the  year  1915.  At  that  time  there  were  $102,493,075  of 
'  capital  stock  outstanding  which  under  Massachusetts  laws  is  all 
issued  at  100  cents  or  more  on  the  dollar.  There  was  represented 
in  addition  to  the  par  value  of  that  capital  stock  paid  into  the 
companies  under  the  laws  of  Massachusetts,  which  requires  stocks 
if  they  are  selling  at  over  par  to  be  issued  at  a  price  above  par,  the 
money  being  paid  into  the  corporation — there  were  in  premiums  so 
paid  to  the  corporations  $6,659,611,  or  in  round  numbers  about 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     201 

$109,000,000  of  capital  stock  or  what  amounted  to  ^\^_f^^^|.^^|jj^f^ 
paid  in  premiums  on  capital  stock,  and  there  was  $91,834,^00  of 

^"^Thf  number  of  people  interested  in  the  stock  of  those  street- 

raEy  Zpanies  i^n  1915  was  26,000.    There  were  26,000  mves^^^ 

interested  in  the  stock.    In  the  bonds  there  was  nothmg  available  at 

tt  dme  as  to  the  number  of  bondholdei;s,  but  the  savings  bank 

and  insurance  reports  did  indicate  the  extent  to  which  the  bonds 

were  held  by  those  two  classes  of  corporations;  and  it  appeared  that 

<;iS1414100  of  street-railway  bonds,  which  was  a  little  more  tnan 

fnelhWoflS    were^held  by' Massachusetts  B--gs  banks  on 

October  30    1915;  $5,758,000  of  the  bonds  were  held  by  Massachu- 

2  ts  life  iLrance  companies,  and  $1 138,000  by  other  Mas.ac^^^^^^^^^ 

insurance  companies.     The  total  held  by  ™^  banks,  ^^^^^^^'^ 

ance   and  other  insurance  companies  was  $38,310,100,  or  about  two 

fifthL  of  aU  the  bonds  which  those  street  railways  had  outstanding 

in  1915 

The  Chairman.  Did  the  bonds  and  stocks  apply  to  railroads  oper- 
ating wholly  within  the  State  of  Massachusetts? 

Mr.  Warren.  Yes;  substantially  so.  There  may  be  one  or  two 
which  operate  without  the  borders  to  a  neighboring  town,  i  here  is 
Tne  I  think,  that  operates  a  little  way  over  into  New  Hampshire 
and  one  tha  operates  a  little  way  into  Rhode  Island ;  but  substan- 
tTally  they  are  corporations  operating  in  the  State  of  Massachusetts 
As  far  as  the  savings  bank  law  is  concerned  that  is  confined  to  the 
Massachusetts  street-railway  companies. 

STATEMENT  OF  MR.  HENRY  G.  BRADLEE. 

Mr.  Warren.  Your  full  name  is? 

Mr.  Bradlee.  Henry  G.  Bradlee.  «  x,t  i   ^ 

Mr.  AVarren.  You  are  connected  with  the  Stone  &  Webster  organi- 

^""mT^  Bradlee.  I  am  a  member  of  the  firm  of  Stone  &  Webster 

Mr.  Warren.  And  that  firm,  as  I  think  appeared  from  Gen. 
Tripp's  testimony  this  morning,  has  had  a  great  deal  to  <io  ?or^  long 
period  of  time  with  street  railways  among  other  public  utilities,  has 

Mr  *  Bradlee.  We  have  been  interested  in  the  public-utility  busi- 
ness for  nearly  30  years.  We  have  under  our  charge  the  operation  of 
some  thirty-odd  public  utilities,  electric  light,  gas  and  street  rai  - 
ways,  of  which  about  25  are  either  street  railway  or  combined  rail- 
way and  electric-light  properties.  We  have  a  so  been  called  on  to 
examine  and  report  on  many  street  railways  m  which  je  are  iiot 
directly  interested,  to  advise  the  owners  as  to  methods  of  l^andlmg 
their  property,  also  to  help  out  certain  receivers  m  the  handling  of 

their  present  difficulties.  „    ,     t  4.  i     i  +^  .i^  ^uv.  fL^ 

Mr.  Warren.  Have  you  personally  had  a  great  deal  to  do  with  the 

street  railway  properties?  ,  ,  ,.      1      a 

Mr.  Bradi^e.  For  the  last  18  years  I  have  been  the  executive  head 

of  the  so-called  management  division  of  our  firm  and  in  that  capacity 

have  had  general  charge  of  the  management  of  all  of  the  properties. 
Mr  Warren.  Mr.  Bradlee,  in  connection  with  the  street  railways 

over  which  you  have  had  charge,  what  is  your  experience  as  to  the 

160643**— 20 14 


i 


202     PROCEEDOGS  OY  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSION. 

need  of  additional  capital  by  such  companies  from  time  to  time,  and 
how  reeailarly  is  that  need  shown? 

Mr.  Bradlee.  I  have  prepared  certain  figures  and  brought  them 
with  me  covering  specific  cases,  with  the  idea  that  that  might  be 
more  valuable  to  the  commission  than  general  figures. 

l^fore  taking  up  the  matter  of  additions  to  capital,  I  would  like  to 
say  just  a  word  on  the  amount  of  capital,  as  a  whole,  required  in 
the  street-railway  business.  .  . 

About  three  years  ago  we  had  occasion  to  examine  tor  our  o^n 
information,  or  investigate  for  our  own  information,  tiie  amount  of 
capital  required  for  various  bmnches  of  industry  That  inv^stigii- 
tion  extended  over  a  period  of  about  a  year.  We  obtamed  data 
from  many  different  industries  of  all  sorts  and  kinds,  and  while  the 
figures  which  we  obtained  are  of  coui-se  not  accurate  as  applied  to  the 
industries  as  a  whole,  they  ai-e  indic>ative  at  least  >of  the  amount  of 
cai)ital  required  to  carry  on  these  various  types  of  mdustry. 

When  our  figures  were  completed,  a  diagram  was  prepared  show- 
inir  the  amount  of  capital  required  to  carry  on  a  business  of  $100,000 
in  gross  earnings.    I  have  several  copies  of  this  diagram  here  which 
I  thought  might  be  of  interest  to  the  commission  1  handing  papers] . 
The  Chairman.  Have  you  enough  to  supply  each  member  i 
Mr.  Bradlee.  Well,  I  will  send  some  more.    There  are  thi^ee  thei-e. 
You  will  see  from  this  diagram  that  the  amount  of  capital  re- 
ouired  to  carry  on,  for  example,  the  construction  business,  that  is  a 
Sac^is  lo^^    A  capital  of  I'ess  than  $.50,000  will  do  $100,000  of 
business.    The  same  is  true  in  what  we  have  termed  the  tmding— 
that  means  retail  and  wholesale  business.     In  manufacturing,  the 
capital  appears  to  just  about  equal  the  gross  annual  business  trans- 
acted    In  mining,  due  to  the  large  amount  of  investment  in  mining 
lands,  mineral  lands,  the  investment  materially  increases.     I  hen  we 
come  to  the  group  of  public  utilities— telephone,  gas,  electric  light, 
street  railway  and  steam  railway,  in  which  the  capital  required  is 
from  $400,000  to  $500,000,  at  least,  to  carry  on  $100,000  of  gi'oss 
earnings.    Last  of  all  is  agriculture,  which  is  even  higher  than  pub- 
lic utilities.  .  ..     ,    i     x    xu  4.    t  ^\.r.  a'.^ 
I  want  to  call  your  attention  particularly  to  the  part  of  the  dia- 
gram which  is  shown  in  red.    That  represents  the  operating  plant, 
the  investment  in  operating  plant.     You  will  see  in  that  case  that 
the  public  utility  stands  out  even  more  markedly  than  in  the  total 
capital.     There  'is  no  other  industry  which  appareiit  y  requires  an 
operating  plant  equal  to  its  annual  gross  earnings.    The  public  util- 
ity requires  a  plant  several  times  its  annual  gross  earnings,  from  four 

to  five  times.  ,  ,  .  i.  ^i       a'v*       ^i. 

Now  this  has  a  direct  bearing  on  the  earnings  of  the  utility— the 

necessary  earnings.     If  a  retail  merchant  is  able  to  turn  over  his 

capital  three  times  a  year  and  in  turning  it  over  makes  3J  per  cent 

profit  on  each  turnover,  he  will  make  10  per  cent  a  year  on  his  entire 

investment.    A  public  utility,  on  the  other  hand,  will  turn  its  capital 

over  only  once  in  every  four  to  five  years,  and  m  order  to  make  a 

reasonable  return  on  that  capital,  or  rather  to  make  the  same  10  per 

cent— if  it  were  10  per  cent— it  would  be  necessary  to  pay  out  from 

40  to  50  per  cent  of  the  gross  earnings  as  a  return  on  the  investment. 

In  other  words,  the  trader  or  merchant  may  get  along  with  ^  per 

cent  profit  and  earn  10  per  cent  on  his  capital,  whereas  the  public 


PROCEEDI^-GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     203 

Utility  must  pay  out  40  to  50  per  cent  of  its  gross  to  earn  an  equal 
return  on  the  public-utility  capital. 

The  capital  requirements  of  the  public  utility  are  not,  as  they  are 
sometinTes  supposed,  paid  in  in  the  creation  of  -  VropeHys^t  ih.^^^^^ 
and  then  continued  at  a  mon.  or  ^s  umform  rate.  .^^^^^^^.^^^.^^^^^^^ 
there  must  be,  as  Mr.  Stuart  told  you,  a  continual  contribution  o 
SaWear  by  year  and  month  by  month.    Tlie  pub  he  utilities  m  all 
Ss  of^his  couW  are  growing  and.growing  ^:^-^^^y^.^l^^^^^^^^ 
continually  increased  demand  for  service  due  to  mcreased  populatio 
and  also  tb  increased  demand  per  capita  in  a  given  PoP^l^tion    and 
to  meet  this  increase  in  service,  it  is  necessary  for  the  public  utility  to 
continually  add  to  its  investment.  •    i      •      „ 

TheTddHion  of  capital  follows  very  closely  the  mcrea^  Z}'r^^^ 
I  have  brought  with  me  here  two  charts  of  one  of  our  street.raihv  ay 
conipanies;  they  are  identical.  And  on  those  charts  you  will  see  two 
1  ines  Tlie  black  line  shows  the  increased  investment  in  the  property , 
sorting  at  the  beginning  of  the  period,  and  then  running  through  the 
W  series  of  years,  adding  each  year  the  new  capital  which  was 
nested  that  year,  in  that  way  producing  the  black  line  which  you 
see  on  the  curve.  The  green  line  is  four  times  the  increase  m  gross 
business,  and  those  two  curves,  as  you  wdl  see,  nin  very  c  osely  to- 
<.ether,  showing  that  we  have  invested,  year  by  year,  four  dollars  of 
new  capital  for  each  dollar  of  increased  gross  business,  and  that  it 
has  been  necessary  to  do  that  in  order  to  adequately  carry  on  that 
business  and  serve  the  public. 

Similar  curves  covering  an  electric-light  company— a  companT  m 
Ix)well— will  show  very  similar  results.  For  instance  [handing 
chart  to  the  commission],  you  will  see  in  both  the  elect ric-light  and 
the  street-railway  property  the  investment  has  followed  very  close 
with  the  increase  in  business  J  the  curves  are  not  identical,  but  the> 
are  verv  close  to  it:  and  in  each  case  the  additional  money,  the  capital 
required,  has  been  about  four  times  the  increase  m  gross  business. 

I  have  also  brought  with  me  a  statement  which  I  will  hand  you. 

The  statement  produced  by  the  witness  is  as  follows: 

Annroximate  gross  mrnings  and  appi-vTimate  erpenditures  for  mnstnwfion  of 
^^7tone  d  Webster  companws  for  the  years  1902  to  1918,  inclusive. 


Year. 

Gross  earnings. 

Construction 
expenditures. 

1902 

1P03 

1C04 

i9a-» 

1906 

I(t07 

1908.. 

ie(» : 

1910 

1911 

1912 

1913 

1914 

191.') 

1916 

1917 

1918 

$3,  .iK^,  000. 00 
6,;«8,000.00 
8,482,000.00 
9,504,000.00 
12,212,000.00 
13.776,000.00 
16,3.'>7,000.00 
19,133,000.00 
20, 747, 000. 00 
21,389,000.00 
23.925,000.00 
26,305,000.00 
28,8^1,000.t^ 
27,044,000.00 
29,456,000.00 
31,029,000.00 
36,322,000.00 

$2,7.')0,000.00 
3,623,000.00 
2,414,000.00 
2, 900, 000.  (W 
5,000,000.00 
8,500,000.00 
6,962,000.00 
5,7a3,000.00 
7,286,000.00 
9,077,600.06 
5,467,000.00 
7,531,000.00 
6,840,000.00 
3,371,000.00 
8,736,000.00 
6,001,000.00 
5,691,000.00 

^r\i  ol                                                                                            .-....---.-•--•-•••"•••••••••••"•■ 

334,485,000.00 

91,852,000.00 

1  Oial -•• 

4 


i\ 


4 


204     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  figures  from  1902  to  1907  cover  a  considerable  number  of  com- 
panies. The  cost  of  constructing  the  Puget  Sound  Railway,  the 
Fuget  Sound  power  development  and  the  Taylors  Falls  power  devel- 
opment are  eliminated.  o  ^i-  i   ^ 

The  figures  from  1908  to  1918,  inclusive,  cover  all  Stone  &  \\ebster 

companies.  ^        ^     i    -,      i  .    .i 

The  cost  of  the  Yerdi  power  plant,  the  Goat  Rock  development,  the 
Citizens'  Railway  Company  (Northern  Texas  Traction),  the  Gal- 
veston-Houston Interurban,  Mississippi  River  power  initial  devel- 
opment Falls  Village  development,  Dallas  Terminal  investment,  and 
all  intangibles  are  eliminated.  The  Minneapolis  figures  are  elimi- 
nated from  both  gross  and  construction  and  Connecticut  power  earn- 
ings from  1913. 
Comparison  of  rates  of  increase  of  gross  earnings  of  Sitone  d  Webster  companies. 


Year. 


1902... 
1903... 
1904... 

1906... 
1907... 
1908... 
1909... 
1910... 
1911... 


PercentaRe 
increase  in 

j?ross 
earnings. 


20.0 

16.0 

10.0 

12.5 

18.0 

19.0 

6.0 

16.0 

5.0 

3.8 


Year. 


1912 

1915 

1916 

1917 

1918 ^.... 

Average 


Percentnge 
Increase  in 

gross 
earnings. 


10.0 

10.0 

2.1 

6.3 

8.9 

13.4 

18.7 


10.7 


Year. 


1902 
1903 
1904 
1905 
1906 
1907 
1908 


Percentage 
increase 
in  gross 

earnings. 


20.0 
16.0 
10.0 
12.5 
18.0 
19.0 
5.0 


Amount 
spent  on 
construc- 
tion per 
1100  of 
gross 
earnings. 


Year. 


f76.00 
57.00 
28.00 
31.00 
42.00 
62.00 
43.00 


1909 

1910 

1911 

1912 

1913 

Average 


Percentage 
increase 
in  gross 

earnings. 


16.0 

5.0 

3.8 

10.0 

10.0 


12.1 


Amount 
spent  on 
construc- 
tion per 
$100  of 
gross 
earnings. 


$30.00 
35.00 
42.00 
23.00 
29.00 


37.  oe 


Year. 


1902 

1903 

1904.... 
1905.... 
1906.... 

1907 

1908.... 

1909 

1910 

1911.... 


Percentage 
Increase 
in  gross 

earnings. 


20.0 
16.0 
10.0 
12.5 
18.0 
19.0 

5.0 

16.0 

5.0 

3.8 


Amount 
spent  on 
construc- 
tion per 

$100  of 

gross 
earnings. 


$76.00 
57.00 
28.00 
31.00 
42.00 
62.00 
43.00 
30.00 
35.00 
42.00 


Year. 


IVlw  •   •   •   ••••••• 

1913 

1914 

1915 

1916 

1917 

1918 

Average 


Percentage 
increase 
In  gross 

earnings. 


10.0 

10.0 

2.1 

6.3 

8.9 

13.4 

18.7 


Amount 
spent  on 
construc- 
tion per 
$100  of 
gross 
earnings. 


$23.00 
29.00 
24.00 
12.00 
13.00 
11.00 
11.00 


10.7 


27.00 


Mr    Bradlee.  On  the  first  sheet  of  the  four  pages  I  have  just 
passed  up,  you  will  find  the  gross  earnings  of  the  group  of  properties 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     205 

which  we  manage,  from  the  year  1902  to  1918,  showing  the  gross  earn- 
W^  of  the  properties  in  each  year.  The  second  column  shows  the 
crstnicSn^Jxp^^^^^^^^^  for  additions  to  those  Properties  each  ye^^^^ 
In  making  up  the  construction  expenditures  we  have  omitted  cei-tain 
lar^  expencPitures  which  were  in  the  nature  of  new  developments 
•atferXnX^^^^  to  existing  property^    For  examp  e  we  b^^^^^ 

an  interurban  road  between  Galveston  and  Houston  It  ^^  owned  by 
the  same  company  which  owns  the  street  railway  ^^^"^^^^^^^^J^^^  ^2 
same  company  which  owns  the  street  railway  in  Galveston;  but  we 
TpXtTdThat'^as  a  new  proposition  and  ^^^f^-^^^^^^^^  "^ 

under  the  construction  expenditures  for  additions  to  pi operty.     vv  o 
ave  om^^^^^^  water  powers  and  others  large  items  of  that 

kind  So  til  these  figures  of  construction  expenditures  cover  merely 
the  extensions  and  development  of  existing  property.  ,  ^i  4  f ^ 

clSo^^^^^  Meeker.  AVhy  the  tremendous  drop  from  1914  to 
1915  in  construction  expenditures? 

Mr  Bradlee.  I  will  come  to  that  in  a  moment. 

Snthe  second  sheet  you  will  find  the  P«f  ««ty,  .^""•n'.^so' per 
earnincs  of  the  group  of  companies.     In  the  year  1902  it  was  M  per 
ceXanl  in  eachV^there  hL  been  an  increase  «-XTtrreTaf 
•^  8  ner  cent,  with  the  exception  of  the  year  1917,  in  which  mere  was 
a  decrease  o^  6.3  per  cent.    That  decrease  was  due  very  largely  to  the 
effect  of  the  jitney  bus  combined,  in  cei^ain  sections  of  the  country 
w^th  poor  general  business  conditions.    Following,  in  1916,  the  jitney 
disacDeared  to  some  extent  and  the  gross  earnings  increa^d  again 
in  the  last  year,  1918,  the  gross  earnings  have  increased  18.7  per  cent 
or  fl  most  as  high  as  the  maximum  of  any  year  since  1902.       _ 
"onThe  third^,age  you  will  find  repeated  the  Percen»f  increase 
in  (rross  earnings  for  the  yeare  from  1902  to  191<>,  and  also  m& 
amount  spent  on^construction  extensions  per  hundred  dollars  of  gross 
TrZgs     In  other  words,  in  1902  for  every  $100  of  gross  earnings 
of  thSoup  of  companies  it  was  necessary  to  ^P^nf  $^6  in  additions 
and  extlnsions.    The  average.for  the  entire  P/"°d  1902  to  1913  is  $37 
expended  on  extensions  and  improvements  for  each  $100  ot  aHnual 

^"^  ttie"fofrth  page  the  figures  are  identical  with  page  3,  except 
th?v  have  been  continued  from  1918  to  1918.    The  original  figures,  as 
it  happens  the  first  page,  was  made  up  in  1914  and  this  second  page 
was  made  to  bring  it  up  to  date.    Yon  will  note  that  the  high  rate  of 
Tmestoent  continued  iip  to  and  including  the  year  1914,    In  191o  we 
rdcoTd^tions  which  had  been  brought  about  by  the  jitney;  we  had 
the  beSnn  ng  of  the  war  period,  and  every  effort  was  made  to  keep 
down  further  extensions  to  property.    During  the  war  period  we  have 
continued  that  policy,  and  of  coui-se  during  the  past  year  and  a  half 
thrOo^rnment.  through  the  Securities  Issues  Committee,  has  pro- 
bited  the  utilities  from  spending  anv  money  on  improvements  or 
eSlns  other  than  such  as  was  absolutely  necessary.    In  addition, 
there  has  been  the  difficulty  of  selling  securities  of  which  Mr. 

'^"NowX'se  Ss  of  the  last  four  years  mean  this:  The  companies 
ha^got^o^tcreasing  in  gross  earnings     In  m 

R  Q  ne?  cent'  in  1917, 13.4  per  cent,  and  in  1918, 18.7  per  cent,  out  we 
have  noTspent  during  that  period  anything  like  an  adequate  amount 
to  take  caHf  that  fncreasid  business. "  We  have  been  in  one  sense 


M  i' 


I 


i 


206     PROCEEDINGS  OF  FEDERAL  EliBCTBIC  RAILWAYS  COMMISSION, 

living  on  our  fat— we  have  been  calling  on  our  power  plants,  our 
track,  our  cars,  to  carry  more  than  tli^ir  normal  araoimt  of  lojui,  and 
we  have  taken  chances  of  breakdowns  and  interruptions  to  service 
which  in  normal  times  we  sliould  not  do.  That  means  that  these 
pi-oi)erties  at  the  present  time  are  below  par.  They  are  not  developed 
to  the  extent  they  sliould  be  normally  to  handle  the  volume  of  busi- 
ness which  they  now  transact  . 

To  meet  that  situation  and  to  adequately  serve  the  public  we  must 
not  only  meet  futui-e  extensions  but  we  must  make  up  for  what  we 
liave  failed  to  spend  in  the  last  four  yeai-s  so  that  the  demand  for  ad- 
ditional capital  during  the  next  four  years,  if  we  ai-e  to  adequately 
ser\e  the  public,  must  be  above  normal  to  offset  the  four  years  which 

•ii*e  below. 

3^1  r  Warren.  Did  you  state,  Mr.  Bradlee,  whether  that  statement 
consisting  of  four  pages  related  to  all  the  utilities  under  the  manage- 
ment of  Stone  &  Webster  or  street  railways? 

Mr.  Bradlee.  It  relates  to  all  of  the  utihtios,  street  railwa.y,  gas, 
and  electric  light.  I  was  unable  to  separate  them  out  m  the  time  al- 
lowed. In  fact,  I  do  not  believe  we  could  separate  them  out,  becau:^e 
many  of  the  properties  are  combined  companies,  the  same  company 
doing  street-railway  and  electric  service,  and  it  would  be  difficult  if 
not  inipossible  to  separate  many  of  the  construction  expenditures  and 
determine  exactly  what  should  he  apportioned  to  the  street  railway 
and  what  to  the  electric-light  company.  ^  , 

The  Chairman.  You  stated  there  were  35  companies  bemg  oper- 
ated by  Stone  &  Webster? 

Mr.  Bradlee.  Approximately;  yes. 

The  Chairman.  Of  that  numl^er,  how  many  are  street-railway 

companies?  .  ,  ^       .. 

Mr.  Bradlee.  Approximatdy  25  are  either  street  railway  or  com- 
bined street-railway  and  light  companies. 

The  Chairman.  You  are  quite  familiar  with  the  street-railway 
companies  operated  by  other  concerns  throughout  the  country  ? 

Mr.  Bradlee.  Many  of  them.  .  ... 

The  CHAIR3IAN.  Do  you  feel  that  your  companies  are  quite  typical 
of  the  companies  giving  service  in  other  sections  of  the  country  ? 

Mr.  Bradlee.  I  think  they  are  reasonably  typical  of  what  has  oc- 
curred in  the  industry — ^yes.  . 

The  Chairman.  Do  you  feel  that  the  other  companies  have  been 
devoting  about  as  much  money  to  new  construction  annually  as  you 

Mr.  Bradlee.  About  a  year  ago  a  report  was  made  to  Mr.  John 
Skelton  Williams  outlining  the  conditions  in  the  street-railway  in- 
dustry. If  I  remember  the  figures  coiTectly,  the  gross  earnings  of 
the  street  railways  were  placed  in  that  report  at  $1,500,000,000.  It 
was  estimated  tliat  the  annual  expenditures  for  extensions  and  im- 
provements would  be  from  $600,000,000  to  $700,000,000  a  year.  That 
would  correspond  very  closely  to  those  figures.  Tliose  figures  would 
figure  out  just  about  $000,000,000  a  year  on  a  gross  business  of 
$1,500,000,000,  so  that  the  statistics  which  were  gathered  for  all  the 
companies  correspond  very  closely  with  those  for  that  group. 

The  Chairman.  Your  table  shows  that  from  1902  to  1918  tliere 
was  $98,252,000  invested  in  construction  expenditures. 

Mr.  Bradij'e.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MMISSI02JT.     207 

The  Chairinian.  Is  that  whole  amount  capitalized! 

Mr.  Bradlee.  No.    A  large  part  of  it  was. 

The  Chairman.  About  what  per  cent? 

Mr.  Bradlee.  Oh,  I  could  not  tell  you.  A  certain  amount  came 
from  earnings  from  companies  that  were  not  paying  dividends  who 
earned  their  dividends  but  turned  the  money  back  into  the  propeity , 
but  iust  what  per  cent  that  was  I  could  not  tell  you. 

The  Chairman.  How  much  of  that  money  represents  new  capital  J 

Mr.  Bradlee.  A  large  part  of  it  represents  new  capital. 

The  Chairman.  About  what  per  cent? 

Mr.  Bradlee.  Oh,  I  could  not  tell  you  what  per  cent. 

The  Chairman.  Of  course  your  books  show  that? 

Mr.  Bradlee.  Oh,  yes.  *  .  „  „«  ^«  fi.o 

Commissioner  Beall.  This  gross  earning  which  you  gave  on  the 

first  page,  does  that  include  the  additional  gi'oss  earnings  which  3  ou 

derived  fA)m  the  new  properties  which  you  built  and  which  you  say 

were  not  included  in  the  total  of  $91,000,000  construction  expendi- 

tures  ? 

Mr.  Bradlee.  No.  ^  j  .i    4.9 

Commissioner  Beall.  You  have  segregated  that? 
Mr.  Bradlee.  Yes.     Those  gross  earnings  apply  only  to  the  com- 
panies to  which  the  construction  expenditures  applied. 

Commissioner  Beall.  How  could  you  show  that  where  you  de- 
veloped new  water  power  and  built  new  power  houses,  as  you  did? 
Mr.  Bradlee.  We  simply  segregated  that  as  we  did  in  the  Houston 
and  Galveston  interurban  case.  ,  .     ,      ,  ^         ..     wi.^^ 

Commissioner  Beall.  But  all  your  big  developments  on  the  White 
River  and  similar  places,  where  you  have  spent  many  millions  ot  dol- 
lars, but  which  brought  in  a  lot  of  gross  revenue,  how  did  you  get 
that  out  of  this  ?  I  do  not  see  how  you  could.  ^  .  ^^ .  ^ 
Mr.  Bradlee.  The  White  River  was  included  in  this  figure 
Commissioner  Beall.  But  you  did  not  include  the  ^hite  River 
expenditure  on  the  other  side,  did  you  ? 

Mr.  Bradlee.  Yes;  we  included  the  Wliite  River  expenditure  m 
the  years  in  which  it  was  made,  and  included  the  earmngs  from  the 
White  River  operation  in  the  years  following. 

Commissioner  Beall.  I  thought  you  said  you  had  not  put  it  m 
vour  construction  expenditures,  a  new  line. 

^  Mr.  Bradlee.  When  I  spoke  of  a  new  enterprise  I  meant  an  en- 
tirely new  thing— like  a  new  interurban  road,  as  distinguished  trofn 
a  water  power  which  was  built  to  supply  a  going  concern. 

Commissioner  Gadsden.  This  statement  you  have  rendered  is  f 
combined  statement  of  the  three  utilities,  gas,  water,  and  electricity, 
is  it  not? 

Mr.  Bradlee.  Yes.  x-    1      i!   j.      i.       1 

Commissioner  Gadsden.  If  it  were  made  up  entirely  of  street  rail- 
wavs,  as  vou  have  in  the  first  chart,  the  proportion  of  capital  would 

Mi'.'^Bradlee.  The  proportion  of  capital  would  be  larger  on  the 

<sti-e-t  railwav  than  on  the  other  two.  j.     ,      ^ 

Commissioner  Gadsden.  This  chart  shows  a  proportion  of  about 

four  and  a  half  to  one. 
]^lr.  Bradlee.  Yes. 


I      'I 


I 


208     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


>  V 


4 


*  r 

.1 


Mr.  Warren.  That  proportion  holds  true  as  regards  additional  or 
increasing  earnings  and  increasing  capital  expenditures,  as  I  take  it. 

^Ir.  Bradlee.  Yes. 

I^Ir.  AVarrex.  The  proportion  is  larger  than  that,  is  it  not,  as  re- 
gards tlie  original  or  initial  capital? 

Mr.  Bradlee.  In  some  cases,  yes,  and  in  some  cases  it  would  be 

about  the  same. 

Mr.  Warren.  In  some  cases  it  would  run  five  or  seven  to  one,  would 

it  not? 

^fr.  Bradlee.  Yes;  it  certainly  would.  I  might  »xy  that  those 
figures,  you  will  understand,  are  average  figures.  AVe  have  one  pub- 
lic utility,  a  large  water  power,  which  Avas  built  entirely  new  and  in 
which  the  investment  is  10  to  1.  'So  that  those  figures  should  not  be 
used  or  considered  as  applying  definitely  to  any  particular  industry. 
They  simply  represent  the  average  of  the  group. 

Now,  to  meet  the  requirements,  such  as  those,  we  must  sell  securi- 
ties. There  is  no  other  way  to  meet  them.  The  earnings  of  the 
properties  are  not  adequate  to  even  meet  operating  expenses— I  am 
speaking  of  street  railways  now — to  meet  operating  expenses,  taxes, 
and  interests  on  bonds,  in'many  cases.  There  is  nothing  left  there  to 
apply  to  extensions  and  improvement.  It  must  all  be  obtained  from 
the  investor  in  some  form,  aCnd  unless  it  is  obtained  from  the  in- 
vestor it  will  he  hopeless  for  the  street  railways  to  attempt  to  ade- 
quately serve  the  public.  The  service  to-day  is  inadequate.  It  will 
continually  grow  more  and  more  inadequate  unless  some  means  is 
found  to  improve  the  credit  of  the  street  railways  and  enable  them 
to  raise  the  money  needed  to  meet  these  demands  for  further  serv- 
ice; and  that  amount  of  money,  as  is  indicated  in  these  figures,  is  a 
very  large  sum  in  proportion  to  the  gross  earnings  of  the  company. 

The  railway  industry  as  a  whole  nuist,  in  some  way,  if  it  is  to 
fairly  serve  the  public,  raise  six  or  seven  hundred  million  dollars  a 
year  for  new  work,  and  in  addition  it  must  provide  for  the  refinanc- 
ing of  maturing  obligations  to  an  amount  varying  from  $250,000,000 
to  $300,000,000  a  year.  So  that  there  is  approaching  a  billion  dollars 
a  year  to  be  raised  in  some  way  for  the  street-railway  industry  in 
order  to  adequately  serv^e  the  public. 

The  Chairman.  Would  it  be  convenient  for  you  to  file  a  statement 
showing  the  amount  of  refunding  obligations  that  are  due  in  the 
next  year? 

•  Mr.  Bradlee.  I  think  such  figures  are  obtainable.  We  secured 
them  for  the  report  which  was  sent  in  to  Mr.  Williams,  and  I  think 
they  could  be  obtained  for  next  year.  I  would  be  glad  to  try  and 
see  what  I  can  get  on  that. 

This  portion  of  new  capital,  to  my  mind,  is  the  crux  of  the  situa- 
tion. In  many  discussions  of  the  public-utility  situation  the  dis- 
cussion has  centered  around  what  is  a  reasonable  return  on  the 
capital  that  is  now  invested,  and  the  suggestion  has  been  made — I 
read  just  the  other  day  the  report  of  the  committee  of  fifty  or  one 
hundred,  I  have  forgotten  which  it  was,  in  Denver,  a  committee  of 
citizens  who  were  appointed  by  the  mayor  to  investigate  the  Denver 
situation.  That  committee  made  a  very  satisfactory  and  intelligent 
report  in  many  ways,  but  then  they  went  on  to  say :  "  Here  is  a  bad 
situation.  It  is  not  anybody's  fault  in  particular.  The  dollar  has 
depreciated  and  everybody  is  suffering;  the  public  is  suffering  and 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     209 

must  suffer  through  increased  fare.  The  company,  on  the  other 
hand,  should  share  their  part  of  the  burden  and  take  a  moderate 
return  on  their  investment  and  be  satisfied  with  less  than  they  might 
think  was  reasonable."  That  is  all  right;  it  may  be  perfectly  fair 
and  just  as  applied  to  the  investment  that  is  already  there.  But  the 
city  of  Denver  is  going  to  grow.  The  city  of  Denver,  if  it  continues 
as  it  has  in  the  past,  will  have  10  years  from  now  at  least  twice  the 
investment  in  its  street-railway  system  that  it  has  to-day,  and  that 
money  must  come  from  somewhere.  x         -i.       4. 

Now  the  street  railway  should  be  looked  on,  as  I  see  it,  not  as  a 
static  thing  but  as  a  growing  organization,  something  which  is 
expanding  and  extending  all  the  time  and  which  must  extend  and 
expand  to  adequately  serve  the  public.    It  is  possible  to  make  a  trade 
with  the  city  by  which  the  investment  which  has  already  been  made 
shall  accept  what  may  seem  an  inadequate  return,  but  that  is  only 
a  half  truth ;  it  is  looking  at  only  half  the  situation.    Y  ou  can  make  a 
trade  with  a  man  who  already  has  his  money  invested,  but  you  can 
not  make  a  trade  of  that  kind  with  a  man  who  is  going  to  invest  his 
monev  next  vear  and  the  year  after.     That  man  will  look  at  the 
situation  in  the  street-railway  field  and  compare  it  with  the  situa- 
tion in  other  lines  of  industry.    There  is  no  situation  tliat  I  know  of 
where  competition  is  keener  than  in  the  investment  of  money.     I  he 
investor  looks  for  the  investment  which  he  considers  is  going  to 
be  the  most  favorable  for  him,  and  that  is  the  investment  which  he 
buys.      Unless  he  can  be  convinced  that  he  will  have  equal  security 
and  an  equal  chance  for  profit  in  the  street  railway  or  other  public- 
utility  industry  that  he  can  obtain  in  manufacturing  and  any  other 
line  of  industry,  he  will  put  his  money  into  manufacturing  and 

not  into  the  public  utility.  ,  .  ,    ,.        .1     ,      •      £  ^.i^        i 

Now  that  problem  is  the  one  which  lies  at  the  basis  of  the  solu- 
tion of  this  whole  question.  It  is  not  the  question  of  what  money 
is  in  there  so  much  as  it  is  how  are  you  going  to  get  additional  money 
in  order  to  reasonably  serve  the  public.   ^    ^      .    ^         ^  .  .     . 

There  are  only  two  ways  that  I  know  of :  One  is  to  go  to  municipal 
ownership  and  have  the  city  or  State  raise  the  money  on  city  or  btate 
bonds  The  other  is  to  establish  some  plan  under  which  the  investor 
will  feel  that  in  the  future  he  may  count  on  a  reasonable  protection 
of  his  invested  capital  and  a  reasonable  insurance  of  an  adequate 

I  think  that  covers  what  I  had  in  mind  here  on  the  capitalization 

end  of  the  problem.  .    .  .  •        at« 

Mr  Warren.  Can  you  give  the  commission  any  information,  iVlr. 
Bradiee,  about  the  increasing  costs  of  operation  during  the  last  twa 
years  or  the  last  three  or  four  years? 

Mr  Bradlee.  I  received  yesterday  from  Texas  a  letter  and  papers 
from 'three  of  our  Texas  companies  in  which  our  Texas  managers 
had  taken  the  operating  expenses  in  two  of  the  companies  for  the 
month  of  April,  1919,  and  in  one  company  for  the  month  of  March, 
1919  They  listed  on  one  of  our  regular  sheets  the  expense  items  for 
those  months  of  the  year  1919.  They  then  figured  the  cost  of  the 
same  labor  and  material  on  the  basis  of  prices  of  labor  and  material 
in  March,  1913.  In  other  words,  they  assumed  that  exactly  the 
same  number  of  hours  of  labor  were  spent,  exactly  the  same  materials 


I 


210     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

wei-e  used,  but  took  the  prices  of  1913  and  then  refigured  their  operat- 
ing expenses  for  tlie  month.  I  will  submit  to  the  commission  these 
sheets  in  detail  and  simply  give  a  few  sunnnary  figures. 

The  Houston  Electric  Co.,  figured  on  that  basis,  shows  an  increase 
in  expense  on  the  maintenance  of  way  and  structures  of  76  per  cent. 
Mr.  Warren.  That  is  one  of  the  four  important   divisions  of 
oix^rating  ex[)ense,  is  it  not,  Mr.  Bradlee? 

Mr.  Bradu-^e.  Yes,  that  is  an  important  division.  On  the  nuiin- 
tenance  of  equipment  the  incroivse  was  58  per  cent.  On  the  con- 
ducting of  transportation — that  means  the  operation  of  cars — an 
increase  of  50  per  cent.  On  general  and  miscellaneous  expenditures, 
32  per  cent ;  an  average  for  the  total  expense  of  48.4  i>er  cent. 

In  the  case  of  the  Houston  companv  the  cost  of  fuel  was  decreased 
by  making  that  change.  The  cost  of  fuel  in  1919  was  less  than  the 
cost  of  fuel  in  1913.  That  was  due  to  the  fact  that  we  fortunately 
made  contracts  for  fuel  oil  two  years  ago  at  a  very  low  rate  and  those 
contracts  are  still  in  effect.  If  we  were  buying  fuel  oil  at  the  pres- 
ent prices,  there  would  have  been  a  marked  increase  in  the  cost  of 
fuel  which  would  have  increased  these  percentages. 

Mr.  Warren.  You  made  your  contract  at  a  lower  price  than  the 
price  in  1913? 

Mr.  Bradlee.  I^wer  than  the  price  in  1913,  so  thei*e  is  an  actual 
saving  in  that  item. 

Mr.  Warren.  I  did  not  catch  the  figure  for  the  total  operating 
expense  there. 

Mr.  Bradlee.  The  total  operating  expense  was  48.4  per  cent. 
Mr.  Warren.  Increase? 

Mr.  Bradlee.  Increase.  In  the  Northern  Texas  Traction  Co., 
which  is  the  company  in  Foit  Worth,  Tex.,  a  street-railway  comi)any 
which  operates  the  entire  street  railways  in  Fort  Worth  and  two  in- 
terurban  lines — one  between  Fort  Worth  and  Dallas  and  the  other 
between  Fort  Worth  and  Cleburne— in  this  property,  the  increase  in 
maintenance  of  way  and  structures  was  63  i)cr  cent;  in  maintenance 
of  equipment,  88  per  cent;  in  conducting  transportation,  57  per  cent; 
in  general  and  miscellaneous,  7  per  cent,  a  total  of  45  per  cent  for 
the  entire  property.  In  this  case  also  we  have  a  fuel  oil  contract  so 
we  ai^  paving  no  more  for  fuel  oil  in  1919  than  in  1913. 

The  third  company  is  located  in  El  Paso,  Tex.  It  is  a  combined 
railwav  and  lighting  property,  but  the  figures  are  separate  for  the 
two  departments  of  the  business.  In  the  railway  department,  the 
maintenance  of  way  and  structures  increased  47  per  cent;  main- 
tenance of  equipment  inci-eased  61  per  cent ;  the  total  cost  of  conduct- 
ing transportation  increased  90  per  cent;  general  and  misceUaneous 
expenditures  increased  27  per  cent,  a  total  for  the  entire  company  of 

65.3  per  cent. 

This  you  will  see  as  a  total  is  considerably  higher  than  the  others, 
but  in  El  Paso  we  burn  coal.  We  had  no  contract,  and  the  cost  of 
fuel  increa^^d  107  per  cent,  which  accounts  for  this  increase.  If  the 
increase  in  fuel  were  eliminated,  the  increase  in  this  company  would 
be  48  per  cent  or  practically  corresponding  with  the  other  two  com- 
panies. 

Mr.  Warren.  I  thought  as  you  read  those  figures  that  the  trans- 
portation in  the  last  company,  the  E\  Paso  company,  I  think,  in- 
creased more  than  it  did  in  the  companies  preceding. 


PEOCEEMNGS  OF  TEJyER&lj  ELECOSHC  -RAILWAYS  COMMISSION.     211 

Mr.  BRAMja!:.  That  is  because  fuel  enters  into  the  cost  of  trans- 
portation ;  it  is  one  of  the  items. 

Mr.  Warren.  It  is  not  separated  into  power  and 

Mr.  Bradlee,  No.  That  enters  in  as  one  of  the  items  under  that 
heading.  These  figures  I  only  received  yesterday.  These  are  the 
only  copies  I  have,  and  I  would  like  to  take  these  home  and  have 
some  copies  made  and  then  send  them  to  the  commission,  if  that 
meets  with  your  approval. 

The  Chaiejviax.  Yes.  ^  i     n  .r 

Mr.  Warren.  You  can  not  say,  I  suppose,  from  the  figures  tliere, 
how  your  operating  ratio  or  operating  railway  revenue  is  atieeted 
by  this  increase.     Does  that  appear?  ^,  ^  •       i 

Mr.  Bradlee.  No,  that  does  not  appear.  These  figures  simply 
cover  the  matter  of  expense.  I  might  say,  however,  that  the  Hous- 
ton companv  a  few  years  ago  was  paying  dividends  at  the  rate  ot  b 
l>er  cent  on*^its  common  stock.  It  now  is  not  paying  any  dividends. 
It  is  barely  earning  the  interest  on  its  bonds.  The  Fort  \>  orth  com- 
pany is  more  fortunate  and  is  still  paying  some  dividends  on  its  com- 
mon stock.  .  .  '  J.  4.Q 
Commissioner  GAD8DirN\  On  account  of  the  oil  contract;  is  it  not« 
Mr.  Bradlee.  On  account  of  the  oil  contract:  to  quite  an  extent ;  yes. 

It  is  a  big  help.  i  •      i  o 

Mr.  Warren.  And  the  other  company  was  a  combmed  company « 
Mr.  Braduiie.  The  other  company  was  a  combined  company,  a 
large  part  of  its  business  coming  from  electric  light  and  power. 

Mr.  Warren.  AVhat  sort  of  f rancliises  are  these  companies  operat- 
ing under  in  Texas? 

Mr.  Bradlee.  The  ordinary  old-fashioned  type  of  franchise— lim- 
ited term ;  none  of  the  modern  provisions  of  service-at-cost  or  any- 
thing of  that  sort.  ,  ,.     .^    1  X  £ 

Mr  Warren.  What  is  your  opinion  of  those  limited-term  tran- 
chises,  are  tliey  to  the  advantage  of  the  public  served  by  the  company 

Mr  Bkadlee.  I  think  they  are  very  much  to  the  disadvantage  of  the 
public  served.  As  the  franchise  term  expires  it  becomes  more  and 
more  difficult  to  raise  money  needed  for  extension  and  improvement ; 
and  being  more  difficult,  it  must  be  raised  on  shorter  and  shorter  term 
bonds  or  notes.  They  must  be  renewed  more  frequently,  and  etich 
rencAval  costs  money.  The  amount  to  be  paid — that  is,  the  rate  of  in- 
terest—is also  higher,  because  the  term  is  short  and  because  the  fran- 
chise is  uncertain.  My  feeling  is  that  the  public  is  very  much  better 
off  with  some  form  of  indeterminate  franchise  m  which  the  public  is 
adequately  guarded  through  power  to  take  over  the  property  by  the 
city  if  at  any  time  they  feel  that  that  should  be  done. 

Mr.  Warren.  Is  there  also  a  tendency  on  the  part  of  the  company 
to  neglect  improvements  and  maintenance  toward  the  end  of  the 
term,  if  there  is  anticipated  difficulty  respecting  the  renewal  of  the 

T  r'lnchise » 

Mr  Bradlee.  Inevitably.  As  you  get  toward  the  end  of  the  fran- 
chise term,  if  you  have  doubts  as  to  whether  you  are  going  to  renew 
it,  you  do  not  put  in  much  new  money— you  hold  everything  down 
to  the  lowest  point  that  you  can. 

Mr  Warren.  And  it  Uvsed  to  be  the  case — I  do  not  know  whether 
it  is  still— that  at  the  beginning  of  the  term  there  was  a  certain  cocki- 


1 


212     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

ness  and  indifference  on  the  part  of  the  grantees  of  the  franchise  re- 
specting the  wishes  of  the  public. 

Mr.  Bradlee.  Well .   ,    .      .  i.  x    i    i 

Mr.  Warren.  Because  they  had  a  long  period  of  enjoyment  to  loolv 
forward  to.    Was  that  true  in  some  cases? 
Mr.  Bradlee.  I  imagine  it  may  have  been. 
Mr.  Warren.  Have  any  of  your  companies  operated  under  the 

service-at-cost  principle?  .  i     ^i    i.      • 

Mr.  Bradlee.  No  ;  we  have  no  companies  operatmg  under  tliat  prm- 
ciple.  AVe  have  made  a  pretty  exhaustive  study  of  the  service-at-cost 
franchise  and  of  the  results  obtained  in  cities  where  it  has  been  in 
effect.  I  believe  a  little  later  one  of  our  men,  Mr.  Nash,  is  to  talk 
to  you  on  some  phases  of  that.  . 

In  general,  we  believe  that  the  service-at-cost  franchise  is  fork- 
ing in  the  right  direction,  and  we  believe  that  some  plan  of  this  sort, 
something  which  is  a  distinct  departure  from  former  methods,  is  an 
essential  to  restore  credit.  There  must  be  something  definite  and 
something  radical  done  in  order  to  change  public  sentiment,  and  the 
best  solution  from  the  standpoint  of  relations  with  the  public  that 
we  have  seen  suggested  is  the  service-at-cost  franchise  in  some  form. 

Mr.  Warren.  Have  you  had  anything  to  do,  Mr.  Bradlee,  with  the 
sale  and  distribution  of  securities? 

Mr  Bradlee.  Yes.  We  have  a  department  for  the  sale  and  dis- 
tribution of  securities.  The  securities  of  our  own  properties  are  sold 
partly  wholesale  to  bankers,  who  then  distribute  them  to  investors, 
and  sold  partly  through  our  own  securities  department;  so  that  we 
have  had  experience  both  in  the  wholesaling  and  retailing  of  public 

utility  securities.  ,    .  .  . 

Mr  Warren.  Cun  you  give  the  commission  any  impression  as  to 
the  nature  of  that  distribution— how  widespread  it  is,  how  large  the 
holdings  average?     You  may  have  heard  Mr.  Stuart's  testimony 

earlier  this  afternoon.  .        .    ,  ^  a   -^    a  u  4. 

Mr.  Bradlee.  I  have  no  figures  in  mind,  no  definite  figures,  but  my 
impression  is  that  the  securities  of  our  companies  are  distributed 
fully  as  widely  as  Mr.  Stuart  stated  was  Kansas  City's. 

Mr.  Warren.  And  that  would  apply  to  a  pretty  large  volume  of 

securities  ? 

Mr.  Bradlee.  Yes. 

Mr.  Warren.  That  is  all  that  I  wish  to  ask  the  witness. 

The  Chairman.  I  w^ould  be  very  glad  if  the  commissioners  desire 
lo  ask  any  questions  that  they  do  so.  ^      ,  .  , 

Commissix)ner  Wehle.  Mr.  Bradlee,  your  statement  which  you 
filed  with  reference  to  Stone  &  Webster  companies  does  not  mention 
the  number  of  companies  involved  in  the  statement  nor  the  names 

of  the  companies.  ,    ,    .   .  -^  -,    - 

Mr.  Bradlee.  I  would  be  glad  to  send  that  to  you  if  you  desire 

to  have  it.  , ,    ,       ^    ^i  •    .    i.-  o 

Commissioner  Wehle.  Could  you  add  that  to  this  testimony  5 

Mr.  Bradlee.  I  would  be  very  glad  to. 

Mr.  Warren.  You  can  state  the  number  now. 

Mr.  Bradlee.  I  think  it  is  about  35.  . 

Commissioner  AVehle.  But  some  of  them— we  were  not  quite  clear 
as  to  their  exact  nature ;  and  I  thought  perhaps  we  could  have  it  more 
definitely  stated. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     213 

Mr.  Bradlee.  Tliose  are  all  public  utilities  and  they  are  scattered 

all  over  the  country.  ..     .     ,       ,        0 

Commissioner  Wehle.  Then  your  statement,  while  i*  treats  of 
the  gross  earnings,  does  not  treat  of  net  earnings.  A\  ould  it  be  ad- 
visable, do  you  think,  in  connection  with  this  statement  to  let  us 
have  net  earnings,  or  would  you  rather  not  include  that,  m  your 
statement  for  some  reason?      .....,,  .     „,.„;„„„   u,,t 

Mr  Bradi.ee.  I  have  no  objection  to  giving  the  net  eiiinings,  but 
what  I  was  endeavoring  to  point  out  in  those  figures  was  *»«  compari- 
son of  investment  required  and  gross  earnings;  that  is,  the  amount 
of  new  iWstment  as  compared  with  the  volume  of  business  trans- 

"''Commissioner  Wehle.  The  reason  I  ask  for  the  net  earnings  in 
conSon  with  vour  testimony  is  that  it  is  not  entirely  clear  unless 
it  its  explained,  'just  what  vou  call  your  gross  earnings,  whereas  net 
earnlngsTave  a  more  common  definition  or  more  universal  definition 

''Mr^'CnrElTy  gross  earnings  I  mean  the  number  of  dollars 
taken  in  by  the  company  in  its  business  before  any  deductions  are 

""commissioner  AVehle.  On  what  basis  of  accounting  did  you  arrive 

"'SCLEE."we"lfmplv  add  up  the  nickels  as  they  come  in  and ' 

the  dollars  as  they  are  received.  . 

Commissioner  Wehle.  That  is  your  gross  earmngs? 
Mr.  Bradlee.  That  is  our  gross  earnings ;  it  is  the  total  income. 
Mr  Warren.  Without  deductions? 
Mr*.  Bradlee.  Without  deductions  of  any  sort,  kind,  or  descrip- 

'commissioner  Wehle.  No  deductions  of  interest? 

Mr  Bradlee.  No  deductions  for  expense,  interest,  maintenance,  or 
anything;  it  is  the  dollars  which  are  taken  m  by  the  company  in 

^^Commissioner  AVehle.  But  there  are  so  many  elements  that  enter 

intn  the  situation  before  we  come  to  the  net  earnings  then  that  it 

slather  dfficult  for  the  commission,  is  it  not,  to  know  exactly  how 

to  treat  the  situation  of  the  street  railway  companies  without  taking 

^''Ihf  BrIS  I  presume  that  the  commission  will  have  presented 
to  it  fiffures  of  net  earnings  of  the  industry.  j    i      j„ 

Commissioner  Wehle.  You  see  we  have  here  in  the  record  already, 
Mr.  Bradlee,  some  indication  of  the  expansion  in  the  various  items 
which  are  deducted  from  gross  earnings. 

Mr.  Bradlee.  Yes.  ,  ,  . 

Commissioner  Wehle.  And  which  are,  as  we  have  seen  here,  cut- 
tino-  down  the  net  earnings  or  even  extinguishing  the  net  earnings  en- 

tirely. 

Mr.  Bradlee.  Yes.  ,    ,  _.       .,  , , 

Commissioner  Wehle.  And  along  that  same  line  it  would  seem 

that  we  might  have  some  interesting  testimony  if  you  could  carry 

vnnr  sheets  iust  a  little  further. 

^  Mr  Bradlee.  I  would  be  very  glad  indeed  to  send  you  figures  that 

will  show  exactly  what  the  expenses,  net  earnings,  and  charges  are  on 


ll 


M 


^* 


214     PROCEEDnTGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

both  properties.  We  published  a  book  which  gives  that  information, 
and  I  will  send  copies  of  those  to  the  commission. 

Mr.  Warren.  What  is  the  latest  year  you  covot  in  those  reports? 

Mr.  Bradlee.  1918. 

Mr.  Warren.  1918? 

Mr.  Bradlee.  Yes, 

Commissioner  Wehle.  In  these  35  companies  that  you  are  report- 
ing on  in  this  concentrated  way  in  these  statements  which  you  have 
filed,  are  there  any  companies  which  have  been  allowed  a  higher 
rate  than  the  nonnal  5-cent  rate  for  transportation  ? 

Mr.  Bradlee.  In  the  city  of  Tacoma  we  have  a  7-cent  fare ;  in 
Beaumont,  Tex.,  we  have  a  6-cent  fare ;  in  Galveston  we  did  have  a 
6-cent  fai-e,  and  they  took  it  away  from  us  and  have  gone  back  to  5 
cents. 

Commissioner  Meeker,  Was  that  because  you  were  making  too 
much  money? 

Mr.  Bradlee.  No  ;  it  was  not.  It  was  because  the  city  administra- 
tion changed  and  a  new  crowd  was  elected.  I  think  those  are  the 
only  ones — no,  in  Paducah,  Ky.,  the  fare  has  increased  to  6  cents. 
Otherwise  I  think  the  fare  is  5  cents. 

Commissioner  Wehle.  Have  those  fares  been  in  foixje  during  the 
.  entire  year  1918? 

Mr.  Bradlee,  No;  they  have  not.  They  have  been  increased  at 
vaiious  times  during  the  year  on  the  various  companies. 

Commissioner  Wehle.  None  of  those  increases  were  in  effect  in 

.1917? 

Mr.  Bradlee.  No ;  all  of  them  occurred  in  1918. 

Commissioner  Wehle,  Do  any  of  the  propeities  which  you  have 
listed  here  in  your  statement  purchase  their  power  rather  than  pro- 
duce it? 

Mr.  Bradlee.  Yes. 

Commissioner  Wehle.  How  many  of  the  companies  purchase  their 

power  ? 

Mr.  Bradlee.  I  think  about  three.  In  one  case — ^there  are  two 
companies  there,  one  an  electric-light  company  and  one  a  i-ailway 
company,  and  the  railway  company  purchases  fi'om  the  electric-light 
company,  so  both  companies  are  included  in  that  statement. 

Commissioner  Wehle.  What  kind  of  contracts  for  the  purchase 
of  ix)wer  ai'e  there  in  force  in  those  three  cities,  if  you  can  give  us 

those  ? 

Ml".  Bradlee.  Well 

Commissioner  Wehle.  First,  as  to  the  period  over  which  the  con- 
tract of  supply  runs. 

Mr.  Bradlee.  I  am  afraid  I  have  not  that  sufficiently  in  mind  to 
give  you  any  exact  figures  on  it. 

Commissioner  Wehle.  What  are  the  three  companies  that  pur- 
chase their  power? 

Mr.  Bradlke.  There  is  power  pmehased  by  one  of  the  Seattle 
companies  or  l\iget  Sound  companies ;  power  is  purchased  in  Keokuk 
and  power  has  been  purchased  in  the  Blue  Hill  Street  Railroad,  which, 
b}^  the  way,  is  no  longer  under  our  management. 

Conunissioner  Wehle.  What  is  the  last? 

Mr.  Bradij-^e.  The  Blue  Hill  Sti-eet  Railroad,  .and  by  the  way,  let 
me  say  a  word  about  the  Blue  Hill  Street  Railroad 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     215 

Mr.  Warren,  That  is  in  Massachusetts  I 

Mr.  Bradlee.  In  Massachusetts, 

Commissioner  Meeker.  Near  Boston? 

Mr.  Bradlee.  Near  Boston.  Mr.  Tripp  made  a  statement  this 
morning  that  Westinghouse,  Church,  Kerr  &  Co.  gave  up  the  stock 
in  a  property  in  which  they  were  interested.  We  gave  up  the  stock 
in  the  Blue  Hill  Street  Railroad  Co.  in  consideration  of  havmg  some 
one  else  assume  the  burden  of  going  on  and  conducting  the  business. 
That  stock  was  issued  under  Massachusetts  laws,  and  under  the 
ISlassac-husetts  laws  it  was  necessarily  fully  paid  at  par  and  it  repre- 
sented an  investment  of  100  cents  on  the  dollar.  And  rather  than 
continue  the  operation  of  that  property,  we  gave  away  the  stock  and 
we  assumed  in  addition  and  continue  to  cany  one-half  the  floatmg 
debt,  so  that  we  not  only  lost  our  stock  but  we  are  still  liable  for 
half  the  floating  debt.  Since  that  time  the  company  has  gone  in 
the  hands  of  receivers,  and  I  think  we  have  lost  half  the  floating 

debt. 

Commissioner  Wehle.  In  connection  with  purchasing  power — 
would  3'ou  be  willing  to  give  the  commission  some  view  as  to  what 
the  future  policy  of  street-railway  business  should  be  from  an  eco- 
nomic standpoint?  . 

Mr.  Bradlee.  My  impression  is  that  there  are  to-day  m  the 
country  too  manv  small  power  plants.  I  believe  it  would  be  eco- 
nomically better  to  have  a  fewer  number  of  large  power  plants  and 
obtain  the  economies  which  come  from  production  on  a  large  scale — 
economies  in  first  cost  of  the  plant  and  economies  through  more  effi- 
cient operation  with  large-sized  turbines.  Just  how  far  that  should 
be  applied  to  street  railways  is  an  open  question.  In  a  city  as  large 
as  Boston,  it  is  quite  possible  that  the  Boston  Elevated  can  produce 
its  power  as  cheaply  as  it  could  produce  it  if  it  combinecl  with  the 
loc^^l  electric-light  company,  because  each  power  station  is  of  suffi- 
cient size  to  produce  power  economically.  In  the  smaller  towns.  I 
think  it  might  very  frequently  work  out  to  be  more  economical  to 
have  one  power  station  oAvned  either  by  the  street-railway  or  the 
electric-light  company,  as  the  case  might  be,  to  produce  ]power  for 
both ;  and,  as  a  matter  of  fact,  in  many  of  our  properties,  being 
combined  electric-light  and  street-railway  properties,  we  have  just 
that  situation. 

Commissioner  Wehle.  Do  you  find  that  in  the  places  where  Stone 
&  Webster  Co.  have  in  operation  the  combined  power  plant  for 
furnishing  both  the  light  and  the  power  for  traction  that  you  are 
generally  producing  it  at  a  lower  cost  than  in  other  places  where 
you  have  your  independent  plant  for  the  operation  of  the  traction 

line  ? 

Mr.  Bradlee.  In  general  the  cost  goes  down  as  the  size  of  the  plant 

and  the  output  increase. 

Commissioner  Wehle.  Then  you  would  say  that  the  normal  de- 
velopment which,  as  an  engineering  proposition  and  as  an  economic 
projwsition,  should  be  aimed  at  in  the  years  to  come,  is  a  plan  which 
would  carry  with  it  the  elimination  in  the  smaller  city  of  the  power 
plant  devoted  exclusively  to  traction  purposes  and  would  carry 
further  the  purchase  or  the  derivation  of  power  from  the  larger 
plant  which  serves  the  entire  community  ? 


W 


ti 


216     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Bradlee.  I  think  in  many  cases  that  would  work  out  to  the 
economic  advantage  of  the  comnmnity.  ■,  v  1 4. 

Commissioner  Wehle.  Not  only  for  traction  purposes  and  light- 
ing purposes  but  also  for  industrial  power? 

Mr.  Bradlee.  I  think  that  is  equally  true  for  industrial  power. 
There  are  so  many  small  plants. which  produce  power  very  much 
more  expensively  and  consume  very  much  more  coal  than  would  be 
the  case  if  they  were  supplied  from  a  central  station. 

Commissioner  Wehle.  In  the  present  state  of  the 

Mr.  Bradlee.  Of  course,  any  change  of  that  kind  must  be  gradual. 
I  mean  you  can  not  afford  to  throw  away  what  you  have  to-day, 
necessarily.  There  may  not  be  enough  additional  economy  to  war- 
rant simply  discarding  existing  plants,  but  the  tendency  as  develop- 
ment goes  on,  I  think,  should  be  toward  greater  concentration. 

Commissioner  Wehle.  The  Stone  &  Webster  Corporation  has 
made  a  success,  has  it  not,  of  the  activity  of  taking  over  properties 
which  are  in  a  far  from  flourishing  financial  condition,  in  building 
them  up  and  putting  them  on  their  feet? 

Mr.  Bradlee.  We  thought  so  up  to  about  a  year  and  six  months 
ago.     We  have  had  a  good  many  troubles  in  the  last  18  months. 

Commissioner  AVehle.  In  connection  with  doing  that  business 
Stone  &  Webster  have  taken  over  properties  of  all  sizes,  have  they 

not  ? 

Mr.  Bradlee.  Yes ;  up  to  cities  of  300,000  people. 

Commissioner  Wehle.  You  spoke  of  Paducah,  Ky.,  for  instance. 

TLTj.   Br\dlee    1  es. 

Commissioner  AVehle.  Which  has  a  population  of  how  many, 
do  you  remember? 

Mr.  Bradlee.  About  30,000  or  35,000,  I  think. 

Commissioner  Wehle.  And  you  have  there  raised  your  fare  to  how 

much  ?  • 

Mr.  Bradlee.  Six  cents. 

Commissioner  Wehle.  Do  you  believe  that  that  will  suffice  to  solve 
your  problem  in  Paducah? 

Mr.  Bradlee.  I  am  sorry  to  say  the  company  is  in  the  hands  of 

Commissioner  Wehle.  Now  we  had  testimony  in  the  record  some 
time  ago  at  another  hearing,  Mr.  Bradlee,  to  the  effect  that  in  cities 
of  approximately  this  size  that  we  are  now  discussing— 30,000  in- 
habitants—there' is  a  type  of  propei-ty  which  presents  a  dilemma, 
from  which  there  seems  to  be  no  escape,  according  to  the  testimony 
of  this  witness;  if  the  rate  is  not  raised  it  is  impossible,  so  said  this 
witness,  for  the  company  to  come  out  with  a  profit.  On  the  other 
hand,  if  it  is  raised,  the  people  will  refuse  to  ride  to  such  an  extent 
as  to  cut  down  the  profit  again.  Would  you  say  that  Paducah  pre- 
sents that  sort  of  a  situation  ? 

Mr.  Bradlee.  No;  I  would  not.  I  think  that  is  true  of  certain 
properties.  I  think  those  are  primarily  properties  that  depend  to 
a  considerable  extent  on  pleasure  travel,  or  else  they  are  properties 
built  through  sparsely  settled  communities  rather  than  urban  lines. 
I  believe  that  the  increase  in  fare  in  the  urban  systems,  even  in  the 
small  cities,  will  bring  about  a  solution  of  the  problem,  and  I  be- 
lieve that  even  though  the  first  effect  of  that  increase  in  fare  is  to 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     217 

cut  down  earnings  so  that  there  is  no  immediate  increase  in  gross, 
I  believe  the  ultimate  effect  will  be  to  work  out  the  situation. 

As  a  matter  of  fact,  in  such  of  the  small  cities  as  I  have  had 
experience,  and  as  I  have  seen  of  other  properties,  the  increase  in 
receipts  when  the  fare  is  changed  from  5  to  6  cents  is  about  one-ha  f 
of  the  theoretical  increase.  In  other  words,  from  5  to  6  cents  is 
20  per  cent  increase  and  you  actually  get  about  10  per  cent  increase. 
It  does  not  apply  to  all  cases,  but  in  general  it  runs  about  that  way. 
Then  gradually  the  falling  off  in  riding  returns,  people  get  a  little 
tired  of  walking  or  else  the  growth  of  the  city  brings  new  riders  into 
the  community;  and  after  a  time  the  ridmg  is  right  where  it  was 
before  with  the  full  increase  of  20  per  cent.  ^ 

Commissioner  Wehle.  Have  you  made  any  study  of  the  cost  of 
affording  the  public  service  of  transportation  by  gasoline  instead  of 
electricity  ? 

3klr.  Bradlee.  Yes.  ^        .    i     ,        i  i     k« 

Commissioner  Wehle.  Wliat  sort  of  a  study  has  been  made  by 
the  Stone  &  Webster  Corporation  of  that  ?  ,    ,    ,^^ 

Mr  Bradlee.  We  have  studied  the  situation  m  this  country,  we 
have  studied  the  situation  abroad  in  Paris  and  London,  and  we  are 
operating  gasoline  buses  in  connection  with  our  properties  in  Buget 
Sound,  m  connection  with  our  properties  in  Fort  AVorth,  and  I 
think  in  one  or  two  of  the  other  cities.  We  are  usmg  the  gas^oline 
buses  primarily  as  feeders  for  the  trolley  linas,  using  them  in  terri- 
tory where  service  is  required  but  which  is  not  yet  built  up  to  a 
point  to  be  self-supporting,  and  where  there  may  be  doubt  as  to 
whether  they  will  ever  build  up  to  a  point  to  be  self-supporting  It 
is  a  simple  matter  to  put  in  a  bus  and  handle  the  traffic,  and  if  the 
district  does  not  build  up,  to  transfer  the  bus  to  some  other  location 
where  service  is  needed,  whereas  if  you  once  lay  your  tracks  you 
have  made  a  permanent  investment  which  can  be  moved  only  at 
,     •  1  1 

"* 'in'^^eneral,  the  cost  of  transportation  in  the  buses  is  greater  than 
with  the  service  on  rails  and  as  far  as  we  have  been  able  to  determine 
we  see  no  reason  to  assnme  that  bus  transportation  can  take  the 
place  of  the  present  type  of  trolley  car  except  m  special  cases. 

One  of  oui- men  last  week  visited  Mr.  Ford's  plant,  and  went  over 
with  them  the  plans  which'they  have  in  mind  for  a  gasoline  car  to 
be  operated  on  the  street-railroad  tracks.  Mr  Ford  has  exp.essec 
the  idea  that  he  can  produce  a  gasoline  car  which  is  lighter  weight 
than  the  present  electric  car  and  will  consequently  be  more  efficient. 
I  am  a  little  bit  «  from  Missouri "  on  that,  but  we  would  be  glad  to 
<ret  anything  that  would  increase  efficiency.  ^  1 1  ^      *i        i  ^ 

"Commissioner  Wehi.e.  But  it  is  an  interesting  field  for  thought 
in  connection  with  certain  kinds  of  communities,  is  it  not^for  the 

*"Mr?'  Bradme.  I   should  say  certain  locations  and   communities 
rather  than  certain  kinds  of  communities. 

Commissioner  Wehle.  You  were  just  now  speaking  of  the  smaller 
property  to  which  the  generalization  made  by  a  previous  witness 
might  possibly  apply,  namely,  that  it  presents  an  economic  dilemma. 

Mr.  Bradlee.  Yes.  .         _  .  _  -,    ^  •        •   j 

Commissioner  Wehle.  And  the  exception  which  you  had  in  mind 
^vas  a  certain  kind  of  sparsely  settled  community ? 
160643**— 20 15 


i' 


i 


m ! 


218     PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Bradlee.  Yes. 

Commissioner  Wehle.  Does  it  occur  to  you  that  perhaps  the 
application  of  gasoline  with  or  without  tracks  might  conceivably 
solve  such  problems  as  that? 

Mr.  Bradlee.  Well,  it  might  solve  it  from  the  standpoint  of  the 
community,  but  I  would  not  want  to  be  an  investor  in  the  company 
that  put  them  in.  I  do  not  think  economically  it  would  be  a  success. 
In  other  w^ords,  if  the  street  railw^ay  does  not  pay,  I  doubt  if  the  bus 
would,  although  there  ma.y  be  exceptional  cases  where  it  would. 

Commissioner  Wehu:.  What  kind  of  a  case  does  Mr.  Ford  make 
out  in  connection  with  the  selling  of  the  car?  He  must  sell  this  bus 
if  he  is  undertaking  to  manufacture  it  at  a  considerable  cost — 

Mr.  Bradl.ee.  He  has  at  the  present  time  an  idea  rather  than  a 
developed  car. 

Commissioner  Wehle.  Has  he  manufactured  any  cars? 

Mr.  Bradlee.  No  ;  he  simply  has  it  on  paper,  and  not  very  complete 
on  paper,  either. 

Conmiissioner  Wehle.  Your  cars  that  you  are  operating  in  Fort 
W^orth  and  Seattle  are  not  on  paper,  though  ? 

Mr.  Bradlee.  No  ;  they  are  in  the  city. 

Commissioner  Wehle.  Are  they  operating  on  tracks? 

Mr.  Bradlee.  No  ;  they  are  operating  on  streets. 

Commissioner  Wehle.  How  much  higher  does  the  cost  of  opera- 
tion of  those  cars- seem  to  run  than  the  cost  of  similar  transportation 
would  be  on  the  track  ? 

Mr.  Bradlee.  I  do  not  think  I  ever  figured  it  that  way.    I 

Commissioner  Wehle.  If  you  had  a  new  community  in  which  no 
street-car  property  existed 

Mr.  Bradlee.  I  will  say  this.  I  tlo  not  think  we  are  operating  a 
bus  that  pays. 

Mr.  Warren.  You  do  not  think  you  are  operating  a  bus  that  pays, 
you  say? 

Mr.  Bradlee.  No. 

The  Chairman.  Is  it  convenient  for  you  to  be  here  to-monow 
morning? 

Mr.  Bradlee.  Well,  I  have  a  ticket  on  the  7.30  train  for  Boston, 
and  have  some  pretty  imi)ortant  engagements  there.  If  I  could  get 
through  to-night  I  would  like  to,  but  if  I  can  not,  I  will  stay. 

Mr.  Warren.  Mr.  Bradlee  came  at  great  inconvenience  to  himself, 
Mr.  Chairman,  and  I  should  like,  if  possible,  if  we  could  release  him 
to-night,  because  I  know  what  his  engagements  in  Boston  are. 

The  Chairman.  We  will  hear  Mr.  Bradlee  through.     Go  on,  Mr. 

W^ehle. 

Commissioner  Wehle.  Supposing  that  you  have  a  community  of 
perhaps  20,000  to  30,000  inhabitants,  somewhat  scattered,  and  you 
were  called  in  as  an  expert  to  solve  the  problem — the  transportation 
problem — for  that  community  and  establish  a  transportation  sys- 
tem for  it 

Mr.  Bradlee.  We  have  a  general  rule  in  our  business  and  have  had 
for  many  years,  and  that  is  never  to  interest  ourselves  in  a  street- 
rail  wav  problem  in  a  city  of  less  than  25,000. 

Mr.  Warren.  Is  that  the  result  of  the  Blue  Hill  Street  Railroad  ? 
[  Mr.  Bradlee.  Well,  that  is  the  result  of  watching  various  com- 
j   panics. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     219 

Commissioner  Wehle.  But  I  am  asking  you  this  question-,  Mr. 
Bradlee,  as  an  individual  whom  I  know  to  have  had  considerable  ex- 
peAence'  and  I  am  asking  you  this  from  the  public  point  of  view  and 
K  asking  you  to  addr^s  yourself  to  it,  not  from  the  investment 
point  of  view  of  a  company  which  has  a  certain  settled  policy  m  de- 
w loping  property,  but  simply  because  one  of  the  various  phases  of 
this  whole  problem  that  is  being  put  up  to  us  is  even  the  phase  of  the 
small  community. 

Mr.  Bradlee.  Natui-ally.  ,  ,  .     '^^       £  4.^ 

Comnnssioner  WEHi.K/And  I  am  asking  you  not  with  refem.ce  to 
your  business,  of  course,  but  simply  from  the  public  point  of  ^ev,^ 

Mr  BR\ra,EE.  Well,  I  said  that  simply  to  indicate  our  point  of 
view  on  those  properties.  I  think  when  you  have  a  «n.alUommumty 
of  that  sort  it  really  comes  down  to  a  community  problem.  I  doubt 
whether  there  is  any  system  of  tmnsportation  in  a  community  of 
To  000  or  20,000  people  which  would  be  self-supporting  just  as  a 

J:Srcial  enterp'r^^  It  may  be  run  in  '^'^'^^^^^^^^'fi^^'^^:^ 
system,  and  the  larger  system  may  support  that  smaller  dastrict. 
In  that  way,  they  may  be  served  without  any  help  from  the  com^ 
munrty.  But  if  it  is  an  isolated  community  I  think  it  will  need  some 
Trm  of  public  help.  Kelief  from  burdens  will  be  «ne  help ;  pos- 
sibly some  contribution  toward  the  expenses,  another  form  of  help. 
Ymf  Zbably  know  that  in  Massachusetts  a  law  has  recently  been 
m4^  under  which  cities  and  towns  are  permitted  to  contribute  a 
S  percentage  of  the  assessed  value  of  the  city  or  town  property 
toward  the  local  transportation  system;  and  a  number  of  Massa- 
chusetts cities  and  towns  are  making  such  contributions.  A  property 
in  which  we  are  interested  in  Plymouth,  Mass.,  is  receiving  a  con- 
iribution  of  that  kind  at  this  time,  and  without  it  the  company  could 

"°CmmniSonir"!^EH.K.  Where  the  Stone  &  Webster  Corporation- 
to  come  back  to  the  corporation  now-has  taken  over  property  and 
^orgTnized  it,  what  has  it  generally  done  with  reference  to  the  out- 

standing  issues  of  stock ?  ,.       •  £    ^-^^i.  i.«xr« 

Mr  Bradlee.  In  some  cases  the  outstanding  issues  of  stock  have 
been  left  unchanged.  In  other  cases  there  has  been  a  complete  i^- 
organization-a  new  company  has  been  formed,  the  old  companies 
have  disappeared  and  the  new  company  has  issued  securities  against 
the  properties  taken  over.  ,       ,      .  no 

Commissioner  Wehle.  On  what  basis,  generally?  . 

Mr  Bradlee.  I  do  not  know  that  there  is  any  general  basis. 

Commissioner  Wehle.  Is  there  any  approach  to  a  general  basis? 

Mr  BrIdlee.  No  ;  I  do  not  think  there  is.  We  have  done  all  kinds 
of  things.  We  have  issued  securities  for  less  than  the  cost;  we  have 
Lued  Securities  exactly  equal  to  the  cost  to  us  of  the  ProP^^ty;  we 
have  issued  securities  equal  to  the  assumed  value  or  the  best  we  could 
determine  to  be  the  value  of  the  property;  and  we  have  issued  se- 
curities  in  excess  of  the  value  of  the  property.  I  think  we  have  done 
all  the  different  combinations,  first  and  last. 

Commissioner  W^ehle.  Have  you  issued  any  bonus  stock? 

Mr.  Bradlee.  Yes. 

Commissioner  Wehle.  How  recently  i 

Mr.  Bradlee.  Well,  not  for  quite  a  number  of  years. 

Commissioner  Wehle.  How  many  years  ^ 


220    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMI,IISSION. 

My.  Bkadlee.  I  can  not  tell  you;  but  it  is  several  years  back.  We 
have  not  taken  over  any  new  companies  for  several  years  now.  The 
question  of  issuing  bonus  stock,  as  I  see  it,  has  been  this:  Rightfully 
or  wrongfully,  the  practice  has  developed  of  selling  bonds  in  a  new 
company  and  of  selling  preferred  stock  and  giving  the  purchaser  of 
the  bonds  and  the  preferred  stock  a  certain  amount  of  common  as 
a  bonus ;  the  idea  being  that  the  bonds  and  the  preferred  stock  would 
represent  their  investment,  the  common  stock  would  represent,  as 
Mr.  Tripp  said  this  morning,  their  hopes;  and  if  the  proposition 
worked  out  well,  the  common  stock  might  be  worth  something ;  if  it 
did  not  work  out  well,  it  would  have  no  value. 

Now  that  practice  grew  up — I  do  not  know  when  it  started  or 
where,  but  it  did  grow  up— and  there  was  a  time  when  it  was  prac- 
tically impossible  to  finance  a  new  corporation  without  following 
that  practice.  You  were  in  competition  with  that  method,  and  the 
investor  liked  it,  and  if  vou  were  going  to  get  the  investor's  money 
and  get  him  interested  in  the  enterprise,  you  were  more  or  less  forced 
to  fall  in  line  to  a  greater  or  less  extent  with  that  method  of  handling 

the  business.  .  ^     .   .i 

I  think  the  public-utility  people  recognized,  perhaps  not  at  the 
start,  but  maity  years  ago,  the  fallacy  of  that  method  of  financing. 
I  think  most  of  them  would  have  done  away  with  it  many  years  ago 
if  it  had  been  in  their  power  to  do  away  with  it  and  go  on  and 
develop  the  business.  But  it  has  taken  time,  and  it  is  only  gradually 
that  the  public  have  been  perhaps  educated  up  to  a  greater  extent 
to  handle  the  financing  of  such  corporations  in  that  way. 

Commissioner  Wehle.  The  legitimate  investment  interests  and  the 
better  class  of  production  interests  would  be  glad  to  see  an  abolition 
of  the  practice  of  issuing  bonus  stock  ? 

Mr.  Bradlee.  I  w^ould  be  delighted  if  it  could  be  wiped  out. 

Commissioner  Wehle.  Has  it  been  abolished  ? 

:Mr.  Bradlee.  No;  it  has  been  abolished  recently,  because  there  has 
been  no  financing  of  street  railways. 

Commissioner  Wehle.  How  recently  do  you  know  of  bonus  stock 
having  been  issued  in  connection  with  the  sale  of  securities  or  the 
issuance  of  mortgage  bonds  of  any  public-utility  company? 

Mr.  Bradlee.  Well,  I  have  no  case  in  mind  in  the  last  few  years. 

Mr.  Warren.  Has  it  not  been  abolished  in  all  States  where  the 
sui>ervisory  commissions  have  been  established? 

Commissioner  Beall.  There  is  hardly  any  State,  as  I  understand 
it,  where  it  could  be  done  to-day.  You  certainly  could  not  do  it  in 
any  state  where  there  is  a  public-service  commission. 

Mr.  Warren.  That  is  what  I  thought. 

Commissioner  Beall.  And  all  the  older  and  more  important  States 
I  think,  without  exception,  have  a  commission,  have  they  not,  Mr. 

Elmquist? 

The  Chairman.  Forty-seven  States  of  the  Union  have  commis- 
sions. 

Commissioner  Beall.  Of  course,  there  are  a  few  States,  I  believe, 
where  the  commission  does  not  pass  on  the  issues  of  securities,  but 
in  most  States  they  do.  •  i      • 

Mr.  Bradlee.  Wherever  there  is  a  commission  with  that  authority, 

of  course  that  immediately  stops  it 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    221 

Commissioner  Wehle.  Certainly,  the  commission  knows  there  are 
a  nuXrJf  StUs  where  the  public-service  commission  of  the  State 
has  that  authority. 

ConSSV  Wkhle.  But  there  are  some  left  where  the  public- 
seiSrcomSon  has  not  that  authority,  and  my  question  which 

'  t^'Z^^'l^^T^'^^  very  distinctly  disap- 

''S^il^^i^^^<>^y^  S^^^^  as  it  exists, 
differs  very  much  in  different  States,  does  it  not » 
Mr.  Bradlee.  In  the  control  of  securities '. 

Commissioner  Wehle.  Yes.  ^r.r^ivn\ 

Mir  Bradlee   Yes,  it  vanes  as  to  the  extent  of  contiol. 
rommSer  Wehle.  There  are  some  States  which  undertake  to 
exerd^some  regulation  over  the  issuance  of  secunt.es.    The  statnte 
does  nXS  terms,  forbid  the  issuance  of  bonus  stock;  is  not  that 

true  ? 

Mr.  Bbadlee.  Yes;  I  think  so.  . 

Commissioner  Wehle.  That  is  all,  Mr   Chairman 

Mr  AVaeren  Is  it  not  true,  Mr.  AVehle,  that  the  law  cioes  not 
rPcoini/e  the Tssuance  of  bonus  stock  as  such  in  any junsdietion;  it 
Xfvs  has  to  be  maneuvered?  Theoretically,  any  State  law  that  I 
have  ever  run  atross  treats  all  stock  as  being  required  to  be  issued 
fnr  vnTuc  anTthe  so-called  bonus  stock  is  usually  the  result  of  a  coii- 
Sucti^n  contract,  or  something  of  that  sort.  I  do  not  recollect  any 
State  which  in  terms  would  sanction,  the  issuance  of  stock  for  noth- 
ing as  a  bonus  to  go  with  other  security. 

Commissioner  AVehle.  1^°;  .^v  q«^t,on  did  not  ^':^}\^^lf:^^l 

*^""'^i'I?.rthe^eyrS3aJlo^K^^^^^^ 
^p^fHlc-in'irctT;an^  the  issuance  of  securities  in  the 

baSsXr  gett"ncr  at  the  value  of  properties  upon  which  the  company 
^r*  .  iuItclaim''to  receive  a  return.  Would  you  agree  with  the  state- 
tLl  i.,ade?>;  Gen  Tripp  as  to  using  stocks  and  bonds  outstanding 

='^^::^  BRti%''S\r.^^^^^^^^  idea  for  determining  the 

nio^ieVThat  went  into'the  property  is  good  as  far  as  it  goes,  but  I  do 

nftfke"r;;ci£^SrntTT{l^Haverhill.G^^  Co.  was 

j^tttc'o'f  the  pxt&S)rnhS;^nT  tk:  e 

irril^d"^  nlnXdlnta?;^^^^^^  time  something  like 

S  000  of  monev.    It  could  not  be  reproduced^— 

^  Conimiioner  Meeker,  In  addition  to  the  original  $6.,0001 


iit  \ 


I 

11 


i 


ij » 


III' 


Jki 


222    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  BuADLEE.  Well,  including  the  $65,000.  Ninety  per  cent  of  the 
money  had  gradually  been  put  in  there  through  dividend  accruals 
and  accruals  on  those  dividends.  We  had  a  rate  case  before  the 
:Massachusi>tts  Gas  and  Electric  Light  Commission,  and  in  that  rate 
i*ase  it  was  necessaiy  for  us  to  go  back  and  show  what  happened  in 
the  building  up  of  this  property,  because  there  was  danger  from  our 
point  of  view  that  they  would  simply  say, ''  You  only  have  an  invest- 
ment here  of  $65,000."  We  were  able  fortunately  to  get  at  the  books 
of  the  company  running  away  back,  and  we  found  that  over  that  en- 
tire period,  while  the  property  had  been  built  up,  with  the  excep- 
tion of  the  $65,000,  out  of  earnings,  the  company  had  never  earned 
an  exce^ive  amount  in  any  yetir  on  the  property  which  existed  at 

that  time.  ,  ,    _        _  .         ,  ,  , 

Commissioner  Meeker.  As  I  understood  Gen.  Tripp,  he  would 
take  account  oi  just  that  situation.  How  did  you  acquire  the  prop- 
erty ;  was  it  by  tlie  issuance  of  bonds  or 

Mr.  Bradlee.  No,  we  bought  the  stock. 

Commissioner  Meeker.  The  $65,000  of  stock? 

Mr.  Bradlee.  Yes,  but  we  paid  a  good  deal  more  than  ^(»o,00U 

^Commissioner  Meeker.  Yes,  naturally.    But  you  would  be  able  to 
show  you  had  more  than  $65,000  of  an  investment  in  the  property  of 

the  plant? 
Mr.  Braduie.  Yes. 

Commissioner  Meeker.  I  think  that  he ,  i  .  i     xu 

Mr  Bradlee.  I  do  not  understand  that  Mr.  Tripp  would  take  the 
purchase  price  of  the  property.  That  is,  if  you  owned  a  property 
and  I  bought  it  from  you  to-moiTow,  and  a  week  later  we  appeared 
before  a  public-service  commission  to  have  our  rates  regulated,  I  do 
not  assume  that  the  commission  would  take  the  price  I  bought  the 
property  from  you  at  a  week  previous  to  the  heanng  as  an  indication 

Commissioner  Meeker.  No,  but  his  scheme  did  take  account  of  the 
turning  back  of  earnings  into  the  property.  But  that  is  not  the 
point  I  want  to  bring  out.  Do  you  think  that  the  value  of  the  prop- 
erty is  most  easily  gotten  at  by  the  method  of  appraisal  of  physical 
valuation,  or  do  you  think  it  can  be  gotten  at  easier  in  some  other 

way?  ,  ,,       .        ..  •      1         Tir 

Mr  Bradlee.  I  do  not  think  the  problem  is  quite  as  simple  as  Mr. 

Tripp  stated.  The  Supreme  Court,  as  I  undei-stand  it.  has  pointed 
out  that  the  money  that  goes  into  the  property  is  one  element  in  de- 
termining a  fair  value ;  that  the  cost  of  reproduction  is  another  ele- 
ment in  determining  a  fair  value ;  that  the  price  paid  for  the  prop- 
erty by  the  then  owners  is  another  element  m  determining  the  fair 
vaiue ;  and  that  it  is  necessary  to  weigh  those  all  more  or  less  and 
give  them  some  consideration  in  arriving  at  a  conclusion  as  to  what 

is  the  fair  value.  .       ,  •  i   \c  • 

Now,  I  think  it  is  perfectly  true  that  there  are  cases  m  which  a  fair 
value  ciin  be  arrived  at  by  taking  the  money  that  has  gone  into  the 
property.  I  think  there  are  other  cases  in  which  that  w  ould  lead  to 
an  unfair  vahie  unless  a  broader  consideration  was  given  to  the  other 
factors.  Wherever  it  is  possible  to  arrive  at  a  fair  solution  of  the 
question  by  taking  the  actual  cash  investment,  I  believe  that  that  is 
a  simpler  thing  to  get  at.    I  believe  it  is  a  thing  which  is  much  better 


t  i 


PEOCEEDIHGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    223 

understood  by  the  public.  I  think  it  makes  it  much  easier  to  work 
SalSiory  soh.tion  with  the  public  and  I  am  -<^"-\  « -l°i;^ 
that  plan  and  favor  it  except  with  this  reservation— that  there  are 
Sses^n  which  I  believe  that  might  lead  to  injustice  sometimes  toward 
the  investor,  sometimes  an  injustice  perhaps  to  the  community 

Commissioner  Meeker.  Do  you  believe  that  it  is  essential  tliat  we 
eet  at  a  fair  valuation  of  the  street-railway  properties? 

Mr.  Bhadu:e.  I  do.    I  see  no  way  of  working  out  a  service-at-cost 
franchise  or  any  other  equitable  solution  without  arriving  at  some 

^''cJnmitsioner  Mkekeb.  I  do  not  wish  to  keep  you  any  longer  than 

^n^B^^LEE.  That  is  all  right;  I  can  stay.    I  am  not  going  until 

'•?.mLi:ione7MES.  -^You  have  indicated  you  liave^  not^ei^ 
much  faith  in  the  motor  bus.  I  would  like  you  to  explain  to  me  if 
you  can,  this  great  falling  off  in  gross  earninp  that  occurred  in  191o, 
which  you  say  was  due  in  part  to  the  ]itiiey  bus. 

ConmSi  mIeker.  If  the  jitney  bus  or  any  other  kind  of  bus 
is  nT really  a  competent  competitor  with  the  street,  railways,  how 
could  they  have  dug  such  holes  in  your  gross  earnings  in  that  year? 

Mr  Bradlee.  Wdl,  it  takes  a  little  time  to  find  out  whether  a  thing 
is  a  financial  success  or  not.  The  jitney  started  up,  not  with  a  bus, 
not  in  he  class  of  service  that  a  sti-eet  railway  would  g^^^ej't  farted 
out  with  a  lot  of  second-hand  automobiles,  a  great  many  of  them 
Ford  c  rs  and  other  low-priced  cars.  The  i^eople  were  crowded  into 
tho^  SI  fn  a  way  that  they  never  would  stand  for  in  he  long  i-un. 
TCe^vere  no  regulartory  ordinances,  there  was  nottung  to  deter- 
mine what  was  reasonable  service  and  what  was  not.  ^  But  even  under 
Hiose  «)mlitions,  the  figures  which  we  have  show  that  the  average 

me  am  n  staved  in  the  jitney-bus  business  was  about  three  monUis, 
and  hm  he  disapi>eared  and  went  into  something  else.  Unfortu- 
nately others  weilSiot  willing  to  profit  by  his  advice,  and  they  had 
to  leaiTi  for  themselves;  and  the  numbei-s  of  buses  remained  the  same 
ovei  a  very  considerable  period  of  time,  but  the  men  who  opei-ated 

**'cSnfm?ssiiner  Meeker.  In  other  words,  the  jitneys  were  running  at 
a  loS^aU  the  while,  although  a  good  many  of  the  jitney  operators  did 
notknow  enough  to  know  that  they  were  operating  at  a  loss?  . 

Mr.  BradLe.  It  took  them  time  to  find  out,  and  many  of  their 
pxnenses  were  not  charged  in  at  all.  . 

Confmi^'oner  Meeker.  And  just  following  that  out,  the  ]itney 
buses  did  not  give  any  sufficient  s^ui  ity  to  the  passengers :  In  case 
of  accident  the  passengers  simply  suffered  loss? 

Mr  Bradlee.^  In  the  early  days  thei^  was  no  security  at  all. 
Later,  in  many  cities,  oixiinances  were  passed  which  required  the 

iitnev  driver  to  take  out  a  bond.  ,      ..^        i  ^    « 

^  Commissioner  Meeker.  And  as  soon  as  the  ]itney  bus  was  put  on 
a  business  basis  it  became  a  more  expensive  method  of  conducting 
transportation  than  the  stixjet-railway  system? 

Mr.  Bradlee.  Yes.  ,  .  ,     ,  ,  -n     • 

Commissioner  Meeker.  Do  you  think  there  may  be  possible  im- 
provements in  the  motor  bus  and  gasoline  engine  that  may  bring  it 
again  into  the  field  as  a  competitor  ? 


224    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


ttill 

HfM 


mil 


* 


Mr.  Bradlee.  That  is  always  a  possibility. 

Commissioner  Meeker.  But  nothing  is  in  sight  as  far  as  you 
know  i 

Mr.  Bradlee.  And  that  is  one  of  the  menaces  to  the  street-railway 

business. 

Commissioner  Meeker.  In  Great  Britain  they  have  given  some 
attention  to  the  creation  of  power  at  great  central  plants  located  at 
the  mines.  Has  any  such  plan  developed  in  this  country  to  your 
knowledge  ? 

Mr.  Bradlee.  Xot  on  any  definite  plan  such  as  has  been  worked 
out  in  England.  In  England  the  Government  took  the  matter  up 
and  appointed  a  special  commission  to  investigate,  and  that  com- 
mission has  studied  the  situation  throughout  England  and  has  made 
very  definite  recommendations  for  centers  at  which  large  power 
plants  shall  l)e  developed.  As  I  understand  it,  that  is  now  in  report 
form;  that  is,  no  definite  progi'ess  has  been  made  in  carrying  out 
the  plan.  The  report  was  submitted  about  a  year  and  a  half  ago,  I 
think — about,  but  during  the  war;  so  naturally  it  was  held  up. 
Just  what  will  take  place  now  I  do  not  know. 

Commissioner  Meeker.  Do  you  think  that  there  is  a  possi- 
bility  

Mr.  Bradlee.  And  in  this  country  there  has  been  a  tendency  to 
work  toward  that  same  general  plan.  There  is  a  tendency  to  con- 
centrate, there  is  a  tendency  of  the  larger  power  distributing  sys- 
tems to  interconnect  their  lines  and  relay  each  other,  and  I  think  that 
is  a  tendency  in  the  right  direction. 

C'ommissioner  Meeker.  That  may  then  eventually  help  in  the 
solution  of  the  troubles  of  the  street  railway  companies,  the  furnish- 
ing of  cheaper  power? 

Jilr.  Bradlee.  Yes;  but  the  saving  in  power  will  not  go  very  far 
in  the  street-railway  situation.  Power,  after  all,  is  not  a  very  large 
percentage  of  your  total  expense. 

Commissioner  Meeker.  The  principal  expense  is  labor 

Mr.  Bradlee.  Yes;  so  that  even  though  you  made  a  25  per  cent 
saving  in  power  it  w^ould  be  a  pretty  small  per  cent  of  the  total 
railway  expense. 

Commissioner  Meeker.  Xow  we  had  data  furnished  to  us  yester- 
day giving  some  information  about  labor  costs.  Could  you  give  us 
some  further  information  about  the  actual  increase  in  the  wage  scale 
in  the  different  items  that  you  spoke  of  a  few  moments  ago? 

^Ir.  Bradlee.  I  think  you  will  find  that  all  here  in  detailed  figures 
w  hich  I  am  going  to  send  you.  For  example,  I  simply  gave  you  the 
figures  under  conducting  transportation.  Now  one  of  the  items  that 
goes  to  make  up  that  figure  is  the  expense  of  trainmen.  The  train- 
men's expense  increased  80  per  cent  in  the  Houston  company  from 
1918  to  1919.    And  you  will  find  all  through 

Commissioner  Meeker.  As  long  as  that  is  to  be  a  matter  of  record, 
that  is  all  I  want  to  know. 

Mr.  Bradlee.  Yes. 

Commissioner  Meeker.  Another  thing  I  would  like  to  ask,  is  it 
possible  for  you  to  give  us  a  monthly  statement  showing  the  effects 
on  your  gross  earnings  and  net  earnings,  too,  if  possible,  of  the 
increase  in  fares  in  those  cities  where  3^ou  have  secured  an  increase 
in  fares?     Otherwise,  we  will  not  know  where  you  stand,  whether 


i! 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    225 

vour  irross  earnings  have  actually  been  increased  or  remained  station- 
^ry,  0^1  to  what  extent  they  have  been  increased  by  the  increa.se  m 

**Ti-.  Bradlee.  Yes;  I  think  we  might  get  some  such  fi^^^^P; 

Commissioner  Meeker.  If  it  is  possible,  I  think  it  would  be  ^eiy 
important  to  show  such  figures. 

Mr  Bradlee.  I  will  see  what  we  can  do  along  that  line.  . 

?omSner  Sweet.  Do  you  think  Mr.  Bradlee,  that  tt.e  m.c>al 
point  in  this  whole  matter  is  getting  the  companies  on  a  basis  wheie 
they  can  appeal  to  new  capital  and  get  new  capital  invested,  and 
without  that  kind  of  relief  their  case  is  pretty  hopeless ? 

Mr.  Bradlee.  I  think  that  is  crucial  in  this  way:  Th»t  it  is  e.s.n 
tial  if  the  public  is  to  be  adequately  served.  ^°  T''*  "'^'VaS^ 
is  met  and  the  situation  is  worked  out  so  that  the  new  capital  is 
attracted  then  I  think  we  can  assume  that  the  old  capital  is  in  that 
same  plak  reasonably  taken  care  of  so  that  the  measure  of  what  is 
necelsa  y  to  be  done  is  what  is  necessary  to  atti-act  new  capitaL 

Commissioner  Sweet.  You  agi-ee  substantially  ^^nth  Gen.  Tnpp, 

that  to  be  upon  a  healthy  basis  it  must  be  ?'>''f^%^Z'"'^r^^l 
engajred  in  tlie  business  to  attract  new  capital  so  as  to  keep  up  ^Mttl 
the  needed  extensions  and  growth  of  the  ind  istry ;  do  you  ( 

Mr  Bradlee.  I  do.    I  do  not  think  they  can  adequately  serve  the 
niiblic  without  that.     It  is  an  essential. 

P  Commis^oner  Sweet.  Now,  can  you  «"g/f  ^^^  7«\>  J^^^^^ 
the  public  can  be  brought  to  a  realization  of  that  fact  ?  \  ou  do  not 
think  the  public  does  realize  it  now,  do  you '. 

Mr  Bradlee.  No;  I  do  not.  .       ,  •  i   ii    ^ 

Co'umissioner  Sweet.  Can  you  suggest  any  way  i"  ;^1»^1'  «"f  ^^^ 
be  brought  to  the  public  so  as  to  make  the  public  realize  that  it  is  not 
merely  !  question  of  invested  capital  and. making  that  fa»J  P^f  ^ 
able,  but  a  question  of  continually  increasing  capital  (     How  can  the 

nuhlio  be  made  to  understand  that?  , 

P  Mr  Bradlee  I  hope  that  vour  committee  will  state  that  so  clearly 
in  vou,  report  that  it  will  be  understood  by  the  public  and  will  come 
noronly  totheir  attention  but  so  forcibly  that  it  will  in  the  future 

""commisJiiner  Sweet.  You  are  passing  the  buck,  as  they  say. 
Mr.  Bradlee.  Well,  you  are  our  hope  right  now. 
Commissioner  Sweet.  AVe  want  you  to  tell  us  how  to  do  it,  if  jou 


can. 


Mr  Bradlee.  AVell,  I  have  tried  to  present  there,  just  from  specific 

caS:  what  has  happened  in  a  group  of  f  ■"P'V'I'^i^T^rt  rtlS 
been  need  of  capital  or  the  capital  has  been  furnished,  that  their 
eed  is  not  a  sporadic  and  occasional  need  but  it  is  a  continuous  one 

onth  by  monlh  and  year  by  year,  /"'"l-'-  «f;|[fU°"rin'^^^^ 
(luced  and  very  likely  have  been  produced  and  will  be  presented  to 
vou  for  the  industry  as  a  whole,  showing  the  amount  of  money  which 
)Z  orone  into  it  year  by  year  in  order  to  meet  the  public  need.  I 
thTnkThose  fi^ues  miglit  be  put  in  such  a  form  that  a  convincing 
*H  ement  to  the  public  could  be  made,  and  I  am  sure  that  anything 
that  your  commission  would  say  along  that  line  would  be  very 

'^Commissioner  Sweet.  That  is  all,  thank  you. 


223    PEOCEEDIIlfGS  OJf  i^EDEBAL.  ELECTEIC  RAH- WAYS  gOMMISSION. 

Coinuiisioner  Beall.  Mr.  Bradlee,  you  were  speaking  about  noth- 
ing having  been  done  in  this  country  as  to  big  power  plants  at  the 
mines.  That  is  not  really  quite  correct,  is  it?  Are  you  familiar  with 
the  Windsor  plant  on  the  Ohio  River  ? 

Mr.  Bradlee.  If  I  said  that,  I  did  not  mean  that. 

Commissioner  Beall.  I  want  the  coimnission  to  know  there  are  a 
good  many  plans  and  some  are  actually  being  built,  for  big  power 
houses  that  will  distribute  not  only  in  one  State  but  in  a  number  of 
states.  There  is  this  big  plant  at  Windsor  on  the  Ohio  River  which 
furnishes  power  to  at  least  two  or  three  States.  The  Duquesne  Co.  of 
Pittsburgh  is  now  erecting  at  a  cost  of  many  millions  of  dollai's  a 
l)lant  at  a  place  near  Cheswick,  right  at  the  mine.  They  are  making 
actual  progi^ess  on  that.  And  there  is  a  big  power  company  in  Cali- 
fornia, and,  if  I  recall  it,  through  the  war,  at  the  request  of  the 
Government  they  were  all  hitched  up  together,  California,  Colomdo, 
Utah,  and  I  think  they  went  up  into  one  of  the  Northern  States  as 

well. 

Mr.  Bradlee.  What  I  thought  I  said  and  what  I  intended  to  say 
was  that  there  had  been  no  general  plan  worked  out  by  the  Gov- 
ernment  

Commissioner  Be.\ll.  No;  not  by  the  Government,  but  they  have 
been  re<][uesting  it 

Mr.  Bradlee.  As  they  have  in  London,  and  no  general  plan  refer- 
ring to  the  country  as  a  whole,  as  has  been  done  in  P^ngland.  There 
are  manv  cases;  we  have  such  cases  ourselves.  The  Mississippi  River 
Power  Co.  is  an  instance.  The  Puget  Sound  Traction,  Light  & 
Power  Co.  is  another  instance  of  such  a  case.  There  we  have 
four  water  powers  and  two  steam  plants  interconnected  feeding  the 
cities  of  Tacoma,  Seattle,  Everett,  and  Bellingham,  and  all  the  in- 
termediate territory.  We  are  connected  up  with  another  power  com- 
pany which  is  located  in  Canada,  which  supplies  power  across  the 
line.  We  have  a  similar  system  in  Georgia — in  Columbus — and  that 
svstem  is  connected  up  with  another  large  power-supply  system 
there;  and  that  general  tendency  is  marked  throughout  the  country. 

Commissioner  Beall.  That  is  true  also  in  Utah,  is  it  not  ? 

Mr.  Bradlee.  Yes. 

Commissioner  Beall.  That  company  with  all  its  plants  in  Utah 
and  Montana  and  Nevada,  connected  with  street  railways  and  elec- 
tric light  and  power  companies? 

Mr.  Bradlee.  And  the  New  England  Power  Co.  in  Ne^y  England 
is  another  instance.  There  are  many  instances  of  that  kind.  I  did 
not  mean  to  say  for  a  moment  that  siich  was  not  the  case. 

Commissioner  Beall.  I  wanted  to  ask  one  question  on  those  jit- 
neys. Was  not  one  cause  for  the  success,  to  use  such  a  term  as  that, 
in  Seattle,  Los  Angeles,  and  other  western  cities,  the  fact  that  in  the 
first  year  or  two  of  their  operation  they  only  operated  in  the  rush 
hours  when  the  traffic  was  the  heaviest  and  only  operated  on  good 
streets  where  the  congestion  was  thickest  ? 

Mr.  Bradlee.  Yes. 

Commissioner  Beall.  That  is,  they  did  not  give  service  at  all 
hours  of  the  day  or  night  like  a  street-railway  company  does. 

Mr.  Bradlee.  No  ;  they  simply  went  in  and  took  the  cream  of  the 
business.    They  not  only  operated  on  the  most  crowded  streets,  but 


PROCEEDINGS  OF  FEDEEAL  ELECTRIC  RAILWAYS  COMMISSION.    227 

they  only  operated  short  distances.    They  picked  out  the  short  hauls. 

ContmLioner  Beall.  In  other  words,  they  took  the  business  which 

was  profitable?  „    ,      ,      .  i  i  i?^.  ^.i 

Mr.  Bradlee.  They  took  the  cream  of  the  busmess  and  lett  tiie 

skim  milk.  •    •       i       4-1.    j?  i 

The  Chairman.  Before  adjournment,  the  commission  has  the  tol- 
lowing  announcement  to  make :  At  the  conclusion  of  the  testimony 
which  is  to  be  presented  by  the  American  Electric  Railway  Associa- 
tion and  related  utilities,  the  commission  will  adjourn  until  Aug^^^t  . 
4  at  this  point,  when  it  will  receive  testimony  from  Secretary  ot  \\  ar 
Baker  and  a  group  of  economists  and  others  who  will  be  invited  to 
attend.  After  that  the  commission  will  take  another  adjournment 
until  August  11,  at  which  time  mayors  from  ^^ewlork,  Boston, 
Buffalo,  Chicago,  New  Orleans,  Minneapolis,  St.  Louis,  Seattle,  ^an 
Francisco,  and  probably  some  other  cities  will  be  invited  to  attend 
and  testify.  At  the  same  time  we  will  invite  regulating  commis- 
sions to  come  here  and  present  their  testimony. 

We  now  will  stand  adjourned  until  10  o'clock  to-morrow  morning. 

Mt,  Warrex.  May  I  ask  one  question  before  we  adjourn? 

On  that  matter  of  valuation,  Mr.  Bradlee,  in  cases  where  the  securi- 
ties of  the  company  have  been  issued  under  supervision  by  a  super- 
visory board  and  with  its  approval,  the  easiest  method  would  be, 
would  it  not,  to  take'the  capitalization  of  the  company  as  the  basis 
rather  than  either  a  valuation  or  an  attempt  to  determine  the  amount 

of  money  that  has  gone  in  ?  .    ,    .  1 1         i     ^ 

Mr.  Bradlee.  I  think  that  would  be  easy  and  that  would  apply  to 
the  State  of  Massachusetts  as  a  very  good  example 

Mr.  Warren.  Yes;  exactly. 

Mr  Bradlee.  There  for  25  or  30  years  the  securities  have  all  l>een 
issued  under  the  direction  and  control  of  the  commission  and  the 
securities  represent  the  actual  cash  which  has  gone  into  the  property. 

Let  me  say  just  a  word  on  that.  It  seems  to  me  if  you  are  going 
to  take  the  cash  that  has  gone  into  the  property  as  the  measure  ot 
value  the  cash  to  be  considered  and  the  value  to  be  considered  is 
the  entire  cash  value  of  everything  that  has  gone  in  to  create  that 
property  from  the  investor  or  any  services,  and  which  has  not  been 
paid  back.  If  the  investor  has  had  some  of  his  investment  paid 
back  to  him  that,  of  course,  cancels  that  part  of  the  proposition. 
But  in  so  far  as  the  investor  has  put  in  money  m  good  taith  and 
properly,  that  should  be  recognized,  whether  that  money  has  gone 
into  a  building  which  is  there  to-day  or  a  building  which  was  there 
some  time  ago  and  has  disappeared.  If  the  investor  has  not  got  his 
monev  back,  he  is  still  entitled  to  a  return  on  his  money  until  such 
time  as  he  is  reimbui-sed  for  the  capital  which  he  has  furnished,  bo 
to  mv  mind,  the  essence  of  the  thing  is  what  money  has  gone  m  there 
and  not  been  paid  back,  and  everything  that  enters  into  that  class 
should  be  a  proper  element  in  the  cost  of  the  property. 

The   Chairman.  We  now  stand  adjounied  until  10  o  clock  to- 
morrow morning.  1       j.    rn        i 
(Whereupon,  at  5.30  p.  m*,  an  adjouxmnent  was  taken  to  ihursday, 

July  17,  at  10  a.  m.) 


m 


i 


228    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Washington,  D.  C,    July  17^  1919, 

Met  pursuant  to  adjournment  at  10  a.  m. 

Present :  Parties  as  before. 

The  Chairman.  Are  you  ready  to  proceed,  Mr.  Warren? 

Mr.  Warren.  I  am  going  to  ask  Mr.  Clark,  whose  testimony  was 
interrupted  day  before  yesterday,  to  resume  the  stand  and  com- 
plete his  historical  sketch,  if  I  may,  now.  Will  you  take  the  stand, 
Mr.  Clark? 

STATEMENT  OF  MK.  WILLIAM  J.  CLARK— Continued. 

Mr.  Warren.  Mr.  Clark,  the  other  day  about  the  time  that  you  fin- 
ished your  testimony,  you  were  speaking  of  obsolescence,  referring  to 
some  company,  I  think. 

Mr.  Clark.  Depreciation  through  obsolescence.  Possibly  I  may 
have  given  the  commission  a  wrong  impression  as  regards  when  that 
terminated.  I  was  referring  to  the  Connecticut  situation,  as  you  may 
remember,  and  I  was  speaking  of  the  excessive  depreciation  from 
that  cause  up  to,  I  think,  1897  and  1898. 

Of  course,  as  a  general  featwre,  this  has  continued  throughout  the 
country.  1  did  not  know  but  I  might  have  given  the  commission  the 
wrong  impression  in  that  regard.  The  ratio  has  decreased,  of  course, 
with  the  advancement  in  the  state  of  the  art.  That  was  all  on  that 
feature. 

But,  gentlemen,  if  I  may  make  another  statement,  I  am  exceed- 
ingly anxious  to  assist  the  commission  in  every  possible  way  and,  at 
the  same  time,  even  more  anxious  not  to  unnecessarily  absorb  your 
time.  I  would,  therefore,  explain  that  while  I  consider  myself  quite 
well  acquainted  with  street-railway  and  local-transportation  condi- 
tions the  world  over  up  to  about  two  years  ago,  since  then  I  have 
devoted  practically  all  of  my  waking  hours  for  seven  days  a  week  to 
the  preparation  of  some  exhaustive  data  on  foreign  commercial,  in- 
dustrial, and  business  conditions  for  the  Government,  more  espe- 
cially to  aid  in  the  expansion  of  American  foreign  trade.  Conse- 
quently, I  can  not  say  that  I  am  up  to  date  fully  on  all  of  these  later 
developments,  although  I  have  a  general  idea. 

It  has  struck  me,  therefore,  that  perhaps  my  greatest  value  to  the 
commission — if  they  so  desire — would  be  in  connection  with  the 
historical  side;  and  in  that  regard  I  would  say  that  before  leaving 
New  York  I  hastily  caught  from  my  files  certain  material  which  I 
have  here,  which  is  not  in  condition  to  be  presented  as  exhibits  to  the 
commission,  but  which  I  should  be  very  glad  to  turn  over  to  them  if 
they  desire  it  as  a  basis  for  verifying  certain  facts.  I  would  go 
further  and  state  that 

The  Chairman.  In  what  shape  is  that  Mr.  Clark? 

Mr.  Clark.  It  is  copies  of  newspaper  articles,  over  different  peri- 
ods. I  might  sav,  continuing  this,  that  I  find  even  with  our  friends 
of  the  street-railway  association  a  mystery,  or  a  seeming  mystery, 
concerning  the  census  of  street  railways  for  1890.  I  have  never  found 
but  very  few  people  who  knew  where  that  existed.  Well,  hero  it  is, 
gentlemen ;  and  the  mystery  is  this :  The  data  is  found  in  the  volume 
on  steam  railroads  and,  so  far  as  I  know,  has  never  been  catalogued 
so  that  people  could  discover  where  it  was. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    229 

Now   in  mv  opinion,  much  of  the  data  contained  there  is  of  cx- 
trem?i\npo"^^^^^  to  you  on  this  question  of  cap^t^^^^^^^^ 
it  is  very  thorough  and  complete;  and  many  of  ^^^.^ompaiisons  t^^^^^^^^^ 
althouo-h  the  census  of  1890,  are  with  the  figures  of  1880,  so  it  caiiies 
yoiibai  to  that  point.    I  ^Vish  that  Mr  Welsh  might  -^;^^^^^^^^^^ 
material  so  he  could  perhaps  have  started  ^^me  of  h^^^^^^^^ 

Now  as  to  the  other  sources  of  information  which  aie  noi  gen 
erally  known :  Obviouslv  examination  of  the  trade  and  technical 
journals  reveals  much,  and  that  is  the  character  of  material  I  have 
here— extracts  which  we  made  in  the  days  gone  by.  ^  ^ 
•  xt^e  is  another  feature  incident  to  that  which  is  not  generally 
appreciated  ny^^^^^^^^  to  fix  dates,  if  you  desire  certain  other 
fTc  iSnt  to  these  different  periods,  examination  of  the  adver- 
iisements  of  electrical  manufacturing  companies  t^--;^^;^^- 
this-  is  as  true  of  European  publications  as  it  is  ot  American    le 

''t^^^i'^S^^^^^^^  as  regards  finding  these  facts    while 

at?he  outset  without  ex'^lanation  it  may  seem  to  ^^^^'^'^^'i 
are  the  patent  records  in  many  important  P^^^f  ^f  htigation  i 
might  say  that  the  records  in  one  particular  case  ^\ould  mi  a  shei^ 
7  or  8  feet  long.  Now  those  records  are  made  up  principally,  of  course, 
l-^th  the  reports  of  testimony  of  individuals,  of  fac  simile  reproduc- 

ons  of  aS^  have  appeared,  some  of  them,  away  back  in  the 

tiiTrtes  and  f^^^^^  reproduction  of  drawings  and  everything  of 

thot  sort     And  this  material  is  beautifully  cros^-i^^^f^^,'     ^^^  I 

u  io\e  thafit  is  existing  here  in  the  Hb-ry  of  the  [ate-t  O 
am  not  sure— but  if  not,  those  are  available  at  a  libiaiy  tliat  we 

''now  i\Sd\Tve?5ad.  if  the  committee  desires-to  avoid  us- 
in?  upVofr^me  here^so  far  as  the  time  will  permit,  to  compile  a 
sHtement-^  do  not  mean  an  expression  of  opinK)n-as  to  what  the 
pa4  publications  reveal  in  connection  with  the  ]^^^y^l^^^^^^^ 
opment  of  electric  railways,  not  only  m  this  country  but,  if  it  is 
desired  to  a  ffreat  extent  abroad,  because  the  same—— 
The  CHAIRMAN.  The  commission  would  be  pleased  to  have  that 

^Tct^'Si^^  be  made  as  extcmsive,  as  l^^J^^ 
permit.  It  can  be  made  very,  very  short-I  say  that,  but  not  ;er> 
E-or  it  can  be  made  quite  extensive,  if  you  wish  it  to  tell  the 

^'' Now 'turning  to  historical  matters  of  a  general  character  briefly 
f oi  a  moS-  As  vou  doubtless  know  the  street  railway  as  a  possible 
JariiroSated'in  this  country,  although  for  transportation  of 
minerals  anHo  on,  in  England,  it  probably  goes  back  to  the  seven- 
Zth  centu^^^^^  The  first  moves  of  its  introduction  abroad  were  by 
Ten  lem^^^^  famous  in  this  country,  Mr  George  Frci^  Train, 

;^T.n  hnd  some  verv  unusual  experiences  in  trying  to  do  it. 
"Xw  briX,  to  outline  the  results  of  this  and  perhaps  carrying 
thnt  f  uiXr  I  will  put  it  this  way :  The  street-railway  mileage  of  the 
that  tmtner,  1  >vii  P  ^er  than  that  of  all  the  other  countries 

iS/Sfcombtldf  Wetave  not  accomplished  ^^^^^^^^^^  1- 
T  will  Drobablv  surprise  you  -when  I  tell  you  this,  that  the  irtea 
Jf  what'^wrnow  call  the  interurban  railway  developed  in  Argentina 


il>l! 
|ii: 


ll  *!  t 


230    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

with  animal  traction,  and  that  long  before  there  had  been  any  pi^c- 
tical  electric  railways  there  was  a  straight-away  horse-car  line  which 
ran  for  120  miles  and  which  operated  sleeping  cars  which  were  made 
in  Philadelphia.    Xow  I  do  not  wish  to  lead  you  far  on  this  thing 

Commissioner  Sweet.  What  was  the  date  of  that,  Mr.  Clark  ? 

Mr.  Clark.  I  can  not  give  you  the  exact  date. 

Commissioner  Gadsden,  AVhere  did  it  run  from? 

Mr.  Clark.  From  Buenos  Aires  out  to  a  town — I  have  forgotten 
the  name  of  it — in  the  direction  of  Rosario,  120  miles.  I  do  not  know 
but  our  friends  of  the  Brill  Co.  who  ai-e  here  to-day,  who  built  those 
sleeping  cars,  can  give  you  more  exact  data. 

But  turning  back  historically  and  bringing  in  further  information 
concerning  the  condition,  as  I  see  the  question  of  electric  street- 
railway  development  and  the  problems  involved  in  its  operation,  up 
to  a  comparatively  recent  period — ^two  or  three  years,  or  tbree  or  four 
years — the  great  question  was  the  one  of  investment  or,  perhaps  more 
jproperly,  capitalization  involved.  Now,  of  course,  as  you  ai^e  well 
aware  from  what  has  been  said  here,  it  is  a  different  thing;  the 
character  of  the  problem  has  changed  somewhat.  Dwi-ease  in  the 
value  of  the  purchasing  power  of  the  dollar,  so  that  the  costs  of  all 
that  goes  toward  construction  and  operation  are  the  gi^at  questions. 
You  have  all  doubtless  heard  nmch  on  this  subject  as  regards  the 
lower  capitalization  or  lower  costs  of  construction,  because,  of  course, 
with  the  municipalities  the  account  stands  as  construction  account 
and  not  as  capital  account,  in  the  United  Kingdom  as  compared  with 
the  United  States,  and  true  of  some  other  countries.  So,  if  agree- 
able, I  will  say  a  word  or  two  on  that. 

Xow,  remember  that,  like  the  street  railway,  in  a  pi-actical  manner 
the  electric  railway  was  developed  here  in  America.  Xow,  all  this 
excessive  depreciation  through  obsolescence  that  I  have  ali-eady  re- 
ferred to — that  is,  the  worst  features  of  it,  the  earlier  ones,  when 
the  seemingly  excessive  costs  were  involved — had  been  gone  through 
to  a  gi'eat  extent  before  Europe  had  made  much  of  any  start.  In 
other  words,  it  was  able  to  profit  by  our  experience  here.  In  the 
ITnited  Kingdom  especially,  street  railways  as  a  whole  had  gone 
through  a  unique  experience  which  culminated  about  the  time — 
well,  it  culminated  about  18i)3  or  1894  when  we  here  had  been  ac- 
quiring this  costly  experience  that  I  have  referred  to. 

As  3^ou  are  perhaps  awai*e,  the  English  theory  of  vested  rights  in 
property  the  courts  have  carried  a  great  deal  further  than  has  ever 
been  done  here.  Now  the  gas  companies,  the  water-supply  com- 
panies which  the  municipalities  had  taken  over,  had  gone  to  the  ex- 
treme in  paying  for  enormous  costs,  some  of  which  I  could  give  you 
if  I  had  my  data  here.  Carrying  this  further  in  the  practical  opera- 
tion of  street  railways — I  myvSelf  have  had  charge  of  construction 
there  where  this  has  been  done,  where  street  widenings  were  neces- 
sary in  the  construction  of  a  street  railway  and  it  was  necessary  to 
expropriate  or  condemn  propert}'^ — if  you  touched  a  licensed  saloon 
for  which  the  proprietor  had  a  long  lease,  you  would  usually  be 
forced  to  pay  more  to  the  holder  of  that  lit^mse  than  the  entire  value 
of  the  property.  That  is  a  specimen  of  the  way  they  do  with  that 
problem. 

Xow,  everybody  supposed  that  the  tramway  act  of  1870  or  1871 
carried  with  it  the  usual  British  practice,  as  I  remarked  before, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    231 

going  to  the  extreme  on  paying  for  vested  rights.  But  about  the  first 
of  the  street-railway  franchises  granted  under  that  expired  at  Glas- 
gow and,  to  be  very  frank,  the  street-railway  company  there  had  not 
treated  the  public  or  the  municipality  fairly  well:  The  holding  of 
the  court  or  the  courts,  for  that  matter,  was  to  the  effect  that  the 
municipalities  were  not  oblio^ed,  as  in  the  case  of  the  gas  companies, 
if  they  acquired  the  street-railway  property,  to  take  it  over  as  a  going 
concern,  or,  in  fact,  to  take  it  over  at  all.  If  they  desired  to  do  it, 
it  was  what  was  known  as  scrap  value.  And  so  this  term  which  is 
commonly  used,  of  the  scrap-iron  tramway  clause,  resulted  in  this — 
that  for  all  the  mileage  of  street  railways  which  were  taken  over  by 
the  numicipalities— I  have  forgotten  the  exact  figures;  I  could  give 
it  you ;  it  was  a  mere  trifle— I  think,  in  the  entire  Kingdom,  some- 
thing like  two  and  a  half  millions  of  dollars  was  all  that  the  munici- 
palities paid  for  the  tramways  that  they  took  over.  However,  I 
would  like  to  correct  that  figui-e  later  on. 

Xow,  for  comparison's  sake,  let  me  say  that  the  tramways  of  the 
United  Kingdom  in  extent  are  not  comparable  to  those  of  this 
country ;  in  fact  in  extent  they  are  about  the  equivalent  to  those  ot 
New  York  Stat>e  alone.  But  as  these  were  municipalized,  as  I  said, 
they  were  practically  able  to  wipe  out  the  previous  capital  account. 

Xow,  with  all  due  respect  to  our  friends  there,  when  it  came  to 
reconstructing  these  lines  and  getting  them  in  shape  for  electrical 
operation,  it  was  found  necessai^  to  do  a  great  deal  of  street  widen- 
ing and  straightening;  and  the  municipal  authorities  were  up  against 
what  I  stated  a  moment  ago,  in  that  regard,  going  to  the  extremity 
as  to  fixing  the  value  of  the  property  taken  over.  In  the  gi'eat  ma- 
jority of  case5  that  was  done  out  of  the  general  funds  of  the  mu- 
nicipality. If  I  recollect  right,  about  $25,000,000  were  expended 
in  that  way  at  London,  which  the  London  County  Council  municipal 
tramways  had  the  advantage  of.  Liverpool.  I  thiiik,  was  about 
$16,000,000  in  the  same  way.  That,  of  course,  all  tended  to  hold 
down  the  capital  investment.  And  so  it  can  be  said  without  fear 
of  contradiction,  and  I  think  if  the  gentleman  who  is  listed  to  testify 
here,  and  who  can  give  you  far  more  information  and  more  exact 
information  than  I,  Sir  Albert  Stanley— I  think  he  will  give  you 
some  very  interesting  facts  on  that. 

Xow,  continuing  on  with  the  progress  of  the  street  railways  in 
certain  cities,  and  in  fact  there  has  been  a  gi-eat  outcry  since  the 
war  on  the  part  of  municipal  authorities  where  this  was  done;  like 
here,  they  were  forced  to  pay  for  paving  between  the  tracks,  and 
I  think  there,  2  feet  outside  of  the  outer  rails,  but  in  many  other  cases 
this  was  not  done.  Paving  was  cared  for  out  of  the  general  funds 
of  the  municipalities,  and  so  it  has  gone— with  the  net  insult  that 
those  tramways — their  construction  accounts — are  relatively  very 
much  lower  than  here.  But  as  I  have  sometimes  put  it,  while  the 
investors  in  American  street-railway  securities  have  paid  liberally 
and  excessively  for  what  went  before  them,  thank  Ood,  none  of  us 
has  stolen  anything  from  the  men  who  made  their  investments,  as 
has  been  done  under  le^l  form  there  in  England. 

Xow,  as  regards  another  most  impoiiant  feature  which  has  been 
partially  touched  upon  in  the  testimony  of  others :  The  fundamental 
error,  as  I  see  it,  in  the  establishment  of  our  system  of  street  rail- 
ways here  in  this  country  was  the  fixed  5-cent  fare  or  the  fixed  fare, 


m 


Hi'' 


232    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  should  say,  because  it  was  not  in  all  cases  5  cents.  Whereas,  in  the 
United  Kingdom  and  elsewhere  throughout  the  world,  as  you  well 
know,  they  have  the  zone  system  or  something  which  is  the  equiva- 
lent of  it. 

Now,  while  the  investors  in  street  railways  here  at  present,  as  you 
all  know,  are  suffering  from  the  result  of  that  system,  unquestionably 
the  result  has  been  to  confer  far  greater  benefits  upon  the  American 
public  than  has  the  other  system ;  that  is  by  distributing  your  urban 
population  far  more  thoroughtly  than  has  been  the  case  over  there. 
Had  our  street  railways  as  they  existed,  we  will  say,  in  1880,  simply 
electrified  as  the  time  came  along  their  existing  lines  and  constructed 
only  those  which  it  would  have  been  profitable  to  operate,  their 
stockholders  would  have  been  very  much  better  off.  But  practically, 
on  the  other  side— I  could  go  into  it  in  detail  if  I  had  my  data  and 
show  it  to  you— much  as  you  have  heard  about  this  wondrous  de- 
velopment oVer  there,  they  have  in  the  main  simply  constructed  lines 

where  they  would  pay  at  the  outset.  .    „     •     r^i  t 

Now,  in  perhaps  the  best  managed  system  of  all— in  Glasgow— 1 
have  been  intimate  with  that  from  the  first.  I  went  over  in  1897, 
after  they  had  sent  their  commission  here  to  this  country,  when  they 
were  just  making  their  preparations.  I  went  over  the  line  which 
they  were  supposed  to  electrify  first,  and  I  followed  it  up  after  I 
located  there  in  1899  and  was  very  intimate  with  the  management. 

Now,  what  is  the  result  ?  That  Glasgow,  with  its  low  initial  invest- 
ment, its  low  rates  of  fare,  seemingly,  has  made  on  paper  a  very  good 
showing;  but  you  have  one  of  the  most  congested  cities  in  the  world 
there  to-dav.  'And  that  holds  true  of  these  other  cities.  The  zone 
svstem  of  fares  has  not  distributed  the  population  as  has  been  done 
iiere,  with  all  the  benefits  which  I  believe  go  with  it.  I  firmly  be- 
lieve that  the  decrease  in  the  average  death  rate  of  American  cities 
is  as  much  attributable  to  this  expansion  of  their  population  which 
has  occurred  within  the  last  30  years  as  to  improved  sanitation,  water 
supply,  and  all  the  other  things  which  have  assisted  in  doing  it. 
Commissioner  Sweet.  They  have  the  zone  system  in  Glasgow  ? 
Mr.  Clark.  Oh,  yes;  they  do.  , 

The  Chairman.  Do  you  believe  that  the  zone-fare  system  in  Glas- 
gow has  contributed  to  the  congestion  that  you  speak  of? 
^  Mr.  Clark.  The  congestion  existed  before,  but  as  they  have  not 
extended  their  system  out,  you  understand,  where  it  would  not  pay, 
they  have  not  improved  the  condition. 

Commissioner  Sweet.  They  have  not  encouraged  suburban  resi- 
dence? .  ,,  x^ 

Mr.  Clark.  Not  at  all.    That  is  true  all  over  Europe. 

Mr.  Warren.  Do  you  happen  to  know  what  the  mileage  of  the 
Glasgow  system  is  now? 

Mr.  Clark.  I  can  not  tell  you.  I  have  the  reports  at  home,  but  I 
will  file  with  the  commission,  as  part  of  my  exhibit,  the  parliamentary 
publications  which  give  that  on  all  of  the  British  cities. 

Mr.  Warren.  I  remember  at  one  time  that  with  a  considerably 
larger  population  than  Boston  the  mileage  was  much  less. 

Mr.  Clark.  Oh,  yes;  only  a  fraction. 

Commissioner  Gadsden.  Before  you  leave  that  question  of  Glasgow 
and  the  congestion — what  you  say  would  seem  to  indicate  that  the 
expansion  of  American  cities  and  the  improvement  in  sanitation  and 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    233 

communitv  life  has  apparently  been  at  the  expense  of  the  railways 
and  not  of  the  public.  ^    u    xi. 

Mr.  Clark.  That  is  exactly  what  I  believe  to  be  the  case. 
Commissioner  Gadsden.  You  think  the  railways  have  paid  for  the 
improved  condition  and  not  the  public  themselves?        ,    ,  ^,        ., 

Mr.  Clark.  They  have.  And  as  I  partially  remarked  the  other 
dav— I  suppose  you  will  laugh  at  this,  gentlemen— that  while  of 
course  it  is  the  desire  for  gain  that  has  actuated  the  financing  of  our 
railways,  and  so  forth,  there  has  been  something  about  electricity— 
there  is  a  germ  which  catches  the  average  individual  and  makes  hirn 
progressive,  and  that  goes  further  in  serving  the  public  than  would 
be  done  in  any  other  way,  as  I  see  it.  ' 

Commissioner  Gadsden.  Now,  what  have  you  got  to  say  Mr.  Clark, 

about  the  wisdom  of  changing  over  now  from  a  fixed  sJ^^f ^^{  9^ 

fares  to  the  zone  system,  so  far  as  it  affects  the  companies  and  their 

fares  or  effects  the  communities?  •   ^     •  4.  •     +«  v^^^K 

Mr.  Clark.  Now,  gentlemen,  you  arc  getting  into  intricate  prob- 

lems.    If  you  will  pardon  me,  Mr.  Gadsden,  for  going  back  a  little 

wavs,  I  wish  to  start  no  controversy  here  on  the  relative  merits  of 

private  and  public  ownership,  but  I  believe,  gentlemen    that  mu- 

ci>f  owne4ip  per  se  is  practically  a  dead  issue,  for  this  reason: 

Yom    public    utilities    almost    without    exception    ^^ave    ^ut^own 

municipal  boundaries.    You  see  it  everywhere.^   Now  I  think  if  you 

win  eximine  the  census  report^my  figures  7\V'1werSt7trsl^ 

15  or  20  per  cent  of  the  entire  population  of  the  United  btates  is 

resident  within  10  miles  of  the  boundaries  of  some  40  of  the  more  im- 

r^rtant  cities  •  that  is,  not  within  the  municipal  boundaries,  but  withm 

\Ti^^eVlimit  of  therJ.    Now,  your  electric4ighting.syst.ms  a^^^^  your 

street-railway  systems  have  spread  there.     In  trying  to  sohe  voui 

Sems  thfs  is  what  has  embarrassed  me.    I  have  an  abiding  faith 

n  the  American  public;  and  to  be  very  frank,  gentlemen,  I  believe 

hat  ff  the  street-railway  interests  had  devoted  more  of  their  energies 

0  educating  the  public  as  a  whole  than  they  have  to  educating  the 
i^preseSves  of  the  public  we  would  all  have  been  very  much  bet- 

*^'now  I  agree  with  what  has  been  testified  to  here  already-that 
this  remedy  which  you  are  seeking  must  rest  on  public  opinion;  it 
could  not  stand  without  it.  Now  this  is  what  puzzles  me.  Take  al- 
most  any  of  these  cities:  How  are  you  going  to  get  your  expression 
Tmiblic  opinion  where  it  may  be  scattered  through-we  1,  we  take 
dyPublic  S^^^^^^  Corporation  of  New  Jersey,  where  it  takes  in  half 
of  the  State  of  New  Jersey  in  these  various  municipidities     Ai^d  yet 

1  feel  ?hat  what  we  do  wLt  in  settling  it  is  to  let  the  public  have  a 

'""^^ow  as  I  said  before,  I  am  not  up  to  date  on  all  these  things,  for 
oood  reasons;  but  I  think  there  has  not  been  a  case  in  the  Umted 
itaes  vet  where  the  public  utilities  have  gone  direct  to  the  people 
with  a  Tell-demonstrated  proposition,  you  ^J^^erstand  shown  to  pos- 
Tess  merit  and  to  be  in  the  public  interest,  but  what  the  Public  have 
^uppXl  it.  I  think  that  that  is  the  case  But  dealing  with  the 
s  re^^^^^^^^^  situation,  as  I  say,  .to  get  this  expression  of  pub  c 

ot  inion-how  you  are  going  to  do  it  is  what  bothers  me.  Take  this 
Sblic  servkl  corporation,  lor  the  sake  of  illustration-the  expres- 

100643^—20 16 


vj 


^  m 


234    PROCliEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

sioii  of  a  referendum  to  the  people  of  Newark  or  Newark  and  Jeri^ey 
Citv  and  the  Oranges  would  not  tell  the  whole  story.  And  every- 
where you  go  it  is  the  sanjB  thing.  And  yet  I  am  particuhirly 
anxious  to  see  if  some  scheme  can  not  be  worked  out  so  that  the  public 
itself  can  have  a  chance  to  express  its  opinion  on  these  matters. 

Conmiissionei'  Swum.  Do  you  not  think  there  are  other  wavs  of  ex- 
pressing public  opinion  rather  tlian  by  vQtes  or  referendums? 

Mr.  Clark.  Well,  I  think  there  is  within ,  . 

Commissioner  Sweet.  If  there  is  a  settled  public  sentmient  m  tavor 
of  a  proposition  such  as  municipal  ownership  or  any  matter  of  that 
kind,  is  not  that  reflected  generally  in  the  representatives  of  the  pub- 
lic, in  conmion  councils,  and  in  legislatures?  ^   i  •   i 

Mr.  Clark.  Yes,  to  a  great  extent.     Not  always,  I  think. 

Commissioner  Sweet.  Is  it  not  true  that  most  of  the  members  ot 
these  representative  bodies  have  their  ear  to  the  ground? 

Mr.  Clark.  I  think  it  is,  entirely  so. 

Commissioner  Sweet.  And  they  want  reelection,  generally  5 

Mr.  Clark.  Yes.  ^  ...  ,.        , 

Commissioner  Sweet.  And  therefore  they  reflect  public  sentiment 

in  their  votes  and  their  action  ? 

Mr.  Clark.  They  do.  ^        o 

Commissioner  Sweet.  Or  they  try  to,  at  least  i 

Mr.  Clark.  They  try  to.  ,  •  ^  i        -^i. 

Commissioner  Sweet.  Sometimes  they  make  a  mistake  with  re- 
gard to  public  sentiment.  .     ,     j.    .        £ 

Mr.  Clark.  Yes;  but  I  think  the  difficulty  there  is  the  fact,  so  fre- 
quently, that  before  these  gentlemen  become  representatives  of  the 
people— in  other  words  the  more  they  are  elected,  they  will  inaugu- 
rate a  campaign  of  false  education,  that  they  arouse  a  public  sentiment 
which  is  not  a  proper  one  and  not  in  accordance  with  the  facts  or 
conditions.  I  think  you  can  see  it  reflected  in  your  public  press.  I 
have  within  a  very  few  days.  You  see  it  reflected  in  fiction.  Here  is 
the  traction  magnate  who  has  worked  all  these  evils,  and  so  on. 

Conmiissioner  Sweet.  Well,  that  had  a  cei-tain  basis  of  truth,  did 

it  not,  in  the  old  days?  .     ,. ,  t  *      „^ 

Mr.  Ci^RK.  In  certain  instances  it  did,  I  am  sorry  to  say. 

Commissioner  Sweet.  Yes.  .  ,     ,,  .,  i  ^^^,.^^ 

Mr.  Clark.  And  I  want  to  say  right  there,  gentlemen,  however— 
if  vou  will  pardon  me— do  not  conceive  tlie  idea  that  all  the  watering 
ofFtock  and  all  the  ingenious  forms  of  financial  manipulation  exist 
on  this  side  of  the  water,  because  the  gentlemen  on  the  other  side  to 
my  mind  can  teach  the  most  expeii;  Americans  of  that  sort  much  more 
ton  tliey  ever  knew.  It  is  a  delicate  matter  to  speak  on,  gjentjemen 
but  I  want  to  say  this:  In  my  thirty-odd  years  of  experience  with 
this,  on  many  occasions  I  have  cursed  the  American  public  official,  1 
hav;  said  he  was  corrupt,  you  understand,  frequent^-  h^ 
not  representing  his  constituents.  But,  gentlemen,  I  ^^^a^^  to  say  this 
after  my  extensive  experience  abroad,  and  I  am  glad  to  say,  that^ 
talk  all  you  wish  about  the  great  integrity  of  public  officials  in  other 
countrii,  ours  are  just  as  near  perfection  as  tliey  are.  Our  gre.^^^ 
difference  is  this— we  wash  our  dirty  linen  in  public,  and  they  do  not. 
ComnlJ^iomv  Sweet.  Well,  it  is  a  pretty  good  thing  to  wash  it, 
don't  you  think? 


PROCEEDINGS  OF  FEDERAL  E|.ECTR1C  RAII^WAYS  COMMISSION.    235 

Mr.  Clark.  Oh,  it  is  in  the  public  interest,  I  think  so;  and  yet 

*^  ComLlsst^^  The  process  may  be  unpleasant,  but  it  brings 

better  results  in  the  long  run. 

Mr.  Clark.  It  does,  unquestionably.     ,  ^^^^oinr» 

Mr  Warren.  You  spoke  of  the  foreign  street-railway  develop- 
ment having  had  tlie  advantage  of  the  experimentation  in  this  coun- 
try, and  that  of  course  is  true. 

Mr.  wln^Ar^s  against  that  is  it  not  true  that  our  public  got 
the  benefits  of  this  improved  method  of  transportation  long  before 

the  public  abroad  got  it?  »    j  ii    *  „„„  v^n  mnti* 

Mr.  Clark.  Olif  very  much,  very  much.    And  that  can  bo  quite 

''S  WaSk.S  the  cost  of  experimentation  was  one  of  the  prices 
that  they  might  reasonably  expect  to  pay  ? 

Mr.  m^'x.  And  that  they  were  anxious  to  pay  at  the  time,  were 
they  not  ? 

&imSie^SwECT!'Can  you  tell  us  what  the  electric-railway  sit- 
uation in  Great  Britain  is  now  ?  ,  t      +!,„(.  ,.„„ 

Mr.  Clakk.  Not  very  accurately.  I  would  much  prefer  that  you 
ask  Sir  Albert  Stanley  when  he  appears,  lou  know  who  he  is,  i 
nresume  He  was  English  born,  but  received  his  street-railway 
tSng  in  Cleveland,  then  at  Detroit,  then  with  the  Public  Service 
rnrnoi?tion  of  New  Jersey,  and  then  went  over  as  the  manager  of  the 
Son  Underground  Baflways;  and  during  the  war  he  has  been  the 
chairman-he  was  not  only  knighted,  but  made  chairman  of  the 
British  Board  of  Trade,  which,  as  you  are  perhaps  aware,  is  a  good 
deal  more  in  form  thaA  any  commission  we  have  in  this  country. 
If  vou  can  conceive  of  the  Interstate  Commerce  Commission,  plus 

sinlkr  authority  over  everything  inf  V^hrBrilJfCd'of  Sk 
tries  of  every  name  and  nature,  you  have  the  British  lioard  ot  irad... 
Anl  Sir  Albert,  I  am  sure,  with  his  experience  in  this  country  and 
thpi-p  will  "ive  you  a  very  accurate  picture.  r  •         •         n 

I  w^uldl  keto  say  this,  gentlemen,  however- 1  am  jumping  all 
o^4r  the  lot,  as  usual-K>nce  more  referring  to  municipal  ownership; 
there  s  a  mistaken  impression  as  to  how  extensive  it  is.  Now  while 
it  Ts  very  extensive  in  the  United  Kingdom,  there  is  virtually  none 
n  France  so  far  as  street  railways  are  concerned  very  litt  e  as  re- 
Lards  thT'ce^tral  stations,  and  only  about  one-third  of  the  mileage  in 
&any.  Certain  of  the  British  colonies,  as  of  course  you  know, 
have  it  quite  extensively,  notably  Australia. 

Commissioner  Sweet.' You  spoke  of  municipal  ownership  as  be- 
ing somewhat  inconsistent  with  the  general  practice  in  this  countrj 
of  extending  the  railway  systems  out  into  the  suburbs  or  beyond  the 
limits  of  the  city. 

Mr.  Clark.  Yes.  ,      ,     i  •    i-       ^  •  : 

Commissioner  Sweet.  Is  there  any  legal  objection  to  a  munici- 
pality's owning  its  street  railroads  and  operating  them  beyond  the 

city  limits?  ,        ^  t   n  •   i     t 

Mr    Clark.  No  legal  one  that  I  see.    I  think  I  can  see 

Commissioner  Sweet.  Would  it  oot  be  a  very  natural  and  proper 


■;  ' 


«i« 


236    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

thing  for  a  city  to  do  that  even  without  profit,  or  perhaps  with  a 
snu'll  degree  of  loss,  because  of  the  resultant  benefits  to  the  city? 

Mr.  Clark.  Well,  it  might,  and  yet  I  should  rather  hold  to  the 
contrary  theory— that  the  municipal  authorities  would  say,  "  If  you 
fellows  want  the  full  advantage  of  good  public-utility  service^and 
all  that  goes  with  it,  come  inside."  Just  the  same  as  New  lork 
reaches  out  and  tries  to  catch  in  various  ways  the  man  who  do^s 
business  there,  you  understand,  and  who  may  live  in  New  Jersey  or 
Long  Island  or  Connecticut.  And  apropos  of  that— it  may  not  fit 
this  situation,  and  vet  it  reminds  me  of  something  I  ought  to  tell 
you— the  most  jealous  people  in  the  world  that  I  have  known,  or 
creations,  I  should  say,  are  British  municipalities.  And  I  have 
never  expected  to  live  to  see  what  has  occurred  in  connection  with 
those  bulk  power-station  matters  which  were  referred  to,  I  think,  on 
yesterday's  hearing.  Now  to  illustrate :  You  can  not  tell  where  Man- 
chester and  Salford  begin  and  end,  any  more  than  you  can  tell  where 
Iloboken  and  Jersey  City  begin  and  end,  yet  through  jealousy,  they 
laid  their  tramways  on  different  gauges  so  they  could  not  exchange 
traffic.  There  is  another  point  there  in  the  north— I  have  forgotten 
the  names  of  the  towns — where  they  would  not  build  within  half  a 
mile  of  each  other.    And  you  find  that  all  over  the  Kingdom. 

Now  that  is  not  only  reflected  in  tramway  practice,  but  otherwise. 
I  trust  I  will  not  be  considered  egotistical  when  I  tell  you  my  ex- 
perience with  those  things,  which  was  a  little  different,  you  under- 
stand, than  a  business  experience. 

During  the  Spanish  AVar,  I  became  quite  mtimate  with  one  who 
was  then  Capt.  and  afterwards  Admiral  Paget,  the  royal  attache, 
and  I  located  in  London  about  the  time  that  he  returned.  Through 
him  I  became  intimate  with  his  brother,  afterwards  Gen.  Paget, 
about  whom  there  was  quite  a  stir^in  Ireland,  as  you  will  perhaps 
remember,  just  before  the  present  war.  That  brought  me  in  con- 
nection w^ith  certain  people  connected  with  the  British  war  office; 
and  my  advice  Wius  asked  on  this  subject,  and  I  gave  it  considerable 
study,  as  to  how  far  we  could  go  in  coupling  up  the  tramway  systems 
of  England  or  of  Great  Britain  to  be  used  as  an  auxiliary  means 
of  military  transport  if  necessary.  It  was  found  utterly  impossible. 
This  parliamentary  publication,  which  I  wall  give  you,  t^lls  the  whole 

storv,  which  vou  will  see. 

This  same  thing — if  I  may  digress  for  a  moment  from  street  rail- 

^jiys occurred  in  connection  with  the  connection  of  power  plants 

and  the  character  of  their  electric  voltage.  It  is  the  worst  mixed- 
up  affair  imaginable— all  kinds  and  sorts  of  conditions,  instead  of  as 
it  is  being  done  here  in  this  country.  And  I  might  say  it  is  true, 
and  I  think  all  the  engineers  here  will  agree  with  me,  that  the  larger 
you  make  a  phvsical  electrical  system— that  is,  I  mean,  make  it 
physically — whether  the  source  of  generation  be  water  power  or 
whether  it  be  steam,  the  better  in  the  public  interest,  the  more  eco- 
nomical will  be  your  result.  Now,  you  are  probably  aware  how  ex- 
tensively that  thing  has  gone  on  in  this  country,  notably  in  the 
South.  You  take  it  in  the  West,  where  these  extensive  hyrdoelectric 
systems,  and  sometimes  the  steam  systems,  have  interconnected 
themselves  physically.  . 

Now,  illustrating  this  point  we  are  on— although  it  is  not  apropos 
to  street  railways,  it  may  be  of  interest  to  you— in  the  very  early  days 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    237 

Of  our  getting  into  the  war,  a  ^-q-^^^^^ 

experts  selected  by  the  ^in-geon  Gene^^^^^^^^ 

central-station  voltages  of  France  J^ithout£^^^^^  ^^  ^ 

necessary  to  secure  very  careful  ^^^^f  ,^^^,^^^^  information.     1 

apparatus.    They    said   they    <'^''^^JX\S^^^^^^ 

laughed,  and  I  went  to  my  library  ^^^^^^^^^^^^^^  But 

cation  of  1914  which  gave  it  on  every  ^^f  ™^^^^^^^  To  our 

this  had  to  be  worked  up  for  tliem   o  get  ^[  ^^^P^^^ne  the^^^  were  36 

surprise,  we  discovered  that  with  direct  cun^^^^^^^^,^^  municipal 

different  voltages  ranging  from  CO  to  56^     Ut  co  ^^^^ 

ownership  was  not  ^-fP^^-^^t^t^S^^^^  ^^^  ^^^^  ^^^"^• 

I  am  telling  you  about     ^^  ^^ V  vin  th\s  Darticiilar  thing,  of  course, 

Now  England  was  ^^«V'^tr£^^^^^^^  ^^'^^^^  '^'^  ^^^^ 

but  for  curiosity  s  sake  we  ^^f  .7|  '^^^      in  England  than  in 
there.    Relatively  there  were  ^^^f  ™f '^what  the  Germans  had 

Sir,  S2.  ^BSBl^^'^^ 

That  had  been  careful  y  P]'V}'?^«l"^,,f„^jras  vou  know,  in  England 

Now,  the  effect  of  all  »* ^'"^V  bulk  po'we7stat  ons.  '  This  theory 

by  their  proposed  legislation  on  ^""^  P*'J^;  "ji^    ^nd  do  what  you 

tL  you.could  ^X:,l-y-t  v^rSto'i- 'neighbor  or  \he 
pleased  mside  -sMthout  i«sai«  "j"  j  -p  ^  ^j^    details,  as  I 

iellow  outside  has  been  <=«'"Pl;/,f /t ^^^P^can     But  the  tendency  of 
say,  Sir  Albert  can  t^ll  J7i«  bettei  <jAn  [  ^a^^^^  ^^  ^^^^  ^^^^ 

the  world  to-day  is  '".tt^'^.f  f"^  .^^^^^^^^^^  the  confines  of  any 

n?"mE'rn;'tfgetTh:"best  advantages   fro.  them? 

m.  Clakk.  Yes,  i»  *«  P^^IJ'^^^^f^'^en  you  wei-e  testifying  day 
Mr.  Warhen.  Mr.Clalk,JOllspol«,^^^^^  ^^^^  ^^^.j 

before  yesterday,  of  the  cost  of  ^]^^^'^  ^^I^^^r^  ^,^^^  the  cost  just 
days  of'the  use  of  electric  motive  POwer  o^V^veA.^^^^^.^^     J 

before  the  war  I  t^»^^>  .y^\*Xng  more  deLite  as  regards  the 
S  oTpo^rStrs^r  inTlfeeaxfy  nineties  and  at  the  present 
time  and  as  to  the  efficiency?        ,„^^_     But  I  think  perhaps  it 

^'■.  ^T^.-  ^r^Te  ft°'tMwav-to  give  them  not  as  p^art  o)  this 
wild  be  better  to  leave  It  this  waj     to  g^  give  you  anything  or  ex- 

histoncal  thing,  because  i  uo  i  ^  ^^^,^  ^  statement 

press  my  own  opinion,  but  I  ^.ou'd  ^e  giau  g  of  the 

prepared  for  them  to  give  «"„«/»  f*^iif,o„ers  spoke  the  other 
llecW-power  station,  as  one  of  the  ~ 

day-I  think  it  was  f"' f^  taddr^essin^  ^  gtreet-car  in  every- 

been  even  more  revolutionary  than  t^;-"  °/  ^^^.j,^^  ^nly  a  moment 
thing  that  applies  to  it.    Because    as  i  re  it  ^necessary  to 

ago,"as  you  have  gone  on  ^"d,X"f„cTntfve  may  have  been  proper 
''''Pr'^-^'^'tnf  HeVitsfhas  be"n  in  the  public,  interest. 


238    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

as  the  General  Electric  Co.  did  not  furnish  the  apparatus,  I  am  not 
persomvlly  concerned.  This  is  dealing  with  water  power  for  the  mo- 
ment, particularly  low  head  power. 

Xow,  I  consider  that  what  the  Duke  interests,  so  called,  have  done 
in  the  Piedmont  district  in  the  Carolinas  in  the  development  of 
power  facilities  is  one  of  the  most  beneficial  things  that  has  ever  been 
attempted  anywhere  in  the  public  interest.  Now,  to  have  you  grasp 
what  this  means,  I  will  have  to  go  back.  The  most  comprehensive 
stiitement  that  has  ever  been  made  concerning  our  water  powers  is 
the  two  volumes  in  the  census  of  1880;  and  that  work  was  compiled 
under  the  direction  of  Prof.  G.  F.  Swayne,  of  Harvard,  of  whom 
you  doubtless  know ;  and  I  have  understood  he  considers  it  the  best 
'work  of  his  life.  His  estimate  as  regards  potential  water  power  in 
the  United  States  agreed  quite  closely  with  those  which  have  since 
been  made  by  the  United  States  Geological  Survey,  but  of  course 
there  is  quite  a  difference  between  your  potential  or  tlicoretical  water 
power  and  the  available  water  power. 

In  his  work,  he  uses  language  practically  to  this  effect :  That  while 
we  have,  we  will  say — I  think  his  estimate  is  something  like 
250,000,000  of  potential  water  power  in  the  United  States— that  the 
existing  low  head  streams  like  the  Mississippi  could  never  be  utilized. 
(Of  course  you  gentlemen  have  heard  of  the  Keokuk  development 
which  has  since  occurred.)  Going  further,  that  where  the  greatest 
proportion  of  your  potential  power  existed  in  the  headwaters  of  the 
mountainous  streams,  that  could  not  be  utilized  because  it  was  ini- 
possible  to  use  water  at  such  high  head.  I  believe  that  this  last  esti- 
mate shows  that  72  per  cent  of  the  entire  potential  water  power  of  the 
United  States  exists  in  those  mountainous  States. 

As  you  may  know,  in  the  calculation  of  power,  the  Geological  Sur- 
vey fixes  its  permanent  power  and  bases  it  on  the  lowest  complete 
minimum  for  12  months  in  the  year,  so  there  is  a  wide  difference  be- 
tween that  and  your  maximum. 

One  of  the  reasons  for  Prof.  Swayne's  remark  about  high-head 
power  was  this :  Your  first  high  liead  apparatus,  the  Pelton,  was  not 
developed  until  1887,  or  the  first  installation  made  in  1888  probably. 
With  that  there  was  some  electrical  development.  It  was  not  until 
you  came  to  your  practical  application  of  alternating  current  trans- 
mission, along  in  the  early  nineties,  that  that  thing  got  a  great  im- 
petus. Even  as  late  as  1898,  when  of  course  there  had  been  exten- 
sive development  and  so  on,  a  gentleman  for  whom  I  have  the  high- 
est admiration,  Mr.  Leighton— as  you  may  know,  formerly  connected 
with  the  Geological  Survey — in  his  estimates  of  the  available  poten- 
tial water  power  of  the  country,  takes  into  account  what  could  be 
accomplished  by  storage,  which  is  obvious.  But  even  at  that  date 
they  had  not  grasped  something  else  that  went  with  it,  and  that  is 
the  physical  inter-connection  of  watersheds,  whicli  is  carried  out  to  a 
perfection  by  this  Southern  Power  Co. 

You  gentlemen  may  all  be  familiar  with  the  way  in  which  they 
do  it.  They  have  their  water  powers — that  is,  I  mean,  their  de- 
veloped powers — located  on  several  streams  with  different  head- 
waters back  in  the  mountains.  They  keep  their  watchmen  there  with 
telephonic  connections.  We  will' suppose,  for  instance,  that  on 
stream  No.  1  they  have  shut  down  the  plants  there,  so  that  the  local 


mi 


PROCEEDINGS  OF  FEDERAL  JLJ.ECTFJC  RAILWAYS  COMMISSIOliT.    239 

reservoirs  or  dams  would  fill,  and  they  are  operating,  we  will  say, 
their  plants  on  streams  No.  2  and  No.  3.  The  watchman  up  at  the 
headwaters  of  No.  1  telephones  in  that  there  has  been  a  very  large 
shower.  Immediatelv  the  word  goes  out  to  start  the  machinery  on 
stream  No.  1,  because  the\^  know  there  is  all-  this  mass  of  water  com- 
irg  down,  and  they  let  off  streams  Nos.  2  and  3,  we  will  say,  the  local 
dams.  Now  they  "^are  going  to  carry  that  even  more  extensively  by 
the  construction  of  enormous  reservoirs  back  at  the  headwaters. 
Well,  the  net  result  of  all  that  is  this,  gentlemen,  that  out  of  what 
vour  Geological  Survey  estimates  as,  we  will  say,  one  permaneiit 
horsepower,  they  are  getting  somewhere  from  three  to  five.  In 
short,  through  inventions  and  advancement  in  the  engineering  art, 
probablv  five,  six,  seven,  or  eight  times  as  much  potential  water 
power  lias  been  made  available  within  the  last  30  or  40  years  as  all 
the  water  power  that  has  been  developed  in  the  United  States. 

AYoll,  continuing  on  for  a  moment,  you  may  know  how  those  large 
systems  in  the  South  are  interconnected,  which  carries  this  same 
scheme  a  little  further.  Now  they,  to  a  modified  degree— and  the 
same  principles  apply  to  interconnection  of  large  steam  systems; 
and  we  came  very  close  to  it  during  the  w  ar  period,  as  perhaps  you 
laiow— I  believe  that  within  a  few  years  ways  and  means  will  be 
found,  either  through  Federal  or  State  legislation,  where  a  man  will 
not  be  permitted  to  wtiste  power.  I  think  that  is  one  of  the  funda- 
mental things  in  our  national  economics.  In  other  words,  some 
manufacturer  who  is  running  an  old  slide-valve  engine  and  chewing 
up  some  30  or  40  pounds  of  coal  per  horsepower-hour  is  not  going 
to  be  permitted  to  do  it  when,  through  w^ater-power  development, 
he  can  get  his  current  at  a  far  less  figure,  or  where  the  best  of  modern 
development  is  using  less  than  two  pounds  and  can  p;:'oduce  the  same 
result.     But,  gentlemen,  once  more,  I  have  rambled  away  from  my 

subject. 

Mr.  Warren.  Do  you  consider,  under  the  present  prices,  the  ques- 
tion of  whether  the  companies  should  generate  or  purchase  their 
power  is  of  great  importance? 

Mr.  Clapk.  No,  I  do  not  on  the  main  issue.  Of  course,  they  should 
take  advantage  of  every  possible  economical  feature,  but  it  is  so 
trifling  at  the  present  time.  Take  the  street  railways  as  a  class — 
you  are  always  going  to  find,  Mr.  Warren,  opportunities  to  intro- 
duce little  economies,  but  this  is  a  minor  economy  and  not  a  big  one. 

Mr.  Warren.  The  wage  item  is  too  big ;  it  overshadows  any  one  or 
all  of  these  possible  economies,  does  it  not,  in  your  opinion? 

Mr.  Clark.  Well,  that  is  a  great  issue.  I  would  not  say  it  is  too 
big.  I  agree  entirely  with  what  Mr.  Tripp  testified  here  yesterday, 
that  it  is  the  reduced  purchasing  power  of  the  dollar  that  has  created 
that  situation. 

Mr.  Warren.  I  do  not  mean  that  the  wages  are  too  high,  but  the 
aggregate  amount  of  wages. 

Mr.  Clark.  That  applies  to  everything  else  that  goes  to  make  up 
cost  of  conducting  transportation  and  of  maintenance,  which  are 
the  great  issues,  as  I  see  it. 

Mr.  Warren.  I  think  if  Mr.  Clark  will  be  good  enough  to  f urnLsh 
that  statement  which  the  commission  intimated  they  would  like — 
an  historical  sketch  of  the  industry  ^nd  the  statement  about  tho 


I, 


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240    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

power  stations— that  is  all  that  I  want  to  ask  him.    I  would  be  very 
glad  to  have  the  commission  ask  him  any  questions. 

The  Chairman.  Did  you  intend  that  the  black  book  that  you  refer 
to  should  be  filed  with  this  commission? 

Mr.  Clark.  Why,  I  will  do  it  if  I  can  not  get  you  another  copy. 
Knowing  where  it  is,  I  have  to  go  up  to  the  Public  Printer  anyway 
with  some  other  material  while  I  am  here  and  I  think  I  can  get  you 
a  copy.     I  will  turn  it  over  to  you. 

The  Chairman.  Well,  we  can  get  it  then. 

Mr.  Clark.  Surely;  and  I  think  I  can  get  you  another  copy. 
And  apropos  of  this,  before  I  complete  my  statement,  I  think  this 
will  interest  you,  which  I  will  also  leave  with  you.  It  is  in  rather 
bad  shape;  some  photostat  reprints  which  I  have  had  made  of  a  very 
large  number  of  letters  from  the  mayors  of  numerous  American  cities 
which  were  published  in  the  New  York  press  in  1802 ;  and  I  think  it 
may  be  of  interest  to  the  commission  when  they  are  examining  some 
of  these  mayors  who  will  testify,  to  see  what  their  predecessors  said. 
I  will  give  that  to  you  now  [handing  papers]. 

The  Chairman.  You  have  been  identified  with  the  street-railway 
industry  since  its  inception? 

Mr.  Clark.  No  ;  I  would  say  the  electric-railway  industry,  not  the 
street-railway  industry. 

The  Chairman.  I  understood  you  had  worked  in  connection  with 
the  first  electric  railway  or  street  railway  in  Virginia. 

Mr.  Clark.  No;  in  Connecticut. 

The  Chairman.  In  Connecticut? 

Mr.  Clark.  In  Connecticut.  Mr.  Sprague,  who  will  be  here,  you 
will  find 

The  Chairman.  Have  you  had  much  to  do  with  the  operation  of 

these  utilities  ? 

Mr.  Clark.  To  a  considerable  extent— as  much  as  a  man  could  who 

was  moving  all  over  creation. 

The  Chairman.  You  are  familiar  with  the  operating  conditions? 

Mr.  Clark.  Oh,  ves;  surely. 

The  Chairman.  Have  you  had  any  experience  in  securing  munici- 
pal franchises? 

Mr.  Clark.  A  great  deal. 

The  Chairman.  And  you  know  all  about  the  methods  employed 
in  securing  those  franchises? 

Mr.  Clark.  Yes.  .  . ,      , , 

The  Chairman.  It  has  been  stated  here  that  there  is  considerable 
prejudice  existing  in  the  public  mind  against  these  utilities.  What 
is  the  reason  for  that  prejudice,  Mr.  Clark? 

Mr.  Clark.  You  mean  the  existing  prejudice? 

The  Chairman.  Yes. 

Mr.  Clark.  Not  those  of  the  past? 

The  Chairman.  Existing.  . 

Mr.  Clark.  To  a  certain  extent,  as  I  see  it,  certain  financial 
manipulation  which  should  never  have  occurred;  that  is,  I  mean 
on  the  part  of  promoters  in  certain  directions.  To  a  greater  extent, 
excessive  exaggeration  of  what  occurred  in  that  regard.  And  third, 
and  perhaps  more  important,  although  none  of  you  gentlemen  may 
agree  with  me,  this:  The  street  railway  is  the  one  form  of  public 
utility  with  which  the  individual  citizen,  whenever  he  uses  it,  is  up 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    241 

against  an  employee  of  the  company,    ^ow  what^I  ^^^^^^ 
this   we  all  have  lost  our  temper— we  do  these  days— with  tne  leie- 
Dhone  employees  when  things  are  not  going  very  smoothly, 
^"^^t  t^my  mind  more  thai  all  the  rest  it  is  ^^^t  e  ann^^^^^^^^^^ 
which  have  happened  in  most  localities ;  these  other  causes  ai  e  con 
tHbutorv     But  if  a  lady  comes  rushing  to  catch  a  p-fereet-car  ]ust  as 
haSu-^^^^^^^  and  dSes  not  catch  the  conductor  s 

ovP   ^hf  has  a  enevance     And  I  would  make  this  novel  suggestion, 
^Sen^^^^^^^^^  down  here  on  the  f-^^^^^^^ 

two  or  three  street-car  conductors  and  let  them  t,f.*^^4^ 
in  dealing  with  the  public,  and  you  will  get  a  diffeient  aspect  ot 

'' TirCnli^^^^^^^^^^^  Is  much  of  this  prejudice  due  to  the  political 
reSns  Xh  it  is  claimed  exist  between  street-car  officers  and 

XtrAr'lXtJ^Sso.  There  was  a  time  when  there  was 
sonlewhatt  but  I  think  it  is  the  individual  coming  m  co^^^^^^^^  ^^  th 
emplovees,  and  that  has  been  exaggerated  by  war  conditions,  as  i 
sS  when  the  street  railways  could  not  mamtam  as  courteous  a 
pharacter  of  employees  as  they  had  had  betore. .     ^      ,  . 

Now  I  must  ^confess  there  is  a  great  deal  m  local  management 
T  Pf  rnP  illustrate  I  do  not  know  what  conditions  are  now,  but  up 
lo  wTr  time  ^yo^^^  had  gone  to  the  city  of  Denver  and  taken  a  street- 
car aU  Ton  menced  to  ask  questions  of  the  conductor,  you  would 
h^ve  fouX  1^^^  excellent%uide  to  the  .f  y.  -^^^^^^^ 

:£r1it?es  wTere\h^^  neglected,  you  would  find  that  there 

was  a  lack  of  courtesy  on  the  part  of  the  employee. 

Now  gentlemen,  I  am  going  to  give  you  in  this  connection--I 
ouSrto^rUiis'first-a'paradox,  perhaps  contradicting  mj^i, 
?hft  wMe^I  remarked  back,  I  believe  the  larger  you  make  the  P|Mic- 
iitflitv  svstem  under  thorough  public  regulation,  of  course,  the  better 
foi1lelS-^h^  unquestionaily  a  gre^jt  share  of  tins  Public  P^^^^^^^ 
dice  in  many  localities  comes  through  the  absentee-landlord  feeling 
at  the V  hale  Do  you  grasp  me?  This  not  only  applies  to  street 
railway^^^^^^^  toWrs.    And  I  will  tell  you  a  rather  inter- 

esting  story,  if  I  may-I  do  not  know  whether  it  should  go  in  the 
record  or  not — illustrative  of  it.  .„     ,         j.  ji    4.   ^^„ 

Now  very  frequently  your  sensational  press  will  play  at  that,  you 
understand :  and  if  the  lady  that  I  referred  to  a  minute  ago  has  an 
hTc  dent  like  that  happen  on  a  street-railway  system  that  is  con- 
ro  ed  in  the  East,  which  is  located  in  the  South  or  AVest,  that  is  a 
Inril  PTievance  affainst  it.  I  think  that  has  far  more  effect  than  is 
geiflTy  supposeT  But  there  is  a  wide  difference  ^f -n  the  way 
fn  which  certain  of  these  properties  are  handled,  and  I  will  tell  you 
thil  story  which  relates  to  a  combined  gas  and  elec  ric  central  sta- 
t ion-a  very  extensive  one.  I  would  prefer  not  to  give  the  name  of 
the  town  for  certain  reasons,  but  it  is  a  town  I  have  known  very  well 

for  over  thirty  years.  •     •^.  ;i 

On  my  arrival  there  some  three  or  four  years  ago,  I  was  invited 

to  a  dinner,  a  sort  of  get-together  dinner  that  they  have  there  in  the 

town   of  the  business  men-I  have  forgotten  what  the  association 


ltd* 


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i. 


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242    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MmSSM)2S'. 

^.as_everv  week.    And  I  sat  next  a  former  United  States  Senator 
whom  I  had  known  for  a  great  many  years.    He  chanced  to  own  a 
newspaT)er  in  that  town  and  his  newspaper  had  always  belabored 
the  public  utilities,  as  I  had  well  known  for  30  years.     But,  in  tlie 
meantime,  this  property  which  I  referred  to,  a  few  years  previously 
had  drifted  into  other  hands,  and  I  had  noticed  that  the  paper  was 
dealing  with  it  extremely  kindly.     So  we  visited  at  the  luncheon 
table  and  I  said,  "  Senator,  how  is  it  that  your  paper  is  treatmg  the 
gas  and  electric  company  so  nicely  "?    He  says,  "  My  God,  they  give 
us  service ;  they  are  courteous ;  they  are  gentlemen.       He  says,      IT 
I  make  a  complaint,  before  I  have  hung  up  my  receiver  on  the 
telephone  they  have  a  man  on  a  motor  cycle  coming  out  to  tix  it.      it 
made  a  great  impression  on  me,  and  I  went  further  west  and  1 
returned  to  this  town.     At  a  junction  point  some  miles  a^ya3^  1 
picked  up  a  morning  paper  and  I  found  a  great  big  headline  in  the 
Senator's  own  paper :  "  Public-spirited  action  of  so  and  so,    referring 
to  the  financial  interests  that  controlled  it,  in  marketing  the  civic- 
center  bonds  without  cost  to  the  city.  •        ,     i  .i 

Now  that  foreign  landlord,  if  I  might  use  the  expression  had  the 
town  and  the  people— they  were  behind  him.  About  150  miles  away 
I  went  to  another  town  which  was  not  so  large  and  where  the  re- 
verse was  tine  and  where  I  think  the  error  had  been  made  by  the 
home  interests  in  not  giving  the  local  nianagement  sufficient  author- 
ity And  I  talked  with  the  manager.  His  ideals  were  all  right  but 
the  newspapers  were  hammering  the  whole  institution.  Everybody 
in  town  was  down  on  it.  And  I  think  you  could  trace  it  right  to 
this,  as  I  say,  something  starting  off  this  feeling  that  it  was  an 
absentee  landlord  that  controlled  fhe  property  and  consequently  they 

were  against  it.  .         ^    ,  .  ,    .,  ^  i      *u 

But,  as  I  have  said  before,  I  think,  the  great  reason  why  the 

street  railways  are  hammered  is  because  of  the  little  things  that  grate 

on  the  nerves  of  those  who  patronize  them  and  are  considered  as 

pei-sonal  grievances  against  the  company. 

Commi^ioner  Swket.  Was  the  name  of  the  newspaper  owned  by 

the  United  States  Senator  the  Herald  ? 

Mr.  Clark.  No.  ^^  ^  ,    .  •      u  x.  4. 

The  Chairman.  Of  course,  we  all  know  that  service  has  much  to 
do  with  irritating  or  soothing  public  opinion. 

Mr.  Clark.  Exactly.  ,     .     *    .  .i 

The  Chairman.  And  one  of  the  more  basic  factors  apparently 
has  been  the  disposition  on  the  part  of  the  utilities  to  make  good 
deals  with  cities  or  villages. 
Mr.  Clark.  Naturally.  .  „       ,  ., 

The  Chairman.  The  city  had  something  to  sell  and  the  corpora- 
tion had  something  which  it  wanted  to  buy. 

Mr.  Clark.  Exactly.  1,-1 

The  Chairman.  And  an  arrangement  has  been  made  which  some- 
times has  been  prejudicial  to  public  interest. 
Mr.  Clark.  Unquestionably. 

The  Chairman.  Is  not  that  the  real  thing  that  has  developed  a 
great  deal  of  opinion  against  public  utilities?     Much  of  it  may  be 

fancy,  but ,„,        ,      ,  *  -j. 

Ml'.  Clark.  I  think  most  of  it  is  fancy.    There  has  been  some  of  it, 

unquestionably. 


PKOCEEDIHGS  OF  FEDEEAL  BLECTEIC  BAII.WAYS  COMMISSION.    243 

The  Chaibman.  Now,  have  you  had  much  to  do  with  dealing  with 
regulating  officials-^tate  as  weU  as  mumapaK  ^^^^^^^^^^^  ^^ 

Mr  Clark.  I  can  not  say  that  X  licue.    a  a<t>c  i    ^ 

do^with'it'but  ,ny  -P™  1-S-l.^^^^^^^^^ 

brought  this  baby  up  untU  IS^^-and  then  I  **=iXy  to 

the  management  of  tlie  General  Electric  <rf -^^  rallA^  aj  depa 

its  foreign  department,  and  I  spent  Ff  ^^-al  .y^^^^^^^^^^^^  devell 

and  I  continued  to  manage  the  fc.reign  departuient  \"™i  ,;       ^^.j^i, 

lo  l,.-.i.cl,  out  beyond  the  bouml.iM  of  cilie.  and  vili.gei. 

Mr.  Clark.  Yes.  .     « 

The  Chairman.  That  applies  to  gas  compames? 

Mr  Clabk.  Not  to  gas  companies  so  much— oi  »**t  nie  qua     ^ 
aiiSwe.    Of  course,  yo- -tural-ga«  cc«iipanies;  ck,^^^^^^ 
and  I  thinli  there  are  a  few  ca^   n  "i^  co  iitiy    X  am  is  . 
larly  familiar  with  the  gas  indu.strv-vvheie  "«y  "a^^  ^^'^         ^ 
to-day  that  thev  are  pumping  artifacial  gas.     I  think  tliie 

"'■^IrCHAirAi'tSri  ,uite  tr«e  that  Ui^.  gas  comg^nie^^^^^ 
well  as  electric  companies,  are  branching  outside  ot  the  citj  umiis 

¥1^  "^JI^trA  that  going  to  continue  to  be  -the 
'' MrCLARK.  I  believe  it  is,  and  I  believe  that  tendency  should  be 
■^'^ZTHitt.^trxSlL  question  of  the  pioper  form  of 
regulation  of  these  utihties. 

The  C^r,^MA"  .'^eir  rates,  as  well  as  their  service  and  capitaliza- 

tion. 

Mr.  Clark.  J^xactly.  .,...  .  ^^  beyond  the  confines  of  a 

.;S::^'S%^^lS^  ^rSied^fficieutly  by  the  city 

one  dt/and  anther  rate  in  another  city? 

Se  €HATBMAr£d  ther.  would  he  immediately  a  conflict  a,-is- 
m^  between  the  two  places. 

Se  8H?i^M]i"tt:t  So.  where  .hould  .the  power  to  regulate 
(tpply? 


'I . 


244'  PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


■ 


Mr.  Clark.  With  the  State,  in  my  opinion ;  and  when  it  comes  to 
interstate,  as  it  is  coming  very  fast — that  is,  not  in  the  street  rail- 
ways so  much;  of  course,  the  Interstate  Commerce  Commission  has 
jurisdiction  over  those — but  the  thought  that  was  in  my  mind  wa& 
the  central  station,  that  I  think  in  due  course  there  should  be 
Federal  regulation  of  those. 

The  Chairman.  It  has  been  suggested  here  that  the  proper  solu- 
tion of  your  street-railway  difficulty  is  the  cost-of -service  plan.  Are 
you  familiar  with  that? 

Mr.  Clark.  In  a  way. 

The  Chairman.  A  cost-of -service  plan  properly  agreed  to  would 
be  absolute  perfection  to  the  invested  capital,  would  it  not  ? 

Mr.  Clark.  So  it  seems  to  me. 

The  Chairman.  Of  course,  one  of  the  principal  items  in  a  con- 
tract of  that  kind  is  the  value  of  the  plant. 

Mr.  Clark.  Certainly. 

The  Chairman.  In  agreeing  upon  the  value  of  the  plant  for  that 
purpose  is  there  not  apt  to  be  a  good  deal  of  conflict  of  opinion 
between  the  utility  and  the  city? 

Mr.  Clark.  Why,  yes.  W^ithout  seeming  egotistical — I  made  the 
first  physical  valuation  of  any  large  public-utility  corporation  in 
the  United  States  in  1896.  We  called  them  appraisals  then.  It  was 
in  Milwaukee.  The  Federal  court  accepted  my  appraisal— ;-we  will 
use  that  term  instead  of  valuation — which  was  something  like 
$5,300,000,  I  think— or  $5,250,000— whereas  the  city  experts  had,  I 
think,  found  a  valuation  of  about  $3,000,000.  The  proposition— this 
may  interest  you  gentlemen — was  a  little  different  in  the  way  in 
which  it  was  put  up — that  is,  as  the  court  called  for  it — than  is 
done  to-day. 

There  were  two  problems  submitted,  one  was  exact  reproduction 
less  depreciation  cost,  and  the  other  was  the  cost  of  constructing  a 
similar  system  to  the  same  extent  over  the  same  streets,  and  all  that 
sort  of  thing,  in  accordance  w  ith  the  best  of  modern  practice.  This 
may  interest  you,  that  the  reproduction  theory  worked  out  at  the 
figures  I  have  stated.  The  other  would  have  cost  something  like 
$2,000,000  more  because  of  increased  weight  of  rail,  and  all  that  sort 
of  thing,  that  came  in. 

The  Chairman.  In  view  of  the  fact  that  corporations  in  the  past 
have  found  it  expedient  sometimes  to  corrupt  public  officers  in  secur- 
ing franchises,  do  you  think  there  would  be  any  danger  in  the  future 
of  their  exercising  the  same  conduct  in  agreeing  upon  a  valuation  of 
a  plant  where  they  undertook  to  agree  on  a  cost-of -service  plan  ? 

Mr.  Clark.  There  might  be  a  slight  danger,  but  I  think  that^- — 

The  Chairman.  Is  not  that  a  real  danger  where  you  are  dealing 
with  local  officers? 

Mr.  Clark.  AVith  local  officers,  unquestionably. 

The  Chairman.  I  am  talking  now  only  of  local  officers. 
:    Mr.  Clark.  Oh,  unquestionably ;  I  agree  with  you. 

The  Chairman.  If  that  is  so,  then  would  not  the  public  be  better 
protected  if  the  value  in  all  matters  of  this  kind  should  be  determined 
by  proper  rate  regulative  officers? 

!^^^.  Clark.  Unquestionably. 

The  Chairman.  That  would  remove  the  element  of  bargain  and 
Bale,  would  it  not? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   245 

it  a^^Mf^/xSiiz'tLic  that  ^^^^r- 
3^=^^^rst:t^Si^s^^£^^- 

%r£n\:' WelK;  I  have  undevjood  «^  ^ZTtJ^^!^^ 
regulating  body  'svould  temporarily  fix  these  lates.    is  not  j 

"^Schxikman.  I  do  not  so  understand,  under  the  cost-of -service 

^^Mr.  C.AKK.  I  had  supposed  ff^f^ZZt^VZ^MZfr^fi^l 
in  several  different  ways,  but  I  had  ^uppof  d  it  jo'ua    i 
vav:  We  will  suppose  that  ^^^er  your  cost-of -se^^^^^^^^^  ff  ."u  Imd  an 

^"^' '  rsSoHd^'  wlict  m  Jm'  Sr' T-c^nT  are^  necessary, 
l™t  wol  "eVur%^^^^^  commission  which  would  deter- 

"  The  CHURMlN.^Ater  the  contract  was  made,  then  the  rate  becomes 

"MrC^lt^'l'h^i^o  practically,  but  I  supposed  the  public-service 
commission  would  come  in  there——  -  . 

''P«« '!'''«'*'<>"■  Ji^'^A'i^°'Cl"r^''^tim  to  Ih.  public  from 
be  txlrBvamnt  or  not,  bi.t  tbere  i»  "»  P  •       „  satejmard  the 

%^%l:nZ^^t^:^^r^^^  7i^A  operation  under 
^' MV'^CLrR^"lTouFd''say  through  the  public-service  commission. 
The  Chairman.  I^cal  or  State? 

it  S^aTkmI!:^  fatraf^^ler  will  be  ■  extensions,  and  improve- 
ments mltX  these  plants  even  under  a  cost-of-service  plan. 

tL  CnrMA^.'Im'o  is  to  pass  upon  the  question  of  security  issues 

-b^^'^i^^'J::^^^       although  as  I- 

Mr   Clark    1  lie  state  t  ^      ^^^^^         ^^^^^^  i^ 

r  ^hrJeferendumScI  in  a  while  on  the  --e  jortant  features 

in  the  street-c^r  situation  is  the  fixed  5-cent  charge? 

Se  CH\THM?r  Th/t  iHiie  basic  difficulty?  ^         ^        .^ 

Mr  Clark    Yes.  that  is  where  the  great  error  was  made,  as  I  see  it, 
at  the  foundation  of  the  J^d^ustry  ^^^  ^^^^^^  ^^,^;^g 

fr Jm'aSrin"  h?^"anchise  ^stemVrough  an  elastic  rather  than 
an  inelastic  charge? 


^ii 


246    PROCfiEWI^GS  0¥  1  iia)ERAL  ELECTRIC  RAILWAYS  COMMISSION. 


I 


^Ir.  Clark.  Yes,  I  think  so.  It  must 

The  Chairman.  If  you  ai-e  to  have  proper  State  regulating  com- 
missions with  the  authority  to  prescribe  rates,  do  you  not  think  tliat 
would  largely  remove  the  diJSiculties  under  which  you  now  operate  ? 

Mr.  Clark.  Oh,  I  think  it  would  to  a  very  great  extent. 

The  Chairman.  Would  that  contain  a  larger  amount  of  protection 
to  the  public  than  can  be  found  in  your  cost-of -service  plan? 

Mr.  Warren.  A  larger  amount  of  what,  Mr.  Chairman? 

The  Chairman.  A  larger  aauount  of  protection  to  the  public. 

Mr.  Clark.  Possibly  it  might.  That  is,  I  believe  that  there 
should  be  public  regulation.  As  I  say,  I  wish  also  there  was  some 
manner — I  do  not  see  how  it  can  be  done— tliat  on  the  graver  prob- 
lems you  could  go  direct  to  the  public.  Now,  if  you  will  pardon  me 
for  digressing  a  moment,  theie  is  a  feature  involved  I  do  not  tliink 
has  been  touched  on  here.     If  it  has,  I  have  not  heard  it. 

To  the  best  of  my  belief,  no  street-railway  dividends  have  ever 
been  paid  by  necessity  riding,  if  I  mi^iy  so  term  it.  I  hope  you 
masp  what  I  mean.  That  is,  all  of  my  experience  goes  to  show  that 
it  has  been,  so  to  speak,  cultivated  traffic — making  it  attractive  to 
the  public,  so  that  they  will  ride. 

Now,  I  had  hoped  not  to  get  into  this  feature  of  it  that  we  are  deal- 
ing with  now,  because  I  do  not  pretend  to  be  an  expert  on  it; 
but  in  this  situation  arises  this  feiiture,  as  to  how  far  you  should 
go  in  rates,  you  understand,  in  the  way  of  advancement  to  avoid 
killing  your  traffic.  You  doubtless  know,  although  I  do  not 
think  k  has  been  biought  out  here,  what  has  occured  in  some  of  these 
cities  where  the  rates  ha^  e  ah'eady  been  incretised.  A  corresponding 
increase  in  gross  recei^^ts  has  not  developed. 

Coming  back  and  applying  this  thing,  if  I  may,  to  certain  con- 
ditions that  you  have  touched  on — I  am  not  saying  that  this  would 
be  practicable— but  I  can  conceive  of  conditions  where,  under  any 
systean,  if  all  that  is  essential  to  the  construction  and  operation  of 
street  railway  continues  (o  increase  in  price,  and  where,  apparently, 
you  would  have  to  keep  going  up  and  going  up  with  your  fares, 
certain  conmiunities  might  be  willing  to  tarry  part  of  this  burden 
themselves  in  the  form  of  a  subsidy. 

That  is  one  reason  why  I  ha\  e  hesitated  to  emphasize  my  theory 
here;  but  I  am  just  expressing  my  opinion,  because,  after  all,  they 
are  the  ones  whose  interest  must  be  first  considered — the  public; 
but  I  think,  as  I  say,  on  this  present  scheme — I  am  not  sufficiently 
well  up  on  it. 

By  the  way,  gentlemen,  before  I  leave,  I  would  like  to  make  one 
more  statement. 

Mr.  Tripp,  for  whom  I  have  the  utniost  admiration  in  every  way, 
in  his  testimony  of  yesterday,  referring  .to  the  change  from  cable 
to  electric  railroads,  made  one  statement  which  I  do  not  think  was 
quite  correct,  and  which,  I  believe,  was  to  the  effect  that  this  was 
done  purely  on  the  part  of  the  companies  because  of  its  economical 
value. 

Now,  I  think  there  is  something  more  involved. 

I  think  you  will  find  in  print  a  statement  made  by  the  Metropoli- 
tan Railroad  of  New  York,  about  1894  or  1895,  after  they  had  some 
experience  with  electrification.  Of  course,  they  were  mostly  cable, 
and  that  gives  the  reasons  for  changing  to  electricity — that  there 


PIUSCEEDINGS  OF  FiODEIiAL  ELECTKIC  pAILWAYS  COMMISSION.    247 

.va8  a  reduction  in  the  accident  account.    The  quick  snap  and  jolt  of 
tlie  cable  car  was  more  djmgerous  than  electric  caib.  ;ii.,stra- 

I  think,  right  in  this  town,  you  will  fn^  »««  «*  ^Jf  ^ctto     Co. 
tions  of  a  sfmilar  character,  as  regards  the  C^pit'i  J^  ««  on  oo. 
As  vou  may  remember,  their  main  Imes  were,  all  of  them,  opeuvtcci 
hy  cable  for  years.     The  cable  house  was  located  about  where  the 
Municipal  Biulding  now  is,  and  in  1894-1  think  it  was-it  ^^.is 
tonedWn    I  came  here  in  a  hurry  to  try  to  help  tl^e™  ou  of  heir 
H  fficultv   and  I  thought  I  had  ai  cSmplished  wonders.     I  thought  1 
faw  a  wa/in  which  they  could  start  with  new  oi>eration,  as  a  cab  e 
road   witlnn  two  weeks,  because  I  found  cable-windmg  machmery; 
i  found  a  genci°ator  which  could  be  attached  as  a  motor  to  operate 
nir^^nrLt  ni  ichinerv  and  I  thought  the  then  electric-lighting  coni- 
p  n>^^had  sfifficien    Se^  to  spar^  so  that  they  could  throw  up  a 
Zf  there  and  start  operations:  but  when  I  ^-''ffd/he  executive  of- 
fices of  the  company— Mr.  Dunlop  was  then  president;  Mi.  Wwei,  ot 
fheRig"S  National  Bank,  was  v*ice  president:  and  I  think  Mr   Car 
was  tlffhief  engineer  of  the  property-I  was  surprised  to  find  that 

Ms  tnderf ul  t&ng  I  had  to  Suggest,  out  of  which  >- ?«- 7.  g«-.f 
to  make  very  much  money,  was  not  what  they  wanted,  for  the  ^el^ 

•eaTons  that'l  have  stated-that  they  were  anxious  to  get  rid  of  their 
cable   to  reduce,  among  other  things,  this  accident  account. 

*Now,  gentleman,  I  must  apologize  for  taking  up  so  much  of  your 

'The  Chairman.  You  may  go  right  ahead,  Mr.  Warren. 
Mr.  Warren.  I  will  ask  Prof.  Cooley  to  take  the  stand. 

STATEMENT  OF  MR.  MORTIMER  E.  COOLEY. 

Mr  Warren.  Prof.  Cooley,  you  are  dean  of  the  College  of  En- 
gineel's  anHrchitectu^^^  of  the  IJniversity  of  Michigan,  are  you  not? 

Mr.  mRR^N.^'fou  a^^^^^^  of  the  American  Society  of 

Mechanical  Engineers,  are  you  not? 

m.  l^N.^And'you  have  taken  part  in  a  gi'eat  many  valua- 
finns  as  an  expert  on  valuation,  I  believe? 

Mr  Cc^^Y.^I  have  taken  part  in  a  great  many  valuations.  I  at 
onf  time^^s  dered  myself  an  expert  [laughter],  but  I  now  regard 
mvselTmore  as  a  student.  The  many  new  problems  that  have  arisen, 
T  think  reauire  one  to  take  the  attitude  of  a  student. 

Mr  Warren  I  think  the  commission  would  like  to  know  some  of 
yo?;;  conclusions  as  your  studies  have  progressed.    How  long  have 

•you  been  engaged  in  the  valuation  of  ^^^^\l^'}^^y^^^  nublic-utilitv- 
Mr.  Cooley.  Twenty  years.    I  began  m  1889  on  public  utility 


v:  luation  work. 

IMr.  Warren.  And  can  you 
nmch  property,  in  value,  you 


rive  the  commission  any  idea  of  how 
lave  had  occasion  to  consider  in  this 


way? 

f  sta^n'my'^orrin  valuation  in  1899,  working  for  the  City 
Commission  of  Detroit,  of  which  Maj.  Pingree,  Lawyer  Stevenson, 
nnd  Manufacturer  Smith  were  members.  It  was  the  time  when 
D^oit  was  c^iSidering  the  purchase  of  the  street  railways,  and 


\i\ 


III 


248    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Tom  Johnson  represented  the  street  railways.    We  made  this  valua- 
tion in  the  summer  of  1899.    The  purchase  fell  through. 

The  next  year  Pingree  was  governor,  and  he  desired  to  have  the 
so-called  specific  tax-paying  properties  of  the  State  of  Michigan  put 
on  an  ad  valorem  basis ;  and  the  legislative  act  had  been  passed  re- 
quiring the  board  of  State  commissioners  to  have  an  investigation 
made  to  determine  whether  they  should  change  from  one  basis  to 
the  other;  and  I  had  charge  of  that  valuation  in  1900.  As  a  result 
of  it,  the  legislature  passed  an  act  transferring  from  a  specific  to 
an  ad  valorem  basis  for  the  railways  of  Michigan.  That  valuation 
amounted  to  about  $200,000,000  for  the  railways.  But  it  was  not 
confined  to  the  railways ;  it  also  embraced  the  telegraphs,  telephones, 
the  plank  roads,  the  river  improvements,  the  express  companies,  and 
private  car  lines.  They  were  all  specific  tax-paying  properties,  and 
so  their  valuation,  in  total,  amounts  to  about  $240,000,000. 

Then,  under  the  act  transferring  these  properties  to  an  ad  valorem 
basis,  the  State  board  of  assessors  were  required  to  make  the  assess- 
ment; and  that  was  done  in  April,  I  believe,  of  1902. 

The  railroads  then  brought  suit  to  enjoin  the  auditor  general  from 
collecting  taxes;  and  that  resulted  in  another  valuation. 

But  I  am  a  little  ahead  of  my  story. 

The  law  required  the  assessment  to  be  as  of  a  particular  date,  and 
that  required  a  valuation  to  be  made  as  of  some  date  in  April  in 
1902  or  1903 — I  have  forgotten  precisely— and  for  the  railways  alone 
the  value  as  of  that  particular  date  was  about  $240,000,000. 

Then  the  railroads  sued  to  enjoin  the  auditor  general  from  collect- 
ing taxes,  and  that  resulted  in  a  third  valuation  in  1905;  and  the 
properties  were  then  found  to  be  worth  al)out  $280,000,000.  That 
suit  was  carried  into  the  Supreme  Court  of  the  United  States,  and 
decided  in  favor  of  the  State,  and  brought  some  $13,000,000  of  back 
taxes  to  the  State. 

That  was  the  first  big  work  of  the  kind,  I  think,  that  was  ever 

done  in  this  country. 

Almost  immediately  came  the  valuation  of  the  railroad  properties 
in  the  State  of  Wisconsin,  and  I  was  consulting  engineer  on  that 

valuation. 

Just  a  little  later  came  a  valuation  of  certain  of  the  railway  prop- 
erties in  Newfoundland— properties  that  were  going  to  be  transferred 
from  private  to  public  ownership — and  I  took  part  in  that  valuation. 


Jhicago  street  railway: 

That  valuation  amounted  to  about  $50,000,000. 

Then,  next,  I  was  in  Milwaukee  in  connection  with  their  valua- 
tion—some $15,000,000  of  railway  property— before  the  Wisconsin 
Kailway  Commission.  It  was  at  that  hearing  that  the  so-called 
Wisconsin  method  of  finding  the  going  value  of  the  concern  was 
evolved.     I  had  some  little  part  in  that. 

The  Chairman.  Did  you  take  ])art  on  behalf  of  the  State? 

Mr.  CooLEY.  Up  to  the  Milwaukee  valuation,  all  of  the  others  were 
State  employment,  and  I  might  state  right  here  without  enumerat- 
ing in  detail  all  the  properties  with  which  I  have  bfeen  connected — 
there  are  several  hundred  of  them,  and  they  aggregated  in  value 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    249 

,    .  ^^A  o  nnovter  billioii  and  one  and  a  half 

IXf  donJS-rom"s5To'oS  rcfnt'if  all  that  wo.k  has  been 

done  for  and  paid  for  by  <;!«  P"Wic  ^^         i  ^n-in  fact,  we 

^'•^'  rin^l"l£el:^teZt^t^^  soon  as  I  get 

SS  fhel^^tio'n  of  dfthe  properties  of  the  Mich.gan  Ln.ted 

Railways.  ,      Afipliicran  Railway  Commission, 

down  to  date.  Afipbicr-in  United  Railways  and  the 

*:'rhS''rsTp?4.%^%*vr.  ?? ...  li ....  ...c.™  ,«.- 

„y.  in  N™  •'«!'•)'■   .     Cleveland  .pplication  .t  the  time  JuJg. 

the  New  lork  State  Kall^^  a}  s  case  ^"^^«  i^gio,,  „„  the  J^letfO- 

T  also  appeared  before  the  ao^^  n-»tate  t«iiHms=>u 
politan  Ka^lways,  I  think  th^, ai^. called  m  ^ew  ^oxk  City. 

tSo%o.  here  ^^^^^^^\S^  are  all  electric 
These  companies  that  I  ^^^^^^o^   o  °?f,,  ^lephone  m-operties  of  the 
railways,  but  I  have  also  l^^'^^o  do  ^^  ith  teie^noi^ej^    i         ,  ;^^^. 
New  fork  St«te  Telephone   the  Pennsyaniam^^^     .^_^^^^^  ^^^^^ 

raCS;»Sop'.5^^^^^^^  and  tLgraph  properties 

of  Michigan  three  different  times    .  difference, 

I  merely  speak  »*  *!»«*' ''^^/"f^Voft^^^^  utility  property  is.     The 
as  I  have  found,  l^^a*  th^tu  ^  "^  ^^^  '^^^^^  ^.^  ,ii  .ijke. 

fundamental  P"n"lf™;f  think  >^u  have  thoroughly  qualified 

.nf  L'lf  gonen'iV'L»i:ior^    i  would  like  to  ask  you  no.v, 

"t?  'Z:lJi'"YeTttl''^Al.ieA  as  a  cadet  engineer  in  1878,  and 
Mr.  Coolly,    les,  bii ,  ^  ^  ,To«r«'  «;prvice  in  the  Navy  as 

engineer.  ,  x|     keynote  of  the  trou- 

bl'-so'Irafyo^t:te7oSdZubL-l^id  I  assUe  you  have-in 
this' valuation  question?  ^  ^^^^j^  ^^^  j,^  ^^^^j^j^g  ^ 

Mr.  P°°^^^-,,S"' hL  been  vJry  much  simplified,  very  much  or- 
property.     Y^^'.^tion  has  been  ^  ery  >■  „its,  and  they 

rSoXaccurtte^ tut  gl^^diffic^lty-and  I  myself  think 

160643*'— 20 17 


fr 


^^R''i 


fll: 


#^ 


250    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

it  is  the  keynote  of  all  our  trouble  to-day— is  ignorance,  slieer  igno- 
rance and  lack  of  understanding  by  the  public,  very  largely,  but  not 
confined  to  the  public— a  lack  of  understanding  by  the  railroads 
themselves  of  the  fundamental  principles  that  are  involved  m  ull 
questions  of  valuing  property,  and  especially  all  questions  that  are 
involved  in  fixing  rates.  If  we  could  have  a  campaign  of  education 
which  will  make  perfectly  clear  these  things  that  are  now  misundei 
stood,  I  think  the  trouble  would  disappear  almost  wholly. 

I  am  convinced  of  that,  and  I  have  been  trying  to  do  my  part  ni 
dispelling  that  ignorance,  but  it  is  very  difficult.  The  attitude  of  ihe 
public  mind  is  such  that  you  can  not  approach  them;  you  can  not 
make  them  listen  to  you ;  they  won't  believe  you,  and  I  do  not  know 
that  they  are  to  be  altogether  blamed  for  it,  because  they  have  been 
sorelv  tempted  in  the  past.  I  think  the  public-utilities  companies 
all  admit  to-day  that  their  own  conduct  in  the  past  has,  to  some 
extent,  merited  the  difficulties  that  they  now  find  themselves  in. 

I  make  no  defense,  and  the  utilities  themselves  make  no  defense,  of 
tlie  mistakes  that  they  have  made  in  the  past.  The  utility  com- 
panies, as  a  rule,  now  see  what  mistakes  they  have  made,  and  are 
trying  their  best  to  remedy  them;  but  the  public  is  not  yet  willing 
to  meet  them  anywhere  near  half  way ;  and  so  I  say  it  is  a  case  of 
ignorance — a  greater  amount  of  ignorance  on  the  part  of  the  public 
than  it  is  on  the  side  of  the  utility. 

Mr.  Warken.  But  you  say  that  as  a  general  proposition  the  factors 
in  any  valuation  are  the  same  as  in  other  cases  5 

Mr.  CooLEY.  I  think  myself  that  the  factx)rs  that  enter  into  a 
valuation  of  any  kind  of  a  utility  property  are  just  the  same  in  the 
case  of  a  steam  or  electric  road  or  a  gas  or  water-works  property 
or  a  telephone  or  telegraph  property.  They  are  all  practically  the 
same,  the  same  fundamental  principles,  the  same  fundamental  ele- 
ments; and  when  you  have  described  the  process  of  valuation  of  one 
property,  and  have  all  the  factors  in  connection  with  that  property, 
you  have  them  all  in  connection  with  the  other  property.  There  are 
about  18  or  20  of  them,  depending  upon  how  much  subdivision  you 
give  all  factors  that  you  can  not  fail  to  take  into  consideration  in 

every  rate-making  case.  .     ,    ,      , 

Mr.  Warken.  Will  you  say  something  on  the  historical  develop- 
ment of  those  factors.  Prof.  Cooley,  and  then  run  over  them? 

Mr.  CooLEY.  Yes.  *       . 

Mr.  Warren.  I  hesitate  to  ask  you  questions,  because  I  know  you 
know  so  much  more  about  the  subject.  Prof.  Cooley,  than  I  do. 

Mr.  Cooley.  It  is  rather  difficult  to  talk  on  this  subject,  because 
it  is  so  easy  to  talk — what  I  mean  is  that  there  is  so  much  that  can 
be  said  and  that  one  can  talk  a  very  long  time,  and  I  would  like  very 
much  to  confine  myself  to  the  particular  things  about  which  the  in- 
formation I  can  give  would  be  wanted. 

Mr.  Warren.  Well,  it  has  been  suggested  here  that  m  case  the  com- 
mission should  make  recommendations  along  certain  lines,  as,  for 
instance,  possibly  a  service-at-cost  recommendation,  that  that  might 
involve,  perhaps  necessitate,  a  basis  for  any  such  plan  for  any  par- 
ticular company,  and  the  valuation  question  has  arisen  and  has  been 
discussed  by  some  of  the  witnesses  as  to  what  sort  of  a  valuation  and 
upon  what  basis  it  should  be  made. 


..    r^r^nTTilC  RAILWAYS  COMMISSION.    251 
PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWA 

mission  should  g^^^  some  <^°"«|f^^^4C^°e^^^^^^  proper  principles 

we  should  enter  into  a  very  full  J^^^^P"*^^;  commission  shall  make 
of  valuation.     It  is  a  qii^tion  ^^  ^etner  o.  i  elements 

fny  finding,  or  even  should  make  '^^^^f^.^ZioL  oi  a'^lant,    We 
which  should  be  inchided  '"J  t*»^  PSes  and  fundamental  evils, 
are  dealing  with  * 'l^d^'^f  ^^^'^ /""X"'*  what  I  understand  to  be 
Mr.  CooiXT.  I  will  endeavor  to  take  up  ^^        ^^^^  ^i 

r;STpiiSLTvllt?^n  ^dlat  S  t  vame  of  ties,  rails,  and 

t:^''J^^^^{^'-X'!.:^J::  &-^ci:  i^rn^Lt  I  suppose  that 
Mr.  Warrek.  I  might  suggest,  Mr  ^  .^  executive  session,  as 

is  a  matter  which  the  ^ommiss  on  wi  1  C(ms  a^^^       ^^^^^^  ^j^^  valuation 
to  whether  they  will  niakc  '*«>  recommen  ^^.^^^  ^^  ^j^^  j^ 

or  as  to  the  elements  en  crmg  '^^°^^^2Tits  consideration  of  that 
be  made.  It  jnight  help  the  '=«»y"''^\  ^t^er  members  of  the  com- 
question  if  ^^^^jJ^'^^'^l^Lltyt^ons  that  seem  to  have 

i^^^^^^^^  subject  of 

.itiSf tirffw J^Hnio  Tt  wfcan  occupy  a  whole  month  in  ,ust 

taking  that  testimony  alone.  presenting  this  subject  that  it 

Mr.  Cooley.  l:es.    I  ha\e  t""""  "!  '    ijnc'  if  you,  the  gentlemen 

makes  for  quicker  and  ^^^f'f^  "-jSeU-es   he  individuals  who  enter 
whom  I  am  «ddressmg,  c<^nsider  yourseu         ^^  ^^^^    ^^.^^^       ^    ^^, 

into,  or  propose  to  enter  »S,^«' ^'^^^^''Jf   \,„  gentlemen  may,  therefore, 
ing 'a  railroad  property.    Each  one  oty^^^  property,  and  I  am 

-So  F  HS&ii^^orwSri  £St 

-teig^'ltC'^'^SH^^^^^^^^^  prefect  is 

,e3!^ienorwni^^4'^t^t^  ^^^^  srSnt 'S 

fhb  will  involve  a  P^Xo^trSe^teni  the  proposed  service 
sound  public  sentiment  to  know  to  wna  concessions  would 

^Id  te  dema"d«i.  or  would-be  te^^^-";^^^^^^ 
have  to  be  obtained  in  the  m^r  o^  p  Obtained.  If  these  inquiries 
ditions  under  which  t^^P^ext  step  would  be  to  employ  engineers 
have  resulted  favorably,  t^^®  n®^*  ^^Pj^  °  survevs  and  estimates  of 
tolook  over  the  field  '^''i'^f/fPSS'Ke  project.as  a  whole 
cost,  and  determine  "pon  the  teasiDiniy  information  thus  tar 

from  an  engineering  P^^^^^^jJ^^'go  to  your  bankers  and  see  about 
accumulated,  your  next  step  is  to,f°j  /^j^iine  to  finance  it— if  you 
the  financing  of  "le  proposition  «  they  ^'^^^  j^^uce  money  to  come 
can  not  make  a  «Vf  .^'^t  JLS,  and  alfthe  time  and  all  the  money 


l4t' 


252    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

You  have  not  anytliing  to  show  for  it,  and  it  is  a  ffood  deal  of  a  sum 
of  money  that  these  preliminary  steps  involve.  You  may  not  know 
how  much  it  will  he;  but  the  best  investigations  that  I  have  been 
able  to  learn  about  indicate  that  these  preliminary  costs  that  I  have 
just  mentioned  to  you  may  run  as  high  as  5  per  cent  of  the  total  cost 
of  tlie  propei-ty,  from  2  to  5  per  cent.  Now,  that  is  a  great  deal  of 
money.  If  vou  have  a  $100,000,000  propertv,  that  may  mean  any- 
where from  $-2,000,000  to  $5,000,000.  Of  course,  I  have  barely  out- 
lined that.  But  should  the  future  promise  be  great  enough  to  inter- 
est capital  mildly,  let  us  say,  at  the  outset,  the  banker  may  be  induced 
to  gamble  a  bit,  and  he  will  make  you  a  proposition  of  what  he  will 
do.  If  the  gamble  is  a  good  bit  of  a  gamble,  you  will  have  to  pay 
a  good  bit  of  a  price  for  it.  If  it  is  a  small  gamble,  you  will  get  a 
corresponding  reduction  in  the  way  of  discounts,  stock  bonuses,  and 
things  of  that  soit. 

It  is  a  gamble,  you  understand,  up  to  this  point. 

The  Chairman.  Do  you  mean  to  say,  Professor,  that  the  bankers 
gamble  with  the  money  that  they  have  in  their  possession? 

Mr.  CooLEY.  I  do  not  mean  to  say  that  they  gamble  in  the  sense 
of  putting  the  money  on  the  table,  but  they  gamble  in  the  sense  that 
you  have  gambled  when  you  have  made  your  preliminary  investiga- 
tion of  this  property.  You  have  made  up  your  mind  it  is  a  good 
thing,  and  you  go  into  the  thing.  You  do  not  know  that  it  is  a  good 
thing  until  you  have  actually  brought  it  to  completion  and  tried  it 
out.  Now,  the  banker  makes  up  his  mind  one  way  or  the  other. 
There  is  alwa3^s  an  element  of  doubt,  but  he  tries  to  make  that  ele- 
ment just  as  small  as  possible ;  nevertheless,  it  is  in  the  nature  of  a 
gamble  up  to  the  time  the  property  has  demonstrated  whether  it  is 
good  property  or  poor  property. 

Commissioner  Sweet.  There  is  an  element  of  chance  in  it? 

Mr.  CooLEY.  That  is  it.  I  used  the  word  "gamble."  It  is  an  ele- 
ment of  chance.  That  is  preinsely  what  it  is,  and  the  number  of 
wrecks  is  very,  very  large. 

Now,  you  have  got  your  property  on  its  feet,  so  far  as  knowing 
that  the  project  is  feasible  and  that  you  can  get  your  money  for  it. 

The  next  thing  is  to  begin  to  do  business.  You  hire  your  engineers 
and  you  organize  your  staff  and  j^our  legal  help.  You  make  an  or- 
ganization which  corresponds  very  closely  to  the  organization  that 
you  are  going  to  use  after  the  property  is  put  into  operation.  You 
inake  all  the  careful  surveys  that  are  necessary.  You  write  all  the 
specifications.  You  go  through  all  the  steps  that  will  enable  you  to 
procure  the  physical  property  complete  in  all  of  its  details. 

Now,  that  is  a  preliminary  part  of  the  actual  construction  w^ork. 
In  other  words,  all  of  this  organization  work  and  these  preliminary 
plans  have  followed  the  development  of  the  project  and  are  the  be- 
ginning steps  of  the  actual  building  operations. 

When  all  of  this  work  has  been  done,  these  surveys  are  completed 
and  the  actual  work  itself  begins. 

Now,  at  this  point,  the  knowledge  of  the  public  begins.  The  pub- 
lic knows  nothing  about  the  things  that  I  have  been  talking  about  up 
to  this  moment.  They  are  ignorant  of  those.  They  can  see  that  the 
cost  of  the  property  begins  when  you  start  to  lay  the  ties  and  to  buy 
the  land. 


P,„.™>.os  0.  P»E,M,  .i,EO».o  ba™-  <,o..m.ssioh.  253 

three  years  or  four  years,  depending  "P«P^  "^J^^^^t  to  material  and 
depending  upon  n-^kft/^jf^V"  whS tl^e  municipality  ^^•ill  per- 
labor,dependmg  upon  the  extent  to  ^mc  ^^^    ^pon  a  large 

mit  you  to  dig  up  «?d  •^'^^^^^/lom  one  to  three  or  four  years  to 
numter  of  factors.     It  ^f  ^'^  ^"^^^^^  "»«  structure 

complete  this  P^-T'%\%^^lotersMi-e,  we  will  say,  or  to  the 
which  corresponds  with  the  hotel  stiuctu^^^^ 

merchant's  estabhshment-the  plij  sic^^  ^^^.^^^  ways-and  I 

Now,  you  can  build  that  stiuture  in  sje  ^^  ignorance. 

speak  of  that  because  it  >?  ''  ^*''®„'  ^truction  force  and  build  it  it- 
The  company  can  organize  its  "««  construe  ^^  .^  ^^^^  j^^  ^^  ^ 

self,  hire  ts  own  labor  and  bu>  its  <>^ "  '"'  .^     jh  jn  turn,  sub- 

tract. It  can  let  it  to  ^f  ^  e  a^^e  eg  tim^^^  ways  of  building 
let  different  parts  of  it.  ^"  °(^  V^^'^b^  ft  that  way  all  the  time, 
properties,  and  properties  are  b«"g  °J"«^^^^  ^^en  let  to  a  general 
^  Now,  suppose,  for  example,  ^h^  P.'f  Pf,''yEach  of  those  contractors 
contractor  and  he,  in  turn,  l/.^s  sublet  >*:  ^^^^^^^  of  the  cost,  and 
makes  the'closest  possib  e  f^tuna  e  rtiat  he   an  m  .^^^^  ^ 

when  he  gets  his  eft>mate  '"^f ' '^^J'i^g^^^^^  figure  to  the  general  con- 
He  never  fails  to  do  tl>f  JJ^.fJ^j^X  "s  responsible  for  the  corn- 
tractor,  and  the  general  conti  actor,  w  no  v  ^^.^  gubcontractor  s 
plete  job,  in  turn,  submits  t^^^  aggiegate  oi  a  ^^^  ^^^^^^  i^g 
PncesVo  tl.  cpj^any  -^^  e! eh  has  got  to  have 
r^i^fif  o'tKitsltXy  are  not  going  to  b^Ud  it  ^^^^^  ^^ 
'now,  the  public  does  ««*  kno^^  t^at^^^  t^^y  send  you  to 
20  or  30  01-40  je«'-%»*f  ■^.^'^Pthe?    t  was  built  by  a  general  con- 

which  is  not  always  very  accurate.  ■       ^^^^^^  ^  would  cost  to 

So,  we  have  to  adopt  son.e  plan  »*  tigui    -        j^.,       ^operty,  to 

reproduce  that  P^oP^'ty '.  f"'^,,^^ '  The  company  will  build  certain 
choose  the  most  ?;easonable  plan.     Ihe  co    V     y  .     ^^ybe  di- 

parts  of  it,  ^'ew'"*'^^.'nrwhr will  build  certain  other  parts  of  it 

1-ectly,  to  a  «"bcontrac  or  who  wiu  mm        ^^^^  ^^^,^^Me  plan  of 

We  always  utilize  what  seems  to  ub  tu  kj^ 

rebuilding  or  reconstructing  the  prope^^^^         ^^^  contractor  to-day 
The  public   as  a  rule   d"/^  f  "^and  liability  insurance  and  fire 
must  insure  all  his  l*^,^; ^^f^^^^^^^^^  be  taken  into  considera- 

insurance,  and  all  of  tho^  """fV*  The  public  does  not  know,  for 
tion  during  the  progress  of  the  wo  k^  i '  p'roperty  has  to  make  ar- 
instance,  that  t^e  company  buldmgth^^^^  ^p.^^y^^  ^^^  ^^^  ,^^^  ^^, 
rangements  for  its  money  oeioie 


11 


I'f 


254    PBOCEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION". 

to  carry  the  intei-est  on  that  money  during  all  the  period  of  con- 
struction.    It  does  not  know  that. 

The  public  does  not  know  that  the  company  has  got  to  pay  taxes 
on  all  of  that  property.  It  has  to  pay  taxes  on  the  land,  and  if  it 
takes  three  years  to  build,  you  have  bought  your  land  presmnably  at 
least  a  year  ahead,  and  you  have  four  years'  taxes  on  the  land  that 
have  to  be  paid  while  you  are  putting  up  your  property. 

You  are  the  ^ntlemen  who  are  building  this  property.  That  is 
why  I  am  speaking  to  you  this  way.  These  are  the  things  that  you 
gentlemen  would  do  if  you  were  engaged  in  this  project. 

Now,  I  mentioned  one  item,  namely,  this  contingency  item.  I  sup- 
pose that  contingency  item  is  i-eceiving  more  attention  in  hearings 
before  commissions  than  almost  any  other  item.  In  the  earlier  days 
we  did  not  hesitate  to  add  10  per  cent  to  the  estinuited  cost  of  repro- 
ducing that  property.  When  we  got  the  value  of  the  property,  we 
added  10  per  cent  at  the  very  end.  That  was  taken,  accepted,  and 
recognized  as  perfectly  proixir,  the  idea  being  to  do  just  precisely 
what  the  contractor  does.  But  you  can  not  do  that  any  more.  We 
do  not  do  it  any  more.  We  even  go  so  far  in  valuing  property  to-dav 
as  to  add  one  contingency  item  in  connection  with  roadway  and  track 
and  buildings,  for  example,  and  another  contingency  in  connection 
with  cars  and  machinery  and  things  of  that  sort.  Take  the  piping 
that  comes  around  a  steam-engine  plant  and  the  wiring  that  comes 
into  the  station.  You  must  add  20  or  25  per  cent  for  a  contnigency 
item  for  that,  whereas  2  per  cent  is  enough  in  certain  other  cases; 
but  when  you  have  got  through,  you  have— if  you  have  done  your 
work  fairly  and  as  it  should  be  done,  in  order  to  be  safe  in  every 
^ay — ^to  add  to  the  unit  costs  that  appear  in  connection  with  the 
physical  property  elements  themselves  what  is  equivalent  to  about  5 
per  cent  contingency.  Then,  when  you  get  all  through,  you  have  to 
add  another  5  per  cent  spread  over  the  whole  property.  You  have  to 
do  that  in  order  to  be  safe. 

So  you  must  not  go  into  this,  gentlemen,  unless  you  have  protected 

yourselves  amply. 

I  could  talk  for  hours  on* the  things  that  happen  that  make  a  con- 
tingency item  necessary.  I  can  cite  you  one  example,  an  extreme 
example — the  Detroit  River  Tunnel. 

That  tunnel  was  dug  in  a  new  way.  It  was  excavated  from  under 
the  water,  from  a  great  ditch  dug  across  the  river,  and  then  the  tun- 
nel built  in  steel  sections  and  sunk  in  place  and  connected  up  and 
covered  with  concrete.    That  had  never  been  done  before. 

The  New  York  Central  Railroad  and  the  other  railroads  interested, 
forming  the  tunnel  company,  debated  for  a  very  long  time  whether 
they  should  build  that  tunnel  themselves  or  let  it  by  contract.  The 
contractor  added  $1,000,000,  I  think  it  was— I  will  not  attempt  to 
be  precise  on  that,  but  it  was  an  enormous  sum— not  10  per  cent,  but 
say  50  per  cent — for  contingencies,  because  he  did  not  know  what  he 
was  going  to  encounter;  and  this  tunnel  company  considered  very 
carefully  whether  they  should  accept  his  proposition  or  build  it  them- 
selves and  take  a  chance  on  the  50  per  cent,  and  save  it,  if  possible. 
They  decided  it  was  better  to  let  the  contractor  assume  the  responsi- 
bility. And  he  did ;  and  he  cleaned  up  a  clean  million  dollars  on  it. 
He  had  good  luck. 


PBOCEEDmCS  or  .BDEKA.  ELEC-TBIC  KAIWAYS  COMMISSION.   255 

The  next  tunnel  will  ^^ ^^.^Z^ :^^^^^^' 

near  as  much,  but  that  was  tJ^f^^^jf^^Vd  somebody  to  appraise  that 

Xow,  20  years  from  now ,  y°^\y'.„,^^,,^  tl.is  50  per  cent  contm- 

tunnel.'   You  do  not  know  '^^y';^';^^^^^,^  P^^* 

gency  item.    You  do  not  know  any  thing  about  i  ^^.^^^^^  .^.  ^^ 

to  that  contractor,  Butler;  but  you  ?"  ^^^^tjcle^^tion  the  conditions 
the  best  way  you  can  and  you  t^f^  "^^^°^XX  appraisal.  You 
of  building  tunnels  that  exist  ^^l^^^l^^Xe  of  that  tunnel,  or  the 
are  not  going  to  get  '^^^^^^  "^^f  ^J J^o  be  allowed?  Not  if 
cost  of  it,  and  if  you  do  get  it,  is  it  gwng  ^^^^^^^  ^ou  can  not 
certain  men  can  prevent  it     "  "^m  ^  ^^^  carefully 

f:Vrd^ntrlS,  l^^^  -  ^oneV  honest  and  rehable  men 

-^1^?:^  respect  to^his^^^^^^^^^^ 
iHei^^SlT^eTcrnt'r  the'in^^rin  connection  with  the  details 

not  only  that,  but  I  base  it  upon  a«t"al^^^nmj  ^.  ^^^  ^ 

been  found  by  the  y"»'»l«^f-,/,* '' ^ten  tejond  the  guessing  stage 
g„ess  in  the  first  Pl«;^«>'*^^i*^^%^°*;^^;\in|enci^^   has  been  argued 

The  Chairman.  Tins  question  "^ J^  •    •  ^   j     ^he  railway  matter 
iHjfore  the  Interstate  Commerce  Commission  in 
for  a  long  time. 

¥heC:i^«MA\"'Are  you  aware  of  the  finding  which  was  made 
unontha" question  in  the  Texas  Midland  case? 
"PMr.'K-T.  No.  I  am  -t ;  I  am  sorr^  to^ay  ^^  ^^^^  ^^^^^ 

Tlie  Chairman.  P'^»1"^P^„\*  Son  did  not  fix  any  value  for  con- 
the  Interstate  Commerce  Commission  ma  n  ^^^^ 

tingency  in  either  the  Texas  Mid  and  or  the  A  -^^^^^  ^t 

Mr.  CooLEY.  You  would  not  1\*^/^  J^rZ''^ropertv!  if  you  knew 
all  if  you  -"Id  f  *he  lu^on^^^^^^^^^  You 

what  the  property  ^if  ^f  ;{,f  ?'"^nd  that,  of  course,  is  the  thing 
can  take  that  cost  out  of  the  'wx,  ana  pnai,       _  „'nf ortunately, 

to  take,  because  it  reP'^?^'^^  ^^J^l^ropert  es  at  'least.    You  may  do 
you  can  not  do  that  with  the  ^^d  propemes^  ^^^^  ^^ 

if  you  could  get  them.  ^  j^  the  meantime,  the  costs  of 

Commissioner  Meeker.  Suppose    in  tie  ^^^^ ^ 

labor  and  materuil  have  adduced  fr^^^^^^  P^^^  right  here.    I 

Mr.  CooLEY.  Yes;  ^  »n*_,",Yy,f 'wgr  but  right  there  that  leads  me 
was  going  to  speak  of  it  a  little  later,  mit     g  ^^^^^  ^  ^^^^ 

to  say.  that  in  "-Jmg  the  s^ateme^^^^^^^  ^^^^  ^^^^ 

tve^rbXX  war-and  dWnot  have  in  mind  the  extreme  costs  of 
TaSr  and  materials  that  we  now  have  to  bear. 


256    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


=1 


i 


'# 


I 


I  think  I  should  not  fail  to  make  this  point,  which  is  not  usually 
conceded,  I  may  also  say,  and  which  has  to  be  in  the  nature  of  an 
expression  of  opinion.  I  have  frequently  said  that,  in  my  opinion, 
if  we  could  have  the  so-called  book  costs — the  historical  costs — and 
have  all  of  them,  goin^  back  to  the  very  day  you  gentlemen  thought 
of  this  project  and  decided  to  go  into  it,  it  is  my  belief  that  that 
cost  would  be  greater  than  the  cost  of  reproduction  in  noruuil  times; 
and  the  common  opinion  is,  or  the  common  belief  is,  that  it  would 
be  very  much  less.    I  believe  it  would  be  more. 

Xow,  I  do  not  believe  I  can  prove  that,  but  that  is  a  belief  that 
has  crept  in  upon  me,  in  view  of  my  study  of  this  i^roblem  during 
all  of  these  years. 

Commissioner  Meeker.  AVell,  it  is  a  matter  of  common  observa- 
tion that  improvements  in  construction  and  all  of  the  other  items 
that  you  have  mentioned  have  come  about  with  the  passage  of  time; 
so  that  it  woidd  seem  to  be  a  rather  foregone  conclusion  that  the  cost 
of  reproduction  in  normal  times,  barring  cataclysmic  world  wars, 
would  be  less  than  the  cost  of  actual  construction. 

Mr.  CooLEY.  I  am  very  glad  to  hear  that  statement.  It  is  the  most 
consoling  thing  that  I  have  heard  in  a  long,  long  time.  I  thought  I 
was  alone. 

Xow,  when  I  spoke  of  building  the  property  by  a  general  con- 
tractor, who  might  sublet,  I  also  should  have  spoken  of  another  way, 
known  as  the  cost-plus,  a  percentage  method,  which  has  been  used 
much  in  recent  years.  I  do  not  need  to  describe  it.  It  merely  means 
that  the  engineering  firm,  or  whoever  builds  the  property,  renders 
a  comiDlete  account  of  all  the  costs,  and  when  he  gets  through  he  adds 
a  percentage  on  it.  That  is  his  profit.  The  idea  is  this,  gentlemen, 
that  there  are  profits  going  to  somebody  all  the  way  through  the 
building  of  this  property.  Xow,  you  can  not  get  away  from  that, 
and  I  don't  want  you  to  get  away  from  it,  because  the  public  does 
not  understand  it,  and  they  object  to  it.  They  do  not  want  anybody 
to  get  a  profit,  and  yet  there  are  profits  going  to  somebody  all  the 
way  through,  and  you  can  not  build  the  property  without  there  be- 
ing profits. 

Now,  so  much  for  that. 

I  have  already  mentioned  incidentally  this  question  of  taxes  that 
have  to  be  paid.  If  you  bought  your  land  the  year  before  construc- 
tion organization,  and  the  construction  period  is,  say,  three  years,  you 
are  paying  four  years'  taxes  on  the  land.  Engineers  have  usually 
lumped  it  as  a  half  of  1  per  cent,  or  1  per  cent,  or  something  of  that 
sort,  in  the  past,  but  to-day  they  are  figuring  out  to  see  what  it 
would  actually  be,  and  they  are  even  going  so  far  as  to  search  the 
records  to  find  out  precisely  what  the  company  has  paid  for  taxes, 
and  instead  of  its  being  one-half  of  1  per  cent  or  1  per  cent,  they 
are  finding  upward  of  2  per  cent. 

Xow,  there  is  one  other  point  in  connection  with  taxes  that  should 
be  mentioned.  It  has  particular  reference  to  the  question  of  muni- 
cipal ownership.  The  public  believes  that  if  the  cit}^  owns  the  prop- 
erty, it  does  not  pay  any  taxes,  and,  as  a  matter  of  fact,  it  does  not 
pay  any  taxes  directly ;  that  is,  the  public  utility  is  excused  from 
paying  taxes,  but  the  taxes — the  money  to  run  the  city  government 
and  the  State  government — have  to  be  raised,  whetlier  the  city  owns 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  KAILWAVS  CO.IMISSION.    257 

property  and  it  does  not  pay  taxes,  men  e^^ij 

share  in  paying  those  taxes.  ,      .^^ .  ,.„,i  u  should  be,  of  course. 

TlS-t'h^  irp^tS^nfind-'^o^^^^^^^^  spek  of  it  to. 

the:^.    They  are  getting  -"^etl.ing  fo^othmg  ^^^^^^^ 

I  might  mention  a  few  of  the  '.*';'»i'V-i„    nml  le^-il  expenses.    This 
the  heSl  of  organization,  achmmsta.   on   ««dleg.x   expense    ^^  ^^^^ 

heading  is  rather  elastic     It  '^^  j^o"^«\»»^^^^^^^^      ^^^  outset-costs  of 
preliminary  expenses  that  I  ha^^   «'''«i.^  i  incorpora- 

^ThlV^ti^n'o^  P-otion  of  an  ^^t^:::j^^Z^ 
profits,  is  another  red  rag  to  ^he  bul^  and  it  is  m  c 
Ihese  promotion  costs  a.c^pn>niote.s^p^^^^^^^^^ 

that  a  good  deal  of  the  yatei  '^"''  8""      .  gjjges.  but  there  is 

And  I  suppose  there  is  .^»ter  th"c  m  a  gieat  W  c    ^^^.^^^^^.^^ 

.very,  very  ittle  ^^■ft^'-,"\^^f„'^i,*^*'^fif  than  the  public  believes  be- 
and  much  le^^^^^"**:  >"  ^f^  Neurit  e?  the  bonds  ire  protected  by  a 
cause  ^hen  y«"  ^;\^,:^°  *\,rop^^^^^^^  The  face  of  the  bonds  is  not 
mortgage  on  the  l]Xi<;^l  P?°^^^^^^^^  but  some  percentage  of  it. 

cent  in  one  case  that  I  knew  about.  ^^  ^^^^^ 

Now,  that  85  per  cent  ^"^rion  as  yoTi  have  taken  the  precaution 
protected  by  a  moitoge.  ^^  «^°"  ^?/„f  these  preliminarv  costs  and 
to  get  into  the  cost  o^^^e  prope  ty  all  ot  tiiese^  ,      ^.^^^^^ 

alfof  these  other  costs  that  I  Jm^^  been  d^  cussi  g^^  ^^  ^^^^^  ^^^^ 

you  are  not  gomg  to  ha  e  a^^^^^^^^  ^j,^  bonds.    Now,  you  must 

:.SeX;::StS  %^iS^  otlJ  way-by  stock,  or  whatever 
it  may  be.    But  say  it  is  stock  property  in  the  form 

If  we  have  got  <,•>, f  a  mort-t^  thei^  must  be  at  least  25  per  cent 
of  bonds,  pro  ected  by  a  "'°i*»''-f '  "  K^arilv  think  of  our  property, 
more  in  the  form  of. stock,  asj^e  oi<linar  y  ^^^i-.^  ^^^^.^._ 

that  is,  just  the  l?hysieal  pr°P«.  *.^' J'^Xi-  .^  „^      be.  to 

tion  to  that   we  have  got  t'^^b<\:„V"°Xnien  know  about-expenses 
Shloifhl-LS  and  whicfi  do  not  appear  in  the  valuation 

»*  i^l  say.  to  some  extent,  this  -«^^jtLV"  ^^t^^ 
is  fully  and  amply  justified    wTdo  not  think  it  is  in  all  cases. 

'"^^J^^:^^'^ ^'^^-  ^^-  «-^^-'^  '''''' 

""Z-COO.BV.  No;  I  J^tStivit'ii'w-'q^^^^^^  common  practice 
•  '^'r  ^"f  "trJlVe  one'sW  o  common  Vk  ^ith  each  share  of 
■p'lJf'e^-rKto^l'andrattas  a  sort  of  "hope"  stock. 

¥,^e  CHAiKMA^'Tha-t  represents  water,  does  it  notJ 


I 


258    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CooLEY.  Yes;  in  a  sense.  I  suppose  it  would  be  called  water, 
of  course ;  but  that  raises  another  question  in  my  mind  that  is  very 
interesting,  indeed.  .  . 

Suppose  you  try  to  induce  some  public  gentleman,  some  citizen,  to 
buy  a  bond,  so  that  you  could  get  some  fraction  of  the  cost  of  your 
property  that  you  are  engage<l  in,  and  he  is  not  satisfied  that  it  is  a 
good  investment.  He  will  not  pay  you  par  for  the  bond.  He  will 
not  pay  you  more  than  85  or  90  per  cent  for  it.  Now,  you  take  a 
share  of  stock,  or  10  shares  of  stock,  and  pin  that  stock  to  the  bond 
certificate.  That  is  the  bait  that  catches  him;  and  you  have  sold  the 
bond,  whereas  you  would  not  have  had  a  chance  to  sell  it  without  it. 

Now,  to  what  extent  is  that  legitimated 

The  Chairman.  Does  that  alter  the  fact  that  that  share  of  stock 
does  not  represent  money  that  is  actually  invested  in  the  property? 

Mr.  CooLEY.  I  will  tell  you  what  it  is,  in  my  opinion.  It  is  a 
little  more  than  the  equivalent  to  dropping  the  price  of  the  bond  a 
few  more  points.  If  you  were  to  ask  80  for  the  bond,  and  it  did  not 
attract  him,  you  might  drop  that  to  75,  and  it  would  not  tempt  him; 
you  might  even  drop  it  to  65,  and  you  would  not  tempt  him.  No\s', 
you  leave  it  at  80,  say— the  first  proposition— and  you  attach  this  bait 
to  it,  and  it  will  go  at  80. 

Now,  if  what  I  have  said  is  true,  then  that  water  that  you  are 
speaking  of  is  worth  the  difference  between  80  and  GO  or  Go  or  70,  or 
whatever  the  lowest  figure  was  that  he  declined.    It  is  worth  that  in 

actual  money.  •    -j.      x « 

Mr.  Warrex.  It  is  what  you  have  to  pay  to  get  the  money ;  is  it  not  ? 
Mr.  CooLEY.  Yes.     I  am  just  simply  citing  this  as  an  illustration. 

1  have  not  thought  of  it  m  just  that  way  before,  sir,  but  it  is  just 

something  that  flashes  through  my  mind.  ,     ,    . 

The  Chairman.  But  the  person  who  holds  that  share  of  stock  that 

is  pinned  to  the  bond  would  like  to  have  returns  on  that  share  of 

stock. 

Mr.  CooLEY.  Yes;  he  would. 

The  Chairman.  And  that,  in  turn,  is  based  upon  a  dollar  that  has 
not  been  invested  in  the  property. 

Mr.  CooLEY.  Precisely;  precisely.  That  is,  for  every  thousand- 
dollar  bond  that  you  have  put  on  that  property,  if  you  have  to  sell 
it  for  $850,  there  is  $150  that  has  got  to  be  provided  for  in  some 
other  way.  Now,  if  you  are  fjoing  to  put  that  into  a  floating  debt 
and  amortize  it  through  a  period  of  years,  you  are  going  to  put  it  m 
there  one  way  or  the  other.  It  has  got  to  go  somewhere.  Other- 
wise, you  are  not  going  to  build  your  property. 

Eight  there  comes  this  question  of  wat«r  again.  If  you  can  get 
$850  with  one,  two,  or  three  shares  of  water,  whereas,  without  water, 
you  can  not  get  more  than  $G00  or  $700  for  that  certificate,  has  not 
water  some  value — a  value  ecjualing  the  difference  between  $8o0  and, 
sav,  $700  or  $G00,  or  whatever  it  is  ?  ,     .       . 

I  raise  the  question.  I  have  not  reached  a  conclusion  in  my  own 
mind.  I  am  arguing  this  thing  now.  It  is  a  new  proposition  to  me. 
It  is  a  new  angle.  I  am  inclined  to  think  it  is  is  logical.  Maybe  I 
will  think  differently  to-morrow.  ^  -,  ,    ^. 

The  Chairman.  Perhaps  you  and  I  need  not  go  into  a  debating 
society  on  that  question. 


PKOCEEDINGS  OF  FEDERAI.  ELECTRIC  RAILWAYS  COMMISSIOK.   259 

Mr.  COOI.V.  My  attitude  is  inclined  ^^^^l^-^^^/^^tu-S. 
is  a  proposition.    It  is  son.etlung  th^^t  may  be  ^  »^y  j  tj^i^k 

I  lik^to  hold  it  up  look  at  ^t  fnt^^^^lfi^^/ciUng  it  s  true.    Now, 

just  for  the  moment  and  for  the  purposes  i  am  uuu„ 

I  may  not  think  so  to-morrow.  .   .  ■■^^^ 

While  we  are  speaking  of  this  ^^f '^«"f.^?'' ^"f''eoS^^^  with  it 
as  well  dispose  of  another  element,  as  it  is  closelj  connette 

in  the  public  mind.  ,  testifying  who  can  give 

You  will  have  gentlemen  on  t'^^  stana  tesim 

vou  the  absolute  inside  facts;  give  y »"  *  "^f ^^^^l^^^J ffi^  has  the 
I  went  to  investigate  ,t  mvself ,  and  t^.  "f ™T*^^  ^  best  security 
least  possible  -"-ption  ot-na.ne  y,  tWt     ith  ^^^^^^^^  ^^^ 

that  vou  can  produce,  the  >eiy  best  *f ^"' "■■;  .  •'  ,  ^oney.  Th  s 
have  got  to  pay  at  least  •  P^.-^ -{J^Jf  „'','^  Bie  sa^iaTS  rails  and 
money  is  costing  you  actual  ™"*\^' ^  f,V  You  have  got  to  go  into 
ties  and  cars  and  everything  else  you  b«y-  J^  °'^  f  ^^  f^,,  5  %,.  eent 
the  market  and  buy  that  money,  a^id  you  ha^  e  got  to  p         I  ^^^^^^  .^ 

?re-bulToifcrfi^d1t"o.Si:<^irfVom^e  gentlemen  who  are 

-s:roir  cannot  get  the  ^^-:y-^^;.^zi::^ 

c^r-s;  you  can  not  get  ■'^^y^,l±l\fi'^^l^C\dh,g  this  property,  re- 
Now,  you  are  the  f  Jlttemen  ^Uio  aie  buim    g^       ,^^^  ^^^^  ^^^^^^^^ 

member,  and  that  is  ^'»f  >^",;^'i;?i  Vf,fake  a  poin"  on  it  when  you 
market  for  money;  and  dont  *^  \*° '"^^^^n^g  to  do  a  verv  great 
render  your  ^P  "'°'^V>'?^-""^^fi"^\;"  av  it  I  am  opposed  to'paying 
good  to  the  Ptl>^.-,/j^»  "ti  bhc  wS  it  comes  to  plying  5  per  cent 
it.     I  am  on  the  l^-^^^ "*  *™=/r^  public  when  I  have  to  pay 

for  the  money.    So  I  am  on  "le  side  01 1      i  ^^-      f ^^  nothing. 

$10  for  shoes;  and,  in  fact,  I  '«°"1^.    ^V'^^'-^.v^^t  score.     [Laughter. 
Thei-e  is  no  q-c^tjon,^^""  ."^^  ^     {^J  can  no    get  these  things  for 
But  vou  can  not  do  it,  gentlemen.     ^  »"  <^'"^  and  thev  have  not  any- 
nothing;  and  they  are  art'-al;]'''"**,  JJ^^i'the  ma^r  comes  before 

thing  to  do  -ith  <i>«*:">'f4:^f  p*.;/.!ft Lmm      of  "»o"«y  '^  '•^'^^y 

the  public  for  the  sale  ot  these  ^e*;""',"'  '       j.,     ^  ^  j  discount  is  so 
merged  in  with  the  discount,  «f  "-ed  up.     l he  totai  ^^ 

IduJi^iSS  »r.;;:  'pk^  - --  -^  •'«  - 

know  it  myself  t^J'^^yXV'f  should  guess,  because  you  will  have  a 

^:^::s^^^^:t^^:^^.  spoken  oi 

Now,  we  have  spoken  »* /  V^^^f^^.'fn""^^  connection  to  speak  of 
the  cost  o    Promotion^^and  It  rema  ns  m  th^^^^^  ^^^  ^ 

promoters'  prohts.     Ihe  puDiic  «iii  ^  j       ^^^^^^i  in  the 

[here  should  be  -"J.  P^^^^-y  word  "promoter"  does  not  sound 
nostrils  of  the  public.    The  a  eiy  avoto     i  o,„oters  in  your 

well;  but  it  IS  there,  gentlemen      iM-ue      ^     .      ^^^^ 

projects.    If  you  are  ^f^J^'^'^Xu^the  promoter  the  bigger  the 
him  a  rattling  big^hiry,  and  «ie  brtte         ^i^^  .^^^  ^^^.^  ^^^^^^^ 

salary  you  x^nll  ^^^'^^^ ^^^^^^^  j^to  it  for  profit,  and  you  are  going 
tMTl  pr— 's  ;ro& ;  'and  ff  you  will  bring  anybody  m  here  w  ho 


260    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

has  had  experience  in  promoting  public-utilities  properties,  or  any 
other  kind  of  property,  you  will  find  that  5  per  cent  is  a  mighty  low 
figure  for  it.  Five  per  cent  of  the  cost  of  the  property  is  a  mighty 
low  figure. 

Xow,  you  do  not  have  to  take  my  word  for  that,  because  I  have 
never  projuoted — well,  yes,  I  have  promoted  one  or  two  properties, 
and  thev  have  turned  out  to  be  gambles,  and  they  are  written  off. 
They  were  written  off  a  long  time  ago,  and  my  regret  now  is  that  I 
have  not  more  recently  lost  them,  so  that  I  could  write  them  off  in  my 
income-tax  account. 

Commissioner  Gadsden.  That  is  the  reason  that  you  do  not  want 
to  act  as  a  promoter  much  longer,  I  suppose. 

Mr.  CooLEY.  Well,  I  was  not  good  as  a  promoter.     It  was  not  my 

forte.  Ill 

You  certainlv  will  have  appearing  before  you  men  who  have  done 
these  things,  and  it  is  not  necessary  for  you  to  take  my  word  for  it. 
You  will  get  directly  from  these  men  the  same  thing  that  I  have 
gotten  from  them,  and  it  is  better  that  it  come  to  you  direct. 

Not  only  has  that  to  do  with  the  development  costs  of  the  projects, 
but  the  cost  of  monev  and  the  promoters'  i)rofits. 

Now,  comes  the  interest  during  construction.  Curioudy  enough, 
we  have  lumped  that,  and  we  say  it  takes  three  years  to  build  a  prop- 
ertv,  and  money  is  spent  uniformly,  starting  at  zero.  At  the  end  of 
three  years  it  is  all  spent.  We  will  say  that  we  had  all  of  the  money 
for  half  of  the  time,  or  half  of  the  money  for  all  of  the  time,  at  6 
per  cent.  So  we  take  3  times  0  per  cent— 18  per  cent— and  divide 
it  bv  2  and  call  the  interest  9  per  cent,  and  we  stick  that  on.  Now, 
that  is'not  right,  but  we  have  been  doing  it  for  years;  we  have  been 
doing  it  for  20  or  :^0  years. 

It  is  not  right,  because  that  is  not  the  way  the  money  is  borrowed. 
It  does  not  conform  to  the  facts.  If  you  can  get  hold  of  the  books 
and  the  historical  records,  you  do  not  have  to  make  any  overhead  at 
all  •  you  can  go  right  through  the  books  and  dig  out  what  the  actual 
interest  was  and  find  the  thing  you  should  use;  but  if  you  can  not 
get  the  books,  you  have  to  make  some  estimate  of  it  in  the  best  way 

you  know  how.  •  i       i         ^    i 

When  you  start  a  years  building  program,  you  either  have  to  have 
the  whole  money  at  the  beginning  of  the  year,  or  at  the  beginning  of 
each  quarter,  if* you  can  make  that  kind  of  a  deal  with  a  banker  who 
is  furnishing  yoii  the  money.  We  will  say  it  is  quarterly.  Now,  he 
will  let  you  have  it  at  6  per  cent,  say,  and  give  you  2  per  cent  on  all 
balances,  or  whatever  it  is,  so  that  when  you  get  through  the  year  it 
may  have  averaged  5  per  cent.  But  when  you  have  run  that  over 
the  construction  period,  which  includes  for  the  land  at  least  a  year, 
or  four  years— including  three  years  for  building  the  property— you 
will  find  that  that  interest,  instead  of  being  9  per  cent,  is  over  11 
per  cent.  Yet  you  did  not  know  it  until  it  was  investigated,  in 
accordance  with  the  actual  facts  which  have  been  found  to  exist. 
It  was  the  same  kind  of  an  investigation  that  developed  the  fact  that 
a  half  of  1  per  cent  or  1  per  cent  for  taxes  did  not  anywhere  near 
reach  the  result.  It  should  have  been  2  per  cent.  They  did  not 
know  it. 

So  I  say,  gentlemen,  this  is  a  research  problem.  When  we  used 
to  apply  9  per  cent  and  one-half  of  1  per  cent,  and  certain  of  these 


•    PKOCEEDINGS  OF  .E.EBA.  K.ECTBIC  RAILWAYS  COMMISSION.    261 
Other  per  cents  to  ^^^'^j:^:n^^^^J^P; 

S^lain.  .^y  I  am  no  longer  -  ^^al    donS  -»  ^^'^  '''  ''^''' 
Now,  when  you  have  this  P'^°Pf ';{, '":„„i  property,  I  mean— you 
this  property  before  1  o  clock,  g"^  V^^^'^J^lJli  and  the  cars 
have  got  the  tracks  laid  and  the  J^^e^^^^^^ 

bought,  and  you  ha\e  at  the  %eiy  «""  ""  ^  ^iave  to 

youliave  already  arranged  ^"-^  ^"'^^X  3  youv  own  buildmg; 
Ut  quartei-s  at  the  outset  "^y^^^^^^  rating  expense;  and  if  you 
and  if  you  rent  it,  the  x^nt  becomes  'in  o^^eat^^^^^^^^  ^ 

build  it,  It  is  a  part  of  the  P'^P^^y' ^''IJ^,,  turn  a  wheel  is  to  provide 
Then  the  very  last  thing  you  do  betoe jou  ^ 

what  we  call  a  working  ^aP'*^^-    /S''*^'/g° ^t  amount  of  sense  to 

Now,  of  course,  it  does  not  i^f  f,  .";7- f  ^j^j^.h  you  buy  materials 

know  that  when  you  «*'»»  t";!",^^'^^ the  week  or^t  the  end  of  the 

and  hire  help,  you  have,  at  t^°  ^^f^^^J  t„  be  the  working  capital 

month,  to  have  a  pay  i""" .  „t  ^",;.f  .f "hT'pav  roll,  and  that  working 
for  that  pay  roll.    Ihat  takes  caie  «*  th«  pay        ,^  .^^^  .^^  ^,^^  ^^^^^^ 

capital,  g«f  «r"h' H  e  tUe     It  i    the^mount  of  money  that  the 
sub  ect  to  check  all  the  time.  J^^J^  ,    -^  business  from  day  to 

company  has  found  necessaij  m  oidei  to  do  its  D       ^^^  ^^^^^     ^  .^^^^ 
day.    And  I  take  that  from  the  books,  i  cio  noi  e  j^^^ 

Se  that.    We  go  back  over  a  ^^^^^^^^^  ,,,      t  it  in. 

te  istrm'iney,  a^Tf  t'-irotUr  interest  in  the  banks,  it 

earns  an  interest  th^ugb  tbe  rate  ^^^^.^  ^  perfectly 

Now,  we  are  ready  to  start  the  ^'^  be^'s  ^oin ^  ^  structure 

inanimate  property.    It.has  »«*  *  P^'^J'^'t'lt  i„to  use  it  would  not  be 
*^^^\ra"dJlirex^epf  f^  ^tt  v^r^alue  it  may  have  in 

Tetturll^ro^n^^^^^^^^^  ,,  eonnection 

ments  in  the  rate  that  you  are  going  to  nx. 

Mr.  Wabren.  Before  you  .ftt°*fjj/jf°|bo^Cerhead  items? 
^^t  Too\r  YS"FcTn  do  «it  an¥;rniay  be  surprised  when 

1  g^tlS-itfyol.    You  .^1  ^y^rS"^^,  over 
IVhat  the  gentleman  means  by  this  o^ eUieaci  ^^^^^-^^^  ^^^ 

and  above  the  actual  money  that  you  im  este 

labor  in  the  physical  proP"-ty- ,,^b**  \!  '^."j  „ou  put  those  costs  into 

You  buy  "materials  and  you  buy  Ubo^,  am  y  ^^^P  ^^  ^ 

the  physica   property;  fnd  it  is  what  we  ^^^  ^^^.  ^^_ 

how  much  in  addition  to  that  base  h^me  m       y  ^^  ^^^ 

zation,  legal  expens^,  engmeer  ng^nteiest  o^  ^^^ 

for  this  thing  and  for  that  thing     au  ^^^  ^^  inventoried. 

ry  Uatwrrov^JhtrS^b^;  ve^rrsmallllO  or  1.  per  cent. 


H 


262    PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

perhaps;  maybe  not  over  8  or  10  per  cent,  dei)ending  upon  condi- 
tions. In  the  city  of  New  York,  they  might  be  60  per  cent.  I  heard 
a  gentleman,  a  very  prominent  engineer,  testify  before  Judge  Tayler 
that,  under  certain  conditions  in  the  city  of  New  York,  the  overheads 
were  60  per  cent.  I  did  not  know  it.  I  was  just  as  much  surprised 
as  Judge  Tayler  was. 

Now,  let  us  see  how  that  figures  out. 

Certain  items  of  overheads  to-day,  instead  of  being  put  on  over- 
head, are  put  inside  in  connection  with  the  item.  A  certain  percent- 
age for  overheads  comes  in  with  grading,  a  certain  percentage  for 
track  laying,  and  a  certain  percentage  for  this  thing  and  that  thing. 
It  comes  into  unit  costs,  and  disappears  as  a  part  of  unit  costs. 
That  is  happening,  and  some  engineers  are  very^  adroit,  enough  so 
that  they  can  conceal  a  very  large  proportion  of  the  overhead,  and 
nobody  will  ever  know.  That  is  being  done.  That  is  the  way  they 
keep  their  overheads  down.  But  if  you  will  be  honest  about  it  and 
put  your  overheads  where  they  belong — and  by  "  overheads  "  I  mean 
the  contingency  items,  the  engineering  item,  the  legal  item,  the  or- 
ganization item,  the  interest  during  course  of  construction — and 
not  yet  consider  cost  of  developing  the  project,  costs  of  money,  or 
promoters'  profit,  but  leaving  those  out,  they  amount  to  12J  per 
cent.  They  run  from  15  to  18  per  cent  up  to  25  or  30  per  cent. 
Now,  if  you  add  all  of  these  other  things,  they  actualty  come  up  to 
between  30  and  40  per  cent,  and  in  certain  instances,  as  high  as  50 
or  60  per  cent,  as  this  gentleman  testified  to  in  the  city  of  New  York. 

The  Chairman.  If  it  is  convenient,  Professor,  we  will  stop  now 
to  meet  at  2  o'clock. 

^Ir.  Cooi^Y.  Yes;  I  have  given  you  everything  up  to  the  point 
of  operating  expenses. 

Commissioner  Meeker.  How  much  are  we  worth  now  ? 

Mr.  CooLEY.  You  may  find  out  that  you  may  not  have  made  a 
cent,  and  you  will  be  lucky  to  escape  without  going  into  your 
pockets. 

Commissioner  Meeker.  I  was  afraid  that  we  were  going  to  be  a 
bankrupt  concern,  and  I  was  going  to  protest.     [Laughter.] 

(Whereupon,  at  1  o'clock  p.  m.,  a  recess  was  taken  until  2  o'clock 
p.  m.) 

after  recess. 

Appearance:  Mr.  C.  J.  Joyce,  Philadelphia,  Pa.,  representing  T. 
E.  Mitten. 

MR.  MORTIMER  E.  COOIEY--Resumed. 

The  Chairman.  You  may  proceed,  Mr.  Warren. 

Mr.  Warren.  I  want  to  read  a  telegram  which  was  received  in  re- 
sponse to  our  request  of  the  vice  president  of  the  San  Diego  Co.,  to 
come  on  and  appear  before  the  commission.  He  could  not  come,  but 
has  sent  this  telegram  which  explains  the  reason  and  also  throws  some 
light  on  the  situation.    It  is  dated  San  Diego,  Calif.,  July  15 : 

John  H.  Pardee,  President ^ 

950  M%mscii  Bnildmp,  Washington  D.  C. 
Utterly  impossible  for  me  representing  our  companj^  be  in  Washington.     We 
indorse  every  word  your  statement  before  committee  reported  by  Associated 


PEOCEEDmGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    263 

Press  this  morning.     Speaking  *-  «"\^«^«„^,f;C'b  "n'Piam-'.u^^^^^^^ 
been  preparing  our  case  for  18  »"°«'^„f"^Jf "1  ""  tliat  December  31.   mS. 
to  Stato^ailroad  ^"'""'f '»'V,(S'ooS7nd   ^.tp^y  h^^^^  deflcit  of  $1,240,000 
our  investment  a"'"""'"^*"  *f'*STccrued  to  amount  of  $1,064,000  but  not 
At  the  same  time  depreciation  ^d  accrue"  to  a  .    ,app„,ents  due  to  m- 

1  per  cent  of  this  accrue.1  depreciation  is  on  h^»<^t»r      1  „.„,„,„  showing 

ndeauate  fares.  This  day  tliere  have  '>**"  P'f  ^"^.!°,, "  ^-is  been  $o2.->.7(W  with 
rta7  for  first  6  monti.s  1919,  total  "Pf^^"""^^  Counting  ^$.568,200  which 
IpeLting  expenses  '"clu.ljiiK  interest^a'^«^',«f;iXu^  ex'ilusive  of  deprecla^ 
leave  actual  o,«*rating  dehcit  »*  fi-'^\.J"tion  amounts  to  $1.55,200,  making 
ti.m  for  first  6  months  1919,  which  d«P'*^'_""  rri,„  pxnenditures  during  tliose 
total  deficit  of  $197,000  for  the  6-'"»»  ''f^n  mce  because  e  have  not  got  the 
6  months  do  not  include  "dequate  nia.ntoijce  bec^^^  ^^^  ^^^^  ^^^  1919.  »"^ 

mmiey.  The  company  is  »". 'IfJ"'^'  "'^  ,?„  ggg  we  receive  large  measure  of  re- 
no  dividend  has  been  paid  .f  "f  ,J»f  ;„„Vp"  m-  can  not  continue  operating  this 
lief  from  railroad  conninssion,  this  tximpany  satisfactory  securitj-  for 

;;-nrt''o=rrf ^^t|j_£^;^  t -^^^^^^^ 

rw;![r;l";llril:dr;^"^rcorhr^Hh  absol^^^^     no  assurance  Of  re- 

turn  of  principal  or  even  interest  on  same.  ^     ^  accentuated  by  war 

The  burdens  of  this  company  have  been  increaeo  increase,!.     Cost   of 

oondmon.s.  Wages  of  all  enjp'"j'^,^„„'^«:^  n^  cent  to  300  per  cent.  Actual 
supplies  have  advanced  any^**":?,//™  .  necember  1918,  amounts  to  134  per 
average  increaswl  cost  between  1914  a«d  Decembei,  la    ^  ^^^^^  j. 

c^nJ,  but  the  fare  still  <;«"»"  l^^^  tl  e  vUleVe  of  misstatement  ami 
utilities  of  the  country  have  '^''^ij"'  'f/'!..„  political  advancement  until  the 
"ituperation  of  cheap  Po""".'"'^'?'  wUl  n  "t  Cept  th..  truth  of  their  con- 
pub  ic  mind  has  been  so  P">s""«  '  "' "  '^'f „;' gt^tes  hesitanee  and  in  some 
rt Itlon  to-dav.  As  a  consequence  there  is  in  !«»">  J'"'J  ,  ^  rgnef.  Power  to 
c^r  rrfusiU  to  grant  -"-f  .^^.^^S'^.a^gr^Uw  go  together.  The  arbl- 
increase  fares  consistent  wi  1    Inciea^^^^^  „  increase  fares  has 

trarv  increase  of  wages  through  VS  ai  »°-'™    ^         Electric  street-railways  .  f 
brought  some  companies  to  verge  «  bankiuptty^  ^  ^^^  through 

United  States  nee<l  prompt  relief  and  ^^  "^^yi^^,,"^,,,  Federal  control.    The 
State  institutions,  Co"8re.ss  should  take  action  w  e^^^  ^^  ^^  ^  ^,^y^„^^  ^, 

control  should  1«  a  permanent  federal  hoar"  .        m,„ 
outside  any  political  interference,  control  or  e^en  sugt,  ^^,    ct.^YTON, 

ytee  President,  Sa«  Diego  Eleetru;  Bailwav  Co. 

Mf.  Wakk...  Now  Mr  Cooley  th^t  tel^grain  sp^^^f  deprcna- 

stood  as  any  subject  connected  ^»*1?  f J'^^^^ *  ^^^^  get  a  clear  con- 
possible,  aPl--fy'J«^  ^HeSc^"  r  «  coZ^^^^^^    "'**^  ^  f^ 

property,  all  the  elements  are  bra«d  nej,  the  ties  an 
power  house,  engines,  ^^T^'^f  "^'^Jf^^'^  iDerclnt  condition.    Some 
brand  new :  it  stands  in  ^h^t^J^/'^^^/'JrPlort  lived.     An  engine 
of  these  elements  are  lon^-lV^fv   .  or  10  Tea"-  a  car  mav  las^  in 
,„ay  last  30  years  a  t-  -ay  J^st  6^;  -  lengths  of 


/ 


2G4    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

of  which  are  partly  worn  out,  and  some  of  which  are  all  worn  out. 
After  it  has  been  running  through  25  to  30  years — the  length  of 
the  longest-lived  element — it  will  be  made  up  of  elements  of  all 
conditions  as  the  length  of  remaining  life. 

Thus,  when  you  make  an  appraisal,  you  examine  these  different 
elements  and  you  find  some  standing  at  100  per  cent,  some  standing 
at  75  per  cent,  some  standing  at  50  per  cent,  and  some  standing  at 
zero.  But  when  you  have  taken  the  w^eighted  average  of  all  these 
elements,  you  find  they  stand  somewhere  between  80  and  90  per  cent 
of  the  original  100.  In  other  words,  there  has  been,  say,  15  per  cent 
of  accumulated  wear,  or  of  wear  that  has  come  into  the  elements,  so 
that  the  100  j^er  cent  condition  is  represented  by  an  85  per  cent  con- 
dition. 

Xow  here  comes  the  point  that  is  so  hard  to  understand.  It  makes 
no  difference  if  the  property  lasts  a  thousand  years,  the  per  cent  con- 
dition in  which  it  remains  after  it  has  come  through  its  longest  cycle 
remains  j^ractically  constant,  say  85  per  cent.  You  can  not  raise  that 
85  per  cent,  if  that  is  the  mean,  because  in  order  to  raise  it,  you  have 
got  to  throw  away  j^roperty  befoi*e  it  is  worn  out.  A  tie  wull  not  '  i 
entirely  worn  out,  a  car  may  not  be  worn  out,  and  if  you  replace  them 
too  soon,  you  will  bring  up  the  average  condition  at  the  expense  of 
property  still  usable. 

Likewise,  you  can  not  let  that  property  drop  veiy  much  below,  be- 
cause then  it  becomes  dangerous  to  operate  and  it  does  not  render  the 
service  for  which  it  is  designed. 

Then  the  conclusion  is  this :  That  the  85  per  cent  condition  that  I 
am  speaking  of  for  all  practical  purposes  throughout  all  the  life, 
whether  10  years  or  30  years  or  1,000  years,  is  the  100  per  cent 
operating  condition. 

Xow  you  can  not  have  that  85  per  cent  except  you  buy  it  with  100 
per  cent.  Thus  you  must  allow  the  100  per  cent  as  the  basis  for  rate 
making  and  not  the  85  per  cent.  You  can  not  have  the  85  except 
yon  pay  100  for  it.  It  is  the  cost  of  the  .85  per  cent  condition  which  is 
the  maximum  practical  operating  condition.  All  this  money  that 
comes  into  the  treasury  of  the  railix)ad  comes  through  a  property  that 
necessarily  exists  at  an  85  per  cent  condition. 

Xo- :  that  is  one  kind  of  a  depreciation.  You  might  call  that  a 
fixed  depreciation.  And  the  i^roper  way,  if  you  are  not  going  to 
allow  the  100  per  cent  as  an  earning,  is  to  allow  out  of  earnings  some- 
thing in  the  nature  of  a  sinking  fund.  You  must  contribute  to  this 
sinking  fund  tlimugh  an  annuity  taken  out  of  earnings  which  in  a 
given  time — say  the  life  of  the  franchise — will  bring  you  back  the 
difference  between  85  and  100  per  cent.  So  whether  you  allow  the 
100  per  C2nt  or  allow  the  annuity,  its  equivalent,  it  comes  out  of 
earnings. 


Xow  the  second  depreciation- 


Mr.  Warrex.  May  I  tisk  one  question  there?  Suppose  instead  of  a 
determinate  franchise  you  had  an  indeterminate  franchise,  would  you 
allow  15  per  cent  ? 

Mr.  CoooLEY.  There  would  be  difficulty  in  an  indeterminate  fran- 
chise to  determine  what  the  annuity  would  be. 

Mr.  Warren.  Because  if  a  pix)perty  was  expected  to  last  forever 
you  would  never  make  up  the  15  per  cent  ? 


PROCEEDINGS  OF  TEDEKAI.  ELECXHTC  .An.-vVAVS  COMMISSION.    265 

Ml-.  COO....  Xot  at  all;  ^fj-J^^:^^^!^^:^ 
rate  of  return  on  what  it  costs  to  get  nut  prop      .y 

coiiiiiiion.                            .              ,  ,i„,^,.pf.;Mtion  item.  In  order  to 

Now  with  regard  to  this  second  ^^eineoaUon  ^t  ^^ 

keep  this  property  m  the  80  per  cent  condition  J  ^^.^^  ^.^^_ 

xeniw  elements  as  they  wear  out.    Ca^s  eng  nes  do  ^^     ^^^^^ 

they  all  have  to  be  renewed  from  t"«e  *«  tm,e  as  tn  v  ^^^^^^ 

you  have  to  put  aside  a  sum  °*  """"^f „  "/^g^'one  obs^  even  when 
Renewals.  A  car  mav  wear  out  or  it  "^^>^  «^^^^^^  °  ^  j^  Detroit  with 
it  is  in  splendid  working  condition  as  ^<^;"ie^?^  ^^^^^.^.^^  ^^^^^ 
the  old  single-truck  cars.     Tl>ey  stood  at  a  1    y       scrapped  because 

T^^^^^^^^^^^  ''-'■ '-' " ''-''"  *'^" 

-S^w  this  second  fund  that  I^^^^^^^^^  ^^^1^1^^^ 
85  per  cent  condition,  has  liKe^Msc  '^^  \^  ^  .  j  ]^|  „^yQ  you  a 
Xch  bigger  a—t  than  peopl^  f  >^rd.    AncU  could  g 

demonstration  of  that.  11  y°" /„,,.  .„a  take  the  length  of  life  of 
physical  property  which  can  ^^^^rm  the  arithmetical  computations, 
tlwse  different  elements  and  perfoim  the  armin  ^^,,\^^^^  out 

you  will  find  that  the  average  l^te  of  the  eiem^^^c         composite  life. 

L  say,  12. 13,  or  14  y^'^'^^.^^/'^Jj^^l.if  f  und  for  'renewal  Lmewhere 
So  that  it  is  necessary  to  P"t  i^to  "««  Wn^^ 

around  6.  7,  or  8  per  cent  of  the  items  mat  ^^^^  ^^^_ 

Now  it  happens  that  the  it«"]s  liat  w  ear  out  are^  property.  So 
third  or  perhaps  one-quarter  of  the Jota^  cost  o  ^^^^^p^^i  .^  ^^^^^ 
when  you  spread  this  6,  <,  01  8  p«  cent  o         ^^^^^  ^^^^ 

that  anywhere  fiop  l'^;  \oi  ^^  P^fS  or  what  is  ordinarily  spoken 
crty  has  got  to  go  into  th  s  i^ei^ewal  tima  or  ^^^  ^^^  j 

-^^  K:  iTor  2  pe.  cent -^^^^^^  ll 

may  be  a  quarter  of  the  bond  int«»«?t,  11  ju  ^  ^^^  ^^ 

earnings  ^hich  that  road  has  got  to  m^^^^^  ^^^  ^^.^  ^^^ 

religiously  saved  f«  ^""^  "^^^Th^Sgrity  of  the  property  is  not 
put  it  back  into  the  propeiiy  "'^  "  jf-^v  to  nut  into  this  deprecia- 
^aintained.  So  I  say  it  is  a  f  f  i"^^^^^;^^  ^XVin  the  integrity  of 
tion  fund  as  much  money  f  i.^^'^^f,^'^^  jt  is  around  about  85  per 
the  property,  .^!"«^1?  fo^o^^^^^^^^fof  Jh^elements  all  being  new.  So 
cent  of  the  original  100  P^'  c^";  ot  i  gtion  of  depreciation, 

that  is  my  idea,  gentlemen  of  this  w  ho  e  que  ^f^^^^ 

Mr.  Warren.  Now,  Prof-  Coo  «y,  w U   jou      y  ^       ^^  through 

the  different  methods  of  ^^^"^'^"'/"pti'  right  at  this  point.    In 
Mr.  CooLET.  Yes,  that  comes  verv  aptly  n|  1  ^^^^  ^ 

talking  about  the  ^f  ^^J- ^ha"   tSsr^^^^  yalLtion  or  the 
y aluation  ?  .  Well,  of  com  se  ^^  na  ^^_  ^^^^  ^^^^  ^^ 

book  valuation  or  the  cost  ofreP»°f;f°', eduction  less  depreciation 

S:^'iXS''^^'otJt^  Wnt  value,  a  very  misleading 

-Tow,  ^^at  I  have  3U.^^^^^^^^^^^ 

tUT^r^^J^^M^^^^^^  <=-*  °f  reproduction  less  deprecxa- 
1G0643"— 20 18 


:  tl 


1 


266    PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tion  is  about  85  per  cent,  so  I  do  not  need  to  say  anything  n^ore  about 
that.     Now  the  historical  method,  of  course,  does  not  need  any  dis- 
cussion, because  that  means  just  what  it  says;  likewise  the  book  ac- 
count.    Those  are  the  different  ones.  ^     •      n 
Now,  we  do  not  have  the  historical  value.    If  the  property  19  old 
and  the  books  have  been  lost,  we  do  not  have  the  book  value.    So  we 
attempt  to  get  at  them  in  the  only  practical  way  that  we  seem  to  know 
anything  about,  namely,  by  estimating  the  cost  of  reproducing  the. 
property  under  normal  conditions  or  under  the  conditions  as  nearly  as 
may  be  which  existed  at  the  time  the  property  was  built  with  respect 
to  the  purchasing  power  of  a  dollar.                 ,    -»,     ^,    . 
Mr.  Warren.  I  think  that  is  all  I  want  to  ask,  Mr.  Chairman. 
Commissioner  Gadsden.  Will  you  follow  up  there  and  say  a  few 
words  on  the  subject  of  obsolescence? 

Mr  CooLEY.  Yes.  Take  the  electric  street-railway  art  as  an  ex- 
ample and  compare  it,  if  you  like,  with  the  art  of  gas  making.  Now, 
the  electric  street-railway  art  represents  an  art  which  has  been  chang- 
ing very,  very  rapidly  in  the  last  quarter  of  a  century,  whereas  the 
gas-making  art,  which  has  existed  for  75  or  100  years  or  more,  has 
been  changing,  but  the  changes  have  been  relatively  slight.  In  other 
words,  the  gas-making  art  in  comparison  with  the  electric  is  a  fixed 
art  and  there  is  not  much  obsolescence.  Take  the  street  railway  and 
take  its  history.  We  all  of  us  remember  horse-car  days  and  remeniber 
how  the  horse-car  was  changed  into  the  cable  road  in  San  Francisco, 
Grand  Rapids,  Chicago,  and  elsewiiere.  And  then  came  the  electric 
road  back  in  the  late  eighties  and  early  nineties.  And  perhaps  as 
good  a  practical  illustration  as  any  I  can  give  is  the  situation  in 
Grand  Rapids,  Mich.  Succeeding  the  horse-car  days  they  built  there 
a  cable  road  up  those  hills.  I  do  not  think  they  operated  that  cable 
road  more  than  a  year— perhaps  not  as  long  as  that,  but  a  very  short 

time when  they  recognized  the  handwriting  on  the  wall,  and  they 

then  scrapped  that  whole  cable  road  and  converted  it  into  an  electric 
i-oad— the  boldest  and  bravest  bit  of  financing  I  have  ever  known 
anything  about.  Now,  there  was  a  case  of  obsolescence.  The  prop- 
erty had  only  been  running  a  year  or  so;  it  was  practically  new;  and 
yet  it  was  scrapped  for  obsolscence,  and  so  far  as  the  duct  and  the 
cable  machinery  was  concerned,  it  was  pretty  nearly  100  per  cent  obso- 

Icvscent.  ,  .,    .  ,  1-  T  ^1 

The  Chairman.  Did  the  company  stand  that  loss  or  did  they  amor- 
tize part  of  it?  ,     T ,  jLL  ^      3 

Mr.  CooLEY.  I  have  never  heard.    I  have  often  wondered. 

Commissioner  Gadsden.  How  ought  it  to  be  treated  economically  ? 
.  Mr.  CooLEY.  Treated  economically.  Of  course  they  went  into  it  in 
the  best  faith  in  the  world  and  with  the  knowledge  and  consent  of 
everyone ;  and  economically  or  morally,  at  least,  they  should  be  per- 
mitted to  earn  on  that  investment  until  they  could  wipe  it  out ;  that 
is,  they  should  be  permitted  to  earn  enough  so  they  could  gradually 
wipe  out  that  tremendous  investment.  And  so  far  as  my  experience 
with  commissions  goes,  they  are  permitted  to  earn  it  and  w  ipe  it  out. 

Take  another  case  right  there  in  Michigan:  The  Commonwealth 
Power  Co.  built  a  high-transmission  line  from  one  of  the  dams  up  the 
Muskegan,  I  think  it  is,  and  carried  the  current  into  Grand  Rapids 
and  the  southern  towns.  They  went  into  the  market  for  copper. 
They  thought  copper  was  going  up— everybody  thought  copper  was 


PKOCEEDINGS  OF  H..ERAI.  .ELECTEIC  EAILWAVS  COMMISSION.    267 

going  up-and  they  paid  30  or  32  cents  say  fr^^^tSinCg  UiSy 
fnough  W  the  ^hole  ]ob  so  as  to  have  It  0^^  Imno,.^^  ^^^^^^ 
to  profit  by  the  market     But  betore  tney  g  ^^^^^  ^_^^^^ 

dropped  to  16  or  18  cents,  a.     V^e'^^^.y/^^,!^  °L         jer  the  Michigan 

^.e  do  with  it?  We  ^-^i-e;?  ";"f  *^1,PC  had  a^pecial  hearing^on 
Kailroad  Commission;  f^^  the  commission  h^^^^^^  ^.^ 

it,  and  the  facts  were  related  to  t^em ,  and  toey^a    ,  .  .^ 

will  allow  them  30  cents  for  the  copper  jha\toev  p  ^^  ^^^  ^^^^^ 
invested  their  money  honesUy,  and  it  was^imp  y  ^^^  ^^  ^.^^  ^^ 
nobody  could  anticipate.      And  ii  weui. 

up  in  a  fund  to  be  amortized.  ^^  ^^^  subject  to 

Cominissioner  Mk™  B^^^^^^^  ^^  „^^  i,  making  the 

ptS  ruld  tL'iintLve  be^^^^ 
^"Ai^'cJoLE^Well,  I  do  not  know  just  where  we  would  draw  the 

"-*Sss^:;:ri£r^^^^^^^^ 

^  I'-^C^fv.  twould  say  fl-^J!l^:tX:^:^^^ 
made  or  they  ^„-tn9^^P-Pf  |  ^-^^^^^         f^^fl  they  si  Jld  stand 

7""?  "':im^t^Tl.T^^r.Zl£n.l  i'n  that  cLdition  up  t. 
high  condition,  ana  in^^y  ^^  ,  vinnble-truck  cars  took  their  place. 
thS  day  they  were  sci.^^^^^^^  early  days  wlien  we 

Now^  take  the  ^lectiic  aiL,  ^ui  g  belted  dynamo;  it  was 

had  th;  little  bigh-P«^d  en^ne  di  vin|  «  ^^  telted  d^^.     ^^^^ 

not  long;  It  was  in  1893,  f  tj^jf^^^;"'  ^  ,^as  not  very  long  until 
had  the  direct  unit  still,  a  small  luni.  slow-moving 

we  began  to  build  bg  ^^J'^^^^^^/'^tong  toward  WOO,  I  do  not  re- 

engif «;  C  '^e^ame'ite  ste^n'turbife  and  small  units,  first  used 
member  the  date—canie  ''"*'  r*^ ,  .        ,       .    j„  enffines,  a  few  kilo- 

as  exciters  for  t^e^  dy«7°s  ^Vo  ^o ^0  kCatts^capacity  with  the 
watts  capacity,  now  thrown  up  ,  ^^^^^  ^^^^^^^  ^ 

t:Z^''S'^^^foft.S.J^n,  street-car'  material  through 
"^MrWARBEN.  Is  the  cost  of  establishing  the  business  a  capital 
%TcoVi^-r':TtS  HlS^s^p  to  very  recently  been  considered  a 
"'£  wIbrf^.  In  that  case  it  enters  into  the  valuation  and  I  want 

to  ask  vou  about  it.  ^^^^.^  tendency  is  to  carry  the 

Mr.  CooMT.  Yes,  but  i  minK  g    ^j       ^ebt  and  amortize  it. 


m 


268    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CooLEY.  It  is  a  very,  very  substantial  item.  It  is  so  sub- 
stantial that  in  a  great  many  cases  it  runs  from  25  to  35  per  cent 
of  the  cost  of  the  physical  property.  It  is  so  big  an  item  as  that, 
so  it  is  very,  very  important.  I  know  one  property  in  Milwaukee, 
for  instance;  it  is  the  heating  property  owned  by  the  Milwaukee 
Electric  Light  &  Railway  Co.  They  have  kept  the  books  separate 
for  that  business.  When  I  made  the  fii*st  analysis  of  it,  in  1907,  they 
had  10  or  15  years  of  life  and  they  must  now  have  25  or  30  years' 
life.  They  were  plotting  the  curves  for  those  earnings  and  for 
operating  expenses.  It  looked  at  the  time  as  if  it  would  take  10 
or  15  years  for  the  earnings  from  that  company  to  reach  the  operat- 
ing expenses.  That  is,  a  period  of  25  years,  we  will  say,  has  been 
required  to  make  the  business  what  we  call  a  going  concern — by 
that  meaning  a  concern  in  which  the  earnings  of  the  company, 
the  income,  is  sufficient  to  meet  all  of  the  outgoes. 

So  I  would  emphasize  the  necessity  of  taking  into  consideration 
the  cost  of  establishing  the  business.  It  has  several  names.  That, 
I  think,  is  the  clearest  name.  I  would  emphasize  it  particularly  as 
the  tendency  to-day  seems  to  be  to  treat  it  as  an  operating  expense. 

Mr.  Warren.  How  would  you  define  it.  Prof.  Cooley  ? 

Mr.  CooLEY.  Well,  I  think  the  Wisconsin  definition  is  perh^s  the 
best  or  most  generally  accepted..  It  is  really  a  summation,  if  you  like, 
of  the  early  deficits — that  is,  a  sum  of  losses  that  the  company  en- 
counters up  to  the  time  its  income  meets  its  outgoes;  and  it  is  very 
hard  to  obtain  it,  because  companies  until  recent  years  have  not  ap- 
preciated the  necessity  of  so  keeping  their  books  that  the  items  of 
loss  can  be  actually  taken  out.  So  it  is  a  very  difficult  thing  to  sus- 
tain in  dollars  and  cents.  But  in  the  future  it  probably  will  be  a 
well-known  factor ;  no  doubt  about  it  at  all,  because  they  are  keeping 
their  books  now  so  as  to  tell  us  what  it  is. 

Mr.  Warren.  But  as  relates  to  income  and  operating  expense,  it  is 
something  like  the  interest  during  construction,  if  you  were  valuing 
the  property. 

Mr.  Cooley.  Yes;  interest  during  cqnstruction  period.  Now  I 
might  say  just  a  w^ord  on  that.  Now,  for  example,  when  before  lunch- 
con  we  had  completed  our  physical  structure  and  were  ready  to  start 
the  property  into  operation,  we  had  just  secured  stores  and  supplies 
and  working  capital  to  enable  us  to  begin  to  turn  the  wheels.  We 
start  in  and  it  may  take  six  months  or  a  year  before  we  get  that  prop- 
erty settled  so  that  the  machinery  all  works  well  and  gets  the  wrinkles 
ironed  out.  It  is  the  same  kind  of  treatment  of  the  property  that  we 
have  to  make  w  ith  a  locomotive.  When  we  buy  it  and  put  it  on  a 
steam  railroad,  we  have  to  run  it  a  few  weeks  under  easy  conditions, 
we  will  say,  so  as  to  work  out  the  troubles — precisely  the  same  thing 
you  have  to  do  on  board  a  battleship  after  it  comes  from  the  yard : 
It  has  to  be  run  and  tuned  up.  All  those  things  have  to  be  done  be- 
fore your  property  is  in  final  shape  for  operation.  Now,  that  all 
costs  money ;  and  when  you  start  to  earn,  you  do  not  earn  anything 
the  first  day  or  the  day  before  the  first  day ;  it  is  zero.  Then  as  you 
begin  to  operate  your  business  the  earnings  begin  to  mount. 

Meantime  you  are  carrying  along  as  expenses  all  these  daily 
operating  expenses  of  whatever  character,  including  taxes  and  in- 
terest  on  the  cost  and — well,  perhaps  you  would  not  start  any  sink- 
ing fund  or  depreciation  fund  at  that  time,  but  if  you  did  that  would 


.T^^^AT    vT  FCTRIC  RAILWAYS  COMMISSION.    269> 
PROCEEDINGS  OF  FEDERAL  ELECTRIC  ka 

also  come  in.    And  of  course  ^^^^^^^Vll^fo^^S  e- 
wiU  say,  the  first  week  or  two  or  th^e^  -eeks,  a^^^  ^^ 
penses  are  very  large.    Now  the  am  business.    And 

ilement  of  this  so-called  cost  «  estaou  i     ^  ^  ^^^  ^ 

when  you  aggregate  those  los^^^^^^^^^^^^^  ense  line  and 

the  gross  earnings  1  me  crosses  tne  g  ^       ^^^^  ^^^^  oi  estMish- 

when  you  sum  up  all  of  those  'f  ^es,  J  ou  i  frequently 

Ing  the  business  as  it  is  ordinarily  understood,    m  ^^^^^  ^^^  ^^^^^^ 

arlued,  and  apparently  with  f.^^^f^^  property,  because  with  every 
these  early  losses  the  more  valuable  your  propei  y,  .^^  ^^       j_ 

Ksfyou  are  adding  to  the  cost  «*  thef  "Pf^^^^  the  utility  when  it  is 
But  «iat  is  fallacious,  ^^  ?,^^"'^,',°  s^?V.  Now  the  public  knows  that 
built  is  built  to  meet  ^Pf  !'•=,  "^,^74' Jrt  with,  if  they  know  anything 
that  property  is  not  going  to  pay  "  swr^         ,  accepted  by  the 

about  it  at  all;  and  thf  P^Pf:;*/.  ^f ^J'^ot  to  grow  into  Its  business 
h"^-Tlf  a  ?uS  Swfedfe^i^  thS  A  losses  are  to  be  there; 

Mr.  Warren.  Now  I  >^ant  to  ^sk  ]u^  material  to-day,  and  I 

either  of  income  or  of  oP?rfting  f  PT-\^  ^  understand  covers  main- 
income-to  allow  for  i^^j^^f  ,^"f '  ^^^enance  of  equipment? 
tenance  of  track  and  roadbed  and  ™X  general  way,  first-I  had 
Mr.  CooLEY.  Ans^^XVelative  expense  of  building  such  properties 
occasion  to  inve^igat^^^^^Jf  ^*'^^^^^^^^  ^^.^^r  conditions  and 

as  electric-railway  ^"4, gas  Propert.es  ^i^^  conditions.    I  sup- 

""^^'•-  ^T£  Ta^t  r  tf  eTght  ln£  we  have  made  a  dozen  or  IS 
',^g::.^^onl  with  different  units  o    c^t.  ^^  ^^.^^  ^^ 

Now,  the  fact  appears  to  be  that  ii  ^^^^^^  j^^^.^  ^^  p^y 

within'the  last  year,  say,  o^  q«jt^  ^ecen^^ly^^^^  ^ 

fully  50  per  cent  more  to  securo/"®^^  i  of  coui-se  is  for  the  cost 
centals  a  very  eonservatn^e  estimate  a^^^^^^^  ^^^^  „,aterials  and 

of  the  property.  J\'^ ^^l  ^P  "  Now  when  you  come  to  operate  that 
other  elements  which  come  m.  ^J?  JV"  expenses  of  the  motorman 
property  of  course  there  are  the  platform  ex^^^^^^^^  ^  j^i^,, 

Snd  conductor-and  all  the  lajor  has  aa  ^  ^  ^^^  .^      ^hng 

in  some  instances,  doubled  perhaps  ana  __^^^^^  ^.^ge  element 

The  importance  of  that  f j^!^^  ^'''^eause  under  prewar  conditions, 
,lone-almost  IS  conclusive  answer    beca         ^^^^  operating  cx- 

as  I  recall  the  figures,  al'out  50  per  ce  ^^^  expenses  and  tho 

penses  were  required  to  pay  the  l^^o^'  ^^^P  operating  cost  excluding 
Jither  help  that  entered  into  It.    m^^^^^  Ig^  one-quarter  of  the 

taxes  was  about  one-  "  ^^alel  Now,  suppose  you  double  them; 
gross  income  was  labor  and  "^^f^  j^^'gjp p^^  you  treble  them ;  see 
That  25  per  cent  b^^ve  iS  atorbed  all  the  difference  between 
where  you  go.    You  naje  simpiy  ^  ^     ^^        depreciation 

the  original  50  per  oent  that  you  had  to  p  y^^^  ^^^^  ^^j 

fund  and  interest  on  the  capital,  on  ^^^^  ^^^^.^  ^^        .^ 

things  that  had  to  be  paid  out  of  the  in  ^  ^^^  ^^  ^^^^^^^^^  ^^^^  ,^^^., 
of  operation  per  se.     ^^^^   j 


270    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

wiped  out  everything.  This  telegram  that  was  just  read  is  very  per- 
tinent and  makes  it  clear.  I  do  not  know  that  I  could  say  very 
much — it  does  not  seem  as  if  I  could  say  very  much,  because  it  is  so 
patent,  it  is  so  apparent — ^but  right  there,  ii  I  may  just  say  some- 
thing showing  how  the  public  gets  things  wrong  end  to,  we  have  been 
making  arguments  right  along,  all  of  us,  that  we  nuist  have  greater 
wagos  in  order  to  meet  this  increased  high  cost  of  living.  That  is 
the  aigument.  But  you  will  correct  me.  Dr.  Meeker,  if  I  am  wrong — 
I  understand  that  is  your  field — but  as  I  see  it,  it  is  putting  the  cart 
before  the  horse,  for  I  believe  it  is  an  accepted  fact  that  the  cost  of 
everything  we  have  to  buy  is  very  largely  the  cost  of  wages.  I  have 
heard  it  stated  that  from  50  to  75  per  cent  of  the  cost  of  every  article 
we  buy  in  the  world  is  the  cost  of  labor  that  went  into  that  article. 
Now  if  that  is  true,  and  I  have  no  reason  to  doubt  it,  it  means  that 
as  we  advance  the  price  of  labor  we  advance  the  cost  of  living. 

Mr.  Warren.  Now,  Prof.  Cooley,  you  stated  that  the  depreciation 
which  ought  to  be  taken  care  of  was  about  2  per  cent. 

Mr.  CooLEY.  I  said  from  IJ  to  2 J  per  cent  on  the  cost  of  the  prop- 
erty. 

Mr.  Warren.  On  the  entire  cost  of  the  property? 

^fr.  CooLEY.  Yes. 

Mr.  Warren.  Supposing  that  is  set  aside  or  provided  for — if  the 
company  is  fortunate  enough  to  have  money  to  do  it — how  much 
more  under  present  prices  of  labor  and  material  should  you  say  ought 
to  be  allowed  for  maintenance — I  mean  for  current  maintenance? 

Mr.  CooLEY.  I  do  not  think  I  answered  the  first  question  you  asked 
completely,  now  that  you  ask  me  this  second  (juestion.  I  started  to 
speak  .generally  and  to  say  that  the  company  should  be  allowed  to 
earn  in  direct  proportion  to  the  increased  costs  of  building  the 
property.  If  the  property  costs  50  per  cent  more  to-day  than  it  did 
5  or  10  years  ago,  the  company  should  be  permitted  to  earn  50 
per  cent  more.     I  speak  of  tlnit  generally. 

Mr.  Warren.  In  other  words,  the  maintenance  cost  would  have  a 
very  direct  relation  to  the  cost  of  building  a  new  property? 

Mr.  Cooley.  Oh,  everything  has  gone  up.  I  do  not  think  50  per 
cent  is  enough.  I  think  it  is  very  conservative.  It  seems  to  be  borne 
out  in  certain  instances,  as  I  observe  the  reports.  The  old  fare  of  4^ 
and  5  cents  has  been  supplanted  by  (5-cent  fares.  That  is  about  a  50 
per  cent  increase.  The  old  5-cent  fare  in  Boston  has  gone  up  to  8 
cents,  I  believe.     That  is  more  than  50  per  cent. 

Mr.  Warren.  Up  to  10  cents. 

Mr.  Cooley.  Then  that  is  more  than  50  per  cent. 

The  Chairman.  When  you  speak  of  the  company  earning  more  on 
account  of  the  high  cost  are  you  speaking  of  the  gross  earnings  or 
net  earnings? 

Mr.  Cooley.  Gross.  That  brinjr^  up  the  question  whether  we 
shoidd  use  present-day  costs  or  l)?fc:e  the  war;  in  other  words, 
whether  we  should  use  the  cost  of  reproduction  to-day  or  the  histori- 
cal cost.  I  think  that  is  answered  splendidly  by  comparing  the  pur- 
chasing power  of  a  dollar  to-day  with  what  it  was  when  the  property 
was  built.  I  have  frequently  said  that  our  dollar  of  to-day  was  the 
50-cent  piece  prior  to  the  war.  So  if  you  are  going  to  build  a  prop- 
erty to-day  you  will  have  to  build  it  so  far  as  purchasing  power  is 
concerned  out  of  50-cent  pieces. 


P^CEEm^OS  0»  FBDEIUO.  .LBOT.™  ""-'"'^  CK>M»,SSIOK.   211 

the  dollar  is  about  M  cents     So  if  f.^^y^.^ay  be  valued  around 
war  at  about  around  ^1^0,000,000,  it  ^voulalo^  percentage  on  the 

$200,000,000;  if  you  '^i?/"«^"^'*,^^utThe  income,  ^e  will  say. 
$200  OOO'.OOO,  of  course  it^wou  d  Jo^We  ^he  'ncom^^^  ^^^^^  ^^ 

Commissioner  Meekbk.  But  the  a"fj\^^,     ^j^j^  ^„  ^^ch  earnings 

however.     If  you  are  «[";'"g  iVend^^on  «i^c^^^  «*  reproduction 
arc  to  be  allowed,  would  you  "epencl  upo  ^^^^^         ^^« 

I  mean.     For  example  ^^   ^^^^   difference  between 

ducing  under  current  prices? 

Mr.  Cooi-Er.  Yes.  exactly  jibe  with  your  state- 

Commissioner  Meeker.  3^°f  ,*f  „_f^!,al  cost  should  be  taken  as 
ment  made  this  forenoon  that  the  ong^na^  cos  ^^^^^.^  ^^.^^^ 
the  basis?    For  exaniple,  the  tunnel  tnroug  ^^^^^^  ^^.^^ 

eventually  became  the  ^«'^?^^^'iSLnS%  or  5^ 
about  100  per  cent,  was  it,  of  contingency ,  i 

Mr.  Cooley.  Very  large. 

Commissioner  Meeker.  Very  large?     . 

i^^'c^U  Ye.,  I  have  forgott      ^^ 

Commissioner  Meeker^^^^^^^^^  ^^^    ^^p^^y  to-day,  but 

rorSnal  ^^^^^^  ^1^^^  do  take  in  the  original 

be  any  question  B^out  that.    You  shoumt  ^^^^     ^^^^ 

ment  is;  that  is,  what  the  proper  "i^estmenL     ,  ^^^ 

to  the  war,  that  investment  was  permrtt^^^^^^^  ^^^^  ^^  ,1^ 

we  got  5  per  cent  and  we  f^  ^^^'t^^t  we  had  to  do.  Now, 
everything  we  ^^'^t^i^lf  ^^IK?  It  would  do  only  half  .the 
to-day  what  ^""^l^^^^l^  jf 'u  are  going  to  hang  onto  the  original 
things  we  have  to  d^- „  7. '^S^g,  the  investment  cost,  you  have  to 
cost  that  we  have  been  <y^cussing,  u  ^.^  ^^^y^^^  the 

allow  twice  the  income  f'-^^^^^l  ^J/iVboth  being  precisely  equal, 
value  and  take  the  f^j^^'f^^^lP^S  raises  the  question,  I  think- 

Mr.  Warren.  But,  Pr^^Vi^rrJ^es  the  other  question-of  whether 
or  the  commissioner's  question  raises  th^^^^^^     q  ^^  ^^^  ^^ 


272    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOTT. 

would  be  f^•lle,  would  it  not,  that  if  the  cost  of  construction — that  is 
only  a  yardstick  by  which  to  measure 

Mr.  CooLEY.  Yes. 

Mr.  Warren.  If  the  cost  of  construction  to-day  would  be  twice 
what  it  was  when  the  road  was  built,  then  the  operating  expenses, 
apart  from  the  return  on  the  capital,  would  be  twice  to-day,  roughly, 
what  they  would  have  been  previously. 

Mr.  CooLEY.  Yes ;  I  think  so. 

Mr.  Warren.  That  is  all  I  want  to  ask.  I  am  very  much  obliged 
to  you,  Prof.  Cooley — unless  the  commission  has  some  questions. 

Commissioner  Meeker.  The  commission  is  a  little  bit  afraid  of 
this  question  of  going  into  the  fair  valuation  of  property.  I  do  not 
want  to  dwell  upon  that  any  more  than  is  absolutely  necessary,  but 
first  of  all  I  would  like  to  know  what  is  the  pamphlet  from  which  you 
have  been  quoting. 

Mr.  CooLEY.  I  am  very  grateful  to  you  for  acking  that  question, 
because  I  wanted  the  permission  of  the  commission  to  send  copies  of 
this  pamphlet  to  them.  It  is  a  pamphlet  that  I  read  ^\e  or  six  years 
ago  before  the  electrical  engineers,  also  before  the  Western  Society  of 
Engineers,  and  it  is  entitled  "  P'actors  Determining  a  Reasonable 
Charge  for  Public  Utility  Service."  There  would  have  to  be  a  few 
changes  made  to  meet  the  new  conditions  that  we  are  encountering 
now,  but  this  at  the  time  it  was  written  represented  my  best  knowl- 
ed,ge,  and  I  have  used  it  in  refreshing  my  mind  as  to  topics,  and  I 
would  like  to  send  enough  so  each  member  of  the  commission  can  have 
a  copy.     It  is  very  short — you  can  read  it  in  40  minutes. 

Commissioner  Meeker.  I  was  about  to  ask  if  I  might  obtain  a 

Mr.  CooLEY.  Yes;  I  will  be  very  happy  to  do  it. 

Commissioner  Meeker.  How  should  improvements  and  extensions 
which  are  made  out  of  earnings  be  treated  ? 

Mr.  Cooley.  If  thev  are  made  out  of  earnings — the  answer  has 
to  be  a  double-barreled  one — if  they  are  made  out  of  earnings  which 
ordinarily  would  go  into  the  pockets  of  the  people  who  have  their 
money  invested  in  the  property,  it  is  equivalent  to  new  capital.  If, 
on  the  other  hand,  the  earnings  have  been  very  large,  far  in  excess 
of  what  would  be  regarded  to-day  as  proper  earnings,  then  I  do* 
not  think  it  ought  to  go  into  capital  except  there  be  some  legal 
phases  which  would  require  it. 

Commissioner  Meeker.  You  think 

Mr.  Cooley.  I  hope  I  make  that  clear.  Say  an  8  per  cent  earning 
is  permissible  and  all  right,  and  suppose  the  earnings  have  been  20 
per  cent — if  in  the  first  case  you  have  got  your  8  per  cent  and  have 
taken  some  part  of  that  8  per  cent  and  invested  it  in  new  property, 
it  belongs  to  capital. 

Commissioner  Meeker.  Some  part  of  a  reasonable  return? 

Mr.  Cooley.  Yes;  surely. 

Commissioner  Meeker.  But  anything  in  excess  of  what  might  be 
regarded  as  a  reasonable  return,  you  think  that  should  not  be 
counted  as  a  part  of  the  original  investment  upon  which  the  com- 
pany is  entitled  to  earn? 

Mr.  Cooley.  No;  I  would  call  that  investment  by  J:he  public,  ex- 
cept there  be  some  legal  requirement  which  of  course  might  control* 
I  do  not  know  what 


P.OCBB..HGS  0.  .EDKKA.  ELECTKIC  KAILWAYS  COMMISSION.    273 

Commissioner  f^^^J^,^.^^^!t^  XliS 

a  fair  return  on  any  proper  valuation    but  Qo  ^^^^  ^^  5 

a  railroad  which  had  a  f  rancluse  with  the  city  an  ^^^^  ^^^ 

cents-suppose  such  a  railroad  mafe  je  Y'"  f  y^.^^Aization  and 

rXrn  afte'r  operating  ^^P^>?f  ^V„l J^f p^r  S      that,  say,  ought 
depreciation— do  you  mean  to  say  tnai  *  pei 
to  so  back  into  the  property  ( 

^r.  Cooley.  No;  not  necessarily.  p,„portion  of  it? 

Commissioner  Gadsden    "^^.  ^  P^  .^j^nt>  *n      .  y  1   ^1^^     .vhatever 

What  I  mean  is  if  we  Vl^K-A  lelon-  to  tlTe  stockholders? 
%TSS  Teltltnot  ~  fot;that  at  all,  because  there 

Mr.  Cooley.  I  ^'f  "^T^rni^ouer  earn  n- 1  the  amount  which  Ls 
real  answer  as  to  what  is  f^^^^^^^.^^,^  business.  That  may  be 
necessary  to  induce  'aP't^l  to.<-0"^^ '",*°  '"^  thing  in  one  town  and 
8,  10,  01- maybe  12  per  cent;  it  may  ^e  one  tnm^  question, 

another  thing  in  another    owii.     I  J^^*   ""^swe^ea  J^^^^.  4^ 

S[gKve'  dii-S  TnS  KSe^renf  localities  a\d  under  dif- 

*^SirsS%i™.  ^^\",f-Lt^t;^;I^  SS^ 

idfr^^urd^a^onSJn^^^^^^  *-  - 

pany  was  entitled  to  earn  i"  tl^y™;,.^^  to  the  general  question, 
naSyf^welt^ncrpVin  sTe-ent  as  an  exan.ple  of  a  reason- 

''^Comm'i;;i^ner  Meeker.  As  a  point  to  argue  from? 

Mr.  Cooler.  \es.  tj  ^  no  t  imrlpr^tand  it,  Mr.  Gadsden  has 

„SXirposiSnS  rcoLUy  is SSed'to  everything  that 

''  SrCWY.  There  comes  the  legal  ^f|  Irx^ft^n^ 

'IveryS'  it  earns  1? gardless  of  how  much  it  is     ,,,^  as  the  fare  is 
Commirsioner  Meeker.  Everyth  ng  t  «^™/^f  Xtlg  the  income 
fixed,  and  the  fare  being  the  public  s  idea  01  reg  k 

of  the  company? 

Mr.  Cooley.  Yes.  nnmninv  earns  50  per  cent  on  its 

mSit T^  SXl- tf  thf  sVpTS  and  can  ^o  with  it  as  it 

•^'MrCooLEY.  Yes;  and  go  into  court  and  get  it.  That  is  what  1 
™  ComiS^er  Meeker..  So  that  must  be  taken  account  of  in  valu- 
ing  the  property  to-day  ^ 


274    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CooLEY.  Yes. 

Commissioner  Meeker.  In  case  there  be  such  returns,  such  invest- 
ment in  improvements  and  extensions  to  pix)perty  out  of  earnings 
so  obtained,  such  investments  are  bona  fide,  the  property  of  the  stock- 
hokiers  of  the  company  and  the  company  is  entitled  to  earn  uj^on 
them ;  is  that  correct  ? 

Mr.  CooLEY.  Well 

Commissioner  Meeker.  All  investments  made  out  of  earnings  as 
the  conditions  have  been  laid  down,  the  company  is  entitled  to  as 
part  of  its  property  and  that  property  must  be  valued  in  determining 
the  property  upon  which  the  company  is  entitled  to  earn  in  the 
future  ? 

Mr.  CooLEY.  Yes. 

Commissioner  Meeker.  Do  you  know  of  any  cases  where  improve- 
ments and  new  equipment  and  even  extensions  have  been  made  under 
the  guise  of  operating  expenses? 

Mr.  CooLEY.  Oh,  yes;  any  number  of  them.  Not  perhaps  within 
a  year  or  two,  but  I  think  one  of  the  most  notable  examples  of  that 
is  the  Michigan  Central  Kailroad.  For  years  and  years  it  paid  its 
stockholders  4,  5,  or  6  per  cent,  wiiatever  it  was,  and  all  the  rest  of 
that  property  went  into  second  track  and  new  station  buildings  and 
new  property. 

Commissioner  Meeker.  I  had  in  mind  street-railway  properties. 

Mr.  CooLEr.  Well,  I  do  not  think  at  this  moment  of  any  street- 
railroad  property;  but  there  is  a  very  interesting  outcome  or  sequel 
to  that  Michigan  Central  case,  if  I  may  dwell  upon  it  for  a  moment. 
They  had  a  very,  very  valuaole  property  with  absolutely  no  addi- 
tions to  capital  for  a  ^reat  many  years,  under  Mr.  Ledyard,  the 
president.  Then  the  Michigan  Central  and  the  Lake  Shore  and  all 
these  roads  were  merged  into  the  New  York  Central  lines,  and  they 
had  to  finance  them  in  order  to  build  this  Grand  Central  Terminal 
in  New  York;  and  then  it  becomes  necessary  to  dig  out  all  these 
sums  of  money  that  had  been  hidden  and  expended  from  earnings 
and  put  them  into  capital.  Now  I  may  not  have  stated  that  precisely 
in  accordance  w^ith  the  facts,  but  that  is  the  idea  in  my  own  mind — 
that  lots  of  the  new  construction  was  built  out  of  earnings  and  paid 
for  by  the  public,  if  you  like. 

Commissioner  Meeker.  You  would  call  such  new  construction  and 
new  equipment  as  made  out  of  earnings,  would  you  ? 

Mr.  CooLEY.  Yes;  I  call  it  in  that  case  made  out  of  earnings, 
surely,  because  they  did  not  add  a  dollar  to  capital  for  all  those 
years. 

Commissioner  Meeker.  Made  out  of  gross  earnings  but  not  out 
of  net? 

Mr.  CooLEY.  I  do  not  know  just  how  it  was  divided,  but  it  was 
made  out  of  their  earnings  because  they  did  not  add  a  dollar  of 
capital  for  a  great  many  years,  and  yet  they  double-tracked  their 
e  tire  system  and  built  very  elaborate  new  stations  with  gardens  and 
everything  of  that  sort. 

Commissioner  Meeker.  Do  you  know  of  any  such  instances  where 
street-railway  companies  have  made  improvements  and  extensions 
in  the  same  manner  ? 

Mr.  CooLEY.  No ;  I  can  not  identify  any  instances  at  this  moment. 


PBOCEEDIHGS  OF  FEDEEAL  ELECTRIC  RAILWAYS  COMMISSION.   275 

Commissioner  Mkeker   You  see  I  ^-J^  *^d''fm^^^^^^^^ 
twcen  improvements  mode  out  of  net  eainmgs  ana  imp 
made  under  the  guise  of  operatmg  expenses. 

'SmSon/M™.  Would  J-  state  also  ^^^^ro^^  ' 
'"''f^T  lifrto^r^fm^t'aireTenlhr^^^^^^^    A-y 

teS  legally    Now,  does  that  answer  your  question? 

net  earnings  there  had  "f  f  f,^P^"7„^,t  affecting  the  net  earnings 
of  money  for  building  nev  piopertj  n«>^  a^T^^"  n,„s  earnings  they 

zt  £  srss;2  S£:  /r^  H^v J 

moral  point  of  Mew,  \^^^^®^^,P''\^    i^„,,i;?  ^^^  belong  to  capital. 
'ToSo'nS™  Sji'Jld tetubl|  gjin  possessL? 
S-  C™They  -^d  £.  -  Lra*:iXVS  sin^St  therel 

aSTou  sXTtharoplnioS?  tl^t  raiW-  ^  f "  T  ^'^  ''"''' 
gan  FenS  was  charging  a  rate  at  that  time  by  law? 

Mr.  CooLEY.  Yes;  i*  ^^as  commission  should 

Commissioner  Gadsden.  In  other  wo^ds  it  t^e^^^.^^  ^^^       ^^^^^ 

authorize  t-«'n'^*Jr.'^'**®„Z  not  only  what  you  call  a  fair  return 
travel,  say,  and  they  had  made  ^^^^J  ^        -^  tj^j^^  t^^t  surplus 

rd^r^UalratTfixedX  ^ <^mfeon  bJlongs  to  the  public  and 
-^^  KfSn^t  at  ^h  In  the  Michigan  Central  -  ^ 
public  had  n^t^^fV^^ditf stockholders  The  stockholders  got  4 
S.S'&?H  S/^ad^L^^^^^^^^^^        tl^is  property,  they  would 

'  "'^^^^  ^^^XJ^  f  l^mSio^L^  Cd 
"^Z^XXr^^^^^^^  S';4pstoc^^of,.r  entitled  to  the  return 

under  that  rate,  whatever  it  is? 


1 


4 


2.76    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CooLEY.  Absolutely,  as  I  see  it. 

Commissioner  Gadsden.  Until  the  commission  changes  it. 

Mr.  CooLEY.  Absolutely,  he  is  entitled  to  it.  That  is  a  different 
question  from  the  one  Commissioner  Meeker  asked. 

Commissioner  Meeker.  Will  you  elucidate  the  difference?  It  is 
not  clear  to  me. 

Mr.  CooLEY.  Well,  j^ou  are  asking  a  hypothetical  question  which 
brought  in  a  question  of  a  moral  return,  as  I  took  it — that  is,  a  fair 
return — not  a  legal  return  but  a  fair  return.  And  the  assumption 
was,  as  I  got  the  question,  that  the  net  earnings  had  been  sufficient 
to  pay  a  fair  return — a  return  which  would  induce  capital  to  come 
into  the  business.  That  was  the  first  assumption.  Now,  that  is  per- 
haps all  the  company  should  be  permitted  to  earn.  If,  in  addition 
to  that,  it  did  earn  enough  so  that  it  could  build  property  exten- 
sions— new  property — that  propert}^,  I  said,  might  properly  belong 
to  the  public  or  at  least  not  enter  into  the  capital  account. 

The  Chairman.  Let  me  give  you  a  practical  illustration. 

Mr.  CooLEY.  Yes. 

The  Chairman.  In  the  Eastern  Advanced  Rate  case,  tried  two 
years  ago,  known  as  the  Fifteen  Per  Cent  case.  President  Rea,  of  the 
JPennsylvania  Railroad,  testified  that  during  the  past  10  years  that 
road  had  expended  $350,000,000  in  new  property  taken  from  earn- 
ings and  that  during  all  of  that  time  the  stockholders  had  received 
their  regular  dividends.  In  your  judgment,  sliould  the  $350,000,000 
taken  out  of  earnings  in  that  way  be  permitted  to  be  capitalized  ? 

Mr.  CooLEY.  Well,  I  think  that  perhaps  brings  up  the  sharp  dis- 
tinction  

The  Chairman.  That  is-  the  distinction,  is  it  not  ? 

Mr.  CooLEY.  Yes.  In  one  case  there  is  the  legal  right  and  the 
other  was  the  moral  right.  As  you  set  up  this  question  it  is  the  legal 
right,  as  I  understand,  to  include  it  in  the  capital  account. 

The  Chairman.  That  is  the  question  I  presented  to  j^ou. 

Mr.  CooLEY.  And  the  other  question  presented  the  moral  right. 
Now,  my  idea  is  this:  That  public  utilities  in  the  future  sliould 
only  be  permitted  to  earn  just  enough  to  induce  capital  to  come 
into  the  property 

The  Chairman.  What  is  your  answer  to  the  $350,000,000  propo- 
sition? 

Mr.  CooLEY.  That,  I  would  say,  is  precisely  the  same  case  as 
Commissioner  Gadsden  spoke  about:  That  the"  company  was  per- 
mitted to  earn  that  legally  and  therefore  it  belonged  in  the  property. 

The  Chairman.  That  it  ought  to  be  capitalized  ? 

Mr.  CooLEY.  Yes. 

Mr.  Warren.  That  is  on  the  theory  it  was  earned  at  a  rate  which 
was  legally  charged? 

Mr.  CooLEY.  1  es.    I  hope  I  have  made  myself  clear. 

Commissioner  Meeker.  I  intended  to  ask  my  question  in  such  a 
way  that  it  would  be  a  practical  question.  I  do  not  want  to  ask 
cjuestions  up  in  the  air.  I  think  I  have  your  point  clearly  now.  Does 
it  boil  down  to  about  this :  That  for  the  past,  whatever  has  been 
done,  we  must  accept  it,  but  in  the  future  street-railway  companies 
and  other  utilities  will  be  permitted  to  earn  a  reasonable  return  upon 
actual  investment  and  anything  over  and  above  that  will  be  taken 
in  pai-t  or  in  whole  by  the  public  ? 


PBOCBKDINGS  0.  FEDEKA.  E.ECTBIC  KA^.S  COMMXSSIOH.    277 

Mr.  COO.KX.  That  is  -^  -  Vub^  S/SSe  ^^^^^^^^^ 
aspects.    I  firmly  believe  that  a  P^^ic  ™""iiie  in  the  way  it  wante 
earn  enough  to  make  it  f«**^„''Xr  a  sufficient  amount  to  satisfy 
to  bo  served  and  to  bring  the  i^^f  f^f^^.^  ^as  to  do  and,  bemg  a 
him  and  enable  him  to  do  .^^^he  things  he  has       ^^^^^^  ^^^^^ 

fi'^ht  ?^y  oS'liew     Sf  turstthere  comesVe  legal  question 
iTo'SKd  that  is  ano^he-iatter  ,„„, 

eit£  rtrciaS^HL^ptr^ava  KaiU-oad  or  the  Michigan 

Central  Eailroad? 
Mr.  CooLET.  Not  a  single  case.  ,•  .  telephone  reach  of  it? 

Mr.  AVARRB^^  Or  even  within  long-d^^^^^^  ^  1 

Mr.  CooLEY.  ^o.     \\e  ha\e  "f  "'';,!•  „<,  of  the  electric  street 
thetical  case  all  the  time  when  we  are  spe^^in=  «J     ^^^^^  ^        j^ 

railroad.    It  is  a  Pe™l}»'-.f4'\!,'^Jfoid;  and  I  do  not  know  of  any 
proposition,  although  it  is  30  >ears  oia ,  ^ 
SecLic-railroadpropery  winch  api^roach^^^^^^^  ^^  r. 

The  Chairman.  I  think  i* '/ ^"Jj^'^^^Stee  last  December,  the 
that  in  the  hearings  before  te  Senate  comm  ^^  ^  ^^^ 

railway  executives  ^f  la/ed  it  to  be  theii^^  ^^  ^^ 

construction  paid  out  of  ea™'"^^' *7i!„Xd  change  in  their  belief, 
zation;  so  it  at  least  represents  a  veomaU«^^^^  p„blic-utility 

Mr.  CooLEY.  \es     I  f^^'^«^^?'J/Sh^ith  conditions  that  would 
men  that  they  would  be.ticUed  to  deam  ^  . 

permit  them  to  earn  a  fair  return  on  their  m  ^^  ^^^^^^  ^^ 

P  Commissioner  Mbe^;  Ij^^^^f  ^X  and  stacks  and  of  any 

securitie^you  spoke  this  forenoon  o^^.^^^^^ 

other  way  of  raising  monej -IS  there  anjo  ^  being  too 

Mr.  CooLEY.  I  was  t^i^^g  /"/f^J^^y  .>4"    i  in  mind  this- 

specific  as  to  the  character  of  the  secux, ties   i^^.^  ^^^^^^  ^^  ^, 

that  the  senior  secunties,  tiie  ^  ^^^^^^^         there  might  be  another 
that  were  protected  by  f .»? st  mortga^^^^  ^^^^^  mortgage, 

issuance  of  securities  jhich  jould  be  protec      j     ^^^^^  ^^^ 

or  it  may  be  in  the  form  ^^  f^^^^}^^  :^^^^  different  securities  any 
I  do  not  care  to  differentiate  ^s J^*^  ee"  these  a  protected 

further  than  to  say  *!-,  !X4  „f  secu   ty  must  come  aloJig  to  en- 
by  a  mortgage,  some  o^ber  ,^oim  ot  secu     y  ^^^^^ 

able  you  to.get  the  rest  of  the  monej , J^^t  «  -.^^^     ^^^^^  ^^^^^  ^, 
Commissioner  Meeker.  J^s*  ""J^  "X^J  ^^  tb^t  came  in  the  over- 
the  cost  of  money  and  eertain  other  chaigesu        ^p^nomist,  would 

head.    Those  charges  ^^^  ^  ^i^ ,^„°J"";P/^^^  ''Ue  fixed  retur'n  upon 
they,  under  the  hazard  of  the  entei  prise  j       ^^  ^^^^^  ^f 

that  IS  paid  for  the  insurance  aga  ^ ^  ^^         , , 

that  what  you  had  m  '"/"f/'^Xd  n  mind  that  money  has  a  regular 

^V-  .^""C  0?'course  t may  no  beVking  corr/ctlv,  because  it 
market  value.  Of  course,  im  y  j  j-g^y  but  I  take  it  for  granted 
all  comes  to  me  second-handed,  or  as  neais^ ,  jg^u.  ti,e  facts. 

.     that  you  will  ha- testimony  £f  ^H  ^JXe^iioney  Lrket  and 
But  my  idea  is  this— that  jou  nave      s  j  ^  expense, 

buy  this  money    ^;°- tj?,f ^'ut^and  h'e  iti  own  investigation 
S'ftaWert"  "TiaTwill  cost  a  considerable  sum.    And  it 


278    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

will  cost  perhaps  a  good  part  of  the  5  per  cent  before  they  get  through 
with  that  investigation.  Then  they  must  provide  in  this  cost  of 
money  for  fluctuations  or  market  conditions  which  no  one  can  foresee. 
Money  may  go  up  or  it  may  go  down,  but  they  have  constantly  to  fur- 
nish the  utility  with  the  money  it  needs  for  construction  purposes,  ami 
there  is  a  risk  involved  there. 

Commissioner  Meeker.  I  see  what  you  mean,  I  think.  It  is  the 
risk  or  hazard  of  the  enterprise.    That  is  all. 

Mr.  CooLEY.  It  is  partly  that. 

Commissioner  Sweet.  You  evidently  have  thought  a  good  deal 
about  the  present  street-railroad  situation. 

Mr.  Cooley.  Yes. 

Commissioner  Sweet.  And  regard  it  as  very  precarious. 

Mr.  Cooley.  Very. 

Commissioner  Sweet.  And  you  have  also,  from  what  you  have 
said  here  to  us,  come  to  a  very  acute  recognition  of  the  difticultj^  of 
bringing  the  public  up  to  the  point  of  understanding  correctly  this 
situation  and  various  features  connected  with  it. 

Mr.  Cooley.  Yes,  that  is  correct. 

Commissioner  Sweet.  If  I  undei-stand  you  right,  this  pamphlet 
you  have  referred  to  was  written  four  or  five  years  ago.   • 

Mr.  Cooley.  Yes. 

Commissioner  Sweet.  And  that  treated  of  the  subject  you  have 
been  discussing  here  with  us. 

Mr.  Cooley.  Yes. 

Commissioner  Sweet.  The  proper  method  of  arriving  at  cost  and 
what  should  be  allowed,  and  so  forth. 

IVIr.  Cooley.  Yes;  and  written  with  special  reference  to  informing 
the  public. 

Commissioner  Sweet.  I  suppose  that  others,  experts  and  students, 
have  presented  similar  arguments  and  explanations  to  the  public? 

Mr.  Cooley.  Undoubtedly. 

Commissioner  Sweet.  And  yet  the  public  is  not  informed  ? 

Mr.  Cooley.  It  is  not  informed,  absolutelv  not  informed. 

Commissioner  Sweet.  Now  don't  you  think,  Prof.  Cooley,  that  the 
situation  with  regard  to  the  street-railroad  companies  is  so  acute 
that  it  is  practically  hopeless  for  us  to  attempt  or  for  anybody  to 
attempt  now  to  educate  the  public  and  bring  it  up  to  the  point  of 
doing  what  is  right  and  advisable  in  this  matter  in  time  to  meet  the 
requirements  of  the  situation? 

Mr.  Cooley.  I  think  it  will  take  almost  a  generation  to  educate 
the  public. 

Commissioner  Sweet.  Then  we  have  to  find  some  other  solution. 

Mr.  Cooley.  Precisely ;  you  have  to  do  it  right  away,  to-morrow  if 
you  can,  because  it  is  very,  very  critical. 

Commissioner  Sweet.  You  are  not  personally,  directly  interested 
in  street  railroads,  or  are  you  ? 

Mr.  Cooley.  Not  at  all. 

Commissioner  Sweet.  You  are  simply  employed  by  them  to  do  the 
work 

Mr.  Cooley.  I  am  not  even  employed  by  them  in  this  case. 

Commissioner  Sweet.  Very  well,  I  think  you  are  a  very  good  man 
for  us  to  talk  to  on  this  subject  a  little  bit.    What  would  you  recom- 


^BOCEEDX^GS  O.  TEDEBAI.  EI^CTKIC  BAILWAYS  COMMISSIOK.    279 

„.end  in  view  of  the  situation  just  exactly  as  it  is  to  be  done  to  help 
out  this  situation?  ,    ,    .  ^r^    reauest  of  the  street- 

Mr.  Cooi^Y.  I  would  "^^^XJtKbe -ivel  an  increased  fare 
railroad  companies  b^  f^^i^f  J' ^JS  ^penses  and  all  the  things 
sufficient  first  to  meet  t'^^i^  ,?,P^*"^f /jnto  the  hands  of  a  recei^^ 
they  have  to  meet  to  P^^^^^t^^f'^rfinTthe  public  and  maintain 
to  fix  them  up  so  they  ^an  ^^^P  *»"  f  ^JJ  You  can  not  give  them 
their  property  intac,  as  far  f^J^^^^X^^^^^  ^m  have  to  be  done 
enough  at  this  tmie  to  dojl  the  tnn^^  w.^^^  ^^^^^  ^^^  ^        ke 

in  the  next  u  or  10  jears.  J,"'*  ,  ,,  different  companies.  You 
investigation  of  the  ^'^'^f^'T^Xf^^MiLy  actually  need  but 
can  satisfy  y°»f4' V'^iJlf  You  can  know  that  they  have  all  got 
K^lt  a'oi^'c^nffare,  but  at  least  50  per  cent  more,  if  not 

^'^mtfoner  SWB.X   mere  f^^lflt^^^S:'::^'^^^ 
SeSerpS of  '£  SKtasSTot  ^^  more  or  less  of 

a  falling  off  i"  P^t"-"" ?if  1  so-  to  some  extent  I  know  it  has. 

^^nS^e^sd^t-Tyour  opinion.that  raising  fares  alone 
wo^M  be  aX  for  this  trouble  that  now  exists? 
;^llr.  COO.EV.  No  I  do  ^f^fZlZStuM  you  recommend? 

Commissioner  bwEET    '^*  V„tv,»  nature  of  a  palliative. 

Mr.  COO..Y.  It  wo^uM  be  m Jh^  "f  ure^o^^^ 

Commissioner  bwECT.  inen  ""      ,    ,  .,      j^  j^  g  ^^^  suggested 
mendation?     I^t  me  help  y^-^^^J^^ttr  \t'  bringing  it  into  abetter 

definite  fare  fixed  by  1*7,;  .^?  ^^^f^^na  I  have  in  mind  one  or  two 

Mr.  Cooi^-.  I  think  ^ha^^^  .^'^^''it  x^^  ^^^  *  *=*^^  "*.^  "'"'^Fri 
instances  wluch  I  think  go  »«  P^^T^  '  -^  ^^  <jone  everything  it  had 
that  had  a  very  large  surplus,    ^tter  it  haa  a  ^b  ^^^  ^ 

conditions.  ^  ^^^  j^^olve  necessarily   in  your 

Mr.  Cooley.  Wei,  I.^^^  no%haTO  m  m  ^^^.^j^  ^^ 

FtSh^tt'S;  O^^ea^^lan   S^K  slfding-scale  busings. 
ThTS  I  consider  in  the  experimental  stage. 


280    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  If  that  were  to  be  adopted  and  this  greater 
ehistieity  introduced  into  the  earning  side  of  the  business,  do  you 
think  the  service-at-cost  plan  would  fill  the  bill? 

Mr.  CooLEY.  No ;  I  do  not  believe  it  would ;  because,  if  I  am  cor- 
rectly informed,  the  Cleveland  situation  is  not  satisfactory  in  that 
not  enough  money  has  been  allowed  to  maintain  that  property  in  the 
condition  which  it  ought  to  be  maintained.  It  has  not  been  able  to 
do  the  things  it  ought  to  do  for  the  public. 

Commissioner  Sweet.  Well,  is  not  that  a  defect  in  carrying  out 
the  plan? 

Mr.  CooLEY.  Yes. 

Commissioner  Sweet.  In  that  particular  case? 

Mr.  CooLEY.  Yes. 

Commissioner  Sweet.  Rather  than  a  defect  in  the  plan  itself? 

Mr.  CooLEY.  Well,  perhaps  so,  but  the  surge  tank  is  too  small 
there,  which  I  think  is  necessary  to  that. 

Commissioner  Sweet.  Service  at  cost  might  very  properly  be  ar- 
ranged on  the  basis  of  taking  care  of  the  repairs  and  deterioration 
expenses  and  everything  else,  might  it  not  ? 

Mr.  CooLEY.  Yes. 

Commissioner  Sweet.  And  should,  of  course? 

IMr.  Cooley.  Yes,  sir. 

Conimissioner  Sweet.  That  should  be  done? 

Mr.  CooLEY.  Yes,  sir. 

Commissioner  Sweet.  And  at  the  same  time  provide  for  a  proper 
return  to  the  investors? 
Mr.  CooLEY.  Yes,  sir. 

Commissioner  Sweet.  And  such  a  return  as  would  induce  further 
investment  ? 
Mr.  CooLEY.  Yes,  sir. 

Commissioner  Sweet.  And  still  at  the  same  time  be  absolutely 
just  to  the  public? 

Mr.  CooLEY.  Yes,  sir.  I  think  Judge  Tayler's  idea  was  a  beautiful 
idea;  and  it  has  worked  out  much  better,  I  guess,  than  a  great  many 
people  expected  it  would,  but  it  needs  some  perfecting,  as  I  see  it. 

Commissioner  Sweet.  Can  you  suggest  any  better  plan? 

Mr.  CooLEY.  Well,  I  was  thinking  of  what  seems  to  me  to  be  a 
better  plan. 

Commissioner  Sweet.  Well,  tell  me  what  you  think  the  objections 
to  the  plan  are.    That  would  be  the  best  way  to  do  it. 

Mr.  CooLEY.  The  main  objection  to  the  plan  is  that  it  is  not  elastic 
enough.  It  does  not  permit  them  to  do  things  as  quickly  as  they 
ought  to  do  theni.  Now,  I  may  be  misinformed  in  regard  to  that.  I 
have  not  looked  into  the  matter  within  a  year  or  two  years,  but  it'  is 
not  big  enough.  The  plan  is  not  big  enough.  It  is  held  in  too  small 
units.  They  have  not  got  enough  money  to  work  with.  I  think  the 
Chicago  plan  is  more  practicable. 

Commissioner  Sweet.  What  is  that? 

Mr.  CooLEY.  The  straight  5-cent  fare  has  been  in  existence  there 
for  years,  and,  after  all  the  expenses  of  all  kinds  have  been  paid, 
the  city  and  the  company  have  shared  profits  in  the  proportion  of 
55  per  cent  to  the  city  and  45  per  cent  to  the  company,  and  the  last 
I  heard,  four  or  five  years  ago,  the  city  had  accumulated,  since  1906 
or  190T,  some  twenty-odd  million  dollars,  and  put  it  into  a  fund 


PKOCEEDINGS  OF  FKDEKAI.  EIXCTKIC  RAII.WAVS  COMmTsSIOK.    281 

.hich  it  has  accumulated  and  whid.  -^W  e^'^^^^^^^^^^    *-«  ^ 
'^hSZ^^^stA^'':^^^^^^'^^  the  present^ime  those 

Commissioner  Bealu  I  can  answer  that,  Mr.  v.ou 

Mr.  CooLEY.  Yes. 

Commissioner  Bea^.  Very  fast^        ^^^^^^^  ^  •        ,,i,i   like 

Commissioner  bwELT.  V^y^^^'J    r^prmitted  it  to  do  its  work^ 
this  has  proven  to  be,  which  has  not  ™^^  ^^^  ^.  1^    if  y,„ 

,  Mr.  ^^:'^''-ZVtL     oTc<S,  the  Chicago  plan  is  very 
let  them  increase  tne  laie.     v/i-  '-  5 

practical.  ^  ^   ,    ^^^„   r,^^^  nlreadv   answered  that  by 

^  Commissioner  Sweet.  But  you  have  alieaciy  ^^^  ^^^^^^ 

savino-  that  an  mcrease  of  fare  does  noi  aiwdj. 

on  acSount  of  loss  of  Pf  tronage  «>metimes  ^^  ^^ 

Mr.  Cooi-EY.  Well,  that  is  t^e,  ^o  but^i  clo  no  ^^^  ^^^  ^^^  ^ 
could  say  just  how  much  loss  theie  is.  ^  he^^  ^^^^^  j  ^^  ^^^ 
Ef;ou  SldiSaatlS^til^niie  effect  of  the  increase 

the  public  must  have ;  must  it  not  5 
SmmiSer'^S™  And  they  must  pay  what  it  costs? 
SmSner^^-.  Now,  to  indu.  t,e  public  to^pai^^  f- 

wrong? 

Mr.  Cooif  Y.  Yes^  ^  j,  ^  ;„  ^^der  to  have  the  benefit  of  this 

Commissioner  b\\EET.  An""' ,       j 
service,  something  has  got  to  be  done . 

Mr.  Cooley.  Yes.  ,  ^^^  jje^e  that  there  are 

Commissioner  Sweet,  ^ow  it  has  Deen  ^^^^^  ^^^.^  ^^^^ 

only  two  things  practical  that  can  be  done,    une 

ice  performed  by  municipalities 

SmmSer^S^i-BT  (continuing).  And  municipal  ownership— 
Smm°Se?'swEET  (continuing).  And  the  other  is  by  having 

some  form  of  relief 

l^ommTssbner'^SwEET  (continuing).  Brought  to  the  private  cor- 
porations  in  charge  of  it. 

CommTssfoner^'s--^-  Now  objections  have  been  made  to  mum- 
cipal  ownership. 

"£nmS;r''swEET.  The  question  that  we  are  trying  to  get  at 
now  "at  form  of  relief  is  most  practicable? 
Mr.  Cooley.  Yes. 

160643*— 20 10 


282    PROCEEDINGS  OP  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  What  oan  be  done  and  done  quickly  ? 

Mr.  CooLEY.  Yes. 

(commissioner  Sweet.  To  bring  the  public  to  such  a  frame  of 
mind.    Because  there  is  some  psychology  in  this  thing,  is  there  not? 

Mr.  CooLEY.    Yes. 

Commissioner  Sweet.  It  is  quite  a  psychological  question  ? 

Mr.  Cooli:y.  Yes. 

Commissioner  Sweet.  So  as  to  enable  the  public  to  get  the  bene- 
fit of  the  best  way  for  the  public? 

Mr.  Cooi.ey.  Yes. 

Commissioner  Sweet.  As  well  as  for  the  corporations  themselves? 

Mr.  CooLBY.  Yes.  I  think  I  can  answer  your  question  more  in- 
telligently now.  Considering  the  fact  that  the  Cleveland  plan  has 
been  running  for  15  or  20  years,  and  that  the  public  already  knows 
a  great  deal  about  it,  and  it  is  on  a  sliding  scale — the  fare  being  pro- 
portioned to  whatever  is  necessary  to  run  the  property — that  would 
seem  to  be  the  plan  which  would  win  the  favor  of  the  public  more 
speedily  than  any  other  plan  that  I  know  of.  Now,  whether  it  is 
a  better  plan  than  the  zone  system  that  is  being  advocated  to-day,  and 
which  has  been  in  use  in  P^urope,  of  course  I  do  not  suppose  anybody 
could  say.  I  think  the  zone  system  is  likely  to  be  fairer;  that  is, 
the  man  who  rides  10  miles  pays  twice  as  much  as  the  man  who  rides 
5  miles.  I  think  that  has  all  the  elements  of  fairness  in  it,  but 
I  am  afraid  it  is  going  to  meet  with  considerable  opposition, 
although  it  may  be  the  fairest  thing,  because  the  public  in  this 
country  does  not  know  anything  about  it,  and  they  are  opposed 
to  it,  and  it  would  not  get  there  quickly  enough,  however  much 
merit  it  may  have  over  the  Cleveland  i)lan,  for  example.  I  think 
the  Cleveland  plan  is  a  more  practicable  one  to  meet  this  existing 
situation ;  but  even  that  does  not  meet  it  to-day,  because  these  rail- 
roads have  got  to  have  help  to-morrow,  and  the  only  practical  way 
that  I  know  of  getting  help  to  them  is  to  give  them  the  increased 
fare  which  they  are  asking  for.  Now,  that  does  not  need  to  go  in- 
definitely.   It  can  go  for 

Commissioner  Beall.  May  I  break  in  there  a  minute,  Mr.  Sweet? 

Commissioner  Sweet.  Just  a  minute.  Right  there,  let  me  ask 
you  this:  If  I  understand  you  right,  that  would  merely  be  a 
sort  of  sedative  to  keep  the  patient  alive  until  some  real  curative 
medicine  could  be  administered? 

Mr.  CooLEY.  Precisely.  That  increased  fare  would  keep  them 
going  until  you  could  find  out  what  they  ought  to  have — what  ought 
to  be  done  for  tlie  patient  to  cure  it. 

Commissioner  Beall.  That  is  what  I  wanted  to  find  out. 

Mr.  Cooley.  Yes. 

Commissioner  Beall.  You  can  not  raise  money? 

!Mr.  Cooley.  No;  you  can  not.     You  are  quite  right. 

Commissioner  Saveet.  As  a  permanent  matter,  it  would  not  fill 
the  bill  ? 

Mr.  Cooley.  Not  at  all ;  not  in  my  judgment.  This  is  a  very  sick 
patient,  gentleman,  as  I  see  it,  and  it  has  to  be  something  more  than 
doctoring  a  pimple  on  the  skin.  You  have  to  get  at  the  constitution 
of  the  patient. 


PROCEEDINGS  OF  FEDEEAL  ELECTKIC  RAILWAYS  COMMISSION.    283 

altogether? 

romSS'e/stEET.  For  a  case  of  this  kind,  just  now? 
An^^LET   It  dc^s  not  seem  to  me  to  have  any  particular  bearing 
for  the  mimediate  needs. 
SrSSritlTha^^I"  very  great  bearing,  however,  when  you 

come  to  treating  the  patient. 
Commissioner  Sweet.  Yes. 

^!in^^^e!s::.^.''T^i^^^  one  thing  that  I  want  to  ask  you 
in  coZcrn  wi^  that  Grand  Eapids  ca.se  that  you  spoke  of  lou 
•v^oTiniTf  i«  a  little  bit  faulty  m  one  particular.  Ine  original  sueei. 
Sav  company  there  did^not  build  a  cable  line,  but  another  com- 
nanTbuiinhr because  the  company  that  was  fii-st  operating  there. 
refuLd  to  otey  a  request  or  mandate  of  the  common  council  with  ^- 
?ard  t»  buSg  a  line  up  the  hill.  Subsequently,  the  original  com- 
pany bought  oft  the  cable  company,  and  my  recoll^tion  is  that  t 
was  at  a  very  much  lower  price  than  the  actual  cost  of  the  cable 
Hnc.    In  other  words,  that  those  who  went  into  that  lost  money. 

CommSer^^^EET.  Now,  who  should  stand  that  loss? 

Mr  (St.  Well,  I  guess  those  chaps  who  accepted  a  lower  price 

***cimmissioner  Sweet.  But  the  old  company  that  bought  out  the 
oabircZ^any  got  the  benefit  of  the  lower  price.  In  figuring  the 
cost,  would  you  do  it  at  what  they  paid  for  it  < 

Mr.  Cooley.  Yes. 

Commissioner  Sweet.  Or  at  what  it  cost «        . ,  .     .. 

Mr  Cooi.EY.  I  would  figure  it  on  what  they  paid  for  it.     _ 

Commissioner  Sweet.  Does  not  this  system  of  yours  involve  a 
gre^t  many  qualities  that  might  be  considered  to  be  historical?  Is 
not  that  one  right  there? 

Commis^oner  Sweet.  Where  the  same  property,  if  what  you  stated 
was  conect  and  the  cable  line  had  been  built  by  the  company  then 
U,  exktence  A  s  you  put  it  to  us  in  your  direct  testimony,  that  would 
be  a  iSmate  p.ut  o^f  the  cost  that  should  be  figured  into  a  valua- 
tion  of  the  property  ?  ^     . 

clmSionerl'^i^.  Now,  when  I  tell  you  that  it  was  built  by 
somebody  else,  and  they  bought  it  at  a  reduced  valuation 

ConSi^ner^SwEET  (continuing).  Then  you  say  that  what  they 
paid  for  it  should  be  figured  m? 

ComSoner^SwEET.  In  other  words,  in  figuring  prmsely  the 
sameToperty,  of  the  street-railway  property  at  Grand  Rapids  to- 
d«v  on  the  basis  of  your  original  statement,  as  I  underetand  it,  it 
ioTnd  be  one  amountf  and  on  the  basis  of  your  present  statement  it 
would  be  another  amount ;  is  not  that  so  ( 


284    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CooLEY.  Yes. 

Commissioner  Sweet.  How  do  you  rec6ncile  that  inconsistency  ? 

Mr.  CooLEY.  Perhaps  I  can  not,  but  here  is  what  I  had  in  mind, 
namely,  that  there  was  no  practical  way  of  paying  those  chaps  who 
lost  their  money.  As  I  understand  it,  the  chaps  who  sold  out  went 
out  of  the  railway  business  entirely. 

Commissioner  Sweet.  Yes,  they  did. 

Mr.  CooLEY.  How  are  you  gomg  to  pay  them  ?  They  have  not 
made  their  money  serving  the  public.     It  was  a  gambling  loss. 

Commissioner  Sweet.  And  yet  the  two  systems  of  figuring  would 
bring  different  results? 

Mr.  Cooley.  Morally,  that  money  was  wisely  spent ;  that  is,  hon- 
estly spent,  at  least,  and  the  public  was  required  to  support  the  whole 
investment;  but  there  was  no  practical  way  of  paying  those  chaps 
who  gambled  and  got  out  of  the  field  that  I  can  see. 

Commissioner  Sweet.  We  have  had  some  testimony  here  with  re- 
gard to  a  western  city,  in  which  a  valuation  was  made  by  experts 
representing  the  corporation,  a  private  corporation,  and  also  the 
municipality,  and  that  they  got  together  without  verv  much  difficulty 
on  the  valuation. 

Mr.  CooLEY.  Yes. 

Commissioner  Sweet.  That  has  led  me  to  think  perhaps  a  similar 
process  might  be  adopted  without  much  difficulty  in  other  cities,  and 
without,  perhaps,  going  into  all  of  the  details  aiid  niceties,  and  with- 
out trying  to  educate  the  public  especially  on  the  subject.  If  the 
representatives  of  the  city— their  experts— agreed  with  the  experts  of 
the  company,  I  dare  say  the  cities  would  generally  acquiesce,  would 
they  not,  m  the  decision,  and  say,  "  Well,  that  is  all  right "? 

Mr.  Cooley.  One  would  think  so,  really,  but  it  does  not  seem  to 
work  out  that  way.  Detroit  is  a  beautiful  example  of  that.  The 
city  s  experts  and  the  company's  experts  have  all  agreed,  but  they 
have  not  any  solution. 

Commissioner  Sweet.  Well,  that  involves  other  questions. 

Mr.  CooLEY.  Yes ;  it  involves  another  question. 

Commissioner  Sweet.  Yes ;  several  of  them. 

Mr.  Cooley.  Yes;  several  of  them. 

Commissioner  Sweet.  I  think  that  is  all. 

Mr.  CooLEY.  Let  me  go  right  back  again.  I  was  thinking  of  the 
case  m  Grand  Rapids  there,  about  those  chaps  who  lost  their  money. 
Of  course,  if  they  stayed  in  the  company,  and  their  investment  was 
still  there  for  the  public,  I  think  I  would  have  given  them  a  return 
on  the  whole  of  it,  and  I  think  I  would,  anyhow,  if  you  could  give  it 
to  them ;  but  I  do  not  see  any  practical  way  of  doing  it. 

Commissioner  Sweet.  Prof.  Cooley,  there  are  other  ways  in  which 
the  companies  might  be  helped,  besides  increasing  the  fare,  like  the 
refund  of  taxes,  are  there  not  ? 

Mr.  Cooley.  Certainly. 

Commissioner  Sweet.  And  especially  the  matter  of  paving  be- 
tween the  tracks  ? 
Mr.  Cooley.  Yes,  sir. 

Commissioner  Sweet.  Is  not  that  very  heavy  on  some  of  the  com- 
panies ? 

Mr.  Cooley.  That  is  very  heavy  in  some  cities.  It  really  cor- 
responds to  a  franchise  payment.    It  amounts  practically  to  an  an- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    285 

nual  franchise  tax.    That  is,  the  city  contracts  to  let  the  railroad 
company  go  through  the  street,  providing  they  will  keep  either  the 

whole  street  paved,  or  a  part  of  it.  •   •       i:  4.1. „^  «„o 

Commissioner  sWeet.^Do  you  know  what  the  ^ngm  of  that^  c^^^^^ 
tom  was  which  required  the  companies  to  pave  between  the  tracks 

and  a  little  outside? 

Mr.  CooLEY.  I  don't  think  I  do. 

Commissioner  Sweet.  Does  it  go  back  to  the  horse-car  days? 

Mr  CooLEY.  It  goes  back  to  the  horse-car  days;  yes,  sir. 

Commissioner  Sweet.  That  was  because  the  horses  that  drew  the 
cars  were  supposed  to  wear  out  that  part  of  the  street? 

ComSSer^Sw^^^^^^^  Do  you  see  any  inequality  in  that  as  between 
thp  different  elements  in  the  community  s  ,  .,     ..   i  i. 

Mr!  Cooley.  I  do  not  know  as  I  clearly  understand  the  "elements 

"'cSmmSn^CEET.  If  the  patrons  of  the  street-railway  com- 
pany aferequh^d  to  pay  enough  lares  to  meet  all  expenses,  including 
this  paving 

SmSoner^'swEET  (continuing).  Then  ^}%Vfoith.^- 
luunitv  would  be  the  only  part  of  the  community  that  would  actually 
fm-nishihe  money  to  do  the  paving,  would  it  not,  under  the  present 

system? 

Mr.  CooLEY.  Yes.  i    •    xi,      

Commissioner  Sweet.  Now,  are  there  not  many  people  :n  the  com- 
munity who  have  automobiles  and  other  means  of  conveyance  who 
very  seldom  if  ever  use  street  railways! 

Mr.  CooLET.  Yes.  ,  .   ,         iu-t 

Commissioner  Sweet.  And  would  they  not  be  exempt  from  that 

taxation?  .  .  ,,  „^^«„4. 

Mr.  Cooley.  Well,  they  are  wearing  out  the  pavement. 
Commissioner  Sweet.  And  they  get  ]ust  as  much  use  of  it;  in  fact, 

more. 

Mr.  Cooley.  Yes.  ,       . ,    •    xi  9 

Commissioner  Sweet.  Than  those  who  ride  in  the  cars? 

Mr.  Cooley.  Yes.  ,  j.    £  ^.u    i.  ^ 

Commissioner  Sweet.  And  yet  they  do  not  pay  any  part  of  the  tax 

"  m"  CooLT?'dTirLlie^  I  could  analyze  that  question  suffi. 

"SmL^rers"^^^^^  If  the  paving  is  paid  for  out  of  the  nickels 
that  come  in,  and  they  do  not  furnish  any  of  the  nickels,  they  do 

''lli"ciY'!VoU^^  certainly,  but  they  pay  another 

tax — the  automobile  tax.  xi-i.ij.i- 

Commissioner  Sweet.  Yes;  but  that  has  nothing  to  do  with  this 

particular  paving  between  the  tracks  and  just  outsider 

Mr.  Cooley.  Yes,  sir ;  I  see  your  point.  ,      ,  1 

Commissioner  Sweet.  Now,  is  there  any  good  reason  why  the 

street-railway  companies  should  be  required  to  do  that  paving  i 
Mr.  Cooley.  No;  I  do  not  think  so.  , ,     -^9 

Commissioner  Sweet.  Is  there  any  good  purpose  served  by  it  i 
Mr.  Cooley.  No  ;  I  do  not  think  so. 


286    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Do  you  think  it  is  an  unjust  burden  upon 
them  ? 

Mr.  CooLEY.  Yes ;  it  is  to-day ;  it  surely  is  to-day,  and  in  the  final 
adjustment  you  might  excuse  them  from  that,  taking  account  of  the 
difference — the  saving  in  the  fare. 

Commissioner  Sweet.  Do  you  think  it  would  be  more  equitable  if 
spread  over  the  comnmnity  in  the  same  way  that  other  paving  re- 
pairs are? 

Mr.  CooLEY.  Yes;  I  believe  it  would. 

Commissioner  Sweet.  How  about  the  taxation  of  its  physical 
properties?  Do  you  think  tliere  would  be  any  justice,  or  do  ^ou 
think  the  public  would  stand  for  remitting  taxation  under  present 
conditions  ? 

Mr.  CooLEY.  I  do  not  know,  sir;  I  do  not  know,  sir.  I  do  not 
know  whether  it  would  stand  for  the  remitting  of  anything  to-day. 
I  do  not  know  how  far  we  can  ^o  toward  remitting  taxes. 

Commissioner  Sweet.  Well,  if  the  public  had  to  walk  instead  of 
ride  for  a  week  or  two,  or  a  month  or  so,  they  would  reconsider  some 
of  these  matter's,  maybe,  would  they  not? 

Mr.  CooLEY.  I  think  that  is  quite  true.  It  is,  however,  one  way 
of  helping  in  the  present  emergency  to  remit  their  taxes,  for  example. 

Commissioner  Sw^eet.  It  is  just  as  important  to  reduce  the  costs 

Mr.  CooLEY.  Yes. 

Commissioner  Sweet  (continuing).  To  reduce  the  burden  of  these 
companies 

Mr.  CooLEY.  Yes,  sir. 

Commissioner  Sweet  (continuing).  As  it  is  to  increase  their  in- 
come, is  it  not  ? 

Mr.  CooLEY.  Precisely. 

Commissioner  Sweet.  The  result  is  practically  the  same? 

Mr.  CooLEY.  Precisely. 

Mr.  Warren.  It  is  even  suier? 

Mr.  CooLEY.  Yes. 

Commissioner  Sweet.  Yes. 

Mr.  CooLEY.  The  companies  are  putting  very  matjerially  tho 
moneys  required  to  keep  the  property.  They  are  not  making  any 
renewals  or  replacements,  but  they  are  allowing  the  property  to  run 
down.  It  is  a  deferred  maintenance.  They  are  doing  everything 
they  can.  They  are  even  going  too  far  in  it.  They  are  not  rendering 
good  service.  Of  course,  they  have  simply  got  to  do  it.  They  can  not 
help  themselves.    They  have  got  to  do  it. 

Connnissioner  Sweet.  Somebody  has  to  do  it,  and  if  the  companies 
can  not  do  it,  then  the  public  has  to  do  it  for  itself? 

Mr.  CooLEY.  The  company  has  to  do  the  very  least  it  can  do. 

Commissioner  Sweet.  Yes,  but  there  is  a  limit;  is  there  not? 

Mr.  CooLEY.  There  is  a  limit,  because  they  can  let  this  maintenance 
go  down  to  such  a  point  as  to  be  absolutely  dangerous  to  the  public. 

Commissioner  Sweet.  Yes. 

Mr.  CooLEY.  Yes.  And  they  will  have  to  stop  there,  surely. 

Commissioner  Sweet.  The  only  recourse  would  be  municipal  own- 
ership and  operation,  would  it  not? 

Mr.  Cooley.  Yes.  Now,  I  have  favored  municipal  ownei-ship, 
not  that  I  believe  it  to  be  successful,  but  I  have  been  an  advocate  of 
municipal  ownership  for  5  or  10  years. 


PROCEEDINGS  or  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    287 

Commissioner  Sweet.  And  opfation?  advocated  it 

Mr  Cooley.  And  operation— the  ^;hole  thing,    i  ha%  e  aa\  ocaie 

Dublic     I  have  worked  for  it.    I  have  urged  it.    I  ha\e  said,     ixo 

pgrf  In  i.«ler  ».ppli«!  «re  toncemed,  jou  (liink  il  is  better  to  put 

"'K,.''0^°tSlk  »,  .Ithough  it  »,ch«p»,  .h™  ,ou  ba,  it 

■f rnm  n  nrivate  corporation ;  I  mean  practically.      „    ,_     ,  ^  . 

*  cZSoner  SwB.^.  Yes.    How  about  lighting?    Would  you  put 

^'^^"Vot^ri f'tW  wlslhl  same  controversy  going  on  to-day 
in  conne^ti^  with  lighting  and  electric  iDOwer,  lighting  particularly 
Jwt  k  S.in2  «i  with  respect  t»  the  electric  street  railways,  I  would 
favor  nfuS^l  o^hip  until  the  people  could  find  out  whether 
it  was  a  goo/thing  or  a  bad  thing  to  \mve  mumcipal  ownership.    I 

would  answer  their  question  in  a  Prf\ct»ca' ^^y-  ,    .      ....-trv 

Commissioner  Swect.  Do  you  think  the  people  of  the  countiy 

want  municipal  ownei-ship  of  the  street  railways? 

Mr.  CooLET.  I  do  not  think  they  do.  .-       -4.0 

rnmmissioner  SwEBT.  Then  what  is  the  use  of  advocating  it? 
U^cZTbZu^  I  believe  the  people  that  do  want  it  make  so 

much  noise  that  the  other  fellows  are  entirely  smothered  out. 

4 


-  ! 


288    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  That  is  all. 

The  Chairman.  As  a  rule  the  fellow  who  makes  the  noise  does  not 
pay  the  taxes. 

Mr.  CooLEY.  That  is  right.    I  thank  you  very  much,  gentlemen. 

Mr.  Warren.  I  want  to  file,  if  I  may,  Mr.  Chairman,  without 
taking  the  time  to  read  it,  a  memorandum  of  the  valuation  of  elec- 
tric-railway properties  by  A.  Merritt  Taylor,  of  Philadelphia,  who, 
as  the  commission  may  know,  is  the  president  of  the  Philadelphia 
&  West  Chester  Traction  Co.,  a  former  president  of  the  New  Jersey 
&  Hudson  River  Railway  &  Ferry  Co.,  and  who  was  transit  com- 
missioner of  the  city  of  Philadelphia,  from  July,  1912,  to  July,  1913 ; 
a  director,  department  of  city  transit,  city  of  Philadelphia,  July, 
191e3,  to  January,  1915,  in  charge  of  location,  design,  and  construc- 
tion of  municipal  subways  and  elevated  lines,  and  in  charge  of  prepa- 
ration of  legislation  required  to  enable  the  city  of  Philadelphia  to 
finance  and  establish  its  municipal  system;  and  more  recently  the 
manager  of  the  division  of  passenger  transportation  and  housing, 
United  States  Shipping  Board,  Emergency  Fleet  Corporation. 

The  memorandum  thus  referred  to  by  Mr.  Warren  is  as  follows : 

MEMORANDUM  IN  RE  VALUATION  OF  ELECTRIC-RAIL  WAT  PROPERTIES. 

By  A.  Merritt  Taylor,  Philadelphia. 

An  electric-railway  company  engaged  in  a  legitimate  constructive  enterprise 
Is  entitled  to  charge  rates  for  service  which  will  yield  a  profitable  return  on 
the  true  cost  of  establishing  and  developing  its  property  and  business.  Any- 
thing short  of  this  means  confiscation  of  money  invested  in  public  service. 

In  order  that  exact  justice  shall  be  accordetl  all  parties  at  interest,  and 
electric-railway  property  must  be  valued  at  the  true  legitimate  cost  of  its  estab- 
lishment and  development  up  to  the  date  when  the  valuaion  is  made. 

If,  in  the  early  stages  of  development,  the  net  results  of  operation  produce 
a  return  which  is  short  of  the  amount  required  to  duly  compensate  the  owners 
of  capital  invested  In  the  property  for  its  use  during  such  period,  and  to  pro- 
vide for  normal  depreciation  and  obsolescence,  such  shortage  plus  accrued  in- 
terest on  accumulated  portion  of  just  return  withheld  from  investors  must 
necessarily  be  considered  to  be  a  part  of  the  cost  of  the  development  of  the 
property  and  its  business  and  be  included  as  an  element  of  value. 

If  an  electric-railway  property  be  valued  (as  is  proposed  by  impractical 
theorists)  at  its  cost  less  depreciation  and  obsolescence,  or  at  what  would  be 
the  cost  of  reproducing  it  less  depreciation  and  obsolescence,  in  instances  where 
the  net  revenue  has  been  insufficient  to  yield  a  return  on  the  capital  invested 
therein  duly  compensatory  for  the  service  performed  and  the  risks  assumed, 
or  where  the  net  revenue  has  been  insufficient  to  provide  for  depreciation  and 
obsolescence  in  addition  to  yieding  a  just  return  upon  the  capital — such  valua- 
tion is  unjustifiable  and  rates  based  thereon  are  confiscatory. 

An  electric-railway  enterprise  is  entitled  to  charge  such  rates  as  are  re- 
quired to  protect  the  capital  legitimately  invested  therein  and  to  yield  to  the 
owners  of  such  capital  a  cumulative  return  which  will  adequately  compensate 
them  for  its  use,  for  the  risks  assumed  and  the  service  performed,  and  which 
are  require<l  to  properly  meet  cumulative  depreciation  and  obsolescence,  to 
invite  corporate  initiative  and  to  maintain  the  credit  and  ability  of  the  enter- 
prise to  procure  such  additional  capital  as  is  required  from  time  to  time  for  the 
purpose  of  expanding  its  facilities  for  public  service. 

Capital  will  not  be  available  for  electric-railway  requirements  In  States  and 
municipalities  where  there  be  question  as  to  whether  electric-railway  com- 
panies will  be  prevented  by  regulatory  authorities  from  establishing  rates  re- 
quired to  yield  and  inviting  cumulative  return  on  the  capital  invested  therein. 
This  fact  must  be  recognized  and  steps  must  be  promptly  taken  to  remove  the 
grounds  for  reasonable  doubt  in  the  premises.  Nothing  short  of  a  clear  and 
common  understanding  of  how  valuations  of  electric-railway  properties  made 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    289 

for  rate.nmU.ns  pnrpo^s  shall  be  -;.^<±^^/^t^l:!tl^ZTe^e^r^ 
[r;'r\.,e  ol';^ta.~h  S;%^l^^«\'o  m^riU'Wations  an.  expand  the. 

vests  in  electric-railway  constructive  ^»t„^\P| '''^^'  /J^l  iiw^^^  therein  at  any 
enterprise  will  not  yield  a  jus  ^-^t^^^"  ii^g  to  paT  for  tlie  service.  In  such  in- 
rate  which  its  customers  would  ^e  wi  nng  to  Pa>^^  ^,f  diminishing  re- 

stances  where  the  rates  are  so  high  f  ^^P,,^";?^.^  "^^^  to  decrease  rates 

up  and  paid  In  later  years.  rendering  essential  service  are 

Many  electric-railway  <^«"fV"'*f  ^J^i'^ ''\fo  n  te  of  fare  which  will  enable 

now  confronted  with  the  fact  that  t^ere  'S  no  late  oi  ^_^^^  ^j^j^ 

them  to  continue  effleien  "P«'-«'""j'f,*'^^''T  "{derating  and  renewal  costs 
to  thein  a  return  sufficient  to  mf '  »  f.  "^s  and  charges  imposed  uiwn  them  by 
resultant  from  the  war  onerous  ~»''V''°"?.f '^nj  to  pav  a  just  return  on  the 
uumlcipal.  State,  and  Government  ""*cuty   and  to  pa        j      ^^  ^^^  ^^^^^^^ 

capital  invested  in  their  P™lfJ  f  ^- „'"  i""^o"^oney  wHh  which  to  provide  the 
railway  c-onipany  Is  Impaired ;  it  can  ™'/f  ""  J"""^*  ,=„,„  for  the  service  of  the 
additional  fucilities  which  are  -i^flXL  nubile  must  augment  s  net  revenue  in 
public  in  a  growing  <^on'""°'tyi  ""iS^.^  j  jo  enable  it  to  maintain  Its  credit 
'one  way  or  """ther  to  an  extent  ^"fhcient  to  e^iabie   ^.^^  ^^_.^..^     There  are 

rar:r:ct\^ic^"a^^qfwS^^ 

[r^rr^esre-^'nTmSS^^^^^^^^ 

STATEMENT  OF  MB.  W.  D.  GEOEGE. 

Mr  Warren.  Mr.  George,  will  you  state  your  full  name,  please? 
Mr!  George.  William  D.  George. 
Mr  Warren.  William  D.  George? 

Sr.  SBK.^Andlour  business  ordinarily  is  that  of— 

£  wZ^NSTouhave  taken  on  a  new  business  recently; 

have  you  not  ? 

Mr.  George.  Yes,  sir.  . 

Sir.  Sr-ltm^;^oV^e\teivers  of  the  Pittsburgh  Railway. 
*^  Mr.  W ARBEN.  How  long  have  you  been  such  receiver  ? 

£  ^l^.'^^^^^l^'^rL  first  went  into  a  receiver- 
^^K.  Gkoroe.  No;  the  road  was  in  the  hands  of  receivers  since 

baSg'&UcU^^i«f  tLtfeL-ra^^^       business  before  you 
were  appointed  receiver? 

Mr  WABREN^Have  you,  since  your  appointment   made  a  pretty 
thfrou  J  study  of  the  Pittsburgh  Railways  system  situation  J 
Mr.  George.  I  have  tried  to. 


290    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  When  you  became  receiver,  what  fares  were  being 
charged  on  the  Pittsburgh  Railways  Co.? 

Mr.  (jeorge.  They  had  two  rates  of  fare  in  the  city  at  that  time. 
One  was  5  cents,  which  prevailed  in  the  congested  area,  the  down- 
town district;  and  the  other  rate  w^as  7  cents,  which  was  in  the  out- 
lying district;  and  the  7-cent  fare  also  was  charged  for  those  pas- 
sengers who  rode  from  the  downtown  area  out  to  the  outlying  dis- 
trict, where  the  7-cent  fare  prevailed. 

Mr.  Warren.  Was  it  roughly  two  zones,  like  my  hat,  one  zone  here, 
coveriijg  the  center  of  the  city,  a  circle,  and  then  going  arouncl  the 
eiix'le  where  the  7-cent  fare  applied  ? 

;Mr.  George.  Yes. 

Mr.  Warren.  And  a  ride  anywhere  in  the  outer  zone  was  7  cents  ? 

Mr.  George.  Yes. 

Mr.  Warren.  Long  or  short? 

Mr.  George.  Yes. 

!Mr.  Warren.  But  it  also  enabled  them  to  come  from  the  outer  zone 
to  the  inner  zone? 

Mr.  George.  Yes. 

Mr.  Warren.  A  ride  in  the  inner  zone  was  5  cents? 

!Mr.  George.  Five  cents. 

Mr.  Warren.  And  I  suppose  that  prior  to  that  it  was  a  5-cent  fare 
in  the  whole  territory. 

Mr.  George.  That  is  right. 

Mr.  Warren.  Also  if  a  person  went  from  this  inner  congested  zone 
to  the  outer  outlying  zone,  he  paid  7  cents  ? 

Mr.  George.  You  ai'e  speaking  now  of  the  new  fare  ? 

Mr.  Warren.  No  ;  I  mean  the  fare  that  you  found  in  effect. 

Mr.  George.  It  was  7  cents  from  the  center  of  the  town  out  to  the 
districts — the  7-cent  district. 

Mr.  Warre:!^.  Something  like  the  zone  system  which  was  put  in  in 
Springfield,  Mass.,  except  that  fare  was  the  same  for  each  zone,  with 
a  reduced  rate  less  than  the  sum  of  the  two  for  a  ride  from  one  zono 
to  the  other. 

How  long  had  that  fare  been  in  effect  when  you  were  appointed  in 
December  i 

Mr.  George.  They  made  a  change  from  the  fiat  5-cent  fare  in 
January  of  1918.  They  first  attempted  a  6-cent  cash  fare  and  two 
tickets  for  11  cents. 

Mr.  Warren.  That  was  a  flat  fare  all  over  the  whole  territory? 

Mr.  George.  Yes;  but  they  found  that  that  did  not  give  them  the 
revenue  which  they  needed,  and  very  shortly  after  it  was  put  into 
effect  they  put  the  5  and  7  cent  fares  into  effect. 

Mr.  Warren.  Did  the  6-cent  fare,  or  two  tickets  for  11  cents,  or 
5J-cent  ticket,  give  them  some  increased  revenue? 

Mr.  George.  Well,  they  did  not  get  any  inoi-eased  revenue  out  of 
it.  It  was  in  effect  a  very  short  period  of  time,  and  during  a  period 
of  time  when  the  situation  was  vei-y  much  disturbed,  due  to  war 
conditions  and  other  conditions,  and  they  could  not  very  well  meas- 
ure what  the  effect  of  that  fare  was,  but  they  realized  that  they  were 
not  going  to  get  fix)m  it  the  revenue  which  was  necessaiy,  and  they 
immediately  chang:ed  to  the  other  system. 

Mr.  Warren.  Did  the  second  system,  of  5  and  7-cent  fares,  pro- 
duce an  increased  income? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    291 

Mr.  George.  Yes ;  it  has. 

Ml-  WiKREN   A  substantial  increases 

mV  GforT  Well,  the  receipts  from  the  5  and  7-cent  fare  meas- 
„rocl  by  the  first  5  months  of  this  year,  as  compared  ^"thtlie  first 
f  ninnths  if  hxst  vear,  have  netted  an  increase  of  approximateU  lo 
nor  cent     The  avS;  rate  of  fare  under  the  5.cent  fare,  of  course 

mtle  better  than  maintained  the  average  increase  that  it  it  did  in  tUe 
^"The  C«'uRMAN.  Is  that  because  they  are  longer  rides,  and  they 
""M^fiEORGE  Well  that  would  no  doubt  have  some  effect  on  it     Of 

wmsmmmM 

revenue.  ^xi^,^^    Ynnr  fare  isnowalO-centcashfare.isitnot? 

Commissioner  Beall.  l  our  tare  i»  nu »  a  T^nhlir-service 

\fr^    avnncr  We  have  filed  a  new  tariff  with  the  public  service 

'^'^Mr"  WARREN.  That  becomes  effective  on  August  1? 

£:  fer..^^^f  you  are  doing  that  becai^e  your  income,  even 
with  this  15  per  cent  increase,  is  still  insufficient  < 

Mr  W™^\tn  you  tell  the  commission  approximately  for  any 
paSJar  period  hoi  your,  income  and  operating  expenses  have 

™Sir'^  GeSge  Etrin't1";ear\vlt^de  a  budget  estima^  for  the 

.^^we  P^im  aed  our  income  for  the  year  at  something  over 

iirdoo  000     0«  "xpericnce  so  far  this  yeari^ix  months-has  very 

!S3y  approacheUe  estimate  o^^^^^^^^^^^^^^XZ^l 

??rt  tt™:i"rd' iSt\ttL'at,t  :su^ 

^ti^r-pen^/orUie  year   and  w^^  ^^the  «i.^^of  the^ 

year    we    would   have    an    opeja"ng   P'"  ^  ;     municipal 

!.LSe;:Schtei^aSetrd  iSintC^vSwe  felt  we  were  Lt 

SnSSsio'er^SiI  "4  wei.  aU  behind  in  your  power  bills, 

""■  Mr^GEORGE  AVell,  we  had  prereceivership  bills  of  about  $900,000 
Ml   UEORGE.  y  ^'  '         ,j     1      (J  ,^hich  the  court  had  authonzed 

Thf  ;:c^:Sst^t  at  S  discretion.    We  have  made  about  20 


292    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

per  cent  of  the  payment  on  that  $900,000  of  prereceivership  bills. 
The  power  bill  was  in  that,  but  this  $1,600,000  of  operating  revenue, 
of  course,  was  after  the  power  bills  for  the  current  were  taken  care 
of.  Now,  that  $1,600,000  did  not  take  care  of  any  of  the  extraordi- 
nary maintenance  charges — any  depreciation  charge — nor  did  it  take 
care  of  any  of  our  fixed  charges,  or  any  interest  charges  of  any  nature 
at  all.    The  fixed  charges  amount  to  about  $3,500,000  a  year. 

Commissioner  Gadsden.  Three  million  five  hundred  thousand 
dollars  ? 

Mr.  George.  Three  million  five  hundred  thousand  dollars  a 
year,  about.  So  our  situation  is  really  very  important  at  the  pres- 
ent time,  because  we  have  in  default  something  between  $2,500,000 
and  $3,000,000  of  fixed  charges,  and  we  owe  the  city  a  very 

Commissioner  Gadsden.  Is  that  from  the  1st  of  January,  the  cur- 
rent deficit? 

Mr.  George.  What  is  that? 

Commissioner  Gadsden.  Is  that  the  current  deficit,  from  the  1st 
of  January? 

Mr.  George.  I  am  speaking  about  the  defaults  which  have  actually 
occurred,  not  the  ones  which  are  occurring. 

Commissioner  Gadsden.  Oh,  yes. 

Mr.  George.  But  merely  those  defaults  which  have  actually  oc- 
curred up  to  the  1st  of  July. 

Mr.  Warren.  How^  much  did  you  say  they  were,  roughly? 

Mr.  George.  Well,  I  said  $2,500,000  to  $3,000,000. 

Mr.  Warren.  That  is  interest? 

Mr.  George.  That  is  interest  and  rentals. 

Mr.  Warren.  Yes;  and  you  started  to  say  that  you  were  also  in 
arrears  in  your  payments  to  the  city. 

Mr.  George.  In  our  payments  to  the  city  for  bridge  tolls,  for  street 
cleaning,  for  franchise  charges  of  one  nature  and  another,  and,  in 
addition  to  that,  the  city  is  trying  to  force  us  into  cooperating  in 
certain  changes  which  they  are  making,  which  would  entail  a  re- 
alignment and  change  of  grade  of  our  tracks ;  and  we  have  no  money 
to  meet  that  with.  When  we  put  the  old  rate  of  fare  into  effect,  wo 
did  it  without  the  sanction  of  the  public-service  commission,  and  we 
were  compelled  to  issue  rebate  slips,  and  there  is  approximately 
$1,300,000  of  those  rebate  slips  which  are  in  the  hands  of  the  public. 
If  the  public-service  commission  refuses  to  allow  the  rate  of  fare 
which  is  now  prevailing 

Mr.  Warren.  That  is  the  5  and  7-cent  fares? 

Mr.  George.  The  5  and  7-cent  fares — and  if  they  are  presented, 
why,  the  receivers  are  insolvent.     [Laughter.] 

Mr.  Warren.  And  nobody  would  take  the  job? 

Commissioner  Gadsden.  The  only  thing  left  would  be  to  put  the 
receivers  in  jail ;  would  it  not  ? 

Mr.  George.  I  don't  know  what  would  happen. 

Mr.  Warren.  Mr.  George,  you  say  that  $1,600,000,  without  the  pay- 
ment of  any  fixed  charges,  was  your  estimate  for  the  year,  at  the  5 
and  7-cent  rates  ? 

Mr.  George.  Yes. 

Mr.  Warren.  My  attention  was  diverted  for  a  minute.  Did  you 
say  to  the  commission  what  you  estimated  the  depreciation  deduction 
should  be  on  that  $1,600,000  2 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    293 

Mr.  George.  Well,  it  has  been  suggested  tlm^^^^^^ 
miles  of  new  track  each  year  to  keep  gi^^f^f  ^f^^ 
We  have  600  n^il||,«,^J^^^^^^  what 

cost,  I  imagine,  $60  OOO  to  $70  0^^^^  w  new  cars,  and  they  say  we 

"'MreJ-WSUll,  »,b.r™s.«l  ..  *.te  tlm  station;  but 
"  i5S.S?»S- w™.  Ho.  m.w  c.„*i...n.  ™mp.»»  .re  tU.r. 

panies  in  this  group  ol"n>H<"'g*"if !,;:„„  „.hich  took  place  was  the 
^  Mr.  George.  Well,  the  last  consolidation  ^^^  ^^"^.^        ^gether 
formation  of  the  Pittsburgli  Kailways  Co    whi^^^^ 
three  companies-the  Consolidated  ^^''^^L  Southern  Traction 
tion  Co.,  and  the  Southern  Tr^^^^n  Co     Th^^^^^  ^^^  ^j,^ 

Co.'s  name  was  changed  t^^^/A^S.^m  under  an  operating 

?X^:rxTp3nSgte^^^^^^ 

ofoOdaj^;  andtho^notice^h-e^^^^^^^^  ^^^p^^.^^  t. 

in  Jrsr;r  To^hlTutl^iSTort^^^^^  of  Pittsburgh-^xc„se  me,  Mr. 
^""^TrnKREK.  I  only  wanted  to  finish  one  line,  and  then  have  tho 
'"cZmrssioner^WEH^.  You  have  some  questions  along  a  certain 

K^selt  nSv'eT  li^^et^'^l^  him  myself  to  any  great 

^''^^"*V        1      t„n^  \t   Mr   Geor<re,  you  estimated  $1,600,000  above 
opt tlrfSr'ear.'  '!vas^ti:^t''aiJve  operation  and  taxes  or  above 

°^^jf  "geLoe.  Well,  that  -s  above  op^^^^^^^  J^- 

cent  of  the  taxes  included     We  Jm  ^.Xthem  are  local  taxes  and 
of  annual  taxes,  and  about  60  per  cent  o  ^^^^     ^^^^  ^^ 

,..bout  40  per  cent  of  tl;?'^*'f„iff  because  we  thought  there  was  no 
eludes  the  State  and  "atonal  taxes,  because  g  ^^^  ^ 

chance  of  having  '^"y^^if  *  ^J^^.^^^S  re^S'ze         situation  and  re- 
that  perhaps  we  could  get  the  city  to  recog 

lieve  us  of  the  local  taxes.  ,   ,  experience  for  the  first 

•^^•''^nftEear  wMTyrr%*\n/T^^^^^^^         indicates  that 
SIX  months  of  the  year  w       ^  j.^^    ^^rect? 

.      your  estimate  of  $l,WO^W"i^^^  ^^^^^ 

Mr.  Geokge.  very,  very  oiosB  you  would  then  have  about 

Mr.  AVarren.  Assuming  it  ^of  correct  you  wo  ^^^ 

$300  000  for  taxes  or  city  charges,  unless  you  are  leiiev 


294    PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


I 


you  would  have  a  depreciation  that  would  exhaust  those  two  items, 
that  would  exhaust  the  entire  balance  above  the  operating  expense; 
is  that  correct  ? 

Mr.  Geobge.  Undoubtedly. 

Mr.  Warren.  Can  you  say  a  word  about  your  wage  situation? 
"What  rate  are  you  paying  now  to  the  train  men  ? 

Mr.  George.  Foity-eight  cents  is  the  maximum-wage  pay. 

Mr.  Warren.  Was  that  a  War  Labor  Board  award  ? 

^Ir.  Geoboe.  That  was  a  War  Labor  Board  award. 

Mr.  Warren.  Is  there  any  movement  with  reference  to  its  change 
or  increase  of  that? 

Mr.  George.  The  men  demanded  GO  cents  as  a  maximum  wage,  and 
the  receivers  refused,  on  the  ground  that  they  did  not  have  the  money 
to  pay,  and  the  men  went  on  a  strike.  Then  it  was  agreed  that  the 
matter  should  be  left  to  the  War  Labor  Board  for  arbitration;  and 
the  matter  has  been  heard  by  the  War  Labor  Board,  but  no  decision 
has  been  rendered.  A  60-cent  rate  of  wages,  if  it  is  made  effective, 
and  a  corresponding  increase  given  to  other  employees  of  tlie  com- 
pany  

Mr.  Warren.  And  have  they  asked  for  a  corrasix)nding  increase? 

Mr.  George.  Yes ;  they  will  have  to  have  it — would  mean  an  addi- 
tional expenditure  of  about  $2,000,000. 

Mr.  Warhen.  Do  you  mean  per  annum  or  for  six  months? 

Mr.  George.  For  the  year.  It  would  cause  as  an  increase  of 
about  $2,000,000. 

Mr.  Warren.  For  this  current  year? 

Mr.  George.  Yes. 

Mr.  Warren.  For  12  months? 

Mr.  George.  At  the  rate  of  $2,000,000  a  year. 

Mr.  Warren.  Or,  in  other  words,  another  million  dollars  for  this 
year  on  which  the  budget  was  $1,600,000  ? 

Mr.  George.  Yes. 

Mr.  Warren.  That  would  put  you  something  over  a  million  dollars 
in  the  hole? 

Mr.  George.  Yes. 

Mr.  AVarren.  Well,  as  a  matter  of  fact,  if  you  have  that  $1,600,000 
is  it  all  committed  in  one  way  or  another  for  existing  liabilities  or 
prereceivership  liabilities  or  extraordinary  expenses;  or  do  you  ex- 
pect to  have  some  of  it  in  cash  at  the  end  of  the  year  ? 

Mr.  George.  Well,  if  we  have  any  of  it  in  cash  it  will  be  because  we 
have  refused  to  pav  it  out. 

Mr.  Warren,  ^ot  because  there  are  not  liabilities  on  which  you 
could  pay  it  out? 

Mr.  (teorge.  Not  because  there  are  not  claimants  for  it. 

Mr.  Warren.  You  seem  to  have  a  number  of  specific  charges,  some 
of  which  sound  a  little  unusual  to  jne,  although  I  thought  I  knew  of 
a  great  many.  Can  you  tell  the  commission  what  they  are?  You 
spoke  of  street  cleaning.    What  does  that  mean  ? 

Mr.  George.  Well,  the  franchises  call  for  the  street-car  companies 
to  maintain  the  track,  as  is  customary,  the  paving,  and  also  to  clean 
the  streets  along  which  they  operate. 

Mr.  Warren.  How  much  of  the  street  ? 

Mr.  George.  Well,  tliHt  was  the  question ;  and  it  was  finally,  after 
years  of  litigation,  resolved  to  a  fixed  sum  of  money  which  the  trac- 


PBOCEEDINGS  OF  FEDERAI.  ELECTEIC  RAILWAYS  COMMISSION.    295 

tion  company  and  the  city  agreed  would  be  an  actual  charge,  which 
would  XTare  of  that  obligation,  whatever  rtwa..  ^^_ 

peSd  S"fo1Sidt  »r.' ac^lly  s^ep  up  the  streets. 

Mr.  GsoKOE.  Yes,  sir. 

Mr.  Warren.  Such  as  most  cities  do?  ^^  ^j^^ 

Mr.  Geobge.  Well,  I  think  it  ^asbmlt  on  toe  theory  ^^^ 

mules  in  the  old  horse-car  ^^y^  ,^f^^Jt^J;T^i^J^ls\  tradition 
necessary  to  keep  them  clean,  and  it  was  handed  down  as  a 

°  Mn  WAHKi'TLre  was  no  corresponding  tax  on  the  private 
driver  of  the  mule,  was  there? 

Mr.  George.  No.  „   ,    ^      ^      ? 

Mr.  Warkek.  What  else  of  that  nature?  p.^^^^ 

side  and  to  the  noitn  sme,  '^"*^*         ..,    ,.     r-oUwav  company  for 

crossinft  the  bridgea 
Mr  Wahrsn.  A,nd  still  does  pay?      „      ,.    -, 
Mr   G^ROE.  Well,  up  until  the  time  [l/^^gM^lrTZ ,         ■ 
Mr'  W.RREN.  There  is  still  a  claim  on  the  $1,600,000? 

£  &.^iw;y- -n^^>^-  SSet^^th^piS 

^flSsii;ent^n=:  Uk^'^gir^Uy:  axe  charged  a  toll  for 
crossing  free  bridges  in  street-cars  ( 

Mr  Wriv.^AndX  automobile  owners  and  carriage  owners  and 
all  other  residents  use  the  bridges  free  < 

£:  ^Z.:'xA  Se\rotl.er  charges  of  that  sort  against 

the  car  rider? 

Mr.  George.  Well,  ^W  ha^e— •  j  j^-^^^  community? 

Comnussioner  Jto^  PJ^^^^^^     -^^Xt  between  the  city  and 
Mr.  Georoe.  \\  ell,  mere  "^^^  uttu  ..  ^  ^^^^ 

the  street-car  company  there,^'^  ^^^^Z'Sft  ha<l  on  the  trac- 
yeais,  and  the  city  would  not  .-^lin^^^^Xf^X franchise.  It  held 
Ln  company,  or  any  ^^ai-ge  it  had  ma^e  in  the        ^^^^  ^^ 

religiously  to  them,  in  o^der +hat  they  coma  traction  com- 

penalty  for  wh^t  it  «°««^^^f^t«tii  to"  Sf  ^  these  charges  were 
pany  to  properly  perform  it«  ™%Yl     It  was  merely  the  remnants 

.  ''r Si?  ESfes  sr  Ti°  =?: 

^  thS'n?^  I  wm  hav^fo ^  Mr.  Kobinsou  to  correct  me  on  that. 
Mr.  KoBiNSON.  $125,000. 


»li 


296    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  George.  $125,000. 

Mr.  AVarrex.  $125,000? 

Mr.  George.  Yes.  The  bridge  tolls  and  tlie  street-cleaning  item  I 
confused.    The  street  cleaning  is  $80,000. 

Mr.  Warren.  That  makes  about  $200,000.  I  think  you  said 
altogether  there  was  about  $300,000. 

Mr.  George.  There  is  a  gross-receipt  tax  in  former  Allegheny  that 
still  prevails. 

Mr.  Warren.  Is  former  Allegheny  a  part  of  the  city  of  Pitts- 
burgh now? 

Mr.  George.  It  is  now,  the  north  side  of  Pittsburgh. 

Mr.  Warren.  And  what  is  that  for? 

Mr.  George.  Well,  they  have  in  some  places,  toll  taxes.  They 
asked  the  company  to  contribute  in  relation  to  the  number  of  poles, 
trolley  poles  that  it  has.  In  another  instance,  they  have  been  asked 
to  contribute  in  proportion  to  the  number  of  cars  which  they  operate. 
That  is  not  all  of  the  city  of  Pittsburgh.  This  is  in  the  communities 
around  the  city,  as  well  as  in  the  city  proper ;  but  those  are  different 
charges  of  one  nature  or  another,  which  would  go  to  the  franchise 
charges  which  were  made  at  the  time  the  company  was  given  its 
original  grant. 

Mr.  Warren.  Have  you  in  mind  how  much  the  car  charges 
amount  to? 

Mr.  George.  Well,  I  could  not  separate  those  from  memory. 

Mr.  Warren.  Well,  I  mean,  have  you  in  mind  how  much  the 
charge  per  car  is  in  different  parts  of  the  system? 

Mr.  George.  Well,  there  was  quite  a  dispute  regarding  that,  and 
the  public-utilities  commission  regarded  a  certain  charge  as  a  legal 
charge.     Mr.  Robinson  can  tell  you  that,  too,  probably. 

Mr.  Robinson.  There  is  not  any  charge  per  car  in  the  city  of 
Pittsburgh,  but  in  the  outlying  boroughs  they  have. 

Mr.  George.  Well,  that  is  what  I  am  speal^ing  of. 

Mr.  Warren.  I  think  that  is  all  I  want  to  ask  Mr.  George. 

The  Chairman.  Commissioner  Wehle,  you  may  proceed. 

Commissioner  Wehle.  Did  the  commission  understand  you  cor- 
rectly, Mr.  George,  as  saying  that  the  last  consolidation  of  the  200 
or  so  separate  companies  which  composed  the  Pittsburgh  system 

Mr.  George.  Sixty. 

Commissioner  Wehle  (continuing).  The  60  companies,  which 
composed  the  Pittsburgh  system,  was  in  the  form  of  a  consolidation 
of  three  constituent  companies? 

Mr.  George.  The  last  consolidation  was  between  three  of  the 
parent  companies  then  existing. 

Commissioner  Wehle.  And  those  three  parent  companies,  between 
them,  represented  what  originally  had  been  about  60  companies  ? 

Mr.  George.  Yes.  Some  of  those  were  legal  fictions,  of  course,  of 
companies,  but  they  were  not  all  of  them  operating  companies. 

Commissioner  Wehle.  Were  some  of  them  power  companies? 

Mr.  George.  No. 

Commissioner  Wehle.  That  sold  current  to  street-railway  com- 
panies? 

Mr.  George.  No. 

Commissioner  Wehle.  Well,  what  were  those  parent  companies? 
What  were  their  functions? 


PBOCEEDINGS  OF  FEDEKAL  ELECTKIC  RAILWAYS  COMMISSION.   297 

rn7re'sou^ttn  T^tir^^^^^^^^  now  the  Pittsburgh  Ea.lways 

"*i'GKor  Oh,  no,  No;  I  say  that  they  -re  street-r^lw^^^ 
companies,  but  they  -ver  X^^^rpo^  CT^^^^^^^ 
STtf  t.ZL^T!:^'^^  ^coCrZr^iLnt  Jrtoi  the  older 
Sfny"  tU  ^as  necega'.y  £  lega   P"J-f '^-^S  ^^e  three 

Commissioner    Wehle.  >\nen    >ou    ba^, 

?c  f^rn,i^ll  the  operating  agreement  which  they  have,  or  lease. 

''  SmtsSn^r^Atal  fn  what  year  was  this  arrangement  put 

throufifh ' 

SmSneJ  ^tSl  Anl^Hhat  proceeding?     Was  it  the 

"IKIolT'^^ell,  i"has  been  the  subiect  of  a  great  ^eaj  of  in- 
quiry before  the  Public  Service  Commission  of  the  State  of  Penn 

^^Commissioner  AVehle.  I  did  not  catch  the  answer 

Commissioner  M     p  ,  ,•     ggrvice   Commission  of  the   State  of 

Penn^vhrirdid^nvSSate  S^flairs  before  it  quite  frequently 
OommiSoner  Wehle.  Did  the  public-service  commission  law  of 
PennsyTrnTaexist  at  the  time  of  this  consolidation,  or  when  it  was 

P'SioKOK*! Sk  not.    I  do  not  know  what  the  date  of  our  pub- 
lic-scrvice  commission  law  was. 
Mr.  Robinson.  January  1,  1914. 

ComrnksToneJ^WEHLK  Under  what  terms  is  the  present  Pitts- 
burgh RaUways  Co.  operating  over  the  lines  of  the  constituent 
companies?  ,. 

SmSSeJmHl^ntrX^^^^^^^^       i«  «-  operation  being 

'''''^:^S^Z'''B:yon^''^^i  are  the  terms  of  the  agreement 
of  the  C^nsSidated  Traction,  the  United  Traction  Co.,  and  the 
other  companies? 

160643"— 20 — -20 


298    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


V 


Commissioner  Wehle.  Under  which  the  Pittsburgh  Railways  Co. 
is  operating  over  the  trackage  of  those  three  constituent  companies. 

Mr.  AVarren.  Do  you  mean  under  the  receivership,  Mr.  Wehle  ? 

Commissioner  Wehle.  No,  I  mean  before  the  receivership. 

Mr.  George.  AVell,  the  operating  agreement  called  for  the  payment 
of  certain  fixed  charges  of  the  companv  first,  and  then  we  have  some 
payments  of  dividends  on  some  stocks,  but  the  dividends  on  the 
stock  were  only  temporarily  paid  and  were  soon  waived,  and  the 
oi>erating  agreement  kept  in  force  merely  for  the  payment  of  the 
fixed  charges. 

Commissioner  Wehle.  Well,  was  there  no  fixed  rental  of  any  sort? 
Mr.  George.  No. 

Commissioner  Wehle.  Then  just  exactly  how  was  this  compensa- 
tion to  be  determined  ? 

Mr.  George.  Well,  it  was  to  be  determined  merely  by  their  me^et- 
ing  these — in  the  first  instance  it  was  to  be  determined  by  their 
meeting  these  fixed  charges  and  by  paying  the  dividends  on  the 
stock,  but  when  they  failed  to  pay  the  dividends  on  the  stock,  that 
portion  of  the  contract  was  waived,  and  merely  the  payment  of  the 
fixed  charges  was  had. 

Commissioner  Wehle.  When  was  that  failure  found  to  be  neces- 
sary, the  failure  to  pay  the  dividends  on  the  stock? 

Mr.  George.  I  could  not  state  just  exactly  what  the  date  of  that 
was,  but  the  payments  on  the  stock  failed  very  early  in  the  case  of  the 
Consolidated  Traction  Co. 

Mr.  Warren.  Do  you  know  when  that  was  ? 

Mr.  George.  I  can  not  give  you  that.  Can  you  give  that,  Mr. 
Robinson  ? 

Mr.  Robinson.  It  was  complete  before  1912,  but  I  do  not  know 
just  the  exact  date. 

Mr.  George.  The  faihire  was  complete  before  1912. 

Mr.  Warren.  On  the  part  of  the  Consolidated  Co.,  or  the  other 
company  ? 

Mr.  Robinson.  The  Consolidated  and  the  United.  No  dividends 
were  ever  paid  on  the  Pittsburgh  Railways  Co. 

Commissioner  Wehle.  Well,  the  Pittsburgh  Railways  Co.  is  the 
operating  company,  I  understand.  I  am  asking  you  about  the  divi- 
dends of  the  three  companies,  over  whose  property  the  Pittsburt'h 
Railways  Co.  is  operating.  ^ 

Mr.  Robinson.  One  of  those  three  was  the  Pittsburgh  Railways  Co. 
At  first  it  was  under  the  name  of  the  Southern  Traction  Co.,  and  as 
to  the  other  two,  as  I  said,  the  default  was  complete  before  1912. 

Commissioner  Wehle.  Was  any  new  stock  issued  by  any  of  the 
three  companies  at  the  time  of  the  consolidation  agreement  in  1912? 

Mr.  George.  I  am  not  familiar  with  that.  You  see  that  is  not  a 
matter  of  concern  to  the  receivers  of  the  companies,  because  we  have 
long  passed  the  consideration  of  the  stock.  We  are  merely  now 
struggling  with  operating  expenses  and  primary  lines.  If  we  get 
that  far  along,  we  would  be  comparatively  comfortable. 

Commissioner  Wehle.  Still,  you  see,  one  of  the  purposes  of  this 
commission  is  to  inquire  into  causes  as  well  as  results;  and  it  would 
be  interesting,  when  you  present  present  conditions,  to  know  what 
may  possibly  have  led  up  to  them.  In  view  of  some  of  the  testimony 
that  has  been  given  here,  it  has  simply  occurred  to  me  to  inquire 


PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   299 

plan  of  consolidation. 
£.Srne7liifL^*D";ou'k-;^  whether  or  not  that  took 

''^Mr' George  No-  but  that  will  all  be  straightened  out  in  the  valu-' 
ation  whTcHs  now  beinj,  n.ade  of  the  property.  The  valuation  of 
ihp  orooertv  has  been  undertaken  under  the  direction  of  the  Public 
SerxTce'^fflmission  of  the  State  of  P^-y^-- =,rl*tu".v; 

.uittee,  in  connection  with  tV«/"g'"f^'-%?f  P^itlsburS  p'4  del 
companv  and  eng  neers  appointed  by  the  city  of  ^\"sOurgn,  piesiacu 
r^'Tbv  the  engmeer  of  the  Public  Service  Commission  of  the  State 
nf  PpnnsvSa  is  about  to  conclude  an  agreed  valuation  of  the 
uroSrtv  wSVm  be  the  basis  of  the  determination  of  the  return 
Si  the  ^mpany  is  entitled  to  if  it  can  get  it  from  the  property. 
The  CHirMrN   Will  that  valuation  consider  the  property  as  a 

whole  ? 

SiiSonei^WEHLE.  Then  you  are  really  not  able  to  give  us  the 
histo  ^of  th^^^^^  All  you  can  say  is  that  you  are  one  of  the 

^c^vers,  and  the  company  is  in  very  bad  way  financially? 

Mr  George.  Well,  I  can  speak  about  the  operating  profit  of  the 
company  and  I  can  tell  you,  of  course,  about  the  charges  which  it  is 
eSed  to  meet.  Now,  about  the  history  of  the  company-we  wo^ld 
bXre  for  several  days  if  I  were  able  to  go  back  and  go  through  the 

^'Snlsi  AYehle.  It  might  be  worth  the  time,  Mr.  George. 

Ml  Teorge  Well,  if  you  a?e  interested  in  it,  there  are  several 
vofmne?Zt  have  be^n  prepared  on  it,  I  think,  and  have  been  put  m 
book  form  and  I  will  be  pleased  to  send  you  a  copy  of  it. 

Com  ™sL^^^^^^^^^  anything  of  that  kind  would  have  to 

fro  throuffh  the  couimission  here,  of  course. 

Mr.  Warren.  Will  the  history  enable  you  to  explain  why  the  com- 
panv is  not  earning  its  real  operative  expenses?     ^  ^,  .  ,    .^  , 

Mr.  George.  I  do  not  think  it  would.  I  do  not  think  it  has  any- 
thing to  do  with  the  situation  at  the  present  time. 

Mr.  Warren.    You  say  that  as  a  receiver?    ^       .      .     .  ,     . 

Mr  George.  Yes.  The  property  is  there,  the  physical  property  is 
there,  and  it  has  to  be  operated  in  a  certain  community,  and  it  is 
reasonable  to  suppose  that  it  has  some  ^^lue  and  that  whatever  the 
overcapitalization  of  the  property  may  be,  that  what  value  there  is 

there  is  entitled  to  some  return. 

Commissioner  Meeker.  Well,  as  a  matter  of  fact,  you  have  not  yet 
been  able  to  meet  operating  expenses.  ^i,  ^    ^       +  ^ 

Mr.  George.  That  is  what  we  are  struggling  with  to-day  to  meet 

^^  CommfssloSerM^^^^  And  the  question  of  watered  stock,  and 

'   whether  it  is  entitled  to  an  income  or  not,  has  not  yet  come  up  as  one 
of  your  troubles? 
Mr.  George.  No. 


I 


M 


300    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  But  you  have  600  miles  of  track ;  and  have  you  any 
power  stations? 

Mr.  George.  No;  we  buy  our  power. 

Mr.  Warren.  You  buy  your  power? 

Mr.  George.  Yes. 

Mr.  Warren.  But  you  have  a  good  many  cars,  and  you  are  not 
thus  far  earning  anything  on  any  of  that  property  ? 
.     Mr.  George.  No  ;  we  have  1,300  cars. 

Mr.  Warren.  Has  the  valuation  proceeded  far  enough  to  indicate 
anything  about  the  probable  value  of  the  property  that  you  can  state  ? 

Mr.  George.  No.  Anybody  who  can  foretell  what  the  value  would 
be  would  certainly  be  a  very  interesting  citizen  in  Pittsburgh  just 
now. 

The  Chairman.  What  have  you  done,  Mr.  George,  as  a  receiver,  to 
try  to  economize  in  the  operation  of  the  plant  ? 

Mr.  George.  Well,  I  think  that  we  have  economized  as  far  as  we 
could,  taking  into  consideration  the  degree  of  safety  which  the  riding 
public  are  entitled  to  and  the  service  which  we  feel  that  we  should 
give  to  them. 

The  Chairman.  What  are  those  economies? 

Mr.  George.  Well,  you  are  speaking  about  operating  economies  ? 

The  Chairman.  Yes,  sir. 

Mr.  George.  Well,  I  can  not  say  that  there  has  been  any  particu- 
lar economy  in  operation  that  was  possible  under  the  receivers  over 
what  was  possible  under  the  management.  I  think  the  management 
of  the  company,  up  to  the  time  that  we  took  hold  of  it,  could  not  be 
criticized  from  the  point  of  view  of  economy. 

The  Chairman.  Have  you  directed  your  officers  to  make  a  study  of 
that  question? 

Mr.  George.  Yes. 

The  Chairman.  What  was  the  report? 

Mr.  George.  We  did  that  in  the  budget.  I  made  an  examination 
of  all  of  the  charges  that  were  included  in  the  budget,  and  it  was  gono 
over  very,  very  thoroughly.  The  company  has  been  investigated  year 
after  year,  by  expert  after  expert,  who  has  been  employed  by  the 
city  to  come  there  and  make  a  study  of  it  to  see  what  could  bo  done 
about  bringing  about  a  more  efficient  operation  of  the  property,  and 
many  recommendations  have  been  made.  Mr.  Bion  J.  Arnold  was 
there  some  years  ago,  and  other  operating  men  have  been  there,  and 
experts  have  been  there  since. 

The  Chairman.  Has  the  company  accepted  the  recommendations 
made  by  tl^se  experts? 

Mr.  George.  In  so  far  as  they  could. 

The  Chairman.  In  your  judgment,  what  is  it  necessary  to  do  then 
to  take  care  of  your  situation? 

Mr.  George.  Well,  the  only  thing  that  I  can  see  that  can  be  done 
at  the  present  time  is  to  get  the  fare  on  the  best  possible  basis  that  it 
can  be  put  on  for  producing  revenue  and  to  get,  if  possible,  relief 
from  some  of  these  municipal  obligations.  I  think  progress  is  beincr 
made  in  that  direction.  ** 

The  Chairman.  To  what  extent  do  you  expect  relief  from  these 
municipal  obligations? 

Mr.  George.  Well,  I  do  not  know  that  I  have  any  ground  to  state 
that  I  expect  the  city  to  cancel  what  charges  it  has  and  to  agree  to 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT.    301 

forego  the  levying  of  more  charges  against  the  ^^^^P.^^^^  j.^^^^u^^^^^ 
study  which  is  b?ing  made  by  the  valuation  ^^.J^^'l^^^^^ 
T^nrt  It  must  be  brought  to  a  realization  of  the  fact  that  eitner  serv 
Fee  will  r4y  ma&ly  reduced  or  will  break  down  at  some  points, 
unless  there  is  some  relief  afforded  to  the  company.  ^^^^^^y 

TViP  Thatrman    In  vour  study,  did  you  discover  that  tne  company 
ha?been  making  exteLions  to  likes  o^t  of  earnings  and  charging  it 

to  operating  cost  ? 

Mr.  George.  The  railways  company  5 

The  Chairman.  Yes.  ,   ^  .,  n    9 

Mr.  George.  The  Pittsburgh  Railways  Co.  i 

Mr!  G^onrf  do^o't  think  it  has.    I  do  not  think  it  has  ever  beci. 
acc^i^sed^of^ tha^^^    That  is  not  done  while  you  have  been  receiver? 

Mr  George.  No;  it  has  not.  .     i»       •        «^„ 

Th;  ChTirman.  bo  you  believe  that  an  increase  in  fare  is  neces- 
sary in  Pittsburgh? 

Mr.  George.  I  do.  ,    .       .     .,  i  3  ,9 

The  Chairman.  Will  that  bring  in  the  needed  money? 
Mr  George.  It  will  bring  in  a  portion  of  it,  at  least. 
The  Chairman.  Is  it  your  thought  that  an  increase  in  fare  will  be 
a  temporary  arrangement? 

Th;  ChTirman^  Do  you  believe  the  present  high  operating  costs 

of  that  plant  will  remain  for  some  time? 

Mr.  George.  I  do.  .,    .  •  j  4.9 

The  Chairman.  Upon  what  do  you  base  that  ludgment? 
Mr  Gf^rge   Well  I  do  not  look  for  a  reduction  in  the  cost  of  labor 
or  iodides  to  s^^^^^^^^        to  come,  and  I  think  that  that  has  ac- 

'Xfc'Z^:^^^^^^^^  the  operating  costs  will  in- 

'' m"  G^Z%Tl^^n^^  look  for  it  to  remain  rather  stationary 
but  in  Uie  Lte  months,  the  increase  in  the  index  figures  indicates  that 
there  are^^^^^^^^  pnces  for  commodities-in  the  last  two  months- 

and  I  do  not  like  to  set  my  judgment  up  as  being  expert  on  that 

The  Chairman.  Prior  to  the  receivership  did  you  have  any  ex- 
perience with  street-railway  affairs? 

Mr.  George.  Just  as  a  citizen. 

The  Chairman.  Just  as  a  citizen? 

Th^  CHliTMAN^^Have  you  made  a  study  of  this  service-at-cost 

plan  ? 

Mr.  George.  Yes,  I  have.  4.  a    ^4  +v.of  oie^« 

The  Chairman.  Is  your  city  making  a  study  of  that  also  i 

Mr.  George.  Yes.  .       ,  1    j  •  i.  j.^ 

The  Chairman.  Has  any  conclusion  been  reached  in  respect  ta 

^^^Mr^  George.  I  think  that  is  the  idea  that  is  behind  the  valuation— 
that  a  new  agreement  will  have  to  be  entered  into  after  the  valua- 
tion  is  determined  which  will  practically  be  a  se^ice-at-cost  plan. 

The  Chairman.  Under  such  a  plan  would  you  favor  a  zone  system 
in  your  city? 


li 


802    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


I  ? 


•J  :' 


Mr.  George.  Personally,  I  would  not. 

The  Chairman.  You  prefer  a  straight  fare? 

Mr.  George.  A  flat  rate  of  fare. 

The  Chairman.  Is  it  in  contemplation  that  under  a  cost-of-service 
plan,  the  company  should  be  under  a  regulating  body  of  the  city,  or 
by  the  State  commission? 

Mr.  George.  The  State  commission.  Under  the  laws  of  the  State 
of  Pennsylvania,  the  valuation  will  be  used  by  the  State  commission 
to  determine  what  are  adequate  rates  of  fare  in  the  effort  to  produce 
a  return  on  the  valuation  which  had  been  agreed  upon. 

The  Chairman.  At  present,  what  body  controls  the  service  and 
rates  of  your  city — the  State  commission  or  the  municipality? 

Mr.  George.  The  State  commission. 

The  Chairman.  And  is  that  a  satisfactory  arrangement  in  Penn- 
svlvania  ? 

Mr.  George.  I  think  it  is.  The  city  has  a  right  to  complain  to  the 
State  public-service  commission  and  to  be  heard  there,  and  the  com- 
-pany  has  a  right  to  defend  itself  before  that  body. 

The  Chairman.  Is  there  anything  in  the  contract  which  prevents 
the  State  commission  from  making  fares  as  high  as  may  be  neces- 
sary ? 

Mr.  George.  Yes.    The  franchise  you  are  speaking  of  ? 

The  Chairman.  The  franchise. 

Mr.  George.  Yes. 

The  Chairman.  Suppose  a  new^  franchise  were  adopted,  or  the  law 
of  Pennsylvania  would  permit  the  State  commission  to  make  reason- 
able rates  for  a  street-car  system ;  would  that  settle  your  problem  ? 

Mr.  George.  Well,  as  near  as  it  could  be  workecf  out,  in  view  of 
public  sentiment. 

The  Chairman.  Would  it  be  as  satisfactory  to  your  city  as  the 
service-at-cost  plan? 

Mr.  George.  Well,  I  am  only  giving  my  personal  views  in  this 
matter,  but  my  view  is  that  the  service-at-cost  plan  would  be  better 
administered  through  a  public-service  corporation  of  a  State  than  it 
would  if  the  State  commission  was  done  away  with. 

The  Chairman.  Perhaps,  you  misunderstood  my  question.  It  was 
this :  Would  a  law  permitting  the  State  commission  to  fix  just  and 
reasonable  rates  for  a  street-car  company  be  as  satisfactory  to  the 
city  as  a  contract  establishing  a  service-at-cost  plan? 

Mr.  George.  Well,  I  do  not  know  how  the  city  would  speak  in 
regard  to  that.  As  far  as  I  am  concerned,  I  think  the  public-service 
commission  should  be  allowed  to  regulate  those  rates. 

^Ir.  Warren.  Mr.  George,  how  many  municipalities  does  j^our 
company  operate  in? 

Mr.  George.  Well,  there  are  a  number  of  boroughs  adjacent  to  the 
city  of  Pittsburgh.  They  are  so  closely  built  up  and  contiguous  to 
the  city  that  they  are  really  a  part  of  it.  I  do  not  know,  but  I 
imagine  that  there  are  probably  13  or  14  or  15,  or  something  like 
that.    Do  you  know  how  many  there  are,  Mr.  Kobinson? 

Mr.  Robinson.  About  80  municipalities,  townships,  and  boroughs. 

Mr.  George.  Well,  you  ar^  speaking  of  townships. 

Commissioner  Meeker.  How  many  ? 

Mr.  Warren.  Eighty. 

Commissioner  Meeker.  Eighty? 


proceedings  of  federal  electric  railways  commission.  303 

Mr.  Warren.  Yes,  sir.  ,     .  .        i    «     Ti.of  itiMnrlp*?  two 

Mr.  George.  That  is  including  the  mterurban.  That  incMes  tv^^^^ 
interurban  lines-one  which  runs  to  Washington,  Pa.,  and  the  otiiei 
up  the  Monongahela  River  to  Charleroi. 

Mr.  Warren.  But  those  ai'e  a  part  of  your  system  f 

Mr.  George.  A  part  of  our  system ;  yes. 

Mr.  Warren.  They  are  in  a  receivership '. 

E:  ^V™ .  mil,  do  yp.  think  it  would  be  P-ticable-^^^^^^ 
ino-  out  the  line  of  the  chairman's  question  a  little  further— to  make 
a  ^on  ract  with  the  city  of  Pittsburgh  relative  to  the  ra  -  and  s^^^^^ 
ice  that  would  be  satisfactory  to  all  these  other  political  units  aiouna 

^  M? gSgk.  The  cities  of  Pennsylvania  are  Fe£l=\t«d  by  i,.,^  of 
the  State  and  they  are  grouped  in  classes;  and  the  la^s  which  are 
pas^d  ar^  not  pasLd  wifh  rijrard  to  any  P=-ticular  commumty  bu 
are  Dassed  with  regard  to  a  class  of  cities  and  a  class  <>t  boioughs 
and  a  class  of  third-class  cities.    Now,  I  do  not  know  whether  legis- 
Httrcould  be  so  devised  that  sufficient  flexibil  ty  could  be  given  to 
all  of  those  cities  to  act  in  a  situation  as  complex  as  this  would  be 
which  would  enable  them  to  control  the  situation;  whereas  if  you 
Invp  the  State  bodv  empowered  to  use  discretion,  then  these  com- 
munities coTd  all  gather  before  the  State  body  and  reflect  their 
nS">uid  their  v!ews,  and  in  tliat  - ^7  ^uld  have  a  be  ter 
rounded  out  plan  than  it  would  be  possible  to  ha^  e  if  all  or  "lese 
communitTes  or  all  of  these  subdivisions  were  dealing  direct  with  the 

^Tlr^'^^AEREN   And  you  think  that  such  an  arrangement  as  that 
woiHd  be  reasonably  satisfactory  to  the  different  communities,  do 

^''lllr   George.  They  have  a  very  high  regard  for  the  public-service 
commissfon  in  the  ^State  of  Pennsylvania.     Public  sentiment  sup- 

^Commissioner  Meeker.  I  want  to  ask  you  one  question,  Mr.  George 
Wm.lrl  it  be  Dossible.  or  is  it  advisable,  to  discontinue  some  of 
thJse  outlvLs:  Irnes'    You  say  that  you  se'rve  80  distinct  borougte, 
o^'shlpsfald  so  forth.    Wo^ild  it  be  possible  to  economize  m  the 
service  bv  cutting  out  some  of  these  places,  for  instance  ( 

Mr.  George,  fliat,  of  course,  is  what  we  ^^l^^ave  to  do.  We  w  11 
have  to  reduce  the  service  to  the  point  where  it  will  supiwit  itselt, 
and  that  will  no  doubt  result  in  some  communities  being  without  any 
seiiic  It  ai",  but  that  would  be  an  extreme  case  it  -ou W^e^m  to  me 
and  it  would  be  very  unfortunate  if  we  should  have  to  resort  to 

^''commissioner  Meeker.  Well,  it  is  a  matter  that  we  have  to  face 
Some  communities  can  not  support  any  street-car  service,  and  it 
servTce  h^s  been  extended  to  that  kind  of  communities,  it  would 
seem  essential  to  cut  it  out ;  would  it  not « 

Mr  George.  Oh,  there  is  no  doubt  about  that.  But  there  is  a 
certain  amount  of  expansion  and  growth  which  is  going  on  in  a 
large  community  all  tlie  time,  and  what  s  taken  in  one  year  as  a 
unit  as  unprofitable  business  maj^  be  developed  .^^thin  a  short  time 
to  be  the  profitable  business;  and  the  question  is  whether  it  is  not 
Se  duty  of  the  company  so  to  conduct  itself  that  it  will  cooperate 


il 


304    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

with  the  growth  and  development  of  the  community.  That  is  only 
possible  if  they  can  secure  the  cooperation  of  the  community  in  sup- 
port of  the  public  utility,  and  I  can  not  conceive  of  the  people  of 
any  community  being  so  blind  that  they  are  going  to  destroy  a 
needed  public  service ;  in  the  end  they  will  have  to  respond  in  some 
way  to  the  necessities  of  the  public  service.  These  street-car  com- 
l^anies  are  attempting  to  give  that  service. 

Commissioner  Meeker.  Do  you  think  if  you  had  an  increased 
fare  it  would  not  be  necessary  to  cut  out  the  service  in  any  com- 
munity ? 

Mr.  George.  I  would  far  rather  increase  the  fare  than  cut  off  that 
service,  which  is  the  lifeblood  of  the  community.  Why  should  we 
as  administrators  of  a  public-service  corporation  move  in  the  direc- 
tion of  destruction  of  property— in  the  direction  of  destruction  of 
property  values — and  handicap  community  life?  Can  we  not  bring 
the  lesson  home  to  them  rather  by  increasing  the  fare  and  telling  the 
people  what  the  situation  is  and  trying  to  get  them  to  respond  to  it  ? 
That  is  my  thought,  and  it  is  the  thought  that  the  receivers  of  the 
railway  conipany  are  acting  on.  If  the  rate  is  7j  and  10  cents,  and 
we  can  justify  ourselves  bv  the  necessities  of  the  situation,  we  need 
to  offer  no  apology  for  making  the  attempt ;  and  I  believe  the  people 
will  respond.  I  think  this  idea  that  you  are  going  to  destroy  the 
revenues  of  the  company  by  increasing  the  rate  of  fare  is  to  a 
degree  fallacious,  and  I  think  we  ought  to  move  in  that  direction— 
that  we  ought  to  move  toward  an  increase  in  the  rates  of  fare  and 
toward  the  education  of  the  public  that  they  have  to  pay  a  fair 
return  for  the  service  which  they  are  getting  from  the  transporta- 
tion companies. 

Commissioner  Gadsden.  And  you  believe  that  in  the  long  run  the 
people  will  pay  the  increased  fare ;  do  you  not  ? 

Mr.  George.  I  do. 

Commissioner  Gadsden.  And  it  is  simply  a  question  of  waiting? 
Can  you  keep  going  a  long  time  ? 

Mr.  George.  You  have  to  ask  them  to  do  it  before  they  will  do  it. 
They  won't  say  voluntarily,  "  We  would  like  to  pay  10  cents  rather 
than  5  cents";  but  if  they  can  be  shown  that  the  necessity  of  the 
situation  is  so  great  that  there  is  no  alternative — ^that  they  are  face 
to  face  with  a  crisis,  either  of  the  interruption  of  service  which  is 
necessary  to  the  communal  life,  or  pay  the  fare,  I  think  they  will 
pay  the  fare. 

Commissioner  Wehle.  Mr.  George,  you  have  been  discussing  this 
now  from  a  public-policy  point  of  view  ? 

Mr.  George.  Yes,  sir. 

Commissioner  Wehle.  And  we  will  assume  now  for  the  sake  of  the 
discussion  that  this  increased  fare  ought  to  be  had:  and  you  speak 
of  educating  the  public  and  convincing  them  that  it  is  both  neces- 
sary and  just  that  they  should  have  it.  Now,  we  have  been  hearing 
to-day — and  you  have  been  here,  I  think,  for  the  last  few  days— from 
officials  of  the  railway  companies  and  investment  companies,  to  the 
effect  that  there  are  certain  deplorable  practices  that  have  prejudiced 
the  people  against  the  companies,  so  that  they  do  not  do  them 
justice. 

Several  of  these  gentlemen  have  stated  that  these  practices  should 
not  continue.    For  instance,  one  of  the  practices  that  were  discussed 


PROCEEDINGS  OF  FEDERAL  ELECTEIC  RAILWAYS  COMMISSION.   305 

;:;^sf  better  elernent  in  the  ^^^^^^^^ 

in,  a^re  we  not  going  *«  end  up  m  anothei^  5  or  W  yeais^^^^^^ 
"Mr^GBOKCE.  I  think  I  do;  and  I  ^-e  confidence  that  this^^^^^^^ 

'"oomSSir  Wehix.  But,  nmrk  you,  Mr.  George,  such  practices 
-HiE?  ^^  ^^^  fuTfsel^nJe: 

wifnesses,that-those  practices  are 'continuing  at  present,  but  that 
they  >yeie  all  ^e"  '»  ^lie  past  understood  this  from 

!lp«lslkct  for  present  purposes,  but  that  up  to  about  the  time- 
dead  subject  lor  Pie!*i     PI        '   rhaps— when  the  street-railway 

lu'sin'essV/s  iX  ^T^^^^^  going  concern,  this  practice 

'^Now^C  gi'ing  to  ask  Mr.  George,  because  he  has  taken  a  some- 
wlfarstatesmfnlik^e  view  of  the  P"blic--rvice  pr  J^em^^^^^^^^^^ 
li««  .rivpn  US  a  verv  interesting  discussion  of  them,  whether  ne  couiu 
^Kanv  suggestion  as  to  aSy  combined  effort  that  might  be  made 
flthTlmericIn  Electric  Railway  Association  or  any  other  general 
'p^ul^S:  m^em^nt  which  niight  be  instituted  b^^them^^"^^^^^^^^ 
i^ihlin  bodv  looking  toward  the  eradication  ot  those  practices,  iook 
Fng  ^waS'  a  claxffication.of  the  methods  of  the  biisiness   and 
finances  that  the  public-service  companies  pursue,  so  hat  a  jM^gram 

ZnCs^Sto^t'moCflvolS:  t'oXm  ML  tha^  are 

lie  1  waste  of  time  for  us  to  address  ourselves  to  that  question. 

T  would  like  to  have  Mr.  George,  if  he  would,  give  to  us,  either 
thi^s  afternoon  or  to-morrow,  some  statement  as  to  what  constructive 
preventive  measures  could  b^  put  forward  by  the  American  Electric 
SaTlway  ISociation,  itself,  looking  toward  an  eradication  of  those 


k    1 1 


•.£■ 


306    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


J 


abubes  of  which  we  have  been  speaking  and  on  which  we  are  all 
agreed  that  they  exist. 

Mr.  George.  Well,  I  will  not  be  here  to-morrow,  and  if  you  will 
give  me  just  about  two  minutes — I  think  public  sentiment  has  taken 
care  of  that  situation  to  a  large  extent,  that  those  things  which  were 
possible,  and  which  have  been  done  in  the  past,  have  had  their 
natural  out^'ome,  and  I  do  not  think  it  is  possible  in  the  future.  In 
addition  to  that,  the  public-service  laws  of  the  different  States  have, 
to  a  very  great  extent,  taken  care  of  that  situation,  and  it  would  be 
imjjossible,  in  most  States,  to  do  any  of  those  things  which  were 
done  in  the  past  and  which  have  to  an  extent  contributed — ^to  a 
large  extent  contributed — to  the  present  unfortunate  state  of  the 
public  mind,  as  it  is  reflected  in  these  questions. 

Conmiissioner  Wehle.  Now,  Mr.  George,  of  course  the  incident 
that  I  happened  to  refer  to — the  issuance  of  fictitious  stock,  or, 
rather,  stock  based  on  a  fictitious  value  or  hope — I  suppose  has  been 
largely  prevented  for  the  future  by  laws,  in  a  number  of  the  States, 
at  least;  but  docs  it  occur  to  you  that  there  are  any  other  kinds  oi 
control  that  could  be  exerted,  not  necessarily  against  actual  unscru- 
pulous dealing  but,  perhaps,  against  the  injudicious  development 
or  overextension  by  companies  of  their  property? 

Mr.  George.  I  think  the  public-service  laws  of  the  different  States 
have  very  well  covered  that.  In  the  State  of  Pennsylvania,  it  is  very 
effective.  We  can  not  move  in  the  management  of  the  company  in 
Pittsburgh  without  complaint  being  registered  by  the  city  of  Pitts- 
burgh before  the  public-service  body  of  the  State.  They  tell  us  to 
put  on  more  cars.  If  some  citizen  in  some  community  complains 
of  the  service  tlnit  is  affoz^ded  that  particular  community,  he  has  a 
right  to  be  heard  before  the  public-service  commission,  and  they  say 
whether  we  shall  put  that  service  on,  or  whether  we  shall  not  put  that 
service  on. 

Commissioner  Wehle.  Let  us  take  a  hypothetical  case.  Suppose 
we  take  a  company  in  some  hypothetical  State,  in  some  hypothetical 
city  unnamed,  and  the  men  in  that  company  were  men  who  were  in- 
terested in  the  development  of  land  in  a  certain  outlying  district, 
and  at  the  risk  of  the  company's  financial  condition,  in  order  to  bet- 
ter the  values  of  the  land,  they  were  to  go  into  the  construction  of  an 
extension.  That  is  a  situation  which  is  not  absolutely  unknown  in 
American  life.  Now,  if  that  extension  happens  to  have  been  im- 
providently  constructed  from  the  point  of  view  of  the  stockholders 
of  the  company,  and  from  the  point  of  view^  of  the  public,  which 
ought  to  have  a  proj>er  kind  of  improvement  in  service  in  the  really 
thickly  populated  part  of  the  city,  what  check  is  there  in  most  of  our 
cities,  or  in  most  of  our  States,  against  that  kind  of  improvidence? 

Mr.  George.  Well,  if  you  gentlemen  will  agree  to  recommend  what 
I  would  suggest  in  that  instance,  I  would  make  land  speculation  un- 
profitable. That  is  my  remedy  on  that  situation  but,  of  course,  that 
is  somewhat  in  advance  of  public  sentiment  at  the  present  time. 

Commissioner  Wehle.  You  do  not  think  there  is  any  way  of  get- 
ting at  the  characters  of  the  street-railway  men  in  such  cases? 

Mr.  George.  Well,  that  is  police  power,  and  it  is  not  very  effective 
in  controlling  the  action  of  people  where  the  public  sentiment  is  not 
against  their  action. 


PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   307 

rommissioner  Weho;.  You  think  that,  perhaps,  placing  in  the 
contXftr  public-service  commiss^^^^  of  any^ew  ex- 

Se  the  extension  is  about  to  be  made,  =*"d  f  ?^*o^/,fnevise 

rr.:t»^r^rt£ryrs.^^^^^^  ■ 

^'^aor^^sSrCH^lr-No.-,  Mr  George  -  -  not  talking  about 
somebody  making  money  out  of  a  land  speculation  at  all. 

SmS=;r\vSrwt  are  talking  about  puMics^    We 
are  talking  about  the  effect  on  the  finances  of  a  Pflic-seiMce  com 

the  line  should  be  entered  into. 

CouS^^eX:T'T&y  have  that  in  very  many  States  now.. 
ComSorr  ^^^l^B.  I  kLw  they  do  in  a  number  of  the  leading 

communities.^      Thev  have  it  in  Pennsylvania,  I  understand. 
SmmiX^r  TlXShey  have  it  i^n  a  J- of  the  leadin^^ 
•4.-^c.  ivf,.   ^Vorvpn   but  mv  sugfirestion  goes  to  tne  laea  inat  pei 
Kf^u  glntSn  wlS  a"'intrrited.in%larifym^  ^ttlltnd 
should  even  go  to  the  extent  of  supporting  legislation  of  that  kind 
instead  of-a?has  often  been  done  by  constituent  members  of  youi 

'"'^t^:::^J^l^^i^  Sle  association-because  I  can  not 
..lli  for  each  of  thH, 500  n>embers-that  I  am  authorized  by  tlie 
^  iLnt  of  the  association  to  say  that  the  association  is  definitely  m 
?Ivor  of  reflation  2d  control  by  public-service  commissions,  not 
favor  ot  r*"!"'"'""/""  ^..  already  exists,  but  the  association  is  in 

:Kcy  Im  thTomrdssion  before  .e  can  build  any  extensions 
:vrhLgh  it  be  a  ™.  o     a  sing^^ck  line^;  an^^^^^^^ 

??  ^"T-  li  noSft'ancUng  that  i-estriction,  because,  with  all  of 
firrSuS^th:     a^^^^^^^^  t-ll'^y  ^r^  of  Massachusetts 

Sf  t^eT^t  vear-1918-I  think  is  probably  the  most  discouraging 
toi  the  last  yeai  ^pgrating  expenses  alone;  and  I  am  going  to 

put  an  S  statemenUn  later^  but  I  think  the.  operating  expenses 
^lone  were  87  per  cent  of  the  gross  receipts  oi  our  companies, 
although  they  are  so  closely  regulated. 


II 


308    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

So  that  whatever  this  crisis  is  clue  to,  I  do  not  think  it  can  be  due 
to  faihire  of  reguhition,  or  abuses,  which  I  condemn  as  fully  as  any- 
one can  in  the  way  of  issuing  securities,  but  because,  as  in  this  very 
Pittsburgh  Co.  case,  whatever  its  history  may  be,  it  is  not  earning  its 
operating  expenses,  and  that  is  true  of  a  good  many  companies  all 
over  the  country. 

Commissioner  Wehle.  I  think  seriously — following  the  thought 
suggested  by  Commissioner  Sweet  yesterday,  and  which  seems  to  be 
so  generally  accepted,  too — that  one  of  the  serious  elements  in  this 
situation  is  the  state  of  public  regulation. 

Mr.  Warren.  I  agree  with  you  entirely. 

Commissioner  Wehle.  And  these  questions  were  addressed  to  some 
constructive  way  of  removing  certain  antagonism  that  lies  in  the  pub- 
lic opinion. 

Mr.  Warren.  I  did  not  want  you  to  think  that  our  association  here 
did  not  believe  in  progressive  and  proper  legislation.  I  think  prac- 
tically every  forward-looking  man  in  the  public-utility  business  to- 
day, however  much  he  may  be  irritated  occasionally  by  the  particular 
exercise  of  public  control,  believes  that  it  is  an  advantageous  thing 
and  in  the  long  run  is  going  to  benefit  the  public-utility  industry, 
not  only  trolleys,  but  all  others. 

Commissioner    Sweet.  You    will    not    be    here    to-morrow,    Mr. 

George  ? 

Mr.  George.  No. 

Commissioner  Sweet.  What  court  appointed  you? 

Mr.  George.  United  States  court — United  States  district  court. 

Commissioner  Sweet.  What  was  your  business  before? 

Mr.  George.  Real  estate. 

Commissioner  Sweet.  Have  you  any  personal  interest  in  street- 
railway  properties? 

Mr.  George.  None  whatever. 
i        Commissioner  Sweet.  Who  are  the  other  two  receivers  ? 

Mr.  George.  Mr.  Charles  A.  Fagan,  who  is  an  attorney,  and  Mr. 
S.  L.  Tome,  who  was  the  former  president  of  the  Pittsburgh  Street 
Railways  Co. 
:       Commissioner  Sweet.  Are  they  interested  in  street  railways? 

Mr.  George.  Mr.  Tome  was  formerly  the  president  of  the  company. 

Commissioner  Sweet.  He  has  stock  in  it  ? 

Mr.  George.  I  don't  know. 

Commissioner  Sweet.  You  don't  know? 

Mr.  George.  I  don't  know  what  stock  he  has.  Mr.  Fagan  was  an 
attorney  at  law  and,  as  far  as  I  know,  had  no  interest  in  the  com- 
pany. 

Commissioner  Sweet.  You  expressed  a  distinct  preference  for  the 
service-at-cost  plan? 
,       Mr.  George.  Yes. 

'       Commissioner  Sweet.  Do  the  other  two  receivers  share  your  views 
on  that  question? 

Mr.  George.  Yes. 

Commissioner  Sweet.  They  do? 

Mr.  George.  They  do. 

Commissioner  Sweet.  When  you  entered  upon  your  duties,  you 
probably  thought  there  was  something  wrong  about  the  company, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    309 

because  it  had  defaulted  in  some  of  its  payments  and  was  not  running 

suSX^^^^^^  You  thought  there  might  be 

Mr  Se   I  knew  there  was  something  wrong.     It  was  perfectly 

^^ComnL  Sweet.  Well,  I  mean  something  wrong  in  the  man- 

agement  of  the  company. 

ComS!ssrne?SwEET.  Did  you  not  think  there  might  be  something 
'^"Mr^GEORCE.  I  felt  that  there  might  be  something  crucially  %vrong 
"Sm3oTrt;i"- And  you  entered  upon  your  duties  in  a  some- 

what 

Mr.  George.  Critical  mood.  .^ 

Commissioner  Sweet.  In  a  somewhat  critical  mood  ? 

SmSssToneJ  Sweet.  And  your  investigations  satisfied  you  that 
evei^y™^^     honest  and  that  the  management  was  capable;  did  it? 

Mr.  George.  It  did.  , ,  , 

Commissioner  Sweet.  Honest  as  well  as  capable « 

Sn^missToner^l^'E^.  So  that  you  are  now  convinced  that  the  " 
troubles  were  inherent-something  that  was  beyond  the  control  of 

^^'^'gC  Well,  it  was  historical,  due  to  old  competing  days. 
Of  couST  Prttsburgh  has  a  very  difficult  operating  problem-more 
SfficuHhan  almol  any  other  city  in  the  country.    Perhaps  Bos- 

'"'cWissioner  Swekt.  But  the  trouble  was  in  the  problem  rather 

*X' G™.~ld  the  manner  in  which  it  had  developed  by 
thfe^oluUonary  process.  Of  course,  you  would  not  build  the  ^me 
streeT-railwav  property  to-day.  It  does  not  fit  the  situation  exactlv ; 
but  nobodrcSu^ld  foreL  just  what  the  situation  as  it  is  ^-day  would 
h^  In  other  words,  thev  built  as  well  as  they  could,  with  the  light 
which  they  haTin  thos4  days,  taking  into  consideration,  of  course 
That  there  were  a  number  of  people  who  were  bidding  one  against 
the  othtr  for  a  foothold  in  the  business:  and  they  built  competing 
lines  Very  often  they  made  a  duplication,  but  as  far  as  the  manage- 
ment of  tlfe  company  was  concerned,  I  have  lost  my  critical  aspect 
toward  it  and  feel  that  the  managementis  good  „„™panv 

(Commissioner  S\veet.  In  the  extensions  made  by  the  company 
intoTuUyTnSdistricts,  do  you  think  mistakes  have  been  made  in  the 

^'""m  GroRGE.  I  think  that  they  overbuilt,  but  that  of  course,  was 
to  an  extent  not  their  fault.  In  the  growth  and  development  of 
PitXrgh-you  know  the  territory  is  very  peculiar  there,  and  the 
great  amount  of  broken  territory  right  m  the  city,  where  it  is  not 

fuftable  for  building,  and  long  s/retches  f  f « J^?  g\°"„*^^l°^S,S 
lines  there  is  practically  no  traffic;  maybe  there  is  a  house  on  eacti 
side  of  the  stteet,  and  behind  that  there  is  always  a  hill  that  goes  up. 

MrG^otTThrrrrs  a^^^at  deal  of  territory  of  that  kind  and,  in 
adSion  to  that-as  devefops  in  a  great  many  commumties-there 


310    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMAnSSION", 


would  be  the  development  in  the  downtown,  then  perhaps  a  little 
sparsely  settled  district,  a  little  community  farther  out,  and  then 
more  undeveloped  territory,  and  another  community  farther  out,  and 
then  working  all  the  time  for  the  purpose  of  connecting  up  th^se 
little  communities  which  had  developed,  and  working  in  such  a 
manner  as  would  contribute  to  a  proper  growth  and  development  of 
the  city. 

Commissioner  Sweet.  And  afford  reasonable  facilities  to  those 
peoj^le  who  had  located  there? 

Mr.  George.  Yas. 

Commissioner  Sweet.  And  enable  them  to  get  back  into  the  main 
conuuunity — the  center? 

Mr.  George.  To  allow  a  man  to  live  at  one  place  and  work  at  an- 
other place. 

Commissioner  Sweet.  Yes. 

Mr.  George.  That  is  the  great  need,  it  seems  to  me,  that  is  sup- 
plied by  the  transportation  companies.  A  man  should  not  live  right 
around  the  mill  where  he  is  working;  and  if  he  has  a  job  and  wants 
to  get  to  another  section  of  the  city  to  seek  employment,  he  ought  to 
be  able  to  go  there  without  moving  his  family  and  everybody  else. 
There  should  be  a  chance  for  them  to  circulate  and  live  where  they 
want  to  live  and  work  where  they  want  to  work. 

Commissioner  Sweet.  Is  it  the  rule  with  the  company  of  which 
you  are  receiver  that  the  rates  are  different  from  one  community  to 
another?  As  you  go  on  these  interurbans,  you  have  different  rates, 
haA'e  you  not? 

Mr.  George.  Ye^s ;  only  on  the  intenirbans.  The  new  rate  of  fare 
which  we  have  in  effect  is  more  of  a  flat  fare  than  any  fai*e  that  they 
have  ever  had  there,  in  that  we  ai-e  giving  now  what  they  never  had 
before — a  cross-town  transfer  privilege.  Ten  cxints  will  entitle  a  man 
to  cross  the  downtown  section,  with  a  transfer — something  which 
they  never  had  before. 

Commissioner  Sweet.  That  was  put  in  operation  by  the  I'eceivers  ? 

Mr.  George.  We  put  that  in  operation  in  the  attempt  to  afford  that 
freedom  of  travel  from  one  section  of  the  town  to  the  other,  and  we 
are  getting  away  from  this  zone  system  of  fares  which,  to  my  mind, 
works  toward  the  congestion  of  population,  and  it  has  a  tremendous 
effect.  ... 

I  want  you  gentlemen  to  consider  what  any  discrimination  of  2 
cents  in  railroad  fares  will  mean  to  a  family  of,  say  four  riders  a 
day.  To  see  what  it  would  mean,  I  figured  it  out  one  day,  as  a  real- 
estate  man,  and  I  figured  that  a  lot  that  was  just  inside  of  a  zone 
that  had  a  5-cent  fare  was  worth  about  $30  a  fi^ont  foot  more  than 
the  lot  that  was  just  outside  of  a  5-cent  zone,  in  a  7-cent  zone,  to  a 
man  who  had  four  daily  riders  on  the  street  cars.  He  could  afford 
actually,  if  he  was  buying  a  30-foot  lot,  to  pay  $30  a  front  foot  more 
to  get  inside  that  zone.    And  don't  you  think  they  will  get  in? 

Why,  they  will  get  in;  and  the  apartment  houses  will  get  in; 
and  there  will  be  a  tendency  toward  congestion  in  these  American 
cities  which  will  approach  the  situation  in  Glasgow  to-day,  and  if 
you  have  been  familiar  with  the  studies  which  have  been  made  of 
housing  conditions  in  Glasgow,  they  will  cure  you  of  any  notion  that 
street-car  companies  should  be  built  up  for  the  purpose  of  raising 
revenue  and,  at  the  same  time,  working  against  the  proper  distribu- 


PROCEEDIKGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    311 

that  casting  the  burden  of  the  solving  of  the  social  pioblem  on  tlie 
street  railways,  and  not  on  the  community  i 

Mr.  George.  Well,  we  have  got  ^  cooperate  one  with  rtie  o  her 

Commissioner  Gadsden.  Have  not  the  street  ra^ways  in  the  iwst 
solved  that  social  problem  at  their  cost,  and  is  not  that  one  of  the 
troubles  that  we  are  up  against  ?  . 

Commissioner  Sweet.  That  is,  the  flat  rate,  you  mea.n?  , . 

Mr.  George.  Yes;  I  think  the  street-car  ^^".P'^nf^^^^^^^^Ji^^^^^ 
contribution,  but  they  felt  that  they  were  going  to  be  rewarded  tor 

''"Cranmissioner  Gadsden.  Yes,  and  they  have  not  been? 

Mr.  George.  And  they  have  not  been. 

Commissioner  Gadsden.  And  the  community  has  gotten  its  con- 
sideration. .     ..  -J      i.-..^ 

Mr.  George.  Oh,  it  has  gotten  its  consideration.  „^„,.  -i^^  :_ 

Commissioner  Sweet.  But  the  general  practice  ^as  Pr«]*^l«d  in 
the  past  in  the  direction  that  you  think  is  right,  of  spresuJing  com- 
munities, instead  of  bringing  them  into  «°«gf  t«f  ,f ''^^•^.t,^  ^f 

Mr  George.  I  do  not  believe  any  city  can  afford  to  see  a  system  oi 
zone  fares  built  up  in  it.  I  think  it  would  be  tremendously  destruc- 
tive  to  the  risrht  sort  of  development  ot  the  city. 

Commoner  Sweet.  And  I  think  most  people  would  agree  with 
you  oTthat  pohit,  with  regard  to  sanitation,  and  perhaps  with  re- 

^^Mr*  George!"  Not  only  that,  but  it  would  be  destructive  of  business 
locations  which  have  been  created  on  a  flat  system  of  fares. 

Commissioner  Sweet.  Yes.  .  ,    ■,  . 

Mr  George.  Take  a  man's  business  house  that  is  located  in  a  com- 
munity and  that  has  a  large  investment  made  there,  and  the  busine^ 
is  established  and  you  make  him  work  against  a  l»andicap  ot  an 
increased  rate  of  fare  to  get  to  and  fron.  him,  as  against  his  com- 
petitor. In  what  shape  does  that  put  his  business  ?  ._„„,  x 
^  Commissioner  Gadsden.  Does  not  that  seem  *«  ^^f »^ft«-«^V 
am  not  questioning  the  wisdom  of  what  you  say-that  the  only  so- 
lution of  this  proWem  is  that  the  community  shall  own  the  street 
railways  and  absolutely  run  them? 

Mr  'George.  I  am  not  ready  to  admit  that.    I  may  later  on,  but 

""commissioner  Sweet.  Do  you  think  that  the  service-at-cost  plan 

"  Mr'  G^^I  &To'  Of  course  the  cost  is  going  to  be  higher 
than  it  is  at  the  present  time,  and  I  thmk  the  people  have  an  an- 
tagonism toward  an  increase  in  rates,  which,  to  an  extent,  is  due  o 
thf  bad  relationship  which  has  existed  between  the  public  and  the  . , 
public-service  corporations  in  the  past.  I  think  that  is  one  of  the  big 
hills  they  have  to  climb,  to  get  over  these  increased  rates  of  fares. 
AVhether  thev  can  successfully  get  over,  and  in  time  to  save  them- 
selves I  do  not  know,  but  I  think  we  ought  to  ma!  the  attempt  m 
that  direction. 


312    PROCEEDINGS  OF  FEDERAL  EI^CTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  If  I  understood  you  right,  you  havo  a 
zone  in  which  the  fare  is  7  cents  within  that  zore? 

Mr.  George.  At  the  present  time,  yes. 

Commissioner  Sweet.  Suppose  a  person  -./anted  to  rido  three 
blocks  withm  your  outside  zone,  the  fare  would  be  7  cents? 

Mr.  George.  Yes. 

Commissioner  Sweet.  And  he  might  ride  a  great  many  more 
blocks  m  the  5-cent  zone  for  a  nickel  ? 

Mr.  George.  Those  inconsistencies 

Commissioner  Sweet.  Do  I  understand  that  to  be  the  real  or- 
dmary  idea  of  a  zone  system? 

Mr.  George.  No.  But  no  matter  what  sort  of  a  zone  system  you 
build  up,  there  has  got  to  be  a  line  some  place. 

Commissioner  Sweet.  Sure. 

Mr.  George.  A  man  just  on  one  side  of  that  line  and  a  man  just 
on  the  other  side  of  the  line  will  be  very  differently  treated. 

Commissioner  Sweet.  Sure. 

Commissioner  Gadsden.  You  have. given  us  vour  estimate  with 
respect  to  real  estate  value  on  each  side  of  the' zone.  I  am  inter- 
ested m  that.    How  did  vou  arrive  at  that? 

Mr  George.  Well  I  took  four  people  riding  each  dav.  That  was 
8  cent«,  and  twice  a  day  was  16  cents,  and  30  times  16  would  be  $4  80 
end  12  times '    ' 

Commissioner  Sweet.  That  would  be  per  month? 

Mr.  George.  Yes;  and  12  times  $4.80  would  be 

Commissioner  Gadsden.  $56. 

Mr.  George.  Well,  almost  $60. 

Commissioner  Gadsden.  $54. 

Mr.  George.  Something  less  than  $60;  and  this  return  at  6  per 
cent  is  on  an  investment  of  a  thousand  dollars,  is  it  not?  And  if  so 
much  a  day  is  worth  a  thousand  dollars  of  cash  investment,  a  man 
could  afford  to  pay  a  thousand  dollars  more  for  a  lot  inside  than  out- 
side the  zone;  and  if  it  is  a  30-foot  lot,  it  would  be  $30  a  front  foot 

Commissioner  Gadsden.  That  is  what  I  wanted  to  get. 

Mr.  George.  That  is  my  method  of  reasoning;  and  if  you  do  not 
beJieve  it,  you  just  establish  a  zone  once  and  see  the  people  rush  to  the 
apartments  just  inside  the  zone  and  the  increase  in  rents  which  would 
result. 

Commissioner  Sweet.  You  could  not  entirely  get  rid  of  that  condi- 
tion, could  you,  Mr.  George,  when  you  come  to  suburban  railways  ? 
.  Mr.  George.  That  is  a  different  proposition.  That  is  natural  It 
IS  sort  of  natural  out  in  the  country  there;  and  that  is  reflected,  really, 
m  the  value  which  the  man  puts  on  his  ground  when  he  goes  out 
there,  because  the  landowner  has  discounted  that.  If  you  go  close 
to  the  city,  where  the  rate  of  fare  is  lower,  you  will  pay  more  for 
your  land. 

Commissioner  Sweet.  Then  they  are  not  subject  to  municipal 
^     taxes?  ^ 

Mr.  George.  No. 

Commissioner  Sweet.  So  that  they  offset  each  other  to  a  certain 
extent  ? 

Mr.  George.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    313 

Commissioner  Sweet.  But  this  zone  plan  that  you  have  been  tell- 
ing us  about— is  that  within  the  same  municipal  limits ?  ,  ,  ., 
1  My  George.  They  had  rather  a  thin  justification  for  it,  but  the 
justification  was  this:  That  where  a  number  of  people  are  ridmg  m  a 
car,  they  distribute  the  cost  of  running  that  car  for  people  who  are 
riding  in  it.  Out  in  the  sparsely  settled  districts,  where  there  are  not 
so  many  riders,  and  each  pays  a  proportionate  cost  of  operating  that 
car,  they  ought  to  pay  more  money  individually  to  make  good  the 

^Commissioner  Sweet.  Did  you  hear  what  was  said  by  one  of  the 
witnesses  here  in  regard  to  the  need  of  elasticity  in  the  adaptation  to 
the  income  of  street-railway  companies  to  varying  conditions,  the 
same  as  in  other  industries  ? 

Mr.  George.  Yes.  ,        ,    .  .  •. 

Commissioner  Sweet.  Do  you  think  that  that  is  as  it  was  pre- 
sented by  that  witness,  or  do  you  think  that  a  straight  raise  of  fare 
would  permanently  solve  the  question?  . 

Mr.  George.  Well,  I  do  not  believe  in  creating  values  by  the  earn- 
ing power  of  public  utilities.  That  is,  I  think  the  public  has  an 
intei^st  in  the  public  utilities,  and  that  capital,  even  if  it  gets  a  fair 
return,  should  not  expect  to  make  any  speculative  proht  on  it;  but  l 
think  that  capital  should  get  a  fair  return.  Now,  m  order  to  pro- 
vent  them,  as  they  have  in  Cleveland,  and  as  they  attempted  to  do  m 
Boston,  if  they  establish  a  reservoir  into  which  this  surplus  goes,  and 
then  that  can  be  withdrawn  either  for  the  purpose  of  rendering  a 
similar  service  at  a  lower  rate  of  fare  or  a  better  service  at  the  same 
rate  of  fare,  why,  I  think  that  is  the  proper  method  of  domg  it  I 
think  that  is  what  should  be  done,  and  I  do  not  believe  that,  if  that 
is  worked  honestly  and  the  people  become  accustomed  to  it  there  will 
be  any  difficulty  in  replenishing  that  fund  for  needed  enlargement, 
ma vbe,  by  the  public,  if  it  becomes  necessary.  ,        ,    , 

Commissioner  Sweet.  Did  you  hear  the  statement  made  by  a  wit- 
ness who  said  that  street-railway  companies  could  not  remain  m 
statu  quo ;  they  either  went  forward  or  backward,  and  that  they 
could  not  be  in  a  healthy  condition  unless  they  were  getting  in  new 
capital  ?     And  do  you  think  that  statement  is  true  ? 

Mr  George.  Undoubtedly,  because  the  street-car  company  must 
reflect  the  growth  of  a  community,  and  it  must  grow  as  the  com- 
munitv  grows.  In  fact,  it  must  grow  a  little  in  advance  and  help 
the  growth  of  the  community,  it  seems  to  me,  and  that  necessitates, 
of  course,  extensions,  and  extensions  should  be  made  from  the  new 

capital  which  is  secured.  n   vi      4.     ' 

Commissioner  Sweet.  Is  there  anything  you  would  like  to  say 

further,  Mr.  George,  before  we  adjourn  ?  ^i,^„m 

Mr.  George.  I  think  I  have  exhausted  more  time  than  I  should 

have  used.  ,         .  ,     ,,  j.-         t\    ^^„ 

Mr.  Warren.  Mr.  George,  there  is  one  further  question :  Do  you 

have  jitneys  in  Pittsburgh?    ,  ..^  _,,  .  t 

Mr    George.  Yes,  sir;  we  have  ]itneys.     They  come  and  go.     1 
think*  that  they  solve  their  own  problem.    I  do  not  thmk  we  ever  wiU 
be  rid  of  them,  but  I  do  not  think  we  need  fear  them. 
Mr.  Warren.  Even  with  a  10-cent  fare,  Mr.  George  ? 

160643°— 20 21 


314    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

Mr.  George.  No. 

Mr.  Warren.  For  short  distances? 

Mr.  George.  No.  Thev  will  do  a  certain  amount  of  business.  I 
may  be  very  sanguine.  You  must  remember  that  I  am  a  novice  in 
this  business.      I  have  only  been  in  it  six  months. 

Mr.  Warren.  It  is  a  question  of  public  interest  in  a  community, 
possibly,  as  against  the  business  principle  of  operating  a  utility. 

Mr.  George.  Well  ought  not  the  public,  then,  to  protect  the  com- 
pany against  licensing  these  jitneys,  who  perform  no  constant  serv- 
ive  and  who,  perhaps,  are  just  using  the  streets  temporarily?  Ought 
they  not  to  regard  that  and  its  effect  on  the  company,  which  is  en- 
couraged to  buy  a  constant  service,  and  under  the  jurisdiction  of  the 
city  and  the  State? 

Mr.  Warren.  They  ought  to  do  that.  I  am  not  sure  that  the 
community  would  not  have  to  go  a  step  further  and  absorb  itself  the 
difference  between  such  a  rate  as  the  people  in  the  inner  part  of  the 
territory  were  willing  to  pay  to  ride,  and  the  amount  that  would  be 
lost  by  the  people  in  the  outer  part  of  the  territory.  That  is  a  fea- 
ture tliat  has  been  considered  in  Massachusetts  this  very  winter.  In 
Boston  now,  where  they  have  gone  to  10  cents,  I  have  heard — since 
I  came  down  here,  so  I  do  not  know  what  the  fact  is — in  certain  parts 
of  Boston,  very  near  the  heart  of  the  city,  they  are  w  alking  at  present 
rather  than  pay  the  10-cent  fare,  because  they  are  so  near  that  the}'^ 
feel  that  it  is  a  discrimination  against  them,  as  against  the  discrimi- 
nation you  speak  of  against  the  people  on  the  other  side  of  the  zone 
line. 

Mr.  George.  Well,  they  will  walk  for  a  while,  but  the  question  is 
whether  the  natural  laziness  or  desire  to  avoid  exertion  will  not 
cure  them  of  that  habit. 

Commissioner  Sweet.  We  will  stand  adjourned  until  10  o'clock  to- 
morrow morning. 

(Whereupon  at  5.40  o'clock  p.  m.,  the  further  hearing  of  this  case 
was  adjourned  until  to-morrow,  Friday,  July  18,  1919,  at  10  o'clock 
a.  m.) 


Washington,  D.  C,  July  18, 1919, 

Met  pursuant  to  adjournment,  at  10  o'clock  a.  m. 
Present:  Parties  as  before. 

Commissioner  Sweet.  The  hearing  will  come  to  order.    Mr.  War- 
ren, are  you  ready  to  proceed? 

Mr.  Warren.  Yes,  I  am,  sir.    I  will  ask  Mr.  Sisson  to  take  the 


stand. 


STATEMENT  OF  MR.  FRANCIS  H.  SISSON. 


Mr.  Warren.  Give  your  full  name,  please. 

Mr.  Sisson.  Francis  H.  Sisson. 

Mr.  Warren.  And  you  are  one  of  the  vice  presidents  of  the  Guar- 
anty Trust  Co.? 

Mr.  Sisson.  I  am  one  of  the  vice  presidents  of  the  Guaranty 
Trust  Co. 

Mr.  Warren.  Have  you  had  occasion  to  give  a  great  deal  of  atten- 
tion to  the  economic  features  and  the  financial  figures  of  public 
utilities  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   315 

Mr.  Sisson.  I  have.  ,      ,      .,  « 

Mr.  Warren.  Includnig  street  railways? 

Mr  wT™  Without  questioning  you  in  detail-will  you  state 

to  th"  commission  your  view.of  the  situation  ^^re^^^^-Jif  ^^we  i 
ways,  particularly  their  credit  and  their  economic  situation,  as  well 

as  their  needs?  .    .  ,     •,,   j.,     _„„ 

Mr  Sisson   Mr.  Warren,  with  your  permission,  and  with  tlie  per 
mi?sk>n  ofThe  commission,  I  h/e  prepared  a  bnef  mempndum 
which  sets  forth  some  of  my  formal  conclusions,  ]Y^f  ^ /  J""  J^^ 
glad  to  lay  aside  for  questions  later,  but  I  would  like  to  run  ovei 
some  of  these  points,  with  your  consent.  r-iilwiv 

I  have  addressed  my  memorandum  chiefly  to  the  street-railway 
credit  and  the  cost  of  capital  for  street  railways. 

The  cost  of  money  is  affected  by  conditions  which  affect  all  other 
costs  The  law  of  supply  and  demand  affects  it  primarily.  The 
dSree  of  safety  and  future  promise  are  also  instrumental  in  de- 
tennining  it.  There  is  every  reason  to  believe  that,  with  the  t  e- 
mendordestruction  of  wealth  which  has  taken  P  -f^^^"  «X"s  of 
both  through  its  physical  loss  and  the  diversion  of  vast  numbers  ot 
men  from  productive  industry,  there  will  be  a  long  period  of  tight 
money  in  which  the  demaaid  for  capital  will  exceed  its  supply.  The 
rehabilitetion  of  Europe,  the  convei-sion  of  industry,  labor  unrest 

he  lUablishment  of  trade  and  th^rt^-^^wleTorrwluS 
all  make  large  drafts  upon  the  available  capital  of  tlie  woild,  which 
must  inevitably  be  reflected  in  higher  charges.  . 

As  long  as  wealth  remains  in  private  hands  subject  to  private  dis- 
position, it  will  seek  the  most  profitable  fields  of  investment.  It 
can  not  be  coerced  into  situations  that  do  not  promise  reasonable 
protection  and  return,  and  the  present  public  attitude  toward  pubhc 
utilities  whether  inspired  by  political  considerations  or  selfash  ig- 
norance, hL  inevitably  diverted  capital  from  sucli  channels  into 
others  not  subject  to  these  hmitations.       ,        .     ,     ,  ,   ,,         , 

This  is  not  a  question  of  the  bankers'  attitude  toward  the  sub- 
iect,  as  the  bankers  are  for  the  most  part  but  middlemen  m  the 
handling  of  securities  of  this  character.  The  ultimate  investor 
fixes  the  conditions  upon  which  he  will  purchase  securities  and  the 
question  of  rate  is  simply  that  at  which  the  security  will  pass  to 
the  buver.  It  is  certain  that,  unless  there  is  a  widespread  change 
in  the  public  attitude  toward  public  utilities,  the  security  buyer  will 
not  hazard  his  money  in  such  ventures,  and  the  bankers  have  no 
choice  but  to  follow  his  decision.  Furthermore,  it  is  certain  that 
no  satisfactory  alternative  is  left  in  public  ownership,  as  there  is 
nothing  in  the  record  of  public  ownership  on  the  whole  to  warrant 
the  hope  that  this  may  offer  a  solution  of  the  problem. 

Stripped  of  all  complications,  the  question  seems  to  be  whether 
or  not  the  American  public  are  willing  to  pay  for  service  rendered. 
The  alternatives  are  simple— either  the  service  will  not  be  renderd 
and  the  growth  of  our  communities  and  the  comfort  of  our  people 
will  be  denied,  or  the  cost  must  be  met,  either  directly  through  fares, 
or  indirectly  through  taxes.  As  to  which  of  these  alternatives  is 
economically  sound,  I  assume  there  can  be  no  doubt. 


316    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  open  question  is  whether  the  traveling  public  will  continue 
to  deny  to  its  utilities  the  basis  of  charges  which  it  accepts  in  every 
other  line  of  business. 

With  the  average  purchasing  power  of  the  dollar  decreased  gen- 
erally about  50  per  cent  since  1914,  it  is  impossible  for  2i  centi  to 
buy  o  cents  worth  of  transportation.  That  is  the  sum  and  sub- 
stance of  the  whole  situation. 

The  impairment  of  the  street-railway-credit  structure  has  been 
brought  about  through  increased  operating  costs  coupled  with  a 
fixed  unit  of  fare.  Prices  of  some  of  the  most  important  material 
used  in  the  maintenance  of  street-railway  property  have  increased 
38  per  cent  to  126  per  cent  over  tliose  in  1914.  Increases  in  wages 
and  fuel,  the  largest  items  in  the  cost  of  operation,  in  some  localities 
are  as  high  as  100  per  cent  over  prices  prevailing  in  1914.  In  recent 
testimony  before  the  congressional  Committee  on  Appropriations, 
it  has  been  estimated  that  the  cost  of  labor  and  materials  over  pre- 
war prices  was  85  per  cent. 

1  ^^  i!^"^f  ^  ^^  ^^^'^^  ^^^*^  *^^^  P^^^^  ^^^"^  tl^e  short-haul  carried  the 
long-haul  passengers  for  the  same  fare.  When  the  margin  of  profit 
from  short-haul  business  was  wiped  out  by  increased  cost  of  opera- 
tion, the  economic  unsoundness  of  the  traction  business  became 
critical. 

In  many  cases  this  condition  was  aggravated  bv  local  difficulties, 
such  as  cheap  motor-car  competition,  franchises  litigation  and  ex- 
cessive burdens  imposed  by  regulating  bodies. 

As  a  result,  net  earnings  of  the  traction  companies  fell  off.  Where 
relief  was  granted  it  usually  did  not  come  until  the  companies  f^ere 
already  m  a  weakened  financial  condition  and  credit  seriously  im- 
paired. -^ 

vP^^!^.  ^"^^^  circumstances  the  companies  found  it  increasingly 
difficult  to  attract  new  capital  by  means  of  stock  issue.  A  few  m- 
stances  may  be  given  to  illustrate  how  the  market  for  street  railway 
stocks  was  affected :  In  1908  the  stockholders  of  the  Boston  Elevated 
Kailway  were  permitted  to  subscribe  to  new  stock  at  $110  per  share 
the  par  value  of  such  shares  being  $100.  Some  1,500  shares  wei^  not 
subscribed  for,  and  these  were  bid  in  at  public  auction  at  $130i  per 
share  in  May  1909.  By  December,  1917,  Boston  Elevated  Railway 
cjipital  stock  had  declined  to  as  low  as  $27  per  share.  Twin  City 
Rapid  Transit  stock,  which  sold  at  107  in  February,  1909,  fell  to  32 
in  1918.  ITnion  Traction  Co.  of  Philadelphia  sold  at  $58|  per  $50 
share  m  May,  1909;  in  1918  it  sold  as  low  as  $37  per  share. 

Finding  it  difficult,  if  not  impossible,  to  obtain  new  capital  through 
the  issue  of  stock,  the  street  railways  have  had  to  resort  to  financing 
by  means  of  fixed  charge  obligations.  As  the  margin  of  safety  over 
interest  requirements  diminished  and  the  risks  attending  investments 
m  street-railway  securities  increased,  the  companies  have  had  to  offer 
greater  and  greater  inducements  to  attract  the  necessary  new  capital. 
Capital  had  to  be  secured  to  take  care  of  maturing  obligations  at  in- 
terest rates,  in  many  instances  higher  than  the  fixed  rate  of  return 
allowed  on  the  investment  by  franchises  and  other  regulations,  and 
with  the  temporary  sacrifice  in  many  cases  of  a  large  part  of  the 
equity  value.  Such  costly  financing  increased  the  companies'  burdens 
still  further,  resulting  in  still  further  impairment  of  credit. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    317 

In  the  following  table  a  comparison  ^^^.^^^f  ^,  ^f  J^^^^^^  {^(l' 

'-1  -^^tr^^L^  KeXi  S,rt  will  iust  leave  it  with 

^  X.' W^rS.  Won't  you  read  just  two  or.three  of  tje^^^^^^ 
Mr.  SissoN.  For  instance,  here  ^^^^'^P.^f  "|.^f  |:S^^^^^^^^ 

'"'l^^'I^Tl^AT^^^  cLSnies  which  are  considered  par- 

table  shows.  j  .     u 

The  table  contained  in  Mr.  Sisson's  statement,  and  referred  to  by 
him,  is  as  follows : 

Price 

July,  1919, 

to  yield. 


Detroit  United  1st  Con.  4Js  -------- 

New  Orlcaas  Railway  &  Lt.  Gen.  4*8 

United  Railways  of  St.  Louis  1st  4s 

Chicago  City  Railways  5s  . 

Metropolitan  West  Side  El.  1st  4s 

South  Side  Elevated  4^3 

West  End  Railway  Co.  I^^;^- ^''.••^■'.{c""' 
Philadelphia  Rapid  Traasit  Col.  Tr.  &s. . . 

Aurora,  Elgin  &  Chicago  1st  5s 

Chicago  Railway  1st  5s 

puluth  Street  Railway  1st  os 

Los  Angeles  1st  5s.....  ^.- 

Louisville  Ry .  Con.  Mort .  5s 

Denver  C.  Tram.  1st  &  Rei.  55 

B.  R.  T.  Gen.  5s 

B.  R.  T.  1st  Ref.  Conv.4s     .  

Conn.  Ry.  &  Lt.  1st  &  Ref.  4^S;  y  p- v  V. 
Interborough  Rapid  Transit  1st  &  Ref.  5^ 


1932 

1935 

1934 

1927 

1938 

1924 

1932 

1957 

1941 

1927 

1930 

1938 

1930 

1933 

1945 

2002 

1951 

1966 


7.55 
19.64 
9.98 
9.75 
9.40 
9.71 
6.00 
5.85 
9.30 
9.80 
7.82 
6.42 
6.74 
13.25 
8.40 
«8.70 
6.95 
6.95 


» Interest  delayed. 


«  Stock  yield. 


Mr    SissoN    A  striking  contrast  is  aflForded  by  a  comparison  of 
yidd  on  a  few  standard  industrial  bonds  for  the  same  period. 


American  Tobacco  4s 

American  Tobacco  6s  . . . ... . .... .  -  - 

Bethlehem  Steel  1st  Ext.  Sk.  Rd.  5s 

U.  S.  Steel  Sk.  Fd.  5s 

Va.-Car.  Chem.  5s 


Year. 


1951 
1944 
1926 
1963 
1923 


Price 

July,  1909, 

to  yield. 


Price 

July,  1919, 

to  yield. 


5.15 

5.30 

5.25 

6.15 

6.05 

6.60 

4.70 

4.95 

6.15 

5.65 

I  have  Quoted  here  such  bonds  as  the  American  Tobacco  4s, 
.•hicihaveTrange  only  of  from  5.15  to  5-30,  and  such  bonds  as  «^ 
TTnitpd  States  Steel,  which  have  a  range  of  from  4.(0  to  4. Jo  ana, 
£  some  instances,  a  positive  decrease.    American  Tobacco  6s  show 


318    PROCEEDmGS  OF  rKDEHAL  ELECTBICRAILWAYS  COMMISSION. 

a  yield  of  5.25  in  1909,  and  a  yield  of  5.15  at  current  prices,  and  that  . 
is  true  broadly  in  the  whole  industrial  field. 

Under  these  deplorable  conditions,  electric-railway-security  own- 
ers have  seen  their  holdings  precipitately  and  alarmingly  depreciate 
in  value.  With  the  opportunities  offei"ed  to  the  investing  jDublic 
during  the  last  few"  years  to  purchase  the  securities  of  industrial  com- 
panies which  have  shown  extraordinary  earnings,  electric- rail  way 
securities  have  found  few"  buyers.  With  the  war-time  demands  upon 
capital,  these  securities  have  sold  at  prices  which  have  been  so  low 
that  the  electric-railway  companies  have  had  the  utmost  difficulty  in 
obtaining  and,  in  some  cases,  have  been  absolutely  unable  to  arrange 
long-term  financing.  Under  the  ordinary  operation  of  economic  law, 
the  electric-railway  companies  have  been  compelled  to  pay  high  rates  • 
for  the  capital  they  did  get,  which  has  further  reduced  the  return  on 
their  securities. 

Another  factor,  however,  which  has  contributed  largely  to  the  diffi- 
culties of  the  situation,  has  been  the  wage  awards  of  the  National 
War  Labor  Board. 

In  this  connection,  it  may  be  illuminating  to  quote  the  following 
sentence  from  a  letter  written  by  the  receiver  of  a  Xew  England 
electric-railway  company: 

The  receivership  i»  a  direct  result  of  the  National  War  Labor  Board's  award, 
which  placed  an  additional  pay-roll  burden  of  $125,000  per  annum  upon  the 
company,  notwithstanding  our  having  submitted  to  the  board  a  full  statement  of 
our  funds  and  demonstrating  to  them  that  any  other  increase  in  wages  would 
create  the  situation  which  we  now  face. 

In  a  hearing  between  the  street-car  companies  of  Cleveland  and 
Detroit  and  their  men,  the  companies  pleaded  that  they  should  not 
be  required  to  raise  wages  because  they  had  no  income  out  of  w^hich 
to  pay  the  increase.  They  said :  "  We  are  working  under  a  franchise 
on  which  w^e  receive  only  3  or  4  cents  a  passenger  carried  many  miles 
and,  if  a  substantial  increase  in  wages  be  granted,  bankruptcy  and  a 
receivership  must  follow." 

Yet,  the  general  chairman  of  the  board  of  arbitrators  in  these  cases 
held  that  the  financial  condition  of  the  companies  could  not  affect 
the  issue  at  stake — the  issue  of  wages. 

Such  rulings,  however,  are  only  in  keeping  with  the  general  public's 
attitude  toward  the  electric  railways,  which  has  compelled  these  com- 
panies to  operate  under  two  distinct  and,  in  some  respects,  diametri- 
cally opposed  kinds  of  law — legal  and  economic.  The  seriousness  of 
this  handicap  is  apparent  when  it  is  realized  that  probably  one-half 
of  the  gross  operating  expenses  of  a  railroad  consists  of  direct  labor 
costs,  which  are  constantly  increasing  while  the  abnormally  low^  rates 
for  the  service  rendered  by  electric  railways  were,  in  many  cases,  fixed 
years  ago  by  special  laws  or  by  provisions  contained  in  ordinances  or 
franchises.  The  rate  of  fare,  in  effect,  was  a  part  of  the  considera- 
tion for  granting  franchises. 

But  the  franchise  method  of  fixing  rates  is  too  rigid  to  meet 
present-day  conditions.  The  franchise,  while  holding  down  the 
charges  for  the  service,  does  not  hold  down  costs ;  consequently,  costs 
have  rapidly  been  overtaking  gross  revenues  and  have  reduced  to  the 
danger  point  the  margin  between  the  two. 

The  commission  form  of  regulation  w  as  developed  largely  with  a 
view  of  remedying  the  evils  ol  the  rigid  franchise  method,  but  even 


PROCEEDINGS  OF  FEDERAL  ELECTKIC  RAILWAYS  COMMISSION.    319 

the  commission  form  of  regulation  is  losing  esteem  among  the  think- 
inrSebecaiise  of  thelittitude  many  commissions  have  assumed 
toward  the  public-utility  corporations.  without  the 

Transportation  can  not  be  rendered  at  less  than  cost  without  the 
money  to  make  up  the  deficit  coming  either  from  ^l^e  security  hol|^- 
ers  or  the  taxpayers,  or  both.     It  should  be  obvious  to  all  that  the 
lltZitXorlti^^^^  ought  to  be  borne  by  the  -er^  o^^^^ 
tion  and  that  some  plan  should  be  worked  out  by  which  such  pio 

'IriSbuf  authorities  maintaui  tl-  1-siti^on  t^?^  f-^^^^^ 
unwarranted  additions  are  continuously  "^^^^^/^^^IVe^.t^^^^^^^^^^  to 
communities,  the  bonds  of  municipaliti^  '"'^^r.prL  of  manv  cities 
bankers  or  investors,  and  the  growth  ^^^  P^f^^^^^y.^Jj^^^  there 
will  be  seriously  threatened.  Indeed,  as  has  been  pointed  out,  tntie 
s  nvolvK  the  situation  the  validity  of  a  h^  structure  of  invest- 

Lnt  and  credit,  the  undermining  of  which  9^- ^^osJ^^^^^^^^^ 
roflchinff  effects  upon  general  credit  and  business  prosperity,  tor  tne 
credit  o^^  ouf  tLnV-tation  lines  can  not  be  Placedm  jeopardy  and 
the  effects  localized  or  even  restricted  to  these  utility  companies, 
cfties  cfn  not  b^^^  without  efficient  utilities ;  and  utilities 

SHofbe  efficient  without  prosperity.     Public  regulation  involves 

^''Ttj:t:t:'n^^  justification  for  imposing  such  burdens 

as  are  being  inflicted  upon  security  holders  and  taxpayers  to-day  m 
an  attempt  to  give  sometJiing  for  nothing,  by  allowing  the  users  of 
transToTaU  to  enjoynhe  -on.em^^cesvr^^^^ 

thin  cost  The  crux  of  the  whole  problem  is  that  f^es  sliouia  Do 
fixed  on  an  equkable  basis  that  will  assure  earnmgs  sufficient  to  meet 
operating  expenses  and  pay  a  fair  return  on  ^vested  capita^^^^  And 
by  "  invested  capital,"  I  mean  actually  invested  capital,  m  its  bioad 

^^  The  electric-railway  security  holders  do  not  seek  exorbitant  in- 
creases in  face's ;  quite^he  contLry.  They  are  f -1/ -f?--^^^^^^^  ^ 
fact  that  it  is  to  their  interest,  as  well  as  to  that  of  tbe  public,  to 
£  rates  for  service  as  low  as  possible,  for  low  fares  benefit  the 
companies  through  stimulating  business. 

In  facing  this  situation  public  authorities  should  not  forget  that 
thev  are  holding  in  their  liands  the  credit  of  their  cities-sayrngs 
ban^ Tif^ins^^^  companies,  and  other  investment  institutions, 
and  a  laro^e  portion  of  the  invested  wealth  of  the  country. 

The  pi^Fe^  is  not  merely  local  or. political  but  ot  nation-WKle 
business  importance:  and  if  it  is  not  fairly  met,  is  capable  of  having 
rSprTadrnd  disastrous  effect  on  business-an  effect  which  every 
LliSfnte^^^  directly  or  indirectly,  but  inevitably,  must  share 

Mr' Warren.  Mr.  Sisson,  referring  to  that  last  statement  about 
the  effect  on  business  generally,  are  the  securities  of  street  railways, 
in  your  opinion,  pretty  widely  distributed  i 

Mr.  Sisson.  Yes;  they  are.  . 

Mr  Warren.  And  if  this  whole  structure  collapses,  representing 
an  investment  of  about  five  or  six  billion  dollars,  you  think  that  the 
effect  would  be  very  widespread  and  yeiy  serious/ 

Mr  Sisson  I  do.  I  think  public-utility  securities  are  more  widely 
distributed  than  any  class  of  securities,  broadly  speaking. 


the  zone 


320    PROCEEDINGS  OF  FEDEFvAL  EIJICTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  And  that  is  more  true  of  street  railways  than  of  any 
other  class  of  securities  ? 

Mr.  Sissox.  Yes. 

Mr.  Warren.  It  is  more  true  of  street  railways  than  of  any  of  the 
others,  except  the  railroads? 

Mr.  SissoN.  Yes. 

Mr.  Warren.  You  spoke  in  the  course  of  your  statement  of  the  need 
of  increased  fares.  Have  you,  from  your  study  of  the  street-railway 
situation,  any  doubt  that,  generally  speaking,  an  increase  in  the  fare 
will  produce  a  substantial  increase'in  revenue? 

Mr.  SissoN.  I  have  no  doubt  about  that;  no,  sir. 

Mr.  Warren.  You  have  no  doubt  about  it? 

Mr.  SissoN.  No. 

Mr.  Warren.  You  spoke  also  of  the  diminishing  margin  of  profit 
on  the  short-ride  haul. 

Mr.  SissoN.  Yes. 

Mr.  Wajiren.  As  making  it  impossible  longer  to  continue  the  low 
flat  rate  for  all  riders.    What  would  be  your  remedy  for  that? 

Mr.  SissoN.  Well,  the  most  obvious  suggestion  is  that  of  th 
system,  of  charging  on  some  mileage  basis. 

Mr.  Warren.  Under  which  a  rider  would  pay  for  what  he  got  ? 

Mr.  SissoN.  Yes,  sir. 

Mr.  Warren.  You  spoke  of  the  propriety  of  the  car  riders  in  bulk 
paying  for  the  service.  When  you  say  that,  would  you  revise  in  any 
respect  some  of  the  elements  of  cost  for  which  car  riders  now  pay, 
such  as  paving  streets,  paying  bridge  tolls,  paying  for  bridge  repairs, 
cleaning  streets,  and  so  forth  ? 

Mr.  SissoN.  I  think  a  very  effectual  remedy  could  be  applied  im- 
mediately in  many  instances  by  relieving  the  companies  of  local  pub- 
lic-improvement costs. 

Mr.  Warren.  As  far  as  you  can  see,  is  there  any  reason  why  the 
car  rider  should  contribute  anything  to  the  general  highway  ex- 
penses, more  than  an  automobile  rider  or  a  truck  rider? 

Mr.  SissoN.  No;  I  certainly  do  not  think  so. 

Mr.  Warren.  The  witness 'is  at  the  disposal  of  the  members  of  the 
commission,  Mr.  Chairman.  I  will  be  glad  to  have  you  ask  any 
questions  that  may  interest  any  members  of  the  commission. 

Commissioner  Sweet.  Have  you  any  figures,  Mr.  Sisson,  or  a  table 
prepared— or  could  you  prepare  one— that  will  show  definitely  the 
distribution  of  tJie  holdings  throughout  the  community? 

Mr.  SrssoN.  Yes.  I  have  not  such  a  table  with  me^  but  we  could 
prepare  a  table  that  would  give  you  a  very  good  impression,  althou<rh 
not  entirely  accurate,  of  where  these  security  holdings  are,  how  much 
of  them  are  in  the  institutions 

Commissioner  Sweet.  Indirectly,  we  have  been  informed  by  other 
witnesses  that  a  great  many  street-railway  bonds,  and  I  think  also 
some  stock,  are  owned  by  widows  and  orphans,  or  more  than  by 
trustees.  '^ 

Mr.  SissoN.  Yes. 

Commissioner  Sweet.  And  that  the  impression,  which  is  rather 
broadcast  m  the  community,  that  the  holders  of  these  bonds  are 
wealthy  people,  is  entirely  a  mistake.    Is  that  true  or  not? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION-.    321 

Mr   SissoN.  I  think  that  is  true  without  question.    There  are  a 
gilaV  many  of  these  securities  in  the  hands  of  ^^^^'f  j^,  i«^^^^^^ 
fnsurance  companies  and  savings  banks  are  holders  o*  ^^^ J^^^^^^^^^ 
very  large  figures.     Aside  from  that,  these  securities  aic  ^^ry  laigeiy 
^the  hfnds  of  the  small  investors.     It  was  a  class  of  security  at  the 
dme  it  was  offered,  which  attracted  the  least  con.cr.^tive  of  m- 
vestoi^  because  of  the  somewhat  higher  yield  thej   Sf  ^  ^\?\;''^ 
prevaning  security  offerings  at  that  time  pc ,  as  a  r"^^^^^^^^^      ^^^^^ 
very  widely  distributed  to  many  comparatively  small  bu}eis. 

rommissioner   Sweet.  At   the    time   when   the   5-cent   faic   was 

sufficient  pay  iov  all  necessary  expenses  and  a  fair  return  upon  thfr 
investment,  was  it  not? 

£.ISnei'swEKT.  And,  in  some  cases,  I  suppose,  rather  a  large 
return  ? 

ComSoner'swEPrr.  And  that  naturally  offered  an  inducement 
to  investors? 

ComSon  Sweet.  So  that  institutions  like  insurance  companies 
„nd  DeoDleTn  a  fiduciary  relation  representing  an  aggregation  of 
compSvel?  poor  peopil,  invested  in  then,  because  they  paid  well 
and  were  looked  upon  as  exceedingly  sate '. 

Mr.  SissoN.  Yes.  ,,.,11 

Pnmmissioner  Sweet.  Is  that  a  facts 

Mr  s™    It  is  SO     The  popular  selling  argument,  and  one  very 
~flyCjdn 'those  dayl,  was  that  you  could  count  upon  the 
revenue-producing  power  of  utilities  of  our  great  cities  more  def-  . 
fnitllv  than  vou  could  upon  any  other  class  of  securities. 
'"SmmponerSwEET.'^Up  to'about  what  time  did  that  condition 

"''mI^^sLsok.  It  existed  until  about  the  outbreak  of  the  war  I 
shfuld  tS  when  the  recent  rise  in  the  cost  of  labor  a«d  materials 
overtook  the  revenues— perhaps  beginning  with  1915. 

Commissioner  Sweet.  Has  the. change  been  gradual? 

mTs  ssoN  It  was  rather  abrupt.  I  think  it  has  been  staccato, 
rafher  than  gradual,  in  many  instances,  but  it  has  been  constant  for 

*°  Commissioner  Sweet.  Is  it  as  great  to-day  as  it  was  three  or  four 

™M?w!rren.  No,  it  is  not;  although  thei^  are  still  rising  costs  in 
laboiand  there  are  'rising  cos  s  in  malerial  that  mus  be  mot  111  inaiiy 
instances,  but  the  ratio  of  increase  is  smaller  to-day  that  it  was 

1       -P 

''commissioner  Sweet.  How  do  you  account  for  that? 

Mr  Sisson  Well,  largely  because  the  costs  of  labor  and  material 
both  have  almost  reached  the  breaking  point,  and  it  was  not  possible 
for  them  to  increase  ratably  as  much  as  they  had  for  the  last  three 

vears  and  still  find  a  market.  ^        ,,    .  ^i 

^Commissioner  Sweet.  Do.  you  mean  to  say  then  that  there  is  an 

increase  up  to  the  present  time? 


1 !; 


822    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  SissoN.  Yes. 

Mr.  SissoN.  Yes. 

ti.'JrsThTS':,^^,!?^^^^  "'^*  *^«  P-"^*  --'-d  at  the  present 

Mr.  SissoN.  Yes.    Up  to  tliis  point ;  yes. 
the  SITre ?'"''*'"  ^'''''^'"'  ^"^  ^*""'  J^^^"^"*'  ^l*''*  ^^  the  prospect  for 

Mr.  SissoN   I  think  you  will  find  still  higher  costs  of  material  and 

HXr  ""*  ^""^T  .  I  ***'"'^  ^^^  ^''"  '>^^-«  t«  '•^'^l^on  with  them  for 
an  indefinite  period  of  time. 

far^s?''^''''''''''''  ^''^^''^'  ^^'^  ""^"^^^^  ^^'^'^  ^^^^  suggested  is  higher 

Mr.  SissoN.  Yes. 

Commissioner  Sweet.  xVre  you  not  aware  that  in  some  cases  where 
It  ha^  been  tried  it  has  resulted  in  a  loss  of  patronaee? 

Mr.  SissoN.  Yes;  lam. 

Commissioner  Sweet.  Do  you  think  that  a  temporary  condition? 

Mr.  SissoN.  I  should  say  that  that  was  exceptional  and  temporary, 
because  it  is  not  sound  economic  law,  as  I  understand  economic  law 

Commissioner  Sweet.  Do  you  think  that  may  be  the  result  of  a 

^^\f  ^  i^"^P^^'*v^  ^^^®^^^"^^^*^  ^^  ^^^^  P'^^"^  ^^  the' public « 
Mr.  hissoN.  Yes,  I  do;  but,  in  any  event,  an  adjustment  would 

sooner  or  later  be  made  on  the  equipment  and  extensions,  and  so  forth, 

to  meet  the  public  demand,  whatever  it  was. 

Commissioner  Sweet.  If  the  public  were  better  informed  as  to  the 

,T;r'  T  '^""^^''^^  *^^^  *^'^  P^??^"^  situation  is  not  in  any  sense  the 
ivT]  L^'f  "^^^"^^^^]P"^?,nt  or  dishonesty   the  public  would  be  more 

M    %      ^^^^7*  ^^'^  situation  and  pay  higher  fares;  would  it  not? 

Mr.  hissoN.  Unquestionably. 

r.STT'f'''^'''  ^Y^'^'o'^^^^h  '"}  >'«"^  judgment,  ought  to  be  the 
method  of  raising  fares  Who  should  have  the  right  to  determine 
what  the  fares  should  be? 

Mr  SissoN.  Of  course,  the  laws  affecting  that  matter  are  so  dif- 
ferent  m  the  different  States  that  it  is  rather  hard  to  generalize. 
W  here  there  are  efficient  public-utilitv  commissions  in  the  States  it 
seems  to  me  that  that  power  should  rest  with  them  as  the  agencies'of 
the  legislature^  from  whom  the  power  springs,  and  that  thty  should 
regulate  fares  to  meet  the  current  situation,  whatever  it  is 

Commissioner  Sweet.  Have  you  not  already  said  that  some  of 
tiiese  commissions  were  of  rather  narrow  gauge? 

^^:^.^lf^^'  \,Vl«'.a^,^  ^01-  that  reason  it  is  all  the  more  neces- 
sary  that  the  public  be  informed,  and  that  such  a  commission  as  your 
own  aid  in  that  operation— if  I  may  be  pai^oned  for  suggesting  it— 
which  I  believe  is  the  basis  for  proper  action  to  follow.  I  have 
enough  faith  in  the  American  people  to  believe  that  when  they  under- 
stand a  thing  and  that  understanding  is  based  upon  an  impartial  in- 
vestigation, or  through  their  political  agencies,  they  will  have  the 
wisdom  to  put  It  on  the  right  basis.  ^  '       J' 

Commissioner  Sweet.  Do  you  think  it  is  in  the  power  of  this  com- 
mission to  perforni  a  valuable  public  service  in  the  way  of  recom- 
mending what  ought  to  be  the  general  policy  of  the  municipalities  of 
the  country  on  this  subject?  ^     ^^ea  ux 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    323 

Mr.  SissoN.  I  certainly  do,  sir.    I  think  there  is  a  great  oppor- 

^-S;;^  j;^:i^:^^"ffi  Sat  duty,  in  your  mind,  restricted  to 
the  corporations  themselves  ? 

'ctSsbne^S^xT^^^the  private  corporations  engaged  in 

*'llfsiB^f ^N^;^"Sd  say  that  your  chief  duty  lay  in  advising 
and  informing  public  bodies  in  relation  to  it. 

Commissioner  Saveet.  For  whose  beneht( 

Mr  SissoN  The  benefit  of  the  public.  I  am  willing  to  put  ims 
whole  niatter  on  the  flat  basis  of  pufaic  interest,  because  it  has  funda- 

^^SmiSS^iS^.  Then  from  yc>ur  f  ^^^  th.  ^  l^ 
that  micht  be  derived  from  a  proper  understanding  ot  this  sut>  ect  ana 
a  propef  leoLmendation  on  the  part  of  this  comnnssion  would  be  o 
the  public,  rather  than  to  those  who  are  conducting  the  business  < 

Mr.  SissoN.  I  certainly  do,  sir. 

Commissioner  Sweet.  Or  the  investors '. 

CommiSonel'swE,^.  In  order  that  the  street-railwav  business . 
may  be  prosperous,  is  it  essential  that  new  capital  shouldi  be  added 

^t:^^  t^-^  =f=r f-Vor  the  .one 

^'tlT'sS'lt  seems  to  me  to  offer  a  fair  ^^^'^  f  ^        f^^ 
Comniissioner  Sweet.  Have  you  worked  out  in  detail  a  plan  lor 

"P^f  sIsS.Th^f  "'but  I  have  seen  such  plans  in  New  York, 

but  nowhere  else.  .    .  .      , 

Commissioner  Sweet.  Is  it  in  operation? 

A-r..  «;T«nv   \o     It  is  pure  V  theoretical,  on  paper.  -^    „.» 

ConuSner  Sweet.  It  has  been  tried  in  some  places,  has  it  not? 

soundness.     I  think  perhaps  f  at  may  oe  ir     ,  y  ^^ 

rentals  and  decreased  cost  of  land^  J  ffj^^^^^t^^k  the  con- 
valuable  for  vacant-land  sPf"\^t^f ',/'";  X^^„^  In  other  words, 
suming  P«Wic  should  hav^^^^^^  ^^  ^^^^^^^^ 

tte^Th^incteiffi  tiSd^v^inL  or  industrial  engagements, 

whatever  they  are. 


324     PRocEEDmcs  of  federal  electric  railways  commission. 

Commissioner  Sweet.  The  city  burdens  would  be  substantially  the 
same,  however,  in  the  outlying  districts  as  in  the  centers? 
Mr.  SissoN.  Yes. 

Commissioner  Sweet.  So  far  as  taxation  and  matters  of  that  kind 
are  concerned? 
Mr.  SissoN.  Yes. 

Commissioner  Sweet.  It  is  only  after  you  get  beyond  the  limits  of 
the  city  that  you  would  find  relief  from  those  burdens,  is  it  not? 
Mr.  Sissox.  Yes. 

Mr.  Warren.  The  assessments  would  be  smaller,  though ;  would 
the^  not.  Mr.  Chairman  ?  »  t.    . 

Commissioner  Sweet.  The  assessments  would  be  smaller,  but  tlio 
rate  of  taxation  would  be  the  same,  I  take  it. 

Mr.  Sissox.  Yes;  of  course  that  spreads  over  the  city. 

Commissioner  Sweet.  The  zone  system  that  3^ou  have  in  mi:id— 
will  you  kindly  describe  that  so  that  we  may  have  a  little  moro 
definite  idea  of  it? 

Mr.  Sissox.  Well,  I  will  not  undertake  to  go  into  any  gi-eat  detail, 
any  more  than  to  say  that  it  should  be,  in  my  judgment,  based  upon 
mileage.  For  instance,  in  the  great  city  of  New  York  a  man  can 
ride  from  Yonkers'  city  line  almost  and  from  Mt.  Vernon's  city  line 
clean  to  Coney  Island,  nearly  30  miles,  for  5  cents.  Well,  that  is 
obviously  a  luxury  that  the  public  enjoys  at  the  investors'  expense 
to-day.  It  is  not  equitable ;  it  is  not  good  business.  Now,  if  a  system 
could  be  arranged  whereby  a  man  pays  a  5-cent  fare  from  the  Yonkers 
city  line  to  a  given  point  and  then  is  required  to  deposit  another  ticket 
for  another  haul,  as  is  true  in  many  surface  systems,  it  would  be  only 
equitable  and  it  would  be  a  source  of  immense  revenue  to  local  trac- 
tion lines. 

Commissioner  Sweet.  It  would  not  be  practicable  to  bring  the 
relation  between  service  and  compensation  to  an  absolutely  fine  point 
in  the  way  of  equity,  would  it?  For  instance,  a  man  who  travels 
a  single  block,  or  two  blocks,  on  a  street  railway  would  pav,  under 
the  conditions  that  exist,  a  nickel  ? 

Mr.  Sissox.  Yes. 

Commissioner  Sweet.  And  the  same  for  a  dozen  or  more  blocks 
or  more? 

Mr.  Sissox.  Yes. 

Commissioner  Sweet.  Now,  there  a  gi^eater  service  would  be  ren- 
dered for  the  same  compensation? 

Mr.  Sissox.  Yes. 

Commissioner  Sweet.  That  can  not  very  well  be  avoided? 

Mr.  Sissox.  No ;  I  do  not  see  that  that  can  be  made  accurate. 

Commissioner  Sweet.  But  your  id^a,  if  I  understand  it,  is  that 
zones  might  be  established  which  might  be  equitable  and  just,  and 
bring  about  a  better  relation  between  service  rendered  and 

Mr.  Sissox.  Cost. 

Commissioner  Sweet  (continuing).  And  compensation  for  it? 
Mr.  Sissox.  Exactly. 

Commissioner  Sweet.  And  that  system  would  be  desirable  on  the 
whole? 

Mr.  Sissox.  Unquestionably,  in  our  great  cities— between  cities. 
Commissioner  Sweet.  And  it  would  be  more  businesslike? 
Mr.  Sissox.  Yes;  there  is  not  any  question  about  that. 


proceedings  of  federal  electric  railways  commission.  325 

Commissioner  Sweet.  Do  you  see  any  other  argument,  except  that 
of  the  distribution  of  population   agamst  this  plan. 

Mr  SissoN  The  argument  of  difficulty  in  collection,  ^^^^n  is 
soS'imos  advanced,  bft  I  think  that  would  be  very  easily  overcome    . 

by  mechanical  methods.  u  _  ^*  fi^Wofa  -n-onhl 

^Commissioner   Sweet.  The  sale   of   a   number   of  tickets   xsould 

obviate  the  necessity  of  mqldng  change,  would  it  not  i 

ComSSeJiwEET.  It  has  been  said  that  >*  -  ^-^  a  different: 
■  coinasre  a  7  or  a  Ti-cent  p  ece,  or  something  of  that  kind,  it  ^ouici 
be  of  verv  sreat  benefit  in  this  matter.   What  is  your  opinion  there? 
%fr   Siss?x    Well   I  think  if  the  dollar  continues  to  depreciate  m^ 
v.l!e   it  win  be  necessary  for  us  to  have  some  intermediate  coins 
because    after  all,  these  are  simply  tokens  of  exchange.    They  do 
not  represent  real  value  in  themselves,  to  any  extent. 

Commissioner  Sweet.  No.  ,     ,if>iKr 

Mr.  SissoN.  And  our  old  coinage  system,  based  upon  f^  J^f^^ 

value  of  five  years  ago,  does  not  meet  the  situation  of  to-day,  in 

•"  cTmrnissiW  Sweet.  It  would  avoid  a  certain  amount  of  annoy- 
ance  and  inconvenience  ? 

ComSoner  SwSt.  Is  it  your  opinion  that  the  American  people 
pay  more  attention  to  that  annoyance  than  do  Europeans  ? 

Mr.  SissoN.  I  think  they  do,  yes     I  think  they  do. 

Cnmmissioner  Sweet.  Do  you  think  we  are  inclined  to  do  things 
on  a  sZfwhat  larger  and  We  liberal  scale,  and  we  do  not  \^ko 

nfr  ™0K*?  Yes;ttlff  ihf t  is  true;  and  you  need  only  see  tho^ 
situation  hrvarious  parts  of  our  own  country.  In  California,  for 
instance,  for  a  good  many  years,  the  nickel  was  the  smallest  unit- 

used. 

Pninniissioncr  Sweet,   les.  i  ^.        j. 

Mr  SissoN.  You  had  to  pay  5  cents  for  a  newspaper  and  5  cents' 
foranything-thev  never  saw  pennies  out  there-and  everything 
from  that  point  up.    It  was  simply  the  custom  of  the  community. 

Commissioner  Sweet.  Do  you  tliink  that  is  something  that  is  in- 

hei-ent  in  the  newer  communities?  ,      x  i-v.  * 

Mr.  SissoN.  I  do.    There  is  no  question  about  that. 

Commissioner  Sweet.  In  regard  to  taxation,  you  said  you  thought 
ceita™rms  of  indirect  taxation-like  paving  between  «ie^  tracks, 
bridge  tons,  bridge  repaii-s.  and  that  sort  of  thing-all  of  which  are 
now  Wne  bv  the  street-railway  companies,  in  many  instances  should 
be  avoided— that  that  is  a  bad  practice.  ,      j  ,,•  „  tu.v 

Mr  SissoN.  Well,  I  think  it  imposes  undue  hardships  upon  the 
trims  t  lines  in  many  cases,  and  it  might  mean  the  difference  between 
solvency  and  insol/ency  iA  many  cases  It  seems  to  me  that  when 
thes^  lines  are  operating  so  near  the  danger  line  as  they  are,  the 
communitv  might  very  well  afford  to  undertake  those  improvements 

^7o±fs^ronrSwSrKfp1r^  prior  to.l915  .^h^n  th^  busi- 
ness  was  reasonably  prosperous,  is  it  your  opmion  that  the  ariange- 


'( 


326       PROCEEDINGS  OF  FKDEBAL  ELECTKIC  K.VILWAYS  COMMISSION. 

niont  that  wns  made  between  the  cities  and  the  street-niihvav  cornoni- 

Son  Se  teh*^' H^*""^  and  repairing,  and  so  fortrwas  Csel 
upon  t lie  Idea  tliat  tliey  were  gettnig  it  out  of  the  coninanie^  tl>Pt,. 
selves  mther  than  out  of  the  usirs  of  the  railways?   '"'"1'""'*^"  ""^'"- 

Mv.  Sissox.  UiKjuestionably. 

Commissioner  SwKKT.  Was  that  at  that  time  a  correct  theory  ? 

Mr.  SissoN.  No;  I  tlunk  not,  entirely  ^ 

C  ommissioner  Swekt.  Is  its  incorrectness,  in  your  opinion  emohi- 

Mr.  SissoN.  I  certainly  think  so.    It  is  fallacious. 

fact^tharTder  tho''''^''-.v  "'"■'  ';,"y  '^''•''^*  >«  y"""-  ^^^^  ^^  to  tlie 
thk  nniL  ^.il      f  °"'''*'°"^  "%"*''>;  "°^^'  ^-^'■'^t'  the  continuance  of 

street  rail^vajs?      ^     '"^  ""  ""'^"^  ^''''^''''  "P«"  *^'«  ''''''  °f  the 
Mr.  Sissox.  That  is  the  e.xact  effect  of  it  to-day;  yes,  sir 
Commissioner  Sweet.  And  if  the  fares  are  increased    and  thi, 
^stem  with  regard  to  paving,  bridge  tolls,  bridgrrepairs,  and  th  t 
sort  of  thing,  should  be  continued,  w^uld  it  not  be,  in  vour    ud^ment 

•  tbf  wflicnvoSdr"  "^.''^^-r  ^"  ""J"«^  form^ofindStrxa-' 
for  somethinrth  I  •  ^  'eq}"""?  that  part  of  the  community  to  pay 
tor  something  that  is  used  more  by  automobile  owners  in  other  Darts 

ation?  '°"™""'*y'  ^^l^'^''  ^^-^I'ld  l^e  exempt  from  that  form  ofTx- 

sir*''l  doTn;  3p  tn^"'"  f°  ^  ^  ^f\y  '^^'"''"  ^^'J  »b^i«"s  statement, 

cerVxinlv  t„?e  fn  „     T  """y''?/  ^  ''""'^  «"'="''«  "^"t  conclusion.     It  is 
ceittiiniy  true  in  our  large  cities 

Commissioner  Sweet.  Is  not  that  a  very  strong  argument  in  favor 
''^'V^'' o'^''"'''^  *^'^  ^«^'*  «f  obsolete  practice  ?  «=""»enr  in  lavor 

Mr.  Sissox.  It  certainly  is. 

nnrt«fV"*r'*  ''"f"'  ""^^'^'y  ™P^'-tial  and  quite  critical;  and  the  iT 
ports  that  we  get  are  most  reassuring  that,  so  far  as  the  mana<remonf 

ancuZt"Tl},!'t'-^'f  ^  T'^^  ««"«"*  "«  ^'  can  humanly  beCdf 
the  ctnjy!  ''  "*  """'*  °*  *^'  high-grade  lines  thi-oughou^ 

Commissioner   Sweet.  We    had    evidence    vesterd-iv    from    Af,. 

Commissioner  Sweet  (continuing).  That,  after  taking  char<.e  of 
SnTo^t^oliSnra'lL'*  *=°'''""^^°"  '^^'  "^  manafeLt^rLl 

tr.S  I:  w^ikltct  Kiisr  *-^  ^'^-^^-^  *•»« — 

Conimissioner  Sweet.  Have  you  any  direct  information  on  that 
point  from  the  receivers  of  other  companies,  or  in  any  other  manner' 

Mr.  SissoN.  Yes;  particularly  in  New  York  Citv  ^nJ  r?^m 
F  tWnkYai /'•'/P^"'""  ?*  the^receive^:  of  all  theVmln"^  s^'tE:' 
finS./       f^  '"  ^•*y"'^"  *"<*  letter  than  that,  it  fs  the  cS 


PEOCEEDINGS  OF  FEDERAL  ELECTFJC  KAILWAYS  COMMISSION.      327 

Mr.  SissoN.  Undoubtedly.  ,-,„io,mpnt  in  regard  to  the 

Commissioner  Sweet.  What  is  yo'^'V j^'^^i^T  'g^t^^^  ability, 

tint  it  i.nks  above  th.  .verag.  bmrn*.  in  .11  those  pfUt.cuiare. 

necessities  of  their  situation. 

Commissioner  Sweet.  Yes.  ,  ,    .1  , 

-iF=I^S  >i^is^^s^^^^  -Id 

thfSti^ran-aSJa^ve  report  Wu,ba-^^^^^^^^ 

sis  of  the  f -^tion   rec«mme«d.^^^^     ^e  ^pot  t  cal  a^ncies,  would 

the  country.  .       -  authoritv  in  the  matter. 

,  ,{,f „rr>i  KrtroSet'vSjtiYwi  b„t  i «™ 

sure  that  they  win  na\e  a  vei^  „^j^.^ivin<r  npcessitv  in  the  whole 
SlSorbi^;"i^orttr^^^^^^^^^  -fleeted  in 

""^^Z^i^^^^  attitude  of  the  public  upon  this 

^"'r'i'sr'Vel- tTstTartVus^^^^^^^  and  in  part  the  blind,  un- 
Mr.  SissoN.   JfeS'  rt  is  in  |W"  J        j    j    iustifled  in  a  measure  by 

reasoning  ignorance  of  ?e™^f ''f l. .^^^^^^^^    and  operating  practices 

.  '''"Eo^^:::r's:i:^'^^'-^r.  the  chief  sufferers  because  of  that 
'"MrX'r.'of  course,  the  security  holder,  primarily,  and  the 
traveling  public  i?  the^^^^Pl^''^;,^  ^^^,  ^n  effect  upon  the  general 
pr?s™yTfX!Zrry^re  no^  all  the  people  of  the  country  more 

'''rSitWnVuV-'?ly,  because -^^^^^^^  <>*  *^«  P"^^" 

"toissi'^sristnin^^^^^^^^^^ 

V   if  The  cTJom  of  issuing  bonus  stock  or  putting  water,  as  the  people 
say,  into  stock  is  now  in  vogue  i 

Mr.  SissoN.  It  is  not.  ..    .  -x  •        *» 


328       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOST. 

Commissioner  Sweet.  Yes. 

Mr.  SissoN.  It  is  still  frequently  used  in  industrial  flotations  of 
various  sorts.  Public  sentiment  has  not  reached  that  point  ap- 
parently, yet;  but  the  public  utilities— the  railways  and  matters 
where  the  public  interest  is  alive,  that  practice  has  not  been  in  vogue 
in  regard  to  them  for  a  long  time. 

I  might  say  in  further  explanation  of  that,  that  in  the  development 
of  any  new  industrv,  like  a  railway  or  public  utility,  the  investment 
banker  very  often  finds  it  necessary,  in  order  to  secure  direct  invest- 
ment in  the  obligations  of  the  company,  to  give  a  profit-sharing  in- 
terest in  the  future  of  that  company,  in  the  form  of  a  stock  bonus, 
in  order  to  induce  investment.  Where  these  things  are  hazard,  their 
profit  earning  is  all  estimated  as  a  matter  of  guess  work ;  the  specula- 
tive possibility  in  the  situation  is  the  only  thing  that  attmcts  the 
investor,  and  stock  bonuses  have  been  given  simply  to  make  the  direct 
offering  attractive. 

Commissioner  Sweet.  The  way  in  which  that  has  been  done  has 
been  by  giving  a  certain  amount  of  stock  ? 

Mr.  SissoN.  Of  common  stock. 

Commissioner  Sweet.  Of  common  stock? 

Mr.  SissoN.  With  the  bonds. 

Commissioner  Sweet.  To  the  purchaser  of  the  bonds  or  preferred 
stock  ? 

Mr.  SissoN.  Exactly.  I  might  go  further  and  say  that  it  is  my 
judgment  that  this  country  would  not  have  been  built  up  and  we 
never  would  have  had  our  railways  and  public  utilities  if  that  finan- 
cial practice  had  not  been  pretty  general  throughout  the  days  of  pro- 
motion and  creation. 

Commissioner  Sweet.  In  order  to  get  new  capital  to  invest  in 
street-railway  enterprises 

Mr.  SissoN.  Exactly. 

Commissioner  Sweet  (continuing).  There  must  be  some  reason- 
able assurance  of  a  fair  rate  of  interest  upon  the  investment? 

Mr.  SissoN.  Yes. 

Mr.  Saveet.  And  a  reasonable  certainty  of  return  on  the  capital 
investment  ? 

Mr.  SissoN.  Exactly;  absolutely. 

Commissioner  Sweet.  No  one  could  possibly  deny  that  proposi- 
tion ?  ^ 

Mr.  SissoN.  No. 

Commissioner  Sweet.  Now,  can  you  suggest  any  definite  and  dis- 
tinct and  practical  method  by  which  that  may  be  accomplished  ? 

Mr.  SissoN.  Well,  of  course,  very  obviously  by  an  expression  of 
public  sentiment  through  regulating  bodies — that  would  assure  a 
reasonable  earning  power. 

Commissioner  Sweet.  Have  you  considered  the  service-at-cost 
plan,  as  it  is  called  ? 

Mr.  SissoN.  It  would  seem  to  me  that  that  margin  would  be  too 
narrow  to  attract  investors,  as  a  rule.  They  would  like  to  have  a  sur- 
plus, a  sinking  fund,  and  a  margin  of  earnings  above  that,  if  they 
had  their  say  m  the  matter. 

Commissioner  Sweet.  Does  the  service-at-cost  plan  necessarily 
limit  the  return  that  should  be  allowed  on  the  capital  invested? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      329 

point  to  attract  mvestors  ? 

Mr.  SissoN.  That  would  be  the  danger.  ^^^^^^_  n  6  or  6i  or 

Commissioner  Sweet.  Suppose  it  were  ^«^-  ^g^P^^^^^^^^^    ^'  ^^ 

7  oer  cent  rate  were  understood  to  be  a  reasonable  amount .  , 

I^r.^^ssoN.  I  think  that  would  be  very  attractive  to  the  average 

^'Cotmissioner  Sweet.  AVhat  percentage  do  you  think  would  be 
necessar5r?  ,      _  ^    ^^^  ^^^^  investor  would 

noS;  Sd^-Ut  llf ttJ  rt  cent  ^^^^^  ZSt>^^" 
and  not  less  than  6  per  cent  upon  stock     I  mean  actual  slocK. 
Commissioner  Sweet.  Common  stock? 

bonds  would  be  sufficiently  attractive  to  mvestors  to  meet  the  needs 
'''^:  sZr  ^elt  t%=t;-^oyou  mean  by  that  to  limit  it  to 

5  per  cent  ? 

Commissioner  Sweet.  Yes. 

^^S-T  S™  &1'.K5V  p..  cent,  „d  „o.  n,o». 

Mr.  SissoN.  Yes ;  I  tl^i^^^-— , 

STrrSi  fMXtlSVuwiVaranteed  bond  on  a  5  per  cent 

"SrSe?  str'S  *;t^^ink  such  bonds  could  be    floated 

gimrantv,  upon  the  «'^j|°*  ^he  communrt.^  a^  P^^^  ^.^^ 

^i^'^a^feTrtisKiSra.i^ 

judgment  is  that  money  is  ^^fj^g^^   ^he  demand^^  ^J^^  ^^^ 

ZA  Sle  a^-^eeTgovernmen^^^^^^^^  - 

United  States  obligation,  caji  b«  f  ^f  ^^Aj'^tttve  at  5  •  but  it  would  be 
to  be  of  a  very  sound  character  to  be /"^''^f^^^l  New  York  or  the 

tr^^NTwVoT'glllraXd^ts"c^iU^^^^^     per  cent   the  se- 

guSaTy?r.la?Toul/aU''nt  Tal^farant^  of  that  kind,  in  the 

cost-of -service  plan? 

Mr.  SissoN.  No.  «,„„;„„  „t  cost,  I  think  it  is  called. 

Commissioner  SwE^^  ^t     My  own  theory  is  that  if  we  get  into 
Mr.  SissoN.  No;  I  f  n^^^^^^ycWng  so  closely  upon  the  field  of 

the  guaranty  fi.e''^'.  ^^,^^!,^^""  fater  we  will  step  over  the  line  into 

ft:S'':ri'C-rof  rSonaUe  earnin'g  power  to  be  dis- 

160643**— 20 22 


■  na 


330       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tril)nted  by  the  owners  of  the  roads  through  fixed  charges  and  labor 
charges  and  material  charges,  in  accordance  with  their  own  necessi- 
ties and  judgment,  is  a  much  more  businesslike  way  to  leave  the  situa- 
tion than  to  provide  for  fixed  guarantees.  But  perhaps  that  is  not 
possible.     If  it  is  not.  I  would  approve  the  guaranty. 

Commissioner  Sweet.  Would  it  not  be  feasible  for  a  State  com- 
mission, for  instance,  to  fix  a  tentative  rate  and  then,  later  on,  have 
an  adjusting  scale  ?  If  the  rate  fixed  in  the  start  did  not  produce  the 
fixed  income  to  meet  the  needs  of  the  companies  and  the  investors, 
would  it  not  be  feasible  that  automatically  or  by  further  action  of  the 
State  commission,  a  slight  increase  should  be  made,  and  so  on,  until 
a  point  were  reached  where  the  property  would  be  preserved  in  at 
least  as  good  condition  as  it  was  when  taken,  necessary  extensions 
made,  investors  properly  compensated,  and  business  go  on  profitably? 

Mr.  SissoN.  I  think  that  is  entirely  feasible. 

Commissioner  Sweet.  That  would  be  feasible,  would  it  not? 

Mr.  SissoN.  It  would  be  feasible,  and  most  desirable. 

Commissioner  Sweet.  Would  not  a  somewhat  elastic  arrangement 
of  that  kind  really  meet  the  situation  better  than  merely  a  range  of 
7^  or  8  or  9  cents  ? 
'Mr.  SissoN.  It  would  be  much  more  scientific. 

Commissioner  Sweet.  Yes. 

Mr.  SissoN.  It  would  depend  only,  I  might  add,  upon  the  intelli- 
gence and  broadmindedness  of  the  regulating  commission  which,  in 
many  instances,  undoubtedly,  would  be  equal  to  the  situation. 

Commissioner  Sweet.  Yoii  can  not  entii-ely  exclude  the  human  ele- 
ment, could  you,  from  any  arrangement  of  that  kind? 

Mr.  Sissox.  Nor  the  political  element. 

Commissioner  Sweet.  No.  The  success  of  any  plan  that  inay  be 
adopted  would  depnd  very  largely,  would  it  not,  upon  eradicating 
from  the  public  mind  the  prejudices  that  have  existed? 

Mr.  SissoN.  Exactly. 

Commissioner  Sweet.  And  bringing  about  a  better  cooperation 
l)etween  the  companies  and  the  public.  And  the  common  councils 
and  representatives  of  the  public. 

Mr.  SissoN.  Yes. 

Commissioner  Sweet.  By  making  the  people  realize  what  is  the 
f.^et— that  their  own  prosperity  depends  largely  upon  the  mainte- 
nance of  this  service. 

Mr.  SissoN.  Exactly.  It  may  be  necessary,  in  order  to  secure  that, 
to  establish  some  sort  of  community  of  interest  between  the  corpora- 
tion and  the  public,  whei-eby  earnings  above  a  certain  figure  revert 
to  i^ublic  uses.  That  might  put  an  automatic  check  upon  too  high  a 
fai-e.  I  am  really  skeptical  of  that  profit-sharing  arrangement,  as 
it  has  not  Avorked  successfully  in  all  places  where  it  has  been  applied; 
but,  theoretically,  I  think  anything  that  establishes  a  community 
of  interest  and  a  community  of  understanding  between  the  owners 
and  users  is  to  be  desired. 

Commissioner    Sweet.  Will    you    explain    that    a    little    more 

definitely  ? 

Mr.  Sissox.  Well,  you  are  familiar,  undoubtedly,  with  the  systems 
that  are  in  vogue  inseveral  cities  in  this  country,  where  there  is  a 
provision  for  a  division  of  profits  lietween  the  city  and  the  corpora- 
tions beyond  a  fixed  return  to  the  corporation. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      331 

Commissioner  Sweet.  We  ask  some  questions  of  this  kind  in  order 
to  make  the  record  more  complete. 

JLSoiJlwEKT.  And  if  you  will  just  explain  it  «> /Mt  .^ 
poison-the  average  man  in  the  community  9"  reading  i-«  il«^^ 
a  clear  apprehension  of  what  you  have  in  mind,  it  a^oukI  ^  tettLr 
than  it  would  be  to  appeal  to  the  members  of  the  connni..ion  upon 

their  own  information.  .  ,•     ,,  t    ^    i,,,*  ;f 

Mr.  SissoN.  Yes.  Well,  that  plan  is  theoretically  pertect,  but  it 
has  not  always  been  practically  successful.  ,  ^  ^,  .  ,  . 
Commissioner  Sweet.  Well,  just  give  us  what  that  plan  's. 
Mr  SissoN.  To  provide  that  the  fare  shall  be  such  as  is  mutually 
acreed  upon,  and  that  any  return  to  the  corporation  above  a  certain 
Sretiun  o  be  agreed  upon  shall  be  divided  on  some  basis  between 
"he  city  and  the  corporation.  That  ought  to  prejudice  pub}e  senti- 
ment in  favor  of  the  corporation,  as  it  is  an  institution  in  which  the} 

have  an  interest.  .    ,. ■„.  ^i,,. 

Commissioner  Sweet.  It  ought  to  remove  prejudices  against  the 

'"Sr.'sJss'i.N.  Now.  I  am  sorry  to  say  that  that  has  not  been  true 
in  all  instances  where  it  has  been  tried,  but  I -believe  that  it  is  still 
worth  a  trial,  and  that  the  sound  theory  that  is  presented  by  it  has 
not  vet  been  disproven  by  its  failure  in  instances  to  secure  that 
result.    Personally,  I  believe  very  thoroughly  in  the  profit-sharing 

^^Commissioner  Sweet.  But,  Mr.  Sisson,  don't  you  think  that  this 
objection  might  be  raised  to  that  plan-that  whatever  is  the  share  ot 
the  general  public  in  those  properties,  would  simply  reduce  general 

taxation  ? 

Mr.  Sissox.  Yes.  ,      „  ,,      ■  u  i 

Commissioner  Sweet.  And  during  the  fo  lowing  year  would  be 

somewhat  lessened  by  reason  of  receiving  their  share;  is  not  that 

true  ? 

Mr.  Sissox.  Yes.  ,        ,,        ,  ■      t      ,  ti,„ 

Commissioner  Sweet.  Would  not  that,  then,  be  removing  from  the 

general  public  a  part  of  the  burden  of  taxation  and   placing  it 

entirely  upon  the  users  of  the  railways? 

Mr.  Sissox.  Unquestionably.  ,         .    ,  ., 

Commissioner  Sweet.  Would  that  be  a  ]ust  arrangement? 
Mr.  Sissox.  No  ;  not  entirely,  except  on  the  theory  that  a  large 

proportion  of  the  general  public  are  users  of  the  utilities ;  but  the 

noint  is  well  taken.  .         ^    ,  ,,..-^^1.1.1 

^  Commissioner  Sweet.  What  portion  of  the  public  is  it  that  does 
not  use  the  street  railways,  or  that  use  them  the  least?    Can  you  tell 

us  what  that  is?  .       ,      /.  £  i.- 

Mr.  SissoN.  Well,  it  is  being  relieved,  of  course,  from  a  portion 

of  taxation.  ,       ,  .         x  -x  •     -j-q     t^  u  +i.« 

Commissioner  Sweet.  Well,  what  portion  of  it  is  it?  Is  it  the 
richest  or  poorest,  or  what  part  of  the  community  is  it  that  uses  the 
street  railways  the  least?  ^  i    .i,      . 

Mr    SissoN.  I  think  it  woud  be  a  portion  of  both  extremes. 

Commissioner  Sweet.  A  portion  of  both  extremes? 

Mr.  SissoN.  Yes,  sir ;  the  poorest  and  the  richest. 


f 

V 


332       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Coniniissioner  Sweet.  The  people  who  have  no  property  to  tax, 
and  the  people  who  have  the  most  property  to  tax. 

Mr.  SissoN.  Yes. 

Connnissioner  Sweet.  Is  that  right? 

Mr.  SissoN.  Yes,  sir;  absolutely. 

Connnissioner  Sweet.  The  one  not  having  the  nickel,  and  the  other 
having  an  automobile? 

Mr.  SissoN.  Exactly. 

Commissioner  Sweet.  Very  well.  Now,  the  people  that  do  use  the 
street  railways  most  would  be  paying  a  fare  that  was  higher  than 
actually  necessary. 

Mr.  SissoN.  Yes. 

Connnissioner  Sweet.  A  part  of  the  general  burden  that  ought  to 
be  borne  bv  the  whole  community. 

Mr.  SissoN.  Yes;  undoubtedly. 

Connnissioner  Sweet.  And  the  users  of  automobiles,  at  least,  get 
the  benefit  of  this  saving  and  street  improvements  and  all  that  sort 
of  thing  that  would  be  thrown  largely  upon  the  users  of  the  rail- 
ways; would  they  not? 

Mr.  SissoN.  Yes;  that  is  a  perfectly  sound  argument.  The  only 
defense  for  the  other*  theory  is  that  it  might  help  evStablish  a  better 
feeling  towards  the  property,  which  would  be  reflected  in  the  general 
conmiunity  good,  but  it  should  not  be  necessary.  In  other  words,  I 
think  the  more  we  can  avoid  paternalism  in  the  treatment  of  this 
business,  the  better  it  will  be,  not  only  for  them  but  for  the  com- 
nnniity  as  a  whole. 

Commissioner  Sweet.  AVould  not  the  remedy  in  all  cases  of  that 
kind,  where  a  surplus  was  produced,  better  be  handled  by  reducing 
the  rates? 

Mr.  SissoN.  Yes;  that  could  be  done. 

Commissioner  Sweet.  To  the  lowest  point  consistent  to  its  pro- 
ducing the  necessary  amount  of  income  ? 

Mr.  SissoN.  Yes. 

Commissioner  Sweet.  That  would  be  the  nearest  to  absolute  justice 
to  the  whole  connnunity ;  would  it  not  ? 

Mr.    SissoN.  It  certainly  would. 

Commissioner  Sweet.  And  the  profit-sharing  device — don't  you 
think  it  has  in  it  a  sort  of  element  seeking  to  get  the  favor  of  people 
by  deceiving  them  ? 

Mr.  SissoN.  It  is  begging  the  question,  I  frankly  agree ;  yes,  sir — 
perhaps  not  deceiving  them  as  much  as  throwing  a  sop  to  them,  I 
should  say. 

Commissioner  Sweet.  Well,  making  them  feel  that  they  are  get- 
ting something  for  favoring  the  system. 

Mr.  Sissox.  Yes. 

Commissioner  Sweet.  Without  really  a  basis  of  justice  in  it. 

Mr.  Sissox.  You  are  quite  right.     I  definitely  agree  with  you. 

Mr.  Warken.  It  is  another  form  of  paving  taxes,  really,  is  it  not? 

Mr.  Sissox.  Yes.    It  has  «ome  color 

Commissioner  Sweet.  And  the  bridge  tolls  and  the  fares  and  the 
cleaning  of  the  streets,  where  it  is  required  of  the  companies? 

Mr.  Sissox.  Yes. 

Commissioner  Sweet.  All  those  things  would  come  under  that  same 
objection  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      333 

SnS^e?  W^!^  think  that  is  all.    Mr.  Meeker,  have  you 

"^ZS^er  Meekek.  You  spoke  of  the  practice  in  financm^ 
street  railways  in  times  past  whereby  stock  was  ^^^f  ^' j\^^^^^^^^ 
money  payment,  but  as  an  inducement,  as  a  bonus,  to  bond  buyers 
So  you^  think  the  street  railways  now  represent  in  their  physica 
properties  value  equivalent  to  the  outstanding  bonded  debt  and  stocU 
Mr  SissoN.  AVell.  I  can  not  speak  aceurately  about  that.  I  should 
be  surprised  if  they,  under  their  present  earnmg  power,  represented 
value  equivalent  to  their  entire  capitalization. 

Commissioner  Meeker.  I  did  not  catch  your  answer 
•     Mr.  SissoN.  I  say  I  should  be  surprised,  ^^ .  ^^^^^^^^^^^  P/^^^"^^^^^ 
earning  power-because  earning  power  determines  value-I  should 
be  surprised  if  their  value  equaled  their  capitalization.    I  do  not  be- 
lieve it  does,  including  stocks  and  bonds.  ,       ^       ,         , 

Commissioner  Meeker.  W^hen  you  speak  of  value,  do  you  mean 
the  vstlue  of  the  physical  property? 

Mr  Sissox.  No ;  I  was  speaking  broadly  of  their  whole  value,  be- 
cause' it  is  the  entire  value  that  is  capitalized     For  instance    fran- 
chise values  are  capitalized  and  are  taxed  in  New  \  ork  State  deh- 
nitely  as  property,  and  in  other  places,  I  have  no  doubt,  and  are  dis- 
tinct value,  provided  there  is  earning  power  to  warrant  it.    I  he  taxa- 
tion of  franchises  in  New  York  State  was  based  upon  the  theory 
that  earning  power  derived  from  franchises  was  a  legitimate  source 
of  public  taxation.     Now,  if  that  earning  power  does  not  exist,  the 
value  does  not  exist.    In  other  words,  common-stock  values  in  most 
street  railways  were  based  upon  franchise  values  and  earning  power, 
and  not  upon  physical  values.    I  do  not  believe  the  physical  values 
of  the  railways,  while  I  am  sure  it  is  greater  than  the  bond  obliga^ 
tions,  has  yet  reached  the  point  where  it  absorbs  stock  obligations. 
Perhaps!  can  give  you  a  better  analogy  of  it  m  the  railroad  held. 
One  of  the  great  public  fetiches  to-day  is  that  railroad  stocks  are 
watered,  but  the  sober  fact  is,  as  any  student  of  the  situation  can 
determine,  that  the  probabilities  are  that  the  physical  value  of  the 
railroads  to-day  is  something  like  $1,500,000,000  in  excess  of  the 
capitalization.     That  was  not  true  25  or  30  years  ago,  but  out  of 
efirninir  power  the  railroads  have  put  back  into  the  property,  year 
after  year  and  year  after  year.    For  instance,  the  Pennsylvania  has 
put  back  something  over  $300,000,000  out  of  earnings  mto  prop- 
erty values.    The  New  York  Central  lines  built  their  Chicago  termi- 
nals out  of  the  surplus  earnings  on  the  Lake  Shore,  and  that  has 
been  true  of  many  of  the  big  railroad  lines.     To  a  lesser  degree  that  is 
true  of  the  street-car  lines,  but  they  have  not  yet  reached  the  point 
where  they  have  absorbed  their  overcapitalization,  if  you  may  call 

Commissioner  Meeker.  What,  in  your  opinion,  should  be  done 
with  investments  out  of  earnings  in  that  fashion  ?  Are  they  the 
property  of  the  street-railway  companies  upon  which  they  are  en- 
titled to  a  reasonable  return?  .,    ^  •    ^i  ^-  «  :„ 

Mr  SissoN.  In  my  judgment,  yes,  because  that  is  the  practice  m 
every  business  in  the  world,  and  I  do  not  know  any  reason  why  in- 
vestors  in  street-railway  securities  should  be  discriminated  against. 


I' 

i; 


334       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

It  is  true  of  every  industrial  activity.  Henry  Ford  starts  a  factory 
with  a  few  thousand  dollars,  and  to-day  he  is  worth  hundreds  of 
millions  out  of  earnings,  and  we  all  i^at  him  on  the  back  and  say, 
"A  wonderful  job." 

Mr.  Warren.  And  buy  Ford  cars  without  any  protest. 

Mr.  SissoN.  Yes,  sir;  and  pay  the  price  that  enables  him  to  make 
those  profits;  and  I  do  not  know  of  any  reason  why  we  should  dis- 
criminate against  our  public-service  corporations  for  having,  in 
their  limited  way,  done  what  the  industrial  corporations  and  financial 
institutions  and  every  other  class  of  business  do  without  protest.  In 
other  words,  it  is  the  legitimate  reward  that  comes  to  business  ven- 
ture. That  has  been  true  according  to  all  of  the  old  theories  of 
doing  business.    We  may  change  that  in  the  future. 

Commissioner  Meeker.  You  think  that  public  opinion  has  not 
changed  in  reference  to  public  utilities? 

Mr.  SissoN.  I  think  it  has  to  a  certain  extent.  I  think  it  has 
been  becoming  definitely  socialized  in  a  great  many  places. 

Commissioner  Meeker.  It  was  not  quite  clear  to  me  whether  you 
believed  in  a  guaranty  of  a  fair  return  upon  a  fair  valuation  of  the 
whole  property  of  the  street-railway  company  or  not? 

Mr.  SissoN.  I  believe  in  a  guaranty  if  they  can  not  get  an  assurance 
of  earning  power  in  any  other  way.  I  think  the  less  paternalism, 
the  less  operating  guaranties  that  we  have  in  any  of  our  public  util- 
ities, the  better ;  but  if  it  is  not  possible  to  adopt  such  plan  as  your 
chairman  indicated  there,  by  wh^ch  an  assurance  of  earning  power  is 
given,  and  arranged  scientificaily  up  and  down  to  meet  the  costs 
and  the  needs  of  the  situation,  then  I  am  frank  to  say  that  I  think 
a  guaranty  is  the  only  think  that  will  attract  the  investor. 

Commissioner  Meeker.  Do  you  tliink  a  guaranty  of  a  minimum 
earning  might  be  made,  with  freedom  to  make  more  than  a  mini- 
mum earning? 

Mr.  SissoN.  That  would  be  somewhat  more  attractive. 

Commissioner  Meeker.  More  attractive  to  the  investor;  but  would 
you  advocate  that  as  justice  to  the  public  ? 

Mr.  SissoN.  Well,  I  should  say  that  if  that  was  kept  within  reason- 
able limits  yes. 

Commissioner  Meeker.  That  is  a  minimum  and  a  maximum  fixed? 

Mr.  SissoN.  A  minimum  and  a  maximum ;  yes. 

Commissioner  Meeker.  What  woijld  do  in  the  case  the  earn- 
ings exceed  the  maximum? 

Mr.  SissoN.  Well,  you  would  have  two  alternatives:  An  elastic 
system  of  regulation,  which  would  reduce  the  rates  to  take  up  that 
slack,  or  a  profit-sharing  plan,  Avhich  would  turn  it  over  to  the  pub- 
lic treasury. 

Commissioner  Meeker.  It  was  not  entirely  clear  to  my  mind 
which  of  those  alternatives  you  would  prefer. 

Mr.  Sissox.  I  would  prefer  the  business  alternative  of  regulating 
the  rates  to  meet  the  situation,  if  it  were  possible  to  do  so  scien- 
tifically. That  assumes  an  intelligent  and  sympathetic  regulating 
board  which,  I  am  sorry  to  say,  is  not  always  possible  in  American 
politics. 

Commissioner  Meeker.  A  true  service-at-cost  plan  would  take 
cognizance  of  all  costs  of  service,  would  it  not? 

Mr.  SissoN.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      335 

Commissioner  Meeker.  It  would  necessarily  PJ^V'^ll^tim-aoTx- 
coneern  instead  of  an  insolvent  concern;  a  I  of  the  legitnnate  ex 
penses  of  conducting-  the  business  must  be  taken  care  ot. 

SmSoner  Meeker.  Under   any   cost-of-service   or   servicc-at- 

cost  plan? 

Mr.  SissoN.  Yes. 

Commissioner  Meeker.  That  deserves  that  name  ( 

Mr    SissoN.  That  is  right.  ,i     •   ^  4.  +;^.. 

Commissioner  M^KKEKrAnd  with  that  reasonable  mterpretat.o,i 
of  the  service  at  cost  you  would  be  in  favor  of  such  a  plan . 

?£nSilSon«-lSiER.  That  is,  with  no  fixed  fare  of  5  cents  or 
7  cents  or  10  cents? 

ComSouef  MwKEB.  But  the  fare  to  be  fixed  according  to  the 

*''Mr"fissoN.  Exactly.    I  think  that  would  be  very  desirable 

Commissioner  Meeker.  I  came  m  late  unfortunately.    A»e  J^u  ia 
favor  of  local  regulation  by  municipalities?     lou  are  in  fa^ol  of 

"^nlf  Si^s'oN.  Yes.     Xo;  I  think  that  State  regulation  is  on  the 
^^  Commissioner  Meeker.  Should  there  be  a  combination,  perhaps, 

of  local  and  State ?  •     x-       -v    ».  nu,.  ,.;<Tiit 

Mr    SissoN.  Well,  suffering  as  they  are  in  New  \ork  City  light 
now,  I  would  prefer  that  there  be  no  combination ;  but  perhaps  it  is 
only  fair  to  the  community  that  they  should  i^a^?,.«°'"«^l"»f  *°^^^^; 
Commissioner  Meekek.  I  am  not  entirely  familiar  with  the  New 
York  situation.    Will  you  elucidate  the  situation  there '  .,.. 

Mr  SissoN.  In  Xew  York  to-day,  we  have  a  conflict  of  authority 
between  our  board  of  estimate,  ^^'^^"^'"'^^^.the  niayor  and  his 
immediate  associates  in  power,  and  our  State  authorities.  They  ha\  o 
been  at  loggeAeads  there  for  a  year,  with  the  result  that  nothing  has 
ever  been  done;  no  relief  given  and  bankruptcv  after  bankruptcy  has 
followed  Xow,  if  there  was  power  in  either  body  to  act  independ- 
ently of  the  other,  I  am  sure  that  some  change  in  the  situation 
would  have  taken  place  long  ago;  but  for  a  long  time  there  we  had 
a  political  conflict  between  the  Republican  public-service  commission 
an^the  Democratic  State  administration  and  neither  side  was  willing 
to  vield  to  the  other,  which  was  most  unfortunate  to  the  interest  of 
JL^Suc  and  recur  ty  holders.  That  conflict  still  exists,  although 
there  ai^sgns  of  relfef  there  through  the  courts  and  thi-ough  the 
more  sympathetic  attitude  on  the  part  of  oui-  governor.  But  whether 
or  not  the?  will  reach  the  point  of  action  only  the  future  can  develop ; 
but  it  has  been  most  unfortunate  for  New  York  City  that  that  con- 
flict has  existed,  in  which  rights  of  action  have  not  been  clearly 

'^^Commissioner  Meeker.  Your  opinion  then  is  that  an  undivided, 
single  authority  is  to  be  prefeii-ed  to  any  cooperative  plan '' 

Mr  SissoN.  "Unless  the  right  of  ultimate  decision  is  clearly  fixed, 

I  certainly  think  so. 

Mr.  Wakren.  And  made  apparent. 


I   1 


336       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  SissoN.  I  think  they  might  work  out  some  advisory  relation- 
ship or  something  of  that  sort,  but  I  think  there  should  be  but  one 
authority  in  a  situatibn  of  that  kind  and  that  definitelj'^  fixed. 

Commissioner  Meeker.  I  take  it  from  the  testimony  that  I  have 
listened  to  that  there  have  been  imwise  extensions  and  building  of 
new  lines  on  the  part  of  street-railway  companies.  What  should  be 
done  with  those  lines  that  have  been  unwisely  built  and  those  exten- 
sions that  have  been  unwisely  built  ? 

Mr.  SissoN.  Well,  broadly  speaking,  bad  business  ventures  pay  the 
penalty  for  bad  guessing,  in  losses,  and  where  there  is  no  jx)wer  of 
recovery  from  a  clearly  established  public  interest,  I  should  say  the 
men  who  put  money  in  those  properties  would  have  to  face  the  losses 
unless  the  public  interest  was  such  as  made  that  inadvisable  from  the 
public  viewpoint. 

Commissioner  Meeker.  Do  you  think  it  would  be  justifiable  to 
abandon  those  lines  to  cut  down  the  operating  expenses? 

Mr.  SissoN.  Yes. 

Commissioner  Meeker,  Well,  do  j'ou  think  that  the  regulating 
body  should  have  decision  as  to  when  extensions  should  be  made — 
when  and  where — and  when  and  where  new  lines  should  be  built? 

Mr.  SissoN.  I  do,  providing  the  arrangement  is  such  as  to  furnish 
the  credit  by  which  those  extensions  can  be  made.  In  other  woi*ds,  I 
feel  that  if  the  regulating  bodies  are  going  to  get  on  top  of  these  utili- 
ties they  must  get  underneath  them,  too.  If  they  are  going  to  fix 
their  earnings,  they  must  also  establish  credit. 

Commissioner  Meeker.  You  spoke  a  momeiit  ago  about  the  de- 
sirability of  having  a  definite  single  authority.  Does  that  squint 
toward  public  ownership?  Is  it  possible  to  have  this  public  interest 
on  top  and  underneath  private  companies  in  the  rtreet-railwaj'^  busi- 
ness? Is  it  possible  to  work  out  any  scheme  of  cooperation  there, 
or  is  it  best  to  give  up  the  attempt  and  go  back  into  public  owner- 
ship ? 

Mr.  hissox.  Well,  that  is  a  very  v   al  question.    My  hope  and  be 
lief  is  it  is,  but  I  am  not  entirely  sure  in  my  onw  mind. 

Commissioner  Meeker.  Your  answer  is  Hot  entirely  clear  to  mo. 

Mr.  SissoN.  It  is  my  hope  and  belief  that  it  would  be  possible 
to  work  out  a  plan  of  regulation,  which  does  no  necessarily  imply 
public  ownership,  but  I  am  not  entirely  sure  that  it  is.  I  frankly 
say  that. 

Commissioner  Sweet.  You  think  it  ougL  to  be  tried  first,  any- 
way? 

Mr.  Sissox.  I  think  it  should  be  the  first  attempt — that  we  ought  to 
do  everything  possible  before  we  reach  any  conclusion  that  public 
ownership  is  inevitable,  because  in  my  mind  J  believe  that  political 
and  economic  tragedies  would  follow  public  ownership  in  this 
country  that  would  be  very  disastrous. 

Commissioner  Meeker.  With  minimum  and  maximum  earnings 
practically  guaranteed,  what  better  would  be  private  ownership  un- 
der such  a  scheme  than  public  ownership  and  operation? 

Mr.  Sissox.  Well,  you  would  avoid  the  chief  objection  to  public 
ownership  and  operation,  which  is  political  ownership  and  opera- 
tion, which  inevitably  piles  up  cost  and  reduces  efficiency;  and  I 
can  show  you  a  long  record  of  inefficient  operation  and  multiplexing 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOH.      337 

involved.  ,,  ^.        _„  or>o«ir;ncr  of  Dubliclv  owned  and 

Commissioner  Meeker.  You  are  speaking  oi  puoii^ij' 

operated  lines  now? 

Mr.  SissoN.  Yes.  •i.:„„» 

Commissioner  Meeker.  In  what  c^^nnj^n'tf  ^ ; 
Mr.  SISSON.  Well,  broadly  speakmg  m  80  or  ^0  P^r  ce  ^^^ 

'%rX'so/le"L  of  their  close  contact  with  the  public.    Water 
-SferZ^rttt^-^^^^^^^^  i^  i3  - 

"^r.^ist^*.' YeTand  there  are  not  all  the  causes  of  daily  irritation 
""commTssioner  Meeker.  It  is  nowhere  nearly  as  complicated. 
c!,mSoner  Meeker.  You  were  not  speaking  of  the  experiments 

"'Mr.\ri-Well,  I  was,  throughout  the  world 

C;«mmissioner  MEE^ER^Thr^^^^^^^  ^^^^  ^^^  ^,. 

eep'JL's  :r -fo^rlhe  mt7  ra^rnVVe^        reasons  that  make  them 

'"commissioner  Swe,^.  Let  me  ask  one  question  or  two  there,  Mr. 
%a'^  you  found  objection  to  municipal  ownership  of  the  water 
supply?  .     ,  ^.  „_      There  have  been  instances  of 

'"Mr.^SissoN.  I  am  inclined  to  think  that  that  is  true;  yes. 


I 


338        PROCEEDINGS  OF  FEDERAL  ELECTRKJ  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Is  it  not  also  true  that  the  need  of  water  in 
public  parks  and  cemeteries  and  for  fire  protection  is  a  further  rea- 
son for  municipal  ownership  of  the  water  supply? 

Mr.  SissoN.  Yes. 

Commissioner  Sweet.  And  those  are  arguments  that  would  not 
apply  to  street  railways? 

Mr.  Sissox.  Not  at  all.    It  is  a  different  form  of  service  entirely. 

Conmiissioner  Sweet.  The  first  step  toward  a  sort  of  qualified 
guaranty  such  as  you  ha^e  mentioned  of  a  reasonable  interest  or 
•  dividend  upon  the  investment  is  to  find  out  what  the  investment  is, 
is  it  not? 

Mr.  SissoN.  Exactly. 

Mr.  Sweet.  This  guaranty  ought  to  apply,  ought  it  not,  to  present 
investors  as  well  as  future  investors? 

Mr.  SissoN.  Exactly. 

Commissioner  Sweet.  Have  you  any  suggestion  to  make  to  the 
commission  as  to  a  practical  way  of  determming  the  amount  upon 
which  such  a  qualified  guaranty  should  be  based  ? 

Mr.  Sissox.  Well,  that  is  a  rather  difficult  question.  Of  course  it 
ought  to  be  based  upon  the  physical  values  of  the  properties,  consid- 
ering the  cost  reproduction.  It  ought  to  be  based  upon  the  franchise 
values  and  the  estimated  earning  power  upon  wliich  money  was 
invested,  as  far  as  possible ;  and  perhaps  there  ought  also  to  be  taken 
into  consideration  the  average  price  of  the  securities  which  were  sold 
to  the  public.  I  think  perhaps  all  three  of  those  elements  ought  to 
enter  into  any  fair  valuation. 

Commissioner  Sweet.  Do  you  think  the  public  ought  to  be  asked 
to  provide  for  a  dividend  upon  the  stock  that  was  given  away  as  an 
inducement  to  buy  bonds? 

Mr.  Sissox.  Within  reason,  yes;  because  those  bonds  would  not 
have  l)een  sold  imless  that  stock  had  been  offered  as  an  inducement. 

Commissioner  Meeker.  But  in  case  the  earnings  have  been  put 
back  into  the  plant  until  now  the  plant  is  valued  either  physically  or 
taking  the  whole  value  as  a  going  concern  equal  to  bonds  and  stocks 
outstanding,  you  would  hold  that  the  public  is  obligated  to  pay  a 
i-easonable  return  upon  the  value  of  the  bonds  and  stocks  out- 
standing? 

Mr.  Sissox.  I  should  say  that  is  only  fair  and  that  it  is  good  busi- 
ness. The  alternative  would  have  been  very  simple;  assuming  the 
board  of  directors,  instead  of  putting  that  money  back  into  the  prop- 
erty had  declared  it  out  in  dividends  and  the  stockholders  had  it.  the 
public  would  be  ^)owerless.  But  a  board  of  directors  who  in  their 
wisdom  and  foresight  for  the  future  put  that  back  into  the  property 
ought  not  to  be  j^enalized  in  favor  of  a  board  of  directors  who  paid 
it  out  to  their  stockholders  in  dividends. 

Commissioner  Sweet.  Have  you  considered  this  phase  of  the  ques- 
tion ?  In  the  early  days  you  said  the  5-cent  fare  more  than  compen- 
sated, so  that  we  will  assume  in  most  cases  their  dividends  were  paid 
to  the  holders  of  common  stock.  And  then  the  interest  as  agreed 
upon  was  paid  upon  the  bonds  or  preferred  stock.  Now,  if  the  5-cent 
fare  named  in  the  original  franchises  produced  more  than  enough 
to  meet  those  requirements,  so  that  a  ceilain  part  of  the  nickel  could 
be  devoted  to  extensions,  is  not  that  evidence  to  your  mind  that  the 


'3 


^„»T    T^Tur-TPTf^  RAILWAYS  COMMISSION.      339 
PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAlLWAis, 

nickel  as  it  .as  originally  '^^^^^V^^'^J^T''^''  ""' 
the  municipalities  ^vas  moiMJ  than  t  "/W^,  J^?^^^^^^  yes.  sir. 

Mr.  Sissox.  In  some  "Stances  that  is  «ncloubtem  O   ^^^^^^ 

Commissioner  Sweet.  Ivow,  if  m  *!«  t'^uie  oi  unt  l^  ^^^_^^ 

situation  the  public  is  to  be  «sked  to  mov  >de  a  <luect  ox        ^^^^ 
of  guaranty  upon  profits  from  th's  t»ne  on  ^s  ^t  i  ^j^^^  ^^^,. 

should  be  asked  to  pay  more  or  to  aUoT^  "f '^-^y  ,\;„es  of  this  pro- 
panies  having  had  tlie  advantage  m  the  eailier  aa„e. 

ceeding?  ,       .       „„ttpr  of  equity  in  which  you 

Mr.  Sissox.  I  should  s^ay  that  '^  a  mattei  ot  eq      v        ^^^^^  ^^.j^^^ 

"S»Z.*1''&™"W  eo„M  b.  l.k«  »,  ot  i»  ll»  l..oc« 

of  valuing  the  properties?     '  ^     ^  •     ^^d. 

Mr.  Sissox.  Absolutely ;  and  thatj  wl^^^^^  ^^^^^^^^  ^ 

Commissioner  Meeker,  lou  think  that  is  tlie  wa> 

taken  care  of? 

Mr.  Sissox.  I  do.  ^^^UoI^Ip  .irrano-ement  be  made 

Connnissioner  Meekek..  And  an  eqmtable  ^^^^'l^     ^^^  ,,iti„,„t 

wherebv  this  business,  which  is  in  a  bad  a\  «>  f°'' '  ^'",  f 
:SSngthein.blictopay  moj^than,^^^  ^^  ^     ^^^^y 

^•'^Smissioner  Meekek.  I  «- ^  mtje^f^id  tliat  hei.tofore^^^^  iny 
questioning  I  have  elicited  '^"^^"^  *  ^^^  ubli^  to  ome  to  their  assist- 
street-railway  companies  n°™"^,  ?J."but  thev  do  not  wish  any 
ance-that  they  are  in  s"*'»\ft\tff,;st  when  thev  were  possibly 
examination  into  what  was  done  in  the  l^f  ^'  ,  "^i  ^^^  •  earninit  in  ex- 
earning  <Uvidends  upon  watered  stocj.  It  y^^  P^-e,  f^^^^-.^  ^j^^^^ 
cess  of  a  reasonable  return  "1  on    m  estment^  ^  impression  ns 

the  street-railway  companies  do  not  ^Msll  anj  i 

"'mTsissox.  Certainly  n^t  ^^  ^^^^^^  t^ig 

Commissioner  Meeker,   lo  dl  :-,i>^" 

^TliSss"ox.  Certainly  not  ^^^^^^^^'^1'^ 
t^:T^^:^^^i  t  tor  ^P-blic  as  Lir  business  pri- 
marily and  as  a  public  W^f^^^-  have  indicated  the 
Commissioner  Meeker.  It  *«'«'"'^„;*''"L  reached  as  between  the 
wav  in  which  an  equitable  "8'^^"  ^"*  ?^^,';',%^e  allimportant  thing 
public  and  the  stieet-ra.lwav  co  poaUons^     ii  1  ^^^^^^  ^^  ^j^^ 

^^:i^r!'^^^^^^^i^-  Sayfai.  entitled  to  earn  a  rea- 
sonable  return. 

SmSonefMEEfcKn.  That  is  the  all-imi.,rtant  thing,  is  it  not? 

Mr.  Sissox.  Exactly  so;  yes,  sir.  questions  I  would 

li.St-aSTou'^sprof'Jiie'^^nciirobVctio.'l  to  public  owner- 


340       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

ship  being  the  political  conti*ol.  Under  private  ownership  there  lias 
not  been  absolute  freedom  f'^om  political  maneuvering 

Mr.  SissoN.  That  is  unfortunately  true. 

Commissioner  Meeker.  But  in  your  experience  you  think  that 
the  evil  would  be  greater  under  public  ownership  than  under  pri- 
vate ownership? 

Mr.  SissoN.  That  has  been  the  experience  of  a  majority  of  the 
communities  throughout  the  world  who  have  tried  it,  as  the  record 
very  clearly  shows. 

Commissioner  Meeker.  The  only  way  that  could  be  brought 
about 

Mr.  Sissox.  I  might  cite  a  very  extreme  instance  in  Australia  or 
New  South  Wales,  where  they  took  over  the  railroads.  In  the  course 
of  a  few  years'  time  the  railroad  employees  became  so  powerful  po- 
litically that  they  were  controlling  the  affairs  of  the  Dominion,  until 
finally  the  shippers  and  farmers  arose  in  righteous  wrath  and  dis- 
franchised all  railroad  employees  in  order  to  get  political  control 
back  into  the  hands  of  the  people. 

Connnissioner  Meeker.  I  do  not  want  to  go  to  Australia 

Mr.  SissoN.  That  was  an  illustration  of  the  extreme  operation  of 
that  sort  of  thing. 

Commissioner  Meeker.  Let  us  take  nearer  at  home 

Mr.  SissoN.  AVell,  I  did  not  want  to  make  it  ofFe^isive,  so  I  went  to 
Australia. 

Commissioner  Meeker.  Are  you  personally  acquainted  with  any 
street-railway  enterprise  that  is  owned  and  operated  by  the  public 
in  this  countrv  ? 

Mr.  Sissox.  In  a  genenxl  way  I  have  studied  the  situation,  3^es. 

Commissioner  Meeker.  And  it  is  your  experience  that  in  this 
country,  no  matter  what  they  may  do  abi"oacl,  public  ownership 
results  in  greater  evils? 

Mr.  SissoN.  It  certainly  does. 

Commmissioner  Meeker.  And  gi-eater  inefficiency  than  private 
ownership  ? 

Mr.  SissoN.  Yes.  I  would  be  glad  to  submit  to  the  commission,  if 
they  desire,  a  pamphlet  we  prepared  in  Xew  York  last  winter  on  tliis 
same  subject  for  the  merchants'  association,  in  which  many  instances 
are  cited  and  a  complete  background  of  facts  and  statistics  is  given 
for  that  conclusion. 

Commissioner  Sweet.  We  would  be  glad  to  have  it. 

Mr.  SissoN.  I  will  l)c  glad  to  send  it  in. 

Commissioner  Meeker.  As  I  see  it,  the  only  way  by  which  we  can 
have  private  ownership  without  the  evils  that  have  existed  in  times 
past  and  which  are  admitted,  I  think,  by  the  street-railway  men 
themselves — the  only  way  by  which  we  can  have  private  ownership 
of  street  railways  without  those  evils  is  for  the  street  railways  to 
open  their  books,  to  make  known  all  their  operations  and  submit  to 
public  control. 

Mr.  Sissox.  Ye^>. 

Commissioner  Meeker.  And  you  think  that  publicly  controlled 
private  corporations  can  conduct  the  street-railway  business  better 
than  publicly  owned  and  operated  concerns  can? 

Mr.  SissoN.  I  certainly  do. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      341 

Comn^issioner  M..K.H.  J-* -Svera^'viVi^-al^ly'^Si 
health.     The  street  railways  themseUes  aie  veiy  j 

'^tf  stSr/es?£  s^^:^e  ekL^nt:a  wk  the  public  comfort  to  a 

^"^JoSsirer  Mbbk™.  Public  comfort  is  just  another  name  for 
public  health,  as  I  take  it. 

Mr.  Sissox.  Yes.  .     ,  t  u        ,.^f  rr^av(^^v  in  mind  the  health 

enable  the  population  to  be  distributed  more  widely. 

Mr.  Sissox.  Yes.  neoDle  mav  live  in  better 

Commissioner  Meeker.  So   that  the  people  may 

houses. 

ConSoneJMKBKEB.  So  that  there  is  distinctly  a  public  interest 
in  p  ™ly  conducted  rapid-transit  street  railways. 

SSo^neyX™  W&ch  is  only  less  important  than  their 
interest  in  a  pure-water  supply. 

without  any  question.  ^^^^^  ^^^  ^^ny  mu- 

Commissioner  (iadsden.  Mr.  ^jSoon,  uu  v        ct„tes« 

nicipal  street  railways  there  are  in  the  United  btates. 
iir.  SissoN.  I  can  not  tell  you  "ght  offhand 
rnmmissioner  Gadsdex.  As  a  matter  ot  laci,  are  ^l^^^^:^^^     ..^   a 

""ooimSer  G.ds..h.  Bat,  manieip.lly  o™«J,  to  .r.  o„lj 

two? 

Mr.  Sissox.  Yes.  Q^^ffU  ic  «  matter  of  only  three  or. 

Commissioner  Gadsden.  And  Seattle  is  a  matter  oi  on  y 

^"^MrTssox    Yes     Those  are  the  only  large  ones  I  know  of,  . 

?immfssioner  So  that  we  have  not  any  real  municipally 

operated  experience  to  rely  on  in  this  country  ^ 

^\r*Siif  No  •  I  do  not  think  it  has  had  anything  to  do  with  it. 

dS  ^^their  issuing  watered  f^l^^^^  effect  on  the 
prSnt'sit«:tio^n.'^niS^td*nrstS  issu.  at  all  the  situation 
would  be  the  same.  mnffpr  of  fact  is  not  the 

revenue  to  operate? 


342       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Sissox.  Absolutely;  to  pay  their  costs  and  pay  the  money 
charges,  unquestionably. 

Commissioner  Gadsden.  Are  not  they  faced  with  a  situation  which 
has  practically  for  the  moment  wiped  out  all  the  value? 

Mr.  SissoN.  Absolutely. 

Comiiiissioner  Gadsden.  Bonds  and  stocks? 

Mr.  SissoN.  In  many  instances. 

Commissioner  Gadsden.  Many  instances  of  it? 

Mr.  SissoN.  Yes. 

Commissioner  Gadsden.  So  that  the  bad  financial  practices— if  we 
clmose  to  so  characterize  them— in  the  past  can  not  be'held  i-espon- 
sible  for  the  present  situation,  in  your  judgment? 

Mr.  SissoN.  Only  in  so  far  as  fiiey  have  "been  used  as  a  text  for  the 
opponents  of  street  railways  to  create  agitation  and  public  prejudice. 

Commissioner  Gadsden.  To  prejudice  the  public  mind? 

Mr.  feissoN.  Yes;  which  has  been  done  very  extensively  in  certain 
communities. 

Commissioner  Gadsden.  But  economicallv  tliey  have  not  had  any 
enect?  .         ^  .  j 

Mr.  SissoN.  As  a  matter  of  economics,  not  at  all. 

Commissioner  Gadsden.  On  this  question  of  the  right  of  a  cor- 
poration to  put  back  into  the  property  its  earnings,  whether  excess 
or  not,  and  the  question  of  whether  that  belongs  to  the  stockholder 
or  the  public;  supposing  for  a  moment  that  we  adopt  the  economic 
theory  that  those  excess  earnings  reinvested  in  the  property  belon"- 
to  the  public;  would  it  not  be  equitable  and  just,  if  that  is  a  sound 
economic  theory,  that  the  public  should  make  good  to  the  cori)oration 
any  deficits  of  earnings  in  bad  times  ? 

Mr.  SissoN.  It  certainly  would.  If  they  are  to  take  all  the  profits 
they  ought  certainly  to  bear  the  burden. 

Commissioner  Gadsden.  In  other  words,  ought  not  the  rule  to 
Avork  both  ways? 

Mi'.  SissoN.  Certainly. 

Commissioner  Gadsden.  And  therefore  if  the  public  is  now  from^ 
to  claim  the  excess  profits  reinvested  in  these  properties  in  times  pas? 
should  not  the  public  within  the  last  two  or  three  years  have  held 
the  l)ags 

Mr.  SissoN.  They  certainly  should.  As  I  said  a  little  while  ago, 
if  they  are  going  to  get  on  top  of  these  properties,  they  ought  in  jus- 
tice to  get  underneath  them.  ^       &  j 

Commissioner  Gadsden.  Would  it  be  fair  for  the  public  to  claim 
these  excess  earning  values  in  property  and  at  the  same  time  allow 
tliese  properties  to  go  into  bankruptcy? 

Mr.  SissoN.  It  certainly  would  not. 

(\)mmissioner  Gadsden.  Tliat  is  not  only  good  economics  but  it  is 
^c{)(!  morals;  is  it  not? 

Mr  SissoN.  It  certainly  is.  I  might  add  that  I  had  a  letter  only  a 
iow  days  ago  from  a  Member  t)f  Congress,  in  which  he  asked  the 
(iuestion  as  to  why  it  was  proper  for  the  public  authorities  to  offer 
any  sort  of  a  guaranty  to  public  utilities  any  more  than  to  any  other 
^x)rt  of  business.  Well,  the  answer  is  perfectly  obvious,  because  pub- 
lic authorities  regulate  their  earning  power.  If  public  utilities  were 
allowed  to  charge  as  they  pleased  for  the  service  rendered  they 
would  ask  no  greater  odds  than  any  other  business.    But  when  they 


PROCEEDINGS  OF  F.^EBAL  FXECTHIC  P.ULWAYS  COMMISSION.      ^ 

.re  limited  as  to  earning  i>ower,  it  is  nght  and  proper  that  they 

should  have  some  a.surance^as  a  gi™^^  ^^^^  -^^^  ,,,i,,,t 

C^ommi-sioner  (I^dsden.  ^^VV^      w.  to  the  steam  railroads  dur- 
tho  United  States  Government  has  done  to  the  steam  laii 

ing  the  war  ? 

Mr.  SissoN.  Yes.  i    p  -i    i  f^  Ar.  inr  the  electric  rail- 

Commissioner  Gadsden.  And  failed  to  do  tor  tne 

ways  ? 

Mr.  SissoN.  Exactly.  i       ,.  ^-p  ot^tt  nther  Dublic-servicc 

Commissioner  (Jadsdex.  But  aside  from  tUe  stieet  railway,  g    , 

^"M'^^ill^rTTdonot     There  has  not  been  any  other. 

ComnSne^G^tr?  Telephone,  telegraph,   and  steanx   ra>l- 

llSr^Lf  ili;jl-Ttf  ^=^t  has  got  hoth  on  the  top 
and  bottom,  as  you  say  ? 

ment  and  the  Federal  Government  could  act  ? 

Mr.  SissoN.  Yes^  AVhereas  these  gas  and  electric-raiiway 

*'fei*s^v  ' Vi^Sklh™  was  undoubtedly  the  view  taken  >uul 
Mr.  MisSON.    iet^,x  1.1111  xi  •„],  u  \^  iiroDer  to  say  that  the  l^ed- 

S  ^^X^^^^^  "^  ^'  the^  desirability  of 
'"SrSS  Sr  As  -aUe;of  ivist^^^^^^^^^^  ^^ith 

"^i&'X7ol-.  Not  extensively,  no;  to  a  lin.it.d  extent. 

<:iommissioner  Gadsden.  Which  rosia-—-    -^^.^  ,„  gt^am  rail- 
Mr.  SissoN.  Not  nearly  so  prosperous,  foi  m^ance,  as  steam  la 

'^??^'     •    •^„...  rin«;nvN-    Yes     Is  it  not  approximately  true  and 
C^mmissione    Gadsden,   les^^.  U      ^  .  ^  .^. 


344       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

fare  was  ever  a  full  and  adequate  compensation  for  the  service 
rendered  ? 

Mr.  SissoN.  I  think  it  is. 

Commissioner  Gadsden.  Tell  the  commission  what  you  think  about 
that. 

Mr.  SissoN.  I  think  in  the  majority  of  cases  that  is  an  open  ques- 
tion. There  are  instances  when  it  was  adequate,  but  I  should  say  in 
the  considerable  majority  of  the  cases  it  is  an  open  question. 

Commissioner  Gadsden.  If  they  had  set  up,  as  they  should  have, 
a  proper  provision  for  depreciation  and  extraordinary  obsolescence, 
is  it  not  questionable  whether  the  5-cent  fare  ever  was  an  adequate 
compensation  ? 

Mr.  SissoN.  Yes;  and  as  a  banker  I  very  frankly  think  they  should 
have  gone  further  than  that  and  set  up  sinking  funds  whicn  would 
have  provided  for  the  liquidation  of  their  indebtedness — which  al- 
most none  of  them  have  done,  and  they  could  not  do  it,  as  a  matter  of 
fact,  out  of  the  5-cent  fare. 

Commissioner  Gadsden.  That  is  all,  Mr.  Chairman. 

Commissioner  Meeker.  Are  you  acquainted  with  the  railway  sys- 
tems about  Boston  and  Cincinnati? 

Mr.  SissoN.  Well,  in  a  general  way  only. 

Commissioner  Meeker.  Have  they  in  those  communities  a  system 
that  is  practically  private  ownership  and  public  operation? 

Mr.  SissoN.  I  understand  so. 

Commissioner  Meeker.  How  does  that  sort  of  cooperation  between 
the  public  and  the  private  corporation  work  out  ? 

Mr.  SissoN.  Well,  my  rougn  judgment  is  that  it  is  working  out 
fairly  well  and  that  it  is  very  just  and  ought  to  be  workable.  In  the 
Boston  situation,  writing  off  a  good  deal  for  depreciation  and  spend- 
ing a  good  deal  of  money  for  maintenance  that  was  needed,  as  I 
understand  it,  kept  them  from  making  the  showing  they  expected  to 
make;  but  the  situation  is  improving  and  gives  every  promise  of 
working  satisfactorily  and  with  fairness  to  the  public  and  to  the 
owners  both! 

Mr.  Warren.  Those  two  cities  are  not  on  the  same  basis,  however  ? 

Mr.  SissoN.  No;  the  arrangement  is  different. 

Mr.  Warren.  Boston  is  public  control  practically;  there  is  a  board 
of  public  trustees  running  it.  I  understand  that  Cincinnati  is 
service  at  cost  with  local  supervision  and  regulation  but  with  cer- 
tain elements  tending  to  stimulate  the  initiative  of  the  private  man- 
agement.   We  expect  to  put  on  some  witnesses  as  to  (Cincinnati. 

Commissioner  Meeker.  Very  well;  I  will  not  follow  that  up. 

Mr.  Warren.  Yes,  we  will  call  witnesses  on  that,  but  I  just  wanted 
to  call  attention  that  the  two  situations  were  not  identical. 

Commissioner  Meeker.  I  was  aware  they  are  not  identical,  but  if 
there  are  other  comnuuiities  where  experimentation  is  being  tried,  I 
hope  you  will  have  witnesses  to  explain  that. 

Mr.  Warren.  We  hope  to  put  on  witnesses  covering  nearly  all  the 
more  important  service-at-cost  experiments. 

Commissioner  Meeker.  Very  good ;  I  will  not  trouble  you  further. 

Mr.  Warren.  I  want  to  ask  one  or  two  questions  suggested  by  some 
of  the  commissioners'  questions.  AVhen  you  speak  of  5  per  cent  under 
a  service  at  cost,  that  was  predicated  on  an  absolute  guaranty  of  5 
per  cent? 


^^,r    T7T  vr^TPTC  RAILWAYS  COMMISSION.      345 
PROCEEDINGS  OF  FEDERAL  ELECTRIC  KAlLWAio 

Mr.  SissoN.  Exactly.  ollnwable  return  under  the 

Mr.  Warren.  Now  s"PP«^^*>^^.^^^J,a  111  t^^^^^^  elements, 

service-at-cost  aiTangement,  which  inc^^^^^^  ^^^^^  ^^^ 

included  finally  a  return  on  the  ^^yff"^^^^^^.;^^^^^^^^^^  at  the  vari- 

determined  to  be  dependent  ^f  ^^^^^^^^^^^^^^^^  then  should 

ous  rates  under  the  slidmg  scale  to  eain  ^^^^^^^^^^^^^^  probably  to 

you  say  the  return  under  Present  money  ^^^^^^^^  ^  / 

be  in  order  to  induce  new  capital  to  come  m .     mat 
question,  but  perhaps  you  see  ^he  pointy  depends  whether 

like  to  know  your  opinion  as  to  the  wisdom  oi 

"k  ^I^^S^^^i^y  -'- "-  -'^"^  ^^•^ 

business  would  insure.  ^*„„fir./.;nt  of  the  paving  public,  I 

Mr.  SissoN.  Viewed  fr°'"  *  >«  .f'^fc"*^^^^^^ 
should  say  that  a  bond  would  haxe  to  bear  an  m^^^^  ^^  ^^^^.^  ^ 

be  a  combination  of  those  two  i 

Mr.  SissoN.  Yes.  , 

Mr.  Warren.  An  average  of  "^se  tAvo  fallacies 

Mr.  S«-;  Yes,     Migh  .^^^^^^^^^  "p^^rcularly  true  of 

ot  our  public-utility  nnancuif,,  "i  ^.,„.j  r„iiv.-av  lines,  has  been 

the  railroads  and  in  a  measure  «"«  "«  ^^  ««*  m  «ay  nn^^       _^^^_ 

the  building  up  of  this  bu«len  of  debt^all    he  tmie  ins 

ing  the  stock  attractive  f^J'^^P'fjS^^^'-VLls  a  credit  based  upon 
up  fixed  charges  'f|7^  of  gmng  these  roa       ^^^^  ^^  ^  ^^.^ 

earnings  which  woulpeimn^  ^^^^  increasing  ratably  year 

P^r^e^r   beetle  >t  can  not  sell  railroad  stock,  the  public  will 
^nlrLf^'becaus^^isnot  ass.  ^^.^^, 

Mr.  Wabbe>-    ^Ae  1  a^e  had  a  U  ^^^  ^  .^^^^^  ^^^^  ^^ 

provide  for  t'^'*^'  '^J'  '"'"V^f  J^"  ,i„ck  can  onlv  be  issued  at  par  the 
!:sulTh:st^n%l  rpiling  rp^S  fflltlng  deL  w^iich  is  far  more 
Tnimfcat  becau^  it  i'nvites  a  --j-'^^'PXn'Sht  to  provide  for 
a  b^dKi.^troTn5t^r'rnX^cenf  of  t.Jreal  value 

"tr^SR"4'.  Andte  situation   ought  to  be  made   sufficiently 
attractive  to  readily  market  that  stock? 

Sr.  ^mK^i'^r^tuart   yesterday-whom    you    know    prob- 

ably 

Mr.  SissoN.   i^.  .     ,  .    opinion  and  from  his  experi- 

J^-ISniS^i^^S^^^^^-'  Street-railway  bonds 
160643*'— 20 23 


346       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

particularly,  the  average  holding  of  such  bonds  outside  of  the  few 
large  corporations  like  life  insurance  companies,  and  so  foilh,  was 
not  over  $5,000;  that  including  all  the  large  corporate  holdings  the 
average  holding  was  not*  over  $7,000.  Would  you  think  you  could 
agree  to  that? 

Mr.  Sissox.  I  should  think  that  is  a  very  fair  estimate.  I  should 
say  it  is  no  more  than  that  and  possibly  less. 

Mr.  Warren.  You  were  asked  something  about  abandoned  lines, 
and  I  think  you  intimated  that  if  a  line  was  unsuccessful  the  people 
who  invested  the  money  ought  to  take  the  consequence,  which  I 
think  as  a  business  proposition  is  no  doubt  true.  Is  it  not,  however, 
a  fact  that  there  are  a  great  many  lines  which  are  not  earning  even 
their  operating  expenses  but  the  abandonment  of  which  would  work 
a  very  real  hardship  upon  a  considerable  portion  of  the  public? 

Mr.  SissoN.  Yes.  In  answering  that  question  I  made  that  reser- 
vation, that  unless  the  public  interest  was  involved  clearly. 

Mr.  Warren.  Yes,  I  think  you  did,  but  I  did  not  think 

Mr.  SissoN.  And  I  think  that  is  a  very  important  reservation 
which  must  be  made  there. 

Mr.  Warren.  And  in  such  cases  probably  some  method  of  public 
ownership  or  public  support  such  as  has  been  worked  out  in  Massa- 
chusetts to  a  certain  extent  ought  to  be  resorted  to? 

Mr.  SissoN.  Yes:  it  is  entirely  possible  that  the  operation  of  that 
line  creates  tax  values  wiiich  are  a  distinct  source  of  profit  to  the 
municipality  which  it  could  well  afford  to  provide  for  through  the 
maintenance  of  the  line. 

Commissioner  (tadsden.  In  that  connection,  is  it  not  true  that 
most  of  these  lines  that  are  improductive  lines  that  we  refer  to,  are 
tied  in  with  existing  systems? 

Mr.  Sissox.  Yes. 

Commissioner  Gadsden.  And  if  the  system  could  lop  off  the  unpro- 
ductive suburban  lines,  in  many  cases  the  road  could  probably  take 
care  of  itself? 

Mr.  Sis'soN.  Yes,  that  is  true  in  a  good  many  instances. 

Commissioner  Gadsden.  And  under  the  law  they  are  not  permitted 
to  cut   off  those  unproductive  and  unremunerative  lines? 

Mr.  SissoN.  Yes,  that  is  true  in  New  York  City  to-day. 

Commissioner  Gadsden.  If  they  could  get  rid  of  their  extensions 
they  probably  could  get  along  in  many  cases? 

Mr.  SissoN.  Yes,  but  it  would  be  opposed  to  the  public  interest- 
Commissioner  Sweet.  Those  extensions  are  maintained  for  the 
benefit  of  the  public  residing  in  those  outlying  districts. 

Mr.  SissoN.  Yes. 

Mi\  Wariien.  That  situation  exists  in  a  great  many  places  and  it 
is  a  very  important  public  question,  and  not  one  that  affects  the 
street  railways  alone.  In  some  jurisdictions — in  Massachusetts,  for 
instance — the  companies  can  abandon  lines,  but  that  does  not  change 
the  public  question  of  whether  those  lines  ought  to  be  abandoned  and 
the  public  dependent  on  them  left  high  and  dry,  and  the  industrial 
centers  dependent  on  them  be  deprived  of  the  support  coming  from 
those  lines. 

Commissioner  Sweet.  Is  it  not  true,  Mr,  Sisson — the  fact  that 
street-railway  companies  that  have  reached  out  into  districts  that 
are  not  directly  profitable  are  performing  now,  and  have  been  for 


PBOCEEDINGS  OF  FEDEBAL  ELECTBIC  RAILWAYS  COMMISSION.      347 

yeai-s  a  sort  of  public  service  for  which  the  companies  have  received 
no  comp^sation  or  not  adequate  compens^ition  ? 

Mr.  Sissox.  That  is  entirely  *"',«  j  ^f ' ''^^itional  reason  for  the 
Commissioner  Sweet.  And  is  not  that  an  additiona^ie^ 
public  and  the  companies  gettmg  togethei  now  upon  .^m    ^ 
basis  which  will  be  fixir  and  ]usU  ^  ^j^^„ 

Mr    SissoN.  It  certainly  is.     Ihe  public  mieiebi  j»  y 

into  the  other? 

would  work"out  substantial  satisfaction' 

£:  %Z:.l  Pjrt^ailarly  with  the  present  reduced  purchasing 
power  of  the  nickel  ? 

initial  fare  is  almost  wholly  a  flat  tares 

Mr.  !Se  J  And  more  than  the  increment  for  each  successive 
zone  ? 

m.  mKKE  J  And  that  you  had  in  mind,  I  suppose,  when  you 
spoke  of  that  system? 

Mr.  Sisson.  Exactly.  .  ^  ^     ^j    benefit  of 

Commissioner  Be-vlt.    ?  "„°^f  J  J^i°  Xmg  lines  that  are  un- 

'''l^:':^^'"'^JhJeXt  if  rplicatioVand.  sometimes  it  is 
profitable     \erjtre^ueiiy^^.p^.^^  ^^  ^^^^  neighborhood,   ike 

cXfn  crors-tJw^lines  h.  New  York  City  which  you  are  famihar 
with. 

ComSone?BE..i,..  And  we  have  one  north  and  south  line 
ther^-The  Second  Avenue  line-which  is  very  unprofitable. 

romSSelBE^LL.  You  see  as  many  people  on  the  street  as  you 
r^ntWnlaces  where  the  street-railway  traffic  is  good,  but  it 
S^i;\ot'^afav"n:e,"lthough  north  and  south,  strange  enough, 
where  there  is  not  a  trend  of  travel. 

JwSel  BEAI.I..  Very  f  i-equently  these  things  come  about 
froiSIr  duplication  or  a  change  in  the  neighborhood. 

^;i;tn\retrm^r goTd  i  cettlScates^of  the  court  on  that  line. 


348       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Beaix.  I  wanted  to  bring  out  that  in  the  bigger 
cities  particularly,  perhaps  there  is  more  trouble  with  duplication  of 
lines  and  changes  in  neighborhood  characteristics  than  there  is  in 
outlying  lines,  although  that  is  a  big  factor. 
Mr.  SissoN.  Yes. 

Commissioner  Meeker.  May  I  add  a  word  ?  What  I  had  in  mind 
particularly  when  I  spoke  of  unwise  extensions  and  building  of  new 
lines  was  perhaps  prmiarily  land  speculation;  and  that  should  be, 
I  take  it  you  will  agree,  absolutely  under  the  control  of  a  commis- 
sion. 
Mr.  SissoN.  Yes. 

Commissioner  Meeker.  So  that  street  railways  would  not  be  built 
in  order  to  make  profits  and  money  for  the  members  of  a  street- 
railway  company  regardless  of  the  need  of  such  an  extension  or  line 
as  a  public  rapid  transit. 

Mr.  SissoN.  Yes.  I  believe  that. 

Mr.  Warren.  Following  up  the  last  two  questions,  you  would 
agree,  I  think,  that  in  those  jurisdictions  where  the  companies  have 
not  the  authority  to  abandon  lines,  the  authority  ought  to  exist  in 
some  commission  to  permit  the  companies  to  do  so  under  such  cir- 
cumstances ? 

Mr.  Sissox.  It  certainly  should. 

Commissioner  Sweet.  There  is  one  point  that  is  not  quite  clear  to 
me,  Mr.  Sisson.  You  have  stated  that  you  think  there  should  be  a 
qualified  guaranty,  as  we  speak  of  it,  of  at  least  5 J  per  cent  on  bonds 
in  order  to  enable  the  companies  to  get  their  needed  capital,  and  8 
per  cent  or  thereabouts  on  stock.  Have  you  not  reference  when  you 
say  that  to  the  conditions  that  have  prevailed  heretofore  in  the  rela- 
tion between  common  stock  and  bonds? 

Mr.  Sissox.  Well,  no;  I  Avas  speaking  broadly  about  what  I  con- 
ceived to  be  a  sound 

Conmiissioner  Sweet.  There  never  has  heretofore  been  any  guar- 
anty upon  common  stock  whatever. 
Mr.  Sissox.  Xo. 

Commissioner  Sweet.  And  the  purchasers  of  common  stock  have 
realized  there  was  more  of  a  speculative  feature  in  their  purchase  and 
ownership  of  stock  than  the  holder  of  the  bonds. 
Mr.  Sissox.  Yes. 

Commissioner  Sweet.  They  might  got  1  or  2  per  cent  or  they 
might  get  10  or  15  per  cent  on  the  common  stock. 
Mr.  Sissox.  Yes. 

Commissioner  Sweet.  Now  if  the  public  was  to  stand  behind  this 
matter  and  so  adjust  the  rates — the  fares  that  could  be  charged — 
that  it  would  produce  an  income  that  would  make  the  return  upon 
common  stock  just  as  certain  as  the  return  upon  bonds,  why  should 
there  be  any  difference  between  the  rate  that  should  be  obtainable  by 
the  holder  of  the  common  stock  and  the  holder  of  the  bonds? 

Mr.  Sissox.  I  had  not  assumed  that  the  ])ublic  would  make  any 
such  definite  assurance.  I  dealt  particularly  with  the  cost  of  capital 
and  answered  the  question  broadly  that  in  order  to  sell  bonds  to  the 
public  and  stock  to  the  public  in  a  proper  financial  structure  of  GO 
per  cent  bonds  and  40  per  cent  stock,  the  return  ought  to  be  about 
5J  per  cent  on  the  bonds  and  8  per  cent  on  the  stock,  or  a  reasonable 


PROCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSIOK.      349 

assurance  of  it.    A  return  upon  stock  m^ht  to jr-idc  ^or  yeai.  in 

which  no  dividend  wou  d  be  P^.^'^P^^^^P^'J^^ncf  perhaps  sinking 
accumuhited  for  extensions  and  betterments  ""^l  P^F  1  ,  j^^^ 
funds  and  depreciation.  It  >n|gW  not  al^  ^'^^e  P'^ss'm  ,  ^^^  ^  ^^^ 
an  8  per  cent  dividend  annually.    I*  miglit  ^"^^^    j        f  g  per  cent 

less  ithers,  but  a  reasonable  "««;''^^"?\'»*  ^^Vi^p  "oW  "m  I  faced  in 
would  sell  common  stock  at  par;  ^^hlch  was  tiie  piooie 

Mr  Warren's  question^  -^^  ^.^^id  flie  assurance  given  by 

thf°pSte  the  hX;  SsWk  i:^^aifferent  and  less  than  the  assur- 
ance  given  to  the  holdei^  of  bonds  (  , 

matter  were  left  «"t"«i>/^/„J*interSruJon  the  binds  of  H  per 

"nfand^'sTprc^on^^  common  sto^k;  if  the  adjustment  o 
cent  and  5i  per  cent  up  ^^  ^^  ^^^^  ^^.j^^j^  ^^,„g 

S  tU^Xr  n^'-Lti::  of  the  company,  wild  not  that  be  as  fair 
''"M^sTsr  ThaSi'noT  qtite  cover  the  question,  because,  bear 
"' M J"tvI^EX.  Without  any  definite  guaranty  ? 

■       rLSiSonellwEET.  Without  any  guaranty  except  that  the  rate 
wo^W  beXnged  from  time  to  time  so  as  to,  as  nearly  as  possible, 

"""m?  Son  '  Thardoes  not  quite  cover  the  question,  because,  bear 
in  m  nd,  the  lK.nds  are  a  first  obligation  on  the  property  and  the  stock 
Hoes  not  come  in  until  after  that  is  met. 

rnmmfSioner  Sweet.  The  stock  only  has  an  equity. 

Mr  SilsoN  Tlmt  is  all :  and  a  man  ought  to  be  entitled  to  a  larger 
return  on  an  eii^y  above  the  mortgage  than  the  fellow  below  it;  and 

^ToTmissronff  stEr'SUldtarb:^^^^^^^^       if  the  arrangement 

•I;??!,    ^nX  were  such  that  the  amount  which  would  be  received 

Tthe  sto'ckhoCrpr^^^^^^       to  tl.ir  holdings  would  be  as  great 

^k:  ="  rtS  ^^i:!^f^r^  «- l-o  defiri^ 
ass^^e  of  Pe-ne-y  of^uch  a.^^^^^^^^^^^  Kn 

^^A^'^T^Siietio^^^^  is  in  much  stronger  po 

undeilyingmoiigag      1       1    .  ^^^  ^  ^^^^^  ^^i^  Y\2ls 

r:qu?t"/wlth^mt£CS^t°ex  or  less  in  accordance  with  the  flue 

^^t^VlnS'ln^trtrdt  trtr:^^  conditions  niiglit  af- 
fect die  posJbi^ity  of  the  scale's'  yielding  a  return  on  stock,  although 
yielding  sufficient  to  cover  the  bonds » 

ComSonell^s-EET.  In  other  words,  the  bonds  would  come  in 

first  for  their  share? 
Mr.  Sisson.  Yes. 


350       PROCEEDINGS  OF  FEDEEAL  ELECTRIC  RAILWAYS  COMMISSION, 


t 


Commissioner  Sweet.  The  holdei-s  of  stock  would  have  to  take 
what  wiis  left  after  providing  for  the  other  needs  of  the  company  ? 

Mr.  SissoN.  Yes ;  both  in  earnings  and  ownership. 

Conimissioner  Sweet.  And  under  your  plan  there  would  be  some 
variation  in  what  the  holders  of  stock  would  receive? 

Mr.  Sissox.  There  must  necessarily  be  so;  yes,  sir. 

Commissioner  Sweet.  And  consequently  you  think  it  would  be 
juht  tlit^.t  the  maximum  would  be  somewhat  larger  than  the  maximum 
provided  for  the  holders  of  bonds? 

]\Ir.  SissoN.  Yes. 

Connnissioner  Sweet.  And  that  is  your  reason  for  it? 

Mr.  SissoN.  I  think  it  not  only  fair,  but  the  practical  question  is 
that  it  would  be  necessary  in  order  to  sell  stock  to  the  public. 

Commissioner  Meeker.  No  connnission  short  of  omniscience  could 
regulate  a  rate  so  that  you  would  get  a  5J  per  cent  return  upon 
bonds  and  the  same  return  upon  stock. 

Mr.  Sissox.  Tliere  is  bound  to  be  fluctuation. 

Commissioner  Meekp:r.  The  bonds  would  come  in  first  ? 

Mr.  Sissox.  Yes. 

j\Ir.  Warrex.  That  is  the  answer  to  it.  In  other  words,  there  is  a 
business  risk.  This  service  at  cost  does  not  eliminate  after  all  the 
busniess  risk.  The  street  railway  might  be  a  business  failure  at  a 
service-at-cost  i)lan  just  as  a  shoe  factory  might  be. 

Mr.  Sissox.  Yes. 

IVIr.  Warren.  All  service  at  cost  insures  the  investor  that  within 
the  rules  of  business  you  can  charge  enough  to  make  a  profit  in  your 
business  if  your  business  will  yield  a  profit? 

Mr.  Sissox.  Yes. 

Mr.  Warrex.  The  minute  you  put  the  guaranty  on  the  investor  is 
safe;  he  does  not  care  whether  it  is  a  successful  or  unsuccessful  busi- 
ness. But  as  bearing  upon  the  return,  if  I  may  refer  to  the  Boston 
situation— and  I  think  Mr.  Sisson  will  probably  bear  out  my  fig- 
ures—the Boston  Elevated  stock  is  guaranteed  for  10  years  under  the 
service-at-cost  proposition  and  then  under  the  State  guaranty,  but 
the  street-railway  securities  are  still  in  such  a  position  in  the  public 
estimation  that  that  stock  is  selling  for  about  70,  although  guaran- 
teed a  5  per  cent  return  for  two  years  and  G  per  cent  ultimately ;  so  it 
is  going  to  take  some  time,  is  it  not,  to  rehabilitate  this  guaranty  ? 

Mr.  Sissox.  Unquestionably. 

Mr.  Warrex.  Even  after  a  sound  system  is  introduced  for  its  as- 
surance in  the  future? 

Mr.  Sissox.  Yes. 

Mr.  Warrex.  There  are  two  or  three  questions  on  the  rate.  You 
said  that  undoubtedly  in  some  cases  an  increase  of  rate  involved  a 
loss  of  traffic.  Did  you  mean  by  that  to  imply  that  in  some  cases 
an  increase  in  rate  involved  such  a  loss  of  traffic  as  to  yield  no  in- 
crease m  revenue? 

Mr.  Sissox.  There  have  been  such  instances,  but  I  do  not  be- 
lieve that  would  be  true  generally. 

Mr.  Warrex.  They  are  very  exceptional;  are  they  not? 

Mr.  Sissox.  They  are  very  exceptional ;  yes,  sir. 

Mr.  Warrex.  In  other  words,  has  not  this  been  the  usual  situation 
—that  when  the  increased  rate  first  went  into  effect  there  would  be 


PEOCEEDINGS  OF  FEDERAL  ELECTBIC  RAILWAYS  COMMISSION.      351 

some  loss  of  traffic,  meaning  by  that  counting  the  number  of  pas- 
sengers. 

Mr!  wItoen.  But  there  was  almost  in  every  case  an  immediate  and 
substantial  increase  in  revenue? 

mI':  ICrek  You  spoke  of  being  in  favor  of  public-service  com- 
mission  regulation,  as  the  association  which  I  represent  here  is  on 
record  as  favoring. 

^  Tr   Sissox    Yes 

Mr*  Warrex.  Is  there  any  particular  feature  in  the  administra- 
tion of  the  public-service  laws  which  in  this  present  emergency  you 
would  criticize  or  which  you  think  might  be  improved^ 

:\Ir  Sissox.  Well,  in  some  instances,  the  matter  that  we  discussed 
a  while  ago,  the  conflict  between  the  public-service  commissions  and 
the  local  authorities.  I  think  these  laws  drawn  by  the  States  ought 
to  crive  the  commission  the  full  power  to  regulate  rates  upward  as  well 

""""Mr'' wTrrex.  Take  cases  where  they  have  the  complete  power, 
as  thov  have  in  Massachusetts  and  in  numerous  jurisdictions;  is 
there  still  anything  that  you  think  has  militated  a.^ainst  the  appli- 
cation of  a  remedy  in  this  emergency  m  the  last  year  j 

Mr.  Sissox.  I  think  the  fundamental  thing  that  has  militated 
ao'ainst  it  has  been  political  controversy. 
^'Mr.  Warrex.  How  about  the  delay?  n  •,  ^  ^  *- 

Mr.  Sissox.  And  the  slowness  of  action  which  has  failed  to  meet 
the  C2*:sis,  as  I  pointed  out  in  my  first  statement 

Mr.   Warrex.  xVnd  the  crisis   is  increasingly  serious  up  to  the 

present  time;  is  it  not? 

Mr.  Sissox.  It  is  indeed;  yes,  sir. 

Mr  Warrex.  Do  vou  think  that  any  of  the  more  fundamental 
remedies  which  have  been  discussed  here  can  in  most  cases  be  ap- 
plied quickly  enough  to  remedy  the  present  situation— service  at 
cost  orAarantv,  or  what  not,  depending  possibly  upon  legislation  or 
action  bv  mimicipalities  ?  Do  you  think  the  companies  can  get 
along,  in  other  words,  without  some  immediate,  or  almost  immediate, 

1  *    -P  9 

^^Mr    Sissox    No,  I  do  not.     I  think  they  need  it  and  need  it  im- 
mediately, and  I  do  not  know  that  the  word  "  remedy  "  meets  the  case 

Mr.  Warrex.  But  it  would  keep  their  heads  above  water? 

Mr.  Sissox.  It  certainly  would  help ;  yes.  .,         , 

Mr.  Warrex.  And  that  would  be,  as  I  understood  you,  through 

an  increase  in  rates? 
Mr.  Sissox.  Exactly.  .      .  i      i  •         j  x 

Mr  Warrex.  deferring  to  those  street  burdens  again  and  to  a 
possible  profit-sharing  plan  between  the  company  and  the  munici- 
pality, should  not  you  sav  that  it  is  generally  true  that  the  com- 
mon'phrase  or  term  for  the  street  car,  "the  poor  mans  carriage," 
is  really  the  fact? 

Mr.  Sissox.  Yes.  .     ,     ,.  .^i   xi     i?  j  i.i     i      j 

Mr  Warrex.  And  that  in  dealing  with  the  fares  and  the  burdens 

upon  street  railways,  that  ought  to  be  kept  in  mind? 

Mr.  Sissox.  I  certainly  do.    It  is  only  ]ust. 


V' 


352       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warken.  You  spoke  of  the  two  possibilities  in  case  the  reve- 
nue exceeded  tlie  amount  necessary  to  meet  the  cost  of  the  service, 
I  tlimk;  one  turning  the  money  over  to  the  treasury,  which  you  did 
not  approve  on  the  whole,  because  it  was  helping  the  more  well-to-do 
taxpayer  at  the  expense  of  an  indirect  tax  on  the  poorer  members  of 
tlie  conununit3\ 

Mr.  SissoN.  Yes. 

Mr.  Warrex.  And  tlie  other  was  to  reduce  the  rate.  Is  there  not, 
m  some  cases,  a  third  method  which  might  be  desirable,  not  to  reduce 
file  rate  but  to  let  that  surplus  earning  be  retained  in  the  property, 
not  as  a  basis  for  payment  of  return  to  anvbody  but  simply  to 
strengthen  the  property  ? 

Mr.  Sissox.  I  think^hat  most  desirable,  and  I  had  assumed  that 
that  would  be  done  under  any  arrangement. 

Mr.  Warrex.  Through  a  sinking  fund  ? 

Mr.  Sissox.  Yes,  or  accumulated  surplus. 

Mr.  Warrex.  That  is  all. 

Commissioner  Meeker.  I  would  like  to  ask  :Mr.  Warren  a  question, 
if  it  is  allowable. 

Mr.  Warrex.  I  will  be  very  glad  to  answer. 

Commissioner  Meeker.  You  spoke  of  the  absolute  guaranty  ac- 
corded to  the  Boston  Elevated  for  10  years.  Is  there  any  likelihood 
that  the  stocks  will  sell  above  TO  with  such  a  limited  guaranty  as  that? 

Mr.  Warrex.  AVell,  considering,  Mr.  Meeker,  that  a  few  years  ago 
the  stock  sold  at  150  without  any  guaranty  whatever,  it  would  seem 
as  if  they  ought  to  sell  higher  than  that. 

Commissioner  Meeker.  Well,  there  is  not  anv  j^ossibility,  is  there 
of  the  stock  being  rehabilitated  so  as  to  sell  at  par  or  above  under  a 
guaranty  limited  to  ten  years,  because  Heaven  onlv  knows  what  will 
happen  when  the  ten  years  is  up  ? 

Mr.  AVarrex.  Apart  from  the  guaranty,  of  course,  the  company 
has  the  right  to  charge  on  this  sliding  scale  whatever  is  necessary  to 
pay  the  cost  of  the  service  including  that  return.  The  guaranty  is 
additional  to  the  service-at-cost  principle.  At  the  end  of  the  10 
years,  in  other  words,  the  service-at-cost  principle  involved  in  that 
settlement  continues. 

Commissioner  Meeker.  After  10  years  the  service-at-cost  principle 
goes  into  effect  ?  r-         i 

Mr.  Warrex.  It  is  in  effect  now. 

Commissioner  Sweet.  It  is  continued? 

Mr.  Warrex.  Yes. 

Commissioner  Meeker.  But.  Mr.  Warren,  under  that  system  there 
never  could  be  any  justification  for  the  common  stock  of  the  company 
to  go  up  to  such  figures  as  you  mention. 

Mr.  Warrex.  Xo,  not  with  the  absolute  guaranty. 

Commissioner  Meeker.  No;  whether  it  was  an  absolute  guaranty 
or  an  assurance  of  rates  being  changed  in  accordance  with  needs 
there  never  could  be  the  possibility  of  what  we  might  call  the  gam- 
bling advantages  which  have  been  looked  upon  as  being  connected 
with  common  stock  under  the  old  system.  There  would  not  be  the 
possibilities  of  great  profits. 

Mr.  Warrex.  No  ;  there  would  not  be.  You  mean  under  the  ser- 
vice-at-cost  system  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      353 

Commissioner  Meeker.  Certainly.  wmild  be 

Mr  Warren.  No;  there  would  not.    I  assume  that  there  ^\o^ld  be 

it  from  the  company  on  the  original  issue;  I  think  it  is  aiouna  $i 

or  $120  a  share.  .    ,     „         -a  i^f 

Commissioner  Meeker.  Aetna  ly  Pi^J  >"J         ^^-^  ^f  Massa- 

Mr.  Wakhes.  Actually  paid  in.     Ihe  st  eet  rai  wajs, 

^^^rt\rnT\:'rgefTt-t  eX^^^^^ 

paid  in  considerably  more  because  when  that  la^^  hi^t  ^"J  \    „^^ 

taxation? 

SnmSS.-  sSrfet  I  w.„l  lo  bring  out  ta:  Under  .„«!, 

„e.ntl,  ■!,.  bond,  of  nil  ~X'»"""°.^,  t^t^  fcTcfc 

favor  of  the  Massachusetts  stocks. 
Mr.  Ford,  will  you  take  the  standi 


• 


KTWIH! 


354       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

STATEMENT  OF  MR,  A.  H.  FORD. 

Mr.  Warrex.  I  want  to  call  Mr.  Ford  out  of  the  order  I  had  in 
mind,  Mr.  Chairman,  because  of  the  reference  to  the  effect  of  in- 
creased fares,  and  I  tliink  he  can  give  the  commission  some  informa- 
tion on  that  which  may  be  very  interesting. 

Your  full  name,  Mr.  Ford? 

Mr.  Ford.  A.  H.  Ford. 

Mr.  Warren.  Your  residence  is? 

Mr.  Ford.  Portland,  Me. 

Mr.  Warren.   You  are  connected  with  a  street  railway  there? 

Mr.  Ford.  Vice  president  and  general  manager  of  the  Cumberland 
County  Power  &  Light  Co. 

Mr.  Warren.  That  company  operates  the  Portland  Street  Rail- 
way Co.? 

Mr.  Ford.  Yes. 

Mr.  Warren.  And  the  Portland  Street  Railway  Co.  is  merely  a 
street-railway  company;  is  it  not?  Does  it  have  an  electric-light 
company  attached  to  it? 

Mr.  Ford.  The  Cumberland  County  Power  &  Light  Co.  controls 
and  operates  the  Portlaijd  railroad  under  a  lease. 

Mr.  Warren.  But  the  Portland  Street  Railway  has  no  business 
except  a  street-railway  business? 

Mr.  Ford.  That  is  all ;  yes,  sir. 

Mr.  Warren.  And  the  Portland  Street  Railway  has  recently  in- 
creased its  passenger  fares? 

Mr.  Ford.  Yes,  sir. 

Mr.  Warren.  To  what  figure? 

Mr.  Ford.  We  had  originally  5  cents;  and  in  1918  we  increased 
it  to  G  cents,  and  on  June  15  we  increased  it  to  7  cents. 

Mr.  Warren.  Now,  since  you  increased  the  fare  to  7  cents,  which 
involves  a  theoretical  increase  in  revenue  of  40  per  cent,  does  it  not, 
over  a  year  ago 

Mr.  Ford.  Yes. 

Mr.  Warren.  Will  you  please  tell  the  commission  what  thus  far — 
as  far  as  yow  have  returns — ^the  actual  increase  in  revenue  has  been  ? 

Mr.  Ford.  Well,  the  increase  for  the  first  half  of  July  amounts  to 
37  i^er  cent. 

Commissioner  Sweet.  July  of  this  year? 

Mr.  Ford.  Yes;  this  present  month. 

Mr.  Warren.  Compared  to  a  year  'ago  when  there  was  a  5-cent 
fare? 

Mr.  Ford.  Yes. 

Commissioner  Sw^eet.  And  this  is  on  the  7-cent  basis  ? 

Mr.  Ford.  Yes. 

Commissioner  Meeker.  Will  you  please  repeat  it,  so  I  can  get  it 
clearly  ? 

Mr.  Warren.  State  what  the  fare  was  a  year  ago  at  the  same  time. 

Mr.  Ford.  The  fare  a  year  ago  was  5  cents.  Then  in  August  the 
fare  was  increased  to  6  cents. 

Commissioner  Meeker.  That  is  August,  1918? 

Mr.  Ford.  Yes.  Then  on  June  15  of  this  year  the  fare  was  in- 
creased to  7  cents.    We  are  operating  under  the  zone  system. 

Mr.  Warren.  What  do  you  mean  by  the  zone  system? 


PROCEEDmOS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      355 

Mr  Ford.  The  system  was  divided.  We  ha^^  106  miles  of  track, 
and  the  system  was  divided  up  into  practically  ^i^l^  .^X'^^nt 
charcre  is  made  of  so  much  for  each  zone.  Our  I'^^e  at  the  piescnt 
time'fs  24  cents  for  a  zone-the  city  proper  being  divided  up  into 

''¥LTh!C^^^  that  that  there  is  a  rate  of  less 

^X'^  t^^r^lTfi  you  can  ride  on  an  initial  ride  of  three 

zones  for  7  cents,  and  then ;  •   ...  ,  x       9 

Mi\  Warren.  That  is  the  minimum  initial  tare? 

Mr.  Ford.  Yes.  . 

The  Chairman.  For  the  shortest  ride «  . 

Mr  Ford    Yes;  the  initial  ride  of  three  zones-in  three  zones 

Mr!  Warren    Or  less.    If  you  ride  1  mile  you  pay  7  cents,  or  three 

^^Commissioner  Sw^eet.  How  about  one  block? 

Mr.  Ford.  Seven  cents.  ,  ^„„f  ^r^  tm  ^n 

Mr.  Warren.  That  7  cents,  however,  is  good,  if  you  want  to  go  so 

far,  for  three  of  your  zones? 

ConSioneTswEET.  That  would  be  in  a  continuous  journey ? 

Mr  FoBD.  Yes ;  but  if  you  want  to  ride  four  zones  you  paj  n 
rents-  but  it  is  handled  by  a  system  of  tickets.  A  zone-ride  ticket, 
whidl  !;"tVepopStickefusecl  costs  35  cents  Jhen  -  ha- what 
we  call  a  lo-zone  ticket  that  costs  3o  cents,  f °  ^^at  the  passengei 
suDDlies  himself  with  two  kinds  of  tickets— the  7-cent  ticKet,  n\e 
rXs  and  he  15-zone  ticket-and  if  he  wants^to  make  four  zon^ 
Ihrc'onductor  punches  one  ticket  out  for  the  7-cent  ride  or  the  3- 
zone  ride!  and  then  he  punches  one  of  these  15-zone  coupons  out  for 

*'|lf  W.rEK!Uw  many  zones  are  there  in  the  city  limits? 

m"  W."rben!  Then  am  I  right  in  thinking  that  the  net  effect  of 

that  system  inthe  city  limits  is  a  7-cent  fare  ( 

Mr.  Ford.  Yes,  sir.  fl„f  t  r,«nf  f.i,-(.  in  the 

Mr.  Wabren.  Just  the  same  as  if  you  had  a  fiat  i  -cent  laie  in  the 

city  of  Portland? 
Mr.-  WrKRESt'ks  increase  you  speak  of  37  per  cent  in  the 

city  limits  or  on  the  entire  system  ? 

Mr  Ford.  The  entire  system.  .     ^     i    x  ^.i    4.  07 

Commissioner  Meeker.' It  is  not  yet  clear  to  me  just  wh^^^^^^^ 

per  cent  increase  means.     Is  it  the  increase  in  July  of  this  >ear  o^  ei 

July  of  last  year? 

Mr.  Ford.  Yes,  sir.  ,        .     £4.-^9 

Commissioner  Meeker.  For  the  same  length  of  time^ 

Mr.  Ford.  Yes.  ,„    „   ,  .10 

Commissioner  Meeker.  One-half  of  the  months 

Mr.  mRREN?\nd  what  was  the  system  of  fare  a  year  ago,  Mr. 

^"fi*  Ford.  It  was  the  straight  5-cent  ride,  or  our  ordinary  New 

England  zone  of- ,      -i     -    ^     „4-\  9 

Mr.  Warren.  Two  or  3  or  4  miles  in  length  i 


I 

I 


II 


S56       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Ford.  Something  like  that. 

Mr.  Warren.  Then  it  was  a  5-cent  flat  fare  in  the  city  limits  a 
year  ago? 

Mr.  Ford.  Yes,  sir. 

Mr.  AVarren.  And  tlien  as  you  went  from  tlie  city  limits  you  went 
into  a  5-cent  zone  of  2  or  3  miles  in  length? 

Mr.  Ford.  Yes. 

Mr.  Warren.  And  then  passed  into  another  5-cent  zone? 

Mr.  Ford.  Yes. 

Mr.  Warren.  That  was  the  system  a  year  ago? 

Mr.  Ford.  Yes,  sir. 

Mr.  Warren.  This  system  you  have  described  now  as  the  present 
system — 7  cents  in  the  city — is  a  7-cent  fare  for  any  three  much 
shorter  zones? 

Mr.  Ford.  Yes. 

Mr.  Warren.  And  as  you  go  from  the  city  you  pay  a  certain 
amount.     What  did  you  say  it  was? 

Mr.  Ford.  Two  and  one- third  cents. 

Mr.  Warren.  Two  and  one-third  cents  for  each  additional  zone? 

Mr.  P^ORD.  For  each  mile  or  zone. 

Mr.  Warren.  And  each  zone  is  about  a  mile  ? 

Mr.  Ford.  Yes. 

Mr.  Warren.  You  spoke  of  having  increased  the  rate  last  August, 
I  think,  a  year  ago. 

Mr.  Ford.  Yes. 

Mr.  Warren.  What  system  did  you  adopt  then?  You  had  this 
old-fashioned  New  England  5-cent  zone.  What  did  you  put  in  in 
August  ? 

Mr.  P'oRD.  In  August  we  put  in  the  straight  6-cent  fare,  1  cent  in- 
crease on  those  5-cent  zones. 

Mr.  Warren.  You  did  not  change  the  limits  at  all? 

Mr.  Ford.  No. 

Mr.  Warren.  You  jacked  up  each  5-cent  fare  to  6  cents? 

Mr.  Ford.  Plxcept  in  the  city,  and  on  the  city  lines  which  were — on 
three  of  our  city  lines  we  charged  a  5-cent  fare. 

Mr.  Warren.  You  continued  the  5-cent  fare,  in  other  words? 

Mr.  P^'oRD.  Yes. 

Mr.  Warren.  And  did  not  change  it? 

Mr.  Ford.  On  only  three  of  the  city  lines;  those  are  the  principal 
lines  running  up  and  down  the  city  on  the  peninsula. 

Mr.  Warren.  And  the  other  city  lines  you  did  raise  to  6  cents, 
did  vou  ? 

Mr.  Ford.  Yes. 

Mr.  \A'arren.  Was  that  change  of  fare  accompanied  with  a  general 
public  acquiescence  in  August  last,  or  was  it  made  against  a  good 
deal  of  opposition? 

Mr.  Ford.  It  was  made  against  a  great  deal  of  opposition.  We 
made  application  in  February  for  this  increase  in  fare 

Mr.  Warren.  February,  1918? 

Mr.  Ford.  February,  1918.  We  had  previously  made  a  valuation 
of  our  property,  and  that  valuation  took  us  19  months  to  make;  and 
that  valuation  was  checked  by  the  public-utilities  commission  engi- 
neers, and  it  took  us  until  August  2 ;  while  the  application  was  made 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      357 

in  February  the  hearing  continued  until  August  2  before  we  got  a 

"^'m?  Warren.  And  as  you  have  said,  there  was  a  good  deal  o{ 
public  opposition  to  it? 

£  ^^Z^i  Ct  Shat  first  increase  .vork  out,  from  5  cents  to 

G  cents?  ^.  ^    j. 

Mr.  Ford.  It  was  not  satisfactory.  or^nrnvimatelv 

Mr.  Warren.  That  should  have  shown  theoretically  approximately 

20  per  cent. 

,  5!^^v:^«b^:^bS  Z  5te,  because  on  three  of  your  best  lines 
in  the  city  you  still  kept  the  5  cents. 

Mr  mRREl' So  it  would  be  less  than  20  per  cent.  But  have  you 
ever  figured  what  is  should  have  showi^ 

Mr.  Ford.  Well,  it  ought  to  have  shown  about  18  pei  cent,  it 
actually  showed  about  4  per  cent. 

Mr.  Warren.  For  what  period^ 

Mr.  Ford.  For  that  period  August  2  to 

Commissioner  Sweet.  To  July  15,  1919^ 

Mr   Ford.  To  June  15.  .    ^  •.     a*      o 

Mr*  Warren.  That  period  included  the  influenza  situation? 

£•  KeS  S£';<;/made  your  change  in  June,  was  that  made 
affainst  public  opposition  to  any  great  extent? 

Mr  Ford.  No  ;  we  had  practically  no  opposition.  , 

Mr.  Warren.  In  other  words,  tlie  public  really  recognized  your 
Tippd  of  additional  revenue,  you  think?  '         ,  ,  j    u     i.u^ 

Mr  FoHD   Yes,  because  of  the  efforts  that  had  been  made  by  the 
public-ut°lity  commission   and  by   ourselves-the   management-to 
make  the  people  acquainted  with  our  condition. 
"i\%\ic-Stility\ommission  recognized  the  gr^^^^^^^^^^ 
ation  and  were  anxious  to  provide  a  remedy.    I  think  thej  lecognized 

the  fact  that  any  rate  that  they  named  "^^^^VrLtr  The  fet 
yield  the  results  unless  the  ijeople  supported  the  rates.     Ihe  lirst 
move  they  made  in  that  direction  was  to  invite  representative  citi- 
zens toTdhmer  given  under  the  auspices  of  the  chamber  of  com- 
merce, and  at  that  dinner  they  promulgated  this  r^te  — T- ,, 
Commissioner  Sweet.  That  is.  the  State  commission  did? 
Mr  Ford.  Yes,  sir;  and  explained  to  the  people  present  what  that 
rate  meant  and  what  it  would  produce  and  the  needs  of  the  coni- 
panyX  an  increased  rate.    And  the  whole  purpose  of  that  gather- 
W  was  to  get  the  cooperation  on  the  part  of  the  public  in  support- 
^l  That  trfllev  company.    Then  they  followed  that  up  by  getting 
Z  newspTpe?  men  CgWr,   and   they   requested  the  newspaper 
people  to  support  the  trolley  company. 
^Commissioner  Sweet.  When  you  say  "they,"  you  still  refer  to 

^ftoTTif State  commission.  Those  two  acts  were  rather 
unusual  on  the  part  of  a  State  commission.  However,  that  produced 
the  r^ult  We  began  to  notice  immediately  a  change  m  the  public 
sentiment. 


— J 


S5S       PROCEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSIO  IJ. 

Well,  the  management  followed  up  that  plan  on  two  increases  tluit 
we  asked  for,  and  two  separate  hearings  before  the  commission  were 
held  on  those  increases.  We  followed  that  up  by  holding  public 
meetings  in  10  different  locations  on  our  proi>erty :  the  people  that  we 
served,  the  community  centers  of  population,  and  the  people  were 
invited.  The  meetings  w^ere  advertised;  and  I  went  with  my  as- 
sistants before  them  to  ask  for  any  criticism  that  they  had  to  make  on 
the  service,  on  the  management,  or  any  suggestions  tiiey  had  to  malvo. 
At  the  same  time  we  explained  this  ticket  system,  which  is  a  rather 
new  proposition.  We  had  never  tried  it  before  and  did  not  know  of 
any  place  where  it  had  l)een  tried ;  and  it  was  important  that  tlic 
people  should  uiiderstiind  the  system  that  we  proposed  to  put  in  to 
get  these  fares,  and  at  the  same  time  we  had  to  exjSain  this  new  zone 
sv^em. 

Well,  the  result  of  that  work  and  of  the  work  done  by  the  com- 
mission was  a  complete  change  in  the  public  sentiment  Iii  the  mean- 
time, we  were  working  with  our  own  employees.  The  public  senti- 
ment prior  to  that  time  was  antagonistic  to  the  company.  The  men 
themselves  were  unionized  and  they  were  not  interested  in  our  propo- 
sition. The  work  that  we  did  with  them  resulted  in  securing  their 
cooperation. 

Commissioner  Sweet.  Was  that  purely  educational  ? 

Mr.  Foiu>.  Entirely— and  explaining  to  them  what  the  situation 
was  and  what  their  duty  was  in  this  matter. 

The  CHAIR3IAX.  Was  thei-e  any  hope  entertained  that  if  a  larger 
fare  was  secured  they  would  have  additional  wages? 

Mr.  P'oRD.  Hso.  sir. 

The  CiiAiR3iAN.  Xo  promise  was  made? 

Mr.  Ford.  Np,  sir.  In  November  the  National  War  Labor  Board 
had  increased  our  wages  on  that  little  property  $150,000  in  the  award 
that  they  made. 

Mr.  Warren.  From  what  rate  to  v;hat  rate,  Mr.  Ford  ? 

Mr.  Ford.  To  45  cents  for  the  maximum  for  motormen  and  42-i 
cents  minimum  pay. 

Commissioner  Meeker.  What  had  been  the  pay  before  that? 

Mr.  Ford.  The  pay  before  that  had  been  33  c^iits. 

Commissioner  Meeker.  Flat  ? 

Mr.  Ford.  No,  sir;  33  cents  for  the  maxinuim. 

Commissioner  Mei-:ker.  For  the  maximum? 

Mi\  Ford.  Yes.  Now,  I  stated  that  we  did  not  have  opposition  on 
this  7-cent  fare.  It  was  because  we  had  done  these  things— or  we 
had  not  done  it,  but  all  of  these  things  had  been  done  to  make  the 
public  acquainted  with  our  condition  and  to  appeal  for  their  support ; 
and  that  is  the  reason  we  are  getting  37  per  cent  increase  on  this  40 
per  cent  theoretical  raise  in  rate. 

Commissioner  Meeker.  May  I  ask  a  question  there?  In  case  an 
individual  does  not  provide  hmiself  with  tickets,  must  he  pay  7  cents 
for  every  zone  outside  of  the  city  limits  ? 

Mr.  Ford.  Tlie  commission  fixed  a  differential  between  a  cash  fare 
and  a  ticket  fare.    The  cash  fare  is  9  cents,  and  the 

Commissioner  Meeker.  Tlmt  is  0  cents  within  the  city  limits  ? 

Mr.  Ford.  Nine  cents  within  the  city  limits. 

Commissioner  Meeker.  In  the  three  zones? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      359 

Mr  Ford    For  the  three  zones,  and  3  cents  for  each  zone  outside. 
Tlva  is   tl^ pav  a  fare  and  they  get  a  transfer  which  en- 

Ibles  tl^em  to  Continue  their  ride  for  one  zone  or  two  zones  more  by 

the  payment  of  3  cents  or  6  cents.  „f;oi  wT^nf  ner  cent 

The  Chairman.  In  the  absence  of  this  differential  what  pei  cent 

of  your  revenue  is  cash  fare  ? 
Mr.  Ford.  About  5  per  cent.  .,.,., 

^Ir.  Warren.  Ninety-five  per  cent  is  tickets « 

Mr  W^rrfI^'so  that  reallv  the  ticket  rate  is  the  actual  rate? 
Mr!  Ford     Yes     There  is  no  complaint  from  our  traveling  public 

en  iiccount  of  ^1^'^^  system  .  ^^,^  tickets  from  any  con- 

Commissioner  Beall.  i.  an  a  pabbt^ii-^^i  "t*j 

<.n  W  Ml   Ch;irnian  that  the  increase  of  rates  under  circumstances 

'"mT'ford.  I  think  it  is.    I  believe  that  the  success  of  any  rate  de- 
pends upon  the  support  that  the  people  gwe  that  rate. 
Mr.  Wakbes.  When  it  is  first  put  into  effect? 

1^  ^CKBTYh^t  Wd?  r\otn:ther  question.     Suppose  that 

^^S:^^it^^^^^i^^^  the  traffic  will  .radu- 
'^"l^irtr^llinft' "ll.'  There  are  two  things  tluit  are  psy- 

l^lnuVre'Tnl'  tleoretka  Tne^^a^  U  that  we  shall  get  from  2 
t"5  pii  ceS  oTthe  nalm-al  increase  that  ought  to  come  w,th  the 

ptrowth  of  the  citv.^  •  j^^^.^  ^^^^  ^nj  jiio 

Mr.  Warren.  Ana  i  jucige  iiom   ""n^.  .>     .  .1  „  ■p,,Ki:„  TifiiiHpq 
emphasis  which  you  ha^^  placed  on  the  ^^f'^'^^f/^^tS^L*''^;"^ 
Commission  of  Maine  that  you  Mieve  that  that  at  .tade,  the  con 
mi^inn   itself  having  become  convinced  of  the  exigenc},  «.ib  ii". 
ZThelplul  element^f  any  of  the  elements  you  have  mentioned? 
Mr.  Ford.  I  think  it  was. 

CommiSr  MeIJ^r'"!  would  like  to  ask  .;hat  you  mean  by  2  to 
r,  ner  cScrease  due  to  the  natural  growth  of  the  city?  That  has 
i  een  the  exTer^nce  of  the  railway  company  in  times  past,  that  the 
nn^inl  earnings  increase  about  that  much  each  year  ? 
Mr  Fo^  les  all  of  our  cities  are  increasing.naturally  m  popai- 
lation-  aS  we  must  natui-ally  count  upon  getting  a  lai^er  ti-avel 
inder 'exactly  the  san.e  conditions  next  year  than  we  had  this  year. 


»     I 

■I 


360       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Meeker;  You  think  the  institution  of  tlie  zone  sys- 
tem will  not  have  any  appreciable  effect  upon  the  growth  of  the 
community— centering  the  population  rather  than  spreading  it  out 
as  in  times  past,  so  as  to  diminish  the  rate  of  increase? 
*  Mr.  Ford.  I  think  not.  The  zone  system  is,  in  my  judgment,  the 
fairest  way  to  fix  a  rate  for  the  reason  that  people  pay  for  what 

they  get.  ,   .  ,     ,  x      o 

Commissioner  Sweet.  When  did  vou  establish  the  zone  sj^stem? 

Mr.  Ford.  That  was  established  October  2,  hist  year. 
Commissioner  Sweet.  1918? 

Mr.  Ford.  Yes,  sir.  .  .       , 

Connnissioner  Sweet.  Since  that  has  been  m  operation  have  you 
noticed  any  tendency  to  greater  congestion  in  the  center  of  your  city? 

Mr.  Ford.  No,  sir.  ,      j  j 

Commissioner  Sweet.  The  rate  which  you  have  decided  upon  is 
substantially  3  cents  a  mile  where  cash  is  paid? 

Mr.  Ford.  Yes.  . 

Commissioner  Sweet.  The  zones  arc  a  mile  wide? 

Mr.  Ford.  About  a  mile;  they  vary.  Those  zones  were  fixed  to 
convenience  the  greatest  number  of  people.  Sometimes  they  would 
be  three-quarters  of  a  mile  and  sometimes  a  mile  and  a  quarter — 
it  depended  upon  the  centers  of  population. 

Commissioner  Sweet.  But  roughly  speaking,  it  is  about  a  mile? 

Mr.  Ford.  Roughly  speaking,  it  is  about  a  mile. 

Commissioner  Sweet.  And  3  cents  in  cash  is  paid  for  each  zone? 

Mr.  Ford.  Yes. 

Commissioner  Sweet.  And  where  tickets  are  bought 

Mr.  Ford.  Two  and  a  third  cents. 

Commissioner  Sweet.  You  have  a  rather  public-spirited  commis- 
sion in  this  State,  have  you  not? 

Mr.  Ford.  We  certainly  have.  ^ 

Commissioner  Sweet.  Made  up  of  pretty  broad-gauge  men? 

Mr.  Ford.  Yes.  .    .  .       i. 

Commissioner  Sweet.  How  is  that  commission  appointed? 
Mr.  Ford.  Appointed  by  the  governor. 
Commissioner  Sweet.  How  many  are  there  on  the  commission? 

Mr.  Ford.  Three. 

Commissioner  Sweet.  Were  they  political  appointments? 

Mr.  -Ford.  Two  Republicans  and  one  Democrat 

Mr.  AVarrex.  Does  the  law  provide* for  bipartisan  representation? 

Mr.  Ford.  No. 

Mr.  Warren.  It  could  all  be  of  one  party? 

Mr.  Ford.  It  could  be.  They  have  kept  the  public-utilities  com- 
mission out  of  politics  up  there;  and  the  public-utilities  commission 
has  entire  regulation  of  our  rates,  under  our  law.  Any  10  people 
can  hale  us  before  the  commission  on  a  petition,  and  then  30  days' 
I  otice  has  to  be  given  before  a  rate  can  be  changed;  and  we  have 
conditions  like  that.  . 

The  Chairman.  Wliat  control  is  there  over  your  service? 

Mr.  YonD.  Absolute  control. 

The  Chairman.  By  the  public-service  commission? 

Mr.  Ford.  Yes. 

The  Chairman.  Have  the  municipalities  any  control  at  all? 


.PROCEEDINGS  OP  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      361 

Mr.  Ford.  None  whatever;  and  we  like  the  arrangement  and  are 

"'g^mitn^^^^^^^^         Has  the  commission  handled  oth.r  similar 
cases  in  other  cities  in  Maine? 

OomSon^r's^vEET.  What  other  cities  have  had  an  experience 

''^  Mf .  For  "well,  the  Lewiston,  Augusta  &  Watcrville  Street  Rail- 
way Co.,  which  is  164  miles  of  practically  interurban  hues.    Ihey 
have  raised  the  rates  on  that  road  from  5  to  (  cents. 
Mr.  W.1RREN.  Keeping  the  same  old  zones  i 

Mr.  Ford.  Practically  the  same  zones.  .  ,  ^    ,  .,         .^ 

Mr.  Warren.  In  the  5-cent  collection  zone  right  along,  the  rate 

was  raised  to  7  cents  ? 

Mr.  Ford.  Yes.  ,  •  ^u      »    r»„^^  ;+ 

Commissioner  Sweet.  What  was  the  experience  there?    Does  it 

correspond  with  Portland's  experience,  if  you  Imow  ? 

Mr  Ford.  Well,  ves;  I  know,  because  I  have  a  good  deal  to  do  with 
that  company.  Tfiey  are  showing  now  about  36  per  cent  mcrease 
since  the  first  of  the  year  on  that  road.  ,      ,        ,      • 

Commissioner  Sw^et.  Is  their  business  largely  a  suburban  busi- 

"^Mr.  Ford.  Yes,  sir.  But  they  went  about  the  thing  in  the  same 
manner.  The  utilities  commission  appeared  before  the  chambers  of 
commerce,  and  they  did  other  things  to  help  that  company  out- 
really  doing  the  thing  that  a  public-utility  commission  ought  to  do; 
and  a  bettfr  sentiment  was  built  up  along  that  entire  system  and 

^'commfssZef  Sweet.  What  other  cities  have  been  helped  by  the 

^"^Mrl^FoRD.*  Bangor.    The  Bangor  company  has  increased  their  rate 

from  5  to  6  cents.  ,     .    i  ^i  i      o 

Commissioner  Sweet.  They  have  adopted  the  zone  plan? 
Mr   Ford   Well,  no ;  they  have  not  the  same  mile-zone  plan  that 
we  have.    They  h'ave  the  iisual  New  England  5-cent  zone  or  t«m- 
torv  •  it  is  about  2  miles  or  2^  miles,  something  like  that. 

CoimnTssio^er  Sweet.  And  then  it  jumps  a  full  5  cents  to  the  next 

A  '4-9 

^""Ur.  Ford!  Well,  yes;  6  cents  is  what  they  charge  for  each  zone. 

Commissioner  Sweet.  That  is  paid  in  cash? 

Mr.  Ford.  Well,  they  have  only  the  one  system. 

Commissioner  Sweet.  Thev  do  not  have  the  t^ket  system  ? 

Mr  Ford.  No.  Now  on  the  Atlantic  Shore  Railway-that  is  an 
interurban  line  in  the  southern  part  of  the  State-they  have  just 
recently  advanced  their  rates  to  8  cents  per  zone. 

Commissioner  Sweet.  What  have  been  the  results  m  Bangor  and 

^"m/  FotD""  We!w  Atlantic  Shore  I  have  not  heard,  because 
that  onlv  recently  went  into  effect.  In  Bangor  they  have  increased 
IheLreceipt^I  think  they  have  gotten  about  12  or  15  per  cent  out 

of  the  6-cent  rate  increase.  .    -,.     ^  ^  w        ^a?    ;,, 

Commissioner    Sweet.  Does   that   indicate   some    fallmg   off   m 

.  P^M^F^RD.  Yes;  you  never  get  the  full  amount  of  the  increase. 

160643"— 20 24 


r. 


I 


362       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Commissioner  Sweet.  How  long  has  the  Bangor  raise  been  in 
operation  ? 

Mr.  Ford.  I  think  it  has  been  in  oj^eration  about  four  months. 

Commissioner  Sweet.  Would  you  expect  that,  as  the  public  become 
educated  to  it  in  Bangor  the  same  as  in  Portland,  that  will  increase  ? 

Mr.  Ford.  Yes. 

Commissioner  Sweet.  The  patronage  will  return? 

Mr.  Ford.  Yes. 

Commissioner  Sweet.  In  the  educational  work  that  you  did,  was 
particular  stress  laid  upon  the  advantages  to  the  public  or  both? 

Mr.  Ford.  Well,  we  discussed  the  matter  with  them  from  their 
viewpoint. 

Commissioner  Sweet.  That  is,  the  public  viewpoint? 

Mr.  Ford.  It  was  a  question  of  service.  We  did  not  wait  for  the 
increase  in  the  rate.  We  increased  our  service  before  the  rate  came 
in,  showing — or  we  wanted  to  show — our  faith  in  the  public.  I  think 
that  did  a  great  deal  to  get  us  support. 

Commissioner  Sweet.  In  what  way  did  you  increase  your  service : 
more  cai*s? 

Mr.  Ford.  We  lan  cars  more  frequently. 

Commissioner  Sweet.  They  ran  on  shorter  schedule? 

Mr.  Ford.  Yes. 

Commissioner  Sweet.  And  you  think  the  public  appreciated  that? 

Mr.  Ford.  Yes. 

Commissioner  Sweet.  And  showed  its  appreciation  by  acquiescing 
in  the  raise  when  it  finally  came? 

Mr.  P^oRD.  Yes. 

Commissioner  Sweet.  But  in  your  efforts  to  educate  the  public  to 
the  situation,  you  laid  your  cards  practically  on  the  table  and  let 
them  understand  your  financial  situation? 

Mr.  Ford.  Yes. 

Commissioner  Sweet.  And  everything? 

Mr.  Ford.  And  everything.  There  was  not  a  thing  concealed  from 
them. 

Commissioner  Sweet.  And  they  appreciated  your  frankness  and 
candor  and  responded  in  kind,  in  a  way? 

Mr.  Ford.  Yes.  In  these  meetings  I  gave  them  the  privilege  of 
asking  any  questions  they  wanted  to  and  advance  any  criticism  they 
wanted  to. 

Commissioner  Sweet.  Do  you  think,  Mr.  Ford,  that  similar  tac- 
tics throughout  the  country  would  show  similar  results? 

Mr.  Ford.  Undoubtedly. 

Commissioner  Sweet.  Do  you  think  human  nature  is  the  same  in 
Maine  as  it  is  in  other  parts  of  the  country? 

^fr.  Ford.  Yes. 

Commissioner  Sweet.  And  you  feel  that  you  have  solved  the  prob- 
lem; or  don't  you? 

Mr.  Ford.  I  would  not  like  to  say  that.  I  hope  we  have.  I  be- 
lieve that  we  have  gotten  a  rate  that  the  people  are  going  to  support 
and  that  gradually  we  shall  work  out  of  our  difficulties.  It  is  going 
to  take  time,  but  I  believe  that  a  rate  can  be  put  to  such  a  point  that 
you  will  spoil  your  whole  proposition  and  raise  it  too  high. 

Commissioner  Sweet.  Are  you  making  prox3er  provision  now  for 
deterioration  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIST.      363 

Mr.  Ford.  Yes,  we  are  depreciating  our  P^^P^^;^^,^^^^^^^^ 
expenses,  charging  it  right  to  operating  expenses-10  per  cent  of  oui 

Timmissioner  Sweet.  Have  you  any  objection  to  bemg  ^s  frank 
with  us  as  you  were  with  the  people  there,  with  regard  to  your  hnan 
cial  situation  and  the  result  ? 

ComSo?er*lwS.  Of  course  it  would  ]>«  v-y  inst^cave  to  us 
to  have  you  give  us  a  statement  showing  what  your  condition  was, 
we  will  ^y,  after  the  first  change  that  you  made,  on  August  2, 1918- 
was  that  the  date? 

Sn!^io^^^o.  at  that  time  ^YtZTtlS'^S'^l.rn'^^ 
the  results  that  followed  that  first  change,  and  then  the  next  change 
wasmade  Junel5,  1919,  wasitnot? 

Mr  Ford.  Yes.    Well,  the  next  change  was  niade 

Comm'Soner  Sweet.  Of  course,  you  have  told  «™Xk  of  Te^-' 
but  what  I  mean  is  more  definitely  with  reference  to  f^l^^"^^^^^^ 
essarv  earnings  prior  to  the  first  change  that  made  that  change  or 
sTrnKnge  necLary,  and  what  the  situation  ha^  devdope^^ 
with  reference  to  your  earnings  and  your  ability  to  P^;^?//^^^^^ 
dends  or  meet  interest  on  obligations  and  so  forth.  I  think  that 
would  be  very  instructive,  if  you  are  wiUing  to  tell  us. 

Mr.  Ford.  Yes,  sir ;  I  am  entirely  agreeable  to  it. 

The  Cha  RMAN.  Can  you  file  a  statement  showing  those  figures? 

Mr  Ford   I  can  do  that  or  I  can  state  it  to  you  very  briefly  now 

^'Snmissioner  Sweet.  Stating  it  briefly  and  filing  a  statement  for 
future  reference  would  be  verylielpful;  don't  you  think  so? 
Mr  Warren.  On  August  2  were  you  earning  any  dividends  i 
Mr!  Ford.  No  ;  we  were  not  earning  our  dividend. 
Mr.  Warren.  Were  you  earning  your  fixed  charges  on  August  2? 

Mr.  wTrren.^  At  the  old  rate  you  were  just  meeting  your  operating 
expenses  and  fixed  charges? 

Mr.  Ford.  Yes.  •  i-      « 

Mr.  Warren.  And  taking  care  of  your  depreciation? 

Mr.  Ford.  Yes.  ,  ,  .  -  ..  _^^o 

•     Mr.  Warren.  At  the  same  rate  that  you  are  taking  care  of  it  now? 

Mr.  Ford.  Yes,  sir.  ,  .  ,  i  j.i„ 

Mr  Warren.  Now,  with  this  increase  which  you  have  recently 
made*  which  you  figure  at  37  per  cent  of  gross,  you  of  course  would  be 
able  to  take  care  of  your  operating  expenses,  do  you  thmk? 

Mr  Ford.  I  think  we  can.  Of  course  the  people  are  not  as  fully 
re^nciled  to  the  new  rate  as  they  will  be  eventually.  We  ought  to 
haVe  a  natural  increase  in  our  business  of  say  5  per  cent,  and  we 
ought  to  handle  as  much  business  under  the  7-cent  rate  as  we  handled 
under  the  5-cent  rate— as  much  business. 

Mr.  Warren.  Well,  you  are  very  nearly  handling  as  much  i 

Mr  Ford.  Very  nearly. 

Mr  Warren.  I  think  what  Mr.  Sweet  wants  to  know  is,  assuming 
that  that  continues— that  same  increase  in  gross  of  37  per  cent— what 


til 


{ : 


364       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

will  it  do,  first,  as  regards  operating  expenses;  second,  a  proper  de- 
preciation; third,  fixed  charges;  and  fourth,  dividends? 

Mr.  Ford.  Well,  I  believe  that  the  7-cent  rate  will  pay  5  per  cent 
on  the  $2,000,000  of  stock  we  have  issued — it  will  pay  all  the  interest 
on  the  bonds,  and  provide  this  depreciation  fund. 

The  Chairman.  How  does  the  value  of  your  property  which  was 
agreed  to  by  the  public-service  commission  correspond  with  your 
capitalization  ? 

Mr.  Ford.  It  took  us  nearly  two  years  to  make  a  valuation  of  our 
property.  That  valuation  was  checked  by  expert  engineers  em- 
ployed by  the  State;  and  the  value  of  the  stock,  leaving  out  certain 
intangibles,  which  ought  to  be  included  in  value,  they  showed  that 
that  stock  was  worth  $132  a  share. 

Commissioner  Sweet.  On  a  face  value  of  100? 

Mr.  Ford.  Yes. 

Mr.  Warren.  One  other  question,  Mr.  Ford 

Mr.  Ford.  In  other  words,  we  had  more  value  in  the  property  than 
the  securities  represented. 

The  Chairman.  Will  you  resume  the  stand  at  2  o'clock,  please? 

Mr.  Ford.  Yes. 

(At  1  p.  m.  a  recess  was  taken  until  2  p.  m.) 

» 

after  RECESS. 

The  hearing  was  resumed  at  2  o'clock,  p.  m. 

Commissioner  Sweet.  You  may  proceed,  Mr.  Warren. 

Mr.  Warren.  Will  you  resume  the  stand,  Mr.  Ford,  please? 

STATEMENT  OF  ME.  ALBEET  H.  FOED— Continued. 

Mr.  Warren.  There  is  only  one  more  question,  Mr.  Ford,  that  I 
wish  to  ask  you,  and  that  is  this :  As  I  understand,  you  have  an 
existing  agreement  with  your  men  for  45  cents  an  hour,  running 
until  next  i^iay? 

Mr.  Ford,   x  es,  sir. 

Mr.  Warren.  If,  at  the  end  of  that  period,  or  if  before  the  end 
of  that  period,  it  should  become  necessary  to  increase  materially 
your  rate  of  wa^4s,  would  it  then,  in  your  opinion,  be  necessary  to 
make  a  further  mcrease  in  your  rate  of  fare? 

Mr.  Ford.  I  think  it  would. 

Mr.  Warren.  That  is  all.    Thank  you  very  much. 

Commissioner  Sweet.  Have  you  any  questions  you  want  to  ask? 

Commissioner  Meeker.  No. 

Commissioner  Sweet.  Have  you,  Mr.  Gadsden? 

Commissioner  Gadsden.  No  questions. 

Mr.  Warren.  Mr.  Ford  may  oe  excused? 

Commissioner  Sweet.  Yes,  sir. 

Mr.  Warren.  Mr.  Tingley,  will  you  take  the  stand,  please? 

STATEMENT  OF  ME.  C.  I.  S.  TINGLEY. 

Mr.  Warren.  Will  you  give  your  full  name,  Mr.  Tingley,  please? 
Mr.  Tingley.  C.  L.  S.  Tingley. 


proceedings  of  federal  electric  railways  commission.    365 

Mr.  Warren.  You  are  vice  president- ,        ^y  ..  ^.^ 

Mr.  Tingley.  I  am  vice  president  of  the  American  Railways  Co 
Mr.  Warren.  And  that  company  is  interested  in  the  operation  of 

various  street  railways?  .  , ,.    „.-i-x-  _ 

Mr.  Tingley.  It  is  a  holding  company  for  various  public  utilities, 
principally  in  the  States,  including  Virgmia,  West  Virginia  and 
Kentucky,  east  of  the  Mississippi  River,  north  of  those  States,  and 
east  of  the  Mississippi  River.  . 

Mr.  Warren.  Will  vou  name  the  street-railway  companies? 
Mr.  Tingley.  The  Jersey  Central  Traction  Co ,  the  Bridgeton  & 
Millville  Traction  Co.,  the  Wilmington  &  Philadelphia  Traction  Co  , 
the  Scranton  Railway  Co.,  the  Altoona  &  Logan  Valley  Electric 
Railway  Co.^  the  Roanoke  Railway  &  Electric  Co  the  Lynchburg 
Traction  &  Light  Co.,  the  Ohio  Valley  Electric  Railway  Co,  the 
People's  Railway  Co.  of  Dayton,  Ohio,  the  Springfield  Rai  way  Co. 
of  Springfield,  Ohio,  and  the  Chicago  &  Johet  Electric  Railway  Co. 
Mr.  Warren.  Now,  Mr.  Tingley,  will  you  tell  the  commission,  as 
regards  any  of  these  companies,  what  your  experience  has  been  in 
increasing  rates  and  what  the  effect  has  been  ?  .  .i  ^^^ 

Mr  Tingley.  We  have  increased  rates  on  practically  all  of  these 
companies.  The  increases  and  the  effect  have  been  materially  con- 
trolled by  the  industrial  conditions.  In  communities  which  had  a 
large  war  business  and  where  there  had  been  a  great  influx  of  popu- 
lation the  increases  did  not  have  to  be  so  much  and  the  effect  was 
ei-eater  than  it  was  in  other  communities.  ,     «?    ^   .  i  -^ 

To  illustrate:  Scranton,  Pa.,  was  not  only  not  affected  by  war  in- 
dustry,  having  none,  but  it  lost  substantially  in  population  by  rea- 
son  of  the  military  service  of  the  younger  men,  who  are  among  the 
best  patrons  of  the  railway,  and  also  the  men  being  attracted  to 
the  centers  where  the  war  work  offered  much  higher  wages  than 
they  could  get  in  the  main  industry  of  Scranton,  which  is  the  an- 
thracite coal  mines.  The  riding  habit  was  also  affected  by  the  stimu- 
lation  of  mining,  which  kept  the  men  underground  for  longer  pe- 
riods  than  they  would  be  normally.  ^ 

In  September,  1917,  we  filed  an  increase  m  rate  from  5  to  6  cents. 
The  municipality  raised  the  question  of  the  authority  of  the  public- 
service  commission  to  permit  an  increase  in  rates  in  the  face  of  a 
rate  of  fare  fixed  in  the  contract  ordinance,  and  we  agreed  with  the 
public-service  commission  that  we  would  not  attempt  to  put  that 
rate  into  effect  until  that  legal  question  was  decided. 

In  explanation  of  that,  I  think  we  should  put  m  right  here  some- 
thine  with  reference  to  our  public-service  law  in  Pennsylvania. 

Under  the  laws  of  Pennsylpania,  a  railway  is  primarily  charged 
with  the  fixing  of  its  rate.  The  railway  files  its  tariff  with  the 
public-service  commission,  and  it  becomes  effective  30  days  after 
filing  The  commission  is  without  power  to  suspend  rates  until 
after  complaint  and  hearing.  So  that  that  agr^ment  was  neces- 
sary to  avoid  the  rates  becoming  automatically  effective  at  the  end 

of  the  30  days.  ,         ,         .  x-       ^ 

Commissioner  Sweet.  Unless  there  is  some  question  from  some 

private  individual x-     n      a»    4.- 

Mr  Tingley.  It  becomes  automatically  eirective. 
Commissioner  Sweet   (continuing).  The  public-service  commis- 
sion takes  no  action  upon  it  whatever? 


366       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Mr.  TiNGLEY.  It  takes  no  action.  Of  course,  if  the  commission 
should  think  that  your  i-ate  was  unreasonable  or  extortionate,  they 
could  on  their  own  motion  institute  an  investigation. 

Commissioner  Sweet.  They  have  the  power 

Mr.  TiNGLEY.  They  have  the  power;  but  it  would  be  an  unusual 
case  in  which  they  would  do  it  that  way,  without  complaint. 

The  matter  dragged  along  until  March,  1918,  when  the  commis- 
sion decided  that  they  had  power,  notwithstanding  the  contract 
ordinance;  and  when  one  or  two  of  the  lower  courts  in  Pennsyl- 
vania had  acted  on  injunction  proceedings  seeking  to  restrain  the 
connnission  from  acting,  they  decided  that  the  commission  must  first 
act  before  the  court  had  jurisdiction,  and,  again,  parenthetically, 
the  superior  court  yesterday  handed  down  a  decision  sustaining  the 
powers  of  the  commission,  notwithstanding  the  contract  ordinance. 

Commissioner  Sweet.  Is  that  the  court  of  last  resort  ? 

Mr.  TiNGLEY.  No,  sir.    That  is  the  court  of  appeals  there 

Commissioner  Sweet.  An  intermediate  court  2 

Mr.  TiNGLEY.  An  intermediate  court 

On  the  21st  day  of  March,  1918,  a  6-cent  fare  went  into  effect. 

Commissioner  Sweet.  In  Scranton? 

Mr.  TiNGLEY.  In  Scranton;  and  it  resulted  in  a  small  diminution 
in  travel.  Being  a  theoretical  20  per  cent  increase,  it  was  producing 
about  12  to  13  per  cent  increase. 

The  War^  Labor  Boai-d,  in  August,  handed  down  a  decision  in- 
creasing our  wages  very  materially.  The  maximum  rate  for  motor- 
men  and  conductors  at  the  end  of  three  years'  service  had  been  36 
cents  an  hour.  It  was  raised  to  45  cents  an  hour  at  the  end  of  the 
first  year's  service.  A  minimum  wage  of  42^  cents  was  established 
for  all  other  employees,  amounting  m  some  instances  to  a  90  per 
cent  increase.     It  was  a  flat  increase  of  all  wages  of  51J  i>er  cent. 

Under  the  6-cent  fare  we  were  having  a  surplus  of  about  $100,000 
a  year  over  and  above  fixed  charges.  The  theoretical  increase 
granted  by  the  Wai'  Labor  Board  amounted  to  $340,000;  so  it  was 
manifest  that  we  had  to  have  more  income. 

We  filed  in  August  an  8-cent  tariff,  which  became  effective  on  the 
15th  day  of  September. 

Commissioner  Sweet.  Of  this  year? 

Mr.  TiNGLEY.  Of  1918. 

Commissioner  Sweet.  Oh,  I  mean  1918. 

Mr.  TiNGLEY.  Wliich  resulted  in  a  very  prompt  diminution  in 
travel.  It  was  followed  early  in  October  by  the  outbreak  of  in- 
fluenza, which  was  very  severe  in  that  country  and  the  travel  dropped 
50  per  cent.  By  December,  however,  the  travel  had  returned,  show- 
ing a  loss  of  about  20  per  cent  in  passengers  but  an  incease  of  about 
28  per  cent  in  income;  and  in  May,  when  the  public-utility  commis- 
sion finally  decided  the  rate  case,  the  travel  was  running  along,  show- 
ing a  diminution  of  about  18  or  19  per  cent,  which  was  just  where 
the  company  had  figured  it  would  land.  We  had  figured  that  if  we 
only  lost  20  per  cent  of  our  travel  and  collected  an  8-cent  fare  we 
w^ould  be^  made  whole  and  able  to  stand  this  increase  in  wages. 

Mr.  Warren.  Did  that  mean  that  you  were  getting  about  two- 
thirds  of  the  theoretical  possible  increase  in  revenue,  Mr,  Tingleyl 
Mr.  Tin  OLE  Y«  Yes,  sir. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      367 

The  commission  then  handed  down  its  ,^^™' J^^^orTtS 
four  tickets  for  a  quarter,  or  6i  cents  each,  sold  on  the  ^ax^^J^^^^^^^^ 
period  of  six  months,  with  a  cash  fare  of  7  cents.    Y^J^e^^^^^^^ 
cent  tariff,  in  the  month  of  June,  and  so  far  m  July,  we  are  ™nig 
more  people  than  we  carried  last  year  under  the  6-cent  taritt  whicn 

""Wil^^  Wilmington  &  Philadelphia  Tra^^n  ^^f^^^l 
serves  the  city  of  Wilmington,  the  adjacent  territory  the  c^y  of 
Chester,  and  up  to  a  connection  with  the  city  lines  of  the  city  ot 
Philadelphia,  the  lx)rough  of  Darby—— 

Commissioner  Sweet.  Before  you  leave  S^ton  k^^^^^ 
this  question,  Mr.  Tingley :  Has  the  return  of  the  soldiers  or  laborers 
harl  nnvthinff  to  do  with  this  increases 

M^Cg^ey?  The  town  is  getting  back  to  normal ;  yes,  sir. 

Commissioner  Sweet.  Yes.       .      ,      ,    .  i 

Ml'  TiNriFY    The  town  is  getting  back  to  normah 

CommLrner  Swebt.  Ca/you  differentiate  now  between  the  ele- 

""MnTiNGLET.  Well,  I  did  not  refer  to  income  there.  I  said  that 
we  were  carrying  more  passengers. 

Commissioner  Sweet.  I  understand.  . 

Mr.  TiNGUiy.  In  other  words,  we  are  getting  "^out  what  I  think 
is  more  nearly  approaching  the  growth  of  a  commumty  of  that  size, 

*^^^llLtslo*nlrXr.  S"ld  be  due  to  the  return  of  the  popu- 

lation  ? 

Mr.  Tingley.  Yes,  sir. 
Commissioner  Sweet.  In  part? 

CommSerlwEET.  And  you  also  think  iy^  in  part  dxie  to  a 
hotter  feeling  on  the  part  of  the  public  in  regard  to  the  raise  i 

Mr  TiNG^Y  Well  «s  to  the  feeling  on  the  part  of  the  public, 
I  want  to  sSk  very  guardedly  on  that,  because  we  are  in  a  very 
naltypolitS  situation  there."  In  other  words,  it  ha^  been  made 

"  »£Si=r1tS^  SKr;  we  are  all  one  family  here  and 

'^"Mr^xS^rf  te^Ta  g^od  deal  goes  out  over  the  wii.. 

Mr!  wTkTn.  At  any  rate,  you  are  now  ba«k  to  your  normal  situa- 
tion? 

Mr  wTrX."  Sther  words,  with  this  inci^ased  fai^,  your  traffic 
is  jfist  £  s"n;  as  it  was  with  the  old  5-cent  fare  or  6^ent  fare? 

Mr  TiNGLET.  Under  the  6-cent  fare  a  year  ago;  yes.  . 

Now  the  Wilmington  to  Philadelphia  system,  prying  Wilmington 
and  Chester;  which  probably,  in  proportion  to  their  size,  had  more 
war  business  than  any  other  community  in  the  country-we  instituted 
r  6  cent  fire  there  in  June,  1918.  That  is  a  theoretical  20  per  cent 
hiSreS  As  a  matter  of  fact,  after  the  armistice  wa^  signed,  the 
ncre  i^s  there  ran  from  30  to  40  per  cent,  and  to-day,  with  the  war 
EerpSically  eliminated,  we  are  showing  about  a  7  per  cent 
\ZeZ  in  those  earnings,  comparing  a  6-cent  faxe  this  year  with  a 
6-cent  fare  last  year. 


M 


J 


368       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

There  was  a  complaint  against  that  fare  in  the  city  of  Wihning- 
ton.  The  commission  sustained  us,  and  the  court  sustained  the  com- 
mission. 

In  Pennsylvania,  in  the  Chester  end  of  the  system,  complaint  was 
filed  with  the  public  service  commission,  but  was  later  withdrawn. 

Commissioner  Sweet.  When  you  speak  of  the  6-cent  fare,  you  refer 
to  the  fare  within  the  corporate  limits? 

Mr.  TiNGLEY.  Yes. 

Commissioner  Sweet.  Only? 

Mr.  TiNGLEY.  Yes,  sir. 

Commissioner  Sweet.  And  from  Wilmington  to  Chester 

Mr.  TiNGLEY.  And  from  Wilmington  to  Chester  there  are  three 
zones  of  6  cents  each ;  and  from  Chester  to  Darby  there  are  two  zones 
of  6  cents  each ;  and  there  are  collateral  lines  that  have  been  placed 
upon  the  same  basis. 

Commissioner  Sweet.  Yes. 

Mr.  Warren.  Those  are  somewhat  like  what  Mr.  Ford  called  the 
New  England  old-fashioned  zone? 

Mr.  TiNGLEY.  Yes.     Those  zones  are  about  3  miles  long. 

Mr.  Warren.  And  that  system  you  did  not  change? 

Mr.  TiNGLEY.  We  did  not  change  that  system. 

Mr.  Warren.  As  I  understand  it,  that  6-cent  fare  has  been  in  effect, 
how  long,  Mr.  Tingley? 

Mr.  Tingley.  Since  June,  1918. 

Mr.  Warren.  And  you  show  an  increase  in  revenue  much  in  excess 
of  the  theoretical  increase  in  rates? 

Mr.  Tingley.  More  than  double. 

Mr.  Warren.  During  the  war  period? 

Mr.  Tingley.  Yes,  sir. 

Mr.  Warren.  And  now  this  year,  with  the  restoration  of  normal 
traffic  conditions,  you  show  an  increase  of 

Mr.  Tingley.  About  7  per  cent. 

Mr.  Warren.  Over  last  year? 

Mr.  Tingley.  Yes. 

Mr.  Warren.  Over  the  war  period? 

Mr.  Tingley.  Yes. 

Mr.  Warren.  I  suppose,  of  course,  you  are  pretty  well  satisfied 
with  the  increase,  which  has  not  affected  your  traffic? 

Mr.  Tingley.  Yes,  sir;  absolutely. 

Commissioner  Meeker.  Of  course,  you  can  not  tell  what  the  traffic 
would  have  been  if  you  had  still  the  5-cent  fare  ? 

Mr.  Warren.  If  we  could  hold  all  of  the  traffic  and  get  a  6  or 
7-cent  fare,  we  would  be  reasonably  satisfied. 

Commissioner  Beall.  Is  not  that  a  section — through  Chester  and 
that  territory — where  people  are  compelled  to  ride  more  than  usual? 

Mr.  TiNGUsr.  I  would  not  say  more  than  usual ;  no,  sir. 

Commissioner  Beall.  It  seems  so  to  me.  I  know  that  section,  and 
you  have  long  stretches  there. 

Mr.  Tingley.  It  is  a  long  stretch.  It  is  6  miles  from  the  city  line 
of  Philadelphia  to  the  center  of  Chester. 

Commissioner  Beall.  But  the  distribution  is  such  between  the 
factories  and  the  residential  sections  that  I  think  that  more  than 


proc»:edings  of  federal  electric  railways  commissiok.  369 
ordinarily  people  are  compelled  to  ride.  Does  not  that  in  part  ac- 
'Tr.  Ti^i^^Y.  That  would  account  for  the  great  increase  during 

the  war  period.  ^  q  i^  shape,  and 

Commissioner  Beall.  It  the  city  t"*"^    ,         ,  ^t 

the  residences  radiated  out  from  it  '*  ^ould  not  be  so  g^^^^^ 

""SSteioner  Buu,.  I,  not  your  situation  th.r.  .  »«.  »»«,  fa- 

vorable  than  the  average  situation  i 

SmmSlv'^Bri:;:  With  a  similar  population.     That  is  the 
<  ^^n^^Birrte  Eemington  Arms  Co.  is  clo^d  dowa 

and  the  necessary  guards  to  P^otf  «t  the  P^"*^  ^j^  j    industries 

In  Wilmington,  there  is  a  ditterent  situation. 

speed  that  it  was  during  the  war. 

%r^^:^:Zt^^^^S^Vros^ou. .  The  ..rklng^ 
man  is  Sing  the  highest  wage  he  ever  received  in  his  life,  and 

ComSoner'S'wBEX.  How  about  the  jHneys?  Have  they  gone 
""Mr^SS.Vhe  jitneys  have  gone  out  of  business.  They  disap- 
'^■'d:^:lSJ^r'&.it^7^':r.  getting  now  the  business 
that  they  were  doing? 

SmSr/e/Mn  Did  I  "nde^tand  you  to  say^  your 

traffic  this  year  is  7  per  cent  greater  than  it  was  last  year  J 

Mr.  Tingley.  Yes,  sir. 


370       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Commissioner  Meeker.  Under  the  war  conditions? 

Mr.  Tingle r.  Yes,  sir. 

Commissioner  Meeker.  And  last  year  there  was  an  increase  of 
40  or  50  per  cent  over  the  preceding  year? 

Mr.  TiNGLEY.  From  30  to  45  per  cent. 

Commissioner  Meeker.  From  30  to  45  per  cent? 

Mr.  TiNGLEY.  Yes;  it  fluctuates. 

Commissioner  Sweet.  In  gross  income! 

Mr.  TiNGLEY.  In  gross  income. 

Mr.  Warrbn.  Not  in  traffic? 

Mr.  TiNGLEY.  Not  in  traffic.  In  ^ross  income.  It  would  have 
indicated,  for  a  20  per  cent  increase  in  rates,  anywhere  from  12  to 
18  per  cent  increase  in  traffic.  With  your  normal  increase  running 
from  about  5  to  7  per  cent,  it  meant  a  war  increase  of  from  5  to  12 
per  cent.  I  am  talking  in  very  rough,  round  figures  because  I  had 
not  expected  to  go  on  the  stand,  and  I  am  talking  purely  from 
memory,  and  my  percentages  may  vary  1  or  2  per  cent  in  either 
direction. 

Commissioner  Sweet.  Well,  the  fare  last  year  and  the  fare  this 
year- 


Mr.  TiNGLEY.  Are  6  cents  in  each  case. 

Commissioner  Sweet.  They  were  the  same? 

Mr.  TiNGLEY.  Yes,  sir. 

Commissioner  Gadsden.  Mr.  Tingley,  what  has  been  the  history 
of  the  net  ? 

Mr.  TiNGLEY.  The  history  of  the  net  is  that  it  is  verjr  much  smaller. 

Commissioner  Gadsden.  Explain  that  to  the  commission.  I  want 
to  understand  it  myself.  You  have  had  some  very  substantial  in- 
crease in  business.    Give  us  the  history  of  your  net  results. 

Mr.  TiNGLKY.  In  1917,  coiiductors  and  motormen  on  those  lines 
wei'e  receiving,  as  I  recall  it,  a  maximum  of  30  cents  an  hour.  To-day, 
they  are  receiving  48  cents  an  hour,  and  all  other  labor  has  been  in- 
creased proportionately. 

The  cost  of  coal  at  the  power  plant  has  more  than  doubled;  and 
its  liaving  been  a  w  ar  situation — we  could  not  cheese-pare  on  main- 
tenance and  upkeep.  We  simply  had  to  do  everything  that  we  could 
to  get  the  material  to  do  it  with.  We  have  not  been  able  to  curtail 
expenditures,  as  we  had,  for  example,  in  Scranton.  There,  we  were 
able  to  curtail  our  expenditures  in  the  way  of  maintenance  and  up- 
keep to  the  extent  of  $150,000  to  $200,000  a  year.  That  is  deferred 
maintenance.  It  is  accumulating,  and  it  has  to  be  taken  care  of, 
but  we  were  able  to  avoid  the  expenditure  of  this  money  in  these 
strenuous  times.  In  this  situation  we  were  not  able  to  do  that,  be- 
cause, instead  of  being  able  to  curtail  the  service,  we  had  to  mate- 
rially increase  the  service. 

Commissioner  Gadsden.  So  that,  notwithstanding  the  increase  in 
business 

Mr.  TiNGLEY.  The  net  results  were  very  materially  less.  I  would 
not  dare  give  you  the  figures,  because  I  do  not  carry  them  in  my  head. 

Mr.  Warren.  In  other  words,  the  increase  was  all  needed  to  main- 
tain  

Mr.  TiNGLEY.  More  than  all  of  it  was  needed.  In  1916,  the  street- 
railway  lines  earned  a  surplus.    In  1918,  they  earned  a  deficit 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      371 

Commissioner  Gadsden.  Would  it  be  fair  to  say  then^^^^^^         pub- 
lic <rot  the  benefit  of  all  the  increase,  and  not  the  st^c^^^^^lders^ 
Mr.  TiNGLEY.  The  public  and  employees  got  every  penny  of  the 

inorease.  * 

Commissioner  Gadsden.  Yes ;  I  mean  that. 

Mr.  TiNGLEY.  And  then  a  little  more.  Tirxrlf^v 

Commissioner  Meeker.  Mr.  Chairman,  I  would  like  if  Mi.  Tmgley 

wo^™  SI  toit  a  brief  statement  summarizing  the  experience  of  the 

IvSington  and  Chester  and  Darby  line,  g-ing  the  experien^  w^^^^ 

the  increa.se  in  fare  and  the  increase  in  wages  and  the  othei  exi5enses. 

Mr.  TiNGLET.  I  will  be  glad  to  do  that,  sir.  Alcona 

Mr.  Warren.  Mr.  Tingley,  you  started  to  speak  of  the  Altoona 

^'*Mr '  TivGLET  The  Altoona  situation,  again,  was  affected  by  the 
wi?  sitTXn,\ltoona  being  tJhe  great  repair  and^-Xtn^-J 
shons  of  the  Pennsylvania  Railroad;  and  due  to  the  demanas  oi 
the  mikoad  they  were  unusually  active,  working,  as  a  matter  of  fa<^ 
throuXut  1916  and  1917  in  three  8-hour  shifts-continuous  opera- 
iinn^Tn  Inril  1917  we  did  away  with  the  tickets,  which  thereto- 
fZ-  iJd  be^n  y^hl  krge  quantks,  good  for  a  5-.ent  fere  at  a 
rate  of  4  cents.  There  was  no  protest,  and  no  diminution  in  ndmg. 
Wo  kept  rfght  on  the  abnormal  growth,  because  riding  had  begun  to 
increase.    The  curve  kept  ascending. 

In  April,  1918,  we  increased  the  fare  from  5  to  6  cents,  and  tne 
increate^s  lllive  averaged  and  are  averaging  "g^t  "P  to  thy-esent 
time  from  30  to  35  per  cent  over  the  flat  5-cent  fare  ot  last  year-  »o 
U  at  thnheoretical  increase  of  20  per  cent  has  practically  all  been 
saved  and  Uiat  is  notwithstanding  the  fact  that  since  the  armist.oa 
wis  s  Zd  the  activities  in  the  shops  have  been  curtailed.  I  do  not 
knowT't  what  they  are  doing  at  the  moment,  b«t  for Jimte  ^while 
tlipv  were  onlv  working  in  two  8-hour  shifts,  instead  ot  three. 
*  (5)mmissSr  SwEET^  How  do  you  a<=coimt  for  that,  Mr.  Tingley? 

""Z^NG^rEnorif  earnings.  The  men  in  those  shops  have 
more  monerthan  they  ever  dreamed  of  having  Some  of  tho^ 
men,  under  General  Order  No.  27,  received  as  high  as  $1,000  m 

^*ComSi'ssioner  Sweet.  Then  it  would  indicate  an  increase  in  the 

^^  Mi^TmGLEY    Yes.    They  have  money,  and  they  are  spending  it. 

M  •:  Wa«k^:  Lit  not  t^e,  Mr.  Tingley,  that  if  the  present  ^ale 
of  wages  general  in  the  industry  is  maintained,  PfopJe  T^i^J^  ^ 
better  Ible  to  ride  and  pay  higher  rates  of  fare  than  they  did  in  the 

time  of  the  old  5-cent  fare?  ,  .  , 

Mr.  TiNGLET.  Unquestionably.  For  example,  we  have  a  very  beau- 
tiful park  located  about  3  miles  out  of  the  city,  and  on  the  Fourth 
of  July  we  hauled  more  people  out  to  that  park  than  had  ever  been 
taken  there  in  the  history  of  the  road.  .„.,,«        ^  t 

The  Chairman.  What  success  did  you  have  with  the  5-cent  fare 

^^^Mr.  Tingley.  Well,  that  has  always  been  a  substantial,  profitable 

^'^ThT  Chairman.  And  the  difficulty  whidi  now  confronts  you  is  duo 
wholly  to  war  conditions? 


372       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Mr.  TiNGLEY.  Absolutely,  sir;  wholly.  Well,  I  would  not  say  to 
the  war  conditions,  but  wholly  due  to  the  increase  in  wages  and  ma- 
terial which,  of  course^ 

The  Chairman.  Which,  of  course,  would  not  have  come  without 
the  European  war? 

Mr.  TiNGLEY.  Well,  they  were  coming  before  the  war  came,  sir. 
The  war  has  simply  hastened  it  and  aggravated  it.  Wages  were 
rising,  and  rising  steadily,  and  have  for  the  last  20  years. 

Commissioner  Sweet.  Can  you  tell  us  what  the  relation  is  be- 
tween the  increase  in  earnings  and  the  increase  in  expenses  on  tho 
Altoona  road? 

Mr.  TiNGLEY.  I  would  not  want  to  do  that  from  memory ;  no,  sir. 
I  will  be  glad  to  submit  it. 

Commissioner  Sweet.  If  it  would  not  be  improper  for  you  to  give 
that  information,  I  think  we  would  be  glad  to  have  it. 

Mr.  TiNGLEY.  It  is  a  matter  of  public  record,  and  I  will  be  glad  to 
submit  it. 

Commissionefr  Sweet.  All  right.    Thank  you,  sir. 

Commissioner  Gadsden.  Mr.  Tingley,  the  figures  that  you  have 
given  for  these  various  propierties  would  seem  to  indicate  that  the 
income  of  that  class  of  the  population  which  is  particularly  given  to 
car  riding  has  been  proportionately  increased? 

Mr.  TiNGLEY.  Yes,  sir. 

Commissioner  Gadsden.  So  as  to  justify  and  encourage  them  to 
ride  more,  has  it  not? 

Mr.  TiNGLEY.  Yes,  sir. 

Commissioner  Gadsden.  It  would  seem  to  carry  with  it,  as  a  logi- 
cal sequence,  that  they  should  be  willing  to  pay  more  ? 

Mr.  TiNGLEY.  I  would  think  so. 

Commissioner  Gadsden.  In  other  words,  it  would  seem  to  indicate 
that  the  car-riding  class  of  the  community  has  profited  to  a  greater 
degree  than  any  other  class,  in  the  increase  in  wages;  is  that  your 
observation  ? 

Mr.  TiNGLEY.  That  is  my  observation.  And  in  the  places  where 
they  have,  unless  the  opposition  has  been  stirred  up  politically, 
there  has  been  no  opposition. 

Now,  there  is  not  the  slightest  semblance  of  opposition  from  any- 
one in  the  city  of  Altoona  to  that  increase  in  rates.  We  operate  also 
an  interurban  line  there,  and  there  was  a  complaint  from  a  borough 
on  the  interurban  line — not  against  the  6-cent  fare,  but  it  was  a 
repetition  of  a  complaint  which  the  commission  decided  10  years 
ago  nearly,  that  that  borough  was  discriminated  against,  because?  it 
paid  3  cents  to  get  to  Altoona,  when  the  borough  on  the  other  side 
only  paid  2  cents. 

The  Chairman.  How  many  years  had  that  company  been  profit- 
ably operating  under  a  5-cent  fare? 

Mr.  TiNGLEY.  Well,  of  course,  sir,  it  had  a  very  heavy  percentage 
of  4-cent  fares  prior  to  April,  1917.  Oh,  that  road  was  built— 
well,  as  a  matter  of  fact,  the  lines  in  the  city  of  Altoona  were  origi- 
nally a  horse  railroad.  They  were  electrified,  I  think,  in  about  1893. 
The  interurban  lines  were  built  about  the  same  time,  and  they  have 
always  shown  a  reasonable  return.    They  have  never  paid 

The  Chairman.  What  dividends  had  you  been  paying,  upon  the 
average  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK.   373 

Mr  TiNGLEr.  Why,  I  would  say-and,  again,  I  am  speaking  from 
memory— it  would  average  about  somewhere  between  b  and  7  per 

Commissioner  Sweet.  On  the  common  stock? 

Mr.  TiNGLEY.  There  is  only  one  class  of  stock. 

The  Chairman.  Did  you  also  lay  up  a  surplus? 

Mr.  Tingley.  We  had  some  surplus;  yes,  sir. 

The  Chairman.  What  was  the  extent  of  that  ^ 

Mr.  TiNGLEY.  I  could  not  answer  that  offhand,  sir.  -      , , 

The  Chairman.  Did  you  likewise  set  aside  a  depreciation  fund  i 

Mr.  TiNGLEY.  Yes,  sir.  ir    i.  i.  4.^.^*^  fV.of 

The  Chairman.  Have  you  made  a  reasonable  effort  to  protect  that 
situation  and  take  care  of  this  large  increase  m  operating  costs  ^ 

Mr.  TiNGLEY.  That  road,  sir,  has  the  reputation  of  bemg  one  of 

the  best-managed  roads  in  the  State  of  Pennsylvania ;  so  much  so 

Sat  when  the  property  over  in  Johnstown,  about  40  miles  away,  got 

nto  trouble,  the  citizens  and  stockholders  there  came  over  and  as^d 

us  if  we  would  not  come  down  to  Johnstown  and  straighten  theift  out. 

The  Chairman.  Have  you  given  any  consideration  to  the  use  ot 

^r^'TrnGLETVes,  sir;  we  have.  There  are  two  or  three  questions 
involved  in  the  one-man  car.  We  have  not  felt  that  it  solved  all  of 
our  questions.  In  the  first  place,  for  a  company  of  that  size,  it  would 
involve  a  very  considerable  expenditure  of  money  to  scrap  rolling 
stock  in  thoroughly  good  operating  condition  and  replace  it  with 
new  rolling  stock.    In  the  second  place,  Altoona  is  a  mountain  town. 

The  Chairman.  What  is  that?  -i         a    ^  t 

Mr.  TiNGLEr.  A  mountain  town,  with  very  severe  grades.  And  1 
am  not  vet  satisfied  in  my  own  mind  as  to  the  advisability  of  operat- 
ing a  car  with  one  man  only  on  it  under  those  circumstances. 

Commissioner  Sweet.  What  kind  of  power  do  you  use  there? 

Mr.  TiNGLEY.  Overhead  trolley.  ^  j         * 

'    Commissioner  Sweet.  I  mean  how  is  the  power  generated— water 

^^Mn  TiNGLEY.  Oh,  coal.    There  is  no  water  power  in  that  part  of 

*  Commissioner  Sweet.  You  get  your  coal  cheaper  than  they  do  in 
most  places;  do  you  not? 

Mr.  TiNGLEY.  Coal  is  cheap ;  yes,  sir.  ^.       -.  o 

Commissioner  Sweet.  What  kind  of  coal  do  you  use— anthracite  ? 

Mr.  T  ngley.  Bituminous.  .  . 

Commissioner  Sweet.  Is     that     purchased    m     the     immediate 

^^  Mr  TiNGLEY.  Yes,  sir ;  within  15  miles  of  the  power  plant 

Commissioner  Sweet.  How  do  your  prices  compare  with  your 

prices  in  Wilmington?  .        .     ,    .  41, 

Mr.  TiNGLEY.  Well,  I  think  the  difference  m  price  between  Altoona 

and  Wilmington  is  about  $2.  i.  x     ^-  i      j     i.-       • 

The  Chairman.  Did  you  have  to  make  a  substantial  reduction  m 
the  operating  cost  before  it  made  you  able  to  reduce  your  rates? 

Mr.  TiNGLEY.  Yes,  sir.  . 

The  Chairman.  What  has  been  your  percentage  increase  m  your 
operating  costs  since  the  war?  ^,    ^    ^       ,     . 

Mr.  Tingley.  I  could  not  answer  that  offliand,  sir. 


374      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION*. 

The  Chairman.  Have  you  substantially  the  same  number  of 
employees  ? 

Mr.  TiNGLEY.  Or  more.  There  has  been  no  radical  change  in  the 
number  of  employees  in  the  car  service.  Of  course,  during  the  war 
period  there  was  a  shortage  of  labor,  and  their  shop  force  and  track 
force  were  somewhat  depleted,  and  the  extra  list  was  somewhat 
depleted,  but  that  is  coming  back  again. 

Tlie  Chairman.  These  rates  were  allowed  by  the  Public  Service 
Commission  of  Pennsylvania  ? 

Mr,  TiNGLEY,  Yes,  sir.  That  is,  they  went  into  force  automatically, 
as  there  was  no  protest. 

The  Chairman.  Have  any  petitions  been  filed  with  that  commis- 
sion asking  for  a  reduction  of  those  charges? 

Mr.  TiNGLEY.  No,  sir;  the  community  is  entirely  satisfied  with  it. 

The  Chairman.  Do  you  feel  that  you  could  continue  with  these 
charges  a  ratlier  indefinite  period  without  any  public  protest? 

Mr.  TiNGLEY.  I  do;  yes,  sir. 

Mf.  Warren.  May  I  interrupt  just  a  minute,  Mr.  Chairman,  to 
gay  that  before  you  came  in  Mr.  Tingley  explained  the  situation 
there,  and  I  think  it  might  be  of  interest  to  you  to  turn  briefly 
to  it 

The  Chairman.  Well,  I  will  read  the  record.  I  would  not  ask 
him  to  repeat  it. 

Can  you  convenient]  v  file  with  us  a  statement  of  your  operating 
sheets  iov  the  years  1918,  1917,  and  1916? 

Mr.  TiNGLEY.  Yes,  sir. 

Tlie  Chairman.  And  with  that  a  statement  showing  the  increase 
in  dollars  in  the  wage  account,  for  fuel,  material  and  supplies. 

Mr.  TiNGLEY.  That  latter  is  rather  a  large  order,  sir. 

The  Chairman.  Is  it?  I  supposed  that  you  were  so  much  inter- 
ested in  that  that  you  had  it  all  at  your  fingers'  ends. 

Mr.  Tingley.  Well,  to  describe  it  in  that  fashion. 

The  Chairman.  I  do  not  want  you  to  go  into  too  much  detail,  but 
I  think  it  would  be  helpful  to  this  commission  if  you  had  some  con- 
crete figures  on  that  question.  It  is  one  thing  to  make  a  statement 
that  there  has  been  a  large  increase  in  the  cost  of  wages,  materials, 
supplies  and  fuel,  and  another  thing  to  have  the  figures  to  back  it 
up.  I  think  it  would  be  well  for  you  to  give  some  attention  to  that, 
Mr.  Warren. 

Commissioner  Sweet.  Is  the  Altoona  Co.  paying  legitimate  ex- 
penses now  and  any  more  than  that? 

Mr.  TiNGLEY.  In  1918,  it  earned  a  small  surplus — a  very  small 
surplus.  That  was  due  almost  entirely,  as  I  recall  the  figures,  to  the 
fact  that  it  leases  and  operates  the  electric-lighting  plant  in  the 
borough  of  Tyrone,  which  had  a  net  earning  of  about  $30,000. 

Mr.  Warren.  Do  you  mean  to  say  a  surplus  after  paying 
dividends  ? 

Mr.  TiNGLEY.  No,  sir. 

Mr.  Warren.  A  surplus  over  fixed  charges? 

Mr.  TiNGLEY.  A  surplus  over  fixed  charges. 

Commissioner  Sweet.  That  was  the  combined  property? 

Mr.  TiNGLEY.  Yes,  sir. 

Commissioner  Sweet.  The  lighting  property  would  be  somewhat 
more  profitable? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      375 

Mr.  TiNGLEY.  Ye.s,  sir. 

Commissioner  Sweet.  Than  the  traction  property? 

SmSSer  Gadsden.  Mr.  Tingley,  will  you  give  the  commis- 
sion some  idea  of  the  increase  in  the  freight  rate  on  coal,  we  will  say, 

put  on  by  the  Government?  i   ht     /-<    i  ^«« 

Mr.  TiNGLEY.  I  could  not  give  you  that  offhand,  Mr.  Cradsden. 
Commissioner  Gadsden.  You  could  not? 

Mr.  TiNGLEY.  No.  ,  i.    1  ^v    i.         ^,^ 

The  Chairman.  In  your  experience,  do  you  feel  that  your  com- 
pany could  get  along  all  right  under  the  commission  form  of  regu- 
fation,  wherlthat  body  ha^  the  i>ower  to  fix  just  and  reasonable  rates, 
according  to  the  operating  conditions? .       ^     .„  ^  .     .,  . 

Mr  TiNGLEY.  That  would  depend,  sir.  I  will  answer  you  in  this 
fashion:  Under  the  Pennsylvania  law  and  under  the  New  Jersey 
law,  with  one  slight  modification,  yes,  if  you  could  persuade  those 
bodies  to  act  with  reasonable  promptness. 

The  Chairman.  You  have  difficulty  in  getting  pix^mpt  action  from 

your  commissions?  ^         .    •       ,  4.^  „„o 

Mr  TiNGLEY.  The  Pennsylvania  Commission  has  no  power  to  sus- 
pend *a  rate  until  after  a  complaint  and  hearing,  or  upon  its  own 
motion  and  hearing,  and  consequently  the  rate  may  become  elective 
in  30  days  after  you  file  it.  In  New  Jersey  the  commission  has  the 
power,  and  has  exercised  it  very  freely,  to  suspend  the  rates  for  liO 
davs  The  result  is  that  the  commission  was  small  until  mcreased  by 
the  last  session  of  the  legislature-only  three  members,  and  it  was 
increased  to  five-^nd  the  calendar  was  crowded,  and  it  took  >ou 
anywhere  from  six  to  nine  montlis  to  get  a  decision.  In  the  mean- 
time the  patient  died.  .      .    T     .      XT         T  r9 

The  Chairman.  Well,  did  the  patient  die  in  New  Jersey  ? 

Mr  TiNGLEY,  Well,  I  have  in  mind  two  with  which  i  am  con- 
nected which  would  have  died  if  the  holding  company  had  not  gone 
down  into  its  surplus  account  to  the  extent  of  three  or  four  hundred 
dollars  and  put  it  out  to  take  care  of  it  If  they  had  been  mde- 
pendently  operated  properties,  they  would  have  been  m  the  hands 
of  a  receiver  within  60  days  of  the  application  to  the  commission  for 

^^The  Chairman.  But  your  experience  in  Pennsylvania  has  not  been 

unsatisfactory.  ^  ,       •    i       •  i„ 

Mr  Tingley.  No,  sir.  I  think  the  Pennsylvania  law  is  as  nearly 
a  iust  and  equitable  law  as  can  be  drawn  to  both  the  companies  and 
the  public,  with  possibly  the  exception,  from  the  public  point  of 
view,  that  their  power  over  security  issues  is  limited.  ,    ^ 

The  Chairman.  Is  your  criticism  of  the  New  Jersey  Commission 
based  upon  its  judgment  in  passing  upon  rate  questions  or  simply  on 
its  delay  in  making  an  order  ? 
Mr.  Tingley.  Its  delay  in  making  an  order. 

Commissioner  Sweet.  The  only  very  important  difference,  1  take 
it,  is  that  in  New  Jersey  the  raise  is  not  made  pending  an  investi- 
gation and  decision. 

Mr.  Tingley.  Yes.  .  •     -.  •  o 

Commissioner  Sweet.  Whereas  in  Pennsylvania  it  is?  ^ 
Mr  Tingley.  Yes,  sir.    That,  I  think  you  will  appi^ciate  there,  is 
the  just  process,  because  the  commission  can,  on  complaint,  say  to 


376      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

the  railroad  company,  «  You  must  issue  rebate  slips  for  this  ";  to  the 
electnc  light  and  power  company,  "  You  must  stamp  your  bills  to 
the  effect  that  if  this  rate  is  approved  you  will  refund  it,"  and  so  on: 
and  the  consumer  is  not  hurt.  The  consumer  can  get  his,  but  if  the 
rate  is  suspended,  even  though  it  be  declared  just  and  reasonable  at 
the  end  of  the  hearing,  six  months  hence,  the  company  has  lost  that 
money  and  can  never  get  it  back. 

The  Chairman.  There  has  been  a  good  deal  of  discussion  here 
about  the  cost-of-service  plan.  In  your  judgment,  which  system 
will  give  the  greatest  public  satisfaction— the  increase  of  a  rate  auto- 
matically under  your  cost-of-service  plan  as  your  costs  of  operation 
go  up,  or  an  increase  ordered  by  a  State  commission  after  a  hearing 
in  which  parties  can  be  heard  ? 

Mr.  TiNGLEY.  I  have  had  no  experience,  sir,  with  the  cost-service 
plan.  I  can  only  look  at  it  from  the  outside,  and  as  I  have  seen  it 
working  in  Cleveland  from  the  outside,  it  seems  to  me  that  the  com- 
pany there  does  not  get  the  full  benefit  that  they  were  supposed  to 
get.  In  other  words,  the  tendency  of  the  council  that  regulates  this 
reserve  fund  is  to  keep  down  the  allowance  for  maintenance  and  other 
purposes  and  to  avoid  an  increase  in  fare  which  would  be  unaccept- 
able to  the  public.  *  ^ 

The  Chairman.  Of  course,  you  are  answering  these  questions  from 
the  standpoint  of  the  company? 
Mr.  TiNGLEY.  Yes. 

The  Chairman.  I  am  trying  to  get  your  point  of  view  from  the 
public  standpoint. 

Mr.  TiNGLEY.  Well,  I  do  not  believe,  sir,  it  will  make  very  much 
difference  from  the  public  standpoint,  one  way  or  the  other.  Human 
natiire  is  very  much  the  same  everywhere.  We  are  all  a  little  bit 
selhsh,  and  we  want  to  get  what  we  get  as  cheaply  as  we  can  get  it; 
and  the  public  will  feel  temporarily— it  won't  last  long— that  some 
injustice  has  been  done  when  the  fare  is  increased,  no  maUer  whether 
It  comes  through  automatic  ordinance  or  through  an  order  of  the 
commission. 

The  Chairman.  Is  it  not  pretty  well  understood  that  our  people 
feel  very  much  better  if  they  get  something  off  their  stomachs  once 
m  a  while  through  a  proper  tribunal  ? 

Mr.  TiNGLEY.  Oh,  sure.  I  think  there  is  no  question  about  that, 
and  I  believe  thoroughly  that  in  those  hearings  they  should  be  given 
the  greatest  possible  latitude  to  ease  their  minds. 

The  Chairman.  But  there  are  no  hearings  provided  for  in  the  cost- 
of-service  plan. 

Mr.   TiNGLEY.   No. 

Commissioner  Gadsden.  Mr.  Tingley,  is  it  not  a  fair  criticism  of 
the  commission  regulation  that  there  is  delay  in  arriving  at  the 

Mr.  TiNOLEy.  Yes,  sir. 

Commissioner  Gadsden.  And  while  the  opportunity  is  being  af- 
forded the  public  to  get  something  off  its  stomach,  the  railway  is 
paying  for  it?  •' 

Mr.  TiNOLET.  Yes,  sir ;  that  is  true. 

Commissioner  Gadsden.  Now,  if  that  could  be  remedied,  a  very 
serious  criticism  of  commission  regulation,  so  far  as  the  raUways  are 
concerned,  would  be  disposed  of,  would  it  not  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      377 

Mr.  TiNGLEY.  You  can  escape  that  by  applying  the  provisions  of 
the  Pennsylvania  law  to  the  case.   .  ,        t  a*„t«o 

The  Chairman.  That  is  the  law  in  quite  a  number  of  States. 

CommSer  Meekeb.  Is  your  criticism  of  the  Cleveland  so.  called 
service-at-cost  plan  that  it  is  not  a  service-at-cost  plan?  It  it  does 
not  provide  enough  for  depreciation,  it  certainly  is  not  a  service-at- 

''°Mr^'TiNOLET.  No,  sir;  and  it  is  exceedingly  difficult  to  get  a  true 
service-at-cost  plan,  because  there  always  will  be  that  tendency  of  the 
city  council  to  Wp  down  the  allowance  for  these  expenditures. 

Commissioner  Meeker.  Do  you  think  that — - 

Mr  Tingley  You  see  now,  under  the  Cleveland  plan,  they  are 
allowed  so  S  a  ear-mile  for' maintenance.  Now,  they  h^e  always 
starved  the  company  on  that  maintenance  item.  If  you  take  their 
annual  report  from  the  time  of  the  inception  up  to  the  present  time 
and  comjarrtheir  actual  expenditures  with  the  allowances  made  for 
those  purposes,  you  will  find  that  in  practically  every  year  since  that 
tS^as  instituted,  the  actual  expenditures  have  exceeded  the  allow- 

^^Coiss^er  MEEKER.  Do  you  think  that  is  likely  to  be  the  case  in 
any  service-at-cost  plan  that  might  be  devised «  . 

Mr  Tingley.  Well,  there  is  the  most  notable  example  of  the 
service-at-cost  plan,  and  that  is  the  way  it  has  worked  there. 

Commissioner  Meeker.  Do  you  think  commission  control  as  under 
thfSsySa  law  would  be  a  satisfactory  service-at-cost  plan  so 

1  '4-9 

Mr'  TiNGi^Y^I  do,  sir ;  for  the  simple  reason  that  in  the  service-at- 
cost  plan  the  city  council  or  the  city  authorities,  by  whatever  name 
they  are  called,  kre  prosecuting  attorney,  judge,  and  jury;  and  the 

''"Mr  wTrr^n  MrSK  would  not  that  objection  be  lessened  m 
caSJ  ofihe  Sinisiration  of  the  service-at-cost  bjr  the  Stat^.commis- 
sLn  in  cases  where  the  State  commission  has  sufficient  jurisdiction,  to 
change  this  so-called  contractual  franchise  i 

Mr.  TiNGLEY.  I  do;  yes,  sir.  .    •   •  ^      -^      vu     *.  fV.of 

Mr.  Warren.  They  would  be  apt  to  administer  it  without  that 

selfish  purpose. 

Mr  TiNGLEY.  Yes,  sir,  ,         .  .     x    j.u 

Mr.  Warren.  That  is  bound  to  influence  the  other  party  to  the 

^^Mr^ TiNGLEY.  Yes,  sir;  but  then  you  are  back  t»  State-commission 

"^^lli^  Warren.  Yes;  but  there  might  be  a  State-commissioji  regula- 
tion with  an  automatic  sliding  scale. 

Mr.  TiNGLEY.  Yes,  sir.  ,  ,      .,     o^  x 

Mr  Warren.  When  once  approved  by  the  Stat«  commission 

Mr  TiNGLEY.  If  that  is  workable  under  the  State  laws.  I  am  not 
a  lawyer,  but  I  am  advised  that  that  could  not  be  done,  for  example, 
in  the  State  of  Pennsylvania.  ,     •  i  x- 

Mr  Warren.  You  mean  without  more  legislation. 

Mr  Tingley.  Without  more  legislation.  ...  .. 

Mr  Warren.  But  I  rather  think  this  commission  is  proceeding 
somewhat  on  the  theory-we  certainly  are-that  legislative  obstacles 

160643*— 20 25 


i 

I* 


378       PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION. 

should  not  interfere  with  our  consideration  of  the  best  method,  be- 
cause these  contractual  franchises  are  an  absolute  obstacle  to  the  serv- 
ice-at-cost  plan,  unless  the  parties  are  willing  to  change  it. 
Mr.  Tin  CLE  Y.  Yes,  sir. 

Commissioner  Sweet.  How  many  members  are  there  on  the  Penn- 
sylvania Commission? 

Mr.  TiNGLET.  Seven. 

Commissioner  Sweet.  How  are  they  appointed? 

Mr.  TiNGLEY.    By  the  governor,  for  10  years. 

Commissioner  Sweet.  Is  there  any  provision  in  regard  to  their  not 
all  being  from  one  political  party  ? 

Mr.  TiNGLEY.  No,  sir. 

Commissioner  Sweet.  How  do  they  stand  at  the  present  time? 

Mr.  TiNGLEY.  At  the  present  time  there  are,  I  think,  six  Republi- 
cans and  one  Democrat. 

Commissioner  Sweet.  The  Democrat  leavens  the  whole  lump,  I 
suppose  ?    [Laughter.] 

Conunissioner  Meeker.  It  is  hard  to  find  a  Democrat  in  Pennsyl- 
Tania. 

Mr.  Warren.  It  sounds  like  a  Pennsylvania  situation,  doesn't  it? 
Mr.  Tinoley.  As  near  as  I  can  recall,  there  always  has  been  one 
Democrat  on  the  commission. 

The  Chairman.  I  was  wondering  if  they  would  be  as  liberal  as 
that  down  in  Texas. 

Commissioner  Sweet.  How  many  members  are  there  on  the  N«w 
Jersey  CommivSsion? 

Mr.  TiNGLEY.  Five. 

Commissioner  Sweet.  And  what  is  the  situation  there  ? 

Mr.  TiNGLEY.  Well,  at  the  present  time,  there  are  four  Republicans 
and  one  Democrat.  Up  until  a  year  ago,  when  the  commission  was 
composed  of  three,  there  were  two  Democrats  and  one  Republican. 

Commissioner  Sweet.  You  say  their  calendar  was  somewhat  over- 
loaded, so  that  they  did  not  get  on  with  their  work. 

Mr.  TiNGLEY.  Yes,  sir.  Of  course,  the  New  Jersey  Commission  has 
rather  an  insufficient  appropriation  for  their  work! 

Commissioner  Sweet.  Has  there  been  any  difficulty  of  that  kind  in 
Pennsylvania  ? 

Mr.  TiNGLEY.  No,  sir. 

Commissioner  Sweet.  The  Pennsylvania  system  has  a  tendency  to 
give  the  commission  less  work,  does  it  not? 

Mr.  TiNGLEY.  Yes,  sir. 

Commissioner  Sweet.  Than  the  New  Jersey  system  ? 

Mr.  TiNGLEY.  Yes,  sir;  and  then,  further,  the  commission,  of 
course,  practically  never  sits  in  a  body  except  to  hear  argument. 
Your  case  is  never  argued  at  the  time  you  take  the  testimony.  The 
commission  sits  once  a  month  to  hear  argument.  In  Pennsylvania, 
the  taking  of  testimony  is  apportioned  among  the  seven  commis- 
sioners ;  and  if  the  calendar  gets  a  little  congested  they  can  deputize 
their  attorney  or  one  of  their  engineers  as  an  examiner  to  take  the 
testimony;  and  you  can  have  8  or  10  hearings  going  on  at  once. 
That  is  not  true  in  New  Jersey.  They  usually  sit  as  a  body.  Occa- 
sionally they  will  split  up  and  sit  one  eommissioner  at  a  time. 

(.  ommissioner  Sweet.  The  Pennsylvania  Commission  keeps  pretty 
well  up  with  its  work;  does  it? 


•      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      379 

!Mr.  TiNGLEY.  Yes.  ,  ,  .  ,  j        « 

Commissioner  Sweet.  So  that  the  delays  which  you  regard  as  a 
serious  objection  do  not  occur  so  much  in  Pennsylvania? 

Mr.  TiNGLEY.  No,  sir.  ,    ,  ./.  j-  -^^  +u^ 

The  Chairman.  New  Jersey  is  so  small  that  if  yo^^^iivi^^  the 
commission  up  and  have  hearings  in  different  parts  of  the  State,  it 
might  find  itself  outside  of  its  own  domain.     [Laugliter.J 

Mr.  TiNGLEY.  New  Jersey  is  peculiar  in  this  situation,  too--that 
thev  have  three  great  big  companies :  the  Public  Service  Railway, 
th^Public  ServiJ  Electrtc,  and  the  Public  Service  Gas,  which  over- 
shadow  outside  of  the  steam  roads,  everything  else  in  the  htate. 
wffi  small  companies  serving  them,  still  those  three 

bg  companies  overshadow  all  the  rest  pi  the  State,  and  naturally 
get  a  larger  percentage  of  the  commission's  time  tlian  some  of  the 
ntliprs  think  thev  are  entitled  to. 

Commissioner  Sweet.  Ai^  you  going  to  tell  us  about  some  of  those 
other  properties  that  you  are  connected  with' 

Mr   TiNGLET.  Well,  I  could  go  on  for  a  considerable  length  of 

time,  if  it  is  interesting,  sir.  ,  ,      ^  ^  * 

Mr  Warren.  I  would  like  to  ask  you  to  go  on  at  least  to  one  mat- 
ter-as to  the  increase  of  rates,  and  the  eifect  of  the  increase  of  rates 
on  the  traffic.    You  have  mentioned  thi-ee  now.    Altoona  was  the  last 

one.  ,^ 

Mr  TiNGLET.   xes.  .  ,  ,  . 

Mr'  Warren.  If  there  are  other  instances  where  you  have  in- 
creased rates,  I  would  like  to  have  you  inform  the  commission  as  to 

the  effect  of  them.  .       .,     •  •        i. 

Mr  TiNOLET.  In  all  of  the  other  properties,  the  increases  m  rat«s 
have  not  produced  any  diminution  m  travel,  with  the  exception  of 
lo  iet  111  There  the  city  itself  is  small.  On  the  int«rurban  line 
extending'from  Joliet  to  Chicago,  the  increase  to  the  maximum  rate 
of  2  centi  a  mile  under  tickets  and  3  cents  a  mile  under  cash,  has  not 
nroduced  much  if  any  effect  on  the  travel.  We  have  continued  to  get 
CnornaT  increase.^  In  the  city  of  Joliet,  however  where  we  went 
f  oni  a  5-cent  fare  to  a  7-cent  fare,  owing  to  the  smallness  of  the  city 
and  the  infrequent  service  which  the  population  would. sustain,  there 
has  been  a  substantial  diminution  in  travel,  ^ow,  just  what  the 
nercentage  was  I  could  not  tell  you  offhand.  It  has  produced  an  in- 
crease in  gross  revenue,  but  not  at  all  proportional  to  the  increase  in 

'^^Commissioner  Sweet.  In  Joliet,  was  there  a  popular  dissatisfac- 

'Mr  TiNGLEY.  No,  sir.  There  was  some.  There  was  an  effort  on 
the  part  of  one  or  two  labor  agitators  to  make  it  a  political  issue,  and 
thev  took  a  complaint  to  the  public-service  commission,  and  the  rate 
was  sustained.  Then  they  took  it  into  the  mayoralty  election,  and 
thev  were  defeated ;  and  since  then  we  have  heard  nothing  fi;om  it. 
Commissioner  Sweet.  But  even  thei-e,  as  I  understand  it,  there 

has  been  an  increase  in  revenue.  ,  ^i.     „u       4. 

Mr.  TiNGLEY.  There  has  been  an  increase  in  revenue,  though  not 
nearly  proportional  to  the  increase  in  rate. 

Mr.  Warren.  But  in  each  instance,  the  increase  in  revenue  has 

Mr.  TiNGLEY.  Has  been  proportional  to  the  increase  in  rate. 


i 


:  ; 


J 


380       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     ' 

Mr.  Warren.  So  you  would  say  to  the  commission,  would  you,  Mr» 
Tingley — because  I  think  this  is  an  important  point  in  the  investiga- 
tion, at  least  it  seems  so  to  me — that  the  increase  in  rates  is  justified 
as  a  measure  by  which  to  increase  the  revenue  of  these  companies 
which  are  so  hard  pressed  now? 

Mr.  Tingley.  I  think  it  is  the  only  quick  remedy  that  can  be  had, 
sir. 

Mr.  Warben.  And  you  have  confidence  in  its  effectiveness? 

Mr.  Tingley.  Yes,  sir. 

Commissioner  Meeker.  Can  you  file  a  statement  covering  that 
Joliet  situation? 

Mr.  Tingley.  Yes,  sir. 

Commissioner  Meeker.  Along  with  the  other  statements. 

Mr,  Tingley.  Yes,  sir. 

Mr.  Warren.  I  am  very  much  obliged  to  you,  Mr.  Tingley,  and 
unless  the  commission  has  some  further  questions,  I  will  ask  that  you 
be  excused. 

The  Chairman.  You  are  excused. 

Mr.  Warren.  Mr.  Barry,  will  you  take  the  stand,  please? 

STATEMENT  OF  ME.  JOHN  G.  BARRY. 

The  Chairman.  What  is  your  name,  sir? 

Mr.  Barry.  John  G.  Barry,  sales  manager  of  the  General  Electric 
Co.,  Schenectady,  N.  Y. 

Mr.  Warren.  This  next  witness,  Mr.  Chairman— the  next  three 
witnesses  will  be  manufacturers,  producing  supplies  very  largely  used 
by  street  railways.  I  have  no  objection  to  your  askmg  them  any 
questions  to  aid  m  your  investigation,  but  I  am  merely  calling  them 
for  the  purpose  of  giving  you  information  as  to  the  increased  cost 
of  such  supplies,  and  not  as  experts  on  street-railway  methods. 

The  Chairman.  We  are  very  glad  to  have  that  testimony. 

Mr.  Warren.  Mr.  Barry,  your  full  name? 

Mr.  Barry.  John  G.  Barry. 

The  Chairman.  And  what  is  your  occupation? 

Mr.  Barry.  I  am  sales  manager  for  the  General  Electric  Co.,  with 
headquarters  at  Schenectady,  N.  Y. 

Mr.  Warren.  And  you  have  been  with  that  company  how  long? 

Mr.  Barry.  Twenty-eight  years. 

Mr.  Warren.  In  your  position,  is  it  a  part  of  your  duty  to  fix  all 
prices  of  railway  supplies — electrical  supplies — produced  by  the  Gen- 
eral Electric  Co.  ? 

Mr.  Barry.  That  is  a  portion  of  my  duty. 

Mr.  Warren.  You  are  familiar  with  the  course  of  the  prices  of 
electrical  supplies  purchased  by  electric  railways,  are  you  ? 

Mr.  Barry.  Yes. 

Mr.  Warren.  I  think  perhaps,  Mr.  Barry,  you  should  go  right  on 
without  my  questioning  you  and  tell  the  commission  how  the  chief 
articles  are  sold,  what  the  prices  are,  and  how  they  have  increased. 

Mr.  Barry.  Yes;  I  have  prepared  certain  data  here  on  railway 
motors  and  car  equipment.  By  "  car  equipment "  I  me^n  all  of  the 
electrical  material  that  is  used  on  a  car,  including  motors,  controllers, 
trolleys,  cable,  circuit-breakers,  and  so  forth. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      381 

Tn  1014  the  selling  price  of  a  four-motor  equipment,  consisting  of 
25  horsepower  motofs,'^with  control,  was  $1,450.  In  1915,  it  was  the 
tame  In  1916,  it  had  increased  to  $1,850,  or  an  increase  of  28  per 
ce"t  In  1917,'the  price  was  $2,275,  an  -^-f^^^^^^^^ 
the  1915  price.  In  1918,  the  selling  price  was  $2,900,  or  an  increase 
of  200  per  cent  over  the  1914-15  price. 

Mr  Warren.  That  blue  print  shows  that  m  graphic  form 
Mr.  Barry.  This  shows  the  increase  from  year  to  year,  but  I  have 
read  it  off  there  from  the  statement,  showing  the  selling  prices.    Ihis 

shows  it  in  percentages.  .    .  ^*  +v.«  uina 

Mr.  Warren.  I  just  handed  the  commission  my  copy  of  the  blue 

^'m!;  Barry.  Yes.     Now,  that  particular  size  of  equipment  is  in- 
dicative  of  the  prices  of  all  car  equipment  of  all  sizes 

Mr   Warren.^I  notice  that  your  figure  for  1919  shows  a  slight 

"^X  bIrry!" Tes.  In  the  early  part  of  1919,  there  was  a  drop  in 
Drices  of  certain  materials  entering  into  the  manufacture  of  this 
Sment  s-^^  as  copper.  Copper  dropped  from  23  cents  -hich 
was  the  price  established  by  the  Government  during  the  war  time- 
that  is,  the  latter  part  of  the  war  period  Copper  dropped  to  be- 
tween  15  and  16  cents  during  February  or  March  of  this  year.  Steel 
also  went  off  some.  That  caused  a  reduction  m  the  pnces  of  car 
Suipment,  although  not  anything  like  the  .i^^f-f^that  had  gone 
into  effect,  because  there  was  no  reduction-m  fact,  there  was  an  in- 

crease  in  labor  costs.  ,.,         .  .„  ,       ^ 

Now,  at  the  present  time,  it  looks  to  me  like  prices  will  be  some- 
what iAcreased,  due  for  one  reason  to  the  fact  that  copper  has  now 
gone  back  from  between  15  and  16  cents  to  22  to  23  cents  and  copper 
fs  one  of  the  largest  raw  materials  that  we  use  m  electrical  apparatus. 
I  am  informed  that  copper  h^^t^^^enji  very  rapid  and  sudden 
advance  in  the  past  10  days,  going  from  18  to  22.5  or  23  cents 

The  Chairman.  AVhat  has  become  of  this  vast  quantity  of  copper 

which  the  Government  had  in  store,  Mr.  Barry?        ,     .  .,    .     ^„„ 

Mr  Barry  Well.  I  understand  that  a  great  deal  of  that  copper 
has  already  been  purchased— oh,  that  the  Government  had  in  store, 

you  mean? 

The  Chairman.  Yes.  ,    ^  ..  „.j.„j  :„ 

Mr  Barry.  Well.  I  don't  know,  I  am  sure  [  but  it  was  reported  m 
the  earlv  part  of  this  week  that  there  was  a  very  large  amount  of 
copper  on  hand  in  the  hands  of  producers,  but  I  believe  that  a  very 
considerable  portion  of  that  has  already  been  bought  for  foreign  use 

Mr  Warren.  In  other  words,  the  market  has  ca^ight  up  with  that 
temporarv  drop,  due  to  the  armistice,  in  the  price  of  copper  entirely? 

Mr  Barry.  Yes;  copper,  as  I  say,  is  back  to  the  figure  where  it  was 
nut  bv  the  Government  at  the  time  the  armistice  was  declared. 

Mr.  Warren.  Is  there  anything  further  that  you  want  to  say  on 

Mr  B^rry.  Now,  the  next  article  that  I  have  prepared  data  upon 
is  the  electric  motors  used  by  quite  a  number  of  electric  railways, 
particularly  interurban  lines;  and  these  have  increased  from  the 
1914  basis  100  per  cent.    In  1915,  they  increased  79  per  cent.    In 

,   ml,  Se  increaL  was  31  per  cent,  and  ^^^^^^^^^.'^^^'Z'lZZl! 
per  cent.    In  1918,  it  was  101  per  cent;  and  m  1919  it  is  97  per  cent. 


382       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  What  was  the  first  figure  there? 

Mr.  Bakry.  In  1014  the  price  was  $13,700. 

The  Chairman.  $15,700? 

Mr.  Barry.  $13,700. 

Commissioner  Sweet.  And  it  is  what  now  ? 

Mr.  Barry.  $27,000 ;  that  is,  for  a  locomotive  of  50- ton  weight. 

Mr.  Warren.  There  is  a  slight  drop,  I  notice  there,  in  1919,  as 
there  was  in  the  case  of  car  equipment.  Is  that  probably  due  to  the 
same  thing? 

Mr.  Barry.  On  all  of  this,  you  win  find  that  there  has  been  a  slight 
drop  in  the  first  few  months  of  1919.  That  is  applicable  to  all  elec- 
trical material,  I  think. 

Mr.  Warren.  And  in  your  opinion,  it  is  only  temporary  ? 

Mr.  Barry.  In  my  opinion,  it  is  only  temporary. 

The  Chairman.  Do  you  mean  by  that  that  these  high  costs  of 
locomotives  and  other  material  will  continue  for  a  long  period  of 
years  ? 

Mr.  Barry.  Well,  I  could  not  say  for  a  long  period  of  years,  but 
they  will  continue,  in  my  judgment,  for  at  least  a  year.  They  will 
continue  while  materials  are  at  the  price  they  are  now  and  while 
labor  is  at  the  price  at  which  it  is  now,  and  I  do  not  look  for  any 
reduction  in  either. 

The  Chairman.  Within  a  year? 

Mr.  Barry.  No,  sir. 

Mr.  Warren.  During  the  year? 

Mr.  Barry.  Within  a  year. 

Mr.  Warren.  Within  a  year. 

The  Chairman.  Do  you  expect  a  falling  off  in  the  price  of  ma- 
terials and  labor  after  the  year  has  passed? 

Mr.  Barry.  Well,  I  don't  know.  I  can  not  express  an  opinion  on 
that.  I  do  not  believe  labor  is  going  to  fall  off,  unless  the  cost  of 
living  falls  off  very  materially. 

Mr.  Warren.  WTiat  is  your  next  item? 

Mr.  Barry.  In  the  matter  of  power  apparatus,  the  electrical  com- 
panies furnished  a  huge  number  of  rotary  converters  for  substation 
operation.  These  rotarios  have  increased  very  substantially,  but  not 
to  the  marked  extent  of  car  oquipmont.  This  data  shows  that  in 
1914 — we  have  taken  as  an  example  a  300-kilowatt  rotary  convert- 
er— our  selling  price  was  $2,350.  In  1915,  it  was  $2,400.  In  1910, 
it  was  $2,900.  In  1917,  it  was  $8,875.  And  in  1918,  it  was  $4,225; 
and  that  price  practically  prevails  to-day — very  little  lower.  That 
means  an  increase  in  that  class  of  apparatus  of  79  per  cent  over  the 
1914  prices. 

Commissioner  Meeker.  How  do  you  explain  the  lower  rate  of  in- 
crease of  this  tvpe  of  apparatus  as  compared  with  the  other? 

Mr.  Barry.  The  explanation  of  that,  Mr.  Commissioner,  I  think, 
is  this,  that  in  certain  classes  of  apparatus  while,  of  course,  the  basic 
prices  of  materials — copper,  and  so  forth — would  be  the  same,  the 
percentage  of  labor  as  applied  to  certain  classes  of  apparatus  is  higher 
or  lower  than  in  other  classes.  The  percentage  of  labor  involved  in 
the  building  of  a  railway  rotary  converter,  the  percentage  of  the 
total  cost,  is  less  than  it  would  be  in  the  case  of  a' railway  motor. 

Commissioner  Meeker.  Then  it  is  the  labor  costs  that  make  the 
greater  increase  ? 


PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION.      383 

Mr  Barry.  Yes.  The  railway  companies,  of  course— many  of 
them— have  got  to  generate  their  own  current.  We  furnish  a  ma- 
chine known  as  a  steam  turbine  generator.  The  P™es  9^  this  class 
of  product  have  been  increased,  in  the  case  of  a  l^^^-J^^^owatt  tur- 
bine, from  a  price  of  $12,750  in  1914  to  $24,000  in  1918.     The  price 

is  $23,000  to-day.  .  .  xi         *     i     n;^« 

Commissioner  Meeker.  Do  these  prices  represent  the  actual  selling 

price,  or  are  they  the  list  prices? 

Mr.  Barry.  Oh,  these  are ,  ,  .    .  x    j-  *  « 

Commissioner  Meeker.  Are  these  prices  subject  to  discounts? 

Mr.  Barry.  No  ;  these  are  actual  net  prices  on  this  particular  piece 

of  apparatus.  .  ,    n    j.  ■    r.9 

Commissioner  Meeker.  And  that  is  true  of  all  of  your  prices? 

Mr.  Barry.  That  is  true  of  all  of  these  prices.  ^      .   .     -.  x 

Commissioner  Meeker.  So  the  discounts  would  not  enter  into  it  to 

explain  any  of  the  difference  in  the  rate  of  inci-easem  prices j 

Mr   Barry.  No;  these  are  all  net  prices  that  I  cite,  and  i  have 

taken  a  certain  specific  capacity  of  machine,  and  all  the  machines  are 

of  the  same  kind.  ,  _  ^  . ,      ,  ,^ 

On  motor  generator  sets,  which  are  also  used  to  a  considerable 

extent  by  railway  companies,  our  prices  increased  f mm  1^14,  on  a 

particular  machine,  costing  $3,000,  gradually  up  to  1919,  to  $6,200, 

or  72  per  cent.  ,       .,  1 1  i    i  •     • 

Commissioner  Meeker.  May  I  suggest  that  it  would  help  us  m  in- 
terpreting these  graphs  that  you  put  in,  if  you  give  us  the  actual 
prices  as  well  as  the  percentages?  . 

Mr.  Warren.  Yes.     Can  you  leave  your  copies  i 
Mr.  Barry.  Oh,  yes;  I  will  leave  them.  . 

Mr  Warren.  I  was  following  your  testimony  with  this  copy. 
Commissioner  Meeker.  As  I  underetand  it,  we  have  the  percentage 
of  increase  here,  but  we  have  not  the  actual  prices  except  as  we  have 

written  them  off.  .  .         ,  i       •        4.i,^ 

Mr.   Barry.  Here  is  the  explanation  of  each  one,  showing  the 

actual  amounts.  ^  ,    ,  *      „  i ^: 

Commissioner  Sweet.  Mr.  Barry,  I  suppose  it  is  none  of  o^i^^bf  }; 
ness  what  profit  the  General  Electric  Co.  makes  on  this  stuff,  but  if 
you  do  not  object  to  telling  us,  I  would  like  to  know  whether  the 
profit  has  been  substantially  the  same  during  this  period  from  1914 

^^Mr   Barry.  I  can  assure  you  that  the  profits  have  not  been  any 
greater  during  the  war  period  than  they  were  during  the  previous 
^ears- that  is,  the  percentage  of  profit  obtained  by  us.         ^ 
^  Commissioner  Sa'^et.  In  the  profit  on  a  percentage  basis,  do  you 

mean  a  percentage  cost?  ,,.  .  ,   . 

Mr.  Barry.  We  usually  figure  our  selling  price  on  a  certain  per- 

centasre  over  our  cost.  .         Ci.  •     inio 

Commissioner  Sweet.  Then  in  dollars  the  actual  profit  m  1919 

would  be  greater  on  some  of  this  material  than  it  would  be  on  the 

^""aIi-^bIrr^^^  in  dollai-s,  the  profit  would  be  greater,  because  your 
selling  price  has  been  increased.    If  you  sell  your  machine  m  19U 
for  $2,000,  you  get  a  cei-tain  amount  of  profit 
Commissioner  Sweet.  I  understand. 


I 


384       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Mr.  Barry.  And  if  you  sell  it  in  1918- 


Commissioner  Sweet.  You  would  get  the  same  percentage  of 
profit? 

Mr.  Barry  (continuing).  The  same  percentage  of  profit  would 
apply.     ... 

Commissioner  Sweet.  But  it  would  be  more  proportionately  in 
dollars? 

Mr.  Barry.  Yes,  sir. 

Mr.  Warren.  That  is,  I  suppose,  because  it  requires  much  more 
working  capital  to  produce  it  ? 

Mr.  Barry.  Yes,  it  does ;  and  the  volume  of  business  has  dropped 
off  very  substantially.  While  you  get  more  profit  on  a  single  ma- 
chine, you  have  been  selling  a  great  many  less  machines. 

The  Chairman.  You  have  given  some  very  striking  figures  here, 
showing  the  increase  in  cost  of  machinery  and  so  forth,  during  the 
past  two  years  particularly. 

Mr.  Barry.  1  es. 

The  Chairman.  As  a  matter  of  fact,  have  you  sold  much  of  this 
equipment  to  the  utilities  during  this  period? 

Mr.  Barry.  We  have  prepared  figures  along  this  line,  showing 
that  in  a  normal  year — and  I  mean  by  a  normal  year  1912,  1913,  and 
1914 — our  company's  business  with  the  railway  companies  aggre- 
giited  from  eighteen  to  twenty  million  dollars  of  materials  and 
supply  pai"ts.  During  the  yeai-s  1917  and  1918,  our  business  with 
the  railway  companies  amounted  to  approximately  $9,000,000  per 
year.  In  other  words,  it  was  cut  to  less  than  half  in  money  amount, 
but  due  to  these  increases  in  the  selling  price,  the  output  of  this 
class  of  apparatus  was  reduced  to  about  25  to  30  per  cent  of  our 
normal  sales. 

The  Chairman.  That  is  what  I  expected. 

Mr.  Barry.  Now,  during  1917  and  1918,  whereas,  I  say  we  did 
business  up  to  about  $9,000,000,  a  considerable  amount  of  that  busi- 
ness was  financed  by  the  Emergency  Fleet  Corporation — where  equip- 
ment had  to  be  furnished  to  certain  roads.  A  good  example  is  the 
Philadelphia  Rapid  Transit  Co.  They  had  to  supply  about  125  or 
150  cars  additional  to  their  ordinary  equipment  to  supply  service  to 
the  Hog  Island  shipyard.  Now,  we  made  a  contract  with,  the  Phila- 
delphia Eapid  Transit  Co.  for  that  equipment,  but  I  have  reason 
to  believe — m  fact,  I  am  sure — that  the  money  was  provided  by  the 
Emergency  Fleet  Corporation  on  some  basis  or  other.  That  is  true 
of  other  roads,  like  Baltimore,  the  Bay  State  road  of  Massachusetts, 
and  several  other  large  properties  that  have  to  serve  shipbuilding 
industries. 

The  Chairman.  Have  the  utilities  which  have  not  been  affected 
by  war  industries  purchased  much  equipment  during  the  last  two 
years? 

Mr.  Barry.  They  have  not,  Mr.  Commissioner.  They  would  like 
to  purchase  equipment,  but  unfortunately,  they  are  not  in  a  position 
to  get  the  equipment.    Their  credit  is  gone. 

The  Chairman.  Are  there  many  orders  for  new  business  filed  by 
the  utilities? 

Mr.  Barry.  There  are  orders  filed  by  certain  utilities.  Take  the 
Brooklyn  Rapid  Transit  Co.,  which  is  now  in  the  hands  of  a  receiver. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      385 

They  have  recently  ordered  quite  a  large  amount  of  motor  equip- 
ment but,  bv  and  large,  the  busmess  is  very  poor. 

The  Cha^iRMAN.  Ho'w  does  new  business  now  compare  with  the 
normal  period  for,  say,  the  first  six  months  of  ^^HPJ;  .  ^^ 

Mr.  Barry.  Our  business  for  the  first  six  months  «f/^i%y^^\^^^^ 
I  should  say,  30  per  cent  of  our  normal  business-say,  during  the 

'Tr'w^l^^^^  of  the  utility  business  or  all  of 

^°Mr.  b1rr?.'No;  I  am  speaking  of  the  railway  business. 

Mr  Wabren.  The  railway  business?  t  n,^ 

Mr  Barry  The  railway  business  alone.  You  were  speaking  of  the 
railwav  business  or  the  general  business  ? 

The  Chairman.  I  was  speaking  of  your  general  business. 

Mr.  Barry.  Oh,  the  general  business? 

The  Chairman.  That  is,  I  was  in  my  last  question. 

Mr.  Barry.  Yes.  Well,  our  general  busmess  is  about  To  to  80  per 
cent  of  what  it  was  last  year.  .  " 

The  Chairman.  Well,  the  last  year  was  not  a  normal  year. 

Mr.  Barry.  I  thought  you  asked  me  how  it  would  compare  with 

^"^ The' Chairman.  No;  I  asked  you  how  your  general  business  for 
the  fir?t  six  months  of  this  year  v  ould  comimre  with  the  same  period 

' tr^B™' O^^^  for  the  first  six  months  of  this  year-our 

^^S^S^^lSW^^  utilities  has  been  about 

30  per  cent  normal  ? 

Mr   Barry.  Thirtv  per  cent.  ,  __ 

Nowfthe  increase  is  due  mostly  to  industrial  plant^^  Many  con. 
tral-station  plants  are  adding  to  their  equipment,  and  that  has  offset 
the  reduced  business  from  the  railway  companies. 

Mr  WARREN.  Mr.  Barry,  right  in  that  connection  on  the  amount 
of  business  done  with  railway  companies-I  suppose  that  in  sonie 
cases  the  companies  had  stocked  up  to  ^  greater  or  ess  ex^nt  to 
supply  their  needs  before  the  war,  had  they  not?  Such  thmgs  as 
entered  into  their  operating  expenses,  they  would  carry  more  or  less 
of  on  hand;  would  they  not? 

Mr.  Barry.  Well,  not  any  great  amount. 

Mr.  Warren.  Not  any  great  amount?  x    i.  ^„ 

Mr.  Barry.  No.  We  ordinarily  do  carry  ar  considerable  stock  on 

^' m-.  wIrren.  I  do  not  mean  that  you  were  stocked  up.    I  mean 

the  companies.  . 

Mr.  Barry.  Oh,  the  railway  companies '. 

Mr.  Warren.  Yes.  .  •         x     xi.  ^ 

Mr    Barry.  Well,  the  railway  companies  previous  to  the  war 

period,  of  course,  did  keep  a  considerable  stock,  especially  of  supply 

^"^MrwrRREN.^Soth^  during  the  last  two  or  three  years,  by  using 
what  they  had  on  hand  and  by  restricting  themselves  to  the  lowest 
point  in  what  they  did,  they  could  drift  along  on  these  small  pur- 
chases  that  you  have  mentioned? 


386       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSIOIf. 

Mr.  Barry.  Yes.  Of  coui*se,  they  have  been  buying  as  a  sort  of 
hand-to-mouth  proposition. 

Mr.  Warren.  But  that  means  that,  sooner  or  later,  they  will  have 
to  buy  in  larger  quantities,  if  they  can  get  the  money  to  pay  for  it  ? 

Mr.  Barky.  Yes ;  or  else  break  down  the  railways,  I  imagine. 

Mr.  Warren.  Yes. 

The  Chairman.  Perhaps  they  are  like  a  good  many  people — they 
are  waiting  for  prices  to  fall.  I  think  most  of  us  are  beginning  to 
think  that  it  is  not  worth  while  to  wait  nuich  longer. 

Mr.  Barry.  I  think  for  the  fii-st  three  months  of  this  year  it  was 
the  general  impression  of  all  purchasers  of  large  apparatus,  by  and 
large,  outside  of  railways,  that  thei*e  would  be  a  marked  re^luction 
in  prices,  and  buj^ing  was  held  off.  There  was  a  slight  reduction. 
I  think  it  is  the  opinion  of  the  trade  generally  that  there  will  not  be  a 
marked  reduction — that  prices,  instead  of  going  down,  will  likely 
go  up;  and,  thei^efore,  during  the  past  three  months,  business  has 
been  improving  very  substantially. 

Mr.  Warren.  Have  you  some  other  items  there,  Mr.  Barry? 

Mr.  Barry.  Yes;  I  have  some  data  on  supply  parts  which  railway 
companies  must  have.  They  can  probably  get  along  without  having 
to  buy  actually  entire  new  equipment  to  put  on  new  cars,  but  they 
must  have  certain  material — gears  and  pinions,  which  is  a  wearing 
article.  Our  prices  on  gears  and  pinions  have  increased  from  1914, 
when  the  gear  and  pinion  cost  $14,  to  $34.60  in  1918,  and  $31.82  in 
1919. 

Mr.  Warren.  That  was  an  increase  of  how  much,  what  percentage  ? 
Mr.  Barry.  That  was  a  total  increase  from  1914  to  the  present 
time  of  127  per  cent. 

Commissioner  Meeker.  Do  the  labor  costs  enter  very  largely  into 
these  costs? 

Mr.  Barry.  Not  so  great  there.  That  is  largely  a  special  grade 
of  steel  used  in  a  railway  motor  and  pinion — a  special  high-grade 
steel. 

Commissioner  Meeker.  I  am  interested  in  the  statement  you  ma<le 
a  moment  ago  that  the  greater  increases  occurred  in  the  types  of 
apparatus  into  which  the  lal>or  cost  entered  most  largely.  Is  it 
your  experience  that  the  wages  of  labor  have  increased  to  a  greater 
extent  than  prices  of  materials? 

Mr.  Barry.  I  should  say  that,  by  and  large,  the  increase  in  both 
has  been  approximately  100  per  cent. 

Commissioner  Meeker.  It  would  seem  to  me,  if  that  is  the  case, 
that  your  explanation  of  your  answer  to  my  former  question  is 
hardly  correct. 

Mr.  Barry.  As  applicable  to  this  gearing? 

.Commissioner  Meeker.  You  stated,  as  I  understood  it,  that  in 
those  types  of  equipment  and  apparatus  in  which  your  labor  enters 
most  largely,  the  increase  in  prices  had  been  greatest. 

Mr.  Barry.  Yes. 

Commissioner  Meeker.  Now,  if  labor  has  increased  at  about  the 
same  rate  as  the  cost  of  materials,  I  do  not  see  that  it  would  make 
any  difference. 

Mr.  Barry.  Well,  I  tried  to  explain  that  in  certain  classes  of  ap- 
paratus, the  percentage  in  cost  of  labor  is  not  as  great.  That  is, 
you  do  not  have  to  perform  as  much  labor  on  certain  classes  of 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      387 

»ppa.-atu3  as  you  do  on  other  classes.  For  example,  on  a  rotary 
coTerter  which  involves  large  castings,  the  pei-centage  ot  the  labor 
cost  of  tha^  rotary  converter  to  the  total  cost  of  the  rotary  converter 
is  considerably  iJss  than  would  be  the  percentage  of  abor  cost  to 
a  railway  niiior,  which  involves  a  considerable  amount  of  hand 

''commissioner  Meeker.  Yes.  Now,  if  the  cost  of  labor  has  in- 
creased 100  i)er  cent,  let  us  say,  and  the  cost  of  materials  has  m- 
c^ksed  100  per  cent,'why  would  not  the  cost  of  both  types  of  appa- 
ratus increase  approximately  100  per  cent?  Instead  of  that  in  one 
case  it  has  increased  100  per  cent  and  in  the  other  only  some  79  pel 

^'"'Mr.  Bakry.  Because  there  is  simply  not  as  much  labor  used  on  a 
larce  machine  as  there  would  be  on  a  small  machine. 

CoZiissioner  Meeker.  I  do  not  think  it  is  worth  while  pressing 
the  S  any  further.  I  did  not  quite  see,  if  the  rate  of  increase  is 
the  si^e  on  all  elements  entering  into  the  cost  of  the  final  product 
■why  the  increase  would  not  be  the  same  in  each  case. 

Mr.  Barry.  Suppose  you  had  a  machine _ .  , 

Mr.  Warren.  Does  the  overhead  expense  have  anything  to  do 
with  it?    How  is  the  overhead  figured ?  v,-„u  ;„ 

Mr  Barry.  The  overhead  expense  on  large  machinery  which  in- 
volved a  considerable  expense  in  tools  is  somewhat  greater  than  on 

^Mr.^mRREN.  What  is  it  figured  on-labor  or  the  materials,  or 

\lr.  Barry.  The  overhead  is  figured  on  labor.  •  .    .,  „ 

Mr  Warren.  So  that  in  any  item  where  labor  enters  less  into  the 
total  cost  the  overhead  would  be  less ;  would  it  not  i 

Mr?  Barry.  Yes;  that  would  apply  to  overhead;  the  percentaga 
of  overhead  is  applied  only  on  direct  labor. 

Mr  W4RREN.  So  if  you  had  something  that  was  largely  material 
and  only  "to  a  small  extent  labor  that  you  applied  in  your  own  shop, 
then  the  overhead  on  that  particular  item  would  be  very  much  less? 

Mr.  Barry.  It  would  be  correspondingly  miuced. 

Mr.  Warren.  Does  that  explain  the  difference  somewhat,  Mr. 

TiJl  T'T'V  '  • 

Mr  Barry.  Yes;  that  would  explain  it  to  a  certain  extent. 

Now  on  what  we  term  overhead  line  materials— that  is,  hangers, 
and  so 'forth,  that  are  furnished  to  railway  companies  for  their  over- 
head line-this  material  is  largely  composed  of  malleable  iron  Mai- 
lable iron  took  a  tremendous  advance  during  the  war  period  much 
Se  so  than  about  any  other  product;  so  that  on  the  basis  of  mai- 
lable iron-100  per  cent  in  1914-it  has  run  up  to  350  per  cent  in 

■^^Transformers  used  with  substation  apparatus  have  increased  from 

1  no  Tier  cent  in  1914  to  178  per  cent  in  1918.  

Switchboards  have  increased  from  100  per  cent  to  182  per  cent, 

^^Commksfoner  Meeker.  That  is,  it  is  an  increase  of  82  per  cent? 

Mr  Barry  Eighty-two  per  cent;  yes.  So  taking  all  of  those,  the 
average  cost  of  all  electrical  material  used  by  the  railroad  companies 
has  increased  from  1914  on  a  100  per  cent  basis  to  204  in  1918  and 
197  per  cent  in  1919. 


388       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION*. 

Commissioner  Gadsden.  One  hundred  and  ninety-seven  per  cent  is 
the  average  increase? 

Mr.  Barry.  Well,  97  per  cent  is  the  increase. 

Mr.  Warren.  And  that  is  all  the  apparatus  you  have  referred  to? 

Mr.  Barry.  That  I  have  previously  cited.  It  simply  throws  it 
into  an  average. 

Mr.  Warren.  Can  you  leave  the  statements  with  the  figures  ac- 
companying those  blue  prints  with  the  commission  ? 

Mr.  Barry.  Yes;  surely. 

The  statements  above  referred  to  are  as  follows : 

Average  cost  of  all  electrical  apparatus  and  supplies  used  hy  electric  railways. 


Year. 

Per  cent. 

Year. 

Per  cent. 

1912.....* 

104 
101 
100 
104 

1916 

130 

1913 

1917 

17R 

1914 

1918 

204 
197 

1915 

1919 '..,.]'. 

Railway  sicitchboards. 


Year. 

Per  cent. 

Year. 

Per  cent. 

1912 

100 

100 

100 

91 

1916 

110 

1913 

1917 

146 

1914 

1918 

182 

1915 

1919 

172 

Transformers  for  rotary  converters. 
3  HR.,  60-100  Kva.,  11,000  volts. 


Year. 

Price. 

Percent. 

Year. 

Price. 

Percent. 

1912 

$1,700 
1,600 
1,400 
1,550 

121 
114 
100 
110 

1916.  . 

$1,600 
2,000 
2,600 
2,400 

114 
143 
178 
171 

1913 

1917 

1914 

1918 

1915 

1919 

Railicay  rotary  converters. 

500  kw.,  1,200  rev.,  600  volts,  60  cycles. 


Year. 

Price. 

Percent. 

Year. 

Price. 

Per  cent. 

1912 

$2,325 
2,375 
2,350 
2,400 

96 
101 
100 
102 

1916 

$2,900 
3,875 
4,225 
4,200 

128 
165 
179 
177 

1913 

1917 

1914 

1918 

1915 

1919 

Railway  locomotives. 

(50-ton,  600  volts.) 


Year. 


1912 
1913 
1914 
1915 


Price. 


$14,000 
13,000 
13,700 
16,000 


Per  cent. 


101 

95 

100 

117 


Year. 


1916 
1917 
1918 
1919 


Price. 


18,000 
25,000 
27,500 
27,000 


Per  cent. 


131 
182 
201 
197 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


389 


Railway  car  equipments. 

(4-motor,  G.E.-258,  "K"  control.) 


Year. 


1912.... 
1913.... 
191#.... 
1915.... 


Price. 


$1,475 
1,475 
1,450 
1,400 


Per  cent. 


102 

102 

100 

97 


Year. 


1916 
1917 
1918 
1919 


Price. 


$1,850 
2,275 
2,900 
2,800 


Percent. 


128 
157 
200 
193 


Railicay  line  material,  round  top  hanger 
(Price  per  100.) 


Year. 


1912. 
1913. 
1914. 
1915. 


Price. 


$22.50 
19.00 
21.75 
21.75 


Per  cent. 


103 

87 

100 

100 


Year. 


1916. 
1917. 
1918. 
1919. 


Price. 


$23.40 
40.77 
57.75 
75.75 


Percent. 


108 
183 
266 
350 


Malleable  iron  Shertirdized  and  molded  compound.    No  copper. 

Railway  motor  gears  and  pinions. 
(Solid,  rolled,  grade  "M".) 


Year. 


Price. 


1912, 
1913 
1914 
1915 


$14.87 
15.29 
14.01 
15.16 


Per  cent. 


Year. 


106 
109 
100 
108 


1916 
1917 
1918 
1919 


Price. 


$18.90 
25.11 
34.60 
31.82 


Per  cent. 


135 
179 
247 
227 


Steam  turUnes— Condensing  turUne  with  exciter. 
(1,000  k.w.,  3,600  rev.,  2,300  volts,  3-phase.) 


Year. 


1912. 
1913. 
1914. 
1915. 


Price. 


$13,000 
13,000 
12,750 
13,000 


Per  cent. 


102 
102 
100 
102 


Year. 


1916. 
1917. 
191&. 
1919. 


Price. 


$15,500 
20,000 
24,200 
23,000 


Percent. 


1 


121 
157 
189 
180 


Mr  Wakren.  I  think  that  is  all,  unless  something  occurs  to  you, 
Mr  Barry,  that  the  commission  ought  to  be  advised  upon. 

Mr  Barrv  I  might  say  that  the  General  Electric  Co.  are  operate 
ingunder  a  wag^sfale  esWished  by  the  War  Labor  Board  in  July 
or  August  of  1918,  with  the  exception  that  some  increases  have  been 
put  into  effect  in  that  wage  scale  by  reducmg  the  number  of  hours 
in  our  shops  from  50  hours  per  week  to  48  hours  per  week  and  mak- 
ing a  corresponding  increase  of  4  per  cent  in  the  wage  scale. 

The  Chairman.  Has  there  been  a  large  turnover  of  labor « 

Mr  Barry.  Our  turnover  during  the  war  period  was  very  large. 
We  were  employing  at  our  Schenectady  works  during  1918  approxi- 
mateTv  23,000  hanSs.  A  considerable  portion  of  that  proved  to  be 
of  very  little  value  and  drifted  back  to  farms  or  other  occupations, 
and  wl  aii  now  operating  a  force  of  approximately  20,000.    We  are 


i  ( 


390       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

operating  more  efficiently,  the  tiirnovefr  is  cut  down  very  materially, 
ami  as  far  as  Ave  can  see  we  will  continue  to  operate  at  that  rate 

Commissioner  Gadsden.  Mr.  Barry,  from  the  standpoint  of  the 
tfenenil  Electric  Co.,  what  is  the  credit  of  the  electric  railways « 

Mr.  Barry.  Well,  I  am  sorry  to  say,  Mr.  Gadsden,  that  the  credit 
ot  electric  railways,  by  and  large,  is  in  very  poor  repute. 

Commissioner  Gadsden.  These  electric  railways  would  like  to  order 
a  good  many  of  these  apparatuses  from  you  if  you  would  sell  them 
to  them,  would  they  not? 

Mr.  Barry.  Yes,  they  would;  particularly  if  they  c^n  eet  loner 
accommodation.  ^  o  & 

Commissioner  Gadsden.  They  are  trying  to  do  it  all  the  time,  are 
they  not?  ' 

Sir.  Barry.  Yes. 

Commissioner  Gadsden.  Are  you  accommodating  them? 

Mr.  Barry.  We  are  accommodating  them  to  this  extent:  In  the 
sale  particularly  of  equipment  for  the  one-man-operated  safety 
car,  we  furnish  equipments  to  railway  companies  and  have  made^ 
we  will  sell  the  equipment  for  25  per  cent  cash,  the  balance  of  75 
per  cent  m  car-trust  certificates  running  over  a  period  of  from  1 
month  to  36  months. 

Commissioner  Meeker.  What  kind  of  certificate  ? 

Mr.  Barry.  Car-trust  certificate.  We  can  ordinarily  turn  a  total 
of  oO  per  cent  of  the  car-trust  certificates  over  to  certain  banking 
connections  who  will  take  it  as  a  banking  proposition.  That  leav^ 
2o  per  cent  of  c^r-trust  certificates  on  our  hands  on  which  we  take 
more  or  less  chance  of  being  paid  for.  That  is  the  way  we  are  now 
furnishing  a  considerable  amount  of  car  equipment  to  railwav 
companies.  ^^ 

^  Commissioner  Gadsden.  Therefore  your  credit  in  the  first  instance 
IS  oractically  limited  to  equipment  for  onef-man  cars  ? 

Mr^  Barry.  Yes;  in  most  cases.  Of  course,  there  are  cases— from 
the  Brooklyn  Kapid  Transit  Co.,  which  is  in  receivers'  hands,  we 
have  recently  received  orders  for  $600,000  or  $700,000  worth  of  busi- 
ne^,  and  the  cash  is  provided— it  is  assui-ed. 

Commissioner  Gadsden.  You  get  receiver's  certificates? 

Mr.  Barry.  No  ;  we  get  cash  in  that  case. 

Commissioner  Gadsden.  But  I  am  talking  about  the  general  run  of 
the  electric-railway  industry.  What  has  become  of  their  credit  with 
you  s 

Mr.  Barry.  I  am  sorry  to  say  it  is  very  poor. 
•    Commissioner  Gadsden.  Does  the  General  Electric  Co.  feel  that 
cr^d?t^on  it^f  ^^         one-man  car  that  they  are  willing  to  extend  the 

ha^^st^t^exf  ^'  ^^"'  ^^  ^^^  willing  to  extend  credit  by  the  amount  1 
e  u^  mTntt''"^^  Gadsden.  By  practically  taking  a  mortgage  on  the 

Mr.  Barry.  Ye«. 

Mr.  Warren.  The  reason  you  can  do  that  is  that  they  can  give  vou 
a  mortgage  on  the  new  equipment,  but  can  not  give  you  a  mortgage 
on  old  equipment  which  is  already  mortgaged ;  is  not  that  it?  These 
car-trust  equipment  certificates  are  put  on  when  the  one-man  cars  are 
purchased,  are  they  not  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      391 

Mr  B^rry   We  get  these  certificates  when  the  car  is  delivered. 

M^wl^EN.  Exactly.  Inother  words,  it  is  delivered  to  the  trolley 
Pnmna™biect  to  the  mortgage  represented  by  certificates  ? 

Xba^y  Oh  y^^^^  and  of  course,  if  the  railway  company  shou  d 
beYn  dS^in  aV  of\h      payments  we  have  a  lien  on  the  property 

'tir^^SiL?'S^  is  all,  unless  the  commission  has  some  questions. 
¥he  ChTiRMAN    How  long  has  that  certificate  plan  been  in  op- 

''Sarry.  We  instituted  that  about  three  or  four  months  ago. 
Mr.  Warren.  As  a  means  of  helping  them  out? 

SmSo^^^^^^  From  the  standpoint  of  a  saksman,  that  is 

^  tir 'SI'rI'^  "^^i^"^^  are  in  the  manufactur- 

in?  business  we  ai'e^not  in  the  banking  business.  We,  m  common 
wSh  mo^^^^^  want  to  get  our  money  when  the  stuff  is 

delivered  b^t  in  oi^er  to  help  out  the  situation  and  in  order  to  get  a 
SZ^n^ni^ihusines.  in  our  own  shops  for  this  class  of  material, 
we  have  been  willing  to  extend  this  acc^mmoKiation. 

Tlie  Chairman.  You  feel  that  the  hazard  m  the  utility  busmess 
is  greater  than  it  has  been  before  ? 

Mr  B\rry    Oh,  in  the  railway  business;  yes,  sir. 

?he  Chmrman.  Are  you  increasing. the  price  of  the  articles  you 
<*p11  to  these  utilities  on  account  of  the  increasing  hazard  ^ 

Mr  Bx^Y    No    we  do  not  take  any  unreasonable  business  hazard. 
Tf  we  do  not  fee^^^^^^  ^«^  that  our  money  will  be  forthcoming 

JLm  a  ra^?4S  pS^^^  ^e  do  not  want  to  sell  the  stuff,  so  we  make 
S'LreasHn^^^^^^    on^ax^count  of  a  railway  company's  wanting  to 

^""m^ mix:  That  is  one  of  the  reasons  the  sales  have  fallen  off 
I  suppose,Ts  it  not-that  you  do  not  sell  where  you  have  to  take  an 

"""mT  Barry 'Yes;  but  I  think  the  main  reason  is  that  the  railway 
J^.^:^m;il  can  not  see  their  way  clear  to  pay  for  apparatus 
r^r^  n  p'Ksh  bftsis  or  Hiost  auv  other  basis. 

Mr  Warren   They  can  not  see  their  way  clear  to  pay  for  it  and 
.   cvMi  if  they  tried  to  make  you  think  they  could,  you  can  not  see  your 

^'j^i-'IIrry.  No;  unless  we  could  obtain  some  data  that  would  war- 
""coZuSnS's'w^T.  Is  this  car  trust  a  sort  of  mortgage  on  the 

^"iS^r'sLy.  Yes;  it  is  a  first  lien  on  that  particular  equipnient. 
Commissioner  SwKET.  The  title  passes  from  the  General  Electric 

Co.  to  the  purchaser,  does  it?  ,      x      x 

Mr.  Warren.  The  title  usually  passes  to  a  trustee. 

Mr  B^RRY.  The  title  is  held  by  a  trustee  until  paid  for. 

Mv  wrERFN   It  is  really  a  conditional  sale,  as  I  understand  it. 

Commi™er  SwLt.  The  legal  effect  would  be  similar  to  sellmg  a 
pifno  forSnceTand  retaining  the  title  in  the  manufacturer  until 

it  is  paid  for. 
^       Mr.  Barry.  Yes. 


i 


392       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  Except  in  these  cases  it  is  usually  put  in  a  trustee  to 
pass  to  the  carrier  when  it  is  all  paid  for. 

Mr.  Barry.  Yes. 

The  Chairman.  Under  this  plan  of  certificates  what  part  of  the 
purchase  price  must  be  paid  on  delivery? 

Mr.  Barry.  Twenty-five  per  cent. 

Mr.  Warren.  And  the  rest  is  payable  in  installments? 

Mr.  Barry.  The  rest  is  paid  in  installments  running  from  1  month 

to  36  months. 

Commissioned  Sweet.  Is  the  custom  of  selling  the  same?  Do  you 
send  salesmen  out,  or  do  you  go  and  visit  these  companies  as  in  the 
years  past,  or  do  the  orders  come  in 

Mr.  Barry.  Oh,  no. 

Commissioner  Sweet.  Or  both  ways? 

Mr.  Barry.  Orders  do  not  come  in.    You  have  to  go  after  orders. 

Commissioner  Sweet.  Very  well 

Mr.  Barry.  Our  methods  of  sale  are  these:  We  have  eight  large 
district  offices  in  the  country  with  a  certain  amount  of  material  stored 
at  these  places,  Chicago,  Boston,  New  York 

Commissioner  Sweet.  For  ready  delivery  ? 

Mr.  Barry.  Philadelphia  and  San  Francisco.  There  are  eight  of 
what  we  term  district  offices.  Under  those  district  offices — we  will 
take  San  Francisco  for  example — we  have  a  district  office  in  San 
Francisco  with  a  certain  amount  of  stock  there.  We  have  a  local 
office  in  Portland,  Oreg.,  one  in  Seattle,  one  in  Spokane,  one  in 
Los  Angeles,  one  in  Phoenix,  Ariz.,  which  report  to  that  district 
office  and  are  directed  by  the  management  of  the  district  office.  And 
all  these  district  offices  or  local  offices  will  have  a  corps  of  engineers 
and  salesmen  who  are  meeting  the  trade  all  the  time  and  trying  to 
get  their  business.  The  day  of  sitting  down  and  waiting  until 
orders  are  delivered  to  you  by  mail  has  gone. 

Commissioner  Sweet.  Have  you  charge  of  these  various  district 
offices  or  their  management? 

Mr.  Barry.  I  have  charge  of  it  in  so  far  as  establishing  selling 
prices  and  method  of  sales  are  concerned.  Of  course  they  have 
executive  charge  of  their  men 

Commissioner  Sweet.  The  detail  work? 

Mr.  Barry.  The  detail  work. 

Commissioner  Sweet.  Have  your  duties  brought  you  in  contact 
with  the  street-railway  companies  and  their  managers  in  the  past? 

Mr.  Barry.  Oh,  yes;  I  frequently  meet  them. 

Commissioner  Sweet.  Have  you  any  distinct  idea  now  as  to 
what  is  the  matter  with  the  street-railway  companies  and  what 
would  be  the  best  remedy  for  it? 

Mr.  Barry.  Well,  my  motion  is  this:  Of  course  the  street  rail- 
ways are  reduced  to  the  deplorable  condition  in  which  they  are  now, 
due  to  the  tremendous  increases  they  have  had  to  pay  for  their  ma- 
terials, the  tremendous  increase  they  have  had  to  pay  for  wages 
and  taxes  and 

Commissioner  Sweet.  Without  a  proportionate  increase  in  income  ? 

Mr.  Barry.  Without  the  income.  Now  while  I  do  not  know  very 
much  about  the  financial  or  operating  conditions  of  electric  rail- 
ways outside  of  unfortunately  investing  some  of  my  personal  money, 
in  electric  railways,  my  notion  is  that  the  electric-railway  companies 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      393 

must  be  <-iven  immediate  relief  by  an  increase  in  fare  or  many  more 
of  ?hem  are  going  to  the  wall.  I  think  that  if  it  were  possible  to 
^ive  tTe  electric  railways  an  increase  to  6  cents  or  7  cents  or  what- 
f^er  L  considered  reasonable,  that  that  is  the  only  method  of  saving 
minv  electric  railway  companies  from  bankruptcy. 

economies  that  can  be  effected  in  the  conduct  of  the  street-railway 

"""mfBARRY.  I  do  not  think  I  am  qualified  to  answer  that..  I  do 
not  know  enough  about  the  operation  of  railways  to  give  an  mtelli- 
gent  opinion  on  that. 
(Witness  excused.) 

STATEMENT  OF  MH.  M.  B.  LAMBERT. 

Mr.  Warren.  Will  you  state  your  full  name  ? 

Mr.  Lambert.  Miles  B.  Lanibert. 

Mr.  Warren.  Your  occupation?  j         ^        x 

Mr.  Lambert.     Assistant  manager  of  the  railway  department, 
Westinffhouse  Electric  Manufacturing  Co. 

Mr.  Warren.  How  long  have  you  been  m  that  business? 

Mr.  Lambert.  Nineteen  years,  about. 

Mr  Warren.  Does  that  bring  you  in  touch  with  the  sale  and 
prices  of  equipment  and  apparatus  for  electric  railways? 

Mr  Lambert.  That  is  part  of  my  duty— to  have  charge  of  the 
prices  of  electric-railway  equipment  and  locomotives. 

Mr  Warren.  AVill  you,  in  your  own  way,  make  a  statement  trom 
such  'data  as  you  have  prepared  for  the  commission,  t^™g  ^lie 
cost  of  electric  apparatus  and  equipment  handled  by  the  AA  estmg- 

Mr  iTvMBERT.  Yes,  sir.  The  Westinghouse  Co.  is  engaged  in  the 
manufacture  and  sale  of  electric  street  railways  and  railway  motors 
and  car  equipment  to  electric  street  railways— controlling  apparatus, 
locomotives,  rotarv  converters,  transformers,  switchboards,  motor- 
crenerator  sets,  turbines,  and  other  electrical  apparatus. 
""  Our  prewar  average  gross  sales  of  this  apparatus  and  equip- 
ment ran  from  $7,000,000  to  $15,000,000  a  year;  it  varies  that  way 
within  the  United  States,  our  customers  being  generally  throughout 
the  United  States.  During  the  past  two  years  it  has  ranged  from 
30  to  40  per  cent  of  this  normal.  ^^^  k  ^t,        t       t 

Beginning  with  about  the  middle  of  the  year  1915  there  has  been 
1  c^te^dv  and  steadily  accelerating  increase  in  the  prices  of  the 
Vavious^  equipment  and  apparatus  until  at  the  present  time,  as 
compared  with  the  middle  of  the  year  1915,  the  percentages  are 

about  as  follows:  •      .  i     o^  i. 

Railway  motors  and  car  equipment,  approximately  87  per  cent 

increase.  ,       ».  .  » 

Locomotives,  approximately  87  per  cent  increase. 
Eotarv  converters,  approximately  75  per  cent  increase. 
Transformers,  approximately  70  per  cent  increase. 
Switchboards,  100  per  cent. 
Motor-generator  sets,  95  per  cent. 
Turbines,  100  per  cent. 
160643'— 20 20 


li 


394       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  have  given  some  thought  to  the  future  conditions  and  prices, 
but  can  see  nothing  at  present  which  would  indicate  to  me  a  sub- 
stantial reduction  in  prices  other  than  the  slight  reduction  that  has 
taken  place  during  the  past  two  months. 

These  increases  in  our  prices  as  manufacturers  and  producers  of 
electrical  equipment  have  been  caused  by  our  increased  cost  of  raw 
material,  manufacturing  machinery,  and  labor.  In  comparing  the 
present  time  with  the  latter  part  of  the  year  1914  and  the  first  half 
of  1915,  I  find  that  machine  tools  which  we  must  purchase  to  manu- 
facture our  apparatus  and  equipnient  show  an  increase  of  approxi- 
mately 100  per  cent.  The  raw  materials  have  shown  great  increases, 
as  shown  by  the  following  tabulation. 

It  might  be  well  to  inject  at  this  point  the  fact  that  we,  as  manu- 
f acurers,  and  I  think  also  the  General  Electric  Co.  and  other  manufac- 
turers supplying  electric  railways,  depend  to  a  very  large  extent  on 
other  manufacturers  to  supply  raw^  material,  sometimes  partially 
fabricated  and  sometimes  just  in  the  i-aw  state;  and  the  following 
will  give  you  an  idea  of  the  increases  we  have  had  to  pay  for  the 
materials  which  we  fabricate.  All  raw  materials  have  shown  great 
increases,  as  shown  by  the  following  tabulation:  Pig  iron,  approxi- 
mately lOG  per  cent;  steel  plates,  141  per  cent;  copper,  58  per  cent. 
That  corrected  as  of  to-day  would  go  up  a  bit,  because  copper  has 
gone  up  from  the  time  I  had  this  tabulation  made.  Steel  castings, 
220  per  cent. 

I  might  digi'ess  here  for  a  moment  for  the  benefit  of  the  com- 
missioner w^ho  is  asking  about  the  discrepancy  in  the  high  cost  of 
cars.  The  reason  for  the  high  cost  of  cars  is  because  of  the  steel 
castings  which  both  •  companies  get  from  the  foundries  and  the 
Carnegie  Steel  Co.;  so  the  price  of  materials  entering  into  cars  has 
gone  up  220  per  cent. 

Spelter,  30  per  cent ;  coke,  35  per  cent ;  mica,  100  per  cent ;  asbes- 
tos material,  which  we  use  a  great  deal  of,  560  per  cent;  other  in- 
sulating materials,  125  per  cent;  magnetic  sheet  steel,  280  per  cent. 

The  development  of  electric  railways  has  been  very  rapid,  and  in 
general  the  equipment  and  apparatus  are  not  always  used  until  worn 
out,  being  laid  aside  very  frequently  by  reason  of  advances  in  the 
art.  In  my  opinion,  it  is  proper  that  the  reserve  for  depreciation 
and  obsolescence  of  electric  railways  should  not  be  wholly  based  on 
the  physical  life  of  the  equipment.  I  thought  it  would  be  interesting 
to  the  commission  to  know  that  point.  Actual  experience  has  shown 
that  it  is  necessary  to  make  special  provision  for  what  may  be  called 
the  shoi-ter  economic  life  of  equipment  and  other  apparatus  where 
the  physical  life  has  not  ended  but  where  the  life  of  the  investment 
in  the  old  equipment  has  not  as  j^et  been  economically  reached.  I 
could  not  state  any  definite  term  of  this  economic  life  because  it 
varies  very  much,  depending  very  largely  upon  the  improvements 
which  we  and  other  manufacturers  develop.  Nevertheless  this  has 
an  actual  bearing  and  serious  importance  and,  in  my  judgment, 
would  largely  affect  all  electric  railways  in  setting  up  their  deprecia- 
tion reserve  in  order  to  meet  these  economic  conditions. 

That  is  a  very  brief  statement,  but  if  there  are  any  questions  you 
would  like  to  ask  I  will  be  very  glad  to  answer  them. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      395 

Mr  Warken.  One  question  I  would  like  to. ask  if  you  are  willing 
to  an^wl  it,  whether  ?n  your  Judgment  the  prices  for  k^^^^^^     Ukely 

to  diminish  within  the  next  year  or  within  ^1^ ^il w  IrW  ^^  next 
Mr.  Lambert.  In  my  judgment  the  pric^  of  labor  ^mg  the  next 
vear^nd  perhaps  the  next  two  years  is  going  to  increase  unless,  as  a 
LLr  wiSsraid,  the  high  co'st  of  living  comes  ^o^v-  very  rapid^^^ 
It  might  be  well  to  mention  there,  Mr.  Warren  that  when  yo^  st<Tp 
to  consfder  it,  and  segregating  the  price  of  ^.f ff^J^jf^^^^^^ 
two  distinct  and  separate  factors,  labor  after  all  ^^  ij^^^^^^^^^^ 
thing  when  you  take  everything  from  its  source.  Take  the  ore,  tor 
W'mce-  vou  might  say  that  the  raw  materials  cost  nothing,  it  is 

^e  ^t  of'laL'p^^^^^^^  them  ^^J^^^^^^^^^^ 
flip  content  of  labor  enters  into  the  whole  thing,  and  theretore  puces 
are  not  goLg  c^^^^^^^^    in  fact  I  think  they  are  going  to  increase  mod- 

erately.  ,        i 

Mr  Warren    That  is  all  I  want  to  asK.  •  i    ^     -i, 

Tl'e  ChIihmIn   Do  you  sell  a  large  quantity  of  materials  to  these 

"^M^Lambekt.  Well,  in  proportion,  if  you  call  it  large,  to  that 
wMch  I  mentioned  heie-that^s,  seven  to  Efteen  ^ilhon  do  lars. 

The  Chairman.  Have  you  many  orders  on  hand  at  this  time^ 

Mr.  Lambert.  No;  probably  30  per  cent  of  normal. 

The  Chairman.  Are  you  expecting  ^".^"9^ X   next   vS 
your  business  with  electric  railways  ^•\t^l.'^  J^"^^^*  ^X  rail- 

Jdr  Lambert.  Our  hope  is  that  some  relief  will  be  given  the  lail 

'''t:^,^^^^^^  apply  exclusively  to 

%rtS;LrT!  No;  the  electric  railways  are.in  worse  straits,  I 
think,  than  any  other  industry  in  the  country  or  m  the  world. 
(Witness  excused.) 

STATEMENT  OF  MR.  WILLIAM  H.  HETJLINGS.  JE. 

Mr.  Warren.  Your  name  is?  . 

Mr.  Heulings.  William  H.  Heulmgs,  jr. 

Mr  Warren.  You  reside  where? 

Mr.  Heulings.  Philadelphia. 

Mr.  Warren.  You  are  vice  president  - 

Mr  Heulings.  Vice  president  of  the  J.  u.  Jiriii  ^^o. 

Mr.  Warren    That  is  one  of  the  largest  electric  car-building  con- 

cerns  in  the  country,  is  it  not? 

Mr.  w".^rHow  iong'have  you  been  connected  with  that  com- 

pany  ? 

Mr.  Heulings.  About  35  years. 

Mr.  Warren.  You  are  now  in  the  sales  department? 

Mr  W arren'^'hIw  1^^^^^  have  you  been  in  that  department  ? 

Mr  LuLiNGS   I  ^  co^lete  charge  of  it  for  20  years  and 

have  been  associated  with  it  for  25  yeai-s. 

Wr.  Warren.  What  plants  does  that  company  operate? 

Mr  Heulings.  At  the  present  time  we  own  four  plants.  1  he  J.  It. 
BiillCa^SdelpM     Pa.;  The  G.  C.  Kuhlman  Car  Co.,  Cleveland, 


^i 


:  ► 


396       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Ohio ;  The  American  Car  Co.,  St.  Louis,  Mo. ;  and  The  Wason  Manu- 
facturing Co.,  Springfield,  Ohio. 

Mr.  Warren.  If  you  will  go  on  in  your  own  way  and  state  to  the 
commission  the  situation  regarding  street  cars,  especially  the  electric- 
railway  industry,  I  shall  be  much  obliged. 

Mr.   Heulings.  I   have  prepared   a   little  statement,  gentlemen. 

Shall  I  read  it? 

The  Chairman.  Yes. 

Mr.  Heulings.  I  have  been  given  to  understand  that  the  character 
of  information  you  want  from  me  is  data  that  will  enable  you  to  form 
an  opinion  as  to  why  the  street-railway  properties  through  this  coun- 
try have  been  called  upon  to  make  the  heavy  investments  that  they 
have  made  and  are  making  in  street-railway  rolling  stock.  There  are 
several  important  elements  that  contribute  most  largely  to  this  re- 
sult, and  they  are  as  follows: 

First.  Change  in  the  character  of  car.  There  have  been,  within  the 
past  10  years,  very  decided  changes  made  in  the  constructional  details 
of  the  electric-motor  car  for  street-railway  service,  inasmuch  as 
metal  has  to  a  considerable  extent  been  used  in  substitution  of  wood. 
This  condition  has  produced  a  situation  in  our  various  plants  making 
it  necessary  for  us  to  lay  aside  a  great  deal  of  woodworking  machin- 
ery and  to  increase  our  capital  account  by  the  introduction  of  metal- 
working  machinery  in  its  stead,  and  the  further  introduction  of  spe- 
cially designed  and  especially  built  machinery  for  working  special 
metal  for  special  service  conditions. 

This  change  in  the  character  of  cars  from  wood  construction  to 
metal  construction  has,  in  itself,  made  a  material  increase  in  the  cost 
of  the  finished  vehicle.  It  must  not  be  overlooked  that  in  this  change 
from  wood  to  metal  cars  the  element  of  safety  to  the  traveling  public 
was  the  foremost  consideration. 

Second.  When  the  various  horse-drawn  street-railway  properties 
made  their  conversion  to  cable  and  electrically  propelled  equipments 
the  tendency  seemed  to  be  to  adhere  to  about  tne  then  approximate 
length  of  the  horse  car  most  popular  at  that  time.  This  was  doubt- 
less a  mistake  and  the  street-railway  operators  were  quick  to  increase 
the  carrying  capacity  of  the  vehicle  to  hereby  influence  and  decrease 
the  cost  to  carry  a  unit  passenger.  This  led  to  the  replacement  of  the 
smaller  cars  with  larger,  heavier,  and  consequently  more  expensive 
rolling  stock. 

Third.  The  factor  of  obsolescence  is  a  very  important  one  and 
many  clianges  in  design  all  tending  toward  economy  of  operation 
have  been  produced  in  the  past  15  years.  It  is  also  perfectly  reason- 
able to  state  that  cities  which  have  been  served  with  a  type  of  car  not 
of  the  very  latest  design  have  through  their  public  organizations  al- 
most invariably  made  demands  for  the  more  up-to-date  and  addi- 
tional rolling  stock. 

Possibly  the  most  important  fundamental  change  was  the  introduc- 
tion of  the  prepayment  system.  This  item,  in  itself,  made  necessary 
the  expenditure  on  the  part  of  the  railway  company  from  six  to  eight 
hundred  dollars  on  each  of  their  then  present  cars  to  convert  them 
into  prepayment  cars,  the  only  alternative  being  to  scrap  them  and, 
as  a  matter  of  fact,  the  scrap  heap  was  used  actively,  for  the  average 
railway  company  purchased  up-to-date  and,  generally  speaking, 
metal  prepayment  cars. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      397 

These  elements-character,  design,  and  o^««|?^,^7/^^-^^^^^ 
contributed  toward  the  introduction  of  new  and  better  ej  pm^^^^^^ 
much  so  that  it  is  the  exception  for  a  car  to  ever  render  serv  ^F^  tor  its 
pnmnlete  lifetime.     I  believe  that  there  are  few  it  any  instances 
Tel^Sn^n  efecTric-motor  car  has  actually  «.-f -<!  m  f^-- - 
line  that  originally  purchased  it  for  a  period  of  anything  lilse  its 

^' The'above  elements  are  fundamental  factors  that  have  made  addi- 
tiona"  outlay  for  rolling  stock  on  the  part  of  the  railway,  companies 
Dositivelv  imperative,  but  the  excessive  costs  of.  every  increase  in 
dnd  material  have  made  a  mailed  increase  .in  the  s|Uing  pnoe 
of  cars  within  the  past  five  years     We.  h^^e/^n^^^ered  for  the  sake 

of  making  a  starting  point,  that  the  prices  of  P"''*^"?!  ^"^^Jue  that 
nrpv-iiled  in  1914  and  1915  were  about  normal.  It  is  quite  true  tnai 
t^lelaSr  rate  has  been,  for  a  great  many  years  constantly  mcreasing 
The  yearly  average  of  increase  has  been  small  except  under  special 
conditions,  but  nevertheless  it  has  shown  an  ax^rage  of  increase. 

In  the  early  part  of  1915  botl,  material  and  labor  advanced  in  un- 
heard of  proportions,  and  while  it  is  a  fact  that  fi-om  the  early  part 
of  1918  to  January,  1919,  thero  has  been  a  reduction  in  the  cost  of 
material  material  has  remained  stationary  as  far  as  our  purchases 
were  concS^ned,  from  January  1,  1919,  to  the  present  day.  It  is  my 
opinion  that  material  will  increase  from  now  on,  rather  than  de- 
crease. In  contradistinction  to  the  drop  m  material,  the  cost  of 
labor  has  shown  a  constant  increase.  . 

I  have  charted  the  direct  material  and  direct  labor  in  the  proper 
pioporlfons  in  which  they  appear  in  the  car  oy«:fy/«d  I  present 
this  chart  as  showing  the  actual  conditions.  Note,  if  you  will,  the 
material  increase  from  January,  1915,  to  January,_1916,  was  about 
Tper  cent.  From  January,  1915,  to  January,  191 -,  >t  was  119  per 
cent  From  January,  1915,  to  January,  1918,  it  was  126  per  cent 
Fiom  January,  1918;  to  January,  1919,  however,  the  decrease  was  18 

^"Xhe  kbor  curve,  however,  shows  the  following  course :  From  Janu- 
«fx,  1015  to  1916  12  per  cent  increase;  from  January,  iJio,  to  janu- 
"■y'  Si?;  io  per  centf  from  January,  1915,  to  January,  1918,  117  per 
cent  from  January,  1915,  to  January,  1919;  119  per  c«nt;  and  the 
cour^  siL  Januar'y  1  of  this  year  to  the  present  day  has  been 

"''One'^of  my  reasons  for  contending  that  material  will  advance  is 
that  I  know  our  labor  has  advanced  and  is  continuing  to  advance,  and 
as  a  matter  of  fact,  as  labor  constitutes  a  very  great  proportion  of 
?hnt  which  we  buy  as  "material."  it  is  but  to  be  expected  that  the 
matedal  will  follow  the  course  of  labor,  especially  when  the  absorp- 
tion  of  stocks  is  completed.  .    .  ,  .      ,,„  . 

I  want  to  make  perfectly  clear  to  your  commission  that  this  chart 
shows  the  actual  different  grades  of  material  and  the  actual  different 
frules  of  labor  in  the  correct  proportion  and  quantities  as  appears 
m'the'average  standard  double-truck  car  of  to-day. 

In  the  foregoing  information  I  have  not  elaborated  at  all  on  one 
very  important  item  of  obsolescence.  This  it«m  is  the  Birney  safe  y 
car  The  adoption  of  this  car  has  been  phenomenal.  W  e  have  built 
■ibout  1,000  of  them  for  different  parts  of  the  country  and  the  prin- 
ciples of  operation  which  they  involve  have  shown  pronounced  econ- 


I! 


398        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

omies.  The  introduction  of  the  safety  car,  however,  means  a  further 
outlay  for  rolling  stock  on  the  part  of  the  railway  companies.  It 
is,  moreover,  economical  and  warrants  adoption  on  exactly  the  same 
ground  that  the  introduction  of  the  prepayment  idea  was  economical 
and  warranted  adoption. 

My  testimony,  I  understand,  is  to  be  confined  to  rising  costs  of  cars, 
and  as  a  consequence  I  will  not  elaborate  on  the  Birney  safety  car, 
especially  as  I  understand  some  direct  testimony  is  to  be  given  by 
another  witness. 

That  is  all,  Mr.  Wan-en. 

Mr.  Warken.  I  am  very  much  obliged  to  you. 

The  Chairman.  When  you  speak  of  the  labor  cost  increasing  120 
per  cent  from  1915  to  1919,  do  you  speak  of  the  labor  that  enters  into 
the  car  that  you  sell  to  these  utilities? 

Mr.  Heulings.  No,  I  mean  the  price  we  pay  to  the  man  to  pro- 
duce the  car  that  we  sell  to  the  utilities — that  is,  the  actual  direct 
labor  as  differentiating  between  indirect  labor. 

The  Chairman.  But  the  dii-ect  labor  which  goes  into  that  car 
has  increased  120  per  cent  from  1915  to  1919? 

Air.  Heulings.  Yes,  sir. 

The  Chairman.  And  what  per  cent  of  the  cost  of  the  car  is  repre- 
sented by  labor? 

Mr.  luiULiNGS.  Direct  labor  about  33J  per  cent.  The  material  at 
the  present  time  averages  about  $2  for  every  $1  of  labor.  It  used  to 
be  practically  even. 

Commissioner  Sw^eet.  You  say  now  the  material  cost  of  a  car  is 
about  double  what  the  labor  cost  is  ? 

Mr.  Heulings.  Yes — well,  that  is  hardly  fair.  I  say  that  for 
every  dollar  in  labor  that  you  invest  in  a  car  you  will  invest  about  $2 
for  material,  making  $3  as  the  total.  In  other  words,  a  car  that  costs 
$3,000  will  be  represented  by  $2,000  for  material  and  $1,000  for  direct 
labor. 

Commissioner  Sweet.  Well,  that  would  be  twice  as  much  in  mate- 
rial as  in  labor? 

Mr.  Heulings.  Yes. 

The  Chairman.  But  you  said  before  it  used  to  be  fifty-fifty  ? 

Mr.  Heulings.  Yes,  it  used  to  be  even  and  now  it  is  two  to  one. 

The  Chairman.  So  material  has  advanced  twice  as  fast  as  labor. 

]Mr.  Heulings.  Material  has  advanced ;  yes. 

Commissioner  Gadsden.  To  state  it  the  other  way,  let  us  take  a 
standard  car — one  of  your  standard  cars — and  give  us  the  price  before 
the  war  and  the  price  now,  and  let  us  get  at  it  that  way. 

Mr.  Heulings.  It  is  an  extremely  difficult  thing  to  give  a  price 
on  a  standard  car  because  there  is  no  such  article. 

Commissioner  Gadsden.  Well,  any  car  you  choose  to  take,  so  you 
use  the  same  car  in  each  case.  Take  any  double-truck  car  that  you 
make  and  give  us  the  price  for  1914  and  give  us  the  price  for  1918. 

Mr.  Heuungs.  Of  the  same  car? 

Commissioner  Gadsden.  Of  the  same  car. 

Mr.  Heulings.  Would  you  let  me  send  that  to  you  accurately. 
I  would  hesitate  to  guess  at  it. 

Commissioner  Gadsden.  Well,  I  thought  you  could  approxi- 
mate it. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      399 

Mr.  Heulings.  I  can  approximate  it,  but  I  would  like  to  give  it  to 

^""comSJner  Gadsden.  Just  approximate  it,  in  order  that  tl^^ 
commission  may  understand  what  you  mean  about  the  material  being 

double  the  labor. 

Mr.  Heulings.  W^ell .      ^  ,         ^,» 

Commissioner  Gadsden.  I  can  tell  you  approximately  mjselt. 
Mr  Heulings.  Yes.    Well,  about  $3,000  to  $6,500. 

Mr.  Warren.  That  is,  a  $3,000  car  m  1914 

Mr.  Heulings.  Would  be  $6,500  to  $7,000  now.  ^ 

The  Chairman.  Then  in  1915   that  $3,000  car  would  represent 
$1,500  in  labor  cost  and  $1,500 in  material? 

Mr.  Heulings.  Yes.  ,  _  i.  ^    ^  i.i,^„ 

The  Chairman.  To-day  that  $6,500  car  would  represent  tvro  thou- 
sand a  hundred  and  odd  doUai-s  in  labor  and  the  rest  in  material? 

Mr.  Heulings.  Yes.  .  ,  ,  , 

Commissioner  Sweet.  Has  not  the  advance  m  wages  and  labor 

been  more  than  that?  ,       ,  i      .  -.-irk  4. 

Mr.  Heulings.  The  advance  in  labor  has  been  about  119  per  cent— 

''"ciSssSer  Sweet.  If  $1,500  of  labor  was  put  in  in  1915,  why 
would  it  not  be  more  than  $3,000  now,  if  it  has  more  than  doubled  i 

Mr.  Heulings.  As  a  matter  of  fact  it  would  be,  because  labor  has 
increased  over  100  per  cent 

Commissioner  Sweet.  Well «.     mi    ^  •    ^i       i.  *i.„+  ;<. 

Mr.  Heulings.  Then  my  guess  is  off.    That  is  the  story ;  that  is 

the  exact  answer. 

Commissioner  Sweet.  I  accept  your  apology. 
Mr.  Warren.  Is  your  guess  off,  Mr.  Heulmgs? 

Mr.  Heulings.  I  think  it  must  be,  if  they  do  not  check. 
Mr.  Warren.  As  I  look  at  this  chart,  apparently  the  cost  of  ma- 
terial accelerated  vei-y  much  more  rapidly  than  the  cost  of  labor. 

Mr.  Heulings.  Oh,  it  did.  *    ^  xi.  x  i  i 

Mr  AVarren.  In  other  words,  is  it  not  generally  a  fact  that  labor 
lacrs  behind  in  this  readjustment  of  prices  to  a  depreciated  currency 
oiMiicrease  in  cost  or  whatever  one  chooses  to  call  it? 

Mr.  Heulings.  It  has,  as  far  as  our  work  is  concerned,  lagged  be- 
hind materially.  .    ,      .•  n     i-  i 

Mr.  Warren.  Your  material  cost  in  1916  was  substantially  higher 

than  your  labor? 

Mr.  Heulings.  Yes.  ^   .    ,     i  .  -.  i       4.  ^-^  ion 

Mr.  Warren.  But  in  June,  1917,  it  had  jumped  up  almost  to  120 

per  cent.  .     .  .^  j. 

Mr.  Heulings.  Yes,  as  against  40  per  cent. 
:Mr.  Warren.  As  against  40  per  cent  for  labor  i 

Mr.  Heulings.  Yes.  .    ^n^n   xi    x  xi       i, 

Mv  Warren.  It  was  not  until  January  1,  1918,  that  they  began 
to  get  nearer  together,  and  it  was  not  imtil  the  middle  of  1918  that 

they  crossed? 

Mr.  Heulings.  That  is*  correct. 

The  Chairman.  Are  you  selling  much  to  the  utility  companies 

at  this  time? 

Mr.  Heulings.  Not  a  great  deal ;  no.  > 

The  Chairman.  Have  you  during  the  past  six  months? 


I 


i 


^ 


II 


400       PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Heulings.  No;  our  business  I  should  say  has  been  consid- 
erably less  than  the  average. 

The  Chairman.  How  much  less? 

Mr.  Heulings.  Well,  in  dollars  and  cents  it  ran  about  the  same, 
but  that  represents  about  100  per  cent  increase  over  normal  times, 
so  it  must  be  about  half  of  the  normal. 

The  Chairman.  Is  the  industry,  speaking  of  it  as  a  whole,  hav- 
ing any  difficulty  in  financing  its  purchasers  with  you  ? 

Mr.  Heulings.  Oh,  yes. 

The  Chairman.  How  do  they  do  it? 

Mr.  Heulings.  Well,  thej;  do  it  as  Mr.  Barry  just  referred  to. 
We  are  jointly  interested  with  him  in  the  car-trust  matter.  That 
is  how  we  are  being  able  to  finance  quite  a  few  of  the  purchasers  of 
these  safety  cars  and  to  help  the  railroads  make  economies  which 
they  will  provide  them  with. 

Commissioner  Gadsden.  Are  you  requiring  certificates  on  other 
types  of  cars  than  the  safety  cars? 

Mr.  Heulings.  No.  We  can  not  handle  them.  You  see  they  are 
not  a  standard  article.  Barring  the  safety  cars  we  have  never  dupli- 
cated an  order.  Except  in  one  instance  have  we  ever  duplicated 
an  order  for  exactly  the  same  style  as  the  other  order.  We  built 
1,500  cars  for  Philadelphia  in  a  period  of  four  years  and  they  are 
so  nearly  the  same  you  can  not  tell  the  difference,  but  each  particu- 
lar set  rexiuired  a  new  set  of  drawings  and  specifications. 

Commissioner  Gadsden.  Does  not  that  suggest  one  of  the  economies 
that  the  railway  people  could  work  out,  in  the  standardization  of 
equipment  ? 

Mr.  Heullxgs.  Unquestionably  they  could,  and  they  could  do  us 
great  good  and  economize. 

Commissioner  Gadsden.  If  we  could  come  out  of  this  hearing  by 
standardizing  the  railway  equipment  would  not  that  help  solve  this 
problem  ? 

Mr.  Heulings.  You  Avould  take  a  great  step  in  the  right  direction. 

Commissioner  Sweet.  How  much  diffei-ence  do  you  think  it  would 
make  if  the  cars  were  standardized  instead  of  having  different 
specifications  for  each  car?    * 

Mr.  Heulings.  I  might  answer  that  by  the  experience  of  the  safety 
car.  The  safety  car  is  practically  standard.  The  total  amount  of 
advance  in  the  safety  car  was  about  50  per  cent,  and  that  was  due 
to  the  fact  it  was  standardized  and  we  could  run  them  through  in  100 
and  200  car  lots  and  sell  them  to  the  individual  as  he  wanted  them 
and  practically  take  them  off  the  shelf.  Now  other  cars  have  ad- 
vanced over  100  per  cent.     That  is  the  best  answer. 

The  Chairman.  Yet  the  Railroad  Administration  let  an  order  for 
100,000  cars  that  used  to  sell  for  somewhere  around  $900  and  their 
order  was  about  $3,000.    There  is  another  sample  of  standardization. 

Mr.  Heulings.  Yes.  It  possibly  would  have  gone  a  great  deal 
higher 

Mr.  Warren.  Is  it  not  a  fact — or  perhaps  you  do  not  know  about 
them,  but  some  of  us  to  our  sorrow  do — ^that  many  of  the  differentia- 
tions in  rolling  stock  on  street  railways  are  caused  by  the  require- 
ments of  different  local  authorities.     Do  you  know  as  to  that? 

Mr.  Heulings.  Yes,  that  is  quite  a  factor.  The  individual  ideas  of 
the   mechanical   departments   of   the   various   railroads  make    for 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      401 

Standards  that  are  peculiar  to  their  property;  and  that  is  the  reason 
"  M^wTRRT'Eut  is  not  that  largely  the  result-perhaps  you  do 
not  know  that,  but  I  will  ^^  jo-'^f-^^^^^^  ''  '^' 

l.^  n^lr'^la^^^  which  would  Y^^^^},^ 

Mr.  Warren.  I  do  -^^wa^t    o^^ 

ThodS^^^^^^^^ 

f"**"^^  1  ^^Vi7a  wnri  of  it  is  that  the  successive  incumbents  of  the 

;1™:;.1"  "Tela™  rlS™..  «<  ~.l  .om„,i«o«r., 

"'KrtrS'.^'  CiS  S'.V°    A  .  CO„„.,.V  will,  .UCl,  di™»- 

^'Xhe  Chairman.  Well,  your  safety  car  is  a  one-man  car. 
Mr  Heulings.  Yes ;  a  one-man  car. 

''''^:V!S^^'C^S^  ^^^^^^-^-^'^'^  be  aPPl-d  to  a  heavier 

^^\\      Ti  ....   T  rln  not  see  why  it  could  not.     The  safety  car 

Mr.  HEt-"^««;  J„,Jait"ons^heTe  your  travel  does  not  get  to  prac- 
app lies  t°  ««:  f '"  JX^^^^^^  have  to  have  larger  equipment 

and  JreaL  cafr?  i  cicity,  bul  I  do  not  see  why  to  a  very  con- 
dderable  de-ree  the'same  standard  should  not  prevail. 

ShS^he'diSty'SaUqu^^^^^^  is  more  due  to  the  opinion  of  the 
o  alm^  than  a/ything  else-the  local  operators. 
Commissioner  Sweet.  The  local  what? 

It  KmIv  ^^^KoKs  hfonTade  in  the  industry  as  well 
asT^tlSmanuf  acturing  end  to  get  together  upon  some  standard  form 
of  car? 


402       PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOlir. 

Mr.  Heulings.  I  do  not  believe  that  any  considerable  effort  has 
been  made  along  that  direction,  where  we  tried  to  bring  all  the  rail- 
way operatives  together  and  to  present  a  standard  form  of  vehicle 
for  them. 

The  Chairman.  Do  you  tliink  that  the  saving  in  dollars  to  the 
public  is  sufficient  to  warrant  an  effoit  being  made  by  interested 
parties  to  agree  upon  a  standard  form  of  ecpiipment? 

Mr.  Heulings.  There  Avould  be  a  big  saving  in  the  manufacture, 
without  a  question  of  doubt. 

Mr.  Warren.  How  much  saving?  I  want  to  get  at  the  percentage 
of  saving  you  thou^^ht  might  result. 

Mr.  Heulings.  1  liere  would  be  a  saving  of  from  $300  to  $400  on 
every  double-track  car. 

The  Chairman.  But  would  it  not  be  open  to  this  objection,  if  it  is 
one:  The  moment  the  country  agrees  upon  a  standard  form  of  car, 
you  have  thus  at  that  very  moment  prevented  any  further  improve- 
ment in  the  art? 

Mr.  Heulings.  You  would.  You  would  probably  stop  initiative 
and  you  would  halt  inventive  genius,  I  believe. 

Commissioner  Gadsden.  You  would  also  stop  obsolescence,  too. 

Mr.  Heulings.  Yes. 

Commissioner  Gadsden.  Which  would  be  desirable. 

The  Chairman.  Have  you  reached  the  point  of  development  in 
the  industry  where  it  can  be  safely  said  that  we  can  agree  upon  a 
standard  car  that  is  going  to  meet  the  demands  of  the  country? 

Mr.  Heulings.  No,  I  do  not  think  so.  I  do  not  believe  you  could 
get  an  agreement  on  that  basis. 

Now,  to  illustrate  that,  there  are  many  very  successful  operators 
who  will  insist  upon  the  use  of  center-entrance  cars.  We  have  had 
them  in  Washington;  we  have  had  them  in  Boston,  and  we  have 
them  in  New  York;  we  have  them  in  Brooklyn;  and  yet  there  are 
other  roads  that  would  not  have  a  center-entrace  car  under  any  cir- 
cumstances. 

The  Chairman.  To  agree  upon  a  standard  form  of  car  would 
mean  the  practical  elimination  of  all  the  equipment  which  you  have 
got  to-day,  or  a  very  great  part  of  it? 

Mr.  Heulings.  It  would. 

The  Chairman.  And  in  the  present  state  of  the  industry  is  there 
any  hope  of  being  able  to  abandon  that  equipment  and  put  in  a  new 
form  or  car? 

Mr.  Heulings.  I  doubt  it;  only  so  far  as  the  introduction  of  the 
new  Bn-ney  safety  car  is  concerned.    There,  I  think,  it  can  be  done. 

The  Chairman.  Would  there  be  any  hope  of  agreeing  upon  a  plan 
for  a  standard  car  that  could  be  used  for  new  equipment  as  it  is  be- 
ing purchased? 

^Ir.  Heulings.  Well,  the  United  States  Housing  Corporation  took 
up  that  identical  thing  here  about  a  year  and  a  half  or  two  years  ago, 
maybe,  and  they  tried  to  come  to  some  conclusion  with  regard  to  a 
standard  car  or  something  that  could  be  called  a  standard  car,  but 
I  doubt  if  you  would  consider  that  very  much  headway  was  made 
with  it. 

Now,  there  is  another  very  popular  type  of  car  that  is  used  in 
Cleveland,  known  as  the  Peter  Witt  type  of  car— a  front  entrance 
and  center  exit— that  probably  presents  some  advantages.    It  han- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      40a 

dies  passengers  probably  as  quickly,  or  more  quickly,  than  any  other 

^^  Thf  ChaIrman.  Do  I  understand  you  have  another  witness  you 
want  to  put  on  to-night  ?  ,  ^     ^,    • 

Mr.  Warren.  If  you  please,  Mr.  Chairman. 

(Witness  excused.) 

STATEMENT  OF  MR.  HENRY  L.  DOHERTY. 

Mr.  Warren.  Your  full  name? 

Mr.  DoHERTY.  Henry  L.  Doherty.  „ 

Mr.  A\^rRREN.  You  are  interested  in  a  gi'eat  many  public  utilities? 

Mr.  DoHERTY.  Y"es,  sir.  -.a 

Mr.  Warren.  Including  street  railways « 

Mr  DoHERTY.  Including  street  railways.  t.t    -r,  i     +   ? 

Mr.  Warren.  What  are  some  of  your  street  railways  Mr  Dohei^y  ? 

Mr  Doherty.  We  have  a  street-railway  company  at  loledo,  Uiiio, 
a  number  of  interurbans  there;  we  have  a  street-railway  property 
run™  over  the  Manhattan  Bridge  and  down  to  Jamaica,  Long 
Eiand^^^^^^^  York  City;  we  have  some  8  or  10  small  street-rail- 

"^'^'KIn.  He  being  interested  in  all  these  railways-I  think 
as  the  time  is  limited,  I  would  like  to  turn  Mr.  Doherty  over  to  the 
coinm^^^^^^^^     to  a^swel^  questions  that  may  interest  the  commission, 
instead  of  my  questioning  him  directly.  .      ^      _   .  .  ,     ,  . 

Mr  Doherty  represents  the  Cities  Service  Co.,  I  think,  do  you  not, 

^^M?Do™^   I  am  president  of  the  Cities  Service  Co.,  and  then  we 
have  othe™Le^^  besides  that^the  firm  of  Henry  L.  Doherty 

^  m1'  Warren.  So  your  experience  has  been  very  great.     I  i^ight 
ask  one  question  following  the  line  of  the  other  witness,  and  that  is 
have  you  had  experience  in  increasing  your  rates  of  fare  on  any  of 
your  companies? 

Mr  wXe^'hS  the'resuirjustified  what  some  of  the  other  wit- 
nesses said  here  to-day,  that  they  got  a  substantial  increase  m 

'"^Mr^DoHERTT.  I  have  not  heard  any  of  the  other  testimony  that 
has  been  given  before  at  this  hearing,  and  I  have  not  read  abo.it  it 
A  raise  of  fare  eventually  results  always  in  a  raise  m  revenue;  but  if 
I  were  trying  to  state  the  effect  of  it,  I  would  prefer  to  make  a  funda- 
mental analysis  of  it  rather  than  to  take  the  specific  figures  from 
Tme  certain  town  and  assume  that  that  would  apply  elsewhere 
Nmv  y^u  can  divide  your  riding  into,  two  classes-necessity  ridmg 
nml  nonnecessity  riding.     If  you  are  in  a  city  where  practically  all 
yoSrriS  is  necessity  riding,  whei-e  the  rider  has  to  ride,  of  course 
a  mise  in  fares  will  not  bring  any  great  y  diminished  amount  of 
ridinsr     But  if  you  are  in  a  city  where  the  distances  are  short,  it 
wn   brinff  a  diminished  amount  of  riding,  at  least  for  the  time  being, 
Tn    I  S    ""depends  largely  on  the  temper  of  the  people  tow.u-d 
tZ  load   whether  they  believe' the  rat«  is  justified  or  not.    A\hat  I 
exnect  to  lee  is  this-that  a  raise  in  rat«s  will  always  cause  mo- 
mintarib^  a  falling  off  in  the  number  of  passengers  but  eventually 


404       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  believe,  except  in  the  smaller  cities,  the  same  number  of  people  will 
ride. 

Mr.  Warren.  And  even  immediately  on  the  change  there  is  some 
increase  in  revenue,  is  there  not,  unless  it  is  an  exceptional  case? 

Mr.  DoHERTY.  Unless  it  is  an  exceptional  case  there  is  immediately 
an  increase  in  revenue. 

Mr.  Warren.  So  that  it  is  a  real  means  of  relief  to  the  companies 
needing  additional  revenue? 

^Ir.  DonERTY.  Yes,  sir. 

Mr.  Warren.  Are  there  any  questions  the  commission  would  like 
to  ask? 

The  Chair^fan.  I  would  like  to  have  Mr.  Doherty  go  ahead  and 
talk  awliile.  He  has  had  a  wide  experience.  Tell  us  what  the  trouble 
witli  the  street-car  industry  is  and  what  is  the  remedy,  if  there  is  one. 

Mr.  Doherty.  Mr.  Chairman,  I  did  not  come  down  for  this  hear- 
ing, although  I  am  intensely  interested  in  it,  and  I  am  verv  glad  that 
the  street-railway  men  are  having  an  opportunity  to  tell  their  story. 

In  the  early  days  of  street  railroading— and  in  a  great  deal  of  this 
I  may  be  simply  repeating  what  other  witnesses  have  said— but  in 
the  early  days  of  the  street  railway,  most  of  the  roads  were  not  to 
exceed  2  miles  long  and  the  platform-hibor  cost  not  to  exceed  15  cents 
an  hour.  I  think  in  the  city  I  was  brought  up  in  the  maximum  wage 
for  a  long  time  was  $1.80  and  the  hours  were  about  12.  Now  we 
have  seen  wages  gradually  increase  from  15  cents  to  a  maximum  of  60 
cents  and  we  have  seen  the  distances  increase  from,  say,  2  miles  to, 
I  believe  in  some  cases,  15  or  20  miles,  and  the  average  distance  of 
riding  constantly  going  up  on  account  of  the  size  of  the  city.  And 
it  seems  to  me  perfectly  obvious  that  we  can  no  longer  stick  to  the 
original  amount  that  was  fixed  for  a  street-railway  fare.  That  was 
fixed  at  that  time  largely  as  a  matter  of  convenience,  on  account  of 
the  nature  of  our  coins. 

Now,  in  addition  to  that,  we  went  through  the  bicycle  craze  and  we 
saw^  the  effect  that  had  on  the  street-railway  companies,  and  now  we 
have  the  automobile  with  us  and  apparently  we  have  got  that  with 
us  pernumently. 

I  do  not  know  the  answer  to  these  problems.  I  would  be  perfectly 
willing  to  try  to  sit  down  and  w^ork  them  out  with  any  group  of 
men.  There  must  be  some  answer,  and  if  things  are  allowed  to  go 
the  way  they  are  I  am  sure  that  in  the  end,  while  the  security  holders 
and  street-railway  men  will  suffer  severely,  it  will  be  the  public  that 
will  suffer  the  most  and  it  will  be  the  wage-earning  cla&s  of  the 
public  that  will  be  punished  most,  because  they  will  have  no  other 
means  of  convevance. 

The  public  are  always  imbued  with  the  idea  in  public-service  work 
that  the  thing  they  are  the  most  interested  in  is  low  cost  of  service. 
It  seems  to  me  they  are  interested  first  in  complete  service  from  a  geo- 
graphic standpoint,  second  in  good  service,  and  lastlv  in  low  rates. 

The  only  solution  that  I  see  to  the  difficulty  is  to  raise  the  rates  of 
fare  to  a  point  where  the  street-railway  companies  can  live ;  and  until 
some  scheme  of  premiumizing  good  management  and  economical 
operation  can  be  devised — something  like  what  is  known  as  the 
London  sliding  scale— I  do  not  see  that  there  is  anv  other  way  to 
work  except  on  a  cost-plus  basis.  I  am  a  believer  that,  if  we  had"  the 
methods  developed  for  doing  it,  we  ought  to  go  to  a  metered  system 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      405 

of  riding,  paid  for  distance.  But  I  think  that  the  paramount  thing 
is  immediately,  before  the  credit  of  street-railway  companies  is  en- 
tirely  wrecked  in  the  minds  of  the  investing  public,  to  get  some  sort 
of  relief  for  the  street  railways,  and  that,  as  I  see  it,  can  only  be 
done  bv  an  increase  in  the  rates  of  fare. 

The  ^Chairman.  Could  the  problem  be  solved  by  getting  away 
from  fixed  franchise  rates  and  leaving  it  to  the  utility  commissions 
to  determine  the  reasonableness  of  a  rate? 

Mr.  Doherty.  Yes,  if  the  utility  commissions  would  act  promptly 
it  would ;  and  I  think  utility  commissions  are  in  better  shape  to  de- 
termine what  a  rate  should  be  than  the  local  authorities. 

I  have  had  one  case  where  we  have  been  trying  to  settle  the  sti;eet- 
railway  difficulty  for  a  number  of  vears  and  we  have  had  continu- 
ous negotiations,  I  would  say,  for  nearly  five  years  with  the  citv 
authorities  and  have  never  reached  a  settlement,  and  largely  I  think 
because  the  citv  authorities  felt  that  they  had  to  comply  with  what 
thev  believed  to  be  the  wishes  of  the  people ;  and  yet  m  many  ways 
those  conditions  would  have  been  something  under  which  the  com- 
pany could  not  have  lived.  ,    ,     ,,      -  ,1      rr.  T    1       -x 

In  that  case— I  refer  to  Toledo— we  took  hold  of  the  Toledo  situ- 
ation when  it  had  been  a  matter  of  controversy  for  a  long  tune,  and 
the  people  there  were  determined  to  have  a  3-cent  fare,  and  a  great 
number,  perhaps  a  majority  of  the  population,  felt  that  if  they  voted 
for  a  3-cent  fare  that  that  should  entitle  them  to  a  3-cent  fare— 
simplv  because  thev  had  voted  for  a  3-cent  fare.  They  had  that  im- 
bued  in  their  minds,  and  when  we  would  try  to  tell  them  we  could 
not  furnish  street-railway  service  at  3  cents,  they  would  say,  "  Wa 
voted  to  have  you  do  it."  .  .      ,    ,. 

Now,  we  have  never  been  able  to  make  the  local  authorities  believe 
that  the  people  of  the  city  understood  that  we  must  have  a  higher 
rate  of  fare ;  and  vet  I  think  the  people  as  a  whole  know  that  we 
must  have  a  higher  rate  of  fare,  and  I  think  they  would  be  willing 

to  pay  it.  ,  _  1    ,    i. 

I  think  in  most  every  case  if  the  matter  was  laid  properly  betore 
the  people,  without  any  confusion  from  the  other  side,  and  was  hon- 
estly presented  from  both  sides,  the  people  would  be  willing  to  pay 
the  necessary  amount  to  provide  adequate  and  proper  street-railway 

The  Chairman.  Well,  of  course,  it  is  the  law  that  a  utility  is 
entitled  to  a  fair  return  on  property  which  it  uses  in  the  public 
service.  Now,  if  we  can  reach  the  time  when  the  street-railway 
properties  are  given  an  honest  valuation  by  State  regulating  authori- 
ties or  some  others  who  have  the  power  to  say  what  that  value  is,  and 
then  a  close  examination  is  made  of  the  operating  sheet  of  the  com- 
panv,  can  you  see  that  there  would  be  any  difficulty  in  having  State 
commissions  or  other  tribunals  promptly  determine  the  question  of 
a  rate  increase? 

Mr.  Doherty.  No,  sir.  .   .        ,         .,    . 

The  Chairman.  Has  not  the  great  trouble  heretofore  been  that 
there  is  always  a  dispute  as  to  the  value  of  your  property,  as  to  the 
amount  of  the  actual  investment  in  the  property,  and  a  feeling  that 
your  property  has  been  greatly  overcapitalized,  and  because  of  that 
the  investors  are  getting  really  more  than  they  are  entitled  to  l 


406       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIS'. 

Mr.  DoHERi  Y.  Well,  there  has  been  so  much  of  a  play  made  on  the 
matter  of  watered  stocks  and  capitalization  in  excess  of  cost  that  the 
public  can  not  disswiate  that  from  the  idea  of  a  valuation  made 
strictly  on  the  property. 

The  Chairman.  Yes.  Xow,  then,  when  you  get  a  valuation,  is 
not  that  in  and  of  itself  ^oing  to  remove  most  of  the  difficulties  which 
you  have  in  dealing  with  the  public? 

Mr.  DoHERTY.  If  you  can  make  the  public  understand  that  the 
amount  of  bonds  and  stocks  issued  on  these  properties  is  not  going 
to  be  considered  at  all  in  making  the  valuation  of  the  property — the 
newspapers  in  the  different  cities  generally  play  up  the  matter  of 
watered  stock,  whether  there  has  been  any  watered  stock  or  not ;  but 
if  you  can  make  it  plain  that  the  property  is  going  to  be  valued  as  a 
property  and  without  regard  to  its  capitalization — I  think  the  public 
would  be  perfectly  willing  to  pay  a  rate  of  fare  that  would  in  turn 
yield  a  fair  rate  of  return  of  the  actual  value  of  the  property.  Now 
in  the  matter  of  the  value  of  the  property,  I  do  not  see  that  there 
should  be  such  a  gi-eat  difference  of  opinion  as  there  has  been  on  some 
of  the  valuations. 

The  Chairman.  Well,  that  is  a  matter  of  detail  and  does  not  go 
into  the  principle  we  are  trying  to  discuss. 

Mr.  DoHERTY.  No;  I  just  want  to  make  a  point — that  it  is  very 
easy  to  determine  the  value  of  the  property. 

The  Chairman.  I  was  back  in  St.  Paul  last'  winter,  and  the  Twin 
Cities  lines  were  trying  to  get  some  sort  of  legislation.  The  mayors 
of  the  cities  and  some  others  immediately  took  advantage  of  a  public 
feeling  that  there  were  about  $10,000,000  or  more  of  w^atered  stock  in 
the  property,  and  that  element  alone  I  think  had  more  to  do  with 
defeating  really  wise  legislation  than  any  other  single  factor.  Now, 
if  those  properties  could  have  been  properly  valued  by  the  State,  sub- 
ject to  the  right  of  appeal  to  the  courts  by  either  party,  that  element 
of  criticism  would  have  been  removed. 

Mr.  DoiiERTY.  And  I  agree  with  you — if  you  can  just  get  out  of 
the  public  mind  that  that  watered  stock  has  anything  to  do  with 
the  valuation  that  is  going  to  be  made. 

The  Chairman.  Exactly.  Now,  if  the  utilities  and  the  public 
authorities  can  reach  the  jwint  where  these  properties  can  be  prop- 
erly valued  and  you  get  away  from  a  fixed  franchise  rate,  have  you 
not,  as  a  matter  of  fact,  got  about  all  that  a  public-service  corpora- 
tion should  have? 

Mr.  DoHERTY.  Well,  that  is  all  I  think  that  any  of  the  public- 
service  corporations  should  ask  for,  but  they  are  asking  if  possible 
that  that  really  be  granted  to  them  very  quickly. 

The  Chairman.  Oh,  I  am  asking  questions  now  with  reference  to 
a  permanent  policy  and  not  immediate  relief. 

Mr.  DoHERTY.  I  a^ee  with  that  policy  until  we  can  find  some 
better  one.  If  there  is  a  better  one,  all  right;  but  that  is  the  only 
one  I  see  now. 

The  Chairman.  If  you  can  reach  this  proper  value  and  have  the 
State  fix  the  rates,  is  there  any  reason  why  you  should  adopt  the 
cost-of-service  plan  ?  I  am  asking  these  questions,  and  I  am  entirely 
open-minded  on  the  proposition. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      407 

Mr.  DoHERTY.  Is  it  not  practically  the  same  thing?    Because—- 

The  Chairman.  No;  because  one  operates  automatically  with  the 
rise  and  fall  of  the  cost  of  operation  and  the  other  addresses  itself 
to  the  judgment  of  the  tribunal.  n    ^    i 

Mr  DoHERTY.  Well,  I  should  think  it  would  be  preferable  to  have 
the  State  commission  determine  the  valuation— I  did  not  quite  catch 
the  distinction  that  you  make  between  your  plan  and  the  cost-ot- 
service  plan.     I  should  think 

The  Chairman.  I  am  not  announcing  a  plan  but  I  am  stating 

the  plans.  .        ^      .,,        ^   -^      x>  4.   :<. 

Mr.  Doherty.  No.     Well,  your  question,  I  will  put  it.     But  it 
seems  to  me  the  matter  of  being  able  to  adjust  yourself  to  new  con- 
ditions without  a  new  hearing  is  very  valuable.     Now,  here  is  what 
happened,  Mr.  Elmquist,  in  the  matter  of  public-service  commissions. 
If  the  day  ever  comes  when  the  farmer  must  go  to  the  public-service 
commission  or  some  agricultural  commission  and  get  the  consent  of 
that  body  to  plant  one  field  in  wheat  and  another  field  m  corn  he 
will  probably  say,  "  Oh,  well,  it  is  so  much  trouble  I  will  ]ust  let  it 
ffo:  I  will  not  plant  anything,"  simply  on  account  ot  the  delay.     VVe 
have  not  been  hurt  so  much  by  public-utility  commissions,  even 
where  they  have  shown  their  teeth  in  many  cases,  because  we  have 
been  able  to  tell  our  story  to  them  and  get  it  before  them.     But  we 
have  often  been  intensely  hurt  by  delay,  and  the  street-railway  com- 
panies now  are  in  a  condition  where  they  need  assistance,  and  they 
need  assistance  at  once,  and  if  they  do  not  get  it  at  once  their  credit 
is  going  to  be  permanently  crippled.    The  whole  industry  s  credit  is 
oroin<r  to  be  so  crippled  that  I  doubt  if  it  can  be  reestablished.     I  do 
Sot  know  that  I  make  myself  entirely  clear.     But  if  some  man  would 
go  around  to  a  farmer  and  say,  "  I  am  starving,"  and  the  farmer 
would  say,  "  Old  fellow,  I  am  going  to  have  the  finest  crop  of  wheat 
next  year  you  ever  saw.    You  come  around  when  that  crop  is  m  and 
I  will  give  you  something  to  eat."    That  would  not  do  the  starving 
man  much  good,  because  he  would  be  dead  when  the  crop  came  m. 
Now,  the  street  railways  are  just  in  a  crucial  condition,     in  tact, 
their  credit  is  already  strained  beyond  the  elastic  limit,  and  when 
we  talk  about  stopping  and  making  an  accurate  valuation  ot  these 
properties  a  very  long  period  of  time  can  be  consumed.     It  is  sur- 
prising how  much  time  it  does  require  sometimes  m  connection  with 
a  State  commission  making  an  accurate  valuation. 

The  Chairman.  I  hope  you  did  not  get  the  idea  that  I  meant  there 
had  to  be  a  valuation  of  these  properties  in  order  to  determme  the 
immediate  pressing  question.     You  know i  j  u    ^     ^« 

Mr  Doherty.  Well,  I  was  afraid  the  conclusion  would  be  drawn 
bv  many  of  our  State  commissions  that  no  relief  whatever  should  be 
granted  until  this  very  detailed  determination  of  values  could  be 

°^  The  Chairman.  Well,  of  course  you  know  that  State  commissions 
during  the  war  times  have  uniformly  granted  rate  increases  with- 
out going  through  the  form  of  valuing  the  properties.  They  have 
simply  overlooked  that  during  the  time  of  the  war  and  have  treated 
them  as  emergency  propositions.  ,    .  •       .,  ^u 

Mr  Doherty.  They  have  in  many  cases,  but  m  other  cases  they 
have  not  granted  the  increase ;  and  my  theory  would  be  whatever  is 
done    to  make  an  approximate  valuation  and  make  some  rate  ad- 


408       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

justment  on  that  basis  and  then  L\ter  make  the  detailed  and  more 
accurate  valuation. 

The  Chairman.  Are  we  to  understand  that  in  your  opinion 
this  commission  has  just  one  duty  to  perform,  and  that  is  to  evolve 
some  plan  by  which  immediate  relief  can  be  given  to  the  utility? 

Mr.  DoHERTY.  Will  you  read  that  to  me? 

(The  question  was  tnen  read  as  above  recorded.) 

Mr.  DoHERTY.  Now,  I  did  not  assume  that,  but  I  do  assume  that 
if  anything  is  going  to  be  done  and  eventually  serve  the  public 
properly  with  street-railway  service,  there  must  be  immediate  re- 
lief given.  In  other  words,  that  a  permanent  plan  will  be  greatly 
handicapped  unless  immediate  relief  is  given. 

The  Chairman.  Well,  might  we  assume  then  that  tli^re  are  two 
functions  to  be  performed  by  this  commission :  One  to  evolve  a  plan 
for  temporary  relief  and  another  to  outline  a  plan  for  permanent 
relief? 

Mr.  DoHERTY.  That  would  be  very  wise,  I  think. 

The  Chair3ian.  Now,  addressing  yourself  to  the  first  proposition— 
of  immediate  relief — how  can  we  serve  the  utilities  in  that  respect? 

Mr.  Doherty.  I  would  say  by  recommending  that  revaluations 
of  the  properties  be  made  by  approximate  methods  and  rates  predi- 
cated on  the  valuation  by  the  appro»ximate  methods  until  such  tmie  as 
credit  valuations  of  the^  properties  can  be  made. 

The  Chairman.  Do  you  mean  that,  where  a  utility  is  actually 
ojierating  in  the  red  and  paying  nothing  at  all  to  its  stockholders, 
there  should  be  a  valuation  of  the  property  before  relief  is  given, 
even  upon  an  approximate  basis? 

Mr.  Doherty.  Now,  I  do  not  think  that  is  necessary.  I  will  amend 
my  answer  by  saying  that  in  many  cases  there  is  no  need  of  even  mak- 
ing an  approximate  valuation.  We  know  that  a  raise  has  to  be  made. 
But  I  should  think  an  approximation  should  be  made.  I  should 
think  rates  could  be  based  better,  even  in  a  situation  like  that,  if  an 
approximation  was  made.  Say,  for  instance,  you  just  took  roughly 
and  said  for  a  railroad,  we  will  allow  a  valuation — I  am  just  talk- 
ing now  in  round  figures — we  will  allow  a  valuation  of  $100,000  a 
mile  of  track  as  an  approximate  valuation,  and  then  we  will  see  what 
the  situation  would  have  to  be  on  that  valuation  to  yield  a  proper 
return,  and  then  these  rates  will  prevail  until  an  accurate  valuation 
can  be  made. 

The  Chairman.  Irrespective  of  value,  the  utility  has  got  to  have 
enough  money  out  of  its  rate^  to  pay  its  operating  costs. 

Mr.  Doherty.  Oh,  yes,  absolutely.  But  I  would  not  like  to  see 
just  enough  given  to  them  to  pay  operating  expenses,  because  that 
does  not  save  their  credit  and  that  does  not  save  the  credit  of  the 
business. 

The  Chairman.  No  doubt  about  that,  but  I  was  trying  to  develop 
the  point  that  there  are  cases  where  valuation  is  not  necessary. 

Mr.  Doherty.  Certainly,  in  most  cases  valuation  is  not  necessary 
to  know  that  there  has  to  be  an  increase  in  rates. 

The  Chairman.  Now  then,  to  whom  should  our  recommendation  be 
made,  and  how,  answering  with  respect  to  immediate  relief  ? 

Mr.  Doherty.  AVell,  I  do  not  know,  of  course;  I  am  not  a  very 
quick  thinker,  but  it  seems  to  me  we  have  got  to  make  that  apparent 
to  whoever  the  rate-making  body  is.    In  many  States  both  the  city 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      409 

and  the  commission  have  to  act,  and  having  two  bodies  which  must 
act  makes  it  more  than  doubly  difficult. 

I  think  that  the  one  important  thing  to  do  here  is  to  make  the  pub- 
lic understand  it,  because  I  know  from  my  dealings  with  public  otti- 
cials  that  very  often  they  know  that  a  thing  ought  to  be  done,  but 
they  are  not  going  to  do  it  unless  they  believe  the  public  thinks  it 

oufifht  to  be  done.  ^        .         ^    .  . 

The  Chairman.  Do  you  believe  the  function  of  this  commission, 

then,  is  largely  educational?  .       ,     ^        ,,        xi_  x  i-i,  u 

Mr  Doherty.  Yes,  largely  educational.  I  would  say  that  the  work 
of  this  commission  would  not  be  entirely  covered  if  it  simply  sue- 
ceeded  in  impressing  upon  the  rate-making  body  that  this  or  that 
were  so.  Unless  it  can  go  further  and  be  of  enough  public  interest 
to  make  them  courageous  enough  to-  act,  not  much  will  be  accom- 
plished from  it.  .  ,     X  1      i. 

The  Chairman.  Now  to  step  from  the  temporary  plan  to  a  perma- 
nent  plan ;  how  can  this  commission  serve  the  utilities  and  the  public 
with  respect  to  a  permanent  plan  ?  j;   ^      ^      -i 

Mr  Doherty.  Well,  it  can  point  out  the  possibilities  of  street-rail- 
way economies,  and  it  can  point  out  the  possibilities  of  the  relief  of 
persons  that  street-railway  companies  should  not  bear.  Ihere  has 
been— I  do  not  know  hoAV  many  cities  there  are  where  there  is  an 
occupation  tax  laid  on  street  railways.  I  do  know  that  many  public 
utilities  are  subjected  to  an  occupation  tax.  And  i^  talking  with 
people  responsible  in  some  cases  for  levying  that  tax  I  find  that  they 
always  look  upon  it  as  a  tax  upon  the  occupation  of  the  street,  not 
usinff  the  name  of  the  tax  in  the  way  it  originally  started— as  being 
the  character  of  business  carried  on.  And  many  gas  and  electric- 
light  and  street-railway  companies  are  compelled  to  pay  a  tax  for  oc- 
cupvinir  the  streets  in  some  form  or  other.  Well,  that  is  a  very  un- 
wise policy,  it  seems  to  me,  from  the  standpoint  of  the  public.  Be- 
cause taking  a  gas  or  electric  company— they  transmit  the  equivalent 
of  an  enormous  amount  of  energy  over  or  under  the  public  streets 
without  noise,  wear  and  tear  or  causing  the  city  the  expense  of  main- 
taining the  streets.  A  street-railway  company  operates  on  its  own 
steel  tracks,  and  it  does  not  wear  out  the  pavement,  and  to  tell  the 
truth,  it  saves  a  great  deal  of  the  city's  pavement  by  the  amount  of 
trucking  that  is  done  on  its  tracks.  ,        •„  j      i 

The  Chairman.  I  assume  we  will  have  witnesses  who  will  develop 
this  part  of  the  question  more  fully,  but  what  I  am  trying  to  find 
out  is  if  you  can  not  sketch  out  in  a  word  the  things  this  commission 

Mr.  Doherty.  I  am  trying  to  think  of  a  few ;  but  if  you  will  al- 
low me  to  proceed  a  moment— no  occupation  tax  ought  to  be  put  on  a 
street  railway,  because  a  car  carries  an  average  of  30  passengers  as 
compared  with  an  automobile  which  carries  2,  yet  we  are  subjected 
to  a  paving  tax  and  it  is  not.  There  was  a  time  we  wore  out  the 
pavement ;  there  was  a  time  when  the  horses  littered  up  the  pavement 
and  we  had  to  clean  them.  We  have  lots  of  obligations  forced  on  us 
now  that  are  relics  of  the  past,  and  we  can  not  get  rid  of  them.  I 
can  not  think  of  all  of  them  sitting  here.  But  every  possible  relief 
which  can  be  given  to  the  street  railways  and  transferred  from  a 
specific  charge  against  them  to  either  the  property  holders  or  tlie 

160643°— 20 27 


410       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

general  fund  should  be  done.  Because  even  if  a  man  has  an  auto- 
mobile and  does  not  use  the  street  railway,  he  wants  it  there — it  is 
an  asset  there  to  him.  It  is  there  ready  to  serve  the  needs  of  his 
premises,  witli  a  measenger  boy  or  anything  else  tliat  comes  along; 
and  in  a  way  you  could  almost  justify  a  subsidy  for  a  railway  rather 
than  have  it  shut  down.  Even  if  the  people  did  not  use  it  enough 
to  pay  for  it,  it  would  still  be  a  municipal  necessity.  One  of  my  first 
thoughts  would  be  to  take  off  ev^ry  load  that  can  possibly  be  taken 
off  of  the  street  railway  company. 

The  Chairman.  That  involves  a  very  comprehensive  study  of  the 
chief  function  of  a  utility  with  reference  to  its  service  to  the  public. 

Mr.  DoiiERTY.  Yes;  and  it  even  involves  the  matter  of  the  differen- 
tiation between  a  street-railway  company  and  another  form  of  public 
utility,  because  there  is  a  differentiation  there. 

The  Chairman.  Should  this*coinmission  undertake  to  reconnnend 
a  definite  form  of  franchise  to  be  used  by  utilities  throughout  the 
country  ? 

Mr.  DoHB^RTY.  I  would  say  no  to  that,  because  I  assume  we  are 
not  going  to  get  away  from  regulation  by  some  regulating  body, 
and  I  think  the  franchise  is  more  or  less  a  suf>erfluous  thing,  if  you 
are  going  to  have  a  regulating  body.  I  do  not  think  you  can  write 
into  a  franchise  in  advance  as  wisely  as  you  can  be  regulated,  and 
I  take  it  that  by  no  chance  will  regulation  be  given  up  of  the  public 
utilities;  and  if  regulation  is  going  to  be  maintained,  it  is  a  good 
deal  better  not  to  have  any  other  instrument  that  interfered  with 
regulation.  Have  your  franchise  just  that  you  are  able  to  operate 
and  have  it  of  an  indeterminate  character  and  subject  to  regulation, 
I  would  say — just  thinking  out  loud,  because  I  did  not  know  that 
question  would  be  asked  and  have  not  thought  of  it. 

The  Chairman.  Then  you  would  be  satisfied  with  a  recommenda- 
tion for  an  indefinite  term  franchise  ? 

Mr.  DoHERTY.  Yes. 

The  Chairman.  And  have  the  utilities  regulated  by  public  author- 
ities ? 

Mr.  DoHERTT.  I  would,  as  a  street-railway  man.  I  do  not  know 
as  that  represents  the  views  of  the  other  street-railway  men. 

The  Chairman.  Then  there  is  one  kind  of  a  franchise  which  you 
would  be  satisfied  to  have  us  recommend  ? 

]^Ir.  Dohertt.  Yes. 

The  Chairman.  Are  there  any  other  features  you  would  have  in- 
corporated in  that  franchise? 

Mr.  DoHERTY.  Well,  I  do  not  know  how  to  distinguish  between 
what  is  in  the  franchise  and  what  is  in  the  law  creating  the  regu- 
latory body.  If  the  duty  of  the  regulatory  body  is  to  act  and  act 
promptly,  I  would  say  the  less  in  the  franchise  the  better.  Most 
every  franchise  to-day— if  you  would  start  out  to-day  and  get  a 
franchise  from  the  city,  you  would  get  what  I  have  seen  in  my  own 
case;  they  want  to  give  you  half  a  page  as  to  the  rights  of  the  com- 
pany and  68  pages  of  restrictions  on  the  company.  That  is  what  a 
franchise  is  to-day. 

Mr.  Warren.  And  attempt  to  regulate  in  advance,  for  all  time? 

Mr.  DoHERTY.  Yes,  and  attempt  to  regulate  in  advance.  Now,  we 
are  not  asking  to  get  away  from  State  regulation,  so  if  we  are  not 
asking  to  get  away  from  State  regulation  and  are  going  to  have  Stat© 


•      PROCEEDINGS  OF  FEDERAL  ELECTRI€  RAILWAYS  COMMISSION.      411   ^ 

regulation  permanently,  it  seems  to  me  it  is  bettei'  not  to  write  a. 
Stite  regulation  in,  in  advance,  at  the  time  the  f ranch^  is  granted 
The  Chairman.  Don't  you  think  it  would  be  well  for  a  Federal 
commission  to  make  certain  genei-al  ^^commendations  to  the  states 
and  to  the  municipal  authorities  that  can  be  incorporated  in  new 

franchises  as  they  are  granted?  ,    ^  t   i         ^  ^i.;^v  ^f 

Mr  DoHERTY.  There  may  be  some  things,  but  I  do  not  think  or 
them  now.  But  I  am  very  sure  you  could  make  one  very  valuable 
recommendation  by  saying,  "  Put  very  little  in  it." 

Commissioner  Sweet.  If  real  relief  is  obtained  through  this  com- 
mission or  otherwise,  does  it  not,  in  your  judgment,  mean  a  rather  com- 
plete revolution  as  compared  with  what  has  been ;  m  other  words,  has 
there  not  been  antagonism  of  a  certain  kind  between  the  general  pub- 
lic and  the  public-service  corporations  m  the  past— a  teeling  on  the 
part  of  the  public  that  the  public-service  corporations  were  grasping, 
were  seeking  to  get  more  than  they  were  fairly  entitled  to,  and  that 
it  was  the  duty  of  the  public  to  be  very  watchful  and  to  do  a  great 
many  things  in  the  way  of  pmiishing  the  public-service  corporations 

for  what  tSey  might  do?  .,    ,   ,       ....it         u 

Mr.  Doherty.  Well,  you  have  described  the  attitude,     I  would  use 

your  same  words  in  trying  to  answer  your  question.  ,,       .^ 

Commissioner  Sweet.  Well,  do  you  think  that  has  been  the  situa- 

Mr.  Doherty.  I  think  that  has  been  the  situation.  I  think  there 
have  been  some  grievances  tliat  the  public  have  had,  but  I  think  they 
have  been  enormously  overagitated ;  and  so  many  men  have  capital- 
ized the  little  original  unpopularity  of  the  utility  corporations  to 
put  themselves  into  political  power  and  have  kept  at  it,  and  the  pub- 
lic have  felt  that  they  had  to  be  watched  very  close. 

Commissioner  Sweet.  Is  it  not  necessary  to  change  that  attitude 
entirely  and  wipe  out  this  whole  feeling,  to  get  permanent  reliet? 

Mr.  Doherty.  You  have  to  make  the  public  understand  that  ordi- 
nary *  common  garden  variety  of  fair  play  demands  that  the  street- 
railway  company  be  given  a  ^fair  and  adequate  rate  of  return,  and  it 
can  not  do  it  with  the  old  rate  of  fare,  with  all  its  expenses  increased 

so  enormously.      •  •        i  i  i  ^4. 

Commissioner  Sweet.  Now  you  are  putting  that  solely  as  a  street- 
railway  man  and  not  as  a  citizen.  Don't  you  think  that  m^ead  of 
demanding  it  or  recommending  it  as  far  as  this  commission  is  con- 
cerned—as a  matter  of  justice  to  the  street-railway  company— that 
particular  stress  should  be  laid  upon  the  fact  that  the  public  can  not 
have  this  absolute  necessity,  to  say  nothing  about  convenience,  unless 
it  changes  its  attitude  and  becomes  helpful  and  cooperative  iii^ead 
of  having  its  tentacles  out  looking  for  trouble  ?  -o  ^  i.i 

Mr.  Doherty.  Yes,  sir;  I  agree  with  you  thoroughly.  But  the 
only  distinction  at  all  between  you  and  me  is  that  I  believe  that 
sentiment  would  be  largely  removed  if  they  did  understand  that 
these  companies  were  really  losing  money.  But  you  will  nnd  in 
every  community  some  demagogue  telling  them  that  is  all  a  blutf — 
the  street-railway  company  is  not  losing  money;  and  that  is  one  of 
the  troubles.  But  I  agree  with  you  on  another  thing,  Mr.  Sweet, 
and  very,  very  thoroughly;  and  you  took  a  slant  at  it,  and  I  was. 
hopintr  you  would  come  out  and  say  so.  Let  us  assume  we  all  do 
o-et  wiped  out ;  for  every  dollar  we  lose  it  will  be  nothmg  m  com- 
parison  with  the  punishment  inflicted  upon  the  public 


412       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Let  US  take  our  railroad  situation.  I  saw  the  railroad  situation 
CiacLe  a  toy  of.  I  lived  in  Wisconsin,  I  was  a  young  man  there ;  and 
I  tried  to  point  out  what  was  to  be  the  effect  of  making  the  railroads 
of  this  country  a  political  football.  But  on  the  plea  of  saving  money 
for  the  wage  earners,  they  kept  reducing  fares  and  regulatm^  and 
regulating.  Now  the  wage  earners  are  not  great  travelers.  And  I 
maintain  this,  and  this  is  conservative— that  for  every  penny  that 
was  saved  the  wage  earners  of  this  country  by  a  reduction  of  fares 
and  regulation  of  railroads,  it  cost  those  people  at  least  10  cents  in 
the  way  of  increased  food,  increased  cost  of  clothing,  and  increased 
cost  of  sheltering  and  housing  them,  because  we  were  a  rapidly 
oTowing  country;  we  had  more  mouths  to  feed  and  more  bodies  to 
clothe  and  shelter  and  were  not  opening  up  more  land  to  take  care 
of  them.  Now  in  the  end  it  was  the  public  that  paid  the  bill.  The 
railroad  companies  paid  first,  but  the  big  bill  was  paid  by  the  public. 
And  how  much  it  cost  the  public  after  we  got  into  the  war  I  do  not 
know,  but  if  it  had  not  been  for  the  development  of  the  automobile 
and  the  substitution  of  gasoline  for  horsepower  I  do  not  know  how 
we  would  have  fed  ourselves  and  our  Allies.  We  could  not  have 
done  it.  And  that  is  just  what  foolish  regulation  cost  and  always 
does,  that  is  done  for  the  political  advancement  of  the  men  who  pro- 
mote it.  It  would  have  cost  us  the  loss  of  the  war  if  it  had  not  been 
for  the  development  of  gasoline-consuming  devices  instead  of  food- 
consuming  animals.  .  i    ^  i     • 

Commissioner  Sweet.  Well,  that  is  a  little  bit  aside  from  the  im- 
mediate question,  but  as  a  matter  of  fact 

Mr.  DoHERTY.  Well,  it  is  a  public  utility,  and  we  are  doing  the 
same  way  with  the  public  utilities ;  and  the  public  will  pay  the  big 
bill  in  the  future.  .  . 

Commissioner  Saveet.  But  the  internal  combustion  engine  has 
really  played  a  big  part  in  this  war. 

Mr.  DoHERTY.  Yes;  and  in  hurting  the  street  railways;  and  it 
did  not  save  us  on  the  fare  question. 

Commissioner  Sweet.  Certainly,  but  we  would  have  no  aeroplanes 
if  it  was  not  for  that  kind  of  an  engine. 

Mr.  Doherty.  No. 

Commissioner  Sweet.  And  no  dirigible  balloon. 

Mr.  Doherty.  Well,  we  might  have  the  balloon,  but  not  the  lighter- 
than-air  machine.  But  it  was  the  substitution  of  gasoline,  a  mineral 
product,  for  a  food  product,  that  enabled  the  existing  lands  to  feed 
ourselves  and  our  Allies. 

Commisisoner  Sweet.  Now,  to  come  back  to  the  mam  question 

Mr.  Doherty.  In  otlier  words,  it  is  a  mere  accident  that  the  matter 
of  trying  to  capitalize  railroad  unpopularity  for  political  advance- 
ment did  not  ruin  us. 

Commisisoner  Sweet.  Now  the  real  point  is,  to  get  away  from 
that  prejudice  which  we  all  realize  does  exist  to  a  certain  extent 
and  that  there  was  some  ground  for  in  the  past  a  great  deal  more 
than  there  is  at  present;  in  fact,  the  evidence  so  far  introduced  seems 
to  be  that  there  is  little  if  any  ground  for  it  now,  and  yet  we  all  recog- 
nize its  existence  to  a  certain  extent.  How  to  get  rid  of  it  is  the  real 
problem,  is  it  not  ?  . ,     - 

Mr.  Doherty.  I  think  so.  But  I  think  the  real  way  to  get  rid  of 
it  is  to  convince  the  public— that  is,  I  think  it  will  change  their 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      41^ 

attitude  of  unfriendliness  if  they  thoroughly  appreciate  that  the 
roads  are  losing  money  and  that  they  must  be  supported,  because  this 
IS  a  public  necessity,  it  is  not  a  matter  of  something  alone  purely  for 
the  benefit  of  the  stockholders;  but  they  must  have  it,  and  it  is  more 
essential  to  them  than  it  is  to  the  stockholders. 

Commissioner  Sweet.  Then  would  it  be  your  opinion  that  if  this 
commission,  by  reason  of  all  the  investigation  that  it  is  capable  of 
making  within  a  comparatively  short  time,  should  report  that  the 
interest  of  the  public,  in  its  judgment,  demands  first  the  immediate 
relief  that  you  have  referred  to  and  later  on  more  permanent  meth- 
ods of  relief,  to  say  comparatively  little  about  the  interests  of  the 
companies,  although  that  means,  however,  the  interest  of  investors^ 
who  are  a  part  of  the  public — often  widows  and  orphans  and  a  com- 
paratively few  people 

Mr.  Doherty.  Yes,  and  some  of  them  savings  banks  and  life- 
insurance  companies. 

Commissioner  Sweet.  Well,  if  the  whole  subject  were  presented  to 
the  public  just  exactly  as  it  is  and  in  a  comparatively  brief  and 
forceful  manner,  backed  up  by  what  little  authority  there  may  be 
given  to  this  commission  in  the  minds  of  the  public,  do  you  think  it 

would  do  some  good? 

Mr.  Doherty.  Oh,  yes ;  it  will  do  a  great  deal  of  good,  and  I  do 
not  believe  that  you  men  can  sit  and  listen  and  examine  every  part 
of  this  case  except  when  you  get  through  you  can  honestly  say  that 
it  is  more  greatly  to  the  interest  of  the  public  to  do  this  and  to  do  it 
promptly  than  it  is  to  the  railroads  or  to  the  investors. 

Commissioner  Sweet.  W^ell,  it  certainly  seems  as  if  the  public 
ought  to  then  be  open-minded  enough  to  realize  that  fact. 

Mr.  Doherty.  Well,  it  depends  how  many  newspapers  are  preach- 
ing thQ  other  side  as  a  pure  matter  of  their  own  selfish  interest  and 
how  many  people  have  already  started  out  to  capitalize  their  own 
political  future  on  this  particular  issue  and  they  can  not  very  well 

back  up. 

Commissioner  Sweet.  Why  should  newspapers  have  any  interest 

in  their  taking  an  opposite  view? 

Mr.  Doherty.  Well,  lots  of  newspapers  have  built  up  their  circu- 
lation by  simply  preying  on  the  public  utilities,  thinking  that  that 
would  be  a  matter  of  intierest  that  would  sell  their  newspapers. 

I  have  been  in  the  public-utility  business — ^this  coming  fall,  if  I 
wanted  to,  I  could  celebrate  my  thirty-eighth  year  in  the  public- 
utility  business.  I  have  seen  case  after  case  of  trouble  hatched  up 
between  a  city  and  a  public-utility  company  that  was  done  purely  for 
political  reasons.  Now  I  could  name  you  case  after  case  where  pub- 
lic councilmen  or  people  of  that  sort  would  make  a  demand  on  the 
public  utility  where  they  would  have  been  the  most  disappointed 
people  in  the  world  if  the  company  had  met  the  demand,  and  in 
many  cases  they  were.  And  I  could  cite  you  other  cases  where  the 
public  utility  met  the  demand  for  a  reduction  in  rates  and  they 
immediately  made  some  demand  that  they  Imew  the  company  could 
not  meet ;  and  then  they  would  have  an  issue  they  could  go  to  the 
people  with  and  promise  them  cheap  gas  or  cheap  current  and  they 
would  get  it  for  them  if  they  would  put  them  in  office. 

Now  you  have  that  to  meet.  An  average  reformer  is  a  man,  to  my 
mind — m  my  time  I  have  met  a  great  many  of  them,  and  I  would 


414       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

describe  him  as  a  rule  as  a  niaii  who  was  w^illing  to  take  every  one 
of  the  great  big  human  problems  and  use  them  as  brickbats  and  use 
them  as  a  pedestal  by  which  he  could  get  his  shoulders  above  the 
balance  of  the  crowd.  Of  course,  many  of  them  are  genuine,  but 
they  are  shallow  thinkers — they  are  always  going  to  tell  you.  I  al- 
ways measure  a  refonner,  as  to  whether  he  is  a  real  I'eformer  or  not, 
by  whether  he  is  willing  to  give  the  people  something  out  of  his  own 
pocket  or  out  of  somebody  else's  pocket,  and  I  do  not  see  very  many 
that  are.    They  are  generally  looking  for  a  good  fat  job. 

The  Chairman.  If  your  definition  of  a  reformer  is  accurate,  then 
does  it  not  mean  that  all  reforms  tliat  have  been  accomplished  for 
the  benefit  of  civilization  have  been  made  to  meet  the  selfish  wishes 
of  those  who  advocated  them? 

Mr.  DoHERTY.  Well,  I  will  tell  you.  There  are  a  lot  of  things 
jou  would  call  reforms  probably  that  I  would  not. 

Commissioner  Sweet.  The  reformer  you  have  been  talking  about 
is  the  spurious  reformer,  the  man  who  is  trying  to  trade  on  the 
principles  of  being  a  reformer  and  is  not  really  one. 

Mr.  DoHERTY.  Yes,  but  just  think  how  many  of  those  we  have 
with  us. 
•  Conmiissioner  Sweet.  Yes,  I  understand. 

Mr.  DoiiERTY.  They  kind  of  crowd  out  all  the  rest 

Commissioner  Sw^eet.  For  one  real  reformer  there  are  probably  15 
or  20  or  maybe  50  of  these  so-i  ailed  reformers  who  are  not  in  ideality 
such.    Is  that  it? 

Mr.  Doiierty.  I  think  your  figure  is  a  little  low  there.  I  would 
say  100  or  200. 

Conunissioner  Sweet.  Well,  I  presume  we  will  all  of  us  agree  in 
rather  despising  those  avIio  sail  under  false  colors  of  any  kind. 

Mr.  Doiierty.  Well,  I  do  not  know  as  I  do.  I  have  a  lot  of  sym- 
pathy with  many  of  these  public  officers.  You  people  know  that*  the 
people  right  down  here  in  the  Senate  and  House  can  not  vote  as  they 
really  think.  I  took  lunch  to-day  with  a  Senator  at  the  Senate 
lunch  room.  He  said  of  course  they  caji  not  do  it — they  are  such  big 
cowards  they  can  not  do  it.  If  they  just  did  what  they  thought  was 
really  right  they  would  never  serve  but  one  tei-m,  and  they  would  not 
serve  that  one  term  out,  if  the  article  could  be  sprung  on  them. 

Mr.  Warren.  I  believe  they  could  vote  what  they  really  believe 
and  stay  there,  but  they  do  not  think  so. 

Mr.  DoHERTY.  I  do  too.  I  think  the  public  admire  bold  people.  I 
think  that  is  the  reason  Theodore  Roosevelt  was  such  a  hero,  because 
he  had  the  nerve  to  tell  the  public  whei-e  they  could  get  off,  and  they 
liked  it,  but  the  average  politician  does  not 

I  went  to  a  city  official  and  said,  "  Are  you  going  to  allow  a  thing 
like  this  to  be  pulled  ?"  He  said,  "  What  can  I  do  ?  If  I  don't  permit 
this  thing  to  go  through,  people  would  say  you  had  bought  me  out." 
It  was  a  case  of  two  opposition  companies  fighting.  There  was  a 
man  as  honest  as  the  day  was  long,  but  he  felt  he  could  not  stand  up 
and  do  what  he  knew  was  right,  because  it  meant  that  sort  of  criti- 
cism. 

Commissioner  Sweet.  I  am  going  to  turn  the  tables  on  you  a 
little  bit. 

Mr.  DoHERTY.  That  is  fair  enough. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      415 

Commissioner  Sweet.  I  know  of  a  case  where  a  Public-service 
corporation  attempted  to  induce  the  appointing  authority  ot  a  city 
to  appoint  a  man  on  the  board  of  assessors  who  had  been  a  member 
of  the  common  council  and  had  been  recognized  all  over  the  city  as 
a  very  decided  friend  of  public-service  corporations.  Ihe  appoint- 
ment was  not  made.  I  know  of  another  case  where  a  public-service 
corporation  attempted  to  induce  a  public  official  who  had  the  ap- 
pointive power  to  appoint  as  chairman  of  a  franchise  coinmittee  ot 
the  common  council  a  decided  friend  of  such  corporations,  and 
especially  desired  to  have  left  off  from  that  committee  entirely  a 
man  who  had  shown  himself  somewhat  advanced  and  a  little  too 
anxious  to  require  street-railway  companies  to  put  down  what  is 
called  the  Trilby  rail.  And  I  could  name  a  number  of  other  in- 
stances of  that  kind  that  never  got  into  the  newspapers  at  all. 

Mr    Doiierty.  Don't  think  that  I  am  sitting  here  and  claiming 
that  the  only  virtue  in  the  world  belongs  to  corporation  men     i  do 
not      But  I  do  say  this— that  the  greatest  degree  of  honesty  that 
voii  will  find  in  the  United  States  you  will  find  among  the  big 
business  men  of  this  country.    And  there  is  a  reason  for  it,  and  it  is 
a  natural  reason:  Big  business  requires  a  certain  amount  ot  mutual 
trust  every  place.     You  do  not  advance  men  there  who  are  thieves. 
Thieves  have  to  work  in  squads  of  one;  they  have  to  watch  each 
other     It  is  natural  that  business  carried  on  with  corporations  should 
brin^^  about  the  advancement  of  the  men  who  are  honest  and  trusty 
worthy,  and  while  I  do  not  say  for  a  moment  but  what— I  am  not 
here  pinning  any  particular  stars  on  them,  that  is,  I  ani  not  claim- 
inir  that  the  corporation  men  have  done  no  wrong;  but  I  would  say 
there  are  certainly  no  more  honest  men  in  this  country  than  corpora- 
tion men.     Unfokunately,  they  are  badged  wrong.     If  you  go  to 
Europe    you   will    find    everybody   tells   you,   "  Look   out    for   the 
American  business  man."     I  say  to  you  after  doing  business  with 
most  of  the  men  in  the  European  countries,  there  is  no  man  as 
honest  as  the  American  business  man,  and  yet  he  allows  himself  to 
be  bado-ed  as  the  dishonest  business  man,  on  account  of  a  few  of 
our  fakers  who  have  gone  over  there  and  put  things  over  on  them. 
Now  the  corporation  man,  for  not  having  defended  his  reputation, 
has  been  made  to  appear  in  the  eyes  of  a  great  many  people  m 
America  a  little  more  dishonest  than  the  average.     Now  they  view 
soinothin<r  as  being  unfair  when  we  try  to  get  somebody  put  on  a 
board   who  we   know   will  be   fair.     We   are  not   supposed  to  do 
that   '  They  can  go  out  and  preach  that  as  far  as  they  want  to.    But 
the  average  corporation  in  this  country  is  not  looking  for  anything 
but  a  fair  deal  and  they  will  be  glad  if  they  get  that.     They  just 
want  the  common,  ordinary  orarden  variety  of  fair  play.    They  will 
be  satisfied  with  that,  and  it  is  that  or  ruination  m  some  cases. 

Commissioner  Sw^eet.  Let  me  say  this,  to  close  the  matter  up,  and 
I  think  you  will  agree  with  me,  that  with  many  business  men,  big 
or  little,  there  are  some  who  are  honest  and  men  that  you  can  admire 
from  every  point  of  view,  and  others  who  are  not.  You  will  find 
the  same  thing  among  newspapers  and  newspaper  men.  I  think  you 
will  find  the  same  thing  among  city  officials ;  you  will  find  some  who 
are  strictly  honest  and  square  and  serving  the  city  faithfully  for 
compensation  far  below  what  is  actually  earned.  You  know  that 
is  a  fact  in  many  cases,  do  you  not? 


416       PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION, 

]Mr.  DoHERTY.  Yes. 

Commksioner  Sweet.  And  there  are  dishonest  ones.  Men  have- 
been  shown,  many  city  officials,  to  have  accepted  bribes  and  business^ 
men  have  been  known  to  give  men  bribes  on  school  boards  and  com- 
mon councils.  Now  these  things  all  occur.  We  have  got  to  admit  it, 
and  it  is  not  fair  nor  is  it  wise  for  us  to  generalize  too  much  and  say 
that  one  type  of  man  or  people  engaged  in  one  kind  of  business  are 
all  right  and  nobody  else  is.  Now  the  facts  do  not  substantiate  or 
sustain  any  such  proposition  as  that.  Now,  then,  when  we  come  right 
down  to  the  point  before  us,  is  not  this  the  situation — that  whatever 
may  be  said  about  public-service  corporations  or  public  officers  or  the 
general  public  or  newspapers,  that  the  points  of  antagonism  that 
existed  a  few  years  ago  have  disappeared  and  that  now  the  interests 
of  the  corporation,  both  public,  private,  and  the  general  public  and 
the  newspapers,  for  that  matter — ^because  the  newspapei*s  are  sup- 
ported by  the  general  public  and  ought  to  be  carried  on  in  the  in- 
terest of  the  general  public,  and  for  that  matter  the  interest  of  the 
politicians  who  used  to  trade  to  some  extent  in  getting  up  on  the 
housetops  and  decrying  the  public-service  corporations — but  the  in- 
terests of  all  if  properly  understood  are  distinctly  in  favor  of  co- 
operation hereafter  instead  of  opposition  and  of  resorting  to  some 
method  by  which  the  general  public  shall  not  be  deprived  of  the 
necessity  of  railroads  and  that  the  holders  of  bonds  and  stock  as  well, 
for  instance,  shall  not  be  deprived  of  a  reasonable  income,  and  that 
some  steps  shall  be  taken  if  it  is  possible  to  find  out  what  ought  to  be 
taken,  to  adjust  this  matter  in  a  proper  cooperative  manner  for  the 
general  benefit  of  all  rather  than  in  a  spirit  of  opposition  such  as  has 
existed  before.    Is  not  that  true? 

Mr.  DoHERTr.  Yas,  sir;  that  is  true. 

Commissioner  Sweet.  Now,  then,  if  that  can  be  brought  about — we 
may  say  that  it  will  be  bringing  about  the  millenium,  but  it  is  not 
absolutely  impossible  that  an  approximation  of  that  may  be  reached, 
is  it? 

Mr.  DoiiERTr.  I  do  not  think  it  is  so  difficult  either. 

Commmissioner  Sweet.  It  ought  not  to  be,  because  it  is  a  mere 
question  of  knowledge  and  knowing  what  the  facts  are,  is  it  not? 

Mr.  DoHERTY.  It  seems  to  me  obvious  that  the  relief  must  be  given. 

Commissioner  Sweet.  That  is  all. 

(Witness  excused.) 

The  Chairman.  We  will  stand  adjourned  until  10  o'clock  Monday 
morning. 

(Whereupon,  at  5.20  p.  m.,  an  adjournment  was  taken  until  Mon- 
day, July  21,  at  10  a.  m.) 

Washington,  D.  C,  July  21^  1019, 

Met  pursuant  to  adjournment  at  10  a.  m. 

Present :  Parties  as  before. 

The  Chairman.  Are  you  ready  to  proceed,  Mr.  Warren? 

Mr.  Warren.  All  ready ;  yes,  sir. 

Mr.  Chairman,  at  this  time  I  should  like  to  put  in  the  statement  of 
Mr.  England,  who  was  here  on  Friday  but  was  not  reached  and 
could  not  well  be  here  to-day.  \ 

The  Chairman.  Is  that  the  witness  you  spoke  to  me  about? 

Mr.  Warren.  That  is  the  witness  I  spoke  to  you  about. 


proceedings  of  federal  ELECTRIC  RAILWAYS  COMMISSION.      417 

The  Chairman.  You  may  file  the  statement.  ,  ,,        '  ,         . 

Mr.  Warren.  I  will  not  read  it.  I  will  ]ust  read  the  statement 
accompanying  it : 

The  business  of  the  Electric  Service  Supplies  Co.  consists  of  a  varied  line  of 
suDDlles  and  accessories  for  the  construction  and  maintenance  of  electric  rail- 
wa^stak^ng  in  pretty  nearly  everything  used  in  the  way  of  electncal  and 

''' Thrsc'hedX  a^^^^  show  the  actual  selling  prices  of  some  of  the  principal 

Xin^^T^:^ltllmv.v^XXs.  percentages  of  such  prices,  ^-^^-^^l^^^^^ 

^^J^TI^^SXI^^^^^  future;  on  the  contrary 

therl  arl  SurnXkable  signs  of  a  stiffening  of  prices  in  many  lines     While 
labor  fs  somewhat  easier  to  obtain,  the  rates  remain  on  prearmistice  basis. 

ReSlKiCtfully,  ^    jj    ENGLAND, 

Vice  President  and  Treasurer, 
Then  follows  these  schedules  of  materials,  and  taking  1914  as  100 
per  cent,  the  six  months  of  1919  showed  had  an  average  percentage 
of  220  per  cent. 


Schedule   A. — 


Overhead  line   material;  relative   selling   prices   during   years 

specified. 
( Prices  of  1914  taken  as  100  per  cent . ) 


Cata- 
logue 
No. 


Description. 


Percent. 


1914 


1915 


50041 

50089 

31006 
41162 
30987 

30989 

31051 

30995 

31169 

31171 

31173 

31175 

31097 

31107 

41425 

31219 

31225 

31237 

31243 

31274 

31280 

41586 

41600 

41634 

41550 

31290 

41619 

31298 

31322 

31333 

31336 

42104 

31396 

31398 

41858 

41862 

31403 


EG  lightning  arresters^  750  volts,  direct  cur- 

CE-2  lightning  arresters,  2,500  volts,  alternat- 
ing current .- .  •  •  v 

Type  K,  round  top  hanger,  f-mch 

Type  K,  round  top  hanger,  ^-inch 

Type  single  curve  with  giant  strain  gal- 
vanized  •--•:•■  i":" : ',' 

Type  double  curve  with  giant  strain  gal- 
vanized  :  •  -  -  • 

Type  C,  cap  and  cone,  |-inch 

Type  C,  straight  line,  galvanized 

Bronze  ears,  15-inch,  2/0 

Bronze  ears,  15-inch,  4/0 

Bronze  ears,  12-inch,  2/0 

Bronze  ears,  12-inch,  4/0 ........ . . . ...... 

Malleable  iron  clamps,  5-inch,  galvanized ... 
Malleable  iron  clamps,  7-inch,  galvanized .. . 
Malleable  iron  clamps,  9-inch,  galvanized... 

Copper  sleeves,  2/0, 16-inch 

Copper  sleeves,  4/0, 16-inch 

Brass  sleeves,  2/0, 16-inch 

Brass  sleeves,  4/0, 16-inch 

Bronze  frogs,  20° 

Bronze  frogs,  15" 

Malleab'.e  iron  frogs,  20" 

Malleable  iron  frogs,  15° 

Rigid  R.  A.  bronze  crossing 

Rigid  R.  A.  malleable  iron  crossing 

A^ustable  bronze  crossing 
Ad 


ustable  malleable  iron  crossing 


section  insulator  2/0,  2i-inch. 


T  vo€  IC  

Type  G,'  section  insulator,  2/0 

Giant  strain  insulator,  2-inch 

Giant  strain  insulator  2i-inch . .-•---• 

Brooklyn  strain,  i  by  4  inches,  galvanized . 

Wood  strain,  1  by  9  inches,  galvanized. 

Wood  strain,  H  by  9  inches,  galvanized 

Pole  brackets,  9  feet  1  ^  inches,  A 

Pole  brackets,  9  feet  2  inches^  A  

Feeder  wire  insulator,  500,ouu  i.M 


100 

100 
100 
100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 


1916 


100 

100 
100 
100 

101 

102 

100 

100 

121 

122 

119 

121 

100 

100 

100 

148 

144 

147 

137 

100 

100 

103 

102 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 


1917 


115 

100 
103 
105 

124 

122 

117 

120 

167 

172 

162 

168 

128 

135 

128 

199 

194 

200 

188 

133 

126 

130 

126 

132 

85 
137 
109 
112 
144 
115 
122 
101 
104 

98 
115 
126 

116 


1918 


6  months, 
1919. 


Average  percentages. 


100 


107 


131 


120 

100 
132 
156 

175 

192 

203 

212 

182 

192 

181 

189 

223 

182 

186 

222 

217 

229 

229 

148 

180 

175 

168 

188 

116 

191 

181 

157 

188 

176 

187 

159 

179 

161 

217 

236 

159 


127 

123 
183 
191 

248 

255 

264 

277 

198 

202 

196 

206 

307 

234 

238 

234 

235 

235 

235 

205 

203 

200 

188 

201 

140 

210 

216 

167 

189 

226 

225 

201 

231 

214 

278 

301 

205 


136 

136 

189 
207 

257 

265 

273 

286 

188 

187 

181 

191 

353 

240 

245 

224 

228 

224 

224 

194 

193 

190 

179 

194 

147 

207 

231 

158 

175 

232 

267 

212 

237 

220 

294 

319 

210 


180 


217 


220 


418       PROCEEDIJS^GS  OF  FEDERAL.  ELEOTRIC  RAILWAYS  COMMISSIOl^. 

Schedule  A. — Overhead  line  material;  aieraye  selling  prices  to  electric  rail- 

ways. 


rata 

logue 

No. 


£0041 

50089 

31006 
41162 


Description. 


31051 

30995 
31169 
31171 
31173 
31175 
31097 
3107 
41425 
31219 
31225 
31237 
31243 
31274 
31280 
41586 
41600 
41634 
41550 
31290 
41619 
31298 
31322 
31333 
31336 
42104 
31396 
31398 
41858 
41862 
31403 


EG  lightning  arresters,  7.50  volts,  direct  cur- 
rent   

CE-z  licrhtning  arresters,  2,."j00  volts,  alter- 
nating current 

Typo  K,  round  top  hanger,  g-lnoh 

Type  K,  round  top  hanger,  i-inch 

Type  K,  single  curve  with  giant  strain,  gal- 
vanized  

Type  K,  double  curve  with  giant  strain,  gal- 

Type  C,  cap  and  cone,  |-inch 

Type  straight  line,  galvanized 

Bronze  cars,  16-inch,  2/0 

Bronze  ears,  15-inoh,  4/0 

Bronze  ears,  12-inch,  2/0 

Bronze  ears,  12-inch,  4/0 

Malleable  iron  clamps,  .Vinch,  galvanized 

Malleable  iron  clamps,  7-inch,  galvanized 

Malleable  iron  clamps,  9-inch,  galvanized 

Copper  sleeves,  2/0, 16-Inch 

Coppersleevos,  4/0, 16-inch 

Brass  sleeves,  2/0, 16-inch 

Brass  sleeves,  4/0, 16-inch 

Bronze  frogs,  20° 

Bronze  frogs,  15° 

Malleable  iron  frogs,  20° ' . . ." 

Malleable  iron  frogs,  15° 

Rigid  R.  A.  bronze  crossing '..'..'. 

Rigid  R.  A.  malleable  iron  crossing 

Adjustable  bronze  crossing 

Adjustable  malleable  iron  crossing 

Type  K  setnion  insulator  2/0,  2*-inch 

Type  K  section  insulator,  2/0. .' 

Giant  strain  insulator,  2-inch 

Giant  strain  insulator,  2i-inch 

Brooklyn  strain  |  by  4  inches,  galvanized.... 

\V  ood  strain,  1  by  9  inches,  galvanized 

v\  ood  strain,  1 J  by  9  inches,  galvanized 

Pole  brackets,  9  feet  U  inches,  A 

I'ole  brackets,  9  feet  2'inches,  A 


1914 


1915 


$350.00  $350.00  $402.50  $420.00 


Feeder  wire  insulator,  500,000 
3140<}  I  Feeder  ^vire  insulator,  500.000. 


440.00 
36.00 
41.00 

41.50 

73.00 
17.  .50 
26.25 
28.25 
33.50 
25.50 
28. 25 
9.00 
13.75 
16.25 
50.  75 
lOH.OO 
44.25 
89.50 
230.00 
270.  00 
185.00 
210.00 
280.00 
240.00 
335. 00 
215. 00 
5«)5.  00 
395.00 
24.00 
32.00 
67.50 
18.00 
22.00 
13,5. 00 
155.00 
32.50 

29.50 


1916 


1917 


440.00 
36.00 
41.00 

42.00 

74,50 
17.50 
26. 25 
34,10 
40,90 
30.25 
34.25 
9.00 
13.75 
16. 25 
75,00 
1.51.60 
t>5.00 
123.  40 
230.00 
270.00 
190.00 
215.00 
280.00 
240. 00 
335.00 
21.5. 00 
5(55.00 
395.00 
24.00 
32.00 
67.50 
18.00 
22.00 
135.00 
155. 00 
32.50 

29.50 


440.00 
37.00 
43.00 

51,50 

89.00 
20.50 
31,50 
47,25 
57.75 
41,25 
47.50 
11.50 
18,50 
21,00 
101.00 
204.00 
88.50 
168,50 
305.00 
340.00 
240.00 
265,00 
370.00 
205.00 
460.00 
235.00 
630,00 
570,00 
27,50 
39,00 
68,00 
18,75 
21.50 
15.5.00 
195.00 
37,75 

33.50 


1918 


440.00 
47.65 
64.02 

72.63 

139.85 
35.50 
55,61 
51. 38 
64,48 
46. 18 
5;^.  50 
20.09 
24,98 
30.21 
112.50 
227.50 
101.46 
204.  94 
300.54 
485.17 
324.  .33 
352,08 
520.00 
277,50 
638,  75 
389.17 
886.08 
742.30 
42.14 
59.75 
107, 40 
32.38 
35.39 
292. 67 
365.25 
51.60 

45.70 


1443. 34 

542.50 
65.81 
78.14 

102.80 

186.42 
46.35 
72.77 
55,96 
67,71 
50.00 
58.33 
27.66 
32.14 
38.63 
119.00 
246.90 
104. 17 
218.  75 
470.  41 
546.88 
369.  79 
385.8:3 
563.00 
335.00 
702.50 
4W.17 
944,17 
745,00 
54.30 
72.04 
135.42 
41.56 
47.10 
375. 59 
466.63 
66.50 

77.58 


6  months 
1919. 


$476.00 

589.40 
68.20 
8.5.00 

10»).00 

193.00 
47.00 
75.00 
52.00 
62.00 
46.00 
5;J.  95 
31.76 
32.96 
39.78 
113.85 
239. 10 
99.00 
207,90 
445,50 
519,  75 
3.51. 45 
376, 13 
644.50 
352,  75 
693. 00 
497.29 
891.00 
693.00 
55.70 
&5. 55 
143.08 
42.63 
48.32 
397.  f^3 
494,45 
68.20 

79.57 


Schedule  B.—Iliyh  tenaion  transmifision  material;  average  selling  prices  to 

electric  railways. 
(Prices  of  1914  taken  as  100  per  cent). 


Cata- 
logue 
No, 


360 

315 

3-3/4 

42375 
298 
42394 
42397 
2335A 


19420 
46008 


31644 

31684 
31769 
31763 
81449 


Description. 


Per  cent. 


1914 


Porcelain  insulator,  pin  tvpe,  66,000  volts 
Porcelain  Insulator,  pin  tvpe,  40.000  volts. .  . 
Porcelain  insulator,  pin  tvi^e,  23,000  volts. . 
Porcelain  insulator  No.  3,  pin  tviw,  20,000  volts 
Porcelain  insulator,  pin  typo,  13,000  volts 
Porcelain  insulator  No,  12,  pin  type,  8,000  volts 
Porcelain  insulator  No,  44,  pin  type,  6,600  volts 
Porcelain  insulator  suspension,  16,000  volts     , . 
Cross-arm  truss  pin  (Pat.  269),  galvanized 

Cro6&«Tn  truss  pin  (Pat.  269),  japanned 

Cross  arm  truss  pin  (Pat.  185).  galvanized 

Cross-arm  truss  pin  (Pat.  185),  Japanned . .    . 
Metal  cross  arm,  30  inches  (KeysU)ne  triangle) 
Metal  cross  arm,  36  Inches  ( Keystone  triangle) 
Wood  cross  arm,  fir,  3i  by  4i  inches,  cubic  foot 
Wood  cross  arm,  fir,  4  by  5  inches 


24-inch  galvanized  cross-arm  braces.... 

I  X  12  inches  galvanized  bolts 

I  by  4^  inches  galvanized  carriage  bolts 

^  by  4  inches  galvanized  lags 

I  by  12  inches  galvani«ed  eye  bolts. . .'. 


Average  percentages . 


100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 

100 


1915 


100 
100 
100 
100 
100 
100 
92 
100 
100 
100 
100 
100 
123 
119 
100 
91 
135 
136 
136 
153 
122 


1916 


100 


110 


122 
112 
148 
185 
109 
130 
113 
127 
129 
120 
111 
100 
167 
191 
133 
86 
205 
215 
234 
265 
199 


1917 


152 


182 

183 

244 

272 

166 

190 

165 

201 

187 

198 

137 

132 

167 

208 

150 

111 

245 

260 

209 

309 

240 


1918 


201 


252 

266 

328 

363 

211 

228 

194 

262 

203 

219 

151 

150 

194 

224 

198 

145 

256 

274 

286 

328 

254 


1919 


263 

295 

328 

263 

211 

231 

l&l 

262 

203 

219 

151 

150 

200 

225 

204 

150 

240 

256 

265 

306 

238 


237 


236 


PROCEEDINGS  or  FEDERAL  ELECTBIC  EAILWAYS  COMMISSION.      419 


Cata- 
logue 
No. 


Description. 


360 

31.5 

3-3/4 

42375 

29S 
42394 
4'.;397 
233oA 


19420 
40008 


31B44 
31684 
31769 
31763 
314 


Porcelain  insulator,  pin  type,  66,000  vo  ts 

P,  rcalain  insulator,  pin  type,  40,000  ^  o  ts 

Prrcelaln  insiUator,  pm  type,  23,000  a  (-It^..^ 

Porcelain  insulator  No.  3  pm  tyPA?",'T, 
Porcelain  insulator,  pin  type,  13,000  voUs 
Porcelain  insulator  No.  12,  p  n  type,  8,000  volts 
Porcelain  insuLit  r  No.44,pint>'peA600yolts 
Porcelain  insulator,  suspension,  16,000  voiis... 
Cross-arm  truss  pin  (Pat.  269),  galvanized  .... 
Cross-arm  trusspin  (Pat.  2fi9)  japanned    . . . . 

Cross-arm  truss  pin  (Pat.  185)  galvanized 

C:ross-arm  truss  pin  ( I'at.  18o),  japanned .  . . 
Metal  cross  arm,  30-inch  (J^eystone  {nan?  e)  . 
Metal  cross  arm,  36-inch  (Kej^stone  triangle).. 

Wood  cross  arm,  fir,  31by  4i  cubic  feet 

Wood  cross  arm,  fir,  4  oy  5... 

24-inch  galvanized  cross-arm  braces 

5.8  by  12  inch  galvanized  bolts. 

I  by  4  J  inch  galvanized  carriage  bolts 

k  by  4'inch  galvanized  lags. 

I  by  12  inch  galvanized  eye  bolts 


1916 


1917 


$272.60 
64.38 
28.39 
23.00 
13.96 
6.75 
5.25 
106.40 
67.50 
50.00 
40.50 
31.50 
1.75 
2.25 
8.75 
10.63 
22.30 
11.05 
2.34 
4.03 
19.35 


1918 


1919 


$408. 10 
105. 20 
46.80 
33.79 
2L19 
9.87 
7,66 
168.90 
98.00 
82.25 
50.17 
42.17 
1.75 
2.46 
9.90 
13.64 
26.69 
13.25 
2.69 
4.69 
23.34 


$563. 75 
153.10 
63.00 
4.5.00 
27.00 
11.83 
9.00 
220.00 
106.  .50 
91.00 
55.00 
48.00 
2.04 
2.64 
13.06 
17.88 
27.90 
14.10 
2.86 
4.98 
24.65 


$590.00 
170.00 
6.3.00 
45.00 
27.00 
12.00 
9.00 
220.00 
106. 50 
91.00 
55.00 
48.00 
2.10 
2.65 
13.48 
18.47 
26. 13 
13.18 
2.05 
4.65 
23.03 


SCHEDULE  C.-Copper  rail  honds;  relative  avcraue  net   selling  prices   during 

years  speinfied. 

(Price  of  1914  taken  as  100  per  cent.) 


Standard  sizes  of  rail  bonds. 


4/0  by  7/0  by  10  inches 

4/0  by  I  by  12  inches 

4/0  by  I  by  30  inches 

500M-CM'by  1  by  15  inches 

500M-CM  by  1  by  20  inches 


Percentages. 


1914 


1915 


$41.63 

45.07 

83.03 

104.06 

124. 32 


100 


$46. 88 

.50.  75 

93.50 

117.19 

140.00 


1916 


112.6 


$63. 75 
09.02 
127.16 
169. 38 
190.40 


1917 


1918 


6  months, 
I     1919. 


$70.00 
76.73 
141.37 
177, 19 
211.68 


153 


170 


$64.51 
69.95 
128.88 
161.53 
192.98 


$59.13 
64.02 
177.94 
147.83 
176.00 


155 


142 


(Price  of  1914  taken  as  100  per  cent.) 


Item, 


Per  cent. 


1914 


Steel  gear  cases 

Incandescent  headlights 

Trolley  catchers 

Curtain  signs 

Lighting  fixtmros 

Fixture  shades 

TroUev  poles 

Trolley  cordage 

}•  are  registers 

Motor  gears:  ,         ..  ^    i 

Wcstinghouse  101  sol.,  cast  steel. . . 
Wcstinghouse  101  sol.,  forged  steel 

Motor  pinions,  17  teeth,  5-inch  face..  .- 


100 


1915   1916 


Average  percentages. 


100  I 

100 

100 

100  1 

100 

100 

100 

100 
100 
100 


100 


105 
100 
100 
110 
100 
100 
100 
106 
106 

106 
115 
116 


105 


126 
112 
111 
165 
100 
104 
123 
122 
12(i 

119 
146 
167 


1917 


127 


211 
142 
139 
175 
110 
121 
181 
161 
139 

206 
189 
244 


ms 


1919 


168 


238 
155 
lOS 
200 
115 
132 
230 
221 
139 

224 
240 

2e« 


194 


239 
155 
200 
213 
120 
l<i6 
2«i5 
250 
139 

224 
245 

268 


207 


I* 


420       PKOCJIEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Schedule  D. — Car  equipment  specialties;  average  selling  prices   to  electric 

railways. 


Item. 


-•-«,  ^t:-f:' 


steel  gear  cases 

Incandescent  headlights 

Trolley  catchers 

Ciirtain  signs 

Lighting  nxturcs 

Fixture  shades 

Trolley  poles 

Trolley  cordage 

Fare  registers 

Motor  gears: 

Wcstinghouse  101  sol.,  ca^t  steel 

Westinghouse  101  sol.,  forged  steel. , 

Motor  pinions,  17  teeth,  5-inch  face 


1914 


$11.40 


4.50 

10.00 

1.25 

3.80 

1.03 

.30 

18.00 

14.90 

13.88 
3.05 


1915 


$12.00 

8.50 

4.50 

11.00 

1.25 

3.80 

1.03 

.38 

19.00 

15.75 

15.94 

3.55 


1916 


$14. 40 

9.50 

5.00 

16.50 

1.25 

3.95 

1.27 

.44 

22.50 

17.80 

20.25 

5.10 


1917 


S24.00 
12.04 

6.25 
17.50 

1.38 

4.eo 

1.86 

.58 

25.00 

30. 75 

26.25 

7.45 


1918 


$27. 12 

13.20 

7.53 

20.00 

1.44 

5.02 

2.37 

.795 

25.00 

33.40 

33.25 

7.94 


1919 


$27.20 

13.20 

9.00 

21.25 

1.50 

0.30 

2.73 

.90 

25.00 

33.40 

34.00 

8.18 


Mr.  AVarren.  Then,  if  I  may,  I  should  like  to  put  in  a  similar  state- 
ment of  Mr.  James  S.  Thompson,  who  was  here  also,  as  a  part  of  our 
cost-of-material  witnesses,  who  is  vice  president  of  the  American 
Brake  Shoe  &  Foundry  Co.  It  is  accompanied  with  blue  prints  and 
charts  and  relates  principally  to  brake  shoes  and  things  of  that  sort. 
I  suppose  I  had  Ijetter  not  take  time  to  read  that,  but  I  will  file  that 
also. 

The  Chairman.  You  may  file  it. 

The  statement  is  as  follows: 

My  name  is  James  S.  Thompson;  I  reside  at  relhnm,  N.  Y. ;  I  am  a  vice 
president  of  tlie  American  Brake  Shoe  &  Foundry  CJo.,  whose  plants  for  the 
manufacture  of  brake  shoes  and  cast-iron  products  are  at  Norwood,  Mass.; 
Buffalo,  N.  Y. ;  Burnside,  111.;  Chicago,  III.;  Melrose  Park,  111.;  Cincinnati*, 
Ohio ;  Mahwah,  N.  J. ;  Baltimore,  Md. ;  Minneapolis,  Minn. ;  Chattanooga,  Tenn. ; 
South  San  Francisco,  Calif. ;  Los  Angeles,  Calif. 

My  connection  with  this  company  has  covered  a  period  of  17  years,  during  a 
part  of  that  time  as  assistant  chief  engineer  in  charge  of  service  performance  of 
brake  shoes  used  on  steam  and  electric  railways.  For  a  considerable  portion  of 
time  I  have  had  some  supervision  over  sales,  and  for  the  last  three  years  as 
vice  president  in  charge  of  engineering  matters  of  all  characters,  particularly 
those  pertaining  to  the  service  of  brake  shoes  used  on  the  railroads.  Through- 
out the  period  of  my  connection  with  this  company  I  have  kept  myself  familiar 
with  the  selling  prices  of  our  finished  product  and  generally  with  the  cost  of 
production. 

The  principal  product  of  our  company  is  brake  shoes  for  electric  railroads, 
for  which  many  types  and  patterns  are  used,  and  steam  railroads,  for  which 
the  types  and  patterns  are  generally  the  same. 

I  have  prepared  and  annexed  hereto  and  made  a  part  of  this  statement  a 
blue-print  curve  entitled  "American  Brake  Shoe  &  Foundry  Co. ;  change  in  cost 
of  raw  materials  from  1912  expressed  in  per  cent."  This  chart  bears  the  identi- 
fication mark  No.  1,  and  shows,  in  effect,  that  I  have  taken  the  prices  per  net 
or  gross  ton,  as  the  case  may  be,  as  of  July  1,  1912,  as  100  per  cent,  the  prices 
at  that  time  presenting  within  a  slight  variation  the  average  costs  during  the 
10  years  preceding.  The  chart  shows  (•hangt>s  in  percentages  of  cost  from  July 
1,  1912,  at  yearly  intervals  to  July  1,  1918.  Percentages  of  costs  are  also  sliown 
as  of  November  1,  1918,  and  monthly  changes  thereafter  to  and  including  July 
1,  1919.  The  advances  in  per  cent  in  the  prices  of  these  raw  materials  which 
we  have  been  obliged  to  purchase  are  correctly  shown  and  set  forth  on  said 
blue  print. 

This  chart  shows  generally  that  from  July  1,  1912,  to  July,  1915,  there  had 
been  slight  reductions  in  the  costs  of  materials.  From  that  date,  however,  up 
to  and  including  July  1,  1917,  the  costs  increased  rapidly,  and  the  peak  of  all 
raw  material  prices  was  reached  upon  that  date  or  within  a  few  months  there- 
after, at  which  time  the  Government  establislied  maximum  prices  for  tlie  mate- 


!  I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      421 

rials  we  use,  and  the  chart  therefore  shows  declines  to  the  Government  prices. 
From  the  date  of  establishment  of  the  Government  prices  in  September  and 
October,  1917,  until  the  signing  of  the  armistice  in  November,  1918,  the  prices 
remained  the  same  or  increased  slightly,  due  to  additional  charges  for  trans- 
portation and,  in  the  Instance  of  coke,  to  increase  in  the  Government  price. 

After  the  signing  of  the  armistice  prices  remained  comparatively  steady  for 
a  brief  period,  excepting  for  scrap  iron,  and  then  declines  occurred  in  all 
materials  until  June  of  1919,  at  which  time  the  prices  of  scrap  iron  and  coke 
increased,  so  tliat  on  July  1,  1919,  there  had  been  an  increase  of  12  per  cent 
in  scrap  iron  over  the  June  1  purchases  and  10  per  cent  in  coke.  The  chart 
shows  that  the  increases  in  the  prices  of  raw  materials  on  July  1,  1919,  over 

those  of  July  1,  1912,  were  as  follows: 

Per  cent. 

Steel   plate 136 

Pig  iron 1^8 

Scrap    iron ^6 

Coke 84 

It  may  be  added  that  since  July  1,  1919,  until  this  date,  July  18,  there  has 
been  furtlier  increase  in  the  price  of  scrap  iron,  amounting  to  about  7  per  cent, 
and  it  is  expected  that  additional  advances  in  steel  plate,  pig  iron,  scrap  iron, 
and  coke  are  imminent. 

I  have  prepared  and  annexed  hereto  and  made  a  part  of  this  statement 
a  blue-print  curve  entitled  "American  Brake  Shoe  &  Foundry  Co.,  average  daily 
wage  expressed  in  per  cent  from  July  1,  1919."  This  chart  bears  the  Identifica- 
tion mark  No.  2.  The  percentages  as  shown  upon  said  blue  print  are  correct 
and  in  accordance  with  the  books  of  our  corporation.  This  shows  in  effect 
that  I  have  taken  the  labor  cost  as  of  July  1,  1916,  as  100  i>er  cent,  the  rate  at 
that  time  representing,  with  slight  variation,  the  average  covering  the  10  years 
preceding.  This  curve  shows  a  constantly  increasing  scale,  the  most  rapid 
increase  occurring  from  July  1,  1918,  to  January,  1919,  during  which  period  the 
increase  was  41  per  cent.  It  will  be  noted  from  the  chart  that  from  July  1, 
1916,  to  April  1,  1919,  the  daily  wage  scale  increased  106  per  cent. 

For  many  years  preceding  July  1,  1915,  the  cost  per  ton  of  materials  enter- 
ing into  the  manufacture  of  our  product,  together  with  the  labor  costs,  re- 
mained practically  uniform,  and  there  had  been  no  advance  in  the  selling  prices 
to  the  electric  railroads.  However,  the  selling  prices  were  increased  from 
July  1,  1915,  from  time  to  time,  until  a  maximum  increase  of  108  per  cent 
had  been  reached.  The  present  selling  prices  are  83  per  cent  in  excess  of  those 
of  July  1,  1915. 

The  company  with  which  I  am  connected  are  not  producers  of  the  raw  ma- 
terials used  in  the  manufacture  of  brakeshoes.  These  materials  are  secured 
by  purchase,  and  in  reaching  a  conclusion  relative  to  the  costs  of  materials  in 
the  immediate  future  It  may  be  well  to  state  that  such  materials  are. the  prod- 
uct, in  a  great  measure,  of  accumulated  labor,  and  we  do  not  see  the  possibility 
of  a  reduction  in  the  cost  of  material  and,  consequently,  the  selling  prices  of 
our  product,  unless  there  Is  a  decrease  in  tlie  labor  rates. 

Mr.  Warren.  There  is  one  other  statement  of  a  witness,  Mr.  Ren- 
shaw,  an  engineer  who  was  with  the  Fuel  Administration  during  its 
activities  and  took  great  interest  and  did  a  great  deal  to  introduce 
various  economies  in  connection  with  the  conservation  of  fuel,  such 
as  the  skip-stop  and  matters  of  that  sort.  He  was  here  all  day  Fri- 
day and  I  think  Thursday,  also,  but  could  not  be  here  this  week ;  and 
he  had  prepared  a  statement  from  which  he  was  going  to  testify, 
which  is  at  our  office,  and  I  should  like  to  file  that,  if  I  may,  as  soon 
as  it  comes  down. 

The  Chairman.  May  his  statement  and  the  other  two  which  you 
have  just  filed  be  subject  to  the  provision  that  if  the  commission  at 
any  time  desires  to  cross-examine  these  witnesses  with  reference  to 
any  matters  in  those  statements,  they  may  be  called  ? 

Mr.  Warren.  Yes;  exactly.  I  should  like  also  to  put  in,  if  I  may, 
a  communication  from  the  actuary  of  the  Association  of  Life  Insur- 


422       rEOCEBDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

ance  Presidents,  which  is  a  rather  short  one,  and  I  will  read  it.  It 
rehites  merely  to  the  distribution  of  securities  as  regards  the  life 
insurance  companies.  It  is  addressed  to  the  statistician  of  the  asso- 
ciation, dated  Julv  16: 

I{esi)onsive  to  your  iiuiuiry  of  recent  date  regarding  the  investments  of  life- 
Injsurance  coniimnies  of  tJie  Unitefl  States  in  electri<'-raihvay  bonds  and  stocks, 
we  are  very  glad  to  give  you  ttie  following  information,  wliicii  you  are  at  liberty 
to  use  In  any  way  wliicli  you  may  decern  wise: 

The  investments  of  26  life  insurance  companies  in  electric-railway  bonds  and 
stocks — these  26  companies  representing  every  company  in  this  country  having 
$500,000  or  more  invested  in  public  utilities— amount  in  bon<ls  to  $109,624,550.77 
and  in  stocks  to  $0,968,120.17.  This  large  investment  represents  policyholders' 
money  held  in  trust  and  is  the  proi>erty  of  individual  policyholders,  numbering 
<»ver  34,000,0(X),  scattered  all  over  the  United  States.  With  this  in  view,  it 
would  seem  wise  to  emphasize,  particularly,  that  it  is  to  the  individuals'  interest 
to  have  sucli  investments  protected,  as  any  depreciation  in  these  funds,  d\ie  to  a 
decrease  in  the  value  of  such  investments,  reverts  at  once,  in  a  detrimental 
way,  to  the  interest  of  each  individual. 

I  liave  asked  your  oflice  in  New  York  to  convey  this  information  to  you  by 
wire,  and  tliis  letter  is  to  contirm  my  telephone  message.     If  we  can  be  of 
service  in  preparing  a<lditional  facts  to  present  before  committees,  we  shall 
be  only  too  glad  to  place  our  facilities  at  your  disposal. 
Yours,  very  truly, 

George  W.  Smith,  Actuary. 

The  Chairman.  Is  there  evidence  within  your  possession  which 
shows  the  amount  of  stocks  and  bonds  of  these  utilities  that  is  in  the 
possession  of  life-insurance  companies? 

Mr.  Warren.  Nothing  other  than  that.  That  covers  26  companies — 
it  covers  all  the  companies,  Mr.  Smith  says,  holding  severally  more 
than  $500,000  of  the  securities,  and  the  total  which  he  gives  is 
one  hundred  and  nine  million  and  odd  dollars  for  bonds  and  nearly 
$7,000,000  of  stocks. 

The  Chairman.  Would  it  not  be  well  to  develop  for  the  record 
some  evidence  to  show  where  utilities  must  go  for  money^  to  use  for 
new  construction  or  for  the  refunding  of  bonds  and  thmgs  of  that 
kind?  Now,  my  thought  is  that  it  might  be  shown  that  a  street- 
car company  is  something  other  than  esesntially  a  local  institution. 
Where  it  needs  money  i:)erhaps  it  can  not  secure  it  in  its  own  locality ; 
thus  it  may  have  to  go  to  the  market  centers  for  that  money.  When 
it  presents  its  application  to  the  bankers  or  otliers,  it  must  be  able 
to  establish  its  credit,  and  that  credit  can  only  be  established  by 
showing  that  the  business  is  upon  a  sound  basis.  I  think  it  would  be 
well  if  you  could  develop  something  along  those  lines. 

Mr.  Warren.  Yes ;  we  will  endeavor  to  do  that,  Mr.  Chairman.  I 
expect  to-day  to  introduce  witnesses  chiefly  on  the  subject  of  cost  of 
service,  but  before  I  do  that  I  should  like  to  call  one  witness,  Mr. 
Lucius  S.  Storrs,  president  of  the  Connecticut  Co.,  which  operates  a 
very  large  portion  of  all  the  street-railway  mileage  in  the  State  of 
Connecticut. 

Mr.  Storrs,  will  you  take  the  stand  ? 

STATEMENT  OF  ME.  LUCIUS  S.  STOERS. 

Mr.  Warren.  Your  full  name. 
Mr.  Storrs.  Lucius  S.  Storrs. 

Mr.  Warren.  I  have  already  stated  that  you  are  the  president  of 
the  Connecticut  Co. 


proceedings  of  federal  electric  railways  commission*    423 

Mr.  Storrs.  President  of  the  Connecticut  Co. 

Mr!  Warren.  And  have  been  president  for  how  long? 

Mr.  Storks.  Nine  years.  j.      •      o 

Mr.  Warren.  And  I  think  you  are  an  engineer  by  profession  f 

Mr.  Storrs.  Yes,  sir. 

The  Chairman.  Where  does  that  company  operate? 

Mr.  Warren.  In  the  State  of  Connecticut,  almost  exclusively,  does 

it  not? 

Mr.   Storrs.  Yes;  exclusively  and  entirely  within  the  State  of 

Connecticut. 

Mr.  Warren.  You  also,  I  think,  are  vice  president  and  m  charge 
and  control  of  the  Berkshire  Street  Railway  Co.? 

Mr.  SixDRRS.  Yes. 

Mr.  Warren.  WHiich  operates  in  the  western  part  of  Massachu- 
setts ? 

Mr.  Storrs.  In  the  western  part  of  Massachusetts  and  southwest- 
ern Vermont,  and  over  the  line  into  New  York. 

Mr.  Warren.  So  it  crosses  the  western  end  of  Massachusetts  and 
goes  thix)ugh  a  corner  of  Vermont  into  New  York? 

Mr.  Storrs.  The  total  mileage  I  can  give  you  in  detail  if  you 
wish. 

Mr.  Warren.  Yes. 

Mr.  Storrs.  The  Connecticut  Co.  operates  696  miles  of  electric- 
raihvay  trackage  in  Connecticut  and  the  Berkshire  Street  Railway 
164  miles  of  electric-railway  trackage  in  the  States  of  Massachusetts, 
Vermont,  and  New  York. 

Mr.  Warren.  You  have  given  special  attention  among  other  sub- 
jects relating  to  the  operation  of  street  railways  to  the  effect  of  the 
automobile  business,  have  you  not? 

Mr.  Storrs.  Yes,  sir. 

lilr.  Warren.  And  the  jitney  competition? 

Mr.  Storrs.  Yes,  sir. 

Mr.  Warren.  And  you  have  encountered  a  good  deal  of  ]itney 
competition  to  vour  lines  at  various  points  in  Connecticut? 

Mr.  Storrs.  Yes;  very  largely  throughout  Connecticut. 

Mr.  Warren.  Are  you  prepared  to  go  on  without  my  questioning 
you  and  describe  to  the  commission  what  you  have  found  about  the 
'jitney  and  automobile,  the  effect  of  each  upon  the  street  railways 
and  statistics  relating  thereto? 

Mr.  Storrs.  I  am.  I  have  some  statistics  here  as  well  as  .a  general 
statement  in  connection  with  it,  and  if  I  may  be  allowed  I  will  pre- 
sent it  in  that  way,  if  Mr.  Warren  wishes. 

Mr.  Warren.  Yes. 

Mr.  Storrs.  In  order  to  carry  the  statistics  through,  if  I  may,  I 
will  sketch  it  over.  The  rapid  development  of  the  automobile  busi- 
ness has  had  a  tremendous  effect  upon  the  earnings  of  electric  rail- 
roads throughout  the  country;  that,  attendant  with  the  very  great 
development  of  the  perfected  highway  and  the  permanent  paving 

of  city  streets.  -,.,111.1 

I  have  a  tabulation  here  prepared  as  the  most  detailed  study  of  the 
automobile  which  has  been  prepared  in  any  Commonwealth,  which 
is  that  of  the  Special  Commission  on  Motor  Vehicles  of  the  Com- 


424       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

monwealth  of  Massachusetts,  and  as  it  is  rather  a  lengthy  table  I 
will  merely  sketch  a  few  of  the  heads. 

Beginning  in  1903,  at  the  time  they  began  to  register  the  auto- 
mobile under  the  present  act  there  was  a  total  of  3,241  automobiles 
registered  within  the  Commonwealth  of  Massachusetts.  Fifteen 
years  later,  in  1918,  there  were  160,000  pleasure  automobiles,  private 
cars  and  with  motor  trucks  and  motorcycles  sufficient  to  bring  that 
total  up  to  193,000.  That  is,  in  15  years,  from  3,200  to  193,497.  Dur- 
ing that  period  the  history  of  the  electric  railroads  in  Massachusetts 
is  one  of  rapidly  approaching  insolvency.  Two  hundred  and  fifteen 
miles  of  electric-railroad  tracks  within  that  State  have  been  aban- 
doned. The  fares  in  the  city  of  Boston  have  been  raised  to  10  cents 
with  an  attendant  deficit  to  be  met  from  the  State  treasury  under 
their  plan  of  operation  of  over  $2,000,000,  and  throughout  the  State 
the  fares  have  been  gradually  increased,  but  with  the  rapid  increase 
in  the  cost  of  producing  transportation  they  have  not  been  able  to 
make  the  income  and  the  outgo  quite  equal. 

Report  of  special  Commission  on  Motor  Vehicles  in  Massachusetts. 


Year. 


1903. 
1904. 
1905. 
1906: 
1907. 
1908. 
1909. 
1910. 
1911. 
1912. 
1913. 
1914. 
19151 
1916. 
1917. 
1918. 


Auto- 
mobiles. 


3,241 
3,772 

4,889 

6,572 

7,733 

18,066 

23,971 

31,360 

38,907 

50,132 

62,660 

77,246 

90,580 

118,615 

147,310 

160,486 


Trucks, 


Total 
auto- 
mobiles 

and 
trucks. 


12,053 
18,194 
26,964 
33,011 


3,241 

3,772 

4,889 

6,572 

7,733 

18,066 

23,971 

31,360 

38,907 

50,132 

62,660 

77, 246 

102,633 

136,809 

174,275 

193,497 


Motor 
cycles. 


502 
489 
533 

665 

832 

1,922 

2,394 

3,358 

3,C58 

5,034 

7,127 

8,161 

9,520 

10,713 

11,065 

12,862 


»  This  is  the  first  year  trucks  were  registered  separately  from  pleasure  cars. 

As  far  as  the  United  States  is  concerned,  a  tabulation  has  been 
prepared  through  the  Census  Depai-tment  and  others  for  the  last 
four  years  for  which  the  accurate  figures  are  available,  showing  the 
motor- vehicle  registration  in  every  State  in  the  Union.  In  1914  there 
were  a  total  of  passenger  cars  and  commercial  cars,  the  passenger  cars 
being  very  greatly  preponderant,  of  1,711,000.  On  the  basis  of  the 
then  population,  that  was  1  car  for  every  64  people,  or  assuming 
4  members  to  a  family,  1  car  for  every  19  families.  In  1918,  these 
figures  had  reached  a  maximum  of  0,140,000  automobiles  or  1  for 
every  19  of  the  then  population,  or  1  for  every  5  families. 

Now,  during  the  first  six  months  of  1919  the  records  which  we  have 
been  able  to  obtain  in  but  few  States  show  there  is  an  alarming 
further  increase  in  the  use  of  the  automobile. 


.PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      425 
Total  number  of  vehicles  in  the  United  States. 


Passenger 
cars. 


Com- 
mercial 
cars. 


1,574,431 
2,240,229 
3,243,631 
4,643,481 
5,352,350 


136,907 
205,435 
301,321 
442,478 
593,092 


Total 

motor 

vehicles. 


1,711,338 
2,445,664 
3,544,952 
5,085,959 
5,945,442 
6,146,617 


Population. 


98,781,324 
100,399,318 
102,017,312 
103,635,306 
105,253,300 


Number 

of 
I)ersons 

per 

pleasure 

car. 


62 
44 
31 
22 
19 


Number 

of 
families 

per 
pleasure 

car. 


16 
U 
8 
6 
5 


Dec. 31,  1914 

Dec.  31,  1915 

Dec. 31,  1916 

Dec.  31,  1917 

Dec.  1,  1918 

Dec.  31, 1918 

Remarks:  Figures  ta«d  on  separate  registrations  „,  commercial  cars  in  10  Sta.esand  es.imatesofn«mber 
ot  commercial  cars  by  secretaries  o!  state  m  o  States. 

It  is  interesting  to  note  that  during  that  period  the  amount  avail- 
able foi  city  paving  and  highway  betterment  throughout  the  country 
reachS  'n  1917-18  a  gross  of  $255,000,000  or  an  appropriation  from 
the  ttxDavers  toward  highway  betterment  for  the  benefit  of  the  auto- 
niobUeS  of  s%htly  under  $2  per  capita  of  the  population.  The 
onlvSvX^hat  haf  been  made  that  I  know  of  of  the  eleetrac-railway 
Stion  is  hat  in  Massachusetts,  in  which  an  attempt  was  made  to 
show  the  amount  of  tax  which  would  have  to  be  assessed  against  the 
noDulatk,nf  the  various  communities  in  order  to  keep  the  electric 
Xiys  of  the  Stat«  as  a  whole  solvent,  which  brought  about  the 
fiCes^of  a  tax  ranging  from  $2  per  capita  in  the  small  villages  to 
slTffhtlv  under  $1  per  capita  in  the  larger  cities. 

Of  the  amount  of  contribution  to  the  paving  program  and  the 
beUerment  program  of  the  streets  throughout  the  country,  so  tar  as 
we  can  differentiate  that  impost  from  general  imposts  made  upon 
die  elertric  railways,  it  would  indicate  an  appropriation  in  the  neigh- 
KoodTf  $10.00^,000  per  year  required  of  the  ele^t"'^  ^f  «'?f  ^^ 
conform  to   he  requirements  of  the  communities  m  the  State  m  the 
street  and  road  betterment  program-all  that,  of  course,  m  the  u  ti- 
mate  ana  vsis  being  a  tax  upon  the  car  rider  for  the  benefit  of  the 
more  fortunate  member  of  the  community  who  has  an  automobile 
AtThe  present  time  the  automoble  industry,  in  its  efforts  to  expand 
the  use  of^ie  cheaper  car,  has  adopted  as  a  slogan  for  future  pub- 
Hcitv  "The  world  owes  you  a  car,"  with  the  idea  of  developmg  with 
that  as  a  slogan  a  certain  amount  of  unrest  and  dissatisfaction  in  the 
mhid  of  tbe  individual  who  does  not  already  own  an  "utomobile. 

Tn  n-irts  of  the  Commonwealth  of  Massachusetts,  and  doubtless  it 
is  true'Vn  other  parts  of  the  United  States,  while  electric  lines  were 
bu  It  throi^gh  strictly  summer-resort  territory,  such  as  the  Berkshire 
mis  Xh  has  been  a  very  popular  summer  trip,  some  years  ago 
the  toi7rsts  came  in  and  spent  a  week  or  a  month  in  some  favorite 
in  wWi  an  accasional  trolley  trip  through  the  hills.  Now  the  tourist 
"m^s  in  in  his  automobile,  and  depending  upon  his  standing,  a  very 
oV  borate  one  or  a  very  simple  one,  stays  a  day  or  two  and  passes  on 
o  some  o^her  part  of  the  country-  That  has  had  a  most  disastrous 
effect  upon  the  revenue  of  the  electric  lines  in  the  territory,  necessi- 
tating a  very  material  decrease  in  the  service  rendered-that  decrease 

100643°— 20 28 


~i| 


426       PROCEEDIlil'GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

now  running  as  high  as  two-thirds— that  is,  one-third  of  the  service 
which  was  originally  rendered  on  those  lines  which  are  still  in  opera- 
tion only  is  given.  Some  lines  were  abandoned,  some  of  them  entirely 
junked,  the  tracks  torn  up  and  the  wires  torn  down,  and  on  other 
lines  the  service  discontinued  entirely,  and  on  other  lines  a  measure 
of  local  relief  or  aid  given  to  the  corporation  for  continued  service 
of  one  or  two  cars  to  serve  the  little  village  and  the  small  communi- 
ties around. 

With  the  cheap  automobile  and  the  even  cheaper  second-hand 
car  there  has  sprung  up  a  measure  of  competition  with  the  electric 
railroad  which,  when  not  recognized  as  competition,  has  been  very 
serious  upon  the  revenues  of  the  transportation  utility.  That  is  the 
jitney.  And  there  is  the  development  of  the  small  second-hand  and 
jitney-bus  automobile  carrying  20  passengers.  In  those  communities 
where  the  essential  need  of  transportation  has  been  thoroughly  recog- 
nized and  the  responsibility  of  the  transpoitation  utility  to  the  com- 
munity expressed  in  form  of  statute— that  is,  the  requiring  of  the 
jitney  bus  a  regularity  of  service  during  all  periods  of  the  day,  a 
cei-tainty  of  service  over  particular  routes,  a  responsibility  in  case 
of  accident  hazard,  and  also  a  measure  of  tax  to  compensate  for  tlie 
pavement  and  other  facilities  offered  by  the  city— that  has  placed 
that  competitor  upon  what  might  be  considered  a  legitimate  basis. 

In  other  communities,  however,  as  yet  there  has  been  no  i-egulation 
which  has  been  effective  from  the  standpoint  of  the  community  in 
giving  essential  means  of  service,  and  in  those  parts  of  the  country 
the  jitney  operates  in  casual  service  over  certain  routes  or  as  far  as 
the  individual  may  have  passengers,  turning  back  into  the  center 
and  picking  up  another  load,  and  if  by  any  chance  a  number  of 
people  are  waiting  to  go  into  c^her  portions  of  the  city,  going  on 
other  routes.  They  are  irresponsible,  the  title  to  the  car  remaining 
frequently  in  the  hands  of  the  manufacturer  or  in  the  name  of  the 
wife  of  the  driver;  and  the  only  property  which  can  be  attached 
from  the  standpoint  of  those  who  might  be  injured  by  accident 
being  that  of  the  deteriorated  automobile,  of  little  or  no  value. 

I  have  some  interesting  statistics  in  connection  with  that.  New 
Jersey  is  one  of  the  States  in  which  the  laws  have  not  been  effective 
from  the  regulatory  standpoint.  I  am  speaking  now  always  from 
the  standpoint  of  the  regulations  required  by  the  conununity  itself 
to  give  a  measure  of  service  which  might  be  of  value.  There  the  in^ 
crease  in  competition  has  be^n  directly  attendant  upon  an  effort  of 
the  electric-railway  utility  to  obtain  increases  in  revenue  through 
changes  in  its  rates  of  fare.  From  a  total  of  120  jitneys  operating 
in  1914,  carrying  a  total  of  1,000,000  passengers,  to  August,  1918,  a 
total  of  232  jitneys  and  carrying  a  total  of  1,400,000— that  is,  the  in- 
crease under  the  straight  rate  of  fare,  without  any  increase  on  the 
part  of  the  electric  railway— to  an  increase  of  601  cars  immediately 
after  the  increase  of  1  cent  for  a  transfer,  to  the  period  of  a  7-cent 
fare  and  1  cent  for  transfer,  a  total  of  1,040  cars  with  estimated 
earnings  as  estimated  from  the  returns  of  the  jitneys  for  tax  pur- 
poses of  over  $3,000,000  a  year;  and  all  of  that  entirely  irresponsible 
and  a  service  which  would  not  meet  the  requirements  of  the  com- 


PROCEEI>INGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      427 

t 

munity  by  any  stretch  of  the  imagination,  were  it  not  for  the  excel- 
lent service  given  by  these  public  utilities. 

Connecticut  also  has  no  effective  jitney  regulation;  in  fact,  no 
statute  at  all  up  until  very  recently  from  which  any  basis  of  regula- 
tion might  be  det^*mined.  A  very  careful  anal^'sis  of  tl^  service 
in  the  city  of  Bridgeiport,  which  is  more  largely  overrun  with  that 
type  of  competition  than  any  other,  shows  that  jitney  routes  par- 
allel practically  all  of  the  city  streets  on  which  service  by  the  utility 
is  rendered,  those  jitneys  running  from  a  terminal  convenient  to 
their  service  1  mile  to  2  miles  from  the  city  center,  into  the  city  cen- 
ter and  returning,  one  fare  in,  but  not  across  the  city  center,  a  short- 
line  car  with  occasional  cars  running  from  a  short  distance  out  from 
the  center  on  one  side  to  a  short  distance  out  from  the  center  on 
the  other  side,  50  per  cent  of  the  total  passengers  riding  on  electric 
railroads  and  jitneys  carried  by  the  jitneys  within  the  area  of  IJ 
miles  of  the  center  of  the  city ;  a  total  of  68  per  cent  carried  by  the 
jitneys  within  IJ  miles;  that  is,  including  the  IJ  miles;  44  per  cent 
of  the  total  passengers  riding  within  the  area  of  2  miles,  showing 
the  rapid  decrease  in  jitney  business  beyond  the  If  to  2^  miles,  and 
on  only  56  per  cent  of  the  total  of  the  entire  city  area  did  the  electric 
railway  have  the  opportunity^  of  giving  a  service  similar  to  the 
jitney  service. 

Tliere  is  no  question  but  that  the  electric  railway  could  not 
compete  with  its  competitor,  could  not  produce  a  satisfactory  service, 
if  the  jitney  service  is  by  any  means  at  all  satisfactory,  and  it  must 
be  if  they  carry  such  large  numbers,  to  make  a  very  handsome  profit, 
and  because  the  jitney  is  confined  solely  to  the  area  of  short  riders 
in  the  densely  settled  portion  of  the  community.  The  electric-rail- 
way service,  on  the  other  hand,  extends  miles  beyond  the  densely 
settled  poition  of  the  conununity  into  the  rural  districts,  the  coun- 
try districts,  the  nonre  venue -producing  area,- that  area  in  which,  by 
the  very  enthusiasm  and  supreme  optimism  of  the  original  promotors 
of  tlie  electric  i-ailroad,  these  lines  were  pushed  from  the  city  center, 
by  reason  of  the  fact  that  an  electric  car  could  run  so  nmch  more 
rapidly  tlian  a  horse-car. 

!Mr.  Wakrex.  I  did  not  catch  the  per  cents  you  gave  the  jitneys 
in  the  whole  city  area. 

Mr.  Stores.  l^"ifty-six.  That  takes  in,  by  the  way,  an  area  of 
4|  miles  in  radius  from  the  center  of  the  city,  over  two-thirds  of 
the  total  business  being  done  within  an  area  of  2  miles  from  the 
city  center  and  50  per  cent,  only  half  of  it,  being  done  in  the  aiea 
of  4  miles,  leaving  to  the  transportation  utility  the  unprofitable 
long-haul  business  and  taking  the  only  profitable  business  there  is 
in  the  community. 

That  is  occasioned  very  largely  by  reason  of  the  very  narrow 
Kew  England  streets,  congested  to  such  an  extent  that  it  takes  a 
very  great  length  of  time  lor  even  the  most  rapidly  moving  electric 
car' to  pass  through  the  city  business  area. 


I 


428       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Comparison  of  number  of  passengers  carried  hy  street  railway  and  jitneys, 

classified  by  length  of  ride. 


In  both  directions. 


Riding  within  IJ  miles  radiiis  of  center  of  pitv 

Ridin?  more  than  IJ  miles,  but  less  than  2  miles  from 

center  of  city 

Riding  more  than  2  miles  but  less  than  2J  miles  from 

center  of  city 

Riding  more  than  2J  miles  but  less  than  3J  miles  from 

center  of  city 

Riding  more  than  3J  miles  but  less  than  iV miles  from 

center  of  city 

Total 


On  the 
railway. 


5,432,947 

4, 805, 761 

3,395,431 

239, 724 

860,048 


On  the 
jitney. 


5,561,451 

10,620,347 

2,758,041 


Total. 


10,994,398 

15,426,108 

6,153,472 

239,724 

860,048 


Per  cent 
taking 
jitney. 


50.58 

68.85 
44.82 


14,733,911 


18,939,839 


33,673,750 


56,245 


The  matter  of  the  jitney  and  general  electric-railway  conditions 
was  studied  in  the  State  of  Connecticut  by  a  commission  appointed 
last  w^inter— a  commission  made  up  by  members  of  the  legislature 
and  also  representatives  appointed  by  the  governor,  and  they  summed 
up  their  consideration  of  the  jitney  competition,  I  think,  in  a  very 
admirable  way,  and  I  would  like  to  quote  from  that : 

Orijjinally  the  street-railway  companies  obtaineil  a  franchise  and  charter 
granting  them  exclusive  transportation  rights  over  certain  specitied  lines, 
and  in  consideration  of  such  exclusive  rights  they  were  and  are  called  upon  to 
pay  an  annual  tax  to  the  State  of  4i  per  cent  on  their  gross  revenue. 

That  is,  that  happens  to  be  the  State  law  in  Connecticut. 

Instead  of  being  protected  in  the  holding  of  a  privilege  which  was  practically 
a  monopoly,  changed  conditions  have  developed  a  new  type  of  transportation 
service  along  the  highways  over  which  the  trolleys  run  >vhich  has  resulted  in 
serious  inroads  in  their  revenues.  There  seems  to  be  no  question  of  the  right 
of  this  new  and  needed  supplement  to  the  trolley  service  to  serve  the  public. 
The  commission  believes,,  however,  that  this  jitney  service  should  be  governed 
and  regulated  and  be  subject  to  the  same  control  as  is  placed  over  other  classes 
of  common  carriers,  and  it  believes  that  the  patrons  and  the  public  should  be 
guaranteeil  redress  for  loss  of  life  or  personal  injury  in  the  same  degree  and 
manner  that  other  common  carriers  are  required  to  provide.  We  believe  that 
the  jitneys  should  be  regulated  as  to  schedules,  routes,  and  rates  in  the  same 
nuinner  as  the  street-railway  companies. 

It  is  useless  to  assume  that  the  jitney  can  by  any  manner  of  means 
take  over  the  transportatiou  within  the  city  area.  It  seems  to  me 
that  the  best  answer  to  that  is  a  very  careful  study  which  we  have 
made  of  the  possibility  of  something  of  that  kind  in  connection  with 
one  of  the  large  cities,  a  congested  type  of  old  New  England  street, 
with  a  population  of  180,000.  It  would  be  necessary  for  jitney  buses 
of  a  capacity  of  20  passengers,  loaded  to  full  capacitv,  to  come  into 
the  central  business  loading  zone,  and  as  in  the  case  of  all  the  New 
England  type  of  city  and  a  great  many  other  cities  throughout  the 
country,  business  originates  or  centers  around  the  central  green  or 
square  or  business  area  of  but  relatively  a  few  blocks — it  ^^oliid  be 
necessary,  as  I  say,  for  6^  of  such  type  of  buses  to  enter  and  leave 
the  central  business  loading  zone  loaded  to  the  full  capacity  every 
minute  during  the  rush  hours  each  day;  that  is,  for  a  period  of  some- 
thing like  6  hours,  morning  and  night  rush  hours,  an  absolutely  im- 
possible condition  imposed  upon  city  streets,  together  with  the  use  of 
the  privately  owned  automobile  and  the  truck  and  pedestrian  and 


^  PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      42^ 

« 

whatever  other  vehicular  or  other  traffic  there  might  be  through  tha 

city  area.  •  /r    j. 

The  development  of  the  motor  truck  has  also  had  a  serious  ettect 
upon  the  revenues  of  the  electric  lines.  That  is  now  becoming  more 
and  more  apparent  as  we  see  makeshift  seats  placed  upon  the  motor 
trucks  or  trucks  loaded  to  full  carrying  capacity  in  space,  if  not  m 
tonnage,  of  those  bound  out  for  picnics  or  to  other  places  of  resort. 

A  case  in  point  that  will  be  of  interest  is  this:  Some  time  aga 
in  one  of  the  New  England  cities  there  sprung  up  unexpectedly 
to  the  transportation  utility  a  very  large  business  in  shore  bathing 
by  the  foreign  element  entirely— Russian  Jews,  Lithuanians,  Italians,, 
and  Greeks — which  required  an  immediate  increase  of  transportation 
during  the  hotter  summer  days,  and  especially  Saturdays  and  Sun- 
days, of  some  20  to  30  extra  cars  of  full  carrying  capacity— that  is,  a 
carrying  capacity  of  75  to  100  passengers,  dependng  upon  the  num- 
ber that  might  stand.  That  ran  over  a  period  of  three  or  four  years^ 
and  as  there  was  a  great  deal  of  difficulty  to  get  the  fares  from  all 
the  mothers  of  the  small  foreignei-s— they  would  not  all  of  them  ac- 
knowledge the  individual  children— the  traction  utility  put  in  a  pre- 
payment inclosure  through  which  they  all  had  to  pass  and  pay  their 
fare  going  in.  That  was  very  effective  in  getting  the  electric-rail- 
road fares,  but,  unfortunately,  the  fathers  in  a  great  many  cases, 
were  vegetable  vendors,  or  ice  vendors,  or  something  of  that  kind,, 
and  they  all  of  them  use  their  motor  trucks,  which  were  normally 
used  for  their  business,  by  putting  in  extra  seats  and  taking  down 
all  these  hordes  of  people  to  the  shore,  with  the  result  to-day  that 
there  is  no  demand  whatever  for  transportation  by  the  utility. 

Commissioner  Sweet.  Are  you  speaking  now^  of  Bridgeport  ? 

Mr.  Storrs.  No  ;  I  am  not  speaking  of  Bridgeport  at  the  present 
time.    I  am  speaking  of  New  Haven,  sir. 

One  of  the  very  profitable  by-products  of  the  electric-railways 
business  has  been  the  carriage  of  goods  in  small  packages  or  in  larger 
quantities,  l^hat  has  been  developed  very  largely  through  our  com- 
munities, and  the  total  revenue  is  relatively  small — about  8  per  cent 
of  the  total  coming  from  the  carriage  of  goods  of  various  kinds — 
but  with  the  excellence  of  the  highways  throughout  New  England 
the  motor  truck  bids  fair  to  absorb  almost  entirely,  or  very  largely, 
the  short-haul  high-rate  express  business — that  which  is  the  most. 

profitable. 

Commissioner  Wehle.  That  affects  your  interurban  lines? 

Mr.  Storrs.  Entirely;  yes,  sir. 

Commissioner  Wehle.  But  what  per  cent,  speaking  in  terms  of 
percentage,  has  the  package  service  of  the  interurban  increased  in. 
the  past  five  years  in  your  district? 

Mr.  Storrs.  It  has  decreased  in  the  last— well,  I  w^ant  to  put  that 
with  a  qualification. 

Commissioner  Wehle.  Yes? 

Mr.  Storrs.  In  the  last  three  years  it  has  decreased  by  reason  of 
the  motor-truck  competition. 

Commissioner  Wehle.  It  does  not  show  any  increase  then  in  the 

past  five  years? 

Mr.  Storrs.  I  think  it  would  in  the  last  five  years.  I  would  want 
to  qualify  that,  but  I  think  that  in  three  years  it  has  shown  a  de- 
crease. 


n 


430       PKOCEEDINGS  OF  FBDERAJL  ELECTRIC  RAILWAYS  COMMISSION. 

Cottunissioner  Wehle.  Do  you  have  through  billing  aiTangemeats 
on  less  than  carload  shipments  through  New  England  ? 

Mr.  Storks.  Not  outside  of  the  State  of  Connecticut.  We  have 
tliose  billing  arningenients  there. 

Commissioner  Wehle.  You  do  an  interline  billing  in  the  State 
of  Connecticut,  but  not  in  the  otlier  States? 

Mr.  Storks.  We  control  about  85  per  cent  of  the  total  mileage  in 
the  State  of  Connecticut.  We  do  havB  interline  billing  thouo-h, 
however.  ^ 

Commissioner  Wehle.  A  shipper  can  not  eflfect  interline  billing 
from  a  point  in  Connecticut  to  a  point,  say,  in  New  York  or  Massa- 
chusetts ? 

rri^^'i  ^'^^^^-  There  has  been  no  demand  for  that  type  of  service. 
That  has  been  very  carefully  watched,  but  tliere  has  been  no  demand 
for  it ;  and  when  occasion  arises,  if  there  are  individual  shipments 
and  that  occasion  arises  that  convenience  is  afforded,  pai*ticu]arly 
during  the  congestion  of  wai'-time  transportation. 

Commissioner  Wehle.  Biit  there  has  l)een  no  attempt,  has  there, 
on  the  part  of  any  urban  electric  comi>any  in  Connecticut  to  cairv 
packages  within  the  city? 

Mr.  Storks.  Oh,  yes.' 

Conmiissioner  Wehle.  From  one  point  within  the  city  to  another 
point  withm  the  same  city? 

Ml'.  Storks.  Well,  we  have  various  express  terminals  within  the 
city.  We  do  have  a  measure  of  carrying  packages  by  tickets  on  the 
passengei-  cars  themselves  which  is  availed  of  to  a  certain  extent, 
although  none  of  that  is  witliin  the  city  areas.  There  has  been  no 
attempt  on  tlie  part  of  the  public  to  avail  themselves  of  the  service 
which  can  be  rendered,  except  occasionally  as  between  two  industries 
where  there  is  a  large  shipment,  we  have  a  great  deal  of  that  in- 
dustrial movement. 

Commissioner  Wehle.  Has  there  ever  been  any  test  of  anv  fran- 
chise in  Connecticut  with  reference  to  the  authority  or  power  of  a 
street-railway  company  to  carry  packages  within  the  limits  of  a 
city  i 

Mr.  Storks.  No  serious  attempt.  There  has  been  some  question  as 
to  that. 

Cominissioner  Weulj:.  The  exercise  of  that  right  has  nevei^  been 
resisted  by  anybody? 

Mr.  Storks.  No.  Well,  some  years  ago  there  was;  it  was  not  a 
serious  resistance,  but  there  was  a  little  objection  to  it. 

Commissioner  Wemle.  When  the  passenger  himself  carries  the 
package  did  I  understand  you  to  sav  that  the  regulations  of  the 
company  provide  that  an  additional  compensation  be  paid  the  car- 
riers ?  ^ 

Mr.  Storks.  No;  that  was  in  case  a  package  is  sent  from— well 
particularly  from  some  drug  store  to  some  home;  it  can  be  sent  tliat 
way  on  a  trolley  car  by  a  tag  that  is  put  on  it.    When  the  passenger 
carries  his  own  package  it  is  carried  free. 

Commissioner  AYehle.  Take  some  city.  New  Haven,  for  instance 
On  what  basis  do  you  render  that  service  ? 

Mr.  Storks.  By  a  tiig— ajQ  express  tag  which  is  put  on  the  pack- 
age, and  the  package  is  tidven  on  the  car  and  delivered  to  ,the  motor- 
man  and  he  m  turn  delivers  it  to  whoever  calls  for  it  at  the  other  end 


PROCEEDINGS  OF  FEDERAL  ELECTRK)  RAILWAYS  COMMISSION.      431 

We  do  not  make  any  delivery,  of  course,  in  a  case  of  that  kind  ex- 
cept from  the  individual  to  the  car  crew  and  back. 

Commissioner  Wehle.  What  is  the  compensation  that  the  com- 
pany receives  for  that  service  ? 

Mr.  Storrs.  I  am  trying  to  refresh  my  mind,  as  we  have  made 
some  changes  in  those  things.    There  is  a  minimum  of  25  cents. 

Conmiissioner  Wehle.  Does  it  amount  to  anything  at  all  in  reve- 
nue? 

Mr.  Storrs.  Very  little;  not  enough  to  notice. 

Commissioner  Wehle.  These  companies  carry  newspapers  for  dis- 
tribution ;  do  they  not  ? 

]Mr.  Storks.  Yes. 

Commissioner  Wehle.  To  distributing  points  within  the  city? 

Mr.  Storks.  Yes. 

Cx)mmissioner  Wehle.  Does  that  amount  to  anything  in  revenue, 
sav,  in  New  Haven? 

Mr.  Storrs.  Very  innnaterial.  I  will  be  very  glad  to  ^ive  you 
those  in  detail.  I  would  rather  have  them  that  way  than  give  them 
from  i^collection.    I  will  be  very  glad  to  supply  that  information. 

Commissioner  Wehle.  Mr.  Chairman,  would  you  suggest  that  the 
witness  jjut  that  in  the  record — his  revenue  from  the  carriage  of 
pai>ers  ? 

Mr.  Storrs.  I  can  easily  get  our  statistical  office  to  draw  that  up  in 
detail  and  send  it  down  for  filing  in  the  record. 

The  Chairman.  You  can  file  with  us  a  statement  showing  the 
gross  revenue  se^'ured  from  the  handling  of  the  mail  and  express  and 
freight  and  at  the  same  time  your  passenger  revenue. 

Mr.  Storks.  We  have  no  mail. 

The  Chairman.  You  have  no  mail? 

Mr.  Storrs.  No.  The  compensation  given  by  the  Post  Office  De- 
partment was  so  immaterial  that  we  declined  to  carry  the  mail  any 
further  some  veal's  ao^o. 

The  Chairman.  Will  you  file  a  statement  showing  your  gross 
revenue  divided  into  the  diiferent  classes? 

Mr.  Storrs.  I  will  be  very  glad  to  do  that. 

Mr.  Warren.  I  can  give  you  those  figures  for  Massachusetts,  Mr. 
Wehle,  I  think — for  the  whole  State,  if  you  care  to  hear  them. 

Commissioner  Wehle.  I  think  it  would  be  very  interesting. 

Mr.  Warren.  The  passenger  revenue  (this  was  for  the  last  year — 
I  have  not  filed  this  yet,  but  I  mean  to) — ^this  is  a  certified  compila- 
tion of  the  figures  for  all  Massachusetts,  which  I  got  from  our  pub- 
lic-service commission  before  coming  down  here.  The  passenger 
revenue  was  forty-three  million  ninety-two  thousand  odd  dollars 
for  the  year;  special-car  revenue,  seventy-five  thousand  odd  dollars; 
mail  revenue,  $41,852;  express  and  baggage  revenue,  $175,625;  milk 
revenue,  $15,437;  freight  i"evenue,  $1,072,329;  miscellaneous  trans- 
poi'tation  revenue,  $20,811.  So  from  all  of  those  sources  the  revenue 
was  increased  from  $43,092,000  to  $44,493,000,  or  about  $1,400,000. 

In  your  investigation  of  the  automobile  and  jitne}^  question,  did 
you  find  any  States  or  localities  whei^  either  the  privately  owned  au- 
tomobile or  the  jitney  paid  any  tax  for  the  use  of  the  highway  other 
than  such  registration  fee  as  might  be  required  under  the  laws  ? 

^Ir.  Storrs.  I  })elieve  there  are  some  States  in  which  a  gross  reve- 
nue ta^  is  fixed  also. 


432        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warrex.  Is  that  true  in  Connecticut? 

Mr.  Storks.  It  is  not  true  in  Connecticut. 

Mr.  Warren.  And  not  in  Massachusetts? 

Mr.  Storrs.  No;  not  in  New  England  at  all. 

Mr.  Warren.  You  spoke  of  a  Massachusetts  investigation  of  the 
amount  necessary  to  maintain  the  electric  railways  generally  on  a 
solvent  basis  as  regards  income  and  outgo.  I  think  you  spoke  of 
$2  por  capita  of  population :  was  is  not  $2  per  thousand  of  valuation  ? 

Mr.  Storrs.  \es;  I  meant  to  correct  that  later  on.  Instead  of 
being  a  per  capita  tax  it  was  $1,000  of  assessed  valuation. 

Mr.  Warren.  And  that  was  in  this  special  report  of  the  public- 
service  commission  this  last  year? 

Mr.  Storrs.  Yes.  I  assume  that  report  will  be  at  your  service 
anyway. 

Commissioner  Meeker.  Could  you  put  those  figures  on  a  com- 
.  parable  basis?  The  figures  regarding  the  tax  necessary  to  keep  up 
the  highways  is  on  a  per  capita  basis,  and  it  would  be  more  useful  for 
me  if  you  had  the  other  figures  on  the  same  basis. 

Mr.  Storrs.  I  can  easily  do  that.  We  could  easily  determine  from 
these  figures  that  amount.  The  statistician  could  easily  determine  it 
and  file  it  here  as  a  part  of  the  record. 

Mr.  Warren.  I  do  not  think  it  would  vary  very  much  as  between 
the  per  capita  and  per  $1,000  of  valuation. 

Mr.  Storrs.  No. 

Mr.  Warren.  I  notice  the  assessed  value  of  the  Berkshire  County 
district  IS  $104,000,000;  and  I  think  the  population  is  about  8.000,  is 
it  not?  •  ' 

Mr.  Storrs.  Yes.  There  would  be  very  little  difference,  as  I  have 
it  in  mind  at  the  time,  but  it  can  be  easily  done. 

Mr.  Warren.  There  was  testimony  last  week— I  do  not  think  vou 
were  here  last  week • 

Mr.  Storrs.  No. 

Mr.  Warren.  From  various  street-railway  representatives  to  the 
effect  that  increasing  the  rates  produced  a  substantial  increase  in 
revenue,  as  bearing  on  the  point  whether  it  was  possible  to  get  in- 
creased revenue  by  increase  in  rates.  Have  you  had  experie'nce  in 
increasing  rates  on  any  of  your  lines  ? 

^  Mr.  Storrs.  I  have.'  In  Connecticut  we  are  on  a  6-cent  basis,  hav- 
ing been  taking  6  cents  since  October,  1917.  The  first  12-month 
period  after  that  was  the  time  during  which  we  were  in  the  war 
and  all  industries  throughout  Connecticut  were  most  intensely  en- 
gaged in  the  production  of  the  essentials  of  war.  With  the  taking 
out  of  the  population  the  younger  men  for  serious  war  duties  on 
this  side  and  also  abroad  .and  also  the  young  women  for  loyal  work 
who  did  not  need  the  income,  to  relieve  men  for  other  more  serious 
places  in  the  industries  and  offices,  the  result  was  a  very  great  drop- 
ping off  in  the  use  of  the  electric-railway  car.  The  additional  carry- 
ing of  operatives  to  and  from  the  plants  in  which  they  were  encrafred 
did  not  nearly  compensate  for  the  loss  of  riding  during  the  normal 
hours  of  the  day  and  during  the  pleasure-riding  hours  of  the  day 
the  evening.  The  result  was  that  for  the  first  year  after  the  instal- 
lation of  the  6-cent  fare  our  revenue  was  practically  identical,  that 
IS,  there  was  an  increase  of  0.9  of  1  per  cent  in  the  gross  revenue 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      433 

That  could  not,  of  course,  be  entirely  attributed  to  the  increase  in 
tV^  rate  of  fTre,  and  it  would  be  impossible  to  determine  what  por- 
t!ro1  that^t^^^^  in  passenger  riding  should  be  attributed  to  the  in- 
crease  of  rate  of  fare. 

Mr.  AVarren.  What  period  was  that? 

Mr.  Storrs.  October  1,  1917,  to  October  1,  1918. 

Mr  AV4RREN  Do  VOU  happen  to  know  from  the  retuins  oi  oiner 
companiesTn  New  England  \vhich  were  operating  at  the  old  rates 
duTng  thalsan.e  period  whether  or  not  there  was  a  large  loss  of 

*''mi-  S™Sri  wlK^lify  that  a  little  bit  in  connection  w^ith  the 
Connectkut  Co  We\Jde  i  very  careful  survey  of  that  and  came 
to  "he  definite  conclusion. that  we  had  lost  10  P^^  f  nt  «f  tj,e^^^ 
ovai,^'  that  is  that  the  increase  from  5  to  6  cents  re^uitea  in  a. 
S;rase*of  10 'per  cent  in  revenue;  that,  had  --™ne^^on  th| 
fi  cent  basis  during  those  serious  days  of  1917  and  iyi»,  we  wouiu 
Lvflost To  per  c'ent  of  our  revenue.  And  we  were  borne  out  by 
Sie  of  the  Records  of  other  electric  railways  who,  during  that 
Un«,  w^nt  fi^m  5  to  6  cents,  practically  a  10  per  cent  increase 

'"-nfe  mo't°effecdve  increase  is  a  decrease  in  the  ser^jii'e  offered 
etfectiv™  in  the  increase  of  gross  revenue,  decreasmg  the  area  for 
ivliicli  the  .5-cent  coin  will  buv  transportation.  ,,     ^       • 

Mr!  WARRKrHow  has  the  increase  operated  since  the  t^rnima- 

^^Mr"  Storrs"  With  the  reversion  to  more  normal  conditions  through- 
oufLw  England  and  throughout  those  dense  industrial  comminu- 
tes there  hTsW,  of  course" a  very  great  increase  in  avenue;  that 
:\  comparatively  great  increase,  not  large  enough  to  offset  JM 
nnrAa«P  in  cost  of  operatioH,  but  an  increase  over  the  1918  nguies, 
vhXs  readfly  to  be  seen.    People  are  back  to  a  more  no^ial  basis 
Id  the  re  ief  from  the  strain  of  war-time  conditions  has  brought 
ba?k  a  desiie'  for  pleasure  riding  in  the  off-peak  hours  of  the  day 
'^"^.•^"^P^"^  the  evening  ^^  ^^  .^^^^^^, 

.  Sn  s™  rirwS run-start'ing  about  April  it  has  W  run- 
ning at  an  average  of  14  per  cent  since  April,  mid-Apul  that  was, 

^^mP  W~N.   So,  from  your  experience,  have  you   any  doubt 

about  the  efficacy  of  rates  toproduce  an  '""''^^^ '"  72"itv  on  the 
\r,-  S-mRRs  I  have  a  very  grave  doubt  as  to  any  ability  on  um 
•virt  of  the  liility  to  estimate  within  any  kind  of  reason  what  the 
A^lt  of  "n  increase  in  rate  might  be  upon  the  gross  revenue.  And, 
r  ouri  tlZi:  a  point  with  the  i--ase  above  6  cents  at  .^^^^^^^^^ 
vou  will  have  a  declining  gross  revenue.  An  increase  to  7,  »,  or 
10  cents  would  result  in  a  declining  gross. 

£:  KrbS"sr;  linrat  least.     There  is  a  very  great  un- 

" Mr"wARBEN.  Now,  have  you  made  an  investigation  and  iu-e  you 
nrep-ired  to  express  to  the  commission  some  views  on  the  effect  of 
IxtSn  of  ifnes  and  complying  with  various  requests  of  tho 
communities  for  additional  service? 


434       PKOCEEWNGS  OF  FEDERAI,  ELKOTEIC  KAILWAYS  COMMISSIOII. 

Mr.  SixHiKs.  Yes. 

3W/-  ^^'^'"'''''-  ^""^  ^''"  »"  "''  *■'*  ^^'^t'  ^>th°«t  "ly  questioning 
Mr.  Storks.  In  this  case  it  is  rather  hard  to  fr«»f  if  ;„  „  i       j 

^^1;  S  eVnf  dt^^-^/r tf  ^  toV/partkr  *in'St:^c  .  '""' 

111  tne  eailj  days  of  the  electric-railway  industrv  the  ODtimiv.m 

of  the  prcnoter  and  the  willingness  of  the  investor^o  be  comWd 

led  to  a  very  gieat  expansion,  primarily  due  to  the  fact  thai  d,e 

i>.actica.ir«jr:e  z::^^:'^:£S2zcc^:^  z^  -"r^z 
ofTiLTtt-v'efS-^  '^^^^«p  thi^  sp.:^rtrtjre"t..itt' 

«Ws  of  th« -Itui       ,' *        lines  were  extended  out  to  tlie  outlying 

~u,5i  es-alT„f"it*r?f  '"^  ""?  ''"^  ^  *>  ^'•^l  '^'^d  suburban 
a.H  1 10  D^mn!  o/fV  ?•  '^  advantage  to  the  coni.nunities  served 
Uvl   dun'^^  tl  I  hn..i^  I'ne-and  it  was  always  at  a  fixed  rate  of 

luTv  "'^•>^;.  ^^^®  stage;  and  when  the  steam  ra  Iroads  came  thrmio-h 
x^fw  r.ngiana  village.     Some  mill  owner  who  had  niadp  n   Inf  oP 

Ihe  Chairmax.  Were  these  extensions  voliuitary? 
i*ii.  ;^TORRs.  ^^olne  of  them  werp  '^f  fha  iv^rtii/^o*  ^^  ^-^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      435 

vidual  car,  together  with  the  actual  cost  of  the  power,  the  power  at 
that  point  being  brought  on  the  kilowatt  basis. 

This  was  frequently  the  case  throughout  the  communities,  a  grad- 
ual development  of  inconsistent  demands.  Of  course,  it  has  been 
rather  inconsistent  or  rather  inconceivable  that  the  owners  of  the 
utility  would  seriously  opix)se  the  insistent  demand  of  the  com- 
munity,  which  itself  gave  the  franchises  essential  to  the  life  ot  the 
corporation,  and  where  that  became  a  serious  pressure  frequently  it 

""  Commfssioner  Meeker.  In  the  end  do  you  think  that  such  exten- 
sion  should  be  passed  upon  by  a  State  commission  rather  than  by 

lo^l^aut^^o^r^y^^^^  in  New  England  are  passed  upon  so     And  in 
connection  with  that  there  is  now  unanswered  an  order  of  the  public- 
utilities  commission  in  one  of  the  New  England  States  directing 
the  electric  railway  to  build  an  extension,  in  this  ca.se  only  about  4 
miles  long,  to  serve  a  little  community,  that  community  haying  a 
double-track  line  between  the  center  and  the  large  city  adjacent, 
but  the  town  hall  happened  to  be  in  one  part  of  the  community  and 
a  large  part  of  the  inhabitants  in  that  viUage  off  from  the  mam 
line  of  transportation,  and  the  people  wanting  to  attend  town  meet- 
ings had  to  take  the  trolley  into  the  center  some  4  miles  and  back 
out  to  the  town  hall  some  6  miles.    The  people  in  that  community, 
rather  important  politically  and  otherwise,  pressed  successfully  their 
ciise  before  the  commission,  and  an  order  was  issued  directing  the 
electric  railroad  to  build  a  line  something  between  3  and  4  miles,  as 
I  recall,  to  connect  that  little  portion  of  the  isolated  comnumity 
with  the  town  hall.    That  is  practically  what  it  was  the  larger  por- 
tion of  the  community  having  already  a  double-track  line  and  prac- 
tically two  connecting  with  the  main  civic  center.    There  was  a  case 
in  which  the  commission  itself  had  ruled  upon  it,  and,  needless  to  say, 
the  corporation  has  not  been  able  to  obey  the  order  ot  the  coimnission. 
The  Chairman.  That  is  the  street-railway  corporation  ^ 
Mr    Storks.  The  street-railway  corporation  h-as  not  been  able  to 
do  it '  The  authority  was  issued  two  or  three  years  ago ;  and  we  came 
upon  the  rocks  at  about  that  time  and  have  not  been  able  to  finance 
orders  of  that  sort,  and  the  commission  itself  has  not  pressecl  its 
demands  to  the  court  nor  has  the  community  pressed  its  demands  to 
the  court  and  through  mandamus  forced  the  company  into  the  con- 
struction of  the  line,  r     .    .  •     r^  ^-     ^9 
Commissioner  Wehle.  Is  that  m  Connecticut  i 
Mr.  Storrs.  Yes;  adjucent  to  New  Haven. 

The  Chairman.  Have  you  taken  any  steps  to  abandon  that  track 
which  cost  $8,000  to  operate  with  $2,000  revenue? 

Mr.  Storrs.  We  have  now  a  little  publicity  going  forward  to  an 
immediate  cessation  of  service  on  that  line. 

The  Chairman.  So  there  is  a  remedy  for  the  company^ 
Mr.  Storrs.  There  is.    What  the  local  remedy  is  we  do  not  know, 
but  the  practical  remedy  must  be  that. 

Comniissioner  Wehlj:.  What  is  the  name  of  that  point? 
Mr    Storrs.  That  is  up  to  Westport,  from  the  railroad  station 
below  Saugatuck.     You  will  recognize  that  gomg  up  above  W  est- 
l^ort  and  on  up  to  the  waterworks. 


436       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  I  suppose  that  cost  of  $8,000  is  a  good  deal  more  than 
the  cost  was? 

Mr.  Storrs.  Decidedly  more  than  the  cost  was  in  horse-car  days. 
Mr.  Warren.  1  es ;  or  in  the  early  electric  days. 
Mr.  Storrs.  Yes.  A  little  tabulation  which  might  be  of  interest 
m  connection  with  that  as  showing  the  difference  between  the  com- 
munities in  this  country  and  in  the  old  world,  where  the  funda- 
mental theory  of  the  electric  railroad  has  been  so  different— the 
theory  being  over  there  that  the  electric  railway  must  serve  the 
densely  settled  part  of  the  community;  it  was  established  for  that 
purpose,  and  that  any  line  built  must  be  a  line  which  would  pro- 
duce transportation  which  Avould  serve  to  pay  for  the  investment. 

If  I  may,  I  will  read  a  little  bit  here.  Figures  have  been  prepared 
and  a  great  deal  of  publicity  given  it  in  the  past  showing  that  had 
the  utility  in  this  country  developed  along  the  line  of  the  same  utility 
in  European  countries  or  in  England,  the  city  of  Columbus,  Ohio, 
if  it  had  the  same  facilities  as  (irlasgow,  Scotland,  would  have  at- 
tained but  about  15  per  cent  of  its  present  area.  Or  the  city  of 
Bridgeport,  Conn.,  would  have  less  than  one-fourth  of  the  street- 
railway  trackage  which  it  actually  has  if  it  had  the  facilities  of 
Aberdeen;  Scotland,  cities  of  the  same  type  and  character. 

Commissioner  Wehle.  What  facilities? 

Mr.  Storrs.  The  lines  of  track,  I  had  in  mind  in  that  case. 

Commissioner  Wehle.  Have  you  in  mind  the  system  of  charging 
fares  when  you  speak  of  the  facilities? 

Mr.  Storrs.  No  ;  only  the  physical  facilities. 

As  showing  the  difference  in  the  facilities  afforded  to  American 
and  European  cities  by  electric  railways,  the  following  tabulation 
of  statistics  for  cities  in  Great  Britain  having  a  total  population 
of  965,000  and  cities  in  New  England  having  a  total  population  of 
1,085,000,  the  same  number  of  cities  in  both  cases,  and  practically  the 
same  population,  shows: 


Item. 

Great 
Britain. 

New 
England. 

Population 

Miles  of  track !!!!!!!! 

Population  por  mile  of  track !!!!!!'!!!! 

Revenue  per  mile  of  track !!!!!!!!!!! 

965,000 

1.56 

6,187 

$16,767 

1,0&5,000 

695 

1,560 

113,314 

The  most  significant  part  of  that  comparison  is  the  fact  of  the 
population  per  mile  of  track.  It  is  a  picture  of  the  whole  British 
tramway  conditions,  slender  accommodations,  dense  congestion,  slow 
service,  low  fares,  and  high  earnings  per  mile. 

Commissioner  Wehle.  Have  there  been  any  developments  in  inter- 
urban  business  in  Great  Britain? 

Mr.  Storrs.  Relatively  small,  I  think.  I  am  not  qualified  to 
testify. 

Commissioner  Wehle.  The  interurban  business  in  this  country 
where  the  general  communities  are  fairly  closely  united  together  has 
grown  considerably,  has  it  not  ? 

Mr.  Storrs.  It  has  been  very  largely  overdeveloped. 

Commissioner  Wehle.  It  has  been  overdeveloped  ? 

Mr.  Storrs.  In  this  country,  you  are  speaking  of  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      437 

Commissioner  Wehle.  Yes. 

Mr  Storrs.  Yes ;  that  is,  throughout  the  densely  settled  portions 
of  the  community,  throughout  New  England  and  portions  of  New 

York  State.  .,  ^        ... 

Commissioner  Wehle.  Taking  the  railway  system  m  Illinois- 
would  you  say  that  was  an  overdeveloped  interurban  system  ? 

Mr.  Storrs".  I  am  hardly  competent  to  testify. 

Commissioner  Wehle.  How  about  Indiana  and  Ohio  i    VV  ould  you 

say  those  are  overdeveloped?  h,,^     ,  ^  •,    i 

Mr.  Storrs.  I  do  not  know  as  to  that  either.  My  detailed  e^xperi- 
ence  is  in  connection  with  New  England  properties^  although  I  have 
been  over  some  of  these  other  lines,  of  course,  but  I  am  not  familiar 
with  their  revenues  and  finances  generally. 

Commissioner  Wehle.  I  mention  this  at  this  point  simply  because 
I  think  that  we  may  find  that  the  interurban  development  which 
would  have  to  be  taken  into  consideration  m  connection  with  the 
comparison  in  population  per  mile,  as  it  has  occurred  in  this  country, 
might  from  an  earning  point  of  view  affect  considerably  the  sparse 

business  in  the  cities  themselves.  -r.     i      i      i,        ^i     ^ 

Mr.  Storrs.  For  that  reason  I  took  New  England,  where  the  de- 
velopment there,  as  you  know,  is  between  the  small  village  and  small 
town  into  a  larger  city  where  they  are  relatively  dense  and  nearer 
together,  and  there  I  think  those  figures  would  be  more  comparable 
than  they  would  in  any  other  portion  of  our  country. 

Comm^issioner  Wehle.  And  the  English  have  nothing,  as  I  under- 
stand, to  compare  with  that  sort  of  development. 

Mr.  Storrs.  No;  that  is  true.  And  I  was  trying  to  bring  out 
that  very  point,  that  had  we  not  developed  beyond  the  area  of  dense 
population,  we  would  have  not  reached  the  difficulties  we  have  but 
it  was  in  the  effort  to  serve  the  large  community  interest  rather  than 
the  local  civic  interest  that  we  have  come  upon  these  rocks,  and  that 
by  a  system  of  abandonment  of  lines  and  discontinuance  of  service  we 
can  find  that  measure  of  supplying  the  pedestrians  which  we  can 

"^  Mr  Wehle.  The  point  is  that  the  electric-railway  systems  in  New 
England  by  reason  of  their  initiative  have  contributed  a  real  social 
service  to  the  cities  bv  preventing  congestion?  ... 

Mr.  Storrs.  Yes.  Take  a  great  many  small  country  communities. 
They  are  made  up  entirely  of  operatives  in  the  mills  in/he  larger 
cities  and  they  are  given  that  opportunity  for  a  free  life  and  the 
own  ng  of  Httle  homes  and  going  out  into  the  country  which  would 
not  have  been  possible  if  there  had  been  no  transportation  facility  of 

^^'commissioner  Wehle.  Has  there  been  any  indication  that  popular 
sentiment  would  permit  of  the  discontinuance  of  the  service  i 

Mr  Storrs.  I  am  afraid  it  is  a  question  of  necessity  rather  than 
popular  sentiment  when  we  get  down  to  the  point  of  mcome  and 

"t^JnmtsTont'wEHLE.  Has  the  legal  question  been  tested  in  New 

En-land  as  to  whether  there  can  be  a  discontinuance  of  the  service  ? 

Mr  Storrs.  Only  in  the  case  perhaps  of  a  receivership  has  it  been 

^^Mr.  Warren.  How  has  it  resulted  ? 

Mr.  Storrs.  That  the  utility  could  be  abandoned. 


438      PROCEEWNGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION-. 

Mr.  Warren.  The  same  as  in  Massachusetts? 

Mr.  Storrs.  The  same  as  in  Massachusetts. 

Commissioner  Wehle.  Would  you  be  willing  to  put  the  case  in 
the  record  for  reference? 

Mr.  Storrs.  The  case  of  a  receiver  of  the  Danbury  &  Bethel  Street 
iiaiiway^     I  can  not  give  you  the  citation,  but  it  can  be  readily 

Commissioner  Wehle.  Will  you  do  that,  Mr.  Warren? 

Mr.  Warrex.  I  have  not  it  here. 

Mr.  Storrs.  I  will  ask  tlie  receiver  to  let  you  have  a  copy  of  it 
He  can  send  the  citation  to  you  readily. 

Commissioner  Wehle.  What  is  your  idea  as  to  the  remedy  that 
could  be  found  if,  as  you  say,  a  decline  in  gross  revenue  is  apt  to 
follow  any  increase  m  fare  beyond  6  cents  and  if,  as  you  further  say 
even  sin  increase  beyond  (>  cents  might  not  produce  a  sufficient  revenue' 
to  make  the  industry  self-supporting? 

Mr.  Stohiis.  A  recognition  on  the  part  of  the  communities  served 
of  the  essential  need  for  transportation,  if  that  need  is  as  it  is  to-day 
throughout  the  sparsely  settled  districts,  and  a  continuance  of  tliat, 
we  will  say,  with  comnmnity  assistance. 

The  Chairman.  You  may  proceed  with  your  statement. 

Mr  Storrs.  There  is  no  question  but  what  the  development  of 
these  lines  through  the  rural  districts  has  been  to  the  welfare  of  the 
Mate  as  a  whole.  It  has  made  it  possible  for  the  small  villa o-es  to 
keep  in  touch  with  the  larger  cities  and  towns,  and  it  is  doubtlul  if 
those  towns  now  served  would  care  to  go  back  to  the  days  before 
tiollevs. 

It  has  been   possible   for  the   cities  to   develop  rapidlv  because 
the  street  railways  have  been  built  in  the  suburban  territory  and 
in  many  cases  have  preceded  tlie  coming  of  the  householder.  *  Were 
It  not  for  this  development  the  growth  of  industry,  business,  and 
commerce  in  large  cities  would  have  been  much  slower.    Everybody 
knows  that  in  days  gone  by  the  development  of  a  suburban  real-estate 
tract  quickly  followed  the  construction  of  a  trollev  line.    These  rail- 
ways have  also  made  possible  the  location  of  industrial  plants  at 
ad\  antageous  site^s  remote  from  the  city  proper.    The  new  construc- 
tion created  as  a  result  of  trolley  lines  being  built  to  the  outskirts  of 
large  cities  and  towns  has  a  value  of  many  millions  of  dollars,  the 
taxes  on  which  have  made  possible  the  improvement  of  the  cities 
and  towns  themselves.    The  investors  in  electric  railways  built  these 
lines  in  the  hope  that  eventually  there  would  be  a  fair  return  upon 
their  inve^stment.     It  was  the  investment  in  the^se  lines  that  cix^ated 
in  a  large  measure  the  increased  valuation  of  the  cities  and  towns. 
Therefoi-e,  should  there  be  a  reduction  in  service  or  a  further  destruc- 
tion of  incentive  to  invast  in  electric-railway  .securities,  there  would 
naturally  follow  a  slackening  of  communitv  and  industrial  develop- 
inent. 

Without  question,  unless  a  resolution  is  found  whereby  the  integ- 
rity of  the  electric  lines  can  be  assured,  mile  upon  mile  of  unprofit- 
able extensions  will  have  to  be  abandoned  with  a  resulting  loss  to  the 
communities  in  declining  real  estate  values  and  genera^l  destruction 
of  the  existing  social  conditions  which  have  been  based  upon  this  • 
convenient  method  of  intercourse. 

Shall  I  go  forward  ?    Arc  there  any  other  points,  Mr.  Warren  ? 


PROCEEMNOS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      439 

Mr.  Warren.  Is  there  anything  fui*th6r  you  have  to  offer? 

Mr.  Storrs.  The  question  is  also  presented  in  connection  with  the 
tranfers  which  are  now  givea  so  generally  and  freely  by  the  electric 
railways  without  any  recognition  of  the  value  which  is  given  by  that 
transpoitation  service.  Developed  originally  in  all  the  cities  of  any 
size  there  were  a  number  of  independent  electric-railway  corpora- 
tions serving  the  community  as  a  whole,  without  any  interchange 
whatevei-  of  service  or  exchange  of  patrons.  These  properties  were 
gradually  consolidated  and,  in  the  process,  there  was  either  imposed 
upon  the  electric  railway,  or  there  was  offered  as  a  sop  for  favor  oi 
the  consolidation,  a  larger  extended  area  for  one  fare  coming  through 
the  transfer.  That  has  developed  now  until — ^there  is  a  case  in  point 
as  being  the  most  extreme  case  of  which  we  know  and  perhaps  also 
the  moS:  absurd  case,  which  was  at  the  time  ex-President  Brush,  of 
the  Boston  Elevnted,  gave  a  man  a  5-cent  piece  and  told  him  to  go  out 
and  ride  as  far  as  he  could.  I  will  have  to  refer  to  the  figure  to  get 
the  exact  distance,  but  I  think  he  rode  54  miles  before  he  had  ex- 
hausted the  i>ossible  extent  of  the  5-cent  fare  and  stopped  then,  not 
because  the  5  cents  was  exhausted  but  because  he  was  exhausted. 
That  is  a  verv  extreme  and  absurd  case,  but  it  is  noted  throughout  all- 
the  country  that  more  transportation  is  given  for  the  original  fare, 
whatever  that  may  be,  than  the  utility  can  afford  to  supply. 

They  come  into  the  center  of  the  city  from  one  end;  that  line  may 
be  5  or  6  or  7  miles  long;  they  transfer  freely  to  another  line  going 
out  5  or  6  or  7  miles  to  the  other  side  of  the  city. 

That  has  giadually  come  up  with  the  extension  of  the  lines,  the 
5  cents  for  the  unit  fare  covering  the  entire  city  and  has  been  a  free 
gift  originally,  and  a  part  of  the  franchise  ultimately,  in  very  many 
cases,  but  a  right  of  the  community  without  question  in  the  minds 
of  the  individuals  of  that  community;  but  it  is  always  at  an  addi- 
tional cost  to  the  utility  in  the  additional  accident  hazard  by  carrying 
more  units  of  passengers  on  and  off  the  cai*s  and  also  by  reason  of  an 
additional  cost  necessitated  to  take  care  of  the  additional  riding  and 
supplying  additional  passenger  carrying  capacity  to  take  care  of 
those  transferred  passengers. 

Another  reason  for  the  installation  of  the  transfer  was  originally 
the  desire  on  the  part  of  the  utility  to  economize  by  not  running 
through-route  cars  from  one  side  of  the  center  of  the  city  to  another 
or  by  changing  that  route,  and  in  order  to  placate  the  public  a  trans- 
fer Was  given  between  the  two  new  routes  obtained  by  the  change 
in  routing  the  cars. 

The  additional  value  given  by  the  utility  to  its  patrons  is  nowhere 
more  exemplified  than  m  connection  with  the  construction  of  the 
property  to-day  as  compared  with  the  construction  of  the  property 
in  the  early  days  of  the  horse  car,  and  since  the  early  days  of  elec- 
trification. 

We  have  made  a  verj^  careful  study — ^we  have  a  great  many 
throughout  New  England;  practically  on  the  great  portion  of  those 
lines,  the  fundamental  basis  was  the  electrification  of  the  horse- 
car  lines—and  we  have  dmwn  out  some  interesting  figures  in  connec- 
tion with  that.  The  old  horse  car,  in  the  first  place,  cost  from  $800 
to  $1,000.  It  was  heated  by  straw  and,  as  someone  has  so  well  put 
it,  the  animal  heat  of  passengers,  lighted  by  kerosene,  and  propelled 
by  a  horse  at  a  pace  not  much  faster  than  a  walk.    It  was  hardly 


440       PHOCEEDIKGS  OP  PEDERAL  BLKCTKrc  KAIWAVS  COMMISSION.. 

nVbTt  liToS:ti''ZZ  t'7„^'^-  /'-  «-^  electric  c„« 
They  were  not  as  large  nor  t  con vpni.  «"<',  ^ome  by  electricity, 
or  gnulualiy  den.an  led  so  th^t  h».  I*"*  "'  ^''*  P"''"^  ultinrntefy 
in  the  equiplnent  of  elec'trTc  railwalc  '  t!  ^T  """"  «"  evolution 
satisfied  with  anythinriei  Sian  ftp  V!!"*  «*'"'•''>'  *''"  P^^P'*^  '"•e  not 
builder's  art.  The  dile  Xe  betw^n  tS  fT  ,P''*""'"*  "*  "'«  '^''r- 
modern  street-railway  cl. ,  cosifn^?? ooo  '  •  r "'?  ^'''^  ""d  the 
creased  value  of  the  s'ervice'ffhtfofh^pSli';  '""'"'*""  "'  *''«  '»- 

caSiaT::;:::;fe;X'onl!lV|lf  j"'=--P^«  -e  and  weight  of 
the  old  horse-ca,'Tr"^rcar  Kthrff.."  car  *;;?f  ^  constructio!;.  I„ 
was  a  str  p  of  steel  on  a  wonrJon  if  •  ^      cai,  all  that  was  necessary 

gcther  at  ^-casiona  inters  a  ktndcoS  ""''  ^^^  '^''"^"^"^  ''^^  to^ 
mile  of  citv  street      \v!  I, .  costing  appro.xiniately  $10,000  oer 

first  electric  n   it  ay  riil  ofTn'T^    '"■°"«''  *'f  'levelopinent  to  the 

to  mil  to-day  wd^hini  from K^rr'■y*'^^^ 

more   frequently  ^W  than  on  ^^^^5  pounds  per  yard  and  ti^ 

heavy  as  the  best  steam  rai  roark  ^n^'j  i    ""?  '''*,''''*'"^  ""^  rail  as 

the  steam  raihx,adsStLuS^^^^^  *'^«"  ''  P-  -"^  of 

worked  into  the  high4yp^  nL.hl^o^^^  raala,  and  grad.ially  we 
further  cost  of  concfete  W  for  t  fe  r.i^i^Y:  T''"''  ^^'l'''^^  '^  ««» 
ballasted  roadbed-  all  of  it  the  wh  i     ^'  *'^^  ^'^  «"<*  «  thoroughly 

costing  originaUv  Vlo  000  trn,iut/frl°P'"!?^  ^'°'"  *''«  ^""^k 
per  mile,  both  b^i„^  iniles  of  «^n  1  f      friick  .costing  lo-day  $85,000 

the  public;  >^nSd1t^n!tl^Tc!%ndeL"tf^^^^^ 

offered;  but  the  return  to  tl  e   ndi,Hd„!i  •    ?"'^/,*?'l"tionaI  facilities 

logical  in  itsorginal  imposition  hWllL^t^  1^    ^*?***'  Peihaps 
used  for  proi>ellI„g  ti.f^TZt'ZTthI ^^^'uf'^'A^ 
this  creates  an  attack  upon  the  revenim  ^f  f?  •'*"*^  ^''-'•ay 

counse,  must  be  passed  on  to  the  c?r  rfr..  i  '*'u'""P''"y  '^'"cl>'  of 
ice  may  be  profitably  openU^dlswellff;  i'"^^^  competitive  sery- 
for  th/private  autoiU^fle  Ums  ms^  i ^1^^.  T^  '}  more  attractive 
who  can  afford  his  own  ^  X  ul^  nf  of  h"^"  *'?•'"  ^^e  resident 
who  has  not  sufficient  inco^me  S^usTut  li^.^Ta  ^  *°  *''^  ""« 

p.JLtUh^?o?  rr:t';;?iXi!lir\T' ^^"^^^^^^^^^^    --'-  ^^^^ 

borne  equally  by  all  Z  \SnZ   he%oZ»ra'nd  t''"  """*  ^ 

betterment  is'7pen^ i„  tre'ruml  ™   "'"""  '"■  1"^'"«  ^^  «'•««» 

tribSTSaSo  amc/i^^rtn  """*'^"'  *'V^  '«'««  -"■'«'  con- 
by  the  ei;ctric  railways  i"act,  ally  ,S.fr'r^\''y. '''^^'f""^         """^'e 

of  inhabitants,  while^^iTor^^^^^^^^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      441 

Of  course,  the  railways  feel  that  it  is  a  perfectly  proper  charge, 
if  they  destroy  the  pavement — the  same  as  any  other  utility  in  the 
use  of  the  street— to  have  that  replaced  and  put  in  repair ;  but  the 
idea  of  passing  on  a  burden  amounting  to  such  large  figures— in 
Connecticut  alone  in  the  last  eight  years  our  properties,  representing 
85  per  cent  of  the  track  of  the  State,  has  expended  solely  for  pave- 
ment over  $2,000,000,  and  it  is  of  record  that  in  Portland,  Oreg.,  in 
the  valuation  of  the  public-utility  commission  they  found  an  actual 
expenditure  by  the  public  utility  in  Portland,  Oreg.,  of  $2,000,000; 
and  we  have  been  spending  right  along  in  Connecticut  at  a  rate  of 
$310,000  a  year  solely  for  the  permanent  pavement.  To  which  must 
be  added  a  very  large  expenditure  to  prepare  the  rails  for  pavement 
laying,  the  older  rail  of  the  standard  types  running  up  as  high  as 
even  80  pounds  per  vard — and  a  very  good  rail,  but  which  was  a 
low  rail,  and  the  change  in  the  type  of  pavement  required  the  use 
of  a  higher  rail  in  order  to  accommodate  the  concrete  base  and  tho 
concrete  subbavse  and  wood-block  surface  cover;  and  we  have  had  to 
put  in  rails  up  to  91  pounds  per  yard  and  destroy  physical  value 
of  the  rails  and  the  roadway  which  had,  at  least  in  many  instances, 
10  or  15  years  more  life,  and  in  practically  all  instances  5  or  6 
years  more  life.  It  had  to  be  done  in  order  to  accommodate  the 
requirement  for  pavement  on  the  part  of  the  public.  That  item 
alone,  in  connection  with  one  which  has  been  running--but  not  at 
the  present  time  because  there  is  no  revenue  to  supply  it,  but  the 
demands  are  there  just  the  same,  and  in  the  past  they  have  been  met — 
totals  a  cost  of  over  half  a  million  dollars  a  year  for  the  one  item 
of  pavement  and  the  incidental  betterment  of  the  roadway  necessi- 
tated by  that  pavement.  That  is  just  in  one  small  community,  to 
bring  it  down  to  a  concrete  case. 

The  trolley  car  is  the  only  user  of  the  street  that  does  not  destroy 
the  pavement.  The  automobile,  the  large  truck,  the  horse  and 
wagon,  even  the  motorcycle  it  is  conceivable  might  possibly  damage 
it,  but  the  trolley  car  is  the  only  one  that  does  not  destroy  the  sur- 
face of  the  street.  In  fact,  it  takes  off  from  that  surface  a  large 
amount  of  what  otherwise  might  be  vehicular  traffic;  and  yet  it  is 
the  only  utility,  the  only  individual,  that  is  charged  for  that  better- 
ment. It  is  probably  logical,  because  the  easiest  thing  to  do  is  to 
soak  the  utility. 

Another  impost  is  that  of  the  requirement  for  bridges,  and  with 
the  gradual  development  and  civic  betterment  and  improvement,  a 
new  and  more  ornamental  bridge  is  frequently  required,  or  with  the 
gradual  increase  in  the  vehicular  use  of  the  highway,  particularly 
the  use  by  trucks  canying  as  high  as  25,000  pounds  at  times,  a  new 
bridge  over  a  large  waterway  is  required.  That  is  recognized  in 
various  cities  by  varying  imposts  upon  the  utility,  because  it  hap- 
pened to  be  the  easiest  thing  to  reach  out  and  pass  the  burden  of 
the  public  onto,  in  the  minds  of  the  average  legislator.  Of  course, 
that  burden  is  not  passed  on;  it  ultimately  rests  on  the  taxpayer 
and  the  individual  user  of  the  utility,  but  it  was  a  popular  thing 
to  pass  it  on.  It  worked  out  in  some  cases  to  an  imposition-  of  over 
one-third  of  the  total  cost.  Right  here  let  me  say,  where  the  utilities 
are  recognized  in  their  mutuality  of  relation  between  the  community 
served  and  the  utility,  these  imposts  are  not  made  on  the  utility; 
they  are,  rather,  made  entirely  from  the  tax. 

160643*'— 20 29 


!• 


442       PROCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSIOIT 

the  drays  were  the  only  known  mlZ^f         farmers'  wagons  and 

care  for  that    nrrPn^  ^.tamlpoint  of  safety,  the  electric  railway  must 

the  nfcL Sy  t^^rrforlhe  adIitlonL?/„T*  "*''^  -pestio/as  to 
if  widening'^were  necessary   *'*'*'^"'"*1  «=*'**^  occasioned  by  widening 

coSsr\r;e^.sr£r  tt  t^nZL-t^Ttr-i  f -^ 
ar::  S'lr  ,^^,^|fi«  — ^%  ^^^^^^^ 

the  enacting  of  a  Ste  bv  the's*;"^  '^""^t'-uction   and   ultimately 

ing  good«  down  to  the  New  York  marW     Th^JT '^  /"'^M^t'-'es  rush- 
co„trac^e<l  for  reconstSon  and  the tntTirt  h'l'n^Hfe"""  ??'"^ 

utility  will  be  required  under  the  State  law  to  nav  itOf  om      n 
the  basis  of  a  0-cent  fare,  that  is  over  6,U?00^0%aS"eT^tie 
total    contribution   bv   6,000  OOO    na^s^sPTifrut^       iV       P**'^^engers— the 

area  in  the  neighborLod  oiZoo'^^^oZI^.oZ  rVr^Thef 
IS  not  enouph  i,rofit  on  the  million  and  a  quai'tei  to  n7v  fL  ^ 

mg  charges  on  the  $400,000  spent  on  the  b,  , W   L-?  K^  ^u    T'T 
of  no  value  to  th^  coiWration^  ,1°^  at:ot te^^^  Lpr^eK^^^^^^ 

poor  utility  a  payment  of  one-third  of  t'lfe  total  co^t'fTon^trLc! 

Mv    «It""'"'T  ""''^  7??',  «"ything  more,  Mr.  Storrs? 

Mr   Storks.  I  would  like  to  emphasize,  if  I  may   this  i^inf    tu^ 
one  phjuse  of  the  combination  of  wn.peti  ion  anTImpoL  which  U 
so  hai-d  up,m  us.  and  that  is  that  of  the  inotor  truSr  I  th int  . 
will  all  acknowIe<lge  that  the  one  thing  that  wears  ,^^thp  J  v  " 

ment  most  is  the  highly  developed  moto.  trnct      T       ^^^""'ly  P»^'e- 
now.  pacing  in  front  of  my  h^s^,  ^t h  t^n  one  Zh?n  "  "'■''' 

tiaffic  policemen  out  there  to  stop  them.    The  i-esult  is  thatThe  pave^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT.      443 

ment  through  there  is  being  torn  up.  The  wooden  blocks  are  being 
torn  out  of  the  pavement.  When  it  rains,  the  wooden  blocks  are 
soaked  out  of  the  pavement  by  these  trucks,  and,  unfortunately,  the 
poor  electric-railway  company  has  paid  for  19  feet  out  of  a  total 
of  40  feet  of  the  pavement. 

Mr.  Warrex.  The  street-railway  company  has  paid  for  19  out  of 
a  total  of  40  feet  of  the  pavement? 

Mr.  Storrs.  Yes,  sir;  and  that  is  true  throughout  the  country, 
wherever  the  right  of  way  has  been  given  to  that  competitor.  Of 
course,  in  this  case,  a  long-distance  motor  truck  would  not  be  a  par- 
ticular competitor.  The  right  of  way  has  been  provided  very  largely 
at  the  expense  of  the  riders  on  the  cars,  and  that  is  being  torn  up 
and  destroyed  by  a  form  of  transportation  that  pays  nothing  what- 
ever toward  the  maintenance  and  upkeep  of  that  highway.  I  can 
not  think  of  anything  more  particularly,  Mr.  Warren. 

Mr.  Warrex.  I  would  like  to  ask  you  one  question,  Mr.  Stori^. 
You  spoke  of  the  annual  expenditure  over  the  countiy  of  something 
like  $200,000,000  on  highways  largely  for  the  improved  operation  of 
automobiles.  Have  you  in  mind,  and  can  you  tell  the  commisvsion 
what  the  aggregate  amount  paid  by  automobiles  in  registration 
fees  is? 

Mr.  Storrs.  I  have  that  in  figures.  This  is  a  tabulation  that  I 
overlooked,  but  I  meant  to  get  it  in  in  connection  w  ith  my  testimony 
as  to  the  automobile  portion  of  it.  I  have  the  tabulation,  if  I  may 
put  it  into  the  record. 

The  CiiAiRMAX.  Very  well. 

The  tabulation  referred  to  is  as  follows: 
Comparison  of  automobile  and  of  electric-raihcay  industry  as  of  101S. 


fr,  146,617 
5, 352, 350 
111,297,000,000 


Total  mimber  of  ears 

Number  of  passenger  cars 

Capital  investment 

Number  passengers  carried  per  year j     »  3^  000^  000, 000 

I'assenger  miles ' i    »  45, 000, 000, 000 

Seating  capacity  of  all  passenper  cars 25, 000, 000 

Number  of  employees j  830, 000 

Gross  revenue  from  license  o^  taxes 1  $51 ,  477, 416 

Cost  of  maintenance  of  way  and  structures • 

Amount  for  jjaving  and  other  imposts 


$5,356, 

14,243, 

42, 730, 

2, 

$49, 

MS, 
16, 


102,379 
S3,8S3 
304,610 
415,  WO 
247,490 
93"),  905 
293,392 
498,334 
706, 3:i0 
065,000 


>ttxolnsive  of  cars. 
2  Based  on  two  passcneers  per  car. 

^Bnsed  on  three  passentjors  per  car  and  3,000  miles  per  year. 

*  Estimated  as  same  percentage  of  total  cost  of  way  and  structures  as  in  1917,  using  1918  estimate  based 
on  115  companies,  American  Electric  Railway  Asso'ciation. 

Mr.  Storrs.  That  tabulation  shows  the  total  number  of  cars  and 
tbe  investment.  The  taxes  recei\  ed  from  the  automobiles  wei*e  $51,- 
000,000. 

Mr.  Warrex,  That  is  all  that  comes  in  as  against  the  $200,000,000? 

Mr.  Storrs.  The  $256,000,000  put  in  by  States  and  communities 
as  a  whole  for  that  pavement. 

Commissioner  Meeker.  Just  what  does  that  $256,000,000  repre- 
sent?    Does  it  represent  new  construction? 

Mr.  Storrs.  And  renewals,  so  I  understand.  That  was  obtained 
from  the  statistical  dei^artment  of  the  Bureau  of  Census. 


444       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

nm.nent.    I  have  an  extra  copy  of  it,  and  I  wfu^  ook  •  t        flftt 
refernng  to  papers.]    No ;  I  lli  not  Imve  that  .    ka^e     Mv  Jmnar 

Mr.  Stouks.  Absohitely;  there  is  no  question  about  that  Ih-.f  b.. 
to  be  recognized  either  in  an  inrrpasin.;  ..„t„  „/*  ,      '"'  ""^ 

facility,  or  dcterioratTni  facility        ^       '  °*  *"'"  °''  ''  ''«"«asing 

Mr.  Warren.  And  while  the  street  railway  was  sui>iin<=P<liv  .... 

nrs^or'?e:rsir  ^-^  ^  ^"-'^''^^  mu^LciSsri^  p-^^- 

Mr.  Warren.  But  now  it  becomes  a  very  acute  ouestinn   n    f 

Mr.  Storrs.  Yes,  sir. 

Mr.  Warren.  That  is  all  there  is  to  the  nuestion  is  it  not.> 
Mr.  Storrs.  Absolutely,  as  far  as  those  in.poste";re  concerned 
Mr.  Warren.  That  is  all  I  want  to  ask  Mr.  Storrs  ceXmen 
Commissioner  Meeker.  Mr.  Storrs.  it  is  true    is  ifnot  7b^;  f I 
street  railways  do  wear  out  the  surface  of  the  strpof  L     v    ■l\  "'** 
tent,  next  to  tho  rail  ?  ^"**'*'  *°  "■  limited  ex- 

Mr.  Storrs.  Next  to  the  rail  for  a  distance  of  5- or  6  inches 
Commissioner  Meeker.  Would  voii  advop«ffl  h,p  oL      *?        j.  , 
street  railways  entirely  from  anv  <1  o  1  f  •  exempting  of  the 

cau.se  of  the  5nsignifica^„ce  of  tl  e^r^a  t^v.t  thf  r"^.  "'?,  ^*'''^'  '"'- 
actually  affects?  ""*  *"^  street-railway  traffic 

th'o;;fhXon,Um":eSl^'i^^^^^^^  "'"'  '^'^^jf'  ^"*  "P-  "- 
a  thoroughly  irnP^^^lS^^^Z^X^l^lZtS^^^'''' 
to  take  up  tlie  relatiyely  insign-ificant  bufden  fflhtt  mtht  bp  .'"? 
which  IS  a  yery  la.-ge  burden,%f  cou.-se,  in  the  to  al  pt.^l^Sos^^^  ^"' 
Commissioner  Meeker    I  takp  \f  ih-U  X7^»     i        l/'^^^^g  <^osts. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      445 

Commissioner  Meeker.  And  if  those  means  of  traffic  are  able  to 
beat  the  street  railways  out,  if  they  were  all  subjected  to  the  same 
regulation,  the  same  measure  of  control,  then  the  street-railway  com- 
panies would  have  to  take  a  licking ;  but  it  is  wholly  unfair,  I  gather 
from  your  testimony,  to  have  these  services  rendered  on  an  unfair 
basis. 

Mr.  Storrs.  Yes,  sir. 

Commissioner  Meeker.  Which  is  really  service  rendered  to  the 
public  at  less  than  cost  ? 

Mr.  Storrs.  Without  doubt. 

Commissioner  Meeker.  And  at  the  expense  of  the  established 
service  rendered  by  th  street-railway  companies  ? 

Mr.  Storrs.  The  communities  and  the  States  have  invited  in- 
vestors to  come  in  and  provide  the  essential  transportation  need  of 
the  communities  and  have  in  the  past  guaranteed,  through  their 
statutes,  a  transportation  monopoly.  In  this  case,  this  other  public 
utility  would  come  in;  and  for  the  community  and  the  Common- 
wealth to  allow  unregulated  competition  is  inconceivable.  It  should 
not  be  allowed  to  go  on. 

Commissioner  Meeker.  May  I  ask  you  a  hypothetical  question 
there?  If,  however,  some  improved  means  of  transportation  of 
traffic  shall  be  hit  upon  in  the  future,  a^ou  would  not  urge  the  mo- 
nopolistic character  of  the  charters  granted  for  the  protection  of 
the  street-railway  companies? 

Mr.  Storrs.  I  think  that  is  so  largely  a  Iwpothetical  question  that 
it  is  easy  to  answer.  I  can  not  see  that  it  would  be  possible.  The 
originally  chartered  companies  have  gone  through  a  very  great  de- 
velopment by  a  change  in  the  art,  and  it  is  inconceivable,  at  least 
to  my  mind,  that  a  further  change  will  come  in  the  transportation 
field  without  the  experts  and  those  interested  in  the  present  utility 
availing  of  the  change. 

Commissioner  Meeker.  So  many  Avonderful  things  have  happened, 
even  in  my  lifetime,  that  I  do  not  like  to  predict  the  impossibility 
of  anything.  I  just  want  to  get  your  views  on  the  subject.  I  think 
I  have  stated  your  views  correctly,  have  I  not,  that  all  j^ou  want  is 
the  same  measure  and  kind  of  regulation  and  control  over  jitney  and 
motor-truck  traffic  that  is  exercised  over  street  railways  and  public 
utilities,  and  then  they  can  fight  it  out? 

Mr.  Storrs.  Absolutelv. 

Commissioner  Meeker.  And  possibly  in  some  lines  the  jitneys  and 
motor  buses  and  motor  trucks  will  remain,  even  under  those  condi- 
tions? 

Mr.  Storrs.  That  is  absolutely  all  that  the  utility  is  asking  at  the 
present  time,  so  far  as  I  understand  it. 

Commissioner  Meeker.  Now,  you  gave  us  some  very  interesting 
facts  regarding  the  developments  and  extensions.  Do  you  think  it 
would  be  advisable  because  of  the  public  service  rendered  by  street- 
railway  companies  in  distributing  population  over  wider  areas,  re- 
lieving the  congestion,  or  preventing  congestion,  if  you  please,  do 
you  think  it  would  be  advisable  to  maintain  services  that  were  not 
paying  for  the  services  at  the  expense  of  general  taxation? 

Mr.  Storrs.  Without  question,  in  my  mind,  it  would  be  very  de- 
sirable. There  are  certain  specific  case^  in  w^hich  that  is  now  being 
done  in  Massachusetts.     On  one  of  our  own  properties  we  aban- 


I 


446       PROCEEDIXCS  OK  KKDKKAL  KLKCTHIC  BAILWAVS  COMMISSION. 

on  !)  miles  farther.  In  that  case  Z  V  "'"^':'?nf'n""no("  of  .orvice 
ward  with  a  .sufficient  annuilfnn'.M  '=°'"'"'!"'t'e.s  served  came  for- 
tion  of  that  line,  gi^^'Ul'Z'^Z:^  ''"  '"'''"'  ^««'  "*'  «1>-- 

?  miles  which  you  pro^^se  to  l"i\t^^^^^^^   f^'f '""^  "'"*  the 

ins  basis  If  you  we.^  given  sufficic^elaSi  v  „^^^"'  a''""  ''  P"^' 
Mr.  Storhs.  Well  I  fhint  if  ,        ."^  «"'^t>cit.V  ot  tares? 

sparsely  settled  comnuS  u.d  A/"  "'f  ""'"'  *'"*='^"^''  '^  ^^  a  very 
tl>at  it  w,>„ld  be  aZ,^?  -^l 'oSb  l%r^^^^"-«  g?ing  "P  ^  rapidly 
to  meet  the  costs  of  to  day  The  cost«  ,11  ""''"^^  P^°I''«  to  travel 
matter,  at  tlfc  time  that  thev  built  ^    "'  "*'"'  "^^"^  "  dilfercnt 

Commissioner  Mhkkkb.  Eiid  the'rommim,*  •    , 

this,  or  did  the  State  piiblicitilitv™^"*^  P*^  judgment  upon 

Mr.  Storhs.  The  appromi  f  „^^^^^^^  P^^^  upon  it ? 

largely  called  for  that^pu^^^o^  "^  ""  '"  °P""  *°^^n  '"^^ting, 

tio'„Tn".^^rmmSr:tfei«l/'^  ''^"^  ^^  --^^e  up  out  of  ta.xa- 
Mr.  Storrs.  Yes,  sir 

onjy'-fJr^r  yiI->-  "Sl^^S^:^ '^tZ  ''''T^'  ""^  ^^^ 
going  over  it  again.    I  don't  know    ^  '''°''  '^'"  *»  Perhaps 

^^l^i^^f:^^:^^ tL:^  ir-  -l-tion  that  I 
fe*s  and  the  amount  expended  cm  huM?L  *''^  '"'tomobile  license 
keep  of  the  roads  built,  of  courJ^thnll^  T"'  ^"^^  *"d  the  up- 
for  the  automobile  owneA  and  H.t  ?  "t  "'"  "°*  '""'t  entirely 
automobiles.    What  is  tTe  amn.it   ^i."''"  "''I  ^'''••"  ""*  entirely  by 

the  public  collects  froTth^^^toiirr"'  ""'^^  '"^^  -^-""e  that 

tic? ^aS^i^c;!  S' Sus'li^r  tthic k '^  ^'^"."^*'''"  "^  «»''^- 
tlie  coiintrv.  ^^^  ^^"^^^^  dissociations  throucrhout 

prSH^rr';**^^"  ^"^  *^»^  --I^  not  include  the  personal- 
Mr.  8TORR8.  No;  I  undershmrl  flmf     tu-    •    i- 
(-..mmissioner  Mkkkkr.  I  tender  if  Tn!f  U  ^' m"^  *''^- 
commission  your  best  estimate  of  the  totlf™!   ""',  f '^  *"  *''^ 
Jules     As  long  -.ts  the  question  ha.s  come  ,m  If  t  P'V^'  "^^-^  ■'"'^«""'- 

I  would  have  t!>  fin     ou       I  ^^I.S  r"?'^'''f «"  ^lepaitment,  and 

Commi^ssioner  Mkkke.  If  voSifmiT, ''"''*.  '"  '""P''^^-  t'^'**- 

not^auach  very  much  im,wLce''tflZ  5^^'  ^^i'^^Ts  LrS 

o.^L.^;ri^-df ^^  ?oSut^to":«- ?  t\ ''-;"  r'^^-^ '"« 

been  before  the  Public  Service  ColSr^f^'lLiS^ttlT"- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK^.      447 

Mr.  Storrs.  Yes;  the  matter  had  been  before  that  commission. 
The  que^^ion  of  ihe  discontinuance  of  the  service  over  this  iX)rtion 
of  9  miles  of  track  had  been  before  the  Public  Service  Conmiission 
of  Massachusetts,  and  they  directed  the  communities  and  the  public 
utility  to  get  together,  if  possible,  on  the  basis  of  seeing  whetht-r 
the  communities  required  transportation  to  an  extent  sufficient  to 
make  an  appropriation. 

Mr.  Warren.  And  that  they  did,  instead  of  passing  on  the  aban- 
donment formally? 

Mr.  Storrs,  Instead  of  passing  on  the  abandonment  formally. 
The  petition  for  abandonment  was  then  pending  before  the  public- 
service  commission. 

Mr.  Warren.  You  spoke  of  the  car  cost  being  $17,000,  with  full 
equipment.  I  think  the  testimony  of  Mr.  Heulings,  of  the  Brill  Co., 
on  Friday,  was  something  like  $10,000  a  car. 

Mr.  Storrs.  In  connection  with  that,  I  am  giving  the  figures  that 
we  iDaid  the  Brill  Co.  for  some  cars  recently  purchased.  They  were 
purchased  during  war  days,  the  delivery  having  just  been  completed, 
but  the  orders  were  placed  in  August,  ayear  ago,  1918,  for  those  cars, 
complete  with  all  the  equipment,  $17,000. 

Commissioner  Gadsden.  Did  not  Mr.  Heuling  give  the  price  of  a 
specific  car  to  show  the  difference  between  the  prewar  prices  and  the 
ordinary  prices?  He  did  not  claim  that  that  was  the  highest  price 
of  a  car. 

Mr  Warren.  No;  but  I  just  wanted  to  bring  out  the  explanation 
of  it. 

Mr  S'ix)RRs.  Yes. 

Mr.  Warren.  You  think  then,  Mr.  Storrs,  that  the  question  of 
convenience  and  necessity  of  the  extension  of  the  street  railways 
should  be  passed  upon  by  the  State  commission,  if  there  is  one? 

Mr.  Storrs.  Oh,  absolutely. 

Mr.  Warren.  You  believe  also  in  connection  with  that,  that  it 
should  pass  upon  the  question  of  whether  it  should  be  self-sustain- 
ing, if  built  ? 

Mr.  S'ix)RRs.  There  is  no  question  about  it. 

Mr.  Warren.  That  is  all.  * 

Conimissioner  Sweet.  How  is  the  State  Commission  of  Connecticut 
appointed  ? 

Air.  Storrs.  It  is  appointed  by  the  governor,  sir. 

Commissioner  Sw^ekt.  How  many  membei-s  are  there? 

Mr.  Storrs.  Thi-ee. 

Commissioner  Sweet.  Is  there  any  politics  in  it? 

Mr.  Storrs.  Not  that  I  know  of.  It  is  extremely  clear  from  any- 
thing of  that  sort.    There  never  was  any  accusation  of  sueh. 

Commissioner  Sweet.  What  authority  is  given  to  the  State  com- 
mission in  Connecticut  now? 

Mr.  Storrs.  Very  broad  j)owers  in  connection  with  the  method  and 
manner  of  the  construction  of  the  property,  the  service  to  be  ren- 
dered, and  the  reasonableness  of  the  rates  of  fare  which  have  been 
established. 

Commissioner  Sweet.  Do  you  think  this  subject  can  be  referred 
to  State  commissions,  or  should  be  inferred  to  State  commissions 
rather  than  to  municipalities? 

Mr.  Storrs.  Without  question,  sir. 


448       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

re^^ttZ iji^'^o'rilZJ.^ri  "'^  con-ect-and  I  have  no 
case  tending  to%hZ  thTp1ese„TJ^^^^^^  ""*  *  ^''^  ^t'"""? 

SDects  and  need  readjustme^urhave  yo    not  '  ^""^  '"  "'''"^  '^■ 

Air.  Storrs.  I  ])ope  so. 

Commissioner  Sweet   The  hosia  im^,,   -^.i,-  i 

Mr.  Storks.  Doubtlessly. 
it  Sr''''°"''  ®''"'"-  •*^'"*  ^'"■'^^  ''^^  «  great  deal  of  time,  would 
pnSc  miner"  ^^'  ''""^''  """^'^  ''^  '""'■«  Particularly  one  in  ,he 

Mr.  Stores.  That  is  a  rather  broad  problem. 
.   Commissioner  Sweet.  Well,  do  you  think  it  ivnnl.i  ?     r 

Commissioner  Saveet.  Certainly 

metH^ra"ste?'i-n'L:a°nt%tl!lTfl''^  1°  ''"  "-*'  •^"*  '"  "'« 
adiustmei^t  of  CfuSrm'nS'which'Zul-^  ^iveT't^  f  ^'^ 
utility  an  opportunity  of  so  conducting  1<^  busfness  within  ^nf " 
by  discontmuinsr  service  bv  temnni-rii,^  „},  ",  "?^-^s  within  areas, 
unprofitable,  untillhe  fundL  e^tarn  H.^/    ""^'^''^'''g.^'"''^^  t'"'*  ^re 

lui.  ;!5TORRs.    les;  or  by  increasing  temporarilv  the  ratp«? 
ni4  s'Xr^r^'nSl^sTry'If p,i^  ^k'  '^''"'-  *^» "i*  ^"eadjust- 

be  made  within  r^eason^abk  Ce,'thef  CmusTCk  fo""  '^^V''* 
porary  measures?  ^^  ^^^*^  ^^^  some  tem- 

Mr.  Storrs.  Yes. 

Commissioner  Sweet.  Now,  the  question  thnf  T  xv^»i  in     x    i 

to™,s„„,„r  S.E„.  W.11,  fa  nol  th.l  th,  pSISn  ,,.! 


PROCEEDINGS  OF  FEDERAL  ELECTKIC  RAILWAYS  COMMISSION.      449 

Mr.  Storrs.  It  is  the  problem  that  is  before  you ;  yes,  sir.  AVith- 
out  any  question,  relief  from  the  imposts  that  are  made  upon  the 
public  utility,  the  regulation  of  competition  to  the  point  that  we 
know  what  that  competition  may  amount  to,  the  granting  of  the  right 
to  discontinue,  either  temporarily  or  for  a  long  time,  the  essentially 
unprofitable  lines,  the  giving  to  the  utility  by  the  public  of  a  sub- 
sidy to  enable  them  to  continue  operation  of  those  unprofitable  lines, 
thereby  bridging  over  the  period  of  reconstruction,  and  a  recognition, 
always,  of  course,  going  with  that,  by  the  public  of  the  essential 
need  of  the  change,  and  a  willingness  to  pay  the  increased  rates  of 
fare — an  increased  rate  of  return,  relief  from  imposts,  regulation  of 
competition,  and  the  privilege  of  discontinuing  service  that  is  so  un- 
profitable as  to  be^jeally  a  nonessential  service. 

Commissioner  Sweet.  If  I  understand  you  correctly,  the  mere 
increasing  of  rates  at  the  present  time  would  not  be  even  a  tem- 
porary remedy? 

Mr.  Storrs.  In  my  opinion,  no. 

Commissioner  Sweet.  In  that  respect,  you  differ  from  some  other 
witnesses  who  have  appeared  before  this  commission. 

Mr.  Storrs.  AVell,  the  effei't  of  an  increase  in  rates  in  various 
communities  is  different.  It  differs  all  over  the  country.  It  so  hap- 
pens that  in  parts  of  Connecticut,  doubtless  by  reason  of  the  fact 
that  the  distances  are  so  relatively  short,  there  is  a  greater  falling 
off'  in  traffic  than  there  would  be  at  other  points  where  the  ride  is, 
of  necessity,  longer  and  the  need  for  the  service  more  acute;  but 
that  has  been  our  experience  in  parts,  at  least,  of  the  New  England 
territory. 

Commissioner  Gadsden.  You  have  had  your  increase  already? 

Mr.  Storrs.  Yes;  we  have  had  our  increase  already. 

Commissioner  Gadsden.  And  you  are  talking  about  a  further 
increase  ? 

Mr.  Storrs.  I  am  talking  about  a  further  increase. 

Commissioner  Gadsden.  You  are  operating  on  at  least  a  6-cent 
fare  ? 

Mr.  Storrs.  We  are  operating  on  at  least  a  6-cent  fare. 

Commissioner  Gadsden.  And  Commissioner  Sweet  has  been  ask- 
ing you  about  a  situation  where  they  were  still  operating  at  5  cents. 

Mr.  Storrs.  Well,  you  have  to  keep  on  going  and  going  and  going. 
The  6-cent  fare  is  not  sufficient  to  meet  the  needs  of  the  corporation! 

Commissioner  Sweet.  My  understanding  of  j^our  testimony  hag 
been  that  the  companies  under  your  control  are  losing  money  to-day? 

Mr.  Storrs.  Yes,  sir. 

Commissioner  Sweet.  I  do  not  think  you  have  put  in  evidence  as 
to  just  exactly  what  that  situation  is  regarding  these  companies. 

Mr.  Storrs.  I  will  be  very  glad  to  do  that.  I  will  have  to  have 
some  little  time  to  get  that  tabulation  together. 

Commissioner  Sweet.  But,  broadly  speaking,  are  you  paying 
operating  expenses? 

Mr.  Storrs.  Some  of  the  companies  are  paying  opera  tin  <>•  ex- 
penses, and  some  of  them  are  not  paying  operating  expenses.    ^ 

Commissioner  Sweet.  Taking  it  as  a  whole,  you  are  losing  money; 
you  are  not  paying  operating  expenses? 

Mr.  Storrs.  Yes,  sir. 


450       PKOCEEDISGH  OF  rKDKEAL  ELECTRIC  RAILWAYS  COMMISSION. 

Conuiiissioner  Swekt.  I  assumed  that  that  is  the  case  in  tho  nno= 
tion  I  asked  you  with  regard  to  the  remedy.  ^""'^" 

Mr.  Storks.  Ves.  "^ 

oveiXSd  Sttr  '*'"'""  ""'  '^  substantially  the  case  all 

Mr.  Stoubs.  Yes,  sir. 

Conimissiouer  Swket.  Undoubtedly,  there  are  somp  nn^o  ^f  tu 
different  railway  systems  that  pay,  ^it  thS  is  morTth^an  off^tl'n 
almost^every  case  by  other  pU\i  the  systems" Vat ^fi^sing 

Mr.  Stokrs.  Yes. 

Comn.i&.ioner  Sweet.  The  idea  that  seemed  to  prevail  in  the  eirlv 
daj^  was  that  the  community  ought  to  get  ever/thh"  ircouid  out 
of  these  public-service  corix)rations.  "  °"' 

Mr.  SiOBRs.  Yes. 

Commissioner  Sweet.  And  the  general  taxpayer  seems  to  have 
coi  suited  his  own  sui^posed  interest  at  that  time  In  shiS  burdens 
to  the  s  reet-railway  companies  and  other  corporations  of  rhatcE 
acter.  wherever  they  could  do  so.  »""*»  ox  mai  cnai- 

Mr.  Storks.  Yes,  sir. 

Commissionor  Sweet.  The  public-service  corporations  I  think  v«., 
will  adm.t,  used  means  in  connection  with  the  nubfi^  tlV.  ^^ 
sometimes  dishonest  and  dishonorable,  iT  ti  way^  of  br  b  n.^f 
1-e.tly  and  indirectly,  public  officials,  Peking  to  get  men  wl"5we,^ 
particularly  favorable  to  their  interests  on  (Smmfn  cZicifs  bo^^rd^ 
of  assessors,  etc.,  and  there  was  a  pit^judice  created  Lfe  pubi' 
mind  against  these  corporations  to  some  extent  which  was  ust 
\\  as  not  that  true  in  the  old  days?  ^  ^'• 

Mr.  Stokks.  It  is  so  rumored  to  be,  at  least 

Commissioner  Sweet.  When  did  your  connection  with  this  biisi- 
ness  commence?  ^  uusi- 

Mr.  Storrs.  Not  until  1906. 

siiS'^i^'""""  ^''"'^-  ^^'^  J°"  ^'''  «««"  '»»>"»ng  of  that  kind 

Mr.  Storrs.  Xo  indeed;  no,  sir— nothing  of  that  kind 
youri'l?"''"*""'  ^'^^'^-  ^  *"  "°*  "^^'""S  you  now  to '  incriminate 

cam/i^tr bSeifTi;'  ""  """'"^'^  ^^^  '*""»^*  P--*^  -'-  I 

toSrt'js"  of  ?hTopti^stT  '''''  "'"^^  '^'^  '''^'  '  '^--  -^--l 
Mr.  Storrs.  W^-H,  those  matters  of  rumor  and  gossip  that  came 

on  down  are  pi-etty  hard  to  trace  with  any  particufar  awuracv 
Commi^ioner  SwEin-    In  your  mind,  yoj  iTave  no  do.^^  tSiose 

things  did  exist  and  that  they  were  responsible  for  a  portion    at 

Mrtiri^r^"-   '"  "'•1iP"^"'=  •"•"dVinst  these  utE?  "' 
iHi.  ^loKRs.  lliat  IS  possible. 

Commissioner  Sweet.  Is  not  that  true? 
.     Mr.  Storrs.  That  is  possible. 

nor^XiSr^  ^"''"  '^^"'  '^  ''  "^^  ^^-  ''^^  P--bJe;   is  it 

Mr   Storrs.  In  fact,  it  is  probable.    In  the  early  days   there  m-iv 

have  been  somethm^  of  that  kind,  but  that  was  Iw^  backli  the 

earliest  days-awaj  back  in  the  ancient  history.  ^  ^ 


PROCEEDINGS  OE  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      451 

Commissioner  Sweet.  But  the  developments  of  the  last  decade,  or 
perhaps  the  last  two  decades— the  internal-combustion  engine,  the 
automobile,  the  jitney,  the  autotruck,  the  motorcycle — all  of  these 
changes  have  revolutionized  the  whole  situation  with  regard  to  the 
business  performed  by  the  electric  railways;  it  not  that  true? 

Mr.  Storks.  Yes. 

Commissi(mer  Sweet,  And  the  competition  that  they  have  to 
meet? 

Mr.  Storks.  Yes,  of  course. 

Commissioner  Sweet.  And  the  justice,  if  there  was  any,  in  con- 
nection with  the  paving,  their  bridge  repairs,  and  all  that  sort  of 
thing,  is  all  changed,  is  it  not? 

Mr.  Storks.  Absolutely. 

Commissioner  Sweet.  And  that  is  the  reason  why  a  general  re- 
adjustment, according  to  conditions  as  they  now  exist,  ouglit  to  be 
made;  is  not  that  true? 

Mr.  Storrs.  The  imposts,  with  the  greatly  increasing  costs  of  pro- 
ducing transportation. 

Commissioner  Sweet.  Certainly. 

Mr.  Storks.  Labor  and  material  costs. 

Commissioner  Sweet.  That  comes  in,  of  course. 

Mr.  Storrs.  Yes. 

Commissioner  Sweet.  Have  you  any  suggestion  to  make  to  the 
commission  as  to  what  benefit  would  be  received  by  the  roads  under 
your  control  if  the  State  commission  would  permit  you  to  make  a 
further  increase  in  your  rates  of  fare? 

Mr.  Storrs.  In  Connecticut,  the  origination  of  the  increase  in  rato 
comes  from  the  directors  of  the  corporation,  and  the  commission's 
control  comes  through  a  review  of  the  rates  as  established  by  the 
corporation. 

Commissioner  Saveet.  Well,  the  commission,  of  course,  would 
really  have  the  final  report? 

Mr.  Storrs.  They  have  the  final  review  after  a  rate  has  been  in 
effect. 

Comuiissioner  Sweet.  Very  well.  Now,  suppose  further. increases 
were  made;  would  that  materially  increase  the  gi'oss  income  of  the 
comi)any  ? 

Mr.  Storrs.  I  had  felt  in  our  company  that  it  would  not  have  a 
material  effect  upon  our  gross  revenue. 

Commissioner  Sweet.  That  is  because  your  distances  are  not  as 
great,  and  you  think  the  people  would  Avalk  or  find  some  other  means 
of  transportation  ? 

Mr.  SioKKs.  Yes.  You  see,  the  perfected  highway  has  been  devel- 
oped to  a  very  great  degree  throughout  that  portion  of  New  England. 

Commissioner  Sweet.  It  is  your  thought  that  any  further  increase 
of  rates  would  stinuilate  and  bring  about  a  greater  use  of  the  jitneys? 

Mr.  Storks.  Yes;  decidedly. 

Commissioner  Sweet.  So  that,  from  that  point  of  view,  you  could 
not  expect  relief  unless  the  regulatory  laws  that  you  have  spoken  of, 
in  regard  to  jitneys  and  autotrucks,  perhax^s,  were  enacted  at  the  same 
time  ? 

Mr.  Storrs.  Yes,  sir. 


/ 


452       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION 

them  upon  those  who  were  previously  using  this  ti  vice  "  '^''*  °* 
apj;;-.stXcSisSn."'  *'^'"'  "*  -"-^'  -*-">■  -"Ited  in 
wlSeXnlEeSSle'S  ^""'^  '^^  ^'^  ^P-^-^  -- 

m^t^'^lS^.S^  ""  ^'"'^  ""^^^  road-electric » 

Coininissioner  Sweet.  Both  electric? 

Mr.  Storrs.  AVe  own  them  both. 

Commissioner  Sweet.  Yes. 

Yi:  Storrs.  That  wiis  abandoned  and  the  service  discontinued  wifl, 
out  any  serious  con,plai„t-the  line  between  the  tow,^^  of  HunUn^on 
and  Lee  m  Berkshire.    The  service  was  discontinued  last  ^vinter  lith 
no  opposition  during  the  wintertime.    In  the  spring  a  complaint  was 
hud  with  the  commission  and  a  hearing  held  on  tlTat  re)  itivP^nVhf 
request  of  the  petition  for  an  order  fro.Ti  the  cZm  Lion  orderh?^s 
to  resume  the  service.    That  was  heard  some  time  a-o^a  monthf  nrl 
a  halt  ago-and  no  order  has  yet  been  found.     In  co^^Uon  w   h  the 
other  ca.se  that  I  have  spoken  of,  the  proposed  discontinuance  of 
0  miles  of  track  resulted  in  the  suggestion  by  the  commission  that  we 
fheto^n      ■'  "       *•'"*  '■''""'''  '"  ""  «PP'iriatZ  teing  giv^n  by' 
Commissioner  Sweet.  In  Connecticut  is  the  increase  of  a  rate  that 
might  b^inade  by  a  street-railway  corporation  effective  unti    it  has 
been  passed  upon  by  the  public-utilities  commission « 
Air.  Storrs.  Yes.  sir. 

(;ommissioner  Sweet.  While  the  subject  is  before  the  commission 
whi lu  It  IS  pending,  which  rate  prevails ?  ^""uib^ion, 

Mr.  Storrs.  The  increased  rate. 

Commissioner  Sweet.  The  increased  rate? 

Mr.  Storrs.  We  increased  our  rates  on  October  1    1917    on,l  wo 
«.rve  the  cities  of  Hartford,  New  Haven,  WaterburV    Bridgeport 
Stamford,  Norwalk,  and  al   of  the  intermediate  smaller  towns     The 
only  eommunity  that  petitioned  the  commission  for  a  review  was 
complaiS^^"    '  """^  "  ''•■''  •'""'■''  '"  connection  with  the  HaT^fn 

.   Commissioner  Sweet.  If  the  State  commission  should  refuse  the 
increase,  would  the  street  railways  have  to  refund  anythin  "      *  "'^ 

Mr.  hTORRS.   No.  *^  ^ ' 

Commissioner  Sweet.  To  the  users  in  the  meantime? 
Mr.  Storrs.  No,  sir. 

Commissioner  Sweet.  Do  you  think  that  the  people  who  reside 
upon  the  portions  of  the  roads  that  have  been  abandoned-take  ule 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      453 


case  that  you  just  spoke  of,  intermediate  between  the  terminals — 
have  suffered  materially,  and  have  they  exhibited  any  particular 
feeling  on  the  subject — any  serious  feeling? 

Mr.  Storrs.  Well,  they  have  been  seriously  discommoded,  and 
suffered  more  prospectively  than  immediately.  Most  of  the  people 
served  throughout  there  are  farmers — the  land  is  farming  land,  and 
of  coui*se  the  value  of  the  property  has  declined  materially  since 
the. abandonment  of  that  service. 

Mr.  AYarren.  Has  that  line  been  dismantled? 

Mr.  Storrs.  That  line  has  been  dismantled  and  the  track  taken  up 
and  taken  away — completely  abandoned. 

Commissioner  Sweet.  If  all  of  the  electric  railways  of  the  United 
States  that  are  not  profitable,  or  portions  of  the  electric  lines  that 
are  not  profitable,  or  did  not  pay  their  own  expenses,  should  be 
abandoned,  the  result  would  certamly  be  very  disastrous  to  a  very 
great  number  of  people,  would  it  not? 

Mr.  Storr.  It  would  be  presumptuous,  of  course,  on  my  part,  to 
speak  for  the  other  portions  of  the  country,  but  throughout  New 
England,  in  general,  there  would  be  about  a  30  per  cent  abandon- 
ment of  property. 

Commissioner  Sweet.  Wliat  percentage? 

Mr.  Storrs.  Thirty. 

Commissioner  Sweet.  Without  going  into  the  actual  percentage 
throughout  the  country  as  a  whole,  there  could  not  be  any«question 
but  what  a  very  large  number  of  people  would  be  seriously  discom- 
moded, at  least? 

Mr.  Storrs.  Very  disastrously  so. 

Commissioner  Sweet.  The  losses,  the  loss  of  time,  the  deprecia- 
tion of  real  estate,  and  the  general  injury  to  the  communities  of  the 
United  States  would  be  very  material,  beyond  any  doubt? 

Mr.  Storrs.  Beyond  any  doubt  at  all. 

Commissionjer  Sw^eet.  Do  j^ou  think  that,  if  the  people  of  the 
country  were  made  to  fully  understand  that  abandonment  would  be 
necessary  unless  relief  w^ere  given  to  the  electric-railway  companies, 
the  element  of  personal  interest  would  come  in  to  an  extent  that 
would  bring  support  to  the  companies  and  to  the  position  that  they 
are  taking? 

Mr.  Storrs.  I  can  not  help  but  believe  that  that  would  be  the 
fact,  sir. 

Commissioner  Sw^eb:t.  In  other  w^ords,  tliere  would  be  an  element 
in  the  community  that  would  be  militant  or  quite  active  in  helping  to 
bring  about  a  reformation  in  the  general  situation? 

Mr.  Storrs.  Yes,  sir. 

Commissioner  Sweet.  Then  what  have  you  to  say  w^ith  regard  to 
the  proper  means  of  getting  before  the  public  the  sort  of  education 
that  is  necessary  in  order  that  the  real  situation  may  be  understood  ? 
You  do  not  think  it  is  now,  do  you? 

Mr.  Storrs.  Far  from  it,  but  1  believe  that  through  the  medium  of 
such  commissions  as  your  honorable  body  we  can  get  to  the  public 
the  story  so  thoroughly  analyzed  that  they  can  not  help  but  believe 
that  the  conditions  as  they  have  been  represented  by  the  utilities' 
managers  are  true;  and  there  is  a  growing  tendency  without  any 
question,  on  the  part  of  the  public,  to  recognize  these  things  and  to 
recognize  the  conditions  as  they  are.    It  seems  to  me  it  would  be 


454     PRocEEDmos  of  federal  electric  railways  commission-. 

but  a  very  short  time  before  an  actual  thorough  knowledge  of  the 
needs  can  be  made  public.  ^ 

Commissioner  Sweet.  You  have  spoken  about  the  patrons  of  the 
rai  way  companies,  those  who  ride  on  their  cars,  both  in  the  cities 
and  in  the  rural  districts  particularly,  having  to  pay  for  this  pav- 
ing between  the  tracks  ?  &    ^  y  y  ^^i  mis*  pav 

Mr.  Storks   Yes,  sir. 

pah^T""^^'''''^'"  ^''^'''^*  ^""^   ^''''  *^®  ^^''^^^  construction  and   i^- 
Mr.  Storks.  Ye«,  sir. 

Commissioner  Sweet.  And  cleaning,  perhaps? 
Mr.  Storks.  Yes,  sir. 

C  ommissix)ner  Sweet.  And  you  have  alluded  to  that  as  an  unjust 
Srcom^^^^^  ^'  P^'*  ""^  '^'^  community  and  the  balance 

Mr.  Storks.  Yes,  sir. 
^.  Coinmissioner  Sweet.  And  especially  that  part  that  owns  automo- 

Mr.  Storks.  Yes,  sir. 

Commissioner  Sweet.  There  is  no  question  about  whether  your 
position  IS  right  with  regard  to  that,  is  there  ?  ^ 

Mr.  Storks  I  do  not  see  any  question  about  it :  and  so  far  we 
have  always  been  able  to  convince  the  commissions  or  others 

<.'utT''ir'''''ZwV^T'  ^^''  ^?''  probably  could  convince  commis- 
sions.   Do  you  think  the  general  public  understands  it  that  way« 

r^ihi     rf-     ^'^^-  ''^'^  ''''^  holp-they  do  not  now,  but  they  can 
no    help  but  recognize  that  as  we  convince  an  ever  increasing ^lum 
W  ^of  people  ot  the  serious  condition  of  things  and  the  solution 

C^ommissioner  Sweet.  Do  you  think  that  is  a  part  of  the  educa- 
tional work  that  should  be  carried  on  now « 

Mr.  Storks.  Absolutely      Thei-e  is  no  question  about  that. 

Commissioner  Sweet.  If  I  understand  you  risht   vou  think  thit 
litneys,   autotrucks,    and    any   conveyance   that  fa ri7es   peope  ^ 
lHi;e,  ought  to  be  regulated  and  controlled  on  the  same  equ  ft  able 
principles,  with  a  vTew  to  the  general  interest  of  thrpSc    a^ 
well  as  the  electric  railways?  pi*"iit,   as 

Mr.  Storks.  Absolutely. 

neS'to'ST""  ^'''''^'''  ^""^  '"''"^'^  recognize,  then,  the  right  of  jit- 
Mr.  Storks.  Without  question. 
Commissioner  Sweet.  But  I  dare  say  that  you  think  if  thev  were 

proper^'  reguhited  there  would  not  be  so  many  of  them?         ^ 
Mr.  Storrs  The  weather  regulates  them  automatically  at  times 

ng  periods  of  snowstorms  the  service  is  entirely  discontinued  or 
continued,  perhaps  through  that  portion  of  the  street  tha  s  cLared 
of  snow  by  the  railway  for  its  own  needs. 

Commissioner  Sweet.  If  the  same  rule  were  applied  to  these 
methods  of  conveyance  as  is  applied  to  electric  railways,  1  you 
think  It  would  make  a  very  material  difference  in  the  number  of 
Jitneys  that  would  be  used?  uumuer  oi 

Mr.  Storks.  Ohj  without  doubt. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      455 

Commissioner  Gadsden.  As  a  matter  of  fact,  has  not  that  been  the 
history  throughout  the  United  States  already,  Mr.  Storrs? 

Mr.  Storrs.  That  has  been  the  history. 

Commissioner  Sweet.  Have  you  figures  that  would  show  that? 

Mr.  Storrs.  They  can  be  prepared.  We  have  no  figures  of  that 
particular  kind,  because  in  our  country  there  has  been  no  regulation. 

Commissioner  Sweet.  But  it  would  seem  reasonable  that  they 
should  be  regulated  on  the  same  general  principles  as  the  electric 
railways. 

Mr.  Storrs.  Yes ;  that  is  true. 

Commissioner  Saveet.  Can  you  think  of  any  reason  that  would  be 
given  why  they  should  not  be  so  regulated  ? 

Mr.  Storks.  It  is  inconceivable  to  me  that  there  would  be  any 
reason. 

Commissioner  Sw^eet.  You  spoke  about  autotrucks  carrying  peo- 
ple in  cities,  in  New  Haven,  for  instance,  or  from  inland  to  some 
bathing  point? 

Mr.  Storrs.  Yes. 

Commissioner  Sweet.  Where  was  that — down  to  Savin  Rock? 

Mr.  Storrs.  No;  this  is  on  the  other  side  of  the  shore,  down  to- 
ward Lighthouse  Point ;  but  that  is  immaterial,  of  course,  although 
it  is  indicative. 

Commissioner  Sweet.  Down  to  Fair  Haven? 

Mr.  Storrs.  Down  to  Fair  Haven ;  yes. 

Commissioner  Sweet.  Is  there  no  regulation  whatever  in  New 
Haven;  is  there  no  restriction  upon  what  they  can  do  in  that  re- 
spect ? 

Mr.  Storrs.  The  State  did  pass,  at  the  last  session  of  the  assembly, 
a  law  requiring  them  to  file  a  bond  for  security  beginning  next 
January. 

Commissioner  Sweet.  Do  you  mean  to  protect  the  users  against 
accidents?  * 

Mr.  Storks.  Accidents;  that  is  all.  Of  course,  there  is  the  usual 
regulation  relative  to  obtaining  licenses,  but  nothing  in  the  way  of 
regulation  at  all. 

Commissioner  Sweet.  Is  a  license  fee  of  any  material  size  re- 
quired ? 

Mr.  Storks.  Not  much — very  small. 

Commissioner  Sweet.  Is  there  a  larger  license  fee  for  those  carry- 
ing passengers  than  for  those  who  do  not  ? 

Mr.  Storrs.  Yes ;  there  is  an  additional  fee  required  of  $25  or  $30. 

Commissioner  Sweet.  You  spoke  alx)ut  transfers  and  the  great 
number  of  miles  passengers  are  often  carried  for  the  initial  expense 
of  a  nickel,  or  6  cents,  or  whatever  the  fare  may  be? 

Mr.  Storrs.  Yes,  sir. 

Commissioner  Sweet.  Have  any  changes  taken  place  since  in  that 
regard  ? 

IVIr.  Storks.  Not  on  our  property.  There  have  been  some  changes 
made  on  some  of  the  other  smaller  properties  around,  in  restricting 
the  transfer  use,  or  making  a  charge  of  the  issuance  of  a  transfer. 

Commissioner  Sweet.  None  of  your  passengers,  I  infer,  could  ride 
54  miles  for  a  nickel  ? 

Mr.  Storks.  Hardly. 

Commissioner  Sweeti  Or  6  cents? 


456       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Mr.  Storks.  Hardly.    Tliat  would  be  merely  an  absurd  case 
rt:rrr";f.™  '''''''  '^  '^«  farthest^  can  ridTo'n 


Mr 

C. 

system  forC  cents"?" "'  ''  "*"  '""'"''  ""^^  ^"^  "^^  ^"^  y"""' 

Commissioner  Sweet.  Do  you  think  that  the  fares  char<red  ou-ht 
t» 'f  in  proportion  to  the  distance?  tiiai^eci  ought 

on  wi,irw!!!"  An  "  •"■'  g«"'ng  Jo^"  *°  *''«  fundamental  theory  there 
on  which  the  American  city  has  been  developed.    That  is  the  uni- 

triSeS'."-"''^"*  ""  ^"^'-^  ''-'^-    ^^^-^!  -  -  cUln^^'^drn 

ritv"?!!!."^"'?*"'  ^J™""-  ^^'^'J'  °"  *'»«  st«am  railroads,  from  city  to 
citj    the  cus-tom,  of  course,  throughout  the  country  is  to  charge  ac- 
cording to  the  number  of  miles,  at  so  much  a  mile?  ^ 
Mr.  Storrs.  les. 

Commissioner  Sweet.  Is  that  feasible  on  the  electric  railways? 

shoSafrmade^^!'  ""^''^^''-''bly  it  can  be  made  feasibie,  and 

Commissioner  Sweet.  It  can  be  made  so  ? 
Mr,  feTORRS.  Yes. 

Cx)mmissioner  S;v^ET.  Well,  what  would  the  effect  of  it  be? 
Mr.    Storrs    l\ell,  we   would   naturally   hope   for  impioVement 
before  we  would  ask  to  put  it  into  effect.  implo^ement 

Commissioner  Sweet.  From  the  standpoint  of  the  railway  do  vou 
think  it  would  result  in  a  remedy?  iciii>vay  ao  you 

Mr.  S-roRRS.  Yes. 

Commissioner  Sweet.  And  it  would  help  them  out  of  their  present 
situation  to  a  very  considerable  extent?  "i  meir  piesent 

Mr.  Storrs.  We  hope  so. 

Commissioner  Sweet.  That  is,  assuming  that  people  paid  thp  Ur^ 
and  that  they  did  not  lose  any  traffic  to  alrge  eSA^  '  ^'''' 

Mr.  Storrs.  les.  es  • 

goSiTZZnify™  ^'''"*  "°"'^  "^  "-  ^ff-*'  ^-<J  "Pon  the 

Mr.  Storrs.  It  can  not  help  but  have  thp  pffo^f  r.f  ^     i     n      i 
ing  in  all  of  the  tenement  di.'tStrthfinntrzon   f  tc  tV''''"- 
in  IC  w^r"-  ''''■'■^-  ^"  ^"-1-"  «t-es  has  it  actSlir^rked 

the  fact  that  it  is  congested  must  be  to  a  certain  extent  due  to  th« 
fact  that  it  IS  the  only  part  served  «^ALeiii,  aue  lo  the 

Conunissioner  Sweet.  AVell,  in  reasoning  on  the  subiert  is  not  th„t 
the  natural  conclusion  to  coiiie  to»  suDject,  is  not  that 

Mn  Storrs.  Yes,  sir;  I  have  always  drawn  that  conclusion 
Commissioner  Sweet.  Then,  in  this  regard  ihlL^J^       }    i' 
rect  conflict  of  interests  between    he  Si^'ommZi'tv"^^. I'- 
railway  companies.    It  would  be  to  the  interest  of  the  rfiL     "*  *^* 
pan.es  to  adopt  the  system  that  prevaHrnn  th!    f  '^T  '''"?• 

would  it  not.  and  that  ^oukl  be  inhSly  just,  woufd  rnoT^''""'''' 
reiatr"-  ''  ^""'^  ^'"^  '«  "^  inhei^n\ly'jusTi'nd*rh  more 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      457 

Commissioner  Sweet.  And  then  the  people  would  pay  for  just 
what  they  get?  ^    ^  ^  *"  ^ 

Mr.  Storrs.  Yes. 

Commissioner  Sweet.  But  in  the  interest  of  the  proper  distribu- 
tion  of  the  population  and  to  prevent  the  congestion  in  the  centers 
of  population,  the  other  system  has  been  adopted  throu2:hout  the 
United  States?  t^  b 

Mr.  Storrs.  Yes,  sir;  the  fundamental  theory. 

Commissioner  Sweet.  And  it  has  worked,  as  you  no  doubt  would 
expect  it  to  work,  and  has  produced  the  distribution  that  has  de- 
cided adyantages  from  many  standpoints? 

Mr.  Storrs.  Yes,  sir. 

Commissioner  Sweet.  Xow,  let  me  ask  you  this  question :  If  that 
antagonism  of  interest  is  recognized  between  the  general  interests 
of  the  community  in  that'  particular  and  the  interest  of  the  com- 
panies, what  remedy,  what  meeting  ground,  what  sort  of  compromise 
do  you  think  should  be  made  so  as  to  get  the  best  results  from  the 
standpoint  of  both  the  companies  and  the  general  public? 

Mr.  Storrs.  I  can  not  see  that  there  is  any  happy  medium  between 
the  two  theories  of  a  flat  rate  of  fare  and  a  distance  tariff.  It  seems 
to  me  we  must  either  have  one  or  the  other. 

Commissioner  Sweet.  Well,  would  not  a  flat  rate  such  as  gener- 
ally prevails  regardless  of  distance,  unless  the  distance  becomes 
very  considerable,  carry  out  the  desire  of  the  public  with  regard  to 
distribution  ? 

Mr.  Storrs.  Yes. 

Commissioner  Sweet.  And  would  not  the  same  flat  rate,  if  it  was 
enough,  and  if  the  general  public  was  educated  up  to  the  point  of 
paying  it,  so  that  it  did  not  reduce  the  patronage  of  the  company, 
meet  the  case  from  the  standpoint  of  the  company  ? 

Mr.  SiORRS.  Oh,  yes.  They  would  still  buy  the  goods  at  the  higher 
rates. 

Commissioner  Sweet.  Yes. 

Mr.  Storrs.  Yes. 

Commissioner  Gadsden.  Would  the  short-haul  rider  do  it,  though  ? 

Mr.  Storrs.  The  trouble  is  they  won't  buy  the  goods.  They  will 
buy  the  jitney  goods  instead. 

Commissioner  Sweet.  Well,  you  said  they  would  use  the  jitneys. 
Mr.  Storrs.  Or  walk. 
Commissioner  Sweet.  Or  walk. 
Mr.  Storrs.  The  short-haul  riders. 

Commissioner  Sweet.  Of  course,  the  largest  profit  is  on  the  short 
haul  ? 

Mr.  Storrs.  Yes. 

Commissioner  Sweet.  There  is  less  service  performed? 

Mr.  Storrs.  Oh,  yes ;  the  more  people  you  can  get  in  the  same  car 
on  each  mile  of  the  trip  the  more  profit  that  car  makes,  of  course. 

Commissioner  Sweet.  You  do  not,  as  far  as  I  can  see,  hold  out  any 
very  rosy  anticipation  for  the  immediate  future. 

Mr.  Storrs.  Not  the  immediate  future;  no,  sir.  We  hope  that 
this  will  be  made  a  continuing  business,  however,  with  the  assistance 
of  the  commissions. 

Commissioner  Sweet.  There  is  no  doubt  of  that,  Mr.  Storrs,  but 
would  not  the  general  collapse  of  the  street-railway  business  result 
100643**— 20 30 


458       PROCEEDmGS  OF  FEDERAL  ELECTBIO  RAILWAYS  COMMISSION. 

^vii.  MoKRs.  Tremendously  so. 

so.ue  means  l.as Vt  to  1^  fouLr    fn  '^'TV'f  ""'^  '=°"''I^^'  '^""^  J^' 
^^•hicIl  is  certaini;  acute,  is  it  not?  "''  P''"'^"*  emergence- 

Mr.  Stohhs.  Decidedly  acute. 

mi.  »Toi!ii8.  ihiit  IS  ,ny  tliouffht  on  it 
^-/onimisKioner  Sweet   Tn  fi^t    m^  *„  „-ii  • 
cent  period?  '  "''  ***  '^'*'"'i  *  comparatively  re- 

Mr.  Storks.  That  is  my  thought  on  it 
£"'SX°"%SwE^T.  That  is  a  correct  statement? 
^11.  MoRRs.  That  IS  my  thought. 
Commiw-sioner  Sweet,  thank  you 

Commissioner  Gadsdex.  Mr    Storrs    «n  fi,;„        i*        j,    , 
ference  between  a  flat  rat;  ami  the  zone  system    Mr  T  °*  "''•  *^'*- 
Sweet  wanted  to  know  whether  there  w-,™'  Commissioner 

you  tliink  vou  haye  worked  nnftl.l  I    "/  compromi.se.     Don't 

it  out  in  Mass^iXsT>tti!-  Im     w  f^^'n  ^'^  ^  '''  °'"  ."^^^  '""^-e  ^^"'•ked 
rate  of  5  crM.lTS^es  to  si  Isid^^o  H  "'"  ^•°""»"'l''y  P'-efers  a  flat 
Mr.  Storks,  j^ i^  JiV^^^S  SLTZ^  '""^  ^^'^  ^'^^ ^ 

o^:-  ?hris^i\se!.s':hat  ''^  '^'^^"^  °^  ^"^  I'-op- 

well  decide,  for  sociolo^^  reas^f  to  Sn ^T^r.'*^  '•■"""S'  ^'^^''y 
into  a  contract  with  the  con  pan  v  to  nut    .n  *  haff '"'  ""''  °"*'^'' 
general  taxation,  could  it  not?  ^         ^         ^  ^''^  diftereuce  out  of 
Mr.  Storks.  Theie  is  no  question  about  it 

be™  deyZS  h^^bj*  a'prope^Xrti'th:  T'.  ''^T  >T 
conmamitios,  the  only  way^o^'et  tK  ly'^/operlatC'  "'  "" 

Coinnnssioner  (Jadsde.x.  As  a  matter  of  fict   \r.'  «,'"".-    . 
your  obseryation  that  this  sol  itinn  !*  f i         '      '•  ?'°"'*'  '^^  •*  «"* 

inierica  has  been  .^ rked  ou"t  tL  electLTa^"^^^^^^  IV''^''^  "* 
expense  so  far?  ^  eiectuc  lailways  at  their  own 

Mn  Storks.  Absolutely.    There  is  no  question  about  that 

Commissioner  Gadsdex    Tlierefnr^    \i^^h      \    '»"<nic  mat. 
wedded  to  this  svstem.  would  i^no^^^^ 
least  come  in  ancf  pay  the  difference'        ^  ^  *^^^  '^'^^^^  ^^ 

Mr.  Storrs.  Unquestionably. 

Commissioner  Gadsden.  Instead  of  beinir  Dut  nn  hv  ih^    ,    i 
holders  or  the  bondholders  in  electric  railwa^s^?        ^  ^^  *^'  •'*^'^^'- 
Mr.  Storrs.  There  is  no  question  about  it: 
Commissioner  Gadsden.  That  wonM  «Anm  f^  k         i?  • 
meet  the  issue,  would  it  not/  ^^  *  ^^'^  ^^^  *« 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      459 

Mr.  Storrs.  Yes. 

Commissioner  Gadsden.  Now,  Mr.  Storrs,  on  the  question  of  the 
effect  of  the  zone  system  on  congestion,  which  you  have  referred  to ; 
the  effect  of  the  zone  system  in  America  is  largely  problematical,  is 
it  not? 

Mr.  Storrs.  Absolutely  problematical. 

Commissioner  Gadsden.  We  have  no  basis  for  thinking  that  what 
has  happened  in  Europe  is  going  to  happen  here,  have  we? 

]\Ir.  Storrs.  None  whatever. 

Commissioner  Gadsden.  As  a  matter  of  fact,  have  we  not  in  New 
York  City  to-day,  with  the  flat  rates  of  fare  of  5  cents,  as  congested 
a  district  as  there  is  in  the  world? 

Mr.  Storrs.  Yes;  that  is  doubtlessly  so. 

Commissioner  (jadsden.  Notwithstanding  the  fact  that  for  a 
nickel  you  can  ride  anywhere  from  30  to  40  miles? 

Mr.  Storrs.  Yes. 

Commissioner  Gadsden.  Yet  that  condition  exists  to-da}^  under  a 
flat-rate  situation,  does  it  not? 

Commissioner  Meeker.  ^\'ould  you  let  me  make  a  suggestion 
there  ? 

Commissioner  Gadsden.  Yes. 

Commissioner  Meeker.  Is  it  not,  perhaps,  partly  due  to  the  flat- 
rate  situation  that  we  have  the  greatest  congestion  known  in  the 
world  in  New  York  City  ?  And  is  it  not  quite  as  likely  that  a  zone 
rate  will  result  in  scattering  industries  to  smaller  localities  rather 
than  to  center  industries  and  population  in  urban  centers? 

Mr.  Storrs.  It  is  very  hard  to  assume,  in  connection  with  the 
New  York  situation,  that  it  is  entirely  due  to  transportation. 

Commissioner  Meeker.  My  object  in  making  the  suggestion  was 
to  show  that  the  flat  rate  of  fares  and  the  zone  rates  operate  in  two 
directions  simultaneously;  and  that  you  can  not,  in  my  judgment, 
foretell  what  the  result  will  be. 

Mr.  Storrs.  No,  sir;  that  is  true. 

Mr.  Warren.  That  is,  it  will  keep  some  people  at  home  in  their 
own  zone? 

Commissioner  Meeker.  Yes. 

Mr.  Warren.  And  it  will  lead  other  people  to  congest  themselves 
in  the  central  zone,  and  you  can  not  tell  until  you  have  tried  what 
is  going  to  be  the  result  in  a  particular  localit3^ 

Commissioner  Meeker.  Yes. 

Mr.  Storrs.  That  is  the  entire  problem. 

Commissioner  Meeker.  Pardon  me  for  making  the  suggestion. 
-     Commissioner  (tadsden.  Yes. 

Commissioner  Meeker.  We  can  not  derive  very  much  useful  in- 
formation from  the  history  of  the  trolleys,  the  electric  railways  of 
Europe,  because  they  are  older  communities,  much  more  thickly 
populated,  and  they  all  had  about  the  degree  of  congestion  that  they 
have  now  before  any  trolley  was  put  in. 

Mr.  Storrs.  Yes. 

Commissioner  Meeker.  And  our  communities  are  wholly  different; 
and  I  do  not  think  we  can  safely  deduce  from  European  histoi\y. 

Mr.  Storrs.  We  can  only  deduce  from  the  European  history  the 
fact  that  the  building  of  the  trolleys  has  prevented  the  congested 
areas  of  cities,  or  those  trolleys  would  be  profitable  ventures. 


4C0       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 
I^^tZe"ttZf  "^"'-  '^^'''  """'•^  l^e  -Keneralizatlon  that  would 

l-.t?on  of  HrfL^^^'^r-  •^'•-  ^*^'"'^'  «"  the  <l»e«tion  of  the  regu- 
!hey  not?        ^'*"">'^"^«  J'^^^J^  «t«rted  on  the  Pacific  Coast!  did 

Sir.  Storrs.  Yes. 

MrsiSr^A^T"'^'!-  "^^-^  '^""'^'^  «*  I^«  Angeles? 
State  ^*  ^'  '^"^''^^  **"*!  in  th«  southern  part  of  the 

acth%f  """*'■  ^•^''^''""-  ^''^*  ^■'^^  «-  g^«t  center  of  the  jitney 
Mr.  Storrs.  Yes. 

Commissioner  Gadsden.  By  what^ 
gested  !r"-  ""'  ''^  ^'*^*y'^'''-  ^"-i  ^'^«  °P-«"on  within  the  con- 
MrsiTp.?hir^''-  ,^-^*  "tout  public  regulation? 

Commissioner  Gadsden.  Well  the  Doint  T  wnnfo^  f^      *  • 

Commissioner  Gadsden.  Now  Mr  Storrs  A^.  „«.,  i,  ,    , 

whether  the  Los  An<reles  railwavL  «ro  f^f'  *^*'/°".  happen  to  know 
neysof  their  own?     ^         railways  are  interested  in  operating  jit- 
Mr.  Storrs.  I  do  not. 

Commissioner  Gadsden.  Mr.  Storrs    fHH  a^,,  ;„t„    i  i       • 
conimission  tlie  impression  that  anTncreaseTf^rP  hf  ^  a^^  ^^'^ 
would  necessarily  result  in  a  loss  of  revenul?  '"^""'^  ^  ''"*^ 

Mr.  Storrs.  Not  at  all. 

Sr  siotr  rS.rr''-  ^  ™*^^'"  .«°*  ^'^'^t  in.pression. 
Mr.  Warren.  I  did  not  catch  that. 


iiib 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      461 

was  SO  understood.  My  thought  was  that  with  the  increasing  of  the 
rate  of  fare  over  and  above  6  cents — there  has  been  an  increasing 
loss  of  patronage,  although  still  the  gross  was  ascending. 

Commissioner  (tadsden.  Yes. 

Mr.  Warren.  Not  in  all  places.  Mr.  Ford,  of  Portland,  testified 
that  Avhen  it  was  a  7-cent  fare  they  got  37  per  cent. 

The  Chairman.  Twenty-five  per  cent  out  of  the  possible  40  per 
cent. 

Commissioner  Gadsden.  Does  not  your  own  experience  in  Con- 
necticut tend  to  prove  the  fact  that  if  you  will  stick  out  long  enough 
you  are  going  to  get  the  money  ? 

Mr.  Storrs.  That  is  true. 

Commissioner  Gadsden.  You  put  in  a  6-cent  fare,  and  for  a  year 
you  could  get  no  result,  but  at  the  end  of  18  months  you  got  14  per 
cent.  Now,  don't  you  think  that  that  is  true,  as  a  general  propo- 
sition, if  we  stay  by  the  fare  ? 

Mr.  Storrs.  That  may  be  true. 

Commissioner  Gadsden.  That  we  will  sell  the  transportation  at 
a  higher  price. 

Mr.  Storrs.  That  is  probably  true. 

Commissioner  Gadsden.  It  has  been  true  in  connection  with  your 
property  ? 

Mr.  Storrs.  It  has  been  true  in  our  property,  certainly. 
Commissioner   Gadsden.  Mr.   Storrs,  have  you  had  any   experi- 
ence in  your  Connecticut  properties  with  the  frequent-service  car? 
Mr.  Storrs.  Yes. 

Commissioner  Gadsden.  I  think  the  commission  would  be  inter- 
ested in  having  your  experience  from  the  standpoint  of  the  oper- 
ators. We  have  heard  from  the  manufacturers,  and  we  would  like 
to  hear  from  the  operators  on  that. 

Mr.  Storrs.  Well,  in  connection  with  that,  we  have  relatively 
few  of  the  safety  cars.  Twenty  of  them  were  purchased  originally, 
and  some  of  them  were  placed  in  service  in  Bridgeport,  some  in  New 
Haven,  and  some  in  Hartford.  They  have  been  universally  satis- 
factory, so  far  as  we  can  find.  One  of  the  communities  is  so  thor- 
oughly satisfied  with  them  that  they  are  requesting  us  to  abandon 
all  other  means  of  transportation  in  that  community.  We  operate 
something  like  100  cars  at  the  present  time.  From^the  standpoint 
of  the  management,  the  treasury  is  the  only  thing  to  look  at;  and 
they  are  entirely  satisfactory.  A  more  frequent  service  brings  a 
greater  gross  revenue,  a  slightly  increased  service  a  slightly  in- 
creased gross  revenue  and,  of  coui^e,  an  equal  service  brings  a  de- 
creased operating  cost. 

Commissioner  Gadsden.  Would  you  care  to  say  Avhat  community 
that  was  ? 

Mr.  Storrs.  That  is  in  Bridgeport. 

Commissioner  Gadsden.  In  Bridgeport? 

Mr.  Storrs.  I  would  be  glad,  if  you  care  to  have  me  do  so,  in  order 
to  get  tbe  atmosphere,  to  file  as  part  of  this  testimony  a  letter  which 
was  written  by  the  secretaiy  of  the  Chamber  of  Commerce  of  the  city 
of  Bridgeport  to  the  secretary  of  the  Chamber  of  Commerce  of  the 
city  of  Norwalk,  that  letter  having  been  written  without  our  knowl- 
edge.    I  can  get  a  copy  of  that. 

Commissioner  Gadsden.  We  would  be  glad  to  have  you  put  it  in. 


0 

462       PROCEEDUSGS  OF  TEDEBAL  ELKOTBIC  BAILWAYS  COMMISSIOBT. 

Mr.  Stokks.  Yes. 

Mr.  Storks.  Yes,  sir. 

An"'^.!^l""T  ^^T^^"":  \  ^ish  you  would  put  tliat  in  the  record. 
jJlr.  bTonRs.  I  will  be  glad  to.  ' 

Conmiissioner  Gadsden.  As  a  part  of  your  testimony? 
Mr.  bTORKS.  1  es,  sir.  •' 

1  il Engknd'"''''  ^'"''"*'  '"*  "^*'"*  ^  '"'^*^  ***  ^'"^  '''  Connecticut  to 
Mr.  Stokks.  That  was  on  those  cities. 

*!.   ♦    n"?"**''''-  ^  "■?'"'",'  '*  t'*"'  is  «l"e  to  the  fact  that  in  England 
the  rolley  lines  ca«»e  after  the  cities  and  villages  had  been  est^tblisled 
Mr.  Storks.  \  erv  possibly  so. 

♦^  ^l'.!**  Ch-^kman.  \Mule  here  the  trolley  lines  have  been  atten.ptin^ 

1  a rge  mLir^"^  '^  '^^^  *^^  '^'*""*''y-    '^^^"''^  "«*  ">"*  be  :: 

♦  im'*";.*'^'""'  i'n'*rP*»'nK)-  It  "'iglit  have  some  effect.    At  the  same 
ti  no  you  are  familiar  with  soma  of  the  English  cities  and  British 

t^^^'^^'^f-    Tli«.v  do  not  have  tlie  dense  transportatt 
facilities  that  we  have  in  this  country. 

The  CHAIB3IAN.  You  have  given  us  some  very  int^re^stinir  t<istimonv 

tZJ^""  f^TM  *^^"  automobile,  the  jitney,  and  the  irmt.>r  truck 

in  1917  one  automobile  to  each  5  families? 
Mr.  Storks.  Yes. 

of  ronvSi™'?'''"  ^'"^'''^^y'  ^'^"'^  ^a«  *  ^eiy  gieat  "se  of  that  kind 
Mr.  Storks.  Yes. 

ntili'ti'es?""'"'''''"  "^"'^  *''"*  ^"'^  •^''*''™'n«l  tl>e  revenue.s  of  the 
Mr  Storks.  If  you  will  go  through  some  of  the  Xew  England  cities 
mitside  of  the  industrias,  you  will  see  the  field  parked  wTthmiSmo-' 

,,ii^'-    U    ■  Y^''''\  '"'^  '*"'?^;'  ^^  ^^^  operatives  in  that  industrv  and 

u««  in  their  trips  bvck  and  fortJi  by  that  operative  and  his  neighb^^ 

The  (.IIAIK.MAN.  Do  not  the  automobile  an.l  the  t'Ood  mads  als<; 

tetrcottry  r  "'  ""  ^"■^^'""^-  "^""^  ^  ^-'  n.a.iy"X"e 
Mr.  Storks.  It  is  conceivable  that  they  do. 

Mr  ^^^«i^' tT*  T^  ^"^  ^"^iness,  and  they  travel  upon  the  cars? 
Ml .  Storks.  That  is  true.     There  is  a  certain  revenue  in  thiU  wav 
\r.  |,^^,^  "^if^'^^^'-  ^^^  not  the  amount  of  business  that  is  brought' in 

IS^  :^h^  lll^'ityT^"""  "^"^*  ^"  "^"^^  ^'^  '^^^  -^^^  ^- 

Mr.  Storks.  \o:  not  at  all. 

The  Chairm.an.  Does  it  not  do  so  in  any  considerable  part? 

fenJd  toTLt •.•"■'•""'  "'  "!'•    }  *^i"f^  *'^"t  ">«t  '^«««  that  I  re- 
leiied  to  in  Beikshue  is  very  clearly  indicative  of  that.    Our  serv- 

ce  there  has  not  grown  materially  over  what  it  was  five  years  ago 

w1. .f";/",^''  ''«''  "'"■  ^'l""-!^'*"  «er, ice  has  decreased  two-thids  ovf r 
v^ilat  it  was  five  years  ago. 

t),l^!!\F"rr*'''''u^'"'T«  "'*  *-"■"'' "^  °f  the  automobile  industrv. 
S^iL'^LeetTiSsiir""'  ^'^  ^-^^^«  -  "'«  «--  ---£ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      463 

Mr.  Storrs.  I  have  never  checked  that  up. 

The  Chairman.  Has  this  increase  kept  pace  with  the  growth  of 
the  automobile  industry? 

Mr.  Storrs.  No;  not  by  any  manner  of  means. 

The  Chairman.  Mr.  Ford  and  others  are  suggesting  the  construc- 
tion of  a  very  much  cheaper  automobile ;  and  I  presume  we  have  rea- 
son to  believe  that  in  the  course  of  years  the  use  of  machines  will 
be  very  much  extended? 

Mr.  Storks.  Of  course,  that  depends  entirely  uj^on  the  traffic  pos- 
sibilities in  the  street.  There  is  a  limitation  on  the  streets  and  roads. 
Certainly  the  highways  throughout  the  populated  portions  of  New 
England  have  reached  their  maximum  carrying  capacity  for  auto- 
mobiles on  Saturdays  and  Sundays  and  when  the  casual  rider  is  out. 

The  Chairman.  And  if  the  automobile  industry  does  expand,  w  hat 
is  the  ultimate  future  of  the  street-car  industr}^?  Of  course,  we  must 
all  of  us  realize  that  the  street-car  industry  or  something  to  take  its 
place  is  here  to  stay,  because  the  people  must  be  served.  Now,  what 
will  be  the  ultimate  effect  on  the  street-car  industry  if  this  automo- 
bile industry  expands  as  rapidly  as  it  has  in  the  past? 

Mr.  Storrs.  Kecognition  by  the  community  of  the  need  of  trans- 
portation and  the  subsidizing  of  it  to  meet  that  need.  The}^  are 
subsidizing  the  automobile  utility  now  by  jmving  and  things  of  that 
sort,  which  they  are  offering  them  free. 

The  Chairman.  If  you  reach  that  point,  will  private  capital  be 
interested  in  investing  in  the  street-car  industry? 

Mr.  Storrs.  With  a  guaranteed  return,  I  imagine  it  would. 

The  Chairman.  Well,  if  there  is  not  a  guaranteed  return? 

Mr.  Storrs.  No;  certainly  not. 

The  Chairman.  Suppose  the  communities  are  obliged  to  guaran- 
tee a  return  to  the  street-car  industry.  Do  you  think  that  will  con- 
duce to  the  continuation  of  private  ownership  and  operation  of  the 
utility? 

Mr.  Storrs.  It  is  conceivable  that  there  would  be  some  method 
of  recognizing  that  subsidy  that  would  still  give  to  the  management 
of  the  industry  and  the  investor  a  method  of  compensating  them  for 
their  initiative  and  ownership. 

The  Chairman.  Do  you  believe  it  would  create  a  very  pronounced 
agitation  for  municipal  ownership  and  operation? 

Mr.  Storrs.  Conceivably  so. 

The  Chairman.  Suppose  we  reached  a  point  w^here  communities 
must  guarantee,  or  rather,  subsidize,  this  industry,  do  you  believe 
that  private  ownership  and  operation  or  municipal  ownership  and 
operation  should  be  preferred? 

Mr.  Storrs.  I  think  that  private  ownei"ship  and  operation  would 
be  preferable  from  all  standpoints — from  the  standpoint  of  the  in- 
vestor, because  it  will  recognize  his  energy  and  initiative  in  the  con- 
stantly-increasing return,  and  from  the  standpoint  of  the  community 
in  the  certainly  declining  rate  of  fare,  as  compared  with  what  would 
result  if  the  municipality  itself  were  to  operate  the  property. 

The  Chairman.  Is  there  any  experience  in  this  country  which 
would  help  this  commission  to  reach  a  conclusion  upon  that  question? 

Mr.  Storks.  That  I  am  not  thoroughly  advised  of. 

The  Chairman.  That  is  all. 


464       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

at-cos'?  piSr''  ^'"^'^-  ^""  ^°"  ^-^P'-^^^  «"y  "Pinion  on  the  service- 

buf  I  havrnf^.n!!l"°*/n'-^P^'*  P"  *'^**'  '^«"««  ^e  have  not  got  it, 

KaLtlf^^eVrd'eitrlt^of it^'*''  "*  ^^^"^  ''^'  ^'  ^"'^^ 

M^"^.'^tl*'"^*■v^'?''^•  ^'*'"  ''."'■«  not  tried  that  out  on  your  system' 

;m.l;.l    „      i.^°         "'^  t"**'  '*  t''«i'«'  should  come  about  a  verv  m-ett 

mprovement  in  some  means  of  transportation  other  than  st?^ 

ra,  way  transportation,  a  means  of  traLsportatU Xt  w^  cfe  iriv 

stS\"trs"anin^  ''"'^  street-i^lway  transportaliot  th^ 

Mr   4ornrTn  fw         ^e  maintamed  by  means  of  subsidies/ 

of  the  Trt  W  biS  1?^'"'"^,°"'  ^■^^■""^'*  ?"y  ti^^t  ">«  developn.ent 
ox  lae  aix  nas  been  trom  withm  the  art  itself  and  not  from  ^n^ 

surprise  point,  such  as  the  automobile  The  aiT/nnmh L  f„  i  •  I 
capable  or  properly  equipped  to  take  carJ of  the  tran^^ortti^fi  L"ds 
of  the  community;  nor  is  it  at  all  possible  to  operate  on  the  s«^n« 
basis  as  the  electric  railway  operates,  except  in  isolated  cases  bt 
the  development  to  the  ideal  to  which  you  refer  if  ^prntJ^!  '      ^ 

ofTro^rr'^'""  ''-  '"'^-^••^  ^*-"'  S^Tf^^L^ufdTa%^ltTS 

Commissioner  Meeker.  That  is.  the  street-railway  industry? 
Mr.  Storks.  That  is  my  thought  in  connection  with  Xt    ' 

tathTnuVT''  '^^'^"^J'-  }  ^''^'^  in  niind  the  situation  wh  respect 
to  the  old  toll  roads  and  the  steam  railroads.  ^ 

Mr.  Storks.  Yes. 

tolVradfluifo^ff fh^-,  '^'m  ''°'"*'  "*  ^y'^'^l'ind  decided  that  the 
toil  loads,  although  they  had  been  granted  monopoly  charters  conbT 

not  stand  m  the  way  of  the  much  more  economicill/oplS  means 

of  transportation,  the  steam  railroads,  and  so  they  dKt-T  don't 

remeniber  whether  the  suit  was  in  the  nature  of  a/injunct^o^ or  not 

but  at  least    hey  did  not  uphold  the  contentions  of^thetoH  roads' 

way  'companiS. """^ '"'"  """'*'  ""^^''^  '"  *^^  ^^^  »*  '^^  ^^  "et'S 
Sir  Storks.  Of  cour^,  they  might,  but  the  thought  was  so  entire 
iTfiSon"  "^  "''  '"*'"•'  ""^*  •*  "''^  "«*  °"^  tliat  I  could  ba^ 
Commissioner  Weiile.  Is  the  commission  correct,  Mr   Storrs   in 
understanding  you  as  saying  that,  based  on  your  kAowLw  of  'th« 
Connecticu   situation,  the  only  wa'y  of  preventing  these  pf He  fit  li 
tics  from   becoming  public  fiit  lities  is  for  the  irener-il   n  W  „  i 
guaiantee  deficits  of  the  privately  operated  companTes         ^  ""''  *** 
Mr.  Stoms.  In  this  report,  which  I  am  leaviAg  on  file  here  there 
wa.s  gone  into  quite  largely  the  question  of  temponirv  relief  Indthlt 

relTeTTtilTe'T  n'  ^"  "'v'^^^  "-°»Sl>  -  a^e^ns  o"  i1,;j;; 
reiiet,  until  we  could  come  to  some  adjustment,  and  without  anv 
question  in  my  mind  the  same  is  true  L  Comiecticut  Is  has  Cn 
true  m  Massachusetts  and  other  places.  " 

ham"  Mn' Stori^-.  '  ''''^'  ^°"  ^'''  '^'^^  Connecticut  report  in  your 
Mr.  Stoiirs.  Yes. 

/ 

y 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      465 

The  Chairman.  Can  you  secure  enough  copies  to  file  with  us  so 
that  we  will  not  have  to  have  it  transcribed  in  the  record? 

Mr.  Storrs.  Oh,  ves. 

Commissioner  W^hle.  Mr.  Storrs,  do  you  think  that  in  the  freight 
business,  both  urban  and  interurban,  there  might  be  a  source  of 
revenue  to  the  electric  railways  which  has  not  yet  been  developed 
and  which  might  possibly  effect  a  greater  financial  return  to  them? 

Mr.  Storrs.  Without  question,  there  is  a  by-product  there  of  con- 
siderable value. 

Commissioner  Wehle.  Mr.  AVarren,  I  have  conferred  with  the 
chairman  over  the  following  questions  which  it  was  thought  might 
be  developed  by  you  through  witnesses: 

First,  to  what  extent  might  the  net  revenues  of  traction  lines  in 
the  larger  cities  be  increased  through  a  use  of  the  properties  for  city 
express  service  at  such  times  and  under  such  conditions  as  would 
not  impair  passenger  service? 

Second,  have  companies  undertaken  such  service  as  this  kind  in 
any  cities;  if  so,  with  what  financial  results? 

Third,  have  companies  been  prevented  from  developing  such  city 
express  business  through  limitations  in  franchises,  and  have  there 
been  attempts  to  have  such  limitations  removed;  if  so,  with  what 
results  ? 

Fourth,  to  what  extent,  if  at  all,  does  the  interurban  freight  busi- 
ness improve  the  earnings  of  traction  companies? 

Have  you  considered,  Mr.  Warren,  that  that  field  of  inquiry  could 
be  developed  in  this  hearing?  I  think  it  would  be  of  interest  to  the 
commission. 

Mr.  Warren.  We  certainly  shall  try  it.  Some  of  it,  I  think,  can 
be  furnished.    Whether  the  rest  of  it  can,  I  do  not  know. 

The  Chairman.  Mr.  Warren,  before  ^ou  proceed  with  the  next 
Avitness,  the  commission  wishes  to  submit  a  proposition  to  you.  This 
is  the  month  of  July,  and  the  weather  is  somewhat  enervating. 
However,  we  are  all  confronted  with  a  tremendously  important 
problem,  and  it  is  one,  of  course,  that  should  command  our  undi- 
vided attention  until  the  question  is  disposed  of.  The  commission 
is  willing  to  violate  the  union  hours  and  hold  night  sessions,  from 
8  o'clock  to  10,  to  expedite  these  hearings,  if  it  is  convenient  to 
yourself  and  your  witnesses,  and  if  you  will  confer  with  your  as- 
sociates and  your  witnesses  during  the  noon  hour 

Mr.  Warren.  Yes ;  I  will  be  very  glad  to. 

The  Chairman.  And  advise  us  after  our  recess,  which  we  will 
take  from  now  until  2  o'clock 

Mr.  Warren.  We  can  assure  you  at  once  that  we  will  accept  it. 

The  Chairman.  Then  it  is  understood  that,  beginning  to-night, 
we  will  have  sessions  from  8  o'clock  until  10. 

Mr.  Warren,  in  connection  with  the  questions  that  were  asked  by 
Commissioner  Wehle,  will  you  insert  one  more: 

What  advantage  is  there*^to  be  gained  in  utilizing  a  double-deck 
passenger  car,  and  what  experience  has  there  been  with  that  car  in 
this  country  or  in  Europe  ? 

Mr.  Warren.  We  will  be  glad  to  add  that. 

The  Chairman.  Have  you  any  witness  that  can  complete  his  tes- 
tnnony  before  the  hour  oi  adjournment? 


466     PBocEEDmcs  of  federal  electric  railways  commission. 

AFTER  RECESS. 

lU'sscs  hiis  been  iimde  up  for  the  dav  «ml  it  it        li  i  °|,'^'*- 

bef^in  n.ght  sessions  to?morrow  evening    nslfdn^  ''^'">''^  *? 

thmkpei-haps  we  shall  get  alonJuTas^Tdh-^  "'  '''''  '^■''""^''  ^ 
n.^io^^t'ot;-rj.:;„^erv£^^^^^      ''  will  be  agi-eeable  to  the  co.- 

soSL^SZZ;^  ^J^^'^  ->'-"-*  tl-  evening 
liie  Chairman.  Very  well 
Mr.  Warren.  Mr.  Xksh,  will  you  take  tlie  stand? 

STATEMENT  OF  MR.  lUTHEB  R.  NASH. 

Mr.  Warren.  Your  full  name. 
Mr.  JsAsii.  Luther  R.  Nash. 

£:  x^srBvIdrjior  ''"^''"'"-  ''^  <^^"«^*'-'  ^  ^'-t? 

^^  Mr.  Wahkbx  And  you  are  a  me.nber  of  the  Stone  &  TVebster 

^orgitLrfor  abtr^M^^^^^^^  "'''  *'^^  ^'^^"^  *  ^^«'^- 

th=?f  orSnSont"'  "'""^  "''^*  l'"-  ^-«  >--  -perience  run  in 

anfc«nsCtit?*^^tef  aLl'iyil"'  ^''^^^  P^"-'  ^  -«  "J-gn-g 
nection  with  thf  sSs  o^i  ™^^^^  'nvestigations  in  con- 

iin.ina.7  to  and  in  ronnert^on'^^Ttnh^^^^  '  '''  T^  "I'"''"  ""'•k  Pre- 
properties.  FollovvinffThat  I  ,w,m!  oonstructmn  of  )>«b]io-utiIity 
Stone  &  Webster  pnfpcXs  fo  .Zut  +^  "'^"'^S'''"  ^f"""  «*  *»>'« 
was  connected  witi/  th,™rviSrv  st  ff  T'  ^'''''''-  Z^"".  "'«*  ^ 
AVebster  companies  and  ha  to  d^  ^it|.  tL  L  ^""T'P  f  .*^^  ^^t""^  & 
agcnient  and  betternient  en^JnP.M-  no.  f  ^^'''^  problen.s  of  man- 
recently  I  have  -  von  more  n",^?^  .1^  'I?''  .^"'^""al  plans.  More 
tions  problems!  maUei^  of  rite  n  r/"'"^'^"  ^  *'>"  P"'''ic  rela- 
ta.x  adjustn.ents,  and  financial  plans  '  "djustn.onts,  valuations, 

« ici!ir,rp.tt"ty  '^i^i^iSi  fif 'of  "tr'"'  rr'""  -""^^  --^^ 

franchises  and  plans?  "^        ""*  so-called  service-at-c«st 

of''nu^,:ro?i^rfralchii:std  h?r"''*^^  "'"^^'^^  "^'^i"^  ""* 

sidertl^ertial^^l-^stTi:^^^^^^^^^^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


467 


Mr.  Nasbl  I  think  perhaps,  not  to  directly  answer  your  question  but 
to  liet  at  the  import-  of  it,  service  at  cost  was  developed  in  the  days 
before  State  regulation  of  utilities  was  bej- ond  its  experimental  stage. 

The  first  service-at-cost  franchises  were  framed  in  1907.  Except 
for  Massachusetts,  there  was  no  commission  with  full  regulatory 
powers  previous  to  1907.  And  I  might  add  that,  up  to  1918,  there 
were  no  service-at-cost  franchises  put  into  effect  in  States  which  had 
public-service  commissions. 

The  purpose  or  scope  of  service-at-cost  franchises  is  not  at  all  dis- 
similar to  that  of  the  regulation  of  the  public-service  conmiissions. 
It  involves  th«  determination  of  all  the  elements  of  cost  of  service 
and  adjusting  the  fares  to  that  cost.  The  elements  of  cost  include  the 
return  on  the  capital  invested,  which  the  investors  demand  for  the 
use  of  their  money,  the  ordinai-y  expenses  of  operation,  the  upkeep 
of  the  property  or  a  provision  for  its  depreciati(Hi,  taxes,  and  the 
creation  of  such  reserve  barometer  funds  and,  in  a  few  cases,  amorti- 
zation, although  I  do  not  consider  amortization  any  part  of  the 
proper  cost  of  service.  Those  are  the  fundamental  elements  which 
enter  into  practically  all  of  these  service-at-cost  franchises.  Xot  all 
of  them  carry  out  fully  the  service-at-cost  plan.  The  early  ones  had 
a  fixed  fare,  which  was  assumed  to  be  higher  than  the  cost  of  service, 
with  a  provision  that  the  surplus  ^delded  by  this  fixed  fare  in  excess 
of  the  cost  of  service  would  be  divided  between  the  city  and  the  rail- 
way. But  the  later  forms  have  an  automatic  adjustment  of  the  fare 
to  the  cost,  and  that  automatic  feature  I  consider  the  essential  differ- 
ence between  the  operation  of  a  service-at-cost  franchise  and  the 
regulation  of  railways  as  practiced  by  the  St^ite  commissions. 

I  think  one  reason  why  the.  service-at-cost  plan  has  become  popu- 
lar is  because  of  this  automatic  feature.  It  has  been  the  experience 
of  a  good  many  railways  in  taking  cases  before  public-service  com- 
missions, even  where  these  commissions  have  full  authority  to  act, 
which  they  have  not  in  many  cases,  that  action  has  been  slow.  I  have 
been  concerned  in  a  number  of  rate  cases  myself  where,  with  a  com- 
l>aratively  free  slate,  the  commissions  have  held  cases  under  consid- 
eration for  the  major  part  of  a  year  before  rendering  a  decision, 
even  when  the  condition  of  the  railway,  its  need  of  additional  reve- 
nue, wei-e  perfectly  obvious. 

As  an  alternative,  any  plan  of  procedure  which  would  automati- 
cally increase — or  decrease,  so  far  as  that  is  concerned — ^the  fare  as 
soon  as  the  need  developed,  is  and  should  be  welcometl  by  the  elec- 
tric railways. 

Mr.  Warren.  Is  there  anything  about  that  sliding  scale^  that 
automatic  adjustment  of  rates  with  the  cost  of  the  service  which,  in 
your  judgment,  is  incompatible  with  the  jurisdiction  of  the  State 
commission  or  with  the  State  commission's  exercising  the  authority 
which  under  some  of  these  franchises  is  reposed  in  municipal  or  local 
authorities  ? 

Mr.  Nash.  I  do  not  think  there  is  any  fundamental  difference  in 
the  effectiveness  of  the  plan  as  far  as  the  fare  schedule  is  concerned 
as  to  whether  a  State  commission  or  a  local  board  has  immediate 
supervision.  The  automatic  featui*e  might  be  applied  in  either  event 
perfectly  well. 

Mr.  Warren.  As  a  matter  of  fact,  Mr.  Nash,  when  the  Massachu- 
setts service-at-cost  statute   was   adopted   last  year,  I  think,  the 


468       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

StateGa^^''''  '"  '"'"  ''"*  *"  ^^'^""^  Elevated  and  the  Bay 

Mr.  Warren^  I  mean  the  general  hiw. 
J^J'm:.^!^^'^  "^'""•"--'-  ''-  i--l-tion  under  the 
n.isJion^^"^'';  Jt%''"^'  ^'  *.t  ^  «'*««f»cto,y  to  the  State  coni- 

^rt-Vas'ihet^oT""''  "'  *'^  commission,  or  something  of  Zt 
♦;  ^^'"Vu  t^'f'  ^*  *^  "'y  recollection  that  the  State  has  entire  inri«r1ip 

Mr!  Nash   I'tSc  not  ''^'"«  ^■""  "''"***^  *"  ^^^  "'">"*  *'>«*? 

iTfofn  "  1  ^  I   '^  refinancing  imcler  a  plan  of  that  kind     Witli  Pi/j  Pr 

Imvfor  on  ik,  p.H  o(  th,  SS  P""«»»"  •8«»M  •»?  mf.be. 

IS  figured  or  estimated «  ^  ^^  ^^^^  investment 

curities,  tlie  fc  uaTfAvI  tLn  in  .f ''^'''*'^  *^  *^"  outstanding  se- 
duction, and  so  fort^^^^^^^  P?^^^*^  ^"^  1^^  cost  of  re'pro- 
has  bee  1  detei  mS  cohic  cV.^f ^^^^^  ?^  ^^^'"^  *^  ^"^^^^^  ^^ich 
inent  in  the  pr^neitv^  T^^^^^^^  TI^  closely  with  the  actual  invest- 
piopeity.     Ihat  is  at  least  true  in  Massachusetts,  where 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      469 


the  actual  investment  has  been  the  standard  for  a  good  many  years 
of  the  rate  base  which  the  commissions  have  adopted.  And,  although 
cost  of  reproduction  has  been  used  and  been  recommeixled  in  other 
jurisdictions,  I  think  there  is  a  definite  tendency  toward  actual  in- 
vestment, so  far  as  that  can  be  determined.  Of  course,  in  the  case 
of  many  of  the  very  old  railways  which  have  gone  through  numer- 
ous reorganizations  and  consolidations  it  is  often  difficult  to  deter- 
mine from  the  accounting  records  what  the  actual  investment  was, 
but  it  is  usually  possible  to  make  some  approximation  by  a  thorough 
search  through  the  old  records. 

Mr.  Warren.  But  in  every  case  there  lies  at  the  entrance  upon 
this  plan  a  determination  by  agreement  or  in  some  Avay — ultimately 
by  agreement,  I  suppose — as  to  what  that  rate  base,  or  so-called 
value  of  the  property,  shall  be. 

Mr.  Nash.  That  is  one  of  the  essentials  of  the  service-at-cost  plan. 

Mr.  Warren.  Then,  as  to  supervision — does  the  plan  ordinarily 
contemplate  supervision  of  the  oj^eration  and  finances  of  the  com- 
pany ? 

Mr.  Nash.  Ordinarily  the  plan  provides  for  a  local  supei*visor 
or  board  of  control,  with  one  to  three  members,  which  has  super- 
vision over  the  service,  the  accounting,  the  rates,  and  matters  of  ex- 
tension; in  fact,  the  general  supervision  of  the  operations  and  pol- 
icy of  the  property. 

Mr.  Warren.  And  where  the  plan  is  put  into  effect  merely  as  a 
local  undei-taking  by  arrangement  between  the  company  and  the 
local  authorities  of  the  city  or  town,  the  supervising  commission, 
if  there  be  one,  has  nothing  to  do  with  it  ? 

Mr.  Nash.  No. 

Mr.  Warren.  As  in  Ohio? 

Mr.  Nash.  In  Ohio  there  are  two  service-at-cost  franchises  in  op- 
eration— in  Cleveland  and  in  Cincinnati;  and  in  both  of  those  cit- 
ies the  local  supervisor  has  direct  charge  and  full  charge  over  the 
regulation  of  the  railwajs.  The  State  commission  has  no  such  au- 
thority. 

Mr.  Warren.  As  a  matter  of  fact,  does  the  Ohio  commission — if  you 
happen  to  know — have  very  much  jurisdiction  over  street  railways? 

Mr.  Nash.  I  am  not  very  familiar  with  the  act  there,  but  as  far 
as  its  actual  operations  are  concerned,  it  has  not.  1  have  seen  very 
few  evidences  of  its  activities  in  railway  cases. 

Mr.  Warren.  If  you  were  recommending  the  supervision  pro- 
vision in  such  a  franchise,  should  you  stop  with  the  absolute  juris- 
diction in  the  local  authorities,  or  should  you  provide  an  appeal, 
and  if  so,  to  whom? 

Mr.  Nash.  I  do  not  think  that  the  absolute  local  supervision  would 
work  out  to  the  best  advantage.  It  has  worked  fairly  satisfactorily 
in  the  cases  where  it  has  been  tried,  but  experience  with  any  of  these 
franchises  has  been  comparatively  limited.  It  seems  to  me  that  in 
the  final  analysis  authority  ought  to  be  lodged  with  the  State  regu- 
latory authorities. 

Now,  there  are  all  kinds  of  degrees  of  jurisdiction  between  local 
and  State  that  might  be  worked  out.  For  example,  the  city  might 
appoint  a  representative,  who  would  be  called  a  supervisor,  or  he 
might  be  an  existing  city  official,  who  would  represent  the  city  in 


470       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

negotiations  with  the  company  with  i-esnpot  in.  co-,;^       4.      ■ 
ana  piejutlice.     Citv  officials  are  apt  to  make  the  ht^t  Irinrl  \;/ „ 

tiiu  ciL>   srreetis.     in  both  those  cases  the  nprcpntacro  ^^4^  fK«     « 
earnings,  if  I  remember  rightly,  is  in  exceJ^  of  fof  %  /  f""^ 

one  c.se  it  is  considerably  higferthanXt  ^  '  "'  '  ^''  ''''''  ^^ 
1  do  not  at  a  1  approve  of  that  kind  of  a  tax.     Theoretical! v  * 
tax  on  a  franchise  oiiffht  to  be  a  t'lv  nn  fl.^  JTl-kf  /"^^^^^i^^^iJ  a 

tax    f  ?t  fsl^^/ •  f''\Yords,I  suppose  tL^effect  of  the  franchise 
Mr.  Nash.  Yes;  it  is  passed  along  directly  to  the  car  rider     wI.lnK 

friK!.";-  ^^  ■?"*:;:'•  ^^"  '"i^  *>*  *'^<^se  franchises  provide  for  oublic  con 
spects  and  has  not  gone  into  effect  as  ye?4hawihise  provided 


PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION,      471 


that  rentals  on  the  city-owned  rapid-ti'ansit  facilities  might  be  sus- 
pended wholly  or  in  part  by  the  city  if  the  revenues  under  the  exist- 
ing fare  schedules  were  not  adequate  to  take  care  of  all  of  the  other 
costs  of  service  and  these  rentals.  And  I  think  in  all  cases  the  rental 
of  subways  and  rapid-transit  lines  was  to  be  borne  by  the  city  dur- 
ing the  first  year,  but  thereafter  it  might  be  waived  wholh^  or  in 
part  if,  under  existing  or  normal  or  what  might  be  considered  normal 
rates  of  fare,  the  rentals  could  not  be  paid. 

Mr.  Wariien.  Did  that  franchise  provide  for  a  sliding  scale  of 
rates  ? 

Mr.  Nash.  It  has  the  sliding  scale,  but  without  the  steps  being  de- 
fined. The  determination  of  fares  in  that  case  was  left  entirely  to 
the  board  of  supervisors,  consisting  of  a  city  representative  and  a 
company  representative  and  a  third  member,  who  would  act  as  an 
umpire  in  case  of  disagreement.  That  is  one  of  the  very  few^  fran- 
chases  in  which  no  rates  of  fare  are  mentioned.  Usually  a  scale  is 
fixed  with  a  certain  number  of  steps  from  one  to  another  m  which 
the  rates  in  effect  change  automatically  as  the  costs  increase  or 
decrease. 

Mr.  Warren.  And  in  that  franchise,  do  you  remember  whether 
there  was  a  provision  that,  after  the  board  of  supervisors  and  the 
company  agreed  on  the  change  in  rate,  the  proposed  change  was  to 
be  submitted  to  the  public-utilities  commission  for  its  approval? 

Mr.  Nash.  The  approval  of  the  commission  is  required  in  that 
case. 

Mr.  Warren.  If  the  commission  will  allow  me,  Mr.  Chairman,  I 
should  like  to  suspend  Mr.  Xash's  testimony  at  this  point  and  call 
Mr.  Culkins,  who  is  the  Cincinnati  director  of  street  railways.  He 
is  not  our  witness  in  any  sense,  except  that  he  has  very  kindly  con- 
sented to  come  at  this  time,  while  more  naturally  he  might  come 
when  the  cities  are  represented  two  weeks  from  now.  It  seemed  to 
us  very  desirable,  if  we  could,  to  present  somebody  to  the  commis- 
sion who  would  explain  the  city  side  of  one  of  these  service-at-cost 
franchises  which  is  in  actual  operation  at  the  same  time  that  we 
explain  the  other  side. 

The  Chairman.  Do  you  intend  to  put  Mr.  Xash  on  again? 

Mr.  Warren.  Yes;  we  intend  to  put  Mr.  Nash  on  again.  Mr. 
Culkins  has  to  leave  at  4  o'clock  to  get  a  train  at  half  past  4,  so 
with  that  explanation  I  should  like  to  call  Mr.  Culkins. 

(Witness  excused.) 

STATEMENT  OF  MR.  W.  C.  CULKINS. 

Mr.  Warren.  Your  full  name? 

Mr.  Culkins.  W.  C.  Culkins. 

Mr.  Warren.  Have  I  correctly  described  your  title? 

Mr.  Culkins.  Director  of  street  railroads  is  correct. 

Mr.  Waiujen.  Director  of  street  railroads  of  Cincinnati? 

Mr.  Culkins.  Yes. 

Mr.  Warren.  And  in  that  capacity  you  represent  the  public  in 
supervising  the  operations  and  activities  of  the  street-railway  com- 
pany ? 

Mr.  Culkins.  Yes. 


472     PRocEEDmcs  of  fedkrai,  electric  railways  commission. 

sentiment  was  with  riference  t^ Tf  itf       v   ^L""'  •'^''^*  ">«  P"blic 
working  out,  and  how  the'Sfc  reSdl^''  ''^°^*""  ''"''  ^""  '*  '^ 

frZ^^g^ocnminfo'ther'dt'is  fr"o. Jlr'^l'.."^  ?  ''"'«  different 
cliise  revision  open  Tthe  ti^l  ,i?^"  "'''  '"?*  that  there  was  a  fian- 

plain  briefly  just  how  tLrsitntir^n  ?^^*  'If '^^  '*  '*  ^  ^""^  ex- 
a  new  franil  ise  In  1 W.  H.I  „?  '""^i  /*  '^"^  "»*  «  question  of 
the  conipanierwhichcont4ieH.  «•;>■. ?^^^^  !  .^°.-y««'-  ^^vnchise  to 

!.«  open  for  mS^  the  end 'of  \r  fi  *^on  "'  *'"*"*^'"^  "^''""'^ 
years  thereafter,  and  provided^n.h,/l'f  ^''^'..^^  J;^'"'^  ""'^  each  15 
be  as  to  rates  of  fare  Ind  ,  r  Iff  f  ^^  *''"* ,"'«  «*'''«'«"  should 
equitably  upon  the  then  rlt  if     ^^"^   ■^""'  ""''  conditions  based 

biacceptablit^lecSmnfandirS^ofT'^^^^^^    ''"•*  ^''""^ 

the  ipa^rKwlX'lr'aich!^^^^  ^.^^^^  ?'--^-l  -* 

sion  for  the  rental  of  a  rLniJ?       ■!  ^""1'  ""^l"^  included  a  provi- 

building.     TrSup"riLXtt  dSi?d  tl^'a/'f/  *\"'^  P^^^^^ 
the  gmund  that  it^as  a  lendinro  '  he  dtv's  S 
rental  was  not  paid  in  the  distrihlifi^^  !!*     "      ciedit,  because  the 
ment  of  the  rental  on  th™;^*.^?  r    ^''"^^  leceipts.    The  pay- 
returns  to  thrtommnv     Th?/^i    ""''*  ''"''1  ''"'V«  subsequent  to  the 

of  last  yearand    nSiaSf  b1otX".rrf't  '""'''^.^"^V"  October 
revision  or  a  new  revision         "'""S^''*  "P  *!»«  question  of  a  further 

expansion  of  the  country  'iC  ?^k  r«  h^  ^?u^'  P^'"*  ?"  *h«  «^n«^> 
franchise  was  the  old  type  of  tthise  It  cnnf" -^  T^^"  V"^  "^^ 
strictions;  it  provided  tf.a^t  cars  shoiUd  run  aS  often  a^ill'^,  f?^  '^- 
InTrrSSthet  wl^a^S;^.£?  «  dtr^l^^^^^^^^ 

tion  of  an  affencv  to  oh rrv  nnf  «  ^     i^  '"^  ^^^.  "^'^^y'  ^"<^  ^^  the  crea- 
was  the  dut/ancfthe  Wtion  nf  T^^^.  "^"nicipal  function;  that  it 

its  own  mot^oraml  ofSlf  to  r^^^^^^^  -  -""^^^^  "'^^""^^"  ^^ 

^nd  that  if  it  dd  not  d^^ 

its  control  that  would  carry  out  thkT  "^  r""'*-^  "?  agency'^unW 
city  should  direct.  ^         ^^"^  ^""""^'^^  "^  ^^^^  ^^J  that  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      475 

It  was  very  evident  that  most  of  the  trouble  in  street-railway 
franchises  was  growing  out  of  too  much  rigidity  all  along  the  line, 
not  only  in  rates  of  fares  but  in  terms  and  conditions;  and  the  city 
felt  that  perhaps  the  cure  for  too  much  rigidity  was  a  great  deal  of 
elasticity.  The  question  was  opened  at  a  time  when  prices  were  very 
high,  when  it  would  be  obviously  unfair  to  the  company  to  expect 
them  to  operate  on  a  rate  of  fare  based  on  prewar  conditions.  It 
would  be  obviously  unfair  to  the  community  to  ask  them  to  allow 
the  company  a  rate  of  fare  based  upon  war  times  which  would 
continue  for  a  period  until  1931,  assuming  that  there  was  a  prob- 
ability at  least  of  there  being  some  change  in  conditions  during 
that  period.  So  that  the  thing  which  seemed  to  be  obvious  was  the 
service-at-cost  plan,  since  it  would  automatically  adjust  itself  to 
these  changing  conditions.  It  would  be  high  enough  to  allow  the 
public  to  have  the  kind  of  service  that  it  wanted  and  was  willing  to 
pay  for,  and  it  would  automatically  reduce  those  rates  when  the 
costs  and  market  conditions  changed  in  accordance  with  that.  So 
that  a  jDlan  was  adopted  that  follows  somewhat  the  Cleveland  plan, 
being  the  oldest  service-at-cost  plan  in  operation  then,  with  such 
modifications  as  we  felt  experience  had  warranted  in  that  plan. 

Our  plan,  briefly,  provides  that  the  rates  of  fare  shall  be  sufficient 
to  pay  the  cost  of  service — the  cost  of  service  being  defined  as  operat- 
ing expenses  and  taxes  and  a  return  to  the  company  and  $350,000 
franchise  tax.  After  that  is  earned,  the  surplus  goes  into  a  fund 
with  the  usual  machinery  of  a  reserve  or  stabilizing  fund  to  regulate 
the  rates  of  fare. 

The  Chairman.  Will  you  refer  to  your  franchise-tax  item  again? 
I  did  not  understand  about  that  franchise  tax  of  $350,000. 

Mr.  CuLKiNs.  Yes;  there  is  a  franchise  tixx  of  that  amount. 

The  Chairman.  That  is  collected  out  of  operating  revenues? 

Mr.  CuLKiNS.  That  is  collected  out  of  operating  revenues.  I  will 
be  glad  to  refer  to  that  further  a  little  later,  if  you  desire. 

Mr.  Warren.  How  about  depreciation  ?     Have  you  mentioned  that  ? 

Mr.  Culkins.  Depreciation,  of  course,  will  be  included  in  the  cost, 
although  the  provision  in  there  is  not  altogether  satisfactory,  and 
will  continue  for  five  years,  at  which  time  the  public-utility  commis- 
sion will  decide  the  method  of  charging  the  depreciation. 

There  were  many  things  in  this  franchise  which  had  to  recognize 
the  present  financial  condition  of  the  company,  because  it  was 
necessary  to  keep  the  thing  moving — to  recognize  that  the  company, 
like  all  companies,  was  in  strained  financial  condition.  The  pro- 
vision for  a  return  on  the  capital  seemed  to  us  to  be  perfectly  legiti- 
mate and  absolutely  necessary,  aside  entirely  from  the  fact  that  a 
great  number  of  our  people  have  invested  their  savings  in  this  par- 
ticular utility,  which  is  very  popular,  from  the  fact  that  people  can 
see  it  running  on  the  streets  and  feel  that  they  own  it,  and  very 
largely  it  is  held  by  people  in  very  moderate  circumstances. 

But  primarily,  from  the  city's  point  of  view,  the  situation  was  no 
longer  whether  an  investor  should  save  or  lose  his  investment,  but 
it  would  be  necessary  to  provide  a  retuni  in  this  cost  of  service  that 
would  enable  the  company  to  procure  the  necessary  new  capital  to 
carry  on  its  expansion  in  harmony  with  the  expansion  of  the  com- 
munity. 


160643'— 20- 


31 


mim^^^^^tSM 


474      PROCEEDINGS  OF  FEDERAL  ELECXfilC  RAILWAYS  COMMISSION. 

sti  iDia^  tills  ordinance. 

The  Ch^xikman    You  mav  file  a  copy  of  the  ordinance. 

Mr.  C  ULK1N8.  Perhaps  that  would  be  better. 

IJie  Chairman    But  we  would  like  to  have  you  touch  the  hie-h 
«  "t'VhnTnd^^  :i?^-    \r  r''  ••"^r"'^'^'-  with  th^Vrv^ce-S 

Mr.  CiLKiNS.  As  I  have  said,  it  includes  the  operating  exDenses 
depre.uation   taxes,  return  to  the  companv,  and  thisSooTfran' 
chise  tax,  and  provides  that  after  that,  witl  the  authority  o^^^^^^^ 
a  worlon^  capital  may  be  set  up  and  any  receipts  beyonc{  that  ^o  int^^ 

FiKler  the  plan,  when  this  fund  reaches  $050,000,  fares  will  be 

^f^^^^i^  '''-  ^-^^  ^>'  ''-  ^-P->^  the^iTriaindtr 

♦1  '^l^^,^ "^^^«?^^^^^^-  At  that  point  will  you  exphiin  liow  you  handle 
^li^linM^cent  increase  or  decrease  in  the  fare?  ^ 

Mr.  Cm.Kixs.  It  is  handled  by  way  of  tickets.  There  is  no  limi- 
tat  ion  either  top  or  bottom  in  this  ordinance.  The  ordinance  W^is 
mitmted  at  a  5-cent  fare,  which  was  an  incorre^-t  rate  of  fTi^  The 
committoe  which  prepannl  the  ordinance  found  on  i n vest i^a  ion  tha? 

he  i   iti^  r?te1>f%«  IV  T""  ?  P'T"^"''  ^-^"^  recommend 'd  that 
tne  initMl  rate  of  fare  be  G  cents.     A  committee  of  public-spirited 

citizens,  who  had  been  before  the  committee  every  div  t  leatrnin^ 

a  refe-renduin,  suggested  that  if  the  city  would  inithite  thrord  S 

w.th  a  .-cen    fai'e  that  then  they  would  abandon  all  tliei>  su^^^^^^^^^^ 

B^ff!]  Tf  "'"•  J^'''\  ^"^^^^^V"^  ''^^"^  ^^^^«  ^^^"^  three  tuvf  ffier 
Buffalo  had  a  referendum,  and  I  think,  rather  to  the  surprise  of 
the  city,  the  company  came  in  and  voluntex^red  to  carry  it^ out  on 
that  fi<rure  The  citizens  continued  to  talk  about  a  referendum^ 
but  It  should  not  have  been  initiated  at  5  cents,  l>ecauL  y^are  ni-' 
tiatmg  a  service-at-cost  ordinance  at  le.ss  than  cost  ^ 

1  mi^rht  ]>nn^  this  to  your  attention,  too^that  in  the  distribution 
of  this  surplus  there  is  another  provision  that  is  unlike  most  of  he 
service-at-cost  ordinances.  Based  upon  our  information  that  he 
greatest  criticism  of  the  service-at-cost  ordinance  plan  was  that  it 
tended  to  produce  an  inertia  on  the  part  of  the  company,  a  soit  of 
feeling  "A\e  ^et  ours;  now  ^  ahead  and  tell  us  what  to  do"-  Lre 

at^Jrt'iil'nmef  'meVn^  T^""^^  "^^'  participate  in  this  sujus 
at  certam  times.     V\  hen  the  fares  are  more  than  6  cents  all  the  snr 

phis  aft^r  paying  cost  of  service  ^oes  into  the  reserv^f und  for  red^^^^^ 
tion  of  fares.     \Vhen  the  fiu^s  are  6  cents  the  companH  permit  ed 
to  retain  20   per  cent,   80  per  cent  ^oin^  into   tCresen^   f  nd 

Ke^i-  c^nt'  fnd^^'r  V^'  ''""V^''  ^^"^P^^-^  ^^  permitted  to  re  a  n 
is  rSrmX  1  f  ^  •^''.^'*^'  ^^  '^^'''"  ^^  ^  ^^'^tf.  ^^  le.ss  the  company 
IS  peimitted  to  retain  45  per  cent.  So  we  think  we  have  a  niece  of 
machinery  in  there  which  makes  it  always  against  the  interest  of 
the  company  to  have  high  rates  of  fare,  but  which  enforcerfro^^^^ 
point  o/view  the  necessity  of  economical  operation 


PROCEEDIl^GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      475 

Now,  it  might  be  said  that  the  company  might  impair  the  service 
in  order  to  get  that,  but  the  city  retains  absolute  control.  To  my 
mind,  that  is  a  very  vital  feature  of  this  ordinance.  The  city  main- 
tains that  control  over  the  operation  of  the  company,  over  its 
finances,  oyer  its  service,  over  its  investments,  and  that  control,  with 
the  exception  of  three  particulars,  is  vested  in  the  director,  in  one 
man,  with  a  view  of  centralizing  the  res^^onsibility.  He  is  not  only 
made  responsible  for  that  but  he  is  made  responsible  wherever  any 
other  department  touches  this  company — that  the  company  need 
only  to  go  to  one  man  and  then  its  becomes  his  duty  to  take  it  to  the 
jjroper  place.  The  matter  of  extensions,  rerouting,  and  further  fran- 
chises are  vested  in  the  city  council,  but  they  are  required  to  refer  the 
matter  to  the  director  for  report  and  recommendation  before  they 
take  any  action  on  it,  thus  overcoming  the  action  of  the  council  from 
being  influenced  by  a  large  delegation  and  the  usual  procedure. 

By  way  of  controlling  the  cost  and  exjienses  of  the  company  we 
adopted,  rather  than  the  Cleveland  jjlan  of  a  car-mileage  allowance, 
a  budget  plan.  The  company  is  required  to  file  with  the  director, 
45  days  before  the  beginning  of  each  year,  a  budget  of  operating  ex- 
penses classified  in  accordance  with  the  Interstate  Commerce  Com- 
mission system.  Tliat  budget,  however,  carrying  out  the  thought  of 
elasticity  and  realizing  that  you  can  not  even  tell  a  year  ahead  just 
what  will  happen,  may  be  revised  by  way  of  the  company's  filing 
a  request  for  a  supplemental  budget,*  which  the  director  may  allow 
or  disallow,  or  he  may  transfer  among  those  funds  in  order  to  meet 
any  extraordinary  or' unusual  expenses.  That  is  the  only  feature  of 
tlie  ordinance  wherein  an  arbitration  is  involved.  If  the  company  and 
the  director  are  unable  to  agree  to  the  budget,  then  the  matter  may  be 
submitted  to  an  arbitration,  w^hich  is  final. 

The  thought  of  elasticity  is  carried  out  in  tlie  control,  since  the 
city  determines  the  number  of  cars,  the  kind  of  cars,  tlieir  frequency, 
wiiere  the  cars  shall  stop,  where  the  transfei^  shall  be  given,  and  in 
the  matter  of  extension  the  city  reserves  the  right  to  order  extensions 
wherever  it  sees  fit. 

AVe  have  also  included  in  there,  in  case  it  may  be  feasible  to  do  it, 
the  right  of  the  company  to  operate  freight  cars,  to  haul  express 
packages  and  anything  of  that  character. 

The  council  reserves  the  right  to  reroute  at  any  time,  in  other  words 
to  meet  whatever  condition  may  arise  at  any  time.  There  is  no 
rigidity  and  no  specific  requirement  as  to  anything.  In  the  case  of 
an  order  to  improve  ser\^ice,  the  order  is  effective  in  10  days  unless 
the  company  files  a  complaint.  In  the  event  of  the  company  filing 
a  complaint  there  sliall  be  a  public  hearing  before  the  director,  who 
finally  determines  after  the  hearing  what  .shall  be  done;  and  the  city 
may  enforce  its  order  in  a  suit  for  specific  performance  and  the  com- 
j>any  may  defend  only  on  the  ground  it  has  not  been  allowed  a  suf- 
ficient revenue  in  the  budget  to  carry  out  the  improvement  as  ordered. 
Since  the  director  has  the  right  to  authorize  a  supplemental  budget', 
it  really  amounts  to  no  defense  or  a  question  of  fact.  In  regard  to 
transfei-s,  the  only  limitation  is  that  the  public  may  not  be  brought 
back  to  the  point  of  origin. 

I  think  I  have  tried  to  touch  all  the  high  points  in  the  system. 
Mr.  Warren.  You  spoke  of  arbitration  once  or  twice,  Mr.  Culkins. 
Is  there  any  fixed  arbitration  board  or  tribunal  ? 


476      PBOCEKPIKOS  0.  FEDBKAL  ELECTKIC  KAIWAVS  COMMISSION. 

Mr.  CtJLKiNs  Jfo. 
'    Mr   CuLK^;  t";  ^'  '*  ''''"*"^  ^y  agreement? 

tliat  tl,e  arbitration  committee  of  th»']'''^?*  ?'  "i.^''"  ^^'^i^S  *"  do 
selects  the  tlurd,  and  ^Hvent  of  tL  f!.;  °'"^'^''™'^''  <*'  commerce 
tlie  sinking-fund  trustTenhot  1  h  "•"' -f-^  f"  *',PP°'"*  »  committer 
ing^fund  trustees  appoTnrthem  '"         arbitrators-the  sink- 

oper^^iliXet  rYSvs  hU' k'?J!*  '"'^'^-  '^'''''''  '"  *»»«  -st  of 
year?  ^  ""^  presented  at  the  beginning  of  tlie 

to*le  e%™JS'i  reepiL^w^riTj!*'".'!  "^  {j"^^^*'  ^^^  <^>o- 
offhand  we  are  probaWv TlOOMO  L  h  "  *'"?  ''"''^«*-  ^  ^^ink  jnst 
b.ulg_et  was  estiLteHri    KLs  of  i?nK  °"  ^  The 

October.  ^  °*^'^  "*  reaching  a  7-cent  fare  in 

Mr.  Warren.  Of  tliis  year? 

fare."  We'went  to  ^SiSe^nt  f^iST  ""*  *°  'T*^  *°  ^^'^^  ^  ^-cent 
and  6i-cent  fare  in  July  Now  „,?r/""''-^'  "  f''""*  fare  in  April, 
little  more  fortunate  than  that  ofZ^Pv'""!^"  ^""^  P'-°»^''Wy  beSi  a 
traffic  on  the  increase  of  fares  ^^'  '"  ''^^''"^  ^  ^^^  '«««  »f 

ciS^s'ztcryS^rt^itt'rrtr"  n*  '^^  -^''--  -p--"-.  m. 

they'^arisT'-Any' n:'wtcuritTes'Z:d"bt\r*  ">^  ^-'""«-  - 
approved  by  the  nublio  .itiiif;!  •  "^  *'^^  company  must  be 

afso  by  the  diSr^ind    RX^^^  Stat^  law,  and 

and  everything  are  determiner!  nffK^f-        conditions  and  the  rates 

on  that.  .Market  conSnso/mleydSmiJ^^^^^^  '^  ""^  "'°'*''"- 

Mr  CrlKi"r  TW  -'"fl  '^t'  '?  A-^ible,™  "• 

Mr'  Wari^v   ?f  1,'f  ^-^■'""'  J"«*  th«  saine  as  the  other 

charge  rn™mo2"adTdir7ost  of'  "''■  T''  "'«  '"^--^ 
\rf  Pt't  ttt^^o   t*    n      rtuueu  ro  rne  cost  of  service  ^ 

;)     ^,V^Ki^s.  To  the  cost  of  service-  ves   ^ir 
higtvllte-Ztts-aXr  -'-^  -  -ti^g  i-.e  of  bonds  at  a 

moi'fo'r^^ee'rhe  Sue^o^S^e'  aSlS^tfc""'*  ^°"  -"<^  - 
Ween  these  things  that  cami  S^n^^eSu^rTi^n^rEtYe^ 

SSssvtetrrLr^^^^^^^^ 

sion^l'itX"  ^""  ^P""^^  °^  '^^  councifthaving  control  of  exten- 
Mr.  CuLKixs.  Yes. 
Mr.  Warrex.  And  service  ? 

and  LwTaSsl^'  Vt^Vf  L'l^^r^^  of  extension,  rerouting, 
must  refer  it  to  the  director  for  h?i  Ti  •''''*•  P"*  '"  ^^^^  ^^^e  they 
think  that  is  the  term  '  ^'^'^''^^  ^^^  recommendation.    I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      477 

Mr.  Warren.  Suppose  he  makes  a  recommendation  one  way  and 
they  can  still 

Mr.  CuLKiNS.  They  can  still  do  just  as  they  please.  The  value  of 
that  is  that  it  secures  some  kind  of  study  into  the  question;  that  it 
will  not  be  carried  by  public  hurrah. 

Mr.  Warren.  You  spoke  of  having  started  with  the  5-cent  rate? 

Mr.  CuLKiNS.  Yes. 

Mr.  Warren.  How  soon  did  you  go  to  the  5J-cent  rate? 

Mr.  CuLKiNS.  At  the  earliest  opportunity,  in  the  three  months. 
Now,  perhaps  to  explain  that,  until  this  reserve  fund  is  accumulated 
the  rates  of  fare  may  change  every  three  months.  In  any  two  calen- 
dar months  where  the  gross  receipts  are  not  equal  to  the  cost  of 
service,  the  rates  of  fare,  beginning  at  the  first  of  the  next  succeeding 
month,  shall  be  advanced  one-half  cent.  That  is  to  continue  until 
thej'^  reach  the  cost  of  service  and  until  $400,000  of  the  normal  re- 
serve fund  is  accumulated.  When  there  is  $400,000  in  the  fund  then 
the  reserve  fund  may  be  used  to  meet  deficiencies,  but  not  until  then. 

Mr.  Warren.  When  you  went  to  the  SJ-cent  rate — ^you  may  have 
told  it  but  I  did  not  catch  it — that  is  with  tickets  ? 

Mr.  CuLKiNS.  Yes. 

Mr.  Warren.  And  the  cash  fare  is  6  cents  ?    . 

Mr.  Culkins.  Yes. 

Mr.  Warren.  Your  present  rate  is  6|  cents  ? 

Mr.  Culkins.  Six  and  a  half  cents  or  7  cents  cash. 

Mr.  Warren.  What  do  you  estimate  that  that  would  yield,  if  there 
was  no  loss  of  traffic? 

Mr.  Culkins.  Well 

Mr.  Warren.  Does  practically  everybody  use  the  tickets? 

Mr.  Culkins.  No  ;  our  experience  with  the  5J  and  6-cent  fare,  was 
that  80  per  cent  used  tickets  and  20  per  cent  paid  cash.  We  have  not 
got  the  figures  out  yet,  but  there  is  a  sort  of  surface  indication,  which 
IS  interesting,  that  there  will  be  a  larger  percentage  of  cash  fares 
than  tickets  from  the  6J  and  7-cent  fares,  they  apparently  feeling 
that  the  proportion  is  not  sufficient — a  man  would  put  up  33  cents 
rather  than  pay  the  extra  half  cent  each  time,  but  he  will  not  put  up 
39  cents.  However,  it  is  not  a  sufficiently  large  fraction  to  be  of  any 
importance. 

5lr.  Warran.  Has  your  experience  with  the  increasing  rate  led  yoii 
to  believe  pretty  firmly  that  j^our  revenue  will  increase  with  increase 
in  rates? 

Mr.  Culkins.  As  a  broad  question,  I  do  not  think  there  can  be 
any  doubt  that  under  this  plan  raising  rates  of  fare  will  reach  a 
point  where  the  economic  law  of  diminishing  returns  will  set  in  and 
where  there  will  be  a  loss  of  car  riders.  Because  the  man  who  must 
ride  and  on  whom  the  company  loses  money  will  be  with  you  always. 
The  man  who  can  walk  will  have  a  disposition  to  walk  as  fares  go 
up.  I  think  that  will  probably  be  different  in  every  city  or  in  various 
cities. 

Mr.  AVarren.  What  has  been  your  experience? 

Mr.  Culkins.  On  the  5J  and  6-cent  rates  there  was  apparently  no 
appreciable  loss.  Of  course,  you  will  understand  that  it  is  a  little 
difficult  to  reach  any  conclusion,  because  this  is  just  at  a  period  when 
the  soldiers  and  the  workmen  are  coming  back,  when  people  are  re- 
turning.   We  do  not  know  how  many  are  returning;  we  do  not  know 


« 

478      PBOCEED,^«s  OK  PEOEKAL  Kr..cTBIC  BAU.WAYS  COMmSSIO^. 

wearegetti^aKroiZn    L^"^"'  ^^'^^  7^^^  indicate  thut 

Tlie  rifA.B«.  J  T   *i    /^  than— the  increase  is  30  per  cent 

\rf  n  "'^"'**^*'a  "  ^^""^  ="»  increase  over ^^ 

Mr.  CuLKiNS.  Over  1918. 

Ihe  Chaibman   But  not  over  the  6-cent  fare » 

peSnce  "f",Ie  e^any  Z^J^^T  'T  '^''^  P"^^'"-  - 
there  should  be  an  a~  h.creaS^of  U  ,T'^^''  r"'""^  conditions 
see,  even  witli  the  soldiers  coml^  hH^  f-'  **"'  ^'^^'^  y^"'-  You 
excess  of  the  30  Dei  cent  of  whif  ^  K  ''  '*  "°*  "P  '»  *!>«*•  The 
is  not  up  to  thatrwhicf  wJuW  fn£!!f/"''  '"°"''*.  '^•^*"»»y  P'od"<* 

^ Mr.  11  „„„.  And  ,™  „.  ^m,,  g,,,,^  ,  ,.„,,  ^^.^^  ^^^  ^^ 

Mr.  CuLKiNs.  Yes. 
28?  JeJ'c^ntl"-  ^ ''  '"''  ^"'''•^^'^  y°-  ^i  f-'"  «>at,  you  are  getting 

Mr.-  Wl^:  Yo"'arjtLf  Sv"  "T'^  ''^  ^«1!  ^^-W— 
Mr.  CVlkins.  Yes.        ^      ^  ^       ^  ""'""''y  *«  «>»cJi  ««  you  could. 

gminglir'''-  ^'''"  ''""^'^  '''"■■"""y  ««t  29  per  cent  where  you  are 

£:  Jl  ™.  Yes  """  **  ""^  *'"^«  «^'y  ^"ditor? 

anythin^  to  the  co™L*il>n  aUi  t  Se  S  of  pu'blic^sent"''"'.  V^^ 
this  service  at  cost  since  it  has  been  in  effect?  ^  sentiment  about 

stro„glv.''\")f  eours'THtl  Hkt  f:  ^1^  "P^P"'^  *«  "^«  P"Wic  very 
subjeft;  many  of  th'Vublk  £  nrS^rslSitTT^^^^  ''''K'"^^' 
able  to  understand  it-  but  wIipipvL  ?f  •  t  ,*/"^  ^^^^  "ot  been 
it  seems  to  be  popuLrand  T  thfnV  u\^r#''*  *f  "'«»•  'Attention 
very  popular  plan  in  the  c  tv      nZ    ■      "  u^  '*^t  *°  «^y  i*  is  a 

would  have  toV  for  it  to^tin  tr^^^'J  ^*'  "^^"^''^  ^^^  '•"*«  of  fare 
perien.e  will  show   h.  f  i?     ^  '^  unpopular  is  a  thinj?  only  ex- 

^  payin^fort^h^t'  y^  ^  d<^sTiraTrth  '^  t?*  ^'^^^  ^^^^'^^ 
thej.est  test  of  that  is  thf?  theTkeeni  ricW^"'^^'''-    ^"^  '  """^ 

be'SpSiTa^JT^^t?  £"£"''  |.  oirSlhat  has  to 
panv  now  contempla  e'  ^Lm^aiS^Tfll  ?f P'.'^^n^d-,  The  com- 
Pubfic  may  better^unde.V^^dTilffi^L'ilS 


it 


pboceedhsTgs  of  fedebal  electric  railways  commission.    479 

to  a  large  number  of  groups  of  our  citizens,  and  I  have  never  had 
an  exception  to  the  experience  that  where  it  was  explained  to  them 
they  looked  very  favorably  upon  it  and  seemed  to  be  very  well 
satisfied  with  the  plan. 

Mr.  Warren.  How  do  you  get  along  with  the  company,  you  as  the 
city's  representative  ? 

Mr.  CuLKixs.  Oh,  we  get  along  fairly  well. 

Mr.  Warren.  If  you  were  starting  out  with  such  an  experience  as 
you  have  already  had  with  your  service-at-cost  franchise — if  you 
wei-e  starting  out  to  draw  one  now  just  as  you  would  like  it  as  a 
sort  of  ideal  or  model  franchise,  what  changes  would  you  make 
from  those  you  have  described  in  the  Cincinnati  franchise? 

Mr.  CuLKiNs.  I  do  not  know  that  L  would  make  any  fundamental 
changes.  I  think  there  is  a  weakness  in  our  ordinance  that  the  super- 
vision is  charged  to  the  general  taxpayer  rather  than  as  a  cost  of  op- 
eration. That  will  always  liave  a  tendency  to  crab  the  supervision, 
because  cities  are  always  broke.  I  believe  that  legitimately  ought 
to  be  a  charge  against  the  car  rider,  foi'  the  service  is  specifically  for 
the  car  rider,  and  you  can  easily  see  it  differentiates  from  every  other 
city  department. 

Mr.  Warren.  How  about  the  term  of  franchise,  if  jou  were  start- 
ing out  with  a  new  franchise? 

Mr.  CuLKiNs.  Of  course  that  is  a  matter  of  personal  opinion.  I 
personally  believe  in  an  indeterminate  franchise. 

Mr.  Warren.  Your  franchise,  however,  has  so  long  to  run  that 
that  question  is  not  vital  yet,  if  it  is  ever  going  to  be. 

Mr.  CuLKiNS.  Well,  not  imtil  we  get  near  to  the  end  of  it;  and 
that  may  be  corrected  some  way  in  the  1931  revision. 

Mr.  Warren.  Has  the  oi>eration  of  this  service-at-cost  franchise  so 
far  resulted  in  any  demand  for  public  ownership  or  any  increased 
demand  ? 

Mr.  CuLKiNS.  Not  anv  at  all.  I  do  not  think  there  is,  beyond  the 
group  which  exists  in  every  city,  any  very  large  amount  of  sentiment 
for  public  ownership,  and  perhaps  less  than  before.  Because  we  have 
said  that  under  this  ordinance  you  get  substantially  all  the  benefits 
of  public  ownership  without  any  of  its  disadvantages.  I  believe  if 
Cincinnati  leaned  toward  public  ownership  they  would  lean  first 
toward  public  ownership)  and  private  operation,  because  we  have  the 
experience ;  we  own  a  steam  railroad  which  is  operated  privately  and 
yields  about  one  and  a  quarter  million  dollars  revenue  to  the  city 
every  year;  so  I  think  that  sentiment  would  be  the  first.  I  have 
heard  that  suggested  as  a  way  of  relief — that  the  city  might  own  it, 
thereby  I'elievmg  the  company  of  that  much  taxes. 

Mr.  Warren.  I  think  that  is  all  I  want  to  ask,  Mr.  Chairman,  but 
I  think  Mr.  Culkins  would  be  very  glad,  because  he  has  really  come 
to  give  information  to  the  commission,  to  answer  any  questions  of  the 
conunission,  keeping  in  mind  only  that  he  would  like  to  get  away  at 
4  o'clock. 

The  Chairman.  Have  you  some  other  witnesses  upon  this  same 
question  ? 

Mr.  Warren.  We  have  other  witnesses  on  the  question ;  yes. 

The  Chairman.  You  are  going  to  file  with  the  commission  a  copy 
of  the  city  franchise? 

Mr.  Warren.  Yes ;  I  understand  Mr.  Culkins  will. 


480      PHOCKOI^CS  O.  .BO.BA.  KZ.CXBIC  BAILWAVS  COMMISSION. 

Mr  CuLKiNs.  Yes ;  I  will  as  soon  as  I  get  back 

lias  one  of  those.    "'  ^^^  ''  '^"'""'S  •"»'=k.    I  see  eve.:,  conunissioner 

^^<^^SJX^^^  enters  into  a  very  complete  de- 

nS\  bookr  •  '''^"'  °*  ^'•^  «»""-«  Plan-you  refer  to  Mr. 
m'*"  ^^""'^an.  Yes. 

getra'll  you"rnt  S.'r"'""  "'^'^  ''^^  °''""---    ^  think  you  will 
naS'  ^'"^"'*'^^-  How  long  have  you  been  con.missioner  of  Cincin- 
Thp  ^'■'"''^-  ^''0"t  t«o  vears. 

Ti*"'  S,^'^''!''^.  None. 

Mn  Co  k"x8 ''i  ^J^*  ^"^^  /»'"•  b-siness  bef o,^  that  ? 
merce  befo^'e^hat      "'  '"'"'''"^  ''"''^'y  "f  the  chamber  of  com- 

cinlltti?^"'"'''"''-  """  ^°"«  h--«  you  been  a  resident  of  Cin- 
Mr.  Cl'lkixs.  Oh,  since  1890. 

Ihe  CHAIR.MAX.  Kr  how  long  a  term* 
^^  M.  Cc.k:.s.  ;yen,  there  is  L  terrspecified.    It  runs  with  the 

of  thb'c^rors^^vSVrr*'"^"*  "^  '""^  co„,„,i.,ioner  is  a  part 
dep{;:tSnTlf  L^p^;^-1  £  ettVStier  ^'^^^'^^  -'-■  ".e 
ad^ed  th1fp?an«°'^  '^'  ^''"^  •""-  »  commissioner  before  they 

w-  a  SS  £%he'"orSLrS  tlf  r^r^'  ■-alid-there 
mission,  adopting  the  titlfin  Clevetnd  m'J  l  ^tT*-'"*"™'"^  <=om- 
made  a  subdepartment  of  the  mavor  in  Jp  ^'^  ".'j^'S"'  '^'^''^^h  ^'^s 
Cleveland.  Then  in  the  new  chart?,  f  1^1  ""^  ?^  the  council,  as  in 
ment  of  the  city  with  the  tftl^  of  d  reetorof'Se^t  r?''Pl'  ^•'P^'"*- 

MrC^ZTkt^t'  f  "'^  'engt'htfVltnnr'"""^- 
nru'  V.  "^^^^-  ^^  t"e  pleasure  of  the  mavor 

over  whatever  powersSdi  oTth^l^'^i?  ""'V^"  *'"*''•«  operation- 
the  city  has  rei-rved  on  ^y  eleJtr  c  st!!!."'  'Y  ^^g^'^tive  powers 
electric  union  depot.  If  tL  rfnill  f.  '««*  ™'^'ay-  mterurtan  or 
the  director  will  'have  con  rol  of  tt  ""*  ^P'*"*  J^  •^'^''"ed  out, 
It  be  municipal  or  privately  oper2d       P"'"''""  "*  ">"*'  ^^hether' 

m"  &.":xst\e1':V„Ti?Ud^">"*'?-"  ^-  <>*  the  city? 
the  accoimting  of  the'  compan/'^'^'"""  *°  *•>''*  ^  ^^^^  control  over 

ten^ionSl""""  '^"'  '"'™  -"^rol  over  service,  accounting   e.- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      481 

Mr.  CuLKiNS.  Not  extensions,  except  as  to  advise  and  recommend 
to  the  council. 

The  Chairman.  To  what  extent  do  you  regulate  the  rates? 

Mr.  CuLKiNS.  They  are  automatic. 

The  Chairman.  Taken  care  of  in  the  contract? 

Mr.  CuLKiNS.  Taken  care  of  in  the  contract. 

The  Chairman.  Are  yoitr  orders  valid  before  they  are  approved 
by  the  council? 

Mr.  CuLKiNs.  Yes;  the  council  has  nothing  to  do  with  the  orders 
i«sued  by  the  department.  My  orders  are  issued  directly  to  the  com- 
pany, and  they  are  enforceable. 

The  Chairman.  Has  the  company  the  right  of  appeal  to  the 
courts? 

Mr.  CuLKiNs.  No ;  it  has  the  right  of  appeal  first  to  me  and  then 
the  right  of  appeal  to  the  court,  but  the  only  defense  they  may 
offer  is  that  the  amount  allowed  in  the  budget  is  insufficient  to  carry 
out  the  order. 

The  Chairman.  Suppose  you  made  an  order  affecting  the  service, 
would  they  have  the  right  of  appeal  from  that? 

Mr.  CuLKiNS.  Not  except  on  the  ground  that  to  improve  the  service 
as  required  would  cost  more  than  they  were  allowed  in  the  budget. 

The  Chairman.  Then  you  are  permitted  to  make  any  order  you 
please  so  long  as  the  cost  does  not  exceed  the  amoimt  fixed  in  "^the 
budget  ? 

Mr.  CuLKiNS.  And  have  authority  to  increase  the  budget  if 
necessary  to  cover  it.    It  amounts  to  'practically  absolute  authority. 

The  Chairman.  Well,  that  is  some  power. 

Mr.  CuLKiNs.  That  is  some  power.  Well,  that  is  the  thought  of 
tlie  ordinance,  Mr.  Chairman,  because  the  city  allows  the  company 
to  retain  its  reserve  that  it  reserves  to  itself,  and  to  charge  whatever 
may  be  necessary  to  do  that — that  it  reserves  to  itself  to  say  how 
much  this  shall  be. 

The  Chairman.  How  large  a  force  have  you  under  you? 

Mr.  CuLKiNS.  Three  inspectors,  an  accountant,  chief  clerk,  and 
stenographer;  not  a  sufficient  force. 

The  Chairman.  What  are  the  duties  of  the  inspectors? 

Mr.  CuLKiNS.  They  inspect  traffic,  inspect  equipment  generally 
and  whatever  may  be  necessary,  under  instruction,  and,  of  course, 
most  of  their  time  is  required  to  make  traffic  checks  and  determine 
what  improvements  may  be  necessary  in  the  service,  or  to  make  any 
investigation  that  may  be  necessary. 

The  Chairman.  You  have  one  accountant  ? 

Mr.  CuLKiNS.  Yes. 

The  Chairman.  Is  that  enough  to  pay  close  attention  to  the  work? 

Mr.  CuLKiNS.  Well;  of  course  he  puts  in  all  his  time.  The  com- 
pany furnishes  an  office  adjacent  or  adjoining  their  accounting  de- 
pai-tment  and 

Tlie  Chairman.  How  is  he  selected? 

Mr.  CuLKiNs.  Appointed  by  me. 

The  Chairman.  Must  he  be  confirmed  by  the  council? 

Mr.  CuLKiNS.  No. 

The  Chairman.  How  are  the  inspectors  appointed? 

Mr.  CuLKiNS.  They  are  civil-service  appointees. 


482      PEOCEEDXSGS  OP  FEDEEAL  ELECTBIC  RAILWAYS  COMMISSION. 
The  Chaieman.  You  have  nothing  to  do  with  it  ? 

The  CHAiRMAJi.  Do  ^^ou  prescribe  the  method? 

,>uKSrcomr„isI^^'ortht %^^^^^  T'^'-  **»''■  °'-'^'-"-  ^y  the 
utilities  commisXn  ^f  the  4 1  •  '  T'"'^  '  ^""^^  ^^^^  ^he  public- 
adopted  the  TSat^'ctnl't'  C^'issTon  "unff^'"*  '''?  '^"^ 
a^countin^,  which  we  have  adopLd  "''"'''"  'y'*^  ''* 

mCmT^^t^h"  '^•^''*  ""'^-^  '",*''^  depreciation  detera.ined? 

an5'thS^;;:il?L?trprt  ^^°  S'Xf''S'aier'=t^^  T'^' ''^- 

ciaTk^P""'''^^^-  ^'  '^"^  comndssion  making  a  study  of  the  depre- 

ofXiwion-.  'S'^re"Lt"mdi!f.?i*Cr"/  ""  *'^«  ^"''^'^'^ 
case.  No  doubt  they  wm  make  V  ^ufficfent^t^n^'  "t.'*"''  P'^rticular 
the  genej-al  rules  fo^  depS^t'^trioct  t  *°  "''''P* 

Ihe  Chairman.  Under  your  Cincinnati  iil«n    ,.!,/•     xi 
tl.e  State  co.nmission  to  do^.itl,er  Sreslc    to  s^,^ce'L*  'T  ^°' 
accounting,  or  anything  else  affecting  theTe^vice?  '       "'*'"'  "'" 

i^  d[e  St'^rmmlrsioXTgeiirir  ""!•'  r^  Powers-that 
of  all  utilities  in  the  sC^t^and^^Z L  sp  d^eXnt  T h.^ °^ 
to.  which  IS  a  right  that  thev  have  withn..!  ;f=  i  "*^  S  '^ferred 

ordinance,  and  to  pass  upo7sec^  ritTes  amWll^fTh'P""  •''I'l '"  *''« 
doubtless  without  regard  to  this  oi'dinauc.  '.ifi  ^u^^  '■'^'''*'  «^'«' 
cifically  provided  therein.  It  "local  conlmlMr°rf"''^  '""''  '^P^ 
cally  and  intentionally  local  cont^  Z,}  ii  ^"^^^  <■ '^"^a".-  specifi- 
the  constitutional  provision  of  the  ^/nf.  'V  ^n^ormity  with 
home-rule  cities  There  C  hJn.  f  ■  ^^^^'ng  lo«*I  control  to 
that  in  Ohio  thi  cLrtei-ed  citks  hlt'',!r"  "'  "'*'  ^"P'-«»<^  ^^""'t 
all  contracts  of  this  kh.d  P'*'"'"'^  P"^""^  '«  '"«tt«r  of 

of'^seaSfe'sr "  ""''  ""  '""""■^^''"^  ^^  -"^i^l  over  the  issuance 
we^as^bTthrcity"'  ""^  ""^^  »"  ^PP'-^''^  by  the  commission  as 
cnSfes^""""'^-  """^  '''''■'  y«"  '^"y  power  over  the  issuance  of  «. 

as'by  thrSmmisS.  ""^  ""^^  ^  ^PP--"^-^  "^^  "-  director  a.  well 
allJws  i?"^'"*^''-  Suppose  you  disapprove  it  and  the  commission 

Mr.  Ct7i.KiNs.  Tlijey  would  not  be  issued. 

Mr!  SkZ:  No^'^^  ^""^^  -*  ^  --^' 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK.      483 

The  Chairman.  There  has  to  be  joint  action? 

Mr.  CnLKiNS.  Yes. 

The  Chairman.  Under  the  cost-of-service  plan  is  there  a  tendency 
on  the  part  of  the  company  to  be  extravagant  in  its  operations  ? 

Mr.  CuLKiNs.  Xo;  there  is  not.  The  purpose  of  providing  this 
incentive,  by  an  additional  return,  was  intended  to  meet  that.  Then 
our  control  over  the  expenditures  would  prevent  that  in  any  event, 
but  there  has  been  practically  no  such  tendency. 

The  Chairman.  That  return  which  you  speak  of  goes  to  the  stock- 
holders and  not  to  the  employees? 

Mr.  CuLKiNS.  It  goes  to  the  stockholders — well,  of  course  it  goes 
to  the  company  for  such  purpose  as  they  see  fit  to  use  it.  The  city 
does  not  dictate  where  it  goes.  The  company  retains  that  and  it  goes 
vrhere  they  see  fit. 

The  Chairman.  Are  the  employees  as  efficient  under  that  plan? 

Mr.  CuLKiNs.  Yes;  I  think  they  are. 

The  Chairman.  Have  you  found  any  tendency  on  the  part  of  the 
employees  to  soldier  on  the  job? 

Mr.  CuLKiNS.  Xo;  not  a  bit  of  that.  Whether  that  is  due  to  the 
fact  that  they  are  the  same  employees  or  to  other  reasons,  of  course 
it  is  too  early  in  the  game  to  determine. 

The  Chairman.  Does  it  have  any  tendency  on  the  part  of  the  em- 
l)loyees  to  try  to  secure  higher  wages? 

Mr.  CuLKiNS.  Well,  judging  by  the  experience  in  cities  not  having 
the  cost-of-service  plan,  I  would  say  not.  In  fact,  the  wages  are 
lower  now  in  Cincinnati  than  they  are  in  some  cities  that  have  not 
the  service-at-cost  plan. 

The  Chairman.  What  is  your  scale? 

Mr.  CuLKiNS.  The  scale  is  50  cents  an  hour. 

The  Chairman.  Eight  hours? 

Mr.  CuLKiNs.  Xine  hours. 

The  Chairman.  Is  there  any  demand  for  increases  now? 

Mr.  CuLKiNS.  We  have  just  closed  a  new  contract  with  them. 

The  Chairman.  And  that  is  the  new  scale? 

Mr.  CuLKiNS.  That  is  the  new  scale,  as  effective  the  1st  of  July. 

The  Chairman.  How  long  does  it  exist? 

Mr.  CuLKiNS.  Three  years — no;  one  year. 

The  Chairman.  What  was  it  before? 

Mr.  CuLKiNS.  Before  that  it  was  a  War  Labor  Board  award — i3, 
46,  and  48. 

The  Chairman.  Will  this  increased  wage  result  in  an  increased 
fare? 

Mr.  CuLKiNs.  I  do  not  know,  Mr.  Chairman.  As  I  saj^,  I  am 
hoping  so  stiongl}^  that  it  will  not  that  perhaps  I  may  be  a  little 
biased.  In  the  month  of  June  it  (^ost  7.54  cents  per  revenue  pas- 
senger, but  that  included  a  large  back  award  from  the  War  Labor 
Board.  Deducting  that,  the  cost  per  revenue  passenger  was  6.75 
cents.  Xow,  with  any  kind  of  an  increase  in  July  that  will  be  met. 
July  and  August  will  be  the  base  months  to  determine  the  rate  of 
fare  on  the  1st  day  of  October. 

Commissioner  Gadsden.  Have  you  talked  with  the  employees  suffi- 
ciently to  find  out  whether  the  fact  that  an  increased  wage  might 
increase  the  fare  would  have  a  tendency  to  keep  them  from  asking 
for  it?  . 


484      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

it  kislSfn  ^ff.J'T  .l"l'"!'  ''  ^'"^  in  Cincinnati.  I  really  think 
It  has  had  an  effect.    I  think  it  was  an  effect  ve  feature  there  because 

feXTl.°f  ^f'rr-^'^'  ««"«iti.ve  to  the  fact  thatTh'e  publ^ 
re«ch  «  tn  nf  f  the  increa.se  is  going  to  them  and  that  they  may 
say  "  Vow  t  J  .?^  i''"'"  "'"".  ""'""^  '^^  th^'"-  °^^n  fellows  will 
in^t'heh  ,nin  Is  W^^^^^^  ^""1  far  enough."  That  is  that  sentiment 
aboiif  it  '"Ji"'f-/^;'tl^o"t  any  doubt,  because  they  have  talked  to  me 
?K?f  fu  ■  '■'***  °*  ""'"S^  '■^"e^ts  so  directly  on  the  rate  of  far* 
that  there  is  an  opportunitv  for  the  public  to  meiusure  it 

won!,!  tPn;!'*^""*::!     "^  '*'"  ^^^  ^'T  y<'"'"  experience  that  this  plan 

rjj-eSsc^irSwk^sf  "'"*  '"p  *" "  '"'"•^  p^'-"--*  f-"^ 

Mr.  CuLKiNS.  I  would  not  be  prepared  to  answer  that  Afr  rhnir 
man  because  the  personal  equation  Is  strong  in  that  amont  the  men' 
and  because  in  this  paiticular  industry  you  find  the^e^l  an  indi ' 
.^duality  in  everv;  city  and  different  characteristics  of  the  people" 
\V  hile  a  man  in  Cincinnati  may  feel  strongly,  as  I  have  indira^ 
Win  n  "nfo'''>teH'y  do-it  is'prettv  eviden  ?here  is  no  sth  feel 
ing  in  Cleveland,  which  has  a  similiar  franchise. 

Mr!  tVLiaNs'^Yes.  ^^'""""""  "  ''''''^'  "'anufacturing  city? 
The  Chairman.  And  are  the  unions  strong  there  » 

car  or^inization  and  other  organized  labor «         "^iween  the  street- 
pl^esSXr^lT  nlTolt  ^''^  - 

,    say  a  little  out  of  proportion  upward  as  to  oth";  lines  at  th'^^s  tile 

popXi^rS^na^rr'  ^°"  ^^'^  ^'^^^  ^^«  eost.of.servS:^;ir  is 
Mr.  CuLKiNs.  Yes. 

thSat^oTf^;;  3b:tz%frr;hiniJ^i""-^"  ^^-^  *™^  ^'^- 

an  arbitrary  fi.xin-  of  the  rate  of  Vnrl  «f  R^'"■^''  ""  T',*?'""  ^l^"* 

S ^^ ^^^ri^^^^^ ^'^''^ ir^"  d'^;%rs- 

and   in  fact   tliere  has  been  no  disturbance  on  this-  and  T  thint  fW 

s  if  Ct.^i"'of  \:?vtdiri.  jfi  ^""^''^'•'^^  /"  co'nSti'oii'Sht 

niiiM.  n/  f  1     ^^,^'^^  riding  under  service-at-cost  franchises— thnt 

a  m  in,1or  ^^  "^  and  Tvfst^"^'  ^^^""^  SfwheK 
picture  show  3  JlS^fif.  ^P^^^  ^uP^''  ^^nt  more  to  see  a  movinff- 
croll'd  tT  ifhe  tSluSV"f„;^''"'  it,  the. picture  shows   afo 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      485 

The  Chairman.  When  the  fare  was  increased  from  5^  to  6  cents, 
were  there  many  demands  for  an  accounting? 

Mr.  CuLKiNS.  No. 

The  Chairman.  Or  when  it  was  increased  from  6  to  6J  cents? 

Mr.  CuLKiNS.  No. 

The  Chairman.  They  were  satisfied  with  your  supervision  ? 

Mr.  CuLKiNS.  Apparently  so.  In  fact,  I  was  very  much  sur^jrised 
that  there  was  not  a  great  deal  more  of  a  clamor  at  6}  cents  than 
there  was  at  5^  cents.  Of  course,  the  public  mind  was  pretty  well 
set  for  6  cents  at  the  time  the  franchise  was  adopted,  because  it  was 
known  the  committee  had  recommended  it,  and  as  an  actual  occur- 
rence, quite  a  number  of  people  offered  a  6-cent  fare  to  the  con- 
ductor under  the  impression  it  was  already  in  effect.  They  were 
I'ather  set  for  6  cents.  1  expected  there  would  be  considerable  feel- 
ing exf)ressed  at  6^  cents,  but  it  has*  not  appeared. 

The  Chairman.  What  is  the  result  of  your  operation?  You  sug- 
gested, or  at  least  I  inferred  from  your  testimony,  that  you  would 
have  to  put  in  a  7-cent  fare  pretty  soon. 

Mr.  CuLKiNs.  No ;  I  said  I  trust  not.  I  was  afraid  we  might  have 
to.  That  would  depend  upon  whether  or  not  the  increase  in  the  new 
wage  scale  would  be  offset  by  the  increase  in  traffic.  In  the  month  of 
June,  G^  cents  would  have  taken  care  of  the  cost  of  service,  so  we  are 
getting  just  about  to  the  point 

The  Chairman.  Did  the  population  in  Cincinnati  increase  or  de- 
crease during  the  war? 

Mr.  CuLKiNs.  Oh,  it  decreased. 

The  Chairman.  About  how  much? 

Mr.  CuLKiNS.  Twenty  or  thirty  thousand,  I  would  say.  The  de- 
crease in  revenue  pjissengers  was  about  5,000,000. 

The  Chairman.  If  you  had  maintained  your  population,  would 
you  have  operated  favorably  on  the  5-cent  fare? 

Mr.  CuLKiNS.  The  1917  ordinance,  which  is  the  5-cent  flat  fare 
ordinance,  was  based  on  the  experience  in  1916,  which  showed 
J^100,000  margin,  after  paying  what  they  call  the  cost  of  service 
in  this  ordinance,  although  it  was  not  the  same  items,  and  the  coal 
alone  in  1917  more  than  wiped  that  out. 

The  Chairman.  How  long  had  your  company  been  paying  regu- 
lar dividends  on  its  fixed  charges,  according  to  this  past  year  ? 

Mr.  CuLKiNS.  I  don't  know  that,  because  they  have  not  paid  any 
dividends  since  my  connection  with  the  properties.  The  operating 
company  is  not  the  owning  company.  The  property  is  leased  by  the 
Cincinnati  Street  Railway  Co.,  and  is  operated  on  a  leasehold,  by  a 
lease  which  requires  a  rent,  equivalent  to  6  per  cent  on  the  outstand- 
ing capital  stock  of  the  street-railway  company. 

The  Chairman.  Wherein  does  your  company  have  anything  to 
do  with  the  operation  of  this  plant? 

Mr.  CuLKiNs.  I  don't  know  that  I  got  your  question,  Mr.  Chair- 
man. 

The  Chairman.  Well,  you  have  nothing  to  do  with  the  hiring  and 
discharging  of  the  men  for  the  company  ? 

Mr.  CuLKiNS.  No;  nothing  at  all. 

The  Chairman.  You  have  nothing  to  do  with  the  expenditure  of 
its  money  ? 


486      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  CX)MMISSIOX. 

Mr.  CuLKiNS.  Except  that  it  must  be  kept  within  the  budget  al- 
lowance. 6      "^ 

The  Chairman.  Within  the  budget  allowance? 

chaJ^*  ^^'^^^^'  Yes— as  long  as  it  is  not  objected  to  as  an  impix)per 

Tlie  Chairman.  Yet  your  supervision  is  not  to  any  extent  a  check 
upon  the  operation  of  the  company  ? 

Mr.  CuLKiNS.  Oh,  yes,  in  this  way— that,  in  the  first  place,  there 
must  be  no  expenditures  made  in  excess  of  the  budget  which  is  al- 
lowed to  them. 

likl?^^  Chairman.  Within  that  bud^t,  they  can  do  anything  they 

Mr.  CrxKiNS.  Except  that  we  have  the  right  to  object  to  improper 
expenditures,  which  is  done  tlirough  the  supervision  of  accounting 
and  a  constant  check  on  the  accounting. 

The  Chairman    Can  you  place  any  limit  upon  the  salaries  paid? 

Mr  CuLKiNs.  The  question  has  never  been  raised.  I  would  think 
I  could  to  an  unreasonable  salary.  I  think  it  would  have  to  be 
manifestly  unreasonable. 

The  Chairman.  Does  the  ordinance  give  you  that  power ? 

Mr.  CuLKiNs.  It  gives  the  power  to  object  to  the  purpase  of  any 

^2."9^r\ -^^^"^^^  ^lo  it,  if  tliere  was  an  increa.se  ot  salary  ?o  any 
official  which  I  regarded  as  unreasonabk.  ^ 

The  Chairman.  What  is  the  highest  salary  paid  there? 

Mr.  CuLKiNS.  I  don't  recall. 

The  Chairman.  How  do  the  salaries  ffo,  ffenerallv? 

Mr.  CtiLKiNs.  Well,  they  vary.  ^ 

The  Chairman    What  is  the  salary  of  the  general  manager? 
roil       ^'-''''''^''-  ^  '^^^  ^  ^*^^'^"-    I  ^^'««ld  have  to  refer  to  the  pay 

The  Chairman.  Or  the  vice  president. 

Mr.  CuLKiNS.  As  I  say,  I  do  not  recall  those  salaries 

Ihe  (iiAiRMAN    If  the  cost-of-service  phm  is  extended  to  all  of 

se«f;it&*^r  of  T"^u';rin7""'""  ''  securities-the  issuance  of 
Tlie  CnAiRMAx  Now,  when  it  comes  to  the  question  of  account- 
ing, do  vou  feel  that  the  inhabitants  of  a  city  would  be  bettci  satk- 
fied  to  fiavc  that  left  with  the  city  co.nmisfsion  or  wfththe  StaTe 
commission?  k>taie 

Mr.  CiLKiNs.  That  will  be  a  matter  of  personal  equation  entirely 
It  would  depend  upon  the  individual.  It  would  dejUd  upon  the  ; 
confidence  in  the  State  or  their  confidence  in  the  local  offickf  Thel^^e 
is  in  our  city  a  very  strong  tendency  to  resent  outside  influences! 
that  is  they  would  rather  have  the  thing  done  at  home  if  T>ossiblp 
.Now,  that  sentmient  might  be  different  in  other  cS'  I  t  ^k  we 
get  a  more  direct  ac'tion  through  direct  control  than  we  would  <^et 

MHL  dK^  i^^^  "^•^^•^^'  complaints  and  application 

befoie  the  pubhc-utilities  commission,  and  having  people  taken  un 
to  the  Capitol,  perhaps,  unless  the  commission  elected  tVhoM  hear 
mgs  in  the  city.  "*^^^ 

The  Chairman.  In  this  cost-of-service  plan,  you  fixed  the  phin  ? 


PSaCEEDIliWSS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOI^.      487 

Mr.  CuLKiNs.  There  was  not  an  appraisement.  This  particular 
ordinance  adopted  the  method  of  valuation  from  the  old  ordinance, 
which  was  invalidated  by  the  Supreme  Court,  witl|  the  exception 
of  one  item,  because  that  had  been  approved  by  the  vote  ot  tiie 
people,  and  because  the  city  did  not  feel  that  the  year  1918  was  a 
very  good  time  to  make  a  valuation,  particularly  as  our  commis- 
sion had  adoiJted  the  reproduction  method  of  valuation. 

The  Chairman.  Well,  does  that  value  muain  the  value  tor  all 
time  as  to  that  basis  with  respect  to  extensions  and  betterments^ 

Mr  CiTLKiNS.  Yes;  generally  speaking.  It  is  not  a  specific  val- 
uation. The  company  is  to  pay  interest  on  its  bonds  and  notes  and 
interest  on  the  equipment  notes,  the  equi^nnent  notes  being  paid  out 
of  operating  expenses,  and  a  flat  allowance  for  this  additional  in- 
vestment of  $416,000. 

The  Chairman.  That  is  not  a  real  valuation  there  i 

Mr.  CuLKiNS.  Oh,  no.  .      ,  i  i     ..•      9 

The  Chairman.  Were  you  permitted  to  make  a  valuation? 

Mr.  CuLKiNs.  Oh,  yes.  -i   ^       a 

The  Chairman.  Suppose  you  did  make  a  valuation  and  toun^t 
that  the  value  of  the  plant  was  considerably  m  excess  ot  the  items 
that  you  have  enumerated,  then  what  would  you  do? 

Mr   CuLKiNS.  The  companv  would  be  stuck  then. 

The  Chairman.  Would  you  be  permitted  to  chajige  the  con- 
tract then,  inside  of  three  years?   .         ,         ^  ^  ,  .  ,,  ^ 

Mr.  Ct  LKIN8.  Xot  unless  the  city  elected  to  purchase  from  the 

^^The'^CHAiRMAN.  On  the  other  hand,  should  it  be  found  that  the 
valuation  was  considerably  less  than  the  items  you  have  enum- 
erated   , ,  ,       ^     ,   ^, 

Mr.  CuKLiNS.  The  city  would  be  stuck  then. 

The  Chairman.  The  city  would  be  stuck  then? 

Mr.  CuLKiNS.  Yes. 

The  Chairman.  So  that  is  a  very  important 

Mr.  CiLKiNS.  Yes;  it  is  very  important. 

The   Chairman    (continuing).  Question  to   establish   a  physical 

valuation  of  the  property?  ^  .       ,      ,  j        x. 

Mr  CuLKiNS.  Well,  in  this  case,  it  was  not  a  haphazard  matteT 
by  any  means.  It  was  established  as  a  guide  and  compared  with 
the  valuation  made  by  the  public-utilities  commission,  which  ran 
about  $27,000,000,  several  vears  ago.  There  was  an  agreed  valua- 
tion under  a  previous  administration  of  $29,000,000,  m  1912,  and 
this  valuation  amounts  to  about  $30,000,000,  and  the  return  is  about 
equivalent  to  G  per  cent  on  that.  ,     x-      0 

The  Chairman.  What  tribunal  should  make  the  valuation^ 

Mr.  CuLKiNS.  The  public-utilities  commission. 

The  Chairman.  The  city  or  State  commission?  * 

Mr  CuLKiNS.  Well,  I  think  the  State  commission  would  prob- 
ably be  the  logical  tribunal  to  make  it.  The  city  has  a  right,  under 
the  constitution,  to  purchase  bv  condemnation,  or  the  right  under 
this  plan  to  purchase  by  that  plan,  or  on  the  valuation  prescribed 
by  the  ordinance.  Five  million  dollars  of  this  will  be  wiped  out 
before  the  end  of  the  franchise. 

The  Chairman.  Did  the  company  express  a  great  necessity  for 
having  the  value  fixed  upon  its  present  basis? 


488      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CuLKiNs.  Do  you  mean  to  have  a  valuation  fixed  at  that? 

Ihe  Chairman    Upon  the  basis  recognized  in  the  contract. 

^.^^^'^y^^^^^»'  I  clon't  know  that  that  question  has  come  up  at  alL 
Mr.  Chairman. 

The  Chairman.  Do  you  believe  that  the  city  will  continue  to  be 
favorably  impressed  with  tlie  cost-of-service  plan? 

Mr.   CuLKiNs.  If  rates  do  not  go  too  high,  I  think  they  will. 

The  Chairman.  What  will  be  the  effect  upon  the  public  mind  if 
the  rates  are  put  to  7  cents? 

Mr.  CuLKiNs.  I  do  not  think  anybody  can  answer  tliat  question, 
because  experience  has  been  of  no  value.  The  city  of  Pittsburgh 
went  to  6  cents  and  showed  an  increase  in  gross  receipts  I  think  of 
k^s  than  1  per  cent.  The  city  of  St.  Louis  showed  a  marked  fallni<r 
ott  on  the  6-cent  rate.  Other  cities  have  shown  a  fallincr  off  It 
seems  to  vary  in  each  community.  It  varies  entirely  in  accordance 
with  the  temperament  of  the  public.  I  do  not  believe  that  any  man 
who  sits  down  and  figures  it,  when  he  is  paying  200  per  cent  for  every- 
thing  else,  believes  that  he  is  being  stung  if  his  transporation  rates 
go  up  So  or  40  per  cent;  but,  as  I  said  before,  there  is  a  psychological 
phase  to  this  whole  question  that  can  not  be  overlooked.  One  city 
^'^iV^^^^  ^^     ^^^^^  ^^^  another  city  will  shove  the  cars  over 

Ihe  Chairman.  Is  there  any  i-elationship  existing  between  the 
company,  their  employees,  and  the  public? 

Mr.  CuLKiNS.  Between  the  company  and  their  employees  ? 
^ublf  2  "^^^^*'^^-  ^®<^ween  the  company,  their  employees,  and  the 

Mr.  CuLKiNS.  Yes;  I  think  so— probably  a  better  relation  than 
there  was. 

The  Chairman  Do  you  think  that  improved  condition  has  re- 
^"ir     J?"^®^^^^*  from  your  cost-of -operation  plan? 

Mr.  CuLKiNS.  Yes;  I  do.  I  believe  that  there  is  a  feeling  that  as 
the  _publio  generallv  undei-stands  it  better,  that  they  have  an  interest 
in  the  control  of  the  company  and  its  operations,  and  that  there  is 
going  to  be  a  readjustment  whenever  they  are  entitled  to  it.  That 
has  a  tendency  to  produce  that  state  of  mind. 

The  Chairman.  Does  the  feeling  that  the  public  has  an  interest  in 
f^fifn ''Vi?  AT  ^T'^V?''  ^^  *^J^  property  naturally  lead  to  the  other 
^^^l'""^^*^^^*  they  should  own  the  plant  as  well  as  operate  it« 

Mr.  CuLKiNS.  Not  so  far.  The  feeling  has  been— and  I  think  the 
general  feeling  in  our  city  is— that  municipal  ownership  would  be 
the  last  thing  to  do;  that  this  will  give  them  all  that  They  would 
have  under  municipal  ownership  and  not  the  obvious  disadvantages 
that  they  would  have.  There  is  not  so  much  talk  about  that  at  all 
it  IS  not  a  live  subject  m  the  city. 

^  The  Chairman.  I  believe  you^said  that  the  Government  operation 
of  the  railroads  and  the  telephones  might  have  something  to  do  with 
that  opinion.  ^ 

Mr.  CuLKiNs.  Well,  I  was  thinking  of  that. 

The  Chairman.  I  have  no  further  questions. 

Commissioner  Sweet.  Has  your  street  railway  in  Cincinnati  any 
outside  lines?    Does  it  control  any  interurban  companies?  ^ 

\Jll'  <-^i^KiN8  Well,  only  one  line  is  an  outside  line,  that  is  owned 
by  the  owners  of  the  traction  company.    Some  parts  are  in  the  city 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      489 

and  some  parts  outside;  and  under  this  ordinance  they  are  required 
to  operate  it  as  a  part  of  their  regular  system. 

Commissioner  Sweet.  Does  that  come  under  your  junsdiction  as 

director? 

Mr.  CuLKiNS.  In  so  far  as  it  is  within  the  city. 

Commissioner  Sweet.  In  so  far  as  it  is  within  the  city  ? 

Mr.  CuLKiNs.  Yes,  sir. 

Commissioner  Sweet.  Beyond  the  city  limits  you  have  no  author- 
ity? 

Mr.  CuLKiNS.  No  authority,  although  the  question  is  not  particu- 
larly raised  on  that,  because  you  can  not  run  a  schedule  to  the  Nor- 
wood line  and  change  it  very  much  beyond  the  Norwood  line. 

Commissioner  Sweet.  Is  that  interurban  or  extension  outside  of 
the  city  limits  paying  or  running  behind?  . 

Mr.  CuLKiNS.  It  is  not  paying.     The  interurban  end  of  it  is  not 

paying. 

Commissioner  Sweet.  Are  the  accounts  of  that  company  kept  en- 
tirely separate  from  the  accounts  of  the  other? 

Mr.  CuLKiNS.  They  are  kept  separate,  but  they  are  kept  m  the 
same  office.  The  gross  receipts  from  that  line  become  a  part  of  the 
gross  receipts  under  this  ordinance,  and  the  expenses  of  that  line  pay 
the  expenses  under  the  ordinance;  so  that  it  is  handled  simply  as 
a  part  of  the  general  system,  although  there  is  a  separate  account- 
ing kept,  because  it  belongs  to  the  Ohio  Traction  Co.,  which  is  the 
owner  of  the  Cincinnati  Traction  Co. 

Commissioner  Saveet.  The  people  of  the  city  then,  in  one  sense, 
are  losers  by  reason  of  having  this  outside  line? 

Mr.  CuLkiNS.  Yes ;  the  car  riders  are. 

The  Chairman.  Yes. 

Mr.  CuLKiNS.  Although  there  is,  of  course,  a  great  part  of  the 
community  population  of  the  city,  some  of  them  actually  withm  the 
city  limits — others  are  within  the  economic  community— who  would 
necessarily  be  served  by  an  extension,  even  though  this  did  not  exist; 
and  that  was  why  it  was  included,  because  it  would  doubtless  have 
to  furnish  service  to  them,  and,  like  all  long  extensions,  you  would 
run  a  pretty  good  risk  of  having  a  losing  line.  Manjr  of  them  are 
losing,  because  we  have  very  many  long  hauls  in  the  city  which  are 

losing  lines.  .       #.         , 

Commissioner  Sweet.  And  there  might  be  a  necessity  for  what- 
ever might  be  directly  lost  in  money,  in  the  fact  of  bringing  the 
business  into  the  city? 

Mr.  CuLKiNs.  Yes. 

Commissioner  Sw^eet.  It  would  be  a  benefit  to  the  merchants? 

Mr.  CuLKiNS.  Unquestionably  the  community  would  get  the  bene- 
fit of  it. 

Commissioner  Sweet.  Were  you  appointed  by  the  mayor  absolute, 

or  did  it  have  to  be  confirmed  by  the  council? 

Mr.  CuLKiNS.  By  the  mayor. 

Commissioner  Sweet.  He  has  the  power  of  removal  ? ' 

Mr.  CuLKiNS.  At  any  time. 

Commissioner  Sweet.  Have  you  the  commission  form  of  govern- 
ment in  Cincinnati  ? 

Mr.  CuLKiNs.  No.  We  have  a  council-and-director  plan.  We  have 
a  council  representative  from  each  ward,  and  six  at  large,  and  the 


160643"— 20- 


-32 


490      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MMISSI02T. 

mayor  appoints  the— he  has  the  general  appointing  power.  The 
council  is  limited  to  legislative  duties.  There  is  a  director  of  service, 
a  director  of  safety,  and  a  director  of  street  railways,  which  the 
mayor  appoints. 

Commissioner  Sweet.  Just  one  from  each  ward,  and  then  six  at 
large? 

]\Ir.  CuLKiNS.  Yes. 

Commissioner  Sweet.  And  then  one  joint  body? 

Mr.  CuLKiNs.  One  joint  body. 

Commissioner  Sweet.  What  was  the  condition  of  the  street-rail- 
way companies  that  led  to  making  this  change  ? 

Mr.  CiTLKiNS.  Well,  the  franchise  was  open  for  revision.  It  came 
about  logically.    It  was  the  time  to  revise  it. 

Commissioner  Sweet.  I  understand  that.  But  was  it,  like  other 
companies  throughout  the  country,  recognized  to  be  in  rather  bad 
financial  condition? 

Mr.  CuLKiNS.  There  is  a  question  about  that.  At  the  time  this 
revision  was  passed  it  was  costing  three-quarters  of  a  cent  more 
to  carry  each  passenger  than  was  received. 

Commissioner  Sweet.  That  was  well  understood  in  the  com- 
munity generally  ? 

Mr.  CuLKiNS.  I  think  so. 

Commissioner  Sweet.  What  did  the  company  do,  if  anything,  to 
make  the  public  aware  of  its  actual  financial  situation? 

-Mr.  CuLKiNS.  There  was  nothing  done  beyond  these  statements  to 
the  council.  It  issued  a  booklet,  which  was  given  to  the  council, 
and  very  widely  published  in  the  newspapers— general  newspaper 
news  publicity,  not  any  paid  publicity. 

Commissioner  Sweet.  Giving  a  statement  of  the 

Mr.  CuLKiNs.  A  statement  of  its  condition,  the  financial  condi- 
tion, and  the  reason  therefor,  and  why  it  was  necessary  to  have  an 
increased  rate  of  fare  in  order  to  live. 

Commissioner  Sweet.  Did  the  council  select  any  auditor  or  ex- 
pert to  go  to  investigate  and  see  whether  that  was  correct? 

Mr.  CuT.KiNS.  Not  other  than  my  department. 

,    Tl^^o  Chairman.  Your  department  had  not  been  created  then, 
had  it?  ^ 

Mr.  CuLKixs.  Oh,  yes. 

Commissioner  Sweet.  You  had  been  appointed  before  that? 

Mr.  CuLKiNS.  Oh,  yes.  I  had  been  appointed  the  previous  year, 
on  the  1st  of  January,  and  the  department  was  changed  from  a  sub- 
department  of  the  mayor  to  a  principal  department  of  the  city. 

Commissioner  Sweet.  And  an  accountant  employed  by  you  went 
over  these  figures  to  see  whether  they  were  correct  ? 

Mr.  CuLKiNS.  Yes. 

Commissioner  Sweet.  And  was  that  understood  bv  the  public? 
Mr.  CuLKiNS.  Yes. 

Commissioner  Sweet.  There  had  not  been  any  serious  dispute « 

Mr.  CuLKiNs.  Oh,  not  at  all.    During  the  public  hearings  I  think 

one  or  two  came  m  and  suggested  that  outside  accountants  might 

be  brought  in,  or  that  outside  experts  be  brought  in,  but  nothing 

very  serious.  ^ 

Oommissioner  Sweet.  No  other  public  sentiment  demanding  that  ? 
Mr.  CuLKiNS.  No.  * 


PROCEEDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOl^.      491 

Commissioner  Swt:et.  At  that  time,  at  the  time  the  change  was 
made  and  immediately  prior  thereto,  had  the  company  been  able  to 
sell  its  bonds  or  induce  anv  new  capital  to  become  interested  in  its 

Mr.  CuLKiNS.  It  had  not/^been  able  to  do  that  for  some  time. 

Commissioner  SwnBET.  Has  it  been  able  to  do  it  at  all  since? 

Mr.  CtJLKiNS.  Not  since.  As  a  matter  of  fact,  immediately  after 
the  passage  of  this  ordinance  there  was  a  suit  filed  to  test  its  validity, 
and  that  was  only  decided  a  little  over  a  month  ago.  The  superior 
court  sustained  the  validity  of  the  ordinance. 

Commissioner  Sweet.  Is  there  an  appeal  from  that? 

Mr.  CuLKiNS,  No  appeal  was  taken.  The  time  has  elapsed  m 
which  an  appeal  might  be  taken. 

Commissioner  Sweet.  So  now  you  regard  that  as  conclusive? 

Mr.  CuLKiNS.  Yes.  Now,  they  can  go  ahead  with  things  they 
might  have  done  some  y^ars  ago,  if  it  had  been  possible. 

Commissioner  Sweet.  I  take  it  from  what  you  have  told  us  that 
the  sentiment  of  what  might  be  called  the  more  intelligent  people 
of  Cincinnati  is  distinctly  favorable  to  this  change. 

Mr.  CxTLKixs.  I  think  so. 

Commissioner  Sweet.  And  that  from  what  you  might  call  the  less 
intelligent  portion  of  the  community  there  has  been  no  complaint? 

Mr.  CuLKiNS.  There  appears  to  be  practically  none. 

Commissioner  Sweet.  Have  you  had  any  jitney  opposition  there? 

Mr.  CuLKiNS.  No;  none  whatever.  The  jitney  was  attempted  m 
Cincinnati  some  years  ago,  and  the  public  just  ignored  it.  A  man 
would  stand  waiting  for  a  street-car,  and  when  a  jitney  rode  by  ready 
to  pick  him  up  and  take  him  down  to  the  station,  he  would  let  the 
jitney  go  by  and  take  the  street -car.     There  are  none  there  now 

at  all.  1.1 

Commissioner  Swt:et.  How  do  you  account  for  that,  when  you 
have  heard  such  testimony  as  we  have  heard  this  morning? 

Mr.  CuLKiKS.  I  do  not.     It  is  a  question  of  temperament.     In 
this  whole  transportation  industry,  you  can  not  tell  what  any  par- 
ticular city  is  going  to  do.  or  know  an}1:hing  about  it.     They  just 
don't  want  them  in  Cincinnati,  and  they  don't  like  them. 
Mr.    Warren.  That    was    before    the    cost-of -service    plan    was 

adopted?  . 

Mr.  Cin>KiNS.  Oh,  yes.    There  has  not  been  an}i:hing  since  that. 

Commissioner  Meeker.  Are  not  your  street-cars  leather  unusually 
efficient  instruments  of  transportation  ? 

Mr.  CuLKiNs.  Well,  we  would  like  to  think  so.  I  think  they 
should  be  more  efficient  than  they  are. 

Commissioner  Sweet.  Is  there  any  difference  between  your  cars 
and  those  used  by  the  Bridgeport  Co.,  so  far  as  you  know? 

Mr.  CuLKiNS.  I  don't  know  what  kind  they  use  in  Bridgeport. 
The  later  type  of  cars  are  very  modern  cars. 

Commissioner  Sweet.  The  pay-as-you-enter  car? 

Mr.  CtJLKiNS.  A  pay-as-you-enter  car.  We  have  some  old  anti- 
quated equipment,  and  that  will  be  got  rid  of  very  soon  now. 
They  are  building  105  new  cars  now  to  take  the  place  of  a  lot  of 
single-truck  old-type  cars  that  are  obsolete.  Then  w^e  are  operating 
some  open  cars  which,  under  the  State  law,  will  be  discontinued  this 
year,  the  old  running-board  type  of  cars. 


fcl-T» 


492      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Do  you    use  what  they  call  the  safety  car? 

Mr.  CuLKiNs.  No. 

Commissioner  Sweet.  The  one-man  safety  car  ? 

Mr.  CuLKiNs.  No ;  we  are  investigating  tnat.  They  have  a  double 
trolley  in  Cincinnati,  and  the  question  was  whether  they  could  be 
operated  there.     That  is  a  matter  which  is  being  investigated  now. 

Commissioner  Sweet.  You  use  the  overhead  trolley  wire? 

Mr.  CuLKixs.  Two  of  them — the  double  trolley. 

Commissioner  Sweet.  Yes;  two  of  them. 

Mr.  CuLKiNS.  Yes. 

Commissioner  Sweet.  AVhat  sort  of  power  do  you  use? 

Mr.  CuLKiNS.  Electricity. 

Commissioner  Sweet.  What  is  that  ? 

Mr.  CuLKiNS.  Electricity. 

Commissioner  Sweet.  I  mean  how  is  it  generated  ? 

Mr.  CiTLKiNs.  The  company  generates  its  own  power. 

Commissioner  Sweet.  It  has  a  power  plant  ? 

Mr.  CuLKiNS.  It  has  a  power  plant ;  yes. 

Commissioner  Sweet.  Does  it  buy  any  of  its  power? 

Mr.  CuLKiNS.  Very  little. 

Commissioner  Sweet.  Dees  it  use  coal  in  the  generation  of  current  ? 

Mr.  CuLKiNs.  Yes,  sir. 

Commissioner  Sweet.  I  am  a  little  surprised  at  what  you  say  with 
regard  to  no  new  capital  being  invested.  Under  this  plan,  now,  there 
is  practically  a  guaranteed  return  on  the  investment  ? 

Mr.  CuLKiNS.  Well,  I  do  not  know  that  I  made  it  clear  that  this 
plan  has  only  been  in  operation  since  last  October,  and  that  up  to  a 
few  months  ago  it  was  under  attack  in  the  courts. 

Commissioner  Sweet.  I  imderstand. 

Mr.  CuLKiNS.  Of  course,  you  would  not  be  able  to  issue  any  capital 
as  long  as  the  ordinance  was  under  attack. 

Commissioner  Sweet.  That  is  very  true.  But  from  what  you  say, 
it  has  been  a  couple  of  months  or  so  since  the  decision  was  rendered. 

Mr.  CuLKiNS.  About  that;  yes. 

Commissioner  Sweet.  Is  there  a  crying  need  of  new  capital  now  ? 

Mr.  CuLKiNs.  Yes ;  there  is  a  need  for  new  capital. 

Commissioner  Sweet.  But  it  is  a  fact,  as  I  stated  a  moment  ago, 
that,  under  your  statement,  there  would  be  practically  a  guaranteed 
return  on  the  investment? 

Mr.  CuLKiNS.  It  would  be  a  guaranteed  return,  unless  eventually 
a  rate  of  fare  would  be  reached  that  would  not  produce  increased 
revenue.  That  is  on  the  knees  of  the  gods.  Nobody  knows  whether 
that  will  happen  or  not.  That  would  be  the  only  contingency  that  I 
can  see  that  would  prevent  this  from  being  substantially  a  guar- 
anteed return. 

Commissioner  Sweet.  Is  .there  any  difference  in  the  different 
classes  of  expenses  to  which  the  gross  returns  should  be  applied ;  for 
instance,  if  there  should  be  a  falling  off  of  business  so  that  your  gross 
revenues  should  not  be  allowed  to  take  care  of  the  expenses,  including 
fair  interest  upon  the  investment  ? 

Mr.  CuLKiNS.  That  has  been  provided  for  in  the  ordinance  by  the 
method  and  arrangement  of  distribution  of  the  gross  receipts:  A, 
operating  expenses,  including  taxes  and  depreciation. 

Commissioner  Sweet.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      493 

Mr.  CuLKiNS.  B,  rental  of  leased  lines^;  C,  what  is  called  the  re- 
ducible debt— that  is,  $5,000,000  of  bonds,  notes,  etc.,  that  will  be 
w"ped  ou^^^^  return  on  Aew'capital;  E,  $416,000  further  flat  return 
allowed  to  the  company;  F,  the  city's  $350,000  franchise  tax;  G, 
working  capital,  if  any ;  H,  reserve  fund.  .  •+  -^ 

The  result  of  these  two  months  will  show  whether  or  not  it  is 
necessary  to  raise  fares  in  order  to  produce  all  of  those  items,    bo  tar, 

it  has  not  been.  ^     ,    ,.       .,  i?      i  ? 

Commissioner  Sweet.  Including  the  reserve  fund  ^ 
Mr.  CuLKiNS.  Yes.    Of  course,  the  reserve  fund  will  be  an  overtiow 

""  Commissioner  Sweet.  So  that,  if  there  should  be  a  slight  falling 
off— if  there  should  not  be  quite  enough  revenue,  the  farst  thing  to 
suffer  would  be  the  reserve  fund? 
Mr.  CuLKiNS.  Well,  of  course,  the  reserve  fund  would-— 
Commissioner  Sweet.  In  other  words  that  ^ight  get  nothing  ^ 
Mr.  CuLKiNS.  Yes;  it  would  get  nothing  on  that  until  there  was 
more  than  enough  to  pay  for  the  cost  of  service. 

Commissioner  Sw^eet.  Then,  the  next 

Mr.  CuLKiNS.  Would  be  the  working  capital,  it  any. 
Commissioner  Sweet.  Return  on  the  capital  originally  invested  ? 
Mr  CuLKiNS.  No;  the  next  would  be  the  city's  franchise  tax.    Just 
as  it  is  now,  the  money  has  not  been  sufficient  to  come  all  the  way 
'w    of  course,  when  the  reserve  fund  is  once  established  those  de- 
flciencies  will  be  taken  out  of  the  reserve  fund;  and  that  is  ]ust  the 
point  now.    For  the  first  two  months  of  the  ordinance  there  was  not 
sufficient  to  pay  all  of  these  items. 
Commissioner  Sweet.  Yes. 

Mr.  CuLKiNS.  Therefore,  the  fares  won't  do,  and  they  will  have 
to  fro  up.  Unless  in  the  months  of  July  and  August  there  wi  1  be  a 
sufficient  amount  of  money  received  to  pay  from  A  to  F,  inclusiv^, 
fares  will  have  to  go  up.  If  there  is  a  sufficient  amount  of  them, 
and  there  is  not  goiSg  to  be  a  cent  left  for  the  reserve  fund  the  fares 
will  not  go  up,  but  the  city  franchise  tax  wi  1  be  lopped  off  first 
That,  of  course,  is  cumulative,  and  must  be  paid  when  there  is  money 

with  which  to  pay  it.  vi  ^     fi.«« 

Commissioner  Sweet.  The  company,  I  suppose,  like  most  other 

companies,  had  to  issue  bonds? 

Mr.  CuLKiNS.  Yes.  xi     i      j  » 

Commissioner  Sweet.  At  what  rate  of  interest  on  the  bonds  i 

Mr.  CuLKiNS.  Five  per  cent. 

Commissioner  Sweet.  And  common  stock  i  . ,    ,   .  . 

Mr.  CuLKiNS.  No;  there  is  no  common  stock  provided  for  under 

this  ordinance.  .  .        i      .  ^i       ^ 

Commissioner  Sweet.  It  does  not  say  anything  about  the  common 

^  Mr*  CuLKiNS.  Unless  they  are  able  to  get  it  out  of  this  incentive 
returA— the  additional  return  to  the  road  for  economic  management. 
Thev  are  allowed  interest  on  the  sinking  fund,  on  the  bonds  and 
notes,  and  interest  on  new  securities,  and  an  amount  which  is  equal 
to  4  87  per  cent  of  the  outstanding  preferred  stock  of  the  Ohio 
Traction  Co.,  which  owns  the  Cincinnati  Traction  Co.  There  is  no 
return  allowed  on  the  common  stock  of  the  Cincinnati  Iraction  Co. 


494      PROCEEDINGS  OF  FEDEEAL  ELECTRIC  RAILWAYS  COMMISSION. 

or  the  common  stock  of  the  Ohio  Traction  Co.,  unless,  from  the  in- 
centive return,  there  is  an  added  return  to  produce  it. 

Commissioner  Sweet.  I  am  not  quite  clear  on  that.  Would  the 
couunon  stock  come  in  after  the  reserve  fund  that  is  to  be  created,  or 
come  out  of  that  ?    I  don't  quite  understand  it. 

Mr.  CuLKiNs.  Perhaps  I  did  not  make  it  plain.  The  return  al- 
lowed are  these  specific  items. 

Commissioner  Sweet.  Yes;  I  undei^tand  that. 

Mr.  CuLKiNs.  Now,  naturally  the  preferred  stock  would  have  the 
fii-st  claim  on  the  $416,000,  and  then  only  enough  to  pay  less  than 
the  5  per  cent  on  the  preferred  stock. 

Commissioner  Sweet.  Could  the  directors  of  the  company,  the 
management  of  the  company,  have  absolute  control  of  that  and  de- 
vote that  to  any  purpose  that  they  saw  fit  without  your  consent  ? 

Mr.  CuLKiNs.  Oh,  yes. 

Commissioner  Sweet.  What  is  that? 

Mr.  CuLKiNS.  Oh,  yes;  I  assume  so,  although  it  is  allowed  as  the 
return  on  the  investment.  I  guess  that  is  a  matter  that  the  stock- 
holders themselves  could  work  out  together.  They  could  defer 
it  if  they  did  not  want  to  apply  it  to  the  dividend,  if  they  saw  fit  to 
use  it  for  other  purposes,  but  the  dividend  is  cumulative. 

Coiimiissioner  Sweet.  If  they  did  not  declare  a  dividend,  it  would 
remain? 

Mr.  CuLKiNS.  I  think  that  would  be  a  matter  between  them  and  the 
preferred  stockholders.  I  do  not  know  anything  about  that.  Now, 
the  reserve  fund  is  the  reservoir  into  which  tlie  surplus  is  deposited. 

Commissioner  Sweet.  I  understand. 

Mr.  CuLKiNS.  Now,  if  there  is  not  any  surplus,  there  is  nothing 
that  goes  in  there. 

Commissioner  Sweet.  No.  I  wish  you  would  tell  us  again — you 
explained  it  once,  but  I  did  not  quite  get  a  clear  idea  of  it — with  re- 
gard to  that  reserve  fund  going  up  to  a  certain  point. 

Mr.  CuLKiNS.  The  reserve  fund  consists  first  of  the  $250,000  pro- 
vided by  that  company.    It  is  the  bumper. 

Commissioner  Sweet.  Yes. 

Mr.  CuLKiNS.  The  minimum.  Then  into  that  reserve  fund  is 
placed  the  whole  excess  earnings  over  the  cost  of  service. 

Commissioner  Sweet.  Yes. 

Mr.  CuLKiNS.  That  is,  A  to  F,  inclusive. 

Commissioner  Sweet.  Yes. 

Mr.  CuLKiNs.  When  that  reserve  fund  reaches  $650,000,  including 
the  amount  put  in  by  the  company,  then  fares  shall  be  reduced  a  half 
a  cent. 

Commissioner  Sweet.  I  see. 

Mr.  CtTLKiNs.  Then  when  it  goes  down  to  $250,000  they  are  to  be 
increaseji.  Now,  if  you  want  a  further  explanation  about  the  initial 
return  to  the  company  out  of  that  surplus 

Commissioner  Stvtiet.  Yes ;  I  think  we  might  have  that. 
Mr.  CiTLKiNS.  Now,  under  certain  conditions  all  of  the  surplus  in 
excess  of  the  cost  of  service  goes  into  the  reserve  fund.  That  is,  when 
fares  are  more  than  6  cents.  When  fares  are  6  cents  only  80  per  cent 
of  the  surplus  goes  in,  and  the  company  retains  20  per  cent.  If  they 
can  bring  the  fares  down  to  5J  cents  they  would  get  30  per  cent  of  it, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      495 

and  if  they  can  bring  it  down  to  5  cents  or  under,  they  would  get  45 

^^Commissioner  Meeker.  That  is  not  clear.    The  return  paid  to  the 
conipanv  is  granted  upon  the  valuation  of  the  properties^ 
Mr.  OuLKiNS.  No ;  rather  upon  an  agreement. 
Commissioner  Meeker.  Outstanding  capital? 
Mr.  CuLKiNS.  Outstanding  capital. 

Commissioner  Meeker.  That  is  all.  ,,     ^  ,i  .  *  ^i. 

Commissioner  Sweet.  Just  one  point  further,  Mr.  Culkins.  After 
ffoincr  through  the  experience  that  you  have  gone  through  m  Cmcni- 
nati  up  to  date,  and  realizing,  as  I  have  no  doubt  you  do,  the  general 
problem  now  confronting  the  country,  and  one,  as  you  know,  which  is 
bein^  considered  bv  this  commission  with  the  hope  of  helping,  m 
som^wav  or  other;  in  this  serious  situation,  what  suggestion  would 
vou  make  as  to  the  proper  remedy  for  the  general  situation  ?  Do  you 
think  that  it  is  to  go  to  this  service-at-cost  plan  such  as  Y^IJ  have 
adopted,  with  one  or  two  slis^ht  changes  that  you  have  made  ?  >\  ou  d 
you  recommend  that  the  Cincinnati  plan  be  adopted  generally 
throughout  the  country  ?  Do  you  think  that  would  be  the  best  remedy 
or  do  vou  have  any  other  suggestion  to  make? 

Mr  *^  Culkins.  We  do  not  offer  the  Cincinnati  plan  as  any  perfect 
3fi    or  anything  of  that  sort,  but  I  believe  the  service- at-cost  plan 
offers  an  opportunity  to  solve  the  whole  question ;  but  as  to  whether 
it  may  require  some  modifications  as  to  the  introduction  ot  some 
zoning  system  or  something  of  that  character  is  going  to  depend 
a  good  deal  upon  the  citv  or  the  particular  community,    ^ow,  many 
cities  have  not  had  the  experience  that  Cincinnati  has  had.     1  per- 
sonally believe  it  is  going  to  be  necessary  for  the  companies  to  intro- 
duce ever}^  reasonable  efficiency,  that  the  keeping^  of  fares  down 
is  of  vital  importance,  and  that  these  losses  of  trafhc  will  not  be  a 
vital  thing,  provided  the  companies  could  live  throughout.     1  thmk 
that  if  they  could  live  throughout  for  a  year,  or  perhaps  two  years, 
vou  would  find  that  the  people  would  become  accustomed  to  it; 
because  I  think  we  all  have  to  realize  that  this  increase,  ]ust  like 
that  of  any  other  commodity  that  is  bought,  is  due  to  a  great  many 
of  the  things  that  vou  brought  out  this  morning.     There  is  appar- 
ently an  inherent  prejudice  against  the  public  utilities,  and  the  feel- 
ing of  the  average  man  is  that  a  public  utility  is  making  all  kinds 
of  money.     Anyhow,  and,  of  course,  there  is  the  fetish  of  the  nickel, 
which  unquestionably  was  built  up  by  the  utilities  themselves.     They 
were  taught  that  the  nickel  was  ]ust  right  for  a  street-car  ride,  and 
you  have  to  have  a  lot  of  sentiment  to  make  them  realize  that  the 
question  of  transportation  is  just  like  coffee  or  coal  or  hogs  or 
hominy.     They  can  not  go  and  buy  a  7-cent  pound  of  sugar  for  a 
nickel,'  without  running  a  long  chance  for  having  short  weight  or 

having  sand.  -  ^   -  a. 

Commissioner  Sweet.  Are  you  personally  interested  m  street- 
railway  stocks  or  bonds? 

Mr.  Culkins.  Not  in  any  sti-eet-railway  stock  or  bonds. 

Commissioner  Sw^eet.  And  you  make  your  statement  now  as  a 
citizen  ? 

Mr.  Culkins*  As  a  citizen.  , 

Connnissioner  Sweet.  And  a  representative  of  the  public  of  Cin- 
cinnati ? 


I 


496      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CuLKiNS.  Absolutely. 

Commissioner  Sweet.  I  think  your  views  from  that  standpoint 
ought  to  have  special  weight. 

Mr.  CuLKiNS.  I  don't  know  anything  about  that. 

Commissioner  Sweet.  Of  course,  the  matter  of  education — differ- 
ent standards  in  different  communities  do  undoubtedly  exist.  Every 
community  has  certain  characteristics  that  are,  perhaps,  contix)lled 
by  the  leading  citizens  to  some  extent,  and  by  various  causes  which 
we  can  not  analyze  definitely,  but  that  really  give  communities  an 
identity,  just  the  same  as  individuals  have.  Now,  that  is  oftentimes 
very  largely  controlled  by  the  newspapers  of  the  community;  is  it 
not?     They  have,  perhaps,  more  influence  than  any  other  one  thing. 

Mr.  CuLKiNS.  There  is  no  question  about  that. 

Commissioner  Sweet.  What  was  the  attitude  of  the  newspapers  in 
Cincinnati  on  the  question? 

Mr.  CuLKixs.  The  newspapers  have  all  been  favorable  to  the  plan. 
I  attribute  that  very  largely — the  lack  of  loss  of  short  haul— to  the 
fact  that  the  newspapers  have  not  been  unfavorable.  If  the  news- 
papers had  given  the  impression  to  the  public  that  this  was  not 
right,  the  ordinary  man  would  have  said,  "  I  won't  do  it :  I  will  walk 
first." 

Of  course,  there  is  another  thing  that  should  be  borne  in  mind 
in  connection  with  this,  because,  as  you  get  away  from  the  nickel, 
your  problem  becomes  greater:  Your  communities  also  differ  in  their 
local  characteristics.  I  do  not  mean  the  sentiment  of  the  people, 
but  in  the  characteristics  themselves.  For  example,  Cincinnati  has 
long  lines,  long  hauls.  It  has  low  density  of  traffic.  Other  towns, 
like  Cleveland,  for  instance,  and  Detroit,  have  high  density  of  traffic. 
They  may  be  perfectly  able  to  get  the  service-at-cost  plan  to  a  point 
where  they  can  haul  passengers  for  a  nickel  and  make  a  profit, 
whereas  Cincinnati  would  be  unable  to  do  it.  There  is  one  of  your 
problems,  because  the  avearage  man  says,  "  If  you  can  do  it  in  one 
town,  why  can  you  not  do  it  in  another  ?  " 

Towns  that  have  a  great  many  short  hauls  and  congested  popu- 
lation can  haul  passengers  at  a  lower  rate  per  passenger;  because, 
after  all,  that  is  the  volume  of  business,  just  as  any  other  line  of 
business  treats  the  cost  of  handling  a  unit. 

Commissioner  Sweet.  Do  you  think  the  service-at-cost  pkn  suffi- 
ciently elastic  to  adapt  itself  to  these  varying  conditions  in  different 
communities? 

Mr.  CuLKiNs.  It  must  do  it,  of  course. 

Commissioner  Sweet.  So  it  would  be  peculiarly  appropriate  then 
as  a  sort  of  general  plan,  because  it  would  adapt  itself  to  the  needs 
of  the  community,  which  are  quite  different  in  the  different  com- 
munities. 

Mr.  CuLKiNS.  I  think  so;  and  yet  I  think  it  probably  is  well  to 
have  in  mind  that,  in  the  communities  that  have  long  expensive 
hauls  there  may  be  some  question  agiiin  of  making  the  service  on 
those  particular  lines  pay  a  little  more  than  their  share.  Of  course, 
you  are  running  now  into  a  very  large  question — into  that  flat- fare 
question  that  you  had  up  this  morning,  with  the  congestion,  and  so 
forth,  with  which  I  have  not  a  great  deal  of  sympathy. 

Mr.  Warren.  Your  scale  is  only  a  flat  f  are  ?  j 

Mr.  CuLKiNs.  Yes ;  we  have  a  flat  fare. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      497 

Commissioner  Sweet.  You  have  never  tried  the  zone  system  ? 

Mr  CuLKiNS.  The  zone  system  was  discussed  m  thrashing  out  the 
ordinance.  I  think  I  was  the  only  one  present  to  have  any  syin- 
pathy  for  the  zone  system  when  it  was  being  discussed ;  but  there  ai^ 
a  great  many  reasons  why  it  would  have  been  difficult  to  have  placed 
ft  in  effect.  ^It  would  have  taken  time  to  study  it,  and  at  the  same 

me  we  were  anxious  to  have  the  matter  thrashed  out  as  ^on  as 
possible.  It  was  suggested  not  only  m  connection  with  the  or  d^- 
nance  but  the  suggestion  was  made  also  m  connection  with  the  ex- 

^' ThTcHAiRMAN.  Just  a  moment,  Mr.  Culkins.    What  is  the  amount 
of  that  franchise  tax  ? 

S^SrSlST^hat  does  the  railway  pay  for  its  paving 

*Ku™  ^Thaf  is  supposed  to  take  the  place  of  the  paving 
obH^ations     They  are  not  «quii-ed  to  pave.    That  goes  into  the 

P^lS  CHl«MiN.^if  you  excluded  the  franchise  tax  and  the  operat- 
ing cost,  you  would  be  able  to  reduce  your  fare*  . 

!lr  Culkins.  We  would  not  be  able  to  reduce  it,  but  we  would  be 
nUU  in  hold  it  whei*  it  is,  without  any  question.  ,.,... 

The  CHAiRMirHas  aky  consideration  been  given  to  that  subject? 

Mr  C^KiNS  Well  there  was  discussion  at  the  time  the  franchise 
was  VsSTbui  it  was  not  seriously  discussed,  because  it  has  been 
There  SAhat  no  power  could  have  convinced  the  people  of  Cm- 
cinnatf  that  to  remove  that  tax  would  not  have  been  takmg  the  money 
Tt  of  tE  pockets  and  presenting  it  to  the  traction  company^  The 
city's  financial  system  was  built  around  it.  We  have  the  Piesent 
^■K  f;l^  V.i  tfl-/p<!  in  Ohio  and  the  cities  are  all  bankrupt.  The 
laklng  away  of  $1w%0  wis  a  matter  that  the  council  would  not 

^^ToSlonei^Sw^ExyTf  they  had  the  option  of  paying  7  cents  for 
a  ride,™mpVpaying  this  $1575.000  in  the  form  of  a  general  tax, 
wViiph  would  be  more  satisfactory  s  -£       , 

Mr  CuLKiN^  I  think,  Mr.  Chairman,  that  the  car  ridei^,  if  you 
ev^get  them  up  to  it,  'would  begin  to  then  understand  it  for  the 
first  time.    Of  course,  there  is  no  option  in  it.    It  is  a  part  of  the 

"'The  CHriKMAN.  Does  the  cost-of-service  plan  have  any  material 
effect  upon  the  number  of  or  the  amount  of  the  payments  of  judg- 
ment allowed  on  personal-injury  claims?  , 

Mr  Culkins.  There  has  not  been  any  experience  upon  which  to 
make  any  determination  on  that,  Mr.  Chairman.  Our  claim  ratio 
"s  pretty  low-less  than  3  per  cent;  and  I  have  not  noticed  any  par- 

^' The'  Cha"! mIn.'  Would  it  be  convenient  for  you  to  file  a  sufficient 

number  of  your  franchises?  iv      •  x 

Mr.  Culkins.  I  will  be  very  glad  to  do  so,  or  any  other  informa- 
tion  that  may  occur  to  the  commission.    I  would  be  only  too  glad  to 

"m^  Warren.  Mr.  Culkins,  you  said  that  the  rate  of  wages  was  50 
cents  an  hour  1 


498       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIO]^-. 

Mr.  CuLKiNs.  Yes. 

Mr.  Warrex.  How  much  of  an  increase  is  that? 
Mr.  CuLKixs.  Two  cents  an  hour  over  the  award  of  the  War 
Labor  Board. 

Mr.  Warren.  Have  you  any  idea  what  the  effect  would  be  on  your 
rate  of  fare  if  your  rate  of  wa^es  went  up  to  G2  cents  an  hour,  and 
your  day  s  work  reduced  to  eight  houi-s,  as  has  just  been  done,  ac- 
cording to  the  papers,  in  Boston  ? 

Mr.  CuLKiNH.  Oh,  just  roughly,  I  would  say  that  it  would  put  the 
fare  above  8  cents. 

Mr.  Warren.  Above  8  cents,  instead  of  6 J  cents? 
Mr.  Culkins.  Yes,  sir;  I  would  say  so,  about. 
Mr.  Warren.  Do  you  publish  your  cost  of  service  periodically? 
Mr.  CuLKiNs.  We  have  it  in  the  newspapers.     It  is  not  published 
in  advertising  form,  but  it  is  available  to  the  public  through  my 

Mr.  Warren.  That  is  all,  Mr.  Culkins.  Thank  you  very  much. 
Mr.  Chairman,  I  am  going  to  suspend  Mr.  Nash's  cross-examina- 
tion longer,  because  Mr.  Draper  is  here.  He  is  the  operating  vice 
president  of  the  Cincinnati  Co.,  and  I  thought  it  might  be  well  to 
hear  both  the  Cincinnati  sides  at  the  same  time. 

The  Chairman.  Very  well. 

Mr.  Warren.  Mr.  Draper,  will  you  take  the  stand  ? 

STATEMENT  OF  MK.  WALTER  A.  DHAPER. 

Mr.  Warren.  Your  fidl  name,  Mr.  Draper? 

Mr.  Draper.  Walter  A.  Draper. 

Mr.  Warren.  Was  I  right  in  saying  that  you  were  the  vice  presi- 

?J^*  ^"^^*^«-  Vice  president  of  the  Cincinnati  Traction  Co. 
Mr.  Warren.  How  long  have  you  been  connected  with  that  com- 
pany, Mr.  Draper? 

Mr.  Draper.  Since  1907. 

Mr.  Warren.  And  how  long  have  you  been  vice  president  of  that 
company  ? 

Mr.  Draper.  Since  1913. 

Mr.  Warren.  You  have  heard  Mr.  Culkins's  testimony  ? 

Mr.  Draper.  I  did ;  yes,  sir. 

Mr.  Warren.  What  can  you  add  to  his  testimony  regardinff  the 
Cmcinnati  situation?  •^      o  & 

Mr.  Draper.  Well,  I  understood  that  one  point  that  was  desired 
to  be  touched  upon  was  the  question  of  the  incentive  to  economical 
operation,  and  knowing  time  was  of  the  essence  here  as  everywhere 
else,  I  have  reduced  to  a  few  pages  what  I  might  say  on  that  sub- 
ject, if  you  will  allow  me  to  read  it. 

Mr.  Warren.  I  would  be  very  glad  to  have  you  do  that.  Is  that 
based  on  what  Mr.  Culkins  referred  to,  in  part,  the  amount  of  the 
surplus? 

Mr.  Draper.  Yes ;  that  is  based  on  the  amount  which  comes  to  the 
company  from  the  amount  that  was  left  over  after  providing  for  all 
the  other  requirements,  and  based  on  what  the  rate  of  fare  mav  be 
In  other  words,  if  it  is  6  cents  or  over,  the  company  gets  nothing 


proceedings  of  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      499 

NEED    FOR    INCENTIVE    FOR    ECONOMICAL    OPERATION    UNDER    SERVICE-AT- 

COST  FRANCHISES. 

One  of  the  fundamentals  of  the  service-at-cost  plan  is  to  arrive  at 
some  figure  that  will  represent  the  i^turn  to  the  company  on  capital 
invested.  This  is  reached  by  asceitaining  the  present  value  ot  the 
property,  or  the  actual  cost  of  the  propertv  and  allowing  a  certain 
?ate  of  feturn  on  such  value.  The  rigid  application  of  this  rule,  how- 
ever, pays  little  or  no  attention  to  the  fact  that  a  return  on  mere 
present  value  or  historical  value  does  not  include  any  consideration 
for  the  risk  originally  undertaken  or  for  the  care,  attention,  labor, 
and  efficiency  bestowed  by  the  company  on  the  development  of  the 

^Thelidvocate  of  a  fixed  and  rigid  return  will  say  that  by  the  very 
certainty  of  its  being  earned,  which  is  often  erroneously  called  a 
guarantv,  the  company  is  sufficiently  rewarded  and  needs  no  other 
iVompense  for  its  yekrs  of  effort  and  endeavor.     It  is  nowadavs 
rather  easily  forgotten  that  the  pix)i>erty  was  built  and  developed 
bv  capital  tLt  was  attracted  to  it  by  the  anticipated  opportunity  of 
makinrr  more  than  a  bare  legal  intoi^st  on  the  investment.    In  fact 
the  investor  himself  has  almost  forgotten  the  happy  days  when  he 
looked  forward  to  the  increasing  value  of  his  property  with  the  de- 
velopment  of  the  city  or  county  it  served;  and  as  increasing  costs 
have  left  an  ever-decreasing  margin  between  income  and  operation, 
it  is  considei-ed  the  height  of  kindness  and  generosity  on  the  part  of 
the  municipal  or  other  government  to  allow  a  legal  rate  of  interest 
on  the  bare  bones.    Ought  not  in  all  fairness  an  f PP^^-^l^^^^t^;  bej^^;^^ 
the  investor  to  get  a  little  moi-e  by  efficient  operation  out  of  his  money 
that  he  has  risked  in  the  development  of  his  community  than  he  could 
have  gotten  if  he  had  locked  it  up  in  bonds  or  turned  money  broker? 
In  ^ttlements  of  traction  problems  fixing  a  valuation  and  a  return 
the  rate  is  generally  made  as  low  as  the  lowest  legal  rate  of  interest. 
Six  per  cent  is  most  frequently  used.    The  original  mvestor  certainly 
expected  more  when  he  risked  his  money,  and  monev  for  utilities 
can  not  be  borrowed  at  that  rate  very  easily  now ;  and  if  a  low  rate  is 
fixed  in  the  franchise  to  define  the  minimum  return  the  investors 
should  be  encouraged  to  careful  and  economical  operation  by  an  op- 
Dortunitv  of  receiving  something  more  if  they  can  earn  it. 

So  much  for  the  ethical  side  of  the  question.    ^\Tiat  of  the  prac- 
tical«     It  is  true  that  a  service-at-cost  franchise  offering  an  almost 
certain  return  makes  it  more  easy,  or  at  le^vst  possible,  to  borrow 
money.     But  bankers  have  always  taken  into  consideration  not  the 
question  whether  a  concern  can  just  live— j"st  manage  to  make  ends 
nieet— but  rather  how  much  margin,  how  much  over  the  bare  living, 
it  can  make.    And  this  question  of  banking  and  getting  new  money  is 
a  vital  one.    Not  only  has  the  question  to  be  solved  as  to  how  street 
railroads  are  to  make  their  operating  expenses,  but  how  they  are  to 
pay  interest  on  borrowed  money  in  the  shape  of  permanent  invest- 
ment or  bank  loans.  .  *  •     i       j  i     i.  ^ 
Actual  experience  under  the  Cincinnati  franchise  has  demonstrated 
that  the  banker  begins  to  take  more  intei-est  when  he  is  shown  that 
in  addition  to  a  fixed  low  intere^st  rate  that  is  practically  assured  the 
company  can  do  even  a  little  better  by  careM  and  attentive  manage- 
ment    "When  it  comes  to  marketing  securities  those  paying  a  tixed 


500      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

return  of  6  per  cent  will  not  sell  so  well  as  those  that  have  at  least  some 
show  of  paying  a  fixed  return  of  G  per  cent  and  then  something  more. 
But  6  per  cent  is  not  n©w  a  sufficiently  high  return.  If  6  per  cent 
must  be  written  in  the  franchise,  then  let  there  also  be  written  therein 
that  an  additional  1  or  2  per  cent  can  be  earned  by  hard  work.  If 
the  fixed  return  is  just  enouofh  to  meet  the  dividend  or  interest  on  a 
senior  security,  let  the  possible  additional  return  go  to  the  conunon- 
stock  holder,  who  under  a  service-at-cost  franchise  is  pretty  apt  to  be 
left  at  the  dock  when  the  boat  pulls  out,  because  there  is  no  room  for 
him.  And  don't  forget  that  the  common-stock  holder  has  played  his 
l^art,  if  not  the  important  part,  in  the  development  of  street-railroad 
enterprises.  The  senior  security  holder  is  the  banker.  The  common- 
stock  holder  is,  or  was,  the  prospector,  the  pioneer,  the  builder — the 
man  with  the  vision. 

Those  who  operate  street  railroads  have  not  lost,  and  it  is  to  be 
hoped  never  will  lose,  their  ambition  to  operate  as  economically  and 
efficiently  as  possible;  and  yet,  because  we  are  all  still  human,  there  is 
needed  in  addition  to  the  desire  to  make  a  showing  the  spur  of  real 
financial  benefit.  Under  a  rigid  service-at-cost  franchise  the  company 
really  becomes  a  sort  of  clearing  house  for  the  money  it  takes  in.  It 
pays  the  employees,  then  the  tax  gatherers,  and  then  the  senior  security 
holders.  This  takes  its  all.  Justice  and  good  business  sense  dictate 
that  there  should  be  at  least  a  small  commission  paid  for  all  this  work. 
It  wJU  add  zest  to  an  otherwise  flat  existence.  Operating  under  a 
service-at-cost  franchise,  without  some  added  incentive,  would  be  a 
good  deal  like  asking  an  old  gambler  to  play  poker  for  fun  and  not  for 
money. 

It  has  sometimes  been  said  that  a  service-at-cost  franchise  with  a 
purchase  clause  therein  and  complete  city  control  has  all  the  good 
leattires  of  municipal  ownership  and  none  of  its  bad  ones. 

I  did  not  know  that  I  was  going  to  quote  Mr.  Culkins's  language, 
but  I  think  that  is  what  he  says. 

This  becomes  tnie  if  there  is  an  incentive  to  careful  management  in 
an  additional  and  contingent  return. 

The  Cincinnati  franchise  provides  that  when  the  fare  is  5  cents  the 
surplus  remaining  after  all  requirements  are  met  shall  be  divided — 
55  per  cent  to  the  reserve  fund  and  45  per  cent  to  the  company.  When 
the  fare  is  5J  cents  the  division  shall  be  70  per  cent  to  the  surplus 
fund  and  30  per  cent  to  the  company,  and  when  the  fare  is  6  cents  the 
(division  shall  be  80  and  20  per  cent,  respectively.  When  the  fare  is 
over  G  cents  the  company  gets  nothing.  This  plan  falls  short  of  pro- 
viding a  proper  incentive,l)ecause  if  the  fare  goes  above  G  cents  there 
is  no  additional  return  to  the  company  beyond  the  fixed  minimum. 
A  more  efficacious  plan  would  be  to  allow  some  additional  return  at 
all  times — larger  as  the  operating  expense  is  kept  down,  smaller  as 
the  operating  expense  increases.  Even  as  it  stands  the  company  has 
an  incentive  to  operate  efficiently  and  economically,  since  by  keeping 
the  fares  down  it  will  receive  a  bonus,  which  can  be  given  the  com- 
pany's common-stock  holders,  who  otherwise  are  cut  off  under  the 
franchise  like  a  disinherited  child. 

There  is  another  potent  argument  for  providing  this  incentive^ 
and  that  is  the  tendency  of  the  public  to  feel  that  if  the  company  is 
practically  guaranteed  a  certain  return  and  can  get  no  more,  it  will 
be  indifferent  to  how  high  operating  costs  and  fares  may  go,  and 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       501 

will  readily  "  pass  the  buck"  to  the  city  in  matters  of  higher  wages 
Tr  anrother  et nt  likely  to  affect  fares  on  the  very  comfortable 
theorj  of  "  W^^^^^  we  care?     Let  the  men  get  higher  wages 

so  long  as  the  car  rider  pays."  «mnlovees. 

In  a  recent  discussion  of  the  wage  question  wrth  »"'  « "J'^y**^' 
the  main  interest  the  public  took  in  the  matter  ^f  jl^Jher  we 
wouldn't  give  in  without  much  pressure  because  it  ^oul'Lj^'l  f° 
i^?o  the  rfje  of  fare.    In  fact,  some  people  declared  that  we  were 

.  c.rt.m  Sxlemion  to  .  'f  »S/Sr.;iuo„    "  Wh,™  von  c.r. 
,11  buncombe,  «"«, '~'«^ 'ft.'tXf  miioneS  U.e  l.ct  that 

this  same  public  to  the  task  ^t  tr>  ing  to  n  .^,     ^    ^^^^  interest 

at  once  as  an  unselfish,  sympathetic  benefactor      iney 

El  .n^'iaTn  3S5fr»\  ini^in'r  r i'ff^  *- 

It  contained  the  following  language : 

THE    PUBLIC    BE ^IGNORED. 

payment  of  wages.  illustration  of  this  tendency.    Transportation 

service.  .        ,        .    ,        ,  . 

If  there  were,  in  the  city  referred  to,  a  service-at-cost  franchise 
ami  a  clause  therein  providing  a  premium  on  efficient  and  economi^ 
management  a^  reflected  by  the  rate  of  fa«,  could  this  ^mpUint 
Inve  been  penned?  Moreover,  would  not  the  company  ha\e  more 
reason  to  consider  much  more  carefully  the  merits  of  the  case  instead 
of  merely  «  passing  the  buck,"  even  if  it  were  inclined  to  do  so? 

Such  an  Tdded  incentive  i^uld  be  provided  in  many  Y^y^f}"^^ 
bv  dfviding  a  surplus  over  requiremehts  as  in  the  Cincinnati  fran- 
chise or  an  Edition  of  1  or  2  per  cent  to  the  fi.xed  minimum  return. 
In  ail  cas^  however,  it  shouM  be  made  to  depend  upon  the  com- 
uanv  not^ow  well  it  is  liked  or  the  degree  of  Christian  fortitude 
wit^'which  officials  bear  public  criticism,  but  upon  actual  tangible  re- 
Sts  obtained  iLsucce  Jul  operation.    The  best  test  would  be  pro- 


502      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

vided  by  fixing  the  added  return  inversely  on  the  rate  of  fare,  but 
allowinff  somethinor,  no  matter  what  the  fare  may  be. 

Mr.  Warren.  Mr.  Draper,  does  your  franchise  have  any  provision 
for  changing  the  measure  of  tlie  scale?  As  I  understood  Mr.  Cul- 
kins,  it  has  a  scale  based  on  a  flat  nite  of  fare. 

JVIr.  Draper.  Yes ;  there  is  no  provision  for  a  change  unless  the  city 
avails  itself  of  the  opportunity  of  again  revising  the  franchise  in 
1931.  ^  t>  6 

Mr.  Warren.  There  is  nothing  in  connection  with  it,  except  by 
agi^-ement  ? 

Mr.  Draper.  No. 

Mr.  Warren.  The  last  thing  Mr.  Culkins  said  as  he  left^and  I 
would  like  your  judgment  on  that  also— was  that  if  the  Boston  wage 
scale,  which  had  just  been  settled  by  arbiti-ation  at  62  cents  an  hour, 
and  the  Boston  hours  of  work  of  8  hours  per  day  were  introduced 
in  Cincinnati,  it  would  probably  send  the  cost  of  service  up  to  about 
8  cents  per  passenger.    Did  you  hear  that? 

Mr.  Draper.  Yes;  I  heard  that. 

Mr.  Warren.  You  think  that  is  about  right? 

^fr.  Draper.  It  is  rather  hard  to  estimate.  I  do  not  know  what 
the  8  hours  would  mean,  but  I  think  if  the  fare  was  as  high  as  it 
would  go  under  existing  conditions  at  the  present  time,  it  would  run 
it  to  about  7.5  cents. 

Mr.  Warren.  If  your  present  6.5  cents  is  paying  the  cost  of  service 
at  the  50-ccnt  wage  scale? 

Mr.  Draper.  Yes. 

Mr.  Warren.  Do  you  think  the  62-cent  wage  scale,  if  not  affected 
too  much  by  the  8  hours,  would  be  met  by  the  7.5  rate? 

Mr.  Draper.  I  think  so. 

Mr.  Warren.  Now,  suppose  the  7.5  cent  rate  did  not  meet  it,  or 
suppose  the  scale  of  wages  went  substantially  higher  than  62  cents— 
I  believe  in  Chicaj^o  they  are  asking  87  cents,  are  they  not? 

Mr.  Draper.  Eighty-five  cents,  I  think. 

Mr.  Warren.  Eighty-five? 

Mr.  Draper.  Yes. 

Mr.  Warren.  Is  there  any  way,  then,  in  which  you  could  substi- 
tute some  different  method  of  collecting  the  fare,  or  some  method 
which  would  be  related  to  the  distance  that  the  passenger  rode,  for 
example  ? 

Mr.  Draper.  Only  by  amending  the  present  franchise. 

Mr.  Warren.  And  that  can  only  be  by  agreement  between  the  com- 
pany and  the  city? 

Mr.  Draper.  I'^es. 

Mr.  Warren.  Do  you  think  the  method  which  you  have  of  increas- 
ing the  income  of  the  company,  in  case  of  making  a  reduction  in  the 
rate,  furnishes  a  sufficient  inducement?  How  does  it  work  out  finan- 
cially, in  other  words? 

Mr.  Draper.  Financially,  of  course,  up  to  the  present  time,  it  has 
not  worked  at  all. 

?J^*  ^^"^''^^-  ^*  present  it  all  goes  into  the  reserve  fund  ? 

Mr.  Draper.  No;  it  does  not  even  reach  the  reserve  fund;  but  if  it 
reached  the  reserve  fund  under  the  6.5  cents  there  would  not  be  any 
division  at  all.  "^ 

Mr.  Warren.  It  would  all  go  into  surplus  ? 


««  ^r.r^T7t>AT   TTTT^rTRir  RAILWAYS  COMMISSION.      503 
PROCEEDINGS  OF  FEDERAL  ELECTBIO  iSAU^w^xo 

"I-  ^::Z^^^^^^^  depend  upon  .our 
'^m    Drapek.  Yes.  sir;  you  can  not  fix  a  rate  that  will  be  just 

^"Z^V!„^.nTirtir tenough  to  bring  the  re^rve  fund  up 
to  $650,000,  then  the  rate  automatically  goes  down 

Mr.  Drakr.  The  rate  goes  down  I*  >t.^"^^^>  Tn^c^  on  a 
up  to  $650,000  in  a  certain  period,  and  is  $20,000m  excess 

E-  >^=  ^SSV~"arS  :l  or  =d%  think  it  worth 
rec'J.idSli^shLe  the  savings,  i*  «-re  w«re  any,  between  the 
company  and  employees-a. saving  on  the  budgets 

Mr-  WaCk'i^ M^'S^testimony,  the  company  submits 
the  bu  Jet  T  dSs  before  the  beginning  of  the  new  year.  That 
is  the  calendar  year,  I  pre.sume. 

£:  A?Xx.  And  that  budget  has  to  be  approved  by  the  director 
of  s-treet  railways? 

E  ^V^r..™ intima^d  that  thus  far,  I  think,  you  were  living 
within  the  budget?     ^ 

.  «EtSH'  =,c.K«  .tr/rs^s 

^  Mr^'RA^r  Y^^-  I  would  say  that  that  would  be  an  additional 
ino^niiS^  We  found,  however,  if  that  would  be  used  in  any  way 
r?ndu<^  the  men  to  accept  a  lower  flat  wage  in  anticipation  of  a 
poiiWe  additional  returA,  that  they  would  not  receive  it  very 

""Mr  mS'They  do  not  care  for  the  contingency  in  it? 

Mr  Draper   No  •  thev  want  to  be  sure  of  what  they  get. 

Mr   Warrfn   They  do  not  like  to  live  on  what  was  referred  to 
here  th|  Xr  dT-ith  ix^fereuce  to  some  of  the  securities   as 

"  MrDRAPER.  No;  they  do  not  care  to  live  on  what  the  street  rail- 
"\^r.  W™.  Perhaps  they  have  been  in  the  busing  too  long  and 
-t^^:^^^:Z?t^rt^^^  bS^  a  long  w^le; 

*''Th?CHAreMAK.  Is  that  the  hopes  of  the  holder  of  common  stock 
in  your  company  1 


504      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Draper.  The  holder  of  the  common  stock  has  apparently  no 
hopes  left. 

Commissioner  Sweet.  That  was  his  attitude  several  years  ago. 

Mr.  Draper.  When? 

Conmiissioner  Sweet.  Quite  a  number  of  years  ago  that  was  his 
attitude. 

Mr.  Draper.  He  had  hopes  then;  yes.  This  franchise  has  given 
our  common  stockholders  some  hope.  You  can  see  how  vague  the 
hope  is  from  the  fact  that  if  your  surplus  goes  down  to  about  $20,000 
in  excess,  they  will  get  $4,000  on  the  6-cent  fare. 

The  Chairman.  What  is  the  amount  of  the  common  stock  ? 

Mr.  Draper.  $7,500,000. 

The  Chairman.  How  much  money  actually  went  into  the  property 
from  the  sale  of  that  common  stock  ? 

Mr.  Draper.  That  is  a  little  hard  to  tell,  because  of  the  fact  that 
the  company  also  invested  some  money  in  the  building  that  is  occu- 
2)ied  by  the  officers. 

The  Chair3ian.  Well,  can  you  approximate  the  amount  that  went 
into  the  plant  of  that  $7,500,000  common  stock? 

Mr.  Draper.  The  $7,500,000  common  stock  and  the  preferred  were 
both  used.  The  preferred  was  sold  at  a  discount,  and  the  common 
stock  practically  took  up  that  discount.    I  don't  know 

The  Chairman.  This  common  stock  is  technically  called  the 
"  hope  "  stock  ? 

Mr.  Warren.  That  is  about  what  it  is ;  yes. 

The  Chairman.  That  is  all. 

Commissioner  Gadsden.  Mr.  Draper,  you  did  not  intend  to  give 
the  impression  to  the  commission  that  you  think  that  there  is  any- 
thing inherently  opposed  to  the  interest  of  the  common  stockholder 
in  tlie  service-at-cost  plan,  do  you? 

Mr.  Draper.  No;  I  should  say  under  this  franchise  he  is  given 
some 

Commissioner  Gadsden.  But  the  service-at-cost  plan  is  theoreti- 
cally based  upon  the  investment,  is  it  not? 

Mr.  Draper.  The  service-at-cost  plan  presupposes  some  sort  of  a 
valuation,  either  made  or  agreed  upon. 

Commissioner  Gadsden.  If  the  common  stock  represents  real 
value,  is  there  any  more  reason  why  he  should  not  be  taken  care  of 
under  the  service-at-cost  plan  than  the  owner  of  the  preferred  stock  ? 

Mr.  Draper.  If  it  represents  real  value,  it  would  have  to  be  taken 
care  of. 

Commissioner  Gadsden.  Exactly.  You  did  not  want  this  com- 
mission to  understand  that,  as  a  general  proposition,  the  common- 
stock  holders  in  this  industry  had  given  up  hope  that  the  common 
stock  will  be  of  real  value? 

Mr.  Draper.  No;  absolutely.  I  say  our  common  stock  has  this 
additional  interest  in  the  building,  but,  so  far  as  the  street-railway 
business  is  concerned,  they  have  not  been  very  much  encouraged  in 
the  last  few  years,  and  this  franchise  gives  them  some  additional 
hope. 

The  Chairman.  Does  your  common  stock,  separate  from  the  pre- 
ferred stock,  ever  have  a  market  value  ? 

Mr.  Draper.  Yes  ,•  it  is  sold  in  the  local  stock  market. 

The  Chairman.  What  is  the  highest  price  that  it  has  sold  fgr? 


^x.T.T,AT   TTT  T7PTT?Tr  RAILWAYS  COMMISSION.      505 
PROCEEDINGS  OF  FEDERAL  ELECTRIC  KAll^wiixo 

£:  ^^^t.V^Z,  under  your  service-at-cost  plan, 

necessary  to  take  care  of  t\e  reqmrement..  ^^^^^  ^^  ^ 

Commissioner  Gadsden.  «  >°^  ,^°"th  som^^  ^^  not? 

^^"£^Kr  Ye^sf  £  :^l?n7ot  or$l0,000,^Is  I  illustrated 

a  while  ago,  would  get  nearly  half. 
Commissioner  Gad^^en^  l  es.  throughout  the  coun- 

try^XoXToptlX^^le^a^^^^^^^^^^ 

accumulation  into  the  re«.rvefimd^^^^^  j^^.^p^^^ 

Commissioner  ^^f.^T;.  f;*'!' "    .^e  certain  things  in  the  arrange- 
your  position  >5..tl"S.a  at  there  are^^^^  g^  .^  ^^^^^^  ^^.^^ 

riantoilTt  Sr  sttkffis  of  the  company » 

Mr.  Dra^r.  Y^.  understand  you  to  express  any 

ais?pToXTLeSom  under  which  you  are  operating,  the  service- 

at-cost  system?  -r    i  •  i       f 

^'-  ^?' wr  s14t  But"if  the  amendments  which  you  think 
shSr  ma'e  ll^^Jf,  you  -uld  regard  it  as  pretty  nearly 
an  ideal  arrangement;  is  t™*  "gf*  V,  •    ^^^  ^^\^\^„     There  are  two 

«/£;„^rC  SS«S^.  «»»>"i^-^  ■"'<"«'»'■ " "" 

me  answer  your  first  que^ion.     . 
Commissioner  Sweet.  les. 
Mr.  Draper.  And  say  Uns 

Commissioner  Sweet.  les.  ,iivUion  that  might  remain 

Mr.  Draper.  That  this  '«/entive  this  dmsion  mat      ^  ^^^^ 

after  the  requirements  are  taken  ^^re  of,  was  one  oi  i  ^ 

we  discussed  more  than  any  «tl>^^  "^SP^t^^o^n'^fv^  what 

.isted  that  there  should  be  some  consideiation^n  en  ^^^  ^^^ 

the  rate  of  fare  was;  that  'l^^Y^^sdnlto  TonditioAs,  and  that 
our  fault,  under  this  plan,  b"*  ^^^.^^f  X^h  rate  of  fare,  the  same 

l.„  l^  high  than  w.  wouU  ^t  .n  c«,  tU.  f.  e     a.  low.  ^^^^^^  ^^ 

1G0G43''— 20 33 


506      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

would  like  to  see  it.  It  is  almost  impossible  to  anticipate  as  far 
ahead  as  we  have  to  under  this  franchise  what  our  expenditures 
are  going  to  be. 

Commissioner  Swekt.  But  there  is  some  elasticity  in  that,  as  ex- 
plained by  Mr.  Culkins,  is  there  not? 

Mr.  Draper.  There  is  some  elasticity,  but  notwithstanding  that 
there  is  a  feeling  on  the  part  of  the  director  and  city  administration 
that,  by  the  very  fact  that  we  are  asking  for  an  additional  allow- 
ance, we  are  not  operating  quite  as  economically  and  carefully  as 
we  should,  unless  it  does  have  some  specific  thing — take,  foi*  example, 
the  increase  in  wages.  Of  course,  you  can  measure  that  very  ac- 
curately. 

Commissioner  Sweet.  Are  there  any  objections  now  that  you  have 
to  the  arrangement  that  you  have  made  with  the  city? 

Mr.  Draper.  None  vital;  no. 

Commissioner  Gadsen.  What  about  the  limited  time  as  against 
the  indeterminate? 

Mr.  Draper.  We  could  scarcely  avoid  that. 

Conmiissioner  Gadsen.  But  it  you  were  drawing  another  one. 
That  is  what  Commissioner  Sweet  wants  to  know. 

Mr.  Draper.  The  Ohio  law  is  not  such  as  will  allow  the  exchange 
of  a  term  franchise  for  an  indeterminate  franchise.  If  it  were,  we 
would,  of  course,  prefer  the  indeterminate. 

Commissioner  Sweet.  But  these  matters  that  you  speak  of  now  by 
way  of  criticism  relate  to  detail  in  the  arrangement  that  might 
easily  be  avoided  in  another  city,  for  instance.  For  instance,  if  it 
should  adopt  the  service-at-cost  plan,  the  whole  arrangement  with 
regard  to  the  reserve  fund,  with  regard  to  the  various  points  of  which 
the  company  should  get  a  part  of  the  earnings,  could  all  be  changed 
as  a  matter  of  detail,  and  you  did  try  to  get  certain  things  dif- 
ferent from  what  you  did  get? 

Mr.  Draper.  That  is  true. 

Commissioner  Sweet.  Now,  in  another  city,  the  company  might 
get  the  very  things  that  you  tried  to  get  and  failed  to  get,  but  with 
those  details  somewhat  changed,  you  think  exceedingly  well  of  the 
system;  is  not  that  correct? 

Mr.  Draper.  We  think  very  well  of  it,  with  the  exception  of  the 
details,  which  you  might  calflocal  details,  and  which  are  not  funda- 
mental. For  example,  starting  at  5  cents.  While  we  agreed  to  that, 
that  was  purely  and  solely  to  try  to  satisfy  a  group  that  was  bent 
on  taking  the  matter  before  the  people  for  another  vote. 

Commissioner  Sweet.  Yes. 

Mr.  Draper.  The  principles  of  this  had  already  been  voted  upon 
at  a  previous  election,  and  the  only  change  that  was  made  was  a 
change  really  dictated  by  the  Supreme  Court,  saying  that  we  could 
not  carry  out  a  certain  form.  That  was  purely  a  local  condition, 
howevei. 

Commissioner  Sweet.  Yes. 

Mr.  Draper.  That  might  not  come  up  in  another  city. 

Commissioner  Sweet.  So  that  this  afternoon  we  had  Mr.  Culkins's 
statement  representing  the  city,  and  without  any  personal  interest  in 
the  company  whatever,  favorable  to  the  service-at-cost  plan ;  and  wo 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      507 

have  your  statement,  from  another  standpoint  so  far  as  the  general 
principles  involved  in  the  plan  are  concerned—^ 

Mr.  Draper.  You  are  safe  m  saying  that;  yes,  sir. 

Commissioner  Gadsden.  Mr.  Draper,  what  solution  to  this  prob- 
lem occurs  to  you,  other  than  the  service-at-cost  plan; 

Mr  DraperI  You  mean  a  permanent  solution  ? 

Commissioner  Gadsden.  Yes;  of  the  industry. 

Mr.  Draper.  The  only  other  solution  that  I  can  ^fJl^l^^^^^^ 
State  commission  such  power  that  it  can  regulate  fares  from  time 
to  time  as  the  necessity  would  require. 

Commissioner  Gadsden.  Do  you  think  that  is  going  to  restore 

the  credit  of  this  industry?  ,  lar^^ely 

Mr.  Draper.  It  would  not  immediately.,  I*  ^^"j^  ^^^^^^^^^ 

rrfeTouRn  the  ^urt^bB  enabled  us  to  borrow  money  for  certain 

^'SL^i^fioTer^Glos^^^^^^  Here  is  the  thou^t  that  I  want.d^o  bring 
out  •  Whether  vou  entertained  the  view  that  some  of  them  enter 
?,Lh    and  Ltmed  to  before  the  commission,  that  the  alternative 
nr^nted  to  the  iT,dustry  at  this  time  in  order  to  i>ermanently  restore 
Kredit  is  either  some  well  worked  out  service-at-cost  plan  or 

municipal  ownership?  ,.  « 

M^   tSrapfk    You  say  it  would  restore  its  credits     ,  .  ,    ^, 
ComSSer  oirnL.  I  asked  you  whether  you  think  there  is 

any  other  alternative  besides  those  two.  .-,■.■      ^«™mi«cinn 

\fr    npiPFR   I  sav    if  vou  give  the  public-utilities  commission 

power  ?o  reguiatel^ak  as^heniecessity 'would  ^quire,  you  would 

Restore  its  credit  if  you  were  assured  that  it  cou  d  be  worked  out 
Comm*^ioner  Gao^sden.  Why,  then,  do  we  find  companies  operat 

ing  in  States  where  the  public-serv  ee  commissions  have  full  poweis 

'"rMLS  We'll  Ts^K'teiuse  it  does  not  work  out  The 
thJory  ?s  an  right,  but  it  is  pfe'tty  hard  to  get  at  in  practice  If  you 
fix^mething  that  is  automatic,  as  the  cost-of-service  plan,  then  you 
SavTrsettled.    You  do  not  have  to  depend  upon  a  human  agency 

''Vommissioner  Sweet.  But  the  important  element  in  this,  which 
evSytody  agrees  to,  is  public  approval.    If  the  people  of  Cmcinna  i 

we'i^noff adorable  to  tkis  scheme,  it  '^^  .---'^yj'>^''^^^\^i:^ZZ 
income  might  have  failed  to  show  any  increase  of  gross  revenue  oy 
making  ^n  increase  of  fai-e.  The  feeling  a^  in  some  oth^J-  Pl;;«|^ 
mfght  have  been  such  as  to  fully  offset  the  "^f  ^''^^  '"  "'.^f  °^^ 
revenues  that  might  be  expected  from  an  increase  of  faie,  is  not 

that  true? 
Mr.  Draper.  That  is  true.  .    ■,    , 

Commissioner  Sweet.  So  that  public  sentiment  has  a  great  deal 

to  do  with  it,  has  it  not?  „„„„j!„i  *„  mvo  thn 

Mr.  Draper.  It  has.    In  our  case,  we  were  very  caref  "Uo  giw  the 

public  and  those  who  were  authorized    o  secure  information  the 

fullest  possible  opportunity  that  they  could  have. 
Commissioner  S^.'EET.  Don't  you  think  that  in  any  s«rv,ce-at-cost 

plan  there  is  something  that  appeals  to  the  public,  makes  it  easier 


508      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

to  convince  the  public  as  to  the  need  of  the  increased  fare,  and  has 
a  tendency  to  alUiy  suspicions  and  prejudices?  Don't  you  think 
there  is  something  in  that? 

Mr.  Draper.  Undoubtedly.  There  are  two  things.  In  the  first 
place,  it  appeals  to  them  as  fair,  and,  in  the  second  place,  the  fact 
that  the  city  can  not  only  control  the  situation,  but  can  come  in  and 
determine  what  the  situation  is,  appeals  to  them. 

Commissioner  Sweet.  Yes. 

Mr.  Draper.  That  was  our  experience  in  conducting  the  negotia- 
tions. 

The  Chairman.  Are  you  familiar  with  the  effect  that  the  war  has 
had  upon  the  rates  of  service  of  similar  utilities  in  European 
countries  ? 

Mr.  Draper.  No;  I  am  not,  Mr.  Chairman. 

The  Chairman.  You  have  said  that  you  favor  the  cost-of-service 
plan  with  a  few  modifications.  One  of  them  which  you  have  em- 
phasized is  that  the  city  has  real  control  over  the  management  and 
supervision  of  the  industry.    What  is  your  relation  to  Mr.  Culkins? 

Mr.  Draper.  Our  relations  with  Mr.  Culkins  are  very  friendly.  He 
has  been  in  public  life  in  Cincinnati  for  a  good  many  years,  and  ho 
had  the  confidence  of  the  people  at  hirge  before  he  took  the  position. 
He  conducted  negotiations  in  the  second  revision.  First,  as  I  ex- 
plained before,  by  reason  of  the  fact  that  it  was  declared  unconsti- 
tutional, and  haying  to  work  it  out,  he  became  thoroughly  familiar 
with  it,  and  giving  pretty  full  information  on  it  to  the  public,  they 
felt  that  it  was  fair,  and  it  started  us  off  on  the  right  basis. 

The  Chairman.  He  has  as  broad  powers  as  those  usually  enjoyed 
by  State  regulating  commissions,  over  both  your  service  and  other 
matters  ? 

Mr.  Draper.  Yes ;  broader  powers  than  our  State  commission  has. 

The  Chairman.  Now,  of  course,  in  view  of  the  close  relationship 
existing  between  you  and  Mr.  Culkins,  and  the  fact  that  he  is  a 
broad-gauge  man,  you  are  getting  along  all  right.  Let  us  suppose, 
for  a  moment,  that  you  had  a  man  in  there  who  preferred  to  play 
politics  and  made  orders  affecting  service  and  the  maintenance  of 
streets  and  repairs  and  equipment  and  things  of  that  kind,  which 
would  be  very  burdensome  to  the  company,  and  be  more  or  less 
exasperating;  then  how  would  you  get  along  under  that  cost-of- 
service  plan? 

Mr.  Draper.  It  would  not  be  very  burdensome  on  the  company.  It 
would  be  burdensome  on  the  car  rider.  I  do  not  think  anybody  could 
dare  do  that.  He  might  make  it  disagreeable  for  you ;  he  might  make 
you  work  24  hours  instead  of  18,  and  insist  on  a  lot  of  information 
that  was  not  necessary,  but  he  would  not  dare  do  anything  that  is 
going  to  add  to  the  burden  of  the  passengers. 

The  Chairman.  In  other  words,  his  responsibilit}'  would  be  to  the 
public  and  not  to  the  company  under  this  plan? 

Mr.  Draper.  Absolutely. 

The  Chair3ian.  So  that  it  would  not  make  any  difference,  would 

it — 

Mr.  Draper.  Well,  there  is  a  dividing- 


The  Chairman  (continuing).  How  costly  the  service  would  be- 
come, the  man  who  had  invested  his  capital  in  the  company  would 
be  secure  at  all  times? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      509 

Mr  Dbapeb.  Yes;  if  the  base  on  which  you  make  the  rate  and  on 
wliich  you  provide  for  purchase  represents  the  amount  that  he  has 

•"The"ci^xiMAT^N?/e  of  the  surplus  that  is  accumuM|J^f-- 
operation  can  in  anywise  go  to  officers  of  this  company?    That  goes 

^''m"  CifS necessarily.    The  company  itself  has  to  dispose 

employees  to  lay  down  on  the  service  since  you  adopted  the  new 
•''mJ  Diupfr    You  mean  traimuen  or  the  higher-up  employees? 

^^'if/^^nL.v.    TTp  is  still  subservient  to  the  management.    The  city 

*"M7iZ?».'To*;;'?Ji'cont™.t.    W.  l»v.  In  our  c.n„«.  ,ith 
i\^a  frninmen's  organization  an  arbitration  provision. 

The  ChI"rman^  Did  your  company  really  promote  this  cost-of- 

service  plan?  TV.a  fViino- st'irted  in  1913— three 

Mr.  DBAPEn    It  was  a  gro.-t  .    The^thm  ^  ^^^^j^_ 

years  before  "«  Pei.<^d  foi  re  ision^^^  ,^^^.^  ^^  ^^^^  ^ 

tion  requesting  the  Pub   c  '^^'*''\^^V•:"  tuities  commission  then  is- 

tion.  It  took  aDO";,^^^St-!tI  to  check  it  A  valuation  was  handed 
!?'w^"bflLpub£u?iitfes  commission  as  a  tentative  valuation, 
fnd  both  the  company  and  the  city  appealed  for -a  rehearing.  Be- 
W  that  rehearing  could  be  held,  the  time  was  proceeding  so  rap- 
fZ  t  at  the  city  desiring  to  go  ahead  with  this  rapid-  ransit  line 
S  was  a  feature  n  the  fii^st  revision,  decided  that  if  we  could 
Je  toirlther  on  some  valuation  that  it  would  not  w^ait  for  the  re- 
ErS  before  the  public-utilities  commission  and  consequently 
there  w,v.s  an  agreed  valuation  very  largely  based  upon  the  valuation 
hnnded  down  bv  the  public-utilities  commission. 

Mr  cSs  ^id  not  touch  on  that  because  he  was  really  not  fa- 
TYiilior  with  the  negotiations  at  that  time.  ,     ,.       *       j  u 

It  maTbe  nteresting  to  point  out  that  the  final  valuation  found  by 
the  company's  engineers  and  by  the  public-utilities  commission  were 
Srnct3v  the  -same,  about  $27,000.p00  to  which  ^^  J^^^^^^^^ZZf 
made  by  tl^e  public-utilities  commission  for  superseded  values,  bring- 


510      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        (j 

ing  the  piiblic-utilities  commission's  tentative  valuation  to  about 
$30,141,000,  and  that  is  the  basis  that  was  used  in  this  franchise. 

The  Chairman.  Is  it  not  rather  an  unusual  situation  to  find  the 
public  utilities  commission  and  the  utility  agreeing  upon  the  valua- 
tion of  the  plant? 

Mr.  Draper.  Not  on  the  physical  valuation,  I  think,  Mr.  Chair- 
man. I  think  that  is  a  matter  that,  if  the  work  has  been  done  prop- 
erly on  both  sides,  they  ought  to  agi'ee  upon. 

The  Chairman.  There  is  more  or  less  dispute  as  to  overhead  ex- 
penses, contingencies,  and  other  things ;  is  there  not  ? 

Mr.  Draper.  Yes;  we  requested  the  franchise  value,  which  they 
did  not  allow.  We  requested  the  paving  value^  which  they  did  not 
allow,  and  on  that  subject  I  might  say  that  the  city  hired  an  engineer 
to  make  the  valuation,  and  he  made  a  depreciated  valuation  of  $1*2,- 
000,000.    So,  you  see,  there  are  discrepancies  occasionally. 

Conmiissioner  Sweet.  How  ditl  this  physical  valuation  compare 
with  your  paper  valuation? 

Mr!  Draper.  The  book  valuation  at  that  time  was  $29,029,000. 

Commissioner  Sweet.  AVhat  did  that  cover?    Give  the  items. 

Mr.  Draper.  That  covei-ed  purely  the  physical  valuation.  In 
other  words,  the  Cincinnati  Street  Railway  Co.  is  the  company  that 
built  this  property  and  leased  it  to  the  Cincinnati  Traction  Co.  in 
1901.  The  capital  stock  of  the  Cincinnati  Street  Railway  Co.  in 
1901  was  $18,738,950,  which  historically  represents  money  that  .went 
into  the  property.  We  can  trace  it  very  carefully  to  show  that  was 
the  real  value,  and  that  was  recognized  oy  the  city  when  it  approved 
the  lease  from  the  old  company  to  the  present  operating  company. 

Commissioner  Sweet,   i  es. 

Mr.  Draper.  Taking  that  as  the  basis,  and  then  taking  the  amount 
that  we  have  expended  on  the  property  ourselves,  dollar  for  dollar — 
not  the  securities  issued  to  provide  money,  but  the  money  that  went 
into  the  property — it  brings  it  up  to  $29,029,000.  Now,  adding  to 
that  what  we  are  entitled  to,  the  cost  of  procuring  that  money,  be- 
cause you  can  not  go  and  get  a  hundred  cents  on  each  dollar  in- 
vested, that  would  bring  it  very  nearly  to  the  valuation  that  was 
found  by  the  public  utilities  commission  and  by  our  own  engineer 
and  put  in  the  franchise. 

Commissioner  Sweet.  That  is  about  $30,000,000? 

Mr.  Draper.  About  $30,000,000. 

Commissioner  Sweet.  What  was  that  $416,000  that  you  spoke 
about,  and  which  Mr.  Culkins  spoke  about,  too? 

Mr.  Draper.  Tlie  $416,000  is  a  little  less  than  the  amount  necessary 
to  pay  the  5  per  cent  on  the  preferred  stock — $8,500,000  preferred 
stock.  The  money  went  into  the  property,  but  the  citj^  when  it 
came  to  go  into  the  whole  matter,  ae<*ided  that  this  interurban  line 
that  Mr.  Culkins  spoke  of  ji  little  while  ago — he  did  not  treat  that 
fully — should  be  brought  in  as  a  part  of  the  city  proper.  The  reason 
it  did  that  was  because  that  line,  under  this  franchise,  was  within 
the  city.  Within  the  city,  including  the  former  villages  that  were 
annexed  to  the  city  under  this  old  franchise,  it  was  entitled  to 
charge  a  10-cent  fare.  We  had  voluntarily  reduced  the  fare  some- 
what, but  the  city  wanted  the  same  rates  of  fare  for  these  communi- 
ties which  had  been  taken  into  the  city  as  for  the  rest  of  the  city.  So, 
at  that  time,  this  interurban  line  was  making  a  little  money,  but 


FROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      511 

inasmuch  as  the  city  wanted  to  bring  it  in  as  a  part  of  the  city  proper 
and  Se  the  rate,  we  did  it  in  order  to  get  the  whole  thing  cleaned 
u  at  that  time,  which  reduced  the  eamFngs  on  that  property  to  a 
point  where  we'did  lose  money,  but  that  was  on  account  of  the  fact 
that  we  extended  the  city  fare  zone  out  to  mclude  these  annexed 

^^^mf'the  $416,000  was  arrived  at  in  a  peculiar  way.  In  cleaning 
the  wh'ole  thing  up,  $425,000  was  the  amount  that  should  have  been 
lowed  to  takfcare  of  preferred  stock.  The  amount  of  money  that 
the  Mill  Creek  Valley  line  lost  in  the  year  that  we  P^^tin  this  re- 
duced rate  of  fare  was  $9,000,  and  some  of  the  very  careful  nego- 
tiators on  the  other  side  said,  "  Well,  we  are  not  going  to  separate 
that  loss,  so  we  will  take  it  off  for  $425,000."    That  accounts  for  that 

""commissioner  Sweet.  Well,  how  were  >^u  to  pay  the  $425,000 
before  the  $9,000  was  taken  out  to  meet  the  interest  on  the  preferred 

^    Mr.'  Draper.  That  was  to  come  from  the  operation  of  the  prop- 
erty, the  same  as  any  other.  .,       •     x         « 
Commissioner  Sweet.  As  in  any  other  instance  i 

Mr.  Draper.  Yes.  ^i     •       ^        + 

Mr  W\RREN.  It  was  a  part  of  the  return  on  the  investment. 
Mr*  Draper.  That  is  the  return  before  the  $350,000  for  the  city. 
The  Chairman.  From  the  standpoint  of  operation,  what  is  the 
substantial  difference  between  the  cost-of -service  plan  and  public 

ownership  and  operation?  .     ,    .  ,  ^js 

Mr  Draper.  The  essential  difference  is  that  you  have  a  group  of 
men^^mplovees— operating  the  property  that  have  had  experience. 
A^  far  as  operation  itself  is  concerned,  I  think  a  private  company 
can  alwavs  operate  more  efficiently  and  economically  than  a  city 
administration,  which  is  subject  to  change,  and  however  well  the  city 
affairs  are  conducted,  it  is  always  subject  to  political  influences. 

The  Chairman.  Do  you  believe  that  this  plan  will  naturally  lead 
to  government  ownership  in  Cincinnati? 

Mr.  Draper.  I  do  not.     I  think  it  tends  the  other  way. 
The  Chairman.  Suppose  the  rate  should  be  increased  to  7  cents; 
then  what  would  be  the  effect  on  the  public  mind? 

Mr  Draper.  If  the  rate  is  increased  to  7  cents,  it  may  be  necessary 
or  advisable  to  go  a  little  more  in  detail,  so  far  as  the  figures  are 
concerned.  They  have  not  asked  so  far  for  details.  They  are  satis- 
fied with  the  showing  that  we  have  made  and  by  the  increase  that 
they  know  of.  In  other  words,  the  rate  to  our  men,  the  trainmen, 
a  vear  ago  last  April  was  30  cents.  It  was  increased  to  48  cents  by 
the  award  of  the  War  Labor  Board,  and  the  same  proportionate  in- 
crease as  in  all  other  awards  of  the  board,  was  allowed  to  the  other 
employees.  The  people,  knowing  about  that,  could  easily  see  that 
an  increase  of  practically  $1,000,000  a  year  m  our  pay  roll  made 
higher  fares  under  a  plan  of  this  kind  necessary. 

There  is  pretty  full  and  free  publicity  of  the  operation  of  tlie 
company's  propertv  right  along,  and  there  is  a  feeling  m  Cincinnati 
that  is  often  voiced  in  public  meetings  and  otherwise  that  they  want 
service,  and  as  an  evidence  of  how  they  feel,  during  the  war  the  Fuel 
Administration  ordered  us  to  install  the  skip-stop  plan,  which  we 
did.     When  the  treaty  was  signed,  although  the  President  has  not 


612      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

yet  made  the  proclamation  of  peace,  the  people  said,  "  Now,  the  war 
IS  over;  let  us  abolish  the  skip-stop  plan."  There  was  considerable 
aij];ument  pro  and  con,  and  they  said,  " If  it  was  well  for  us  to  save 
$08,000  in  coal  and  something  like  $25,000  or  $30,000  in  other  inci- 
dentals during  the  war,  it  is  just  as  well  for  us  to  save  that  now  that 
the  war  is  over."  But  the  people  said,  "No;  if  we  are  paying  a 
higher  rate  of  fare,  and  are  willing  to  pay  for  the  service,  we  ought 
to  get  the  kind  of  service  that  we  want."  That  was  the  expression 
that  was  used. 

The  Chairman.  What  has  been  done  during  the  war  to  keep  up 
your  maintenance? 

Mr.  Drapek.  We  have  kept  up  our  maintenance,  except  the  streets. 
As  anybody  else,  we  could  not  get  the  rail  or  materials.  Neither 
the  city  nor  ourselves  could  do  any  work  in  the  street  until  this  year. 

The  Chairman.  Have  you  run  up  a  large  item  of  deferred  main- 
tenance ? 

Mr.  Draper.  We  are  doing  more  work  in  the  streets  this  year 
than  we  have  in  several  years  past  in  any  one  year. 

The  Chairman.  Are  you  able  to  get  "that  out  of  your  operating 
revenues  ? 

Mr.  Draper.  Yes ;  all  of  that  is  in  the  budget,  with  the  exception 
of  about  $70,000,  which  w^e  expect  to  save  on  some  other  items. 

The  Chairman.  Have  you  kept  your  cars  well  repaired  ? 

Mr.  Draper.  Our  cars  are  in  very  fair  shape,  except  about  180 
small-truck  cars  that  we  are  going  to  abandon  as  soon  as  w^e  get  the 
105  new  cars. 

The  Chairman.  Are  you  purchasing  new  equipment? 

Mr.  Draper.  Yes;  we  are  adding  105  cars  to  the  total. 

The  Chairman.  How  much  will  that  add  to  your  capital  account '? 

Mr.  Draper.  It  will  add  $1,200,000,  at  6  per  cent. 

The  Chairman.  Have  you  worked  out  any  economies  in  opera- 
tion? 

Mr.  Draper.  Yes.  We  have  attempted  some  rerouting,  which  we 
expect  to  put  through,  and  we  have  also  started  all  the  way  clown 
the  line,  as  far  as  the  employees  are  concerned,  toward  getting  more 
and  efficient  help  now  tiiat  the  wage  is  such  as  will  attract  the 
better  class  of  men  in  the  service,  and  we  are  adopting  a  great  many 
efficiency  plans,  such  as  street  railways  do  when  they  can  and  which 
everybody  had  to  drop  during  the  war. 

The  Chairman.  What  do  you  expect  to  save  by  the  rerouting 
scheme  ? 

Mr.  Draper.  Well,  by  the  rerouting  scheme  we  will  probably  save 
about  $100,000  a  year. 

The  Chairman.  Have  you  discussed  the  one-man  car? 

Mr.  Draper.  Mr.  Culkins  has.    We  have  not. 

The  Chairman.  What  is  your  idea  upon  that  question  ? 

Mr.  Draper.  We  are  peculiarly  located  in  Cincinnati.  In  the  first 
place.  We  have  hills  and  narrow  streets  in  excess,  I  think,  of  prob- 
ably any  other  city,  unless  it  be  Pittsburgh  or  Kansas  City,  and  we 
have  three  inclined  planes  over  which  we  operate  three  different 
lines.  Those  inclined  planes  can  be  operated  only  so  frequently; 
you  can  not  make  closer  headway  than  a  certain  headway,  neces- 
sitating our  using  larger  units  instead  of  smaller  units.    In  addition 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       513 

to  that,  the  congestion  in  the  downtown  district,  with  the  narrow 
streets/is  such  that  we  have  not  so  far  found  that  we  could   in  our 
opinion,  save  money  by  going  into  a  smaller  unit  and  "^^^^  / ^^^^^^^^^ 
operation  than  by  having  the  larger  units  and  not  so  close  t^^^^^^ 
The  Chairman.  As  I  understand  it,  you  make  the^e  one-man  cais| 
Mr.  Draper.  Well,  the  Cincinnati  Car  Co.,  an  affiliated  company 
•  1-1 

^^  Vhe"cHAiRMAN.  Are  you  able  to  make  any  economies  in  your  over- 

lipid  exnenses 

Mr.  Draper".  No  much.  The  tendency,  of  course,  aU  the  way 
through  the  salary  list  is  toward  increasing  the  pay.  Jsone  of  the 
officials  of  the  company  have  had  any  increase  m  pay  it  is  nec- 
essary to  increase  the  clerks  and  bookkeepers  and  p^ple  in  the  ac- 
counting department  and  others  in  the  general  office,  as^eU  f 
outside,  which  has  made  it  impossible  to  reduce  the  overhead  ex- 
penses  very  much. 

The  Chairman.  That  is  all.  .  n      tvt,. 

Mr.  Warren.  Wliat  is  the  gross  operating  revenue,  roughly,  JNlr. 

Draper,  of  your  company? 
Mr.  Draper.  In  1918  it  was  about  $o,2o0,000.  ^      _ 

Mr.  Warren.  How  many  passengers  did  you  carry  m  that  year 
Mr.  Draper.  Pardon  me  just  a  moment.     And  for  the  present 

year,  our  estimates,  considering  the  increase  of  7  cents,  it  will  be 

slightly  under  seven  million.  ^^„„i.i..? 

Mr.  Warren.  And  how  many  passengers  did  you  carry,  rougldv  i 

Mr  Draper.  We  carried  about  106,000,000  last  year.  That  is, 
revenue  passengers,  and  about  35,000,000  transfer  passengers. 

Mr.  Warren.  The  powers  of  your  commission  in  Ohio  aie  not 
verv  extensive,  are  they?  , 

Mr  Draper.  Not  as  far  as  street  railways  are  concerned. 

Mr*  Warren.  Not  as  far  as  street  railways  are  concerned  ? 

Mr'  Draper.  No;  the  law  is  so  drawn  that  their  jurisdiction  prac- 
tically  does  not  extend  to  street  railways,  unless  in  case  ot  certain 
appeals— appeak  under  certain  conditions. 

Mr.  Warren.  Yes.  i  .     .   i      •     *   t« 

Mr  Draper.  And  tliev  have  constantly  refused  to  take  jurisdic- 
tion in  cases  of  any  franchise  rates.  In  other  words,  they  won  t  step 
in  and  determine  a  rate,  or  have  anything  to  do  with  rates,  where 
they  are  fixed  by  franchises? 

Mr.  AVarren.  So,  as  a  matter  of  fact,  a  good  many  of  the  powers 
which  are  given  to  the  director  of  street  railways  in  Cincinnati  are 
taken  from  the  commission  and  given  to  him ;  but  they  do  not  exist 
anywhere,  except  as  that  agreement  sets  them  out? 

Mr.  Draper.  That  is  true. 

Mr.  Warren.  That  is  all,  Mr.  Draper. 

Commissioner  Gadsden.  Just  a  question,  Mr.  Draper : 

The  city  has  an  option  to  purchase  the  property,  has  it  not  5 

Mr.  Draper.  Yes. 

Commissioner  Gadsden.  In  the  franchises 

Mr.  Draper.  Yes.  .     ,,     .  j.    n  ^i 

Commissioner  Gadsden.  That  is  practically  true  of  all  these  serv- 

ice-at-cost  plans,  is  it  not? 


r 


1^ 


514      PROCEEDIlifGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Draper.  Well,  it  is  essential.    There  would  be  no  way  of  the 
city's  getting  any  changed  condition  unless  it  was  privileged  to 

Commissioner  Gadsden.  That  is  what  I  wanted  to  find  out. 

Mr.  Warren.  That  is  all,  Mr.  Draper. 

The  Chairman.  We  will  adjourn  until  to-morrow  morning  at  lU 

o'clock.  ,      .     .,       ,       •         ^  .1.' 

(^^Tiereiipon,  at  4.55  o'clock  p.  m.,  the  further  hearing  of  this  case 

was  adjourned  until  to-morrow,  Tuesday,  July  22, 1919,  at  10  o'clock 
a.  m.) 

Washington,  D.  C,  July  22,  1919, 

Met  pursuant  to  adjournment.    10  o'clock  a.  m. 

Present :  Parties  as  before. 

The  Chairman.  You  may  proceed,  Mr.  Warren. 

Mr.  Warren.  Mr.  Pellissier,  take  the  stand. 

The  Chairman.  You  did  not  complete  Mr.  Nash's  testimony  i 

Mr  Warren.  No  ;  I  did  not.  I  am  going  to  put  Mr.  Nash  on,  but 
I  want  to  put  on  Mr.  Pellissier  for  just  one  point,  may  it  please  the 
Chairman. 

STATEMENT  OF  MU.  lOTJIS  PELLISSIER. 

Mr.  Warren.  Your  full  name? 

Mr.  Pellissier.  Louis  Pellissier.  ,     ..^  ,     ,     o.      ^  t>  -i         i 

Mr.  Warren.  You  are  President  of  the  Holyoke  Street  Railway  i 

"Wv    "Pitt  t  tsstfr      Jl  es 

Mr.  Warren.  You  are  also  general  manager  of  the  Northampton 
Street  Railway  Co.? 

Mr.  Pellissier.  Yes,  sir. 

Mr.  Warren.  Both  Massachusetts  companies? 

Mr.  Pellissier.  Yes,  sir.  .  i.  u  xi, 

Mr.  Warren.  You  are  in  charge  of  the  operations  of  both  com- 
panies ;  are  you  not  ? 

Mr.  Pellissier.  Yes,  sir. 

Mr.  Warren.  What  sort  of  a  franchise  do  you  have  on  those  prop- 

erties  ? 

Mr.  Pellissier.  Indeterminate  franchise. 

Mr.  Warren.  Indeterminate? 

Mr.  Pellissier.  Yes.  ,  ,    ,      • 

Mr.  Warren.  That  is  a  franchise  during  good  behavior. 

Mr.  Pellissier.  Yes,  sir.  .    •       .     i^c         t.       ^x 

Mr.  Warren.  What  power  has  the  commission  in  Massachusetts 

over  rates  ? 

Mr.  Pellissier.  They  have  the  absolute  power  over  rates. 

Mr.  Warren.  It  is  unlimited  ? 

Mr.  Pellissier.  It  is  unlimited ;  yes,  sir. 

Mr.  Warren.  Is  there  any  limitation  in  the  franchise  on  what 
rates  you  can  charge  ? 

Mr.  Pellissier.  No,  sir. 

Mr.  Warren.  That  means,  does  it,  that  you  can  charge  any  rates 
which  the  public-service  commission  approves? 

Mr.  Pellissier.  Yes,  sir. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      515 

Mr.  Warren.  Have  you  had  occasion  to  increase  your  rates  on 
either  or  both  of  these  properties? 

Mr.  Pellissier.  Yes ;  we  have  on  both. 

Mr.  Warren.  On  both? 

iVTr  Pet  lissier    i.  es. 

Mr.  Warren.  Take  the  Northampton  Co.  first.  How  did  you  in- 
crease the  rates  there? 

Mr.  Pellissier.  There  we  increased  the  unit  from  5  cents  to  7 

cents. 

Mr.  Warren.  And  that  indicated  a  theoretical  increase  of  40  per 

cent  ? 

Mr.  Pellissier.  Forty  per  cent;  yes,  sir. 

Mr.  Wakren.  Was  that  increase  taken  before  the  public-service 
commission  ? 

Mr.  Pellissier.  Yes. 
Mr.  Warren.  And  approved  by  them? 

Mr.  Pellissier.  Yes,  sir ;  and  approved  by  the  public.  \\  hen  we 
w^ent  before  the  commission  the  representatives  of  the  public  were 
there  and  they  told  the  commission  that  if  they  thought  we  needed  a 
7-cent  fare  they  wei-e  perfectly  willing  to  pay  it;  and  that  they 
needed  the  service  and  were  willing  to  pay  what  it  cost. 

Mr.  Warren.  And  you  put  it  in  effect? 

Mr.  Pellissier.  Yes,  sir. 

Mr.  Warren.  When  did  you  put  it  in  effect? 

Mr.  Pellissier.  February  1,  this  year. 

Mr.  Warren.  What  has  been  the  result?  Theoretically,  you  might 
have  gained  40  per  cent? 

Mr.  Pellissier.  Yes. 

Mr.  Warren.  And  what  did  you  actually  gam?  

Mr.  Pellissier.  Thirty  per  cent. 

Mr.  Warren.  You  are  still  getting  that? 

Mr.  Pellissier.  Yes;  about.  .,  -v.    o 

Mr.  Warren.  So  you  gained  three-fourths  of  the  actual  possibility « 

Mr.  Pellissier.  Yes,  sir. 

Mr.  Warren.  On  the  Holyoke  Street  Railway,  what  did  you  do  i 

Mr.  Pellissier.  There  we  shortened  some  of  the  zones  and  re- 
mained on  the  5-cent  fare,  with  the  exception  of  a  central  zone  that 
the  commission  decided  they  would  increase  the  unit  in  the  central 
zone  from  5  to  7  cents. 

Mr.  Warren.  What  was  the  theoretical  increase  there  m  per  cent  i 

Mr.  Pellissier.  About  35  per  cent. 

Mr.  WARitEN.  About  35  per  cent? 

Mr.  Pellissier.  Yes,  sir.  •  ,    •  o 

Mr.  Warren.  And  what  was  your  experience  with  it? 

My.  Pellissier.  We  are  getting  between  25  and  30  per  cent. 

Mr.  Warren.  Between  25  and  30  per  cent? 

Mr.  Pellissier.  Yes,  sir. 

Mr.  Warren.  Has  that  been  in  effect  several  months? 

]Mr.  Pellissier.  Since  the  1st  of  January,  this  year. 

Mr.  Warren.  You  say  that  the  public  was  not  unfriendly? 

Mr.  Pellissier.  Not  at  all. 

Mr.  Warren.  Do  you  think  that  helped  the  immediate  results 

Mr.  Pellissier.  Yes,  sir;  I  do. 


f 


616      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMxSSION. 

Mr.  Warren.  What  is  j^oiir  opinion  as  a  street-railway  operator  of 
the  ultimate  etlect  of  increasing  fares,  regardless  of  tlie  attitude  of 
the  public  ?     Suppose  the  public  were  opposed  to  it. 
Mr.  Pellissier.  It  increases  the  revenue. 
Mr.  Warren.  It  increases  the  revenue? 
Mr.  Pellissier.  Yes,  sir. 

Mr.  Warren.  And  as  time  goes  on  does  it  increase  it  very  much  ? 
Mr.  Pellissier.  Yes,  sir.     As  time  goes  on  that  loss  of  traffic  does 
come  back  to  a  large  extent. 

Mr.  Warren.  So  that  in  your  opinion  an  increase  in  fare,  even 
thougli  the  public  does  not  understand  it  or  is  even  hostile  to  it,  pro- 
duces some  immediate  increased  revenue  and  ultimately  a  large  in- 
crease ? 

Mr.  Pellissier.  Yes,  sir. 

Mr.  Warren.  Your  stock  in  the  Holyoke  Street  Railway  Co.  was 
all  is-ued  for  cash? 
Mr.  I^ELLissiER.  Yes,  sir. 

Mr.  Warren.  And  under  the  Massachusetts  law  was  a  premium 
paid  in  on  it?       ' 

Mr.  Pellissier.  Yes,  sir.  For  evoi^  share  of  $100  there  is  $120 
of  property  behind  it. 

Mr.  Warren.  So  that  the  company  has  realized  $120  a  share? 
Mr.  Pellissier.  Yes,  sir. 

Mr.  Warren.  .That  is  all  I  want  to  ask  this  witness,  Mr.  Chairman. 
The  Chairman.  What  is  the  effect  of  this  increased  rate  upon  the 
ghort-haul  traffic? 

Mr.  Pellissier.  Well,  in  the  city  of  Northampton  the  community 
is  more  or  less  of  an  interurban  community;  that  is,  the  city  of 
Northampton  itself  is  only  a  city  of  20,000,  but  the  suburbs  are 
about  3  miles  away  from  the  center.  There  is  very  little  short- 
haul  riding.     There  we  increased  the  unit  because  of  the  fact  that 

there  w^as  practically  no  short-haul  riding  and 

The  Chairman.  There  many  people  are  obliged  to  ride? 
Mr.  Pellissier.  Yes,  sir. 

The  Chairman.  And  the  increased  fare  would  not  affect  the  num- 
ber of  passengers  hauled? 
Mr.  Pellissier.  No,  sir. 

The  Chairman.  What  can  you  tell  us  of  your  experience  in  a  more 
congested  territory? 

Mr.  Pellissier.  In  the  more  congested  territory  the  increasing  of 
the  unit  does  affect  the  short-haul  riders  to  some  extent. 
The  Chairman.  To  what  extent? 

Mr.  Pellissier.  Well,  I  do  not  know  just  how  much,  but  probably 
as  high  as  10  per  cent. 

The  Chairman.  Have  you  made  any  study  for  the  purpose  of 
finding  out  how  many  less  passengers  you  carry  within  a  certain 
zone,  a  congested  zone,  since  this  fare  went  into  effect  ? 
Mr.  Pellissier.  No;  we  have  not. 

The  Chairman.  Was  that  10  per  cent  shrinkage  in  the  number  of 
passengers  observed  immediately  after  the  increase  went  into  effect? 
Mr.  Pellissier.  Yes,  sir. 

The  Chairman.  Has  there  been  an  increase  in  the  number  of  pas- 
sengers as  time  has  gone  on? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      617 

Mr.  Pellissier.  Yes,  sir;  it  has.     It  has  been  coming  back  to  some 

extent.  ^  .  .  x-      a 

The  Chairman.  About  what  is  the  effect  at  the  present  time  ? 

Mr.  Pellissier.  The  effect  at  the  present  time,  in  my  best  judg- 
ment, is  about  10  per  cent,  but . 

The  Chairman.  AVhat  was  it  when  it  first  w^ent  in? 

Mr.  Pellissier.  Well,  it  was  10  per  cent,  but  the  reason  of  that 
is  jitney  competition.  I  think,  if  the  jitneys  were  not  alloAved  to 
operate  for  5  cents  where  we  are  obliged  to  charge  7  cents  under 
the  ruling  of  the  public-service  commission,  that  it  would  probably 

not  be  over  5  per  cent.  -  .,  •     •  j 

The  Chairman.  Did  the  jitneys  take  advantage  of  this  increased 

charge  ? 

Mr.  Pellissier.  Yes,  sir.  ,         ^  .-x  •  -9 

The  Chairman.  Are  there  any  larger  number  of  Jitneys  m  service? 

Mr.  Pellissier.  Well,  there  is  not  a  very  large  number,  but  there 

are  probablv  in  our  town— it  is  not  a  very  large  town,  70,000— there 

are  20  to  30  operating  now  when  there  were  only  1  or  2,  I  think, 

before.  ,      ,  .  ,     .  -i  •     ^i      --x     _ 

The  Chair^ian.  Whixt  character  of  vehicle  is  used  in  the  Jitney 

service  ? 

Mr.  Pellissier.  There  are  several  motor  buses  with  a  carrying 
capacity  of  about  12  to  16,  I  think,  and  then  there  are  a  number  of 
touring  cars  with  a  capacity  of  5  to  7. 

The  Chairman.  Does  the  commission  have  any  control  over  the 

fare  charged  by  jitneys? 

Mr.  Pellissier.  I  do  not  think  so. 

Mr.  Warren.  I  think  not,  Mr.  Chairman. 

The  Chairman.  Does  the  municipality? 

Mr.  Pellissier.  Yes;  I  think  the  municipality  can  Rx  the  rate. 

The  Chairman.  Has  it  fixed  the  rate? 

Mr.  Pellissier.  Well,  in  a  wav  it  has.  I  think  in  the  ordinance 
it  states  that  it  will  not  be  more  than  that  charged  by  the  street- 
railway  company.  i     ^   i  •     tt  i     i    o 

Mr.  Warren.  Has  that  ordinance  been  adopted  in  Holyoke? 

Mr.  Pellissier.  Yes,  sir.  ^ 

The  Chairman.  Does  the  7-cent  fare  bring  you  m  money  enough 
to  pay  all  your  operating  expenses  and  fixed  charges  ? 

Mr.  Pellissier.  Well,  the  combination  of  the  two  on  that  system, 
5  and  7  cents  does ;  yes,  sir. 

Mr.  Warren.  That  is  on  the  Holyoke  system? 

Mr.  Pellissier.  That  is  on  the  Holyoke  system. 

Mr.  Warren.  How  is  it  on  the  other  system,  where  you  have  the 
straight  7-cent  fare? 

Mr.  Pellissier.  On  that  we  are  doing  very  well. 

The  Chairman.  I  did  not  get  clearly  in  my  mind  where  you  were 
charging  the  5 -cent  fare. 

Mr.  Pellissier.  Well,  on  the  Holyoke  system  we  charge  a  5-cent 
fare  on  the  greater  part  of  the  system,  in  the  central  zone.  That  is, 
it  takes  the  congested  section  of  the  city— we  charge  7  cents  there. 
That  has  a  diameter  of  4  miles,  and  they  ride  for  7  cents.  All  the 
other  zones  are  on  practically  a  2-mile  basis,  and  in  those  zones  we 
charge  5  cents. 


518       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  You  stated  that  the  public  approved  of  this  in- 
crease.   In  what  way  did  they  make  that  approval  manifest? 

Mr.  Pellishiek.  Well,  on  the  Holyoke  system  they  were  not  quite 
as  unanimous  in  their  approval  of  it  as  they  were  in  Northampton ; 
there  was  some  objection  on  the  Holyoke  system  by  the  public. 

The  Chairman.  How  was  the  approval  indicated  ? 

Mr.  Pellissier.  Well,  on  the  Northampton  system  it  was  indi- 
cated by  the  representatives  of  the  cities  and  towns  before  the  com- 
mission stating  that  if  the  company  needed  a  7-cent  fare  to  operate 
its  business  successfully,  they  were  perfectly  willing  to  pay  it,  that 
they  wanted  the  sendee  and  they  knew  they  could  not  have  it  without 
paying  for  it. 

The  Chairman.  Had  thev  attempted  in  some  way  to  get  an  ex- 
pression of  the  opinion  of  the  connnunity  before  they  made  that  ex- 
pression before  the  commission? 

Mr.  Pellissier.  I  presume  so.  These  were  selectmen  of  the  town 
whf)  represented  their  people. 

The  Chairman.  Had  they  had  some  sort  of  a  New  England  town 
meeting  to  discuss  the  question? 

Mr.  Pellissier.  I  do  not  think  they  had  a  town  meeting  but  they 
had  a  meeting  of  some  committees. 

Mr.  Warren.  The  average  New  England  selectman  can  sense  the 
opinion  of  his  community  pretty  rapidly,  Mr.  Chairman. 

The  Chair^ian.  He  keeps  his  ear  near  the  ground,  does  he? 

Mr.  Warren.  Very  near  the  ground  all  the  time. 

The  Chairman.  Tell  us  something  about  the  sentiment  of  the 
other  community  on  the  other  system. 

Mr.  Pellissier.  Well,  on  the  Holyoke  system  we  attempted  to  re- 
duce the  zones  to  2  miles,  and  of  V*ourse,  that  immediately  threw 
some  of  the  people  that  were  formerly  in  the  inner  zone  into  the 
outer  zone.  In  that  case  they  were  obliged  to  pay  7  cents  where  they 
were  paying  5  cents.     Those  people  objected  to  that  increase. 

The  Chairman.  What  is  the  charge  from  one  zone  into  another 

zone  ? 

Mr.  Pellissier.  It  is  12  cents. 

The  Chairman.  Twelve  cents? 

Mr.  Pellissier.  Yes ;  7  in  one  and  5  in  the  other. 

The  Chairman.  So  that  your  trip  from  one  zone  into  another  is 
the  sum  of  the  two  local  charges,  is  it? 

Mr.  Pellissier.  Yes,  sir. 

The  Chairman.  The  5-cent  zone  is  in  the  congested  part  of  the 

city  ? 

Mr.  Pellissier.  No;  the  7-cent  zone  is  in  the  congested  part  of 

the  city. 

The  Chairman.  Where  is  the  5-cent  zone? 

Mr.  Pellissier.  On  the  outer  zone,  adjacent  to  the  inner  zone. 

The  Chairman.  Does  not  that  rather  reverse  the  rule  of  the  zone 
charge? 

Mr.  Pellissier.  Yes;  a  little,  I  think. 

Mr.  Warren.  Your  idea  was  to  make  the  inner  zone  smaller  and 
charge- 5  cents  there? 

Mr.  Pellissier.  Yes;  that  was  the  idea,  with  the  idea  of  retain- 
ing the  short-haul  passenger. 

The  Chairman.  Why  did  you  not  stick  to  that  idea? 


proceedings  of  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      519 

Mr  Pellissier.  We  did,  but  the  commission  ruled  against  us. 
The  people  that  made  the  objection  to  the  S-cent  fare  or  the  shor^n- 
ing  of  the  zone,  rather,  preferred  a  flat  increase  m  the  unit  rather 

than  shorteninfif  the  zone.  .       ,        •  i      ^,. 

The  ChairmIn.  What  justification  is  there  for  charging  a  lower 

fare  in  the  sparsely  settled  section  of  your  line  and  a  higher  taic 

in  vour  congested  portion?  .      ,  .     i,    j.  it,  „„  „* 

Mr.  PELL"issiER.^The  only  justification  is  this  that  the  z«^^^/  ^f 
course  in  the  outer  sections  are  only  2  miles,  so  that  the  limit  ot  t  le 
ride  is  2  miles  for  5  cents,  which  makes  24  cents  a  mile,  hut  ^n  the 
inner  zone  the  diameter  is  4  miles,  so  the  possible  ^ide  is  4  miles 
for  7  cents,  and  the  short  ride  of  course  is  anything  that  it  may 

be — several  blocks.  .  ^ 

The  Chairman.  What  is  your  combined  mileage^ 
Mr.  Pellissier.  In  the  system? 

The  Chairman.  Yes.  „  ,     ,  ^  j  oa  ^;i«« 

Mr.  Pellissier.  Seventy  miles  in  the  Holyoke  system  and  30  miles 

in  the  Northampton  system. 

The  Chairman.  That  is  all.  „     ,• ,  ^        i  i.i,„f 

Mr  Warren.  What  the  commission  really  did  was  to  enlarge  that 
*  inner* zone  and  enlarge  the  fare  upon  it  from  5  to  7  cents? 

Mr.  Pellissier.  Yes.  ^      .  ,,  ^^ 

Mr.  Warren.  Your  idea  being  to  make  it  a  smaller  zone  and 

charge  5  cents  and  preserve  the  short  ride? 
Mr.  Pellissier.  Yes. 
Mr.  Warren.  That  is  all. 

(Witness  excused.)  ,  •   ji    x  i     j-i     r^^T.A% 

Mr.  W^arren.  Mr.  Hedges,  will  you  kindly  take  the  standi 

STATEMENT  OF  ME.  JOB  E.  HEDGES. 

Mr.  W^ARREN.  Your  full  name? 
Mr.  Hedges.  Job  E.  Hedges. 
Mr.  Warren.  You  are  receiver- 


Mr.  Hedges.  Receiver  of  the  ^ew  lork  Railways. 
Mr.  Warren.  How  long  have  you  been  receiver,  Mr.  Hedges  5 
Mr.  Hedges.  Since  the  20th  of  March. 

Mr  Warren.  Will  you  kindly  tell  the  commission  how  you  came 
to  be  receiver  and  what  your  experience  has  been  as  receiver  m 

operating  those  lines  ?  .  ,  ,    ,  i  i  „  #^„ 

Mr.  Hedges.  Modesty  compels  me  to  withhold  mv  real  reason  for 
appointment.  I  think  it  was  the  intelligence  of  the  judge,  but  it 
was  a  surprise  to  me,  because  I  have  never  been  m  this  or  had  an>- 
thinff  to  do  with  railways  before.  -j.        -.  . 

I  was  appointed  on  the  20th  of  March  m  an  equity  suit  to  preserve 
the  properties  of  the  railways,  there  being  many  unpaid  debts  and 
taxes  and  the  actual  physical  operation  o*  the  road  being  m  jeopardv 
and  two  foreclosures  imminent,  dependent  upon  the  payment  of 

^^Now,%in^Xri  have  been  personally  occupied  largely  in  learn- 
ing  the  mechanism  of  it,  and  I  have  not  any  particular  technical 
knowledge  of  the  detail  of  it,  except  I  hjave  possibly  some  observa- 
tions as  this  struck  me  as  I  first  saw  it. 


520       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

When  I  went  in  there,  and  up  to  now,  it  takes  part  of  the  capital 
of  the  road  all  the  time  to  run  the  ix)ad.  There  are  no  rentals  being 
paid  at  all— all  the  rentals  are  in  default.  One  of  the  roads,  the 
Eighth  Avenue,  has  applied  for  a  severance,  and  an  order  has  been 
entered  on  that  and  there  will  be  a  separate  operation  on  the  1st  of 
August. 

Within  a  month  an  application  before  Public  Service  Commis- 
sioner Mxon  was  made  for  authority  to  charge  for  transfers.  The 
law  seems  to  be  in  New  York  that  a  public-service  commissioner 
has  authority  over  transfers,  but  it  has  been  in  dispute  as  to  whether 
he  has  over  a  flat  rate.  And  in  the  recent  case  in  Buffalo  it  is 
analyzed  both  ways;  some  people  say  it  just  applies  to  the  local  con- 
dition under  which  it  arose  and  others  generally— the  public-service 
commission  counsel  in  New  York  holding  that  it  does  give  the 
public-service  commissioner  authority  to  raise  or  lower  the  flat  rate 
and  the  counsel  to  the  city,  the  corporation  counsel,  saying,  naturally, 
it  does  not.  And  under  direction  of  the  mayor  the  corporation  coun- 
sel has  been  told  to  fight  this  rate  to  the  last  ditch,  as  I  read  it  in 
the  paper. 

Mr.  Warren.  This  transfer? 

Mr.  Hedges.  This  transfer— on  the  ground  that  the  public  is  being 
robbed.  So  the  issue  in  New  York  at  the  present  moment  is  sustain- 
ing the  order  of  the  public-service  commission  providing  for  a  paid 
transfer  as  against  an  admitted  declaration  that  there  shall  be  no 
money  added  for  transportation  than  the  5  cents,  and  that  that  is 
enough.  And  the  corporation  counsel  within  a  week  took  the  posi- 
tion that  this  2  cents  was  not  justified  because  of  excessive  rentals, 
and  therefore  the  public-service  commissioner  went  beyond  his 
jurisdiction  either  as  to  fact  or  law. 

Mr.  Warren.  As  I  undei^tood  you*,  you  are  not  paying  your 
rentals. 

Mr.  Hedges.  And  so  I  wrote  the  corporation  counsel  and  suggested 
that  he  was  all  right  except  as  to  his  facts— that  the  rentals  could 
not  be  a  part  of  a  composite  condition  because  we  were  not  paying 
them. 

Now,  there  is  one  thing  perfectly  certain  in  New  York,  in  my  judg- 
ment— am  I  too  discursive,  Mr.  Warren? 

Mr.  Warren.  No;  that  is  just  what  I  w^ant. 

Mr.  Hedges.  Because  I  am  quite  ingenuous  in  some  features  of 
this — — 

Mr.  Warren.  No;  because  you  are  not  a  street-railway  man,  and  I 
want  the  commission  to  hear  your  experience. 

Mr.  Hedges.  Unless  the  railways  get  relief— and  in  any  event  it 
may  be  that  this  2-cent  charge  for  a  transfer  will  not  satisfy,  and  if 
it  does  not,  every  one  of  those  lines  will  be  severed  from  the  general 
system  except  the  hve  they  own.    All  the  rest  are  leased  lines. 

The  Chairman.  Except  the  what? 

Mr.  Hedges.  There  are  Rve  where  they  have  the  controlling  interest 
in  the  stock.  The  rest  are  all  leased  lines.  The  railway  system  is 
in  default  to  the  Sixth  Avenue  line,  to  the  Fourth  Avenue  line,  and 
the  Eighth  Avenue  is  gone,  and  it  is  in  default  to  the  Ninth  Avenue. 
Now,  my  observation,  while  it  is  limited,  is  this,  among  other  things: 
Even  the  short-haul  traffic  on  the  New  York  railways  has  been  in- 
terfered with  in  two  ways— by  the  difficulty  of  expediting  their  cars 


1 

proceedings  of  federal  electric  RAILWAYS  COMMISSION.      521 

on  the  street,  owing  to  congested  vehicular  traffic,  and  the  fact  that  in 
many  cases  either  the  elevated  or  the  subway  parallel  the  surface 
line.    And  therefore  it  is  just  a  matter  of  expedition  in  New  York— 
New  York  living  on  the  fashion  to  get  from  one  place  to  another  be- 
fore somebody  else  gets  there.  .       •.  * 
Now,  outside  entirely  of  the  question  of  remuneration  by  way  ot 
a  charge,  these  street  railways,  apparently,  from  my  limited  observa- 
tion, have  arrived  at  their  highest  point  of  passenger  trathc.     Ihat 
was  reached  somewhere  in  1913;  I  saw  in  some  figures  furnished 
me,  and  that  was  a  high-water  mark.    Since  then,  with  varying  con- 
ditions  as  to  finances  and  otherwise,  we  have  gone  up  and  down  dur- 
ing the  war  and  after  the  war  and  are  rather  approaching  that  19ia 
fio-ure,  but  will  never  go  above  it  probably.    Therefore  the  logic  of 
it^'is  very  simple.     If  ^,500,000  has  been  added  at  a  computed  rate 
to  the  expenses  of  the  road— assuming  it  is  running  at  a  full  rate 
of  car  equipment  and  conductors  and  motormen— and  they  are  run- 
ning behind  and  do  not  earn  even  that,  it  is  just  a  question  of  the 
date  of  burial  of  the  road.     It  is  not  a  question  of  rate  or  the 
earning  at  all,  because  we  are  not  even  withm  the  penumbra  of 
discussion  of  what  the  roads  ought  to  earn.    In  some  way  they  have 
got  to  be  put  in  a  position  to  have  enough  physical  strength  lett 
to  discuss  how  much  thev  ougjit  to  earn  finally  in  the  reorganiza- 
tion.   Now,  that  is  not  rhetorical  intensity  at  all.     The  discussion 
before  the  public  in  New  York  has  lately  veered  to  the  question  of 
certain  rentals  which,  to  my  mind,  logically  have  nothing  to  do 
with  it.    These  roads  were  organized  by  a  combination  of  ownership 
plus  rentals.    Those  rentals  were  made  up  at  the  time  of  what  was 
the  best  guess  as  to  what  they  ought  to  earn.  Now,  at  the  present 
writing,  according  to  the  wav*^vou  make  a  computation,  the  rate  of 
a  rental  has  a  rhetorical  value.  '  I  do  not  know  anything  about  street 
railways,  but  if  you  pay  $100,000  a  year  for  rental  on  a  capitaliza- 
tion of  a  million  or  a 'capitalization  of  the  same  property  at  two 
million,  with  that  being  possible  in  the  growing  of  time,  the  question 
is  not  a  per  cent  but  the  relationship  of  that  rental  to  the  value  of 
the  property  by  way  of  use.    Now,  this  severed  line  of  the  Eighth 

Avenue  the  other  day  was  a  street-car  line.    When  it  was 

The  Chairman.  Was  it  under  your  control? 

Mr.  Hedges.  Yes,  sir;  it  came  through  the  New  York  Railways, 
following  the  old  Metropolitan  system  there,  and  therefore  to  me 

as  receiver. 

Mr.  Warren.  By  a  street-car  line  you  mean  a  horse  railroad  ? 

Mr.  Hedges.  I  mean  at  the  time  it  was  first  taken  over  as  a  horse- 
car  line,  and  the  agreement  as  to  lease  as  a  price  was  $215,000 — 
stating  just  from  memory— plus  taxes  and  some  other  charges,  city 
charges,  and  an  agreement  that  they  should  electrify  the  road. 
Since  then  the  road  has  been  electrified ;  some  three  or  four  million 
dollars  have  been  added  to  it,  according  to  the  covenant,  and  the 
computation  as  I  can  make  it  out  is  twelve  and  a  fraction  per  cent 
on  all  the  property  used  by  the  public.  The  mayor,  who  seems  to 
be  my  rhetorical  antagonist  at  the  moment,  divides  215,000  into  a 
million  and  lets  it  go  at  that,  because  26J  per  cent  has  a  great  deal 
better  conversational  value  in  opposing  an  increase  in  rate  than  has 
12^  per  cent. 

160643**— 20 34 


t 


522       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION'. 

Now,  without  any  desire  to  express  my  private  opinion  or  a  desire 
to  flaunt  mv  suggestions,  and  having  m  mind  the  question  the 
chairman  asted  the  gentleman  who  was  on  }iere  before  me,  I  would 
very  modestly  suggest  this:  The  chairman  asked  the  gentleman  how 
he  knew  that  the  public  accepted  something  or  acquiesced  in  some- 
tliing  in  this  increased  rate.  I  know  nothing  about  Northampton 
or  Holyoke,  but  I  do  know  something  about  the  people  of  New  York 
City.  New  York  City  can  get  up  a  protest  on  any  side  of  any  topic 
overnight,  with  any  number  of  people  pi-otetsing,  usually  the  same, 
and  with  any  intensity  of  vocalizing  required  by  the  situation. 
Therefore  there  is  no  question  settknl  in  New  York  primarily,  eco- 
ncmiically,  or  legislatively  successfully  until  the  facts  are  told  the 
citizens. 

My  observation  through  some  85  wars,  including  one  unfortunate 
year,  is  that  the  public  of  New  York,  made  up  of  the  tremendous 
varieties  of  intelligence,  will  understand  a  fact.  The  average  man 
and  woman  on  the  streets  of  New  York  will  face  a  fact  and  acquiesce 
in  it.  What  confuses  them  is  when  they  see  a  discussion  carried  on 
by  deductions  from  infereitces,  and  then  they  know  nothing  about  it. 

Now,  there  is  no  disposition  in  New  York,  Mr.  Chairman,  I  think, 
regai-ding  these  fares  other  than  to  believe  that  they  have  got  to  be 
increaseci.  As  I  make  a  nonprofessional  deduction,  it  would  have 
Vjeen  wise  instead  of  giving,  had  there  been  authority,  a  '2-cent  trans- 
.  fer  charge  as  a  tentative  thing,  to  raise  the  flat  rate  a  cent,  if  you 
are  just  going  to  experiment.  I  think  the  average  person  on  the 
street  looks  on  a  cent  now  as  a  means  of  a  fractional  way  to  deter- 
mine something.  It  used  to  be  the  minimum  charge  for  something. 
Now,  it  is  5  cents.  Then,  1  think,  there  is  an  instinct  that  whatever 
you  get  whei'e  you  do  not  show  a  physical  conmiodity  as  a  result  of 
it,  you  think  you  are  entitled  to  get  for  nothing;  and  therefore  what 
in  in  the  mind  of  the  avexage  i>ei-son — the  working  person  there,  we 
will  say — is  to  get  from  their  residence  to  their  place  of  woric. 

Now,  they  are  being  rai-ried  across  one  of  the  I^rooklyn  bridges  at 
a  reduced  I'ate,  at  a  loss;  one  of  the  arguments  there  why  there  shoidd 
not  l^  a  raise,  being  that  a  small  corporation  there  for  oi>ei*ating 
that  bridge  service  is  earning  a  substantial  per  cent,  more  than  any- 
one ought  to  earn  who  has  not  money ;  the  fact  being  that  they  or- 
ganized a  little  bit  of  a  tentiitive  corix)ration,  if  I  recollect  right, 
something  like  $10,000,  just  to  have  a  coriX)ration,  so  that  the  people 
in  Brooklyn  and  New  York  and  the  operating  companies  could  each 
liave  half  of  it.  Therefore,  in  the  plentitude  of  present-day  wisdom 
they  compute  what  the  earnings  would  be  by  way  of  a  dividend  on  a 
$10,000  corporation,  leaving  out  for  nmntal  and  physical  fatigue  the 
question  of  whether  it  earned  an.^thing  or  whether  the  thing  was 
run  at  a  loss  except  for  that  capitalization. 

Now,  the  questioA  has  got  to  be  continued  there.  This  decision  of 
Commissioner  Nixon  will  probably  go  to  the  court  of  appeals,  and 
l^ending  that  the  problem  of  my  receivership  is:  Do  I  get  enough 
money  as  receiver  to  discontinue  the  use  of  capital  with  which  to 
operate  those  roads.  The  i-eceivership  owes  to-day  about  a  million 
dollars'  worth  of  taxes,  with  the  penalties  beginning  to  accrue.  I 
assumed  in  the  neighborhood  of  half  a  million  dollars  of  postponed 
necessary  reproduction  in  the  streets  and  maintenance  of  way  and 
whatever  those  things  may  be.     So  that  I  am  ai;  the  pi^esent  moment 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      523 

personifying  the  New  York  Railways,  at  least  between  one  and  a 
half  and  twi  millions  of  dollars  behind,  before  I  get  to  the  pomt  of 
the  question  of  whether  the  operating  receipts  meet  operating  ex- 

^'Tow,  that  discussion  is  all  carried  on  in  the  atmosphere  whidi  is 
within  the  penumbra  of  what  is  the  best  for  the  common  people. 

One  side  IS  appealing  for  the  maintenance  and  the  physical  exist- 
ence of  a  piece  of  property  and  the  other  side  is  appealmg  to  .^^at  is 
for  the  interest  of  somebody  else  who  does  not  know  what  it  is  a  I 
about  and  would  like  to,  and  I  think  is  more  intelligent  than  their 
advocate;  and  all  of  which  is  colored  by  the  collateral  discussions  oi 
municipal  ownership  and  the  proximity  of  elections  which  are  ne^ei 
further  off  in  New  York  City  than  12  months 

Now  I  believe  that  the  people  of  New  York-and  I  do  not  know 
whether  this  is  pertinent,  I  only  suggest  it  because  your  chairman 
asked  it-there  will  always  be  people  i^  New  lork  City  whoj  ill 
protest  against  anything  except  an  annult3^  ,A^^  ^^hey  will  i^^^^^^ 
against  anything  new  and  revile  anything  that  is  old.  But  the  pub- 
fe  in  New  York-if  tliev  understand  this  situation,  and  it  can  be 
exDlained  to  them— will  make  no  protest  against  a  proposition  that 
toCe  a  railmid  live  on  its  capital  is  pubUc  laix^eny,  -nd  they  -^^ 
not  be  a  party  to  it.  But  as  long  as  the  discussion  is  kept  withm 
Sie  range  of  who  can  sav  the  most  for  somethmg  while  doing  some- 
thing to  them,  the  thing  will  never  be  solved. 

Now,  any  specific  data  that  the  commission  wants— and  I  f eel  i 
have  taken  toi  long-I  will  get  for  them  if  I  can.    There  are  two 
mortgages  under  foreclosure  there  now:  a  4  per  cent  f ^rtgage  ii^^ 
volving^  as  I  recall  it,  something  around  $1^000  or  $1^^^^^^ 
and  another  involving  I  think  something  like  $aO,0OO,O(X)  and  a 
mort-a-e  predicated  on  income.    If  nothing  is  done  there  the  $50,- 
000  OOo'mirtgage  becomes  a  memory,  because  if  the  first  mortgage 
forecloses  anS  ^lls,  the  later  bonds  have  only  a  conversational  me- 
morkl  value.     If  the  first  bonds  do  not  sell  and  the  pubhc-service 
Tthorities  permit  the  ix^ceiver  to  have  an   ncome  why,  there  should 
bL  aTeorganization,  otherwise  all  these  lines  will  divide.     That  is 
i^^st  the  observation  of  a  layman.    Later  I  will  know  more  about  it. 
Mr.  Warrex.  Mr.  Hedges,  you  spoke  of  the  commissioner  having 
authoritv  to  change  transfers.  ... 

Mr.  Hedges.  Yes;  to  permit  a  charge  for  transfer. 
Mr.  Warren.  To  permit  a  charge  for  transfer? 
IVTt*  TIvdces     jl  es 

Mr.  Warren.  But  not  an  increase  in  fare.  That  of  course  means 
where  the  franchise  itself  limits  the  fare. 

Mr.  Hedges.  Yes,  sir.  xr    r_  xi.    ^        •    •« 

Mr  W\RREx.  Because  in  manv  parts  of  New  York  the  fare  is  in- 
creased owing  to  the  silence  of  the  franchise.  .    ^  .y^       -^ 

Mr.  Hedges.  Yes;  that  is,  you  mean  where  it  is  a  part  of  the  origi- 
nal contract  in  the  franchise  itself.  ,  v    i    .        v:.^., 

Mr.  Warren.  And  that  is  the  situation  m  New  York  franchises 

^lir  Hedges.  Yes,  sir.  Now,  the  Buffalo  case  as  the  commission 
probably  knows,  came  up  from  a  legislative  ratification  of  the  con- 
tract between  the  city  and  the  company. 


524      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  And  there  the  court  held  that  the  legislature  had 
delegated  the  commission  its  own  power  to  change  the  rate. 

Mr.  Hedges.  Yes.  Now,  the  legal  discussion  is  whether  that  carried 
anything  other  than  the  Buffalo  case. 

Mr.  Warren.  The  court  having  previously  decided  the  Quinby 


case 

Mr.  Hedges.  Yes;  in  which  they  said  they  had  no  authority. 

Mr.  Warren.  You  spoke  of  the  congestion  in  the  streets  as  retard- 
ing and  slowing  up  the  cars. 

Mr.  Hedges,  les. 

Mr.  Warren.  Do  you  know  whether  there  is  any  effort  made  by 
the  municipal  authorities  to  give  the  cars  any  right  of  way  over  the 
tracks? 

Mr.  Hedges.  Not  that  I  know  of. 

Mr.  Warren.  There  is  in  some  cities. 

Mr.  Hedges.  Yes.  Every  once  in  a  while  there  will  be  an  effort 
made  to  divert  traffic  to  another  street,  like  the  widening  of  what  is 
now  Lafayette  Place,  but  I  know  of  no  method  generally. 

Mr.  Warren.  Trying  to  keep  the  traffic  off  the  rails  themselves  ? 

Mr.  Hedges.  Yes. 

Mr.  Warren.  That  is  all,  Mr.  Hedges.  I  think  perhaps  the  com- 
missioners would  like  to  ask  you  some  (juestions. 

The  Chairman.  Have  you  had  any  prior  experience  in  the  railroad 
business? 

Mr.  Hedges.  No,  sir;  not  the  slightest. 

The  Chairman.  The  immediate  problem  seems  to  be  to  secure 
revenue  enough  to  operate  the  railroad. 

Mr.  Hedges.  Yes,  sir. 

The  Chairman.  You  have  no  immediate  concern  in  the  return 
upon  capital  inve.sted? 

Mr.  Hedges.  That  is  not  within  mjr  activity. 

The  Chairman.  The  New  York  Railways  which  you  represent  con- 
sist of  all  of  the  surface  lines? 

Mr.  Hedges.  All  of  the  green-car  surface  lines;  not  all  of  Man- 
hattan Island,  because  there  is  another  system  called  the  Third  Ave- 
nue system — ^and  the  Second  Avenue. 

The  Chairman.  Any  connection  with  the  subways? 

Mr.  Hedges.  No. 

The  Chairman.  Or  the  overhead? 

Mr.  Hedges.  Do  you  mean  the  system  I  represent  ? 

The  Chairman.  Yes. 

Mr.  Hedges.  No,  sir;  except  this:  that  there  were  three  corpora- 
tions, the  Interborough,  the  New  York  Railways,  and  an  overhead 
corporation  know  as  the  Interborough  Consolidated,  which  owned 
the  stock  of  these  two  other  companies;  and  the  physical  service  of 
the  two  companies,  the  Interborough  and  the  New  York  Railways, 
is  performed  in  large  part  by  the  same  administrators  or  executives 
with  an  allocated  remuneration. 

The  Chairman.  From  your  study  do  you  believe  that  the  rentals 
which  are  being  paid  to  these  subsiciiary  companies  are  fair? 

Mr.  Hedges.  I  think,  as  far  as  I  know^,  approximately.  I  do  not  see 
how  that  can  finally  be  deteraiined  on  that,  I  do  not  see  why  the  New 
York  Railways  had  not  a  right  to  make  an  original  contract.  I  can 
see  that  there  might  be  a  desirability  to  change  the  rate.     For  in- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      525 

Stance,  the  rate  of  return  on  the  Eight  Avenue  on  their  capital  is  12 
and  a  fraction  per  cent,  on  the  capital  involved.  Now,  if  the  question 
of  the  physical  life  of  a  raih-oad  has  got  to  be  considered  exclusively 
as  to  a  final  reorganization  earning  price  there  will  never  be  any 

solution  of  it.  .  „  .,  i?       t        •  j. 

The  Chairman.  If  you  could  consolidate  all  the  surface  lines  into 
one  corporation,  could  you  perfect  such  saving  in  the  overhead  and 
other  costs  as  to  pay  your  fixed  charges  and  operating  expenses  on  a 

5 -cent  fare? 

Mr.  Hedges.  No,  sir. 

The  Chairman.  It  could  not  be  done  ? 

Mr.  Hedges.  No,  sir.  . 

The  Chairman.  Then  that  is  not  the  solution? 

Mr  Hedges.  No,  sir.  I  think  I  can  say  with  as  much  accuracy  aa 
a  layman  could  give  that  the  operating  expenses  have  been  reduced 
to  a  minimum,  from  necessity  if  for  no  other  reason,  during  the  past 

three  or  four  years.  .  -,   -,     -       ^i.  * 

The  Chairman.  Have  your  wages  been  increased  during  the  past 

year?  •     ,  ^ 

Mr.  Hedges.  Yes,  sir— not  the  past  year,  but  a  year  ago,  as  I 

^^The  Chairman.  Were  they  increased  before  the  War  Labor  Board? 

Mr.  Hedges.  The  New  York  Railways  did  not  come  up  during  the 
war.     I  think  it  was  just  before  the  war. 

The  Chairman.  What  was  the  increase  m  dollars  ? 

Mr  Hedges.  It  would  have  amounted,  if  the  road  was  running  to 
its  proper  capacity,  as  I  recollect,  to  about  two  million  four  hundred 
or  two  million  five  hundred  thousand  dollars. 

The  Chairman.  What  is  your  present  scale? 

Mr.  Hedges.  I  can  not  give  you  that  from  memory.    I  will  be  very 

glad  to  furnish  it  to  you.  '    ^  •     n       « 

The  Chairman.  Are  you  operating  the  roads  as  economically  as 

it  i<^  possible  to  do  consistent  with  reasonable  service  to  the  public  i 
Mr  Hedges.  I  think  very  close  to  the  danger  line.     The  question 

of  accidents  in  New  York  is  very  serious,  and  they  ai;e  m  arrears  in 

keeping  up  their  paving  contracts  and  keeping  up  their  maintenance 

of  right  of  way.  ^  ,       ,    ,,  j.    £  j.i 

The  Chairman.  Have  you  at  your  fingers'  ends  the  per  cent  of  the 
operating  cost— that  is,  the  per  cent  which  the  claims  paid  bear  to 
the  operating  cost  of  the  railroad? 

Mr.  Hedges.  Do  you  mean  the  accident  claims? 

The  Chairman.  Yes. 

Mr.  Hedges.  No;  but  I  can  give  you  that. 

The  Chairman.  Is  it  a  large  amount? 

Mr.  Hedges.  It  is  quite  a  substantial  amount— much  larger  propor- 
tionately than  the  Interborough.  ^        ,,.     ^.       , 

The  Chairman.  Do  you  also  have  paving  obligations? 

Mr.  Hedges.  Very  serious  ones.  .  , 

The  Chairman.  What  per  cent  of  the  operating  cost  is  borne  by 

the  paving  items ?  ,    ^  t     -n        j  -i.  x 

Mr.  Hedges.  I  can  not  give  it  from  memory,  but  I  will  send  it  to 


you 


The  Chairman.  I  wish  you  would. 

Mr.  Hedges.  I  will  be  very  glad  to,  and  any  other  data. 


526      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Will  you  send  us  a  statement  showing  the  amount 
of  claims  paid,  the  paving  obligations  and  other  assessments  made 
against  the  property  5 

Mr.  Hedges,   i  es. 

The  Chairman.  And  work  it  out  on  a  percentage  bajsis. 
■  Mr.  Hedges.  Yes.  I  will  say  regarding  the  $200,000  that  was  sup- 
posed to  have  been  cleared  over  operating  expenses  in  the  past  six 
months  that  that  was  exclusive  of  the  luck— that  they  did  not  happen 
to  have  to  expend  $200,000  for  snow  removal  last  year,  so  that  up  to 
the  present  writing  it  can  literally  be  said  that  the  road  is  running 
on  capital  expenditure. 

The  Chairman.  Will  the  2-cent  transfer  charge  divert  much 
traffic  to  the  subways  or  the  overhead  lines? 

Mr.  Hedges.  My  own  judgment  is  that  it  will  be  appreciable.  I  do 
not  know.  I  think  that  is  experimental,  and  I  do  not  know  that 
anyone  can  tell  definitely.  The  experts  on  the  road  figured  out  that 
there  would  be  a  falling  off  of  40  per  cent  in  transfers  themselves, 
even  by  an  increase  of  2  cents,  and  that  tlwt  would  cause  people  to 
walk  or  otherwise,  but  the  slowness  of  tlie  movement  of  the  surface 
cars  has  already  diverted  traffic  to  the  subways  and  the  elevated. 

The  Chairman.  In  your  judgment 

Mr.  Hedges.  And  I  think  more  will  go  with  the  transfer,  especially 
in  those  places  where  the  subway  approximately  parallels  the  sepa- 
rate road.  Take,  for  instance,  tlie  Brooklyn  Eapid  Transit.  It  now 
goes  up  Broadway  to  Fifty -seventh  Street  before  it  veers  off  through, 
going  under  the  East  River.  In  other  words  that  parallels  the  green 
cars  all  the  way  to  Fifty -seventh  Street. 

The  Chairman.  Will  the  transfer  charge  add  to  or  take  from  the 
gross  revenues  of  vour  lines? 

Mr.  Hedges.  I  think,  hope,  and  pray  it  will  add  to  it. 

The  Chairman.  What  is  your  judgment? 

Mr.  Hedges.  Mv  judgment  is  that  of  the  experts  fvho  know  more 
about  it,  that  it  will  add  something  in  the  neighborhood  of  six  hun- 
dred or  seven  hundred  thousand  dollai-s,  as  I  recall  the  figures. 

The  Chairman.  Will  that  take  up  the  slack  in  your  operating  ex- 
penses ? 

Mr.  Hedges.  No,  sir. 

The  Chairman.  Then  you  have  got  to  have  some  relief  other  than 
ft  transfer  charfire  ? 

Mr.  Hedges.  Yes ;  there  has  to  l>e  a  flat  rate ;  and  I  think  the  flat 
rate  would  be  less  objectionable  to  the  public  in  its  ordinary  every- 
day human  activities,  where  you  pay  it  all  at  once  and  get  it  off 
your  mind  than  to  pay  it  apparently  in  two  amounts. 

The  Chairman.  Now,  you  proposed  a  flat-rate  increase  of  1  cent? 

Mr.  Hedges.  No;  I  say  that  a  tentative  increase  of  1  cent  on  a 
flat  rate  would  have  been  a  better  test  than  a  2-cent  transfer  charge. 

The  Chairman.  Do  you  believe  that  the  6-cent  fare  would  enable 
you  to  operate  the  railroad  satisfactorily  ? 

Mr.  Hedges.  I  doubt  it.  I  do  not  think  it  would;  it  would  take 
a  very  great  period  of  time  with  that  even  to  approximate  the  pay- 
ment of  arrears  of  taxes   and  maintenance  and  things  that  had 

fallen  off. 
The  Chairman.  That  would  represent  a  20  per  cent  increase  in 

gross  ? 


proceedings  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      527 

The  cSTiRMAN^'what  do  you  think  the  actual  increase  would  be 

on  a  flat  1-cent  raise?  ,       t   i  .  _x  -j 

Mr.  Hedges.  I  do  not  know,  sir;  I  have  not  the  slightest  idea. 

The  Chairman.  No  way  of  telling?  , ,  ^  „  .,    .  _^„i,i  i^  f,,,, 

Mr.  Hedges.  No;  the  only  way  they  could  tell  that  would  l>e  foi 

the  men  in  the  company  who  have  followed  it  to  make  their  best 

guess  from  human  experience  along  the  developing  of  new  lines,  or 

where  it  has  fallen  off  owing  to  the  subway  or  elevated. 

The  Chairman.  Would  the  6-cent  fare  tend  to  divert  a  great  deal 
of  traffic  to  the  other  lines  and  also  force  a  great  many  people  to 
walk  in  the  congested  territory  ? 

Mr.  Hedges.  I  think  not  so  much  as  a  2-cent  transfer. 
The  Chairman.  It  would  not? 
Mr.  Hedges.  That  is  just  my  layman  s  guess. 

The  Chairman.  What,  in  your  judgment,  is  the  ultimate  solution 
of  the  railroad  problems  in  New  York  \  ,,,.,, 

Mr  Hedges.  The  first  step,  to  my  mind,  would  be  the  human  step 
of  letting  the  public  know  what  the  facts  were. 
The  Chairman.  That  is  your  job? 

Mr.  Hedges.  So  far  as  it  is  not  interfered  with  by  the  authorities. 
But  I  have  got  to  persuade  the  authorities  to  tell  the  facts  and  then 
Stween  us  we  will  tell  them  to  the  public.  >sow,  the  public  will  be 
reconciled,  in  my  judgment,  except  the  protesting  professional  mi- 
nority, to  any  preposition  that  officialdom  declares  is  the  substan- 
tiallV  ust  thing  to  do.  I  have  a  higher  opinion  of  the  public  m  that 
respect  than  I  did  a  few  years  ago,  from  personal  experience. 

The  Chairman.  Well,  undoubtedly  you  have  to  have  the  proi^er 

psvchology. 

'Mr.  Hedges.  Absolutely.  .   .        ,     ., 

The  Chairman.  And  that  can  only  be  secured  by  pying  to  the 

public  the  real  facts,  so  they  will  understand  them  and  believe  them  i 

Mr.  Hedges.  Absolutely.  .^    ^    ^    ^u  4. 

The  Chairman.  And  assuming  that  the  public  have  the  facts,  what 

is  vour  solution ?  .       «      ,,  •  j      j 

Mr  HEiKiES.  An  increase  of  remuneration  for  the  service  rendered. 
The  Chairman.  Do  you  i-equire  a  reorganization  of  your  plant  if 

you  get  an  increase  in  fare?  , 

Mr.  Hedges.  Do  you  mean  in  the  manning  of  it  I 

The  Chairman.  Yes.  .       ,      i  i  j  u 

Mr  Hfj>ges.  The  only  question  I  could  see  involved  now  would  be 
whether  the  New  York  Railways  were  severed  from  the  ]oint  me- 
chanical operation.  That  would  mean  the  installing  of  power  else- 
where. The  New  York  Railways  buys  its  power  from  the  Inter- 
borough,  and  I  think  gets  it  at  a  cheaper  rate  than  it  could  through 
an  independent  company. 

The  Chairman.  Suppose  there  was  a  consolidation  of  all  the  sur- 
face, subway,  and  overhead  lines ;  could  you  then  operate  on  a  5-cent 
faie'so  as  to  pay  operating  costs  and  fixed  charges?  ,,    .   u  4. 

Mr.  Hedges.  I  have  not  professional  knowledge  to  know  that,  but 
I  have  not  the  slightest  doubt  that  it  could  not  be. 

The  Chairman.  That  it  could  not  be? 

Mr.  Hedges.  No. 


f 


528       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  How  much  of  a  saving  in  overhead  cost  and  other 
expenses  coukl  be  made  by  perfecting  a  complete  consolidation  of  all 
lines  in  New  York  Citj^? 

Mr.  Hedges.  A  very  inappreciable  amount,  in  my  judgment,  so  far 
as  my  observation  goes. 

The  Chairman.  You  think  it  would  not  be  substantial  ? 

Mr.  Hedges.  I  can  not  conceive  of  anything  being  more  compact 
than  it  is  now.  I  can  conceive  that  a  man  may  have  so  much  to  do 
by  way  of  executive  function  that  he  scattei^.  But,  as  it  is  now, 
everything  is  made  about  as  composite  as  it  could  be.  I  do  not  know 
anything  about  the  Third  Avenue. 

The  Chairman.  There  are  all  sorts  of  franchises  existing  in  New 
York  City,  are  there  not  ? 

Mr.  Hedges.  Yes. 

The  Chairman.  Different  terms  and  different  conditions? 

Mr.  Hedges.  Yes,  sir ;  some  of  them. 

The  Chairman.  How  many  of  the  companies  are  included  in  your 
system? 

Mr.  Hedges.  My  recollection  is  something  like  14.  I  think  there 
are  five  owned  and 

The  Chairman.  Do  you  believe  that  the  situation  would  be  helped 
some  if  you  could  have  a  uniform  franchise  for  all  of  the  railwaj^s 
in  your  system  ? 

Mr.  Hedges.  I  do  not  believe  the  form  of  franchise  would  af- 
fect it. 

The  Chairman.  I  beg  pardon  ? 

Mr.  Hedges.  I  do  not  see  how  the  form  of  the  franchise  would 
affect  it  unless  it  provided  a  living  rate. 

The  Chairman.  Then  you  do  not  think  there  are  provisions  in 
the  franchise  which  are  against  the  public  interest? 

Mr.  Hedges.  None  that  I  know  oi,  sir. 

The  Chairman.  Are  there  any  that  are  against  the  interests  of  the 
corporation  'i 

Mr.  Hedges.  There  are  certain  transfer  points  required  by  cer- 
tain franchise  provisions  now  where  there  can  not  be  any  charge 
for  transfer. 

The  Chairman.  How  about  your  paving  charges? 

Mr.  Hedges.  I  think  that  is  a  burden — well,  I  do  not  know  how 
that  started,  but  I  think  that  is  a  burden  that  the  roads  should  not 
bear,  certainly  not  exclusively,  because  what  is  reproduced  by  them 
for  the  city  is  not  destroyed  by  them  in  their  own  service. 

The  Chairman.  Would  it  be  possible  in  a  new  franchise  to  elimi- 
nate that  feature? 

Mr.  Hedges.  You  can  do  it  without  a  franchise. 

The  Chairman.  Has  the  council  the  right  to  do  it? 

Mr.  Hedges.  I  think  so. 

The  Chairman.  The  franchise  is  a  contract. 

Mr.  Hedges.  Yes,  sir.  I  think  the  council  can  contribute  that  if 
it  wants  to  in  some  way. 

The  Chairman.  Has  that  proposition  been  advocated? 

Mr.  Hedges.  It  has  been  suggested  in  the  public  prints.  I  have 
never  participated  in  a  discussion,  but  I  doubt,  Mr.  Chairman,  dur- 
ing the  present  official  situation  in  New  York,  if  it  would  provoke 
other  than  noise. 


I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      529 

The  Chairman.  There  is  a  very  considerable  sentiment  for  mu- 
nicipal ownei^hip  there,  is  there  not?  ^      .^  .  ,   •    v    u^j 

Mr.  Hedges.  There  is  a  very  intense  feelmg  for  it  in  certain  limited 
localities.  It  is  being  advocated  in  one  daily  publication  and  is 
advocated  from  the  city  hall  up  to  the  point  of  their  not  having 

any  money  to  buy  with.  .,  i     i.     xi 

The  Chairman.  Do  you  believe  it  would  be  possible  for  the  mu- 
nicipality to  operate  the  surface  line  on  a  5-cent  charge?  . 

Mr  Hedges:  No,  sir ;  I  do  not  believe  they  could  operate  it  withm 
a  substantial  per  cent  of  the  rate  private  ownership  can;  and  I 
make  that  observation  with  considerable  conviction,  because  1  was 
once  secretary  to  a  mayor  in  New  York.  It  is  physically  impos- 
sible, in  my  judgment,  with  an  unrestricted  franchise-the  same 
man  being  the  recipient  of  what  comes  from  the  casting  of  a  ballot- 
to  administer  a  function  unmindful  of  that,  and  that  is  regardless 

of  party  or  anything  else.  ,    ^     ,  ,         .u  4.  ^^^i^ 

The  Chairman.  We  have  heard  a  good  deal  here  the  past  week 

about  the  cost-of-service  plan.    Are  you  familiar  with  that  i 
Mr.  Hedges.  A  cost  of  service?  , 

The  Chairman.  Yes;   a  cost-of -service  franchise,  such   as  they 

have  in  Cleveland  or  Cincinnati.  i     x    v^ 

Mr.  Hedges.  I  am  not  familiar  with  it.  I  have  heard  it  dis- 
cussed, but  I  have  not  any  judgment  about  it. 

The  Chairman.  Then 'you  are  not  prepared  to  discuss  that  as  to 
its  applicability  to  the  New  York  system? 

Mr.  Hedges.  No,  sir;  but  it  is  quite— well—— 

The  Chairman.  I  have  an  appointment  at  11  o  clock.    If  you  will 

^  Mr^VARR^EN^  TJu  Te^'not  prepared  to  discuss  it  further  dian 
that  you  would  like  to  see  the  limitation  of  5  cents  removed  so  that 

"^it^Z^  r^i^  &^n^^^out.this  other  theoi^  you 
mentioned,  Mr.  Warren,  but  I  am  confirmed  m  my  own  mind  that 
if  the  rates  do  not  go  up,  the  roads  will  go  out,  not  down. 

Mr  Warren.  And  that  that  provision  of  the  franchise  ought  to 
be  changed  by  some  method  so  that  the  rates  can  be  changed^ 

Mr.  Hedges.  Yes ;  but  I  have  not  any  fruitful  opinion  as  to  how 

^  Conirnissioner  Sweet.  I  understood  you  to  say  that  you  had  not 

had  previous  street-railroad  experience. 

Mr.  Hedges.  Yes. 

Commissioner  Sweet.  You  are  an  attorney  at  law^ « 

Mr.  Hedges.  Yes,  sir.  ..  .       j>  -i.  i 

Commissioner  Sweet.  And  have  been  practicing  for  quite  a  good 

many  years  in  New  York  City? 

Mr.  Hedges.  Since  1886,  sir.  .   .  .... 

Commissioner  Sweet.  You  have  also  been  giving  some  attention 
to  public  affairs  all  your  life,  have  you  not? 

Mr.  Hedges.  AW  my  life—and  tried  to  officially. 

Commissioner  Sweet.  You  refer  by  that  to  your  candidacy  for 
Governor  of  New  York? 

Mr.  Hedges.  Yes,  sir. 


If 


530      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  S\s^et.  I  believe  you  were    born  in    Livingston 
County,  N.  Y.,  were  you  not? 
Mr.  Hedges.  I  came  from  there ;  my  people  came  from  there. 
Commissioner  Sweet.  Were  3^ou  not  bom  there  ? 
Mr.  Heix^.es.  No,  sir;  I  was  born  in  New  Jersey,  but  my  father 
came  from  Danville. 

Commissioner  Sweet.  Without  going  over  the  gi*ound  you  have 
been  over,  with  regard  to  the  detail  of  the  New  York  system  and  your 
present  very  difficult  pfoblems,  in  your  study  of  public  questions, 
your  mind  undoubtedly  has  rested  frequently  and  with  more  or  less 
care  upon  the  question  of  the  public  utilities? 
Mr.  Hedges.  Yes. 

Commissioner  Sweet.  Were  you  present  in  New  York  when  for- 
mer-President Taft  appeared  before  this  commission? 
Mr.  Hedges.  I  was  in  the  city,  but  not  at  the  hearing. 
Commissioner  Sweet.  He  made  a  statement  before  the  commis- 
sion that  ho  had  taken  up  the  general  study  of  the  subject  of  street 
railways  as  a  member  of  the  War  Labor  Board  in  connection  with 
wages,  and  that  as  a  war  measure  it  became  exceedingly  important 
that  the  electric  railways  on  lines  over  which  workmen  in  factories 
doing  war  work  were  transpoited  from  their  homes  to  the  factories — 
that  it  was  important  that  these  lines  be  kept  in  operation.  He  also 
stated  that  wages  were  raised  on  the  basis  of  needs — ^the  general  in- 
crease throughout  the  country  of  what  we  call  the  cost  of  living— 
and  that  not  so  much  consideration  was  given  to  the  ability  of  the 
railroads  to  pay  those  wages.  Of  course,  you  know  as  a  citizen  and 
also  as  receiver  of  these  companies  that  wages  have  been  raised  to 
a  very  high  point  as  compared  to  the  prewar  rates.  You  also  know 
that  everything  that  a  railroad  has  to  buy — steel,  equipment  of  all 
kinds,  electrical  apparatus,  and  everything— is  very  high ;  is  not  that 
true  ? 

Mr.  Hedges.  Yes,  sir;  very  high. 

Commissioner  Sw^eet.  Now,  former-President  Taft  took  the  posi- 
tion that  something  had  got  to  be  done  to  help  the  general  systems 
of  railroads  throughout  the  country — not  New  York  City  alone,  but 
all  over  the  United  States — to  continue  in  ojieration,  and  that  their 
incomes  had  to  be  very  materially  increased  or  expenses  very  mate- 
rially reduced.  He  also  expressed  the  opinion  that  expenses  could 
not  be  very  well  reduced,  or  to  any  material  extent,  in  the  immedi- 
ate future.  He  thought  the  purchasing  power  of  money  had  been 
reduced  and  that  it  was  a  condition  that  had  come  to  stay — that 
had  some  degree  of  permanency.    Is  that  your  opinion? 

Mr.  Hedges.  Only  in  degree.  I  think  that  the  cost  of  maintaining 
these  roads,  the  cost  of  living,  has  very  largely  increaased,  abnormally 
increased.  I  think  a  measure  of  it  will  continue  for  a  period  of  time.  *I 
think  prices  are  inflated  as  a  result  of  the  war  plus  an  added  amount 
imposed  upon  a  purchaser  by  virtue  of  not  knowing  how  much  the 
article  cost.  I  think  we  are  still  making  the  war  as  an  excuse,  and 
I  do  not  think  it  has  gotten  back  yet  to  an  approach  to  economic 
propositions;  but  I  think  it  will  continue  some  time,  and  I  think 
that  the  price  of  material  and  the  price  of  wages  have  each  forced 
the  other  up— whichever  took  the  fii-st  step,  it  had  to  be  responded  to. 
Commissioner  Sweet.  In  matters  of  tliat  kind  it  is  very  often 
difficult  to  tell  which  is  cause  and  which  is  result,  is  it  not? 


PROCEEmNGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION,      531 

Mr.  Hedges.  Yes ;  they  are  each  both.  . 

Commissioner   Sweet.  But   they   have  moved   along   in   parallel 

lines  to  a  certain  extent  ?  ,      . , , 

Mr.  Hedges.  It  seems  to  me,  Mr.  Sweet,  they  have^competed  with 
each  other  for  raises,  with  the  general  public  standing  by  as  tlie 

""  Commissioner  Sweet.  Each  one  affording  a  certain  measure  of 
justification  for  the  raise  in  the  other? 

Mr.  Hedges.  Yes.  ,        ,       .^  -i-i  -o^^c.; 

Commissioner  Sweet.  You  say  you  do  not  quite  agree  with  rres.- 
dent  Taft  that  this  situation  has  some  degree  of  permanency— or  a 
considerable  degree  of  permanency? 

Mr.  Hedges.  Where  I  would  differ,  with  modesty,  would  be  as  to 

the  period  of  time  before  we  begin  to  recover.     Tlie  period  of  time 

n  my  judgment,  would  be  shortened  by  the  courage  of  intellectua 

men  y  difcussing  things  as  they  are;  and  the  public  ^^^^  J^P^^^ 

to  that,  and  concHtions  will  become  more  normal  from  an  accuiate 

^""comSioner  Sweet.  I  assume,  Mr.  Hedges  that  you  would  not 
like  to  state  exactly,  or  with  any  degree  of  exactness,  the  period  that 
vou  think  these  conditions  will  continue. 

Mr    Hedges.  My  Imowledge  would  not  have  any  value. 

Commissioner  Sweet.  Well,  would  anybody  s? 

Mr.   Hedges.  According  the  value  they  placed  upon  their  own 

judgment.  ^      ,    .  •    j 

Commissioner  Sweet.  In  their  own  mmds. 
Mr.  Hedges.  In  their  own  mmds. 
Commissioner   Sweet.  They    might    have    some    value,    but    m 

P  A. 

Mr.  Hedges.  In  fact,  I  think  it  is  a  guess,  sir.  «  .„^, 

Commissioner  Sweet.  But  this  is  not  a  guess,  is  it,  Mr.  Hedges, 
that  iniTess  these  railroad  companies  that  are  now  generally,  through- 
out the  coun^  operated  at  a  loss,  defaulting  in  the  payment  pf  m- 
ten>st  upon  tliir  bonds,  paying  nothing  to.their  stockholders-un- 
Is"  that^condition  is  changed,  these  companies  are  going  practically 

°"m"!  HF?>^.FrThey  will  cease  to  be  a  part  of  community  life  en- 

tirelv  • 

Commissioner  Sweet.  Exactly  so.  ,        .      .     v^^ 

Mr.  Hedges.  They  will  pass  from  the  i-ealm  of  actuality. 

Commissioner  Sweet.  And  whether  the  purchasing  power  of  the 
dollar  is  going  to  be  restored  in  six  months  or  a  year  or  tAvo  years 
is  not  so  imi^rtant  for  this  immediate  consideration  as  the  fact 
tliat  these  railroad  companies  can  not  exist  until  the  purchasing 
DOwer  of  the  dollar  is  restored,  in  your  judgment i  n^.     v. 

^  Mr  Hedges.  Absolutelv  not.    That  is  a  matter  of  years.    The  life 
of  these  companies,  so  far  as  I  have  observed,  is  a^niatter  of  months 

Commissioner  Sweet.  So  far  as  the  question  that  President  Taft 
presented  is  concerned,  that  is  the  real  essential  featui^  of  it  as  ap- 
plied to  this  situation,  is  it  not?  .  ^  .T.  •  J  iS  x-  •  fV,^ 
.  Mr  He]>ges.  Absolutelv,  the  question  of  the  period  of  time  is  the 
point*  of  view  and  the  degree  of  human  experience  the  man  has  had 
in  observation  who  utters  the  opinion. 


h 


632       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  But,  so  far  as  the  railroads  are  concerned, 
they  must  have  what  we  might  call  immediate  relief  in  order  to  live. 
Mr.  Hedges.  Absolutely ;  and  in  New  York,  Mr.  Sweet,  it  is  pathetic 
the  way  the  matter  is  discussed  publicly. 
Commissioner  Sweet.  Not  only  in  New  York  but  everywhere. 
Mr.  Hedges.  I  mean  wherever  it  is  discussed.    The  reason  is  this,, 
sir,  if  I  may  volunteer  a  suggestion:  The  discussion  of  the  street 
railways,  a  part  of  the  everyday  life,  is  made  the  bonus  of  a  request 
for  advantage  and  public  approval  by  giving  to  somebody  something 
that  some  one  else  has  paid  for  and  claiming  a  reward  in  the  next 
few  months,  usually  falling  in  about  November.     And  I  am  com- 
pelled to  say  with  entire  truthfulness,  as  a  man  from  the  same 
locality  with  which  you  are  familiar,  that  that  weakness  is  not  en- 
tirely chargeable  to  any  one  line  of  political  faith. 

Commissioner  Sweet.  No;  that  is  true.  Is  it  not  your  experi^ 
ence,  Mr.  Hedges,  in  connection  with  your  observation  and  partici- 
pation in  public  affairs,  that  politicians  have  made  a  sort  of  football 
of  public  utilities  and  have  frequently  found  it  to  their  immediate 
advantage,  perhaps  in  the  way  of  getting  into  office,  to  bring  a 
great  many  charges  against  public  utilities  that  were  unjust? 

Mr.  Hedges.  Yes,  sir.  I  think  that  many  of  these  intellectual 
opinions  that  people  arrive  at  they  reach  for  their  rhetorical  possi- 
bilities. 

Commissioner  Sweet.  Beyond  any  question  of  doubt. 

Mr.  Hedges.  Yes. 

Commissioner  Sweet.  Can  you  tell  the  commission  what,  in  your 
judgment,  it  can  do,  or  the  interested  railroads  can  do,  to  change 
public  sentiment  in  that  regard? 

Mr.  Hedges.  You  are  not  asking  now  regarding  some  particular 
legislative  way  or  legislative  feature? 

Commissioner  Sweet.  No;  I  think  it  will  have  to  go  back  of  that. 
I  think  the  legislative  measures  would  follow  a  change  in  public 
sentiment. 

Mr.  Hedges.  I  think  this,  Mr.  Sweet:  I  think  the  country  is  more 
and  more  responding  to  the  officialdom  of  Washington  as  to  an  ex- 
pression of  opinion.  I  think  if  there  should  come  from  this  com- 
mission a  succinct  statement  that  the  present  management  and 
handling  of  these  roads  as  between  them  and  municipalities  is  result- 
ing in  plain  ordinary  theft— the  taking  of  property  without  re- 
muneration—it would  cause  people  to  think  about  it.  I  think  the 
more  the  facts  of  it  can  be  promulgated,  and  thev  come  with  greater 
force  when  sent  from  Washington— here  is  a  Federal  commission 
discussing  a  great  question  which  goes  into  the  jurisdiction  of  States 
as  well 

Commissioner  Sweet.  You  think  that  would  reach  the  public  con- 
science ? 

Mr.  Hedges.  I  think  it  would  help  very  greatly.  Now,  of  course, 
there  are  questions— this  political  question— I  think  you  have  touched 
on  pretty  nearly  the  sore  spot  very  largely.  It  is  impossible  to  have 
an  accurate,  wholesome  public  opinion  when  men  of  intellect  will 
appeal  for  public  rewards  by  an  inaccurate  and  dishonest  statement  . 
of  fact ;  not  deliberately  making  it  but  making  deliverances.  Now^ 
for  instance,  we  are  discussing  in  New  York  the  question  of  munic- 
ipal ownership;  that  is  gradually  passing  out  of  discussion.     Aca- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION,      533 

demically,  municipal  ownership  is  perfectly,  sound  if  P^edicate^^ 
two  propositions-I  am  giving  my  own  opmion-thataU  people  who 
cast  a  ballot  are  of  equal  status  mentally  and  morally     There  is  no 
wav   in  mv  judgment,  to  get  away  from  the  logic  of  that,  if  that 
;Ye  ihe  fici  bfcause'it  isSredicaU  upon  that     ^ow  it  does  not 
happen  to  be  the  fact  and  in  the  providence  of  God  was  nevei  in 
enTd  to  be  the  fact.    Now,  then,  we  go  to  the  f ^f  er  p-op^^^^^^^^^^ 
AVhat  is  the  duty  of  a  thoughtful  man,  official  or  otherwise  in  b^^^^^^ 
in^  over  the  gap  between  a  fact  and  an  intelligent  but  unintoimecl 

mind  in  coming  to  a  conclusion?  onmmis- 

Now,  I  believe— if  this  is  not  taking  the  time  of  the  co^^^^^s 
sion-^J^e  talk  about  the  people  and  the  relation  of  govern^^^^^^^^^ 
them:  the  real  question  is  whether  government  is  a  t/^^ng  to  live 
onTr  under.    Now  what  is  the  relatton  of  government  to  an  indi- 
vidual?   Not  to  bribe  his  mind  by  a  pretended  f/y^^\  ^Jhe  p^^^^^ 
Mr.  Sweet,  at  this  moment-I  am  speaking  beyond  the  ultraign^^^^ 
T^ublic— is  vearninff  for  a  statement  of  fact.    1^  or  20  years  tacts  have 
Eeen  gradu^n^^^^^^^  from  the  discussion  of  public  questions 

in  the  United  States,  in  my  judgment.  ,       , ,.    ,„^^.:^^^  o-enei- 

Commission  Sweet.  You  are  speaking  of  public  questions  genei 

""%.  Hedges.  Of  public  questions  generally.  ^^^<^^^',^^7^^^^^^^ 
comes  very  intimate;  here  is  a  community  that  builds  a  road-i  am 

spelking  as  an  amateur-the  people  on  th^V'^.'^^rcond^ 
from  that  community,  some  of  tl^^«^; /^^^^^f  ^X^'^^^^^ 
it  i^  fl  nart  of  the  life  of  that  community.    But  at  the  same  time,  wmio 
visuSeftKr  and  the  conducto/and  the  "-to™    J^^^^ 
rate  entity  is  not  there;  they  do  not  see  it  because  1*/^^^" '^^^'^f^^* 
thinff     Thev  know  that  somebody  connected  with  it,  an  othcial  or  a. 

coiidftion  to  me"t  and  thev  may  give  an  opponent  an  advantage  by 
aSing  for  themselves.  That  would  only  be  temporary.  For  m- 
Se  at  the  moment-if  you  will  pardon  the  personal  referen^ 
I  arc'oun^l  for  the  Associ^ion  of  Life  Insurance  Pi^siden  s  of  New 
York  The  companies  own  volumes  of  railroad  securities  stean^  and 
otherwise.  Thole  securities  represent  policyholders  of  course  Th«se 
securities  are  the  reserves  to  substantiate  those  policies.  For,  aw^y 
in  the  background  beyond  this  little  childish  petty  discussion  about 
a  snecific  rate  and  a  specific  locality,  when  those  people  begin  to 
know  about  t  and  the  official  in  a  petty  office  be^ms  to  know  that 
his  constituents  in  his  ward  know.it,  he  will  begin  to  do  business 
intelliffentlv.    Now,  somebody's  business  it  is  to  do  mat.  _ 

NowTt  is  for  th^  individual  citizen  to  present  the  discussion  It 
is  for  the  public  official  to  tell  the  truth.  It  is  the  position  of  a  com- 
mission  life  this,  if  vou  will  pardon  me,  to  state  the  facts  and  give 
STeatninglor  tlem,  with  the  scalpel  cut  right  down,  to  make 

'"^cSsSfrSrYoTlleed  not  beg  the  pardon  of  the  com- 
mission  for  offering  any  advice  or  suggestion. 


*! 


534       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSTOIT. 

Mr.  Hedges.  I  only  say  that  because  1  am  so  conscious  of  my 


Ignorance. 


Commissioner  Sweet.  That  is  exactly  what  we  want. 

Mr.  Hedges.  I  am  ignorant  of  the  technique  of  the  rate,  but  I  hav^ 
general  impressions. 

Commissioner  Sweet.  That  is  the  idea.  Now,  yon  seem  to  think 
that  by  presenting  the  facts  to  the  public  just  exactly  as  they  are. 
whether  it  is  brought  to  their  consciousness  by  this  commission  or  in 
other  means,  that  the  pnblic  conscience  in  any  way  will  be  reached 
and  the  fact  that  injustice  is  being  done  to  the  railroad  corporati(ms 
will  be  impressed  upon  the  pnblic  mind. 

Mr.  Hedges.  I  think  it  will  be  a  very  great  gain  for  a  tremendous 
commission  like  this  sitting  here  to  state  to  the  pnblic  that  there  is 
such  a  thing  as  American  justice  as  between  an  impei^sonal  thing 
known  as  a  corporation  and  a  human  vitalized  thing  like  an  indi- 
vidual. 

Commissioner  Sweet.  Now,  then,  aside  from  the  matter  of  con- 
science that  would  be  involved  in  what  you  have  spoken  of,  would 
there  not  be  two  other  very  important  considerations:  One  the  fact 
that  you  alluded  to  with  regard  to  investors  being  composed 
throughout  the  country  of  people  of  moderate  means  and  of  the 
moneys  invested  by  insurance  companies,  for  instance,  protecting  life 
insurance  throughout  the  country  of  all  classes  of  people  who  insure, 
so  that  aside  from  the  question  of  conscience  involved,  there  is  the 
matter  of  doing  what  is  right  for  their  own  benefit  and  selfish  inter- 
est, on  the  part  of  the  comnumity  as  a  whole  involved  in  protecting 
life-insurance  companies  and  protecting  themselves  in  their  invest- 
ments— widows  and  orphans  who  directly  or  through  trustees  have 
invested  in  these  securities?  But  in  addition  to  that,  is  there  not  a 
still  larger  question,  and  that  is  the  matter  of  providing  in  some  way 
for  the  necessity,  not  merely  the  convenience,  but  the  absolute  neces- 
sity of  the  public  for  these  services  rendered  by  corporations  of  this 
kind,  which  will  be  either  cut  off  entirely  or  transformed  into  some 
other  position  with  regard  to  the  public  which  may  not  be  anywhere 
near  as  convenient  as  at  present  ? 

Mr.  Hedges.  Why,  somewhere,  Mr.  Sweet,  a  high  legislative 
authority,  or  whatever  kind  of  authority  it  is,  has  got  to  give  some- 
body ofTicial  permission  to  meet  the  situation  as  it  is  and  give  a  rate 
that  will  preserve  property.  Now,  you  take  as  illustrating  what  you 
were  saying  a  moment  ago  about  a  political  coloring:  Here  is  the 
situation  in  New  York — and  I  am  speaking  just  because  I  am  here — 
of  a  public-service  commission  of  the  same  political  faith  as  a  city 
administration.  The  moment  an  official  opinion  is  rendered  it  is  at- 
tacked. The  party  to  which  I  belong  had  a  commission  of  five,  neces- 
sarily well-ordained  men  mentally  but  without  any  spines;  and  so 
they  rested  for  a  year  lest  they  be  misunderstood,  and  they  were  not 
misunderstood.  That  is  the  reason  the  condition  changed,  by  virtue 
of  which  they  resumed  labor.  The  proposition  is  finding  a  mind 
and  a  spine  that  will  synchronize  and  a  man  who  will  come  to  his 
intellectual  conclusions  and  wait  for  the  conclusions  to  justify  his 
utterance  rather  than  a  claque.  Tlie  question  of  breathing  self-manu- 
factured incense  is  one  of  the  greatest  outdoor  sports  known  to  man, 
but,  in  my  judgment,  I  think  headlines  have  destroyed  more  men 
than  obituary  notices. 


PROCEEDHs-GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      535 

C^ommissioner  Sweet.  You  do  think,  Mr.  Hedges,  there  is  a  very 
.learSteTn^rest  on  the  part  of  the  public  in  the  .proper  solu- 
tion of  this  railway  question,  do  you  not^  ^„.:^„  oT.vt>iiTi<r 

Mr.  Hedges.  I  think,  Mr.  Sweet-not  as  eA;en  '<^^''^''^^'^^f'^^^^^ 
inv  the  roads  I  represent— I  think  the  public  is  yearning  to  ha\e 
th  s  thinrdecid^^rightly.  They  understand  it;  they  understand 
t  at  ther!  fs  trouble  liere.  To  the  last  minute  they  are  going  o 
enioY5-cent  fares  or  4.cent  fares.  It  was  suggested  by  an  expert 
in  Nw  M  aty  for  the  city  the  other  day,  in  the  hearing  before 
CoiZJZl^^on^h.t  the kw  York  l^-^-^^f  ^^^^^^^^^ 
money  by  reducing  fares.  The  coroner  was  not  caUed,  because  the 
thing  was  going  on  all  the  time,  you  know. 

The  factls  that  there  are  two  governments  .^;f ^.^'"^^^^^ 
is  the  man  who  has  official  office,  charged  with  the  particulai  le- 
snonsibilHy  under  the  statute.  The  other  is  the  tremendous  numeri- 
cal  nmioX  of  p^^^^  who  do  not  hold  it.  Neither  one  of  them  can 
StXnTwyhou^^  other,  and  public  opinion  is  the  umbilical  cord 
flvit  ties^them  together.  The  conscription  act  could  not  have  been 
nut  over  if  th^  publ  c had  not  acquiesced  in  it;  there  were  not^enough 
SdLrs  W  to^  en^^^^^^^  it.  Nol,  the  intelligent  part  of  the  com- 
munTtv  owe^^^  than  its  numerical  obligations  to  the  rest  of  them; 

Td  tK orHhere  is  no  way  to  divide  individual  responsibility 

"S'^f  tMnk-I  do  not  know  enough  about  it,  but  it  is  mv  infer- 
enS  think  that  these  corporations  In  past  years  have  erred  >y  not 
?n.tructinTthe  public  as  far  as  they  could  while  they  were  going  on 
W   I  asLmeC^^  attempted  to    I  assume  that  was  mixed  up  by 
fciive^io^^^^^^  opinion  for  individual  opinion  and  everybody 

keftX  pi.fei.e^^     i  man  who  saj.  he  does  -t  like  .^v^^^ 
an  ordinary  liar.    The  test  is  what  will  he  do  to  get  i*-  /^^e  test  is 
whether  his  principle  is  weaker  than  his  personality.    My  observa- 
Sn  is  thaT  w^^^^^^  assumes  that  his  personality  has  become  a 

nroDosition  of  conduct,  his  mind  has  begun  to  decay  without  his 
Eng  it,  because  the  Almighty  never  intended  us  to  be  personal 

^"^olZiSr^Sw^^^^  to  be  admitted,  Mr.  Hedges,  by 

the  Sfwho  have  appeared  before  us  and  those  connected  with 
the  raUroad  business  as  well  as  others,  that  there  was  a  time  m  tlm 
hi^ory  of  the  country  when  practices  that  were  not  strictly  hones^ 
ofhonorable  were  indulged  in  by  the  street-railroad  companies  n 
various  communities  and  that  these  practices  had  something  to  do 
wiUi  the  creation  of  the  prejudice  which  has  existed  and,  to  some 
extent,  still  exists  against  the  companies. 

Mr  Hedges.  I  have  no  doubt  that  is  litera  ly  true,  sir 

Commissioner  S^t^et.  Now,  then,  to  eradicate  prejudice  and  to 

place  before  the  people  the  exact  facts  and  to  secure  acquiescence  in 

mea^res  that  must  be  adopted  in  order  to  bring  about  a  healthy 

SSon  with  regard  to  these  companies  is  certainly  no  boy's  job, 

''  Mr  Hedges.  It  is  not  only  no  boy's  job,  but  it  will  take  a  consider- 
able-period  of  time,  sir,  and  with  continuous  effort. 

Comnksioner  Sweet.  Now,  during  the  period  that  ^y  ill  be  required 
to  brhiXfabout,  if  it  is  ever  brought  about  if  nothing  is  done  for 
the  ^ifef  of  the  companies,  they  are  going  by  the  board,  are  they  not  I 


¥ 


536      PROCEEDINGS  OF  FEDERAL  ELECTRIC.  RAIL  WAYS  COMMISSION. 

Mr.  Hedges.  They  are  going  by  the  board,  and  discussion  of  railway 
matters  will  be  as  to  what  would  have  happened  in  the  past  if  some- 
thing had  been  different. 

Commissioner  Sweet.  Now,  then,  can  you  make  any  suggestions  or 
offer  any  helpful  thought  on  the  subject  as  to  what  might  be  done  by 
this  commission,  if  it  saw  fit  and  had  the  real  good  of  the  public  at 
heart  as  well  as  of  the  companies,  a.s  a  remedial  measure  to  keep  the 
patient  alive  before  the  final  administration  of  the  remedial  cure  ? 

Mr.  Hedges.  I  can  not  intelligently  or  illuminatingly  answer  that 
question,  except  so  far  as  for  the  moment  to  say  officially  that  the 
keeping  aliv^e  of  these  tilings  requires  an  increased  fare  and  giving 
reasons  for  it,  and  then  meanwhile  looking  for  some  legislative  way 
to  do  it.     I  have  not  reflected  enough  to  answer  your  question. 

Commissioner  Sweet.  Don't  you  think  that  even  to  get  the  full 
benefit  of  an  increased  fare  a  certain  degree  of  education  is  necessary 
on  the  part  of  the  public  to  avoid  a  diminution  of  patronage  to  a 
certain  extent? 

Mr.  Hedges.  Yes ;  but  I  think  the  public  as  a  matter  of  protest  and 
principle  will  not  physically  inconvenience  itself. 

Commissioner  Sweet.  You  think  the  public  would  acquiesce  in  the 
recommendation  for  a  general  inciease  of  fares ? 

Mr.  Hedges.  There  is  a  difference  between  acquiescing  in  it  and  not 
physically  protesting  against  it,  Mr.  Sweet. 

Conmiissioner  Sweet.  Yes ;  in  other  words,  they  pay  the  fare. 

Mr.  Hedges.  They  pay  the  fare ;  and  if  there  is  no  mob  violence, 
they  have  relatively  acquiesced. 

Commissioner  Sweet.  That  is  right. 

Mr.  Hedges.  In  other  words,  the  public,  in  my  judgment,  thinks 
anti,  not  pro.    A  small  minority  think  pro. 

Commissioner  Sweet.  But  if  there  w^ere  no  direct  affirmative  oppo- 
sition, you  think  the  wheels  would  keep  turning. 

Mr.  Hedges.  I  have  not  the  slightest  doubt  about  it,  providing  they 
had  enough  money  to  turn  them,  and  I  have  not  the  slightest  doubt 
about  it  that  after  the  public  mind  had  adjusted  itself  to  that  by  a 
physical  everyday  habit  they  would  curse  the  people  that  did  not  help 
bring  it  about. 

Commissioner  Sweet.  And  the  way  to  keep  the  wheels  turning,  if 
I  understand  you  right,  is  by  an  increase  of  income,  especially  because 
you  think  that  a  diminution  of  expenses  is  not  to  be  expected  in  the 
immediate  future. 

Mr.  Hedges.  Oh,  not  near  enough  to  apply  to  this  solution,  not  at 
all,  and  I  think  all  that  can  be  done  is  to  substitute  money  for  rhetoric. 

Commissioner  Sweet.  That  is  all. 

Mr.  Warren.  Just  one  minute,  Mr.  Hedges.  You  could  have,  could 
you  not,  immediate  increase  of  fares  if  the  city  government,  which 
represents  the  other  side  of  the  contract,  assented  ? 

Mr.  Hedges.  In  New  York  the  board  of  estimate  and  apportionment 
can  give  it. 

Mr.  Warren.  So  if  this  commission  saw  fit  in  its  wisdom  to  recom- 
mend as  an  intermediate  remedy,  while  more  permanent  remedies  were 
being  considered,  an  increase  in  rate,  places  like  New  York,  which  are 
tied  up  with  contracts,  could  give  that  relief  if  the  public  representa- 
tives  chose  to  do  so  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      537 

'Vr."wM.KB..  And  as  regards  ta  l^^^/^S^wt^S  ha"; 
missions  have  authority   and  ca^sm  ^«J^/°/^™Ldiat^ely  ou 

'^S'^jrr^.nXLy  doubt  about  it,  and  I  have  but  little 
doubt  that  they  would.  .    .  .    ^he  recommendation? 

5!r  IZZ- ilfZ.T'^l^r'^r.^^^  that  the  commission 

''!?.  W~  Thank  you  very  much,  Mr.  Hedges. 

(Witness  excused  )  .^    ^^  ^^j,  ^^^  indulgence 

S'mK^ri^ill  a&r.  Bertron  to  take  the  stand. 
STATEMENT  OF  ME.  SAMUEL  READING  BEBTKON. 

Mr  Warkex.  Your  full  name,  Mr.  Bertron? 

Mr  Bfrtron.  Samuel  Reading  Bertron. 

Mr!  AA™N.  And  you  are  a  banker,  I  believe. 

Mr.  Bertron.  Yes,  sir. 

Sr.  I:^.  S^onrGri^  &  Co.,  oi  New  York  and  Phila- 
*^'S!  Warren.  And  what  experience  have  you  had  in  street  rail- 
"'^r'   to?K?N"  Well.  I  regret  to  say,  sir,  that  we  have  mad.  a 

*tlf  BBlUri^SHhink  next  to  steam  railways,  more  so  than 
anfotlfer^r-ity  tjjat  we  have  to  off^^^^^^^^  •„  „,,,, 

-r  b'So^^1~^--SS  ^a^Lir^own  securi- 
ties— at  least  on  the  initial  issue. 

Mr.  B™n.  vTry  often  they  gradually  get  back  and  are  dis- 
tributed  locally. 

160643**— 20 35 


i 


538      PROCEEDINGS  OF  FEDEEAL  ELECTBIC  RAILWAYS  COMMISSIOK. 

M...  W™.  AS  a  result  of  tha^e^di^  general  credit,  is  necessary 
in  order  to  enable  the  companies  to  get  money  f 

Mr,  Bbbtron.  Absolutely.     .  fl„„„^:„r  renters' 

Mr.  Wakken.  To  get  credit  m  the  financial  centers. 

'^Mr^wlR^ErYoXay  state  first  some  of  the  companies  with 

^Vs*.BS;f  HarS^i^  oTrha^rhafabot  t  supposef  close 

S  compes  since  I  ^^-^^.'^^^^^I'Zt^^^^.y  securities  in  the 
There  are,  as  you  know,  6  billions  »*  f '^^f  ^'t^^^^  securi- 

handsof  thepubhc,asaga>ns^l9b^  y^ 

ties.  Many  of  us  thought  ^l^"  Y4' ^"f  ^  investment  that  could 
railroads  and  street  raihvays  "^^^'^  "'"I'^'J^^'Je^^^^^  and  thivt  was 
be  had,  because  they  supplied  ^ofM-r^^^honds  sold  on  a 
demonstrated  by  the  ftvct  that  8°?^  "'^^7^"^  '  j  J  ly  hdd  by  sav- 
yery  Jo-\ -t«f  tr«^  fimds  by  iSrance  Sanies  ;'and  there  are 
l"eg  iTw  'invLtot  I  tSnkf  who   have   not   some    publicservice 

securities.  .  ifi^^,icT>i  this  narticiilar  industry  was  re- 

When  the  .^«  ^^^'^^^  eJuS  L'^^^at  of  the  steam 'rail roads, 

trioVS^^'nrin^^dTosroniifan^  material  to  the 

•^rw^%aid  by  the  o^^^^^^^^^^^l^^ ^^'^.t^ 
should  be  handled  I'^'^^^y^i!!  "flLoread  and  due  to  the  war. 
disaster  to  the  ,'^o«\P'^'"«t7n^trer^s^Ponded  promptly,  and  hardly 
Only  a  few  local  mumcipaliti^  if  P^^^^^'^^Pj^  t,P  ^rWit  of  these 
any  sufficiently,  in  r^'sing  r^tes^  as  to  maintam  tl  e        ^^^  ^ 

K  ^.1,  in  some  «»»,  •«|"«"'' "ff  "Jf,'  ,„.l  munioipalit,  ..  to 

fiving  a  rate  bumcieni  lo  ou.^  v  average  citizen  said, 

een  Sone  in  a  •'omprehensive  way,  ^  tha^  «^  ^^^^^^ 

»  Oh,  well,  they  have  gotten  along,    n^y  ^i"  s"  xhey  have  not  come 
don't  run  them,  somebody  else  w'lll  urn  them.       xuey 
5°"  ..*.,„„  ,„uv,  ..  siisnension  of  the  service. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      539 

Now,  there  is  not  an  intelligent  or  semi-intelligent  dtizen  who 
won't  Realize  that  without  the  service  hf  inunic.pality  can  not  ex^^ 
Thev  can  not  conduct  business  unless  they  have  the  transpoitation 
means,  but  that  has  not  been  brought  home  to  him. 

1'hp  lack  of  intelligent  publicity  is  excessivelv  great.  1  think, 
Jm-  HedgL  remarlfed,  pLibly  the  majority  o/our  people  would 
act  intelligently  and  wiLly  if  the  problem  were  brought  homej^o 
them  with  sufficient  clearness,  and  the  others  would  act— the  un 
InteTligent  and  the  selfish-privided  they,  thought  they  would  have 
to  walk  instead  of  ride.     They  do  not  realize  that.    . 

Then,  one  of  the  great  drawbacks  has  been  the  injection  of  t  is 
business  into  politics.  To  use  a  vulgar  expression  which,  to  y 
mind,  is  effective,  they  have  not  the  "  guts"  to  stand  up  and  do  what 

*'^owTh- -Sanies  ought  not  to  be  in  politi^.  It  is  a  gr.at 
economic  problem  It  is  not  a  political  problem.  And  I  thnik  that 
Tur  commission,  which  we  all  hoped  would  l?'^^*  been  appointed 
two  years  earlier,  will  be  very  effective  m  bringing  that  home  to  the 

»"S  Id  IntemgS'p^iwicity  and  the  realization  that  these  com- 
panieL  must  be  taken  out  of  politics.  It  is  an  economic  problem  and 
nodii^^else,  and  the  whole  life  of  municipalities  is  dependent  upon 
Sie  proper  handling  of  their  public  utilities.  How  best  it  can  be 
effect^  of  course,  is  a  big  problem,  but  I  do  not  think  it  is  beyond 
fhe  p^sibility  of  your  devising  a  formula  which  can  be  applied 
goneraUy.    To  ha/dle  each  specific  case  would  take  a  very,  very 

'""/otTnstance,  I  know  one  city  where  a  6-cent  f are  has  produced 
a  29  per  cent  increase  instead  of  20  per  cent.  There  are  other  com- 
munitres  X,re  a  6-cent  fare  does  not  produce  over  a  5  per  cent 
nc  "a^  That  is  dependent  upon  local  conditions  very  large  y, 
and  it' would  be  very  difficult  for  you  to  analyze  each  one^parately. 
The  cZiRMAN.  tV'here  did  the  6-cent  fare  produce  a  29  per  cent 

"'"h*  b'ektuon.  At  the  moment,  it  is  doing  that  in  New  Orleans. 
Mr.  Warren.  A  29  per  cent  increase?  .i,  •*    ,„„  oo 

Mr.  Bbhtron.  Yes;  from  25  to  29  per  cent.    One  month  it  was  29. 

Mr.  Warren.  Yes.  ,  .  .    , 

The  Chairman.  Where  did  that  5  per  cent  increase  come  m? 
Mr  Bertron.  That  has  been  pretty  general.     There  are  a  number 
of  places  where  they  have  not  had  even  a  5  per  cent  increase,  m  some 

You  are  not  going  to  be  able  to  raise  money  to  operate  these  prop- 
erties  unless,  in  the  public  estimation,  their  credit  is  substan  uU 
and  is  going  to  continue  so.  A  temporary  adjustment  is  not  going 
to  helprbecause  people  are  not  going  to  buy  any  more  securities  of 
street  railways  in  such  a  temporary  expedient.  ,.^«„i«, 

Mr.  Warren.  A  temporary  expedient  might  save  the  companies 
whilethepermanent  one  was  being  adopted?  ^^  a 

Mr  Bertron.  It  would  be  essential  to  increase  fares  generally,  and 
that  should  be  immediate.  Otherwise,  most  of  the  remainmg  ones 
would  go  into  the  hands  of  a  receiver.  . 

Mr.  Warren.  It  would  be  a  post-mortem  otherwise  i 


IM 


don't  run  tnem,  someuuuy  iri^c  »»" -. 

te  to  face  with  a  suspension  of  the  service. 


640      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Bertron.  Indeed  so.  But  that  should  be  recognized  as  a  tem- 
porary expedient  pending  a  vahiation  of  the  properties  and  the 
granting  of  a  fair  return  on  that  vahiation  by  some  elastic,  easily 
adjustable,  automatic  system;  and  that  is  what  I  think  should  be 
striven  for.  You  will  save  many  of  these  companies  from  receiver- 
ships and  enable  them  to  pay  at  least  their  bond  interest  by  a  6-ccnt 
fare  at  the  moment.  That  is  not  going  to  be  enough  generally,  I 
fear.     Prices  rise 

The  Chairman.  What  fare  is  that  ? 

Mr.  Bertron.  Six  cents. 

Then  the  politicians  have  brought  in  this  question  of  watered 
stocks,  bonds,  and  so  forth.  All  of  that  has  passed.  It  probably 
was  done  often  in  the  old  days,  but  everybody  should  be  satisfied  with 
a  fair,  honest  valuation  of  the  property,  and  in  many  States  rules 
have  been  established  for  making  such  a  valuation.  There  is  a  field 
that  I  hope  you  can  enlighten  the  people  with  reference  to.  And 
when  you  have  a  fair  valuation,  let  there  be  definitely  a  fair  return 
on  that  valuation ;  and  when  that  is  established  the  credit  of  the  com- 
panies will  be  reestablished  and  the  service  will  be  able  to  be  main- 
tained. 

Now,  to  my  mind,  there  is  only  one  alternative — two  alternatives. 
The  first,  is  the  business  going  to  pieces,  and  the  people  not  be 
able  to  get  the  service  ?  That  means  walking.  The  other  is  munici- 
pal ownership. 

Now,  personally,  wlnle  I  may  not  be  in  accord  with  many  of  my 
friends,  I  am  not  so  averse  to  municipal  ownership  as  some  people 
are,  of  these  properties. 

Tlie  objection  to  it  is  that  these  companies  would  be  run  for  politi- 
cal purposes.  I  do  not  think  that  that  follows  at  all.  A  plan  can  be 
devised  in  each  municipality,  by  which  the  merchants'  associations, 
the  banks,  the  chambers  of  commerce  could  cooperate,  and  have  a 
business  board,  with  labor  represented,  and  they  could  handle  this 
as  a  great  economic  problem  and  not  as  a  political  problem. 

Many  years  ago  water  companies  gradually  became  municipalized. 
A  great  many  people  looked  upon  that  with  a  great  deal  of  hesi- 
tancy and  dread.  It  has  worked  well,  as  a  rule;  and  I  do  not  think, 
as  a  rule,  there  are  any  politics  in  it.  It  has  one  distinct  advantage, 
and  that  is  that  a  municipally  guaranteed  security  will  be  placed 
at  a  lower  rate  than  any  other,  and  therefore  the  money  necessary 
to  maintain  these  properties  can  be  secured  on  the  lowest  possible 
basis. 

Mr.  Warren.  Mr.  Bertron,  might  not  that  result  be  served,  to  a 
certain  extent,  if  privately  owned  securities  were  guaranteed,  or 
substantially  so? 

Mr.  Bertron.  I  think  if  the  valuation  were  recognized  by  the 
public  service  commission  or  the  city,  as  the  case  may  be,  and  ap- 
proved as  increased  expenditures  occurred,  and  a  definite  return  on 
that  capital  were  assured  by  the  city  through  an  automatic  plan, 
in  which  the  fares  would  increase  if  the  earnings  were  not  sufficient 
to  pay  that,  and  decrease  if  they  were  too  high,  and  act  speedily. 
The  great  trouble  is  that  they  do  not  act  for  six  months  or  a  year 
and  then  the  company  is  busted,  and  to  restore  confidence,  it  has 
to  be  something  that  moves  at  once. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      54L 

Mr.  Warren.  When  investors  feel  that  they  will  get  a  fair  re- 

^  mTIbertron.  Whatever  return,  it  is  there  to  get  it. 
Mr.  Warren.  As  soon  as  expenses  require  it,  it  will  go  up  ? 

Mr.  Bertron.  That  is  it.  .      ,      i.        i  •  ^^  9 

Mi.  Warren.  What  about  the  limitations  in  the  franchises  now? 
Are  there  pretty  generally  fare  limitations? 

Mr.  Behtko/  fn  my  experience  there  are  very  gen/'-ally.  They 
are  limitations  that  are  bad  for  the  municipality  and  bad  for  the 
finances  of  the  company,  and  if  you  had  ]ust  one  kind  of  franchise 
for  a  whole  lot  of  them,  they  would  all  be  better  off.  •   ^r„„:„„ 

Mr  Wakren.  And  that  makes  an  absolute  obstacle  to  increasing: 
the  fare,  without  the  city's  authorities  gmng  P^™ission? 

Mr  Bertron.  In  some  cases;  not  always.  The  i-ublic  service 
Commissron  in  New  York  State  has  increased  the  fares  to  a  num- 
ber o^cWes  In  the  case  of  Buffalo,  it  did  not  do  so,  by  reason  of 
an  old  agreement,  called  the  Middleburn  agreement  which  had  been 
in  existence  for  sLme  time,  and  in  which  a  5-cent  fare  was  assured 
L  munTcipaUty  in  consideration  of  the  abolition  of  transfers    . 

Mn  Warren^  And  the  opponents  of  the  increased  fares  claimed 

that  that  was 

Mr.  Bertron.  A  fixture.  .-it    -^  ^-^^^ 

Mr  Warren  (continuing).  A  practical  limitation? 
Mr   Bertron  And  the  public-service  commission  refused  to  take 
thf  casf uX'consideratfon  for  that  purpose    ^^  t^^^^^^^^^^^ 
n/Hii«Hinr  fares     The  case  was  presented  to  all  ot  the  courts  oi  ine 
State  and  finally,  a  day  or  two  ago,  the  highest  court  of  the  State 
Unanimously  de^rmine'd  it  was  I  right  and  duty  of  die  public 

Ti?srS'SwE.?S;^ined  what?  I  did. not  catch  that. 
You  safd  the  Court  of  Appeals  of  New  York  determined  what  ? 

Mr  Bertron  Decided  that  the  public-service  commission  should 
take  cognizance  and  had  a  perfect  right  to  increase  fares. 

Commissioner  Sweet.  A  perfect  right  to  rai^  ^^e  fares? 

Mr  Bertron   And  the  case  is  being  presented  to  it  to-day. 

Mr.  \V™x:  Then  these  fare  limitations  in  franchises  would  be 

almost  the  first  step . 

Mr  Bertron.  Where  they  exist.  .     ,,„ 

Mr  Warren.  Where  they  exist,  in  some  way  must  be  eliminated; 

and  your  suggestion  is  to  substitute  for  them  this  automatic  scale  of 

?he  rites  gofng  up  and  down  in  accordance  with  the  expenses  of  the 

company  ? 

Mr  mRREN.-  And'you  think  that  that,  coupled  with  the  fair  val- 
uation would  ultimately  restore  the  credit  of  the  companies? 
Mr  Bertron.  It  is  essential  that  you  have  a  valuation  first. 
Mr  Warren.  Yes:  I  say  based  on  a  valuation. 
Mr.  BERraoN.  Bask  on  a  just  valuation;  and  that  is  not  difficult 

'"  Mr!  Warren.  How  long  would  it  take  to  restore  the  credit,  in  your 

^"fcli^ttrLnicipality  took  over  the  .street  railway  and 
lent  it  credit,  its  credit  would  be  that  of  the  municipality. 
Mr.  Warren.  I  did  not  mean  that. 


542       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Bertron.  If  the  other  plan  went  into  effect  the  mere  public 
statement  put  in  a  circular  offering  tlie  security  of  that  company, 
with  a  statement  of  the  agreement  with  the  city,  which  convinced  the 
investor  that  his  investment  was  saf^uarded,  it  would  enable  you  to 
finance  at  once. 

Mr.  Warren.  So  it  would  depend  largely  on  how  long  the  authori- 
ties might  require  to  be  satisfied  with  the  utility  and  satisfied  with 
the  adoption  of  the  scale? 

Mr.  Bertron.  Well,  a  temporary  increase  in  rates  could  be  esttib- 
lished,  pending  the  working  out  of  that  plan. 

Mr.  AVarren.  Yes;  I  understand  that  that  would  be  necessary  any- 
way. 

Mr.  Bertron.  Yes, 

Mr.  Warren.  Without  that  there  is  no  use  discussing  the  other, 

Mr.  Bertron.  You  would  not  get  much  credit  on  the  temporary 
line  of  procedure. 

Mr.  Warren.  No;  I  assume  not 

Mr.  Bertron.  No.  ^ 

Mr.  Warren.  But  it  is  necessary  to  take  care  of  the  company  while 
the  other  matter  is  being  considered  ? 

Mr,   Bertron.  Absolutely.     You   have   that   or   wholesale  bank- 

ru])tcy. 

Mr!  Warren.  Yes, 

Mr.  Bertron.  And  what  they  do  not  realize  is  tliat  that  means 
practically  a  suspension  of  service.  It  lias  not  been  brought  home  to 
them  that  the  tracks  are  wearing  out  and  the  cars  are  going  to  pieces 
and  they  can  not  buy  new  stock.  They  take  it  out  in  damning  the 
company,  and  the  company  can  not  help  it. 

Mr.  Warren.  Don't  people  have  tlie  impression  that  a  conipany 
will  continue  to  run  just  as  well  under  a  receivership  as  otherwise? 

Mr.  Bertron.  Yes:  that  is  the  lack  of  intelligent  publicity. 

Mr.  Warren.  Because  tha>t  is  not  the  fact  ? 

Mr.  Bertron.  It  certainly  is  not. 

Mr.  Warren.  In  your  judgment,  then,  a  receivership  means  a  con- 
stantly deteriorating  service  and,  in  many  cases,  would  mean  a  sus- 
pension of  service? 

Mr.  Bertron.  In  a  great  many  cases.  We  have  actually  recom- 
mended the  tearing  up  of  tracks — the  abolishing  of  service  altogether. 
A  temporary  expedient,  one  that  they  can  exist  under  for  a  time,  on 
which  the  investor  does  not  make  anything  on  his  investment,  and  he 
is  eager  for  payments,  when  things  are  so  high 

Commissioner  Sweet.  Will  you  speak  a  little  louder? 

Mr.  Bertron.  That  does  not  help  the  investor  who  bought  these 
securities,  expecting  a  remedy,  and  gets  none, 

^Ir.  Warren.  Have  you  given  any  study  to  the  abandonments  of 
any  of  the  railways? 

Mr.  Bertron.  Well,  I  know  of  a  number  of  cases  in  which  it  has 
been  recommended  and,  I  am  sorry  to  say,  one  or  two  that  I  financed. 

Mr.  Warren.  But,  speaking  generally,  you  would  say  that  these 
C0141  panics  were  performing  an  essential  service? 

Mr.  Bertron.  I  think  there  is  no  doubt  on  that  point,  sir. 

Mr.  Warren.  That  service  must  be  rendered  in  some  way  by  some- 
body. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      543 

Mr.  B1.RTR0N.  The  highest  o^-i ^  ,«^,;^F.  ^.rr^r^^^^ 
nized  that  and  have  so  stated,  and  I  think  there  is  satistaction  in 

'^Iii^TSen.  That  is  all,  Mr.  Bertron,  unless  you  think  of  some- 

*'S.  Z™  fThirnot?  Tim  afraid  you  have  heard  all  of  this 

^"^The*  Chairman.  You  have  been  handling  securities  for  about  25 

years  ? 

Mr.  Bertron.  Or  more.  n       u  «^o7 

The  Chairman.  Consisting  of  stocks,  as  well  as  bonds  { 

Mr.  Bertron.  Principally  bonds. 
The  Chairman.  Principally  bonds  i 

The  ?H™AN^What  per  cent  of  your  business  has  been  the  han- 

dling  of  stocks,  or  securities,  I  will  say?         .  i.«ndlino. 

Mt  Bertron.  Our  business  has  been  principally  that  of  handling 

bomls.     m  ^^^         handled  preferred  stocks  and   some  investment 

^*  The  Chairman.  Have  you  ever  handled  stocks  separate  from  the 
bonds  ? 

^e^r^^^'.^^^^^^^  of  that  kind,  do  you  undertake  to  find 

out  whether  or  not  there  is  real  value  behind  the  stock  issue  ? 

Mr  Bertron.  We  endeavor  to  find  that  out.        ,     ,    .  ,, 

The  Chairman.  What  investigation  do  you  make  before  you  sell 

"^^Mr '^Bertron.  Well,  we  always  have  engineers  go  oyer  it  and  make 
a  valuation,  and  we  ascertain  what  the  earnings  have  been  for  a  num- 
ber of  years,  and  the  chances  of  earnings  being  continued,  showing 
a  handsome  margin  over  the  security,  etc. 

The  Chairman.  Have  you  ever  sold  stocks  at  a  premium '. 
Mr.  Bertron.  Oh,  yes. 

The  Chairman.  Frequently?  .      .^' 

Mr  Bertron    Well,  I  do  not  know  of  any  stocks  of  public-service 
companies  that  we  have  sold  at  a  premium  lately.    I  think  not. 
The  Chairman.  Have  you  sold  many  lately  much  below  par? 
Mr.  Bertron.  Well,  if  "^thev  sold  at  all,  they  were  sold  below  par 
now.    The  fact  is  that  they  are  unsalable. 

The  Chairman.  You  stated  that  there  is  practically  no  market  for 
these  securities  at  the  present  time.  Is  that  statement  based  upon 
your  experience? 

Mr.  Bertron.  Absolutely.  .     .,     ,    ^  ^.       * 

The  Chairman.  What  have  you  done  m  the  last  year  or  two  to 
sell  securities?    What  has  been  your  experience? 
Mr.  Bertron.  You  mean  quite  recently?  , 

The  Chairman.  Yes;  in  the  last  two  years,  or  during  the  war 
Mr  Bertron.  We  have  never  offered  any  public-service  securities 
in  the  last  two  ye^rs,  because  there  were  hardly  any  that  could  be 

sold,  in  our  judgment.  .  . 

The  Chairman.  You  have  had  no  actual  experience  m  the  last 

^"^MrB^^RTRON.  Well,  naturally,  there  is  a  little  going  om     The 
bond  rates  are  very  low,  and  some  man  will  say,     Well,  I  will  take 


IN 


■HBB 


644       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION^ 

a  chance  on  that  bond ;  it  is  very  low,"  and  he  will  buy  it.     But  that 
is  a  speculative  investment. 

The  Chairman.  And  have  those  bonds  that  you  have  sold  been 
new  bond  issues  or  old  bond  issues  ? 

Mr.  Bertron.  There  are  very  few  instances  where  new  bond 
issues  are  sold. 

The  Chairman.  Have  you  sold  any  new  bonds  in  the  last  two> 
years? 

Mr.  Bertron.  No;  not  of  street-railway  companies. 

The  Chair:man.  As  a  matter  of  fact,  is  not  the  public  looking  with 
rather  eager  expectation  to  the  purchase  of  a  lot  of  these  bonds  that 
are  now  selling  at  a  large  discount? 

Mr.  Bertron.  I  do  not  think  you  could  say  that  the  invest ing^ 
public  does.  As  a  rule,  the  investing  public  does  not  buy  any  until 
it  is  sure 

The  Chair^ian.  Who  does  it? 

Mr.  Bertron.  There  is  a  class  of  people — usually  it  is  the  rich 
man  who  takes  a  flier  in  buying  a  cheap  security,  and  he  does  not 
buy  it  on  the  advice  of  anybody,  because  we  would  not  advise  a 
client  to  buy  a  security  that  was  not  sure  of  a  return. 

The  Chairman.  You  stated  that  these  securities  are  held  by  in- 
surance companies,  trust  companies,  and  bankers,  generally  speak- 
ing? 

Mr.  Bertron.  Verv  generally. 

The  Chairman.  About  what  percentage  of  the  securities  of  the 
country — the  public-utilities  securities — are  held  by  investors  other 
than  the  corporations  that  you  have  named  ? 

Mr.  Bertron.  Do  you  mean  to  ask  what  percentage  of  the  street- 
railway  bonds  are  held 

The  Chairman.  Other  than  by  trust  companies,  insurance  com- 
panies, and  bankers. 

Mr.  Bertron.  Well,  this  is  more  or  less  of  a  guess.  I  have  not  the 
figures  with  me,  but  I  have  the  figures  of  the  holding  companies  and 
the  savings  banks  in  these  securities.  Probably  one-fifth  of  the  se- 
curities outstanding,  or  maybe  more,  are  held  by  institutions,  sav- 
ings banks,  and  insurance  companies. 

The  Chairman.  Would  it  embarrass  you  to  supply  us  with  the 
figures  showing  the  amount  of  bonds  and  stock  held  by  trust  com- 
panies and  insurance  companies? 

Mr.  Bertron.  Not  at  all.  It  is  a  public  record.  The  Comptroller 
of  the  Currency— I  made  the  statement,  and  you  are  familiar  with 
it,  Mr.  Gadsden,  last  year,  giving  the  details  which  we  had  worked 
up  for  him.    Mr.  Gadsden  has  that  data. 

The  Chairman.  Well,  will  you  supply  us  with  the  record? 

Mr.  Bertron.  I  w^U,  if  he  has  it  not  at  hand ;  yes,  with  pleasure. 

The  Chairman.  Do  you  recall  just  where  the  market  center  for 
this  money  is  to  be  found  ? 

Mr.  Bertron.  Well,  of  course,  the  East  is  usually  the  market  for, 
and  has  been,  this  class  of  securities.  Later  on  the  market  broad- 
ened, and  the  West  bought  a  lot.  Farmers  became  pi-osperous,  and 
they  bought  the  securities  of  public-service  corporations. 

The  Chairman.  Do  they  come  to  New  York  in  this  particular 
business? 

Mr.  Bertron.  If  it  is  a  large  issue ;  yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      545^ 

The  Chairman.  What  do  you  regard  as  a  large  issue-one  that 

would  require  them  to  come  here  ?  Fr^noisoo^ 

Mr  Bertron.  Well,  they  could  have  the  capital  in  San  b  rancisca 

to  finance  any  issue,  but  I  do  not  think  you  would  see  an  issue  of  any 

considerable  size  thkt  was  not  offeix^d  in  New  lork  and  locally^ 

The  Chairman.  What  size  would  the  issue  have  to  be  betoie  it. 

'''^C^^wI:^^:tL  limit  to  that,  sir.  L-ge  banking 

houses  rarely  bother  with  a  very  small  issue,  because  they  hfi^^^.^  ^. 

u"e  issue  4h  the  same  facilit.^  and  at  the  same  expen^  o     ookii^- 

upTis  a  small  issue.    It  is  just  as  great  in  the  case  of  a  small  issue  as 

'"The  cLuRMAN.  AVelL  generally  speaking  what  must  the  size  of 
the  issue  be  before  an  eastern  bank  will  handle  it  i 

Ml  Bertron.  There  is  no  limit.  You  see  them  advertise  a  $200,. 
000  issue  at  times,  and  at  other  times  a  $20,000  000  issue 

The  Chairman.  Is  that  the  practice  in  most  of  these  companies 

tro'imr  to  New  York  for  money?  -,    •    vr       v^^v 

mP.  Bertron.  The  public  offerings  are  usually  made  in  New  lork„ 

and  then  they  are  absorbed  over  the  country. 

The  Chairman.  When  a  western  issue  comes  to  New  \ork   how 

thoroughly  does  the  New  York  banker  investig-ate  that  security  be- 

'^Mr!  B^T^^^^^^  depends  on  the  banker     There  was  a  time  I 

think   when  those  things  were  taken  upon  faith  more  than  they  aie 
to-day.     You  will  find  that  there  is  a  most  rigid  investigation  to^ 

'^""The  Chairman.  Are  there  many  bonds  that  are  maturing,  or 
about  to  mature,  this  j^ear? 

Mr.  Bertron.  Oh,  a  great  many.  .,         i       i   » 

The  Chairman.  What  is  to  be  done  with  those  bonds « 

Mr.  Bertron.  In  default. 

The  Chairman.  I  beg  your  pardon? 

Mr.  Bertron.  In  default. 

The  Chairman.  A  great  many  of  them? 

Mr  Bertron.  A  great  many  of  them.  ,     ,.     ,        •       •  x 

The  Chairman.  Does  that  usually  result  m  the  line's  going  into 

the  hands  of  a  receiver?  .      „ 

Mr.  Bertron.  It  usually  does;  not  m  all  cases.  ,       i     •     ^u 

The  Chairman.  Have  you  handled  any  refunding  bonds  in  the 

past  two  years? 
Mr.  Bertron.  No.  ,,    ,  ,         u       » 

The  Chairman.  Do  you  know  of  any  that  have  been 5 

Mr.  Bertron.  Yes.  n  j.     o 

The  Chairman.  What  have  they  been  sold  for?  ^  ^  ^  ., 
Mr.  Bertron.  There  were  a  few  cases  in  which  street-railway 
bonds  were  sold.  I  only  know  of  one  or  two,  and  that  is  due  to 
special  circumstances  underlying  the  bonds.  They  made  an  excel- 
lent showing,  and  under  all  the  circumstances  we  will  say  on  the 
valuation  that  was  made  on  the  property,  the  property  was  well 
worth  more  than  the  bond  issue ;  but  you  can  count  on  one  hand  all 
the  issues  that  have  been  offered.  ,       ^,    ,,        i      jo 

The  Chairman.  What  did  it  cost  to  handle  those  bonds  I 


ill 


546       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

t 
t 

Mr.  Bertron.  That  is  very  difficult  to  answer.  It  depends  upon 
the  investigation  that  is  made,  but  it  would  cost  anywhere,  I  should 
say,  from  2  to  5  per  cent,  depending  on  the  size  of  the  issue. 

Commissioner  Gadsden.  What  does  it  cost  the  company,  Mr.  Ber- 
tron ? 

^[r.  Bertron.  Well,  you  mean  what  rate  it  would  cost?  I  haven't 
anv  idea. 

i'he  Chairman.  Give  us  some  illustrations. 

Mr.  Bertron.  Well,  there  are  companies  I  Imow  of  that  money 
cost  them  up  to  12  per  cent. 

The  Chairman.  What  companies? 

Mr.  Bertron.  Well,  I  should  not  mention  the  names  of  the  com- 
panies. I  can  get  you  some  and  give  them  to  you,  but  there  is  hardly 
any  company  to-day  that  can  afford  to  borrow  money  of  this  charac- 
ter and  practically  none  that  can  afford  to  borrow  it  at  what  it  costs 
them  to-day. 

The  Chairman.  Now,  when  the  banker  handles  a  bond  issue  at 
that  2  per  cent,  does  the  banker  keep  that  bond  until  he  can  sell  it  in  a 
favorable  market? 

Mr.  Bertron.  That  depends  altogether  on  the  circumstances.  As 
a  rule,  in  these  times,  a  man  buying  a  bond  usually  wants  to  ^et  rid 
of  it  and  buy  something.  Of  course,  if  there  are  reasons  why  it  may 
be  worth  more  later  on  he  may  carry  it. 

The  Chairman.  That  is  purely  a  business  proposition  with  a  bank? 

Mr.  Bertron.  And  the  conditions  surrounding  the  property. 

The  Chairman.  That  is  all. 

Commissioner  Sweet.  I  would  like  to  ask  a  question  or  two. 

Have  you  given  much  attention  to  the  service-at-cost  plan  of 
operating  street-railway  companies? 

Mr.  Bertron.  What  do  you  mean,  please,  Mr.  Commissioner,  by 

that? 

Commissioner  Sweet.  Are  you  familiar  with  the  plan  adopted  in 

Cincinnati  ? 

Mr.  Bertron.  Fairly  so. 

Commissioner  Sweet.  Tliat  is 

Mr.  Bertron.  It  is  a  term  that  is  used  very  generally. 

Commissioner  Sweet.  Yes. 

Mr.  Bertron.  But  I  think  various  people  have  diJfferent  ideas  as  to 
just  what  it  does  mean. 

Commissioner  Sweet.  Well,  in  Cincinnati,  you  are  aware  of  the 
fact  that  an  arrangement  has  been  made  between  the  corporation  and 
the  city  Avhereby  fares  may  be  increased? 

Mr.  Bertron.  Yes. 

The  Chairman.  One-half  a  cent  at  a  time. 

Mr.  Bertron.  Yes. 

Commissioner  Sweet.  And  a  reserve  fund  is  provided  for  operat- 
ing expenses,  etc.    You  undei:stand  the  general  principles? 

Mr.  B^ERTRON.  Yes. 

Commissioner  Sweet.  I  think  that  is  called  a  service-at-cost  plan. 

Mr.  Bertron.  Yes.  What  they  mean  to  do  is  to  find  out  the  cost 
of  service,  including  a  fair  return  on  the  capital. 

Commissioner  Sweet.  Including  a  fair  return  on  the  investment. 

Mr.  Bertron.  That  is,  making  a  rate  that  has  a  margin  over  and 
above  that,  so  that  they  have  a  fund  to  go  upon. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK.      547 

£:XSr"  ir^hlnhe  costs  rise  above  that  there  is  a  raise 
in  f-ire  to  meet  it,  or  if  tkey  go  below,  they  use  the  surplus,  etc. 

cZmi^Znev  S^^^^     AnS  if  suMcient   funds  are  produced  to 
mcirrATthese  expenses  and  produce  a  fair  return  upon  t^^- 
vestment    at  a  certain  point  the  fares  would  automatically  drop? 
Mr.  BERTRON.  Quite  so.    I  hope  so,  some  day. 
Commissioner  Sweet.  And  the  lower  the  fare,  after  ^t  gets  down 
to  6  cents,  or  below  6  cents,  the  holders  of  the  common  stock  wou  d 
come  in  on  a  better  ba.sis,  or,  at  any  rate,  the  company  itself  would 
Xive  a  larger  percentage  than  it  would  under  any  f  l^er  circum. 
stances,  ^d  if  it  saw  fit  it  could  make  a  distrihution  of  V^^ht^^^'- 
Mr.  Bertron.  Well,  it  should  be  able  to  distribute,  as  I  "ndei- 
tand  it,  whatever  amount,  after  properly  safeguarding  the  property-- 
wi  h  a  proper  depreciation-and  tliat,  by  the  way,  has  been  grossly 
Tdei-estiniat^l  always,  in  my  judgment;  but  after  providing  for  a 
proper  depreciation  and  maintenance,  and  all  that,  and  after  a  valu- 
ation  is  had,  and  after  you  have  determined  upon  what  value  should 
be  paid  upon  that  valuation,  then,  whatever  that  amount  is,  the 
company  can  distribute  it  at  will.  ^   .  •  i     ,i.-  „ 

Cominissioner  Sweet.  Well,  without  confining  o^^  consideration 
now  to  anv  specific  form  of  service-at-cost  plan— there  might  be 
variations  m  details,  of  course-and  without  particularly  distin- 
(Tuishing  between  the  common  stock  and  the  bonds  or  preferred 
stock,  but  simply  going  on  the  basis  that  all  moneys  actually  in- 
vested,  whethei^  represented  by  one  form  of  security  or  another, 
ought  to  produce  a  fair  return? 

Mr.  Bertron.  Whether  stock  or  bonds. 
Commissioner  Sweet.  Going  on  that  principle 

Mr.  Bertron.  Yes.  xi  •  i      ^  +i,^ 

Commissioner  Sweet.  I  want  to  ask  you  what  you  thmk  of  the 

plan.  «  .    .  1 

Mr.  Bertron.  The  principle  of  it  is  good. 

Commissioner  Sweet.  Do  you  know  of  any  other,  or  have  vou 
thought  of  anv  other  plan  that  you  think  would  be  equally  good? 

Mr  Bertron.  Well,  vou  know  there  are  several  of^those  plans. 
The  most  comprehensive  one  that  I  know  of  is  one  m  Montreal.  It 
is  rather  complicated— probably  more  complicated  than  we  would 
adopt  here— but  most  comprehensive.  ^  .,    .  • 

Mr.  Warren.  You  described  the  general  principle  of  that  m  your 
direct  testimony,  did  you  not? 

Mr.  Bertron.  Quite  so;  yes.  ,.,.,.     i    ^  t         4.  4r 

Commissioner  Sweet.  Yes;  I  understand  that,  but  what  1  want  to 
ask  you  now  is  this,  without  going  into  the  details  of  any  particular 
plan:  Would  the  plan  of  service-at-cost,  properly  worked  out  as 
to  detail,  render  a  return  upon  capital  sufficiently  certain,  so  that 
you,  as  a  banker,  could  recommend  it  to  your  clients,  that  you  could 

recommend  the  bonds? 

Mr.  Bertron.  That  would  depend  upon  whether  or  not  the  munici- 
pality was  a  party  to  the  agreement  and  it  was  legally  effective., 
*  Commissioner  Sweet.  Well,  the  municipality  would  have  to  be 
a  party  to  the  agreement,  would  it  not,  in  any  plan  of  cost  of 
service  ? 


548       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Bertron.  By  attorneys  giving  the  opinion  that  the  amount 
agreed  upon  was  properly  safeguarded  in  that  agreement,  that  it 
was  just  and  legal,  and  the  company  would  be  put  into  the  posses- 
sion of  funds,  whatever  they  were,  that  that  plan  called  for.  That 
would  restore  ci^dit  very  largely.  But  if  there  is  a  doubt  about  it, 
then  it  does  not  have  the  effect. 

Commissioner  Sweet.  As  I  understand  it,  Mr.  Bertron,  there 
would  be  one  element  of  doubt,  but  not  a  very  large  one,  under  the 
plan  such  as  I  think  ordinarily  would  be  adopted,  and  that  is 
whether,  having  the  right  to  increase  fares,  a  point  would  be 
reached  where  the  general  public  would  not  respond  and  where  the 
loss  of  patronage  would  perhaps  offset  whatever  might  be  gained 
by  the  increase  of  rates  and  where  an  amount  could  not  be  obtained 
that  would  be  sufficient  to  pay  the  interest  upon  the  securities. 

Mr.  Bertrox.  Yes;  that  is  quite  remote,  though. 

Commissioner  Sweet.  It  would  seem  to  me  that  that  would  be 
remote,  but  what  I  wanted  to  get  at  was  whether,  assuming  now  that 
all  steps  were  legal  and  a  good,  reasonable  plan  of  that  kind  was 
adopted,  as  an  investment  banker,  you  would  be  willing  to  recom- 
mend to  your  clients  the  purchase  of  such  securities,  without  at- 
taching too  great  or  too  serious  importance  to  the  contingency  that 
I  have  mentioned. 

Mr.  Bertron.  Well,  we  should  like  them  to  look  at  it,  but  gen- 
erally speaking,  it  would  go  a  very  long  way  toward  restoring  credit. 
I  think  you  might  say  it  would  restore  credit  entirely.  As  far  as 
they  did  it,  it  was  working  out  in  a  great  many  places. 

Commissioner  Sweet.  \  ou  understand,  I  am  asking  this  question 
so  that  the  commission  will  have  your  opinion? 

Mr.  Bertron.  Yes. 

Commissioner  Sweet.  As  a  practical  man? 

Mr.  Bertron.  Yes. 

Commissioner  Sweet.  Engaged  in  this  business? 

Mr.  Bertron.  Yes. 

Commissioner  Sw^eet.  As  to  the  efficacy  of  a  §ervice-at-cost  plan, 
if  one  should  be  recommended,  in  bringing  about  the  necessary  re- 
lief with  regard  to  bringing  in  new  capital  into  the  business? 

Mr.  Bertron.  It  would  go  a  very  long  way  toward  doing  it. 

Commissioner  Sweet.  You  think  it  would? 

Mr.  Bertron.  You  would  have  to  pay  higher  rates  at  first  until 
you  demonstrated  that  it  was  effective,  and  afterwards  you  would 
get  some  at  a  lower  price. 

Commissioner  Sweet.  Of  course,  an  out-and-out  agreement  on  the 
part  of  the  municipality  would  avoid  even  that  contingency  ? 

Mr.  Bertron.  Yes. 

Commissioner  Sw^eet.  And  would  give  greater  relief? 

Mr.  Bertron.  And  get  your  money  at  the  lowest  possible  cost. 

Commissioner  Sweet.  But  the  probability  is  that  it  would  be  very 
difficult  to  induce  municipalities  to  make  such  a  guaranty ;  would  it 
xiot? 

Mr.  Bertron.  That  is  altogether  a  question  how  it  is  done  and  the 
amount  of  publicity. 

Commissioner  Sweet.  You  think  that  might  be  accomplished  ? 

Mr.  Bertron.  If  they  realize  that  they  were  not  going  to  be 
political  footballs  and  were  going  to  have  a  business  administra- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      54§ 

tion   they  must  then  realize  that  the  money  would  be  acquired  at 
a  less  rate  ^f  interest  than  in  any  other  way,  and  hence  that  they 

''''^li^l2Zr%^^^^^^^       expressed  a  fairly  favorable  opinion 

^\r.l1£orrpS^        think  a  wm  come  to  that  in  time. 
Commissioner  Sweet.  You  think  it  will  come  to  that  i 
Mr.  Bertron.  Yes;  that  is  only  a  personal  opinion. 
Commissioner  Sweet.  Do  you  base  that  on  your  idea  of  the  sit- 
uaSrritT  especially  wi|i  -gard  to  publk  ^^^^^^^^  etc.,  or 

upon  what  vou  regard  as  really  the  best  for  the  public^ 
^  Mr.  Bertron.  Well,  there  is  a  general  disposition  on  tlie  part  of 
any  municipality  to  run  their  own  property.     They  dislike  having 
it  owned  and  operated  from  a  distance. 

MrB™"  IhS'oTfld  like  to  have  it  operated  at  home,  very 
naturally  Well,  it  is  not  a  far  step  from  thai,  if  you  are  going  to 
operate  at  home  to  work  out  a  business  P^-.f"'  °Pf  S^^'  "^^ 
thev  will  not  concede  that  some  one  else,  living  at  a  distance,  has 

anT  bi  business  judgment  than  *f  ,  l^^l  ^  .T[h  "f  on^ 
comoanv  and  they  know  that  they  will  be  able  to  get  the  money 
Ser^  and  hence  should  get  the  service  cheaper.  Therefore  the 
Sgic  of  die  situation  is,  isn^t  it,  that  it  should  come  to  that  in  these 

^^'cSslL'niriwEKT.  Do  you  know  of  any  objection  on  the  part 
nfoCmbfrs  of  commerce  or  of  the  communities  generally  to  having 
?orin  capital  come  in  and  invest  in  industries  of  other  kmds- 

""Mf  BbkS  No.'nof so  much  that;  but  there  is  a  distinct  feeling 
in  mosf  muSalities  that  they  would  like  to  be  their  own  doctors 

"'^CommisTon'rSKryou  think  there  is,  and  ought  to  be 
a  SSn  between,  water  supplies  and  street  railways  m  regard 
to  ownership  by  the  city  ? 

Mr.  Bertron.  Somewhat.  at     -n    *  ,^« « 

Mr.  Warren.  AVhat  is  your  answer,  Mr.  Bertion? 

Commissioner  Sweet.  Somewhat. 

Mr.  Bertron.  Somewhat. 

^■r-  SkT..  Therfif  not  much  danger  of  the  water  company 
being  utmzed  politically;  less  than  with  the  street  railway,  on  ac- 
count of  the  number  of  employees,  and  al  that.  ^.tural 

Commissioner  Sweet.  The  water  supply  is  somewhat  of  a  natural 

monopoly;  is  it  not? 

a^;Soner  Sweet.  There  is  a  disadvantage  to  the  municipality 
in  having  more  than  one  water  supply,  ordinarily  5  •  . 

Mr!  bIrtron.  The  same  is  true  with  the  street  railway.    It  is  a 

natural  monopoly.  ,       .       ,  i„9 

Commissioner  Sweet.  A  natural  monopoly  i 
Mr  Bertron.  Yes;  and  recognized  as  such.  •  ^  i     t 

CommSer  Sweet.  Is  not  the  same  thing  true  of  telephone 

companies? 


I 


550      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Bertron.  Well,  that  is  not  local  so  much.  You  have  telephone 
systems  that  are  a  part  of  great  trunk  lines  running  all  over  tho 
country. 

Conunissioner  Sweet.  Don't  you  think  it  is  a  nuisance  in  a  com- 
munity to  have  more  than  one  company  operating  there? 

Mr.  Bertron.  Oh,  unquestionably. 

Commissioner  Sweet.  If  the  street-railway  company  is  a  natural 
monopoly  in  the  same  sense  that  the  water  supply  is  a  natural  mo- 
nopoly ^  why  did  you  make  a  distinction  between  the  two  with  regard 
to  municipal  ownership  ? 

Mr.  Bertron.  The  point  I  made  was  that  there  would  be  more  ob- 
jection, probably,  on  tho  part  of  citizens  to  a  municipally  owned 
street  railway  than  to  a  water  company,  fearing  lest  they  might  not 
have  as  good  business  mnnagement.  It  is  a  little  more  complicated 
problem.  Thev  have  engineers  on  the  outside  and  various  other 
things.  They  have  to  keep  in  touch  with  operations  in  other  cities 
and  other  developments  that  take  place. 

Commissioner  Sweet.  Yes. 

Mr.  Bertron.  And  then,  too,  a  great  many  people  think  it  would 
be  a  mistake  to  have  such  a  large  body  of  men  who  are  employed 
upon  street  railways  subject  to  political  influence  of  various  par- 
ties. 

Commissioner  Sweet.  Don't  you  think  that  would  be  a  serious 
objection? 

Mr.  Bertron.  I  think  it  can  l>e  overcome.  I  think  the  street  rail- 
ways can  be  taken  out  of  politics,  just  as  much  as  the  water  com- 
panies, and  made  an  economic  business  proposition  in  the  municipal- 
ity.   I  think  it  quite  possible  to  do  it. 

Commissioner  Sweet.  You  are  rather  optimistic  with  regard  to 
city  government,  are  you  not,  then? 

Mr.  Bertron.  Well,  I  think  we  are  on  the  upgrade.  I  am  a  great 
believer  in  the  honesty  of  the  American  people  when  they  know  the 
facts. 

Commissioner  Sweet.  Do  you  think  the  introduction  of  the  com- 
mission form  of  city  government  has  helped  materially  in  the  quality 
aiid  character  of  those  governments? 

Mr.  Bertron.  That  depends  upon  the  locality.  It  has  in  some 
and  it  has  not  in  others. 

Commissioner  Sweet.  Do  you  think  at  the  present  time  there  is  a 
greater  freedom  from  bribery  and  dishonesty  than  there  was  25  years 
ago? 

Mr.  Bertron.  I  do,  very  much ;  and  I  think  that  when  this  great 
body  of  young  men  that  we  are  demobilizing  from  the  military 
service  are  disseminated  throughout  the  country — men  who  have  had 
discipline,  who  have  had  patriotism,  and  who  have  had  experi- 
ence— I  think  they  are  going  to  be  more  public  spirited,  and  I  look 
for  a  distinct  improvement  in  our  whole  civic  morale  as  a  result  of 
what  these  young  men  have  gone  through. 

Commissioner  Sweet.  Do  you  think  the  management  under  mu- 
nicipal ownership  and  operation  would  be  as  eflicient  as  under  private 
ownership  ? 

Mr.  Bertron.  It  can  be  made  so. 

Commissioner  Sweet.  Would  it  be  likely  to  be? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      551 

Mr.  Bertron.  Well,  it  can  be  ?«^d\«°- ,,N,°''Vhe.f  .tre^cS^^n 
^•oukl  depend  entirely,  on  how  it  is  handled  Theie  aie^ities  m 
wUinVi  tViPv  r-onld  Drovide  the  arrangement  that  you  nave— say,  i-«u 
membeS  of  the  chaXrs  of  commerce  on  the  board,  a  ^^^bf  <>f  the 
mpXnts'  association,  and  two  men  representmg  labor,  etc.-and 
X  it  out  of  pontics  Lid  run  it  as  a  business  enterprise.     It  can  be 

"^^^^Z^iS^S^^o  ;^  tSnC-uld  have  the  feelin. 

that  it  was  their  own  business?  -^    •„  u 

Mv   Rfrtron    And  they  would  take  a  pride  m  it.  .1    ^  4.u    , 

CommiSoner  Swket.  Ld  you  think  it  -ould  so  develop  that  they 

would  acquiesce  in  changes  of  fares  with  less  skepticism? 

ComSn^r  S™  If  i^'Le  time,  Mr  Bertron,  don't  vou 
know  th™  to  date  where  municipal  ownership  has  been  triea  it 
has  not  been  as  efficient  as  private  ownership! 

Mr.  Bertron.  Rarely. 

Commissioner  Sweet.  What  { 

^^<;;i.Srr  SrWe^U,  a.  a  rule,  it  has  not  been? 

SmSn^r  I^^^Lt.^  Ct^o^XnTySr^scountin^        Mure 
onShTuneTs  conlervative  for  a  banker,  in  assuming  the  conditions 
are  Sng  ^  be  better  in  the  hereafter  than  they  have  been  in  the 
past— materially  better  in  that  regard  i 
Mr  TivRTRoN   I  think  it  will  come.  .       ,       ,  j 

CommiSoner  Sw"et.  Former-President  Taft,  when  he  appeared 
hpfoTus  expressed  the  opinion  that,  under  the  present  situation  of 
Sfstr^t-raXS  compass,  they  would  come  to  municipal  owner- 

ship.  ., 

&iSrner  imT/S  were  not  given  to  the  companies  in 
some  way. 

Sm?=n^  si^-  He  said  he  thought  it  would  be  an  unfor- 
fnmtft  thin<'  to  have  to  adopt  municipal  ownership.  ,   ,        ,         _^  _, 

Mr    C?RON    Unless  it  was  properly  safeguarded  and  removed 

^Toin^SoLrSwEET.  Well  that  is  ^^^Vr^^'^^^J^^rtrTv:^^ 

^rrS^i^eil^d^t^oi^eit^^^^^^^^^ 

^^^k^^2£^l^r^^^T^^     I  think 
thf Jiwouid  much  rathei^  vote  for  a  man  who  was  brave  enough 

to  stand  up  for  something -^ 

Commissioner  Sweet.  That  is  very  true.  ,-,    ^.        4. 4.^  ^a 

Mr  B™n  (continuing).  Than  a  man  who  would  attempt  to  ad- 
iii«t  himself  to  what  he  thought  were  their  wishes. 
^  ComSone7swEET.  But  those  are  his  purposes  and  those  are  his 
moraTsThatTs  almost  invariably  the  case.  He  wants  at  least  one 
Sction  as  a  sort  of  indorsement.  Now,  accorcling  to  his  breadth 
^corS  to  bis  vision  will  be  the  course  that  he  will  take,  and  I 


iNji 


i 


552       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

think  you  will  agree  with  me  that  a  very  large  pjroportion  of  officials 
are  rather  narrow,  not  altogether  wise,  and  instead  of  taking  a 
broader  view  and  doing  what  is  right  and  depending  upon  that  for 
public  indorsement  in  reelection,  they  indulge  in  what  we  call  petty 
politics  and  seek  to  get  votes  here  and  there  by  cultivating  the  good 
will  of  this  one  or  the  other ;  is  not  that  true  ? 

Mr.  Bertron.  Very  frequently. 

Commissioner  Sweet.  At  least,  it  has  been  true  in  the  past? 

Mr.  Bertron.  Very  frequently. 

Commissioner  Sweet.  And  you  are  looking  now  for  a  broader 
knowledge  and  a  bigger  lot  of  public  officials — ^those  who  will  not  be 
controlled  by  such  narrow  methods? 

Mr.  Bertron.  In  the  organizations,  the  removal  of  the  stock  from 
political  atmosphere  entirely.    I  think  that  can  be  done. 

Commissioner  Sweet.  One  question  moi-e  on  this  point :  Do  you 
think  this  same  man  serving  as  an  elected  official  or  serving  at  the 
head  of  a  street  railway  company  as  an  appointee  of  an  elected  of- 
ficial w^ould  do  as  good  work,  would  be  as  efficient  as  he  would  if  he 
were  employed  by  a  private  corporation  ? 

Mr.  Bertron.  He  should  be. 

Commissioner  Sweet.  I  am  not  asking  what  he  should  be,  but  do 
you  think  he  would  be? 

Mr.  Bertron.  Well,  I  thmk  he  would  have  as  much  or  even  more 
civic  pride  in  doing  well  for  his  community  than  he  would  for  a  cor- 
poration. It  w^ould  depend  on  the  man,  largely.  Please  don't  mis- 
understand me  about  advocating  municipal  ownersliip  of  these  prop- 
erties. I  think  it  is  better  not  at  this  time.  I  think  we  can  work  out 
a  plan,  as  I  said — an  automatic  adjustment  on  a  fair  valuation — to 
give  a  fair  return,  and  that  is  the  way  it  should  be  handled ;  but  I 
said  ultimately  I  think  it  will  come  to  the  other  thing,  because  it  is 
the  rational  thing  and  the  cheaper  thing. 

Commissioner  Sweet.  When  you  say  "rational,"  you  mean  in 
theory  it  would  be  a  better  thing  ? 

Mr.  Bertron.  Yes. 

Commissioner  Sweet.  But  in  practice  I  do  not  understand  you  to 
say  that  now,  at  the  present  time,  you  consider  that  it  is  the  better 

thing  ? 

Mr.  Bertron.  I  prefer  to  see  the  other  adopted  first. 

Commissioner  Sweet.  That  is  all. 

The  Chairman.  Have  you  had  any  experience  in  dealing  with 
municipal  officers? 

Mr.  Bertron.  No. 

The  Chairman.  Then  why  do  you  say  that  there  is  not  the  same 
degree  of  integrity  and  moral  strength  of  character  and  good  judg- 
ment observed  by  officials  in  the  conduct  of  public  affairs  as  there  is 
by  bankers  or  others  in  the  conduct  of  private  affairs? 

Mr.  Bertron.  I  did  not  make  that  statement. 

The  Chairman.  I  rather  assumed  that. 

Mr.  Bertron.  Not  at  all. 

The  Chairman.  You  have  not  got  that  opinion? 

Mr.  Bertron.  No,  sir.    I  did  not  express  it. 

The  Chairman.  That  is  all. 

Mr.  Warren.  I  thought  Mr.  Bertron  was  going  rather  far  the 
other  way. 


pnOCEKDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      553 

Mr.  Bertron.  What?  ;  11.-1^.1. 

Mr.  Warren.  I  say  I  thought  you  were  going  rather  far  the  other 

way. 

Mr.  Bertron.  In  the  other  direction;  yes. 

The  Chairman.  Perhaps  I  got  the  wrong  slant. 

Mr.  Bertron.  You  certainly  did.  , ,.      «.        t 

The  Chairman.  And  I  wanted  to  defend  the  public  officer,  because 
I  have  been  one  myself  pretty  long. 

Mr.  Bertron.  I  have  a  great  respect  for  many  of  them. 

Mr.  Warren.  Did  I  ask  you  your  opinion  of  the  term  franchise? 
I  do  not  think  I  did. 

Mr.  Bertron.  No;  you  did  not.  ,     1     i.     i 

Mr.  Warren.  In  this  plan  which  you  suggest  as  the  best  plan,  m 
your  opinion,  for  adoption,  there  would  be  involved,  would  there 
not,  the  elimination  of  these  term  franchises,  which  come  to  an  end 
and  have  to  be  reviewed  periodically? 

Mr.  Bertron.  It  is  much  better  not.  •      o 

Mr.  AVarren.  It  should  be  during  good  behavior.? 

Mr.  Bertron.  The  better  the  franchise  the  better  the  property  and 
tJie  better  the  service  the  public  will  get.  ,     .    wi,  4. 

Mr.  Warren.  And  those  things  will  follow  if  the  people  feel  that 
the  company  is  there  during  good  behavior? 

Mr.  Bertron.  Quite  so.  ^i.  xi  • 

Mr  Warren.  You  spoke  of  a  straight  guaranty.  Of  course,  this 
plan  that  vou  are  suggesting  involves  no  real  guaranty,  does  it, 
except  the  right  to  adjust  fares  as  the  exigency  of  the  business  may 

^^ Mr! ^Bertron.  Yes;  or  it  may  be  that  the  city  would  guarantee  a 

fair  return. 

Mr.  Warren.  Yes;  but  that  was  not  what  you  suggested. 

Mr.  Bertron.  No.  .  ^        i      i 

Mr  Warren.  If  the  city  added  to  it  a  real  guaranty,  a  legal  guar- 
anty, then  I  suppose  the  securities  would  sell  just  the  same  as 
municipal  securities? 

Mr.  Bertron.  Absolutely.  . 

Mr  Warren.  So  the  cost  of  that  particular  service  would  be  no 
more 'than  it  would  be  without  the  public  control  of  the  service? 

Mr.  Bertron.  That  is  right  ,    n^r     -d    ^ 

Mr.  Warren.  That  is  all.    Th^ink  you  very  much,  ^Ir.  Bertron. 

STATEMENT  OF  MR.  J.  K.  NEWMAN. 

Mr.  Warren.  You  gave  your  full  name,  Mr.  Newman  ? 

Mr.  Newman.  Yes.  .         0 

Mr  Warren.  What  has  been  your  streetrailway  experience? 

Mr.  Newman.  I  started  in  in  the  engineering  department. 

Mr.  Warren.  As  engineer?  .-,,.. 

Mr   Newman.  Yes;  then  in  the  operation  department. 

Mr.  Warren.  Of  actual  street-railway  properties? 

Mr  Newman.  Yes;  of  actual  street-railway  properties.  Also  in 
the  accounting  department;  and  while  I  am  not  a  lawyer,  I  have 
hud  to  get  very  busy  with  the  legal  department. 

Mr.  Warren.  Most  street-railway  men  do. 

Mr.  Newman.  Yes. 


KKKHS"— 20- 


36 


554       PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  How  lonff  were  you  in  the  engineering  department? 
Mr.  Newman.  Well,  I  nave  never  been  out  of  it. 
Mr  Warren.  How  long  have  you  been  in  the  railway  business? 
Mr.  Newman.  Well,  since  1895.    I  have  had  a  little  lapse  in  be- 
tween, when  I  was  out  in  business. 
Mr.  Wauren.  And  over  how  long  a  period  has  this  experience 

extended  ? 

Mr.  Newman.  Twenty-four  years. 

Mr.  Warren.  With  what  companies  have  you  had  this  practical 

experience? 

Mr.  Newman.  With  the  Canal  &  Claiborne  in  New  Orleans,  the 
New  Orleans  &  Carrollton  at  New  Orleans,  the  Birmingham  Rail- 
way Light  &  Power  Co.,  the  Knoxville  Railway  &  Light  Co.,  Little 
Rock  Railway  &  Light  Co.,  the  Nashville  property— I  have  been  in- 
timately connected  with  the  St.  Louis  property,  .with  the  Dallas 
propei-ty,  and  I  have  been  acting  in  an  advisory  way  at  times  in  the 
San  Francisco  situation. 

Mr.  Warren.  You  have  some  pretty  definite  views  on  this  present 
street-railway  situation,  I  imagine. 

Mr.  Newman.  I  have  had  to  have. 

Mr.  Warren.  Would  you  prefer  to  stat«,  without  interruption  by 
questions,  and  if  so,  will  you  state  to  the  commission  what  you  think 
of  the  present  situation  and  how  it  came  about? 

Mr.  Newman.  Well,  if  the  commission  will  bear  with  me,  I  think 
I  can  throw  some  light  on  this  situation. 

The  Chairman.  Go  ahead. 

Mr.  Newman.  Now,  I  am  not  going  to  take  this  from  the  street- 
railway  point  at  all.  I  would  like  to  talk  from  both  sides  of  it,  be- 
cause I  recognize  that  there  are  two  sides  to  this  question.  The  pub- 
lic have  a  very  definite  interest,  and  without  understanding  the  pub- 
lic side  of  it  it  is  impossible  to  arrive  at  a  solution  of  this  problem. 
I  do  not  take  the  stand  that  we  are  altogether  right. 

Let  us  go  back  into  the  historj^  a  little  bit. 

I  started  out  with  13J  cents  for  motormen  and  conductors.  I 
bought  the  first  rail  at  $20  a  ton,  ties  at  $12  a  thousand. 

Now,  the  one  thing  that  was  uppermost  in  my  mind  always  was 
the  franchise,  and  I  wanted  to  be  sure  that  there  was  a  5-cent  fare 
in  the  franchise  and  that  I  had  a  franchise  for  as  long  a  term  as 
possible.  I  have  repeatedly  refused  to  be  interested  in  street-railway 
propositions  that  did  not  embody  a  5-cent  fare  and  a  long-time 
franchise.  This  franchise  gives  an  enoi-mous  value  to  the  property 
over  and  above  its  physical  worth. 

The  bankers  were  keen  to  see  that.  I  want  to  confess  to  being  a 
banker  also,  or  I  try  to  be  a  banker. 

Taking  advantage  of  the  situation,  we  commenced  to  capitalize. 
We  capitalized  the  earning  power,  l>ecause  we  had  a  monopoly.  If 
we  did  not  have  a  monopoly,  we  went  on  and  bought  the  other  road 
and  put  them  together  as  a  basis  of  some  additional  capitalization. 

The  Chairman.  Are  you  speaking  now  about  the  bankers? 

Mr.  Newman.  The  bankers  and  the  street-railway  men.  They 
work  together  always,  and  the  result  was  that  it  was  about  as  lucra- 
tive a  business  as  there  was  in  this  country.  The  public  got  the 
idea,  and  it  has  it  to-day,  that  the  street-railway  men  and  the  bank- 
ers associated  with  them  made  enormous  profits ;  and  that  is  true  only 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      555 

on  paper.  It  was  true  in  reality  in  the  early  stages  of  the  game, 
amUhe  securities  became  very  cfesirable  became  general^  d^r  b-^ 
uted  and,  next  to  steam-railroad  securities  are  the  most  populai 
form  of  investment  on  the  part  of  the  general  public. 

Now,  we  took  these  franchises  with  the  o-cent  fare.  \\  e  did  not 
offer  to  divide  any  of  that  profit  with  anyone  who  was  not  in  on  the 
^ame;  but  if  we  had  too  mAch,  we  revised  the  capitalization ;  and  we 
got  this  reputation  of  being  big  money-makers,  and  we  got  the  repu- 
tation of  beating  the  public.    There  is  no  doubt  about  that. 

Now,  the  thing  reverses  itself  completely.  -,  i.    .^  „^f 

You;  labor  his  gone  up  three  or  four  times    and  we  have  not 

reached  the  end  of^it  yet.'    Your  rails  are  up  three    ^^es  ^ndj^^ 

•other  materials  are  up  in  the  same  way      Withm  ^^^^^  ^^f /^^  >.Xi 

everything  has  practically   doubled,  which  means  that  the  nickel 

is  worth  50  cents  on  the  dillar-about  2.5  cents;  and  we  are  in  abso- 

^"  I  d?nof  believe  the  street-railway  men  here  appreciate  that  as 
thoroughly  as  it  is  true.  We  are  hopelessly  bankrupt.  Now,  that 
mav  be^a  Ihock  to  some  of  them;  but  I  want  to  tell  you  the  part  of 
the  crame  that  hurt  us  more  seriously,  or  nearly  as  seriouslv  as  the 
idea'which  the  public  has  that  we  have  been  enormouslv  profitable- 
Ihat  we  are  making  enormous  profits  and  do  not  need  this  relief. 

Whe'nThese  roads  began  to  improve  their  science,  bigger  cars  and 
fast  schedule  speed  and  improved  service  to  the  public,  we  got  an 
asfendin-  cur^  of  gross  earnings  that  was  quite  remarkable  As 
W  s  that  ascending  curve  continued  upward,  we  could  capitalize 
Sse  11  securi^^^^  Is  long  as  we  ^i^e  selling  securities  we  ca^^^^ 
talized  the  renewal  and  replacement  fund,  which  should  ha.e  be^n 
in  the  operatincr  expenses,  but  which  had  not  been  m  the  operating 
expensesTthe^xt^^^^^  that  it  is  necessary  The  only  situation  that 
I  know  of-I  suppose  there  are  others--where  they  have  taken  care 
of  that  renewal  and  replacement  fund  is  the  United  Railways  of  St. 
Lout  There,  for  a  period  of  8  or  10  years,  on  top  ot  their  regular 
n^h\tenance  hey  have  set  aside  a  fund  called  depreciation,  but 
Xclf  Sd  be^cal^  renewals  and  replacements,  to  take  care  of 
he  thing  that  was  going  to  be  put  out  of  service  next  year  or  the 
foRowin-  year,  but  whic^  did  not  need  throwing  into  the  junk  pile 

''Sfr?o:'I%1riod  of  seven  or  eight  years  and  that  road  now 
has  reduced  its  capitalization.  It  has  not  sold  a  security,  to  my 
knowledge,  within  the  last  seven  or  eight  years.  It  does  not  sell 
securittf  But  still,  what  do  we  find?  We  find  that  that  road  is 
Xfhands  of  a  recover,  is  not  able  to  meet  the  natural  grow  h  of 
Ihe  city  of  St.  Louis  by  putting  in  the  improvements,  because  it  can 
not  camtalize  We  find  the  4  per  cent  bond  selling  for  55.  1  hey 
were  sK  a  few  weeks  ago  L  50,  and  behind  them  the  junior 
bonds  We  find  the  four's  closed  out  and  no  more  could  be  issued, 
and  even  though  they  could  be  issued  you  could  not  sell  them. 

Now!  there  fs  the  one  outstanding  property  that  has  taken  care  ot 
this  renewal  and  replacement  fund,  and  yet  it  has  not  been  able  to 
navigate  in  a  capital  way  and  has  had  to  go  into  the  hands  of  a 

''wrare  all  familiar  with  the  fact  that  they  had  a  loan  from  the 
War  Finance  Board  during  the  war  and  have  not  been  able  to  pay  it 


656       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

off  up  to  this  time,  notwithstanding  the  fact  that  these  gentlemen 
on  that  commission  have  crowded  this  road  to  the  utmost,  threatening 
them  with  the  sale  of  the  securities,  which  has  not  alarmed  them  very 
nuich,  because  what  we  can  not  do  the  commission  can  not  do.  The 
securities  can  not  be  sold. 

Mr.  Warren.  You  are  referring  to  the  Finance  Commission  ? 

Mr.  Newman.  Yes. 

Mr.  Warrkn.  The  Federal  commission. 

Mr.  Newman.  Then,  we  find  the  road  breaking  down  under  their 
old  svstem  of  accounting.  We  find  that  they  can  not  do  any  financ- 
ing. '  AVe  are  finding  this,  too,  that  when  they  have  to  come  out  from 
under  their  old  system  of  financing,  there  must  be  established  a  com- 
plete new  financial  set-up,  a  complete  new  process  of  financing. 

Now,  what  is  going  to  happen?  I  have  had  to  do  wuth  putting  six 
properties  in  the  hands  of  receivers.    The  interest  is  being  cut  on  all 

of  the  bonds. 

The  Chairman.  During  the  last  year  or  so? 

Mr.  Newman.  During  the  past  year.  And  we  have  a  serious  prob- 
lem, a  problem  w^hich  is  far  more  serious  than  the  public  has  any 
idea  of,  and  I  believe  far  more  serious  than  the  members  of  this 
commission  believe. 

How  are  we  going  to  get  around  it  ?    How  are  we  going  to  solve  it  ? 

Let  us  talk  municipal  ow^nership  for  a  minute.  There  is  a  consti- 
tutional prohibition  in  the  charters  of  all  of  the  cities  that  they 
can  not  take  over  the  street  railways  by  any  system  of  guaranty,  be- 
cause it  is  not  legally  possible. 


cian  lives  on  public  favor,  and  the  moment  the  politician  attempts  to 
raise  the  street-car  fare,  the  public  are  against  him,  and  he  will  lose 
out  at  the  next  election.  They  do  not  want  to  enter  into  that;  so, 
frankly,  I  have  given  up  all  hope  of  municipal  ownership. 

Mr.  Warren.  Before  you  leave  that,  Mr.  Newman,  have  you  any 
views  on  State  ownership  as  distinguished  from  municipal  owner- 
ship? 

Mr.  Newman.  No  ;  I  never  thought  of  that  proposition. 

Mr.  Warren.  Of  course,  that  would  be  a  possibility  with  which 
most  of  the  constitutions  w  ould  not  interfere. 

Mr.  Newman.  There  you  are  separating  the  city  and  State,  and  I 
do  not  dream  of  that  as  a  possibility. 

I  do  not  believe  the  people  themselves  want  to  put  street  railways 
in  municipal  ownership.  They  are  different  from  any  other  kind  of 
public-service  corporation,  for  this  reason.  They  have  an  enormous 
pay  roll — 40  per  cent,  maybe  50  per  cent,  of  their  operating  expenses, 
and  maybe  a  great  deal  more  than  that,  the  way  wages  are  going.  It 
means  that  motormen  and  conductors,  who  have  not  had  the  advan- 
tages of  an  education,  who  are  not  carpenters  or  mechanics,  and  who 
have  to  take  this  class  of  work— that  means  not  the  highest  order  of 
education — are  prey  for  politicians;  and  that  puts  a  lot  of  strength 
into  the  hands  of  the  politicians.  It  puts  a  great  big  pay  roll  in  the 
hands  of  the  politicians.  A  water  company,  a  gas  company,  and  a 
lighting  company  do  not  have  the  same  proportion  of  employees. 

So  I  do  not  believe  in  municipal  ownership. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      557 

T  wnnhl  hft  crlnd  to  cret  relief  if  we  had  to  lose  money  and  got  rid 
of  some  o  the  timible.*=  L^^^^^  is  hardly  worth  living  with  the  proposi- 
tion as  ii  is^^^^^^^^^^  but  I  think  the  cities  themselves  do  not  want 
municipal  ownership.  .       ,     -i    o 

"NTmv  then  what  are  we  going  to  do?  ,     ,    .  rr\    .r     ■ 

The  St  ^et-railway  people  hSve  not  presented  their  case     They 
h.vebeentVsailed.    When  they  did  ask  for  something  they  asked  for 
f  cent  faTf  Why,  that  did  not  begin  to  take  care  of  the  situation, 
if  ;«    keep  in  niind  this  renewal  and  replacement  fund   and  espe- 
i.n^  tl.p  wo"o"c-»lo     Thev  left  no  room  for  a  trade.    If  they  had 
;£    for  r  W-ceM  f;re  &  might  have  helped  the  situation  some 
Fvon  at  a  6-cent  fare,  I  do  not  believe  there  is  a  single  municipality 
i^;  the  United  States  that  would  vote  a  6-cent  fare  at  a  referendun^ 
"ml  many  of  the  cities  have  a  referendum.    The  reason  they  won't 
-do  ti 'because  they  sav,  "  These  fellows  h-e  b««n ^f ,^"8  "<=!''  ^""^ 
thev  have  made  a  lot  of  money,  and  we  don  t  beheve  it. 
the  Chairman.  They  did  in  Sioux  Falls,  S.  Dak. 
Mr  Kf-wman.  Well,  that  is  an  exception,  as  you  know. 
Mr'  Warren.  The  exception  that  proves  the  rule. 
Mr'  Newman.  Then,  what  are  we  going  to  do  with  the  situation? 

''I'^e  cVy"ot&"oX'ns  I  knew  an  old  conductor  on  a  line; 
>ind  w len  I  was  riding  with  him  I  said,  "AVhy  do  you  motormen 
am  iducto^f  fight  tSis  increase  in  f-e"  (thev  e„,ploy^^^^^^  a  - 
tnrnev  and  thev  are  going  to  the  court  to  fight  it)  when  you  gei 
thirenormousTncrease  in  wages?  "    "  Because  the  company  does  not 

"^f  believe  the  public  is  fair  enough  to  give  it  if  tlie  facts  are 
know  n-  and  the  hope  that  I  have  in  this  situation  is  that  this  com- 
misLn  w  1  say  something  to  the  public  which  *¥/ .^'»  J ""f  ^e- 
Heve  when  they  won't  betieve  the  same  thing  said  by  the  street- 

'"The^soCtmn  in  my  judgment,  is  the  service  at  cost,  plus  a  return 
on  theTnves?ment_aV  ascending  fare,  or  a  descendmg  fare,  but  a 

*1f  uleTchle'^ff  ?heihrce  of  the  street-railway  people  and  bank- 
ers from  manipulating  the  securities  again,  I  do  not  believe  it  mat- 
ters much  what  the  capitalization  of  the  company  is  whether  it  is 
hi4^r  low.  That  is  not  the  point.  If  we  got  out  to  make  securi- 
aes  they  could  be  cut  down.  It  can  be  dealt  with  by  the  process  of 
law,  bnt^what  the  people  want  to  know  is  that  an  unfair  return  is 
Tint  naid  on  the  capital  invested. 

Xen  the  public  is  educated  to  the  fact  that  they  are  paymg  a 
fair  return  on  the  investment  and  not  a  return  on  watered  securi- 
tiJs  they  L  not  going  to  object  to  an  increase  in  fares,  no  matter 
whnt  it  is  even  if  it  should  be  10  cents.  .  • 

Now  Tn  this  position  vou  have  to  take  the  public's  point  of  view, 
because  you  can  not  look  at  it  fairly  if  you  ]ust  go  below  the  sur- 
face of  the  street-railway  situation  and  do  not  analyze  the  public 

^"suVpose^we  are  operating  a  factory,  and  we  were  unwise  enough 
to  se  1  our  m-oduct  at  a  fixed  price  for  a  term  of  20  years,  what 
*^uld  Cppm  when  the  raw  material  went  up,  so  that  we  could  not 


558       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

produce  that  article  at  cost?    We  would  go  into  receivership  and 
then  bankruptcy. 

Now,  would  the  purchaser  of  that  material  want  to  take  the  fac- 
tory and  run  it,  or  would  he  say,  "  Here,  you  go  on  and  manufacture 
your  goods,  and  I  want  to  see  that  you  do  not  make  an  abnormal 

Erofit  out  of  it."  I  think  most  business  men  would  say,  "  You  had 
etter  operate  your  factory;  I  don't  want  to  operate  it,  especially 
when  you  are  only  getting  a  meager  return  on  your  investment." 
And  that  is  what  the  public  is  going  to  say  when  they  are  con- 
vinced that  that  is  the  situation  in  the  street-railway  business.  They 
are  fairly  entitled  to  know  that,  after  we  have  had  the  cream  of 
these  fianchises,  and  that  when  the  day  of  reverses  passes,  we  are  not 
going  to  continue  to  pay  large  dividends  on  the  basis  of  securities. 
They  will  insist  that  we  pay  only  a  fair  i^turn  on  the  capital  prop- 
i^rty  value  and  let  tlie  securities  readjust  themselves. 

There  is  another  feature  about  the  financial  plan — ^the  securities 
plan — that  I  would  like  to  see  the  commission  adopt,  if  the  commis- 
sion should  favor  the  plan  of  service  at  cost  plus  a  fair  return  on 
the  capital  property  value,  and  that  is  this,  that  there  should  be  a 
condition  attached  to  that  sort  of  an  arrangement  by  which  the 
securities  would  be  readjusted  so  that  a  new  system,  a  financial  set- 
up, will  be  established  in  order  to  make  it  possible  for  the  street 
railways  to  go  ahead  and  keep  up  with  the  times,  to  take  care  of 
this  renewal  and  replacement  fund,  which  has  not  been  accumulated 
by  a  majority  of  the  roads,  but  which  has  been  an  operating  charge, 
just  to  the  same  extent  as  the  motormen  and  conductors'  salaries. 
It  has  been  taken  care  of  in  the  past  through  this  ascending  pros- 
jwrity,  now  blocked,  because  we  have  reached  the  height  of  the  in- 
dustry or  nearly  so ;  and  automobiles  have  come  along  and  have  taken 
the  ci'eam  off  the  top.  So  we  are  dealing  to-day  with  this  problem 
of  a  renewal  and  replacement  which  must  be  inserted  in  the  operat- 
ing charge  at  a  fixed  charge.  Now,  when  you  have  done  that,  you 
have  broken  down  your  whole  system  of  finance,  because  there  is  not 
a  banker  who  has  played  the  game  in  New  York  or  elsewhere  who 
has  not  adopted  the  standard  of  judging  a  bond  by  the  ability  of 
the  company  to  earn  twice  its  intei-est  charge.  When  you  insert 
♦  hat  renewal  and  replacement  charge — notwithstanding  all  the  prop- 
erties ar*e  face  to  face  with  that,  and  it  is  a  much  more  material 
thing  than  we  have  been  thinking  of  in  the  past — you  destroy  its 
net  earnings,  and  even  if  you  had  an  open  issue  of  bonds,  you  could 
not  sell  them  unless  you  had  two  for  one  and,  of  course,  I  do  not 
know  of  1  road  in  10  that  can  make  that  sort  of  a  statement  to-day, 
with  a  renewal  and  replacement  fund. 

Now,  if  you  do  not  put  it  in  operating  expenses,  you  have  to 
capitalize  it,  and  you  are  not  allowed  to  do  so  by  the  cities  as  an 
oj^erating  expense.  WHien  you  put  it  into  operating  expenses,  and 
you  want  a  return,  an  interest  on  the  fair  valuation,  6  cents  fades. 
There  is  nothing  to  it,  and  7  c«nts,  in  many  instances,  will  fade,  and 
will  go  up  to  a  very  much  higher  standard,  and  there  is  no  hope  of 
that  higher  standard,  unless  we  have  taken  the  public  into  our  con- 
fidence and  say,  "We  have  stopped  the  juggling  of  securities;  we 
have  stopped  consolidation  to  get  out  more  stock;  we  have  gotten 
down  to  an  honest  system  of  finance,  by  which  the  public  will  pay 
a  return  on  the  investment  and  nothing  more,  and  what  you  pay  you 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      559 

crot     If  vou  want  a  low  rate  of  fare,  take  the  seats  out  of  the  cai^ 
nmi  let  even^body  stand  up;  but  if  you  pay  enough,  we  will  put  on 
Sman  palce  Lvs  for  you.    You'shall  be  the  ^^^^ ^^^^ 
want,  but  whatever  you  pay  you  get,  and  you  pay  it  only  to  gne  us 
a  roturn  on  our  actual  investment.'  .  .i  r»    ^  i^«i- 

'  ¥he  Chairman.  At  this  point,  we  will  discontinue  "ntd  2  o  do^^^^^ 
(Whereupon,  at  1  o'clock  p.  m,  a  recess  was  taken  until  2  o  clock 
p.  m.) 

AFTER  RECESS. 

STATEMENT  OF  MR.  J.  T.  NEWMAN— Resumed. 

Mr  Warufn    Will  you  resume,  Mr.  Newman? 

Mr.  Newman.  We\4re  talking  about  renewals  and  replacements; 
or  if  we  were  not,  I  want  to  talk  it  strong.  ,.„i„.. 

Let  us  assume  for  a  basis  now  that  your  property  has  a  fair  ^alu^ 
tion  of  five  to  one,  gross  receipts.  I  will  not  say  that  that  )S  tlie 
wav  it  is  going  to  wo?k  out,  but  let  us  take  that  figu.^  tS'^S^ 

the  Chairman.  What  do  you  mean  by  five  to  one,  f  "fs    eceipts^ 

Mr   Newman.  That  the  value  of  the  property  is  five  time.,  the 
irros^' receipts     Now,  we  talk  about  10  per  cent  of  the  gross  receipts 
fo""e3  and  replacement.    That  is  2  per  cent  of  the  -  -  o^^^^^^^ 
property.    Just  ask  yourselves  the  question,  hf';*^'^  .^f  |  ^^l  '^^ 
go  towird   rebuilding  the   property ;    ^yl^"*  ^^   *^^, '^^^^J^il  lork ^ 
what  is  the  life  of  the  rail;  what  is  the  life  of  the  special  ^^orK, 
:     t   s  the  life  of  power  equipment j    So  I  am  emphasizing  the  fact 
that  this  renewal  and  replacement  fund  has  not  bfe-^^^^  *  ;^;t J^^f 
an  operating  charge  in  the  past;  that  we  have  capita hzed  the  recon- 
s  rSon  "r  worn^ut  property  because  the  P|«P"  J  "/  *'^Xs' 
pany  in  the  past  permitted  the  capitalizing  "^n^  the  sa  e    f  «>, u„ties 
Lit  now  we  can  not  do  it  anv  more;  we  can  not  capitalize,  v\e  can 
So    ^iT  the  securities.     The  wearing  out  of/he  property  is  going 
on  and  we  are  face  to  face  with  this  renewal  and  this  replacement 
on  top  oTthe  ordinary  maintenance.    You  can  maintain  a  thing  up 
to  a  certainToint  by  impairing  and  patching  it  and  then  it  comes  to 
where  it  has'^ot  to  be  repla.^d ;  so  that  becomes  an  operating  ex- 

P  Mr.  W^Rn"^  How  much  do  you  think  that  should  be,  Mr.  New- 

™Mr  Newman.  That  varies  all  over  the  country,  according  to 
the  local  condition.  Some  roads  have  veiT  heavy  traffic  in  narrow 
streets-  some  have  w  de  streets  to  iiermit  vehicles  to  go  on  the  side, 
and  «iey  do  not  interfere  with  your  track,,  do  not  wear  out  your 
track  Paint  lasts  longer  in  some  communities  than  others.  But  it 
is  so  much  more  substantial  than  street-railroad  men  and  bankers 
have  ever  put  into  their  statements  that  from  now  on  we  have  got  to 
deal  with  that  as  an  operating  expense. 

Commissioner  Gad.sden.  Do  you  mean  the  current  or  accumulated, 

*"^Mr  Newman.  Both.  The  curi-ent  is  repairs  and  maintenance. 
The  future  is  going  on  every  day,  but  may  be  only  calhng  for  a  large 
amount  of  capital  at  some  future  time;  reconstruction  of  the  tiack 
or  something  of  that  kind  is  a  replacement. 


560       PROCEEDINGS  OF  FEDERAI^  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Who  is  to  determine  the  amount  of  the  deprecia- 
tion ? 

Mr.  Newman.  The  management  of  the  road.  Now,  I  will  talk 
about  that  in  a  minute. 

The  Chairman.  You  know  that  in  the  past  railroad  companies 
desiring  to  hide  a  large  return  would  charge  a  very  big  depreciation 
account,  and  those  who  wanted  to  make  a  very  favorable  showing 
would  charge  practically  no  depreciation.  Now,  are  you  going  to 
be  able  to  leave  this  to  the  street-car  management? 

Mr.  Newman.  You  have  stated  two  cases.  One  does  not  exist 
very  often. 

The  Chairman.  Well,  it  has  in  the  past,  and  we  hope  it  will  in  the 
future. 

Mr.  Newman.  There  has  been  very  little  hiding  of  net  earnings. 
To  the  contrary,  there  has  been  representation  of  net  earnings  that 
did  not  exist  in  order  to  justify  the  sale  of  securities  for  capitaliza- 
tion purposes.  Now,  that  must  go  in  the  future.  When  that  goes  in 
the  future — I  want  to  talk  banking  to  you  a  minute.  You  go  into  any 
banking  house  in  the  country  that  has  a  means  of  distributing  se- 
curities and  they  say,  "What  are  your  net  earnings?  Are  they 
two  for  one  ?  "  "  No."  "  Well,  we  are  not  interested."  And  that 
standard  has  been  adopted  before  you  reached  the  renewal  and  re- 
placement account.    Now,  if  you  leave  it  out  in  the  future 

The  Chairman.  W^hat  is  that  two  for  one  ? 

Mr.  Newman.  Net  earnings,  twice  the  bond  interest.  Now,  if  you 
leave  it  out  in  the  future  the  cities  will  say  when  giving  you  a  return 
on  your  investment,  "  Oh,  this  does  not  belong  in  here."  If  you  put 
it  in  as  an  operating  expense  you  have  destroyed  this  system  of 
financing,  so  you  have  to  set  up  an  entirely  new  financing.  That  is 
as  it  should  be,  a  new  system  of  financing,  because  you  Avill  never 
finance  on  the  old  basis.  And  before  the  cities  grant  this  new  relief 
that  should  be  one  of  the  conditions.  And  I  hope  that  this  commis- 
sion will  point  to  that  as  one  of  the  necessary  things  to  be  done.  It 
will  help  the  reorganization  of  the  property,  it  will  help  to  a  better 
understanding  in  the  future  as  to  when  and  how  we  can  get  money 
for  these  properties.  Now,  those  are  two  of  the  points  that  I  want 
to  emphasize. 

Now,  about  the  increased  fare,  when  we  get  it.  The  mathematical 
percentage  of  a  6-cent  fare  is  20  per  cent-  It  is  practically  impos- 
sible to  say  from  the  past  experience  what  that  is  yielding,  because 
when  you  get  your  receipts,  showing,  as  Mr.  Bertron  has  said,  in 
some  cases  30  per  cent  increase  and  in  other  cases  only  5  per  cent  in- 
crease, that  is  mixed  up  with  the  prosperity  or  the  lack  of  pros- 
perity in  a  given  community.  In  New  Orleans,  where  we  are  get- 
ting about  30  per  cent  increase  with  a  20  per  cent  increase  in  fare, 
it  is  very  largely  due  to  an  enormous  prosperity  brought  on  by  war 
conditions,  and  it  is  very  hard  to  say  which  is  which.  But  if  you 
can  just  get  the  public  mmd  convinced  that  they  are  getting  a  square 
deal  now,  that  there  will  be  no  more  pyramiding  of  securities  and 
no  more  compounding  and  excessive  flotations  and  excessive  profits 
to  the  bankei-s,  and  convince  them  that  they  are  paying  only  for 
what  they  get  plus  return  on  invested  capital,  I  think  there  will  be 
no  objection  at  all  to  the  increased  fare  nor  will  that  mean  even- 
tually a  material  reduction  in  the  riding.    So  I  do  look  for  consider- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       561 

able  relief  from  the  increased  fare  and  I  believe  it  will  measure  up 

verv  closely  as  time  goes  on  to  the  mathematical  proportion. 

^!r   Wakren.  And^it  is  the  only  relief  that  can  be  mnnediately 

applied;  is  it  not,  Mr.  Newman? 
Mr.  Newman.  Absolutely.  «j  «„^ 

Mr.  AVarren.  These  other  matters  that  you  |^ave  discussed  and 

that  others  have  discussed  inquire  a  good  deal  of  time  for  tneir 

consideration  and  adoption? 

Mr.  Warren.'  And  in  the  meantime  this  increased  revenue  must 

^'^'i?  Newman.  But  if  the  public  is  convinced  that  the  relief  they 
nre  oivinff  is  for  service,  irrespective  of  capitalization  but  dependent 
11  x.n  tKlue  of  the  properly  plus  a  fair  ^^--^-^  ,^^^^^^^^^^^ 
believes  that,  we  will  get  our  increased  fares  with  a  less  effort  than 
we  are  making  at  the  present  time. 

Mr.  Warren.  And  without  public  hostility  ? 

Mr.  Newman.  Yes.  Now,  if  we  say  this  they  do  not  believe  us-- 
and  I  say  we,  the  street-railroad  people-but  if  this  commission 
would  sav  it  I  believe  it  would  be  a  tmnendous  step  forward. 

Mr  wIrren.  I  agree  with  you.  I  think  that  is  all  I  want  to  ask 
Mr.  Newman,  Mr.  Chairman.  .      , 

The  Chairman.  Hew  many  years  have  you  been  m  the  stieet-car 

business  ? 

Mr.  Newman.  Twenty-four.  i      i         •„  +i,^ 

The  Chairman.  During  all  of  that  time  have  you  also  been  in  tlio 

^'""MrNF^wMAN.' Yes;  not  all  of  the  period  in  the  banking  business. 
I  orra'duated  from  the  street-railroad  business  into  the  banking  end 

^  Tlie  Chairman.  To  what  have  you  given  your  greatest  attention, 

'"MTNE^ML^'FiSf  to  raih-oading  and  then  to  the  banking  end 

■f    '4- 

^  The  Chairman.  How  many  years  have  you  been  giving  most  at- 

tention  to  the  banking  end?  ,.  ^     ,      .  ..^ 

Mr  Newman.  Since  my  father  died,  about  10  years  ago. 

The  Chairman.  Have  you  been  giving  much  attention  to  railroad- 
ing in  the  past  10  years? 

Mr.  Newman.  Yes.  . 

The  Chairman.  At  the  present  time  you  have  a  good  many  prop- 
erties under  your  control? 

Mr.  Newman.  Yes. 

The  CHAIR3IAN.  How  many?  .    ,  i    ^  t  «f 

Mr.  Newman.  Well,  I  do  not  like  that  word  control,  but  I  am  act- 
ing in  an  advisory  capacity  for  nine. 

The  Chairman.  You  gave  us  some  very  interesting  information 
about  the  early  history  of  these  companies,  and  particularly  about 
the  long-term  franchise  and  the  5-cent  charge.  Was  it  your  ex- 
perienc^in  the  early  days  that  the  5-cent  fare  was  profitable  to  these 

comnames 

ISIr.  New'man.  In  the  very  early  days  it  was  profitable,  but  it  never 
was  as  profitable  as  the  bankers  thought  it  was,  for  the  reason  that 
we  were  capitalizing  that  renewal  and  replacement  charge. 


n 


682       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  How  long  did  they  operate  profitably  on  that 
5-cent  fare? 

Mr.  Newman.  I  should  say  up  to  the  time  that  they  began  to  have 
an  increase  in  their  platform  expenses  over  and  above  25  cents  an 
hour,  and  that  varied  in  different  situations. 

The  Chairman.  Did  the  practice  of  capitalizing  the  replacements 
and  earnings  begin  early  in  the  history? 

Mv.  Newman.  Yes. 

The  Chairman.  And  did  you  participate  in  that  practice? 

Mr.  Newman.  Yes. 

The  Chairman.  Did  the  bankers  know  that  sooner  or  later  that 
practice  would  lead  the  companies  into  trouble  ? 

Mr.  Newman.  Mavbe  not. 

The  Chairman.  They  were  fascinated  with  a  scheme  of  the  5-cent 
fare  with  a  long  term  and  thought  that  would  carry  them  over  all 
sorts  of  difficulties? 

Mr.  Neavman.  Yes;  but  you  must  keep  in  mind  this — that  we  had 
a  new  industry  and  it  was  just  making  leaps  and  bounds.  Where  a 
town  or  a  city  was  at  all  prosperous  the  improved  service,  the  im- 
l^roved  cars,  the  improved  speed,  the  moving  out  from  the  con- 
gested centers  of  the  city  into  the  outlying  districts  developed  the 
traffic  with  leaps  and  bounds,  and  that  was  an  appreciation  which 
more  than  counterbahinced  that  renewal  and  replacement  that  was 
going  on,  sometimes  called  depreciation. 

The  Chairman.  But  there  was  a  large  amount  of  capital  issued 
for  stock  which  did  not  represent  the  capital  put  into  the  plant,  was 
there  ? 

Mr.  Newsman.  Absolutely. 

The  Chairman.  Was  not  that  quite  a  common  practice  in  the  early 
days  ? 

Mr.  Newman.  Yes. 

Commissioner  Gadsen.  Was  it  confined  to  public  utility? 

Mr.  Newman.  No,  sir. 

The  Chairman.  I  think  the  limit  was  the  roof  in  almost  every- 
thing. 

Mr.  NEw:NrAN.  I  think  the  steam  railroads  are  in  exactly  the  same 
condition  to-day,  and  if  they  were  to  be  taken  from  under  the 
Government  control  you  would  see  a  situation  similar  to  the  street- 
raih'oad  situation,  and  that  is  something  this  Government  is  facing. 

Commisioner  Gadsden.  Was  not  that  the  code  of  ethics  in  those 
days  and  everybody  subscribed  to  it? 

Mr.  Newman.  Yes. 

Commissioner  Gadsden.  It  was  looked  upon  as  proper  by  every- 
body ? 

Mr.  Newman.  Absolutely.  I  am  not  meaning  to  reflect  that  I 
ha\e  been  dishonest — I  won't  let  you  say  that — and  I  do  not  believe 
the  bankers  were. 

Tlie  Chairman.  I  am  not  atte' ipting  to  make  any  reflection  but 
am  trying  to  develop  the  facts. 

Mr.  Warren.  It  is  still  the  practice  in  many  industrials;  is  it  not? 

Mr.  Newman.  It  is  quite  the  fashion  to-day. 

The  Chairman.  Suppose  these  properties  had  been  operated  ac- 
cording to  modern  ethics,  capitalizing  only  the  money  that  is  in- 
vested, would  they  be  able  to  operate  under  a  5-cent  charge? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      563 

The  Chairman.  Under  a  5-cent  fare« 

Mr  Newman.  Without  interest,  I  think  so;  yes,  sir 

tL  Chaieman.  Can  your  companies  pay  operating  expenses  on 

a  5-cent  fare?  .  ,     ,  u  i.  «^  ,.ofnrn  nn  the  investment. 

^L'l^i^t^S'^f^^^^-    Has  that 

nif  "SwMii^A^;^  it  has  been  discussed  by  every 

^X  cirifMrn^.Sl'rp^sent  charge  in  St.  Louist 

Mv  Nfw^ai\n.  Six-cent  fare.  .       «.    ,  a 

Th;  Chairman.  How  long  has  that  been  m  effect? 
Mr  Newman.  Something  over  a  year. 
The  Chairman.  Granted  by  the  commiss  on? 

^L^^^^Il^r^^^:St1^  the  commission  to 
"'Mr  Nk™!"  Well,  it  came  rather  easily  at  St.  Louis  as  compared 
^-^rc'^L'^N^^CSr^^^^^^  been  very  prompt 

in  disposhig  of  these  war-time  questions;  has  it  not? 

porience?  ,,    .  i  „  fi,^  Alahama  Commission.    There  they 

"^  Mr.  Nr.wMAN.  Well,  take  the  Al^a^am^^  ^^^  ^^^  ^ 

have  done  very  well-the  St«te  com^inssion  .^  ^^^^ 

conflict  as  to  whether  th^i^  Jf  f,  f  t  some  cm^^^^^^         ^      1  ^^ti„     ^^^ 
i^'^:Z:^t^t''^^^^^^    still  operating  under  a 

had  the  power? 

Mr.  Newman.  Yes.  .c^^^rJ  ih^f  frenerallv  true  with  all 

The  Chairman.  Have  you  not  found  that  geneiaii> 

commissions?  ^o;^  rkuKlip-utilitv  bill  through 

Mr.  N«waA».  Yjs,  .(you  anpl  f.X^Km  nStion  for  gS.. 

business  and  also  m  ttie  oanKiug  ""  »  ..     street-car  problem— 


liii 


I  law 


bl 


564        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

an  indeterminate  permit  franchise  subject  to  the  right  of  the  city  to 
buv,  with  the  rates  to  be  fixed  by  the  State  commission? 

Xir.  Newman.  Well,  I  do  not  see  a  great  deal  of  difference  between 
the  two  statements;  they  are  so  closely  related  that  they  are  about 
the  same  thing.  I  believe  all  service-at-cost  plans  are  based  upon  an 
indeterminate  franchise.  A  franchise  is  worthless,  or  a  scrap  of 
paper,  from  my  point  of  view.  What  w^e  want  is  the  indeterminate 
franchise  which  regulates  the  rate  so  that  here  are  your  gross  re- 
ceipts and  here  are  your  operating  expenses,  and  there  are  your  net 
earnings  between,  and  that  remains  constant,  no  matter  which  way 
the  business  goes.  Just  keep  it  that  way.  Xow,  that  indeterminate, 
with  the  city  represented  on  the  board  of  the  property  to  see  that 
there  is  an  honest  administration,  and  with  the  city,  or  if  they  have 
not  the  power,  the  public-service  commission  of  the  State  granting 
the  increase  and  ordering  the  decrease  in  rates. 

The  Chairman.  Then  so  far  as  you  are  concerned  either  i^lan  would 
offer  a  satisfactory  solution? 

Mr.  Xewman.  Yes. 

The  Chairman.  Have  you  discussed  this  alternative  plan  with 
many  people  engaged  in  this  line  of  business? 

Mr.  Newman.  Yes,  I  have.  We  have  had  a  conference  of  the  in- 
terested parties  in  all  of  our  properties  together  with  the  operators  of 
these  properties,  and  we  have  thrashed  this  whole  question  out.  I 
am  able  to  talk  freely  about  it,  not  because  of  my  wisdom  but  be- 
cause I  think  I  represent  here,  in  what  I  am  saying,  the  consensus 
of  opinion  of  a  great  number  of  able  men  in  the  business. 

The  Chairman.  This  conference  that  you  speak  of  is  the  one  held 
by  the  representatives  of  the  plants  that  you  are  interested  in? 
'Mr.  Newman.  Yes. 

The  Chairman.  Have  you  discussed  this  alternative  plan  with 

those  men? 

Mr.  Newman.  Well,  I  may  be  a  little  thick,  but  I  can  not  quite 
catch  the  alternate-plan  idea. 

The  Chairman.  The  cost-of -service  plan  is  one,  and  the  other  to 
have  the  rates  established  by  a  State  commission,  the  franchise  based 
on  an  indeterminate  permit  subject  to  the  right  of  the  municipality 
to  buy. 

Mr.  Newman.  Let  me  see  if  I  can  not  clear  that  up  for  3^ou.  The 
cost -of -service  plan  is  nothing  until  the  rate  is  fixed.  You  find  out 
what  your  gross  receipts  are  and  what  your  operating  expenses  are 
and  that  determines  the  fare. 

The  Chairman.  That  is  true. 

Mr.  Newman.  And  then  the  public  commission  fixes  the  fare? 

The  Chairman.  That  is  true. 

Mr.  Newman.  And  they  go  right  together;  you  can  not  separate 
them;  it  is  only  one  plan.  It  is  not  an  alternative  plan;  one  is  part 
of  the  other. 

The  Chairman.  Well,  not  exactly.  One  operates  automatically 
after  the  contract  has  been  made.  In  the  other,  you  must  address 
yourself  to  the  judgment  of  a  commission  when  you  make  an  applica- 
tion for  an  increase  or  decrease,  and  the  question  then  depends  upon 
the  facts  presented.  Now,  as  between  those  two  plans  your  people 
would  be  satisfied  with  either? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       565 

Mr.  Newman.  Yes,  sir;  preferably  a  combination  of  the  two,  if  you 

can  distinguish  them  as  two  plans.  ,    ^  ,  .  u  ^- 

The  Chairman.  Well,  we  may  be  able  to  develop  that  later  on,  but 

I  have  not  seen  the  combination  of  the  two  yet ;  at  least,  it  has  not 

been  presented  to  us.  i--j.i.-^„„f 

Mr.  Newman.  You  will  find  this,  that  the  city  administration  want 
to  ffct  out  of  this  problem;  they  do  not  want  to  deal  with  it.  iliey 
are%ing  to  be  only  too  happy  to  leave  it  to  the  public-service  com- 
nlfssion.  Now,  the  alternate  plan  you  talk  about  is  this  that  the 
public-utility  commission  may  order  certam  rates  to  ^f^  P^^^  jn  f^^f^' 
Now,  the  cities  may  take  action  to  make  effective  the  State  com- 
mission's recommendations.  fi.of  T 
And  while  I  am  on  that  point  I  want  to  say  something  too.  that  I 
hope  your  commission  will  adopt  m  your  report;  and  t  is  this.  A 
tentative  increase  in  fare  not  based  upon  some  definite  policy  by 
which  the  companies  will  come  into  vested  rights  is  worthless  for 
banking  purposes. 

Mr!  NE'^MrN."^^^  have  vested  rights;  they  must  have  the 

question  settled  for  all  time.  We  can  not  be  going  through  these 
controversies  and  these  discussions  every  two  or  three  years. 

The  Chairman.  How  did  the  patrons  m  St.  Louis  regard  this 

^'  Mr  Newman.  There  was  not  a  bit  of  opposition  to  it— well,  just 
correct  that.    There  was  no  concerted  action.    It  was  generally  well 

'  »   1 
'^Tl^  Chairman.  Do  you  think  that  the  public  looked  upon  that 
charge  with  favor  becaiise  the  rate  was  established  by  a  commission 
that  examined  the  facts? 

Mr.  Newman.  Yes.  .    .     ^r       ^  i         9 

The  Chairman.  Your  home  is  in  New  Orleans « 

"SXv  Nfwm\n   \  es. 

The  Chairman.  There  are  some  street-car  difficulties  in  that  com- 
munity, are  there  not? 

Mr.  Newman.  Yes ;  terriffic.        / ,  .     ^,    ^    ,      « 

The  Chairman.  Are  you  interested  m  that  plan? 

Mr  Newman.  Well,  indirectly;  yes.  I  do  not  know  whether  I  am 
iroinor'  to  be  landed  with  it  or  not.    I  have  got  some  senior  securities. 

The  Chairman.  What  is  the  volume  of  your  senior  securities  ^ 

Mr  Newman.  All  of  the  stocks  of  the  New  Orleans  Railway  & 
Light  Co.  are  pledged  to  secure  an  issue  of  collateral  trust  notes 

which  my  firm  floated.  .        .       .     , 

The  CiiAiRMAN.  What  is  represented  by  those  notes?     V\  hat  is  tlie 

""' Mr'^NEWMAN.  Seven  and  a  half  million  outstanding  now  of  notes, 
but  they  have  all  these  other  properties  m  addition  to  the  New 

^  tI^^Chmr^Ln^  Have  they  got  a  fixed  franchise  fare  there? 

Mr.  Newman.  Yes. 

The  Chairman.  What  do  they  charge?       .  .      ^, 

Mr.  Newman.  Five  cents.    They  are  now  giving  them  6  cents. 

The  Chairman.  Who  gave  them  6  cents?  ,      .^    ,.         c      . 

Mr  Newman.  The  city  council ;  and  there  was  a  terrific  time  about 
it  for  this  reason :    They  did  not  have  a  State  commission,  and  the 


\  1 


566       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

War  Finance  Board  had  a  loan  made  to  New  Orleans,  and  Mr.  Hard- 
ing came  to  New  Orleans  and  absolutely  demanded  that  the  city 
administration  give  a  6-cent  fare.  They  gave  a  6-cent  farfty  but 
tliere  was  real  opposition  to  it ;  and  the  opposition  came  in  this 
way.  Remember,  I  take  the  stand  that  there  is  no  opposition  to 
an  increased  fare  proj5erly  granted,  because  there  is  a  very  small 
per  cent  of  the  population  so  ignorant  as  not  to  know  that  they  have 
got  to  pay  the  increased  cost  of  these  properties.  But  they  do  i\ot 
want  to  pay  it  until  they  know  that  it  is  being  paid  for  service  and 
not  being  paid  to  make  good  some  watei^d  securities 

The  Chairman.  Why  did  the  people  object  to  the  6-cent  fare  in 
New  Orleans? 

Mr.  Newman.  Because  it  was  granted  very  promptly  without  the 
proper  explanation  as  to  why  it  was  granted;  and  they  took  the 
stand  that  Mr.  Harding  had  no  right  to  come  down  there  and  de- 
mand that  the  increased  charge  be  put  on  the  people  without  the 
question  being  thoroughly  discussed. 

The  Chairmax.  Was  not  the  question  discussed  before  the  council? 

Mr.  Newsman.  Yes. 

The  Chairman.  And  did  not  the  utility  present  figures  there  to 
show  what  its  operating  conditions  were? 

Mr.  Newman.  Yes. 

The  Chairman.  Did  not  the  people  have  the  right  to  examine 
those  figures? 

Mr.  Newman.  Yes. 

The  Chairman.  And  cross-examine  witnesses? 

Mr.  Newman.  Yes ;  but  they  did  not  do  it. 

The  Chairman.  Were  not  the  representatives  of  the  public  there? 

Mr.  Newman.  Yes;  they  were  there  and  brought  suit  against  it; 
the  attorneys  for  the  public  were  there.  The  street-railroad  men 
were  there  themselves,  and  the  motormen  and  conductors  employed 
an  attorney  to  represent  them.  And,  as  I  stated  in  my  testimony 
earlier,  one  of  the  most  trusted  conductors  on  the  road  told  me  they 
were  opposing  it  because  they  did  not  believe  the  street-railroad 
company  needed  it.  Of  course,  it  is  notorious  that  the  New  Orleans 
property  is  grossly  overcapitalized. 

Tlie  Chairman.  How  much  is  it  overcapitalized? 

Mr.  Newman.  In  the  light  of  the  present  information,  it  is  im- 
possible to  tell  what  the  value  of  the  property  is. 

The  Chairman.  That  may  be  so,  but  what  is  the  generally-as- 
sumed overcapitalization  ? 

Mr.  Newman.  Many  millions  of  dollars. 

The  Chairman.  And  if  the  people  there  could  have  felt  that  this 
6-cent  fare  would  result  in  paying  no  more  than  the  operating 
charges  and  a  fair  return  on  the  honest  value  of  the  plant,  do  you 
suppose  they  would  have  objected? 

Mr.  Newman.  I  think  not;  but  the  burden  is  upon  the  street-car 
people  to  let  the  public  know  it,  and  the  public  does  not  believe  the 
street-railroad  company;  consequently  your  commission  can  do  a 
wonderful  service  for  us  by  telling  them  the  facts. 

The  Chairman.  Of  course,  you  would  not  expect  our  commission 
to  go  into  detail  and  develop  statistical  facts  with  reference  to  all 
these  companies  in  the  country? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       567 

Mr    Newman.  No;  but  vou  could  state  generalities. 

The  ChTi^man.  If  we  did,  I  do  not  know  when  we  would  reach 

New  Orleans. 
Mr  Newman.  You  certainly  would.  .         ,        ,  ,.„ 

The  Churm^n.  Now,  you  spoke  of  renewals  and  replacements- 
and  I  S  it  was  a  v^r^  intir^ting  point.  Have  >-«  ever  .nade 
an  investigation  as  to  the  life  of  these  bridges,  rails,  and  cuheits, 

and  things  of  that  kind  on  the  ^^^i.''Y\y''''^^^^f  t  ^™  ,. 
Mr.  Newman.  I  never  made  any  particular  investigation.     1  am  so 

thoroughly  familiar  with  it  that  I  carry  it  in  my  head.    _ 

The  "chairman.  Don't  you  believe  since  it  is  '^.y^ry  important 

item  that  it  would  be  better  for  yoYf^^'^\%7^1\C  miestion  of 
having  in  mind  this  question  of  psychology,  to  have  the  question  ot 

depreciation  determined  by  public  authorities «  ,,..     Hecn.nso 

Mr  Newman.  Yes;  it  must  be  developed  m  each  locality,  because 
eJh  one  has  its  peculiarities  and  is  different  from  the  other. 

The  Chairman.  Yes;  it  is  always  a  question  of  study. 

Mr   Nk'wman    Yes-  but  the  principle  remains  the  same. 

The  ChT™ma"n  AAd  do  vou 'believe  also  that  the  public  authori- 
ties shouTd  have  control  over  the  expenditure  of  the  money  that  is 
set  aside  for  that  fund? 

The  Smr^^n^  Giving  the  right  of  the  utility  to  borrow  from 
that  fund  if  it  so  chooses? 

The  SaTrm^n^  Don't  you  believe  that  the  public  would  have 
very  much  mo4resP  lor  the  utilities  if  it  had  a  larger  share 
in  fixing  thiTrpiWion  fund  and  in.  controlling  the  expenditures 
aiid  especially  the  contracts  for  material  and  supplies? 

Mr  N^wmIn.  Yes.  We  have  got  to  take  them  into  our  confidence 
and  let  them  sit  in  with  us.    We  have  got  to  clear  what  is  m  the 

"commissioner  Sweet.  Were  you  here  when  Mr.  Culkins,  of  Cin- 
cinnati,  was  on  the  stand? 

Mr.  Newman.  No;  I  only  came  to-day. 

Commissioner  Sweet,  rfe  is  the  director  '^^P'^««"'''t"^«^*^\"*^ 
interests  in  dealing  with  the  street-railroad  company.  Do  you  know 
what  sort  of  settlement  or  arrangement  was  made  between  the  city 
of  Cincinnati  and  the  street-railway  company?       . 

Mr.  Newman.  Not  in  any  of  its  details,  only  m  a  very  general 

""commissioner  Sweet.  They  have  adopted  what  they  '^'^^  f/™' 
at-cost  plan.  But  with  certain  details  that  perhaps  7""'^  not  be 
applicable  in  every  city.  I  understood  you  to  say  this  moimng 
that  in  the  city  of  St.  Louis  provision  had  been  made  right  straight 
al^ng"year  after  year,  for  what  you  call  the  i-enewal  and  replace- 
ment  fund. 

Co'inmSi^nfr  Swet.  And  yet  notwithstanding  that,  the  company 

got  into  trouble. 
Mr.  Newman.  Yes.  ^  _       ^      .  au  i.  «« 

Commissioner  Sweet.  So  that  you  would  not  rely  "?»»  *««*  «^ 

doing  anj'thing  except  to  correct  what  you  deem  to  have  been  an 


I 


I, 


11 


568       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

evil  in  the  past  by  way  of  what  you  ini^ht  call  self-deception  on  the 
part  of  bankers  and  investors  through  the  banks. 

Mr.  Xew3ian.  That  is  it  exactly. 

Conunissioner  Sweet.  They  fooled  themselves  in  the  belief  that 
the  profits  were  greater  than  they  actually  were? 

Mr.  Xew^ian.  Yes. 

Commissioner  Sweet.  Because  that  very  large  item  was  omitted, 
and  you  think  it  should  always  be  included. 

Mr.  NEW3IAN.  In  the  future  there  will  be  no  other  way  of  handling 
it  except  to  take  it  out  of  operating  expenses. 

Commisioner  Sweet.  And  always  will  be,  probably.  Now  j^ou  ad- 
mitted this  morning  that  in  the  old  days  your  chief  concern  was  to 
get  a  long-term  franchise  and  to  have  specified  in  that  franchise  a 
5 -cent  fare. 

Mr.  New^ean.  Yes. 

Commissioner  Sweet.  And  you  thought  if  you  got  that  you  had  a 
valuable  piece  of  property,  based  of  course  upon  the  history  of  the 
industry  up  to  that  point  and  not  based  upon  conditions  such  as 
exist  now.     At  the  present  time  you  would  not  think  of  taking  such 

a  franchise? 

Mr.  Newman.  I  think  all  of  our  5-cent  franchises  are  worthless. 

Commissioner  Sweet.  Absolutely  worthless? 

Mr.  Newsman.  Yes. 

Commissioner  Sweet.  That  is,  because  the  cost  of  constructing  the 
street  railroads  and  operating  them  has  so  tremendously  increased? 

Mr.  Neavman.  Yes. 

Commissioner  Sweet.  That  is  the  chief  reason ;  so  that  the  5-cent 
fare  is  not  adequate  and  is  not  in  proportion  now  and  does  not  affoi*d 
a  revenue  sufficient  to  meet  the  proper  operating  expenses  and  pay  a 
fair  interest  on  the  investment.  On  the  same  basis  as  you  figured  in 
the  old  days  that  a  5-cent  fare  was  ample,  what  ought  the  fare  in  your 
judgment  to  be  now  to  produce  a  similar  result,  taking  into  account 
the  increased  cost  of  material  and  labor  ? 

Mr.  Newman.  Well,  I  do  not  ever  hope  for  a  similar  result  such 
as  we  fancied  we  had  at  the  time 

Commissioner  Sweet.  Well,  you  told  us  there  was  quite  a  differ- 
ence between  Avhat  you  fancied  and  the  real  fact. 

Mr.  Newman.  Yes. 

Commisioner  Sweet.  But  could  you  answer  my  question  without 
any  regard  to  what  you  fancied  and  tell  us  what  you  think  to  be  the 
fare  now  tfuit  would  be  equivalent  under  present  conditions  to  the 
5-cent  fare  in  the  old  days? 

Mr.  Neavman.  It  is  different  in  every  locality.  I  would  like  to 
answer  your  question  directly,  but  I  do  not  think  there  are  enough 
brains  in^the  street- railroad  business  to-day  to  answer  that  question. 
Only  time  will  tell  Avhen  we  know  whether  these  high  costs  are  going 
to  continue  and  Avhat  the  scale  of  wages  is  going  to  be.  Only  here 
recently  in  Boston  they  were  awarded  G2  cents  an  hour  pay  to  the 
motormen  and  conductors.  In  New  Orleans  we  are  paying  42  cents. 
We  thought  that  was  tremendously  high.  The  biggest  item  of  cost 
of  course  is  this  wage  scale,  and  it  is  fluctuating  so  fast  now  that  it  is 
impossible  for  anyone  to  say  they  ought  to  have  a  6-cent  fare  or 
a  10-cent  fare.  Tiut  I  say,  let  the  commission  say  hoAV  much  return 
you  must  have  and  let  them  fix  the  fare  accordingly  and  change  it 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMTSSIOl^.      569 

from  year  to  year  as  we  know  the  conditions  with  which  we  have  to 

^  ^Mr.  AVarren.  That  Boston  rate  is  only  an  example  of  a  great  many 
pending  requests,  is  it  not,  Mr.  Newman?  In  Chicago,  for  instance, 
do  you  know  what  the  request  for  wages  is  there? 

Mr.  Newman.  Well,  I  understood ; 

Mr.  AYarren.  Eighty  cents,  or  something  like  that « 

Mr.  Newman.  Yes ;  it  is  away  up  in  the  eighties.  . 

Commissioner  Sweet.  Have  you  worked  out  a  definite  plan  in  all 
its  details  on  what  we  call  the  service- at-cost  principle  ^ 

Mr.  Newman.  Personally,  I  have  not,  but  there  is  a  Mr.  Nash  con- 
nected with  the  Stone  &  Webster  organization,  and  I  think  he  may 

lip  present  here • 

Mr.  Warren.  He  is  the  witness  whose  testimony  has  been  mter- 

'"Slr^NEWMAN.  And  I  think  he  has  done  the  most  comprehensive 
piece  of  work  we  have  had  done  in  the  street-railroad  business. 
^  Commissioner  Sweet.  You  have  not  worked  that  out  yourse  f  ? 
Mr.  Newman.  No  ;  I  have  not.  I  have  been  content  to  take  his 
statement  of  the  case.  I  have  just  the  one  objective  in  mind,  and 
all  our  people  have  it,  and  that  is  to  get  a  fair  return  on  the  invest- 
ment irrespective  of  what  the  capitalization  may  be  on  these  prop- 

erties 

Commissioner  Sweet.  The  very  thing  that  made  you  years  ago 
feel  that  vou  were  getting  a  bonanza  when  you  got  a  long  franchise 
at  a  5-cent  fixed  rate  of  fare  causes  the  public  now,  looking  back  at 
those  days,  to  realize  that  to  some  extent  the  public  was  buncoed  by 
granting  those  franchises;  does  it  not? 

Mr.  Newman.  Yes.  .    ..       ^  ^ 

Commissioner  Sweet.  And  it  is  true,  too,  is  it  not,  or  some  part 

^  Mr  Newman.  If  that  renewal  and  replacement  account  had  been 
taken  care  of  I  say.  No;  it  is  not  true.  The  money  was  made  in 
handling  the  securities  but  not  in  operating  the  property. 

Commissioner  Gadsden.  Do  you  think  the  car  rider  ever  paid 
more  than  he  ought? 

Mr.  Newman.  No;  I  do  not. 

Commissioner  Gadsden.  That  is  the  point. 

Commissioner  Sweet.  You  do  not  think  he  ever  did  ? 

Mr.  Newman.  No.  .  , 

Commissioner  Sweet.  You  do  not  think  5  cents  was  ever  too  high 

a  fare 

Mr  'Newman.  No.  If  we  had  had  the  vision  to  see  where  the 
science  has  developed  as  it  is  now— where  the  creani  is  no  longer 
on  the  top  but  has  been  taken  off  by  automobiles  and  other  condi- 
tions—and had  started  to  put  aside  then  and  there  replacement  and 
renewal  funds  to  take  care  of  the  dilapidation  of  the  property,  there 
never  was  a  time  in  the  business  under  those  conditions  that  5  cents 

was  an  excessive  fare.  j.  xi     •   j     i. 

Commissioner  Sweet.  Are  you  speaking  now  of  the  industry  gen- 
erally, or 

Mr.  Newman.  Generally.  ,.,..,  •  ^.^  v.        u 

Commissioner  Sweet.  Will  you  admit  that  there  might  have  been 
particular  localities  in  which  the  5-cent  fare  was  too  large? 

160643"— 20 37 


^ 


^1 


:! 


570       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

'Mr.  Newman.  Well,  I  could  not  deny  it. 

Commissioner  Sweet.  You  could  not  deny  it! 

Mr.  Newman.  No. 

Commissioner  Sweet.  So  that  the  local  conditions  which  you  have 
previously  mentioned  as  existing  to-day  have  always  existed  to  a 
certain  extent;  have  they  not? 

Mr.  Newman.  Yes,  sir.  I  might  say  this  to  you — that  I  started 
10  years  ago  to  write  an  article  on  the  contingency  overhanging  the 
street-railroad  industry 

Commissioner  Sweet.  Ten  years  ago? 

Mr.  Newman.  Yes.  I  never  finished,  but  I  sold  our  property 
when  I  got  the  opportunity. 

Commissioner  Gadsden.  You  were  fortunate  to  find  a  purchaser, 
even  10  years  ago;  were  you  not? 

Mr.  Newman.  I  thought  so. 

Commissioner  GadsdeN.  Others  would  have  done  the  same  thing 
if  they  had  found  a  purchaser  ? 

Mr.  Newman.  No,  I  think  not.  There  were  others  who  realized 
that  the  contingencies  were  there  but  we  kept  thinking  that  this 
phenomenal  growth  which  we  had  been  enjoying  due  to  the  develop- 
ment of  the  science  and  service  would  continue. 

Commissioner  Sweet.  Have  you  had  any  experience  with  what 
they  call  the  safety  car? 

Mr.  Newman.  T^he  safety  car? 

Connnissioner  Sweet.  Yes. 

Mr.  Newman.  I  do  not  know^  it  by  that  name. 

Commissioner  Sw^eet.  The  one-man  car. 

Mr.  Newman.  The  one-man  car? 

Commissioner  Sw^eet.  The  one-man  car. 

Mr.  Newman.  I  have  had  one  of  our  men  investigate  it.  It  will 
be  a  very  great  relief  to  short  lines  in  small  cities  or  short  hauls  in 
big  cities.  It  will  in  a  measure  do  away  with  the  competition  of  the 
jitneys.  We  have  several  situations  where  we  ought  to  use  the  one- 
man  car,  but  we  have  not  got  any  money  to  buy  them  with  and  can 
not  get  them. 

Commissioner  Sweet.  Are  you  speaking  of  New  Orleans  now  ? 

Mr.  Newman.  I  am  speaking  of  all  of  our  properties — and  I  think 
GUI'S  are  in  no  different  situation  than  the  generality  of  properties. 

Commissioner  Sweet.  So  you  think  there  is  a  permanent  place  for 
that  kind  of  car? 

Mr.  Newaian.  Yes;  but  it  will  give  you  relief  of  such  a  nature  that 
it  will  be  important  in  influencing  the  conclusions  that  I  think  will 
be  brought  out  by  this  testimony  here  before  vour  commission. 

Commissioner  Sweet.  That  is,  you  do  not  think  that  the  amount 
of  relief  that  it  woidd  give  is  sufficient  to  cut  very  much  figure? 

Mr.  Newman.  No;  but  if  I  should  be  mistaken  in  that,  it  will  be  re- 
flected in  the  service-at-cost-plus-interest-on-investment  plan  by  a 
reduction  in  the  fares  of  roads  if  they  are  put  in  shape  to  finance 
themselves  and  buy  these  cars ;  and  that  is  one  point  I  would  like 
to  emphasize  again,  that  whatever  is  done  by  the  cities  it  should  be 
withheld  from  the  companies  until  they  have  put  themselves  in 
financial  shape  to  enjoy  the  new  grant  from  the  city  to  finance  the 
requirements  of  the  property  economically  instead  of  at  12  per  cent, 
as  Mr.  Bertron  testified  was  x>aid  in  one  instance. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       571 

Commissioner  Sw^et.  Your  idea  of  the  ^^T  ^^^^^  ^f ?/^^  '^^'^ 
should  be  handled  in  the  future,  if  I  understand  you  right,  is  m  a 
spirit  of  cooperation  between  the  city  and  the  company  i 

Mr.  Newman.  And  the  public.  ^„Kiin 

Commissioner  Sweet.  Well,  when  I  say  the  city,  I  mean  the  public. 

SmSksioner  SwE1a^  That  would  be  a  decided  change  of  attitude 
'X' Ni^^^t  Wd  not  be  with  the  administration  such  as 

^Sml^Si^^S^r  &ere  not  been  an  antagoni  W  in^^^ 
to  a  certain  extent  between  the  public  represented  by  the  city  gox 

"M^t^rM.f  YeT^^^^^  many  instances;  but  we  were  fortii- 

n.te  in  neveTh^^^  bSt  one  difficulty  with  the  city  government. 

"tomm'sL^^^^^^  Well,  whether  you  had  actual  ^^^^^^^^^     or 

not,  has  there  not  been  antagonism-that  is,  a  ^7^^^^*.  ^^f/^^^^^^^  '^^ 
respect,  we  will  say,  to  taxation  and  paving  and  various  things  of 

^^'Ml^'NEWMAN.  That  is  our  steady  diet;  that  is  our  daily  work 

Commissioner  Sweet.  I  know;  but  they  have  not  pulled  together 
in  those  things    have  they?     Has  not  the  municipality  said,     A\e 
LiiTow  tluftVo^^^  between  the  tracks  and  maybe  for  a 

foot  orTwo  ou^  and  imposed  a  burden  upon  the,  companies 

whkh  walin  one  s^nse  to  the  advantage  of  the  niunicipality  and 
TATnst  the  interest  of  the  company.    Has  not  that  been  the  case  ? 
^Mr.  New^  there  has  b^n  a  lot  of  that  controvei-sy,  but 

^  CWisstiTe^r'^EET   Well,  whether  they  b a ve  actually  quarreled 
over  it  or  not,  I  think  it  has  generally  been  accepted  by  the  com- 

'^^  ^^r^^^h^  V^t  of  it  was  a  franchise  obliga- 

tion  in  all  of  our  properties. 

Commissioner  Sweet.  In  most  cases  it  has  been? 

CommSnM-  Sweet.  But  it  imposed  a  very  heavy  burden  on  the 
street  railroads  of  the  country,  did  it  not? 
Mr.  Newman.  Tremendous.  .  .  , 

Commissioner  S^^'E^.T.  And  what  is  your  view  w^ith  regard  to  the 
fiitiTre  of  those  burdens?  Should  they  be  removed  under  the  serv- 
ice at  cost  plan?  Do  you  think  it  would  be  wise  and  the  proper 
tliini  from^  every  standpoint  for  the  general  public  to  J-ehnquish 
Staiily  whatever  advantage  it  might  have  obtamed  by  reason 

''ilf'^!:^!."T:o:^rL.er  that  m  this  way:  ^e  idea. of 
cervice  at  cost  based  upon  a  valuation  is  such  a  tremendous  question 
in  t^lf  that  when  yo  i  attempt  to  complicate  that  with  these  other 
QuestTons  vou  will  be  getting  nothing  accomplished.  Now  I  pre- 
fer not  to  bring  up  ihe  question  of  taxes  and  of  paving  and  to  let 
that^o  aloT'as  part  oi  the  future  obligations  of  the.  company 
bee  lule  it  3res  no  difference  whether  you  do  the  paving  or  the 
dty  does  tl'paving  pro^^ded  you  «-«  ptting  a  return  on  yo^^^^ 
vestment  and  provided  the  public  will  pay  the  increased  tare  to 
justify  that  investment.   That  is  almost  mathematics ;  is  it  not  ? 


572       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Yes.  The  result,  however,  would  be  more 
certain,  would  it  not,  and  more  satisfactory  to  investors  if  the  bur- 
dens that  I  have  been  speaking  of  were  removed  so  that  the  total 
amount  necessary  to  earn  would  be  less.  That  would  mean  that 
the  fares  would  be  somewhat  less;  would  it  not? 

Mr.  Newman.  Yes. 

Commissioner  Sweet.  And  with  a  lower  fare  you  are  more  cer- 
tain to  hold  up  your  patronage,  and  the  whole  thing  would  move 
more  smoothly ;  would  it  not  ?  .    ,        i      -  u 

Mr.  NEW3IAN.  Yes;  but  I  am  afraid  if  we  tried  to  be  too  much 
hog  we  might  not  get  anything.  ,  .   ,     ,  , ,  ,  , 

Commissioner  Sweet.  You  do  not  think  there  would  be  any  hog 
about  demanding  or  trying  to  get  absolute  justice;  do  you? 

Mr.  Newman.  Not  at  all.  But  when  you  remove  the  pavmg  and 
taxes  you  are  throwing  a  burden  back  on  the  people  that  has  been 
on  the  street  railroads  and  then  asking  them  to  pay  increased  fares, 
and  I  think  you  are  complicating  the  question  so  you  can  not  pre- 
sent it  in  a  concise  and  clear  manner  and  can  not  get  relief.  I  am 
afraid  to  tackle  too  many  phases  of  this  problem.  It  is  unfair  in  the 
light  of  to-day's  operations  to  pay  for  paving  because  we  all  know 
the  city  paves  every  street  with  rails  on  before  any  others  are  paved ; 
and  in  New  Orleans  we  pav  more  taxes  than  the  steam  rairoads  to- 
gether, and  the  same  is  true  in  Birmingham.  Now,  if  you  cut  off 
those  big  taxes  vou  are  transferring  your  troubles  back  to  the  ad- 
ministration. In  the  city  of  New  Orleans  they  can  not  do  without 
these  street-railroad  taxes.  In  the  city  of  Birmingham  they  can 
not  do  without  these  street-railroad  taxes.  And  that  is  where  this 
thing  is  going  to  come  back  home  to  the  city;  they  are  going  to 
choke  these  companies  to  the  point  of  receivership  and  poor  service, 
and  then  the  companies  are  in  shape  to  go  into  court  and  contest 
the  taxable  value  and  get  a  reduction  on  this  franchise  tax;  and 
that  is  going  to  be  a  boomerang  to  the  cities  who  can  not  afford 
to  cut  off  this  tax.  I  do  not  believe  in  complicating  the  question 
with  this  tax  problem  and  the  paving  problem  and  starting  more 
antaoronism  to  the  street  railroads,  because  I  believe  we  can  get  a 
fareVhich  will  return  us  a  fair  rate  on  our  investment  and  at  the 
same  time  take  care  of  the  paving  and  the  taxes  without  having  to 
go  back  to  the  city  and  complicate  the  problem  further. 

I  reallv  believe  that  if  you  could  put  that  problem— I  mean  the 
problem  of  the  railroads— to  all  of  the  people  we  could  get  a  10-cent 
fare  if  it  was  necessary,  because  we  gave  the  service  to  justify  the 
10  cents  The  people  are  not  set  against  an  increased  fare ;  they  are 
set  a<rai*nst  the  street-railroad  people  who  had  a  bonanza  once,  as 
thev  thought,  and  who  now  in  their  trouble  are  asking  you  to  take 
up  their  burdens,  and  they  want  to  know  in  the  future  that  this 
pvramiding  of  securities  will  stop  and  that  the  securities  will  be 
sold  on  a  fair  interest  rate.  And  that  is  why  I  say  to  you,  reference 
should  be  made  to  the  financial  plan  and  to  get  a  fair  financial  plan 
vou  must  have  vested  right  and  permanent  right  and  a  process  \\^ich 
iorever  chokes  off  all  those  errors  in  the  past.  Gives  us  only  a  hxed 
return  and  then  let  the  public  pay  for  what  they  want. 

Commissioner  Sweet.  I  spoke  of  the  paving  burden  and  taxation 
together  but  really  they  are  on  quite  a  different  basis,  ai:e  they  not  i 
Mr.  Newman.  Yes. 


'       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       573 

Commissioner  Sweet.  But  if  I  understand  your  position  it  is  that 
even  though  absolute  justice  might  require  that  the  paving  burden 
should  be  removed  from  the  companies,  it  would  not  be  good  policy 
for  them  to  urge  that  at  the  present  time,  because  it  would  create  an- 
tagonism, and  it  is  more  for  their  interest  and  the  general  good  that 
it  should  not  be  created ;  is  that  right  ? 

Air  N^eWjVian     x  es. 

Commissioner  Meeker.  It  is  not  quite  clear  to  me  just  how  you 
would  obtain  a  reasonable  return.  Do  you  mean  a  reasonable  return 
upon  moneys  invested  or  a  reasonable  return  upon  a  fair  valuation? 

Mr.  Newman.  I  mean  upon  a  fair  replacement  value  of  the  prop- 
erty, including  the  cost  of  the  development  of  that  property. 

Commissioner  Meeker.  In  the  properties  under  your  control  have 
you  followed  that  scheme  or  have  you  depended  upon  physical  valua- 
tion of  the  properties?  .     ,       ,  rr^i 

Mr.  Newman.  You  can  not  take  the  naked  physical  value.  I  here 
is  lots  that  does  not  appear  in  that  that  goes  to  make  up  part  of  the 
value.  It  would  appear  in  the  cost  to  any  city  which  would  attempt 
to  build  a  new  street-railroad  system,  if  it  was  all  thrown  out.  1  on 
can  not  find  certain  elements  of  value  that  were  there  to  start  with 
and  are  not  there  to-day,  but  they  have  been  part  of  the  cost  of  the 
development  of  the  system. 

For  instance,  you  put  in  a  generator  and  that  becomes  obsolete. 
The  custom  was,  or  should  have  been,  not  to  capitalize  the  amount  of 
power  which  you  threw  out  for  the  increased  unit  but  to  capitalize 
the  increased  unit.  But  in  many  cases  this  unit  was  capitalized  and 
tilt  old  one  thrown  away,  because  its  efficiency  was  there  and  the 
saving  to  the  company  was  supposed  to  have  wiped  out  the  original 
cost.  But  we  have  kept  on  doing  that  over  and  over  again,  and  those 
original  costs  never  were  repaid  to  the  company. 

Mr.  Warren.  If  I  may  interrupt  for  a  moment.  Had  the  base  of 
anv  plan  such  as  you  have  been  suggesting  and  at  its  very  foundation 
you  would  expect  a  proper  and  fair  valuation  of  the  property  devoted 
to  use,  would  you  not? 

Mr.  Newman.  Yes,  sir;  certainly.  The  paving  taken  up  and  re- 
placed— who  knows  about  the  old  paving?  You  have  forgotten  all 
about  itj  but  yet  the  city  demanded  that  you  do  it.  They  had  one 
type  of  paving  and  they  changed  it.  You  would  have  to  go  back  to 
the  old  inliabitants  to  remember  that,  j^et  it  was  taken  up  and  never 
paid  back  to  you  and  it  is  part  of  the  original  capitalization. 

Commissioner  Meeker.  I  do  not  wish  to  press  that  further,  but  it 
would  be  a  sort  of  cumulative  process  then;  you  would  necessarily 
have  to  include  as  a  part  of  your  investment  upon  which  you  are  en- 
titled to  a  reasonable  return  some  properties  that  have  been  discarded 
bul  have  not  been  written  off  the  books  as  yet? 
Mr.  Newman.  Yes. 

Commissioner  Meeker.  The  thing  that  I  am  really  interested  in  is 
the  outstanding  capital,  whether  bonds  or  stock.  Are  you  much  con- 
cerned with  the  control  of  the  issuance  of  such  securities?  What  I 
mean  is  this:  Does  it  make  much  difference  w^hether  such  securities 
be  controlled  by  a  commission  as  long  as  you  are  limited  to  a  fair 
return  upon  investment? 

Mr.  Newman.  That  is  correct,  but  you  must  put — let  me  explain 
this.    It  does  not  make  any  difference  under  this  plan  we  are  dis- 


574       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK. 

cussing  what  the  securities  are  out  against  the  property,  whether 
bonds  or  stocks.  I  say  ignore  it  absolutely  and  let  the  security 
holders  fight  that  out  among  themselves.  The  authorities  have 
nothing  to  do  with  that  capitalization  and  ought  to  ignore  it  entirely, 
except  for  one  reason.  Tlie  roads  must  be  financed  in  the  future ;  and 
you  must  have  a  sound  financial  plan  by  which  you  are  going  to 
float  your  securities  at  the  lowest  j^ossible  rate  in  the  future.  Ex- 
cept for  that  one  reason  the  city  authorities  are  not  concerned  as  to 
what  amount  of  securities  is  outstanding,  whether  bonds  or  stocks. 

Commissioner  Meeker.  You  think  there  should  be  some  public 
control  of  the  issuance  of  securities  so  as  to  protect  the  credit  of  the 
street-railway  company  ? 

Mr.  Newt^ian.  Absolutely. 

Commissioner  Meeker.  So  it  can  get  the  capital  it  needs  at  the 
lowest  rate  of  interest? 

Mr.  Newma:n.  Yes;  and  I  go  further  than  that.  I  say  that  before 
the  cities  make  tlvese  new  concessions — this  new  franchise  arrange- 
ment with  the  property  owners — they  should  demand  that  they  fix 
up  their  capitalization  in  such  shape  that  they  will  not  only  have 
securities  that  can  be  sold  to  take  care  of  the  properties  in  the  future, 
but  that  will  take  care  of  them  in  a  way  that  will  do  it  at  the  lowest 
rate  of  interest.  You  have  got  to  reestablish  the  credit  for  these 
roads  and,  in  my  judgment,  you  can  not  do  it  without  a  complete 
financial  reconsti-uction ;  and  the  cities  are  interested  that  that  re- 
construction takes  place. 

The  Chairman.  Which  would  require  reorganization  of  the  com- 
pany ? 

Mr.  Newman.  Yes. 

The  Chairman.  Throwing  out  all  the  old  stock  and  reissuing 
new  ? 

Mr.  Newman.  Yes. 

Commissioner  Meeker.  One  point  I  did  not  hear  you  refer  to; 
that  is,  the  zone  system. 

Mr.  Newman.  No ;  I  did  not  refer  to  it. 

Commissioner  Meeker.  Do  you  think  that  may  perhaps  be  a  means 
of  helping  to  solve  the  difficulties  of  the  street  railways? 

Mr.  Newman.  It  will  be  a  contributing  help  but  it  will  not  be  a 
substantial  remedy. 

Commissioner  Meeker.  It  is  in  the  nature  of  the  one-man  car;  it 
may  help  some,  and  every  little  helps. 

Mr.  Newman.  Yes. 

Commissioner  Meeker.  But  the  one-man  car  and  the  zone  sj^stem 
seems  to  be  incompatible  so  far  as  I  can  make  out. 

Mr.  Newman.  No  ;  they  are  a  different  proposition  entirely.  The 
one-man  car  has  no  place*  in  street-railway  operation  except  in  short 

hauls. 

Mr.  AVarren.  Wliere  the  zone  system  would  not  be  operative,  the 
haul  would  not  be  long  enough  to  make  into  zones. 

Mr.  Newman.  That  is  correct.    The  zone  system  goes  out  into • 

Commissioner  Meeker.  The  only  way  I  can  think  is  to  think  con- 
cretely. Take  the  city  of  Washington:  If  we  establish  a  zone  sys- 
tem in  this  city  I  do  not  see  how  we  could  use  the  one-man  car,  be- 
cause as  I  see  it,  it  would  be  very  uneconomical  to  have  these  one- 
man  cars  operate  only  within  tliese  limited  zones  and  then  turn 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       575 

back  at  the  corner.  We  would  have  to  run  them  through  as  we  do 
now  from  the  beginning  to  the  end  of  the  run,  as  I  see  it. 

Mr.  Newman.  You  would  have  two  types  of  car— the  present  car 
for  long-distance  hauls  where  the  zone  system  would  prevail,  and  on 
the  short  haul,  especially  in  smaller  cities,  you  would  use  the  one- 
man  car.  ,  1  i.        i„ 

Commissioner  Meeker.  And  the  one-man  cars  would  operate  only 

within  a  single  zone? 
ATt*  "NrE\vAi\N  jTes 
Commissioner  Meeker.  Has  that  been  tried,  do  you  know,  in  that 

way?  ,11 

Mr.  Newman.  I  think  the  city  of  Houston  has  had  some  experience 

in  that  direction.  .  .r^        £  ^ 

Mr.  Warren.  We  expect  to  introduce  a  witness  on  the  satety  car 

and  its  operation. 

Commissioner  Meeker.  Ver\'  well.    That  is  all.  . 

Commissioner  Gadsden.  Mr.  Newman,  referring  to  what  you  said 
about  the  public  authorities  having  no  concern  with  the  capitaliza- 
tions of  these  companies,  do  you  not  think  that  consideration  would 
probably  have  to  be  given  bv  public  authorities  to  the  innocent  hold- 
ers of  these  securities  that  the  bankers  and  street-railroad  people  to 
whom  you  referred  issued  some  20  years  ago?  What  is  going  to 
become  of  the  innocent  third  pai-ty,  we  will  say,  who  is  holding  some 
millions  of  these  securities  now?  Is  the  public  conscience  going  to 
stand  for  just  depriving  these  people  of  their  property?  They  did 
not  do  any  harm,  did  they  ?  They  bought  them  from  bankers,  we 
will  say,  in  the  ordinary  course  of  business.  Now,  are  you  going  to 
take  the  position  before  this  commission  that  those  people's  prop- 
ertv— widows,  orphans,  trust  companies,  and  savings  banks— that 
those  securities  are  going  to  be  sacrificed  because  20  years  ago  a  lot  of 
bankers  issued  watered  stock  and  inflated  securities? 

Mr.  Newman.  Now,  I  am  going  to  say  yes,  but  with  a  tremendous 

qualification.  ^.n    j.-        J.^    ^  -       i    4.  t 

Conmiissioner  Gadsden.  I  want  the  qualification;  that  is  what  i 

am  after. 

Mr.  Newman.  Yes ;  I  am  going  to  give  you  that. 

Commii-sioner  Gadsden.  Before  you  go  ahead,  here  is  the  thought 
in  mv  mind.  I  want  you  to  get  my  fiill  thought.  If  that  confisca- 
tion were  carried  out,  would  not  that  of  itself  still  further  destroy 
credit  on  the  part  of  investors  in  any  security  which  the  public  had- 

control  of?  -r  •  i 

Mr.  Newman.  All  right.  I  want  you  to  get  what  I  am  saymg  and 
<ret  it  very  carefully.  I  have  taken  the  position  in  all  of  our  reor- 
Sanizations  that  the  bondholder  who  wants  to  exercise  his  full 
measure  will  have  to  work  without  me.  I  will  fight  him  to  a  finish; 
that  the  securities  in  the  first  to  the  tenth  position  are  all  part  of  the 
svstem.  and  when  the  rex)rganization  comes  I  want  all  of  them  to  be 
dealt  with  fairly  so  that  no  one  security  holder  can  get  advantage  of 
this  new  city  contract  to  the  detriment  of  the  other.  I  do  not  mind 
confessing  to  you  that  part  of  the  scheme  that  I  have  in  my  mind  is 
to  withhold  this  franchise  right  from  the  bankers  or  from  any  class 
of  securities  and  make  them  adopt  a  reorganization  scheme.  The 
basis  of  that  is  sound,  because  it  must  take  care  of  future  financing 
and  it  makes  them  deal  with  all  classes  of  securities  and  agree  upon 


576       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

a  reorganization.  Now,  in  some  instances — take  the  New  Orleans 
case  where  the  common  stock  of  $20,000,000  is  absolutely  worthless- 
there  is  no  chance  for  that  stock  to  have  any  intrinsic  value  whatever. 

The  Chairman.  Is  that  stock  all  water? 

Mr.  Newman.  Yes.  It  is  going  to  work  a  great  hardship  on  some 
people,  but  is 

Commissioner  Gadsden.  Then  it  is  all  held  in  New  Orleans,  is 

it  not? 

Mr.  Newman.  No;  there  is  a  holding  company,  but  there  is  some 
minority  interest  outstanding.  I  am  very  sorry  for  those  people; 
but  you  can  not  brin^  that  into  this  problem.  But  there  is  another 
way  of  throwing  equity  to  those  common-stock  holders.  Take  the 
case  of  St.  Louis,  Detroit,  and  New  Orleans:  St.  Louis  has  a  4  per 
cent  bond  which  matures  in  1934;  New  Orleans  has  a  ^  per  cent 
bond  maturing  in  1934,  and  Detroit  has  a  4J  per  cent  bond  maturing 
in  1934  or  1935— all  about  the  same  period.  The  St.  Louis  bond  is 
selling  at  about  05,  the  New  Orleans  bond  is  selling  at  about  67,  and 
the  Detroit  bond  is  selling  at  76.  Now,  if  you  precipitate  these 
reorganizations  these  fellows  who  hold  those  bonds,  who  have  made 
a  loan  for  15  years,  are  going  to  come  in  and  say,  "  Give  me  my 
mone}^  now." 

A  dollar  at  4  per  cent  payable  in  15  years  is  not  worth  par  to-day. 
So,  when  vou  get  this  valuation  of  the  property — take  St.  Louis  with 
$12,000,000  underlving  and  $30,000,000  fours,  with  $30,000,000  of 
bonds.  That  $30,000,000  of  bonds  have  got  to  be  converted,  say,  into 
a  6  per  cent  bond  which  would  give  it  ultimately  66J  per  cent  value; 
and  you  cut  $10,000,000  out  of  that  and  that  $10,000,000  capitaliza- 
tion moves  down.  And  the  fair  bankers  who  are  in  this  reorganiza- 
tion are  now  going  to  demand  their  pound  of  flesh  on  these  strangle- 
hold securities  at  the  top  but  are  going  to  pass  the  equity  all  the 
way  down,  and  if  they  attempt  to  do  otherwise  thev  are  the  ones  you 
want  to  complain  about;  they  are  the  ones  who  will  be  to  blame.    Is 

that  clear? 

Commissioner  Gadsden.  I  am  looking  at  it  now  and  the  commis- 
sion is  going  to  look  at  it  from  the  standpoint  of  the  public  and  not 
from  the  railroad  company  or  the  holders  of  the  first  securities.  I 
am  asking  you  from  the  standpoint  of  the  general  good  of  this  great 
public,  have  we  not  got  to  take  into  consideration  a  situation  where 
there  are  millions  of  securities  in  the  hands  of  innocent  third  parties? 
.The  same  is  true  of  the  steam  railroads,  is  it  not? 

Mr.  Newman.  Yes. 

Commissioner  Gadsden.  Do  you  think  this  country  can  face  the 
catastrophe  of  wiping  that  stock  out  altogether?  Do  you  think  your 
banking  S3stem  would  stand  that? 

Mr.  Newman.  AVell,  you  are  putting  a  question  to  me  that  is  not 
going  to  be  a  real  one.  I  am  quite  an  optimist  on  the  street-railroad 
situation,  because  I  believe  in  the  fairness  of  the  American  public 
and  I  believe  they  are  going  to  come  around  and  straighten  it  up 
for  us  when  the  time  comes  that  we  get  on  a  right  basis. 

Commissioner  Gadsden.  But  they  have  to  have  your  help  and  that 

of  others  to  do  that. 

Mr.  Newman.  But  the  bonds  that  are  in  the  trust  companies  and 
insurance  companies,  etc.,  will  be  taken  care  of.  It  is  the  only 
watered  stocks  in  most  instances  that  will  be  affected,  and  they  will 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       57T 

get  some  by  virtue  of  their  voting  power  and  control ;  and  the  fair 
banker  is  going  to  pass  a  little  of  the  plum  all  the  way  down ;  there 
are  going  to  be  several  bites  of  the  plum. 

Commissioner  Gadsden.  That  is  true ;  but  is  it  not  true  that  a  lot 
of  that  admittedly  watered  stock  has  gone  into  the  hands  of  innocent 
people  ? 

Mr.  Newman.  Yes. 

Commissioner  Gadsden.  What  are  we  going  to  do  about  it? 

Mr.  Newman.  Well,  it  is  very  unfortunate,  but  I  think  some  of 
them  will  have  to  take  their  loss.  I  hate  to  say  this,  but  it  is  neces- 
sarily true. 

Commissioner  Sweet.  Did  you  not  say  that  in  getting  the  valua- 
tion of  these  properties  you  thought  that  the  question  as  to  what  it 
would  cost  now  to  replace  them  ought  to  be  taken  into  account  ? 

Mr.  New3ian.  Yes. 

Commissioner  Sweet.  To  replace  rails  and  cars  and  electrical 
equipment  at  present  prices  Avould  mean  a  tremendous  addition, 
would  it  not,  or  produce  a  tremendous  excess  over  the  original  cost  ? 

Mr.  Newman.  Yes ;  but  they  will  never  stand  for  it ;  they  are  not 
willing  to  look  at  the  cost  when  it  means  something  for  us,  but  they 
are  willing  to  look  at  the  cost  when  it  means  something  against  us. 
That  is  the  attitude  of  the  city  authority. 

Mr.  Warren.  The  valuation  has  to  be  made  on  the  best  fair  basis 
it  can,  has  it  not,  Mr.  Newman,  by  agreement  between  the  parties  ? 

Mr.  Newman.  Yes;  but  there  are  parties  in  line  to-day  who  will 
determine  that  amount — ^there  are  men  who  are  following  that  as  a 

business  w'ho  will  do  it. 

Commissioner  Sweet.  My  idea  was  this,  that  in  fixing  the  valua- 
tion of  these  companies  the  cost  of  replacement  at  present  high 
prices  ought  to  be  a  factor;  that  possibly  enough  would  be  derived 
to  more  than  take  care  of  the  bonds  and  what  you  might  call  the 
senior  securities,  and  something  might  be  left  for  the  common  stock. 

Mr.  Newman.  May  I  explain  this  to  you  on  this  problem  of  value? 
No  system  has  been  devised  for  getting  at  that  value  and  there. is 
never  going  to  be  any  system  either.  There  are  no  engineers  in  the 
country  competent  enough,  and  no  group  of  engineers  in  this  coun- 
try competent  enough,  to  know  the  absolute  cost  of  that  system  or 
its  past  history,  which  is  not  available.  It  has  to  be  a  compromise 
situation,  as  every  situation  I  have  seen — it  is  just  a  backward  and 
forward  trade  until  you  get  a  happy  compromise  or  an  unhappy 
compromise  for  the  street  railroads  usually. 

Commissioner  Sweet.  Well,  it  has  to  be  on  a  satisfactory  basis  to 
the  city  anyway.  In  other  words,  they  liave  to  feel  that  it  is  sub- 
stantially correct  and  fair. 

Mr.  Newman.  Yes. 

Commissioner  Sweet.  Or  else  they  will  not  agree  to  it. 

Mr.  Newman.  Yes.  . ,         -    , 

The  Chairman.  Perhaps  we  can  get  your  idea  of  the  reorganiza- 
tion of  the  company  and  the  actual  effect  which  it  will  have  upon  the 
stockholders  if  I  can  present  an  illustration  to  you.  I  know  figures 
are  a  little  misleading,  but  I  am  quite  sure  you  will  grasp  this. 

Let  us  assume  that  vou  own  a  property  which  has  a  capitalization 
of  $10,000,000 ;  $3,000',000  is  in  bonds,  $4,000,000  in  preferred  stocky 


-  fr 


imk 


578       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

and  $3,000,000  common  stock.  This  common  stock  is  water.  A 
physical  vahuition  is  made  of  the  property  and  it  is  determined  by 
competent  tribunals  that  that  property  is  worth  $6,000,000  and  th-at 
rahie  is  established  by  the  courts.  Now,  your  plan  is  to  perfect  a 
reor^^anization  and  to  rewrite  the  securities  down  to  the  value  of  the 
property.  Tell  me  in  that  scheme  of  reorganization  how  the  common 
stockholder  is  going  to  be  given  any  consideration. 

Mr.  Newman.  In  the  first  place,  these  bonds  may  be  2  per  cent 
bonds  due  in  50  years.  Now,  what  is  the  value  of  a  2  per  cent  bond 
due  in  50  years?  Certainly  not  par;  so  those  $3,000,000  may  be  cut 
to  50  cents  on  the  dollar.  The  preferred  stock  may  have  had  a  5-cent 
franchise  and  be  earning  nothing  on  it,  but  with  the  new  rate  from 
the  city  it  may  be  able  to  earn  something.  But  the  common-stock 
holdei-s  say,  "  No;  we  will  not  join  in  this  unless  you  will  share  with 
iis'^_and  they  usually  do  share,  the  conmion-stock  holders,  where 
fair  bankers  tiave  got^the  situation  in  hand.    Now  there  is  another 

The  Chairman.  Well,  then,  the  only  way  by  which  the  common- 
stock  holders  can  share  in  that  reorganization  is  through  their  voting 

ix)wer  ? 

Mr.  Newman.  No;  there  is  another  way.    That  is  one  way. 

The  Chaikman.  What  is  it?  .  n.,         x      * 

:Mr  Newman.  I  had  hoped  to  avoid  this  discussion.  Ihe  rate  of 
return  on  that  property^Now  let  us  say  we  would  get  10  per  cent 
return  on  the  property,*  which  to  my  mind,  is  not  excessive,  knowing 
the  business  and  the  miseries  of  it  as  I  do.  I  would  not  want  to  live 
throui?li  it  another  24  yeai-s  for  10  per  cent.  The  bonds  mav  be  5 
per  cent  bonds,  the  preferred  stock  may  be  a  5  per  cent  preferred 
stock— and  many  of  them  are.  .      . 

Commissioner  Meeker.  This  is  under  the  reorganization? 

Mr.  Newman.  No;  the  old  securities.  Now,  it^only  absorbs  part 
of  that  10  per  cent  return  on  your  investment.  You  pay  that  5  and 
5  and  vou  might  capitalize  the  common  stock  for  one  dollar  and  issue 
certificates  of  participation  in  that  dollar  and  yet  have  a  substantial 
amount  to  divide  without  having  the  capitalizaion.  You  might  have 
no  par  value  a  share.     Do  you  see  that  ? 

The  Chairman.  I  do  not  know  what  I  see.    I  am  asking  you 

questions.  ^  .,  .  i    t  i 

Mr.  Newman.  Yes.  Well,  I  have  answered  it,  or  1  think  I  have, 
and  I  will  repeat  it.  Take  your  proposition  of  $3,000,000  bonds— I 
will  make  it  concrete  for  you— and  $4,000,000  preferred  and  $3,- 
000,000  common.  I  will  make  this  calculation  in  a  hurry  for  you. 
Now,  you  have  $6,000,000  value,  and  say  that  ought  to  get  10  per  cent 
for  the  risk  and  worry  of  the  business.  That  gives  us  $600,000  a 
year.  We  have  to  cut  our  capitalization  to  $6,000,000.  These  $3,- 
000,000  bonds  are  four's  and  are  entitled  to  $2,000,000  of  the  new 
six's.  The  preferred  stock  of  $4,000,000  will  be  entitled  to  $3,000,000 
of  new  7  per  cent  preferred  stock.  That  is,  120,000  and  210,000  is 
330,000  from  000,000  and  we  have  an  equity  of  270,000  to  pay  the 
1,000,000  conmion  stock  which  I  can  issue  within  my  capitalization 

or  27  per  cent. 

The  Chairman.  Of  course  that  is  a  hopeful  future.  I  think  that 
rs  an  exceedingly  valuable  contribution  to  the  record.  I  may  want 
to  go  into  the  public-utility  business, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       579 

Mr.  Warren.  You  first  have  to  catch  your  10  per  cent. 

Mr.  Ne^t^ian.  If  we  get  the  10  per  cent  you  had  better  go  into  it, 
at  the  pi-esent  value  of  the  security. 

Commissioner  Meeker.  Is  there  any  reason  why  the  holders  of 
common  stock  in  street-railroad  companies  should  be  treated  dif- 
ferently from  the  holders  of  common  stock  in  any  other  risky  enter- 
prise ? 

Mr.  Newman.  I  think  so ;  yes. 

Commissioner  Meeker.  Why? 

Mr.  Newman.  They  i*endered  a  public  servi<*e;  they  took  a  risk 
that  was  an  extremely  hazardous  one.  They  have  built  extensions 
of  street-railroad  tracks  into  territory  that  was  vast  fields,  and  yet 
these  fields  to-day  are  city  lotis.  Now,  the  city  has  had  an  enormous 
vain  at  ion  placed  upon  those  city  lots,*  and  it  has  come  back  into  the 
coffers  of  the  treasury  as  city  taxes  and  relieves  the  burden  of  all 
the  people ;  and  there  are  many  of  those  street  railroads  to-day  who 
have  built  those  extensions  which  are  not  paying  interest  on  the 
investment. 

Commissioner  Meeker.  But  these  widows  and  orphans  who  have 
l:>een  mentioned  to  us — these  innocent  investors — ^to  what  extent  did 
they  contribute  to  building  street-railway  lines  into  these  extensions? 

Mr.  Newman.  By  putting  up  their  money  to  make  such  invest- 
ments as  I  have  mentioned  possible. 

Commissioner  Meeker.  I  do  not  wish  to  push  that  any  further, 
only  it  seems  to  me  that  a  person  investing  in  a  risky  enterprise, 
his  blood  is  on  his  own  head,  no  matter  whether  that  is  a  street- 
railway  company  or  a  real-estate  development  of  a  steam  railroad 
or  any  other  enterprise.  I  see  no  reason  why  we  should  treat  the 
security  holders  in  this  enterprise  differently  from  what  they  would 
be  treated  if  they  had  invested  it  in  some  other  risky  enterprise. 

Commissioner  Gadsden.  Why  not  leave  them  to  regulation  of 
their  rates  and  then  you  would  be  treating  them  as  other  people? 

Commissioner  Meeker.  Of  course,  they  wei*e  well  aware  of  the 
regulation  of  the  pul^lic  rates  when  they  made  the  investment. 

Mr.  Warren.  But  the  regulation  followed  the  investment  in  most 
cases.  The  investment  was  made  befoi*e  regulation  was  installed, 
but  it  seems  to  me  if  you  had  proper 

The  Chairman.  How  is  that  so?  Do  you  not  have  to  get  a 
franchise  before  you  made  the  investment? 

Mr.  Warren.  Yes;  but  in  many  cases  the  rates  were  not  fixed 
in  the  older  franchises.  In  Massachusetts  rates  were  almost  never 
fixed. 

Commissioner  Meeker.  Do  you  think  that  any  rate  that  the  street- 
railway  company  fixed  was  the  established  rate? 

Mr.  Warren.  Yes.  The  compulsory  regulation  followed  later. 
It  was  a  development  of  the  public-utility  business  from  the  State, 
the  government  side. 

Commissioner  I^Ieeker.  I  think  it  would  be  very  interesting,  Mr. 
Warren,  if  you  could  give  us  some  documentary  evidence  on  that 
point. 

Mr.  Warren.  I  should  be  very  glad  to. 

Commissioner  Meeker.  This  is  rather  a  new  phase  to  me,  for  I 
had  supposed,  as  the  chairman  has  indicated,  that  the  franchises, 
at  least  for  a  very  long  period  of  years,  had  fixed  the  fare. 


580        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warken.  In  some  States  they  have  for  a  long  time,  but  in 
some  States  they  were  not  fixed  and  the  regulation  came  with  the 
supervisory  connnission. 

Commissioner  Meeker.  I  wanted  to  make  it  clear  that  I  regard 
this  as  a  minor  point.  The  only  thing  is,  Mr.  Gadsden  has  brought 
the  m'.tter  up  and  it  is  not  yet  evident  to  me'  that  the  security 
hoklers — those  who  have  been  innocent  enough— to  put  it  that  way,, 
to  invest  in  street-railway  securities,  have  a  right  to  get  100  cents 
on  every  dollar  they  invested  in  the  street-railway  company  any 
more  than  a  man  who  invests  in  a  shoe  factory  or  a  real-estate  de- 
velopment is  entitled  to  get  100  cents  return. 

Mr.  Warren.  Of  course,  if  they  are  entitled  to  100  cents  on  the 
dollar  there  is  no  reason  for  having  any  valuation,  because  the  out- 
standing securities  would  be  the  measure  of  the  amount  on  which 
(he  return  Avas  to  be  made.  If  the  return  is  to  be  made  upon  the  valu- 
ation, then  tlie  security  holders  can  adjust  their  respective  equities 
somewhat  in  the  line  suggested  by  Mr.  Newman,  or  in  various  other 
lines  which  have  been  suggested. 

Commissioner  Meeker.  Yes.  I  think  Mr.  Newman  has  given  us 
a  very  illuminating  discussion  of  the  possibilities  of  reorganization. 

Mr.  Warren.  We,  probably  all  of  us,  have  had  more  or  less  sad 
personal  experiences  in  reorganizations  and  we  know  they  can  be 
worked  out  in  very  many  ways,  according  to  the  actual  or  assumed 
equities  of  the  various  security  holders  in  the  corporation. 

I  have  two  other  witnesses  whom  I  very  much  want  to  get  on  be- 
fore 5  o'clock,  because  neither  of  them  can  be  here  this  evening.  One 
is  Mr.  Ferguson,  president  of  the  chamber  of  conmierce,  and  the 
other  is  Mr.  Stanley,  president  of  the  Cleveland  Street  Railway ;  and 
Mr.  Stanley  has  to  leave  at  5  o'clock  and  Mr.  Ferguson  wants  to 
leave  earlier,  so  I  would  ask  the  commission  to  have  in  mind  that  if 
Mr.  Ferguson's  examination  takes  too  long  Mr.  Stanley  will  have  to 
go  without  testifying. 

Mr.  Newman.  You  do  not  desire  anything  further  from  mei 

The  Chairman.  No. 

(Witness  excused.) 

The  Chairman.  You  may  proceed,  Mr.  Warren. 

STATEMENT  OF  MH.  HOMER  L.  FERGUSON. 

Mr.  AVarren.  Your  full  name,  Mr.  Ferguson. 

Mr.  Ferguson.  Homer  L.  Ferguson. 

Mr.  Warren.  And  you  are  the  president  of  the  United  States 
Chamber  of  Commerce,  I  believe? 

Mr.  Ferguson.  Yes,  sir. 

Mr.  W^ARREN.  And  also  of  the  Newport  News 

Mr.  Ferguson.  Shipbuilding  &  Dry  Dock  Co. 

Mr.  W^\RREN.  Yes,  sir. 

The  Chairman.  What  was  that  last  statement? 

Mr.  Ferguson.  The  Newport  News  Shipbuilding  &  Dry  Dock  Co. 

Mr.  Warren.  As  President  of  the  United  States  Chamber  of  Com- 
merce, have  you  had  occasion  to  hold  hearings  or  conduct  an  investi- 
gation on  this  same  silbject,  by  the  chamber? 

Mr.  Ferguson.  Yes,  sir.  The  committee  was  appointed  before  I 
was  elected  president,  by  Mr.  Harry  Wheeler,  of  Chicago.    At  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       581 

St.  Louis  convention,  it  was  decided  that  the  conditions  of  the  street 
railways  had  become  so  critical  that  the  chamber  of  commerce 
should  appoint  a  special  committee  to  investigate  the  subject  as  com- 
pletely as  possible,  with  a  view  of  submitting  to  a  referendum  their 
decisions,  with  the  arguments  pro  and  con,  so  as  to  get  an  expression 
of  the  business  organizations  of  the  country,  which  constitute  the 

chamber.  .         ^ 

Mr.  Warren.  And  this  convention  was  what — ^the  convention  of 

what?  i?  /^ 

Mr.  Ferguson.  It  was  a  convention  of  the  Chamber  of  Commerce 
of  the  United  States,  attended,  I  should  say,  by  about  3,000  dele- 
gates from  all  over  the  country,  and  it  was  decided  there  that  this 
committee  should  be  appointed.  The  committee  was  appointed  by 
Mr.  Wheeler,  and  has  been  in  session  here  in  Washington  on  a  num- 
ber of  occasions.  I  have  attended  one  or  two  of  the  meetings  of  the 
committee,  but  not  as  a  member. 

Mr.  Warren.  You  have  said  that  the  feeling  of  that  convention 
was  that  the  situation  was  a  very  serious  one  and  demanded  some  cer- 
tain action? 

Mr.  Ferguson.  Yes,  sir. 

Mr.  Warren.  And  has  that  impression  been  increased  or  lessened 
by  what  you  have  heard  in  the  hearings  ? 

Mr.  Ferguson.  It  has  been  increased— that  and  discussion  with  a 
great  many  men  who  are  operating  street  railways  and  who  are 
concerned  with  them.  I  think  the  business  judgment  of  the  country, 
so  far  as  it  can  be  gauged,  is  that  the  situation  is  right  critical  and 
should  receive  attention  just  as  soon  as  possible,  on  account  of  the 
enormous  amount  of  values  involved  and  the  fact  that  the  companies, 
a  great  many  of  them,  are  in  a  bad  w^ay. 

Mr.  Warren.  You  yourself  have  had  some  street-railway  experi- 
ence, I  believe  ? 

Mr.  Ferguson.  Not  as  a  manager,  Mr.  Warren.  I  am  a  director  m 
a  local  street  railway  at  Hampton  Roads,  between  Old  Point  and 
Newport  News;  and  I  believe  we  have  one  of  the  few  street-railway 
properties  in  the  United  States  that  is  doing  very  well  at  the  present 

time.  .  ,     , 

Mr.  Warren.  That  is,  thanks  to  your  activities  at  present  with  the 

shipbuilding  company,  I  assume. 

Mr.  Ferguson.  Well,  it  has  been  due  to  the  shipyard  to  an  enor- 
mous extent.  It  has  been  due  to  the  fact  that  the  population  feeding 
this  railway  probably  more  than  doubled.  We  have  from  fifteen 
to  forty  thousand  soldiers  there  all  the  time,  and  they  ride  on  the 
cars  a  great  deal,  and  it  has  also  been  due  to  the  fact  that  the  street 
railway  there  not  only  sells  transportation  but  also  power,  ice,  gas, 

and 

Mr.  Warren.  So  the  returns  are  not  confined  to  the  transportation 

features . 

Mr.  Ferguson.  No.  Another  point  is  that  in  the  early  days  we 
had  a  12-mile  trip  when  we  had  a  competing  company.  Both  com- 
panies practically  went  broke  carrying  people  these  12  miles  for  a 
nickel ;  and  then,  when  one  company  went  under  and  the  property 
was  absorbed  by  the  other  in  a  reorganization,  the  district  was  split 
into  three  zones,  and  a  5  cents  fare  in  each  zone,  for  the  primary 
reason,  as  I  understand— I  was  not  associated  with  the  company  at 
all  then 


582       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Mr.  Warren.  Yes. 

Mr.  Feiwuson.  For  the  priniarv  reason  that  the  country  was  so 
sparsely  ix)pulatcd  that  we  could  not  afford  to  carry  them  for  a 
nickel.  Now,  when  the  traffic  has  increased  enormously,  this  weak- 
ness of  the  original  system  has  been  the  strength  of  the  present  sys- 
tem. 1         J       i!  i.- 

Mr.  Warren.  You  practically  increased  your  fares  ahead  ot  time 
because  of  the  sparsely  settled  territory?  ^  „      ^ 

Mr.  Ferguson.  Yes;  and  now  when  the  cars  are  running  full,  of 
course  that  has  given  the  benefit  to  us.  At  the  same  time,  at  the 
works,  our  men  are  carried  over  the  old  lines  as  much  as  3.5  miles 
TOT*  2  o  events 

Mr.  Warren.  That  is  a  special  morning  and  evening  rate? 

Mr.  Ferguson.  That  is  between  0  and  7  in  the  morning  and  4  and 
5  in  the  afternoon.  They  are  carried  very  thick.  About  2,500  men, 
or  20  per  cent  of  our  force,  ride  in  the  cars.    The  others  walk. 

On  the  new  line,  which  was  built  with  money  loaned  by  the  United 
States  Shipping  Board  Emergency  Fleet  Corporation,  the  fares  werb 
fixed  by  that  corporation  at  5  cents  for  workmen— or  twice  the  fare 
over  the  old  line — on  account  of  the  excessive  cost  of  the  new  equip- 
ment of  the  new  line. 

Mr.  Warren.  Which  was  built  during  the  war? 

Mr.  Ferguson.  It  was  built  during  the  war  under  an  agreement 
that  the  money  loaned  on  the  actual  railroad,  as  I  understand  it,  was 
to  be  repaid  in  full,  but  the  equipment  was  to  be  purchased  at  a  fair 
vahiation  under  a  board  of  neutral  appraisers. 

Mr.  Warren.  Yes? 

Mr.  Ferguson.  In  other  words,  the  excess  cost  during  the  war 

was  taken  care  of  by  the  war. 
•  Mr.  Warren.  Yes.  ,  .  . 

Mr.  Ferguson.  In  that,  as  in  several  other  things  in  our  vicinity, 
it  was  recognized  that  this  was  a  war  cost. 

Mr.  Warren.  And  where  was  this  5-cent  fare,  as  compared  with 
the  2.5-cent  fare— in  the  same  direction? 

Mr.  Ferguson.  No;  in  another  direction. 

Mr.  Warren.  But  about  the  same  distance? 

Mr.  Ferguson.  Not  quite  so  far. 

Mr.  Warren.  So  that  the  Government  recognized  thus  the  in- 
creased cost  of  construction  by  fixing  a  higher  fare  on  the  new  line 
for  the  men  than  on  the  old  line? 

Mr.  Ferguson.  Oh,  yes;  not  only  for  the  men,  but  the  ordinary 
fare  was  made  15  cents  a  round  trip  over  the  new  line  for  the  sol- 
diers. Then  the  citizens  living  along  this  line  all  kicked,  and  so  they 
were  given  15  cents  a  round  trip,  although  the  ordinary  fare  was 
10  cents,  and  for  workmen  5  cents. 

Mr.  Warren.  And  on  the  old  line  it  was  still  10  cents? 

Mr.  Ferguson.  Yes. 

Mr.  Warren.  For  that  distance? 

Mr.  Ferguson.  Yes. 

Mr.  Warren.  For  the  public? 

Mr.  Ferguson.  Yes. 

Mr.  Warren.  How  did  you  happen  to  become  connected  with  the 

road,  Mr.  Ferguson? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       583 

Mr.  Ferguson.  It  was  largely  accidental.  We  were  very  much 
interested  in  the  street  railway,  because  decent  transportation  was 
necessary  to  the  operation  of  our  business;  and  after  one  of  the  old 
roads  had  gone  into  bankruptcy  and  had  been  bought  up  by  the 
other,  and  the  other  was  in  pretty  nearly  as  bad  shape,  the  whole 
thing  being  run  down,  and  they  did  not  have  any  money,  and  the 
men  would  come  into  the  works  in  the  morning  a  half  hour  late  or 
an  hour  late,  and  we  used  to  have  to  argue  with  them  more  or  less 
not  to  wreck  the  svstem.  This  had  happened  time  and  time  again. 
The  lights  would  go  out  and  would  come  on  again  the  next  night, 
perhaps.  So  that  when  the  bondholders  took  over  the  propei-ty  and 
iw)rganized  it  bv  sending  some  railway  people  there  who,  in  my 
judgment,  knew  \he  business,  the  local  people  were  very  much  in- 
terested ;  and  in  order  to  rehabilitate  themselves  in  local  favor,  they 
had  a  number  of  local  men,  or  asked  them  to  acquire  enough  shares 
in  the  company  to  be  elected  directors.  A  majority  of  the  directoi-s 
are  local  men^who,  by  no  means  control  the  stock;  and  it  was  an 
evidence  of  good  faith  on  the  part  of  the  people  who  came  there  to 
rehabilitate  Uiis  railroad.  The  (juestion  we  asked  them  was  whether 
they  are  going  to  run  a  real  railroad  or  the  kind  of  thing  that  we 
had  had,  and  they  showed  every  evidence  of  operating  the  street 
railway  not  only  for  the  benefit  of  the  stockholders,  but  for  the 
benefit  of  the  public;  and  I  think  they  have  done  it;  and  the  local 
directors  have  been  very  active  in  assisting  them  to  do  it,  and  in 
seeing  that  they  did  do  it. 

Mr.  ^  ,^ARREN.  Yes  ?  ^i     .  ,     «.  ,.     • 

Mr.  Ferguson.  Which  they  wanted  to  do.  So,  instead  of  having 
a  company  which  could  furnish  no  service,  we  have  a  company 
which  does  furnish  a  real  service  that  did  not  break  down  during 
the  war,  notwithstanding  the  fact  that  their  traffic  more  than 
doubled,  and  which  has  been  a  real  asset  to  the  community.  The 
war- working  community  could  not  have  been  carried  on  at  all  with- 
out the  street-railway  transportation,  the  power  and  electric  lights, 

and  so  forth.  .  .^,       ,      ,        i 

Mr.  Warren.  So  that  you  had  an  experience  with  a  broken-down 
road  rendering  poor  service,  because  it  was  not  earning  enough  to 
do  anything  else  s 

Mr.  Ferguson.  Yes. 

Mr.  Warren.  And  with  an  ux)-to-date  road  there,  charging  a 
high  rate  of  fare,  you  have  maintained  good  service? 

Mr.  Ferguson.  No;  they  did  not  charge  a  high  rate  of  fare.  The 
old  road  had  charged  the  higher  rate  before  they  went  into  the 
hands  of  a  receiver. 

Mr.  Warren.  They  had  raised  it  to  the  three  fares? 

Mr.  Ferguson.  They  had  raised  it,  but  they  had  no  money.  They 
had  no  credit  So  a  local  syndicate  was  formed  which  raised  ap- 
proximately $1,000,000,  about.  Of  this  $1,000,000,  $750,000  was  put  in 
a  power  house  and  the  rest  was  put  in  the  property.  In  other  words, 
they  put  the  property  on  its  feet. 

i/Lr.  Warren.  Yes.  ^  .        t      • 

Mr.  Ferguson.  By  creating  a  credit  for  it.  Then,  with  the  in- 
creased business  the  earnings  picked  up  at  once,  and  they  have  been 
going  very  well  ever  since. 


I: 


584       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  So  tliat  that  is  a  question  of  a  company  without 
credit  as  compared  with  one  with  credit?  ,     • ,, 

Mr.  Ferguson.  The  company  had  no  credit  under  the  old  arrange- 
ment. As  soon  as  it  could  borrow  money  they  put  the  property  in 
good  condition  and  built  it  up,  and  that,  with  the  increased  busmess, 
paid  them  very  fair  earnings. 

Mr.  Warren.  One  of  the  reasons,  I  suppose,  that  you  were  on  the 
board  was  to  get  i-eliable  service? 

Mr.  Ferguson.  Absolutely. 

Mr.  Warren.  For  your  employees? 

Mr.  Ferguson.  Yes;  that  is  very  important  in  a  small  place  like 
ours— of  about  30,000  or  40,000  people— because  we  have  a  grea.  many 
men  who  live  a  good  distance  away  from  their  work.  I  think  the 
most  vital  feature  in  a  place  like  ours,  of  street-car  transportation- 
reliable  transportation— is  that  it  enables  the  workmen  to  live  \yliere 
land  is  cheap,  where  he  can  eke  out  his  wage  by  being  fairly  inde- 
pendent in  the  matter  of  his  own  garden,  his  chickens  and  cow  and 
pigs,  and  all  that  sort  of  thing.  Incidentally,  I  believe  that  the  one 
real  sure  cure  for  all  of  what  we  are  pleased  to  call  our  modern  ills 
and  bolshevism  is  to  have  every  man  own  his  own  home ;  and  if  his 
home  is  out  in  the  country,  where  land  is  cheap,  and  where  living  is 
cheaper,  I  think  that  is  of  great  benefit.  We  have  built,  for  instance, 
R  town  of  500  houses,  where  this  new  transportation  was  provided, 
for  the  express  purpose  of  giving  the  men  a  place  to  live  other  than 
a  tenement  or  a  mud  row,  or  something  like  that. 

Mr.  Warren.  You  provide  some  land  for  each  owner  ? 

^fr.  Ferguson.  Oh,  yes. 

Mr.  Warren.  A  house  and  lot? 

Mr.  Ferguson.  Well,  they  have  a  garden.  The  street-railway  com- 
pany has  made  access  to  cheap  land  for  industrial  workers,  and  I 
think  that  is  most  important. 

Mr.  Warren.  Yes;  and  as  president  of  the  chamber,  you  would 
say  that  this  matter  is  one  of  the  very  greatest  importance  at  this 
time,  would  you  not? 

Mr.  Ferguson.  Yes. 

Mr.  Warren.  This  street-railway  problem  ? 

Mr.  Ferguson.  I  think  it  is  one  of  the  most  important  matters  in 
the  country  at  the  present  time.  Financially,  it  would  seem  to  me 
to  be  the  most  acute  problem  that  we  have  internally  at  this  time. 

Mr.  Warren.  And  unless  settled  it  might  involve  great  and  serious 
financial  dangei*s,  I  suppose? 

Mr.  Ferguson.  I  should  say  so. 

Mr.  Warren.  That  is  all. 

The  Chairman.  Has  the  committee  of  the  chamber  of  commerce 
which  has  been  making  a  study  of  this  question  made  any  report? 

Mr.  Ferguson.  I  do  not  know  that  they  have  as  yet,  sir ;  but  they 
are  formulating  a  report.  I  understand  the  matter  has  progressed 
favorably.    They  had  a  hearing  in  Washington. 

The  Chairman.  Have  you  an  idea  how  soon  they  will  have  such 
a  report  presented? 

Mr.  Ferguson.  I  don't  know.  I  believe,  though,  within  a  com- 
paratively short  time. 

The  Chairi^ian.  Before  this  commission  gets  through  with  this  in- 
vestigation? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      585 

Mr.  Ferguson.  I  hope  so,  and  if  the  commission  would  like  the 
data  that  they  have  accumulated  from  a  variety  of  sources  it  can  be 
put  at  the  service  of  the  commission,  if  the  commission  sees  fit  to 

use  it.  ,      t       .  i. 

The  Chairman.  That  is  very  kind  indeed.    We  will  take  that  into 

consideration. 

Mr.  Ferguson.  Yes,  sir. 

The  Chairman.  In  your  Newport  News  plant  you  have  gas,  light, 
and  railway  combined? 

Mr.  Ferguson.  Yes,  sir. 

The  Chairman.  Have  you  ever  made  a  separation  of  the  cost  of 
performing  each  branch  of  the  company's  service? 

Mr.  Ferguson.  Yes.  . 

The  Chairman.  Do  you  know  whether  the  railway  service,  m  and 

of  itself,  is  paying  its  own  way? 

Mr.  Ferguson.  Yes ;  it  is  paying  its  own  way,  but  not  much  more, 
at  the  present  time. 

The  Chairman.  Although  you  have  greatly  increased  the  volume 
of  your  business? 

Mr.  Ferguson.  Yes. 

The  Chairman.  And  the  number  of  passengers  that  you  serve? 

Mr.  Ferguson.  Yes.  ^ 

The  Chairman.  You  mentioned  a  village  of  500  houses  which  was 
built  for  the  use  of  industrial  workers.    How  far  is  that  from  the 

plant? 

Mr.  Ferguson.  About  2J  miles. 

The  Chairman.  What  is  that  fare? 

Mr.  Ferguson.  5  cents.  The  Government  fixed  that  rate  of  fare 
for  this  village.    They  loaned  the  money  to  build  the  village  with. 

The  Chairman.  Do  you  feel  that  the  street-car  industry  is  a  per- 
manent institution? 

Mr.  Ferguson.  Permanent? 

Tlie  Chairman.  Yes. 

Mr.  Ferguson.  Yes,  sir. 

The  Chairman.  Do  you  think  it  is  just  as  vital  to  the  commercial 
development  and  welfare — the  communal  development  and  welfare 
of  the  city  as  the  light,  gas,  and  water? 

Mr.  Ferguson.  I  do  not  think  it  is  as  important  as  water,  but  I 
think  it  is  as  important  as  the  light  or  gas  or  anything  else  we  use, 
except  water  and  air. 

The  Chairman.  But  if  the  street-car  companies  should  become  a 
decadent  institution  and  there  was  nothing  better  put  in  its  place, 
would  we  not  have  to  completely  revolutionize  our  whole  economic 
jinrl  sncTil  svstemf 

Mr.  Ferguson.  I  think  so.  Of  course,  automobiles  can  be  operated, 
but  I  do  not  believe  we  will  ever  see  the  time,  unless  some  new  power 
method  of  transportation  is  devised,  when  we  will  operate  over  roads 
as  economically  as  we  will  on  steel  rails.  .      .      .        , 

The  Chairman.  But  the  country  must  have  some  institution  that 
can  travel  365  days  on  steel  ? 

Mr.  Ferguson.  Yes,  sir.  •  .       « 

The  Chairman.  Regardless  of  weather  conditions? 

Mr.  Ferguson.  I  think  so. 

160643°— 20 38 


586       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIJT. 

The  Chx^irman.  And,  of  course,  the  automobile  will  not  supplant 
that'^ 

Mr.  Ferguson.  Yes,  sir.  •  tf  ±    j.    £ 

The  Chairman.  In  Minnesota  oftentimes  we  have  5  feet  ot  snow 

on  the  level. 

Mr.  Ferguson.  Yes,  sir.  i     •       xi    i 

The  Chairman.  And  the  automobiles  are  stored  up  during  thai 

Bferiod.  ,  11.  -i. 

Mr.  Ferguson.  I  would  say  that  they  are  an  absolute  necessity 

in  any  modern  city.    For  industrial  workers,  for  whom  I  speak 

particularly,  I  think  it  is  vital  that  you  have  street-car  transporta- 

The  Chairman.  Then  we  should  proceed  upon  the  theory  that 
this  distribution  must  be  preserved? 
"Vri'   Ffrcuson     jl  es  sir. 
Conimi.ssioner  Sweet.  What  wages  are  you  paying,  Mr.  Ferguson, 

on  your  street  railway  ? 

IMLr.  Ferguson.  45  cents,  I  believe,  at  the  present  time. 

Commissioner  Sweet.  AVas  that  adjusted  by  the  War  Labor  Board  i 

Mr.  Fekguson.  No,  sir;  it  has  been  adjusted  by  the  company  v(^un- 
tarily.    I  think  we  had  seven  raises  in  three  years. 

Commissioner  Sweet.  Are  your  conductors  and  motormen  white 

men? 

Mr.  Ferguson.  Yes,  sir.  .    xi        « 

Commissioner  Sweet.  Is  that  wage  satisfactory  to  them? 
Mr.  Ferguson.  As  far  as  I  know.  ^ 

Mr.  Warren.  I  do  not  suppose  it  is  fair  to  ask  you  whether  you 
think  they  will  go  up  further? 

Mr.  Ferguson.  I  do  not  think  it  is  likely  to  come  down  soon. 
Commissioner  Sweet.  The  general  raise  of  wages  and  materials 
that  go  into  street  railways,  and  everything  else  now,  has  been  men- 
tioned by  former-President  Taft  as  an  evidence  in  his  mmd  that  the 
purchasing  power  of  money  had  been  reduced.    Is  that  your  view 

^  Mr.  Ferguson.  Yes,  sir;  it  results  in  that.  Wages  and  materials, 
generally  speaking,  I  think,  have  doubled  and  more  than  doubled 
in  the  hist  four  years.  They  have  considerably  more  than  doubled  in 
our  business.     In  the  street-railway  business,  I  understand,  they  are 

about  doubled.  .      .      -i         ^i.  x 

Commissioner  Sweet.  Taking  an  ordinary  street  railway  that  was 
doing  fairly  well  before  prices  advanced,  with  the  nickel  fare,  having 
no  control  over  the  increase  of  costs  and  no  ability  to  mcrease  its 
income  by  raising  fares;  when  you  take  that  into  account,  are  you 
at  all  surprised  at  the  critical  condition  that  you  say  you  think  the 
companies  are  now  in  with  regard  to  street  railways?         ,^     c.       i. 

Mr.  Ferguson.  I  think  it  would  be  very  surprising,  Mr.  bweet, 
if  what  has  happened  had  not  happened.  .  ,      •  i -i 

Commissioner  Sweet.  PracticalTy,  to  a  man  of  any  business  abil- 
ity whatever,  or  intelligence,  it  is  the  very  thing  that  had  to  hap- 
pen; is  it  not?  ,    .  ^    ^   i  -J.- 

Mr.  Ferguson.  I  think  it  is;  and  it  is  a  demonstrated  proposition 
that  if  everything  else  goes  up  except  street-car  fares,  and  they  are 
left  in  the  lurch,  and  no  miracle  is  going  to  take  place  with  refer- 
ence to  them  any  more  than  with  anything  else.    Everything  else 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       587 

seems  to  have  gone  up  that  I  know  of.    It  seems  to  me— I  won't  say 
absurd,  but  it  seems  very  strange  that  the  question  would  have  to 
be  discussed  at  such  length,  Mr.  Sweet. 
The  Chairman.  Yes. 

Mr.  Ferguson.  Now,  for  instance,  when  men  have  to  be  charged  to- 
day a  greater  fare  because  pix)perty  costs  more  money,  we  have  found 
thivt  by  explaining  it  to  the  men,  all  of  whom  may  be  getting  more 
money,  because  it  costs  them  more  to  live,  that  this  is  a  necessary 
tiling  on  account  of  its  having  been  done  during  the  war;  and  al- 
though they  do  not  like  it,  they  put  up  with  it  as  the  rest  of  us  do 
when  it  is  explained  to  them  and  when  it  is  explained  that  the  Gov- 
ernment has  allowed  this.  As  a  matter  of  right,  they  do  not  object 
particularly,  and  we  have  found  that  they  want  to  do  what  is  fair 
and  right.     I  am  speaking  of  the  workmen  who  pays  his  nickel. 

Mr.  Warren.  On  your  line? 

Ivir  Fercuson    ^iTes. 

Commissioner  Sweet.  Do  yoii  think  that  is  typical  in  all  com- 
munities throughout  the  country? 

Mr.  Ferguson.  I  do  not  know  that  it  is,  sir.  There  seems  to  be 
a  good  deal  of  opposition  to  it,  but  it  does  seem  to  me  if  the  facts— 
and  particularly  the  facts  as  developed  in  an  authoritative  way — 
could  be  properly  placed  before  the  people  who  ai^  concerned,  you 
will  find,  in  general,  that  most  i>eople,  the  big  majority  of  people, 
would  be  willing  to  do  what  is  fair  and  right. 

(Commissioner  Sweet.  Yes. 

Mr.  Fekguson.  If  thev  were  convinced  that  it  was  the  right  thing 
to  do.  Of  course,  I  have  no  scheme  of  financing  a  reorganization. 
The  one  thing  that  is  patent  to  me  is  that  they  must  get  more  fares 
or  go  broke,  but  as  to  how  it  will  be  done  and  how  the  final  reor- 
ganization will  take  place  or  just  what  method  will  be  used,  I  do 
not  know;  but  it  seems  perfectly  patent  that  no  one  should  expect 
to  ride  now  for  5  cents  as  he  rode  for  5  cents  six  years  ago. 

Commissioner  Saveet.  When  he  knows  that  he  can  not  buy  pota- 
toes or  anything  else  at  tlie  same  price. 

Mr.  Ferguson.  He  knows  he  can  buy  absolutely  nothing  except 
at  greatly  increased  prices. 

Commissioner  Sweet.  In  view  of  the  fact  that  the  Chamber  of 
Commerce  of  the  United  States  has  a  committee  investigating  this 
subject  which  will  soon  make  a  report,  I  presume  you  would  prefer 
not  to  express  any  personal  opinion? 

Mr.  Ferguson.  Not  at  all;  because  it  would  be  my  job  to  try  to 
assist  in  putting  through  the  recommendations  of  that  committee. 

Commissioner  Sweet.  And  you  would  prefer,  naturally,  to  await 

that  report? 

Mr.  Ferguson.  Not  only  that,  sir,  but  I  do  not  feel  competent  to 
express  a  judgment  as  to  the  final  solution  of  it  at  all,  and  I  would 
not  do  so,  awaiting  the  report  of  our  committee. 

Commissioner  Sweet.  That  is  what  I  would  imagine. 

Mr.  Ferguson.  Yes,  sir. 

Commissioner  Sweet.  And,  for  that  reason,  I  will  not  ask  you  any 
question  on  that  point ;  but  a  matter  that  I  think  is  patent  to  every- 
body, or  ought  to  be,  at  least,  as  you  have  said,  is  that  with  costs 
increasing  for  everything  that  the  company  has  to  buy  that  its  in- 


688       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

come  must  be  inei^ased  by  higher  fares  in  order  to  meet  its  obliga- 
tion? 

Mr.  Ferguson.  Yes,  sir.  i.    t  \     - 

Commissioner  Sweet.  Otherwise,  it  would  have  to  go  out  of  busi- 
ness ? 

Mr.  Ferguson.  Yes,  sir.  ^  .        ,      x  ^i    i.   •    <n       9 

Commissioner  Sweet.  There  is  no  question  about  that,  is  there? 

Mr.  Ferguson.  I  do  not  think  there  is. 

Commissioner  Sweet.  That  is  all. 

Commissioner  Gadsden.  Mr.  Ferguson,  pending  a  working  cut  of 
a  permanent  solution  either  on  the  lines  recommended  by  the  com- 
mittee of  the  chamber  of  commerce,  or,  we  will  say,  by  this  commis- 
sion, what  would  you  say  as  to  the  immediate  necessity  of  the  situa- 

Mr.  Ferguson.  Well,  I  should  say  the  first  aid  to  the  wounded 
would  consist  in  giving  an  increase  in  fare  to  suit  the  actual  posi- 
tive present  necessities  of  any  particular  situation.  I  do  not  see 
that  that  can  be  escaped,  if  the  companies  are  to  be  saved. 
Commissioner  Gadsden.  That  is  all  I  have  to  ask. 
Mr.  Warren.  Your  men,  I  suppose,  are  receiving  a  great  deaJ 
higher  wages  in  your  work  than  they  received  formerly? 

Mr  Ferguson.  When  the  2.5-cent  workmen's  fare— which  also 
applied  to  school  children,  by  the  way— was  adopted,  the  first-class 
pay  of  the  mechanic  we  had  was  two  and  a  half  a  day.  At  ^e 
present  time  the  pay  of  a  first-class  mechanic  is  $6.40  a  day.  He 
worked  10  hours  then,  and  he  works  8  hours  now. 

The  Chairman.  Go  down  the  line  and  give  us  a  few  more  hgures 
of  the  same  kind,  Mr.  Ferguson 

Mr  Ferguson.  The  common  laborer  got  $1  a  day.  At  the  pres- 
ent time  he  gets  $3.68  a  day  for  the  commonest  of  the  common 
labor,  and  $4  a  day  for  what  you  would  call  a  helper  or  the  higher 
grade  of  laborer.  When  the  fare  was  established  he  was  getting  9(V 
cents  a  day.    That  is  black  labor. 

The  Chairman.  Are  you  paying  black  labor  $d.b8{ 

Mr.  Ferguson.  The  minimum  is  $3.68  now. 

Mr.  Warren.  For  black  labor? 

Mr.  Ferguson.  Yes,  sir.  It  runs  from  that  with  pieceworkers  up 
as  high  as  $150  a  week. 

Commissioner  Meeker.  Have  they  been  working  8  hours,  too  i 

Mr.  Ferguson.  Working  8  hours;  yes,  sir. 

Commissioner  Sweet.  And  formerly  10  hours? 

Mr.  Ferguson.  No  one  is  working  10  hours. 

Commissioner  Meeker.  I  say,  formerly  10  hours. 

Mr.  Ferguson.  Formerly  10  hours;  yes,  sir. 

The  Chairman.  These  men  are  in  your  street-car  service? 

Mr.  Ferguson.  No;  the  shipbuilding  service.  In  the  street-car 
service  the  wages  are  different.  They  pay  the  same  wages  in  the 
shops  as  we  do,  but  the  motormen  and  conductors,  as  I  understand  it, 
run  about  12  hours.    I  am  not  sure,  but  they  run  longer  hours  than 

we  do. 

Commissioner  Sweet.  At  45  cents  an  hour? 

Mr.  Ferguson.  Yes,  sir. 

There  was  one  thing  that  was  done  locally  that  may  interest  you 
gentlemen,  in  regard  to  the  street-car  service,  and  that  is  in  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       589 

morning  and  afternoon  when  the  cars  are  crowded  we  have  a  great 
many  men  who  are  not  motormen,  and  these  men  will  take  the  place 
of  the  regular  motormen  on  the  morning  and  afternoon  runs  and 
get  a  quarter  or  50  cents  a  day  extra  for  the  running  of  the  car 
in  and  out  when  it  is  loaded.  They  come  into  the  shipyard  and 
work  all  day  and  run  that  car  back  at  night.  That  is  very  satis- 
factory to  the  men  and  very  satisfactory  to  the  company,  because  it 
saves  them  the  service  of  these  extra  men.  That  is  done*  in  the  case 
of  a  good  many  men. 

Mr.  Warren.  How  has  this  wage  of  the  men  on  the  work  that  you 
have  mentioned  been  fixed? 

Mr.  Ferguson.  They  were  fixed  by  the  Shipbuilding  Labor  Ad- 
justment Board  here  in  Washington.  At  the  shipyard  they  were  in- 
creased about  150  per  cent.  In  the  case  of  some  trades,  in  piece- 
workers, it  was  much  more  than  that ;  so  that  I  feel  that,  as  a  local 
situation,  the  men  who  were  employed  industrially  can  very  well 
afford  to  pay  the  higher  street-car  fare. 

Mr.  Warren.  And  it  does  not  make  the  street-railway  wage  look 
as  high,  by  comparison,  as  it  seems  to  the  street-railway  men,  meas- 
ured only  by  what  it  used  to  be? 

Mr.  Ferguson.  No  ;  and  it  has  made  it  very  difficult  for  the  street 
railway,  locally,  to  keep  their  men,  because  they  could  come  into  the 
shipyard  and  get  so  much  better  wages,  so  that  their  wages  have 
gradually  been  increasing  with  ours. 

Mr.  Warren.  Do  you  expect,  Mr.  Ferguson,  that  this  level  of 
wages  is  going  to  continue  for  some  time  or  is  it  going  to  drop  again 
soon  ? 

Mr.  Ferguson.  I  think  it  will  continue  for  some  time. 

Mr.  Warren.  A  matter  of  months  or  years? 

Mr.  Ferguson.  Years.  I  do  not  see  any  signs  of  decreases  in 
wages.  It  seems  to  me  that  commodities  are  bound  to  remain  high, 
on  account  of  the  tremendous  foreign  demand,  and  that  wages  with 
us  are  bound  to  remain  high,  on  account  of  the  cost  of  living,  and  also 
on  account  of  the  tide  of  immigration  actually  setting  the  other  way, 
instead  of  to  this  country ;  so  that  I  think,  although  a  great  many 
people  predicted  lower  wages  with  the  end  of  the  war  and  the 
signing  of  the  armistice,  there  has  been  no  sign  of  it,  and  if  any  ten- 
dency has  been  exhibited,  it  has  been,  I  think,  a  tendency  upward 
instead  of  downward,  as  illustrated  by  the  various  strikes  going  on. 

Mr.  Warren.  That  is  in  the  street-railway  industry,  certainly,  is 
it  not? 

Mr.  Ferguson.  Oh,  yes. 

Mr.  Warren.  I  am  very  much  obliged  to  you,  Mr.  Ferguson.  That 
is  all  I  have. 

Mr.  Ferguson.  I  am  much  obliged  to  you,  gentlemen. 

The  Chairman.  Mr.  Ferguson,  you  have  a  very  illustrious  man  to 
follow  in  the  chamber. 

Mr.  Ferguson.  Yes,  sir;  he  is  a  very  fine  man. 

Mr.  Warren.  Mr.  Commissioner,  I  will  ask  Mr.  Stanley  to  take 
the  stand. 


mim 


*;; 


t  ; 
i   •- 


590       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

STATEMENT  OE  ME.  JOHU.  J.  STANLEY. 

Mr.  Warren.  Mr.  Stanley,  your  full  name? 

Mr.  Stanlby.  John  J.  Stanley. 

Mr.  Warren.  You  are  the  pi-esident  of  the  Cleveland  Street  Kail- 

Avav  Co.? 

Mr.  Stanley.  The  Cleveland  Street  Eailway  Co. 

Mr.  Warren.  And  have  been  for  how  long? 

Mr.  Stanley.  Ten  years. 

Mr.  Warren.  Were  you  the  president  before  the  service- at-cost 

plan  was  introduced  there? 

Mr.  Stanley.  I  was  vice  president  and  general  manager. 

Mr.  Warren.  How  long  were  you  connected  with  the  road  befoi*e 
you  became  president? 

Mr.  Stanley.  I  had  been  with  the  road  about  36  years. 

Mr.  Warren.  What  did  you  start  as? 

Mr.  Stanley.  Hill  boy. 

Mr.  Warren.  Sanding  the  mil  ? 

Mr.  Stanley.  No;  pulling  the  cars  up  the  hill  with  a  horse. 

Mr.  Warren.  Tow  horse  ? 

Mr.  STANLiiY.  A  tow  hoi^se ;  yes. 

^ii\  Warren.  So  you  have  been  with  the  road  from  the  time  it 
w  as  a  horse  railway  down  to  the  time  that  it  became  a  service-at- 
cost  road? 

Mr.  Stanley.  Yes. 

Ml-.  Warren.  And  that  marked  some  change,  I  presume? 

Mr.  Stanley.  Yes;  I  have  seen  some  change. 

Mr.  Warren.  Now,  Mr.  Stanley,  you  have  to  go  at  5  o'clock,  do 

you  not? 

Mr.  Stanley.  Gr  very  soon  thei^after. 

Mr.  Warren.  I  want' to  leave  some  time  for  the  commissioners  to 
ask  some  questions,  so  I  do  not  want  to  take  up  too  much  time  ask- 
ing questions  myself;  but  I  should  like  to  have  you  give  the  com- 
mission a  sketch  of  this  service-at-cost  situation — how  it  came  about, 
and  how  it  is  working. 

Mr.  Stanley.  After  10  years  of  fighting  in  Cleveland  with  Tom 
Johnson  and  the  city  officials.  Judge  Tayler  devised  a  scheme  of  serv- 
ice at  cost.  The  scheme  was  to  deduct  from  the  i-eceipts  the  operating 
costs,  the  maintenance  costs,  taxes,  and  interest.  The  interest  cost 
was,  of  course,  tiie  6  per  cent  on  our  stock.  The  balance  would  go 
into  the  interest  fund.  When  that  interest  fund  became  $700,000 
or  more,  the  fare  was  reduced.  When  it  came  down  to  $300,000  the 
fare  was  increased.  So  the  interest  fund  is  the  barometer.  As  the 
interest  fund  reaches  $700,000,  there  is  nothing  else  to  do  but  to 
lower.    When  it  i*eaches  $300,000,  it  has  to  raise  it. 

We  operated  in  Cleveland  for  10  years  on  a  3-cent  fare,  3  and  1. 
We  are  now  operating  at  5  cents,  i  penny  for  a  transfer,  and  11 
tickets  for  50  cents. 

That  is  about  all  there  is  to  it 

Commissioner  Sweet.  What  was  the  fund  upon  which  you  pay 

the  6  per  cent  ? 

Mr.  Stanley.  Upon  which  we  pay  the  6  per  cent? 

Commissioner  Sweet.  You  s^ofee  of  it  as  stock.  Does  that  repre- 
sent the  entire  cost? 


PEOCEEDINGS  0¥  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       591 

Mr.  Stanley.  It  was  a  valuation  that  was  decided  upon  at  the 
time  of  the  Tayler  grant.  That  valuation  was  gotten  together  by 
not  onlv  the  city's  side  of  it  but  the  railway  side. 

Mr.  Wakren.'  That  was  a  valuation  of  the  whole  property? 

Mr.  Stanley.  A  valuation  of  the  whole  property.  We  were  al- 
lowed at  that  time  about  $110,000  a  mile  for  the  amount  of  tracks 
that  we  had  in  the  city  of  Cleveland. 

The  Chairman.  Including  equipment? 

Mr.  Stanley.  Yes;  including  equipment  and  everything. 

Mr.  Warren.  Did  that  valuation  include  anything  for  unexpired 
franchises,  do  vou  remember? 

IVIr.  Stanley.  Yes.    Yes,  sir;  about  three  million — $3,500,000. 

Mr.  Warren.  Tlmt  was  these  term  franchises  tliat  still  had  some 

time  to  run,  I  suppose? 

Mr.  Stanley.  Yes.  t    i  •  i 

Mr.  Warren.  And  you  mentioned  starting  on  3  and  1,  I  thmlc 

That  was  the  rate  of  fare? 

Mr.  Stanley.  That  was  the  rate  of  fare  we  decided  on  at  that 

time,  to  start  on. 

Mr.  Warren.  What  does  three  and  one  mean? 

Mr.  Stanley.  Three  cents  for  a  fare  and  a  penny  for  a  transfer. 

Mr.  Warren.  Was  that  the  lowest  rate  that  you  ever  had  ? 

Mr.  Stanley.  I  really  do  not  know  whether  we  ever  went  below 
that  or  not.  I  can't  recall.  I  think,  under  the  first  commissioner, 
we  did  operate  for  a  while  at  3  cents. 

Mr.  Warren.  At  3  cents? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  Without  the  transfer  charge? 

Mr.  Stanley.  Without  the  transfer  charge.  There  was  a  rebate. 
The  charge  was  made,  but  it  was  rebated. 

Mr.  Warren.  How  was  that  3  cents  paid — in  cash  each  time? 

Mr.    Stanley.  Either  cash  or   tickets.     A  ticket  was   worth   3 

cents. 

Mr.  Warren.  Those  tickets  were  bought  in  strips? 

Mr.  Stanley.  Yes;  they  were  in  a  strip — six  in  a  strip.  Five  at 
15  cents:  that  is  right.  . 

Mr.  Warren.  That  cash  fare,  Mr.  Stanley— was  that  strictly  a 
3-cent  cash  fare?  Suppose  a  man  got  on  without  any  ticket,  and  he 
did  not  have  3  i>ennies  in  his  pocket  but  had  a  nickel,  what  was  the 

fare  to  him  ? 

Mr.  Stanley.  He  paid  the  nickel. 

Mr.  W.UIKEN.  In  other  words,  the  conductor  did  not  make  change  ? 

Mr.  Stanley.  That  is  true. 

Mr.  Warren.  Suppose  he  had  a  dime.     Did  he  make  change  tor 

*Mr.  Stanley.  Well,  we  had  one  line  that  ran  down  to  the  Union 
Depot  that  we  used  to  charge  a  penny  for.  If  he  put  in  a  nickel, 
why  it  was  all  right.  If  he  put  in  a  dime,  it  was  all  right.  We 
would  keep  the  dime  or  the  nickel,  or  whatever  he  put  m. 

Mr.  Warren.  That  is  a  veiy  short  ride,  as  I  recall  it? 

Mr   Stanley.  It  was  a  mile— about  a  mile  long. 

Mr.  Warren.  That  was  from  the  square  down  to  the  Union  Sta- 
tion? -,         J.    j_i       ' 

Mr.  Stanley.  From  the  square  down  to  the  piers. 


i 


592       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Uv.  Warrex.  I  should  like  to  turn  the  witness  over  to  the  com- 
mission now,  because  I  know  you  are  interested  in  this  subject ;  and 
^vhile  I  think  I  know  somethinor  about  the  subject,  I  thmk  your 
questions  are  apt  to  be  directed  to  the  points  that  you  want  to  know 
about;  and  Mr.  Stanley,  I  think,  represents  the  pioneer  company  in 
this  so-called  service-at-cost  plan.  r     o      i       xi    ^         ^ 

You  were  the  first  company  in  the  country,  Mr.  Stanley,  that  went 

into  it,  were  you  not? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  Is  it  a  term  franchise  that  you  have  now? 

Mr.  Stanley.  It  is  a  perpetual  franchise.  It  is  a  franchise  that 
runs  25  years ;  but  every  10  years  they  are  supposed  to  renew  it.  If 
thev  do  not  renew  it,  the  service  goes  back  to  the  railway  company; 
and  then  we  are  supposed  to  get  our  money  out  of  it  in  the  last  15 
years,  at  the  maximum  rate  of  fare.  Our  maximum  rate  of  fare 
to-day  is  a  6-cent  fare  and  a  penny  for  a  transfer. 

MiC  Warren.  What  fare?  n^,    ^  . 

Mr.  Stanley.  Six  cents,  with  a  penny  for  a  transfer.  1  hat  is  our 
maximum  rate  of  fare  that  we  can  charge.    We  are  not  charging  it. 

Mr.  Warren.  Oh,  yes.    What  are  you  charging? 

Mr.  Stanley.  Five  and  one,  and  11  tickets  for  50  cents. 

Mr.  Stanley.  Oh,  yes.  .        ^  .,     i.        i  • 

The  Chairman.  Mr.  Nash  is  going  to  file  copies  of  the  franchises 

with  us,  is  he  not? 
]SIr.  Warken.  Yes.  .       .  .         ,      ^  xi. 

The  Chairman.  So  there  is  no  need  of  our  inquiring  about  the 

terms?  ... 

Mr.  Warren.  I  do  not  think  there  is.  I  think  it  is  more  the  gen- 
eral principles,  the  working  of  it. 

The  Chairman.  It  is  the  general  principles  and  the  ettect « 

Mr.  AVarren.  Yes.  . 

The  Chairman.  How  long  has  that  franchise  been  in  eiiect  i 

Mr.  Stanley.  Ten  years,  sir. 

The  Chairman.  The  cost-of-service  franchise? 

Mr.  Stanley.  Yes. 

The  Chairman.  What  fare  did  you  start  at? 

Mr.  Stanley.  We  started  at  three  and  one. 

The  Chairman.  What  is  it  now? 

Mr.  Stanley.  Five  and  one. 

The  CHAIR3IAN.  When  was  it  made  five? 

Mr.  Stanley.  I  will  read  it  off  to  you. 

To  May  31,  1911,  rate  E,  3-cent  cash  fare,  1-cent  transfer. 

To  August  31,  1914,  rate  F,  3-cent  fare,  1-cent  transfer,  and  1-cent 

To  December  14,  1917,  rate  E,  3-cent  cash  fare,  1-cent  transfer. 

To  December  25,  1917,  rate  D,  4-cent  cash  fare,  3  tickets  for  10 
cents,  1-cent  transfer,  and  1-cent  rebate. 

To  April  2,  1918,  4-cent  cash  fare,  3  tickets  for  10  cents,  1-cent 
transfer. 

To  April  9 

Mr.  Warren.  No  rebate? 

Mr.  Stanley.  No  rebate. 

Mr.  Warren.  What  does  that  rebate  mean,  Mr.  Stanley? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       593 

Mr.  Stanley.  Well,  when  you  receive  the  transfer,  you  pay  a 
penny ;  and  if  you  do  not  rebate,  of  course,  the  company  keeps  the 
penny ;  but  if  you  rebate,  the  conductor  hands  back  the  penny  to  the 
passenger  at  the  time  he  turns  in  his  transfer. 

Mr.  Warken.  Oh,  yes. 

The  Chairman.  It  is  very  hard  to  hear  you,  Mr.  Stanley. 

Mr.  Stanley.  To  August  3,  1918,  rate  A,  4-cent  cash  fare,  seven 
tickets  for  25  cents,  1-cent  transfer. 

To  August  6,  1919,  rate  2d,  5-cent  cash  fare,  five  tickets  for  25 
cents,  1-cent  transfer. 

Now,  the  only  reason  that  the  five  tickets  for  25  cents  were  put  in 
there  was  as  an  accommodation  to  the  public.  They  liked  the  five 
tickets,  rather  than  pay  a  cash  fare. 

The  Chairman.  How  long  did  you  operate  under  that  contract  be- 
fore you  increased  rates? 

Mr.  Stanley.  Well,  up  to  December  25,  1917. 

The  Chairman.  That  was  how  many  years? 

Mr.  Stanley.  That  is  over  eight  years. 

The  Chairman.  That  was  on  a  3  and  1  basis? 

Mr.  Stanley.  That  was  on  a  3  and  1  basis  ? 

The  Chairman.  During  all  of  that  time  was  the  company  meeting 
the  contract  provisions? 

Mr.  Stanley.  Yes;  in  a  way. 

The  Chairman.  Then  you  had  no  difficulty  in  paying  your  wages, 
maintaining  your  property,  and  taking  care  of  fixed  charges  on  a 
3  and  1  fare  from  1908  up  to  1917  ? 

Mr.  Stanley.  We  had  a  deficit  each  and  every  year,  which  was 
taken  care  of  in  the  following  year.  Otherwise,  we  got  along  very 
well  with  it.  *    . 

The  Chairman.  Well,  from  what  fund  was  that  deficit  paid? 

Mr.  Stanley.  Under  the  ordinance  we  are  allowed  so  much  for  op- 
erating, cents  per  car-mile,  and  so  much  for  maintenance,  cents  per 
car-mile.  After  the  first  year  of  operation,  when  we  found  that  it 
was  not  sufficient  to  take  care  of  it,  they  allowed  a  sufficient  fund,  or 
allowed  a  special  allowance  to  take  care  of  the  deficit  of  the  year 
before. 

The  Chairman.  But  this  fund  is  created  out  of  the  operating 

revenue  ? 

Mr.  Stanley.  Yes. 

The  Chairman.  Everything  comes  out  of  the  fare? . 

Mr.  Stanley.  Yes. 

The  Chairman.  Then,  you  were  able  to  operate  that  'plant  and 
pay  all  of  the  expenses  and  maintain  the  property  and  take  care  of 
fixed  charges? 

Mr.  Stanley.  Yes. 

The  Chairman.  Out  of  the  revenues? 

Mr.  Stanley.  Yes. 

The  Chairman.  On  the  3  and  1  basis? 

Mr.  Stanley.  Yes. 

The  Chairman.  Do  you  regard  the  value  of  that  plant  as  fair? 

Mr.  Stanley.  No,  sir;  we  were  not  satisfied  with  the  valuation  at 
the  time  the  settlement  was  made.    They  cut  our  stock  down  from 


I 


594       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

par  to  55.    I  will  frankly  say  that  if  we  were  allowed  at  that  tiino 
about  80,  we  would  have  been  satisfied.    ^    ^      ^        _      ^  .  ,, 

The  Chairman.  How  many  years  had  the  franchise  to  go  at  tlu- 

time  this  contract  was  made  ?  ,  ^        j     ^i.        i     i 

Mr.  Stanley.  Some  of  them  were  runnmg  out,  and  others  had 

four,  or  five,  or  six,  or  seven  years  probably,  to  go.        ,     ,.       .      ^, 
The  Chairman.  Do  you  consider  that  $3^00,000  valuation  for  the 

franchise  as  fair? 

Mr.  Stanley.  To  some  extent.  ...  01^79 

The  Chairman.  You  began  increasing  these  charges  m  lyiT  ? 

TVTt    ^ta^TjKY     jl  es 

The  Chahoian.  Those  charges,  1  undei-stand,  work  automatically ; 
as  the  increased  cost  takes  place,  the  fare  increases? 

^Tv      ^TA'NT  EY       JL  es 

The  Chairman.  There  has  been  quite  a  number  of  increases  here 
in  the  last  year  and  a  half— four,  I  think.  As  I  recall  your  testi- 
mony, there  have  been  about  four  increases  in  the  last  year  and  a 

half. 

Mr.  Stanley.  That  is,  in  the  fare? 

The  Chairman.  Yes. 

IMr    Stanuey    Y^es 

The  Chairman.  Now,  what  effect  did  those  increases  have  upon 

the  patrons?  ^    ,     ,  ,    i     ,     j.    ir    i. 

Mr.  Stanley.  Why,  none  at  all.  It  had  a  good  deal  of  ellect  on 
the  politician,  but  not  on  the  car  rider.  I  think  the  car  rider  real- 
izes that  he  ought  to  pay  more  fare.  .  . 

The  Chairman.  Well,  under  your  contract,  does  the  city  maintain 
strict  supervision  over  expenditures? 

Mr.  Stanley.  They  do. 

The  Chairman.  And  over  your  accounts? 

Mr.  Stanley.  They  da 

The  Chairman.  In  what  way?  , 

Mr.  Stanlf:y.  They  have  to  approve  everything  that  we  buy,  and 
Ihev  have  absolute  supervision  over  our  accounts. 

the  Chairman.  And  they  have  supervision  over  your  contracts 

as  well  ? 

Mr.  Stanley.  Yes.  .  ,_.,  « 

The  Chairman.  Are  all  of  the  contracts  submitted  on  bids? 

Mr.  Stanley.  Yes.  1. ,  « 

The  Chair^ian.  And  the  city  has  to  approve  those  bids? 

Mr.  Stanley.  Thev'  have  to  approve  bicls. 

The  Ch-airman.  How  large  a  force  does  the  city  use  in  that  work? 

Mr.  Stanley.  Well,  the  cost  of  the  commissioner's  office  runs  any- 
where from  $40,000  to  $60,000  a  year. 

The  Chairman.  How  many  men  are  employed? 

Mr.  Stanley.  They  have  something  like  20  or  25  men— 25  men. 

The  Chairman.  Is  the  cost  of  maintaining  that  office  charged  to 
the  operation  of  the  railway  or  paid  for  out  of  taxes? 

Mr.  Stanley.  It  comes  out  of  the  railway. 

The  Chairman.  It  comes  out  of  the  railway? 

Mr.  Stanley.  Yes. 

The  Chairman.  Then  the  whole  public,  as  well  as  the  private 
control  of  the  road,  is  charged  to  operation? 

Mr.  Stanley.  Yes. 


PROCEEDOfGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIGS".       595 

The  Chairman.  How  many  accountants  are  maintained  by  the 

public? 

Mr.  Stanley.  I  think  they  have  pi-obably  three  accountants. 

The  Chairman.  They  devote  all  of  their  time  to  a  study  of 
your 

Mr.  Stanley.  Accounts. 

The  Chairman  (continuing).  Property? 

IVIr.  Stanley.  Yes.  They  even  inspect  our  work  on  the  tracks 
and  inspect  our  cars. 

The  Chairman.  Does  this  city  supervision,  in  your  judgment, 
prevent  the  company,  if  so  disposed,  from  profiting  out  of  contracts 
which  it  makes  in  supplies  with  others? 

Mr.  Stanley.  I  do  not  believe  there  is  any  way  of  profiting  fi'oni 
contracts  under  this  scheme. 

The  Chairman.  Under  this  scheme? 

Mr.  Stanley.  Xo. 

The  Chairman.  Of  course,  it  has  been  under  tlie  old  method — 
perhaps  not  in  Cleveland? 

Mr.  Stanley.  I  do  not  know  of  any  that  has  been  done. 

The  Chairman.  By  individuals,  I  mean  the  officers  of  the  com- 
pany. 

Mr.  Stanley.  Personally,  I  never  have  had  that  occur,  that  I  know 
of,  in  my  organization.    It  may  have  happened,  but  I  do  not  know 

of  it. 

The  CiLMRMAN.  Well,  could  that  happen  under  this  system  of 

supervision? 

iVIr.  Stanley.  Yes ;  it  could  happen. 

The  Chairman.  Would  it  not  have  to  be  collusion  between  the 
offi(  er  of  the  railway  and  that  of  the  city  ? 

Mr.  Stanley.  Sure. 

The  Chairman.  It  is  very  hard  to  get  collusion  among  three 

parties,  is  it  not? 

Mr.  Stanley.  Yes,  sir;  it  is. 

The  Chairm^vn.  Well,  during  the  whole  time  the  capital  on  the 
fixed  charges  had  been  paid  upon  the  investment? 

Mr.  Stanley.  Yes. 

The  Chairman.  Had  they  been  making  any  extensions  and  im- 
provements since  this  contract  was  made? 

Mr.  Stanley.  We  are  making  five  extensions  this  year. 

The  Chairman.  Wliat  is  the  cost  of  those? 

Mr.  Stanley.  The  extensions  are  running  probably  a  mile  to  an 
extension,  which  would  make  it  anywhere  from  5  to  7  miles  of  exten- 
sion this  year;  and  the  cost  of  those  extensions  would  run  from 
$50,000  to  $60,000  a  mile. 

The  Chairman.  Where  did  you  get  the  money? 

Mr.  Stanley.  From  our  stockholders. 

The  Chairman.  You  sold  new  stock? 

Mr.  Stanley.  We  sold  new  stock. 

The  Chairman.  What  was  that  stock  sold  at? 

Mr.  Stanley.  At  par.    We  can  not  sell  it  at  any  less. 

Tlie  Chairman.  Was  there  any  trouble  in  disposing  of  it? 

Mr.  Stanley.  We  have  not  had  any  trouble.  We  had  trouble 
when  we  first  started  the  grant.     That  might  be  of  interest  to  you.   • 

The  Chairman.  Was  that  sold  to  the  stockholders  locally?. 


I 


596       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Stanley.  Yes.  I  would  be  very  glad  to  furnish  you  that. 
We  have  with  our  company  5,202  stockholders.  Seventy  per  cent  of 
those  are  local  stockholder— Cleveland  stockholders.  All  the  trust 
companies— three  of  them— in  Cleveland  control  possibly  anywhere 
from  $1,000,000  to  $2,000,000  worth  of  stock  for  estates,  widows,  and 

orphans.  -    .     i    •         i  £ 

The  CiiAiRi^iAN.  What  was  the  total  amount  of  stock  issued  for 

these  new  extensions?  _       ,      ^  ,  i.  i.i  ;i 

Mr.  Stani^y.  That  I  can't  say  offliand.    I  have  not  the  record 

here 

The  Chairman.  It  is  comforting  to  be  able  to  find  one  street-car 
company  in  the  country  that  can  sell  its  stock  at  par. 

Mr.  Stanley.  Yes.  .      x     -^i.  xr.      -4    « 

The  Chair:^ian.  Is  that  the  result  of  your  contract  with  the  city? 

Mr.  Stanley.  Yes  and  no.  _        .     ^,      ,      -,  ^i    *     *  u 

The  Chairman.  What  are  the  conditions  m  Cleveland  that  estab- 
lishes this  credit  for  your  company  ?  .        ,  i.  TIT 

Mr  Stanley.  If  I  might  read  this  quotation  here  from  Mr. 
Baker.  Hon.  Newton  D.  Baker,  upon  taking  office  as  mayor  of 
Cleveland,  January  1,  1912,  wrote  a  letter,  in  which  he  said: 

Mv  advice  and  hopes  are  that  from  now  on,  by  cooperation  and  sympathy, 
the  company  and  the  city  administration  can  worls  out  their  respective  parts 
of  whai  is"  in  effect,  a  common  trust  of  the  public  welfare.  The  luterests  of 
the  owners  of  the  property  and  the  people  whom  it  serves  are  one 

Now,  there  is  the  secret.  If  the  city  and  the  railw.^y  company 
work  together,  the  plan  will  be  successful.  ^ 

The  Chairman.  Is  there  a  real  confidence  between  t.e  public  ana 

the  railway  company  ? 

Mt.  Stanley.  There  has  been;  yes,  sir. 

The  Chairman.  Is  there  to-day  ?  .  ,     ,  *i,  4. 

Mr.  Stanley.  Yes  and  no.  A  man  might  become  mayor  that 
cares  more  for  his  affiliations  with  the  unions  than  ue  would  with 

the  railroads.  ,...,,      i         i        o 

The  Chairman.  AVill  you  speak  a  little  louder,  phase ? 
Mr.  Stanley.  He  would  do  things  for  the  unions  and  would  not 

care  anything  about  what  he  did  for  the  companies.  ^    .     .^ 

The  Chairman.  Well,  just  elaborate  on  that  a  little.     I  don't 

know  what  you  mean.  ^  .,      •     /^i      i      i 

Mr.  Stanley.  Well,  we  just  got  through  a  strike  in  Cleveland. 
The  Chairman.  I  thought  you  would  lead  up  to  that. 

Mr.  Stanley.  Yes.  ^     ^ir      .  .i  •  4. 

The  men  were  asking  for  more  wage.  On  May  1  they  came  into 
my  office— the  union  did— and  said  to  me,  "  Now,  we  are  not  going 
to  ask  for  an  increase.  If  you  won't  ask  to  decrease  our  wage,  we 
-won't   ask   to   have   it   increased."     Detroit   comes    along   in    six 

weeks ■ 

Mr.  Warren.  What  were  they  getting  then,  Mr.  Stanley  ? 

Mr.  Stanley.  They  were  getting  48  cents.    That  was  high,  and 

the  low  was  42.  i.  ^  -i 

Detroit  comes  along  and  pays  the  men  60  cents,  after  a  strike. 
Our  men  immediately  came  to  me  and  said,  "Now,  we  are  going  to 
ask  for  more  wages."  "  Well,"  I  said,  "  What  about  May  1 V  "Well, 
that  don't  make  any  difference;  we  are  going  to  get  more.  I  said, 
"All  right;  now,  i  don't  propose  to  sit  here  and  argue  and  talk 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       597 

with  you  on  the  wage  question.  We  will  take  our  troubles  right 
to  the  city  council  and  see  if  we  can  not  fight  it  out  there.  The 
mayor  immediately— of  course,  they  went  to  call  on  the  mayor— and 
the  mayor  said,  "  Of  course,  you  are  entitled  to  60  cents, '  and  that 
is  all  there  was  to  it.  Now,  we  did  go  before  the  council,  and  they 
did  get  their  60  cents.  I  got  an  increase  in  operating  cost,  and  I 
have  an  increase  in  maintenance.  I  got  the  maximum  rate  of  fare 
changed  from  4  cents  and  a  penny  for  transfer  to  6  cents  and  a 
penny  for  transfer,  and  there  is  to  be  arbitration  on  whether  we 
are  entitled  to  7  per  cent  on  our  stock  or  6  per  cent. 

The  Chairman.  Well,  in  the  first  place 

Mr.  Warren.  What  did  you  mean  by  saying  on  May  1  ? 

Mr.  Stanley.  That  was  the  time  that  the  union  had  a  right  to 
open  their  contract  for  a  wage. 

Mr.  Warren.  If  they  do  not  do  it  within  30  days 

Mr.  Stanley.  If  they  do  not  do  it  within  30  days  it  carries  over 
the  next  year. 

Mr.  Warren.  And  they  had  not  opened  it  up? 

Mr.  Stanley.  Had  not  opened  it  up. 

The  Chairman.  Does  this  contract  fix  a  maximum  charge  of  6 

cents  ? 

Mr.  Stanley.  It  fixes  the  maximum  charge  at  6  cents  and  a  penny 

f oi'  fi  'transfer 

The  Chairman.  And  what  return  on  the  capital  does  the  contract 

fix? 

Mr.  Stanley.  Six  per  cent. 

The  Chairman.  Six  per  cent? 

Mr.  Stanley.  Yes.  . 

The  Chairman.  In  this  negotiation,  you  say  the  union  wanted 
GO  cents  an  hour? 

Mr.  Stanley.  Yes.  ,  i  j 

The  Chairman.  And  then  the  stockholders  came  along  and  wanted 

7  per  cent? 

Mr.  Stanley.  Yes.  ^  1 ,    ,  i       • . 

The  Chairman.  What  difference  did  it  make  to  the  stockholders  if 
the  union  got  40  or  50  or  60  cents  an  hour  so  long  as  the  stockholders 
got  their  return  ? 

Mr.  Stanley.  Well,  the  stockholders  used  the  same  argument  that 
the  men  were  using,  that  the  high  cost  of  living  was  so  that  they  had 
to  have  more  wages;  and  if  that  applied  to  the  union,  it  certainly 
applied  to  the  stockholders. 

The  Chairman.  Well,  but  under  your  contract  you  say  the  umon 
can  come  in  on  the  1st  of  May  each  year  and  ask  for  an  adjustment  of 

Mr.  Stanley.  But  we  can  me^t  that  any  time  on  any  change  we 
want  to  make  in  the  contract. 

The  Chairman.  Even  as  to  the  return  upon  the  capital? 

Mr.  Stanley.  Yes;  that  can  be  arbitrated  as  well  as  anything  else. 
Now,  the  contract  has  been  changed 

The  Chairman.  Can  the  city  reduce  that  return? 

Mr.  Stanley.  Can  they  reduce  it? 

The  Chairman.  Yes. 

Mr.  Stanley.  Not  below  6. 

The  Chairman.  You  can  only  arbitrate  for  an  increase? 


598       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

The  ChIirmIn.  Well,  supposing  labor  gets  60  cents  an  hour;  can 

you  then  operate  on  a  C-cent  fare?  ^       i  -,         rn  ^^r,f. . 

Mr  Stanley.  Yes;  I  think  we  can  operate  on  6  and  1,  on  60  cents, 

but  if  the  wages  go  up  above  60  cents,  I  doubt  very  much  whether  we 

could  operate  on  that.  ,. ,  .a     i^r         i^      i.4- 

The  Chairman.  Suppose  the  wage  did  go  up  to  the  Massachusetts 

basis  and  you  found  that  you  could  not  operate  under  a  6-cent  tare ; 

what  would  be  your  remedy  ? 

ISIr.  Stanley.  A  change  of  that  maxmium,  of  course. 

The  Chairman.  Then,  as  a  matter  of  fact,  if  you  are  going  to  have 

a  cost-of -service  scheme  of  operation,  should  there  be  any  maximum 

fixed  to  the  charge  ?  ,      , ,  ,  •      _ 

Mr   Stanlet.  In  a  franchise,  there  should  not  be  any  maximum 

or  minimum  rate  of  fare.     Eliminate  that,  and  your  troubles  are 

^^The  Chairman.  Are  you  satisfied  that  this  scheme  is  as  good  a 
one  as  can  be  created  for  the  utilities  and  the  public? 

Mr  Stanley.  I  do  not  know.  I  know  that  it  has  carried  us 
throuffh  these  10  years,  and  I  know  we  have  been  on  easy  street 
those  last  four  or  five  years,  which  no  other  railroad  company  in 

this  country  has  been. 

The  Chairman.  Now,  can  you  suggest  a  better  plan? 

Mr.  Stanley.  No  ;  I  can  not. 

The  Chairman.  Do  you  think  this  is  as  good  a  plan  as  can  be 
devised  to  take  care  of  the  companies,  as  well  as  the  public,  during 
good  as  well  as  during  bad  times? 

Mr.  Stanley.  Yes.  , ,.  .  i       j-j. 

The  Chairman.  Do  you  feel  that  this  plan  establishes  a  good  credit 

for  the  company  ?  ,  ,  ,    ^      i_     i 

Mr.  Stanley.  Without  a  doubt.     I  do  not  know  what  a  banker 

is  in  my  business.  ,     ,   ,  ,        0       ^        ^  u  19 

The  Chairman.  And  creates  an  absolutely  safe  return  for  capital  I 

Mr.  Stanley.  Yes. 

The  Chairman.  And  assures  labor  a  fair  wage  5 
Mr.  Stanley.  Yes.  0 

The  Chairman.  And  the  public  a  good  service  i 

Mr.  Stanley.  Yes.  ,  ,       ^  •    •        1  x      i 

The   Chairman.  What  does  the   State  commission   have  to   do 

with  the  street  railways  in  Cleveland  ?      ,     ^    ^  .    .       ^ 

Mr  Stanley  You  have  to  go  before  the  State  commission  to  get 
an  increase  in  capitalization.  Now,  they  have  never  bothered  us. 
Whatever  we  wanted  from  the  State  commission,  with  the  recom- 
mendation of  our  street-railway  commissioner,  they  have  granted. 

The  Chairman.  Now,  looking  forward  to  the  best  sort  of  scheme 
that  can  be  evolved,  do  you  feel  that  the  State  commission  should 
have  anything  to  do  with  the  control  of  the  rates,  service,  extensions, 
betterments,  expenditures,  and  accounting  of  your  company  ? 

Mr.  Stanley.  It  surely  depends  entirely  upon  the  personnel  of 

any  board  that  you  go  to.  .    •       1  *v   «. 

The  Chairman.  Well,  should  the  State  commission  have  anything 
to  do  with  the  things  that  I  have  mentioned? 

Mr.  Stanley.  Should  they  have  that? 

The  Chairman.  Yes. 


PROCEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION.       599 

• 

Mr.  Stanley.  Yes ;  I  think  so. 

The  Chairman.  What  should  they  have  to  do  with  it? 

Mr.  Stani^y.  I  think  we  would  be  safer  in  goiiig  to  the  State 
commission  than  we  would  in  going  to  a  city  commission. 

The  Chairman.  Well,  do  you  believe  that  the  State  commission, 
then,  should  have  that  supervision  over  your  company,  which  is  now 
maintained  by  the  city  ?  .  . 

Mr.  Stanley.  The  fact  of  the  matter  is  that  they  have  supervision 
over  our  company  to-day. 

Mr.  Warren.  iThe  State  commission? 

Mr.  Stanley.  As  well  as  the  city. 

The  Chairman.  I  understood  you  to  say  that  it  does  not  have  that 
supervision. 

Mr.  Stanley.  As  well  as  the  city,  because  when  we  appear  be- 
fore the  State  commission  for  an  increase  in  capitalization  we  have 
to  show  our  expenditures. 

The  Chairman.  Oh,  that  is  true,  but  the  State  commission  has 
nothing  to  do  with  the  service  furnished  by  your  company. 

Mr.  Stanley.  Not  at  all. 

The  Chairman.  Or  with  its  constructioa? 

Mr.  Stanley.  No. 

The  Chairman.  Or  with  its  operation? 

Mr.  Stanley.  No. 
-The  Chairman.  Or  its  accounts? 

Mr.  Stanley.  Well,  only  as  far  as^ 

The  Chairman.  The  only  supervision  is  as  to  capitalization.  The 
city  has  that  entirely.  Now  then,  should  the  State  or  city  have  that 
supervision? 

Mr.  Stanley.  Personally,  I  don't  care  which  has  it. 

The  Chairman.  Well,  you  must  have  an  opinion.  You  have  been 
in  this  business  for  a  long  while. 

Mr.  Stanley.  I  know  that  the  city  has  had  it,  and  we  have  not 
had  any  trouble  so  far. 

The  "CHAIR3I.VN.  Are  you  satisfied  with  the  present  arrangement? 

Mr.  Stanley.  Am  I? 

The  Chairman.  Yes, 

Mr.  Stanley.  Yes;  I  am. 

The  Chairman.  What  was  the  effect  upon  the  employees,  speaking 
about  service  and  efficiency,  since  this  contract  was  made  ? 

Mr.  Stani^y.  Do  you  mean  as  to  whether  or  not  it  was  better  or 
poorer  ? 

The  Chahlman.  Yes, 

Mr.  Stanley.  I  do  not  think  the  plan  had  anything  to  do  with  it. 
I  think  the  times  themselves  have  had  a  good  deal  to  do  with  it,  but 
the  men  are  not  as  efficient  now  as  they  were  four  or  five  years  ago. 

The  Chairman.  Is  there  anything  in  this  system  that  compels  the 
company  to  exercise  initiative  and  economies  in  the  service? 

Mr.  Stanley.  Well,  I  think  it  is  shown  very  clearly  that  there 
must  have  been  some  economy  in  the  service  by  operating  that  rail- 
road for  10  vears  on  a  3-cent  basis. 

The  Chaiiiman.  But  under  this  plan,  where  your  wages  and  rates 
work  up  and  down  automatically,  can  you  not  conceive  that  the  com- 
panies may  be  extravagant,  that  their  operation  may  be  very  ex- 


600       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

travagant,  and  the  costs  piled  up  all  the  time,  without  any  protec- 
tion whatever  to  the  public? 

Mr.  Stanley.  That  might  happen ;  yes. 

Tlie  Chair^ean.  Because  the  company  itself  is  protected  by  its 
returns  upon  the  capital. 

Mr.  Stanley.  Sure. 

The  Chairman.  Now,  if  that  situation  should  develop,  how  could 
the  public  protect  itself  against  an  increased  charge  and  increased 
operating  costs?  .  ,        •         i 

yiv.  Stanley.  Well,  of  course,  our  franchise  gives  the  city  the 
right  to  take  over  our  property  at  any  time  at  110. 

The  Chair>l\n.  Then  the  protection  to  the  public  grows  out  of  the 
fact  that  they  can  buy  that  plant  at  110? 

Mr.  Stanley.  Sure. 

Mr.  Warren.  Does  the  city  comptroller  control  your  expenses  and 

supervise  them? 

Mr.  Stanley.  If  he  sees  any  extravagance  he  can  stop  it. 

The  Chairman.  That  is  what  I  am  trying  to  develop. 

Mr.  Stanley.  Yes. 

The  Chairman.  I  am  trying  to  find  out  how  the  public  can  protect 
itself  against  extravagant  operation. 

^Ir.  Stanley.  I  will  read  3-ou  a  clause  from  the  franchise  that  will 
probably  give  it  to  you. 

The  Chairman.  It  seems  to  me  that  that  is  a  very  important  point 
in  connection  with  this  cost -of -service  plan,  because  you  can  not  have 
something  that  gives  absolute  protection  to  capital  and  no  protection 
to  the  public. 

Mr.  Warren.  I  understand  that  the  city  comptroller  of  Cleveland 
has  absolute  control  over  that. 

The  Chairman.  That  is  what  I  wanted  to  find  out 

Mr.  Warren.  Yes. 

Mr.  Stanley.  Section  10  of  the  franchise  reads : 

Immediately  upon  the  taking  effect  of  this  ordinance  there  may  be  desig- 
nated by  the  city  a  city  street-railroad  commissioner,  which  designation 
shall  be  made  by  the  mayor  of  the  city,  subject  to  the  approval  of  the  city 
council.  The  city  reserves  the  right,  at  any  time,  and  from  time  to  time,  to 
remove  the  street-railroad  commissioner  designated  by  it,  such  removal  to  be 
by  the  mayor,  and  to  fill  the  vacancy  in  the  manner  provided  for  original 
designation ;  and  the  city  shall  forthwith  upon  the  naming  of  any  city  street- 
railroad  commissioner  notifj'  the  company  in  writing  of  the  name  and  address 
of  such  commissioner.  The  city  street-railroad  commissioner  shall  act  as 
the  technical  adviser  of  the  council  of  the  city  of  Cleveland  in  all  matters 
affecting  the  Interpretation,  meaning,  or  application  of  any  of  the  provisions 
of  this  ordinance  and  of  action  thereunder  affecting  the  quantity  or  quality 
of  service  or  the  cost  thereof  or  the  rate  of  fare.  He  shall  keep  always  in- 
formed as  to  all  matters  affecting  the  cost  or  quality  or  quantity  of  service 
furnished,  the  receipts  and  disbursements  and  property  of  the  company,  the 
rate  of  fare,  the  vouchering  of  expenditures;  and  if  he  disapproves  of  the 
voucherlng  of  expenditures,  or  of  the  manner  of  keeping  accounts  or  other 
matter  affecting  the  bookkeeping  of  the  company,  he  shall  at  once  take  the 
matter  up  with  the  company;  and  in  case  of  disagreement  the  matter  shall 
at  once  be  submitted  to  the  committee  on  standard  classification  of  accounts 
of  the  American  Street  &  Interurban  Railway  Accountants'  Association,  or 
to  such  person  or  persons  upon  whom  the  regulation  of  such  matters  may 
from  time  to  time  be  devolved  by  law ;  and  the  decisions  of  such  committee  or 
person  or  persons,  not  inconsistent  with  the  provisions  of  this  ordinance,  to 
whom  this  question  shall  be  submitted,  shall  be  flnaU 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       601 

The  Chairman.  Now,  will  you  let  me  give  you  a  concrete  ex- 
ample? Suppose  that  you  had  agreed  to  pay  labor  60  cents  an  hour. 
Could  the  city  exercise  any  veto  ov-er  that  order  ? 

Mr.  Stanley.  Yes;  I  have  always  been  very  careful  to  get  the  ap- 
proval of  the  city  in  such  a  thing. 

The  Chairman.  Well,  you  have  as  a  matter  of  policy,  but  as  a 
matter  of  fact,  can  the  city  veto  that  wage  agreement  ? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  Through  the  allowance,  Mr.  Stanley  ? 

Mr.  Stanley.  Through  the  allowance.  They  would  not  give  us 
enough  allowance  to  take  care  of  it. 

The  CHAIR3IAN.  I  did  not  get  that  matter  of  the  allowance  very 

clearly. 

Mr.  Warren.  Explain  that  allowance  matter,  Mr.  Stanley. 

Mr.  Stanley.  All  right.  In  the  operating  allowance,  the  city  al- 
lows us-  so  much  a  car-mile  to  operate  our  road.  Now,  if  the  wage 
goes  up  above  that  allowance,  they  would  absolutely  refuse  to  in- 
crease our  allowance,  and  we  could  not  pay  the  men. 

Mr.  Waren.  That  allowance  is  for  all  the  operating  expenses,  if 

it  not? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  Including  wages? 

Mr.  Stanley.  Yes. 

The  Chairman.  Then,  the  city  can  prevent  the  pyramiding  of 
wages  or  any  other  operating  expenses? 

Mr.  Stanley.  Yes;  they  can. 

The  Chairman.  Then,  the  city  has  a  double  protection  J.g/J^xst  ex- 
travagant operation? 

^Ir.  Stanley.  Yes,  sir. 

The  Chairman.  One  by  curtailing  your  charges,  and  the  other  by 
taking  over  your  property? 

Mr.  Stanley.  Yes.  They  prescribe  the  service  grv%n.  They  tell 
us  how  many  cars  we  can  operate,  and  operate  them  at  a  certain 
cost ;  so  they  have  a  check  there  also. 

Mr.  Warren.  Can  you  make  a  contract  without  their  approval? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  Assume,  then,  that  these  agreements  with  the  men 
are  what  they  purport  to  be,  contracts,  it  is  not  only  as  a  matter 
of  caution  but  as  a  matter  of  necessity  that  you  should  submit  tho 
figures  to  the  city,  is  it  not? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  What  is  the  maintenance  allowance? 

Mr.  Stanley.  What  does  it  amount  to  to-day  ? 

Mr.  Warren.  No  ;  but  how  is  that  fixed  ? 

Mr.  Stanley.  That  is  fixed  by  the  council  at  9  cents  a  car-mile. 

Mr.  Warren.  Do  you  mean  now  or  it  always  has? 

Mr.  Stanley.  It  is  now.    It  started  with  5,  and  it  has  finally  got 

up  to  9. 
Mr.  Warren.  That  is,  they  allow  5  cents  for  each  car-mile  you 

run? 
Mr.  Stanley.  Yes. 
Mr.  Warren.  For  the  maintenance  of  the  property? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  Does  that  include  renewals? 


160043**— 20- 


39 


602       PItOCTEEDmGS  OF  FEDERAL  ELECTRIC  BAILWATS  COMMTSSTOIT. 

Mr.  Stanley.  That  does  not  include  depreciation. 

Mr  Warren.  Well;  it  indndes  all  the  current  maintenance? 

Mr   Stanley.  Yes;  the  ordinary  maintenance.  •  *•      o 

Mr*  Wx«REN.  Well;  is  there  any  other  allowance  for  depreciation ? 

Mr  Stanley.  The  depreciation  is  taken  care  of  through  the  re- 
production valu€.  I^ow,  if  we  scrap  a  car,  we  ^^^^P  ^^^t^^^V*^,^^^ 
reproduction  value.  To-day  any  car  that  we  scrap  would  be  scrapiml 
at  $6,000  a  car.     That  is  how  the  depreciation  is  taken  care  of. 

Mr  Warren.  When  >^i  were  operating  on  a  3-cent  tare  and  a 
1-cent  transfer-^theaowest  rate  that  you  operflted  under 

Mir   Stanley    Yes 

Mr*.  Warren'  (continuing).  Did  you  happen* to  make  any  over- 
drafts on  your  operating  reserves?  ^^.^..Wn  ..«rP 
Mr.  Stanley.  Yes;  we  had  some  overdrafts,  but  it  was  taken  caie 

of  in  the  following  year. 
Mr.  Warren.  Afterwards? 

Mr.  Stanley.  Yes.  .  «     r^.       „  ^4. 

Mr.  Warren.  What  caused  the  overdrstf t  ?— The  allowance  wus  not 

^  Mr.^STANLEY.  The  allowance  was  not  sufficient  to  take  care  of  it. 

Mr.  W^ARREN.  So  the  allowance  was  increased? 

Mr    Stanley.  Yes;  the  allowance  was  increased. 

Mr*.  Warren.  And  that  increased,  I  suppose,  the  operatmg  ex- 
penses ? 

Mr.  Stanley.  Sure.  ^    ,    ,        j.      £  £      9 

Mr.  Warren.  Did  it  increase  it  enough  to  affect  the  i^te  of  fare? 

Mr.  Stanley.  It  did  in  time;  yes.  .         ,  ,      ,  9 

Mr.  Warren.  And  during  that  same  time,  how  about  new  cars? 
Were  they  charged  to  depreciation  or  capital  ?  Did  you  have  to  buy 
some  new  cars  and  charge  them  to  capital?  -x  1    v  ^   xi,^ 

Mr  Stanley.  All  new  cars  were  charged  to  capital,  but  tne 
moneV  for  the  scrapping  of  the  cars— the  reproduction  value— was, 
of  course,  applied  to  the  new  cars.  In  other  words,  if  we  scrnpped 
a  car  at  $6^000  and  we  paid  $10,000  ior  the  new  ear,  the  $i,000 

was  charged  to  capital.  .    .        .*  xi,^ 

Mr  Warren.  Can  you  give  a  statement  to  the  commission  of  the 
increase  allowed  to  the  operating  allowance— the  increase  made  m 
the  operating  allowance? 
Mr.  Stanley.  Since  the  Tayler  advance!  .,     x      j 

Mr.  Warren.  Yes.     It  is  based  on  so  much  per  car-mile,  1  under- 
stand, always;  is  it  not? 
Air   St  4x1  e y    Yes 

Commissioner  Gadsden.  Mr.  Warren,  will  you  bring  out  from 
him  the  effect  of  the  increase  in  the  rates  on  the  revenues  that  he 

gets? 

Mr.  Warren.  Yes;  I  will.  ,,,..,  x-   « 

Mr:   Stanley.  I  can  tell  you  right  offliand  that  the  operating 

expense  on  March  1,  1910,  was  llj  cents. 
Mr.  Warren.  And  what  is  it  now?  j  ^    j  „ 

Mr.  Stanley.  On  December  31,  1919,  it  was  19i  cents,  and  to-day 

it  is  '^Si^ 

Commissioner  Meeker.  Mr.  Warren,  did  you  find  out  what  in- 
centive there  is  for  efficiency,  if  there  is  any  sliding-scale  arrange- 
ment with  the  city? 


PROCEEBlJrGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COlVIlVIISSION.      603 


Mr.  Warren.  There  is  no  sliding  scale  in  your  case,  is  there,  Mr. 
Stanley? 

Mr.  StA^^LEY.  In  ^hat? 

Mr.  WAiRfREN.  In  the  rate  of  return, 

Mr.  Stanley.  No. 

Mr.  Warren.  To  the  investors. 

Mr.  Stanley.  No. 

Mr.  Warren.  Is  there  an  arrangement  for  a  bonus  to  the  em- 
ployees or  to  the  officers  ? 

Mr.  Stanley.  No. 

Mr.  Warren.  The  salaries  at-e  feedl 

Mr.  Stanley.  Yes. 

Mr.  WA'RimN.  Tlie  galarfes  may  be  changed,  but  I  sup'()(:)se  only  by 
a  larger  allowance  for  operating  expenses? 

Mr.  Stanley.  That  is  true. 

Mr.  Warren.  Unless  you  can  save  in  some  other  respect? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  Now,  you  have  heard  Mr.  Gadsden's  inquiry.  What 
has  been  the  eftect?  You  have  frequently  had  occasion  to  increase 
your  rate  of  fare? 

Mr.  8ta>cley.  Yes. 

Mr.  Warren.  How  has  that  affected  the  riding  by  people,  the 
traveling?    Have  yon  ever  noticed  any  difference? 

Mr.  Stanley.  Yes;  I  can  give  you  that. 

'Commis'sioner  MeI^.i^eR.  Perhaps  you  had  better  'file  that  book  with 
the  commission. 

Mr.  Warren.  I  have  an  idea  that  that  is  a  vade  mecum,  Mr.  Com- 
missioner. 

I  would  like  to  know  what  the  effect  of  the  fare  on  riding  has 
been. 

Mr.  Stanley.  Of  course,  there  has  been  some  less  riding.  1  do 
not  think  it  amounts  to  over  1  per  cent. 

Mr.  WaRRen.  One  per  cent? 

Mr.  Stanley.  Yes.  I  think  we  carried  375,000,000  passengers  the 
year  before  last,  and  last  year  we  carried  something  like  '^62,000,000. 

Mr.  Warren.  But  I  mean  more  closely  than  that,  Mr.  Stanley. 
These  changes  in  rates,  changes  in  fares,  go  into  effect  automatically'^, 
do  they  not? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  For  instance,  this  increase  of  wages  that  you  have 
recently  made;  if  your  operating  income  is  not  large  enough  to  meet 
it  your  rate  of  fare  will  automatically  go  up  when?  On  the  first  of 
the  month  or  the  first  of  the  quarter? 

Mr.  Stanley.  The  moment  it  reaches 

Mr.  Warren.  The  moment  the  barometer  goes  down? 

Mr.  Stanley.  Yes;  the  moment  it  reaches  $300,000,  then  the  fare 
goes  up. 

Mr.  Warren.  Wlien  it  reaches  $300,000  the  fare  goes  up? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  Now,  referring  to  those  increases  in  fares  that  you 
have  made  from  time  to  time,  how  has  the  public  received  it?  HaVe 
they  stopped  riding  in  part,  or  have  they  ridden  just  as  much? 

ftfr.  Stanley.  Very  nearly  as  milch ;  yes.  I  do  not  think  it  has 
changed  very  much. 


604       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  You  would  say  to  the  commission,  would  you,  that 
there  has  been  no  appreciable  effect  on  the  traffic? 

Mr  Stanley.  Well,  there  has  been  this  effect :  We  have  not  had 
any  increase  in  rides.  We  usually  run  along  about  6  to  8  per  cent 
increase  from  year  to  year.    Now,  this  last 

Mr.  Warren.  In  traffic? 

Mr.  Stanley.  In  traffic.  .      ^    xi  ^i.    * 

Commissioner  Sweet.  Is  that  about  in  proportion  to  the  growth  of 

the  city?  ,     ,  .  i       j.        xu 

Mr.  Stanley.  Yes.  Since  we  have  gone  to  the  higher  fare  there 
has  been  a  decrease  of  about  1  per  cent,  showing,  you  see,  that  there 
has  been  about  8  or  9  per  cent  loss.  ,    ,       ,  o         ■ 

Mr.  Warren.  Well,  what  period  would  that  loss  cover  i 

Mr.  Stanley.  I  think  it  covered  all  of  last  year. 

Mr.  Warren.  All  of  last  year? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  That  was  1918  ? 

Mr.  Stanley.  1918.  .  .'.  ^.        i.    .      i.      m 

Mr.  Warren.  Well,  have  vou  followed  the  statistics  of  street  rail- 
ways—other companies— sufficiently  to  have  noticed,  Mr.  Stanley, 
that,  regardless  of  fare  increases,  nearly  all  of  the  companies  lost 

traffic  last  year?  .       .  ^,  ^/^^^    rri.    4.  *  i 

Mr.  Stanley.  Now,  here  I  will  give  you  the  year  1917 :  The  total 

number  of  passengers  carried  was  398,000,000.    In  1918  it  was  375,- 

000,000,  showing,  you  see,  that  there  was  a  loss  there  of  about  Zi),- 

000,000.  ^  ^  .^,  .  , 

Mr.  Warren.  And  when  was  the  increase  of  fare  with  respect  to 

1918-^the  last  one? 

Mr.  Stanley.  August  4,  1918.  ^.       i 

Mr  Warren.  But  you  did  not  answer  my  other  question  because 
you  were  looking  for  that  figure.  Did  you  notice,  or  did  you  follow 
the  street-railway  figures  enough  to  have  noticed  whether  or  not  in 
1918  the  traffic  on  nearly  all  street  railways  fell  off  somewhat? 

Mr.  Stanley.  Yes. 

Mr.  Warren.  That  is  true,  is  it  not? 

Mr.  Stanley.  That  is  true.        .        ,  .  ,         -  ,  .  . 

Mr.  Warren.  Even  on  companies  which  made  no  change  of  fare 

whatever  during  the  year? 

Mr.  Stanley.  That  is  true.  _x    i-  xu  *  *  it         it  » 

Mr.  Warren.  So  that  would  account  for  a  part  of  that  falling  otf  i 

Mr.  Stanley.  Yes.  ,  ,  .  •       ^i, 

Mr.  Warren.  And  that  is  the  number  of  passengers;  in  other 
words,  it  is  the  measure  of  the  traffic? 
Mr.  Stanley.  That  is  true. 
Mr.  Warren.  Those  figures? 

Mr.  Stanley.  Yes.  ,  .,       ^v     ^  t 

Mr.  Warren.  And  that  decrease  is  no  more  than  the  decrease  of 

other  companies— many  other  companies? 

Mr.  Stanley.  I  would  not  say  it  was;  no.  i    .  t  i, 

Mr.  Warren.  It  is  no  more  than  the  decrease  of  some  that  1  hap- 
pen to  knoXV. 

Mr.  Stanley.  No.  ,       ,-    .      rr.     i  ^r.        ^u 

Commissioner  Sweet.  You  say  that  Judge  Tayler  was  the  author 

of  this  plan  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       605 

Mr.  Stanley.  Judge  Tayler  was  the  author  of  the  plan ;  yes. 

Commissioner  Sweet.  Was  he  the  judge  of  one  of  the  lower  courts? 

Mr.  Stanley.  He  was  judge  of  the  Federal  court  in  Cleveland. 

Commissioner  Sweet.  The  Federal  court? 

Mr.  Stanley.  Yes. 

Commissioner  Sweet.  How  did  the  matter  come  before  him? 

Mr.  Stanley.  The  matter  came  before  him  by  the  railway  and 
the  city  administration  agreeing  to  submit  it  to  Judge  Tayler. 

Commissioner  Sweet.  He  was  on  the  bench  at  the  time? 

Mr.  Stanley.  He  w^as  on  the  bench  at  the  time. 

Commissioner  Sweet.  Did  he  inaugurate  the  plan,  or  was  it  sub- 
mitted to  him  by  some  one  else  and  approved  by  him  ? 

Mr.  Stanley.  He  had  both  sides,  and  he  gave  a  decision,  and  then 
w^e  put  it  into  use.    It  was  passed  by  the  city  council  in  Cleveland. 

Commissioner  Sweet.  Yes;  but  in  the  argument  before  him  was 
this  plan,  either  in  whole  or  in  part,  recommended  by  either  side — by 
the  city  or  by  the  company  ? 

Mr.  Stanley.  No;  he  thought  of  it  himself. 

Commissioner  Sweet.  He  thought  of  that  himself? 

Mr.  Stanley.  Yes. 

Commissioner  Sweet.  Have  you  given  any  personal  attention  to 
the  plan  now  that  is  used  in  Cincinnati  ? 

Mr.  Stanley.  Why,  I  do  not  think  the  Cincinnati  plan  is  much 
different  from  what  our  plan  is. 

Commissioner  S^veet.  They  got  their  idea  largely  from  you,  did 
(hey  not  ? 

Mr.  Stanley.  Entirely. 

Commissioner  Sweet.  But  there  are  some  features  of  their  plan 
that  differ  quite  widely  from  yours ;  are  there  not  ? 

Mr.  Stanley.  Yes ;  I  think  so.    I  understand  they 

Commissioner  Sweet.  Do  you  regard  those  changes  as  improve- 
ments or  otherwise  upon  your  plan  ? 

Mr.  Stanley.  Well,  I  really  don't  know. 

Commissioner  Sweet.  You  have  not  given  that  enough  study  ? 

Mr.  Stanley.  I  have  not  given  it  enough  study  to  know. 

Commissioner  Sweet.  To  pass  an  opinion  on  it  ? 

Mr.  Stanley.  Yes ;  that  is  true. 

Commissioner  Sweet.  I  understand  that  the  commissioner  has  been 
appointed  or  is,  under  the  charter,  appointed  by  the  mayor  ? 

Mr.  Stanley.  He  is  appointed  by  the  mayor. 

Commissioner  Sweet.  During  the  10  years  that  this  plan  has  beea 
in  operation  have  there  been  several  commissioners? 

Mr.  Stanley.  There  have  been  three. 

Commissioner  Sw^eet.  Are  they  political  appointments? 

Mr.  Stanley.  Political  appointments. 

Commissioner  Sweet.  The  mayor  has  usually  appointed  a  member 
of  his  own  party? 

Mr.  Stanley.  Always. 

Commissioner  Sweet.  Always? 

Mr.  Stanley.  Yes. 

Commissioner  Sweet.  Have  they  been  broad-gauge  men  or  poli- 
ticians? 

Mr.  Stanley.  We  have  been  very  fortunate  in  having  very  good 
commissioners. 


606       I>llOCE^DINGS  OF  FEDERAL.  ELECtRlC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Men  who  have  worked  honestly  for  the  wel- 
fare of  the  public  and  who  have  cooperated  with  the  company  t 

Mr.  Stanlet.  Exactly.  ,         .      .      ^  •      ;,. 

Commissioner  Sweet.  Are  there  other  street-railway  companies  in 

Cleveland  ? 

Mr.  Stanley.  We  have  the  only  one. 

Commissioner  Sweet.  You  are  the  only  one? 

\Tr  Stanley,   x  es. 

Commissioner  Sweet.  The  entire  street-railway  system  is  under 

your  control? 

Mr.  Stanley.  Yes.  .,,     «      ,       ^i    ^  -is        i 

Commissioner  Sweet.  Do  you  think,  Mr.  Stanley,  that  if  a  plan 
similar  in  general  principles  to  yours  were  adopted  by  the  street 
railways  of  the  country  it  would  relieve  the  situation  that  is  now 

Tbound  to  exist?  ,,,    ,    ,       t-      .^ 

Mr.  Stanley.  Yes;  I  think  it  would  help  to  relieve  it. 
Commissioner  Sweet.  Do  you  think  it  would  help  to  relieve  it 

materially?  _      ^  .       ,^      ^  /-ti      i      i  i 

Mr.  Stanley.  Yes;  I  do.  You  kri^w  the  city  of  Cleveland  does  a 
ereat  many  things  for  the  railway.  We  operate  over  eight  bridges. 
One  of  those  bridges  cost  $5,000,000.  Now,  we  do  not  pay  a  cent  for 
rental  in  going  over  that  bridge,  and  at  eacji  end  of  the  |^i.  l^^^e  they 
have  subw-ays,  and,  as  I  say,  that  one  particular  bridge  cost  $o,000,000. 
Now,  we  do  not  have  to  repave.  .,     .      ,    , 

Commissioner  Sweet.  You  do  not  pave  between  the  tracks  f 
Mr  Stanley.  No;  the  city  is  supposed  to  do  that. 
Another  thing:  For  the  past  five  or  six  years,  a  great  many  of  our 
extensions  have  been  paid  by  the  real  estate  men. 

Commissioner  Sweet.  Abutting  owners?  ,     .  ,  ,, 

Mr    Stanley.  Yes.    They  have  assessed  the  real-estate  liieli,  the 
abutting  owners,  $1  to  $2  a  running  foot.    Tliat  money  goes  to  the 
railway  company  so  as  to  make  that  extension  or  help  to  make  it. 
Commissioner  Sweet.  You  mean  where  new  extensions  have  been 

ordered  bv  the  council?  ,         ^i  ^x 

Mr  StU'ley.  Exactly.  Out  in  the  country,  where  they  watit  an 
extension  to  develop  a  certain  part  of  the  city,  they  come  to  us  and 
say  "  We  would  like  to  have  a  road  out  there."  We  will  say,  All 
right;  how  much  can  you  afford  to  pay  toward  it? "  And  in  five  ex- 
tensions that  I  can  name  we  have  been  paid  for  it. 

Commissioner  Gadsden.  Fully? 

Mr.  Stanley.  Sir?  ,    ,. ,    ,  ^       o 

Commissioner  GadsDen.  How  much  did  the  company  put  up « 

Mr.  Stanley.  Well,  we  have  taken  these  extensions  and  put  prob- 
ably a  single  track  through  it,  Mr.  Gadsden. 

Commissioner  Sweet.  What? 

Mr.  Stanley.  Laid  a  single  track. 

Commissioner  Sweet.  Yes? 

INIr.  Stanley.  Where  we  were  developing  the  territory,  so  as  to 
have  the  traffic  there  when  the  time  comes  to  lay  the  second  track. 

Commissioner  Sweet.  Your  car  service  in  that  locality  would  be, 
of  course,  in  proportion  somewhat  to  the  business? 

Mr.  Stanley.  Yes.  Now,  I  will  tell  you  how  we  handle  it.  We 
apply  that  money  to  the  receipts  of  that  line.    If  the  line  was  taking 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       607 

20  or  25  cents  a  car-mile,  we  wsould  take  part  of  that  money  out  there, 
so  as  to  railse  it  to  the  operating  expenses  allowed. 

Commissioner  Gadsden.  The  average  car-mile? 

Mr.  Stanley.  Yes.  . 

Commissioner  Gadsden.  What  is  your  average  car-mile  m  Cleve- 
land? 

Mr.  Stanley.  Forty-two. 

Commissioner  Gadsden.  That  is  very  much  higher  than  most 
companies. 

Mr.  Stanley.  Yes.  . 

Commissioner  Gadsden.  You  have  a  great  density  of  traffic  m 

Cleveland  ? 

Mr.  Stan-ley.  Our  tripper  service  is  four  times  more  than  our  base 
table.    There  is  no  other  line  in  the  United  States  that  does  that. 

Commissioner  Gadsden.  Is  not  that  the  real  reason  that  you  have 
been  able  to  charge  3  cents,  while  other  properties  charge  5  ? 

^T-p  Stanlfy    jL  es 

Mr.  Warren.  Mr.  Stanley,  with  all  of  these  things  that  you  say 
the  city  relieves  vou  from— like  bridge  assessment,  paving,  and 
things  of  that  sort— if  you  were  charged,  as  you  used  to  be,  or  as 
other  companies  are  in  those  respects,  how  much  below  5  cents  would 
your  fare  fall,  when  you  have  been  making  it  3  cents  and  1  cent? 

Mr.  Stanley.  I  doubt  very  much  whether  5  cents  was  ever  high 
enough  to  pay  a  railway  company.  I  mean  by  that  that  railway 
companies  never  knew  what  depreciation  was  up  to  5  or  10  years  ago. 

Mr.  Warren.  In  other  words,  you  think  this  low  fare  has  been 
made  possible  largely  because  of  the  concessions  that  the  city  has 
made  to  the  company? 

Mr.  Stanley.  To  some  extent,  and,  of  course,  to  the  reduction  in 
our  capitalization. 

Mr.  AVarren.  Yes. 

Mr.  Stanley.  At  the  time  we  made  our  settlement  with  the  city, 
the  particular  line  that  my  father  and  Mr.  Samuel  Andrews  pro- 
moted we  offered  to  turn  over  our  stock  to  the  city  at  cost,  plus  6  per 
cent,  and  thev  would  not  take  it. 

The  Chairman.  Do  your  lines  sprinkle  the  streets  or  any  part  of 

them  ? 

Mr.  Stanley.  Do  they  sprinkle? 

The  Chairman.  Yes. 

Mr.  Stanley.  They  sprinkled,  but  the  city  realized  that  that  was 
a  burde-n  to  us,  and  they  said,  "Now,  we  will  relieve  you  from  sprink- 
ling, and  we  will  pay  you  for  flushing  the  streets  " ;  and  we  get  out 
of  that  somewhere  from  $15,000  to  $20,000  a  year,  but  it  used  to  cost 
us  for  sprinkling  something  like  $40,000  or  $50,000.  Unless  you  work 
together,  unless  the  city  government  and  the  railway- 

The  Chairman.  I  want  to  ask  you  this:  You  say  it  used  to  cost 
you  $40,000  or  $50,000,  and  now  you  do  it  for  $20,000? 

Mr.  Stanley.  No.  At  one  time,  we  sprinkled  the  streets  at  a  cost 
of  $30,000  or  $40,000.  Then  the  city  saw  it  was  a  burden  to  the  car 
riders,  and  they  said,  "  Now,  you  flush  the  streets  for  us,  and  we  will 
pay  you  for  flushing  them."  So  they  relieved  us  of  sprinkling.  We 
flushed  the  streets,  and  we  are  getting  out  of  that  anywhere  from 
$15,000  to  $20,000  a  year. 


h 


I 


\\  I 


608       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  You  mean  they  pay  to  you  more  than  actual 
cost  ? 

Mr.  Warren.  They  pay  for  the  service;  do  they  not? 
Mr.  Stanley.  Yes. 


our 

property  taxed  as  it  is  in  other  cities  ? 

Mr.  Warren.  Real  estate,  for  example  ? 

Commissioner  Sweet.  Yes;  real  estate. 

Mr.  Stanley.  Oh,  yes;  we  are  taxed.  The  tax  runs  about  154  per 
cir-mile 

'  Mr.  Warren.  The  general  theory  is  to  take  as  much  as  possible  off 
the  car  riders  and  give  them  as  low  a  fare  as  possible  ? 

Mr.  Stanley.  Sure. 

Commissioner  Meeker.  Do  you  think  it  would  be  a  better  arrange- 
ment to  have  a  sliding  scale  so  as  to  induce  the  company  to  make 
improvements  in  service  and  introduce  greater  efficiency  in  connection 
with  the  management? 

Mr.  Stanley.  No  ;  I  rather  think  that  a  fair  rate  should  be  given 
to  the  company  on  its  capitalization.  I  doubt  very  much — in  fact, 
I  am  satisfied  that  we  could  not  to-day  sell  any  of  our  stock  at  6  per 
cent.  We  would  have  to  put  our  stock  on  the  market  below  par. 
Now,  if  that  is  so,  the  city  should  give  us  a  higher  rate  of  interest 
and  allow  us  to  sell  our  stock  at  par,  or  above  par. 

Commissioner  Meeker.  Do  you  think  you  are  operatmg  just  as 
efficiently  as  you  could  if  you  had  an  incentive  to  make  a  larger 
profit,  a  larger  income? 

Mr.  Stanley.  I  think  so;  yes. 

Commissioner  Meeker.  By  reducing  the  expense  or  increasing  the 

income  ? 

Mr.  Stanley.  Yes;  I  think  so.  .         ,  ,     ,  •  ,  ^ 

The  Chairman.  We  will  stand  adjourned  until  8  o  clock  to-night. 
(Whereupon,  at  5  o'clock  p.  m.,  a  recess  was.  taken  until  8  o'clock 

p.  m.) 

evening  SESSION. 

The  commission  met  at  8  p.  m.,  pursuant  to  adjournment. 

Mr.  Warren.  Before  I  call  a  witness  I  would  like  to  put  in  a  tele- 
gram, if  I  may,  from  Mr.  Paul  Shoup,  of  the  Pacific  Electric  Kail- 
way,  addressed  to  Mr.  Pardee,  president  of  the  association.  It  is 
dated  Los  Angeles,  Calif.,  July  19 : 

There  are  27  operating  electric-railway  companies  in  California,  representing 
several  lumdrecl  millions  of  dollars  in  actual  cash  invested.  Of  these  only  one 
actually  earned  5  per  cent  return  on  investment  during  year  1918,  and  that  was 
due  to  extraordinary  shipyard  activities.  Nineteen  failed  to  earn  interest 
char<'es  on  their  debts.  One  more  earned  its  interest  charges  only  because 
bondholders  of  one  issue  waived  collection.  Another  road  showed  net  income 
above  all  charges  only  because  it  has  no  bonded  debt,  but  earned  only  2i  per 
cent  on  monev  invested.  Also  true  of  three  roads  which  earned  about  3  per  cent 
on  money  invested.  These  figures  illustrate  the  desperate  situation  of  electric 
lines  in  California.  Wages  and  cost  of  materials  have  increased  practically  in 
same  proportion  as  in  the  East.  Increases  in  wages,  for  example,  since  1915 
of  conductors  and  motormen  have  averaged  above  50  per  cent.  Cost  of  ties 
has  more  than  do^ibled.    Our  State  taxation  is  on  basis  of  gross  income,  which 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       609 

was  increased  from  4  per  cent  in  1913  to  51  per  cent  in  1918,  due  to  State 
extravagance,  resulting  in  increased  rates  of  taxation  for  public  service  cor- 
poration. In  the  same  period  value  of  our  properties,  as  measured  by  market 
quotations  for  the  securities  and  by  earnings  above  fixed  charges  carried  to 
surplus,  has  decreased  fully  40  per  cent.  In  California  the  jitneys  and  motor 
trucks  competing  with  electric  lines  are  not  only  not  taxed  for  maintenance 
of  highways  but  are  permitted  to  operate  over  the  verj^  pavements  which 
electric  lines  are  required  to  build  and  maintain  for  all  space  occupied  by 
tracks  and  2  feet  outside  thereof.  In  addition,  the  State  income  tax  on  elec- 
tric lines  is  in  part  used  to  maintain  system  of  good  roads  generally  so  freely 
used  by  motor  trucks  and  jitney  competitors. 

Within  last  30  days  electric  railways  of  State  have  again  generally  had  to 
face  further  demands  for  nicreased  wages  from  conductors  and  motormen, 
and  they  do  not  know  which  way  to  turn  to  secure  the  money  to  satisfy  in 
any  degree  these  requests,  and  one  of  the  largest  systems  is  threatened  with 
strike  if  demands  are  not  granted.  Our  costs  of  construction  and  maintenance 
have  been  tremendously  increasetl  because  of  high  standard  of  track  construc- 
tion and  paving  demanded  by  public  where  streets  and  other  highways  are  used. 
The  old  60-pound  T  rail  has  been  superseded  by  public  ordinance  with  128- 
pound  grooved  rail  for  interurban  cars  and  light  paving  of  old  days  has  been 
superseded  by  concrete  foundation,  asphaltum-top  pavements  costing  two  and 
one-half  times  as  much.  In  some  California  cities  6-cent  fares  have  been 
granted  and  in  a  number  of  other  cities  applications  for  that  rate  are  pending. 
Very  considerable  increases  in  freight  and  passenger  rates  have  been  granted 
interurban  lines,  but  necessary  relief  has  not  followed.  It  is  my  judgment  that 
inasmuch  as  the  5-cent  piece  has  only  two-thirds  of  the  purchasing  power  that 
it  had  three  or  four  years  ago,  the  street-car  nickel  must  be  replaced  with  a 
7i-cent  fare,  and  coin  should  be  minted  accordingly.  All  interurban  fares  will 
Iiave  to  be  nicreased  in  proportion.  Further  than  that,  because  of  increased 
costs  of  maintenance  due  to  higher  stands  of  competition  of  motor  truclis, 
jitneys,  and  privately  owned  automobiles,  the  following  relief  measures  are 
proposed:  (1)  Reduction  in  taxation  from  5i  per  cent  to  4  per  cent  of  gross; 
(2)  elimination  of  franchise  tax  entirely;  (3)  elimination  of  paving  obligation 
and  maintenance  of  paving;  (4)  reduction  in  number  of  free  riders;  (5) 
service  on  basis  of  meeting  public  demands  and  not  arbitrary  requirements; 
(6)  elimination  of  obligations  to  beautify  landscape  with  iron  poles  instead  of 
wooden  poles,  to  put  wire  underground,  separate  grades,  sprinkle  or  light 
streets  except  where  public  bears  all  or  larger  part  of  expense;  (7)  free  use 
of  one-man  cars  wherever  adapted  to  service;  (8)  use  of  shuttle-car  service 
where  service  to  and  from  certain  points  is  not  justified  by  business  offered; 
(9)  restriction  of  street-car  fares  at  even  7i  cents  to  thoroughly  settled  dis- 
tricts, zone  systems  to  be  provided  elsewhere,  and  transfers  to  be  made  more 
strictly  limited  as  to  number  of  points  and  extent  of  use.  It  may  not  be  pos- 
sible for  national  legislation  to  take  care  of  these  subjects,  but  if  not,  uniform 
laws  should  be  passed  by  various  States  looking  toward  this  relief,  and  if  it 
is  necessary  to  have  subject  taken  up  through  constitutional  amendments,  then 
it  should  be  taken  up  that  way,  for  situation  is  desperate  and  only  prompt 
application  of  relief  measures  by  the  public  expressed  through  its  govern- 
ments will  save  the  electric  railway  service.  It  must  be  remembered  that  this 
service  is  vitally  essential  to  the  country  and  that  no  satisfactory  substitute 
has  been  found. 

Paul  Shoup. 

Commissioner  Sweet.  Where  is  that  from  ? 

Mr.  Warren.  This  is  from  Los  Angeles,  Calif. 

The  Chairman.  He  is  president  of  the  Pacific  Electric  Co.  ? 

Mr.  Warren.  Yes.  I  did  not  read  the  word  "  stop  "  as  it  occurred 
through  the  telegram.     I  did  not  think  that  would  help. 

The  Chairman.  Do  you  recall  whether  the  California  commission 
has  complete  control  over  the  rates  of  these  railway  utilities? 

Mr.  Warren.  I  do  not  know,  Mr.  Chairman. 

The  Chairman.  I  think  it  has. 

Mr.  Warren.  I  think  it  has ;  that  is  my  impression.  I  am  advised 
that  they  have  full  control  now. 


•I 


610       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  CuAiRMAN.  That  was  my  understanding. 

Mr.  Warren.  Yes.  ,      .   i     •       xi.  i„ 

The  Chairman.  Well,  is  it  not  true  that,  at  least  during  the  early 
months  of  the  war,  the  California  commission  met  every  demand  on 
the  part  of  the  public  utilities?  The  utilities  of  all  kinds  were  get- 
ting along  very  well  in  that  State  ?  ,     ^  Ti.  n 

Mr.  Warren.  It  was  my  impression  that  the  California  Commis- 
sion was  very  prompt.  ,  .     ,,     ^     ^  £  *i..9 

The  Chairman.  What  has  happened  in  the  last  few  months? 

Mr.  Warren.  I  suspect  that  the  costs  have  mounted  so  fast  that  it 
has  not  been  possible  to  ask  for  the  relief  and  get  it;  but  that  is  only 
mv  own  individual  judgment.  I  do  not  believe  the  coinnnssion  ap- 
preciates the  rapidity  A^Tth  which  these  costs  have  overwhelmed  soine 
of  the  companies,  and  where  a  case  is  to  be  pi;e«ented  to  a  commis- 
sion it  has  to  be  prepared  before  it  is  presented,  of  course;  the  com- 
pany has  to  decide  on  the  tj^riff  it  wants  to  ask  to  have  permission 
to  operate  and  prepare  the  exhibits  and  data  necessary  to  prove  the 
case.  The  burden  of  proof,  I  think,  universally— certainly  it  is  so  in 
Massachusetts— is  on  the  company.  i         ,  j      i         j;i; 

The  Chairman.  Have  the  compj^mes  to  your  knowledge  been  diU- 
irent  in  presenting  their  claims  to  the  California  Commission  ( 

Mr  Warren.  That  I  could  not  say.  I  know  that  some  companies 
have,'because  some  in  which  I  am  interested  got  relief  some  time  ago, 
but  those  did  not  happen  to  be  street-railway  companies.  xVnd  the 
labor  item  in  the  street  railways  is  so  very  lai>^e  that  under  the  old 
5-cent  fare  it  takes  in  some  cases  half  the  receipts,  and  the  unsettle- 
ment  of  labor  is  a  very  difficult  thing  to  deal  with  Even  if  an  agree- 
ment is  signed  up  for  a  year  or  two  years,  under  the  effect  ot  the  war 
the  men  will  become  restive  and  uneasy  and  oftentimes  three  months 
after  the  agreement  has  been  made  they  will  intimate  that  unless 
some  further  relief  is  given  they  will  have  to  strike;  and  very  likely 
that  is  what  has  been  happening  in  California,  because  labor  is  more 
or  less  active  in  California  at  all  times,  I  think. 

STATEMENT  OF  MR.  CHARLES  A.  FAOAN. 

Mr.  Warren.  Your  full  name? 

Mr.  Fagan.  Charles  A.  Fagan.  . 

Mr.  Warren.  You  are  one  of  the  receivers  of  the  Pittsburgh 

Railways? 

Mr.  Fagan.  Yes.  .  ^  ^  -  j.       r 

Mr.  Warren.  And  Mr.  George  is  one  of  your  two  associates,  1 

think,  who  was  here  the  other  day. 

Mr.  Fagan.  Yes,  sir.  ,  ,      ,i  .9 

Mr  Warren.  You  were  appointed  by  the  court? 

Mr  Fagan.  Bv  the  United  States  district  court.  ^ 

Mr  Warren.  "Were  you  interested  in  the  railways  previously? 

Mr*.  Fagan.  No,  I  was  not ;  except  about  20  years  ago  I  was  counsel 
for  one  of  the  underlying  companies  of  this  company. 

Mr.  Warren.  But  of  late  years  you  have  not  been  interested  in 

Mr.  Fagan.  Of  late  years  I  have  not  been  interested  in  them  in 
any  way  whatever. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       611    ^ 

Mr.  Warren.  No  more  than  Mr.  George  is? 

Mr.  Fagan.  Not  at  all.  .       -.a 

Mr.  Warren.  When  were  you  appointed? 

Mr.  Fagan.  On  the  23d  of  April,  1919.  ^        ^ 

Mr  Warren.  So  that  you  have  been  receiver  about  four  months-— 

Mr  Fagan.  I  was  appointed  one  of  the  original  receivers.  At  that 
time  my  associates  and  I  disagreed  about  the  policy  of  the^  company 
and  two  of  them  resigned  and  thereafter  Mr.  George  and  Mr.  lome 
were  appointed.  Mr.  Tome,  by  the  way,  was  president  of  this  com- 
pany at  the  time  of  the  receivership.  ^1    4^+1^ 

Mr.  Warren.  When  you  were  appointed  did  you  believe  that  the 
company  had  been  well  managed  or  poorly  managed,  or  did  you  ha^e 

no  opinion  about  it?  %  .•      o 

Mr.  Fagan.  Well,  do  I  have  to  answer  that  question  i 
Mr.  Warren.  I  will  not  press  the  question  if  you  do  not  care  to 

answer  it. 
The  Chairman.  Eead  the  question. 

(The  question  was  then  read  as  above  recorded.)  .    . 

Mr.  Fagan.  I  might  answer  that  by  saying  that  the  general  opinion 

was  that  it  was  not  properly  managed— I  mean  of  the  community. 
Mr.  Warren.  The  general  feeling  in  the  community  i 
Mr.  Fagan.  Yes.  .  i  u  ^ 

Mr    Warren.  Since  you  have  been  a  receiver  you  have  had  an 

opportunity  to  acquaint  yourself  with  the  methods  of  management, 

I  presume? 

Mr.  Fagan.  Yes.  ,  .  ,      ^    i  ^-    i 

Mr  Warren.  And  what  do  you  think  of  the  practical  manage- 
ment? I  am  not  speaking  of  the  financial  operations,  but  the  opera- 
tion  of  the  railway. 

Mr.  Fagan.  I  think  it  was  faiiiv  good.  ^  ^     _ 

Mr.  Warren.  And  what  are  the  conditions  prevailing  in  Pitts- 
burgh with  respect  to  the  expenses  and  income  of  the  company « 

Mr.  Fagan.  The  income  of  the  coinpany  is  about  $15,000,000  a 
year.     Of  that,  about  Go  per  cent  is  paid  in  wages. 

Mr.  Warren.  Sixty-five  per  cent  of  the  income? 

Mr.  Fagan.  From  65  to  70  per  cent  of  the  income  is  paid  in  wages. 

Mr!  Warren.  I  did  not  overstate  it,  when  I  said  50  per  cent  in 

some  cases ;  did  I  ?    _  .  .     ,    ,  i  /•        i  • 

Mr.  Fagan.  No.  There  are  large  municipal  charges  and  franchise 
charges  against  the  company  consisting  of  obligations  to  pave  the 
streets  in  the  principal  municipality  through  which  the  lines  run,  to 
wit,  the  city  of  Pittsburgh,  which  amount  to  40  per  cent  of  the  pav- 
ing of  the  streets  over  which  the  lines  run. 

This  company  passes  over  about  150  bridges.  Some  of  them  m 
the  outlying  municipalities  like  the  boroughs  and  townships  are 
toll  bridges.  In  the  city  of  Pittsburgh  where  the  greater  part  of 
the  business  necessarily  is  done  all  of  the  bridges  are  free  to  all  sorts 
of  passengei-s  and  vehicles  except  this  railway  company,  and  under 
an  old  ordinance  the  railway  company  has  always  been  charged  for 
tolls  over  those  bridges  and  is  still  charged  for  them.  There  are  also 
pole  taxes  for  the  poles  which  are  erected  along  the  lines  upon 
which  all  of  these  municipalities  collect  tax. 


If 


612       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  bonds  outstanding  against  the  company  amount  to  about 
$50,000,000.  There  are  leases  upon  which  rentals  are  provided 
amounting  to  about  eight  or  nine  million  dollars. 

When  we  took  charge  of  this  company,  of  course  it  was  insolvent. 
The  road  had  been  allowed  to  run  down  for  6  or  7  years.  We  found 
the  physical  condition  of  the  company  such  that  it  was  unsafe  tO' 
life  or  limb  in  some  cases  to  travel  over  it.  We  were  appointed  dur- 
ing the  activities  of  the  war,  on  the  2t3d  of  January,  1918.  We 
are  in  a  district  where  a  great  many  munition  factories  exist.  In  the 
preceding  winter  the  road  had  absolutely  fallen  down  on  account 
of  the  severe  weather,  the  inunense  snowstorms,  and  so  forth,  so  that 
in  some  instances  you  would  have  to  wait  for  2  hours  at  a  time  to 
get  a  car.  On  account  of  very  great  complaints  that  were  made 
about  the  inability  of  the  company  to  convey  back  and  forth  the 
munition  workers,  the  Federal  Government  took  cognizance  of  the 
situation,  and  they  sent  a  rej) resent ative  of  the  Navy  Department 
and  also  one  of  the  War  Department  to  insist  upon  the  rehabilitation 
of  the  road  and  the  placing  of  the  tracks  in  proper  condition  ta 
convey  these  munition  workers.  A  board,  I  presume,  of  a  Federal 
nature,  or  quasi-Federal  nature,  called  the  war  productions  commit- 
tee, which  consisted  of  members  of  the  chamber  of  commerce  acting 
in  conjunction  with  the  representatives  of  the  War  and  Navy  Depart- 
ments, insisted  upon  whatever  money  came  into  the  hands  of  the  re- 
ceivers being  used  for  the  purpose  of  keeping  up  the  service.  That 
was  done  to  such  an  extent  that  the  service  became  practicable,  and  we 
were  able  to  convey  these  munition  workers  back  and  forth  to  their 
homes.  That  entailed  the  expenditure  of  nearly  all  of  the  available 
money  that  came  into  the  hands  of  the  receivers. 

In  the  meantime  a  controversy  arose  upon  my  part  on  the  one 
side  and  the  other  receivers  on  the  other  side  concerning  the  policy 
of  paying  interest  on  the  capital  charges  of  the  company.  I  main- 
tained that  all  of  the  money  ought  to  be  put  into  the  service  of  the 
road  until  it  was  put  in  proper  condition.  Upon  that  subject  we 
disagreed  and  the  other  receivers  resigned;  thereupon  Mr.  George 
and  Mr.  Tome  were  appointed  in  their  place. 

Since  that  time 

The  Chairman.  Has  your  policy  been  followed  since  the  ap- 
pointment of  the  new  receivers? 

Mr.  Fagan.  I  was  just  coming  to  that.  Since  that  time  the  re- 
ceivers have  agreed  upon  the  policy  of  maintaining  the  service  in. 
a  proper  way  to  accommodate  the  public.  In  order  to  do  that,  we 
have  been  obliged  to  forego  the  payment  of  the  capital  charges.  In^ 
addition  to  that,  we  have  not  paid  any  of  these  municipal  obligations.. 
And  while  we  have  improved  the  service  and  it  is  admitted  gener- 
ally that  we  have  done  so,  it  has  been  done  at  that  expense,  so  that 
now  the  only  charges  that  are  paid  are  the  wages  of  the  emploj^ees 
and  the  payment  of  material  men  and  for  materials. 

Just  shortly  before  the  receivers  took  charge  of  the  company  an 
increase  in  the  wages  of  the  employees  had  been  effected.  Imme- 
diately after  the  receivers  were  appointed  it  became  necessary  to 
raise  fares  in  order  to  have  sufficient  mone}^  to  operate  the  road. 

Connnissioner  Sweet.  You  are  speaking  of  the  first  appointment 
jiow  in  January,  1918? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      613 

Mr.  Fagan.  About  January,  1918.  We  did  increase  the  fares 
which  at  that  time  were,  in  round  numbers,  about  5^  cents  a  fare. 
In  lieu  of  that  we  established  a  zone  system  consistmg  of  two  zones,  m 
the  first  of  which,  extending  about  2  miles  from  the  center  of  the 
city  in  all  directions,  we  made  the  fare  5  cents,  and  m  the  zones 
beyond  that  within  the  city  limits,  7  cents.  The  result  of  that 
increase  in  fares  was  that  the  riders  fell  off  about  14  per  cent,  but 
notwithstanding  that  fact  the  revenue  increased,  I  think,  about 
$600,000  for  the  year,  gauging  it  by  month  to  month. 

Mr.  Warren.  About  when  was  that  change  made  effective,  Mr. 

Mr!"  Fagan.  I  would  say  in  January,  1918.    We  have  proceeded 
with  those  fares  at  that  basis  up  until  this  time.  , 

In  the  meantime,  shortly  after  we  went  into  office  we  increased  the 
wages  of  the  workmen.    AVhen  this  governmental  activity  began  the 
men  insisted  upon   another  increase,  which   we  opposed   on   the 
ground  that  the  receipts  of  the  company  did  not  justify  it.     Ihe 
representatives  of  the  War  and  of  the  Navy  Departments  and  of  this 
war  productions  committee  of  the  chamber  of  commerce  insisted 
upon  the  increase  being  granted;  and  thereupon  we  granted  it.     In 
the  meantime,  we  were  using  a  great  deal  of  money  to  rehabilitate 
the  road ;  in  fact  all  the  spare  money  we  had.  -  Things  went  along 
in  that  way  until  the  expiration  of  the  then  existing  contract,  which 
expired  on  the  30th  of  April  of  this  year.    And  under  the  terms  of 
the  contract  the  employees  notified  us  that  they  would  require  an 
increase  of  the  existing  rate  at  that  time,  the  maximum  of  which 
was  48  cents  an  hour  to  60  cents  an  hour.     We  opposed  that  in- 
crease and,  we  thought,  demonstrated  that  the  revenue  was  not 
sufficient  to  justify  it.    However,  the  matter  was  carried  on  and  we 
had  conferences  covering  a  period  of  nearly  a  month  with  the  result 
that  the  employees,  becoming  dissatisfied,  ordered  a  strike ;  and  the 
strike  went  into  effect  last  month  and  lasted  about  4  days.     And  m 
order  to  bring  the  strike  to  a  termination,  we  agreed  with  the  work- 
men that  we  would  join  with  them  in  the  submission  of  the  con- 
troversy to  the  National  War  Labor  Board  for  arbitration ;  which 
we  did.     That  matter  is  now  pending  before  the  National  War 
Labor  Board.    No  decision  has  been  rendered  on  it. 

Now  that  is  about  the  situation.  ^ 

The  Chairman.  Is  there  anything  in  that  agreement  wnich  would 
prevent  the  men  from  striking  if  they  are  not  satisfied  with  the  action 

of  the  War  Labor  Board  ?  .  .        .       ,  ^    a    ^ 

Mr.  Fagan.  No.  There  is  a  provision  in  the  agreement,  hrst, 
that— we  were  responsible  for  this  covenant  in  the  agreement— that 
the  decision  of  the  National  War  Labor  Board  was  to  be  subject  to 
the  approval  of  the  United  States  district  court,  that  we  agreed  that 
we  would  recommend  for  the  approval  of  the  United  States  courts 
the  decision  of  the  National  War  Labor  Board.  And  on  the  other 
hand  the  men  exacted  a  covenant  that  in  the  event  that  they  would 
not  agree  to  the  final  award  that  they  would  have  20  days  in  which 
to  resume  their  strike. 

Mr.  Warren.  That  was  the  agreement  submitting  it  to  the  INa- 

tionai  AVar  Labor  Board  ?  ^   .       ^       ^ 

Mr.  Fagan.  To  the  National  War  Labor  Board. 


^14       PROCEEDmcS  OF  'FEraJRAL  ELECTKIC  RAILWAYS  COMMISSION. 

Mr.  Watwen.  Did  you  have  an  agreemerit  "with  them  otherwise? 
Are  theT  membeTS  of 'the  Amalgamated  Association^ 

Mr.  Fagan.  They  are— well,  I  do  not  Imow;  the  Federation  of 
Labor  I  think  tliey  call  it. 

Mr.  Waiireis\  I  gness*  il  they  are  ^reet-rallW^y  men  it  is  more 
likelv  to  be  tlie  Amalgamated  'Association.  . 

Mr.  Fagan.  Well,  whatever  it  is,  they  belong  to  the  national  or 
international  association,  I  have  forgotten  the  technical  name  of  it. 

Mr.  Wi^REN.  The  Amalgamated  Association  of  Street  Railway 

Employees  of  America.  - .       t  ^         ti 

Mr.  F\GAN.  Yes.  I  do  not  know  the  name  of  it.  1  can  not  recall. 
Amalgamated.  I  know  they  belong  to  the  street-car  employees'  as- 
sociation to  which  all  of  these  other  concerns  belong. 

Commissioner  Gadsden.  They  belong  to  the  Amalgamated  Asso- 
ciation. 

5ilr.  Fagan.  Well,  I  do  not  Itnow. 

Mr.  Warren.  I  ask  only  to  identify  it.  Was  there  a  written 
agreement  with  them  as  regarded  tl>eir  wages? 

Mr.  Fagan.  Yes. 

Mt.  Warren.  Between  the  company  and  the  men? 

Mr.  Fagan.  Yes.  . 

Mr.  Warren.  That  was  the  agreement  which  expired  on  the 

Mr.  Fagan.  The  30tli  of  last  April. 

Mr.  Warren.  On  the  30th  of  last  April? 

Mr.  Fagan.  In  other  words,  on  the  1st  of  May.  . 

Mr.  Warren.  Do  you  happen  to  know  whether  that  contained  a 
provision  for  arbitration  of  grievances  ? 

Mr.  Fagan.  I  think  it  did ;  yes,  I  am  sni-e  it  did. 

Mr.  Warren.  The  Ama;igamated  usually  has  an  arbitration  agree- 
ment in  it. 

Mr.  Fagan.  Yes.  ^     ^       h 

Mr.  Warren.  But  anvhow  the  strike  took  place? 

Mr.  Fagan.  Yes.  We  a^'ee^  to  submit  it  to  the  iJnited  States 
court  and  they  declined  to  do  it. 

Mr.  Warren.  They  d<»clined  to  submit  it  to  the  court? 

Mr.  Fagan.  Yes.  . 

Mr.  Warren.  As  I  have  followed  your  statement,  you  increased 
the  wages  twice  before  the  strike? 

Mr.  Fagan.  The  wages  were  increased  just  before  we  went  into 

office.  , ,  - 

Mr.  Warren.  That  w^as  by  the  old  company? 

Mr.  Fagan.  Yes.  I  would  say  that  would  be  in  December,  1917. 
Immediatelv  npon  our  going  into  ^ce  we  increased  the  wages. 
Then  when^this  Government  activity  began  we  increased  the  wages 
again,  and  then  if  this  aw^ard  should  be  made  we  will  have  increased 
the  wages  four  times.  . 

Mr.  Warren.  And  the  last  time  raised  it  to  48  cents,  which  was 
the  maximum  of  the  War  Labor  Board. 

Mr.  Fagan.  Yes.  These  wages,  as  I  undei^stand  it,  about  five 
years  ago  were  30  cents  an  hour,  the  maxinmm  wages.  If  these 
gentlemen  in  their  application  should  be  successful  they  will  get  60 
cents,  which  would  be  just  double  what  they  got  five  yeai's  ago. 

Commissioner  Gadsden.  Wliat  does  that  mean  in  dollars  and  cents? 

Mr.  Fagan.  From  30  cents  an  hour  to  60  cents  an  hour. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      '61 5 

Commissioner  'Gadsden.  I  mean  do  you  happen  to  carry  in  your 
head  the  figures  it  means  to  the  company  approximately  ? 

Mr.  Fagax.  We  have  3,500  employees  who  are  members  of  this 
association.  We  have  3,500  other  employees  who  are  nOt  members 
of  the  association.  And  the  rule  heretofore  has  been  that  when  the 
union  employees  were  raised  the  nonunion  men  should  be  raised 
a  commensurate  amount.  It  costs  $80,000  a  cent  to  raise  these  wages. 
In  other  words — wefl,  in  round  figures  I  figured  out  in  my  mind  one 
day  it  would  cost  us  $2,1000,000  to  make  this  increase  per  annum. 

Mr.  Warren.  That  of  course  would  mean  a  further  increase  of 
passenger  rates. 

Mr.  Fagan.  Xow,  I  forgot  about  that.  Just  about  the  time  that 
this  labor  dispute  was  on  and  before  that  time  we  recognized  that 
if  we  wanted  to  carry  on  this  company  we  would  have  to  have 
another  increase  in  rates. 

We  have  a  public  service  commission  in  Pennsylvania  which  re- 
quires that  a  notice  of  30  days  shall  be  given  of  any  intended  in- 
crease. As  I  said,  we  had  our  minds  made  up  about  the  time  this 
came  along  to  ask  for  an  increase,  and  while  this  question  was  pend- 
ing we  made  an  application  for  the  increase  because  we  finally  figured 
out  that  it  would  not  be  fair  to  these  men  to  postpone  the  time  of 
asking  for  the  increase  until  this  case  was  decided,  that  the  War 
*L<abor  Board  ought  to  have  all  the  information  on  the  subject,  and  we 
therefore  did  it  before  the  argument  before  the  War  "Labor  Board 
in  Washington  here.  That,  of  course,  provides  for  a  flat  rate  of 
7^  cents  w^ithout  regard  to  zones.  We  obliterated  the  zone.  And 
by  the  sale  of  tickets  it  is  7J  cents,  which  would  mean  tickets  of  four 
for  30  cents  or  multiples  of  that  and  10  cents  if  a  cash  fare  was 
paid.  Now,  w^e  figured  that,  under  ordinary  circumstances,  we  could 
get  along  with  that  and  operate  the  road  and  possibly  pay  something 
on  these  capital  charges. 

Commissioner  Sweet.  Did  you  include  in  that  an  increase  in 
wages  or  leave  them  as  they  were  ? 

Mr.  Fagan.  Well,  I  apprehend  that,  considering  the  falling  off 
in  passengers,  which  appears  to  be  the  inevitable  result  of  these 
increases  in  fares,  if  these  wages  were  increased  a  substantial  amount 
we  would  be  then  or  now  just  about  where  we  are  and  there  would 
he  nothing  left  to  pay  on  accomit  of  the  capital  charges  nor  on 
account  of  these  municipal  obligations. 

Mr.  Warren.  In  other  words  should  you  say  that  you  were  not 
earning,  or  jnst  earning,  your  operating  expenses  at  the  present  time? 

Mr.  Fagan.  That  is  all  we  are  doing,  after  paying  the  Avages 
and  material  men  and  for  materials. 

Mr.  Warren.  Nothing  left  after  paying  operating  expenses? 

Mr.  Fagan.  Nothing  left  at  all. 

Mr.  Watiren.  Nothing  left  to  pay  these  municipal  charges? 

Mr.  Fagan.  Not  a  cent. 

Mr.  Wahren.  Is  there  enough  left  to  pay  yonr  regular  taxes? 

Mr.  Fagan.  Well,  we  have  paid  our  State  taxes,  our  corporate 
caxes. 

Mr.  Warren.  Yon  stated,  1  think,  that  you  raised  the  fares  in 
January,  1918,  and  you  stated  how  much  the  traffic  fell  off,  but  I  did 
not  catch  it. 

Mr.  Fagan.  Fourteen  per  cent  I  said. 


i- 


r 


616       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  But  you  gained  nevertheless  about  how  much? 
Mr.  Fagan.  About  $G00,000. 

Mr.  Warren.  Did  you  follow  during  1918  the  street-railway  sta- 
tistics of  anv  other  road  enough  to  notice  whether  the  traftic  of  all 

roads  fell  off  in  1918  ? 

Mr.  Fagan.  That  was  my  recollection ;  yes. 

Mr.  Warren.  That  was  the  year,  if  I  am  not  mistaken,  when  the 
weather  was  so  very  severe  in  January  and  February. 

Mr.  Fagan.  Yes.     I  think  all  railways  fared  about  the  same. 

Mr.  Warren.  So  that  part  of  your  loss  of  revenue  or  of  trattic 
might  be  due  to  that? 

Mr.  Fagan.  Yes.  „   -,    •     t 

Mr.  Warren.  There  were  also  the  coldest  days,  socalled,  in  Janu- 
ary and  extending  into  February.  ^    .     ^  ^  ^     t  u 

Mr.  Fagan.  Yes;  and  in  season,  as  I  say,  this  road  absolutely  fell 

Mr.*  Warren.  And  then  Pittsburgh,  I  suppose,  suffered  from  the 
influenza  epidemic  as  all  the  rest  ot  the  country  did? 

Mr.  Fagan.  Yes;  we  suffered  from  that,  and  during  that  time  our 
income  was  depleted  about  one-half. 

Mr.  Warren.  Are  all  those  losses  included  m  this  loss  of  14  per 

cent  of  traffic?  .  ,     ,    ,        -^  ^xru 

Mr.  Fagan.  Yes.  I  might  say,  I  ]ust  overlooked  an  item.  When 
we  were  appointed,  under  the  decree  of  the  court  appointing  us,  we 
were  required  to  pay  the  prereceivership  debts,  amounting  to  $900,- 
000,  which  had  accrued  within  four  months  of  the  time  of  our 
appointment.  We  have  been  able  up  to  now  to  pay  only  20  per  cent 
of  those.  We  have  paid  two  installments  of  10  per  cent  each  since 
we  have  become  receivers. 

Commissioner  Sweet.  What  is  the  nature  of  those  debts  ^ 

Mr.  Fagan.  For  materials  wholly— materials  furnished  to  the 
company  for  the  upkeep  of  the  road  for  the  four  months  preceding 
the  appointment  of  the  receivers.  . 

Commissioner  Sweet.  Was  that  after  the  application  of  the  ap- 
pointment of  the  receivers  and  before  they  were  actually  appointed  I 

Mr.  Fagan.  Yes.  When  they  were  appointed  the  court  in  its  de- 
cree appointing  them  provided' that  they  should  pay  the  obligations 
owing  by  the  company  for  materials  furnished  within  four  months 
of  the  time  of  the  appointment  of  the  receivers. 

Mr.  Warren.  I  suppose  the  court  anticipated  that  you  might  be 
able  to  pay  those  in  addition  to  paying  your  current  expenses? 

Mr.  Fagan.  Yes ;  I  think  so. 

Mr.  Warren.  But  it  did  not  prove  so.  ... 

Mr.  Fagan.  No,  only  to  the  extent  I  say— that  we  paid  two  in- 
stallments of  10  per  cent  each.  ,,        ,  •         V.'    9 

Mr.  Warren.  In  the  entire  period  covered  by  the  recei vei-ship  ? 

Mr.  Fagan.  Yes;  and  one  of  those  just  within  a  week. 

Mr.  Warren.  In  your  judgment,  Mr.  Fagan,  is  a  substantial  in- 
crease of  rates  necessary  to  rehabilitate  that  company  ? 

Ui\  Fagan.  Absolutely,  if  it  will  bring  the  revenue.  The  revenue 
is  the  last  guess  about  the  thing.  I  do  not  know  to  what  extent  this 
will  bring  an  increase.  During  the  period  of  this  strike  about  which 
I  have  spoken  it  was  demonstrated  m  our  community  that  thi«  com- 
pany of  ours  was  not  a  monopoly.    That  strike  lasted  for  four  days 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       617 

and  nobody  complained  about  being  discommoded.  We  have  15 
steam -raihoad  linos  running  out  of  our  city  through  the  suburbs 
and  in  the  city,  with  stations  in  the  city;  and  among  them,  plus  a 
disposition  upon  the  part  of  everybody  who  had  an  automobile  to 
pick  up  people  and  help  them  along  and  carry  them  back  and  forth, 
there  was  decidedly  little  inconvenience,  so  that  I  think  on  that 
question  it  narrows  itself  down  to  the  riding  habit. 

Mr.  Warren.  And  yet  you  anticipate  a  considerable  increase  in 
revenue  ? 

Mr.  Fagan.  Of  course  we  do.  We  hope  to  have  an  increase,  but 
judging  the  future  by  the  past  we  can  not  count  on  the  revenue  being 
commensurate  with  the  increase. 

Mr.  Warren.  The  percentage  of  increase? 

Mr.  Fagan.  Yes. 

Mr.  Warren.  I  think,  though,  that  you  may  be  not  quite  hopeful 
enough  if  you  base  that  judgment  on  the  1918  figures,  because  I 
think  you  will  find  you  would  have  had  a  considerable  loss  of  traffic 
if  you  had  left  your  fares  the  same  in  1918. 

Mr.  Fagan.  Yes ;  I  think  so,  too. 

Mr.  Warren.  I  judge  from  the  method  you  are  adopting  of  in- 
creasing the  fare  this  time — a  flat  increase  to  TJ  cents  for  tickets  and 
10  cents  for  cash — that  you  have  reached  the  conclusion  that  in  Pitts- 
burgh a  flat  increase  is  more  desirable  than  dividing  the  city  into 
two  or  more  zones. 

Mr.  Fagan.  We  thought  so;  because  when  the  city  was  divided 
into  zones,  we  got  no  credit  from  the  people  who  lived  in  the  cheaper 
zone,  and  it  gave  an  argument  to  the  people  who  lived  in  the  higher 
zone  against  the  inequity  of  the  proposition. 

Mr.  Warren.  Well,  those  charges,  as  I  undei*stood  Mr.  George  and 
as  I  have  otherwise  gained  the  impression  from  literature  upon  the 
subjectAthe  7-cent  fare  in  the  outer  zone,  if  I  may  call  it  that,  was 
charged  to  everybody  whether  he  rode  only  in  that  zone  or  whether 
he  rode  in  both  zones. 

Mr.  Fagan.  Yes. 

Mr.  Warren.  Did  you  consider  at  all  the  possibility  of  making 
two  5-cent  zones  for  the  local  rides  within  either  zone? 

Mr.  Fagan.  No;  we  did  not.  Well,  we  did  consider  that,  but  we 
did  not  think  it  was  feasible.  We  also  considered  having  in  the  7- 
cent  zone  a  lower  rate  for  collateral  streets,  cross  streets,  where  you 
would  ride  only  three  or  four  squares;  but  we  were  argued  out  of 
that  by  experts  and  managers  of  the  road  and  those  who  had  had 
experience. 

Mr.  Warren.  That  is  all  that  I  wish  to  ask,  Mr.  Chairman. 

The  Chairman.  When  will  that  7J-cent  fare  go  into  effect? 

Mr.  Fagan.  The  1st  of  August. 

The  Chairman.  And  that  applies  in  this  5-cent  zone  as  well  as 
in  the  7-cent  zone? 

Mr.  Fagan.  Yes. 

The  Chairman.  Was  that  ordered  by  the  public-service  com- 
mission? 

Mr.  Fagan.  Under  the  act  establishing  the  public-service  com- 
mission, upon  filing  application  we  are  authorized,  or  any  railway 
company  is  authorized,  to  establish  the  fare,  the  hearing  upon  which 
may  take  place  30  days  afterwards.     Of  course,  this  is  all  subject 

1G0G43*— 20 40 


p 


i! 


.-MlJ., 


618       PBOCEEDINGS  OF  FEDERAL  ELECTEIC  RAILWAYS  COMMISSION. 

to  the  decision  of  the  public-service  commission.  And  I  might  say 
in  passing  that  the  public-service  commission  has  not  yet  approved 
of  these  prior  increases  we  made. 

The  Chaihman.  Do  you  think  that  the  74-cent  fare  m  your  con- 
<rested  zone  will  result  m  a  material  reduction  in  the  number  of  pas- 

sen  fife  rs  $ 

Mr.  Fag  AN.  I  apprehend  that  it  will.  . 

The  Chairman.  Do  you  expect  it  will  result  in  an  increase  m  tlie 

gross  earnings? 

Mr.  Faoan.  Well,  we  calculate  it  will.  «.  •     ^  . 

The  Chairman.  Do  you  hope  that  the  increase  will  be  sutticient  to 
take  care  of  your  operating  expenses  on  fixed  charges? 

Mr.  Fagan.  I  do  not.  ,    .^  .^  ,  ^o 

The  Chairman.  What  will  be  the  result  if  it  does  not? 

Mr  Fagan.  Well,  one  result  already  that  has  obUuned  is  that  one 
of  these  underlving  companies  has  asked  the  court  for  leave  to  lore- 
close  its  moitgage  and  the  couit  has  granted  the  leave,  and  we  are 
netting  ready  to  make  the  foreclosure.  ,    .  •    xu       u- 

The  Chairman.  Assuming  that  property  is  sold,  what  is  the  ulti- 
mate result?  -  -  ,  i.  J    „  „„ 

Mr.  Fagan.  Now  this  particular  property  could  be  operated  as  an 
independent  unit.  It  is  not  absolutely  dependent  upon  cooperation 
with  the  general  system. 

The  Chairman.  What  is  its  mileage?  wi  •    •      u     *  on 

Mr.  Fagan.  Our  whole  mileage  is  G20  miles,  and  this  is  about  20 
per  cent  of  that,  about  120  or  130  miles.  .      ,     .  ,     ^        ^    • 

The  Chairman.  Does  it  occupy  the  streets  m  the  imi>ortant  part  of 

\^-.  "Fagan.  Well,  in  an  important  part  for  a  railroad  system,  but 

not  in  the  valuable  part.  ,     ^       ,. 

The  Chairman.  Then  if  it  operates  as  an  independent  system,  you 
will  have  the  sum  of  two  local  fares  if  a  person  is  ti-aveling  from  one 
line  to  another. 

Mr.  Fagan.  I  can  not  see  any  way  out  of  it.  j        i      •    i 

The  Chairman.  Has  the  commission  the  power  to  order  physical 
connection  and  a  through  rate  between  those  lines? 

Mr.  Fagan.  I  do  not  think  so. 

The  Chairman.  Very  well,  that  is  one  thing.  Now  suppose  that 
that  company  is  not  sold  on  the  foreclosure  of  the  mortgage,  then 

what  is  going  to  be  the  insult  ?  ,      '  ,      ,  ,  .ri 

Mr  Fagan.  Then  that  company  would  take  the  same  place  as  other 

underlying  companies  and  have  to  depend  for  any  return  upon  the 
prosi:>erity  of  the  whole  system. 

The  Chairman.  looking  at  the  system  as  a  whole,  what  dc^s  the 
future  hold  in  store  for  it  if  the  7i-cent  fare  does  not  bring  sufhcient 

revenue?  ,  .  ,  js  xu         j^« 

Mr.  Fagan.  I  can  not  see  anything  except  severance  of  the  under- 
lying companies  from  the  system.  ^ 

The  Chairman.  How  many  underlying  companies  are  there « 
Mr.  Fagan.  Well,  at  the  base  there  are  about  208. 
The  Chairman.  I  am  sure  you  do  not  mean  that  there  would  be 
208  independent  companies  operating  in  the  city.  ^   .      -i.- 

Mr  Fagan.  Well,  there  are  not  208  companies  except  in  this 
respect :  This  entire  system  is  built  upon  about  208  underlymg  com- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       619 

panics.  Those  208  underlying  companies  have  been  merged  and  con- 
solidated and  remerged  and  reconsolidated  until  they  now  consist  of 
practically  three  underlying  systems. 

The  Chairman.  Then  you  might  have  three  independent  systems 
operating  in  the  city  ? 

Mr.  Fagan.  Yes. 

The  Chairman.  Very  well.  Would  that  seriously  affect  the 
public? 

Mr.  Fagan.  Well,  it  would  seriously  affect  them  inasmuch  as  they 
would  probably  have  to  pay  two  fares  where  they  have  now  to  pay 
only  one;  or  in  some  cases  would  have  to  pay  three  where  they  pay 
now  only  one. 

The  Chairman.  Suppose  these  companies  oj>erated  independ- 
ently, do  you  think  they  could  subsist  on  a  5  cent  fare? 

Mr.  Fagan.  I  apprehend  that  two  of  them  could. 

Mr.  Warren.  On  a  5-cent  fare? 

Mr.  Fagan.  On  a  5-cent  fare;  yes. 

The  Chairman.  What  makes  you  think  so? 

Mr.  Fagan.  Well,  they  hapj^en  to  be  companies  that,  as  I  say, 
might  be  operated  independently.  They  run  through  districts  not 
very  long  and  where  a  great  many  passengers  could  be  served,  and  I 
think  perhaps  they  could  operate  at  a  profit. 

Commissioner  Gadsden.  On  5  cents? 

Mr.  Fagan.  Yes. 

Mr.  Warren.  Even  with  these  present  rates  of  wages? 

Mr.  Fagan.  Well,  now,  I  have  not  taken  into  consideration  the 
increased  cost  of  labor  and  materials  and  material  men.  Why, 
looking  at  it  from  that  viewpoint,  I  think  it  is  very  doubtful 
whether  they  could  or  not. 

The  Chairman.  You  have  got  to  have  more  money  if  you  are 
going  to  maintain  that  as  a  single  system. 

Mr.  Fagan.  Yes. 

The  Chairman.  If  the  7-cent  fare  does  not  produce  sufficient  rev- 
enue do  vou  think  that  8  cents  will? 

Mr.  Fagan.  Seven  and  a  half  cents  is  the  proposed  increase — 7J 
cents  for  tickets  and  10  cents  for  individual  cash  fares. 

The  Chairman.  Yes. 

Mr.  Fagan.  Why,  we  hope  it  will ;  and  that  is  as  strong  as  I  can 
put  the  feature  of  that  situation.     It  is  an  experiment  largely. 

The  Chairman.  How  does  the  public  look  upon  this  increased 
fare  ? 

Mr.  Fagan.  The  public  in  a  general  way,  so  far  as  individuals 
are  concerned  and  so  far  as  trades  bodies — civic  bodies,  of  which  we 
have  a  great  number,  have  not  indicated  very  much  about  what 
their  feeling  is.  Some  of  the  minor  municipalities,  the  boroughs, 
have  shown  a  disinclination  to  the  increase.  The  principal  muni- 
cipality— the  city  of  Pittsburgh,  consisting  of  the  council  and  the 
mayor,  who  look  after  such  things  as  this,  privately  sympathize  and 
commiserate  with  us  and  say  it  has  to  be  done,  but  pulDlicly  they  op- 
pose it  and  have  filed  an  objection  before  the  public-service  com- 
mission against  the  increase. 

Tha.  Chairman.  Have  you  paid  any  of  the  capital  charges  since 
you  became  receiver? 


620       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Fagan.  Yes,  sir;  that  is,  the  receivers-or  while  I  was  re- 
ceiver under  the  first  receivership;  none  since  the  other  receivers 
were  appointed  in  last  January;  none  has  been  paid  at  all. 

The  Chairman.  The  condition  that  confronts  you  is  due  entirely 
to  the  increased  cost  of  labor,  supplies  and  materials,  and  fuel ;  is  it 

not?  ,    ^         ,. 

Mr.  Fagan.  I  would  say  yes  to  that  question. 

The  Chairman.  Because  up  to  the  rising  tide  of  prices  you  were 
operating  successfully;  were  you  not?  „.i^^;„f 

Mr  Fagan  Well,  if  you  mean  that  from  a  financial  standpoint, 
bv  pavinff  the  interest  on  the  capital  charges— yes.  If  you  mean 
satisfactorily  so  far  as  the  service  of  the  system  was  concerned,  I 
would  say  no.  In  other  words  I  think  this  system  is  about  at  least 
six  years  behind  in  the  rehabilitation  and  upkeep  of  the  physical 

^^The  Chairman.  How  many  years  ago  did  this  let  down  in  the  main- 
tenance and  condition  of  the  property  become  apparent? 

Mr.  Fagan.  About  six  years  ago. 

The  Chairman.  What  was  the  cause  of  it  six  years  ago  i 

Mr.  Fagan.  Well,  my  opinion  is  that  the  company  in  the  beginning 
or  at  these  different  times  was  overcapitalized ;  that  the  capital  stock 
was  too  high;  that  the  bonds  were  not  sold  at  par;  that  favorite  con- 
tractors were  given  the  contracts  for  the  building  and  the  rehabilita- 
tion of  the  road;  and  that  all  of  those  things  tended  to  the  situation 
which  finally  developed.  -x  v     j* 

The  Chairman.  To  what  extent  was  the  system  overcapitalized? 

Mr  Fagan.  Well,  now,  as  I  tell  you,  the  bonds  of  this  company 
amount  to  about  $50,000,000.  I  da  not  know  this  of  my  own  knowl- 
edore,  but  the  conditions  are  that  those  bonds  were  not  sold  at  par— 
they  were  negotiated  through  favorite  banks  at  a  sum  below  par,  a 

great  many  of  them.  .   t  i  vl       i.  *       ii 

The  Chairman.  How  much  below  par?     What  did  it  cost  to  sell 

^Mr!  Fagan.  Well,  in  some  cases  I  have  understood  they  were  sold 
at  about  20  per  cent  below  par.       ,       ,        .      , 

Mr.  Warren.  What  rate  were  they  bearing  i 

The  Chairman.  What  about  the  stock? 

Mr  Fagan.  Well,  most  of  the  stock,  I  mean  of  the  common  stock- 
there  are  two  classes  of  stock  in  this  company,  the  preferred  and  com- 
mon stock— my  information  is  that  the  common  stock  was  very 
largely  taken  by  promoters  for  the  payment  of  their  compensation, 
for  the  compensation  of  engineers,  and  for  the  compensation  of  law- 
yei-s  and,  in  some  instances,  I  think  as  a  bonus  for  the  sale  of  the 

\he  Chairman.  Do  you  know  whether  the  common  stock  represents 
any  money  that  was  actually  put  into  the  plant? 

Mr.  Fagan.  I  think  it  does  not.    Now,  I  do  not  know  that 

The  Chairman.  How  much  common  is  there? 

Mr.  Fagan.  About  $50,000,000,  I  think. 

Mr.  Warren.  In  addition  to  the  preferred! 

Mr.  Fagan.  Yes. 

Mr.  Warren.  How  much  is  that? 

Mr.  Fagan.  It  is  equally  divided. 

The  Chairman.  Equally  divided? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       621 

Mr.  Fagan.  Yes. 

The  Chairman.  Fifty-fifty — fifty  million  more  preferred? 

Mr.  Fagan.  Yes. 

The  Chairman.  Did  the  preferred  represent  any  money  actually 
invested  in  the  plant  ? 

Mr.  Fagan.  Well,  really,  I  can  not  say  that. 

The  Chairman.  Has  this  property  been  valued  by  any  public  body  ? 

Mr.  Fagan.  It  is  in  the  process  of  being  valued  and  has  been  under 
a  body  called  the  valuation  conference,  which  is  a  subordinate  body 
to  the  public-service  commission,  from  which  we  expect  a  report 
almost  any  day  now.  That  has  been  in  process  of  investigation  I 
think  for  about  a  year  and  a  half  and  at  the  enormous  cost  of  five  or 
six  hundred  thousand  dollars.  Now,  I  understand — ^by  the  way,  this 
may  be  interesting  to  you — that  the  basis  upon  which  this  valuation 
is  being  made  is  first  upon  the  original  cost  of  the  company  and 
secondly 

The  Chairman.  Have  you  figures  to  show  the  original  cost  ? 

Mr.  Fagan.  I  think  so.  They  have  access  to  all  our  books  and 
they  just  go  down  there  and  take  charge  of  them  as  if  they  owned 
them. 

The  Chairman.  What  do  they  find  the  original  cost  to  be? 

Mr.  Fagan.  They  have  not  reported.  We  are  waiting  for  the  re- 
port. It  is  to  be  based  upon  the  original  cost  and  then  upon  what 
they  call  the  historical  value,  which  is  based 

llie  Chairman.  I  think  I  am  quite  familiar  with  the  theory. 

Mr.  Fagan.  Yes,  and  then  the  ultimate  object  is  to  ascertain  what 
is  the  fair  value. 

The  Chairman.  The  present  fair  value? 

Mr.  Fagan.  The  fair  present  value. 

The  Chairman.  You  need  not  explain  the  theory.  That  is  quite 
well  understood. 

Mr.  Fagan.  Yes.  Upon  that  they  give  their  idea  of  what  the 
fares  ought  to  be,  based  upon  this  fact. 

The  Chairman.  Do  you  believe,  if  a  fair  value  of  that  property 
is  established  and  the  whole  operated  as  one  system  economically  and 
still  giving  good  public  service,  that  a  6-cent  fare  w^ill  be  fair  and 
reasonable  to  the  investors  as  well  as  to  the  public  ? 

Mr.  Fagan.  I  think  not. 

The  Chairman.  You  think  you  have  to  have  more  than  6  cents 
under  those  conditions  ? 

Mr.  Fagan.  Absolutely.  I  do  not  think  there  is  any  question  about 
it.  My  own  judgment  is  that  under  the  present  living  conditions 
and  wage  conditions  and  costs  of  material  that  this  road  can  not  be 
operated  and  pay  a  decent  return  to  the  people  who  own  it — I  mean 
the  bondholders — under  a  fare  less  than  10  cents. 

The  Chairman.  You  stated  that  there  is  more  or  less  suspicion 
of  municipal  corruption  and  collusion  in  fixing  the  contracts  and 
things  of  that  kind.  Has  anything  of  that  kind  been  going  on  while 
the  road  has  been  in  the  hands  of  the  receivers,  to  your  knowledge? 

Mr.  Fagan.  Absolutely  not.    I  know  that. 

The  Chairjman.  Contracts  are  let  on  open  bids? 

Mr.  Fagan.  Openly.  No  contract  could  be  let  under  this  receiver- 
ship unless  it  is  open. 


■*^. 


622       PEOCEEDINGS  OF  FEDERAL  ELECTKIC  RAILWAYS  COMMISSION. 

Thp  Chmrm^n  Had  the  city  or  the  State  commission  attempted 
toTxerS^  any  iurisd  oiion  over  the  operation  or  the  construction  or 
the  ktt'S  of  contracts  or  the  expenditure  of  money  prior  to  the  tune 

y^JJlJ^r^rNrXhe  only  activity  that  the  city  has  sho^n  in  re- 
laUon  fo  tWs  railway.  compLy.  has  been  to  a^a>.  j.tK,..  ^ 
^ince   the   public-service   commission    was   established— this   pvioiic 
See  cUnission  is  a  recent  creation;  it  has  "'^  y.^e^^  '^^ «^-^t-- 
phniif.  five  vears— is  to  file  petitions  against  anything  that  the  rail 
?av  company  wanted.    Now,  they  among  others  were  anxious  to 
have  thfe?e?eivSip  created  and  we  thought  that  when  the  receivei- 
shin  was  Sid  that  that  would  probably  end  the  antagonism  of  the 
citv  but  Sad  of  that  they  just  caniea  it  on  the  same  as  they  al- 
ways have     This  railway  company  heretofore  has  not  been  a  very 
nomUar  function  in  the  city  of  Pittsburgh  and  politicians  have  al- 
wa^"  taken  advantage  of  the  virtue  of  having  a  propaganda  against 
the  raUwav  company.     Now,  as  I  say,  we  tliought  that  would  end 
Sh  the  appZtment  of  receivers,  and  it  did  end  to  a  very  large 
Txtent ;  bvrt  when  any  concrete  proposition  is  made  like  the  increase 
of  f-u^es  the  city  immediately  comes  in  and  files  objections  to  it. 
SchIirman.  Were  the  politicians  holding  the  company  up? 
Mr  F\oAN.  Do  you  mean  for  sordid  purposes? 
The  Chairman.  Yes.    I  have  heard  it  intimated  that  sometimes 
they  do— not  in  Pittsburgh.  ,     ,.  .        ,  „ » 

Mr  F^OAN.  In  what  period  of  time  do  you  mean? 
The  Chairman.  Prior  to  the  receivership,  sir.    I  do  not  make  any 
«!ii<-h  imoutation  since  you  have  taken  charge. 

Mr  Kn  I  wantefl  t«  fix  the  time.  The  politicians  and  the  pro- 
moters of  "street  railways  when  these  affaii-s  were  going  on  were 
usuallv  acting  in  concert,  at  least  they  were  ,n  our  bailiwick;  I  do 
not  know  how  thev  were'in  other  places,  although  I  have  heard  of 
^oln '  other  places  where  that  situation  did  exist. 

The  Chmrman.  If  these  properties  go  back  to  private  operation 
and  control  again,  how  are  you  going  to  prevent  a  recurrence  of 

"'mi- 'fao."n!  w"ell,  of  course-do  you  mean  these  receivers  or  the 

public? 

The  Chairman.  The  public.  ^    ^      i     i    ^# 

Mr  Fagan.  I  do  not  know  except  by  the  different  standards  of 
honesty  that  prevails  now  and  the  difference  m  the  publicity  that  is 
ffh  en  to  all  these  public  questions.  And  in  our  State  by  the  existence 
of  this  public-service  commission,  which,  by  the  way,  is  a  ^ry 
effident  and  capable  body  which  did  not  exist  at  the  tune  when 
the^corpom^^^^^  were  put  together-at  the  time  when  they  were 
Diit  to-ether  and  when  these  securities  were  exploited  the  only  test 
was  whether  you  could  sell  them.  You  had  to  get  no  consent  from 
anvbodv  like  the  public-service  commission.  ,       ,      • 

The  Chairma/  Have  you  attempted  to  sell  any  bonds  since  you 

were  appointed  receiver?  i.u;«« 

Mr.  Fagan.  No,  we  have  not  any  to  sell;  but  I  know  something 

about  the  market.  .  .    ,« 

The  Chairman.  Have  you  had  to  raise  any  new  capitaH 
Mr.  Fagan.  No;  we  have  not  raised  any  capital.    We  have  issued 

no  certificates. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       623 

The  Chairman.  You  have  heard  something  about  this  cost-of- 
service  plan,  have  you  not? 

Mr.  Fagan.  I  just  read  it  in  the  paper  the  other  day  at  home  when 
Mr.  George,  one  of  my  coreceivers,  testified  here,  and  I  left  town 
the  day  he  got  back  to  town.  I  did  not  have  time  to  go  into  the 
subject  with  him. 

The  Chairman.  You  are  not  sufficiently  familiar  with  that  sub- 
ject to  discuss  whether  or  not  that  would  afford  a  suitable  remedy  for 
the  Pittsburgh  situation? 

Mr.  Fagan.  I  do  not  know  enough  about  it  to  say  that,  except 
this,  that  if  the  cost-of -service  plan  means  that  a  railway  company 
should  be  run  at  cost,  I  think  it  is  a  very  dangerous  thing,  because 
then  the  door  would  be  open  to  the  labor  to  ask  the  highest  cost 
possible  that  could  be  obtained,  and  so  as  to  materials  and  as  to 
material  men.  It  might  be  all  right  if  it  was  properly  safeguarded 
under  suitable  limitations,  but  if  it  is  as  the  term  implies  I  do  not 
think  it  would  be  a  good  thing. 

Mr.  Warren.  It  would  be  a  supervised  cost. 

Commissioner  Gadsden.  I  understand  that  the  bonded  indebted- 
ness in  that  company  is  about  $50,000,000  ? 

Mr.  Fagan.  Yes. 

Commissioner  Gadsden.  And  your  recollection  is  that  the  bonds 
sold  at  about  80? 

Mr.  Fagan.  Well,  I  say  that  I  have  heard  that  some  of  them  sold 
as  low  as  80.  That  would  be  an  issue  or  part  of  an  issue  to  a  bank 
who  would  take  them  up  and  then  they  would  probably  sell  them  at 
par  and  the  profit  would  go  to  the  bank  and  not  to  the  company. 

Commissioner  Gadsden.  That  would  represent  about  $iO.OOO',000 
of  real  money  in  this  property,  would  it  not? 

Mr.  Fagan.  If  they  all  sold  at  that  price.  I  never  heard  that  they 
all  did. 

Commissioner  Gadsden.  So  that  even  if  the  common  and  preferred 
stock  represented  nothing  it  would  look  as  if  there  was  real  money 
in  that  property  to  the  extent  of  about  $40,000,000  or  in  that  neidibor- 
hood  ?  ^ 

Mr.  Fagan.  Yes,  I  would  say  that;  although  in  the  face  of  this 
investigation  being  made  by  the  public-service  commission  and  which 
report  will  probably  be  made  public  in  a  few  days,  it  looks  a  little 
mal  apropos  for  me  to  give  an  opinion. 

Commissioner  Gadsden.  What  I  was  getting  at  is,  if  that  is  so  or 
approximately  so,  how  is  that  $40,000,000  or  any  part  of  it  to  be  taken 
care  of  under  existing  conditions  ? 

Mr.  Fagan.  As  I  tell  you,  this  road  has  approximately  600  miles 
of  line — that  is,  300  miles  of  double  track.  Under  the  present  con- 
ditions, costs,  it  would  take  $70,000  a  mile  to  build  that  road.  That 
would  be  $42,000,000.  Now  that  is  without  regard  to  the  rolling 
stock;  and  we  have  as  many  cars  on  our  road,  I  heard  it  testified 
recently  by  the  vice  president  of  the  Baltimore  &  Ohio  Railroad,  as 
the  Baltimore  &  Ohio  Railroad  has  passenger  cars.  Now  that  is  plus 
power  houses,  barns,  and  all  that  sort  of  thing,  so  that  there  is  actu- 
ally, according  to  present  prices,  $42,000,000  invested  in  the  tracks, 
and  I  would  say  in  a  rough  guess,  twelve  or  fifteen  million  dollars 
in  these  other  things  I  have  mentioned. 


624       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Coininissioner  Gadsden.  Now,  Mr.  Fagun  even  allowing  6  per  cent, 
which  of  course  is  too  low  a  rate  of  interest  for  these  days,  and  allow- 
ing 4  per  cent  depreciation  that  property  ought  to  earn— that  would 
be  10  per  cent  on  $40,000,000  or  $4,000,000  net  earning.  Do  you  see 
anv  possible  way  it  can  earn  anything  like  that? 

Mr.  Fagan.  I  can  not.  t         .    « 

Commissioner  Gadsden.  Under  any  system  of  chai-pes,  I  mean? 
Mr  Fagan.  Oh.  yes.     You  could  get  up  a  systeni  of  charges  that 
would  earn  it,  provided  the  passengers  would  continue  to  ride. 
Commissioner  Gadsden.  Yes;  that  is  what  I  mean. 

Mr.  Fagan.  Yes.  .  ...       .,    . 

The  Chairman.  What  have  you  to  say  as  to  the  proposition  that 
the  city  has  got  to  appropriate  sufficient  money  out  of  its  taxes  to  taUe 
care  o*  the  deficit  and  provide  proper  service? 

Mr  Fagan.  I  think  I  told  you  we  have  all  these  bridges  which 
are  free  to  evervbodv  except  the  railway  company  and  upon  winch 
we  pav  tolls.  We  paV  tolls  for  cleaning  the  streets  which  do  not  need 
anv  cleaning  at  our  hands.  Those  obligations  were  imposed  in  the 
davs  of  horse  cars  to  clear  up  the  drippings  from  the  horses.  We 
pav  40  per  cent  of  the  paving  expenses  of  the  streets  oyer  which  we 
run  and  I  thought  as  one  of  the  means  by  which  this  difficulty  could 
be  obviated,  it  was  to  have  the  city  forego  these  charges,  and  we  in- 


tend to 'take  that  question  up  with  the  city  in  the  near  future. 
Commissioner  Gadsden.  My  recollection  is  that  Mr.  Georg 


ge  testi- 


fied that  that  was  about  $200,000 ;  did  he  not  ?        ^    ^    ^_.  ^.^ 
Mr.  Fagan.  I  think  in  the  aggregate  it  amounts  to  ^-38o,OUU. 


ning. 


Well, 


Commisisoner  Gadsden.  That  goes  far  toward  paying- 
Mr.  Fagan.  We  pay  $75,000  a  year  for  this  alleged  clea  „ 
we  do  not  have  anything  that  causes  cleaning.  Electric  cars  do  not 
make  the  same  drippings  that  horses  do,  and  we  are  the  only  people, 
as  I  say,  who  pay  any  tolls  on  bridges.     Automobiles  and  everything 

else  are  free.  ,       ,  ^        ,  .,  .     ^ 

The  Chairman.  Of  course,  we  people  who  use  automobiles  aje  in  a 

spcH-ial  class.     [Laughter.]  ^      -j    • 

Mr.  Fagan.  Yes.    Well,  we  poor  fellows  have  to  ride  m  cars  once 

in  awhile.  .     ^.     ,        i  ixo        * 

Mr.  Warren.  Do  you  reside  m  Pittsburgh  yourself  f 

Mr.  Fagan.  Yes,  sir.  • 

Mr.  Warren.  And  is  it  your  opinion  that  the  unified  system  which 
now  exists  there  should,  if  possible,  be  preserved? 

Mr.  Fagan.  Absolutely.  ,    ,    ..      ^i        -^  -^  n- 

Mr.  Warren.  It  serves  the  city  much  better  than  if  it  were  split 

up,  even  in  three?  ,  ,      .  xi    ^        j    ^     i^u 

Mr   Fagan.  Yes,  sir;  there  is  no  doubt  about  that,  and,  further 

th>n  that,  the  people  are  satisfied  with  it,  the  way  it  is  running  now. 
Mr  AVarren.  Is  there  any  reason,  under  the  law  of  Pennsylvania, 

why  there  should  have  been  so  many  companies  originally  entering 

into  this  combination?  ^i.  xv,  i.  i 

Mr  Fagan.  No.  This  was  just  the  natural  growth  that  occurred 
there,  the  same  as  it  did  in  every  other  place,  through  those  days  ot 
iiiero-ers  and  combination  and  exploitation  and  reexploitation. 

Ml-  Warren.  I  had  an  impression  that  it  was  easier  to  get  a  char- 
ter in  Pennsylvania  in  one  borough  than  it  was  to  go  through  three 
or  four.    That  is  not  so? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       625 

Mr.  Fagan.  No. 

Commissioner  Sweet.  These  companies  have  not  all  been  operating 
companies,  have  they? 

Mr.  Fagan.  Originally. 

Mr.  Warren.  The  200  ? 

Mr.  Fagan.  Originally  they  were. 

Commissioner  Sweet.  I  understood  Mr.  George  to  say  that  some 
of  them  were  only  paper  companies  and  never  had  actually  operated. 

Mr.  Fagan.  Well,  there  may  have  been  some  of  that  class.  I  would 
not  say  that  is  not  correct.  It  appears  to  be  preposterous  that  there 
should  be  208  companies  in  a  combination  that  comprises  only  625 
miles  of  track,  but  some  of  those  companies  run  over  a  very  small 
territory — some  of  them  only  half  a  mile. 

Mr.  Warren.  It  would  be  an  average  of  3  miles  to  a  company. 

Mr.  Fagan.  Yes,  sir.  I  think  they  were  all  real  bona  fide  com- 
panies in  the  beginning. 

Mr.  Warren.  Have  you  had  any  occasion  to,  or  have  you  made  any 
attempt  to,  issue  receivers'  certificates? 

Mr.  Fagan.  No,  we  have  not. 

Mr.  Warren.  You  spoke  of  capital  charges  which  were  paid  dur- 
ing the  last  six  years  before  the  receivership. 

Mr.  Fagan.  Yes. 

Mr.  Warren.  What  did  you  include  in  that — the  interest  on  those 
bonds  ? 

Mr.  Fagan.  The  interest  on  the  bonds  and  the  rentals  to  the  under- 
lying companies. 

Mr.  Warren.  What  is  the  occasion  of  this  valuation?  Why  is  it 
being  made  at  this  time  ? 

Mr.  Fagan.  The  purpose  of  it  is  to  ascertain  the  present  value  of 
the  property,  and  upon  that  to  base  what  should  be  a  proper  return, 
for  the  purpose  of  furnishing  funds  to  operate  the  company  and 
pay  the  capital  charges. 

Mr.  Warren.  Looking  to  a  reorganization,  perhaps. 

Mr.  Fagan.  AVell,  eventually,  I  presume.  In  fact,  this  valuation 
board  began  its  functions  before  the  receivers  were  appointed. 

Mr.  AVarren.  Yes. 

Mr.  Fagan.  This  trouble  as  to  the  financial  condition  of  this  com- 
pany has  been  prevalent  for  four  or  five  years.  It  was  not  a  new 
thing  when  the  receivers  were  appointed. 

Mr.  Warren.  So  the  public-service  commission  took  steps  to  have 
this  valuation  made? 

Mr.  Fagan.  Yes. 

Mr.  Warren.  That  is  all. 

Mr.  Fagan.  I  was  told  when  I  came  here  that  if  I  had  any  siig- 
gestions  to  make  about  this  matter,  I  ought  to  make  them. 

The  Chairman.  W^e  would  be  glad  to  have  them. 

Mr.  Fagan.  This  one  thing  has  occurred  to  me,  and  this  arises 
from  the  fact  that  I  was  here  recently  appearing  before  the  National 
War  Labor  Board.  That  board,  of  course,  as  everybody  knows,  is  a 
Federal  institution,  and  during  the  existence  of  the  war  was  given 
authority  to  fix  the  wages  of  the  men.  I  presume  that  that  function 
will  cease  as  soon  as  the  war  is  over;  in  fact,  I  understand  that  our 
case  is  about  the  last  one  of  which  they  can  take  cognizance. 


Ik 


fe- 


626     pnocEEDiNGS  or  federal  electric  railways  commission. 

\„w  take  (.ur  casf,  for  instance.  The  Public  Service  Commission 
of  Prnnsvivanil  is  ve'sted  with  the  power  to  fix  the  rate  of  wages 

Mr.  AVakukx.  The  rate  of  wages? 

Mr.  Facax.  I  mean  tlie  rate  of  fare. 

Mr  M'AititKX.  The  rate  of  fare.  •      u„ 

Mr  F  u  AN  And  it  occurred  to  me  that  these  two  companies,  be- 
ing^ clo'ely  correlated,  ought  to  be  under  the  jurisdiction  of  one 

body.  „  .     « 

The  Chairman-.  Wages,  as  well  as  rates?  •  ^    i-    ,i  ♦!,„  :„ 

M  F-ui^N  Wages  Ss  well  as  rates.  Rates  consist  of  all  the  in- 
come of  the  company  and  that  is  now  under  the  jurisdiction  of  the 
miblic  service  commission.  Wages  consist,  in  our  case  of  at  least 
two  thirds  of  the  disbursen.ents,  and  I  think,  therefore,  that  both  of 
;  ose  th  ngs,  which  are  the  largest  and  most  important  items  that 
en?^  no  this  operation,  should  be  under  the  jurisdiction  of  one 
Wlv  whether  it  be  the  War  Board  or  somebody  tantamount  to  that, 
or  ImpuK-service  commission;  but  I  think  it  would  have  to  be  the 
pubHc-^rvice  commission,  from' the  fact  that,  a  Federal  institution 
\vould  not  have  any  jurisdiction,  except  over  interstate  aifairs. 

cimmfssbner  gIdUn.  Do  y^u  think  you  could  get  the  laboring 
mpn  to  a«"ree  with  yoii  on  that?  .  , 

Ml'  Fagan.  I  don--t  know.    The  thought  ]ust  occurred  to  me,  and 

I  thouffht  I  would  give  it  to  you.        .       „       ,     •„  ..*  „*  „^.:„t 

Commissioner  Sweet.  The  War  Labor  Board.  JiH  go  out  of  exist- 
ence  as  soon  as  peace  is  declared,  as  you  have  said. 

Smmtrsloner  Sweet.  So  that  would  not  be  a  Pei;i"anent  body. 
Mr    F^GAN    Well,  when  I  was  here  appearing  before  the  A\  ar 
Lnbo;  IW  it  ^^^s  suggested  that,  after  they  did  actually  go  out  of 
e4  stenfe   t^^^  probably  be  replaced  by  a  commission  t..  be 

eSshed  by  the  Labor  Department.     I  did  not  pay  any  at  ention 
to  it  at  that  time,  but  in  evolving  this  thought,,  it  j  ustocc.irred^^^^^ 
Ih- 1  anv  Federal  body  could  not  have  any  jurisdiction,  except  in 
nieUaL  niaU^^^^^  and  therefore    the  -^ural  body  to  ^^^^^^^^^^ 
power  should  be  given,  if  it  should  be  given,  would  be  a  btate  body. 

C^oiiHnissioner  Sweet.  With  the  idea ,    ,       ^     i.- 

-      Mr  Sn    That  they  would  have  practically  the  whole  situation 

^^SmiSoner  Sweet.  Certainly,  and  if  they  would  permit  an  in- 
crearof  wages,  a  corresponding  increase  in  revenue^could  be  made. 

Mf  F\g 'x.  Yes;  and  then  one  of  the  defenses  which  we  gave  to 
the  National  War  Labor  Board  was  that  we  were  an  insolvent  con- 
cern \Ve  -a  ve  them  all  our  figures-everything  we  had;-and  that 
under  no  cTrcumstances  would  we  be  able  to  meet  the  increase  in 
Ihes^w  a-es  rand  we  were  politely  informed  that  that  was  not  their 
Sess-that  their  business  was  to  fix  the  wages,  and  our  business 
was  to  find  the  money.     [Laughter.] 

Mr.  Warren.  That  has  been  one  of  your  chief  duties  since  you 
became  receiver;  has  it  not,  Mr.  Fagan? 

Mr.  Fagan.  Yes. 

Mr.  Warren.  Thank  you  very  much. 

Mr  Fagan.  Not  at  all.  ,       .      j 

Mr'  Warren.  I  will  ask  Mr.  Head  to  take  the  stand. 


PROCEEDII^GS  OF  FEDERAL  ELECTRIC  RAIL^VAYS  COMMISSION.       627 


STATEMENT  OF  ME.  W.  B.  HEAD. 

Mr.  Warren.  Give  your  full  name,  Mr.  Head, 

Mr.  Head.  W.  B.  Head. 

Mr.  Warren.  Where  do  you  reside? 

Mr.  Head.  Li  Dallas,  Tex. 

Mr.  Warren.  In  Dallas,  Tex.? 

Mr.  Head.  Yes,  sir. 

Mr.  Warren.  Are  you  connected  with  the  street  railway  there? 

Ml*.  Head.  Vice  president  of  the  Dallas  Railway  Co. 

Mr.  Warren.  How  long  have  you  been  vice  president  of  that 
company,  Mr.  Head? 

Mr.  Head.  Since  it  was  organized.  The  Dallas  Eailway  is  a 
new  company,  however. 

Mr.  Warren.  When  was  it  organized? 

Mr.  Head.  It  was  organized  in  1917. 

Mr.  Warren.  That  company  practically  succeeded  a  prior  street- 
railway  company;  did  it  not? 

Mr.  Head.  Yes,  sir. 

Mr.  Warren.  Of  the  same  name? 

Mr.  Head.  No,  sir. 

Mr.  AVarrex.  What  was  the  name  of  the  old  company? 

Mr.  Head.  There  were  several  companies  operating  in  the  city 
of  Dallas,  but  under  one  management,  owned  b}'  a  holding  company. 

Mr.  Warren.  And  this  new  company  w^as  organized  to  take  them 
all  over? 

Mr.  Head.  Yes,  sir. 

Mr.  Warren.  And  merge  them  into  one? 

Mr.  Head.  Yes,  sir.  • 

Mr.  Warren.  And  in  connection  with  that  organization — that 
new  organization — was  anything,  and  if  so,  what,  done  in  rasi>ect  to 
a  new  franchise  ?     Were  some  of  the  old  franchises  expiring  ? 

Mr.  Head.  Yes,  sir;  all  of  the  old  franchises  of  the  various  com- 
panies had  practically  expired. 

Mr.  Warren.  So  that  a  new  franchise  was  necessary  either  for  the 
old  or  new  company? 

Mr.  Head.  Yes,  sir. 

The  Chairman.  Did  all  of  the  old  franchises  have  a  fixed  fare? 
.  Mr.  Head.  I  do  not  think  so.    Some  of  them  had. 

Mr.  Warren.  Now,  will  you  describe  to  the  commission  the  prin- 
cipal features  of  the  new  franchise,  which  3^ou  think  they  would 
be  interested  in,  this  plan  being  the  service-at-cost  plan,  as  it  is 
sometimes  called. 

Mr.  Head.  As  a  preface,  the  things  the  present  franchise  has 
negotiated,  it  might  be  well  to  state  to  the  commission  some  of  the 
peculiarities  of  the  Texas  laws. 

We  have  no  public-service  commission  in  Texas,  but,  on  the  other 
hand,  have  what  is  known  as  home  rule,  an  act  passed  by  the  legis- 
lature in  1913,  giving  to  all  cities  of  5,000  or  more  practical ly\ll 
the  powers  of  rate  regulation  that  the  legislature  itself  would  have. 

Prior  to  this  time,  however,  there  had  been  some  laws  passed 
with  reference  to  the  operation  of  street-railway  properties.  We 
have  a  State  law  that  requires  a  railway  company  to  pave  between 
its  rails  and  2  feet  outside  the  rails.  No  city  has  authority  to  waive 
that  charge,  even  if  it  wanted  to. 


-■iLrt 


628       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

We  nlso  have  laws  with  reference  to  carrying  school  children 

Mr.  Warren    Is  that  because  the  court  has  so  deeded,  about  the 

r>'ivin<»  or  because  the  statute  is  so  clear?  ,    .   .    ^,  t* 

^  M^He.d:  The  statute  is  quite  clear  that  that  is  the  case.    It 

has  never  been  repealed.    It  was  not  repealed  when  the  home-rule 

'""Mr."  WarTex.  Well,  does  the  statute  say  that  the  municipality 
can  not  waive  it,  or  shall  not  do  it? 

Mr.  Head.  No  ;  I  do  not  think  so. 

Mr.  Warrex.  And  the  court  has  not  said  so« 

Mr  Head  No  ;  there  has  been  no  ruling  of  the  courts.  The  opin- 
io.^ of  vaiious  attorneys  are,  however,  that  the  city  can  not  waive 

*''Mr'' w!rren.  It  is  an  interesting  thing,  Mr.  Chairman,  because 

we  had  a  law  in  Massachusetts  quite  "l- t,^«tTPrrour^su™ 
what  the  street-railway  companies  should  do;  and  our  supreme 
court  held  that  the  municipality  could  extend  the  amount  required 

***£"  Hf!^^  Ithas  never  been  attacked,  and  in  the  development  of 
our  franchise  we  asked  the  opinion  of  several  attorneys  w  J  rf « 
ence  to  whether  or  not  these  paving  charges  could  be  ehminated 

*Te  wereTnSfking  to  work  a  service-at-cost  franchise  and  the 
effort  was  made  to  get  relief  of  all  burdens  and  we  did  get  re- 
lieved of  numerous  burdens  that  heretofore  had  been  imposed  on 
he  railway  companies,  such  as  pole  and  wire  taxes,  a  gross  receipt 
ta^  and  other  things  of  that  l^ind  which  we  were  specifically  re- 
ife^'ed  of  in  the  contract.  The  paving  burden  was  one  that  we 
discussed  a  great  deal,  and  we  came  to  the  conclusion-both  parties 
?o  the  contmct-that  the  franchise  would  have  to  carry  with  it 

^  We^aKavein  Texas  the  initiative  and  referendum  and  we  have 
reached  the  point  that  the  street-car  rider,  or  the  electnc-light  user, 
or  the  u^r  of  any  public  utility,  practically  fixes  the  fare.  It  re- 
quires only  500  signers  to  order  an  election  and  pass  on  any  ordinance 

that  may  have  been  passed.  . 

The  Chairman.  Has  the  referendum  been  exercised  I 

Mr.  Head.  Yes.  sir.  ,      ,        , 

Mr.  Warren.  This  is  a  local  referendum.      ,       ,     ,  ,        . 

■    Mr  Head.  Yes.  sir ;  a  local  referendum,  under  the  home-rnle  act. 

In  the  city  of  Houston,  the  street  railway  company,  the  Houston 
Railway  Co.,  went  before  the  city  commission  and  asked  for  an  in- 
creased fare,  and  after  laying  all  the  facts  before  the  commission, 
t^e  ordinance  was  passed  granting  a  6-cent  fare.  Five  hundred  peo- 
ple stned  a  petition  asking  for  a  referendum  on  the  ordinance,  and 
it  was  A^oted  down. 

Mr.  Warren.  That  was  in  Houston?  .,    ^,    .  x    fi  .  .^,r. 

Mr.  Head.  That  was  in  Houston.  I  merely  cite  that  to  the  com- 
mission  to  show  the  situation  in  Texas  with  reference  to  utility  rates 

.^^"IhrCH AIRMAN.  Perhaps  that  was  after  the  people  of  Houston 
beffan  to  expeiience  great  reductions  in  telephone  and  telegraph 
rates  made  by  the  Postmaster  General,  who  was  from  Texas. 
[Laughter.] 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       629 

Mr.  Head.  Po.ssibly  so. 

To  get  back  to  the  history  of  the  development  of  the  present  Dal- 
las franchises,  I  will  state  that  not  only  the  railway  franchises,  but 
the  light  and  power  franchises,  and  the  franchises  of  the  gas  com- 
pany— all  separate  corporations — are  under  service-at-cost  plan.  I 
say  "  service  at  cost."  They  are  not  real  service-at-cost  franchises, 
which  I  will  explain  a  little  later  on. 

Under  the  former  management,  after  having  a  great  deal  of  agita- 
tion, running  over  some  six  or  seven  years,  in  an  effort  to  get  these 
separate  railway  companies  consolidated  and  get  the  franchises  for 
the  electric-light-and-power  company  the  city  of  Dallas  suggested 
the  cost-of-service  franchise.  * 

The  mayor— it  was  in  1914, 1  believe — was  active  in  trying  to  work 
out  a  utility  situation,  both  railway  and  lighting,  and  the  Cleveland 
franchise  was  brought  to  Dallas.  The  city  employed  experts  to 
make  a  valuation  of  the  railway  properties.  The  company  employed 
its  engineers  and  experts. 

They  failed  to  agree  on  a  valuation;  also  they  could  not  agree  on 
a  kind  of  a  franchise — the  rate  of  return,  and  other  things  in  con- 
nection with  it. 

The  city's  charter  had  to  be  amended  before  a  service-at-cost  fran- 
chise could  be  granted. 

The  city,  in  the  April  election,  I  believe,  of  1914,  prepared  an 
amendment  to  the  charter,  so  that  a  service-at-cost  franchise  could 
be  granted,  and  at  the  same  election  put  up  to  the  people,  on  a  kind 
of  a  straw  vote,  the  controversy,  or  the  model  franchise,  that  the 
city  was  offering  the  companies  operating  at  that  time. 

The  company  opposed  the  franchise  and  used  every  effort  possible 
to  prevent  even  the  amending  of  the  charter. 

The  election  resulted  favorably  to  the  city's  side  of  the  contro- 
versy. The  company  refused  to  accept  the  franchises  as  favorably 
indicated  by  the  straw  vote.  Some  gentlemen  in  Dallas  then  went 
to  the  owners  of  the  properties  and  secured  an  option  at  a  figure 
somjwhat  lower  than  the  value  that  was  placed  on  them  by  the  com- 
pany's engineers  and  opened  up  negotiations  with  the  city,  with  a 
view  to  organizing  two  separate  companies,  one  for  the  lighting  and 
one  for  the  railway.    These  negotiations  went  on  for  about  a  year. 

The  present  franchises  were  voted  upon  by  the  people,  as  a  result 
of  those  negotiations,  at  an  election  in  1917. 

Mr.  Warren.  By  "  an  election  "  you  mean  a  referendum  vote,  do 
you? 

Mr.  Head.  Well,  the  franchises,  being  entirely  different  from  the 
ones  the  people  had  approved  before,  it  became  necessary  that  they 
be  ratified  or  adopted  by  the  people.  In  the  Dallas  city  chai-ter 
franchises  must  be  voted  on. 

The  Chairman.  The  electric-lighting  company  and  the  other  com- 
panies are  entirely  separate? 

Mr.  Head.  Yes.  The  companies  were  organized  under  public  laws 
and  the  capitalization  based  upon  the  value  agreed  upon  in  the  fran- 
chise contract.  In  substance,  the  Dallas  Railway  franchise  starts 
out  as  of  a  certain  date,  with  a  fixed  value,  known  as  propeijty  value, 
and  every  dollar  that  is  added  to  the  property  value,  thereafter  that 
value  becomes  the  basis  for  making  rates,  the  franchises  provide 
for  a  very  rigid  supervision. 


1^ 


li 


630       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  First,  who  fixed  the  value? 

Mr.  Head.  Who  fixed  the  value  ? 

The  Chairman.  Yes.  ^      ,   .       ,  ^      x    •     xu 

Mr.  Head.  The  original  value  was  fixed  in  the  contract,  m  trie 

fmnchise.  .      ,    ,         ,     « 

The  Chairman.  AVlio  determined  the  value? 

Mr.  Head.  It  was  a  value  agreed  upon  between  the  men  who  had 
the  option  on  the  property  and  the  city,  approved  by  the  people. 
The  Chairman.  Go  ahead. 

Mr.  Waijren.  Based  on  the  previous  engineers'  study! 
Mr.  Head.  Yes ;  it  was  a  compromise  value. 

Mr.  WarI^en.  Yes.  ,    ,     .,       ..  , 

Mr.  Head.  Based  on  the  valuations  which  were  made  by  the  city  s 
experts  and  by  the  company's  experts.  ,     ,     •       *      ^ 

This  figure,  the  property  value,  then  becomes  the  basis  of  rates. 

The  franchises  are  diiferont  from  the  Cleveland  franchises  in  this 
respect:  The  city  undertakes  no  control  whatever  of  the  issuance  of 
the  securities,  except  there  is  a  limit  placed  upon  the  amount  of 
bonds  that  mav  be  issued  in  terms  of  property  value.  You  can  not 
issue  bonds  in  excess  of  85  per  cent  of  the  property  value.  The  con- 
tract states  that  the  city  will  not  be  concerned  in  and  will  have  noth- 
ing to  do  with  the  issuance  of  stocks  and  bonds,  other  than  the  pro- 
viso that  I  have  just  mentioned;  but  the  grantee  may  issue  securities 
without  a  lot  of  legal  questions  on  the  part  of  the  city,  in  any  law- 
ful manner.  We  have  some  State  laws  that  regulate  the  issuance  of 
securities.  There  is  no  provision  made  for  the  cost  of  obtaining 
money,    it  is  the  actual  bare  bones  amount  that  goes  into  the  prop- 

61*tv 

the  Chairman.  What  goes  in  is  the  only  money  that  is  reckoned 

with  ? 

Mr.  Head.  Yes. 

Mr.  Warren.  That  is,  up  to  this  original  amount. 

Mr.  Head.  Yes;  and  every  dollar  that  goes  into  the  property  must 
be  approved  by  the  city.  The  contract  provides  for  what  is  known  as 
a  supervisor  of  the  utilities,  and  when  we  want  to  make  an  extension 
of  the  plant,  or  spend  any  money  that  is  to  go  into  property  value,  a 
requisition  is  made  for  the  expenditure,  and  it  is  laid  before  the 
supervisor.  If  it  is  a  good  largo  amount--I  can  not  give  you  the  ex- 
act figure ;  I  think  possibly  even  as  small  an  amount  as  $10.000 — it 
requires  not  only  the  approval  of  the  supervisor  but  of  the  city  com- 
mission itself.  -a 

Mr.  Warren.  Is  that  a  commission  city? 

Mr.  Head.  Yes,  sir;  a  commission  city. 

The  supervisor  has  his  engineers  and  his  accountants,  and  the  com- 
pany furnishes  an  office,  a  room,  in  the  office  building  of  the  railway 
company  for  his  use,  so  that  he  can  come  there  and  examine  the  books. 
Our  accounts  are  open.  We  publish  every  month  a  statement  of  what 
the  company  has  done.  We  keep  an  account  and  present  the  city 
each  month  with  just  what  the  books  show  as  to  what  the  property 
value  is,  how  it  is  growing,  and  what  the  additions  have  been. 

Mr.  W^arren.  And  also  of  the  earnings? 

Mr.  Head.  And  of  the  earnings — a  complete  statement  and  that 
statement  is  published  every  month  in  the  daily  papers  in  the  city. 


n; 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       631 

The  rate  of  return  was  6  or  7  per  cent  on  the  property  value.  That 
was  the  allowed  return.  You  could  make  that,  if  you  could.  Tha 
serious  defect  in  the  railway  franchise 

The  Chairman.  Is  that  rate  of  return  a  preferred  charge  ? 

Mr.  Head.  No,  sir.  The  first  thing  j^ou  must  do  is  that  out  of  your 
income  you  pay  operating  expenses,  and  these  franchises  provide  re- 
serves. Depreciation  and  replacement  reserve  must  come  out  next. 
Then,  6  per  cent  accident  reserve,  and  the  balance  to  surplus  reserve. 
That  is  the  division  of  the  operating  expenses. 

Mr.  Warren.  That  surplus  reserve  is  what  is  sometimes  called  the 
barometer. 

Mr.  Head.  Yes,  sir. 

The^e  reserves  are  all  figured  in  terms  of  property  value.  When 
the  depreciation  reserve  gets  to  a  certain  per  cent  of  the  property 
value,  it  is  considered  normal.  When  the  accident  reserve  becomes  a 
certain  per  cent  of  the  gross  receipts,  it  is  normal ;  and  when  the  sur- 
plus rCvServe  becomes  a  certain  per  cent  of  the  property  value,  it  is 
normal.  Then,  whenever  the  surplus  reserve  reaches  the  point  of  so 
many  per  cents  above  normal,  fares  are  reduced  for  six  months,  until 
we  see  where  that  reserve  is  going. 

The  great  defect,  as  it  turned  out,  in  the  railway  franchise,  on  ac- 
count of  the  war  situation,  is  the  fact  that  it  has  a  top  limit  and,  to 
that  extent,  is  not  a  service  at  cost.  You  can  not  go  above  a  5-cent 
fare,  and,  therefore,  it  is  not  a  service- at-cost  franchise,  to  that  ex- 
tent. 

Mr.  Warren.  In  that  i^espect,  however,  it  is  like  the  Cleveland  ono 
originally. 

Mr.  Head.  Yes. 

Mr.  Warren.  Until  the  Cleveland  franchise  was  changed. 

Mr.  Head.  It  has  this  top  limit.  In  addition  to  the  top  limit,  wo 
introduced  into  the  franchise  the  London  sliding  scale.  The  fran- 
chise provides  that  we  are  allowed  a  certain  per  cent  return  on  the  5- 
cent  fare.  If  by  efficiency  in  operation  and  economies,  we  sell  six 
tickets  for  25  cents,  they  allow  us  to  make  7J  per  cent,  if  we  can. 
Then  it  goes  down.  There  are  three  items  in  the  schedule,  the  idea 
being  that  the  rate  of  return  would  rise  as  the  rate  of  fare  descended. 

That  system  in  the  lighting  company's  franchise  has  worked  ex- 
ceedingly well,  and  there  have  been  reductions  in  the  lighting  rates. 
The  maximum  in  the  lighting  franchise,  which  had  the  top  limit  in 
it,  too,  but  it  was  such  a  limit  that  it  could  never  interfere,  because 
of  the  fact  that  it  only  dealt  with  the  maximum  ligliting  rate,  giving 
you  an  opportunity  to  get  your  revenue  from  the  long-hours  con- 
sumer, and  hence  it  has  been  working  quite  well  in  the  lighting 
franchise. 

I  personally  am  very  much  of  the  opinion — I  feel  quite  sure — that 
but  for  this  top  limit,  it  would  be  working  quite  well  in  the  railway 
franchise  in  Dallas  to-day. 

We  find  a  hearty  cooperation  on  the  part  of  the  city  and  the  man- 
agement. Each  side  seems  to  remember  that,  or  to  understand  that 
what  is  to  one's  interest  is  to  the  other's  interest.  We  have  it  demon- 
strated in  the  lighting  franchise  in  several  instances.  For  instance, 
just  prior  to  the  time  that  we  took  over  the  property,  the  ducts  had 
been  laid  for  a  large  amount  of  the  underground  wires  in  the  busi- 
ness section  of  the  city  of  Dallas,  and  the  time  was  up  in  which  to 


632       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

begin  putting  this  copper  underground.  The  city  said,  "Don't  put 
that  in  now  while  copper  is  so  high,  because  we  think  we  could  afford 
to  wait,  rather  than  have  possibly  a  million  dollars  of  excess  money 
in  thes^  ducts  and  have  a  lot  of  money  that  the  city  of  Dallas  would 

have  to  pay  a  return  on."  i     •        n  *• 

The  same  thing  came  up  in  the  power  plant  about  the  installation 
of  a  laiffe  turbine,  under  present  prices.  They  said  it  would  pos- 
sibly be  better,  rather  than  to  spend  all  of  this  money  at  this  pai- 
ticular  time,  to  wait  a  while  and  buy  it  when  we  could  get  it  at 

quite  reasonable  rates.  x-  xi  *  ^t  fi.^ 

We  have  found  the  same  sort  of  cooperation  on  the  pait  of  the 

citv  officials  in  the  railway  franchise.  x  xt    f^«  li.v.if 

the  question  that  we  are  up  against  now  is  to  get  this  top  limit 
off  Under  the  present  cost  of  material  and  labor,  we  are  not— well, 
we  have  made  about  4  per  cent  on  the  property  value. 

Mr.  Warren.  For  what  period,  Mr.  Head  i  x   x     i  « 

Mr.   Head.  AVell,   it  has  been   an   average   for  the   past  twelve 

"'Mr' Warren.  How  long  has  it  been  operating  under  the  franchise? 
Mr    Head.  It  will  be  two  years  next  Octol^er. 
The  Chairman.  Have  you  made  any  extensions  to  the  property 

durinir   that   time?  .        _.  ,,.        .^ 

Mr    Head.  No,  sir;  that  is  the  very  question  I  was  getting  to. 

The  city  of  Dallas  is  not  properly  served.     We  need  more  cars. 

The  city  is  growing  very  rapi^ly-  , 

Mr.  Warren.  How  large  is  Dallas  now?      ,     ,    ,  i.  x  -x  • 

Mr.  Head.  It  was  165,000  when  I  left.    I  don't  know  what  it  is 

now.     [Laughter.]  .    ,       .  ■,    -       xu     9 

Mr.  Warren.  You  think  it  has  increased  since  then? 
Mr  Head.  Possibly  200,000.    Well,  that  is  one  of  the  great  troubles 

in  the  utility  business  in  Dallas  to-day,  to  keep  up  with  the  very 

rapid  growth  of  these  cities.  ^,    ^  t  u^«. 

If  you  will  pardon  me  for  just  a  word  or  two  on  that,  I  can  show 
you  cities  in  Texas  of  20,000  to-day  that  had  20  people  in  them  a  year 
Lo  It  is  remarkable.  During  this  oil  development,  possibly 
150  000  or  200,000  people  have  come  to  Texas  in  the  last  year,  m  this 
pai-ticular  section  lying  immediately  northwest  of  the  city  of  Dallas. 
We  are  not  properly  serving  the  city.  We  are  not  making  any 
extensions.  We  have  not  the  money,  and  we  can  not  get  the  money. 
We  need  new  equipment,  and  we  can  not  get  money  with  which  to 

purchase  that  equipment.  '     t  .i  •  i  a*. 

The  Chairman.  If  you  are  making  4  per  cent,  I  think  your  credit 
would  be  good  enough  to  get  out  and  get  new  money  for  cars  and 
necessary  extensions. 

Mr.  Head.  No;  not  in  Texas. 

The  Chairman.  Not  in  Texas? 

Mr.  Head.  No.  ^r    i  « 

The  Chairman.  How  about  New  York? 

Mr  Head.  I  mean  money  invested  in  Texas.    Rates  of  interest  are 
very  much  higher  in  our  section  than  they  are  up  in  this  section. 
Mr.  Warren.  You  suffer,  too,  from  the  general  collapse  of  the 

street-railway  credit,  I  suppose?  .   ^  •   .       .i. 

Mr  Head.  Yes.  We  know  that  we  are  not  maintaining  the  prop- 
erty as  it  should  be  maintained.     And  that  is  not  all.     We  have 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       633 

nursed  it  every  way  we  possibly  could,  in  order  to  get  the  return  out 
of  it  that  we  have.  The  management  of  the  Dallas  Railway  Co.  also 
managers  some  other  large  properties  in  the  State  whose  general  offices 
are  in  Dallas.  As  to  the  matter  of  salaries  for  officials,  we  are  in  a 
position  where  we  can  favor  the  railways,  in  the  matter  of  salaries 
for  management.  We  have  done  everything  that  we  possibly  could 
to  keep  our  heads  above  water.  Our  increases  in  operating  expenses 
have  been  about  like  the  increases  that  you  have  heard  testified  to. 
I  have  heard  the  testimony  of  a  great  many.  I  have  some  figures 
which  might  be  interesting  to  show  some  of  the  increases  in  Texas. 

The  maximum  paid  motormen 

The  Chairman.  Do  you  have  this  in  writing? 

Mr.  Head.  Ye-s,  sir. 

The  Chairman.  Suppose  you  file  it  with  the  reporter. 

Mr.  Head.  Yes,  sir — showing  the  increase  in  motormen 's  wages 
from  25  cents  to  42  cents,  and  other  wages  in  proportion. 

The  statement  referred  to  by  Mr.  Head  is  as  f ollow  s : 

Statement  of  the  Dallas  Railway  Co.  showing  icages  per  hour  or  month,  and 
hours  worked  per  day,  July,  1914,  and  July,  1919. 


TRAINMEN. 


First  six  months  of  scnice. . . 
Second  six  months  of  service. 

Second  year  of  service 

Third  year  of  service 

Fourth  year  of  service 

Fifth  year  and  thereafter 

First  three  months  of  ser^'ice. 

Next  nine  months 

Second  year  and  thereafter... 


SHOPMEN, 


General  foreman 

Truck-shop  foreman 

Carpenter  foreman 

Paint-shop  foreman 

Inspector  foreman  (day) . . 
Inspector  foreman  (night). 

Carpenters 

Armature  winders 

Truckmen 

Carpenter  inspectors 

Machinists 

Machinists'  helpers 

Truck  inspectors 

Electricians 

Painters 

Car  shifter 

Blacksmith 

Blacksmith  helper 

Shop  cleaners 

I'itmen 

Car-house  cleaners 

Car  cleaners 


TRACKMEN  AND  LINEMEN. 


Watchman  at  material  yard. 

Line  foreman 

Linemen.. 

Track  foreman 

Common  laborers 


July,  1914. 


Rate  per  hour 
or  month. 


Hours 
per  day. 


$0.20 
.21 
.22 
.23 
.24 
.25 


lOi 


115. 00 
110.00 
.35 
.32i 
.32i 
.23i 
.221-.  32i 
.30 
.25-.  30 
.  22-.  27i 
.27i 
.17i-.25 
.20-.27i 
.25 
.25 
.24 
.37i 
.20 
.18 
.17i 
.16 
.15 


55.00 
.37i 
.27i-.25 
.20-.26§ 
.I7h 


10 
10 
10 
10 
10 
13 
10 
10 
10 
10 
10 
10 
10 
10 
10 
11 
10 
10 
10 
10 
10 
10 


10 
10 
10 
10 
10 


July,  1919. 


Rate  per  hour 
or  month. 


»$0.38 
.40 
.42 


175.00 

160.00 

160.00 

160.00 

160.00 

160.00 

.47i-.60 

.60 

.40-.  45 

.47i 

.45 

.38-.  40 

.38-.  45 

.42J-.56 

.40-.  60 

.45 

.70 

.50 

.32 

.38-.  45 

.30 

.30 


80.00 

160.00 

.  55 

95. 00-145!  00 

.35 


Hours 
per  day. 


10\ 


9 
• 
9 
9 

10 

10 
9 
9 
9 

10 
9 
9 

10 
9 
9 

10 
9 
9 

10 
9 

10 

10 


10 
9 

9 
9 

9 


•  Approximate  number  of  hours  in  regular  runs. 

*  The  company  owns  12  one-mau  cars.    Operators  of  these  cus  receive  4  cents  per  hour  in  addition 
regular  race. 

160643"— 20 41 


l« 


if' 


634       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet,  ^liat  you  want  to  do  now  is  to  get  your 
franchise  amended  so  as  to  i^ermit  you  to  charge  higher  f ai-es  i 

Mr.  Head.  Yes,  sir.  .  ,    « 

Commissioner  Sweet.  Is  that  right? 

Mr.  Head.  Yes,  sir;  to  get  that  top  hmit  off.  .19 

Commissioner  Sweet.  Would  that  require  another  referenduni  i 

Mr.  Head.  Yes,  sir.    You  can  not  change  a  franchise  in  lexas  m 

any  of  the  larger  cities  without  an  election.  ^.c     tt     j  9 

Mr.  Warren.  What  is  the  term  of  the  franchise,  Mr.  Head  i 
Mr.  Head.  It  is  indeterminate.    The  city  has  an  option  to  purchase 

the  property  after  20  years. 
Commissioner  Sweet.  At  par? 

Mr.  Head.  What  is  that  ?  .1      j  n     0 

Commissioner  Sweet.  At  a  hundred  cents  on  the  dollar?        ^ 
Mr  Head.  No,  sir;  I  believe  it  is  a  hundred  and  five.    I  forget  ]ust 

the  figure,  but  it  is  slightly  above  the  property  value  as  fixed. 
Commissioner  Sweet.  Yes ;  somewhat  like  the  Cleveland  plan. 
Mr.  Head.  Yes,  sir;  very  much.    I  think  it  is  identically  the  same 

figures  as  in  the  Cleveland  plan.  ^  v    •.  xi,        1 

Mr  Warren.  But  is  this  matter  of  the  maximum  limit  the  only 

criticism  that  you  would  make,  after  working  under  this  franchise 

for  a  couple  of  yeai^s  ?  ,  x  u 

Mr  Head.  I  think  so,  Mr.  Warren.  Of  course,  we  have  not  been 
jroinor*  long  enough  to  find  some  defects  in  it.  The  question  came  up 
and  was  discussed  at  great  length,  with  reference  to  the  question  of 
regulating  on  a  basis  of  the  actual  money  that  goes  into  the  property, 
under  city  supervision  and  the  regulation  of  securities.  Ihe  city, 
after  considering  the  matter,  was  agreeable  to  this  basis  of  i^g"la- 
tion  •  in  fact,  a  discussion  as  to  whether  or  not  we  should  be  allowed 
something  for  the  cost  of  obtaining  money,  and  they  said  that  they 
would  prefer  that  they  rather  regulate  on  the  actual  money  m  the 
propei-ty  and  make  the  rate  of  return  somewhat  higher,  in  order  that 
we  might  absorb  whatever  costs  there  might  be  m  obtaining  money. 
The  Chairman.  What  rate  was  your  company  charging  betore 
this  contract  w^as  made  ? 

Mr.  Head.  What  did  you  say  ?  ,        •       1   i- 

The  Chairman.  What  rate  was  your  company  charging  before 

this  contract  was  made  ? 

Mr.  Head.  Five  cents. 

The  Chairman.  A  5-cent  fare? 

Mr.  Head.  A  5-cent  fare,  with  a  universal  transfer. 

The  Chairman.  And  you  are  now  charging  a  5-cent  fare? 

Mr.  Head.  A  5-cent  fare,  with  universal  transfei-s. 

The  Chairman.  A  maximum  of  5  cents? 

Mr.  Head.  Yes,  sir. 

The  Chairman.  Has  it  not  looked  to  you  as  if  the  city  got  every- 
thing in  this  contract,  and  you  got  nothing?  ^    ^ 

Mr.  Head.  Well,  I  quite  agree  with  you,  Mr.  Commissioner,  that 
the\'  got  the  best  of  it. 

The  Chairman.  Well,  what  did  you  get  out  of  it? 

Mr.  Head.  If  conditions  had  continued  as  they  were  in  1913  and 
1914,  as  to  the  cost  of  materials  and  labor,  I  think  that  we  would 
have  been  earning  at  this  time  about  8  per  cent  on  the  property  value, 
and  the  people  would  have  been  riding  at  six  tickets  for  a  quarter. 


PKOCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSION.      635 

Now,  we  did  not  have  to  support  that,  or  rather,  some  of  us  did  feel 
that  there  might  come  a  time  when  the  fare  would  have  to  be  made 
above  5  cents  as  a  straight  fare ;  but  at  the  time  the  franchises  were 
negotiated  we  had  the  severe  jitney  competition— -that  is,  the  old 
company  management  had  jitney  competition — and  one  of  the  agree- 
inents  of  the  city  was— what  you  might  term  a  side  agreement— that 
they  would  pass  an  ordinance  that  would  relieve  the  railway  com- 
pany of  this  jitney  competition. 

The  Chairman.  Has  that  been  done? 

Mr.  Head.  Yes,  sir ;  but  it  took  a  good  long  time.  It  got  into  the 
courts ;  and  we  have  only  been  relieved  of  it  in  the  month  of  May  of 
this  year.  That  was  the  first  month  that  we  have  had  in  which  to 
make  a  comparison. 

Mr.  Warren.  Wliat  was  the  result  of  that  comparison,  Mr.  Head  ? 

Mr.  Head.  It  is  interesting.  The  receipts  jumped  up  in  May  of 
this  year  over  May  of  last  year  about  50  per  cent.  We  never  knew 
how  much  they  were  taking. 

Mr.  Warren.  Fifty  per  cent? 

Mr.  Head.  Yes. 

The  Chairman.  Of  course,  you  know  Dallas  is  still  growing  and 
has  been  growing  some  since  last  May. 

Mr.  Warren.  You  think  30  per  cent  may  have  been  the  normal 
growth  ? 

Mr.  Head.  The  June  statement  showed  an  increase  in  June  this 
year  over  June  of  last  year,  with  no  jitneys  last  year,  of  about  10 
per  cent.  The  increase  in  May  this  year  over  May  last  year  was 
48.3  per  cent.  May,  1919,  as  compared  with  May,  1918,  increased 
48.3  per  cent. 

Mr.  Warren.  And  the  next  month  it  increased  10  per  cent? 

Mr.  Head.  The  next  month  it  was  10  per  cent. 

Mr.  Warren.  Because  they  had  been  cut  off  in  June  a  j^ear  ago? 

Mr.  Head.  Yes ;  because  they  had  been  cut  off  in  June  a  year  ago. 

Commissioner  Sweet.  How  did  they  get  rid  of  the  jitneys? 

Mr.  Head.  Well,  it  is  a  very  long  story,  Mr.  Sweet. 

Commissioner  Sweet.  Well,  briefly  outline  it. 

Mr.  Head.  It  was  done  by  ci-^ating  a  zone  in  which  they  were  not 
allowed  to  operate,  and  that  zone  comprises  practically  all  of  the 
business  section. 

Mr.  Warren.  That  was  taken  into  litigation? 

Mr.  Head.  That  was  taken  into  litigation  and  had  to  go  through 
the  courts. 

Mr.  Warren.  And  it  was  sustained,  was  it  ? 

Mr.  Head.  It  was  sustained ;  yes,  sir.  There  had  been  other  ordi- 
nances passed,  the  requiring  of  bonds  and  things  of  that  kind. 
Thore  were  altogether  four  or  five  lawsuits  in  the  court. 

The  Chairman.  So  far  as  this  contract  is  concerned,  you  can  not 
got  more  than  a  7  per  cent  return  upon  your  capital? 

Mr.  Head.  I  did  not  understand  it. 

The  Chairman.  Under  this  contract  you  can  not  get  more  than 
7  i)er  cent  upon  the  capital,  no  matter  what  the  earnings  are? 

Mr.  Head.  Yes,  sir. 

The  Chairman.  Can  you? 

Mr.  Head.  Yes;  we  have  this  London  sliding  scale.  If  the  earn- 
ings will  permit  we  can  get  8  per  cent  if  we  sell  6  tickets  at  25  cents. 


636       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  That  is  somewhat  academic  under  the  present  con- 
ditions ;  is  it  not,  Mr.  Head  ? 

Mr.  Head.  Very ;  yes,  sir.  v^  ^ff  fU^f 

The  Chairman.  Do  you  expect  to  be  able  to  get  the  lid  off  that 

maximum  fare?  .       .        ,  .  r\         x  *u 

Mr.  Head.  I  rather  think  we  will,  for  this  reason :  One  of  the 
trading  points  of  the  city  was  that,  on  account  of  the  fact  that  they 
put  this  lid  on,  we  introduced  certain  clauses  in  the  franchises  by 
which  thev  can  not  force  extensions  when  we  are  not  making  the  al- 
lowed return,  and  we  are  hopeful  of  using  that  to  be  able  to  get 
this  lid  off,  so  that  the  property  can  grow.  That  was  one  of  the 
offsets  to  the  limit's  being  placed.  .     .    ,     i      ^    .9 

Commissioner  Sweet.  How  do  the  people  seem  to  feel  about  it  ? 

Mr.  Head.  I  think  the  great  majority— well,  I  know  that  all  the 
business  men,  the  thinking  people,  understand  that  an  increase  in 
fare  is  necessary  and  are  perfectly  willing  to  pay  it.  Of  course, 
we  have  an  element  in  our  city,  like  you  find  everywhere  else,  that 
wants  to  hold  on  to  evervthing  they  can  get  and  will  oppose 

Commissioner  Sweet.  They  have  a  prejudice  against  the  company, 
I  suppose,  in  its  present  shape? 

Mr.  Head.  Yes,  sir. 

Commissioner  Sweet.  As  well  as  the  old  one. 

Mr  Head.  Well,  there  has  not  been  a  great  deal  of  prejudice 
now.  This  company  is  managed  by  a  board  of  21  directors.  Prac- 
tically all  of  them  have  lived  in  the  city  of  Dallas  and  were  selected 
with  a  view  to  creating  public  sentiment  favorable  to  the  company 
and  to  give  it  what  you  would  call  a  moral  standing  in  the  com- 
munity. .  -  _  ^,  .  .       . 

The  Chairman.  You  said  the  business  men  favored  this  contract. 
Do  they  use  the  cars  very  much,  or  do  they  use  their  own  auto- 
mobiles ? 

Mr.  Head.  I  did  not  understand  you. 

The  Chairman.  You  said  the  business  men  favored  this  contract. 
I  was  wondering  if  they  used  your  cars  very  much  or  whether 
they  ride  in  their  own  automobiles?  ^      ^ 

Mr.  Head.  Well,  I  expect  most  of  them  ride  in  automobiles. 

The  Chairman.  What  does  the  ordinary  citizen  of  Dallas  think 
about  that  system? 

Mr.  Head.  You  mean  about  the  franchise? 

The  Chairman.  Yes. 

Mr.  Head.  When  the  franchises  were  voted  on,  they  were  carried 
by  a  majority  of  about  2  to  1,  and  that  with  one  of  the  evening 
papers  violently  opposing  the  franchises  as  drawn,  and  also  with 
the  mayor  who  negotiated  the  franchises  coming  out  at  the  very  last 
hour  and  saying  that  they  were  bad. 

The  Chairman.  Saying  that  they  were  bad  ? 

Mr.  Head.  Yes,  sir.  ^  ,  •       •   j 

The  Chairman.  Well,  a  politician  has  a  right  to  change  his  mmd. 
Commissioner  Gadsden.  Is  there  any  agitation  in  Texas  for  a  State 

commission,  Mr.  Head?  ,    ,     i.      ..  ^-       * 

Mr.  Head.  Yes,  sir ;  there  has  been  a  great  deal  of  agitation  for  a 
State  commission,  which  comes  from  two  angles.  The  long-distance 
toll  service  in  Texas  is  not  regulated  by  any  authority.  The  smaller 
communities,  in  the  towns  of  less  than  5,000,  have  no  rate  regulation. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       637 

Commissioner  Gadsden.  What  is  the  attitude  of  the  public  utilities 
toward  that?  . 

Mr.  Head.  The  public  utilities  have  taken  the  attitude  of  being 
favorable  to  a  State  commission  if  the  State  commission  has  final 
authority.  There  was  a  bill  introduced  in  the  last  session  of  the 
legislature,  and  it  passed  the  house  but  did  not  get  by  the  senate, 
although  it  did  not  reach  a  a  ote,  that  undertook  to  create  a  State  com- 
mission, making  the  commission's  jurisdiction  in  home  rule  cities 
appellate  or  upon  the  request  of  the  municipality.  That,  I  think, 
will  really  solve  the  situation  in  Texas. 

Mr.  Warren.  Was  there  not  formerly  a  railroad  commission  in 

Texas? 

Mr.  Head.  There  is  a  railroad  commission  there  now. 

Mr.  Warren.  It  has  jurisdiction  only  over  the  railroads? 

Mr.  Head.  Only  over  the  railroads. 

The  Chairman.  At  this  point,  we  will  adjourn  until  to-morrow 
morning  at  10  o'clock. 

(Whereupon,  at  10  o'clock  p.  m.,  the  further  hearing  of  this  case 
was  adjourned  until  to-morrow,  AVednesday,  July  23,  1919,  at  10 
o'clock  a.  m.) 

Washington,  D.  C,  July  23,  1919. 

Met  pursuant  to  adjournment  at  10  a.  m. 

Present:  Parties  as  before.. 

The  Chairman.  Are  you  ready,  Mr.  Warren? 

Mr.  Warren.  All  ready;  yes,  sir.     Prof.  Bullock,  take  the  stand. 

STATEMENT  OF  PROF.  CHARLES  J.  BULLOCK. 

Mr.  Warren.  Your  full  name,  Prof.  Bullock,  is  Charles  J.  Bul- 
lock ? 

Mr.  Bullock.  Charles  J.  Bullock. 

Mr.  Warren.  You  are  connected  with  Harvard  University? 

Mr.  Bullock.  I  am,  as  professor  of  economics. 

Mr.  Warren.  And  you  have  had  occasion  repeatedly  to  make 
special  study  of  questions  of  taxation,  I  think? 

Mr.  BuixocK.  1  have. 

Mr.  AVarren.  You  have  advised  various  Massachusetts  legislative 
commissions  and  assessment  commissions  as  to  taxation  along  various 
lines  ? 

Mr.  Bullock.  I  have. 

Mr.  Warren.  And  if  I  am  not  mistaken,  you  had  a  great  deal  to 
do  with  the  drafting  of  the  Massachusetts  income  tax  adopted  a  few 
years  ago? 

Mr.  Bullock.  I  had. 

Mr.  Warren.  Have  you  also  had  occasion  to  stiidy  the  actual  meth- 
ods of  taxation  of  public  utilities  and  of  street  railways? 

Mr.  Bullock.  I  made  a  study  of  the  taxation  of  corporations  in 
genei-al  for  the  purpose  of  working  out  a  revision  of  our  own  corpora- 
tion tax  laws  in  Massachusetts.  I  have  also  served  as  chairman  of  a 
committee  appointed  by  the  National  Tax  Association  to  investigate 
the  taxation  of  public  service  corporations,  which  committee  submit- 
ted a  report  of  which  I  furnished  you  a  copy. 


638       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILV/AYS  COMMISSION. 

Mr  W^iEEX  And  have  vou  made  a  study  of  street-railway  taxa- 
tion for  "tile  purpose  of  submitting  certain  data  and  views  to  this 

'Tlr'S'^ocK  I  have  recently  made  a  special  study  of  street-rail- 
way  taSn  for  the  purpose  of  presenting-  a  memorandum  to  this 
^ninmission  and  I  have  prepared  a  memorandum. 

m  W^i^^^.^ow.  Will  you  take  up  that  memorandum  and  go 
throucrh  it  without  my  questioning  you  ? 

ThrCiiAiRMAN.  Have  you  extra  copies  ot  it  J  . 

Mr    But^cK.  I  have  left  with  Mr.  Warren  t^ree  copies  of  th^ 

Jmorandum  and  also  a  <^opy  of  tl^*^/-!?";-*  «* /^^e  to^^^ 

sible  the  main  points. 

S;^  SrK.^il^e'^^i^nloLdum  begins  by  -ttingj-th  w^^^^^^^ 

;irl  fhP  icitll  sl^ock  tax,  are  donbtless  kno^-n  to  yonr  commission. 

"K  »Sfl.».  in  principk  are  p.rf«l1y  'V''  •»;'  I*,''";"? 
are  required  to  assess  at  ti»«  T^^  «      „„^^p,.  ,.a,„p   .assessed  at  one- 

*" Commissioner  Sweet.  What  was  the  second  State? 


PROCEEDINGS  OF  FEDEEAL  ELECTKIC  RAILWAYS  COMMISSION,       639 

Mr.  Bullock.  Maine,  Connecticut,  and  California  the  operating 
property  is  exempt  from  local  taxation,  and  from  State  taxation  for 
that  matter,  as  property,  and  the  railroads  pay  a  tax  on  their  gross 
receipts  in  lieu  of  taxation  on  their  operating  property. 

In  some  other  States,  enumerated  in  the  memorandum,  they  levy 
gross-receipts  taxes  in  addition  to  property  and  franchise  and  capital 
stock  and  license  and  other  taxes,  such  gross-receipts  taxes  usually 
bein^  at  a  lower  rate  than  those  prevailing  in  Connecticut  and  Cali- 
fornia. The  gross-receipts  tax  is  therefore  extensively  used,  it  being 
the  only  tax  on  operating  property  in  three  States  and  it  being  a  sup- 
plementary tax  in  10  or  a  dozen  others. 

Then  there  is  a  capital-stock  tax  which  electric  railways  usually 
in  common  with  other  corporations,  pay,  which  ordinarily  is  not 
heavy.  It  is  a  small  fraction  of  1  per  cent.  But  in  times  like  this 
small  taxes  mount  up,  especially  when  one  small  tax  is  added  to  an- 
other small  tax  and  that  to  another.  In  Pennsylvania  the  capital- 
stock  tax  is  the  principal  tax  levied  on  street  railroads  outside  of 
Philadelphia  and  Pittsburgh.  That  capital-stock  tax  is  at  the  rate 
of  5  mills  on  the  dollar  of  the  valuation  of  the  capital  stock,  and  it  is 
in  lieu  of  other  taxation  of  the  property  of  the  railroad.  IBut  there 
is  in  addition  to  the  capital  stock  tax  a  gross-receipts  tax. 

Commissioner  Sweet.  I  did  not  quite  understand  that  last. 

Mr.  Bullock.  In  addition  to  the  capital-stock  tax  in  Pennsyl- 
vania there  is  a  gross  receipts  tax  as  well,  so  that  that  of  5  mills  on 
the  dollar  is  not  the  only  tax  paid.  There  is  also  a  tax  on  the  bonds 
and  obligations  of  electric  railroads,  which  is  a  part  of  a  general 
tax  levied  on  all  corporation  obligations.  That  corporations  are 
authorized  to  deduct  from  payments  made  to  bondholders,  and  in 
niany  times  past  they  have  assumed  the  payment  of  that  tax  and 
did  not  deduct  it. 

Then  there  is  a  great  variety  of  license  taxes  and  charges  about 
which  it  is  very  difficult  to  get  comprehensive  information.  There 
are  State  license  taxes  in  a  few  States  and  a  gieat  variety  of  local 
license  taxes;  especially  in  the  Southern  States,  you  will  find  a 
pretty  comprehensive  system  of  privilege  taxes  which  are  license 
taxes  of  one  sort  or  another,  applicable  to  a  great  variety  of  indus- 
tries. I  have  run  through  the  different  taxes  in  the  strict  sense  of 
the  word  that  the  street  railroads  pay  IcK-ally  and  nationally  and 
will  presently  present  some  figures  thereon. 

In  addition  to  those  taxes  there  are  a  multitude  of  other  pay- 
ments, other  public  contributions,  made  in  connection  with  their 
occupation  of  the  streets  or  made  in  payment  for  franchises  under 
arrangements  in  effect  in  times  past.  These  payments  are  fre- 
quently of  a  contractual  character;  they  are  legally  not  taxes  at  all. 
In  fact,  however,  they  amount  to  extra  contributions  made  to  the 
public  treasury  which  the  street-railroad  industry  has  to  support, 
and  therefore  they  should  be  mentioned  here  arid  statistics  about 
them  will  presently  be  presented. 

Xow,  in  regard  to  the  taxes  paid,  there  are  some  statistics  con- 
tained in-  this  memorandum.  The  data  have  been  carefully  pre- 
pared by  the  American  Electric  Railway  Association,  and  I  have 
made  an  analysis  of  them  which  gives  the  following  rather  inter- 
esting results: 


P 


!*• 


I 


If  ■ 


•"  1 


•!**^ 


C40       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  U\xes  on  real  and  personal  property  paid  locally  by  the  electric 
railways  in  1917  amounted  to  $21,800,000,  and  the  miscellaneous  and 

other  taxes  paid  to  State  and  local  ^^^^^^'^'^''^J'^^  ^^^f^^^^^^  ^^'^ 

taxes  paid  to  the  Federal  Government  amounted  to  Ji)23,y00,OUU 

Commissioner  Sweet.  In  addition  to  the  twenty-one  million  ? 

Mr.  Bullock.  In  addition  to  the  twenty-one  million;  the  total 
t.axes  proper  amounting  to  $45  756,000     The  other  P"b  ^c  c'ontr^^^^ 
tions  which  I  have  just  been  referring  to  amounted  to  $17,oOO,OUO  m 
addition  to  the  taxes;  so  that  the  total  public  contributions  of  the 
street  railways  amounted  to  $63,200,000  in  round  numbers. 

Of  course,  a  total  figure  of  that  sort  does  not  mean  much  until 
vou  take  it  in  its  relation  to  the  earning  power  of  the  railroads 
and  some  other  things.  Now  that  figure  of  $63,000,000  in  round  num- 
bers amounted  to  8.67  per  cent  of  the  gross  earnings  of  the  electric 
railways.  That  will  show  you  that  the  tax  burden  is  a  heavy  one, 
particularly  with  reference  to  this  industry. 

In  the  street-railwav  industry  it  used  to  be  said  or  the  figures 
used  to  show  that  you  Invested  $5  or  $6  of  capital  to  get  $1  of  gross 
receipts.  That  means  to  get  $100,000  of  gross  receipts  you  have  an 
investment  of  $500,000  to  $600,000  of  capital.  Assuming  that  the 
cost  of  capital— your  interest  charge  in  other  words— is  6  per  cent, 
vou  have  got  a  charge  of  $30,000  to  $36,000  for  capital  against  your 
$100  000  of  earnings.  Therefore  a  tax  burden  of  8  per  cent  on  top 
of  your  capital  charge  that  may  amount  to  30  per  cent  or  more 
mortgages  a  very  large  part  of  the  available  revenue  of  the  street 
railwa\l  In  an  industry  where  you  invest  $100,000  and  turn  it 
over  two  or  three  times  a  year,  getting,  say,  $300,000  gross,  you 
have  an  interest  charge  of  $6,000  against  $300,000  gross,  and  a 
gross  receipts  tax  of  8  per  cent,  while  it  is  a  larger  tax,  because  the 
gross  is  larger,  it  comes  out  of  a  larger  margin  of  earnings  above 
operating  expenses;  8.6  per  cent  for  an  industry  where  the  capital 
charges  are  necessarily  as  large  as  they  are  in  the  street-railway 
industry  is  a  heavy  tax.    I  further — -  ^,    ,  .     ,    ,      ^, 

Commissioner  Sweft.  That  is  not  all  tax.  That  includes  the  con- 
tractual   ,  ,.  ,     .,      X-  Ti.  •  4. 

Mr.  Bullock.  It  includes  all  these  public  contributions.     It  is  not 

all  taxes.    It  is  about ,    ^  t        .     u 

Commissioner  Sweet.  But  it  represents  money  that  has  to  be 
earned  by  the  companies  and  is  made  to  the  public? 

Mr.  Bullock.  It  has  to  be  earned  and  is  made  to  the  public. 

Commissioner  Sweet.  Either  in  the  form  of  taxes  or  by  con- 
tractual agreement  ? 

Mr.  Bullock.  Yes. 

The  Chairman.  Does  that  include  your  assessment  taxes,  your 

paving  tax?  .         ,         ,      «  . v       j  u 

Mr.  Bullock.  It  includes  everything  that  the  figures  gathered  by 
the  association  identified  as  a  public  contribution  for  the  use  of 

streets  ^nd       ~ 

Commissioner  Sweet.  I  take  it  that  that  was  practically  paid  over 

in  money  and  not  in  service,  like  paving  ?  ,       ,      ^  * 

Mr.  Bullock.  Sometimes  these  contributions  take  the  form  of 

carrying  public  employees  without  charge  or  doing  work  on  the 

streets,  such  as  snow  removal.    Now  whether  the  statistician  of  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       641 

association  has  included  the  money  spent  for  snow  removal  in  this 
item  I  can  not  tell  you,  but  he  can. 

Commissioner  Sweet.  We  ought  to  know  that. 

Mr.  Bullock.  I  have  assumed  those  figures  are  in  here,  so  these 
are  outside  figures.  If  they  are  not,  then  that  estimate  of  8.6  per 
cent  should  be  raised.  I  assume  that  that  is  included  here,  and  if  it 
is  not  the  statistician  of  the  railroad  association  can  correct  that 
figure. 

Commissioner  Sweet.  Very  well. 

Mr.  Bullock.  The  gross  operating  revenues  have  increased,  but 
while  the  net  operating  revenue  has  decreased  in  recent  years,  the 
taxes  down  to  the  year  1918  have  gone  on  increasing;  that  is,  the 
taxes  and  other  public  contributions.  In  1912  the  total  taxes  and 
other  public  contributions  amounted  to  $50,000,000  in  round  num- 
bers; in  1916  they  had  increased  to  $62,000,000;  in  1918  they  had 
risen  to  $65,500,000.  I  leave  out  the  intermediate  years,  which  sim- 
ply show  the  steps  in  the  ladder. 

Now  during  that  period  the  net  revenue  from  operations  has 
diminished.  The-ttet  revenue  was  $228,000,000  in  round  numbers 
in  1917  and  it  decreased  to  $192,000,000  in  round  numbers  in  1918, 
a  decrease  of  $36,000,000.  At  the  same  time  the  taxes  proper,  leav- 
ing out  these  public  contributions,  increased  from  $45,700,000  to 
$49,500,000. 

Still  more  striking  perhaps  is  the  fact  that  the  net  income  after  all 
charges  in  1917  w^as  $56,000,000  in  round  numbers,  and  in  1918  it  fell 
to  $20,000,000  in  round  numbers.  In  1917  the  net  income  after  charges 
of  $56,000,000  may  be  compared  with  taxes  paid  to  the  amount  of 
$45,000,000,  public  charges  or  contributions  being  ignored.  In  1918 
the  net  income  of  $20,000,000  after  paying  all  charges  including  taxes 
may  be  compared  with  the  total  amount  of  taxes  paid  amounting  to 
$49,000,000.  The  taxes  alone  apparently  took  $2.50  for  every  dollar 
of  net  income  left  after  meeting  the  charges  against  the  operating 
revenue.  The  industry  apparently  is  not  only  heavily  taxed,  but  up 
to  1918  at  least,  the  last  year  for  which  figures  are  available,  the 
tax  burden  had  increased. 

Now  I  pass  to  a  discussion  of  the  principles  that  ought  to  govern 
the  taxation  of  street  railways.  I  w^ill  first  discuss  the  matter  in 
a  general  way,  referring  for  further  details  to  the  report  of  that  com- 
mittee of  the  National  Tax  Association. 

There  are  three  theories  that  have  been  entertained  at  different 
times  about  the  taxation  of  public-service  corporations.  The  earlier 
theory  of  the  three — and  it  was  the  one  that^prevailed  20  or  30  years 
ago — was  that  public  service  corporations  were  possessed  of  very 
valuable  franchises  from  which  they  were  deriving  a  large  profit 
and  that  they  ought  to  be  specially  taxed.  The  period  of  the  nine- 
ties was  a  period  of  continual  discussion  of  franchise  taxation.  That 
theory  w^as  perfectly  logical  in  those  days.  It  was  the  theory  that  I 
taught  classes  in  college.  The  public  utilities,  with  the  exception  of 
the  railroads,  were  not  under  effective  public  regulation  in  most 
States.  The  street-railway  industry  was  a  profitable  industry,  and 
the  companies  possessed  valuable  franchises  which  in  many  cases 
they  had  received  on  very  favorable  terms.  Under  those  conditions 
it  was  perfectly  natural  to  look  upon  them  as  offering  a  fit  subject 


•1 


642     PROCEEDmGS  or  federal  electric  railways  commission. 

for  special  taxation.    The  special  franchise  tax  of  the  State  of  New 
York  is  the  best  illustration  of  the  special  taxation  of  franchises  that 

came  in  in  that  period.  ii    x      4.     „  i 

Under  those  conditions  of  unregulated  operation  of  street  and 
electric  railways  by  public  corporations,  which  wei-e  fi-equently  very 
profitable,  that  theory  was  justifial.    The  companies  were  the  pos- 
sessoi-s  of  valuable  special  privileges  and  it  was  proper  to  tax  them. 
With  the  coining  of  regulation,  however,  of  the  public  utilities, 
the  basis  for  that  theory  changed.    Under  public  regulation  I  take 
it  we  have  got  to  assume  that  public  utilities  are  limited  to  a  reason- 
able return  upon  the  capital  investment  and  that  their  service  also 
is  subject  to  regulation.    Under  those  conditions,  any  special  charges 
that  ire  put  upon  them  shifted  to  the  public.     Before  regulation 
came  in  thest^  special  taxes  might  have  been  assumed  to  be  paid  out 
of  the  company's  monopoly  profit.    Under  a  system  of  regulation, 
special  taxation  of  public-service  corporations  simply  increases  the 
cost  of  rendering  the  service  and  in  one  way  or  another  has  got  to  be 
taken  into  account.    If  it  is  not  recognized  in  rate  makmg,  then  it 
will  simply  come  out  of  the  service.    The  public  bfts  to  pay  either  m 
higher  rates  or  in  service,  in  less  service  or  m  poorer  service. 

So  then,  when  we  pass  to  a  regime  of  regulation  and  pretty  effec- 
tive regulation  of  public-service  corporations  the  situation  changes, 
and  the  matter  of  the  proper  method  of  taxation  seems  to  need  to  be 
reconsidered.  Two  theories  have  been  advanced  premised  on  effec- 
tive regulation  of  public  utilities.  One  of  those  theories  is  that  with 
the  regulation  of  public  utilities  you  do  not  need  to  consider  whether 
their  t'axation  is  more  or  less  heavy  than  that  of  other  companies;  it 
all  comes  out  of  the  consumers  of  the  service  and  not  out  ot  the  com- 
panies. You  can  emplov  the  companies  as  an  agency  for  collecting 
spc-cial  taxes  from  people  who  ride  upon  the  cars  ^^^^P^^^^^^^^™ 
hand,  you  can,  if  you  please,  exempt  them  from  all  taxes.  Ihe  com- 
panies will  not  profit  because  their  rates  are  regulated  a^jcordingly, 
and  the  consumers  will  get  untaxed  service. 

In  the  report  of  this  committee  which  I  submit  with  mv  memo- 
randum the  obiections  to  that  view  of  the  case  are  set  forth,  and  1 
believe  they  are  valid.  Under  normal  conditions  it  would  seem  that 
street-car  fiders  ought  to  pay  just  what  the. service  costs  and  not 
more  nor  less.  If  you  exempt  public  utilities  from  taxation  and 
orive  the  riders  untaxed  service,  you  increase  by  so  much  the  taxes 
that  owners  of  property  have  U)  pay,  and  that  is  something  that  a 
city  ought  not  to  do  and  can  not  afford  to  do  under  normal  con- 

^Tlwe  are  many  demands  for  city  expenditure.  To  fritter  away 
your  source  of  revenue  by  giving  untaxed  service,  by  granting  ex- 
emptions which  benefit  the  rider,  is  bad  municipal  finance  and  it  is 
not  fair  as  between  the  car  riders  and  taxpayers  who  are  not  neces- 
sarily the  same  people  or,  if  they  are  the  same  people,  do  not  use  the 
cars  in  the  same  proportion  that  they  pay  taxes.  Our  municipal 
taxes  fall  very  largely  upon  real  property  and  that  may  be  very 
laro^elv  owned  by  nonresidents  who  get  no  benefit  from  the  street- 
raiWad  service  whatever  and  never  patronize  it.  Then,  even  those 
that  own  property  in  the  city  and  pay  taxes  there  do  not  use  the 
street  railways  in  precise  proportion  to  their  ownership  of  property, 
rultinor  p-vrt  of  the  cost  of  furnishing  street-railway  service  into 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSLO:tr.       643 

the  tax  levy  is  not  under  normal  conditions  good  finance.  The 
proper  theory  would  seem  to  be  tliat  of  equal  treatment  of  the  in- 
dustry with  other  property.  It  should  not  be  burdened  beyond 
other  property  in  business;  it  should  not  pay  tax  less  tlian  other 
property  in  business.  If  you  levy  upon  the  industry  of  the  electric 
railways  taxes  precisely  like  those  levied  upon  other  similar  objects 
of  taxation,  you  hold  the  balance  level  between  the  taxpayers  and 
the  car  riders  and  you  do  substantial  justice  to  all  parties  in  in- 
terest, and  the  correct  theory  seems  to  be  that  of  equal  taxation  of 
public  utilities  under  normal  conditions. 

Now  every  general  theory  has,  of  course,  certain  limitations.  The 
limitations  to  this  theory  of  equal  taxation  are  implied  in  the  ex- 
pression "normal  condition"  that  I  have  used.  In  time  of  war 
when  revenue  is  the  paramount  need,  the  Govei-nment  may  very 
properly  levy  a  tax  on  transportation,  as  it  has  just  recently  done 
during  the  war.  And  similarly,  in  times  when  transportation  facili- 
ties are  needed  and  it  is  not  practicable  to  get  them  in  any  other 
way,  governments  may  properly  offer  exemptioixs  from  taxation,  as 
they  have  often  done.  The  exemption  policy  has  been  abused.  Per- 
petual grants  of  exemption  have  been  given  which  were  never  justi- 
fied, but  exemption  for  t*  limited  num&r  of  years  of  companies  un- 
dertaking public-service  enterprises  which  it  is  not  likely  can  prove 
immediately  profitable  may  be  justified  under  special  conditions. 

So,  then,  I  conclude  that  your  commission  might  very  well  find 
that  street  railways  under  normal  conditions  ought  to  be  taxed  like 
other  similar  enteiprises,  neither  more  nor  less,  and  it  might  at  the 
present  time^  if  it  finds  a  serious  emergency  existing  which  can 
not  be  effectively  remedied  in  other  ways,  it  mi^ht  perfectly  con- 
sistently recommend  relief  from  some  of  the  taxation  that  street  rail- 
ways now  bear;  and  I  shall  make  some  suggestions  on  that  point. 

Nothing  but  an  emergency  would  lead  me  to  think  that  street  rail- 
ways ought  to  be  relieved  from  equal  taxation.  I  have  always 
maintained  the  theory  of  equal  taxation — that  is  for  20  years  past^ 
but,  however,  always  with  this  qualification — that  circumstances  that 
would  justify  levying  a  tax  on  water  or  transportation  or  lighting 
would  justify  heavier  taxation  of  regulated  public-utility  companies, 
and  circumstances  that  would  offer  levying  a  tax  to  pay  a  bounty  for 
a  needed  puWic  service  that  you  could  not  otherwise  get  would  jusify 
reducing  the  burdens  of  railroad  taxation. 

Now  looking  over  the  taxes  that  street  railways  pay,  you  find  that 
Federal  income  and  excess-profits  taxes  so  far  as  they  fall  upon 
street  railways  are.  perfectly  conformable  to  the  theory  of  equality 
and  ought  not  to  be  removed  unless  there  is  an  emergency  that 
justifies  it.  You  find  that  local-pi*opei*ty  taxes  are  in  principle 
perfectly  conformable  to  the  theory  of  equality  and  that  they  ought 
not  to  be  removed  unless  there  is  a  very  serious  emergency  that 
justifies  it.  You  find  that  these  miscellaneous  taxes  on  gross  receipts, 
capital  stock,  and  license  charges  levied  in  addition  to  property 
taxes,  are  frequently  more  in  the  aggregate  than  other  properties 
bear.    Sometimes  they  are  not.     You  will  find  in  various  States— I 

have  alluded  to  the  Southern  States  and  some  of  the  Western  States 

you  will  find  their  property  subject  to  special  taxes,  and  also  to 
privilege  and  license  taxes,  and  under  those  conditions  there  is  no 
inequality   in   imposing  similar  charges  on   street   railways.     But 


644       PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION. 

where,  as  in  New  York  or  Pennsylvania,  you  have  taxation  on  prop- 
erty and  have  in  addition  a  gross-receipts  tax  or  some  other  kind  ot  a 
tax  that  other  property  does  not  pay,  you  have  a  departure  trom 
the  principle  of  equal  taxation  and  you  have  a  special  taxing  on 
transportation  which  is  not  consistent  with  the  theory  of  equal  taxa- 

^^Now  I  come  to  the  miscellaneous  public  contributions  that  I  have 
already  alluded  to',  which  in  the  aggregate  are  so  large;  and  1  in- 
vite your  attention  to  them.  They  are  an  inheritance  from  tho 
past.  They  came  from  the  days  when  street  railways  were^  not 
regulated  and  frequently  derived  large  profits  from  the  use  of  the 
franchise  which  they  enjoyed.  Under  a  system  of  regulation  of 
public  utilities,  the  charges  must  be  assumed  to  fall  upon  the  street- 
car rider  and  they  amount  to  a  special  tax  on  the  transportation 
industry  in  all  cases  where  they  exceed  a  figure  which  fairly  repre- 
sents the  special  charges  that  the  presence  of  the  street-railway  tracks 
in  the  streets  occasions  the  city.  ,  .  ,  . 

About   that   point— about   the   amount   of   special   expense   to   a 
city  occasioned  by  street-railway  tracks— there  has  always  been  dif- 
ference of  opinion.     The  companies  have  been  inclined  to  think 
that  the  presence  of  the  tracks,  at  least  under  modern  conditions,  did 
not  occasion  great  expense  and  wearing  out  of  the  pavement  and 
the  surface  was  due  to  the  use  of  the  tracks  by  other  vehicles  than 
the  cai-s.    The  cities,  on  the  other  hand,  have  undoubtedly  made  this 
theory  of  charging  for  upkeep  of  the  streets  an  excuse  for  levying 
special  taxes  on  the  transportation  industry  far  m  excess  of  the  legiti- 
mate charges  that  the  users  of  street  cars  should  pay     The  correct 
principle  seems  to  be,  however  hard  it  may  be  to  apply  it,  that  any 
Special  damage,  any  special  extra  expense  for  upkeep  of  streets  under 
normal  conditions  may  very  properly  be  put  upon  the  street-car 
riders     It  should  be  considered  just  like  an  equal  amount  of  tax 
similar  to  that  which  other  similar  enterprises  pay  and  the  car 
riders  should  pay  it.     Anything  beyond  that  point  under  normal 
times  violates  the  principle  of  equality  in  taxation  and  m  a  crisis 
like  the  present  is  in  every  way  objectionable.    A  thorough  reynsion  of 
those  charges  in  all  cases  where  they  exceed  a  fair  charge  for  extra 
cost  of  upkeep  of  streets  would  seem  to  be  one  of  the  things  needed. 

Now  in  conclusion ,  .  ,    ..         n  i     .    x-c   i 

Mr  W\RKEN.  The  only  principle  upon  which  it  would  be  lustitiecl 
wouki  be  that  stated  in  this  report  of  the  committee,  would  it  not. 
Prof  Bullock,  where  it  is  stated  somewhat  graphically  as  follows: 
"  The  principle  of  plucking  the  most  feathers  with  the  least  squawk    ? 

Mr  Bullock.  Well,  I  am  not  sure  about  that.  As  I  have  said, 
there'has  always  been  difference  of  opinion  as  to  whether  the  pre^fe- 
ence  of  the  car  tracks  occasioned  special  extra  cost  for  keeping  up  the 
street  I  have  supposed  that  it  did.  My  opinion  of  that  point  is  that 
of  a  layman.  I  am  not  an  engineer  and  am  not  expert  m  the  matter 
of  street  construction.  But  of  course  it  is  perfectly  clear  that  these 
char<^es  in  many  cases  vastly  exceed  any  such  figure,  and  if  charges 
could  be  reduced  to  that  figure,  substantial  relief  could  be  given. 

In  the  concluding  part  of  my  brief  I  suggest  first  the  revision  of 
these  special  charges.  They  used  to  be  a  means  of  securing  to  the 
public  treasury  a  part  of  the  frequently  excessive  profits  of  unregu- 
lated monopolies.    They  are  to-day  a  special  charge  on  the  industry 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      645 

of  railway  transportation  and  they  are  not  consistent  with  the  prin- 
ciple of  equal  taxation.  i     ;   i  Uxr 

I  suggest,  in  the  next  place,  that  the  other  special  taxes  levied  by 
the  States— the  additional  taxes,  gross  receipts,  and  capital  stock 
and  licenses— ought  also  to  be  reconsidered,  and  m  so  tar  as  they 
lead  to  a  burden  of  taxation  on  street  railways  exceeding  that  borne 
by  other  business  enterprises,  they  should  be  reduced  or  abolished. 

I  suggest,  in  the  third  place,  that  relief  from  the  ordinary  taxes 
imposed  upon  property  ought  to  be  the  last  remedy.  It  can  be  justi- 
fied only  upon  the  ground  of  extreme  emergency  and  the  failure  of 
other  relief  measures.    Before  you  reduce  the  ordinary  taxes  levied 


clustry  Should  nor  oe  reneveu  ux  tuc  yj.^..^^^j  i-^^t.-^-.y  ~"  -~ 
other  property  pays  except  as  a  last  resort.  In  some  cases,  appar- 
ently we  are  about  at  that  point.  The  increase  of  fares  m  my  own 
State  has  certainly  reached  the  revenue  point,  and  the  revenue  result 
is  somewhat  disappointing.  We  very  likely  have  got  to  give  relief 
in  taxation  if  we  want  to  keep  a  good  many  of  our  street-railroad 

tricks  down. 

Commissioner  Sweet.  That  is  in  Massachusetts?        ,    .     ,,  . 

Mr.  Bullock.  That  is  in  Massachusetts.  I  suggest,  in  the  next 
place,  that  if  relief  is  to  be  given  from  the  property  tax  it  would  be 
better  not  to  repeal  the  tax  but  to  suspend  its  operation  for  a  term 
of  years  and  to  provide  for  an  income  tax  on  the  companies  during 

that  interval,  if  there  are  any  compajiies 

Commissioner  Sweet.  AVould  that  be  on  gross  or  net  income/ 
Mr  Bullock.  A  tax  on  net  income,  if  there  are  any  companies  that 
are  prosperous.  We  have  one  company  in  Massachusetts,  if  1  re- 
member,  that  was  prosperous,  or  was  prosperous  six  months  ago ;  at 
least  it  was  not  unprosperous.  If  any  companies  are  earning  a  sub- 
stantial amount  of  net  income  they  might  pay  a  moderate  income 
tax  This  substitution  for  a  term  of  years  of  a  tax  on  net  incoine 
for  a  tax  on  property  would  maintain  the  principle  that  street  rail- 
ways ought  to  be  taxed  and  it  would,  as  the  industry  revived  and 
begins  to  see  better  days,  bring  in  a  normal  contribution  to  the 

public  treasury.  ^  •    x     i     j  xi  ^ 

I  finally  suggest  that  if  the  Federal  Government  is  to  lead  the 
way,  reduction  might  very  well  be  made  or  total  exemption  might 
very  well  .be  gi\inted  from  the  Federal  income  and  excess-profats 
taxes.  The  revenue  sacrifice  by  the  repeal  of  those  taxes  would  be  a 
small  thing  for  the  Federal  Government.  The  Federal  Government 
by  a  very  small  sacrifice  can  afford  substantial  relief.  For  the  btate 
and  local  governments  to  set  aside  their  property  taxes  means  a  com- 
paratively large  sacrifice  for  a  particular  locality. 

Mr.  Warren.  You  stated,  I  think,  that  there  was  no  sound  prin- 
ciple on  which  the  general  taxpayer  could  be  relieved  by  the  imposi- 
tion of  special  burdens  on  the  street  railways  not  called  for  by  spe- 
cial conditions 

Mr.  Bullock.  Nothing  but  a  great  emergency  like  war. 

Mr  Warren.  And  of  course  you  would  apply  that,  I  assume, 
equally  to  the  taxpayers  on  a  particular  street,  that  they  ought  not 
to  be  relieved  from  the  otherwise  local  assessments  for  sprinkling  a 
street,  repairing  and  similar  items  by  casting  the  burden  on  the 


646       PROCEEDmOS  0¥  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

sti-eet  railway  except  to  the  extent  that  the  car  riders  caused  the 

trouble. 

Mr.  BuixocK.  Undoubtedly.  ...-*<.  ^..;> 

Mr.  Wakren.  You  have  six)ken  of  the  present  cnsis  m  street  rai!- 
wavs.    Do  you  consider  it  a  very  serious  one  ? 

Mr.  Bullock.  So  far  as  ray  observation  and  information  goes,  it 
has  conie  to  a  point  in  some  parts  of  the  country  where  it  is  a  ques- 
tion of  having  the  street  raflroad.  In  our  part  of  the  country,  as 
vou  know,  we  are  tearing  up  tracks,  and  we  have  a  good  deal  more 
niiles  of  track  that  ought  to  come  up  because  it  is  absolutely  unsate 
for  stre^t-cai-s  to  run  over  them. 
Mr.  Warren.  Unsafe? 

Mr.  Bullock.  Absolutely  unsafe.  .     ^\  ^        „ki^ 

Mr.  Warren.  That  is,  the  companies  have  been  absolutely  unable, 
or  at  any  rate  they  have  not  maintained  the  tracks  in  safe  condition 

in  Tiiinv  cases  * 

Mr.  Bullock.  They  have  been  absolutely  unable.  There  ai-e  streets 
in  Massachusetts  where,  if  you  drive  an  automobile,  you  do  well  to 
eet  over  on  the  other  side  of  the  street  if  a  street-car  comes  along ;  you 
do  not  know  whether  it  is  coming  on  the  track  or  is  not  coming  on 
the  track  as  it  reaches  you.    I  refer,  of  course,  to  our  rural  lines. 

Mr  Warren.  In  view  of  the  injury  the  automobiles  have  done  to 
the  revenues,  that  might  not  be  an  unmitigated  evil.  , 

Mr.  Bullock.  I  was  i*eferring  to  the  condition  of  the  industry. 

The  tracks  ought  to  come  up.  ,       ,      ,         .        i  -i     ^  •     « 

Mr.  Warren.  Yes,  I  know  it,  but  if  only  the  automobile  driver 
were  ffoing  to  suffer  from  the  unsafeness,  I  do  not  know  that  we 
should  shed  so  manv  tears.  Under  those  circumstances,  should  you 
say  that  the  imposition  of  these  special  burdens  or  spe -lal  taxes  not 
called  for  by  the  injury  done  by  the  car  riders  to  the  street  are  really 

indefensible  ^ 

Mr.  BuLixK-K.  I  should  say  it  was  absolutely  indefensible. 

Mr.  Warren.  I  do  not  know  that  you  expressed  any  dehnite  opin- 
ion as  to  whether  in  some  cases  this  emergency  is  so  great  that  the 
relief  temporarily  from  the  ordinary  taxation  should  be  extended 

*  Mr.^B^locK.  Well,  there  are  companies  that  are  not  earning  op- 
erating expenses;  and  if  a  proper  allowance  for  depreciation  is  made, 
of  course  vttst  numbers  of  companies  are  not  earning  their  oi>erating 
expenses,  and  conditions  are  getting  worse.  That  is,  wages  are  ris- 
inrrS  costs  of  materials  and  supplies  have  not  begun  to  decline 
So  far  as  I  know,  there  has  been  no  improvement  m  the  operating 
ratio;  the  operating  ratio  has  been  going  up.  If  there  has  been  any 
improvement  it  is  very,  very  recent,  and  I  have  not  heard  about  it 

Now  under  those  conditions  we  are  likely  to  reach  a  point  m  Mas- 
sachusetts where  we  have  got  not  only  to  aboish  taxes  but  we  have 
got  to  go  down  into  our  pockets  and  make  up  deficits,  if  we  aie  going 
to  have  street  railway  service. 

Mr.  Warren.  If  we  are  going  to  have  it • 

Mr.  Bullock.  We  have  got  to  have  it. 

Mr  Warren.  In  Massachusetts,  you  are  familiar  with  the  laws 
there'relative  to  the  issue  of  securities  and  the  length  of  time  those 
laws  have  been  in  effect  I 

Mr.  Bullock.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       647 

Mr.  Warren.  So  that  in  the  ordinary  sense  of  the  term,  should  you 
say  to  the  commission  that  there  is  substantially  no  stock  watering 
affecting  the  situation  of  street  railways  in  Massachusetts  ? 

Mr.  Bullock.  There  has  been  none  since  the  nineties.  Our  anti- 
stock-watering  hiws  date  back  to  about  1893,  1894,  or  1895 ;  do  they 
not? 

Mr.  Warren.  Yes. 

Mr.  Bl-llock.  And  all  issues  of  securities  have  been  subject  to  the 
approval  of  the  commission,  and  the  securities  outstanding  that  were 
issued  before  that  time  are  a  small  part  of  the  whole  proposition. 
Even  with  those  securities  the  amount  of  stock  watering  was  not  so 
large  in  many  cases.  Our  first  street  railroads  were  built  in  days 
when  corporations  in  our  part  of  the  country  were  financed  by  capi- 
tal stock  and  when  bonds  were  not  known.  Our  early  railroads  were 
built  by  capital  stock,  and  there  was  a  period  in  the  seventies  and 
eighties  when  there  was  stock  watering,  but  there  has  been  none  since 
the  nineties. 

Mr.  Warren.  And  in  many,  if  not  all,  cases  when  those  laws  were 
first  put  into  effect  in  1894,  current  issues  were  made  dependent  upon 
appraisals  of  the  property  to  verify  the  integrity  of  the  past  issues ; 
were  they  not,  as  a  general  practice? 

Mr.  Bullock.  The  commission  passed  upon  the  amount  of  securi- 
ties to  be  issued  and  it  has  checked  up  the  cost.  We  can  say  sub- 
stantially there  has  been  no  stock  watering. 

Mr.  Warren.  So  that  the  plight  of  the  street  railways  in  Massa- 
chusetts, whatever  it  is  due  to,  is  not  due  to  that  ? 

Mr.  Bullock.  In  the  case  of  roads  like  the  Boston  Elevated  every 
share  of  stock  represents  a  payment  of  more  than  par.  The  stock 
has  been  put  out  at  premiums.  I  do  not  remember  the  Elevated 
figures,  but  every  share  of  Elevated  stock  represents  something  like 
$110  or  $115  of  money  put  into  the  property. 

Mr.  Warren.  And  that  company  was  not  incorporated  until  after 
the  laws  you  refer  to  were  put  in  the  statute  books  ? 

Mr.  Bullock.  Not  until  about  1898. 

Mr.  Warren.  That  is  all  I  want  to  ask  Prof.  Bullock. 

The  memorandum  presented  by  Mr.  Bullock  is  as  follows: 

The  Taxation  of  Electric  Railways. 

In  this  statement  the  taxation  of  electric  railways  will  be  considered 
under  the  following  heads:  (1)  The  existing  method  of  taxing  electric  rail- 
ways; (2)  the  amount  of  the  taxes  and  other  public  contributions  paid  by 
electric  railways;  (3)  the  principles  which  ought  to  govern  the  taxation  of 
electric  railways;  (4)  the  measures  which  ought  to  be  adopted  to  relieve  elec- 
tric railways  in  the  present  crisis. 

1.      THE  EXISTING   METHOD  OF  TAXING  EI.ECTRIC  RAILWAYS. 

The  payments  which  electric  railways  are  required  to  make  to  the  various 
governmental  authorities,  Federal,  State,  and  local,  may  be  conveniently  di- 
vided into  two  classes:  (a)  Taxes  proper  and  (ft)  other  public  contributions. 
The  former  include  pcoperty,  income,  business,   license,  franchise,  and  other 


Data  on  this  subject  may  be  found  in  the  U.  S.  Census  Report  on  the  Taxation  and 
Revenue  Systems  of  State  and  Local  Governments,  1914 ;  the  report  of  the  U.  &.  Commis- 
sioner of  Corporations  on  the  Taxation  of  Corporations,  1909-1915  ;  and  the  report  of 
the  Special  (Commission  on  the  Taxation  of  Corporations  of  the  State  of  Connecticut, 
1913  Appendix.  Statistics  concerning  the  amount  of  taxes  paid  by  electric  railways 
may  be  found  in  the  various  reports  of  the  U.  S.  Census  on  the  electric-railway  industry  ; 
other  data  have  been  gathered  by  the  American  Electric  Railway  Association  for  the  In- 
formatiou  of  the  commission. 


m  \ 


648       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 
t-ivp^.  which  electric  railways  pay  In  common  with  other  corporations  and,  in 

"T.ie''4x:r;:^h  elt^llcVaC^^^^^^^     may  oonvenient.y  be  su.n.nari.ea  as 

^"T'^rroverty  taxes.  In  43  States  and  the  District  of  CoIu..*ia  electric 
raUwajs^me  under  the  operation  of  "'?  seueral-property  tax  In  22  of  ^^e^ 
Ik  Vjt.Ls'  pither  all  the  property  of  such  railways  or  all  of  what  is  l^""""  J" 

""C  "5  ^m^^■The"p^o;;^?{y'■"i'e.ec,ric  railways  is  locally  assessed  and  fxxed 

•^^r5='sresThe"'a'/sL^S'i'f  the  electric  railways  ««  ^.^J^j;-^?^ 
and  local  authorities.    In  Massachusetts   some  «■•  «"  »^h«p^»"fb''e' VS[^^ 

iVuliod^  iSand  Vhe  assessment  of  the  tangible  proi>erty  is  made  by  the  local 
tion  Uke  other  real  estate.  ,  receipts  of 

Impose  taxes  on  t^^.f  P''°' f  ef^.f„|rthVpr^^  are  not  a  negligible 

■  Theso  States  are  Alabama,  Sl-|Jf  •  "fh°c'a??l'r,fa';-  N^^UoVa'' Obio.^i'S";!: 
Nevada,  New  Hampshire,  New  Mexhr6,  Nortn  \J,^^"°r'x 'r'  vy  g^  vireinla,  Wisconsin. 
TlnSes«ee,  Utah,  vrrginla    Vermont    Oklahoma^  ashu^^^^^^^^^  .^ 

iL*SleTo^d%JmlL'';Srrpfn?\^n"i^'^  Wyoming  from  consideration  iu 

this  statement.  »..i,„^o„a    nainwnrp    Florida.   Iowa,  Louisiana,  Michigan, 

Ml7n^elo1af  iSfsllsll^^^K^^  ^-o^^^'  «-*^  ^^^^^^• 

'"^These  States  are  Alnhnma.  Massachnsetts.  New  Jersey.  New  York.  Ohio.  Pennsylvania. 

TennlsseerTexas,  Utah.  Vermont.  Virginia,  West  Virginia. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       649 

tax  is  deducted  by  the  corporations  from  interest  paid  to  the  bondholder,  ex- 
cept in  cases  where  companies  have  assumed  liability  for  the  tax. 

In  addition  to  these  State  taxes  electric  railways  have  been  subject  in  recent 
vears  to  a  Federal  tax  upon  their  capital  stock. 

E  License  taxes.— \  considerable  number  of  States  impose  either  State  or 
local  and  sometimes  both  State  and  local,  license  taxes  which  take  various 
forms  that  are  very  difficult  to  classify.  The  aggregate  amount  of  such  charges 
is  sometimes  considerable  and,  since  they  are  always  levied  in  addition  to 
other  taxes,  they  are  a  factor  of  no  small  imiwrtance.  v.-^f  f^  « 

F  Federal  income  fao?.— Since  1909  electric  railways  have  been  subject  to  a 
Federal  tax  on  their  net  income,  which  was  at  first  an  excise  imposed  on  cor- 
porations and  since  1913  has  been  a  part  of  a  general  income  tax.  \V  ith  the 
shrinkage  of  the  net  income  of  electric-railway  companies  the  amount  of  tax- 
able income  has,  of  course,  decreased,  but  upon  the  other  band  the  rate  of 
the  normal  income  tax  has  increased  so  that  the  Federal  tax  is  at  the  present 
time  a  substantial  burden.  This  it  is  entirely  in  the  power  of  the  Federa  Gov- 
eminent  to  remove  if  it  desires  to  cooperate  with  the  State  and  local  gov- 
ernments in  rehabilitating  the  electric-railway  industry.  ^     ,       k 

G  Federal  excess-profits  tax.— The  Federal  excess-profits  tax  must  also  be 
mentioned,  even  though  most  electric  railways  have  shown  so  small  a  return 
upon  the  capital  invested  iu  them  as  to  exempt  them  from  the  payment  of  any 
tax  under  this  head. 

2.   THE    AMOUNT    OF    TAXES    AND    OTHER    PUBLIC    CONTRIBUTIONS    PAID    BY    ELECTKIC 

RAILWAYS. 

In  the  year  1917,  according  to  the  United  States  census,  the  electric  rail- 
ways of  the  United  States  iiaid  taxes  and  other  contributions  amounting  to 
$03,279,000,  which  may  be  classified  as  follows: 

Taxes  on  real  and  personal  property $21, 804, 000 

Taxes  on  earnings  and  capital  and  other  bases -^'  ^^"^  ^^^ 

Total  taxes tl'f^yZ 

Other  public  c(mtributions k.d^^.wu 

Total  taxes  and  other  contributions 63,  279,  000 

The  total  payments  for  taxes  and  other  contributions  amounted  in  this  year 
to  8  67  per  cent  of  the  gross  earnings  of  the  electric  railways.  This  percentage 
would  be  moderate  in  the  case  of  a  business  where  the  gross  receipts,  or  annual 
turnover,  amounted  to  two  or  three  times  the  capital  investment;  but  it  is 
exceedingly  heavy  in  an  industry  where  there  is  capital  investment  amounting 
to  several  dollars^  for  every  dollar  of  annual  gross  receipts. 

Although  net  operating  revenue  has  actually  decreased  in  recent  years,  the 
taxes  and  other  public  contributions  of  the  street  railways  appear,  at  least 
down  to  the  year  1918,  to  have  increased.  In  1912  the  total  taxes  and  other 
contributions,  according  to  data  compiled  by  the  American  Electric  Railway 
Association  from  census  reiwrts  and  from  replies  from  214  companies,  amounted 
to  .$50,086,000.  In  1916  these  charges  had  increased  to  .$62,106,000,  while  m 
1918  they  had  risen  to  .$65,r>61,000.  The  total  of  these  payments  for  1912 
amountetl  to  8.r^^>  per  cent  of  the  gross  earnings  of  the  railways.     In  1918  they 

amounted  to  8.57  per  cent.  ,>  .^  ,  i.^-^ 
The  most  striking  commentary  upon  the  present  situation  of  the  electric 
railways  with  reference  to  taxation,  is  the  fact  that  in  the  year  1918,  when 
the  revenue  remaining  after  defraying  operating  expenses  decreased  from 
.$228,989,999  to  .$192,615,000,  the  taxes  paid  by  electric  railways  actually  In- 
creased from  .$45,756,000  to  $49,496,000.  Even  more  striking  is  the  comparison 
of  the  amount  paid  in  taxation  with  the  net  income  of  electric-railway  com- 
panies after  making  deduction  for  all  charges.  This  net  income  in  1917  was 
$.56  450,000,  after  the  payment  of  taxes  amounting  to  $4o,756,000.  In  1918, 
however,  the  net  income  fell  to  $20,183,000  after  paying  taxes  amounting  to 
$49,496,000.* 

1  I  have  taken  these  statistics  from  the  tables  compiled  by  the  American  Electric  Rail- 
way Association  for  the  information  of  this  Commission.  The  figures  for  1918  are  In 
part  estimated. 

160643''— 20 42 


G50       PROCEEDmGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

8,    THE  PRINCIPLES  WHICH  OUGHT  TO  GOVERN  THE  TAXATION  OF  ET.ECTRIC  RAILWAYS. 

There  ire  three  theories  which  have  been  advanced  at  different  times  cott- 
er "th^  tax  a  do     of  street  railways  and  other  pubiic-servlce  corpora  ions 

Tl  e  Ih-sr  of  these  is  the  theory  that  public-service  corporations  should  l)e 
^nh  ect  to  taxation  nuich  heavier  than  that  imposed  upon  otlier  classes  of 
bu^  ness    r  p?ope??^  they  hold  and  enjoy  special  franchises  of  great 

V  ^r    A   trSation   ago,  before  our   Federal   and   State   Governments   hnd 
II     ertaken   to   regiilate^fe^^^^  the   service   and   charges   of  publlc-ser^'lce 

",?pomHons  this'theory  providecl  a  natxinil  -d  logical  remedy  for  -me  of 
the  conditions  which  existed  in  the  days  of  ""^'egylatec  monopolj  T^^ 
the  nn)nertv  or  business  of  unrcgidated  monoi>olies  will  tend  to  fall  upon  the 
pmti'^^sSrthe  monopolists,  and  by  their  agency  the  ^^'-^"^"^f  \\  ."^.^^  ^I^s 
Hhare  of  the  profits  resulting  from  the  pc.ssi^ssion  of  valuable  public  fraiichi^^?- 
l\  It  the  situation  was  radicallv  changed  when  public-service  corporations  were 
im  u  dit  un^^^^^^^^  regulation.     Under  the  latter  condition,  regida  ion  of 

rates  an^  m>on  the  tlHH)ry  that  the  corporations  have  a 

Hght  foeaiTa  reasonable  return  uinm  their  investment  Special  taxes  upon 
,^u  ated  monoiK)lies  increase  the  expense  of  providing  the  ^^^vice  and  there- 
fore increase  the  rates  ne<-essary  to  yield  a  reasonable  »*^turn  (^r  d  miu.^^^^^^^ 
resources  available  for  extending  and  improving  the  service.  Kffectne  i^^^'a- 
[fmis  Tpublic  utilities  not  only  remove  the  evils  whic^  in  former  times  ed 
to  the  demand  for  special   taxation,  but   also  alters  the   incidence  of  such 

^""shK-e"  we  are  now  committed  to  the  policy  of  regulation  of  public-service 
corporations,  we  should  readjust  our  theories  of  taxation  to  present-day  facts 
^id  conditi<»ns.  We  must  assume  that  special  taxes  upon  electric  railways  or 
other  public-service  companies  increase  the  expense  of  providing  the  service 
and  in  the  long  run,  must  be  borne  by  those  who  use  the  service  either  in  the 
fonn  of  increased  rates  or  reduced  facilities.  There  may  be  circumstances, 
such  as  extreme  need  for  public  revenue,  that  can  be  providetl  in  no  less  m- 
conv^lent  or  objectionable  manner,  which  justify  the  imposition  of  special 
taxation  upim  transportation  and  other  public-service  companies  But  these 
circumstances  must  be  regarded  as  exceptional,  and  we  must  conclude  that  un- 
der a  regime  of  effective  public  regulation  it  is  undesirable  to  subject  public- 
service  coriK^rations  to  heavier  taxation   than  is  imposed  upon  other  classes 

^  TheTecond  theorv  takes  effective  regulation  of  public  utilities  for  granted  and 
holds  that  such  regulation  niHkes  it  unnecessary  to  consider  whether  the  taxa- 
tion of  nublic-sei\ice  conwrations  is  heavier  or  lighter  than  that  imposed  on 
other  business  or  proiierty.  Such  corporations,  it  is  said,  might  even  be  ex- 
empted from  all  taxation  provided  that  their  charges  were  reduced  or  their 
service  improvefl  in  a  measure  corresponding  to  the  benetits  they  derive  from 
such  exemption.  And,  on  the  other  hand,  it  is  argued  that  taxes  upon  such 
corporations  may  properly  be  increased  to  any  desired  extent  provided  that 
rates  are  increase<l  in  a  corresponding  degree.  In  the  former  case  the  public 
will  secure  untaxwl  service  and  in  the  latter  the  Government  will  employ  the 
corixirations  as  an  agency  for  collecting  special  taxes.  In  neither  case  is  the  in- 
terest of  the  corpora ti(ms  affected,  either  favorably  or  adversely. 

This  theory  upon  examination  will  be  found  to  ignore  the  effect  of  taxa- 
tion upon  the  real  parties  at  interest,  namely,  the  taxpayers  and  those  who  use 
the  services  of  public  service  corporations.  Between  these  two  classes  of 
people  there  is  no  necessary  identity  of  interest.  Here  I  may  be  permitted  to 
quote  from  the  report  of  a  committee  of  the  National  Tax  Association  ap- 
pointed to  consider  the  taxation  of  public-service  corporations :  * 

"  With  corporations  national  in  scope  it  may  be  true  that,  if  we  leave  out  of 
account  citizens  residing  abroad  and  foreigners  residing  temporarily  in  the 
country,  the  persons  that  consume  the  service  are  the  same  body  of  people  that 
must  pay  the  taxes;  but  it  is  by  no  means  true  that  the  extent  to  which  par- 
ticular persons  use  the  sersdce  is  the  measure  of  the  contributions  they  make 
to  the  national  revenues.  Even  if  all  taxation  were  direct,  and  were,  in  fact  as 
well  as  theorv,  levied  proportionately  upon  property  or  income  without  exemp- 
tions of  any  'description,  it  would  be  certain  that  all  taxpayers  would  not  use 
the  services  of  public- service  corporations  in  properties  to  the  amount  of  their 
property  or  income.    When  we  consider  that  direct  taxation  is  not  necessarily 


»  Froceodings  of  the  National  Tax  Association  1913,  pp.  372-383. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       651 

iCrni'r*''  *'*'^<*r.'°  theory  or  In  nctual  operation,  and  that  exemptions  are 

botli  numerous  and  important,  it  be<.omes  evident  thit  the  ai.im^i  idpnlitv  n? 

nlrnilt'"^"  '?"«""'«'«  ■••"<»  taxpayers  does  nol:  exist     \TO™^rvices    oca! 

iLSs    whirtlle  ZZT"^^')  ^""^  "'""^  taxpayers  are  lillerto  bVnon- 

thn.^l  ''^  "1^  interests  of  taxpayers  and  consumers  are  not  iSi^af  t  fo^ 

hPnifft^'^'^P*'^''  ""^  public-service  corporations  from  taxation  conS  a  snecHl 

in"  ,?VX"  ^'Jf^VT'".^^  "^^  ^^I^^"«^  ^f  taxpayers;  and  by  a  parity  of  Z^n. 

t  S  t'lxnnli^^  ?'  '^'''^'  t^^^^«  "P««  such  companieVrell^c^^ 

ue  taxpayers  at  the  expense  of  the  consumers.     In  excentional  cases  stm.Mni 

or  blstlfv^Hr-"""^  justify  the  grant  of  what  is  in  effec-tTCry  to^Lume  4 
1  "L      f^/^^  imposition  of  special  taxes  upon  them  ;  the  rule  of  eoualitvT^ no/ 

of  (Qualitvin  ti?n^^^^^^^  ^'^"^  ^^"^^""^^  ^^  inconsistent  with  the  principle 

ui  (quality  in  taxation,  and  for  this  reason  we  are  compelle<i  to  reiect  it " 

tl^f  shnnn^^h"'  '^^  '^'^^  ^^^^^•>''  '^^'  the  taxation  o^^ic-serrice  corpora 
.!^H,.  I  ir  they  are  taxed  more,  consumers  are  burdened  for  the  ht-n^nt 

i^d  r=.t=''^rp^f--.;?,-  T'th^^-ia'^^f Si 

otJ^of  8«,eralTLiT  T?'x*S""h„f -.^"''"'^-''^""^'^  corporations,  like  any 

ThraT/ieatio'n  o"^Ws  tCil^'o/'"'''"  ^t  «'T*'  P'''"^'P'<'  «*  «^ual  taxa  ion! 

„^/i.    'J'l*  '""=^'  «""ergency  can  Justify  the  Iniposltion  of  special  taxation  nnfi 

™vf  faf  utHfr:[/ife";'/^^'''"r'^  ""P'"^"?  tU  earning  p'mve^s  o'sucT  ra   ! 

V-i-     <-an  ju&tity  either  a  direct  or  an  indirect  subsidv.     The  onlv  nr^oH^.^i     • 
difticulty  in  applying  the  principle  arises  from  the  fact  tliat  the  oiup^itim^^ 
the  street  by  railway  companies  seems  to  occasion  some  extra  expe^^^^^ 
upkeep  which  the  companies  should  fairiy  be  called  upon  to  me^^     This  ex tr^ 
expense  is  difficult,  and  perhaps  impossible,  to  estimate  with  e^n  approxim-ite 
accuracy.     It  seems   o  justify  in  normal  times  the  payment  of  an  extm  con  rii  f, 
tion  by  such  companies,  but  it  has  sometimes  been  made  an  excuse  fo?  iZos    c^ 
bSifie^!'  ^--^'^-^-^^y  or  even  greatly  exceed  the'fl^^.^"  which 'wouJS 

Under  the  Federal  income  and  excess  profits  tnxas  there  has  been  no  discrihif 
nation  against  electric  railways,  and  if  times  were  normal  there  would  Ye  nn 
ground  of  complaint     The  taxes  levied  by  the  State  and  local  go vernnm^^^^^ 
the  property  of  such  railways  are  in  principle  perfectly  justtfied  ai^^d  give  n 
occasion  for  complaint  except  in  cases  where  valuations  have  blen  placed  at  n 
higher  proportion  of  the  true  value  tlian  is  generally  applied  to  the  property  of 


t^ 


652       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 
ln<livi«livil  taxpayers     But  the  numerous  additional  taxes  imposed  upon  fran- 
fimllr  thHrind^^^^^^  The  same  is  true  of  the  payments,  contractual 

In  llilT  eieciric  ^all\^a,^»  ui.  *^"^^      <i!i t  f^'>9  fifwi  in  othpr  contributions,  a   sum 
^M^.Tr:rX^?xfeer^li.e^"^^^^^^  j;-  Uaa  to  pay  .. 

the  theory  of  equal  taxation  had  been  followed. 

4     THE    MEASURES    AVHICH    OUGHT    TO    BE    ADOPTED    TO   RELIEVE   ELECTRIC    RAILWAYS 

IN    THE  PRESENT   CRISIS. 

with  other  measures  of  relief,  a  «"P^^f  1\^'^.^^^*'^  „,\.t^.  f.,«  this  reduction  should 

cost  of  maintenance  <'<^<:»^'°"*1'^J,  "^ .P  X'tW^  before  the  <la^-s  of  effeetive 
aons  may  have  been,  »"  PJ^babl}  ^|'%^'^^™,o"*ieal  place  In  our  present 
regulation  of  public  "t''/"«^' J^"' /  'f  " "/.r  as  they  do  not  exceed  the  extra 
scheme  of  public  regulation,  e'^'*''' "' f  *''' 4,is  of  securing  for  the  public 
.^st  of  "^"'"t^mjnce     InsteMl  of  bei^     a  ™t»4\„°J,n',„4oUes,  they>ave 

Sme\%peclaf  taTon  el?ct;t?ailway  transiH>rtation  and  are  inconsistent 

SrshTartircarry%S"e32k^^^^ 

•of  streets,  these  t.>xes  may  have  1^^^^^  itXco,Un.t  the  taxation' of  publio- 
il^rSTr^raulsTn'^Sly  U-nes'!    In  an  emergency  like  the  present,  they 

"'■^"K  Cfthe  oniinary  taxes  Imposed  upon  property  can  be  justified  only 
up^n  rgroSf  extreme  Liergencyaud^s^^^^^^^^^ 

'Ave  as  far  as  may  be  expe(llent  and  P-^-««'bl«-„,,  ,„a  It  seems  necessary  to 
Xl\re[ec;rrai£l^^^^^^^^ 

^r.ranrtSe^S^Jn^S^^^^ 

preferable  in  every  w»y  *<>  t"*?'  tf be    axed -it  4lll  afford  much  relief  in  ex- 

l';j;j;e"rs:s"  nd^'v™  t°  *^  P"''"^  ^^^"^"^^  '^^  """ 

"\^''^irttTede.S'U"vlnimlnt^ft'o%ec..minend  measures  o 
.h^sl .tes  are  exnected  to  adopt,  it  would  obviously  be  appropriate  for  It  to 
•  P®,^i,v!^vhv  relieving  electric  railways,  at  least  for  a  limited  term  ofl 
^aisXiTsomloflhe  Federal  taxation  that  is  now  imposed  upon  them. 

Commissioner  Sweet.  I  was  very  much  interested,  Prof .  Bullock, 
In^vhat  vou  have  said  to  us  about  taxation,  and  m  one  way  I  think 
pe£ps  the  ground  has  been  fully  covered  but  there  are  one  or  two 
little  points  I  would  like  to  ask  some  questions  on.  . 

WitV  regard  to  the  taxation  of  street-railroad  companies  or  the 
reSon  Sf  it  as  a  means  of  granting  relief,  do  you  not  tlnnk.it 
3l  come  too  slowly  now  for  the  kind  of  relief  that  the  companies 

nperl   too  slowlv  to  be  effectual?  ii       .i  • 

Mr  BuLU.eZ  Well,  it  would  be  slower  than  some  other  things,  no 
doubt.    If  your  commission  can  work  out  a  solution  without  remis- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      653 

sion  of  ordinary  equal  property  taxation,  you  ought  to  do  so.  But 
in  so  tar  as  btate  and  local  taxation  exceeds  the  figure  that  would  be 
consistent  with  equal  taxation  of  the  street-railway  industry,  aboli- 
tion of  the  extra  burdens  ought  to  be  recommended.  You  have  to 
ask  the  street-car  rider  to  do  enough  in  the  way  of  increased  rates 
without  asking  him  to  contribute  now  tlii.s  special  transportation  tax. 

,.r!:TiT^''''""'  ,^"'^r-  ^*  ^  ^^*  y""""  ^^'^^  con-ectly,  it  is  that  in 
noi  mal  times  and  under  normal  conditions  the  properties  of  street- 
railroad  companies  ought  to  be  taxed  on  substantially  the  samo 
basis  as  other  property  in  the  community  ? 

Mr.  BrLLOCK.  Undoubtedly. 

Commissioner  Sweet.  No  more  and  no  less? 

Mr.  BcLLOCK.  No  more  and  no  less. 

Commis.sioner  Sweet.  But  that  in  times  such  as  we  are  passing 
through  now,  and  taking  perhaps  as  one  of  the  strongest  examples 
the  situation  in  Ma.ssachiisetts,  the  situation  is  verv  critical  If 
what  you  said  with  regard  to  tlie  risk  of  an  automobile  in  the  im- 
mediate vicinity  of  a  track  is  correct 

ridfngfn  S^ncH  '^'"''^  '^  something  that  occurred  to  a  car  that  I  was 

Commissioner  Sweet.  It  did  occur?  Well,  then,  it  is  not  an  im- 
possible case,  surely.  Wliat  I  was  going  to  say  was  if  there  vvas 
even  any  remote  justification  for  youi- rentark,  tlL  there  is  imXed 

rdads'Jl  tTer^e  iS      '^    ^^  "'  *°  *''"'  "''"'  "P**"  *''^'*'  interurban 

5Ir.  BuLMCK.  Undoubtedly. 

Commissioner  Sweet.  Thei-e  is  also  involved,  as  vou  have  practi- 
cally stated,  the  question  of  the  existence  of  some  of  these  roads 
which  are  not  only  great  conveniences  to  the  public  but  in  many 
cases  necessities,  are  they  not,  for  the  conduct  of  business  and  moving 

uTnot  ^wlf V°  """""^^Pl'*^ '■  ^^«^v  that  is  very  far  from  normaf, 
is  It  not— A^  hat  we  regard  as  normal  and  hope  to  be  normal  in  this 
country;  that  condition  has  not  prevailed  before  and  we  hope  never 
will  again;  is  not  that  true?  "ib  never 

to'faee^rub'!'"''  ^'^  ''  '"  *'"'  ^''°'"  """""'  ""**  *''^  industry  appears 
Mr.  Warrex.  AVhat? 

I  s^e'^'it^'^''"*'''"  ^*  *"''"''''  '"'"'  *''''*  '^'  *''**  *''''*'''^  "'■°  ^°"""g  "P'  'IS 

th^'i'rJIIl.'H '°""  ^'T''-  ^?'"."«  ,"'"*  '"t°  ««^«"n*  «nd  looking  at 
the  situation  squarely  as  it  is,  do  you  think  there  would  be  any 

impropriety,  anything  wrong  or  unreasonable,  in  the  total  remission 
ot  taxes  for  a  limited  period?  i^imssion 

Mr.  BuLMCK.  I  do  not.    I  think  it  will  come  to  that  in  many 
cases,  or  else  It  wil    be  made  up  in  some  other  way.    We  may  "o 
through  the  form  of  levying  taxes  and  then  make  up"a  deficit     Th%^ 
IS  what  we  are  doing  in  Massachusetts. 
Commissioner  Sweet.  By  levying  more? 
Mr.  Bi'i.LocK.  Yes. 

Commissioner  Sweet.  That  would  simply 

Mr.  Bullock.  It  is  whipping  the  devil  around  the  stump 
Commissioner  Sweet   Yes;   in  a  sense  practicing  a  species  of 
deception  upon  the  public.  "        H'^^"^  oi 


I 


654       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIf. 

Mr.  Bullock.  Undoubtedly,  mat  is  involved  is  giving  a  sub- 
sidy to  an  industry  that  faces  ruin.  ,  ^       ^.  i    .t,^^  ,„^,„, 

Connnissioner  Sweet.  In  the  matter  of  taxation,  whether  upon 
an  equal  basis  or  upon  the  unfair  basis  that  your  figures  would 
indicate  has  prevailed  in  many  cases,  the  public  has  come  to  look 
upon  the  taxation  of  these  companies  as  a  sort  of  public  asset, 
something  the  public  in  the  past  has  been  entitled  to,  and  to 
<rive  them  up  would  require  a  good  dea  of  argument  and  dis- 
cussion—would  it  not— and  that  would  be  the  more  difticult  as 
vou  iret  lower  down  in  the  community  with  regard  to  mtelligence; 

'"^Mr.   Bullock.  Yes;   and   with  reg-ard  to  the  seriousness  of  the 

burden.  As  I  pointed  out,  for  the  Federal  G<>::f,^"i^^Vt'll''tive 
the  income  tax  is  a  slight  thing,  but  for  some  little  locality  to  gne 
up  some  local  charge  may  be  comparatively  a  big  thing. 

Commissioner  Sweet.  Exactly.     People  would  be  more  likely  to 
object  the  nearer  home  it  would  come  to  them. 

Mr.  BuLix^cK.  Undoubtedly.       ,        ,        .  ^  .     ^^„  „^f 

Commissioner  Sweet.  Then  under  the  circumstances  do  you  not 
think  it  would  be  unwise  for  this  commission  to  attempt  to  help  the 
situation  in  that  way  at  the  i>resent  time?     I  mean  as  a  matter  of 
immediate   and   temporary   relief.  ,     ,      _,      ^,         ,.     .         ^  ^#  «n 
Mr.  Bl-llock.  I  think  that  undoubtedly  the  adjustment  of  all 
these  inequalities  in  taxation  will  take  time.     AVhere  the  situation 
is  bad  enough,  however,  the  adjustment  might  be  quickly  reached 
and  a  recommendation  from  the  commission  would  be  helpful.    More- 
over, a  recommendation  of  higher  rates  to  be  paid  by  car  riders  would 
have  more  force  if  it  were  accompanied  with  a  recommendation  that 
unequal  charges  be  done  away  with.    Whether  your  commission  went 
on  the  theory  that  the  time  liad  not  come  to  take  oil  or^]in^y>;^J?^^f 
and  recommended  that  ordinary  property  taxes  be  left,  but  that 
taxes  in  excess  of  what  ordinary  property  pays  should  be  remitted 
and  other  charges  cut  down,  such  a  recommendation  would  help  very 
much  a  recommendation  for  higher  rates.  .      ^u  ^ 

The  street-car  rider  will  object,  and  justly,  to  higher  rates  that 
enable  the  continuance  of  taxes  which  under  a  scheme  of  public 
regulation  amounts  to  a  special  tax  on  the  transportation  industry 
and  which  he  pavs  for  the  benefit  of  property  owners.  It  is  hard 
to  raise  the  fares."  A  street -car  fare  is  not  like  your  gas  bill  that  you 
have  once  a  month;  vou  have  your  bill  presented  to  you  twice  a  day, 
six  or  seven  days  in  the  week,  and  the  increase  comes  to  you,  the  tact 
of  the  increase'  is  very  obvious,  it  is  rubbed  into  the  street-car  riders 
twice  every  day.  And  a  recommendation  would  come  with  greater 
weight,  it 'seems  to  me,  if  it  were  accompanied  with  a  very  strong 
recommendation  for  the  abolition  of  unequal  taxes. 

Commissioner  Sweet.  It  would  seem  under  present  conditions  as 
if  the  generd  public  ought  to  accept  a  recommendation  of  that  kind 
without  very  much  dispute  and  controversy;  would  it  not? 
Mr.  Bulix)CK.  They  certainly  ought. 

Commissioner  Sweet.  What  has  been  the  attitude  of  the  news- 
papers in  Massachusetts  since  the  trouble  has  arisen  with  regard 

to  the  street  railroads.?  .     i-     •     i  *     i: 

Mr.  Bullock.  My  newspaper  reading  is  limited  on  account  ot 

poor  eyesight.    I  read  two  or  three  papers  in  a  summary  fashion. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       655 

Now  the  newspapers  last  year  generally  were  favorable  to  the  passage 
of  laws  putting  into  application  the  principle  of  service  at  cost. 
At  the  present  time  when  the  trustees  that  are  operating  the  Boston 
Elevated  and  tlie  Bay  State  Street  Railway,  which  is  now  the 
Eastern  Massachusetts,  undertook  to  raise  fares  and  make  readjust- 
ments which  the  car  riders  complained  of.  I  should  say  that  there 
was  a  tendency  of  the  newspapers  to  favor  the  car  rider  and  to 
tend  on  the  whole  to  nuike  comments  that  caused  discontent  over 
the  increase  in  fare.  However,  my  observation  is  limited.  Mr. 
AVarren  has  followed  that  probably  more  than  I  have. 

Mr.  Warrex.  I  have  not  followed  it  very  closely,  but  I  should 
think  that  was  a  correct  statement. 

Commissioner  Sweet.  Have  you  given  personal  consideration  to 
this  plan  of  service  at  cost? 

Mr.  Bullock.  I  gave  considerable  attention  to  it  last  year.  It  was 
much  discussed.  * 

Comjiiissioner  I^weet.  Have  you  been  here  and  heard  the  discus- 
sions and  explanations  concerning  Cleveland  and  Cincinnati  and 
Dallas? 

Ml-.  Bullock.  I  have  not. 

Commissioner  Sweet.  You  have  not? 

Mr.  Bullock.  I  have  not  been  here.  It  had  many  advantages  as 
a  means  of  educating  public  sentiment  on  this  matter.  It  was  a  plan 
well  calculated  to  lead  to  legislation  in  our  State  that  was  fair  to  the 
street  railway.  But  the  continuance  of  high  operating  expenses  and 
the  necessity  of  putting  the  ordinary  fare  up  to  10  cents  has  been 
producing  some  unrest. 

Commissioner  Sweet.  Making  the  plan  unpopular  somewhat? 

Mr.  Bullock.  I  do  not  know.  I  think  perhaps  the  people  have 
forgotten  about  the  plan  of  service  at  cost  and  the  only  thing  is  the 
10-cent  fare.    That  is  unpopular  in  Boston  at  the  present  moment. 

Commissioner  Meeker.  Well,  the  people  certainly  do  not  think 
they  can  get  service  at  less  than  cost,  do  they,  in  Massachusetts? 

Mr.  Bullock.  I  do  not  know  what  thev  thinlc,  but  they  object  to 
paying  the  increase.  Whether  they  thinly  about  the  cost  I  do  not 
know. 

Commissioner  Meeker.  Would  you  advocate  keeping  the  fare  at 
a  lower  level  and  making  up  the  deficit  out  of  general  taxation? 

Mr.  BULI.OCK.  I  would  advocate  the  highest  charge  for  the  service 
consistent  with  revenue.  I  would  have  the  rider  pay  the  full  cost 
as  far  as  it  is  practicable  to  make  him  do  so,  but  at  the  same  time 
I  would  remove  unequal  tax  burdens  so  as  not  to  have  him  pay  more 
than  the  cost.     Your  question  simpler  related  to  public  sentiment. 

^ow  I  am  a  little  at  a  loss  to  judge  just  what  the  public  sentiment 
in  Massachusetts  at  the  present  moment  is.     I  sliould  say  the  plan  of 
service  at  cost  was  not  unpopular  but  I  guess  it  has  been  forgotten 
has  it  not,  Mr.  Warren  ?  ' 

Mr.  Warren.  I  think  largely  the  interest  centers  in  the  fare. 

IMr.  BuLi^CK.  I  think  at  the  present  moment  the  interest  largely 
centers  in  tjie  fare. 

Commissioner  Sweet.  As  a  national  problem  the  solution  of  it 
depends  very  largely  upon  public  sentiment;  does  it  not? 

Mr.  Bullock.  It  does.  Now  sentiment  in  our  State  I  should  say 
worked  admirably  as  a  means  of  molding  public  sentiment  last  year. 


656       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Is  it  not  likely  to  be  so  all  over  the  coun^ 

try  ? 

Mr.  Bullock.  Yes.  ^        _  ti.ii, 

Mr  AVarrex.  As  Trof.  Bullock  has  referred  to  me,  I  should  say 
the  amount  of  dissatisfaction  with  the  10-cent  fare  m  Boston  is  neg- 
ligible compared  to  what  it  would  have  been  had  the  company  been 
operating  as  it  did  up  to  a  year  ago.  The  public  would  have  thought 
it  was  being  robbed.  .,,  ,  .  ,  . 

Uv.  BrixocK.  I  think  probably  there  will  be  a  change  there  in 
Boston.  I  guess  that  when  the  fare  was  8  cents  and  before  it  was 
raised  to  10  a  great  many  newspaper  readers  paid  8  cents  tor  then- 
ticket  and  spent  2  cents  ^f or  a  newspaper  and  a  good  many  people 
now  spend  10  cents  for  their  ticket  and  do  not  pay  2  cents  for  the 
newspaper,  and  the  newspapers  are  unhappy. 

Commissioner  Sweet.  Among  ^he  various  remedies  which  have 
been  suggested  and  those  that  have  been  tried,  has  any  come  to  your 
knowledge  or  have  you  thought  of  any  that  you  think  would  give 
better  results  than  the  service-at-cost  plan? 

Mr.  Bullock.  I  have  not.  I  do  not  know  any  fairer  means  of 
presenting  to  the  public,  or  any  more  expedient  and  diploinatic  and 
straightforward  means  of  presenting  to  the  public,  the  idea  that 
they  have  got  to  pay  for  the  cost  of  the  service  and  at  the  same  time 
are  going  to  be  protected  against  undue  exactions  tlmn  that. 

Commissioner  Sweet.  And,  of  course,  you  would  include  among 
your  costs  a  proper  return  upon  the  invested  capital  i 

Mr.  Bullock.  Undoubtedly.  ax  •     4. 

Commissioner  Sweet.  And  a  sufficient  return  and  with  suthcient 
certainty  to  induce  new  capital  to  come  in  ? 

Mr.  Bullock.  Undoubtedly.  .-  i  ^    xi.      ^„ 

Commissioner  Saveet.  Do  you  regard  that  as  essential  to  the  con- 
tinued prosperity  of  an  industry  of  this  kind? 

Mr.  Bullock.  Certainly.  Of  course  the  industry  needs  large 
amounts  of  capital.     It  is  in  a  run-down  condition. 

Commissioner  Sweet.  For  safety  or  extensions- . 

Mr.  Bullock.  First  for  safety  and  then  doubtless  for  extensions 

and  improvements.  ^  ,         ,       n-         i.    / 

Commissioner    Sweet.  Upkeep   of   the   track    and    rolling   stock 

would  also  be  regarded  as  an  expense  that  must  be  met  under  this 

plan? 

Mr.  Bullock.  Undoubtedly.  .  jj    .  • 

Commissioner  Sweet.  Do  you  see  any  economic  flaw  or  defect  in 

the  system  ? 

Mr.  Bullock.  I  have  not  seen  any.  It  seems  to  present  the  mat- 
ter in  a  reasonable  and  fair  way  to  the  public  and  to  offer  a  guaranty 
against  excessive  charges  if  the  plan  is  adopted. 

Commissioner  Sweet.  What  you  have  said  to  us  about  taxation 
has  brought  to  my  mind  more  clearly  than  perhaps  ever  before  what 
seems  to  me  to  be  a  fact;  and  that  is  that  the  whole  subject  of  taxa- 
tion involves  two  propositions :  One,  getting  enough  revenue  to 
carry  on  the  Government  in  some  way;  and  the  other— and  this 
is  the  point  that  has  specially  impressed  itself  upon  my  .mind— the 
adjustment  fairly  among  different  elements  in  the  community,  and 
that  perhaps  involves  the  most  difficulties,  does  it  not? 

Mr.  Bullock.  It  is  a  very  difficult  problem. 


PROCEEDINGS  OF.  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       657 


Commissioner  Sweet.  Now,  then,  on  the  old  plan  based  upon  the 
idea  that  these  companies  were  making  large  profits  and  might  be 
taxed  heavily — more  heavily  than  the  iDrivate  ow^ners  of  property 
and  more  than  the  ownership  of  their  more  direct  properties  would 
justify — if  I  understand  you  right,  that  idea  is  now  absolutel}^  ob- 
solete— it  is  a  thing  of  the  past  and  ought  not  in  any  degree  be 
applied  as  a  principle  of  taxation  to  these  companies.  Is  that 
correct  ? 

Mr.  Bullock.  I  think  so.  We  have  got  to  wholly  readjust  our 
ideas.     That  is  a  difficult  thing  for  us  to  do,  but  we  must  do  it. 

Connnissioner  Sweet.  In  other  words,  instead  of  fowls  to  be 
plucked  they  are  fowls  to  be  fed,  or  at  least,  if  we  are  to  have  the 
conveniences  of  street  railroads,  they  must  be  treated  with  the  utmost 
fairness? 

Mr.  Bullock.  And  where  under  former  conditions  .you  were  tax- 
ing what  used  to  be  called  monopoly  profits,  with  a  regulated  in- 
dustry 3^ou  are  taxing  the  rider.  That  is  a  change  that  has  come 
about. 

Commissioner  Sweet.  The  paving  tax  when  analyzed  under 
present  conditions  falls  entirely  upon  the  riders  who,  as  you  have 
stated,  are  only  one  part  of  the  community,  and  to  that  extent,  there 
is  a  flaw  in  the  system  as  between  one  gi'oup  and  another  in  the  com- 
munity. In  other  words,  as  I  understand  it,  according  to  your  idea 
at  the  present  time  at  least,  it  is  not  a  proper  or  just  apportionment 
of  the  burdens  to  the  various  parts  of  the  community ;  is  that  correct  ? 

Mr.  Bullock.  Undoubtedly. 

Commissioner  Sweet.  Then  for  that  reason  as  well  as  the  fact 
that  it  is  putting  a  very  heavy  burden  upon  corporations  whicli  are 
now  seeking  at  least  to  be  a  benefit  to  the  general  community  and  are 
needed  by  the  general  community,  instead  of  helping  them,  it  i?^ 
putting  a  burden  upon  them  and  in  addition  to  that,  it  is  inequit- 
able as  between  the  various  parts  of  the  community  outside  of  the 
corporation.     Is  that  true? 

Mr.  Bullock.  Yes. 

Commissioner  Sweet.  And  would  the  same  thing  apply  to  bridgt^ 
tolls  and  street  cleaning? 

Mr.  Bullock.  I  think  the  same  thing  applies  to  every  kind  of  a 
charge  made  upon  a  public-service  corporation  in  excess  of  a  pay- 
ment for  what  they  actually  get  or  what  damage  they  actually  do. 
And  if  I  may  suggest  it,  since  you  brought  up  the  matter  of  service 
at  cost,  it  would  seem  to  be  logical  and  an  essential  part  of  that  plan 
that  a  service-at-ccst  scheme,  should  be  so  contrived  as  to  determine 
accurately  the  cost,  and  that  can  not  be  done  if  these  excessive  public 
charges  and  contributions  are  exacted.  You  are  not  giving  service 
at  cost;  you  are  giving  service  at  more  than  co^t. 

Commissioner  Sweet.  Of  course,  if  those  burdens  are  to  be  con- 
tinued under  the  service-at-cost  plan,  they  would  be  figured  as  a  part 
of  the  expense  ? 

Mr.  Bullock.  They  would. 

Commissioner  S^^'EET.  And  would  have  to  be  paid  for  by  the  riding 
public? 

Mr.  Bullock.  Yes. 


658       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COlVCVUSSIOlir. 

Commissioner  Sweet.  But  as  you  say,  the  nomenclature  would  be 
incori-ect,  if  you  call  it  a  service  at  cost  when  strictly  speaking  it 
would  not  be  at  cost.  Have  you  had  your  attention  called  to  the  one- 
man  car? 

Mr.  BrixocK.  Yes. 

Commissioner  Sweet.  Have  they  been  tried  in  Massachusetts? 

Mr.  BrixocK.  I  believe  tliey  have  been  coming  in  within  the  last 
year  or  so.     Formerly  they  were  not  permitted. 

Commissioner  Sweet.  Not  permitted? 

Mr.  Buu.ocK.  Not  permitted.    Is  not  that  correct,  Mr.  Warren? 

Mr.  Warken.  Yes. 

Mr.  Bullock.  The  commission  for  a  long  time  did  not  think  they 
were  safe  and  would  not  permit  them. 

Commissioner  Sweet.  Are  they  being  used  now? 

Mr.  BuiJuOCK.  To  some  extent,  but  not  extensively,  so  far  as  I 
know.     It  costs  money  to  buy  them  and  money  is  scarce. 

Commissioner  Sweet.  They  liave  not  the  money? 

Mr.  Warken.  Several  companies  want  to  try  them,  but  they  can  not 
get  the  money  to  buy  the  cars. 

Commissioner  Sweet.  As  an  economic  pi*»)position,  Prof.  Bullock, 
do  you  think  there  is  a  place  for  them  in  the  general  regime  of  the 
street-car  industry  ? 

Mr.  Bullock.  I  should  think  on  many  car  lines  in  Massachusetts 
there  was  a  good  place  for  the  one-man  car. 

Commissioner  Sweet.  That  it  would  give  reasonable  service  and 
satisfaction  to  the  public  and  at  the  same  time  be  operated  economi- 
cally ? 

Mr.  Bullock.  I  should  think  so. 

Commissioner  Sweet.  So  wherever  such  conditions  exist  under 
the  present  emergency,  don't  you  think  it  would  be  reasonable  to 
recommend  that  th«y  should  be  used  ? 

Mr.  Bullock.  Undoubtedly. 

Commissioner  Sweet.  Do  you  think  of  any  other  economies  or  any 
economies  further  than  those  mentioned  that  might  reasonably  be 

recommended  ? 

Mr.  Bullock.  I  do  not.  I  am  not  particularly  well  informed  about 
the  street-railroad  industry.  I  know  about  it  just  what  a  layman 
would  know,  and  if  the  industry  were  one  of  expanding  revenues  that 
could  command  plenty  of  capital,  I  have  no  doubt  economies  could 
be  effected  by  extensive  reconstruction  programs ;  but  capital  can  not 
be  had  under  present  conditions. 

Commissioner  Sweet.  That  is  to  say,  the  poverty  of  these  com- 
panies has  brought  about  uneconomical  conditions? 

Mr.  Bullock.  It  has  absolutely  forced  uneconomical  conditions. 

Commissioner  Sweet.  For  which  the  companies  are  not  really  re- 
sponsible? 

Mr.  Bullock.  Undoubtedly. 

Commissioner  Sweet.  That  is  all. 

Commissioner  Meeker.  I'm  interested  in  the  10-cent  fare  in  Boston. 
I  gathered  from  what  you  say  that  the  10-cent  fare  is  insufficient,  or 
at  least  it  has  not  furnished  a  fair  return  upon  investment  in  addi- 
tion to  the  cost  of  conducting  the  street-railway  transportation? 

Mr.  Bi'llock.  In  Boston  it  has  been  in  operation  but  a  very  short 
time,  and  there  has  been  a  strike  and  we  do  not  yet  know  the  result 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MMISSI0:N'.      659 


ay  situ- 


and  nobody  can  do  anything  but  guess.  Now  my  guess  is  that  the 
.  10-cent  fare  will  not  give  the  Elevated  the  revenue  that  it  will  need 
to  have,  and  that  there  will  be  a  deficit  which  the  city  of  Boston 
and  other  cities  served  by  it  will  have  to  make  up.  But  that  is  a 
guess  and  it  is  too  early  to  determine.  I  hope  that  the  guess  will 
turn  out  to  be  wrong. 

Mr.  Warren.  It  would  have  met  it  before  the  last  increase  in 
wages,  would  it  not,  probably?  Did  you  see  the  cost  given  in  the 
papers  at  9.3  cents  per  passenger  under  the  old  wage  scale  before  the 
strike? 

Mr.  Bi  llock.  In  my  answer  I  took  into  account  this  recent  strike. 
Now,  I  think  that  strike  has  just  about  taken  out  of  the  company's 
treasury  and  handed  over  to  the  men  the  increase  of  fare;  at  any 
rate,  the  benefit  of  it  to  the  company  will  not  be  sufficiently  great,  I 
shoidd  guess,  to  put  the  company  in  proper  financial  position. 

Commij?sioner  Meeker.  Have  you  compared  the  street-railway  sil 
ation  in  Boston  with  the  situation  in  other  cities  ? 

Mr.  Bullock.  Not  extensively.  I  know  something  about  condi- 
tions in  New  York,  Chicago,  and  Cleveland. 

Conimissioner  Meeker.  The  president  of  the  street-railway  com- 
pany in  Cleveland  testified  yesterday  that  their  5-cent  fare  plus  1 
cent  for  transfer  was  sufficient  to  enable  them  to  operate  on  a  serv- 
ice-at-cost  plan  and  pay  a  yield  on  the  investment,  although  the 
company  was  not  entirely  satisfied  with  the  yield  upon  the  invest- 
ment. How  do  you  account  for  the  great  difference  in  Cleveland  as 
compared  with  Boston? 

Mr.  BuLLO(  K.  We  have  a  very  extensive  subway  system  in  Boston. 
In  the  old  days  when  money  could  be  had  for  about  4  per  cent,  and 
Avhen  operating  costs  were  low  and  gross  revenues  increasing,  we 
built  a  very  excellent  and  very  expensive  system  of  subways ;  so  the 
Boston  Elevated  Railroad  is  under  a  charge  for  subwa}  s  which  makes 
the  situation  there  utterly  unlike  the  situation  in  Cleveland. 

Mr.  AVarren.  I  miglit  bring  out  here,  because  it  might  answer  your 
question  in  part,  that  the  rental  of  those  subways  which  were  built 
by  the  city  is  chaiged  as  a  part  of  the  cost  of  the  service;  is  it  not, 
Prof.  Bullock  ? 

Mr.  Bullock.  It  is. 

Mr.  Warren.  And  includes  a  sufficient  charge  not  only  to  pay  the 
interest  on  the  city  debt  incurred  in  building  the  subways,  but  suf- 
ficient in  addition  to  amortize  the  entire  capital  cost  of  the  subways 
over  a  given  period  of  years.  That  is  all  included  in  the  cost  of 
service. 

Commissioner  Meeker.  Twenty-five  years? 

Mr.  Warren.  I  think  it  is  either  40  or  50  years,  but  it  makes  a 
very  substantial  payment  annually  by  the  car  ridei^s,  and  it  is  in  part 
being  paid  upon  subways  which  are  not  yet  completed. 

Mr.  Bullock.  When  I  leave  my  house  in  Cambridge  I  get  into  a 
subway  that  carries  me  into  the  center  of  Boston  in  8  minutes. 

Mr.  Warren.  That  is  3  or  4  miles. 

Mr.  Bullock.  And  it  is  a  very  expensive  service  that  we  get.  New 
York  is  the  only  city  with  any  subway  outlay  like  ours,  and  there,  of 
course,  their  traffic  is  much  larger  than  ours  in  proportion. 

Commissioner  Meeker.  We  must  be  very  careful  in  making  gen- 
eralizations not  to  make  them  too  broad. 


660       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Bullock.  Uncloubtedl3^ 

Commissioner  Meeker.  And  must  take  the  different  local  condi- 
tions into  account. 

:Mr.  Bullock.  Undoubtedly.  .   .         n    .     f 

Commissioner  Meeker.  I  would  like  to  get  your  opinion— tirst  ot 
all,  your  statement  as  to  how  the  investment  or  capitalization  was  ar- 
rived at.    Was  it  by  a  physical  valuation  or- 

Mr.  Bullock.  You  mean  in  Massachusetts? 

Commissioner  Meeker.  Yes,  or , 

Mr.  Bullock.  The  commission  with  its  engineers  followed  the 
construction  and  cliecked  it  up;  and  every  application  for  an  issue 
of  stock  was  accompanied  bv  statetments  of  the  actual  expenditures, 
etc.,  so  that  the  commission  has  approved  not  only  the  issue,  but  has 
checked  up  the  amount  of  the  issue.  , 

Commissioner  Meeker.  So  that  there  is  no  question  of  an  excessive 
valuation  of  property  upon  which  a  fair  income  is  due  to  the  in- 
vestors ? 

Mr.  Bullock.  Xo. 

Commissioner  Gadsden.  Are  you  familiar  with  the  resolution  re- 
cently passed  in  the  State  of  New  Hampshire  exempting  street  rail- 
ways from  all  taxation  in  case  the  public-service  commission  certities 

that  thev  have  an  operating  deficit!  ^  -^   u  4.  t 

Mr.  Bullock.  I  have  seen  a  newspaper  statement  about  it,  but  i 

have  no  other  knowledge. 

Commissioner  Gadsden.  That  is  in  line  with  your  suggestion. 
\       Mr.  Bullock.  That  is  in  line  with  the  suggestion. 

Mr.  Warren.  What  is  the  custom.  Prof.  Bullock,  respecting  taxa- 
tion of  municipally  owned  plants  engaged  in  the  utility  business,  if 

you  know? 
Mr.  Bullock.  In  the  United  States? 
\  \    Mr.  Warren.  Yes.  ,  ,  /^^ 

i  Mr.  Bullock.  I  think  the  practice  is  to  tax  them.  Of  course, 
there  are  some  departures  from  that  rule.  In  our  own  State  where 
a  city  or  town  goes  outside  its  limits  and  takes  land  for  waterworks, 
then  the  land  is  taxed,  and  there  are  doubtless  some  other  exceptions; 
but  municipally  owned  plants  in  the  United  States,  so  far  as  I  am 

tware,  are  generally  untaxed.  , ,  ,     .,  ,^  -jt^i 

Mr.  Warren.  Presumably  that  would  be  the  result  if  the  munici- 
palities or  any  other  governmental  agencies  took  over  these  street 

railwavs  ? 
,.      Mr.  Bullock.  Presumably  it  would. 
■        Mr  Warren.  Is  it  not  at  least  a  debatable  question  whether  if  a 

cervice-at-cost  ph\n  or  some  other  form  of  partnership  between  the 

corporation  and  the  municipality  were  adopted,  whether  under  those 

circumstances  the  property  should  be  taxed? 

Mr.    Bullock.  It   is   perhaps   debatable.     I   believe   that   under 

normal  conditions  the  property  of  municipal  industries  ought  to  be 

t'lxpd 

Commissioner  Meeker.  Municipally  owned  industries? 
'        Mr.  Bullock.  Yes;  and  of  course  in  England  that  is  done.     If 

the  city  municipalizes  its  gas  works,  it  pays  the  national  income  tax. 

The  exchequer  does  not  lose  thereby  and  the  real  estate  is  supposed 

to  be  taxed   for  local  taxation  like  other  things,  exempting  the 

property  of  public  industries  from  taxation  like  other  things.    Ex- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    661 

empting  the  property  of  public  industries  from  taxation  can  be  car- 
ried only  a  certain  distance  without  producing  conditions  which  lead 
to  a  reversal  of  policy.  In  Europe  the  property  of  municipal  and 
State  industries  is  not  uniformly  taxed.  In  this  country  it  some- 
times is.  Our  Federal  forest  reserves,  for  instance,  are  not  taxed, 
but  a  part  of  the  revenue  is  given  to  the  counties  in  which  they  are 
located. 

Mr.  Warren.  So  that  in  the  English  system  the  car  rider  or  gas 
consumer  pays  a  proper  proportion  of  tax? 

Mr.  Bullock.  Pays  a  proper  proportion  of  tax. 

Mr.  Warren.  Whether  it  is  municipally  or  privately  owned? 

Mr.  Bullock.  Whether  it  is  municipally  or  privately  owned. 

Mr.  Warren.  And  you  see  no  distinction  between  the  principle  of 
taxation  which  ought  to  apply,  whether  the  plant  is  publicly  or 
privately  owned? 

Mr.  Bullock.  I  do  not.  Under  proper  conditions  the  city — well, 
there  is  an  absolute  limit  to  the  amount  of  property  that  you  can 
withdraw  from  taxation.  The  Prussian  railroads  were  taxed  locally, 
and  they  had  to  be.  They  never  would  have  been  nationalized  other- 
wise. If  our  Government  takes  over  the  railroads  it  has  to  have  the 
consent  to  tax  them,  and  the  proper  condition  is  one  in  which  indus- 
tries of  this  character  if  owned  by  the  municipality  have  charged 
against  them  their  due  share  of  all  taxes. 

Commissioner  Meeker.  May  I  interject  a  question  here? 

Mr.  Warren.  Certainly. 

Commissioner  Meeker.  I  intended  to  ask  this  before,  but  forgot  it. 

You  spoke  of  the  property  tax  being  rescinded  in  favor  of  a  net 
income  tax  for  the  time  being.  Would  it  not  be  better  to  adopt  the 
taxation  of  net  income  as  a  permanent  policy? 

Mr.  Warren.  On  these  utilities? 

Commissioner  Meeker.  Yes. 

Mr.  Bullock.  I  doubt  if  it  would.  At  least,  so  far  as  all  the  real 
estate  is  concerned.  Real  estate  can  not  be  taxed  on  its  net  income 
for  local  purposes. 

Commissioner  Meeker.  But  what  real  estate  does  the  street-rail- 
way company  owu? 

Mr.  Bullock.  Well,  it  has  its  power  houses  and  barns  and  electric- 
railway  rights  of  way  which  they  own  in  a  good  many  cases.  The 
real-estate  element  with  the  electric  railway  is  not  as  important  an 
element  as  with  steam  railways,  but  still  it  is  an  element.  I  should 
say  such  real  estate  as  they  own  should  not  be  exempted  from  the 
property  tax  under  any  condition.  Their  other  property,  their  cars 
and  other  things,  might  very  well  be  exempted  from  taxation,  and 
you  might  very  well  have  an  income  tax  on  the  railroads  and  then  a 
real-estate  tax  on  their  real  estate.  Now,  that  solution  might  be  a 
very  good  ultimate  solution.     To  illustrate,  in  other 

Mr.  Warren.  Under  normal  conditions? 

Mr.  Bullock.  Yes. 

Mr.  Warren.  You  are  not  proposing  to  modify  what  you  said 
about  the  possible  exemption  in  view  of  the  peculiar  conditions? 

Mr.  Bullock.  My  income-tax  suggestion  which  I  make  on  the  last 
age  of  the  brief  has  reference  to  an  immediate  measure  of  relief, 
b  suspend  the  property  tax  for  5  or  10  years  and  impose  a  tax  on  the 


I' 


662       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

net  income  would  give  a  very  large  amount  of  reliefp  and  it  is  fairly 
justified  if  the  emergency  is  as  great  as  I  think  it  is  in  many  cases. 

Commissioner  Meeker.  But  you  think  it  should  not  be  adopted  as 
a  permanent  policy 

Mr.  Bullock.  I  think  it  should  not  be  adopted  as  a  permanent 

policy. 

Commissioner  Meeker.  Except  as  you  have  indicated,  in  a  modi- 
fied form? 

Mr.  Bullock.  In  a  modified  form. 

(AVitness  excused.) 

Mr.  Warren.  Mr.  Nash,  will  you  resume  the  stand,  please? 

STATEMENT  OF  MB.  I.  E.  NASH— Resumed. 

Mr.  AVarren.  I  have  here  Mr.  Nash's  printed  article,  and  I  thought 
it  might  be  convenient,  as  he  testified,  if  the  membei*s  of  the  Com- 
mission had  it  to  look  at,  as  some  questions  might  be  answered  in 
the  article. 

Commissioner  Sweet.  Yes. 

(Mr.  Warren  thereupon  handed  copies  of  Mr.  Nash's  printed 
article  to  the  members  of  the  commission.) 

Mr.  Warren.  Mr.  Nash,  when  your  testimony  was  interrupted 
day  before  yesterday,  you  had  just  finished  your  outline,  I  think,  of 
the  general  principles  that,  in  your  judgment,  should  govern  the 
8ervice-at-cost  franchise.     Is  that  correct  ? 

Mr.  Nash.  That  is  correct ;  yes,  sir. 

Mr.  Warren.  You  had  not,  however,  taken  up  the  result  of  your 
study  with  the  various  service-at-cost  plans  which  had  actually 
been  adopted  and  put  in  operation  in  this  country  and  Canada,  had 
you  ? 

Mr.  Nash.  No. 

Mr.  Warren.  And  since  then  you  have—necessarily,  because  of 
not  being  put  on  the  stand — heard  the  testimony  here  with  respect 
to  Dallas  and  the  testimony  with  respect  to  Cincinnati  and  the 
testimony  with  respect  to  Cleveland? 

Mr.  Nash.  I  have. 

Mr.  Warren.  I  think  it  would  help  the  commission  in  its  con- 
sideration of  this  service-at-cost  plan  if  you  would  briefly  compare 
the  different  plans  of  service  at  cost,  pointing  out  the  differences  in 
effect  in  the  different  franchises. 

Mr.  Nash.  This  paper  that  has  been  handed  the  commission  sum- 
marizes in  an  analytical  and  historical  way  the  various  franchises  on 
this  service-at-cost  form  that  have  been  put  into  effect  in  the  United 
States  and  Canada,  with  one  exception.  The  city  of  Youngstown. 
Ohio,  early  this  year,  granted  a  franchise  of  that  form.  It  did  not 
differ  radically  from  those  which  are  summarized  in  this  paper. 

The  testimony  that  was  presented  yesterday  from  these  cities 
which  Mr.  Warren  has  mentioned  simplifies  the  view  that  I  need  to 
make  of  the  details  of  these  different  franchises  to  a  material  ex- 
tent, and  I  think  it  would  be  unnecessary  to  go  into  any  great  de- 
tail of  the  features  of  these  different  franchises;  so  that  I  will  re- 
view rather  briefly  what  I  consider  the  important  features,  and  leave 
to  the  conmiission,  through  questions,  to  bring  out  such  further 
details  as  they  may  Avish. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       663 


I  think  one  of  the  fundamental  features,  and  one  of  the  necessary 
features,  of  this  form  of  franchise  is  the  so-called  barometer  fund- 
It  is  through  this  barometer  fund  that  the  automatic  feature  has  its 
effect.  All  of  these  service-at-cost  franchises  have  this  fund  under 
one  name  or  another.  The  amount  has  been  testified  to  in  the  cases 
that  came  up  yesterday.  In  most  cases,  that  amount  is  fixed — fixed 
with  the  idea  that  the  upper  and  lower  limits  will  be  far  enougli 
apart  so  that  any  ordinary  variations  in  either  revenues  or  cost  of 
Oix^ration  will  not  require  frequent  changes  in  the  rate  of  fare,  which 
would  be  confusing  to  the  public.  I  think  if  changes  ordinarily 
occur  at  intervals  of  six  months,  or  even  a  year,  the  best  results  arc  in 
the  end  accomplished,  and  the  fund  should  be  large  enough  for  that 
IDurpose.  Rather  than  to  have  a  fixed  fund,  I  think  it  would  be 
better — and  that  is  embodied  in  one  of  the  recent  franchises — to 
have  a  fund  varying  with  the  size  of  the  jDroperty.  The  Dallas 
franchise  fixes  the  fund  on  a  per  cent  of  the  capital  value;  so  that, 
proportionately,  as  the  property  grows,  the  amount  of  this  barometer 
fund  and  its  upper  and  lower  limits  increase. 

Mr.  Warren.  How  is  that  fund  provided,  Mr.  Nash  ? 

Mi\  Nash.  In  different  ways.  In  some  cases,  b}'  the  borrowing 
of  money  charged  wholly  to  the  capital  account  or  property  value. 
In  other  cases,  part  of  it — and  this  is  the  case  in  Cincinnati,  for  ex- 
amj^le — a  part  of  it  is  furnished  by  the  company  and  included  in  its 
capital  value,  and  the  balance  gradually  accumulated  through  the 
suiplus  earnings  from  operation.  This  latter  method  has  the  ad- 
vantage that  a  large  sum  of  money  is  not  necessarily  borrowed  at 
once  on  which  the  car-riders  are  required  to  pay  the  specified  rate 
of  return. 

It  is  true  that  that  fund  is  not  kept  as  a  fund  in  cash,  but  perhaps 
it  is  not  needed,  in  the  same  way  as  a  corporate  siii'pli:s.  It  may  be 
invested  in  additions  to  the  property;  but  I  think  there  are  some 
advantages  in  building  up  at  least  a  part  of  this  barometer  fund 
through  surplus  revenues.  I  think  a  very  useful  purpose  is  served 
by  this  automatic  feature  arising  through  the  barometer  fund,  as  is 
evidenced  by  the  testimony  which  was  presented  yesterday  and  the 
day  before  by  several  witnesses. 

It  was  brought  out  that  in  Cleveland,  in  Cincinnati,  and  other 
places  possibly,  the  increases  in  fares  which  have  been  made  under 
the  service-at-cost  franchises  have  occasioned  comparatively  little 
reduction  in  riding.  In  other  cities  where  increases  have  been  made 
through  negotiations  with  the  city,  or  through  orders  of  public-service 
commissions,  where  a  6-cent  rate  has  been  put  into  effect,  for  exam- 
ple, involving  a  theoretical  increase  in  revenue  of  20  per  cent,  the 
actual  increase  in  revenue  has  averaged  not  iar  from  10  per  cent.  In 
other  words,  there  has  been  a  material  loss  in  traffic.  I  think  that 
loss  arises  almost  entirely,  not  because  the  car  riders  can  not  afford  to 
pay  the  additional  cent,  but  because  of  the  agitation  and  resentment 
arising  in  connection  with  the  negotiations  for  the  increase.  City 
councils,  city  officials,  where  an  appeal  is  taken  to  a  public-service 
commission  for  an  increase  of  fare,  always  feel  it  incumbent  upon 
them  to  protest  the  increase;  and  the  public  press  and  professional 
politicians  take  that  opportunity  to  very  loudly  and  at  great  length 
express  their  opinion  oi  the  public  utility  who  would  impose  addi- 
tional burdens  upon  the  XDOor  working  people.    The  result  is  that  there 


m 


664       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

is  bound  to  be  a  large  amount  of  popular  attention  to  the  subject  and  a 
lot  of  misunderstanding,  and  consequent  resentment,  without  which, 
I  feel  quite  sure— and  the  testimony  before  the  commission  has  borne 
it  out— that  the  reduction  in  riding  would  be  comparatively  small. 
In  other  Avords,  the  operation  of  the  service-at-cost  franchises  tends  to 
minimize  the  unfriendly  public  relations,  and  yield  revenues  from 
fare  changes  that  should,  under  normal  conditions,  be  yielded— the 
kind  of  increases  in  revenue  that  actually  take  plaqe  in  private  busi- 
ness where,  as  a  matter  of  course,  the  charges  for  commodities  have 
increased  in  these  davs  as  the  cost  of  the  commodities  increased. 

So  that  I  think  that  that  feature  of  the  service-at-cost  franchises  is 
of  verv  particular  importance. 

Another  essential  feature,  a  universal  feature,  of  these  franchises 
is  supervision.  It  has  a  variety  of  forms.  In  the  majority— I  think 
I  am  safe  in  saying  in  the  majority  of  eases— supervision  is  centered 
in  a  single  individual  selected  by  city  officials,  who  represents  them 
in  the  regulation  of  service,  the  examination  of  the  accounts,  studies 
all  the  needs  of  extensions  of  the  facilities  and  other  features  which 
are  involved  in  the  franchise.  In  other  cases,  and  usually  ip  the 
larger  cities,  a  board  of  city  members  has  been  substituted  for  the 
single  supervisor.  In  Mavssachusetts,  the  Boston  Elevated  board  of 
trustees,  appointed  by  the  governor,  has  five  members.  That  is  the 
largest  number  on  a  supervision  board  so  far  in  effect. 

Mr.  Warren.  And  the  Bay  State  has  the  same  number? 

Mr.  Nash.  The  Bay  State  has  the  same  number  as  the  Boston  t^le- 

vated.  .    ,    .  .  .  n 

The  Chairman.  Arid  is  the  expense  of  that  supervision  generally 

borne  by  the  utility  ? 

Mr.  Nash.  Generally. 

The  Chairman.  In  all  cases? 

Mr.  Nash.  It  is  my  recollection  that  there  is  one  case— I  have  for- 
gotten what  it  is  for  the  moment— in  which  the  city  pays  the  expense 
of  this  supervisor's  office,  and  I  think  very  properly  it  is  a  part  of  the 

cost  of  car  service.  i     ^   i  •    axi  • 

The  consolidated  franchise,  socalled,  which  was  drafted  in  Chicago 
to  cover  the  combined  elevated  service  and  the  proposed  rapid-transit 
lines,  but  which  was  rejected  by  referendum  last  fall,  provided  for  a 
board  of  trustees  of  nine  members.  I  think  that  is  an  unnecessarily 
large  number.  It  is  apt  to  be  unwieldy  unless  the  duties  of  the  board 
are,  in  effect,  lodged  in  the  hands  of  a  comparatively  small  executive 

committee.  ^   ,        ,     .  _ ,  ,      i    .    1 1    xi,  j. 

I  have  said  in  this  paper  that  I  thought  it  would  be  desirable  that 
the  supervisor  should  be  a  man  preferably  of  technical  education  or 
else  a  man  of  broad  business  experience  who  should  be  appointed  by 
the  State  public-service  commission,  and  perhaps  act  as  the  agent  of 
the  commission,  instead  of  supervision  under  the  service-at-cost  fran- 
chise being  independent  of  the  State  commission.  This  plan  of  State 
commission  appointment  would  have  this  advantage,  if  the  service-at- 

cost  ])lan  becomes  widely  extended ,        •    -i. 

Mr.  Warren.  That  is  the  Massachusetts  general-statute  plan,  is  it 

not,  which  was  adopted  last  year? 

Mr.  Nash.  I  so  understand. 

While  that  plan  has  not  come  into  general  use  at  all  as  yet,  because 
of  the  unfavorable  financial  conditions,  this  general  Massachusetts 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      665 


plan  provides  that  for  each  service-at-cost  company,  or  at  least  a 
group  of  nearby  companies,  the  State  board  shall  appoint  a  super- 
visor who  has  special  charge  as  the  agent  of  the  commission  of  these 
companies. 

Mr.  Warren.  Those  unfavorable  financial  conditions  are  due  to  the 
fact  that  the  Massachusetts  act  requires  the  barometer  fund  and  also 
a  rehabilitation  fund,  I  think. 

Mr.  Nash.  To  be  set  up  in  cash  in  advance. 

Mr.  Warren.  And  raised  through  the  issue  of  securities? 

Mr.  Nash.  Yes;  that  is  the  regil  trouble. 

Mr.  Warren.  The  companies  have  not  found  themselves  able  to 
secure  the  credit  necessary  to  issue  securities;  is  not  that  true? 

Mr.  Nash.  That  is  true. 

The  effect  in  any  State  of  a  large  number  of  service-at-cost  fran- 
chises under  such  a  plan  of  supervision  would  be  that  the  State  com- 
mission would  be  able  to  train  a  body  of  supervisors,  more  or  less 
in  the  way  that  our  diplomatic  corps  is,  or  ought  to  be,  trained — 
taking  young  men  and  educating  them  in  the  office  of  the  commission, 
sending  them  out  as  supervisors  of  the  smaller  properties,  and  gradu- 
ally transferring  them  to  larger  and  larger  positions  of  responsi- 
bility, with  their  increase  in  experience;  so  that  in  the  end  there 
would  be  developed  a  body  of  specially  trained  supervisors  to  have 
charge  of  this  class  of  public  service. 

The  commission  has  heard  some  testimony  on  the  question  of  the 
value  or  rate  base  to  be  adopted  for  use  in  cases  of  this  kind.  I 
think  it  is  sufficient  to  say  that  a  franchise  of  this  kind  should  have 
a  fair  value  expressed  in  more  or  less  the  ways  the  public-utilities- 
service  commissions  have  determined  fair  value  in  specific  rate  cases. 

I  think  I  testified  in  my  opening  testimony  that,  in  my  opinion, 
the  actual  investment,  honestly  and  prudently  made,  to  use  the  words 
of  the  Massachusetts  commission,  is  the  most  logical  basis  for  deter- 
mining the  return  to  investors.  That,  in  these  franchises,  is  also  the 
basis  of  the  city  purchase,  which  is  a  feature  of  nearly  all  of  them 
with,  in  most  cases,  the  addition  of  a  small  percentage  to  cover  costs 
of  liquidation  and  the  procuring  of  money,  where  not  otherwise  pro- 
vided for  in  the  plan. 

The  values  actually  fixed  in  these  various  franchises  show  quite  a 
wide  range  with  relation,  as  figured  out  in  the  per  mile  of  traffic,  and 
in  relation  to  capitalization,  perhaps.  In  practically  all  cases,  capi- 
talization has  been  entirely  ignored,  as  it  is  in  the  conventional 
handling  of  rate  cases  by  the  public-service  commissions. 

In  the  majority  of  cases,  I  think  the  valuation  has  approximated 
at  least  the  actual  investment  of  the  properties,  where  it  has  been 
possible  to  determine  that.  In  a  few  cases,  a  depreciated  value  has 
been  accepted,  but  these  have  been  cases  where  the  franchises  have 
expired  or,  for  other  reasons,  the  railways  were  not  in  a  position  to 
strenuously  contest  the  values  which  they  thought  were  too  low. 

Under  the  heading  of  the  cost  of  service,  from  which  the  rates  of 
fare  are  determined,  the  testimony  of  various  witnesses  has  brought 
out  tlie  elements  of  cost  which  are  universally  recognized,  but  some 
divergence  of  method  of  determining  this  cost  has  been  developed. 

For  example,  in  Cleveland,  the  company  has  been  allowed  for  its 
cost  of  operation  a  certain  number  of  cents  per  car-mile ;  an  amount 
fixed  in  the  franchise  but  subject  to  readjustment  by  ordinance  of 


160643*'— 20- 


43 


^66       PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION. 

the  city  council  and,  in  fact,  actually  adjusted  a  considerable  number 
of  times,  because  of  the  increased  cost  of  operation. 

Mr.  Culkins  testified  that  in  Cincinnati  they  thought  it  better  to 
prepare  an  annual  budget,  in  dollars,  of  the  anticipated  cost  of  op- 
eration, the  expected  conditions  of  service  all  being  taken  into  con- 
sideration as  carefully  as  possible.  I  think  that  method  is  better,  and 
it  involves  a  desirable  increased  flexibility.  City  councils  are  some- 
times disposed  to  look  at  revisions  of  franchise  terms  fairly,  and  at 
other  times  they  are  influenced  by  political  considerations;  so  that 
there  is  a  tendency,  and  I  think  a  definite  tendency,  tp  postpone  the 
needed  adjustments  in  the  operating  allowance  where  it  is  fixed. 

In  the  Massachusetts  acts  and  in  a  number  of  other  recent  ones 
there  has  been  no  attempt  at  all  made  to  fix  a  definite  standard  of 
operating  costs  for  efficiency,  as  far  as  expense,  or  even  as  far  as 
maintenance  and  replacements  are  concerned,  the  responsibility  being 
placed  wholly  on  the  shoulders  of  the  supervisor  or  the  board  of  con- 
trol to  keep  in  close  touch  with  operating  costs  that  there  will  be  no 
chance  of  extravagance. 

I  think  the  budget  system  is  a  desirable  one.  It  is  desirable  in  any 
form  of  corporate  business,  and  particularly  so  under  a  service-at- 
cost  franchise,  as  it  gives  the  public,  so  far  as  the  public  is  interested, 
a  forecast  of  what  is  liable  to  happen.  If  this  budget,  for  instance, 
had  l3een  prepared  in  these  service-at-cost  cities  prior  to  the  begin- 
ning of  1919,  it  would  very  pi-obably  have  shown  an  anticipated 
increase  in  the  cost  of  materials  and  an  increase  in  pay  rolls  and 
would  have  shown  the  inevitable  necessity  of  some  fare  increases, 
and  where  the  public  is  forewarned  of  increases  of  that  kind,  the  dis- 
turbance attending  the  actual  increases  when  they  go  into  effect  is 

minimized. 

With  respect  to  maintenance  and  replacement,  again,  m  several  of 
the  franchises  there  has  been  an  attempt  to  fix  the  amount  witliin 
which  the  entire  upkeep  of  the  property  should  be  taken  ciire  of  in 
cents  per  car-mile.  That  is  true  in  Cleveland.  That  is  fixed  by 
ordinance  in  Cleveland,  and  has  been  revised  several  times.  In  sev- 
eral cases,  it  is  fixed  in  the  form  of  an  annual  budget.  This  allow- 
ance is  intended  not  only  for  the  current  routine  maintenance  and  re- 
pairs, but  also  for  the  replacements  or  larger  items  of  the  property. 
In  other  words,  it  is  supposed  to  take  care  of  the  permanent  upkeep, 
and  supplementing  the  annual  allowance  or  expenditures,  it  is  ex- 
pected that  the  company  will  aecumidate  a  peserve  for  future  re- 
quirements. .     .  .       •/! 

The  amount  of  this  reserve— and  I  think  this  is  rather  signihcant— 
is  not  definitely  fixed  in  most  of  these  service-at-cost  franchises.  In 
the  Dallas  franchise,  it  has  been.  That  is  the  only  one,  as  I  recall  at 
the  moment,  in  which  there  has  been  a  definite  attempt  to  define  what 
provision  should  be  made  for  obsolescence,  supersession,  and  a  future 
provision  for  large  replacements  of  the  uroperty  analyzed. 

Commissioner  Meeker.  Has  that  definite  fund  been  indicated  m 
dollars,  or  is  it  in  a  percentage  of  the  capital? 

Mr.  Nash.  A  percentage  of  the  capital  value. 

Commissioner  Meekek.  Do  you  know  what  percentage  it  is? 

Mr.  Nash.  The  Dallas  percentage,  if  I  recall  rightly 

Mr.  Warren.  Mr.  Head  says  it  is  8. 

Mr.  Nash.  It  is  8. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      667 

Mr.  Wakren.  Eighteen. 

Mr.  Nash.  Not  18  per  cent  of  the  capital  value.  That  is  the  maxi- 
mum af  18  per  cent  of  the  gross  annual  accrual  for  the  reserve.  The 
per  cent  of  capital  value,  il  I  remember  rightly,  is  8.  It  is  very 
much  less;  and  the  point  I  would  like  to  bring  out  about  that  is 
this — that  the  provision  in  Dallas,  which  they  marked  out  with  a 
great  deal  of  care,  is  very  much  less  than  the  theoretical  requirements 
of,  for  instance,  the  Intei-state  Commerce  Commission  and  a  number 
of  State  commissions*  They  are  getting  more  and  mare  into  the 
habit  of  requiring  the  utilities  to  set  aside  each  year  an  amount  whic^h 
is  estimated  as  the  current  loss  in  service  value  of  the  property  ele- 
ments. In  other  words,  if  an  element  of  property  has  an  estimated 
useful  life  of  20  years,  each  year  we  should  set  aside  this  for  its  ulti- 
mate replacement  one-twentieth  of  its  original  cost,  less  whatever  sal- 
vage value  there  may  be. 

The  effect  of  the  method  of  accruing  for  replacements,  deprecia- 
tion, socalled,  which  I  have  referred  to  as  being  produced  by  the  In^ 
terstate  Commerce  Commission  and  some  of  the  State  commissions 
in  their  accounting  requirements,  leads  to  the  accumulation  of  a  large 
reserve — in  some  cases,  a  very  large  reserve — which  is  never  used. 
This  reserve  accumulation  comes  fix>m  the  car  riders  in  the  case  of 
the  railway  ccmipany.  It  is  money  taken  from  the  car  rider,  and 
usually  this  reserve  is  invested  in  the  property.  That  is  not  in  these 
days  a  very  profitable  investment  for  the  car  rider,  and  if  he  had  his 
option,  he  would  prefer  to  invest  his  money  somewhere  else.  Of 
course,  normally  and  theoretically,  this  investment  reserve  earns  a 
return.  It  is  unnecessary  to  go  out  and  borrow  as  much  outside 
capital;  so  that  the  fixed  charges  against  our  operation  are  less  than 
otherwise  would  be  the  case;  but  so  long  as  this  reserve  is  in  excess 
of  any  possible  actual  requirements — and  I  am  familiar  with  calcu- 
lations which  show  that  even  on  a  sinking  fund  basis,  this  reserve 
might  amount  to  as  nmch  as  40  per  cent  of  the  investment  in  the 
property — to  the  extent  that  that  is  excessive,  the  car  riders  pay  a 
higlier  rate  of  fare  than  otherwise  would  be  necessary,  and  I  think  in 
any  service-at-cost  progiam  any  excess  accumulation  of  that  kind 
sliould  be  avoided. 

I  am  heartily  in  favor  of  full  provision  for  any  actuul  require- 
ments, but  I  doubt  very  much  whether  provision  should  be  made  for 
so-called  obsolescence  and  supersession;  in  other  words,  whether  the 
car  riders  of  to-day,  using  a  certain  tyi>e  of  equipment,  should  fur- 
nish the  means  of  retiring  that  equipment,  so  that  subsequent  car 
riders  may  have  the  advantages  of  more  efficient,  safer,  and  otherwise 
more  attractive  service.  For  example,  we  are  now  introducing  in 
very  large  numbers  about  the  country — quite  large  numbers — the  one- 
man  car.  It  is  a  more  efficient  piece  of  equipment  than  the  older 
style  of  car.  The  cost  of  operation  is  less.  The  older  and  heavier 
equipment  is,  in  effect,  abandoned.  It  probably  will  be  for  some  time 
used  for  extra  heavy  service,  but,  in  the  end,  it  is  a  supersession,  and 
there  is  a  reduction  in  future  costs.  There  is  a  more  frequent  service 
for  the  car  rider,  and  I  think  the  user  of  the  one-man  car  is  the  man 
who  ought  to,  in  part,  at  least,  pay  for  the  amortization  of  the  re- 
maining life  of  the  equipment  which  is  superseded. 

In  short,  in  the  service-at-cost  franchise,  the  car  rider  should  pay 
as  a  part  of  the  cost  enough  to  accumulate  reserves  for  existing  re- 


I 


668       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

newals  but  not  for  theoretical  depreciation  or  for  unforeseen  ob- 
solescence of  equipment.  . 

Mr.  Wakren.  Your  feeling  is  that  the  substitution  of  the  new 
form  of  equipment  and  apparatus  before  the  normal  life  of  the 
superseded  item  has  been  reached  is  a  proper  charge  for  the  future 
car  rider,  rather  than  to  be  taken  out  of  the  present  car  rider? 

Mr.  Nash.  Largely  so;  yes.  ^  n^r     xr    u    •  4. 

Mr.  Warren.  What  features  would  you  introduce,  Mr.  IS  ash,  into 
the  Cincinnati  franchise,  or  what  differences  would  you  make  in  it 
from  those  which  were  actually  adopted,  to  make  it,  m  your  opinion, 

an  ideal  franchise?  .         .  .        .  .         ... 

Mr.  Xash.  There  is  one  feature  of  the  Cincinnati  franchise  which 
I  approve  of  theoretically.  Practically,  it  does  not  work  out,  and  I 
doubt  if  it  will  ever  work.  That  is  the  incentive  to  the  management 
and  investors  in  that  property  to  operate  it  efficiently. 

This  franchise  provides  that  for  a  5-cent  rate  of  fare  the  investors 
ffet  this  return  specified  in  the  franchise  for  various  classes  of  se- 
curities, plus  45  per  cent,  I  think  it  is,  of  any  .surplus  which  may  be 
earned.     If  the  fare  is  in  excess  of  6  cents,  the  traction  company 

gets  nothing.  •  i  j  j 

Now,  back  in  normal  times,  that  provision  might  have  yielded  a 
mateiial  amount  of  supplemental  return  to  the  traction  company, 
but  I  think  there  is  a  very  small  chance,  in  the  near  future  at  least, 
for  fares  to  get  down  to  a  point  where  the  company  will  get  any 
share  in  the  surplus  at  all.  So  that  this  incentive  intended  to  be  em- 
bodied in  this  franchise  is  not,  in  fact,  a  real  incentive.     It  is  a 

theoretical  one.  . 

Commissioner  Sweet.  Your  objection  is  rather  to  the  hgures  that 

thev  have  agreed  upon  than  the  principles?  .     . 

Mr.  Nash.  The  criticism  is  of  the  figures  rather  than  the  princi- 
ples. The  principle,  I  think,  is  thoroughly  right,  except  that  it  is 
not  clear  to  me  how  it  can  be  applied  to  rates  of  fare.  ,r     -rj     ;» 

That  same  provision  exists  in  the  Dallas  franchise,  as  Mr.  Head 
explained  last  night.  If  rates  of  fare  were  stable— that  is,  if  we 
could  look  forward  to  more  or  less  uniform  costs  of  living  under 
even  the  present  scale,  if  we  may  assume  that  we  have  stepped  from 
one  plane  of  living  to  another,  which  is  50  per  cent  or  more  higher, 
and  are  going  to  stay  there,  then  that  statute  should  be  revised  by 
raising  the  fare  a  cent,  or  a  cent  and  a  half  or  2  cents.  Two  cents, 
really,  should  be  the  amount  of  increase,  I  think.  Then  there  would 
be  a  real  incentive  to  the  company  for  an  increase  in  efficiency. 
There  would  be  an  incentive  to  the  investors  to  put  additional 
money  in  the  property.  The  average  investor  likes  to  see  something, 
I  think,  outside  of  a  certain  fixed  rate  of  return.  That  is  the  reason 
why  he  likes  to  buy  a  security  at  a  slight  discount,  rather  than  to 
pay  par  for  it,  because  at  maturity  he  gets  something  more  than  he 

originally  contributed.  ^  i.      ^ 

Mr.  AVarren.  Is  there  any  method  that  you  can  suggest  for  fur- 
nishing an  incentive  which  you  think  would  be  better  or  more  work- 
able than  either  that  of  the  'Cincinnati  franchise  or  that  described  by 
Mr.  Head  last  night,  in  the  Dallas  franchise?  ,  r-   -^  i 

Mr.  Nash.  I  do  not  know  of  any  method  that  could  be  dehnitely 
adopted  to  the  radically  changing  conditions  with  which  we  are 
confronted. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


669 


Mr.  Warren.  But  in  normal  conditions,  what  do  you  think  about 
either  of  them  ? 

Mr.  Nash.  I  think  either  of  those  plans,  the  Cincinnati  or  the 
Dallas  plan— they  are  somewhat  similar — is  useful. 

I  should  like  also  a  provision  in  the  Montreal  franchise,  that  if 
the  company  lives  within  a  predetermined  budget^ — and  its  budget  is 
fixed  on  a  car-mile  basis  similar  to  Cleveland,  and  is  determined 
each  year  in  advance  and  not  definitely  fixed— that  if  thejr  live 
within  that,  or  do  not  exceed  it  by  more  than  2.5  per  cent,  I  think  is 
the  margin  allowed,  the  company  is  allowed  a  so-called  operating 
profit  of,  I  think,  one-eighth  of  1  per  cent  on  the  capital  value. 
That  is  a  small  amount,  so  far  as  percentages  go,  but  it  should  serve 
as  an  incentive  to  keep  the  expenses  within  all  reasonable  limits; 
but  the  just  working  of  an  allowance  of  that  kind  requires  absolute 
unvarying  fairness  on  the  part  of  the  commission  that  fixes  the  al- 
lowance in  advance  with  a  very  clear  forecast  of  what  is  going  to 
happen.  Otherwise,  it  is  difficult  to  definitely  and  successfully  apply 
it.  If  the  commissioner  fixes  his  allowance  one  year — if  he  fixes  it 
just  as  close  as  he  can,  and  the  company  comes  a  little  bit  under,  the 
tendency  in  the  succeeding  year,  if  the  commissioner  does  not  want 
the  company  to  earn  its  operating  allowance,  is  to  crowd  the  allow- 
ance down ;  so  that  in  a  series  of  years  there  is  an  attempt  to  crowd 
the  allowance  down  to  the  lowest  possible  limit,  and  the  incentive  is 
lost.  If,  on  the  other  hand,  the  allowance  is  made  libei-al,  so  that 
the  company  can  easily  live  within  it,  somebody  gets  up  and  says 
the  commission  and  the  company  are  in  collusion  and  there  is  an 
operating  profit  there  that  really  does  not  belong  to  the  company  and 
was  not  really  earned. 

That  is  the  difficulty  in  applying  that  sort  of  an  incentive,  but 
the  principle  is  theoretically  good. 

Mr.  Warren.  The  principle  of  an  incentive  is  good  ? 

Mr.  Nash.  The  principle.  I  think  it  is  better  than  the  London 
sliding-scale  principle,  because  of  the  probability  of  continued 
changes  in  the  basic  costs. 

Commissioner  Meeker.  Have  you  described  the  London  sliding 
scale  in  your  pamphlet? 

Mr.  Nash.  I  have  described  its  application  in  the  cases  of  Dallas 
and  Cincinnati  in  the  pamphlet,  and  I  have  described  the  Montreal 
provision  also  on  the  operating  profit  here. 

Commissioner  Meeker.  Is  the  Dallas  plan  the  London  sliding 

scale? 

Mr.  Nash.  Practically  so,  but  not  exactly.  It  is  based  on  the  rate 
of  fare.  The  London  sliding  scale,  I  think,  is  correctly  applied  in 
the  case  of  the  Boston  Gas  Co. ;  that  when  the  price  for  gas,  for  in- 
stance, is  a  certain  amount,  a  certain  return  in  per  cent  is  allowed. 
If  your  rate  for  gas  is  reduced  by  the  company  5  per  cent,  it  may 
add  1  per  cent  to  its  allowed  rate  of  return. 

Commissioner  Meeker.  If  the  price  of  gas  goes  up 

Mr.  Nash.  The  rate  of  return  goes  down. 

Mr.  Warren.  The  great  difficulty  with  that  is  in  establishing  a 
starting  point ;  is  it  not,  Mr.  Nash  ? 

Mr.  Nash.  That  is  a  very  serious  difficulty. 

Mr.  Warren.  In  Dallas,  the  starting  point  for  its  application  is 
the  5-cent  fare. 


6T0       PROCEEDINGS  OF  FEDEBAL  ELECTBIC  RAILWAYS  COMMISSION. 

Mr.  Nash.  And  eren  if  that  starting  point  is  accurately  de- 
termined, the  changes  in  conditions  that  we  have  gone  through  de- 
stroy the  effectiveness  of  it. 

Mr.  Waiiren.  It  would  be  alniost  impossible  to-day  to  adopt  the 
starting  point  which  you  could  consider  normal  in  the  street-rail- 
way business;  would  it  not? 
Mr.  Nash.  I  think  it  is  quite  impossible. 

Mr.  Warren.  What  rate  of  fare  could  be  said  to  be  a  proper  rate 
of  fare  bj^  which  to  measure  your  London  sliding  scale  ? 

Mr.  Nash.  I  do  not  think  we  could  forecast  at  all  what  the  normal 
rate  should  be,  established  for  the  future,  for  any  term  of  years. 

Mr.  Warren.  Do  you  think,  under  the  existing  uncertainties  of 
operating  expenses,  a  semiannual  budget  would  be  preferable  to  an 
annual  budget,  as  provided  for  in  the  Cincinnati  franchise? 

Mr.  Nash.  Under  the  authority  provided,  as  is  the  case  in  the 
franchises,  the  company  and  the  conunissioner  may  agi-ee  upon  re- 
visions. That  is,  if  there  is  any  definite  change  in  the  operating 
conditions  which  make  expenses  necessarily  higher,  or  possibly 
lower,  a  revision  of  the  budget  is  permissible^,  and  I  think  it  should 
be  made,  as  is  done  very  commonly  in  general  corporation  prac- 
tice, six  months,  or  even  quarterly,  Vhere  conditions  change  at  all 
radically. 

Mr.  Warrex.  This  service  at  cost  involves  a  franchise,  as  every 
case  of  a  street  railway  does,  of  course. 

Mr.  Nash.  There  is  just  feature  of  a  grant  conventionally 

Mr.  Warren.  What  would  you  say  were  the  salient  features  of  a 
service-at-cost  franchise  the  essential  featui-es,  distinguishing  it 
from  an  ordinary  franchise? 

Mr.  Nash.  The  essential  difference  is  the  assurance  to  the  in- 
vestor that,  as  far  as  any  rate  of  fare  can  be  put  into  effect  which 
the  patrons,  the  car  riders^  can  afford  to  and  are  willing  to  pay,  the 
•  investor  will  get  a  normal  return  upon  his  investment.  In  other 
words,  the  kind  of  a  return  that  he  would  get  if  he  put  his  money 
in  an  alternative  commercial  or  industrial  proposition. 

That  is  not  a  guamnty.  I  think  that  distinction  ought  to  be  very 
clearly  brought  out,  that  it  is  not  a  guaranty  in  the  ordinary  fran- 
chise. In  our  Massachusetts  cases — the  Boston  Elevated  act,  at 
least— there  is  a  guaranty  that  the  State  treasury  will  ntake  up  the 
deficit,  and  the  return  to  the  investor  is  absolutely  guaranteed ;  but 
it  is  expected  that  the  deficit  which  the  State  makes  up  at  one  time 
will  be  paid  at  another  time  under  more  favorable  conditions  by  the 
car  riders;  so  that  in  the  end  the  State  will  not  lose  anything,  but 
there  is  no  definite  provision  for  that  in  the  act. 

Mr.  Warren.  So  that  one  essential  feature  and  difference  is 
the  assurance  to  the  inve.stors.  that  so  long  as  the  business  is  ca- 
pable of  producing  it,  they  will  get  a  fixed  normal  return  on  their 
investment  ? 

Mr.  Nash.  That  is  the  real  vital  advantage  of  it. 
Mr.  Warren.  Is  there  any  assurance  to  the  car  rider  that  he 
does  not  always  enjoy  under  present  franchises? 

Mr.  Nash.  There  is  an  assurance  to  the  car  rider  that  he  can  have 
any  kind  of  service  that  he  is  willing  to  pay  for. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       671 

Mr.  Warren.  And  is  there  not  also  an  assurance  to  the  car  rider 
that  he  will  not  be  called  upon  to  pay  this  return  on  any  more 
than  a  determined  value  of  the  property  used  in  furnishing  service? 

Mr.  Nash.  Not  when  he  does  not  pay  any  higher  value,  but  he 
never  pays  more  than  the  established  normal  rate  of  return  on  that 
established  value. 

Mr.  Warren.  Oh,  yes. 

Mr.  Nash.  Tliere  is  an  assurance  that  the  investor  never  gets  any 
more  out  of  the  business  than  he  could  get  if  he  put  his  naoney 
somewhere  else,  in  competitive  business,  where  their  return  is  re- 
stricted by  competition,  as  it  is  not,  ordinarily,  in  the  railway 
business. 

Mr.  Warren.  So  that  really  those  two  features  are  very  im- 
poi-tant:  The  determination  of  the  value  of  the  property  used,  and 
then  permission  to  the  company  automatically  to  have  its  rates  go 
up  and  down,  to  furnish  a  return  upon  that  value  ? 

Mr.  Nash.  Those  are  the  fundamentally  necessary  features. 

Mr.  Warren.  Those  are  the  two  reciprocal  benefits? 

Mr.  Nash.  Yes. 

Mr.  Warren.  The  investor  says,  "I  won't  require  you  to  pay  on 
money  that  is  never  invested  " ;  and  the  car  rider  says,  "  You  may 
get  a  proper  return  on  whatever  is  invested." 

Mr.  Nash.  Exactly. 

Mr.  Warren.  You  said  the  other  day,  I  think,  in  your  opinion, 
that  the  term  of  the  franchise  should  be  indeterminate — a  good- 
behavior  franchise? 

Mr.  Nash.  There  are  undoubted  advantages  in  the  indeterminate 
franchise.  Unfortunately,  there  are  laws  in  a  good  many  States 
that  make  the  granting  of  such  franchises  impossible.  When  that  is 
the  case  the  results  can  be,  in  a  way,  accomplished  b}'  franchises  of 
this  Cleveland  form,  which  Mr.  Stanley  described,  or,  assuming  that 
a  25-year  term  is  the  maximum  that  the  authorities  can  grant, 
at  the  end  of  a  10-year  period  the  nr  icipality  must  either  extend 
that  franchise  for  10  years  more,  starting  anew  again,  in  effect,  with 
a  full  2o-year  term,  or  relinquish  its  rights  of  control,  and  i^ermit 
the  railway  to  charge  the  maxinmm  possible  rate  of  fare  authorized 
under  the  franchise,  and  to  amortize  its  investment.  That  means, 
of  course,  a  nuich  higher  cost  of  service  to  the  car  rider.  The  city 
is  really  forced  to  make  the  extension  in  order  to  keep  the  rates  down 
to  a  consistency  with  current,  normal  costs;  and  if,  at  the  end  of 
every  10  years,  in  that  way  the  franchise  is  renewed  and  it  never 
comes  nearer  than  15  years  of  its  expiration,  the  question  of  financinn: 
is  very  umch  simplified;  but  undoubtedly  the  indeterminate  form  is 
much  better,  because  this  lO-year  agitation  over  terms  and  condi- 
tions of  the  franchise  is  entirely  avoided,  and  also  when  the  ques- 
tion of  renewal  comes  up  there  is  more  or  less  popular  discussion 
and  agitation. 

Commissioner  Meeker.  Should  not  the  indeterminate  franchise 
be  subjected  to  a  review^  about  every  10  years? 

Mr.  Nash.  Certain  features  of  it  logically  should  be  subject  to 
review. 

Mr.  Warren.  But  these  essential  features  ought  not  to  need  re- 
view— the  determination  of  the  value  and  the  assurance  of  a  return? 


672       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Nash.  Those  should  be  fundamentally  unchanged.  They 
should  be  fixed. 

Now,  take  the  question  of  the  rate  of  return,  for  instance.  I  do 
not  think  we  can  foresee  indefinitely  what  rate  of  return  the  investor 
is  able  to  earn  in  other  business  and  what  he  is  entitled  to  under 
a  service-at-cost  franchise;  so  that  there  might  well  be  a  provision 
for  arbitration  or  readjustment  of  things  of  that  kind  that  are  sub- 
ject to  change  with  changing  general  conditions. 

Commissioner  Meeker.  Would  you  make  these  changing  features 
subject  to  review  at  periodical  intervals,  say  every  10  years,  or  when- 
ever the  emergency  arises? 

Mr.  Xash.  Preferably  when  a  real  emergency  arises,  if  it  is  pos- 
sible to  definie  what  one  means  by  a  "  real  emergency."  That  is 
always  difficult. 

Commissioner  Meeker.  Could  3'ou  describe  such  an  emergency  as 
3'ou  have  just  outlined? 

Mr.  Nash.  I  think  it  would  be  unquestionable  that  conditions 
which  have  arisen  during  the  war  should  be  an  occasion  for  the  re- 
vision of  any  established  features  of  this  kind. 

For  instance,  Mr.  Stanley  has  explained  that  while  the  Cleveland 
franchise  provides  for  a  6  per  cent  return  on  the  company's  stock — 
and  that  that  franchise  was  extended  for  10  years,  onlv  a  few  months 
ago — the  company  found  it  necessary  to  come  to  the  commission, 
saying  that  their  investors  are  entitled  to  a  T  per  cent  return.  They 
are  doubtless  claiming  that  7  per  cent  to  investors  to-day  commands 
less  in  purchasing  power  than  6  per  cent  did  three  or  four  years 
ago.  That  is  undoubtedly  true;  but  I  think  a  revision  applied  to 
the  question  of  the  rate  of  return  should  or  might  properly  be 
limited  to  the  question  of  what  differences  have  arisen  between  the 
time  when  the  rate  of  return  was  originally  established  and  the  time 
of  the  arbitration,  so  that  the  question  may  not  be  too  broad.  If  it 
is  left  too  broads  the  investor  is  likely  to  be  frightened.  If  he  knows 
that  unless  conditions  change,  he  is  going  to  be  assured  of  a  continued 
return  on  the  basis  on  which  he  has  made  his  investment,  and  that  if 
conditions  do  change  the  rate  of  return  will  be  affected 

Commissioner  Gadsden.  Mr.  Nash,  don't  you  think  that  that  will, 
in  some  measure,  affect  the  securities  of  the  investor?  If  an  investor 
buys  a  security  under  any  consideration  of  that  kind,  with  the  pro- 
vision that  the  rate  on  these  securities  is  subject  to  revision,  don't 
you  think  that  that  is  going  to  make  money  more  expensive  to  get, 
under  this  plan  ? 

Mr.  Nash.  There  would  be  a  tendency  both  ways. 

Commissioner  Beall.  You  think  nornuilly  it  would  go  up,  and 
not  down  ? 

Mr.  Nash.  If  the  investor  foresaw  that  prices  were  going  to  con- 
tinually rise,  and  that  the  rate  of  return  that  he  could  command  in 
the  future  ought  to  be  revised,  he  would  look  for  a  revision  to  give 
him  an  opportunity  to  get  more  than  he  started  with. 

Commissioner  Beall.  Well,  are  not  the  chances  all  the  other  way  ? 

Mr.  Nash.  It  is  pretty  hard  to  tell  how  the  average  investor  would 
look  at  the  future,  whether  he  thinks  prices  are  going  up  or  going 
down. 

Commissioner  Beall.  A  banker  would  not  undertake  to  raise 
money  under  those  conditions.    He  could  not  do  it,  absolutely. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      673 

Commissioner  Gadsden.  That  is  a  gamble;  that  is  not  an  invest- 
ment. 

Commission  Beall.  Is  not  the  protection  to  the  public  this:  If 
the  situation  is  such  that  the  return  ought  to  be  fixed  on  the  pur- 
chase provision,  which,  I  suppose,  you  would  recommend  as  a  feature 
of  eveiy  one  of  these  service-at-cost  franchises,  it  would  put  it  in 
the  power  of  the  municipality  or  the  State  or  other  public  agency 
to  take  the  property  over  ? 

Mr.  Nash.  There  is  a  still  more  definite  provision  than  that  in 
the  Cleveland  franchise,  for  instance,  that  the  city,  instead  of  exer- 
cising the  right  of  purchase  itself,  could  designate  a  new  licensee,  a 
new  purchaser,  although  the  company  has  a  right  to  retain,  the 
existing  company  has  a  right  to  retain  the  property,  if  it  will  accept 
a  rate  of  return  somewhat  lower  than  that  originally  prescribed. 

Commissioner  Beall.  That  would  protect  the  public. 

Mr.  Nash.  That  would  prevent  the  prescribed  rate  of  return  from 
being  excessive. 

Connnissioner  Beall.  Yes. 

Mr.  Nash.  And  that  may  be  an  adequate  provision,  so  far  as  the 
city  is  concerned. 

Commissioner  B^all.  Now,  the  amount  upon  which  the  return 
should  be  allowed  should  not  vary,  except  as  additional  amounts  arc 
added  to  the  investment  in  the  property  ? 

Mr.  Nash.  I  think  not. 

Commissioner  Beall.  Having  once  been  determined? 

Mr.  Nash.  Of  course,  there  is  this  to  be  said,  that  an  investor  to- 
day, if  he  gets  a  living  out  of  his  investment,  must  get  more  money  in 
dollars  than  he  got  a  number  of  years  ago,  and  that  must  come 
either  through  a  higher  rate  of  return  or  from  a  higher  valuation 
of  the  property  which  he  has  invested.  I  think  the  simpler  way  of 
giving  him  that  higher  income  is  through  a  change  in  the  rate  of 
return  and  not  in  his  investment. 

Commissioner  Beall.  Yes. 

Mr.  Nash.  The  more  stable  an  investment  value  is  fixed  the  better. 

Commissioner  Beall.  If  that  amount  is  going  to  be  varied  up 
and  down,  there  will  be  the  same  feeling  of  insecurity  on  the  part 
of  the  investor;  will  there  not? 

Mr.  Nash.  I  think  there  will  be. 

Commissioner  Beall.  And  if  it  was  not  determined,  would  you 
say  that  the  investor  would  not  prefer  to  invest  ? 

Mr.  Nash.  Here  is  an  illustration  that  came  up  in  a  hearing  on 
this  question  before  the  chamber  of  commerce  that  may  be  of  in- 
terest on  this  point : 

It  was  testified  to  in  Cleveland  when  the  franchise  came  up  for 
an  extension  last  spring,  that  an  incentive  ought  to  be  added  to  the 
fixed  rate  of  return,  so  that  the  investor  might  under  certain  condi- 
tions get  more.  I  think  there  was  no  suggestion  that  the  return 
might  be  less  than  that  fixed,  but  the  investors — and  a  very  large 
portion  of  them,  Mr.  Stanley  has  told  you,  are  residents  of  Cleve- 
land— seem  to  be  opposed  to  any  change  from  the  fixed — the  abso- 
lutely fixed — rate  that  they  were  entitled  to.  They  were  afraid 
that  any  added  flexibility  might  result  sometime  in  their  getting  a 
less  return  than  the  franchise  allowed  them;  so  that  that  provision 


674       PBOCEEDINGS  OF  FEDERAX,  ELECTRIC  RAILWAYS  COMMISSION. 


of  flexibility  was  not  embodied  in  the  franchise  when  it  was  re- 
newed. 

Mr.  Warren.  Of  course,  you  would  say,  I  presume,  that  the  fran- 
chises ought  not  to  contain  a  maximum  rate  of  fare? 

Mr.  Nash.  Neither  a  maximum  nor  a  minimum. 

Mr.  WxVRREN.  Yes. 

Mr.  Nash.  Neither. 

Mr.  Warren.  In  view  of  the  experiences  of  the  last  year  and 
a  half? 

Mr.  Nash.  I  think  the  less  definition  regarding  fare  schedules  that 
is  actually  set  forth  in  the  franchise  the  better;  and  the  more  that 
can  be  left  to  the  judgment  of  the  supervising  authorities  the  l)ettcr. 
It  may  be  advisable  in  cities  to  change  from  a  fixed  fare  basis  to  a 
zone  basis,  or  change  the  character  of  the  schedules  in  some  other 
way;  so  that  if  a  franchise  does  not  require  a  certain  kind  of  fare 
to  be  charged  at  varying  rates  the  opix)rtunity  to  make  a  change 
in  the  type  of  the  schedule  is  obtained. 

Mr.  Warren.  That  exists  in  the  Massachusetts  statute,  as  I  ixicall 
it.  The  compan;y  can  submit  to  the  public-service  commission  a 
scheme  of  fares,  with  a  sliding  scale,  and  when  the  commission  ap- 
pi*oves  it,  the  scale  can  be  made  effective;  and  it  may  subsequently, 
if  the  commission  permits,  substitute  another,  scale,  a  different  kind 
of  scale;  is  not  that  so? 

Mr.  Nash.  An  entirely  different  kind. 

Mr.  Warren.  Yes. 

Mr.  Nash.  There  is  no  definition  of  rates  or  scales  in  the  Massa- 
chusetts acts  at  all.  The  only  thing  is  that  whenever  a  particular 
schedule  of  fares  is  in  effect,  there  must  always  be  ready  to  go  into 
effect  steps  above  and  below,  so  that  there  will  be  no  delay  in  making 
a  change,  whenever  it  is  necessary,  promptly. 

Mr.  Warren.  Have  you  stated  what  rate  of  return  is  allowed  on 
capital  in  these  different  franchises.    Does  it  vary? 

Mr.  Nash.  It  does  vary  to  a  material  extent,  I  think  it  is  5 
per  cent  plus  a  proportion  of  the  divisible  surplus — one-third,  I 
think  in  this  case.  In  Chicago,  it  is  5  per  cent  plus  45  per  cent  of 
the  surplus.  Kansas  City  has  6  j>er  cent.  We  have  not  any  real 
service-at-cost  franchises. 

Mr.  Warren.  Would  you  call  Chicago  a  real  service-at-cost  fran- 
chise ? 

Mr.  Nash.  It  is  not. 

Mr.  Warren.  It  is  a  partnership  arrangement? 

Mr.  Nash.  It  is  a  partnership  arrangement,  with  a  division  of 
the  surplus,  really. 

Commissioner  Beall.  Chicago  has  two  plans.  There  is  one  that 
you  have  not  mentioned.  That  really  increases  your  return.  They 
are  allowed  to  charge  a  certain  amount  when  they  negotiate  securi- 
ties, which  goes  into  their  treasury.  As  a  matter  of  fact,  one  of 
the  companies  out  there  has  something  like  four  or  five  million 
dollars  accumulated  through  that  process,  which  is  entirely  outside 
of  the  rate  of  return  that  they  are  allowed  on  their  capital  stock  or 
the  value  of  their  property. 

Mr.  Nash.  That  is  a  very  liberally  promulgated  supervision 
allowance. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       675 

Commissioner  Beall.  Not  when  you  figure  it  down,  but  it  is  an 
addition  to  what  you  have  mentioned. 

Mr.  Nash.  All  of  that  adds  to  the  average  rate  of  return.  The 
Dallas  franchise  embodies  the  highest  theoretical  permissible  rate 
that  I  recall;  and  that  is  9  per  cent,  and  that  is  only  obtainable 
when  the  fare  is  appreciably  below  5  cents. 

Mr.  Warren.  But  what  they  assume  to  be  a  normal  fare  in  Dallas 
is  7  per  cent. 

Mr.  Nash.  That  is  7  per  cent. 

Mr.  Warren.  That  is  7  per  cent  on  the  value  of  the  property? 

Mr.  Nash.  Seven  per  cent  on  the  value  of  the  property,  as  fixed  in 

the  franchise. 

Mr.  Warren.  And  I  do  not  suppose  anybody  can  tell  to-day  what 

should  be  allowed,  if  you  considered  that. 

Mr.  Nash.  Only  in  a  general  way.  If  the  costs  of  living  generally 
have  gone  up  not  less  than  50  per  cent,  the  investor,  who  theoretically 
may  live  on  his  income,  ought  to  have  his  income  increased  50  per 
cent.  The  investor  makes  his  money  work  for  his  living,  and  he  is 
just  as  much  entitled  to  a  higher  wage  on  his  money  as  the  working- 
man  is  entitled  to  a  higher  wage  for  his  physical  labor. 

Mr.  Warren.  Do  many  franchises  provide  for  the  actual  rate 
which  has  to  be  paid  for  obtaining  new  capital? 

Mr.  Nash.  There  are  several  of  them  that  provide  that  the  actual 
cost  of  obtiiining  new  money,  whatever  it  may  be,  shall  be  allowed  as 
a  part  of  the  cost  of  the  service.  That  is  true  in  Cincinnati,  as  Mr. 
Culkins  testified.  It  is  also  true  of  the  Youngstown  franchise,  the 
most  recently  granted,  and  not  included  in  my  summary-.  That  is 
true  of  the  Massachusetts  provisions,  too,  but  not  entirely  so  either, 
because  the  Boston  Elevated  was  allowed,  of  course,  a  certain  fixed 
return  upon  the  capital  stock  to  cover  interest  requirements  upon 
boiTowed  money. 

Mr.  Warren.  I  think  that  is  all,  Mr.  Nash. 

The  CHAiR3f  AN.  I  have  not  had  time  to  review  your  pamphlet,  Mr. 
Nash.  Have  you  discussed  the  theory  of  the  cost  of  service  in  the 
different  franchises  that  exist  in  Cincinnati,  Cleveland,  Dallas,  and 
some  other  places,  and  also  the  experiences  which  have  been  derived 
from  the  exercise  of  those  franchises? 

Mr.  Nash.  I  have  discussed  the  theory  and  the  experiences  in 
cases  like  Cleveland,  where  the  franchise  has  been  in  operation  a 
considerable  number  of  years.  I  have  in  the  case  of  Dallas,  I 
think,  although  at  the  time  that  was  prepared,  only  about  one  year 
of  experience  was  available.  A  great  many  of  those  franchisees  were 
so  new  that  there  is  comparatively  little  about  the  actual  experience 
in  that. 

The  Chairman.  If  the  commission  should  desire  to  cross-examine 
you  at  some  future  time,  could  you  come  back  here  ? 

Mr.  Nash.  I  will  be  glad  to. 

The  Chairman.  Tliere  are  one  or  two  points  that  I  would  like  to 
develop.  It  appears  that  the  cost  of  public  supervision  must  be 
borne  by  the  utility. 

Mr.  Nash.  I  think  so. 

The  Chairman.  Might  not  that  prove  very  burdensome  to  the 
utility  in  the  case  of  small  plants? 


676       PROCEEDINGS  OF  FEDEEAT  ELECTRIC  RAILWAYS  COMMISSION. 

•  Mr  Nash.  It  might,  of  course;  but  I  think  that  the  supervision 
miX  hP  so  adjusted  by  having  a  joint  supervisor  for  a  number  of 
Zf  small  plant  who  '^ould  nft  spend  all  of  his  time  on  any  one  of 
il  em-  a  supervisor,  as  I  have  suggested  befoi-e,  appointed  by  the 
State' com  n^ion  and  responsible  to  them,  dividing  his  time  over 
!naDDredibl^  number  of  small  plants.  I  think  that  is  quite  ti-ue; 
tZta^ervslu  railway  would  not  need  the  attention  or  the  entire 
attention  of  e^^n  one  supervisor,  and  other  large  systems  will  re- 
Jufre  not  only  the  entire  attention  of  one  man  but  of  a  subordinate 

%^.fcHfJS''?f  o^Z'^pany  operates  in  several  villages,  and 
alSfn  uTe  sXirban  territory,^it  might  follow  that  >:o«  -ould  have 
aHnany  contracts,  different  in  form,  as  you  have  villages  through 

"S  ferC;Xbl7  would  be  the  case,  because  they  are  apt 
to  disagree  rather  than  a^ree  on  some  things. 

The  Chairman.  It  would  also  follow  that  municipdities  ^vould  be 
attempting  to  establish  rates  for  service  for  communities  over  which 

'^^.^^xLh'  xXTmight  attempt  it,  but  they  could  not  enforce  it. 
.    The  Cha"rman.^How  are  vou  going  to  work  out  that  situation? 

Mr  Nash  I  think,  especially  where  a  railway  system  covers  a 
nmnber  of  cities  and  villages,  that  there  must  be  State  supervision; 
Zr  he  nuinic'pality  could  gnint  a  franchise  only  for  the  part  of  the 
svstem  Sn  Fts  limits,  and  it  would  only  control  the  Pf 't  of  the 
Sm  within  its  limits'.  There  is  an  attempt  in  several  of  these 
sLvice-at-co^^  franchises,  notably  Montreal  I  think  to  extend  the 
iXence  of  the  agreement  beyond  the  confines  of  the  city,  and,  as 
far  as  I  kno^^S  it^  working  through  the  sufferance  of  the  adjoining 

ommunitfer'  It  is,  I  think,  a  good  deal  to  the  adv-tage^f^^^^^^^^^^ 
communities  that  the  general  plan  which  is  in  f  ^^f  ^l'^,™ 
should  be  working  in  these  other  communities  as  well,  because  it 
Sves  to  them  prob^ably  lower  rates  of  fare  than  they  would  otherwise 

^\lie  cSairman.  Now,  back  in  Minnesota,  for  instance,  a  rapid- 

transit  company  operates  on  the  streets  of  St.  f-^v^lS^to^^^^^^^ 
•md  the  same  cars  go  out  into  the  suburban  territory,  18  to  20  miles. 
When  it  ge^s  beyond  the  territory  of  the  city  of  Mmneapolis,  it  oper- 
ates  as  a^ailrokd  company,  yet  you  have  the  same  equipment,  the 
^•ime  men  the  same  company,  and  the  same  capital  investment. 
Manifestly  it  would  be  very  difficult  for  the  city  of  Minneapolis  to 
Sempt^^^^^  the  service  on  the  rails  in  the  outlymg  te^^^^^^^^^ 

Thereiore,  it  seems  that  you  must,  in  some  way,  link  the  State  and 

^f^Alrt'think  that  is  quite  necessary.    It  must  be,  of  course 
an  appoitionnV^^  of  the  value  of  the  property  over  the  city  and  of 
aU  n^i^Dvab  rproperty  between  the  city  and  .suburban  communities. 

ThrCHAiRMAN    I  have  no  further  questions  to  ask  at  this  time. 

Smmfssio^^^^^^^^^^        I  just  want  t!.  ask  Mr.  Nash  a  question  or 

*'' You  were  saving  that  you  did  not  believe  that  the  seryice-at-cost 
fraSisrsLuM  provide  too  large  a  depreciation  and  obso  escence 
f  un<?f  andTt  was  Li  clear  to  my  mind  what  was  -  J^^r  ^f '  ^  ^ow 
do  you  propose  that  that  should  be  taken  out?    As  I  understand  it, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


677 


there  are  only  two  ways  of  dividing  it.  You  must  do  it  year  by  year 
by  accruals  or  else  pay  it  in  one  year,  getting  the  whole  lot  of  it 
at  once. 

Mr.  Nash.  I  would  not  take  care  of  it  out  of  capital  at  all. 

Commissioner  Beall.  When  you  said  you  would  not  charge  the 
present  car  rider  for  any  of  that  beyond  a  certain  point,  I  did  not 
know  what  your  theory  was,  or  how  it  would  be  taken  care  of.  That 
is  what  I  am  trying  to  get  at.    I  did  not  know  what  you  had  in  mind. 

Mr.  Nash.  The  thought  I  have  in  mind  is  that  every  railway 
should  set  up  a  reserve.  I  do  not  know  that  I  would  attempt  to  define 
what  that  would  be,  because  it  involves  so  many  different  questions 
as  to  probable  useful  life  and  the  extent  of  the  effect  of  changes  in 
the  art  and  all  that;  but  if  I  were  guessing  at  a  suitable  reserve, 
which  would  take  care  of  any  actual  retirements  and  replacements 
on  a  normal  charge,  I  would  say  something  like  10  per  cent  of  the 
investment.  I  think  that  would  be  enough  to  wholly  take  care  of 
any  normal  amount  of  retirements.  There  might  conceivably  be  a 
time  when  some  very  large  element  in  the  property — for  instance, 
if  they  had  a  very  large  power  station,  with  reciprocating  engines, 
and  it  would  be  necessary,  for  reasons  of  economy,  to  replace  that 
plant  with  turbine  units  and  converting  system,  the  writing  off  of 
that  entire  plant,  together  with  other  current  retirements,  might 
conceivably  overdraw  the  accumulated  reserve.  But  what  would 
happen,  I  think,  as  a  matter  of  fact,  would  be  this,  that  in  a  case 
such  as  I  have  cited,  when  this  new  power  plant  was  built — and  I 
have  known  of  a  case  of  exactly  this  sort  lo  actually  happen— in- 
stead of  tearing  down  the  old  plant  and  writing  it  off  and  selling 
for  junk,  it  would  be  retained;  some  parts  of  it  very  probably 
removed  to  the  new  station  as  being  useful  for  future  service,  and 
the  balance  retained  for  emergencies.  Such  emergencies  happen.  I 
have  known  things  that  have  been  shut  down  for  a  year  or  two — 
and  when  I  say  "emergencies,"  I  include  the  abnormal  demands  of 
the  war  period,  and  the  inability  during  that  period  to  secure  new 
equipment — I  have  known  these  old  plants  that  have  been  shut  down 
for  several  years  to  be  replaced  in  service  and  operated  more  or  less 
continuously.  So  that  the  retirements,  the  writing  off,  and  the  dis- 
posing of  large  items  of  property  of  that  kind  may  very  properly 
be  spread  over  a  term  of  years,  instead  of  being  taken  out  all  at  once. 

Commissioner  Beall,.  1  do  not  know  whether  I  understand  what 
you  mean  or  not — whether  you  will  want  to  put  that  burden  on  the 
future  car  rider  and  extend  it  into  the  future,  rather  than  have  it 
accumulated  in  a  fund  from  year  to  year,  which  would  ordinarily 
take  care  of  those  kinds  of  items. 

Mr.  Nash.  I  would  accumulate  a  fund  for  a  reserve,  which  could 
be  invested  in  the  extensions  of  property,  and  not  held  in  cash. 

Commissioner  Beall.  You  see  what  I  mean? 

Mr.  Nash.  Yes. 

Commissioner  Beall.  If  a  big  plant  comes  to  you  to  spend  a 
million  dollars  for  possibly  this  new  power  house  or  equipment  or 
whatever  it  may  be,  you  either  have  that  money  accumulated — and 
the  difference  between  what  you  have  accumulated  and  what  is 
needed  you  have  to  raise  in  some  way  and  spend  it.  There  are  only 
two  ways  of  taking  care  of  that:  You  either  have  to  charge  it  to 
capital  account,  which  is  probably  wrong,  or  else  you  have  to  amortize 


678       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOS". 

that  for  quite  a  series  of  years  in  the  future,  and  charge  it  for,  per- 
haps, so  much  per  year. 

Mr.  Nash.  My  thought  about  the  methods  of  accounting--and 
I  think  they  are  consistent  with  the  Interstate  Commerce  Commission 
requirements  and  those  of  some  of  the  other  commissions — is  that 
when  new^  property  is  added  to  railway  facilities,  it  should  be  charged 
to  the  property  account.  Now,  if  a  railway  builds  a  new  {)Ower  sta- 
tion, that  new  power  station  is  its  property,  and  it  should  be  added  to 
its  capital  value.  The  precribed  methods  are  that  when  property  is 
retired  or  abandoned  or  replaced,  it  must  be  written  off,  and  the 
amount  which  was  actually  spent  on  the  property  account  must  be 
removed. 

Now,  it  is  not  necessary,  for  accounting  purposes,  that  the  removal 
of  an  old  plant,  which  may  be  temporarily,  and  possibly  permanently, 
put  out  of  actual  use,  should  be  written  off  at  exactly  the  time  that 
the  new  plant  is  added  to  the  property.  It  may  be  disposed  of  in 
the  way  that  the  Interstate  Commission  prescribes.  If  it  is  an  actual 
retii"ement  and  the  reserve  is  not  available  in  full,  it  may  be  put  into 
a  suspense  account  provided  for  that  purpose  and  taken  out  of  prop- 
ei*ty  and  gradually  written  off. 

Commissioner  Beall.  But  the  public  service  commissions  having 
jurisdiction  over  electric  railways  will  not  let  you  write  anything  of 
that  kind  off  except  the  excess  for  your  old  property.  They  will  not 
let  you  take  a  new  station  that  cost  $1,000,000,  and  charge  that  in  as 
new  construction.  If  you  are  goin^  to  abandon  then  or  later  an  old 
power  house  it  has  some  value,  lou  will  duplicate  your  capital  if 
you  do  that. 

Mr.  Nash.  What  they  expect  to  be  done  is  that  when  a  piece  of 
property  is-  abandoned  it  should  be  written  off,  regardless  of  whether 
something  else  takes  its  place  or  not.  When  anything  new  is  added 
to  the  property,  whether  it  takes  the  place  of  old  pi'operty  or  not,  it 
should  be  added  to  capital,  and  proj)erly,  of  course.  Where  there  is 
a  substitution,  the  old  elements  should  be  taken  out.  If  it  is  really 
abandoned,  it  should  be  taken  out  at  the  time  the  new  one  is  added ; 
but  the  accounting  system  does  provide  for  a  suspense  account  in 
which  that  can  he  carried  if  the  accumulated  reserve  is  not  adequate 
to  take  cai*e  of  it  until  the  additional  accruals  can  be  made  to  make 
the  amount  available  adequate.  I  think  we  are  quite  agreed  on  the 
principle.  It  is  just  a  matter  of  accounting  practice,  in  which  com- 
missions have  endeavored  to  allow  some  latitude  in  the  way  in  which 
the  retired  property  shall  actually  be  charged  off  through  the  opei*at- 
ing  and  expense  accounts. 

Commissioner  Beall.  I  w^as  trying  to  get  at  what  portion  you 
thought  should  be  charged  to  the  present  car  rider  and  what  portion 
you  ought  to  charge  to  the  future  ridere. 

Mr.  Nash.  It  is  not  a  thing  that  can  be  definitely  fixed,  because  you 
can  not  state  definitely  whether  a  particular  retirement  is  due  to 
obsolescence.  It  is  not  wholly  in  those  cases,  A  piece  of  track  is  torn 
up  because  the  city  wants  to  pave  the  sti*eet.  It  is  hardly  worn  out, 
but  the  cause  of  removal  is  partly  wear  and  tear  and  partly  suj^er- 
session,  or  whatever  you  want  to  call  it 

Commissioner  Beali>.  You  see,  we  are  anxious  to  get  from  every- 
body who  has  stated  these  different  plans  their  ideas  and  the  best  way 
of  working  them  out. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      679 

Mr.  Nash.  I  have  studied  this  question  of  depreciation  a  good  deal. 

Mr.  Warren.  Mr.  Nash,  what  would  you  do  with  this  piece  of 
track?  I  think  that  would  answer  Mr.  Beall's  question.  You  say 
you  would  take  up  a  piece  of  track.  Suppose  it  had  20  years'  life, 
and  the  city  repaves  and  wants  to  take  it  out  at  the  end  of  15  years  ? 

Mr.  Nash.  I  would  take  that  immediately  out  of  the  property  ac- 
count entirely. 

Mr.  Warren.  At  what  rate? 

Mr.  Nash.  At  what  it  actually  cost  originally. 

Mr.  Warren.  Let  us  say  $50,000. 

Mr.  Nash.  A  new  piece  of  track  would  conceivably  cost  $100,000. 
The  Avhole  of  that  $100,000  cost  of  new  track  would  be  added  to  the 
property  account.     So  that  the  net  increase  would  be  the  difference 

between  the  two. 

Commissioner  Beall.  That  is  $50,000.  You  only  have  an  increase 
in  vour  property  value  of  $50,000. 

Mr.  Nash.  $50,000. 
.  Commissioner  Beall.  Only  $50,000. 

Mr.  Nash.  That  is  all. 

Commissioner  Beall.  That  would  be  the  real  increase.  Other- 
wise, you  would  duplicate  your  value.  Of  course,  that  means  the 
same  thing,  but  I  was  tryin<^  to  see  how  you  would  take  care  of  that. 

Mr.  Nash.  I  am  not  argumg  for  a  duplication  of  capital. 

Commissioner  Beall.  No  ;  I  do  not  think  there  is  any  difference  in 
what  we  mean,  but  we  have  stated  it  in  different  ways,  and  I  wanted 
to  see  what  your  idea  was  as  to  how  to  take  care  of  it.  It  may  be 
useful  to  the  commission  to  know  that. 

Mr.  Nash.  I  think  it  is  a  disputed  question  as  to  how  far  obso- 
lescence should  be  borne  befoi*e  the  fact  rather  than  after  the  fact, 
because  it  is  essentially  an  indefinite  question.  You  can  not  tell  how 
far  in  anj^  specific  replacement  that  one  element  rather  than  another 
requires  the  replacement. 

The  Chairman.  We  will  suspend  here  to  resume  at  2  o'clock. 

Commissioner  Meeker.  It  seems  to  me  that  Mr.  Warren's  question 
has  not  yet  been  answered,  and  I  would  like  to  hear  the  answer  to  it. 

Mr.  Warren.  I  do  not  think  so,  either. 

The  Chairman.  You  can  get  that  answer  at  2  o'clock. 

(Whereupon,  at  1  o'clock  p.  m.,  a  recess  was  taken  until  2  o'clock 
p.  m.) 

after  recess. 


STATEMENT  OF  MR.  L.  R.  NASH— Continned. 

Mr.  Warren.  I  think  I  am  through  with  my  questions  of  Mr.  Nash. 

Commissioner  Sweet.  Mr.  Meeker,  I  think,  has  some  questions  he 
wants  to  ask  Mr.  Nash. 

Commissioner  Meeker.  I  would  like  to  ask  again  the  question  Mr. 
Warren  asked,  with  a  little  modification.  Let  us  take  the  supposed 
values  that  he  suggested,  a  piece  of  track  that  has  cost  originally 
$50,000,  and  let  us  say  that  $30,000  of  the  $50,000  has  been  written 
off  in  depreciation,  that  there  remained  $20,000  capital  investment 
unaccounted  for,  and  that  for  some  reason  or  other  the  ti^ck  is  torn 
up  and  relaid  by  new  track  which  costs  $100,000;  how  would  you 
recommend  handling  that  bit  of  finance  ? 


680       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Nash.  Now  your  assumption  is  not  quite  in  accordance  with 
the  established  accounting  practice.  That  is,  this  original  piece  of 
track  would  stay  in  the  property  account  in  full  as  long  as  it  re- 
mained in  service.  There  might  have  been  $30,000  accrued  to  take 
care  of  it 

Commissioner  Meeker.  I  was  not  making  any  assumptions  there 
as  to  what  was  actually  done  with  the  capital  investment  as  shown  by 
the  books  of  the  company,  but  $30,000  has  actually  been  taken  care 
of  through  a  depreciation  fund  and  $20,000  has  not  been  touched  at 
all. 

Mr.  Nash.  That  piece  of  track  when  it  is  taken  up,  there  would  be 
some  salvage  to  it;  say  a  possible  $5,000  of  salvage,  although  that 
would  be  large.  That  would  be  realized  in  cash,  leaving  $15,000  of 
value  unprovided  for,  and  that,  if  there  was  no  more  reserve  to  take 
care  of  that,  would  be  put  in  a  suspense  account  in  your  standard  ac- 
counting system,  called  property  abandoned,  and  would  remain  there 
until  a  sufficient  reserve  had  been  accrued  to  take  care  of  that  balance. 

Commissioner  Meeker.  It  would  be  accounted  as  pail  of  the  in- 
vestment until  it  was  written  off? 

Mr.  Xash.  Well,  it  would  be  taken  out  of  the  property  account, 
but  would  still  be  included  in  an  asset  suspense  account. 

Commissioner  Meeker.  So  that  anj^  estimate  of  the  value  of  the  in- 
vestment would  take  that  into  account 

Mr.  Nash.  It  would  not.  It  would  be  taken  out  of  the  property 
account. 

Commissioner  ^Ieeker.  Well,  but  I  am  speaking  now  not  merely 
of  the  property  account,  but  of  an  estimate  of  investment  upon  which 
the  company  is  entitled  to  a  reasonable  return.  There  would  be  the 
$100,000  which  the  new  track  cost,  plus  $15,000,  would  there  not? 

Mr.  Nash.  Yes. 

Commissioner  Meeker.  Making  a  total  of  $115,000  on  thi?  par- 
ticular piece  of  line  which  the  company  is  entitled*  to  earn  a  reason- 
able income  on. 

Mr.  Nash.  I  think  about  $15,000  should  be  included  in  the  rate 
base,  so  to  speak,  until  it  has  been  written  oif  because  otherwise  it 
is  a  part  of  the  investor's  money  that  would  not  be  earning  a  return 
as  it  should. 

Commissioner  Meeker.  I  want  to  make  sure  of  that.  The  ques- 
tions asked  by  Mr.  Beall  seemed  to  rather  becloud  the  issue  so  that  I 
was  not  certain  of  your  opinion.  Now  you  hav^e  brought  up  some 
very  fundamental  and  theoretical  questions  in  your  testimony  this 
morning  in  regard  to  changing  the  rate  of  return  with  changing 
levels  of  prices.  The  term  "gamble"  has  been  introduced  in  this 
morning's  session.  I  want  to  ask,  do  you  think  there  is  any  greater 
uncertainty  to  the  investor  to  guarantee  him  a  fixed  return  in  goods 
purchasable  by  money  rather  than  to  guarantee  him  a  fixed  return 
in  money  itself? 

Mr.  Nash.  I  should  think  there  was.  That  is,  money  has  a  con- 
stantly varying  value  and  what  an  investor  wants  is  purchasing 
power. 

Commissioner  Meeker.  Well,  your  answer  then — let  me  put  the 
question  again.  My  question  was,  Is  there  any  greater  imcertainty  to 
the  investor  under  a  guaranty  of  a  fixed  return  in  goods  purchasable 
by  money  rather  than  a  fixed  return  in  money  itself? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       681 

Mr.  Nash.  The  answer  to  that  is  no.    I  did  not  understand  your 

question.  . 

Commissioner  Meeker.  The  greater  risk  would  inhere  in  the  fixed 

money  return;  would  it  not? 

Mr.  Nash.  I  think  so,  but  of  course  that  is  fundamentally  so,  and 
yet  I  think  the  average  investor  is  not  apt  to  quite  appreciate  it.  He 
perhaps,  without  recognizing  the  full  significance  of  what  is  going  on 
in  the  past  few  years,  is  very  likely  more  apt  to  say  he  would  rather 
take  a  chance,  whatever  the  chance  is  on  his  fixed  return  rather  than 
submit  himself  to  adjustments.  A  good  many  investors  would  very 
much  rather  do  that. 

Commissioner  Meeker.    Do  you  think  that  is  true  to-day? 

Mr.  Nash.  Well,  whether  this  is  true  of  the  average  investor  I 

would  not  like  to  say. 

Commissioner  Meeker.  It  seems  to  me   the  financial  literature  is 

littered  with  costs  of  living  data 

Mr.  Nash.  It  is. 

Commissioner  Meeker.  And  with  articles  on  the  changing  levels 
of  prices;  and  we  know  in  what  direction  they  have  been  changing 
for  the  last  20  years,  and  it  would  seem  to  me  that  quite  likely  the 
investor  would  much  rather  be  assured  of  a  fixed  return  in  purchas- 
ing power  rather  than  a  fixed  return  in  a  depreciating  dollar. 

Mr.  Nash.  I  think  any  investor  who  is  a  student  of  economics  ap- 
preciates that  previous  to  these  war  times  there  was  a  steadily  or 
fairly  steadily  diminishing  purchasing  power  cf  the  dollar.  We  have 
estimated  that  the  cost  of  electric-railway  property  since  about  1894, 
I  think,  when  the  upward  trend  started,  has  been  about  3  per  cent 
a  year  on  an  average.  So  if  that  was  tnie  of  commodities  generally  it 
would  necessarily  follow  that  the  purchasing  power  of  a  dollar  has 
decreased  in  that  proportion  and  the  purch:ising  power  of  an  in- 
vestor's return  on  a  fixed  investment  has  similarly  decreased. 

Connnissioner  Meeker.  We  are  getting  into  the  theory  which  I  do 
not  care  now  to  enter  into,  because  I  do  not  think  it  is  pressingly  im- 
portant in  this  problem,  although  it  is  quite  important:  the  ques- 
tion as  to  whether  the  rate  of  interest  tends  to  rise  with  rishig  prices. 
Do  you  care  to  express  an  opinion  on  that  subject? 

Mr.  Nash.  No;  I  do  not  think  so — not  unless  you  wish  it  par- 
ticularly. 

Conmiissioner  MeeivER.  I  will  not  press  for  an  answer  on  that,  but 
I  do  want  to  call  your  attention  to  the  fact  that  what  you  have  just 
said  does  depend  upon  the  correctness  or  the  incorrectness  of  the 
theory  that  interest  rates  do  tend  to  increase  with  increasing  prices 
and  they  tend  to  decrease  with  decreasing  prices.  Now,  my  own 
opinion  is  that  there  is  no  necesssary  connection  whatsoever,  and  we 
may  have  increases  in  prices  with  decreasing  interest  rates,  and  vice 
versa.  But  whether  or  not — well,  I  do  not  care  to  press  that  any 
further  unless  you  care  to  express  an  opinion  upon  it. 

I  would  like  to  have  your  statement  in  regurd  to  changing  the 
rate  of  return  with  changing  price  levels.  Tlrs  morning,  if  I  under- 
stood ycu  correctly,  you  said  you  believed  that  the  rate  of  return 
should  change  with  clianging  price  levels. 

Mr.  Nash.  My  thought  was  that  where  there  are  radical  changes 
in  conditions,  such  as  have  occurred  during  the  war,  that  an  injustice 
might  be  done  either  to  the  investor  or  to  the  party  on  the  other  side 

160643"— 20 44 


682       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      683 


with  fixed  rates  of  return.  But  under  normal  conditions,  where 
radical  changes  of  that  kind  are  absent,  I  think  the  average  investor 
Avould  much  prefer  what  he  considers  the  security  attaching  to  a 

fixed  rate  of  return. 

Commissioner  Meeker.  A  fixed  rate  of  money  return? 

Mr.  Nash.  Yes. 

Commissioner  Meekeb.  And  not  purchasing  power? 

Mr.  Nash.  Yes. 

Commissioner  Meeker.  In  case  there  is  any  provision  for  a  chang- 
ing of  rate  of  money  return,  would  you  wish  to  limit  that  provision 
in'^any  way?  Would  you  make  it  a  changing  return  as  prices  in- 
creased but  not  make  it  a  changing  return  in  case  prices  decreased? 

Mr.  Nash.  I  think  with  full  fairness  the  question  should  be  left 
entirely  open.  Of  course,  the  investor  from  his  point  of  view  would 
prefer  to  see  a  stop  which  would  not  operate  against  him,  but  the 
public  from  their  point  of  view  would  prefer  to  see  the  stop  the  other 
way ;  and  in  fairness  to  both,  if  the  question  is  open  at  all,  it  ought 
to  be  open  both  ways. 

Commissioner  Meeker.  That  is,  there  should  be  a  rule  to  work 

both  ways? 

Mr  Nash.  Yes. 

Commissioner  Mj:1':ker.  If  the  rule  is  to  be  introduced  at  all? 

Mr.  Nash.  Yes.  And  as  I  said  this  morning,  I  think  if  a  rat«  of 
n^turn  is  fairly  fixed  in  the  beginning— fair  to  the  investor  under  the 
existing  circmnstances — that  the  question  of  readjustment  should  be 
restricted  to  an  extent  measured  by  the  specific  changes  in  the  con- 
ditions existing  at  the  time  of  the  ivadjustment  from  what  they  were 
at  the  time  of  the  original  fixing  and  not  to  leave  the  question  wide 
open  for  somebody  to  sit  down  and  say,  "  What  is  the  market  value 
of  money  to-day,'"*  but  rather,  "  Wluit  is  the  difference  in  the  value 
or  rate  of  return  on  money  to-day  from  what  it  was  10  years  ago,  say, 
for  an  investment  of  this  particular  character  and  risk?"  I  would 
narrow  the  arbitrable  issue  just  as  closely  as  possible 

Connnissioner  Meekek.  Would  you  make  these  periods  of  readjust- 
ment fixed  periods,  every  5  or  every  10  years,  or  would  you  pre- 
scribe in  a  general  way  that  the  readjustment  should  be  made  when- 
ever such  and  such  an  exigency  arose— wlienever  a  question  of  chang- 
ing price  levels,  for  example,  brought  the  serious  issue  of  the  pur- 
chasing power  of  the  dollar  of  income  before  the  public? 

Mr.  Nash.  I  think  the  nearest  approach  to  an  accurate  determina- 
tion of  actual  cost  of  service  as  applying  that  thought  to  a  case  of  a 
railway  company  would  be  to  have  that  question  opened  whenever  the 
occasions  definitely  arose;  but  there  again  would  come  the  thought 
on  the  one  hand  of  the  investor  that  he  would  hesitate  about  haying 
the  question  of  his  rights  raised  at  any  time  that  anybody  might 
want  to  raise  them,  and  the  public  on  the  other  hand  might  feel  that 
there  might  be  an  advantage  to  them  in  holding  the  investor  down, 
for  instance,  during  a  given  term  of  years  rather  than  having  the 
issue  opened  at  any  time. 

Commissioner  Meekek.  The  reason  I  asked  the  question  was  be- 
cause i)rice  levels  have  changed  more  within  the  past  year  than  they 
had  during  the  past  three  or  four  years,  to  put  it  very  conservatively, 
and  they  have  changed  within  the  war  times  more  than  they  had 
changed  within  the  previous  years. 


Commissioner  Gadsden.  In  connection  with  what  Mr.  Meeker  is 
asking  you,  I  want  to  ask  you  whether  it  is  not  true  that,  when  we 
come  to  the  question  of  the  return  on  capital — the  rate  that  money 
shall  bear — that  is  a  question  which  is  practically  solely  determined 
by  the  investor.  It  is  not  a  question  that  we  can  legislate  about,  nor 
is  it  a  question  that  we  can  compromise  on.  If  the  terms  are  not  satis- 
factory, the  investor  puts  his  money  in  other  industries  than  the 
street  railroads.    Is  not  that  true  ? 

Mr.  Nash.  That  is  very  true. 

Commissioner  Gadsdex.  So  it  is  not  a  two-sided  question,  where  ' 
the  parties  can  discuss  it  pro  and  con.    You  have  got  to  do  what  the 
•investor  wants  in  that  respect,  have  you  not,  or  you  do  not  get  his 
money  ? 

Mr.  Nash.  This  also  is  true,  that  if  an  issue  of  bonds  is  offered  to 
the  investing  public  and  the  term  of  the  bonds  is,  say,  30  years,  the 
public  will  pay  for  those  bonds  what  they  think  the  average  return 
on  that  money  ought  to  be  for  the  30-year  period  during  which 
those  bonds  run.  That  is,  a  fair  guess  of  the  economic  financial  con- 
ditions of  the  future  to  a  certain  extent. 

Commissioner  Gadsdex.  'Wliat  I  had  in  mind — if  the  investor 
was  apprehensive  of  a  provision  in  the  franchise  whereby  the  rate 
this:  Is  it  not  entirely  up  to  him  to  say  what  those  terms  shall  be? 
13ut  any  more  money  into  street  railway  business ;  would  he  not  ? 

Mr.  Nash.  That  is  perfectly  true. 

Commissioner  Gadsden.  And  the  point  I  want  to  bring  out  is 
this:  Is  it  not  entirely  up  to  him  to  say  what  those  terms  shall  be? 
The  city  could  not  provide  the  terms,  the  companies  could  not  pro- 
vide the  terms.  We  have  at  last  got  to  one  point  in  the  inquiry 
where  one  class  of  people  dictates  the  terms,  have  we  not? 

Mr.  Nash.  They  dictate  the  terms  on  the  money  that  they  have 
got.  On  the  money  that  they  have  already  loaned  under  certain  pre- 
scribed conditions  they  can  not;  they  have  to  take  the  return  until 
they  get  it  back. 

Commissioner  Gadsden.  Of  course  the  fellow  that  is  in  has  to 
take  what  he  can  get,  but  the  fellow  who  is  out  and  whom  we  want 
to  bring  in 

Mr.  Nash.  The  fellow  who  is  out  can  dictate  whether  the  electric 
industry  or  any  other  industry  shall  advance  or  remain  fixed  and 
stagnant. 

Commissioner  Meeker.  Admitting  the  truth  of  that — and  I  do  not 
think  anyone  will  gainsay  it — my  question  was  whether  you  think 
investors  would  refuse  to  invest  under  terms  that  I  indicated,  of  a 
revision  either  upward  or  downward  according  as  prices  change  or 
price  levels  change.  Do  you  think  investors  would  refuse  to  invest 
under  those  circumstances? 

Mr.  Nash.  That  is  a  quesion  that  I  can  not  answer  from  experi- 
ence. I  do  not  recall  that  just  that  kind  of  a  proposition  has  been 
put  up  specifically  to  the  investing  public. 

Conmiissioner  Meeker.  I  think  that  is  correct,  so  far  as  my 
knowledge  goes. 

Mr.  Nash.  It  is  a  matter  of  speculation  as  to  what  the  frame  of 
mind  of  the  average  investor  would  be. 

Commissioner  Meeker.  But  you  did  answer  in  response  to  Si 
previous  question  of  mine  that  you  thought  there  was  less  hazard 


684       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

involved  in  investing  under  a  guaranty  of  a  fixed  return  in  pur- 
chasing power  than  there  is  involved  in  investing  under  a  guaranty 
of  a  fixed  return  in  money. 

Mr.  Nash.  I  think  that  is  undoubtedly  so;  but  the  question  re- 
mains as  to  whether  the  average  investor  appreciates  that  point,  and 
I  am  not  sure  that  he  does. 

Commissioner  Meeker.  Well,  I  think  we  have  covered  that  suffi- 
ciently.    There  are  two  other  questions  I  had  in  mind. 

Commissioner  Beall.  When  you  are  through  with  that  I  want 
to  ask  some  questions. 

The  Chairman.  Do  you  want  to  follow  up  this  line? 

Commissioner  Beall.  It  has  a  bearing  on  it ;  yes. 

Commissioner  Meeker.  Go  ahead. 

Commissioner  Beall.  Is  it  not  true  that,  in  any  proper  plan  for 
operation  at  cost  of  street  railways,  that  it  includes  a  provision  as 
part  of  the  cost  of  operation,  if  you  please,  of  what  it  costs  to  get 
capital,  money  from  time  to  time?  Street  railways  always  have 
to  raise  large  sums  of  money  from  year  to  year  other  than  what 
they  may  get  out  of  earnings,  even  though  they  are  prosperous — a 
great  many  millions  every  year,  the  country  over.  Now  ever}' 
proper  plan  should  provide  for  that  cost,  should  it  not,  as  part  of 
the  cost  of  operating  the  property  ? 

Mr.  Nash.  Every  plan  should 

Commissioner  Beall.  Every  plan  provides  for  it  that  I  know  of 
and  every  other  so  far  as  I  have  any  knowledge  of.  Did  you  ever 
know^  of  an  investor  who  ever  bought  a  bond  where  the  interest  on 
it  at  any  time  could  be  made  less? 

Mr.  Nash.  No. 

Commissioner  Beall.  I  do  not  think  anybody  ever  knew  of  such 
a  case. 

Mr.  Nash.  I  do  not  know  of  any. 

Commissioner  Beall.  The  only  case  where  a  man  is  willing  to 
take  less  than  what  the  property  is  paying  when  he  goes  into  it  is 
when  he  is  dealing  with  what  are  called  equities  in  stock.  There 
he  knows  that  if  the  property  earns  more  his  dividends  may  be 
more  or  they  may  be  less,  but  when  he  is  bidding  on  stock  he  is 
counting  on  a  minimum  dividend  in  his  own  mind;  is  not  that  true? 
It  may  be  a  property  that  never  has  paid  a  dividend,  but  he  is  in 
hopes  that  it  will. 

Mr.  Nash.  He  is  hoping  that  he  will.  Whether  he  can  count  on 
it  or  not  is  another  question. 

Commissioner  Beall.  But  he  does  not  count  on  its  not  paying  at 

all? 

Mr.  Nash.  No. 

Commissioner  Beall.  Is  it  not  true  that  the  only  forms  of  capital 
where  that  is  done  is  where  a  man  is,  you  might  say,  speculating,  and 
he  does  not  hope  for  a  reduction  but  an  increase  and  he  would  not 
invest  otherwise? 

Mr.  Nash.  The  holder  of  a  final  equity,  of  course,  always  is  sub- 
ject to  fluctuation.  It  may  be  nothing  at  one  time  and  very  good  at 
another.     He  is  speculating  on  an  average 

Commissioner  Beall.  But  he  is  not  investing  on  that  theory.  He 
knows  he  runs  that  risk,  but  he  is  not  investing  thinking  that  that 
is  going  to  happen,  if  the  company  earns  nothing.     He  is  expecting 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       685 

it  will  earn  something.    If  it  earns  4  per  cent  he  hopes  it  will  earn 
5  or  6  and  not  3  per  cent. 
Mr.  Nash.  I  think  that  is  so.  ,      •        ^  j 

Commissioner  Beall.  Did  you  ever  know  of  a  man  who  mvested 
his  money  on  any  other  theory  ? 

Mr.  Nash.  No.    There  is  always ^    ,    /.      ,        -i 

Commissioner  Beall.  If  I  may  continue  that  a  little  further,  does 
not  that  take  care  of  itself  in  this  way— that  every  proper  franchise 
of  a  company  under  the  cost-of -operation  plan  provides  for  the  cost 
to  the  company  of  getting  money  from  time  to  time?  Now,  a  few 
years  ago  some  big  companies  who  had  large  earnings  would  some- 
times borrow  at  as  low  as  4  per  cent,  some  of  them  at  ^,  and  the 
average  was  5,  5^,  and  6.  To-day  you  could  not  sell  anything  at  all 
to  the  public  probably  at  less  than  a  6  per  cent  basis.  AVhat  you 
could  get  money  from  the  bank  at  I  do  not  know,  but  very  few  com- 
panies could  sell  anvthing  at  any  price.  Now,  next  year  if  times  and 
conditions  surrounding  these  properties  are  better,  of  course  that 
rate  may  be  5.5  per  cent,  maybe  it  will  be  7  per  cent.  But  when  that 
time  comes  that  the  company  has  to  get  money  the  point  is  they  have 
to  pay  the  market  rate  for  the  period  of  time  they  want  it,  whether 
it  is  1,  5,  10,  20,  or  30  years,  but  that  rate  varies  and  w^hatever  that 
cost  is,  the  franchise  should  provide  a  means  of  taking  care  of  it. 

Mr.  Nash.  It  certainlv  should  provide .    . 

Commissioner  Beall.  It  is  a  part  of  the  cost  of  the  property ;  it  is 
what  it  costs  you  to  get  that  money. 

Mr.  Nash.  The  return  on  the  long-term  issues  of  securities  ot 
course  would  of  course  be  much  more  stable  than  short  term  notes. 

Commissioner  Beall.  You  never  knew  of  a  case  of  a  man  who 
bought  a  bond  which  bore  5  or  6  per  cent  with  the  understanding 
that  sometime  that  rate  could  be  reduced  ? 

Mr.  Nash.  I  never  heard  of  such  a  case.  -j.   ,      • 

Commissioner  Beall.  He  has  a  provision  in  it  that  if  the  interest 
is  not  paid  he  forecloses  and  takes  the  property  ? 

Mr.  Nash.  That  is  the  case ;  but  the  man  would  be  affected  by  an 
adjustment  of  the  average  rate  of  return  such  as  we  have  been  dis- 
cussing. ,  ^  .  -.- 
Commissioner  Beall.  The  man  who  owns  the  property  is  a  dif- 
ferent matter ;  but  the  obligations  you  sell  to  the  public  by  the  way 
of  new  capital  have  to  bear  a  fixed  interest  subject  to  no  change  un- 
less it  is  an  increasing  one  and  not  a  decreasing  one? 
Mr.  Nash.  That  is  undoubtedly  true. 

Commissioner  Meeker.  Mr.  Nash,  I  would  like  to  ask  regarding 
the  sinking  fund  or  barometer  fund,  as  you  refer  to  it:  You  said, 
rs  I  recall,  that  you  thought  it  should  be  partly  charged  to  capital 
investment  and  partly  built  up  from  net  earnings.  Would  you 
give  your  reasons  for  that  ?     I  was  not  clear  on  that  point. 

Mr.  Nash.  There  is  not  any  very  great  difference  as  to  whether  it 
is  built  up  in  one  wav  or  another.  If  the  money  is  raised  in  cash 
outright  at  the  start,  the  whole  fund,  the  riding  public  immediately 
begins  to  pay  interest  on  that  whole  fund.  Now,  if  that  can  be  im- 
mediately invested  in  additions  to  the  property  so  that  it  earns  its 
own  support,  it  does  not  cost  the  car  rider  anything.  If,  on  tha 
other  hand,  no  extensions  to  the  property  are  made  for  a  time,  that 
fund  lies  idle  except  as  it  may  draw  a  small  interest  on  bank  deposit 


686       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

and  the  investor  is  getting  a  much  larger  return  on  tliat.  That  is, 
the  i)roperty  is  paying  under  the  franchise  a  6  per  cent  return  and 
this  part  of  the  investment  only  draws  2  or  3  out  of  the  bank  and  the 
car  rider  pays  temporarily  the  difference.  If  only  a  small  part  of 
that  money  is  raised  from  capital,  new  money,  and  charged  to  the 
property  account,  it  is  much  easier  to  immediately  use  the  cash 
available  for  additions  because  of  its  smaller  amount. 

Connnissioner  Meeker.  Would  that  be  Siife  financiering,  to  invest 
the  whole  barometer  fund  in  extensions? 

Mr.  Nash.  Not  the  whole  of  it,  but  it  would  a  large  part.  I 
would  treat  a  barometer  fund  in  that  respect  very  much  like  a  cash 
balance  that  the  company  might  have,  that  it  would  keep  in  cash 
just  what  was  needed  for  outright  payments  of  any  maturing  obliga- 
tions or  emergencies. 

Commissioner  Meeker.  In  that  way  you  advocate  building  up  the 
fund  partly  out  of  capital  and  partly  out  of  net  earnings? 

Mr.  Nash.  To  avoid  adding  so  much  to  the  capital  account — ^that 
is  the  only  advantage  in  that. 

Commissioner  Meeker.  I  am  not  quite  clear  about  this  sliding- 
scale  business.  You  spoke  of  the  franchise  in  Cincinnati.  When  the 
fai-e  bex-'omes  6  cents  then  no  extra  earnings  go  to  the  company  at 
all,  in  case  there  should  be  any? 

Mr.  Nash.  If  the  fare  is  in  excess  of  G  cents.  When  it  is  6  cents 
the  company  gets  20  per  cent.  When  it  is  5.5  cents,  the  company 
gets  35  per  cent,  I  think.  And  when  it  is  5  cents,  the  company  gets 
45  per  cent. 

Conmiissioner  Meeker.  Of  course  it  is  possible  to  devise  a  sliding 
scale  which  will  have  no  limit  except  infinity,  upward  and  down- 
ward ? 

Mr.  Nash.  Yes. 

Commissioner  Meeker.  Is  that  the  London  sliding  scale? 

Mr.  Nash.  The  London  sliding  scale  hjis  no  limit  at  all.  And  as 
applied  in  tlie  case  of  the  Boston  Gas  Co.,  the  original  company  to 
adopt  that  in  the  United  States,  there  is  no  limit  there.  Kegardless 
of  the  existing  rate  of  return  and  the  existing  price  of  gas,  if  there 
is  a  reduction  of  5  cents  the  rate  of  return  goes  up  1  per  cent.  No 
limit  either  way. 

Commissioner  Meeker.  Do  you  think  that  is  a  superior  form  of 
sliding  scale  to  the  Cincinnati  or  the  Dallas  plan? 

Mr.  Nash.  I  think  so  in  principle,  because  of  its  lack  of  limits  in 
eitlier  direction. 

Commissioner  Meeker.  Does  it  give  sufficient  incentive  to  effi- 
ciency in  management  to  tlie  company? 

Mr.  Nash.  In  principle  it  does,  and  in  practice  it  does  if  it  starts 
at  tlie  right  point.    If  the  original 

Commissioner  Meeker.  The  starting  point  puzzled  me  somewhat. 
Will  you  elucidate  that  somewhat,  just  how  you  fix  upon  a  certain 
starting  point  and  the  approximately  correct  one? 

Mr.  Nash.  If  I  recall  rightly,  when  the  Boston  Gas  Co.  adopted 
this  act,  which  was  a  State  legislative  act  whicli  gave  them  the 
riglit  to  employ  this  sliding-scale  principle,  the  price  of  gas  was 
fixed  at  90  cents,  and  that  was  the  so-called  normal  price  of  gas. 
Tlie  corresponding  rate  of  return  was  8  per  cent.  Then  when  the 
price  of  gas,  as  it  did,  went  down  to  85  cents,  the  company  got  9 


PROCEEDINGS  OF  FEDERAL,  ELiECTRIC  RAILWAYS  COMMISSION.       687 

per  cent,  and  when  it  went  down  to  80  cents,  they  were  allowed  10 
per  cent.  Now  if  the  price  of  gas  should  have  been  $1  instead  of 
90  cents,  corresponding  with  8  per  cent,  it  should  have  been  80  cents 
or  85  cents.    The  effect  would  have  been  materially  different. 

Commissioner  Meeker.  Yes;  I  see. 

Mr.  Nash.  And  it  was  somebody's  business — I  do  not  know  whose 
now — to  see  that  that  adjustment  was  made,  and  it  has  always  been 
charged,  whether  justly  or  not  I  do  not  know,  that  the  price  of  gas 
corresponding  with  an  8  per  cent  return  was  fixed  somewhat  too 
high. 

Commissioner  Meeker.  That  is  all. 

Commissioner  Sweet.  Are  you  a  member  of  the  firm  of  Stone  & 
Webster  ? 

Mr.  Nash.  I  am  not. 

Commissioner  Sweet.  Have  you  investments  in  sti*eet-railway 
properties  of  your  own? 

Mr.  Nash.  Yes;  I  have,  unfortunately. 

Commissioner  Sww.t.  In  the  statements  that  you  have  made  here 
orally  and  in  this  pamphlet  are  you  taking  an  attitude  in  favor  of 
investors  that  in  a  sense  conflicts  with  the  interest  of  the  general 
public  so  far  as  you  know  ? 

Mr.  Nash.  I  do  not  think  my  pei*sonal  interest  in  the  matter  is 
sufficient  to  bias  my  judgment.     I  try  to  ignore  that  side  of  it. 

Commissioner  Sweet.  In  the  present  situation  is  there  a  conflict  of 
interest  between  the  general  public  and  the  investors  in  utility  prop- 
erties, either  those  who  have  invested  or  those  who  may  become 
investors? 

Mr.  Nash.  There  is  no  real  conflict.  A  good  many  i^eople  think 
there  is,  but  fundamentally  the  interests  oi  the  public  and  the  in- 
vestors I  think  are  substantially  identical,  in  the  final  analysis. 

Commissioner  Sweet.  When  the  railroad  companies  were  making 
large  profits  and  the  public  was  seeking  to  get  all  it  could  out  of  the 
companies  there  was  a  conflicting  attitude  between  the  two  that  does 
not  exist  at  the  present  time,  in  your  judgment? 

Mr.  Nash.  I  think  there  was  more  difference  of  opinion  in  those 
older  days  that  j^ou  speak  of,  but  even  then  I  think  that  the  differ- 
ences were  imaginary  to  a  considerable  extent  rather  than  real.  I 
finnly  believe  that  the  exorbitant  profits  which  the  electric  railways 
are  alleged  to  have  made  in  the  early  days  are  very  largely  fictitious. 
I  say  that  because  I  have  had  occasion  to  make  a  considerable  number 
of  careful  studies  of  the  history  of  these  old  properties,  going  back 
even  through  the  days  of  horse  cars,  45  and  50-year  periods  of  com- 
plete study. 

Connnissioner  Meeker.  Have  you  published  any  articles  on  that 
subject  ? 

Mr.  Nash.  I  have  not ;  no.  And  I  found  that  in  the  horse-car  days 
in  typical  cases — that  is,  cases  that  I  think  are  entirely  typical — that 
the  companies  were  able  to  earn  approaching  10  per  cent  on  an 
average.  There  were  years  in  which  they  earned  more  and  others  in 
which  they  earned  less,  depending  upon  the  general  business  condi- 
tions. But  in  the  cases  that  I  have  studied  carefully,  the  average 
of  the  whole  horse-car  period  has  been  less  than  10  per  cent  upon  the 
actual  cash  investment,  regardless  of  security  issues;  and  since  the 
days  of  electrification  the  average  return  has  been  materially  less 


688       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

than  that,  less  than  8  per  cent,  and  that  is  not  an  extravagant  rate 
of  return,  by  any  means.  '  -i   ,    .         at,-  i 

Commissioner  Sweet.  I  figured  from  what  you  said  that  you  think 
the  solution  of  this  problem  depends  upon  cooperation  upon  the 
part  of  the  company  and  the  public.  . 

Mr.  Nash.  I  think  that  is  very  essential,  cooperation  based  upon 
a  knowledge  upon  the  part  of  the  public  of  the  condition  of  the 
electric  railways  which  they  have  not  at  present  acquired  in  full  by 

any  means.  ,  .  .   ,        ,  ^    x  •  a       a 

Commissioner  Sweet.  AVho  do  you  think  has  the  greatest  interest 
in  arriving  at  a  correct  solution  of  this  problem,  the  companies  or 
the  public,  if  there  is  anv  difference  between  the  two?     • 

Mr.  Nasii.  There  may  be  some  difference  as  to  time— that  is,  the 
railroads  are  for  the  moment  much  more  disturbed  over  the  situa- 
tion than  the  communities  are.  In  the  long  run,  the  communities 
have  just  as  vital  an  interest  in  the  prosperity  of  the  railways  as  the 
investors  have,  because  the  communities  can  not  exist  without  trans- 
portation. The  investoi-s  can  take  their  money  out  and  put  it  some- 
where else  or  they  can  lose  it.  ,_.,,,.     ^ 

Commissioner  Sweet.  Take  a  city  like  Pittsburgh,  for  instance,  as 
you  have  heard  the  testimony  here.    I  think  you  were  present. 

xcj.  J*f  ASH.  Y'es. 

Commissioner  Sweet.  With  regard  to  the  rather  critical  and  seri- 
ous situation  in  Pittsburgh.  Suppose  you  were  called  m  as  an  ex- 
pert and  a  student  of  this  question,  and  asked  to  recommend  what 
the  people  of  Pittsburgh  should  do  now  to  bring  about  a  better 
situation  with  regard  to  their  street-railroad  facilities.  What,  briefly, 
if  you  are  willing  to  mention  it,  would  be  your  recommendation? 

Mr  Nash.  Without  being  fully  acquainted  with  the  local  situa- 
tion, particularly  as  to  the  degree  with  which  the  public  are  ac- 
quainted with  the  financial  condition  of  the  railway,  I  would  say 
that  the  public  should  be  acquainted  as  promptly  and  as  thoroughly 
as  possible  with  the  actual  condition  of  the  company,  not  only  the 
actual  present  condition,  but  the  past  prosperity  or  lack  of  it.  The 
public  very  often  says  that  the  railways  are  poor  and  they  are  not 
earning  their  living,'  but  they  ought  to  live  on  their  fat— they  have 
earned  so  much  in  the  past  that  they  had  better  get  along  awhile  until 
they  have  consumed  their  fat  and  then  we  will  allow  them  some 

increased  revenue.  ..       xi    x  xt         u 

Commissioner  Sweet.  That  is  on  the  assumption  that  there  has 

been  some  fat?  ,  ,  i  x-         j: 

Mr.  Nash.  Yes.  Now,  if  there  has  not  been  an  accumulation  of 
fat  the  public  ought  to  know  it,  and  there  has  been  altogether  too 
much  exaggeration  as  to  the  accumulation  of  fat  in  the  street-rail- 
road business.  ^  ,    ,  ,  . 

Commissioner  Sweet.  Then  the  first  step  that  you  would  recom- 
mend to  the  people  of  Pittsburgh  is  that  they  learn  the  facts  as  they 
are  actually  and  not  as  they  may  have  supposed  them  to  be? 

^Ir.  Nash.  Yes. 

Commissioner  Sweet.  What  is  the  next  step? 

Mr  Nash.  The  next  step  which  would  naturally  follow  would  be 
a  recognition  by  the  public  of  the  justice  of  a  larger  revenue  to 
the  railroad. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       689 

Commissioner  Sweet.  Do  you  mean  justice  from  the  standpoint 
of  the  investors  or  do  vou  take  in  the  entire  community  as  being 
benefited  bv  what  you  arc  going  to  recommend  now?  Is  i^  pod  tor 
a  part  of  the  community  or  of  the  foreign  investors,  or  is  it  foi  the 
ffood  of  the  entire  community?  .,    ,   ,  ^  xi,« 

Mr.  Nash.  The  investors  should  be  entitled  to  a  return  on  the 
money  that  they  have  put  into  the  property.and — - 

Commissioner  Sweet.  Do  you  mean  that  from  the  standpoint  of 
investors  merely  or  do  you  think  in  the  long  run  it  is  for  the  inter- 
est of  the  entire  community  that  justice  shall  be  done  to  mvestors? 

Mr.  Nash.  It  is  undoubtedly  to  the  interest  of  the  community,  be- 
cause if  justice  is  not  done  to  the  investor,  he  is  going  to  quit  and 
go  somewhere  else  and  the  service  and  the  community  will  suffer. 
"  Commissioner  Sweet.  Then  self-interest  would  induce  the  ]  ib he 
to  do  what  is  best,  not  only  for  the  investor  but  for  the  public  itself. 

Is  that  right?  ^       ,  ^   ,  .   ,  .,  -n 

Mr.  Nash.  They  should  and  I  think  they  will.  .        . 

Commissioner  Sweet.  Very  well.  How  would  jx)u  provide  that  ? 
The  service-at-cost  plan— would  you  recommend  introducing  that, 
so  that  investors  could  be   assured  of  a  proper  return  on  their 

cVoital 

^  Mr  Nash.  I  think  service-at-cost  plan  would  give  more  assur- 
ance to  the  investors  of  a  proper  return  on  their  money  than  any 
alternative  plan  that  has  been  proposed.       .     '     ,  , 

Commissioner  Sweet.  Right  on  that  point  let  me  ask  you  one 

"^"you  "said  this  morning  that  in  Massachusetts  the  public  in  some 
way— the  State,  I  think  you  said— had  guaranteed  a  certain  per- 
centage on  the  investment;  did  you  not?        ^,       ^   , 
Mr  Nash.  Yes ;  in  the  case  of  the  Boston  Elevated. 
Commissioner  Sweet.  In  the  case  of  the  Boston  Elevated  ( 
Mr.  Nash.  Yes.    It  is  not  the  public  at  large ;  it  is  the  public  m 

the  cbmmunities  served.  ,   .     .      ,  -.-  1 9 

Commissioner  Sweet.  The  public  m  the  communities  served  ^ 
Mr    Nash.  The  State  treasurer  pays  out  the  voucher  and  then 

assesses  it  back  on  the  community  served  in  proportion  to  their 

Commissioner  Sweet.  That  is  done  under  a  Massachusetts  law? 

Mr.  Nash.  Under  a  State  laAv.  o..  ^      i. 

Commissioner  Sweet.  Do  you  know  whether  other  states  have  a 
law  which  would  permit  that  to  be  done? 

Mr.  Nash.  There  are  none  that  I  know  of. 

Commissioner  Sweet.  So  that  that  remedy  would  not  apply  gener- 
allv  throughout  the  country? 

iMr  Nash.  But  I  do  not  know  that  there  are  any  limitations  on 
lo<rislative  acts  of  other  States  of  the  same  kind,  I  mean  constitu- 
tional limitations.    There  may  be  or  may  not.    That  is  a  question  of 

State  constitutions.  ,        ..  x  i.  ^^  a 

Mr  Warren.  I  think  Wisconsin  has  such  a  statute,  recently  passed. 
Commissioner  Sweet.  Any  other  States  besides  Wisconsin? 
•     Mr.  Warren.  I  do  not  recollect  any,  but  I  happened  to  see  a  very 
recent  statute  in  Wisconsin. 


690       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIS". 

Commissioner  Sweet.  Where  that  can  be  done,  Mr.  Nash,  I  take 
it  that  the  investment  would  be  more  certain  than  it  would  under  the 
service-at-cost  plan? 

Mr.  Nash.  Undoubtedly. 

Commissioner  Sweet.  If  it  is  backed  up  by  an  organization.  State 
oi-  otherwise,  that  is  solvent,  so  that  investments  would  be  more 
readily  made  and  perhaps  would  be  made  at  a  lower  rate  somewhat 
by  i-eason  of  the  extra  ceftainty. 

Mr.  Nash.  A  materiallv  lower  rate,  I  think. 

Commissioner  Sweet.  If  so  guaranteed.  So  that  if  States  had  the 
authority-;-or  communities — to  niake  such  a  guaranty  that  would 
secure  the  investment  more  certainly  than  any  other  way  that  has  been 
proposed ;  would  it  not  ? 

Mr.  Nash.  I  think  that  is  undoubtedly  the  case;  the  security 
would  be  greater,  and  the  return  demanded  would  be  lower. 

Commissioner  Sweet.  But  service  at  cost,  where  such  a  guaranty 
could  not  be  legally  made,  or  if  it  could  be  legall^^  made  if  it  is  not 
made,  if  the  conmiunity  does  not  wish  to  make  it,  if  I  undei^tand 
you  aright,  comes  as  near  as  may  be  or  as  is  practicable  under  pres- 
ent conditions  to  giving  that  assurance  to  the  inventor? 

Mr.  Nash.  It  does.  It  is  an  assurance  that  the  investor  places  a 
goo<l  deal  of  reliance  upon,  as  shown  in  the  case  of  Cleveland.  The 
company  has  always  paid  for  the  full  10  years,  including  the  war 
time,  the  return  which  the  franchise  authorizes  upon  the  company's 
capital.    It  has  never  failed. 

Commissioner  Sweet.  It  is  an  absolute  assurance  with  just  one 
limitation,  and  that  is  that  enough  money  shall  be  made? 

Mr.  Nash.  That  is  the  only  limitation. 

Commissioner  Sweet.  Enough  net  income 

Mr.  Nash.  Can  be  obtained  from  the  public. 

Commissioner  Sweet.  That  is  it  exactly. 

Mr.  Nash.  And  the  public  in  the  final  analysis  is  the  one  to  de- 
cide whether  it  is  going  to  patroniz'^  it  at  any  rate  of  fare. 

(\)mmissioner  Swf^t.  And  if  there  is  not  a  limit  as  to  the  fares 
to  be  charged  then  the  question  would  simply  turn  upon  the  point 
of  greatest  revenue — that  is,  fares  could  be  raised  to  the  point  where 
patronage  would  fall  off  to  such  an  extent  as  not  to  increase  the 
revenue? 

Mr.  Nash.  Yes,  that  is  the  truth;  the  point  of  maximum  net 
revenue  that  will  l>e  earned. 

Commissioner  Sweet.  If  that  point  is  enough  to  protect  the  in- 
vestor he  is  just  as  well  protected  as  he  would  be  with  a  guaranty 
or  in  any  other  way  ? 

Mr.  Nash.  Yes. 

Commissioner  Sweet.  But  he  would  not  know  that.  That  is  the 
disadvantage  of  it;  is  not  that  true? 

Mr.  Nash.  That  is  true. 

Commissioner  Sweet.  Then  would  your  next  step  be  in  your 
recommendation  to  Pittsburgh  to  adopt  the  same  general  plan  they 
have  in  Cleveland  or  Cincinnati? 

Mr.  Nash.  The  same  general  plan,  yes. 

Commissioner  Sweet.  With  certain  modifications  which  you  men- 
tioned ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      691 

Mr.  Nash.  Just  incidental  modifications.  I  think  the  question  of  a 
point  of  flexibility  that  I  mentioned— not  having  the  thing  so  tightly 
sewed  up  that  it  can  not  be  adapted  to  varying  conditions  from  time 
to  time— and  the  point  of  incentive  to  both  the  investors  and  the  man- 
agement to  get  the  most  that  is  possible  out  of  the  property— tlie 
investor  to  more  readily  furnish  the  money,  the  management  to  keep 
itself  up  to  the  highest  pitch  and  to  keep  in  the  service  of  the  railway 
the  class  of  men  that  is  necessary  to  secure  the  best  results.  It  the 
extent  of  supervision,  for  instance,  is  so  great  that  the  officials  ot  the 
company  are  merely  clerks  to  carry  out  the  instructions  and  the 
plans  and  designs  of  the  supervisory  body,  that  is  not  attractive  work 
for  a  real  man.  Just  so  far  as  is  consistent  with  the  interest  ot  the 
l)ublic  I  think  the  management  should  be  left  free  to  initiate  the  im- 
provements and  take  credit  for  improvements. 

Commissioner  Sweet.  But  you  would  have  a  director,  as  they  have 
in  Cincinnati,  or  a  commissioner,  or  three  commissioners— some  body 
representing  the  public  ? 

Mr.  Nash.  Yes.  .  .    i       5 

Commissioner  Sweet.  To  see  all  the  time  that  this  is  carried  on  ^ 

Mr.  Nash.  Yes ;  I  would. 

Commissioner  Sweet.  What  other  steps  would  you  recommend^ 

Anv  others  ? 

Mr.  Nash.  You  mean  what  other  changes  from  the  fundamental 

plan?  ^  ^  ,  -r>.,. 

Commissioner  Sweet.  Yes.  Suppose  we  now  want  to  put  1  itts- 
burgh  on  a  proper  basis  as  regards  its  street-railroad  facilities  and 
o-ct  rid  of  their  receivership ;  I  assume  you  would  prefer,  if  you  could, 
to  ^et  rid  of  the  receiverships  or  the  need  of  them  and  put  the  com- 
panies on  a  paying  basis  under  regular  ordinary  private  manage- 
ment ;  would  you  not  ? 

Mr.  Nash.  I  think  that  would  be  possible  as  soon  as  the  plan  was 
adopted,  that  the  companv  could  be  so  refinanced  or  reorganized  that 
it  would  take  care  of  itself.  Its  credit  would  be  so  improved  by  the 
adoption  of  a  plan  by  which  there  was  assurance  of  return  to  the  in- 
vestor that  reorganization  or  refinancing  could  be  effected  without 

great  difficulty.  .        ,      ,  ^  ,  .    ,       1 

Commissioner  Sweet.  Then  the  initiative  should  be  made  by  the 
city  of  Pittsburgh;  is  that  your  idea  in  the  adoption  of  a  different 
kind  of  franchise? 

Mr.  Nash.  It  is  not  necessary  that  the  initiative  come  from  either 
side,  but  very  properly  the  city  of  Pittsburgh  might  say  that  they 
were  willing  to  grant  a  franchise  of  this  kind  to  the  railways  if  they 
would  accept  it,  and  define  the  term ;  and,  of  course,  various  more  or 
less  extended  negotiations  would  follow  before  the  city  and  the  com- 
pany would  get  together.     That  would  be  inevitable,  I  think. 

Commissioner  Sweet.  It  would  not  make  any  difference  which  one 

start f-d  it  ? 

Mr.  Nash.  Not  at  all. 

Commissioner  Sweet.  Providing  they  had  their  conferences  and 
they  finally  resulted  in  such  an  arrangement? 

Mr.  Nash.  No;  I  think  the  point  of  initiation  is  immaterial. 

Commissioner  Sweet.  The  public  officials  representing  the  general 
public  having  at  least  as  much  interest  in  the  matter  as  the  com- 


692        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

panics  have,  although  perhaps  not  quite  so  immediate.     That  is  your 

idea,  is  it  not  ? 

I^Ir  Nash.  Yes. 

Commissioner  Sweet.  And  with  the  adoption  of  a  change  of  that 
kind,  with  an  indeterminate  franchise  providing,  as  I  understand  they 
usually  do,  and  as  you  think  they  ought  to,  for  the  possibility  of  the 
city  taking  over  the  entire  property,  if  it  sees  fit,  upon  equitable  terms 
that  could  be  prescribed  in  the  franchise,  you  think  that  the  arrange- 
ment might  be  made  without  unreasonable  delay  and  give  the  relief 
that  is  necessary  and  bring  about,  we  will  say,  as  good  results  in  Pitts- 
burgh as  they  are  getting  in  Cleveland  ? 

Mr.  Nash.  I  see  no  reason  why  that  should  not  be  the  case,  except 
that  in  all  probability  Pittsburgh  would  not  be  able  to  operate  on  as 
low  a  cost  and,  therefore,  as  low  a  rate  of  fare  as  Cleveland.  Ihero 
are  essential  differences  in  type  between  the  communities,  but  the  prin- 
ciple would  be  the  same.  -r  i-  -i 

Commissioner  Saveet.  That  is  a  feature  of  it  that  I  did  not  mean 
to  bring  into  it,  because  I  assume  that  there  are  local  differences.  JSo 
two  cities  are  just  alike. 

Mr.  Nash.  N^o.  .    ,      ,        , ,  j 

Commissioner  Sweet.  They  all  have  their  local  problems,  and  one 
city  might  be  so  situated  that  a  5-cent  fare  would  be  really  higher  in 
the  way  of  producing  revenue  than  a  6-cent  fare  would  be  in  some 
other  city.     Is  not  that  true  ? 

Mr.  Nash.  That  is  very  true. 

Commissioner  Saveet.  So  that  each  city,  so  far  as  the  actual  fare 
is  concerned,  must  be  controlled  largely,  if  not  entirely,  by  the  exist- 
ing conditions  in  that  locality.    Is  not  that  so? 

Mr.  Nash.  Tliat  is  entirely  so.  ,  ,  i 

Commissioner  Sweet.  But  under  this  flexible  system  that  would 
adjust  itself,  would  it  not?  •     i,       i 

Mr.  Nash.  It  could  not  help  it.  The  fare  would  automatically  ad- 
just itself  to  the  cost  of  service,  whatever  that  was. 

Commissioner  Sweet.  That  is  it  exactly.  Where  the  cost  would 
be  greatest  the  fares  would  have  to  be  the  greatest  to  meet  that  cost. 

Mr.  Nash.  If  the  city  was  dissatisfied  with  the  cost  they  might 
conceivably  be  satisfied  with  a  lower  standard  of  service.  That  is 
not  usually  the  case,  though.  I  think  that  the  public  in  most  of  the 
cities  of  the  United  States  want  good  service,  and  if  they  are  satis- 
fied that  what  is  called  cost  is  real  cost,  they  are  willing  to  pay  it. 

Commissioner  Sweet.  What  you  have  said  about  a  remedy  for 
Pittsburgh  would  also  apply,  if  *I  understand  you  correctly,  in  your 
judgment,  equally  well  to  practically  every  other  suffering  com- 
munity of  the  United  States? 

Mr."  Nash.  I  think  it  would. 

Commissioner  Sweet.  That  is  all. 

Commissioner  Beall.  I  would  like  to  come  back  for  a  moment  to 
that  question  of  depreciation.  I  think  perhaps  we  did  not  quite 
understand  each  other.  Do  you  not  think  that  it  is  for  the  best  in- 
terests of  the  public,  as  well  as  the  companies  and  investors,  that  a 
property  should  be  allowed  to  earn  its  full  depreciation  as  it  goes 
along  in  fares?  Otherwise  they  would  be  unable  to  maintain  for 
themselves  and  for  the  public  the  real  value  of  their  property.  If 
you  start  with  a  street-railway  company  that,  for  the  sake  of  argu- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       693 

ment,  has  an  investment  of  $1,000,000,  everybody  knows  that  every 
year  a  certain  part  of  that  wears  out  and  has  to  be  renewed — certain 
parts  of  the  plant  and  apparatus,  etc.  Now,  if  you  do  not  renew  oi 
make  an  accrual  fund  to  provide  for  that  from  year  to  year,  the  day 
would  come  when  your  property  that  cost  $1,000,000  might  be  worth 
only  six  or  seven  hundred  thousand  dollars  and  yet  you  might  have 
$1,000,000  in  securities  out  against  it,  and  instead  of  giving  $1,000,000 
service  you  would  be  giving  a  $700,000  service.  Now,  I  do  not  know 
what  their  rule  is  to-day,  but  your  firm  of  Stone  &  Webster  some 
years  ago  had  either  a  written  law  or  an  unwritten  law  that  not  less 
than  either  18  or  20  per  cent,  I  do  not  remember  which 

Mr.  Nash.  Twenty. 

Commissioner  Beall.  That  not  less  than  20  per  cent  of  the  gross 
earnings  of  any  street  railway  that  they  operated  should  either  be 
expended  or  reserved  each  year  from  gross  earnings  for  maintenance, 
renewals,  and  depreciation.  Now,  if  you  were  accepting  for  any  of 
those  properties  to-day  a  service-at-cost  plan,  would  you  not 
feel  that  it  was  absolutely  necessary  to  include  in  such  plan  that  20 
per  cent,  or  whatever  sum  you  deemed  was  necessary  to  take  care 
of  that  property  over  a  long  period  of  3"ears?  Because  if  you  did 
not  do  it,  the  day  would  surely  come  when  your  property  would 
actually  be  worth  less  money  than  it  was  when  you  started  out  some 
years  before.  You  might  have  a  less  value  than  the  city  had  allowed 
you  and  than  they  were  permitting  you  to  earn  on,  and  you  would 
have  a  less  value  on  which  your  securities  were  based.  Now, 
although  that  may  result  in  the  accumulation  of  a  cash  fund  from 
time  to  time,  it  is  customary,  is  it  not,  to  invest  quite  a  part  of  that 
fund  in  other  extensions  than  additions  than  the  exact  renewal  of  a 
certain  piece  of  property  which  may  be  in  process  of  wearing  out, 
the  idea  being  that  in  one  form  or  another,  by  property  of  some  kind, 
or  in  cash  you  are  always  maintaining  that  value.  If  j^ou  do  not  do 
that  you  are  not  treating  the  city  right  or  the  public  or  the  investor 
in  your  company.     Is  it  not  necessary  to  take  care  of  that? 

Mr.  Nash.  I  am  in  thorough  accord  with  the  policy  or  rule,  written 
or  unwritten,  of  reserving  not  less  than  20  per  cent  of  the  annual 
gross  earnings  of  a  railway  for  combined  maintenance  and  deprecia- 
tion. Now,  that  rule,  as  you  naturally  assume,  is  not  an  arbitrary 
one.     It  is  based  on 

Commissioner  Beall.  I  am  not  trying  to  say  what  is  correct — it 
may  be  18  or  25  per  cent,  but  there  is  some  such  amount? 

Mr.  Nash.  Based  on  a  long  experience  with  properties  I  have  had 
occasion  to  test  that  rule  out  with  properties  we  have  operated  for  a 
good  many  years,  and  as  a  matter  of  fact,  it  results  in  the  keeping  on 
hand  of  a  sufficient  reserve  to  take  care  of  replacements,  current,  and 
large  units,  as  they  are  required.  I  do  not  think  it  is  large  enough 
to  accumulate  what  would  be  called  a  theoretical  reserve  for  accrued 
depreciation  of  the  propert3^     Now,  it  is  not 

Commissioner  Beall.  I  know ;  but  you  can  put  it  into  other  things. 
The  idea  is  to  at  all  times  maintain  the  value  that  you  started  out 
with. 

Mr.  Nash.  That  reserve  is  accumulated  and  invested  in  extensions 
to  the  property 

Commissioner  Beall.  Some  of  it. 


694       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Nash.  Now,  when  you  come  to  ask  me  to  set  aside  a  reserve, 
fully  enough  for  theoretical  depreciation,  I  have  got  to  tell  you  I 
do  not  know  how,  because  I  do  not  know  in  the  first  place  what  the 
life  of  a  railway  property  is,  and  that  is  really  fundamental  in  order 
to  set  up  any  reserve. 

Commissioner  Beall.  But  you  have  a  pretty  good  idea  of  it? 

Mr.  Nash.  Well,  I  have  not,  unfortunately. 

Commissioner  Beall.  Well,  your  operating  men,  then. 

Mr.  Nash.  Unfortunately  there  are  a  good  many  of  the  operating; 
n>en  who  have  not ;  for  ever  since  I  have  known  anything  about  the 
oloctric-railway  business  we  have  gone  through  one  state  of  changes 
after  another.  I  have  never  yet  seen  an  important  piece  of  electric 
railway  property  worn  out.  I  have  seen  it  put  aside  because  some 
more  reliable  or  efficient  piece  came  along,  and  that  is  almost  the  in- 
evitable rule — that  the  railroad  property  is  abandoned  because  it  does 
not  fit  in  with  something  else,  it  is  not  suitable  for  the  extended  serv- 
ice or  it  is  not  up  in  efficiency  with  modern  standards.  And  the  ques- 
tion that  I  am  confronted  with  if  I  attempt  to  forecast  accrued  de- 
pi^ation  is  how  is  the  future  development  in  the  art  and  in  public 
demands  and  other  things  that  enter  into  this  question  going  to  com- 
pare with  the  past.  I  am  forced  to  say  I  do  not  know.  I  have  hopes 
that  the  near  future,  at  any  rate,  will  not  show  as  radical  changes  in 
the  art  as  the  past  has.  We  have  gone  through  the  age  of  horse 
cars  and  cable  cars  r.nd  the  very  experimental  electric  cars,  and  just 
now  we  are  going  through  a  radical  change  in  type  of  car,  from  the 
big  two-man  double-truck  car  to  a  light  one-man  car,  and  something 
else  may  come  up  and  it  may  not;  but  if  there  was  not  this  question 
of  obsolescence  and  supersession  and  other  things,  aside  from  wear 
and  tear,  to  come  up,  the  life  of  the  average  electric-railway  property 
with  recurrent  renewals  of  parts  could  be  maintained  indefinitely; 
so  you  could  not  say  a  car  would  wear  cut  in  30  years  or  in  100  years. 
At  the  end  of  100  years  there  would  be  no  part  of  it  left,  but  in  no 
year  would  you  change  from  an  old  car  to  a  new  car.  That  is 
the  difficulty  is  estinmting  depreciation. 

Commissioner  Beaij>.  Well,  you  might  differ  frcm  somebody 
else  as  to  the  amount,  but  you  know  what  it  has  been,  and  is  not  this 
correct?  You  know  in  your  own  mind  there  would  be  some  mini- 
mum sum  and  you  would  feel  that  if  at  least  that  amount  was  not 
preserved,  your  line  would  soon  come  to  a  point  where  your  property 
was  worth  less  now  than  5  or  10  years  ago?  And  I  think  you  will 
agree  that  should  not  be  permitted,  in  justice  to  the  city  or  the 
riding  public,  or  the  investor.  If  it  takes  a  million-dollar  property 
to  serve  a  certain-sized  community,  it  should  be  kept  at  $1,000,000; 
it  should  not  fall  below. 

Mr.  Nash.  Its  investment  should  be  kept  there,  and  assurance 
should  be  given  that  no  part  of  that  property  should  ever  be  aban- 
doned without  having  a  sufficient  reserve  to  replace  it. 

Commissioner  Beall.  That  is  the  point  exactly.     Now,  men  may 
differ  very  materially  as  to  what  that  amount  should  be,  but  each 
one  would  have  a  minimum  below  which  it  should  not  fall  each  year. 
Mr.  Warren.  The  pnnciple  is  perfectly  clear. 
Mr.  Nash.  I  think  there  isjio  question  about  the  prmciple  at  all. 


PROCEEDINGS  OF  FEDERAI^  ELECTRIC  RAILWAYS  COMMISSION.       695 

Commissioner  Beall.  And  you  should  be  allowed  to  earn  it  out  of 
your  fares;  the  earning  power  of  the  company  should  be  made  to 
include  that? 

Mr.  Xash.  It  should,  unquestionably. 

Mr.  Warren.  It  should  not  be  paid  out  of  capital. 

Mr.  Nash.  No. 

Conuuissioner  Beaij:>.  You  are  unfair  to  the  public  if  that  is  not 
done. 

Mr.  Nash.  Yes. 

Mr.  Warren.  We  may  differ  as  to  the  amount 

Conmiissioner  Beall.  Yes,  but  there  has  to  be  an  amount  to  take 
care  of  it? 

Mr.  Warren.  Yes. 

Commissioner  Meeker.  You  have  spoken  of  the  one-man  car  as  if 
it  were  a  foregone  conclusion,  that  it  either  had  superseded  the  old 
heavier  car  or  that  it  would  supersede  it.  What  experience  have  you 
to  base  that  judgment  on? 

Mr.  Nash.  We  have  in  various  properties  several  hundred  of  that 
type  of  car  in  operation.  They  have  been  in  operation  in  some  cases 
two  and  a  half  years — more  than  two  and  a  half  years — and  they 
have  been  su(cessful  to  such  a  degree  that  in  mj^  own  mind  I  have 
accepted  it  as  the  foregone  conclusion  that  this  was  the  (!oming  type 
of  car  for  a  very  considerable  portion  of  electric-railway  service. 

Commissioner  Meeker.  Do  you  think  it  would  be  an  economical  car 
to  put  on  in  New  York  City  railway  lines? 

Mr.  Nash.  I  have  not  made  any  study  of  New  York  conditions. 
I  think  there  will  be  a  witness  on  this  subject  who  will  speak  with 
reference  to  New  York  conditions  later.  But  I  will  say  this,  that  I 
do  not  know  of  any  places  where  the  one-man  car  has  been  tried 
that  it  has  failed  on  account  of  densitv  of  traffic.  There  has  been  a 
rather  cautious  introduction  of  it,  I  think,  so  that  it  would  not  be 
pushed  too  fast  in  the  way  of  application  to  very  dense-traffic  con- 
ditions; and  ver}^  probably  it  will  be  found  that  the  operator  on 
that  type  of  car  would  have  trouble  in  making  fare  collection  in 
cases  of  congested  loading  with  sufficient  promptness  to  maintain  a 
satisfactory  schedule. 

Commissioner  Meeker.  Yon  heard  the  testimony  that  one  of  the 
witnesses  ^ave  yesterday,  I  think  it  was,  in  regard  to  the  one-man 
car  operating  under  a  zone  system? 

Mr.  Nash.  Yes:  I  heard  that. 

Commissioner  Meeker.  Do  you  think  that  it  is  feasible  to  have 
switches  in  our  streets  so  that  the  one-man  car  will  operate  only  in 
a  single  zone  and  be  turned  back  at  the  end  of  that  zone  ? 

Mr.  Nash.  No;  I  do  not  think  that  would  be  practicable.  Street- 
car service  has  got  to  be,  for  convenience,  continuous. 

Commissioner  Meeker.  It  would  seem  so  to  me.  How  is  the  one 
man  going  to  collect  fares  in  the  second,  third,  or  seventeenth  zone? 

Mr.  Nash.  He  can  collect  in  the  second  zone  perfectly  well.  That 
is,  he  can  collect  from  a  passenger  entering  in  the  first  zone  and 
leaving  in  the  second  zone.  Beyond  that,  where  there  are  more  than 
two  zones,  it  would  be  necessary  for  the  operator  when  a  passenger 
gets  on  not  to  collect  the  fare  but  issue  an  identification  check  which 
will  tell  him  what  zone  that  passenger  got  on  in.     Then  when  the 


z' 


/ 


696       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

passenger  gets  off,  regardless  of  how  many  zones  he  has  gone  through, 
the  operator  will  see  at  a  glance  or  have  a  mechanical  computer  in 
front  of  him  which  will  tell  him  the  amount  of  fare  the  passenger 
should  pay  to  correspond  with  the  identification  check,  and  the  pay- 
ment would  always  be  left  until  the  passenger  left  the  car.  There 
are  no  insurmountable  difficulties  about  that  arrangement  that  I 
know  of  at  all. 

Mr.  Warren.  We  have  another  witness  especially  on  the  one-man 
car  whom  we  hope  to  put  on  to-day.  I  do  not  want  to  cut  your 
questions  short,  but  we  will  cover  that  subject. 

(Witness  excused.) 

The  Chairman.  Let  the  record  show  that  ex-Governor  Foss  of 
Massachusetts  sent  a  telegram  to  the  commission  requesting  the 
privilege  of  appearing  before  us  to-morrow  or  on  Friday.  We  have 
set  to-morrow  at  12  o'clock  for  his  appearance;  and  I  hope,  Mr. 
Warren,  you  will  make  your  arrangements  accordingly. 

STATEMENT  OF  MR.  CHABLES  L.  HENRY. 

Mr.  Warren.  Will  you  give  your  full  namei^ 
Mr.  Henry.  Charles  L.  Henry. 
Mr.  Warren.  Your  residence? 
Mr.  Henry.  Indianapolis,  Ind. 

Mr.  Warren.  And  you  have  sometime,  I  think,  been  referred  to  as 
"  the  father  of  the  interurban  railway." 

Mr.  Henry.  Well,  that  is  when  they  do  not  have  respect  for  my 

old  age.  .     . 

Mr.  Warren.  But  you  have  had  a  very  wide  experience  m  mter- 

urban  railways  ?^ 

Mr.  Henry.  Yes;  I  have. 

Mr.  Warren.  And  are  connected  with  a  great  many  to-day? 

Mr.  Henry.  No;  not  with  many,  but  with  only    one  company 

to-day. 

Mr..  Warren.  What  is  that? 

Mr.  Henry.  The  Indianapolis  &  Cincinnati  Traction  Co.  I  was 
connected  formerly  with  the  Union  Traction  Co.  of  Indiana,  and  as 
manager  of  that  company  built  some  bf  the  principal  parts  of  the 

road. 

Mr.  Warren.  And  you  are  acquainted  with  the  interurban  rail- 
ways in  other  parts  of  the  country? 

Mr.  Henry.  Yes. 

Mr.  Warren.  Missouri  and  Illinois? 

Mr.  Henry.  Yes;  quite  fully. 

Mr.  Warren.  AVe  have  thus  far  had  practically  no  testimony 
specifically  directed  to  the  interurban  railways;  and  I  believe  you 
are  prepared  to  tell  the  commission  something  about  them,  and 
something  about  their  conditions  and  difficulties  and  usefulness. 
Before  you  begin,  Mr.  Henry,  those  are 

Mr.  Henry.  That  is  a  map  of  what  we  term  the  central-electric  ter- 
ritory, the  central-electric  territory  being  that  which  is  covered  by  the 
Central  Electric  Railway  Association,  prepared  by  their  traffic  de- 
partment and  corrected  up  to  date;  and  it  is  typical  of  the  general 
development  of  the  interurbans. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       697 

(At  this  point  the  map  referred  to  was  presented  to  the  Commis- 
sion.) 

Commissioner  Beall.  Did  you  build  that  terminal  in  Indianapolis, 
the  first  interurban  terminal  ? 

Mr.  Henry.  No  ;  I  did  not. 

Commissioner  Beall.  Was  that  before 

Mr.  Henry.  That  w  as  built  by  the  Indianapolis  Traction  Terminal 
Co.  I  was  not  connected  with  that  company,  but  I  have  been  using 
it  with  our  cars  ever  since  it  was  built. 

The  Chairman.  Will  your  testimony  relate  exclusively  to  the  inter- 
urban as  distinguished  from  the  street-cars? 

Mr.  Henry.  It  will  so  far  as  I  know,  unless  you  want  to  ask  me 
about  something  else.    They  will  lap  over,  of  course. 

The  interurban  railway  is  a  matter  of  20  years'  growth.  Perhaps 
it  is  well  that  we  get  clearly  in  our  minds  what  is  the  interurban 
as  we  talk  about  it.  We  have  a  good  many  electric  railways:  We 
have  the  electrified  steam  road.  We  have  some  special  electric 
lines  built  for  a  specific  purpose  like,  for  instance,  the  line  from 
Philadelphia  to  Atlantic  City,  w^hich  amounts  to  nothing  but 
a  shuttle  train  really  between  points;  it  does  not  do  any  gen- 
eral interurban  business,  it  pays  no  attention  to  the  intervening 
territory.  Then  w^e  have  what  are  known  as  suburban  electric 
roads  which  you  are  all  familiar  with.  They  run  out  to  the  various 
suburbs  of  the  city  or  town  which  they  serve.  Then  we  have,  as  in 
New  England,  the  roads  which  connect  up  the  various  communities, 
sometimes  called  interurban,  but  entirely  distinct  from  what  I  am 
going  to  talk  about,  because,  except  for  the  fact  that  they  run  upK)n 
the  country  highways,  they  are  as  much  street  railroads  in  fact  and 
in  operation  as  the  roads  themselves  within  the  cities  and  towns. 

The  interurban,  as  ordinarily  understood  and  which  I  will  direct 
my  remarks  to,  is  of  a  different  character  from  that.  They  are  built 
to  take  care  of  the  traffic  between  cities  and  towns  and  from  the  coun- 
try to  the  town  and  the  town  to  the  country.  It  is  to  serve  not  only 
the  travel  between  cities  and  towns  but  it  is  to  serve  the  country  com- 
munity between  those  cities  and  towns.  It  is  not  confined  to  pas- 
senger business  but  it  includes  express  business  and  it  includes  freight 
business.  In  other  words,  it  is  intended  to  serve  the  communities  for 
the  transportation  which  properly  belongs  to  that  class  of  road.  It 
is  in  one  sense  a  competitor  of  the  steam  roads.  In  another  sense 
it  is  not,  because  it  has  and  develops  and  makes  a  traffic  of  its  own 
because  of  its  peculiarity. 

The  first  electric  road  in  Indiana  was  built  and  the  first  car  run 
the  1st  day  of  January,  1898.  There  h  .d  been  some  little  interurban 
development  in  Ohio  before  that  time.  It  was  restricted,  however, 
because  of  the  restriction  on  power.  The  three-phase  distribution 
system  of  power  was  not  known  in  electric  railways  at  that  time.  It 
had  been  out  in  the  West  in  connection  with  power  in  the  mountains, 
carrying  the  current  to  the  cities  for  lighting  purposes,  but  up  to  the 
time  of  the  building  of  the  Indiana  Traction  Co.'s  line  at  Anderson 
for  three-phase  distribution,  it  never  had  been  applied  to  street-railway 
purposes.  The  station  there  was  the  first  station  of  the  kind  built. 
That  brought  out  the  opportunities  of  interurban  business,  because 
before  that  time  the  direct  current  died  too  soon,  the  loss  was  too 
great.     The  first  line  we  built  was  only  12  miles  long,  from  Anderson 

160643''— 20 45 


698       PROCEEDINGS  OF  FEDERAL  ELE(7TRIC  RAILWAYS  COMMISSION*. 

to  Alexandria ;  and  in  order  to  get  enough  current  up  at  Alexandria 
"SVC  Avould  put  in  the  Anderson  station  what  we  called  a  booster.  That 
ran  it  up  to  1^00  volts  and  carried  it  up  to  Alexandria  and  by  that 
time  it  had  dropped  to  600,  and  we  put  it  in  there  at  600  volts,  and 
that  is  all  we  could  do.  But  the  three-phase  distribution  permitted  of 
reaching  any  distance  that  was  neeiled,  being  transmitted  on  the  high 
tension  line  to  substations  10  or  12  miles  apart;  there  the  voltage 
was  reduced  and  transformed  into  direct  current  and  a  large  amount 
of  copper  was  dispensed  with  and  the  current  was  distributed  equally 
all  over  the  system.  From  that  time  that  has  been  the  general  way 
of  operating  interurbans  and  is  now.  Of  course,  like  everything  else 
new,  we  did  not  have  a  broad  idea  of  the  possibilities  of  interurbans 
when  we  commenced.  They  were  built  cheaply,  with  lighter  rails, 
smaller  cars.  We  did  not  think  anything  about  freight,  we  did  not 
think  anything  about  train  dispatchers.  We  would  put  a  signal  with 
a  lever  at  one  switch  and  a  lever  at  another  switch  and  we  stopped 
and  got  the  train  through  as  best  we  could. 

Then  after  a  while  we  saw  that  would  not  do.  So  the  present 
system — and  I  say  the  present  system,  for  it  is  practically  uniform, 
the  system  of  operation  of  interurban  roads  at  this  time — was  gradu- 
ally adopted.  xV  train  dispatcher  was  employed  and  we  used  the 
telephones  for  issuing  orders,  and  we  have  the  men  take  the  orders 
by  telephone  and  repeat  them  back  to  the  dispatcher,  and  a  record 
is  made  and  it  tends  to  safety.  We  put  on  larger  cars,  put  a  com- 
partment in  for  the  smokei-s  and  another  compartment  for  the  gen- 
eral public  and  another  room  for  the  baggage  and  express,  and  then 
in  the  forward  part  a  compartment  for  the  motorman.  The  cars 
average  in  size  from  55  feet  up  to  something  like  65  feet  long,  with 
heavier  trucks,  heavier  motors,  and  heavier  wheels,  either  steel-tired 
or  steel  wheels.  The  purpose  of  that  in  the  first  place  was  to  keep 
from  chipping  the  flange,  which  made  it  dangerous,  because  the 
flange  had  to  be  smaller  where  we  ran  through  the  city.  Air  com- 
pressors are  put  on  the  cars  so  that  the  air  brakes  are  as  complete  as 
on  the  steam  roads.  Electric  headlights  are  used;  and  they  nm 
through  the  country  at  varying  rates  of  speed,  some  of  them  as  high 
as  60  and  70  miles  an  hour.  The  fastest  train  that  ever  ran  on  our 
road  we  ran  from  Indianapolis  regularly  to  Connersville,  58  miles, 
and  we  made  the  run  in  an  hour  and  a  half  by  schedule  time,  22 
minutes  of  that  being  taken  in  getting  out  4  miles  to  the  suburbs  of 
the  city. 

The  Chairman.  How  many  stops  were  there  on  that  route? 

Mr.  Henry.  We  made  two  intervening  stops — one  to  meet  the  other 
car  running  in  the  opposite  direction,  and  the  other  at  the  county 
seat  of  Rush  County,  Rushville.  That  gives  you  some  idea  of  the 
speed  at  which  they  can  be  run. 

Now,  the  old  way  when  we  commenced  was  that  we  picked  up  the 
passengers  everywhere ;  we  stopped  on  hail  at  a  crossroad  or  an  alley ; 
it  did  not  make  any  difference  which.  But  that  would  not  work; 
that  took  too  much  time,  so  we  had  regular  stations  adopted,  and  we 
got  tickets  and  finally  we  organized  a  traffic  association  that  is  the 
publisher  of  this  map,  which  covers  the  territory  of  Indiana,  Ohio, 
Michigan,  part  of  Pennsylvania,  and  part  of  Kentucky ;  it  does  not 
cover  Illinois  simply  because  there  is  no  physical  connection  between 
the  lines  in  the  two  States.    Under  that  freight  business  was  built  up 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       699 

and  regular  freight  schedules  of  trains  and  also  freight  tariffs  filed 
with  the  commissions,  both  the  State  and  interstate,  covering  the 
freight  rates,  and  the  passenger  business  the  same  way.  So  that  it  is 
a  regular  systematic  business — serving  these  communities;  and  this 
map  which  you  have  is  fairly  indicative  of  the  general  territory  cov- 
ered by  the  interurbans,  although  it  is  true  in  this  territory  there  is 
a  larger  proportion  than  in  other  sections,  according  to  the  size  of  the 
territory. 

Down  in  south  Missouri  the  great  Southwest  Missouri  system  serves 
the  mining  districts  of  Joplin,  Webb  City,  Carthage,  and  over  to 
Pittsburg  m  Kansas.  On  the  western  coast  there  are  some  very  large 
systems,  the  Pacific  Electric  being  the  largest.  Over  in  Illinois,  the 
Illinois  Traction,  one  of  the  biggest  systems  in  the  country,  and  the 
Aurora,  Elgin  &  Illinois  is  another,  and  from  Chicago  to  Milwaukee 
is  another  good  system.    This  gives  you  an  idea  of  the  extent  of  it. 

Now,  they  vary  in  amounts  in  different  parts  of  the  country,  but  I 
am  telling  you  about  the  body  of  them. 

We  are  in  all  the  States  now  nearly,  you  may  say,  generally  speak- 
ing, subject  to  the  public-service  commissions  in  everything.  We  file 
w^ith  the  Interstate  Commerce  Commission  everything  relating  to  in- 
terstate business,  and  to  that  extent  we  are  controlled  by  the  Inter- 
state Commerce  Commission.  This  does  not  do  away  with  the  local 
restrictions  in  towns,  about  which  I  want  to  speak  a  little  later.  Some 
of  those  are  troublesome  and  many  losing  propositions.  But  I  have 
tried  to  give  you  a  general  idea  of  the  business. 

Now,  we  have  at  Indianapolis  the  most  perfectly  developed  system 
for  taking  care  of  the  people  who  come  into  and  go  out  of  Indianajx)- 
lis.  We  have  a  terminal  traction  building  there  owned  by  the  In- 
dianapolis Traction  &  Terminal  Co.,  which  is  the  local  city  company, 
which  just  changed  hands  by  reorganization  the  other  day — I  mean 
changed  the  name  by  consolidation,  but  it  remains  the  same  in  every 
other  respect.  That  was  built  with  a  view  of  taking  care  of  the  in- 
terurban business.  I  have  before  me  some  extracts  from  the  report 
of  the  secretary  and  treasurer  of  that  company,  which  I  think  you 
would  be  glad  to  have,  from  Mr.  McGowan : 

In  accordance  with  your  verbal  request,  we  beg  to  advise  that  during  the 
year  1918,  7,519,634  passengers  arrived  and  departed  from  the  Traction  Terminal 
Passenger  Station.  The  number  of  passenger  trains  In  and  out  of  Indianapolis 
during  the  year  1918  was  128,145. 

That  gives  you  some  idea  of  the  extent  of  the  business;  that  is, 
the  passenger  business. 

Now,  I  will  stick  for  a  little  while  to  the  passenger  part  of  it, 
and  then  I  will  give  you  some  of  the  other.  First,  I  want  to  give 
you  an  idea  of  the  extent  of  the  mileage  in  these  States.  Michigan 
has  8G5  miles |  Ohio,  2,486  miles;  Indiana,  1,732  miles;  Kentucky, 
158  miles;  Illinois,  1,575  miles;  a  total  in  these  5  States  of  6,8i6 
miles  of  interurban  road. 

The  Merchants'  Association  of  Indianapolis  is  constituted  of  all  of 
the  principal  retail  merchants.  I  asked  the  manager  of  that  associa- 
tion to  give  me  a  letter  as  to  what  the  interurban  is  to  Indianapolis. 
If  you  will  allow  me,  I  will  read  it : 

Replying  to  your  Inquiry  as  to  wliat  extent  the  traction  lines  entering  In- 
dianapolis benefited  the  retail  trade  of  tins  city,  be  advised  that  while  we  are 
not  able  to  give  you  exact  tiguues  as  to  the  increase  in  retail  trade  that  the 


700       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION*. 


Intenirban  lines  are  directly  responsible  for,  we  are  safe  in  saying  that  no 
factor  has  done  so  much  to  increase  down-town  trade  as  have  the  interurban 
lines. 

Indianapolis  being  the  center  of  the  State  probably  enjoys  a  better  out-of- 
town  trade  than  any  other  large  retail  center  in  the  country.  This  is  in  a 
large  measure  due  to  the  fact  that  the  interurban  lines  make  it  possible  for 
residents  in  a  smaller  city  or  town  adjacent  to  Indianapolis  to  come  to  the 
city  to  do  their  trading  and  return  at  most  any  hour  of  the  day. 

In  former  years  this  association  rebated  railroad  fares,  this  plan  having 
been  abandoned  some  14  years  ago.  The  plan  served,  however,  to  materially 
increase  the  out-of-town  .trade,  but  had  it  not  been  for  the  interurban  lines, 
the  increase  would  not  have  been  nearly  so  large  as  it  was. 

Since  the  abandonment  of  the  rebating  of  railroad  fares  the  out-of-town 
trade  has  still  kept  growing  and  to-day  is  even  greater  than  when  the  custom- 
er's fare  was  paid  to  and  from  Indianapolis. 

The  credit  files  maintained  by  this  association  show  thousands  of  persons 
throughout  the  State  having  regularly  estallshed  credit  accounts  In  our  stores, 
and  we  are  safe  In  saying  that  the  majority  of  these  customers  travel  to  and 
from  Indianapolis  by  Interurban. 

Generally  speaking  the  Interurban  lines  are  the  greatest  asset  that  a  retail 
center  can  have. 

Very  truly,  yours. 

Merchants'  Association,  Indianapolis, 
W.  E.  Balch,  Manager. 

The  Chairman.  Right  at  that  point,  can  you  tell  me  about  what 
radius  Indianapolis  draws  its  trade  from  on  the  interurban  lines? 

Mr.  Henry.  Well,  some  all  over  the  State,  but  largely  within  100 
miles;  some  to  all  points  within  the  State.*  That  is  largely  because 
of  the  length  of  the  lines,  but  that  is  about  the  way  it  is. 

Commissioner  Beall.  That  terminal  station  in  Indianapolis  was. 
the  first  one  of  its  kind ;  was  it  ? 

Mr.  Henry.  Yes;  it  is  the  only  one  of  its  kind  to-day  that  is  as 
complete  as  it  is.  The  one  at  Los  Angeles  is  large  and  efficient,  and 
all  that,  but  it  does  a  little  different  kind  of  business.  It  takes  care 
more  of  the  suburban  cars,  as  you  are  aware,  perhaps. 

Now,  this  passenger  business  I  want  to  speak  of  a  little  bit  with  re- 
gard to  the  other  towns.  I  am  seeking  to  show  you  what  the  inter- 
urban means  and  why  it  is  a  necessity  to  these  various  communities. 
Interurban  towns  outside  of  the  large  cities — I  will  give  you  now  a 
picture  of  the  Indianapolis  trade,  the  passenger  trade.  My  idea  and 
that  of  others  was  that  the  little  towns  would  be  injured  by  the 
interurbans.  We  all  expected  it,  but  it  has  proved  not  to  be  true. 
It  is  a  fact  in  practice,  that  every  town  in  Indiana,  and  the  rest  of 
this  territory  all  over  the  country  that  an  interurban  touches,  is 
benefited  by  it.  It  makes  it  a  better  place  for  them  to  live;  they 
are  happier  and  more  contented ;  their  homes  are  nicer  and  fixed  up 
better.  They  can  go  to  the  theaters;  they  can  go  to  parties;  they 
can  go  to  association  meetings,  and  go  and  come  as  they  please  and 
when  they  please ;  and  they  have  made  it  easier  to  live  there.  They 
live  there  and  do  business  in  town.  We  have  a  number  of  persons 
that  do  business  25,  30,  or  40  miles  away  from  their  homes.  There  is 
one  woman  down  in  Shelbyville,  26  miles  away,  who  occupied  a  State 
position  in  connection  with  the  schools,  who  goes  back  and  forth 
every  morning  and  evening.  That  is  an  illustration  of  what  I  mean. 
The  children  go  to  the  schools,  from  the  country  or  the  villages  to 
the  larger  towns,  either  the  grade  or  the  high  school.  They  go  there 
and  attend  church  if  they  want  to ;  and  it  makes  it  one  community. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       701 

They  all  rely  upon  the  service  of  the  interurban  for  the  purpose  of 
going  and  coming. 

Those  who  travel  most  are  furnished  with  reduced  rates,  so  that 


to  li  cents.  There  is  a  60-ride  monthly  book  sold  for  about  1 J  cents. 
Now  they  fit  into  the  different  classes.  The  school  teachers  and 
children  use  the  40-ride  book  because  it  fits  into  their  opportunities. 
People  who  go  to  work  in  the  larger  towns  and  work  every  day 
only  buy  the  60-ride  book.  The  fares  have  been  changed — I  speak 
of  it  in  order  that  you  may  have  it  in  your  picture.  Whereas  we 
charged  originally  about  l|  cents  for  the  ordinary  fares,  then  we 
adopted  what  was  known  as  the  penny-zone  system,  which  was  a 
cent  for  every  half  mile  or  2  cents  a  mile ;  then  in  January,  1918,  we 
put  our  rates  up  to  2^  cents  and  in  February,  1919,  we  put  them  up  to 
2f  cents.    That  is  almost  uniform  over  the  entire  State. 

Mr.  Warren.  Do  you  have  a  minimum  fare  along  with  that? 

Mr.  Henry.  Yes;  the  minimum  fare  used  to  be  5  cents  and  has 
been  made  10  cents ;  so  that  there  is  no  fare  now  less  than  10  cents. 

The  Chairman.  By  order  of  the  commission  or  by  statute? 

Mr.  Henry.  By  order  of  the  commission.  The  statute  made  no 
regulation  of  our  fares.  Our  rates  are — ^It  has  all  been  done  by 
the  commission,  and  in  that  I  may  say  that  the  commission,  since 
they  got  their  faces  turned  toward  the  East  and  saw  what  was 
needed — it  was  a  little  difficult  to  get  them  to  see  what  was  needed, 
but  as  soon  as  we  got  their  faces  turned  in  the  right  direction  and 
they  did  see  what  was  needed — they  have  shown  a  disposition  to  co- 
operate with  the  interurbans. 

The  Chairman.  I  think  you  have  a  good  commission  in  Indiana. 

Mr.  Henry.  Well,  I  second  the  motion.  We  have.  But  here  is  one 
of  the  troubles  about  it.  We  were  going  in  the  hole  for  from  six  to 
nine  months  because  of  the  losses  in  operating  expenses  before  we  got 
an  increase,  and  when  we  got  the  additional  increase  it  was  the 
same  way ;  it  took  three  months  to  get  them  to  issue  the  first  permit 
for  2J  cents  per  mile.  I  presented  the  petition  for  our  road  first, 
and  it  took  us  three  months  to  get  action  on  it,  before  we  got  them  in 
the  notion  of  really  doing  it.  They  first  thought  maybe  the  2-cent 
fare  law  affected  it ;  and  we  showed  them  it  did  not ;  it  only  affected 
steam  roads ;  and  after  that  they  treated  us — well,  I  will  not  say  with 
liberality,  but  with  all  the  justice  the  situation  demanded  and  re- 
quired. 

Mr.  Warren.  That  was  the  second  application  ? 

Mr.  Henry.  Yes ;  2}  cents.    Two  and  a  half  cents  was  the  first  one. 
I       Mr.  Warren.  That  took  how  long? 

Mr.  Henry.  It  was  three  months  before  we  got  the  first  action 
on  it. 

Mr.  Warren.  And  by  the  first  action  do  you  mean  the  approval? 

Mr.  Henry.  Yes;  it  is  a  permission  in  our  case;  it  is  a  permit  to 
file.  • 

Mr.  Warren.  That  is  from  the  time  you  filed  your  application 
until  you  got  the  permit? 


702       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Mr.  HENRr.  Not  exactly  that.  I  talked  to  tlieni  al)out  it  and  tried 
to  ffet  them  to  receive  the  application  and  they  would  not  even 
docket  it  at  first.    It  took  a  good  while  to  get  it  on  tlie  docket. 

The  Chaikman.  That  was  because  they  thought  thej^  had  no  juris- 
diction over  the  fare^ 

Mr.  Henry.  They  doubted  the  fact  of  their  having  jurisdiction 
because  of  tlie  2-cent  fare  law  on  the  statute  book. 

Commissioner  Meeker.  Were  th«  steam  roads  limited? 

Mr.  Henry.  They  were,  yes.  That  has  been  removed  by  tlie  last 
legislature. 

Mr.  Warren.  But  from  the  tune  they  recognized  their  jurisdiction 
until  you  got  your  permission 

Mr.  Henry.  It  did  not  take  them  long  to  act  on  it  after  that — a 
month  or  six  weeks — no  longer  than  was  required  to  get  up  the  neces- 
sary papers  and  everything. 

Now^  I  want  to  give  you  a  little  idea  of  the  freight  business  in 
order  that  you  may  understand  the  extent  to  which  it  has  been  de- 
veloped. First,  I  am  going  to  read  you  a  short  letter  from  a  live- 
stock shipper,  as  to  what  benefit  the  interurban  is  to  the  community : 

Crawfordsvtlle,  Ind.,  July  16,  1919. 
Mr.  Charles  L.  Henry, 

President  IndiaiMpoIis  d  Cincinnati  Traction  Oo., 

SIO  Traction  Terminal  Buildintj,  Indianapolis,  Ind. 

Dear  Sir:  I  have  have  l>een  told  that  you  want  an  expression  from  me  as 
to  the  advantages  of  shipping  stock  over  electric  lines,  as  compared  with 
steam-railway  service  and  wish  to  state  that  my  experience  in  using  both 
services  has  proven  conclusively  that  the  electric-road  service  is  by  far  the 
better,  principally  for  the  reason  of  quicker  service. 

This  quicker  service  makes  it  possible  to  practically  save  the  transportation 
charges  by  the  elimination  of  shrinkage.  For  this  reason  I,  as  a  buyer  and 
shipiier  of  stock,  am  able  to  pay  the  stock  raiser  10  cents  more  per  hundred 
pounds  than  I  could  if  my  shipments  were  made  over  the  steam  roads. 

Another  reason  for  the  saving  is  that  while  shipping  over  steam  roads  I 
would  average  a  loss  of  one  hog  to  a  car,  while  between  September  12,  1918, 
and  July  15,  1919,  I  have  shipped  3o5  cars  of  hogs  from  Crawfordsville  to 
Indianapolis  and  have  lost  just  one  hog. 

Hoping  that  this  information  will  answer  the  purix)se  for  which  you  want  it, 
I  am. 

Yours,  truly, 

Jesse  S.  Ward. 

Now,  count  that  the  average  carload,  and  you  will  find  that  the 
electric  line  put  into  the  pockets  of  the  fanners  in  the  vicinity  of 
Crawfordsville,  who  sold  their  stock  to  this  one  man,  $7,100  more 
than  would  be  paid  them  if  he  had  to  ship  by  the  steam  road. 

The  CiiAiR^rAN.  It  ought  to  be  pretty  easy  sailing,  selling  electne 
stock  to  those  hog  raisers. 

Mr.  Henry.  You  think  it  should  ? 

The  Chairman.  Sure. 

Mr.  Henry.  Well,  he  would  rather  make  his  money  the  way  he 
does.    He  make^  it  quicker,  faster,  safer,  and  l>etter. 

Commissioner  Gadsden.  He  wants  to  make  his  money  and  keep  it, 
you  mean? 

Mr.  Henry.  Yes.  He  is  satisfied  with  it  as  it  is,  as  you  see  from 
his  letter. 

Xow,  it  is  generally  supposed,  gentlemen,  that  the  traffic — freight 
traffic — is  limited  to  short  distance.     I  want  to  read  you  a  letter  here 


PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


703 


somewhat  at  length,  although  it  is  not  very  long,  that  shows  you  how 
much  it  has  already  been  developed  as  to  long  distances.  This  is 
from  Mr.  Norviel,  general  passenger  and  freight  agent  of  the  Union 
Traction  Co.,  of  Indiana,  dated  July  17,  1919 : 

Mr.  O.  L.  Henry, 

President  Indianapolis  &  Cincinnati  Traction  Co.,  Indianapolis,  Ind. 

Dear  Mr.  Henry;  Answering  your  esteemed  favor  of  July  16  on  the  re- 
quest of  our  freight  service.  This  is  rather  a  hard  matter  to  give,  offhand, 
without  sufficient  time  to  gather  statistics  to  back  up  the  statements  made 
by  us.  However,  in  a  brief  way  will  state  that  for  some  years  we  have 
operated  a  fast  freight  from  Indianapolis  to  Fort  Wayne,  Ind.,  (125  miles) 
.the  present  schedule  being  as  follows :  Leaving  Indianapolis  3.30  p.  m.,  arriving 
at  Fort  Wayne  at  11  p.  m.  Leaving  Fort  Wayne  on  the  Ohio  Electric  4  a.  m. 
and  arriving  at  Toledo  about  noon  the  following  day  (137  miles).  Total 
Indianapolis  to  Toledo,  262  miles.  Returning,  leaving  Toledo  about  6  p.  m., 
arriving  at  Fort  Wayne  about  midnight  over  the  Ohio  Electric  and  leaving 
Fort  Wayne  about  6  a.  m.  and  reaching  Indianapolis  at  2.45  p.  m.  The  motor 
car  in  this  service  operates  between  Indianapolis  and  Fort  Wayne  trans- 
ferring freight  from  or  to  points  beyond  Fort  Wayne  which  may  be  con- 
tained in  the  motor  car  to  and  from  the  Ohio  Electric,  motor  car  operating  on 
the  above  schedule  to  Toledo,  Ohio,  but  the  trail  cars  make  the  entire  trip 
unopened. 

The  effect  of  this  service  Is  freight  leaving  Indianapolis  at  3.30  p.  m.  Is 
ready  for  delivery  at  Fort  Wayne  at  6  a.  m.  o'clock  the  following  morning  and 
at  Toledo  at  12  o'clock  noon  of  the  next  day  follo^ving  its  departure  from 
Indianapolis,  Including  all  intermediate  points  touched  by  this  service.  Re- 
turning from  Toledo,  merchandise  loaded  on  one  day  reaches  Indianapolis  at 
2.45  p.  m.  on  the  day  following.  An  actual  service  not  bettered  by  American 
Railway  Express, 

Regarding  the  South  Bend  service  a  train  leaving  Indianapolis,  knowni  as 
the  Cannon  Ball,  at  7.00  p.  m.,  makes  deliveries  to  South  Bend  at  8  o'clock 
the  following  morning  (171  miles),  with  corresponding  deliveries  to  all  inter- 
mediate points.  Returning,  a  train  leaves  South  Bend  about  4  p.  m.  and  ar- 
rives in  Indianapolis  at  5.10  a.  m.  the  following  morning  with  corresponding 
service  for  such  intermediate  points  as  Warsaw,  Goshen,  Elkhart,  etc.  A 
service  not  equaled  by  the  American  Railway  Express  Co.  These  ti*alns  operate 
six  days  a  week  and  are  reasonably  uniform  on  their  schedules. 

We  handle.  In  connection  with  the  motor  service  above  referi"^!  to,  from  one 
to  three  trail  cars  on  each  of  the  trains  named  and  have  had  as  many  as  three 
trail  cars  loaded  with  freight  from  Toledo  to  Indianapolis  and  vice  versa,  and 
from  Indianapolis  to  South  Bend  and  vice  versa. 

The  South  Band  service  will  shortly  be  extended  to  Michigan  City,  connecting 
with  the  Indiana  Transportation  Co.  between  Michigan  City  and  the  city  ot 
Chicago  and  the  city  of  Milwaukee. 

A  water  line  part  of  the  way. 

The  volume  of  this  traflSc  I  believe  I  can  safely  state  Is  governed  only  by 
the  amount  of  equipment  that  can  be  set  aside  for  same,  as  the  time  of  these 
schedules  is  far  superior  to  any  other  mode  of  transportation,  that  the  traffic 
simply  waits  on  facilities.  Much  of  this  traffic  would  be  in  carload  lots  of 
1.  c.  1.  shipments  under  seals  and  without  breaking  bulk  between  large  termi- 
nals and  would  undoubtedly  be  a  very  profitable  traffic  to  foster. 
Trusting  this  is  the  information  you  desire,  we  beg  to  remain, 
Yours,  truly, 

(Signed)  F.  D.  Norviel, 

G.  P.  d  F.  A, 

The  Chairman.  You  may  proceed,  Mr.  Warren. 

Mr.  Henry.  I  have  a  number  of  letters  here,  gentlemen,  that  1 
will  leave  copies  of.  I  will  leave  them  with  the  reporter,  and  in 
order  to  save  time  will  read  extracts  on  a  few  points,  because  it  would 
take  up  too  much  time  to  read  the  whole  letter.  If  you  will  permit 
me  to  do  that,  I  will  then  hand  the  letter  to  the  reporter. 

The  Chairman.  Suit  yourself,  sir. 


704        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Henry.  Here  is  a  letter  from  M.  O'Connor  &  Co.,  large  whole- 
sale dealers  in  Indianapolis,  in  which  they  make  this  statement: 

Indianapolis,  Ind.,  July  i7,  1919. 
Indianapolis  &  Cincinnati  Traction  Co.,  City. 

Gentlemen  :  Much  has  been  said  about  railroad  transportation  and  what  it 
has  done  for  various  communities,  but  Iiere  in  Indianapolis  the  jobbers  and 
manufacturers  realize  that  the  traction  lines  centering  in  this  city  have 
brought  more  business  to  this  city  on  account  of  the  splendid  service  a^d 
low  rates  given  the  people  of  rural  towns  and  districts  touched  by  tliese  lines. 
We  can  not  say  too  much  in  praise  of  the  service  rendere*!  the  merchants  ot 
this  city  and  State  by  the  traction  lines  by  giving  good  service  at  a  reasonable 
rate. 

It  is  with  great  pleasure  that  we  write  this,  and  we  know  we  echo  the  senti- 
ments of  practically  all  of  the  people  in  the  community  served  by  your  and 
other  traction  lines. 

Yours,  very  truly, 

M.  O'Connor  &  Co., 
(Signed)  O.  C.  Hague. 

Here  is  a  little  side  show  that  I  want  to  give  you. 

There  are  a  great  many  comnmnities  that  are  not  served  by  elec- 
tric current,  and  the  business  has  grown  up  over  a  great  many  lines 
of  selling  current  to  those  communities,  sometimes  to  the  individual 
farmer,  sometimes  to  the  grain  elevator,  sometimes  to  the  town  to  be 
distributed,  and  sometimes  to  the  communities.  I  have  one  letter 
here  that  illustrates  that  situation. 

This  is  from  Mr.  G.  K.  Jeffries,  the  general  superintendent  of  the 
Terre  Haute,  Indianapolis  &  Eastern  Traction  Co. : 

Indianapolis,  Ind.,  July  16,  1919. 
Mr.  Chas.  L.  Henry, 

President  I.  d  C.  Traction  Co.,  City. 

Dear  Sir:  This  company,  In  addition  to  the  power  which  it  uses  for  trans- 
portation purposes,  furnishes  i>ovver  to  14  towns  who  retail  it  to  the  inhabi- 
tants of  the  towns  for  lighting  and  power  purposes  and  for  street  lights. 

In  addition  to  this  we  sell  along  our  lines  to  24  other  consumers,  such  as 
planing  mills,  elevators,  brick  plants,  tile  plants,  etc.  We  will  connect  up 
within  the  next  few  days  a  cement  mill  which  will  use  between  600,000  and 
700,000  kilowatts  per  month. 

Hardly  a  week  passes  that  we  do  not  have  inquiry  for  power,  and  just  yester- 
day a  large  zinc  mill  on  our  line  was  conferring  with  us  for  power  to  the 
amount  which  will  be  consumed  by  the  cement  mill  or  more. 
Very  truly,  yours, 

(Signed)  G.  K.  Jeffries, 

General  Superintendefit. 

The  Chairman.  Then  your  electric  line  is  also  a  power  company? 

Mr.  Henry.  Yes,  sir;  the  transmission,  as  I  stated  at  the  begin- 
ning, is  of  such  a  character  that  it  carries  an  immense  volume  of 
power. 

Mr.  Warren.  Is  that  generally  true  of  interurbans? 

Mr.  Henry.  Yes,  sir;  it  is. 

Mr.  Warren.  Most  of  them  furnish  power? 

Mr.  Henry.  Yes,  sir;  that  is  a  fair  illustration  of  the  situation. 
On  our  little  road  we  have  13  towns  and  villages  that  we  supply 
with  power.  Then  we  supply  grain  elevators  and  farmers,  anybody 
that  wants  it.  ■ 

Mr.  Warren.  Many  of  those  places,  I  suppose,  were  without  any 
service  until  you  supplied  it?  . 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       705 

Mr.  Henry.  All  of  them  that  are  mentioned.     We  have  no  com- 
petition.    We  put  them  in  nowiiere  where  there  is  competition. 
What  I  wanted  to  refer  to  before  was  this : 

The  freight  tonnage  carried  in  and  out  of  Indianapolis  for  the  year  1918, 
by  interurban  freight  trains,  amounted  to  151,654  tons. 

The  express  business  carried  in  and  out  of  Indianapolis  for  the  year  1918» 
in  the  express  and  baggage  compartments  of  passenger  cars,  amounted  to  12,673 
tons. 

If  you  will  just  permit,  I  should  like  to  say  a  word  there,  and  I 
do  not  want  you  to  consider  it  as  too  much  criticism,  but  I  would 
like  to  have  y6u  consider  it  as  little  criticism. 

This  refers  to  express  business.  Before  the  Railroad  Adminis- 
tration organized  the  American  Railway  Express  Co.  there  were 
contracts  with  almost  all  of  the  electric  lines  in  the  country,  the  in- 
terurban electric  lines,  for  carrying  the  business  of  the  old  line  ex- 
press companies. 

Mr.  Warren.  On  what  basis? 

Mr.  Henry.  They  were  paying  us  about  40  or  50  per  cent  of  the 
receipts.  That  is  the  same  general  kind  of  contract  that  the  steam 
roads  had ;  but  when  the  American  Railway  Express  Co.  was  formed 
by  the  Railroad  Administration,  they  immediately  commenced  di- 
verting the  business  from  the  electric  lines  to  the  steam  lines.  I 
would  also  state  personally  that  the  accounting  department  aided 
also  in  cutting  down  the  revenue  of  the  electric  railways;  so  much 
so  that  on  our  little  road,  wiiere  we  had  been  getting  about  $500  a 
month  from  the  Adams  Express  Co.,  it  commenced  going  down  right 
away.  During  the  first  six  months  it  went  down  to  about  three- 
fourths  of  what  it  had  been,  and  for  the  month  of  November  they 
sent  us  a  check  for  4  cents.  I  had  that  check  photographed  and 
have  it  hanging  up  in  my  office.  I  wanted  to  bring  you  a  copy  of 
it,  but  I  forgot  it. 

Mr.  Warren.  What  effect  does  that  have  upon  the  express  service 
to  the  communities? 

Mr.  Henry.  It  has  hurt  them.  These  communities  that  we  serve 
in  many  instances  have  no  steam  roads.  That  does»not  apply  to  all 
of  them.  We  run  to  the  same  place  in  many  cases;  but  not  only 
that,  they  do  not  get  the  frequent  service  that  we  give.  For  instance, 
take  the  C,  I.  &  V.,  that  runs  along  our  line  from  Indianapolis  to 
Connersville.  I  do  not  know  w^hat  their  present  schedule  is,  but 
they  only  have  a  local  passenger  train  stopping  once  a  day,  and  that 
is  westbound.  They  run  it  down  to  the  east  and  transfer  the  express, 
and  that  is  only  once  a  day  that  they  stop  their  westbound  train; 
whereas  on  our  line  they  get  it  every  hour,  or  every  hour  and  a  half 
throughout  the  day,  if  they  want  it. 

In  view  of  the  fact,  the  traction  lines  have  gone  into  the  express 
business,  and  the  public-service  commission  of  our  State  has  granted 
off-line  and  interline  rates.  We  are  going  into  the  business,  and  we 
are  increasing  our  business.  We  did  before  what  we  called  station- 
delivery  express.  We  did  not  use  a  wagon-and-pick-up-and-delivery 
system.  That  is  one  of  the  things  that  the  war  and  the  formation 
of  the  Railroad  Administration  have  put  on  us.  I  will  tell  yoii 
some  of  the  rest  of  them  after  a  little  bit. 


706       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Now,  I  hare  a  very  interesting  letter  here  from  the  Western  Ohio 
Eailway  Co.,  from  Mr.  Carpenter,  which  I  wonld  like  to  read: 

The  Western  Ohio  Railway  Co., 

Lima,  Ohio,  July  19,  1919. 
Chari.ks  L.  Henry, 

PreaiOvnt  Ifi^Iiana  <C-  Cincinnati  Traction  Co., 

Care  of  The  New  Willard  Hotel,  Washmpton,  D.  C. 

Dear  Sir  :  Replying  to  your  favor  of  the  16th  instant,  beg  to  advise  there  is 
nothing  .striking  or  exceptional  to  the  general  rule  to  the  operation  of  our  line 
that  I  am  able  to  report.  However,  I  wish  to  state  a  few  items  that  in  my 
.Indgment  should  l>e  ineludeti  In  your  report,  and  you  without  much  doubt  will 
have  these  alrejidy  in  your  mind. 

During  the  sugar-beet  setison  we  have  been  of  material  benefit  to  the  sugar- 
beei  growers  by  bring  able  to  place  cars  near  to  their  tields  and  thus  save  con- 
siderable time  and  exjiense  in  hauling  the  produce  to  places  for  shipment.  This 
Is  also  true  of  many  other  commodities,  especially  with  factories  located  In  the 
various  villages  along  our  line. 

We  have  just  concluded  a  contract  for  the  handling  of  about  2.000  carloads 
of  cvnient,  sand,  and  gravel  for  the  buibling  of  public  highway  which  runs 
adjacent  to  our  tracks.  The  contractor  was  able  to  make  a  less  price  for  his 
w<»rk  on  this  road  by  reason  of  the  prompt  and  convenient  deliverj'  we  were 
able  to  make,  thus  effecting  a  saving  to  the  State  and  all  other  parties  who 
are  taxed  tV>r  this  improvement.  In  this  case  we  receive  the  carloads  from  the 
Baltimoi-e  &  Ohio  in  Wapakoneta,  Ohio,  and  transiK)rt  them  to  various  sidetracks 
upon  the  road  where  the  work  is  being  performed,  and  as  al)ove  stated,  afford 
a  great  saving  to  the  contractor,  besides  effecting  a  more  prompt  delivery  of 
the  material,  as  compared  with  their  haul  by  wagons  or  trucks. 

Last  year  we  completed  a  contract  for  16  miles  of  Dixie  Highway,  amounting 
to  3,800  carloads  of  business,  which  was  handled  in  the  same  manner  as  the 
al>ove,  also  making  a  saving  to  the  contractor  and  the  taxpayers. 

We  operate  through  service  between  Dayton,  Lima,  Toledo,  and  Detroit, 
and  all  intermediate  stations,  wliich  through-freight  service  bandies  shipments 
to  all  points  reached  by  interurban  lines  In  the  States  of  Indiana,  Michigan, 
Ohio,  Kentucky,  and  on  account  of  the  short  time  in  which  this  freight  is 
delivered  it  makes  quite  a  saving  to  the  i)ublic  located  in  this  territory  in  the 
way  of  being  able  to  order  tlieir  goods  in  the  morning  and  In  many  instances 
have  same  in  their  possession  the  same  evening  or  the  following  morning. 

During  the  war  the  interurban  lines  In  this  territory  were  a  great  factor  In 
the  movement  of  all  classes  of  freight,  and  esi)eciany  Government  freight,  used 
in  the  manufacture  of  war  supplies,  and  the  service  rendered  at  that  time  and 
also  at  present  is  practically  the  same  as  express  service. 

At  the  present  tifiie  we  are  handling  many  carloads  of  castings,  automobiles, 
automobile   starters,   wheels,   etc.,    from    Dayton    to    Detroit,    Pontine,   Grand 
Rapids,  and  various  other  manufacturing  centers  and  are  giving  second  morn- 
ing delivery  from  Dayton  to  points  mentioned.     Shippers  are  gradually  appre- 
ciating this  prompt  interurban  service,  but  we  are  han(llcappe<l  In  many  places 
by  municipal  restrictions  as  to  the  number  of  carloads  that  can  be  handled  in 
each  train,  and  in  some  places  we  are  restricted  to  the  movement  of  one  motor* 
car  and  one  additional  load  at  a  time,  which  causes  a  great  deal  of  expense 
doubling  through  at  tiighttime,  when  the  train  consists  of  8  to  10  carloads.    Our 
average  cars  i>er  train  for  the  last  12  months  has  been  6  cars.     Thus  you  can 
se«»  the  extra  expense  incurred  by  reason  of  the  municipal   restrictions.     In 
some  Instances  the  municipalities  object  to  the  movement  of  freight  cars  at 
any  time  during  the  day.    This  handicaps  our  movement  and  causes  additional 
expense  by  reason  of  being  obliged  to  pass  through  these  coriM)rations  during 
the  night.     It  is  therefore  neci'ssary  for  us  to  maintain  a  day  and  night  force 
in  order  to  handle  the  business,  both  in  train  .service  and  station  service,  adding 
as  you  will   see  very  materially  to  our  operating  expense.     We  believe  we 
should  in  some  manner  be  relieved  from  these  restrictions  and  added  expenses. 
During  the  year   1018   we  handleti  1,316  carloads.     During  the  vear   1917* 
1,717  carloads.     This  was  straight  carload  business  and  does  not  include  the 
L.  C.  L.  business,  which  is  loaded  and  unloaded  in  our  freight  houses,  but 
consLsts  of  solid  carloads,  loaded  by  consignor  and  unloaded  by  consignee  to 
and    from    the   cars.     You    will    note    from    the   above   figures   a    decrease   In 
the  carload  business  of  401  cars  for  the  year  19i8,  and  has  continued  on  a 
decline  to  the  present  date,  due  to  tlie  decrease  in  production  of  tlie  various 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       707 


factories  tliat  were  served  and  the  motor-truck  competition.  At  tlie  present 
time  we  are  confronted  with  motor-truck  competition  between  almost  all  points 
which  are  local  to  our  line,  and  while  at  this  time  the  motor  trucks  have  not 
proven  a  success,  they  have  been  tlie  means  of  depriving  us  of  many  carlcwids 
of  business.  From  this  competition  I  believe  we  should  Iiave  some  relief.  Just 
what  the  remedy  is  to  be  I  am  only  able  to  suggest,  nam^y : 

Any  truck  line  doing  a  transportation  business  for  profit  should  file  a  tariff 
and  pay  an  additional  license  for  tlie  privilege  of  so  doing.  The  public  roads 
are  free,  of  course,  for  the  public,  and  no  taxes  can  be  legally  imposed  for  the 
use  of  same,  but  this  truck  service  is  fast  wearing  out  the  roads  for  whicli  the 
public  are  taxed,  and  they  are  contributing  nothing  whatever  to  its  main- 
tenance, but  a  license  tax  would,  to  some  extent,  contribute  to  the  same. 

The  steam  roads  should  be  induced  to  advance  their  interstate  passenger 
rates,  which  would  entitle  the  iuterui-bans  to  advance  their  rates.  The  steam 
roads  are,  as  I  understand,  operating  a  passenger  service  at  a  loss,  and  the 
deficit  is  being  made  up  in  part  from  freight  earnings  and  the  balance  finally 
to  be  paid  by  the  Government  or  taxpayers.  The  interurban  roads  should  be 
relieved  of  cost  of  new  paving  and  repairs  to  paving.  There  should  also  be 
some  legislation  to  relieve  the  electric  railways  and  for  that  matter  the  steam 
lines  from  the  tremendous  financial  burden  from  crossing  accidents,  most  of 
which  are  due  to  carelessness  of  the  public  oiierating  motor  cars  and  other 
vehicles. 

Trusting  the  suggestions  herein  nameil  may  be  of  some  assistance  to  you,  I 
remain. 

Yours,  very  truly. 

The  Western  Ohio  Railway  Co., 
(Signed)  F.  D.  Carpenter, 

President  and  General  Manager. 

You  will  see  the  immense  amount  of  business  tliat  they  do  in  certain 
towns. 

Here  is  a  letter  from  the  Cleveland,  Southwestern  &  Columbus 

Railway,  which  I  will  treat  in  the  same  way.    I  have  a  map  of  the 

road  with  that. 

July  19,  1919. 
Mr.  Charles  L.  Hkxbt, 

President  Indianapolis  d  Cincinnati  Traction  Co., 

New  Willard  Hotel,  Washington,  D.  C. 

Dear  Mr.  Hknry  :  In  reply  to  your  communication  of  July  16,  permit  me  to 
inclose  you  two  maps  of  our  road.  The  territwy  outlined  in  green  is  a  very 
good  dairy  country,  and  practically  all  of  the  milk  produced  goes  to  the  city 
of  Cleveland.  The  red  line  shows  some  of  the  minor  dairy  farms,  the  product 
of  which  practically  all  goes  to  Mansfield. 

We  handle  on  our  road  over  fifty  thousand  lO-gallon  cans  of  milk  per  mouth. 
The  rate  on  tliis  milk  is  fixed  by  the  Interstate  Commerce  Commission  and  the 
public-utilities  commission  at  18  cents  per  can  for  a  lO-gallon  can  over  an 
average  distance  of  25  miles.    This  rate  compels  us  to  return  the  empties  free. 

The  milk  has  to  be  carried  at  certain  hours  of  the  day.  The  convenience  of 
the  shipper  in  getting  his  milk  to  the  stands  and  getting  the  milk  into  tlie  city 
before  tlie  heat  of  the  day,  are  factors  which  we  have  to  take  into  consideration, 
and  provide  service  accordingly. 

In  addition  to  the  above,  we  handle  a  large  quantity  of  cream,  which  is  not 
on  daily  shipments  and  which,  according  to  the  public-utilities  commission,  we 
are  compelled  to  handle  at  the  same  rate  that  we  handle  milk;  the  injustii-e 
that  we  complain  of  in  this  resptn^t  is,  if  we  lose  a  can  of  cream  we  liavo  to 
pay  the  price  of  cream  for  it,  while  handling  it  at  the  milk  rate. 

We  also  handle  over  some  of  the  territory  referred  to,  into  Cleveland  alone, 
approximately  105,000  dozen  eggs  per  month,  and  40,000  pounds  of  butter  per 
month. 

We  undoubtedly  could  increase  tlie  business  in  dairy  and  farm  products  if 
we  were  not  limited  in  equipment,  which  at  the  present  time  we  are  unable 
to  procure  on  account  of  limitation  of  our  finances. 

With  kindest  personal  regards,  permit  me  to  remain. 
Very  sincerely,  yours, 

,  Geneml  Manager, 


708       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Beall.  That  road  lias  not  done  very  well? 
'     Mr.  Henry.  No;  and  there  are  a  good  many  reasons  for  it. 
*.     Commissioner  Beall.  Yes. 

Mr.  Henry.  I  can  tell  you  more  that  have  not  done  very  well,  too. 

Commissioner  Beall.  Yes.  . 

Mr.  Henby.  But,  in  a  business  way,  they  are  serving  the  com- 
munities, and  that  is  the  subject  I  am  on  now.  .       .  ,         .      . 

The  Indiana  Kailways  &  Light  Co.  is  a  road  running  into  and  out 
of  Kokomo,  both  ways ;  and  I  have  a  letter  from  them  on  the  same 
subject: 

Indiana  Railways  &  Light  Co. 

Kokomo,  Ind.,  July  18,  1019. 

Mr.  Charles  L.  Henry,  . 

General  Manager,  Indiana poUs  d  Cmemnati  Traction  Co., 

New  Willard  Hotel,    Wa.^hmgton,   D.   C. 

Dear  Sir-  Having  been  informed  tliat  you  will  present  tlie  cases  of  the  in- 
terurban  companies  to  the  Government  commission  appointed  for  the  Purpose 
of  nvestigating  the  present  financial  condition  and  future  prospects  of  such 
inte^urban  properties  we  desire  to  acquaint  you  with  the  location  of  the  Indi- 
ana UalwavsT^^^^^^^^^^  Co.  and  as  far  as  possible  with  the  service  it  performs 
?o  the  public  in  general,  which  information  we  hope  will  be  of  some  assistance 
to  you  In  presenting  the  deplorable  condition  of  the  industry  to  the  com- 

^ForUie  reason  that  the  financial  condition  of  the  steam  and  electric  rall- 
wavs  of  the  country  Is  so  well  known,  we  will  omit  any  further  reference  to 

%\f  fn1iaL%}lways'*&  Light  Co.  operates  an  Interurban  railway  between 

th^cttles  of  Frankfort,  In  Clinton  County ;  Kokomo,  In  Howard  Coun  y ;  and 

Mark)n   in  Grant  County ;  all  In  Indiana,  a  distance  of  52.8  miles  and  the  line 

paral  els  "he  Tc.l^^^^     St.  Louis  &  Western  Railroad,  almost  the  entire  distance 

SSd  connects  with    he  Terre  Haute,  Indianapolis  &  Eastern  Traction  Co.  at 

Frankfort    the  Union   Traction   Co.   of   Indiana   at   Kokomo    and   the  Union 

Traction  Co.  of  Indiana  and  Marion  &  Bluflfton  Traction  Co.  at  Marion. 

I       The  first  operation  of  an  interurban  line  by  this  company  was  performed  In 

*   1903  from  Kokomo  to  Greentown,  Ind.,  a  distance  of  10  miles    and  this  line 

was  exte  de^     n  1905  from  Greentown  to  Marlon,  a  distance  of  18  miles   and 

Z  ifne^^s  further  extended  In  1912  from  Kokomo  to  Frankfort,  a  distance 

of  26  miles,  and  since  1912  there  have  been  no  extensions  and  none  are  an- 

** The^sl'^llnes  traverse  a  rich  farming  territory  and  serve  three  incorporated 
townl  and  eight  unincoriK)rated  towns  and  villages,  in  addition  to  the  three 
cmL  na  ed  a,  d  the  frequent  service  of  Interurban  cars  enables  the  laborers 
of  tL  interm^^^  towns  to  take  up  employment  In  the  three  cities  named, 
which  are  largely  manufacturing  centers. 

'^  The  fanners  along  the  line  have  frequent  service  to  and  from  their  nearest 
Dubllc-highwav  crossings,  both  passenger  and  freight,  and  have  always  been 

i    in vored  by  srieclal  service  in  emergencies.     As  an  example :     In  January  and 

;  rXimry  of  1^18  when  the  demand  for  stock  cars  in  the  South  by  the  Govern- 
luent  for  war  purposes  compelled  the  railroads  of  this  territory  to  embargo 
sldprnents  of  stock  for  lack  of  cars,  <hls  company  arranged  to  transport  the 
hogs  and  cattle  to  the  Indianapolis  market  with  its  freight  equipment  and  m 
thf  meantime,  using  improvised  methods  to  perform  service  to  those  de- 
nt^ndinc   on   the   freight   service   along   Its  line.  ^  ^    ,. 

"^  Arrangements  weil  quickly  made  with  the  Union  Traction  Co  of  Indiana. 
Indlanawlls  Traction  &  Terminal  Co.,  and  Terre  Haute,  Indianapolis  &  East- 
ern Trac^on  Co  for  the  use  of  their  tracks  and  also  with  the  farmers  and  stock 
buyers  along  this  line ;  and  by  running  the  train  of  three  cars  night  and  day, 

•  Sing  tvvo  round  trips  per  day,  we  were  able  to  relieve  the  situation  to  the 
Pvtent  that  9  000  head  of  livestock  were  marketed  by  reason  of  the  operation  of 
rhfrraln  on  iTtilpTfro^  points  along  the  line  to  Indianapolis,  an  average  dls. 
tSLe  of  80^t;ilel  The  farmer  was  permitted  to  load  his  stock  at  any  point 
along  the  right  of  way,  and  the  charges  for  transportation  were  very  little  in 
excess  of  rates  for  steam-road  service. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       709 


Many  similar  Instances  of  minor  nature  might  be  mentioned,  where  this  inter- 
urban railway  has  relieved  the  stress  of  circumstances  in  such  emergencies  and 
at  no  great  profit  to  itself  and,  for  the  fact  that  it  is  not  built  or  equipped  for  ex- 
tensive carload  business,  at  a  great  inconvenience  to  itself  and  a  part  of  the 

public  in  general. 

However,  this  instance  of  helpfulness  has  been  greatly  appreciated  by  the 
farmers  and  citizens  in  general  and  the  company  was  given  favorable  com- 
mendation by  the  local  newspapers  along  the  line,  in  many  articles  concerning 
the  relief  obtained. 

For  many  years  the  paralleling  steam  road  passenger  service  has  been  very 
inadequate  to  the  needs  of  the  public  in  this  53  miles  and  so  far  as  passenger 
service  is  concerned,  this  line  is  a  necessity  as  great  as  If  no  parallel  line  was 
in  existence  and  is  a  valuable  adjunct  to  the  life  and  growth  of  the  com- 
munities which  it  serves  in  many  ways — one  of  the  most  important  being  that 
all  of  the  smaller  towns  receive  lighting  and  power  service,  they  being  a  part  of 
the  23  tow^ns  outside  of  Kokomo  receiving  such  service,  a  great  many  of  them 
being  some  miles  from  the  line ;  this  being  made  possible  by  the  fact  that  cur- 
rent Is  taken  from  the  railway  high-tension  lines  at  frequent  intervals  for 
transmission  to  other  localities  entirely  off  of  the  line  and  these  branches  pro- 
vide power  and  lights  for  farmers  along  about  100  miles  of  highway. 

It  would  appear  that  this  Interurban  line,  with  its  various  methods  of  serv- 
ing the  public,  so  intermingled  that  the  disposal  of  one  means  of  the  non- 
success  of  the  others,  is  indispensable  so  far  as  the  public  welfare  is  con- 
cerned, and  for  this  reason  should  be  allowed  to  exist  and  after  paying  rea- 
sonable wages  to  Its  employees,  as  other  Industries  are  permitted  to  do,  and 
after  paying  all  expenses  Incident  to  the  proper  operation  of  the  property, 
should  be  permitted  to  pay  its  stockholders  a  reasonable  return  on  its  actual 
valuation. 

The  company  also  operates  8  miles  of  city  car  lines  in  Kokomo  and  there 
have  been  no  additions  to  the  tracks  of  these  lines  since  1902  and  since  that 
time  there  has  been  no  change  whatever  in  the  charges  for  the  transportation 
of  the  public  over  the  lines,  and  in  the  meantime  public  opinion  has  compelled 
a  change  from  single-truck  to  double-truck  cars,  at  a  great  exi^nse,  and  the 
cost  of  labor  and  material  has  increased  entirely  out  of  proportion  to  the  num- 
ber of  passengers  carried ;  and  while  Kokomo  has  in  this  period  grown  from  a  city 
of  7,000  to  28,000,  at  present  it  has  not  had  a  foot  of  track  built  for  the  purpose 
of  transporting  the  public,  many  of  whom  now  live  far  beyond  the  present 
lines,  and  these  must  walk  as  far  as  they  can  ride  in  their  trips  to  and  from 
the  center  of  the  city. 

This  condition  is  deplorable  and  is  a  hindrance  to  the  further  growth  of  the 
city  and  is  practically  the  same  condition  as  exists  in  hundreds  of  other  cities 
in  the  country  and  there  are  reasons  for  such  conditions,  very  well  know^n  to 
those  who  might  have  observed  in  the  past,  not  the  least  of  which  is  the  con- 
tinual regulation  of  income  by  State  and  municipal  officials,  without  in  any 
way  attempting  to  consider  the  expenditures  incident  to  the  operation. 

This  company  can  not  extend  its  lines  to  suit  the  needs  of  this  city  for  the 
reason  tliat  sane  men  will  not  invest  money  in  a  hazardous  industry,  in  which 
facts  obtained  from  past  and  present  conditions  indicate  that  there  can  be  no 
reasonable  return  on  actual  valuation  and  with  present  conditions  and  the  out- 
look for  the  future  there  can  be  but  very  little  hope  that  circumstances  sur- 
rounding such  public  utilities  will  become  improved  to  the  extent  that  they 
may  again  take  their  position  on  the  same  plane  with  private  industry  and  in 
the  meantime  the  public  must  suffer  the  inconvenience  brought  about  by  the 
lack  of  adequate  eflicient  service. 

Our  experience  has  taught  us  that  it  is  not  the  public  in  general  that  object 
to  these  public  utilities  being  allowed  to  earn  a  reasonable  return  on  valuation 
after  paying  a  reasonable  wage  to  its  workers  and  other  operating  expenses, 
but  that'  it  is  one  of  those  who  claim  to  represent  the  public  in  some  political 
oflice  or  position,  and  usually  all  of  his  efforts  for  their  benefit  are  directed 
toward  public-service  corporations  and  without  a  thought  of  the  future,  or  of 
any  phase  of  the  matter  not  beneficial  to  his  constituents. 

This  condition,  however,  is  being  gradually  relieved  by  the  various  public- 
service  commissions,  but  the  outlook  for  that  radical  improvement  necessary  to 
stabilize  such  industries  is  in  no  sense  encouraging. 

For  these  and  many  other  reasons,  not  only  the  public  should  be  fully  in- 
formed, but  public  officials  should  by  some  method  be  educated  to  consider  both 
sides  of  the  matter  of  utilities,  which  must  serve  their  constituents  and  there 


710       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

must  be  that  rtejn-ee  of  fairness  on  all  sides  that  will  breed  confidence  If  such 
utilities  can  supply  the  needs  of  growing  communities  and  expand  to  other 
communities  which  are  In  crying  need  of  them. 
Yours,  very  truly, 

C.  P.  Ryan,  O.  P.  d  F.  A, 

Here  is  a  letter  from  the  fruit  district  in  the  southwest  part  of 
Michigan: 

,,     ,  „   „  Berrien  County  Bank,  July  17,  1919. 

Mr.  James  H.  Pound, 

Benton  Harbor,  Mich. 

Dear  Mr.  Pound:  In  reply  to  your  request  of  this  day,  relative  to  the  letter 
of  Mr.  Charles  L.  Henry,  I  beg  to  advise  that  the  Millburg  Fruit  Growers' 
Association  last  year  shipi)ed  approximately  30  carloads  of  fruit  and  had 
shii)ped  in  14  carloads  of  supplies;  that  the  Benton  Center  Fruit  Gorwers' 
Association  shipped  approximately  38  carloads  out  and  20  carloads  of  sup- 
plies in. 

You  will  appreciate,  of  course,  when  you  make  a  comparison  of  these  figures 
with  previous  years,  that  the  fruit  crop  was  practically  a  failure;  during  the 
year  of  1916  the  Millburg  Fruit  Growers'  Association  shipped  183  carloads  of 
peaches  alone  over  your  line.  While  the  crop  this  vear  is  not  so  large  as  dur- 
ing 1916,  nevertheless  we  are  expecting  that  shipments  from  these  two  points 
on  your  line  will  more  than  double  last  year's  record. 

I  am  frank  to  say  that  If  it  were  not  for  your  line  in  connection  with  these 
two  points,  which  as  you  know  I  am  vitally  Interested  in,  the  market  for  fruits 
would  be  much  less  than  at  present. 

Trusting  that  this  is  the  information  desired,  I  am, 
Very  truly,  yours, 

Jas.  M.  Rose,  Cashier. 

The  Chairman.  Mr.  Henry,  would  you  not  have  a  right  to  as- 
sume that  this  commission  regards  the  electric  lines  as  a  necessary 
institution,  and  that  we  are  disposed  to  do  all  we  can  to  help  them  out 
in  their  difficulty? 

Mr.  Henry.  All  right;  I  do  assume  that,  but  I  do  assume  that 
possibly  some  members  of  the  commission  need  to  be  enlightened 
on  the  subject  of  the  great  advantages  which  we  give  the  com- 
inunities  over  and  above  what  the  steam  roads  give  them.  That 
is  the  only  point  that  I  thought  there  might  be  some  doubt  about. 

I  want  to  read  here  a  letter  from  the  Ohio  Electric  Railway  Co. : 

The  Ohio  Electric  Railway  Co., 

,^     ^  ^    ^^  Sprirwfidd,  Ohio,  July  19,  1919. 

Mr.  Charles  L.  Henry, 

New  Willard  Hotel,  M'ashinffton,  D.  C. 

My  Dear  Mr.  Henry:  Mr.  Dana  Stevens,  vice  president  of  this  company 
has  referred  your  letter  of  the  15th  instant  to  me,  in  which  vou  asked  for  a 
statement  from  the  traffic  manager  of  this  company  with  reference  to  the  extent 
of  its  merchandise-freight  business  and  the  manner,  especially  the  expedition 
In  which  It  is  handled.  '  ' 

In  resi)onse  wish  to  advise  that  this  company  operates  510  miles  of  inter- 
luban  track  over  which  freight  business  is  handled,  and  the  total  gross  freight 
revcMiue  for  the  year  1918  amounted  to  $613,052.32. 

Merchandise  freijjht  is  handled  in  the  territory  between  Fort  Wavne 
Union  City,  and  Richmond,  Ind.,  and  Lima,  Defiance,  Toledo,  Dayton  Spring- 
field, Columbus,  Newark,  and  Zanesville,  Ohio,  over  this  company's  line  Shin- 
men  ts  i-eceived  during  the  day  at  Toledo  and  Fort  Wayne  on  the  one  hand 
and  Dayton,  Springfield,  and  Columbus  on  the  other,  are  forwarded  in  the 
evening  and  reach  destination  the  following  morning,  making  an  over-night 
delivery  for  L.  C.  L.  shipments.  ^ 

In  addition  to  this  service,  solid  merchandise  cars  are  handled  between  all 
the  larger  points  on  the  line.  For  example,  Columbus  >Aill  load  cars  for 
/imesviUe  Newark,  Springfield,  <m-  Dayton.  When  these  are  loaded  to  their 
full  capacity  before  the  schedule  time  of  our  regular  freight  trains,  they  are 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       711 


coupled,  to  one  of  our  local  passenger  cars  and  handled  through  to  destina- 
tion on  passenger-train  schedule.  Shipments  from  commercial  centers  to 
near-by  points  within  30  or  40  miles  are  delivered  within  a  few  hours  after 
receipt. 

This  quick  service  when  first  inaugurated  created  quite  a  little  fear  in  the 
minds  of  merchants  at  the  smaller  tow^ns  and  villages  that  their  business  would 
be  absorbed  by  the  merchants  at  the  large  centers.  This  fear,  however, 
has  proved  groundless,  and  Instead  It  has  really  been  a  benefit  to  them  in  this 
way :  That  it  has  enabled  them  to  conduct  their  business  with  a  reduced  stock, 
as  sales  can  now  frequently  be  made  from  selection  from  catalogues  where 
otherwise  the  stock  would  have  to  be  carried  on  the  fioor. 

On  rush  orders  the  mwchant  can  telephone  to  his  jobber  and  frequently 
have  the  article  in  the  hands  of  the  purchaser  the  same  day  or,  at  the  furthest, 
the  next  morning.  As  far  as  the  matter  of  time  is  concerned,  freight  ship- 
ments over  our  line  make  a„s  good  and  frequently  better  time  than  those  handled 
by  the  express  company. 

I  trust  that  this  information  Is  what  you  desire.     Should  you  wish  anything 
further  along  this  line,  kindly  advise. 
Yours,  very  truly, 

W.  S.  Whitney,  O.  P.  d  F.  A. 

Detroit  is  a  large  Q\ty^  and  I  want  to  read  to  you  a  statement  of  a 
disinterested  outsider  on  that  subject,  and  then  leave  the  papers  here. 
This  is  from  the  Detroit  Wholesale  Merchants'  Bureau: 

Detroit,  July  18,  1919, 
Mr.  W.  S.  Rodger, 

(General  Traffic  Manager,  Detroit  United  Railway,  Detroit,  Mich. 

Dear  Sir  :  The  question  was  recently  asked  how  the  wholesaling  interests  of 
Detroit  were  affected  by  the  freight  service  given  by  electric  lines  running  from 
this  city  to  points  in  Michigan  and  Ohio.  In  answer  to  that  question,  I  believe 
that  I  can  safely  state  that  70  per  cent  of  the  shipments  from  wholesale  houses 
in  Detroit  go  out  via  electric  lines.  As  a  result  Detroit  wholesalers  are  vitally 
interested  in  service  given  by  electric  railroad  lines  in  this  section  of  the 
country. 

The  electric  lines  give  the  wholesalers  second  or  third-day  deliveri^  to  all 
points  within  a  radius  of  100  and  150  miles.  As  a  result  of  this  they  have 
saved  the  wholesale  interests  of  the  city  thousands  of  dollars  in  business.  Many 
accounts  would  have  been  lost  had  the  wholesalers  depended  upon  deliveries  by 
the  steam  roads  running  out  of  the  city. 

The  electric  lines  have  repeatedly  saved  the  day  for  various  business  Interests 
of  the  city.  This  w^as  particularly  the  case  during  the  extremely  cold  weather 
of  the  winter  months,  and  at  other  times  when  the  railroads  had  proved  their 
inefiiciency  in  handling  L.  C.  L.  shipments. 

The  wholesalers  of  Detroit  have  found  it  to  their  advantage  to  ship  their 
goods  via  the  electric  lines  wherever  the  electric  company  is  in  competition  with 
the  railroad. 

It  would  indeed  be  a  serious  blow  to  the  wholesaling  interests  of  the  city 
should  anything  happen  to  curtail  the  service  given  by  the  electric  lines.  We 
believe  that  financial  assistance  should  be  given  to  these  companies  and  every- 
thing possible  should  be  done  to  maintain  a  high  standard  of  efficiency  in  this 
very  important  link  of  our  country's  transportation  system. 
Very  truly,  yours, 

Wholesale  Merchaistts'  Bureau, 
W.  E.  WiLiNGSON,  Secretary. 

T  have  a  map  of  their  line  also. 

The  Louisville  Traction  lines  are  a  little  different  from  the  rest  of 
the  interurbans  down  there.  They  run  in  and  out  in  that  form. 
[Illustrating.]  They  look  like  snakes  almost,  only  short  distances 
out,  and  I  will  not  take  up  any  time  to  say  anything  about  them. 

Now,  then,  what  is  the  trouble?  That  is  what  you  want  to  hear 
about. 

In  a  general  way,  the  interurbans  have  no  serious  troubles  with  the 
exception  of  the  general  situation.  That  is,  we  are  not  hampered 
by  franchises  to  any  large  extent.    We  are  to  a  certain  extent. 


712       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

For  instance,  take  the  city  of  Indianapolis,  which  will  illustrate 
one  of  them.  I  read  to  you  there  a  letter  about  how  much  stock  one 
shipper  brought  into  Indianapolis.  There  is  a  clause  in  the  franchise 
in  Indianapolis  that  no  live  stock  shall  be  shipped  in  by  an  interurban. 
Only  recently  they  allowed  them  to  start.  That  was  during  the  war, 
when  the  steam  railroads  broke  down  in  their  service,  and  that  was 
the  only  way  they  could  get  stock  in.  Since  that.it  has  been  going 
along,  and  I  do  not  suppose  it  will  ever  be  stopped  again. 

Commissioner  Beall.  Is  that  statement  quite  correct?  Is  it  not  a 
fact  that  the  Northern  Ohio  Traction  Co.,  for  instance,  has  been  ham- 
pered in  its  business  for  quite  a  number  of  years  on  account  of  the 
franchises? 

Mr.  Henry.  Yes;  I  was  speaking  generally. 

Commissioner  Beall.  And  other  lines  have  many  difficulties. 

Mr.  Henry.  Yes;  there  are  a  great  many  difficulties  of  which  I  will 
speak.  Mr.  Carpenter's  letter  and  Mr.  Schneider's  letter  both  refer 
to  those  things. 

Commissioner  Beall.  But  you  said  a  little  while  ago  that  they  had 
no  franchise  troubles. 

Mr.  Henry.  Well,  perhaps  my  remark  was  too  general  in  its  form. 

Commissioner  Beall.  Yes. 

Mr.  Henry.  There  are  a  great  many  places  where  the  handling  of 
freight  is  restricted  to  one  car,  sometimes  two  cars,  and  sometimes  to 
three  cars.  They  are  bothered  about  the  through  business  in  that 
way.  The  Ohio  Electric  Co.  is  bothered  very  much  about  that. 
That  is  the  largest  company  in  Ohio.  They  are*  bothered  very  much 
about  it,  and  the  trouble  is  to  get  a  continuous  acting  business  on  ac- 
count of  these  various  things. 

Even  in  Cleveland  they  do  not  allow  freight  cars  to  run  in.  They 
call  them  express,  whatever  they  take  into  Cleveland.  They  do  not 
allow  freight  cars  to  run  in. 

Then,  there  are  also  the  provisions  regarding  paving  that  you  have 
heard  so  much  about  here  during  the  hearings.  Those  apply  in  nearly 
all  of  these  small  towns.  In  nearly  all  of  them  they  have  just  that 
kind  of  a  provision.  Personally  I'have  only  signed  one  contract  of 
that  kind,  and  that  was  a  renewal  of  one,  which  necessitated  it.  I 
thought  it  better  to  do  that  than  not  to  do  it;  but  I  never  believed  in 
signing  them.  There  are  lots  of  them  in  existence,  though.  I  might 
say  that  the  first  interurban  contract  that  I  ever  made  with  that  town 
provided  also  for  the  handling  of  freight,  that  of  Alexandria ;  but 
there  are  a  lot  of  these  franchise  restrictions. 

For  instance,  in  regard  to  what  it  termed  the  State  highways  that 
the  Government  is  assisting  in :  There  are  provisions  in  there  for  the 
paving  of  the  part  of  the  street  where  the  railroad  is,  and  in  many 
towns  and  villages  that  will  apply.  That  will  require  the  elimination 
of  a  great  many  grade  crossings  that  otherwise  would  not  have  to  be 
eliminated,  because  there  was  no  necessity  for  it;  but  everybody  recog- 
nizes that  with  the  travel  on  these  proposed  paved  highways,  it  will 
be  so  great  that  it  will  require  the  elimination  of  a  great  many  grade 
crossings.  Now,  if  that  is  carried  to  the  extreme,  as  it  looks  like 
it  will  be,  that  practically  extinguishes  the  ability  of  the  interurban. 
roads  in  many  places  to  do  anything.  While  they  are  doing  that, 
alongside  of  them  are  the  gasoline  trucks,  their  best  competitor.  In 
other  words,  the  gasoline  runs  along  without  any  control,  without  any 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       713 

sort  of  arrangement  with  the  public-service  commission  or  any  other 
public  body,  right  straight  alongside  on  the  road  which  we  are  help- 
ing to  pay  for.  We  get  it  both  going  and  coming  that  way,  you 
know.    We  can  not  miss  it. 

Now,  I  want  to  call  your  attention  to  one  thing  in  connection  with 
this  trucking  business.  Just  before  I  came  over  here,  I  was  handed 
a  copy  of  the  United  States  bulletin,  issued  on  July  14,  1919,  which 
I  think  is  very  interesting : 

LARGE  BUBAL  MOTOB  EXPKESS  COMPANY  l-EAKS   OPEKATIONS   OF   SO-CALLED   WILD  CAT 

LINES. 

The  highways  transport  coininittee  of  the  Council  of  National  Defense  author- 
izes the  following: 

The  general  manager  of  a  new  rural  motor-express  company  in  the  northwest 
submits  some  very  interesting  ideas  to  the  highways-transport  committee  in 
connection  with  the  operation  of  motor  apparatus  for  commercial  purposes,  and 
this  committee  is  glad  to  pass  them  along  to  the  big  and  rapidly  growing  family 
of  highways-transport  committee  enthusiasts  throughout  the  country. 

This  company  is  preparing  to  cover  a  pretty  big  territory  with  a  complete  sys- 
tem of  rural  motor-express  routes.  In  this  connection  its  executives  have  made 
a  study  of  the  various  angles  of  this  work  and  apparently  seem  to  have  devel- 
oped the  practical  end  of  it  most  satisfactorily. 

WILDCATTING  OBJECTIONABLE. 

However,  one  very  pertinent  subject  is  suggested,  and  that  is  the  possibility 
of  a  few  individuals  who  might  attempt  to  haul  freight  from  a  large  city  to 
towns  30  or  40  miles  away  for  a  sum  per  hundredweight  which  would  make  it 
impossible  for  one  operating  a  route  regularly  and  on  fixed  schedule  to  meet 
such  competition.  The  suggestion  made  is  that  a  continuation  of  such  practices, 
wildcatting,  as  it  were,  in  the  motor-transportation  field,  tends  to  discourage 
the  entrance  into  this  field  of  those  who  would  seek  to  serve  the  public  regu- 
larly and  satisfactorily,  and  at  a  cost  to  the  shipper  of  just  enough  to  make  a 
venture  financially  profitable. 

QUESTION  FOR   STUDY. 

This  question  is  then  asked: 

"  Is  there  not  some  way  that  an  honest  company,  which  will  maintain  schedules 
and  protect  shippers  against  loss  in  transit,  can  be  protected  against  operators 
of  the  character  suggested  above?" 

The  highways-transport  committee  believes  this  question  is  one  which  State 
highways-transport  committees  may  very  well  and  profitably  take  up  for  study. 

Any  views  had  on  this  subject  by  State  highway  organizations,  or  by  anyone 
else,  would  be  welcomed  by  the  highways-transport  committee  of  the  Council 
of  National  Defense. 

Now  take  that  and  apply  it  to  the  interurbans.  It  tells  its  own 
story.  It  is  rather  remarkable  that  at  this  early  day  in  the  develop- 
ment of  trucking  that  they  should  have  to  issue  such  a  circular  as 
that.  We  do  not  ask  you  to  do  aw^ay  with  the  truck  hauling  by  motors, 
but  we  do  think  they  ought  to  be  under  the  same  kind  of  regulation 
and  restrictions  that  we  are  under. 

Mr.  Warren.  They  are  like  the  jitneys,  I  suppose,  are  they  not? 

Mr.  Henry.  They  are  worse;  that  is  all.  The  jitneys  are  lice,  and 
these  are  full-grown  animals.     [Laughter.] 

There  is  no  reason  why  this  sort  of  wildcatting,  as  this  gentleman 
calls  it  here,  should  be  permitted  to  go  on  uncontrolled,  and  I  am 
glad  to  know  that  some  fellow  going  into  the  truck  business  has  seen 
fit  to  call  attention  to  it.  It  may  bring  about  important  results.  It 
is  one  of  the  things  that  you  gentlemen  ought  to  take  into  considera- 

H50C43**— 20 46 


714       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

tion  and  take  such  action  as  you  may  think  is  best  in  regard  to  it,  be- 
cause it  amounts  to  a  great  deal.  ^^^4.^r^A^rr 

Now,  gentlemen,  Mr.  Hill  here  gave  me  a  memorandum  yesterday. 
I  think  you  will  hear  him  in  person.  It  is  about  the  Pacific  slope, 
and  I  am  not  going  to  siiy  much  about  the  Pacific  slope. 

The  Mc^Electric  Co.  is  losing  $1,400  a  day,  $500,000  a  year, 
from  iitney  buses  doing  country  business.  Now,  you  may  call  them 
interurban  jitneys,  if  you   want  to.    They  are  absolutely  uncon- 

^  In^San  Francisco  the  jitneys  were  uncontrolled  absolutely  until  the 
city-owned  property— it  is  not  city-owned,  broadly  speaking,  but  the 
city  built  it  on  Market  Street,  and  when  the  city  built  its  lines  up 
Mjirket  Street,  it  excluded  from  Market  Street  the  jitney,  but  it 
could  not  see  fit  to  do  it  when  the  privately  owned  company  was 
operating  on  Market  Street-and  there  was  no  relief  given  against 
the  jitney  in  San  Francisco  until  the  city  constructed  its  line.  Ihen 
it  tried  to  protect  its  own  line  without  giving  any  protection  to  its 

""VL^CHliRMAN.  Do  you  think  the  Council  of  National  Defense 
would  be  as  anxious  to  promote  reasonable  regulation  of  the  trucks 
as  it  has  been  in  selling  them  ? 

Mr.  Henry.  Do  you  want  me  to  answer  that  f 

The  Chairman.  Yes.  '  ii:«^. 

Mr  Henry.  I  think  not,  because  they  have  encouraged  the  selling , 

they  have  increased  the  selling  by  giving  out  the  idea  of  the  great 
things  that  could  be  done  with  trucking.  On  that  point,  I  want  to 
sav  that  the  interurban  people  of  the  country  are  not  afraia  of  the 
truck  competition,  if  the  trucking  business  bv  motoi-s  is  put  under 
rt^crulation  and  made  to  handle  business  like  they  ought  to.  We  can 
take  care  of  them  all  right  if  you  will  put  them  under  regulation. 

Now  so  far  as  the  general  business  of  the  interurbans  is  con- 
cerned! expense  of  construction  and  maintenance  has  ^one  clear  out 
of  s\<r\k  It  is  fair  to  say,  and  we  say  it  frankly,  that  in  our  section 
of  th'e  country,  where  the  interurbans  are  in  fairly  good  shape  and 
where  the  commissions  have  taken  care  of  us  as  best  they  could  in 
the  matter  of  the  increase  of  rates,  our  receipts  at  this  time  are 
fairly  promising,  quite  promising,  but  the  expense  of  operation  is 
still  going  up  For  instance,  in  the  last  60  or  90  aays  there 
has  b?cn  an  increase  of  about  10  per  cent  in  wages^-a  thing  which 
was  wholly  unlooked  for  when  the  armistice  was  signed. 

The  Chairman.  Has  the  National  War  Labor  Board  made  any 
wage  adjustments  for  your  lines? 

Mr.  Henry.  The  National  War  Labor  Board? 

The  Chairman.  Yes.  •       .i       «    r^u^r.^r 

Mr  Henry.  Will  you  permit  a  strong  expression  there?  Ihank 
God,  they  stayed  away  from  us.  W^e  did  not  have  to  go  to  the 
W^ar  Labor  Board.  We  were  able  to  take  care  of  wages  in  a  fairly 
satisfactory  manner,  owing  to  the  suitable  conditions  with  which 
we  surrounded  our  men.  ^      u-  u  ^u 

The  Ch\irm\n.  But  I  presume  that  the  adjustment  which  they 
made  for  the  street-car  lines  and  which  the  Director  General  made 
for  the  steam  raih-oads  has  had  its  reflection  m  mcreasing  the  costs 
of  your  companies. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       715 

Mr.  Henry.  Yes;  it  did  have.  For  instance,  we  have  to  pay  a 
dollar  and  a  quarter  for  ties  that  we  could  get  for  90  cents  if  it  were 
not  for  the  regulation  of  prices  by  the  Eailroad  Administration. 
They  bought  35  or  40  of  them,  and  they  put  a  price  on  them,  and  that 
is  the  price  that  they  charge  us  when  we  want  more  of  them. 

They  are  paying  trackmen  $3  a  day  at  a  minimum,  while  we  have 
our  men  working  right  across  the  fence,  and  they  were  work- 
ing contentedly  and  happily  at  $1.83,  when  this  commenced.  Since 
then,  we  have  put  our  wages  up  to  $2.50,  and  finally  to  $3  a  day. 
Those  are  the  things  which  have  helped  us.  The  Railroad  Ad- 
ministration and  the  outgrowth  of  the  war  has  helped  us  in  increas- 
ing our  operating  expenses  all  along  the  line.  That  is  the  history 
of  it. 

Another  thing  that  I  want  to  call  your  attention  to  is  this:  I 
have  a  letter  here  from  Mr.  Faber,  of  the  Aurora,  Elgin  &  Chicago 
llailroad  Co.,  which  calls  attention  to  a  matter  which  is  very  perti- 
nent. They  started  out  to  increase  passenger  rates.  They  came  to 
the  suburban  rates,  w^hich  had  always  been  ridiculously  low  for  a 
long  number  of  years.  I  will  not  say  "  always,"  because  I  have  not 
lived  always,  but  for  a  long  time. 

This  is  not  a  long  letter,  and  it  tells  the  story  quite  straight: 

The  Auroba  Elgin  &  Chicago  Railroad  Co., 

Aurora,  III,,  July  21,  1919, 
Mr.  Chas.  L.  Henry, 

President  and  General  Manager,  Indianapolis  &  Cincinnati 

Traction  Co.,  Indianapolis,  Ind. 

Dear  Mr.  Henry:  Permit  me  to  siij;ge.st  that,  in  your  remarljs  before  the 
Federal  Electric  Railway  Commission  at  Washington  on  Wednesday,  you  call 
operating  out  of  the  so-calle<l  metropolitan  districts,  where  the  electric  roads 
find  themselves  in  an  absolutely  helpless  condition  as  a  result  of  the  ruinous 
competition  in  suburban  passenegr  rates  established  by  the  steam  railroads 
on  their  so-called  commutation  and  multiple-trip-ticket  rates. 

You  are  very  familiar  with  the  condition  of  the  electric  interurban  railroads 
of  the  country  to-day,  particularly  with  respect  to  the  competition  of  the  steam 
lines,  where  the  rates  are  3  cents  per  mile. 

AVhat  I  want  to  particularly  call  your  attention  to,  in  addition  to  the  condi- 
tions with  which  you  nre  familiar,  is  the  ruinous  competition  of  the  extremely 
low  rates  on  suburban  multiple-trip-ticket  rates  in  effect  on  the  steam  railroads. 
The  rates  charged  by  the  steam  railroads  on  commutation  business  are,  in  some 
instances,  as  low  as  0.4  cent  per  mile.  The  2o-ride  tickets,  good  for  one  year 
and  good  for  bearer,  are  sold  at  from  0.9  cent  to  1.35  cents  per  mile.  These 
tickets  are  scalped  by  storekeepers  and  others,  and  are  generally  used  by  oc- 
casional riders  in  the  communities  served,  and  therefore  establish  the  going 
rate  paid.  This  business  is  not  only  done  at  a  direct  and  substantial  loss  to 
the  steam  railroads,  but  prescribes  and  limits  the  rates  of  the  electric  inter- 
urbans, and  results  in  a  return  of  less  than  cost  to  these  lines,  and  therefore  to 
a  confiscation  of  their  earnings  and  properties. 

Attached  herewith  please  find  a  few  letters  taken  from  ray  file,  from  which 
you  will  note  that  on  ^lay  ^  Traffic  Director  Chambers  advised  that  Director 
General  McAdoo  had  instructed  that  a  careful  study  be  given  these  rates  at 
once,  with  the  view  to  placing  them  on  a  consistent  and  reasonable  basis,  and 
for  that  purpose  a  committee  was  subsequently  appointed,  with  Mr.  Smith,  of 
the  New  Haven  road,  as  chairman. 

On  June  17,  1918,  a  conference  of  the  Inter-Regional  Passenger  Committee 
was  held  in  Chicago,  for  the  purpose  of  standardizing  surburban  fares,  and  the 
writer  appeared  as  representative  of  the  electric  interurban  roads,  A  further 
conference  of  this  committee  was  held  in  New  York  City,  and  on  ,Tuly  12  this 
committee  recommended  a  uniform  rate  per  mile  for  54  and  60-ride  monthly 
tickets,  and  that  all  forms  of  trip  tickets  be  removed  from  sale,  except  a  25- 
ride  family  ticket,  good  for  90  days,  to  be  sold  at  the  rate  of  2i  cents  per  mile. 


/ 


716       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Director  Chambers  approved  the  reconinieiulations,  with  tlie  exception  that 
he  decided  it  was  inexpedient  to  change  the  rate  on  54  and  60-ride  individual 
monthly  tickets  and  tlmt  the  rate  to  be  charged  for  the  2o-ride  tickets  was 
changed  from  21  cents  per  mile  to  2  cents  per  mile.  In  this  form  the  recom- 
mendations  were  npproved  by  the  Railroad  Administration,  and  the  effective 
date  of  the  new  rates  was  fixed  for  February  10,  1919. 

As  a  result  of  the  announcement  in  the  Chicago  newspai^ers  of  the  change  in 
suburban  rates,  the  State  attempted  to  enjoin  the  administration  from  i"aK»nf: 
the  new  rates  effective.  In  the  meantime,  the  question  of  State  rights  \yltli 
respect  to  the  fixing  of  intrastate  rates  for  telephones  and  railroads  was  raised 
In  a  number  of  States,  and  the  administration  decided  to  hold  up  the  commu- 
tation rate  matter  until  the  Supreme  Court  of  the  Uniteil  States  decided  defi- 
nitely the  question  of  whether  the  administration  or  the  State  had  the  power  to 
fix  Intrastate  rates.  The  Supreme  Court  recently  unanimously  decided  that  this 
power  was  vested  with  the  administration.  I  have  been  Informetl  that  the 
steam  railroads  have  requested  some  modification  in  the  Government  order 
as  proposed,  and  that  the  final  recommendations  are  now  before  the  administra- 
tion at  Washington.  In  the  meantime,  the  electric  lines  are  unable  to  obtain 
relief  through  Increased  rates  to  offset  the  advanced  cost  of  operation. 

The  effect  of  these  extremely  low  suburban  multiple-trip  ticket  rates  upon 
the  electric  lines  serving  the  same  territory  is  to  limit  the  price  of  transpor- 
tation over  their  lines  and  forces  tli^m  to  do  business  at  rates  that  spell  disaster. 

There  Is  some  hope,  through  the  obtaining  of  relief  through  Increased  rates, 
for  the  local  street-railway  properties  In  large  cities  where  distances  are  such 
that  most  of  the  people  must  ride.  There  is  no  relief  that  I  can  see  for  the 
electric  Interurban  roads  If  the  competing  steam  roads  are  allowed  to  continue 
to  furnish  passenger  service  at  rates  which  are  admitted  by  them  to  be  much 
below  their  out-of-pocket  costs,  regardless  of  Investment,  taxes,  etc. 

During  my  work  at  Washington,  as  manager  of  the  American  Electric  Rail- 
way Association  War  Board,  I  had  opportunity  to  see  a  report  covering  the  cost 
of  operating  the  suburban-commutation  business  operated  by  the  steam  rail- 
roads In  the  Chicago  district,  prepared  by  Mr.  C.  F.  Balch,  statistician  of  the 
Chicago  &  North  Western  Railroad.    This  report  shows : 

Gross  revenue  from  transportation  for  year  ended  Dec.  31,  1918_  $6, 251, 609.  54 
Transportation    expenses    and    maintenance    of    equipment    ex- 
penses (commonly  known  as  out-of-pocket  expenses) 1,569,422.76 

Total  operating  costs  amounted  to 7,  936,  766.  96 

Net  revenue   (deficit) 1,685,157.42 

To  this  deficit  should  be  added — 

Estimated  taxes  assignable  to  suburban  traffic 33<,614.  69 

Rental  of  property  used  In  suburban  service 3, 853, 929. 15 

From  these  figures,  the  amount  of  gross  revenue  which  It  would  be  neces- 
sary to  derive  from  suburban  service  to  make  It  remunerative  as  all-rail  traffic 
conducted  by  class  1  railroads  In  the  western  district  In  1916  would  have  to 
be  $12,128,310.80,  or  about  double  the  amount  that  was  actually  derived  from 
this  class  of  business,  viz,  $6,251,609.54. 

The  Federal  Electric  Railway  Commission  couhi  Ue  helpful  In  this  matter  by 
urging  the  administration  to  act  promptly  and  establish  these  suburban  mul- 
tiple-trip-ticket  rates  upon  a  basis  that  would  recognize  the  cost  of  the  service 
and  a  fair  return  upon  the  Investment  In  the  property. 

Very  truly,  yours, 

Edwin  C.  Faber, 

Vice  President  and  General  Manager. 
P.  S.  Please  return  the  inclosed  papers  for  mj^  files  after  they  have  served 
your  purpose.  *  ^   ^   ^ 

Now  then,  they  raised  it  10  per  cent,  and  they  stopped  at  that. 
They  put  the  steam  roads'  passenger  rates  up  to  3  cents,  but  they 
raised  the  suburban  rates  10  per  cent,  and  left  them  so  low  that 
neither  the  steam  roads  nor  the  electric  roads  can  do  business  and 
make  any  money.  They  can  not  do  it.  We  have  not  anything  of 
that  kind  at  Indianapolis,  but  that  is  the  situation  there. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION,       717 

Mr.  Warren.  Mr.  Henry,  do  you  know  about  the  railways  in  the 
small  towns,  as  to  what  their  condition  is  ? 

Mr.  Henry.  The  electric  railways? 

Mr.  Warren.  Yes. 

Commissioner  Beall.  Do  you  mean  the  interurban  roads? 

Mr.  Warren.  AVell,  I  mean  others. 

Mr.  Henrf.  You  mean  giving  local  city  service? 

Mr.  Warren.  Yes. 

Mr.  Henry.  In  small  cities  ? 

Mr.  Warren.  Yes. 

Mr.  Henry.  Yes,  sir;  I  know  a  great  deal  about  them. 

Mr.  Warren.  Will  you  tell  us  about  their  condition  ? 

Mr.  Henry.  Their  condition  is  worse  than  any  others,  than  those 
in  the  larger  cities.  The  conditions  have  hurt  them  worse.  The  ex- 
pense of  operation  has  run  high.  I  do  not  know  any  of  them  in  any 
of  the  small  cities,  in  the  interurban  field,  which  I  have  been  talkmg 
about,  which  is  making  any  money.  They  are  like  the  interurban 
roads,  about  which  I  was  going  to  tell  you,  that  on  account  of  the 
conditions  which  I  have  cited,  there  is  not  an  interurban  road  in  our 
section  of  the  country,  and  I  do  not  think  in  any  other  section,  that  is 
paying  a  dividend  on  its  stock,  either  preferred  or  common — not  one 
of  them.  They  are  trying  to  live  through  these  conditions  and  do 
the  best  they  can,  and  some  of  these  things  I  have  spoken  to  you 
about  are  permanently  existing.  They  are  not  just  for  the  day. 
They  have  all  of  these  burdens  that  you  have  heard  about  for  the 
last  couple  of  days.  There  is  no  reason  to-day,  and  there  never  was, 
in  my  opinion,  which  I  will  state — I  am  an  Irishman,  and  I  have  a 
right  to  state  my  opinion — in  my  opinion  there  never  was  a  reason, 
and  there  is  not  now  any  reason,  why  any  charge — and  that  is  as 
broad  as  I  know  how  to  make  it— to  be  put  up  against  an  interurban, 
or  city  line  for  that  matter,  but  I  am  speaking  about  interurbans, 
except  the  cost  of  carrying  the  passengers  and  the  freight  and  express 
business.  There  is  not  anything,  gentlemen,  that  is  so  absolutely 
necessary  to  the  prosperity  of  this  country  as  transportation.  We  can 
not  exist  without  it.  The  cities  and  towns  of  the  country  have  not 
learned  to  appreciate  what  might  be  done,  even  in  the  use  of  inter- 
urbans. These  interurban  cars  ought  to  be  allowed  to  run  right  into 
their  market  houses,  with  the  produce  of  the  country  for  a  hundred 
miles  around,  and  cut  out  all  of  the  charges  for  trucking  and  dray- 
age  and  everything  of  that  kind.  It  can  be  done  just  as  easily  as  not, 
and  it  should  be  done.  That  is  one  of  the  things  that  should  be  done 
to  help  the  business  and  to  help  the  community. 

Now,  there  is  not  an^  reason  why  anything  more  should  be  charged 
against  the  man  who  is  riding  on  our  line  or  shipping  goods  on  our 
line,  or  shipping  express  on  our  line — anything  at  all,  for  only  the 
cost  and  the  reasonable  profit  to  do  that  business.  Why?  Why? 
You  take  it  in  the  cities.  The  merchant  may  ride  down  town,  if  he 
wants  to,  in  his  limousine,  but  his  customers  are  going  down  on  the 
street  car.  That  is  the  way  it  is.  The  man  from  the  country  may 
ride  in  alongside  of  the  interurban  road  to  Indianapolis  to  trade  or 
to  attend  to  business,  or  anything  of  that  kind,  but  the  mass  of  the 
people  are  going  to  ride  on  the  interurban  cars,  and  they  do  ride  on 
them  right  along,  constantly. 


718       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

You  heard  something  said  here  yesterday  I  believe  it  w.is  about  ^ 
the  decrease  of  business.  We  had  a  striking  illustration  ot  that.  Urn 
i^vs^^^^^^  put  up  to  2i  cents  a  mile  in  the  last  few  days  of  January  of 
list  year  I  kept  an  accurate  account,  a  distributor's  account,  ot 
ever?  day  since  then.  Our  business  began  running  down  m  the  num^ 
ber  of  passengers— down,  down,  down,  down,  and  down,  and  1 
CO  ildn't^mderrtand  it;  and  when  Mr.  McAdoo  put  the  railroad  fares 
im  to  3  cents  I  said,  "  is^ow,  we  will  see  how  our  number  of  passengers 
w^  1  inc'eai:"  Thk  was  put  on  on  the  10th  of  June,  last  year,  and 
tTe  following  month,  in  JuV,  it  showed  the  greatest  loss  in  the  num- 
ber of  passengers  on  our  line  that  we  had  ever  had  at  any  tmie-2;) 
per  cent  of  the  number  of  passengers  as  compared  with  July  of  the 

^""Xowf that  was  not  attributable  to  the  fares  It  is  attributable  to 
two  or  three  things  besides  the  rate.  In  the  first  place,  the  people 
had  made  up  their  minds  to  save  their  money ;  they  were  not  going 
to  spend  their  money  unless  they  had  to,  and  that  is  the  reason  that 
thev  stopped  riding  a  great  deal.  The  other  was  that  the  flower  of 
d^^cS^  the  young^men  of  the  land,  had  gone  into  the  Army. 
They  constituted  the  moving  part  of  the  population  very  hirgely. 
That  was  another  thing  which  really  cut  down  the  number  of  fares. 
Since  then,  since  the  close  of  the  war— I  niean  the  real  close  of  the 
war  •  I  do  not  mean  the  theoretical  close  of  the  war— since  the  real 
close  of  the  war,  they  have  been  coming  back  gradually,  and  our 
business  is  increasing  constantly,  all  the  time.  Now,  under  a  2  or  3 
or  4-cent  fare,  as  against  a  2J-cent  fare  a  year  ago,  we  have  ]ust  the 
10  per  cent  increase,  and  our  passenger  business  shows  an  increase  ot 
over  20  000,000  last  year.  So  that  about  as  much  is  coming  from  old 
business,  coming  back,  as  well  as  the  mcreased  fare.  ^,    ^      .  , 

^Ir.  Warren.  How  does  that  traffic  compare  with  that  of  two 

years  ago? 

Mr.  Henry.  In  number  of  passengers  < 

Mr.  Warren.  Yes. 

Mr.  Henry.  It  is  still  less  than  it  w  as  two  years  ago. 

Mr.  Warren.  But  not  very  much? 

Mr.  Henry.  Not  so  much  less.  . ,   ,  .  .  • 

Mr  AYarren.  So  that  there  is  a  decided  increase  m  revenue? 

Mr  Henry.  Oh,  yes;  the  increase  in  revenue  is  very  good.  We 
did  not  ask  the  commission  to  allow  us  to  charge  a  3-cent  fare.  VVe 
asked  for  a  2J-cent  fare,  but  that  is  what  they  gave  us. 

Mr.  Warren.  Have  you  any  doubt  that  a  reasonable  increase 
would  permanently  increase  your  revenue  account? 

IVIr.  Henry.  Th'ere  is  no  doubt  alx)ut  it.  rr    ^    t  -  a 

Mr.  Warren.  So  that  you  are  not  afraid  of  the  effect  of  increased 

^Mr.*  Henry.  No,  sir;  we  are  not  afraid.     We  put  in  a  2fcent  fare 
in  July,  1917,  in  the  face  of  the  2-cent  law  on  the  statute  book  regu- 
lating the  steam  roads.  .,        xi  ^  a;a 
Ur.  Warren.  And  you  did  not  lose  any  more  then  than  you  did 

after  the  3-cent  fare  went  into  effect?  xi      o        ^         +i 

Mr.  Henry.  No;  we  lost  more  when  it  came  to  tiie  3-cent  on  tiie 

steam  roads  than  we  did  before.  i    j     js 

Mr   W^\RREN.  Mr.  Henry,  the  other  day  a  question  was  asked  of 

one  of  the  witnesses  whether  the  street  railways  had  considered— 


PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION.       719 

the  city  roads  now,  and  I  suppose  you  are  pretty  familiar  with  the 
city  system  in  Indianapolis? 

Mr.  Henry.  Yes;  I  know  a  good  many  of  them. 
.    Mr.  Warren.  Would  there  be  a  material  increase  from  revenue 
by  doing  city  express  business?     What  do  you  think  about  that?     I 
am  not  speaking  of  the  interurbans. 

Mr.  Henry.  That  would  depend  a  gi-eat  deal  on  the  way  the  cities 
are  built,  how  compact,  largely.  The  less  compact,  the  more  need 
there  is  for  that  kind  of  business.  The  more  compact,  the  less  need 
there  is,  because  of  the  short  distances;  but  I  think  in  almost  every 
case,  very  much  could  be  done  on  that. 

Mr.  Warren.  It  would  necessitate  some  sort  of  a  freight  terminal 
on  each  line,  would  it  not;  either  that  or  wagon  delivery? 

Mr.  Henry.  Yes,  it  would,  but  I  think  it  could  be  worked  out  very 
largely  without  very  much  building  in  many  places. 

Mr.  Warren.  You  think  that  is  a  thing  they  may  do? 

Mr.  Henry.  I  do.  I  think  the  street  railway  must  look,  perhaps 
not  to  as  great  a  degree  as  they  should,  to  the  income  from  freight 
and  express,  but  there  is  no  reason  at  all  why  the  street-railway  car 
should  not  pull  a  trailer  hauling  anything  that  is  hauled  in  a  truck 
alongside  of  it.    If  there  is,  I  never  could  find  a  reason  for  it. 

Mr.  Warren.  Except  that  the  truck  can  go  to  the  sidewalk,  and 
the  trailer  can  not. 

Mr.  Henry.  Yes;  it  can  do  that,  but  I  am  not  talking  about  the 
inconvenience  of  the  people. 

Mr.  Warren.  Oh! 

Mr.  Henry.  So  far  as  the  convenience  of  the  people  is  concerned, 
that  does  not  mean  so  much. 

Mr.  Warren.  No;  I  do  not  mean  that,  but  I  mean  as  a  revenue 
producer,  whether  the  company  could  make  much  net  money  out 

of  it. 
Mr.  Henry.  I  think  in  large  cities  it  could,  but  in  small  cities,  no. 

Mr.  Warren.  Yes? 

Mr.  Henry.  That  would  be  my  notion  about  that. 

Mr.  Warren.  Do  you  know  of  any  cases  where  street-railway  cars, 
as  I  understand  they  do  in  Grand  Rapids,  carry  a  mail  box? 

Mr.  Henry.  Yes,' they  do  there,  and  I  happen  to  know  that  they 
do  in  Des  Moines,  Iowa,  simply  from  the  fact  of  my  daughter's  be- 
ing out  there  as  an  aide  in  the  hospital,  I  know  about  that.  I  know 
about  those  two  places. 

Mr.  Warren.  So  that  letters  can  be  dropped  in  the  box  on  the  car? 

jMr.  Henry.  Yes;  dropped  in  the  post-office  box  on  the  car. 

Mr.  Warren.  Do  they  have  any  of  them  on  interurbans? 

Mr.  Henry.  No,  sir. 

Mr.  Warren.  These  interurbans,  Mr.  Henry,  are  built  largely  in 

the  highway? 

I^Ir.  Henry.  No,  sir.  Originally  they  started  to  build  them  on 
the  highways,  but  they  soon  disregarded  that;  they  discovered  that 
it  was  a  mistake,  and  they  are  now  largely  built  on  private  rights 

of  way. 

Mr.  Warren.  And  where  they  are  built  (m  the  highways,  they  are 

usually  built  outside  of  what 'we  call  the  worked  portion  of  the 
highway  ? 


720       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Henry.  Yes;  and  whenever  the  highway  is  wide,  for  instance, 
like  the  old  national  road  built  across  the  country,  a  hundred  feet 
wide — and  I  might  say  that  that  is  theoretical — but  they  are  not 
any  more;  the  honest  farmer  has  encroached  on  them;  they  are 
built  clear  outside  of  it,  from  the  traveled  highway.  We  have  a 
road  10  or  12  miles  on  the  old  Michigan  right  of  way,  which  is 
theoretically  a  hundred  feet  wide,  and  we  are  outside  of  the  side 
ditch  of  the  highway,  even,  and  there  are  some  places  where,  on  the 
highways 

^Ir.  Warren.  Where  they  approach  villages? 

Mr.  Henry.  Yes;  they  have  to  do  that  where  we  go  through  the 
streets  of  villages. 

Mr.  Warren.  But  the  great  percentage  of  their  mileage 

Mr.  Henry.  Oh,  a  large  part. 

Mr.  Warren  (continuing).  Is  ordinarily  on  the  highways;  they  are 
built  alongside  of  it? 

Mr.  Henry.  Yes. 

Mr.  Warren.  But  they  are  on  private  right  of  way,  are  they  not  ? 

Mr.  Henry.  Yes,  sir ;  we  have  41  miles  of  road  from  Indianapolis 
to  Rushville.  That  is  not  on  the  highway  after  we  get  away  from 
the  suburbs  of  Indianapolis.  We  even  have  our  private  right  of 
way  through  the  little  towns,  and  then  beyond  Rushville,  20  miles 
farther,  it  is  the  same  Avay. 

Mr.  Warren.  As  I  understand  vou,  none  of  these  companies  at  the 
present  time  are  paying  their  dividends. 

Mr.  Henry.  Xo,  sir;  we  do  not  know  what  a  dividend  is,  Mr, 
Warren. 

The  Chairman.  How  long  has  that  condition  lasted? 

Mr.  Henry.  Well,  with  our  company  it  is  bound  to  exist  until  we 
get  our  road  completed  to  Cincinnati ;  that  is,  we  do  not  expect  to  pay 
dividends  until  we  get  there.  So  that  is  out  of  the  question,  as  far  as 
dividends  are  concerned,  but  with  most  of  the  companies  the  dividend 
on  preferred  stock  was  paid  four  or  ^ye  years  ago. 

Mr.  Warren.  They  all  had  to  stop  ? 

Mr.  Henry.  Yes. 

Mr.  Warren.  Are  they  earning  fixed  charges  and  their  interest? 

Mr.  Henry.  No,  sir ;  they  are  not  all.  In  Indiana  they  are  mostly 
and  in  Ohio,  and  so  forth,  but  they  are  not  all  of  them  earning  their 
fixed  charges.  There  are  some  roads  that  are  not.  Most  of  them  now 
are.  Our  condition  is  better  under  the  increased  fares  than  it  was 
before. 

Mr.  Warren.  And  what  further 

Mr.  Henry.  Mr.  Warren,  will  you  allow  me  to  interject  a  remark 
right  there  ? 

Mr.  Warren.  Yes,  sir. 

Mr.  Henry.  In  Illinois  the  condition  is  peculiar.  Our  public- 
service  commission  held,  and  I  guess  rightly  so,  that  they  had  no 
right  to  raise  the  fares  above  the  statutory  limitation ;  so  the  roads  in 
Illinois,  all  of  them,  went  to  charging  3  cents  a  mile;  and  it  went 
into  the  courts,  and  they  enjoined  the  public  authorities  from  inter- 
fering with  them,  and  they  are  operating  on  3  cents  a  mile  in  that 
way.    That  is  a  peculiar  condition  in  Illinois. 

C(vnmissioner  Sweet.  W^hat  has  been  your  experience  with  regard 
to  patronage? 

I 


PROCEEDINGS  Or  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       721 

Mr.  Henry.  Do  you  mean  out  there? 

Commissioner  Sweet.  In  Illinois. 

Mr.  Henry.  They  claim  they  have  done  well  by  it.  They  have 
lost  very  little  patronage.  Nobody  will  claim  that  an  increased  fare 
does  not  do  any  injury  to  the  roads.     It  always  does  some. 

Commissioner  Sweet.  But  going  to  a  3-cent  tare  in  Illinois  has  not 
proved  serious? 

Mr.  Henry.  No  ;  only  in  Ohio.  They  are  nearly  all  on  the  3-cent 
basis  in  Ohio.  Our  State  is  right  in  there  at  2}  cents,  and  in  Michi- 
gan they  could  not  raise  the  fares  because  of  local  legislation.  The 
last  legislature  made  a  provision  for  them  to  raise  their  fares.  I  can 
not  tell  you  just  what  the  arrangement  was  just  now. 

Mr.  Warren.  None  of  your  roads  were  taken  over  or  guaranteed 
any  return  by  the  Railroad  Administration? 

Mr.  Henry.  No,  sir ;  but  they  were  assured  of  losses. 

Mr.  Warren.  The  assurance  proved  correct,  did  it  not? 

Mr.  Henry.  Yes ;  they  were  assured  of  a  loss,  and  they  got  it. 

Mr.  Warren.  Do  you  feel  that  a  further  increase  of  rates,  an  im- 
mediate increase  of  rates,  would  help  you  ? 

Mr.  Henry.  In  our  individual  case,  I  have  some  doubt  about  it. 
Our  community  is  there;  we  are  so  situated  that  I  would  rather 
have  to-day  the  2f-cent  fare.  I  think  at  this  time  that  is  the  best 
bjvsis 

Mr.  Warren.  What  are  the  companies  doing  about  depreciation, 

Mr.  Henry? 

Mr.  Henry.  You  mean  as  to  their  account? 

Mr.  Warren.  Yes. 

Mr.  Henry.  Under  the  instructions  of  the  Interstate  Commerce 
Commission,  which  we  follow  in  our  accounts,  we  keep  a  deprecia- 
tion account  on  our  equipment,  and  nothing  else.  They  have  never 
required  it,  except  on  the  equipment. 

Mr.  Warren.  Independently  of  the  accounts,  are  the  companies 
earning  enough  properly  to  take  care  of  depreciation? 

Mr.  Henry.  No,  sir;  they  are  not.  Our  State  commission— not 
in  interurban  cases,  but  in  other  public  utilities  of  the  State — fixed 
a  sort  of  rule  in  the  different  hearings  that  7  per  cent  for  income  and 
3  per  cent  for  depreciation,  which  would  make  10  per  cent,  was 
right;  that  is,  in  deciding  what  they  would  allow  them  to  charge 
in  rate  cases,  they  fixed  that  rule  tentatively. 

Mr.  Warren.  Yes. 

Mr.  Henry.  But  we  never  had  any  opportunity  to  use  that  rule. 

Mr.  Warren.  Either  as  regards  the  return  or  the  depreciation? 

Mr.  Henry.  No  ;  we  did  not. 

Mr.  Warren.  AVell,  the  first  suggestion  you  would  make  is  the 
elimination  of  these  local  requirements  which  retard  and  interfere 
with  your  business  and  add  unnecessary  charges  on  your  income? 

Mr.  Henry.  No  ;  that  is  not  the  first. 

Mr.  Warren.  What  would  he  your  first? 

Mr.  Henry.  That  is  not  the  first,  because  it  is  not  the  quickest. 

Mr.  Warren.  What  is  the  first? 

Mr.  Henry.  The  first  ought  to  be  the  quickest,  and  that  ought  to 
be  everything  that  the  Government  and  the  State  can  do  to  help  them 
in  an  emergency,  in  the  emergency  that  is  surrounding  the  roads. 


m 


722       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

One  of  them  is  the  Government.  The  Government's  administration 
of  the  raih'oads  ought  to  be  equitable  and  fair.  I  do  not  know  any 
i"eason  why  tlie  Government,  running  one  utility,  should  run  it  in 
such  a  way  as  to  cripple  other  utilities  which  are  needed  just  as 
much. 

Mr.  Warren.  And  from  your  knowledge  of  it,  they  are  the  same 
kind  of  service,  at  that? 

Mr.  Henry.  Absolutely  the  same  general  kind  of  service.  An- 
other thing:  I  listened  with  a  great  deal  of  interest  to  some  of  the 
things  that  have  been  said  here  in  regard  to  the  taxation  question. 
The  professor,  in  talking  about  the  income  tax,  mentioned  that.  I 
had  occasion  a  short  time  ago,  in  appearing  before  our  State  tax 
board,  to  argue  a  point  with  them.  It  does  not  have  any  bearing 
on  this  question,  except  that  it  is  similar  in  its  results,  if  we  coidd 
get  it.  I  contended  before  the  State  tax  board,  and  I  think  rightly, 
that  our  properties  had  no  value  for  the  purpose  of  taxation,  or  for 
any  other  purpose,  for  that  matter,  except  the  value  represented  by 
their  eammg  power.  We  are  working  under  the  State.  We  are 
trustees  for  the  State.  We  can  not  quit  our  business  if  we  want  to. 
We  can  not  fix  our  rates  if  we  want  to,  except  as  the  commission 
authorizes  us.  We  can  not  even  tear  up  our  tracks,  unless  the  com- 
mission authorizes  it.  So  that  there  can  be  no  reason,  in  my  opin- 
ion, why  we  should  be  taxed  upon  a  value  any  more  than  what  our 
earning  power  shows  at  this  time. 

Applied  to  our  individual  case,  T  showed  the  commission,  in 
round  numbers — we  were  speaking  about  their  assessment — it  was 
$2,000,000  as  they  fixed  it,  whereas  if  we  applied  it  under  the  10 
per  cent  that  I  spoke  of  there,  it  should  have  been  $700,000  less. 

Mr.  Warren.  The  valuation? 

Mr.  Henry.  Yes.  Now,  that  may  not  be  an  income-tax  proposi- 
tion, but  it  comes  to  the  same  point. 

The  Chairman.  Would  you  want  to  use  that  same  basis  of  value 
for  rate-making  purposes? 

Mr.  Henry.  Well,  I  would  say  this  in  that  connection :  Our  com- 
mission has  never  had  any  formal  valuations  of  any  of  the  prop- 
erties, but  they  have  had  informal  valuations  of  them,  and  in  one 
case — ^I  will  not  give  the  name,  as  I  am  not  authorized  to  do  it — 
tentatively  the  tax  board  had  fixed  a  valuation  that  was  $5,000  a 
mile  above  what  the  jMiblic-service  commission  was  using  in  its 
permission  for  the  fixing  of  rates.  That  does  not  answer  your 
question,  but  it  shows  how  it  is  turned  the  other  way. 

The  Chairman.  I  think  it  depends  upon  the  extent  to  which  you 
capitalize  the  earnings.  Some  railroads  will  have  a  very  large  value 
and  some  will  not  have  any  value  at  all. 

Mr.  Henry.  They  have  no  value,  except  what  their  earnings  show, 
and  if  they  have  the  earnings,  I  do  not  know  anv  reason  why  they 
should  not  be  taxed  upon  the  value  according  to  the  earnings. 

Mr.  AVarren.  You  look  upon  them  something  as  a  highway? 

Mr.  Henry.  Yes. 

Mr.  Warren.  A  highway  produces  no  income,  and  the  abutting 
owner,  who  owns  no  fee  in  the  middle  of  the  highway  subject  to 
servitude,  is  not  taxed. 

jMr.  Henry.  That  is  right.    I  think  taxation  is  a  matter  of  justice, 
distributed  properly. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       723 

Mr.  Warren.  Well,  you  have  heard  what  Prof.  Bullock  said  this 
morning — that  he  would  take  off  these  special  franchise  taxes,  and 
when  a  sufficiently  serious  emergency  existed,  he  thought  it  would 
be  proper  to  take  off  all  the  taxes,  even  the  property  tax. 
Mr.  Henry.  Temporarily. 
Mr.  Warren.  Temporarily? 
Mr.  Henry.  Yes,  sir. 

Mr.  Warren.  Do  you  think  such  an  emergency  as  that  has  arrived  ? 
Mr.  Henry.  I  think  it  has. 

Mr.  Warren.  And  that  if  all  of  those  taxes  could  be  temporarily 
removed  from  these  companies,  they  could  pay  dividends? 
Mr.  HENRy.  Yes. 

Mr.  Warren.  Is  there  anything  else?  That  is  the  second.  The 
first  thing  you  say  is  that  the  Government  ought  not  to  discriminate 
against  these  electric  railwa3^s. 

Mr.  Henry.  The  next  is  that  after  you  have  taken  care  of  the 
emergency  which  is  before  us,  then  all  of  these  burdens  that  are 
not  chargeable  as  a  part  of  the  transportation  expense  should  be 
taken  off  of  every  one  of  the  roads. 

Mr.  Warren.  And  that  should  be  a  permanent  change? 
Mr.  Henry.  That  should  be  a  permanent  change. 
Mr.  Warren.  Then,  how  about  the  regulation  of  the  trucks? 
Mr.  Henry.  The  regulation  of  the  trucks?    I  should  say  that  they 
should  be  regulated  locally  by  the  public-service  commissions  of  the 
States,  and  that  they  should  be  required  to  file  schedules  and  observe 
them.    That  is  my  notion  about  that. 
\       Mr.  Warren.  And  they  should  be  required  to  render  their  services 

regularly  ? 
k       Mr.  Henry.  Yes. 
I       Mr.  Warren.  And  reliably? 
}       Mr.  Henry.  Yes. 
!       Mr.  Warren.  Just  as  the  railways  do? 

Mr.  Henry.  Absolutely.    In  other  words,  in  the  language  of  the 
•   article  which  I  read  from  that  circular,  the  "  wildcatting  "  ought  to 

be  stopped. 
!       Mr.  Warren.  And  although  the  jitneys  are  only  lice,  as  compared 
with  these  trucks,  the  jitneys  ought  to  be  subjected  to  similar  treat- 
'   ment  ? 

\       Mr.  Henry.  Oh,  yes. 
!       Mr.  Warren.  Is  there  anything  further? 

Mr.  Henry.  I  do  not  think  of  anything  else,  Mr.  Warren. 
Mr.  Warren.  How  about  the  delays  in  securing  an  increase  of 
rates? 

Mr.  Henry.  Well,  that  hurt  us  locally  and  generally  all  over  the 
\  country,  more  than  any  other  one  thing.    It  is  largely  attributable, 
or  has  been,  to  a  condition.    I  gave  you  an  instance  of  the  delays 
which  we  had.    But  you  take  Michigan.    Just  a  month  ago,  not  60 
days,  that  was  the  first  relief  that  they  got  on  the  question  of  rates. 
Mr.  AVarren.  Well,  how  long  had  they  tried  to  get  it? 
Mr.  Henry.  Well,  they  tried  right  away;  but  I  think  the  com- 
mission was  right,  and  I  think  the  traction  companies  believed  they 
were  right,  in  saying  that  they  had  not  any  power,  and  that  they 
had  to  go  to  the  legislature. 


724       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Mr.  Warren.  That  was  not  a  question  of  delay  on  the  part  of  the 
comiTiission  ? 

Mr.  Henry.  No,  sir;  I  do  not  think  the  commission  in  any  case 
that  I  know  of— the  State  commission — can  be  justly  criticized,  ex- 
cept that  they  did  not  see  the  need  quick  enough.  We  felt  it  quicker 
than  they  could  see  it. 

Mr.  Warren.  But  where  there  are  laws  that  interfere  with  prompt 
action,  or  where  there  are  franchise  obligations  that  interfere  with 
prompt  action,  or  some  things  that  prevent  action  altogether,  you 
think  they  should  be  furnished  by  changing  those  laws? 

Mr.  Henry.  I  do. 

Mr.  Warren.  And  those  franchise  provisions? 

Mr.  Henry.  Yes,  I  do ;  and  the  people  believe  it. 

Mr.  Warren.  You  think,  so  far  as  your  State  is  concerned — Indi- 
ana— when  that  situation  exists,  or  is  brought  about,  you  can  rely 
upon  the  commission  for  sufficiently  prompt  action  ? 

Mr.  Henry.  I  do.  I  have  great  confidence  in  our  commission,  not 
only  in  its  present  make-up,  but  in  former  makes-up  of  the  com- 
mission. 

Mr.  Warren.  How  about  the  other  States  in  which  the  interurbans 
operate  ? 

Mr.  Henry.  So  far  as  I  know — and  I  know  a  great  deal  about 
it,  probably  as  much  as  anybody  does  in  the  country — the  State 
commissions  have  not  been  unfavorable  to  the  interurbans.  They 
are  regarded  as  the  people's  mode  of  transportation,  the  mode  which 
the  people  w^ant,  and  it  should  be  taken  care  of. 

Mr.  Warren.  Have  you  had  much  opposition  from  the  people 
"which  you  serve  in  the  increases? 

Mr.  Henry.  No,  sir;  none.  I  went  down  to  the  towns — this  will 
illustrate  it — I  went  down  to  the  towns  along  our  line,  the  principal 
towns,  before  I  filed  the  application  for  the  2.5-cent  fare,  and  I  put  a 
notice  in  the  paper  and  called  for  a  public  meeting,  and  I  got  an 
actual  affirmative  indorsement  from  every  one  of  these  communities 
to  the  commission  to  grant  the  increase ;  and  I  think,  in  many  cases, 
we  make  mistakes  in  not  going  right  to  the  people  to  get  their  affirma- 
tive support. 

Mr.  Warren.  So  that  when  you  took  your  case  before  the  com- 
mission you  had  practically  the  indorsement  of  all  your  communities? 

Mr.  Henry.  I  had  it  absolutely. 

Mr.  Warren.  Do  you  think,  perhaps,  the  delay  would  have  been 
greater  if  you  had  not  had  that  ? 

Mr.  Henry.  No.  I  think  they  got  muddled  on  the  2-cent-fare  law. 
That  caused  the  most  of  the  delay. 

Mr.  Warren.  Yes. 

Mr.  Henry.  I  used  the  word  "  muddled,"  because  it  was  muddled. 
The  proposition  itself  was  as  clear  as  could  be,  but  they  got  muddled 
on  it.  They  did  not  want  to  violate  the  law,  and  they  thought  they 
could  say  that  they  had  not  jurisdiction  and  get  rid  of  the  bother. 
That  is  the  only  thing  I  blame  them  for. 

Mr.  Warren.  That  is  all  I  want  to  ask. 

The  Chairman.  What  three  States  embrace  the  Central  Electric 
Traffic  Association  ? 

Mr.  Henry.  Excuse  me.    I  did  Tiot  catch  your  question. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       725 

The  Chairman.  I  say,  what  three  States  are  embraced  in  the 
Central  Electric  Traffic  Association  ? 

Mr.  Henry.  The  Central  Electric  Traffic  Association  embraces 
nearly  all  of  the  roads  in  Indiana,  Ohio,  Michigan,  a  few  of  the  roads 
around  Louisville,  Ky.,  and  a  few  in  the  western  part  of  Pennsyl- 
vania. 

The  Chairman.  And  your  mileage  is  something  over  6,000? 

Mr.  Henry.  Yes,  sir. 

The  Chairman.  How  many  railroads  are  there  ? 

Mr.  Henry.  I  can  not  give  you  the  number.     I  do  not  have  them, 
in  my  mind. 

The  Chairman.  Do  j^ou  have  available  figures  showing  the  mile- 
age of  each  separate  corporation  ? 

Mr.  Henry.  Of  each  of  these  ? 

The  Chairman.  Yes. 

Mr.  Henry.  I  can  get  that.  I  have  not  got  that  with  me,  but  I 
can  furnish  it  to  the  commission,  and  would  be  very  glad  to  do  it. 

The  Chairman.  Will  j^ou  file  with  this  commission  a  statement 
fchowing  the  mileage  of  each  of  those  railroads  ? 

Mr.  Henrf.  Yes,  sir. 

The  Chairman.  Their  capitalization  divided  into  stocks  and 
bonds  ? 

Mr.  Henry.  I  may  have  difficulty  about  doing  that.  I  will  do  it 
as  far  as  I  can. 

The  Chairman.  Let  me  present  my  request,  and  then  do  the  bast 
you  can — the  capitalization  divided  between  stocks  and  bonds,  and 
also  a  statement  showing  what  dividends  had  been  paid  upon  the 
stock,  and  the  other  fixed  charges  during  the  past  five  j^ears. 

Mr.  Henry.  I  w^ill  try  to  get  that.    I  can  get  most  of  it,  I  know. 

Mr.  Warren.  These  statistical  data  that  the  commission  has  asked 
for  from  time  to  time,  I  presume,  it  will  be  perfectly  proper  to  file 
after  our  hearings  are  closed? 

The  Chairman.  Oh,  yes. 

Mr.  Henry.  There  are  12  roads  running  out  of  Indianapolis,  and 
in  order  that  you  may  know  that  the  service  which  I  speak  of  was 
not  attributable  to  a  want  of  steam  railroads,  there  are  15  steam 
railroads — not  companies,  roads. 

Commissioner  Sw^eet.  Are  you  a  lawyer? 

Mr.  Henry.  No,  sir;  I  used  to  be. 

Commissioner  Sweet.  You  are  a  "  has  been  "  ? 

Mr.  Henry.  I  am  a  "  has  been  " ;  yes,  sir.  I  was  a  lawyer  until  I 
drifted  into  Congress,  and  I  drifted  out  of  Congress  into  tliis. 

Commissioner  Sweet.  You  have  been  a  Member  of  Congress? 

Mr.  Henry.  Yes.    I  will  have  to  plead  guilty  to  that. 

Commissioner  Sweet.  Among  your  other  sins? 

Mr.  Henrf.  Yes. 

Commissioner  Sweet.  You  have  had  a  good  deal  of  experience  in 
dealing  with  people,  have  you  not — the  public  ? 

Mr.  Henry.  A  very  great  deal.    I  always  keep  close  to  them. 

Commissioner  Sweet.  And  you  have  found  that  by  going  right  to 
the  public  with  your  interurban  problems  and  presenting  the  facts 
to  them  honestly  and  squarely,  you  met  with  a  friendly  and  hearty 
response  ? 

Mr.  Henry.  Yes,  sir. 


'  •>' 


726       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOM". 

Commissioner  Sweet.  Do  yon  think  that  rule  would  apply  to  the 
city  railways,  as  well  as  the  interurbans? 

Mr.  Henry.  Not  as  fully,  but  in  a  general  way;  yes.  You  can  not 
reach  them  the  same  way. 

Commissioner  Sweet.  That  is  because  the  dense  urban  popidation 
is  more  difficult  to  get  hold  of? 

Mr.  Henky.  Yes.  And  also  there  is  a  difference  in  the  character 
of  parts  of  the  population.  In  the  small  communities,  you  do  not 
find  the  bad  spots  in  the  population  as  much  as  you  do  in  the  cities. 

Conmiissioner  Sweet.  I  tliink  I  know  what  you  mean.  What  we 
call  the  laboring  element,  the  manual  labor 

Mr.  Henry.  No. 

Commissioner  Sweet.  They  are  not  as  intelligent? 

Mr.  Henry.  No;  I  do  not  mean  that.  I  have  the  greatest  con- 
fidence in  the  world  in  the  laboring  element,  when  they  are  let  alone ; 
when  they  do  not  have  labor  agitators  in  their  midst,  there  is  no 
trouble  with  them.  You  can  reason  with  them,  just  as  well  as  you 
can  with  anybody  else. 

Commissioner  Sweet.  But  are  they  as  much  inclined  to  reading  as 
the  ordinary  laborer  of  the  countr}^  ? 

Mr.  Henry.  Oh,  yes;  they  are.  We  have  quite  a  number  of  intelli- 
gent laboring  people  in  our  part  of  the  country. 

C\)mmissioner  Sweet.  Well,  what  is  the  difference? 

Mr.  Henry.  For  instance,  in  Indianapolis,  there  is  a  Greek  settle- 
ment, thei'e  is  an  Italian  settlement,  and  so  on,  like  that.  We  do  not 
have  a  great  deal  of  it.    In  New  York  you  have  much  more. 

Commissioner  S\^t:et,  You  do  not  find  that  in  the  rural  commu- 
nities? 

Mr.  Henry.  No;  in  proportion,  it  is  greater  in  the  cities.  They 
soon  get  amalgamated  in  the  smaller  communitiea 

Commissioner  Sweet.  They  Americanize  rather  quicker? 

Mr.  Henry.  Yes,  sir;  they  do. 

Commissioner  Sweet.  There  are  not  so  many  of  them  to  hobnob 
together  ? 

Mr.  Henry.  But  outside  of  that,  I  think  the  proposition  is  just  as 
pood  for  the  cities  as  it  is  for  the  country,  the  country  town — that 
IS,  to  go  to  the  people  and  present  it. 

Commissioner  Sweet.  What  is  the  rule  on  these  interurban  roads 
that  you  are  connected  with  with  regard  to  passengers  within  city 
limits?    Do  you  take  them  on  and  discharge  them 

Mr.  Henry.  In  Indianapolis,  and  that  is  the  only  large  city  we 
touch,  the  city  ordinance  under  which  we  enter  the  city  requires  us 
to  make  the  same  stops  as  the  city  cars,  and  to  carry  city  passengers 
at  5  cents  within  the  city,  from  a  point  within  to  a  point  within.  At 
the  time  that  was  made,  the  city  company  issued  tickets  at  6  for  a 
quarter,  or  25  for  a  dollar,  and  the  little  difference  of  5  cents— I  was 
instrumental  in  getting  it— kept  the  city  traffic  off  of  our  cars  very 
largely,  but  now,  since  the  city  company  is  charging  5  cents  we  are 
cursed  with  it — a  regular  nuisance. 

(  ommissioner  Sweet.  You  mean  the  local  business  has  increased 
beyond  what  you  want? 

Mr.  HENRr.  They  will  take  the  seats  of  the  interurban  passenger 
going  at  a  distance  ought  to  have. 

Mr.  Warren.  You  do  not  want  the  city  business  on  your  line? 


r     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIO:^'.       727 

:Mr.  Henry.  We  do  not  want  it.  That  will  have  to  be  changed  in 
order  to  relieve  us  from  that.  The  commission  regulates  an  inter- 
urban ride  as  a  ride  to  or  from  a  point  outside  the  city,  although  it 
starts  within  the  city. 

Commissioner  Sweet.  At  the  time  the  interurban  car  reaches  the 

citv  limits 

Mr.  Henry.  It  does  not  make  any  difference  in  our  interurban  fare. 

Commissioner  Sweet.  It  does  not? 

Mr.  Henry.  No,  sir.  We  get  our  mileage  onto  the  terminal  sta- 
tion, under  the  order  of  the  commission. 

Commissioner  Saveet.  That  is  different  from  the  interurbans  in 
Michigan;  is  it  not? 

Mr.  Henry.  It  is  different  from  a  good  many  States,  but  that  is 
our  situation. 

Commissioner  Sweet.  I  think  the  interurban  rule  in  Michigan  is 
to  charge  a  5-cent  rate  from  the  city  limit  to  the  terminal  station. 

Mr.  Henry.  A  good  many  of  them  do,  but  it  is  not  right,  and  our 
commission  said  so.  Our  commission  said  it  was  a  part  of  his  rido 
until  he  got  to  his  destination. 

Commissioner  Sweet.  Have  you  any  reason  to  doubt  your  ability 
to  get  a  raise  to  the  3-cent  per  mile  fare  from  your  commission,  if  you 
should  ffo  to  the  commission  for  it? 

Mr.  Henry.  That  is  guesswork,  and  we  never  have  a  doubt  about 
guesswork. 

Commissioner  Sweet.  Well,  do  you  think  you  could  get  it  ? 

Mr.  Henry-.  I  think  so;  but  they  would  do  it  reluctantly,  because 
they  have  said  it  is  to  our  interest  ix)  charge  only  the  2f-cent  fare. 

Commissioner  Sweet.  Do  you  think  the  same  way  ? 

Mr.  Henry.  I  do  now.  I  might  change  my  mind.  I  always  re- 
serve the  privilege  to  change  my  mind,  but  at  the  present  time  I 
think  the  2f-cent  fare  is  what  we  ought  to  charge. 

Commissioner  Sweet.  Then  you  do  not  think  you  could  get  relief 
by  increasing  the  fare? 

Mr.  Henry.  I  do  not,  in  our  case,  because  we  have  already  gotten 
relief  by  an  increase  of  fare  from  2  cents  up. 

Comrnissioner  Sweet.  What  is  your  explanation  of  the  fact  that 
they  can  do  that  in  Illinois  and  can  not  do  it  in  Indiana? 

Mr.  Henry.  I  should  say  they  are  getting  more  money  than  they 
got  at  2f  cents.    I  don't  know  what  their  local  conditions  are. 

Commissioner  Sweet.  But  they  are  charging  a  3-cent  fare? 

Mr.  Henry.  Yes. 

Commissioner  Sweet.  I  understood  you  to  say  it  was  without 
particular  objection. 

Mr.  Henry.  No  ;  if  I  said  that,  it  was  not  my  intention  to  say  it, 
because  there  has  been  a  great  deal  of  objection  on  the  part  of  the 
people  of  the  State  to  the  3-cent  fare  in  Illinois,  but  there  was  very 
little  in  Ohio. 

Commissioner  Sweet.  Well,  has  it  increased  their  revenues  or  not? 

Mr.  Henry.  Oh,  yes. 

Commissioner  Sweet.  Then,  why  would  it  not  increase  your  reve- 
nues? 

Mr.  Henry.  Well,  it  might  do  it.  I  don't  know  whether  it  would 
in  our  case.  I  think  we  could  get  more  revenue  at  the  2|  cents  than 
we  would  at  3  cents.    The  people  rather  like  it  because  they  think  we 


m 


728       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


are  giving  them  a  special  privilege  in  carrying  them  for  less  than  the 
steam  roads,  and  more  people  ride  at  that  rate  than  tliey  would  at  the 
3-cent  rate,  in  my  opinion. 

Commissioner  Sweet.  What  is  it  you  want  the  Railroad  Adminis- 
tration to  do  ? 

Mr.  Henry.  Well,  as  they  are  going  to  have  a  very  short  life  it  is 
hardly  worth  mentioning  it,  but  I  will  tell  you.  One  of  them  is  that 
in  the  express  business  they  should  direct  the  American  Railway  Ex- 
press Co.  to  give  the  interurbans  their  proportion  of  the  express  busi- 
ness of  the  country. 

The  Chairman.  Has  that  question  ever  been  put  up  to  the  Railroad 
Administration  ? 

Mr.  Henry.  I  took  it  up  personally  with  Mr.  Thielen — I  think  that 
is  his  name — under  an  appointment,  along  with  others.  I  happened 
to  be  the  chairman  of  the  committee,  and  I  addressed  him  on  the 
subject,  and  I  put  the  subject  up  to  him  just  as  it  was;  and  his  answer 
was,  "  AVell,  you  would  not  expect  us  when  we  are  running  the  steam 
railroads" — ^this  is  in  effect,  not  in  words — "you  would  not  expect 
us,  in  looking  out  for  the  income  of  the  steam  railroads,  to  give  the 
business  over  to  the  electric  lines,  wlien  we  do  not  have  to."  That  was 
in  effect  his  answer. 

Commissioner  Sweet.  What  do  you  think  was  wrong  about  that 
answer  ? 

Mr.  Henry.  What? 

Commissioner  Sweet.  -Outside  of  your  personal  interest,  why  was 
not  that  a  good  answer  ? 

Mr.  Henry.  I  will  tell  you  why  it  is  not.  They  are  representing 
the  people  of  the  United  States,  and  we  are  a  part  of  the  people  of  the 
United  States,  just  the  same  as  the  owners  of  the  steam  railroads  are, 
and  they  have  no  moral  right,  in  running  the  steam-railroad  busi- 
ness, to  run  it  in  such  a  way  as  to  cripple  any  other  industry  that  is 
entitled  to  live  just  as  well  as  they  are  and  that  people  are  dependent 
upon  just  as  much  as  they  are  on  them. 

The  Chairman.  Do  you  believe  that  the  Government  should  not 
have  diverted  any  traffic  from  any  line,  unless  it  was  necessary  to  do 
so  for  w^ar  purposes? 

Mr.  Henry.  That  is  exactly  what  I  do. 

The  Chairman.  I  agree  with  you. 

Mr.  Henry.  Another  thing  they  can  do,  while  on  that  subject,  is 
this :  They  have  an  agreement  with  the  short-line  railroads  by  which 
they  allow  them  two  days'  free  overtime  on  freight  cars  before  de- 
murrage commences.  Now,  they  turn  a  car  over  to  Mr.  Faber,  in  Illi- 
nois, on  the  line  from  Elgin  to  Chicago,  or  to  Mr.  Budd,  on  the  line 
from  Chicago  to  Milwaukee,  and  they  charge  them  from  the  minute 
they  get  it. 

Commissioner  Sweet.  They  charge  demurrage  right  off  ? 

Mr.  Henry.  Yes.  They  did  that.  I  do  not  know  whether  they 
changed  that  at  all  or  not.  I  know  they  are  doing  it  in  many  cases. 
In  other  cases  the  traffic  was  so  large  that  there  was  some  hope  they 
would  change  it. 

Commissioner  Sweet.  What  is  the  next  thing  you  would  have  the 
Railroad  Administration  do? 

Mr.  Henry.  The  Railroad  Administration  itself? 
Commissioner  Sweet.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       729 

Mr.  Henry.  Well,  they  can  not  do  it  now,  but  they  ought  to  cut 
down  the  abnormal  price  of  material  which  they  fixed  without  rea- 
son, and  w^hich,  therefore,  set  a  pattern  against  us  for  prices. 

Commissioner  Sweet.  Are  you  referring  to  steel,  now,  and  coal? 

Mr.  Henry.  I  refer  principally  to  ties  and  poles  and  things  of  ihixt 
kind.     Nobody  is  buying  a  steel  rail. 

Commissioner  Sweet.  Do  you  mean  the  prices  that  were  fixed  dur- 
ing the  war  ? 

Mr.  Henry.  Yes;  and  still  maintained.  Not  only  that,  but  we  can 
hardly  get  the  ties.  They  are  making  every  effort,  of  course,  to  catch 
up  Avith  their  rehabilitation.     They  got  behind,  of  course,  during  the 

war.  ,        1     -r»  -1       -I 

Commissioner  Sweet.  Do  you  think,  Mr.  Henry,  that  the  Railroad 

Administration  fixed,  or  can  fix,  these  prices? 

Mr.  Henry.  They  do  fix  them.     I  will  tell  you  how  they  do  it. 

Commissioner  Sweet.  Now  ? 

Mr.  Henry.  They  fix  them  now.  This  is  the  way  they  fix  them. 
They  say, "  We  will  give  you  $1.25  for  all  the  crossties  in  a  certain  ter- 
ritory," and  then  different  prices  in  others.  That  is  the  price  that 
is  fixed  there,  and  when  we  have  got  to  buy  from  that  territory  we 
have  to  buy  at  the  same  price  because  the  Government  fixed  the  price. 

Not  long  ago  I  inquired  for  some  45-foot  cedar  poles.  I  made 
some  five  or  six  inquiries,  and  the  answers  came  back  as  though 
they  had  taken  a  rubber  stamp  and  stamped  the  price  which  they 
quoted.  They  were  just  exactly  alike,  just  as  much  so  as  if  they 
had  used  the  same  rubber  stamp  on  all  of  them.  I  was  quite  well 
acquainted  with  the  salesmen  of  several  of  the  companies,  and  I  talked 
to  them  very  freely  about  it.  I  said,  "I  realize,  of  course,  that 
you  are  not  going  to  break  your  combination  price."  They  said, 
"What  do  you  mean  by  combination  price?"  ^  I  said,  "I  mean  the 
combination  price  you  have  agreed  you  won't  sell  to  us  for  any- 
thing less  than  the  price  that  is  fixed  for  poles  by  the  Railroad  Ad- 
ministration." Although  they  can  buy  only  one-tenth  or  one- 
hundredth  of  the  number  of  poles,  because  they  don't  have  much 
use  for  that  kind  of  a  pole,  it  fixed  a  certain  price  there,  and  I 
offered  them  $1.40  for  less  than  that.  I  was  just  trying  them,  and 
finally  I  bought  them  at  that  from  a  man  who  broke  out  of  the  gang. 

Commissioner  Sweet.  This  price  fixing  that  you  are  speaking  of 
is  not  a  matter  of  law  ? 

Mr.  Henry.  No,  sir. 

Commissioner  Sweet.  It  is  something  that  inheres  in  every  large 
buyer,  ordinarily,  does  it  not,  whether  governmental  or  any  other 

large  buyer? 

Mr.  Henry.  Usually  the  large  buyer  gets  the  cheaper  prices.  If 
you  count  the  Government  as  the  large  buyer,  it  fixed  the  higher 
prices  paid,  although  they  were  normal  at  the  time  they  were  fixed. 

Commissioner  Sweet.  What  else  do  you  want  from  the  Railroad 
Administration  ? 

Mr.  Henry.  That  is  all  I  have  now. 

Commissioner  Sw^eet.  That  is  all. 

Mr.  AVarren.  That  is  all,  Mr.  Henry. 

The  Chairman.  You  are  excused,  Mr.  Henry. 

Mr.  W^ARREN.  Mr.  Kellogg,  will  you  take  the  stand,  please? 

160643**— 20 47 


/ 


730       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

STATEMENT  OF  MR.  CHARLES  W.  KELLOGG^ 

Mr.  Wakken.  Will  you  give  your  full  name,  Mr.  Kellogg? 

Mr.  Kellocg.  Charles  W.  Kellogg. 

Mv.  Warrex.  And  your  residences 

^fr.  Kellogg.  Boston,  Mass. 

Mr.  Warren.  What  is  your  occupation? 

Mr.  Kellogg.  I  am  with  Stone  &  Webster,  of  Boston,  and  have 
l)een  in  charge  of  the  street-railway  business,  amongst  others,  for 
about  15  years. 

Mr.  Warren.  Have  you  in  connection  with  your  work  had  occa- 
sion to  give  special  attention  to  tlie  one-man  car  or  the  safety  car, 
so  called? 

Mv.  Keli/)gg.  T  have  this  year,  as  chairman  of  the  committee  of 
the  American  Raihvay  &  Electric  Transportation  &  Traffic  Associa- 
tion, which  is  studying  that,  among  three  or  four  other  subjects; 
and  it  was  on  account  of  the  study  which  we  have  made  of  that  sub- 
ject that  I  was  asked  to  testify  here  to-day,  as  I  understand  it. 

Shall  1  go  right  on  and  tell  about  the  car  ? 

Mr.  Warren.  Yes;  go  right  ahead. 

Mr,  Kellogg.  The  one-man  car,  so  called,  has  to  be  distinguished 
in  two  ways.  The  method  of  oi>erating  a  street-car  with  one  man 
instead  of  two  simply  is  the  closing  up  of  the  back  platform  and 
having  one  man  on  the  front  end  of  the  car;  and  that  is  one  that 
has  bwn  in  use  in  the  street-railway  busine.ss  by  small  comiKinies, 
iust  as  a  matter  of  saving  platform  expense,  for  a  great  many  years. 
There  is  nothing  new  about  that  method  of  running  a  street-car, 
but  there  is  a  very  new  thought  contained  in  the  so-called  Birney 
safety,  designed  by  a  man  named  Birney  from  St.  Louis,  Charles 
S.  Birney.  This  car  was  the  result  of  jitney  competition.  As  you 
all  remember  who  have  followed  the  street-railway  business,  about 
five  years  ago  there  was  a  terrific  flood  of  light  automobiles,  mostly 
Ford  cars,  that  came  out  on  the  streets,  and  especially  in  the  south- 
em  cities,  where  the  climate  was  mild,  which  created  havoc  with 
the  street-railway  business. 

It  was  the  feeling  of  Mr.  Birney  and  others  that  the  only  w^ay  to 
get  that  business  back  was  to  build  a  street-car  which  would  sinui- 
late  as  nearly  as  possible  the  conditions  which  that  seemed  to  be 
able  to  create. 

That  meant  a  light  car,  so  as  to  save  power  and  so  as  to  accelerate 
quickly.  It  meant  a  one-man  car,  because  there  was  only  one  man 
to  run  a  jitney;  and  that  was  how  the  one-man  car,  as  they  use 
the  term  to-day,  the  one-man  safety  car,  came  into  use.  Xow, 
this  car  was  very  light  as  compared  to  the  old  ones.  Let  me  go  a 
little  further  back  in  the  business.  About  10  or  15  years  ago,  or, 
perhaps,  as  long  as  15  years  ago,  there  was  a  perfect  mania  among 
fctreet-railwav  companies  for  heavy  street-cars,  Pullman  cars. 

The  CiiATRMAN.  Why? 

Mr.  Keli/)gg.  It  was  felt  that  they  were  more  dignified ;  they  rode 
smoother  on  relatively  poor  track,  and  therefore  would  attract 
traffic.  And  anyone  who  has  studied  the  situation  and  rememl)ers 
the  conditions  in  those  days  will  know  that  even  a  small  town  that 
did  not  have  large  heavy  double-truck  cars  was  considered  rather 
out  of  the  running. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       731 

It  was  not  until  after  all  of  the  city  systems  were  equipped  with 
these  veiy  heavy  cai-s,  weigliing  around  50,000  pounds — some  of  tlwim 
even  heavier — that  the  industry  woke  up  to  the  fact  that  an  enor- 
mous unnecessary  weight  was  being  dragged  around  the  streets, 
that  they  meant  excessive  investment,  a  correspondingly  heavy 
track,  and  an  expensive  construction  to  carry  these  big  cai*s.  It 
meant  correspondingly  more  power-station  capacity  to  move  them, 
including  in  that  also  substations,  cables,  etc.,  and  correspondingly 
higher  maintenance  costs,  both  of  the  cars  themselves  and  for  the 
track  they  ran  over  to  keep  the  service  going. 

The  Chairman.  Would  you  say  that  these  large  cars  were  urged 
by  the  car  manuf acturei*s  ? 

Mr.  Kellockj.  I  should  say  not,  although  I  am  not  able  to  pass  on 
that  point.     At  all  events,  the  street  railways  were  willing  customers. 

It  was  not  until  after  this  effect  had  occurred— I  think  that  is  a 
fair  statement — until  it  had  practically  fully  occurred,  that  the  re- 
sults were  realized  by  the  industry.  Now,  in  view  of  the  big  invest- 
ment that  has  been  made,  it  seemed  impossible  to  scrap  this  large 
investment. 

I  have  mentioned  that  past  history  simply  to  indicate  that,  in  ad- 
dition to  fighting  the  jitney  competition,  the  light  one-man  car  also 
filled  a  long-left  want  for  some  economy  in  power  consumption  and 
platform  time  on  the  part  of  the  street  railways. 

Another  very  important  feature  of  this  new  car,  which  distin- 
guislies  it  decidedly  from  past  types  of  one-man  operation  which  I 
mentioned  and  which  might  be  called  a  sort  of  home-made  car,  is 
the  safety  devices,  because  it  was  realized  that  the  public  would  not 
stand  in  large  cities  for  car  operation  by  one  man,  unless  there  were 
special  devices,  such  as  to  make  the  operation  of  the  car  safe  in  case 
that  one  man  should  be  taken  ill  or  drop  dead  or  anything  should 
happen  to  divert  his  attention. 

That  brought  out  the  so-called  dead  man's  handle,  more  or  less 
similar  to  what  is  on  a  great  many  elevators,  where  if  the  man  takes 
his  hand  off  the  controller,  it  immediately  automatically  goes  back 
and  shuts  the  power  off;  also  if  the  controller  automatically  throws 
off  in  that  manner,  the  brakes  are  applied  on  this  car  and  sand  ap- 
plied to  the  track  and  the  car  is  brought  to  a  quick  standstill. 

There  are  other  special  devices,  such  as  allowing  for  the  hand- 
opening  of  the  doors  when  this  automatic  stop  is  made ;  all  of  which 
has  tended  to  make  this  Birney  car  not  only  actually  safe  but  to 
convince  the  public,  w^hich  uses  the  car,  that  it  is  safe. 

This  new  car  weighs  about  13,000  pounds  as  against  an  average 
weight  of  the  former  city  cars,  which  it  replaced,  of  not  less  than 
35,000  pounds,  and,  as  I  said  before,  a  great  many  considerably 
heavier. 

At  the  present  time— and  meaning  by  the  "  present  time  ",  up  to 
October  1  this  year — there  are  1,100  of  tliese  Birney  cars  in  opera- 
tion in  the  United  States,  and  there  are  now  under  order  and  in 
process  of  manufacture  about  600  more  than  that  1,100,  200  of  this 
latter  being  for  the  Brooklyn  Rapid  Transit  Co. 

Now,  in  connection  with  the  study  which  the  committee  of  wdiich 
I  am  chairman  has  made,  we  sent  out  questionnaires  to  all  of  the 
member  companies  in  the  street-railway  business.  The  questionnaires 
contained  about  50  questions  covering  all  the  various  features  which 


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732       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

the  Birney  car,  or  other  one-man  cars,  were  supposed  to  furnish, 
and  I  have  here,  in  a  report  which  I  have  worked  out  for  my  com- 
mittee this  year,  the  tabulated  results  of  the  answers  to  these  ques- 
tionnaires, which  are  very  interesting. 

They  are  quite  brief,  and  if  the  commission  wdl  permit  me,  I  will 
read  them  throuirh  very  briefly. 

First,  regarding  power  consumption,  of  course  there  will  be  no 
power  saving  by  converted  one-man  cars,  but  only  by  the  Birney 

safety  cars.  .  .,      x      • 

The  average  reduction  in  energy  consumption  per  car-mile  ot  using 

the  Birney  cars  is  51.2  per  cent. 

Taking  3  kilowatt  hours  per  car-mile  as  a  fair  average  for  most 
city  systems,  this  means  a  saving  of  about  1.5  kilowatt  hours  per  car- 
mile.     Actual  figures  from  45  companies 

Commissioner  Bealu  May  I  ask  you  a  question  right  there? 

Mr.  KrxLOGG.  Sure. 

Commissioner  Beall.  Have  you  compared  that  car  with  a  car  that 
will  carry  tAvo  or  three  times  as  many  people  ? 

Mr.  Kellogg.  No;  I  am  comparing  that  with  a  car  which  will 
carry  substantially  as  many.     I  will  read  those  figures  off. 

As  to  general  dimensions,  the  Birney  car  seats  from  30  to  32  and, 
as  you  know,  the  seating  capacity  of  40  to  44  is  quite  a  good-sized 
city  car.  The  seating  capacity  is  quite  thoroughly  comparable, 
although  that  of  course  is  one  of  the  ways  the  weight  was  cut  down. 

Commissioner  Beall.  Well,  how  about  the  standing  room  ? 

Mr.  Kellogg.  How  about  the  standing  room? 

Commissioner  Beaij[>.  You  make  your  money  from  the  strap- 
hangers, do  you  not,  and  not  from  the  seated  passengers?  If  you 
ran  all  of  your  cai*s  on  seating  capacity,  you  would  not  make  any 
money,  would  you? 

Mr.  Kellogg.  You  do  with  the  Birney  car.  That  is  one  of  the 
surprising  things  that  I  am  coming  to  later  with  regard  to  this  car. 

I  will  sav  this  with  regard  to  the  heavy  peak-load  traffic,  that 
where  it  is 'found  that  large  cars  need  to  be  used  over  the  peak  to 
carry  the  heavy  traffic,  it  is  still  possible  to  run  those  heavy  cars 
and  use  all  of  that  power  and  use  the  two  triUnmen  only  a  few  houi-s 
a  day,  with  this  light  power  car  that  saves  power  and  labor.  As  a 
matter  of  fact,  the  weight  per  foot  of  this  car  is  very  low. 

Commissioner  Beall.  Well,  they  carry  the  same  capacity  of  stand- 
ing passengers  as  the  other  will ;  do  they  not  ? 

Mr.  Keli^gg.  It  will  carry  more  per  ton  of  weight  on  the  car ;  yes. 

Commissioner  Bfj^ll.  That  is  not  what  I  asked  you,  but  will  the 

car  itself  carry  them? 

Mr.  Kellogg.  No  ;  the  car  itself  will  not.     It  is  a  smaller  car. 

Mr.  Warren.  It  is  a  much  narrower  car? 

Mr.  Kellogg.  It  is  not  conspicuously  narrower.  It  is  a  little  bit 
nan-ower.     The  over-all  width  of  this  car  is  8  feet. 

Commissioner  Beall.  What  I  wanted  to  bring  out  so  that  we  can 
understand  it  is  this :  Would  you  have  to  have  big  cars  in  the  cities 
to  handle  the  rush-hour  crowd  ? 

Mr.  Kellogg.  You  would  in  some  cases,  and  in  some  cases  you 

would  not. 

Commissioner  Beall.  That  makes  a  very  big  difference,  whether 
this  car  will  answer  for  all  the  demands  of  the  average  lines,  or 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       733 

whether  it  is  only  adapted  to  special  business,  and  you  have  to  havo 
your  other  equipment  anyhow. 

Mr.  Kellogg.  It  is  not  a  panacea.  There  are  some  lines  whore  it 
would  not  work.     That  is  perfectly  true. 

Commissioner  Beall.  Well,  right  there,  if  it  is  proper,  I  would 
like  to  ask  you  this  question :  I  think  you  have  operated  quite  a  num- 
ber of  them,  have  you  not,  in  the  West,  around  Seattle  and  other 
places? 

Mr.  Kellogg.  Yes ;  mostly  down  in  Texas  and  the  Southeast. 

Commissioner  Beall.  Well,  have  you  not  found  that  they  were 
only  adapted  to  lines  which  can  not  pay,  or  only  to  lines  where  you 
have  lighter  traffic  and  not  such  frequent  service,  and  where  you  do 
not  have  a  very  big  load  ? 

Mr.  Kellogg.  No;  that  is  not  so. 

Commissioner  Beall.  That  is  not  true? 

Mr.  Kellogg.  No;  that  is  not  true. 

The  Chairman.  At  this  point,  we  will  adjourn  until  8  o'clock 
to-night. 

(Whereupon,  at  5  o'clock  p.  m.,  a  recess  was  taken  until  8  o'clock 
p.  m.) 

EVENING   session, 

STATEMENT  OF  MR.  CHASIES  W.  KELLOGG— Continued. 

Mr.  Warren.  Mr.  Kellogg,  will  you  proceed  with  the  result  of  your 
investigation  ? 

Mr.  Kellogg.  When  we  adjourned,  Mr.  Chairman,  Mr.  Beall  had 
a  question  I  do  not  think  I  had  answered  quite  satisfactorily,  and 
that  was  with  regard  to  the  smaller  size  of  these  cars.  I  think  you 
made  the  point,  Mr.  Beall,  that  while  the  amount  of  power  consump- 
tion was  small,  the  car  itself  was  smaller,  and  as  to  that  I  think  per- 
haps the  fairest  way  to  put  it  is  that  the  Birney  car,  seating,  say 
32,  has  a  power  consumption  about  half  as  large  as  a  car  seating  40 
to  44;  so  that  while  the  car  is  smaller  there  is  some  less  power  per 
seat. 

Commissioner  Beall.  How  about  the  rush-hour  capacity  ?  Will  it 
hold  as  many  people  standing?  That  was  not  really  my  point.  I 
think  you  missed  it. 

Mr.  Kellogg.  I  do  not  think  I  did  get  your  point. 

Commissioner  Beall.  I  was  simply  ti-ying  to  find  out  whether 
that  necessitated  any  duplication  in  Avhole  or  in  part  by  larger  cars 
to  handle  peak  loads. 

Mr.  Kellogg.  It  would  require  more  of  the  Birney  cars  to  furnish 
the  same  number  of  seats  than  of  the  larger  cars. 

Commissioner  Beall.  I  did  not  mean  quite  that.  I  mean — a  good 
many  companies  have  the  Birney  cars  and  whether  they  would  not 
also  have  to  have  larger  cars  also  to  some  degree  ? 

Mr.  Kellogg.  To  some  degree  they  might ;  yes. 

Commissioner  Beall.  I  am  not  trying  to  make  out  a  point,  but  to 
get  information. 

Mr.  Kellog<}.  It  might  work  out  that  way. 

Mr.  Warren.  What  about  snow?  I  have  particularly  the  New 
England  cities  in  mind,  where  we  have  at  least  a  month  of  very 
heavy-snow  weather. 


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734       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Kei^ogg.  We  have  had  reix)rts  from  one  or  two  Northern 
cities  that  they  are  sometimes  bothered  with  snow,  and  also  from 
one  company  in  Illinois— Mr.  Bosenbury,  of  the  Ilhnois  Traction 
Co.,  who  reports  that  in  that  case  they  take  out  their  heavier  cars 
and  leave  the  light  caBS  in  the  barn. 

Mr.  Warren.  That  would  mean  more  or  less  duplicate  equip- 

Mr!  Keixogg.  That  would  mean  more  or  less  duplicate  equipment 

in  that  case.  .  .  , 

Mr.  Warren.  Something  like  the  open-car  proposition,  where  the 
company,  to  run  open  cars  in  the  summer  weather,  has  to  have  two 

equipments  of  cars.  .  , 

Mr.  Kellog.  That  would,  tend  to  reduce  the  saving  that  could  be 

made  from  the  operating  feature. 

The  Chairman.  Are  any  of  these  cars  used  in  the  congested  por- 
tions of  the  city?  „^        ,  ,      i 

Mr.  Kellogg.  Well,  they  are  in  some  cases.  The  closest  headway 
we  had  reported  was  one  minute;  and  in  the  city  of  Seattle  I  know 
these  Birney  cars  run  in  with  the  other  cars  through  the  congested 
district  and,  as  far  as  our  reports  go,  they  are  able  to  hold  their 
place  in  line  with  the  other  cars. 

Mr.  Warren.  Is  that  the  largest  city  that  uses  them? 

Mr.  Kellogg.  I  should  say  perhaps  Seattle  was— no ;  Kansas  City 
uses  them,  and  Kansas  City  I  think  is  larger  than  Seattle,  and  it 

uses  Birney  cars. 

Mr.  Warren.  How  long  has  Kansas  City  used  them  ? 

Mr.  Kellog.  That  I  can  not  say.  My  impression  would  be  per- 
haps six  months  or  something  of  that  sort.     It  is  quite  recent. 

The  Chairman.  You  stated  that  200  are  being  built  for  the 
B.  R.  T.— in  Philadelphia,  is  it? 

Mr.  Kellogg.  No;  the  Brooklyn  Rapid  Transit. 

The  Chairman.  How  will  they  be  used  there? 

Mr.  Kellogg.  They  will  be  used  in  some  of  the  lighter  lines  where 
traffic  is  not  so  heavy. 

Commissioner  Beall.  We  have  a  lot  of  lines  in  the  semisuburban 

section. 

Mr.  Kellogg.  That  would  be  where  they  would  be  used  first. 

Commissioner  Beall.  They  would  not  attempt  to  use  them  in  the 
thickly  settled  portions  of  the  city? 

Mr.  Kellogg.  No;  they  will  first  be  used  in  the  lighter  lines. 

Mr.  Warren.  Kansas  City  started,  did  it  not,  with  some  made- 
over  cars?  Did  they  not  start  with  35  cars  that  they  made  over 
themselves  ? 

Mr.  Kellogg.  That  I  do  not  know,  Mr.  Warren. 

Mr.  Warren.  Do  you  know  whether  or  not  they  use  them  so  far 
as  they  have  actually  used  them  on  the  suburban  lines— that  is,  the 

outlying  lines?  „    r^    ▼    ,         j  j 

Commissioner  Beall.  Where  do  you  mean?    To  Independence  and 

those  sections? 

Mr.  Warren.  Yes.     I  do  not  know  the  names  of  the  places. 
Commissioner  Beall.  That  is  one   of  their  principal  suburban 

line^. 

Mr.  Warrbn.  But  not  in  their  congested  section. 


proceedings  of  federal  electric  railways  commission.     735 


Commissioner  Gadsden.  I  can  answer  that,  because  I  was  there 
last  week.  Mr.  Keeney  is  running  those  cai*s  right  in  between  the 
others  in  the  congested  part  of  the  town. 

The  Chairman.  You  may  proceed,  Mr.  Kellogg. 

Mr.  Kellocjg.  If  the  commission  please,  I  will  read  the  results  of 
the  answers  to  these  questionnaires. 

The  next  subject  we  took  up  was  the  saving  of  the  trainmen,  and 
the  replies  show  that  the  operator  on  a  one-man  car  was  paid  more 
than  either  of  the  other  trainmen  on  a  two-man  car  by  about  five- 
eighths  of  the  companies  which  answered  the  question. 

Commissioner  Meeker.  Are  you  going  to  submit  the  results  of  the 
questionnaire  to  the  commission? 

Mr.  Kellogg.  I  am  going  to  have  to  dictate  it  because  this  thing 
is  just  some  notes  I  have  for  refei-ence.  The  figures  are  fairly 
sini])le.  however,  and  I  think  it  will  be  perfectly  clear  in  the  record. 

I  have  here  a  list  of  the  additional  amounts  in  cents  per  hour  paid 
to  the  operators  of  one-man  cars  and  they  average  4  cents  an  hour 
more  than  is  paid  to  either  of  the  men  on  a  two-man  car.  The  theory 
of  that  is  that  the  company  sliares  with  the  trainmen  part  of  the  sav- 
ing which  is  secured  from  this  metliod  of  oi>eration. 

As  to  the  question  of  how  the  trainmen  feel  toward  one-man  cars, 
the  replies  showed  favorable  83  and  unfavorable  10. 

roj.nni.  sionor  Bkall.  V»'hat  h    IvM — svr^teins  or  men? 

Mr.  Kelix)gg.  Systems  reporting  that  their  men  were  favorable  or 
unfavorable  respectively,  showing  the  men  in  89  per  cent  of  the 
systems  favored  the  Birney  car. 

Commissioner  Meeker.  How  reliable  are  those  returns?  Can  we 
accept  the  statement  of  the  company  officials  whether  the  men  are 
favorable  or  unfavorable  without  question? 

Mr.  Kellogg.  That  was  the  only  source  of  information  the  com- 
mittee had  to  go  by.  I  do  not  think  thei'e  was  any  plebiscite  taken 
or  anything  like  that. 

^Ir.  Warren.  j\lay  I  state  one  thing  from  my  own  conferences 
with  the  men?  Do  you  happen  to  know  whether  or  not  the  men 
in  a  number  of  instances  have  included  in  their  demands  in  making 
contracts  for  their  wagcis  and  working  conditions  a  demand  that 
every  car  shall  he  oi>erated  by  a  crew  of  two  men  ? 

Mr.  Kellogg.  I  do  know  that  the  Amalgamated  Association 
through  its  president  has  come  out  very  strongly  against  these  cars. 
Mr.  Mahon  has  issued  two  or  three  manifestoes  ridiculing  and  criti- 
cizing the  cars  very  severely;  and  in  giving  these  figures  that  I  have 
given  I  am  simply  giving  the  information  we  received  from  the  com- 
panies to  whom  we  sent  out  the  questions. 

Mr.  Warkex.  But  you  did  not  visit  the  companies;  you  did  not 
have  an  opportunity  to  ask  them  questions. 

Mr.  Kellogg.  No;  we  did  not.  It  was  all  done  by  mail  with  a 
formal  printed  questionnaire. 

Mr.  Warren.  Yes. 

Mr.  Kellogg.  The  same  ratio  was  reported  in  answering  the 
question  as  to  whether  the  trainmen  opposed  the  inauguration  of 
one-man  car  operation,  the  opposition  being  classified  as  seven  due  to 
labor-union  feeling  and  three  due  to  apprehensions  of  the  men  as  to 
the  difficulty  of  accounting.    Of  coui^e  the  man  who  runs  these  cars 


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736       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

is  pretty  busy ;  he  has  to  operate  the  car  and  take  care  of  his  trip 
sheet  and  the*^money  and  change,  and  he  is  a  j^retty  busy  man. 

In  answer  to  the  question  as  to  whetlier  or  not  trainmen  have  been 
assured  that  they  would  not  lose  their  jobs  due  to  the  starting  of 
one-man  operation  the  companies  were  divided  about  equally,  39 
reported  that  they  had  made  this  promise  and  42  that  they  had  not. 
The  reconnnendation  of  our  couunittee  would  be  to  the  ett'ect  that 
such  a  promise  should  be  made,  for  the  reason  that  these  cars  are  in- 
troduced gradually  and  the  number  of  men  who  fall  out  of  the 
ranks  for  one  reason  or  another  is  sufficient  to  prevent  the  company 
from  being  obliged  to  hold  extra  men  on  account  of  that  promise. 

Conmiissioner  Gadsden.  Would  not  that  be  entirely  taken  care  of 
by  the  unusual  turnover  in  employment  ? 
*^Mr.  Kelix)gg.  It  apparently  has  been. 

Mr.  Warren.  That  is  the  dropping  out  of  men? 

Mr.  Keixogo.  That  is  the  dropping  out  of  men  for  one  reason  or 
another — it  would  be,  very  easily. 

Mr.  Warren.  Do  you  not  think  that  with  a  OO-cents-an-hour  wage 
that  turnover  is  going  to  be  very  much  lessened  ? 

Mr.  Kellogg.  I  should  imagine  it  would  be. 

Mr.  Warren.  Taking  Boston,  for  instance,  it  is  62  cents  an  hour 
for  an  8-hour  dav.     That  is 

Mr.  Kellogg,  t^rettv  good  money  for  unskilled  labor. 

Mr.  Warren.  That*  is  $5  a  day  without  any  of  the  overtime  and 
the  bonuses  which  will  necessarily  go  with  the  shorter  hours.  I 
apprehend  myself  that  the  turnover  is  going  to  be  very  much  less. 

Mr.  Kellogg.  I  think  it  will  be  hard  to  keep  them  out  of  the  busi- 
ness pretty  soon. 

Mr.  Warren.  There  have  always  been  more  applications  than 
places  in  normal  times. 

Mr.  Keixogg.  With  regard  to  the  public  attitude  toward  one-man 
cars,  it  was  reported  as  friendly  by  84  and  unfriendly  by  18.  It  was 
also  stated  that  this  latter  number  was  changed  to  4  after  a  trial  of 
the  cars  themselves. 

Conmiissioner  Beall.  May  I  ask  there,  is  there  anything  in  your 
questionnaire  which  would  show  whether  those  which  reported  un- 
favorably among  the  users  of  the  cars,  whether  it  was  the  large 
towns  or*^ small  towns,  or  whether  it  is  interspersed  between  different 
classes  of  cities  as  regards  the  size  of  population? 

Mr.  Kellogg.  I  am  soiTy  to  say  I  could  not  answer  that  question 
without  referring  to  the  original  record.     I  do  not  have  it  in  mind. 

Commissioner  Beall.  All  right. 

Commissioner  Meeker.  Can  not  you  submit  that  information? 
Because  that  would  be  important. 

Mr.  Kellogg.  I  would  be  very  glad  to  do  so.     I  will  get  that  and 

send  it  in. 

With  regard  to  the  question  of  fare  collection  on  one-man  cars,  the 
replies  show  that  no  difficulty  or  no  change  from  conditions  with 
two-men  cars  took  place  in  88  cases;  and  three  companies  reported 
difficulty,  saying  however,  it  was  only  to  a  limited  degree.  In  the 
matter  of  schedules 

Mr.  Warren.  Before  you  leave  the  other  matter,  did  the  question- 
naire indicate  whether  the  fare  collections  in  those  cases  that  had  no 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       737 

difficulty  were  flat  fares,  so  far  as  the  territory  covered  by  the  one- 
man  cars  was  concerned,  or  whether  they  were  zone  systems? 

Mr.  Kellogg.  They  did  not.  There  would  be  more  difficulty  with 
a  zone  system.  .    . 

Mr.  Warren.  In  fact,  on  a  good  many  lines,  even  where  it  is  not 
technically  know  as  a  zone  system— -that  is,  a  5-cent  fare  Avith  an 
increment  of  1  or  2  cents  for  each  zone  thereafter — there  are  a  good 
many  lines  where  there  is  more  than  one  5  cents  collected  by  a  good 
many  companies. 

Mr.  Kellogg.  Yes.  It  is  also  true,  of  course,  in  the  case  of  the 
complicated  zone  system,  where  some  kind  of  a  ticket-issuing  ma- 
chine would  have  to  be  used;  it  might  become  almost  impossible  for 
one  man  to  do  that  class  of  business.  That  particular  subject  did 
not  happen  to  come  up  in  the  questions  which  we  sent  out.  I  do  not 
think  there  is  any  company  yet  using  that  machine,  although  the  Pub- 
lic Service  Corporation  of  Xew  Jersey,  I  believe,  is  planning  to  do  so. 

Mr.  AVarren.  I  suppose  a  prepayment  zone  and  an  inclosed  area 
where  the  great  majority  of  the  passengers  took  the  car — take  Bos- 
ton for  instance,  with  which  you  are  familiar,  the  subways  are  pre- 
payment areas. 

Mr.  Kellogg.  Yes. 

J^Ir.  Warren.  And  if  in  the  cities  generally  it  were  possible  at  a 
congested  center  to  establish  a  prepayment  area  where  every  pas- 
senger would  pay  his  fare  when  he  went  into  the  area  and  take  his 
car  in  the  area,  that  would  help  out  with  the  one-man  car. 

Mr.  Kellogg.  It  would;  yes. 

With  regard  to  schedules,  the  replies  to  the  questions  under  this 
heading  had  to  be  clearly  distinguished  between  the  converted  one- 
man  car — meaning  by  that  a  former  two-man  car  that  had  been 
rebuilt  to  operate  with  one  man — and  the  Birney  car,  because  of 
course  the  former  cars  simply  ran  as  they  did  before  and  we  found 
an  average  of  14.76  per  cent  increase  in  scheduled  speed  reported 
from  the  use  of  the  Birney  cars.  The  headway  had  been  increased 
by  the  companies  reporting  on  43.7  per  cent,  making • 

Mr.  Warren.  That  means  the}^  ran  more  cars  ? 

Mr.  Kellogg.  That  means  they  ran  more  cars — i3.7  per  cent  more 
cars  at  an  average  speed  of  14 J  per  cent  greater,  which  made  an 
average  increase  in  car  frequency  of  58.46  per  cent. 

Commissioner  Beall.  How  much  more  money  did  they  take  in? 
That  is  your  test. 

Mr.  Kellogg.  That  is  the  next  question  I  have  to  answer.  One 
more  point  before  I  get  to  that.  One  question  as  indicating  the 
range  of  adaptability  of  Birney  cars,  the  headways  are  from  1  to 
30  minutes  reported. 

Now,  on  the  matter  of  earnings,  of  course  these  reports  on  earnings 
refei*  to  the  most  successful  lines  where  the  conditions  were  exactly 
right  for  the  use  of  these  cars ;  and  the  most  successful  lines  showed 
a  slight  decrease  in  gross  per  car-mile,  from  21.11  cents  to  20.65  cents, 
with  this  increase  in  car-miles  operated  of  53.4  per  cent  and  an  in- 
crease in  gross  earnings  of  51  per  cent.  In  other  words,  where  the 
conditions  are  just  right  for  the  use  of  these  cars  their  benefit  comes 
from  taking  the  saving  in  operating  expense — that  is,  in  power  and 
l)latform  time — and  sjpending  that  money  on  additional  service. 


i 

'■I  I  I 


738       PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION", 

Now  I  want  to  explain  right  there,  so  that  the  commission  will 
realize  the  hnutations  of  this  Birney  car,  that  the  only  place  where 
it  can  accomplish  its  best  results  is  where  the  schedule  initially  is 
such  that  more  people  will  ride  if  cars  come  more  frequently  or — 
that  IS  the  only  case.  Now  the  other  cases  would  be  a  very  light 
traffic  in  a  small  city  where,  if  you  had  a  car  every  30  seconds,  you 
would  get  no  more  people  because  no  more  are  there  to  ride.  There 
the  car  would  save  nothing  but  platform  expense  and  fuel ;  or  in  a 
very  dense  traffic  where  cars  were  frequent  enough  to  be  in  sight, 
you  might  say,  most  of  the  time.  The  Birney  car  would  add  nothing 
thei-e  to  the  amount  of  traflSc,  so  its  most  useful  field  is  in  cases  whei^ 
the  traffic  on  a  line  can  be  increased  if  the  frequency  is  furnished; 
and  that  represents  the  maximum  effective  use  of  these  cars. 

Mr.  Warren.  Before  you  leave  that,  Mr.  Kellogg,  you  said  the 
earnings  w^ere  21  cents  a  mile? 

Mr.  Kello«g.  Before,  and  20.65  afterwards. 

-tt-"^^^ J  ^^^^^^*  ^^  ^^^  *^^^^  ^  pretty  light  earnings  per  car-mile? 
U  ould  not  that  indicate  that  these  companies  were  not  in  districts  of 
heavy  traffic  ?     My  recollection  is 

Mr.  Kellogg.  That  is  a  light  average ;  yes. 

Mr.  Warren.  I  think  the  average  for  the  country  is  something  like 
36  or  38— is  it  not— now  ?  '^ 

Mr.  Kellogg.  I  do  not  happen  to  have  that  figure  in  mind.  I 
did  not  know  it  was  quite  as  high  as  that. 

Mr.  Warren.  I  may  be  wmng,  but  I  Imow  they  have  gone  uiv- 
the  earnings  per  car-mile.  During  the  last  year,  owing  to  the  in- 
crease in  rates 

Mr.  Kellogg.  Oh,  yes;  I  think  perhaps  that  is  true. 

Mr.  Warren.  And  my  impression  is  that  the  rates  of  some  com- 
panies m  Massachusetts  are  over  40  cents,  but  it  used  to  run  around 
25  or  26. 

Mr.  Kellogg.  These  earnings  that  I  am  referring  to  are  on  a  car- 
mile  basis. 

Next  as  to  the  effect  of  Birney  cars  in  eliminating  jitney  compe- 
tition :  As  I  explained  this  afternoon,  the  Birney  car  was  Imm  from 
Jitney  competition;  that  is  what  prwluced  the  car.  The  replies  to 
that  question  do  not  make  much  of  a  showing  because  a  large  numl>er 
of  the  companies  reported  they  were  not  bothered  with  jitney  compe- 
tition, but  nine  companies  i-epoi-tc^l  complete  and  two  com])a'nies  par- 
tial elimination  of  jitney  competition  due  to  the  use  of  Birney  cars 
liiose  companies  were  largely  in  the  South— Texas  and  the  South- 
east, where  the  mild  winter  enables  the  jitney  to  flourish  a  good  deal 
more  than  it  can  in  the  North  and  where  the  size  of  the  cities  is  such 
that  it  IS  just  about  right  for  jitney  service. 

Regarding  operating  features,  the  answers  as  to  whether  accident 
re(iuction  had  been  secured,  47  companies  reported  reductions  and  22 
companies  no  reduction.  I  am  inclined  to  believe,  however  that 
those  22  were  considerably  of  the  old  converted  type,  because' there 
were  24  companies  which  had  no  safety  devices  on'their  cars. 

\\  e  asked  the  question  as  to  car  maintenance— whether  any  saving 
could  be  made  in  car-maintenance  cost  through  the  use  of  the  Birney 
car.  ihis  question  ^yas  really  more  for  an  expression  of  opinion 
than  for  actual  experience  because,  as  you  probably  realize,  this  de- 
vice IS  quite  new.     AVhile  there  will  be  1,100  of  these  cars  in  use  in 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       739 


this  country  by  October  1,  still  the  actual  number  in  use  is  still  pretty 
small  and  the  time  in  which  they  have  been  used  is  very  brief. 

Mr.  AYarren.  They  are  all  new  in  other  words? 

Mr.  Kellogg.  Yes.  They  are  skimming  the  cream  now.  But  at 
all  events  six  of  the  companies  predicted  a  substantial  reduction  in 
car  maintenance;  about  half  of  the  companies  predicted  a  saving  in 
the  cost  of  track  maintenance.  Of  course,  there  were  no  figures  on 
that,  but  that  was  their  opinion. 

With  regard  to  the  question  of  acceleration — of  course  you  realize 
that  the  increase  in  speed  obtained  by  these  cars  is  obtained  almost 
entirely  through  their  quicker  acceleration;  they  pick  up  more 
quickly.  There  were  several  companies  that  had  actual  figures  on 
that,  giving  the  acceleration  in  miles  per  hour  per  second;  and  they 
showed  for  the  average  car  1.67  and  for  the  Birney  car  2.53. 

Mr.  Warren.  What  does  that  mean  'i  AVhat  do  those  figures  indi- 
cate ? 

Mr.  KELiA)G(i.  Those  are  miles  per  hour  per  second  in  acceleration 
of  the  car.  One  point  we  asked  particular!}^  about  was  that  of  flag- 
ging railroad  crossings.  You  gentlemen,  of  course,  realize  that  it 
has  been  the  practice  from  time  immemorial  in  the  street-railway 
business  when  a  street-car  approaches  a  railroad  crossing  for  the 
conductor  after  the  car  has  been  stopped  to  get  oif  and  go  ahead  of  the 
car  onto  the  crossing,  look  up  and  down  the  track  and  signal  the  car 
to  come  across.  AVith  the  Birne}^  car  that  practice  is  impossible; 
in  fact  it  would  be  dangerous  for  the  trainman  to  leave  the  car  ancl 
go  onto  the  railroad  crossing.  So  the  method  of  flagging  is  simply 
to  stop  the  car,  for  the  operator  to  look  up  and  down  the  track,  and, 
if  all  is  clear,  to  proceed.  There  is  some  difference  of  opinion  as 
to  the  safety  of  that.  Personally  I  do  not  think  with  a  normal  rail- 
road crossing  where  the  view  is  unol3structed  that  that  method  of 
flagging  is  any  more  dangerous  than  tlie  old-fashioned  method.  But 
wherever  a  cx)mplicated  set  of  tracl^  are  ci*ossing  it  is  necessary  with 
the  Birney  cars  to  maintain  a  flagman  who  can  actually  be  there 
at  all  times.  Of  course,  to  such  an  extent,  whatever  that  amounts  to, 
it  tends  to  offset  the  saving  in  expense  in  the  use  of  these  cars. 

Mr.  Warren.  Would  that  mean  one  man  or  two?  It  would  mean 
two;  would  it  not?  He  would  have  to  be  there  during  the  hours 
the  car  runs? 

Mr.  Kellogg.  Yes,  you  would  have  to  have  a  man  on  a  flag  cross- 
ing where  the  view  was  obstructed  or  there  were  a  great  many  tracks. 

Mr.  Warren.  And  to  cover  the  period  of  operation  it  would  re- 
quire two  men? 

Mr.  Kellogg.  Yes,  tw^o  9-hour  men,  probably. 

Mr.  Warren.  Yes. 

Mr.  Ketj.ogg.  The  answer  to  the  general  question  of  whether  the 
saving  with  the  one-man-car  operation  would  lead  the  company  to 
favor  the  extension  of  its  use  showed  this  result :  Extension  favored 
by  76  companies;  not  favored  by  2.  That  seemed  like  a  pretty  de- 
cisive vote.  ^ 

Commissioner  Sweet.  Xo  replies  from  the  rest  of  them? 

Mr.  Kellogg.  No,  some  of  them  did  not  answer  some  of 
the  questions.  It  seemed  to  work  out  that  way.  I  think  that  is  true 
of  all  questionnaires. 


740 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       741 


Comnnssioner  Sweet.  That  you  ask  questions  and  some  people 
answer  some  and  some  answer  others,  like  a  ballot. 

Mr.  Kellogg.  Yes;  like  a  ballot. 

The  committee  feels  that  the  most  valuable  features  of  the  Birney  car 
in  the  order  of  their  importance  are:  First,  improved  service  to 
the  public  both  as  to  frequency  and  safety;  second,  increased  earn- 
ings; third,  decreased  expenses  (although,  as  I  just  explained,  the 
nuiximum  results  when  conditions  are  right  are  obtained  by  taking 
the  saving  in  expenses  and  spending  it  on  service). 

The  conuuittee  also  agreed  that  part  of  the  saving  should  be  shared 
with  the  trainmen  at  a  slightly  higher  hourly  rate,  although  we  did 
not  feel  like  recommending  exactly  what  that  percentage  should  be. 

Mr.  AVarren.  You  said  the  average  so  far  was  4  cents? 

^Mr.  Kellogg.  Four  cents. 

C'ouunissioner  Gadsden.  What  is  the  range? 

Mr.  Kellogg.  From  1  to  10;  but  most  of  them  are  in  the  middle 
range.  That  is,  it  is  not  a  uniform  range  from  1  to  10.  There  is 
just  one  at  1  and  one  at  10,  as  I  remember. 

Connnissioner  Beall.  I  suppose  on  the  average  system  there  would 
not  be  more  than  one-third  of  your  motormen  who  would  be  capable 
of  satisfactorily  operating  that  kind  of  a  car,  would  there? 

Mr.  Kellogg.  Possibly  not. 

Connnissioner  Beall.  Is  that  what  the  objection  is? 

Mr.  Kellogg.  Although  the  men  seem  to  like  it.  That  is,  the  work 
interests  them. 

Commissioner  Beall.  The  fellow  who  can  do  it  likes  it  because  he 
gets  more  money? 

Mr.  Kellogg.  Yes.  Well,  it  interests  thenu  They  say  the  day 
passes  quicker;  that  is  the  comment  you  hear  the  men  make. 

Mr.  Warrex.  It  requires  the  combination  of  the  capacity  of  a  mo- 
torman  and  a  conductor,  to  a  certain  extent. 

Mr.  Keli.ogg.  It  does.  It  requires  quite  a  high  bookkeeping  skill, 
and  in  fact  some  of  the  old-line  motormen,  the  old  fellows  who  have 
been  on  the  front  end  for  a  great  many  years,  do  not  seem  to  be  able 
to  handle  the  one-man  car  at  all ;  it  confuses  them. 

Mr.  Warren.  That  is  due  to  the  bookkeeping  end  of  it,  I  suppose. 
I  \    Mr.  Kellogg.  Yes ;  they  do  not  know  the  bookkeeping  part. 

^Ir.  Warren.  Do  you  know  how  the  conductors  have  made  out 
in  rimning  them  ?  Are  they,  as  a  rule — or  are  a  good  many  of  them 
able  to  take  on  the  work  of  a  motorman  and  do  it  satisfactorily  ? 

Mr.  Kellogg.  We  asked  that  question;  and  the  replies  seemed 
to  be  rather  inconclusive.  The  men  I  talked  with  who  seemed  to 
have  the  most  experience  with  Birney  cars  seemed  to  feel  that  an 
ex-conductor  makes  the  best  operator. 

Mr.  Warren.  An  ex-conductor? 

Mr.  Kellogg.  An  ex-conductor;  because  he  has  had  that  experi- 
ence in  handling  trip  sheets,  transfers,  fares,  and  so  forth. 

^Ir.  Warren.  And  he  can  take  on  the  work  of  a  motorman  better 
than  the  motorman  (;;in  take  on  the  work  of  a  conductor. 

Mr.  Kellogg.  Yes,  although  that  is  not  universal.  That  is  to  say, 
there  is  no  reason  why  an  intelligent  motorman  should  not  run  one 
of  these  cars. 


As  I  have  just  stated,  one  of  our  conclusions  is  that  when  inagu- 
rating  one-man -car  service  it  is  good  policy  to  assure  the  trainmen 
that  no  man  will  lose  his  job  on  account  of  the  new  cars. 

Mr.  Warren.  That  is  to  head  off  their  opposition  ? 

Mr.  Kellogg.  That  is  to  head  off  opposition ;  and  it  is  a  j^erfectly 
feasible  thing  to  do. 

The  other  conclusions  I  have  here  have  already  been  covered 
more  or  less  in  my  testimony.  We  point  out  the  fact  that  the  sav- 
ing which  can  be  obtained  from  Birney  cars  depends  very  largely  on 
the  traffic  existing  at  the  time  and  that  a  very  small  community  can 
save  only  a  certain  amount  of  operating  expense ;  a  very  dense  line 
can  probably  save  very  little  if  anything.  So  that  the  zone  of  great- 
est usefulness  is  where  increased  riding  can  be  obtained  from  increas- 
ing the  frequency. 

Another  point  which  has  been  brought  out  in  the  discussion^ 
this  is  really  recapitulating — is  the  fact  that  where  traffic  is  too 
heavy  over  the  peak  field  for  the  Birney  cars,  naturally  the  old 
heavy  cars  can  be  used  at  that  time.  Of  course,  that  is  a  very 
mixed  blessing,  because  it  requires  having  two  extra  trainmen  avail- 
able for  that  service,  to  whom  you  have  to  pay  the  minimum  wage 
for  waiting  around  all  day,  and  it  also  means  maintaining  the 
heavier  car;  so  as  such  it  is  rather  a  disadvantage  than  an  advantage. 

Mr.  Warren.  That  minimum  wage  is  running  now  at  what  num- 
ber of  hours,  do  you  know,  generally,  Mr.  Kellogg  ? 

Mr.  Kellogg.  I  think  the  practice  varies  a  good  deal  on  that. 

Mr.  Warren.  It  is  increasing? 

Mr.  Kellogg.  But  I  have  in  mind  it  is  at  least  eight  hours  and 
in  some  cases  nine.  I  think  it  is  at  least  eight  hours  a  man  is 
guaranteed,  so  if  he  can  not  be  used  eight  hours  you  are  simply 
wasting  that  much  money. 

Commissioner  Gadsden.  There  w^ould  not  be  any  saving  in  that 
feature. 

Mr.  Kellogg.  No;  that  would  be  rather  an  adverse  feature.  An- 
other adverse  feature,  as  Mr.  Warren's  question  pointed  out,  would 
be  in  case  of  heavy  snow  storms,  where  the  light  car  could  not  get 
by  as  well  as  the  heavy  one.  It  might  be  necessary  to  have  spare 
heavy  equipment  for  that  purpose. 

The  committee  felt  that  standardization  was  quite  desirable.  Sa 
far,  these  Birney  cars  have  been  built  all  of  a  pattern  almost  en- 
tirely, and  it  is  rather  hoped  that  that  may  lead  to  somewhat  low^er 
construction  costs  if  these  cars  can  be  gotten  out  in  very  large 
numbers  from  the  same  pattern  on  the  general  principle  of  quantity 
production. 

Mr.  Warren.  On  the  whole,  jrour  feeling  is  that  the  car  promises, 
considerable  hel^D  within  a  certain  range  where  it  is  adopted  to  use ; 
is  it  not  ? 

Mr.  Kellogg.  Within  a  certain  range  the  results  which  have  beea 
obtained  are  remarkable. 

Mr.  Warren.  I  suppose,  on  the  other  hand,  that  the  car  is  so  new 
that  the  answers  to  these  questions  are  all  more  or  less  tentative — 
that  is,  no  company  has,  for  instance,  used  them  long  enough  to 
know  what  the  life  of  the  car  will  be  or  what  its  maintenance  will  be. 

Mr.  Kellogg.  That  is  true.    What  I  said  about  maintenance  ex- 


•ii! 


742       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

presties  the  belief  of  managers  who  reported  on  that  point.  The 
same  thing  was  true  of  track  maintenance;  it  was  simply  an  expres- 
sion of  opinion. 

Mr.  Warren.  I  suppose  the  latter  would  be  based  on  the  theory 
that  a  lighter  vehicle  ought  to  use  up  the  track  much  more  slowly 
tlian  a  heavier  vehicle  would. 

Mr.  Kellogg.  Yes. 

Mr.  Warren.  I  think  our  own  experience  would  demonstrate  that, 
when  we  used  to  run  lighter  cars. 

Mr.  Kellogg.  Yes. 

Mr.  Warren.  I  think  that  is  all  I  have  to  ask,  Mr.  Chairman. 

Commissioner  Meeker.  Do  the  passengers  like  this  higher  accelera- 
tion of  the  Birney  car  or  do  they  object  to  it? 

Mr.  Kellogg.  Do  the  passengers  object  to  it? 

Commissioner  Meeker.  Yes. 

Mr.  Kellogg.  No;  so  far  as  I  know^  they  do  not. 

Commissioner  Meeker.  Does  it  mean  starting  so  suddenly  that  it 
gives  a  j)erceptible  jerk? 

Mr.  Kellogg.  No;  the  jerk  would  have  no  particular  effect  on  ac- 
celeration. Acceleration  is  the  actual  gain  in  speed  in  miles  per 
hour  for  each  second  of  time,  which  is  a  perfectly  gradual  process 
right  through  from  rest  to  full  speed. 

Commissioner  MEi-:KER.  There  is  not  any  greater  jerk  in  the  actual 
starting  of  the  Birney  car  as  compared  with  the  heavier  car? 

Mr.  Kellogg.  No,  sir. 

Commissioner  Meeker.  The  same  is  true  of  stopping,  of  course? 

Mr.  Kellogg.  The  same  would  be  true  of  stopping.  Of  course,  on 
stopping  any  car  the  matter  of  standing  people  up  on  their  ears  is 
a  pure  question  of  the  motorman.  With  a  car  equipped  with  air 
brakes,  careless  braking  is  always  possible  regardless  of  the  weight 
of  the  car;  but  the  acceleration  is  entirely  a  matter  of  the  weight  of 
the  car  and  the  capacity  of  its  motors,  friction  loss,  and  so  forth. 

Commissioner  Mej:ker.  There  is  no  greater  possibility  of  standin<r 
the  passengers  on  their  ears  in  stopping  with  the  Bimey  car  than 
with  the  old-fashioned  car? 

Mr.  Kellogg.  I  should  say  not ;  no. 

Commissioner  Sweet.  Is  the  motor  lighter  on  these  cars  than  on 
the  heavier  cars  ? 
Mr.  KELLt)GG.  Yes. 

Commissioner  Sweet.  Is  it  in  proportion  to  the  weight  of  the  car? 
Mr.  Kellogg.  In  proportion  to  the  weight  of  the  car.    The  wheels 
are  lighter,  the  trucks  are  lighter,  the  axles  are  lighter..   Weight  has 
been  saved  in  every  part  of  the  car. 

Commissioner  Sweet.  It  is  a  single  truck,  I  understand? 
Mr.  Kellogg.  Single  truck ;  yes. 

Commissioner  Sweet.  Do  the  cars  ride  as  easily  as  the  others?  Is 
there  any  difference  in  that  respect? 

Mr.  Kellocjg.  They  ride  as  easily  as  any  single  truck. 

Commissioner  Sweet.  Well,  not  as  easily  as  a  double-truck  car? 

Mr.  Kellogg.  Probably  not,  although  their  lightness  makes  them 
ride  a  little  bit  easier. 

Commissioner  Sweet.  A  little  easier? 

Mr.  Kellogg.  I  think  it  does;  yes. 

Commissioner  Sweet.  That  is  not  true  of  automobiles,  is  it? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       743 


Mr.  Kellogg.  No. 

Commissioner  Sweet.  The  heavier  automobiles  ride  easier,  do  they 
not? 

Mr.  Kellogg.  I  think  they  do;  yes,  the  ones  I  have  ridden  in. 

Cominissioner  Sweet.  Why  is  not  that  true  of  cars  ? 

Mr.  Kellogg.  Well,  the  case — ^you  are  talking  now  about  single- 
truck  cars,  of  course  ? 

Commissioner  Sweet.  I  am  comparing  the  single-truck  car  of  the 
Birney  t^pe  with  a  double-truck  car. 

Mr.  Kellogg.  Well,  of  coui-se,  no  single-truck  car  will  ride  as 
smoothly  as  the  double-truck  car. 

Commissioner  Sweet.  That  is  what  I  had  in  mind. 

Mr.  Kellogg.  I  misunderstood  your  question. 

Commissioner  S^^^et.  So  there  might  be  objection  from  the  pas- 
sengers ? 

Mr.  Keixogg.  Yes ;  that  is  one  of  the  causes  of  the  battleship  type 
in  the  old  days. 

Mr.  Warren.  The  public  used  to  object  to  the  double-truck  cars, 
as  I  remember  it. 

Mr.  Kellogg,  Yes. 

Mr.  Warren.  Is  this  a  longer  wheel  base? 

Mr.  Kellogg.  It  is  an  8-foot  wheel  base.  It  is  rather  longer  for 
the  weight  of  the  car.  I  think  the  car  rides  rather  more  easily  than 
the  average  car  for  that  reason. 

Commissioner  Sweet.  What  is  the  method  of  payment  of  fare  in 
these  cars? 

Mr.  Kellogg.  As  a  rule  a  recording  fare-box  is  used,  but  that  is  not 
universal. 

Commissioner  Sweet.  That  is  in  the  front  end  of  the  car  ? 

Mr.  Kellogg.  Yes ;  the  entrance  and  exit  are  both  at  the  front  end. 

Commissioner  Sweet.  Is  it  necessary  at  the  end  of  the  route  to 
turn  these  cars  around? 

Mr.  Kellogg.  That  depends  on  track  conditions.  Some  companies 
have  a  Y  and  tise  a  single-end  car.  Othei*s  prefer  a  double-end 
operation  or  are  obliged  to  use  it  and  have  double-end  cars.  That  is 
more  a  matter  of  track  arrangement  than  car  arrangement. 

Commissioner  Sweet.  In  that  case  only  the  front  door  would  be 
accessible  to  passengers? 

Mr.  Kellogg.  Well,  in  the  case  of  the  double-end  car,  there  would 
be  an  exit  and  entrance  from  either  end. 

Commissioner  Sweet.  From  either  end. 

Mr.  Kellogg.  Yes ;  and  as  a  matter  of  fact  the  single-end  cars  as  a 
rule  have  a  safety  door  at  the  rear  so  the  passengers  can  get  out  that 
way.  But  single-end  and  double-end  operation  are  a  question  of 
track  in  almost  all  companies — that  is  as  to  whether  the  car  goes 
around  a  loop  or  a  Y  at  the  end  of  the  line  or  turns  the  trolley  and 
goes  back. 

Commissioner  Sweet.  In  the  one-man  ear  is  the  motonnan  the  one 
who  Iveeps  track  of  the  payment  of  fares  by  passengers? 

Mr.  Keixogg.  He  is  sometimes  called  the  motorman-conductor. 
He  is  a  combination  of  motorman  and  conductor. 

Commissioner  Sweet.  Is  he  supposed  to  see  whether  they  put  their 
fare  in  the  box  ? 


/ 


744       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK. 

Mr.  Kellocc.  Yes,  sir.  AVliile  the  car  is  standing  still  he  has 
nothing  else  to  do,  and  it  is  proper  that  he  should  be  watching  the 
passengers,  because  he  can  not  start  the  car  until  the  door  is  closed. 

Commissioner  Beall.  On  the  Birney  car  you  only  use  the  front 
door,  do  you  not?  You  do  not  let  passengers  get  on  and  off  from 
the  rear  door  except  in  case  of  accident? 

Mr.  Kellogg.  No. 

Commissioner  Beall.  I  do  not  think  Mr.  Sweet  quite  caught  that. 

Mr.  Warren.  They  all  have  to  pass  the  motorman  as  they  get  on. 

Mr.  Kellogg.  They  all  have  to  pass  the  motorman  as  they  get  on ; 
J  es. 

Mr.  Warren.  Mr.  Sweet  asked  one  ciuestion  about  the  ease  of  the 
car.    Does  this  car  have  any  overhanging  platforms? 

Mr.  Kellogg.  Overhanging  in  what  respect  ? 

Mr.  Warren.  I  mean  like  the  ordinarv  car,  does  it  have  a  platform 
at  each  end  which  extends  the  length  of  the  car  and  tends  to  give  it  a 
teetering  motion? 

Mr.  Kellogg.  It  has  proportionately  as  much  platform  as  other 
single-truck  cars;  yes. 

Mr.  Warren.  I  suppose  the  single-truck  car  requires  a  track  in 
better  condition  for  the  same  amount  of  riding  than  a  double-truck 
car  does ;  does  it  not  ? 

Mr.  Kellogg.  It  does.  But  it  is  a  fact  that  the-  trucks  of  the 
Birney  cars  are  designed  to  ride  rather  better  than  the  normal  single- 
truck  cars. 

Commissioner  Sweet.  How  does  the  Birnev  car  compare  with  the 
heavier  double-truck  car  in  the  wearing  out  of  the  track  ? 

Mr.  Kellogg.  Well,  assuming  that  the  wear  and  tear  on  track  is 
largely  a  matter  of  tonnage,  it  would  be  less.  How  much  less  is 
unknown. 

Commissioner  Sweet.  That  would  be  partly  offset  by  the  greater 
speed  of  the  Birney  car.    Would  it  not,  or  would  it  ? 

Mr.  Kellogg.  The  difference  is  rather  too  slight,  I  think,  to  make 
Tery  much  difference,  because  the  running  speed  and  the  full  speed 
attained  is  practically  the  same  in  the  other  cars.  The  question  is  in 
the  acceleration  in  starting  and  stopping. 

Commissioner  Sweet.  I  notice  you  do  not  seem  to  make  any  dif- 
ference m   your  recommendations  there   with   regard   to  climate 
Don  t  you  think  that  the  Birney  car  is  better  adapted  to  the  cities 
m  the  southern  part  of  the  United  States  rather  than  the  extreme 
north  ? 

Mr.  Kellogg.  There  is  no  question  about  that:  that  is  perfectly 
true.  '  1  J 

Commissioner  Saveet.  Or  cities  like  Seattle,  which,  although  in 
the  north,  do  not  have  a  great  deal  of  snow. 

Mr.  Kellogg.  Yes ;  that  is  perfectly  true. 

Commissioner  Sweet.  Before  a  real  test  can  be  made  of  these  cars, 
cfon  t  you  think  that  a  great  deal  more  time  must  elapse  so  that  the 
P"^yic  taste  with  regard  to  the  matter  may  be  better  determined « 

Mr.  Kellogg.  That  is  perfectly  true.    It  is  a  new  thing. 

Commissioner  Sweet.  So  that  it  would  be  stretching  the  point 
somewhat,  do  you  not  think,  for  tlie  commission  to  make  any  particu- 
Jar  recommendation  with  refard  to  these  cars? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       745 

Mr.  Kellogg.  Oh,  I  think  for  the  commission  to  hang  anything 
definite  on  as  relatively  new  a  proposition  as  this,  especially  with 
its  limited  application,  would  be  very  dangerous. 

Commissioner  Sweet.  About  the  furthest  the  commission  could 
possibly  go,  it  seems  to  me  now,  would  be  to  suggest  the  possibility 
that,  with  the  incentive  that  there  is  at  the  present  time  and  perhaps 
that  there  has  been  during  the  Avar  more  than  in  ordinary  times, 
economical  improvements  such  as  this  might  be  introduced  through 
the  street-railway  services  of  the  future  that  would  cut  considerable 
figure  ? 

Mr.  Kellogg.  Yes. 

Commissioner  Sweet.  Which  is  true,  is  it  not? 

Mr.  Kellogg.  It  is  true.  And  the  company  is  studying  these  things 
all  the  time.  The  work  of  this  committee,  for  example,  has  been 
along  the  lines  the  association  has  been  studying  year  in  and  year 
out. 

Commissioner  Saveet.  What  is  that  committee  ?  Describe  it  a  little 
more  fully. 

Mr.  Kelixxjg.  The  committee  I  haA^e  reference  to  is  on  one-man 
operation.  The  American  Electric  Raihvay  Association  is  the  parent 
association,  called  the  American  Electric  Railway  Association,  and 
then  there  are  two  affiliated  organizations  which  are  really  part  of 
the  main  organization.  One  of  them  is  the  American  Electric  Rail- 
way Transportation  &  Traffic  Association,  and  this  committee  of 
which  I  am  chairman  is  one  of  four  committees  which  have  been 
appointed  this  year— that  is,  the  year  Avhich  will  end  in  October  at 
the  convention — to  study  various  features  and  report  on  them  to  the 
convention.  And  these  committees  during  the  year  either  send  out 
questionnaires  or  study  the  matter  in  any  way  they  can,  the  idea 
being  that  at  all  times  there  are  A^arious  matters  in  process  of  study 
on  the  part  of  the  industry,  and  one  of  the  main  functions  of  the 
American  Electric  Railway  Association  is  to  study  these  things  at 
all  times.    That  is  Avhat  it  was  organized  for. 

Commissioner  Saveet.  And  give  all  the  members  of  it  the  benefit  of 
the  accumulated  knoAvledge  that  can  be  brought  together  by  these 
committees  when  they  make  their  reports? 

Mr.  Kellogg.  Yes. 

Commissioner  Saveet.  Which,  of  course,  is  a  very  good  system. 

Mr.  Kellogg.  That  is  what  the  association  Avas  organized  for  many 
years  ago.  "^ 

Commissioner  Saa^eet.  In  small  communities,  and  as  a  means  of 
going  from  one  rather  small  community  to  another  not  yery  far 
away,  that  kind  of  a  car  would  seem  to  be  exceedingly  useful,  would 
it  not  ? 

Mr.  Kellogg.  Do  you  i.iean  a  small  interurban? 

Commissioner  Saveet.  Well,  you  might  call  it  interurban,  or  I  think 
it  has  been  spoken  of  as  a  shuttle.  Suppose  there  were  tAvo  villages 
or  small  communities,  neither  one  of  Avhich  Avould  be  able  to  support 
a  street-car  system,  and  yet  with  a  certain  amount  of  business  between 
them. 

Mr.  Kellogg.  Yes. 
^    Commissioner  Sweet.  If  there  was  enough  interchange  there  to 
justify  it— that  is  imaginable— a  car  of  this  kind  would  come  into 
160643"— 20 48 


746       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

play  a  great  deal  quicker  than  the  heavier  double-truck  car  with  two 
men  ? 

Mr.  Kellogo.  No  doubt  about  it. 

Commissioner  Sweet.  One  operated  so  cheaply.  It  might  be  serv- 
iceable between  such  places  where  they  could  not  begin  to  afford  one 
of  the  heavier  cars  with  two  men  operating  it, 

Mr.  Kellogg.  Yes;  that  is  true. 

Commissioner  Beall.  You  can  not  run  any  single  truck  at  the 
average  interurban  speed,  not  even  with  the  old  type,  can  you  ? 

Mr.  Kellogg.  Not  with  the  average  interurban  speed.  Of  coui-se 
there  are  interurbans  and  interurbans. 

Commissioner  Beall.  But  if  you  are  going  to  give  your  pas- 
sengers rides  with  a  good  speed  you  can  not  do  it  Have  you  ever 
ridden  on  them  ? 

Mr.  Kellogg.  Yes. 

(Commissioner  Beall.  It  depends  on  the  speed,  and  I  do  not  care 
how  good  your  track  is  either. 

Mr.  Kellogg.  Well,  there  are  lines  where,  as  Mr.  Sweet  says,  two 
communities  are  not  very  far  apart 

Commissioner  Beall.  Yes,  if  they  are  close  enough — but  not  a 
real  interurban. 

Mr.  Kellogg.  No. 

Conmiissioner  Sweet.  I  did  not  have  in  mind  what  j^ou  call  a 
regular  interurban. 

Mr.  Kellogg.  An  interurban  generally  means  a  pretty  high-c^ass 
road  with  a  private  right  of  way,  good  track,  well  ballasted,  and 
high-speed  cars,  very  different  from  city  service. 

Commissioner  Sweet.  Take  a  city  like  Washington,  where  about 
4  or  half  past  4  in  the  afternoon  when  the  department  clerks  want  to 
go  home,  there  is  a  great  congestion ;  that  you  would  call  the  i)eak? 

Mr.  Kellogg.  Yes. 

Commissioner  Sweet.  And,  I  should  imagine,  a  pretty  big  peak, 
would  it  not  be? 

Mr.  Kellogg.  Yes. 

Commissioner  Sweet.  In  this  city  the  peak  would  perhaps  be 
larger  than  in  many  other  cities. 

Mr.  Ivellogg.  On  account  of  the  large  number  of  employees  off  at 
the  same  time. 

Commissioner  Sw^eet.  Yes. 

Mr.  Kellogg.  Yes ;  I  should  think  so. 

Commissioner  Sweet.  With  your  regular  equipment  of  heavy  cars, 
if  you  wanted  to  take  care  of  that  peak,  why  could  not  you  treat  this 
single  man  as  an  assistant,  an  aid  in  carrying  the  load  during  that 
peak? 

Mr.  Kellogg.  For  tripper  service,  you  could. 

Commissioner  Sw^eet.  And  if  there  were  very  slack  hours  of  the 
day,  we  will  say  from  9  oxlock  to  12  or  1  in  the  morning,  there  are 
periods  when  it  is  necessary  to  run  some  cars  but  when  the  travel 
IS  cx)mparatively  light.  Why  would  not  a  car  of  that  kind  answer 
the  purpose  and  save  in  various  ways  in  oi)eration  and  in  the  various 
ways  you  have  pointed  out? 

]\Ir.  Kellogg.  It  would.  Of  course,  it  all  depends  on  each  indi- 
vidual line.  You  can  not  make  a  general  rule.  You  would  have 
to  take  each  line  and  analyze  it.     If  they  were  i^lanning  to  install 


PBOCEEBINGS.  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       747 

these  Birney  cars  b^e  in  Washington  they  would  want  to  analyze 
each  of  their  lines  and  take  each  line  on  its  merits  and  see  if  tl^at  line 
was  apparently  one  where  those  cars  would  work  out.  They  would 
probably  get  some  one  who  had  operated  them  and  get  his  advice  on 
it,  or  else  take  a  line  where  from  all  the  information  tliey  could  get 
it  appeared  they  could  make  a  saving  and  just  get  the  cars  and  try 
them.  That  is  really  the  way  the  thing  has  developed  all  over  the 
country,  just  by  trial. 

Commissioner  Sweet.  That  is  all. 

The  Chairman.  If  I  understand  your  testimony  correctly,  the 
principal  object  of  the  one-man  car  is  to  save. 

Mr.  Kellogg.  No;  that  was  not  what  I  said. 

The  Chairman.  Welly  let  us  see.  By  the  use  of  the  one-man  car 
you  will  save  capital,  will  you  not,  because  it  costs  less  to  buy  a 
one-man  car  than  it  does  a  large  standard  car? 

Mr.  Kellogg.  If  it  replaces  a  ear  you  already  have,  of  course  it 
means  more  capital. 

Tlie  Chairman.  You  also  save  in  power  used  to  propel  that  carl 

Mr.  Kellogg.  Yes. 

The  Chairman.  And  you  save  in  wages  for  employees? 

Mr.  Kellogg.  Yes. 

The  Chairman.  And  you  save  in  the  maintenance  of  the  ear? 

Mr.  Kellogg.  Yes;  the  amount  unknown. 

The  Chairman.  And  possibly  maintenance  of  your  track? 

Mr.  Kellogg.  Yes. 

The  Chairman.  You  also  save  in  fixed  charges  upon  the  capital 
employed? 

Mr.  Kellogg.  Well,  there  again  the  saving  is  problematical,  if  you 
replace  existing  cars  that  are  in  perfectly  good  condition  with  other 
cars.  If  you  wall  pardon  the  suggestion,  the  investment  feature  of 
Birney  cars  is  a  biirden  and  not  a  benefit.  In  other  wortls,  the  Birney 
car  has  got  by  its  economy  to  offset  additional  investment.  It  is  not 
really  a  saving.     The  investment  feature  is  a  negative  feature. 

The  Chairman.  Might  there  not  also  be  a  saving  in  the  amount  of 
depreciation  which  you  find  it  necessary  to  set  aside? 

Mr.  Kellogg.  As  to  that,  experience  has  not  been  quite  long 
enough  to  be  certain.  Of  course,  these  cars  are  a  good  deal  lighter, 
and  some  people  think  there  is  more  depi-eciation  on  them,  just  like 
there  is  more  on  a  Ford  than  there  is  on  a  Packard.  But  it  is  simply 
something  we  have  not  got  the  experience  on. 

Commissioner  Meeker.  And  the  Ford  never  wears  out,  while  the 
Packard  does. 

Mr.  Kellogg.  Well,  that  is  what  the  protagonist  for  the  one-man 
car  would  say. 

The  Chairman.  The  advantages  come,  as  I  undei-stand,  from  your 
being  able  to  start  and  stop  more  quickly? 

Mr.  Kellogg.  Yes;  we  class  the  greatest  advantage  as  improved 
service. 

The  Chairman.  And  greater  speed  between  points*  Those  are 
your  principal  advantages? 

^Ir.  Kellogg.  Yes. 

The  Chairman.  Now,  summarizing  the  savings  as  well  as  the  ad- 
vantages, is  not  the  whole  matter  of  i^eculiar  benefit  to  the  com- 
pany ? 


748       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Kellogg.  I  think  three  people  benefit  from  it,  if  you  will 
pardon  the  suggestion.     I  think  the  public  get  a  great  deal  better 

service  where  that  is  feasible  under  the  conditions 

Tlie  Chairman.  We  will  take  up  the  service  next;  but  is  it  not 
a  peculiar  benefit  to  the  company? 
Mr.  Kellogg.  By  "peculiar"  do  you  mean  eliminating  others? 
The  Chairman.  I  am  not  eliminating  anything.     I   am   asking: 
you  that  direct  question,  and  you  can  answer  it. 
Mr.  Kellogg.  It  is  of  benefit  to  the  company. 
The  Chairman.  That  is  what  I  thought.     Now   is  it  not   alsa 

true 

Mr.  Kellogg.  I  was  not  trying  to  quibble,  but  I  wanted  to  raise 
the  point  that  the  company  was  not  the  only  beneficiary. 
The  Chairman.  I  am  not  trying  to  get  you  in  a  trap. 
Mr.  Kellogg.  Yes. 

The  Chairman.  Is  it  not  also  true  that  your  ability  to  use  this 
equipment  more  readily  than  the  heavier  equipment,  and  perhaps 
the  greater  saving  to  the  company,  will  be  the  real  benefit  to  the 
public  ? 

Mr.  Kellogg.  Yes;  it  will. 

The  Chairman.  In  that  you  can  give  them  better  and  perhaps 
more  prompt  service? 
Mr.  Kellogg.  Yes. 

The  Chairman.  That  being  so,  why  is  it  not  a  very  good  thing 
to  advocate  the  use  of  the  one-man  car  just  as  much*^  as  possible? 
Mr.  Kellogg.  I  think  it  is  a  good  thing. 
The  Chairman.  If  it  is  a  good  thing  for  the  companies  as  well 

as  for  the  public 

Mr.  Kellogg.  And  for  the  trainmen. 

The  Chairman.  And  for  the  trainmeft — why  should  it  not  be  a 
good  thing  for  this  commission  to  advocate  theuse  of  such  a  car? 

Mr.  Kellogg.  I  think  they  should  advocate  it  wherever  it  can  be 
used  to  advantage. 

The  Chairman.  How  many  companies  are  there  that  manufacture 
equipment,  cars? 

Mr.  Kellogg.  I  only  know  of  two.  There  nuiy  be  more.  There 
is  the  J.  G.  Brill  Co.  'in  Philadelphia  and  the  St.  Louis  Car  Co.  of 
St.  Louis.  Mr.  Beck  is  here.  Is  that  right,  Mr.  Beck,  or  are  there 
more? 

The  Chairman.  Are  those  two  separate  companies? 
Mr.  Kellogg.  They  are  two  separate  companies.     Are  there  more 
than  that?     The  Brill  Co.  and  the  St.  Louis  Car  Co. 

Mr.  Beck.  Those  are  the  two  principal  companies,  although  others 
arc  in  the  business. 

Conunissioner  Beall.  The  Pullman  Co.  still  makes  cars,  although 
I  do  not  know  but  that  during  the  war  they  stopped  making  them. 

The  Chairman.  So  there  are  three  companies  then  that  manu- 
facture street  cars? 
Mr.  Kellogg.  The  only  ones  I  know  of  are  the  ones  I  mentioned* 
Conunissioner  Beall.  Who  swallowed  up  the  Kuhlman  Co.? 
Mr.  Kellogg.  I  think  the  Brill  Co.  took  them  over. 
Commissioner  Beall.  Did  the  Brill  Co.  take  them  over? 
Mr.  Kellogg.  I  think  they  did.     I  am  not  sure  of  that. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       749 

The  Chairman.  Is  there  any  relation  existing  between  those  com- 
panies by  stock  ownership  or  directorship  or  anything  else? 

Mr.  Kellogg.  None  that  I  know  of. 

The  Chairman.  Which  company  manufactures  the  Birney  car? 

Mr.  Kellogg.  They  both  manufacture  it.    It  is  not  patented. 

The  Chairman.  It  is  not  patented? 

JVir.  Kellogg.  No;  nothing  about  it  patented. 

The  Chairman.  That  is  very  singular. 

Mr.  Kellogg.  It  was  given  to  the  world  by  the  inventor. 

Commissioner  Gadsden.  Does  not  the  Cincinnati  Car  Co.  make 
cars  ? 

Mr.  Kellogg.  Maybe  they  do. 

Commissioner  Gadsden.  I  know  they  do. 

The  Chairman.  Is  the  Cincinnati  company  a  subsidiary  of  any 
of  the  otlier  companies  you  mentioned? 

Mr.  Kellogg.  Not  that  I  know  of,  but  I  really  could  not  testify 
anything  about  that  definitely.  I  say  negatively  that  I  do  not  think 
they  are. 

The  Chairman.  If  it  could  be  proved  advantageous  to  generally 
use  the  Birney  car,  would  it  not  mean  a  replacement  of  a  lot  of 
equipment  now  in  service? 

Mr.  Kellogg.  To  such  an  extent  as  they  could  be  used  to  improve 
the  situation,  I  should  say  yes. 

The  Chairman.  Are  any  of  the  companies  you  know  of  in  posi- 
tion now  to  buy  these  new  c^rs  and  use  them  for  equipment  which 
they  now  have  which  is  serviceable?. 

Mr.  Kellogg.  Do  jou  mean  are  they  financially  able  ? 

The  Chairman,  les. 

Mr.  Kellogg.  Well,  I  dare  say  a  number  of  companies  might  be. 
I  do  not  happen  to  know  enough  about  things  to  know  directly. 
Most  street-car  companies  are  nearly  broke  now. 

The  Chairman.  Is  it  not  true  that  these  replacements  must  be 
very  gradual,  if  at  all,  on  account  of  the  financial  condition  of  the 
companies  ? 

Mr.  Kellogg.  Yes;  .and  even  if  they  had  the  money,  they  would 
have  to  go  at  it  gently,  one  line  at  a  time. 

The  Chairman.  Then  the  one-man  car  is  not  an  expedient  that 
can  remedy  the  present  situation? 

Mr.  Kellogg.  No.  As  I  said  this  afternoon,  it  is  not  a  panacea; 
it  is  not  something  that  you  simply  fill  in  a  blank  check  and  say  that 
is  all  there  is  to  it.    It  is  a  great  help  in  some  cases. 

The  Chairman.  Why  is  the  Amalgamated  Association  opposed  to 
the  one-nuin  car? 

Mr.  Kellogg.  You  are  asking  me  to  read  the  mind  of  that  gen- 
tleman.   I  can  not  do  it. 

Commissioner  Beall.  What  is  his  argument?  You  say  he  ob- 
jects to  it.  You  say  you  have  read  his  objection.  What  does  he  say, 
ostensibly  ? 

Mr.  Kellogg.  Ostensibly,  he  says  the  car  is  not  safe ;  it  is  put  out 
by  the  companies  simply  to  save  money;  the  trainmen  do  not  like 
it ;  they  get  more  work  out  of  the  men,  and  it  is  just  a  device  to  cut 
out  labor  and  deprive  men  of  their  jcbs — the  usual  talk  that  emanates 
from  that  source. 


/ 


750      PROCEEDINGS  OF  FEI^RAL  ELECTRIC  RAILWAYS  COMMISSION". 

The  Chairman.  The  queiitionnaires  that  you  sMit  out  covered  that 
question  pretty  thoroughly,  didn't  they  ? 

Mr.  Kellogo.  Not  very  fully.  We  did  aot  think  it  was  worth 
while  asking  questions  about  it  except  as  to  how  the  trainmen  felt: 
aiul  those  answers  I  gave. 

The  Chairman.  Has  there  been  a  real  protest  by  the  employees  of 
the  c  ompanies  where  tlie  one-man  car  is  in  use  ? 

Mr.  Kellogg.  There  have  been  about  10  per  cent  of  the  cases  so 
reported. 

The  Chairman.  Did  those  protests  result  in  any  strike? 

Mr.  Kellogg.  Not  that  I  know  of.    I  think  not. 

The  Chairman.  Do  you  believe  that  the  use  of  the  one-man  car 
could  be  so  arranged  as  to  take  care  of  the  present  labor  without  any 
grievance? 

Mr.  Kellogg.  Absolutely.    That  is  my  opinion. 

The  Chairman.  That  being  so,  why  should  the  Amalgamated  As- 
sociation or  the  unions  object  to  it? 

Mr.  Kellogg.  The  only  reason  I  can  think  of  is  a  general  desire 
to  oppose  anything  which  seems  to  take  a  man  out  of  a  job.  That 
is  to  siiy,  I  think  they  oppose  labor-saving  devices  on  general  prin- 
ciples, their  purpose  being  to  keep  labor  employed. 

The  Chairman.  From  the  experience  you  have  had  and  tlie  study 
you  and  your  committee  have  made,  do  you  believe  that  the  one-man 
car  will  give  satisfactory  public  service"? 

Mr.  Kellogg.  Wherever  conditions  of  traffic  aie  right,  I  do. 

The  Chairman.  Is  it  necessary  to  have  a  better  roadbed  in  order 
to  give  good  service  with  the  one-man  car  ? 

Air.  Kellogg.  Compared  to  former  single-truck  cars,  do  you  mean 
or  former  double-truck  cars?    Of  course  it  depends.  ' 

The  Chairman.  Single-truck. 

Mr.  Kellogg.  I  do  not  think  any  single-truck  car  can  ride  quite  as 
smoothly  as  a  double-tinick  car.  to  answer  that  question  we  would 
necessarily  have  to  presuppose  former  conditions,  which  vary  a  ffood 
deal.  "^      ^ 

The  Chairman.  Well,  I  ctin  see  that  if  we  wanted  to  pursue  that 
inquiry  jt  would  consume  considerable  time;  so  we  will  not  pursue  it. 

Mr.  Kellogg.  I  am  not  trying  to  dodge  it,  but  I  mean  to  answer 
it  categorically  you  would  have  to  know  what  the  conditions  were 
before. 

The  Chairman.  That  is  alL 

(Witness  excused.) 

STATEMENT  OF  MB.  FEANK  J.  SPRAGUE. 

Mr.  Warren.  Your  full  name  is? 

Mr.  Sphague.  Frank  J.  Sprague. 

Mr.  Warren.  You  are  a  graduate  of  the  Naval  Academy? 

Mr.  Sprague.  Yes,  sir. 

;Mr.  Warren.  You  are  a  member  of  the  Naval  Advisory  Board  or 
were  during  the  war?  ' 

Mr.  Sprague.  Yes.  sir. 

.  Mr  ^^Varren.  I  think  you  were  formerly  associated  with  Thomas 
A.  Edison? 


PROCEEDIIS^GS  OF  FEDEBAL  ELECTEIC  RAILWAYS  COMMISSION".       751 

Mr.  Sprague.  For  a  short  time. 

Mr.  Warren.  And  you  organized,  did  you  not,  and  operated,  the 
first  commercially  successful  electric  railway  in  this  country,  in 
Kichmond? 

JSIr.  Sprague.  I  equipped  it.    I  did  not  operate  it. 

Mr.  Warren.  You  equipped  it? 

Mr.  Sprague.  Yes. 

Mr.  Warren.  That  was  in  1888,  was  it  not? 

Mr.  Sprague.  In  1888. 

Mr.  Warren.  You  also  developed  the  multiple  control 

Mr.  Sprague.  The  multiple-unit  control  for  train  operation,  yes. 
Mr.  Warren.  Which  made  it  possible  to  operate  cars  in  trains 
mstead  of  single  units  ? 

Mr.  Sprague.  It  is  the  basis  of  operation  of  all  subway  and 
elevated-train  operations. 

Mr.  Warren.  You  really  were  at  the  very  beginning  of  the 
electric  railway  in  this  country,  were  you  not? 

Mr.  Sprague.  I  suppose  I  might  fee  called  the  midwife  of  those 
certain  interests. 

Mr.  Warren.  Would  you  mind  telling  this  commission,  because 
they  are  studying  that,  what  you  experienced  and  discovered  as  a 
midwife  to  this  industry  and  whether  you  feel  satisfied  with  the 
child,  now  that  it  has  grown  up. 

Mr  Sprague.  Well,  really,  Mr.  Chairman,  I  do  not  quite  know 
why  1  am  here,  unless  it  is  to  carry  out  a  practice  that  is  often- 
times common.  I  am  reminded  of  an  institution  which  was  rather 
famous  m  London  and  had  its  replica  in  New  York,  known  as  Mi^. 
Jarley  s  Wax  Works,  and  in  New  York  it  was  the  Eden  Muse«. 
All  tourists  were  invited  to  these  places  to  see  what  people  looked 
like  who  had  been  identified  with  either  politics  or  crime  or  scandal 
or  literature. 

I  am  not  directly  interested  at  present  in  electric  railways.  My 
work  for  a  number  of  years  was  in  development,  in  promoting  and 
equipment,  either  directly  or  through  my  agents.  I  built  the  first 
niodern  road  in  this  country  and  in  Italy  and  in  Germany.  And 
If  you  are  interested  at  all  in  the  history  of  it,  I,  of  course,  can  ffive 
you  some  information  on  that  subject.  ^ 

The  Chairman.  I  do  not  think  we  should  forego  the  privileo^  of 
hearing  from  the  midwife.  ^  yi^yn^ge  or 

T  }t-'  ^^«^«^J-,  ^ell,  it  may  have  a  bearing  upon  the  principle  that 
1  think  ought  to  be  observed  m  the  relation  between  communities 
Jinct  electric  railways. 

There  is  an  impression  that  when  an  individual  or  a  group  o-et  a 
franchise  they  are  immediately  embarked  on  a  sure  thing  toward  a 
very  happy  return.  But  my  impression  is  that  it  is  vei-ir  much 
like  getting  a  patent  out  of  the  United  States  Patent  Office-  it  is 
an  invitation  to  a  costly  contest.  Oftentimes  they  sink  capital  in  the 
nope  of  some  ultimate  reward. 

I  am  not  interested  in  any  electric-railway  securities.     I  do  not 
own  a  bond  and  have  not  a  share  of  stock.    I  am  not  a  member  of 
any  concern  who  is  interested  in  dealing  with  electric  securities 
wln^  ''^'"'''''  ''  no  more  than  that  of  a  looker-on  from  the  outside! 
t)ecause  my  present  interests  are  quite  in  other  directiors. 


752       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  think  perhaps  the  history  of  the  growth  of  the  electric  railway 
Illustrates  very  clearly  that  there  are  two  sides  which  have  got  to 
be  considered ;  not  the  community  alone  on  the  one  side,  but  those 
who  take  the  risks  m  electric-railway  development. 

In  1887  I  took  the  contract  for  the  Richmond  Union  Passenger 
Ivailway.  I  had  more  hope  than  sense;  more  confidence  than  ex- 
perience. The  basis  of  experience  was  that  of  experiments  which 
1  had  been  carrying  on  on  a  private  track  on  the  elevated  railroads 
in  New  1  ork  City,  or  a  short  branch  of  them.  And  when  I  took 
the  contract  for  the  Richmond  road  we  really  proceeded  on  the  basis 
of  a  blue  print.  That  contract  called  for  the  equipment  of  40  cars, 
80  motors,  a  small  central  station  in  connection  with  the  overhead 
line,  to  be  built  m  60  days  and  to  be  paid  for,  $110,000,  if  satisfactory. 
Most  people  would  say  that  is  an  insane  contract.  Judged  from 
ordinary  commercial  principles  it  was.  But  on  several  occasions 
1  have  had  to  make  precisely  that  same  kind  of  contract  to  carry 
through  some  enterprise  in  which  I  have  been  interested,  and  I  have 
been  interested  in  quite  a  number  of  popular  developments.  I  have 
had  to  take  the  risks. 

At  that  time  the  Richmond  road  as  a  road  did  not  exist.  It  was 
simply  a  franchise  belonging  to  a  lot  of  New  York  politicians.  It 
cost  us  nearer  $200,000  and  it  cost  my  company  over  $100,000— the 
wrong  side.  ^  i      j  v       j 

The  Chairman.  To  get  the  franchise  ? 

np«r[;^9nn  mn  ^V  ^  ''^^\''  ^"^  '^^'*''>'  ^"^  *^^  contract.  It  cost  them 
nearly  $200,000  and  we  lost  over  $100,000;  but  it  began  this  business. 
Well,  that  IS  31  years  ago. 

I  look  over  the  field  and  I  see  the  electric  railway  has  perhaps 
had  the  most  remarkable  growth  of  any  industry  in  the  wx)rld  in 

LnLf  T  nm  nnn  r^n  ^^""^'^"^^  ^''-^''^^  ^"  *^^  United  States  alone,  I 
guess,  $6,000,000,000;  gross  revenues  of  nearly  three-quarters  oi  a 
billion ;  men  employed,  about  300,000.  There  has  been  one  continual 
demand  on  the  part  of  the  public  for  the  betterment  and  tlie  increase 
m  service. 

I  look  back  at  the  Richmond  road.     I  could  not  find  a  vestige  of 

fw^JI!?''  '^?^  ^u  ^^^^^^^^^-^^  purposes,  not  a  pound  of  copper  on 
that  entire  road.  The  growth  of  the  art  required  it  to  be  gradually 
abandoned;  it  wore  out.  The  first  motors  used  were  onlv  7^  horse- 
power, two  on  a  car     The  cars  were  of  the  ordinary  street-car  type 

W  ^n^^  ^^^T^  *'*"1-  ^^^  ^"*y  P"^  "P«"  the  motors  was  .at 
least  100  per  cent  more  than  they  could  reasonably  expect  to  carrv 
They  were  operating  with  30-pound  rails  laid  in  Virginia  mud 
They  could  not  run  a  single  trip  without  repairs.  Sometimes  we 
fW  ^^  ?l  going,  sometimes  2.  And  if  the  people  interested  in 
that  had  not  stuck  to  it,  the  electric-railway  growth  would  have  been 
postponed  some  years.  ^^  nave  ueui 

In  that  tiine  there  has  been  a  rather  curious  ratio  of  increase  in 
certain  matters  connected  with  electric  railways.  The  cost  of  the 
cars  the  weight,  the  power  of  the  motors  have  all  been  just  about 
quadrupled  The  cost  of  tracks  has  increased  from  six  to  eight 
times.  In  the  last  15  or  16  years  the  revenue  per  car-mile  has  in- 
creased about  50  per  cent,  the  operating  cost  has  about  doubled. 
The  taxes  have  about  doubled,  the  net  return  per  car-mile  has 
remained  almost  stationary.  ^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      753 

Within  recent  years,  owing  to  the  general  increase  of  prices  in 
•  everything,  the  cost  of  equipment,  the  cost  of  upkeep,  the  cost  of 
operation  of  every  electric  railroad  in  the  country  has  been  very 
materially  and  very  gravely  increased;  and  it  seemed  to  be  about  the 
one  business— that  is,  the  selling  of  transportation— in  which  there 
has  been  a  fixity  of  unit  return  with  a  constant  increase  of  the  cost. 

Now  many  of  those  increases  of  cost  have  been  due  to  the  ordinary 
increases  in  cost  of  material  and  labor,  but  many  of  them  have  been 
due  to  Government  action,  to  decisions  in  which  the  railroads  had  no 
voice  whatever. 

There  is  another  direction  in  wliich  that  rather  curious  relation 
has  been  evidenced.  I  think  the  taxable  area  and  the  livable  area 
of  a  great  many  of  our  cities  has  just  been  about  quadrupled  for  the 
same  nickel  ride.  I  can  give  you  a  single  instance  in  which  I  sup- 
pose, contrary  to  the  knowledge  and  belief  of  a  good  many  people, 
a  single  invention  has  meant  hundreds  of  millions  of  dollars  to  one 
community. 

The  Chairman.  To  one  what? 

Mr.  Sprague.  A  single  invention  has  meant  hundreds  of  millions 
to  one  community.  Take  the  multiple-unit  system,  to  which  ref- 
erence has  been  made.  That  is  a  system  in  which,  instead  of  a  train 
being  operated  by  a  locomotive,  as  in  steam,  cars  are  individually 
equipped  with  motors  and  controllers  and  with  master  controllers 
and  train  lines  in  such  fashion  that  any  number  of  cars  can  be 
assembled  into  a  train  in  any  end  relation  or  sequence  or  number 
and  the  characteristics  of  the  train  operated  from  either  end  of  any 
car  are  identically  the  same  as  the  characteristics  of  a  single  unit  • 
which  means  that  an  8  or  10-car  train  can  make  the  same  schedule—^ 
the  same  stops  with  the  same  maximum  speed— that  a  single  car 
would.  Now,  that  is  the  basis  of  operation  of  all  subway  and 
elevated  railroads. 

I  spent  two  years  in  trying  at  my  own  expense  to  get  that  system 
introduced  on  the  elevated  railroads  in  Xew  York.  On  two  different 
occasions  I  proposed  to  the  directors  of  th^t  company  that  I  would 
at  my  own  expense— which  would  have  been  a  very  heavy  expense-^ 
demonstrate  that  they  could  save  a  thousand  dollars  a  day  in  coal 
alone  on  the  elevated  railroads  and  increase  their  running  schedule 
increase  their  capacity,  and  decrease  their  strain  on  their  structures! 

Commissioner  Meeker.  That  is  when  they  were  still  operating 
under  steam  ?  ^        ^ 

Mr.  Sprague.  Yes ;  but  electric  railways  in  other  directions  were 
being  used,  of  course,  all  over  the  United  States  and  the  world.  I 
hnally  got  the  opportunity  to  try  out  that  system  in  Chicago,  still  as 
a  personal  venture.  Well,  the  Chicago  South  Side  Elevated  Railroad, 
which  was  a  steam  railroad,  got  in  the  hands  of  a  receiver  and  the 
stock  went  down  to  about  32  or  33,  and  I  took  the  contract  and  we  lost 
$100,000  in  carrying  it  out,  and  the  road  in  a  year  had  benefited  to 
the  extent,  as  represented  by  the  increase  in  the  stock,  to  somewhere 
about  105  or  110.  That  was  the  first  instance  in  which  that  system 
was  used,  and  then  it  was  afterwards  adopted  in  Boston  and  Brooklyn 
and  New  York.  "^ 

Now,  its  value  to  the  city  of  New  York  is  measured  by  the  cost  of 
the  subways  which  would  have  to  be  built  to  give  equivalent  capacity 


/ 


754       PR0CEEDI3JGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

operated  in  any  other  way,  and  that  cost  would  have  been  oAer  $100,- 
000,000  in  excess  of  the  present  cost  of  the  subways.  And  it  added 
several  hundred  millions  of  dollars  to  the  property  values  in  New 
York  City  and  a  great  many  scores  of  millions  to  the  operating  tax- 
able receipts.  Nobody  got  any  benefits  from  that.  I  did  not  as  an 
inventor,  except  in  a  very  small  sort  of  way.  The  manufacturing 
companies  did  not,  except  in  a  small  sort  of  way,  but  the  public  got 
it  all. 

Thei-e  is  another  direction  also  in  which  there  has  been  that  curious 
cxpansivenees  of  ratio.  The  distance  which  people  can  ride  to-day 
is  oftentimes  about  four  times  what  they  could  in  the  early  days  of 
the  electric  railroads  for  the  same  cost. 

Now,  it  seems  to  me  there  must  be  a  basic  principle  underlying  the 
relation  between  a  comnmnity  which  is  served  by  an  electric  railway 
and  those  who  are  interested  in  this  property,  and  that  has  got  to  be 
simply  one  of  fair  dealing.  It  is  absolutely  impossible  to  keep  up 
the  operation  of  electric  railways  unless  the  return  gives  something 
to  those  who  put  the  money  into  it,  otherwise  they  had  better  get 
into  some  other  business;  in  fact  they  would  have  to.  The  welfare 
of  a  community  is  inseparably  connected  with  the  welfare  of  the 
means  of  communication  and  transportation.  You  can  not  destroy 
the  one  without  gravely  hurting  the  other. 

Commissioner  Meeker.  May  I  ask  a  question  there? 

Mr.  Sprague.  Yes. 

Commissioner  Meeker.  You  spoke  of  the  general  public's  reap- 
ing all  the  benefits  of  your  invention.  Is  that  wholly  true?  Did 
not  the  stockholders  reap  some  benefit?  You  spoke  of  the  stock  of 
the  Chicago  Elevated  being  at  32,  I  believe,  and  going  to  105  as  a 
result  of  installing  the  electric  system. 

Mr.  Sprague,  I  think  possibly,  if  I  may,  you  have  misunderstood 
me.  I  did  not  say  that  in  all  cases.  I  said  in  that  particular  in- 
stance, which  was  a  very  remarkable  instance — that  of  the  introduc- 
tion of  the  multiple-unit  system  in  New  York  City,  those  who  were 
i-esponsible  originally  for  it  received  practically  nothing;  the  public 
got  the  chief  benefit,  and  I  think  that  so  far  as  individual  quotations 
of  the  Interborough  stock  of  New  York  City,  perhaps  they  feel  that 
they  have  not  got  the  benefit  of  it  I  do  not  know ;  I  am  not  inter- 
ested in  it  at  all. 

Personally,  in  looking  over  some  of  the  testimony  that  has  been 
given  here,  I  do  not  know  that  there  is  anything  I  pei^sonally  can 
add  to  the  facts  that  have  been  presented  m  such  an  able  way  by 
gentlemen  like  Mr.  Tripp  and  Mr.  Pardee  and  the  host  of  operating 
and  expert  railway  men  that  are  here.  If  I  can  answer  any  ques- 
tions I  will  be  very  glad  to,  but  I  do  not  want  to  burden  the  record. 

The  Chairman.  What  business  are  you  now  engaged  in? 

Mr.  Sprague.  Well,  the  usual  business  of  sei>ending  a  lot  of  money 
in  the  hope  of  getting  a  return.  I  am  at  present  the  president  of  the 
Sprague  Speed  Control  &  Signal  Operation,  and  I  have  been  inter- 
ested in  the  past  five  years — excluding  the  two  yeai-s  we  have  been  at 
war,  when  I  have  been  giving  most  of  my  time  to  the  Government — 
in  developing  a  system  which  ties  together  the  braking  system  and 
waj^side-signal  system  of  a  railroad  to  make  rear-end  collisions  and 
head-on  collisions  impossible  in  steam-railroad  operation. 

The  Chairman.  You  said  that  you  had  been 


PEOCEEDIIJ'GS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION.       755 

^fr.  Sprague.  It  is  a  pretty  large  enterprise,  and  a  great  deal  of 
money,  running  into  many  hundreds  of  dollars,  has  been  spent,  but 
It  IS  very  uphiU  work  on  account  of  the  present  condition  of  the 
railroads  and  also  their  reluctance  to  depart  from  present  practices. 

The  Chairman.  You  stated  that  you  had  been  engaged  in  pro- 
moting and  developing  railroads  and  equipment  in  this  country  as 
well  as  in  Europe. 

Mr.  Sprague.  My  activity  has  been  mostly  in  this  country. 

Tlie  Chairman.  How  many  years  were  you  engaged  in  this  work 
in  Europe? 

Mr.  Sprague.  Well,  my  work  there  has  not  been  direct:  it  has  been 
through  the  people  that  control  my  intei*ests  there. 

The  Chairman.  Aie  you  quite  familiar  with  the  electric  situa- 
tion throughout  Europe? 

Mr.  Sprague.  No ;  not  in  detiiil. 

The  Chairman.  Have  you  kept  track  of  the  results  of  operations 
during  the  period,  of  the  war  over  there  ? 

Mr.  Sprague.  No,  sir ;  I  have  not.  For  the  past  ^\e  years  I  have 
been  too  absorbed  in  my  own  work. 

Tlie  Chairman.  Do  you  know  whether  the  electric  lines  over  in 
Europe  are  suffering  from  the  same  financial  disease  that  they  are 
over  here? 

Mr.  Sprague.  I  do  not  see  how  it  can  be  otherwise. 
Tj^^^^  5^'"'^^^?^^'  ^^"^^^^^^«ioner  Clark  presented  evidence  to  the 
House  Committee  of  Interstate  and  Foreign  Commerce  day  befoi-e 
yesterday  which  showed  that  the  steam  railroads  in  England  had 
operated  during  the  war  at  a   profit   and  without  inci-easing  the 

iroight  rate.    I  have  not  analyzed  the  figures  nor  the  statement 

Mr.  Sprague.  This  is  the  steam  railroads? 

The  Chairman.  That  is  the  steam  railroads.  Now  if  that  has 
applied  to  the  steam  railroads  in  Europe,  why  has  hot  the  same 
thing  applied  to  the  electric  lines  at  the  same  time? 

Mr.  Sprague.  I  might  ask  you  why  has  it  not  applied  to  the  steam 
railroads  of  the  United  States,  which  have  been  run  at  an  extra- 
ordinarily heavy  loss  during  the  war.    I  think  the  only  fair  com- 
paiison  there  is  steam  railroads  against  steam  railroads. 
The  Chairman.  You  think  that  is  a  fair  comparison  ? 
Mr.  Sprague.  Yes. 

The  Chairman.  I  was  just  wondering  though,  how  it  happens 
that  the  mdustry  as  a  whole,  steam  lines  as  well  as  electric  lines,  is 
in  so  much  difficulty  over  here  when  perhai>s  tlie  siime  conditions  do 
not  apply  m  Europe,  where  the  war  really  has  been  going  on. 
.  Mr.  Sprague.  Well,  I  do  not  think  tho  same  conditions  do  exist 
m  any  two  countries;  the  same  condition  as  to  franchises  and  taxes 
and  cost  of  labor,  methods  of  charging  fares.  Of  coui-se  on  a  great 
many  European  roads  what  is  called  the  zone  system  of  charo^ino- 
IS  in  operation.  Personally,  I  believe  it  is  the  only  fair  system  "^We 
iiave  the  American  habit  of  thinking  we  can  get  for  a  nickel  the 
absolute  Ihiut  of  return.  You  can  not  do  it,  unless  somebody  pays 
the  price.  I  can  see  no  reason  why  one  man  should  ride  two  or  three 
»)locks  and  ^ay  a  nickel  and  another  may  ride  20  or  25  miles  and  pav 
tne  same  price.  *   "^ 

The  Chairman.  You  have  had  a  good  deal  of  experience  in  pro- 
moting railroads  in  this  country  ? 


756       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Sprague.  No,  sir;  I  have  never  been  a  promoter  of  railroads 
at  all.  My  work  has  been  entirely  on  the  technical  side— that  is,  the 
promotion  of  the  idea  of  the  use  of  electricity  in  pretty  nearly  every- 
thing it  can  be  used  for,  for  power. 

The  Chairman.  The  only  road  which  you  have  mentioned  as  being 
interested  in  is  the  Richmond  road.  Have  you  been  interested  in 
other  roads  ? 

Mr.  Sprague.  Well,  I  equipped  at  least  150,  I  think,  in  the  first 
two  or  three  years. 

The  Chairman.  When  you  speak  of  equipping,  you  mean  you  sold 
equipment  to  those  roads;  do  you? 

Mr.  Sprague.  We  supplied  the  electric  equipment. 

The  Chairman.  Did  you  own  stock  in  those  roads  ? 

Mr.  Sprague.  Not  a  d.ollar. 

The  Chairman.  You  were  simply  a  selling  man  ? 

Mr.  Sprague.  We  were  simply  equipping  them,  supplying  the 
Imes,  and  trying  to  convert  the  public  to  the  idea  that  electric  roads 
were  the  thins:  to  use. 

The  Chairman.  Have  you  been  brought  into  close  contact  with 
any  of  the  promoters  of  these  roads  ? 

Mr.  Sprague.  No;  very  little. 

The  Chairman.  Do  you  know  whether  the  promotion  has  been 
successful  from  a  financial  standpoint? 

Mr.  Sprague.  It  has  been  at  times,  and  at  times  it  has  been  very 
disastrous. 

The  Chairman.  Generally  speaking,  what  is  your  judgment? 

Mr.  Sprague.  Well,  I  hope,  and  I  think  it  is  entirelv  true,  that 
the  larger  portion  of  those  who  ventured  into  the  promotion  of  elec- 
tric railways  made  a  profit,  if  they  let  go  soon  enough. 

The  Chairman.  The  Richmond  road  was  built  31  years  ago. 
There  is  not  a  pound  of  copper  or  a  single  piece  of  equipment  left? 

Mr.  Sprague.  I  do  not  think  there  is. 
,     The  Chairman.  That  shows  a  very  rapid  improvement  in  the  art. 

Mr.  Sprague.  Necessarily. 

The  Chairman.  Do  you  suppose  that  we  have  reached  the  maxi- 
mum improvement  of  the  art? 

Mr.  Sprague.  Pretty  nearly ;  yes. 

The  Chairman.  Pretty  nearly  ? 

Mr.  Sprague.  Yes ;  looking  at  it  from  the  mechanical  construction 
point  of  view.     Motors  have  been  brought  to  a  remarkable  degree  of 
perfection.     I  think  they  are  perhaps  the  most  reliable  piece  of 
inechanism  to-day  in  operation.     There  is  very  little  possible  increase 
in  efficiency— that  is,  in  the  ratio  of  convei*sion  of  electric  energy  into 
power.     There  is  almost  a  negligible  margin;  and  the  same  way  with 
generators.     Generators   for  example,  to  give  an   illustration:   At 
Kichmond  I  think  we  used— well,  the  generators  were  about  possibly 
100  horsepower  as  a  maximum,  driven  by  small  steam  engines     A 
single  unit  to-day  of  a  generating  plant  is  40,000  kilowatts  or  more. 
JSow,  it  has  been  the  same  in  stationary-motor  business,  in  the  trans- 
mission of  power,  as  it  is  in  the  electric  railway.     There  has  been 
that  enormous  increase.    Now,  the  efficiency  of  those  big  generators  is 
way  up  until  there  is  not  over  2  or  3  per  cent  left  that  is  converted 
into  heat ;  and  it  must  be,  otherwise  they  would  go  to  pieces.    And 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.         757 

as  to  mechanisms,  I  can  not  conceive  of  very  much  improvement  ia 
them. 

The  Chairman.  Let  us  see.  Are  you  mindful  of  the  fact  that 
Congress  passed  a  special  bill  here  this  winter  authorizing  the  patent- 
ing of  an  electrical  device  by  which — I  can  not  describe  it  tech- 
nically—a  small  mechanism  weighing  about  50  pounds  would  gener- 
ate 150  horsepower? 

Mr.  Sprague.  Well,  a  turbine 

The  Chairman.  No;  this  is  not  a  turbine. 

Mr.  Sprague.  Of  course,  the  turbine,  the  steam  side  of  every  high- 
speed generator  set,  is  an  extraordinarily  light  equipment.  But  if  the 
claim  has  been  made  that  generators  are  built  with  any  such  ratio  of 
weight  to  output,  I  flatly  say  it  is  impossible. 

The  Chairman.  Well,  this  person  got  a  special  bill  through  upon 
the  promise  that  his  device  would  completely  revolutionize  the  elec- 
trical world;  you  could  run  street-cars  and  run  engines  by  this  small 
mechanism.  ' 

Mr.  Sprague.  I  know.     That  universal  claim  at  once  condemns  it. 

The  Chairman.  If  it  should  happen  that  such  development  could 
be  perfected,  then  there  would  be  a  very  great  improvement  in  the 
art  ? 

Mr.  Spragut:.  Then  you  could  scrap  everything  there  is. 

The  Chairman.  Yes. 

Mr.  Sprague.  But  such  a  thing,  you  may  put  your  judgment  down, 
is  impossible.     This  art  is  one  of  evolution,  not  revolution. 

The  Chairman.  I  suppose  20  years  ago  vou  and  I  would  have 
agreed  that  the  man  who  said  they  could  flv  across  the  Atlantic 
Ocean  in  24  or  36  hours  was  crazy,  but  they  are  doing  it. 

Mr.  Sprague.  I  do  not  know  what  my  opinion  would  have  been  at 
that  time,  and  I  venture  that  perhaps  you  might  have  been  a  little 
hesitant  about  saying  a  thing  was  impossible.  But  the  electric  art 
for  the  past  40  years  has  followed  perfectly  clear  lines  of  develop- 
ment. 

To  give  you  an  illustration  in  another  branch  of  electric  art,  I  am 
old  enough  to  recall  when  one  Dr.  R.  V.  Pierce  used  to  have  an  adver- 
tisement running  in  the  patent  insides  of  almost  every  country  news- 
paper, called  "  Pierce's  Golden  Medical  Discovery."  It  is  not  neces- 
sary for  me  to  explain.  Pierce  was  not  satisfied  with  the  return  he 
was  getting  from  his  patent  medicine  and  he  thought  he  would  go 
into  the  mining  business.  And  some  promoters  convinced  him  that 
there  was  a  river  called  the  Feather  River  out— I  think  in  Nevada, 
but  I  am  not  quite  sure;  somebody  here  can  correct  me — where  there 
was  a  great  source  of  possible  wealth  if  it  could  be  drained,  because 
of  an  assured  placer  mine. 

Well,  he  and  his  associates  short-circuited  a  bed  of  that  river  by  a 
tunnel  which  drained  the  river.  This  was  really  before  the  electric- 
railway  business  got  going— I  think  it  was  about  1887.  I  made  a 
contract  with  Pierce  for  supplying  him  a  number  of  motors  which 
were  operated  from  600  to  1,000  volts  pressure  over  a  maximum  dis- 
tance of  5  or  6  miles.  I  think  the  largest  unit  was  perhaps  6  or  7 
horsepower.  When  they  got  the  bed  of  the  river  uncovered,  it  was 
so  full  of  boulders  that  it  was  simply  impossible  to  try  any  placer 
mining,  and  the  enterprise  was  a  failure. 


/ 


758       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

That  location  now  is  the  site  of  the  gre^at  Wptern  Tower  Co.'s  great 
phmt,  and  instead  of  a  mechanism  of  1,000  volts  they  are  transmitting 
it  at  over  100,000  volts;  instead  of  a  distance  of  5  or  6  miles  they  are 
transmitting  it  100  to  150  and  200  miles;  instead  of  units  of  5  or  b 
Wpower  they  are  dealing  with  units  of  twenty  or  thirty  thousand 

^'''xr)w%Tlmt  ^imp'from  those  miniature  equipments  and  distances  and 
pressures  to  the  enormous  pressures  and  powers  and  distances  now  m 
use  was  a  perfectly  progressive  one,  a  gradual  increase  m  size,  in- 
crease of  efficiency,  increase  in  the  method  of  manufacture;  and  I  do 
not  think  that  there  is  any  possibility  of  any  d^P^^^ure  froni  that 
evolutionary  process,  and  I  do  not  thml.  that  one  man  in  10,000  would 
lav  down  a  dollar  based  upon  that  possibility  which  y««/.^/g«^^-^^.^ 
know  I  would  not,  and  I  have  gone  through  a  good  deal  of  it.  Iheie 
is  no  such  hope  to  a  man  as  an  inventor. 

The  Chairman.  Then  are  you  quite  confident  that  m  the  future 
the  item  of  obsolescence  will  be  a  very  much  less  factor  in  railroad 
development  than  it  has  been  in  the  past? 

Mr.  Sprague,  Yes.  ,    .  .   .  ,     . 

The  Chairman.  Investor  can  thus  put  their  money  into  a  plant 
with  a  certain  realization  that  the  industry  is  going  to  continue  along 
certain  well-defined  lines  and  the  property  is  not  going  to  be  scrapped^ 

Mr.  Sprague.  Yes:  I  do.  ,  ivl       j     •  g 

The  Chairman.  Now  ought  that  to  mvite  credit  and  give  conh- 

dence  to  investors?  u        t7      „ 

Mr  Sprague.  Yes;  and  I  will  tell  you  another  reason  why.  tor  a 
loner  time  there  was  a  very  unfortunate  controversy  in  this  country 
between  advocates  of  what  is  called  direct-current  and  alternating- 
current  apparatus.  There  were  those  who,  like  myself,  believed  be- 
cause of  certain  fundamenUl  facts,  that  direct-current  motors  were 
the  most  satisfactory  ones  to  be  used  on  railways  and  alternating  cur- 
rent for  the  transmission  of  the  power.  There  were  othei-s  who  be- 
lieved that  what  is  called  single-phase  operation  of  motoi-s  was  the 
coming  method  of  running  street  railways.  \  ou  have  here  within 
eunshSt  of  where  you  are  sitting  a  typical  example  of  that  contro- 
versy,  and  its  unfortunate  results,  in  the  Washington,  Baltimore  & 
Annapolis  Hailwav.  There  is  an  enterprise  which  for  a  long  time 
was  considered  a  natural  electric-railway  proposition  m  competition 
with  steam,  and  being  in  competition  with  steam  railroads  between 
here  and  Baltimore,  those  who  were  active  in  its  promotion  sought  to 
get  the  maximum  amount  of  economy.  I  advised  against  their  deci- 
sion It  cost  them  a  very  large  amount  to  learn  their  lesson,  and  they 
finally  had  to  change  over  and  operate  the  road  by  direct  current,  bo 
that  pai-ticular  controversv,  so  far  as  it  applies  to  street-railway  sys- 
tems interurban  systems,  suburban  roads,  elevated  and  underground, 
and-^I  personally  think-^thers,  has  been  settled.  It  is  no  longer 
subject  to  dispute  or  question.  So  that  I  think  it  is  perfectly  safe  to 
say,  as  you  exi)ressed  it,  that  the  time  has  now  come  when  the  public 
and  the  capitalists  can  rely  upon  the  reasonable  permanence  of  the 
equipment.     Tliat  doe,s  not  mean  thei-e  will  not  be  improvements.     Uf 

course  there  will  always  be.  .  .  * 

Commissioner  Meeker.  How  about  the  primary  generators  ot 
power?  Is  not  there  a  possibility  that  the  Diesel  engine  will  do  away 
with  the  old  steam  engine? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       759 

Mr.  Sprague.  No,  sir. 

Commissioner  Meeker.  Why  not  ? 

Mr.  Sprague.  Too  large  a  capital  cost  for  the  outfit.  The  Diesel 
engine,  which,  of  course,  is  an  attempt  to  get  a  higher  thermal  insult, 
uses  oil  instead  of  coal  and  uses  it  directly  instead  of  through  tlie 
medium  of  boilers,  and  is  necessarily  a  very  heavy  engine  in  regard  to 
its  output.  I  can  see  no  possibility  from  the  standpoint  of  first  invest- 
ment, safe,  occupied,  output,  of  its  ever  rivaling  the  turbine.  We  do 
not  hear  of  the  Diesel  engine,  for  example,  on  board  ship,  except  for 
what  we  may  call  low-grade  operation — slow  steamers,  comparatively 
light  power.  But  where  you  want  great  powers,  there  is  no  thought 
of  the  Diesel  engine. 

Commissioner  Meeker.  However,  it  is  a  new  engine  and  it  seems 
to  me  there  may  be  possibilities  of  improvement  and  development. 

Mr.  Sprague.  Well,  the  Diesel  engine  has  been  in  existence  a  good 
many  years  and  it  is  a  very  excellent  engine  for  its  purposes.  But 
the  old  reciprocating  st^am  engine  was  a  very  economical  and  very 
good  and  very  reliable  piece  of  mechanism,  and  the  steam  turbine, 
weight  for  weight,  enormously  outranlvs  it 

The  Chairman.  Now,  Mr.  Sprague,  you  have  home  a  very  con- 
spicuous part  in  the  development  of  this  industry  and  you  have 
naturally  given  very  close  attention  to  it.  You  have  seen  it  developed 
from  a  very  small  industry  to  perhaps  the  second  largest  in  the  country 
and  performing  a  very  great  public  service.  In  recent  years  you  have 
also  witnessed  the  tremendous  development  in  good  roads  and  in  the 
automobile  industry  and  in  the  very  recent  years  in  the  aircraft  in- 
dustry. Now,  bearing  in  mind  the  very  great  initiative  of  the 
American  people,  can  you  for  a  few  moments  present  to  us  what  you 
believe  to  be  the  future  of  the  electric-railways  industry. 

Mr.  Sprague.  Well,  the  electric-railway  industry  is  going  to  face 
greater  and  greater  competition  all  the  while.  It  is  facing  it  to-day 
in  the  automobile.  The  better  your  roads,  the  better  your  pavements, 
the  cheaper  the  automobile,  the  more  people  who  can  buy  one — the 
more  the  electric  railway  has  got  to  suflfer.  That  is  undoubtedly  true. 
The  Chairman.  And  will  it  stand  up  under  the  force  of  this  com- 
petition and  rapid  expansion  of  other  lines  of  activity  in  transpor- 
tation ? 

Mr.  Sprague.  Well,  many  of  them,  the  aircraft  and  the  automobile, 
will  create  a  traffic  of  their  own  which  is  in  addition  to  the  traffic 
that  the  electric  railways  will  carry. 

When  the  electric  light  was  first  introduced  it  was  freely  pre- 
dicted that  the  day  of  gas  was  ended.  The  incandescent  lamp  itself 
has  been  but  little  changed  in  all  these  years.  We  have  gone,  it  is 
true,  from  a  carbon  filament  to  the  metiillic  filament,  but  the  basic 
principle  is  the  same — a  high-resistance  filament  inside  of  a  vacuum, 
giving  certain  standard  pressure,  and  that  pressure  has  remained 
practically  all  these  years.  There  has  been  an  improvement  in  the 
economy  of  the  lamp.  On  the  other  hand,  those  interested  in  the  gas 
industry  have  tried  to  improve  their  product  and  wdden  the  uses  of 
it,  and  I  guess  there  is  more  gas  used  to-day  despite  the  rivalry  of  the 
electric  light  than  there  ever  was  in  the  past. 

People  get  the  habit  of  riding.  They  do  not  forsake  entirely  one 
method  and  adopt  some  other.  They  simply  ride  more.  And  I  think 
the  electric  railway  has  a  field  of  its  own^— meeting  competition,  of 


\'  < 


Va 


760       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

course,  all  the  while— but  if  it  is  well  managed,  if  it  is  well  kept 
up,  if  we  maintain  its  standard,  it  will  hold  a  traffic  of  its  own. 

The  Chairman.  Will  not  the  improvement  such  as  you  have  men- 
tiontd  cause  a  more  general  distribution  of  our  population  through- 
out the  country,  decentralizing  the  cities  and  spreadmg  them  out 
into  suburban  territory  on  small  tracts  of  land,  thus  causing  more 

^Mr.SpRAGUE.  The  more  you  spread  them  out  the  more  intercom- 
munication will  exist.  „  ."     .     \         -1       J   • 

The  Chairman.  And  that  will  be  beneficial  to  the  railroad  in- 
dustry? 

Mr.  Sprague.  Yes ;  I  think  so.  ,    ,  .         i 

The  Chairman.  Do  you  feel  hopeful  that  the  electric  railway  as 
it  now  stands  is  a  permanent  institution? 

Mr.  Sprague.  Absolutely.  .        ,  .    .  -  , 

The  Chairman.  And  such  an  institution  that  capital  can  safely 
invest  in  it  and  people  depend  on  service  from  it? 

Mr.  Sprague.  They  can,  if  they  can  be  assured  of  reasonable 

^  ThT^CHAiRMAN.  Now  then  you  know  their  troubles.    AVhat  is  the 

'^^'Mr'^^SpRAGUE.  I  say  to  a  certain  extent  it  is  a  sociological  i;emedy. 
It  is  an  appreciation  by  those  who  are  in  power  m  a  community. 

The  Chairman.  Develop  that  a  little  further. 

Mr  Sprague.  To  establish  as  a  basis  for  all  dealings  with  a  public- 
service  corporation-I  care  not  whether  it  be  a  street  railway,  gas 
plant,  electric-lighting  plant  or  any  others-to  establish  a  basis  of 
fair  dealing.  They  want  efficient  operation.  They  demand  a  very 
Wh  chara^^^  of  service.  They  are  not  willing  that  that  service 
shin  go  backward,  shall  fall  off  in  character.  They  can  not  get  it 
if  capital  will  not  invest  the  money,  and  even  if  the  money  is  in- 
vested, they  can  not  get  it  unless  the  road  is  operated  efficiently.  It 
can  nJt  be  operated  efficiently,  it  can  not  be  maintained,  it  can  not 
be  extended  unless  there  is  a  reasonable  assurance  of  profat.  It  is 
sfmply  selling  a  service.  Many  of  the  elements  of  the  cost  of  that 
service  are  no  more  under  their  control  than  the  religion  of  this 
country  is  under  mine.  Whether  it  be  wages  or  the  cost  of  mate- 
rials,  they  must  accept  it.  They  are  subject  to  taxes,  they  are  sub- 
iect  to  the  possible  expiration  of  their  franchises  they  are  subject 
to  the  demands  of  a  good  many  petty  types  of  politicians  who  seek 
to  use  the  expiration  of  a  franchise  as  a  means  of  driving  a  public- 
^rvice  corporation  to  the  wall.  They  gam  nothing  by  it  because  if 
cTne  corporation  goes  to  the  wall  no  other  will  take  its  place  except 

^^Tt  seemsTo^me  there  has  got  to  be  a  basis  which  means  that  on  a 
fair  capitalization  there  must  be  a  fair  return ;  if  costs  go  up,  the 
cost  of  service  must  go  up.  If  those  costs  go  down,  the  cost  of  serv- 
ice  should  be  reduced.  The  operation  of  course,  has  got  to  be  undei 
public  control,  and  if  it  is  under  intelligent  control,  as  it  is  in  many 
cases  if  the  books  are  open  and  aboveboard  and  the  management 
open'  and  aboveboard  and  if  the  profits  which  the  people  seek,  no 
matter  whether  they  are  promoting  an  enterpri^  or  simply  mvest- 
Sas  capitalists  a/e  only  reasonable  but  still  sufficient  to  encourage 
them,  I  believe  the  public  itself  will  accept  that  situation  and  pay 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       761 

a  reasonable  price  for  the  service.  I  do  not  see  how  it  can  be  other- 
wise. On  everything  else  that  they  buy  they  do  accept  those  con- 
ditions.   They  demand  it  for  themselves. 

The  Chairman.  Then  to  summarize  your  opinion,  you  must  first 
cultivate  a  degree  of  confidence  between  the  industry  and  the  public  ? 

Mr.  Sprague.  That  is  the  very  first  thing  that  is  absolutely 
necessary. 

The  Chairman.  And  that  can  only  be  done  by  having  a  basis  of 
fair  deahng  between  the  industry  and  the  public? 

Mr.  Sprague.  Yes,  sir;  that  is  the  only  way  it  can  be  done. 

The  Chairman.  That  means  honest'  performance  by  the  public 
corporation  as  well  as  by  public  officers? 

Mr.  Sprague.  Yes. 

The  Chairman.  I  never  have  seen,  in  my  experience  as  a  regulat- 
ing officer,  where  the  public  seriously  criticized  the  raising  of  a  rate 
or  any  other  order  made  by  a  corporation  or  by  the  commission  whera 
they  knew  the  facts  and  honestly  believed  in  them. 

Mr.  Sprague.  I  think  that  inevitable.  I  do  not  see  how  it  can  be 
otherwise.  If  people  will  put  in  office  men  in  whom  thev  have  con- 
fadence,  and  those  men  have  all  the  facts  before  them  and  then 
render  a  decision,  I  believe  the  public  can  not  help  but  accept  it. 

The  Chairman.  Then  your  second  proposition  is  that  after  this 
mutual  confadence  has  been  established  you  have  got  to  have  a  basis 
of  regulation  ? 

Mr.  Sprague.  Yes. 

The  Chairman.  By  which  the  public  will  pay  no  more  and  no  less 
than  what  the  service  costs,  thus  assuring  to  capital  a  fair  reward, 
to  labor  a  fair  wage,  and  to  the  public  good  service  at  reasonable  cost? 

Mr.  fePRAGUE.  Yes,  sir. 

The  Chairman.  Now,  the  problem  of  the  future  then  is  to  work 
out  that  basis  ? 

Mr.  Sprague.  It  is.  I  am  reminded  of  a  remark  that  the  late 
Tresident  Koosevelt  is  said  to  have  once  made.  I  think  it  was  on  an 
occasion  of  some  labor  discussion,  and  the  representative  of  that  par- 
ticular labor  element  said,  "  Well,  now,  finally  we  have  got  somebody 
to  listen  to  us."    And  President  Roosevelt  is  said  to  have  replied. 

Yes,  so  long  as  I  am  President  the  door  of  the  White  House  is  open 
to  labor  just  as  freely  as  to  capital,  but  no  easier." 

The  Chairman.  I  think  your  contribution  to  this  commission  has 
been  of  very  great  value,  Mr.  Sprague,  and  I  thank  you  for  it. 

Mr.  Sprague.  I  am  very  glad  if  I  have  been  of  the  slightest  use  to 
you  at  all. 

The  Chairman.  There  may  be  some  other  examination  by  other 
members  of  the  commission. 

Commissioner  Sweet.  Are  you  the  inventor  of  the  Sprague  motor* 
Mr.  Sprague.  Yes,  sir. 

Commissioner  Sweet.  Have  you  not  invented  other  things  besides 
the  motor? 

•  ^^'  Sprague  Well,  I  started,  after  resigning  from  the  naval  serv- 
ice,  m  the  development  of  the  stationary  motor  for  all  sorts  of  pur- 
poses, and  then  I  took  up  the  development  of  the  trolley  and  thft 
principles  which  were  laid  down  at  Richmond  have  become  uni- 
versal—they are  accepted  everywhere— the  motor  mounting  and  con- 
trol is  now  umversal.  Then  I  took  up  wiiat  is  called  the  multiple- 
ieeW3"— 20 49 


/ 


762       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

unit  system  of  operation  of  trains,  but  meanwhile  I  had  developed 
the  electric  elevator,  as  distinguished  from  the  hydraulic,  and  now  I 
have  spent  the  past  five  or  six  years  on  the  development  of  tram  con- 
trol for  safe  operation.  . 

I  want  to  say  this,  that  there  were  none  of  those  enterprises  but 
Tv^hat  the  cost  of  development  has  run  into  hundreds  of  thousands  of 
dollars.     It  is  a  long  story  before  one  gets  a  return. 

Commissioner  Sweet.  A  man  who  has  had  your  long  and  interest- 
ing experience,  I  imagine,  would  hardly  be  willing  to  say  that  any- 
tliing  that  now  exists  in  the  world  is  perfect? 

Mr.  Spr-v«ue.  I  have  not  found  anything  yet.  ^    -..- 

Commissioner  Sweet.  You  would  have  no  hesitation  in  admitting 
or  stating  that  there  are  likely  to  be  improvements? 

Mr.  Sprague.  That  is  absolutely  certain. 

Commissioner  Sweet.  I  think,  in  answer  to  a  question  that  was 
asked  you,  you  have  stated  that  you  thought  the  generation  of  elec- 
tricity and  its  conversion  into  power  for  the  purpose  of  moving  elec- 
tric cars  and  other  purposes  had  reached  a  very  high  point  of  ef- 
ficiency and  was  not  likely  to  be  superseded  by  any  other  system. 

Mr.  Sprague.  That  is  my  belief ;  yes. 

Commissioner  Sweet.  But  you  would  not  go  so  far  as  to  say  that 
improvements  of  various  kinds— minor,  perhaps,  many  of  them— are 
not  likely  to  be  made  in  the  future ;  would  you  ?  ^    .     , 

Mr.  Sprague.  Oh,  no.  Of  course  there  will  be  improvements  ]ust 
the  same  as  there  are  improvements  in  that  fan  there,  for  example, 
which  is  on  your  desk.  There  is  an  example  of  a  pretty  reliable 
piece  of  apparatus.  You  stick  it  away  anywhere,  anybody  turns  on 
the  current  and  it  runs  along  hour  after  hour  without  any  attention 
whatever.  Well,  it  would  be  foolish  to  say  that  its  efficiency  could 
not  be  improved  a  little. 

Commissioner  Sweet.  Certainly.  ,       ,.    ,  •    i 

Mr.  Sprague.  And  that  it  could  not  be  made  a  little  more  noiseless, 
that  perhaps  it  could  not  be  built  possibly  a  little  cheaper.  But  those 
are  more  in  the  nature  of  i^finements ;  they  are  not  radical,  they  are 
not  revolutionary.  This  incandescent  lamp  that  I  spoke  of,  which 
is  the  basis  of  the  modem  incandescent-lighting  system,  operated 
to-day  as  it  is,  has  operated  for  the  last  25  years  at  125  volts; 
it  could  be  operated  at  60  or  it  could  be  operated  at  250,  but  there 
happens  to  be  an  advantage  in  the  raising  and  lowering  of  tension 
which  makes  that  about  the  best  tension,  and  also  it  has  become  now 
almost  universal.  But  the  lamp  itself  in  its  economy  has  been  in- 
creased, the  amount  of  power  required  to  get  a  certain  power  is  half 
or  one-third  wiiat  it  was  some  years  ago.  ,  .    ,     . 

Commissioner  Sweet.  That  is  by  the  substitution  of  one  kind  of  a 

filament  for  another? 

Mr.  Sprague.  Yes;  but  wath  that  same  improvement  has  gone  a 
disadvantage.  That  is,  we  get  more  intense  light  and  getting  a 
more  intense  light  we  cut  down  the  light  so  that  the  net  result  has 
not  been  very  much  changed. 

You  take  a  great  generator,  a  thirty  or  forty  thousand  kilowatt 
machine— it  has  an  efficiency  of  97  or  98  per  cent,  not  50  or  60  or  70 
per  cent,  as  the  earlier  and  small  machines  would  have.  There  is  only 
a  couple  of  per  cents  moi^  that  is  left,  so  that  all  you  can  do  is  to  re- 
fine it. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT.       763 

Commissioner  Sweet.  When  you  built  your   Richmond   road  the 
art  was  at  the  beginning,  practically? 
Mr.  Sprague.  Oh,  yes. 

Commissioner  Sweet.  Now,  it  was  perfectly  natural  that  changes 
should  be  made  of  a  very  radical  character  that  would  practically 
scrap  everything  that  you  had  there;  and  what  you  see  to-day  in  the 
ftb-enee  of  any  of  the  equipment  that  you  put  in  there  is  wliat  you 
might  naturally  expect,  is  it  not? 

Mr.  Sprague.  Yes.     For  example 

Commissioner  Sweet.  But  if  I  understand  you  right,  that  is  not 
likely  in  the  very  nature  of  things  to  be  rei)eated? 

Mr.  Spilxgue.  Oh,  no,  it  would  not. 

Commissioner  Sweet.  Yet  you  do  not  claim  for  a  minute  that 
considerable  of  the  material  that  is  used  in  present  equipment  may 
fail  to  come  up  to  either  the  demands  of  the  public  for  the  best 
points  of  economy  and  be  scrapped,  do  you  ? 

Mr.  Sprague.  Xo;  I  would  not  claim  that  that  was  impossible,  of 
course.  For  example,  a  good  many  equipments  are  running  to-day 
with  generators  of  perhaps  a  certain  capacity.  You  may  find  it 
necessary  to  combine  this  and  that  road  under  a  common  manage- 
ment, like  the  light  and  power  supply  lines,  as  well  as  the  trolley 
lines  themselves,  and  expand  the  operation  under  one  management 
over  a  very  much  enlarged  territory,  and  it  might  easily  be  that  it 
would  pay  a  company  to  scrap  this  or  that  smaller  station  and  put 
in  a  fewer  number  of  larger  stations  of  very  much  increased  unita 

Commissioner  Sweet.  Yes. 

Mr.  Sprague.  I  would  not  say  that  was  in  the  nature  of  ordinary 
sci-apping  due  to  either  wearing  out  on  the  one  hand  or  failure  in  its 
purpose,  but  because,  taking  it  by  and  large,  they  could  gain  greater 
economies  in  the  operation  of  the  station,  fewer  men,  for  example. 

Commissioner  Sweet.  That  is  right.  Now,  Mr.  Sprague,  is  not 
this  whole  matter  of  obsolescence  of  very  minor  importance  in  con- 
nection with  the  problem  that  we  are  here  to  consider  ? 

Mr.  Sprague.  I  think  it  is  almost  negligible. 

Commissioner  Sw^eet.  Yes.  Is  not  the  real  essence  of  the  thing  in 
the  fact  that  the  nickel  that  was  paid  at  the  time  you  built  that 
railroad  in  Richmond — because  I  suppose  the  fare  was  then  a  nickel, 
was  it  not  ? 

Mr.  Sprague.  Yes. 

Commissioner  Sweet.  It  was  a  nickel  fare? 

Mr.  Sprague.  Yes. 

Commissioner  Sweet.  Away  back  in  1887? 

Mr.  Sprague.  Yes. 

Commissioner  Sweet.  And  it  was  an  entirely  different  nickel  from 
the  nickel  we  have  to-day,  as  far  as  purchasing  power  is  concerned  ? 

Mr.  Sprague.  Well,  it  is  only  about  half  as  good  or  less. 

Commissioner  Sweet.  Is  it  not  a  fact  that  these  railroad  compa- 
nies are  paying  for  everything  that  they  get  and  everything  that 
they  need  in  the  way  of  equipment  and  wages  and  everything  in  a 
nickel  or  in  a  dollar  or  on  the  basis  of  a  dollar  that  is  worth  100  cents 
and  that  their  income  is  coming  on  the  basis  of  a  dollar  that  is  worth 
about  50  cents? 

Mr.  Sprague.  Yes. 


/ 


764       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Commissioner  Sweet.  And  can  any  institution  live  under  those  cir- 

Mr.  Srague.  I  think  that  is  a  very  modest  way  to  put  it ;  and  no 
institution  can  live  under  those  conditions. 

Commissioner  Sweet.  The  only  solution  of  the  problem  then  is  to 
find  some  way  of  bringing  up  the  income  of  thcvSe  street-railroad 
companies  to  a  proper  relation  or  proportion  to  what  their  expenses 
are ;  is  not  that  the  whole  question  ? 

Mr.  Sprague.  Yes ;  because  you  can  not  compel  people  to  ride ;  and 
thei-e  is  the  danger  in  handling  it. 

Commissioner  Sweet.  Certainly. 

Mr.  Sprague.  There  are  people  who  ride  because  they  have  got  the 
habit,  or  they  ride  because  it  is  just  about  a  little  more  advantageous 
to  ride  a  certain  distance  than  it  is  to  walk.  If  it  cost  them  any 
material  amount  more  they  would  walk.  The  fellow  that  has  a 
longer  distance,  however,  will  still  ride ;  and  that  is  why  I  personally 
feel  that  a  more  equitable  system  of  charging  is  a  zone  system,  al- 
though it  is  rather  difficult  to  apply,  but  one  which  in  some  respects 
might  be  more  flexible.  But  there  has  to  be  an  increased  return 
somehow.  People  to-day  are  not  paying  the  same  nominal  nickel 
but  really  only  about  half  value  for  a  gieat  deal  better  service  and  a 
great  deal  longer  ride.  In  other  words,  the  ratio  of  what  they  have 
got  and  what  they  are  paying  for  has  been  increased  enormously. 

Commissioner  Sweet.  The  same  thing  could  be  accomplished  if  it 
were  possible  to  reduce  expenses  in  some  way  so  as  to  make  the  in- 
come of  these  companies  correspond  properly  with  the  outgo,  but  as 
an  inventor  having  full  knowledge  of  electrical  equipment  and  of  the 
general  expenses  of  these  companies,  is  it  your  judgment  that  it  is 
possible  to  reduce  expenses  to  meet  the  present  emergency  ? 

Mr.  Sprague.  It  is  not. 

Commissioner  Sweet.  Or  anywhere  near  it? 

Mr.  Sprague.  No,  sir. 

(AVitness  excused.) 

The  Chairman.  We  will  adjourn  now  to  meet  at  10  o'clock  to- 
morrow morning. 

(Whereupon,  at  10.05  p.  m.  an  adjournment  was  taken  to  Thurs- 
day, July  24, 1919,  at  10  a.  m.) 


Washington,  D.  C,  July  24^  1919 — 10  a.  m. 

Present:  Parties  as  before. 

Mr.  Warren.  Mr.  Mortimer,  will  you  take  the  stand,  please? 

STATEMENT  OF  ME.  JAMES  D.  MOETIMEE. 

Mr.  Warren.  Mr.  Mortimer,  you  are  the  president  of  the  North 
American  Co.? 

Mr.  Mortimer.  I  am. 

Mr.  Warren.  Which  is  interested  in  a  good  many  street  railways? 

Mr.  Mortimer.  It  is. 

Mr.  Warren.  You  are  also  president  of  the  Milwaukee  Electric 
Railway  &  Lighting  Co.? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       765 

Mr.  Mortimer.  I  am. 

Mr.  Warren.  Of  Milwaukee. 

Mr.  Mortimer.  Yes,  sir. 

Mr.  Warren.  How  many  street  railways  is  the  Xorth  American 
Co.  interested  in? 

Mr.  Mortimer.  Three;  the  Milwaukee  Railway  &  Lighting  Co.; 
a  railway  utility  in  the  southern  part  of  Wisconsin,  forming  a  part 
of  the  Wisconsin  Gas  &  Electric  Co. ;  and  we  have  a  vanishing  in- 
terest in  the  United  Railways  Co.  of  St.  Louis,  being  a  common 
shareholder. 

Mr.  Warren.  There  is  commission  regulation  in  Wisconsin;  is 
there  not,  Mr.  Mortimer? 

Mr.  Mortimer.  There  has  been  commission  regulation  in  Wiscon- 
sin since  1905. 

Mr.  Warren.  Your  company  has  been  subject  to  that  regulation 
ever  since  it  was  adopted? 

Mr.  Mortimer.  We  have  been  the  experimental  ground  for  most 
of  the  regulation  for  sti-eet  railways  in  Wisconsin,  and  also  the  ex- 
perimental ground  for  the  most  of  the  regulation  for  street  railways 
in  the  United  States. 

Mr.  Warren.  Will  you  give  a  brief  sketch  of  the  regulation  and 
its  effect  as  it  related  to  your  company? 

Mr.  Mortimer.  Regulation  in  Wisconsin  first  was  attempted  in 
1896  by  the  common  council  of  the  city  of  Milwaukee,  acting  under 
its  police  powers.  It  sought,  following  a  consolidation  of  seven  de- 
tached lines  making  up  the  unified  system,  to  substitute  a  commuta- 
tion fare  of  6  tickets  for  25  cents  in  lieu  of  the  5-cent  cash  fare, 
with,  universal  transfers. 

That  case  went  to  the  Federal  district  court  on  the  ground  of 
confiscation,  and  the  common-council  resolution  was  declared  to  be 
confiscatory.  No  appeal  was  ever  taken  by  the  municipality.  It  was 
one  of  the  early  cases  of  regulation  where  a  Federal  court  held  that 
street-railway  utilities  were  entitled  to  a  reasonable  return,  and 
any  order  of  a  governmental  body  reducing  such  return  below  cur- 
rent ordinary  interest  rates  was  confiscatory,  and  therefore  in  viola- 
tion of  the  Constitution. 

In  1905,  the  legislature  passed  the  railroad-commission  law.  The 
railroad  commission  law  was  primarily  designed  to  take  care  of 
steam  railroads  and  telegraph  companies.  It  was  not  entirely  clear 
from  a  reading  of  the  statute  that  it  covered  street  railways. 

Despite  that  fact,  a  case  was  brought  by  the  city  of  Milw  aukee  in 
thj  following  January  after  the  3-cent  fare  in  Cleveland,  to  have  the 
railroad  commission  ordered  to  discontinue  the  franchise  rates  of 
fare  and  install  a  fare  of  3  cents. 

The  railroad  commission  started  a  valuation  of  the  physical 
property 

Mr.  Warren.  Of  your  company? 

Mr.  Mortimer.  Of  the  Milwaukee  Electric  Railway  &  Lio-ht- 
ing  Co.  ^ 

The  Milwaukee  Electric  Railway  &  Lighting  Co.  at  that  time 
was  serving  the  city  fare  area.  It  was  closely  related  to  a  company 
that  was  serving  the  suburban  and  interurban  area,  known  as  the 
Milwaukee  Light,  Heat  &  Traction  Co.;  and  when,  hereafter,  I 
refer  to  the  Milwaukee  Electric  Raihvay  &  Lighting  Co.  I  refer  to 


/ 


766       PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

the  city  company,  and  when  I  refer  to  the  Milwaukee  Light,  Heat  & 
Traction  Company,  I  refer  to  the  interurban  company. 

Commissioner  Gadsden.  Why  not  refer  to  them  as  the  city  com- 
pany and  the  interurban  company. 

Mr.  Mortimer.  I  think  I  can  refer  to  them  more  conveniently  as 
tlie  city  company  and  the  interurban  company. 

Commissioner  Gadsden.  Yes. 

Mr.  Mortimer.  These  two  pi-operties  were  operated  jointly,  owned 
by  the  same  interests,  and  had  the  same  operating  organizations. 
The  physical  property  of  one  began  where  the  other  ended,  and  all 
the  physical  property  was  used  interchangeably. 

The  company  relied  upon  the  rate  of  fare  prescribed  in  the  fran- 
chise, and  did  not  take  at  all  seriously  the  attempt  to  reduce  the  rate 
of  fare,  and,  accordingly,  paid  comparatively  little  attention  to  the 
valuation  of  the  physical  property.  In  fact,  there  was  some  effort 
to  show  how  cheaply  material  was  purchased,  the  idea  being  to  keep 
the  valuation  down  because  of  its  possible  influence  upon  taxation. 

The  3-cent-fare  case  was  reinstituted  again  in  1907,  following  the 
enactment  of  an  amendment  to  the  railroad-commission  law,  which 
clearly  put  the  street  railways  under  the  jurisdiction  of  the  rail- 
road commission.  The  case  was  finally  decided  by  the  railroad  com- 
mission in  August,  1912.  The  details  of  the  testimony — the  con- 
clusions, the  analyses,  and  related  mattei*s — are  clearly  set  forth  in 
Mr.  Doolittle's  book  on  the  cost  of  passenger  transportation  service. 
That  book  I  am  going  to  offer  to  the  commission  for  the  detailed 
information.  The  book  carries  data  down  to  1912.  The  com- 
mission's order  required  that  the  company  discontinue  the  sale  of 
25  tickets  for  $1,  and  substitute  in  lieu  thereof  the  sale  of  13  tickets 
for  50  cents,  retaining  a  5-cent  cash  fare  and  0  tickets  for  25  cents. 

It  also  ordered  the  extension  of  the  single-fare  limits — the  city 
fare  limits,  the  5-cent  limits — out  a  distance  outward  from  the 
center  of  a  mile  to  a  mile  and  a  half,  thereby  increasing  the  length 
of  the  ride.  Nineteen  hundred  and  thirteen  was  a  year  of  compar- 
atively poor  business.  In  1914,  the  jitney  competition  sprang  up. 
Oi:>erating  expenses  per  car-mile  increased,  and  operating  revenues 
per  car-mile  decreased.  The  same  conditions  were  maintained  dur- 
ing the  year  1915,  and  in  November  of  the  last-mentioned  year  the 
two  companies  filed  a  joint  petition  with  the  railroad  commission, 
asking  for  an  adjustment  in  fares.  We  had,  in  the  interval,  pro- 
cui-ed  the  installation  of  the  modified  zone  system,  whereby  we 
abandoned  the  5-cent  zone  on  the  suburban  lines,  and  substituted  in 
lieu  thereof  increment  zones  of  2  cents  per  mile. 

The  commission,  after  this  hearing,  putting  in  these  cash  zones  of 
2  cents  per  mile,  ordered  the  siile  of  commutation  zone  tickets  of 
30  for  50  cents,  in  response  to  considerable  complaint  and  political 
pressure. 

Piior  to  the  time  of  our  filing  the  November,  1915,  petition,  a  re- 
valuation of  the  physical  property  had  been  started. 

Mr.  Warren.  There  had  already  been  one? 

Mr.  MoRTniER.  There  had  already  been  one  valuation.  The  com- 
pany was  dissatisfied  with  that  valuation,  because  it  was  evident 
froni  their  checking  of  it  that  a  good  deal  of  property  had  not  been 
disclosed.  There  were  substantial  quantities  of  property  that  had 
been  treated  as  nonoperating  that  were  either  at  the  time  actually 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION".       767 

oi^erating  or  had  since  been  converted  into  actually  operating  utility 
property,  and,  moreover,  there  had  been  an  increase  in  the  quantity 
of  the  physical  proi)ei-ty  by  approximately  50  per  cent.  The  revalua- 
tion of  the  physical  property  disclosed  an  increase  of  something  over 
$2,000,000,  when  contrasted  with  the  physical  property  as  of  the 
same  date  of  the  prior  valuation. 

The  problem  of  making  rates  in  our  system  is  rather  complicated 
because  of  the  fact  that  it  is  a  joint  railway,  electric,  and  steam-heat- 
ing corporation;  in  other  words,  we  have  three  utilities,  much  of 
certain  classes  of  the  propeity  of  which  is  common  to  all  thi-ee 
utilities. 

The  Chairman.  Do  they  have  a  separate  system  of  accounting  for 
each  company  ? 

Mr.  Mortimer.  They  have  a  separate  system  of  accounting  for 
capital  expenditures,  operating  revenues,  and  operating  expenses; 
but  when  a  piece  of  land  is  purchased  for  a  power  situation  or  for  an 
office  building,  the  value  of  that  real  estate  must  necessarily  be  ap- 
portioned between,  the  three  utilities  in  accordance  with  the  use  by 
each  class  of  the  business  growing  much  more  rapidly  than  another 
class. 

For  example,  if  the  light  and  power  business  is  increasing  three 
times  as  fast  as  the  railroad  business  both  in  capital  expenditures 
and  in  revenues,  there  will  be  a  changing  basis  of  apportionment  of 
the  common  property. 

The  railroad  commission  in  its  decision  of  August,  1912,  estimated 
that  the  rate  of  depreciation— that  is,  the  allowance  which  should 
be  made  to  coyer  the  cost  of  replacements  over  and  above  the  expendi- 
tures for  ordinary  maintenance— should  be  4.4G  per  cent  per  annum. 
The  city  attorney  had  previously  computed  it  at  2.394G32  per  cent. 

Mr.  Warrex.  a  sort  of  squaring  of  the  circle  ? 

Mr.  Mortimer.  In  our  petition  of  November,  1915,  we  used  the 
railroad  commission's  valuation  of  the  railway's  property  as  of 
August,  1912,  and  made  it  up  to  date  by  our  capital  expenditures, 
using  the  railroad  commission's  estimate  of  the  rate  of  accruing 
depreciation,  and  thereby  showed  that  we  were  earning  between  4 
and  5  per  cent  per  annum  ui3on  the  appraised  value  of  the  utility 
capital. 

No  action  was  had  upon  the  petition  of  November,  1915,  for  a  lono- 
time.  '^ 

In  the  latter  part  of  1916,  the  company  filed  an  emergencv  petition 
with  the  railroad  commission,  asking  for  emergency  relief,  because 
of  the  necessity  of  making  large  increases  in  wages  to  attract  the 
labor  necessary  to  operate  the  railway  system  and  also  to  permit  it 
to  make  an  8-hour  day  effective  throughout  the  railway  department. 
That  petition  was  denied  on  the  ground  that  the  emergency  was 
not  such  as  to  justify  the  granting  of  emergency  relief  as  contem- 
plated within  the  statute,  and  the  commission  at  that  time  indicated 
that  e^•en  a  threatened  receivership  would  not  be  sufficient  to  con- 
stitute an  emergency  within  the  meaning  of  the  statute.  The  officers 
of  the  company  pushed  for  a  determination  on  the  petition  of  No- 

.  vember,  1915. 

'  The  valuation  had  dragged  rather  slowlv— the  revaluation  had 
dragged  slowly— and  was  finally  completed  in  August,  1917. 


768       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  cost  of  living  began  to  verjr  rapidly  increase,  and  it  became 
necessary  for  the  company  to  consider  mating  substantial  increases 
in  wages;  first,  to  keep  the  men  on  the  cars;  and  second,  to  keep  the 
service  going — that  is,  to  keep  a  sufficient  number  of  trainmen  to 
operate  the  cars. 

The  matter  finally  came  to  a  head  in  a  demand  made  in  the  latter 
part  of  April,  1918,  by  the  employees  for  an  increase  of  15  cents 
an  hour  and  for  an  8-hour  day.  The  company  told  the  men  that 
they  had  no  dispute  with  them  on  the  matter  of  wages,  but  since 
wages  were  so  intimately  related  to  fares  that  the  proper  place  to 
make  the  application  was  at  the  office  of  the  railroad  commission 
in  Madison.  The  committee  went  there  and  received  very  atten- 
tive treatment  and  were  assured  that  by  the  1st  of  May  there  would 
be  an  order  granting  an  increase  in  fares. 

Based  upon  the  assurance  given  by  all  three  members  of  the  rail- 
road commission  to  the  committee,  I  entered  into  a  contract  where- 
by the  wages  of  the  men  were  increased  10  cents  per  hour,  or  ap- 
proximately $1  per  day.  A  strike  had  been  threatened.  The  cessa- 
tion of  service  had  been  threatened,  and  this  assured  the  continuity 
of  service  for  the  time  being.  The  Railroad  Commission  of  Wiscon- 
sin told  the  committee  that  an  order  would  be  forthcoming  from  the 
15th  of  May,  and  not  later  than  the  19th.  The  15th  came  by,  and 
there  was  no  order,  and  the  19th  came  by  and  there  was  no  order ;  and 
the  employees  naturally  wanted  to  know  when  the  case  was  going  to 
be  determined.  I  found  it  necessary  to  tell  the  committee  that  if  there 
was  no  order  forthcoming  by  the  time  the  pay  roll  for  the  last  half  of 
the  month  of  May,  1918,  was  made  up,  w^e  would  be  unable  to  pay 
the  increase  in  wages  for  the  last  half  of  the  month  of  May,  because 
the  increase  had  been  predicated  upon  the  granting  of  relief  by  the 
railroad  commission. 

The  employees  communicated  these  facts  to  the  railroad  commis- 
sion, and  on  the  1st  of  June,  before  all  the  time  slips  had  been  as- 
sembled, the  railroad  commission  handed  down  an  order,  order- 
ing the  company  to  discontinue  the  sale  of  25  tickets  for  a  dollar 
and  6  for  25  cents,  and  to  substitute  in  lieu  thereof  a  5-cent  cash 
fare ;  and  that  is  the  fare  that  we  are  collecting  to-day. 

In  August,  1918 


The  Chairman.  You  say  there  was  an  understanding  between  you,^ 
the  i-ailroad  commission  and  the  employees,  that  an  order  would  be 
made  increasing  rate^? 

Mr.  Mortimer.  The  understanding 

The  Chairman.  Now,  what  were  they  going  to  increase  the  rates 
to? 

Mr.  Mortimer.  There  was  an  understanding  between  the  com- 
mission and  the  men,  and  then  between  the  men  and  the  company, 
that  there  would  be  an  adjustment  of  rates.  There  was  no  under- 
standing as  to  the  magnitude  of  that  adjustment,  so  far  as  I  know,. 
At  least,  the  company  had  no  knowledge  of  it. 

The  CHAiR^tAN.  It  was  one  of  those  open  covenants  openly  ar- 
rived at  which  did  not  materialize? 

Mr.  Mortimer.  Well,  we  got  an  increase.  So  that,  so  far  as  that 
part  of  it  is  concerned,  the  commission  carried  out  its  word  tech-. 
nically  with  the  employees. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       769^ 

The  results  of  the  increase  in  rates  were  not  sufficient  to  com- 
pensate for  the  increase  in  expenses  and  produce  a  reasonable  return 
upon  any  measure  of  utility  capital.  So  the  company,  in  August, 
1918,  hied  an  additional  petition  asking  the  commission  to  investi- 
gate the  matter.  The  commission  had  retained  jurisdiction,  as  they 
usually  do  in  cases  of  that  kind,  so  that  the  results  could  be* watched, 
and  we  were  filing  frequent  statements  with  the  commission  showing 
Uie  results  of  the  order  and  the  tendencies  of  operating  expenses. 
The  commission  appeared  to  be  very  much  peeved  because  we  had 
hied  an  additional  petition  so  shortly  after  we  had  been  granted  an 
increase  to  5  cents  from  the  1st  of  June.  No  time  was  set  for  the 
hearing  until  the  latter  part  of  October.  The  hearings  were  neces- 
sarily of  relatively  short  duration,  because  all  the  essential  facts 
up  to  April,  1918,  had  been  presented  to  the  commission,  and  it  was 
only  necessary  to  supplement  them  by  more  recent  data  of  the  ex- 
penses and  actual  expenditures.  The  hearings  were  supposed  to  be 
closed  on  the  27th  of  November,  1918. 

The  employees  had  begun  to  push  for  further  increases  in  wages. 
Their  wages,  following  the  May  1  adjustment,  while  embracing  a  very 
large  increase  in  the  hourly  rate,  were  not  then  comparable  with  the 
awards  that  were  being  made  by  the  National  War  Labor  Board, 
the  hrst  of  which  were  made  along  in  the  early  part  of  July,  1918. 

When  the  employees  asked  for  further  adjustments  iii  order  to- 
bring  their  scales  into  line  with  what  they  called  the  Government 
wage,  we  told  the  employees  that  it  was  a  question  of  revenues,  and 
that  it  was  up  to  them  to  get  an  increase  in  revenues,  and  that  we 
would  cooperate  to  whatever  extent  we  could,  that  we  had  already 
had  this  petition  filed.  . 

The  employees  employed  an  accountant  to  make  an  examination 
of  our  books  of  account  to  ascertain  whether  or  not  we  were  telling 
them  the  facts,  and  the  accountants  reported  to  them  that  the  facts 
were  substantially  in  accordance  with  what  the  company  had  stated. 
Based  upon  this  examination,  the  employees  again  presented  them- 
selves  to  the  railroad  commission  and  asked  if  the  information  con- 
tained m  the  Hagenah  and  Erickson  report  was  not  correct.  The 
commission  replied  that,  so  far  as  their  cursory  examination  indi- 
cated,  the  report  was  substantially  correct  and  did  not  differ  ma- 
terially from  their  own  figures. 

Then  the  situation  began  to  become  more  active.  The  company 
indicated  its  helplessness.  It  showed  that  the  earnings  on  the  rail- 
way  property  were  only  3  per  cent  per  annum  on  the  appraised 
value  of  the  physical  property,  stripped  of  all  considerations  of 
stocks  and  bonds  and  bond  discounts,  and  with  only  very  modest, 
allowances  for  overhead,  engineering  overhead. 

The  employees  made  a  number  of  trips  to  the  railroad  commission 
and  they  finally  went  to  the  governor  of  the  State.     It  thus  became 
more  or  less  of  a  political  issue.     Then  the  employees  finally  decided 
that  they  would  have  to  cease  service  on  the  1st  of  January,  1918  after 
serving  notice  upon  the  public.  ' 

Commissioner  Meeker.  1918? 

Mr  Mortimer.  1919,  the  end  of  the  year  1918.    And  service  waa 
ceased  for  one  day. 


m 


I  i 


770       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  service  was  resuiiied  on  the  ni^ht  of  January  1,  upon  the  agree- 
ment of  tlie  company  to  pay  to  the  employees  an  increase  in  wages  of 
api>roxiniately  4J  cents  an  hour,  predicated  uj)on  the  organization's 
rising  its  infiueiice  to  get  out  of  the  railroad  commission  a  i>rompt 
decision  upon  the  company's  application  of  August,  1918. 

The  fact  that  the  company  was  not  fighting  witli  the  men,  that  they 
ap})eared  to  be  on  friendly  terms,  had  caused  the  city  attorney  of  Mil- 
waukee to  claim  that  a  conspiracy  existed  and  had  resulted  in  the 
lirst  attempt  on  the  part  of  the  railroad  commission  to  investigate  the 
cause  of  the  strike,,  but  later  there  was  an  appointment  of  a  legisla- 
tive investigating  committt^  made  up  of  members  from  both  houses. 

That  legislative  investigating  committee  held  hearings  during  a 
number  of  weeks,  took  testimony  of  over  1,800  pages,  and,  finally, 
ai>out  the  middle  of  April,  it  handed  down  its  findmgs. 

Now,  the  findings  are  of  intei-est ;  and  I  beg  the  privilege  of  the 
commission  to  lead ceitain  extracts. 

Commissioner  Meeker.  Will  not  tlie  wfcole  report,  if  it  is  contained 
in  that  brief  pamphlet,  be  of  interest  to  the  commission  ? 

Mr.  MoKTiMER.  I  intend  to  file  it. 

Connnissioner  Meeker.  Yes. 

Mr.  Mortimer.  There  are  certain  matters  connected  with  it  that  I 
want  to  develop. 

The  Chairman.  Proceed. 

Mr.  MoRi'iMER.  I  believe  it  was  said  at  some  prior  hearing  that  the 
Btreet-railway  companies  never  presented  their  fad;s  to  the  public, 
and  it  was  also  said  that  the  street-railway  companies  would  have  less 
trouble  if  they  fought  back;  and  I  want  to  disclose  some  of  our  ad- 
vertisements. 

This  is  a  pait  of  the  findings  of  the  legislative  investigating 
committee : 

The  railroad  commission  in  the  negotiations  with  the  men  always  took  the 
position  that  the  company  shoulcl  first  raise  the  wafres  of  the  men  and  that  the 
commission  would  consider  such  raise  as  an  oiM?rating  expense  in  its  decision. 
It  was  on  this  basis  that  tlie  raise  of  May  1  was  granted,  hut  it  was  claimed 
on  the  part  of  the  company  that  the  railroad  commission  did  not  at  that  time 
frive  sufliclent  consideration  to  the  increase  in  wage  <-ost.  The  comimny,  there- 
lore,  took  the  position  that  no  further  raise  should  l>e  made  until  the  conmiis- 
Fion  first  acted  on  the  proposed  increased  wage  and  provided  revenues  therefor. 
There  is  a  sharp  difference  of  opinion  between  the  company  and  the  railroad 
commission  as  to  the  power  and  duties  of  the  railroad  commission  with  refer- 
ence to  wages.  The  company  contends  that  the  conunission  has  the  power  and 
duty  to  pass  on  the  question  of  wages  as  a  factor  in  the  administration  of  the 
railroad  commission  law,  and  that,  where  the  increased  wage  is  il<^termined 
upon  by  the  conunission,  it  is  its  duty,  as  a  condition  precedent  to  the  payment 
thereof,  to  furnish  In  revenues  Ijiwfully  requireil  for  that  pun^ose.  The  com- 
mission contends  that  it  has  no  i)Ower  and  no  d\ities  in  regard  to  wages,  ex- 
cept to  consider  them  when  paid  as  an  operating  expense.  It  is  the  opinion  of 
the  committee  that  the  railroad  commission  takes  too  narrow  construction  of 
the  law  and  that  It  luis  the  power  to  consider  wages  the  same  as  it  has  the 
power  to  consider  any  other  factor  In  ordering  service,  and  if  this  power  is 
not  sufficiently  specific  in  the  statutes  as  now  provided,  the  commission  should 
be  given  that  power.  Tn  other  words,  the  commission  should  have  full  and 
comprehensive  administrative  jurisdiction  to  keep  tlie  wheels  going  and  prevent 
cessation  of  service. 

The  company  exi>ressed  its  dissatisfaction  with  the  delay  of  the  commission 

!n  its  decision  on  the  case  pending  from  November,  1915,  to  .Tune,  1918,  and 

'  Beemcd  determined  not  again  to  take  any  chances  on  a  delay  of  that  character 

by  advancing  wages  and  waiting  for  a  subsequent  recognition  of  the  outlay. 

It  not  only  sought  to  bring  pressure  on  the  commission  to  decide  the  pending 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       771 

application  of  August,  1918,  by  encouraging  the  men  to  bring  pressure  upon 
the  commission  to  act,  but  it  sought  to  influence  public  sentiment  against  the 
commission  and  in  its  favor  by  various  means.  This  was  partly  done  through 
publications  which  it  issued  from  the  Public  Sei-vice  Building  and  had  dis- 
tributed to  the  patrons  of  the  road  by  its  employees,  and  it  was  done  by  paid 
advertisements  in  the  public  press.  On  December  28  the  following  paid  ad- 
vertisement w^as  run  in  a  Milwaukee  newspaper: 

"The  Electric  Co.  has  no  dispute  with  its  employees  over  wages,  hours,  or 
working  conditions.  Our  relations  have  been  and  are  most  friendly.  The  com- 
pany deeply  appreciates,  and  we  believe  the  connnunlty  does,  the  fact  that 
Milwaukee  Street  Railway  employees  have  shown  a  high  degree  of  loyalty  and 
forbearance  In  keeping  the  cars  moving  during  the  war  year  notwithstanding 
the  wage  was  less  than  that  established  by  the  National  War  Labor  Board  for 
cities  of  Milwaukee's  class.     ♦     *     * 

"  The  railroad  commission  well  knows  and  our  men,  through  tlieir  own  ac- 
countants' investigation,  learned  that  the  street-railway  systems  of  these  com- 
l>aules  entered  the  year  1918  earning  much  less  than  the  reasonable  return  assured 
them  by  State  law.  ♦  *  *  It  Is  In  view  of  the  foregoing  facts  that  our 
men  demanded  of  the  railroad  conunission  par  revenue  increases  which  as  they 
know  are  the  only  means  of  giving  them  adequate  wages.  They  share  the 
company's  belief  that  the  people  of  Milwaukee  are  able  and  willing  to  pay  the 
fair  going  price  for  the  services  they  render  and  that  the  commission  will  fear- 
lessly execute  the  plain  intent  of  the  State  utility  regulation." 

And  on  December  29  the  following  paid  advertisement  was  run  in  a  Milwaukee 
newspaper : 

"  I'unishing  Milwaukee.  ♦  ♦  ♦  Wisconsin  Railroad  Commission's  refusal 
to  maintain  the  State's  good  faith  by  executing  the  plain  Intent  of  the  utility- 
regulation  law  robs  street-railway  employees  and  investors  and  injures  the 
whole  community. 

"  Milwaukee  and  surrounding  cities  are  threatened  with  a  strike's  stopping 
strtH^t  railway  and  electric  service  on  January  1,  because  the  railroad  commis- 
sion for  over  two  years  has  faile<l  and  refused  to  allow  the  Milwaukee  Electric 
Railway  &  Light  Co.  and  the  Milwaukee  Light,  Heat  &  Traction  Co.  earnings 
enough  to  pay  living  wages.  *  *  ♦  It  is  because  our  men  through  their  own 
accountants'  investigation  know  the  above  facts  that  they  address  their  de- 
mands for  higher  wages  primarily  to  the  railroad  commission  rather  than  to 
the  companies. 

"  As  a  direct  and  ui.avoidable  result  of  this  gross  violation  of  the  State's 
go^rl  faith,  the  employees  of  these  utilities  have  l)een  underpaid ;  the  owners 
will  be  robbed  of  a  large  share  of  return  on  the  investment  which  they  should 
have  received  for  the  year  1918;  the  companies  are  being  compelled  to  pay  a 
higher  price  for  new  cajiital  urgently  needed  to  finance  plant  growth,  and 
service  betterments  desired  by  the  public  could  not  be  provided." 

The  Chairman.  Who  paid  for  those  advertisements? 

Mr.  Mortimer.  We  paid  for  them. 

Commissioner  Sweet.  The  company'  did? 

Mr.  Mortimer.  The  company  did. 

Commissioner  Gadsden.  It  was  put  out  over  the  name  of  the  com- 
pany? 

Mr.  Mortimer.  Oh,  yes;  over  the  name  of  the  company,  of  the 
Milwaukee  Eailway  &  Electric  Lighting  Co. 

"  These  companies  and  their  employees  do  not  for  a  minute  doubt  the  good 
frith  of  the  people  of  Wisconsin  nor  of  the  State  of  Wisconsin.  We  feel  sure 
that  when  the  facts  are  known  public  opinion  will  compel  action  by  the 
governor  and  the  railroad  commission  to  maintain  the  State's  good  faith  and 
do  justice  to  this  community  and  to  the  employees  of  and  investors  in  Milwau- 
kee's electric!  service. 

"  For  more  than  two  years  past  these  companies  have  been  quietly  pleading 
with  the  railroad  commission  to  do  its  plain  duty  under  the  State  law.  The 
commission,  in  possession  of  all  the  facts,  has  failed  and  refused  to  do  its  duty. 

"As  a  result  our  employees  are  now  prepared  to  tie  up  tlie  system  unless 
the  companies  give  them  Mage  iucicjises.  which  tliey  need  and  should  get,  but 
^vhich  can  not  be  given  them  without  robbing  our  creditors* 


!! 


772       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

*•  There  Is  just  one  way  out.  That  is  for  the  railroad  commission  to  fix 
fares  that  will  let  the  companies  pay  the  wages  demanded  and  pay  their  in- 
vestors a  fair  yearly  return,  which  the  State  assured  them  when  it  assumed 
<foutrol  of  their  rates,  services,  finances,  and  accounting." 

Then,  following  the  discussion  of  the  causes  and  the  fact  that  the 
causes  had  not  been  removed,  the  legislative  investigating  committee 
says: 

As  there  is  no  change  of  venue  from  the  commission,  and  the  company  must 
continue  to  submit  its  matters  of  service  and  regulation  to  the  commission, 
this,  in  itself,  presents  a  serious  question.  Provisions  are  made  in  the  court 
practice  for  a  change  of  venue  for  prejudice  of  the  judge,  but  there  is  no  such 
provision  in  the  case  of  the  commission. 

The  beginning  of  the  trouble  probably  came  from  lack  of  prompt  decision 
on  the  part  of  the  commission.  That  condition  has  existed  for  a  long  time. 
Decisions  have  been  delayed  seemingly  for  unreasonable  periods.  There  can 
be  little  justification  in  a  hearing  pending  from  November,  1915,  to  June,  1918. 
But  other  decisions  have  been  delayed  much  longer. 

The  commission  has  the  power  and  jurisdiction  to  require  books  to  be  kept 
by  the  companies  in  the  manner  and  form  required  by  it  and  to  require  reports 
from  the  companies  in  the  manner  and  form  and  at  the  time  demanded  by  it. 
By  a  careful  checking  of  these  reports,  as  filed,  and  prompt  correction  of  errors, 
there  would  seem  to  be  no  reason  why  the  commission  should  not  be  fully 
advised  of  the  financial  conditions  of  the  companies  at  all  times.  Such  a  sys- 
tem In  itself  furnishes  a  valuable  check  on  the  management  and  service  of  such 
companies. 

The  commission  has  frequently  held,  and  so  have  the  courts,  that  a  rate  from 
7  or  8  per  cent  on  invested  capital  is  reasonable.  In  a  decision  by  the  circuit 
court  of  Dane  County,  Judge  Stevens  presiding,  the  court  held  that  the  com- 
pany had  an  "income  on  the  city  railway  property  in  1912  of  5.61  per  cent; 
In  1913,  3.48  per  cent;  in  1914,  5.49  per  cent,"  and  he  concludes  "that  the 
average  being  5i  per  cent  or  thereabouts" — under  5^  per  cent — "any  order 
isv'hich  reduces  returns  on  investment  to  so  low  a  cost  as  5i  per  cent  is  unrea- 
eonable."  In  that  decision  Judge  Stevens  used  the  commission  valuation. 
This  rate  is  susceptible  of  fluctuation  as  the  interest  on  money  fluctuates,  and 
the  rate  of  return  need  not  be  uniform  throughout  the  year  or  even  over  a  term 
of  years.  If  the  general  level  of  rate  upon  investments  is  in  conformity  to  the 
lawful  rate,  the  rates  may  vary  considerably  from  time  to  time.  By  a  full 
accounting  system,  the  commission  should  have  no  serious  difficulty  in  deter- 
mining the  general  level  of  returns  on  invested  capital  from  month  to  month 
and  to  maintain  that  level  by  adjustment  of  rates  and  service.  Hasty  and 
Ill-considered  action  should  never  be  required,  but  reasonably  prompt  decisiona 
are  necessary  to  any  system  for  administering  justice. 

It  would  be  well  to  guard  against  unwarranted  delay  in  the  future  in  decid- 
ing cases  by  the  commission  by  providing  in  the  law  that  whenever  any  party 
deems  its  case  to  be  unwarrantably  delayed,  it  may  obtain  in  the  circuit  court 
for  Dane  County,  an  order  to  show  cause  against  the  commission  why  the  com- 
mission should  not  be  ordered  to  render  a  decision  within  a  reasonable  time 
to  be  fixed  by  the  court. 

The  committee  finds  that  the  cessation  of  service  on  the  street-car  lines  in 
the  city  of  Milwaukee  on  the  Ist  day  of  January,  1919,  was  the  result  of  the 
company's  failure  to  meet  the  just  wage  demands  of  the  trainmen  on  the  one 
band,  and  the  failure  of  the  railroad  commission  to  expeditiously  function,  od 
the  other  hand. 

The  commission  is  subject  to  reasonable  criticisms  through  the  press  or 
otherwise,  but  in  no  case  should  It  be  coerced  into  a  decision  by  a  party  liti- 
gant. 

Mr.  Warren.  There  is  no  time  limit  in  your  statute,  the  Wisconsin 
statute,  on  the  decisions  of  the  commission  ? 

Mr.  Mortimer.  No;  there  is  no  time  limit  on  the  decisions  of  the 
commission. 

Mr.  Warren.  Do  your  tariffs  have  to  be  approved  by  the  com- 
mission before  they  become  effective,  or  does  the  commission  sus- 
pend them  ? 


i 


rROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       77^ 

Mr.  Mortimer.  In  practically  all  cases,  under  both  the  railroad 
commission  law  and  the  so-called  public-utility  law,  increases  are 
procured  by  filing  petitions,  rather  than  by  the  filing  of  tariffs.  In 
other  words,  the  Wisconsin  law  differs  materially  in  that  respect 
from  the  laws  of  many  other  States  by  permitting  the  filing  of  the 
tariffs  and  rate  schedules,  with  the  authority  of  the  commission  to 
suspend  for  limited  periods  of  time. 

Mr.  Warren.  So  that  your  increase  can  not  take  effect  at  all  until 
affirmative  action  by  the  commission? 

Mr.  Mortimer.  Our  increases  can  not  take  effect  until  there  is 
affirmative  action  by  the  commission.  We  can  have  no  increase  in 
rates  until  there  has  been  affirmative  action  by  the  commission. 

Commissioner  Sweet.  After  this  legislative  committee  made  its 
report,  were  any  bills  introduced  into  the  State  legislature  seeking 
to  amend  the  law,  so  as  to  compel  the  commission  to  take  prompt 
action  ?  ir         tr 

Mr.  Mortimer.  There  were  a  number  of  bills  introduced  in  the 
legislature  at  that  time  following  the  filing  of  this  report  relating 
to  the  abolition  of  the  commission. 

Commissioner  Sweet.  Still  more  drastic  than  compelling  them  to 
act  promptly? 

Mr.  Mortimer.  Yes. 

Commissioner  Sweet.  But  was  there  ever  any  legislation  enacted 
or  any  laws  passed  by  the  State  legislature  on  the  subject  ? 

Mr.  Mortimer.  There  was  no  action  taken  on  this  report.  There 
has  been  some  legislation  not  directly  connected  with  this  report 
but  having  a  bearing  on  it,  that  was  enacted,  and  that  legislation  I 
^^i    A      *^  ^^^^^  *^  ^^  ^  separate  discussion  of  recent  legislation. 

The  Chairman.  What  action  was  taken  on  the  bills  introduced  to 
abolish  the  commission? 

Mr.  Mortimer.  They  died  their  natural  and  usual  death.    . 

The  Chairman.  Was  there  any  real  support  for  those  bills? 

Mr.  Mortimer.  It  was  isolated  and  not  organized. 

J?^  Chairman.  Were  the  utilities  for  or  against  those  bills? 

Mr.  Mortimer.  Some  of  the  utilities  openly  opposed  them,  and 
other  companies  took  the  position  that  it  did  not  make  any  difference, 
that  it  could  not  be  any  worse  if  they  had  no  commission. 

Mr.  Warren.  Are  you  a  believer  or  not  in  the  theory  of  commission 
regulation.  State  regulation  through  commissions? 

Mr.  Mortimer.  I  am  a  believer  in  the  theory  of  regulation  by  com- 
mission, and  believe  it  is  the  most  satisfactory  way  of  taking  care  of 
the  many  complicated  relationships  that  exist  between  the  public 
utility  and  the  community  served,  the  State,  and  the  employees. 

Commissioner  Sweet.  But  you  think  there  should  be  coupled  with 
It  a  requirement  for  prompt  action? 

Mr.  Mortimer.  Yes.  I  would  even  go  further  than  that  and  sug- 
gest that  the  laws  be  materially  changed,  so  that  there  should  be  no 
shifting  bases  for  commission  regulation.  That  is  one  of  the  hazards 
of  commission  regulation. 

Commissioner  Sweet.  What  do  you  mean  by  "shifting  basest" 

Mr  Mortimer.  A  commission  may  shift  its  basis  on  three  princi- 
pal things :  First,  the  item  of  valuation.  One  commission  may  have 
one  viewpoint  as  to  what  elements  of  value  are  to  be  considered, 
and  another  commission,  a  subsequent  commission,  appointed  under 


774       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

the  same  law,  may  have  an  entirely  different  opinion.  It  is  im- 
portant that  that  hazard  of  shifting  valuation  be  eliminated;  fii*st, 
so  that  the  utility  may  know  where  it  stands  with  respect  to  earning; 
and  second,  so  that  the  investors  may  be  assured  wlien  capital  is  put 
into  the  property,  when  the  property  is  sold  or  subsequently  regu- 
lated for  rate-making  purposes,  it  will  be  considered  at  the  par  value 
of  its  original  investment. 

Conmiissioner  Sweet.  Well,  you  did  not  have  two  conmiissions, 
did  you?     There  was  onlv  one  State  commission? 

Mr.  Mortimer.  Yes;  tliere  was  only  one  State  commission,  but 
the  personnel 

Commissioner  SwEirr.  Oh,  yes. 

Mr.  Mortimer.  There  had  been  a  rather  rapid  turnover  in  the 
commission  ? 

Commissioner  Sweet.  I  see. 

Mr.  Mortimer.  In  the  period  between  the  August,  1912,  decision, 
and  the  decision  of  June,  1918. 

Commissioner  Sweet.  So  that  the  commission  at  different  times 
with  different  personnel  might  adopt  a  different  plan  of  valuation? 

Mr.  Mortimer.  Yes.  Then  the  second  element  is  the  amount  to 
be  allowed  to  insure  future  replacements. 

The  connnission  that  had  the  job  in  August,  1912,  when  it  ordered 
a  discontinuance  of  25  tickets  for  a  dollar  and  13  tickets  for  50 
cents,  used  a  depreciation  allowance  of  4.46  per  cent. 

The  commission,  in  Jime,  1918,  with  a  different  personnel,  used  an 
allowance  of  2.82  per  cent,  a  difference  of  IJ  per  cent.  One  and  a 
half  per  cent  on  the  valuation  of  $20,000,000  nms  into  a  substantial 

sum  each  year. 

Commissioner  Sweet.  Oh,  yes.     How  large  a  commission  do  you 

have  in  Wisconsin? 

Mr.  Mortimer.  There  are  three  members — the  chairman  and  two 
other  conmiissioners. 

Commissioner  Sweet.  Appointed  by  the  governor? 

Mr.  Mortimer.  Appointed  by  the  governor  and  confirmed  by  the 
senate.    Each  gets  paid  $5,000  a  year. 

Commissioner  Meeker.  What  was  the  tliird  point  that  you  just 
started  to  elucidate? 

Mr.  Mortimer.  The  third  point  is  some  definite  determination 
with  respect  to  permanency  of  return. 

The  commission,  in  its  decision  of  August,  1912,  held  that  the 
railway  utility  was  entitled  to  a  reasonable  return  upon  the  fair 
measure  of  the  utility  capital,  that  that  reasonable  return  was  7j 
per  cent  per  annum,  and,  based  upon  that  assurance,  I  authorized 
the  expenditure  in  our  Wisc»onsin  pi*oporties  during  the  succeedin<>' 
years  of,  roughly,  $15,000,000.  I  feel  quite  sure  that  we  have  never 
earned  any  74  per  cent  n^turn  in  the  railway  business  during  the  iri- 
tervening  period  of  time,  and  the  railroad  commission,  in  its  deci- 
sion of  April  4,  1919,  in  response  to  our  petition  of  August,  1918, 
held  that  the  commission  had  never  said  that  the  companies  were 
to  get  a  reasonable  return  during  good  times  and  bad  times. 

Now,  if  a  reasonable  return  limited  to  7J  per  cent  means 
anything,  it  means  that  you  are  going  to  get  it  both  in  good 
times  and  bad  times.  Otherwise,  there  is  no  justification  for  limit- 
ing the  return  to  a  figure  as  low  as  7J  ]>er  cent.    The  theory  of  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       775 

computation  of  7J  per  cent  is  that  there  shall  be  an  allowance  for 
interest  of  approximately  6  per  cent,  plus  a  profit  on  that  for  the 
compensation  of  the  enterprise  of  IJ  per  cent. 

Commissioner  Meeker.  Do  you  mind  suggesting  how  you  think 
these. shifting  things  can  be  avoided? 

Mr.  Mortimer.  Yes;  I  would  like  to  do  that,  Mr.  Commissioner, 
and  I  want  to  discuss  that  in  touching  on  the  relationship  between 
State  regulation  and  so-called  cost-of-service  franchises. 

Mr.  Warren.  Do  you  want  first  to  describe  the  recent  legislation  ? 

Mr.  Mortimer.  There  is  one  intervening  thing,  because  I  want  to 
lead  up  to  the  April  4, 1919,  decision. 

During  the  time  that  the  legislative  investigating  committee  was 
holding  sessions,  just  shortly  prior  to  the  time  that  it  arived  at  its 
decision  and  filed  its  report-^ 

Mr.  Warren.  Was  that  report  unanimous  ? 

Mr.  Mortimer.  That  was  the  unanimous  report.  There  was  a  sup- 
plementary report  that  dealt  more  with  the  labor  aspects  of  the  sit- 
uation. That  supplementjiry  report  was  signed  by,  I  think,  three  of 
the  members,  and  it  attempted  to  show  the  great  hazard  that  existed 
for  the  public  and  for  the  employees  where  there  existed  a  labor  or- 
ganization such  as  ours. 

Commissioner  Gadsden.  Was  it  Amalgamated  ? 

Mr.  Mortimer.  No. 

Mr.  Warren.  It  is  an  organization  of  your  own  men? 

Mr*  Mortimer.  Well,  there  is  an  organization  that  has  exclusive 
labor  contracts  with  several  of  our  companies,  with  all  of  our  com- 
panies, the  Milwaukee  Electric  Kailwav  &  Lighting  Co.,  the  Wiscon- 
sin (las  &  Electric  Co.,  the  Xorth  Milwaukee  Light  &  Power  Co.,  and 
the  Wells  Power  Co. 

The  chairman  of  the  commission  during  this  time  was  up  for  reap- 
pointment. There  was  considerable  opposition  to  his  reapiwintment 
from  the  Social  Democrat  members  in  the  legislature,  in  the  Senate. 
We  also  ascertained  subsequently  that  there  was  a  good  deal  of  pres- 
sure brought  to  bear  upon  the  commission  not  to  permit  any  advance 
in  fares  while  the  legislature  was  in  session. 

So  the  railroad  commission,  in  its  decision  of  April  4,  1919,  in  re- 
sponse to  our  petition  of  August,  1918,  estimated  the  increase  in  rev- 
enues during  the  year  1919,  which  they  thought  the  company  ought  to 
enjoy.  They  made  certain  allowances  for  maintenance  of  way  and 
structures  and  for  the  maintenance  of  equipment,  and  estimated  what 
the  net  operating  revenues  would  be  applicable  to  the  payment  of  a 
return  upon  the  utility  capital. 

In  this  process  of  making  these  estimates,  it  very  largely  reduced 
the  allowances  which  we  had  incurred  during  the  last  two  years — 18 
months,  rather— for  the  maintenance  of  way  and  structures,  and  for 
the  maintenance  of  equipment,  and  substituted  its  own  allowances. 
They  also,  in  the  process  of  the  computation  allowances,  dropped 
$100,000  of  our  expenditures  for  the  maintenance  of  way  and  struc- 
tures, and  then  forgot  to  pick  it  up  again. 

So  that  on  its  own  computations,  we  were  $100,000  short  of  earning 
this  reasonable  return.     They  estimated  that  we  would  earn  during 
the  year  1919,  7.5  per  cent  return. 
Here  are  the  results : 

For  the  Milwaukee  city  and  suburban-railway  utility,  comprising 
about  220  miles  of  track  and  involving  a  capital  investment  in  tha 


776       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

railway  business  alone,  exclusive  of  power-plant  facilities,  of  $15,- 
910,000,  the  rate  of  return  earned  during  the  month  of  May  was  3.92 
per  cent  per  annum,  or  about  0.25  of  1  per  cent  per  month. 

Mr.  Warren.  May  of  what  year,  Mr.  Mortimer? 

Mr.  Mortimer.  May,  1919.  I  want  to  correct  that  That  is  in  the 
smffle  fare  area  alone,  comprising  167  mile«  of  track. 

Mr.  Warren.  What  was  that  $15,000,000?  Was  that  the  result  of 
the  valuation  made  by  the  commission  ? 

Mr.  Mortimer.  This  determinatii)n  of  $15,900,000  is  the  appraisal 
of  the  physical  property  by  the  railroad  commission  as  of  January 
1,  1914,  to  which  have  been  added  the  capital  expenditures  as  shown 
by  the  books  and  as  audited  by  the  railway-commission  accounting 
staff. 

The  figures  that  are— I  was  in  error.  The  return  during  the 
month  of  May  for  the  single  fare  area  was  0.45  of  1  per  cent  per 
^.??*^' J^  ^^^  operating  revenue  of  $71,557  out  of  a  gross  revenue  of 
$533,045.  There  was  a  loss  shown  on  the  suburban  svstem,  not  in- 
cluding the  interurban,  of  0.6  of  1  per  cent,  and  the  combined  return 
for  the  two  systems  for  the  month  of  May  was  0.36  of  1  per  cent. 
For  the  five  months  ended  May,  1919,  we  earned  1.92  per  cent  under 
the  5-cent  fare  in  the  single-fare  area,  lost  3.39  per  cent  on  the 
suburban  system,  and  on  the  two  systems  taken  together  showed  a 
net  of  1.5  per  cent  for  five  months. 

Commissioner  Meeker.  Will  you  allow  me  to  suggest  that  these 
percentages  that  you  have  given  should  be  in  equivalent  percentages 
per  annum,  so  that  no  confusion  may  arise  ?  I  do  not  ask  that  you 
do  that  now,  but  will  you  have  that  in  the  record  ? 

Mr.  Mortimer.  Yes.  I  now  have  the  figures  on  the  annual  basis. 
For  twelve  months  ended  May,  1919,  the  Milwaukee  single  fare 
area  shows  a  return  of  3.92  per  cent.  That  is  a  cumulative  percent- 
age for  12  months  and  is,  of  course,  at  that  rate  per  annum. 

The  suburban  system  showed  a  loss  of  6.27  per  cent  upon  a  utility 
capital  of  $1,353,000,  and  upon  the  combined  system  a  return  of 
3.12  per  cent  upon  a  utility  capital  invested  exclusivelv  in  railway 
facilities  of  $17,264,751.  ^  ^ 

Commissioner  Meeker.  You  said  $17,000,000  now  and  over  $15,- 
000,000  a  moment  ago. 

Mr.  Mortimer.  Yes ;  the  $15,910,909  relates  to  the  capital  in  the 
smffle-fare  area. 


Commissioner  Sweet.  The  city  property? 
Mr.  Mortimer.  Yes;  the  city  property. 


Now,  we  are  required  to  file  these  statements  monthly  with  the 
railroad  commission,  showing  these  analyses,  and  we  also  hand 
them  to  the  press,  so  that  the  public  who  are  interested  will  be  in- 
formed. We  also  filed  with  the  commission,  for  the  information 
of  the  commission,  a  comparison  between  our  actual  results  and  the 
coumiission's  estimates. 

For  the  five  months  of  the  calendar  vear,  the  commission  under- 
estimated the  operating  revenues  by  $18,084.  It  underestimated 
©Iterating  expenses  by  $297,793,  or  something  above  12  per  cent 

Commissioner  Meeker.  Do  you  still  have  faith  in  the  commission 
principle  of  regulation? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       777 

Mr.  Mortimer.  If  they  would  let  me  fix  the  law,  I  would  have 
f;.ith  in  it. 

Commissioner  Sweet.  You  would  not  fix  the  commission? 

Mr.  Mortimer.  Well,  the  commission  thinks  we  did.  During  the 
five  months,  according  to  the  commission's  computation,  we  should 
have  earned  an  actual  return  of  3.11  per  cent — actual  for  the  five 
months,  cumulative  for  five  months— and  we  have  earned  1.5  per 
cent,  as  previously  indicated,  upon  a  utility  capital  of  $17,335,134. 
That  is  our  most  recent  experience  with  the  regulation  by  the  com- 
mission. 

The  statements  thus  ref erredt  to  by  Mr.  Mortimer  are  as  follows : 

utility  income  accounts  of  the  Milwaukee  Electric  Railicay  &  Light  Co.  and 

Milwaukee  City  d  Suhurhan  Railway  utilities, 

FIVE  MONTHS  1919  ACTUAL  COMPARED  WITH  ESTIMATE  IN  WISCONSIN  RAILROAD 

COMMISSION  order  OF  APR.  4. 


Operating  revenues. 


Passenger  revenues . 
Other  revenues 


Operating  expenses. 


Way  and  structures 

Equipment 

Power 

Traffic  and  transportation. 
General  and  undistributed. 

Taxes 

Depreciation 


Net  operating  revenue. . 
Per  cent  return  (five  months). 

Cost  of  reproduction 

Materials  and  supplies 


Total  utility  capital. 


1G0643' 


1  Jan.  1, 1919. 

-20 50 


Five  months 
operation  based 

on  Wisconsin 
Railroad  Com- 
mission order  of 

Apr.  4, 1919. 


$2,698,442.85 


2,158,580.30 


124,055.10 
182,271.75 
382,777.05 
1,014,708.00 
164,399.65 
106,179.50 
184,189.25 


Utility  income 

account  for  five 

months  ended 

May  31, 1919. 


12,716,526.92 


2,695,846.12 
20,680.80 


2,456,373.39 


639,862.55 
3.11 


1  $16,812,003.00 
542,500.00 


17,354,503.00 


189,486.71 
295,431.07 
377,761.41 
1,046,860.58 
238,157.37 
112,333.20 
197,343.05 


260,153.53 
1.50 


2 $16, 795, 134. 00 
540,000.00 


17,335,134.00 


Differences. 


3  Average. 


$18,084.07 


297,793.09 


65,431.61 
113,159.32 

6,015.64 
32,152.58 
73, 757. 72 

6, 153. 70 
13,153.80 


S79, 709.09 


778       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Utility  income  accounts  of  the  MiTiraulee  Electric  Railicay  d  Light  Co.  and 
Miliraukee  City  d  Subnrban  Railway  utilities. — Continued. 

TWELVE  MONTHS  ENDED  MAY  31,  1919. 


Operating  revenues. 


Passenger  revenues. 
Other  revenues 


Operating  expenses. 


Way  and  structures 

Equipment 

Power 

Traffic  and  transportation. 
General  and  undistributed. 

Taxes 

Depreciation 


Milwaukoe  City 
Railway  (single- 
fare  area). 


$5,871,354.95 


5,823,505.38 
47,849.57 


Milwaukee  Su- 
burban Rail- 
way. 


$298,057.86 


28ti,9fl7.50 
11,090.36 


Milwaukee  City 

and  Suburban 

system. 


$6,169,412.81 


6,110,472.88 
58,939.93 


5,217,022.70 


Net  operating  revenue 

Per  cent  return  earned,  per  year. 


Cost  of  reproduction,  average. 
Materials  and  supplies 


Total  utility  capital. 


399,682.43 
622,677.37 
892,084,13 
2,213,011.68 
475,.3.=>S.46 
211,620.98 
434,587.65 


624,332.25 
3.92 


383,024.80 


65,513.25 
44,586.13 
45,852.50 
133,580.80 
38,345.79 
18, 065. 96 
37,050.37 


84,966.94 
6.27 


5,630,047.50 


465,225.68 
667, 263.  50 
937, 936. 63 
2,316,592.  ^S 
511,704.25 
22J,6M5.94 
471,638.02 


539,365.31 
3.12 


$15,410,909.00 
500,000.00 


15,910,909.00 


$1,313,842.00 
40,000.00 


1,353,842.00 


$16,724,751.00 
540,000.00 


17,264,751.00 


MONTH  OF  MAY,  1919. 


Operating  revenues. 


Passenger  revenues , 
Other  revenues 


Operating  expenses. 


Way  and  structures 

Equipment 

Power 

Traffic  and  transportation. 
General  and  undistributed. 

Taxes 

Depreciation 


Net  operating  revenue 

Per  cent  ret  urn  earned,  one  month. 


Cost  of  reproduetfon,  first  of  month. 
Materials  and  supplies 


Total  utility  capital. 


$533,045.70 


$26, 755. 55 


529,559.20 
3,486.50 


26,008.06 
747. 49 


$559,801.25 


555, 567. 26 
4, 233. 99 


461,487.74 


45,334.08 
55, 529. 60 
64,395.02 
195,600.41 
43,389.50 
20,699.53 
36,559.60 


34,923.63 


5,909.82 
5, 151. 09 
3,244.88 
12,387.51 
3,346.36 
1,767.11 
3,116.86 


496,411.37 


51,243.90 

60,680.69 
67, 6:i9.  90 
207,987.92 
46,715.86 
22, 466. 64 
39,676.46 


71,557.96 
.45 


8,108.08 
.60 


63,389.SS 
.36 


$15,557,275.00 
500,000.00 


16,057,275.00 


$1,326,323.00 
40,000.00 


1,366,323.00 


$16,883,598.00 
640,000.00 


17,423,598.00 


FIVE  MONTHS  ENDED  MAY  31,  1919. 


Operating  revenues. 


Passenger  revenues. 
Other  revenues 


Operating  expenses. 


Way  and  structures 

Equipment 

Power 

Traffic  and  transportation. 
General  and  undistributed. 

Taxes 

Depreciation 


$2,596,458.43 


2,579,379.00 
17,079.43 


2,290,407.70 


163, 535.  73 
271,  430.  23 
359, 723. 83 
986,688.47 
220,691.38 
I0:i,497.65 
181,840.41 


Net  operating  revenue. 
Per  cent  return  (5  months)... 


306,050.73 
1.92 


Cost  of  reproduction,  average. 
Materials  and  supplies 


Total  utility  capital. 


$15,475,779.00 
500,000.00 


15,975,779.00 


$120,068.49 


$2,716,526.92 


116,467.12 
3,601.37 


165,965.69 


25,950.98 
20,000.84 
18,037.58 
60,172.11 
17, 465. 99 
8,835.-55 
15,502.64 


45,897.  go 
S.39 


$1,319,355.00 
40,000.00 


1,359,355.00 


2,695,846.12 
20,680.80 


2,456,373.39 


189,486.71 
295,431.07 
377,761.41 
1,046,860.58 
238, 157. 37 
112,33;i.20 
197,343.05 


260, 153. 53 
1.50 


$16,795,134.00 
540,000.00 


17,335,134.00 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       779 

Utility  income  accounts  of  the  Milwaukee  Electric  RaiUcny  &  Light  Co.  and 
MUtoaukee  City  &  Suburban  Railway  utilities. — Continued. 

MONTH  OF  MAY,  1919,  COMPARED  WITH  WISCONSIN  RAILROAD  COMMISSION  ORDER 

OF  APR.  4. 


Operating  revenues. 


Passenger  revenues . 
Other  revenues 


Average  month 
based  on  Wis- 
consin Railroad 
Commission  order 
of  Apr.  4,  1919, 
and  Exhibit  4, 
Apr.  24, 1919. 


$539,688.57 


Operating  expenses. 


Utility  income 

account  for 

month  of  May, 

1919. 


$559, 801. 25 


555, 567.  26 
4,233.69 


Way  and  structures' 

Equipment 

Power 

Traffic  and  transportation . 
General  and  undistributed. 

Taxes 

Depreciation 


Net  operating  revenue. 
Percent  return: 

Per  month 

Per  year 


Cost  of  reproduction. .. 
Materials  and  supplies. 


Total  utility  capital . 


431, 716. 06 


24,811.02 
36, 454. 35 
76,555.41 

202,941.60 
32, 879. 93 
21, 235. 90 

.  36,837.85 


496,411.37 


107,972.51 

.62 

7.47 


1  $16,812,003.00 
542,500.00 


17,354,503.00 


51, 234. 90 
60, 680. 69 
67, 6;J9. 90 
207,987.92 
46, 715.  86 
22,466.64 
39,676.46 


63,389.88 

.36 
4.37 


2  $16, 883, 598. 00 
540,000.00 


17,423,598.00 


Differences. 


$20, 112. 68 


64,695.31 


26,432.88 
24,226.34 
8,915.61 
5,046.32 
13,  a35.  93 
1, 2:^0.  74 
2, 83S.  61 


44,582.65 


» Jan.  1, 1919. 


2  May  1, 1919. 


Utility  income  accounts  of  the  Milwaukee  Electric  Railway  &  Light  Co.  and 

Racine  City  Railway  utility. 

YEAR  ENDED  MAY  31,  1919;  FIVE  MONTHS  ENDED  MAY  31,  1919;  AND  MONTH  OF   M\Y 

1919. 


Operating  revenues. 


Passenger  revenues . 
Other  revenues 


Year  ended  May 
31, 1919. 


$427, 426.  71 


Operating  expenses. 


Way  and  structures 

Equipment 

Power 

Traffic  and  transportation , 
General  and  undistributed. 

Taxes 

Depreciation 


Net  operating  revenue. 
Per  cent  return  earned 


Cost  of  reproduction. ., 
Materials  and  supplies. 


Total  utility  capital , 


420,093.65 
7,333.06 


Five  months 

ended  May  31, 

1919. 


$205, 097. 13 


203,400.21 
1,696.92 


436,522.13 


199,232.28 


59, 409. 33 
50,913.37 
52,016.25 
191,017.01 
44, 194. 04 
12,770.78 
26,20L35 


9,095.42 
K9S 


*  $929, 126. 00 
30,000.00 


959,126.00 


Month  of  May, 
1919. 


$40,9.35.97 


40,610.72 
325. 25 


40,989.43 


24,372.81 
23,698.44 
21,344.78 
90,719.37 
21,887.91 
6,245.80 
10,963.17 


5,864.85 

2.61 


«$933,0:J7.00 
30,000.00 


963,037.00 


5,582.66 
6,175.32 
3,  SCO.  08 
17,973.94 
3, 914. 09 
1,249.16 
2, 204. 18 


53.46 
8.006 


*  $937, 951. 00 
30,000.00 


967,951.00 


■  12  months. 


*  4  months. 


*  1  month. 


*  Average. 


•  May  1, 1919. 


780       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION^ 

Mr.  Mortimer.  Xow,  regulation  by  the  Wisconsin  Commission  is 
presiunecl  to  embrace  the  theory  of  cost  of  service.  The  rates  of  fare 
ai*e  intended  to  produce  sufficient  revenues  which  will  provide  all 
current  ordinary  operating  ex^)enses,  taxes,  and  an  allowance  to 
insure  the  future  replacement  ot  physical  property  and  a  i*easonable 
return,  and  in  our  railway  utility  the  commission  has  held  that  a 
7.5  per  cent  return  is  a  reasonable  return,  and  that  has  been  adjudi- 
cated by  the  supreme  court  of  the  State  as  fair  and  proper.  At 
no  time  during  the  last  two  years  have  we  earned  any  such  return. 
The  year  191G  was  our  best  year,  because  our  expenditures  for  main- 
tenance were  rather  low,  but  even  then  the  connnission  held  that,, 
during  1916,  after  making  adjustments  and  operating  expenses, 
charging  to  depreciation  reserve  the  things  that  this  commission 
thought  should  be  charged,  and  things  that  the  previous  commission 
thought  should  be  charged  to  operating  expenses,  they  found  that 
our  i-eturn  never  exceeded  7.G  per  cent. 

Now,  our  experience  with  the  investment  of  capital  in  a  railway 
business  is  such  that  I  would  feel  no  justification  in  recommending 
to  investoi*s  that  they  put  any  additional  monev  into  the  railway 
business  in  Wisconsin.  I  have  frequently  told  tlie  commission  that, 
and  it  is  pretty  well  undei-stood  that  some  important  change  has  to 
take  plac€.  The  railroad  commission  has  infonnation  at  all  times 
respecting  the  utility  capital,  provided  there  is  no  dispute  on  what 
the  valuation  is.  By  the  arrangement  for  the  filing  of  frequent 
reports,  it  is  also  in  a  position  to  watch  the  tendencies  in  operating 
expenses,  and  it  is  my  opinion  that  the  railix)ad  commission  should 
provide,  by  order,  for  a  scheme  of  automatic  i-egulation,  so  that  the 
net  operating  revenues  would  at  all  times  be  kept  in  approximate 
accordance  with  the  amount  determined  as  the  proper  annual  return 
by  the  commission.  There  may  be  some  technical  objection  from  the 
standpoint  of  law  that  the  commission  can  not  enter  such  an  order, 
but  having  been  apprised  of  the  facts  in  advance  of  the  ]^st  session' 
of  the  legislature,  it  was  the  duty  of  the  connnission  to  have  asked 
for  the  enactment  of  such  legislation  as  would  have  permitted  it  to 
have  entered  such  an  order. 

Xow,  that  brings  up  the  relation  of  cost  of  service  and  con- 
tractual relations  of  municipalities.  Commission  regulation,  as 
I  said  before,  contemplates  cost  of  service,  but  it  does  not  work  out 
that  way  in  practice,  because,  first,  of  the  shifting  bases  of  subsequent 
commissions,  and,  second,  because  of  the  long  period  of  time  required 
by  the  commission  to  act  upon  applications  of  utilities  for  adjust- 
ments in  rates.  There  may  even  be  a  valuation  required,  or  a 
revaluation,  or  accountants  may  have  to  have  an  examination. 
There  can  be  any  number  of  things  developed  as  reasons  for  delav 
if  the  commission  desires  to  cause  delay. 

Some  of  these  cost-of-service  francliises  are  defective  in  two  im- 
portant respects.  First,  there  is  no  guarantee  of  the  integrity  of  the 
capital.  The  franchises  on  their  faces  provide  for  a  diminishing 
capital  account.  In  other  words,  they  make  no  adequate  provision 
for  the  accumulation  of  reserves  against  the  future  replacements  of 
the  physical  property.  They  require  usually  the  creation  of  re- 
serves only  in  sufficient  amount  to  take  care  of  current  replace- 
ments, and  in  the  Cleveland  so-called  cost-of-service  franchise,  if  they 
encounter  an  extraordinary  replacement,  that  is  carried  as  a  sus- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       781 

pended  asset  and  written  off  over  some  agreed  period  of  time.  In 
other  words,  there  has  been  a  number  of  years  in  which  the  Cleve- 
land Electric  Railway  was  financially  insolvent  and  an  examination 
of  the  balance  sheet  would  have  disclosed  that.  That  is  touched  on 
in  considerable  length  in  Doolittle's  book  on  a  study  of  the  Cleve- 
land problem. 

The  second  defect  in  these  cost-of-service  franchises  lies  in  the  fact 
that  the  cost  of  capital  is  continually  changing,  and  there  is  no  pro- 
vision made  for  the  determination  at  the  time  of  the  return  that  is 
to  be  allowed  upon  additions  to  capital  account. 

A  proper  State  utility  law  would  provide  something  to  this  ef- 
fect^: Ihat  all  utihtiesshall  be  valued,  and  the  utility  capital  shall 
be  determined  by  the  commission ;  that  before  there  are  any  capital 
expenditures  made,  the  utility  shall  apply  to  the  commission  for 
authorization  to  make  the  expenditures,  and  the  commission  shall,  at 
the  same  time,  fix  the  return  to  be  allowed  upon  the  capital  ex- 
penditure.  If  the  commission  fixes  too  low  a  return,  the  company 
can  ^y,  "  You  get  the  money,  Mr.  Commissioner."  If  the  commis- 
sion hxes  too  high  a  return,  that  fact  can  be  corrected  in  the  next  ap- 
plication of  the  utility.  Authorizations  of  capital  expenditures  shall 
be  cumulative.  Authorizations  of  annual  return  shall  likewise  be 
cumulative,  and  neither  shall  be  changed,  except,  in  the  first  case 
when  property  is  removed,  taken  out  of  service,  and  abandoned,  and 
then  It  shall  be  taken  out  of  capital  account,  and  the  amount  of 
annual  return  that  is  fixed  in  this  manner  shall  not  be  chano-ed  ex- 
cept  m  the  event  of  refinancing,  which  may  cause  some  subsequent 
change  in  the  cost  of  money. 

Some  such  arrangement  as  that  would  be  fair  to  both  parties. 
Ihere  is  only  one  defect  m  it  and  that  is  the  defect  of  all  cost-of- 
service  franchises,  and  that  is  you  may  not  be  able  to  collect  suffi- 
cient revenues  to  pay  tlie  annual  return.  Operating  expenses  are 
rising  so  rapidly,  the  demands  of  labor  in  all  lines  of  industry  are 
increasing  so  fast  that  the  electric-railway  business  is  fast  ^oin^ 
mto  the  position  of  the  British  coal  mines,  and  it  is  not  at  all  sure 
that  we  are  going  to  be  able  to  collect  sufficient  revenues  out  of  the 
railway  business  to  keep  it  going.  We  already  have  situations,  as  I 
will  instance,  where  I  am  unable  to  see,,  with  substantial  improve- 
ments  to  the  railway  system  and  the  addition  of  a  large  amount  of 
rollmg  stock  for  the  size  of  the  community,  that  we  could,  under 
any  system  of  fares  which  we  can  devise,  collect  sufficient  revenues 
to  pay  the  operating  expenses  and  pay  a  reasonable  return  upon  the 
utility  capital.  ^ 

That  situation  to  which  I  refer  is  in  the  city  of  Kenosha.  The  city 
of  Kenosha  has  had  a  remarkable  experience  with  its  railway  busi- 
ness. In  1914,  the  little  street  railway  down  there,  embracing  about 
a  miles  of  track,  had  very  severe  jitney  competition.  Distances 
were  very  short.  We  undertook  the  operation  of  one-man  cars 
-that  produced  a  very  unfavorable  public  reaction.  The  town  was 
not  well  situated  for  the  operation  of  one-man  cars,  because  there  are 
2o  railroad  crossings  in  our  7^  miles  of  track,  and  one  of  the  principal 
functions  of  the  conductor  is  to  flag  the  railroad  crossings.  At 
least,  that  was  the  principal  function  during  the  time  when  the  lit- 
neys  were  so  active.  ^ 


782       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION".        ]T 

The  employees,  in  Maj^,  1918,  operating  the  cars,  in  Kenosha  fol- 
lowing the  increased  wage  of  10  cents  an  hour  in  Milwaukee,  asked 
for  a  like  increase  in  wages.  Our  reply  to  them  was,  "  We  have  not 
the  heart  to  deny  it,  but  we  have  not  the  money  from  the  Kenosha 
Ivailway."  Then  they  said  they  would  strike,  and- we  told  them  tliat 
that  was  probably  the  best  thing  for  them  to  do  under  the  circum- 
stances and  that  there  were  lots  of  other  means  of  employment  in 
Kenosha  that  were  more  remunerative,  and  all  but  two  men  struck. 
Two  old  men  that  could  not  understand  what  that  meant.  And  it 
was  necessary  to  put  them  on  other  work,  trinmiing  lamps,  as  we  did 
not  want  two  cars  rimning  around  the  streets.  Street-railwa}'  serv- 
ice was  entirely  stopped  for  a  period  of  five  weeks. 

While  there  had  been  much  complaint  about  single-truck  cars  and 
the  fact  that  they  would  like  double-truck  cars  down  there,  opinion 
gradually  changed,  and  on  numerous  occasions  the  editorial  writers 
in  the  local  press  wished  the  company  would  take  a  car  out  of  the 
station  and  let  it  stand  down  in  Market  Square,  so  that  they  could  see 
what  a  street-car  looked  like. 

Things  developed  that  way  for  Rve  weeks,  until  the  railroad  com- 
mission ordered  the  jitneys  off  the  street,  and  ordered  the  comj^any 
to  resume  service.  We  resumed  service  at  a  5-cent  fare,  and  Avith 
largely  increased  revenues.  We  are  now  operating  that  short  sys- 
tem with  the  smallest  average-sized  cars  and  the  largest  earnings 
per  car-mile  that  we  have  in  the  State  of  Wisconsin. 

Kenosha  is  a  large  manufacturing  city 

Mr.  W^ARREN.  What  is  the  population? 

Mr.  Mortimer.  About  37,000. 

The  housing  problem  is  very  serious,  and  a  housing  corporation 
has  been  formed,  but  the  promoters  are  naturally  unwilling  to  go 
ahead  with  it  until  they  are  provided  with  additional  railway  facili- 
ties. 

The  Wisconsin  Gas  &  Electric  Co.  had  indicated  that  it  was  unable 
to  provide  any  additional  facilities  under  the  revenues  and  under  the 
type  of  regulation  which  it  had  been  experiencing. 

Local  discussion  arose  as  to  the  desirability  of  purchasing  the  elec- 
tric railway.  We  never  indicated  any  opposition  to  that,  because  we 
thought  that  would  be  a  very  good  disposition  of  it.  They  called  me 
to  Kenosha  to  give  them  a  price  on  it.  I  told  them,  in  substance, 
that  we  had  no  objection  to  their  buying  it  and  thouglit  it  would  be 
a  good  thing,  and  then  went  on  to  try  to  sell  it  to  them,  but  my  ef- 
forts at  salesmanship  were  very  poor,  because  the  more  I  talked  in 
favor  of  the  advantages  of  their  buying  it,  the  less  they  seemed  to 
want  it.  The  result  was  that  they  asked  if  there  Avas  not  any  kind  of 
a  proposition  that  we  could  make  that  would  pennit  us  to  provide 
additional  railway  facilities  in  Kenosha  by  the  investment  of  private 
capital. 

AVe  then  outlined  the  necessity  of  a  municipal  guaranty,  and  that 
led  to  the  enactment  in  the  closing  days  of  the  legislature  of  a  mu- 
nicipal guaranty  law,  whereby  municipalities  can  contract  with  utili- 
ties for  extensions,  for  the  loaning  of  municipal  capital  to  provide 
utility  corporations,  or  for  the  guaranty  of  return,  and  profit  shar- 
ing. 

T  had  indicated  that,  as  a  starter,  we  would  require  a  guaranty 
of  6  per  cent  annual  return  upon  the  then  investment  of  aj^proxi- 


PROCEEDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       783 

mately  $500,000,  plus  the  additional  investment  of  $500,000,  roughlv; 
that  any  i-eturns  earned  in  excess  of  6  per  cent  should  be  divided 
40  per  cent  to  the  municipality,  10  per  cent  to  the  employees,  and  50 
per  cent  to  the  company ;  that  all  restrictions  with  respect  to  the  rates 
of  fare  should  be  eliminated ;  that  the  property  should  be  operated 
to  produce  the  maximum  return  by  whatever  scheme  of  fares  was 
deemed  to  be  advisable,  and  that  the  company  should  have  the  rio-ht 
to  initiate  the  fares.  The  fundamental  ideas  were  accepted,  fhe 
original  bill  as  drafted  contemplated  that  this  law  should  be  ap- 
plicable to  all  the  cities  of  the  State,  which  would  have  included 
Milwaukee;  but  the  governor  limited  it  to  cities  of  the  third  class, 
which  included  Kenosha  and  one  other  of  our  municipalities,  Racine. 

Mr.  Warren.  What  is  the  division  point  of  population  between  a 
city  of  the  third  class  and  a  city  of  the  second  class? 

Mr.  Mortimer.  The  cities  of  the  third  class  embrace  a  population 
of  10,000  to  40,000,  by  the  last  preceding  Federal  census.  The  cities 
of  the  second  class  are  in  excess  of  that  amount  and  up  to -100,000. 
So  that  there  are  only  two  cities  in  the  State  that  are  not  in  the  third 
class — I  mean  larger  cities. 

Mr.  Warrex.  That  is  Milwaukee  and  what  other  city? 

Mr.  Mortimer.  The  city  of  Superior.  Racine  will  pass  out  of  that 
class  in  1920. 

The  1900  franchise,  under  which  the  Milwaukee  Railway  &  Light 
Co.  operated,  contained  a  provision  that  the  companv  should  extend 
its  tracks  over  any  street  that  mi^ht  be  designated  by  resolution  of 
the  common  council  whenever  public  necessity  and  convenience  re- 
quired the  same.  That  resulted  in  the  ordering  of  track  extensions 
over  a  substantial  number  of  streets  whenever  they  wanted  to  pave 
the  balance  of  the  street,  because  the  costs  of  the  permanent  paving 
m  the  track  zone  are  imposed  by  ordinance  upon  the  street-railway 
utility.  It  became  necessary  to  correct  that.  There  may  have  been 
other  franchises  in  other  municipalities  of  the  State  that  contained 
a  similar  provision.  So,  in  one  of  the  sessions  of  the  legislature 
somebody  got  a  law  on  the  books  that  provided  that  the  railroad  com- 
mission should  order  extensions  whenever  public  necessity  and  con- 
venience required  the  same,  provided  that  the  cost  of  operating  such 
extensions  should  not  prevent  the  utility  from  earning  a  reasonable 
return  upon  the  utility  capital ;  and  since  that  law  went  on  the  books 
there  have  not  been  any  street-railway  extensions. 

In  connection  with  the  labor  problem  there  was  introduced  into 
the  legislature  a  bill  making  the  railroad  commissioner  arbiter  of 
wage  disputes  between  the  public-utility  employees  and  the  em- 
ployer. Comparatively  little  progress  was  made  with  the  bill  be- 
cause there  was  another  measure  advocated  by  tlie  administration 
known  as  the  conciliation  bill.  The  conciliation  bill  provides  that 
in  the  event  of  dispute  between  employer  and  emplovee  on  a  matter 
of  wages,  hours,  or  working  conditions,  the  matter  shall  be  referred 
to  the  board  of  conciliation  appointed  by  the  governor,  which  shall 
mediate  and  make  recommendations. 

Mr.  Warrex.  Is  that  confined  to  the  utilities,  or  to  all  industry? 

Mr.  Mortimer.  The  board  of  conciliation  measure,  up  to  the  ex- 
tent that  I  have  described  it,  applies  to  all  industries.  It  has  no 
mandatory  powers  and  relies  upon  public  opinion  to  enforce  iU 
recommendations. 


784       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

In  addition,  the  bill  contains  provisions  which,  in  the  event  of 
disputes  between  a  public  utility  and  the  employees,  the  matter 
shall  be  referred  for  determination  of  the  facts  to  the  railroad  com- 
mission, should  the  employer  set  up  the  defense  that  it  has  in- 
sufficient revenues  with  which  to  pay  the  increased  wages  demanded, 
and  that  the  determination  shall  be  made  promptly  by  the  railroad 
commission,  it  thus  being  the  outgrowth  of  the  recommendations  of 
the  special  legislative  investigating  committee. 

Xow,  as  I  have  watched  the  operation  of  our  railway  system  in 
Wisconsin,  there  have  been  two  very  notable  influences  that  have 
caused  the  increase  in  cost  of  carrying  passengers.  One  of  these  has 
been  the  general  rise  in  wage  level  and  commodity  prices,  and  the 
other  has  been  of  an  entirely  different  character. 

Mr.  Warren.  Before  you  go  to  that,  have  you  described  all  of  the 
legislation  that  you  want  to  call  the  attention  of  the  commission  to  ? 

Mr.  Mortimer.  Yes ;  I  think  so.  I  think  that  is  all  that  is  impor- 
tant. 

A  part  of  this  additional  investment  of  $15,000,000  in  our  Wis- 
consin utilities  to  which  I  have  referred  has  been  caused  by  extend- 
ing our  railway  lines  into  unprofitable  territory,  having  expenses  in 
the  way  of  unremunerative  car  mileage,  car  hours,  track  mainte- 
nance, maintenance  of  equipment,  and,  in  part,  by  the  gradual  in- 
crease in  length  of  haul  over  which  passengers  ride. 

The  determination  was  made  of  the  average  length  of  haul  in 
1911,  in  the  city  of  Milwaukee,  and  it  approximated  2.6  miles. 
Subsequent  estimates  have  indicated  that  that  average  length  of  haul 
had  increased  in  about  five  years  an  additional  half  mile,  showing 
the  gradual  movement  of  population  outward. 

Mr.  Warren.  What  is  that  due  to?  Is  that  due  to  the  street  rail- 
ways in  any  way? 

Mr.  Mortimer.  I  ^'ould  not  say  that  the  street  railway  was  in  any 
way  responsible  for  it.  It  is  due  to  the  growth  of  the  residential 
and  manufacturing  territory  gradually  outward,  from  the  center  of 
the  city. 

Mr.  Warren.  Is  it  mostly  within  your  flat-fare  territory  ? 

Mr.  Mortimer.  Oh,  yes;  the  average  length  of  haul  lies  well  within 
the  flat-rate-of-fare  area,  the  single-fare  area.  In  other  words,  pas- 
sengers are  riding  further  and  further. 

Xow,  of  course,  its  fundamental  trouble  is  that  its  revenues  are  too 
low  and  its  operating  expenses  are  too  high,  but  the  fact  that  its 
revenues  are  too  low  may  be  due  to  either  one  or  two  causes — either 
that  the  fare  is  too  low,  or  we  are  hauling  them  too  far  for  the  fare 
we  are  collecting.  We  have  a  fair  demonstration  of  that  in  the  case 
of  the  Kenosha  situation.  The  Kenosha  railway  utility  is  showing 
a  larger  amount  available  for  depreciation  and  return  than  is  the 
Milwaukee  utility,  although  it  is  operating  with  smaller  cars  and 
has  a  higher  platform  wage  per  car-mile.  The  scheduled  speed  is 
lower.  That  is  due  to  the  fact  that  the  distance  passengers  are  hauled 
is  comparatively  small. 

There  has  been,  during  the  last  ten  years,  an  incessant  demand  for 
increased  frequency  of  service,  particularly  during  the  nonrush  hours. 
That  demand  has  been  insistent,  irrespective  of  the  nature  of  line  or 
territory  served,  and  there  have  been  commission  orders  that  have 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       785 

required  that  the  minimum  frequency  inside  given  areas  shall  be  not 
greater  than  ten  minutes.  That  has  added  to  the  cost  of  producing 
the  service,  but  it  is  probably  not  an  unmixed  evil,  because  the  added 
service  may,  m  a  number  of  cases,  have  paid  for  itself  through  in- 
creased travel.  Our  facts  respecting  that  are  comparatively  few, 
and  what  I  give  is  merely  an  expression  of  opinion. 

In  all  of  our  applications  to  the  Railroad  Commission  of  Wiscon- 
sin, which  we  believe  we  had  timed  so  that  if  properly  acted  on  they 
would  have  provided  us  with  the  necessary  increase  in  revenue  and 
would  have  kept  the  railroad  utility  wholly  solvent  and  produced  a 
reasonable  i-eturn,  we  have  never  asked  for  an  increase  in  fare  above 
5  cents. 

In  1914  we  limited  the  length  to  which  passengers  might  ride  for  a 
certain  fare  by  installing  the  small  increment  zone  svstem  outside 
the  single-fare  area.  That  in  itself  lay  somewhat  outside  the  city 
limits. 

We  have  been  desirous  of  retaining  as  much  of  the  short-haul  busi- 
ness as  IS  possible,  but  the  delay  in  commissions  in  acting  upon  our 
petitions  has  made  the  situation  more  urgent,  and  what  would  have 
been  adequate  relief  for  us  in  1916  and  1917  and  afterwards  would 
not  now  be  adequate  relief,  because  the  tendencies  of  increasing  costs 
are  on  an  increasing  rate  of  increase. 

We  have  not  found  that  the  increase  in  rates  into  suburban  terri- 
tory has  in  any  way  influenced  the  growth  of  the  communities.  We 
have  tried,  so  far  as  we  can,  to  make  the  outer  ends  of  the  lines  self- 
supporting.  That  has  been  absolutely  impossible,  and  I  do  not  be- 
lieve It  IS  possible  on  any  street  railway  at  the  present  time,  but  the 
central  area  wdll  have  to  make  some  substantial  contribution  to  the 
cost  of  carrying  service  in  outlying  territory. 

Mr.  Warren.  Before  you  go  to  that,  Mr.  Mortimer— You  spoke 
of  extensions  as  increasing  the  haul,  and  then  you  spoke  of  the  in- 
creased haul  which  is  independent  of  the  extensions,  but  which  is 
simply  the  tendency  of  the  population  to  live  further  out  beyond  the 
existing  lines,  as  both  contributing  to  a  higher  cost. 

Mr.  Mortimer.  Yes. 

Mr.  Warren.  Was  there  any  substantial  increase  of  line  going 
back  to  the  electrification  of  this  system,  in  mileage  ? 

Mr.  Mortimer.  No;  in  this  system  there  has  been  no  substantial 
increase  m  mileage  w^ithm  the  city  limits,  because  the  company  was 
built  up  of  seven  separate  systems,  many  of  which  closely  paralleled 
one  another,  and  in  a  process  of  gradual  rehabilitation,  the  lines  that 
have  been  too  close  together  have  been  removed ;  so  that  while,  say  at 
the  end  of  the  year  1910,  there  was  less  actual  track  mileage  in  the 
city  of  Milwaukee  than  there  was  in  1896,  it  reached  farther  out  into 
the  residential  and  manufacturing  districts  and  w^as  much  better 
distributed  to  serve  the  population. 

Mr.  Warren.  So  that  there  were  extensions  ? 

Mr.  Mortimer.  Oh,  there  were  extensions. 

Mr.  Warren.  But  you  have  eliminated  some  unnecessary  mileage? 

Mr.  Mortimer.  Yes;  we  have  eliminated  some  unnecessary  miloa^^e. 

Mr.  Warren.  Were  those  different  lines  merged  into  one  company* 
or  were  they  all  in  one  company  before  that? 


786       PROCEEDIls-GS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MMISSI02T. 

Mr.  Mortimer.  The  IVIilwaukee  Electric  Railway  &  Light  Co.  is 
a  reorganization  of  the  Milwaukee  Street  Railway  Co.,  and  all  lines 
were  merged  in  the  Milwaukee  Street  Railway  Co. 

Mr.  Warren.  After  or  before  electrification? 

Mr.  Mortimer.  The  process  extended  over  a  period  of  about 
three  yeai-s,  electrification  and  merger  simultaneously. 

Mr.  Warrex.  Prior  to  merger,  were  those  companies  entirely 
separate,  so  far  as  fares  were  concerned? 

Mr.  Mortimer.  Yes.  There  were  no  free  ti-ansfers  between  the 
difterent  lines;  so  many  lines  serving  the  south  side  of  the  town, 
running  over  to  the  river;  other  lines  serving  the  north  side;  and 
still  other  lines  serving  the  west  side,  and  possibly  one  or  two  of 
the  seven  lines  serving  two  sides,  the  north  and  the  west  sides. 

Mr.  Warren.  So  that  in  connection  with  the  electrification  the 
lines  were  merged,  and  in  connection  with  the  merger  the  double 
fares  were  eliminated? 

Mr.  Mortimer.  The  double  fares  were  eliminated  and  the  transfer 
system  instituted. 

Mr.  Warren.  For  the  benefit  of  all  lines? 
Mr.  MoRTi3iER.  Yes. 

Mr.  Warren.  That  amounted  to  a  very  large  extension  of  the 
nding  privilege  in  connection  with  electrification;  did  it  not? 

Mr.  Mortimer.  Oh,  without  a  doubt,  it  was  a  very  substantial 
improvement  in  facilities. 

Mr.  Warren.  And  from  your  laiowledge  of  street  railways  gen- 
erally over  the  country,  would  you  say  that  was  a  general  practice? 
l)o  you  happen  to  know,  in  Boston,  for  instance,  whether  that  was 
done  or  not  ? 

Mr.  MoRTniER.  Xo;  I  am  not  familiar  with  the  Boston  situation. 
I  know  about  it  in  St.  Louis.    I  know  that  it  was  a  fact  in  St.  Louis. 

The  CiiAiR^iAN.  You  may  pmcced,  Mr.  IVIortimer. 

Mr.   Mortimer.  Aside   from  the  problem  of  increased   revenues, 
one  of  the  most  pressing  problems  confronting  the  railway  is  that 
of  labor.    It  has  been  the  experience  in  the  last  few  years  tliat  the 
strikes  on  electric  railways  have  been  frequent  and  of  varying  dura- 
tion.    Their  causes  have  been  numerous.     During  the  laS    four 
or   five    months   it   has  been    increasinglv    difTuult    for   the    inter- 
national officers  of  the  unions  to  control  the  local  unions,  and  tht're 
have  been  a  number  of  street  railwavs  that  have  had  sporadic  strikes 
and  outbreaks  and   threats  from  the  national  officers  to  rule  the 
locals  out  of  the  national   unions  because  of  failure  to  adhere  to 
their  labor  contracts.    That  spirit  or  feeling  is  fairly  general  throuoh- 
out  labor,  j^rompted  partly  by  the  increase  in  the  cost  of  livfinr 
and  partly  by  some  of  the  spirit  of  unrest  that  has  api)arently  been 
wafted  across  the  ocean.     The  rises  in  hourly  rates  for  the  same 
number  of  hours  per  day  worked,  resulting  from  some  of  these 
rerent  wage  awards,  have  been  larger  than  the  cost  of  living  ex- 
perienced since  the  award  of  the  National  War  Labor  Board.    Some 
of  these  hourly  increased  rates  of  wages  may  be  justified  on  the 
shorter  number  of  hours  worked  a  day  and  the   fewer  days  per 
month,  but  as  a  general  proposition  I  think  most  students  of  the 
labor  problem  will  indicate  that  something  difi'erent  from  the  present 
day  schenie  of  arbitration  will  have  to  be  developed.    And  I  know 
m  the  electric-railway   business  that  we  need  a  much  keener  re- 


proceedings  of  federal  electric  railways  COMMISSION.       787 

sponsibility  on  the  part  of  the  workmen  in  their  duties  to  the  em- 
ployer and  in  their  duties  to  the  public,  to  the  end  that  service  may  be 
maintained  at  a  minimum  cost  and  that  it  may  be  operated  with 
minimum  interruptions,  that  the  convenience  of  the  public  may  not 
be  disturbed. 

It  is  also  desirable  as  far  as  possible  to  incorporate  the  element  of 
productivity  as  a  basis  of  wages.    That  looks  as  though  it  might  be 
difficult  in  the  railway  business,  but  it  is  not  as  difficult  as  it  might 
appear  at  first  glance.     The  trainmen  forming  a  part  of  the  em- 
ployees making  up  the  principal  group  have  primary  control  over 
the  regularity  of  speed  and  the  ability  to  maintain  fast  schedules 
and  thus  influence  the  cost  of  platform  labor  per  car-mile.    Usually 
they  are  paid  on  the  basis  of  hours— that  is,  a  rate  per  hour— and 
the  faster  the  cars  are  operated  the  less  wdll  be  the  expense  of  pro- 
ducing the  service.     They  also  have  control  over  the  power  con- 
duction through  care  in  operating  the  car,  care  in  braking,  care  in 
Starting,  and  care  in  shutting  off  power  when  the  same  'is  not  re- 
quired in  oi-der  to  make  its  schedule.     It  is  conceivable  that  the 
schedule  makers  could  design  a  time  schedule  that  would  appre- 
ciably reduce  the  cost  of  platform  labor  per  car-mile  but  would 
require  the  cars  to  operate  so  fast  that  thev  would  not  have  time  to 
stop  for  passengers.     That  that  is  not  an  "^exaggeration  is  disclosed 
by  the^ experience  of  the  old  St.  Louis  Transit  Co.,  under  the  opera- 
tion of  the  late  Mr.  A.  B.  Du  Pont.    He  was  pressed  because  of  his 
increaise  m  operating  expenses  by  the  management,   and   he   con- 
cluded, of  course,  that  the  way  to  reduce  operating  expenses  for 
giving  the  same  car  mileage  was  to  run  the  cars  faster.     So  he  ran 
the  cai-s  so  fast  that  they  did  not  have  time  to  pick  up  any  pas- 
sengers, and  the  result  was  that  the  passengers  usuallv  went  *to  the 
street  intersection  w^ith  a  brick  in  their  hand,  and  if  the  car  did  not 
st«p  for  them  they  threw  the  brick  at  the  car.     The  damac^e  to 
equipment  was  considerable,  and  it  finallv  resulted  in  the  iinposi- 
tion  of  a  license  tax  on  the  system,  a  gross- receipts  tax  of  2  per  cent 
It  was  thought  that  by  imposing  that  tax  it  would  require  the  cars 
to  stop  and  it  also  would  placate  somewhat  public  opinion  at  the 
outrages  that  had  been  coumiittcd  on  them. 

Another  element  in  which  the  trainmen  are  primarily  interested 
IS  the  revenues  per  car-mile.  So  a  productivity  system  of  wao-es 
can  be  arranged  whereby  an  agreed  hourlv  rate,  graduated,  if  aw 
please,  can  be  provided  as  a  minimum,  and  in  addition  thereto  a 
system  of  participation  in  the  savings  which  the  employee  may  ef- 
lect,  first  by  reason  of  decrease  in  injuries  and  damages;  second, 
•1  J  1  ^^^^"^  ^"  power  consumption;  third,  by  increasing  the 
schedule  speed ;  fourth,  by  the  maintenance  of  equipment  over  which 
the  trainmen  have  control ;  and  fifth,  through  increased  revenues  ])er 
car-mile.  Such  a  system  when  extended  can  be  made  to  develop  one 
lor  the  administration  of  discipline.  An  employee  may  start  out 
at  the  beginning  of  the  month  with  1,000  points' to  his  credit  and 
for  each  infraction  of  rules  or  justified  complaints  on  the  part  of 
the  public  deductions  can  be  arranged  so  that  his  participation  in 
the  aggregate  profits  for  the  month,  profits  resulting  from  the  «av. 
ings  under  these  standards,  will  be  reduced,  but  his  saving— that  is 
the  money  that  is  taken  from  him— should  go  to  the  other  employeej^ 


788       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

of  the  group,  SO  that  it  can  not  be  said  that  the  employer  is  disciplin- 
ing the  men  for  the  purpose  of  increasing  his  net  earnings. 

It  IS  a  so  possible  to  put  all  accounting  work  on  a  productivity 
t.?ri v'.r7  •  r '■- ,'"'*,r™''  psychological  aspects  to  that.  Fundamen- 
of  hein.  n?«."'i  """^  workmen  be  they  male  or  female,  are  desirous 
of  being  placed  on  an  individual  basis  of  compensation.  Now,  that 
s  strongly  urged  against  by  certain  classes  of  organized  labor.  But 
It  has  been  our  experience  that  where  there  has  been  this  gain-sharin<r 
plan  m  certain  departments  that  we  have  had  demands  from  othe? 
department^fi-om  the  employees  of  those  department^that  they 
be  installed  In  other  words,  my  actual  e.xperience  with  operationi 
of  that  kind  IS  different  from  the  general  published  results 

1  am  not  suggesting  that  this  will  fundamentally  take  care  of  in- 
creases in  wages,  because  there  are  no  economies  which  employees 
the"i™'J  l«^a«t>«}.  sufficient  magnitude,  to  compensate  tZKr 
the  ncreased  cost  of  living,  either  actual  or  imagined.  But  thev  are 
small  elements  which  tend  to  develop  care  on  the  part  of  worsen 
and  which  m  turn  have  their  influence  in  adding  to  the  life  of  the 
physical  property  imder  their  jurisdiction  and  tend  to  develop  a  cer! 
tarn  amount  of  individual  pride  and  individuality.  ^ 

Commisioner  Sweet.  That  would  stabilize  the  labor  market  to  a 
certain  extent,  or  have  a  tendency  in  that  direction  i 

Mr.  Mortimer.  Yes ;  it  docs  tend  to  stabilize  the  market  It  hoId«! 
out  to  employees  first  a  certain  return  for  the  month  in  he  way  of 
« age  compensation  and  in  addition  it  offers  to  them  a  soeculatW 
and  desire  to  speculate  is  inherent speculation, 

Commissioner  Sweet,  A  reward  for  extra  good  conduct? 

Mr  Mortimer.  Well,  it  is  a  reward  for  extra  good  conduct  but 
It  IS  that  sanie-it  originates  from  that  same  brafn  cell  tha  causes 
men  to  go  into  the  desert  for  the  discovery  of  gold  mines     There  i= 

o^rlilnirf Z";f  ^  '"•"'^t'^'-y  "^''^^''y'"^  »'  '"  -l^"*  th'i^esuUs  of  the 
cainings  from  the  gain-sharing  plans  are  going  to  be  for  that  nar 

ticular  month;  and  it  has  the  further  advanta'ge  that  through  the 

operation  of  the  plan  you  can  disclose  some  of  tKe  most  n  fmfte  de 

tails  of  operation  to  the  employees  and  show  to  them  the  influence  of 

tieZlth.  '""'^'"""'  ""*^  °*  '^'''  ''^'"  '=''"'^"'=*  "P°"  the  resX  for 

«l,£°"'"lf '''"^'"  ^E^K"-"-  Would  you  extend  the  sharing  plan  to  a 
share  m  the  management  of  the  industry  ? 

xMr.  MoRTiMFJi.  Yes.    We  have  done  that  in  most  of  our  companies 
td^ol  Tr'^i'VtS:^''  °'  ^  representative  of  laboTtoTe 

Mr  MoRTTMER^YJ,*''w''rr*''"^5  T-  ^^^  •''^''^'-'l  °f  directors.. 

t\^^i     <^?     #    •,  ■^^^•,  )Ye  tirst  provided  in  our  group  for  the  elec- 

lon  by  the  Employees'  Mutual  Benefit  Association  of  a  representa 

'r   h/^f  'i°-''^  of  directors  of  the  Union  Electric  LightTpowe; 

dii^ctoL     One  of    h^r/ *•  ^"''•-    '^^'  ^^■}^^'  P^^^^^e  ft  seven 
oiieccoi-s.     une  of  those  directors  is  now  a  direct  reDrespntoHTro  ..f 

the  Employees'  Mutual  Benefit  Association.    ThrE^S^^^ 
Benefit  Association  first  asked  for  representation  uponX  boa  ^^^^^^ 
directors  and  we  acceded  to  that  request.  ^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       789 

Commissioner  Meeker.  How  long  has  that  plan  been  in  operation? 
Mr.  Mortimer.  That  election  took  place,  I  think,  in  March  of  the 
current  calendar  year.  The  emyloyee  was  chosen  by  a  process  of 
primary  nominations  at  which  two  were  selected  to  run  for  the  elec- 
tion ;  and  then  an  election  was  had  to  eliminate  one  or  the  other,  and 
the  man  chosen  to  represent  the  Employees'  Mutual  Benefit  Associa- 
aTi^^  o.  ^^^^"^  ^^  directors  is  one  of  the  watch  engineers  in  the 
Ashley  htreet  power  station,  and  he  sits  in  at  each  of  the  monthly 
board  meetings  The  same  thing  is  now  in  process  of  working  out  in 
the  Wisconsin  Gas  &  Electric  Co. 

Commisioner  Meeker.  Does  this  employees'  representative  have 
tJie  same  power  as  other  directors  ? 

Mr.  Mortimer.  Absolutely.    He  has  absolutely  the  same  powers— 
the  right  of  vote  and  the  right  to  discuss  questions  of  all  kinds. 
Commissioner  Meeker.  Does  he   have   to   have   a   share   in   the 

capital  of  the  industry,  or 

Mr.  Mortimer.  Yes,  the  law  requires  that  the  directors  be  share- 
holders in  the  States  in  which  we  operate.  That  is  not  true  of  all 
htates.  And  in  this  case  he  was  qualified  by  the  company's  trans- 
ferring one  share  of  stock  to  his  name,  so  that  he  is  legally  entitled 
to  sit  as  a  member  of  the  board  of  directors.  It  is  all  being  worked 
""y^i"'  *¥r.?^^  "J^  the  Wisconsin  Gas  &  Electric  Co.,  and  in  the  case 
of  the  Milwaukee  Electric  Light  Co.  certain  changes  of  our 
articles  of  incorporation  will  have  to  be  made,  but  that  will  be  done 
I  hope.  ' 

Commissioner  Meeker.  This  employees'  representative  was  chosen 
by  the  Employees'  Mutual  Benefit  Association  ? 

Mr.  Mortimer.  Chosen  by  the  members  of  the  Employees'  Mutual 
iSeneht  Association,  which  embraces  all  of  the  emplovees  of  the 
company.  ^    '^ 

Commissioner  Meeker.  All  employees? 

Mr.  Mortimer.  All  employees. 

Commissioner  Meeker.  Is  that  an  organization  that  stands  on  its 
own  feet  or  is  it  subsidized  by  the  company? 

Mr.  Mortimer.  It  is  an  organization  that  has  two  principal  pur- 
poses m  life :  One  is  to  administer  sick  benefits  and  death  benefits, 
provide  medical  and  surgical  attendance  for  the  employees,  and  also 
to  provide  additional  insurance  of  both  life  and  sickness  and  acci- 
dents,  off-duty  types.  In  respect  to  certain  of  its  insurance  bene* 
nts  where  the  rate  is  flat  and  that  business  does  not  carry  itself,  the 
premiums  are  not  sufficiently  high,  it  is  necessary  for  the  company 
to  make  contributions.  Its  other  principal  function  is  that  of  col- 
lective bargaining,  and  in  that  respect  of  course  it  needs  no  contri- 
butions by  the  company. 

Commissioner  Meeker.  By  collective  bargaining,  you  mean  set- 
tling upon  the  wage  and  hours  ? 
Mr.  Mortimer.  And  conditions  of  labor,  3^es. 

Commissioner  Meeker.  And  conditions  of  labor  within  the  com- 
pany ? 

Mr.  Mortimer.    Yes;  within  the  company. 

Commissioner  Sweet.  Do  you  like  that  plan  of  representation  on 
the  part  of  employees  ?  x-  « 

Mr.  Mortimer.  On  the  board  of  directors? 


Do  you  think  you  have  statistical  deiiion- 


790       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Yes. 
.   Mr.  Mortimer.  Yes;  we  have  no  objection  to  it  at  all.    I  think  it 
IS  a  portectly  satisfactory  thing;  in  fact,  we  would  have  no  objection 
to  ^nvmg  tJiem  a  larger  representation. 

Commissioner  Meeker.  Did  the  plan  originate  with  the  men  ? 
Mr.  Mortimer.  Yes. 

Conmiissioner  Meeker.  And  you  acceded  to  it? 
Mr.  Mortimer.  Yes. 

Commissioner  Meeker.  It  was  not  your  proposal? 
Mr.  Mortimer.  No  ;  it  was  not  our  proposal. 

Commissioner  Meeker.  Before  you  leave  the  question  of  labor  re- 
lations, I  would  like  to  ask  a  little  bit  further  about  this  gain-shar- 
ing plan  that  you  have     Do  the  employees  actually  have  an  appreci- 
able control  over  accident  prevention  ? 
Mr.  Mortimer.  They  do. 
Commissioner  Meeker.  I 
stration  of  that? 
Mr.  Mortimer.  Yes;  we  tliink  we  have. 

Commissioner  Meeker.  Your  actual  rate  has  been  cut  down  since 
this  plan  was  put  into  operation  ? 

Mr.  Mortimer.  Our  actual  disbursements  for  injuries  and  dam- 
ages have  been  materially  less  since  this  plan  was  effected. 

Commissioner  Meeker.  How  long  has  this  plan  been  effective  ? 
Mr.  Mortimer.  This  plan  applicable  to  transportation  in  conjunc- 
tion with  our  employees. has  been  applicable  since  June,  1915— a 
period  of  four  years. 

Commissioner  Meeker.  Have  you  statistics  which  would  bear 
upon  this  subject/  Of  course,  other  causes  have  been  operating  to  • 
cut  down  the  accident  rates;  the  general  safety  movement  and  the 
workmen  s  compensation  movement,  and  other  movements.  Do  vou 
think  your  experience  is  better  than  the  experience  of  other  com- 
panics  in  a  similar  line  of  business? 

Mr.  Mortimer.  I  know  in  many  cases  the  electric  railways  have 
experienced  an  increase  in  tlie  cost  of  injury  and  damage  settlements. 

Commissioner  Meeker.  However,  that  verges  on  quite  another 
question,  the  competence  of  administration  of  compensation  laws 
and  increases  m  rates,  which  have  been  quite  general  in  all  the  com- 
pensation states,  and  various  other  matters. 

Mr.  Mortimer.  But,  Mr.  Commissioner,  the  injuries  and  damages 
to  which  I  refer  and  upon  which  these  calculations  are  based  relfite 
to  injuries  and  damages  to  the  public  and  have  no  relation  to  work- 
men s  industrial  injury  compensation. 

The  Chairman  Mr.  Mortimer,  yesterday  afternoon  the  commis- 
sion assigned  the  hour  of  12  o'clock  to  hear  Gov.  Foss 

Mr.  Mortimer.  Yes,  I  remember  that. 

Tlie  Chairman.  I  understand  that  he  is  here  now,  and  vou  may 
resuine  at  the  conclusion  of  his  testimony.  ^ 

(AVitness  excused.) 

The  Chairman.  Gov.  Foss,  we  are  ready  to  hear  from  you. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       791 

STATEMEin:  OF  ME.  EUGEUE  N.  FOSS. 

Mr.  Foss.  Gentlemen,  you  will  understand  that  I  am  here  in  a 
private  capacity.  I  do  not  represent  any  corporation.  But  I  have 
been  and  am  still  a  large  holder  of  street  railroads  and  quasi-public 
corporation  stock.  I  have  been  a  great  believer  in  quasi-public  cor- 
porations I  have  been  a  director  in  many  street-railroad  corpora- 
tions in  Massachusetts  and  also  in  New  York— in  the  two  leading 
systeins  of  New  York,  the  Brooklyn  Rapid  Transit  and  the  Manhat- 
tan i^levated ;  and  I  have  been  more  or  less  acquainted  with  this  class 
ot  investment  and  have  followed  it  for  a  good  many  years. 

I  have  come  to  the  conclusion,  somewhat  reluctantly  I  admit,  that 
public  ownership  is  the  only  true  solution  of  this  railroad  question, 
whether  it  be  the  railroads  or  the  electric  railwavs.  Of  course 
private  ownership  is  out  of  the  question.  Private  ownership  with 
public  regulation  has  fallen  down.  There  is  nothing  else  left,  in  my 
judgment,  except  public  ownership  and  operation  or  else  public 
ownership  with  private  operation.  Public  or  private  ownership  and 
public  regulation  is  wrong  in  principle.  You  never  can  make  it 
work  successfully.  The  man  who  owns  tliese  pro])erties  has  orot  to 
run  them.  *= 

Now  I  am  interested  in  this  proposition  primarilv  because  it 
means  a  better  deniocracy,  and  we  have  got  to  democratize  our  trans- 
portation system  in  this  country.  That  is  the  first  thing  we  have 
got  to  do.  And  then  we  have  got  to  democratize  our  industries  to  a 
greater  extent  than  they  have  been,  otherwise  we  are  going  to  be  in 
the  condition  that  they  are  abroad  in  some  places.  So  I  say,  pri- 
marily I  am  for  this  thing  because  it  means  a  better  democracy 

1  here  are  a  great  many  reasons.    Of  course,  it  has  been  stated— 
you  read  the  public  press  and  you  would  think  that  we  had  public 
ownership  m  this  country  of  the  railroads.     We  have  not  public 
ownership  in  this  country.    We  do  not  know  anvthing  about  public 
ownei-ship  in  this  country.     We  have  not  tried "^it.     What  we  have 
in  this  country  is  a  lease  by  the  Federal  Government  of  the  railroads 
of  the  country.     But  when  was  that  lease  made?     That  was  made 
under  the  stress  of  the  war,  when  the  railroads  fell  down  and  could 
not  function.     And  what  was  that  lease?     That  lease  was  forced 
upon  the  Government  at  a  rental  of  $9.30,000,000  a  year,  which  is 
from  $130,000,000  to  $150,000,000  more  than  the  Governin'eiro^^^^^^^^^    - 
to  pay  as  a  fair  return.    The  Delaware,  Lackawanna  &  Western  ffet 
under  this  thing  something  like  32  per  cent  on  their  stock,  I  think- 
the  1  ennsylvania  Railroad  gets  about  12  per  cent.     Some  of  the 
weaker  roads  do  not  get  as  much.    Now  this  deficit  of  $200,000  000 
ill  1918  was  not  properly  chargeable  to  inefficiency  on  the  part  of 'the 
ijovemment.    Practically  the  same  people  are  operating  these  rail- 
roads under  the  Government  that  there  were  prior  to  the  Govern- 
ment taking  hold  of  this  question.    It  was  chargeable  directly  to  the 
wai^  just  as  much  as  the  billion  dollai-s  we  lost  in  making  aeroplanes 
IS  chargeable  directly  to  the  war.  ^  cit^iupianes 

N-ow  a  proposition  as  large  as  this,  as  Director  General  McAdoo 
says  takes  five  years  to  work  it  out  and  effect  the  economies  that 
could  be  effected  under  Government  ownership ;  no  question  about  it. 
It  ta  es  time.  Director  General  Hines  says  give  lis  time  and  we 
can  show  you  wonderful  economy.    Talk  about  efficiency.    You  can 


792       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

get  just  as  good  efficiency— I  will  not  concede  for  a  single  moment 
that  you  can  not  get  just  as  good  efficiency  under  Government  owner- 
ship as  you  can  under  private  ownership — just  exactly  as  good. 

We  have  had  cases  in  Massachusetts— for  instance,  our  metropoli- 
tan water  system  if  you  please,  created  25  jears  ago,  in  which  a  com- 
mission, a  nonpartisan  commission,  appointed  by  the  governor  has 
spent  $40,000,000  on  a  water  system  for  Boston,  one  of  the  best  in 
the  country.  It  gives  us  the  cheapest  water.  That  commission  paid 
off  $20,000,000  indebtedness  to-day,  and  w^e  will  have  it  all  paid  off, 
and  there  has  not  been  a  word  of  scandal  about  the  management,  no 
graft  or  anything  of  that  sort.  I  had  no  trouble  when  I  was  governor 
of  Massachusetts  for  three  terms  to  find  the  best  patriotic  men  in 
the  State  to  take  these  Government  positions.  It  fell  to  my  lot 
to  rebuild  the  court  of  Massachusetts,  both  branches,  and  I  did  not 
have  any  trouble  about  getting  the  best  men  in  the  State  at  the  very 
moderate  salaries  paid  by  the  State  of  Massachusetts  to  its  judiciary: 
no  trouble  about  it  at  all. 

It  is  a  reflection  upon  our  intelligence  and  upon  our  business 
capacity.  I  am  not  willing  to  admit  that  the  Post  Office  is  not  well 
handled,  economically  and  efficiently  handled.  I  know  you  can  put 
a  package  in  the  mail  in  Boston  and  get  it  here  to  Washington 
quicker  than  you  can  by  express.  I  am  not  going  to  stand  for  that 
sort  of  thing.  We  can  do  just  as  efficient  work  under  Government 
ownership  as  we  can  any  other  way ;  no  doubt  about  it  at  all. 

And  there  is  the  question,  gentlemen,  of  the  capital.     How  are 
we  going  to  get  capital  for  this  purpose,  for  these  railroads?     You 
can  not  turn  them  back ;  it  is  utterly  impossible.    If  you  gentlemen 
will  read  the  indictment  of  the  Interstate  Commerce  Commission  of 
the  New  Haven  Railroad  and  Mr.  Mellen,  I  do  not  believe  there  is 
a  man  m  this  room  who  ever  read  it  who  can  stand  up  and  say  he  is 
m  favor  of  turning  these  railroads  back  to  the  crowd  that  wrecked 
them.    We  never  will  do  it  in  the  world.    In  the  first  place  they  can 
not  take  them  back,  and  they  ought  not  to  take  them  back.    Banker 
management  has  got  to  cease  from  all  of  these  railroads  and  public- 
service  corporations.    It  is  a  failure.    Wliy?     Because  the  tempta- 
tion to  wreck  these  roads  and  reorganize  them  is  too  great.    They  do 
It  every  10  years  or  thereabouts;  that  is  what  happens.     Do  these 
railroad  presidents  and  these  railroad  managers,  who  own  very  little 
of  the  stock  of  the  companies  you  will  find — do  they  ever  consult 
their  directors  or  stockholders  in  reference  to  any  measure «     No- 
they  go  right  down  to  Wall  Street  and  talk  with  the  banker  who  is 
running  the  proposition.    That  is  the  man  who  appointed  them— the 
banker,  not  the  directors.    Mr.  Mellen  did  not  use  to  know  his  di- 
rectors when  he  met  them  on  the  street;  he  never  knew  them.    Some 
of  the  directors  have  told  me  that  they  did  not  speak  to  him.    Where 
did  he  go?    He  went  down  to  Morgan's  office.    When  Mr.  Morgan 
said  that  so  and  so  was  all  right,  he  went  right  ahead.    That  is  what 
happened.    They  have  got  to  take  their  hands  off.    The  country  is 
going  to  demand  it  and  say  we  are  going  to  democratize  these  things. 
Labor  and  these  other  forces  are  going  to  have  more  to  say. 

Again,  we  tried  in  Massachusetts  everything.  We  were  the  first 
State  in  the  Union  to  have  a  public-service  commission,  or  a  rail- 
road commission— right  there  in  Massachusetts.  And  our  railroad 
stocks,  you  know,  for  years  have  been  sold  there  by  the  companies 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       793 

at  a  price  fixed  by  the  railroad  commission,  and  our  investors  have 
bought  those  securities.    Widows  and  orphans  and  trustees  have  put 
their  money  in  these  railroad  securities  and  quasi-public  corpora- 
tion securities  in  Massachusetts,  because  they  thought  they  were  the 
next  thing  to  Government  bonds,  because  they  considered  that  noth- 
ing cou  d  happen  to  them,  since  the  State  fixed  the  price  at  which 
the  stock  should  be  put  out  and  also  fixed  the  tariffs  on  the  railroads. 
But  we  saw  ISew  York,  New  Haven  &  Hartford  stock  go  from  250 
to  2o,  while  the  commission  could  say  the  New  Haven  stock  should 
not  be  put  out  at  less  than  $200  a  share,  which  it  was  worth,  and 
Boston  H^levated,  selling  at  155,  some  of  it— and  really  $135  to-dav 
represents  every  dollar  put  in  the  property— still  this  stock  sold 
down  to  27  or  28     Thousands  of  people  were  ruined.     I  know  of 
women  m.  Massachusetts  who  are  working  to-day  who  had  a  small 
competence  put  away  in  these  stocks  which  has  all  been  wiped  out. 
JNow  this  thing  has  got  to  stop.    The  State  is  morally  responsible 
for  that  condition  to-day  and  ought  to  be  responsible  in  equity,  and 
the  people  are  going  to  see  to  it  that  they  are.    These  quasi-public 
corporation  stocks  have  got  to  cease   being  speculative  footballs. 
Ihat  IS  my  judgment  about  it.. 

1    ^'^^  T^Jru  ^"^st^on  ?f  ^abor:  It  is  a  very  big  question,  as  we  all 

1  ^^T;  1^^^^  "^^^  ^^**^®  ^^  ^^*^^  ^^^^  t^^^  Government  ?  Who  can 
handle  this  labor  proposition  in  an  equitable,  fair,  and  just  way  to 
all  concerned  more  than  the  Government  ?  We  have  got  to  appeal 
to  the  Government.  Did  not  the  railroads  come  to  the  Government 
and  appeal  to  the  President  to  settle  the  railroad  strike  prior  to 
the  war  i  It  is  the  same  thing ;  they  can  not  do  it  otherwise.  Labor 
IS  going  to  make  these  demands,  and  whether  they  be  just  or  whether 
they  be  unjust,  let  the  Government  settle  it.  It  is  a  Government 
proposition.    Let  them  settle  it. 

Now  I  say  we  tried  almost  everything  in  Massachusetts.     We  have 
a  scheme  there  on  the  street-railroad  question  and  the  whole  State 
It  stirred  up  about  it,  of  a  service-at-cost  plan.    It  was  created  a 
year  ago,  in  1918,  by  an  act  of  the  legislature,  by  which  the  governor 
appointed  five  trustees  to  run  the  Boston  Elevated  Railroad,  which 
IS  the  entire  street-railway  system,  both  the  surface,  subway,  and 
elevated  lines,  of  the  whole  city  of  Boston  and  its  suburbs.    Thev 
have  been  running  the  roads,  they  have  advanced  the  fares  steadily 
until  they  are  now  10  cents.    They  were  put  at  the  10-cent  rate  about 
a  week  ago  or  thereabouts.    A  strike  by  the  employees  immediately 
toilowed  which  has  been  adjusted  after  the  railroad  was  closed  up 
tor  four  days  and  the  public  suffered  a  great  inconvenience.    But 
what  has  been  the  result  ?     The  result  has  been  this— that  25  per 
^nt  less  people  patronized  the  railroad  because  the  fare  was  10  cents 
Now  that  railroad  is  not  serving  the  people  as  it  ought  to,  if  25  per 
cent  of  them  can  not  ride  on  account  of  the  price.    The  revenue  has 
fallen  off  about  $4,000  a  day.    That  act  is  abortive;  it  is  a  make- 
shift; It  is  doomed  to  failure.     It  is  neither  satisfying  the  ridino- 
public  nor  will  it  result  in  increased  revenue.  '^ 

I  want  to  ask  you  this  question:  Everybody  is  taxed  to  make  this 
street  out  here  safe  for  the  automobile.  The  Supreme  Court  said 
that  a  railroad  is  a  part  of  the  highway.  Why  should  not  every- 
body be  taxed  to  make  the  people's  automobile,  the  electric  car,  safe? 
Answer  that  question  for  me,  if  you  can.  If  that  is  socialism,  then  I 
160643°— 20 51 


784       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

am  a  socialist.    That  is  what  we  have  got  to  come  to  in  this  country, 
and  it  is  right  that  we  should  come  to  it,  too. 

The  street  railroad  is  a  necessity,  it  is  a  part  of  our  social  and 
industrial  life.  Now  I  am  the  head  of  a  manufacturing  establish- 
ment eujploying  2,000  operatives  in  the  suburbs  of  Boston.  It  is 
not  possible  for  those  operatives  all  to  live  within  walking  distance 
of  that  plant,  neither  is  it  possible  for  their  children  to  be  within 
walking  distance  of  those  schools  that  they  must  attend.  We  have 
got  to  have  that  means  of  conveyance  and  we  have  to  make  that 
means  of  conveyance  as  cheap  and  reasonable  as  possible,  I  say,  in 
the  interest  of  a  better  democracy. 

We  usetl  to  have  post  road«  in  this  country.     W^e  used  to  have 
toll  bridges.    They  have  all  been  wiped  out.    Now  that  thing  is  all 
covered  by  general  taxation,  and  we  have  got  to  cover  a  great  deal 
of  the  operation  and  the  construction,  if  you  please,  of  these  street 
railroads  by  taxation — no  doubt  about  it  m  my  judgment;  you  can 
not  get  around  it.     These  street  railroads  in  Massachusetts  have 
alandonod,  within  the  last  few  years,  miles  of  those  tracks  in  the 
suburbs.    T^eople  have  built  houses  alon^  these  tracks  supj^osing  that 
these  traclv's  were  laid  there  under  the  direction    'id  approval  of  the 
public-service  commission  as  a  public  necessity.     Are  these  people 
now  to  be  cut  off  from  all  forms  of  transportation?     Is  the  State 
liable?     I  say  they  are;  they  ought  to  be  liable.     That  construction 
ought  never  to  have  been  permitted  if  it  is  not  going  to  be  maintained. 
Now,  we  are  going  to  have  a  campaign  in  Massachusetts  this  fall 
and  determine  some  of  tliese  que,stions.    It  is  right  on  now,  in  fact  it 
has  reached  such  a  crisis  that  the  governor  of  the  State  sent  a  special 
message  to  the  legislature  yesterday  in  which  he  asked  to  be  per- 
mitted to  appoint  a  commission  of  seven  to  make  an  investigation 
of  the  street-railroad  question,  and  have  a  special  session  of  the  legis- 
lature from  the  15th  of  November  to  consider  the  question  and  that 
question  alone.    W^e  are  going  to  do  something  there  in  Massachu- 
setts, and  I  predict  that  we  are  going  to  come  to  government  owner- 
diip  as  the  only  thing.     I  know  that  I  could  work  out  a  plan,  and  I 
could  find  a  body  of  men  in  Massachusetts  or  any  other  State  in  the 
Union  honest  and  patriotic  enough  to  conduct  these  street  railroads 
just  as  honestly  and  just  as  fairly  and  just  as  economically  for  the 
State  as  they  could  for  the  Standard  Oil  Co.  or  any  other  organiza- 
tion there  is  in  the  country.     There  is  no  reason  why  our  young 
men  and  boys  should  not  work  for  the  State  and  Government  just  as 
efficiently  and  just  as  honestly  as  they  would  for  any  other  corpora- 
tion.   And  it  is  a  great  mistake  not  to  admit  it.    I  will  not  admit  for 
a  single  moment  but  what,  when  we  get  Government  ownership  in 
this  country — as  we  are  going  to  get,  in  my  judgment,  and  we  ought 
to  have  it,  as  applying  to  all  these  railroads — you  are  going  to  see 
marked  and  wonderful  economies  in  all  respects.    The  public  can  not 
get  a  square  deal  through  a  private  corporation,  even  if  it  is  pub- 
licly regulated.     It  can  not  do  it ;  it  is  utterly  impossible.     And  I  do 
not  see,  as  I  say,  any  other  solution. 

The  people  say,  "  Oh,  we  must  keep  these  railroads  out  of  politics." 
Good  heavens,  have  they  not  been  in  politics?  Are  they  not  in  poli- 
tics? Th^y  have  been  m  politics  for  50  years.  What  did  I  find  on 
Beacon  Hill  in  Boston  ?  I  found  out  that  the  greatest  lol)bv  of  the 
State  was  maintained  by  the  quasi-public  corporations.    The  king  of 


\ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOI^.       795 

the  lobby  who  was  employed  by  the  Boston  Elevated  Eailroad 
re  eivod  a  salary  of  $25,000  a  year.  One  corporation  paid  that 
amount  for  one  man,  and  he  had  a  train  of  followers.  And  it  is  the 
quasi-pubhc  corporations  who  have  done  more  than  any  other  force 
m  this  country  to  debauch  legislatures.  They  have  made  legislatures 
and  unmade  legislatiires  an?  unmade  men.  They  have  erf at^  tlie 
legislatures.  Now  what  we  have  to  do  is  to  take  these  street  railroad^ 
over  and  keep  them  out  of  politics.    That  is  what  we  have  to  do.    We 

Is  I  sf e  it  '''^^''  ^"^  ^^^^  ^^^"^  ''"^*    ^^'^^  '^  ^^^  proposition 

f;.l'^rl'V^^  very  glad  indeed,  Mr.  Chairman,  to  answer  anv  ques- 

best  w^Ty  I  can!  ''^""^  ^^""^  '""^^^^  ^  ^^^^^^  "^  ^^'^ 

qxIlllnT'"''^'''  ^'-  ^^''''''  ^^  ^^^"  ^^^'^  ^^  ^^  *^^  g^^'^r^oi^  <^ny 
Mr.  Warren.  I  do  not  think  I  do.    I  think  the  governor  has  de 

scribed  the.street  railway  situation  in  Massachusetts^aZ   riiht 
Commissioner    Sweet.  You    have   expressed   youi    opinion    very 

clearly  and  I  think  we  all  understand  what  your  view  is  on  this  s'lZ 

joct,  but  there  are  a  few  points  that  I  would  like  to  ask  son  e  qu^ 
ions  on  with  i-egard  to  government  ownership.     In  the  list  pi  act 

have  you  any  figures  or  data  or  statistics  upon  which  vou  base  you^ 

Xr/ou^hinkls^^^^^^^^  '--  ^-^  --  consciousifer  Js^^ 

as  on  boards  of  directors  and  as  owner  of  street-railroad  securities 
and  railroad  securities  generally  s«t-"ri«es 

m,blTntn?J?.?H  ^l"^"^-  ^?'?  y""  ^PPl-^  t^«  ^'in^^  reasoning  to  all 
public  Htihtiea  that  you  apply  to  street  railroads  ?  s       «  * 

JVlr.  h  OSS.  Yes,  I  would.  The  gas  companies,  electric  companies. 
1,  '  «"?P*"'es-water  companies  are  Tlmost'  wholly  ta^n  o^er 
pani'es.  "'    ''"'''  "*  **'''' ""'''  ''^  "^'^  ^^^  ^"^  electric-li^ii  ^Z 

Oommissioner  Sweet.  And  steam  railroads  ? 

Mr.  Foss.  And  steam  railroads— the  whole  bu^ness. 

Commissioner  Sweet   And  the  telegraph  and  telephone? 

Mr.  Foss.  Yes,  the  telegraph  and  telephone. 

th^rr^^TthJr^I]  ^  '"PPT*  y«"  ha^e  given  consideration  to 
Go^Sn^iemploT;''^  ""''"  '  tremendous  number  of  people  under 
Mr.  Foss.  Yes,  I  do. 

mi^l!I"r'^^'°'"'''  ^i^^7-  ^"*^  ^  presume  you  would  admit  that  that 

m  ^       ^T  'i'sadvantages  and  perhaps  some  advantages? 

i>ir.  ±1088.  1  do  not  see  any  menace  in  that  proposition  at  all      Yon 

ht'/^Tr^*^^  authorities  to-day;  I  can  not  tell  you  how  many  we 

hare,  but  t^iey  are  no  menace  as  I  see  it.    Some  of  tliem  are  RemibH! 

and'whaTnl     *""  ^"^°"''*^'  -">«  P-hibitionists,  s^mrsSS 

tl,5'^"""'^^'°r''  ^^"'^-  '^^  J-ostmasters  are  almost  invariably  of 
Ir      ®  P^""^  ^^  *'^®  appointing  power.  »'i»uiy  oi 

Mr.  Foss.  Yes,  of  course.     Our  civil  service  is  very  PToiierlv  t-x. 

tending  its  duties  and  service  and  I  think  will  do  mZH  out 


796       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Government  gets  better  and   stronger,  as  we  get   to  be   a   better 
democracy.    As  I  say,  I  am  talking  about  a  better  democracy. 

Commissioner  Sweet.  You  think  a  properly  enforced  civil-service 
system  would  obviate  the  objections  which  might  be  raised? 

Mr.  Foss.  Entirely.  When  the  changes  of  administration  come  we 
are  not  going  to  change  the  managers  of  any  of  these  railroads;  no 
president,  no  general  manager,  no  engineer  is  going  to  change  his 
position  at  all.    He  does  not  change  with  the  administration. 

Commissioner  Sweet.  Has  it  not  been  your  experience.  Governor, 
in  public  life,  that  governmental  officials  are  usually  very  poorly 
paid  ? 

Mr.  Foss.  Yes,  that  is  true,  they  are  poorly  paid. 

Commissioner  Sweet.  Don't  you  think  the  public  will  require  con- 
siderable education  before  it  will  consent  to  pay  for  the  kind  of  serv- 
ice which  it  ought  to  have  to  run  these  utilities  ? 

Mr.  Foss.  No,  sir;  I  do  not.  I  will  tell  j^ou,  I  have  dealt  with  the 
public  a  good  deal  all  my  life.  I  have  been  close  to  the  public.  I 
have  been  a  large  employer  of  labor  all  my  life.  I  have  been  close 
to  that  labor.  I  have  not  had  labor  troubles.  And  I  think  I  know 
something  about  the  public.  My  theory  is  this,  that  when  you  tell 
the  public  the  whole  truth  you  never  have  any  trouble.  They  are  the 
most  reasonable  thing  to  deal  with  that  there  is  on  earth,  the  great 
public,  when  you  just  tell  them  all  the  truth.  But  when  you  tell  them 
onlv  half  of  it  or  a  part  of  it  or  cover  something  up,  then  the 
devil  is  to  pay,  and  properly  so,  too.  But  when  you  tell  them  all  the 
truth  they  do  not  object  to  a  large  salary.  Let  them  understand  they 
can  come  right  up  from  the  ranks  the  same  as  they  can  in  our  Gov- 
ernment, and  if  they  have  the  qualities  to  become  general  managers 
and  presidents  of  these  railroad  corporations  that  j)osition  shall  be- 
long to  them  and  to  nobody  else.  How  are  these  presidents  created 
to-day  ?  How  are  these  general  managers  created  to-day  ?  They  are 
created  by  the  bankers  that  control  these  roads.  A  great  many  of 
them  are  inefficient  and  have  been  for  years.  Perhaps  we  are  getting 
more  efficiency  to-day  than  we  have  got  before,  but  I  tell  you  you  will 
not  have  any  trouble  if  you  tell  the  public  the  whole  truth.  ^But  the 
trouble  is  we  lie  to  the  public  and  deceive  the  public  and  only  tell 
them  part  of  it ;  and  you  can  not  get  along  that  way. 

Commissioner  Sweet.  In  Massachusetts  while  you  were  governor, 
did  you  think  public  officers  were  properly  compensated  for  the  work 
they  did  and  the  brains  they  put  into  the  work  ? 

Mr.  Foss.  No. 

Commissioner  Sweet.  Why  did  you  not  explain  that  to  the  public 
and  get  the  change  made  ? 

Mr.  Foss.  I  did  so  far  as  I  could. 

Commissioner  Sweet.  But  you  could  not  do  it:  could  you? 

Mr.  Foss.  I  got  the  State  to  advance  the  salaries  of  all  the  judges. 
We  have  an  appointive  system  of  judges  in  Massachusetts,  and  I  got 
the  State  to  increase  their  salaries. 

Commissioner  Sweet.  Are  you  familiar  with  the  situation  in  the 
smaller  cities  of  the  country  with  regard  to  public  employees? 

Mr.  Foss.  I  think  I  am  to  some  extent,  but  I  am  particularly  in 
Massachusetts.    I  do  not  know  so  much  about  the  other  States. 

Conimissioner  Sweet.  Let  me  state  to  you  an  experience  which  I 
think  is  typical  of  a  great  many  of  our  cities  of  the  smaller  size.    I 


I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       797 

was  connected  with  the  city  government  of  a  city  of  a  little  over 
100,000  inhabitants.    We  employed  a  general  manager  of  our  board 
ot  public  works  and,  under  the  city  charter,  the  maximum  price  we 
could  pay  him  was  $4,000  a  year.     That  man  was  a  very  public-spir- 
ited  man  and  a  very  competent  one,  and  he  made  an  excellent  show- 
ing m  the  way  of  saving  for  the  city  in  economies  of  various  kinds 
and  in  efticiency.     A  private  corporation  offered  him  six  or  seven 
thousand  dollars  a  year.    There  was  no  way  in  which  the  city  could 
pay  him  more,  although  he  was  admitted  by  all  intelligent  people  of 
the  city  to  be  worth  more,  and  finally  against  his  own  wishes— for  he 
would  have  preferred  to  stay  with  the  city  government— his  financial 
situation  practically  demanded  that  he  resign  his  public  employment 
and  accept  the  private  employment.    Now  then,  I  believe,  Governor, 
that  that  is  the  situation  that  you  will  find  in  a  great  many  of  our 
cities  of  moderate  size  and  that  the  public,  at  the  present  time  at  least, 
^^  T?f    willing  to  properly  compensate  for  real  first-class  service. 

Mr.  Foss.  Oh,  I  will  admit  that  is  so  to  some  extent,  but  I  will 
teJl  you  that  if  the  public  believed  that  they  were  getting  a  square 

deal  you  would  not  have  any  trouble  about  advancing  that  fellow's 
salary. 

^  Commissioner  Sweet.  Now,  to  come  to  the  street-railway  situation, 
IS  It  not  a  fact  that  labor— that  is,  wages  and  the  cost  of  material 
and  everything  that  street-railway  companies  have  to  buy— has  ma- 
terially advanced  in  price? 

Mr.  Foss.  Oh,  doubled. 
TT  ^^'n^f sjoner  Sweet.  And  can  you  name  a  single  industry  in  the 
United  states  that  could  stand  that  without  an  increase  in  income? 

Mr.  J^oss.  Of  course  not;  certainly  not. 

Commissioner  Sweet.  Then  this  situation  as  it  exists  to-day  with 
the  street  electric  railways  is  one  which  any  intelligent  man  would 
expect  it  to  be ;  is  it  not  ? 

Mr.  Foss.  Surely. 

Commissioner  Sweet.  It  could  not  be  otherwise. 

Mr.  Foss.  No,  it  could  not  be  otherwise.  But  I  want  to  tell  you 
why  It  IS  due  to  that  fact.  You  see,  these  public-service  commis- 
sions m  the  States  and  in  the  Nation  have  not  got  courage  enough  to 

thcm"''^  ^  '    ^^^^^  """"^  ^''''^^^  '''^''*     ^  appointed  some  of 

Commissioner  Sweet.  Are  they  not  prevented  by  law  in  many 
cases  s  ^  j 

Mr  Foss  They  may  be  to  some  extent,  but  they  are  not  in  Massa- 
cnusett|.  I  appointed  the  railroad  commission  in  Massachusetts, 
most  of  them  who  are  serving  to-day;  five  splendid  men,  who  have 
not  courage  enough  to  do  it.  Why  haven't  they  courage  enough  to 
do  It?  Because  the  railroads  have  grafted  and  they  have  stolen 
and  have  wrecked  their  properties  and  have  lost  the  confidence  of 
tJie  public  to  that  extent  that  there  is  no  railroad  commission  that 
can  stand  up  for  a  single  moment  against  the  public  and  do  what 
they  ought  to  do  and  what  they  know  they  ought  to  do.  You  talk 
i"^  th/^f?n«  },t^^  public-service  commissioners  in  that  State  or 
n  the  Nation  and  they  will  tell  you  these  fares  ought  to  be  doubled: 

nnf  9^f.'"''^'^'PK^?fn*^  P^''^^*^  Ownership  the  rates  have  to  go  up 
not  25  per  cent,  but  50  per  cent.  .  ^     ^* 


Or. 

ir 


798       FROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION", 

Commissioner  Sweet.  Are  you  not  aware  in  most  States  the  right 
to  raise  fares  is  under  the  control  of  the  State  commissions? 

Mr.  Fo«s.  Certainly. 

Commissioner  Sweet.  Are  they  not  under  governmental  orders? 

Mr.  Fo8s.  Certainly. 

Commissioner  Sweet.  Are  they  not  under  governmental  officials? 

Mr.  Foss.  Yes. 

Commissioner  Sweet.  Just  the  same  as  thev  would  be  if  the  whole 
thmg  was  under  the  control  and  operation  of  the.  Government  ? 

Mr.  Foss.  Yes. 

Commissioner  Sweet.  Are  not  the  companies  as  a  rule  anxious  to 
raise  fares  and  are  they  not  in  many  cases  obstructed  by  these  pub- 
lic service  commissions? 

Mr.  Foss.  I  think  the  public-service  commissions  are  ready  if  they 
felt  that  public  sentiment  was  behind  them,  but  the  public  will  not 
stand  for  it,  because  they  feel  tliat  they  do  not  know  the  whole  truth, 
they  have  not  been  treated  right.  That  is  the  condition  in  Massa- 
chusetts. I  have  talked  with  the  public-service  commissioners  and 
thev  openly  say  so. 

Oonunissioner  Sweet.  Is  not  this  condition  of  not  having  been 
treated  right  rather  a  tradition  from  years  ago  rather  than  a  condi- 
tion that  exists  at  the  present  time  ? 

Mr.  Foss.  Well,  I  think  that  is  true.  I  think  the  condition  in  the 
country  to-day  is  better  than  it  ever  has  been  as  to  integrity  and 
honesty. 

Commissioner  Sweet.  Then  you  think  if  the  public  fully  under- 
stood the  situation  as  it  is  to-day  and  realized  the  fact  that  these 
companies  can  not  do  business  unless  they  can  increase  their  income 
and  that  they  are  at  the  present  time  being  for  the  most  part  honestly 
and  capably  managed,  do  you  think  if  the  public  were  convinced 
of  the  truth  as  it  stands  that  it  would  readily  acquiesce  in  an  in- 
crease of  fares  and  would  pay  them  without  demur? 

Mr.  Foss.  Xo;  I  do  not  put  it  so  broa<lly  as  yon  put  it.  They 
would  to  some  extent,  but  the  public  have  got  the  idea  which  I  have 
advanced  here,  and  very  properly  in  my  judgment  and  the  right 
idea  too,  that  a  portion — not  all,  but  a  portion — of  this  expense  must 
go  into  general  taxation. 

Now  we  are  making  the  car  rider  pay  the  whole  bill.  I  will  ilhis- 
trate.  In  my  own  family  there  are  10  adults  and  we  have  8  grand- 
children, the  oldest  one  only  6  years  old.  We  have  9  automobiles 
to  carry  those  10  people  around.  I  am  the  only  fellow  who  ever 
uses  the  electric  car.  Every  one  of  my  sons  and  daughters  and  my 
wife,  never  step  into  one.  I  do  not  believe  they  have  been  in  an 
electric  car  for  five  years.  When  they  want  to  go  any  place,  the 
automobile  is  standing  at  tlie  door  and  they  go  in  that.  When  we 
get  around  the  dinner  table  at  night,  as  we  do  once  in  a  while,  the 
first  thing  they  will  do  is  to  kind  of  touch  the  old  man  up  about 
prohibition  and  then  they  will  start  to  talk  about  the  roads.  One 
of  the  boys  has  been  out  here  and  he  struck  the  damnedest  roads  he 
ever  saw  in  his  life,  and  he  begins  to  score  the  State  commission  and 
the  selectmen  of  the  town  and  everybody  all  down  the  line  because 
we  have  such  poor  roads.  Should  not  he  be  taxed  as  ever>^body  is 
taxed?     The  poor  man  in  niy  factory  is  taxed  to  make  that  road 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       799 

safe  80  that  fellow  can  ride  on  it.  Should  not  the  rest  of  them  be  taxed 
so  as  to  make  these  street  railroads  safe?  It  is  ]:>art  of  the  higli- 
way.  There  is  no  reason  why  that  track  down  there  should  not  be 
Jaul  and  mamtamed  and  supported  by  the  taxpayers  or  why  another 
corporation  should  not  own  the  equipment  and  operate  Mt  under 
Government  ownership.  We  do  not  necessarily  have  to  have  Govern- 
inent  operation.  You  may  have  private  operation  if  you  please, 
but  that  is  the  way  this  thing  has  to  be  divided. 

We  have  a  system  of  subways  in  Boston  which  is  equivalent  to 
streets.  All  of  Washington  Street  and  Tremont  Street  and  under 
tlie  coinmon  is  made  into  an  undergiound  street,  and  we  enter  the 
stores  in  the  basement  from  these  subways,  and  that  is  all  taxed 
upon  the  car  rider  and  the  car  rider  is  decreasing  all  the  time  because 
the  number  ot  autouiobiles  is  increasing  and  the  people  buy  those 
whether  they  can  afford  a  house  or  not.  They  buy  an  automobile 
and  rice  m  it.  JSow  they  ai-e  putting  all  that 'burden  on  them  and 
It  should  not  be  on  them  at  all.  It  all  belongs  to  the  public— every 
bit  of  It.  1  ou  have  to  recognize  it.  It  is  foolish  for  us  to  stand  up 
and  not  recognize  these  things  in  the  interest  of  a  better  democracy, 
as  1  say.  •^* 

Conjmissioner  Sweet.  Is  it  not  possible  to  make  a  great  many 
changes  and  improvements  in  our  taxation  system  and  various  other 
matters  witliout  going  to  the  full  extent  of  public  ownership  and 
operation  of  these  railroads?  ^ 

Mr.  Foss.  I  do  not  believe  you  can  do  it 

Commissioner  Sweet.  Is  H  wrong,  in 'your  judgment,  that  the 
Lncks?'"''    '^"^     companies  should  be  required  to  pave  between  the 

Mr.  Foss.  Yes;  it  is.    I  think 

Commissioner  Sweet  Very  well.  Could  not  that  be  changed  by 
legislation,  by  the  public?  ^        ^ 

Mr.  Foss.  You  may  do  that.     That  is  right. 

Commissioner  Sweet.  Is  it  wrong,  in  your  judgment,  for  the 
public  to  expect  twice  as  many  miles  for  a  nickel  as  they  got  15 
years  ago?  *^   ^ 

Mr.  Foss.  No ;  it  is  not  right. 
Commissioner  S\\^et.  They  ought  not  to  expect  it « 
Mr.  Foss    Oh,  no     They  ought  to  expect  higher  rates.    I  agi^ee 
with  you.     Somebody  has  to  pay  it.  ' 

Commissioner  SwEE-r.  They  ought  to  expect  to  pay  in  proportion 
to  their  use  of  it?  ./        x-    x- 

Mr.  Foss.  Somebody  has  to  pay  it ;  yes. 

Conmiissioner  Sweet.  They  ought  to  expect  to  pay  in  proportion 
to  the  service  they  receive. 

Mr.  Foss.  Yes ;  some  one  has  to  pay  it. 

Conmiissioner  Sweet.  Are  they  doing  it  to-day? 

Mr.  Foss.  No;  they  are  not. 

Commissioner  Sweet.  Then  it  is  not  a  fact  that  the  street-railway 
companies  are  attempting  to  give  the  people  too  much  for  what 
they  receive  in  compensation? 

Mr.  Foss.  They  are,  of  course;  no  doubt  about  that.  They  are 
giving  them  too  much.  They  are  bankrupt— the  whole  thiiio-  is 
bankrupt.  ^ 


:  I; 


800       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  If  you  had  Government  ownership  and 
operation  your  idea  would  he,  I  take  it,  to  adjust  that  upon  just  as 
equitable  a  basis  as. could  be? 

Mr.  Fobs.  That  is  right. 

Commissioner  Sweet.  Ought  not  the  same  thing  to  be  done  under 
private  ownership  and  operation? 

Mr.  Foss.  I  do  not  think  you  can  do  so. 

Commissioner  Swjiet.  Whether  you  can  or  not,  ought  it  not  to  be 

that  way? 

Mr.  Foss.  Yes.  .  . 

Commissioner  Sweet.  And  if  they  are  to  remam  under  private 
ownership  then  the  public  ought  to  be  educated  up  to  the  point  of 
willingness  to  do  what  is  fair  and  square  and  compensate  the  rail- 
road companies  properly  for  what  they  receive;  is  not  that  true? 

Mr.  Foss.  We  have  been  trying  to  do  that  all  this  time,  under  pri- 
vate ownership  with  public  regulation ;  and  I  say  it  has  fallen  down 
and  gone  to  pieces  and  you  can  not  revive  it. 

Commissioner  Sweet.  You  believe  it  is  hopeless?  ^         •     •   , 

Mr.  Foss.  Hopeless,  perfectly  so;  because  it  is  wrong  m  principle. 
If  vou  own  a  piece  of  property,  are  you  going  to  let  John  Jones 
come  in  and  tell  you  how  vou  shall  run  it?  Not  on  your  life,  lou 
will  run  it  as  vou  want  to;  it  is  your  property.  Now  these  stock- 
holders own  these  street  railroads  and  the  railroads  of  the  country. 
Now  they  ought  to  run  them.  I  believe  the  Government  had  better 
turn  them  back  without  any  strings  on  them  if  you  are  going  to 
have  private  owners  and  let  them  live  like  any  other  private  cor- 
poration—let the  survival  of  the  fittest  exist,  if  you  please.  We  did 
that  in  the  earlv  days.  What  did  it  result  in?  In  paralleling  a  lot 
of  lines  and  bankruptcv  and  everything  of  that  sort.  A  street 
railway  is  not  a  thing  of  competition;  it  is  a  monopoly,  just  remem- 
ber that.     You  can  not  do  it  that  way. 

Now  that  has  fallen  down  and  we  l\ave  got  to  come  right  back  to 
the  thing  that  the  Supreme  Court  said— that  these  railroads  are 
highwavs  and  that  no  profit  should  come  from  them  other  than  a 
fair  return  upon  actual  money  invested.  Anything  above  that 
should  go  to  the  people,  either  in  reduced  fares  or  in  some  other  way, 
in  building  up  the  property.  Some  of  these  railroads  have  only  paid 
out  a  portion  of  their  earnings.  Thev  are  strong  and  they  have  ac- 
cumulated tremendous  surpluses  to-day.  As  I  say,  the  Delaware, 
Lackawanna  &  W^estern  are  getting  32  per  cent  allowed  them  by  the 
Government  because  thev  have  piled  up  this  great  surplus  and 
charged  these  rates,  and  which  ought  to  have  gone  by  all  justice  and 

right  to  the  people.  i  •     i  • 

We  have  got  to  reverse  our  policy — w^e  have  to  reverse  this  thing, 
as  I  see  it,  in  the  interest  of  the  Nation  and  in  the  interest  of  a 
happier  Government.    We  have  got  to  do  it. 

Commissioner  Sweet.  I  do  not  want  you  to  infer  from  the  ques- 
tions I  have  asked  you  that  I  am  altogether  at  variance  with  your 
views. 

Mr.  Foss.  No. 

Commissioner  Sweet.  But  whether  I  am  or  not,  I  thought  perhaps 
some  of  the  points  I  have  asked  you  about  ought  to  be  elucidated  a 
little  further. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       801 

Mr.  Foss.  Yes. 
quSio^tTask.  ^'"''^'''  ^"^  ^"'  "'  ^  "^  concerned,  I  have  no  further 
The  Chairman    Governor,  this  commission  has  been  appointed  to 

be  in  ;'  ver?crftic5?  t'1""^"^^  '"''t^^''^  ^^^^^"^  ^'  hLum^  to 
be  in  a  \eiy  critical  situation.     You  offer  as  a  reined v  public  owner- 

we^shnn^'ifV^  M^  ""'i^'"  right  ready  for  it  this  minute.     I  think 
nnV  i^  f       I  "1  Massachusetts  before  the  snow  flies,  almost-we  can 

r'ih?  aww      W rfV^"''  ^"S"^  ""''  ^."^"^.  ^  ^^^  ^'  ^^  Massachusetts 

fn  fl  %     >^e  have  reached  a  crisis  in  Massachusetts;   we  are 

n  the  worst  condition.    I  got  in  the  car  here  to  come  from  the  sta! 

h  oL'^h'^  ^\^^  ^"^^  ^''""''^  "^^  ^  ^^^^ts.     In  Boston  if  you  ride  two 
blocks  they  tax  you  10  cents.     They  are  up  in  arms. 

wonlrl  Ww'?''-i'^''^  there  not  some  States  where  the  constitution 
Mr  FnL  %^\^^''^''Sfd  before  you  took  over  these  properties? 

^"iS:^^^^       -'  -^'  --y^'^'^  -  can  think^^ff  ani 

The  CHAinsiAN.  In  the  States  where  the  constitution  foi!)irl«  if 
yonr  remedy  would  be  rather  hopeless,  would  it  notV  *^ 

Mr.  !<  OSS  Certainly.  We  have  a  constitutional  convention  in 
Massachusetts  which  has  been  working  the  last  year,  and  thev  com" 
into  session  immediately  when  the  legislature  adjou'rns  nex?weekt 
and  that  proposition  is  pfoing  to  be  put  right  up  to  them. 

the  Pn„nfrt"'fi"f  ■      ?  *^^'?  "°*  "''°  "  g'''^-'"*  ""»ny  miinicipalities  ia 

i   mia  t  kY ,*i'**  ?■*  '^"t*^  r^^  ^"^  "^'^  '""'*  «f  tJieir  cai^citv  and 

"1  ?Fn«    w^if^f '"?,*, *°';/''^'"  t°  t^ke  over  these  properties? 

Ml .  Foss.  Well,  I  will  tell  you  I  do  not  agree  with  vou  on  that 

It  IS  surprising-when  the  war  broke  out  we  did  not  know  we  had 

.so  much  money.    We  did  not  know  we  could  raise  $30,000,000,000- 

n  this  country  and  loan  $10,000,000,000  to  other  countrieL.    Nobodr 

knows  where  it  came  from,  but  there  is  more  money  in  the  saS 

banks  than  before  the  war;  and  we  have  loaned  all  tWs  money  "nd 

t;l^    V""«MAN.  Well,  It  IS  true,  is  it  not.  that  where  those  condi- 
tions  exist  you  would  have  to  have  new  legislation  ? 

Mr.  Foss.  Undoubtedly. 

The  CHAiRAf AN.  And  is  it  not  also  true  that  before  any  of  these 

Mr.  Foss.  Yes. 

Mr^Fo'ss^' T"^^*  ^^'^^  ^"  ^^^''^'^  ^^'*  ^'""^^  '^""^^  '*  "''^• 
The  Chairman.  During  the  working  out  of  this  scheme  of  ouhliV 
ownership  what  is  to  be  done  with  these  utilities,  assuS  tlLrthev 
are  m  a  desperate  condition  ?  '  aa^^uinm^  tnat  tjiej 

Mr.  Foss..  I  say,  go  to  it  immediately. 
1  he  Chairman.  Well,  what? 


( 


802       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Foss.  Well,  go  to  it  right  off.  ^Ye  are  going  to  get  it  in  Massa- 
chusetts, we  are  going  to  take  it  up  there.  We  are  not  going  to 
wait  for  the  Nation  to  act. 

The  Chairman.  Your  solution,  then,  is  Government  ownership? 

Mr.  Foss.  Yes. 

The  Chairman.  That  is  the  only  thing  you  have  to  offer? 

Mr.  Foss.  That  is  the  only  thing  I  have  to  offer;  or  Government 
ownership  and  Government  operation  or  Government  ownership  and 
private  operation,  but  Government  ownership  first. 

The  Chairman.  Then  do  you  believe  that  the  one  function  of  this 
commission  which  has  been  appointed  by  the  President  is  to  make 
a  recommendation  to  the  country  in  favor  of  Government  owner- 
ship of  these  utilities? 

Mr.  Foss.  I  think  that  would  be  the  greatest  report  you  could 
make.  It  would  mean  more  to  the  people  of  this  country  than  any 
report  that  has  been  made  in  my  memory,  because  this  is  the  greatest 
question  in  the  country.  It  affects  the  food  (piestion.  Transporta- 
tion is  a  great  question  which  enters  into  the  cost  of  everything,  and 
into  the  cost  of  food  to-day.  Now,  you  are  talking  alx>ut  these  pack- 
ers and  the  conditions  existing  now.  It  is  on  the  public  mind.  You 
ride  on  these  street-cars  and  see  what  people  are  talking  about. 
Transportation  plays  a  very  important  part,  and  these  rates  have 
to  be  very  materially  advanced  right  away,  whether  the  Government 
holds  the  ropes  or  not. 

The  Chairman.  You  have  spoken  about  the  Massachusetts  situa- 
tion. 

Mr.  Foss.  Yes. 

The  Chairman.  You  say  they  are  going  to  take  some  action  in 
November  ? 

Mr.  Foss.  Yes. 

The  Chairman.  In  your  judgment  will  the  State  decide  in  favor 
of  State  ownership  of  those  utilities  or  municipal  ownership  ? 

Mr.  Foss.  In  Massachusetts,  you  see,  Boston — within  10  miles  from 
Boston — is  half  the  population  of  the  State.  We  have  a  population 
in  Massachusetts  of  about  3,500,000  and  about  1,500,000  are  wuthin 
10  miles  of  the  State  House.  We  do  a  great  many  things  by  the 
State  in  Massachusetts  that  are  done  by  municipalities  in  other  com- 
munities, because  our  metropolitan  center  of  BoHk>n  with  its  suburbs 
is  such  a  large  part  of  the  State.  But  I  think — as  I  say — ^wdien  I 
say  public  ownei*ship  I  mean  municipalities  or  States. 

The  Chairman.  But  in  most  cases  it  would  mean  by  the  State? 

Mr.  Foss.  Well,  it  would  be  in  a  great  many  instances.  Probably 
in  cities  like  Springfield  and  Worcester  and  Boston  it  would  be  the 
municipality.  In  the  smaller  towns — ^you  see  we  have  a  gi'eat  chain 
of  suburban  roads  all  through  the  State  and  a  good  many  miles  of 
them  have  been  abandoned  because  they  can  not  pay  under  this 
present  condition,  and  the  State  has  to  do  something  about  them. 
They  can  not  abandon  these  roads  that  are  a  public  necessity. 

The  Chairman.  Let  us  assume  the  State  took  over  all  those  utili- 
ties, what  fare  would  you  charge  for  the  service? 

Mr.  Foss.  I  do  not  know.  That  has  to  be  worked  out.  My  judg- 
ment is  here  that  the  5-cent  unit  fare  in  our  large  cities  has  got  to 
stand. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       803 

Tha  Chairman.  Then  you  believe  the  State  should  operate  these 
companies  and  charge  a  5-cent  fare  and  make  up  the  deficit  from  an 
appropriation?  ^ 

Mr.  Foss.  Not  in  all  cases;  do  not  misunderstand  me.     It  has  to  be 

fTn  AW  v'YT'^^/-^  ^?^'-  .^  "^y  ^^  ^^1  «"^'  l^rge  centers  like  Bos- 
ton, ^;ew  lork  ;\  ashington,  they  have  to  hold  to  the  5-cent  fare  be- 
canse  that  is  the  unit  that  we  have  been  accustomed  to,  and  I  think 
that  18  what  will  satisfy  the  public,  but  it  would  not  apply  over  a 
load  running  from  here  to  Georgetown  or  Richmond.  That  is  an- 
other kind  of  service. 

The  Chairman  But  under  the  present  standard  of  wages  and 
operating  costs  those  companies  could  not  afford  to  operate  on  a 
j"cent  xaie. 

Mr.  Fos^.  Oh,  no. 

The  Chairman.  Then  there  would  be  a  large  debt  which  would 
have  to  be  taken  care  of  by  taxation? 

Mr.  Foss.  Surely. 

The  Chairman.  And  now  do  you  think  it  is  just  to  the  property 
owner  and  citizen  living  remote  from  the  city  of  Boston  that  he  be 
taxed  to  pay  for  service  which  is  given  to  the  people  who  ride  upon 
the  streets  in  the  city  of  Boston.?  ^ 

Mr.  Foss.  Yes,  I  do. 

The  Chairman.  Upon  what  theorv  do  you  say  that* 

Mr.  Foss.  Upon  the  theory  that  the  street  railroad  is  a  necessity,  an 
abso  ute  necessity  to  oiiir  social  and  industrial  life,  and  as  such  he 
should  be  taxed  to  niaintain  that  necessity  just  as  much  as  he  is  taxed 
^^r^^  ^^  highway  without  the  street  railroad  on  it 

1  he  Chairman.  Would  you  apply  the  same  principle  in  the  opera- 
tion  ot  a  lighting  company  ?  ^ 

Mr.  Foss.  Yes. 

The  Chairman.  Or  a  water  companv? 
Mr.  Foss.  Yes. 

The  Chairman.  Or  a  gas  company? 
Mr.  Foss.  Yes;  the  same  thing. 

The  Chairman.  So  then  you  would  wish  the  city  generally  to 
mamtain  a  service  which  is  of  a  peculiar  benefit  to  the  citizens  of  a 

hale^*  ftTo'bP^'  ^^^^  ^^  ^'^^^  ''^^'*^  ^^'^^^  quasi-public  corporations 

The  Chairman    What  is  the  length  and  breadth  of  Massachusetts? 

Mr.  Foss.  Well^it  is  about  225  miles  long,  I  think,  and  about ^ 

Mr.  Warren.  Fifty  miles  wide,  is  it  not? 

Mr.  Foss.  Fifty  miles  wide? 

The  CHAIR3IAN.  Apply  that  same  principle  to  the  State  of  Min- 
nesota, where  I  come  from,  where  the  State  is  over  400  miles  lorn? 
and  over  200  miles  wide.  ** 

Mr.  Foss.  As  big  as  all  New  England. 

The  Chairman.  Yes.  We  have  counties  in  our  State  that  are 
larger  than  some  of  your  Eastern  States. 

Mr.  Foss.  Yes. 

The  Chairman.  Now  in  that  State  the  street-cars  are  operated  in 
Minneapolis,  St.  Paul,  and  in  Duluth.  It  so  happens  tLt'^theTwJn 
e.  ties  are  located,  and  Duluth  also,  all  the  way  from  200  to  300 
miles  from  some  of  the  largest  agricultural  and  mining  communis 


i 


:  I 


8C4       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 


i\ 


ties  in  our  State.  Large  niinibers  of  people  never  ride  upon  those 
street-cars.  Is  it  fair  to  ask  the  farmer  of  Minnesota  and  the  miner 
up  in  northern  Minnesota  and  the  stock  raisers  generally  all  over 
that  country  for  a  service  that  is  a  peculiar  benefit  to  the  citizens 
of  St.  Paul,  Minneapolis,  and  Duluth  ? 

Mr.  Foss.  I  am  not  going  to  say — I  do  not  understand  your  whole 
system  of  taxation,  but  if  your  system  of  maintaining  highways  is 
that  you  tax  the  whole  people  of  the  State  to  maintain  them — for 
instance,  you  tax  the  people  of  Minneapolis  and  St.  Paul  to  main- 
tain the  highways  in  the  southern  part  of  Minnesota — why  should 
not  the  people  be  taxed 

The  CiiAiPMAN.  We  have  what  we  call  a  1-mill  tax.  The  State 
raises  1  mill  by  general  taxation  and  that  is  distributed  upon  some 
ratable  basis  to  all  of  the  counties  in  the  State. 

Mr.  Foss.  Well,  we  are  trying  to  get  that  same  system  in  Massa- 
chusetts, which  is  a  very  good  system,  I  think.  Now,  I  honestly 
think  if  you  tax  the  people  of  southern  Minnesota  to  maintain  the 
streets  or  St.  Paul  and  Minneapolis,  then  it  is  no  more  than  right 
to  tax  the  people  of  southern  Minnesota  to  maintain  those  street 
railroads. 

Mr.  Warren.  If  you  followed  up  in  Massachusetts  that  analogy, 
you  would  not  have  to  tax  the  whole  State. 

Mr.  Foss.  No;  I  do  not  think  you  would. 

Mr.  Warren.  We  tax  the  cities  and  towns  for  local  highways,  the 
counties  for  intertown  highways  and  the  State  for  State  highways. 

Mr.  Foss.  Yes. 

Mr.  Warren.  In  Boston  you  have  your  metropolitan  district. 

Mr.  Foss.  In  Boston  we  have  our  metropolitan  district  to  take 
care  of  it.  My  idea  is  to  take  the  metropolitan  district  of  Boston 
which  these  railroads  serve. 

Mr.  Warren.  You  spoke  of  the  water  system  there.  The  same 
method  of  taxation   and  operation   applies  to  the  sewer  system? 

Mr.  Foss.  Yes ;  and  it  has  worked  out  well. 

Mr.  Warrex.  But  you  do  not  tax  the  western  part  of  the  State 
for  the  metropolitan  region? 

Mr.  Foss.  No ;  only  that  region  through  there. 

Commissioner  Gadsden.  The  condition  of  electric  railways 
throughout  the  country  is  admittedly  very  bad,  is  it  not? 

Mr.  Foss.  Yes,  very  bad. 

Commissioner  Gadsden.  Pending  the  working  out  of  a  compre- 
hensive plan  such  as  you  advise,  do  you  not  think  in  all  justice  and 
fairness  to  the  comj)anies  that  there  should  be 'an  immediate  in- 
crease of  their  rates  of  fare  ? 

Mr.  Foss.  No ;  I  am  not  sure  that  there  should  be.  I  do  not  think 
that.  We  have  to  meet  the  situation,  of  course,  in  some  way  as 
quickly  as  possible.  I  say  just  go  to  it  as  quickly  as  possible.  It 
may  be  necessary  in  some  cases  to  do  that  temporarily. 

Commissioner  Gadsden.  I  am  not  talking  about  your  roads  in 
Massachusetts 

Mr.  Foss.  AVe  have  done  it  in  Massachusetts. 

Commissioner  Gadsden.  Throughout  the  country  there  are  a  great 
many  roads  who  have  had  no  relief  at  all. 

Mr.  Foss.  No. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       80^ 

Comniissioner  Gadsden.  I  say  pending  the  eventual  working  out  of 
this  problem,  do  you  not  think  that  those  roads  which  have  not  had 
any  relief  should  be  relieved  at  once  ? 

Mr  Foss.  They  should  be,  but  the  people  should  be  told  that  it 
is  only  temporary,  and  if  you  tell  them  the  whole  truth  and  do  not 
go  to  make  it  permanent  instead  of  temporary- 
Commissioner  Gadsden.  I  mean  as  an  expedient. 
Mr.  l^oss.  That  is  right,  if  you  make  it  purely  temporarv,  yes:  but 
if  you  are  going  to  make  that  temporary  business  permanent,  then 
you  are  up  against  it,  because  that  is  only  half  the  truth. 

Commissioner  Gadsden.  Don't  you  think  this  commission  would  be 
well  advised  if  it  shou  d  take  the  position  that,  pending  this  further 
investigation  of  this  subject  and  a  permanent  solution  of  the  problem 
\l.?^!^,^^.T'T''^  ^"^  ^^  American  people  that  some  relief  should 
renfed    it  ?""  transportation  system  to  keep  it  alive  until  you  can. 

Mr.  Foss.  Yes;  if  you  say  public  ownership  is  the  thing  and  we 
are  going  to  write  about  it  and  recommend  it,  then  I  say  yes.  But  if 
you  wait  until  the  next  60  days  or  90  days  we  will  have  l  higher  fare, 
but  at  the  end  of  60  or  90  days  we  will  have  it  changed  ' 

Commissioner  Gadsden.  Suppose  the  American  people  are  not  pre- 
pared for  Government  ownership a  ^  i  ^^t  pie 

Mr.  Foss.  They  are. 

Commissioner  Gadsden.  Well,  you  may  be  mistaken. 

anfthing'eise  *^'^  ''''    ^  '^"^  '"''^  ^"^^"'^^  ^^^^  ^^'^  prepared  for 

Commissioner  Gadsden.  A  good  many  of  us  who  have  been  ridinff 

on  the  steam  railroads  during  the  war  have  heard  a  great  many  peo? 

pie  express  the  opinion  that  if  that  is  an  example  of  governmental 

ownership  we  do  not  want  anvthing  more  of  it  ninenwi 

Mr.  Foss.  My  dear  sir,  we  have  not  had  any  yet. 

^^Commissioner  Gadsden.  The  people  think  it  is  Government  owner- 
Mr.  Foss.  They  ought  to  be  disabused. 

abused  f'"''''''^'*  Gadsden.  How  long  will  it  take  them  to  be  dis^ 

Mr.  Foss.  You  have  to  tell  them  they  have  not  had  it.  Thev  have 
had  a  lease  of  the  roads  and  the  same  crowd  is  managing  them  Is 
maiiaged  them  before  the  Government  took  them  Te r ^    " 

shivT^^T^T^'lV^^''-''^^^"^  '\^^'^  y^"  *^^^^  governmental  owner- 

the  war?  ^  ''''^  ^""^'^  ^^'^  experience  of 

Mr.  Foss.  This  propaganda  which  has  been  put  forward  bv  the 

railroads  themselves-by  Wall  Street,  if  you  please,  by  those  vLed 

thKnd"o5^tffr  f '  *^- --^P^'^P-s  andVve'gJt  the  p^e  !^ 
that  k  nd  of  stuff  has  been  going  around  the  country  and  manv  peo- 
ple believe  we  have  public  ownership  in  this  country  and  that  we 
have  tried  it  out  and  It  is  a  failure.  We  have  not  had  it  •  thei-^  is  no 
failure  about  it.  We  are  going  to  have  it,  and  it  is  going  to  succeed 
Ini::^^^^^^^^^^  ~-  of  timfn^L^Sel 

The  Chairman.  There  is  one  other  thought  I  would  like  to  discuss 

moirnZ^r'''T  "'  *^''-  ^'  ''/'.''^^  there  are  about  $to(KV 
000,000  in  bonds  and  money  invested  in  these  utilities  throughout 


806       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION*. 


the  country.  It  has  been  freely  stated  here  that  a  good  deal  ()f 
watered  stock  lias  been  permitted  to  be  issued  to  the  public  and  it  is 
now  in  the  hands  of  innocent  purchasers.  Do  you  believe  that  the 
net  result  of  Government  or  numicipal  ownership  of  all  of  these 
utilities  would  be  that  the  investor  would  get  his  actual  money  back? 

Mr.  Foss.  Yes;  absolutely,  with  interest. 

The  Chairman.  With  interest? 

Mr.  Foss.  Yes.  I  think  he  ought  to  have  his  actual  money  back 
with  interest.  If  there  is  any  watering  done,  it  ought  to  be  squeezed 
out.  You  understand  a  security  which  is  privately  owned  of  a  pri- 
vately owned  corporation  does  not  sell  nearly  as  high  as  a  Govorn- 
nient  security.  The  last  money  we  got  for  the  Boston  Elevated  Kn.il- 
road  we  had  to  have  a  year  ago  and  it  was  $8,000,000  that  the  stock- 
holders put  up  on  a  guaranty  by  the  State  that  they  would  see  the 
interest  paid  for  10  voars,  and  we  had  to  pay  7  per  cent  for  it.  Now, 
if  the  city  of  Boston  had  issued  that  $3,000,000,  what  would  they  have 
had  to  pay?  Four  and  a  half  per  cent,  possibly,  or  4J  for  it.  The 
Htate  would  have  had  to  pay  4^  or  4}.  See  the  difference  in  the  in- 
tei-est,  see  what  you  are  goin^  to  effect  in  the  cost  of  these  railroads, 
in  the  cost  of  carrying  on  this  property,  if  you  get  your  money  at  4 
per  cent  instead  of  paying  7  for  it.  That  is  what  you  are  going  to 
save.  It  is  going  to  make  a  tremendous  difference.  We  can  do  it 
over  here 

The  Chairman.  In  reaching  your  concUision  favoring  Govern- 
ment ownership,  have  you  been  influenced  at  all  in  the  belief  that 
that  plan  would  result  in  paying  back  to  all  of  the  investors  the 
money  which  they  had  put  mto  these  properties? 

Mr.  Foss.  Yes ;  it  ought  to. 

The  Chairman.  That  is  one  of  the  reasons  you  favor  Govern- 
ment ownership? 

Mr.  Foss.  Yes.  Well,  I  believe  that  is  justice.  I  do  not  believe  in 
the  confiscation  of  any  man's  property.  He  should  be  paid  back 
with  good  liberal  interest,  and  the  public  are  willing  to  do  it.  The 
public  do  not  stand  on  that.  They  are  in  favor  of  every  man  getting 
his  money  back,  but  not  a  factitious  price  or  water. 

The  Chairman.  Do  you  believe  if  we  should  attempt  to  buy  all 
these  properties  at  the  same  time  that  it  might  result  m  the  people 
paying  a  great  deal  more  for  these  properties  than  actually  was  put 
into  them  and  thereby  capitalizing  a  good  deal  of  water  that  is  in 
the  stock? 

Mr.  Foss.  No ;  I  think  that  could  all  be  fairly  found  out.  I  think 
an  investigation,  a  commission  to  find  out  what  these  properties 
were  severally  worth,  what  had  been  put  into  them  and  to  see  that 
nobody  was  harmed  in  any  way — an  exchange  of  securities  could  be 
effected  for  a  Government  security.  Of  coui-se,  a  Government  se- 
curity at  par  would  offset,  you  see — at  par  it  would  be  worth  130  or 
150,  possibly. 

The  Chairman.  But  in  all  these  cases  the  property  should  be  duly 
valued  by  some  State  tribunal? 

Mr.  Foss.  Yes. 

The  Chairman.  According  to  the  settled  principles  of  law? 

Mr.  Foss.  Yes. 

The  Chairman.  It  ought  not  to  be  a  purchase  and  sale  proposition? 

Mr.  Foss.  No ;  I  do  not  think  so  at  all. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       807 

asTlie  invXf-  ^^'^^  ""''^^'^^  ^'^"^^^  ^'  ^'"^^  ^^  '^'^  ^''^^^'  ^^  ^^11 
Mr.  Foss.  Yes,  but  my  theory  is  to  very  liberally  deal  with  tlie 
people.    We  owe  somethrng  to  the  people  who  put  tLi>  money  into 
the^se  corporations  ^nd  developed  them  f  no  doubt  about  tliT  ^ 
1  he  Chairman    Now  then,  do  you  want  to  apply  your  princiDle 
AT    ^™^  ^^  public-service  corporations «  l^imcipie 

Mr.  Foss.  Yes,  all  quasi-public  corporations. 

is  arouS'''^?f000  indebtedness  of  this  country 

M^FosIy^^^^^  '^  not-growmg  out  of  the  war?       ^ 

The  Chairman    Now  if  we  should  ask,  say  $15,000  000  000  for 
t^mt:^  $^^,000,000  000  moi.;  fo^  the  utSs  and  we 

Mr.  l^ss    I  do  not  think  it  would  bust  us  at  all     But  we  ho va 

all  fx  d'  Yo't  Ir  ^7?^^-,debted-.s  on^tse  nlil^o^aJn^ 
ail  nxed.  I  oil  do  not  need  to  disturb  those  bonds  at  all  Now 
those  can  be  adjusted  so  that  they  will  receive  a  Government  miar' 
anty.  ^^  e  have  not  got  to  do  this  thing  that  T^^f™ll  T  o^. 
Dwnei^-I  speak  from  knowledge-of  these  railroad7are  very  wfl  W 
u  eed  to  turn  them  over  to  the  Government  at  a  fair  and  Teason^ 
able  price,  not  what  they  cost- reason- 

Mr.  l^oss.  Yes. 

eap.tal,zHt.on  of  that  railroad  is  $99,000.0^  Sl^he  raSadTn^ 
Ven  earning  very  fair  returns  rlniMno-  ih^  r.^  I    -  raiiroaa  has 

.nd  the  raJlroad  Claims  that'he  X-fhKrop^ 

n.l  m  ofuKonlr tv  &T^''".'  '*  ^7  P'''"-'''-  so-newhat  into  tl,e 

iJ^wlT:  /^!'1^  ^°  »"*  ?»  represent  actual  valoe.    Tliere  are  ,>oots 
m   VV  all  Street  that  see  tliat  certain  shares  of  ^tnot  JIii  »+      T  • 
times  at  certain  figures  and  that  at  othertimi  they  sell  lien 


iv 


'    :l 


> 


>ti 


808       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  The  rtiilroads  in  these  valuation  proceedings  are 
contending  for  a  great  many  different  items  that  will  add  many, 
many  billions  of  dollars  to  the  value  of  their  property;  increment 
to  land,  present  value  of  land  which  has  been  donated  by  the  Govern- 
ment, contingencies  and  overhead  expenses  and  all  those  things; 
no  one  to-day  knows  just  what  the  Supreme  Coui-t  will  finally  say 
upon  the  disputed  points.  Now,  those  questions  do  involve  billions 
of  dollars.  Now,  do  you  think  that  this  country  at  this  time  should 
decide  to  buy  those  railroads  before  any  of  us  know  anything  about 
what  those  railroads  ai*e  worth  ? 

Mr.  Foss.  It  is  not  necessary — yes,  we  should  decide  to  buy  them, 
no  doubt  about  that,  and  take  them  right  over,  and  we  will  deter- 
mine the  value  afterwards.  But  I  want  to  pay  them  what  it  is 
worth.  Whether  they  should  be  recompensed  for  increment  of 
value  which  has  come  to  them  through  a  period  of  years  through  the 
fact  that  they  have  occupied  them  and  business  has  grown  up  around 
them  is  a  thing  that  I  do  not  admit. 

By  the  way,  Mr.  Prince,  a  prominent  banker  in  Baston,  is  here, 
and  he  calls  my  attention  to  the  fact  that  the  public  will  furnish  the 
money  with  a  Government  guaranty.  You  are  speaking  about  the 
Government  issuing  these  securities  in  great  quantities  and  flooding 
the  market  with  Government  securities.  That  would  be  unnecessary. 
And  as  I  said  with  respect  to  the  bonds,  and  as  Mr.  Prince  very 
properly  says,  the  public  will  furnish  the  money  under  a  Govern- 
ment guaranty.  So  we  are  not  going  to  throw  a  great  quantity  of 
Government  bonds  onto  the  market  if  we  take  these  things  over. 

The  Chairman.  That  is  all. 

(Witness  excused.) 

(At  1  p.  m.  a  recess  was  taken  until  2  p.  m.) 

AFTER   RFXESS. 

The  hearing  was  resumed  at  2  o'clock  p.  m. 

The  Chairman.  You  may  proceed,  Mr.  Warren. 

Mr.  Warren.  Mr.  Mortimer,  will  you  take  the  stand  again? 

i 

(  STATEMENT  OF  MR.  JAMES  D.  MOETIMER  (Resumed).. 

Mr.  Mortimer.  The  electric-railway  industry  for  a  great  many 
yeai-s  past  has  been  gradually  losing  its  commercial  aspects.  It  has 
become  an  industry  that  is  regulated  in  the  extreme  by  tlie  govern- 
mental authorities,  and  it,  of  course,  has  been  one  where  the  net  earn- 
ings have  been  declining. 

It  appears  that  the  railway  industry  has  not  been  increasing  its 
volume  of  business  as  rapidly  as  has  been  the  general  business  in 
community  life  of  the  territory  served.  The  causes  for  that  are  com- 
paratively well  known.  They  have  found  themselves  unable  to  at- 
tract additional  capital  to  expand  facilities,  to  keep  the  railway  utili- 
ties in  line  with  the  growth  of  business  and  expansion  of  territory, 
partly  because  of  the  imposition  of  unremunerative  expenditures, 
both  for  capital  and  for  operating  expenses,  and  partly  because  the 
business  has  been  regarded  as  an  exceedingly  hazardous  one.  Ex- 
penses have  risen  so  rapidly  in  the  last  two  years  that  it  is  not  at  all 
clear  that  there  is  any  uniform  solution  for  the  problem.    In  fact,  as 


I 


;  PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       809 

I  indicated  in  my  earlier  testimony,  there  are  a  gi^eat  many  of  the 
smaller  communities  served  by  track  mileages  running  up  10  or 
15,   or   possibly    as    high   as   20,   and    in   placing   the   population 
as  high  as  50,000,  where  it  is  doubtful,  at  present  wage  levels  and 
commodity  prices,  that  the  business  can  be  made  remunerative  at  all. 
Ihere  are  a  good  many  of  our  fundamental  conceptions  respecting 
the  railway  business  that  will  probably  have  to  be  modified.     We  may 
have  to  change  from  a  flat  form  of  fares  to  a  distance-tariff  plan.     In 
any  eY^ni,  if  we  are  going  to  commercialize  the  business  we  have  to 
be  placed  m  a  position  where  we  can  manufacture  our  product— 
namely,  seat  miles— at  the  lowest  possible  cost,  and  then  be  accorded 
the  necessary  freedom  so  that  we  can  sell  those  seat-miles  to  our 
customers.     Just  what  form  the  commercial  aspect  of  the  sale  of 
our  service  is  going  to  take  is  very  difficult  for  any  electric-railway 
operator  to  state  at  this  time.     In  fact,  the  changes  in  the  funda- 
mental economic  basis  of  street-railway  operation  have  been  so  im- 
portant in  the  last  two  years  that  it  is  not  improbable  that  we  will 
have  to  go  through  a  two-year  experimental  period.     Of  course,  an 
experimental  period  of  two  years  would  ruin  every  electric  railway, 
and  present  operators  would  not  care  what  would  happen  to  the  rail- 
ways at  the  end  of  the  two  years.     Present  conditions  are  such  that 
emergency  relief  has  to  be  granted,  and  we  have  not  conducted  the 
experiments  to  that  fine  point  to  take  sufficient  time  to  try  to  restore 
it  to  a  commercial  basis,  if  such  a  restoration  is  at  all  possible. 

Any  business  that  is  of  a  shrinking  nature,  where  the  volume  of  its 
market  is  decreasing,  is  necessarily  not  attractive  to  private  investors, 
and  the  changes  in  fare  agreements  that  have  been  generally  made 
throughout  the  United  States  have,  of  course,  produced  a  very  great 
reaction  upon  the  riding  habit. 

There  has  been,  in  every  case,  after  the  lapse  of  a  short  period  of 
time,  an  increase  in  revenues  as  the  result  of  an  increase  in  flat  rates 
of  fare.  That  is  true.  The  increase  has  not  in  all  cases  been  equal 
to  the  estimated  increase  resulting  from  the  application  of  the  new 
fare  to  the  previous  number  of  passengers. 

All  important  industrial  centers  are  growing  at  a  rapid  rate.  The 
ridmg  habit  ought  to  increase  likewise  at  a  rapid  rate,  but  the  in- 
crease m  ridmg  habit  has  been  somewhat  influenced  by  the  increases 
m  the  flat  rate  of  fare. 

Now,  what  the  railway  business  needs  is  more  business  rather  than 
less.  If  you  liken  the  railway  busineas  to  a  manufacturing  institu- 
tion, with  a  relatively  large  overhead,  the  analysis  of  the  manufac- 
tiirer  would  be  along  the  following  lines :  I  have  a  large  overhead. 
1  hat  overhead,  distributed  over  my  present  volume  of  output,  is  too 
high  per  unit  to  permit  me  to  sell  in  competition  with  other  com- 
modities of  like  use. 

The  electric-railway  operator  is  faced  with  the  proposal  of  increas- 
ing his  selling  price  so  high  that  competition  from  walking  becomes 
most  severe.  The  principal  competitor  of  the  electric-railway  busi- 
ness is  walking.  The  number  of  cars  to  be  operated  by  an  electric 
railway  m  any  given  time  should,  in  point  of  fact,  be  determined 
more  nearly  by  the  movement  of  people  that  are  on  the  street,  rather 
than  by  the  number  of  people  that  are  on  the  cars. 

So  I  know,  with  respect  to  the  companies  in  which  I  am  interested, 
that  we  are  anticipating  a  period  of  experimental  development  for 

160643*— 20 52 


Ii 


810       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     ^ 

the  next  two  years,  but  we  have  got  to  be  granted  emergency  relief 
in  order  tliat  we  may  have  a  restoration  of  earning  power,  to  the 
end  that  tlie  proper  wages  may  be  paid,  that  the  existing  physical 
property  may  be  adequately  maintained,  and  that  we  may  be  placed 
m  a  position  to  invite  the  additional  capital  at  the  end  of  the  two- 
year  period. 

Mr.  Warren.  Did  you  refer  to  the  British  experience  during  the 
war  period? 

Mr.  Mortimer.  No  ;  I  said  nothing  about  that. 

I  recall  a  series  of  articles  appearmg  in  the  Electric  Railway  Jour- 
nal that  purports  to  show  that  under  the  distance  tariff  or  zone  system 
of  fare  in  operation  of  most  of  the  British  street-railway  systems 
they  have  been  able  to  increase  their  revenues  to  substantial  accord 
with  the  increase  in  expenses;  that  their  traffic  has  not  fallen  off, 
except  to  the  extent  that  they  were  not  able  to  provide  the  service 
because  of  the  shortage  of  operators;  that  while  there  were  a  large 
number  of  men  who  went  into  the  service,  there  were  likewise  large 
numbers  of  women  who  took  their  places,  and  women  ride  to  a 
gieater  extent  than  do  men ;  that  the  increases  in  revenues  on  all  the 
British  tramways  where  they  endeavored  to  keep  the  revenues  in 
accord  with  the  increase  in  expenses  have  been  satisfactory;  that 
theie  has  been  no  decrease  in  riding  habit  or  traffic  as  the  insult  of 
their  inci^ase  in  fares,  except  to  the  extent  that  the  shoi-tage  of  oper- 
ators prevented  them  from  running  prewar  service. 

Mr.  Warken.  I  think  that  is  all  I  want  to  ask  Mr.  Mortimer,  Mr. 
Chairman. 

Commissioner  Meeker.  I  would  like  to  get  your  idea  about  the 
proper  way  of  accounting.  You  mentioned  some  things  that  are 
rather  obscure  to  me.  Will  you  state  a  little  more  completely  your 
idea  of  how  depreciation  should  be  cared  for  and  how  obsolescence 
should  be  cared  for? 

Mr.  Mortimer.  The  purpose  of  accumulating  a  reserve  for  so- 
called  depreciation  is  fundamentally  to  create  a  reserve  out  of  earn- 
ings so  as  to  insure  the  future  replacement  of  the  element  of  physi- 
cal property  at  the  end  of  its  probable  lifetime.  No  elements  of 
physical  property  of  the  same  class  have  all  equalized.  The  lives 
of  cedar  trolley  poles  may  vary  from  8  to  20  years.  There  are,  of 
course,  as  the  statisticians  know,  one  certain  year  in  each  class  of 
property  where  the  number  of  replacements  is  at  a  maximum.  Re- 
placements or  abandonments  invariably  begin  within  a  very  short 
time  after  the  initial  construction  takes  place.  The  curve  of  mor- 
tality of  the  elements  of  physical  property,  to  the  extent  that  such 
mortality  curves  have  been  computed  or  arranged,  are  quite  similar 
to  the  curves  of  mortality  of  human  lives.  The  problem  of  provid- 
ing for  so-called  depreciation  is  not  to  provide  for  the  wearing  out, 
so  much  as  it  is  to  provide  for  the  replacement.  I  am  speaking  now 
from  the  utility  standpoint.  Every  utility  is  presumed  to  operate 
in  perpetuity.  Its  obligations  to  oj^erate  and  conserve  its  capital 
account  do  not  necessarily  terminate  at  the  expiration  of  its  de- 
terminate franchise,  if  it  has  such  a  thing.  No  rates  of  fare  have 
ever  been  allowed  which  will  amortize  the  value  of  physical  property 
to  its  scrap  value  within  the  life  of  the  determinate  franchise.  All 
the  rates  of  fare  provided  for  in  any  plan  never  make  an  allowance 
in  amount  greater  than  what  will  insure  the  replacement  of  the 
elements  of  physical  property  at  the  end  of  tlieir  probable  lifetime. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIN'.       811 

Now,  we  have  a  piece  of  track  which,  for  simplicity  in  calcula- 
tions, we  will  assume  has  a  life  of  15  years.  It  is  the  duty  of  the 
utility  to  appropriate  a  sufficient  amount  of  money  out  of  its  earn- 
ings with  which,  with  equal  increments,  if  you  please,  each  year, 
together  with  the  interest  upon  the  reserve  balances,  will  provide  a 
sum  at  the  end  of  15  years  which  will  enable  the  utility  to  replace 
that  element  of  property— a  piece  of  track— to  the  extent  of  the 
original  cost  thereof. 

Now,  that  will  apparently  result  in  the  creation  on  the  balance 
sheet  of  the  corporation  of  a  liability  very  much  larger  than  the 
amount  that  the  corporation  can  use  in  any  one  year,  but  the  recogni- 
tion of  that  liability  is  essential  if  the  balance  sheet  of  the  corpora- 
tion is  to  fairly  show  the  assets  and  liabilities,  because  the  balance 
sheet  purports  to  represent  fundamentally  the  liabilitv  of  the  corpo- 
ration as  a  gi'oup  of  shareholders  to  the  various  creditoi^  and  the 
public,  to  the  extent  that  the  public  in  interested  in  the  continued 
operation  of  the  utility.  By  that  I  mean  that  the  depreciation  or 
replacement  reserve  created  by  the  methods  that  I  have  generally 
indicated  records  the  liability  of  the  corporation  to  the  utility  to 
effect  these  replacements  at  the  end  of  the  probable  lifetime  of  the 
physical  property. 

Commissioner  Meeker.  Suppose,  in  this  case  that  vou  cite,  that 
some  exigency  should  arise  whereby  it  was  necessary  to  replace  a 
piece  of  track  at  the  end  of  5  years  instead  of  at  the  end  of  15  years, 
with  absolutely  new  track  that  would  cost,  perhaps,  twice  as  much 
as  the  original  track  cost.  Or  you  could  take  a  more  specific 
example 

Mr.  Mortimer.  I  will  take  that  example.  That  is  sufficiently  spe- 
cific, and  the  question  which  you  ask,  Mr.  Commissioner,  consists  of 
two  parts :  One,  how  are  we  going  to  treat  life  that  corresponds  to 
the  remaining  10  yeai^  normally,  the  difference  between  the  probable 
life  of  15  years  and  the  actual  life  of  5  yeai-s;  and  the  other  question 
is,  how  shall  we  treat  increased  capital  cost? 

When  the  property  is  abandoned,  the  original  cost  should  be  re- 
moved from  the  capital  account.  If  it  wei-e  1  mile  of  track  and  cost 
$25,000,  we  would  take  $25,000  out  of  capital  account,  creditincr 
capital  account  with  that  amount,  and  debiting  the  replacement  re^ 
serve  with  a  corresponding  amount,  provided  we  are  going  along  on 
the  assumption  that  our  depreciation  reserve  has  been  credited  with 
a  sufficient  reservation  to  take  into  account  the  varying  lives  that 
equipment  and  physical  property  are  subject  to. 

Now,  the  rule  of  the  Interstate  Commerce  Commission  for  ac- 
counting of  that  class  requires  that  an  amount  be  debited  to  depi^cia- 
tion  reserve  equal  to  the  proportion  that  the  expired  life  bears  to  the 
probable  life;  in  other  words,  one-third;  and  that  the  remaining 
two-thirds  will  be  charged  into  ordinary  current  operating  expensed 
of  the  railway.  Whether  it  Avould  be  in  one  month  or  six  months  is  a 
matter  that  is  left,  as  a  rule,  to  the  discretion  of  the  operating  officers. 
If  it  is  not  charged  to  depreciation  reserve  and  is  to  be  charged  into 
operating  expenses  during  a  period  of  six  months,  it  is  carried  as  a 
suspended  asset  and  written  off  in  equal  monthly  installments. 

Comniissioner  Meeker.  And  if  earnings  are  not  sufficient  to  take 
care  of  it  within  six  months,  you  still  further  suspend  it? 


812       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION* 

Mr.  Mortimer.  That  is  a  matter  of  discretion.  Now,  if  you  were 
to  ask  me  what  our  practice  is,  I  would  say  that  only  the  amount  that 
corresponds  to  the  expired  life  is  charged  against  the  depreciation  re- 
serve, and  the  remaining  amount  is  charged  to  operating  expenses  for 
the  month  in  which  the  order  for  property  removal  comes  through 
into  the  accounting  department. 

That  was  the  practice  and  recommendation  of  the  Railroad  Com- 
mission of  Wisconsin  prior  to  1915  or  thereabouts.  With  a  changmg 
personnel,  they  changed  the  basis,  and  were  thereby  able  to  make  a 
reduction  in  maintenance  expenses,  requiring,  according  to  their  cal- 
culations, that  these  unexpired  lives  of  elements  of  physical  property 
should  all  be  charged  to  depreciation  reserve.  .   .  '       • 

In  other  words,  in  the  case  that  you  cite,  the  entire  original  cost  of 
the  item  of  physical  property— namely,  the  mile  of  track— should  be 
debited  to  depreciation  reserve  at  the  same  time  that  the  property  ac- 
count is  credited  with  its  original  cost. 

Now,  taking  up  the  question  of  how  the  additional  expenditure  is 
to  be  taken  care  of,  it  is  this :  We  have  taken  out  of  the  plant  and 
property  account  the  original  cost  of  the  element  of  property  that  has 
been  abandoned.  We  should  accordingly  write  on,  that  is,  into  prop- 
erty account,  the  cost  of  the  property  that  has  been  constructed.  The 
costs  of  the  removal  of  the  old  property  should  be  charged  to  operat- 
ing expenses.  .  ,  1 1  i  i. 
Commissioner  Meeker.  What  percentage  of  earnings  should  be  set 
aside,  do  you  think,  in  order  to  take  care  properly  of  replacements? 

Mr.  Mortimer.  I  am  unable  to  answer  that  question  for  the  fu- 
ture, because  the  levels  are,  of  course,  changing.  Operating  ratios 
are  on  an  entirely  different  basis  from  what  they  formerly  were, 
but  more  particularly  the  ratio  of  capital,  utility  capital,  to  oper- 
ating revenues,  is  changed,  due  to  rise  in  rates  of  fare. 

We  have,  by  the  practical  setting  up  of  22  per  cent  of  the  operat- 
ing revenues  of  the  urban  and  surburban  system,  been  able  to  accu- 
mulate, in  the  case  of  the  Milwaukee  Electric  Railway  &  Light  Co., 
a  replacement  reserve  approximately  equal  to  the  estimated  accrued 
depreciation,  or  the  difference  between  reproduction  cost  ned  and  so- 
called  depreciated  value;  so  that,  so  far  as  utility  capital  accounts 
are  concerned,  the  utility  has  been  maintained  intact ;  and  we  have, 
as  a  rule,  carried  through  that  practice,  irrespective  of  the  return 
we  were  actually  earning  on  this  utility.  We  have  shaded  it  in  some 
years.  That  isj  in  the  last  year  we  did  so,  when  it  was  necessary  to 
show  a  sufficient  margin  over  bond  interest. 

Commissioner  Meeker.  Have  the  street  railways  under  your  di- 
rection ever  been  solvent  on  a  5-cent  fare  ? 

Mr.  Mortimer.  We  have  never  had  a  straight  5-cent  fare  on  any 
of  our  electric  railways  at  a  time  that  they  were  solvent.  They 
always  had  to  get  insolvents— the  utility  had  to  become  insolvent 
before  it  could  get  a  5-cent  fare. 

Mr.  Warren.  You  are  speaking  of  the  Milwaukee  company  ? 
Mr.  Mortimer.  I  am  speaking  of  the  Milwaukee  company.  Keno- 
sha had  a  5-cent  fare,  and  the  advent  of  the  5-cent  fare  did  not  re- 
store the  solvency  of  the  utility,  if  we  recognize  the  liability  that 
the  utility  has  because  of  the  unpaid  return,  the  unpaid  reasonable 
return. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       813 

Commissioner  Meeker.  Could  they  have  operated  solvently  if 
they  had  started  anew  on  a  5-cent  fare  ? 

Mr.  Mortimer,  No;  they  could  not  have. 

Commissioner  Meeker.  This  proper  reserve  fund — depreciation 
and  replacement  fund,  and  all  of  the  other  elements— if  taken  care 
of,  would  not  enable  the  railways  to  operate  on  a  solvent  basis  with 
a  5-cent  fare? 

Mr.  Mortimer.  No;  not  during  the  period  of  time  that  we  have 
under  review. 

Commissioner  Meeker.  How  far  back  would  that  extend  ? 
Mr.  Mortimer.  Well,  I  am  going  back  to  1896.  On  the  Mil- 
waukee Electric  Railway  &  Light  Co.  there  were  periods  of  time 
when  the  return  earned  upon  the  fair  measure  of  the  utility  capital, 
after  providing  for  depreciation,  was  7  or  8  per  cent  possibly ;  but 
that  was  in  times  before  we  had  a  regulation  of  rates  by  a  regulat- 
ing commission. 

Commissioner  Meeker.  But  since  the  regulation  of  rates,  the 
5-cent  fare  has  never  been  a  sufficient  fare  ? 

Mr.  Mortimer.  Well,  if  we  had  had  a  5-cent  fare  in  1913  and 
1914,  it  would  probably  have  been  remunerative;  but,  of  course, 
that  assumes  a  static  condition  with  respect  to  the  other  factors  of 
operating  expenses;  and  with  an  increase  in  rate  of  fare,  there 
would  probably  have  been  a  synchronous  increase  in  certain  other 
items  of  operating  expense,  possibly  wages,  etc.  It  would  ceV- 
tainly  have  increased  our  taxes,  because  combined  railway  and 
electric  utilities  in  Wisconsin  are  virtually  on  an  income-tax  basis. 

The  Milwaukee  Electric  Railway  &  Light  Co.,  as  a  corporation^ 
has,  of  course,  been  solvent.  It  enjoys  a  favorable  reputation  in 
that  respect,  but  that  has  not  been  due  to  the  railway  business.  Its 
electric  business  has  been  rapidly  developed,  and  is  growing  at  a 
very  rapid  rate.  It  has  tended  to  assist  the  railway  business  very 
materially,  because  it  is  taking  over  portions  of  the  reserve  power 
station  facilities  and  absorbing  them  by  absorbing  their  output  and 
thus  reducing  the  rate  of  increase  of  capital  expenditures  in  the 
case  of  the  railway. 

Commissioner  Meeker.  What  would  you  say  in  answer  to  the 
accusation  that  the  street  railways  have  been  addicted  to  issuing 
watered  stock  and  that  they  have  been  trying  to  pay  dividends  upon 
water  ? 

^  Mr.  Mortimer.  I  would  say,  in  the  first  place,  speaking  generally. 
It  is  an  attack  that  is  made  primarily  for  the  purpose  of  confusing 
tlie  issues.  The  figures  that  I  have  presented  to  you  applicable  to 
the  Milwaukee  Electric  Railway  &  Light  Co.  have  no  bearing  what- 
ever with  respect  to  capital  stock  and  bonded  debt,  but  represent  only 
the  appraised  value  of  the  physical  property ;  and  if  any  one  of  such 
persons  to  whom  you  refer  should  say  that  the  system  can  be  satis- 
factorily operated  and  produce  an  8  per  cent  return,  a  reasonable 
return  upon  the  fair  measure  of  utility  capital,  whereas  we  are  able 
only  to  operate  it  at  a  2  or  3  per  cent  return  on  the  present  rate  of 
fare,  then  I  should  tell  him  he  is  losing  his  time,  that  he  should  be 
m  the  street  railway  business,  and  I  have  a  job  for  him. 

Commissioner  Meeker.  Has  any  part  of  the  value  of  the  plant 
been  paid  for  out  of  earnings? 


i'l 


.  t 


814       PROCEEDINGS  OF  TEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Mortimer.  There  have  been  substantial  additions  to  the  plant 
and  property  account  through  reinvestment  of  depreciation  reserve, 
through  reinvestment  of  earnings  specifically  appropriated  for  that 
purpose;  but  the  amount  that  the  tympany  has  earned  over  and  above 
a  reasonable  return  has  been  negligible. 

Commissioner  Meeker.  Even  including  these  amounts  turned  back 
into  plant,  the  returns  on  a  fair  valuation  have  been  modest? 

Mr.  Mortimer.  They  have  been  low;  in  fact,  and  of  course,  rela- 
tively low  during  the  last  two  or  three  years. 

Conunissioner  Meeker.  I  think  that  is  all. 

Commissioner  Sweet.  Did  you  finish  what  you  had  to  say  about 
Kenosha?  As  I  recollect  it,  you  said  this  morning  that  you  got  a 
change  in  the  law,  which  made  a  diffei*ent  provision  for  third-class 
cities. 

Mr.  Mortimer.  Yes. 

Conunissioner  Sweet.  Enabling  you  to  do  certain  things  there,  but 
not  including  Milwaukee  and  Sui)erior? 

Mr.  Mortimer.  That  is  cori-ect. 

The  Chairman.  Did  you  take  advantage  of  that  new  law  in 
Kenosha  ? 

Mr.  Mortimer.  Well,  we  now  haAe  in  process  of  preparation  a 
contract  to  submit  to  the  officials  of  the  city  of  Kenosha,  under  which 
we  propose  to  give  them  additional  railway  facilities. 

Commissioner  Sw^eet.  Does  that  involve  an  increase  of  fares? 

Mr.  MoRTi^iER.  This  does  not  in^'olve  any  increase  in  fares  as  a 
part  of  the  contract,  but  it  will  require  that  the  rate  of  fare  shall 
be  determined  by  the  company  and  shall  be  in  such  form  as  will 
produce  the  maximum  net  eainin^  power  for  the  street-railway 
utility  has  expanded.  We  will,  or  course,  have  to  secure  the  ajv 
proval  of  this  contract  by  the  railroad  conunission  and  assurance 
from  the  railroad  commission  that  they  will  accej^t  our  filings 
of  the  rates  of  fare. 

Commissioner  Sweet.  Is  the  Kenosha  account  kept  entirely 
separate  from  other  accounts? 

Mr.  Mortimer.  Yes;  from  the  Milwaukee  Electric  Railway  & 
Light  Co.,  and  the  other  utilities  of  the  Wisconsin  Gas  &  Electric  Co. 

Commissioner  Sweet.  Do  the  Kenosha  accounts  include  any 
suburban  districts? 

Mr.  Mortimer.  None  whatever.  The  service  is  confined  wholly 
within  the  city  limits  of  the  city  of  Kenosha. 

Commissioner  Sweet.  You  have  been  charging  a  5-cent  fare! 

Mr.  MoRTi^f er.  Yes ;  we  have  had  a  5-cent  fare,  and  the  return  on 
this  very  high  earning  per  car-mile  has  been  on  the  order  of  3  per 
cent  per  annum.  In  otlier  words,  we  had  at  the  rate  of  about  6  per 
cent  for  allowances  for  future  replacements  and  for  return,  and  that, 
in  turn,  is  referring  to  the  actual  bare  bones  of  the  physical  property 
value. 

Commissioner  Sweet.  And  3^ou  divided  that  amount  in  two,  in  the 
middle,  and  devote  half  of  it  to  returns  upon  the  investment  and  the 
other  half  to  replacements? 

Mr.  Mortimer.  In  that  particular  case,  I  do  not  recall  how  the 
distribution  was  made.  It  is  my  recollection  that  there  was  not 
approi^riated  for  depreciation  an  amount  equivalent  to  3  per  cent.     I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       815 

think  it  was  tip|ireeiabiy  under  2  per  cent.  So  that  our  return  actu- 
ally sho\^ii  during  the  last,  say  10  months,  was  at  the  rate  of  4  per 
cent,  the  return  as  per  books,  whereas,  on  computing  the  return  upon 
the  commission's  formula,  it  would  be  on  the  order  of  3  per  cent 

Commissioner  S^^^:ET.  How  did  the  valuation  upon  the  basis  of 
the  physical  property  compare  with  the  issues  of  bonds  and  stocks  in 
the  book  charges? 

Mr  Mortimer.  Well,  in  the  case  of  the  Milwaukee  Electric  Rail- 
way &  Lig-ht  Co.  and  the  Milwaukee  Light  &  Traction  Co.,  the  re- 
production costs  of  the  physical  property  was  $2,000,000  in  excess— 
the  reproduction  cost  of  the  physical  property,  plus  materials  and 
supplies,  plus  working  capital,  like  accounts  receivable,  cash,  etc 
was  on  the  order  of  $2,000,000  in  excess  of  the  par  value  of  the  pre- 
ferred and  common  capital  stock,  plus  the  present  value  of  the  lia- 
bility on  account  of  funded  debt ;  and  when  I  say  "  the  present  value 
?l  f  J*^  *^  ^^  account  of  funded  debt,"  I  mean  the  par  value  of 
the  funded  debt  and  securities,  less  the  unamortized  portion  of  the 
discount  at  which  they  were  sold. 

So  there  was  a  straight  case  where,  on  the  face  of  it,  there  was  no 
water  in  its  securities,  as  compared  with  the  reproduction  cost  of 
the  property  and  assets. 

Commissioner  Sweet.  Had  common  stock  been  issued « 

Mr.  Mortimer.  Yes. 

Commissioner  Sweet.  What  became  of  that? 

Mr.  Mortimer  I  am  counting  that.  That  is  included  in  the  par 
value  of  the  preferred  and  common  stock.  We  found  in  our  prop- 
erties  there  that  it  was  absolutely  impossible  to  make  any  reference 
to  the  security  issues,  because  tliey  have  gone  bacJc  over  a  very  lono^ 
period  of  time,  and  the  Railroad  Commission  in  its  early  stages  sub*^ 
stituted  physical  valuation  for  any  attempt  at  stock  valuation  or 
security  valuation. 

Commissioner  Sweet.  Was  there  any  value  attached  to  your  f ran- 

Mr.  Mortimer.  We  have  no  allowance  for  franchise  yalue  whatever 
and  no  allowance  in  these  valuations  for  superseded  property  of  any 

Commissioner  Sweet.  Did  you  have  a,  dispute  with  the  State  com- 
mission  m  regard  to  the  basis  of  valuation? 

Mr.  Mortimer.  We  were  not  satisfied  with  the  valuation  that  was 
made  as  of  1^07,  but  we  were  fairly  well  satisfied  with  the  valuation 
made  as  of  January  1,  1914;  so  the  dispute  was  not  so  serious  be- 
tween us  that  we  have  hesitated  to  use  the  figures.  In  fact  we  have 
accepted  them  for  the  puri^ose  of  rate-making. 

Conunissioner  Sweet.  Was  there  a  basic  difference  between  those 
two  valuations,  or  simply  a  difference  of  opinion  as  to  what  thp 
values  were? 

Mr.  Mortimer.  Xo  ;  there  was  no  difference  between  us  as  to  the 
quantity  of  property.  There  was  some  difference,  to  begin  with 
between  our  engineers  and  the  commission's  engineers  respecting  unit 
prices,  and  there  was  also  some  difference  with  respect  to  some 
amount  to  be  allowed  as  overhead,  but  the  differences  were  larcrelv 
minimized.  *=    ^ 

Commissioner  Sweet.  The  last  valuation  was  of  1914? 


816       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Mortimer.  January  1,  1914,  made  as  of  that  date,  and  begun 
in  the  early  part  of  that  year,  and  completed  as  of  January  1,  1914, 
in  the  month  of  August,  1917. 

Commissioner  Sweet.  That  was  before  prices  had  begun  to  go  up 
very  much? 

]\Ir.  Mortimer.  Yes.  . 

Commissioner  Sweet.  Suppose  you  were  to  take  a  valuation  of  the 
railway  property  now;  do  you  think  that  the  reproduction  cost,  the 
cost  of  reproducing,  upon  the  present  high  prices  of  steel  and  equip- 
ment of  all  kinds,  ought  to  be  taken  into  account  ? 

Mr.  MoRTOiER.  I  think  that  is  an  element  that  would  have  to  be 
given  consideration,  just  like  the  estimated  cost  of  reproduction  is 
only  one  element  in  valuation.  We  have  not  needed  in  any  of  our 
calculations  to  show  that  regulation  as  practiced  in  Wisconsin  was 
unreasonable. 

Commissioner  Sweet.  I  do  not  know  whether  you  have  expressed 
the  opinion  that  your  maximum  revenue  would  be  reached  by  an 
increase  of  fare;  in  other  words,  whether  the  patronage  would  fall 
off  as  your  fares  advanced,  so  that  you  could  not  get  much  more 
revenue  than  vou  are  getting  now. 

Mr.  Mortimer.  I  feel  almost  sure  that  almost  any  change  in  rate 
of  fare  upw^ard  would  increase  revenues.     I  am  confident  of  that. 

Commissioner  Sweet.  The  falling  off  in  revenue  would  not  equal- 
ize the  gain  in  fare? 

Mr.  Mortimer.  No;  I  am  very  sure  of  that. 

Commissioner  Sweet.  You  think  the  increase  in  fares  would  be, 
at  present,  at  least,*  very  helpful  to  the  companies  throughout  the 

country  ? 

Mr.  Mortimer.  There  can  be  no  doubt  about  it. 

Commissioner  Sweet.  Do  you  see  any  other  means  of  awarding 
immediate  relief? 

Mr.  Mortimer.  AVell,  as  emergency  measures,  it  would  be  highly 
advantageous  to  the  railway  industry  if,  first,  the  unremunerative 
capital  and  operating  expeditures  could  be  eliminated.  I  refer 
primarily  to  paving  and  the  other  contributions  which  street-rail- 
way utilities  indirectly  make  to  taxes,  sprinkling,  etc. 

The  second  thing  is  to  abandon  the  operation  of  the  service  over 
lines  which  can  not  be  made  remunerative,  or  which  can  not  other- 
wise be  supported. 

The  third  would  be  to  impose  a  distance-tariff  plan  on  the  outlying 
sections  of  long  lines  or  lines  of  modest  length,  so  as  to  increase  the 
revenues  and  minimize  the  losses ;  and  the  fourth  thing  would  be  an 
immediate  and  large  increase  in  the  flat  rate  of  fare.  An  immediate 
and  large  increase  in  the  flat  rate  of  fare  is  essential,  for  two  rea- 
sons :  First,  it  is  necessary  in  order  to  restore  equality  between  operat- 
ing revenues  and  operating  expenses ;  and  second,  it  is  important  that 
a  large  increase  in  fare  be  allowed  to  take  care  of  increased  expenses 
that  the  street  railways  will  meet  in  the  next  few  months,  because 
of  rate  increases  and  probably  coal  costs,  and  to  return  the  net  earn- 
ing power  of  the  raimays  to  a  relatively  high  levej,  so  that  their 
credit  at  the  end  of  two  years  may  be  reestablished  and  that  they  may 
be  able  to  go  into  the  money  markets  and  procure  the  additional 
capital  that  will  15e  needed  at  that  time. 

The  Chairman.  You  are  excused,  Mr.  Mortimer. 

Mr.  Warren.  Mr.  Quackenbush, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       817 

STATEMENT  OF  MR.  JAMES  L.  aUACKENBUSH. 

Mr.  Warren.  Mr.  Chairman,  I  am  calling  Mr.  Quackenbush  with 
reference  to  his  experience  with  public  supervision  and  control  ia 
New  York  State  and  New  York  City. 

Mr.  Quackenbush,  you  are  a  lawyer  by  profession  ? 

Mr.  Quackenbush.  Yes,  sir. 

Mr.  Warren.  You  are  counsel  for  the  Interborough  Rapid  Tran- 
sit Co.? 

Mr.  Quackenbush.  Yes,  sir. 

Mr.  Warren.  And  also  for  the  New  York  Railways  Co.  ? 

Mr.  Quackenbush.  Yes,  sir. 

Mr.  Warren.  How  long  have  you  been  connected  with  the  com- 
panies professionally? 

Mr.  Quackenbush.  Fifteen  years. 

Mr.  Warren.  That  is  about  as  long  as  you  have  had  a  public-sery- 
ice  commission  in  New  York  ? 

Mr.  Quackenbush.  Longer. 

Mr.  Warren.  Longer? 

Mr.  Quackenbush.  We  have  had  it  12  years. 

Mr.  Warren.  You  have  two  commissions  there,  one  the  so-called 
up-State  commission,  and  the  one  with  particular  control  in  New 
York  City  and  the  immediate  vicinity,  I  believe? 

Mr.  Quackenbush.  Just  New  York  City. 

Mr.  Warren.  Have  vou  had  experience  with  both  commissions? 

Mr.  Quackenbush.  A  slight  experience  with  the  up-State  commis- 
sion, and  a  very  large  experience  with  the  city  commission. 

Mr.  Warren.  Will  you  please  tell  us  what  changes  are  necessary, 
in  your  opinion,  Mr.  Quackenbush,  in  the  commission  laws  or  prac- 
tices to  make  them  more  effective  and  more  efficient  in  the  present 
situation  of  the  street  railways  and  properly  to  control  in  the  future 
the  street  railways?  In  that,  I  include,  of  course,  the  railways 
operating  the  subways  and  the  elevated  ? 

Mr.  Quackenbush.  Fundamentally,  I  think  the  laws  of  New  York 
are  satisfactory.  The  trouble  in  New  York  has  not  been  with  the 
law,  but  with  its  administration. 

The  first  time  that  anything  has  been  done  by  the  public-service 
commission  in  the  first  district,  which  is  the  New  York  City  district 
of  the  slightest  benefit  to  the  railroads,  was  done  last  week  by  Com- 
missioner Nixon.  Since  the  1st  day  of  July,  1907,  down  to 'the  1st 
day  of  July,  1919,  I  have  been  in  daily  contact  with  the  administra- 
tion of  the  public-service  commission  in  the  first  district,  and  I  can 
not  now  recollect  a  single  transaction  that  has  been  of  the  slightest 
benefit  to  the  railroads  under  their  jurisdiction. 

Now,  the  trouble  has  been  that,  instead  of  the  members  of  the 
commissions  carrying  out  the  theory  of  Gov.  Hughes  in  the  session 
of  1907,  when  the  public-service  commission  law  was  first  enacted 
namely,  that  the  commission  would  be  a  tribunal,  impartial  and 
fair,  between  the  industry  and  the  public ;  that  it  would  be  a  means 
of  the  prevention  of  any  further  prejudice  against  the  industry  on 
the  part  of  the  public;  that  it  would  ascertain  the  truth  and  tell  the 
people  the  truth;  that  the  people,  learning  the  truth,  would  be  edu- 


III 


\  j 

I 


818       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOI^. 

cated  up  to  carrying  out  what  is  always  tlie  desire  of  the  people— to  do 
justice— that  function  completely  and  absolutely  failed. 

Now,  that  you  do  not  need  to  take  my  stat^nent  about  it— and  1 
might  be  supposed  to  be  a  prejudiced  witness— I  call  jour  atten- 
tion to  the  fact  that  there  has  been  no  question  of  politics  entering 
into  the  matter.  During  the  12  years  beginning  with  Gov.  Hughes, 
the  majority  of  the  commission  was  of  his  party,  the  Republican 
Party.  Political  changes  in  the  State  of  New  York  succeeding 
his  administration  resulted  in  the  majority  of  the  commission,  for 
a  period  of  years,  being  of  the  Democratic  Party.  Then  it  swung 
again  to  the  Republican  Party ;  and  this  present  year,  with  a  Repub- 
lican legislature  and  Democratic  governor  in  the  State,  it  was  agreed 
that  something  had  to  be  done.  So  they  both  agreed  on  the  enact- 
ment of  a  law,  which  practically  legislated  out  of  office  the  remain^ 
ing  connnissions  and  legislated  into  office  a  single  commissioner,  Mr. 
Louis  F.  Nixon,  and  took  from  tlie  public-service  commission  the 
duties  of  supervising  the  reconstruction  work  of  the  subways,  in 
which  the  city  is  financially  interested,  and  all  the  contracts  between 
the  Interborough  Rapid  Transit  Co.  and  the  city  on  the  one  hand, 
and  the  Brooklyn  Rapid  Transit  Co.  and  its  subsidiary  companies, 
and  the  city,  on  the  other  side  of  the  river.  The  changes  in  tlie  law 
were  practically  all  that  I  have  stated.  ^.     ,     o       .      xu 

The  public-service  committee  of  the  New  lork  Senate  three 
vears  ago  carried  on  an  investigation  of  the  whole  matter  of  trac- 
tions, of  public  utilities.  That  investigation  began  four  years  ago; 
it  began  in  1915,  and  ran  through  1916,  and  c^ontmued  through 
1917  and  1918.  It  consumed  months  of  time.  I  attended  the  semite 
committee.  It  was  a  joint  committee.  I  was  mistaken  in  saying 
it  was  a  senate  committee.  The  chairman  was  a  senator.  It  was 
a  joint  committee  of  both  houses.  . 

The  law  was  completely  i^vised.  The  substantive  portions  ot  the 
law  remained  unchanged,  but  the  procednial  part  was  changed. 
I  will  not  go  into  that  now,  because  I  think  whether  it  was  as 
it  was  pmposed  by  the  so-called  Thompson  Law,  or  as  at  present,  is 
of  no  consequence  to  the  problem  confronting  you  at  the  present 

moment.  *     ,. ,  •     i.u 

The  bill  passed  the  senate  two  years.  It  did  not  pass  m  the  as- 
sembly. I  think  it  is  fair  to  say  from  that  that  my  conclusion  that 
the  law  itself  is  satisfactory  is  warranted. 

The  main  change  suggested  was  to  get  quicker  action  by  the  com- 
mission, and  if  vou  care  to  know  about  that,  I  might  spend  a  moment 
in  explaining  it.  The  idea  was  to  get  rid  of  the  practice  that  the 
commission  had  fallen  into  of  failing  to  recognize  that  it  was  an  ad- 
ministrative body,  instead  of  treating  everything  as  though  it 
were  a  court,  with  long-drawn-out  examinations  and  ci'oss-oxamina- 
tions  and  the  usual  numbor  of  adjournments  and  postponements, 
and  to  have  matters  heard,  in  the  first  instance,  by  so-called  regula- 
tory commissions,  who  would  decide  the  ordinary  routine  matters 
promptly  and  provide  then  for  a  hearing  commission.  The  idea  was 
to  abolish  the  two  separate  commissions,  and  to  have  one  commis- 
sion, the  hearing  commissioners  to  sit  in  Albany  and  take  up  mat- 
tei-s  that  might  be  i-eferred  to  them  by  the  regulatory  commissioners^ 
or  that  might  be  brought  to  them  in  an  appeal  from  the  utility,  with 
a  further  provision  that  decisions  could  be  summarily  reviewed  by 


PROCEEDmOS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      819 

the  appellate  division  in  the  third  department  sitting  in  Albany,  and 
not  go  to  the  court  of  appeals  except  on  a  certified  question  of  law 
of  the  highest  importance. 

I  believe  that  that  bill,  which  already  passed  the  senate  on  two 
occasions,  would  make  for  celerity ;  but,  so  far  as  we  are  concerned 
—and  by  we,  I  mean  the  companies  operating  largely  on  Man- 
hattan Island— we  could  get  along  with  the  existing  'law  if  we 
could  get  It  administered  in  the  manner  that  was  first  intended. 
In  other  words,  it  has  been  a  failure  on  the  part  of  individuals  to 
recognize  that  they  were  there  as  protectors  of  the  people  who  had 
their  investments  there.  I  go  further  than  that :  I  say  that  the  pub- 
hc-service-commission  regulation  in  New  York  City*  failed  because 
1  }^  ^^^  courageously  put  a  stop  to  the  prejudice' that  was  shown 
by  the  former  governor  of  Massachusetts  here  this  morning. 

Now,  I  challenge,  so  far  as  it  relates  to  the  city  of  New  York,  the 
accuracy  of  every  statement  made  by  that  gentleman.  There  is  no 
wai-rant  for  it,  and  yet  it  exists,  and  it  exists  solely  and  only  because 
those  men  who  were  m  a  position  all  those  years  to  know  the  truth 
and  did  know  the  truth  kept  the  truth  to  themselves  and  did  not  con- 
vey it  to  the  public  whom  they  represented. 

From  the  time  that  the  commission  took  office,  on  July  1,  1907, 
down  to  this  act  of  Commissioner  Nixon,  the  whole  problem  was  to 
control  the  outgo  of  utilities,  and  no  heed  or  regard  was  paid  to 
their  income  whatever.  Notwithstanding  that  the  surface  lines  of 
the  JSew  lork  Railways  Co.  were  going  down  hill,  were  going  fast 
toward  a  receivership  last  year;  notwithstanding  that  we  warned 
them  of  it,  advised  them  of  it,  that  our  monthly  reports,  quarterly 
reports,  annual  reports,  frequent  hearings  under  oath  showed  the 
tact,  they  continued  to  make  orders  to  increase  service.  They  took 
the  view,  and  both  commissions  took  the  view  that  they  were  not 
concerned  with  the  question  of  how  we  were  going  to  get  the  monev  to 
provide  the  service— and  when  I  said  awhile  ago  that  I  was  slightly 
familiar  with  the  operation  of  the  so-called  up-State  commission  I 
meant  by  actual  appearance  before  them,  although  I  represent  two 
roads  that  are  within  their  jurisdiction;  but  I  do  know  about  their 
operations,  because  it  is  my  business  to  watch  the  operations  of  both 
commissions. 

That  commission  in  Buffalo  last  year,  when  the  men  struck  for 
higher  wages,  took  the  position  that  they  must  go  on.  The  lower  court 
also  took  that  position,  but  the  court  of  appeals,  with  some  sanity 
said  no,  that  they  could  not  operate  witJiout  income,  and  if  it  was 
a  fact  that  they  did  not  have  income  sufficient  to  pay  the  wage  of 
the  War  Labor  Board  that  that  was  a  question  of  fact  to  be  tried  out 

I  think  it  is  only  fair  to  say  that  the  commission  in  the  Albany 
district  has  shown  a  gieater  disposition  to  function  in  accordance 
With  the  fundamentals  than  the  one  in  New  York  City. 

Now,  the  New  York  City  Commission  took  office  in  July,  1907 
when  the  surface  lines  were  tottering  toward  bankruptcy  and*  became 
bankrupt  in  September.  They  were  getting  an  inadequate  fare  there 
at  that  time  through  excessive  use  of  free  transfers.  The  averao^e 
fare  had  been  descending  until  at  the  time  of  the  insolvency  in  Sen- 
tember,  1907,  it  was  roughly  3.5  cents. 

The  receivers  of  the^Now  York  City  Railway  Co.,  which  then  oper- 
ated  aU  the  lines  on  Manhattan  Island,  found  the  leases  of  the  Third 


820       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Avenue  and  many  of  the  others  unprofitable  and  returned  them  to 
their  owners,  under  fio  instructions  of  the  United  States  court.  That 
meant  that  the  duty  to  exchange  transfers  ceased,  because  the  law 
of  New  York  did  not  require  transfers  from  otherwise  independent 
and  competing  lines. 

The  public-service  commission  knew  what  the  rate  of  fare  was, 
but  the  public-service  commissioners  made  speeches  in  various  por- 
tions of  the  city  announcing  that  they  would  restore  the  transfers; 
and  during  the  years  1907,  1908,  1909,  1910,  and  1911  we  were  en- 
gaged in  efforts  to  persuade  them  not  to  do  that. 

The  matter  went  along 

The  Chairman.  To  do  what — to  make  speeches  or  to  restore  the 
transfers  ? 

Mr.  QuACKENBusH.  Oh,  no.  I  tried  in  my  humble  way  to  reason 
with  them  as  brethren  not  to  make  the  speeches,  but  that  was  unavail- 
ing, and  so  I  resorted  to  the  courts  and  succeeded  in  getting  the  courts 
to  prevent  their  carrying  out  their  nefarious  purpose  of  restoring  the 
transfers ;  and  being  unwilling  to  leave  their  record  to  be  determined 
by  the  courts  finally,  and  wanting  to  get  quick  action,  these  gentle- 
men went  to  the  legislature  in  1912  and  succeeded  in  securing  the 
passage  through  both  houses  of  the  legislature  of  a  bill  which  en- 
acted into  law,  in  extenso,  their  order  for  the  restoration  of  the 

transfers. 

Mr.  Warren.  You  mean  the  restoration  between  the ■ 

Mr.  QuACKENBusH.  Between  the  independent  foreign  lines  that 
had  been  separated. 

They  knew,  of  course,  as  I  knew,  that  the  order  could  not  be  sus- 
tained, because  it  was  confiscatory,  and  instead  of  leaving  it  as  a 
judicial  question,  it  was  sought  to  make  it  a  legislative  one.  Former 
Gov.  John  A.  Dix  vetoed  that  bill. 

Then,  in  the  latter  part  of  1912,  the  independent  companies  and 
the  commission  arranged  a  modification  of  the  transfer  free  across 
Fifty-ninth  Street;  and  they  waived  the  others,  and  that  is  the  sit- 
uation down  to  the  present  time. 

Now,  I  mention  that  as  proof  of  the  correctness  of  my  indictment. 
They  knew  better.  They  knew  that  they  were  not  protecting  the 
property  or  the  service  in  doing  that. 
I  Now,  let  us  pass  that  and  come  to  the  last  few  years.  It  was  ap- 
parent  in  1917,  early  in  1917,  as  soon  as  we  got  into  the  war — it  was 
!  apparent  before  we  got  into  the  w^ar,  that  we  were  going  onto  a  new 
price  level.  It  was  perfectly  apparent  that  the  5-cent  fare,  with  free 
transfers  on  the  surface  lines,  would  be  inadequate  to  keep  them 
going.  I  am  not  talking  now  about  return.  I  am  talking  about 
keeping  them  going  in  the  interest  of  the  public,  keeping  the  equip- 
ment up,  so  that  it  could  render  that  safe  and  adequate  service  that 
the  statute  requires;  and  transfers  having  been  the  principal  cause 
of  the  lowering  of  the  average  rate  of  fare — rather  than  to  ask  for 
a  flat  increase  of  fare  in  the  first  instance,  the  surface  companies  made 
application  to  the  commission,  in  May,  1917,  for  the  privilege  of 
abandoning  the  transfers,  as  the  commission  might  direct. 

We  had  procured  changes  in  the  law,  I  might  say,  parenthetically^ 
in  1910,  which  left  the  whole  matter  with  the  commission. 

Mr.  Warren.  The  whole  matter  of  transfers? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       821 

Mr  QUACKENBUSH.  Of  transfers— either  to  abolish  them  entirely, 
or  to  limit  their  use,  also  in  the  matter  of  transfers  upon  transfers  i 
m  other  words,  to  deal  with  the  whole  subject. 

Those  proceedings  were  begun  in  May,  1917,  and  when  Commis« 
sioner  Nixon  took  office  on  the  8th  day  of  Mav,  1919,  he  found  them 
pending  undecided.  In  the  meantime,  the  New  York  Railways  Co. 
had  gone  into  the  hands  of  a  receiver. 

The  Second  Avenue  Railway  Co.  in  New  York  has  never  come  out 
of  the  hands  of  a  receiver  since  it  started  there  in  1907.  And  now 
the  receiver  is  unable  to  earn  interest  on  the  certificates  issued  by  him 
under  the  orders  of  the  court,  and,  rather  facetiously,  he  is  consid- 
ering whether  there  won't  be  a  receivership  of  the  receiver.  [Laueh- 
ter.]  ^        ^ 

Now,  that  condition  confronting  that  particular  line  of  railway 
on  Second  Avenue  alone  condemns  the  action  of  the  gentlemen  that 
held  those  positions  during  those  years. 

Now,  there  is  another  thing:  A  number  of  public-spirited  gentle- 
men in  Brooklyn  conceived  the  idea  that  it  would  be  a  good  thing  to 
have  a  3-cent  fare  in  New  York  City,  and  so  they  organized  a  cor- 
poration to  operate  the  cars  on  the  Manhattan  Bridge,  and  they  called 
It  the  Manhattan  Three-Cent  Fare  Line.  We  opposed  it,  naturally. 
We  opposed  it  because  it  was  economically  unsound,  and  everybody 
knew  that  it  was.  But  they  were  received  with  open  arms,  and  they 
got  their  franchise,  a  short  haul  across  the  bridge. 

Across  the  Williamsburg  'Bridge  in  1904,  an  arrangement  was 
made  for  a  ten-years'  term  to  operate,  a  number  of  the  companies  en- 
tering into  the  thing  jointly.  They  organized  the  so-called  Bridge 
Operating  Co.  and  agreed  to  operate  for  a  3-cent  fare.  Just  as  soon 
as  it  became  apparent  that  that  3-cent  fare  for  the  short  haul  across 
the  bridge  was  earning  a  little  more  than  an  ordinary  rate  upon  the 
low  capitalization  of  the  line,  being  entirely  an  instrumentality  for 
joint  operations  of  several  lines,  the  public-service  commission  re- 
duced that  rate  to  2  cents,  ignoring  entirely  the  fact  of  the  long  hauL 
of  the  lines  feeding  into  the  short-haul  line. 

In  1917,  when  the  transfer  hearing  was  started,  it  was  only  neces- 
sary to  show  the  difference  between  operating  expenses  and  income  to- 
show  that  some  emergency  relief  was  needed.  The  facts  were  there, 
but  they  wanted  a  valuation ;  and  the  thing  went  along— examination 
upon  examination  of  the  accounts,  and  all  the  various  things. 

Counsel  for  the  commission  was  nominated  for  district  attorney 
that  fall  and,  among  the  reasons  that  he  gave  the  people  why  he 
should  be  elected  district  attorney,  was  that  he  had  prevented  the; 
abolition  of  the  transfers,  or  any  charge  for  the  transfers.  He  did 
not  get  elected  on  that  issue,  but  he  ran  on  it. 

I  am  speaking  of  facts  as  thdy  are,  because  I  suppose  that  is  what 
you  want  to  know.  These  gentlemen  are  all  friends  of  mine.  I 
have  gotten  along  with  them  pleasantly.  I  do  not  enjoy  stating  what 
I  do;  but  the  truth  is  the  truth,  and  it  was  about  time  it  should  be 
told  somewhere  by  somebody,  and  I  propose  to  tell  it  as  long  as  you 
want  to  listen  to  it. 

Now,  I  say  that  for  the  commission,  for  one  day,  to  keep  Judge^^ 
Ransom  in  office  after  he  made  that  a  campaign  issue— and  it  is  in  the 
public  prints  that  he  did  it— they  convicted  themselves  of  an  utter 
lack  of  appreciation  of  their  duties  under  the  law. 


Ii 


822       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION", 

That  has  been  the  trouble  in  New  York. 

Now,  that  is  the  surface  situation.  Let  us  take  up  now  the  Inter- 
borough  Rapid  Transit  Co.,  operating  the  elevated  lines  and  sub- 
ways. 

1" he  only  rapid  transit  available  to  the  people  of  New  York,  Man- 
hattan Island  and  the  Bronx  was  the  Manhattan  Elevated,  and  this 
had  become  utterly  inadequate  to  meet  the  terrific  congestion  of 
traffic  afforded  to  it.  For  years  the  matter  was  discussed  in  New 
York  as  to  what  relief  should  be  given  to  the  public.  The  rapid- 
transit  act  was  amended.  Efforts  were  made  to  get  subways  built, 
and  franchises  for  20  years  were  prepared. 

The  legislature  is  to  blame  now.  There  was  not  any  commission 
at  tlie  time  I  am  speaking  of. 

They  could  not  find  anybody,  of  course,  that  could  go  into  the 
investment  of  the  millions  upon  millions  required  to  construct  and 
operate  subways  on  any  20-year  franchise,  or  25  years — I  do  not  re- 
call just  exactly  which,  but  I  think  is  was  a  20-year  arrangement — 
because  you  could  not  amortize  any  such  investment  in  that  time. 

That  remained  the  law  for  some  time. 

The  franchise  was  peddled  upon  the  steps  of  the  city  hall,  and  no 
takers. 

Finally  the  law  was  changed,  and  a  number  of  gentlemen  or- 
ganized the  Interborough  Rapid  Transit  Co.  and  took  the  chance  of 
equipping  and  operating  it.  The  city  put  its  own  money  in,  because, 
of  course,  that  was  the  economic  thing  to  do,  for  the  reason  that 
Gov.  P'oss  mentioned  here  this  morning — public  credit  is  always 
cheaper  than  that  of  private  corporations.  And  the  city  then  had 
credit,  the  company  agreeing  to  pay  the  interest  and  sinking  fund 
on  the  investment  of  the  city. 

The  subway  began  operation  in  the  fall  of  1904.  It  was  not  very 
long  before  it  was  apparent  that  extensions  must  be  had.  By  the 
way,  I  might  say — and  you  probabl}^  know  it,  or  probably  I  know 
you  all  do  know — that  the  original  subway  was  a  Z-shaped  line.  It 
came  up  the  eastern  side  of  the  city  to  the  Grand  Central,  went 
westerly  across  Forty-second  Street,  until  it  met  Broadway,  and 
then  went  on  up  Broadway  on  the  westerly  side  of  the  city.  That 
was  laid  out  that  way  not  because  it  was  considered  the  scientific 
way  to  lay  out  a  railway,  but  because  the  limitations  of  the  city's 
credit  were  such  that  the  city  could  not  at  the  time  finance  a  line 
up  and  down  the  east  side  of  the  island,  and  up  and  down  the  west 
side.  They  laid  it  out  that  way  with  the  idea  that,  as  soon  as  we 
got  going,  naturally  the  extensions  up  the  east  side  would  be  built 
and  the  extensions  down  the  west  side  would  be'  built,  and  would 
be  financed  out  of  the  earnings  and  the  established  credit  of  the 
city,  from  the  original  plan. 

As  I  was  saying,  after  1904  it  became  apparent  that  they  had  to 
build  those  extensions.  The  congestion  was  increasing.  It  was  pay- 
ing. Nothing  was  done  by  the  old  Board  of  Rapid  Transit  Commis- 
sioners, who  had  charge  of  it  prior  to  the  1st  of  July,  1907 — nothing 
of  any  great  consequence.  I  do  not  mean  this  to  be  as  criticism  of 
them,  because  the  period  from  1904  to  1907  was  the  period  of  the  up- 
building of  the  subway;  but  by  1907  it  had  become  apparent  that 
something  had  got  to  be  done. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      823 

^^ow,  what  was  done  by  the  commission,  of  which  Mr.  Wilcox  was 
chairaian  in  1907  and  succeeding  years? 

The  fundamen^al  theory  of  the  public-service  commission  law  in 
New  York,  and  of  course  throughout  the  United  States  is,  as  Gov. 
Foss  has  said,  monopoly— not  competition,  but  regulation  and  mo- 
nopoly. It  was  the  commission's  duty  to  regulate  it  It  had  all  the 
powers  of  regulation. 

Instead  of  undertaking  to  accept  any  one  of  the  several  offers  that 
the  Interborough  Rapid  Transit  Co.  made  to  the  city  to  build  those 
natural  extensions  that  I  have  mentioned,  witli  their  own  money,  the 
commission  thought  they  had  to  hav«  competition,  they  had  to  have 
public  operation;  and  they  pix>ceeded  with  a  plan  of  building  an 
independent  subway,  and  that  was  to  have  another  Z ,  coming  down 
Lexington  Avenue  and  crossing  below  Fortv-second  Street,  and  then 
commg  down  the  west  side.  They  called  that  the  Triborough  Sub- 
way, and  they  spent  several  million  dollars  in  actually  constructing 
it.  That  has  no  justification  in  finance,  economics,  railroading,  or 
common  sense. 

It  was  not  the  fault  of  the  law. 

Tenders  were  requested  from  people  to  build  these  lines  in  com- 
petmg  with  us,  and  they  did  not  succeed  in  getting  them. 

The  next  thing  was  the  encouragement  of  the  Brooklyn  Rapid 
Transit  Co.  to  come  in,  and  they  laid  out  this  so-called  dual  system, 
which  IS  now  in  process  of  completion,  and  thev  had  so  many  railways 
m  Manhattan  Island,  as  a  result  of  that,  that  of  course  it  was  im- 
possible for  any  of  them  to  be  sure  of  earning  the  fixed  charges  dur- 
ing the  first  few  years  of  operation ;  and  that  was  recognized. 
^  Now  the  city's  credit  in  the  meantime  had  become  so  naiTow  that 
it  could  not  build  these  things.  It  had  to  have  private  capital.  The 
private  capital  could  not  be  gotten  on  any  plan  that  was  so  sure  to 
result  in  thin  traffic  in  the  first  years,  and  therefore  these  present 
contracts  were  prepared,  and  if  you  will  pardon  me,  I  will  dwell  a 
moment  on  those  contracts,  because  I  think  concerning  them  the 
truth  has  not  permeated  very  manv  places. 

The  city  did  not  have  the  capital,  and  I  will  confine  myself  to  the 
Interborough  side  of  it  with  which  I  am  familiar,  although  the 
Brooklyn  plan  is  identical  in  principle.  The  city  did  not  have  the 
capital.  It  invited  the  Interborough  Rapid  Transit  Co.  to  raise  the 
capital  necessary  to  construct,  equip,  and  operate  its  part  of  the  plan 
that  the  city  laid  out— not  our  plan;  their  plan— the  plan  we  ad- 
vised against.  We  did  not  have  it  in  our  treasury  anvwhere.  It 
required  $80,000,000,  the  original  plan,  of  new  capital,  o*^f  which  we 
were  to  contribute  $58,000,000  for  construction  and  $22,000,000  for 
equipment.  It  was  provided  that  we  should  not  go  beyond  the 
$58,000,000  for  construction ;  that  the  city  would  contribute  $58,000,- 
000  for  construction,  and  more  if  needed,  and  we  would  contribute 
$22,000,000  for  equipment,  and  more  if  needed. 

We  had  to  refund  the  bond  issue  which  we  had  against  the  orio'inal 
cost  of  all  of  our  equipment  of  the  old  subway,  and  we  therefore  had 
to  get  out  an  issue  of  $160,000,000  of  bonds,  which  we  got  out. 

These  contracts  were  finally  executed  in  1013,  after  negotiations 
extendmg  from  1907  to  1913.  All  the  terms  of  the  contracts  were 
incorporated  into  acts  of  the  legislature,  so  that  there  would  be  no 


\'i 


824       PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

question  about  the  power  of  the  commission.  The  matter  was  deter- 
mined by  the  court  of  appeals  to  be  constitutional  or  legal,  and 
investors  generally  were  invited  to  take  the  Interborough  Rapid 
Transit  Co.'s  fives  in  the  aggregate  amount  of  $100,000,000,  for 
refunding  purposes,  and  the  others  that  I  have  mentioned. 

At  the  same  time,  the  city  was  issuing  bonds  for  its  contribu- 
tions. These  are  5  per  cent  bonds,  and  the  contract  provided  that 
we  were  to  have  a  1  per  cent  sinking  fund,  so  that  the3^  would  be 
amortized  in  about  38  years. 

Now,  when  that  proposition  was  made,  it  was  perfectly  apparent 
to  anybody  with  the  simplest  knowledge  of  finance  that  you  could 
not  get  the  individual  investors  to  put  money  to  the  extent  of 
$160,000,000  into  that  venture  unless  they  were  guaranteed  by  the 
city  or  unless  they  had  first  call  on  the  revenues  of  the  joint  enter- 
prise. 

The  city  could  not  guarantee — and  may  I  be  pardoned  for  a 
moment  now  in  digre&sing,  because  I  deal  with  facts,  and  not  with 
theory. 

The  discussion  of  Gov.  Foss  this  morning  about  public  ownership, 
that  we  are  going  to  do  it  right  off,  so  far  as  the  State  of  New  York 
is  concerned — if  I  may  be  pardoned  the  use  of  a  remark  concerning 
the  distinguished  gentleman  from  Massachusetts — is  nothing  but 
stuff  and  nonsense. 

Under  the  constitution  of  the  State  of  New  York,  the  city  of 
New  York  has  absolutely  no  power  to  lend  its  credit  to  any  cor- 
poration, or  to  guarantee  anything,  or  to  become  the  owner  of  stock 
m  any  corporation;  but  before  the  measure  suggested  by  the  ex- 
governor  of  Massachusetts  can  be  carried  out  in  the  State  of  New 
York,  an  amendment  to  the  constitutioh  must  be  obtained.  This 
may  seem  like  a  law  lecture,  and  probably  it  is  familiar  to  you,  but, 
very  briefly  stated,  under  our  constitution,  you  can  amend  it  only 
by  a  constitutional  convention,  or  by  an  amendment  passing  the 
legislature ;  then  the  same  amendment,  as  passed,  being  submitted  to 
the  next  succeeding  legislature,  made  up  of  the  senate,  which  has, 
since  the  fii'st  enactment,  been  newly  selected  from  the  people;  and 
then,  after  those  two  successive  legislatures  have  passed  the  amend- 
ment, it  is  submitted  to  the  people  at  the  next  annual  election,  and 
on  the  time-table  as  of  to-day  of  the  governor's  program — mind  you, 
I  am  not  talking  about  whether  public  ownership  is  the  thing  or  not ; 
I  am  talking  aoout  whether  you  can  do  it  now — we  could  not  get 
anything  through  in  New  York  State  for  our  relief  until  the  legis- 
lature next  year  passed  it,  in  1920;  and  then,  there  being  an  election 
in  1920  for  senators,  the  senate  of  1921  would  be  a  new  one,  and 
they  could  pass  it  in  the  fall  of  1921.  If  the  people  approved  it,  it 
would  be  in  shape  for  the  legislature  of  1922  to  pass  the  requisite 
legislation  through  by  constitutional  amendment.  So  that  on  the 
time-table 

Commissioner  Meeker.  Has  not  the  legislature  authority,  how- 
ever, to  amend  the  charter  of  New  York  City,  so  that  New  York  may 
do  it? 

Mr.  QuACKENBusH.  No,  sir ;  it  is  absolutely  prohibited  by  the  con- 
stitution— no  city.  It  is  in  the  constitution.  Not  the  city  itself,  nor 
any  city  or  other  political  subdivision  in  the  State,  can  do  it.  That 
is  because,  in  the  very  early  days,  when  I  lived  up  in  the  central 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       825 

part  of  the  State,  they  came  along  and  bonded  my  town  to  build 
the  steam  railroad  out  there.  You  all  know  the  history  of  the  early 
days  of  that.  That  was  put  in  the  constitution,  so  that  no  misguided 
gentlemen  of  the  notions  of  the  distinguished  former  governor  of 
Massachusetts  would  use  public  moneys  for  any  such  things,  for  you 
can  not  put  his  ideas  into  effect  until  you  have  had  the  approval  of 
two  successive  legislatures  and  have  gotten  the  majority  vote  of  the 
voting  population  of  the  State  of  New  York. 

The  Chairman.  Assuming  that  public  sentiment  in  New  York  was 
ready  for  public  ownership,  what  are  the  steps  possible  to  be  taken 
by  which  the  properties  in  New  York  could  be  taken  over,  after  the 
constitution  had  been  amended  and  had  been  ratified? 

Mr.  QuACKENBusH.  If  the  legislature,  convening  on  the  firet  Wed- 
nesday of  January,  1922,  passed  a  bill  and  it  was  signed  by  the 
governor,  the  law  would  be  there.  Then  would  come  \he  question 
of  condemnation  or  purchase.  Bj  no  possible  stretch  of  my  imagina- 
tion can  I  conceive  of  the  carrying  out  of  anything  that  would  pro- 
tect my  clients  in  less  than  three  years  from  to-day.  I  think  you 
can  see  that  that  would  be  so.  That  is  moving  pretty  fast,  too.  So 
that  that  is  not  available. 

Now,  I  digressed  there,  because  that  condition  existed  when  you 
made  the  contract,  and  therefore  the  people  who  were  to  take  out 
the  $160,000,000  of  bonds,  could  not  get  any  of  the  guaranty.     They 
could  not  fall  back  on  taxation  or  on  the  public  treasury,  and  so 
it  was  provided  that  the  private  investor  in  the  new  enterprise 
should  have  the  first  call  on  earnings,  and  the  city  subordinated  in 
the  interest  and  sinking  fund  on  its  investment  until  the  interest  and 
sinking  fund  charges  on  our  investment  were  paid. 
Mr.  Warrex.  How  much  did  you  say  the  city's  investment  was? 
Mr.  QUACKENBUSH.  Practically  a  hundred  million. 
Mr.  Warren.  As  against  your  $160,000,000? 
Mr.  QUACKENBUSH.  I  had  not  come  to  that  yet,  but  answering 
your  question,  the  increased  cost  of  equipment  and  additional  equip*^ 
ment  due  to  the  enlarged  system  required  $40,000,000  of  additional 
capital,   which   we   procured   last   year   through   a   note  issue;    so 
that  our  capital  outstanding  is  $200,000,000,  as  against  the  citv's 
$100,000,000,  in  round  numbers.  ^ 

Mr.  Warren.  Yes.    Will  you  resume,  Mr.  Quackenbush? 
Mr.  Quackenbush.  Yes.     Now,  I  think  I  was  about  to  speak  of 
the  obtaining  of  the  $160,000,000,  which  became  last  year  $200,000,000. 
I  want  to  make  this  point  about  it,  bearing  on  something  I  am  com- 
ing to  a  little  later,  about  the  attitude  of  public  officials. 

Mr.  Warren  asked  me  about  the  city's  investment  and  I  said 
$100,000,000.  I  want  to  call  attention  to  the  character  of  the  so- 
called  city's  investment.  The  people  of  New  York  City  have  been 
told  in  the  last  few  years  how  "  they  "  have  $100,000,000  invested  in" 
the  Interborough  subway,  and  $150,000,000  invested  in  the  Brooklyn 
Rapid  Transit  subway,  as  if  it  came  from  the  treasury  of  the  city  of 
New  York. 

Now,  as  I  have  said,  .it  did  not  come  from  the  treasury  of  the 
city  of  New  York,  because  they  did  not  have  it,  and  all  that  they 
got  was  from  the  investors  throughout  the  United  States  and  Europe; 
probably  the  same  individuals  who  bought  our  5  per  cent  bonds 
bought  the  New  York  city  bonds  in  the  same  enterprise  to  average 
160643"— 20 53 


826       PROCEEDINGS  OF  FEDERAL  Bt.ECTRIC  RAILWAYS  COMMISSION. 

up  their  rates  and  sense  of  security.  So  that  the  enterprise,  the 
subway  enterprise  in  New  York  Citv,  was  put  on  its  feet  by  the  in- 
vesting public  of  the  civilized  world. 

The  Chairman.  Is  the  city  obligated  to  pay  those  bonds? 

Mr.  QuACKENBusH.  The  city  is  obligated  to  pay  those  bonds,  but 
the  money  come  from  the  investing  2)ublic,  and  under  the  contract  wo 
axe  required  to  amortize  that  investment  and  it  will  go  back  to  the 
people  at  maturity  without  the  city  treasury  being  the  gainer  or 
the  loser.  So  that  the  thing  to  do  is  to  consider  it  as  an  en- 
terprise in  which  city  credit  is  coupled  with  corporation  credit  and 
the  money  all  the  time  is  the  money  of  the  honest  investor  who 
put  it  in  in  good  faith,  and  he  put  it  in  in  good  faith  on  the  holding 
out  to  hinx  of  a  contract  which  has  been  authorized  by  the  legislature, 
sustained  by  the  court  of  appeals,  entered  into  by  the  city  of  New 
York,  which  provided  that  his  investment  would  be  a  first  call 
upon  the  earnings. 

Now  is  there  anybody  that  supposes  for  a  moment  that  in  1913 
when  we  raised  $160,000,000  that  a  single  one  of  those  people  could 
think  for  a  moment  that  a  time  would  come  when  the  city  with 
$100,000,000  of  investment  junior  to  oui-s,  with  a  provision  that  so 
long  as  the  interest  and  sinking  fund  on  our  investment  was  not 
earned  it  became  cumulative  with  compound  interest  before  the 
city  was  permitted  to  take  anything  out  of  the  earnings  for  its 
interest  and  sinking  fund — did  anybody  suppose  that  the  time  would 
come  when  such  an  investment  would  be  in  jeopardy  ?  That  the  city, 
having  the  power  at  any  time  and  the  public-service  conmussion 
reprasenting  the  city  having  the  power  at  any  time  to  modify  that 
contract  so  that  if  the  revenues  were  not  sufficient  that  they  would 
be  made  sufficient  to  take  (are  of  the  city's  investment? 

So  that  I  say  that  morally  the  public  authorities  in  the  city  and  in 
the  State  of  Xew  York  are  estopped  from  doing  anything  to  pre- 
vent that  investment  made  under  those  circumstances  from  being 
self-sustaining.  And  yet  we  have  been  endeavoring  for  the  last  year, 
as  the  Interborough  lias  suffered  the  fate  of  all  tractions,  to  per- 
suade the  city  administration  and  the  public-service  commission 
and  the  legislature  to  change  that  rate  of  fare  so  that  that  invest- 
ment will  be  self -sustaining  not  only  for  us  but  for  tlie  city. 

Now,  bear  in  mind  there  can  not  be  any  talk  of  water  about  that, 
there  can  not  be  any  of  the  distinguished  governor's  talk  about 
fooling  or  half  truths  about  what  T  am  saying,  because  the  records 
are  all  there  to  substantiate  what  I  am  saying.  It  is  a  question  of 
$200,000,000  which  we  raised;  and  $100,000,000—1  am  now  speaking 
of  the  completion  of  the  plan — starving  to  death  to-day. 

Xow,  there  are  two  hundreds  of  millions  of  new  money  put  in  in  tho 
last  six  years.  There  can  not  be  any  talk  about  water  so  far  as  tliat 
venture  is  concerned ;  because  when  we  made  the  contract  the  question 
arose  as  to  what  was  to  be  done  to  conserve  our  earnings  in  the  old 
subway,  which,  as  you  know,  had  become  prosperous,  and  it  was 
agreed  that  we  had  built  it  up — we  had  taken  the  risk  when,  as  I  say, 
nobody  else  would — and  we  said,  "  Find  out  what  our  investment  is," 
and  iie  city  mayor  then,  being  the  late  Mayor  Gaynor,  appointed  a 
conmiittee  of  engineers  and  accountants,  and  they  determined  that 
our  investment  at  that  time  in  the  original  equipment  of  the  old  sub- 
way was,  in  round  numbers,  $48,000,000. 


J»R0CEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       827 

Now,  SO  tliat  tlmm  can  not  be  any  question  of  the  accuracy  of  wdiat 
I  say  to  you,  you  examine  the  contract  and  y^u  will  find  that  it  is 
jH-oyided  in  the  contract  that  after  our  bond 'interest  comes  out  and 
sinking  fund  that  we  shaU  take  out  of  the  subway  eai^nings  $6,335,000 
a  year  and  then  after  that,  the  city  shall  take  out  8.76  per  c^t  upon 
Its  mvestinent,  after  which  we  divide  equally.     Now,  of  course,  the 
city  s  bond  interest  and  sinking  fund  averages  5 J  per  cent,  and  where 
^  o  nnn  n^^'^^i.  ^T^  ^^^^ '     ^^^  ^-^^  ^^'^^  arrived  at  by  adding  the 
nnh  AA^     i^^^i  ^^  ^^^  conceded  to  be  our  investment,  to  the  $80,- 
000,000  which  we  were  to  put  in,  maldng  in  round  numbers  one 
hundred  and  twenty-odd  millions  of  dollars,  $3,000,000  coming  out 
for  a  special  reason,  so  it  is  $125,000,000— and  the  special  reason  was 
that  we  contributed  the  tunnel  under  East  Eiver  for  $3,000,000,  which 
Ann  AAA  ^^f..     ^^  ^^^  million  dollars,  but  it  was  calculated  at  $125,- 
?T^  '^^P.^^o^^aLP^'*  "^""^  ^^  ^^'^  80,000,000  that  we  were  to  put  in  plus 
the  $6,330,000  produces  $10,000,000  or,  which  divided  by  125  pro- 
duces 8.r0,  which  was  what  was  contracted  that  we  were  to  receive 
on  the  terms  then  under  consideration.     And  it  was  said,  "  Well,  you 
get  that,  the  city  must  get  that  on  its  investment,"  so  that  the  eitv  of 
xNew  1  ork  is  m  that  venture,  not  as  an  exercise  of  sovereignty,  but  as 
a  railroad  corporation,  engaged  in  profit,  and  the  profit  is  the  differ- 
ence between  5^  per  cent  and  8.76  per  cent  plus  the  50-50  that  we 
divide  after  those  things  are  taken  care  of.     So  that  our  investment 
to-day  can  not  be  disputed  by  anybody  representing  the  public  or 
anyone  else  for  that  matter,  that  it  is  the  200,000,000,  160,000,000  of 
bonds,  40,000,000  of  notes  secured  by  sixty-odd  millions  of  bond- 
but  1  am  speaking  now  m  terms  of  money— $248,000,000  standmir 
there  being  starved  to  death.  ^ 

Conuiiissioner  Meeker.  The  fixed  charges,  then,  are  excessive  be- 
cause of  this  element  of  profit  that  the  city  gets  over  and  above  the 
H  per  cent  return  on  the  investment  ? 

Mi\  QuACKENBusH.  Thcv  have  not  come  within  sight  of  that, 
Mr.  Commissioner.  But  what  I  point  out  is  that  the  enterprise  is 
absolutely  on  a  parity;  and  I  want  to  make  that  plain  to  you  be- 
cause theie  has  been  a  good  deal  of  talk  that  we  had  some  advantage 
over  the  city  of  ^ew  lork.  Xow  we  are  absolutely  niatliematically 
down  to  a  fraction  on  a  parity  with  the  city  except  that  our  invest- 
ment IS  senior  and  their  is  junior  in  point  of  time  of  coming  out 
ot  the  earnings ;  that  is  all.  ^ 

Xow,  on  a  5-cent  fare  on  the  calculations  made  in  1913,  it  was 
agreed  by  the  city  and  by  us  that  probablv  for  the  first  three,  four, 
or  hve  years  the  enterprise  would  not  take  care  even  of  our  fixed 
charges,  because  it  would  take  time  to  build  it  up.  And  to  provide 
against  that,  when  our  earnings  were  large  on  the  old  subway  we 
accumulated  a  cash  surplus  of  over  $10,000,000,  and  we  had  a  book 
surplus  of  about  $18,000,000,  the  other  portion  of  it  being  invested 
however,  in  subsidiary  lines  whose  credit  has  been  so  impaii'ed  that 
ot  course  they  can  not  now  pay  it  back  to  us.  To-day  our  situation 
IS  that  we  have  exhausted  that  cash  surplus.  Our  requirements  are 
very  lieavy,  as  you  know,  and  the  last  of  our  surplus  went  the  1st 
aay  ot  this  July  to  meet  our  fixed  charges,  and  now  we  are  livino- 
from  hand  to  mouth.  We  will  be  $5,000,000  short  on  the  1st  ot 
January  of  meetnig  our  fixed  charges.  The  best  possible  estimate 
ot  earnings  on  a  o-cent  fare,  if  the  5-cent  fare  continues,  the  deficit 


828       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

from  operations  under  fixed  charges  for  the  next  three  or  four  or 
five  years  will  continue  in  sums  of  five,  four,  three,  along  there.  It 
is  the  rnost  hopeful  view  to  take  of  it.  Unless  we  get  an  increase 
in  the  fare  between  fiow  and  the  1st  day  of  January  it  means  a 
"^c^ivership  for  the  Interborough  Rapid  Transit  Co.,  unless  some 
of  the  large  owners  are  willing  to  take  it  on  their  backs  and  tide 
it  over  the  1st  of  January  in  the  hope  that  the  governor  and  the 
legislature  may  take  it  into  their  heads  to  do  something.  Our 
borrowing  capacity  is  gone;  we  have  not  anything  beyond  possibly 
$2,000,000,  if  we  scrape  the  box,  anywhere. 

That  is  the  condition  of  the  Interborough  Rapid  Transit,  and  that 
is  the  condition  facing  the  people  who  have  got  the  $200,000,000  at 
stake  here.  And  the  city  in  tne  meantime  is  facing  the  payment 
annually  upon  its  investment  in  our  subway  of  $100,000,000  and 
$150,000,000  in  the  Brooklyn  Rapid  Transit  subway  of  thirteen  and 
one-third  millions  of  dollars. 

Commissioner  Sweet.  The  only  remedy  you  see  is  in  the  raise  of 
fare? 

Mr.  QuACKENBusH.  That  is  the  only  thing  possible  for  this  system. 

Commissioner  Sweet.  How  large  a  raise  would  be  required? 

Mr.  QuACKENBusH.  An  8-cent  fare. 

Commissioner  Sweet.  To  8  cents? 

Mr.  QuACKENBusH.  Ycs;  8  cents  On  the  rapid-transit  line,  and 
of  course  in  the  city  of  New  York  you  can  not  in  fairness  to  the 
surface  lines  have  any  fare  that  is  different  on  the  rapid-transit  line. 

The  whole  solution  of  the  thing  should  be  an  arrangement  by 
which  a  universal  8-cent  fare  is  charged  for  transportation  in  New 
York  City  with  reasonable  adjustments  and  provisions  that  if  on 
the  numerous  independent  surface  lines  that  are  in  the  greater 
city  that  produces  an  inordinate  return  there  shall  be  a  provision 
that  it  shall  go  into  the  property  or,  if  you  please,  into  the  treasury 
of  the  city,  because  you  have  got  to  have  them  on  an  equality 
in  order  to  carry  out  the  proper  theory  of  governmental  regulation. 

Now  these  facts  are  all  known,  and  have  been  all  known 

Commissioner  Sweet.  Would  Commissioner  Nixon  have  authority 
now  to  grant  that  raise  if  he  wanted  to? 

Mr.  Quackenbush.  There  is  one  view  in  which  he  might  have. 
The  trend  of  judicial  decisions  in  our  State  and  in  the  United  States 
Supreme  Court  is  such  that  I  am  not  prepared  to  say  that  he  would 
not  have  it;  but  candor  requires  me  to  say  to  you  that  I  would  be 
facing  long  3'ears  of  litigation,  which  of  course  would  have  to  go 
to  the  Supreme  Court  of  the  United  States,  if  he  did  not  have 
additional  legislative  power. 

Commissioner  Sweet.  Then  you  think  that  the  legislature  of 
New  York  should  be  called  upon  to  give  him  that  authority  ? 

Mr.  Quackenbush.  They  certainly  should ;  and  we  had  a  bill  for 
that  purpose  there  in  1918,  and  it  did  not  get  beyond  committee  in 
either  house.  The  same  bill  was  there  last  year.  It  passed  the 
assembly  and  failed  in  the  senate ;  both  times  failed  because  the  two 
governors — Gov.  Whitman  in  1918,  and  Gov.  Smith  in  1919— were 
not  able  to  see  their  duty  requiring  them  to  recommend  anything  to 
the  legislature. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       829 

Mr.  Warren.  Is  there  anybody  who  could  grant  that  increase 
now  but  the  city  ? 

Mr.  Quackenbush.  It  could  be  done  to-morrow  by  joint  action  of 
Commissioner  Nixon,  Transit  Commissioner  Delaney,  and  the  board 
of  estimate.     I  do  not  say  now,  because  I  want  to  be  cautious  on  this 
subject,  because  my  words  may  be  quoted  against  me— I  do  not  say 
that  it  is  not  possible  to  work  out  a  legal  theory  which  can  ultimately 
be  sustained  which  does  not  require  the  joint  and  concurrent  action  of 
those  three  bodies,  but  I  do  say  that  that  gets  rid  of  litigation.     If 
Commissioner  Nixon  with  the  concurrence  of  Commissioner  De- 
lane}^ — and  I  will  digress  to  explain  that  he  is  the  commissioner  in 
charge  of  construction  work  and  has  succeeded  to  the  powers  of  the 
old  Board  of  Rapid  Transit  Railroad  Commissioners  who  were  the 
contracting  agents  as  to  the  rapid  transit — if  those  two  commis- 
sioners and  the  board  of  estimate  and  apportionment,  consisting  of 
the  mayor — you  know  their  composition — and  the  borough  presi- 
dents and  the  president  of  the  board  of  aldermen  and  the  comptroller 
of  the  city  would  concur,  that  could  be  brought  about  within  24  hours* 
time. 
Mr.  Warren.  Without  the  need  of  any  legislation? 
Mr.  Quackenbush.  Without  legislation ;  and  if  that  could  be  done, 
that  ought  to  be  done  because,  as  I  pointed  out  to  you,  we  can  not 
live  beyond  the  1st  of  January  unless  we  get  help.    And  when  I  say 
help— our  credit  will  not  stand  it — I  mean  as  a  business  proposition, 
not  as  it  did  last  year.     Last  j^ear  we  were  able  to  get  through  with 
the  aid  of  the  War  Finance  Corporation,  and  but  for  them  we  never 
would  have  got  through  with  our  new  capital  requirements.     But 
they  took  a  part  of  our  loan.    The  bankers  who  had  placed  the 
original  one  hundred  and  sixty  millions  spread  the  rest  of  it.     And 
I  doubt  myself  whether  that  was  entirely  a  loan  taken  on  an  in- 
vestment basis,  but  i)robably  taken  by  the  then  owners  of  the  same 
securities  who  did  not  want  them  to  go  through  a  receivership.    And 
I  do  not  know  that  anybody  after  listening  to  what  I  say  here  will  be 
very  likely  to  buy  any  of  our  bonds  on  the  1st  of  January.    And  I 
am  saying  what  I  say  with  a  due  sense  of  my  responsibility,  too. 
And  the  War  Finance  Corporation  will  not  loan  any  more — and 
there  you  are. 

Now  the  problem  and  the  reason  I  am  so  vehement  and  so  critical 
in  my  statement  is  that  if  this  tribunal  can  do  anything  that  will 
energize  those  gentlemen  into  concurrent  action — I  do  not  say  mine 
is  the  only  plan,  but  anything  that  will  increase  the  revenue,  then 
we  can  be  saved  from  bankruptcy  and  the  people  who  have  not  only 
the  $200,000,000  of  notes  and  our  stock,  but  all  the  other  securities 
that  I  have  not  yet  mentioned,  because  the  companies  that  I  repre- 
sent have  out  approximately  five  hundred  millions  of  securities,  andJ 
that  is  one-twelfth  of  the  whole  problem  you  have  got  before  you. 
The  Chairman.  Delaney  and  Nixon  were  appointed  by  the  gov- 
ernor ? 

Mr.  Quackenbush.  Yes. 

The  Chairman.  How  many  members  constitute  the  board  of  esti- 
mate? 

Mr.  Quackenbush.  Five  boroughs  each  have  the  president  of  the 
borough  upon  the  board. 


#^l 


830       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMTSSIOIT. 

The  Chairman.  How  are  they  appointed? 

Mr.  QuACKENBUSH.  They  are  elected  by  the  people;  and  then  the 
r.iayor,  the  comptroller,  and  the  president  of  the  board  of  alder- 
men sit  on  the  board  of  estimate,  all  elected  by  the  people.  They 
have  different  voting  powers.  The  mayor,  the  president  of  the 
board  of  aldermen,  and  the  comptroller  each  liivve  three  votes.  The 
Borough  of  Brooklyn  and  the  Borough  of  the  Bronx  each  have  two 
vote^.  The  Borough  of  Queens  and  Staten  Island  have  one  vote 
each. 

The  CHAIR3IAN.  Would  a  majority  vote  of  the  board  of  estimate 
control  the  situation  ? 

Mr.  QuACKENBUSH.  Yes,  sir.  80  far  there  has  been  a  sort  of 
gentlemen's  agreement  over  there  that  whatever  is  done  is  going  to 

be  unanimous. 

The   Chairman.  The  mayor   is  for  numicipal  ownership,  is  he 

not  ? 

Mr.  QuACKENBUSH.  The  mayor  is  for  municipal  ownership. 

The  Chairman.  And  he  has  a  vote? 

Mr.  QuACKENBUSH.  He  has  three  votes.  His  votes  count  3  out 
of  IG.  I  trust  I  have  enumerated  them  correctly;  but  there  are  10 
votes,  of  which  the  mayor  and  the  comptroller  have  6  and  the  presi- 
dent of  the  board  of  aldermen  3,  making  9  out  of  the  IG,  and  then 
the  presidents  of  the  boroughs. 

Commissioner  Sweet.  Those  three  men  have  a  majority  of  all  ? 

Mr.  QuACKENBUSH.  Yes,  sir;  those  three  men  have  a  majority 

of  all. 

Commissioner  Sweet.  Why  should  the  mayor,  if  he  is  m  favor 
of  municipal  ownership,  be  opposed  to  a  proper  readjustment  here? 

Mr.  QuACKENBUSH.  Well,  now 

Commissioner  Sweet.  I  do  not  think  Gov.  Foss,  according  to  what 
he  said  here  this  morning  toward  the  last,  under  examination,  would 
oppose.  He  said  he  was  in  favor  of  a  square  deal  to  the  people  who 
had  already  made  investments. 

Mr.  QuACKENBUSH.  Well  now,  so  that  what  I  sav  here  may  not 
be  challenged  in  any  quarter,  before  my  answer  I  will  refer  you  to 
a  statement  made  on  behalf  of  the  board  of  estimate  in  January  of 
this  year  by  Comptroller  Craig,  in  which  was  expressed  the  idea 
that  they  would  not  do  anything  so  long  .as  the  existing  contracts 
remained  unchanged.  They  want  to  rewrite  the  contracts.  The  at- 
titude— and  mind  you,  now,  I  am  speaking  from  memory  and  I 
mean  to  be  accurate,  but  I  want  what  I  say  checked  up  by  the  writ- 
ten document,  because  it  is  my  intention  not  to  go  without  its 
bounds— the  theory  is  that  if  we  are  dissatisfied  with  our  bargain, 
turn  the  roads  over  to  them  and  they  will  operate  them  on  be- 
liiilf  of  the  public.  They  will  raise  the  fares,  they  will  pay  the  in- 
terest and  sinking  fund  on  the  city's  investment  and  they  will  have 
due  regard  to  the  real  investment,  as  they  say,  that  is  in  the  property. 

Now,  if  you  desire  to  know  fuither  concerning  the  attitude  of  the 
city  officei^,  it  might  be  well  to  ask  the  members  of  the  War  Finance 
Corporation  to  give  you  some  information  concerning  their  attitude 
when  our  application  Avas  before  them  for  a  loan  a  year  ago,  when  the 
whole  membership  of  the  War  Finance  Corporation,  Gov.  Harding 
leading  them,  called  upon  the  mayor  and  his  colleagues.  They  went 
into  executive  session  and  I  was  not  iDiesent,  and  I  am  not  able  to  tell 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOiN-.       881 

you  of  mv  own  knowledge  what  took  place.  Probably  Gov.  Harding 
could  tell  you.  I  have  heard  rumors  that  the  view  is  that  a  receiver- 
ship of  the  Int^rborough  Rapid  Transit  Co.  would  not  be  regarded 
by  the  city  administration  as  an  unmixed  evil  (I  trust  that  I  am 
quoting  accurately  the  statement),  the  theory  being  that,  if  we  arc 
busted,  the  owners  will  take  the  attitude  probably  of  the  distin- 
guished former  governor  of  Massachusetts  who  frankly  said  that  he 
also  had  investments  in  tractions  and  would  be  glad  to  sell  out  on  the 
best  terms  obtainable,  and  then  they  would  have  municipal  ownership 
and  operation. 

The  Chairman.  Can  that  be  done  until  the  constitution  has  been 
amended  ? 

Mr.  QuACKENBUSH.  Oh,  they  could  operate,  perhaps  as  an  emerg- 
ency measure.     Suppose  we  decamped  and  ran  away— suppose  we 
fell  down  completely,  they  have  under  the  contract  the  right,  the 
pubhc-service  commission,  to  operate  it  instead  of  a  receiver.     Of 
course  what  will  happen— a  receiver  will  be  appointed;  and  you  have 
lilt  ui:)on  It,  because  I  am  answering  Commissioner  Sweet's  question. 
I  do  not  want  to  be  understood  as  agreeing  with  their  conclusions, 
because  they  also  are  born  of  complete  ignorance  of  the  law  and  of 
the  contracts  and  of  what  will  be  done;  but  that  is  the  theory,  that 
they  are  going  to  starve  the  Interboi-ough  into  surrendering  its  rights, 
surrendering  the  custody  of  the  property.     And  these  statements  that 
I  mentioned  are  m  the  public  press  at  various  times,  coming  from 
some  of  the  officials,  and  I  assume  with  the  authority  of  all  of  them. 
Now,  they  can  not  do  it,  because  if  we  are  not  able  to  pay  our  fixed 
charges,  as  you  know,  the  mortgage  securing  the  first  5  per  cent  bonds 
that  I  am  talkin|y  about  will  be  foreclosed,  a  receiver  will  be  ap- 
pointed and  it  will  be  the  duty  of  that  receiver  under  the  instruc- 
tions  of  the  court  to  preserve  the  equities  of  the  contract  for  the  bene- 
fit of  those  bondholders.     In  other  words,  the  contract  will  be  carried 
out  by  the  courts  instead  of  by  us,  and  the  city  of  Xew  York  will  be 
no  forwarder.     That  is  the  truth  of  it.     But'^the  people  of  the  city 
of  Xew  York  do  not  seem  to  appreciate  that,  and  unless  you  gentle- 
men are  able  to  find  out  by  checking  up  my  statements  that  they  are 
truthful  and  correct,  and  tell  them,  they  "will  never  knovN.     I'^nless 
Commissioner  Nixon  tells  them  or  the  new  commissioner,  Delaney, 
and  I  have  great  hopes— the  only  thing  that  has  cheered  up  my  other- 
wise sad  and  desolate  existence  of  the  last  few  years  was  the  action 
of  Commissioner  Nix-on  last  week  in  ordering  those  transfers  and  his 
request  to  know  what  the  conditions  of  the  company  are.     So  pos- 
sibly he  will  state  the  facts,  but  he  can  not  alone  do  the  thing,  except, 
as  I  say,  in  a  possible  theory  that  might  be  sustained. 

Now,  when  we  wei-e  undertaking  to  get  that  loan  from  the  War 
Finance  Corporation,  we  sought  the  cooperation  of  the  city  as  the 
junior  investor  in  that  enterprise.  We  were  not  able  to  get  it;  and 
that  is  why  I  say  the  War  Finance  Corporation  is  able  to  tell  you, 
if  you  are  interested,  why  the  city  representatives  would  not  turn 
their  hands  over  to  save  us  last  year  from  bankruptcy.  Because  we 
had  invested— I  forgot  to  state  that  to  you— in  absoluate  good  faith 
we  had  invested  our  entire  cash  surplus  in  construction  account  and 
a  year  ago  this  time  we  were  right  on  the  ragged  edge,  not  able  to 
meet  current  bills  for  supplies  which  were  coming  in  from  the  Pull- 
man Co.  and  from  everybody,  and  we  w^ere  on  the  rocks;  and  then 


fillit 


III 

li 
ill 


832       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

it  was,  as  I  say,  that  I  heard  it  has  been  expressed  as  not  being  an 
unmixed  evil  if  we  did  have  a  receivership. 

Xow^  tliere  is  another  phase  of  this  matter,  and  I  think  I  have 
covered  it  sketchily,  that  a  good  deal  has  been  said  about,  and  that 
is  this  question  about  the  holding  company,  and  that  is  where  the 
old  history  conies  in,  and  it  is  ireshened  up  every  now  and  then; 
that  is,  the  Interborough  Consolidated  Corporation. 

In  1906  the  Interborough  Rapid  Transit  Co.,  the  operating  com- 
pany of  the  subway  and  the  elevated,  and  the  Xew  York  City  Rail- 
way Co.,  the  lessee  of  all  the  lines  on  Manhattan  Island  and  the  lines 
in  the  Bronx,  formed  a  consolidation,  not  a  merger,  turned  in  their 
respective  stocks  in  exchange  for  propoitions  of  stock  and  bonds  of 
the  Interborough-Metropolitan  Co. — as  it  was  then  called,  since  by 
reorganization,  now  called  the  Interborough  Consolidated  Corpora- 
tion, which,  by  the  way,  went  into  the  hands  of  a  receiver  on  the  21st 
day  of  March,  1919. 

Now  the  Interborough  Consolidated  Corporation  took  the  thirty- 
five  millions  of  capital  stock  of  the  Interborough  Rapid  Transit  Co, 
and  for  that  exchanged  seventy  millions  of  its  4J  per  cent  bonds. 
That  was  equivalent  to  a  9  per  cent  annual  dividend  upon  the  Inter- 
borough Rapid  Transit  Co.'s  stock.  At  the  time  we  made  the  con- 
tract with  the  city  in  1913,  the  Interborough-Metropolitan  Co.  was 
in  existence,  and  through  its  ownership  of  this  stock  controlled 
through  voting  power  the  action  of  the  opei*ating  company  in  mak- 
ing the  contract.  It  was  known  by  everybody  at  the  time  that  the 
Interborough-Metropolitan  Co.  had  in  addition  to  the  $70,000,000 
of  bonds  $45,000,000  of  preferred  stock.  Now,  the  $6,335,000,  which 
has  come  to  be  called  a  pi-eferential,  that  w^e  are  entitled  to  take  out 
of  the  subway  earnings  I'epresented  our  average  net  profits  of  the 
yeai-s  1910  and  1911.    They  were  taken  as  a  fair  test  and  agreed  to. 

I  have  not  said  anything  so  far  about  the  elevated  features  of  the 
contract,  because  the  city  did  not  have  any  investment  there.  I 
wanted  to  impress  upon  you  fii^st  the  fact  that  the  city's  own  invest- 
ment is  not  being  taken  care  of  intelligently  or  faithfully  by  any- 
body. 

Now  we  put  many  millions  of  dollars  in  the  improvements  of  the 
elevated  lines  and  added  and  extended  the  lines  and  third-tracked 
them  and  made  an  agreement  w4th  the  city  by  which  it  shared  in 
the  profits  above  our  average  profits  of  1910  and  1911,  which  in  that 
case  were  $1,590,000.  Now  the  sum  of  those  two  which  have  been 
called  preferentials  was  known  to  everybody  to  be  sufficient,  with 
other  nonoperating  income  which  we  had,  to  pay  a  dividend  on 
our  pi-eferred  stock. 

Now,  I  say  that  when  tlioSe  facts  were  known  and  when  it  was 
known  to  the  people  with  whom  we  were  in  daily  conference  for  three 
yeai-s  of  time  that  the  Interborough-Metropolitan  Co.  permitted 
the  Interborough  Rapid  Transit  Co.  to  make  this  contract  and  they 
knew  that  that  was  done  on  the  strength  of  these  preferentials  and 
that  those  preferentials  were  sufficient  to  pay  the  interest  on  the  4J 
per  cent  bonds  plus  a  return  on  the  preferred  stock,  that  it  is  wicked, 
immoral  and  unjust  and  nothing  but  simple  repudiation  morally  for 
anybody  who  took  part  in  that  transaction  or  who  succeeded  those 
who  did  take  part  in  it,  to  starve  us  now  into  the  destruction  of  the 
values  of  that  preferred  stock  and  of  those  bonds. 


S 


I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       83^ 

Now,  that  is  the  elevated  and  subway  part  of  that  holding  com- 
pany. In  addition  to  that,  we  had  the  securities  of  the  New  York 
Railways  Co.,  which  had  come  through  a  four  years'  receivership 
from  1907  to  1912,  during  which  time,  as  I  think  Gen.  Tripp  has 
told  you — he  was  the  chairman  of  the  joint  reorganization  committees^ 
and  I  imagine  he  gave  you  in  a  general  way  the  facts  about  how  the 
capitalization  was  written  down.  At  any  rate,  when  we  took  the 
properties  over  after  the  examinations  of  the  reorganization  com- 
mittees and  of  the  public-service  commission,  the  commission  it- 
self found  that  there  were  warranted  at  that  time  an  issuance  of 
$85,000,000  plus  of  securities.     That  was  for  capital  purposes. 

Mr.  Warren.  That  is  the  surface  railways? 

Mr.  QuACKENBusH.  The  New  York  Railways. 

The  actual  capital  outstanding  after  the  reorganization  and  to- 
day was  less  than  $100,000,000.  I  think  the  view  that  the  commis- 
sion took  at  the  time  was  that  the  margin  between  values  and  capi- 
talization was  about  $16,000,000,  and  they  directed  an  amortization 
fund  of  $108,000  a  year  to  be  set  aside  out  of  earnings  to  take  care 
of  that  difference.  We  did  not  agree  with  them  at  that  time  that 
they  had  that  power,  and  subsequently  without  litigation  they 
agreed  that  they  did  not  have  it  and  rescinded  it.  I  mention  it  as 
an  evidence  of  value  that  they  regarded  as  there. 

Now,  in  1917 — I  am  coming  back  now  to  where  I  quit  al)out  the 
transfers,  and  I  am  talking  now  about  the  surface  lines  and  the  hold- 
ing company's  investment  in  the  surface  lines — I  had  this  property 
appraised  by  Ford,  Bacon  &  Davis.  And  I  told  those  gentlemen—- 
and  when  I  say  these  "  I's  "  I  am  doing  it  for  brevity  and  not  because 
I  am  the  whole  thing;  I  do  not  want  to  appear  here  to  be  immodest, 
but  to  be  brief;  everything  that  I  have  done  has  been  with  the  con- 
sent and  knowledge  and  conference  with  the  president  and  executive 
committee,  and  I  am  the  lawyer  of  the  concern — I  said  "  I  want  an 
appraisal  now  that  we  can  get  quick  action.  I  do  not  want  any- 
thing to  be  put  in  here  that  is  going  to  be  arguable  even,  because  we 
want  emergency  action.  You  appraise  it  on  the  cost  to  reproduce 
less  depreciation  on  the  straight-line  method.  Never  mind  what 
your  views  are  about  it;  you  appraise  it  on  prewar  prices  and  you 
leave  out  any  question  of  franchise  value,  any  question  of  superseded 
value,  any  question  of  going  value,  any  questions  of  the  many  things 
that  you  gentlemen  know  are  perfectly  proper  in  a  rate  case,  and 
make  a  report  to  the  owners  on  which  we  can  ask  for  emergency 
relief."  And  they  found  the  property  was  worth  in  round  numbers 
on  these  eliminations  and  others  which  occur  to  you,  $70,000,000. 

Now,  we  have  been  paying  taxes  for  years  on  a  special  franchise 
tax  valuation  of  $16,000,000,  leaving  out  all  the  other  questions.  Now 
there  we  have  $70,000,000  on  which  we  have  not  earned  one  penny 
for  our  stock,  and  on  the  reorganization  it  was  reduced  to  $17,500,000 
of  which,  in  round  numbers,  $16,000,000  is  in  our  treasury  and  some 
of  the  rest  of  it  in  the  hands  of  the  public.  We  have  not  earned  a 
dollar  on  that  from  the  day  we  took  it  over  on  the  first  of  January, 
1912. 

Now,  th.'i  physical  valuations  made  by  the  public-service  commis- 
sion in  1910  on  which  they  made  their  order  allowing  our  capital 
issues  in  1911  and '1912  indicated  at  least  $50,000,000  of  tangible 


I 


834       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       835 


property.  On  that  reorganization  were  issued  at  $30,000,000  of  in- 
come 5  per  cent  bonds  and  at  no  time  since  the  first  of  January, 
1912,  did  they  receive  tlieir  full  5  per  cent  interest  in  their  six 
months'  periods,  Takin^i:  the  calendar  year — in  the  year  1916  they 
either  received  it  or  so  near  to  it  that  it  was  regarded  as  practically 


and  odd  of  underlying  liens  on  the  various  owned  companies,  $21,- 
000,000  of  se<;urities  on  the  12  leased  line«,  and  $18,000,000  of  the 
first  fours.  In  other  words,  the  funded  debts  on  that  property  were 
only  $48,000,000,  and  yet  that  property  went  into  the  hands  of  a  re- 
ceiver on  the  20th  of  March  hist  and  the  first  mortgage  of  $18,000,000 
is  now  under  foreclosure. 

Now,  there  is  something  wrong  when  that  situation  arises  and  when 
under  such  conditions  there  is  any  talk  about  water.  I  never  have 
mentioned  the  question  of  the  securities  except  as  I  have  mentioned 
them  here  on  the  theory  that  everybody  knew  they  were  out  and  made 
a  bargain  knowing  that  they  were  out,  and  when  people  make  bar- 
gains under  those  conditions  they  or  their  successors  ought  to  be 
ashamed  of  themselves  to  repudiate  them. 

But  the  holding  company  has  notiiing  to  do  with  it.  I  do  not  need 
to  say  that  to  the  gentlemen  sitting  here.  The  question  is  the  invest- 
ment; and  under  the  statutes  of  the  State  of  New  York  it  is  the  value 
of  the  property  devoted  to  the  public  service  that  is  entitled  to  a  fair 
average  return,  having  due  regard  among  other  things  to  the  neces- 
sity of  reserving  out  of  earnings  a  provision  for  surplus  and  con- 
tingency. Now,  that  is  a  queer  phrase,  but  I  am  the  author  of  it. 
I  have  sat  with  the  legislature  in  every  revision  of  the  i)ublic-service- 
commission  law  year  after  year,  and  I  will  tell  you  for  a  moment 
just  how  that  came  about. 

The  law  of  the  State  of  Xew  York  from  1850  to  1910  provided  that 
rates  would  not  he  reduced  unless  during  the  preceding  year  the 
company  had  earned  more  than  10  per  cent  upon  the  capital  actually 
expended.  Now,  the  gentlemen  who  were  on  earth  during  that  time 
I  think  knew  a  great  deal  more  than  some  of  the  highbrows  that 
have  come  around  since,  and  I  think  you  will  agree  with  me.  (jov. 
Hughes  in  1009  refused  to  approve  the  consolidated  report  of  the 
revision  commissions  on  the  railroad  law  because  they  left  that  10 
per  cent  provision  in.  He  insisted  on  its  coming  out.  And  in  1910 
the  matter  came  up  and  we  had  a  general  revision  of  the  law.  And 
I  said  at  that  time,  and  with  all  due  regard  to  tlie  governor,  that  that 
was  not  good  business,  and  this  phrase  that  I  mentioned  to  you  was 
the  best  that  we  could  f^et  as  a  compromise. 

Now,  that  meant  Smythe  versus  Ames;  that  is  what  that  meant. 
It  did  not  mean  (>  per  cent.  It  meant  all  the  things  that  the  gentle- 
man who  preceded  me  has  said,  and  I  indorse  everything  he  has  said. 
It  means,  of  course,  you  have  got  to  have  something  to  attract  capital. 
You  have  got  to  keep  the  industry  going,  and  you  have  got  to  have 
provision  for  reserve,  and  we  have  not  been  able  to  get  those  things. 
So  I  say  to  you  it  is  not  the  fault  of  the  law. 

And  one  thing  which  I  should  have  said  to  Mr.  Warren  in  the  be- 
ginning in  this  rather  rambling  statement  I  will  say  now.    Possibly 


if  the  provision  which  obtains  in  many  of  the  States  for  filing  sched- 
ules and  having  a  hearing  afterwards  had  been  put  into  the  law  of 
1910  we  might  have  been  a  little  further  along,  and  when  we  get  the 
next  crack  at  the  public-service-commission  law^  something  of  that 
sort  I  think  ought  perhaps  to  be  put  in.    But  that  is  not  the  thing. 

Now,  I  have  told  you  I  have  eliminated  water.  I  have  shown  you 
•the  values  of  our  main  leading  property.  We  have  got  others  which 
I  will  not.  go  into  here.  I  am  not  saying  that  we  are  entitled  to  re- 
turns on  the  lines  perhaps  over  on  Long  Island  in  which  we  invested 
our  good  money,  but  we  invested  there  with  the  idea  that  we  would 
wait  until  that  borough  grew  up.  That  is  a  business  venture  and  we 
can  not  squeal  much  about  tliat.  So  I  merely  mention  it  to  call  your 
attention  to  the  fact  that  we  have  other  things  under  our  outstanding 
securities  than  the  things  I  have  specifically  mentioned. 

Commissioner  Sweet.  Suppose  you  laid  aside  all  interest  in  the 
investment  and  simply  looked  at  this  question  in  New^  York  from 
•the  standpoint  of  a  citizen  who  needed  this  service,  the  same  as  all 
citizens  do ;  wiiat  would  you  say  was  the  best  policy — I  am  eliminat- 
ing now  tlie  question  of  morals,  and  honesty  is  always  the  best  policy, 
but  the  best  policy  from  the  standpoint  of  the  citizen — for  the  city 
to  take  or  the  State  so  far  as  it  has  control? 

Mr.  QuACKENBusH.  Now,  Mr.  Sweet,  I  want  to  say  before  I  answer 
that  question,  lest  I  be  thought  to  be  absolutely  poisoned  with 
])rejudice  on  one  side,  that  I  began  my  career  serving  the  public • 

Commissioner  Sweet.  You  see,  I  am  absolving  you  from  prejudice. 

Mr.  QuAGKENiiusH.  I  kuow  you  are,  but  I  want  to  make  it  clear 
for  emphasis,  that  years  ago  I  was  city  attorney  of  the  city  of  Buf- 
falo. N.  Y.,  and  I  think  I  can  still  divest  myself  of  my  experience 
and  give  a  fair  answer  to  your  question.  And  there  is  not  an}^  doubt 
in  my  mind  that  even  if  there  be  a  receiver  appointed  of  the  Inter- 
borough  and  all  these  line,  you  can  not  get  the  service  the  people  are 
entitled  to  until  you  solve  this  question  by  increasing  the  rate  of 
fare. 

Now,  in  New  York  City  the  congestion — or  density  of  traffic  is  a 
better  word — is  such  that  the  troubles  in  Boston  and  other  places 
won't  count.  And  the  direct  answer  to  your  question,  without  cir- 
cumlocution, is  that  the  best  thing  for  the  citizens  generally,  par- 
ticularly for  the  ridei-s,  is  to  impose  at  once  an  8-cent  fare.  Now, 
we  are  perfectly  willing  that  the  cit}^  shall  take  1  cent  out  of  that  8 
cents  to  insure  it  gets  a  return  on  its  investment.  Our  president,  be- 
fore he  became  ill,  w^ent  before  the  board  of  trade  and  transportation 
and  authorized  them  to  transmit  to  the  board  of  estimates  through 
their  committee  an  offer  to  the  effect  that,  if  they  would  increase  the 
fare  to  8  cents,  we  would  agree  that  they  should  take  1  cent  out 
of  the  8.  Now,  1  cent  out  of  8  will  take  care  of  their  interest;  and 
that  we  would  waive  a  lot  of  things  which  you  are  not  interested  in. 
The  comptroller  did  not  receive  the  communication  and  said  that  they 
had  closed  the  situation,  so  I  am  informed,  when  they  denied  our 
application  of  December  31,  1918. 

Now,  that  railroad,  just  like  any  other  railroad,  can  not  render  the 
kind  of  service  that  is  needed  unless  it  has  an  adeqiuite  return. 

Commissioner  Sweet.  Are  ^ou  figuring  that  there  would  be  any 
falling  off  of  patronage? 


836       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  QuACKENBusH.  Yes;  we  are  figuring — and  in  this  we  have 
the  advice  of  distinguished  engineers  like  Stone  &  Webster,  Day  &. 
Zimmerman,  Barchiy,  Parsons  &  Clapp 

Commissioner  Meeker.  The  falling  off  would  be  very  slight  in 
New  York? 

Mr.  QuACKENBusH.  Well,  we  have  made  our  estimate  which  war- 
rants my  statement  to  you  that  it  would  be  perhaps  13  per  cent  the 
first  year  and  12,  11  j  and  so  forth,  because  conditions  in  New  York,, 
as  you  know,  are  unique — I  mean,  particularly,  Manhattan,  and 

Commissioner  Sweet.  Of  course,  you  understand,  Mr.  Quacken- 
bush,  that  this  commission  can  not  enter  definitely  and  distinctly 
into  local  problems. 

Mr.  QUACKENBUSH.  No ;  I  do  not  expect  you  will,  but  on  the  other 
hand 

Commissioner  Sweet.  We  are  looking  into  it,  and  we  are  listening 
to  you  with  a  great  deal  of  patience,  and  we  are  glad  to  hear  these 
local  problems  with  a  view  of  formulating  a  general  idea  of  the 
situation  throughout  the  country,  and  that  is  all  anybody  can  expect 
of  us. 

Mr.  QuACKENBusH.  I  appreciate  you  can  not  take  up  our  quarrels ; 
but  on  the  other  hand  if  you  do  not  know  the  facts,  you  are  not  in- 
formed. 

Commissioner  Saveet.  No. 

Mr.  QuACKENBusH.  And  you  are  going  to  hear  some  other  side  of 
these  facts  and  I  wanted  you  to  hear  my  side. 

Commissioner  Sweet.  Of  course,  you  understand  the  situation  gen- 
erally throughout  the  country  ? 

Mr.  QuACKENBusH.  I  do. 

Commissioner  Sweet.  And  do  you  think  that  there  is  a  function 
that  can  be  performed  by  this  commission  which  will  be  useful  to  the 
general  public? 

Mr.  QuACKENBusH.  This  commission  can  perform  the  function  of 
pointing  out  that  the  duty  of  public-service  corporations  or  of  the 

local  authorities  of  the  municipalities  is 

J    Commissioner  Sweet.  To  represent  the  public? 

Mr.  QuACKENBusH.  To  represent  the  whole  public;  that  is  this,  to 
be  courageous,  to  tell  them  the  truth :  That  rates  should  be  determined 
not  by  ancient  history  but  by  what  is  devoted  to  the  public  use;  to 
tell  them  that  the  public  can  not  have  good  service  or  safe  service  or 
convenient  service,  no  matter  who  owns  the  instrumentality,  unless 
the  public  or  the  public  treasury  pays  an  adequate  price  for  the 
service  rendered,  so  that  you  can  keep  it  up. 

Commissioner  Sweet.  Just  as  they  have  to  pay  for  commodities 
which  they  buy  for  the  table  or  anything  else. 

Mr.  Quackenbush.  Of  course,  it  is  tlie  same  thing.  We  are  not 
dealing  with  anything  else.  And  then,  and  the  main  thing,  and  if  I 
may  be  pardoned  for  an  expression,  but  I  think  it  will  be  interesting^ 
I  remember  perfectly  well  when  the  question  was  whether  we  were 
going  to  get  mto  the  war,  being  present  at  a  meeting  at  which  Joseph 
H.  Choate  and  Mr.  Root  and  others  discussed  the  question.  And  I 
remember  also  being  present  at  a  later  date,  and  a  day  or  so  before 
Mr.  Choate  died,  at  a  meeting  in  which  the  former  prime  minister  of 
France  was  present,  and  I  remember  that  what  Mr.  Choate  said  was^ 
"  If  you  are  going  to  do  something,  for  God's  sake  hurry  up."    Now, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      837 

that  is  what  we  are  asking,  and  that  is  the  message  that  I  think  you 
can  convey  to  these  public  bodies.  If  you  are  going  to  do  something, 
do  not  take  the  advice  of  the  governor  of  Massachusetts  but  hurry  up. 
Put  a  little  oxygen  into  the  patient  and  then  build  him  up ;  and  then, 
if  a  major  operation  is  needed,  perform  it. 

Now,  those  are  the  things  that  ought  to  de  done ;  and  the  only  thing 
that  you  can  do,  in  my  judgment,  that  will  be  of  any  value  to  us  and 
to  the  industry  generally  is  to  put  a  stop  to  the  cheap  talk,  what 
Governor  Smith  in  his  campaign  facetiously  said  was  "old  stuff." 
Now,  our  laws  recognize  the  statute  of  limitations  on  a  great  many 
things,  and  with  the  history  that  I  have  given  you  of  our  negotiations 
with  the  appointees  of  Governor  Hughes,  whom  I  have  criticized — 
and  the  time  is  never  going  to  come  when  public  servants  are  not  go- 
ing to  be  subject  to  criticism,  I  hope,  but  whom  I  have  always  said 
were  well-intentioned  men  and  certainly  were  absolutely  above  any 
suspicion  as  to  their  integi'ity — those  men  made  a  contract  with  us. 
It  was  ratified  by  Mayor  Gaynor  and  his  board  of  estimate  after  he 
had  made  a  campaign  against  having  anything  to  do  with  us.  Now, 
if  we  were  good  enough  to  contract  with  in  1913,  and  if  it  was  all  right 
for  us  to  be  the  instrumentality  of  getting  $200,000,000  put  into  this 
enterprise,  it  is  about  time  to  have  the  statute  of  limitations  run  on 
matters  which  were  done  by  William  C.  Whitney  and  his  colleagues 
in  the  late  eighties  or  early  nineties. 

We  have  gone  through  the  public-service  commission  fire  on  re- 
organization; we  have  been  through  a  receivership  on  the  surface 
lines,  and  we  are  back  again ;  and  the  thing  is  not  to  talk  buncombe 
but  to  recognize  facts;  and  I  say  you  can  help  on  that. 

Now,  as  to  the  other  thing — and  I  think  that  I  will  mention  this 
because  at  a  meeting  at  which  I  was  present,  among  some  of  the 
gentlemen  who  are  here  in  this  room,  one  of  the  members  said  that 
what  troubled  him  in  dealing  with  this  whole  matter  was  how  to 
meet  the  constant  statement  that  you  are  seeking  to  repudiate  your 
contracts,  and,  of  course,  that  view  does  prevail.  And  I  think  there 
this  body  may  do  a  service  if  you  will  get  the  public  to  see  that  after 
all  it  is  the  public  that  is  interested  in  the  question  of  rate ;  it  is  their 
business,  and  that  no  matter  if  20  years  ago  with  conditions  entirely 
different  the  local  authorities  of  some  little  village  or  some  big  city 
and  some  well-intentioned  but  ill-advised  corporation  managers  made 
contracts  that  no  longer  fit  the  case,  that  the  interest  of  the  people  is 
the  supreme  law,  and  that  if  the  time  comes  that  the  interest  of  the 
people  requires  a  modification  of  the  rate,  and  the  carrier  is  ready 
on  its  part  to  modify  them,  and  the  people  represented  by  their 
sovereign  representatives  in  the  legislature,  for  instance,  or  their  dele- 
gated bodies  are  ready  to  do  it  and  the  local  authorities  of  the  little 
town  or  the  village  or  small  city  or  medium-sized  cit}^  or  the  big  city 
come  up  and  say,  "We  make  a  contract,"  the  answer  is  that  the 
sovereign  people  represented  by  the  legislature  or  its  delegated  com- 
mission will  say  to  the  local  authorities :  "  That  contract  was  all  right 
as  between  you  and  that  carrier,  that  contract  probably  to-day  will 
be  recognized  in  the  courts  as  a  judicial  matter,  but  now  the  principals 
are  dealing  face  to  face,  and  I,  the  people  of  the  State,  do  not  any 
longer  need  your  service,  Mr.  Agent,  city,  town,  or  village ;  now  you 
just  step  aside  and  you  forget  your  little  petty  and  short-sighted 
vision  of  this  question,  and  I  will  make  a  bargain  with  the  carrier  that 


838       PROCEEDINGS  OF  FEDEJIAL  ELECTRIC  RAILWAYS  COMMISSION. 

wiU  be  in  the  interest  of  the  general  public,  whose  intei^st  after  all 
i«  the  only  concern  of  anybody.** 

Xow,  Lliat  view  has  not  been,  so  far  as  I  know,  very  much  stated.  I 
think  that  its  general  expression — it  is  well  founded  in  law — its  gen- 
oral  elucidation  will  be  very  helpful  in  educating  public  opinion, 
which  is  what  I  believe  is  the  functicai  of  this  body,  and  it  will  help 
those  local  authorities  and  those  courageous  public-service  commis- 
sions and  members  of  legislatures  and  governors  who  want  to  do 
their  duty  over  troublesome  hurdles. 

Now,  I  have  lots  more  ideiis  but  I  think  my  time  has  expired.  If 
tJiere  are  any  questions,  I  want  to  be  very  free  in  answering  them. 

The  Chairman.  Mr.  Quackenbush 

Mr.  Quackenbush.  Oh,  may  I  add— I  hate  to  interrupt  you,  Mr. 
Chairman,  but  my  talk,  I  ([uite  appreciate,  has  been  rather  vehement. 
Lest  you  should  thinlv  that  I  have  lived  a  quarrelsome  life  with  the 
public-service  commissioneis  I  want  to  say  to  you  that  with  all  the 
companies  that  I  have  represented  during  the  whole  period  of  the 
life  of  tlie  public-service  commission,  we  have  had  one  case  against 
us,  against  the  Interborough  Rapid  Transit  Co.,  for  penalty  for 
failure  to  render  service,  in  which  we  succeeded  at  the  trial  court. 
We  have  had  one  or  two  differences  of  opinion  in  which,  with  the 
exception  of  the  2-cent  fare  rate,  we  have  succeeded  in  the  cH>urts.  We 
ha\'e  been  represented  in  all  these  y^ars  as  defiant  of  the  public- 
service  commission.  We  have  been  represented,  not  by  them  alto- 
gether but  generally  by  public  officials,  by  public-spirited  citizens,  by 
some  of  the  newspapers,  as  defying  their  orders. 

We  took  the  New  York  Railways  Co.  on  the  1st  day  of  January, 
1912,  under  the  oiders  tliat  had  been  made  by  the  commission  when 
the  receivers  had  it  in  1908  and  1909.  They  never  made  a  new  order. 
We  operated  it  without  an  order  as  to  service,  and  there  was  no 
order  made  until  last  September,  when  the  commivssion  was  stam- 
l>eded  into  making  an  order  by  the  district  attorney  of  the  county, 
who  said — when  we  could  not  get  enough  men  and  were  hiring  women, 
and  everybody  knows  the  conditions  in  the  middle  of  the  summer — 
that  if  they  made  an  order  he  would  see  that  somebody  went  to 
jail  if  they  did  not  get  more  cars,  so  they  made  an  order.  I  want  you 
to  keep  that  in  mind  in  connection  with  what  I  have  said;  and  it  is 
that  we  have  rendered  such  service  in  the  city  of  New  York  on  tlie 
surface  lines  that  they  did  not  make  an  order,  and  we  have  rendered 
such  service  on  the  elevated  and  subway  lines  that  they  ha\'e  never 
had  to  make  an  order.  They  have  made  a  general  order  and  we 
have  had  conferences  and  we  have  agreed,  with  one  single  exception, 
and  my  personal  relations  with  the  gentleman  whom  I  have  criti- 
cized are  agreeable  and  satisfactory.  Wlvether  they  will  continue 
so  I  do  not  know  and  I  do  not  care. 
Now,  Mr.  Chairman. 

The  Chairman.  In  a  general  way,  Mr.  Quackenbush,  your  testi- 
mony this  afternoon  has  been  quite  a  serious  indictment  of  the  ad- 
ministration of  the  law  in  New  York  City. 
Mr.  Quackenbush.  Yes. 

The  Chairman.  Has  that  criticism  been  directed  toward  the 
public-service  commission  particularly  or  all  of  the  different  olficers 
who  have  to  deal  with  your  public  problems? 


PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       839 


^Ir.  Quackenbush.  The  pubJic-service  conwnission  and  board  of 
estimate,  combined. 

The  Chairman.  Combined? 

Mr.  Quackenbush.  Yes. 

The  Chairman.  Has  it  not  been  a  well-accepted  fact  in  New  York 
•City  that  you  had  a  5-cent  contra>ct — I  mean  a  5-cent-fare  contract — 
and  that  that  imposed  an  obligation  which  the  city  could  force  you 
to  live  up  to? 

Mr.  Quackenbush.  That  has  been  preached  but  it  has  not  been 
an  accepted  fact.  Every  intelligent  newspaper  has  aot  accepted 
that  as  the  fact.  They  have  recognized  what  I  undertook  to  say 
here  a  few  minutes  ago — that  a  bargain  made  under  tlie  circum 
stances  which  I  have  described,  which  produced  no  return  to  the 
city's  investment  required  revision  in  the  interest  of  the  taxpayers 
of  tlie  city,  leaving  out  entirely 

The  Chairman.  But  has  it  not  been  the  law  as  interpreted  bj  the 
courts  of  that  State,  at  least  up  to  a  recent  date,  that  a  franchise  of 
that  kind  was  an  established  affair? 

Mr,  Quackenbush.  That  contract  regarding  the  rapid-transit 
lines  has  never  be^n  the  subjex^t  of  litigation  in  any  court  in  the 
State.  What  you  have  in  mind  is  the  decision  of  the  court  of  ap- 
peals in  the  Rochester  case. 

The  Chairman.  Yes. 

Mr.  Quackenbush.  Which  has  no  relation  whatever  to  the  rapid- 
transit  situation. 

The  Chairman.  But  did  not  the  Eochester  case  decide  that  the  city 
had  no  right  to  relieve  the  company  of  a  5-cent  charge  ? 

Mr.  Quackenbush.  No.  The  Rochester  case  decided  that  the  act 
of  1910  did  not  definitely  and  clearly  convey  to  the  commi&sion 
jurisdiction  to  fix  rates  of  fare  in  controvention  of  the  terms  of 
a  franchise  granted  since  the  amendment  of  the  constitution  in 
1875.  They  did  not  sav  that  they  had  no  right  to  do  it.  They 
simply  said  that  in  precise  language  they  had  not  done  it,  and  then 
imme<i lately  the  legislature  was  requested  to  do  it,  and  since  tliat 
time  several  decisions  of  the  court  of  appeals  have  been  handed 
down  clearly  showing  that  they  would  hold  that  the  legislature 
had  the  power.  Now  that  is  all  there  was  in  the  Rochester  case. 
And  Judge  Hughes  made  the  argument  before  the  joint  committee 
of  the  senate  and  the  assembly  on  the  12th  day  of  March  of  this  year 
right  along  the  lines  I  am  now  stating  to  you  and  expressed  as 
his  own  opinion — and  he  was  the  author  of  the  law — that  the 
court  of  appeals  had  clearly  irl^mated  to  the  legislature  that,  if 
they  acted,  they  did  not  possess  the  power  to  act;  and  their  last 
decision  within  this  week  I  liav«  in  my  pocket,  and  I  suppose  you  have 
seen  it. 

The  Chairman.  But  until  a  recent  date  the  public-service  com- 
mission has  been  of  the  opinion  that  they  did  not  have  the  right  to 
modify  that  contract;  is  not  that  so? 

Mr.  Quackenbush.  No.  I  am  glad  you  asked  that  question.  As 
soon  as  that  decision  came  down,  they  were  of  the  opinion  in  New 
York  that  they  could  not  take  any  action  on  anything,  and  I  con- 
vinced them  that  right  within  the  term,s  of  that  opinion  they  had 
power  over  transfei*s,  because  they  were  of  statutory  origin;  and 


840       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

they  wrote  an  opinion  that  they  did  have  the  power,  and  it  is  a  mat- 
ter of  record,  but  tliey  never  exercised  the  power. 

The  Chairman.  When  was  that  opinion  written? 

Mr.  QuACKENBusH.  The  decision  in  the  Rochester  case  came  down 
on  the  5th  of  April,  1918,  and  I  immediately  presented  the  thing 
to  the  public  service  commission  the  latter  part  of  April  or  May, 
1918,  and  it  is  in  the  Third  Avenue  case,  and  you  will  find  it  cited 
in  the  report.  I  should  say  within  a  couple  of  months.  It  took  some 
time  to  figure  it  out,  but  within  a  couple  of  months  they  reached 
that  conclusion  and  made  their  decision.  But  they  said — and  with 
this  I  agree — that  it  would  be  much  better  if,  instead  of  their  trying 
to  give  an  unbalanced  relief  by  eliminating  transfers  here  and 
there,  we  could  get  the  consent  oi  the  board  of  estimate,  to  let  them 
decide  the  whole  question.  And  we  immediately  applied  for  their 
consent,  which  they  declined;  and  then  we  went  back  to  the  commis- 
sion, and  I  said  to  them  in  language  that  is  as  plain  as  I  have 
said  here  to-day,  "Do  something.  We  are  on  the  rocks;  we  are 
going  to  be  broke.  Give  us  a  charge  for  transfers  that  will  help  us 
along."  And  the  last  commission  went  out  of  office.  The  case  closed 
in  November  and  they  went  out  of  office  on  the  8th  day  of  May  with- 
out its  being  decided, 

Tlie  Chairman.  You  claim  you  have  been  very  closely  in  contact 
with  the  commission  from  1907  up  to  date? 

Mr.  QuACKENBusH.  I  do  not  believe  anybody  has  been  any  closer 
except  their  own  organization. 

The  Chairman.  When  was  the  first  time  your  railroads  asked  to 
have  the  fares  increased? 

Mr.  QuACKENBusH.  In  May,  1917,  as  soon  as  we  got  into  the  war. 

The  Chairman.  Up  to  that  time  you  had  been  operating  upon 
favorable  terms? 

Mr.  QuACKENBUSH.  We  had  been  as  to  everything  except  the 
transfers.  Xow  as  to  the  transfers,  we  started  the  education  of  the 
commission  in  1907,  and  had  a  stniggle  with  them  right  straight 
along,  so  that  the  fare  question — and  by  that  I  mean  the  rate  ques- 
tion, our  3J-cent  rate  which  we  had — has  been  a  subject  of  testi- 
mony— well,  going  from  here  up  there  [indicating],  3  feet  of  it, 
extending  over  months  and  months  at  a  time,  and  they  all  the  time 
were  going  to  extend  the  transfers.     Does  that  answer  that  question  ? 

The  Chairman.  Yes. 

Commissioner  Beall.  You  are  familiar  with  that  decision  given 
last  week  in  Buffalo? 

Afr.  Quackenbush.  Yes.  You  will  find  I  am  on  the  brief  in- 
tervening. 

Commissioner  Beall.  Some  people  think  that  will  apply  to  New 
York  and  others  do  not. 

Mr.  Quackenbush.  Well,  I  think  that  it  indicates  the  need  of 
additional  legislation  and  that  the  legislation  will  be  sustained. 

Commissioner  Beall.  Do  you  think  it  applies  to  New  York  City 
or  do  you  not  care  to  express  an  opinion  ? 

Mr.  Quackenbush.  Oh,  I  am  willing  to  express  an  opinion  on 
anything  you  ask  me.  I  think  it  applies,  but  not  to  the  extent  of 
giving  the  adequate  relief  that  we  ought  to  have.  I  think  it  en- 
larges considerably  the  limited  jurisdiction  possessed  by  Commis- 
sioner Nixon,  and  I  hope  to  be  able  to  pei-suade  him  and  his  advisers 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       841 

as  to  the  correctness  of  my  views,  but  it  is  not  going  to  solve  the 
thing. 

The  Chairman.  I  presume  regulation  is  not  in  a  finished  state  yet. 
In  New  York  you  have  one  public-service  commissioner,  Mr.  Nixon. 

Mr.  Quackenbush.  Yes. 

The  Chairman.  In  view  of  the  great  mass  of  detail  work  which 
must  come  before  the  commissioner  for  his  judgment,  do  you  think 
it  possible  for  one  man  to  successfully  and  properly  officiate  as  the 
commissioner  to  regulate  those  large  transportation  and  other  utility 
questions? 

Mr.  Quackenbush.  Well,  I  would  say  immediately,  no;  but  you 
must  bear  in  mind,  Mr.  Chairman,  that  the  amendment  of  this  year 
created  a  single  commissioner,  but  authorized  him  to  appoint  depu- 
ties, which  he  has  done,  and  those  deputies  fulfill  exactly  the  func- 
tions that  were  fulfilled  by  the  associate  commissioners  under  the 
old  act.     It  is  the  same  thing  under  a  different  form  of  organization. 

Commissioner  Meeker.  How  many  deputies  have  been  appointed? 

Mr.  Quackenbush.  He  has  appointed  Mr.  Glennon  and  Mr.  Bar- 
rett so  far.  I  do  not  recall  any  others.  My  recollection  is  that  he 
has  authority  to  appoint  at  least  three.  But  the  idea  of  it  was  to 
economize.  Commissioners'  salaries,  as  you  know,  before  were 
$15,000  a  year  for  five,  making  a  salary  list  of  $75,000,  and  the  salary 
of  the  commissioner  himself  was  cut  down  and  the  deputies'  cut 
down  to  $7,500. 

Whether  that  is  wise  remains  to  be  seen.  I  do  remember  on  that 
subject — and  it  is  pertinent  to  a  question  which  was  asked  the  gov- 
ernor of  Massachusetts— that  when  the  question  of  the  salaries  of 
the^original  conimission  was  under  discussion  in  the  legislature  in 
1907,  it  w^as  pointed  out  by  some  opposed  to  so  high  a  salary  as 
$15,000,  which  meant  $150,000  for  the  two  commissions,  that  Gov. 
Hughes  recommended  that  because,  notwithstanding  that  the  sal- 
aries of  the  judges  of  the  court  of  appeals  of  the  State  were  only 
$12,000,  Gov.  Hughes  would  appoint  to  the  commissions  men  of 
such  standing  and  ability  that  their  decisions  would  be  accepted 
by  the  carriers,  the  utilities,  and  by  the  public  as  final  and  it  would 
be  unnecessary  to  go  into  court  to  review  them ;  he  was  going  to  get 
men  of  the  highest  grade,  and  I  have  no  doubt  the  governor  in- 
tended to  do  so,  and  as  I  have  said,  so  far  as  character,  integrity,  and 
intelligence,  he  succeeded,  but  he  did  not  succeed  in  getting  men  who 
held  the  scales  even. 

The  Chairman.  If  the  railroad  and  the  public  officers  should 
modify  the  contract  to  an  8-cent  fare,  is  there  any  appeal  from  that 
contract  on  the  part  of  the  public  ? 

Mr.  Quackenbush.  No  ;  not  if  it  is  by  agreement. 

The  Chairman.  That  forecloses  the  question;  they  can  not  even 
attack  the  legality  of  the  rate  in  court  ? 

Mr.  Quackenbush.  Oh,  yes ;  I  am  very  glad  you  asked  that  ques- 
tion. 

The  Chairman.  I  wanted  to  know  that. 

Mr.  Quackenbush.  Yes ;  I  can  answer  that  in  a  minute.  Since  the 
separation  of  the  functions  of  regulation  and  of  construction  and  con- 
tracting, which  formerly  had  been  combined  in  the  public-service 
commission,  Mr.  Nixon  now  is  vested  only  with  jurisdiction  to 
regulate — that  is  the  rate-making  power  of  the  State  of  New  York. 
160643°— 20 54 


S42        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIf. 

Mr.  Delaney  is  the  contracting  agent  of  the.  city,  and  an  amendment 
to  the  contract  would  be  made  by  Mr.  Delaney ;  and  assinning  now  the 
general  view  that  prevails,  but  not  conceding  its  correctness,  with 
the  approval  of  the  board  of  estimate  and  apportionment  and  our- 
selves. That  is  the  contract  part.  Then  we  nnist  go  in  on  the  rate- 
making  feature  and  have  its  fairness  determined  by  Mr.  Nixon  in  an 
ordinary  rate  case,  which  is  subject  to  review^  on  the  complaint  of 
anvboJy  in  the  appellate  division  on  cei*tiorari. 

I'he  Chairman.  So  there  is  some  remedy  in  court? 

Mr.  QuACKENBusH.  Yes ;  I  was  hurried  in  my  answer,  because  for 
the  moment  I  forgot  about  the  fact  that  a  person  could  intervene,  as 
you  know,  under  the  Stat«  and  make  a  complaint  that  the  rate  is 
unduly  burdensome  upon  the  public  and  have  an  ordinary  rate  case 
heard  and  have  his  day  in  court  on  ceitiorari.  There  is  not  any 
danger  of  any  job,  in  other  words. 

The  Chairman.  I  do  not  care  to  examine  on  the  mass  of  figures 
Tou  have  presented.  It  is  ratlier  an  intricate  situation  involved  in 
i^ew  York. 

Mr.  QuACKENBUSH.  Well,  I  did  not  mean  to  go  into  a  mass  of 
figures,  but  I  wanted  you  to  see  that  there  are  certain  principles  un- 
derlying it. 

The  Chairman.  I  am  very  glad  to  have  them  in  the  record. 

Mr.  Quackenbush.  If  I  have  made  that  clear,  I  have  done  what 
I  sought  to  do. 

Mr.  Warren.  We  are  very  much  obliged,  Mr.  Quackenbush. 

(Witness  excused.)  •  ^ 

Mr.  Warren.  I  trust  the  commission  fully  understands  that  in 
putting  on  evidence  with  respect  to  particular  situations,  we  are  not 
doing  it  with  the  exj^ectation  that  the  commission  will  endeavor  to 
cure  them,  but  simply  as  isolated  instances  of  the  general  situation 
we  want  to  bring  before  you. 

At  this  point,  if  I  may,  I  should  like  to  put  in  a  letter  from  Mr. 
Thomas  A.  Edison.  It  happens  to  bear  on  the  very  question  of  con- 
tract that  the  last  witness  discussed : 

Obange,  N.  J.,  July  22,  1919, 
Federal  Electric  Railways  Commission, 

Washington,  D.  C. 

Gentlemen  :  I  Imve  been  very  much  interested  in  tlie  progress  made  by  the 
electric  railways  since  I  first  built  one  at  Menlo  Park,  N.  J.,  in  1880. 

The  systems,  operation,  and  apparatus  have  now  reached  great  perfection. 
Some  of  the  greatest  engineers  in  the  country  liave  given  almost  the  whole  of 
tlieir  lives  to  attain  this  end.  The  end  is  not  yet  reached.  The  great  trunk 
lines  will,  in  time,  be  added  to  the  electric  domain.  It  is  to  the  greatest  ad- 
vantage to  the  public  that  every  encouragement  be  given  to  those  who  have 
and  will  still  further  act  as  pioneers  in  the  further  perfection  of  this  flexible 
and  highly  economical  system  of  power  distribution,  whereby  our  natural 
fuels  are  conserved  to  a  greater  extent  and  all  the  power  of  waterfalls  utilized. 

At  the  present  time  the  electric-railway  industry  has  reached  a  serious  stage. 
Everything  has  stopp>ed  advancing.  Countless  millions  of  securities  based  on 
this  industry  are  held  by  conservative  investors,  families,  etc.,  who  are  pos- 
sesseil  of  a  dread  for  the  future.  No  more  capital  can  be  obtained,  except  in 
spe<'ial  cases. 

The  ironclad  contracts  betwe<*n  the  roads  and  the  cities  made  in  the  pionet^r- 
ing  days  under  normal  conditions  have  no  protective  clause  against  the  greatest 
change  that  has  taken  place  in  centuries,  due  to  the  World  War.  The  munici- 
palities can  exact  their  pound  of  flesh  if  they  so  desire,  with  the  ultimate 
bankruptcy  of  these  organizations,  but  the  spirit  that  is  now  abroad  in  the 
world  is  against  this.    We  are  now  all  trying  to  play  fair.    If  suffer  we  must, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       843 

let  us  all  suffer  alike.     If  prosperity  comes,  all  should  participate  In  a  like 
manner. 

I  hope  the  commission  will  succeed  in  placing  this  industry  on  its  feet  again, 
aiiis,  in  its  turn,  will  stop  stagnation ;  give  the  roads  stability  to  raise  plenty 
of  capital ;  new  extensions  will  go  on ;  new  things  will  be  perfected  and  intro- 
duced. The  restless  Americans  who  work  all  day  and  far  into  the  night  are 
forever  pushing  higher  and  higher  that  great  line  of  30"  angle,  illustrating^  the 
rise  of  the  American  Nation  in  wealth  and  iK)wer.  '^ 

Yours,  very  truly, 

Thos.  a.  Edison. 
STATEMENT  OF  MR.  JAMES  0.  CARH. 

Mr.  Warrex.  Your  full  name  is  James  O.  Carr,  I  think? 

Mr.  Carr.  Yes,  sir. 

Mr.  Warren.  And  you  reside  where,  Mr.  Carr? 

Mr.  Carr.  Pittsburgh,  Pa. 

Mr.  Warren.  And  you  were  one  of  the  public-service  commis- 
sioners in  New  York  of  the  up-State  district  between  what  dates « 

Mr.  Carr.  May  1,  1915,  to  February  1, 1918. 

Mr.  Warren^  And  before  that  in  what  were  you  en^a^d? 

Mr.  Carr.  Well,  for  about  20  years  I  was  very  actively  engaged 
in  the  operation,  construction,  and  reorganization  of  public  utilities 
street  railroads,  electric  light  and  gas  companies.  ' 

Mr.  Warren.  And  for  about  how  long,  Mr.  Carr? 

Mr.  Carr.  For  about  20  years. 

Mr.  Warren.  So  that  your  experience  ran  back  pretty  nearly  to 
tlie  electrification  of  horse  railroads  and  the  construction  of  new 
electric  railways;  did  it  not? 

Mr.  Carr.  The  electrification  generally  of  street  railroads  beo-an 
about  1890,  as  I  recall  it. 

Mr.  Warren.  And  your  connection  with  the  work  began  about  five 
yeai*s  later? 

Mr.  Carr.  No;  I  was  connected  -^ith  it  before  that  time,  but  not 
so  actively. 

Mr.  Warren.  There  is  only  one  point  on  this  that  I  want  to  get 
from  Mr.  Carr,  and  that  is  as  to  the  extension  of  rides  in  the  earlier 
days  of  the  business. 

Mr.  Carr,  did  the  electrification  of  street  railways  generally  in- 
volve the  construction  of  extensions  affording  the  public  longer  rides 
for  the  old  nickel  fare  than  they  had  formerly  enjo^^ed? 

Mr.  Carr.  Very  much  so. 

Mr.  Warren.  Would  you  give  the  commission  any  particular 
example  of  that  which  you  may  recall  ? 

Mr.  Carr.  Why,  I  think  that  is  true  of  practically  every  city  in 
the  country;  and  I  imagine  every  man  on  this  commission  recognizes 
that  fact.  I  recall  very  specifically  one  case,  and  that  was  the  city 
of  Schenectady,  N.  Y. 

Mr.  Warren.  AVon't  you  tell  briefly  just  what  happened  there? 

Commissioner  Beaf.l.  Are  you  the  man  who  used  to  be  with  the 
Schenectady  company  ? 

Mr.  Carr.  I  am  the  same  man ;  yes. 

Commissioner  Beall.  I  have  not  seen  you  for  a  good  many  years. 

Mr.  Carr.  You  remember  the  Schenectady  property  also  ? 

Commissioner  Beall.  YeSi 


844       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Carr.  At  that  time,  in  1890,  the  Schenectady  Railway  con- 
sisted of  a  horse  road  about-I  think,  all  told,  less  than  3  miles  long-- 
lust  one  line  of  road,  no  branches  or  extensions;  and  the  fare  on  that 
road  was  5  cents,  fixed,  I  believe,  by  the  original  franchise  which 
was  granted  in  1886.  That  road  was  electrified  in  1890.  it  con- 
tinued to  operate  as  an  electric  road  from  1890  to  1900,^  at  which 
time  the  propei-ty  was  acquired  by  the  General  Electric  Co.  in  con- 
nection with  its  development  at  Schenectady. 

It  was  absolutely  essential  for  it  to  have  transportation  facilities 
for  the  emploveesin  that  city.  The  road  was  developed  from  that 
time  from  1900  to  1905,  from  around  3^  miles  of  track  to  110  miles. 
That,  of  course,  included  interurban  lines,  but  the  city  lines  com- 
prised, as  I  recall  them,  about  26  miles  of  track.  And,  of  course, 
the  city  lines  as  they  were  extended  formed  a  paii:  of  the  interurban 
lines.  So  that  the  result  was  that  in  that  citv  in  particular,  where 
the  passenger  had  a  ride  of  around  3  miles  if  he  took  the  entire  rid© 
in  1900,  in  1905  and  since  that  time,  he  had  a  ride  if  he  desired  it  of 
10  miles,  and  in  some  instances— well,  approximately  10  miles  for  a 
nickel,  and  he  could  not  only  take  it  in  one  direction,  but  he  could 
take  it  in  half  a  dozen  directions.  .         j.  • 

Now  that  is  one  concrete  illustration  of  the  extension  of  service 
with  no  increase  of  fare,  and  that  has  been  true  all  over  the  country. 
The  5-cent  fare  was  a — well,  it  was  a  motto,  almost  a  household 
motto ;  you  can  ride  on  the  street-cars  for  a  nickel. 

Mr.  Warren.  Do  you  remember  the  Boston  situation? 

Mr.  Carr.  Yes;  I  used  to  live  in  Boston. 

Mr.  Warren.  I  thought  you  did.  That  consisted  before  electrifi- 
cation of  a  number  of  different  horse-railroad  lines,  did  it  not? 

Mr.  Carr.  Yes.  I  remember  in  the  old  days  of  riding  to  Brighton 
on  the  horse-car  from  Boston  and  nearly  freezing,  and  its  taking  a 
period  of  one  and  a  half  to  two  hours. 

Mr.  Warren.  And  keeping  your  feet  warm  if  you  could  ? 

Mr.  Carr.  In  the  hay ;  yes. 

Mr.  Warren.  Before  they  were  merged,  the  rate  in  Boston  was  5 
cents  with  a  3-cent  charge  if  any  person  went  from  one  of  the  radiat- 
ing lines  to  another ;  is  that  the  fact  ? 

Mr.  Carr.  I  do  not  recall  the  fact  as  to  the  transfers  on  the  horse 
lines,  but  after  the  lines  there  were  electrified,  there  was  a  3-cent 

charge  for  transfers.  ^      .^     ^  \    n 

Mr.  Warren.  And  that  was  subsquently  removed,  after  electrifa- 

Mr.  Carr.  I  do  not  remember,  because  I  moved  aw  ay  from  Boston 

Mr.  Warren.  But  do  you  know  that  the  lines  were  extended  very 

greatly  within  the  city  ?  ,         ,      ,       i.  t^    . 

Mr.  Carr.  Oh,  very  greatly,  all  over  the  suburbs  of  Boston. 

Mr!  Warren.  Now  you  have  been  a  public-service  commissioner 
and  have  had  experience  in  that  position.  Will  you  briefly— and  this 
is  the  only  other  subject  on  which  we  have  called  Mr.  Carr,  Mr.  Chair- 
nian— state  to  the  commission  what  effects  you  have  observed  either 
on  the  system  or  on  the  administration  of  supervision,  and  what 
chanties  you  would  suggest  better  to  meet  the  situation  which  I  sup- 
pose "you  with  others  would  say  exists  to-day  in  the  street-railway 

world. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       845 

Mr.  Carr.  Well,  when  I  left  the  public-service  commission  I  left 
It,  as  I  assumed,  for  good;  and  I  have  not  given  any  thought  to  the 

TJnncJ  r^'  ^^"^  ^'"^f    ^-  ^^^^"'"^  I  "^^y  be  somewhat  diffefent  f rom 
a  good  many  men  who  sit  on  public-service  commissions.     I  have 

coinmiS'^^^  ^  ^''^^^  many  things,  and  my  idea  about  a 

cheTheiaw  commission  should  have  full  power  to  exer- 

h.l  f^l"^  the  good  fortune-as  I  thought  at  the  time,  but  mv  pride 
New  YnV-  ^l\''"''~^?  have  written  the  decision  in  the  State  of 
New  lork  in  the  second  district  commission,  giving  authority  to 
railroads  to  increase  any  fare,  and  I  thought  I  had  done  a  very  re^ 
markable  piece  of  work.  I  spent  the  whole  summer  on  it,  and  the 
commission  was  unanimous  on  the  proposition.  It  arose  out  of  the 
plight  winch  a  very  small  street  railroad  found  itself  in  down  on 
Long  Island. 

Mr.  Warren.  May  I  interrupt  there  with  just  one  question?  Is 
It  your  ex'perience  or  observation  or  judgment  that  small  companies 
are  in  just  the  same  plight  ?  ^ 

Mr.  Carr.  Oh,  they  are  all  the  same. 

Mr  Warren.  There  is  no  difference  between  the  small  companies 
and  the  city  companies.     ]\  ow,  you  may  go  on  with  that  case. 

Mr.  Carr    As  I  recall  it,  we  had  this  matter  before  us  all  of  the 
sunimer  of  191  i .    There  was  an  association  of  the  railway  companies 
in  New  York,  m  which,  I  think,  some  of  the  companies  in  the  first 
district  participated    endeavoring  to  impress  upon  our  commission 
the  necessity  for  relief  to  the  corporations.     It  was  an  organized 
propaganda  or  an  organized  effort  on  the  part  of  the  corporations 
to  make  us  know  or  realize  that  more  money  was  required  or  would 
be  required  by  the  street  railroads  to  enable  them  to  perform  their 
service.     And  after  the  hearings  were  given  during  the  summer 
to  the  street  railroad  committee  presenting  general   propositions 
no  specific  data  with  relation  to  the  operations  of  any  particular 
company,  but  conditions  in  general  with  respect  to  wages,  cost  of 
material  and  things  of  that  sort,  we  were  able  to  get  down  to  the 
consideration  of  certain  specific  cases  which  had  been  filed  by  the 
various  companies  with  the  commission.     In  fact,  at  that  time  I 
Uiink  the  companies  in  Rochester,  Syracuse,  Utica,  Albany   Ithaca 
Binghamton,  Elmira,  Buffalo,  Poughkeepsie,  Kingston    ind  some 
other   roads   m   the   lower  district   had   filed   appllcationrfor  Tn! 
creased  rates.     And  as  the  result  of  the  hearing  which  we  had— 
we  started  m  immediately  with  hearings  after  the  committee  had 
finished  with  its  presentation  of  facts— I  was  able  to  brinir  to  a 
point  where  It  was  ready  for  determination  several  of  the  cases 
that  involved  the  fewer  intricacies-that  is,  the  smaller  companies 
had  a  concrete  state  of  facts  as  to  which  there  was  no  dispute  and 
as  to  which  the  valuations  could  be  readily  determined,  which 
of  course,  did  not  apply  with  the  larger  cities.    And  we  made  one 
case  the  case  upon  which  to  rest  our  determination,  which   was 
known  as  the  Huntington  case;  and  we  decided  in  that  case  that  not- 
withstanding the  statutes  in  the  State  of  New  York,  we  had  the 
right  and  the  right  had  been  delegated  to  us  by  the  legislature  to 
increase  the  rate  of  fare  to  the  corporation  if  it  was  entitled  to  an 
increase  in  order  to  live. 


i)i 


l 


845       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION-. 

Mr.  War!«:n.  And  that  notwithstanding  a  fixed  5-cent  fare  in  the 

f  m  nc  h  i  se . 

Mr.  Carr.  And  that  notwithstanding  a  fixed  5-cent  fare.  My 
riew  of  that  apparently,  in  whicli  I  am  alone,  except  the  four  com- 
niissionei-s  who  stood  with  me  in  that  case,  was  that  the  statute  did 
not  mean  that  the  mimicipality  had  a  right  to  l^x  a  fare  for  all 
time  as  a  condition  for  giving  its  consent  to  the  oi>eration  by  a 
sti-eet  railroad  in  the  streets  of  a  municipality  as  against  the  State 
itself.  In  other  words,  we  held  that  the  State  was  supreme  when 
it  came  to  the  question  of  determining  .what  rate  a  public  utility 
should  charge.  We  then  decided  on  that  state  of  the  law  from  our 
standpoint,  from  all  the  decisions  of  the  courts,  with  one  exception, 
the  Westchester  case,  and  basing  our  i^osition  on  the  cases  that  had 
been  decided  bv  the  Supreme  Court  of  the  United  States  in  soine 
instances,  that  we  had  the  power  to  grant  an  increase,  and  we  did 
giant  the  increase  in  that  case  and  numerous  others. 

Mr.  Warrex.  Well,  the  court  sustained  your  view  that  the  legis- 
lature was  supreme  ? 

Mr.  Carr.  No.    .      , '  ,     ,     •  ,  ^ 

Mr.  Warren.  Oh,  I  thought  they  held  simply  that  the  legislature 
had  not  in  vour  public-service  law  clearly  delepted  that  authority. 

Mr.  Carr.  I  do  not  know  what  the  real  decision  was  beciUise  I 
left  the  commission  before  the  case  was  decided,  and  I  have  never 

seen  it. 

The  Chairman.  The  commission  will  adjourn  at  this  point  until 

8  o'clock  to-night. 

Mr.  Carr.  I  have  to  leave  here  at  9.*25. 

Mr.  Warren.  I  think  we  can  get  you  off  on  that  train. 

(At  5  p.  m.  an  adjournment  was  taken  to  8  p.  m.) 

EVENING  SESSION. 

The  hearing  was  resumed  at  8  o'clock  p.  m. 

STATEMENT  OF  ME.  JAMES  0.  CAKE— Continued. 

Mr.  AVarren.  I  judge  from  what  you  were  saying,  Mr.  Carr.  ]>e- 
fore  the  recess,  that  one  thing  you  think  should  be  remedied  is  the 
law  under  which  the  commissions  act,  so  that  in  cases  where  they 
have  not  jurisdiction,  either  because  of  contractual  franchises  or 
otherwise,  tliev  should  be  given  that  jurisdiction  over  rates,  and  if 
the  constitutions  of  the  States  interfere  with  the  giving  of  such 
jurisdiction,  vou  think  the  jiublic  interests  would  be  served  by  chang- 
ing the  constitutions,  so  that  authority  might  be  given  the  commis- 
sions: is  that  so? 

Mr.  Carr.  I  believe  that  if  public-service  coriX)rations  are  to  be 
regulated  bv  regulating  commissions,  they  j^hould  have  full  power  to 
rc^ilate  them.  I  have  in  mind  particularly  the  New  York  law  under 
which  we  were  operating,  which  gave  the  commission  every  ix)wer 
that  a  regulating  body  could  possibly  have,  so  far  as  service  was  con- 
cerned. There  was  lio  limit,  practically,  to  what  could  be  required, 
biit  goinir  along  with  that  there  was  not  the  same  power  to  provide 
the  means  for  the  corporation  to  get  the  money  to  make  tliose  im- 


PROCEEDINGS  OP  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       847 

provements,  if  improvements  were  required,  or  to  provide  such  other 
expenses  as  might  be  necessary  to  give  the  service  tliat  the  public  was 
entitled  to,  and  which  it  demanded. 

Mr.  Warren.  Tliat,  in  your  judgment,  is  just  as  essential— the  pos- 
session of  that  power  is  just  as  essential  as  the  power  over  service: 
that  one  without  the  other 

Mr.  Carr.  One  without  the  other  makes  it  absolutely  incomplete. 
Mr.  W  ARREN.  1  es.  J  L 

Mr.  Carr  That  law,  as  it  now  stands,  gives  every  power  to  the 
commission  to  reduce  fares,  but  it  does  not  give  them  power  to  in- 
crease fares  when  increases  are  necessary,  and  absolutely  required  in 
order  to  enable  the  corporation  to  perform  its  functions! 

31r  >>  ARREx.  >ow.  in  view  of  the  present  emergencv,  which  has 
been  testihed  to  by  various  people  here,  do  you  think  it  is  essential 
that  some  immediate  relief  should  be  furnished  to  many  of  the<e 
street  railway  companies?  ^ 

\\^'  w^^'  ^^'^^  ^^  ^  ^ ^^'  ^^^^^  question. 

Mr.  V\  ARREN    Well,  you  qualify  it  in  your  answer. 

Mr.  Carr.  Of  course  whether  or  not  there  should  be  immediate 
action  ,s  a  question  of  fact :  and  that  fact.  I  believe,  is  easily  demon- 
stiated  in  most  cases  to  prove  that  the  street  railways  throughout 
the  country  to-day,  in  most  instances,  are  barely  able  to  earn  therr 
operating  expenses.  I  do  not  believe  there  is^  hardly  any  in  th^ 
coimtrv  that  is  ab^e  to  earn  a  return  on  its  capital  invested. 

oJ'uLa'f?''-^'''  ^"^  ?•''"  ^^"'^  ^*'^*  "^^""y  ^^  ♦l^^^^  a^e  really  not 
eainmg  tlieir  operating  expenses,  properly  defined,  includiW  a 
proper  allowance  for  depreciation  of  the  plant?  tiuuin^    a 

Mr.  Carr.  I  think  there  is  no  question  about  that. 

31r.  W  ARREN.  Well,  under  those  circumstances,  it  would  seem  to 
he  necessary  that  they  should  get  some  kind  of  quick  relief  even 
t^iough  of  a  temporary  character:  would  it  not? 

Mr.  Carr.  Yes;  I  think  that  is  true:  and  I  also  believe  that  a  <^reat 

Mr.  Carr.  I  think  the  State  of  Xew  York,  in  so  far  as  its  second- 
district  commission  is  concerned,  acted  with  reasonable  promptness 
on  matters  of  that  sort.  At  least,  it  did  when  I  was  there  We  imde 
It  a  point  to  expedite  action  wherever  it  seemed  to  be  urgent,  and  t 
was  e.xpecl,ted :  but.  of  co«i;se,  it  must  be  borne  in  mind"  that  there 
are  certain  provisions  in  the  law  which  can  not  te  ignored,  and 
which  make  it  obligatory  „ix)n  the  commission  to  satisfv  it-elf  thu 
the  company  is  not  earning  a  fair  return  before  it  can  "increase  the 
rate.  But  ,n  most  instances  to-day  I  do  not  think  the  company  would 
have  very  much  trouble  in  satisfying  a  commission  on  that  point. 

Mr.  \\  AiiRKx.  And  satisfying  them  speedily  ? 

Mr.  Carr.  And  satisfying  them  sjieedily.    " 

Af!.'  r.?'"'xi  ''!*'•  *^  to  Ju-'tify  a  speedy  decision  by  the  commission? 
311.  A.  ARit.   Ihat  IS  so. 

Jlr.  Warren.  And  if  such  decisions  could  be  rendered,  it  would 
go  far.  would  it  not.  to  afford  temporary  relief  for  the  situation 
pending  some  more  permanent  form  of  relief?  '^  «"«iion, 

n.^^'"  Fr*?;i^^ ''"•.'*  "",  ''^P'^n'ls  "iwn  how  they  must  apply  the 
money  that  they  get  on  tlie  increase.  ^ 


Nil 


848       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  Well,  if  they  are  not  earning  operating  expenses,  it 
would  be  a  pretty  simple  thing  to  determine  how  the  money  should  bo 
spent;  would  it  not? 

Mr.  Carr.  Yes ;  but  nowadays  there  seems  to  be  a  very  decided 
fluctuation  in  certain  elements  of  operating  expense. 

Mr.  Warren.  Do  you  think  the  commissions  should  in  any  way 
control  the  expenditure  of  the  money  if  they  gave  this  emergency 
relief? 

Mr.  Carr.  That  is  all  provided  for  in  the  system  of  accountmg 
which  is  required  of  these  corporations  under  the  State  regulations. 

Mr.  Warren.  So  that  the  commission  could  control  the  expendi- 
ture of  the  money  to  such  an  extent  to  see  that  it  was  applied  as  it 
should  be? 

Mr.  Carr.  I  do  not  think  any  conunission  goes  as  far  as  that — that 
fs,  not  so  far  as  to  attempt  to  dictate  as  to  the  actual  disbursement  of 
income  for  expenses.  The  most  they  attempt  to  do,  so  far  as  I  have 
been  informed,  is  to  make  their  order,  setting  forth  what  the  money 
that  is  derived  from  capital  can  be  expended  for.  Of  course,  if  the 
company  attempts  to  expend  money  derived  from  capital  for  oper- 
ating expenses,  there  is  certain  provision  made  for  that.  It  shows 
up  in  their  accounting. 

.  Mr.  Warren.  Yes,  of  course.    This  increase,  of  course,  would  be 
income,  would  it  not? 

Mr.  Carr.  That  would  be  income,  absolutely. 

Mr.  Warren.  Well,  the  commission,  I  think,  probably  in  every 
case,  has  a  right  to  call  for  reports  periodically  from  the  company. 

Mr.  Carr.  Oh,  yes. 

Mr.  Warren.  And  if  the  commission  should  be  satisfied  that  the 
money  was  being  improperly  spent,  say  for  dividends,  when  the 
dividends  should  not  be  paid,  the  commission  could  easily  reduce  the 
emergency  rate,  could  it  not  ? 

Mr.  Carr.  Undoubtedly. 

Mr.  Warren.  So  that  it 

Mr.  Carr.  I  think  that  is  a  very  remote  possibility. 

Mr.  Warren.  Do  you  mean  the  improper  expenditure  of  the 
income  ? 

Mr.  Carr.  I  think  you  would  have  great  difficulty  in  finding  a 
street  railway  to-day  that  would  attempt  to  pay  dividends  when  they 
were  not  having  earnings  enough  to  cover  operating  expenses. 

Mr.  Warren.  I  agree  with  you.  I  think  any  emergency  relief  that 
they  might  obtain  would  be  fully  absorbed  in  taking  care  of  the 
propertv. 

Mr.  Carr.  That  is  it  absolutelv. 

Mr.  Warren.  But  the  delays  that  have  been  incident  to  some  cases 
in  that  case  would  be  more  prejudicial  to  furnishing  the  relief  which 
is  needed  at  this  time  ?  I  am  not  speaking  of  New  1  ork  particularly ; 
but  in  many  cases  in  the  past  it  has  taken  a  long  time  to  get  decisions 
on  rate  increases,  has  it  not  ? 

Mr.  Carr.  Yes ;  it  has,  in  many  instances,  where  complicated  ques- 
tions arose,  and  as  a  rule,  those  delays  were  largely  incident  to  the 
action  of  the  municipality  in  which  the  corporation  was  located. 

Mr.  Warren.  They  opposed  it? 

Mr.  Carr.  They  invariably  opposed  any  rate  increase. 

Mr.  Warren.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       849 

Mr.  Carr.  And  the  commission  had  to  pass  on  questions  of  law 
and  questions  of  fact;  and  I  think  it  is  the  history  all  over  the  coun- 
try  that  each  locality,  as  a  rule,  fights  any  increase  in  fare.  It  ap- 
pears to  be  human  nature.  ^ 

..^J^u  )^^^«^^-  ^f  i^.the  localities  were  convinced,  or,  at  any  rate, 
seriously  impressed  with  the  importance  to  the  street  railway  of  some 

^LT-f. J''"''"''  ^-^  ^  T^'^h  Vos^^^\y,  of  a  report  of  this  commis- 
sion, if  the  commission  should  take  that  view,  then  it  would  be  pos- 
sible for  the  commissions  in  a  great  many  cases,  to  afford  very  imme- 
diate  relief,  would  it  not  ?     That  is,  I  mean  within  a  few  weeks. 
Mr.  Carr.  It  would.     1  es,  indeed. 
Mr.  Warren    Instead  of  its  being  a  matter  of  months? 
Mr.  Carr    The  great  trouble  is  that  the  people,  as  such,  are  not  let 
a  one.    I  be  leve  the  public-and  by  that  I  mean  the  people  as  a 
class— will  decide  fairly  on  any  public  question  that  is  put  up  to 
them ;  but  there  are  always  certain  people  in  the  community  that  feel 
It  incumbent  upon  them  to  advise  and  lead  the  public,  with  the  re- 
sult that  there  is  always  trouble,  that  opposition  does  develop  in  that 
way,  and  that  is  what  has  to  be  overcome  before  vou  can  reason  it  and 
argue  it  out  with  the  public,  so  as  to  make  them  actually  believe  what 
you  are  trying  to  tell  them,  that  you  are  in  trouble  and  you  need 
help     Now   if  you  leave  out  the  third  party,  your  public  will  come 
to  the  front  very  quickly,  but  it  is  always  a  public  benefactor  that 
comes  across  and  is  trying  to  help  the  people  who  causes  the  trouble. 

Vi^  n«s  been  my  experience,  and  I  think  I  am  right  in  saying  it 
,  Mr.  Warren.  But  notwithstanding  that,  would  not  the  commis- 
sions, in  many  instances,  be  justified,  in  this  present  emergency,  in 
furnishing  relief  of  a  temporary  character? 

Mr.  Carr  With  respect  to  those  commissions  of  which  I  have  any 
knowledge,  I  have  no  doubt  that  every  one  of  them  would  give  relief 
to-day  if  a  plain  statement  of  facts  was  furnished  them,  if  they 
thought  It  correct,  without  waiting  for  any  great  length  of  time  to 
get  a  mass  of  evidence  in  front  of  them  that  they  would  have  to  pore 
over  and  spend  their  nights  and  Sundays  in  digesting.  The  pur- 
pose of  every  one  of  these  commissions  to-day  is  to  aid  the  corpora- 
tion  that  needs  help,  but  where  they  are  bound  around  with  statutes 
and  with  constitutional  provisions  and  other  things  that  prevent 
them  from  giving  that  aid,  they  are  absolutely  helpless,  no  matter 
how  much  they  may  desire  to  help  the  corporation;  and  the  best  evi- 
dence of  that  IS  what  has  happened  in  New  York. 

Mr.  Warren.  Yes,  I  appreciate  that.  But  in  cases  where  they 
have  jurisdiction,  you  feel  that  many  of  the  companies  could  furnish 
such  a  prima  facie  case  as  to  justify  immediate  relief,  and  the  com- 
missions would  be  willing  to  give  it,  of  a  temporary  character « 

Mr.  Carr.  In  the  average  case,  where  a  corporation  is  required  to 
keep  Its  accounts  as  prescribed  by  the  commission,  a  plain  operating 
statement  put  m  front  of  a  commission  would  demonstrate  whether 
or  not  they  were  entitled  to  any  relief.     That  has  the  facts  riffht 
in  it.    I  hey  do  not  need  to  go  around  it  and  to  present  any  arorument 
to  show  whether  or  not  they  are  earning  enough  to  pay  expenses. 
Mr.  Warren.  That  would  be  enough  for  the  commission « 
Mr.  Carr.  That  would  be  enough  for  the  commission,  temporarily. 
Mr.  Warren.  Yes;  I  mean  that.  ^         ^ 


i 


850       PKOOEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Carr.  Tt  should  be  enough  to  show,  taking  a  Penoil  of  «x 
ni.mths  or  !»  vetir  exactly  what  that  company  is  doing  with  lespect 
OS  earning!  and  as  to^whether  or  not  it  is  -nakng  enough  to  take 
!•  UT  of  its  operating  expenses  and  any  return  on  its  investment. 

Mr   w!r  .Kx.  An^d  in  a  period  like  the  pi-esent,  with  eoste  going 

MP  as  rapidly  as  they  are,  and  with-wages  going  «P  by  1^»P?  f"« 

munds    IS  thev  have  Wn  doing  in  the  last  few  weeks,  the  delays 

w    cl    V  ul  1  1^  incident  to  the  ordinary  pi-ocedure  of  the  commy,- 

TionV  would  involve  vei-y  serious  injury  to  the  companies;  would 

*^ll[r!T*AKR.  Well,  if  there  was  any  very  long  delay,  I  would  say  it 
^vould. 

Mr.  ciTof  bourse,  it  is  difficult  to  say  ^^\^«"^  y^Ynlcnrnt" 
a  corporation  that  is  on  the  down  grade  from  becoming  bankrupt, 
so  tluit  it  can  not  continue  any  longer. 

I^Ir  Wakrex.  Well,  for  example,  a  company  whose  wages  aie 
increased  to-dav  from  40  or  45  cents  to  60  or  62  cents  would  be  pretty 
seriously  affected  by  a  delay  of  a  month  or  two.  4      x,  „^ 

Mr  Carr.  I  sholild  think  that  would  be  very  serious.  Another 
proposition:  You  can  not  very  well  pay  things  unless  you  have 
money  to  pay  them  with,  whether  wage.s  are  increased  from  40  to 

60  cents  or  50  cents. 

Mr.  Warren.  If  you  do  not  have  the  money • 

Mr.  Carr.  It  is  very  essential  to  get  it. 

Mr.  Warren.  Yes;  without  very  much  delay.  ^  v    -4?  *i.  1. 

Mr.  Carr.  Well,  you  will  have  very  hard  work  to  get  it,  if  that 

is  vour  financial  status.  «    ,   .  j-m     ix  *     «  4. 

Mr.  Warben.  You  say  we  will  not  find  it  very  difficult  to  get 

"^  Mi\  Carr.  I  say  you  will  find  it  difficult  to  get  money,  if  that  is 

your  financity  status.  ,  .         ,      ^  •  i      * 

Mr.  Warren.  I  am  only  si^eaking  about  increased  rates. 

Mr.  Cakr.  Oh,  yes.  ,    ^r     r>.  i 

Mr  Warren.  I  think  that  is  all  I  want  to  ask  Mr.  Carr,  unless 
vou  have  something  further  that  you  want  to  say  to  the  commission, 

AT  I*    C  {ii*r 

Mr  C  4RR.  Tliere  is  one  statement  that  I  thought  I  would  like  to 
allude  to,  not  so  much  because  of  my  loyalty  to  the  New  \  ork 
Commission,  but  because  I  think  it  is  a  thing  that  ought  not  to  go 

^"ex^Go\^  Foss  who  testified  there  made  the  statement  that— as 
I  understood  it,  it  was  to  this  effect— that  these  so-called  quasi-public 
corporations,  as  he  termed  them,  spend  most  of  their  time  in  the 
halls  of  the  various  State  capitols  and  elsewhere,  lobbying  tor  their 
interests  and  endeavoring  to  obstruct  the  laws  wherever  they 
could  and  to  prevent  the  appointment  of  capable  men  on  the  com- 
mission that  would  see  that  the  rights  of  the  public  were  protected. 
Now  I  think  that  is  a  statement  that  ought  not  to  go  unchallenged, 
as  I  say,  because  it  is  far  from  the  fact.  The  trouble  is  that  the 
appointing  power,  as  a  rule,  where  the  commissions  are  appointed— 
in  many  of  the  States  they  are  elected— but  where  they  are  appointed, 
I  l)ebeve  the  public-service  corporations  are  more  interested  than 
anyone  else  to  have  clean,  able,  upright  men  on  the  commission. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       851 

because  it  is  to  their  best  interests  to  have  men  of  that  character 
yet  m  all  cases  the  tmuble  with  the  appointing  power  is  the  politi- 
cian. He  IS  always  there  to  see  that  a  politician  or  someone  who  is 
selected  by  the  politician  is  put  on  the  e(Mnmission,  because  it  is  con- 
sidered a  political  plum. 

Now  that  is  the  fact  as  distinguished  from  what  the  governor  said, 
and  1  think  you  will  find  that  if  you  keep  the  politician  awav  from 
the  appointing  power  you  will  have  no  trouble  in  getting  good  men 
15ut  there  is  this  further  fact  to  be  considered:  It  is  difficult  to 
get  a  competent  man  unless  he  happens  to  be  of  independent  means 
to  be  willing  to  assume  the  burdens  of  public-service  commit^sioner, 
because  he  does  not  like  to  be  hounded  and  blackmailed,  if  you 
please— accused  of  everything  in  the  calendar,  and  work  himself 
night  and  day  to  do  the  best  he  can  for  his  State,  with  the  knowledo-e 
all  the  time  that  a  change  in  the  political  power  or  the  expiration 
of  his  term  of  office  means  that  he  goes  forth  without  honor. 

And  what  is  the  result  ?  His  innermost  pride  is  aflPected,  because  he 
teels  that  if  he  has  done  his  duty  well,  the  least  reward  that  he  could 
have  would  be  a  reappointment  to  that  office,  and  you  will  find  that 
that  is  very  seldom  done.  I  did  not  have  an  opportunity  to  meet 
that  experience,  but  I  presume  I  might  have  had  it,  just  the  sanuB 
as  many  other  men  have  had  it :  and  that  is  the  reason  whv  it  should 
be  eliminated  from  politics.  If  you  have  a  competent  nian  there, 
keep  him  on  the  job.  That  is  what  I  was  taught  in  the  ffood  old  days 
in  .New  J^ngland,  where  I  came  from,  in  eastern  New  England— that  if 
there  was  a  good  man  in  the  office  he  was  kept  there  as  long  as  he 
lived,  and  if  he  was  not  good  he  was  thrown  out,  and  that  applies 
to  the  public-service  commissions. 

^  Mr  Warren.  That  is  the  practice  of  our  public-service  commis- 
si^rj,  I  am  happy  to  say,  in  Massachusetts,  with  very  few  exceptions 
Mr.  C  ARR.  I  would  not  like  to  have  the  public  feel  that,  in  these 
days  at  least,  the  public-service  corporations  were  using  their  efforts 
all  the  time  to  prevent  good  men  from  getting  office,  or  that  thev 
si>ent  their  time  in  the  halls  of  the  legislature  trying  to  frame  up 
Jaws  tor  their  benefit,  because  it  is  not  so;  and  I  know,  because  I 
have  represented  corporations. 

Mr.  Warren.  I  agree  with  you  absolutely  on  both  of  those  propo- 
sitions. *  ^     ^ 

That  is  all,  Mr.  Chairman. 

Commissioner  Sweet.  What  is  your  business  now,  Mr.  Carr? 

Mr.  Carr.  I  am  in  the  steel  business. 

Commissioner  Sweet.  In  Pittsburgh? 

Mr.  Carr.  Pittsburgh. 

Commissioner  Sweet.  You  are  not  connected  with  any  street-rail- 
way enterprise  ? 

Mr.  Carr.  I  have  no  interest  in  any  street  railway. 

Commissioner  Sweet.  You  know  something  about  the  Pennsyl- 
vania Commission,  I  suppose? 

Mr.  Carr.  Nothing  whatever,  except  by  hearsay. 

Commissioner  Sweet.  Is  it  not  generally  conceded  that  they  have 
a  good  commission  up  in  Pennsylvania? 

Mr.  Carr.  I  have  no  knowledge  of  it. 

Commissioner  Sweet.  You  made  a  comparison  between  the  horse- 
car  days  and  the  electric-car  daj^s  ? 


.« 


852       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK'. 


..II 


Mr.  Carr.  Yes,  sjr.  • 

Commissioner  Sweet.  And  I  think  you  said  that  for  a  nickel,  in 
the  horse-ear  days,  a  man  could  ride  approximately  3  miles. 

Mr.  Carr.  If  he  went  from  one  end  of  the  road  to  the  other. 

Commissioner  Sweet.  If  he  went  from  one  end  of  the  road  to  the 
other  ? 

Mr.  Carr.  Yes,  sir. 

Commissioner  Sweet.  He  was  entitled,  if  he  wanted  to,  to  ride  S 
miles  for  a  nickel? 

Mr.  Carr.  Yes. 

Commissioner  Sweet.  And  after  the  roads  were  electrified,  he 
could  ride  about  12  miles  for  a  nickel? 

Mr.  Carr.  Yes. 

Commissioner  Sweet.  From  the  standpoint  of  the  rider  on  the 
street-cai*s,  that  would  seem,  certainly,  that  he  was  getting  about  4 
times  as  much  for  his  nickel  under  the  electric  system  as  under  the 
horse-car  system  ? 

Mr.  Carr.  He  was  getting  a  great  deal  more  than  4  times  as  much^ 
because  he  was  getting  a  better  service  in  the  way  of  equipment  and 
time  and  every  otlier  respect. 

Commissioner  Sweet.  But  in  miles  of  travel,  he  was  getting  4 
times  as  much? 

Mr.  Carr.  In  miles  of  travel,  he  was  getting  4  times  as  much,  if  he 
wanted  that. 

Commissioner  Sweet.  If  he  wanted  it. 

Mr.  Carr.  Yes. 

Commissioner  Sweet.  Now,  T  would  like  to  call  your  attention  to 
the  other  side  of  that  question — not  from  the  standpoint  of  the  street- 
car patron  or  rider  on  the  street-car,  but  from  the  standpoint  of  the 
company  operating  under  the  two  systems.  What  would  l)e  the  rela- 
tive expense  to  the  operating  company  to  run  the  3  miles  of  horse 
car  or  12  miles  with  electric  power? 

Mr.  Carr.  I  do  not  know  that  I  ever  saw  any  statistics  on  horse-car 
traffic.  I  could  not  say  how  much  it  might  cost  them.  It  is  all 
figured  out  in  car-miles,  in  passenger-miles. 

Commissioner  Sweet.  From  that  standpoint,  the  difference  would 
not  be  anything  like  it  would  be  from  the  standpoint  of  the  rider  on 
the  street-car;  would  it? 

Mr.  Carr.  The  cost? 

Commissioner  Sweet.  Yes. 

Mr.  Carr.  I  would  say  that  the  cost  of  the  12  miles  on  an  electric 
line  would  be  certainly  more  than  4  times  as  much  as  3  miles  of 
horse-car  line. 

Commissioner  Sweet.  Then,  the  cost  per  mile  of  electric  power 
would  be  greater  than  the  cost  per  mile  of  horsepower? 

Mr.  Carr.  Oh,  there  is  no  question  about  that.  There  is  no  ques- 
tion about  it. 

Commissioner  Sweet.  So  that,  from  the  standpoint  of  the  street- 
railway  company,  then,  more  than  4  times  as  much  would  be  fur- 
nished for  the  nickel  than  in  the  horse-car  days? 

Mr.  Carr.  Absolutely. 

Commissioner  Sweet.  So  that,  then,  from  both  standpoints — the 
standpoint  of  the  rider,  he  would  get  more  than  4  times  as  much  for 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       863 

his  nickel,  and  from  the  standpoint  of  the  company,  which  would 
furnish  more  than  4  times  as  much  for  the  nickel-theVe  would  se^^^^ 
to  be  a  tremendous  change  after  the  roads  were  electrified? 
Mr.  Carr.  In  what  way? 

Commissioner  Sweet.  I  say,  from  both  standpoints, 
tweeh  theTwo!       '  "'^'"''^^  ^^"^^^  ^  ^^^^  comparison  as  be- 

Commissioner  Sweet.  The  company  is  furnishing  four  times  as 

in^'^n^T'.^f  c^tainly  would ;  and  of  course  it  should  be  borne 

LTn,l^rr  f  '  '^^'^^^  "'^^'^^'^  P''"  ""^^  ^"^  *l'»«st  nothing  in 
the  horse-car  days  in  comparison  with  the  electric  roads. 

Commissioner  Sweet.  So  that  when  the  street  railroads  of  the 

svste^  tlei:  r^'rr*  "''''  *r ?  *''^  ^''^•^■'^^  ^y^^em  to  the  electr  c 
system,  there  really  was  no  logic  or  fairness,  when  vou  come  rMrht 

tluieref'  ''''  '"'"'^"*  '"''''"'''  '"  '--Gaining  tlTJZ!  ft' 
Mr.  Cakr.  Well,  there  was  in  some  respects,  and  I  think  in  manv 
return  nn  ^r-''"*^  satisfactorily,  and  the  companies  did  Jet  a  fa" r 
leturn  on  their  capita  ,  because,  with  better  equipment  and  more 
speedy  operation  and  larger  cars,  they  were  able  to  cany  a  Treat 
many  more  passengers  per  car-mile,  and  in  that  way  they  were^able 
to  increase  their  earnings  per  car-mile;  but  it  was  the  constant 
growth  of  the  main  body  oAhe  company-that  is/the  constant  ex 
tension  of  tracks,  here  and  there  and  elsewhere,  t^meet  the  expand-' 
ing  development  of  the  community  that  began  to  pXlie  wmDanias 
down.    It  reached  a  certain  peak,  and  then  it  pas^d  o  ^r  th7peak 
on  the  way  down.    It  began  to  give  more  and  more  and  more  foffi 
inoney,  and  then  the  transfer  system  came  in  on  top  of  that  in  manv 
places.     For  instance,  in  the  city  of  Albany  they  did  not  hav^^nv 
transfers  until,  I  think,  after  1905.     Thev  even  had  ^  Jrf  f«  *k^ 
legislature  to  get  transfers  in  the  city  of  aLiiv.  ^     *"  *^^ 

Commissioner  Sweet.  Would  it  he  a  fair  shitement  to  sav  th^t 
from  the  inception  of  the  electric  street  railways,  theil  had  been  a 
reTimeSionT'""^  """"^^'  "'"""*  ^  l-opo^rtlonate  inc1.^rof 
•  Mt.  Carb.  Absolutely.  The  nickel  fare  was  in  force  in  the  Stata 
of  New  York,  as  I  recall  it,  as  far  back  as  1848.  I  may  be  mon| 
in  my  history,  but  I  went  into  the  thing  very  e.xhaustivelv   and^ 

dty  oHew  Y^rk'^"'^  '"^  '  ^''''''  "''"^  ^^'^  -S^S  in't4' 

elertXS'"'""''  ^'''^^''-  "^"'^  ""  ^'"""P  ^"^  ^'''^'^^  ^^'«n  the  roads 

Mr.  Carr.  Yes. 

Commissioner  Sweet.  But  from  that  time  on,  if  I  understand 
you  correctly,  there  has  been  a  tendency,  as  the  roads  have  ex 
tended  out  and  made  lateral  lines  and  have  given  transfei^the^ 

tt  Sef  ?""'""""'  '^"^^'^'=y  ''  ^'''  "^''^  »"d  more  a^d  ,^*L^ 

Mr.  Carr.  Absolutely. 

You  have  here  the  reports  of  the  New  York  Commission   and  if 
you  are  interested  in  connection  with  your  inVe~^n  here  to 


II 


854       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

read  the  opinion  sometime  that  I  wrote  in  the  Huntington  case,  you 
will  find  a  history  of  fares  in  the  State  of  New  York,  gomg  back 
as  far  as  1848 — and  I  do  not  know  but  what  it  is  longer— showing 
how  the  legislature,  at  different  times,  created  corporations,  street 
railway  corporations,  and  fixed  the  fare  when  the  charter  was 
granted.  That  case  gives  the  history  of  street  railways  in  the  State 
of  New  York,  and  it  is  very  illuminating,  showing  that  even  in 
the  old  days  it  was  considered  that  a  universal  fare  was  not  really 
intended  to  be  universal,  if  there  were  other  conditicms  that  made 
it  desirable  to  fix  a  different  fare,  and  the  mere  fact  that  that  was 
stuck  into  the  statute  in  later  years  was  not,  to  my  mind,  with  the 
intention  that  every  street  railroad  throughout  the  State  of  New- 
York  and  the  city  and  the  municipality  should  be  limited  to  a 
nickel  fare,  no  matter  how  much  it  might  extend  its  lines  in  that 
community,  but  the  courts  have  held  it  was  so,  provided  that  they  put 
it  in  the  franchise. 

Commissioner  Sweet.  It  is  quite  evident  from  what  you  say  that 
you  have  been  quite  a  student  of  this  question  for  a  number  of 

yeai*8.  . 

Mr.  Carr.  Well,  many  who  have  been  in  the  public-utility  busi- 
ness can  answer  that  better  than  I  can.  They  know.  I  have  been 
in  it  a  good  part  of  my  life,  and  until  I  quit  the  New  York  Commis- 
sion I  made  a  speciality  of  it. 

Commissioner  Sweet.  Well,  it  would  be,  perhaps,  immodest  for 
vou  to  admit  what  I  have  just  said,  but  it  is  quite  evident  that  that 
Is  the  fact  just  the  same,  and  on  that  supposition  I  want  to  ask  you 
this:  During  the  period  of  your  acquaintance  with  the  street-railway 
companies  have  you  observed  a  tendency  to  antagonism,  a  sort  of 
conflict,  between  the  general  public  and^the  street  railways  on  the 
one  side,  trying  to  get  more  and  more  for  the  nickel,  and  on  the 
other  side  in  trying,  perhaps,  in  a  defensive  attitude,  to  prevent  the 
public's  carrying  it  too  far? 

Mr.  Carr.  I  think  you  will  find  that  this  has  been  the  experience, 
that  the  initiative  in  the  development  of  the  street  railways  has  usu- 
ally come  from  the  corporation,  which  has  showed  a  disposition  to 
develop  and  extend  its  lines.  In  some  instances,  the  initiative  has 
been  taken  bv  the  community,  but  in  most  instances  I  think  you  will 
find  that  the  initiative  came  first  from  the  corporation,  and  then 
there  was  a  struggle  for  a  franchise.  I  do  not  say  that  there  has 
been  antagonism,  because  I  do  not  think,  in  the  average  instance, 
there  has  been  antagonism.  The  ix^ople  have  wanted  tlie  street-rail- 
way lines  extended,  and  unless  there  was  a  good  deal  of  politics  in- 
volved, as  a  rule  the  franchise  for  the  extension  was  granted.  In 
the  good  old  days  when  there  was  a  good  deal  of  graft,  so  they  say— 
I  don't  know  anything  about  that — in  connection  with  the  street 
railwav  franchises;  but  that,  as  a  rule,  was  in  the  initial  stage 
of  the  development  and  l)efore  the  road  had  been  built,  not  so  far  as 
related  to  extensions,  but  the  existing  road.  The  municipalities 
usually  endeavored  to  throw  as  many  conditions  around  the  construc- 
tion of  an  extension  or  a  new  line  as  they  possibly  could,  but  ordi- 
narily they  set  forth  in  the  franchise  the  conditions  that  are  set 
forth  in  the  statutes ;  and  I  think  you  will  find  throughout  the  State 
of  New  York  that  the  bulk  of  the  "^franchises  that  have  been  granted 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       855 

in  the  past  25  years,  outside  of  the  greater  city,  do  not  embodv  much 
more  than  the  conditions  attached  to  the  franchise  than  are  con- 
tained in  the  statute  itself. 

Commissioner  Swect.  You  have  alluded  to  the  political  pressure 
that  is  brought  to  bear  upon  the  appointing  power  with  regard  to 
btate.  commissions.  Under  the  plan  advocated  by  ex-Gov.  Foss  of 
public  ownership  have  you  any  reason  to  think  there  will  be  any  less 
pressure  brought  to  bear  upon  the  appointing  power  in  connection 
with  the  choice  of  managers  and  thousands  of  others  who  would  be 
outside  of  the  civil  service  or  a  great  number  who  would  be  employed 
m  connection  with  street-railroad  operation  ? 

Mr.  Carr  I  firmly  believe  that  public  ownership  in  this  country 
will  never  be  successful,  so  long  as  we  have  our  present  form  of 
government. 

Commissioner  Sweet.  You  think  that  those  charged  with  the  duty 
ot  appointing  would  have  pressure  brought  to  bear  upon  them  to 
such  an  extent  that  they  would  appoint  political  friends « 

Mr.  Carr.  Well,  they  might  not  appoint  a  political  friend  so  much 
as  they  would  appoint  men  tlmt  they  were  urged  to  appoint  by  po- 
htical  friends,  and  then  what  would  be  the  incentive?  The  avera<re 
man  that  holds  a  political  job  knows  that  sooner  or  later  he  is  ffoino- 
to  get  out.  ^      ^ 

Commissioner  Sw^eet.  That  is  all. 

Commissioner  Meeker.  How  about  public  regulation  under  our 
present  system ;  is  it  possible  to  work  that  ? 

Mr.  Carr  I  think  public  regulation  can  work,  and  it  has  worked 
verywelh    Of  course,  it  has  its  evils. 

Conimissioner  Meeker.  We  have  heard  some  pretty  severe  bumps 
handed  to  it  to-day.  ^       j  ^ 

Mr.  Carr.  Of  course,  you  have  always  to  consider  that  some  of  the 
.  people  that  do  the  bumping  also  have  their  grievances 

In  1907,  when  the  New  York  Commission  was  formed,  I  mi^ht  say 
that  a  great  many  people  with  whom  I  was  associated  were  opposed 
to  It,  but  I  was  very  much  in  favor  of  it,  because  I  felt  I  saw  what 
was  coming  and  I  tried  all  I  could  to  help  make  it  a  law  in  my  feeble 
way,  and  I  believe  if  you  would  put  it  to  a  vote  of  the  public-service 
companies  in  the  State  and  ask  them  whether  they  would  go  back  to 
the  old  days,  they  would  tell  you  that  they  would  prefer  to  have  the 
regulation  exactly  as  they  were  having  it  to-day.  Now,  I  may  be 
wrong,  but  that  is  what  they  have  told  me.  ^  J 

Commissioner  Meeker.  What  is  the  difference  between  the  politics 
that  affects  the  public  regulators  to-day  and  the  politics  that  would 
affect  the  public  operators  in  case  of  public  ownership  and  operation 
or  the  public  regulators  under  public  ownership  and  private  opera- 
tion ?  ^ 

Mr.  Carr.  Well,  all  I  can  speak  for  is  the  commission  I  was  with 
We,  m  the  words  of  the  President,  adjourned  politics.  We  elimi- 
nated politics  entirely  from  our  operations. 

*i  ^^^'  .^"'^iK^AN.  Is  it  not  true,  Mr.  Carr,  that  although  some  of 
the  public  service  commissioners  may  be  politicians,  and  they  may 
be  appointed  for  political  purposes,  yet,  when  it  comes  to  the  ques- 
tion of  appointing  their  expert  men,  their  expert  rate  men,  en<rineers 
etc.,  they  always  look  for  the  best  men  in  the  field  that  can  be  se-' 
cured? 


1: 


856       PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Carr.  I  think  that  it  true. 

The  Chair3ian.  And  is  it  not  also  true  that  these  public  commis- 
sioners very  generally  respect  the  recommendations  and  follow  the 
recommend«:tions  of  their  expert  forces  in  matters  coming  before 
them? 

Mr.  Carr.  I  think  it  is.  * 

The  Chairman.  Is  not  that  the  answer  to  the  situation? 

Mr.  Carr.  It  is  largely,  except  that  I  do  not  like  to  see  a  man  in 
a  regulating  position  that  relies  on  his  subordinates  for  his  knowl- 
edge or  for  his  action.  I  think  a  man  who  is  a  commissioner  and 
holds  that  important  position  should  be  the  man  that  takes  the  re- 
sponsibility. 

The  Chairman.  Oh,  sure.  There  is  evidence  on  both  sides;  but 
where  there  is  a  conflict  of  testimony  lie  has  to  pay  a  good  deal  of 
attention  to  the  recommendations  made  by  the  men  he  hires  and  who, 
in  his  judgment,  he  can  absolutely  depend  upon. 

Mr.  Carr.  That  is  absolutely  true. 

Commissioner  Meeker.  Would  it  work  any  differently  under  public 
ownei*ship?  Is  the  difference  really  one  of  de^xree  or  one  of  the  size 
of  the  job,  or  is  there  some  sort  of  difference  between  public  owner- 
ship and  public  regulation? 

Mr.  Carr.  Well,  that  is  a  very  difficult  question  for  me  to  answer. 

Commissioner  Meeker.  Well,  you  have  had  more  particular  ex- 

Eerience  on  that  particular  point  than  anybody  that  has  yet  appeared 
efore  us.  You  have  served  on  a  public-service  commission,  and  you 
have  been  r.ctually  engaged  in  operating  public  utilities,  as  I  under- 
stand. 

Mr.  Carr.  Well,  there  is  a  difference,  as  you  can  readily  see.  If 
there  was  a  question  of  public  ownership,  what  would  enter  into  it? 
What  would  be  the  function  of  the  regulator  then?  And  what 
would  bring  up  the  questions  as  to  regulation;  who  would  bring 
them  up? 

Commissioner  Beall.  Is  it  not  one  of  the  answers,  Mr.  Carr,  that 
in  a  large  or  fairly  large  city,  instead  of  five  commissioners  or  three 
or  seven,  or  whatever  it  may  be,  you  have  a  certain  commission  of 
regulatoi^,  and  they  perhaps  employ  thousands  of  men? 

Mr.  Carr.  Yes. 

Commissioner  Beall.  Each  one  of  those  thousands  of  men  have 
members  of  their  family  and  friends  who  are  all  pulling  for  their 
relative's  advance,  so  that  the  men  w^ho  regulate  under  municipal 
control  would  be  harassed  by  people  wanting  some  friend  appointed 
or  his  pay  increased,  or  some  favor  granted,  and  that  is  a  hundred 
times  more  influence  than  there  would  be  in  the  case  of  a  public 
service  commission,  is  not  that  true  ? 

Mr.  Carr.  Yes ;  I  think  that  would  be  so. 

Commissioner  Beall.  That  is  just  one  basis  of  the  difficulty? 

Mr.  Carr.  The  whole  thing  is  so  interwoven  that  when  you  make 
an  analysis  of  it,  it  opens  up  such  a  tremendous  subject  that  it  is 
extremely  difficult  for  me  to  say  what  would  or  would  not  happen. 
I  draw  my  conclusions  from  my  observations. 

Commissioner  Beall.  Well,  is  it  not  true  that  if  you  were  on  a 
commission  and  were  running  a  property,  for  instance,  for  a  large 
city,  instead  of  having  just  one  assistant  secretary  to  appoint,  as 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       857 

happened  at  one  time,  there  might  be  a  thousand  positions  to  be 

^^  Mr.  Carr.  That  would  all  depend  upon  how  large  the  community 

Commissioner    Beall.  Well,    I    am    considering    evervthin^     of 
course-conductors  and  motormen,  and  clerical  force.     ^  ^'  '''^'    ""^ 

c^SlXpTnTopS^^^^^  "^^^  "^'^  ^^-  --^  ---  -th  public 

Mr  Cahr.  Civil  service  is  all  right,  as  far  as  it  jroes  as  lono-  «,  if 

gets  the  man  to  do  the. work  he  is  supposed  to  dof  but  he  does  „of 

corporator         ""'*'"""'  '^'''  ^'  *^°^^  ^'^"^  ^«  ^^'^'  for  a  private 
The  Chairman.  You  are  excused,  Mr.  Carr. 
Mr.  \\  ARREN.  I  am  much  obliged  to  you,  Mr.  Carr. 

STATEMENT  OF  MR.  RICHARD  SCHADDEIEE. 

Mr.  Warren.  Will  you  give  your  full  name,  Mr.  Schaddelee? 

Mr.  ScHADDELEE.  Eichard  Schaddelee.  '"Qaeiee . 

Mr.  Warren.  Are  you  in  the  street-railway  industry? 

Mr.  Schaddelee.  Yes,  sir.  ^ 

Mr.  Warren.  And  what  position  and  with  what  company? 

Mr.  Schaddelee.  Well,  I  have  the  general  supervision  of  the  man- 

^Mr' w!'  ^^^'^'•^l^treet-car  companies  and  interurban  companies 
Mr.  Warren.  Where  are  they  located «  ""■pdiuet,. 

Mkhigan.'"""^'''  ^^'^  '''^  ^"''*''*  '°  """«'«'  in  OhiO'  «nd  in 

Mr.VARREN.  Is  there  a  public-utilities  commission  or  regulatina- 
commission  in  each  of  those  States?  leguiating 

.r.^^'  ^.'i^i'^''^^^^-  No;  only  in  Illinois  and  Indiana.    Well,  there  is 
one  m  Michigan  also,  but  the  commission  of  Michigan  has  no  iuris 
diction  of  rates  of  utilities,  except  where  there  are  no  eSinJ  ran: 

wiS^yl^^ifef  iSicrga^n"r^^        ''^""^''^  ^  — "- 

on^inlriar  •  £!'  ^  ^^nX  ^^^Jl^^^ 
power  to  regulate  the  rates  of  interurban  railroads 

Mr.  Warren.  The  commission  has  not  ? 

Mr.  Schaddelee.  No,  sir;  because  the  constitution  of  Michigan  has 
a  provision  that  does  not  permit  the  legislature  to  delegate  to  anv 
of^rsor        P"""''  *"  '■'^"^"*'  '^'  *"S^^  *•''•  th«  transportation 

Mr.  Warren.  Then  we  will  drop  Michigan. 
Mr.  Schaddelee.  Yes. 

Mr.  Warren.  Because  that  is  not  in  the  case.  Now,  in  Illinois  th« 
commission  has  authority  to  regulate  rates?  -iiunois  tne 

Mr.  Schaddfxee.  Yes,  sir. 

Mr!  Icu:Z.t:V:s!s^^^  ''  ^^^  ^^"^  '^  -^^^^^^  -^es? 
Mr.  Warren.  Have  you  had  occasion  to  appear  before  both  of 
these  commissions  on  matters  of  rate  regulation  ? 
Mr.  Schaddelee.  Yes,  sir. 

160643*— 20 55 


"HI 


858       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  More  than  once  ? 
Mr.  ScHADDELEE.  Ycs,  sir. 

Mr.  Warren.  And  what  has  been  your  experience  with  the  re^i- 
liition  of  rates  in  each  of  those  States'?  Take  them  up  in  any  order 
vou  please,  with  particular  reference  to  the  length  of  time  that  it 
lias  taken  to  get  decisions,  and  anything  else  that  you  think  ought  to 
be  called  to  the  attention  of  this  conunission. 

Mr.  ScHADDELEE.  Well,  Mr.  Warren,  I  have  prepared  a  paper  here 
wherein  I  cover  that.  Possibly  I  had  better  read  that  to  the  commis- 
sion. Then  they  will  know  just  what  the  experience  has  been.  Other- 
wise we  might  have .  repetition  here. 

Mr.  Warren.  Well,  if  it  is  not  long.  If  it  is,  I  would  like  to  ask 
you  to  summarize  it,  taking  the  prominent  features  of  it.  You  can 
do  it  bettor  than  I. 

Mr.  ScHADDELEE.  Well,  I  think  I  can  read  it  here,  and  I  think 
everybody  will  know  something  about  our  experience  and  also  some- 
thing about  our  ideas  about  commission  regulation. 

Mr.  Warren.  All  right;  you  may  go  right  ahead. 

Mr.  ScHADDELEE.  Mr.  Chairman  and  members  of  the  commission, 
I  have  never  held  public  office.  I  do  not  aspire  to  have  public  office. 
Hence,  I  will  address  myself  to  you  and  not  to  the  proletariat  on  the 
floor,  because  they  know  more  about  these  matters  than. I  do. 

Mr.  Warren.  I  hope  you  are  not  reflecting  on  any  fellow-citizens 
of  mine  from  Massachusetts,  Mr.  Schaddelee.     [Laughter.] 

Mr.  Schaddelee.  During  February,  1918,  the  President,  the  Sec- 
retary of  State,  and  the  Comptroller  of  the  Currency  of  the  United 
States  issued  an  open  letter  urging  the  various  rate-regulatin<sj  bodies 
to  give  prompt  and  adequate  relief  to  the  utilities  under  their  juris- 
diction, where  need  for  relief  was  reasonably  shown.  The  primary 
purpose  of  these  appejils  by  the  Government  was  to  enable  these 
utilities  to  function  efficiently  and  adequately  in  response  to  the 
enormous  increased  demand  for  utility  service  caused  by  the  condi- 
tions created  by  the  war.  The  Government  realized  the  vast  im- 
portance of  this  in  its  prosecution  and  winning  of  the  war. 

Previous  to  this  time  the  utilities  as  a  whole  had  patriotically  and 
enthusiastically  responded  to  the  demands  for  increased  service  and 
facilities,  and  many  had  strained  their  credit  to  or  beyond  the  break- 
ing point  in  raising  the  vast  sums  needed  for  additional  service, 
facilities,  and  equipment.  The  interests  of  the  investors  were  rele- 
gated as  of  secondary  importance  to  the  winning  of  the  war  and  to 
patriotic  duty. 

In  August,  1918,  a  street-car  company  filed  with  a  State  com- 
mission a  rate  schedule  providing  for  a  6J-cent  car  fare  to  replace  the 
existing  5-cent  fare.  After  a  so-called  valuation  of  the  visible  physi- 
cal assets  of  the  company  by  the  engineers,  a  long-drawn-out  audit  of 
the  books  by  the  auditors,  and  after  several  hearings  the  commission 
finally  decided,  on  July  9, 1919,  that  the  company  did  not  need  relief. 

Mr.  Warren.  When  was  the  petition  filed? 

Mr.  Schaddelee.  The  petition  was  filed  in  August,  1918. 

Mr.  Warren.  That  wtis  about  11  months  back? 

Mr.  Schaddelee.  Yes;  a  little  over  11  months.  Thus  the  idea  of 
promptness  of  this  commission  in  a  decision  in  one  year's  time  from 
filing  of  application,  and  its  idea  of  adequate  relief  is  no  relief  at 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       859 

all.    This  is  given  merely  as  a  very  recent  illustration  of  the  failure 
ot  some  commissions  to  be  responsive  to  even  national  emergencies. 
1  fV'^n  ^^lAway  company  in  question,  however,  spent  during  1917 
and  the  first  six  month^  of  1918  a  quarter  of  a  million  dollars  for 
new  cars  and  additional  equipment  to  take  care  of  the  war  needs  of 
the  community,  which  resulted  in  the  manufacturers  bein^  able  to 
take  on  all  war  contracts  secured.     The  company  considered  the  needs 
of  the  Government  and  the  community  first,  trusting  in  the  fairness 
and  justice  of  the  commissions  to  give  it  pi-ompt  and  adequate  relief 
in  the  matter  of  rates.     Some  commissions'  laws  make  it  mandatory 
for  the  commissions  to  inquire  into  the  reasonableness  of  rates  and 
the  conditions  of  utilities,  on  their  own  initiative,  while  others  em- 
power the  commissions  to  initiate  investigations.     I  do  not  know 
ot  a  single  case  where  a  commission  has  ever  exercised  this  initiative 
2)ower. 

The  failure  of  commissions  and  other  rate-regulation  bodies  to  ad- 
equately protect  utilities  and  grant  them  the  relief  necessary  to 
enable  them  to  maintain  good  and  adequate  service,  as  exemplified 
by  the  present  condition  and  future  prospects  of  the  electric  rail- 
ways is,  m  my  opinion,  due  to  the  personnel  of  these  commissions, 
their  manner  of  appointment,  and  the  influences  they  are  subiect  to 
much  more  than  the  laws  themselves.  The  object  of  the  people  in 
passmg  these  laws  through  the  legislatures  of  the  various  States 
Avas  to  msure  the  public  good  and  ade<iuate  service  at  rates  reason- 
able and  fair  to  both  the  customei-s  of  and  the  investors  in  these 
utilities.  Ultimately,  a  fare  that  is  not  adequate  or  fair  to  the 
luxlity  is  not  fair  or  adequate  to  the  public,  for  the  reason  that 
frcilTti?''''  ^^         ultimately  in   inadequate   service   and 

I  am  sure  the  American  people  desire  that  the  utilities  servinor 
them  shall  be  empowered  to  collect  a  charge  or  fare  that  will  enable 
them  to  earn  their  fair  and  reasonable  operating  expenses,  taxes, 
depreciation,  etc.,  and  m  addition  a  sufficient  rate  of  net  return 
on  their  mvestment  to  make  the  investment  in  street  railways  at- 
Jfn  ir  f  r  investor.  The  people  know  that  only  on  that  basis 
^ill  the  street  railways  be  able  to  extend  and  improve  their  prop- 
erties, and  have  them  keep  pace  with,  or  abreast  of,  the  growth  of 
the  communities,  and  the  increasing  demands  of  the  public  for  more 
adequate  and  superior  service. 

^^iTt^r.7l^''''^^  ^r^  ^'r^"".  7^^^  committee  a  comprehensive 
statement  of  the  present  deplorable  conditions  existent  in,  and  tlie 
even  more  alarming  future  confronting  the  electric-railway  industry. 
pvlZnr^stJur  ""^""^  ^^''^''^  ^^""^  ^""^  responsible  for  this 

The  program  committee,  as  I  understand  it,  desires  me  to  analyze 
the  basic  reasons  as  to  why  the  various  regulating  bodies,  especially 
vii  •  w^^  commissions,  have  failed  to  accomplish  the  objects  for 
Which  thej^  were  created,  viz: 

fl.  J^^^         regulate  these  companies  in  such  a  manner  as  to  enable 
the'^ublir'^  ^^  reasonable  and  satisfactory  service  to 

Second.  To  enable  them  to  obtain  the  money  needed  to  make  ex- 
i!T^  and  improvements  required  by  the  growth  of  the  communi- 
ties and  the  increasing  use  of  service  by  the  public. 


T 


860       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Third.  To  enable  them  to  earn  a  reasonable  return  on  their  invest- 
ment. 

Of  all  the  factors  to  which  the  present  critical  condition  of  the 
electric  lines  has  been  attributed  there  is  only  one  against  which  the 
commissions  can  not  afford  us  protection.  This  single  exception  is 
the  competition  of  the  private  automobile,  and  this  factor  is  the  one 
that,  in  my  opinion,  is  least  responsible  for  our  critical  illness.  The 
automobile  has  fastened  the  riding  habit  on  the  public,  has  accus- 
tomed it  to  rapid  transit  and  thus  has  been  rather  beneficial  to  us 
than  otherwise. 

The  electric  lines  which  I  am  connected  with  or  have  knowledge  of 
are  collecting  more  street-car  fares  now  than  ever  before.  Our  gross 
business  is  very  satisfactory  and  will  continue  to  increase  if  we  re- 
ceive enough  money  to  restore  our  credit  with  the  investors. 

The  electric  railways  ai'e  not  sick  and  will  not  die  by  reason  of 
being  economically  or  evolutionarily  obsolete,  or  superannuated,  nor 
by  reason  of  natural  decay.  If  these  were  the  causes  of  our  illness, 
or  if  we  were  threatened  with  extinction  by  a  superior  mode  of  loco- 
motion that  can  better  perform  our  functions  under  the  same  restric- 
tion as  to  fares,  and  under  the  same  requirements  as  to  service,  taxes, 
etc.,  then  in  that  case  it  would  be  useless  to  ask  or  request  for  relief. 
For  no  private  interests  can  successfully  resist  real  economic 
evolution. 

Electric  railways  are  now  more  necessary  to,  and  enter  more  inti- 
mately into  the  social  and  industrial  life  of  our  urban,  suburban,  and 
interurban  population  than  ever  before,  even  if  a  small  percentage  of 
this  population  is  not  now  as  exclusively  dependent  upon  electric- 
railway  transportation  as  it  was  10  or  20  years  a^o. 

The  automobile  has  been  a  great  factor  in  relieving  congestion  in 
cities  by  encouraging  suburban  and  interurban  residence.  These 
people  feel  that  the  automobile  makes  them  independent  of  the  elec- 
tric lines,  yet  they  will  use  them  habitually,  using  their  car  or  our 
cars  as  their  convenience  or  caprice  dictates. 

No,  gentlemen,  the  present  critical  illness  and  the  impending  death 
of  the  electric  lines  are  not  due  to  natural  causes. 

We  are  ill,  even  unto  death,  entirely  by  reason  of  an  artificial  cause 
and  that  is :  Insufficient  financial  nourishment. 

If  you  agree  with  me  so  far,  especially  as  to  my  diagnosis,  then  you 
will  also  agree  with  me  that  there  are  two  remedies  that  can  effect  a 
permanent  real  cure,  viz : 

First.  An  adequate  increase  in  the  quantity  of  our  financial  nour- 
ishment, or, 

Second.  An  adequate  decrease  in  our  output  of  energy,  which 
means  in  our  service. 

A  cure  is  possible  by  an  adequate  increase  in  our  fares  alone,  but  if 
a  decrease  in  service  is  to  be  employed  as  a  remedy,  it  must  be  admin- 
istered in  combination  with  an  increase  in  fares  in  order  to  effect  a 
real  cure. 

A  man  who  suffers  from  lack  of  sufficient  food  does  not  need  medi- 
cine. He  needs  a  sufficient  quantity  of  food.  That  is  what  we  need 
and  must  have  if  we  are  to  survive. 

State  commissions  were  established  because  the  people  were  dis- 
satisfied with  the  results  of  utility  operation  under  franchise  restric- 
tions or  under  regulation  by  local  municipal  councils. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       861 

The  people  did  not  enjoy  the  spectacle  of  these  franchises  or  fh^ 
regulating  ordinances  of  their  councils  being  made  anHictatP^^^ 

rXsS^^^^^  workingmen,  are  intelligent  and  have 

tlioroughly  understand  the  merits  of  a  controversy  or  proposftion  ^ 

J\  hatever  the  intent  or  motives  were  of  the  lemslature  who  enictpd 
IJie  people  know  that  the  political  manhandling  of  utilitv  Dioh 

li  ?''f^*i'''f  ^  convinced  that  no  modus  vivendi  could  be  thuq  ^^«h 

Kn  ',Hn''"°'i'^^%?'*""  '^'^'^  '•^'"'''^W«  *»  both  parties  ''*'^' 

Kegulation  of  utilities  was  n vessary,  the  people  felt  not  onlv  fn. 
their  own  protection  but  also  f,:r  the  protection  of  the  utflitkl^ 

The  people  were  convinced  that  such  regulation  must  be  don.  h. 
men  possessing  the  experience,  education,  ^udic  a?  tZperamen  in^ 
tegnty  of  character,  and  absolute  fearlessness  necesXr^ntellT 

S  eTtabilS  the"%r'  ''''^''^''''  Powe^  tKo",1L' 
i  am  sure  that  your  committee  is  now  convinced  th«f  fLoc. 

We  must  now  examine  into  the  reasons  of  the  failure  of  thpc« 

%rS«t1' T],^  object.for  which  they  wL  eXblilS  "' 
ine  i^HAiRMAN.  The  commission  feels  that  it  will  derive  hi^t  oq 

^nJJfl  ^"V"*'''^-  i^"}?  *''''"  i"^*  tell  us  briefly  what  your  exneri 
ences  have  been  m  dealing  with  the  commissions.  ^  ^  "* 

Mr.  ScHADDELEE   All  right.    That  is  very  satisfactory 
yI^£^^JJ^  "-^  -"^  -'^^  -t  very  we^l  and  give 

The  statement  continues  as  follows: 

and  honestly  financed     It  is  not  mv  intpnf  fi  h5?i  Ju  '  ^^^"^"iit^ally  managed, 
.or^utnu.  c^onipauJ.-  ^'^  :^  T^IJ^Z^  ^Z^^^  ^^^^^   ' 


i 


i' 


1 
862       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

All  commissions  have  done  some  good  work  and  there  nre  many  able, 
conscientious,  capable,  and  fearless  members  on  these  commissions 

?  have  hoW-udge  aj^ainst  any  individual  member  of  a  co™°J  ^f^!?"  "?f  »^« 
mv  criticisms  or  remarks  addressed  to  the  commissioners  as  lndi\iduals. 

I  am  considering  each  commission  as  a  separate  body  and  all  the  comnus- 

^'Tl^oTairc^nvlnced'that  the  failure  of  the  commissions  can  not  be  laid  at 
the  door  of  any  Individual  commissioner.  We  are  not  dealing  In  personalities. 
We  are  dealing  with  complete  governmental  bodies  or  departments,  If  you  wl  1. 
The  iS  reason  for  the  failure  of  the  commissions  to  function  effectively 
is  the  fact  that  they  have  not  been  Immune  from  political  Influence  as  the 

^^lts?u^nmer?n''atTis^^  States,  to  my  personal  knowledge  numerous 
blls  were  introduced  to  either  abolish  these  commissions  or  otherwise  to 
ureatly  curtail  their  power.  In  one  State  the  commissioners  were  compelled 
t^def^iS  themselves  against  the  most  ridiculous  charges  pi-epa red  against 
tLm  bTmiinWl  otficlals  and  conteinptlble,  self-seeking  politicians. 

T lie  miwor  of  one  city  bitterly  and  unjustly  attac-ked  the  commissioner^ 
nndthfJi  sought  reelection  as  mayor  shortly  afterwards,  appealing  to  the 
p^ple  to  vote  for  mm  and  he  would  see  to  It  that  the  commission  would  be 
tiiioiitiii^wl   that  car  fares  would  not  be  raised,  etc. 

In  thrpr  marle^^  man  was  snowed  under,  being  the  low  man  of  three 

candidates.     Which  Indicates  how  the  people  feel  about  these  matters 

These  commissioners  are  but  human.  As  a  rule  they  like  to  retain  the  r 
positions,  and  under  the  conditions  cited  they  can  not  be  expected  to  make 
mirelv  iudiclal  decisions,  without  fear  or  favor.  ^     ,   ^  ,  ,   *^  ..„ 

If  thev  are  to  function  effectively,  they  must  be  absolutely  removed  from 
polltlcaMnfluence  and  they  must  be  secure  In  their  tenure  of  office  as  long  as 
{i.t>v  ftYPcntp  their  duties  ably,  justly,  and  fearlessly. 

UnderSrLeTcoidltlons  the  commissions  have  no  backbone,  they  have  no 
courage  they  are  not  free  agents.  They  are  much  more  Influenced  by  what 
the  Si   poUticlans  and  officials   are  saying   than  by   what  the  people  are 

^^^They^ear  the  vaporlngs  of  designing  politicians,  but  they  do  not  know 

^'"'AV'J^rtltSn^  are  usually  entirely  wrong  as  to  what  the 

neoDll  Se  in  these  matters,  as  they  are  much  more  nfluonce.1  by  what 
ETneople  ten  ttiem  than  by  what  50,000  people  do  not  tell  them.  The  great 
majSy  of  the  American  people  do  not  spend  their  time  telling  local  poll- 
tini»n<s  what  their  Ideas  are  on  these  iubjects. 

X  Tocar^om^^^^^^  are  usually  wrong  In  their  Interpretation  of  the 
people's  attitiide   on   these   matters   and   the   commissioners   are   unduly    In- 

^"Thrco'r^^n^l'ssl^^^^^^^^^  actions  and  decisions  that  they  are  con- 

sciously or  unconsciously  dominated  by  the  theory  that  their  duties  are  much 
more  largely  toward  the  people  than  toward  the  company,  and  that  the  people 
e^ibllshSd   them   mainly    as   rate-reducing  bodies   Instead   of   rate-regulating 

^^R^te  Increases  were  practically  unknown  before  the  war  and  the  habit  of 
rPihu-lne  rates  like  other  habits  Is  not  easy  to  break. 

Hate  reductions  have  been  made  with  more  alacrity  than  rate  Increases. 

Rpduc^  rates  are  put  in  effect  for  Indefinite  periods.  Rate  increases  are 
nntl^rlzed  for  one  year  or  for  six  mouths,  and  the  companies  are  required 
to  tile  auTrterly  or  monthly  statements  with  the  commissions  nnd  with  the  mu- 
nicipalities, so  that  as  soon  as  the  company  shows  Its  head  above  water,  a 
Dronerlv  administered  kick  will  again  submerge  It. 

^  Se  conditions  have  paralyzed  all  Incentive  to  economy  in  the  utility 
business,  and  no  staple  flnancial  conditions  can  be  created  until  they   aifc 

"^^Th^^blggest  handicap  to  a  utility  Is  to  appear  before  a  utility  commission 
with  a  record  and  data  showing  effective  operation  and  careful,  economical 

"^  Y^fiPwill  receive  verbal  commendation  but  a  lower  rate  than  another  corn- 
pan  v  not  so  well  operated  or  managed.  .         .,       x  , 

There  is  really  now  no  Incentive  to  economy,  nor  any  incentive  to  spend 
efforts  and  money  to  stimulate  expansion  of  the  business. 

If  you  spend  money  In  improved  equipment  to  effect  material  economics  in 
operation,  and  thus  increase  your  rate  of  return  over  the  6  per  cent  or  7  per 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       863 

cent  allowed  you,  the  commission  will  eventually  confiscate  this  excess  and 
maybe  more,  and  will  also  confiscate  part  of  the  capital  you  have  fnvlsLlto 

much "ir/h? nnlV'  ^"li*  ^^'^^^^^^fjires  or  rates  the  commissions  examine  too 
much  ;n  the  past  and  not  enough  in  the  future  or  present. 

They  are  willing  to  base  their  decisions  on  anticipated  decreases  in  the  rv^^t 
Uenfs    '  """^  "^"''''^'^  ^"'  ^'^""  ^'^  anticipated  inc?ea^  In  the  cos?  oJ  theS 

ve^r^  m.  K^'fi^r^  "^"^  "i^*  ''^^''"^^  *^^*  ""  °^a"'«  condition  during  the  last 
renefTf  hefs  Jcknow'  rf  "^'  '^^f'  ""''  "^^  ^^^  P^^^^P*  treatment  a^id 
from  him  vhfe  von  in  JnV  J"^"  ''  ^""^''"^  J^'^^^^  ^^^  ^^"  "<>*  withhold  food 
bad  su^leff^^  Whether  he 

^^^s^r^^r^^  --  ™  the  basis 

PhWcaf Lw'lhTi;  ?'  T"""'  '^""'^'^  ^"^^'i  ^^^-  to  fSrstand  that  there  is  a 
physical  law  which  is  also  an  economic  law,  viz,  that  the  total  ontcro  pnr.  Lf 

be  in  excess  of  the  income.    That  is  the  reason  we  denied  the  r^M  of  th^Wn^ 

"n"at^trtme'«  ^^'^  T'^^  theTor  ^.e^olher Vu'tLm^^ 

wages  regulate  our  Income  to  enable  us  to  pay  the  increased 

nc|Jn^/S^^^r ^V^l^^or  ^1^^ "*    '^^^  '^^^  ^^^  ^^^  ^^ 

if  ^^^Jii^^~^  ^  ^^isiTr^^^^t^i,:^^^ 

iDg  prompt  and  adequate  relief  from  onr  workin^men  nnrt  nil  n?  nnt^^L. 
the'^lo^  "and'  tl^.r^,::  ^™'"'"'  "'"^  oonn.'^.illjTrRif  have^'norve^TeS 

tben,  not  enough  to  live  ami  to),  nraVIo  me  "  *''™=  "  '""''  «"""^ 

^%i!^P^=^^^^^:^'^^^^  a  .  per 

commissions  and  tl  e  people     The  St  of  LntL^  ^     fi^'  ^"'  "''^  between  the 
relations  of  all  these  thrS  par™l  ^  """"'*'  confidence  must  pervade  the 

,.,.H.  «""'  *^'',  ™"1P'''"'<'«  aiKl  the  commissions  will  cultivate  closer  r^lntlnn. 

n,un  ty  In  a  more  or  less  degree,  eit'J.er  l^ldfnTo?  a^Trlnfto  offl4     ''"''  ''''"• 

themselves,  or  (m  both.  """Lrti  ueinagogues  or  on  the  companies 

m^'"*.  P"),'"*^^'"""',  <iemagOfnies,  and  newspapers  often  succeed  in  inpitin„  i,^.. 
tlhty  m  the  people  against  certain  utilities  when  there  S^  real  r^son  for 


4 


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864       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

such  hostility.    This  Is  because  they  talk  to  the  people  very  much  and  the* 
utilities  talk  to  the  people  very  little. 

The  utilities  and  the  conunissions  are  more  influenced  by  the  politicians  than 
by  the  people,  because  the  people  in  these  matters  are  Inarticulate,  while  the 
politicians  are  very  much  articulate. 

Mr.  "Warren.  What  was  the  name  of  the  company  that  you  refer 
to,  Mr.  Schaddelee  ? 

^Ir.  Schaddelee.  Of  the  railway  company  ? 

Mr.  Warren.  Yes. 

Mr.  Schaddelee.  They  were  the  Tri-City  Eailway  Co.  of  Illinois^ 
and  also — there  are  two  companies  involved,  although  they  are  owned 
by  the  same  people,  the  Moline  Eastern  &  Rock  Island  Traction. 

Commissioner  Beall.  Were  you  with  the  company  when  it  was  the 
old  Davenport,  Rock  Island  &  Moline  ? 

Mr.  Schaddelee.  No. 

Commissioner  Beaix.  Now  called  the  Tri-City? 

Mr.  Schaddelee.  No.  There  are  two  companies  existent  now.  I 
am  talking  about  two  companies  now. 

Commissioner  Beall.  The  Tri-City  used  to  be  the  Davenport, 
Rock  Island  &  Moline,  years  ago. 

Mr.  Schaddelee.  That  was  before  I  had  any  connection  with  it. 

Mr.  Warren.  How  long  have  you  been  connected  with  these  com- 
panies ? 

Mr.  Schaddelee.  We  have  owned  those  companies  since  1912. 

Mr.  Warren.  And  the  commission  to  which  you  referred  was  the 
Illinois  Commission? 

Mr.  Schaddelee.  Yes. 

Mr.  Warren.  Have  you  had  any  other  similar  experience  with  the 
Illinois  Commission  involving  what  seemed  to  you  unreasonable  de- 
lay in  a  rate  question  ? 

Mr.  Schaddelee.  Yes.  We  have  had  questions  of  increased  rates 
on  gas  and  electricity  that  were,  in  our  opinion,  unnecessarily 
delayed. 

Mr.  Warren.  How  long  were  they  delayed  ?  I  mean  how  long  did 
it  take  to  get  the  decision  from  the  time  you  filed  the  petition? 

Mr.  Schaddelee.  Well,  I  do  not  remember  in  the  gas  case.  It  must 
have  been  over  six  months. 

The  Chairman.  Has  that  been  during  the  war  time? 

Mr.  Schaddelee.  Yes. 

The  Chairman.  Is  it  not  a  fact  that  most  all  gas  and  electric  and 
railway  utilities  have  been  applying  for  increased  rates  from  the 
Illinois  Commission  and  other  commissions  during  the  war? 

Mr.  Schaddelee.  Yes,  sir;  a  good  many  of  them  have. 

The  Chairman.  And  do  you  know  whether  they  have  been  simply 
overwhelmed  with  the  number  of  applications  and  hearings? 

Mr.  Schaddelee.  That  is  true. 

The  Chairman.  In  view  of  that  fact,  do  you  think  that  they  have 
been  unduly  tardy  in  making  the  decisions  in  which  you  have  been 
interested  ? 

Mr.  Schaddelee.  Yes,  sir.  I  believe  that  under  the  emergency  ex- 
isting that  the  utilities  commissions  could  very  well  and  properly 
have  got  us  rates  without  going  into  all  this  question  of  physical 
valuation,  and  in  this  case  they  spent  months  and  moiiths. 

The  Chairman.  Did  the  Illinois  Commission  nuike  a  valuation  of 
your  properties  before  they  decided  it  ?  '. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIJ.       865 

Mr.  Schaddelee.  Yes. 

The  ChairxM AN.  In  the  war  times  ? 

Mr.  Schaddelee.  Yes. 

The  Chairman.  In  each  case  ? 

Mr.  Schaddelee.  Yes. 

pr Jpertyt""*'-'''-  ""'^  ^^"^  ^''^  '*  ^""^'^  ">'^'»  ^'>  ^^  «>«  ^»l»e  of  jo.,r 
..f'""  ^"'f ""^i-EE   Well,  we  had  our  hearing  in  our  raihvav-faro 

aiJjMientiy,  to  digest  the  information  and  write  un  tlip  oninmn 
Now,  the  question  is,  you  know:  What  would  vou  th  nk  of  aCtor 
who  would  take  a  year  for  him  to  find  out  Whether  fou  were  sick 
or  not  when  you  applied  for  relief  and  medicine?         ^ 

The  Chairman.  What  relief  did  the  commission  grant  you « 
ri  i'  f,*-"-^'?^''^^-  J^one  at  all;  and  the  reason  thev'did  not  "rant  us 
c.e'Kl.u'7ea?ToiV'rV''"T^  '^'  '«^*  ^^^  >•«-"«  and  dui^ng  the 
fn  tiri;  rood  coSiS"^  ""  '''''  ""'  ^  "'^•''^'  "^"*  ^  '-^  ^^-^ 

The  Chairman.  Had  you  laid  up  a  large  surplus? 

Mr.  bcHADDELEE  No;  not  a  surplus;  but  thev  said  that  we  hnd 
earned-the  first  thing  they  did,  they  reduced  our  vakiation  Thev 
cut  down  the  depreciation  that  their  own  engiLr  had  fiZrednnH 

^VZ-:i  ?  n  '""^  depreciation  on  a  street-railwry  compTnT   And 
notwithstanding  the  present  high  cost  of  materials  and  lalinr-^tn^ 
of  course,  by  sufficently  reducing  the  depreciation  allowance  and  re 
due  ng  the  valuation  of  the  property,  you  know    vou  can  aWov^ 
finally  arnve  at  a  figure  where  yoi  earn  nothing  o^'  il  ^^' 

fn.thJ  K  /r'  }  ""T,*  ^''''"•'  *'^^^^  commissioners  so  very  much 
Z,}^^'  ^"*  *^  trouble,  you  know,  with  these  commissiZeT  is 
that  they  are  not  secure  in  their  tenure  of  office.  In  mv  opin  on  tW 
commissions  can  never  function  Dronerlv  nnloVc  fi,? 
pointed  for  life  like  Supreme  Court^/XeTarro  thev  ^ilfwt' 
a  raid  of  losing  their  j/b.  Unless  th^  are  financial  finXendeSt 
they  can  not  help  but  be  subject  to  local  political  influence  andTn 
my  opinion  these  commissioners  as  a  rule,  as  bodie^  are  much  more 
cafiTea^^ffLtltef'^'^V'^'"  '°'="1  politicians' th?n"StX; 

ThrCHAiZfN   if -f  .     ^^Tw^f,"  P''*"^"*  t''  "'*""  a  mile  high, 
ine  CHAIRMAN.  Is  It  true  that  there  was  a  verv  considerablfl 

agitation  sprung  up  m  Illinois  during  the  last  year  for  the  at,Hsl 
nent  of  the  commiss  on,  due  to  the  l^rge  numb^fincreas^  fares 
that  they  had  granted  to  the  companiesi  mcreasea  tares 

Mr.  Schaddelee.  No;  I  do  not  believe  that  had  so  much  to  do  with 
It.  There  has  not  been  so  much  increase  in  fares.  The  onlv  th^^n^ 
hey  have  given  us  is  a  small  increase  in  gas  rates  and  no  hicS 
in  street-railroad  rates  at  all.  No ;  the  trouble  with  the  c^mS^s 
down  there  is  some  of  the  contemptible  politicians  and  demaS^ 
who  had  made  unwarranted  charg^  and  attacks  against  s^meoTih! 
members  of  that  commission  which  were  entirely  un?riiea^d  fall 
And  I  want  to  say  that  those  commissioners  were  called  unonTo 
defend  themselves  before  the  Legislature  of  Illinois  ao-ainst^^bos^ 
charges  of  these  men.  These  men  are  not  free  agentL  in^onsldeHn^  ' 
tlie  question  of  regulation  any  more.  ^  consideung 


M 


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866       PROCEEDINGS  OF  FEDEPuM.  ELECTRIC  RAILWAYS  COMMISSION". 

Another  thing,  in  Illinois  there  is  to  be  a  constitutional  convention 
next  October,  and  the  home-rule  advocates  are  ]ust  laying  for  that, 
and  their  idea  is  to  frame  that  constitution  m  such  a  way  as  to 
abolish  the  commission ;  and  the  commissioners  know  that,  and  are 
afraid  they  are  goinjr  to  lose  their  jobs.  •       .     •     •  x 

The  Chairman.  The  home-rule  people  are  going  to  insist  upon 
franchises  with  a  maximum  fare  of  5  cents;  are  they  not? 

Mr  ScHADDELEE.  I  do  not  Imow  about  what  their  idea  ot  the 
maximum  fare  is  to  be  at  all.  But  now  that  is  the  situation.  You 
can  not  blame  them.  You  take  a  man  that  is  not  financially  inde- 
pendent, with  a  fairly  decent  job,  and  a  family  to  supix)rt;  he 
knows  that  if  he  does  his  duty  fearlessly  he  is  in  danger  of  losing 
his  job  by  the  machinations  of  those  politicians.  You  can  not 
l)lanie  him  if  he  is  a  little  bit  careful  about  the  exercise  of  his  power. 
I  would  not  blame  him  very  much.  But  that  is  the  propsition 
You  have  to  put  these  men  in  for  life,  in  my  opinion,  and  it  would 
be  still  more  desirable  if  you  could  appoint  men  on  these  commis- 
sions if  they  were  from  some  other  State. 

Mr  Warren.  Your  remedy  would  be  to  appoint  them  from  an- 
other State  for  life  and  the  opposition  want  to  abolish  them  alto- 
gether? 

Mr.  Schaddelee.  Altogether;  yes,  sir.  ,.,   ,    ,  .,, 

Mr.  Warren.  Which  do  you  think  is  more  likely  to  prevaiH 
Mr.  Schaddelee.  Well,  I  am  not  telling  you  which  is  more  likely 
to  prevail.    I  am  just  telling  you  something  of  the  things  that  are 
necessaiy  if  you  are  going  to  have  courageous  and  fair  and  ]ust 

regulations.  - 

Mr.  Warren.  Supposing  that  you  can  not  get  the  appointment  tor 
life,  is  there  any  other  suggestion  you  could  make  that  would  pro- 
duce what  you  consider  a  more  satisfactory  situation? 

Iilr.  ScHADDEi^E.  Well,  it  is  pretty  hard  to  suggest  any  other  way 
than  by  removing  the  political  factor. 

Mr.  Warren.  Are  they  appointed  by  the  governor? 

Mr.  Schaddelee.  Yes. 

Mr.  Warren.  They  are  not  elected  by  the  people? 

Mr.  Schaddelee.  No;  they  are  appointed  by  the  governor. 

Mr.  Warren.  What  is  their  term? 

Mr.  Schaddelee.  I  think  their  term  is  four  years,  as  I  remem- 

ber  it 
i       Mr.  W^^RREN.  Now,  this  is  the  Illinois  Commission  you  are  dis- 

*  cussing? 

i       Mr.  Schaddelee.  Yes. 

\       Mr.  Warrfjjj.  Have  you  had  any  other  street-railway  case  before 
that  commission  ? 

Mr.  Schaddelee.  No. 

Mr.  Warren.  How  about  Indiana— have  you  had  any  rate  case 

there  ^ 

Mr.  Schaddelee.  We  had  electric  rate  cases  there,  but  no  street- 
railway  cases  in  Indiana. 

Mr.  Warren.  What  was  your  experience  there? 
•     Mr.  Schaddelee.  Well,  our  experience  has  been  a  good  deal  like  it 
has  been  in  Illinois;  that  the  first  thing  when  you  tell  them  you  are 
sick  they  say,  "  We  will  have  to  investigate  and  see  whether  that  is  is 

•  true  or  not."    Then  it  takes  them  a  long  time  to  find  out  whether  you 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       867 

are  sick  or  not;  and  in  the  meantime  the  patient  is  getting  worse  all 
the  time  and  it  takes  more  medicine  to  make  him  well  again,  and  tlie 
longer  you  wait  the  worse  it  gets. 

Mr.  Warren.  Have  you  had  any  rate  cases  in  any  of  these  States 
duruig  the  war  m  which  relief  was  given  you  without  any  valuation 
and  am^raisal? 

Mr.  Schaddelee.  No. 

Mr.  Warren.  You  had  had  an  appraisal  in  every  case? 

Mr.  Schaddelee.  Yes. 

Mr.  Warren.  Could  you  tell  this  commission  what  the  shortest 
time  was  in  which  any  decision  was  rendered  ? 

Mr.  Schaddelee.  Well,  I  do  not  i^eniember,  but  I  am  sure  we  never 
had  any  decision  in  less  than  six  months'  time. 

Mr.  Warren.  Nothing  less  than  six  months? 

Mr.  Schaddelee.  No. 

Mr.  Warren.  Is  there  anything  else  you  want  to  suggest  apart 
from  what  is  in  your  paper? 

Mr.  Schaddelee.  Yes.  There  are  some  things  I  would  like  to  call 
to  the  attention  of  the  honorable  commission. 

One  of  the  wrong  policies  of  these  commissions,  you  know,  is  the 
fact  that  when  they  are  asked  to  increase  the  rates  they  are  (ioncerned 
a  whole  lot  with  the  past  but  very  little  with  the  future,  and  very 
little  with  the  present.  Now,  you  know  a  man's  present  needs  are 
practically  not  influenced  by  his  past  condition.  Because  a  man  was 
a  millionaire  six  years  ago,  if  he  is  hungry  to-day  he  has  got  to  have 
food  now,  and  the  fact  that  he  was  a  millionaire  two  or  three  vears 
ago  will  not  appease  his  hunger  now.  Thev  do  not  realize  ^that 
apparently.  They  also  do  not  seem  to  realize  the  very  simple  eco- 
nomic law,  which  is  also  a  physical  law,  that  the  outgo  can  never 
exceed  the  income.  But  they  seem  to  have  the  idea  that  the  public 
utility  men  are  much  smarter  than  anybody  else  and  that  thev  can 
evade  those  laws. 

There  are  some  things  that  were  said  here  that  I  do  not  agree  with, 
and  I  just  want  to  ghc  you  gentlemen  some  other  ideas  and  some 
new  ideas  about  a  few  things. 

You  have  heard  a  lot  about  the  jitney  competition.  Well,  we  have 
had  jitney  competition  in  past  years,  too,  and  the  only  reason  that  we 
had  that  competition  is  because  the  politicians  and  the  public  officials 
allowed  those  jitneys  to  compete  with  us  on  an  uneven  and  unfair 
basis.  I  am  not  afraid  of  jitney  competition  if  vou  put  on  those 
Jitneys  the  same  burdens  you  put  on  us;  not  a  bit.  I  told  one  of 
our  council  when  they  had  the  jitney  competition  up,  I  says,  "  I  will 
stop  the  street-cars  for  a  month  if  you  say  so,  and  let  the  jitneys  do 
all  the  business.  Then  we  will  stop  the  jitneys  a  month  and  w^e  will 
do  it  all.  You  can  be  your  own  judge  as  to  which  is  the  better  mode 
of  transportation. 

You  know  what  we  want  is  justice  and  fairness,  and  jitneys  or  any 
other  mode  of  locomotion  is  a  revolutionary  mode  over  our  system 
of  transportation.  We  can  not  prevent  that  going  into  effect.  There 
IS  no  private  enterprise  that  can  oppose  or  retard  to  any  extent  the 
Working  of  an  evolution  in  transportation.  We  might  just  as  w^ell 
lay  down,  but  I  do  not  want  to  lay  down  unless  the  competition  is 
fair. 


868       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Mr.  Warren.  Is  there  any  regulation  of  jitneys  there? 

Mr.  ScHADDFXEE.  Well,  the  court  has  regulated  them  out  of  busi- 
ness. 

Mr.  Warren.  The  courts  have? 

Mr.  ScHADDELEE.  Yes ;  and  that  is  another  thing  where  the  com- 
mission failed  to  do  its  plain  duty  under  the  law.  The  Illinois  law 
says  that  nobody  engaged  in  the  transportation  of  persons  in. Illinois 
can  engage  in  that  unless  they  first  have  a  certificate  of  convenience. 

Mr.  Warren.  From  the  commission? 

Mr.  ScHADDALEE.  Yes,  sir ;  and  that  is  the  duty  of  the  commission-- 
to  enforce  that  law.  They  never  made  any  effort  to  enforce  it. 
Finally  we  got  them  after  long  w^ork,  and  after  keeping  at  it  all  the 
time;  they  finally  issued  an  order  telling  them  to  desist.  Do  you 
suppose  they  desisted?  Not  a  bit.  They  increased.  They  did  not 
care  for  it —  they  were  nothing  but  a  lot  of  outlaws — and  as  long  as 
they  could  operate  as  outlaws  they  could  stay.  The  minute  they 
were  compelled  to  abide  by  the  law  they  could  not  live.  Any  outlaw 
can  live  as  long  as  nobody  interferes  with  him. 

Mr.  Warren.  What  did  you  do — ^go  to  the  court  and  get  an  order 
to  enforce  the  commission's  order? 

Mr.  ScHADDELEE.  Yes ;  we  got  a  blanket  order.  I  do  not  know  if 
any  court  has  ever  issued  an  order  of  that  kind,  but  we  got  it.  And 
there  are  no  jitneys  now  and  there  won't  be  any  more  down  there. 
If  they  do  come,  we  will  take  care  of  them. 

The  Chairman.  Do  you  not  think  it  was  a  good  thing  for  the 
people  to  be  fed  on  jitneys  for  a  while  so  as  to  have  the  full  experi- 
ence ? 

Mr.  ScHADDELEE.  Well,  I  had  no  objection  to  their  being  fed,  but 
we  had  objection  to  the  nourishment  to  feed  them  being  withdrawn 
from  us;  that  is  what  we  objected  to.  Those  jitneys,  you  know,  in 
the  wintertime  when  the  snow  was  on  the  ground — there  would  be  2 
feet  of  snow  on  the  ground  and  the  jitneys  would  not  run  until 
w^e  had  cleared  the  snow  from  the  streets,  and  then  the  jitneys  would 
go  right  ahead  of  our  street-cars  and  take  all  our  business  away  from 
us,  and  then  they  say  the  street-car  company  has  a  competitor.  That 
is  a  fine  competitor,  that  is. 

Now,  another  fallacy  that  a  lot  of  people  seem  to  be  laboring  under 
is  that  the  people  of  the  United  States  are  opposed  to  increased  rail- 
way fares,  increased  gas  and  electric  rates.  There  is  no  such  thing 
at  all ;  it  is  not  true  at  all.  They  are  not  opposed  to  it.  The  poli- 
ticians are  opposed  to  it.  We  had  a  case  of  a  popular  election  to 
get  a  6-cent  fare,  and  carried  it  in  Grand  Rapids,  Mich.  I  am  not 
connected  with  the  railways  there  and  have  no  interest  except  to  pay 
my  fare  when  I  use  their  cars ;  but  the  commission  down  there  hap- 
pened to  have  some  courage,  and  when  the  company  made  application 
for  an  increased  street-car  fare  they  had  a  perfect  right  to  pass  the 
buck  on  to  the  people,  but  they  said,"  No,  the  price  of  coal  has  been 
raised,  the  price  of  everything,  of  furniture,  of  meat,  of  bread, 
everything  has  been  raised,  and  the  people  did  not  have  to  vote  on 
that.  The  utilities  did  not  have  a  vote  when  the  price  of  coal  was 
raised,  not  at  all."  So  this  commission  said,  "  Well,  why  should  this 
poor  street-car  company  go  to  the  people  and  have  the  people  vote 
whether  they  shall  have  an  increase?  "    So  they  said,  "  We  will  do  it 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       869 

ourselves  "  and  passed  an  ordinance  giving  the  street-car  company 
a  6-cent  fare.  All  right.  Then  some  of  these  municipal-ownership 
fellows  got  busy ;  they  started  a  petition.  They  wanted  to  have  that 
under  the  referendum  provision  of  the  Grand  Eapids  home  charter 
reterred  to  the  people,  but  they  could  not  get  enough  people  to  sign 
It,  so  they  dropped  their  petition.  foil  b 

Commissioner  Beall.  No  ;  they  reduced  the  fare,  did  they  not  ? 

Mr.  SCHADDELEE.  No ;  that  was  later  on.  The  present  commission 
has  had  some  changes  since  that  happened  last  fall.  I  live  in  Grand 
Kapicls.     I  know  what  is  happening  in  Grand  Eapids. 

Aow  another  thing  I  want  to  tell  you.     In  Cadillac • 

Mr.  VV  arren  W  hen  you  refer  to  the  commission  in  Grand  Rapids 
do  you  mean  the  State  commission? 

Mr.   ScHADDELEE.    No. 

Commissioner  Beall.  This  was  the  State  commission.  Thev  re- 
diiced  It  afterwards.  "^ 

Mr.  ScHADDELEE.  For  a  month  only,  as  a  trial. 
Commissioner  Beall.  Well,  we  do  not  know  what  it  will  be 
Mr.  SCHADDELEE.  Well,  T  know  what  they  did.     They  said  it  was 

l^h  fi  "^^,f  ^Vi*^'^^  ''T'^^  S"""'-  ^^  ^^y  *1^^  ^-cent  fare  in  order  to  see 
whether  the  theory  that  under  a  5-cent  fare  people  would  ride  much 
more  often  would  be  true,  or  the  increased  riding  would  compensate 
enough  to  take  care  of  the  earnings  that  they  got  under  a  6-cent  fare. 
I  hat  IS  what  they  are  trying  out.     They  are  going 

Mr.  A\ARREx.  Was  this  the  same  commission  that  raised  it? 

Mr.   SCHADDELEE.  Well,  it  was  somewjiat  the  same  commission, 

if     w    ^^®  ^^^  ^^^^^  changes  which  have  taken  place. 

Mr.  VV  ARREN.  There  has  been  an  election  between  ? 

Mr.  SCHADDELEE.  Well,  there  has  not  been  an  election,  but  there 
are  commissioners  down  there  and  they  have  some  rights  amonff 
themselves  to  change  the  powers  of  the  commission.  One  of  the 
men  who  IS  quite  dominant  down  there  has  always  been  opposed  to 
public-utility  companies,  and  I  think  he  is  responsible  for  it.  But 
the  people  would  not  sign  in  sufficient  numbers  to  have  it  subjected 
to  the  referendum. 

We  had  another  experience  in  Cadillac,  Mich.,  where  we  had  a 
franchise  for  $1  gas.  A  year  ago  the  people  voted  us  a  new  fran- 
chise for  30  3'ears  giving  us  25  per  cent  increase  in  gas  rate,  and  we 
carried  that  franchise  9  in  favor  to  1  against  that  franchise.  That 
gives  another  indication  how  the  people  think  about  it.  And  last 
week,  or  two  weeks  ago,  the  city  cominission  of  Cadillac  gave  us 
another  25-cent  increase  in  gas  rate,  passing  an  ordinance  givin<y  us 
another  25-cent  increase  in  gas  rate,  and  the  commission  had  adver- 
tised and  invited  everybody  who  was  opposed  to  giving  us  another 
increase  to  appear  before  the  commission  and  voice  their  objections 
to  it ;  and  when  they  had  their  meeting  there  was  one  man  appeared 
and  he  had  no  objections,  so  they  passed  it.  ' 

The  American  people— you  know,  I  have  an  awful  lot  of  faith  in 
the  American  people.  If  you  leave  them  alone,  the  American 
people  will  never  knowingly  do  an  injustice  to  you  or  anyone  else. 
And  if  the  idea  of  the  commissions  is  that  the  way  they  have  treated 
these  utilities  is  in  line  with  the  desires  of  the  American  people 
then  I  say  that  that  is  a  libel  on  the  American  people.  The  Ameri- 
can people  are  all  right,  but  when  they  are  debauched  by  a  lot  of 


II 


ill 


870       PROCEEDINGS  or  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

designing  politicians  who  are  used  to  having  too  much  vocal  exor- 
cise and  not  enough  physical  exeix^ise  then  there  is  no  telling  what 
those  American  people  may  do;  but  they  w'lll  never  do  you  an  in- 
justice knowingly  or  designedly— I  don't  believe.     They  have  never 

done  it  to  me.  .        ,     .  ,  .  ^         ^  i.       i  * 

Now,  we  had  here  in  the  Michigan  Legislature— I  want  to  relate 

to  you  some  of  my  experiences  there  and  my  views  on  that  m  op- 
pasition  to  some  other  views  I  have  heard  here  expressed.  In  Miclii- 
cran  the  interurbans  were  confronted  with  the  fact  that  they  were 
fimited  to  2  cents  a  mile  under  the  State  law  that  was  passed  many 
years  ago,  so  that  the  only  way  that  those  interurbans  could  get 
relief  was  by  a  direct  action  of  the  legislature  itself.  VVlien  the 
legislature  met  last  fall  we  went  down  to  Lansing— I  went  down 
to  Lansing,  and  that  was  the  first  time  I  had  ever  been  in  the  fetate 
Capitol  in  Lansing.  We  had  operated  utilities  for  many  years  in 
that  State,  and  it  was  with  great  deprecation  that  I  went  down  there 
to  talk  to  these  men.  But  when  I  came  there,  the  first  thing  1  saw  at 
night  was  a  sign  in  big  electric  letters,  "  Welcome."  That  shows 
you  how  they  received  me.  Well,  later  on  I  found  that  the  wel- 
come "  was  meant  for  the  soldiei-s,  but  it  encouraged  me  anyhow. 

Well,  I  went  right  to  the  legislature.  I  appeared  before  the  house 
committee,  and  evervbody  said,  "  You  can  not  pass  a  2.5-cent  fare  or 
any  increased  fare  through  this  legislature  against  these  home-rule 
men  It  can  not  be  done."  AVhen  I  said  that  we  intended  to  pass  a 
2.5-cent-fare  law  and  also  intended  to  have  the  legislature  relieve 
us  from  some  of  these  franchise  contracts,  you  know  like  l.o  cents 
and  2  cents,  thev  said  that  could  never  be  done;  but  it  has  beeji  done 
and  it  is  done  now,  and  the  legislature  not  only  passed  the  2.o-ceiit 
law  in  Michigan  with  a  great  majority  in  both  house  and  seriate, 
but  they  have  also  passed  a  law  specifically  repealing  all  these  tran- 
chises  and  what  they  call  contractual  provisions. 

When  I  was  talking  to  the  house  committee  they  said,  well  they 
were  all  convinced  that  we  needed  the  relief,  the  interurbans  did, 
but  they  said  it  would  be  impossible  to  pass  that  law  and  abrogate 

'  and  void  those  contracts.  Well,  I  says,  "That  is  schoolboy  talk. 
For  if  you  say  that  we  need  the  relief,  if  you  are  convinced  ot  that, 
then  it  is  your  duty  to  give  it  to  us.  And  now  you  say  you  propose  to 
pass  a  law  that  will  make  it  impossible  for  us  to  get  that  rehef. 
Kow,  you  know  no  sensible  men  would  talk  that  way,  and  they  were 
sensible  men  and  they  put  it  through.  ,,         .    • 

Now  those  men  needed  information,  and  we  gave  them  informa- 
tion and  I  did  not  apologize  to  anybody  for  appearing  on  the  floor 
of  that  legislature,  and  I  don't  intend  to  do  so  either.  It  was  our 
duty  to  protect  our  investors,  and  no  man  need  to  be  ashamed  of 
iroinfir  to  any  legislature  to  protect  his  company  and  the  interests 
that  are  entrusted  to  him.  It  is  his  duty  to  do  it  and  no  legislature 
will  be  mad  at  you  if  you  do  it;  don't  you  worry  about  that.  1  hey 
all  listened  to  me  and  they  got  a  lot  of  information;  and  that  is  what 
they  needed  and  that  is  what  the  commissions  need.  Here  is  what 
they  have  said :  They  say  the  public-utility  people  must  get  in  closer 
touch  with  the  people.  That  is  true,  but  the  commissions  must  get 
in  closer  touch  with  the  people  and  not  listen  so  much  to  the  vaporing 
of  those  politicians,  but  listen  to  the  people  themselves. 


PR0CEEDI:N-GS  of  federal  electric  RAILWAYS  COMMISSION^.      871 

We  had  an  occasion  in  Bock  Island  where  the  mayor,  who  had 
been  mayor  for  many  years,  so  many  at  least  that  my  memorv  is 
not  long  enough  to  remember  when  he  was  not— but  he  had  been 
mayor  for  a  good  many  years,  and  he  was  the  main  man  in  attacking 
this  company  because  we  had  an  application  asking  for  increased 
rates,  and  he  attacked  it  most  violentlv.     Then  he  had  to  run  for 
mayor  and  he  was  on  the  platform  that  "  if  you  will  elect  me  I  will 
see  that  the  street-railway  company  gets  no  increase  of  fare  and  no 
increase  m  electric  rates  and  no  increase  in  anything,  and  that  thev 
will  spend  a  lot  of  money  in  extending  the  line."    That  is  the  kind  of 
a  platform  he  nm  on.    And  in  the  primaries  he  was  low  man  of  three 
men  running.     Tliat  shows  you  how  the  people  resent  that.     The  peo- 
ple are  changing  their  minds  about  some  of  these  things.     If  you 
can  convince  the  people  that  you  are  honest,  that  you  are  true  to 
them,  that  you  are  running  your  business  in  an  economical  way  like 
every  busmess  ought  to  be  run,  and  if  thev  believe  that  thev  will 
stand  by  you.     But  I  want  to  say  it  is  a  very  hard  thing  to  make  them 
believe  that  sometimes,  and  the  reason  it  is  hard  to  make  them  be- 
lieve that  is  because  a  lot  of  the  other  fellows  are  telling  them  iust 
the  opposite  way,  and  it  is  true  that  these  men  talk  verv  muci'i  to 
tlie  public  and  usually  tlie  utilities  people  talk  verv  little  to  the  pub- 
lic, so  they  get  a  whole  lot  more  in  their  ears  from  the  other  side 
than  they  do  from  the  public-utilities  side. 

Mr.  Wariusn.  Is  there  anything  else  on  your  list  about  street  rail- 
ways that. you  want  to  call  to  the  commission's  attention^ 

Mr.  ScHADDELEE.  Thcrc  are  some  other  items  I  can  touch  upon 
Our  street-car  business  is  not  going  to  pot,  yoit  know.  The  people 
are  more  dependent  upon  street-car  transportation  than  ever  before 
and  I  think  the  automobile  has  been  a  lot  of  help  to  us  on  tlia^  The' 
automobile  has  given  people  the  habit  not  to  walk,  and  that*  is  the 
reason  they  use  street-cai-s  when  automobiles  are  available  Our 
gross  business  is  all  right.  We  have  no  doubt  about  our  grog's  busi- 
ness, but  what  we  need  is  a  higher  rate  of  pay  for  the  business 
because  we  are  not  like  the  Jews— that  can  run  a  big  business  at  a  loss 
because  they  do  so  much  of  it. 

^  Another  reason  a  good  many  street-railway  companies  are  not  vet 
m  bankruptcy  is  due  to  the  fact  that  there  are  some  strong  holdino' 
companies  standing  back  of  them  and  they  are  putting  the  credit 
behind  those  companies ;  that  is,  they  are  holding  a  lot  of  them  up 
and  If  they  were  standing  on  their  feet  there  would  be  a  whole  lot 
more  bankrupts  than  there  are  now.  Tlmt  is  another  thing  vou  have 
to  consider.  ^  '■ 

*i  ^,^,^^.^*^^^  *?  municipal  ownership,  I  might  sav  this.  You  know 
that  this  gentleman  tins  morning— I  was  afraid  he  was  going  to  be 
so  enthusiastic  that  he  was  going  to  advocate  municipal  ownership 
of  his  own  business,  but,  as  usual,  he  stopped  before  that.  But  he 
is  not  very  radical.  Lenme  and  Trotsky  are  very  much  more  radical 
than  he  is.  They  are  not  only  advocating  municipal  ownership  of 
our  business  but  of  his  business  and  also  of  his  automobiles. 

Mr.  Warren.  Who  is  advocating  that? 

Mr.  ScHADDELEE.  Leuiuc  and  Trotsky.  He  is  not  radical  at  all 
compared  to  those  men.     They  would  take  his  nine  automobiles 

Another  fallacy  that  is  prevalent  among  even  the  railwav  men  is 
that  people  ride  because  it  costs  a  nickel  and  that  if  it  costs  more  than 


,U 


872       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

a  nickel  they  are  not  going  to  ride.  Have  you  ever  heard  of  an 
American  citizen  foregoing  a  convenience  because  it  cost  more?  I 
never  have.  The  effect  of  the  increased  cost  of  the  ride  is  going  to 
be  very  short  lived  in  my  opinion.  If  you  gentlemen  give  us  the 
increased  rates,  we  will  take  chances  on  the  people  not  riding. 

In  conclusion,  I  mention  just  this  to  your  honorable  commission- 
there  are  a  lot  of  things  I  might  talk  about,  but  there  is  no  use  in 
making  it  too  long— but  here  is  one  thing  I  might  put  up  to  you : 
I  think  we  will  all  agree  that  a  5-cent  fare  was  a  fair  rate  generally 
Rye  years  ago  and  that  was  generally  five  years  ago  an  acc'epted 
street-car  fare.  All  right ;  the  people  paid  that  and  nobody  kicked 
about  that.  Now  I  think  anybody  will  agree,  without  any  examina- 
tion of  physical  properties,  books^  or  anything  else,  that  if  you  start 
from  the  basis  that  5  cents  was  fair  five  years  ago  that  the  estab- 
lishment of  a  6  or  7-cent  fare  at  the  present  time  generally  through- 
out the  whole  country  would  be  just  as  fair  and  would  not  be  any 
more  unfair  now  that  the  5-cent  fare  was  five  years  ago.  And  if  you 
gentlemen  could  through  your  influence  persuade  these  commissions 
or  these  legislatures  to  establish  now  generally  a  6  or  7-cent  fare  as 
a  maximum  fare,  and  then  let  the  people,  the  patrons  of  any  of  these 
companies,  who  object  to  that  and  think  that  is  too  high,  let  them 
go  to  their  commissions  and  ask  them  to  investigate  whether  it  is  too 
high  and  lower  it  if  it  is;  and  if  the  companies  are  not  satisfied  with 
the  6  or  7  cents,  if  it  is  established,  if  they  feel  it  is  not  correct,  then 
let  them  go  to  the  commission  and  ask  for  a  higher  one.  But  if  you 
could  do  that  you  could  give  at  least  some  prompt  general  relief  to 
the  general  situation. 

Mr.  Warren.  I  forgot  to  ask  your  position  with  this  street-railway 

companv.     Did  you  state  it? 

Mr.  ScHADDELEE.  Well,  I  am  vice  president  and  general  manager 
of  the  United  Light  &  Railways  Co.,  which  controls 

Wr.  Warren.  You  have  been  with  the  company  since  1912? 

Mr.  ScHADDELEE.  I  liave  been  with  the  company  since  its  organiza- 
tion and  I  have  been  in  the  public-utility  business  since  1891. 

Mr.  Warren.  Have  you  been  in  the  street-railway  and  public- 
utility  business  since  1906  ? 

Mr.  ScHADDELEE.  I  have  been  connected  with  the  street-railway 
business  since  1906. 

Mr.  Warren.  Do  you  knoAv  whether  the  street-railway  fares  of  the 
companies  with  which  you  have  been  connected  have  been  extended 
80  as  to  include  a  longer  ride  since  you  have  known  them  ? 

Mr.   ScHADDELEE.    YcS. 

Mr.  Warren.  Eather  generally  has  that  been  so? 

Mr.  ScHADDELEE.  Yes,  and  the  old  street-cars  have  been  scrapped 
and  new  ones  bought 

Mr.  AVarren.  I  do  not  care  about  that,  but  I  wanted  to  cover  the 
distance  they  could  ride. 

Mr.  ScHADDELEE.  Yes. 

Mr.  Warren.  Either  by  building  lines  or  giving  transfers  and  by 
merging  different  lines? 

Mr.  ScHADDELEE.   YcS. 

Mr.  Warren.  That  is  all. 
(Witness  excused.) 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      87^ 

STATEMENT  OF  MR.  HENRY  J.  PIERCE. 

Mr.  Warren.  Your  name? 

Mr.  Pierce.  Henry  J.  Pierce,  Seattle,  Wash. 

Mr.*  PiERr-4^^^^       "'""''^  '"  '"^  ''"''  '"'"^^^  "^"• 

Mr.  Warren    How  long  since  you  have  been  ? 

ne^^n  /oOQ^ln  '^'^'"'"^  '"^^  connection  with  the  street  railroad  busi- 
ness  in  uioy;  10  years  ago. 

Mr.  Warren.  And  before  1909  with  what  street  railway  com- 
panies were  you  connected  ?  launay  com 

Rdiwav  Po^'^A/R'^ff  r^'^'^^f  *»'•  ^on^e  years  of  the  International 
«aiiway  Co.  of  Buffalo,  winch  serves  western  New  York  with  street 
railroad  transportation.    I  was  also  president  of  the  yitherlandl 

Sn^d/fn  hT'I'"'^'  ^r'"^-*^,  °""^^  «"*!  "P^'-^t^d  several  tTeet 
railroads  m  Holland— m  Ilaarlaem,  one  from  Haarlaem  to  Amster- 
dam and  from  Amsterdam  to  Zantfoordt.  """aem  to  Amster- 

vou  can  stT/Hir'''''''^''"*'-^!^  ^'''^'1  suggestions  to  make,  and  that 
fhat  so"  "^"'^    ^  '^'""'"*  "'y  questioning  you.    Is 

Mr.  Pierce.  Yes. 

Mr.  Warren.  Will  you  go  ahead ' 

Mr.  Pierce.  Mr.  Chairman  and  members  of  the  commission,  while 

said  in  reply  to  Mr.  AVarren,  and  while,  to  use  a  quotation  of  Mr 
s?  ff  "?.t'!.tfl'"'  morning,  what  I  am  to  say  for  that  reason  is  "old 
stuff,  yet  at  the  same  time  I  have  kept  in  pretty  close  touch  with  my 
friends  in  the  street-railroad  business,  more  especially  TXcause^f 
the  great  interest  I  took  in  it  previous  to  1909.  am  I  Lve  some  sug- 
gestions which  I  wish  to  convey  to  you,  very  briefly  ^ 
Ihese  suggestions  relate  only  to  the  city  street  railroads  of  th« 

iZSan  i.o"!'''  ""  "'"^^^  ""'  ^'^"■'^^^  ''  Xew  York  fto  tt 

For  over  a  quarter  of  a  century  the  people  who  have  ridden  on 

street-cars  have  been  accustomed  to  pay  tie  5-cent  fa i^  and  they 

have  come  to  believe  that  5  cents  is  tfie  value  and  the  proper  value 

the'f.urtol""7"8"or''o"^  ?T.  »"TP*^^>''^'^  ^^"  nfade^to  rals^ 
me  taie  to  6,  7,  8,  or  9  cents  the  public  have  resented  it,  there  is 

not  any  question  about  that.  I  ride  on  the  street-cars  m^-self  and 
have  ridden  dn  the  street-cars  in  cities  where  the  fare  had  been  raised 
and  I  know  there  is  a  lot  of  resentment  on  the  part  of  the  public 
the"Zs  of  ''•'  "1  "«dei-sta„d  it.  They  have  been  educated  dong 
the  lines  of  a  o-cent  rate.  Therefore  if  it  is  a  possible  thing  to  keep 
the  street-car  fare  at  6  cents  it  should  be  done.  I  am  inclined  to 
think  that  It  can  be  done  through  some  readjustment  of  the  relations 
that  now  exist  and  which  have  existed  between  the  municipal  ties 
and  the  street-railroad  corporations,  and  it  is  along  those  lines  that 
I  wish  to  convey  these  suggestions  to  you. 

I  would  have  the  fare  a  straight  5-cent  cash  fare,  no  tickets     I 
would  abolish  transfers  absolutely.    I  would  have  the  municipalities 
remit  „il  taxes  and  I  would  have  the  municipalities  do  the  paving 
If  that  IS  not  enough-I  think  it  would  be  enough  in  veri^  many 
cases  te  settle  these  difficulties,  these  very  serious'difficuH'el  wlikh 


874       PBOCEEDIKGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

confront  this  industries— but  if  it  were  not  sufficient  then  I  would 
charge  an  extra  5-cent  fare  outside  of  a  central  zone  3  miles  m 

diameter. 

I  would  then  allow  the  street-car  company  8  per  cent  upon  its 
investment,  and  by  its  investment,  I  mean  its  cost  in  money  that  they 
have  invested,  not  in  any  event  to  be  greater  than  reconstruction 
cost,  and  in  that  cost  I  would  include  as  a  matter  of  fairness  what 
might  be  termed  the  replacements  of  obsolescence  in  machinery  and 
equipment  which  had  been  made  necessary  through  improvement  of 

the  art.  ,    .   • 

In  1890  the  horse  street-cars  were  scrapped  and  the  electric  opera- 
tion of  street-cars  was  begun.  But  the  motors  were  small,  the  rails 
were  light,  the  street-cars  were  small.  In  1895  the  original  electrical 
equipment  had  pretty  much  all  to  be  scrapped—it  was  obsolescent. 
Better  machinery  and  better  equipment  had  come  in.  It  had  to  be 
replaced.  The  same  thing  took  place  along  about  1900  to  1902.  The 
street  railroads  have  had  to  bo  rebuilt  about  three  times. 

Now,  those  who  have  invested  in  street-railroad  securities  should 
not  be  penalized  on  that  account,  and  any  money  which  has  not  been 
returned  to  them  which  they  have  still  invested  in  the  property 
through  i-eplacements  of  that  kind  should  be  included  in  the  value 
upon  which  they  are  entitled  to  earn. 

Then  I  would  have  all  money,  all  further  surplus  beyond  that  8 
per  cent,  go  back  into  the  city  treasury. 

I  believe  that  in  this  way  this  difficulty  would  be  solved.  I 
believe  that  the  street-car  companies  could  finance  and  refinance 
their  property.  I  think  that  they  could  deal  with  the  bankers.  I 
think  that  the  people's  interests  would  be  protected,  the  investors' 
interests  would  be  pix)tected  and  everybody  would  be  treated  fairly. 
I  do  not  think  any  other  way 

The  Chairman.  The  general  complaint  here  for  the  past  10  days 
is  that  a  5-cent  fare  will  not  even  pay  operating  costs. 

Mr.  Pierce.  Yes. 

The  Chairman.  How  are  you  going  to  pay  8  per  cent  on  the  capi- 
tal and  turn  something  over  to  the  others  with  a  5-cent  fare? 

Mr.  Pierce.  Through  the  abolition  of  transfers,  through  the  aboli- 
tion of  taxes,  and  through  the  municipality's  paying  for  the  paving, 
and  if  that  is  not  enough,  through  the  5-cent  extra  fare  outside  of  a 
3-mile  zone,  Mr.  Chairman.  I  do  not  think  it  is  right,  anyway,  for 
the  street-car  company  to  pay  for  paving  in  the  street,  because  these 
streets  or  roads  came  down  to  us  from  the  olden  times  as  the  king's 
highway  through  which  the  people  might  ride  and  walk.  The  street- 
car is  the  poor  man's  vehicle,  and  I  suppose  90  per  cent  of  the  people 
who  ride  on  street-cars  are  not  well  enough  off  to  own  horses  and 
automobiles,  therefore  they  have  to  ride.  But  the  man  who  has  a 
horse  or  an  automobile  may  go  through  streets  without  paying  taxes. 
I  think  it  is  only  fair  in  any  event  that  the  paving  should  be  done 

by  the  city. 

Now,  the  only  alternative  to  this,  to  my  mind,  would  be  for  the 
municipalities  to  take  over  and  operate  the  street  railroads  of  the 
country.     That  I  consider  un-American.     That  I  should  very  much 

dislike  to  see. 

I  think  the  function  of  government  is  to  govern  and  regulate,  not 
to  own  or  operate  public  utilities.    I  have  lived,  in  all,  perhaps  10 


PROCEEDIKGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       875 

wer^ni""^  ^^V""  ^"''^P^-    ^  ^^^^  "d^^n  on  their  railroads  which 

hatTlZv!  ni^^  government  or  by  municipalities,  and  I  telT  yo5 

P ir.     TK      f  ^  ?''!'^  ""^^^  ^^^^s  ^^d  a  good  many  kaisers  on  those 

vateiv  one^afp^T.'  'T^  ^i^"  ^^^^^  ^^^^^^^  '^^^^^J  that  our  pH 
i\  .,t  A  ""P^^^t^^^  stj-^,«t  railroads  and  railways  treat  them  here      It 

l^ft^^'ZX'  """^  ''''""  '^^^"'  "^  ' '^^'  hope  :Twm  neve'r' 
^  J  think  that  is  all,  Mr.  Chairman  and  gentlemen,  that  I  have  to 

lur.  I'lERCE.  1  would. 
Mr.  Pierce.  Yes. 

Mr.  Pierce.  Yes. 

Commissioner  Gadsden.  What  you  really  suggest  is  in  a<?rlif  Jon  f-. 

Mr.  Pierce.  Yes. 

mTSc^"  Y^.^'"'^'^''-  •^"'^  ^  commercial  proposition? 

niS.T^I'r^'fT'  .^"^'^^^^^^;  I^'^tead  of  a  merchant  raising  the  price 
TVT    ??^^^^  ^^  ^^^'^^  y^"  l^ss  of  them  ?  ^  P^  ^^® 

lonn        ?^''^'  y^""''  ^"^  then  in  abolishing  transfers   as  I  vpcrII    i,. 
1909,  and  previous  to  that,  about  45  per  cent  of  th^st'eet-car^^^^^^^^ 
m  Buffalo  were  on  transfers,  and  that,  of  course    wonM   L? 
great  deal,  the  abolition  of  the  transfer  '      ^^  ^'^^^  * 

Mr.  Warren.  Your  suggestion,  as  a  matter  of  fact  is  verv^  ruuoh 
hke  what  the  city  of  Springfield,  Mass.,  has  tried  with     e^v  fatJ 
factory  results  and  very  little  loss  of  riding,  confim^L  vo^^ 
pression.     I  am  very  much  obliged  to  you  """"^^"ig  Joui  mi^ 

(Witness  excused.) 

STATEMENT  OF  MR.  FREDEEICK  DE  BEEARD. 

Mr.  Warren.  Your  full  name  ? 
Mr.  De  Berard.  Frederick  B.  De  Berard. 
^r     ^^«REN.  You  reside  in  New  York« 
Mr.  De  Berard.  I  do. 

exferiencer"-  ^^'"  ^""^  *^"  ''''  commission  your  connection  and 


876       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  De  Berard.  I  am  director  of  research  for  the  Merchants' 
Association  of  Xew  York.  My  function  is  the  study  and  examina- 
tion on  behalf  of  the  association  of  the  very  numerous  economic 
questions  of  all  kinds  that  come  before  them  for  consideration,  for 
the  information  of  their  various  committees.  My  work  involves 
investigation  and  study  of  the  legislation  which  is  proposed  at 
Albany,  nuich  of  that  which  is  proposed  at  Washington  and  very 
many  of  the  larger  business  affairs  of  the  city.  We  take  no  cogni- 
zance whatever  of  political  questions,  except  as  they  are  inseparably 
connected  with  economic  questions.  I  have  been  engaged  in  that 
work  for  22  years. 

Mr.  Warren.  And  have  you  any  interest  in  or  connection  with 
street  railway  companies  or  any  street-railway  company? 

Mr.  De  Berard.  None  whatever;  nor  with  any  public  utility  of 
any  kind. 

Mr.  Warren.  Have  you  had  occasion  for  the  Merchants'  Asso- 
ciation to  study  this  street-railway  question  in  its  relation  to  the 
community  ? 

Mr.  De  Berard.  I  have  given  considerable  study  to  the  street- 
railway  question,  but  in  connection  with  other  public  utilities  of 
various  kinds  and  in  connection  with  the  general  study  of  the  rail- 
way situation. 

Mr.  Warren.  Including  the  steam  railway  situation? 

Mr.  De  Berard.  The  steam-railroad  situation. 

Mr.  Warren.  And  have  you  arrived  at  any  conclusions,  Mr. 
De  Berard,  particularly  with  reference  to  street  railways  which  you 
think  would  be  of  interest  or  help  to  this  commission  ? 

Mr.  De  Berard.  I  have  given  particular  attention  to  the  relative 
merits  of  private  and  commercial  operation  of  all  classes  of  public 
utilities,  the  principles  which  govern  them  all  being  substantially 
identical,  and  conclusions  that  may  be  reached  as  to  one  will  apply 
with  practically  equal  force  to  all  the  others. 

Commissioner  Gadsden.  Before  you  go  into  that,  you  are  a  mem- 
ber of  the  public-utilities  committee  of  the  United  States  Chamber 
of  Commerce? 

Mr.  De  Berard.  I  am. 

Comn.issioner  (iadsden.  And  that  committee  has  had  hearings  on 
street-railroad  questions — public  hearings;  has  it  not? 

Mr.  De  Berard.  Yes. 

Commissioner  Gadsden.  Some  three  or  four? 

Mr.  De  Berard.  I  have  attended  those  various  hearings  and  have 
received  the  benefit  of  the  knowledge  of  numerous  gentlemen,  tech- 
nical experts,  and  students  of  economics  who  have  appeared  before 
that  coniniittee. 

The  Merchants'  Association  in  the  latter  part  of  1916  directed  me 
to  make  a  careful  study  of  the  question  of  government  ownership,  by 
reason  of  the  fact  that  that  subject  was  to  be  considered  by  the  New- 
lands  Commission  in  connection  with  legislation  which  was  then 
proposed  for  the  rehabilitation  or  change  in  form  of  management 
of  the  railroads  of  the  country. 

I  prepared  a  rather  extensive  monograph  as  the  result  of  the  pro- 
tracted study  wliich  I  gave  to  that  subject,  in  which  I  developed 
somewhat  fully  the  principles  relative  essentially  to  efficiency  and 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION        877 

and   o  report  whether  in  view  of  the  changes  bioui^^"  about  bv  the 
war  there  was  any  reason  for  the  association  to  mof  f v  the  pre vious 
fp4V°"-,  •^,'"'*  committee  made  a  further  careful  stuX  of  the  sub 
ject  m  which  my  work  was  requisitioned  and  likewise  made  a  renn^" 

Wf  rn^^jL^ed^inW*""  f  *^^  associS"  Sr  oV?C 
iicive  oeen  printed  m  the  form  of  monographs  and  I  have  rnniPQ 

here  tha^  are  available  for  the  use  of  this  commission  ^''' 

.    Mr.  WARREN.  Have  you  given  any  attention  to  the  subiect  nf  tha 
hTattrc7m^rn^i;s^'^^"^^  *°  the  ^prosperity  and  ^^.^^^^ 

to'Kubprb^  KnSrr;  ic^:n^^:sff^ 

17nZ  V  ^r  ^/^'•fl^t^^  to  the  industrial  prospTritTofthe^itv" 

°4hTeIat"n'to"oth.  '"'  '"""""."'^  ^"*°  "^^  ^"''^t'^"  to'^sle  extent 
wim  leidtion  to  otlier  communities  to  supply  instancp*  fnr  ..co  ;„ 

our  study  of  that  subject  in  New  York,    fl^  Sral  situatirde 
veloped  as  to    hat  is  along  these  lines:  That  fuly  efficient  local 
transportation  is  essential  to  the  welfare  both  soc  al  and  industria 
of  any  community.    It  is  essential  to  the  social  welfare  of  "lie  com 
munity  that  its  population  be  not  extremely  congested  but  th^^^f' 
be  distributed  over  a  reasonably  wide  territoVHoi  severa   r^Sns 
both  for  the  sanitary  and  social  well-being  of  the  inhabitanTs^nH 
irpTf /7A'''  "^d"«tri«l  prosperity  of  thf  business  XS  £ 
are  located  there,  in  order  that  they  may  be  located  in  thro.^ski  +« 

employment  ^"^  ^""^^^  **"  ^'^"""^^  t^"""  P>"<=es  of 

con5:i^^^^^ 

radi^?  7,  T,-  ^'''Y.  V"^  ^'"•^^ly  t^^^-ard  the  development  of  a 
cftv  of  New  YoT' fni*r"i  "  l«»git«dinal,  transporta'tion  in  he 
ciiv  oi  JNew  lork,  in  order  to  make  accessible  the  very  laree  area^s 
and  unimproved  lands  in  the  boroughs  and  in  the  outsffrf«  nf 
Brooklyn  that  were  not  at  that  time  accessible/Ld  therS4  werf 
™  Z*"!'/  "'"'""'  because  the  working  popula  ion  couW  not  oMaTn 
access  to  the  areas  nor  on  the  other  hand  cmdd  the  industries  obta  n 
es^fl/"t  W  -'Tufted  parts  of  the  city  at  a  reasonable  cos  .with  the 
esult  that  industrial  enterprises  were  locating  in  other  cities  where 

moV  frorabr"*^'''""'  ''  '"^  transportation  ^and  cheap  UnHZ 

So  our  general  conclusion  on  that  subject— although  as  I  hnv« 
said  It  has  not  been  the  subject  of  a  subject  report?^ur  jenm-o? 
conclusion  in  connection  with  our  study  o  general  conditions  wal 
that  efficient  and  regular  and  cheap  uAan  tTansportatioi  fs  fnr^f 
pensable  to  the  welfare  of  any  growing  commimfty  ^' 


"  ' 


tj 


u 


I 


I! 


878       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Mr.  Warren.  What  section  did  you  say  the  commission  had  given 
attention  to  in  order  to  reach  it? 

Mr.  De  Berard.  The  outlying  territory  in  the  Borough  of  Queens, 
which  is  very  largely  undeveloi>ed  by  reason  of  its  lack  of  ef- 
fective transportation  facilities. 

Mr.  Warren.  That  is  on  Long  Island;  is  it  not? 

Mr.  De  Berard.  On  Long  Island,  and  large  areas  in  the  outskirts 
of  Brooklyn  which  could  not  readily  be  reached  for  the  same  reason. 

Mr.  Warren.  Have  transportation  lines  been  built  to  that  ter- 
ritory ? 

Mr.  De  Berard.  A  new  system  of  subways  and  the  extensions  of 
the  elevated  lines  lying  in  the  Boroughs  of  Queens  and  Brooklyn 
were  built  for  that  specific  purpose,  for  the  purpose  of  bringing  into 
industrial  and  domestic  use  for  habitation  areas  that  were  much 
nearer  the  center  of  Manhattan  than  were  otherwise  available. 

Mr.  Warren.  Have  those  lines  been  put  in  operation,  or  some  of 
them  ? 

Mr.  De  Berard.  They  are  just  coming  into  operation  now.  They 
are  in  process  of  construction  and  the  construction  has  been  delayed 
by  the  war,  but  they  are  in  operation  to  a  considerable  extent  ai\d 
proJbably  all  will  be  in  operation  within  the  coming  year. 

Mr.  Warren.  And  those  lines,  as  I  understand  you,  have  been 
built  in  advance,  either  of  industrial  or  population  development 
merely  for  the  purpose  of  furthering  the  interests  of  the  city  in 
further  industrial  development  and  in  securing  housing  territory  for 
the  employee. 

Mr.  De  Berard.  That  motive  was  a  very  impoi-tant  and  possibly 
a  controlling  motive,  but  not  the  sole  motive.  Of  course  in  laying 
out  the  new  subways  they  had  to  have  regard  to  the  existing 
population  and  its  demands  for  better  and  further  transit;  but  like- 
wise studies  were  made  of  the  undeveloped  areas  and  several  of  the 
lines  were  run  into  territory  that  was  practically  undeveloped  at  that 

time. 

Mr.  Warren.  And  almost  without  population? 

^Ir.  De  Berard.  Well,  with  very  scant  population. 

Mr.  Warren.  Yes,  I  mean  compared  with  New  York  generally. 

Mr.  De  Berard.  Yes. 

Mr.  Warren.  And  that  was  done  largely  at  the  suggestion  of  the 
transit  commission? 

Mr.  De  Berard.  It  was  made  the  subject  of  a  very  careful  study 
particularly  by  Commissioner  Bassett.  who  visited  Europe  and  made 
a  personal  examination  and  very  careiul  study  of  the  existing  transit 
system  in  the  principal  industrial  centei*s  in  Europe,  particularly 
those  that  are  supplied  with  more  modern  means  of  transportation. 
I  have  had  frequent  conversations  with  him  on  that  subject,  and 
although  I  speak  without  his  authority,  I  believe  that  I  reflect  the 
results  of  the  studies  which  he  made  and  which  were  an  important 
element  or  factor  in  determining  the  new  rapid  transit  routes  in 
which  the  cities  and  the  companies  are  investing  in  the  neighborhood 
of  $300,000,000. 

Mr.  Warren.  Do  you  know  whether  it  was  proposed  to  transport 
people  to  and  from  that  territory  at  the  same  fare  as  elsewhere  ? 

Mr.  De  Berard.  The  question  of  advanced  rates  of  fare  had  not 
at  that  time  assumed  acute  proportions. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      879 

Mr.  W^ARREN   But  I  mean  was  the  idea  to  make  the  fare  the  samo 
there  as  it  was  then  on  other  parts  of  the  system?  '''"' 

SD^r  W  ?''''''''''*  Ir?  .r^  'i'^^^  ^^^  t^^^  commission  in  that  re^ 
spett,  but  I  assume  that  it  was  tacitlv  (^\rH^off^A  fKof       r        f      f 

A  J^*  )^^^*K«N.  Were  to  be  5  cents  ? 

Mr.  De  Berard.  Were  to  be  5  cents     Thif  i*c  r^r,^  ^4  i\  •  j 

Mr.  Waw!en.  I  think  you  said  you  lived  in  New  York 
Mr.  De  Ber.^rd   I  do;  I  live  in  Brooklyn. 

or  bUIP"-       **  ^""  ''"'*  ''•""  -"  ^''"S-ti™^  »-««"lent  of  New  York 
Mr.  De  Berard.  Thirty  years. 

they  were  changed  ir^^^ll' ^^tl^^^./r  '•"^^  ^^^^ 
Mr.  De  Berard.  les. 

the  length  of  haul  for  a  S!%«  "^^''*'  °'"  «*'''y  nineties, 

and  at  the  Jres^n    time  one  cf  1  nflf  ''^^'''7 ,g^<^tiy  increased 

caJJ^XriXg^rnX  l^J^  advertisement  in  the  subway 

tha   in  former  yets  ^"veaTs  tf  v"*°  *'' u  «P?'fi-»y.  but  I  k^ow 

mi.  WARREN.  Ihat  was  in  Brooklyn  or  New  York« 
Mr.  De  Berard.  Either. 
Mr.  Warrex.  Either? 


i  :i 


880       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  So  much  so  that  even  if  a  10-cent  fare  were  now 
charged,  it  would  be  possible  to  ride  for  the  10  cents  much  further 
than  it  would  have  been  possible  to  ride  for  10  cents  under  the  old 
system  of  separately  operated  companies? 

Mr.  De  Berard.  I  think  that  is  true ;  but  as  to  the  exact  measure,, 
we  are  very  likely  within  the  next  few  weeks  to  have  a  very  concrete 
object  lesson  in  New  York  by  reason  of  the,  dissolution  through  re- 
ceivership of  the  consolidation,  so  that  the  numerous  separate  lines 
will  each  be  charging  a  5-cent  fare  for  passage  over  their  lines ;  sa 
if  anybody  wants  to  go  by  the  surface  lines  from  the  Battery  to  the 
upper  part  of  the  island  he  will  have  the  privilege  of  paying  perhaps 
15  cents  where  he  now  pays  5. 

Mr.  Warren.  Is  a  similar  separation  of  lines  threatened  in  Bi-ook- 

lyn,  do  you  know? 

Mr.  De  Berard.  Yes;  the  Brooklyn  system  is  made  up  of  quite  a 
number  of  separate  lines. 

Mr.  Warren.  Whose  legal  existence  is  still  continued  ? 

Mr.  De  Berard.  They  are  under  lease  to  a  holding  company.  The 
holding  company  is  in  the  hands  of  a  receiver  and  the  underlying^ 
lines  have  just  likewise  gone  into  the  hands  of  a  receiver,  so  there 
is  likely  to  be  a  dissolution  of  the  companies  there. 

Mr.  Warren.  And  the  benefit  secured  a  good  many  years  ago  may 
now  disappear? 

Afi*   De  Ber  \rd    Y^es 

Mr.  Warren.  I  think  that  is  all,  Mr.  Chairman,  that  I  want  to 

ask  ^Ir.  De  Berard. 

Mr.  De  Berard.  I  should  like  to  say  a  little  more,  gentlemen,  on 
the  subject  of  government  ownership,  if  you  care  to  listen  to  it. 

The  Chairman.  Five  minutes? 

Mr.  De  Berard.  AVell,  I  can  say  a  little  in  five  minutes  but  I  can 

not  exhaust  the  subject. 

Commissioner  Meeker.  Well,  you  have  a  pamphlet  here  on  the 

subject.  . ,    ,  .  .        T 

Mr.  De  Berard.  In  view  of  what  Gov.  Foss  said  this  morning,  I 
do  not  think  his  statement  should  be  permitted  to  go  unchallenged. 
There  are  certain  assumptions  in  the  governor's  statement  which  to 
me  seem  entirely  unwarranted.  Like  most  advocates  of  govern- 
ment ownership,*  he  assumes  that  such  ownership  is  the  haven  and 
the  relief  for  the  assumed  or  alleged  hardships  under  which  the 
public  is  suffering.  Personally  I  am  inclined  very  strongly  to  dis- 
count the  public's  statement  and  its  beliefs  as  to  the  extent  of  the 
hardships.  As  Mr.  Warren's  questions  have  indicated,  the  public 
have  very  substantially  benefited  during  recent  years  by  the  major 
operation  of  street-railway  lines— in  the  city  of  New  York,  at  any 
rate — through  consolidations  and  extensions  whereby  the  public  gets 
very  much  more  for  its  money  than  it  formerly  got.  There  are  un- 
doubtedly justified  complaints  as  to  service,  sporadic  here  and  there, 
but  those  are  subject  to  cure  by  the  existing  commissions. 

But  that  was  not  the  point  that  I  wanted  to  make.  I  do  not  think 
that  Gov.  Foss's  assumption  that  government  ownership  is  going  to 
effect  a  cure  for  any  evils,  whether  real  or  imaginary,  is  correct.  On  the 
contrary,  it  is  going  to  create  a  new  class  of  evils.  Whether  under  gov- 
ernment ownership  or  private  ownership,  the  operation  of  a  street  rail- 
way is  a  business  imdertaking  as  distinguished  from  a  political  func- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      881 

slri^wf/w'^ff^'^''  under  private  or  government  ownership,  it  must  be 

S'Mni^  ir^nT  "I^f  "^J^  P^^"^.^^  ^"^  wen-managed  busii^Lun! 

ublk  must  li^^tr^^  ^"  economic  costs  that  are  involved.    The 
puuiic  must  pay  those  economic  costs  in  one  form  nr  nnnfh^r.      Q^ 

he  question  to  be  considered  is  whether  tho^e  ecoTomL  cSwm 

WD^^'A^r'''"^""^'  ^^'^^^^^^^P  '^'^''  '^'^y  willTndeT  private  ^wne^ 

fen  J   J^^^^^^^  "T'^^^P  -i"  P^--^^»--  equ^al  or  s 'Sr 

ciiiciency,  whether  it  will  produce  equal  or  superior  economv      Xr^A 

t'Jr^^i?^  ""^  '-'"i^  "^  ^^  '^'^  application  Tf  the  pHnS^  fhat 
govern  bo  h  cases  is  that  government  ownership  will  InevitabW  and 

SX  h?:  '''"^*  ^^  ^''^^  increasing  the  economc  costs  o^^^^^^^ 
Xcha^k^^^^^  propositions  that  are  under  consideration.       ^ 

nianiy  by  n.^!,  o(  the  method  of  seiectin,  ll™™,™Zj      I'nS  ," 

.TAit:?  Xt?r,r  ^,sr  JT»^2r.r?F-  ™"r^ 

entrusted  is  not  and  can  not  be  a^XipnfV.  fi    *    *  management  is 
jnent,  the.rea«,n  beingVatthe  moS   ^^  %t^  Etrorf" 

tl.e  selection.    I  ventm-^to  sav  tl"^  r- ^  '"^'^iiS'''  ^'"^"^^  «"ter  inta 

to  the  m«„,ge„.e„ro?  his*X^XS"STss  re  Te^^'r^/PP'^ 
tion  that  he  applied  to  the  selection  ^ftll^  1  i  r   ^^"^9^  of  selec- 

sion  of  the.StaVe  of  MassLhStts     I^hfdirso  1^1?^°'"'°^!,- 
not  be  vnnnmg  a  facto.-y  but  he  would  bele^idngaS'   '  '''  "''"'** 

Ihe  Chairman.  I  am  sure  we  would  be  verv  S-ui  t^  h 
at  length  on  that,  but  the  conunission  1ms  Wn  ife^  utl.,  n  Jh" 

ttmtrr^?;^  '-^  ^™"'^  '^^^  '^  adiou.rno;ritTl"  3£i 

JuifJrrgt^lVa"  S;.r  ""  ""'•'"--  -^  -'i-'-d  to  Friday. 

Met  pursuant  to  adiournmentTriO^r-^'  ""■  ''■'  '''''  '''  '"''• 
l^resent:  Parties  as  before. 
The  Chairman    You  may  proceed,  Mr.  Warren 
Mr.  Warren.  Mr.  Chairmiui,  I  want  to  put  in  if  T  m,v  a  I.ff 
from  Mr.  Samuel  Insull,  of  the  Chicago  Elevated  feyVwK 


i 


i 


( 


I; » 


882     pBOCEEDmos  of  fedebal  electkic  railways  commissiok. 

ovMng  to  certain  situations  in  Chicago,  is  not  able  to  be  present  as 
he  expected,  to  address  the  commission : 

Chicago  Elevated  Railways, 

OK.1C.  OK  XHK  CH.1BM.«  ».  J^^CUXIV^^C^^^^^^^^ 
TO  THK  FKOKH^  KA-W^VS  COM^U^SIOK.  ^    ^ 

GK.T,.K«K«:  The  demands  '0F,'"-«rf„;-|-rn?trpCd^  a^-rf^^^ 
cag..  Kl«ate<l  lines  (of  ^^tose  board  I  an   chairman)  n      y      ^^^^  ^  ^^^^^^ 

situation  m  tills  c  ty  and  Xi\d  like  to  set  forth\riefly  the  sitnaUon  In  re- 
before  your  '"'"'"'f '""v^if ^rves  toaether  with  the  surface  lines,  the  trans- 
pird  to  tWs  proiw-ty,  which  server.  tof«P„«'jh7ijn,ted  states. 
•Mutation  needs  ot  the  second  larKf' "'y  >"  [^.r  and  material,  has  decreased 
'  The  increased  cost  o«»P«"-"t'""'/XtthrmcasoKlevated  lines  are  barely 
the  earning  power  to  such  «»  «^t^"' *'lf '^^er  y^^^^^^  companies.  The  Chicago 
able  to  cover  the  l"t«rest  «harg^  on  the  unueuj  g  the  oi>erating  companies, 
Klevated  Collateral  Trust,  w"ch  ^'.s  tlie  »t.^^  »i  ^  I  ^^  ,.etinanced  and 
had  $14,(KK),(X)0  notes  ""t"';  »« i.^'^  ^^  interest  payment  duo  on  the  same  date, 
on  which  we  were  unalde  to  meet  ">«  ''"';!«»^  hniwrtant  factor  in  the  develop- 

ST'c.?sl  l?.t?e!T^rgX  r":™^  inc^^^sed  fU.  5  to  6  cnts,  going 

iuto  effect  November  22,  19l8.  r,,„atiiii?  the  demands  of  the  men  for  a 

'"we  are  faced  with  ^1^^  P'jf j,^"^  the  present  time, 

further  increase  ^n^^^ag^/^^^^^^^'^ftThiTrativ^  of  the  elortric-rnilway  industry 
The  condition  which  ^«^fj^"^i„^^,  .^j""^'^^^^  curtailed  to  such  an  extent 

^^I^^^S  rthrcom^ai^rr^'^^^^^^^     «.  or  to  even  maintain 

as  a  whole  by  bringing  to  the  a  tention^  ,^  Une^iate 

conditions  obtaining  m  the  ^^j^f^^^J^  "'"^g.^^iu  prevent  the  ruin  of  this  ueces- 
measure  of  relief  s^iclimcrei^se  in  fares  a^  ^^^  readjust- 

Bury  public  utility  and  by  rec^inmending  a  comp  ^^^^^  ^^..^^  ^^^.^^.^ 

Yours,  truly,  Samuel  Insull,  Chairman. 

S^to^JrtoirtSirridS^whi^"  is  very  serious. 

STATEMENT  OF  ME.  JOHN  H.  PAKDEE. 

located  in  the  smaller  cities  ^__„,,tion  of  street  railways  In  these  smaller 

eitl''s^rfnTnor^iS^Mvl^thr  g^^^^^^^        the  operation  of  street  rail- 

-•^hel:;*a';i'Kev?rPfrherent^^ 

1«^/S!.ir  "ii'istonc^Tf  1^' b^»o rt-  i-lt  in  fewer  rides  per  cpita 


PEOCEEDINGS  OF  FEDERAL  ELKCTEIC  RAILWAYS  COMMISSION..       883 

anrs'X'dem^ds'VTe  'inVrt^^Z^^r  "'''""^^  "'  ^«^""^  ""out' 
section.s.  It  is  necessary  to  oDerate^rlL^"'  !*"''<*  ^'■«°  '"  outlying 
warranted  by  the  number  of  ^^^enSr^  ?„  k"  '"°''®.  ^e^ient  schedule  than  if 
ditions  which  prevail  TnlJnaTlc?«rkwmAl,?7j^-  ^'"'«'"  *•»«  t™"";  c«»- 
ated  to  particular  advantage  An?i,l  «1^r<.f*"*  t^ie  one-man  car  can  be  oper- 
the  general  relief  of  el™Se  ra  lw,vff !!''""?•  "J.'^'"'"'''"*  *>>'«  Hearing  for 
Pronipt  Increase  in  ratet!!SiSfro.n  an  Lwfl'''''r'^  *"  "'«  ™all  railways 
pron„.t  action  by  publfc  amimrTties "^ann^^  and  service  requirements, 

cooperation  on  the  part  of  n  bl  p  nnthnrfni^  ''k""*  <"  ^^^  railway  company 
the  Institution  of  sifetv  ca^rnmi  ^Ih^  2.^^;  '""'*"■  """^  '"«  g<^"eral  public  in 
Will  contribute  towfrd  the  soh.t"on  of  ntl  .^m""?!?"'  '"«'  "'"er  methods  whicS 

co.miiKjr  ;i^^-^^^^^        -  £L^i"— ^- 

period  of  12  n.onths  to  earn  sufflclen  none  tn  ™f,^'?^  '^^^"'^""^  ^'^•^  <"•  ">'<"• 
ftxed  cliarges,  including  taxes  ami  exohS  inf F^I.^^  operating  expenses  and 
provide  for  the  necessary  renaii^  ml  .1  „r^  interest  on  its  Indebtedess,  and  to 
reserves  tor  deprecit^^ S  thr  V "^ oSn  %'l?  P^Perties  and  a'deqna  e 
s.on  such  property  is  incapable  luring  tie  ,  rvB  f  .  „^  "T  P'-hHc-service  commis- 
sufficient  money  to  pay  Lh  expenses  LdT^/Tf"^^^ 
such  repairs,  n>alntenance,  and  depreciation  t.i.f""''*^*'*V'""'  "*  P™^"^''  tor 
and  estate  within   this  Stnfe  mvnilr^L  '  f'f".  '"  ^"<^h  ™se  the  property 

ordinary  business  as  a  street  r-.wav.h.nT/"'*''  ^^  ^""^^  corporation  on  its 

s  .^e%"i:r"  against?h?i»orrr;r  ^zs'^z:^^^ 

n  t" itthe'i 't  T"""  '"  '^  ^P^'''^^  <Jetennination.    Section  3 : 

this  chapter  prior  to  the  Istlhiy  of  May  fn^ny  yea?'^  ""        ""^  P"'^''«*»n«  «>' 
I  will  hand  the  whole  statute  to  the  secretary 

Hampshire,  and  I  ^UaXh^S  S^l^illl^f '  '^^*^  ^*  ^^- 
Mi    wSr  iT'i  ^•*.  ^.!"  "e*  y«^  become  a  law  f 

in  de  bene,  a^^Zlnf  mVi^^SoTiloSlf '  '"*  ""  ^^"  P"*  ^'- 

STATEMENT  OF  MR.  W.  E.  CEEED, 

Mr.  Wabben.  Your  full  name? 
Mr.  Creed.  \V.  E.  Creed. 

Mr.  S'Ci'I""  "'^  *  ^'^'^y-'  I  tW"k,  Mr.  Creed? 
tri^RaiTw^^Wktrir"""'  ^"'^  '""^  ^*"*™  Trans-Bay  Eleo 


I 


ti 


II 


884       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Mr.  Creed.  For  the  San  Francisco-Oakland  Terminal  Railway^r 
which  operate  the  traction  lines  in  nine  cities  on  the  east  side  of 
San  Francisco  Bay,  from  Oakland,  and  also  the  Trans-Bay  service 
between  Berkeley,  Alameda  and  San  Francisco. 

Mr.  Warren.  Will  you  state  to  the  commission  the  electric-railway 
situation  in  California,  with  special  relation  to  the  regulation  and 
supervision  and  its  effect  in  this  emergency  ? 

Mr.  Creed.  I  speak  with  particular  reference  to  the  situation  on 
the  east  side  of  the  bav.  The  San  Francisco-Oakland  Terminal  Rail- 
ways operate  two  divisions :  One  division  known  as  the  key  division, 
which  runs  trains  connecting  with  the  ferry  system  which  carries 
passengers  to  and  from  San  Francisco,  Oakland,  Alamenda,  and 
Berkeley  and  outlying  territories  on  the  east  side  of  the  bay;  the 
other  division  is  known  as  the  traction  division  and  operates  traction, 
lines  in  nine  cities  and  the  intervening  territory. 

The  position  of  that  company  is  worse  to-day  than  it  was  m  1914. 
In  1914  the  necessity  for  reorganization  was  seen  and  a  committee: 
on  reorganization  appointed  and  the  work  of  reorganization  has 
been  going  on  ever  since,  the  delay  being  due  very  largely  to  the 
necessary  delay  in  securing  what  w^e  call  a  resettlement  franchise, 
there  being  a  great  many  negotiations  and  some  legislation  necessary. 

Xow,  I  could  perhaps  best  state  the  situation  there  by  saying  the 
California  Railroad  Commission  in  August  of  last  year  granted  the 
traction  division  a  6-cent  fare,  an  increase  of  20  per  cent  over  the 
theretofore  fare  charged.  The  gross  revenue  of  the  traction  division 
was  approxim^itely  $3,000,000  per  annum.  There  was  no  loss  of  short 
siders  as  the  result  of  that  increase  of  fare,  and  the  company  received 
at  the  rate  of  $600,000  per  annum  increase. 

Mr.  Warren.  You  got  the  full  theoretical  increase? 

Mr.  Creed.  Yes,  substantially  the  .full ;  in  fact,  there  was  an  un- 
usual situation  there.  The  granting  of  that  increased  fare  was 
thrown  on  the  screens  in  moving  picture  theaters  and  was  cheered 
by  the  audiences  in  several  theaters. 

Xow,  the  increase  from  labor  alone  in  two  years  has  been  oyer 
$600,000  in  the  two  divisions,  and  the  only  increase  in  revenue  which 
the  company  has  had  has  been  the  increase  from  5  to  6  cents  and  the 
10  per  cent  increase  in  the  key  division  fares.  Instead  of  a  10-cent 
one-w^ay  fare,  they  now  have  il  cents,  and  instead  of  a  $3  commuta- 
tion rate  they  now  have  a  $3.30  commutation  rate — that  10  per  cent 
increase  coniing  through  the  commission  to  meet  the  10  per  cent 
increase  given  to  the  railroads  and  to  put  the  key  division  on  a  par 
with  the  Southern  Pacific  Trans-Bay  service.  Of  course  in  addition 
to  that  labor  increase  there  has  been  the  increased  cost  of  materials 
and  the  increased  cost  of  power,  so  that  the  company  is  showing  less 
revenue  over  and  above  direct  operating  expenses  than  it  did  a  year 
ago  or  two  years  ago  or  four  years  ago.  Its  position  has  steadily 
decreased  in  strength. 

I  regard  the  situation  there  on  the  east  side  of  the  bay  as  extremely 
hazardous  for  the  continuance  of  the  service.  I.  feel  the  death  rattle 
is  in  the  throat  of  those  companies  and  that  the  only  relief  which  will 
be  of  any  service  is  immediate  relief.  The  company  can  not  wait  for 
a  complete  final  and  perfected  solution.  It  must  have  more  money 
to  continue  that  service. 


PKOCEEDmcS  OP  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK.      885 

gross  revenues   on? H,.f;  -i   '      *  ""K^^I  <=«"*  ^tate  franchise  tax  on 
averagecfaround  2  per  ?ent     tfi  l!^'f  I  f^T'^^  '""^  approximately 

"Inch  l«,d  b„„  liid  4  b,  ,h?t,S„„  ^n™?"';?'  "'  P'™™«' 
«  far  larger  siiii.  of  moi,™    »  ,],.  i'^  companies,  llie  investmenl  of 

Thai  I..3  lien™   °er,  SL,  hMXIlT";' "  'Pl^':'^  P«««n,„t. 

was  an  absolute  capital  loss.  ^      *  company,  and  it 

The  next  difficulty 

oJt^^^l^^irJX^Z^^'  ^°"  °i'"-'''-«  -P—  -  paid 
Mr.  Creed.  I  have  not  looked  at  those  figures  for  some  tlm» 
Tl«.  Chairman.  I  wish  you  would  supply  it  '  *""'• 

Mr.  Creed.  I  can  get  them  and  will  have  them  filed 

irCREED.Tt  ^^^^l^^^^'ffr.^  yea. 

of'^a^^lt^^S^^^n^  Z'foi'^ul^'' '"^  *'^  P'-^^*'-  -*  there 
widening,  ?nd  there  Tssome'^llli^  io^no^'r  thrC'J*'  ^^'  f  T' 
right  is  asserted,  and  that  increSes  the  axes  undSw  t  ^'ll  ^^^^  ^^^ 
be  some  change  in  that  '  unduly  and  there  must 

o'ssirj'" ""  •»'«? '- fi";  .'.j,r„,''pSei",",v»«i? 

eaSrjruTd  ,«?■  ''"'"  """'"  *«  '»""■  0"'»"«h  «"  Jour 

Mr.  Creed.  Yes.    Another  difficulty— and  this  I  rea.„v7  „o 
serious  one-is   the  demand  of  municiml   authormS  1        ^  ''^^ 
beyond  tha  revenue  on  particular  lines  and  the  refis.lL^''  'V.T 
abandonment  of  lines  ^^lich  have  not  been    us  ffi^   t,,?,  P^"'*  ^^^ 
a  burden  on  the  more  profitable  lines  aSa  CS%t"the  ^S 


886       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MMISSI0I7. 

as  a  whole.  Because  the  traction  division  represents  the  consolida- 
tion of  some  9  or  10  companies  and  the  service  rendered  on  that 
side  of  the  bay  was  greatly  improved  by  this  consolidation.  The 
consolidation  involved  the  cost  of  many  heavy  abandonments,  but 
it  did  give  a  much  better  service  due  to  unity  of  operation  and  also 
a  better  service  for  less  money. 

Under  the  old  condition  there  people  sometimes  had  to  pay  20 
cents  to  get  where  they  can  now  get  for  5  cents  or  6  cents  under  the 
increased  rate.  That  Wiis  a  tremendous  advantage  to  the  com- 
munit3%  and  the  community  has  built  up;  the  population  has  fol- 
lowed the  transportation  and  the  lines,  but  there  are  some  lines 
which  ought  to  be  abandoned,  and  I  think  the  insistence  upon  too 
much  headway  on  lines  which  have  not  an  adetjuate  revenue  to  jus- 
tify it  is  a  serious  difficulty  there. 

in  a  general  way  I  have  pictured  the  situation  as  I  see  it.  I 
think,  too,  that — if  I  may  go  on  with  just  this  one  other  thought 
ti*at  I  have — in  California  it  is  essential  that  there  be  an  adjust- 
ment of  the  entire  franchise  situation.  We  have  expiring  franchises 
with  forfeiture  clauses  in  them,  and  it  is  essential  to  the  reorganiza- 
tion of  the  San  Francisco-Oakland  Terminal  Railways,  and  that  is 
now  in  process  of  financial  reorganization,  that  the  company  have 
franchises  which  do  not  expire  on  definite  periods;  and  it  can  not 
be  soundly  reorganized  until  those  resettlement  franchises  are 
adopted.  The  comnumity  havS  already  at  a  public  election  expressed 
its  approval  of  the  idea  and  progress  is  being  made. 

The  Chairman.  What  is  the  maximum  life  of  a  franchise  under 
your  law? 

Mr.  Creed.  Fifty  years  is  the  longest  they  have  had  on  that  side 
of  the  bay ;  some  20  and  some  25. 

Xow,  I  feel  it  is  essential  if  that  service  is  going  to  continue  there, 
either  under  the  reorganization  committee  or  a  private  company  or 
under  a  receiver,  no  matter  who  is  going  to  be  responsible  for  it; 
that  there  be  immediate  relief  in  the  inci*ease  of  income. 

Commissioner  Gadsden.  How  much  ?     You  have  6*  cents  now  ? 

Mr.  Creed.  Yes,  but  I  do  not  believe  that  6  cents  is  going  to  carry 
the  situation. 

Commissioner  Gadsden.  How  much  more  would  you  have  to  have 
in  Oakland?  ^ 

Mr.  Creed.  I  think  that  the  traction  company  will  require  7  cents, 
and  I  feel  that  the  key  division  must  have  an  increase  of  approxi- 
mately 5  cents  for  one-way  fares  and  a  commutation  rate  between 
$i  and  $5. 

Let  me  tell  you  about  that  commutation  rate.  Tlie  average  haul 
bjr  rail  and  water  between  the  east  side  of  the  bay  and  San  Fran- 
cisco in  9  miles;  that  is  the  average.  Our  commutation  rate  has 
been  $3  up  to  the  10  per  cent  increase  put  in  by  the  Eailroad  Admin- 
istration, not  applicable  to  us,  but  given  us  to  put  us  on  a  parity 
with  the  Southern  Pacific. 

Mr.  Warren.  Three  dollars  would  mean  how  much  for  the  9-mile 
ride? 

Mr.  Creed.  Well,  very  close  to  half  a  cent  a  mile. 

The  Chairman.  What  do  you  mean  by  $3? 

Mr.  Creed.  Three  dollars  per  month. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  TlAum.^a 

r^ui^lRlC  RAILWAYS  COMMISSION.       887 

M^-  JCV'^r*""  *^«  -^  fare  iI-5  centef  ""'^  ^'^'^  ^^y- 
U^  ^;;--  r^'^^  «-  ^^^'^Z^^i^^^a  the 

been  in  the  past  as  g^d  as  any  in  the  co^ntrv"  '"7^  °"*  *•>"•«  »>«« 
very  few.  Any  of  you  who  hav«  t . »  l  J  ^  '""'^  /*  ^^^  equaled  by 
trans-bay  lines  have  realised  it^<f  „      '■*'^^^-  "r"  "»"«'  suburban  or 

yet  the.^is,  say  in  round  nuibL;  half  7cenf  a  'nltf  f  T^^^'  -" 
Mr.  M  ARREx.  Xow  von  «ov  ^^^.l  "'»^r  a  cent  a  mile  for  that  service 

iHfher  fares,  and  I  Ih^d ThU'voSd'^mt'^  ""f  "^^  "^^  "^ 
Mr.  Creed.  Well,  our  commission  otf  hi  '\  *""*  "°*  y**"  Set  it? 
mendable  courage  with  regard  to  ?J^.f  !^''^  ^"^  '''"*^  ^'th  com- 
ished  tlie  case  which  involved  the  qte  ion^o/"™'^''"^''  '""^  '^^  fin- 
July  or  about  the  1st  of  July  |.,st  1.^.  ,  "^"^  \"  '""-eased  fare  in 
s.on  granted  the  6-cent  far^on  heli'tl?"  f  T  ^"^''^t  the  commis- 
yet  gone  to  them  on  the  7-ceVfaro  but  «l  I,V  "^"'*.--  ^^^  ^^''^  "o* 
tion  for  an  increase  of  fares  on  th«klv^--®  pending  an  appliea- 
has  not  yet  come  down.  ^  ^^  division,  and  that  decision 

Mr'  C^J'^^^^Vr^ l""'  ""»*  ^ri  pending? 
Ml.  tnEED.  Since  July  of  last  year.  ^ 

V^^Z^^J'"'  — --  you  speak  of  is  the  State 

Mr  Sw/ TJ>  °*  State-wide  jurisdiction. 

Mr   Crefd   iw 'iT  '"'?  jurisdiction  to  do  it? 
-11."  oTToul'll^J^r.  ^dt  ^■'"''*'°"  -  <^«"f-nia  very 
tion  with  the  inc'rease  in  the  trCs  b^v^f^  conip  ications  in  conneZ 
the  Southern  Pacific    whi^l!  ;^''"^"'''iy  fare.     The  question  is  whit 

whether  the  EaiCfd'AdSst-aL'?'^^^^  '^•'"  do,  and 

also  the  question  of  whether  we  wo  ,W  dlLf,  t^^V""^  '^S"''^'  ""^ 
fare.  I  have  said  we  would:  I  have  t  iken  th^t  '^"■"/•'  "*  *"  inoreased 
and  I  do  not  recede  from  it     I  would  rati  o.  IT*T  ^'^'^  *'«nklv, 

pf^^i:::^if^^^^r^  ^  t-rsrtlt 

of  taxes  that  cost  yo^  3ey  "supS  the"we,l  ''u^''''  '".">«  ""f-e       . 
have  mentioned;  you  would  still  npf^.^J-r.^'i  ''^'no^ed,  that  you 
Mr.  Creed.  Well    that  wn,,U  a       "^ditional  fare,  or  not? 

power  of  the  dolli^-T^gdnf  to^'br'lXnk"'"^  '""^  P"'-'="-ing 
ditions  we  would  need  a  higher  rate' of  f^M  ""^er  pi^sent  con- 
yes.    But  the  removal  of  the^  burden//'  ^i''^  "'^  ^'^^  '«  i^l*'. 


I 


;i 


888       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Creed.  No  ;  it  is  going  to  require  a  great  deal  of  study  to  work 
out  the  permanent  solution  for  the  railway  situation  there. 

Mr.  Warren.  Could  any  substantial  portion  of  those  burdens  be 
immediately  removed  by  the  action  of  any  govermnental  authority? 

Mr.  Creed.  No,  sir. 

Mr.  Warren.  So  that  for  immediate  relief  those  may  be  dismissed 
from  consideration,  may  they? 

Mr.  Creed.  Yes. 

Mr.  Warren.  And  that  brings  it  back  to  the  fare  ? 

Mr.  Creed.  Yes. 

Mr.  Warren.  And  unless  the  relief  is  forthcoming  in  fares  you 
think  the  situation  is  a  very  serious  one 

Mr.  Creed.  Oh,  it  is;  I  know  it. 

Mr.  Warren.  For  the  continuance  of  the  service? 

Mr.  Creed.  Yes. 

Mr.  Warpen.  What  in  your  opinion  could  this  commission  do  to 
assist  the  situation  of  these  companies,  assuming  that  it  wished  to 
assist  them? 

Mr.  Creed.  Well,  if  the  commission  has  the  power  they  could 
assist  us  by  seeing  we  get  more  revenue. 

Mr.  Warren.  Well,  they  have  not  the  power  to  order  anything. 

Mr.  Creed.  I  know,  and  using  whatever  means  they  have  to  edu- 
cate the  people  generally  as  to  the  necessity  of  an  increase  in  fare 
to  save  the  situation.     >fow  I 

Mr.  Warren.  Let  me  ask  one  other  question  there.  You  have  de- 
scribed the  condition  of  the  tw^o  particular  companies.  Is  it  practi- 
cally one  interest? 

Mr.  Creed.  Yes;  it  is  a  consolidation  of  a  trans-bay  service  and  a 
traction  service. 

Mr.  AVarrex.  Should  you  say  to  this  commission  that  substantially 
that  represented  the  situation  over  the  State  ? 

Mr.  Creed.  I  think  so;  yes.    I  think  it  does  in  Los  Angeles. 

Mr.  Warren.  So  that  most  of  your  companies  are  in  need  of  some 
form  of  immediate  relief? 

Mr.  Creed.  Yes. 

Mr.  Warren.  And  the  only  one  you  can  suggest  to  the  commission 
from  your  acquaintance  with  the  laws  and  the  situation  regarding 
franchises  in  California  is  an  immediate  relief  through  increased 
revenue  ? 

Mr.  Creed.  Yes.  There  is  one  other  thing  I  would  like  to  volunteer 
to  the  commission,  and  that  is,  I  think  it  would  be  desirable  if  the 
commission  could  make  some  studies  and  findings  regarding  the 
future  rate  fixing  policies  of  State  commissions  regarding  utilities 
in  general  or  street  railways. 

I  feel,  as  everyone  does,  that  it  is  desirable  to  have  compensation 
and  the  rate  of  fare  as  low  as  is  consistent  with  maintaming  the 
credit  and  service,  but  I  do  think  that  it  is  essential  that  a  rate-nxing 
policy  making  adequate  provision  for  depreciation  and  contingencies 
be  adopted.  I  think  it  requires  some  educational  work  to  do  that.  I 
think  it  particularly  desirable  in  particular  communities  that  there 
be  a  uniform  fare  over  a  considerable  period.  I  do  not  assume  that 
there  should  be  uniformity  of  fares  over  the  country  as  a  whole,  but 
I  think  it  desirable  that  there  should  be  no  fluctuation  in  charges  for 


PKOCHKomcS  O.  .EDKKA.  KLECTBIC  KAZLWAYS  COMMISSION.       889 

seems  to  ,„e,  is  to  allow  "Ee  IoLTJ^  7''/"  aecon.plish  that,  it 
care  of  the 'fl„ctuat  on      T]Z    ZT''  ^"J'"''  '•?^"'^"«^  *»  take 

that  has  done  has  been  To  "on  rol  flL         ''''  '^e  great  service  that 

th.nk  it  was  essential'tb!t%S'b:\£'b"ri^?,°iir't'l'  ""^'-I 
fctate-wide  refrnlation  has  been  to  rpn,r;'..o  •     *''^  tendency  in 

substantiallv  at  cost     Th  ,f  ;!      i   '•'^""^  companies  to  give  service 

which  haveien  decided  bt  !omiZi^  *"'^''^  Tf  ?^  *''«  ™t«  -«  ' 
«l.erating  expenses,  whate^r  .  ow'.ncr;i?'°"  ^"."^  H"'J'  ^"''^  "P  tl'« 
bond  interest  and  the  di vrdends  o  I  e  . L^''-^'  ,"-"^-  ^•"'  <leP>eciation, 
|"g,  and  then  there  is  Tl  t    e  ,  ,.  "in  n,.  .'^'"'''  ''  "'^^'  *"'  «»""«- 

bas  not  been  big  enough  to  tll»  I  i'l     '  °''''"'  ''"*  *''«'  >"«gin 

Mr.  CW,>  V  throinmnen  1  VT"""?'  «°I"tion?  ^ 
tl'ink  one  of  o„r  d  fficuHes  has  been  T;  ^  ""/  ''"^^'"^  about.  I 
reserves.  Now  you  take  this  nne^tif  i  >  ''"*,  ''^''^  ""*  ^^d  those 
has  a  10  .Vears'^lif^  and  a  'cK^^'  e?nrVf''""/^lV"^  "  '^'^''  ^hieh 
■sents,  say  $200,000.  That  is  w  ne  1  !  ^  °*  ^^  >''^'""«'  »"fl  repre- 
a  better  class  of  paven  ent      If^vl     *  ?"''  •^'*'"  P"*  »'  ^-'OO'OOO  in 

those  things  that  1^  would  „o!ocZ  and  it  T'''?  *°  *f  ^"^  '^^''^  «« 
are  a  part  of  the  cost  of  wh.?f  "[""'  ""a  it  seems  to  me  those  thino-s 
>vay  of  service.  '  ''"'  "'"^  c<"nni<in,ty  is  demanding  in  the 

faviTSfnTuf  r™,ert%uffi*  ".  T''T  "^^^  ^^-'I^'  vou 
$200,000  which  is  LondSbelofeTo^^^  "f /'-   -1-Ic 

for  the  new  pavement*  ^      abandoned  the  old  pavement 

.Voi^coiddTot  'ell\:]ra\  "^.^  ^"1'  ^"l'^  '"''''^^  -^-O"'-  -«-ve- 
there  should  be  a  s,  bs  an  ial  reserve  ll/^^'  ''"'  ?"'""  *"  ^l"'  '"'t 
■'.ent  of  what  was  likely  to  blTolt^  nlT/'l  '"*«"i?<-"t  judg- 
whatever  it  was,  the  coinnanies  3f  f  '.''•' V'  '''"''  $400,000  or 
of  the  revenue,  out  of    he  b, tines!    T?    "  '''"""•"•seel  for  that  out 

tain  their  credi    and  stand  IosSh.  .T''% '"'^""'^  ™»  ""'  '"'•'">- 
Now  you  see  the  i,t il^f Li  ?       V  "*'  *"''  "i**"-^  t">ies. 

without'mucrtiSua  of rnt  r;:c^^^^^^^^^  rri^f  °" "  .''■^'-'''  '■^^■«"-'° 

has  been   fluetnatinsj  and  the  bS.^f    f    "^  °Pf ''^'''S  «'"'l  "*  it 

against  them-or  not  fluctuating^^  but    h^J  l,ThlJ,T  «"<=.^""""S 
ing  scale.  *"  ^^^y  ""^^<^  t)een  on  an  iiicreas- 

Mr:  Sr  Yer'^^t''flue/rr  ^'f^'"'^  "P  "H  the  time? 
words,  I  feel  the  lan?e  S  iples^S  ^T^  "P"    I"  «thor 

credit  of  a  utility  as  wo    d  go  ein  t'-  -^"'^'™  "maintenance  of 

other  business  concern  Take  tire  if  ""^''"''"'''^  °^  '^''^^''t  of  any 
saved  theniselves  bfhdr  reserves  iff  T "'"'■""?  companies:  they 
those  reserves  wei/very  biu'^^)  a:it  d'^eJ  ZHe't^Ui^^^^^  ''''"' 


I 


I 


i  I 


890       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

thing  tluit  has  saved  those  companies  at  this  time.  And  it  was  with 
rehictance  that  they  were  allowed  to  retain  them. 

Commissioner  Meeker.  The  reserves  should  be  sufficient  so  that 
the  major  portion  of  any  replacement  should  be  paid  for  immediately 
out  of  the  reserve :  is  that  your  idea  ? 

Mr.  Creed.  Yes,  sir. 

Commissioner  Meeker.  And  the  fare  should  be  so  regulated  as  to 
give  a  sufficient  increment  to  reserve,  so  that  any  deficiency  not  im- 
mediately paid  for  out  of  reserve  could  be  speedily  made  up. 

^Ir.  Creed.  Yes,  and  the  reserves  of  course  should  be  treated  as 
trust  funds,  quite  differently  from  the  other  funds  of  the  company. 
1  mean,  they  should  be  impressed  with  a  trust,  to  be  used  under  the 
regulatory  body;  and  if  these  i-eserves  built  up  higher  than  experience 
showed  it  necessary,  they  should  l>e  used  for  additions  to  service 
which  were  not  capitalized  or  for  the  benefit  of  the  public.  But  the 
lx)ssession  of  those  reserves  is  a  protection,  it  seems  to  me  that  is  ab- 
solutely necessary,  or  in  lieu  of  that  you  have  to  have  something 
which  means  a  fluctuating  charge. 

Conunissioner  Meeker.  Is  not  that  one  of  the  vital  points  in  the 
permanent  solution  of  the  whole  thing? 

Mr.  Creed.  I  think  so;  yes. 

Commissioner  Meekmj.  And  is  not  a  great  deal  of  public  educa- 
tion needed  in  order  to  understand  just  plain  bookkeeping? 

Mr.  Creed.  Yes. 

Commissioner  Meeker.  Or  which  is  sometimes  dignified  by  the 
term  accounting? 

Mr.  Creed.  Yes. 

Commissioner  Meeker.  Is  it  not  true — I  will  put  it  that  way — 
that  the  public  needs  to  be  educated  to  the  fact  that  these  i-eserve 
funds  are  not  the  private  property  of  the  traction  companies  but 
they  are,  as  you  have  expressed  it,  merely  held  in  trust? 

Mr.  Creed.  Trust  funds  for  the  protection  of  the  credit  and  the 
service  of  the  agency  performing  the  service,  is  my  idea. 

Commissioner  Meeker.  And  that  should  be  taken  into  account  in 
any  cost-of-service  plan  adopted? 

Mr.  Creed.  Yes. 

The  Chairman.  It  has  been  generally  considered,  Mr.  Creed,  that 
the  California  Commission  has  been  a  veiy  efficient  body. 

Mr.  Creed.  It  has — I  feel  it  has. 

The  CHAiR3fAN.  And,  in  studying  the  different  cases  that  have 
came  before  it,  it  has  attempted  to  work  out  economies  in  service  and 
secure  a  rate  which  would  bring  in  a  fair  return  upon  the  cai)ital 
invested,  set  aside  a  proper  depreciation  fund  and  things  of  that 
kind.  Now  during  the  normal  yeai-s  did  not  its  practice  conform  to 
good  regulative  experience? 

Mr.  Creed.  I  think  so.  I  have  a  very  high  opinion  of  the  work 
of  the  California  Commission. 

The  Chairman.  And  did  not  the  utilities  have  a  very  fair  measure 
of  pi'osperity  in  that  State? 

Mr.  Creed.  I  think  so. 

The  Chairman.  The  difficulty  you  speak  of  has  largely  grown  out 
of  the  war? 

Mr.  Creed.  Yes. 


PROCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSION.       891 

_^  The^CHAiPMAN.  With  the  rapidly  increasing  cost  of  labor  and 
Mi:  Creed.  Yes. 

rates  because  tlie  prices  have  been  IhiftinS'rS  '"    *''^""""^' 
Mr.  Creed.  It  has  been  extremely  difficnlt.      ^      ^" 

landf  Yourraii^„ad°l '!n   '»"«^'"n.>°"  mentioned  tl,ere  at  Oak- 
Pacific?  '^   '"   competition   there   with   the   Southern 

Tlin^p'-™-  ^"  ''*f  trans-bay  service;  yes. 
Mv.  Creed.  Yes. 

Ijiit  I  kn,,,v  11,2     :,;,:,; l,''"°"-°*  "V  «"■"  ImowMge  „bo«l  il, 
Mr.  Creed.  Yes. 

souti;r^"s:^;„c?LrtheS^^ ""  ^  '"'-"'-^  >--  *•-« «,« 

we  a.:e'nrin  eo!l;Si;i:„  'w"l"'""  '"''  ^'""'^  *-"t»--  -h-e 

carry,  and  if  Me  .^^'r^v^less  mJZ.T^^''''  T^  P'^'^"^''  «'« 

not  afraid  to  do  it.     (vrwi/l  !et  f selecteJT   •'''  """T"     ^  '^"^ 
not    oso  anv  inonev  n„   it     Vv^  se  ected  business,  and  we  will 

appeal  to  pL^  7nd    hey  J  II  ^  ^'^'  T''^'"  ''^'^  *!'«*  -i'> 
there.  ^       "  ^'^^-     "^  have  some  business  out 

eountrv.  We  ha  e  W]  T\„.  '""j  this  thing  is  true  all  over  the 
tion.  due  to  tlirf-ict  ?h  J  fh.  .  '*—  situtation  in  public  i-cgula- 
Jargelv  after  WOT  „dtl,iv  ^°"'»f  ^'""^came  into  existence  very 
others  had  been  t,  ng  st,  rittesl  'Slt^'''  '''^'^^'^'^  «-' 
commissions  came  in  a'ul  took  control  nffl-^'  •^'''"  ^^'  *"''  ^he 
and  thex-  fi.xed  rates  wi^t  referencrtn  .  ^^  • ''""??^  <**  securities 
ties  issued  in  lar-rnVit  on   frl  ff!.     .".',''^""'^2  ""'"<^'»  '^"tl  securi- 

theory  on  ^UtJ^::i.Z^£!Z:^^l^r  *''T'  ^".^l^ 
I  have  always  thought  the  onlv  thin.^lf  i  i*'  securities.     And 

as   a   financial   question      i3   at ^s  m.t  "^nd" /r  *  """'f- «-^'!^^ 

in  other  word?  if  thi}  i:oi^i^m:s^:'^r;^i :rL 


I 


892       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

• 

company  to  go  on — that  the  commissions  might  just  as  well  frankly 
force  reorganizations  in  those  securities  and  cut  down  the  securi- 
tiovj  to  where  they  could  handle  the  thing  as  a  whole.  Now,  we 
iiave  had  that  inconsistency  in  regulation  which  I  think  has  been  a 
very  bad  thing.  I  found  it  in  several  other  classes  of  utilities  where 
We  have  had  securities  issued  and  put  out  in  good  faith  and  our 
credit  depended  upon  the  nuiintenance  of  revenue  to  support  those 
securities.  Now,  if  you  fix  rates  upon  an  entirely  different  theory 
and  do  not  kick  out  those  securities  you  have  an  entirely  different 
situation. 

The  Chairman.  The  California  Conmiission  has  sought  to  regu- 
late the  rates  so  as  to  bring  a  fair  return  on  the  value  of  the 
property  ? 

Mr.  Creed.  Yes. 

The  Chairman.  And  have  proceeded  to  value  the  property  in 
very  man^'  cases? 

Mr.  Creed.  Yes. 

The  Chairman.  Do  you  think  that  to  be  a  proper  basis? 

Mr.  Creed.  Yes;  I  approve  of  tliat;  but  I  think  it  is  merely  pro- 
ducing a  slow  death  to  go  on  without  removing  that  inconsistency. 

Connnissioner  Meeker.  Do  you  think  tlie  same  authority  should 
regulate  the  issuance  of  securities  that  regulates  rates? 

Mr.  Creed.  Yes,  sir. 

Commissioner  Meeker.  Will  you  explain  why? 

Mr.  Creed.  Well,  because  the  credit  of  a  company  depends  upon 
what  it  earns  and  its  management;  and  it  requires  its  earnings  to 
pay  its  operating  expenses,  take  care  of  its  depreciation,  and  pay 
the  obligations  on  its  securities,  and  I  think  there  is  an  absolute 
close  connection  between  the  securities  out  and  the  revenue.  And 
I  would  go  even  further  than  that.  I  would  give  the  8tate  regulat- 
ing authorities  the  power  to  control  financial  structures  of  com- 
panies and  control  reorganizations.  If  you  are  going  to  have  regu- 
lation you  might  as  well  have  it  100  per  cent,  because  those  three 
things  are  so  intimately  connected  that  you  have  a  constant  struggle 
unless  you  have  cooperation  in  the  issuance  of  the  securities,  ap- 
proval of  the  securities  already  out,  and  regulation  of  the  revenue 
in  harmony  with  those  securities. 

Commissioner  Meeker.  It  has  been  stated  to  the  commission  that 
tlie  function  of  protecting  the  public  and  the  traction  company  was 
something  different  from  the  function  of  protecting  the  investors. 
You  think  that  there  is  no  conflict  there,  that  it  is  really  part  of 
one  function. 

Mr.  Creed.  I  do;  yes.  I  do  not  agree  with  that  other  theory.  I 
have  heard  of  it,  but  I  do  not  agree  with  it.  That  is  a  personal  view 
only  of  my  own.  I  think  Ave  ha^e,  in  most  cases,  too  much  duplica- 
tion and  lapping  over.  I  think  the  more  consolidation  you  have  in 
regulation,  the  better. 

Mr.  Warren.  That  is  all. 

Commissioner  Sweet.  I  want  to  ask  a  question.  IIow  is  3'our 
State  commission  appointed?    By  the  governor? 

Mr.  Creed.  By  the  governor;  yes. 

Commissioner  Sweet.  How  many  are  there  on  the  commission? 

Mr.  Creed.  Five,  and  several  examiners. 


angement  is  in 


PBOCEEDmcS  0.  TEDEHAL  ELECTRIC  KAILWAVS  COMMISSION.       893 

faS'Xfr^o^hre  t^d^''  ^°"  ^^'"'"*^''  ^°  '--  -  -crease  of 

lmti\''^r;in^^:,rS:rcoiSl'  ^^  -*  *-  '-•-...  and  you 
make  a  valuatw  i  of  the  ron?!   .1.  f  engineers   investigate   and 

i"  writing:  the  usu?al  procedte     '  ^'°"  P'''''*""*  <^^'"'^"'^«  "^^''-V  and 

the  oTSrtSer  ''^""'"^  ''"^  -*'-  °f  the  comniission,  does 

Mr.  Creki).  Yes;  it  always  ha«  so  far  in  rni;*      • 

Commissioner  Sweet.  Do  you  i"now  wlSt  f^r'"" 
Pennsylvania?  j^u  luiow  wnat  the  aira 

Mr.  Creed.  What  is  that  ? 
Commissioner  Swfft    4va  at«,.  -p      -t 
Pennsylvania  in  that  regard  «^  "'"''"  ''•"'  ">'^  ^arrangement  in 

Mr.  Creed.  No;  I  am  not.' 

betteTrtC  whoirjiaJ'ri.r."  """^'*  ^^"'^  '-  .-  advantage  or 

should  be  i  "oSrat%n  wh  t  thTSte/t  ''T'''  ""^  ■*''«  <'"«  'h" 
tl)e  commission?  "'^"'^^  '*  '=nder  consideration  by 

and'[he'ScVo^tvi\C  '"  *"^  '"^-^t  ^^  "oth  the  company 

^_^Con.m^ioner  Sweet.  That,  as  I  understand  it,  is  the  Pennsyl- 

Mr.  Creed.  Yes. 

Commissioner   Sweft    Tnn    coi^i 

the-bay  con.pany  is  concerned   th- 1  nnlh*'  ^°"  f?'J  '^'^^^  '^^ross- 

sioner.  ^"'  ^  ''"  "°'  'JU'te  "mlerstand  you,  Mr.  Commis- 

Commissioner  Sweet   Whnf  i«rv,i       ^i 
"nee  in   ,  .„„«,,  of  aJi.pS onfi!""^''^  "°"'''  ^^"^er  assist- 

Mr.  Creed.  If  the  Ri  Imnr    A  i    •  ^^  *'™  P'''^''^  corporations* 
both  lines  it  could;  ye.s^'^''  Adnnn.strat.on  had  jurisdiction  of 

Commissioner  Sweet.  Oh,  yos 

situation.    Let  me    el  %ou     ithh?"     t  ^''']'  "^'"^  *''«  Pre««nt 
division  is  earning  >es.  than^Zt^f  of  \^r ceS^  ^  rSfi^ 


894       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

commission's  valuation,  without  any  depreciation  fund  for  imniatured 
depreciation,  I  mean  depreciation  which  might  mature  in  the  fiituie. 

Commissioner  Sweet.  Well,  that  situation  is  pretty  near  as  bad  as 
it  can  be. 

Mr.  Creed.  Now,  there  is  no  question  of  capitalization  there  at  all. 
It  was  0.49  per  cent.  In  other  words,  it  is  just  barely  takinnr  in  the 
outgo. 

Commissioner  Saveet.  In  your  complaint  in  regard  to  strvet  pav- 
ing you  ^particularly  stressed  the  point  that  sometimes  the  railroad 
corporation  is  required  to  put  down  a  new  pavement  in  plaic  of  one 
that  has  not  worn  out. 

Mr.  Creed.  Yes. 

Commissioner  Sweet.  Do  you  not  think  you  could  reasonably  go 
a  good  deal  further  than  that  and  claim  that  it  is  unjust  and  unfair 
and  imreasonable  for  a  street-railroad  company  to  be  required  to  do 
any  paving? 

Mr.  Creed.  Oh,  yes.  I  thought  I  did  that.  I  intended  to.  Of 
course,  that  is  a  relic,  as  everyone  knows,  of  old  days.  I  thought  I 
did  point  that  out. 

Commissioner  Sweet.  Well,  perhaps  you  did ;  but  I  did  not  hear  it. 

Mr.  Creed.  Yes;  I  think  they  should  l>e  relieved  absolutely  of  that 
burden.  But  I  Avas  ix>inting  out  that  not  only  did  the  street  railway 
company  on  the  east  side  of  the  bay  have  the  burden  of  carrying  the 
original  paving  but  it  has  also  had  thrust  upon  it  the  burden  of 
abandoning  a  pavement  before  it  is  worn  out  and  while  it  is  still 
in  serviceable  condition  to  make  way  for  some  municipal  notion  of  a 
new  kind  of  pavement,  costlier  and  better. 

Commissioner  Sweet.  Please  describe  this  5J  per  cent  tax  you 
spoke  of. 

Mr.  Creed.  That  is  a  constitutional  tax  of  the  State  of  California 
applicable  to  street  railways  which  is  called  a  State  franchise  tax  and 
amounts  to  o\  per  cent  of  the  gross  revenue  from  operative  propvrties. 

Commissioner  Sweet.  Does  that  apply  to  other  public-service  cor- 
porations ? 

Mr.  Creed.  It  applies  to  some  others,  yes ;  but  not  to  all. 

Commissioner  Saveet.  What  others?     Light? 

Mr.  Creed.  Yes;  gas,  light,  and  power  companies  and  to  railroads. 

Commissioner  Saveet.  Steam  niilroads. 

Mr.  Creed.  Yes.  It  does  not  apply  as  to  local  property.  It  does 
not  apply  to  Avater  companies,  for  certain  constitutional  reasons. 

Commissioner  Saveet.  Is  that  5:}:  per  cent  upon  the  entire  capital 
stock  ? 

Mr.  Creed.  No  ;  on  the  gross  revenue. 

Commissioner  Saveet.  On  the  gross  rcA^nue  each  year? 

Mr.  Creed.  Yes;  on  the  gross  rcAenue  each  year.  Now  that  5^ 
per  cent  is  not  the  only  tax.  If  the  company  has  any  nonoperating 
property  it  pays  in  addition  the  municipal,  county,  and  State  taxes 
U])on  nonoperatiA  e  property. 

Commissioner  Saveet.  But  if  the  property  is  in  actual  use  those 
factors  are  remitted  ? 

Mr.  Creed.  There  is  no  direct  tax  of  the  property  as  such,  Avhich  is 
operative  pro]>erty. 

Commissioner  Saveet.  You  mean  no  local  taxes? 


PMOEEMHOS  OF  rttliRAl,  ^OTRIC  RAILWAYS  C»MM1SSI0».      895 

per  cent  tax  on  gross  revenue  ?  regaid  to  that  5J 

we  have  had  h,  Calif„"^ia  lu^t'^l^t^^^^'l^'r'''''"' 
fectlv  frank  ^hnnf  if      ^Vr.  i  A      ''^^.v/^^i^i  tning,  i  auII  be  per- 

t^ouVlS^^^^^i^^^i^;:^:^^-^  the  burden  of  tl.xa- 

taxes  arc  i-emoved  fioni  the  creat  miss  nf  tX.  .,1    ***'"* 's*'!"*  yo"r 
{rovorn.nont  has  run  u,>  very  rioidTv  Lsf        I^OP'^  and  the  cost  of 

.nove,l  and  have  taxes  brought  directh^/oX  t^Sb^dl^onrp:: 

througlihiseaTftu-e?  ''"  ''  ^"'^  '*^'«*1  father  than 

Mr.  Creed.  Yes. 

Commissioner  Sweet.  Just  one  general  anestion      D^  ., 
prospect  of  solving  your  Californi;  .  rob  e?nTh Z'.I,  h1^''''J^*  ''"•^ 

liaiUlTmnSm'iTir^^^^^^^^^ 

division  one  of  the  high  offickls  ^f  tL\w  eJrP^cifi  '  R*::Ti'''""J 
Co.  said,  "  lou  people  remind  ma  ^f  fi.^     •^^^J«uiiein  ±  aciJic  Kailroad 

how  to  eco„on.ile  IZ  \Z^t  maV/ltC g1  LTo'n^^^Jv^?"  '^"°- 

Th'eiSl'Cu -^£e^:"":r;;^/^s^^^^ 

their  entire  office  fore*  T  eir  «.  ^  v  Ih  " '"^  Y"'  '''''"•'^^'  *»^'  ^  is 
wages  and  they  are  operat  „g  on  al  ^w  Tco's  '  "  H  '''"''  ^""■>'  '"^^ 
except  that  the  skip-.ston  ,)hn  «••?«  IZ  I  ?  ^  ^^^  ^'•'"  <^m>ite, 
the  war  and  it  has  now  lien  im^vfd  '  Tl  '*''^  ''"''  '"»•'  "'»*  during 
sort  that  inight  be  done  'L  the  nt"  .llT.  '  T  T'  *'"n^*  «*  that 
ears  on  somt  of  the  o.u'lvhit  nes  T  h '•°'?  ^t  ''  ^V'  '"°^«  «>«-'"»■' 
cans  now.     But  the  econS  th\?n„,  n  /"''  "r^  ''"^'^  ^2  one-man 

Mr.  Creed.  1  es.  ^^nci. 

Commissioner  Sweet.  And  you  think  that  the  i^roner  w.v  t       ■ 
tliat  rehet  is  an  increase  of  fares?  propei  AAay  to  give 


896       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Creed.  Yes. 

Commissioner  Sweet.  As  quickly  as  it  can  be  done? 

Mr.  Creed.  Yes. 

Commissioner  Sweet.  And  in  your  judgment  that  would  give  im- 
mediate relief  pending  a  more  complete  and  thorough  readjustment 
of  the  situation  upon  conditions  that  exist  to-day  and  did  not  exist 
10  or  15  or  20  years  ago? 

Mr.  Creed.  Yes. 

Commissioner  Sweet.  Is  that  your  idea? 

Mr.  Creed.  That  is  my  idea  exactly. 

(Witness  excused.) 

STATEMENT  OF  MR.  HARLOW  C.  CLARK. 

Mr.  Warrex.  Your  full  name? 

Mr.  Clark.  Harlow  C.  Clark. 

Mr.  AVarren.  AVhere  do  vou  reside? 

Mr.  Clark.  New  York  City. 

Mr.  Warrex.  What  is  your  present  occupation  ? 

Mr.  Clark.  I  am  the  editor  of  Aera. 

Mr.  Warrex.  That  is  a  street-railroad  journal  ? 

Mr.  Ci^rk.  Yes. 

Mr.  AVarrex.  Circulating  among  street-railway  men  principally? 

Mr.  Clark.  Yes. 

Mr.  Warrex.  How  long  have  you  heen  editor  of  that  journal? 

Mr.  Clark.  Since  1918. 

Mr.  Warrex.  What  was  your  occupation  before  that? 

Mr.  Clark.  I  have  had  various  occupation. 

Mr.  Warrex.  I  mean  just  before  that. 

Mr.  Clark.  Just  before  that  I  was  with  the  firm  of  Allen  &  Peck 
who  are  public-utility  operators,  for  about  a  year.  Before  that  I 
was  located  in  the  city  of  Syracuse,  where  I  was  secretary  of  the 
chamber  of  commerce  for  one  period  and  conmiissioner  of  public 
safety  for  another  period. 

Mr.  Warren.  What  are  the  duties  of  the  commissioner  of  public 
safety? 

Mr.  Clark.  In  Xew  York  State  in  the  cities  of  the  second  class 
they  have  single-headed  commissions.  The  commissioner  of  public 
safety  is  in  charge  of  the  police,  fire,  and  health  departments;  and 
in  the  city  of  Syracuse  I  was  in  charge  of  the  building  department 
and  the  bureau  of  gas  and  electricity. 

Mr.  Warrex.  So  that  your  duties  brought  you  more  or  less  in 
contact  with  the  public  utilities  of  the  city,  I  suppose? 

Mr.  Clark.  Yes. 

Mr.  AVarrex.  And  as  the  editor  of  the  Aera  have  you  had  occasion 
to  make  a  study  of  this  question  of  the  actual  relation  of  street  rail- 
ways to  the  communities  which  they  serve  and  also  to  changes  in 
those  relations  which  might  be  desirable? 

Mr.  Clark.  I  have  had  almost  continuous  study  of  it  from  the 
time  I  was  connected  with  Aera. 

Mr.  Warren.  You  have  heard  all  the  testimony  which  has  been 
given  here  in  the  last  few  weeks? 

Mr.  Clark.  Yes,  sir. 


PROCEEDmcS  OF  PEDKBAT  ELECTRIC  RAILWAYS  COMMISSION.       897 

own  as  f„  tlie  probable  propel  soluUon  of '^r'/'"?'  ''P""""  "^  y""^" 
chancres  in  the^ituation^e  ween      ^m^^^^  "^  «n.T 

as  tliey  are  street  railways?  ^  "''  *'"^  utilities,  so  far 

'Hav?,e^p;™ikiuo"r'ea"d  thenf"'  *'"'"  ""  ^'^^"^  '**'>"  "''•""flv,  if  I 
_^.M.  W.U....  I  ,,o.„d  ,ik,-^^  ,.,^.^  ^^^  ^^^^^^  ^^^^_^^^^  ^^^^  ^^^^^ 

.uW  «mcf  ii^tenlr  uirpt^^^^^^^^  ''  ^ffi-^""*  -^1  efficient 

"f  inodein  eoininunity  //f^^^'P'"^'''''""  >«  a  recognized  vital  necessity 

p|ui;-SS  Of  each  State  to 

necer;tcilts"r.dd  be'torLrbf'""-/'"^  '^'^^  ""^*  *'- 
use  of  i>rivate  capital    ami  s  ,hWf  !    ^  P"'"*''  "gencies.  witli  the 

'"e"t=il  agencies  Ts  tuld  in  S  'e' tl  at 'S  H^^^^'^T  '/'^  ^«^«-"- 
"T"';^' '•---•"''.  efficient,  a^d'efficf^nttrS-ed  ''""'^'   "^  ^"•- 

an  extent  aJ  -ill  pS^^ttcesClun.f  f  ""  "^"•*-^  *°  «-»» 
Such  fuither  returk  should  be  allowe^.^s^Zn?^  '''?'*''*'  purposes, 
ing  utility  to  the  greatest  measure  nAf  "^  stjmnhite  the  operat- 

tive,  and  thus  insui-e  the  devXZ,rofTC^  f  ?™'y-  ^"^^  ""ti»- 
the  j>,iblic  service  at  th7hfTst!nKrH  ^* '*"/'j'l'' '"'*'"*«»'"««  of 
l)"blic;  otherwise,  private  crit-ilw^^^^^  <lemanded  by  the  American 
the  standard  of  s;i?;"ce  Su  Te  d  ^l eci^S  1°  f^ff  °*''""  '"-^^''-ts, 
ii.iproven.ent  of  these  properties  will  ho™  T     ^  '"".'"tenance  and 

State  or  municipal  source's  nfl  d  fic^l,^oSerr;'^''''  /°''  ^'""' 
taxation,  or  the  service  i^erniif fori  f  7  •  .^^^^^*^^"  "^*^tle  up  bv 
As  tlie  L;st  alternat  v^  ^impossiKn  "odf  TI  ^7^^"^  '^'"'^^^^ 
tion  is:  Shall  the  service  iTnrovil  1  1  w     "  ^'\^^'^  ''^*""1  l"''^- 

oi-by  the  use  of  public  credit  and  reSrcJs*'  "'°  "*  ''"^"^^  ^"P'^"' 

As  existing  laws  and  conditions  in  the  diffe.-enf  df  <-      i 
a  general  adoption  of  the  princiolp  of  n,„i;  •     ,'  '^'"^*'®  ''"  ""*  '""^e 
ation  feasible  at  this  time  Vl,e  fnH.fcf    '"""'"P"'  ownership  or  o.Der- 

permanent  plan)   as  is  necessarv  to  ,,. J  fi  ^^   *''''  subsequent 

prevent  that'  fin/ncial  dis"Xw  .ich  is  i  „  itn'tTi  "''"^  ^^^-^^ 
of  the  industry  This  would  n.aintaii  tl  e  serv  1  J  '^^  '"1^""*^ 
velopment  and  formulation  of  the  ne -mnnB^f  "  *?"""-  t'^e  de- 
any  suitable  revision  in  such  e>^^ri::^Z;^^^^'^<^        . 


f 


I 


898       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Periuaiient  plan:  A  plan  for  the  permanent  conduct  of  the  busi- 
ness, under  State  or  municipal  regulation,  capable  of  automatically 
adjusting  itself  from  time  to  time  to  varying  conditions. 

The  machinery  for  such  permanent  plan  should  include: 

(a)  The  ascertainment  of  the  amount  upon  which  the  enterprise 
should,  in  fairness  and  justice  to  both  the  investors  and  the  public, 
be  allowed  to  earn  a  return. 

(h)  The  establishment  by  the  authorities  of  a  system  of  charges 
for  service  by  which  rates  will  automatically  increase  or  decrease 
above  or  below  the  initial  rates  named  in  the  permanent  plan  by  a 
defined  method  and  schedule  so  as  to  yield  at  all  times  sufficient 
revenue  to  meet  all  the  payments  contemplated  by  the  plan,  including 
such  protective  reserves  as  should  be  established,  and  also  sufficient 
opportunity  for  participation  in  benefits  resulting  from  economy, 
efficiency,  and  initiative  to  induce  the  greatest  efforts  by  the  utility. 

(c)  Power  of  regulation,  either  by  State  or  municipal  authorities, 
in  respect  to  all  matters  affecting  conditions  and  character  of  service, 
including  extensions,  improvements,  and  betterments. 

(d)  The  utility  to  be  conducted  on  the  so-called  indeterminate 
franchise  principle  and  to  be  subject  to  such  iH?gulation  as  may  be 
prescril)ed  by  law  in  resi^ect  to  accounts,  to  capital  investments,  and 
other  matters. 

(e)  The  establishment  of  the  right  of  the  municipality  or  other 
governmental  agency  to  purchase,  as  shall  be  set  forth  in  the  plan, 
which  shall  in  particular  establish  the  price  or  the  method  of  ascer- 
taining the  price. 

•  (/)  All  special  taxes  and  all  sjx^ial  charges  and  assessments  paid 
by  the  utility  are  in  fact  paid  by  the  car  rider,  l)eing  a  part  of  the 
cost  of  transportation.  Car  riders  as  a  class  should  not  be  sub- 
jected to  such  indirect  or  special  taxation  and  should,  so  far  as  the 
particular  circumstances  in  each  community  will  permit,  be  relieved 
therefrom. 

Mr.  Warren.  How  important  do  you  think  it  is  that  these  com- 
l)anies  should  be  afforded  emergency  relief  pending  the  determina- 
tion and  adoption  of  some  i>ermanent  plan  for  establishing  their 
i-elations  to  the  public? 

Mr.  Clark.  I  think  it  is  absolutely  essential.  I  think,  from  the 
testimony  brought  out  before  this  conunission  and  from  a  general 
knowledge  of  the  situation,  it  is  apparent  that  a  crisis  exists  in  street 
railway  affairs;  that  this  crisis  is  in  the  nature  of  an  emergency  such 
as  is  provided  for  and  described  in  many  of  the  j)ublic-servicc  laws, 
and  in  which  the  commissions  are  authorized  to  waive  the  usual  provi- 
sions as  to  increasing  rates  and  make  an  emergency  rate.  I  believe 
that  this  emergency  shoidd  be  considered  not  alone  as  affecting  the 
investors  in  the  properties,  but  particularly  as  affecting  the  public 
which,  in  my  opinion,  is  in  a  great  many  cases  threatened  with  an 
entire  loss  of  its  service  and  in  nuiny  more  is  threatened  with  a  great 
deterioration  of  service. 

If  I  may  be  perniitted  to  add  to  that  this  suggestion,  if  this  com- 
mission after  hearing  this  testimony,  representing  the  I'resident  and 
the  Federal  Government,  should  declare  that  in  its  opinion  such  an 
emergency  as  I  have  described  exists,  it  would  have  a  tremendously 
helpful  effect  upon  public  opinion  and  public  ircntiment  all  over  tho 
country. 


P«0«BW»,;S  0.-  MDEH^I,  .l,E<,Tnic  MILWAB  COMMISSIO!..       899 
Mr.  Clark.  Yes. 

Tl  P  r„  ,„x^:  J  A        ""  ^  "^""^  **>  "*'  *J»'-  Clark, 
problem f-  "°'^  '"""^  ^'"^'^  '"'^^  >■<>"  '^^en  a  student  of  this 

It.iowledge  of  the  facts.  ^  '"*'''  "  *'"'''>'  ^"^<^ 

if  If'^Lni'Vi"'""^"'-  ^°  ^■°"  \>^^''^^<'  that  the  adoption  of  this  nro<rrnm 

Mr.  Clark.  I  believe  so. 

«n,»,„„t,on,  „  ,t  were,  for  „„„  ,vl,o  ...  no/pa.tfv  conri"c«Uh  , 

Mr.  Cr..\«K.  Exactly. 

ir-V!i  <^''""'-''-^^:-  Po  J-""  know  if  there  have  been  mnnv  incre-.se<i 
Mr  r  "'^T  1'""'"^  H'«  "•*»•  '>->•  -n-nicipal  authorities^  '"""''^^ 
Mr.  CLAitK.  I  know  of  a  number.     I  think,  if  it  would  interest 

IlllT''TTi  ''"'*  r  ^'V  •■•  ^t"'''y  »*  tl'»t  question  made  a  d  cTn 
divide  the  total  number  of  increases  allowed  into  those  nnoweTlv 
comn,..ss.ons  and  those  allowed  by  local  authorities  ^ 

thJt'i'n'^J^^'eeo.^  '  "'"'  ''  ^^""'•^  ""'  '''y  ''''^^'-''^-  them  to  have 


900       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Clark.  Well.  T  will  see  that  yon  get  it. 

The  CiiAiKMAN.  That  can  he  filed  as  part  of  your  testimony. 

Mr.  Clark.  Yes.  -        ,  ^i 

The  CriATRMAx.  (Generally  speaking,  have  you  found  the  muni- 
cipal aut]>oiities  fairly  receptive  in  these  rate  cases? 

Mr.  Clark.  Whv,  I  think  it  is  almost  impossible  to  make  aivv^  gen- 
eral statement  to  that  eifect.  In  some  cases  they  have  been.  I  know 
that  in  the  State  of  New  York,  with  which  T  am  perhaps  more  fa- 
miliar than  anv  other  State,  in  the  cities  of  Albany  and  Utica,  whicli 
are  fairlv  large  cities,  and  including  my  own  home  city  of  Syracuse 
and  several  others,  the  citv  councils  have  waived  the  provisions  of 
their  franchise  and  allowed  the  public-service  commission  to  deter- 
mine a  higher  rate  of  fare.  ,   ,     o.  .  i  x- 

The  CnAnniAN.  What  has  been  the  attitude  of  the  State  regulating 
ccmmissions  in  the  States  where  they  had  control  of  the  rates  during 

the  war  period  ?  ,     .     ^  c     .-.         •    • 

Mr.  Clark.  I  think  generally  sympathetic,  Mr.  Commissioner. 

The  Chairman.  Have  they  in  a  large  majority  of  the  cases  granted 
the  applications  ])rayed  for  in  the  petitions? 

Mr.  Clark.  I  think  so.  * 

The  Chairman.  Broadly  speaking,  the  industry  has  no  real  com- 
plaint of  the  service  given'by  the  State  commissions  during  the  war; 

his  it ' 

'  Mr  Clark.  Onlv  so  far  as  delays  have  occurred,  Mr.  Commis- 
sioner, in  administering  the  law.  Whether  those  result  from  the 
perhaps  unnecessarily  cumbersome  procedure  or  not,  1  think  you  can 
only  discuss  in  individual  cases.  .^  ^  ^^    ^ 

The  Chairman.  Now,  with  respect  to  emergency  relief,  that  means 

an  increased  rate  ? 

Mr.  Clark.  Yes.  , 

The  Chairman.  Is  it  your  thought  that  the  rate  should  be  estab- 
lished as  an  emergency 'rate  for  a  certain  definite  period  of  time, 
leaving  to  the  municipality  or  a  State  commission  the  power  to  ex- 
tend that  time  upon  a  showing  made  by  the  industry  that  there  has 
not  been  a  sufficient  change  in  conditions  to  warrant  a  resumption  to 

the  basis  of  the  old  rate  ?  .    .  .,    ^  ^i 

Mr.  Clark.  My  idea,  Mr.  Commissioner,  was  that  the  emergency 
rate  which  might  be  put  into  effect  in  accordance  with  the  recom- 
mendations I  have  made  to  you  would  stay  in  effect  until  a  perma- 
nent plan  for  regulating  those  rates  should  be  adopted. 

The  Chairman.  So  it  is  not  an  emergency  war  rate  that  you  want  f 

Mr.  Clark.  No.  .  ^  .,  , 

The  Chairman.  But  simply  a  rate  to  tide  over  until  a  permanent 

solution  is  worked  out? 

Mr.  Clark.  Yes.  „  . 

The  Chairman.  Then  perhaps  your  word  "emergency      is  not 

strictly  accurate.  .  ,  ,    •.  ,i    ^  i 

Mr  'Clark.  Well,  I  doubt  if  I  am  prepared  to  admit  that,  because 
I  think  that  this  emergency  is  going  to  continue,  at  least  until  a  per- 
manent plan  is  adopted.  •%€    ^^^    ^ 
The  Chairman.  Well,  we  will  not  quibble  over  the  term,  Mr.  Clark. 

;       Mr.  Ci^vRK.  Yes.  ,  .  ,     ,  •    •  •   „     T 

Mr.  Warren.  Some  of  us  think  the  emergency  is  increasing,     i 

'   received  a  Boston  paper  this  morning  which  created  that  impression. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       901 

The  Chairman.  During  the  war  quite  a  number  of  commissions 
granted  emergency  relief? 
Mr.  Clark.  Yes. 

The  Chairman.  By  fixing  the  rates  for  a  definite  period? 
Mr.  Clark.  Yes. 

The  Chairman.  Subject  to  an  extension  on  the  showing  made  by 
the  industry  that  the  conditions  had  not  changed.  Would  not  that 
be  entirely  satisfactory  to  the  industry,  and  would  it  not  pacify 
public  feeling  a  good  deal  better  than  to  have  a  rate  put  in  without 
any  limited  time?  * 

Mr.  Clark  I  think  perhaps  so,  excej^t  that  in  a  great  many  of 
those  cases-I  say  a  great  many,  at  least,  in  some  of  the  cases—the 
commissions  have  since  decided  that  their  powers  under  the  emer- 
gency act  of  the  constitution  have  ceased  by  the  signing  of  the  armis- 
tice and  that  they  are  now  without  the  power. 

The  Chairman.  What  commissions  have  so  ruled  ^ 
Mr.  Clark.  Well   if  I  am  not  mistaken,  the  Indiana  Commission 
has  so  ruled;  at  least,  the  increase  granted  to  the  Indianapolis  com- 

^''Wa'   n     ''"'  ''''^  '\V'^^^^."'  ''-'^^  withdrawn  because  of  that  reason. 

I  he  Chairman.  A\  ell,  I  presume  they  have  construed  the  statute 
that  way. 

Mr.  Clark.  Yes. 

The  Chairman    Now,  when  you  come  to  your  permanent  plan, 

that  permanent  plan  suggests  either  State  or  municipal  re-ulation^ 

Mr.  Clark,    i  es.  ^  »  • 

The  Chairman.  You  have  given  a  good  deal  of  study  to  the  ques- 
tion of  regulation,  have  you  not?  ^ 
Mr.  Clark.  Yes. 

anrilf  itXreguSSolrr  ''''  '''''  "^^°™"  ''"^  ^'^'"-"''^  ^''^^ 
Mr.  Clark.  Yes. 

The  Chairman.  Now,  in  your  judgment  should  regulation  be 
exclusively  in  the  municipality  or  in  the  State,  or  shoidd  there  be 
some  sort  of  a  happy  middle  ground  wherebv  you  can  work  out 
proper  cooperation  between  both?  "^    ^  ^^ 

c>,^^'"i  ^'1f'''  ^  ^^"?,^  the  advantages  of  the  two  systems  might  be 
s  a  ed  in  this  way,  that  when  you  have  State  regulation  it  is  more 
stable.  It  IS  less  hkely  to  be  affected  by  prejudice,  and  on  the  whole 

Ll  J?nn  '^Ti  f 'T  ^^^'  ^^  ^^'^  company  and  to  the  public  in  the 
long  lun  That  when  you  have  nmnicipal  regulation  such  as  is  ex- 
tant in  Cleveland  you  secure  perhaps  a  greater  degree  of  coopera- 
t  on  from  the  public  than  you  do  when  the  State  commissions  are  in 
cliarge  of  the  regulation.  I  believe  that  your  suggestion  would 
make  an  ideal  system  of  regulation  if  it  could  be  put  into  effect  if 
some  way  of  combining  the  two  could  be  devised. 

The  Chairman.  Do  you  think  that  the  State  as  such  should  attemut 
to  regulate  the  service  within  a  village  or  city? 

fi  ^\?^J^^^'  ^^-^^^  ^^^^^'^  '^^^  ^  S^'^^^  ^^^^y  questions  entering  into 
that,  Mr.  Commissioner.  »      «^" 

The  Chairman.  When  I  speak  of  service  I  refer  to  speed,  stoics, 
and  to  the  ordinary  regulations  which  are  so  closely  identified  with 
the  welfare  of  the  city  itself.  . 

Mr  Clark  In  a  modern  city  the  systems  extend  usually  beyond 
the  city  limits,  the  suburban  lines  are  part  of  the  city  system,  the 


902       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

interuiban  lines  are  part  of  the  city  system.     Tlie  aiitliority  of  a 
city  rej^ulatory  commission  would  cease  with  the  city  limits. 

The  CHAiiniAN.  Yes.  ,         ^i       i  i    4^ 

Mr  Cl\RK  I  refer  particularly  to  Boston,  where  they  have  what 
I  think  is  known  as  the  metropolitan  district,  where  the  service  ex- 
tends for  miles  beyond  the  city  limits  of  Boston;  and  whie  Boston 
city  has  no  particu'lar  jurisdiction  over  those  communities,  it  is  really 
pak  of  the  community  life  of  Boston;  and  service  on  those  proiier- 
ties  should  be  regulated  as  a  whole.  •'^ndnc>t  allow  the  city  of  Bos^m 
to  regulate  the  service  within  the  well-dehned  limits  of/>«^^*^t.y 
itself  and  allow  the  other  municipalities  to  re«:ulate  it  withm  their 
limits;  there  should  be  some  «;eneral  reojulation  ot  that  system  which 
would  nuike  it  m(^  efficient  and  the  best  for  all  the  i>eople  served. 

The  Chairman.  Well,  referrinor  now  to  this  Boston  situation,  do 
you  think  it  would  be  fair  to  the  public,  as  well  as  to  the  utility,  to 
•permit  the  municipal  authorities  in  Boston  to  have  jurisdiction  oyer 
the  service  and  extensions  of  street-cai-s  subject  to  an  apix^al  to  tlie 
State  commission  by  either  party  ?  .     ,      .     ,  -^  i  i       *. 

Mr.  Clakk.  I  believe  that  in  that  particular  instance  it  woultl  not 

be  very  workable. 

The*CiiAiK.^iAx.  Why  not?  . 

Mr  Clvrk.  For  the  reascm  that  each  of  these  other  communities 
would  also  have  the  ri-ht  of  appeal  to  the  commission  and  tluit, 
as  I  sav,  it  would  be  difficult  to  ccK)rdinate  the  entire  system  ot  sei  v- 
ice  to  one  whole  that  would  most  efficiently  serve  all  the  comnm- 
nities  I  think  it  might  be  possible  to  create  a  metropolitan  district 
whidl  would  have  tliat  right  of  an  appeal  to  the  public-service  com- 

""llle  CiiAiEMAN.  Do  you  believe  if  the  right  of  appeal  by  these  dif- 
ferent municipalities  to  the  State  commission  were  granted  it  Avould 
promote  confusion  and  delay  and  uncertainty  rather  than  stability? 

Mr.  Ci^^RK.  I  am  inclined  to  think  so ;  yes,  sir. 

The  Chairman.  But  you  would  have  a  fanal  body  to  determine  the 

question  'i 

Mr.  Clark.  Yes.  ,       ,         ,  .  , 

Tlie  Chairman.  And  establish  the  general  rules  which  munici- 
palities must  obey? 

Mr.  Ci^^KK.  Yes.  ,     ^.     ,i     •      .1         ».  i 

The  Chairman.  Now  would  not  that  result  hnally  m  the  estab- 
lishment of  a  general  code  of  rules  for  the  service  the  si>eed,  and 
stops  and  extensions  and  things  of  that  kind  which  woud  be  con- 
trolling upon  municipal   authorities  and  thus  stabilize  the  whole 

"^Mr  Clark.  Well,  I  am  not  an  operating  electric  official,  and  I  do 
net  believe  that  T  am  prepared  to  answer  that  question,  because 
it  seems  to  me  that  that  is  a  question  of  operation  and  a  very  se- 
rious question,  Avhether  any  code  or  standard  or  set  of  rules  couk 
le  adopted  that  would  apply  indiscriminately  to  all  services  rendered 
under  various  conditions  and  in  various  cities. 
The  Chairman.  Well,  that  may  be  so. 

Mr.  Clark.  Yes.  ^  .        ,  ,  _  ,       j     .   j  9 

The  Chairman.  But  generally  speaking  they  could  be  adopted  ? 
Mr.  Clark.  I  suppose  general  principles  could  be  laid  down. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       903 

The  Chairman.  Now,  do  you  think  in  Boston  it  is  better  to  have 
If^^  commission  regulate  all  the  affairs  of  the  utility « 

if  wl*  1 1  i"""!   II  '''''-iV^  '"'^"S^^  '"^  ^^'""^  "^  *^^«t  particular  situation 
It  would  be  better  either  to  have  the  State  regulate  them  or,  if  it 

were  possible  to  combme  the  territory  that  they  serve  into  some  dis- 
trict, to  Jiave  such  a  district  regulate  them 

The  Chairman.  Do  you  feel  that  the  Massachusetts  situation  is 
typical  so  that  it  could  be  applied  to  all  the  States  of  the  Union,  or 
IS  it  rather  an  exception?  ' 

Mr.  Clark.  I  think  that  is  rather  exceptional. 

1  he  Chairman.  Then  we  have  to  look  somewhere  else  for  experl- 
ence  that  will  enable  us  to  develop  a  plan  which  can  be  useful 
throughout  the  country? 

Mr.  Clark.  Yes,  sir. 

The  Chairman.  Now  then  apply  the  same  questions  I  have  asked 
you  to  some  oi  the  other  States.  Take  my  own-Minnesota.  Do  you 
tliink  that  pJan  ot  cooperation  would  work  thei-e? 

Mr.  Clark.  Between  a  State  commission  and  a  local  commission? 

1  he  CjL\iR3fAN.  And  the  city,  yes. 

Mr.  Clark.  I  would  have  to  ask  a  question  first 

The  Chairman.  Yes. 

,Jt'  ^^f"^'  }  ^T^"^'^  ^^'T  ^"^  ^^^^'''  ^'^'''  ^^^^^y  the  system,  say, 
ot  St.  1  aid  and  Minneapolis  are  coordinated,  how  the  schedules  for 
instance m  one  city  affect  the  scedules  in  tlie  other  city 

11  ^'^t^^^/:^^-  ^^»»  J^^i^e  got  several  corporations,  but  they  are 
al  owned  by  the  same  persons  and  they  intertwine  and  it  is  practi- 
cally  one  service.  ^ 

,  iH^'''  I' ^r ''•  ^^'°r'''  !*  ^^  P^s^'l^le  to  get  the  city  of  St.  Paul  and  the 
!;  i"f   ^^f'^'^'^'Pol's  to  agree  upon  one  legi.lating  commission  to 

regulate  the  service  on  both  .systems? 
The  ("h-\irm.\x.  I  do  not  think  so. 
Mr    Cl.\;!k.  I  am  rather  inclined  to  doubt  whether  such  a  nlnn 

beli  :l  H.    "nK  '  ^•••,}^l'«i™"»-  in  that  particular-  ^kuatio^  ? 

tirelv  feasible'       "  "  self-contained  community  that  it  would  be  en- 

The  Ch.ubm.vx.  Do  you  not  think  that  there  is  a  verv  stron" 
utiliHes"    *'"'°"^'"*"'  ^''''  *^""°t'"y  in  fa™r  of  home  rule  "of  tlie^ 

Mr.  Clark.  Yes. 

The  Ch.mrm.^n.  And  that  if  you  can  not  have  some  measure  of 
tiZ\  sentiment  will  demand  local  owner.ship  and  opera- 

Mr  CL.MtK  I  might  say  in  regard  to  that  that  I  do  not  know 
how  far  a  sentiment  of  home  rule  goes  in  that  respect 

1  he  Ch.vihm.vx.  AVell,  it  is  mightv  strong  there 

Mr  CL.uiK.  Perhaps  in  Minnesota.  But  I  am  i-eferrin"  particu- 
larly to  one  ca.se  in  \ew  York  where  Gov.  Smith,  who  was  elj^t^  o  , 
a  home-rule  platform  and  who  was.  I  understand,  an  ardent  ad  o'nte 
of  home  rule,  vetoed  the  cost-«f-service  bill  for  the  city  of  R.^ffa lo 
on  the  ground  it  interferiod  with  the  jurisdiction  of  the  Sc 
service  commission  and  withdrew  tb.o  Internationl  Eailwav  of  B  f- 
falo  ,10m  the  jurisdiction  of  the  public-service  commission      It  is 


904       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

evident  there,  in  the  mind  of  one  man  at  least,  that  the  two  theories 
are  not  incompatible. 

The  Chairman.  Speaking  for  the  industry,  of  course  you  have 
talked  to  a  great  many  men  in  this  busmess.    Does  it  preter  fetate 

to  local  regulation? 

^ir.  Clakk.  I  do  not  believe  that  I  could  answer  that  question.  1 
know  a  very  large  number  of  men  who  prefer  State  regulation.  I 
Ivuow  a  few  men  who  prefer  local  regulation. 

The  CiiAiKMAN.  But  the  industry  is  very  rapidly  growing  and 
expanding  from  city  to  city^ 

Mr.  Clark.  Yes. 

The  Chairman.  One  corporation  may  utilize  the  streets  of  a  large 

number  of  cities? 

Mr.  C^LARK.  Yes. 

The  Chairman.  Does  not  that  in  and  of  itself  establish  the  fact 
that  you  have  got  to  have  a  central  organization  or  a  central  control 
over  the  rates  and  service  and  capitalization  of  these  industries? 

Mr.  Clark.  Personally,  Mr.  Commissioner,  I  believe  that,  as  a 
mere  matter  of  economy  and  efficiency,  in  the  majority  of  cases 
State  regulation  is  necessary.  If  you  are  going  to  add  to  the 
burdens  of  the  street  railwavs,  which  are  very  large  at  the  present 
time,  the  additional  burdens*^of  providing  the  machinery  for  regula- 
tion it  is  going  to  make  a  considerable  difference  in  the  receipts  of 

the  companies. 

The  Chairman.  Now  vour  paragraph  (a)  says:  "The  ascertain- 
ment of  the  amount  upon  which  the  enterprise  should  in  fairness 
and  justice  to  both  the  investors  and  the  public  be  allowed  to  earn 
a  return." 

Mr.  Clark.  Yes.  ^    ^  .  ,  ,.  i 

The  Chairman.  That  presupposes  that,  before  you  can  establish 
rates  and  stabilize  credit,  the  utility  as  well  as  the  public  must 
know  what  a  pro])ertv  is  worth.  Of  course  the  general  scheme  to- 
day is  to  value  the  plant;  in  some  places  that  is  done  simply  by 
agreement  Avith  municipal  authorities  and  in  other  cases  it  is  done 
by  the  State.  Now,  looking  at  it  in  the  broad  way,  which  is  the 
best  method:  To  have  this  done  by  agreement  with  the  municipal 
authorities  or  to  have  the  State  investigate  the  property  and  fix 

the  value?  ,     ,  ,         ,  .  ,  i     ,. 

Mr.  Clark.  I  would  say  that  the  method  by  which  you  can  best 

invite  the  confidence  of  the  public  in  the  value  as  fixed  is  the  method 

that  should  be  adopted.  ,  i   •      -x     xi    ^ 

The  Chairman.  Now,  which  of  those  methods  would  invite  that 

foiifidence . 

Mr.  Clark.  Depending  upon  the  confidence  which  the  community 
has  in  the  i)ublic-service  commission.  I  have  no  doubt  that,  in 
States  where  the  public-service  commission  has  been  established  long 
enough  and  has  so  conducted  itself  that  it  is  firmly  fixed  in  the 
confidence  of  the  public,  a  valuation  of  the  property  made  up  by  it 
would  secure  exactly  what  I  said.  ^    , 

The  Chairman.  Is  it  not  a  fact  that  the  State  commissions  are 
equipped  with  expert  engineers  and  s^tatistical  men  who  are  qualified 
to  make  an  impartial  studv  of  a  plant  and  to  fix  a  fair  valuation  bet- 
ter than  a  municipality,  which  must  go  into  the  market  and  purchass 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       905 

experts  and  engineers  to  make  a  proper  study  for  a  particular  pur- 
pose ? 

Mr.  Clark.  Oh,  yes ;  no  doubt  about  that. 

The  Chairman.  In  other  w^ords,  is  there  not  a  larger  element  of 
fairness  m  having  the  State,  which  is  an  impartial  body,  determine 
the  value  of  the  plant  which  the  public  is  going  to  buy "^ rather  than 
have  a  particular  community  itself  do  that  thing? 

Mr.  Clark.  Personally,  I  should  think  so;  yes. 

The  Chairman.  Then  you  would  generally  favor  valuations  made 
by  the  State  rather  than  by  municipal  authorities  for  these  agi*eed 
values  ? 

Mr.  Clark.  Except  under  the  limitations  I  made  in  my  first  state- 
ment. 

The  Chairman.  Your  paragraph  (b)  suggests  a  scheme  of  rates 
which  will  automatically  increase  or  decrease  above  or  below  the 
initial  rates  according  to  operating  conditions? 

Mr.  Clark.  Yes. 

The  Chairman.  The  essence  of  that  plan  is  the  cost  of  service? 

Mr.  Clark.  Yes.  I  believe  the  cost-of-service  plan  is  perhaps  a 
misnomer,  because  I  believe  that  ever  since  the  State  has  taken  over 
the  regulation  of  public  utilities,  the  theory  of  cost  of  service  has 
been  established.    I  do  not  know  what  else  to  call  the  plan 

The  Chairman.  I  presume  that  paragraph,  or  the  suggestion  con- 
tained m  that  paragraph,  is  predicated  upon  the  experience  which 
has  been  had  in  Cleveland,  Cincinnati  and  some  other  places  with 
what  is  known  as  the  cost-of-service  plan? 

Mr.  Clark.  Yes. 

The  Chairman.  From  your  study  of  the  industry  do  you  believo 
that  that  plan  produces  the  largest  degree  of  satisfaction  to  the 
communities  ? 

Mr.  Clark.  I  am  inclined  to  think  so.  The  trouble  with  making 
an  answer  to  a  question  of  that  kind,  Mr.  Commissioner,  is  that  in 
no  instance  except  Cleveland  has  it  been  in  practice  long  enough  to 
get  a  true  reflex  of  public  opinion  on  it,  in  my  opinion. 

The  Chairman.  Well,  is  it  still  experimental? 

Mr.  Clark.  Yes— well,  I  would  not  say  experimental,  no;  because 
it  has  proven  itself  in  Cleveland. 

The  Chairman.  It  has  proven  itself  to  be  very  effective  durino-  the 
rapidly  changing  operating  conditions  during  the  war?  ^ 

Mr.  Clark.  Yes. 

The  Chairman.  But  would  the  cost-of-service  plan  in  Cleveland 
give  real  satisfaction  during  a  normal  period  covering  a  i?ood  many 
years?  =      ©  j 

Mr.  Clark.  As  I  remember  it,  it  was  put  into  effect  in  Cleveland 
in  1911  or  the  latter  part  of  1910  and,  as  near  as  I  can  judge,  so  far 
as  the  public  is  concerned  it  has  given  satisfaction  during  all  that 
period. 

The  Chairman.  But  considering  the  industry  as  a  whole,  there 
being  large  companies  as  well  as  small  companies  operating  in  large 
as  well  as  small  cities,  do  you  think  that  a  plan  by  which  the  State 
commission  should  have  the  right  to  fix  the  rates  upon  investigation 
or  upon  complaint  would  give  more  general  satisfaction  and  a  greater 
measure  of  security  to  capital  than  your  cost-of-service  plan  now 
used  in  Cleveland? 

160643**— 20 58 


906       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Clark.  I  donbt  it,  Mr.  Commissioner,  because  I  believe  that 
the  fixing  of  a  rate  shouhl  or  ou^^ht  to  be  a  matter  of  arithmetic. 
Your  expenses  are  so  much,  your  receipts  are  so  much,  and  those 
i-eceipts  should  be  i-egulated  automatically  to  cover  your  cost.  Now, 
I  can  see  no  good  reason  why  that  should  be  left  to  the  judgment  of 
anybody,  having  decided  on  the  principles  or  the  elements  which  go 
to  make  up  your  service  or  your  cost  of  service. 

The  Chairman.  But  if  the  value  of  a  proi>ei-ty  is  established  and 
built  up  as  extensions  and  l>etterments  are  added  to  it,  then  the 
commission  always  has  the  value  and  knows  what  the  base  must  be 
for  return  purposes? 

Mr.  Clark.  Yes. 

The  Chairman.  It  simply  requires  a  study  of  the  operating  sheet 
to  determine  whether  or  not  you  must  have  an  increased  rate ;  does 
it  not? 

Mr.  Clark.  That  is  all. 

The  CHAnniAN.  Then  the  value  having  once  been  established,  the 
commission  having  the  power  to  fix  rates  either  upon  its  own  motion 
or  upon  petition,  have  you  not  got  all  that  the  industry  needs? 

3Ir.  Clark.  Xo;  because  I  think  there  is  still  the  element  of  delay 
which  is  very  costly — i*ostly  both  to  the  company  and  to  the  public. 

The  Chairman.  I^on't  you  think  a  large  part  of  that  delay  grows 
out  oi"  the  fact  that  there  is  a  very  considerable  prejudice  against  the 
capitalization  of  companies  and  a  feeling  in  the  public  mind  as  w^ell 
as  in  the  minds  of  many  of  the  commissioners  that  the  utilities  are 
trying  to  get  a  return  upon  a  lot  of  stock  which  is  either  fictitious  or 
not  represented  by  capital? 

Ml".  Clark.  I  think  that  is  probably  true. 

The  Chairman.  And  when  you  have  your  properties  valued  by  the 
State  have  you  not  removed  every  element  of  suspicion  against  the 
cor.ipany  aiid  reduced  the  whole  proposition  to  a  plain  dollars  and 
cents  question  ? 

Mr.  Cl.\rk.  I'ndoubtedlv. 

The  Chairman.  And  will  not  that  result  in  expedition  in  the  de- 
termination of  these  rate  cases? 

Mr.  Cl.\rk.  It  might. 

The  CHAuniAN.  Don't  you  think  it  would? 

Mr.  Clark.  Yes;  I  think  it  would. 

The  Chairman.  Then,  don't  you  believe  that  as  far  as  the  industry 
is  concerned  you  are  entirely  safe  to  have  either  a  cost-of-service 
plan  or  a  scheme  of  State  regulation,  wherein  the  State  can  fix  the 

rates  ? 

Mr.  Clark.  I  think  the  industry  as  a  whole  would  feel  very  much 
better  than  it  does  now  if  it  was  ])Ossible  to  conduct  State  regula- 
tion under  those  conditions,  but  I  doubt  if  it  would  feel  as  well  as  it 
would  under  an  automatic  system,  by  which  they  were  absolutely 
assured  of  these  increases  as  they  came  up,  and  in  which  situation 
the  judgment  of  no  man  or  no  set  of  men  intervenes. 

Mr.  Warren.  May  I  interrupt  for  just  one  moment  there,  because 
I  think  it  has  a  bearing  on  that  Cleveland  exi>erience.  Don't  you 
think  it  may  have  this  advantage,  Mr.  Clark,  that  as  to  any  auto- 
matic rate  the  public  knows  that  rate  will  depend  upon  demands  for 
service;  and  therefore  it  affects  just  what  tlie  utility  might  consider 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       907 

unreasonable  demands;  it  tends  to  restrict  unreasonable  demands,  be- 
cause the  rate  is  going  to  reflect  the  cost  of  this  extra  service? 

Mr.  Clark.  I  think  that  is  undoubtedly  true- 
Commissioner  Bkall-  Ml*.  Clark,  don't  you  think  that  one  of  the 
tilings  that  worries  the  investor  most  now  is  that  he  does  not  know 
what  he  is  going  to  get? 

Mr.  Clark.  Yes,  sir. 

Commissioner  Beall.  And  don't  you  think  that  the  average  in- 
vestor would  infinitely  prefer  an  automatic  rate — ^th.at  is,  under 
well-prescribed  conditions,  where  it  is  not  left  to  the  judgment  or 
whims  or  views  of  any  men  or  any  board  of  men? 

Mr.  Clark.  That  is  my  idea  exactly. 

Commissioner  Beall.  And  he  wants  to  feel  sure  of  a  proper 
return  on  his  investment? 

Mr.  Clark.  Yes. 

Commissioner  Beall.  And  a  great  many  investoi^,  I  take  it,  feel 
that  they  can  not  leave  that  to  any  man;  they  must  know  what  the 
conditions  are. 

Mr.  Clark.  I  think  that  is  true,  Mr.  Beall. 

Commissioner  Beall.  I  do  not  know,  but  it  seems  to  me  that  the 
companies  would  infinitely  prefer  a  State  board  to  an  individual 
man. 

Mr.  Clark.  Yes. 

Commissioner  Beall.  I  do  not  think  there  is  any  room  for  argii- 
meut  on  that,  under  the  general  conditions  pertaining  to  securities. 

The  CHA1R3IAN.  Paragraph  (d)  suggests  an  indeterminate  fra-i- 
chise.  One  of  the  large  difficulties  now  concerning  the  utility  is  the 
limited  franchise,  with  its  many  limitations. 

IMr.  Clark.  Yes. 

The  Chairman.  How  many  States  to-day  permit  an  indeterminate 
franchise  ? 

Mr.  Clark.  That  I  can  not  tell  you. 

The  Chairman.  AVisconsin  and  Indiana? 

Mr.  Clark.  I  know  those  two. 

The  Chairman.  Do  you  know  of  any  others? 

Mr,  Clark.  I  do  not.  I  think  that  information  could  be  obtained 
for  you,  though. 

Mr.  Warren.  Most  of  the  Xew  England  States. 

The  Chairman.  Most  of  the  New  England  States  ? 

Mr.  Warren.  I  should  say  most  of  them. 

The  Chairman.  I  believe  Massachusetts  was  the  first  one  to 
consider  it. 

Mr.  Warren.  Yes;  unless  I  am  mistaken,  Maine,  Xew  Hampshire, 
Connecticut,  Massachusetts;,  and  I  think  Ehode  Island,  too;  but  I 
am  not  sure. 

The  Chairman.  Of  course,  legislation  has  to  be  secured.  Do  you 
think  that  this  commission  would  be  performing  a  proper  service 
if  it  recommends  the  use  of  an  indeterminate  franchise? 

Mr.  Clark.  Yes,  sir. 

The  Chair3ian.  Assuming  that  that  was  done,  should  the  report 
simply  contain  a  broad  statement  favoring  the  principle,  or  should 
it  suggest  the  reasons  Avhy  the  indeterminate  form  of  franchise  is 
preferable  to  the  limited  franchise? 


^1 


908       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSIOIT. 


Mr.  Clakk.  I  think  a  discussion  of  the  subject  would  help  im- 
mensely, undoubtedly. 

The  Chairman.  Well,  are  thei-e  any  substantial  objections  to  that 
form  of  franchise,  so  lon^y  as  the  public  is  permitted,  at  any  time, 
to  purchase  the  plant  at  a  fair  value? 

Mr.  Clark.  I  think  not. 

The  Chairman.  The  right  given  to  the  j^ublic  to  purchase  at  any 
time  would  not  affect  the  stability  of  the  credit;  would  it? 

Mr.  Clark.  Depending,  of  course,  on  the  terms  under  which  they 
are  permitted  to  purchase.  I  think  that  is  a  matter  of  detail,  but 
we  have  got  to  assume  that  the  terms  of  purchase  as  set  forth  in 
the  franchise  are  fair  and  just. 

The  Chairman.  Well,  it  presupposes  the  purchase  on  a  fair  value. 

Mr.  Clark.  Yes,  sir. 

The  Chairman.  Of  course,  no  investor  is  going  to  put  money  into 
securities  where  they  exceed  the  value  of  the  plant;  will  he? 

Mr.  Clark.  No. 

The  Chairman.  If  he  does,  he  is  not  entitled  to  very  much  sym- 
pathy from  the  public  or  community  ? 

Mr.  Clark.  No;  I  do  not  believe  so. 

The  Chairman.  Then,  the  investor  would  be  entirely  protected, 
under  that  plan  ? 

Mr.  Clark.  You  mean  if  a  paragraph  was  included  in  the  inde- 
terminate franchise  saying  that  it  could  be  purchased  at  a  fair  value? 

The  Chairman.  To  be  fixed  by  the  State. 

Mr.  Clark.  To  be  fixed  by  the  State? 

The  Chairman.  Yes. 

Mr.  Ci^\RK.  I  think  that  would  depend  again  on  the  confidence 
wiiich  the  investor  had  in  the  particular  State  commission  in  which 
the  indeterminate  franchise  was  in  effect. 

The  Chairman.  Well,  you  are  perfectly  familiar  with  the  fact 
that  a  corporation  is  protected  by  the  Constitution;  its  property  can 
not  be  condemned  for  less  than  its  value  ? 

Mr.  Clark.  That  is  true.  That,  however,  is  under  the  general 
law^  of  the  State,  but  if  you  put  a  clause  in  the  statute  saying  that  the 
franchise  shall  be  fixed  at  a  price  set  by  any  particular  commission — 
I  am  not  lawyer  enough  to  know,  but  it  seems  to  me  that  that  would 
be  a  waiver  of  the  rights  to  protection  under  the  general  State  law. 

The  Chairman.  I  do  not  think  so.  That  is  subject  to  the  right  of 
appeal  to  the  court,  of  course, 

Mr.  Clark.  Yes. 

Commissioner  Beall.  May  I  ask  a  question  right  there,  Mr.  Chair- 
man? 

The  Chairman.  Yes. 

Commissioner  Beall.  In  all  of  these  indeterminate  permits  and 
other  forms  of  franchises  which  permit  purchase  by  the  city  on  a 
valuation,  is  it  not  true  that  in  practically  all  of  them,  just  for  the 
reason  that  we  have  described,  they  provide  very  carefully  for  the 
method  of  arriving  at  such  a  valuation? 

Mr.  Clark.  Yes,  sir. 

Commissioner  Beall.  In  other  words,  as  I  understand  it,  it  is 
deemed  by  the  investors  and  companies  that  it  is  absolutely  necessary 
to  define  how  that  valuation  shall  be  arbitrated  and  found? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       9C9 

Commissioner  Gadsden.  Or  it  is  fixed  in  advance. 
Commissioner  Beall.  Yes;  but  that  is  the  same  thing. 
Commissioner  Gadsden.  Fixed  at  the  time. 
Mr.  Clark.  Yes. 

The  Chairman.  Your  paragraph  (/)  suggests  the  elimination  of 
taxes  and  special  assessments. 

Mr.  Clark.  Yes,  sir. 

The  Chairman.  Of  course,  these  taxes  and  special  assessments 
have  proven  extremely  irksome  during  the  war  period.  Prior  to 
that,  during  the  nornuil  years,  did  they  impose  a  large  burden  upon 
the  industry? 

Mr.  Clark.  I  think  so;  and  I  think  there  is  one  feature  that  has 
not  often  been  thought  of.  If  you  will  look  into  the  capitalization 
account  of  those  companies  yoii  will  find  a  very  large  amount  of 
capital  which  is  there  because  the  investment  in  paving  and  other 
municipal  requirements,  and  which  are  fixed  charges,  are  now  paid 
by  these  companies.  I  have  in  mind  that  when  the  Rhode  Island 
Co.  was  valued  by  a  commission  appointed  by  the  legislature,  it 
was  discovered  that  almost  one-tenth  of  its  capitalization  was  due  to 
payments  made  on  account  of  paving  and  other  requirements  of  that 
kind.  So  there  is  a  charge  that  was  saddled  on  that  company,  as  I 
think,  unjustly,  and  which  to-day  is  keeping  up  the  rate  of  fare  in 
the  cities  of  Rhode  Island. 

The  Chairman.  Now,  under  your  cost-of-service  plan,  where  your 
return  is  practically  guaranteed,  how  can  the  paving  assessment  or 
tax  matter  affect  you? 

Mr.  Clark.  It  can  not.  I  think  that  is  largely  a  question  be- 
tween the  car  rider  and  the  public  as  a  whole.  If  the  car  rider  cares 
to  be  indirectly  taxed  for  the  l)enefit  of  the  property  owner,  that  is 
a  matter  as  between  him  and  the  property  owner,  except  that  I 
think  it  is  particularly  desirable,  from  the  company's  standpoint 
and  from  the  public  standpoint — from  every  standpoint — to  keep 
those  fares  as  low  as  possible,  and  therefore  these  imposts  should 
be  taken  away. 

The  Chairman.  Of  course,  the  municipality  has  to  have  a  certain 
amount  of  money  to  do  business  with. 
Mr.  Clark.  Yes,  sir. 

The  Chairman.  And  it  is  a  question  of  the  most  convenient  way 
of  getting  it. 

Mr.  Ci^rk.  Yes,  sir. 

The  Chairman.  So  that,  under  the  cost-of-service  plan,  the  as- 
sessment does  not  do  you  any  harm. 

Mr.  Clark.  Plxcept  that  it  may  raise  fares  above  a  point  where  it 
would  be  impossible  to  get  business  to  sustain  them. 

The  Chairman.  I  suppose  that  is  a  matter  that  you  will  have  to 
leave  to  the  judgment  of  the  regulating  officials,  as  well  as  the  city 
officers. 

Mr.  Clark.  Yes,  sir. 

The  Chairman.  Wherein  can  your  assessments  and  tax  features 
be  harmful  if  the  State  commission  has  a  right  to  fix  the  rate? 

Miv  Clark.  I  would  not  say  that  it  enters  into  that  phase  of  the 
matter.  I  mean  that  the  question  of  impost  did  not  affect  tho 
method  of  regulation  at  all. 


910       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  All  of  these  matters  are  items  deducted  from  the 
revenue,  and  the  conunission  has  to  take  them  into  consideration. 

Mr.  Cl^vrk.  Yes,  sir. 

The  Chairman.  Then,  do  you  helieve  that  if  you  had  either  the 
cost-of-service  plan  or  commission  regulation  of  rates  it  would  be 
necessary  to  the  industry  to  have  these  special  assessments  and  taxes 
eliminated? 

Mr.  Clark.  You  mean,  Mr.  Connnissioner,  if  you  had  city 
ivgulation  ? 

The  Chairman.  Yes;  or  cost  of  service. 

Mr.  Ci>ark.  As  I  said  before,  I  think  I  have  answered  that  ques- 
tion when  I  said  that  that  is  a  question  which,  in  my  opinion,  should 
be  decided  between  the  car  rider  and  the  taxpapei'.  Personally,  I 
see  no  justice  in  assessing  the  car  rider  for  something  that  somebody 
else  benefits  from. 

The  Chairman.  Then,  your  paragraph  (A),  dealing  with  special 
taxes  and  assessments,  was  put  in  there  Avitli  some  qualifications, 
was  it  not  ? 

Mr.  Clark.  Xo;  I  do  not  believe  it  is  put  in  there  with  any  qualifi- 
cations, Mr.  Commissioner,  because  that  is  my  opinion. 

The  Chairman.  Yes;  but  it  is  not  essential  to  the  welfare  of  the 

industry,  is  it,  that  these  taxes  and  special  assessments  be  eliminated? 

Mr.  Claihv.  It  is  not  essential,  ])ut  very  helpful,  because  it  keeps 

the  cost  of  service  down,  and  thus  keeps  your  fare  low;  and  I  think 

a  low  fare  is  very  ess(^ntial,  wherever  it  can  be  put  into  effect. 

Commi:>sioner  Beall.  I  just  wanted  to  bring  out  the  point,  Mr. 
Clark,  that  for  the  success  of  the  cost-of-service  ])lan,  or  any  other 
plan,  the  majority  of  the  peo])le,  being,  in  a  sense,  of  the  ]X)orer  class, 
consequently  the  majority  of  the  citizens  of  any  town,  being  riders, 
would  feel  l)etter  if  they  felt  that  the  taxation  was  scattered,  that 
they  wei-e  not  burdened  with  something  that  increased  their  fare,  and 
that  the  property  owners  and  the  automobilists  and  others  were  not 
paying  their  fair  ])roj)ortion  of  it?  AVould  it  not  tend  toward  a 
better  feeling  if  they  tliought  that  taxation  was  better  distributed? 
Mr.  Clark.  I'ndoubtedly. 

The  CHAuofAN.  Taxation  is  a  matter  of  local  law,  and  it  depends 
very  much  upon  the  conditions  pertaining  to  the  ])roper  upkeep  of 
the  city.  Do  you  think  it  wise  for  a  Government  commission  to  come 
m  and  recommend  the  removal  of  all  taxes  and  si)ecial  assessments? 
Mr.  Clark.  I  think  it  Avoiild  be  very  Avise  for  you  gentlemen  to  say 
these  two  things:  First,  that  it  is  a  question  as  between  the  car  rider 
and  the  general  i)ublic,  and  second,  that  it  has  a  direct  effect  upon 
the  rate  of  fare  to  be  charged. 

Let  me  give  you  an  instance  where  that  was  verv  concretely  shown. 
In  a  city  in  central  New  York,  a  paving  ])rogram*for  this  year  called 
for  an  expenditure  of  some  $r)()(),()00  on  the  ])ait  of  the  city  comi)any 
in  laying  i)avements,  reconstructing  its  track,  and  so  forth.  The 
company  did  not  have  the  money  and  did  not  have  the  credit.  It 
could  not  borrow  money.  It  Avent  to  the  citv  and  said,  ''  If  you  will 
allow  us  to  charge  a  cent  for  a  transfer  in  addition  to  the  fare  that 
you  are  now  paying,  we  will  devote  all  of  that  money  to  paying 
these  charges."  Xow,  there  was  tlie  situation  that  was  thus  created. 
The  proposition  was  to  take  a  cent  out  of  each  person  that  used  the 


PROCEEDINaS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       911 

transfer,  and  to  use  it  for  the  benefit  of  the  man  who  might  or  might 
not  be  a  car  rider,  but  it  was  very  much  more  apt  to  be  an  automobile 
owner,  in  order  to  i>ay  for  that  improvement. 

I  tliink  that  that  concretely  points  out  what  I  wanted  to  show  you, 
JMr.  C  ommissioner.  "^      ' 

The  Chairman.  I  have  no  further  questions. 

C^ommissioner  Sweet.  Mr.  Clark,  this  statement  that  vou  made 
here  IS  brief  and  right  to  the  point,  and  it  is  based,  I  judge,  from 

•  looking  It  over,  upon  what  you  have  heard  said  by  the  witnesses  that 
have  ])een  introduced  U}>  to  this  point  in  this  case,' largely. 

Till-.  Ci^vRK.  \es,  sir.  "^ 

Connnissioner  Beall.  Which  paragraph  is  that,  Mr.  Sweet? 

C  ominissioner  Sweet.  Xo  particular  i>aragraph,  the  whole  of  it. 

And  it  represents  what  you  consider,  at  least,  the  best  thought,  the 
best  suggestion  the  best  recommendations  that  have  been  made  here 
in  view  of  the  facts  that  have  been  disclosed  ? 

Mr.  Clark.  Yes,  sir. 

Ccmmissioner  Sweet.  Has  there  been,  so  far  as  you  know,  any- 
hing  s^ud  here  with  regard  to  the  paving  question  that  distinguishes 
^'i'i^'^'^Ji  *^^''  general  public  and  the  abutting-propeity  owner  i? 

Mr.  Clark.  Xo,  sir.  r-     i      .7 

Commissioner  Sweet.  Is  there  not  something  to  be  said  on  that 
point  ?  Is  there  not  the  thought,  for  instance,  or  the  argument  that 
might  be  presented,  that  the  street-railway  track  in  the  street  is  a 
burden  upon  that  street  and  perhaps  an  inconvenience  and  an  annoy- 
ancte,  both,  to  the  people  residing  upon  the  street,  and  that  the  relief 
that  IS  given  by  requiring  the  street-railway  companv  to  i)ave  be- 
tween the  tracks  IS  a  relief  to  the  property  owner  up6n  that  street, 
rather  than  to  the  general  public,  under  the  usual  provisions  in 
sti-eet-car  chartei;s  with  regard  to  taxation  and  street  buildino-^ 

JMr.  C  LARK.  \\  ell,  Mr.  Commissioner,  what  you  say  about  its  be- 
ing, perhaps,  an  annoyance  as  well  as  a  benefit  I  tliink  is  true  in 
general,  and  as  reflected  in  the  mere  matter  of  finance  I  am  con- 
vinced that  the  presence  of  a  street  railway  on  most  streets— not  all 
streets,  but  on  most  streets— is  a  direct  benefit  to  the  financial  in- 
terests, at  least  of  the  i)roperty  owner. 

Commissioner  Sweet.  It  is  an  asset  and  not  a  liability  « 

Mr.  Clark.  Yes,  sir.  * 

•  ^'9P^",YS«,i^^,^^^y  Sweet.  Do  the  facts  with  regard  to  property  values 
justify  that  statement?  1     1      J 

Mr.  Cl.\rk.  I  think  so.  I  would  not  say  so  in  every  case,  be- 
cause I  do  not  know  enough,  and  I  have  never  gathered  statistics 
but  It  is  unquestionably  true  that  real-estate  values  increase  where 
extensions  of  lines  are  made  or  where  railroad  tracks  exist  If  you 
are  now  considering  whether  the  abutting-property  owner  or  the 
public  in  general  should  pay  for  all  of  the  paveme'nt,  I  think  that 
IS  an  entirely  different  point :  and  if  you  say  that  it  is  a  general 
charge  against  the  public,  or  should  be  a  general  charge  against  the 
public  instead  of  the  abutting-i)roperty  owner,  I  am  rather  inclined 
to  agree  with  you,  although  in  the  city  with  which  I  have  had  some 
experience  it  was  entirely  different. 

Commissioner  Sweet.* Is  it  not  :i  fact,  under  most  of  the  citv 
charters  throughout  the  cx)untry,  that  it  is  charged  against  the 
abuttmg-property  owners? 


912       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Clark.  Well,  I  don't  know  that.  I  know  in  some  cities  it  is 
not,  and  it  is  paid  for  from  the  city  tax  budget. 

Commissioner  Sweet.  Most  of  the  cities  with  which  I  am  familiar 
make  that  a  charge  upon  the  abutting  property  owner. 

Mr.  Clark.  Yes,  sir. 

Commissioner  Sweet.  Not  only  the  original  construction  cost  but 
subsequent  repairs  or  reconstruction.  Upon  that  point  I  am  inclined 
to  think  that,  if  the  original  construction  is  charjred  to  the  abutting- 
property  owner,  that  ought  to  end  at  least  any  charge  or  assessment 
that  could  be  made  against  him  for  that  street  paving,  and  repairs 
should  be  entirely  nuide  by  the  city.  I  think  that  would  result  in 
better  continuous  repairs  and  pavements,  and  not  let  them  go  into 
absolute  scrap,  you  might  say,  and  require  the  rebuilding  of  the  pave- 
ment, because  it  will  place  then  upon  the  city  government  the  re- 
sponsibility of  keeping  that  in  repair,  or  else,  by  general  taxa- 
tion, rebuilding  it.  In  that  event,  I  think  the  city  generally  would 
take  more  pains  to  keep  the  street  in  better  repair;  and  I  think  it 
would  be  more  just;  and  I  am  not  prepared  to  say  that  I  would  not 
be  willing  to  go  this  far — no  matter  what  the  situation  may  be  now, 
the  charge  should  be  on  the  general  public  from  the  beginning  for 
construction  and  repairs;  but,  in  any  event,  this  is  true,  and  evi- 
dence has  been  adduced  which  confirms  it ;  and  I  think  it  is  a  nuxtter 
of  good  judgment  that  the  burden  should  not  be  placed  upon  the 
street-car  rider.  If  you  recognize  the  fact  that  the  street-car  is  what 
it  professes  to  be — a  public  utility — and  that  it  performs  valued  serv- 
ice in  the  economics  of  our  municipalities,  with  its  tendency  to  diffuse 
population,  and  as  a  convenience,  so  that  the  people  can  live  in  the 
suburbs  and  have  their  little  gardens  and  plenty  of  breathing  space, 
and  still  do  business  in  the  city — if  we  recognize  that  feature  of  it, 
no  one  can  deny  the  benefits  of  a  street-railway  svstem.  Then  it 
would  seem  to  be  logical  that  every  extra  burden  ought  to  be  removed 
from  the  street-car  rider  and,  so  far  as  may  be,  placed  upon  the 
general  public,  which  really  gets  the  benefit  of  the  street-car  service, 
thereby  keeping  fares  down  not  purely,  as  you,  I  think,  have  rather 
intimated,  for  the  benefit  of  the  street-railway  companies  and  in  order 
to  prevent  public  criticism  on  account  of  high  fares,  but  for  the 
general  good.     Perhaps  I  misunderstood  you. 

Mr.  Clark.  Yes,  sir.  Mr.  Commissioner,  I  did  not  intend  to  con- 
vey any  such  idea.  My  idea  was  this,  in  relation  to  low  fares,  that 
it  is  distinctly  for  the  benefit  of  the  car  rider  to  give  low  fares.  It 
is  distinctly  for  the  benefit  of  the  community  to  give  low  fares;  and 
it  is  also  for  the  benefit  of  the  stability  of  the  industry  that  these 
low  fares  should  be  in  effect,  if  it  is  a  profitable  thing. 

Commissioner  Sweet.  Then,  the  fact  that  the  State  commission 
did  automatically  arrange,  under  the  service-at-cost  plan,  for  a  higher 
cost  to  the  rider,  as  it  naturally  would — it  would  not  entirely  meet 
the  situation,  if  we  wanted  to  readjust  matters  completely  so  as  to 
bring  about  a  better  situation  on  the  whole;  would  it? 

Mr.  Clark.    I  do  not  know  that  I  got  your  question,  Mr.  Sweet. 

Commissioner  Sweet.  Well,  a  broad  consideration  of  the  whole 
subject,  for  the  benefit  of  the  whole  community,  would  not  be  satis- 
fied with  merely  protecting  the  operating  company  by  having  all  of 
its  cost  taken  care  of  by  the  service-at-cost  i^lan  or  by  an  intelligent 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       913 

commission  that  might  give  it  the  benefit  of  raising  its  rates  to  meet 
the  extra  cost  of  riding. 
Mr.  Clark.  Yes. 

Commissioner  Sweet.  So  that  of  itself  would  not  meet  the  situa- 
tion with  regard  to  the  entire  community,  although  it  might  as  re- 
gards the  operating  company? 

Mr.  Clark.  You  mean  there  might  be  a  question  as  to  whether, 
under  the  rates  of  fare  granted  by  the  commission  or  by  this  auto- 
matic plan,  the  service  would  be  sufficient  to  serve  the  community? 

Commissioner  Sweet.  I  mean  that,  so  far  as  the  company  is  con- 
cerned, as  Mr.  Elmquist  indicated  to  you  in  the  question  he  asked 
you,  it  would  not  make  any  difference  what  the  actual  cost  was,  what 
the  fares  might  be,  provided  they  produced  enough  revenue  to  meet 
the  requirements  of  the  company. 

Mr.  Clark.  Yes,  sir. 

Commissioner  Sweet.  Now,  as  between  the  car  riders  and  the  bal- 
ance of  the  community,  it  would  make  a  difference  ? 

Mr.  CluVrk.  Yes,  sir. 

Commissioner  Saveet.  Whether  the  whole  community  bears  that 
paving  expense  or  the  riders  bear  it  ? 

Mr.  Clark.  Yes,  sir. 

Commissioner  Sw^eet.  And  I  say  that,  taking  a  broad  view  of  the 
interests  of  the  entire  community— the  car  rider  and  all  the  rest  of 
the  community— it  would  be  better,  would  it  not,  to  have  the  fares 
low,  thereby  putting  a  premium  upon  diffusion  of  population,  than 
it  would  be  to  have  them  high,  even  though  they  be  met  just  as  well 
if  they  were  high  as  if  they  were  low  ? 

Mr.  Clark.  Undoubtedly,  Mr.  Commissioner. 

Commissioner  Sweet.  Is  the  distinction  between  the  car  rider  and 
the  balance  of  the  community  properly  understood  at  the  present  time 
throughout  the  country? 

Mr.  Clark.  I  doubt  it. 

Commissioner  Sweet.  AVith  regard  to  these  taxes? 

Mr.  Clark.  I  doubt  it. 

Commissioner  Sweet.  Do  you  consider  there  is  a  very  great  pro- 
portion of  the  people  at  the  present  time  who  realize  that  this  burden 
IS  placed  upon  the  car  rider — the  paving  burden? 

Mr.  Clark.  I  think  it  developed  in  the  testimony  of  Mr.  Culkins 
here  the  other  day,  when  he  talked  about  the  insistence  on  the  part  ' 
of  the  city  of  Cincinnati  in  the  collection  of  this  sum  of  $300,000, 
and  in  the  higher  cost  of  service  in  Cincinnati,  simply  because  it  was 
impossible  to  explain  in  the  limited  time  that  they  had  that  this  was 
to  be  a  charge  on  the  car  rider. 

Commissioner  Sw^eet.  Don't  you  know  that  in  the  matter  of  water 
supply  it  is  quite  a  common  custom  in  cities  for  a  board  of  public 
works  to  furnish  water  for  parks  and  cemeteries  and  for  fire  pro- 
tection without  any  charge? 

Mr.  Clark.  Yes,  sir. 

Commissioner  Sweet.  Do  you  think  that  is  a  good  practice  ? 
Mr.  Clark.  I  do  not. 

Commisioner  Sw^eet.  Does  it  not  involve  precisely  this  question 
that  we  are  talking  about  ? 
Mr.  Clark.  Yes,  sir. 


i 


M 


914       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Coiimiissioner  Sweet.  Is  it  not  throwing  upon  tlie  water  users  tho 
burden  that  ouofht  to  rest  upon  the  entire  community? 

Mr.  Clauk.  Exactly. 

Commissioner  Sweet.  And  in  some  of  these  communities  where 
tliere  ai-e  private  cori)orations  furnisliing  water  in  competition  with 
the  city,  which  is  sometimes  the  case,  miglit  it  not  result  in  a  user 
of  water  furnished  by  the  private  corporation  getting  the  benefit  of 
fire  protecti.:»n  and  other  lu^iefits  that  he  did  not  pay  a  cent  for? 

Mv.  Clark.  Yes,  sir. 

Commissioner  Sweet.  Through  the  city  system? 

Mr.  Clark.  Yes,  sir. 

Commissioner  Sweet.  Is  not  that  an  evil  that  ought  to  be  cor- 
rected ? 

]Mr.  Clark.  I  think  so. 

Connnissioner  Sweet.  Of  course,  wc  have  nothing  to  do  with  that, 
but  the  principle  involved  is  precisely  the  same,  is^it  not? 

Mr.  Clark.  I  think  so. 

The  Chairman.  May  I  ask  a  question  there,  Mr.  Sweet? 

C\)mmissioner  Sweet.  Yes. 

The  Chairman.  If  that  principle  Avere  to  be  adopted,  would  it  not 
result  in  New  York  City  in  eliminating,  perhaps,  DO  per  cent  of  the 
population  from  the  payment  of  any  direct  or  indirect  tuxes  for  the 
support  of  tJie  city?  In  New  York  tliore  is  a  very  large  number  of 
people  who  live  in  tenement  houses.  They  do  not  oAvn  their  own 
homes.  They  have  very  little  taxable  property.  The  great  mass  of 
them  have  no  taxable  property.  They  do  not 'pay  a  cent  in  support 
of  the  water  system;  they  do  not  pay  a  cent  in  support  of  the  school 
system;  and  they  would  not  pay  a  single  penny  in  tlie  way  of  tax 
for  the  paving  or  other  things  if  that  be  paid  by  the  city  froni  taxes. 
Now,  it  would  not  be  fair  to  relieve  tins  great  body  of  untaxable 
people  from  any  contribution  to  the  upbuilding  of  the  city,  would  it? 

^h:  Clark.  My  experience  in  New  York  has  been  this.  Mr.  Coin- 
mi.'^sioner,  that  while  the  taxes  are  assessed  against  tlie  owners  of 
tliese  properties  they  are  paid  by  the  tenants  in  the  matter  of 
rentals. 

Connnissioner  Meeker.  Is  it  not  a  fact  that  everybody  on  the  right 
side  of  the  walls  of  penal  and  other  institutions  pay  taxes .^ 

Mr.  Clark.  I  think  so;  directly  or  indirectly. 

Mr.  SuLLiNAN.  Let  me  suggest  there  that  the  man  who  pays  the 
rent  pays  the  taxes. 

Connnissioner  Sweet.  Now,  Mr.  Clark,  one  other  point:  Whether 
the  service-at-cost  plan  be  adopted,  or  regulation  by  the  commission, 
municipal  or  State,  be  adopted,  do  you  regard  that  as  a  matter  of 
importance  that  the  actual  cost,  with  the  rates  and  the  fare^i  and 
everything  else,  should  be  kept  as  low  as  possible  ? 

Mr.  Cl.vrk.  I  do. 

C\)mmissioner  Sweet.  You  agree,  I  presume,  with  the  testimony 
that  has  been  presented  here,  that  the  maintenance  of  the  street  rail- 
ways requires  the  constant  increase  of  capital,  the  influx  of  new 
ca})ital  ? 

Mr.  Clark.  Undoubtedly. 

Commissioner  SwEtn-.  And  that  these  companies  can  not  continue 
to  exLst  and  j)erform  their  proper  function  without  new  capital  Is 
not  that  true? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       915 

Mr.  Clark.  Yes,  sir. 

Connnissioner  Sweet.  Then  anything  that  increases  the  cost  of 
obtannng  new  capital  is  a  burden  whicli  ought  to  be  removed  if 
It  can  be.    Is  not  that  right?  "vcu  u 

Mr.  Clark.  Yes,  sir. 

Commissioner  Sweet.  Is  not  the  certainty  of  return  a  very  im 
portant  element  in  connection  with  the  investment  of  new  capital 
in  any  enterprise?  v.  ^  iccti 

]\Ir.  Clark.  Oh,  yes. 

Commissioner  Sweet.  Do  you  consider  that  the  certainty  of  re- 
turn IS  greater  under  an  automatic  plan,  where  the  whole  thin-  is 
mapped  out  in  advance    than  where  it  is  left  to  any  human  inter- 

leonhHnn''  ''^"^'^   ^'  ^^''  ''^''  ^^   ^^''^  «^'  municipal  commission 
miss'o  ^'^'^'*^^*  ^  ^^"^^^  ^^^^^"^  ^'"^  ^®  "^  question  as  to  that,  Mr.  (^oin- 

Commissioner  Sweet.  If  that  is  true,  would  it  not  be  then  an 
argument  worth  considering  in  favor  of  the  service-at-cost  phm  as 
It  has  been  outhnod  here?  ^ 

Mr.  C'l-AiiK.  I  tliink  so. 

Cominissioner  Swekt.  Where  the  rates  would  go  up  or  down  ac- 
coidmjr  to  the  actual  needs?  <=      i        «"   "  ac 

Mr.  Clark.  Yes,  sir. 

Commissioner  Swket.  Do  vou  think  so« 

Mr.  Clakk.  Ye.s,  sir;  I  thiiik  so. 

Commissioner  Swket.  I  think  that  is  all. 

iluSion.''''"""'  ^'""'"''■''-  ^^'■-  ^^'"•■'''  ^  ^'''"*  *«  •''«'^'  y«»  i"«t  om 

\V'"r/'"  yo'i  insider  the  pressinfr  need  of  the  situation? 
Mi:  Li.ARK.   Ihe  immediate  need? 
Commissioner  Oadsden.  Yes. 

Mr  Clark.  Increased  revenues  for  the  companies  that  need  them- 
and  tlujt  means  practically  every  company  in  the  country  ' 

-Ihe  Chairman'.  The  long  green? 
Mr.  Clark.  Yes.  sir. 

Commissioner  CxAnsoEx.  Unless  that  immediate  need  can  be  nron- 
erly  taken  care  of,  do  you  see  any  advantage  in  our  condnuinfth^s 
academk?"'         "  l>«™"nent  solution?     Would  it  norbrhfrgely 

.^^!\f''''T-  ?,.*'»»k  so.  Mr.  Commissioner,  because.  althou<rh  I 
am  rather  familiar  with  the  Xew  York  Citv  situation  I  was  verv 
much  surprised  and  shocked  to  hear  Mr.  Quackenbush  sav  th-^t 
unless  thej'  have  sonie  relief  of  some  sort,  tlie  Interborough^  R,kl 
Transit  Co.,  operatnig  the  subway  and  elevated  systems  i^K^ 
(irentei-  City  of  New  York  would  be  in  b.^iltalScvTfS  Janua  " 
1.  I  think  hat  ei,.tom,7.es  the  situation  with  lUrd  to  the  Xet 
railways  of  the  country.  "  street 

(Commissioner  Gadsdex.  If  the  credit  of  the  Interborough  of  New 
Mr.  Clar^'yI  S.     "  '"  '""'"'"''  "*  '"'"'^  "**'•''  littfe  fellS 

l'r"""r,l*''""*''"  '"'•^"«"K^--  T  have  no  further  questions 
Mr.  A^ARREx.  Well    really  nearly  every  company 'that  h-.s  -.nv 
bonds  accruing,  even  if  it  is  getting  along  with  operating  ex^nseT, 


ti 


!i| 


-    * 
1  * 

916       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

would  be  in  the  same  position  as  the  Interborough,  unless  relief  is 
brought  to  restore  its  credit. 

Mr.  Clark.  I  think  so,  Mr.  Warren. 

Mr.  Warren.  And  that  relief,  you  believe,  should  come  through 
an  inmiediate  increase  of  fares? 

Mr.  Clark.  Yes,  sir. 

Mr.  Warren.  Laying  aside  the  ordinary  delay  in  ordinary  rate 
cases,  and  perhaps  quite  appropriate  ordinarily 

Mr.  Clark.  I  think  an  emergency  exists,  and  it  should  be  treated 
as  such. 

Mr.  Warren.  And  rely  on  the  power  of  the  commission  to  correct 
any  overliberality  of  which  they  may  be  guilty? 

Mr.  Clark.  Yes,  sir. 

Connnissioner  Sweet.  I  would  like  to  ask  another  question.  In 
the  plan  that  you  have  outlined  here,  you  seem  to  be  looking  forward 
to  a  new  day  and  one  of  cooperation  between  the  general  public 
and  the  corporation,  rather  than  one  of  antagonism.  In  order  to 
carry  out  that  idea  more  completely,  does  it  not  seem  to  you  as  if  the 
immediate  commimity  concerned  ought  to  have  some  voice,  either 
through  a  commission  or  some  other  way,  with  regard  to  the  con- 
tinuing arrangement  that  might  be  made,  rather  than  to  have  the 
matter  taken  immediately  to  a  State  conunission — either  as  Mr. 
Elmquist  suggested,  through  a  local  commission,  from  which  an 
appeal  might  be  taken,  or  in  some  other  way — that  the  immediate 
locality  w^ould  feel  more  in  accord  with  the  general  proposition  and 
cooperate  better  if  the  subject  w^ere  not  removed  from  the  immediate 
community  and  carried  right  on  to  the  State? 

Mr.  Clark.  I  will  answer  that  by  saying  this,  that  my  thought  is 
that  the  immediate  interests  of  the  man  that  uses  the  street-car  serv- 
ice are  in  the  service,  and  what  he  wants  is  to  be  carried  comfortably 
and  expeditiously  from  one  destination  to  another;  that  if  that  serv- 
ice is  provided  by  whatever  means,  he  is  going  to  be  fairly  content 
with  the  good  service,  and  that  will  do  more  toward  reconciling  the 
public  and  the  companies  than  any  other  one  thing.  Now,  I  be- 
lieve that,  in  some  way,  if  the  alternative  of  commission  regulation  is 
accepted,  the  city  should  have  some  way  of  expressing  its  wants  and 
needs  in  the  matter  of  service.  I  believe  that  the  other  matters 
connected  with  the  regulation  might  properly  be  left  to  the  State 
commissions,  and  even  this  question  of  service  might  find  in  the  com- 
mission its  ultimate  decision. 

Commissioner  Sweet.  Do  you  think  that  having  a  director  rep- 
resenting the  public,  as  they  have  in  Cincinnati,  fills  the  bill?  Does 
that  answer  the  necessary  requirements  of  the  case? 

Mr.  Clark.  This,  in  my  opinion,  Mr.  Sweet,  is  a  new  thing.  I  do 
not  think  it  has  ever  been  put  into  practice,  this  cooperation  between 
the  city  and  the  State  in  the  regulation  of  utilities,  and  therefore  I 
am  not  competent  to  tell  you  in  detail  how  the  thing  should  be 
effected. 

Commissioner  Sweet.  But,  as  a  matter  of  judgment,  does  it  not 
se^m  to  you  to  carry  out  the  general  idea  of  this  plan,  which  is  one 
of  friendly  cooperation,  that  there  should  be  a  sort  of  working  to- 
gether of  the  city  and  the  company? 

Mr.  Clark.  Yes,  sir;  I  believe  so. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       917 

Commissioner  Sweet.  Now,  would  that  idea  be  encouraged  and 
carried  out  if  you  had  a  large  representation  on  the  board  of  direc- 
tors of  the  company  from  local  citizens? 

Mr.  Clark.  I  think  the  two  principles  are  not  the  same.  If  you 
are  puttmg  representatives  of  the  public  on  a  board  of  director,  you 
are  dividing  the  responsibility  for  the  performance  of  the  service 
as  between  the  community  and  the  company  itself.  If  you  are  per- 
mitting the  public  to  specify  the  service,  you  are  putting  all  the 
responsibility  on  the  company  where,  I  believe,  it  belongs. 

Commissioner  Sweet.  Well,  one  of  the  witnesses  suggested  that  a 
part  of  the  prejudice  against  the  street-railway  corporations  was 
because  they  were  usually  owned  by  nonresidents. 

Mr.  Clark.  Yes,  sir. 

Commissioner  Sweet.  Or  practically  owned  by  nonresidents. 

Mr.  Clark.  Yes,  sir. 

Commissioner  Sweet.  Did  you  hear  that? 

Mr.  Clark.  Yes,  sir. 

Commissioner  Sweet.  You  think  that  is  true;  do  you  not? 

Mr.  Clark.  I  think,  Mr.  Commissioner,  that  that,'^like  everything 
else,  is  one  of  the  excuses  or  one  of  the  means  of  combating  a  street 
railway,  seized  on  after  something  other  than  the  mere  fact  that  it 
is  owned  by  somebody  else,  which  has  caused  disturbance  between 
the  company  and  the  public. 

Commissioner  Sweet.  I  think  Mr.  Clark  made  that  statement; 
did  he  not? 

Mr.  Clark.  Mr.  W.  J.  Clark? 

Commissioner  Sweet.  Mr.  W.  J.  Clark. 

Mr.  Clark.  I  don't  know.     I  didn't  hear  it  if  he  did. 

Commissioner  Sweet.  That  is  all. 

Commissioner  Beall.  There  is  just  one  point  that  I  would  like  to 
take  up.  I  am  not  sure,  Mr.  Clark,  that  this  has  been  thoroughly 
brought  out  in  any  of  the  hearings— but  is  it  not  true  that  the  aver- 
age investor  nowadays,  unless  there  is  a  continuing  right,  such  as  an 
indeterminate  permit,  coupled  with  the  right  of  purchase,  will  not 
invest;  that  is,  that  the  investor  is  not  only  concerned  with  a  good 
rate  of  return,  agreed  on,  but  above  all  the"^  final  return  of  the  prin- 
cipal of  his  investment? 

Mr.  Clark.  Yes,  sir. 

Conmiissionor  Beall.  And  unless  he  knows  that  one  of  two  things 
will  happen— either  he  will  get  a  continuous  right  to  operate  the 
property,  or  else,  if  it  is  bought,  it  will  be  at  a  price  that  will  leave 
him  whole  as  regards  his  principal? 

Mr.  Clark.  Yes,  sir. 

Commissioner  Beall.  And  is  it  not  true  that  for  many  years 
now,  one  of  the  greatest  difficulties  with  all  public  utilities  in  raising 
new  money  or  in  refunding  an  old  debt  that  comes  due  has  been  on 
account  of  the  fact  that  in  too  many  States  there  was  a  provision 
limiting  the  franchise  by  State  law  to  20  or  30  years,  or  whatever  it 
may  be,  and  that  if  they  had  an  obligation  coming  due  and  a  fran- 
chise maturing  at  that  time,  or  a  few  years  later,  or  even  five  years 
later,  the  company  could  not  refund,  except  at  a  very  short-time 
obligation,  at  a  very  high  rate  of  interest? 

Mr.  Clark.  I  think  that  is  true.  That  is  the  way  I  would  look 
at  it  if  I  were  an  investor. 


918       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Commissioner  Sweet.  Do  you  think,  Mr.  Clark,  that  with  these 
rather  short-term  franchises,  as  the  end  approaches,  a  consideration 
of  the  grantino;  of  a  new  franchise  becomes  prominent  in  the  public 
inind,  and  do  you  think  that  that  has  anything  to  do  with  the  foster- 
ing of  the  spread  of  antagonism  between  the  company  and  the  com- 
nuinity? 

Mr.  Clakk.  Oh,  undoubtedly. 

Commissioner  Saveet.  And  the  indeterminate  franchise  would  tend 
to  do  away  with  that? 

J\Ir.  Clark.  Yes,  sir. 

Connnissioner  Beali..  The  politician  takes  advantage  of  it. 

(\)nmiissioner  Sweet.  Sure. 

Mr.  Wakrex.  Prof.  Jenks,  will  you  take  the  stand? 

STATEMENT  OF  MR.  JEEEMIAH  W.  JENKS. 

^fr.  Warren.  Your  full  name.  Prof.  Jenks? 
Mr.  Jenks.  Jeremiah  W.  Jenks. 
Mr.   Warren.  And  your  occupation? 

Mr.  Jenks.  I  am  research  professor  of  government,  New  York 
I^niversity. 

]\Ir.  Warren.  And  in  that  position  you  have  had  occasion,  I  sup- 
pose, to  study  almost  all  phases  of  government,  particularly  of  these 
utilities  and  their  relation  to  the  Government? 

Mr.  Jenks.  I  have  made  no  special  study  of  the  electric  railways, 

but  in  a  number  of  cases  in  connection  with  my  university  work 

and  in  connection  with  some  Government  work,  I  have  been  called 

upon  to  look  right  carefully  into  the  relations  of  government  and 

business  in  general. 

Some  years  ago,  for  example,  I  had  charge  of  a  (xovernment  in- 
vestigation into  the  larger  corporations  and  trusts  for  the  United 
States  Industrial  Commission,  and  later  I  made  other  minor  investi- 
gations in  connection  with  the  relation  of  government  to  business. 

Mr.  AVarren.  You  are  familiar  with  the  appointment  of  this 
conunission  and  with  the  problem  with  which  they  are  confronted 
hei*e  ? 

Mr.  Jenks.  Yes.  I  have  understood  from  the  public  press  and 
from  information  gathered  in  various  places  that  the  electric  rail- 
ways have  been  in  very  serious  financial  condition  indeed,  and  that 
the  President  thought  it  wise  to  appoint  this  commission  to  make 
a  i^articular  investigation  and  see  if  they  could  suggest  remedies. 

Mr.  Warren.  And  can  you,  and  will  you.  be  good  enough  to  state 
to  the  commission  your  views  on  this  question  and  on  this  situation? 
And  would  you  rather  do  so  without  the  interruption  of  questions 
from  me  ? 

^Ir.  Jenks.  It  will  be  just  as  well,  perhaps,  to  begin  with,  and 
then  I  should  be  glad  to  have  any  questions  later  on. 

Mr.  Warren.  I  will  ask  you  any  that  will  help  matters. 

Mr.  Jenks.  It  had  seemed  to  me  that,  inasmuch  as  I  am  not  a 
technical  expert  on  these  railway  questions,  I  perhaps  should  begin 
by  stating  very  briefly  what  nly  views  are  as  to  the  relation  of 
governnuMit  and  business,  for  two  or  three  minutes,  and  then  take 
up  more  specifically  these  things. 


PROC^EEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       919 

I  have  felt  for  a  long  time— from  the  public  press  and  elsewhere 
one  gathers  the  nnpression— that  the  real  social  significance  of  busi- 
ness as  business  is  not  understood  and  appreciated.  When  one  con- 
siders the  problems  that  managers  of  business  have  to  consider,  Pot 
merely  as  regards  earning  dividends  for  their  stockholders  but  prob- 
lems with  their  wage  earners  and  customers  of  all  kinds,  the  fact 
tliut  almost  CA^erybody  in  the  community  is  engaged  in  business  in 
bome  capacity  or  other,  that  is,  he  is  attempting  to  render  some 
service  and  get  ])aid  for  it,  business  after  all  is  the  greatest  and 
I^erhaps  most  difficult  social  science  that  there  is. 

An  attempt  to  formulate  the  general  juinciples  upon  which  busi- 
ness is  to  be  done  needs  to  l)e  based  absolutely  \\\)q\\  the  actual  facts 
of  business,  the  main  fact,  perhaps,  l)eing  the  business  man  himself, 
his  character,  his  ideals,  and  his  purposes.  That  concerns  all  of  us 
from  that  point  of  view. 

Xow,  on  the  other  hand,  as  I  understand  it,  the  Government,  when 
you  speak  of  it  specifically,  regardless  of  the  men  who  are  doing  the 
work  for  the  city,  is  a  sort  of  grand  committee  that  under  our  laws 
we  have  picked  out  to  do  our  work  for  us. 

The  consequence  is  that  when  we  are  speaking  of  government  and 
business  and  the  relations  of  government  and  business  we  are,  after 
all,  largely  speaking  of  the  same  people  doing  things  from  different 
viewpoints,  one  from  the  regulating  end  and  the  other  the  people 
Avho  are  actually  doing  work;  so  that  there  ought  not  to  be  in  reality, 
as  in  essence,  any  conflict.  It  should  be  the  business  of  the  Govern- 
ment, as  representing  the  people,  to  help  on  business.  As  long  as 
it  is  helping  it  in  ways  to  promote  the  best  interests  of  the  people 
as  a  whole,  any  special  feeling  of  antagonism  that  some  people  seem 
to  have,  or  wish  to  set  up,  is  really  out  of  place  in  any  proper  view 
ox  government  and  business. 

It  has  been  suggested  that  the  electric  railways  have  not  been  pay- 
ing proper  expenses,  generally  speaking.  That,  to  my  mind,  is' a 
public  calamity,  not  merely  to  the  owners  of  the  stocks— and  in 
many  cases  this  condition  is  apparent  to  the  bondholders — ^but  also 
of  course  to  the  traveling  public,  as  we  found  out  during  the  war. 
If  we  are  going  to  find  a  remedy,  the  first  thing,  of  course,  is  to 
find  exactly  what  the  facts  are;  and  that  is  what  this  commission  is 
ai^pointed  for,  I  suppose. 

The  causes,  as  they  develop,  seem  to  begin  with,  I  should  say, 
the  increased  expenses  that  necessarily  have  come  from  high  prices 
of  all  kinds  and  from  high  wages,  which  have  normally  developed 
out  of  the  present  conditions  and  the  war  conditions- 

Another  way  of  putting  it  is  that  it  is  the  inflation,  if  you  like, 
of  our  currency  and  credit.  That  has  been  the  fundamental  cause 
of  this  increased  cost  of  living,  while  the  fixed  fares  have  not  gone 
iq)  cori-espondingly.  There  was  no  other  way  out.  The  trouble  must 
come. 

The  offhand  remedy,  one  would  say,  to  begin  with,  would  be, 
of  course,  to  raise  the  fares  proportionate  to  i\\^  increased  expenses; 
and  there  is  where,  of  course,  we  get  into  difficulty  at  once. 

It  has  seemed  to  me  from  a  study  of  similar  questions  along  other 
lines  that  where  the  public  really  understands  the  question  it  is  not 
prejudiced  against  a  reasonable,  moderate  return  to  capital,  and  I 


f 


:i| 


\\ 


920       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

believe  that  if  this  commission  can  ^t  itself  clearly  before  the 
public,  so  that  the  public  knows  what  the  facts  are  alonof  this  line, 
there  will  be  no  special  objection  on  the  part  of  the  patrons  to  payin<^ 
a  higher  rate  of  fare.  Of  course,  they  ^vill  regi-et  it,  but  it  is  a  part 
of  the  normal  business,  and  they  ai*e  getting^  it  back  in  higher  wages 
and  in  other  wa^^s.  There  will  l)e  objections,  of  course.  We  have 
had  plenty  of  experience,  if  one  may  judge  b}-  some  of  our  papers  in 
New  York  and  elsewhere.  Where  anything  of  that  kind  is  at- 
tempted, it  is  looked  upon  by  many — and  they  seem  to  wish  to  pro- 
mote that  idea  among  the  voters  in  general — tliat  the  people  that  are 
owning  and  managing  these  public-service  corporations  are  trying  to 
get  something  extra  out  of  the  people,  more  than  they  have  had" be- 
fore, and  it  is  a  burden  on  the  people,  or  a  burden  on  the  working- 
men.     It  depends  on  how  they  are  putting  it. 

It  seems  to  me  that  where  that  is  apparently  a  deliberate  attempt 
to  mislead,  as  it  often  is,  for  special  political  purposes,  an  attempt 
to  furnish  some  kind  of  political  propaganda,  it  should  be  met  di- 
rectly by  telling  the  facts  officially  to  the  people;  and  I  see  no  reason 
why  it  is  not  a  very  wise  policy  for  the  public  corporations  them- 
selves to  give  the  facts.  Of  course,  we  know  that  as  to  facts  given 
by  the  public  corj)orations,  they  would  be  considered  to  be  interested 
parties,  and  are  often  discounted  by  a  good  many ;  but  after  all,  facts 
are  facts,  and  they  do  carry  weight.  Some  of  the  railways  have  done 
admirably  along  that  one  line,  and  it  has  had  some  weight,  as  in  the 
case  of  the  telephone  companies;  and  if  the  real  facts  would  come 
from  this  commission  it  would  help  a  great  deal  more. 

There  doubtless  have  been  at  times  great  difficulties  that  have  been 
caused  either  by  earlier  mismanagement  or  perhaps  by  present  mis- 
management in  individual  cases.  I  think  there  is  no  question  that 
in  the  early  days,  more  particularly  when  franchises  were  given  away 
Aery  freely,  there  was  often  a  good  deal  of  watered  stock,  and  so 
forth,  and  attempts  were  made  to  pay  dividends  on  a  larger  capitali- 
zation than  was  for  the  good  of  the  public.  That  is  a  matter  for  in- 
vestigation into  the  individual  cases  wherever  that  is  found.  The 
remedy  in  most  cases,  I  suppose,  would  be  in  due  time,  at  any  rate, 
in  the  hands  of  the  commissions  and  courts.  At  any  rate,  when  an 
attempt  was  made  to  develop  further  along  that  line,  it  clearly 
would  be. 

I  have  felt  also  that  some  very  simple  principles  of  business  should 
be  developed  among  the  public,  as  far  as  possible. 

For  example,  all  of  us  have  doubtless  lieard  hundreds  and  hun- 
dreds of  times  statements  made  by  people  that  are  promoting  the  in- 
terests of  the  laboring  men  that  implied  that  wages  could  be  raised, 
and  that  as  a  permanent  thing,  out  of  the  profits,  out  of  the  wages  of 
the  managers,  and  so  forth,  and  not  realizing  the  fundamental  fact 
that  in  any  business  it  is  out  of  the  value  of  the  product  that  the 
wages  and  interest  on  the  cai)ital  and  the  wages  of  the  management, 
in  case  there  is  to  be  any  special  benefit  to  the  consumer  from  lower 
prices,  has  to  come.     It  is  out  of  the  product  itself. 

Now  anything,  then,  that  can  be  done  to  increase  the  value  of  that 
product — in  this  case,  of  course,  as  I  say,  the  remedy  is  to  raise  the 
fares — ])roduces  a  fund  from  which  all  of  these  things  can  be 
handled. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       921 

If,  on  the  other  hand,  through  great  skill  in  management,  the  costs 
can  be  lessened  along  any  line,  that,  of  course,  increases  the  fund  out 
of  which  wages  can  be  paid,  and  interest,  and  so  forth. 

So  that  fundamental  idea,  which  is  certainly  not  in  the  minds  of 
hundreds  and  thousands  and  millions  of  laboring  men,  I  think,  is 
one  of  the  first  things  to  be  driven  into  the  heads  of  the  American 
public,  as  far  as  possible-^that  we  have  to  look  after  the  value  of 
the  product,  and  these  things  are  to  be  taken  out  of  that,  and  no  one 
of  these  groups  in  business  can  permanently  go  ahead  at  the  expense 
of  another  group.  The  business  can  not  stand  for  that  at  all,  and 
won't  do  that. 

I  think  the  difficulties  that  have  come  along  that  line,  and  a  good 
deal  of  the  trouble  that  has  come  to  the  street  railways,  as  well  as  to 
others,  has  come  from  the  advocates  of  certain  special  ])olitical  ele- 
ments, the  extremists  in  favor  of  municipal  ownership,  the  socialists, 
and  others. 

I  perhaps  may,  in  just  a  word,  express  my  own  view  on  that  ques- 
tion now  of  municipal  ownership. 

I  have  no  doubt  that  there  are  certain  localities,  particularly  the 
smaller  towns,  where  everybody  knows  everybody,  and  particularly 
where  an  opportunity  could  be  had  for  combining  the  street-railway 
system — the  power  there  with  the  electric  lights,  and  things  of  that 
kind — where  municipal  ownership  might  work,  and  work  to  advan- 
tage; but,  speaking  generally,  the  experience,  not  merely  of  this 
country,  but  of  the  best  of  Europe,  is  against  municipal  management 
generally. 

I  think  my  own  experiences  along  that  line  have  been  most  marked 
in  work  that  I  have  done  from  time  to  time  in  association  with  dif- 
ferent departments  of  the  Government. 

But  the  reason  for  it,  to  my  mind,  is  absolutely  fundamental  in 
human  nature.  When  we  have  a  business  carried  on  primarily  for 
the  purpose  of  normal  profits,  under  conditions,  of  course,  implying 
honesty  of  management  and  things  of  that  kind — we  had  the  man- 
agement— and  if  the  workingmen  are  properly  treated  and  properly 
handled,  they  should  recognize  the  fact  that  they  need  to  put  forth 
their  best  energies  and  their  best  intelligence,  their  interest  in  the 
business,  and  stick  right  on  the  job  and  not  waste  time.  I  have 
known  some  very  striking  cases,  for  example,  of  individuals,  abso- 
lutely unskilled  workers,  who,  when  they  got  a  change  of  heart  along 
that  line,  increased  their  output  amazingly.  I  know  one  specific  case, 
for  example,  wdiere  a  young  man  in  a  shop  was  simply  feeding  an 
automatic  machine,  stamping  up  triggers  in  a  gun  shop.  His  normal 
output,  which  was  as  good  as  that  of  the  average  of  the  shop,  was. 
about  200  a  day.  The  boss  came  along  one  day  and  told  him  that 
he  was  going  to  raise  his  wages  25  cents  a  day.  He  was  a  faithful 
sort  of  a  fellow  and  got  to  thinking  the  matter  over.  He  realized 
that,  perhaps,  he  had  gone  to  get  a  drink  a  little  oftener  than  was 
necessary,  looked  aside  to  other  people  a  little  oftener  than  was  neces- 
sary, and  he  said  to  himself,  "  Old  George  has  been  pretty  ^ood  to 
me;  I  will  see  what  I  can  do  for  him."  So  he  got  on  the  job  the 
next  day  and  did  not  waste  a  minute  of  the  day,  all  day  long.  He 
did  not  work  any  overtime,  but  he  simply  worked  carefully  and 
faithfully,  and  he  turned  out  that  day  instead  of  260,  460  pieces, 
and  he  said,  "  I  can  easily  average  400.'^ 
160643°— 20 09 


•'t 


1 


922  j    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

There  is  an  example  of  what  an  absolute  change  in  spirit  only 
will  do. 

Now,  it  does  seem  to  me  that,  in  connection  with  private  manage- 
ment, you  can  get  that  spirit  all  through  the  organization  from  top 
to  bottom  much  more  easily  than  you  can  in  the  case  of  Government 
management  of  any  kind. 

As  I  have  said,  I  have  had  more  or  less  experience  in  connection 
with  (xovernnient  management,  and  it  is  a  necessity  in  many  cases, 
but  I  believe  it  is  nnich  more  difficult  to  get  that  spirit  in  the  first 
place.  In  the  second  phice,  you  can  not  pick  and  control  your  men 
nearly  so  well.  I  have  been  for  many  years  an  advocate  of  civil 
service  reform  all  along  the  line,  not  because  I  thought  it  was  the 
ideal  thing  at  all,  but  because  it  was  the  lesser  of  two  evils.  Under 
civil  service,  the  difficulty  is  not  so  much  in  getting  the  mau,  but  tb.e 
difficulty  is  in  getting  rid  of  him.  Anyone  who  has  had  any  ex- 
perience with  it  knows  that  it  is  absolutely  impossible  to  get  rid  of 
those  people  that  you  do  not  want.  1  know'  of  a  case  Avhere,  for  tlircM 
or  four  months,  they  had  been  trying  to  get  rid  of  j^eople  whom  they 
knew  were  dishonest.  Now,  in  a  private  establishment  that  would  be 
done  easily  and  pleasantly. 

So  it  seems  to  me  there  ai-e  those  two  things. 

The  third  thing,  which  is  not  along  the  same  line,  is  this:  In  the 
case  of  public  management  the  idea  of  a  profit  or  a  tax  does  not 
(*Oine  in  at  all.  That  is  v.here  I  think  we  have  been  making  very 
many  fallacious  conclusions  with  reference  to  our  war  work.  The 
war  work,  in  many  cases,  was  done  remarkably  well,  but  it  was  done 
regardless  of  cost.  It  was  simply  to  get  the  biggest  output  possible, 
regai-dless  of  cost.  Wlien  peat^  comes  we  can  not  run  on  that  basis 
any  longer.  We  have  an  example  of  that  in  some  of  this  beautiful 
])rinting  in  (Tovemment  reports.  It  is  done  absolutely  regardless  of 
cost.  You  can  not  do  that  in  private  work.  You  have  to  hold  the 
costs  down.  On  the  oth^r  hand,  if  in  all  private  enterprise  you  do 
not  give  excellent  service,  you  can  not  get  your  price. 

Now,  it  is  doubtless  true  that  when  people  are  working  equally 
conscientiously  in  both  cases,  the  (government  on  the  one  hand  anil 
the  private  individuals  on  the  other,  they  will  come  pretty  nearly  to 
getting  results,  but  that  is  assuming  the  ideal  in  lx)th  cases,  and  you 
do  not  get  it  in  both  cases. 

Another  difHculty  that  has  come  in  has  been  the  very  slow  action 
on  the  part  of  the  conmiissions  whei*e  they  have  had  to  make  decisions 
and  of  the  courts  when  ihoy  have  had  to  make  decisions.  I  do  not 
feel  that  I  am  really  competent  to  express  a  very  definite  opinion  on 
that,  l)ecause  I  have  not  investigated  the  cases;  but,  generally  speak- 
ing, we  know  our  courts  have  been  very  slow,  and  one  of  the  chief 
movements  among  the  lawyers  has  been  to  expedite  the  work  of 
the  courts  by  a  reformation  in  methods  of  procedure.  I  have  no 
doubt  that  that  would  run  all  through  this  work,  as  well  as  elsewhere. 
Other  difficulties  have  U-en  due  at  times  to  differences  of  opinion 
as  to  the  proper  method  to  he  applied,  the  proi>er  theories,  if  you  like, 
that  should  l>e  applied,  as  io  division  of  earnings,  or  as  to  the  amount 
of  return  on  the  capital  invested,  and  as  to  the  area  in  which  you  are 
to  fix  the  amount  of  capital  upon  which  you  should  pay  the  return, 
and  so  forth. 


PROCEEDINGS  01-  FEDEEAL  ELECTEIC  EAILWAYS  COMMISSION.       923 

mmmmmm 

equippe,],  all  the  way  &ah       "  °*  commissions  properly 

i^^M  ^  pt£i^^^-,:i;l -rj  "^^^^^£/f  rr 

questions  of  aceoun    ^    t  ^  vtry^lsi^tbtlh^t'^h;.:''?"  '1,7""^  *" 
II n  form  system  of  •icmiint^  Vn7fl.„  i        •  *"»l  t"ei'e  should  be  soii.o 

that  khi.L^   I^at"  wo"m  t\  el   ;  iSr^tL'  ^^t.""'  *'""^^  "^ 
Von  are  not  verv  lil«.lv  t^  „„*  %        ra'  •       "  **"*^  commissions. 

^vorK-in,  to:4tho?so''St  i^4l^ml:^S  ^^Ztll^T  ''^  ''' 
«ay,  so  tliat  comparisons  can  be  made     n  ess  vo,w7-^i  '"  """" 

tral  power.     I  think  something  shoS-belne^k,^"  ttube"*^  """ 
1  speak   witli  some  hesitancy  with   reference  fr,  av...      ■ 

income  from  whateyer  source  be  large  enough    so  that  tbet  ?i 

lie  no  possibility  of  not  earning  a  miiZ  m  imo  nt  1  ■  ""''' 
return  ou  the  iiiyestment      Tl.on  .■     '      i  i  V       '"""""/<  a  minimum 

there  would  be  i-e  rn  aboTe  that  Z  tl^t".f  IT'^f^  "  'Tf^  '""'^'^ 
for  a  proper  division  of  the  surphiV  e  u"n  brtS  "^i""' 

concerned  and  the  municiDality  with  nV.  ?!  '"^*''^*^<^ »  *f  e  corporation 
to  the  municipality  as  th^  S  i  c  li.ed  Tf'  '"  "'!  l"«I'°'-ti"" 
reasons  for  that.     If  you  Ih  e  tl  "  .mmici.v,^  '''■^*•'^"  "i'  ">''''« 

certain  minimum,  then  atC-e     le  iVenS  ^^  i^^^'  ^ 

efficiency.  If,  on  the  othor  l».,,i.i  ,  ^*"S*»ii^^  is  gone  to  keep  up 
tinual  likelihoXf  c^re^vto^^^  corporation  a'con- 

is    it  will  I'o^,.  fi  ^'^^^       1  ^*^^""^^'^'  no  matter  how  ^ood  its  '-erviop 

question  enough      T  en    v^  w-ri'  s,v  f?     "  '.   \  ''"''^  "''*  «t"«'"^d  the 
»a,l  think  j„„  wouU  grt  f bKto  ™»  ~;,r    '"■  ""■  "'""" 


I 


924       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I^t  me  repeat  that  I  speak  with  great  hesitation  on  these  things, 
be?ause  it  is  not  my  real  field,  but  I  was  interested  in  the  subject  for 
jj^ears,  and  I  have  read  a  good  deal  on  it. 

I  have  felt  also  that  it  is  very  desirable  that  some  method  of 
calculating  these  returns  be  made  that  can  be  flexible,  that  can  be 
uniform,  that  can  he  adaptable,  so  that  one  does  not  need  to  be 
changing  rules  all  the  time. 

I  wonder  if  I  might  be  permitted  to  give  an  illustration  from 
another  field  that  I  am  rather  more  familiar  with. 

There  came  into  my  own  experience  three  or  four  yt'ars  ago  a  ques- 
tion of  this  kind.  One  of  the  governments  in  the  Far  East  wanted 
to  buy  some  millions  of  ounces  of  silver,  which  had  been  tied  up  in 
Europe  and  practically  speculated  on  in  the  limited  market.  More- 
over, the  rates  of  freight  from  London  or  from  anywhere  in  Europe 
to  the  Far  East  are  higher  than  they  are  from  San  Francisco.  A 
very  large  part  of  the  American  silver  is  shipped  to  London,  to  begin 
with.  So  the.  suggest  ion  was  made  that  tlie  Government  make  a  con- 
tnict  with  our  biggest  American  producer  of  silver  to  be  allowed  to 
take  as  long  as  it  wanted  to  a  certain  number  of  thousands  of  ounces 
a  month  at  a  rate  based  on  the  London  market  price.  The  London 
market  price  was  to  be  taken  as  the  average,  if  I  recall  rightly,  of 
the  preceding  two  weeks.  That  took  the  element  of  speculation  out 
of  it  entirel3\  On  account  of  the  lower  freight  rate,  it  assured  the 
Government  something  like,  if  I  recall  rightly,  a  quarter  of  a  cent 
an  ounce,  at  least,  with  the  cheaper  rates,  than  they  could  buy  in 
London  on.  Then  another  article  of  the  contract  said  that  this  is  a 
self-perpetuating  contract  that  may  be  suspended  temporarily  by 
either  party,  and  then  may  be  renewed  again  by  consent  of  both 
parties.  The  idea  was  that  that  kind  of  a  contract,  based  on  the 
London  market  and,  for  that  matter,  the  rate  of  interest  also  made 
flexible  and  depending  upon  the  rate  of  the  Bank  of  P^ngland,  was 
successful  and  adaptable  to  market  conditions,  and  there  was  no 
reason  whv  that  should  not  be  run  for  20  vears. 

It  seems  to  me  that  in  anv  of  these  cases  where  we  are  makinff 
contracts  with  the  corporations  and  the  Government  it  is  difficult 
to  get  those  things  through,  and  if,  when  they  are  made  we  could 
put  them  through  in  some  form  that  would  be  more  or  less  self- 
adapting  to  varying  conditions,  it  would  have  a  great  deal  of  time. 
In  the  long  run  it  would  doubtless  be  much  more  satisfactory,  and 
much  help  all  along  the  line  could  be  done  there.  Now,  how  it 
should  be  done  is,  of  course,  something  that  I  do  not  know  anything 
about. 

It  might  also  very  well  be  that,  in  making  contracts  of  that  kind, 
the  franchise — I  think  normally  they  should  be  limited,  because  we 
cannot  foretell  the  future  long  enough — would  become  practically  a 
perpetual  franchise.    I  am  against  perpetual  franchises,  on  principle. 

The  Chairman.  On  that  point,  let  me  ask  you  one  question. 

Mr.  Jenks.  Yes,  sir. 

The  Chairman.  Do  you  believe  in  the  indeterminate  franchise, 
subject  to  the  right  of  the  city  to  buy  the  plant  ? 

Mr.  Jenks.  To  buy  the  plant? 

The  Chairman.  Yes. 

Mr.  eJENKS.  Yes;  I  have  advocated  that  a  good  many  times, 
especially  of  late  years.    The  more  I  go  into  these  questions,  the  more 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       925 

I  put  emphasis  upon  the  fact  that,  while  it  is  worth  while,  perhaps, 
to  retain  the  option  to  buy,  you  had  better  not  buy  unless  the  cases 
are  very  exceptional. 

There  again,  let  me  repeat  what  I  said  before.  I  think  your  public 
ownei^hip  with  private  management  is  often  a  very  good  combina- 
tion  When  I  was  thinking  of  buying,  and  when  I  spoke  so  em- 
ment  ^  1      ^^^^inst  buying,  it  was  with  the  idea  of  municipal  manage- 

Commissioner  Beall.  Professor,  let  me  ask  you  there  whether  one 
of  the  principal  things  that  a  company  has  to  do  is  to  continue  to 
rr.ise  mone}'. 

Mr.  Jenks.  Yes,  sir. 

Cominissioner  Beall.  Would  you  put  anv  money  in  a  street  rail- 
way  of  your  own?  For  instance,,  suppose'  I  wanted  to  sell  you  a 
20-year  franchise— and  they  do  have  20-year  franchises— would  you 
put  your  money  m  it  ?  -^ 

Mr.  Jenks.  I  think  that,  so  far  as  that  is  concerned,  if  you  have 
your  proper  contract,  your  proper  supervision  by  the  State  commis- 
sion, and  so  forth,  then  that  is  not  so  serious  a  difficulty 

Commissioner  Beall.  Well,  but  it  has  been.  That' is  just  what 
comes  up.    What  happens  at  the  end  of  20  years? 

Mr.  Jenks.  I  wonder  if  that  does  not  deioend  upon  the  character 
of  the  franchise  there  m  the  first  place  ? 

Commissioner  Beall.  Well,  but  that  franchise  is  ended  You 
have  no  further  right.    Would  you  take  that  risk? 

I    •  i^l"^/'  ^t  .^"«"^*^^'  this  is  true.     The  bonds  that  were  issued 
under  that  franchise  are  good. 

Commissioner  Beall.  They  are  not  good  if  you  have  not  the  ri^ht 
to  operate.  ^ 

Mr.  Jenks.  Well,  that  is  true. 

Commissioner  Beall.  Would  ycu  put  your  money  in  it? 

Mr.  Jenks.  Yes;  I  would. 

Commissioner  Beall.  On  what  theory  ? 

Mr  Jenks.  On  this  general  theory,  which  I  think  is  perfectly 
sound,  that  If  you  have  be^n  able  to  get  a  good  franchise,  particularly 
of  the  type  that  I  have  had  in  mind,  the  chances  are  speculative- 
but  speculation  is  not  a  very  serious  difficulty.  The  chances  are 
reasonably  good,  just  as  good  as  the  contract's  being  continued 

Commissioner  Beall.  Would  you  put  your  money  in  anything  like 
that  when  you  have  a  lot  of  other  things  offered  to  Vou  that  will  pay 

tlSrfsk?^''      ""^  '''       '''"  ^''^*^'''  ^''^  ""'^'"''^  '''"  '^''^''''^  ^'""'^^  ^^  ^^^^' 

Mr.  Jenks.  Well,  yes,  I  know  that. 

Commissioner  Beall.  There  are  a  number  of  things  where  you 
do  not  have  to  take  that  risk.  ^  ^ 

Mr.  Jenks.  No. 

Commissioner  Beall.  Why  take  that  risk  if  you  do  not  have  to? 

Mr.  Jenks.  1  our  rate  of  return  may  be  a  little  higher. 

Commissioner  Beall.  Well,  it  is  not. 

Mr.  Jenks  You  doubtless  will  find  many  individual  cases  of  that 
kind  A  ow,  let  me  reply  on  the  other  side.  The  reason  for  a  some- 
what shorter  permit-I  had  not  suggested  20  or  25  years  as  the 
lowest;  I  had  suggested  25  or  30  years  a^  the  lowest  that  I  had  in 
mind,  but  that  is  immaterial. 


ii 


926       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Cominissioner  Beall.  Let  me  ask  you  right  there:  You  are  fa- 
miliar with  the  fact  that  where  a  company  has  a  25-year  franchise, 
or  whatever  term  it  be,  and  it  is  about  to  expire,  and  the  securities 
ai-e  coming  due,  either  at  tlie  same  time  as  the  franchise  expires  or 
maybe  some  years  previously,  it  is  very  often  the  case  that  it  is 
practically  impossible  to  renew  those  obligations? 

Mr.  Jenks.  I  should  think  it  would;  yes.  The  other  conditions 
are  aside  from  these  very  abnormal  conditions. 

Commissioner  Beall.  But  to  a  very  great  extent  that  has  alway^j 
been  true  in  good  times. 
Mr.  Jenks.  Doubtless  it  has. 

Commissioner  Beall.  This  thing  would  have  to  be  handled  for  a 
very  short  time  at  a  very  high  rate. 

Mr.  Jenks.  May  I  give  in  just  a  word  my  reason  for  suggesting 
that  alone  and  not  a  perpetual  franchise? 

The  conditicms  in  every  community  are  pretty  rapidly  changing 
all  along  the  line.     I  do  not  think  we  can  foretell  conditions  very 

far  ahead,  and  I  should  say  that  if  we  were  to  go  back  50  years 

now,  I  haAe  not  gone  through  the  books  on  it,  but  from  the  "general 
information  that  one  has— 1  should  say  that  if  we  were  to  go  back 
50  years  we  would  find  that  the  difficuities  that  had  arisen  in  many 
cases— of  course,  I  aui  not  saying  in  all,  but  as  a  general  thing— have 
been,  in  the  first  place,  due  to  a  franchise  given  that  was  very  valu- 
able, or  else  it  had  been  overcai)italized,  or  else  the  corporation  had 
conducted  its  affairs  in  such  a  way  that  there  Was  some  real  legiti- 
mate cause  of  complaint  against  it  that  had  stirred  up  a  liostnity 
that  was  more  or  less  justified. 

Now,  along  the  lines  that  I  have  suggested,  if  the  cori)oration  has 
managed  its  business  in  the  right  way,  and  the  i)iiblic  has  been  prop- 
erly informed,  I  do  not  think  tliere'is  any  special  likelihood  of  the 
corporation's  being  plundered  by  the  i)ub*lic.     I  grant  there  are  ex- 
ceptional cases,  and  I  am  as  afraid  of  the  politicians  as  you  are. 
Conmiissioner  Beall.  Unfortunately,  it  is  the  politicians  that  do  it. 
Mr.  Jenks.  I  am  as  afraid  of  the  ix>liticians  as  you  are. 
Commissioner  Beall.  Now,  is  not  this  true  that,  all  things  being 
e(}ual,  you  are  going  to  put  your  money  in  the  thing  that  offers  the 
best  securitv  ? 

Mr.  Jexks.  Oh,  surelv. 

CommissicHier  Beall.  And  if  a  street  railway,  through  having  a 
short  franchise,  or  a  limited  term,  has  to  compete  against  somethmg 
which  is  very  much  better,  with  another  form  of  security,  the  street 
railway  is  going  to  suffer. 

Mr.  Jenks.  It  will  have  great  difficulty  in  getting  it. 
Commissioner  Bkall.  Is  it  not  just  as  important  to  the  strt^et  rail- 
way as  to  any  other  form  of  investor  to  get  that  money  as  constantly 
and  as  cheaply  as  pssible?     It  is  really  vital;  is  it  not? 
Mr.  Jenks.  Other  things  equal,  I  grant  that. 
Commissioner  Beall.  The  minute  you  look  into  the  term  of  your 
franchise,  are  you  not  putting  a  great  big  handicap  on  the  company? 
Mr.  Jenks.  Not  if  the  other  things  are  carried  on  as  your  question 
imi)lies. 

Counnissioner  Beall.  Have  you  ever  tried  to  raise  money  for  a 
stieet  railway ? 


PROCEEDIIfGS  OF  FEDEEAL  ELECTBIC  RAILWAYS  COMMISSION.      927 

Mr.  Jenks.  No. 

Mr.  Jenks.  No,  sir;  that  is  not  my  business.    I  have  been  rather 

The  CH^iHMvf  w'-'^^r  °*  ""^^  ^""S«'  ^"*  -hat  yw  say  i  S" 
1  lie  (^H.viKMAN.  We  will  resume  at  2  o'clock. 

p.  !,JY'"''""P°"'  ^*  1  •^'^'ock  p.  m.,  a  recess  was  taken  until  2  o'clock 

AITER  RECESS. 

The  hearing  was  resumed  at  2  o'clock  p.  m. 
mo^y  hLt"""""'-  ^  '™"^'^  "^''  *"  '"^^''^-^^  ^"'""^  documentary  testi- 

Mr.  Chairman,  you  asked  Mr.  Clark  when  he  was  on  the  stand 
for  certam  information  about  increases  of  fares. 
Ihe  Chaiidian.  Yes,  sir. 
Mr.  Warren.  And  I  have  a  summary  of  those  figures  here 

lO^O    xll""'"""'^  ?i-^l  *?*  *''?  S'-«»t<^d:  as  was  found  in  the  June 
1919   Aera    page  10/8,  have  been  as  follows:  By  commissions    133 • 

?n';.ts:s^1;ilSrwr'tf  "■"^^*  <^n'  '■    ^'-^  increasSSe 
w.„     -^l  ,h  -.l»?'l'ei"  a  charge  for  a  transfer  or  in  any  other 

to  whicli  inciiases  h^.4''b  en^Edln  ^ 
The  CiiAiprAx.  Does  that  statement,  Mr.  Warren  show  the  n„m 

stilus  r*'°"^  *'"' """  "^'^^  *»'•  i-i-easerfkiT  du;r„;"he" 

Mr.  Warren    This  summary  does  not,  Mr.  Chairman     The  -ii-ticlo 
shows  applications  pending  before  commissions,  3C;  before  com  ts 
3    and  before  city  authorities,  27.     It  also  shows  applications  re-' 
fused.  b.y  commissions,  4;  by  local  authorities,  18.        PP"^^"°"«  ^^• 

J]^WARr-:1'-t,iLKf '  '^"^^ '  ""^^'•'^'•"''  ^*^*— t? 

grJured^'ii^r^as:"  ''  ^'""^  ""^  '''"^^  ''"^'^  ''-^  I'^tty  generally 

.^  ilr^^ti^tiii'iftii:::  °'^'^-  '"^^^^  "-^  --'^^  ^  -^^ 

voh-ed"ouf  of  ^..^XT''--  T'T  "'■?  ""'y  ^"^"t  300  companies  in- 
\onecl  out  ot  the  whole  industry.    Lots  of  them  did  not  annlv  bp 
cause  they  knew  they  could  not  get  anything  ^^  ^ 

Mr.  ^^  ARREN.  That  may  be  so. 

ceSrrtTL?Xw-ThaT^^^  ''"* " ''''  ^'  *'"'  -'^-^'-y  -  — 

.  Mr.  AVarren.  It  appeared  in  a  special  report  of  the  commission 
investigating  this  general  subject  in  Massachusetts,  which^Sed 
a  year  ago  last  January  as  I  recall  the  statement,  that  the  averl^e 
time  before  the  MassacTiusetts  commission  had  been  four  montl^ 
Lnder  normal  conditions  I  do  not  think  that  could  be  criticized  m^ 
under  the  war  conditions  four  months  is  a  lomr  time  tu  ' 
on  the  Boston  Elevated,  as  I  have  just  been  read^fg  rthis^J,^^ 
paper,  have  been  raised  25  per  cent  since  the  1^  of  Wt  "^, 
they  have  been  rate  increases  retroactive  to  the  1st  of  Mav^  fo  tW 
the  20  per  cent  for  May,  June,  and  July,  three  month? 'must  bo 


111 


i 


928       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

paid,  although  during  those  three  months  the  rate  of  fare,  most  of 
it,  was  at  the  old  rate. 

Do  3^011  care  to  have  these  magazines  filed  with  the  commission, 
showing  those  increases  in  detail? 

The  Chairman.  Well,  you  might  as  well  file  one,  if  you  will. 

Mr.  Warren.  It  is  in  two  parts,  some  in  one  and  some  in  the  other. 

Commissioner  Gadsden.  Why  not  just  tear  the  page  out  and  put 
it  in  evidence,  instead  of  the  whole  magazine? 

The  Chair^ian.  That  can  be  done,  Mr.  AVarren. 

Mr.  Warren.  Yes. 

I  have  here  also  copies  of  replies  made  to  an  inquirv  by  the  Secre- 
tary of  Labor  as  to  the  permanence  ot  the  range  of  prices  for  necessi- 
ties of  life.  They  are  statements  of  Julius  Rosenwald,  John  D. 
Ryan,  Darwin  P.  Kingsley,  W.  L.  Douglas,  A.  Barton  Hepburn,  J. 
Ogden  Armour,  James  B.  Forgan,  of  the  Fii^t  National  Bank  of 
Chicago,  and  Jacob  H.  Schiff.  Those  I  should  like  to  have  inserted 
in  the  record,  if  I  may. 

The  Chairman.  That  mav  be  done. 

The  statements  referred  to  b}'  Mr.  Warren  are  as  follows : 

STATEMENT  BY  JTTLItrS  ROSENWALD. 

Tt  is  my  belief  that  the  range  of  prices  for  the  necessities  of  life  will  average 
little,  if  any,  lower  than  at  the  present  time.  Of  course,  there  will  be  some 
exceptions,  but  I  do  not  look  for  a  sudden  or  violent  reduction  in  the  near 
future  aside  from  those  which  have  been  artificially  stimulated. 

There  exists  a  tremendous  demand  in  our  own  country  for  all  kinds  of 
conunodities.  This  demand  will  not  diminish  materially  until  war-wrecked 
Knrope  firmly  reestablishes  herself  on  a  peace-time-i)roduction  basis.  I  fully 
aprree  with  those  who  believe  that  the  reconstruction  is  going  to  tax  our 
efforts  perhaps  even  harder  than  did  the  war,  and  that  there  is  cause  for 
rejoicing  in  these  conditions  even  though  accompanie<l  by  high  prices,  for, 
after  all.  It  is  not  a  questi(m  so  much  of  the  price  one  has  to  pay,  but  as  to 
what  relation  this  price  bears  to  one's  own  income. 

STATEMENT  BY  JOHN  D.  RYAN. 

I  am  rather  a  firm  believer  in  the  natural  economic  laws  and  I  do  not  find 
myself  in  accord  with  the  impression  that  many  people  setMu  to  have  that  the 
level  of  prices  is  not  likely  to  be  radically  changed  over  the  decade.  I  believe 
that  prices  must  be  made  that  will  equalize  consumption  and  production. 

We  have  seen  some  sharp  adjustments  already  from  war  prices,  and  in  every 
product  in  which  the  companies  with  which  I  am  connected  are  interested 
prices  have  gone  back  to  prewar  averages,  and  in  some  cases  lower.  I'hese 
products  are  copper,  zinc,  lead,  and  manganese. 

I  do  not  believe  that  the  level  of  prices  will  fall  permanently  as  low  ns 
before  the  war,  but  I  am  convinced  that  we  can  now  look  for  gradual  adjust- 
ments in  most  staple  products.  I  think  prices  will  have  to  be  put  where  build- 
ing and  development  of  all  kinds  must  be  encouraged  before  we  will  see  con- 
sumption approach  production  of  the  staples. 

I  think  in  the  adjustments  which  are  necessary  labor  will  have  to  contribute 
its  share  or  unemployment  on  a  very  serious  scale  is  bound  to  result.  I  hope, 
however,  that  the  intelligence  and  foresight  of  those  who  have  to  settle  these 
questions  will  be  such  that  every  consideration  of  the  needs  of  those  who  work 
for  wages  and  salaries  will  be  considered  before  profits,  and  that  reductions 
in  wages  will  take  place  only  where  it  is  imperative. 

STATEMENT  BY  DARWIN  ?.  KINGSLEY. 

Wo  have  \mdoubte<lly  reached  a  new  price  level.  For  some  years  food  will 
bo  higher.  Europe  has  been  so  stripped  of  every  sort  of  food  that  it  will  take 
more  than  the  harvests  of  1919  to  restore  an  equilibrium. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       929 

Food  will  remain  high  because  wages  will  not  go  back  to  the  prewar  level. 
Wages  will  fall  at  some  points  where  production  was  overforced  during  the 
war;  but  unless  our  whole  industrial  and  financial  fabric  falls  into  chaos— 
and  nothing  like  that  seems  possible  now— the  postbellum  readjustments  mean 
continued  high  wages  and,  of  course,  a  higher  cost  for  everything  into  which 
wages  enter. 

How  far  discoveries  in  science,  inventions,  improved  methods,  etc.,  mav  go 
toward  overcoming  this  increased  cost  through  increased  efl[iciency  and*  in- 
creased production  is  a  question.  These  will  be  a  factor,  p<jssibly  a  surprising 
factor,  because  the  rewards  will  be  large,  and  few  things  so  quicken  invention 
a!  d  eftiricncy  as  the  incentive  of  large  returns. 

('arry  the  message  to  the  Bolsheviks. 

STATEMENT  BY  W.  L.  DOUGLAS. 

If  you  will  call  it  to  mind,  the  per  capita  in  the  United  States  in  1914,  in 
round  numbers,  was  about  $84.  Recently  I  have  noticed  that  the  per  capita  is 
;d)out  $57,  which  is  an  increase  of  a  little  over  57  per  cent.  While  the  per 
cai)ita  remains  at  this  high  level  the  cost  of  conunodities  and  labor  will  remain 
about  the  same.  I  am  of  the  opinion  that  prices  will  be  governed  to  a  great 
extent  as  the  ix»r  capita  rises  or  falls. 

STATEMENT  BY  A.  BARTON  HEPBURN. 

Seventy-five  to  eighty  per  cent  of  the  cost  of  all  products  represents  labor; 
and  as  long  as  the  mininmm  price  of  wheat  is  fixed  by  the  Government  at  .$2.2.5 
a  bushel  and  other  necessities  of  the  wage  earner  are  approximately  as  high  in 
proportion,  there  is  every  reason  why  labor  should  contend  against  reduction. 
With  a  recession  in  the  cost  of  living  there  should  be  a  corresponding  reduc- 
tUm  in  the  cost  of  labor.  The  employers  of  labor  can  not  go  on  paying  present 
wages  nor,  indeed,  any  wages,  unless  their  business  continues,  and  it  has  seemed 
to  me  that  the  closing  of  certain  industries  would  throw  labor  out  of  employ- 
ment. In  seeking  new  employment  they  would  accei)t  the  reduction  in  accord- 
ance with  what  industry  could  afCord  to  pay. 

I  understand  that  this  is  what  you  are  contending  against ;  and  you  seek  to 
induce  manufacturers,  wholesalers,  retailers,  and  consumers  to  accept  the 
present  prices  for  goods  and  conunodities  and  continue  business,  thereby  assur- 
ing the  employment  of  labor  at  the  present  level  of  wages.  You  very  likely 
will  be  successful  as  to  the  large  industries,  but  I  think  there  will  be  more  or 
Ie.ss  readjustment  of  the  wage  scale  on  a  lower  level  in  the  smaller  industries 
and  in  various  localities. 

STATEMENT  BY  J.  OGDEN  ARMOUR. 

The  greatest  danger  to  our  economic  structure  to-day  arises  from  the  failure 
of  many  to  recognize  a  new  and  higher  level  of  prices,  based  on  permanently 
IncreaseU  cost  of  labor  and  higher  taxation. 

Those  who  postpone  building  or  buying  in  the  hope  of  materially  lower  prices, 
are  si)eculating  in  the  future  misfortune  of  the  Nation.  For  falling  prices,  when 
reaching  the  point  where  profit  is  eliminated,  mean  panic,  depression,  unem- 
ployment, and  other  troubles. 

In  the  final  analysis,  75  i^er  cent  or  more  of  the  cost  of  most  conunodities  con- 
sists of  labor,  and  reductions  in  the  market  price  of  conunodities  are,  therefore, 
inevitably  refiected  in  the  compensation  of  labor. 

Nothing  in  the  labor  situation  warrants  anyone  in  expecting  materially  lower 
cost  of  commodities  in  general,  and  building  in  particular.  Wages  will  not 
be  less  for  several  fundamental  reasons ;  viz : 

1.  The  practical  stoppage  of  inunigration  since  1914,  depriving  America  of 
the  several  million  workers  who  would  normally  have  come  to  our  shores. 

2.  The  retention  by  the  Nation's  military  and  naval  establishments  of  nearly 
2,000,000  workers,  which  may  continue  for  an  indefinite  i)eriod. 

3.  The  creation  of  new  industries,  such  as  shipbuilding  and  manufacture  of 
chemicals  and  dyes,  requiring  hundreds  of  thousands  of  workers. 

4.  The  urgent  demand  for  building  and  construction  of  every  class  due  to 
their  having  been  forcibly  held  back  for  several  years. 


Ill' 


930       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

5.  The  shortag:e  of  the  world's  supply. 

C.  The  proportionately  higher  levels  of  commodity  prices  existing  practically 
all  over  Europe. 

On  the  one  hand  then,  we  are  facing  a  serious  shortage  of  labor  as  soon 
as  we  approach  normal  industry  activity,  and  on  the  other  hand  there  is  con- 
fronting UK  a  tremendous,  unsatistied  demand  for  many  necessities  which  it 
was  dillicult  or  imi)ossn)le  to  obtain  during  the  war. 

Normally,  under  such  conditions  we  could  have  expected  a  flood  of  low- 
IHiced  goods  from  the  Old  World,  while  now  we  tind  that  prices  in  Euroi^  have 
risen  i)roportionately  nnich  higher  than  in  America,  and  the  demand  for  com- 
modities and  labor,  to  make  u])  for  the  wastage  of  war,  is  even  more  keenly 
felt  there  than  here. 

The  manufacturer  who  now  quotes  the  lowest  possible  price  consistent  with 
the  high  cost  of  labor  and  guarantees  this  to  be  so,  doing  his  buying  freely  on 
the  same  basis,  ranks  as  our  highest  type  of  patriotic  citizen.  A  new  level 
of  prices  fias  been  established  from  which  there  can  l)e  no  material  recession 
until  inventive  genius  suci-tn^ds  in  corresixnulingly  increasing  labor's  productive 
caj)a<'ity  by  mechanical  means. 

STATEMENT  BY  JAMES  B.  FORGAN,  FIRST  NATIONAL  BANK,  CHICAGO. 

While  it  is  my  belief  that  the  general  trend  of  prices  during  the  next  decade 
may  be  downward,  I  do  not  anticipate  any  sudden  or  violent  tumble  in  the 
near  future  beyond  the  elimination  of  war  prices  made  necessary  to  stimulate 
production  in  high-cost  i)lants.  We  can  not  eat  our  cake  and  have  it.  We  can 
not  innuediatoly  have  low-])rice<l  products  with  high-cost  labor. 

At  no  time  wsis  honest  labor  more  indispensable  than  during  the  war,  and 
during  that  period  the  average  w(»ekly  wage  of  all  workers  was  greatly  in- 
creased. 

Out  of  the  war  has  come-  a  strong  i*ealization  of  the  value  of  labor  to 
civilization,  and  we  must  accustom  ourselves  to  the  evident  fact  that  a  per- 
manently higher  scale  of  wages  or  c(mipensation  has  been  established  for  the 
Morld's  worker,  both  skille<l  and  unskilled. 

In  all  lines  of  industry,  to  make  a  fair  protit.  willing  pri<-es  must  be  in  pro- 
portion to  the  cost  of  production,  including  the  enhanced  cost  of  labor.  This 
fact  should  be  nn-ognizefl  in  buying  as  well  as  selling. 

There  exi.sts  in  the  world  to-day,  and  there  will  exist  for  some  time  to  come, 
n  tremendous  latent  denmn<l  for  goods  and  service  and  a  relative  shortage  of 
workers  caused  by  the  war.  The  high  cost  of  living  has  not  yet  begun  to  r€H^e<le, 
and  it  would  be  an  erroneous  policy  at  present  to  cut  prices  at  the  expense  of 
hibor. 

STATEMENT  BY  JACOB  H.  SCHIFF. 

In  the  i>eriod  from  May.  1918,  to  October,  191S,  connnodity  prices  in  the 
T'nited  States  had  advanced  about  107  iier  cent  above  the  1917  level;  in  Canada 
ll.l  i>er  cent;  in  (Jreat  Hritain  1.S8  iM»r  cent,  and  in  France  285  per  cent.  From 
October,  1918,  until  March  this  year,  in  spite  of  the  most  violent  cry  for  lower 
prices,  even  by  those  who  are  umbmbted  beneficiaries  of  high  prices,  the  de- 
cline, ac<*ording  to  Dun's  figures,  averaged  only  6.9  per  cent.  During  April,  in 
spite  (*f  th(^  agreement  to  lower  steel  prices,  other  conun(Klities  rose  to  such 
an  extent  that  the  average  pri<*e  on  April  1  was  only  5.7  i^r  cent  below  the 
high  point  for  October  1  last  year. 

The  reason  for  this  tenacious  grip  which  high  prices  apparently  have  taken 
on  the  world  is  obviously  to  be  found  in  the  immutable  law  of  supply  and  de- 
mand. The  cost  of  labor  is  the  most  important  factor  in  the  i)rice  of  com- 
modities, as  it  makes  up  7.')  per  (-ent  or  more  of  their  price.  It  starts  witli  the 
f<jst  of  food  and  raw  uuiterials,  which  is  largely  represented  by  labor,  goes  on 
to  the  manufacture  of  semifinished  and  finished  products,  whicli  again  is  labor 
lirai)ed  upon  labor,  anil  is  frequently  punctuated  lietween  or  after  these  various 
st;>g(>s  or  processes  with  transportation  and  distribution,  which,  when  analyzed, 
turn  o«Ji  to  consist  of  a  high  percentage  of  lalwr  in  its  broadest  .sense. 

Tl;o  \ 'sAStnge  of  war,  both  in  men  and  materials,  again  is  largely  responsible 
for  shortage  of  lal)or,  especiall.v  past  and  i)rospective.  For  four  years  the 
orderly    poduction    and   maintenance   of  peace-time   activity   has   been    most 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       931 

violently  interrupted  throughout  the  civilized  world,  causing  on  the  one  hand 

a  heavy  depreciation  of  property  and  on  the  other  hand  an  appalling  <lestruction 

ot  all  those  tlnngs  which  are  vital  to  human  happiness,  life  and  activity     The 

ivconstruction  IS  going  to  tax  our  efforts  perhaps  even  harder  than  did  the 

V.i  ^"^  liitent  demand  for  labor  and  connnodities  being  tremendous 

ihere  is  cause  for  rejoicing  in  these  conditions,  for  iiUense  acVivitv    even 

hough  accompanied  by   high   prices,   is   far   to  be   preferred   to     he  bliibt   of 

nac  ivity,   stagnation,     dleness,   and    suffering   attendant    upon    unso m  d     un- 

^  muHwHoII^t^'';-  ""'^  'r^'^  'i"'"'''-  ^'••^^•"•^'  '^''''''  '^"'  it  is  not  a  quest  on 
^1  A  «  If.''^'^^  i'T''  '^''''1'  '•*  "^  ''•■'•"  ^''  ^'''>'  ^''''  ^^'1^''^  ^^'^  ^^-^i^t  but  as  to  what 
1  elation  this  price  bears  to  (mr  own  income.  These  millions  of  men  whose 
incomes  have  grown  apace  with,  or  ahead  of,  the  general  price  advance  have 
alHUKlant  cause  for  satisfaction.  Yet  how  often  do  we  liear  tl  ese  s  me 
people  unwittingly  complain  of  higli  prices,  their  attitude  being  that  high  prices 
is  a  privilege  that  belongs  to  them.selves  onl.v,  in  the  selling  of  their  own  labor 
or  wares,  but  has  no  place  in  their  scheme  of  buying. 

Mr.  Waiikex.  Tlien,  earlier  in  the  session 

The  CiiAiKMAx.  Just  a  moment.  Can  you  state  for  the  record 
M'hat  the  suhstance  of  those  replies  is? 

Mr.  Wahken.  I  think  the  substance  of  it  is  that  the  pvke  level  is 
going  to  be  maintained  for  a  long  time. 

The  CHAIR3IAX.  That  is  all  I  wish  to  ask  on  that. 

Mr.  Warren.  Then  we  referred  in  some  of  the  earlier  testimony 
to  the  history  of  prices  during  the  war,  international  price  com- 
parisons issued  by  the  Department  of  Commerce.  I  would  like  to 
hie  that  as  a  memorandum.     It  might  assist  the  commissioners 

I  should  also  hke  to  file  the  Review  of  Economic  Statistics  for 
June,  1919,  monthly  supplement,  the  post-war  level  of  (ommoditv 
prices,  which  is  issued  by  the  Harvard  University  Committee  on 
P.conomic  Research,  at  Cambridge,  Mass. 

The  Chairman.  Would  it  be  convenient  for  you  to  get  a  sufficient 
number  of  copies  so  that  each  and  every  cominissioner  could  have 
one  of  them  ? 

Mr.  Warren.  I  Avill  endeavor  to  do  that,  Mr.  Chairman 

The  Chairman.  Thank  you. 

Mr.  Warren.  There  are  'many  things  we  have  promised,  and  which 
1  Avant  to  file,  but  which  I  should  like  to  have  an  opportunity  to 
look  at  the  record  for;  because  while  we  have  kept  a  memorandum 
I  am  afraid  it  is  not  complete,  and  I  want  to  run  through  the  steno- 
graphic record,  when  finished,  to  see  what  we  should  furnish  that 
we  have  not  furnished. 

The  Chairman.  Yes. 

Mr.  Warren.  The  commission  has  asked  for  data  as  to  the  power 
generated  and  purchased  by  the  electric  railways  of  the  ITnited 
States,  with  the  cost  of  each,  for  the  census  year.  'They  are  referred 
to  in  Table  104,  1912,  and  Table  104  of  Adyance  S'tatistics  1917 
census,  and  that  I  will  file. 


•  J 


i: 


932       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  information  thus  referred  to  by  Mr.  Warren  is  as  follows: 

Power  generated  and  purchased  bjf  electric  railways  of  United  States  with  the 

cost  of  each  for  the  census  years. 


(Table  104, 1912,  and  Table  104,  Advance  Statistics,  1917  Census.) 

Kilowatt  hours. 

Percent 
of  total. 

Cost. 

Percent 
of  total. 

Power  genera te<l . . . 

1917. 

7, 240,  .'W?,  783 
4,r47,.348,042 

59.4 
40.6 

154,494,814 
37,757,963 

59.1 

50.9 

Power  purchased 

Total 

12,187,8.50,831 

100.0 

92,352,777 

100.0 

1912. 

Power  generate  i . . . 

6,a52,699,0n8 
2,967,318,781 

67.1 
32.9 

35, 788, 270 
24,696,647 

59.2 
40.8 

Power  purchased. . . 

Total 

9,020,017,78^ 

100.0 

60,4^,917 

100.0 

1907. 

Powerijenerate  i . . . 

4,75'*,  130, 100 

(») 

31,235,005 
12,342,258 

71.1 

Powt  r  purchased. . . 

28.9 

Total 

43,577,268 

100.0 

1902. 

PoM'er 'generated . . . 

2, 261, 48),  397 

19,190,810 
3,871,518 

83.2 

1A  R 

Po  rer  puri  hased 

Total 

23,082,328 

100.0 

*  Not  available. 

Mr.  AVarrex.  The  commission  also  asked  that  the  ratio  of  tax  to 
net  capitalization  for  the  census  years  1902  to  1912,  whicli  is  made 
up  from  Table  5, 1912  census,  and  Table  5,  Advance  Photostats,  1917 
census,  and  that  I  will  file.  The  ratio  appears  to  have  0.935  per  cent 
in  1917,  as  against  0.826  per  cent  in  1912. 

The  information  thus  referred  to  by  Mr.  Warren  is  as  follows : 

Ratio  of  taxes  to  net  capitalization  for  the  censyst  years  1902-1912. 
(Tables,  1912ceasus, and  Table  5,  Advance  Photcstats,  1917  census.) 


Net  capitalization 

Taxe; 

R.tio  taxes  to  net  capitalizatim  (per 
cent) 


1917 


1912 


$4,&S},962,0€6 
45,756,695 

0.935 


$4, 24.'^,  317, 727 
35,027,965 

0.826 


1C07 


$3,400,107,839 
19,955,602 

0.58 


li;02 


$2,155,768,102 
13, 07  8, 8  J9 


0.607 


Mr.  Warrex.  Our  statistician  was  asked,  when  on  the  stand — as 
to  the  segregation  of  electric-railway  companies  relating  to  power 
statistics — where  the  companies  were  conibined  companies,  as  re- 
ported in  the  Special  Electric  Railway  Census ;  and  I  am  advised  as 
follows  by  him : 

In  answer  to  questions  of  Commissioner  Wehle  regarding  the  ex- 
tent to  which  the  United  States  census  reports  segregate  power 
statistics  as  between  strictly  electric-railway  properties  and  those 
doing  a  combined  electric-railway,  lighting  and  power  business,  it 
has  been  found  that  complete  separation  has  been  made  by  the  United 
States  Census  Department. 

This  is  included  in  the  1912  census  report  under  the  discussion  of 
power-plant  statistics. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       933 

We  are  advised  by  the  Census  Department  that  the  same  segregation 
has  been  made  in  the  1917  census,  and  where  possible,  an  even  greater 
refinement  has  been  made  in  the  attempt  to  segregate  as  completely 
as  possible  electric-railway  properties  from  those  doing  a  combined 
])ower  and  lighting  business.  As  a  result,  the  amount  of  power  and 
lighting  business  included  in  the  electric-railway  statistics  is  in- 
significant. This  applies  to  all  statistics,  including  the  number  of 
employees  and  the  capacity  of  equipment  in  use. 

One  of  the  witnesses  was  also  asked  as  to  double-decked  cars ;  and 
we  have  the  following  replies: 

The  first  one  is  bv  Mr.  Tome,  receiver  of  the  Pittsburgh  Railways 
Co.,  dated  July  23  r 

]\!r.  E.  B.  BuRRiTT, 

Secretary  American  Electric  Railicay  Association. 

Washington,  D.  C. 
(Re  double-deck  cars  used  by  Pittsburgh  Railway.s  Co.,  Pittsburgh,  Pa.) 

Dear  Mr.  Burritt.  The  operation  of  double-deck  cars  in  Pittsburgh  has  been 
In  eflFect  since  the  sununer  of  1912,  at  which  time  a  double-deck  car  constructed 
in  tlie  company's  shop  was  put  in  service.  This  operation  proved  sufficiently 
successful  to  warrant  the  purchase  of  five  additional  cars  from  the  car  builder. 
So,  therefore,  for  the  last  five  or  six  years  we  have  been  oi:>erating  a  total  of 
six  cars  of  this  type  in  regular  passenger  service  from  the  center  of  the  city  to 
the  residential  districts.  These  cars  were  designed  primarily  to  meet  a  demand 
from  the  public  an.l  in  response  to  a  campaign  of  certain  complainants  for  a 
greater  proportion  of  seats  per  passenger  during  the  rush  hour. 

These  cars  are  the  center-entrance  type  with  double  doors  and  two  stairways 
at  the  center,  thus  facilitating  the  collection  of  fares. 

The  seating  capacity  of  the  cars  is  112  persons,  and  they  take  the  place  in 
the  schedule  of  a  regular  motor  car  and  trailer,  having  a  combined  seating 
capacity  of  120.  In  other  words,  the  double-deck  car  is  used  in  the  same  service 
with  two-car  trains.  They  have  not  noticeably  slowed  up  the  schedule,  although 
there  is  no  doubt  that  some  additional  time  is  required  for  loading  these  cars 
as  compared  with  the  other  cars  on  the  system. 

Of  course,  these  cars  are  not  so  well  suited  for  midday  service,  since  the 
larger  capacity  is  not  needed  except  in  the  rush  hour,  and  this  involves  some 
additional  weight  and  wear  and  tear  during  the  nonrush-hour  periods.  As  a 
matter  of  fact,  however,  these  cars  have  been  so  closely  designed  that  they  do 
not  weigh  more  than  the  standard  double-truck  end-entrance  cars  largely  used 
on  the  system.  It  is  only  in  comparison  with  the  mode*rn  center  entrance,  low- 
floor  cars,  now  adopted  as  standard  on  the  system,  embodying  the  same  prin- 
ciples as  these  double-deck  cars,  that  a  saving  in  weight  may  be  secured. 

Owing  to  narrow  streets,  sharp  curves  and  clearance  in  passing  overhead 
structures,  the  interior  design  and  dimensions  of  these  cars  were  necessarily 
limited,  resulting  in  some  loss  of  comfort  and  convenience  to  the  passengers. 

In  view  of  the  above  considerations,  we  do  not  believe  that  we  Avould  care 
to  extend  the  use  of  this  type  of  car,  as  its  economies  are  somewhat  doubtful 
in  view  of  the  limitations  in  schedule  speed,  the  carrying  of  extra  weight  in 
the  nonrush-hour  periods,  and  the  limited  dimensions  of  the  car. 
Yours  very  truly, 

(Signed)  S.  L.  Tome, 

Receiver,  Pittsburgh  Railways  Co. 

A  telegram  from  Mr.  A.  M.  Eobertson,  vice  president  of  the  Twin 
Cities  Rapid  Transit  Co.,  Minneapolis,  Minn. : 

Minneapolis,  Minn.,  July  22,  1919. 
Hkrbert  Warren, 

950  Munsey  Building,  Washington,  D.  C: 

Telegram  received.  Experience  of  Twin  City  Co.  with  double-deck  cars  was 
not  of  sufficient  duration  to  go  to  the  real  merits  of  their  operation.  During 
pleasant  weather  all  passengers  wanted  to  ride  on  upper  decks,  during  bad 
weather  they  wanted  to  ride  below. 

A.  M.  Robertson. 


,( 


\i 


934       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PR0CEEDIN<5S  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       935 


Telegram  from  Horace  Lowry,  president  of  the  Twin  Cities  Rapid 
Transit  Co.,  Minneapolis,  Minn. : 

Minneapolis,  Minn.,  July  23,  1019, 
Joseph  K.  Choate, 

American  Electric  Railxcay  Association, 

DoO  Mttrisey  BuiUlinff,  ^Vas^li^lgtot^^  D.  C: 

Yesterday  we  wired  Warren  of  Diiluth  Co.  in  regard  to  double-deck  cars. 
Our  experience  not  of  miicli  value  as  equipment  was  too  heavy  on  account  of 
attempt  to  build  upper  deck  on  standard  cars.  Upper  deck  was  not  closed  in 
and  was  very  unpopular  in  bad  weather  and  over-crowded  in  jrood  weatlr  ;\ 
n'akiuR  cars  top-heavy.  I>o  not  believe  our  experience  of  any  value  in  dis- 
cussion.    We  only  built  three  cars  and  onlj'  used  them  a  short  time. 

Horace  Lowry. 

Teloorrani  from  Franlv  Hedley,  vice  president  and  of^neral  niana^er 
of  the  Interliorough  Rapid  Transit  Co.  of  New  York,  sayin*?: 

New  York,  N.  Y.,  July  23,  1010, 
Joseph  K.  Choate,  Esq.. 

Anicricau  Electric  h'nihra;/  Association, 

O'tO  MuuHcu  liiiihlinu,  M'a  shiny  ton,  D.  C: 

Ol^eration  of  double-deck  car  has  been  successful  and  ix)pular  here.  Built 
before  war.  not  practicable  to  build  and  operate  such  etpiipment  at  present 
prices  of  lalwr  and  material  on  o-cent-fare  basis. 

Frank  Heulev. 

I  would  like  to  file  a  letter  from  Mr.  IT.  H.  AVestinghonse,  of  tlie 
AVestinghouse  Air  Brake  Co.,  on  the  cost  of  materials.  Other  mate- 
rial of  that  kind  was  filed,  and  I  do  not  think  I  need  to  take  your 

time  to  read  it: 

New  York,  N.  Y.,  July  23,  1010. 
Committee  on  Presentation, 

American  Electric  Uailway  Association. 

(iENTLKMEN :  The  Westinghouse  Traction  Brake  Co.  .si)ecializes  iu  furni.shing 
material  and  expert  service  for  the  .safe  r.nd  effective  braking  control  of  elec- 
trically propelled  vehicle.s.  Its  business  forms  a  substantial  i)roportion  of 
the  product  of  the  parent  company,  Westinghouse  Air  Brake  Co..  the  largest 
injinufacturer  ot  power  brakes  for  steam  locomotives  and  cars. 

During  the  period  of  tht»  war  practically  the  entire  output  of  the  We.;ting- 
liouse  Air  Brake  Co.  was  on  (Government  orders,  and  our  raw  material  and 
labor  costs,  as  well  as  personnel,  were  aft'ecttnl  in  almost  exact  ratio  to  the 
large  steel  mills  and  other  industries  in  the  vicinity  of  Pittsburgh,  where  our 
works  are  located.  The  increased  cost  and  scarcity  of  material  and  labor  has 
resulted  in  a  continual  ri.se  in  cost  of  production,  and  therefore  in  the  price 
to  our  cu.stomers,  the  electric  railways,  as  shown  by  an  approximately  increase 
in  price  of  standard  brake  apparatus  in  1919  over  1914  of  78  j^er  cent.  Not- 
withstanding tl>is  condition,  the  rate  of  profit  has  remained  practically  the  same 
ns  in  1914,  being  in  some  cases  somewhat  less. 

The  art  of  brake  manufacture  has  Ix'en  so  completely  developed  that  there 
is  little  prospect  of  reduced  co.sts  due  to  improved  methods ;  and  as  there 
setMus  to  be  no  innnediate  reasons  to  expect  a  reduction  jn  either  wages  or 
cost  of  nuiterial,  it  is  believed  that  the  present  scale  <>f  lu'ices  can  not  be  re- 
duced within  the  near  future.  We,  of  course,  hope  that  conditions  will  so 
change  that  we  can  readjust  prices  for  the  benefit  of  our  customers,  but 
circumstances  over  which  we  have  no  control  must  necessarily  govern  what 
may  be  done  in  that  direction. 
Truly,  yours, 

H.  H.  Westinghouse. 

Mr.  Wakrkx.  a  cpiestion  was  asked  the  other  day  about  British 
conditions.  The  Electric  Eailway  Journal  has  published  numerous 
articles  on  the  situation  in  Great  Britain,  in  which  it  appears  that 
theie  have  been  increases  in  wa^es,  and  that  fares  have  been  in- 
ci*eased  in  many  cases  from  50  to  100  per  cent. 


There  is  also  included  in  these  articles  a  statement  of  increased 
cost  in  the  city  of  Sheffield,  and  if  I  may  file  those — not  to  be  copied 
into  the  record,  but  as  possible  useful  information  for  the  cx)mmis- 
sion — I  would  like  to  do  so. 

I  should  also  like  to  have  go  into  the  record,  if  I  may,  without 
Uxhmg  the  time  to  read  it,  a  letter  from  Congressman  W.  B.  Mc- 
kinley, who  is  president  of  the  Illinois  Traction  system,  on  the  street- 
r^uhvay  situation.     I  should  like  to  have  that  copied  into  the  record. 

The  letter  thus  referred  to  by  Mr.  Warren  is  as  follows: 

Champaign,  III.,  July  23,  1010. 

Dear  Sir:  I  inclose  herewith  sundry  data  in  connection  with  the  electiic 
railways  and  collected  from  our  experience  in  operation. 
Yours,  very  truly, 

-,  ,,  W.  R.  McKiNLEY,  P resilient, 

Peoeiial  Li.ectrjc  Railways  Commission, 

Interstate  Commerce  Building,  Washington,  D,  C, 
There  are  so  mauy  dependent  wnsiderations  to  be  considered  in  a  discussion 
of  tlie  financial  crisis  in  whicli  the  street-railway  systems  find  themselves  that 
It  can  not  be  covered  in  any  short  discussion.  The  following  sulxlivisions  wiU 
furnLsh  a  basis  of  su???:estion,  from  wliich  may  l3e  selected  the  particular 
br*anch  of  tlve  subject  which  one  may  wish  to  present. 

street  railway  data — development  and  evolution. 

Facilities:  (fl)  Cars,  </;)  track  and  roadway,  <c)  wages,  {d)  i>ower  houses, 
(c)  competition,  (/)  saturation  or  service. 

(a)  Cars.— If  mp  !)egin  in  the  year  1895  and  take  steps  in  five-vear  neriiuls 
down  to  the  yenv  1919.  we  find  that  there  has  been  a  comi>lete  evolution  and 
Change  in  the  type,  construction,  electrical  equipment,  size,  and  apiiliauces  in 
us<-  .in  street-railway-transportation  systems. 

About  189.J  the  electrize  street  railway  bec^iine  n  reaiitv,  although  the  ejirliest 
£xperiences  and  development  in  that  utility  pi-eceded  that  date  bv  wol>abiv 
five  years.  '    * 

nie  fii-st  cars  were  constructed  witJi  open  vestibules,  without  anv  protection 
tor  the  trainmen,  with  the  most  simple  oi^rating  devices;  hand  brakes  single 
motors,  light  weight  and  cheap  construction.  Thev  were  single-truck  aus 
without  any  improved  fare-collecting  or  I'egistei'ing  devices,  witli  tlie  most 
.simple  electrical  equiinnent  and  heate<l  by  stoves. 

The  present  electric  street-car  is  usually  of  the  double-truck  tvpe,  multijile 
motors,  large  seating  capacity,  vestibules  conipletelv  inclosed  and  electricillv 
beated.  '  '    * 

The  electric  cquii)ment  on  the  pi-esent  type  of  c-jir  costts  more  than  the  entire 
car  complete  cost  originally. 

CMn^^i;!'/  ^ar  c-osting  probably  ^^,.100  fully  equii>ped,  ^^^  now  pay  .$5,000  to 
.>!  0,000  for  a  single  car. 

(b)  Track  <ind  ronduHi y.— The  original  ele<-tric  street  railwav  w^is  usiuiHv 
run  on  30-pound  .steel  rails;  over  light  special  work;  little,  if  anv  bailasf 
no  pavement,  light  bonding,  without  cix)ssing  signals  m-  devic^es,  jiml  without 
any  modern  safety  appliances. 

To-day  the  track  is  laid  of  90-i)ound  steel  rails,  sojiietiines  125  pounds  (heavier 
than  in  use  on  the  steam  railroads),  rails  of  si^ecial  tvpe;  tlie  si^ecial  work  of 
the  heaviest  construction  obtainable;  track  usually  laid  on  concrete  l>ase  and 
lavements  of  expensive  and  i)ermaneiit  charactei*.  Where  street  is  uiisafe 
the  track  is  heavily  ballasted.  Tlie  cH)st  of  installing  and  maintaining  crassin^' 
signals  and  <]evices  is  a  material  element;  the  r^il  joints  are  frequently  welded 
and  connected  with  heavy  and  expensive  bond- 

A  coiui)arison  of  the  installation  of  the  track  and  roadway  of  the  year  1900 
with  the  present  time  shows  from  100  per  cent  to  200  per  cent  increase  in  the 
cost  of  tliis  i>art  of  tlie  property. 

Likewi.se  in  similar  ratio  the  maintenance  costs  have  increased. 

(c)  Wages. — From  a  15  or  20  cents  per  hour  wage  to  platform  men  the 
str(»et  railways  are  paying  from  36  to  70  cents  per  liour^  and  demands  are  being 
seriously  urged  for  additional  increase. 


1 


936       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION,       937 


The  wajres  of  all  the  trackmen  has  increasetl  from  approximately  $1.35  per 
clay  of  12  hours  to  approximately  $4  per  day  for  8  hours. 

Shop  labor  and  power-house  labor  has  increased  in  like  proportion.  Linemen 
are  receiving  $1  per  hour. 

(d)  l*on'cr  houses. — The  development  of  the  generating  plants  of  the  electric 
street  railways  has  undergone  a  complete  evolution  within  the  last  decade. 
From  small  100  kilowatt  belt,  or  direct-connecte<l  units,  we  have  advanced  to 
noncondensing  steam  turbines  of  from  500  to  10,000  kilowatt  capacity. 

{€,)  Cow  petit  ion. — In  the  face  of  these  advancements,  street  railways  to-day 
comi^ete  with  gas-engine  vehicles  in  the  form  of  jitneys  or  taxicabs,  to  say 
nothing  of  the  privately  owned  automobile  which  carries  a  large  i>er  cent  of 
the  population  which  used  to  use  the  tram  cars. 

(f)  ifiaturation  and  serviec. — The  street-railway  systems  10  years  ago  aver- 
aged a  i>opulation  of  1,000  per  mile  of  track  in  the  cities  served ;  with  the 
d<mbling  and  red<mbling  of  population,  to-day  the  electric-railway  mileage  is 
on  a  ratio  of  probably  2,500  people  per  mile  of  track,  in  smaller  communities 
with  nnich  larger  ratio  of  population  than  in  the  larger  cities. 

Originally  the  electric  car  carried  the  passenger  on  comparatively  short  hauls 
for  a  5-cent  fare;  while  to-day  the  electric-railway  utility  is  expected  to  carry 
passengers  as  far  as  20  miles  for  the  same  nickel. 

A  bare  suggestion  of  the  above  historical  facts  is  enough  to  prove  the  im- 
possibility of  the  future  development  or  success  of  the  electric  street  railway 
on  the  old  basis  of  a  5-cent  fare. 

Probably  one  of  the  fundamental  errors  in  the  evolution  of  street-railway 
business  lias  been  the  effort  to  extend  the  length  of  haul  without  any  reference 
to  a  zoning  system  and  without  any  proportionate  or  compensatory  increase  in 
fare. 

There  cjin  be  no  justification  for  charging  one  passenger  5  cents  for  a  ride 
of  two  or  three  blocks  and  another  passenger  on  the  same  car  only  5  cents  for 
traveling  a  distance  of  10  miles. 

There  can  be  no  defejise  of  the  regidating  practices  which  are  being  applied 
to  the  street-railway  business  by  the  commissions  and  regulating  bodies  at  the 
l>resent  time. 

The  single  aim  of  the  regulating  bodies  seems  to  have  been  directed  to  an 
effort  to  justify  a  continuance  of  the  5-cent  fare  in  the  face  of  the  conditions  of 
evolution  and  development  of  the  service. 

One  of  the  false  methods  by  which  it  has  been  attempted  to  justify  the  nickel 
fare  under  impossible  conditions  is  for  the  regulating  Ixnly  to  ascertain  an  esti- 
mate<l  original  cost  of  the  jihysical  property  remaining  in  the  service  of  a  par- 
ticular utility,  entirely  ignoring  the  property  that  had  l)een  retired  without  hav- 
ing served  its  useful  life  and  without  any  effort  to  reward  the  utility  for  losses 
from  functional  depreciation  in  the  units  replaced  with  improved  types  and 

structures. 

Thus  by  this  process  of  unfair  appraisals,  the  regulating  tribunals  have  con- 
fiscated iliillions  of  dollars  of  invested  capital,  wholly  without  any  effort  to 
compensate  for  the  loss  or  recognition  of  the  destruction  of  the  industry. 

There  has  also  apparently  been  no  effort  to  harmonize  or  reconcile  the 
various  classes  of  patronage  which  supi)ort  the  street-railway  service. 

The  man  who  rides  on  the  car  once  a  month  and  to  whom  it  is  nothing  but  a 
luxury  and  who  does  the  loudest  complaining  at  any  discomfort  in  the  service 
pays  the  same  fare  as  the  laboring  man  who  rides  on  the  same  car  four  times  a 
day  and  who  really  supports  the  service. 

if  a  service  is  maintained  to  acconunodate  the  transient  rider  he  would 
probably  have  to  be  charged  from  50  cents  to  a  dollar  per  tiip;  while  the 
maintenance  of  a  service  to  accommodate  a  daily  user  could  i)robably  afford 
it  at  5  cents  per  ride. 

There  is  also  apparently  no  recognition  of  the  necessity  for  a  tremendous 
investment  to  meet  peak-load  business  during  the  rush  hours  of  the  day  or 
uiK)n  the  occasion  of  unusual  gatherings  such  as  county  fairs,  circuses  and  the 
like;  and  the  street  railway  is  expected  and  required  to  maintain  sufficient 
equipment  to  conveniently  handle  tremendous  crowds  for  probably  three  or 
four  days  in  the  year,  and  50  per  cent  of  this  equipment  lies  idle  the  rest  of  the 
time  with  no  thought  of  the  interest  upon  the  investment  necessary  to  provide 
the  same. 

During  the  rush  hours  the  passenger  complains  of  the  crowded  condition 
of  the  cars,  and  the  public  is  entirely  forgetful  of  the  remaining  four-fifths  of 
the  day  when  the  cars  are  rattling  over  the  system  without  passengers  and  at 
an  actual  operating  loss  to  the  company. 


SUGGESTED    REFORMATIONS. 

1.  There  should  be  a  zoning  system  put  into  practice  on  every  street-railway 
system,  by  which  the  long-haul  passenger  pays  for  the  additional  service  in 
some  degree  of  proportion  to  the  short-haul  passenger  who  probably  pays  an 
excessive  fare. 

2.  A  basic  10-cent  fare  would  be  less  in  proportion  to  the  present-day  invest- 
ment and  operating  and  maintenance  costs  than  was  a  5-cent  fare  when  the 
thing  became  generally  operative. 

3.  With  a  basic  10-cent  cash  fare,  provision  should  be  made  for  the  accommo- 
dation and  recognition  of  the  value  of  the  daily  patron  by  a  sliding  scale  of 
reduced  fares  in  proportion  to  the  frequency  of  patronage  by  the  individual  or 
his  family. 

4.  The  street-railway  company  should  be  encouraged  to  inaugurate  the 
practice  of  one-man  car  operation  and  to  purchase  specially  designed  and  con- 
structed equipment  for  that  character  of  operation. 

This,  however,  requires  as  a  condition  precedent  that  the  retirement  from 
service  as  obsolete  of  the  present  character  of  equipment  should  not  operate 
to  deprive  the  investor  of  the  value  of  the  remaining  useful  life  of  such  equip- 
ment and  the  original  investment  therein,  but  the  same  should  continue  and  be 
made  a  part  of  the  fair  value  of  his  property  upon  which  subsequent  rates  are 
predicated  and  return  allowed. 

Unless  the  regulating  bodies  do  allow  as  a  part  of  the  appraisal  of  street- 
railway  systems  the  property  which  the  company  elects  to  retire  and  treat  as 
fin.ctionally  obsolete,  it  will  be  financial  suicide  to  attempt  this  improvement 
a?id  economy  when  o])eruting  street  railways. 

5.  If  the  patron  of  the  street  railway  company  is  to  be  required  to  furnish 
the  money  to  pay  a  compensation  to  the  city  for  the  use  of  the  street  by  the 
street-railway  system,  it  should  be  laid  as  a  direct  charge  and  not  camouflaged 
by  assessments  for  pavements  for  which  there  can  be  no  present-day  apology. 

The  theory  of  assessing  a  street-railway  company  for  street  paving  may  have 
been  justified  when  the  nuiles  trod  down  the  middle  of  the  street  and  wore  out 
the  roadway,  but  it  can  not  be  justified  with  electrically  operated  cars,  where 
the  surface  of  the  pavement  is  usually  better  than  in  the  adjoining  portion  of 
the  street  upon  which  vehicles  are  supposed  to  preferably  travel. 

Under  present  conditions  the  patron  of  the  street-car  who  supports  the  service 
pays  for  the  construction  and  maintenance  of  a  pavement  in  the  streets  for  the 
use  of  the  automobile  driver,  who  does  not  patronize  the  street-car  but  who  uses 
the  facility  provided  by  the  revenues  furnished  by  the  street-car  passenger. 

The  Chairman.  Mr.  Warren,  will  you  kindly  indicate  to  the  re- 
porter the  documents  filed  that  you  desire  to  have  made  a  part  of  the 
transcript  of  the  record  ? 

Mr.  Warren.  I  will  do  that  afterwards;  yes,  sir. 

The  following  statement  was  also  submitted  by  Mr.  Warren : 

Electric  raihcays — Balance  sheet,  operatiuff  and  lessor  companies^  1917. 

.Number   of   companies 1, 307 

Profit  and  loss  surplus 732 

Profit  and  loss  deficit 394 

Balanced  statements  (neither  surplus  nor  deficit) 181 

Total    assets   or   liabilities .$6,272,617,041 

Assets : 

Road  and  equipment 5,136,441,599 

Other   physical    property 79, 608,  323 

Stocks  and  bonds  of  other  eleclric  railway  companies 312,606,036 

Stocks  and  bonds  of  companies  other  than  electric  railways  63,395,213 

Treasury    securities 77,  883,055 

Stock 17,  254,  917 

Bonds ' 60,  628, 138 

Other  i)ermanent  investments » 108,  769, 096 

Materials  and  supplies 59,168,287 

Cash  and  notes  and  accounts  receivable 140, 191, 981 

Stock  and  bond  discount 101,483,071 

Sinking   and    other   special   funds 71,454,040 

160643'— 20 60 


I 


938       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION*. 


$8,208,174 
39,  G47.  487 
78,  740.  GSO 


Assets — ContiiuuHl. 

Interest,  dividends,  and  rents  receivable 

Sundries 

Profit  and  loss,  deficit . 

Lial)ilities: 

Capital    stock 2,  473,  S4C.  G.'l 

CoUHHon 2, 012,  ISJ),  21)4 

Preferred 4G1,  (>r>7,  3r)7 

Fundetl    debt 3,051, 179,  272 

Keul   estate  niortjrnjres 7,197,89.") 

Floating;  debt    (loans  and  notes) 160.592.228 

Reserves-.-. , 75,  744,  518 

Accounts   payable 87,947, 134 

Interests,   rents,   and    taxes   due   and    accrued ;    dividends 

<lue 

I'reniium  on  cai)ital  stock  and  funded  tlebt 

Accrued  depreciation 

Sundries 

Profit   and    loss,   surplus 

Net  surplus 


102.  999.  990 

12,  224,  ms 

73,933,  75G 

04,138,284 

150,  812.  709 
78, 072, 029 


CondcHHcd  incfjine  accounta,  year  1017, 


Operating  companies : 

Income  from  all  sources $730, 108, 040 


Operating  revenues — 

Ilailway  operations 050, 149,  800 

Auxiliarj-    operations 59,  075,286 


Total  operating  revenues- 
Operating  expenses 


Taxes. 


Net  operating  revenue. 


709,  825,  092 
452,  594. 654 

257, 230,  438 
45,  750,  095 


Ol)erating  income 211,473,  743 

•Nonoperating  income 20, 282, 948 


Gross  income. 


231,750,091 


Deductions  from  gross  income : 

Kent  for  leased  roads  (lines  and  terminals) 

Interest  on  funded  and  unfunded  debt 

All   other 


Total  deductions- 


48,  302,  S23 
119,113,018 

7, 889, 920 

175,  .305,  701 


Net    in<'ome- 
Dividends-- 


50,  450,  930 
48,  337,  435 


Surplus 8, 113,  495 

Opcrothif/  crpmscs  by  detailed  aeeount,   United  States,  1917. 


Numl>er  of  companies 943 

Oi)erating  expenses $452,  594,  054 


Railway- 
Auxiliary 


421,250,838 
31,343,810 


Way  and  structure 55,  754,  859 

Superintendence  of  way  and  .structures 3,110,073 

Maintenance  of  way , 35,717,257 

Maiuti^iance  of  electric  lines 0,023,513 

Buildings,  fixtures,  and  gnmnds 2,912,025 

Depreciation  of  way  and  structures 0,800,348 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       939 

Way  and  structure — Continued. 

Other  operations <;rjr)-j  (»^o 

Other  operations,  credit I-I— I__II-_  I-_I  ''>54  440 

Railway  oi^erations,  net  total !___  55  470'  419 

I^quipment J  49'485's80 

Superintendence  of  equiimient o'  039'  073 

Maintenance  of  equipment l^ZZ^Zl  35;910;G95 

Mi.scellaneous  equipment   expenses 4  *>49  990 

Depreciation  of  and  retired  equipment 0  830  830 

Other    operations __  ~  448' 057 

Other  oi^erations,  creilit _~~     ~"  504*  3->0 

Railway  operations,  net  total -      —      -  qgi'^.^i 

Powpr  '    ^   "  '  ^^"* 

iU«ei g.^     g-i^     jyj 

Superintendence  of  power ~  "'  93J'  3]  ^^ 

Power-plant  buildings,  fixtures,  and  grounds I_  408  3''>l 

Maintenance  of  power  equipmeirt J  4, 128  435 

Depi'eciation  of  power  plant,  buildings,  and  equipment_Z_-  ^'•>7(;  ">95 

Power-plant    employees _"-_-_  0,059,758 

Fuel  for  power 30  107  325 

\\  ater   for   power -^4. 132 

Other  power  supplies  and  expenses 1  47-,  3^^ 

Substation  employees ~_  ~  *^  034  Vo" 

Power  purchased  and  exchanged,  credit ~"  4  'yr.q' k-ii 

Other  operations,  credit ~  "  _  ~__~_y~"Z  11  1.34  504 

Railway  operations,  net  total __  76'qH<«'4«i 

Conducting  transiwrtation ZIS_1_  I"  174  979  j^-, 

Superintendence  of  transportation - ZI__'  9  839* '^30 

Conductors,  motormen,  and  trainmen ~  131'  950'  ggj) 

IMi.scellaneous  transportation  expenses ~  q4'osn'7*>n 

Traffic  exi)en.ses _  _  __!  i::":":: o  oni   iT7 

(General  and  luiscellaneous '""  04  185  3()8 

Salaries  and  expenses  of  general  officers I__-II— I  7  013  75'> 

(Jeneral  expenses ^  *»'  794  ()ivi 

Iiuuries  and  damai^es ""  oq' riVj' ^.3 , 

Insurance '___ IIHIIIIIIIIIIIIII  3  loi  407 

Rent  of  track.s,  facilities,  and  tniuipment ^~  7'i5o'qoo 

Other  oi)erations .        _  _"_  ~"~~  ^70  woo 

Other  operations,  credit ~_I  _'_'_'_  _______  1  447  04'> 

Railway  operations,   net   total ~  0'>' 7W  o-.r 

Transportation  for  investment— ~_ ~_  172  323 

Mr.  Warrex.  Prof.  Jenks,  will  yon  resume  the  stand? 

STATEMENT  OF  ME.  JEREMIAH  W.  JENKS— Continned. 

Mr.  Jenks.  Yon  had  been  asking  me  some  qnestions,  Mr.  Com- 
missioner. 

Commissioner  Beall.  Yes,  sir;  I  had  finished  with  tho.se. 

Mr.  Jenks.  Some  questions  have  been  asked  with  reference  to  the 
effect  ot  tlie  short-term  franchise  on  the  securities.     I  had  spoken 
ot  the  desirability  of  the  short-term  franchise,  25  or  30  years  perhaps 
the  reason  for  the  term  submitted  being  that  there  are  very  many 
changing  conditions  that  can  not  be  expected.  *^ 

I  recall  to  my  mind,  for  example,  a  specific  instance  that  I  remem- 
ber being  told  me  in  Washington  here  some  years  ago,  when  I  wa-:- 
engaged  in  a  Government  investigation.  It  was  the  case  of  a  jras 
company.  One  of  the  directors  told  me  that  the  chief  problem  be- 
fore them  for  some  little  time  had  been  to  find  ways  to  cover  up 
their  profits,  so  that  they  would  not  get  in  difficulties  with  the  taxing 
authorities.  ° 

Mr.  Warren.  That  was  not  a  street-railway  company. 


I 


I 


T      I 

J; 


940       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Jexks.  That  was  not  a  street-railway  company ;  no.  The  prin- 
ciple, as  to  the  franchises,  of  course,  may  be  the  same  in  general. 

He  said  that  it  had  to  seek  new  ways  to  get  securities  out,  so  as 
to  not  have  their  profits  appear  so  high  that  the  public  would  not 

stand  for  it. 

That,  of  course,  was  an  exceptional  case,  and  under  present  condi- 
tions I  am  quite  prepared  to  believe  it  would  not  apply  to  any  one 
of  the  electric  railways. 

Notwithstanding,  we  do  know  perfectly  well  that  in  the  early  days 
street-car  franchises  in  many  cities  that  were  rapidly  growing  were 
given  on  such  terms  that  within  a  few  years  they  did  become  unjust 

to  the  public. 

Now,  as  regards  this  question  of  securities,  I  am  quite  in  sym- 
pathy with  the  suggestion  that  was  made  that  they  had  to  be  taken 
care  of.  I  believe,  as  I  said  to  begin  with,  that  business  is  as  much 
a  care  of  the  public — property,  I  mean,  is  as  niuch  a  care  of  the 
public — as  anything  else.  We  are  all  one.  It  is  the  difference  in 
the  point  of  view :  but  I  should  think  there  might  be  different  ways 
of  meeting  that  objection.  If  we  are  going  to  have  any  spe<!ific 
term,  50  yeai*s,  75  years,  the  same  difficulty  is  likely  to  arise. 

Mr.  Warrex.  The  idea  of  the  indeterminate  franchise  is  to  have 

no  definite  term. 

Mr.  Jexks.  Yes ;  that  is  undei-stood. 

^fr.  Warrex.  It  simply  continues  until  the  city  chooses  to  buy  on 
an  agreed  price,  based  on  the  actual  value  of  the  property. 

Mr.  Jexks.  Yes;  I  understood  that  was  the  case. 

Mr.  Warrex.  And  in  Cleveland  it  goes  a  step  further  than  that, 
and  provides  that  the  city  can  arrange  for  the  sale  to  some  other 
company,  and  the  city  does  not  necessarily  have  to  buy  it  iself. 

Mr.  elEXKS.  In  a  great  many  cases  at  the  present  time  in  the  sales 
of  bonds  of  public-service  corporations — and  I  think  it  should  be 
generally  the  custom,  when  the  bonds  are  issued — rigid  provisions 
are  made  for  either  a  sinking  fund  or  issues  of  term  bonds  that  will 
take  care  of  themselves  as  they  go  on.  My  own  feeling  is  that  they 
should  be  included  in  the  cost -of -service  idea  and  be  taken  care  of 
in  the  permanent  obligations  of  that  kind,  as  I  think  there  should 
be  taken  care  of  a  proper  depreciation  and  maintenance  of  the  road 
and  things  of  that  kind.  I  see  no  reason  why  that  is  not  one  of  the 
regular  proper  charges  to  take  care  of  in  that  way,  and  that  would 
include  amortization. 

Commissioner  Beall.  That  is  all  right,  if  they  will  allow  you  to 
earn  enough  to  do  it ;  but  they  do  not. 

Mr.  Jexks.  Well,  there  again,  that  will  come  in  under  the  prin- 
ciple that  I  have  laid  down  at  the  beginning— that  if  we  are  going 
to  have  that,  the  rate  should  be  fixed  high  enough  so  that  there  would 
be  no  question  about  taking  care  of  the  proper  legitimate  charges. 
I  am  quite  in  sympathy  with  that,  that  they  should  take  care  of  the 

securities. 

Commissioner  Beall.  So  an  essential  feature  of  the  term  fran- 
chise, in  your  judgment,  would  be  to  take  care  of,  in  some  way,  any 
bond  issues  that  would  have  to  be  made  ? 

Mr.  Jexks.  Yes,  of  course.  Personally  I  would  not  like  to  be 
understood  as  opposing  an  indeterminate  franchise  along  the  line 
you  are  suggesting,  but  I  would  like  to  have  that  developed  in  such 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       941 

a  way  as  to  adapt  itself  to  the  changing  conditions,  and  of  course 
we  should  take  care  of  what  I  think  is  a  perfectly  legitimate  charge, 
such  as  depreciation  is. 

Commissioner  Beall.  Yes. 

Mr.  Jexks.  May  I  add  just  one  or  two  words  more,  and  then  I 
have  nothing  further  to  say,  as  far  as  I  myself  am  concerned. 

We  have  spoken  of  the  control  by  State  commissions  and  of  the 
control  by  the  city  governments  themselves.  It  seems  that  it  is  a 
little  difficult  to  lay  down  any  hard  and  fast  rule.  As  I  intimated  to 
begin  with,  the  conditions  in  different  cities  vary  so  that  each  case 
should  be  considered  by  itself.  In  the  case  of  many  large  cities,  for 
example,  if  you  do  not  have  the  city  itself  exerting  a  considerable 
measure  of  control  and  discretion,  they  are  likely  to  lose  the  interest 
in  it  that  they  have.  Of  course,  I  recognize  the  dangers.  Generally 
speaking,  the  tendency  has  been  to  give  the  State  commission  more 
control,  and  that  is  doubtless  right. 

It  would  be  very  advantageous,  it  would  seem  to  me,  if  the  com- 
mission, in  the  very  beginning,  would  seek  remedies  for  this  difficulty, 
aside  from  the  question  of  raising  fares.  I  am  not  in  a  position  to 
recommend  definitely  very  many,  but  I  recall,  for  example,  that  in 
New  York  City  at  the  time  of  the  most  congested  period,  which  was 
one  of  the  greatest  difficulties  there,  arrangements  were  made  by 
which — and  I  can  see  no  reason  why  it  should  not  be  applied  here- 
various  business  houses  might  change  their  opening  and  closing  hours 
in  such  a  way  as  to  prevent  the  ver^^  great  overcrowding. 

That  might  he  done  by  a  sort  of  an  agreement,  if  j^ou  like,  or  by 
the  city  authorities;  and  in  that  way  you  can  escape  the  peak  load 
to  it  considerable  extent,  and  thereby  get  relief  from  that  difficulty. 
Of  course,  the  trouble  with  the  electric  roads  is  that  very  largely 
their  cars  are  often  run  only  half  full,  and  at  other  times  they  can 
not  possibly  take  care  of  the  traffic,  and  if  you  could  spread  this  over 
more  time  it  would  be  helpful. 

Then  it  has  been  suggested,  I  believe  here,  that  a  very  customary 
l^lan  is  to  compel  the  electric  lines  to  pave  between  the  tracks,  and 
that  they  might  possibly  be  relieved  from  such  taxation  in  an  emer- 
gency, although  the  latter,  it  seems  to  me,  ought  to  be  avoided  if 
possible.  I  do  not  want  to  make  exceptions  along  those  lines  if  it 
can  be  avoided.  Those  things,  I  should  think,  in  a  good  many  cases 
might  be  worked  out,  but  I  am  not  competent  to  state  how. 

That  is  all  I  have  to  say,  Mr.  Chairman,  unless  you  wish  me  to 
answer  some  questions. 

The  Chairmax.  We  are  much  obliged  to  you. 

Mr.  W^arrex.  I  want  to  introduce  Prof.  Conway  in  reference  to 
the  increases  of  fare,  and  particularly  in  reference  to  the  zone 
system. 

STATEMENT  OF  MR.  THOMAS  CONWAY,  JE. 

Mr.  Warrex.  Will  you  give  your  full  name? 
Mr.  CoNw^AY.  Thomas  Conway,  jr. 
Mr.  Warrex.  Where  are  you  located  ? 

Mr.  Conway.  I  hold  the  chair  of  finance  of  the  University  of 
Pennsylvania. 


942       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 


Mr.  Warren.  And  have  you  given  a  good  deal  of  study  to  the 
street-railway  situation? 

Mr.  Conway.  I  have ;  yes,  sir. 

Mr.  Warren.  And  a  good  deal  to  the  question  of  increased  fares 
and  different  methods  of  accomplishing  it? 

Mr.  Conway.  That  is  correct. 

I  might  say — and  I  think  j^erhaps  it  would  help  the  commission, 
to  know  how  far  my  study  of  this  question  has  gone,  in  order  that 
they  may  tell  to  what  extent  my  views  are  worth  while 

Mr.  Warren.  Yes;  I  will  be  glad  to  have  you  do  that. 

Mr.  Conway.  If  I  should  just  go  into  that  a  little? 

Mr.  Warren.  Yes. 

Mr.  Conavay.  For  a  great  many  years — that  is,  for  over  10  years — 
I  have  studied  the  public-utility  question,  first  as  a  university 
teacher,  and  later  from  a  more  intimate  connection,  in  the  examin- 
ing and  reporting  upon  public-utility  properties  for  investment 
bankers.     Included  in  that,  of  course,  were  street-railway  properties. 

When  the  European  war  broke  out  and  the  price  situation  had 
begun  to  be  acute,  I  was  requested  by  some  of  these  firms  to  study 
the  matter  of  protecting  the  securities  which,  in  past  years,  had  been 
sold  to  investors.  In  that  way  I  became  intimately  interested  in 
the  matter  of  endeavoring  to  reestablish  a  sound  economic  basis  for 
the.se  enterprises. 

The  electric  railways  of  the  State  of  New  York,  through  their 
association — the  Xew  York  State  Electric  Railway  Association — I 
believe,  were  the  pioneers  in  calling  the  attention  of  the  public  and 
the  commissions  to  the  problem;  and  through  a  special  committee 
which  was  created  in  191G,  of  which  Mr.  Choate  was  chairman, 
general  testimony  in  form  very  similar  to  that  which  has  been  pre- 
sented here,  was  laid  before  the  New  York  Commission,  especially 
the  up-State  commission,  so  called.  Mr.  Carr  at  that  time  was  a 
member  of  the  commission. 

I  testified  in  that  proceeding  and  assisted  the  committee  in  bring- 
ing out  the  facts  as  they  then  existed,  largely  from  the  records  of 
the  commission  itself  and  the  repoi-ts  of  the  companies  to  the  com- 
mission. 

Subsequent  to  that  time  I  have  given  a  great  deal  of  attention  to 
the  matter  of  endeavoring  to  work  out  an  equitable  solution  of  the 
problem  of  readjusting  rates  to  bring  about  the  necessary  readjust- 
ment of  revenues,  and  in  connection  with  that  matter  have  made 
careful  studies  of  the  possibility  of  rate  readjustment  on  a  number 
of  properties.  These  properties,  I  think,  present  practically  every 
condition  which  you  Avould  encounter,  at  least  in  the  eastern  part 
of  the  United  States.  I  have  in  mind  particularly  certain  proper- 
ties in  which  these  various  phases  are  illustrated,  such  as  the  Wilkes- 
Barre  Railway  Co.,  which  serves  the  territory  in  and  around  the 
city  of  Wilkes-Barre ;  the  Lehigh  Valley  Transit  Co.,  which  serves 
a  large  part  of  the  territory  lying  to  the  north  of  Philadelphia  and 
including  the  eastern  end  of  the  Lehigh  Valley. 

Subsequent  to  that  time,  when  these  matters  were  investigated  and 
I  made  a  report  upon  questions  of  revisions  of  fares  and  rates,  I  was 
privileged  to  participate  in  two  very  interesting  studies,  one  made  at 
the  direction  of  the  Xew  Jersey  Utilities  Commission,  which  ordered 
the  Public  Service  Railway  Co.  to  work  out^  if  joossible,  a  plan  for 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       C43 

a  zone  system  of  fares.  (I  might  Siiy  that  the  Public  Service  Railway 
^^'Op^^Yntcs  practically  all  of  the  electric-railwav  lines  in  the  State 
of  ^ew  Jersey,  exceptmg  those  in  the  seashore  resorts  and  in  the  city 
of  Trenton.  So  that  you  l^^^d  practically  all  of  the  conditions  which 
you  would  encounter  in  a  State,  from  the  rural  lines  to  the  lines  in 
thickly  settled  cities). 

At  about  the  same  time  the  president  and  trustees,  the  latter  ap- 
pointed by  the  United  States  court,  operatinor  and  controlling  the 
Connecticut  Co.  property  (which  serves  practically  all  of  the  State  of 
Connecticut,  including  not  only  cities  but  the  rural  districts)  re- 
<iuested  me  to  make  a  study  of  the  whole  question  of  a  readjustment 
of  rates  to  meet  the  necessities  of  the  situation. 

Mr.  Warren.  Just  a  moment.  Professor.  Those  trustees  have  no 
personal  interest  m  the  Connecticut  Co.  at  all,  have  they  ? 

Mr.  Conway.  No.    They  were  appointed  bv  the  Federal  court  to 
adiiiimster  the  property  m  connection  with  the  dissolution  of  the  so- 
called  trust  affected  by  the  court  when  thev  divorced  the  trolley  line 
from  the  control  of  the  Xew  York,  Xew  Haven  &  Hailford  Railroad. 
Mr.  Warren.  They  are  merely  trustees  to  disj^ose  of  the  property^ 
Mr.  Conway,  les,  sir;  and  administer  it  until  such  time  as  that 
can  be  accomplished. 
Mr.  Warren.  Yes. 

Mr.  Conway.  Xow,  it  was  my  good  fortune  to  have  in  connection 
with  those  two  matters  every  metisiire  of  c(K)peration  and  assistance 
which  it  was  possible  to  secure.  The  studies  were  most  elaborate  and 
without  going  into  detail  at  this  time  regarding  them,  I  think  that 
in  connection  with  these  questions,  I  was  able  to  get  a  very  clear  i)ic- 
ture  oi  at  least  some  of  the  difficulties  in  readjusting  rates  and  some 
measure,  perhaps,  of  the  possibilities  of  the  various  methods  of  read- 
ju^.ting  rates  to  sec-ure  additional  revenues;  because,  as  I  sav,  vou  had 
practical  y  every  situation  which  existed  in  the  two  States,  from  the 
thinly  settled  rural  lines,  with  hourly  service,  as  in  Connecticut  to 
cars  operating  on  20-second  headway  in  the  rush  hours  in  the  city  of 
Aewark. 

Xow,  in  addition  to  that,  I  have  been  requested  to  report  en 
various  other  properties;  in  each  ease,  the  report  along  the  lines  of 
endeavoring  to  work  out  or  point  out  an  equitable  method  of  increas- 
ing the  revenues  by  the  readjustment  of  fares  to  meet  the  increased 
operating  ex^^enses. 

Mr.  Warren.  Do  you  care  to  siiy  anything  al>out  the  rapidity  of 
the  increase  ot  operating  expenses? 

Mr.  Conway.  Well,  I  have  not  been  here  regularly  at  these 
s^ssuns— 1  got  in  last  evening— but  I  assume  that  the  commission  is 
well  aware  of  the  general  course  of  these  increases  in  operating  costs. 

in  the  hrst  place,  in  my  mind,  they  divide  themselves  into  Certain 
periods.  1  he  real  increase  in  operating  cost  began  manv  years  aoo 
and  It  went  along  gradually.  The  situation  from  a  broad  point  of 
View  as  1  see  it,  was  one  m  which  increased  costs  were  offset  to  -i 
considerable  extent  in  that  first  stage  by  various  improvements  iii 
the  art,  which  were  effected  by  the  managers  of  the  properties;  but 
1  think  on  the  whole,  speaking  now  of  the  prewar  period,  the  man- 
ageis  of  the  propei-ties  were  steadily  but  slowly  losing  gi-ound.  The 
investors  in  securities  were  very  uncertain  about  the  ability  of  the 


m 


944       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

manager  to  meet  these  increased  costs,  and,  in  consequence,  the  street- 
railway  securities  wei-e  in  disfavor. 

Now,  when  the  war  came,  this  gradual  progress  was  suddenly 
changed  into  an  acute  crisis.  In  1916  tkere  was  a  large  increase  in 
operating  costs,  resulting  at  that  time  in  most  cases  from  an  increasa 
in  the  cost  of  materials,  largely  due,  no  doubt,  to  the  demands  of  the 
Allies  for  supplies  of  all  kinds.  In  these  stages  there  was  little  or  no 
increase  in  lal)or  cost. 

Then  the  labor  phase  of  the  situation  became  acute;  and  what  I  call 
the  first  crisis  in  the  labor  element  was  reached  last  summer,  when 
the  War  Labor  Board  was  called  upon  to  readjust  wages  in  order  to 
offset  the  increased  cost  of  living. 

Now,  as  you  doubtless  know,  the  greater  part  of  the  expenses  of 
an  electric  railway  is  lalx)r.  My  recollection  is  that  the  census  of 
1012  shows  that  over  60  per  cent  of  the  total  operating  expense  of 
electric  railways  were  wages  and  salaries,  and  that  only  a  little  over 
1  per  cent  represents  the  salaries  of  officers.  A  recent  careful  study 
of  the  cost  of  operation  of  the  Public  Service  Railway  Co.  for  the 
12  months  ending  July  1  of  this  year  showed  that  over  75  per  cent 
of  the  operating  expenses  were  labor,  and  since  that  time  the  War 
Labor  Board  has  raised  wages.  I  have  not  figured  it  out,  but  it  must 
be  practically  80  per  cent  now  of  the  operating  expenses  of  that 
company  are  labor. 

The  increased  wages  which  the  AVar  Labor  Board  granted  to  the 
men,  beginning  last  summer  and  extending  through  the  fall  and 
winter,  brought  a  very  serious  problem;  and,  as  I  see  it,  the  com- 
panies have  not  even  yet  l)een  able  to  readjust  their  fares  and  their 
income  to  ttike  up  these  increased  expenses  represented  by  the  in- 
creased wages  granted  to  the  men  last  summer  and  fall  and  early 
winter. 

Now  we  are  about  to  enter,  in  my  opinion,  the  third  phase.  It  is 
here.  It  is  on  us.  We  are  just  coming  into  it,  and  that,  from  the 
standpoint  of  the  companies,  is  the  most  serious  of  all,  on  the  theory 
that  it  is  the  last  straw  that  breaks  the  camel's  back. 

You  know  the  wages  of  trainmen,  and  they  carry  with  them  col- 
lateral increases  for  other  classes  of  employees,  have  recently  been 
increased,  by  one  method  or  another,  and  the  process,  as  I  see  it,  of  a 
second  general  readjustment  is  here. 

I  call  attention  to  the  recent  increase,  in  Detroit  from  48  cents  to 
60  cents  an  hour,  and  in  Cleveland  48  cents  to  60  cents  an  hour. 

There  are  pending  before  the  National  War  Labor  Board  cases 
involving  the  Bay  State  Street  Railway  Co.,  or,  as  it  is  now  called, 
the  Eastern  Massachusetts  Street  Railway  Co.,  and  the  Pittsburgh 
Railways  Co. 

Mr.  Warren.  You  do  not  mention  the  Boston 

Mr.  Conway.  I  was  just  getting  to  Boston. 

Mr.  Warren.  Oh,  I  beg  your  pardon. 

Mr.  Conway.  The  Boston  case  was  pending  before  the  War  Labor 
Board,  but  the  men  w^ere  not  willing  to  wait  for  that  answer.  The 
consequence  was  that  it  had  to  be  settled  by  a  quicker  tribunal ;  and 
62  cents,  I  think,  was  the  amount  granted  to  the  men  in  order  to  re- 
establish service. 

The  Chicago  situation  is,  at  the  moment,  very  acute.  The  men 
are  asking  85  cents  an  hour,  wuth  an  eight-hour  day. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       945 


Mr.  Warren.  I  ought  to  state  that  I  do  not  know^  which  is  cor- 
rect. The  telegraphic  dispatches  stated  the  rate  in  Boston  at  62  cents, 
and  the  Boston  paper  which  I  received  this  morning,  in  giving  an 
account  of  the  celebration  on  the  common  when  the  result  was  an- 
nounced, indicated  that  60  cents  was  the  rate  for  the  surface  men 
and  62  cents  for  the  men  on  the  subway  and  elevated  cars.  So,  as  I 
say,  I  do  not  know  which  is  correct. 

Mr.  Conway.  Probably  that  is  correct. 

Mr.  Warren.  Yes.    They  usually  have  a  slight  differential. 

Mr.  Conway.  Yes.  Now,  my  information  on  the  Chicago  situa- 
tion that  I  am  about  to  relate  now  is  all  from  the  newspapers;  but 
the  clippings  which  I  received,  taken  from  the  Chicago  papers,  just 
before  I  came  to  Washington  yesterday,  indicated  that  the  company 
had  offered  the  men  operating  on  the  surface  cars  60  cents  an  hour 
and  those  operating  on  the  elevated  62  cents  an  hour.  The  men  had 
rejected  the  offer  and  had  demanded  85  cents,  their  original  demand. 

Now,  as  I  say,  the  War  Labor  Board  advanced  the  wages  of  the 
trainmen  of  the  Public  Service  Railways  from  45  cents  to  50  cents. 
These  increases  are  far  more  important  than  would  be  indicated  by 
the  enumeration  of  the  companies  which  are  affected,  because  the 
War  Labor  Board  had,  practically  speaking,  standardized  wage  rates, 
dividing  the  companies  into  three  groups.  The  fii*st  group  embraced 
those  properties  in  the  large  cities  where  the  cost  of  living  was 
highest.  In  the  original  awards  they  gave  the  men  48  cents  an  hour 
as  the  maximum  in  these  cities.  That  48-cent  rate  has  gone  to  60 
cents  an  hour,  an  increase  of  at  least  25  per  cent. 

The  second  group  of  companies  established  by  the  War  Labor 
Board  w^ere  what  was  known  as  the  45-cent  group,  the  companies 
operating  in  the  smaller  cities,  where  the  cost  of  living  was  less; 
and  then  there  was  a  third  group,  representing  properties  operating 
in  the  thinly  settled  districts,  where  the  cost  of  living  was  still  less. 

Now,  with  a  w  ell-organized  unit  of  men,  such  as  is  the  case  in  the 
street-railway  business,  the  establishment  by  a  number  of  companies 
of  the  60-cent  rate  practically  means — I  am  certain  of  this  m  my 
own  mind — that  all  of  the  other  companies,  under  like  conditions, 
are  going  to  have  to  follow  suit,  and  the  -establishment  of  rates  for 
such  companies  as  are  typical  of  the  old  45-cent  group,  such  as  the 
Public  Service  Railway,  the  Bay  State  system,  and  the  Pittsburgh 
Railways  Co.,  is  going  to  mean  that  all  of  those  companies  will  be 
elevated,  and  then  the  rural  lines — if  I  might  so  term  them:  those 
with  the  cheapest  rates — w  ill  have  to  follow  suit. 

You  have  therefore,  as  I  say,  a  situation  in  which  the  industry 
is  now  called  upon,  or  will  be  within  a  very  short  time,  to  take  on  at 
least  a  25  per  cent  increase  in  wages.  I  think  that  is  the  outstanding 
fact  of  the  moment. 

We  have  been  talking  largely,  all  of  us,  about  where  we  were 
yesterday  and  last  month  and  last  winter.  The  real  problem  is  where, 
are  we  going  to  be  this  fall  and  this  winter  with  these  increased 
w  ages ;  and  the  statistical  record  is  before  you.  You  know  how  little 
there  is  in  the  way  of  surplus  revenue  to  carry  these  increases,  and 
yet  they  are  here,  and  they  must  be  met  somehow  or  other. 

I  have  in  mind  an  interurban  road  in  the  Middle  West,  the  bond- 
holders of  which  asked  me  to  advise  them.    They  have  a  protective 


II 


946       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

committee.  That  company  is  in  receipt  of  demands  from  their  men 
for  wage  rates  based  on  these  Chicago  demands,  and  if  those  wages 
are  granted  the  total  revenue  of  that  property  on  the  rates  now 
charged  will  not  be  sufficient  to  pay  the  wages;  and  yet  that  prop- 
erty, for  many  years,  paid  dividends,  and  has  a  value  fixed  by  the 
commission  of  some  $1^1,000,000.  They  earned  within  a  liuiulred 
thousand  dollars  of  their  fixed  charges  last  year.  There  you  have  a 
condition  which  I  do  not  think  can  be  paralleled  in  this  country — 
in  the  history  of  this  country — and  one  the  seriousness  of  which  is 
in  the  immediate  future,  rather  in  the  present  or  in  the  late  past. 

Now,  therefore,  to  talk  about,  as  I  see  it,  the  increased  rates  which 
had  been  granted  in  the  past  by  commissions,  or  the  increases  which 
are  now  being  asked  for  in  cases  pending  and  undecided,  is  to  discuss 
the  affairs  of  yesterday  and  not  the  questions  which  are  the  live  niiit- 
ters  of  to-day.  It  is  true  that  a  large  percentage  of  the  companies 
in  this  country  have,  in  some  measure,  received  increases. 

I  took  a  computation  made  by  the  American  Electric  Railway 
Association  and  endeavored  to  bring  it  up  to  date  by  adding  com- 
panies which  had  increased  fares,  and  classified  those  companies 
according  to  the  recent  changes.  On  that  basis  I  find — that  is,  by 
bringing  their  figures  up  to  date — that  there  are,  according  to  their 
statement,  273  cities  in  the  United  States,  having  a  population  of 
25,000  or  more.  In  over  200  of  these  fares  have  been  increased  from 
those  which  prevailed  before  the  war.  Of  these  increases,  13o  were 
granted  by  public-utility  commissions,  and  52  by  local  authorities, 
11  became  effective  under  service-at-cost  plans,  1  was  put  into  effect 
by  order  of  a  IJ^nited  States  court,  and  1  by  action  of  the  company. 

In  24  cities,  applications  for  increases  have  been  refused.  In  20 
of  these  cases,  tlie  refusal  came  from  local  authorities,  and  in  4:  cases 
from  the  connnissions. 

Forty-two  States  and  the  District  of  Columbia  have  cities  of  more 
than  25,000.  In  30  of  these  States,  increases  have  been  granted.  In 
Connecticut,  Delaware,  the  District  of  Columbia,  Idaho,  Maine, 
Maryland,  Massachusetts,  Mississippi,  Montana,  Xew  Hampsliire, 
New  Jersey,  North  Carolina,  Oregon  and  Rhode  Island,  increases 
have  been  granted  in  all,  cities  of  more  than  25,000.  In  Arkansas, 
Florida,  Kansas,  Oklahoma,  South  Carolina  and  Tennessee,  no  in- 
creases have  been  granted  in  such  cities. 

A  10-cent  fare  is  being  charged  in  29  cities;  an  8-cent  fare  in  8; 
7  cents,  plus  1  cent  for  transfer,  in  13;  6  cents,  plus  1  cent  for  trans- 
fers, in  2 ;  and  a  7-cent  fare  in  20,  and  a  G-cent  fare  in  94. 

Thirty-six  applications  are  pending  before  commissions,  27  before 
citv  authorities,  and  2  before  coui*ts. 

Municipal  ownership  has  been  proposed  in  three  cities — San  Fran- 
cisio,  Detroit  and  Omaha.  Service-at-cost  plans  are  being  considered 
in  Philadelphia,  Xew  Orleans,  Minneapolis,  Denver,  Louisville,  Oak- 
land, I^erkeley  and  Muskogee. 

In  six  cities,  the  service  is  being  operated  by  the  State,  while 
State  operations  will  be  shortly-  under  way  in  12  more. 

In  31  cities  railway  companies  are  in  the  hands  of  receivers. 

In  addition  to  these  increases  affecting  urban  systems,  a  large 
proportion  of  the  interurban  electric  lines  in  the  country  have  ma- 
terially increaseil  their  fares. 


I 


u 

'7 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       947 

Mr.  AVakrex.  Has  that  been  compiled  up  to  date,  Professor? 

Mr.  Conway.  The  compilation  made  by  the  offic^x's  of  the  Ameri- 
can Electric  Railway  Association  is  as  of  April.  I  searched  the  files 
of  the  Electric  Railway  Journal  and  the  Commercial  and  Financial 
Chronicle,  and  where  a  company  had  increased  fares  from  6  to  7 
cents,  I  reduced  the  number  of  companies  on  which  G-cent  fares  pre- 
vailed by  one,  and  added  one  to  the  7-cent  cities.  In  that  way  I 
endeavored  to  bring  it  up  to  date.  I  am  quite  certain  it  is  not  fully 
complete,  but  perhaps  it  errs  on  the  side  of  understating  recent 
changes,  especially  with  reference  to  small  communities:  but  that 
was  as  near  as  we  could  get  any  kind  of  an  accurate  picture  of  the 
situation  as  it  prevailed. 

Xow,  if  I  am  <orrect  in  my  assumption  that  these  increases  in 
wages  which  have  come  about  in  the  last  few  days  are  the  fore- 
runners of  another  general  advance,  such  as  occurred  in  the  late  sum- 
mer, then  all  of  these  increased  rates  are  going  to  be  as  inadequate, 
or  almost  as  inadequate,  as  were  the  rates  prior  to  the  time  of  the 
last  increases.    We  have  got  to  get  over  another  mountain. 

Therefore,  as  I  see  it.  the  record  of  increases  in  the  past  is  of 
significance  in  pointing  out  the  communities  in  which  a  recognition 
has  thus  far  occurred  of  the  economics  of  the  situation,  and  probably 
the  whole  work  has  to  be  done  over  again  in  a  few  months  to  take 
up  these  labor  increases,  or  if  you  do  not,  your  companies  will  be 
back  where  they  were,  say,  a  year  ago,  if  no  increases  whatever  had 
been  granted. 

Now,  as  I  talk  to  the  ordinary  man  on  the  street — and  after  all 
his  view,  I  think,  is  very  important—  he  fails  to  appreciate  the  ex- 
tent to  which  costs  of  operation  have  increased. 

I  well  remember  when  the  present  Public  Service  Railway  Co.  ap- 
peared before  the  Camden  Board  of  Trade,  in  Camden,  N.*^  J.,  com- 
posed of  business  men,  who  were  acquainted  with  the  changes  in  price 
levels,  the  gasp  that  went  around  the  room  when  they  were  told  that 
to  haul  within  2  per  cent  of  the  same  number  of  people  which  the 
company  carried  in  lOlG  would  cost  in  the  year  1919-20.  the  year 
ending  June  30,  1920,  80  per  cent  more.  That  gasp,  as  I  say,  in- 
dicated to  my  mind  that  they  were  taken  off  their  feet.  They  could 
not  believe  the  facts. 

Xow,  if  the  5-cent  fare  was  adequate  in  the  days  when  costs  were 
as  they  were  in  191G,  anyone  will  readily  admit  that  on  the  basis  of 
averages  an  8  or  9  cent  fare  will  be  required  to-dav  to  put  the  com- 
pany where^it  was  in  191G. 

I  think  one  of  the  problems  Avhich  the  industry  must  solve,  and 
which  I  think  this  commission  can  perform  a  gi-eat  national  service 
m  assisting  in  the  solution  of,  is  to  get  the  people  to  understand  the 
extent  to  which  costs  have  increased.  That  is  the  first  thing.  The 
public  are  behind  the  times  in  this  thing.  They  do  not  understand 
the  relation  of  income  and  outgo. 

Now,  the  second  fact  I  think  is  quite  evident,  and  that  is  the  matter 
for  which,  perhaps,  the  commissions  are  in  part  responsible,  and  I 
do  not  except  the  companies.  They  have  been  shortsighted  in  talking 
about  an  emergency,  to  get  through  the  war. 

Mr.  Warren.  Before  you  take  up  the  question  of  emergency you 

say  the  commission  can  do  a  great  deal  of  good  in  educating  'the 
public  as  to  increased  operating  costs? 


948       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Conway.  Yes. 

Mr.  Warren.  How  should  that  be  done? 

Mr.  Con  WAV.  I  liad  in  mind  more  particuhirly  this  commission 
setting  here.  The  average  commission's  opinion,  from  the  standpoint 
of  the  requirements  of  the  law,  must  of  course  meet  certain  require- 
ments, but  I  notice  that  if  you  take  even  a  college  student  and  give 
him  an  opinion  to  read,  lie  does  not  see  the  homely  truths  that  lie  at 
the  bottom  of  the  whole  thing.  He  does  not  get  the  ordinary  common 
denominator  comparisons.  The  average  commission  does  not  point 
out  the  things  in  their  opinions  in  a  way  that  the  man  on  the  street 
can  understand  them.  It  is  over  his  head,  just  like  a  decision  of  the 
Supreme  Court  of  the  United  States.  That  is  doubtless  necessary 
from  a  legal  point  of  view,  but  I  have  often  felt  that  if  there  were  a 
few  paragraphs  in  the  opinion  which  an  ordinary  man  could  under- 
stand, because  they  stated  the  truth  in  a  homely  Avay,  and  by  the  use 
of  a  few  simple  comparisons  which  he  would  understand,  he  would 
get  the  measure  of  the  thing. 

Mr.  Warren.  Then,  I  take  it.  you  think  *we  should  set  out  the 
figures? 

Mr.  Conway.  It  is  not  so  much  stating  how  many  millions  of 
dollars  are  required  as  it  is  stating  the  fare  which  is  required.  A  man 
reasons  in  his  terms  of  a  nickel.  The  commissions'  decisions  deal 
with  millions  or  hundreds  of  thousands,  depending  on  the  size  of  the 
company.  To  the  ordinary  man  the  difference  between  $100,000  and 
$150,000  or  $200,000  is  not  very  great. 

Mr.  Warren.  But  if  you  raise  the  motorman's  wages  from  40  to  65 
cents  an  hour 

Mr.  Conway.  He  understands  that. 

Mr.  Warren.  He  understands  that? 

Mr.  Conway.  Yes. 

Mr.  Warren.  Because  it  takes  five  more  fares  per  hour  to  pay 
that  man's  wage? 

Mr.  CoNnvAY.  That  is  the  idea  exactly. 

Mr.  Warren.  If  you  divide  it  up  in  that  way,  the  ordinary  reader 
could  understand  it:  could  he  not? 

Mr.  Conway.  That  is  right. 

Mr.  Warren.  Is  that  the  idea  you  have? 

Mr.  Conway.  That  is  the  idea  I  have,  or,  stated  in  another  way, 
that  a  car  ride,  according  to  the  commission's  finding,  costs  so  much 
to-day,  and  say,  five  years  ago,  that  same  car  ride  cost  so  many  cents. 
The  commission  goes  through  a  lot  of  calculations,  involving  hun- 
dreds of  thousands  of  dollars  and  a  hundred  operating  accounts  and 
valuations  and  a  lot  of  things,  and  then  says  that  the  rate  is  fair, 
but  it  does  not  say  what  it  cost  the  company,  in  cents,  to  furnish  a 
car  ride. 

Now,  the  commission's  opinion  after  all  is  justification  for  its 
finding,  that  is  to  justify  its  finding  to  a  court  of  review,  and  I 
think  it  is  just  as  important  to  justify  it  to  the  man  on  the  street. 
Jt  takes  the  language  of  the  court  of  review.  It  apparently  forgets 
the  man  on  the  street. 

Commissioner  Sweet.  You  think  homeliness  is  a  virtue? 

Mr.  CoNW\\Y.  Yes;  in  these  opinions 

Commissioner  Sweet.  And  homeliness  is  one  of  the  character- 
istics of  this  commission.     [Laughter.] 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       949 

The  Chairman.  We  need  no  evidence  to  prove  that. 

Commissioner  Meeker.  As  you  stated,  the  increase  m  wages  was 
the  prime  question,  the  prime  question  involved  in  the  immediate 
problem,  so  that  the  determination  of  the  labor  policy  is  of  the  first 
importance,  I  take  it,  in  your  mind  ?  ,     .         i.    ,  • 

Mr.  Conway.  Do  you  mean  from  the  standpoint  of  this  commis- 
sion or  from  the  standpoint  of  the  company? 

Commissioner  Meeker.  From  the  evidence  that  you  yourself  have 

adduced.  .    ,       ,  ^       p  i  i  t 

Mr.  Conway.  Yes;  the  result  of  the  demands  of  labor,  as  1  see 

it,  is  the  controlling  factor.  ,  .    ,  ,  ^.  t 

Now  the  public  have  a  peculiar  attitude  on  this  labor  question,  i 
do  not  sav  this  in  any  criticism,  but  as  an  explanation  of  the  facts 
as  I  see  them  at  this  moment— that  the  extent  to  which  operating 
expenses  will  be  increased  and  the  extent  to  which  the  fare  must  be 
increased,  if  possible,  is  determined,  you  might  say,  by  the  enlight- 
ened self-interest  of  labor. 

Commissioner  Meeker.  And  the  all-important  thing  is  to  stabilize 

so  far  as  it  is  possible,  the  labor  bill? 

Mr.  Conway.  Yes.  .  . 

Commissioner  Meeker.  Have  you  any  suggestion  to  give  us  along 

that  line?  ,      ^  .      ^i    x  ^i 

Mr.  CoNW\\Y.  I  think  that  is  the  great  unsolved  question  that  the 

world  has  got  to  solve.  n  j  -m      u 

Commissioner  Meeker.  You  are  familiar  with  the  so-called  I'lumb 

bill? 

Mr.  CoNW^AY.  In  a  general  way;  yes. 

Commissioner  Meeker.  Do  you  advocate  any  such  treatment  as 
that  to  cure  the  street-railway  troubles? 

Mr.  Conway.  Well,  I  must  confess  that  I  have  not  been  able  to 
think  out  a  practical  solution  of  this  labor  question.  The  companies 
make  a  great  mistake  in  each  thinking  in  terms  of  itself.  Without 
mentioning  any  names— a  certain  company  will  make  an  agreement 
with  a  labor  union  that  they  will  give  them  a  certain  wage  increase 
if  the  laboring  men  will  help  them  force  the  fare  up.  Now  they 
do  not  realize  that  whatever  they  do  affects  the  entire  industry.  I 
do  not  know  that  you  can  change  that  situation;  I  do  not  know 
that  it  would  be  advisable  to  change  it. 

Mr.  Warren.  But  you  do  not  think  that  any  company  often  agrees 
to  pay  a  higher  fare  than  the  best  judgment  of  its  mi?.nagers  would 
justify,  in  order  to  avoid  a  strike? 

Mr.  CoNW^\Y.  Well,  that  is  it.  I  think  the  public-utility  operators 
are  like  any  other  class  of  managers  in  that,  as  a  practical  matter, 

they  can  not  afford  a  strike.  ,.,..         tjuui^ix 

Commissioner  Gadsden.  Don't  you  think  it  would  be  helpful  to 
this  commission  and  to  the  public  if  the  representatives  of  organized 
labor  in  the  street-railway  field  would  come  before  the  commission 
and  give  us  their  views  on  the  subject  ? 

Mr.  Conway.  I  certainly  do.  If  they  would  tell  you  frankly  what 
their  terms  are,  then  you  would  know. 

Commissioner  Meeker.  Do  you  think  it  might  be  possible  to  bring 
on  the  street-railway  men  and  the  workmen,  not  merely  the  platform 
men,  but  the  workmen  generally— that  if  they  were  given  some 
responsibility,  a  voice  in  the  management  of  the  industry,  whether 


950       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

it  goes  SO  far  as  the  Plumb  bill  or  not,  if  they  could  be  made  to 
realize  that  every  time  their  wages  are  increased  5  cents  per  hour, 
it  means  so  much  increase  in  the  cost  of  operation,  wliich  must  be 
met  by  charging  the  riding  public  an  increased  fare? 

Mr.  Conway.  I  think  there  is  no  doubt  of  that.  I  think  if  they 
have  to  come  to  the  point  where  in  some  fashion  labor  must  take  a 
responsible  share — not  in  the  management  of  the  company,  becaus.^ 
I  do  not  believe  that  we  are  far  enough  along  for  that,  but  you  have 
got  to  the  point  where  labor  must  feel  that  they  are  not  dealing  with 
an  alien  enemy,  and  that  is  their  attitude  with  most  companies.  They 
have  no  interest  in  common  with  the  company.  They  feel  that  every- 
thing they  ^et  is  the  fair  spoils  of  war. 

Commissioner  Meeker.  They  must  be  made  to  realize  that  they 
have  an  investment  in  the  industry,  the  employees  have? 

Mr.  Conway.  They  have  got  to  realize  that  there  is  only  a  certain 
amount  of  money  in  the  business,  because  in  my  judgment  in  many 
cases  you  have  reached  very  close  to  the  maximum  under  private 
operation.  Now  if  they  want  to  deliberately  force  the  industry  ou  a 
basis  which  it  can  not  survive,  as  a  i^rivate  enterprise,  and  take  their 
chance  of  Government  control,  or  whatever  ma^^  be  involved,  they 
ought  to  make  that  choice  with  their  eyes  open  and  a  full  under- 
standing of  the  facts  as  they  exist. 

Commissioner  Meeker.  Well,  do  you  regard  the  labor  question  as 
the  question  for  the  immediate  solution  of  this  problem,  and  not 
merely  as  the  ultimate  solution,  as  I  take  it  from  your  testimony? 
Mr.  Conway.  I  do  not  go  quite  that  far.  Dr.  Meeker,  because'  I 
feel  that  the  street-railway  industry  prior  to  the  war  was  on  an 
unsound  basis,  in  that  they  were  not  paying  their  men  as  much  as 
they  ought  to  pay  theui.  I  remember  your  study,  as  Commissioner 
of  Labor,  of  the  turnover  of  the  men.  Xow,  an  industry  where  you 
have  in  prewar  times  as  much  a  turnover  as  there  Avas  in  the  street- 
railway  business  is  an  industry  in  which  there  must  be  some  degree 
of  unhealthiness.  The  companies  were  up  against  the  fixed,  inflexible 
5-cent  fare.  They  were  paying  all  they  could  pay  their  labor,  but  it 
was  a  rate  which  did  not  attract  and  hold  the*  best  class  of  men. 
Now  the  pendulum  is  swinging  tlie  other  way  perhaps.  This  union 
movement  has  s\yept  over  the  world.  The  men  have  gotten  together. 
Tliey  are  recognizing  and  feel  their  power,  and  they  are  exerting  it. 
Cominissioner  Meeker.  You  are  not  afraid  that  the  apparent  turn- 
over will  be  reduced  too  low  for  the  heaUh  of  the  industry,  are  you  ? 
Mr.  Conway.  I  do  not  think,  if  you  have  a  desirable  thing,  there 
is  such  a  thing  as  getting  it  too  low.  .1  believe  in  a  man  getting  in  a 
business  and  staying  in  that  business.  We  all  know  that  the  street- 
raihvay  job  is  a  sort  of  a  makeshift  job.  It  is  a  voung  man's  job, 
and  it  must  l)e  a  young  man's  job  in  the  nature  of  things. 

Commissioner  Meeker.  There  is  one  thing  in  regard  to  the  turn- 
over in  the  street-railway  industry,  and  that  is  the  very  undesirable 
hours  tluit  the  men  must  necessarily  work  in  order  to  serve  the  public 
and  give  it  the  service  that  it  demands. 
Mr.  Conway.  That  is  true. 

Commissioner  Meeker.  No  matter  how  high  the  wages  must  be 
made,  that  (an  not  be  avoided. 

Mr.  Conway.  There  is  no  doubt  that  that  is  true,  but  you  would 
not  call  the  work  of  the  motorman  a  skilled  occupation.    I  think  you 


I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMxMISSION.       951 

Av^ould  call  it  semiskilled,  but  their  wages  and  the  continuity  of  em- 
ployment can  be  brought  up,  I  believe,  to  such  a  point  that  the  indus- 
try will  eventually  attract  and  hold  the  higher  type  of  men  in  years 
to  couie,  a  higher  type  than  they  enjoyed  in  the  prewar  days. 

1  have  been  interested,  in  looking  over  the  pay  rolls  of  some  of 
these  companies,  to  see  what  these  men  are  making.  Now  when  a 
man  can  niake  from  $00  to  $80  a  week-that  is,  $80  every  pay  day, 
which  IS  about  $30  to  $iO  a  week-that  is  good  pay,  even  in  these' 
lays  for  semiskilled  labor;  and  when  you  remember  that  he  is  not 
Ike  the  man  employed  outdoors,  who  only  works  eight  months  in 
the  year,  but  that  the  street-car  employee  is  workinrr  throuLdiout  the 
year,  and  that  therefore  his  yearly  earnings  are  nmch  more-a  com- 

vnnf?"  ""i     f  IV?  ""'^^  '^'^'''  ^^'^^  ^-^  the  bricklayer  or  stonemason, 

}Nould  indicate  that  you  have  a  situation  which,  I  think,  in  the  future 

IS  going  to  be  able  to  attract  and  hold  the  better  class  of  labor,  who 

Will  give  better  service  to  the  public.  ' 

Commissioner  Meeker.  Let  me  repeat  my  question:  Is     not  the 

a bor  ques  ion,  then,  right  in  the  forefront?    Must  we  not  solve  t  e 
bSnil J? ''''  '"      '  street-railway  industry  before  we  have  made  a 

Mr.  Conway.  No;  I  should  say  you  must  make  the  beffinnino-  Ije- 
fore  you  come  to  the  final  ending,  and  you  will  have  to  consider  the 

Commissionei- Meekek.  What  is  the  use  of  raising  rates  to  increase 
yo.ir  income  if  it  all  has  to  go  out  in  an  advance  in  wa^cs? 

Mr.  CoNWAy.  That,  of  course,  is  a  matter  which  I  am  Sot  nrei)ar(.(l 
to  form  an  intelligent  opinion  on,  whether  the  wage  rates  now  pre 
vai]in<r  are  exceptionally  liigh.  ' 

H  '""?'"■' *l  infer  from  the  recent  findings  of  the  War  Labor  Board 
that,  in  their  judgment,  a  further  advance  in  wages  is  due  to  the  men 
If  such  IS  the  case,  then  I  submit  that  they  ought  to  get  it  whe.  the 
industry  gets  the  money  to  pay  them.  Xow.  when  wages  beg  n  to 
go  above  a  pom  which  represents  a  fair  living  wage,  then  I  agree 
with  you;  but  this  imlustry.  my  point  is.  has  reachedihe  stage  where 
what  It  needs  is  a  lifebuoy,  and  after  vou  have  saved  the  drowning 
nian,  we  can  then  inquire  why  he  fell  overboard,  and  I  am  afraid  that 
If  wc  are  going  to  try  to  regulate  wages  before  we  get  the  companies 
more^i^venue  that  while  we  are  regulating  the  wages  the  patient 

Xow  in  order  that  I  may  bring  clearly  before  you  mv  feelino' 
aI)out  the  matter  of  increased  fares,  whi^h  I  have  been  asked  Jo 

nro-r;/  7'")  *"  •'^""  •^''"•'  '^"*"*'<'"^  t°  ««•»«  °f  t'^e  recent  catl  or 
l)roiX)sals  for  fare  increases. 

The  Kansas  City  Eailways  Co.  in  Kansas  Citv,  whose  nroneitv 
was  recently  valued  by  the  United  States  court  and'its^pitS  oi 
fixed,  has  made  application  to  the  State  commission  for  10-cent 
fares,  or  two  tickets  for  15  cents;  that  is.  a  commutation  rate  of  74 
cents  and  a  cash  fare  of  10  cents.  •  i  aie  or  <  j 

The  Middlese.x-  &  Boston  Street  Railway  Co.,  in  Massachusetts 
whose  capitalization  for  a  generation,  as  in  the  case  of  the  other 
Massachusetts  companies,  has  Wen  subject  to  regulation  haffiledi 
schedule,  effective  August  1,  which  puti  the  system  on  m'acticaUv  a 
10-cent  basis,  with  a  3-cent  charge  for  transfers.  Pi'«<-"caiiy  a 


952       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Eastern  Massachusetts  Street  Railway  Co.  (the  old  Bay 
State  system),  whose  property  has  just  been  valued  by  the  Massachu- 
setts Commission  and  the  company  reorganized  under  the  service-at- 
cost  law  in  accordance  with  the  findings  of  the  commission,  and  is 
operating  under  public  trustees,  instituted  a  10-cent  fare  on  the  1st 
of  July. 

The  Boston  ElevatecJ  Railway  Co.,  also  operating  under  public 
trustees,  instituted  10-cent  fares  from  the  1st  of  July. 

The  president  of  the  Chicago  surface  lines  has  announced  that  the 
rates  of  wages  demanded  by  the  men  mean  either  a  9-cent  or  a  10-cent 
fare  in  that  cit3\ 

The  Pittsburgh  Railways  Co.  will  on  August  1  institute  a  10-cent 
fare,  with  TJ-cent  tickets. 

These  10-cent  fares  are  to  my  mind  the  serious  question.  We  have 
heretofore  talked  in  t-erms  of  6-cent  fares  and  7-cent  fares,  and 
latterly  8-cent  fares,  l)ut  these  new  wages  mean  10-cent  fares  if  you 
are  going  to  stick  to  the  straight  cash  fare. 

Now,  a  6-cent  fare  was  a  comparatively  easy  matter,  but  when  you 
get  to  10-cent  fares,  you  are  getting  into  deep  water ;  and  if  the  large 
cities  must  charge  10  cents,  the  rate  of  fare  in  the  small  towns  is  going 
to  be  one  which  is  practically  prohibitive.  In  fact,  the  whole  matter, 
I  am  afraid,  would  become  impracticable  on  the  basis  of  getting  the 
full  cost  of  operation,  under  present  conditions,  out  of  the  car  rider. 

I  sat  here  this  morning  and  listened  to  various  gentlemen  express 
their  views  on  taxes — paving,  for  instance. 

My  belief  is  that,  taking  the  companies  as  a  whole,  all  the  things 
that  you  can  suggest  of  relieving  them  of  taxes  and  of  paving  re- 
quirements and  all  of  the  other  obligations  which  represent  an  in- 
direct tax  on  the  car  rider,  a  necessary  addition  to  his  fare,  will  not 
meet  the  situation  b}^  offsetting  these  increased  costs ;  but  all  of  that, 
if  given  to  them,  still  means  for  man}^  properties  a  rate  of  fare  which 
is  almost  prohibitive,  as  a  practical  question. 

Therefore,  as  I  see  it  from  the  commission's  point  of  view,  you 
start  by  these  abatements  as  a  necessary  element,  because  without 
them  there  will  be  hundreds  of  electric  railways  that  will  have  to  go 
to  the  junk  heap,  unless  they  are  to  be  taken  over  and  operated  by 
the  public,  who  bear  the  deficit,  through  taxation. 

Now  my  feeling  about  this  matter  is  that  this  situation  is  so  serious, 
due  to  the  sudden  addition  of  these  wages,  first  last  summer  and 
fall,  and  now  to  make  these  new  additional  demands,  that  I  do  not 
believe  that  even  the  commissions  themseh  cs  are  fully  aware  of  the 
crisis  presented. 

I  have  lived  in  the  State  of  Pennsylvania.  As  I  say,  I  have  been 
in  intimate  touch  with  the  situation  in  Connecticut.  I  have  had 
the  good  fortune  of  being  well  acquainted  with  the  commissions  in 
both  States.  My  work  has  brought  me  in  close  contact  with  their 
work,  and  with  their  staffs. 

Now  I  think  the  public  utilities  laws  of  most  States  are  funda- 
mentally at  fault.  The  Pennsylvania  law  and  the  Connecticut  law — 
and  perhaps  other  States  have  the  same  law,  but  I  am  not  aware  of 
the  instances,  if  there  are  such — that  have  one  tremendous  advantage, 
and  that  is  that  in  those  States  the  companies  can  initiate  rate  in- 
creases or  rate  reductions,  to  make  a  change  and  put  it  into  effect. 
The  commission  has  the  privilege  of  ordering  the  companies,  if  it 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       953 

seems  wise,  to  give  some  sort  of  a  rebate,  a  slip  or  certificate  for  the 
amount  of  the  increase. 

To  illustrate,  if  a  company  increased  its  fare  from  5  cents  to  7 
cents,  the  commission,  if  they  feel  that  there  is  any  doubt  about  the 
justice  of  the  matter,  authorizes  and  directs  the  company  to  give 
every  passenger  a  2-cent  rebate  slip  as  he  pays  his  fare.  Those  are 
carried  as  liabilities. 

The  commission  in  Pennsylvania  or  in  Connecticut  does  not  have 
the  power  of  suspension  without  a  hearing  and  determination  of 
the  matter,  but  if  anyone  complains  about  the  rate  the  commission 
must  go  ahead  and  make  an  inquiry.  The  law  requires  the  companies 
in  Pennsylvania  to  post  the  increases  conspicuously. 

The  Chairman.  The  Penns3^1vania  law  has  been  described  here  by 
two  witnesses.  Prof.  Conw^ay,  and  you  need  not  spend  any  time  on 
that. 

• 

Mr.  Conway.  I  did  not  know  that.  The  point  I  want  to  make  is 
that  in  Pennsylvania  and  Connecticut  the  companies  have  the  right 
to  increase  their  rates,  and  the  commissions  have  the  power  to  ratify 
and,  so  far  as  I  can  see  by  studying  the  opinions  of  the  commissions, 
there  have  been  no  serious  abuses  to  develop  because  of  that  condition. 

Now^  the  great  advantage  of  that  is,  as  I  see  it,  that  the  companies 
are  able  to  try  experiments. 

Let  me  illustrate  some  of  the  instances  where  it  has  worked  ad- 
vantageously. This  rate  situation,  gentlemen,  is  not  one  of  arithmetic 
or  one  in  which  there  is  any  golden  rule  that  you  can  arrive  at 
mathematically.  I  am  frank  to  say  to  you  that  this  industry  is  in  the 
experimental  stage,  so  far  as  rates  are  concerned,  and  that  these  ex- 
periments are  largely  ahead  of  us. 

The  Pittsburgh  Railways  Co.,  for  example,  about  a  j-ear  ago  last 
December,  when  the  war  costs  hit  them,  increased  their  fare  from  5 
cents  to  6  cents  cash,  or  5J-cent  ticket.  The  War  Labor  Board  then 
increased  their  wages.  The}^  then  tried  a  so-called  zone  sj^stem, 
which  I  think  can  be  called  such  only  by  courtesy.  It  is  really  two 
superimposed  flat-fare  areas.  The  commission  held  hearings  on  the 
matter,  and  it  did  not  interfere.  Now  after  a  few  months  of  that, 
they  are  going  to  abandon  that  system  and  go  to  a  10-cent  fare. 

The  Wilkes-Barre  Railways  Co.  tried  a  6-cent  fare,  and  then  w  hen 
wages  went  up  they  tried  a  7-cent  fare,  and  then  an  8-cent  fare.  The 
matter  is  now  being  heard  on  its  merits  by  the  commission. 

The  Lehigh  Valley  Transit  Co.  first  tried  to  keep  the  S-^ent  fare  by 
shortening  up  the  zone,  the  distance  you  could  ride  for  5  cents,  and 
the  War  Board  said  its  say.  Instead  of  again  redividing  the  prop- 
erty into  zones,  the  6-cent  fare  was  put  in. 

Those  are  simpl}^  typical  instances  of  what  has  occurred.  If  that 
commission  had  been  called  upon  to  pass  upon  every  application  for 
an  increased  rate  and  decide  w^hether  or  not  it  should  be  granted  be- 
fore it  was  actually  granted  or  became  effective,  there  would  be  utter 
chaos.  I  heard  the  chairman  of  the  commission  state  that  his  men 
had  averaged,  according  to  the  time  sheets,  which  are  accurately  kept, 
over  14  hours  a  day  in  the  last  six  months.  He  stated  that  to  the 
legislature.  And  there  were  700  cases  on  the  calendar  to  be  tried. 
Now,  if  each  company's  necessities  required  three  trials,  they  would 
have  been  absolutely  swamped. 

160643"— 20 61 


I 


954        PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

Now,  I  want  to  say  that  I  think  part  of  the  delay  in  many  of  these 
commissions  in  deciding  these  cases,  which  has  been  very  imfortunate 
and  very  unfair,  has  been  due  to  overwork.  It  has  been  due  to  this 
re<iuirement  of  the  law,  or  at  least  the  interpretation  of  the  law,  by 
these  commissions,  that  they  must  hold  long  hearings  and  go  into 
^  ablations — ^the  procedure  of  a  regular  rate  case — before  they  do  any- 
tliiiig.  I  think  tiiat  is  a  mistaken  idea,  and  I  think  any  requirement 
which  imposes  that  duty  upon  a  commission  is  a  very  shortsighted 
public  policy.  With  the  industry  as  it  stands  to-day,  the  crying  im- 
mediate need,  in  my  judgment,  is  to  give  the  commissions  libertv  of 
action,  freedom  to  put  in  almost  any  rate  that  they  think  will  ineet 
this  exigency,  and  then,  as  in  the  casi^  of  Pennsylvania  and  Connecti- 
cut, let  the  commission  observe  the  actual  result  and  make  the  changes 
as  seem  necessary. 

Mr.  AVarren.  Prof.  Conway,  may  I  ask  you  at  this  point — I  as- 
sume you  are  thrdiigh  with  your  discussion  of  the  specific  labor  ques- 
tion.    You  have  sa'id  notliing  about  the  8-hour  day. 

Mr.  Conway.  Xo;  I  forgot  that. 

The  electric  railway  industry  is  face  to  face  with  a  world-wide 
demand  for  an  eight-hour  day.  ^  Now,  in  some  businesses,  I  belie\  e  it 
is  possible,  to  a  large  extent,  at  least,  to  offset  the  apparent  increase 
in  labor  costs  resulting  from  an  eight-hour  day,  involving,  as  a  rule, 
10  liours'  pay,  under  the  old  plan,  for  eight  hours  of  work,  on  the 
theory  that  the  old  wage  was  a  living  wage,  and  the  men  must  get  a 
living  wage  with  a  shorter  day,  to  offset  that  by  a  speeding-iq) 
process.  The  pt)ssibilities  of  such  economies  in  the  electric-railway 
industry  are  very  limited.  The  motcaman  and  conductor,  who  con- 
stitute the  most  important  class  of  labor,  can  not  increase  their  pro- 
ductive i>ower  in  this  fashion,  for  the  speed  of  the  car  is  determined 
by  the  track  construction,  as  well  as  the  matter  of  safety  and  con- 
venience of  the  public  requiring  numei-ous  stops.  Tlie  size  of  the 
car  can  not  be  profitably  increased  so  that  he  hauls  more  fares  per 
trip.  As  a  matter  of  fact,  the  tendency  is  in  the  opposite  direction, 
smaller  cars  and  more  fi-equent  service. 

Therefore,  the  extent  to  which  the  companies  can,  by  a  speeding-up 
process,  take  up  the  cost  of  the  eight-hour  day  is  probably  less  than 
in  any  other  business  in  the  whole  round  of  business  enteq)rise  in 
this  countiy. 

Xow,  I  do  not  aiirue  against  the  eight-hour  day.  I  am  not  dis- 
cussing tlie  merits  of  what  the  men  should  get  in  the  matter  of  wages 
or  what  the  workhig  day  sliould  be,  but  if  we  have  an  eight-hour 
day,  we  have  not  only  an  increase  in  the  pay  of  the  men  on  the 
hourly  basis,  but  we  have  a  large  increase  in  the  cost  of  operation. 

The  chairman  alluded  some  time  ago  to  the  nature  of  the  business. 
You  must  have  considerable  spreads,  because  the  working  day  of 
the  usual  street-railway  emj^loyees  must  be  longer  than  tluit  of  other 
people  in  the  community.  To"  state  the  matter  simply,  they  must  be 
there  to  take  other  workmen  to  work,  and  they  must  be  working  after 
the  other  men  have  quit  to  bring  them  home;* so  their  working  day  is 
considerably  longer  than  that  of  other  members  of  the  community, 
who  represent  their  patrons. 

Xow,  with  the  eight-hour  day  literally  applied,  you  have,  on  many 
properties,  niost  difficult  operating  conditions,  and  in  the  application 
of  that  requirement  to  the  service  you  have  a  great  deal  of  lost  man 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       955 

hours,  if  such  it  may  be  termed,  to  meet  the  eight-hour  day,  and  to 
get  their  working  day  within  the  certain  limits  of  the  spreads  you 
have  to  pay  for  labor  which  is  not  very  productive. 

So  it  is  not  only  the  immediate  matter  of  an  hourl}^  rate  of  wage 
that  this  business  has  to  confront,  but  it  is  a  matter  of  the  readjust- 
ment of  the  hours  of  employees  on  a  basis  which  raises  the  cost  of 
operation;  and  I  say,  that— and  I  want  to  emphasize  it— would 
prejudice  to  the  rights  of  the  workers,  either  to  wages  or  to  shorter 
hours;  that  is  not  a  matter  that  I  am  here  to  discuss,  but  assuming 
that  they  are  entitled  to  higher  wages,  and  assuming  that  they  are 
entitled  to  shorter  hours,  the  industry,  somehow  or  other,  must  bear 
the  cost  of  both  of  those  changes. 

Commissioner  Gadsden.  Doctor,  the  eight-hour  day  vrould  impose 
greater  costs  for  overtime ;  would  it  not  ? 

Mr.  Conway.  Oh,  yes.  Let  us  take,  for  instance,  the  morning 
rush.  On  many  properties  it  l>egins  at  6  to  7  o'clock,  bringing  the 
factory  worker  to  his  plant,  depending  somewhat  on  the  customs  in 
the  connn unity.  The  rush-hour  service  in  the  evening  must  run  up 
until  approximately  7  o'clock,  C  to  7.  It  begins  to  taper  off  after  G. 
lou  have  12  hours  in  there.  The  requirements  for  rush  service  arc 
anywhere  from  140  to  100  per  cent  of  the  base  schedule;  tliat  is,  you 
have  to  have  from  140  to  100  per  cent  of  the  normal  service  in  these 
rush  hours  to  take  the  workers  to  and  from  their  work.  That  means 
that  whatever  may  be  the  standard,  you  either  have  to  have  two  sets 
of  men,  one  set  running  the  morning  rush  hour,  and  the  other  the 
evening  rush  hour,  the  cost  of  which  would  be  prohibitive  absolutely; 
or  you  have  to  pay  the  same  set  of  men  overtime  to  run  in  the  morn- 
ing and  evening  rush  hours,  and  after  they  have  been  working  an 
eight-hour  day.  They  may  work  eight  hours,  but  their  working  day 
covers  12  hours,  perhaps,  or  11  hours,  and  they  get  paid  overtime  for 
a  good  part  of  that  time,  especially  if  there  is  a  requirement  as  to 
straight  runs  or  swings  between  the  various  parts  of  the  dav's  work. 
]Mr.  Wakijkn.  I  might  say  on  this  point,  Mr.  Chairman,*^that  the 
association  is  endeavoring  to  get  some  figures  and  estimates  froiu 
those  companies  whose  wages  have  been  materially  increased.  There 
are  certain  companies  which  are  making  estimates  as  to  the  effect  of 
both  increased  wages  and  the  eight-hour  day  upon  the  pay  roll,  and  I 
would  like  to  file  that,  but  the  work  is  in  process  at  the  present  time. 
The  Chairman.  It  may  be  of  interest  to  know  that  the  commission 
will  have  before  it  the  representatives  of  the  employees,  so  that  we 
will  hear  fully  from  their  side  of  the  case  iilso. 

Mr.  Warukn.  I  am  very  glad  to  hear  you  are  going  to  do  that. 
Ml.  Conway.  I  was  asked  particularly  to  endeavor  to  present 
to  you  the  possibilities  and  limitations  of  increasing  revenues  from 
higher  fares.  It  is  a  very  large  subjix-t,  and  I  would  be  grateful  for 
any  cjuestions  which  nmy  bring  out  any  points  that  I  can  help  you  on. 
From  my  observation  and  experience,  I  am  fully  convinced  that 
there  are  very  definite  practical  limitations  on  most  properties  of 
increasing  rates.  The  theory  which  exists  in  the  minds  of  many 
people  that  a  street  railway  enjoys  a  complete  monopoly  is,  in  a 
limited  sense,  true,  of  course— if  there  are  no  other  street  railways  in 
the  community;  but,  as  a  practical  matter,  there  are  very  few  elec- 
tric railways  which,  in  a  positive  sense,  enjoy  a  monopoly,  and  that 
fact  is  being  developed  in  rather  painful  fashion  to  many  electric- 


956       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

railway  operators  as  they  endeavor  to  get  their  revenues  by  higher 

T'lres 

'Now,  I  want  to  make  it  clear  before  I  begin  this  discussion  that 
I  am  absolutely  convinced,  as  I  feel  ceilain  anyone  must  be,  that, 
with  private  ownership  and  operation,  the  electric-railway  business 
must,  in  some  fashion,  get  sufficient  revenues  to  equal  its  operating 
expenses,  to  set  up  a  proper  amount  for  maintenance  and  deprecia- 
tion, and  to  give  a  fair  return  upon  the  value  of  the  property,  be- 
cause, as  one  of  you  said  this  morning,  these  properties  are  never 
finished,  new  capital  is  required  from  day  to  day  and  from  year  to 
year.  To  get  that  new  capital  and  t.o  provide  the  facilities  w-hich 
the  public  demand  and  have  a  right  to  expect,  it  is  necessary  to  give 
these  companies  a  fair  return.  It  is  not  a  matter  necessarily  of 
equity,  as  I  see  it,  from  the  public  standpoint.  It  is  a  matter  of 
self-interest.  The  average  man  will  have  to  realize  that  the  giving 
to  the  owner  of  the  street  railway  a  fair  return  is  not  a  gratuity  or 
charity,  but  it  is  just  as  much  to  his  interest  as  it  is  to  the  owner's 
interest,  if  he  wants  to  get  good  car  service  or,  indeed,  for  any 
length  of  thne,  any  car  service  worthy  of  the  name.  He  has  to  do 
that.  The  ordinary  man  thinks  to  give  the  owner  a  raise  of  fare  is 
the  same  thing  as  giving  a  beggar  a  quarter.  At  least,  many  people 
feel  that  way.  They  do  not  realize  that  their  interest  is  fully  as 
great  as  that  of  the  security  holder. 

Therefore,  I  heartily  agree  with  the  view  that  the  companies  must 
get  sufficient  revenues,  but  what  I  want  to  point  out,  if  I  can,  is  that 
m  o-etting  these  revenues  there  are  practical  difficulties,  and  without 
wearyin<y  you,  I  hope,  Avith  the  details  of  these  difficulties,  I  w^ant  to 
develop.^'if  I  can,  the  extent  to  which  they  enter  into  the  problem 
that  you  are  considering. 

To  begin  with  things  which,  perhaps,  are  well  knovrn  to  all  of  us, 
when  G-cent  fares  were  instituted,  we  had  a  theoretical  increase  of 
20  per  cent  in  the  rate,  but  very  few  companies  got  a  20  per  cent 
increase  in  revenue.  The  revenue  increase  that  you  can  generalize— 
and  the  value  of  generalizations  about  increases  is  very  limited, 
except  as  indicating  a  trend— but  if  you  can  generalize,  the  increase 
in  revenue,  from  a  20  per  cent  increase  in  rates,  was  about  10  per  cent, 
the  difference  is  due  to  the  falling  off  in  riding. 

The  Chairman.  Have  you  studied  the  comparative  results  of  a 
sufficient  number  of  companies  to  form  that  conclusion  ? 

Mr.  Conway.  I  think  I  have;  yes,  sir. 

Some  time  ago  I  collected  all  of  the  data  that  I  could  get  together 
and  published  an  article  in  the  Electric  Railway  Journal  at  their 
request  for  a  review  on  the  special  results  on  the  6-cent  fares. 

The  Chairman.  What  was  the  date  of  that  article? 

Mr.  CoNW^AY.  It  was  printed  about  a  year  ago,  or  a  little  more, 
perhaps.    It  was  based  upon  the  commission's  reports  largely. 

The  Chairman.  How  many  plants  did  you  study  for  the  purpose 
of  making  that  report?  . 

Mr.  CoNAVAY.  My  recollection  is  that  it  was  something  over  7a 
companies  for  which  I  could  get  official  statistics. 

The  Chairman.  All  right.     You  may  proceed. 

Commissioner  Meeker.  Over  what  length  of  time  did  your  studies 
run  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAIL W^ AYS  COMMISSION.       957 

Mr.  Conway.  Of  course,  that  varied,  depending  on  the  company. 

I  took  the  first  increases  in  Massachusetts,  where  the  6-cent  move- 
ment began,  and  then  followed  it  tlirough,  taking  the  experience  of 
the  comi^anies,  one  after  another,  which  raised  fares. 

Commissioner  Meeker.  Do  you  think  the  time  was  long  enough 
so  that  the  first  resentment  against  the  raise  in  fare  Avas  done  away 
with,  so  that  they  could  get  it  back  to  normal  conditions? 

Mr.  Conway.  That  was  true  to  some  extent.  Of  course,  in  refer- 
ence to  later  cases,  it  was  not  so. 

Commissioner  Sweet.  Would  j^ou  not  admit  that  your  figure  may 
be  a  little  bit  low  if  you  brought  it  down  to  date,  because  of  the 
tendency  on  the  part  of  the  public  to  become  accustomed  to  the 
change  and,  for  that  reason,  might  acquiesce  in  the  arrangement  to 
get  more  revenue? 

Mr.  CoNAVAY.  There  are  so  many  things  that  enter  into  theise  com- 
parisons, Mr.  Commissioner,  that  any  comparison  concerning  the 
influence  of  a  rate  of  fare  over  a  period  of  months  is  very  dangerous. 
For  instance,  you  have  the  influence  of  the  war,  or  the  cessation  of 
the  war;  you  have  the  influence  of  the  influenza  epidemic;  a  com- 
parison of  the  severe  winter  year  before  last  with  the  mild  winter 
of  last  year;  you  have  the  presence  or  the  absence  of  the  soldiers, 
which  has  an' effect  upon  evening  riding,  by  girls  going  out,  etc. 
I  have  heard  numy  street-railway  operators  say,  and  I  think  there 
is  a  great  deal  of  truth  in  it,  that  the  only  one  true  comparison  is 
what  happened  just  before  the  rate  was  raised  and  what  happened 
just  after,  because,  when  you  get  away  from  there,  there  are  a  lot  of 
influences  that  you  can  not  measure. 

Now,  we  all  know,  taking,  I  suppose,  the  average  of  the  companies, 
there  is  about  a  5  per  cent  increase  in  travel,  as  a  normal  increase. 
That  is  true  of  the  country  as  a  whole,  as  shown  by  census  figures. 
It  runs  pretty  nearly  true  to  form  with  a  lot  of  the  properties  that 
I  have  studied.  In  two  years  you  will  have  a  10  per  cent  increase 
in  traffic,  comparing  the  receipts  of  to-day  with  the  6-cent  fares, 
with  the  receipts  of  two  years  ago  w4th  5-cent  fares. 

Commissioner  Sweet.  In  1918,  instead  of  there  being  any  increase 
in  travel,  there  was  an  actual  dropping  off? 

Mr.  Conway.  In  some  companies  that  was  true.  In  other  cases, 
there  was  a  tremendous  increase  of  riding. 

Commissioner  Sweet.  It  has  been  a  very  unfortunate  period  in 
which  to  measure  accurately  the  effect  of  increased  fares,  has  it  not  f 

Mr.  Conway.  That  is  absolutely  correct. 

Now.  take  the  matter  of  the  7-cent  fare.  As  a  general  rule,  a  7-cent 
fare,  with  a  large  group  of  lines,  would  give  3^011  from  15  to  25  per 
cent  increase.  Now,  how^  is  that  increase  made  up?  It  is  an  average, 
and  it  is  a  good  deal  like  the  life  of  a  man.  When  you  say  the  average 
life  of  a  man  is  65  3'ears,  we  include  the  fellow  who  dies  at  21  and  the 
man  who  dies  at  99,  and  all  those  who  died  at  intervening  ages. 

I  made  a  very  careful  study  concerning  the  effect  of  7-cent  fares 
on  the  Public  Service  Railway  Co.  That  property,  as  I  say,  covers 
practically  the  whole  State  of  New^  Jersey.  You  have  every  condition 
there  and  all  sorts  of  lengths  of  riding,  differing  widely  as  regards 
the  length  of  the  ride,  and  their  average  was  about  15  to  16  per  cent 
for  the  property;  but  when  aou  come  to  study  that,  in  so  far  as  it 
affects  particular  routes,  you  find  the  widest  divergent  conditions, 


I 


958       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

and  if  each  of  these  separate  routes  had  been  a  separate  company, 
yen  could  have  found  instances  where  the  increase  had  been  nothing, 
IN  here  there  had  been  an  actual  loss  in  travel ;  so  with  a  line  earning 
less  money  on  7  cents  than  it  did  on  5  cents,  it  would  offset  some  other 
line  where  they  would  earn  a  theoretical  increase  of  40  per  cent. 

That  is  why  I  say  generalizations  are  dangerous.  I  took  two 
months  which,  after  a  careful  study  of  all  the  surrounding  facts  and 
previous  history  of  the  company,  were  found  to  be  typical.  I  found 
that  lines  under  1  mile  in  length  showed  not  only  a  loss  in  travel,  but 
the  loss  was  so  great  it  showed  a  loss  in  money.  I  found  that  lines 
operating  from  1  to  2  miles  showed  a  lower  ratio  of  loss  tlian  those 
which  were  shortei*,  except  wheie  there  was  active  jitney  competition. 

Twelve  lines  out  of  the  thirteen  lines  falling  within  this  group 
showed  an  increase  of  revenue 

Commissioner  Sweet.  That  is,  from  1  to  2  miles? 

JNIr.  Conway.  From  1  to  2  miles,  although  the  increases  in  most 
cases  were  slight. 

Lines  varying  from  2  to  3  miles  in  length  show  mixed  results.  An 
analysis  of  the  figures  seem  to  indicate  that  the  variation  is  due  to 
differences  in  the  average  length  of  ride  and  to  the  presence  or  ab- 
sence of  jitney  competition.  Taken  as  a  whole,  these  lines  show  up 
no  better  than  the  shoiter  lines. 

In  this  comparison,  I  had  the  advantage  of  a  very  accurate  pas- 
senger coimt,  which  was  taken  at  considerable  expense,  and  which, 
in  substance,  showed  the  exact  length  of  the  journey  of  the  pas- 
sengers on  the  line.  Each  passenger  getting  on  the  cars  was  given 
a  slip,  on  which  was  noted  where  he  boarded  the  car,  and  he  wrote 
down  where  he  was  going  to  leave  the  car,  and  where  he  was  going 
to  ride  on  a  transfer  if  he  got  a  transfer.  So  we  not  only  knew^  what 
happened,  but  we  were  able  to  ascertain  the  proportion  of  people 
riding  a  half  mile,  three-quarters  of  a  mile,  a  mile,  a  mile  and  a 
quarter,  etc. 

Commissioner  Sweet.  If  you  had  crowded  cars,  how  could  you 
get  people  to  do  that  ? 

Mr.  Conway.  We  had  no  trouble.  During  the  war  we  liad  as 
many  as  180  people  on  one  car,  and  we  got  over  95  per  cent  of  the 
people  to  fill  out  the  slips.  We  were  taking  this  check  at  the  order 
of  the  commission,  and  the  public  felt  it  was  their  duty  to  cooperate. 
It  sounds  almost  unl)elievable,  but  it  can  be  done.  The  reason  they 
took  the  check  was  to  work  out  the  zone  system  and  get  data  relating 
to  the  traffic;  but  I  used  the  opportunity  to  study  the  7-cent  fare 
question,  and  to  see  what  the  possibilities  of  the  flat  increases  were. 

In  general,  on  these  lines  which  I  have  just  described,  from  2  to  3 
miles  in  length,  where  the  average  ride  exceeded  IJ  miles,  and  where 
jitney  competition  was  not  present,  the  net  results  were  a  considerable 
increase  in  revenues, 

AVhen  the  group  of  lines  ranging  from  3  to  4  miles  in  length  is 
retiched,  a  distinct  improvement  is  noticed.  Certain  lines  in  this 
Igroup,  as,  for  example,  the  First  line  (central  division),  are  not 
comparable,  because  of  rerouting.  The  gains  secured  on  Harrison, 
Park  Avenue,  and  a  number  of  other  lines,  are  minimized  because 
of  active  jitney  competition ;  but,  taking  all  things  into  consideration, 
the  loss  of  riding  on  these  lines  was  not  nearly  as  great  as  on  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION".      959 


shorter  routes,  and  the  reason  was  that  there  was  a    larger  propor- 
tion of  people  taking  rides  of  a  mile  or  more. 

When  we  got  to  the  lines  of  4  miles  in  length,  we  found  a  still 
greater  improvement,  and  so  on,  as  the  length  of  line  increased  and 
the  average  length  of  line  increased. 

Now,  generally  speaking,  the  result  seemed  to  show  that  the  7-cent 
fare  was  driving  most  of  the  passengers  riding  a  mile  or  less  off  the 
cars.  On  a  particular  day  we  checked  some  lines  under  5  cents,  and 
then  we  checked  the  same  lines  under  7  cents,  and  got  some  data  and 
compared  the  results.  The  long  riders  stayed  with  you  and  the 
7-cent  fare  drove  away  a  considerable  part  of  the  short-distance 
riders,  especially  those  riding  less  than  a  mile. 

The  Chaikiman.  Does  that  hold  true  more  fully  in  these  congested- 
areas  ? 

Mr.  Conway.  Yes.  In  the  rural  districts  they  rode,  I  suppose, 
because  the  sidewalks  were  not  there,  and  you  had  less  jitne}^  com- 
petition, although  in  the  smaller  towns,  such  as  Plainfield  and  some 
of  the  other  smallei*  communities,  like  Xew  Brunswick,  and  towns 
of  ten  or  fifteetn  or  twenty  thousand  people,  the  results  were  rather 
disapixjinting.     People  walked. 

The  most  disquieting  thing  in  many  respects  was  the  effect  of  the 
7-cent  fares  on  the  jitneys.  The  7-c«nt  fare  became  effective  October 
15.  11)18.  From  the  1st  of  October,  1918,  to  the  1st  of  June,  1919, 
the  jitney  business  increased  100  per  cent  in  the  actual  number  of 
passengers  handled  by  jitneys,  as  shown  by  our  checks. 

In  the  city  of  Bridgeport  you  have  the  most  hopeless  condition 
I  have  ever  seen  with  reference  to  the  jitnej^s.  The  jitneys  in 
Bridgeport,  in  April  of  this  year,  when  we  made  a  very  careful 
cIkh  k  of  the  mr.tter.  were  handling  just  a  little  under  tw^o-thirds  of 
tlie  total  people  riding,  either  on  trolleys  or  jitneys,  in  the  city. 
They  have  a  G-cent  fare  there.  The  jitnej^s  are  charging  5  cents. 
'NA  ith  the  jitneys  you  have  a  large  amount  of  short-distance  travel 
in  the  city. 

The  figures  on  Waterbury,  Hartford,  and  Xew  Haven,  where  the 
a\ei-age  journey  is  greater,  shows  a  much  more  healthy  condition; 
but  my  point  is  that,  with  a  1-cent  differential  throwing  moi*e  than 
half  of  the  total  business  of  the  city  to  the  jitneys,  it  is  idle  to  talk 
about  7,  8,  9,  or  10-cent  fares.  It  is  just  an  exercise  in  arithmetic. 
You  might  as  well  close  up  shop  and  stop  operating,  and  let  the  jit- 
neys haul  all  the  business. 

Mr.  Wakkkn.  That  is  a  flat  fare? 

Mr.  CoNw^\Y.  A  flat  fare;  yes. 

This  Connecticut  company,  operating  over  the  whole  State  of 
Connecticut,  showed  less  than  0.8  of  1  per  cent  passenger  revenue 
under  increased  fares  for  the  first  12  months  of  operation  under 
such  fares. 

Mr.  Warren,  What  were  those  12  months? 

Mr.  Conway.  The  fare  was  put  in  effect  in  October,  1917.  That 
would  carry  it  up  to  the  fall  of  1918. 

Commissioner  Gadsden.  That  was  very  much  improved  later, 
though,  according  to  the  testimony  of  their  expert,  Mr.  Storrs,  before 
the  commission. 

Mr.  Conway.  That  is  true. 


?^V.  sfc'rt**! 


960       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  In  Massachusetts,  in  that  same  rehitive  period, 
^vhere  fares  were  not  changed,  as  I  recall  the  figures,  in  comnuinities 
siniihir  to  those  in  Connecticut,  like  Worcester,  and  cities  in  the 
western  part  of  the  State,  it  showed  an  actual  decrease  in  traffic. 

Mr.  Conway.  Yes;  but  those  companies  with  6-cent  fares,  as  I 
remember  it,  did  not  show  anv  increase  in  revenue. 

Mr.  Warren.  Well,  take  Springfield.  Their  fares  were  increased 
on  a  diiferent  plane,  and  they  showed  a  very  gratifying  increase. 

Mr.  Conway.  The  point  I  want  to  make  is  this :  You  have  various 
factors  that  have  to  be  considered,  which  I  want  to  lay  before  you 
as  controlling  elements,  I  think,  in  helping  to  work  out  a  solution 
of  this  question. 

•  In  the  first  place,  there  is  a  large  amount  of  the  street-railway 
business  Avhich  is  what  I  call  convenience  riding.  It  is  not  necessity 
riding.  I  refer  to  the  man  whose  journey  is  less  than  a  mile.  He 
can  walk,  and  he  will  walk,  when  you  get  to  a  certain  point  with  your 

fare. 

In  some  cities,  taking  the  country  as  a  whole,  I  think  you  now  get 
better  results  from  the  6  cents  than  you  did  two  years  ago.  People 
are  used  to  it:  they  expect  it,  and  they  think  it  is  fair.  There  is  hot 
any  of  that  spit*  walking,  as  I  sometimes  call  it — walking  to  spite  the 
companv.  Six  cents  does  not  mean  much.  Men  will  pay  6,  7,  8,  9, 
or  10  cents  for  cigars  and  everything  else,  and  they  are  used  to  it. 

The  city  of  S(hene( tady,  for  example,  showed  a  theoretical  in- 
crease of  20  per  cent  when  they  put  the  6-cent  fare  in,  while  some 
cities  very  similar  to  that,  in  New  York  State,  did  not  show  anything 
like  that  when  thev  put  the  6-cent  fare  in.  But  I  am  not  talking,  in 
most  cases,  for  the  immediate  future,  about  6-cent  fares.  They  are  al- 
most as  out  of  date  as  5-cent  fares  are.  The  thought  that  I  want  to 
leave  in  your  minds  is  what  is  going  to  be  the  effect  of  the  10-cent  fares 
and  the  i)-cent  fares.  That  is  Avhere  the  fare  equation  is  being  carried 
by  this  labor  development  that  is  here  and  ahead  of  us.  What  is 
that  going  to  do  with  the  companies  in  the  little  towns,  where  every- 
body lives  within  15  minutes  of  their  work,  and  walking  is  easy,  and 
what  is  going  to  be  the  effect  of  it  on  the  amount  of  riding  in  the 

big  cities?  *.   T»r -i 

I  have  some  interesting  figures,  which  I  got  just  before  I  left  Phil- 
adelphia, from  Boston,  concerning  the  effect  of  various  raises  there. 
Their  lines,  in  the  first  few  days  of  10-cent  fares,  showed  approxi- 
mately 60  per  cent  increase  over  the  5-cent  revenue.  Eight-cent  fares, 
which  were  in  effect  in  December,  1918,  to  June.  1919,  showed  from 
36  to  46  per  cent  increase  over  the  5-cent  revenues.  The  7-cent 
averages  ran  from — well,  I  will  leave  out  October,  when  they  had 
the  influenza  epidemic— from  12  to  21  per  cent  increase  over  the  5- 

cent  fares. 

Now.  Boston,  from  my  knowledge  of  the  property,  and  from  gen- 
oral  knowledge  of  other  cities,  ought  to  show  much  better  results 
with  these  high  fares  than  any  city  I  know  of,  because  of  the  fact 
that  there  is  very  little  riding  in  the  shopping  district  of  Boston,  the 
cars  are  all  run  underground,  a  large  part  of  the  surface  tracks  are 
pulled  up  in  the  center  of  town,  and  yet  there  they  do  not  get  a 
theoretical  increase. 

Mr.  Warren.  There  is  no  jitney  competition  there. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       961 

Mr.  Conway.  There  is  no  jitney  competition  there.  The  long- 
distance riders  are  flocking  to  the  railroad  trains,  to  a  point  where 
they  are  embarrassing  the  railroads,  taking  advantage  of  the  com- 
mutation rates,  and  a  great  deal  of  walking  has  developed. 

Now,  these  are  facts  which  we  can  not  ignore.  The  increase  in 
fares  drives  a  continually  larger  number  of  people  away,  and  I 
think  it  would  be  unfortunate  if  the  impression  grew  up  in  your 
minds  that  it  is  a  matter  of  an  arithmetical  average — tliat  by  divid- 
ing the  operating  expenses  by  the  number  of  people  and  getting  a 
result,  and  saying  that  all  you  have  to  do  is  put  the  fare  up  to 
that  level  and  you  solve  the  problem.  It  is  very  far  from  being 
that,  with  the  high  costs  of  the  immediate  future,  as  I  see  it. 

Now,  on  the  other  hand,  if  I  am  correct  in  my  belief  that  the  com- 
panies should  be  allowed  to  quickly  readjust  their  fares  to  take  care 
of  these  increasing  expenses,  the  halter  should  be  taken  off,  and 
they  should  be  told  to  go  ahead  and  try  to  work  this  out,  put  in  any 
change  in  rates,  and  allow  the  commissions  to  revise  and  correct  any 
inequalities  later  on. 

I  do  not  mean  to  infer  that  the  companies  should  not  increase 
their  rates  by  increasing  the  flat  unit  of  fare.  There  are  only  two 
ways  to  get  this.  One  is  a  flat  increase  in  the  unit  of  fare,  and  the 
other  is  some  sort  of  a  zone  system. 

Now,  speaking  generally,  if  you  are  to  face  that  emergency,  you 
will  have  to  have  a  simple  remedy;  and  a  simple  remedy  is  to 
increase  your  flat  unit  of  fare;  and  that,  I  think,  is  what  the  indus- 
try will  have  to  do. 

Now,  whether  that  will  solve  the  question  is  a  far  more  serious 
matter.  Whether  10-cent  fares,  with  loss  of  riding  that  it  occa- 
sions, is  the  answer,  is,  in  my  opinion,  a  far  less  settled  question ;  but 
this  much  I  am  certain  about:  A  zone  system,  applied  under  condi- 
tions of  heavy  urban  traffic,  such  as  you  have  in  our  large  cities,  is 
in  this  country  still  in  an  experimental  stage. 

Last  fall  and  winter  I  visited  every  city  in  the  United  States 
in  Avhich  there  was  anything  approaching  a  zone  system.  The  zone 
system  was  successfully  applied  on  interurban  and  suburban  lines, 
but  when  you  came  to  putting  it  in  under  strictly  urban  conditions, 
such  as  travel  in  the  large  cities,  you  have  to  answer  that  it  has 
never  been  successfully  done. 

The  Chairman.  Not  even  in  Europe? 

Mr.  Conway.  It  has  been  done  in  Europe ;  yes,  sir. 

Mr.  AVarren.  But  not  in  this  country? 

^Ir.  Conway.  Not  in  this  country.  And  I  want  to  make  this 
point:  There  is  a  var>t  difference  between  operating  conditions,  such 
as  I  understand  them  to  be,  in  Europe,  and  as  they  are  in  this 
country. 

In  the  Public  Service  Railway  investigation  we  had  an  unusual 
opportunity  to  get  a  comparison.  Sir  Robert  Stanley,  the  first  presi- 
dent of  the  British  Board  of  Trade  and  a  member  of  the  British 
Cabinet,  left  the  general  managership  of  the  Public  Service  Railway 
Co.  to  go  to  England  and  manage  the  London  omnibus,  tramway* 
and  underground  system.  He  knew  the  Public  Service  property^ 
which  is  typical,  I  think,  of  citv  properties;  he  had  operated  suc- 
cessfully with  a  zone  system.    But  Sir  Robert  Stanley  would  not 


962 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


siiy.  when  the  question  was  put  up  to  him,  that  that  method  of  fare 
collection,  which  successfully  worked  in  London,  would  work  in 
Newark,  or  Jei-sey  City.  There  aie  differences  which  have  t-o  be 
dealt  with. 

Now,  there  is  another  thing:  I  heard  a  gentleman  say  here  last 
night  that  he  would  solve  this  matter  by  taking  these  street  railways, 
and  he  would  shorten  the  5-(ent  ride  to  a  radius  of  3  miles,  and  tlien 
if  you  ride  beyond  that  3  miles  you  would  pay  another  5  cents.  Now, 
without  considering  the  sociological  features  at  all,  he  probably  had 
in  mind  one  instance;  but  from  my  knowledge  of  the  ConncLti' ut 
properties  in  places  like  Hartford,  Xew^  Haven,  Waterbury,  and 
Bridgeport,  I  sat  here  and  smilexl,  because  I  realized  that  that  was 
no  solution  at  all  for  those  properties.  Practically  the  whole  town 
<omes  within  the  3-mile  radius;  and  to  say  that  it  should  he  3  miles 
for  5  cents  is  just  as  foolish  as  to  say  you  ought  to  haid  a  man  over 
the  municipal  area  for  5  cents.  There  is  no  relation  whatever  to  it. 
The  cost  of  opeiation  of  a  property,  as  the  chairman  knows,  diffei-s  to 
a  considerable  extent  from  other  properties  under  the  same  conunis- 
sion  jurisdiction. 

Xow,  the  zone  system,  to  be  applied,  nuist  not  be  ready-made  and 
l)Ut  on  as* he  suggested.  It  is  the  result  of  a  careful  study  of  the 
riding  habit  of  the  community,  of  the  number  of  people  taking  rides 
of  varying  lengths.  Some  idea  of  the  amount  of  work  that  is  involved 
is  conveyed  by  the  experience  in  this  Public  Service  Railway  inves- 
tigation. That  investigation  was  begun  on  the  last  day  of  July,  1918. 
The  company  was  ordered  to  present  its  report  on  or  before  January 
1,  1919,  four  months  later.  The  traffic  engineers  of  the  commission 
worked  with  us  in  this  investigation.  We  invited  them  in.  We  asked 
their  help.  We  wanted  them  to  know  what  was  being  doiie,  and 
wanted  their  advice.  W^e  had  over  175  people  at  one  time  working 
there,  trying  to  get  it  done,  and  the  best  we  could  do  was  to  present 
the  report  on  the  11th  day  of  March,  the  commission  having  extended 
the  time  twice.  That  was  about  eight  months.  Xow,  when  w«  have 
a  25  or  30  or  40  per  cent  wage  increase  to  face,  you  can  not  work  out 
something  that  is  going  to  take  eight  months  before  you  have  the 
answer.  That  is  why  I  say  the  immediate  answer  is  to  give  the  com- 
panies latitude,  to  let  them  put  in  anything  which  seems  to  be  fair 
and  which  meets  the  emergency.  That  is  the  first  thing  that  must  be 
done  as  an  emergency  solution,  and  then,  if  the  commissions  want  to 
value  the  properties— which  I  think  they  should,  if  they  have  any 
doubt  about  the  value  of  the  properties — and  investigate  the  fairness 
of  this  proposal,  assuming  that  the  companies  make  it  a  permanent 
scheme,  let  them  do  it  afterwards.  If  a  better  solution,  such  as  the 
zone  system,  can  be  worked  out,  let  that  be  done;  but,  in  the  mean- 
time, allow^  the  company  to  live. 

Xow,  I  have  confidence  that  eventually  a  solution  will  be  found. 
I  do  not  believe  that  anybody  understands  or  clearly  sees  the  exact 
lines  of  that  solution  of  the  fare  question  to-day.  My  judgment  is 
that  if  the  matter  of  fare  collections  can  be  solved,  I  think  we  will 
have  gone  a  long  way  toward  the  solution  of  it.  Some  sort  of  zone 
system  is  going  to  be  the  eventual  solution,  but  that  is  in  the  future. 
It  is  not  an  accromplished  fact.  In  the  meantime,  the  companies  must 
be  allowed  to  get  tliis  money  as  best  they  can. 


PROCEEDINGS  or  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       963 

The  Chairman.  You  tlmik  the  zone  s^^st^m  requires  a  lonff  study 
or  each  particular  plan?  "^ 

Mr.  Conway.  Exactly.    You  can  not  have  any  made-to-order  solu- 
tion of  it. 

Mr.  Wakken.  Well,  a  flat  rate  could  be  put  into  effect  at  once: 
could  it  not  ?  ' 

Mr.  CoNW^AY.  That  is  something  that  the  public  understands. 

Mr.  VV  ARREN.  And  whether  the  Boston  trustees  have  treated  the 
situation  in  the  wisest  way  or  not— and  personally,  as  a  Boston  man, 
I  have  a  great  deal  of  doubt  as  to  whether  they  have,  as  to  whether 
a  study  ot  the  situation  would  not  have  developed  a  plan  to  brino-  in 
more  revenue-yet  it  is  a  fact  that  in  the  first  two  days  of  the  10-cent 
lai-e,  involving  a  raise  of  2  cents  on  top  of  the  previous  raises,  and 
m  the  vei7  days  when  whatever  spite  walking  must  be  evidenced  was 
m  effect,  they  w&re  increasing  the  revenue  GO  per  cent  over  the  old 
o-cent  fare. 

Mr.  Conway.  That  is  the  statement  that  is  made 

Mr.  Warren.  And  appreciably  over  the  8-cent  fare  also  ? 

Mr.  Cx)xway.   les,  sir. 

The  Chairman.  Gov.  Foss  said  yesterday  that  the  10-cent  fare 
caused  a  loss  of  $4  000  a  day.    Where  did  he  get  those  figures^ 
Mr.  Conway.  I  don't  know.  ^         • 

I  have  here,  and  perhaps  it  would  be  well  to  read  it  into  the  record, 
Uiis  letter  dated  July  18,  from  the  general  auditor  of  the  Boston 
Elevated  Railway  Co.  I  wrote  to  Mr.  Neal,  the  president  of  the 
company,  askmg  him  for  figures  concerning  the  effect  of  various 
increases  »^. /ares  feeling  that  it  might  be  of  interest  to  you.  The 
general  auditor,  IMr.  Reed,  writes  me  as  follows: 

As  Mr    Neal  lias  been  very  bu.sy  in  connection  witli  the  stril^e  of  onr  phi- 
ployees  he  has  asked  me  to  answer  your  letter  of  Jnly  16.     I  bllieve  the  i^ 
closed  statement  will  give  you  the  information  desired 

Regrardii^  the  rates  of  fare  I  would  say  that  up  to  Julv  31,  1918  we  had  i 
universal  5-cent  fare;  from  August  1,  1918,  to  November  30,  1918  a  7-cen? 
fare;  from  December  1  1918.  to  July  9,  1919,  an  8-cent  fare  and  from  .Tidv 
10,  1919,  a  10-t>ent  fare  has  been  in  opei-ation.  It  is  too  earlv  to  deterniino  thi 
real  effect  of  the  10-cent  fare,  as  it  wa«  in  operation  but  a  Z^vanvTZfort 
the  strike  and  because  of  unusual  conditions.  Opinions  vary  as  to  whaf  the 
result  will  be  but  we  eventually  hope  for  an  increase  of  GO  to  65  per  cent  ns 
compared  with  the  H-cent  fare.  ^  ^^ 

As  you  probably  know   our  universal  fare  allows  a  transfer  without  charge 

vice  ^rsf      "^  ^"""^  '"'^^"^  '^''  '"^  ''^'"^^""  ^"^'^^^^^  ^"^  ^-^P^^^  transit!  or 

T  ^^Z\  ^{Z^J''^'''  ^}''^  ^''^^^  illustration,  as  I  read  this  letter,  from 
July  31,  1918,  to  the  10th  of  July,  1919,  they  had  5  cents,  tl>en  7 
cents,  then  8  cents,  and  then  10  cents.  Now,  they  were  aJreadv  mider 
jmblic  trustees,  and  they  ran  a  big  deficit  that  had  to  be  assessed  to 
the  oommunity  under  the  service-at-cost  act.  Is  it  not  clear  to  everv- 
one  s  mind  that  you  can  not  expect  the  Public  Utilities  Commission 
to  reconsider  a  ca.se  four  or  fixe  times  in  a  vear?  And  vet  tliat  is 
what  hii^  to  be  done.  This  industry,  as  I  saiJd,  and  I  think  some  of 
you  thought,  perhaps  I  was  overstating  it,  is  in  the  experiment.il 
sta^e  lo  my  jiiind,  the  immediate  trouble  is  more  serious  than  that 
winch  confronted  the  industry  in  the  earlv  nineties  aixl  late  eio-hties 
when  the  agitation  was  on  as  to  whether  you  should  have  hor^e  cars 
or  electric  cars.  That  was  a  mechanical  problem.  If  one  ped-son 
solved  It,  it  was  solved  for  everybody,  but  as  the  chaii^nan  has  said, 


I 


964       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

the  solution  here  differs  with  ahiiost  every  property.  You  have  here 
an  economic  question  to  solve.  And  the  thought  I  want  to  leave 
with  you  is  that  there  is  a  very  serious  doubt  in  my  mind  with  refer- 
ence to  at  least  a  large  percentage  of  these  companies,  whether  it 
is  practicable  to  get  a  rate  of  fare  which  will  give  you  enough  money 
to  pay  all  of  these  costs  and  to  carry  this  tax  burden,  this  paving 
burden,  and  all  these  other  things.  This  industry,  in  other  words, 
has  to  reorganize  itself,  and  in  that  process  of  reorganization  it  has 
to  have  a  chance  to  thrash  around,  to  tr}'  a  lot  of  experiments,  just 
as  is  being  done  everywhere — put  in  a  rate,  and  if  it  does  not  work, 
take  it  out  and  put  another  one  in,  because  it  is  only  by  these  ex- 
periments that  we  are  ever  going  to  get  the  infornuition  which  is 
necessary  to  work  out  a  solution.  If  the  commissions  are  going  to 
be  required  by  public  opinion  to  hold  hearings  lasting  four  or  five 
months,  to  make  valuations  and  take  a  year's  time  to  make  one 
change,  why,  gentlemen,  the  situation  is  hopeless. 

The  Chairman.  Now,  assuming  that  a  great  many  commissions 
do  raise  rates  and  that  the  people  are  induced  to  travel,  and  it  does 
not  bring  in  revenue  enough  to  pay  the  operating  expenses  and  fixed 
charges,  then  what  have  you  got  to  do? 

Mr.  Conway.  Then  you  have  pretty  nearly  reached  the  end  of 
private  ownership  and  private  operation  of  the  business. 

Mr.  AVarren.  Do  you  mean  if,  after  experimenting,  they  can  find 
no  wav? 

Mr.  Conway.  That  is  what  I  undei-stood  him  to  mean. 

The  Chairman.  Do  you  believe  in  public  subsidy  of  a  private 
corporation  ? 

Mr.  Conway.  I  do  not.     I  think  in  principle  it  is  vicious. 

The  Chairman.  Then,  if  these  public  utilities  can  not  maintain 
themselves,  the  solution  is  government  ownership? 

Mr.  Conway.  I  would  not  go  that  far;  but  I  do  say  we  ought  to 
give  the  matter  of  private  ownership  a  thorough  trial,  and  private 
operation.  Let  the  initiative  of  the  operator  have  free  play.  If  he 
can  not  work  out  a  problem,  then  he  has  a  property  for  sale.  I  do 
not  think  it  makes  any  difference  to  him  whether  the  buyer  is  to  be 
the  junkman  or  whether  it  is  going  to  the  municipality,  if  he  is 
satisfied  he  is  through  and  he  can  not  work  it  out ;  but  that  is  the  last 
resort,  in  my  opinion — public  ownership.  I  think  a  substitute,  in 
general  principle,  is  bad,  because  I  am  a  believer  in  individual 
initiative,  and  in  giving  a  reward  for  efficiency,  and  in  giving  the 
railroads  freedom  to  work  out  the  best  methods. 

Mr.  Warren.  But  don't  you  think  it  may  be  of  such  importance 
to  maintain  the  service  that  the  company  can  not  Avork  out  its  prob- 
lem, and  yet  it  is  a  case  where  the  road  ought  not  to  be  discon- 
tinued, and  that  in  the  interest  of  the  public  a  subsidy  might  be 
advisable  pending  a  determination  of  whether  the  public  would  in 
some  way  take  over  the  property? 

Mr.  Conway.  I  think  that  is  true;  yes.  In  other  words,  during 
these  critical  days,  in  which,  perhaps,  discouragement  may  come 
because  a  solution  has  not  yet  been  found,  it  would  pay  the  public 
to  support  the  companies,  at  least  for  a  sufficient  period  of  time, 
that  the  entire  i)roblem  be  understood  b}^  all  parties  and  the  most 
advantageous  solution  found,  no  matter  what  may  be  the  solution 
determined  upon. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       965 

Mr.  Warren.  Could  you  say  just  a  word— I  do  not  want  to  pro- 
long  your  examination  unduly— but  from  your  study  of  rate  reo-ula- 
tion  as  applied  by  municipal  authorities  and  State  authorities,  what 
would  you  consider  the  better  method  of  treating  that  subject « 

•  J'.f^^.^o/^-  ^^'  generally  speaking,  there  is  no  doubt  in  my 
mmd  that  State  regulation,  through  a  utility  commission,  is  better 
than  municipal  regulation. 

In  the  first  place,  the  State  commission,  assuming  the  same  set 
ot  men  are  doing  the  regulating,  will  do  better  work  than  those 
men  would  as  municipal  commissioners.     The  State  commissioner  if 
he  gets  m  there  knowing  nothing  about  the  business,  and  unfor- 
tunately  many  of  them  do  come  to  their  positions  in  that  way    is 
educated;  he  can  not  sit  there  day  after  day  and  listen  to  cases  and 
to  witnesses  dealing  with  these  matters  without  getting  a  pretty 
good  education  m  the  coui^e  of  a  few  years  on  the  question     Now 
you  take  a  councilman  or  a  mayor.     There  is  only  one  out  of  three 
or  four  or  a  half  dozen  of  them  that  ever  has*^  a  rate  matter  to 
consider.     Ihey  come  there  without  very  much  knowledge— and  it 
is  certainly  true  that  in  that  respect  a  little  knowledge  is  a  dancrerous 
thing— when  they  have  any,  and  they  have  no  trained  advisers',  such 
as  the  engineers  and  accountants  of  the  commission.     The  cities  have 
no  trained  lawyers,  such  as  counsel  of  the  commission,  that  can  brincr 
out  the  facts:  and  tlie  consequence  is  that  justice  is  not  done  because 
of  a  lack  of  knowledge  of  the  judges.     You  might  as  well  put  a 
layman  on  the  bench  and  expect  him  to  administer  justice  in  muni- 
cipal regulation. 

Commissioner  Sweet.  I  would  like  to  ask  a  few  questions  Prof 
Conway  I  thmk  you  have  given  us  some  very  valuable  informa- 
tion, but  really  it  is  very  discouraging  as  a  whole,  especially  your 
hnal  conclusion;  at  least,  it  Avould  seem  so  to  me. 

Do  you  think  it  would  be  possible  to  induce  the  public  authorities 
of  the  various  municipalities  of  the  United  States,  or  State  com- 
missions, to  throw  the  doors  open  as  wide  as  you  suggest  and  orive 
the  conipanies  a  free  hand  to  place  the  fares  wherever  they  plelise 
riglit  off,  as  an  immediate  measure?  ' 

Mr.  Conway.  It  certainly  will  never  be  done  unless  somebody 
suggests  it  to  them.  -^ 

Commissioner  Sweet.  Well,  would  it  be  done  if  it  were  sugcrested « 

Mr.   Conway.  Perli^ps  not,  but  this  far,  Mr.   Commissioner,  I 

think   it  will  help:   The   average   commissioner,  I  believe,  except 

perhaps,  where  it  affects  his  own  home  town,  his  own  neighbors' 

wants  to  do  the  right  thing.    Now,  if  they  hold  these  cases  up,  you' 

go  in  and  talk  to  them  in  their  private  offices,  or  you  meet  them  on 

the  street,  and  they  will  freely  admit  that  these  prolonged  hearings 

are  not  fair  to  the  company,  but  they  will  say  to  you,  "  We  must  dve 

everybody  in  the  community  all  the  time  he  wants  to  talk  himself  to 

death,  or  he  will  go  out  and  howl  that  the  commission  sat  on  him 

and  would  not  give  him  a  fair  hearing." 

Commissioner  Sweet.  That  is  true,  isn't  it? 

Mr.   CoNWAY.  Yes,  sir;   and  it  means  hundreds  of  volumes  of 
testimony. 

Commissioner  Sweet.  Yes. 

Mr.  Conway.  Most  of  which  is  utter  nonsense.     Now,  his  time 

is  frittered  away  on  these  things.    My  observation  is  that  the  moment 


966       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

the  rate  goes  in  it  is  a  nine-day  wonder  if  it  does  not  outrage  the 
community  because  it  is  so  ill-advised  and  poorly  conceived.  When 
you  come  to  the  trial  of  the  case,  the  newspapers  in  Pennsylvania 
give  it  very  little  notice.  My  observation  is  that  most  of  the  time 
is  taken  up  with  the  disputes  about  facts,  where  you  have  no  guide. 
In  one  city  a  6-cent  fare  is  going  to  give  you  an  18  per  cent  increase 
and  in  another  city  an  8  per  cent.  Instead  of  spending  time  on  those 
questions,  \yhy  not  put  it  in  and  see  what  it  gives  you? 

Connnissioner  Sweet.  As  I  understand  it,  in  Pennsylvania,  where 
the  rate  can  be  changed  practically  at  the  option,  temi^orarily  at 
lejist,  of  the  company,  by  putting  it  in 

Air.  Conway.  Filing  a  new  tariff. 

Conmiissioner  Sweet.  Pending  a  decision? 

Mr.  Conway.  Yes. 

Commissioner  Sweet.  Even  there  an  effort  has  been  made  in  every 
case  that  has  arisen  so  far  to  make  a  specific  rate,  and  it  must  be. 
Tliere  has  been  no  instance,  has  there,  where  the  door  has  been 
thrown  wide  open  and  the  company  allowed,  at  its  own  sweet  will, 
to  phice  the  fare  wherever  it  pleased? 

Mr.  Conway.  Yes;  that  is  the  situation.  Take  the  case  of  the 
Pittsburgh  Railways  Co.  Before  the  6-cent  fare  went  into  effeci 
the  connnission  held  hearings  and  allowed  the  6-cent  fare  to  go  in 
but  required  the  company  to  sell  two  tickets  for  11  cents,  instead 
of  11  tickets  for  55  cents,  as  they  wanted  to  do.  Xow,  since  then 
the  company  has  twice  changed  the  rate,  and  the  matter  has  not  yet 
been  decided. 

Commissioner  Sweet.  But  if  I  understand  you  right,  the  State 
couimission,  of  its  own  motion,  could  put  a  veto  on  that  ? 

Mr.  Conway.  Xo;  except  it  went  through  the  process  of  determin- 
ing the  justice  of  the  rate.  What  the  State  did  was  to  immediately 
begin  a  valuation  of  the  property. 

Conmiissioner  Sweet.  It  goes  into  effect  immediately? 

Mr.  Conway.  Yes. 

Commissioner  Sweet.  But  could  not  the  State  commission,  with- 
out waiting  for  a  complaint,  decide  against  it  ? 

Mr.  Conway.  Not  w  ithout  getting  the  facts.  In  other  w^ords,  they 
can  not  just  arbitrarily  say  that  the  rate  is  excessive.  They  have  to 
have  evidence  to  support  it. 

Commissioner  Sweet.  But  still  that  could  be  done  in  a  very  formal 
and  brief  way,  could  it  not  ? 

Mr.  Conway.  Well,  you  would  have  to  satisfy  the  courts. 

Commissioner  Sweet.  Well,  laying  aside  the  situation  in  Penn- 
s^dvania  and  Connecticut,  and  taking  other  States  where  they  have 
iio  provision  of  that  kind 

Mr.  Conway.  Yes. 

Commissioner  Sweet.  Don't  you  anticipate  that  it  would  be  a  very 
difficult  thing,  indeed,  to  bring  about  a  situation  that  would  permit 
the  companies  to  place  their  fares  wherever  they  saw  fit? 

Mr.  Conway.  ^Ir.  Commissioner,  my  ow^n  judgment  is  that  the 
counnissions  themselves  are  coming  to  this  view.    Let  me  illustrate : 

The  last  issue  of  Public  Utilities  Keports,  annotated,  contains  the 
opinion  of  the  Illinois  Commission  denying  the  application  of  the 
surface  lines  in  Chicago  for  G-cent  fares.  These  newspaj>er  clippings 
that  I  received  before  coming  to  Washington  yesterday  contain  what 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       967 

represent  to  be  an  interview  with  the  chairman  of  the  Illinois  Com- 
mission,  m  which  he  says  that,  without  any  hearing,  he  is  inX 
vidually  prepared  to  allow  the  companies  to  advanfe  their  fares 
enough  to  take  up  these  extra  wages. 
Mr.  Wakren.  Who  said  that  ? 

Mr.  Conway    The  chairman  of  the  Illinois  Commission  is  quoted 
as  saying  it  by  two  newspapers.  quotea 

Commissioner  Sweet.  As  related  to  what  point « 
Mr.  Conway.  To  Chicago. 
•  Commissioner  Sweet.  To  what  point  have  they  raised  the  fare? 
Mr.  Conway.  He  does  not  know  yet,  because  they  have  not  rotten 

It  7.TI'  }\1  '"  '"'"^"^  ^^  ^^^^  ^^'^  companies  inLediate  reUef  to 
the  ex  ent  of  the  raise  m  wages,  but  he  is  careful  to  say  that  that  is 
his  individual  view.  ^  **^  ^^ 

Commissioner  Sweet.  As  a  measure  of  relief,  don't  you  think  some- 
thing should  be  done  to  prevent  jitney  competition  ^ 

ceininc^  which  T  lh\J^^  Connecticut  company,  as  an  instance,  con- 
ceining  which  I  tlunk  there  is  no  more  friendly  public  feelino-  anv 
where  than  is  found  by  that  company  in  the  s\a\e  of  Co^^nel^^^^^^ 
t  IS  surprising  how  little  animus  there  is  to  that  company,  prSlv 
because  the  trustees  &re  operating  it .  ^'  piooaoiy 

Commissioner  Sweet.  Do  you  think  the   State  should  reo-ulate 
them,  the  same  as  a  street  railway?  le^mate 

Mr.  Conway.  That  would  do  it. 

1    ^  "^M^  u^-/^""  '"^^'^^  happened  in  that  Connecticut  case,  showincr 
how  difficult  It  IS  to  manage  the  jitney  situation.     The  Legt?S 
of  Connecticut  at  the  instance  of  the  governor,  appointed  fs^S 
committee  to  study  the  problem  of  the  street  railwaVs  in  CWecdcut 
and  they  recoinmended  various  forms  of  relief.     Among  Xif  "As 
the  putting  of  the  Jitneys  under  the  control  of  the  utifity  ^inn  is 
sion.     Now,  the  legislature  considered  all  of  these  measure? and  "a^^ 
them  nothing.     They  did  report  out  a  jitney  bill  which  had  t'eeth 
m  It,  and  whicb  put  the  jitneys  under  the  control  of  thrutilit; 
cTZZT    P'  Street  Railway  Union;  the  American  Fede™^^ 
of  Labor,  with  which  the  street-railway  men  were  affiliated     tZ 
Jitney  operators  ran  excursions  from  the  sister  citieTin  C^^^^^^^^ 
they  rode  m  Jitneys  from  Bridgeport  and  Hartford,  and  tD <^o"  a 
cjique  and  they  took  the  galleries  the  day  that  bill  Jame  up  %r"con 
sideration,  and  they  niade  so  much  noise  that  you  cou  d   LdlV  te^^ 
what  was  going  on.     The  legislature  evidently  thought  tharthis  vSs 
~^^^^^^^  ^^"  ""'''  ^^'^^  emasculated.-  The  vlltVJit 

Commissioner  Sweet.  I  have  nothing  further 
Air.  Warren    Thank  you  very  much.  Prof.  Conway. 
1  have  one  other  witness,  Mr.  Chairman.       ' 

STATEMENT  OF  MR.  HALFORD  ERICKSON. 


!    f 


968       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Mr.  EiucKsoN.  I  was  a  member  of  the  commission  for  11  years, 
and  chairman  part  of  the  time. 

Mr.  AVarren.  Yes.  That  is,  as  a  matter  of  fact,  the  Public  Utility 
Commission  or  the  Public  Service  Conmiission  of  the  State  of  Wis- 
consin I 

Mr.'  P]rickson.  Yes. 

^Ir.  Warren.  Otherwise  called  the  railroad  commission? 

^Ir.  Erickson.  It  has  jurisdiction  over  railroads  and  all  other 
public  utilities,  including  street  railways. 

Mr.  Warren.  Now^,  you  have  made  a  pretty  thorough  investiga- 
tion of  the  street-railway  situation,  have  you  not  ? 

Mr.  Erickson.  I  have  had  occasion  to  go  into  it  from  time  to  time 
quite  fully,  as  fully  as  I  was  able  to  under  the  circumstances,  both 
on  the  commission  and  since. 

On  the  commission  we  had  to  appraise,  prescribe  accounting,  audit 
the  books  of  every  street-railway  company,  and  make  rates  for  every 
street  railway  in  the  State.  Since  I  got  out  of  the  commission  we 
have  appraised  about  seven  or  eight  hundred  millions  of  dollars  of 
utility  property,  audited  their  books,  and  made  rates  for  a  large  pro- 
portion of  them.  I  suppose  of  that,  15  or  20  properties  represent 
street-railway  properties. 

Mr.  Warren.  As  a  matter  of  fact,  have  you  not  made  a  very  care- 
ful preparation  or  statement  on  this  situation  in  reply  to  a  question- 
naire from  the  Chamber  of  Commerce  of  the  United  States? 

Mr.  Erickson.  Some  time  ago  the  Federal  Chamber  of  Commerce 
asked  me  to  testify  in  some  hearings  that  they  had  here  in  Wash- 
ington. I  was  not  able  to  get  there,  but  I  prepared  a  rather  lengthy 
statement  on  the  street-railway  situation,  based  upon  the  analysis 
of  tlie  accounts,  valuations,  etc.,  of  some  30  or  35  roads  or  more,  part 
of  which  we  had  to  appraise  ourselves,  and  based  upon  as  many 
other  facts  as  I  could  get  hold  of.  The  greater  portion  of  the  paper, 
however,  was  devoted  to  the  indeterminate  permit,  which  I  was  re- 
quested to  testify  on,  in  addition  to  a  sort  of  survey  of  the  situation 
as  a  whole. 

Mr.  Warren.  I  propose,  if  I  may,  to  leave  a  copy  of  that  w^ith  the 
commission,  because  I  think,  in  view  of  Mr.  Erickson's  broad  ex- 
perience and  varied  experience,  it  would  be  a  very  valuable  contribu- 
tion to  this  investigation. 

You  have  also  prepared  some  data  for  this  investigation,  Mr. 
Erickson? 

Mr.  Erickson.  Yes ;  I  have.  I  have  had  a  very  short  time  on  that, 
but  I  used  the  facts  as  to  the  conditions  of  the  railroads  which  I  dug 
up  at  the  previous  hearing  and  presented  them  in  a  different  light, 
and  then,  in  this  case,  I  went  into  State  versus  local  regulation. 

^fr.  Warren.  Which  we  asked  you  especially  to  consider  ? 

Mr.  Erickson.  Yes.  In  addition  to  that,  I  have  also  summarized 
the  results  of  verv  extensive  investigations  as  to  the  cost  upon  which 
capital  can  be  ha^.  Part  of  that  investigation  was  carried  on  in  con- 
nection with  the  work  of  the  Newlands  committee — I  mean  the  con- 
gressional committee — and  part  of  it  has  been  carried  on  in  connection 
with  other  rate  cases.  That  investigation  embraced  practically  every 
i-ailroad  in  the  country,  and  public  utility,  the  securities  of  which 
were  listed,  and  the  leading  manufacturing  plants  throughout  the 
country. 


proceedings  of  federal  electric  railways  COMMISSION.       969 

Mr.  Warren.  You  have  a  memorandum  of  this  last  study;  have 
you  ? 

Mr.  Erickson.  Yes. 

Mr.  Warren.  Will  you- give  the  commission  briefly,  and  still  so 
that  you  will  do  the  matter  justice,  what  you  found  with  reference 
to  the  street  railways  and  with  reference  to  the  cost  of  capital,  be- 
fore you  take  up  the  question  of  the  study  of  municipal  control  ? 

Mr.  Erickson.  I  took  the  operating  results  of  some  35  roads  rep- 
resenting the  conditions  before  the  war,  or  1914  and  1915.  I  also 
went  back  several  yeai^,  as  far  as  to  1894. 

Without  going  into  detail,  I  mi^ht  say  that  in  1915,  the  cost  per 
ride,  per  passenger,  without  anything  for  return,  without  anything 
for  depreciation,  amounted  to  3.6  cents.  Eight  per  cent  on  the  value 
of  the  property  amounted  to  2.5  cents,  making  at  that  time  the  cost 
of  every  ride  over  6  cents,  if  the  road  should  have  received  reasonable 
returns.    That  was  before  the  war. 

From  1910  to  1915,  the  net  earnings  fell  33  per  cent,  approximately 
34  per  cent  on  these  35  or  40  leading  roads.  The  reason  for  the  bad 
condition,  of  course,  in  1914  and  1915,  is  almost  entirely  due  to  high 
prices.  Prices  have  been  steadily  rising.  They  had  increased  about 
50  per  cent  from  1896  to  1915;  that  is,  for  commodities  alone,  and 
about  40  or  45  per  cent  for  labor.  Those  increases  had  been  gradually 
going  down.  The  conditions  of  the  street-railway  companies  were 
fairly  good  up  to  1910  from  1900,  but  at  that  time  the  increase  in 
prices  worked  very  fast.  Since  that  time,  conditions  began  to  grow 
worse.  From  1915  to  1919,  of  course,  we  know  what  the  situation  has 
been.  During  the  intervening  time,  prices  have  doubled  for  both 
labor  and  materials  and  supplies.  As  a  matter  of  fact,  on  many  of 
them  they  have  more  than  doubled  since  1915.  In  1918,  the  cost  per 
passenger  per  ride  was  4.8  cents,  without  including  enough  for  depre- 
ciation, without  including  anything  for  return  on  the  investment. 
If  you  add  2.5  cents  for  return  on  the  investment,  you  have  a  cost  per 
passenger  of  7.3  cents.  That  represents  the  conditions  of  about  35  or 
40  leading  roads  in  the  country, 

Mr.  Warren.  In  1918? 

Mr.  Erickson.  In  1918. 

Commissioner  Sweet.  It  is  still  worse  now;  is  it  not? 

Mr.  Erickson.  It  is  still  worse  now,  because  i)rices  have  kept  on 
increasing.  Since  that  time,  however,  a  few  reliefs  have  been  gotten 
through  occasional  increases  in  rates;  so  that  the  average  rate  now 
is  slightly  more  than  5  cents,  not  a  great  deal  more,  but  slightly 
more.    At  that  time,  it  stood  at  about  5  cents  per  ride. 

Mr.  Warren.  But,  as  far  as  costs  are  concerned,  conditions  are  a 
great  deal  worse  ? 

Mr.  Erickson.  The  costs  are  now  higher  than  they  were  in  1918 
by  perhaps  as  much  as  7  or  8  per  cent. 

Mr.  Warren.  And  that  is  regardless  of  this  60  cents  an  hour 
wage  scale? 

Mr.  Erickson.  Yes,  sir. 

Mr.  Warren.  Which  has  been  adopted  in  the  case  of  a  few  com- 
panies ? 

Mr.  Erickson.  Since  my  figures  were  made,  most  of  the  increases 
in  wages  authorized  by  the  Federal  Labor  Board  have  been  put  into 
effect — not  all  of  them,  but  a  great  many  of  them — some  of  the 
1C0643''— 20 62 


970      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

greatest  ones,  because  my  figures  ended  partly  with  July,  1918.    For 
some  of  the  15  roads  they  were  carried  up  to  January  1,  1919. 

Mr.  Warken.  Those  rotuls,  you  think,  were  fairly  typical  of  the 
industry  ? 

Mr.  Eric'kson.  They  were  fairly  typical.  They  were  located  in 
Minnesota,  Wisconsin,  Illinois,  Indiana,  Ohio,  and  a  great  many  in 
Massachusetts,  many  in  New  York,  many  in  the  South,  some  west  of 
the  Mississippi  River,  including  Omaha,  St,  Louis,  Kansas  City,  and 
many  of  the  other  leading  cities  in  the  country. 

The  Chairman.  Do  you  include  the  lines  of  the  Twin  Cities  and 
Milwaukee? 

Mr.  Erickson.  Yes,  sir;  those  were  all  included.  Duluth,  also — 
not  Superior,  but  Duluth. 

Commissioner  Sweet.  Are  they  strictly  city  service,  or  do  they 
include  interurbans? 

Mr.  Erickson.  There  is  hardly  a  railroad  in  the  country  that  does 
not  have  a  suburban  business  besides  the  city  business. 

Commissioner  Sweet.  Yes. 

Mr.  Erickson.  Almost  every  road ;  I  suppose  three-fourths  of  the 
lines  go  beyond  the  city  limits  into  the  suburbs  and  into  adjoining 
towns  and  cities.  Of  course,  they  include  the  entire  line,  the  city  part 
as  well  as  the  suburban  part.  I  did  not  have  time  to  separate  the 
figures  by  political  units  or  divisions.  They  do  not  include  inter- 
urban  roads,  however. 

Commissioner  Sweet.  That  is  what  I  mean. 

Mr.  Erickson.  They  include  urban  and  suburban  roads. 

Conmiissioner  Sweet.  Yes. 

Mr.  Erickson.  In  1915  the  roads  were  earning  about  half  as  much 
for  returns  as  it  was  necessary  to  earn  in  order  to  secure  capital, 
based  upon  market  conditions.  In  1919,  or  1918,  the  roads  were  earn- 
ing very  little  more  than  the  operating  expenses.  Some  roads  weie 
earning  some  more,  but  others  less,  and  on  the  average  not  much 
more  than  perhaps  a  fraction  of  a  cent,  on  the  average,  than  the 
operating  expenses. 

Commissioner  Saveet.  Without  allowing  anything  for  deprecia- 
tion or  interest  on  investment? 

Mr.  Erickson.  Without  allowing  any  more  for  depreciation  than 
was  included  in  the  accounts,  which  I  would  say  was  about  half,  but 
nothing  on  return  whatever.  Perhaps  35  per  cent  was  included  in 
the  accounts  for  depre<^iation — not  more  than  that — of  what  sliould  be 
allowed. 

Commissioner  Sweet.  Then,  Mr.  Erickson,  the  stre<>t  railwa3^s  of 
the  country  as  a  whole,  taking  these  typical  roads  that  you  have  ex- 
amined, have  in  their  physical  properties  been  getting  in  woii>e  and 
worse  condition  as  time  has  progresst^d  ? 

Mr.  Erickson.  Since  1910 ;  yes.  Their  condition  was  ])ad  from  1890 
to  1900  Ix^cause  the  industry  was  in  its  infancy,  but  it  grew  better  up 
to  1900.  It  kept  growing  still  better  up  to  about  1908  and  1910. 
Then  the  situation  was  again  reversed;  and  owing  to  the  high  prices 
of  labor  and  material,  and  owing  to  the  increases  in  the  length  of  line, 
and  owing  to  demands  for  better  service  which  were  made,  it  has  \>een 
gi'owing  woi*se. 

Commissioner  Sweet.  Are  you  si)eaking  now  of  the  financial  condi- 
tion? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION".       971 

Mr.  Erickson.  I  am  speaking  of  the  financial  condition  exclusively 

Commissioner  Sweet.  What  about  their  physical  condition  during 

this  period  ?  ^ 

Mr.  Erickson.  Their  physical  conditions  have  been  fairly  well  kept 
up.  They  were  until  1914  and  1915.  The  necessary  improvements 
have  been  made  since,  of  course.  They  have  had  to  be  made,  but 
the  lull  improvements  have  not  been  made  since  1914  and  1915  Thev 
have  skimped  wherever  they  could.  That  is  the  size  of  it!  Thev 
have  had  to,  and  there  are  a  great  many  deferred  maintenance  charges 
to  be  taken  care  of  as  soon  as  they  get  on  their  feet  again. 

Commissioner  Sweet.  If  that  process  should  have  continued  for 
several  years,  would  it  have  had  any  bearing  upon  the  question  of  the 
safety  of  the  public  ? 

Mr.  Erickson.  Yes;  and  the  service  would  go  to  pieces.  If  it  con- 
tinues very  much  longer,  you  will  have  little  or  no  service  at  all  It 
will  go  to  pieces.  The  cai^  will  be  in  such  condition  that  they  will 
not  be  safe  Power  houses  will  not  be  able  to  furnish  the  necessary 
power  for  the  driving  of  the  cars. 

1  o?n''*  ^II  of^''\?'^^'^V  mention  the  decrease  in  net  earnings  between 
J  910  and  191o,  Mr.  Erickson  ? 

Mr.  Erickson.  Yes;  I  stated  that  the  decrease  at  that  time  in  net 
earnings  amounted  to  about  33  per  cent;  in  fact,  nearly  34  per  cent 

Mr.  W  arren.  And  did  you  state  the  increase  in  the  investment  per 
revenue  passenger  ?  ^ 

Mr.  Erickson.  Showing  the  effect  of  the  increase  in  the  price  of 
labor  and  material,  and  showing  the  effect  of  the  unproductive  im- 
provements  from  1910  to  1915,  I  have  a  few  figures  here  that  I  hap- 
pened to  get  together  on  that  question.  ^ 

For  instance,  the  investment  per  passenger  ride,  in  1910  or  there- 
abouts was  about  20  cents.  In  1915  it  had  increased  to  very  nearly 
28  cents,  showing  that  the  fixed  charges  per  passenger  have  had  to 
increase  because  you  had  more  property  per  passenger  to  take  care  of. 
itnnL'1  hff  .to  increases  in  prices.  It  is  due  to  improvements  de- 
manded,  but  it  did  not  bring  in  any  proportionate  amount  of  returns. 

I  he  cost  of  getting  capital 

ihil^^nn^Hr'^'';  ^^''  \V^^'  ^^^"  '''^"^^  ^^^'^  ^^^^  "P  ^"d  say  some- 
thing  on  tlie  cost  of  capital. 

jt^^^'''^^'''  Yes;  I  will  briefly  state  what  we  found. 

Utilities  before  the  war  had  to  earn  about  8  per  cent  on  the  full 
value  of  the  physical  property,  including  the  goin^  value,  in  order  to 
attract  the  necessary  capital.  Bonds,  for  instance;  if  they  bore  6  per 
cent  would  not  sell  at  par  unless  there  was  more  propertV  by  a  good 
deal  behmd  thorn  than  their  par  value.  And  unless  theV  were  pi (^ 
tected  by  net  earnings  that  amounted  to  at  least  twice  ^as  much  as 
the  interest  charges  Stocks  were  in  the  same  position.  Thev  had 
to  have  property  behind  them.  Six  per  cent  stock  had  to  sell  at  par. 
I  hey  had  to  have  net  earnings  behind  them  that  amounted  to  10  or 
12  or  14  per  cent.     If  they  did  not  have  those  earnings  behind  them, 

cent  bLlr"^    """'"  ""^  ''''"^'^  "^^^  ^*  ^'^'^'  ^^^*  ^^  ^'''  ^^>^'  ^  ^  P^^ 

That  means  this— that  the  cost  of  capital  in  the  utility  field  is 
measured  not  by  the  income  basis  upon  which  the  securities  are  sell- 
ing, but  the  cost  IS  measured  by  what  you  must  have  in  the  way  of 


972      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

net  earnings  behind  the  securities,  in  order  that  they  may  sell  on 
a  normal  basis. 

I  investigated  also  from  time  to  time,  and  particularly  in  1914, 
1915,  and  1916,  the  income  basis  on  which  mortgages  were  selling,  in 
some  of  our  leading  cities.  A  farm  mortgage  on  a  good  farm,  well 
located,  could  not  cover  more  than  one-half  of  a  good  farm,  in  order 
to  sell  on  6  per  cent  income  basis.  That  may  be  likened  to  the  bonds 
covering  half  of  the  property.  A  second  farm  mortgage,  covering 
at  least  the  investment,  w^ould  not  sell  on  a  C  per  cent  basis,  unless 
they  received  10  or  12  per  cent  as  interest.  In  other  words,  the 
security  w^as  not  good  and  demanded  compensation  for  the  risk. 
That  may  be  likened  to  the  stocks  that  come  on  top  of  the  bonds. 

The  result  was  that  the  cost  of  money  on  a  farm,  up  to  the 
full  value  of  the  farm,  was  over  8  per  cent  on  the  full  value,  the 
same  as  the  cost  of  money  or  capital  in  the  public-utility  field 
amounted  to  over  8  per  cent. 

Those  investigations  were  carefully  made,  based  upon  thousands 
of  illustrations,  covering  not  onlj^  the  income  accounts  and  the  value 
of  the  propert}^,  but  upon  their  market  price  for  five  or  six  years. 
I  had  at  least  eight  or  nine  men  working  on  this  investigation  alone. 
I  realized  that  the  cost  of  capital  in  the  utility  and  railroad  field 
was  measured  by  what  you  had  to  have  in  order  to  get  capital,  and 
I  tried  to  ascertain  that;  and  it  is  for  that  purpose  that  that  in- 
vestigation was  carried  on.  The  results  that  1  gave  you  are  in  sub- 
stance what  I  found.  Of  course  they  cover  files  of  routine  matter 
which  I  have  not  here,  but  which  I  have  in  my  files  in  my  Chicago 
office. 

The  Chairman.  Did  the  data  which  you  filed  with  the  United 
States  Chamber  of  Commerce  contain  the  same  details  on  tliat 
matter? 

Mr.  Erickson.  The  details  are  given  fairly  closely  here  in  this 
brief  statement  that  I  will  hand  you,  and  also  somewhat  more  fully 
in  the  statement  made  to  the  chamber  of  commerce,  but  more  fully 
still  in  the  report  I  made  to  the  attorneys  before  the  Newlands 
committee.  I  do  not  think  those  figures  are  available,  but  I  will 
furnish  you  a  more  detailed  summary,  if  you  would  want  to  have  it. 

The  Chairman.  I  have  the  report  of  the  Newlands  committee. 

Mr.  Erickson.  Oh,  you  have?  Well,  that  is  in  that  report.  It 
covers  in  detail  practically  all  of  the  leading  railway  systems,  all 
the  leading  utilities  and,  besides  that,  I  have  a  fairly  full  record  of 
practically  all  the  leading  manufacturing  industries.  I  have  a  de- 
tailed report  covering  100  typewritten  pages;  and  I  should  be  glad 
io  send  you  a  copy  of  it  if  you  would  like  to  have  it. 

The  Chairman.  Thank  you. 

Mr.  Erickson.  I  have  not  that  here,  though,  but  I  have  it  in 
Chicago,  and  would  be  glad  to  forward  it  to  you. 

The  Chairman.  I  think  it  would  be  useful,  and  we  would  appre- 
ciate it,  if  it  is  convenient  for  you. 

Mr.  Erickson.  Yes;  I  will  send  it  in  to  you. 

The  street-railway  situation  is  such  that  something  will  have  to 
be  done,  and  it  will  have  to  be  done,  in  my  judgment,  through  the 
action  of  the  State.  Owing  to  regulation  of  utilities,  the  street  rail- 
ways themselves  can  not  remedy  the  situation.    They  are  powerless 


PROCEEDINGS  OF  FEDERAI.  ELECTRIC  RAILWAYS  COMMISSION.      973 

to  do  what  should  be  done.    It  can  only  be  done  by  permission  of  fhe 
State  and  in  some  cases,  of  the  city  authorities.      ^  ^  ^'^^ 

N«w,  that  means  that  the  State  will  have  to  take  action  •  the  rpm, 

lowe?rfXs"t''   ^'''''  *^  '^^'  '''^'''-    It  n^eans  furtSll  at  if  fl^' 
power,  of  the  btate  commissions  are  not  sufficient  now  they  will  have 

be  t.i'''Sieof't'"'*,Pf^"P%*'''"P"'-'^F  ^^^'^t^'^^^  w^iniave'Io 
ue  granted,  subject  to  what  may  have  to  be  done  later  on  •  but   in 

ny  judgment,  it  has  to  be  done  through  the  State  commission  or 
through  the  supervision  of  a  State  commission  ^^^mission  oi 

1  was  asked  to  say  something  on  Sta:te  vei-sus  local  reffulition 
I  have  prepared  something  on  tlTat,  and  I  suppos^  I  can  gif e  you  a 

voH-  !«t°h''-  K^  ''"  °""*  "'?  '^•^*«."^  "^"'l  "••^f^r  to  my  no?ef,  and^^ve 
you  what  has  been  my  experience  in  that  matter  while  I  was  on  thfl 

Tc  sXTf  Sfalf  "T*7:'^S^"/°'"S  «°'  '"  order  to  show  K 
necessity  of  State  regulation  I,  of  course,  have  gone  into  details  as 

to  what  IS  necessary  in  order  to  provide  adequate  service  at  reason- 
able rates,  and  perhaps  I  could  as  well  omit  that  since  it  is  fnT» 
renort,  anyway,  and  confine  myself  to  comments  '"  ^^^ 

Mr.  yvARREN.  I  should  like  to  havp  tho  vpr»nrf    ,*^  +u«4.        u 

pa*Jr;:£'  ^"^ '-  '''■■  ^^^^lo^r^^ 

thJ'l^STvduauf  "'"■  -«*"'^"tion  Mr.  Erickson  makes  to 
Mr.  Warken.  I  e.xpect  so,  and  I  feel  it  should  be  in  the  record. 
The  report  of  Mr.  Erickson  is  as  follows : 

STKEET   RAILWAY   SITUATION. 

awa.v.  About  1000  this  Had  etanged  "oifewltat  md  Zf  *"  ^^'^  '"^'•^^'''''^ 
mgs  grew  somewhat  faster  than  the  lnvp«wn;  •$,  ■"",  ^?"*  J'^'""*  *e  earn- 
to  draw  capital  into  tl.e  street  ralwnvflliriAV  This  had  a  strong  tendency 
even  advanced  into  the  tavestment  elai  '"'^  "*  "'«  ""•^^■■'J'ng  bonds 

di,^tM,e''e°:S  th'.rri"thT,rS,nSVd°  ^^'^  '"t*«  "P"*'^"" 

capital  that  was  needed  *"'  necessary  to  earn  to  attract  all  the  new   " 

tistics'?;™anf  teadTng  str^T^ailwnvr,*^  1"''  °'  ""^  "f«™«"S  and  other  sta- 
the  serious  nnLcM&mi^iJ'^^lTniTT^  ^"T  ."^  "'^  '""'»  >•«««<"•«  tor 
find  themselves.  ^'  ""  "'"^'  "^  "'«  electric  street  railways  now 

faft™"thl.n  Ve%^ross^°™lLl%t^^T'  """•'  '"^  °P«™""S  '^'^Penses  increased 

During  this  pS  furtJ.fr'  the  invesJZ,?  i"""""^  "'^°"'  ^^^  ^'  «■'" 
nearly  20  cents  to  close  to  28  cents  Thffn.r"^  passenger  advanced  from 
the  investment  per  passenger  is  largely  d,P  n  w"^  "*  f  *'"'  ^  P*""  ««"'  1" 
and  labor  and  to  the  fact  that  aurin'thi?n»HlT*''''''^  "  P''"^'^«  «'  material 
service  have  been  required, Ihe  cost  of  whth  hi""  "TJ  "nPi-ovemeuts  in  the 
In  the  density  of  traffic.  ^^^  """^  "*"  '"*'»  o^set  by  increases 


974 


PROCEEDINGS  OF  FEDERAL  EIJJCTRIC  RAILWAYS  COMMISSION". 


In  1914-15  the  operatinc:  expenses  alone,  without  including  sufficient  amounts 
for  depreciation,  averajred  about  3.6  cents  per  passenjjer.  Durinj?  tlie  sunie 
periml,  8  per  cent  on  the  investment  for  intc^rest  and  profits  averaj^ed  about  2.5 
cents  per  passenger.  This  made  the  total  co.st  ix»r  passenjjer  about  6.1  cents.-  Tlie 
average  rate  of  fare  per  passenger  during  this  period  averaged  5  cents  or  slightly 
less. 

The  principal  reason  why,  for  electric  stivet  rjiilways,  the  expenses  and  charges 
have  thus  increased,  is  found  in  the  increases  that  have  taken  place  in  prices  of 
material  and  labor.  From  1807  to  3915  the  wholesale  price  on  commodities  in- 
creased about  50  p«T  (^nt,  while  the  prices  on  hibor  increast»d  about  48  per  cent. 
The  situation  arising  from  such  increases  in  tlie  operating  expenses  and 
charges  was  also  greatly  aggravatt^l  by  the  fact  tlie  length  of  the  haul  increased 
and  by  the  further  fact  that,  as  time  went  on,  continually  increasing  demands 
for  better  and  more  comfortable  service  had  to  be  met.  Long  hauls  are  more 
costly  than  short  hauls  and  good  service  is  more  costly  than  poorer  service.  In 
the  face  of  such  increases  in  the  cost  of  the  service  the  number  of  passengers 
per  car-mile  decreased  rather  than  increased.  The  rate  of  fare  also  remained  the 
same  as  it  was. 

The  facts  just  given  apply  mostly  to  conditions  that  existed  for  some  time  up 
to  the  beginning  of  war.  Since  the  war  started  the  conditions  in  the  street- 
railway  world  have  steadily  grown  worse.  From  1914  to  1919  the  prices  on 
conmiodities  and  labor  have  about  doubled,  the  length  of  the  hauls  have  kept 
on  increasing  and  so  have  the  operating  expenses  and  fixed  charges.  In  the  face 
of  all  this  it  is  only  recently  that  a  few  of  the  worst  situated  roads  were 
reluctantly  granted  certain  small  increases  in  the  rate  of  fare. 

Tlie  operating  expenses  alone  increased  from  3.6  cents  per  passenger  in  1914 
to  4.8  cents  per  iwissenger  in  1918.  This  is  an  increase  of  1.2  cents,  or  about  33 
per  cent  in  the  operating  expenses  per  passenger.  The  cost  of  the  capital  has  also 
increa.sed.  But  if  no  allowance  is  made  for  this  increase  in  the  cost  of  the  capital, 
and  if  it,  therefore,  is  placed  at  the  prewar  tigure  of  2.5  cents  per  passenger,  the 
total  cost  per  passenger  in  1918  was  about  7.3  cents  for  each  ride. 

During  the  war  the  situation  became,  in  fact,  so  bad  that  road  after  road  had 
to  be  granted  increases  in  rates  in  order  that  they  would  be  able  to  keep  up  the 
service. 

The  conditions  which  created  the  bad  situation  before  the  war,  and  especially 
during  tlie  war,  are  still  with  us. 

I'rices  of  labor  and  material  are  not  declining  greatly,  nor  are  they  likely  to 
fall  much  as  long  as  our  supply  of  money  and  credit  remains  as  great  as  is  now 
the  ca.se.  Gold  production  is  about  as  great  as  ever.  During  the  war  the  imports 
of  gold  exceeded  the  exports  by  over  one  billion  dollars.  The  available  credit  and 
asset  currency  supplies  are  twice  as  great  now  as  before  the  war. 

It  is  true  that  these  increases  in  the  prices  of  materials  and  labor  applies  to 
other  industries  as  well  as  to  street  railways  and  other  public  utilities.  Here, 
however,  the  resemblance  ends.  Public  utilities,  like  other  industries,  have  not 
often  iK-en  able  to  meet  increasing  costs  on  what  they  buy  by  increases  in  the 
prices  on  what  they  sell. 

Public  utilities  have  to  buy  all  the  capital,  material,  supplies  and  labor  which 
they  use  in  the  open  comiietirive  market.  But  the  prices  on  the  service  which 
these  utilities  sell  is  subject  to  regulation.  Their  prices  are  fixed  by  the  gov- 
ernment.   In  many  cases,  these  prices  are  the  same  now  as  l)efore  tlie  war. 

When  all  the  facts  are  considered  it  will  be  found  that  at  present  and  for 
several  years  in  the  past  the  street  railways  have  not,  as  a  rule,  been  earn- 
ing a  fair  living. 

They  have  had  to  pay  the  ruling  wage.  They  have  also  had  to  meet  tMe 
most  urgent  reptiirs  and  renewals,  but  few  roads  have  been  able  to  keep  up 
their  equipment  as  well  as  they  would  have  done  had  the  earnings  been  ade- 
quate. Few,  if  any,  roads  have  beside  these  and  other  necessary  outlays  been 
able  to  earn  fair  returns  on  the  investment. 

It  is  often  said  that  low  prices  increase  the  sales  and  that  the  cost  per  unit 
of  service  decreases  as  the  volume  of  business  increases.  It  is  further  .said 
that  this  applies  with  special  force  in  the  street  railway  field,  l)ecause  in 
this  field  only  a  part  of  the  expenses  tend  to  vary  with  variations  in  the  amount 
of  business  done. 

It  is  true  that  the  law  of  increasing  returns  or  decreasing  cost  applies  to 
the  street-railway  traftic  the  sami'  as  it  does  to  other  industries  where  rela- 
tively larjre  Investments  are  recpiired.  But  this  law  while  important  is  sub- 
ject to  numy  qualifications.    In  such  industries  the  fixed  charges  and  other 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      975 

costs  per  unit  of  service  are  rapidly  increasing  as  long  as  the  investment 
lemains  the  sanie.  But  when  the  capacity  of  the  existing  equipment  is  reachefl 
and  ^vhen  additional  investments  are  needed  for  handling  the  growing  traffic 
then  It  IS  usually  found  that  the  cost  of  the  additional  equipment  is  out  of 
proix>rtnm  to  the  amount  of  traffic  that  can  be  had.  The  amount  of  traffic, 
for  instance  that  has  grown  too  great  for  one  track  is  not  often  even  nearly 
lai-ge  enough  f;or  the  full  use  of  two  tracks.  Yet  the  second  track  has  to  be 
put  m  ;  and  it  is  also  well  known  that  two  tracks  cost  nearly  twice  as  nmch  as 
one  tra<-k.  When  the  second  track  has  been  put  in,  the  interest  charges  per 
unit  of  service  become  much  greater  than  they  were  while  onlv  one  track  wa? 
used.  Ihis  increase  in  the  interest  charges  per  unit  is  also  fikelv  to  becorM> 
permanent  even  after  the  traffic  has  so  grown  as  to  fullv  utilize  'both  tracks, 
for  It  IS  well  known  that  double-track  lines  do  not  or  can  not  as  a  rule  handle 
twice  as  much  traffic  as  single-track  lines. 

Troubles  of  this  nature  have  greatly  aggmvated  transportation  conditions 
in  tins  country  during  the  past  decade.  While  there  was  too  much  traffic  for 
tlie  existing  facilities,  there  was  not  enough  traffic  to  equallv  fully  occupv  the 
facilities  after  they  had  been  extended.  New  extensions  mu.4t  alwavs  Ije  some- 
what out  of  i)rop<ution  to  the  amount  of  business  that  is  immediatery  available 
Adequate  street-car  service  is  a  necessity.  Without  it  no  citv  of  aiiv  con- 
siderable size  can  possibly  grow  and  prosper.  Good  sti-eet-car 'service'  how- 
ever, can  not  in  the  long  run  be  had  unless  the  earnings  are  high  enough  to 
bring  the  necessary  capital  into  the  street-raihvav  field.  When  the  choic-e  lies 
between  good  service  at  reasonable  rates,  on  the  one  hand,  and  poor  service 
at  too  low  ratas  on  the  other,  it  is  to  the  best  interest  of  all  that  the  former 
should  be  preferred. 

A  living  wage  in  any  industry  consists  of  earnings  that  are  high  enough  to 
attract  all  the  capital  and  all  other  factors  of  production  that  are  required  in 
the  business.  * 

In  the  stiwt-rallway  and  public-utility  fields  this  means  that  under  normal 
conditions  the  earnings  must  be  high  enough  to  yield  re^isonable  returns  for 
the  operating  expenses  including  taxes,  depreciation,  and  interest  and  profit 
on  the  fair  value  of  the  plant  and  the  business.  Reasonable  returns  are  rep- 
msented  by  fair  prices  of  all  the  labor,  services,  materials,  supplies,  and  other 
things  that  are  needed,  as  well  as  by  fair  prices  for  the  capital  emploved  and 
for  the  enterpriser  or  employer.  l     ^    ^  *"'u 

For  several  years  up  to  the  time  of  the  war  such  reasonable  returns  were 
ordinarily  covered  by  earnings  thiit  were  high  enough  to  meet  all  other  ex- 
penses and  charges  and  leave  a  balance  of  about  8  per  cent  on  the  fair  value 
ot  the  plant  and  the  business  for  interest  and  profits  thereon. 

During  the  war  the  cost  of  the  factors  of  production  including  the  capital 

was  as  stated  grejitly  increased,  and  these  costs  still  remain  at  high  levels      It 

.  is  iK>ssibIe,  however,  that  during  the  near  few  years  there  will  be  some  fall  in 

the  cost  ot  investment  capital,  although  it  is  doubtful  whether  for  many  years 

this  cost  will  fall  as  low  as  to  the  prew^ar  point. 

The  conditions  upon  which  capital  can  be  had  or  securities  sold  are  about  as 
follows :  "vyui  cto 

The  property  and  earnings  behind  the  investment  must  be  sufficient  to  alTord 
the  necessary  protection  against  risks,  and  to  also  constitute  adequate  com- 
pensation tor  the  use  of  capital  employed,  and  for  the  work  and  responsi- 
bilities assumed  by  the  employer  and  investor. 

Investments  in  bonds,  in  onler  to  be  safe,  n.ust  have  behind  them  much  more 
proptMty  than  their  par  value,  and  much  greater  net  earnings  than  the  interest 
charges  on  the  bonds. 

Stocks  in  order  to  be  fairly  safe  or  to  come  in  the  investment  class,  must 
have  behind  them  at  least  as  much  property  as  their  par  value,  and  much 
gi-eater  net  earnings  than  the  ordinary  6  per  cent  of  7  per  cent  dividends  that 
may  be  paid  thereon. 

Without  such  margins  of  safety  as  these,  the  securities  are  speculative  rather 
than  investment  i)ropositions. 

The  fact  that  investment  securities  must  be  protected  bv  more  property  than 
their  par  value  and  by  much  greater  net  earnings  than  the  ordinarj-  interest 
and  dividend  charges  shows: 

1  That  the  cost  of  capital  is  represented  by  the  amount  of  the  net  earnings 
that  are  required  in  order  that  the  securities  thus  representing  the  capital  mav 
sell  on  the  ordinary  investment  or  income  basis,  and 

2.  That  the  rates  charged  by  a  utility  for  the  service  it  furnishes  must  in 
the  long  run  be  high  enough  to  yield  such  net  earnings. 


976      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  investment  conditions  in  these  respects,  whicli  prevaile<l  for  several 
years  prior  to  tlie  war,  may  be  further  summarized  as  follows: 

Investors,  in  order  to  purcliase  5i  per  cent  to  6i  per  cent  bonds  at  par,  re- 
quireil  amonj;  other  things: 

1.  That  such  bonds  should  not  amount  to  more  than  about  two-thirds  of  the 
value  of  the  assets  behind  them. 

2.  That  tlie  net  earning^s  of  the  issuing  company  should  amount  to  not  less 
than  twice  as  much  as  the  interest  charges  on  such  bonds. 

3.  Tliat  the  pa.st  record  and  future  prosi)ects  of  the  utility  should  be  good  or 
at  least  very  fair. 

4.  That,  in  taking  the  securities  on  such  income  bases  as  those  given,  the 
investors  would  not  assume  the  cost  of  such  discount,  commissions,  and  other 
selling  and  issuing  exi)ense  as  had  to  be  met  when  the  securities  were  first  put 
on  the  market. 

Such  bonds  as  these  represent  for  the  most  part  the  class  of  investment  bonds 
wliich  were  available  for  new  capital  at  the  time. 

Tlie  comparatively  few  available  underlying  issues  which  were  better  pro- 
te<ted  than  this  were  selling  at  somewhat  higher  prices  and  lower  yields. 

Tlie  many  junior  issues  bearing  the  same  rates  of  interest  but  which  were 
less  well  protected  than  this  were  selling  at  lower  prices,  and  higher  yields  or 
often  much  below  par. 

Investors  in  order  to  purchase  6  per  cent  to  7  per  cent  stocks  at  about  par  at 
that  time  required: 

1.  That  the  par  value  of  such  stocks  should  not  amount  to  more,  or  as  much 
as,  the  amount  by  which  the  value  of  the  a.ssets  exceetled  the  par  value  of  the 
bonds  whicli  come  ahead  of  such  stocks. 

2.  That  the  n^t  earnings  of  the  company  which  were  availal)le  for  returns  or 
dividends  on  such  stocks  should  amount  to  from  more  than  half  again  to  fully 
twice  as  much  as  the  regular  dividends. 

3.  That  in  addition  to  this  the  amount  by  which  the  net  earnings  for  tlie 
stock  exceeded  the  regular  dividends  be  used  for  strengthening  the  equities 
behind  the  stock  and  for  occasional  extra  dividends  tliereon.  • 

4.  That  the  future  prospects  of  the  conii)aiiy  appear  to  be  good  or  at  least 
fair. 

In  taking  the  stock  on  these  bases  the  investor  did  not  assume  the  cost  of 
dis<'ounts,  commissions,  or  other  selling  expenses. 

Less  well-protected  stocks  than  this  bearing  the  same  rates  of  dividends  sold 
at  lower  prices  and  higher  yields  or  below  par.  Better  protected  stocks  with 
similar  dividend  rates  sold  at  higlier  prices  and  lower  yields,  or  sometimes 
above  par. 

When  both  bonds  and  stocks  are  outstanding,  the  bonds  are,  of  course,  much 
safer  than  the  stocks.  Among  the  reasons  for  this  are  that  l)onds  have  the 
first  claim  on  the  entire  property  and  on  the  entire  net  earnings;  tliat  all  just 
claims  of  the  bondholder  must  be  satisfied  before  the  stockholder  gets  anything; 
that  tlie  bonds  have  foreclosure  ijrivileges  when  the  interest  cliarges  tliereon 
are  not  paid. 

The  facts  tlius  given  represented  normal  investment  conditions  in  the  utility 
field  for  the  period  involved.  For  a  plant  earning  8  per  cent  on  its  fair  value, 
t>f  which  60  per  cent  was  represented  by  bonds,  and  40  per  cent  by  stocks,  the 
situation  was  as  follows: 


I 


Assets. 

Rate, 
earned. 

Rate, 
paid. 

Interest 
dividends. 

Par 
price. 

lionds 

$60,000 
40,000 

Per  cent. 
13.3 
11.1 

Per  cent. 

.    6.0 

11.1 

$3,600 

4,400 

J^ino 

Stock 

100 

Total 

100,000 

8.0 

8.0 

8,000 

1<^ 

Farm  mortgages  bearing  interest  at  from  5J  to  6i  per  cent  will  not  often 
sell  for  as  much  as  par  if  tliey  amount  to  more  tlian  one-lialf  as  much  as  the 
value  of  the  farm,  and  if  the  farm  is  not  well  located  and  well  managed. 

Second  farm  mortgages,  covering  the  remaining  half  of  the  value  of  the 
farm,  will  not  sell  at  par  unless  the  interest  received  thereon  amounts  to  from 
10  per  cent  to  12  per  cent. 


t 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      977 

First  mortgages  of  this  kind  on  farms  resemble  the  bonds  which  were  sav 
one-half  the  value  of  a  utility.  ' 

Second  farm  mortgages  of  the  kind  mentioned  resemble  the  second-mortgage 
bonds  or  even  stock,  which  cover  the  remaining  half  of  the  value  of  a  utility 
plant.  ' 

The  cost  of  obtaining  capital  in  the  public  utility  for  several  years  up  to 
the  beguining  of  the  war  may  be  further  illustrated. 

Twelve  representatives  20  to  30  year  first-mortgage  bond  issues  covering 
gas,  electric,  and  street-railway  plants  brought  out  before  the  war  and  bearing 
interest  at  the  rate  of  5  per  cent  were  placed  on  the  market  at  prices  under 
which  they  yielded  the  investors  from  something  over  5^  per  cent  to  more 
tlian  6  per  cent.  The  cost  to  the  issuing  companies,  when  discounts,  com- 
missions, and  other  expenses  averaging  about  7  per  cent  are  included,  amounted 
to  about  6i  per  cent.  These  issues  did  not  cover  more  than  al>out  one-half 
of  the  book  values  of  the  property  and  were  protected  by  net  earnings  that 
averaged  considerably  more  than  twice  as  much  as  the  amounts  required  for 
interest  on  the  bonds. 

During  tlie  same  period  fifteen  .25  to  30  year  representative  second-mortgage 
bonds  covering  similar  properties  bearing  rates  at  5  and  6  per  cent  were  offered 
at  prices  which  would  net  investors  about  6.7  per  cent.  On  these  bonds  the 
discounts  and  selling  expenses  amount  to  about  8  per  qent  on  the  par  value 
of  the  bonds.  These  costs  when  pro  rated  on  the  life  of  the  bonds  brought  the 
cost  of  the  capital  to  the  utilities  up  to  over  7  per  cent.  These  issues  were 
protected  by  half  again  as  much  property  as  their  par  value  and  by  net  earn- 
ings that  amounted  to  about  twice  as  much  as  the  interest  cliarges 

The  situation  witli  respect  to  older  issues  is  about  as  follows":  A  group  of 
twenty-seven  5  per  cent  first-mortgage  bonds,  most  of  which  are  underlying 
hens  upon  the  whole  property  and  all  of  which  are  underlying  liens  upon  ai 
least  a  part  of  the  property,  were  taken  in  the  1916  markets  by  investors  at 
prices  upon  which  the  approximate  yield  was  5i  per  cent  There  wi*:  nnf 
standing  about  $170,000,000  of  these 'securities,  bac'L  of^^ich  stooc^^f  book 
value  of  nearly  $420,000,000.  It  is  clearly  indicated  by  these  figures  that  these 
Issues  cover  much  less  than  one-half  of  the  book  value  of  these  propertii 

Lm'^onVv'^ir^SoJ^f  ^^^  ^^T  *f^/\amounted  to  over  $27,500,000.  of  which 
sum    only   $10,320,000   was   absorbed    by   interest    and    sinking-fund   charges 
leaving  an  excess  for  safety  of  $17,180,000.    Interest  charges  oh  these  bonds 
were  thus  earned  2.7  times  over,  and  the  margin  of  safety  was  63  per  cent 

A  small  group  of  long-term  4  per  cent  bonds  whose  securitv  is  rated  highly 
were  similarly  demanded  by  investors  at  a  price  to  yield  approximately  5  Jj 
per  cent.  The  average  income  available  annually  for  the  past  five  years  was 
three  times  the  interest  requirements. 

Another  group  of  about  40  utility  bond  issues,  protected  on  the  average  by 
not  far  from  twice  as  much  property  and  earnings  as  the  face  value  of  tlie 
bonds  and  interest  charges  tliereon,  have  sold  at  prices  on  which  the  yield 
averaged  over  6  per  cent.  The  cost  to  the  utilities,  however,  when  all  ms- 
counts,  commissions,  outlays,  and  deductions  of  about  8  per  cent  are  included 
Increased  this  figure  considerably,  or  to  about  7  per  cent  mciucied, 

A  group  of  11  collateral  trust  securities,  8  bearing  5  per  cent  interest  2 
bearing  4  per  cent,  were  issued   to  the  extent  of  nearly  $120,000,000     The 

ZZ'^^"^/^'^^^  ''?^'  '^  ^^^^^  ^"^^^  ^y  ^^««^^y-  These  issues  yiSdapproxf- 
mately  5.84  per  cent  on  an  average  price,  and  the  interest  is  covered  three 
times  by  the  income  available  on  a  five-year  average  basis. 

A  great  many  five-year  note  issues  have  of  late  years  been  offered  at  prices 
which  would  yield  investors  from  6  per  cent  to  7.5  per  cent.  In  many  of  these 
cases  the  issues  bear  interest  at  6  per  cent.  The  discounts  and  other  expens^ 
amounting  to  about  10  per  cent  make  the  cost  to  the  utilities  in  pracUcX 
all  cases  more  than  8*  per  cent  per  annum.  Many  such  note  issues  were 
undertaken  for  the  purpose  of  postponing  comprehensive  refinancing  plans  to 
a  time  when  long-time  securities  would  find  a  market,  and  when  it  is  ex^t^ 
that  the  money  market  will  be  easier  so  tht  permanent  long-time  mortog^ 
or  bonds  could  be  offered  at  a  less  financial  sacrifice  ^"orrfedges 

Several  preferred  stocks  protected  by  ample  assets  and  bv  net  earnin<r« 
amounting  to  from  10  per  cent  to  30  per  cent  thereon  have  ^W  at  pdces  o^ 
which  they  yielded  from  a  little  less  than  7  per  cent  to  about  8  per  ceift  Wim 
discounts  and  other  expenses  the  capital  obtained  on  these  issues  cost  the 
utilities  at  least  1  per  cent  more  than  this.    Twenty-nine  preferred  stocks 


978      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

amounting  to  almut  $170,000,000,  protected  by  earnings  that  amounted  to  2} 
times  the  ordinary  direct  dividend  charges  sold  on  a  7  per  cent  to  an  8  per 
cent  income  basis. 

Tlie  public-utility  securities  which  have  thus  far  been  discus.sed  belong  in 
large  part  to  these  large  utilities  which  are  fairly  well  known  and  for  whose 
securities  there  is  a  fairly  well  developed  market.  They  represent  the  leading 
listed  and  unlisted  securities  in  all  stock  exchanges  and  prominent  markets 
uiK)n  winch  reliable  data  can  be  secured.  They  are  mainly  of  an  active  class, 
altliough  some  are  included  which,  though  somewhat  active,  are  of  proven 
worth. 

All  of  these  facts  clearly  show  that  for  several  years  up  to  the  earlier  years 
of  the  v.ar  the  utilities,  as  has  been  stated,  could  not  obtain  all  the  ciipital 
they  needed  on  normal  terms  and  conditions  unless  the  net  earnings  for  re- 
turns on  the  Investment  amounted  to  at  least  8  per  cent  on  the  fair  value  of 
the  plant  and  the  business. 

These  facts  show  further  that  during  the  same  years  the  net  earnings  for 
returns  did  not  on  the  average  amount  to  nmch  more  than  about  half  of  this 
or  to  only  about  4  per  cent. 

It  is  further  disclosed  that  the  unsatisfactory  conditions  in  which  the  street 
railways  found  themselves  at  the  l>eginning  of  the  war  have  steadily  grown 
worse  since  then.  During  the  i>ast  two  years  they  have  earned  but  little  more 
than  enough  to  cover  the  operating  expenses. 

It  is  clear  to  all  that  this  is  a  situation  that  can  not  last.  No  one  will  con- 
tinue to  render  st^rvice  at  a  loss.  Unless  the  street  railwavs  are  allowed  to 
earn  reasonable  returns,  the  service  is  certain  to  become  so  bad  as  to  be  un- 
beanible.  The  choic-e  therefore  lies  between  good  service  at  reasonable  rates 
and  [>oor  service  that  is  gradually  growing  worse  at  the  existing  rates  Vs 
good  street-car  service  is  indispensable  in  all  growing  cities  the  choice  is  plaia 

As  the  stn'et  railways  are  subject  to  government  regulation  and  have  but 
little  control  over  the  growing  costs  of  oi)eration,  they  are  themselves  utterly 
unable  to  remedy  the  situation  with<nit  the  active  and  comprehensive  assist- 
ance from  the  regulating  connnissions  or  botlies.  Such  assistance  is  not  easily 
obtaineil.  Some  of  the  princii)al  reasons  for  this  are  found  in  the  attitude 
of  the  <-ity  authorities  in  these  matters,  and  in  the  conflicting  powers  and  other 
relations  that  often  exist  as  between  the  State  commissions  and  the  local 
authorities.  It  is  highly  imiM>itant  that  these  obstacles  be  removed  and  that 
full  iM>\ver  to  deal  with  the  situation  be  placed  in  the  hands  of  whatever  body 
or  connnissions  which  from  every  point  of  view  is  in  the  best  position  to  njos't 
pnunptly,  most  fairly,  and  most  effectively  straighten  out  the  situation.  If 
State  regulation  through  utility  connnissions  is  the  best  agency  for  this  pur- 
rwse,  this  is  also  the  means  that  should  be  adopted.  If  local  regulation  is  a  bet- 
ter medium  then  this  should  be  chosen.  In  order  to  she<l  some  light  on  these 
nuitters  these  two  methods  of  regulation  will  be  discussed  at  some  length. 

STATE    VERSUS    LOCAL    REGTTLATION. 

The  power  to  regulate  st^rvice,  prices,  and  other  conditions  Is  vested  In  th»» 
State  and  not  in  the  municipality  or  in  any  subdivision  of  the  State  Such 
State  regulation  may  take  the  fonn  of  specific  legislation  to  be  enforced  if 
need  be,  either  through  the  regularly  establisheil  legal  machinery  or  through 
such  administrative  bodies  as  the  railroad  and  public-utility  'commissions 
The  State  may  also  delegate  such  regulation  to  any  of  the  locjiTunits  of  whi<-h 
the  State  is  made  up,  such  as  cities,  etc.  When  the  regulation  of  public  utilities 
is  delegated  to  the  local  units  it  is  usually  carried  out  through  franchise  and 
ordinary  provisions  mostly  without  any  regular  department  for  administering 
.';uch  regtdation. 

The  purpose  of  the  regulation  of  public  utilities  is  mostly  to  see  to  It  that 
f  uch  utilities  fnrnish  adequate  service  at  reasonable  rates,  "and  that  excessive 
r.mounts  of  securities  are  not  issued  by  them. 

While  it  is  generally  admitted  that  such  regulation  of  public  utilities  is  neces- 
sary in  public  interest,  there  are  differences  of  opiniim  as  to  what  form  of  regu- 
lation is  preferable  or  best  from  this  point  of  view.  Some  prefer  re'-ulatfon 
through  State  legislation  and  conmiissi<m :  others  hold  that  such  re^nilation 
should  be  dek-gatiHl  or  intrusted  to  the  municipality  actually  served^ by  the 

The  purpose  herein  is  to  present  a  fewfacts  which  mav  throw  some  light  unon 
whether  State  or  local  regulation  is  the  best  or  most  advantageous  from  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      979 

k?ml'o''f'wo7k  ?hru  ri,"f''^?^--  '^^  '"^^^l  '""^  *^"  "^^*"^^  ^f  regulation,  and  the 
Knul  ot  >\ork  that  is  required  m  proj^erly  administering  it  will  be  brieflv  out- 
lined. The  past  exi»erience  under  the  two  methods  of  re|ulation  and  other  facts 
and  conditions  will  also  be  touched  uiK)n 

The  service  in  order  to  be  adequate,*  must,  as  a  rule,  conform  to  certain 
standards  which  have  been  developed  from  experience  and  which  are  sublecJ 
to  change  with  changes  in  the  condition.s.  sunject 

In  the  street-ralway  service  the  tracks  must  be  safe  and  well  maintiined 
They  must  also  be  located  on  the  streets  where  most  needed  and  extS^frmn 
time  to  time  with  the  growth  of  the  city.  Other  street  rX.^eq id, m.em  iims^ 
^  ^WYy^  ^".^  '''^"  ^^P*  "P  ^^^^^  ^'^^P^^^t  to  both  the  safetv  .Z  tWoiXt 
tLmn  ^^u'""'  V.^'"^  *r^*.  ^^  ^'"'^  »«  ^ff^«  «s  necessary  to  accomn^odate  t  e 
,ii?r  .  •  .^^^  ^outmjr,  loading,  and  headway  of  cars  as  a  whole  asTell  as  a! 
different  times  of  the  day,  are  matters  that  can  not  be  safely  nass^d  noon  t\ti 
out  elaborate  traflic  and  other  studies  or  investigations        ^  ^  ^    '''^^' 

The  gas  used  for  cooking,  lighting,  and  heating  must  have  the  nroner  he-.tin- 
value  or  qualities,  be  comparatively  free  from  ^ilphur,  and  bf  dX^red  m^ 
proper  pressure.     The  meters  by  which  the  gas  is  measured    in  ord^  In  Z 
accurate,  must  also  be  tested  at  frequent  intervals       "'^''^"'^^'  '"  ^^^^^  ^^  ^^ 

thl^neL'^fte^i^m^^^^^  ^"^^  ^^  eompamtively  constant, 

Lue  iiieceis  nequently  tested  and  the  lamps  renewed  whenever  necessMrv     Th« 

Waterworks  uiiist  have  suHicient  pressure  for  both  fire  and  domestic  servi,v. 
7,eVaZi:rTt  7>^lTil!'t  T'"'  "'?'■'*'■  "^"^  ^^PP^of  water*  n.us[X- 
date  ami  well  marutSd  """"''  '^"'"•'""  """  *"  «>«iP"'«''t  «p  to 

n  z;r,^;x^:^j:z^  fr^^dtsnu?^.«„srererStr 

the  (.Iterating  expenses  and  charges,  and  manv  other  facts  ^  '^"^^  ''^ 

usually  deteriniued  from  the  original  eU  .rdevelm,i,^e  H,?Lt„  f^  "'"'■>'  '•* 
ie  gh'Jn'oln^derTtiolr  ""  '''^  """«'  *'"'"-  '""«  ""''  -"^'""-  «-t  ^'t 
property  and  books  of  the  plant  arl  neceJ.:^'' ^^:::^  ZH^^J^"^ 


980      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION* 

separated  from  renewals  and  repair  items.  Information  must  be  obtained  as 
to  what  the  prices  of  labor  and  material  were  at  the  time  the  different  units 
were  put  into  the  plant.  In  fact,  all  investment  and  operating  accounts  must 
be  carefully  examined  and  analyzed  as  well  as  measured  in  the  light  of  what 
is  reasonable  under  the  circumstances. 

The  work  of  ascertaining  the  cost  of  reproduction  and  the  amount  of  de- 
preciation that  has  accrued  in  the  physical  property  requires  complete  inven- 
tories of  the  property,  and  careful  pricing  of  each  part  or  item  thereof,  as 
well  as  full  data  as  to  the  age,  service  life,  and  actual  condition  of  such  prop- 
erty. To  this  end  further  complete  price  lists  of  all  elements  of  cost  and  de- 
tailed inspection  of  the  property  as  well  as  full  Information  as  to  the  char- 
acter of  its  use  and  upkeep  and  as  to  the  state  of  the  art  are  also  needed. 

In  order  to  determine  the  original  cost  of  developing  the  business  of  the 
plant  and  the  probable  cost  of  reproducing  the  same  under  existing  conditions, 
much  information  and  many  facts  are  necessary.  The  financial  history  of  the 
company  as  disclosed  by  its  books  and  records  and  in  other  ways  must  be 
known.  This  is  also  true  of  what  constitutes  reasonable  allowances  for  the 
operating  expenses  and  charges  including  interest  and  profits  on  the  investment 
at  the  different  stages  during  the  development  of  the  business.  Facts  must 
also  be  had  which  show  how  long  it  would  take  to  reproduce  the  plant  and  the 
business  at  the  time  of  the  appraisal,  and  what  would  be  the  relation  between 
the  expenses  and  the  earnings  at  each  stage  during  the  time  required  for  the 
reproduction  of  the  business,  and  numerous  other  facts  and  conditions. 

In  order  to  know  what  are  reasonable  amounts  for  the  operating  expenses 
Including  depreciation  and  returns  for  interest  and  profits  on  the  investment  a 
great  deal  of  information  is  needed.  Statistics  showing  the  cost  of  operation 
of  different  plants  under  varying  conditions;  familiarity  with  operating  con- 
ditions and  equipment,  experience  with  or  a  thorough  understanding  of  operat- 
ing methods  and  practices  enables  one  to  properly  pass  upon  the  operating 
exi>enses.  Information  as  to  the  cost  and  probable  service  life  of  the  depreci- 
able property,  the  nature  of  its  use  and  upkeep,  and  the  state  of  the  art 
places  one  In  position  to  say  how  much  should  be  set  aside  annually  for  the 
renewal  of  worn-out  or  discarded  property.  Knowledge  of  financial,  Industrial, 
and  Investment  conditions  and  of  the  general  trend  of  events  enables  one  to 
estimate  the  amounts,  or  rates,  or  prices  at  which  capital  and  the  enterprise 
can  be  had. 

When  the  total  cost  of  the  service  has  thus  been  ascertained  and  adjusted 
to  probable  future  conditions,  It  Is  necessary  to  so  apportion  the  various  items 
of  which  this  total  is  made  up  that  proper  costs  per  unit  of  service  for  each 
class  of  customer  can  be  obtained  and  equitable  rate  schedules  built  up. 

In  order  that  the  facts  ne  ded  to  pass  upon  the  cost  value  of  the  plants  and 
their  business  and  the  cost  of  the  service  performed  may  be  available.  It  is 
necessary  that  the  accounts  and  records  kept  by  the  utilities  be  as  complete 
and  correct  as  well  as  uniform  throughout  the  State.  It  is  further  necessary 
that  such  accounts  and  records  should  be  regularly  audited  and  Inspectetl. 
Without  proper  groupings  of  the  different  expense  Items  the  total  cost  can  not 
be  properly  apportioned  between  the  different  branches  and  classes  of  the 
service.  Without  uniformity  in  such  groupings  the  figures  for  different 
plants  can  not  be  fairly  or  accurately  compared.  Without  audits  irregulari- 
ties of  one  kind  or  anotlier  are  certain  to  creep  into  the  results.  Until  uni- 
form and  correct  classifications  of  accounts  are  made  effective,  those  are  few 
who  so  group  their  expenses  and  charges  that  they  become  safe  basis  for  rates 
for  the  service. 

The  conditions  which  affect  the  charges  for  the  service,  like  the  con<litions 
which  affect  the  quality  of  the  service,  are  almost  constantly  changing.  Changes 
In  prices  of  material  and  labor  affect  the  value  of  the  plant  as  well  as  the 
cost  to  It  of  furnishing  the  service.  The  cost  per  unit  of  the  service  may  also 
be  greatly  affected  by  changes  In  the  volume  of  the  business.  New  inveiitions, 
the  adoi)tion  of  new  methotls,  and  variations  in  municipal  a.nd  other  re- 
quirements may  also  lead  to  similar  results.  Competitive  and  commercial 
conditions  also  play  their  part  in  affecting  the  rates;  and  this  is  even  true 
of  the  different  seasons  of  the  year. 

Much  of  the  information  that  is  needed  in  rate  making  is  also  required  in 
connection  with  new  security  issues.  When  new  securities  are  issued  In 
order  to  provide  for  new  extensions,  it  is  necessary  to  correctly  estimate  in 
advance  the  cost  of  such  extensions.  In  this  connection,  further  correct  esti- 
mates of  the  effect  upon  the  earnings  and  the  operating  expenses  of  such 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      981 


'  •-•'»   _i-Jc-.-  ' 


I 


additions  to  the  property  or  plant  are  also  necessary.  If  the  extension  is  not 
In  line  with  public  policy  it  should  not  be  built.  All  this  requires  much 
knowledge,  a  wide  experience  and  some  judgment.  This  is  also  true  of  the 
work  involved  in  fixing  all  other  conditions  and  terms  that  are  connected  with 
security  issues. 

Experience  has  taught  us  that  the  problems  of  regulation  are  so  complex 
in  their  nature,  so  far-reaching  in  their  eff^t,  so  persistent  in  their  tenden- 
cies that  they  can  not  be  successfully  handled  by  any  but  the  strongest  and 
best-equipped  commissions.  Such  commissions  should  be  backed  up  by  com- 
prehensive laws  and  strong  government  as  well  as  by  adequate  appropriation 
for  the  employment  of  the  necessary  engineering,  accounting,  statistical  and 
other  expert  services,  and  for  the  inspection  of  the  service  and  other  condi- 
tions and  practices.  Less  well-equipped  departments  than  this  will  not  be 
able  to  properly  cope  with  this  work.  Poorly  equipped  departments  may  cause 
more  harm  than  good.  For  lacking  the  necessary  information,  their  orders 
are  likely  to  go  either  too  far  or  else  not  far  enough,  and  in  these  and  other 
ways  seriously  disturb  many  sensitive  industrial  and  commercial  relations. 

It  is  apparent  from  what  has  been  said  that  the  work  of  regulation  is  by 
no  means  a  simple  task.  To  promulgate  and  administer  proper  rules  or  stan- 
dards of  service,  and  reasonable  rates  which  are  not  unjustly  discriminatory 
should  be  the  task  of  technically-trained  men  of  wide  experience.  It  is  work 
that  requires  detailed  Information  and  a  full  understanding  of  the  physical 
parts  and  condition  of  the  plant,  and  of  both  local  and  general  industrialand 
financial  conditions.  It  requires  familiarity  with  operating  matters  and  the 
progress  of  the  Industry.  It  requires  familiarity  with  values,  the  cost  of  the 
service,  both  as  a  whole  and  per  unit,  for  the  entire  plant  as  well  as  for 
each  class  of  Its  customers.  It  requires  scientifically  kept  accounts  and  records, 
uniform  for  the  state  and  even  for  the  country.  It  requires  knowledge  as 
to  the  conditions  and  terms  upon  which  each  factor  of  production  can  be 
had  and  the  probable  future  tendencies  of  these  terms.  It  requires  much  other 
information  that  can  only  be  acquired  through  special  facilities,  preparation 
and  long  experience.  The  need  for  all  this  is  not  limited  as  to  time,  but  is 
constant.  It  must  be  available  when  the  work  of  regulation  first  begins  It 
is  needed  for  the  readjustments  that  are  necessary  with  each  of  the  changes  in 
conditions  that  take  place  so  frequently,  especially  in  growing  industries 
Much  of  it  is  also  required  for  inspection  and  for  other  administrative  work. 

This  work  can  also  be  carried  on  much  more  cheaply  and  much  more  effec- 
tively on  a  large  scale  by  the  State  than  on  small  scales  bv  each  local  unit 
or  city.  The  State  can  employ  service  experts,  appraisers,  'accountants,  sta- 
tisticans  and  other  assistants  at  moderate  salaries  and  keep  them  constantly 
employed.  None  but  the  largest  cities  can  very  well  do  or  afford  this.  Most 
of  the  cities  can  not  even  afford,  or  feel  they  can  not  afford,  even  occasional 
service  of  such  experts.  The  Slate  has  broad  powers  and  wide  jurisdiction 
The  information  it  obtains  covers  large  areas  and  many  plants,  and  so  does 
the  uniform  practices  and  rules  which  it  puts  into  effect  and  enforces  Its 
powers  are  State  wide.  The  activities  of  the  city,  on  the  other  hand,  can 
not  extend  beyond  the  city  limits.  Its  powers  therefore  are  limited  the  in- 
formation it  can  obtain  is  r^tricted,  and  so  are  the  rules  it  can  put  into 
effect  and  enforce.  It  is  In  its  very  nature  debarred  from  doing  and  seeking 
most  of  those  things  which  are  essential  to  effective  regulation,  economically 
administered. 

State  public-service  commissions  are  usually  equipped  with  well-equipped 
assistants.  They  develop,  prescribe,  and  put  into  effect  proper  standards  and 
rules  of  service,  and  through  regular  inspections  see  to  It  that  these  standards 
are  lived  up  to.  They  are  constantly  engaged  in  Investigating  the  prices  of 
construction  material,  operating  supplies,  labor  and  other  services.  They  in- 
quire into  the  cost  of  capital  and  the  enterprise  as  well  as  into  the  cost  of  the 
service,  both  as  a  whole,  and  by  classes  of  customers.  In  appraising  the  plant 
and  its  business  they  examine  the  books,  records,  and  other  sources  for  evidence 
as  to  the  original  cost  of  the  same.  They  cause  the  property  and  other  elements 
to  be  carefully  Inventoried  and  priced  in  order  to  determine  the  cost  of  repro- 
duction of  the  same  such  property  and  business.  For  the  purpose  of  deter- 
mining the  questions  connected  with  the  depreciation  of  the  property,  they  obtain 
full  data  as  to  the  cost,  age,  condition,  service  life,  the  state  of  upkeep  and 
other  facts  of  the  property  involved.  They  audit  the  earnings  and  operating 
expenses  of  the  plant  and  see  to  it  that  the  uniform  accounting  systems  which 
they  have  prescribed  are  adhered  to.    They  study  general  and  local  condi- 


982       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tions,  operating  methods,  construction  projects,  and  other  facts  and  practices. 
The  facts  thus  gathered  and  the  knowledge  thus  obtained  become  the  basis  upon 
which  the  work  of  regulation  is  carried  on. 

Under  local  regulation  such  work  is  not  often  carried  on.  It  is  mostly 
regarded  as  too  costly.  For  all  but  perhaps  the  very  largest  cities  this  is  also 
true.  Franchise  and  ordinance  provisions  alone  do  not  mean  much.  They 
are  either  out  of  date  and  unenforcihle  soon  after  enacted,  or  the  means  for 
enforcing  them  are  lacking.  Legislation,  in  order  to  be  of  value,  must  be  pracs 
tical  as  well  as  enforced.  Franchises  run  for  long  periods  of  years.  The  regu- 
lating provisions  therein,  even  if  proper  at  the  time  the  franchise  is  enacted, 
are  usually  out  of  date  in  a  year  or  two  thereafter.  Even  when  these  pro- 
visions are  subject  to  revision  from  time  to  time  the  situation  is  not  greatly 
improved.  For  it  is  usually  found  that  such  revisions  are  neither  as  frequent 
as  is  necessary,  nor  properly  made  when  it  is  attempted  to  make  them.  Local 
regulation  therefore  mostly  means  no  regulation. 

That  legislation  alone,  without  proper  supervision  and  enforcement,  will  not 
accomplish  all  that  is  needed  in  the  way  of  regulation  is  fully  shown  by  experi- 
ence. When  tlie  need  for  railway  regulation  tirst  appeart^d,  the  States  tried 
to  meet  tliis  demand  by  direction  legislation  without  provisions  for  the  enforce- 
ment of  tliese  laws.  The  results  were  far  from  satisfactory.  It  was  soon  dts- 
coveretl  tliat  the  laws  could  not  be  made  flexible  enough  to  meet  every  changing 
condition.  It  was  also  found  that  these  laws,  even  when  just,  would  not  be 
lived  up  to  unless  enforced  through  inspection.  These  and  other  conditions 
Ultimately  led  to  the  establishment  of  fully-equipped  railroad  commissions. 

This  experience  has  also  been  repeated  in  the  rest  of  the  utility  field  outside 
of  the  steam  railways.  When  the  need  for  regulation  of  municipal  utilities  was 
first  felt,  tlie  State  usually  delegated  the  power  of  such  regulation  to  the  munic- 
ipality. These  units  in  turn  attempted  to  bring  about  better  conditions  through 
franchise  and  ordinance  provisions  without  adequate  provisions  for  their 
enforcement.  These  efforts  fell  short  of  their  purpose.  When  the  question  of 
adequate  regulation  and  its  proper  enforcement  was  fully  inquired  into  it  was 
found  to  be  too  costly  and  too  complicated  to  be  undertaken  by  single  mu- 
nicipalities. As  the  situation  grew  worse  it  finally  came  to  such  a  pass  that 
the  State  had  to  step  in  and  take  full  charge.  The  State  then  did  in  the 
municipal  utility  field  what  it  had  already  done  in  the  railway  field.  It 
enactetl  proper  utility  laws  and  provided  for  their  administration  and  enforce- 
ment through  State  utility  commissions. 

The  failure  of  franchise  or  local  regulation  Is  not  only  shown  by  the  causes 
which  letl  to  the  establishment  of  State  conmiissions,  but  it  is  further  emi)hasized 
by  the  conditions  which  tlie  State  conmiissions  found  when  they  took  hold  of 
the  work.  When  the  State  commissions  thus  took  hold,  the  standards  of  serv- 
ice, if  any  such  standards  existed  at  all,  were  mostly  either  bad  or  out  of  date. 
The  service  itself  was  usually  bad  either  as  a  whole  or  in  spots.  It  would  have 
been  much  worse  than  it  was  had  ths  standards  and  rules  laid  down  been  c<mi- 
plied  with.  The  rates  were  in  the  same  fix.  They  were  seldom  adjusted  uiwn 
any  scientific  basis.  Unjust  discriminations  were  often  encouraged,  if  not 
demanded  by  the  cities  themselves.  Favored  customers  received  either  free 
or  reduced  rates. 

The  citi(»s  as  such  often  paid  nothing,  or  else  much  less  tlian  they  should 
pay,  for  such  street-railway,  water,  light,  power,  and  phone  service  as  they 
used,  thus  throwing  an  undue  burden  upon  the  rest  of  the  customers.  Little 
or  no  efforts  wt^re  made  by  the  city  toward  having  such  rates  establislied  as 
would  tend  to  develop  the  service  and  reduce  its  cost.  The  result  was  that 
tlie  rates  in  effect  were  often  such  as  to  retard  rather  than  promote  proper 
business  developments.  • 

State  regulation  is  not  i^erfect — no  human  Institution  Is.  State  commissions 
hjjve  made  mistakes.  In  their  work  they  have  often  gone  too  far  in  construing 
every  doubtful  point  in  favor  of  the  i)ublic.  They  have  often  misjudged  or 
faile<l  to  give  sufticient  weight  to  the  long-continued  upward  tendency  In  thf» 
prices  of  both  material  and  labor.  The  result  Is  that  many  of  their  or<U»rs 
have  been  unjust  and  have  bordered  upon  confiscation.  There  have  also  been 
mistakes  the  other  way.  For  it  is  no  doubt  possible  to  pick  <mt  orders  in 
which  the  commissions  may  have  been  more  liberal  to  the  utility  than  to 
the  public.  Occasional  shortcomings  of  this  kind,  however,  must  be  expected. 
On  the  whole,  State  regulation  has  been  much  fairer  and  much  more  equitable 
than  local  regulation.  This  conclusion  is  so  well  sustained  by  experience  and 
public  records  that  further  details  here  are  superfluous. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      983 

I.  ^"^V^!"!  ^^^!7  T^  ^"^^  ^^^^  ^^  requisite  facilities  and  the  other  shortcom- 
ings that  have  thus  bet^n  mentioned  are  not  the  only  obstacles  in  the  way  of  effec- 
tive and  fair  local  regulation.     There  are  also  important  questions  of  juris- 

fhi;  r'hnln.lLr"'"'!^''''^-..^^^^^"   ^'^^    ^^^^''   ""^^^   ^^^^^   »«    jurisdiction    bcyoud 

their  boundan^.    One  city  can  not  interfere  with  conditions  in  another  city 

T^nm-r^"  "^i^^"  !k^-''  ^'^J'l'"  ''""'^^  °^*^^^  ^"^  «^^  «^^^-ed  by  the  same  utilities. 

Utilities,  on  the  other  hand,  often  openite  in  more  than  one  municipalitv.  In 
ne^irly  all  cities  many  of  the  street-car  lines  extend  bevond  the  citv  limits 
int.»  the  suburbs  villages  or  towna  Interurban  lines  operate  over  the  tracks 
of  urban  and  suburban  lines  and  handle  business  thereon.  Over  90  per  cent 
of  the  telephone  companies  and  not  far  from  one-half  of  the  gas  and  water 
plants  serve  more  than  one  local  unit.  Electric  transmission  lines  fed  bv 
hydraulic  and  other  electric-power  stations  extend  all  over  most  of  the  States 
and  serve  from  one  to  as  many  as  50  or  more  communities. 

A«  local  units  have  nothing  to  say  beyond  their  boundaries,  many  utilities 
would  have  to  be  regulated  by  as  many  boilies  as  the  units  thev  serve  if  the 

^L^r-^'Kr^.if^.'*^"^''!^^''"'''  ^^  ^^^^  o^t-     This  would  obviously  be  s., 
impracticable  that  even  the  most  ardent  supporters  of  local  control  shrink  from 

A  State  commission,  on  the  other  hand,  not  only  has  the  nec-essary  juris.iic- 
tlon  over  each  of  the  units  served,  but  it  is  in  position  to  view  the  situ  at  on 

iVhi  "'"•\*"r'^^'  %ht,  and  is  better  equipped  for  such  regulation  froni  ever? 
other  point  of  view  than  local  units. 

Regulating  bodies  repi-esenting  the  smaller  units  are  also  much  more  likely 
to  be  mfluencecl  in  their  work  by  politic-al  considerations  than  is  the  case  with 
commissions  whnA  represent  the  entire  State.     The  first  and  principal  dntv 

nL  ^^T',^*  'J^  V^^V^  ^''  ^^  ^"^^  -^"'^^'^^  ^^  ^"  ^^'i«^^"t  special  favors  to  anv- 
nfA^iTi  ^  principle  IS  sound.  But  it  is  not  always  in  harmony  with  the  interest 
of  politicians  or  political  groups  and  factions.  Servility  to  political  -nterests 
s  as  bad  as  servility  to  financial  or  other  special  Interests.  Few  decisions  are 
likely  to  be  sound  that  are  based  on  political  considerations.     It  is  the  duty  of 

InH  fi?   I  1,'*^  ^"^^^  ^  M  ^"^^  "'''^"*^  influences  away  from  the  commissions ; 

and  this  is  much  more  easily  accomplished  under  State  than  under  local  systems 
of  regulation.  If  the  principle  is  sound  that  only  such  duties  should  be  deh^ 
gated  to  the  loi-al  unit  as  such  unit  can  do  better  than  the  State   then  it  is 

ga^ed  t?[o!.a?  miUs.'"^'"'"^"  ""'  ""''''''"'  ''  ^  '"'^^*'""  "^'^^^  ^^^"^^  ^^'^  ^^'^ 

The  locaj  units  do  not  often  use  their  power  of  such  regulation  even  when 

they  have  It.     This  Is  well  Illustrated  in  Wisconsin  where  S  ?he  premTser  the 

T    H  ^•''J;''?  ^^"    ""J  '"""^^  I^'^'^^  *^  «"^^  "»^^"ers  as  the  State  comniission 
In  this  State,  m  the  face  of  this,  the  cities  or  units  themselves  seldom^ndeavo; 
to  make  any  use  of  this  power.     Whenever  they  have  occasion  to  complain  of 

Whiih"''  .T- "^-"^  ^'^^  *^r  ?^^-^  """^"-^^  ^""^-  ^^^^^  ^^'^  ^«  '^^  State  comn dsLn! 
i«  fn  1.  J  r'  "^T:^  ^^  ^^^^"^  "^^"^^  ^*  ^^^  ^^^t  that  the  State  commission,  wldch 
is  fully  equipped  for  such  work  and  much  more  fi-ee  fi-om  local  prejudices  cau 
best  straighten  out  the  trouble,  or  whether  it  is  done  merely  in  order  to  av^jld 
r/u  /"J!i  ^^^"^"^  is  not^  always  disclosed.  The  chapces  are  that  when  ac  u 
So  nrf;  fi^H  H?  conip  icHted  and  laborious  work  involved  the  local  authorlt  es 

M«nv  w«]  olfh^T-  ^^l"7  ^".?  .^''"^  P'^^^^  <^^  ^^''^^  ^t  ^^  *h^  St«te  commission. 
Many  k»cal  authorities  take  this  coui-se,  even  at  the  very  time  thev  are  ac^ 

tivelv  engaged  in  denouncing  State  interference  in  what  they  choose  to'call  local 
questions.  ^   ^  v.«.x  i^^^cn 

It  is  often  said  that  the  regulation  of  municipal  utilities  through  a  Stat© 
rfihr'^n'J'l'  ^^"'^d^^^^'atic  and  deprives  the  people  of  power  which  is  theirs  by 
right     This  charge  is  baseless.    All  power  of  government,  and  consequently  of 
regulation,  is  vested  in  the  State.    The  city  is  simply  a  creature  of  the  Stnte 
given  certain  powers  for  the  purpose  of  aiding  the  State  in  ks  functions     T  S 
duty  to  regulate  rests  in  the  State  and  must  be  carried  out  through  the  State 
legislature.    This  legislature  may  delegate  this  duty  to  either  the  city  coun^l  op 
to  a  State  comniission.    It  will  so  delegate  it  to  the  one  of  these  two  bod"^  thnt 
is  expeite<\  to  give  the  best  service  and  render  the  most  assistant    If T^gula- 
tion  IS  delegated  to  or  carried  out  through  a  State  commission    tliis  course  is 
taken  because  this  methml  has  been  bound  to  be  the  best,     cian  anyone  tn^ti 
fully  say  that  a  city  council  is  more  democratic  than  a  State  legislature'    Borh 
are  elected  by  the  people  and  resjxjnsible  for  their  acts  to  the  plSple  * 

In  thus^  considering  the  source  and  nature  of  regulation,  the  character  ind 
scope  of  the  work  involved  therein,  the  cost  of  properly  administering  it,  the 


984       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

equipment  that  is  necessary  to  that  end,  the  jurisdiction  required,  past  experi- 
ence in  these  matters,  and  otlier  conditions,  the  conclusion  would  seem  Inevitable 
that  from  the  point  of  view  of  public  interest  State  regulation  is  better  and  more 
advantageous  than  local  control. 

It  has  been  found  that  for  several  years  prior  to  the  earlier  years  of  the  war, 
owing  to  Increasing  cost  of  operation,  to  increasing  length  of  the  hauls,  and  to 
Improvements  in  the  service,  the  net  earnings  in  the  street-railway  field  had 
been  gradually  declining  until,  on  the  whole,  they  did  not  amount  to  more  than 
about  one-half  as  much  as  the  cost  at  which  the  capital  could  be  had ;  that  the 
situation  since  that  time  has  been  rapidly  growing  worse  until  it  has  reached 
a  point  where  these  roads  were  not  earning  much  more  than  the  operating  ex- 
penses ;  that  since  these  conditions  have  only  been  partially  relieved  through  in- 
creases in  rates  or  otherwise,  the  electric  street-railway  situation  is  now  such 
that  public  interest  demands  that  drastic  measures  be  adopted  or  steps  taken 
that  will  place  these  roads  in  such  a  financial  position  that  they  can  obtain 
such  capital  as  they  need  on  normal  terms  and  be  placed  in  position  to  continue 
to  render  good  service ;  that  because  they  are  subject  to  regulation,  the  existing 
situation  can  not  be  remedieil  by  the  roads  themselves  without  active  and  com- 
prehensive assistance  from  the  goveniment  itself  through  its  regulating  agen- 
cies ;  that  because  of  the  nature  of  such  regulation  and  of  the  character  of  work 
involved  therein  and  because  of  many  other  conditions,  the  best  fitted  for  this 
lmix>rtant  work  is  the  State  public-utility  commission. 

Assuming  that  the  utility  commissions  have  or  are  given  all  the  power  and 
all  the  facilities  that  are  necessary  in  order  to  straighten  out  the  street-railway 
situation,  the  question  immediately  arises  as  to  just  how  to  proceed  in  this  work. 
Several  courses  may  suggest  themselves.  They  may  adhere  to  the  usual  prac- 
tice in  rate  cases,  and  proceed  to  investigate  the  service  and  determine  its 
needs;  to  determine  the  value  of  the  plant  and  its  business;  what  constitutes 
reasonable  allowances  for  the  operating  expenses,  including  depreciation  and 
interest  and  profits  on  the  fair  value  of  the  plant  and  the  business ;  to  determine 
whether  a  flat  or  uniform  rate  or  whether  zone  rates  will  best  meet  the  situa- 
tion ;  to  investigate  all  other  facts  and  conditions  that  are  involved  in  the  situa- 
tion or  have  a  closer  bearing  upon  It.  When  this  work  has  been  completed  it 
should  put  into  effect  and  enforce  such  rates  as  are  reasonable  under  the  cir- 
cumstances, and  which,  under  normal  conditions  and  for  adequate  service,  are 
high  enough  to  encourage  the  necessary  capital  and  other  factors  of  production 
-to  come  into  the  electric-railway  field.  The  rate  fixed  in  this  wav  would  just 
about  cover  the  cost  of  the  service.  It  would,  in  fact,  be  a  service-at-cost  rate. 
Rates  which  are  higher  than  necessary  to  obtain  the  capital  and  other  factors 
of  production  are,  in  fact,  the  lowest  servlce-at-cost  rates  at  which,  In  the  long 
run.  the  service  can  be  had. 

Wliile  this  is  the  usual  way  in  which  the  commissions  proceed  in  rate  cases, 
and  in  which  service-at-cost  rates  are  established,  the  work  involved  therein  is 
fso  comprehensive  as  to  re(iuire  more  time  than  can  always  be  safelv  allowed 
tor  this  purpose.  This  is  especially  true  of  such  readjustments  In 'the  rates 
once  established  in  nbove  manner  which  becomes  necessarv,  because  of  the 
<'hanges  that  take  place  i;i  the  cost  of  the  service  and  in  otlJer  conditions.  In 
order  to  avoid  such  delays,  the  order  of  the  conmiission  might  go  far  enough  to 
provide  for  a  so-called  sliding  scale  of  rates,  which  rates  would  automatically 
<hange  with  changes  in  the  cost  of  the  service.  When  the  operating  expenses 
increase<i  so  as  to  leave  less  for  depreciation  and  interest  than  the  amount  de- 
termined upon,  the  rates  would  go  up.  When  the  operating  expenses  fell  so 
as  to  leave  niore  for  depreciation  and  interest  than  the  amounts  determined 
v.]Mn\  for  these  purposes,  the  rates  would  move  downward. 

Such  rates  would  be  true  cost-of-service  rates.  The  rates  first  established  in 
this  manner  would  cover  the  cost  of  the  service  as  it  stood  at  the  time.  These 
rates  would  remain  unchanged  as  long  as  they  yielded  the  prescribed  returns. 
They  would  automatically  rise  when  the  cost  increased  and  the  net  earnings 
for  returns  declined  below  the  prescrii>ed  level.  Thev  would  automatically 
fall  when  the  cost  of  oi)eration  fell  and  the  net  earnings  rose  above  the  pre- 
scril>e<l  level.  Such  rates,  if  fairly  applied,  would  automaticallv  and  fairly 
meet  all  necessary  changes  in  the  cost  of  operation,  whether  these  changes  were 
brought  about  by  changes  in  the  prices  of  labor  and  material  or  by  additions  to 
tlie  plant  and  the  amount  of  business  obtained  from  new  extensions  of  the  lines. 
Such  an  arrangement  further  would  relieve  the  commissions  from  at  least  a  part 
of  the  work,  controversies,  and  other  complications  that  are  certain  to  arise 
Id  connection  with  all  rate  changes  that  are  made  under  prevailing  methods. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      985 

It  would  operate  promptly  as  well  as  automaticallv  and  would  therefore 
anTs,  nel^MC^on^'"'?  T^  embarrassing  delays.  Through  proper  examination^ 
and  superMsions  of  the  accounts,  records,  and  other  practices,  such  sliding- 
scale  serviee-at-cost-rate  arrangements  can  also  be  equitably  applied  without 
any  material  increases  in  the  cost  of  regulation  <^iwnea  NMtnout 

The  additional  amount  of  work  involved  in  so  extending  and  broadening 
the  orders  of  the  commission  that,  besides  provisions  for  a  service-at  cos  rate 
SI. ;!!;!;  *L"r^''/^^:""^  conditions,  these  orders  would  also  provide  for  such 
shdnig  scales  of  rates  as  those  outlined  is  not  great  This  extri  vi^rk  wm.i.i 
argely  consist  of  determining  how  much  the  rates  shoufd  be  chlnged  w"  h 
changes  m  the  cost  Under  zone  rates  and  ticket  svstems,  thirextra  work 
would  also  have  to  be  extended  so  as  to  cover  the  form  of  the  ratf  schedules 
or  the  proportion  in  which  each  specific  rate  or  part  of  a  ra?e  should  be 
effected  by  the  change  in  the  cost.  This  extra  work  might  a  so  have  o  in 
cude  a  somewhat  closer  supervision  over  the  accounts  and  records  of  the 
plants,  and  over  certain  other  practices  and  rules  than  would  XrX  be 
ior  doTng?     ^"'^  ''''''''  ^'  '""'^^  ^^^^^^^'^"»  '^^  commissions  are  alreadf^uipped 

r^l^nl  ^i^^u  qwestjons  involved  In  rate  making,  such  as  the  valuation  of  the 
w  fh^       its  business;  the  determination  of  what  constitutes  fair  allowances 
vu  nHHn,Tfhi'"^  expenses.  Including  depreciation  and  the  returns  upon  such 
valuation;  the  cost,  as  a  whole  and  per  unit,  for  each  branch  and  class  of 
service;  the  forms  of  rates  under  which  the  varving  cos    ca^i  best  be  met  and 
under  whch  the  service  can  best  be  expanded,  are  about  the  sanL  in  aH  rate 
investigations.     Owing  to  the  experience  obtained  under  regulaiion  tlu"vv^rk 
of  determining  such  values,  costs  including  returns,   and   ?ates   is   nKo   well 
understood,  and  so  are  the  conditions  and  facts  upon  vXch  si  S  valued  costs 
and  ratas  are  founded.     There  is  no  part  of  the  work  in  vol  v^n  develop? 
applying  and  operating  such  sliding  rate  schedules  as  those  outlined  above  that 
can  not  be  safely  entrusted  to  the  State  commission.    In  fact  such  State  com 
cT.nm?^'":.!  r.7*^  experience  in  such  matters  and  bec-ause  of  the?r  facm  L^^^^^^ 
dealing  with  them,  are  not  only  the  best  equipped  but  the  most  lo"ixa    bodies 

WhZll^'^/h^^'"';*'  '^^^f»  f"^  ^^^  supervising  of  thel  optaHon      ^^'^^ 
\yheneyer  this  is  deemed  advisable,  service-at-cost  arrangements    in  which 
such  sliding  scale  provisions  as  those  outlined  above  aie  emboXf  can  a  so  be 
vM^?:^'^'^^  *^ IV  '^  ''^^'^  themselves  become  parties  thereto,     urdertlesuner! 
vision  of  the  State  commissions,  the  city  and  the  c^ompany  c^i  enter  into  n 
contract  in  which  rates  are  agreed  upon  that  will  vield  such  amounts  f      the 
.Tnf  ^"'^  tP?'^'  ^"'^  ^^'  depreciation  and  interest  upon  the  fa     va  ne  of  the 
plant  and  the  business  as  are  necessary  to  attract  all  the  factors  of  Droduction 
including  capital ;  that  in  order  that  the  amounts  or  ratLX  Sep,  elation  ^^^ 
returns  agreed  upon  may  be  maintained,  will  automatictllv  rise  ai^  faU  wi^h 
fT.  «"^\;^^"-^    »  the  operating  expenses.     Under  such  agreements    such  q^ies 
tions  as  the  value  of  the  plant  and  the  business ;  the  cost  of  the  or^ratfons  • 
the  rates  to  be  allowed  for  depreciation  and  interest  on  a  fair  valSn    ?he 
specific  rates  to  be  put  into  effect;  the  relation  between  the  changes    nthesi 
^«!^h^"^  changes  in  the  cost;  the  form  of  the  rate  schedules,  and  othe?  facts 
can  be  determined  either  by  the   State  commission   alone  or  jointly  bv   the 
1^  ivn^"'!"^^'*''?'  ^^^  ""^^^  ''^"^^  "^^  company.    Under  such  agreements  the  citv 
«nd?hf15•'"^'^^'^"^  ^^  "^^  P^^"^«  to  both  the  service-at-cost-rate  sch^iu^^^ 
and  the  slidmg-scale  arrangements  therein.    Whether  this  would  be  of  n.w  nd 

Intho?fM^'^f"^'  very  largely  upon  the  attitude  of  the  dtTwhLeth^dty" 
authorities  desire  to  take  a  hand  In  the  making  of  such  contract  and  to  hZ 
come  direx^t  parties  of  the  same  It  may  be  a  plaifthat  is  worth  trving  ^^ 

It  is  obvious  that  service-at-cost  rates  of  this  kind  which  einbodv  sliding 
scale  provrisions  such  as  those  outlined  may  offer  manv  advantages     Suclf^f 

rf,i,^rH"^''.^t^r"^^V"^  ^°^^^^^^'  ^"t«  ^"^  strictly  complied  with   would  g^^^^^^^ 
reduce  the  risks  involved  In  the  business  and  would  therefore  also  tend  to  lower 
the  cost  at  which  capital  can  be  had.     When  once  fullv  understood  and  en^^^^^^^^ 
wifh    h«'  ?^«?^^^^^»y  «^?t  such  agreements  would  be  more  cSulu"  compUed 
Til^ils^o'fThJs^^lird^^^^^  -^^  -^-  *-  Which  slidin^g-LlTovt 

Mr.  Erickson.  The  power  to  regulate  is  vested  in  the  State     It  i<? 
inherent  in  the  State.  .  It  may  be^Ielegated  by  the  4ate  either  lo  a 

S  ate  i^^^r'^^^'  ^^./^  ^'^  be  delegated  to  a  local  unit,  but  it  is 
btate  regulation  m  either  case.    It  must  come  from  the  State. 

160643"— 20 03 


986      PROCEEDINGS  OF  FEDERAL  EI.ECTRIC  RAILWAYS  COMMISSION. 

The  question,  as  I  understand  it,  in  most  cases,  is  whether  State 
regulation  or  local  regulation  is  preferable,  whether  the  State  should 
gi-ant  this  power  to  a  State  commission  or  to  the  local  unit.  A  careful 
analysis  of  what  is  required  of  regulation,  the  equipment  you  must 
Jiave  to  properly  provide  for  adet^uate  service,  to  properly  provide 
for  reasonable  rates,  and  have  it  when  you  need  it,  is  so  complicated 
and  so  costly  as  to  be  really  out  of  the  question  for  a  local  conmmnity. 
It  IS  a  matter  that  must  be  in  the  hands  of  a  larger  luiit,  whei-e  you 
can  keep  i^eople  constantly  employed,  where  you  h<ive  all  past  expe- 
rience to  be  guided  by,  in  order  to  have  it  done  properly.  I  have 
commented  on  that,  and  I  do  not  know  but  what  I  may  be  pardoned 
for  reading  from  my  notes  briefly,  as  I  think  I  can  shorten  the  matter 
up  if  I  may  be  i>ermittod  to  do  tliat. 

The  Chairman.  Do  it  in  your  ovrn  way,  Mr.  Erickson. 

(Mr.  Erickson  herewith  read  part  of  statement  above  recorded.) 

Mr  EificKsoN.  But  the  heavy  cost  and  lack  of  requisite  facilities 
and  the  other  shortcomings  that  have  thus  been  mentioned  are  not 
the  only  obstacles  m  the  way  of  effective  and  fair  local  regulation. 

It  has  bcpi  found  in  Wisconsin,  and  many  other  States  where  I 
have  investigated  it,  that  most  of  the  street-car  lines  in  the  cities  go 
beyond  the  city  lines,  into  the  suburbs.  The  citv,  of  course,  would 
not  have  jurisdiction  except  within  its  boundaries,  leaving  the  other 
out  of  the  question,  unless  some  outside  body  took  hold  of  the  out- 
lying property. 

Ninety  per  cent  of  the  telephone  companies  operate  in  more  than 
one  unit;  oyer  one-half,  or  very  nearly  one-half,  of  the  water  and 
gas  companies  extend  beyond  the  city  limits  into  the  suburbs;  trans- 
mission lines  are  now  operating  all  over  the  State  in  often  as  many 
as  50  towns.  Now,  to  have  local  regulation  in  each  one  of  these  units 
seems  almost  absurd.  One  company,  for  instance,  might  have  to  be 
regulated  by  50  local  commissions  or  bodies.  That,  of  course,  is  out 
of  the  ({uestion. 

Political  influences  also  cut  much  more  of  a  figure  in  local  regula- 
tion than  in  State  regulation.  In  almost  every  city,  you  have  fac- 
tions which  are  very  powerful  within  the  city  but  are  not  so  when 
they  come  to  affect  State  conditions. 

The  first  and  principal  duty  of  a  regulating  body  is  to  do  equal 
justice  to  all  without  special  favors  to  anyone.  This  principle  is 
sound.  But  it  is  not  always  in  harmony  with  the  interest  of  poli- 
ticians or  political  groups  and  factions.  Servility  to  political  in- 
terests is  as  bad  as  servility  to  financial  or  other  special  interes-ts. 
Few  decisions  are  likely  to  be  sound  that  are  based  on  political  con- 
siderations. It  is  the  duty  of  the  State  to  do  its  best  to  keep  undue 
influences  away  fix)m  the  commissions,  and  this  is  much  more  easily 
accomplished  under  State  than  under  local  systems  of  regulation. 
If  the  principle  is  sound  that  only  such  duties  should  be  delegated 
to  the  local  unit  as  such  unit  can  do  l)etter  than  the  State,  theifit  is 
also  clear  that  the  regulation  of  utilities  is  a  function  that  should  not 
be  delegated  to  local  units. 

(Mr.  Erickson  again  read  from  statement  as  above  recorded.) 
Mr.  Erickson.  Local  regulation  very  often  fails  to  do  equal  justice 
to  all  pai-ts  of  the  city,  and  particularly  as  between  the  utility  and  the 
public 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      987 

In  the  State  of  Wisconsin,  the  local  units,  in  the  first  instance 
have  as  much  power  as  the  State  commission.'  Nevertheless  ^i^^^^^^^^ 
any  of  them  ever  attempt  to  exercise  it.  When  they  have'  a  com 
plaint,  It  always  comes  to  the  State  commission.  ^  "^ 

sion  l^fhoT^I'f-^K  ^'""'i  V""^'  "''^^'"  y^"^  ^^^  t^^e  State  commis- 

quSfoiSroTe^Itarco?^^^^^  ^'  '-'  '^^^^  ^^-3^^  -^-  the 

nff^*""  FfV^^T-  ^  ''l^?'"'  "*  '■«'''y   *««■   <-ases  where  the  local   unit 

attempted  to  do  anything  for  itself,  without  throwing  the  burden 

pen  the  State  commission.    The  reasons  probably  wer^e  t lese-t  at 

&^'*"*''*'m  "T'^^*'"^,  '""'■'^'-  "'"t  it  l»ok«^d  too  big  for  them  it 
felt  they  could  not^afford  experts  to  do  the  work,  and  hence  it  had 
to  be  done  by  the  State  commission.  In  a  few  cases  they  dkl  some- 
«ung,  like  ordering  m.-es  underground,  or  extensions,  which  after- 
wards was  found  to  be  unconstitutional  and  thrown  over  by  the 

alw;?s  S  ow^oirtt's;?'  '''"''■■'''  "•''  ""'""■°--    The  woS  was 
i?3    tnrown  on  the  htate  commission 

Mr.  Wahrex    Suppose  the  local  tribunal  did  take  up  the  work 
there  would  still  be  a  finding  of  the  State  commission^  ^  ' 

Mr.  liRicKsox.  leg. 
Mr.  Wakken.  While  concurrent,  it  was  not  final? 

misSon  tll^^T;  ^t  f '''•  ""'  advantage  in  favor  of  the  State  com- 
mission, that  the  State  commission  could  pass,  in  the  first  in«tinc« 
upon  the  act  of  the  local  unit,  and  offset  it,  if  it  found  it  to  teu^-' 
reasonable.  We  have  a  few  cases  where  that  was  done  but  not  verv 
nmny,  and  m  all  cases  where  the  State  commission  o  eituined  ?he 
coS.  '  ^""'^  ^'^^''  '^"  ®^"*^  commission  was  upheld  by  the 

The  Chairmax.  Does  your  law  specifically  provide  that  an  annoal 

trrbim.ft V; s"t\f "  ''"^''■'''  'T"'"*'""  °'  ^^  -d-anee  o?  "Sol^ 
Liibunai  tx)  tne  fetate  commission^ 

it  ?an  p^^lTon  i?'"""'''"*''**''  "'^"'"^^  '^  '""^  ^^^^  commission, 

c<imS:T^;J^^  ''  ""  ""'^'"-'•y  P--<i«'i  by  which  they 
Mr.  Erickson.  Xo. 
The  Chairman.  To  the  State? 

toS  ctSk.n^'''^'  ""  '^^^"''^  ^^"  ''^  *«'^-  "^y  «-  aggrieved  city 
The  Chairman.  Oh,  it  can? 

Jdemfc^-'^r'wJif  i*  ^r  "''°. '';•""  '"'^  *^*  «*«*«  regulation  is 
ci*nhrou^h  tliP  S  i't.  I  •  /?«"l*tr'  °f  co"rse,  must  be  exer- 
cisea  thiough  the  State  legislature,  the  same  as  bcal  regulation  h-i« 
to  be  exercised  through  the  city  council.    Both  the  Statf  leg  slat  l-e 

lev  can'b^  Z"  d  ffe?  t'^l,''-^  *^?  T"? '^•'  ^"^  '  ^^  not^se  ho" 
uie\  can  be  any  different  m  the  point  of  v  ew  of  one  thino--_on- 

more  undemocratic  than  the  other.    The  local  commissfon  wouhTb^ 

to  thf  Sfi't.V^-'r.'^'  '^'"'f-u  ^•'^  ^"""^  commission  is  rerponsibt: 
to  the  State  legislature,  and  both  are  elected  by  the  people     The 

coinmissions  in  both  cases  ai^  responsible  to  the  legislatn-e  body  for 

their  acts.    I  do  not  see  that  there  can  be  anythingin  that  statement 

that  one  is  more  democratic  than  the  othen    I  fooked  into  it  very 


988      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

carefully  from  that  point  of  view,  because  that  argument  was  raised 
veiy  frequently  in  our  State,  but  it  does  not  seem  to  me  to  have  any 
foundation.  So  that,  on  the  whole.  State  regulation  is  not  only  more 
in  Ime  with  public  interest,  but  State  commission  regulation  has 
behind  it  the  necessary  equipment,  the  necessary  power  to  do  what 
ought. to  be  done,  not  only  in  reducing  rates  if  that  is  necessary,  but 
m  raising  rates  if  that  is  necessary,  which  is  the  case  to-day. 

Assuming  that  the  utility  commissions  have,  or  are  given,  all  the 
power  and  all  the  facilities  that  are  necessary  in  order  to  straighten 
out  the  street-railway  situation,  the  question  immediately  arises  as 
to  just  how  to  proceed  in  this  work.  Several  courses  may  suggest 
themselves.  They  may  adhere  to  the  usual  practice  in  rate  cases, 
and  proceed  to  investigate  the  service  and  determine  its  needs;  to 
determine  the  value  of  the  plant  and  its  business^  what  consti- 
tutes reasonable  allowances  for  the  operating  expenses  including 
depreciation  and  interest  and  profits  on  the  fair  value  of  the  plant 
and  the  business;  to  determine  whether  a  flat  or  uniform  rate  or 
whether  zone  rates  will  best  meet  the  situation;  to  investigate  all 
other  facts  and  conditions  that  are  involved  in  the  situation  or  have 
a  closer  bearing  upon  it. 

When  this  work  has  been  completed  it  should  put  into  effect  and  en- 
force  such  rates  as  are  reasonable  under  the  circumstances,  and  which 
under  normal  conditions  and  for  adequate  service  are  high  enough 
to  encourage  the  necessary  capital  and  other  factors  of  production  to 
come  into  the  electric-railway  field.  The  rate  fixed  in  this  way  would 
just  about  cover  the  cost  of  the  service.  It  would  in  fact  be  a  service- 
at-cost  rate.  Rates  which  are  no  higher  than  necessarv  to  obtain  the 
capital  and  the  other  factors  of  production  are  in  fact  the  lowest 
service-at-cost  rates  at  which,  in  the  long  run,  the  service  can  be  had. 

While  this  is  the  usual  way  in  which  the  commissions  proceed  in 
rate  cases,  and  in  which  service-at-cost  rates  are  established,  the  work 
involved  therein  is  so  comprehensive  as  to  require  more  time  than  can 
always  be  safely  allowed  for  this  purpose.  This  is  especially  true  of 
such  readjustments  in  the  rates  once  established  in  above  manner 
which  become  necessary,  because  of  the  changes  that  take  place  in  the 
cost  of  the  service  and  in  other  conditions. 

Xow,  as  you  know,  wages  have  increased,  as  well  as  the  prices  of 
material.  You  will  require  quick  remedies  to  meet  those  conditions. 
A  shding-Rcale  arrangement  would  seem  to  be  the  fairest  method  of 
meeting  them.  The  commission  could  extend  its  order  so  as  to  include 
a  shding-scale-rate  arrangement,  by  which  the  rates  rose  when  the 
cost  rose,  and  fell  when  the  cost  fell.  Of  course,  there  is  a  little  work 
in  working  out  that,  but  that  is  not  very  difficult  to  rate  makers  or 
to  commissions,  with  all  the  help  they  have. 

The  Chairman.  Do  you  think  the  State  commissions,  under  the 
laws  as  they  now  stand,  have  the  power  to  make  an  order  for  the 
sliding  scale  of  rates? 

Mr.  Ericksox.  Some  of  them  have.    Most  of  them  have  not. 

The  Chairman.  How  about  Wisconsin? 

Mr.  Erickson.  Wisconsin  could  do  it  in  a  way;  but  it  is  not  ex- 
pressly granted  to  us. 

The  Chairman.  Ordinarily,  the  obligation  of  a  commission  is  to  fix 
a  just  and  reasonable  rate? 

Mr.  Erickson.  Yes. 


PROCEEDINGS  OF  FEDERAI.  ELECTRIC  RAILWAYS  COMMISSION.      989 

mSn?"^"'*'^''-  ^""""^  "P°"  ^^^  conditions  then  before  the  com- 
Mr.  Erickson.  Yes. 

howtn  ?hrc"2,iSU\rwo?.'^''T'  ^"'^  ""'^^■-  '^''  state  law, 
suggest  ?         ''""""'ssion  go  to  work  and  make  an  order  the  way  you 

vesti'gadon'tX  ^mnZuiV:l^\tl^^  make  a  subsequent  in- 
thepowertomakea^^dJn^i  ?'  ^  *^  Wisconsin  Commission  has 
is  a  profit4Lring  am^^^^^^  '^^  ''"*>*•'«'•  ^o^-    That 

the  rates  may  bSd^l     ilnr'"'  'f  ''^  ^'''-^ngement  under  which 

The  Chairman   That  is  what  I  thought. 

spS  oTpiXblv  iZ,  ^r'"'f'Tf  •'''"'^'  ""^^'^  ^^^  arrangement  I 
tive  powere-  and  Jill  T    *^^  safer  thing  would  be  additionat  legisla- 

wiiiLTe'toCittSirweirsuSiifS^e^r        T^'* 

many  advantages.  Thef  opS  automaticafl v  TW  rT^^TK  '  ^^"^ 
mission  of  a  great  deal  of  wort  fW  •  7'  /"«y  ^ellevethecom- 
vision-and,of  course  itthrowl  .m.^H  ^  "*"'"?'  y""''^^  "°t  of  super- 
of  additional  work  on  the  otL?hl^  '^r™'"'!'""  ^  ^^^uin  am^nt 
rangements  of  that  kZ  once  Cvin^^^^^^^  is  also  possible  that  ar- 
changes  occurring  under  them  wl  ^Id  }T  ^'"^^  ''"^  '??"'^'J  f^'"-'  '•«*« 
the  public  than  otferwise  wS  be  the  case  Thaf^r  ""^-  ^T^^^  ''^ 
in  some  cases,  if  it  should  be  found  necLarvT^P^'"*i*'">'"ly  t™« 
or  urge  it-to  make  the  citv  a  nartv  t!.  tfo  ^  "^^  "°*  advocat*  it 
under  the  final  say  of  the  commP«^n^  ^    ^  arrangement.    The  city, 

to  the  contract,  in'^LetntrTcte  aTne^S^^^^^  ^k^  P^^^ 

seems  superfluous.    However  it  miX  h!^t!7  "^  '*^  °"*'  "^w*  that 

If  necessary,  it  might  avo  fa  Sde«l  "f  tZblV"ir^?^^'  *"<*' 
city  what  it  sometimes  cherishes  It  win  ^LlT  '  "^^  '^•."  ^i^^  ^^e 
teis  though  not  a  final  decision  ^  ^  ^^^""^ ""  ''^'^ '"  ^^e  mat- 

piom'ptirS  it  Ss^'ttrZ"""^  ^T.""'^'  *«  b«  done  fairly 
might'^be^'a  grea  deaHf  help  t^  the"sf«f '**'°"'  -^'^^^  '^^  «««! 
out  those  problems,  partic  ilaW  as  to  itt-^-""""''/""'  ^"  ^"^king 
and  if  prices  are  Wing  to  continnp  f^    •     ^*'<^»>g-scale  arrangement! 

thing  of  that  kinf  7s  frobS  needed  -'  "'  T^""  '*A^^  ^^"'  '«'"«- 
investigation  before  each  r«t».l!  ^^  ^-  ^'^f^guard,  because  a  full 

the  prices  of  that  t  me  as  a  ha^i«  f nr. ^1^-  •  ^^^^  would.  We  used 
by  1912  and  1913  thTr^tes' Smat  wereTo  low  ^1*"-^  that 
yield  the  requisite  return.  That  was  tnfe  in  1010  ^^^^  ^^^  "«* 
after  we  had  made  the  decisions  WpII  i  P^^' j?".«  o*"  ^^°  years 
that  it  was  difficult  for  us  to  Xnd  nnr  IZ^^  conditions  were  such 
drawn  investigations.  In  «ie  meantZe  thl^'^T-^'*''''*  ^^^^"^  ^^^S 
less  than  they  should  earn.    C^^Tt^nt  dS^^'a^yTrortS 


990      PROCEEDIlSrGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Utilities.  The  cost  of  getting  capital  increased,  the  service  was  en- 
dangered, although  It  was  upheld  in  many  cases  by  allowing  capital 
to  suffer.     80  I  say  the  State  commissions  are  not  free  from  errors. 

1  here  may  also  be  instances  where  they  have  gone  too  far  in  favor 
of  the  utility;  so,  though  I  think  there  are  very  few,  there  mav  be 
some.  ]So  human  institution  is  perfect;  but  a 'State  commission  is 
Sjifer  than  local  regulation,  because  it  has  the  jurisdiction,  it  has 
the  power  to  do  things,  it  has  a  broader  view  of  the  field  and  is  able 
to  look  at  matters  upon  a  very  much  wider  scale  than  the  local  unit 

1  he  local  unit  stands  m  the  forest  and  sees  the  trees  around  it. 
iw!cf  /^  commission  is  up  on  the  knoll,  and  can  see  the  whole 
f 01  est  from  it;  and  if  the^State  commission  wants  to  do  justice,  it 

]L?  ^T? V  ""  *?  i^  '1*  r^?^'^  ^\"^^  '^^^'  «^^'"  t^-"^  of  the  local 
unit.  It  has  not  the  facilities.  It  has  not  the  money.  It  has  not 
the  equipment  for  it. 

Mr.  Warkex.  Mr.  Erickson,  I  judge  from  what  you  have  said, 
and  also  froin  the  memorandum  which  I  took  the  opportunity  to 
examine,  that  you  are  of  tije  opinion  that  street  railways,  generally 
speaking,  are  m  a  very  desperate  situation  at  this  time? 
,  Mr.  Ericksox.  Yes,  sir;  35  of  the  leading  roads  are  not  now  earn- 
ing more  tlian  operating  expenses— very  little  more,  if  any. 

Mr.  1\  AKREX.  I  judge  also  that  you  think  the  sliding  scale  could  be 
administered  sometimes,  in  some  cases,  only  after  further  legisla- 
tion by  the  State  commissions?  "^ 

Mr.  EmcKsox.  I  think,  perhaps,  further  legislation  would  be 
necessary.  I  am  not  entii-ely  clear  on  that,  but  the  chances  are  that 
the  action  of  most  commissions  might  be  questioned,  unless  their 
power  was  broadened  or  extended. 

Mr.  Warrex.  And  if  further  legislation  is  necessary,  and  even 
If  It  is  not,  the  adoption  of  such  a  sliding  saile  would  involve  con- 
sidei-able  time  would  it  not?  Or,  let  me  put  it  in  another  way:  Do 
you  think  that  those  States,  where  the  authority  of  the  commissions 
to  adopt  the  sliding  scale  is  questioned,  could  adopt  it  quickly  enough 
to  afford  the  relief  which  many  of  these  companies  need« 

Mr.  Ericksox.  Well,  I  tliink  a  reasonable  rate  should  be  put  into 
effect— what  is  es  imated  to  be  a  reasonable  rate— first,  and  allowed 
to  stand  wlule  all  these  other  matters  are  being  worked  out  A 
sliding-scale  arrangement  does  not  require  a  long  time.  It  is  'pos- 
sible that  very  few  commissions  would  need  very  much  equipment 
or  additional  represent^ition  to  carry  it  out.  Some,  I  know,  would 
need  it.  ' 

Mr.  Warren.  About  the  only  sliding  scale  that  could  be  adopted 
and  put  into  ejFect  quickly  would  be  one  which  was  based  on  the 
present  rates  of  fare;  would  it  not? 

Mr.  P:ricksox  I  think  not.  "Reasonable  rates"  is  a  broad  term 
:Maybe  I  did  not  understand  you. 

Mr.  Warren.  I  say,  would  not  any  sliding  scale,  in  order  to  be 
iui(.pted  quickly,  have  to  be  made  up  on  whatever  a  particular  com- 
pany s  present  scheme  of  fares  happened  to  be?  If  the  company  to- 
day is  charging  G  cents,  they  could  file  a  sliding  scale  going  up 
(..  7,  8  9,  and  10,  or  going  down,  but  they  could  not  adopt  a  slfdinL 

'' Mr  F^i.^K^nr-Tf^"'  without  taking  more  time  than  is  availablel 
Ml    Erickson.  Before  the  sliding  scale  can  be  made  operative,  tou 
will  have  to  have  a  reasonable  scale  based  upon  existing  conditions 


PROCEEDINGS  OF  EEDEEAL  ELECTRIC  KAILWAYS  COMMISSION.      991 

Mr.  Wa».».  Thai  i.,  („r  ,|,«  c„l  „,  „"i„f  "^  °"""- 

Mr.  Erickson.  Yes 

ment  and  for  depreciation,  as  conditions  now  exist.     Therprovid; 
tn-  as  much  as,  on  account  of  changed  conditions,  you  faU  to  e  ab  c 

n.„v,    ^"'^^^^'■\^-  But  under  your  plan,  tlie  amount  of  the  retuin=i 
nm  vary  according  to  the  conditions,  according  to  the  cost  of  m  nlv 
the  intei-est  rate,  in  certain  territx,rv,  and  thing's  of  that  kindV"'-' 
Mr  Ekicksox.  It  may  he  that  it\;ill  come  t^o  that  and   t  could  b> 
made  to  include  that.    However,  if  you  have  a  rate 'to  day  it  w  „1 ' 
yield  what  was  deemed  to  l>e  a  fair  return,  and  if  y'.u  fo^d  b^ea  so 

inose  lacts  could  be  determined  and  the  rate  adiusted  to  cover  tlmt 
as  well  as   o  cover  such  additions  to  the  capital  as  are  rem  it^dfor 
new  extensions,  and  such  e.xtra  costs  of  the  service  as  w^rTbiSSt 
about  by  the  new  extensions.    Tho.se  are  <,uestions  to  be  dItermineSy 
cin  t'*%TT''"'V^'  '?'"^  «f  ♦■'^'^  ^"^'  "*  ">«  operatfon  and   Lev 

that  can  IjV  T^'^ri  •/  '''''^  '",  ^'^^'^  ^»««'  ^ut  it  is'not  work 

mat  can  not  be  done,  but  it  can  not  be  done  safelv  I  think  wiH,;,Mf 

a  fairly  close  stud^-  and  by  a  strong  commi  Jon^  ^'  '     '"''"'* 

iMr.  \\  ARREX.  Do  I  understand  that  before  that  is  done  von  tbinlr 

Mr.  P:rick.^x.  Well  I  think  that  is  absolutely  necessary  in  nerhnnc, 

v^rflitUe  „?or  'trnTb'"  ''"'  ?""*'-^''  '^«— 'hey  ar'e'^Jw  Z'^T^ 
exclU  :    thl  *''S  operating  expenses,  and  that  can  not  go  on 

except  at  the  expense  of  the  service  and  of  the  company 
fllr.  V\  ARREx    I  am  very  much  obligated  to  you,  Mr  Erickson 
I  will  file  this  with  the  reporter,  Mr.  Chairman  [referr  n?  to  Mr 

T  e'SuRr.  M"'"  ^'^'i  ^""''"^  ^'"'^  ^'^'"ber  of  ComS.erce] 
J  ne  CHAIRMAN.  If  you  please.  -^ 

Mr.  Warren    I  have  a  few  documents  that  I  would  like  to  mif  in 
the  record,  to  close,  so  far  as  I  can,  ^    ^  ^"^ 


992       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Thei-e  is  a  list  of  companies  used  in  the  wage  rates  in  reference 
to  the  cost  of  labor,  Chart  C-133.  There  are  sufficient  copies  for 
all  members  of  the  board.  I  will  hand  them  around  [handing  copies 
to  the  members  of  the  conunission]. 

Mr.  Erickson.  I  have  summarized  most  of  the  things,  because  my 
time  was  so  short,  and  I  did  not  want  to  take  any  more  time  than 
was  necessary. 

Mr.  Warren.  Then  I  have  here  a  document  that  I  have  referred 
to  before  three  or  four  times.  It  is  a  statement  from  the  secretary 
of  the  Public  Service  Commission  of  Massachusetts,  showing  the 
balance  sheet  at  the  end  of  1918,  with  a  deficit  of  over  $4,000,000  on 
the  aggregate  street  railways,  showing  the  revenues  and  operating 
expenses  and  other  charges,  with  a  deficit  for  the  year  of  $5,000,000, 
and  miscellaneous  data,  such  as  mileage. 

I  would  like  to  have  that  go  into  the  record. 

The  Chairman.  Yes. 

The  statement  thus  referred  to  by  Mr.  Warren  is  as  follows: 

The  attached  statement  of  assets  and  Uabilities,  revenues  and  expenses  and 
niiscellaneims  data,  pertaining  to  street  railways  in  Massachusetts,  is  a  true 
copy  of  the  figures  on  file  in  the  office  of  the  commission. 

Attest  : 

[sEAul  Andrew  A.  Highlands,  Secretary. 

Assets  and  Uabilities  of  street-rail  way  companies  in  Massachusetts  as  of  De- 

ccntber  31,  IV 16. 

ASSETS. 

Cost  of  railway $118,  a^7, 98.5.  29 

Cost  of  etiuipment 41,707,159.13 

Cost  of  land  and  buildinjajs 50,739,028.03 

Cost  of  other  [>ermanent  investments 1,582,552.45 

Total  cost  of  permanent  investments $212,806,724.90 

Sinklnis:   funds 317,  686.  80 

Miscellaneous  physical  property 1,  274,  899.  38 

Investments 2,  293,  782.  40 

Current    as.sets 14,701,154.01 

Deferred    assets l,  043,  715.  54 

Unadjusteil    debits 9, 162,  773.  73 

28,794,011.86 

Grand  total 241,  660,  736.  76 

LIABILITIES. 

Common  stock 88,  217, 375.  00 

Preferred  stock 18, 673,  500. 00 

106,  890,  875.  00 

Premium  on  capital  stock 6.675,651.04 

Funded   debt " 91,  .^,47,  2(X).  00 

Xonnejyotiable  debt  to  affiliated  companies 1, 214, 948.  88 

Current   liabnitles 27, 178, 978.  73 

rvferred   liabilities 407, 135. 17 

Unadjusted   credits 11,846,869.19 

39,  432,  986.  Of) 

Appropriated    surplus 267,  567.  40 

Profit   and  loss ^,  S68,  J,91,  60 

Grand    total 241, 660, 736.  76 

% 


I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      993 

Revenues  and  expenses  of  street  raihvays  in  Massachusetts  for  year  ended 

December  31,  1918. 

Revenues : 

Passenger   revenue ^  040  r^^  (^aa  kq 

Parlor  and  special  car  revenue  *    '   75'  \^'  os 

Mail   revenue ^  ^J^'  ^^^  H 

Express  and  baggage  revenue "        "  ll^R^iio 

Milk   revenue \^^'  5^2'  '^ 

Freight  revenue ZlZl  1  072  pA  69 

Miscellaneous  transportation  revenue '   20,'  811.'  87 

Total  from  transportation _        ^aa  400  o-q  q- 

Total  revenue  from  operations  other  th7n  Tran"sp"o7ta"tion::       1,  24.5,'  siS."  50 

Operating  expenses:  45,739,005.35 

EaYlumenf  ^''"''^"'^^ ^4'  ^76,  039.  34 

Equu)ment g^  ^^^  ^.^  ^^ 

General  and  miscellaneousIZIZZIZZZIIIII"      4^  973'  ^  3^ 
Grand  total  _  ~  ,^  ^ 

Net  revenue  railway  operations r,  r^o.  ..o  ,y. 

Net  revenue,  auxiliary  operations ^'  ^oi'  q7-  !S 

Net  operating  revenue TlTiT.      7. ' 

Taxes  assignable  to  railway  opeVaUonsZZZZZZZZZZZZZZZZZZZZZZZ      2,  018  43-^"  13 

Operating  income '      Vi^^     Z, 

Income  from  lease  of  road Z~_Z__Z  2"fi^i"~p-^"rQ      '^'  ^^'  ^-^-  ^^ 

Miscellaneous  nonoperating  income ZZZZZZZ  176,'  549.'  ^ 

2,  828,  225.  21 

Gross  income TTZT" 

Deductions:  e.  458. 851. 90 

Rent  of  lease  of  roads q  ^99  c7q  ^n 

Interest  on  funded  debt ZZZZ 4  iSl'  9^'  I? 

Interest  on  unfunded  debt """  ^'  991'  oXX*  ^J 

Amortization  of  discount  on  funded" deb'tZZ  58  172'  48 

Maintenance  of  organization 10'  S.55  04 

Miscellaneous   debits ZZZZZZ  1. 091!  126:  42 

Total  deductions-  ' 

Net  income _ • 

Dividends  declared.,     Z~ZZ'  ^'  *'''^'  '^^'^-  00 

2,440,834.24 
Deficit  for  year__ 

Miscellaneous  data. 

Railway  owned 

Second  main  track  ownedZ" ^»  ^^^'  ^18 

535.447 
Total  main  track  owned T"! 

Sidings  and  switches  owned  ^'  ^^^-  ^^^ 

^ 204.  692 

Total  track  owned _  *  ~ " 

Leased  main  track  and  trackage  rightsZ_Z_"_Z~Z  '  2^1'  ^'^ 

Total  main  track  operated  ~  '^^-  '^25 

2,  913.  293 


^ 

? 


994      PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Kuiuber  of  revenue  passeiijiers  carried ___  noo  40-  9-^ 

Number  of  free  transfer  passengers  carried II IIIIIIIIH  340]  394]  004 

Total  passengers  carried 923,  879,  260 

Passenger  car-miles __  117  74fi  'jto 

Other  revenue  car-miles I_III__I IIIHII      2!  102'  478 

Total  revenue  car-miles 119,  848.  756 

Passenger   car-hours _  vTsiTTqi 

Other   revenue  car-hours ^^l^I^l^^^^^lIUm^ZI^ZIZ  313  152 

Total  revenue  car-hours r>  l'>8  '^4^ 

Operating  revenue  per  car-mile 'I.'I.I~I."  _centsl~  "'    '"ss'^lT 

Operating  expenses  per  car-mile _~  _(io "  33'  'a 

OiHTuting  revenue  per  car-hour ~ "  ^3  77 

Operating  exi)enses  per  car-hour III_I_I II_~"  $3  31 

Ratio  of  operating  expenses  to  oi>erating  reveTmesIlIlVIiircentl"  87  9*^ 

I'ercentage  of  dividends  declared do— _I  2  28 

The  Chairman.  Was  it  your  thought  that  Mr.  Erickson's  contri- 
bution to  the  chamber  of  coinnierce  should  go  into  the  record  or 
siini:>ly  be  filed  with  the  coniniission? 

Mr.  Warren.  I  thought  that  it  might  go  into  the  re^'ord  in  con- 
nection with  that  balance  sheet,  which  was  taken  from  the  census 
report  for  all  of  the  companies  of  the  country,  but  if  you  think  it 
would  encumber  the  record,  it  might  as  well  be  filed. 

The  Chairman.  I  do  not  want  to  have  the  record  too  large  of 
course.  ' 

Mr.  Warren.  No;  and  I  do  not. 

The  other  two  documents  are  the  combined  balance  sheet  of  the 
electric  railways  of  the  country,  made  for  the  census. 
The  Chairman.  They  ought  to  go  into  the  record. 
Mr.  Warren.  Yes,  sir. 

The  Chairman.  And  also  the  operating  expenses? 
311'.  Warren.  Yes,  sir. 

(The  documents  thus  referred  to  will  be  found  incorporated  in 
this  record,  at  pages  973  to  985,  and  992  to  994.) 

Mr.  Warren.  Then,  we  were  asked  for  the  classification  of  ac- 
counts for  electric  railways,  and  we  have  six  copies  of  those. 

We  were  also  asked  for  a  list  of  the  345  companies  responding  to 
Uio  American  PJectric  Kailway  Association's  data  sheet,  No.  l.SC>. 
ihis  is  shown  on  (liart  C-100,  and  I  have  five  copies  of  that. 

\\  e  were  also  asked  for  copies  of  the  questionnaire  which  was  sent 
to  the  member  companies  of  the  Association  for  information  concern- 
ing taxes  and  other  State,  municipal,  and  Federal  requirements;  and 
1  have  a  large  number  of  copias  of  that. 

That  concludes  our  evidence,  Mr.  Chairman,  and  we  wish  to  thank 
you  very  smcei-ely  for  your  kindness,  your  attention  and  vour  pa- 
tience in  hearing  us  during  this  hot,  muggv  weather,  and  at  such 
great  length  \\  e  would  not  have  thought  o'f  trespassing  upon  vour 
time  if  we  had  not  felt  the  very  desperate  condition  in  which  our 
companies  are  placed. 

I  assume  that  after  the  close  of  the  hearing  we  shall  have  an 
opportunity  to  present  a  summary  of  our  views  of  the  evidence,  and 
submit  a  brief. 

The  Chairman.  Surely. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOl^.      995 

The  commission  is  very  grateful  to  you,  Mr.  Warren   and  to  vour 
associates  for  your  patient  attendance  and  close  at  entio^^^^^^        Ip  ' 
important  business  before  us.     We  feel  like  apXg S  for  ha  in 
been  with  you  from  10  o'clock  in  the  morning  unti    10  oVlock  S 

lyStiS  ""  '^"^^  '^"  ""^^^^'"^^^  ''  ''''  proW  rather  £1^ 
We  now  stand  adjourned  until  August  4,  unless  otherwise  advisp.l 
(Whereupon,  at  5.30  o'clock  p.  m,  on  July  2^191^  heliS^^ 

lo"o'l^clfa.t^^  ""  ^'^'^"^"^^  ^^'"^  ^'-^^y^  Aui tm9f:i 

o 


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COLUMBIA  UNIVERSITY  LIBRARIES 


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LIBRARY 


School  of  Business 


For  Report  of  the  Comrmssion,  see  pages  mO--^iS89  of  VoluTne  3, 
For  General  Index  and  Digest,  see  pages  2291-28i9  of  Volume  3, 


PROCEEDINGS  OF 

The  FEDERAL  ELECTRIC 
RAILWAYS  COMMISSION 

Held    in   WASHINGTON    D    C      ^ .,    • 
or    July      Aiin-n^t      Q       *         u         '      """'"^   *^^    month 
^"iy,    August,    September,    and    October,    191 


hs 
9 


^=-togeiher  -with 


Final  Report  of  the 

Commission  to  the 

President 


IN  THREE  VOLUMES 

VOL.  2 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1920 


^ 


PROCEEDINGS  OF  FEDERAL  ELECTRICAL  RAILWAYS 

COMMISSION. 


Washington,  D.  C,  August  11,  1919—10  a.  m. 


0 


I 


■f 


The  commission  met  pursuant  to  adjournment 
Present:  Parties  as  before. 

STATEMENT  OF  HON.  NEWTON  D.  BAKER,  SECRETARY  OF  WAR. 

The  Chairman.  Gentlemen,  come  to  order.     Mr.  Secretary,  the 

''^^Zt^''\  '^  Tl  f^"^^^  *^  ^^^^  y^^  ^i^^  «s  this  morning  and 
would  be  glad  to  listen  to  you. 

Secretary  Baker.  Thank  you.    Perhaps  you  would  be  willing  to 
indicate  what  line  of  observation  the  commission  would  like  me  to 

Jru^^'r.       ^^  ^^  ^^"^  ^^^^  objective,  if  I  mav  ask  it? 

Ihe  Chairman.  Personally,  I  would  rather  have  you  develop,  as 
fully  as  you  can  the  Cleve  and  plan.  I  understand  you  had  a  good 
T  .  •  "^Vr^^  *^^  formation  of  that  plan  and  you  know  what  the 
ettect  is.  The  commission  wants  to  know  whether  such  a  plan  fairly 
protects  the  public  interest,  if  it  results  in  inefficiency  in  operation 
extravagance,  or  things  of  that  kind.  ' 

Secretary  Baker.  Well  Mr.  Chairman,  the  Cleveland  situation 
grew  out  of  a  condition  which  I  suppose  is  more  or  less  common  in 
cities  m  this  country.  When  I  first  became  acquainted  with  the 
Cleveland  situation  there  were  two  large  combinations  of  street  rail- 
roads one  known  as  the  " Big  Consolidated"  and  the  other,  the 
Little  Consolidated."     Each  of  those  has  been  formed  of  a  Aum- 

rnn«^l  Tf  ^""r'  ^""^  ^\^  f  """^  P^'"^'  th^y  ^^^  ^«*  compete.  The  Little 
H«nni  t  "^  lines  which  were  primarily  the  property  of  Senator 
Hanna    were  on  the  west  side  of  the  river  in  Cleveland  and  the 

ani  thp  Fv!!!!ff^  '''^J''\'':f^u^  ^"^^?^  hy  ^^-  H«^^^^  Andrews, 

^.1  T^^  ^1^"^'^^'  7^""  ^^^  ^^^^^  life-long  street-railroad  oper- 

erSwTv  h  ^""H^^'  '''  ^t.J'^  l^^^  ^^  *^^  ^i^^^-     That  was  not  a 
perfectly  hard  division,  but  for  the  most  part  it  w^as  accurate. 

inose  two  companies  had  been  formed  by  the  consolidation  of 
entor^^rrser  ^^  railroad  which  had  been  built  as  individual 

.,^^uH^  Tom  Johnson  became  mayor  of  Cleveland  his  platform  was 
;  nnmW  7'"'^'-'^^r  *^  ^/.P^^^s^ed,  «  Three-cent  fare.'^  There  were 
liZhZ'll^''l^^^^^  ^^hi^^  ^^re  in  immediate 

citTVw  ^^'t  s^*"a^i^n  in  Cleveland  was  just  as  it  is  in  every  other 
had  bepn  L  Ta  T%  ^""i  '^"^  ^PP^^i^unity  to  examine;  franchises 
been  au^h^^r*;"^  *^  r'  ^?^  ^  definite  period,  then  exceptions  had 
Deen  authorized  on  those  lines,  extensions  of  track  and  doubtful 

995a 


996      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

phrases  were  contained  in  the  extension  ordinances  which  the  com- 
panies contended  meant  renewals  of  the  parent  grant  and  which 
the  city  contested  as  to  that  interpretation.    There  were  a  number 
of  ordinances  changing  rates  of  fare  in  consideration  of  extensions. 
I  hose,  It  was  also  contended,  had  the  effect  of  renewing  the  parent 
grant  on  tlie  modified  rate  of  fare  for  the  maximum  period  possible 
under  the  Ohio  law,  which  was  25  years.    So  that  the  whole  situa- 
tion as  between  the  city  and  these  two  consolidated  companies- 
there  Tvere  no  renewals  of  franchises  upon  the  formation  of  the  con- 
solidation; those  were  voluntary  and  were  corporate,  and  not  public 
m  any  way  and  had  no  sanction  from  the  public  except  a  mere  per- 
missive resolution  on  the  part  of  the  council  which  it  was  contended 
by  nobody  gave  any  extension  to  the  life  either  of  the  consolidated 
tranchises  or  the  constituent  parts.     But  there  were  these  contentions, 
the  duration  of  the  underlying  grants  of  the  constitutent  roads,  the 
effect  of  the  extension  ordinances  and  the  effect  of  fare  ordinances. 
Mr.  Johnson's  theory— and  the  whole  Cleveland  street- railroad 
situation  IS  a  development  of  Tom  Johnson's  theories;  they  are  not 
mine,  and  it  is  of  the  highest  importance  that  it  should  be  realized 
that  they  were  his;   not  that   I   do   not   sympathize   with   them, 
but  they  were  his  creation,  and   the   result   in   Cleveland   is  his 
result,  and  he  is  entitled  to  all  the  credit,  and  it  is  very  great,  for 
the  settlement  in  Cleveland— Mr.  Johnson's  contention  never  was 
really  an  arbitrary  3-cent  fare.    That  became  the  slogan.    Because, 
of  course,  it  was  easier  to  pack  into  that  phrase  the  things  that  Mr. 
Johnson  stood  for  than  any  other  phrase.    But  he  always  believed 
hi-st  that  street  railroads  should  be  operated  in  the  interest  of  the 
service ;  that  it  was  a  public  utility ;  its  object  was  to  serve  the  public ; 
and  therefore  the  first  objective  to  be  attained  was  service.     An(i 
second,  he  believed  that  the  rate  of  fare  should  be  a  flexible  rate  of 
fare  and,  by  some  process,  determined  from  time  to  time  so  as  to 
secure  the  lowest  possible  rate  of  fare  to  the  users  of  the  road,  con- 
sistent with  an  adequate  payment  of  wages  and  operating  expenses 
and  a  fair  return  on  the  investment. 

Those  principles  seem  perfectly  axiomatic  and  simple  when 
stated  m  that  fashion,  and  yet  of  course  at  the  very  outset  thev 
came  up  against  the  problem  of  overcapitalization.  Mr.  Johnson 
had  been,  I  think,  one  of  the  formers,  one  of  the  organizers,  of  the 
group  known  as  the  Big  Consolidated.  He  had  owned  a  number  of 
street  railroads  m  Cleveland,  had  built  a  number  there,  a  good  many 
years  prior  to  his  having  become  mayor,  and  was,  I  am  inclined  to 
think  president  of  the  Big  Consolidated,  Cleveland  Electric  Rail- 
road Co.,  when  It  was  first  formed.  He  used  to  tell  me  that  the  way 
that  corporation  was  formed  was  that  all  of  the  roads  which  were 
to  be  consolidated  met  together  by  representatives  from  their  boards 
ot  directors,  turned  in  their  stock,  the  aggregation  assumed  the 
bonded  indebtedness  of  all  of  the  constituent  companies,  and  issued 
consolidated  stock  for  each  share  of  constituent  stock,  in  the  ratio 
of  one  share  of  constituent  stock  for  five  shares  of  Consolidated 
stock.  In  other  woixls,  a  man  who  put  in  a  $100  share  of  stock  in 
a  constituent  railroad  took  out  $500  worth  of  stock  in  the  Consoli- 
dated railroad. 

The  Chairman.  How  many  constituent  railroads  were  there? 


«'/ 


it 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      997 

Secretary  Baker.  I  can  not  answer  that  from  recollection.  There 
'  must  have  been  half  a'dozen,  at  least.  There  must  have  been  half  a 
dozen  lines  that  were  originally  separate  and  may  have  been  formed 
into  subsidiary  consolidations  before  I  had  any  contact  with  it  at  all. 
I  used  to  know  the  history  pretty  well,  but  I  have  not  thought  of  it 
for  a  long  time,  so  that 

The  Chairman.  At  that  time  when  that  plan  was  consummated, 
can  It  fairly  be  stated  that  the  stock  of  the  Consolidated  represented 
as  5  to  1  of  the  stock  of  the  constituent  companies? 

Secretary  Baker.  Substantially  that.  That  was  Mr.  Johnson^s 
general  statement  about  it.  There  are  no  secrets  in  that  business 
now,  because  this  has  all  been  talked  out  in  full  in  Cleveland ;  and  the 
situation  IS  so  changed  that  nobody  would  object,  I  am  sure,  to  my 
quoting  Mr.  Johnson's  statements  to  me  on  that  subject.  Nobody 
has  any  sensibilities  about  it  any  more.  But  what  they  did  was  to 
turn  on  the  hose,  and  they  gave  five  shares  of  Consolidated  stock  for 
each  share  of  constituent  stock,  although  the  market  value  of  the  con- 
stituent stock  at  the  time  of  the  consolidation  was  very  little,  if  any, 
above  par  in  any  of  the  constituent  companies. 

Of  course,  what  they  were  doing  was  capitalizing  the  advantages  of 
consolidation  and  centralized  management  and  the  speculative  ad- 
vantages of  the  future  growth  of  the  city  of  Cleveland. 

Well,  we  faced,  therefore— and  when  I  say  "  we  "  I  mean  Mr.  John- 
son  and  those  who  were  associated  with  him— faced  a  problem  first 
of  an  enormous  overcapitalization  of  the  properties.    Shortly  after 
the  contest  began— it  was  a  legal  contest  in  its  outset— Mr.  Johnson 
undertook  to  assert  an  expiration  of  some  of  the  underlying  grants 
of  somie  of  the  constituent  companies.     His  belief  was  that  the  so- 
called  Woodlawn  Avenue  franchise  expired  in  1908.    It  was  one  of 
the  underlying  franchises  of  the  Little  Consolidated  Railroad,  which 
was  Senator  Hanna's  property.    There  was  a  lawsuit  brought  about 
It  by  the  Little  Consolidated  Railroad  Co.  to  enjoin  the  city  from 
enforcing  the  expiration  of  the  grant;  and  that  case  went  to  the 
feupreme  Court  of  the  United  States,  and  it  was  decided  adversely 
to  the  city  on  the  ground  that  some  years  prior  to  1908  there  had  been 
an  extension  granted  to  that  railroad  and  in  consideration  for  the 
extension  the  company  had  agreed  to  issue  tickets  good  throughout 
its  entire  system  at  a  somewhat  modified  rate  of  fare,  and  the  Supreme 
Court  of  the  United  States  sustained  the  view  of  the  local  district 
judge  to  the  effect  that  the  purpose  of  that  ordinance  was  to  make  a 
complete  line  of  the  Woodlawn  Avenue  Street  Railway  Co.'s  prop- 
^rty  and  to  have  a  uniform  rate  of  fare  over  it  for  the  entire  period 
of  the  extension,  a  technical  question  based  upon  the  wording  of  the 
ordinance,  of  course. 

The  next  expiration  that  was  claimed  was  with  regard  to  a  street 
known  as  Central  Avenue  in  Cleveland,  which  it  was  contended  by  Mr 
Johnson  expired  in  1910—1  may  have  these  dates  wrong.  Any- 
how, he  gave  a  date  of  expiration  for  it.  The  company  contended 
that  It  was  a  perpetual  grant  and  that  it  had  got  this  grant  without 
a  limitation  of  time  prior  to  the  enactment  of  a  State  statute  which 
limited  all  grants  to  25  years,  and  that  by  reason  of  the  building  of  a 
cross-town  line  coupling  up  the  radial  line— Cleveland  is  a  fan-shaped 
city  with  Its  head  on  the  lake,  and  the  main  thoroughfares  radiate  out 
like  the  ribs  of  a  fold  fan  unfolded— that  the  building  of  a  cross-town 


II 


998     PROCEEDmos  or  fedebal  electric  railways  commission; 

line  that  intersected  and  exchanged  transfers  with  the  radial  lines  had 
extended  the  life  of  all  of  the  intersected  lines  to  at  least  the  life  of  the 
cross-town  line;  so  that  their  contention  was  twofold,  that  they  had  si 
l)erpetiial  grant  on  one  theory  and  if  they  did  not  have  that  they  at 
least  had  16  or  17  years  by  reason  of  the  extension  of  life  due  to  tlio 
building  of  the  cross-town  line. 

That  case  was  litigated  to  the  Supreme  Court  of  the  United  States 
and  decided  against  the  company  and  its  grant  was  declai-ed  to  have 
expired  on  the  Central  Avenue  line.  I  do  not  know  whether  this  is 
interesting  to  you,  but  it  is  the  history  of  a  contest  which  will  come  to 
an  end  in  just  a  moment  with  a  settlement. 

Mr.  Warren.  That  was  the  Big  Consolidated,  was  it  not? 
Secretary  Baker.  That  was  the  Big  Consolidated. 
Mr.  Warren.  That  line? 

Secretary  Baker.  That  line.  At  that  time  there  was  a  tremendous 
amount  of  excitement  in  the  city  of  Cleveland.  It  was  the  first  real 
victory  for  Mr.  Johnson's  theories  and  his  cause.  The  public  senti- 
ment in  Cleveland  was  aroused  over  that  issue  as  I  never  saw  any 
local  sentiment  aroused  on  any  subject. 

Commissioner  Sweet.  What  was  the  date,  Mr.  Secretary? 
Secretary  Baker.  Well,  Mr.  Johnson  began  in  1901  and  these  con- 
tests ran  along  until  1910  when  he  was  defeated  for  reelection. 

Commissioner  Sweet.  But  the  date  of  this  decision  that  you  just 
referred  to  in  Cleveland  in  favor  of  the  city  ? 

Secretary  Baker.  I  must  be  wrong  about  it,  Mr.  Sweet.  It  must 
have  been  a  1906  or  1907  expiration.  Maybe  not;  it  may  have  been 
as  late  as  1908.  If  you  are  interested  in  that  case,  I  can  give  you  the 
citation  w  it  in  the  United  States  Reports.  I  think  it  is  in  the  Two 
hundred  and  first  United  States  Reports.  The  first  is  in  the  One 
hundred  and  ninety-seventh  United  States  Reports  and  the  second 
in  the  Two  hundred  and  first  United  States  Reports. 

Well,  the  contest  had  become  very  serious  at  that  time.    There  wore 
in  all,  I  think,  in  that  period  of  contest,  some  40  to  45  injunction  suits 
against  the  city  of  one  kind  or  another.    I  was  the  city  solicitor  at 
the  time  and  did  nothing  else  but  try  street-railway  injunction  cases 
The  contest  or  the  effort  to  arrive  at  a  settlement  and  adjustment 
of  the  street  railroads  was  constjint.     In  order  to  present  a  more 
solid  front  they  had  consolidated  the  two  consolidations;  the  Big 
and  Little  Consolidated  went  together  into  a  consolidation  known 
as  the  "Con-Con,"  the  two  Consolidateds;  and  thereafter,  of  course 
the   corporate   interests    presented    a    solid    and    undivided    front' 
There  were  constant  efforts  by  negotiations  and  otherwise  to  reach 
an  agreement  with  them,  but  they  were  all  futile,  and  litigations 
very  often  went  against  the  city  on  these  doubtful  phrases  in  the 
ordinances.     And  finally  a  new  attack  was  made  on  the  problem, 
Avhich  was  to  procure  the  building  of  competing  lines  on  a  new  sys- 
tem of  franchises  w^hich  would  charge  a  lower  rate  of  fare.     Half 
a  dozen  street-railroad  companies  were  organized.     Ultimately,  how- 
ever, the  Forest  City  Railroad  Co.,  so  called,  became  the  real  agent 
for  the  construction  of  these  competing  lines. 

Its  stock  was  sold  to  everybody,  and  large  amounts  of  it  were 
bought  by  the  people  of  Cleveland  who  were  very  nnich  aroused 
by  this  business,  and  a  number  of  grants  were  made  to  it  of  street- 
raUroad  rights  and  franchises  upon  which  they  built ;  but  the  streets 


L' 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      999 

leading  into  the  downtown  or  business  section  of  the  city  were  all 
occupied  by  outstanding  or  claimed  grants  of  the  old  companies, 
and  it  was  very  difficult  to  get  any  joint  use  of  tracks  through  the 
heart  of  the  city  so  as  to  couple  up  the  dismembered  sections  of  the 
Forest  City  property  into  a  system.  That  led  to  most  of  the  in- 
junction  suits.  Ohio  is  one  of  four  States  I  think,  which  has  the 
absurd  and  unconstitutional,  as  I  believe,  requirement  that  there- 
must  be  a  consent  of  the  majority  of  the  foot  frontage  of  abutting 
property  upon  a  street  before  a  street  railroad  can  be  laid  in  that 
street.  I  think  that  an  unconstitutional  requirement.  The  Supreme 
Court  apparently  takes  the  other  view,  however;  but  some  of  these 
days,  if  the  States  are  absurd  enough  to  keep  that  law,  I  hope  to  see 
the  Supreme  Court  of  the  United  States  declare  its  unconstitution- 
ality. Well,  we  had  this  litigation  going  on  continuously  about  the 
Forest  City  Railroad  and  the  practice  ol  getting  either  joint  use  of 
tracks  or  new  streets.  We  took  a  strip  of  land  off  a  public  cemetery 
one  day  and  made  a  street  out  of  that,  and  that  was  a  new  street, 
so  we  could  grant  rights  in  that  street.  And  the  most  extremely 
ingenious  and  subtle  efforts  were  made  by  Mr.  Johnson  to  get 
around  the  difficulties  of  the  situation. 

When  the  Central  Avenue  grant  was  declared  by  the  Supremo 
Court  of  the  United  States  to  have  expired,  the  Cleveland  Railway 
Co.,  or  Con- Con,  decided  to  teach  the  people  of  Cleveland  a  lesson, 
and  it  gathered  a  great  group  of  people  together  and  went  up  and  tore 
up  the  tracks  of  the  Central  Avenue  line.  It  was  its  niost  i^ecently  laid 
line.  It  was  laid  in  concrete  with  the  best  roadbed  of  any  street  in  the 
city;  as  a  concession  for  its  grant  it  had  paved  the  street  with  the 
finest  pavement  there  was  anywhere  in  Cleveland.  The  rail  was 
90  pounds  or,  I  think,  a  110-pound  rail— I  have  forgotten— but  it 
was  the  very  latest  type ;  and  it  tore  up  about  2^  miles  of  that  street 
and  replaced  the  pavement  as  notice  to  the  city  of  Cleveland  that 
if  it  did  not  come  to  some  adjustment  with  it,  it  would  simply  tear 
up  the  tracks  and  let  the  people  do  without  any  street  milroads 
at  all. 

That,  of  course,  presented  a  serious  complication.  The  people  on 
the  street  were  pretty  patient  about  it  and  used  adjacent  lines,  al- 
though they  were  somewhat  inconvenienced  by  it.  And  then  we  came 
by  the  lapse  of  time  to  a  place  where  obviously  on  the  same  princi- 
ples a  large  number  of  other  grants  were  about' to  fall  in  and  expire. 
That  predisposed  everybody  to  an  adjustment,  the  public  desiring 
to  avoid  the  inconvenience  of  a  destruction  of  the  service  and  the 
company  desiring  to  avoid  the  vast  destruction  of  its  invested  capi- 
tal. And  finally  a  suggestion  was  made  that  a  plan  be  worked  out 
which  would  compromise  and  settle  the  difficulties  of  the  situation. 
The  Cleveland  Railway  Co.,  the  Con-Con,  placed  its  entire  case  iii 
the  hands  of  Mr.  F.  H.  Goff,  who  w^as  then,  as  he  is  now,  the  president 
u\^^  Cleveland  Trust  Co.,  a  lawyer  of- great  distinction  and  great 
ability,  and  a  man  of  such  high  character  that  everybody  on  both  sides 
of  every  question  has  confidence  in  his  capacity  and  in  his  fairness. 
He  and  Mr.  Johnson  met  in  the  council  chamber,  and  debated  for  a 
period  of  six  or  eight  weeks  a  settlement  before  the  members  of  the 
council  sitting  as  a  committee  of  the  whole— sitting  day  and  night.  As 
the  result  of  that,  a  plan  was  devised  whereby  the  property  was 
revalued  by  experts.    When  revalued  it  was  re<japitalized,  and  by 


1000    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

its  owning  company  leased  to  what  was  known  as  the  Municipal  Trac- 
tion Co.,  a  company  gotten  up  with  Mr.  Johnson  as  its — I  do  not  think 
he  was  president,  I  think  he  was  the  treasurer,  probably,  although  ho 
was  mayor  of  the  city  at  the  time.  I  was  city  solicitor,  and  I  was  a 
member  of  the  board  of  directors. 

There  were  eight  or  nine  persons  in  the  company,  and  it  was  a  com- 
pany organized  under  the  laws  of  Ohio,  not  for  profit.  Its  obliga- 
tion was  to  pay  the  bonded  indebtedness,  to  pay  enough  money  t*) 
jnoduce  6  per  cent  interest  upon  the  recapitalized  value  of  the  prop- 
erty as  represented  by  its  reissued  stock,  its  new  stock,  and  to  keep 
the  rate  of  fare  as  low  as  was  consistent  with  those  two  objects. 

The  property  was  valued  by  experts,  Mr.  Goff  and  Mr.  Johnson 
passing  in  public  upon  any  dispute  between  the  groups  of  experts 
representing  the  city  on  one  side  and  the  companies  on  the  other. 
And  finally  a  valuation  was  reached,  which  was  about  50  cents  on  the 
dollar  of  the  outstanding  stock,  making  all  the  bonds  good,  but  de- 
ducting the  outstanding  bonds  from  the  total  ascertained  value,  it 
left  about  enough  to  make  50  cents  on  the  dollar  for  the  stock.  The 
road  was  then  leased  to  the  Municipal  Traction  Co.,  and  the  day  after 
the  Municipal  Traction  Co.  took  charge  tlie  employees  struck  for  an 
increase  in  wages.  The  strike:  ran  along  for  some  little  time,  and 
then  a  referendum  was  called  on  the  ordinance,  which  renewed  the 
rights  of  these  companies  on  condition  of  their  making  the  lease;  and 
in  that  referendum,  by  a  very  narrow  majority,  the  people  of  Cleve- 
land rejected  the*  settlement  ordinance. 

That  threw  the  whole  thing  up  in  the  air,  of  course.  It  was  then 
suggested— a  suit  was  brought,  I  think— no,  I  guess  not — it  was 
then  suggested  that  the  whole  case  be  put  up  to  the  Federal  judge 
in  Cleveland,  R.  W.  Tayler,  as  arbitrator,  to  settle  the  relations  be- 
tween the  company  and  the  city.  Judge  Tayler  took  the  valuation 
which  had  been  made  by  Mr.  Johnson  and  Mr.  Goff,  made  some  modi- 
fications of  that  based'  upon  expert  inquiries  made  under  his  own 
guidance,  had  a  new  ordinance  drawn  which  left  out  the  Municipal 
Traction  Co.  entirely,  and  allowed  the  Cleveland  Railway  Co.  to  op- 
erate its  own  property,  and  by  the  terms  of  the  ordinance  regulated 
and  controlled  their  operation,  fixed  the  value  of  the  stock  at,  I  think, 
65  cents,  a  slight  increase  above  what  had  been  determined  by  the 
Goif-Johnson  valuation.  The  company  was  then  reorganized,  its 
stock  reissued  on  the  new  basis,  the  ordinance  passed  by  the  council, 
a  referendum  approved  it,  and  the  company  then  began  operating 
under  the  revised  ordinance. 

Now  that  ordinance  provides  this :  It  is  a  privatelv  managed  rail- 
road in  the  sense  that  the  owners  of  the  property  itself,  by  the  board 
of  directors,  its  president 

Commissioner  Sweet.  Is  that  the  one  they  are  operating  under 
no\v  ? 

Secretary  Baker.  That  isthe  one  they  are  operating  under  now— 
operate  the  railroad.  The  city  is  represented  by  an  officer  known  as 
the  city  street-raih-oad  commissioner,  who,  is  *bv  the  terms  of  the 
ordinance,  the  technical  adviser  of  the  mayor  and  council.  He  has 
no  supervisory  power,  no  visitorial  power,  but  has  an  office  in  the 
offices  of  the  company,  which  is  supplied  him  by  the  company;  all 
accounts  and  books  of  every  sort  are  opened  to  his  inspection,  and  he 
reports  regularly  to  the  mayor  and  council  whatever  he  thinks  worth 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1001 

reporting.  And  the  relations  between  the  company  and  the  city  are 
CQuducted  by  the  council  and  the  mayor  on  the  one  side,  advised  by 
the  city  street-railroad  commissioner,  and  by  the  company  on  the 
other  side. 

The  ordinance  provided  for  the  consolidation  of  all  the  lines,  those 
of  the  Con-Con  and  those  of  the  competing  system  of  roads  known 
as  the  Forest  City  roads,  which  had  been  built  in  the  earlier  period  of 
the  conflict.  The  Forest  City  properties  were  taken  in  on  the  basis 
of  dollar  for  dollar,  because  they  were  just  newly  constructed  and 
there  had  been  nothing  but  construction  value  placed  in  their  ex- 
penditures. The  Con-Con  properties  went  in,  I  think,  on  the  basis 
of  about  55  cents  on  the  dollar  of  outstanding  stock. 

The  ordinance  fixed  the  amount  of  outstanding  stock  and  bonds. 
It  authorized  the  issuance  of  stock  and  redeemed  bonds  as  they  be- 
came due.  I  think  most  of  the  bonds  originally  outstanding  on  the 
constituent  companies  have  now  been  replaced  by  stock.  There  is 
probably  a  very  small,  if  any,  bonded  indebtedness  upon  the  property. 

So  that  the  revised  value,  based  upon  an  appraisement  of  the 
property,  is  now  represented  by  stock  of  the  Cleveland  Railway  Co. 
of  all  the  properties.  That  was  fixed  in  amount  in  the  ordinance; 
and  thereafter,  while  we  could  not  under  the  laws  of  Ohio  prevent 
a  corporation  from  issuing  more  stock — that  is,  a  city  could  not  pre- 
vent it — the  corporation,  having  its  corporate  power  derived  from 
the  State,  could  issue  any  amount  of  stock  it  wanted  to  issue.  The 
ordinance  provided  that  the  company  should  have  as  its  compensa- 
tion for  operation  only  enough  money  to  pay  the  interest  upon  its 
bonds  and  the  stipulated  rate  of  interest  upon  $16,000,000,  if  that 
was  what  the  stock  then  was,  and  such  additions  to  the  $16,000,000 
as  should  subsequently  be  authorized  by  the  city. 

So,  while  we  could  not  control  the  further  issuance  of  stock,  we 
limited  the  amount  of  return  to  the  company  available  for  dividends 
ujion  the  stock.  The  whole  scheme  was  based  upon  a  6  per  cent  divi- 
dend on  stock;  and  if  the  company  had  issued  more  stock  than  it  was 
authorized  to  by  the  ordinance,  it  would  have  had  to  cut  down  the 
dividends. 

The  ordinance  provides  that  the  entire  earnings  of  the  property 
from  all  sources  go  into  a  fund  known  as  the  interest  fund.  Into 
tliat  fund  at  the  beginning,  $500,000  was  placed,  which  was  part  of 
the  capital  of  the  company.  All  earnings  from  fares,  from  advertise- 
nients,  from  services  of  one  sort  and  another  performed,  rentals  from 
interurban  companies  and  package  companies,  all  earnings  of  every 
sort  go  into  the  interest  fund. 

The  ordinance  provides  then  the  order  and  amounts  of  things  to 
be  paid  out  of  the  interest  fund.  Operating  expenses,  of  which  I 
shall  make  further  observation  in  just  a  moment,  including  insurance 
and  taxes,  wages  and  salaries,  next  bond  interest,  and  last  a  sum 
which  will  pay  the  interest  upon  the  outstanding  capital  at  6  per 
cent. 

The  operating  expenses  are  divided  into  two  kinds— one  pure 
operation  and  the  second  maintenance.  Operating  expenses  were 
limited  to  so  much  per  car-mile,  a  certain  number  of  cents  per  car- 
mile,  which  could  not  be  exceeded;  and  maintenance  was  limited 
to  a  certain  number  of  cents  per  car-mile.  I  have  forgotten  those 
figures  at  this  moment,  but  my  impression  is  in  the  first  ordinance 


1002    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

pure  operation  was  something  like  11  cents  per  car-mile  and  main- 
tenance something  like  4  cents  a  car-mile,  although  they  varied  in 
dilferent  seasons  of  the  year.  Cleveland  has  a  very  heavy  winter 
climate,  and  the  cleaning  of  snow  and  all  that  sort  of  thing  in  the 
winter  makes  operating  expenses  high,  and  the  heating  of  the  cars: 
and  in  the  summer  season  it  is  easier  and  cheaper  to  operate. 

Mr.  Warren.  I  am  told  it  is  11 J  c^nts  from  May  to  December  an;! 
12|  the  remainder  of  the  period. 

Secretary  Baker.  That  has  been  modified  since  then.  There  havi- 
been  two  or  three  modifications  under  that  ordinance  that  have  modi- 
fied those  figures. 

Mr.  Warren.  Those  were  the  initial  figures? 

Secretary  Baker.  Very  likely.  It  is  a  long  time  since  I  have  even 
thought  of  this  subject,  so  that  my  recollection  of  figures,  and  per- 
haps of  some  details,  is  to  be  corrected. 

Commissioner  Sweet.  I  think  it  is  remarkable  that  you  remember 
as  Tvell  as  you  do,  with  aU  that  you  have  had  on  your  mind  the  last 
few  vears. 

Secretary  Baker.  I  have  not  thought  of  these  things  for  four 
years — three  years,  at  least. 

Those  sums  go  out  of  the  interest  fund  in  the  order  provided. 

Now,  we  come  to  the  rate  of  fare  and  the  control  of  that. 

A  schedule  of  rates  of  fare  was  set  up  in  the  ordinance  itself.  The 
base  fare  of  3  cents  is  in  the  middle  of  the  schedule,  and  a  variation 
of  fares  is  provided :  3  cents  cash  with  1-cent  transfer,  and  it  runs  up 
to  4  cents,  I  think,  cash,  with  1-cent  transfer.  The  schedule  is  unim- 
portant, except  that  there  are  enumerated  in  specific  lines,  a,  b,  c,  d, 
e.  and  f,  these  various  grades,  and  as  I  recall  it,  3  cents  fare  with 
what  we  call  a  rebated  transfer  of  1  cent  is  about  the  minimum. 
Operation  was  started  on  the  basis  of  the  3-cent  fare  with  1  cent  for 
a  transfer. 

The  ordinance  provides  that  whenever  the  sum  in  the  interest  fund 
which,  you  will  recall,  started  out  at  $500,000 — whenever  the  amount 
in  the  interest  fund,  plus  all  accruals  and  less  all  pmportionate  de- 
ductions— that  is,  crediting  to  the  fund  the  earnings  that  came  in 
yesterday  but  have  not  been  actually  transferred  to  it,  and  taking 
out  of  it  the  proportionate  amount  which  that  fund  would  have  to 
stand  for  all  interest  and  dividends  and  operation  charges;  taking 
all  those  out — whenever  the  amount  in  the  interest  fund  amounts  to 
$750,000— that  is,  $250,000  more  than  it  started  with— the  fare  auto- 
matically goes  down  to  the  next  lower  rate  of  fare. 

Whenever  the  amount  in  the  interest  fund,  plus  accruals  and  less 
charges,  goes  as  low  as  $250,000,  the  fare  automatically  rises  to  the 
next  higher  one. 

So  that  the  change  in  the  rates  of  fare  is  automatic.  There  is  no 
provision  in  the  ordinance  for  literally  free  transfers.  Under  all 
circumstances,  where  a  transfer  is  issued  a  cent  is  charged  for  it; 
but  if  the  next  lower  rate  of  fare  calls  for  a  rebated  transfer,  then  the 
man  who  pays  the  penny  for  a  transfer  gets  the  penny  back  when  he 
delivers  the  transfer,  the  object  of  that  being  to  prevent  the  frauds 
that  are  inherent  in  free  transfers. 

In  a  great  many  systems  the  free  transfers  nm  up  to  40  or  50  per 
cent,  and  whole  books  of  transfers  are  given  away  by  conductors  and 
other  persons,  and  people  have  their  own  punches,  and  ride  on  these 


PEOCEEDIKGS  OF  FEDERAL  ELECTEIC  RAILWAYS  COMMISSION.   1003 

transfers,  and  there  is  a  tremendous  loss.    But  when  a  conductor  has 
to  account  for  a  cent  for  each  transfer  issued,  all  that  is  cut  out. 

Commissioner  Sweet.  Are  you  speaking  of  street  railwavs  gener- 
ally or  merely  Cleveland,  when  you  say  that  ? 

Secretary  Baker.  Of  course,  I  have  always  believed  Cleveland  to 
be  better  than  any  other  city,  and  I  assume  that  any  evil  that  might 
exist  there  would  certainly  exist  elsewhere. 

Commissioner  Sweet.  If  it  is  as  bad  as  that  in  Cleveland,  what  is 
it  in  the  rest  of  the  country? 

Secretary  Baker.  I  believe  that  the  literallv  free  transfer  is  prob- 
ably the  worst  practice,  the  woret  difficulty  that  the  street  railroads 
have  to  deal  with.  The  problem  does  not  affect  only  street  railroads, 
but  it  affects  the  riding  public.  The  man  who  uses  a'fraudulent  trans- 
fer does  not  hurt  the  street  railroad  as  much  as  he  hurts  the  other 
passengers  who  have  to  pay  for  carrying  him. 

Commissioner  Sweet.  And  hurts  himself? 

Secretary  Baker.  Well,  he  must  be  pretty  well  hurt  before  he  starts 
that. 

That  is  the  scheme  upon  which  the  fare  started.  We  started  out 
with  a  3-cent  fare  and  a  cent  for  a  transfer,  and  kept  the  cent.  At 
the  end  of  about  a  seven  or  nine  months'  period— I  am  mistv  as  to 
^JiL^^^  period,  but  some  such  period— the  interest  fund  khowed 
Jh750,000,  and  the  fare  went  down  to  the  next  lower,  which  was  3  cents 
with  a  rebated  transfer.  It  has  switched  several  times.  It  never 
went  below  a  flat  3  cents  with  a  rebated  transfer,  and  never  until  the 
war,  went  above  3  cents  with  the  unrebated  transfer,  the  chapged 
transfer.  ^ 

After  the  war  came  on,  the  cost  of  operation  increased  very  larffelv 
and  a  number  of  difficulties  have  arisen  there,  and  the  fare  at  present' 
1  thmk,  is  5  cents.  ^  It  is  according  to  the  ordinance,  whatever  the  pro- 
vision IS.    I  thmk  it  IS  5  cents  straight  fare  now. 

That,  in  brief,  is  the  history  of  the  settlement. 

There  are  two  or  three  comments  to  be  made  about  it.  In  the  first 
place,  it  was  a  popular  settlement,  in  the  sense  that  the  people  of 
Cleveland  understood  it.  I  do  not  think  it  is  possible  for  me  to  em- 
phasize too  strongly  so  far  as  the  expression  of  my  own  belief  is  con- 
cerned,  the  feeling  that  no  street  railroad  settlement  can  be  a  success- 
ful  one  which  is  not  understood  in  its  details  and  approved  by  the 
people.  It  IS  one  of  the  most  intimate  of  their  services,  and  they  re- 
sent and  distrust  and  suspect  the  management  unless  they  understand. 

J  he  whole  theory  of  the  Cleveland  settlement  was,  first  that  the 
people  understood  all  that  had  gone  on  in  the  past,  aAd  all  that  was 
proposed  to  be  done,  and  had  a  continuous  means  of  information  as 
to  the  state  of  affairs,  by  the  inspection  of  the  city  street-railroad 
commissioner  s  books  and  the  publication,  at  short  intervals  of 
reports  from  hmi. 

The  city  sti-eet-railroad  commissioner  in  Cleveland  every  month 
Kl'""  public  newspapers  the  state  of  the  intei^  fund,  so  that 
l&  ""l"}  see  whether  it  is  going  up  or  whether  it  is  going  down; 

Thp  V^i  '^"^"^  f ''"'^'''  ^^^'V  "^'^^^  *^^  slightest  question  about  it. 
nerin^i  ?^i        V7  T'"'''  m  advance,  that  they  were  approaching  the 
period  where  the  fare  would  go  up  or  would  go  down  and  it  is  ip 
cepted  without  the  slightest  hesitation  or  objeftion       ' 


« 


10C4    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  great  thing  accomplished,  therefore,  in  the  Cleveland  settle- 
ment was  that  it  was  accomplished  with  the  intelligent  and  detailed 
comprehension  and  understandin|r  of  the  people  of  the  city ;  and  the 
subsequent  working  of  the  ordinance  has  always  been  relatively 
easy  because  of  the  f  ullness^of  the  disclosures  made  and  the  complete- 
ness of  the  information  the*p"blic  have  on  the  subject. 

Perhaps  the  most  striking  defect  in  the  ordinance  is  the  thing 
you  would  rather  have  me  point  out  than  anything  else,  and  that 
IS  the  lack  of  stimulus  to  the  operators  to  operate  economically. 

We  faced  two  problems  in  Cleveland :  One  was  the  control  of  the 
operation  of  the  property— and  perKaps  I  should  put  a  parenthesis 
here,  because  I  have  omitted  something  that  I  ought  to  have  said. 
The  company  was  not  permitted  to  spend  any  money  for  improve- 
ments or  betterments  or  even  for  renewals  and  replacements  without 
the  consent  of  the  city ;  if  it  wanted  to  buy  100  cars  it  presented  to 
the  street  railroad  commissioner  the  kind  of  cars  it  wanted  to  buy, 
the  cost  of  the  cars,  the  times  of  delivery,  and  he  presented  that  to 
the  council,  and  a  resolution  was  passed  authorizing  the  purchase  of 
those  100  cars. 

If  they  wanted  to  relay  the  rail  on  Central  Avenue  or  on  Wood- 
land Avenue  they  had  engineers  estimate  the  cost  of  this  work  and 
those  estimates  when  drawn  up  were  presented  to  the  city  street- 
railroad  commissioner  and  he  had- a  group  of  experts  in  his  employ 
and  they  went  over  it  and  found  out,  first,  whether  it  was  necessary, 
and  second,  whether  it  was  economically  proposed,  and  then  it  was 
approved  by  the  council. 

We  were  a  little  too  hopeful  about  that  ordinance  in  one  aspect. 
We  believed  that  the  replacements  could  come  out  of  the  maintenance 
fund  and  we  did  not  make  a  sufficient  apportionment  of  the  replace- 
ment cost  to  capital  account.  Our  effort  was  to  keep  the  capital 
account  down. 

I  can  illustrate  what  I  mean  by  taking  a  single  instance:  If  the 
company  wanted  to  relay  the  rail  on  Woodland  Avenue— let  us  as- 
sume that  the  rail  was  10  years  old,  and  that  at  the  time  of  the  settle- 
ment its  life  was  only  a  prospective  three  years  more.  Plainly,  cor- 
rectly, when  that  rail  was  relaid  the  three  years  of  lifetime  left  it 
at  the  time  of  the  settlement  should  have  been  paid  out  of  mainte- 
nance, but  the  nine  years  of  expired  life  in  that  rail  ought  to  have 
been  paid  out  of  new  capital  because  it  was  valued  on  the  basis  of  its 
depreciated  condition ;  and  there  ought  to  have  been  an  addition  of 
new  capital  in  the  new  rail  to  the  extent  of  nine  to  three.  We  did 
not  do  that.  And,  as  a  consequence,  the  maintenance  fund  of  the 
company  was  constantly  being  called  upon  to  bear  altogether  too 
high  a  contribution  for  replacements  of  property  which  was  nearly 
worn  out  at  the  time  of  the  settlement,  and  which  rapidly  wore  out 
>vhen  it  was  in  use  under  the  settlement. 

That  led  to  a  resort  by  the  company  to  the  arbitration  features 
provided  in  the  ordinance,  which  were  that  every  dispute  of  every 
kind  between  the  city  and  the  company,  in  the  event  of  failure  to 
agree  between  the  company  and  the  city,  should  be  referred  to  ar- 
bitratoi^,  one  of  whom  should  be  appointed  by  the  company,  one  by 
the  city,  and  one  by  the  district  Federal  judge  or  circuit 'judge  of 
that  community. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1005 

The  conypany  has  had,  I  thinli,  two  or  three  arbitrations  for  the 
purpose  ot  having  the  operation  allowance  increased  to  meet  in- 
creased wage  demands,  and  to  have  the  maintenance  allowance  in- 
creased  to  meet  either  increased  cost  of  maintenance  or  to  overcome 
this  insuthciency  of  maintenance  allowance  by  reason  of  the  failure 
to  provide  for  apportionment  to  new  capital  of  the  replacements 
under  the  provisions  of  the  ordinance. 

We  faced,  at  the  outset,  the  problem  of  the  complete  control  of  the 
service  and  of  the  property  in  the  interest  of  the  public— which  you 
see  is  reserved  in  this  ordinance,  because  the  company  can  practically 
do  nothing  without  the  consent  of  the  council— and  the  alternative 
plan  which  we  knew  as  the  Boston  gas  plan,  of  an  increasing  return 
on  the  capital  invested  as  an  inducement  to  economical  operation 

We  all  put  our  heads  to  it,  and  we  all  tried  to  find  some  way  to 
combine  those  two  things;  but  it  seemed  illogical,  when  the  city  had 
complete  control  of  operation  and  there  was  nothing  left  for  stimulus 
to  the  management  to  do. 

So  we  put  in  a  flat  rate  of  return  on  the  capital  at  6  per  cent. 

I  think  that  was  a  mistake.  I  think  there  ought  to  have  been  a 
provision  that  the  company  should  have  6J  per  cent  as  long  as  it  con- 

•.^^u^  i^j^i"^^  i^^T^^  ^^^^y  ^^  operate  a  3-cent  fare  flat,  and  that 
it  should  lose  a  half  of  1  per  cent  upon  its  capital  return  when  it  had 
to  charge  an  extra  cent  for  a  transfer,  and  that  it  should  lose  another 
quarter  of  a  per  cent  when  it  had  to  go  to  the  next  higher,  and  that 
Its  rate  of  return  should  be  based  upon  the  fare  which  they  were  able 
to  maintain.  If  there  had  been  that  inducement  to  the  management  to 
thrift  and  providence  and  economy,  I  think  it  would  have  been  a 
better  plan. 

The  Chairman.  What  would  have  happened,  or  what  might  have 
happened  to  the  return  under  that  provision  if  it  had  been  continued 
in  the  abnormal  conditions  we  now  have,  with  the  prices  of  supplies 
and  of  labor  and  material  of  all  kinds  constantly  mountino-2 

Secretary  Baker.  You  mean  the  capital  earning  wouldliave  gone 
down  without  their  fault  ?  ^ 

The  Chairman.  Yes. 

Secretary  Baker.  That  is  perfectly  true.  That  is  exactly  what 
would  have  happened  They  are  havmg  an  arbitration  in  Cleveland 
^T^'u  .u  ^  company  has  come  to  the  council  and  said  that,  in  spite 
of  all  the  management  could  do,  they  can  not  sell  new  stock  on  a  6 
per  cent  basis;  that  6  i)er  cent  does  not  mean  as  much  now  as  it  used 
to;  and  their  stock  is  m  the  market,  I  think,  at  97  or  98,  and  thev 
can  not  sell  new  stock  on  a  par  basis;  so  they  have  come  to  the  council 
and  asked  them  to  increase  the  6  per  cent  allowance  on  stock  divi- 

That  is  up  for  arbitration  now ;  and  I  notice  in  this  morning's  news- 
paper, quite  by  accident,  that  the  Federal  judge  has  appointed  a 
third  arbitrator,  and  that  many  other  questions  between  the  com- 
pany and  the  city  are  to  be  worked  out  by  this  arbitration  board, 
with  the  strong  likelihood  that  some  such  element  as  I  have  sug- 
gested will  be  injected  into  the  ordinance  giving  them  a  sli^htlv  in- 
creased capital  return,  and  perliaps  making  it  contingent  upon  some 
economies  that  they  are  to  effect  under  the  guidance  of  these  ar- 
Ditrators. 


f 


1006   PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Commissioner  Sweet.  But  it  is  a  fact  that  in  times  like  the  present 
the  provision  you  referred  to  a  few  moments  ago  would  not  be  opera- 
tive— that  is,  the  incentive  to  extra  effort  toward  economy  would  not 
have  any  operation  at  all  in  times  like  this?  There  would  be  no  op- 
portunity, no  matter  what  their  economies  might  be,  without  ;i 
change  m  fare  or  some  other  help,  for  the  company  to  get  any 
benefit  from  their  efforts  whatever. 

Secretary  Baker.  That  is  true. 

Commissioner  Sweet.  Still,  at  the  same  time,  that  is  no  argument 
against  having  the  incentive  there  for  normal  times? 

Secretary  Baker.  I  think  you  are  perfectly  right  about  that;  and 
this  additional  statement  can  be  made  about  it:  Of  course  these  times 
are  abnormally  abnormal. 

Commissioner  Sweet.  Of  course. 

Secretary  Baker.  So  that  the  situation  now  is  that  the  company 
comes  to  the  council  and  frankly  says:  "These  are  completely  ab- 
normal times,  and  we  can  not  meet  them  at  all,  and  we  must  have  a 
new  arrangement  on  a  particular  point."  And  then  they  and  the 
council  try  to  work  it  out,  and  if  they  fail  to  work  it  out,  it  goes  to 
arbitrators  to  settle  the  question,  and  the  community  understands 
the  whole  thing. 

So  matter  what  conclusion  these  arbitrators  come  to — it  does  not 
make  any  difference  what  conclusion  they  come  to — their  arbitration 
will  be  open,  the  public  will  be  represented  by  suitably  instructed 
and  skilled  advocates,  the  company  will  be  represented  in  the  same 
way,  and  their  debate  and  the  presentation  of  evidence  will  all  be 
carried  in  the  newspapers ;  and  when  the  arbitrators  come  to  decide 
that  question,  the  people  of  Cleveland  will  be  just  as  able  to  decide  it 
as  they  are,  and  it  is  a  10-to-l  shot  that  the  people  will  have  decided 
it  as  the  arbitrators  do  when  they  get  through.  It  will  be  perfectly 
understood  and  accepted;  and  instead  of  being  an  acrimonious  and 
hostile  controversy  between  the  company  and  the  city,  the  ordinance 
provides  a  way  of  settlement  which  is  sure  to  be  mutually  acceptable. 
The  Chairman.  Is  it  your  experience,  Mr.  Secretary,  that  the  re- 
sults of  the  arbitration  are  popularly  accepted? 

Secretary  Baker.  Entirely  so.  There  has  been  a  little  f retf ulness 
about  it.  I  represented  the  city  when  I  was  mayor,  having  been  city 
solicitor  and  having  drawn  the  ordinance  substantially  as  it  now  is. 
I  represented  the  city  personally  at  the  council  table  in  the  one  arbi- 
tration that  took  place  while  I  was  mayor;  and  the  newspapers  with 
a  gala  spirit  made  some  jests  at  the  expense  of  the  arbitration ;  but 
when  they  got  through  with  it  the  public  always  accepted  it  without 
hesitation. 

I  think  I  have  covered  the  Cleveland  situation,  unless  there  is 
some  detail  of  it  that  you  want  to  know  about. 

The  Chairman.  Have  you  any  other  suggestions  to  make,  Mr. 
Secretary,  upon  the  general  problems  before  we  take  up  the  question 
of  cross-examination? 

You  understand  why  this  commission  has  been  appointed  ? 

Secretary  Baker.  Yes;  I  know  why  this  commission  has  been 
appointed. 

Of  course  tlie  street-railroad  problem  is  essentially  a  local  problem. 
I  do  not  know  what  the  National  Government  can  do,  either  by  way 
of  advice— and  certainly  that  is  the  only  thing  it  can  do— or  in  any 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION".   1007 

other  way.    The  fact  is  that  medicine  for  one  community  would  be 
poison  for  another  in  this  business. 

It  would  be  a  very  great  mistake  to  have  municipal  ownership  or 
public  control,  according  to  the  Cleveland  plan,  either  one,  in  a  com- 
munity which  did  not  want  it  and  did  not  understand  it. 

The  street  railroad  problem,  more  than  any  I  know,  illustrates  the 
truth  of  the  general  theory  that  the  degree  of  civilizatiopi  of  any  com- 
munity is  shown  by  its  capacity  for  cooperation.  And  cooperation 
does  not  mean  an  impulsive,  concerted  action  for  a  moment,  but  it 
means  continuous  cooperation.  You  see  a  lot  of  children  out  in  an 
orchard,  and  they  decide  that  they  want  to  get  a  particular  apple  out 
of  the  tree.  They  all  get  together  until  they  get  the  apple.  As  soon 
as  they  get  the  apple  they  fall  out  and  quarrel  about  the  division  of  it. 
True  cooperation  means  the  capacity  to  cooperate  until  they  get  the 
apple  and  through  the  long-drawn-out  judicial  process  of  its  subdi- 
vision and  enjoyment. 

If  a  community  reaches  the  state  of  mind  where  it  understands 
how  it  wants  to  control  a  street  railroad,  and  is  willing  to  be  patient 
and  to  endure  through  the  difficult  problem  of  its  reorganization  and 
management,  that  community  has  reached  the  place  where  public 
control,  whether  in  the  form  of  ownership  or  of  public  control  ac- 
cording to  the  Cleveland  plan,  is  acceptable.  But  if  the  people  are 
going  to  take  the  street  railroad  over  for  public  management  be- 
cause they  are  mad  at  the  street  railroad,  and  then  get  mad  at  them- 
selves for  having  taken  it  over,  as  soon  as  they  do  it,  then  that  form 
of  management  would  not  be  a  success,  of  course. 

So  that,  to  sum  up  what  I  think  about  it :  The  solution  of  a  street 
railroad  problem  is  essentially  a  question  of  popular  education.  It 
must  be  made  satisfactory  to  the  people  of  a  community  in  order 
to  be  a  permanent  or  valuable  settlement. 

I  think  the  Cleveland  plan  is  the  best  I  know  of  anywhere  in  the 
world  so  far.  It  has  some  defects  which  can  be  modified  out  of  it; 
but  I  think  it  is  the  best  I  know,  and  chiefly  for  the  reason  that  it 
was  understood  in  its  makings  and  it  is  understood  in  its  operation, 
and  is  controlled  by  the  people  whom  it  serves.  I  think  the  proof 
of  its  excellence  lies  in  the  fact  that  the  stock  of  that  company, 
while  it  has  been  a  point  or  two  below  par,  has  for  all  these  years 
been  almost  as  steady  as  a  rock,  and  none  of  the  disturbances  of 
materials  and  markets  and  wages  and  all  the  other  things  which 
have  beset  street  railroad  operations  in  this  country  generally  have 
had  any  marked  effect  upon  the  Cleveland  street-railroad  properties 
since  this  settlement  went  into  effect. 

I  think  that  is  the  only  general  observation  I  care  to  make. 

The  Chairman.  Primarily,  the  agitation  in  Cleveland  was  for  a 
consolidation  of  the  plants  into  one,  was  it  not? 

Secretary  Baker.  No;  I  would  not  say  that,  Mr.  Chairman.  I 
think  not,  sir.    They  were  practically  all  consolidated  into  one. 

The  primary  thing  in  Cleveland  was  the  management  of  the  serv- 
ice by  the  people  who  were  to  be  served,  so  that  they  could  tell  how 
many  cars  to  run.  The  council  in  the  city  of  Cleveland  makes  the 
schedule.  It  tells  the  management :  "  You  must  run  cars  on  a  two- 
minute  headway  at  certain  hours  of  the  day  on  such  and  such  lines, 
and  ^ou  must  cut  that  line  here  and  turn  it  out  and  run  it  another 
way. '    The  whole  control  of  the  service,  the  kind  and  quality  of  the 


1008   PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

service,  is  determined  by  the  repiesentatives  of  the  people  in  the 

The  Chairman.  It  is  really  municipal  management  of  the  service' 
tli  „  l^'"^  Baker.  Almost  complete;  except  that  it  is  done  through 
the  agency  of  a  private  corporation  which  owns  the  proiLrty  bf.t 
regnhSon^  ^"^  ^°'  management  by  complying  wi?h  t^e  public 

The  Chairman.  There  has  been  a  great  deal  of  testimonv  Kc-a 
during  the  past  two  weeks  reciting  the  difficulty  of  these  3  roil 
way  interests  all  over  the  United"^  States  in  meeting  o^^^^^^^^^ 
pcnses  on  a  5  or  6  cent  fare.    What  is  there  about  th^  Clevfland 

T^^TJdte^'TJY  rri^'  *»  <'?«'•«*«  °"  a  S^c^nt  schedule 
to  aay  and  meet  all  of  its  fixed  charges  and  operating  costs' 

In?hrfi'rs7pfartW^^"V*^'^^  ^'^JT  '^^^^"^  *«  me^attt  outset, 
talizflhnn      T..'        <=»P'talization  of  that  company  is  a  sound  capi- 
talization.   It    i-ei)resents    approximately    its    physical    valuation 
There  is  no  franchise  value  left  in  it,  or  very  littV    Thev  dW  cani " 

vt'mSirt'&frt'".  ?'"^  ^*  the^ime  the  cololidaTon 
to  d^nnnp«r  «.  ^.if  J'l*,"''''^'^  ''  '"  «  ^*>^  *'»«*  ""o'^s  it  gradually 
chii  vaCf;  if  "?1  ^^'^""^  ''  ^^''y  ""'«  capitalization  of  fran- 
f  n.r  2ih  .'*'  ""**  the  monev  upon  which  they  have  to  pay  a  re- 
tuin,  or  the  value  upon  which  they  have  to  pay  a  return,  is  the  vake 
of  the  physical  property;  which  is  a  very  exceptional  situation     I  do 

ird%\2irjnrttiig^"^-^^''  ^»  -'^^•^  ^^'^  ^^  ^^^clt 

ww*^T*°  meet  that  growth  solely  in  the  interest  of  ^rvice 
fw!!n  ""T  \^  *^**  "I  ^•''^=  '^I'ere  has  been  no  crmpetttion  be- 
tween competing  lines,  and  there  has  been  no  building  for  swculati™ 
purposes.  When  you  have  a  privately  owned  street  raCd  it 
sometimes  happens-I  do  not  mean  that  this  is  the  usual  thine  but  t 
sometimes  happens-that  the  persons  who  manage  thrraHfoadVo 
out  and  buy  large  farms  in  the  suburbs,  and  then  thev  extend  thp^r 
rai  road  out  to  their  farms  and  sell  the  farms  cut  up^into  building 
lots,  and  they  operate  the  street  railroad  as  a  feeder  to  a  rea"-estatf 
venture.  That  has  not  happened  in  Cleveland,  because  the  ^ppp? 
railroad  is  operated  in  the  interest  of  the  people',  and  U  has  hid  no 
heavy  los^s  in  long  hauls  to  spai-sely  settled  communities  for  thp 
purpo.se  of  aidmg  real-estate  speculation.  ThatTa  thiiShich  hat 
happened  in  a  great  many  street-railroad  enterprises,  a^d  ft  has  S 

LT&l^^n^Srl  iongS  '"""^  ''''-'  "^^^  ''^  -"«-"' 
on'^i^evenTeh"^'  undoubtedly  helped  somewhat  to  keep  Cleveland 
In  addition  to  that,  the  equipment  in  Cleveland  of  the  street  rail 

are  W^^  ^Tl''''^  T^'Z  f^^  ^^^^''^  g^^^^«'  ^"^  the  cars 

are  large— very  Jaige.     The  cost  of  transportation  in  Cleveland    I 

should  say  under  normal  conditions,  is  lower  tLn^n  almost  anv 
other  city  of  the  country ;  certainly  lower  than  any  other  dty  of  i^U 
size  with  which  I  am  acquainted.  ^ 

densh^lf^^^  l^^^'^"  ^^"^^  ^"^>;*^^"fe  '-^^"t  «^e  relative 

aensity  of  traffic  m  Cleveland  as  compared  with  other  cities?     Is 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   1009 

it  not  true  that  the  passengers  per  car-mile  in  Cleveland  are  very 
substantially  greater  than  in  most  American  cities? 

Secretary  Baker.  Oh,  very  much  ^eater.  But  that  would  be  a 
misleading  datum  unless  you  realized  the  size  of  the  oars  in  Cleve- 
land. I  think  the  size  of  the  cars  in  Cleveland  must  be  twice  as  great 
as  the  size  of  the  cars  in  Pittsburgh,  for  instance.  I  am  speaking 
now  from  superficial  observation. 

Of  course  the  car-mile  density  of  the  passenger  traffic  with  the 
little  car  and  the  big  car  would  be  a  very  misleading  thing  to  estimate. 

The  Chairman.  Have  you  had  many  lines  that  extend  out  into 
unprofitable  territory? 

Secretary  Baker.  Very  little,  I  think. 

The  Chairman.  Do  you  suffer  from  jitney  competition?  Have 
the  Cleveland  lines  suffered  from  jitney  competition? 

Secretary  Baker.  Oh,  no. 

The  Chairman.  They  had  the  same  difficulties  from  the  auto- 
mobile competition  there  as  in  other  places,  of  course  ? 

Secretary  Baker.  Undoubtedl3^ 

The  Chairman.  And  that  is  a  gi^owing  condition? 

Secretary  Baker.  Jitney  lines  have  started  in  Cleveland,  but 
never  got  anywhere.    The  distances  are  too  great. 

The  Chairman.  I  presume,  in  view  of  the  contract  that  exists,  the 
municipal  authorities  as  well  as  the  public  would  not  encourage  the 
use  of  jitney  service? 

Secretary  Baker.  No  ;  I  do  not  think  so.  I  think  the  public  at- 
titude would  be  that  they  would  give  the  jitneys  a  chance  to  show 
that  they  were  better  than  the  street  cars,  and  if  they  were  they 
could  live.     They  would  give  them  a  fair  show. 

The  Chairman.  Then  is  the  first  fundamental  proposition  in  all 
street-car  questions  that  we  must  know  what  the  true  value  of  the 
property  is? 

Secretary  Baker.  Absolutely.     Absolutely  and  fundamentally. 

The  Chairman.  That  precludes  overcapitalization  and  inspires 
confidence  by  the  public  in  the  integrity  of  the  plan  ? 

Secretary  Baker.  Exactly. 

The  Chairman.  Was  that  valuation  in  Cleveland  made  by  the 
State  or  by  experts  selected  by  the  city  as  w^ell  as  the  company? 

Secretary  Baker.  It  was  made  by  experts  selected  bv  the  city  and 
the  company,  and  they  worked  in  pairs.  The  city  had  a  trackman 
and  the  railroad  had  a  trackman.  The  city  had  a  carman  and  the 
railroad  had  a  carman,  and  so  on  with  the  power-house  men,  etc.; 
and  they  worked  in  pairs.  Whenever  they  agreed,  their  agreement 
was  reported  to  Mr.  Goff  and  Mr.  Johnson,  and  I  do  not  recall  a 
single  instance  in  which  they  rejected  an  agreement  of  the  two 
valuers. 

Wliere  there  was  disagreement,  Mr,  Goff  and  Mr.  Johnson  settled 
the  disagreement  in  a  public  hearing. 

The  Chairman.  Do  you  think  that  method  of  valuation  is  as  sat- 
isfactory as  to  have  it  done  by  a  Stat<i  commission  ? 

Secretary  Baker.  That  is  two  questions  in  one.     There  are  some 

State  commissions  that  would  do  it  very  well ;  there  are  some  State 

commissions  that  would  do  it  very  badly,  and  there  are  some  that 

would  never  get  done.     I  made  a  calculation  as  to  how   long  it 

100643"— 20— VOL  2 2 


1010   PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION-. 

would  take  the  State  Commission  of  the  State  of  Ohio  to  reach  a 
case  mvolvmg  an  electric-light  controversy  which  I  had  sent  down 
theie,  and  it  was  something  like  140  years  before  they  could  ffet  to  it 
The  Chairman.  But  if  the  State  commissions  had  their  organiza- 
tions so  perfected  that  they  could  expeditiously  value  the  physical 
propertyof  tlie  street-car  company,  do  you  think  it  would  be  prefer- 

Secretary  Baker.  I  do  not  think  it  would  be  nearly  so  good  as  tli/ 
system  we  have.  J       b 

The  Chairman.  Wliy? 

Secretary  Baker.  As  I  said  a  moment  ago,  the  street  railroad  is 
the  most  intimate  service  the  people  have  in  a  city.  I  think  it  is  so 
intimate  that  they  regard  it  as  their  own,  as  distinguished  from  anv 
fetate  interests.  I  am  inclined  to  think  that  there  is  a  strong  likeli- 
hood that  a  greater  degree  of  confidence  is  inspired  when  the  city 
Itself  does  it  than  when  the  State  does  it. 

The  Chairman.  Do  you  feel  that  the  value  that  was  established  in 
Cleveland  is  fairly  representative  of  the  true  value  of  the  property « 

hecreiaiy  Baker.  Of  that  property  ?  f    f      j  • 

The  Chairman.  Yes. 

Secretary  Baker.  Very  accurately;  very  closely.  As  a  matter  of 
faxjt,  there  are  two  or  three  it»ms  of  half  a  dozen  million  dollars  in 
there  which  should  never  have  been  put  in  thei-e,  in  my  judgment ;  but 

«^  oni'''//>5''r'''  ^iT^v!^^-  For.  instance,  Judge  Taylt  allowed, 
^  .w'^^^u^  '^""^  '^^'':^  brought  his  valuation  up  from  50  to  55- 
it  that  is  the  change  which  was  made— he  allowed  the  value  of  some 
paving  which  the  company  had  done  in  return  for  the  grants  which 
were  given  it.  I  do  not  believe  paving  was  ever  an  investment  value 
of  a  stTeet  railroad  m  Ohio.  I  think  it  was  a  concession  made  to 
the  public  for  the  grant,  but  I  do  not  think  it  was  a  capital  invest- 
ment or  should  ever  have  been  so  regarded. 

The  ChairxMan.  Does  the  valuation  by  the  municipahty  in  that 
way  present  the  opportunity  for  municipal  corruption « 

Secretary  Baker.  In  the  valuation? 
.Ju^  Chairman.  Yes;  the  company  has  something  to  sell  the  city, 
as  it  ^n''  et  iti  ^^^^^^^^^  '"^  ^^'"^"'^  ^^®  ^^^"^  "P^*^  ^  hig^i  a  basis 

Secretary  Baker.  Oh  yes.  It  does  present  it;  but  it  presents  it 
no  more  than  it  does  when  the  valuation  is  to  be  made  by  a  State 
commission.  -^       ^^ai^Kj 

The  Chairman.  Have  you  ever  heard  of  any  State  commission 
that  was  subject  to  an  influence  of  that  kind « 

Secretary  Baker.  1  never  heard  of  it;  but  they  are  all  human  be- 
ings— they  are  all  men.  If  a  company  were  to  start  out  to  corrupt 
a  judge  who  was  judging  its  property,  it  would  not,  in  my  opinion, 
nmke  very  much  difference  whether  Ke  was  a  State  or  a  inunicipa 
otheer.  That  work  can  only  succeed  when  it  is  done  by  men  of  the 
highest  character  and  capacity,  of  course. 

The  Chairman.  What  is  the  real  difference  between  the  Cleveland 
Pi.  /^"i  •"'V'JT^^  «^«ership  and  operation?  I  understand  what 
the  technical  difference  is,  but  in  its  broad  aspect  as  to  service  and 
efficiency  and  rates,  what  is  the  difference  f 


PROCEEDINGS  OF  FEDEEAL  ELECTRIC  RAILWAYS  COM^VOSSION.   1011 

Secretary  Baker.  I  do  not  think  there  is  any  very  substantial 
difference.  I  think  that  all  of  the  operating  advantages  of  munici- 
pal ownership  are  gotten  by  that  plan.  •    ^.        a 

Mr.  Warren.  There  is  no  recourse  to  the  tax  levy,  is  there? 

Secretary  Baker.  None. 

The  Chairman.  There  is  no  tax  levy  I 

Mr  Warren.  I  say  there  is  no  recourse  to  the  tax  levy. 

Secretary  Baker.  If  there  is  a  deficiency  of  earning,  there  is  no 
way  to  make  the  taxpayers  pay  it.  .  .     ,  ^  •      .i. 

Commissioner   Sweet.    And   under   municipal  ownership    there 

would  be? 

Secretary  Baker.  Undoubtedly. 

The  Chairman.  From  your  study  of  the  street  railway  questions, 
do  you  feel  that  the  Cleveland  plan  could  be  safely  adopted  in  many 
of  the  communities  of  the  country  ? 

Secretary  Baker.  In  such  communities  of  the  country  as  were 
ready  to  study  it  and  understand  it  and  give  it  their  real  approval, 
it  would  be  a  very  great  advantage ;  but  any  momentary  fascination 
with  the  Cleveland  plan  which  led  to  its  adoption  without  a  funda- 
mental appreciation  of  it  and  determination  to  ^and  by  it  and  see  it 
work  would,  of  course,  be  unadvisable. 

The  Chairman.  Has  the  service  in  your  city  been  better  since 
the  contract  was  made  than  it  was  before  ? 

Secretary  Baker.  Very  much  better;  but  that  would  be  mislead- 
ing, because  we  were  in  a  state  of  war  before,  and  the  companies 
were  not  giving  as  good  service  as  they  would  have  given  if  they 
had  been  operating  under  long-term  grants  which  gave  them  an  as- 
sured tenure. 

The  Chairman.  Is  the  penny  transfer  satisfactory  to  the  people? 

Secretary  Baker.  Perfectly. 

The  Chairman.  Does  not  that  make  for  discriminations  between 
employees  and  others  traveling  the  same  distance  to  their  business? 

Secretary  Baker.  There  is  a  discrimination,  of  course,  but  it  is  a 
sound  discrimination.  The  company  performs  an  extra  service  for 
the  man  who  rides  on  two  of  its  cars  rather  than  on  one.  It  stops 
for  him  twice  instead  of  once-  It  identifies  him  twice  instead  of 
once.  All  of  its  accident  hazards  are  multiplied  by  his  being  on  the 
cars  twice  instead  of  once.  It  provides  extra  service  for  him,  for 
which  he  ought  to  pay. 

The  Chairman.  I  presume  that  question  has  been  largely  debated 
and  discussed  in  Cleveland? 

Secretary  Baker.  Oh  yes.  It  is  a  perfectly  popular  thing  to 
charge  for  the  transfer, 

Mr.  Warren.  Are  most  of  your  lines  radial,  as  a  matter  of  fact, 
so  that  if  a  person  uses  a  transfer  it  is  ordinarily  giving  him  the 
benefit  of  two  rides  ? 

Secretary  Baker.  You  mean  a  round-trip? 

Mr.  Warren.  No;  but  he  goes  to  the  center,  and  there  uses  the 
transfer  to  go  out  from  the  center. 

Secretary  Baker.  A  very  great  deal  of  transferring  is  done  at 
ihe  center.  There  is  a  center  in  Cleveland,  known  as  the  Public 
Square.  Most  of  the  long  radial  lines  reach  the  square;  but  that 
system  of  radial  lines  is  intercepted  by  three  or  four  cross-town 


1012    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

lines  which  circle  like  belt  lines,  and  transfers  are  given  on  all  of 
those. 

Mr.  Warren.  But  the  discrimination  between  the  transfer  and 
nontransfer  passenger  does  not  exist  as  markedly  as  it  would  in  the 
case  of  some  cities  where  some  of  the  lines  run  through  from  one  side 
to  the  other  of  the  city,  so  that  the  passenger  makes  his  complete  ride 
on  one  car,  while  other  lines  run  to  a  center  and  stop,  and  a  pas- 
senger wishing  to  go  across  in  that  direction  would  have  to  use 
two  cars  ? 

Secretary  Baker.  I  realize  what  you  mean.  I  could  not  answer 
3'ou  as  to  what  the  present  situation  is.  The  routes  are  changed 
very  often.  At  the  time  of  the  consolidation  most  of  the  lines  ran 
clear  through  from  the  east  side  to  the  west  side;  an  east-side  line  and 
a  west-side  line  had  been  joined,  and  ran  clear  through,  and  they 
were  broken  at  the  square,  and  required  a  transfer  in  the  center  of 
town.  I  should  say  perhaps  the  majority  of  the  lines  now  require 
the  transfer  in  the  center. 

Mr.  Warren.  To  get  across? 

Secretary  Baker.  Yes. 

The  Chairman.  Do  your  Cleveland  lines  extend  beyond  the  do- 
main of  the  city? 

Secretary  Baker.    Yes. 

The  Chairman.  Do  they  go  to  other  villages? 

Secretary  Baker.  Yes. 

The  Chairman.  Does  the  Cleveland  plan  extend  throughout  the 
whole  length  of  the  lines? 

Secretary  Baker.  No.  They  have  ordinances  in  those  villages  and 
operate  under  those  ordinances ;  but  their  ordinance  with  us  requires 
that  we  shall  accept  no  new  grant  or  no  renewal  of  existing  grants 
which  the  city  of  Cleveland  does  not  consent  to;  so  that  as  soon  as 
they  have  worked  out  their  relations  with  these  outlying  villages, 
they  can  accept  no  new  grant  which  will  impose  a  burden  upon  the 
city — and  most  of  them  do  impose  a  burden  upon  the  city. 

The  Chairman.  It  seems  the  same  corporation  may  have  different 
standards  of  service,  different  kinds  of  rates  and  different  kinds  of 
management  in  as  many  cities  as  it  may  be  operating  through? 

Secretary  Baker.  Not  in  Cleveland."^  It  might  if  there  were  any 
very  large  cities  near  by. 

The  city  of  Lakewood  on  the  west  side  is  a  city  of  perhaps  30,000, 
and  is  just  like  the  rest  of  Cleveland.  You  would  not  know  that  you 
were  going  out  of  one  place  and  into  another. 

On  the  east  side  of  the  city  is  East  Cleveland,  which  has  18,000 
or  19,000  people,  I  suppose.  Those  are  the  two  principal  ones.  The 
lines  which  operate  in  them  operate  under  franchises  which  were 
granted  long  prior  to  this  settlement.  But  it  is  the  same  kind  of 
service — the  same  cars,  the  same  frequency  of  schedule  is  maintained, 
for  the  most  part,  and  the  service  is  identical  in  everything  except 
fare. 

The  Chairman.  Do  you  believe  that  where  a  company  extends 
through  two  or  more  villages  and  also  out  into  suburban  territory 
that  it  would  produce  greater  harmony  and  more  uniform  service  if 
the  State  itself  fixed  the  rate  and  had  control  of  the  service? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1013 

Secretary  Baker.  No;  I  think  that  would  create  a  riot  in  Cleve- 
land ;  if  the  State  of  Ohio  undertook  to  fix  the  street  railroad  rate 
in  the  city  of  Cleveland,  I  think  it  would  create  a  riot. 

The  Chairman.  That  may  be  so  in  Cleveland,  because  the  question 
has  been  so  thoroughly  debated  there;  but  as  a  general  proposition, 
do  you  think  that  would  naturally  follow  ? 

Secretary  Baker.  No;  I  do  not  think  so,  as  a  general  proposition. 
I  think  as  a  general  proposition  the  State  commissions  have  won  tho^ 
confidence  of  the  communities,  and  they  are  adequately  manned  and 
officered  to  perform  their  duties  and  get  the  job  committed  to  them 
done  fairly  expeditiously.  Many  of  the  State  commissions  have  had 
on  them  men  of  very  high  character— statesmen.  A  great  many  of 
them  are  doubtless  known  to  you  as  they  are  to  me.  In  States  like 
that,  I  think  probably  the  State's  undertaking  to  adjust  would  be  ac- 
cepted by  the  public  generally.     It  would  not  in  Cleveland,  in  my 

judgment. 

The  Chairman.  Have  you  given — of  course,  you  have — considera- 
tion to  an  effort  to  secure  cooperative  regulation  between  the  cities 
and  the  States? 

Secretary  Baker.  No;  I  have  never  heard  of  that  suggestion. 
There  has  been  no  difficulty,  as  a  matter  of  fact,  in  Cleveland  with 
the  outlying  municipalities — no  serious  difficulty. 

The  Chairman.  It  has  been  suggested  from  some  sources  that  it 
might  be  a  good  plan  to  give  the  city  in  the  first  instance  the  right 
to  prescribe  rates  of  fare  and  also  service  regulations  and  extensions, 
subject  to  the  right  of  appeal  to  the  State  commission,  thus  appeal- 
ing to  another  technical,  scientific  body,  rather  than  to  a  court. 

Secretary  Baker.  I  should  be  very  much  opposed  to  that  for 
Cleveland. 

The  Chairman.  Why? 

Secretary  Baker.  Because  I  think  the  responsibility  for  the  man- 
agement of  its  own  affairs  is  the  greatest  educational  influence  that 
the  city  of  Cleveland  has ;  the  fact  that  the  people  of  that  city  have 
studied  and  grasped  and  solved  an  intricate  and  complicated  prob- 
lem like  the  street-railroad  problem  has  made  it  a  more  self-conscious 
and  a  stronger,  more  virile  people  than  they  were  before  that  prob- 
lem was  put  up  to  them;  and  I  should  be  very  sorry  indeed  to  see 
the  responsibility  for  the  management  of  their  own  affairs  in  as 
intimate  and  important  a  matter  as  street-railroad  service  taken 
away  and  transferred  to  a  State  agency. 

The  Chairman.  Would  it  be  taken  away  if  there  were  simply  a 
right  of  appeal  by  the  aggrieved  party  to  the  State  ? 

Secretary  Baker.  Oh  yes.  The  appeal  would  be  control.  Tlieir 
original  dealing  with  the  problem  would  not  even  make  a  prima 
facie  case. 

The  Chairman.  There  are  a  great  many  communities  that  have 
not  made  the  intensive  study  of  this  subject  that  you  have  at  Cleve- 
land? 

Secretary  Baker.  Certainly. 

The  Chairman.  And  they  are  perhaps  ill  qualified  to  meet  the 
problems  in  a  satisfactory  way.  Would  it  be  well  to  have  those 
people  depend  upon  the  State? 

Secretary  Baker.  Yes;  I  think  as  long  as  they  are  in  need  of  that 
sort  of  assistance  it  would  be  a  good  thing  for  the  State  to  give  it  to 


1014    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  OOMMISSIOK, 

them;  but  the  attitude  of  the  State  should  be  constantly  that  of 
education  for  self-help  rather  than  the  substitution  of  the  State 
agency  in  local  concerns. 

The  Chairman.  Then,  in  your  judgment,  the  street-railroad  prob- 
lem is  one  of 'purely  local  concern  and  there  should  be  different  con- 
ditions in  the  different  States? 

Secretary  Baker.  Yes.  I  can  imagine  the  cities  of  Cleveland  and 
Cincinnati  having  entirely  different  problems.  As  a  matter  of  fact 
they  do  have ;  vei-y  different. 

The  Chairman.  Do  you  think  it  is  possible,  Mr.  Secretary,  for  the 
country  to  adopt  some  general  franchise  scheme  which  will  operate 
generally  throughout  all  of  the  cities  and  villages? 

Secretary  Baker.  No;  I  do  not  tliink  so.  You  mean  a  kind  of  uni- 
form street-railroad  law,  to  be  recommended  to  the  various  cities? 

The  Chairman.  We  have  our  uniform  bill  of  lading,  we  have  uni- 
form demurrage,  we  have  uniformity  in  a  number  of  things.  Is  it 
not  possible  to  have  more  or  less  uniformity  in  the  street-railroad 
franchise  ? 

Secretary  Baker.  I  should  not  think  so. 

The  Chairman.  Might  there  not  be  as  to  the  length  of  the  fran- 
chise, for  example  ? 

Secretary  Baker.  I  do  not  see  what  business  it  is  of  the  State  of 
Wisconsin  what  the  length  of  the  franchise  is  in  Ohio. 

Tlie  Chairman.  Not  at  all.  That  is  true.  But  if  it  could  be  dem- 
onstrated that  an  indeterminate  permit  was  t3ie  most  satisfactory 
form  of  franchise,  could  not  that  be  accepted  throughout  the  coun- 
try? 

Secretary  Baker.  If  you  could  demonstrate  it ;  but  I  do  not  think 
it  is  susceptible  of  demonstration. 

The  Chairman.  If  it  could  be  shown  that  the  cost-of -service  plan, 
with  certain  modifications,  might  be  the  best  thing  for  the  community 
and  for  the  utility,  would  it  not  be  fair  to  make  that  recommendation 
to  the  public? 

Secretary  Baker.  Anything  that  you  can  demonstrate  to  be  bet- 
ter than  anything  else  that  has  been  suggested  would  be  wise  to 
recommend  for  universal  adoption;  but  those  demonstrations  are 
impossible,  in  my  opinion. 

The  Chairman.  Then  do  you  believe  that  this  commission  ought 
not  to  make  any  recommendation  as  to  franchise  conditions? 

Secretary  Baker.  I  do  not  want  to  be  put  in  the  position  of  sug- 
gesting what  this  commission  ought  to  do. 

The  Chairman.  We  are  asking  for  your  judgment. 

Secretary  Baker.  The  commission  will  undoubtedly  do  what  seems 
wise  to  it.  I  can  only  express  my  opinion.  I  would  not  under- 
take to  express  an  opinion  of  my  own  that  the  city  of  Red  Bank,  in 
South  Dakota — if  there  is  such  a  place — should  have  the  same 
length  of  franchise,  or  the  same  conditions  of  franchise,  as  the  city 
of  Chicago,  111. 

It  seems  to  me  the  problems  are  so  essentially  different  that  it 
would  be  quite  impossible  for  me'  to  put  them  in  the  same  category 
as  to  length  of  franchise. 

The  Chairman.  You  have  discussed  the  question  of  efficiency  of 
service  under  your  plan,  and  you  admitted  that  there  was  one  defect 
in  your  contract! 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1015 

Secretaiy  Baker.  I  think  there  are  a  good  many.    That  is  the 

chief  one.  ^  -  ^  -,  n    ^9 

The  Chairman.  That  was  the  chief  defect  i 

Secretary  Baker.  Yes.  , ,  1         ,  r       ' 

The  Chairman.  Do  you  believe  that  would  be  taken  care  of  en- 
tirely by  the  provision  which  you  suggested— of  having  a  reduced 
return  on  capital  as  the  rate  of  fare  goes  up? 

Secretary  Baker.  I  am  not  sure.  We  thought  about  that  a  very 
great  deal,  and  found  it  so  difficult  a  problem  that  we. left  it  un- 
solved, as  you  see.  ,  XT,    .        •    1.x  *  ff 

The  Chairman.  I  can  see  where  that  might  operate  very  effec- 
tively upon  the  owner  of  the  stock,  and  perhaps  the  officers  of  the 
corporation,  but  how  is  that  going  to  influence  at  all  the  conduct  of 

the  employees?  .  1        •       •      i  x 

Secretary  Baker.  I  do  not  know  that  it  can,  unless  it  stmiuiates 
in  the  management  a  cooperative  spirit  which  wiD  find  its  response 
in  the  operator. 

The  Chairman.    So  that  it  must  work  from  the  top  down? 

Seci-etary  Baker.  I  should  think  so. 

The  Chairman.  Is  there  any  wa^  that  you  can  work  out  a  plan 
by  which  you  can  get  the  real  initiative  and  efficiency  throughout 
the  whole  personnel  of  the  company? 

Secretary  Baker.  I  have  no  plan  in  my  mind. 

The  Chairman.  There  has  been  a  good  deal  of  discussion  of  late 
about  the  Plumb  plan.     Are  you  familiar  with  that? 

Secretary  Baker.  I  have  read  about  it  in  the  newspapers.  That 
is  all. 

The  Chairman.  Would  that  apply  in  the  city  of  Cleveland? 

Secretary  Baker.  I  do  not  know  that  I  know  the  Plumb  plan  well 
enough  to  express  any  judgment  about  it.  In  effect,  what  you  are 
asking  me  is  whether  I  think  the  operatives  would  be  stimulated  to 
greater  zeal  and  activity  if  they  were  represented  in  the  manage- 
ment.   That  is,  in  effect,  what  you  are  asking  ? 

The  Chairman.  Yes. 

Secretary  Baker.  I  can  imagine  that  being  a  very  effective  way 
of  producing  cooperation  on  the  part  of  the  worker.  I  can  see  no 
insuperable  objection  to  it  in  the  Cleveland  contract.  That  is,  it 
might  very  well  be  a  wise  addition  to  make  to  that  ordinance. 

The  Chairman.  At  the  present  time,  of  course,  the  officers  of  the 
company  are  selected  by  the  stockholders;  are  they  not? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  You  are  certainly  familiar  with  the  general 
street-railway  situation  throughout  the  United  States,  I  have  no 
doubt;  are  you  not,  Mr.  Secretary? 

Secretary  Baker.  I  used  to  be. 

Commissioner  Sweet.  Now,  at  the  present  time  you  know  that 
their  incomes  are  not  sufficient,  as  a  general  rule,  to  pay  their  ex- 
penses— even  their  operating  expenses? 

Secretary  Baker.  Undoubtedly,  that  is  true. 

Commissioner  Sweet.  You  are  aware  of  the  fact  that  labor,  which 
constitutes  over  50  per  cent,  I  think,  as  a  general  rule,  of  the  expenses 
of  the  street-railroad  company,  is  demanding  and  receiving  very 
high  wages — very  much  higher  than  in  normal  times,  at  least  double 
in  some  cases,  and  in  some  cases  more  than  double;  and  that  all  ma- 


1016    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION; 

terials  that  go  into  the  equipment  of  a  street  railroad  are  exceedingly 
expensive  as  compared  with  prewar  prices?  You  know  that;  do 
you  not? 

Secretary  Bakek.  Wr. 

Commissioner  Sweet.  And  you  know  that  the  nickel  of  to-dav  has 
not  the  purchasmg  power  of  the  nickel  of  four  or  five  years  a 'vo: 
do  you  not  ?  J  ^   ^ 

Secretary  Baker.  Certainly. 

Commissionev  Sweet.  And  that  that,  in  itself,  aside  from  news- 
paper reports,  or  what  vou  might  hear,  or  the  testimony  of  street- 
railroad  men,  would  lead  you,  with  your  knowledge  of  that  business, 
or  any  other  business,  to  look  for  trouble;  would  it  not? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  You  would  wonder  how  a  conceni,  how  an 
enterprise  or  an  industry  could  live,  paying  such  tremendous  ex- 
penses, and  with  no  ability  on  its  own  part  to  materially  i'lcrease 
its  income? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  You  made  a  very  careful  study  of  this  situa- 
tion, as  the  solicitor  of  the  city  of  Cleveland;  did  you  not? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  You  have  given  Tom  Johnson  the  credit 
of  the  so-called  Cleveland  plan,  if  I  understand  you  right? 

Secretary  Baker.  Entirely. 

Commissioner  Sweet.  But  I  understand  that  you  were  quite 
closely  associated  with  him  in  working  out  the  details  of  that  plan ; 
were  you  not  ? 

Secretary  Baker.  Our  association  was  very  intimate  and  constant. 

Commissioner  Sweet.  Is  there  any  one  living  now,  Mr.  Secretary' 
who  was  closer  to  Tom  Johnson  or  had  more  to  do  with  him  in 
working  out  this  plan  than  you  had  ? 

Secretary  Baker.  I  think  not. 

Commissioner  Sweet.  Then  of  all  living  persons  you  probably 
can  give  us  at  least  as  much  information  as  anv  one  on  tJie  subject 
of  the  Cleveland  plan? 

Secretary  Baker.  I  think  I  could. 

Commissioner  Sweet.  And  what  you  have  given  us,  what  you  have 
said  about  it,  has  certainly  been  very  interesting;  and  as  a  Federal 
official  at  the  present  time,  and  interested,  as  I  think  you  always  have 
been,  in  the  general  welfare  of  the  country,  is  there  not  some  way  in 
which,  in  your  mind,  the  cities  of  the  country  that  are  now  strug- 
gling with  this  problem  and  are  face-to-face  with  perhaps  the  loss 
of  street-railway  service,  or  receiverships  or  bankruptcy,  if  vou 
please— can  you  not  suggest  some  way,  as  the  result  of  your  interest 
and  study  of  this  subject  in  Cleveland,  by  which  the  cities  in  general 
could  be  helped  in  solving  this  problem? 

Secretary  Baker.  Well,  so  far  as  my  own  experience  is  concerned 
Mr.  Sweet,  I  think  that  the  only  solution  that  will  be  permanently 
helpful  will  be  one  which  the  cities  will  work  out  with  the  com- 
panies themselves. 

If  I  were  asked  to  advise  Philadelphia  or  Pittsburgh  or  Chicao-o  or 
New  lork  or  any  other  city  about  the  solution  of  its  street-raihoad 
problem  I  would  say,  "  Get  the  council  and  the  board  of  directors  in 
the  same  room,  with  all  the  facts  and  all  the  figures,  and  let  evcry- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1017 

body  in  the  community  understand  what  they  are."  I  believe  that 
any  community  in  America  will  pay  cheerfully  and  willingly  what- 
ever rate  of  fare  is  necessary  to  carry  people  on  their  street  railroads 
and  to  maintain  good  service  in  their  communities,  if  they  are  sure 
that  they  are  paying  only  proper  operating  expenses,  proper  main- 
tenance and  a  proper  return  on  capital.  As  soon  as  they  are  sure  of 
that,  I  believe  that  any  community  in  America  will  pay  whatever 
rate  of  fare  is  necessary. 

Commissioner  Sweet.  You  lay  great  stress  upon  the  education 

of  the  people? 

Secretary  Baker.  Undoubtedly,  sir. 

Commissioner  Sweet.  As  a  result  of  the  conditions  that  have  ob- 
tained through  Cleveland,  by  referendum  votes  and  speeches  and 
talks  and  newspaper  articles  and  various  means  of  education,  the 
])eople  have  been  thoroughly  interested  in  the  subject  and  have  be- 
come well  informed  on  the  subject  ? 

Secretary  Baker.  Yes.  ^i    i.\f 

Commissioner  Sweet.  Is  there  not  some  way  we  can  do  that  for 
all  the  cities  of  the  country,  or  for  most  of  them? 

Secretary  Baker.  Of  course  that  is  the  answer. 

Mr.  Frank  Walsh,  of  Kansas  City,  came  to  see  me  once  when  I  was 
city  solicitor  of  Cleveland,  and  said  that  Mr.  Johnson  had  sent  him 
to  me  to  learn  something  about  our  Cleveland  street-railroad  situa- 
tion. 

I  said  to  him,  "  I  am  going  to  court  at  this  moment,  and  I  can  not 
see  you  until  I  get  back;  but  if,  in  the  meantime,  you  will  go  down 
to  tiie  Public  Square  and  pick  out  the  most  unlikely  looking  citizen  on 
a  bench  there,  and  ask  him  about  it,  and  then  come  back  to  me  after 
that,  I  will  tell  you  what  he  has  not  told  you." 

When  I  got  back  from  court,  Mr.  Walsh  came  in  and  said :  "  I 
don't  think  there  is  anything  you  can  add  to  what  he  has  told  me.  I 
picked  up  a  fellow  with  a  broken  hat  and  worn-out  looking  shoes  and 
of  a  generally  unpromising  aspect  and  asked  him  about  the  Cleve- 
land street-railroad  situation,  and  he  told  me  its  history  from  the 
beginning  until  now.  I  even  know  the  nicknames  by  which  the  of- 
ficers of  the  companies  are  called." 

He  said  that  he  thought  I  could  add  nothing  to  the  information 
that  had  been  given  to  him ;  that  that  man  was  able  to  discuss  even 
the  legal  questions,  and  what  the  courts  had  decided  in  the  51  injunc- 
tion suits. 

Commissioner  Sweet.  That  was  simply  because,  starting  in  a  fight 

•  that  interested  the  people,  and  progressing  along  with  referendum 

votes  that  the  people  had  to  express  themselves  on,  and  the  various 

steps,  the  people  had  become  thoroughly  familiar  with  all  angles  of 

the  subject  ? 

Secretary  Baker.  Yes.  Mr.  Johnson  had  a  circus  tent — two  of 
them,  in  fact— and  he  used  to  take  this  tent  around  over  the  city 
and  put  it  on  vacant  lots,  and  Peter  Witt,  who  is  now  a  street- 
railroad  expert,  had  to  make  a  speech  about  40  minutes  long  on  the 
general  problem  of  street  railroads  and  then,  as  city  solicitor,  I 
spoke  generally  about  an  hour,  discussing  the  legal  aspects  of  it,  and 
the  latest  decisions  of  the  courts,  as  to  why  the  courts  decided  it 
that  way,  and  what  our  adversaries  said  and  what  we  said  on  the 
legal  questions,  and  then  Mr.  Johnson  would  end  with  about  30 


1018    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

minutes  answering  questions  from  anybody  on  any  subject — whether 
on  the  subject  of  street  railroads,  or  not;  any  question  that  anybody 
wanted  to  ask  him. 

That  went  on  for  weeks,  and  months,  and  years,  and  as  a  conse- 
quence everybody  in  Cleveland  went,  and  became  familiar  with  these 
matters.  The  women  went  with  their  baby  coaches  and  pushed  them 
up  in  the  vacant  space  in  front  of  the  platform  and  left  the  baby 
theie  while  they  sat  back  and  asked  Tom  questions. 

Commissioner  Sweet.  That  kind  of  an  educational  campaign 
would  hardly  be  practicable,  of  course,  but 

Secretary  Baker.  I  do  not  thmk  we  could  inaugurate  that. 

Commissioner  Sweet.  That  could  not  be  done  to  meet  the  present 
situation  ? 

Secretary  Baker.  No,  I  think  not. 

Commissioner  Sweet.  But  the  publicity  which  you  have  referred 
to,  it  seems  to  me,  is  one  feature  of  the  case  that  can  be  imme- 
diately met. 

Secretary  Baker.  I  think  it  can.  I  think  your  commission,  for 
instance — and  I  speak  with  very  gi*eat  deference;  but  the  chairman 
asked  me  a  question  and  you  have  repeated  it  in  another  form — I 
think  your  commission  could  serve  a  very  useful  purpose  by  saying, 
so  that  everybody  might  understand  it,  that  the  problem  of  the  street 
railroad  is  a  problem  of  justice  to  two  interests:  The  owners  of 
the  property  and  the  public  whom  it  serves — the  owners  and  opera- 
tives of  the  proi)erty  and  the  public  whom  it  serves;  that  justice  can 
not  be  done  by  haphazard,  but  must  be  done  on  ascertainment  of  the 
facts,  and  if  any  city  has  a  problem  affecting  its  street  railroad,  if 
it  will  sit  down  judicially  and  learn  all  the  facts  to  start  with,  it  will 
have  the  very  best  start  possible  toward  ascertaining  a  solution  of 
the  problem. 

Commissioner  Sweet.  Then,  I  judge,  you  think  that  the  first  step 
for  a  street-railroad  company  that  is  facing  bankruptcy  or  a  receiver- 
ship would  be  to  la}^  its  cards  down  face  up  on  the  table? 

Secretarjr  Baker.  Surely. 

Commissioner  Sweet.  And  invite  inspection  by  the  public? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  And  through  the  newspapers  and  perhaps 
public  meetings  and  in  every  way  possible  to  bring  the  public  in  that 
community  to  a  realizing  sense  of  the  fact  that  nothing  is  being  held 

back? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  And  that  everything  is  aboveboard  and 
that  the  interest  of  the  public  at  least  equally  with  the  interest  of  the 
stockholders  of  the  company  is  involved  ? 

Secretary  Baker.  Exactly. 

Commissioner  Sweet.  Because  if  nothing  is  done,  they  are  not  go- 
ing to  have  the  facilities  of  the  street  railroads;  which  would,  of 
course,  be  a  disaster  in  every  community. 

Secretary  Baker.  Yes.  I  have  in  mind  a  street-railroad  situation 
in  which  the  receipts  of  the  company  are  not  equal  to  their  operating 
expenses,  leaving  nothing  for  interest  on  their  bonds  or  dividends  on 
their  capital. 

Commissioner  Sweet.  I  think  there  are  a  great  many  such  in- 
stances as  that. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1019 

Secretary  Baker.  Of  course,  no  community,  if  it  understood  that 
situation,  would  be  willing  to  have  it  so. 

Commissioner  Sweet.  Of  course  not. 

Secretary  Baker.  All  that  is  necessary  for  that  company  to  do  is  to 
carry  its  case  to  the  people.  The  council  will  not  deal  with  it  unless 
the  people  are  back  of  them. 

The  Chairman.  Apply  that  thought  of  yours  to  the  Boston  situa- 
tion. They  have  raised  fares  to  10  cents,  and  people  are  not  riding, 
and  Gov.  Foss  has  stated  that  they  are  running  short  $4,000  a  day. 
Evidently  the  people  are  not  willing  to  pay  10  cents  to  ride,  and 
therefore  the  company  is  losing  money. 

Secretary  Baker.  They  have  gone  beyond  the  point  of  maximum 

return. 

The  Chairman.  What  is  the  solution  there? 

Secretary  Baker.  I  do  not  know  the  Boston  situation.  I  do  not 
know  the  Boston  situation  w^ell  enough  to  answer  that  question. 
They  have  in  Boston  a  lot  of  terminal  subways  that  have  added  very 
greatly  to  the  cost;  have  they  not? 

Commissioner  Sweet.  Yes;  that  is  one  trouble.  But,  Mr.  Secre- 
tary, this  idea  suggested  by  the  chairman,  of  maximum  income, 
which  is  not  necessarily  the  same  thing  as  maximum  fares,  but  the 
highest  point  to  which  fares  can  be  raised  without  materially  dimin- 
ishing patronage,  so  that  the  highest  amount  of  revenue  can  be  at- 
tained— that  undoubtedly,  as  I  see  it,  w^ould  be  different,  very  differ- 
ent, in  different  communities;  would  it  not? 

Secretary  Baker.  Undoubtedly 

Commissioner  Sweet.  And  would  depend  very  largely  upon  this 
very  matter  of  education  which  you  have  referred  to. 

Secretary  Baker.  Yes.  But  there  is  no  reason  for  any  mystery 
about  it.  We  tried  out  that  question  in  Cleveland,  of  the  point  of 
maximum  return  for  the  fare,  and  the  way  we  did  it  was  to  ex- 
periment. We  got  the  people  together  in  the  tent,  and  in  the  news- 
papers the  matter  was  explained  that  we  were  going  to  work  to  oper- 
ate the  road  this  week  at  3-cent  fare,  with  no  charge  for  a  transfer, 
and  then  the  next  week  we  are  going  to  charge  for  a  transfer,  and 
then  we  are  going  to  operate  at  a  5-cent  fare.  So  don't  be  surprised 
if  you  see  the  fare  change.  We  are  experimenting,  for  your  informa- 
tion, to  see  what  the  point  of  maximum  return  is.  And  we  made  a 
number  of  those  experiments. 

Commissioner  Sweet.  And  the  result  of  your  experiments  ^yas 
finally  expressed,  I  suppose,  in  your  Cleveland  plan,  largely  ? 

Secretary  Baker.  It  has  its  ultimate  answer  there;  but  the  ex- 
periments were  carried  far  enough  to  show  that  we  could  succeed 
with  the  experiment,  but  without  getting  definite  results  for  other 
reasons. 

Commissioner  Sweet.  The  street  railroads  of  Cleveland  are  taxed? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  They  pay  regular  city  and  county  and 
municipal  taxes  upon  their  physical  property? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  Is  the  franchise  taxed? 

Secretary  Baker.  No. 

Commissioner  Sweet.  Is  the  income  taxed? 

Secretary  Baker.  No.     It  may  be  under  Federal  law,  but  not  locaL 


1020  PRO,  ]:EDi]srGS  of  federal  electric  railways  commission. 

Commissioner  Sweet.  Are  they  required  to  do  paving  between  the 
tracks  and  for  a  short  distance  outside  ? 

Secretary  Baker.  They  are  required  on  all  new  paving — that  is, 
on  all  streets  not  previously  paved,  where  they  make  extensions,  or 
in  a  street  in  which  they  have  tracks  which  has  not  been  previously 
paved — they  are  required  to  pave  between  the  rails  on  each  track 
and  the  strip  outside,  and  are  required  to  keep  up  the  pavement,  and 
they  make  any  repairs;  but  in  the  case  of  repavmg  they  are  not  re- 
quired to  pay  the  cost  of  repaving. 

Commissioner  Sweet.  Is  that  a  burden  which  they  should  be  re- 
quired to  bear? 

Secretary  Baker.  I  do  not  think  they  ought  to  pay  it  at  all. 

Commissioner  Sweet.  You  regard  it  as  sort  of  a  heritage  of  the 
old  horse-car  days,  where  there  might  have  been  some  justice  in  the 
start? 

Secretary  Baker.  I  think  there  was  a  justification  in  the  days 
when  the  horse  cars  were  there,  because  they  consumed  the  pave- 
ment. 

Commissioner  Sweet.  You  recognize  that  as  a  burden  that  ought 
to  rest  either  on  the  abutting  owners  of  the  property  or  the  whole 
community,  removing  the  burden  from  them  to  the  ridei*s  on  the 
street  railway. 

Secretary  Baker.  Exactly. 

Commissioner  Sweet.  And  in  that  respect  it  is  unjust  as  between 
the  different  elements  of  the  community? 

Secretary  Baker.  Yes.  A  street  railroad  put  into  any  street  very 
greatly  enhances  the  value  of  the  adjacent  property,  and  I  think 
that  enhancement  ought  to  bear  the  l)urden. 

Commissioner  Sweet.  And  you  would  place  that  burden  on  the 
abutting  owners? 

Secretary  Baker.  I  Avould  divide  it.  I  would  not  take  more  than 
the  enhanced  value. 

Commissioner  Sw^eet.  But  as  between  the  general  public  which 
would  include  the  owners  of  automobiles,  autotrucks,  and  all  that 
sort  of  thing,  and  the  street-car  riders,  you  would  rather  place  the 
burden  upon  the  whole  than  you  would  upon  the  street-car  riders 
alone? 

Secretary  Baker.  I  would  very  much  rather  have  it  paid  by  tax- 
payers than  by  street-car  riders. 

Commissioner  Sweet.  Absolutely.  Now,  then,  if  it  were  neces- 
sary to  put  it  upon  either  one  class  or  the  other,  if  we  may  use  that 
term — either  the  automobile  owners  and  truck  owners  and  the  street- 
car riders — which  of  those  two  classes  would  you  put  it  on? 

Secretary  Baker.  I  would  not  put  it  on  either  one. 

Commissioner  Sweet.  I  know,  but  if  you  had  to  put  it  on  either 

one. 

Secretary  Baker.  I  think  there  is  a  little  more  justification  for 
putting  it  on  the  automobile  riders  than  the  street-car  riders. 

Commissioner  Sweet.  They  get  more  use  out  of  that  pavement, 
do  they  not  ? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  Is  there  any  form  of  conveyance  or  trans- 
portation in  a  city  that  does  less  harm  to  the  paving  than  the  street- 
railroad  cars? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1021 

Secretary  Baker.  Well,  it  does  some  harm.  It  is  very  difficult  to 
keep  tracks  in  such  condition  that  they  do  not  work  up  and  down 
and  work  the  pavement  loose.  They  do  some  harm  to  the  pavement. 
They  ate  all  laid  on  ties  and  as  soon  as  a  track  begins  to  get  a  little 
soft  the  tie  jumps  and  pushes  out  stones  or  bricks  or  the  concrete 
surface,  so  that  they  do  some  harm.  I  would  not  say  which  does  the 
most  harm,  whether  one  class  or  another. 

Commissioner  Sweet.  I  was  referring  more  to  wear  than  1  was 
to  those  changes  which  might  occur  from  the  influences  you  speak  of. 

Secretai7  Baker.  Of  course  they  do  wear. 

Commissioner  Sweet.  Of  course,  if  the  pavement  is  m  any  way 
broken  or  loosened  by  reason  of  the  flexibility  of  the  track  it  would 
seem  to  me  that  the  street  railway  ought  to  repair  it  the  same  as  they 
repair  their  tracks,  and  I  think  it  ou^ht  to  be  so,  but  I  was  thinking 
more  of  the  wear  and  tear  of  the  traffic. 

Secretary  Baker.  Of  course,  there  is  no  wear  on  the  street  surface 
bv  a  street-car. 

Commissioner  Sweet.  At  a  time  like  this  when  the  street-railroad 
companies  are  up  against  it  as  they  are  at  the  present  time,  do  you 
not  think  there  ought  to  be  a  public  awakening  on  this  subject  of 
taxation,  and  especially  of  paving,  because  that,  we  have  been  told 
here,  amounts  in  the  whole  country  to  millions  of  dollars  every 

Secretary  Baker.  It  does  amount  to  a  very  large  sum.  1  think  it  is 
very  wise  to  call  the  public's  attention  to  the  changed  conditions 
under  which  paving  taxes  and  requirements  are  now  made. 

Commissioner  Sweet.  I  wish  I  believed  with  you  that  the  decision 
of  this  commission  would  be  accepted  generally  throughout  the 
country  at  100  per  cent  and  acted  upon,  because  I  feel  that  the  in- 
formation we  have  been  getting  ought  to  enable  us  to  arrive  at  facts 
that  could  not  be  disputed,  that  are  really  good  for  the  country  to 
know  and  for  the  different  cities  of  the  country  not  only  to  realize 
but  to  act  upon.  Whether  that  is  possible  or  not  I  am  not  sure.  As 
you  said,  a  Federal  commission  has  no  power  in  a  matter  of  this 
kind  except  to  advise  and  recommend  and  report  its  findings  of  fact. 

I  am  very  glad  to  note  that  the  general  public  must  be  getting  a 
great  deal  of  the  testimony  such  as  yours  here  to-day.  That  ought 
to  be  very  helpful.  We  have  had  from  some  of  the  best-informed 
and  biggest  men  of  the  country — Mr.  Edison  and  others — statements 
on  this  subject  that  it  is  good  for  the  people  to  hear  and  for  them  to 
know ;  and  a  great  deal  of  publicity  has  been  given  to  these  things ; 
and  from  that  point  of  view  it  seems  as  if  perhaps  before  we  reach 
a  conclusion  the  general  public  ought  to  be  much  better  informed 
than  it  was  before,  by  reason  of  these  hearings. 

Secretary  Baker.  The  problem  is  so  intricate  and  goes  back  so 
far  it  is  difficult  to  find  a  place  to  tie  on  to  it.  I  have  in  my  mind — 
I  will  not  name  it — a  street-railroad  system  which  was  rebuilt  and 
rehabilitated  under  a  settlement  ordinance  where,  in  my  judgment, 
the  cost  of  rehabilitation  was  enormously  too  high,  and  yet  that  was 
done  under  the  sanction  of  public  authorities.  Now,  that  imposes  a 
permanent  burden  on  that  community.  And  I  think  if  your  commis- 
sion were  to  point  out  the  fact  that  in  the  rehabilitation  of  property 
and  in  the  making  of  extensions  and  new  additions  to  street-railroad 
properties  and  the  purchase  of  equipment,  throwing  away  equip- 


1022    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

ment  before  it  is  really  obsolete — when  it  simply  has  ceased  to  be 
pleasant  as  a  matter  of  taste  and  all  that  sort  of  thin^ — that  all  of 
that  is  wasteful  and  adds  to  the  general  burden  which,  in  the  last 
analysis,  gets  back  to  the  car  rider — now  that  sort  of  counsel  of 
prudence  to  economy  in  reconstruction  and  rehabilitation  and  use 
of  equipment  and  maintenance  of  property  would,  I  think,  be  a  very 
helpful  thing  to  say  to  a  great  many  communities  of  this  country. 

Commissioner  Sweet.  Do  you  think  that  the  general  public  realizes 
that  the  car  rider  is  the  one  who  pays  for  this  paving  ? 

Secretary  Baker.  I  doubt  if  it  does,  because  it  took  us  a  long  while 
to  realize  it  in  Cleveland.     We  had  to  say  it  a  great  many  times. 

Commissioner  Sweet.  You  think  the  car  rider  does  practically  pay 
that  and  all  other  expenses  of  the  company  without  the  general  pub- 
lic realizing  it? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  Would  it  not  be  mighty  helpful  to  the  gen- 
eral public  and  to  a  solution  of  the  whole  question  if  the  general 
public  could  realize  it? 

Secretary  Baker.  I  think  so. 

Commissioner  Sweet.  And  realize  that  the  street-car  is  the  poor 
man's  carriage  and  that  that  is  the  part  of  the  community  which  is 
the  least  able  to  bear  heavy  burdens  probably ;  is  it  not  ? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  What  do  you  think  about  the  form  of  inde- 
terminate franchise  with  the  power  reserved  to  the  city  to  purchase  ? 

Secretary  Baker.  I  think  the  indeterminate  franchise  with  the 
right  to  the  city  of  acquisition  and  proper  regulation  is  the  only 
scientific  form  of  franchise. 

Commissioner  Sweet.  Absolutely.  You  think  that  is  better  than 
a  very  long  term  or  any  term? 

Secretary  Baker.  Very  much  better  than  any  fixed  term. 

Commissioner  Sweet.  And  you  think  the  public  is  amply  pro- 
tected by  that  form  of  franchise? 

Secretary  Baker.  I  think  so,  if  the  rest  of  the  terms  are  properly 
drawn.  Of  course,  the  Cleveland  franchise,  by  the  way,  is  not  an 
indeterminate  franchise;  it  is  a  25-year  franchise — you  know  that. 

Commissioner  Sweet.  But  there*^  is  an  automatic  form  of  exten- 
sion, is  there  not? 

Secretary  Baker.  Not  quite.  There  is  a  provision  in  it  that  dur- 
ing the  first  15  years  of  a  25-year  period  all  of  the  controlled  fea- 
tures of  the  ordinance  are  operative,  the  city  has  the  right  to  pass  a 
renewal  ordinance  in  identical  terms  with  the  existing  ordinance 
which  the  company  must  accept  at  any  time  during  that  15  years, 
and  if  the  city  does  pass  it,  that  starts  the  operation  of  a  new  25-year 
period.  If  the  city  fails  to  pass  such  a  renewal  during  the  first  15 
years  of  any  grant,  then  whatever  remains  of  the  period,  the  10 
years — or  such  time  as  elapses  until  the  city  does  pass  the  renewal — 
is  operated  by  the  company  without  the  regulatory  features  of  the 
ordinance  applying. 

Commissioner  Sweet.  But  you  would  prefer  to  have  it  indefinite? 

Secretary  Baker.  We  could  not  under  the  Ohio  law,  and  with  25 
years  as  maxinmm. 

Commissioner  Sweet.  But  you  would  rather  have  it  indeterminate? 

Secretary  Baker.  I  would  rather  have  it  indeterminate. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1023 

Commissioner  Sweet.  You  are  somewhat  familiar  with  the  Cin- 
cinnati Street  Railway  situation? 

Secretary  Baker.  I  have  not  seen  the  Cincinnati  Street  Railway 
recentl3\    I  used  to  know  about  it  years  ago. 

Commissioner  Sweet.  Are  you  not  aware  that  a  plan  modeled 
somewhat  after  Cleveland  has  been  adopted  in  Cincinnati? 

Secretary  Baker.  I  have  heard  that. 

Commissioner  Sweet.  With  a  director,  as  they  call  him  in  Cin- 
cinnati, representing  the  public.  What  is  the  representative  of  the 
public  called  in  Cleveland?     Superintendent? 

Secretary  Baker.  No;  he  is  the 

Mr.  Warren.  Commissioner. 

Secretary  Baker.  The  city  street-railroad  commissioner. 

Commissioner  Sweet.  That  is  a  single  individual? 

Secretary  Baker.  That  is  a  single  individual. 

Commissioner  Sweet.  x\ppointed  by  the  mayor? 

Secretary  Baker.  Appointed  by  the  mayor,  confirmed  by  the 
council,  as  I  recall. 

Commissioner  Sweet.  Confirmed  by  the  council,  I  think;  and  he 
is  the  go-between,  he  is  the  spokeanan  of  the  public — supposed  to 
be — or  the  connecting  link  between  the  operator  of  the  road  and  the 
council ;  and,  of  course,  the  council,  strictly  speaking,  represents  the 
public.     That  would  be  a  more  correct  statement ;  would  it  not  ? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  If  Cincinnati  could  work  up  a  plan  some- 
what based  on  the  Cleveland  principle,  I  do  not  see  any  reason  why 
other  cities  could  not,  even  in  a  comparatively  short  time,  if  the 
railroad  companies  present  all  the  facts  and  satisfy  the  general 
public  and  their  own  communities  that  they  are  playing  fair,  that 
they  are  concealing  nothing,  and  that  they  want  to  recognize  the 
two  interests  that  you  have  spoken  of — the  people  who  have  invested 
their  money,  the  operatives  on  the  one  side  and  the  general  public 
on  the  other.  Now,  if  the  people  could  be  convinced  of  that  I  do 
not  see  why  any  community  could  not  adopt  a  plan  somewhat  similar 
to  this,  if  they  wanted  to. 

Secretary  Baker.  It  is  the  indispensable  prerequisite. 

Commissioner  Saveet.  And  that  is  the  education  of  the  people, 
their  complete  knowledge  of  it? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  But  sometimes  people  get  an  education 
without  going  to  college;  do  they  not?     Is  it  not  possible  for 

Secretary  Baker.  Most  of  us  get  most  of  it  after  we  have  been  to 
college. 

Commissioner  Sweet.  Absolutely.  Now,  is  it  not  possible  that, 
m  the  present  emergency,  with  great  trouble  staring  them  in  the 
face  that  the  necessary  education  might  be  obtained  by  a  community 
in  a  very  short  time? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  Do  you  think  that  referendum  votes  arc 
necessary  on  a  subject  of  this  kind? 

Secretary  Baker.  I  do  not  think  they  are  necessary.  I  think 
they  are  very  desirable. 

Commissioner  Sweet.  They  have  a  very  great  educative  value. 

Secretary  Baker.  Very  great. 


1024    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK. 

Commissioner  Sweet.  And  you  would  recommend — whatever  plan 
might  be  adopted  by  a  city — that  it  be  referred  by  referendum  to  the 
voters  of  the  city? 

Secretary  Baker.  Whenever  it  is  legally  possible.  Of  course,  the 
referendum  is  not  universally  possible  in  this  country,  but  wherever 
it  is  leg^ally  possible,  I  think  the  value  of  a  referendum  is  very 
great — its  moral  value  is  very  great. 

Commissioner  Sweet.  And,  if  I  understand  you  right,  you  tliink 
a  large  part  of  its  value  would  consist  in  its  permanency — tliat  is, 
the  permanency  of  the  plan  that  might  be  adopted,  the  satisfying  of 
the  people  who  feel,  no  matter  what  was  adopted,  that  it  was  their 
plan,  and  they  would  give  it  a  fair  show.     Is  that  it? 

Secretary  Baker.  Yes.  In  fact,  in  Cleveland  nobody,  even  the 
wildest  talker,  has  ever  suggested  the  overthrow  of  the  Cleveland 
street  railroad  ordinance,  because  it  was  adopted  by  the  vote  of  the 
people.  That  is  fixed.  Everybody  starts  saying  now,  "  That  much 
we  did ;  that  much  we  are  bound  to. ' 

Commissioner  Sweet.  Do  you  know,  Mr.  Secretary,  of  any  city  in 
the  United  States  that  is  less  affected  by  war  prices  and  present  con- 
ditions than  Cleveland  in  its  street  railways? 

Secretary  Baker.  Oh,  no ;  I  do  not.  I  should  say  it  was  the  least 
of  all  that  I  know  anything  about. 

Commissioner  Sweet.  You  attribute  that  to  what  you  call  the  Cleve- 
land plan  of  operation ;  do  you  ? 
Secretary  Baker.  Yes. 

Commissioner  Sweet.  You  think  that,  if  other  cities  had  gone 
through  the  same  process  of  education  and  the  public  felt  the  same 
way  about  it  and  had  adopted  the  same  plan,  you  would  get  the  same 
results  in  other  cities? 

Secretary  Baker.  I  should  think  so,  Mr.  Sweet.  It  just  occurs  to 
me — take  the  Cleveland  situation — as  the  price  of  wages  went  up, 
and  of  materials,  the  rate  went  up  in  Cleveland  so  that  there  was  a 
constant  attempt  on  the  part  of  the  rate  to  assimilate  itself  to  the 
needs  of  the  company.  They  finally  got  to  the  place  where  the  maxi- 
mum rate  permissible  under  the  ordinance  was  not  enough,  and  they 
went  to  the  council  and  told  them  so,  and  the  council  said, "  We  realize 
that  on  the  figures  you  have  presented."  And  they  authorized  a 
higher  rate  temporarily  than  the  ordinance  permitted.  In  other 
cities  they  had  adjusted  their  operations  to  a  fixed  rate  of  fare,  and 
could  not  get  anywhere  at  all,  as  the  increase  went  on  in  their  operat- 
ing expenses,  and  their  catastrophies  and  calamities  have  been  pre-» 
cipitated  until  they  all  came  at  one  time,  while  Cleveland  simply  had 
the  little  bump  at  the  top  of  the  hill  where  it  had  to  pass  over,  where 
its  highest  rate  of  fare  would  not  pay  operating  expenses. 

Commissioner  Sweet.  If  it  should  be  necessary  in  the  course  of  the 
next  year  or  so — we  do  not  know  what  is  ahead  of  us — ^to  go  higher 
and  higher,  would  you,  from  your  knowledge  of  the  situation  in 
Cleveland  and  the  balance  of  the  country,  judge  that  the  point  of 
highest  revenue  would  be  at  a  higher  point  of  fare  in  Cleveland  ?  In 
other  words,  that  the  people  of  the  community  would  be  satisfied 
with  paying  a  higher  fare  if  it  was  necessary  to  do  so  without  any 
resentment  such  as  is  felt  in  any  ordinary  community  ? 

Secretary  Baker.  They  are  perfectly  satisfied ;  they  will  pay  what- 
ever is  necessary  to  carry  them  where  they  want  to  go,  because  they 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1025 

know  they  are  only  paying  a  stipulated  return  and  stipulated  wages. 
But  I  do  not  believe,  personally,  that  a  rate  of  fare  higher  than  5 
cents  is  economically  justifiable — that  is,  I  do  not  think  it  is  the  point 
of  maximum  return  if  you  charge  anything  more  than  5  cents.  When 
people  have  to  break  a  10-cent  piece  to  pay  the  fare  they  move  to  a 
place  nearer  their  work  so  they  will  not  have  to  pay  it. 

Commissioner  Sweet.  Would  not  the  ticket  system  somewhat  rem- 
edy that  objection  ? 

Secretary  Baker.  Well,  that  is  bad  on  principle.  A  cash  fare  is 
better  to  everybody  concerned.  But  I  do  not  think  it  would  make 
very  much  difference.  I  think  any  rate  higher  than  5  cents  as  a  cash 
fare  would  have  very  shortly  the  effect  of  redistributing  the  popu- 
lation of  the  community  so  as  to  avoid  paying  it  and  would  bring 
down  the  use  of  the  service.  Now,  that  may  be  wise  and  may  not 
be.    Personally,  I  do  not  think  it  is. 

Commissioner  Sweet.  Do  you  believe  in  the  zone  plan  of  charge? 

Secretary  Baker.  Yes,  I  have  always  believed  in  the  zone  plan  of 
charge.  I  think  that  the  payment  that  one  makes  to  a  street-rail- 
road company  ought  to  be  for  the  service  rendered  him,  as  near  as 
it  can  be.  I  used  to  argue  with  Mr.  Johnson  about  that,  and  his 
objection  to  it  was  that  you  would  have  to  have  a  bookkeeper  for  each 
passenger  on  the  street-car,  which  was  an  exaggerated  but  illustrative 
way  of  stating  the  difficulties.  I  do  not  see  the  slightest  reason 
why  we  should  not  have,  on  the  street  railroads  in  this  country,  a 
zone  system  like  the  one  the  British  use  in  their  motor  buses.  When 
you  get  in  you  pay  a  penny,  and  when  you  cross  a  line  you  pay  an- 
other penny  or  half-pence,  as  the  case  may  be,  and  I  see  no  difficulty 
whatever  in  establishing  the  zone  system  in  that  way  in  this  country. 

Commissioner  Sw^eet.  Is  the  zone  system  in  vogue  in  Europe  on 
electric  railways? 

Secretary  Baker.  I  do  not  know,  Mr.  Sweet.  There  are  not  many 
electric  railways  in  Europe,  relatively.  They  use  the  motor  bus. 
There  are  in  the  motor  buses,  of  course,  but  I  do  not  remember  about 
the  street  railroads.    It  has  not  been  on  the  underground,  I  know. 

Commissioner  Sweet.  Do  you  still  entertain  the  same  view  you  did 
when  you  were  discussing  that  matter  with  Mayor  Johnson? 

Secretary  Baker.  Yes. 

Commissioner  Meeker.  In  the  underground  they  do  have  to  pay  an 
extra  fare. 

Secretary  Baker.  Do  they?     I  have  forgotten  about  that. 

Commissioner  Meeker.  When  they  emerge  from  the  train,  in  case 
they  have  ridden  beyond  a  certain  point.  And  in  the  tramways  they 
have  the  same  system  as  the  motor  bus. 

Secretary  Baker.  I  am  not  in  favor  of  the  British  method  of 
collecting  any  kind  of  fare.  I  think  their  method  of  collecting  fare 
is  incomprehensible  to  the  American  mind. 

Commissioner  Meeker.  They  have  that  on  the  tubesin  New  York, 
too. 

Secretary  Baker.  I  noticed  that  the  other  day,  that  they  pay  an 
extra  fare  when  they  get  out  of  the  so-called  McAdoo  tube. 

Commissioner  Sweet.  In  your  discussion  with  Mayor  Johnson  of 
the  zone  svistem  did  either  of  you  bring  up  the  question  of  distribution 
of  population? 

160043"— 20— VOL  2 3 


1026    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION*. 

Secretary  Baker.  Very  constantly.  It  was  a  thing  we  had  in 
mind  all  the  time. 

Commissioner  Sweet.  Don't  yon  think  the  zone  plan  would  work 
rather  in  favor  of  congestion  and  be  objectionable  on  that  ground, 
quite  seriously? 

Secretary  Bakei?.  Yes,  it  kills  the  traffic  on  both  sides  of  the  zone 
line;  it  lias  that  effect;  and  I  think  it  docs  have  the  effect  of  congest- 
ing the  people  toward  the  cheaper  haul. 

Commissioner  Sweet.  When  you  consider 

Secretary  Baker.  But  that  accounts  for  itself  very  easily.  What 
happens  then  is  that  the  rent  which  the  landlord  gets  at  the  end  of 
the  line  falls,  so  it  ultimately  goes  back  to  the  land  value  after  all. 

CommisBioner  Sweet.  I  understand  that,  under  the  European 
system,  the  higher  charge  in  proportion  to  the  longer  trip  has 
seriously  tended  toward  congestion  in  the  cities.  Our  system  of 
charge,  a  nickel  for  almost  any  ride  whatever  on  an  electric  railroad, 
urban  or  in  the  vicinity  of  a  city,  has  had  a  tendency,  I  think,  to 
build  up  the  suburbs  of  cities  to  quite  an  unusual  extent,  more  than 
in  foreign  cities. 

Secretary  Baker.  I  think  it  has. 

Commissioner  Sweet.  And  that  would  certainly  seem  to  be  in  the 
interest  of  sanitation,  and  perhaps  good  morals  and  the  general 
benefit  of  the  community ;  would  it  not  ? 

Secretary  Baker.  Yes;  there  arc  advantages  on  that  side. 

Commissioner  S^tjet.  I  have  wondered  whether  the  advantages 
there  were  such  that  it  would  be  better  to  make  up  a  deficiency,  if 
necessary,  by  general  taxation  and  charge  the  low  rate  of  fare  to  en- 
courage people  to  build  and  own  homes  outside  the  cities. 

Secretary  Baker.  You  may  be  interested  to  know  that  Mr.  John- 
son entertained  your  view  so  strongly  that  he  regarded  the  ideal  way 
of  street-railroad  operation  as  entirely  paid  for  by  the  taxpayers  and 
all  car  riding  fre^.  He  used  to  say  there  was  no  more  reason  why 
elevators  should  be  operated  free  in  buildings  than  that  street  rail- 
roads should  not  be  operated  free.  The  same  thing  ought  to  apply. 
I  do  not  agree  with  that. 

Commissioner  Sweet.  Do  you  think  the  arbitration  plan  in  Cleve- 
land is  a  good  one? 

Secretary  Baker.  It  has  always  worked  well,  Mr.  Sweet. 

Commissioner  Sweet.  And  do  you  think  that  that  ought  to  be  in- 
corporated in  any  system  that  is  modeled  at  all  or  somewhat  modeled 
after  the  Cleveland  plan  ? 

Secretary  Baker.  Yes,  I  think  it  is  a  very  excellent  safety  valve 
and  a  very  effective  piece  of  machinery  if  it  it  handled  properly. 

Commissioner  Sweet.  I  understand  the  company  appoints  one  ar- 
bitrator and  the  city  one,  and  then  the 

Secretary  Baker.'  The  Federal  judge. 

Commissioner  Sweet.  The  Federal  judge? 

Secretarjr  Baker.  Yes,  the  Federal  ]udge  appoints  the  third. 

Commissioner  Sweet.  I  think  that  is  all. 

Commissioner  Meeker.  Mr.  Secretary,  I  would  like  to  ask  what 
you  would  do  in  case  the  fares  did  not  afford  a  sufficient  income. 
Would  you  support  the  street  railways  through  taxation? 

Secretary  Baker.  No,  I  would  not. 


PROCEEDINGS  OF  FEM:RAL  ELECTRIC  RAILWAYS  COMMISSION.    1027 

Commissioner  Meeker.  Suppose  that  the  street  i-ailways  are  un- 
able to  bring  in  sufficient  income  with  any  fare  that  may  be  de- 
mised— the  maximum  net  revenue  fare 

Secretary  B\ker.  I  do  not  think  that  can  be  answered  as  a  gen- 
eralization. It  may  be  that  there  are  reasons  it  can  not  bring  in 
enoucrh  and  that  they  have  improperly  laid  out  lines  that  may  be 
vorv ''uneconomical  lines.  For  instance,  in  Cleveland  when  we  were 
making  our  settlement,  we  undertook  to  estimate  the  unexpired  fran- 
chise value  of  the  lines  in  the  belief  that  that  was  an  asset  of  the 
company  that  ought  to  be  covered  in  their  new  stock.  We  got  some 
three  or  four  million  dollars  unexpired  franchise,  and  then  I  proved 
that  th^re  were  half  a  dozen  lines  that  had  a  negative  franchise  value, 
that  it  cost  the  company  money  for  every  passenger  they  hauled;  and 
I  wanted  to  take  the  negative  franchise  value  from  the  positive 
franchise  value  and  put  only  the  net  in  the  ordinance,  but  Judge 
Tayler  would  not  do  that.  You  may  have,  in  the  case  you  are  speak- 
ing of,  a  lot  of  lines  which  ought  not  be  operated  at  all. 

Commissioner  Meeker.  You  would  eliminate  lines  that  did  not 

pay,  would  you,  regardless  of  what ,    ,     .  j,         .    . 

Secretary  Baker.  I  would  not  say  I  would  do  it  regardless;  but 
if  vou  had  two  lines  operating  close  to  one  anc^her,  and  only  got 
revenue  from  both  sufficient  to  operate  one,  I  would  operate  the  one 
and  discontinue  the  other  one. 

Commissioner  Meeker.  Would  you 

Secretary  Baker.  When  I  say  I  would  do  that,  I  do  not  mean  if 
I  were  mayor  or  were  this  commission  or  a  State  commission,  but  I 
mean  if  1  were  the  people  of  that  city,  I  would  get  together  with  the 
city  and  understand  that  situation  and  decide  among  ourselves  whicn 

one  to  cut  out.  .  • 

Commissioner  Meeker.  You  think  under  certain  circumstances  it 
would  be  justifiable  to  support  the  street  railways  through  taxa- 
tion— — 

Secretary  Baker,  No  ;  I  do  not  think  so. 

Commissioner  Meeker.  If  tl^y  can  not  earn  sufficient  revenue  to 
pay  the  current  wages  and  the  price  of  materials  at  a  reasonable  re- 
turn upon  the  capital  investment  you  would  have  the  lines  discon- 
tinued ? 

Secretary  Baker.  Yes. 

Commissioner  Meeker.  You  would  apply  that  to  Boston,  with 

Secretary  Baker.  I  would  apply  it  anywhere. 

Commissioner  Meeker.  With  ruthlessness  ? 

Secretary  Bakfr.  I  do  not  believe  in  taxing  the  people  of  Boston 
to  let  some  people  ride  on  street-cars.  People  who  get  the  service 
from  the  street-cars  pay  for  the  service  they  get,  and  if  there  are 
not  enough  of  them  who  want  the  service  to  justify  its  continuance, 
it  ought  to  he  discontinued. 

Commissioner  Meeker.  Does  the  plan  of  coopei'ative  management 
permit  any  considerable  economies  in  operation  ?  I  mean  a  plan  not 
necessarily  the  Plumb  plan,  but  some  cooperative  plan  under  which 
the  employees  and  the  management  and  the  public  will  get  together 
in  the  management  of  the  street-railway  lines. 

Secretary  Baker.  Mr.  Meeker,  I  do  not  want  to  speculate  about 
the  Plumb  plan,  because  I  know  too  little  about  it,  but  I  am  willing 
to  say  this — that  my  expeiience  as  the  responsible  manager  of  a  lot 


1028    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

of  very  large  manufacturing  enterprises — namely,  the  arsenals  that 
are  operated  by  the  War  Department — has  shown  me  that  introduc- 
ing the  committees  of  workers  into  the  councils  of  the  management  of 
the  arsenals  has  brought  a  very  high,  fine  degree  of  cooperation  from 
tlie  operatives  in  those  plants  to  the  Government.  It  has  been  a  dis- 
tinct improvement.  Or  coui^se,  that  is  a  different  case,  because  no- 
body is  operating  for  profit  there. 

Commissioner  Meeker.  I  hesitate  to  ask  this  question,  but  I  do  not 
know  how  to  get  the  answer  in  any  other  way :  Would  you  advise  this 
commission  to  make  any  recommendation  on  that  point?  That  is, 
is  there  likelihood  of  a  quick  enough  take-up  of  any  such  suggestion 
so  as  to  result  in  any  influence  solving  the  present  very  unsatis- 
factory street-railway  situation? 

Secretary  Baker.  Eeally,  I  do  not  think  I  could  state  my  own 
mind  on  that  subject.    I  do  not  know. 

Commissioner  Meeker.  You  will  note  that  I  did  not  suggest  the 
Plumb  plan.  I  simply  mean  any  kind  of  a  cooperative  plan  of  man- 
agement that  may  be  thought  practical. 

Secretary  Baker.  On  the  general  principle  I  am  perfectlv  willing 
to  say  that  I  believe  without  at  all  having  in  mind  the  details  and  all 
safeguards  and  all  the  rest  of  it,  but  as  a  general  principle,  the  in- 
telligent cooperation  of  the  workers  with  the  operators  and  the  pub- 
lic whom  they  are  to  serve  will  produce  a  higher  degree  of  efficiency 
than  a  combination  of  any  two  of  those  to  the  exclusion  of  the  other. 

Commissioner  Meeker.  And,  of  course,  no  one  of  those  three  in- 
terests represented  should  be  in  a  position  to  outvote  the  other  two. 

Secretary  Baker.  Well,  I  am  rather  inclined  to  think  that  the 
public  interest  ought  to  be  in  a  position  to  outvote  all  the  others. 

Commissioner  Meeker.  To  outvote  all  of  them? 

Secretary  Baker.  That  would  be  my  judgment: 

Commissioner  Meeker.  In  regard  to  taxation :  What  was  the  origi- 
nal theory  of  taxation  as  applied*  to  street-railway  operations?  Was 
it  the  idea  to  get  at  the  profits  made  by  the  street-railway  companies, 
that  the  taxation  would  not  fall  in  the  last  instance  upon  the  street 
railway  rider? 

'  Secretary  Baker.  If  there  ever  was  any  theory  behind  the  general 
real  and  personal-property-tax  system  which  was  adopted  in  most  of 
the  States  of  the  Union  I  have  no  idea  what  that  theory  was.  I  have 
never  been  able  to  discover  any  justification  for  it  in  logic  or  sense, 
and  I  have  no  idea  what  theory  was  in  anybody's  mind  when  he  either 
adopted  or  voted  for  it. 

Commissioner  Meeker.  You  think  from  the  very  beginning  the 
taxation  as  applied  to  street  railways  really  did  hit  the  pocketbooks 

of  the  car  riders? 

Secretary  Baker.  Yes ;  I  think  the  car  riders  paid  the  taxes. 

Commissioner  Meeker.  Even  in  the  early  days  of  street  railways, 
when  the  companies  were  at  least  believed  to  be  making  large  profits? 

Secretary  Baker.  Yes;  I  think  the  car  riders  still  pay  both  profits 
and  taxes. 

Commissioner  Meeker.  The  taxes  would  increase  the  car  fares  in- 
stead of  decreasing  the  profits. 

Secretary  Baker.  Yes;  I  think  so;  because  I  think  the  rule  with 
regard  to  street  railroad  fares,  as  with  all  other  fares  in  America 
unti)  very  recent  years,  has  been  all  the  traffic  will  bear — the  point  of 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1029^ 

maximum  return.  I  think  if  the  owners  of  the  property  had  been 
exonerated  from  the  necessity  of  paying  the  taxes  they  would  still 
have  charged  the  highest  rate  of  fare  they  could;  so  that  may  mean 
that  the  riders  paid  the  tax. 

Commissioner  Meeker.  Yes. 

Mr.  Warren.  But  they  might  have  given  more  in  service  or  have 
been  forced  to  give  more  in  service  ? 

Secretary  Baker.  Well,  that  is  a  question  of  opinion  upon  a  past 
fact.  You  can  not  generalize  about  that.  In  some  places  there  were 
street-railroad  companies  that  had  a  very  high  degree  of  responsi- 
bility for  the  public  service  they  were  performing.  In  others,  there 
were  companies  that  just  squeezed  the  public  down  to  the  minimum.. 
I  would  not  generalize  about  that. 

Commissioner  Meeker.  I  think  that  is  all. 

Commissioner  Gadsden.  I  have  just  one  question,  Mr.  Secretary. 
The  testimony  which  has  been  offered  before  the  commission  for  the 
last  two  weeks  has  shown  a  condition  of  practical  bankruptcy  in  the 
entire  industry,  numbers  of  companies  showing  an  operating  deficit, 
no  return  on  capital  at  all.  Plans  for  a  permanent  solution  of  the 
problem  such  as  you  have  discussed  necessarily  will  take  a  considerable^ 
time.  Now,  in  the  interim,  do  you  not  think  it  only  fair  and  proper 
and  just  that  the  fares  of  these  companies,  pending  a  permanent  solu- 
tion of  the  trouble,  should  be  increased  certainly  to  the  point  of  off- 
setting the  admitted  increase  in  the  cost  of  labor  and  materials? 

Secretary  Baker.  Well,  if  you  mean  in  those  properties  in  which 
no  return  is  being  made  upon  investment,  I  would  say,  obviously, 
yes.  But  if  you  mean  to  have  in  mind  a  lot  of  companies  in  which 
an  insufficient  return  is  being  made  upon  apparent  capitalization,  I 
should  say  that  with  a  great  deal  of  hesitation  whether  it  ought  to  be 
in  a  particular  case  or  not.  But  whether  the  rate  of  fare  is  to  be 
increased  or  not — if  it  is  to  be  increased  it  ought  to  be  done  by 
the  people  who  are  to  pay  it.  If  it  is  done  by  any  other  body  or 
agency;  if  the  Federal  Government  tries  to  do  it,  or  the  State  gov- 
ernment tries  to  do  it,  it  will  be  resented  and  will  postpone  a  cor- 
rect adjustment  between  the  people  and  the  company  rather  than 
accelerate  it,  in  my  judgment. 

Commissioner  Gadsden.  What  I  had  in  mind  was  whether  possibly 
this  commission  might  not  aid  public  opinion  by  recommending  that, 
pending  the  permanent  solution  of  the  problem,  some  adequate  in^ 
crease  in  fares  should  be  granted  railways,  as  has  been  granted  every 
other  industry  in  the  United  States. 

Secretary  Baker.  Yes.  I  would  be  perfectlv  satisfied  if  I  were 
a  member  of  the  commission  to  urge  the  cities  in  this  country  that  had 
street-railroad  problems  of  this  kind  to  grant  additional  fares  under 
an  arrangement  to  be  made  with  the  company  whereby  the  surplus 
should  be  kept  in  a  separate  account  and  taken  account  of  in  the 
final  settlement  with  the  street-railroad  company. 

Commissioner  Gadsden.  In  other  words,  keepthem  alive  until  you 
can  work  out  the  problem  ? 

Secretary  Baker.  Keep  them  alive  and  let  it  be  perfectly  under- 
stood how  much  was  granted  to  them  in  excess  of  their  franchise- 
rights. 

Commissioner  Sweet.  What  objection  would  there  be  to  a  referen-^ 
dum  vote  on  that  ? 


1030    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Secretary  Baker.  None  whatever. 

Commissioner  Sweet.  It  would  help  things  along  in  tlie  way  of 
education  ? 

Secretary  Baker.  Yes;  but  we  never  depended  upon  referendum 
votes  for  our  educational  work  out  there.  We  had  very  few  refer- 
endums.  The  referendum  is  simply  a  rod  in  pickle  that  you  do  not 
have  to  use  because  evervbodv  knows  it  is  there.  We  went  out 
and  made  speeches  in  tents  and  held  meetings 

Commissioner  Gadsden.  Education  must  necessarily  precede  the 
referendum  ? 

Secretary  Baker.  Yes, 

Commissioner  Sweet.  But  when  a  referendum  vote  is  to  be  taken, 
just  like  in  a  political  campaign,  you  can  get  the  ear  of  people;  they 
will  come  together  and  listen  to  you. 

Secretary  Baker.  But  we  did  not  wait  until  there  was  a  referen- 
dum coming.  Mr.  Johnson  would  i^ut  in  the  newspapers  that  he 
wiis  going  to  be  at  the  corner  of  Loraine  and  Forty-fourth  Street 
at  half  past  7  o'clock,  and  the  corner  would  be  packed. 

Commissioner  Sweet.  How  many  cities  in  the  United  States  have 
Tom  Johnsons  to-day  ? 

Secretary  Baker.  Unha]>pily,  none  that  I  know  of. 

Commissioner  Meeker.  You  do  not  mean  by  education  to  depend 
upon  the  newspapers  to  educate  the  public  ? 

Secretary  Baker.  No;  although  the  newspapers  are  a  very  help- 
fid  agency,  of  course;  but  I  would  not  depend  entirely  upon  that. 

Commissioner  MEEKim.  Is  there  not  danger  of  education  being  of 
the  wrong  kind  and  the  result  proving  a  detriment  instead  of  an 
advantage  ? 

Secretary  Baker.  Of  course,  there  is  always  a  possibility  of  poo- 
pie  being  deceived  by  erroneous  statements  of  fact.  I  never  felt 
that  obvious  bhis  was  dangerous — that  is,  propaganda  work  does  not 
seem  to  me  to  be  dangerous. 

Commissioner  Sweet.  Cheap  politicians  have  made  a  lot  of  capital 
out  of  fighting  street- railroad  companies,  have  they  not? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  In  the  past. 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  Some  of  it,  I  imagine,  and  I  rather  think  you 
do,  is  deserving  and  some  not. 

Secretary  Baker.  I  think  the  only  reason  that  the  cheap  politicians 
have  done  it  is  that  the  good  politicians  did  not. 

Commissioner  Sweet.  Probably ;  but  what  I  meant  to  say  was  that 
the  street-railroad  companies  ha^e  not  been  entirely  without  blame. 

Secretary  Baker.  No.  What  I  mean  by  that  is  this — that  the  re- 
lations between  street  railway  companies  and  municipalities  in  this 
countrv  have  not  been  sound  or  wholesome,  and  the  fact  that  wise 
people  either  blinked  at  that  fact  or  refrained  from  trying  to  correct 
it  gave  less  wise  people  an  opportunity  to  agitate  in  an  unwholesome 
way. 

Commissioner  Sweet.  But  the  fact  that  cheap  politicians  might 
come  forward  and  try  to  misstate  and  beguile  people  into  believing 
thing  that  were  not  true  with  regard  to  the  street-railway  companies, 
and  throw  dust  in  their  eyes,  would  not,  I  imagine,  in  your  judgment, 
be  any  reason  why  the  subject  should  not  be  thoroughly  discussed  with 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1031 

the  idea  that  more  intelligent  people  would  be  able  to  satisfy  the 
general  public  of  what  is  right.        ^,.      .    ,  i       i,      ^i 

Secretary  Baker.  No  ;  that  sort  of  thing  is  dangerous  only  when  the 
facts  are  not  accessible.    _^       .    .  , 

Commissioner  Sweet.  That  is  it  exactly.  ^ 

Secretary  Baker.  Now,  anybody  can  go  out  on  the  street  and  get 
up  a  bio-  hubbub  about  something  when  there  is  no  access  to  the  f  actu, 
and  his^'own  statement  of  them  will  be  as  colorable  as  anybody  else's; 
but  if  the  people  can  go  into  the  next  building  and  look  at  the  facts 
they  will  come  out  and  drive  that  fellow  to  his  corner  right  away. 

The  Chapman.  You  have  stated  that  in  your  judgment  the  maxi- 
mum street-car  fare  should  be  5  cents? 

Secretary  Baker.  That  was  a  very  bold  thing  for  me  to  say.  I  do 
not  know  that  I  ought  to  say  that;  it  is  just  as  a  reminiscence  more 
than  anything  else.  I  do  not  believe— from  my  observation  of  popu- 
lar psychology  in  regard  to  street-car  fares,  with  the  traditions  that 
adhere  to  it— I  do  not  believe  the  people  of  this  country  are  going 
to  pay  permanently  more  than  5  cents  for  a  street-car  fare. 

The  Chairman.  If  it  is  possible  through  economies  or  otherwise 
to  maintain  the  5-cent  fare,  that  should  be  done  % 

Secretary  Baker.  Or  less. 

The  Chairmax.  Or  less? 

Secretary  Baker.  Yes. 

The  Chairman.  The  facts  are  that  a  very  great  number  of  the 
companies  to-day  are  charging  more  than  5  cents,  and  the  tendency 
of  wages  and  the  cost  of  material  and  supplies  is  still  upward.  Have 
you  any  opinion  as  to  the  length  of  time  that  this  abnormal  price 
tendency  may  last? 

Secretary  Baker.  No;  I  have  none. 

The  Chairman.  During  that  period,  however,  it  is  manifestly  im- 
possible for  State  commissions  or  other  regulating  bodies  to  reduce 
the  rate  to  the  5-cent  fare  in  many  communities? 

Secretary  Baker.  Yes. 

The  Chairman.  Is  there  any  other  way  than  by  the  payment  of  a 
fare  by  which  these  companies  could  get  anything  in  excess  of  5 
cents  ? 

Secretary  Baker.  Yes. 

The  Chairman.  What  way  should  that  be? 

Secretary  Bakeij.  The  payment  of  two  fares;  break  the  haul. 

The  Chairman.  But  you  do  not  believe  that  the  public,  by  way  of 
a  subsidy,  should  pay  that  excess  over  5  cents  ? 

Secretary  Baker.  No,  I  do  not  say  that;  but  I  would  say  that  ajiy 
particular  system  ought  to  be  examined  by  those  in  charge  of  regu- 
lating those  fares  to  find  out  whether  there  are  not  uneconomical  lines 
that  are  imposing  the  burden  that  makes  5  cents  insufficient.  You 
find  a  lot  of  people  or  a  few  people,  for  instance,  riding  14  miles 
and  they  pay  5  cents,  and  a  lot  of  other  people  ride  half  a  mile  and 
pay  5  cents. 

Commissioner  Sweet.  Or  half  a  block. 

Secretary  Baker.  Yes.  Now,  I  think  it  would  be  very  much  wiser 
to  make  the  people  who  ride  14  miles  pay  10  cents  than  everybody 
who  rides  half  a  block  of  the  14  miles  pay  7  cents. 

The  Chairman.  That  means  the  establishment  of  zone  fares? 

Secretary  Baker.  Yes. 


1032    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


The  Chairman.  Do  you  think  the  situation  could  be  helped  any 
by  having  6-cent  or  7-cent  or  7 J-cent  coins  produced  ? 

Secretary  Baker.  Yes;  I  think  it  would  help  some.  I  would  not 
say  just  which  ones.  I  always  believed  that  the  establishment  of  a 
3-cent  coin,  or  really  the  introduction  of  the  3-cent  coin,  would  be 
an  enormous  advantage  to  the  Cleveland  situation.  We  had  ver}^ 
entertaining  times  with  our  3-cent  fare,  gentlemen.  The  ordinance 
required  it  should  be  paid  in  cash,  and  there  were  no  3-cent  tickets; 
and  people  would  hand  our  conductors  five-dollar  bills  and  ten-dollar 
bills,  and  that  got  to  be  a  A^ery  evident  effort  of  the  adversaries  of 
the  Municipal  TracJtion  Co.,  which  was  operating.  So  Mr.  Johnson, 
with  his  customary  ingenuity,  answered  it  by  equipping  the  con- 
ductors with  bags  containing  497  coppers  and  997  coppers,  and  when 
anybody  handed  a  conductor  a  five-dollar  bill,  he  dumped  a  bag  with 
497  coppers  in  his  hands;  and  they  discontinued  that  line  of  attack. 
A  3-cent  coin  would  have  helped  a  lot. 

Commissioner  Sweet.  Highly  educated  as  your  people  were,  they 
co.uld  not  get  the  start  of  Tom  Johnson,  could  thejr  ? 

Secretary  Baker.  He  was  their  schoolmaster  until  he  died. 

The  Chairman.  We  are  very  much  obliged  to  you,  Mr.  Secretary. 

Mr.  Warren.  May  I  ask  a  question? 

The  Chairman.  Would  you  wish  to  answer  Mf .  Warren  ? 

Secretary  Baker.  Certainly. 

Mr.  Warren.  Subsequently,  was  there  not  a  rule  adopted  that  no 
change  would  be  made  f  I  think  that  Mr.  Stanley  when  he  was  here 
testified  that  change  was  not  made  by  conductors. 

Secretary  Baker.  Change  above  a  certain  maximum-sized  coin — I 
think  they  had  nothing  over  a  dollar;  some  such  rule  as  that. 
*    Mr.  Warren.  I  thought  that  if  a  man  gave  a  nickel  he  did  not  get 
change  for  it.     Under  the  present  arrangement  the  fare  now  is  5 
cents,  is  it  not  ? 

Secretary  Baker.  Yes. 

Commissioner  Sweet.  That  is  what  was  testified. 

Mr.  Warren.  With  1  cent  for  transfers? 

Secretary  Baker.  I  think  there  was  some  such  rule  as  that  at  one 
time.     I  have  forgotten  what  it  was. 

Mr.  Warren.  I  understood  somebody  to  testify  that  was  so.  Then, 
Mr.  Secretary,  you  were  mayor  after  this  went  into  effect? 

Secretary  Baker.  Yes. 

Mr.  Warren.  Was  Peter  Witt  your  commissioner? 

Secretary  Baker.  I  was  not  mayor  at  the  time  it  went  into  effect, 
you  understand. 

Mr.  Warren.  But  subsequently. 

Secretary  Baker.  Mr.  Johnson  was  defeated  in  1910  and  Mr. 
Herman  Baer  was  elected  mayor  and  was  mayor  for  two  years ;  and 
it  was  during  Mr.  Baer's  term  that  the  ordinance  went  into  effect. 
Mr.  Gerhart  Dahl  was  his  city  street-railroad  commissioner.  Then 
I  was  elected  after  the  termination  of  one  term  of  Mayor  Baer  and 
was  mayor  for  four  years ;  and  during  that  time  Mr.  Peter  Witt  was 
city  street-railroad  commissioner. 

Mr.  Warren.  So  you  had  very  practical  experience  in  the  opera- 
tion of  this  plan  in  Cleveland  as  mayor? 

Secretary  Baker.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1033 

Mr.  Warren.  And  was  there  not  a  very  complete  cooperation  be- 
tween the  city  and  the  company,  taken  as  a  whole  ?  I  suppose  there 
may  have  been  differences  of  opinion  froni  time  to  time,  but  did  not 
the  city  do  a  great  many  things  to  facilitate  the  operation  of  the 

railway  ? 

Secretary  Baker.  I  think,  taking  it  all  in  all,  that  the  cooperation 
was  as  effective  and  cordial  as  one  could  well  imagine. 

Mr.  Warren.  For  example  the  keeping  of  vehicles  off  the  tracks? 

Secretary  Baker.  Yes. 

Mr.  Warren.  The  city  cooperated  in  that? 

Secretary  Baker.  Yes. 

Mr.  Warren.  Enabling  the  company  to  speed  up  the  cars  and  main- 
tain better  schedules? 

Secretary  Baker.  Yes ;  and  the  introduction  of  the  alternate  stop, 

which  was  an  enormous  economy. 

Mr.  Warren.  So  that  was  really  one  of  the  very  great  benefits  of 
this  public  education  and  understanding  of  the  situation? 

Secretary  Baker.  Yes. 

Mr.  Warren.  And  to  a  greater  or  less  extent  that  might  be  hoped 
to  follow  a  similar  education  elsewhere? 

Secretary  Baker.  I  should  think  so.  Another  conspicuous  illus- 
tration of  it  was  the  reintroduction  of  the  trailer  car.  Cleveland  is 
especially  adapted  to  the  use  of  trailer  cars,  and  of  course  it  cuts 
the  expense  of  operation  practically  in  half — you  can  operate  a  car 
and  a  trailer  for  one  and  a  half  times  the  cost  of  operating  the  main 
car,  and  the  car  itself  is  not  so  expensive.  There  was  a  tremendous 
objection  against  trailer  cars  all  over  the  United  States;  they  were 
characterized  as  murderous  things.  And  yet  an  effective  and  safe 
trailer  car  was  used  and  worked  with  the  consent  of  the  city  and  the 
city  adopted  it  at  once. 

Mr.  Warren.  And  the  city  oftentimes  made  suggestions? 

Secretary  Baker.  Very  many. 

Mr.  Warren.  Mr.  Witt  was  a  very  suggestive  man,  I  believe.  I 
think  you  answered  this  question,  but  I  did  not  catch  the  answer^ 
Did  this  apply  only  to  the  city  of  Cleveland  or  to  the  suburbs? 
What  would  be  the  fare  in  the  suburbs? 

Secretary  Baker.  The  ordinance  applied  only  to  the  city  of  Cleve- 
land and  the  fare  outside  was  different  in  different  municipalities, 
based  upon  their  ordinances  in  effect  at  the  time  this  ordinance  was 
effective. 

Mr.  Warrex.  Are  you  familiar  with  the  Boston  situation  at  all? 

Secretary  Baker.  No;  I  am  not. 

Mr.  Warren.  I  might  just  state  there,  because  I  think  it  is  rather 
an  interesting  difference — I  can  not  state  it  exactly — but  the  Boston 
Elevated  serves  not  only  the  city  of  Boston,  but  some  11  or  12  sur- 
rounding municipalities  and  which  roughly,  I  should  say,  have  half 
as  much  population  as  Boston.  They  include  Cambridge  with 
100,000;  Somerville,  with  approximately  the  same  number:  and 
Newton  and  Brookline,  with  approximately  40,000  each,  and  there 
the  attempt  of  tlie  company  has  been  to  serve  all  those  people  for  a 
flat  fare.  One  of  the  results  of  that  in  the  twenty-odd  years  has 
been  to  take  a  great  many  thousand  people  from  the  city  of  Boston, 
from  the  more  congested  and  older  sections,  into  these  suburban 
towns  and  into  the  remote  parts  of  the  city  limits,  so  that  they  have 


1034    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

increased  vei-y  much.  Now,  under  such  a  situation  as  that,  might  it 
not  be  d<?sirable  that  a  State  commission  should  have  some  sort  of 
supervisoi-y  power  or  appellate  jurisdiction? 

Secretary  Bakek.  If  you  start  out  with  the  assumption  that  it  is 
impossible  to  do  the  logical  and  right  thing  at  Boston,  then  this 
mav  be  the  best  substitute  for  it. 

Mr.  Warren.  Well,  you  mean  to  have  the  city  regulate  it  as  in 
Cleveland? 

Secretary  Baker.  No;  I  mean  if  you  start  out  with  the  assumption 
that  you  can  not  make  one  city  of  what  is  one  city — namely,  Boston, 
and  the  population  that  lives  around  Boston — if  you  can  not  con- 
solidate those  and  make  one  city  out  of  them,  then  I  suppose  you 
would  have  to  have  some  State  agency  to  control  tliem, 

Mr.  Warren  Unfortunately,  the  tax  rate  varies  so  much  in  those 
different  places  that 

Secretary  Baker.  I  know.  That  is  the  greatest  superstition  in  the 
world.  I  have  had  to  fight  that  in  Cleveland  over  and  over  again. 
People  imagined  that  they  lived  in  a  little  section  outside  of  Cleve- 
land and  they  imagined  that  the  tax  rate  in  Cleveland  was  high,  and 
that  they  would  never  get  any  improvements  if  they  came  into  the 
city.  And,  one  after  another,  we  have  gotten  them  in  by  persuasion 
and  sometimes  by  coercion,  and  I  have  never  known  one  willing  to 
go  out  after  it  once  got  in.  And  that  would  be  true  of  Boston. 
The  advantages  of  incorporation  in  the  city  ai-e  too  great-;— and  of 
course  they  are  glad  to  be  in  after  they  get  in. 

Mr.  Warren.  Your  solution  would  be  to  make 

Secretary  Baker.  To  make  one  city  out  of  Boston.  At  one  time 
there  were  39  separate  police  jurisdictions  in  the  city  of  London. 
And  a  fellow  would  break  a  window  and  would  run.  and  the  police- 
man would  chase  him,  and  as  soon  ivs  he  got  to  the  limit  of  his 
jurisdiction  he  would  have  to  stand  there  and  holler  to  the  next 
policeman  to  chase  him,  and  if  the  fellow  could  run  fast  enough 
he  would  run  all  day  long  through  these  39  jurisdictions  and  never 
'be  caught  by  anybody.  It  is  just  the  same  thing  in  Boston.  You 
have  a  lot  of  comnmnity  interests  up  there  which  are  separated  by 
these  separate  municipalities.  And  Boston  is  only  in  a  larger  sense 
worse  than  other  cities,  because  Cleveland  is  the  same  way.  You 
can  not  make  East  Cleveland  come  into  Cleveland,  but  they  ought  to. 

Mr.  Warren.  When  you  speak  of  the  5-cent  fare  being,  in  your 
judgment,  perhaps  the  maximum  possible  fare,  I  judge,  from  some- 
thing you  said  afterwards,  that  you  had  no  particular  distance  of 
ride  in  mind,  because  you  said  something  about  if  it  would  not  pay, 
if  that  fare  would  not  pay  under  the  present  abnoimal  conditions, 
to  put  in  another  5-cent  fare  and  divide  the  territory. 

Secretary  Baker.  Yes;  divide  the  territory,  not  necessarily  into 
two  5-cent  zones,  but  into  a  5  and  a  1  or  a  5  and  a  2. 

Mr.  Warren.  In  other  words,  you  did  not  want  the  commission 
or  the  public  to  understand  that  the  5-cent  fare  was  the  maximum 
for  vour  5-cent  territory? 

Seci*etary  Baker.  Obviously  not.  But  you  and  I  both  know  that 
that  most  profitable  traffic  on  a  street  railroad  is  the  short-haul  traffic 
downtown,  where  a  man  goes  from  his  office  to  the  bank  and  gets 
on  the  street-car.  He  will  get  in  if  it  only  costs  him  5  cents,  fn.it 
he  will  walk  if  it  costs  him  C  cents,  and  it  does  not  make  a  bit  of 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1035 

difference  how  right  he  is.  There  is  some  psychology  that  I  do  not 
know  enough  to  explain,  but  it  is  there.  When  you  put  in  a  6-cent 
fare,  you  decrease  not  your  long-haul  expensive  traffic  which  costs 
vou  more  than  your  in(X)me,  but  you  have  cut  out  the  heart  of  your 
profitable  short-haul  traffic,  so  it  is 

Jklr.  Warren.  So  in  your  mind  the  5-cent  fare  is  the  unit  which 
should  be  used? 

Secretary  Baker.  Yes. 

Mr.  Warren.  And  the  service  which  should  be  given  for  it  should 
be  measured  by  other  circumstances. 

Secretary  Baker.  Yes. 

Commissioner  Gadsden.  And  you  would  shorten  the  ride  rather 
than  increase  the  fare? 

Secretary  Baker.  Yes.  I  have  never  been  able  to  get  the  difficul- 
ties of  the  zone  system — I  think  if  you  start  with  the  5-cent  fare, 
if  that  is  the  necessary  fare,  and  you  charge  another  cent  for  riding 
an  additional  mile  beyond  the  profitable  limit,  it  is  perfectly  un- 
objectionable. 

Commissioner  Meeker.  Do  you  thinli  the  effect  upon  congestion 

is  negligible? 

Secretary  Baker.  Negligible. 

Commissioner  Meeker.  We  have  in  our  5-cent-fare  zones  the 
greatest  congestion  of  population  to  be  found  in  the  world,  in  New 
York  City. 

Secretary  Baker.  Yes.  The  immediate  effect  undoubtedly  would 
be  to  cause  people  to  move  in  the  tenements  in  the  cheap  fare  dis- 
trict. The  next  effect  of  it,  however,  is  to  decrease  the  rental  value 
of  outlying  lands,  and  then  people  find  they  can  rent  for  as  much 
less  out  there  than  they  could  downtown  as  the  difference  in  the 
cost  of  the  street-railroad  fare,  so  that  the  effect  of  it  is  to  disperse 
the  population. 

Commissioner  Meeker.  Does  it  not  also  have  the  effect  of  dis- 
persing industry  ?    That  seems  to  be  the  experience  of  Europe. 

Secretary  Baker.  Yes,  I  think  it  does — although  the  European 
experience  on  that  subject  is  unreliable  because  the  habits  of  the 
two  sets  of  people  are  different.  Their  laborers  all  live  around 
their  factories  and  workshops,  and  ours  never  did. 

Commissioner  INIeeker.  They  had  congestion  before  they  had 
street  railroad  svstems. 

Secret ar^T^  Baker.  Yes. 

Mr.  Warren.  I  want  to  follow  up  that  5-cent  proposition  a  little 
further.  You  do  not  question,  I  judge,  that  many  of  the  companies 
need  additional  revenue  to-day. 

Secretary  Baker.  Well,  I  would  not  generalize  about  that. 

Mr.  Warren.  But  assuming  that  a  company  with  an  avei^ge  haul 
of  3  miles  and  a  5-cent  fare  and  |3erhaps  a  5-cent  franchise  limita- 
tion, was  not  making  its  operating  expenses,  there  would  be  no  ques- 
tion, would  there,  but  what  it  ought  to  get  more  revenue  if  it  is 
going  to  continue  to  operate? 

Secretary  Baker.  I  think  there  might  be.  If  it  were  put  up  to 
me,  the  first  thing  I  would  look  at  would  be  whether  they  had  not 
too  high  operating  expenses.  A  3-mile  avei-age  haul  is  not  too  nufch 
for  a  5-cent  fare.     Of  course,  conditions  are  so  different — it  may  all 


1036    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

be  uphill  and  downhill  and,  in  that  case,  it  would  be  very  obvious 
they  ought  to  have  more. 

Mr.  Warren.  But  I  wanted  to  make  sure — I  think  you  have  al- 
ready said  so — that,  by  what  you  have  said  about  the  5-cent  fare, 
you  do  not  mean  that  the  5-cent  fare  should  under  the  present  con- 
ditions necessarily  apply  to  the  haul  that  was  formerly  given  for 
5  cents? 

Secretary  Baker.  Of  course  not. 

Mr.  Warren.  And  whether  the 

Secretary  Baker.  But  I  would  say  that  before  I  would  raise  any 
fare  above  o  cents,  which  is  not  at  5  cents,  I  would  have  to  be  shown 
that  the  operation  was  economical,  because  I  believe  that  is  the 
psychological  fare  that  can  be  obtained. 

Mr.  Warren.  And  if  you  were  satisfied  of  that,  then  you  would 
consider  shortening  the  haul  and  putting  in  an  additional  zone  at 
the  same  rate? 

Secretary  Baker.  I  would,  rather  than  increasing  the  general  fare. 

Mr.  Warren.  Rather  than  increasing  the  unit  of  collection. 

Secretary  Baker.  Yes. 

The  Chairman.  Under  a  zone  system,  what  would  you  start  the 
fare  at? 

Secretary  Baker.  I  would  not  like  to — in  Cleveland  I  would  start 
it  at  3  cents. 

The  Chairman.  Then  the  5-cent  fare  is  not  the  minimum  charge 
for  the  service? 

Secretary  Baker.  Oh,  no.  As  a  matter  of  fact  there  must  be  a 
lot  of  places  in  the  United  States  where  they  ought  to  do  it  for  2 
cents. 

Mr.  Warren.  If  the  zone 

Secretary  Baker.  No;  I  do  not  mean  that,  but  take — well,  there 
must  be  very  large  hydroelectric  plants  with  surplus  power  out  in  the 
far  western  country  where  they  have  enormous  quantities  of  exceed- 
ingly cheap  electric  power  and  flat  cities.  It  seems  to  me  they  ought 
to  be  able  to  supply  service  there  for  2  cents. 

Mr.  Warren.  I  do  not  suppose  you  remember  at  all  what  the  rate 
of  wages  was  at  the  time  of  the  strike  which  you  mentioned  ? 

Secretary  Baker.  You  mean  the  first  strike  of  the  Municipal 
Traction  Co.? 

Mr.  Warren.  Yes. 

Secretary  Baker.  No. 

Mr.  Warren.  I  do  not  suppose  you  have  had  an  opportunity  to 
follow  the  increase  in  wages? 

Secretary  Baker.  They  liave  gone  up  enormously  from  that  time 
until  now.     They  must  have  been  more  than  doubled. 

Mr.  Warren.  Yes;  I  think  they  have  just  about  doubled.  You 
are,  of  course,  familiar  with  the  increase  which  was  made  in  the 
rate  on  steam  railroads  from  2  cents  to  3  cents  per  mile? 

Secretary  Baker.  Yes. 

Mr.  Warren.  So  that  in  a  general  way  I  judge  that  you  would 
agree  that  the  proper  operating  expenses  would  be  found  to  have 
very  greatly  increased  since  the  European  war  began  ? 

Secretary  Baker.  Well,  leaving  out  of  account  any  possible  econo- 
mies that  may  be  involved— and  that  would  be  on  the  other 
side  of  it — I  think  it  is  perfectly  obvious  that  practically  all  operat- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1037 

ing  costs  have  increased  in  the  street-railroad  business  since  the 
beginning  of  the  war,  coal  and  wages — and  those  are  the  two  princi- 
pal items. 

Mr.  Warren.  You  spoke  of  various  things  that  made  operation 
less  expensive  in  Cleveland  than  in  some  other  parts  of  the  country. 
Is  not  coal,  which  you  have  just  mentioned,  one  of  those?  Is  riot 
the  coal  pretty  near  to  Cleveland  ? 

Secretary  Baker.  Yes;  we  are  pretty  close  to  the  Ohio  mines. 

Mr.  Warren.  And  freight  rates  correspondingly  low? 

Secretary  Baker.  They  are  very  favorable. 

Mr.  Warren.  For  example,  a  $3.50  water-freight  rate  from  New- 
port News  to  Boston  plus  the  rail  rate,  which  I  think  makes  it  about 
$5,  would  be  very  much  more  than  is  paid  in  Cleveland? 

Secretary  Baker.  Very  much  more  than  is  paid  in  Cleveland  at 
any  time  in  my  knowledge.     I  do  not  know  what  the  rates  are,  at 

present. 

Mr.  Warren.  I  think  that  is  all,  Mr.  Secretary.    I  am  very  much 

obliged. 

(Witness  excused.) 

The  Chairman.  Is  Mr.  Ogburn  present? 

Mr.  Ogburn.  Mr.  Chairman,  there  are  present  several  public- 
utility  commissioners  who  are  here  to  testify  on  certain  limited 
phases  of  the  traction  situation,  particularly  in  their  own  localities. 
They  have  indicated  to  me  that,  as  they  occupied  judicial  positions, 
they  would  want  to  make  their  testimony  limited,  and  would  not 
care,  of  course,  to  testify  in  regard  to  any  cases  or  any  question 
bearing  upon  any  cases  which  at  the  present  time  are  pending^ 
before  them.  ^ 

One  of  the  commissioners  whom  we  desired  to  have  next  is  the 
chairman  of  the  Public  Utilities  Commission  of  the  District  of 
Columbia,  Lieut.  Col.  Kutz.  ^ 

STATEMENT  OF  LIEUT.  COL.  CHARLES  W.  KUTZ. 

The  Chair3ian.  You  may  proceed,  Colonel,  in  your  own  way. 

Col.  Kutz.  Mi*.  Chairman,  in  the  District  of  Columbia,  the  street- 
railway  lines  are  consolidated  or  allied  into  two  distinct  groups,  the 
Capital  Traction  group  and  the  Washington  Railway  &  Electric 
group.  Both  groups  are  competitive  in  the  strictly  built-up  portion 
of  the  city,  but  the  two  systems  differ  materially  in  the  suburbs, 
the  Capital  Traction  group  having  two  lines  running  to  the  confines 
of  the  district,  and  the  Washington  Railway  &  Electric  having  about 
10  suburban  lines;  so  that  the  mileage  of  tlie  Washington  Railway  & 
Electric  is  very  much  greater  than  that  of  the  Capital  Traction. 

Prior  to  the  war  the  two  companies  were  both  operating  on  a  fare 
of  6  tickets  for  25  cents,  and  the  Washington  Railway  &  Electric, 
having  a  larger  mileage,  was  enjoying  the  greater  revenue.  And,  in 
addition  to  that,  there  was  a  condition  existing  which  probably  helped 
to  account  for  the  fact  that  before  the  war  they  were  both  subsisting 
equally  well  on  the  same  rates  of  fare  and  just  now  they  are  not. 

Commissioner  Sw^eet.  When  you  say  "  greater  revenue "  do  you 
niean  greater  gross  revenue  or  net  revenue  ? 

Col.  Kutz.  Prior  to  the  war? 


1038    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Yes. 

Col.  KuTz.  The  gi-eater  number  of  paying  passengers. 

Commissioner  Sweet.  That  would  be  greater  gross  revenue? 

Col.  KuTz.  Yes;  greater  gross  revenue,  gross  reveime  from  street- 
car fares.  The  Washington  Railway  &  Electric  Co.  is  tl>e  owner  or 
all  the  stock  in  the  Potomac  Electric  Power  Co.  and  enjoys  all  the 
profits  of  the  power  company;  that  is,  they  are  added  into  its  rev- 
enues. 

In  1917,  just  about  the  time  the  United  States  entered  the  war,  the 
public-utilities  commission  reduced  the  rates  for  electric  light  and 
power,  and  thereby,  to  that  extent,  curtailed  the  revenues  of  tlie  power 
company  and  curtailed  the  revenues  of  the  street-car  company. 

Of  course,  that  act  of  the  commission  was  enjoined  in  the  coui"t, 
and  has  not  yet  l)een  decided ;  but  the  difference  between  the  old  rates 
and  the  new  rates  is  now  being  set  aside  by  the  power  company  and 
will  be  either  paid  to  the  users  or  go  into  the  treasury,  dependent 
ujx^n  the  decision  of  the  court. 

I  speak  of  that  now  because  I  think  it  helps  to  account  for  the  fact 
that  at  the  present  time,  both  companies  enjoying  the  same  rate  of 
fare,  one  is  applying  for  relief  and  the  other  one  is  not. 

The  Chairman.  Which  one  is  applying  for  the  I'elief  I 

Col.  KuTz.  The  Washington  Railway  &  Kloctric  Co.,  the  one  with 
the  larger  mileage,  the  large  suburban  mileage. 

Another  thing  is  that  the  population  of  Washington  greatly  in- 
creased during  the  war,  and  that  led  to  an  increased  number  of  pay 
passengers  and  greater  increase  on  the  Capital  Traction  lines  than 
on  the  lines  of  the  Washington  Railway  &  Electric  Co.  So  that  we 
have  this  situation  at^he  present  time:  Each  company  is  carrying 
approximately  the  same  number  of  passengers,  and  yet  the  Wash- 
ington Railway  &  Electric  Co.,  which  has  this  large  suburban  mile- 
age, almost  twice  the  nyleage  of  the  other  line,  is  operating  a  greater 
car  mileage,  and  yet  its  gross  revenues  are  the  same ;  and,  of  course, 
it  has  a  greater  cost  of  maintenance  of  track. 

The  fares  were  increased  last  fall  from  6  tickets  for  25  cents  to  a 
straight  5-cent  fare.     That  was  upon  the  petition  of  both  companies. 

Early  this  year  the  Washington  Railway  &  Electric  Co.  applied 
for  a  furtlier  measure  of  relief,  the  Capital  Traction  Co.  making  no 
application;  and  the  commission  decided  the  Washington  Railway 
&  Electric  Co.  was  entitled  to  relief  and  base<l  that  upon  a  tentative 
valuation  of  the  property  of  the  company,  we  not  yet  having  reached 
a  final  conclusion  as  to  the  values. 

As  a  result  of  that  consideration,  the  commission  decided  that  the 
net  operating  income  of  the  AVashington  Railway  &  Electric  Co. 
should  be  increased  by  $300,000  a  year  so  as  to  make  its  net 
operating  revenue  approximately  $900,000.  It  also  decided,  in  this 
same  opinion,  to  grant  the  same  increase  in  rates  of  service  to  the 
Capital  Traction  Co.  that  it  granted  to  the  Washington  Rail- 
way &  Electric  Co.,  on  the  ground  that  if  it  granted  one  rate  of 
service  to  one  company  with  a  lower  rate  to  the  other,  there  would 
be  such  a  transfer  of  passengers  from  one  line  to  the  other  within  the 
congested  part  of  the  city  that  the  increased  rate  of  fare  would  be 
entirely  onset  by  the  reduction  in  the  number  of  passengers  carried. 
So  that,  by  reason  of  the  fact  that  they  were  competitive  within  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MMISSI02T.    1039 

city  proper,  we  decided  that  each  should  receive  the  same  rate  of 
service.  We  granted  that  increased  revenue,  not  by  increasing  the 
fiat  fare,  nor  by  a  strict  application  of  the  zone  system,  which  was 
advocated,  but  by  the  imposition  of  a  charge  of  2  cents  for  trans- 
fers, that  charge  applying  to  transfers  within  each  of  the  two 
groups  of  companies,  and  also  to  transfers  between  the  two  groups, 
which  had  formerly  been*  granted  free. 

We  also  provided,  in  the  transfer  order,  that  where  a  transfer 
was  granted  on  a  transfer,  a  charge  should  be  made  for  it.  There 
were  about  20,000,000  i>assengers  on  each  line  that  were  transferred. 

Of  coulee,  it  was  expected  that  the  number  of  passengers  applying 
for  transfers  would  be  reduced  as  a  result  of  the  charge;  and  that  has 
been  borne  out,  the  number  of  tmnsfers  having  been  reduced  prob- 
ably about  25  per  cent. 

The  commission  expects  to  complete  its  valuation  of  the  property 
of  the  two  companies  during  the  current  month,  and  it  will  then 
announce  its  values  and  will  l3e  prepared  to  authorize  a  i-ate  of  fare 
based  on  that  valuation,  with  a  reasonable  rate  of  return.  But  we 
see  before  us,  though  we  have  not  yet  come  to  it,  this  problem  con- 
fronting us,  of  two  competing  companies  within  the  city,  and  the 
difficulty  of  granting  a  different  rate  of  fare  to  each,  and  yet  the  in- 
equity to  the  public  of  granting  a  living  rate  to  one  company  and  an 
unnecessarily  high  rate  to  the  other  company. 

There  have  been  several  suggestions  made  by  which  that  problem 
can  be  solved.  One  of  them  was  that  the  tax  which  is  now  made  on 
the  gross  income  of  the  companies  be  levied  on  the  net  income. 

The  Chairman.  What  is  that  tax.  Colonel  ? 

Col.  KuTz.  I  think  4  per  cent.  The  suggestion  was  that  it  be  ap- 
plied to  the  net  income  rather  than  the  gross  income,  which,  of 
course,  would  have  an  equalizing  effect. 

Mr.  Warken.  That  is  applied  to  each  company  now,  Colonel? 

Col.  KuTz.  Yes;  that  is  applied  to  each  company  now.  Then  the 
suggestion  was  that  we  adopt  a  zone  system,  which  would  also  have 
an  equalizing  effect  in  this  particular  case,  because  of  the  10  suburban 
lines  of  the  one  company  as  against  the  two  of  the  other.  But  when 
the  zone  system  was  suggested  some  months  ago,  very  great  oppo- 
sition was  voiced  to  it. 

The  District  of  Columbia  is  somewhat  different  from  the  average 
city  in  the  country  in  that  its  boundaries  were  fixed  a  great  many 
years  ago  and  probably  will  remain  unchanged  for  a  great  many 
yeai«.  In  other  words,  it  is  not  an  expanding  community,  from  a 
territorial  standpoint. 

Of  course,  all  property  values  within  the  District  have  for  many 
years  been  based  on  this  flat  rate  for  street-car  fare,  and  of  course 
we  distribute  electric  light  to  all  parts  of  the  city  on  the  same  rate 
and  we  distribute  gas  to  all  parts  of  the  city  on  the  same  rate,  and 
yet  we  know  that  it  costs  more  to  deliver  gas  10  miles  than  it  does  to 
deliver  gas  1  mile.  Also,  sociologically,  we  think  there  are  a  great 
many  advantages  in  a  fiat  rate  of  fare  within  the  District  of 
Columbia. 

I  am  not  expressing  any  opinion,  not  voicing  the  opinion  of  the 
commission;  I  am  really  not  voicing  a  definite  opinion  of  my  own 
on  the  question  of  the  zone  fare. 


1040    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

The  Chairman.  You  are  simply  pointing  out  *e  proWem? 

Col  KuTZ   Yes.    The  evidence  seems  to  indicate  that  a  zone  sys 
tern  in  the  District  would  be  very  unpopular;  and  I  believe  if  «  were 
subndtted  to  a  referendum  of  the  people  their  preference  would  be 

in  u'tnm^Sy     Many  people,  ind-idiially  and  c^^^^^^^^^^^^ 
expressed  the  opinion  that  an  increase  in  the  flat  rate  of  fare  uoum 

TmSfLf rs^'m?  tflT^u^'^mOOO   passengers, 

an!l  SlaTLmW  would  not  L  reduced  Xr^f  w^^XieW 
in  the  rate,  with  an  increase  of  half  a  cent  in  the  fare,  it  would  yiem 
«450 000  a  year  to  each  of  the  companies;  and  our  study  of  the  lack 
S'SiLf  revenue  indicated  that  the  Washington  Railway  & 
Electric  Co.  needed  $300,000  to  .bring  .up  to  the  sum  which 
wA  estimated  •  and  as  it  was  estimated  that  a  2-cent  cnarge  lor 
TransfS  would  yield  the  $300,000,  we  prescribed  that  charge  as  be- 
ing thelers^r  of  ^the  two  burdens  on  the  public  sufficient  to  yield  6 
pe?  cent Tthe  fare  value,  while  half  a  cent  increase  in  the  fare 

Tl«w'\ike"totTj*!'st'one  word  about  the  question  of  paving, 
which  the  Srei^ry  ofVar  brought  up  this  «?«™>^g' be-use J rom 
«n  engineering  standpoint  I  see  great  difficulties  in  a  divided  re- 
=^nS?kv  for  the  paving  between  the  rails  and  over  the  ties. 
'^Thf iS^ige  to  the^pavmg  between  the  rails  and  for  two  feet  out- 
sid^rhe  o^ter  rail  is  not  caused  by  the  traffic  on  the  street  to  any- 
thing Hke  the  extent  that  it  is  caused  by  the  character  of  the  founda- 

*Tf  Xe'^raiK'on  ties,  and  those  ties  are  not  properly  tamped, 
thev  are  S  to  heave  up  the  best  pavement  than  can  be  laid. 

ff  th!  rail^are  on  cast-iron  yokes  embedded  in  concrete,  and  those 
concrete  foundations  under  the  yokes  are  not  adequate,  so  that  the 
ra"ls  settle,  they  will  bi-eak  up  the  best  concrete  and  asphalt  pave- 

T/vofhave^hnliSy-company  responsible  for  the  foundation 
unde7?he  rails,  and  the  cfty  res^pon^ible  for  the  pavmg,  there  is  go- 
ino^  to  be  a  constant  source  of  trouble  and  difficulty.  So  the  sug- 
3ion  has  been  made  that  if  the  companies  are  to  be  relieved  from 
t^e  cost  oYpavLg  and  maintaining  the  pavement  between  the  rails, 
-.wnnM  he  fetter  to  go  one  step  further  and  let  the  city  acquire  title 
tLThe  loadbed-that  f^  the  rails  and  their  foundations-leasing  them 
Ta  private  operating  companies.  In  other  words,  it  would  be  muni- 
dpal  ow^ershfp  of  the  roadbed,  but  with  private  operation  of  the 

'"ThaTsugSon  has  this  advantage  over  privately  owned  roadbed 
•M  ^,Slitional  advantage:  It  has  one  advantage  as  far  as  paving 
Ts  coSfrne'd  anS  it  has  thfs  additional  advantage,  that  a  munici- 
lu!^  nwnir.Vthe  roadbed  can  extend  that  roadbed  when  and  where 
rt'^S^^nrthals  one  of  the  difficulties  under  commission 
Sgulation  of  street  railways-that  is,  the  difficulty  of  extending  a 
Rvltem  without  injustice  to  the  company.  That  is,  m  the  past, 
when  thire  was  no  commission  regulation,  companies  would  extend 
7heii  lines  into  the  suburte  on  the  strength  of  prospective  profits. 
With  the  present  commission  regulation  of  the  rates  of  return  and 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1011 

with  rates  of  service  fixed  by  the  commission,  the  companies  hesitate 
to  make  extensions  of  their  lines,  and  there  are  a  number  of  ex- 
tensions— local  extensions — that  I  think  ought  to  be  made,  that  I 
am  sure  that  either  company  would  hesitate  to  make,  because  they 
would  not  promise  to  be  compensatory  within  a  reasonable  time — 
that  is  the  phraseology  of  our  law ;  and  without  such  a  promise  the 
commission  really  has  not  the  power  to  grant  them,  or  to  compel  thi^ 
extension  to  be  made. 

So  that  the  paving  difficulty  and  the  extension  difficulty  would  be 
solved  by  a  municipal  or  local  ownership  of  the  roadbed;  and  that 
intermediate  relationship  between  complete  private  ownership  and 
control  and  municipal  ownership  and  control  does  not  have  one  ob- 
jection that  has  been  voiced  to  complete  municipal  ownership  and 
operation,  and  that  is  that  street-railway  traction  is  not  now  limited 
to  the  confines  of  a  city,  but  runs  well  out  into  the  suburbs,  p.nd  runs 
to  other  communities. 

With  the  city  owning  the  tracks,  it  could  lease  operating  rights  to 
interurban  railways,  or  permit  the  existing  railway  corporations, 
which  are  interurban  in  character,  or  extending  into  the  country  to 
operate ;  and  it  would  have  this  advantage,  that  if  certain  lines  were 
not  as  profitable  as  other  lines,  the  rental  fixed  for  those  lines  could 
be  made  such  as  would  yield  a  return  at  a  given  rate  of  fare, 
whether  that  be  flat  or  zone  fare,  and  a  larger  rental  charge  on 
other  more  profitable  lines,  if  it  were  desired  to  maintain  a  single 
rate  of  fare  throughout  the  community. 

It  seems  to  me  that  it  would  be  a  very  flexible  arrangement.  But 
I  see  a  great  disadvantage  from  an  engineering  standpoint  in  di- 
viding the  responsibility  for  the  foundations  of  the  rails  and  the 
paving  between  the  rails.     It  is  a  difficult  thing  to  work  out 

Commissioner  Meeker.  What  you  say  regarding  Washington 
would  apply  to  other  cities  with  equal  force,  I  suppose  ? 

Col.  Kirrz.  I  do  not  pretend  to  any  special  knowledge  of  condi- 
tions m  other  communities,  but  I  think  it  would 

Commissioner  Meeker.  Pavements  act  in  about  the  same  way  in 
Baltimore  and  New  York  that  they  do  in  Washington « 

Commissioner  Sweet.  How  many  other  communities  have  two 
railroad  systems? 

Col.  KuTz.  I  can  not  answer  that. 

Commissioner  Sweet.  Is  not  that  in  itself  a  serious  evil? 

heS  of  tir  city  ''''  ^"^  ^^^'  ^""'^  ^^  ^^""^  competitive  in  the 

riT  Kvtl^Yri:--?^'^  you  finished  your  formal  statement,  Colonel  ? 
^  Col.  KuTZ.  I  think  so.     I  do  not  believe  anything  else  suggests  it! 

I  will  say  this,  that  in  connection  with  this  sufreested  munirinnf 
ownership  of  the  rails  that  suggestion  is  made  firffon  th^LsuX 
thP  .-i^n^  T'.^'^^fi^^'"  ^^^  ^^^^«  ^^^  ^«t  be  effected,  either  thrS 

Congress  1,,XuSiyh^  -erger;  but 

of  law,  the  roadbeds  of  these  companies       ^       '  "'''^''  ^'''  ^'""'''^ 

160643°— 2a-voL  2 4 


1042    PROCKEDINGS  OF  FEDERAL  ELECTEIC  RAILWAYS  COMMISSION. 

I  would  say  that  many  of  the  evils  --^^^/i^P/^^^'^^?  aL^^^^^ 

o'clock,  Colonel,  for  such  cross-examination  as  the  commisbiu 
ic\  TYi*vke 

?t  g^A^MAt  w/will  take  a  recess  at  this  point,  then,  until  -2 

""Imereupon,  at   1   o'clock  p.   m.,   a  recess  was  taken  until   2 
o'clock  p.  m.)  ^^^  ^^^^^ 

STATEMENT  OF  IIEUT.  COL.  KTJTZ-ContinMd. 

The  Chaikmak.  You  may  proceed  with  your  formal  statement  if 
you  have  anything  further,  Colonel.  chairman. 

"V^of  KiTi^Nvell.  I  have  not  thought  very  much  about  it. 

The  ChI^bmIn.  If  that  is  an  embarrassing  question  just  now  do 

not  answer  it.  ,      ,  i  _ 

^  ^r.JJ!^^^r^"  c^^tlTthe  operating  cost  is  paid  out  in 
maintenance  requirements? 

The  CiiAiKMAN.  Is  it  substantial  ? 

?ii  ?r„ii:  'Afuvr-  ito-sw ...» -  »„ »,.. 

railways? 

CoL  KuTz.  Yes.  ,      «     .  ,w        9 

Mr.  Warren.  Altogether?    AH  taxes?,  . 

Pni  KuTz    You  are  talking  about  municipal  tax,  1  take  it . 

but  not  necessarily  on  the  power  plant. 
The  Chairman.  Or  upon  the  equipment? 

?^;;  SI«m:."'So  tXTSt  the  .one  system  is  a  proper 

*^rS  K^f  Yei'Tdo ;  from  the  standpoint  of  equity  or  standpoint 
of^meaJurld  sli^ce,  I  teHeve  the  public  should  pay  for  what  they 

T 

Wai 

people  they  would  prefer  a  flat  rate,     m  lact,  it  mifo 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1043 

Step  toward  equalizing  these  two  companies  and  it  might  be  that  this 
commission  might  feel  imi>elled  to  adopt  such  a  plan  in  order  to 

equalize  the  two  companies.  ,     x,r    .  •      ^       -o    1      ,    p  -pi^ 

The  Chairman.  You  stated  that  the  Washington  Railway  &  t.lec- 

tric  Co.  owns  the  Potomac  Power  Plant? 

Col.  KuTz.  They  own  all  the  stock  m  it. 

The  Chairman.  And  that  plant  supplies  us  with  our  light' 

Col.  KuTz.  All  the  heat  and  light  for  the  city  and  all  the  power 
for  the  Washington  Railway  &  Electric  Co. 

The  Chairman.  Does  the  company  keep  the  accounts  of  these  two 
companies  separately  ? 

Col.  KuTz.  Yes.  •    •      0 

The  Chairman.  That  is  a  requirement  of  your  commission? 

Col.  KuTz.  They  are  required  by  law  to  maintain  the  power  com- 
pany as  a  separate  and  distinct  corporate  entity.  The  commission 
has  m  times  past  taken  exception  to  its  contractual  relations  existing 
between  the  power  company  and  the  railway  company,  expressing 
the  opinion  that  they  were  not  dealing  with  each  other  at  arm's 
length,  but  since  the  commission  completed  its  valuation  of  the 
power  company's  property  and  established  rates  for  service  based 
on  that  value,  it  is  a  matter  of  indifference  to  the  company  whether 
the  two  are  in  common  ownership  or  in  separate,  distinct  ownership. 

The  Chairman.  Referring  now  to  the  suggestion  that  the  city 
should  own  the  roadbed  and  that  they  should  lease  the  operation  to 
some  private  concern — is  there  any  city  in  the  United  States  wiiich 
you  know  of  that  operates  under  such  conditions  ? 

Col.  KuTz.  No,  unless  you  would  consider  the  New  York  City 
subways  as  in  that  class.  The  subways,  as  I  understand  it,  are 
owned  by  the  city,  are  they  not? 

The  Chairman.  Are  you  addressing  the  question  to  the  commis- 
sion ? 

Col.  KuTz.  Well,  I  did  not  mean  to  put  it  that  way. 

Commissioner  Gadsden.  No. 

Col.  KuTz.  They  are  separately  owned? 

Commissioner  Gadsden.  The  city  has  an  interest,  but  not  the  ma- 
jor interest  by  a  great  deal. 

The  Chairman.  Does  this  system  prevail  in  any  of  the  European 
countries? 

Col.  KuTz.  Not  to  my  knowledge ;  no. 

The  Chairman.  What  would  be  the  particular  advantage  in  hav- 
ing the  city  own  the  roadbed  and  not  the  equipment  and  i>ermit 
private  operation? 

Col.  KuTz.  Well,  the  two  advahtages  that  I  see  to  the  munici- 
pality's owning  the  roadbed  are  the  question  of  paving,  for  which  I 
think  the  responsibility  can  not  be  divided  between  the  company 
and  the  municipality — the  maintenance  of  the  track  or  maintenance 
of  the  roadbed  must  be  the  function  of  the  company  or  a  function  of 
the  municipality;  you  can  not  place  the  burden  of  maintaining  the 
rails  on  the  company  and  the  burden  of  maintaining  the  pavement  on 


city  s  owning  the  rails  is  the  ease  with  which  extensions  can  be  made 


H 


1044    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

^.hel•e  the  interests  of  the  community  d™^  extend  the  Pnvi- 
Ipore  of  niakinff  those  extensions  irrespective  of  the  wishes  or  win  or 
financial  condition  of  the  street-railway  company.  Sometimes  they 
havra  win  to  do  a  certain  thing  and  have  not  the  financial  ability 

^''The'cH AIRMAN.  Would  not  that  result  in  the  municipality's  build- 
in  Jtracks  out  into  certain  sections  of  the  city  ^h<^^re  operation  wo^ 
not  be  profitable  and  thereby  comi>elling  the  city  to  have  that  mvest 
ment  for  a  long  time  without  getting  any  return* 

Col  KuTZ  No;  they  can  adjust  all  that  in  the  rentals  which  they 
clmie  the  operat  ng  company.  They  can  make  that  higher  or  lower ; 
t  ev  can  iiX  "low  on  suburban  lines  or  high  on  the  city  lines.  It 
eeL  to  me  there  is  such  flexibility  in  thei-e.that  they  can  make  the 
TZt  railway  svstem  absolutely  self-sustaining  or,  if  they  want  to 
start  out  on  the^assumption  that  a  5-cent  fare  is  the  maximum  fare 

fat'  shou?S  be  charges,  they  can  adjust  their  rentals  so  that  tiie 
coinoanv  would  be  able  to  operate  successfully  on  a  5-cent  tare. 

The^HAiRM^N.  How  would  you  take  care  of  the  rental  if  the 
company  was  opeiating  on  a  bra'nch  line  that  did  not  even  pay  op- 

'"coI^kX"  Well,  I  think  that  such  a  line,  of  course  should  not  be 
buSt    IfTt  was  an  existing  line,  I  would  absorb  the  shortage  on  ono 

^Te'S^M?.' Would  it  not  be  quite  a  temptation  on  the  part 
of  ctv  officers  to  extend  lines  out  into  different  sections  of  the 
rountrv  for  the  purpose  of  developing  them,  hoping  thereby  to  bmld 
TtKy  and'sprLd  the  populkion  over  other  territories  regard- 
l!L  of  the  effect  it  had  and  regardless  of  the  need? 

Col  Kuxr  We  1,  of  course,  our  legislation  in  the  Distric  of  Co- 
lumbia is  in  the  hands  of  Congress  and  we  would  assmne  that  Con- 
jrrpsci  has  wisdom  not  to  do  the  absurd  thing.  ,     „  »„ 

^  The  ChTibman.  Do  you  advance  this  idea  as  applicable  alone  to 
Washington  or  should  it  apply  to  all  cities « 

Col  Kotz  I  have  thought  of  it  only  m  connection  with  the  Dis- 
trict of  cSumbia.  It  is  our  problem  here;  and  I  think  in  many  of 
the  large  c  ties  of  the  country  the  zone  system  is  essentia  .  I  do  not 
telieve  ft  is  essential  in  Washington.    It  may  be  advisable  for  cer- 

%f CHAitMA"-  If  the  city  should  own  the  track  why  should  it  not 

likewise  own  the  equipment  and  operate  the  plant?  .      j^  ^^ 

likewise  o  4  ^  ^  question  of  judgment     In  my 

o^n  opSn;  Ste  operation  would  be  more  successful  than  pub- 
?i^  opeSn  and  if  you  have  private  operation  the  cars  and  equip- 
ment should  be  owned  by  the  operating  company.     .....  ^^ 

The  Cha^^  Congress  has  given  your  commission  the  right  lo 

fix  f-ires     Do  vou  believe  in  the  flexible  fare! 

Col   kui^^^  Such  as  outlined  by  the  Secretary  of  War  as  desir- 

^^ThTPHAiRM^N  Generally  should  fares  be  fixed  in  the  franchise 
or^n  the  itwf oi  slS  the^y  be  open  to  adjustment  to  meet  operat- 

'''!:or£T'l  believe  they  should  be  adjusted  from  time  to  time  by 
the  commission  established  for  that  purpose. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1045 

The  Chairman.  Do  you  apprehend  that  there  would  be  any  dif- 
ficulty in  making  a  reasonable  adjustment  of  fares  to  bring  m  a  fair 
return  upon  the  property  after  you  had  fixed  the  value? 

Col  KuTz.  Yes ;  in  Washington  I  do,  because  of  the  peculiar  situ- 
ation of  the  two  companies.  If  the  companies  were  noncompetitive 
it  would  be  a  very  simple  matter  to  take  the  valuation  of  each  and 
establish  rates  of  service  that  would  yield  to  each  a  fair  return  on 
the  fair  value.  But  with  two  competing  companies  it  would  be  al- 
most suicidal,  it  seems  to  me,  for  one  company  even  to  accept  a 
higher  rate  of  fare  with  the  other  company  operating  on  a  lower 
rate  of  fare.  I  think  the  cream  of  their  business  would  be  diverted 
to  the  company  with  the  lower  rate  of  fare.  Not  only  would  there 
be  a  distinct  loss  in  the  total  number  of  passengers  carried  but  there 
would  be  enormous  congestion  on  the  other  line,  such  a  congestion 
as  would  make  the  service  to  the  public  as  a  whole  very  much  worse 

than  it  is  to-day. 

The  Chairman.  Did  you  say  that  the  gross  revenue  of  these  com- 
panies during  the  past  year  is  less  than  it  was  prior  to  the  war? 

Col.  KuTz.  No,  no;  very  much  greater.    It  is  greater  in  1919  than 
it  was  in  1918,  the  number  of  passengers  carried.     But  prior  to 
the  war  the  Washington  Railway  &  Electric  Co.  with  its  greater 
mileage  was  also  carrying  a  greater  number  of  passengers.    To-day 
the  companies  are  each  carrying  practically  90,000,000  passengers 
yearly. 
Mr.  Warren.  How  many? 
Col.  KuTz.  About  90,000,000. 
Mr.  Warren.  Each  of  them? 
Col.  KuTz.  Yes. 

The  Chairman.  What  has  caused  that  shift  in  the  riding  habit? 
Col.  KuTz.  Well,  Washington  very  greatly  increased  in  popula- 
tion during  the  war,  possibly  100,000.     The  great  majority  of  those 
are  in  the  congested  part  of  the  town  and  are  better  served  by  the 
Capital  Traction  Co.  than  by  the  Washington  Electric. 

Commissioner  Sweet.  You  are  a  West  Point  graduate,  are  you 
not? 

Col.  KuTz.  Yes. 

Commissioner  Sweet.  Have  you  had  anything  to  do  with  the  street 
railroads  in  other  cities  besides  Washington? 
Col.  KuTz.  No,  nothing  whatever. 
Commissioner  Sweet.  You  are  an  engineer? 
Col.  Kutz.  Yes. 

Commissioner  Sweet.  Does  the  difficulty  that  you  speak  of  with 
regard  to  the  tracks  of  a  street-railroad  company  and  the  defects 
that  arise  from  an  improper  foundation  for  them — is  that  the  only 
reason  you  have  for  thinking  that  the  tracks  ought  to  belong  to  the 
municipality  ? 
Col.  Kutz.  No. 

Commissioner  Sweet.  I  mean  outside  of  the  suburban  extensions. 
I  notice  you  spoke  of  that. 

Col.  Kutz.  Those  are  the  two  reasons. 
Comniissioner  Sweet.  Any  others  besides  those  two  ? 
Col.  Kutz.  No  ;  I  do  not  think  of  any. 

Commissioner  Sweet.  Could  not  the  matter  of  extensions  be  prop- 
erly cared  for  by  the  public — I  am  not  speaking  necessarily  now  of 


1046    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK. 

the  city  of  Washington  but  of  cities  generally.  Do  you  see  any 
reason  "why  the  matter  of  extensions  could  not  be  properly  cared  for 
by  a  proper  system  of  control  on  the  part  of  the  city,  having  the 
initiative  in  the  city  where  it  is  necessary,  or  a  restrictive  right  on 
the  part  of  the  city  if  the  company  should  be  inclined  to  extend 
where  it  ought  not  to — that  you  could  not  handle  it  in  the  way 
of  control  by  proper  legislation  and  control  on  the  part  of  the  city  ? 

Col.  KuTZ.  Well,  it  is  controlled  in  Washington  to-day  by  the 
authority  given  to  the  public-utilities  commission.  But  I  do  not 
think  it  is  satisfactorily  controlled.  We  can  curb  the  company 
in  so  far  as  unreasonable  extensions  are  concerned  and  we  have  cer- 
tain powers  to  compel  the  construction  of  extensions.  We  have 
ordered  several  extensions  since  this  commission  was  established, 
but 

Commissioner  Sweet.  Have  you  any  means  of  enforcing  your 

order  ? 

Col.  KuTZ.  By  means  of  fines. 

Commissioner  Sweet.  Where  you  have  given  such  orders  they  have 
been  observed  or  obeyed? 

Col.  KuTz.  They  have.  All  extensions  that  have  been  ordered 
have  been  built. 

Commissioner  Sweet.  But  as  I  said,  I  am  not  restricting  this  now 
to  the  city  of  Washington.  Do  you  see  any  reason  why  that  matter 
of  extensions  could  not  be  cared *^for  by  proper  legislation  under  the 
control  of  the  city  just  as  well  if  the  tracks  wexe  owned  by  private 
corporations  as  if  they  were  owned  by  the  city? 

Col.  KuTz.  I  think  in  public  ownership  the  city  would  have  a 
great  deal  more  freedom  of  action. 

Commissioner  Sweet.  But  if  under  the  law  it  had  absolute  control 
•and  power,  it  could  do  the  same,  could  it  not,  practically  as  if  it 
owned  the  tracks,  in  regard  to  extensions? 

Col.  KuTz.  Well,  I  doubt  very  much  whether  it  could  compel  a 
private  company  to  make  extensions  that  would  not  reasonably  be 
compensatory.  That  is  one  of  the  fundamentals  of  our  law,  and 
based  on  the  Wisconsin  law;  and  I  think  the  commissions'  funda- 
mental law^  is  much  the  same  throughout  the  country. 

Commissioner  Sweet.  Would  not  the  municipality  run  up  against 
exactly  the  same  difficulty  in  private  operation  over  tracks  laid 
where'  there  would  not  be  enough  income  produced  to  pay  operat- 


ing expenses 


2 


Col.  KuTz.  I  think  that  could  be  adjusted  in  the  rental.  Take, 
for  instance,  this  local  situation:  Rock  Creek  Park  is  a  great  asset 
to  the  city ;  it  is  accessible  now  to  the  residents  who  own  automo- 
biles and  to  a  limited  few  in  the  vicinity  of  the  park,  but  it  would 
be  open  to  thousands  of  others  if  we  had  a  street-railway  line  run- 
ning from  the  vicinity  of  Brightwood  Reservoir  across  the  park; 
and  such  a  line  would  be  enormously  patronized  on  Sundays  and 
Saturday  afternoons  and  on  holidays,  but  it  probably  could  not  be 
operated  seven  days  a  week  to  any  great  advantage.  Such  a  line,  I 
think,  if  built  by  the  city,  could  be  operated  by  existing  companies 
and  the  rental  which  would  be  charged  for  such  a  line  would  be 
small — it  would  be  insignificant,  because  the  company  would  not 
get  ver3^  much  out  of  it,  but  it  would  enable  it  to  run  its  cars  there 


*^i 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1047 

on  Sundays  and  holidays  and  bring  the  people  into  the  park  when 
they  wanted  to  go  there,  and  service  on  the  other  five  days  of  the 
week  would  be  incidental.  Now,  from  an  operating  standpoint, 
that  service  w^ould  pay  on  holidays  and  the  people,  I  think,  could 
well  afford  to  make  that  investment  even  though  they  got  but  a  small 
return  upon  the  investment,  but  it  would  be  an  investment  in  the 
interest  of  the  people  as  a  whole. 

Commissioner  Sw^eet.  You  are  stating  now  a  rather  exceptional 
case,  are  you  not?  Because  you  have  in  mind  the  fact  that  the  city 
and,  in  one  point  of  view,  the  people  of  the  United  States  have  made 
an  investment  in  Rock  Creek  Park,  and  you  think  that  it  w^ould  be 
a  good  thing  for  the  general  public  to  get  all  the  benefit  out  of  that 
park  that  is  possible  and  that  a  street  railroad  there  would  facilitate 

that  purpose. 

Col.  KuTZ.  In  other  words,  I  look  upon  street-railroad  lines  as 
only  a  special  form  of  roadway.  We  build  roads  into  the  park  for 
the  accommodation  of  the  rich  man's  vehicle.  Why  should  we  not 
build  roads  into  the  park  for  the  accommodation  of  the  poor  man's 
vehicle,  which  is  the  street-car  ? 

Commissioner  Sweet.  Well,  the  same  thing  would  apply  to  a  great 
many  other  things.  For  instance,  access  to  the  Tidal  Basin  for 
bathing  purposes,  and  a  lot  of  other  things  that  seem  to  be  somewhat 
more  emphasized  in  Washington  than  in  most  other  cities.  Is  not 
that  true?  Are  not  we  inclined  to  a  little  more  paternalism  here 
than  in  other  cities? 

Col.  KuTz.  I  do  not  call  that  paternalism.  I  am  not  a  great  be- 
liever in  paternalism  mj'self.  Let  me  give  you  another  example. 
The  commission  held  a  hearing  a  short  time  ago  as  to  the  advisa- 
bility of  building  ti*acks  on  B  Street  from  Seventh  Street  west  to 
Seventeeth  or  Eighteenth  or  Nineteenth  to  the  group  of  Govern- 
ment buildings  recently  erected  there.  The  estimates  submitted  to 
the  commission  indicated  it  would  cost  $700,000  or  more.  Now,  such 
a  line  would  be  a  great  convenience  to  a  lot  of  people  and  probably 
would  not  add  anything  to  the  revenues  of  the  company.  I  do  not 
believe  they  would  haul  any  more  passengers,  but  they  would  haul 
them  a  little  closer  to  where  they  want  to  go.  In  other  words,  it 
would  improve  the  service  so  far  as  those  people  are  concerned,  but 
it  would  not  add  one  penny  to  the  revenues  of  the  company  at  pres- 
ent. The  connnission  did  not  order  that  extension,  having  in  mind 
the  very  peculiar  conditions  existing  at  the  present  time  and  the 
difficulty  in  obtaining  additional  capital,  probably  influenced  by  the 
fact  that  some  other  extensions  which  were  under  consideration 
seemed  to  represent  a  better  investment  than  that  one. 

There  is  a  case  in  which  a  community  I  think  would,  if  it  owned 
all  the  tracks,  extend  that  system  for  the  accommodation  of  the 
thousands  of  people  who  go  there  every  morning  and  come  back 
every  night,  and  yet  the  private  company  will  not  do  it  unless  it 
is  compelled  to  do  it. 

Commissioner  Sweet.  What  you  were  saying.  Colonel,  seems  to 
me  to  rather  emphasize  the  need^^of  cooperation  between  the  electric- 
raihyay  companies  and  the  public.  In  other  words,  you  are  laying 
particular  stress  upon  the  fact  that  the  general  public  ought  to  be 
served  under  various  circumstances  that  you  have  mentioned  here — 


1048    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

like  the  Rock  Creek  Park  and  the  B  Street  case — even  though  the 
company  operating  them  might  not  make  any  money  out  of  that 
))articular  service.  So  that  you  are  recognizing  what  Secretary 
Baker  spoke  of  this  morning  as  the  need  of  considering  the  subject 
from  the  standpoint  of  the  public  as  well  as  of  the  company  and 
its  officers.     Is  not  that  your  view  ? 

Col.  KuTZ.  Yes;  surely. 

Commissioner  Sweet.  Do  you  think  that  the  general  public 
throughout  the  United  States  are  informed  on  that  subject  and 
realize  the  extent  to  which  the  public  ought  to  cooperate  in  the  enter- 
prise of  street  railroading? 

Col.  KuTZ.  Well,  I  think  it  is  a  very  vital  problem  in  every 
municipality. 

Commissioner  Sweet.  Is  not  that  one  of  the  very  important  things 
expre^ssed  by  Secretary  Baker  as  necessary  to  educate  the  people 
upon  ? 

Col.  Kutz.  Yes. 

Commissioner  Sweet.  If  the  people  of  the  United  States  under- 
stood the  situation  of  street-railroad  companies  to-day  just  exactly 
as  you  and  well-informed  people  do  understand  it,  the  difficulties  they 
are  encountering  to  make  even  enough  money  out  of  their  nickel 
fares  to  pay  operating  expenses,  to  say  nothing  about  interest  on  the 
investment  and  the  need  that  everybody  recognizes  of  making  the 
securities  sufficiently  safe  and  certain  of  paying  a  fair  rate  of  interest 
so  as  to  attract  new  capital — that  is  necessary,  is  it  not? 

Col.  Kutz.  Yes,  but 

Commissioner  Sweet.  If  the  people  understood  that,  do  you  think 
there  would  be  any  hesitation  on  the  part  of  the  general  public  to 
paying  larger  fares  or  fares  that  would  be  commensurate  with  the 
service  that  is  rendered  ? 

Col.  Kutz.  I  think  they  would  be  perfectly  willing  to  pay  fares 
commensurate  with  the  services  rendered  as  far  as  sufficient  to  pay 
operating  expenses  and  a  fair  return  upon  a  fair  value  of 

Commissioner  Sweet.  That  is  it  exactly. 

Col.  Kutz.  But  let  me  illustrate.  We  will  assume  that  7  per  cent 
i*epresents  a  fair  rate  of  return.  Now,  suppose  the  company  can 
not  borrow  money  at  that  rate;  shall  the  rate  of  return  be  increased 
in  order  to  establish  the  credit  of  the  company  and  enable  it  to  bor- 
row more  money  to  make  extensions,  or  shall  the  municipality  make 
those  extensions  itself  when  it  can  borrow  money  at  a  very  much  less 
rate  ?  Is  it  not  economical  for  the  city  to  own  its  tracks  rather  than 
to  pay  the  company  to  own  them  at  such  a  rate  that  they  can  borrow 
money  on?  In  other  words,  we  give  the  company  here  during  this 
war  i^eriod,  the  street-railway  company  and  the  other  companies  we 
have  power  over,  6  per  cent  return  only  during  this  period  of  read- 
justment. The  companies  come  to  us  and  say  6  per  cent  may  be  a 
fair  rate  of  return  upon  our  fair  value,  but  it  is  not  sufficient  to 
enable  us  to  borrow  money.  Now  we  want  the  extension.  The  city 
can  borrow  money  at  less  than  6  per  cent.  The  company  must  have 
more  than  6  per  cent  before  it  can  borrow  money. 

Commissioner  Sweet.  Then  you  would  name  that  as  the  third  rea- 
son why  it  is  better  for  the  general  public  to  own  the  street-railroad 
tracks? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1049 

Col.  Kutz,  Yes. 

Commissioner  Sweet.  Could  not  that  argument  be  carried  to  an 
absurd  limit  in  almost  every  enterprise?  If  the  Government  can 
borrow  money  at  a  lower  rate  than  anybody  else,  why  not  have  the 
Government  borrow  money  and  invest  it,  and  all  that  sort  of  thing? 

Col.  Kutz.  That  is  true,  and  if  it  were  not  for  the  other  two  advan- 
tages, I  do  not  think  I  would  advocate  it. 

Commissioner  Sweet.  You  would  not  say  much  about  that  one  ? 

Col.  Kutz.  No,  because  I  believe  there  are  certain  advantages  In 
private  operation  which  you  would  not  get  from  public  operation. 

Commissioner  Sweet.  In  this  matter  you  spoke  of  firsts 
which  you  seemed  to  regard  as  the  strongest  reason  for  the  city's 
owning  the  tracks,  let  me  ask  you  whether  a  plan  of  this  kind  would 
not  answer  the  purpose  as  you  see  it:  I^et  the  city  do  the  paving  orig- 
inally— that  is,  if  a  new  street  is  to  be  paved  let  the  city  pave  it — 
and  then  have  a  provision  in  the  franchise  by  which  the  company 
would  be  called  upon  to  replace  or  repair  any  damages  to  that  paving 
that  it  might  cause  and  leave  that,  we  will  say,  in  Washington  to  you 
as  engineer  commissioner  or  in  any  city  to  the  proper  authority. 
Would  not  that  be  just?  Would  not  that  answer  practically  the  pur- 
pose you  have  in  mind  with  regard  to  city  ownership  of  the  tracks? 

Col.  Kutz.  My  contention  applied  to  the  maintenance  of  the  pave- 
ment rather  than  to  the  cost  of  the  original  pavement.  That,  I  think, 
might  well  be  assumed  by  the  city. 

Commissioner  Sweet.  You  understand  that  now  in  both  cities  the 
street-railroad  companies  are  required  to  pay  the  original  cost  of 
paving  between  the  tracks  and  a  little  outside  ? 

Col.  Kutz.  Exactly. 

Commissioner  Sweet.  Is  that,  in  your  judgment,  fair  ? 

Col.  Kutz.  No.  I  think  that  the  city  can  probably  afford  to  do 
that  better  than  to  have  the  companies  do  it. 

Commmissioner  Sweet.  Do  you  see  it  the  same  as  Secretary  Baker 
did — that  that  is  an  unjust  burden  upon  the  riders  upon  street-rail- 
road cars? 

Col.  Kutz.  It  increases  the  capital  investment.  In  our  valuations 
we  considered  that. 

Commissioner  Sweet.  Does  it  not  all  have  to  be  paid,  in  the  final 
analysis,  out  of  the  nickel  that  the  company  receives  ? 

Col.  Kutz.  It  certainly  does. 

Commissioner  Sweet.  And  the  riders  on  the  cars  furnish  the 
nickels  ? 

Col.  Kutz.  Tliey  do. 

Commissioner  Sweet.  And  the  people  who  have  automobiles,  and 
do  not  patronize  the  street  railroads— do  they  pay  any  part  of  that 
paving,  under  these  circumstances? 

Col  Kutz.  Any  part  of  the  paving  between  the  rails  ? 

Commmissioner  Sweet.  Yes;  any  part  of  the  paving  between  the 
rails. 

Col.  Kutz.  No. 

Commmissioner  Sweet.  Do  you  think  that  is  just,  as  between  one 
part  of  the  community  and  the  other  ? 

Col.  Kutz.  Well,  they  probably  do  not  use  that  part  of  the  street 
very  much.  They  probably  stay  off  of  that  part  of  the  street,  ex- 
cept when  it  is  necessary  for  them  to  cross. 


1050    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOlf.        ' 

Commissioner  Sweet.  Don't  they  have  to  cross  tlie  tracks?  Don't 
thPY  require  good  paving  there? 

Col.  KuTz.  Yes. 

Commissioner  Sweet.  But  do  they  pay,  under  the  present  system  ? 
Do  the  owners  of  automobiles  pay  any  part  of  that  paving  between 
the  tracks  ? 

Col.  KuTz.  No. 

Commissioner  Sweet.  That  burden  is  thrown  on  the  poorest  part 
of  the  community  that  can  not  afford  automobiles,  largely,  is  it  not? 

Col.  Kt^Tz.  Yek 

Commissioner  Sweet.  Do  you  think  that  is  the  right  thing  to  do  i 

Col.  Kt  Tz.  Well,  it  is  just  as  fair  as  to  impose  any  tax  on  the  street- 
railway  company.  The  tax  that  is  put  on  the  gross  revenues  of  the 
conipa'ny  comes  out  of  the  nickel  paid  by  the  street-car  traveling 
l>ublic,  and  it  goes  into  the  general  treasury  for  the  benefit  of  the 
poor  and  the  ricli  alike.    There  is  no  difference  between  the  two 

Commissioner  Sweet.  Two  wrongs  do  not  make  a  right;  do  they? 

Col.  Kutz.  No:  but  I  say  it  is  in  the  same  class  with  taxes. 

Commissioner  Sweet.  You  did  not  quite  answer  my  question,  as  to 
whether  the  plan  I  suggested  of  having  the  original  paving  done  by 
the  city  and  the  injury  that  might  be  caused  by  defective  work  on 
account  of  the  railroad  company  cared  for  by  the  company. 

Col.  Kutz.  I  think  that  would  be  eminently  fair. 

Commissioner  Sweet.  Whether  that  would  not  be  eminently  fair, 
and  as  good  an  arrangement  from  the  public's  standpoint  as  to  have 
the  tracks  owned  by  the  city— I  mean  upon  that  one  feature  of  your 
proposition  ? 

Col.  Kutz.  No,  I  do  not  think  so ;  because  if  the  city  were  to  own 
the  tracks  it  would  consider,  in  connection  with  the  paving  of  the 
street,  the  condition  of  the  tracks,  and  the  street  would  be  paved  at 
about  the  time  it  became  necessary  to  renew  the  rails  or  the  founda- 
tions of  the  rails.  In  other  words,  it  would  be  done  together,  as  one 
job,  when,  considering  all  the  circumstances,  the  time  had  come  to 
pave  the  street. 

Now,  when  we  put  an  expensive  pavement  down — concrete  founda- 
tion and  asphalt  top— and  we  call  on  the  company  to  pave  the  space 
between  its  rails  and  for  2  feet  exterior  thereto  with  a  similar  pave- 
ment, the  company  may  find  itself  with  ties  that  are  only  half  worn 
out,  and  it  is  a  question  whether  those  ties  are  to  be  wholly  replaced 
or  whether  they  are  to  be  bedded  into  a  concrete  base,  and  probably 
it  would  be  wise  to  take  them  out  and  throw  away  the  unexpired 
life  nf  those  ties;  and  the  question  arises  whether  the  rails  should 
be  replaced  with  heavier  rails,  and  also  there  is  a  question  sometimes, 
as  to  whether  overhead  should  be  converted  into  underground,  in 
connection  with  paving.  There  are  a  great  many  questions  which,  to 
my  mind,  would  be  better  solved,  if  the  ownership  of  everything  in 
the  street  bed  was  in  the  city.  I  go  so  far  as  to  say  that  I  believe 
that  all  pipes  and  conduits  and  everything  in  the  streets  should 
be  owned  by  the  city  and  leased  only  by  the  utilities  that  need 

them. 

Commissioner  Sweet.  Not  to  have  private  corporations  digging 
up  the  streets  to  get  at  their  own  property  ? 

Col.  Kutz.  Not  to  have  them  own  any  structures  in  the  street. 
Then  you  can  go  ahead,  when  you  come  to  pave  the  street,  and  if 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1051 

thei-e  is  no  conduit  in  the  street  you  will  put  one  in  there,  even 
though  there  is  no  immediate  demand  for  that  conduit,  because  there 
will  be  a  demand  in  the  course  of  a  few  years.  If  there  is  no  gas 
main  in  the  street,  you  will  put  one  down,  even  if  there  is  not  a  single 
applicant  for  gas ;  and  if  there  is  need  for  street-car  tracks,  you  will 
put  them  down.    . 

Commissioner  Sweet.  You  recognize  the  fact,  do  you  not,  that  it 
would  be  a  difficult  and  very  long-drawn  out  proceeding  to  change 
the  street  railroads  of  the  United  States  in  the  various  cities  over 
to  that  system  now? 

Col.  Kutz.  Yes. 

Commissioner  Sweet.  Would  it  meet  the  present  acute  situation 
at  all?  With  bankruptcy  staring  in  the  face  a  whole  lot  of  these 
companies,  do  you  think  such  a  proceeding  as  that  could  be  put  into 
operation  before  they  were  completely  down  and  out? 

Col.  Kutz.  No;  but  I  do  not  see  why  we  should  not  begin  right 
now  and  say  that  every  additional  mile  of  street-car  track  within  the 
city  shall  be  put  down  at  the  expense  of  the  city.  There  is  no  rea- 
son why  that  could  not  be  done,  and  that  would  settle  the  question 
of  extensions  once  and  for  all.  The  rest  could  remain  in  the  owner- 
ship of  the  companies  pending  a  complete  settlement  of  this  question. 

Commissioner  Sweet.  That  seems  to  me  to  be  feasible,  as  far  as 
that  is  concerned.  But  how  about  the  tracks  that  are  alread}"  laid 
and  belong  to  the  companies?  How  would  you  transfer  the  title  to 
the  general  public? 

Col.  Kutz.  That  would  have  to  be  valued  and  paid  for. 

Commissioner  Sweet.  And  then  money  would  have  to  be  raised  by 
the  municipalities  to  buy  them? 

Col.  Kutz.  Yes. 

Commissioner  Sweet.  And  municipal  bonds  given,  I  suppose,  and 
so  ©n  ? 

Col.  Kutz.  Yes. 

Commissioner  Sweet.  How  about  the  rolling  stock — the  cars  and 
equipment  of  the  railroads?  Would  you  have  them  belong  to  the 
companies  or  to  the  public  ? 

Col.  Kutz.  I  would  have  them  belong  to  the  companies.  I  believe 
in  private  operation. 

Commissioner  Sweet.  That  is  all  I  have. 

The  Chairman.  Just  one  question.  You  spoke  of  valuing  this 
property,  and  that  you  expected  the  report  to  be  i-eady  within  a 
month.  Can  you  state  for  the  record  the  differences  in  the  amounts 
claimed  by  the  railroad  company  and  those  presented  by  your  en- 
gineers? If  you  have  not  your  figures  at  your  fingers' ends,  you  may 
supply  them  for  the  record. 

Col.  Kutz.  I  can  insert  in  the  record  the  estimates  submitted  by  the 
companies  and  the  estimates  submitted  by  the  commission's  account- 
ants and  by  the  commission's  engineer,  first,  as  to  the  historical  cost, 
and  second,  as  to  the  reproduction  cost.  I  can  not  give  you,  at  this 
time,  any  figures  representing  the  views  of  the  commission. 

Commissioner  Sweet.  I  undei^tood  you  to  say  this  morning  that 
you  considered  it  to  be  to  the  disadvantage  of  a  city  to  have  two  rail- 
wav  systems,  such  as  W^ashington  has.     Did  you  say  that  ? 

Col.  Kutz.  Yes. 


1052     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Commissioner  Sweet.  You  think  that,  in  the  matter  of  telephones? 
and  street  railways,  and  perhaps  other  similar  public  utilities,  there 
ought  to  be  a  monopoly  ? 

Col.  KuTz.  Absolutely ;  a  regulated  monopoly. 

Commissioner  Sweet.  A  regulated  monopoly? 

Col.  Kirrz.  Yes. 

Mr.  Warren.  Where  such  a  situation  does  exist,  I  gather  from 
what  you  said  that  you  think  the  zone  system  would  be  the  best  way 
of  meeting  it,  adjusting  the  affairs  of  the  two  systems?  I  do  not 
want  to  ask  you  anything  that  will  embarrass  you. 

Col.  KuTz.  You  mean  as  to  the  two  systems  such  as  we  have  in 
Washington? 

Mr.  Warren.  Yes;  or  ii>  an}'  other  city  where  such  a  thing  may 
exist. 

Col.  KuTz.  It  seems  to  me  that  two  remedies  might  be  applied  to 
the  local  situation  that  would  go  far  toward  equalizing  matters. 
One  is  to  change  the  present  form  of  taxation,  changing  the  base 
from  the  gross  revenue  to  the  net  revenue ;  and  the  other  is  to  estab- 
lish a  zone  system  which  would  bring  about  equality,  or  reduce  the 
inequality  due  to  the  fact  that  ono  has  10  lines  going  to  the  District 
boundary  and  the  other  has  2  lines  going  to  the  district  boundary. 

Mr.  Warren.  In  applying  that,  it  would  be  designed,  I  suppose, 
to  have  the  zone  system  apply  to  the  longer  line  so  as  to  equalize 
the  fare  in  that  way  ? 

Col.  KuTz.  The  suggestion  as  made  by  one  of  the  companies  be- 
fore the  commission  was  to  establish  zone  points  which  were  ap- 
proximately equidistant  from  the  central  part  of  the  community, 
and  yet  which  were  more  or  less  natural  zone  points. 

Mr.  Warren.  And  have  the  fares  the  same  on  the  corresponding 
zones? 

Col.  KuTz.  The  fares  the  same  within  that  irregular  line.  Theii  an 
additional  fare  of  2  cents  for  a  ride  outside  of  that  line. 

Mr.  Warren.  But  for  the  same  fares  on  a  corresponding  zone  for 
both  companies? 

Col.  KuTz.  Yes. 

Mr.  Warren.  Any  suggestions  you  have  made  to  the  commission, 
or  that  were  made  to  you,  perhaps,  or  that  you  have  repeated  to  the 
commission,  of  public  ownership  of  the  roadbed — that  would  include 
simply,  in  a  place  like  Washington,  where  the  underground  system  of 
distribution  exists,  the  ownership  of  the  conduit  and  the  conductor, 
electric  conductor  in  the  conduit? 

Col.  KuTz.  I  should  say  it  certainly  ought  to  include  the  contact 
bar  in  the  slot. 

The  electric  distribution  system  of  the  Washington  Electric  Rail- 
way Co.,  is  intimately  bound  up  with  its  power  and  lighting  dis- 
tribution system;  so  just  the  point  at  which  public  ownership  should 
end,  would  be  a  question  for  study  and  very  careful  consideration. 

Mr.  Warren.  In  the  case  of  an  overhead  wire  system,  would  the 
suggestion  include  the  ownership  of  the  overhead  wire  equipment? 

Col.  KuTz.  No;  I  should  think  that  would  be  better  left  to  the 
operating  company.  It  might  be  taken  over  or  not,  dependent  on 
local  circumstances. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1053^ 

Mr.  Warren.  The  principal  ground  on  which  that  suggestion  ap- 
peals to  you,  I  take  it,  is  to  eliminate  the  divided  responsibility 
for  the  pavement  and  the  condition  of  the  surface  of  the  highway  ? 

Col.  KuTz.  Yes.  The  very  great  difficulty  I  see  in  the  maintenance 
of  an  adequate  pavement  between  the  rails,  with  the  responsibility 
for  pavement  resting  on  one  body  and  the  responsibility  for  the 
foundation  of  the  rails  and  tracks  resting  on  another  body. 

Mr.  Warren.  Would  there  not  be  some  danger  of  that  divided  re- 
sponsibility merely  shifting  from  the  responsibility  for  the  mainte- 
nance of  the  pavement  to  a  responsibility  for  accidents  ?  A  good 
many  accident  claims  are  based  on  the  condition  of  the  pavement  or 
of  the  track? 

Col.  KuTz.  If  the  city  owned  the  tracks  and  maintained  the  pave- 
ment, it  would  be  solely  held  responsible  for  accidents  due  to  defects 
in  that  pavement ;  as  it  is  now,  they  generally  sue  both  the  company 
and  the  District. 

Mr.  Warren.  They  are  going  to  get  one  or  the  other  ? 

Col.  KuTz.  Yes. 

Mr.  Warren.  WTiat  you  said  about  taxes— the  desirability  of  re- 
lieving the  company  from  taxes — I  suppose  would  apply,  in  your 
judgment,  to  any  other  burdens  which  are  not  technically  taxes  but 
amount  to  the  same  thing — any  taking  of  money  from,  or  imposing 
expense  upon,  the  companies.  For  instance,  the  payment  for  traffic 
officers  or  the  charging  of  license  fees  for  cars  ? 

Col.  KuTz.  Yes,  I  think  that  is  an.  injustice  to  the  street-railway 
companies,  to  make  them  bear  the  entire  expense  of  traffic  police- 
men, because  the  number  of  street-cars  passing  such  a  point  is  prob- 
ably less  than  the  number  of  automobiles  passing  the  same  point  ia 
a  given  time. 

Mr.  Warren.  And,  too,  the  automobiles  probably  require  traffic 
regulation  more  than  the  street-cars  ? 
Col.  KuTz.  Yes. 

Mr.  Warren.  That  would  be  on  the  theory,  I  presume,  applying^ 
to  all  those  burdens,  that  the  car  rider  ought  not  to  pay  indirect  taxet 
which  ins  fanancial  condition  might  not  oblige  him  to  pay  directly? 

Col.  KuTz.  This  commission  has  opposed  all  forms  of  free  servi(i- 
has  opposed  free  service  even  to  its  policemen  and  firemen,  thouffh 
they  now  receive  it,  as  a  matter  of  law. 

Mr.  Warren.  I  think  that  is  all. 

The  Chairman.  That  is  all,  Colonel.    Thank  you  very  much. 

(Witness  excused.) 

STATEMENT  OF  MR.  ROGER  W.  BABSON. 

^   The  Chairman.  Now,  Mr.  Babson,  you  may  proceed  to  talk  to  us^ 
m  your  own  way.     You  know  what  the  problem  is. 

Mr.  Babson.  That  is  very  kind  of  you  gentlemen,  I  am  sure 
It  seems  to  me  that  there  are  three  general  methods  of  pursuit 
VVe  have,  first,  the  method  of  private  ownership  and  public  regu- 
lation, which  apparently  has  fallen  down,  or  else  we  would  not  ba 
nere  to-day. 

Secondly,  we  have  the  proposed  systems  of  municipal  ownershii> 
and  service-at-co3t  plans  and  similar  methods,  which  seem  to  me  veiy 


X 


1054    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MMISSI03T. 

good  from  the  sti^et-railway  security  holders'  point  of  -^^^.^ut  I 
sort  of  feel  that  some  day  there  may  be  a  back-fire  to  such  methods. 
The  third  method  would  be  for  the  communities  to  relieve  the  street 
railways  of  their  taxations  and  various  other  burdens  and  permit 
them  to  charge  what  fares  they  wish  to  charge  but  to  rtct  the 
public  by  permitting  a  proper  competition  m  the  line  of  judicious 

^^^iTeeTv^^^  strongly  that,  in  the  end,  the  street  railways  and  the 
public  would  be  better  off  by  opening  the  throttle  and  letting  the 
street  railways  and  the  automobiles  fight  the  thing  out  on  a  service 
basis,  and  each  class  charge  what  they  need  to  do  the  business,  in 
some  communities  the  street  railway  would  go  out  of  business,  and 
we  would  have  a  bus  service  instead.  In  other  communities  the 
buses  would  go  out  of  service,  and  we  would  have  ^.f  ^,^^-^™J 
service  instead.  But  in  all  the  communities  we  would  have  decent 
service,  which  we  are  not  having  at  the  present  time. 

I  think  the  street-railway  difficulties  began  in  Massachusetts,  for 
instance,  when  the  State  came  in  and  practically  fathered  the  roads. 
The  State  approved  the  issues  of  securities,  and  protecteil  the  roads 
against  competition,  and  the  roads  became  lazy  and  indifferent,  the 
service  fell  down,  and  that  was  the  beginnmg  of  the  trouble. 

If  the  roads  had  been  obliged  to  fight  for  their  existence  from 

'the  first,  had  been  free  to  charge  what  fares  they  wanted  to  charge, 

and  had  been  dependent  on  service  for  holding  their  business,  I  do 

not  think  we  would  have  the  trouble  so  acute  as  we  have  it  at  the 

^"^Now,  ofcourse,  if  a  monopoly  existed,  I  would  believe  in  the  regu  • 
lation  of  that  monopoly,  because  it  is  necessary.  If  one  pers<)n 
owned  all  the  coal  in  the  country,  I  certainly  believe  that  the  price 
of  coal  should  be  determined  by  some  commission.  But  so  long  as 
different  interests  own  the  coal,  and  so  long  as  there  are  other  kinds 
of  fuel,  I  think  that  in  the  end  it  would  cost  the  public  more,  either 
in  money  or  in  poor  service,  to  have  the  price  of  coal  regulated  at  the 

^ITo  nS^'know  that  I  have  made  myself  clear,  but  I  feel  very 

keenly  on  that  point.  .  ,     , 

The  real  difficulty  with  the  street-railway  situation  came  with  the 
automobile.  It  is  not  the  labor  problem,  as  I  see  it  It  is  not  the 
h^^h  cost  of  materials.  Those  are  factors.  But  labor  ha,s  always 
gradually  increased  in  price;  the  materials  have  gradually  increased 
Tn  price.  It  was  Henry  Ford  who  hit  the  street-railway  system  a 
Low  between  the  eyes.  If  he  had  only  been  bright  enough  to  sell 
street-railway  securities  short  when  he  built  his  plant,  he  would 
have  been  making  double  the  money  that  he  is  making  now 

Take  Massachusetts,  for  instance:  There  are  less  than  5,000  street- 
cars in  Massachusetts,  and  there  are  186,000  automobiles  There  are 
186,000  automobiles  and  less  than  5,000  street  cai^.  There  is  the 
fundamental  difficulty,  as  I  see  it,  with  the  street-railway  situation. 

Now  we  are  in  it,  the  question  is,  how  are  we  going  to  get  out  of 
it     We  can  not  get  out  of  it,  certainly,  by  having  our  hands  tied 

There  are  only  two  ways.  Either  to  sell  out  to  the  conimunities, 
through  municipal  ownership  or  service-at-cost  plan,  or  else  have  a 
free  rein  to  win  out  on  the  basis  of  service. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION,    1055 

There  are  some  communities  where  the  street-railway  companies 
can  not  win  out  on  the  basis  of  service;  but  there  are  other  com- 
munities where  I  feel  very  strongly  that  the  street  railways  could 
win  out  if  they  were  free  to  charge  what  the  traffic  would  bear  and 
were  freed  from  restrictions  on  such  questions  as  paving,  which  is 
simply  an  inheritance  from  the  old  horse-car  days;  the  reason  we 
have  to  pay  for  the  paving  between  the  tracks  is  that  we  used  to 
liave  horses  that  wore  out  the  dirt  between  the  tracks.  And  I  further 
believe  that  in  Boston,  for  instance,  where  we  have  the  lO-cent  fares 
to-day,  if  the  city  and  the  State  were  not  holding  the  umbrella  over 
the  Boston  Elevated  Co.,  and  the  Boston  Elevated  Co.  was  free  to 
charge  any  fare  that  they  wanted  to,  but  had  to  stand  on  its  own 
basis,  the  people  of  Boston  would  get  better  service  and  lower  fares 
than  they  have  got  to-day. 

The  Chairman.  Please  develop  that  thought,  Mr.  Babson.  Give 
us  your  reasons  for  it. 

Mr.  Babson.  Well,  it  is  the  old  principle  that  what  is  everybody's 
business  is  nobody's  business.  We  had  what  is  called  the  Massa- 
chusetts Electric.  The  Boston  companies  were  controlled,  around 
Boston,  by  the  Massachusetts  Electric  Co.;  that  was  the  holding 
company.  All  the  stock  of  the  Bay  State  was  owned  by  the  Massa- 
chusetts Electric 

We  used  to  have  stockholders'  meetings  once  a  year;  and  we 
would  have  a  couple  of  hundred  people  present,  and  we  would  have 
real  meetings,  and  real  interests.  There  has  been  a  service-at-cost 
plan  adopted  there,  and  the  fare  has  been  raised  to  10  cents.  Last 
Thursday  a  stockholders'  meeting  was  called  and  over  3,000  notices 
were  sent  out,  printed  notices,  two  weeks  in  advance;  and  there  were 
only  3  people  there — a  clerk  of  the  company,  a  lawyer  from  the  at- 
torney's office  and  myself,  out  of  the  whole  3,000.  Why?  Because 
we  feel  that  the  State  is  holding  the  umbrella;  and  the  interest  is 
gone.  ♦ 

The  Chairman.  You  are  sui'e  of  your  reward? 

Mr.  Babson.  Of  coui-se,  practically  we  are  not,  because  we  simply 
have  a  contract  for  10  years,  and  even  now  they  are  talking  about 
having  the  State  break  that  contract,  and  not  wait  the  10  years.  I 
believe  that  ultimately  in  this  world  everything  has  to  stand  on  its 
own  basis.  Unless  a  trade  is  good  for  both  parties,  it  is  not  good 
for  either  party  in  the  end.  Sometime  or  other,  one  side  or  the 
other  is  going  to  kick  over  the  traces.  A  bargain  that  is  not  good 
for  both  sides  is  not  good  for  either  side,  ultimately. 

The  city  of  Boston  is  trying  the  service-at-cost  plan  now,  and 
we  have  got  the  lO-cent  fare.  It  costs  you  10  cents  to  ride  a  quarter 
of  a  mile  in  Boston  on  the  street  railway.  The  same  system  has  been 
adopted  by  the  Bay  State,  which  is  the  largest  street  railway  in  the 
country,  I  understand,  which  takes  in  around  Boston.  So  much  for 
the  stockholders'  interests. 

The  wageworker  is  in  the  same  position.  He  looks  upon  it  as  a 
grab  bag,  you  might  say;  that  it  is  not  coming  out  of  anybody 
especially,  that  it  is  coming  out  of  the  who'e  public  in  general,  and 
that  the  spirit  of  the  age  is  to  grab,  and  consequently  his  restraints 
are  off. 

It  may  work  out  all  right,  but  I  f 3el  very  strongly  that  before  wo 
go  headlong  into  municipal  ownership  or  service  at  cost  we  should 


ft 


1056    PROCEEDINGS  OF  FEDERAL. ELECTRIC  RAILWAYS  COMMISSION. 

free  the  street  railways  from  their  shackles,  that  we  should  stop 
persecuting  them,  and  give  them  an  opportunity  to  save  themselves. 
And  I  am  not  sure  but  that,  in  giving  them  an  opportunity  to  save 
themselves,  some  communities  would  save  themselves  likewise;  be- 
cause the  relation  between  the  prosperity  of  a  community  and  th3 
prosperity  of  its  street-car  system  is  very,  very  vital. 

A  monopoly  should  be  regulated.  I  feel  that  very  strongly.  I 
think  that  before  the  auto  came  the  commissions  did  right  in  regu- 
lating these  street  railways  and  controlling  them;  but  now  that  tlie 
auto  has  come  into  the  field,  it  seems  to  me  that  a  monopoly  no 
longer  exists,  and  there  is  no  reason  why  the  States  and  cities  should 
shackle  these  roads,  until  they  again  become  a  monopoly.  I  do  not 
know^  whether  I  have  made  myself  clear  or  not. 

I  stand  very  strongly  on  the  belief  that  before  we  shift  bodily 
over  to  municipal  ownership  or  the  service-at-cost  plan  we  should 
give  the  street  railways  a  chance  to  work  out  their  own  salvation. 
If  they  can  do  it,  then  the  problem  is  solved.  If  they  can  not  do  it, 
then  we  have  to  consider  municipal  ownership  or  service  at  cost. 
But  before  we  take  up  the  municipal  ownership  or  service  at  cost, 
let  us  give  the  street-railway  companies  a  chance  to  work  out  their 
own  salvation  by  removing  the  restrictions,  by  removing  the  taxation, 
by  quitting  the  persecutions,  and  by  giving  .them  an  opportunity  to 
charge  what  fare  they  want  to  charge. 

The  Chairman.  Let  me  see  if  I  understand  just  what  your  plan 
is.  In  the  city  of  Washington  we  have  street  railroads  and  automo- 
biles. Would  you  favor  repealing  the  ordinance  which  establishes 
the  tax,  assuming  that  there  is  an  ordinance  here  I 

Mr.  Babson.  I  would. 

The  Chairman.  And  also  repealing  the  paving  costs? 

Mr.  Babson.  Yes.  There  is  absolutely  no  moral  or  economic  or 
physical  reason  for  the  paving  costs. 

The  Chairman.  And  repealing  the  law  which  gives  the  commis- 
sion the  right  to  fix  reasonable  charges? 

Mr.  Babson.  That  depends  on  whether  they  have  a  monopoly  or 
not.  If  they  have  a  monopoly,  I  think  that  the  commission  should 
establish  rates. 

The  Chairman.  You  are  familiar  with  the  city  of  Washington. 
You  know  the  number  of  automobiles? 

Mr.  Babson.  I  know  that  there  is  practically  no  jitney  service 
in  Washington ;  I  do  not  know^  why  that  is. 

Commissioner  Meeker.  The  trouble  is  that  jitnevs  here  charge 
$1.25. 

Mr.  Babson.  Those  are  not  jitneys.    Those  are  cars. 

The  Chairman.  There  is  a  monopoly,  in  your  judgment,  where  a 
street-car  company  has  not  the  jitney  competition? 

Mr.  Babson.  Yes. 

The  Chairman.  But  the  fact  that  there  are  hundreds  of  thousands 
of  automobiles,  privately  owned,  carrying  persons  to  and  from  busi- 
ness otherwise,  but  not  charging  for  it,  is  competition,  of  course  ? 

Mr.  Babson.  Yes;  and  that  has  been  what  has  put  the  street  rail- 
ways on  the  blink — the  automobile. 

The  Chairman.  You  do  not  expect  to  eliminate  competition  be- 
tween that  form  of  conveyance  and  the  street-car  company;  do  you? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1057 

Mr.  Babson.  No;  and  that  has  removed  the  great  cause  of  public 
regulation.  That  has  opened  the  door.  When  I  w^as  a  boy,  or  even 
15  years  ago,  it  was  either  a  question  of  taking  a  street-car  or  a 
slower  conveyance;  the  street-car  people  had  the  service.  That  is 
the  real  thing  that  counts  in  this  world — service.  The  street-car 
people  had  a  monopoly,  not  of  the  streets,  but  they  had  a  monopoly 
of  service.  They  could  get  you  there  quicker  than  any  other  form 
of  conveyance.  That  is  where  their  monopoly  lay — not  in  the  ftict  ' 
that  they  had  the  streets,  but  in  the  fact  that  they  had  the  quickest 
service.    Now  that  monopoly  has  gone. 

The  Chairman.  Are  you  willing  to  suggest  that  where  there  arc 
automobiles  and  no  jitney  service,  the  laws  giving  the  commissions 
the  right  to  fix  just  and  reasonable  rates  should  be  repealed? 

Mr.  Babson.  Not  for  the  first  thing,  no;  I  would  not  say  that.  I 
would  say  that  the  first  step  in  such  communities  w^ould  be  to  relieve 
the  roads  of  taxation  and  paving  and  various  other  forms  of  perse- 
cution.   That  is  the  first  step. 

The  Chairman.  But  I  believe  you  do  say  that,  even  where  there 
are  automobiles,  they  in  and  of  themselves  prevent  the  street-car 
company  fix)m  getting  excessive  charges,  in  the  absence  of  regula- 
tion?    * 

Mr.  Babson.  Yes;  they  do  remove  the  great  need  of  regulation; 
bu*  I  would  not  give  up  the  regulation.  I  should  keep  the  regula- 
tion up  my  sleeve,  in  such  cases. 

The  Chairman.  We  are  always  going  to  have  automobiles  with 
us,  of  course  ? 

Mr.  Babson.  Yes. 

The  Chairman.  So  that  there  is  always  going  to  be  competition 
between  that  form  of  conveyance  and  the  street-car  ? 

Mr.  Babson.  Yes;  and  a  great  deal  more.  *» 

The  Chairman.  Then,  in  the  last  analysis,  if  your  conclusion  is 
right,  we  would  have  to  remove  all  restrictions  from  the  street-car 
companies  for  all  time? 

Mr.  Babson.  Well,  I  think  that  sufficient  unto  the  day  is  the  evil 
thereof.  What  we  are  interested  in  now  is  getting  them  out  of  their 
present  predicament.  I  think  the  way  things  are  moving  it  is  a 
pretty  unsafe  thing  to  say  what  we  shall  have  to  do  for  all  time ;  but 
I  think  right  now  that  the  next  step  is  to  remove  the  restrictions, 
taxations,  and  the  various  forms  of  persecution,  as  I  call  it,  and  give 
them  a  chance  to  save  themselves,  just  the  same  as  the  man  in  the  coal 
business. 

The  Chairman.  What  do  you  refer  to  as  "  persecutions?" 

Mr.  Babson.  I  mean  these  questions  about  the  traffic,  for  instance : 
in  some  cities  where  they  have  to  pay  for  a  portion  of  the  traffic  of- 
ficers, for  example.  Also  I  think  this  matter  of  paving  between  the 
rails,  at  the  present  time,  has  absolutely  no  excuse  whatever,  because 
in  a  great  many  cities  it  is  the  only  part  of  the  street  that  is  used  by 
the  automobiles.  I  took  a  trip  yesterday  from  Boston  out,  and  it 
was  a  double-track  road,  and  the  only  place  where  the  automobiles 
could  run  with  any  degree  of  comfort  was  on  the  paving  which  was 
put  m  by  the  street  railways.  The  boulevard  on  each  side  of  this 
paying  was  very  rutty  and  very  bad,  and  no  automobile  could  run 
in  it  with  any  comfort. 

160643"— 20— VOL  2 5 


1058    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Now,  you  have  described  traffic  conditions  and 
the  paving.     What  other  persecutions  have  you  in  mind? 

Mr.  Barson.  I  should  say  the  general  taxation.  In  Massachusetts 
we  have,  I  think,  three  forms :  We  have  the  property  tax  and  we  have 
the  excise  tax  and  we  have  the  franchise  tax. 

The  Chaikman.  Do  you  regard  as  persecutions  most  of  these  ef- 
forts by  which  the  public  seeks  to  imi>ose  charges  or  burdens  upon  the 
street-railway  companies  ? 

Mr.  Babson.  Not  when  they  had  a  monopoly.  I  believe  in  the 
taxation  of  monopolies,  absolutely.  If  I  had  charge  of  the  taxing  of 
this  Government,  I  would  i*aise  every  cent  by  the  taxation  of  monopo- 
lies and  land  values  and  natui^l  resources.  I  would  take  off  income 
taxes  and  take  off  all  taxation  on  enterprise  and  effort.  I  should  raise 
my  money  from  the  taxation  of  monopolies  and  natural  resources  and 
land  values,  and  so  forth.  But  when  that  mono|X)ly  has  gone  by, 
and  when  the  sti-eet-car  business  is  no  different  froni  the  dry-goods 
business  or  the  restaurant  business  or  any  other  business  in  town — 
which  is  the  condition  it  is  in  in  most  of  the  communities  to-day — I 
should  relieve  it  from  those  burdens. 

The  CHAiRjtf  AN.  You  mean  that  the  city  should  permit  the  fight  to 
go  on  between  the  street-car  and  the  jitney  service  and  see  who  wins 
out? 

Mr.  Babson.  I  do  not  think  I  used  the  word  "fight."  If  I  did,  I 
did  not  mean  to.     I  would  let  competition  go  on,  however. 

The  Chairman.  Let  us  assume  in  a  city  of  100,000  population  that 
competition  between  the  street-car  and  the  jitney  was  so  intense  that 
the  street-car  company  had  to  abandon  its  service  for  a  while,  and  the 
jitneys  w^ere  left  as  the  exclusive  means  of  conveyance.  Would  you 
think  a  city  could  permanently  exist  with  nothing  but  the  jitiiey 
sel*tice  ? 

Mr.  Babsox.  I  think  there  is  a  difference  between  the  jitney  serv-ice. 
It  depends  on  what  you  call  jitney  service.  We  have  on  Fifth  Ave- 
nue, New  York,  for  example,  a  bus  service.  Would  you  call  that 
a  jitney  service? 

The  Chairman.  I  should  call  that  bus  service.  I  suppose  after 
all  it  is  rather  an  elaborate  form  of  jitney;  is  it  not? 

Mr.  Babson.  I  feel  that  in  the  majority  of  our  cities,  if  the  bus 
had  come  before  the  street  railway,  there  would  be  no  street  rail- 
ways at  all. 

The  Chairman.  Do  you  feel  that  in  the  economic  development  of 
this  question  the^'itney  may  win  out  over  the  street-car? 

Mr.  Babson.  \es;  in  certain  communities,  and  in  a  great  many  of 
the  suburban  lines,  absolutely. 

In  this  Bay  State  Street  Railway,  which  I  think  is  the  largest 
street-railway  system  in  the  country  to-day—I  do  not  know  about 
that,  perhaps  Mr.  Gadsden  can  tell  me— but  I  am  unfortunately  a 
director  in  that  company,  and  we  have  over  a  thousand  miles  of 
track,  and  our  own  engineers  testified  that  on  270  miles  the  company 
could  better  afford  io  run  buses,  gasoline  buses.  On  270  miles. 
Our  own  engineer  has  reported  that,  advising  us  to  run  buses  on 
270  miles,  and  rip  up  the  tracks. 

The  Chairman.  Has  your  board  acted  upon  that  recommendation? 

Mr.  Babson.  No;  we  got  the  service-at-cost  plan,  you  know.  We 
were  getting  5  cents  a  year  ago,  and  now  we  get  10  cents ;  so  we  are 


PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1059 

simply  going  to  wait  and  see  what  happens.     In  the  meantime,  we 
insiders  are  selling  out  just  as  fast  as  we  can,  and  when  the  10 
3^ears  are  up,  you  will  not  find  your  Uncle  Dudley  or  any  one  of 
us  that  will  own  a  share  of  stock  or  a  bond. 
The  Chairman.  You  are  doing  what  you  said  Henry  Ford  ought 

to  have  done  ? 

Mr. Babson.  Yes. 

The  Chaikman.  Do  you  believe  that  the  bus  would  be  able  to  give 
sufficient  public  service  to  the  community  represented  by  this  270 
miles  of  surburban  line  ? 

Mr.  Babson.  Yes;  better  service. 

The  Chairman.  Better  service  than  the  street-car? 

Mr.  Babson.  Yes.  I  think  everything  is  dependent  on  the  serv- 
ice. I  think  it  is  all  a  question  of  service,  and  that  ultimately  is 
what  will  win  out. 

If  you  and  I  got  into  an  argument  about  some  horses,  as  to  which 
was  the  better  horse,  we  would  not  hold  a  hearing  to  determine  which 
was  the  better  horse.  We  would  let  them  race.  But  on  everv  other 
question  under  the  sun  that  I  know  of  except  horse  racing  and  box- 
ing, we  have  to  determine  it  by  vote;  and  I  feel  that  ultimately  the 
thing  is  going  to  be  decided  on  the  basis  of  service,  and  that  the 
sooner  we  make  the  test,  the  better  off  the  companies  will  be,  and 
the  better  off  the  communities  will  be. 

The  Chairman.  How  long  have  you  had  experience  as  a  stock- 
holder in  street-railroad  companies  and  as  a  director,  Mr.  Babson  ? 

Mr.  Babson.  Why,  I  graduated  from  the  Massachusetts  Institu- 
tion of  Technology  as  a  civil  engineer  in  1898,  and  the  first  job  I 
had  was  to  hold  a  tape  on  the  street  railway,  on  the  Bay  State  Street 
Kailway,  in  which  I  am  now  a  director.  Out  of  the  l/KK)  miles,  I 
worked  in  connection  with  the  construction  of  100  of  those  miles,  as 
an  engineer  and  surveyor.  Then  I  went  with  a  bond  house,  and 
we  sold  most  of  the  bonds  of  the  system,  and  then  I  started  in  busi- 
ness for  myself,  in  reporting  on  securities. 

The  Chairman.  So  that  you  have  been  a  student  of  it  since  18881 

Mr.  Babson.  A  student ?*^  Well,  I  have  been  in  tiie  machine. 

The  Chairman.  I  meant  a  student  in  the  broad  sense. 

Mr.  Babson.  Yes.  I  am  practically  out  of  the  stocks.  I  am  still 
a  director,  but  I  have  just  enough  to  hold  my  job,  and  that  is  all. 
I  still  have  bonds,  but  I  do  not  pose  as  a  stockholder. 

The  Chairman.  What,  in  your  judgment,  is  the  future  of  the 
street-railway  industry? 

Mr.  Babson.  I  think  in  some  communities,  in  the  large  cities,  they 
will  be  profitably  operated,  and  there  will  be  a  sound  business  for 
them.  I  think  in  other  communities  they  will  be  disbanded.  I  do 
not  think  one  problem  can  apply  to  all. 

For  instance,  we  assumed  that  candles  had  gone  out  of  business 
when  kerosene  came,  and  that  keix)sene  went  out  of  business  when 
gas  came,  and  that  gas  went  out  of  business  when  electricity  came ; 
yet,  as  a  matter  of  fact,  there  are  more  candles  and  more  kerosene 
and  more  gas  being  sold  to-day  than  ever  before. 

I  think  that  the  street  railways  of  the  future  will  find  their  func- 
tion with  subways  and  elevated  lines ;  and  I  think  in  a  great  many 
communities  the  street  railway  has  come  to  stay.    For  instance,  you 


1060    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


can  get  in  from  Brookline  into  the  center  of  Boston  more  quickly 
by  street  railway  than  you  can  in  a  taxicab.  That  is  the  test.  And 
I  believe  for  that  service  the  street  railway  should  be  allowed  to 
charge,  if  it  wanted  to,  as  much  as  the  taxicab. 

On  the  other  hand,  there  are  hosts  of  other  instances  where  you 
can  travel  better  by  taxicab  than  you  can  by  street-car. 

I  think  the  thing  ultimately  is  going  to  be  solved  on  the  basis  of 
service,  whatever  system  we  have,  whether  we  have  municipal  owner- 
ship or  service-at-cost  plans,  or  what  not. 

Commissioner  Meeker.  You  do  not  think  any  w^orkingman  can 
pay  taxicab  fares,  even  in  Boston,  do  you  ? 

Mr.  Babsox.  On  the  other  hand,  the  workmen  do  not  live  in 
Brookline. 

Commissioner  Meeker.  I  judged  that  you  meant  that  as  an  illus- 
tration, to  apply  not  merely  to  that  service? 

Mr.  Babson.  In  that  case,  I  really  think  they  could  charge  10 
cents,  or  more  than  10  cents,  perfectly  satisfactorily.  And  the  sub- 
ways of  Boston  were  not  built  to  serve  the  working  people.  The 
subways  were  not  built  in  the  direction  of  the  poor.  They  were 
built  in  the  direction  of  the  rich  sections. 

The  Chairman.  You  stated  a  moment  ago  that  the  stockholder  in 
the  Boston  company  has  lost  his  interest  in  the  company  because  he 
is  sure  of  his  return,  on  this  cost-of -service  plan? 

Mr.  Babson.  Well,  he  thinks  so. 

The  Chairman.  For  10  years,  at  least.  What  effect  has  thut  sys- 
tem upon  the  efficiency  of  labor? 

Mr.  Babson.  I  think  it  is  poor. 

The  Chairman.  You  are  not  getting  as  efficient  service  now  as  you 
had  before  ? 

Mr.  Babson.  No,  we  are  not. 

The  Chairman.  To  what  do  you  attribute  that  lack  of  efficiency? 

Mr.  Babson.  On  the  general  principle  that  what  is  everybody's 
business  is  nobody's  business,  and  the  fact  that  it  is  the  spirit  of  the 
age  now  to  do  as  little  as  you  can  and  get  as  much  as  you  can. 

The  Chairman.  There  has  been  a  great  ttirnover  of  labor  during 
the  past  few  years,  has  there  not  ? 

Mr.  Babson.  Yes. 

The  Chairman.  You  have  had  war  industries  up  in  Boston  and 
the  surrounding  neighborhoods,  have  you  not  ? 

Mr.  Babson.  Yes. 

The  Chairman.  And  they  have  paid  very  attractive  wages;  have 

they  not? 

Mr.  Babson.  Yes. 

The  Chairman.  And  they  have  taken  a  great  many  men  from  the 
street-car  industry,  have  they  not? 

Mr.  Babson.  Well,  practically  they  have  not. 

The  Chairman;  I  thought  they  had. 

Mr.  Babson.  No;  we  have  had  to  meet  them  by  raising  wages. 

The  Chairman.  So  that  there  has  not  been  a  very  large  turnover 
in  your  company?  , 

Mr.  Babson.  No.  There  has  not  been  a  large  turnover.  We  have 
had  a  lot  of  stealing.  •  . 

The  Chairman.  So  that,  even  with  your  experienced  men,  you 
still  have  not  as  good  service  as  you  had  before  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1061 

Mr.  Babson.  No. 

The  Chair3£an.  Is  there  more  theft  than  there  was  before  ? 

Mr.  Babson.  With  the  10-cent  fare  I  can  not  say  that  there  is, 
but  that  only  went  into  effect  the  1st  of  June.  We  first  had  a  7-cent 
fare  and  then  an  8-cent  fare,  and  we  had  a  tremendous  amount  of 
stealing  with  the  7  and  8-cent  fares. 

I  might  say,  by  wav  of  parenthesis,  that  I  believe  it  is  either  ii 
question  of  a  5-cent  fare  or  a  10-cent  fare.  I  feel  that  from  ex- 
perience, very  strongly. 

The  Chairman.  Could  you  not  use  tickets  and  have  some  middle- 
ground  fare? 

Mr.  Babson.  Possibly  w^ith  tickets,  yes;  but  people  do  not  seem 
to  like  tickets. 

The  Chairman.  Why  do  you  say  private  ownership  and  regula- 
tion has  broken  down? 

Mr.  Babson.  Because  the  roads,  so  many  of  them,  are  in  bank- 
ruptcy. 

The  Chairman.  Is  that  tlie  result  of  private  ownership  and  regu- 
lation, or  is  it  tlie  result  of  the  war,  with  its  attendant  high  prices, 
high  cost? 

Mr.  Babson.  That  is  the  result  of  the  automobile. 

The  Chairman.  The  result  of  the  automobile? 

Mr.  Babson.  The  result  of  the  automobile,  absolutely.  It  is  the 
automobile  that  puts  the  street  railways  where  they  are.  We  have 
less  than  5,000  street-cars  in  Massachusetts,  and  we  have  186,000 
automobiles.    There  is  the  answer  to  the  question. 

The  Chairman.  Do  you  feel  that  if  the  war  had  not  come  your 
street-car  industry  in  Boston  would  still  be  a  broken-down  in- 
stitution ? 

Mr.  Babson.  Yes;  I  do.  • 

The  Chairman.  What  was  the  condition  before  the  war  started? 

Mr.  Babson.  It  was  losing  money. 

The  Chairman.  It  was  losing  money? 

Mr.  Babson.  Yes. 

The  Chairman.  It  was  not  paying  its  capital  charges? 

Mr.  Babson.  No,  sir. 

The  Chairman.  How  long  has  the  company  failed  to  pay  the 
capital  charges? 

Mr.  Babson.  The  Boston  Elevated  never  failed,  as  such,  but  the 
Bay  State  has  failed  for  three  or  four  years. 

The  Chairman.  The  war  started  in  1914. 

Mr.  Babson.  I  thought  you  meant  our  war. 

The  Chairman.  I  think  the  prices  began  to  rise  the  moment  the 
European  war  started. 

Mr.  Babson.  Yes.    I  do  not  know  what  you  are  driving  at. 

The  Chairman.  I  am  trying  to  develop  the  facts. 

Mr.  Babson.  I  feel  very  strongiy  that  the  question  of  the  prices 
of  materials— even  if  the  prices  of  material  went  down  and  the  cost 
of  labor  went  down— that  would  not  solve  the  problem,  if  that  is 
the  point. 

Mr.  Warren.  You  mean,  applied  to  the  Boston  Elevated,  for 
instance? 

Mr.  Babson.  The  companies  that  I  know  about,  the  Boston  Ele- 
vated and  the  Bay  State  and  other  companies  that  the  Babson  system 


1062    PROCEEDmGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

of  organization  have  studied  and  put  out  reports  cm.  I  feel  that  the 
war,  you  might  say,  was  the  straw  which  broke  the  camel's  back,  but 
that  it  simply  hastened  the  period,  and  that  even  now,  if  the  prices  of 
material  went  bacl^  considerably,  and  even  if  wages  went  back,  which 
I  seriously  doubt,  we  would  still  have  the  problem  on  our  hands. 
The  Chairman.  Did  you  hear  Secretary  Baiter's  testimony  here 

this  morning? 

Mr.  Babson.  No,  I  did  not,  I  am  sorry  to  say. 

The  Chairman.  I  think  the  evidence  shows  that  in  Cleveland, 
under  a  cost-of -service  plan,  they  have  raised  the  fare  from  3  cents 
to  5  cents,  and  they  have  maintained  their  operating  expenses  and 
fixed  charges,  and  the5^  have  increased  the  wages  of  labor,  and  that 
in  all  respects  the  company  has  maintained  good  service.  If  that  is 
the  result  of  the  cost-of-service  plan,  why  isn't  it  a  good  system? 

Mr.  Babson.  Why,  where  that  is  the  result,  it  is  a  good  system. 
There  is  no  question  about  that. 

The  Chairman.  Why  should  it  not  be  the  result  generally? 

Mr.  Babson.  I  don't  know.    I  hope  it  will  be. 

The  Chairman.  You  say  in  Boston  you  have  got  it,  but  it  is  a 

failure?  . 

Mr.  Warren.  May  I  inject  a  question  there,  Mr.  Chairman^  Be- 
cause I  think  Mr.  Babson  is  talking  about  a  different  kind  of  cost 
of  service  from  the  testimony  that  has  come  here  fix)m  Cleveland. 

In  the  Boston  Elevated  cost  of  service,  Mr.  Babson,  the  scheme 
involves  a  guaranty,  does  it  not,  of  the  cost  of  service? 

Mr.  Babson.  Yes.  .     ,  , 

Mr.  Warren.  And  if  that  cost  of  service,  is  not  realized  by  thcf 
rates  charged,  the  deficit  is  assessed  upon  the  communities  served, 
and  they  pay  it  in  cash? 

Mr.  Babson.  Yes.    It  is  assessed  on  all  the  property  in  the  city. 

Mr.  Warren.  And  it  is  that  fact,  I  imagine,  that  influences  your 
judgment,  as  producing  this  lethargy  on  the  part  of  the  managers 

and  employees? 

Mr.  Babson.  Yes. 

Mr.  Warren.  They  feel  that  their  interest  in  the  cost  of  service 
is  going  to  come  anyway  ? 

Mr.  Babson.  Whatever  deficit  there  is  is  paid  by  the  State  treas- 
urer and  assessed  upon  the  communities  served. 

Mr.  Warren.  Yes.  In  Cleveland,  as  I  understand  the  situation 
there,  the  only  guaranty  is  that  the  company  may  charge  up  to  a 
certain  limit  a  sufficient  fare  to  meet  that  cost  of  service;  but  it  has 
to  get  it  out  of  the  operation  of  the  property  ? 

Mr.  Babson.  That  is  more  in  line  with  what  I  have  suggested. 

That  is  all  right. 

Mr.  Warren.  I  felt  that  you  were  talking  about  diffei-ent  phases 

of  cost  of  service. 

Mr.  Babson.  Yes.  . 

The  Chairman.  You  have  been  using  the  words     cost  of  service 
there  in  a  certain  general  way,  and  I  supposed  that  we  thorouglily 
understood  what  the  Cleveland  plan  was. 

Mr.  Warren.  We  call  it  cost  of  service.  Tliis  Boston  plan,  in 
Massachusetts,  is  called  "  service  at  cost " ;  but  it  is  a  very  different 
proposition. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1063 

The  Chairman.  Of  course. 

Commissioner  Meeker.  It  is  rather  a  guaranteed  income? 

Mr.  Warren.  It  is  a  guaranteed  income.  The  theory  is  that  the 
rates  are  going  to  take  care  of  it  Thus  far  they  have  not.  and 
nobody  cares  whether  they  do. 

Mr.  Babson.  The  Cleveland  plan  is  all  right.  That  is  practical!}' 
what  I  liave  in  mind — letting  the  company  charge  what  is  needed  to 
bear  the  traffic.     That  is  what  we  call  the  New  Brunswick  plan. 

Mr.  Warren.  That  Prof.  Ritchie  put  in  down  there? 

Mr,  Babson.  Yes. 

Mr.  Warren.  Except  that  had  an  element  of  an  inducement  to 

the  managers? 

Mr.  Babson.  Yes;  when  they  lower  the  fare  they  get  increased 
dividends,  and  when  they  increased  the  fare  they  get  a  reduction  of 
dividends. 

Mr.  Warren.  That  is  what  Secretary  Baker  spoke  of  this  morn- 
ing. 

Mr.  Babson.  I  think  of  all  the  different  systems  that  is  the  ideal 
system. 

Mr.  Warren.  That  New  Brunswick  system? 

Mr.  Babson.  Yes.  The  Governor  General  of  Canada  appointed  a 
commission,  of  which  Mr.  Guy  W.  Currier,  of  Boston,  was  chairman — 
and  you  ought  to  have  him  here  to  talk  before  you  if  he  has  not  been 
here.  I  think  that  was  tlie  most  scientific  plan  that  I  have  ever  seen 
in  print  at  all.  That  was  a  plan  like  the  Cleveland  plan,  except  that 
there  was  an  additional  inducement  to  the  stockholders  there. 

Mr.  Warren,  The  rate  on  the  stock  increases  as  the  fare  rate  goes 
down  ? 

Mr.  Babson.  Yes ;  a  similar  plan  is  adopted  in  connection  with  the 
gas  companies  in  Boston.  We  can  increase  the  dividends  only  as 
we  reduce  the  price  of  gas. 

The  Chairman.  How  long  has  that  been  in  effe€t  in  Boston  ? 

Mr.  Babson.  Twelve  or  fifteen  years. 

The  Chairman.  What  is  the  effect  of  it  ? 

Mr.  Babson,  The  effect  of  it  is  that  everybody  is  right  on  his  toes, 
and  we  have  a  very  efficient  organization  there.  We  have  the  best 
gas  engineers  in  the  country  and  we  have  very  low-priced  gas.  I 
think  it  has  been  successful. 

Mr.  Warren.  Judge  Anderson,  who  was  one  of  the  Interstate  Com- 
merce Commissioners  for  a  short  time,  w^as  very  much  interested  in 
the  introduction  of  that  at  the  time  Mr.  Babson  mentioned. 

Mr.  Babson.  And  Mr.  Brandeis. 

Mr.  Warren.  Yes;  both  were  very  keenly  interested  in  that. 

The  Chairman.  Is  this  commission  to  understand,  then,  that,  in 
your  opinion,  the  cost-of-service  plan,  such  as  they  have  in  Cleveland 
or  New  Bruswick  or  in  Boston 

Mr.  Babson.  Not  in  Boston. 

The  Chairman.  The  gas  ? 

Mr.  Babson.  In  Boston,  on  the  gas,  yes. 

The  Chairman.  Would  be  ample  protection  to  the  public  and  to 
capital  and  labor? 

Mr.  Babson.  Yes;  as  an  experiment,  as  the  next  step  to  try. 

The  Chairman.  Do  you  think  such  a  plan  would  be  the  best  solu- 
tion that  could  be  found  under  the  present  conditions? 


1064    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Mr.  Babson.  Yes. 

Commissioner  Sweet.  I  am  somewhat  interested  in  what  you  have 
said  about  street  railway  and  jitney  competition.  Do  you  mean  that 
as  a  general  proposition  throughout  the  country  or  do  you  think  it 
would  only  apply  in  certain  particular  localities? 

Mr.  Babson.  I  do  not  believe  in  letting  Tom,  Dick  and  Harry  run 
these  Ford  care  around.  I  believe  that  jitney  service  should  be  regu- 
lated, and  that  it  should  be  done  decently  and  properly,  and  in  a 
responsible  way  and  by  responsible  people.  On  the  other  hand,  I 
feel  that  the  attempt  which  some  street-railway  companies  show  in 
trying  to  throttle  jitneys  is  exercised  from  the  same  spirit  that  the 
old  stagecoach  owners  showed  when  they  tried  to  throttle  the  steam 
roads,  and  that  the  steam  roads  showed  when  they  tried  to  throttle 
the  street-cars.  We  went  through  the  same  thing  in  fighting  the 
steam-railroad  companies,  in  trying  to  get  our  franchises  and  in 
trying  to  build  our  roads.  They  thought  that  they  were  going  to  be 
ruined,  and  they  fought  us  at  every  turn.  They  would  be  better 
off  to-day,  and  we  would  have  been  better  off  to-day,  if  we  had  both 
sat  around  the  table  and  said :  "  Now,  here ;  there  is  a  certain  amount 
of  this  traffic  that  you  can  handle  the  best,  and  we  will  keep  out  if  it ; 
and  there  is  a  certain  amount  of  the  traffic  that  we  can  handle  the  best, 
and  you  can  keep  out  of  that."  And  if  the  thing  had  been  built  up  in 
a  coopei*ative  way,  our  street-railway  securities  would  be  better  off, 
and  our  steam-railroad  securities  would  be  better  off. 

Xow,  I  believe  that  the  street-car  people  are  up  against  the  same 
problem  with  the  jitneys.  1  think  there  are  certain  things  that 
the  jitnej's  or  buses — I  am  referring  to  buses  very  largely — I  think 
there  are  a  large  number  of  communities,  and  a  large  number  of 
routes,  especially  interurban  routes,  where  the  bus  or  the  jitney 
can  perform  better  service  than  the  street-car. 

Commission  Sweet.  Take  the  ordinary  street-railway  systems 
of  the  various  cities  of  the  United  States.  Do  you  think  that  it  is 
necessary  to  demonstrate  their  right  to  live  by  a  cat-and-dog  fight 
with  jitneys,  in  the  way  you  have  spoken  about? 

Mr.  Babson.  I  should  not  call  it  a  cat-and-dog  fight. 

Commissioner  Sweet.  Is  it  not,  in  most  cases,  demonstrable  sit- 
ting around  a  table,  without  ever  going  through  any  contest  at  all, 
that  in  certain  places  and  for  certain  purposes  the  street  railroad 
is  far  better  than  the  jitney? 

Mr.j  Babson.  Yes ;  absolutely. 

Commissioner  Sweet.  And  for  those  places  you  do  not  need  any 
demonstration  of  it? 

Mr.  Babson.  Absolutely. 

Commissioner  Sweet.  And  there  are  certain  other  places  like,  for 
instance,  the  feeders,  we  will  say,  extending  out  into  the  rural  dis- 
tricts a  cei-tain  distance,  where  a  street  railroad — you  can  tell  sitting 
around  this  table — will  not  pay  for  years,  at  least? 

Mr.  Babson.  Yes. 

Commissioner  Sweet.  If  such  a  case  as  that  were  being  consid- 
ered, then  it. would  be  your  judgment  that  it  would  be  better  not  to 
have  a  street  railroad,  and  to  either  let  the  street-railroad  company 
or  the  others  who  arc  willing  to  do  it  perform  that  service  of  bring- 
ing people  there  to  that  point  on  the  street  railroad  from  which  it 
will  pay? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1065 

Mr.  Babson.  Yes. 

Commissioner  Sweet.  Is  that  your  idea? 

Mr.  Babson.  Yes;  but  let  me  make  this  clear:  The  method  that  I 
would  pui'sue  in  determining  that  would  be  this:  I  would  ask  a 
body  of  men  like  yourselves  to  assume  that  no  street  railway  existed 
on  that  street,  and  the  question  was  put  to  you,  "  Shall  we  build  a 
street  railway  or  operate  a  bus  linef "  And  if  you  would  answer 
the  question  from  that  point  of  view,  I  should  be  perfectly  content 
to  take  3^our  decision. 

Commissioner  Sweet.  I  suppose  the  Fifth  Avenue  bus  lines  are 
regulated  by  the  public-service  commission  in  some  way,  and  are 
compelled  to  run  regularly ;  are  they  not  ? 

Mr.  Babson.  Yes;  and  I  believe  any  jitney  service  should  be. 

Commissioner  Sweet.  Is  that  true  ordinarily  with  the  jitney 
throughout  the  country,  where  it  has  sprung  up  in  opposition  to  the 
street  railway? 

Mr.  Babson.  Not  in  the  early  stages. 

Commissioner  Sweet.  Is  it  now? 

Mr.  Babson.  It  is  becoming  that  way.  It  should  be  that  way 
absolutely.  : 

Commissioner  Sweet.  They  are  compelled  to  make  regular  trips, 
are  they  ? 

Mr.  Babson.  Let  me  get  back  to  my  point.  It  seems  to  me  that  if 
I  were  a  public-utility  commissioner,  or  if  I  were  a  railroad  com^ 
missioner,  I  should  devote  my  energies  to  service  rather  than  to 
price.    It  is  the  service  the  people  want. 

Commissioner  Sweet.  Would  ygu  impose  the  same  obligations  as 
to  regularity  and  charges  and  everything  else  on  jitney  service  that 
you  would  on  street-railroad  service?  I  do  not  mean,  necessarily, 
having  the  same  amount  of  fares,  or  anything  of  that  kind;  but 
would  you  be  just  as  careful  to  have  them  under  the  control  of  the 
public  as  you  would  the  street  railroad?        •  •  » 

Mr.  Babson.  Absolutely. 

Commissioner  Sweet.  You  would  want  to  have  just  as  much  guar- 
has  been  done  in  many  cases,  to  build  up  an  overnight  opposition  and 
competition,  and  then,  as  soon  as  they  had  made  it  very  unpleas- 
ant for  the  street  railroad,  to  pull  out  and  leave  the  public  without 
any  service? 

Mr.  Babson.  No;  I  seriously  oppose  that.  I  think  the  jitney- 
service  should  be  under  the  same  regulations  as  the  street-railway 
service. 

Commissions  Sweet.  You  would  want  to  have  just  as  much  guar- 
anty of  continued  service  as  with  the  street  railroad  ? 

Mr.  Babson.  Yes. 

Commissioner  Sweet.  The  public  is  entitled  to  that  ? 

Mr.  Babson.  Yes.  I  sympathize  with  the  public-service  commis- 
sion in  their  demand  for  service,  and  it  seems  to  me  that  there  h 
the  great  field  at  the  present  time  for  work — ^to  demand  service ;  but 
we  are  all  discussing  price,  and  we  forget  all  about  service.  I  think 
there  are  a  lot  of  street-railroad  companies  that,  if  they  would  only 
wake  up  and  give  good  service,  would  save  themselves.  * 

Commissioner  Sweet.  Of  course  you  understand,  Mr.  Babson,  that 
owing  to  the  automobile  opposition  or  competition— I  am  speaking 


1066    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

now  of  the  automobiles  that  are  privately  owned  particularly — and 
added  to  that  the  hig:h  cost  of  materials  and  the  higher  wages  paid, 
they  all  combine,  do  they  not,  to  make  it  mighty  hard  for  the  street- 
railroad  company  to  live  at  the  present  time? 

Mr.  Babson.  Yes,  sir. 

Commissioner  Sweet.  Now  then  their  incomes  have  not  been 
advanced  in  proportion  to  their  outgo^  that  is  the  fact? 

Mr.  Babson.  No,  sir. 

Commissioner  Sweet.  And  some  way  or  other  a  way  must  be 
found  if  they  are  to  live  at  all  to  approximately  equalize  the  income 
to  the  outgo;  is  not  that  so? 

Mr.  Babson.  Yes. 

Commissioner  Sweet.  You  have  to  find  a  way  ? 

Mr.  Babson.  Yes. 

Commissioner  Sw^eet.  Now  then,  you  say  give  better  service. 
Well,  how  can  they  under  the  present  conclitions  give  very  good 
service? 

Mr.  Babson.  My  first  point  is  to  remove  the  restrictions  and  give 
them  an  opportunity  to  breathe. 

Commissioner  S\veet.  1  understand  that  would  take  off  the 
taxes? 

Mr.  Babson.  Yes ;  and  let  them  stand  on  their  own  bottom.  Those 
that  siirvive  from  a  service  point  of  view,  they  will  survive,  and 
those  that  can  not  shall  go  by  the  wayside;  and  I  believe  that  it  is 
ultimately  going  to  hapi>en  tliat  way,  anyway,  and  that  such  plans 
as  we  are  having  in  Boston  are  simply  delaying  the  evil  day. 

Commissioner  Sweet:  So  if  I  .understand  you  right,  you  would 
reileve  them  of  the  burden  of  paving  between  their  tracks  and  a  little 
outside;  you  would  relieve  them  of  taxati(Mi  upon  their  franchises 
and  upon  their  physical  property;  you  would  treat  them  as  public 
utilities  in  the  sense  that  they  are  needed  by  the  public  in  order  to 
do  the  work  of  the  public:  and  you  would  give  them  every  chanc« 
to  prove  their  right  to  lives 

Mr.  Babson.  Yes. 

Commissioner  Sweet.  And  if  they  could  not  prove  it,  you  would 
let  them  go? 

Mr.  Babson.  I  would  let  them  go ;  yes,  sir. 

Commissioner  Sweet.  And  as  every  other  service  ought  to  go,  if 
it  can  not  prove  its  right  to  exist  under  such  circumstances  as  that? 

Mr.  Babson.  Yes. 

Commissioner  Sweet.  But  at  the  present  time  the  street  railroads 
of  the  country  are  suffering  and  laboring  under  all  these  burdens, 
are  they  not? 

Mr.  Babson.  They  certainly  are. 

Commissioner  Sweet.  And  they  can  not  live  under  them,  can  they  ? 

Mr.  Babson.  No;  they  can  not;  and  it  is  a  crime  to  the  communi- 
ties to  keep  them  in  such  a  position. 

Commissioner  Sweet.  And  your  idea  is  that  the  burdens  must  bo 
removed,  and  they  must  be  given  a  freer  hand  in  regard  to  fares,  and 
that  sort  of  thing,  so  that  they  can  get  a  fair  return  for  the  service 
they  render,  and  then  let  them  depend  upon  their  good  service  to 
bring  custom  and  trade  to  them,  and  business,  and  in  that  way  be 
able  to  take  care  of  their  expenses — operating  expenses,  and  a  fair 
return  upon  the  investment ;  that  is  your  idea  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1067 

Mr.  Babson.  Those  are  my  sentiments,  exactly. 

Commissioner  Gadsden.  I  wish  you  would  give  us  some  informa- 
tion along  the  lines  from  an  investment  standpoint  of  the  shrinkairt; 
in  values  of  street-railway  securities.  You  have  made  a  study  of 
that  problem,  have  you  not?  Just  leave  the  question  of  fares  and 
rates  out  of  it  and  let  us  discuss  for  a  moment  what  the  effect  on  the 
investment  feature  has  been. 

Mr.  Babson.  Taking  all  the  street-railway  bond  issues  of  the  coun 
try,  the  shrinkage  has  been  about  25  per  cent,  and  considering  all 
stock  issues  of  the  country,  the  shrinkage  has  been  about  75   per 
cent. 

Commissioner  Gadsden.  Can  you  approximate  what  that  means  in 
dollars  and  cents? 

Mr.  Babson.  It  Amounts  to  over  a  billion  dollars;  it  amounts  to 
over  a  billion  dollars  and,  of  course,  a  gi'eat  deal  of  these  securities 
are  held  by  the  banks  and  trust  companies  and  insurance  companies 
and  the  mass  of  the  people. 

Commissioner  Gadsden.  Is  it  not  a  fact  that  up  to  five  or  six 
years  ago  street  railwav  securities  were  considered  rather  a  favorite 
securitv  in  the  market  f 

Mr.  Babson.  Well,  the  savings-bank  investment  laws  of  Massachu- 
setts are  generally  considered  as  the  strictest  of  any  State  in  the 
country;  that  is  to  say,  judges  all  over  the  country  when  it  comes 
to  guardianship  questions  will  state  that  the  money  may  be  invested 
in  anything  legal  for  Massachusetts  savings  banks,  as  they  are  the 
most  strict  of  any  of  the  laws.  Now,  the  State  of  Massachusetts 
made  street  railways  legal  for  Massachusetts  savings  banks  some  10 
\ears  ago. 

Mr.  Warren.  Massachusetts  street-railway  securities? 

Mr.  Babson.  Yes;  Massachusetts  sti'eet-railway  securities.  And 
I  was  looking  over  the  accounts  of  a  bank  the  other  day  in  Massachu- 
setts, a  savings  bank  where  they  had  bought  the  first-mortgage  bonds 
of  the  Warren,  Brookfield  &  Spencer  Street  Railway  Co.,  bonded  for 
only  $8,000  a  mile,  legal  for  Massachusetts  savings  banks,  and  where 
thei-e  was  an  absolutely  total  loss.  The  stockholders  not  only  lost 
all  they  put  in,  but  those  bondholders  lost  all  they  put  in;  and 
when  the  tracks  were  ripped  up  a  few  months  ago  and  sold  for  junk, 
there  was  only  enough  to  pay  the  lawyers  and  i-eceivei-s'  certificates. 
So  I  feel  very  strongly  on  that  point. 

Commissioner  Sweet.  Do  you  icnow  whether  any  of  the  holders 
of  the  stock  who  lost  money  were  widows  and  minors  and  that  class 
of  people,  poor  people  comparatively? 

Mr.  Babson.  I  should  not  say  that  the  holders  of  the  stock  were 
so  much 

Commissioner  Sweet.  Well,  the  bonds,  perhaps. 

Mr.  Babson.  As  the  bonds  and  notes.  But  in  the  Massachusetts 
Electric,  it  had  3,000  stockholders  when  it  went  busted,  and  that 
Was  a  $25,000,000  corporation,  two  or  three  yeai^  ago;  and  I  made 
a  list  of  those  stockholders,  and  the  directors  of  the  company  held 
less  than  5  per  cent  of  the  stock  and  95  per  cent  of  it  was  held  by 
pure  investors,  while  over  50  per  cent  of  it  was  held  by  trustees, 
guardians,  and  banks.  Over  50  per  cent  of  it;  and  that  has  all  gone 
by  the  board. 


1068    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Gadsden.  Do  you  think  that  fairly  reflects  the  gen- 
eral situation  of  the  railway  securities  in  this  country? 

Mr.  Babson.  Yes,  I  think  it  does;  but  the  first  figures  I  gave  you, 
about  25  per  cent  shrinkage  in  bonds  and  75  per  cent  shrinkage  in 
stock,  apply  to  the  country  as  a  whole. 

Commissioner  Gadsden.  A  total  loss  of  about  a  billion  dollars? 

Mr.  Babson.  Yes. 

Commissioner  Gadsden.  In  what  period? 

Mr.  Babson.  Within  the  last  10  years,  since  it  has  reached  its 
apex. 

Mr.  Warren.  Could  you  not  almost  say  within  the  last  five  years  ? 

Mr.  Babson.  I  should  say  three-fourths  of  it;  yes,  in  the  last 
five  years. 

Mr.  Warren.  Practically,  since  the  European  War  began?  It 
began  about  that  same  time,  1914? 

Mr.  Babson.  Yes. 

Mr.  Warren.  Mr.  Babson,  as  I  get  your  view  of  the  situation, 
it  is  either  that  the  restrictions  on  the  street  railways  should  be 
removed  or  corresponding  restrictions  should  be  imposed  upon  the 
jitney Sj  including  the  motor  buses;  and  then  they  should  be  left  to 
see  which  one  will  survive  in  cases  where  both  are  not  needed.  Is 
that  right?  . 

Mr.  Babson.  Well,  I  would  rather  remove  these  artificial  re- 
strictions on  the  street  railways  first. 

Mr.  Warren.  By  that,  you  mean  the  taxes  and  burdens? 

Mr.  Babson.  Yes ;  I  w  ould  not  put  paving  taxes,  for  instance,  on 

the  jitneys. 

Mr.  Warren.  I  was  not  referring  to  that  so  much  as  I  was  to 
what  is  called  regulation.  I  suppose  nearly  everybody  would  agree 
that  those  burdens  which  have  no  relation  to  the  service  and  which 
are  not  necessary  to  performing  the  service  and  amount  only  to  a 
tax  on  the  car  rider  ought  to  be  removed  anyway.  If  income  is 
needed  by  the  community  it  ought  to  be  acquired  through  some 
proper  method  of  taxation  and  not  by  an  indirect  tax  on  the  car 
rider.  But  aside  from  that,  there  is  a  great  deal  of  regulation  of 
street  railways  that  does  not  apply  to  jitneys  in  most  places.  For 
example,  the  street  railways  are  expected  to  operate  in  a  snow- 
storm as  well  as  in  fair  weather;  it  is  expected  that  they  will 
begin  very  early  in  the  morning  and  operate  until  midnight  and, 
in  some  places,  all  night.     Would  you  remove  such  requirements 

as  that  ?  . 

Mr.  Babson.  I  should  make  them  equal ;  yes,  sir. 
Mr.  Warren.  Make  them  equal? 
Mr.  Babson.  Yes,  sir. 
Mr.  Warren.  And  then  let  them  see  who  could  best  serve  the 

public?  ,  ,  in-... 

Mr.  Babson.  I  feel  very  strongly  that  we  should  msii^t  on  regu- 
lations for  service,  and  we  should  hold  up  the  standard  of  service 
on  all  forms  of  public  utilities;  and  I  feel  that  the  great  work  of 
^    public-utility   commissions  is  to   see   that  the  public   has   proper 
gervice  and  to  see  that  the  jitneys  and  the  street-'cars  are  under  the 

same  rules  as  to  service.  .    ,        ,  i        ^i 

Mr.  Warren.  So  that  practically,  I  infer  that  rather  than  re- 
move these  service  regulations  from  the  street  railways,  you  would 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1069 

leave  them  in.  but  you  would  impose  corresponding  requirements 

on  the  jitneys? 

Mr.  Babson.  So  far  as  they  refer  to  service ;  yes. 

Mr.  Warren.  If  they  were  going  to  undertake  to  serve  in  a  cer- 
tain street  in  competition  with  the  street  railway  they  should  meet 
the  same  hours  and  same  service  conditions? 

Mr.  Babson.  Yes,  sir. 

Mi*.  Warren.  And  if  the  fare  was  going  to  be  regulated  on  the 
street  railway,  then  the  fare  on  the  jitney  should  be;  but  your  judg- 
ment, I  take  it,  would  be  that,  as  regarding  the  fare,  if  they  were 
in  competition  you  would  let  them  regulate  that  themselves? 

Mr.  Babson.  Yes ;  I  would  let  that  regulate  itself. 

Mr.  Warren.  And  the  same,  I  presume,  as  regards  liability  for 
accident.  I  do  not  know  whether  you  have  noticed — but  I  hap- 
pened to  be  in  Williamstown  over  Sunday,  and  in  reading  The  Re- 
publican I  saw  that  a  jitney  in  Holyoke,  where  they  had  just  been 
considering  a  regulation  of  jitneys,  had  been  upset  with  six  or 
seven  children  in  it — one  or  two  had  been  killed,  and  the  rest  were 
all  taken  to  the  hospital.  Now,  if  that  had  happened  to  a  street-car 
in  Massachusetts  it  w  ould  have  amounted  to  anywhere  from  twenty 
to  fifty  or  sixty  thousand  dollars  damages,  would  it  not,  as  our 
juries  operate? 

Mr.  Babson.  Including  lawyers'  fees. 

Mr.  Warren.  Well,  I  think  with  that  it  would  be  still  more,  but 
it  would  have  been  a  very  substantial  amount.  How  would  you 
meet  that? 

Mr.  Babson.  I  think  the  same  thing  should  apply;  yes,  I  should 
think  the  same  thing  should  apply. 

Mr.  Warren.  Most  of  the  jitneys  which  are  at  present  operating 
in  Massachusetts  are  individual  operators,  and  the  only  way  it  could 
be  reached  would  be  by  requiring  some  sort  of  a  bond? 

Mr.  Babson.  When  I  speak  of  jitneys,  \  have  more  in  mind  than 
the  bus  system. 

Mr.  Warren.  And  there  you  would  expect  a  corporation,  with 
some  responsibility  of  operation? 

Mr.  Babson.  Yes. 

Mr.  Warren.  Assuming  that  that  is  the  proper  method  with  the 
jitneys  or  motor  bus,  the  prospective  motor-bus  competition  and  the 
actual  competition,  where  it  exists  as  it  does  in  the  Bay  State  ter- 
ritory, should  be  regulated  in  the  same  way  as  the  street  railways? 
It  is  not  under  the  Massachusetts  law  to-day  so  regulated,  is  it? 

Mr.  Babson.  No,  sir. 

Mr.  Warren.  And  I  think  that  is  true  in  a  great  many  States, 
from  what  I  have  heard  from  street-railway  people  here.  So  that 
to  bring  about  that  situation  which  you  recommend  involves  the 
necessity  of  further  legislation? 

Mr.  Babson.  Yes,  sir. 

Mr.  Warren.  What  would  you  recommend,  if  anything,  for  the 
present  exigency  of  the  street  railways  ?  It  has  appeared  here  that 
something  over  6,000  miles  of  street  railways  are  in  receivers'  hands 
to-day,  and  that  many  more  are  really  failing  or  are  with  difficulty 
earning  their  operating  expenses.  This  necessity  for  legislation 
would  take  one  or  two  years,  would  it  not,  according  to  whether 
the  legislature  meets  every  year  or  every  other  year? 


1070    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Babson.  I  should  remove  the  burdens  first 

Mr.  Warren.  That  requires  legislation  too,  in  many  cases,  does 

it  not? 

Mr.  Babson.  Wliy,  yes;  it  does. 

Mr.  Wareen.  It  does  in  Massachusetts,  and  it  does  in  many  St:ites. 

Mr.  Babson.  Then  my  second  step  would  be  to  open  wide  the  faro 
question. 

Mr.  Warren.  Immediately? 

Mr.  Babson.  Yes;  immediately. 

Mr.  Warren.  So  that  the  companies  could  charge  enough  to  keep 
their  heads  above  water? 

Mr.   Babson.  Yes, 

Mr.  Warren.  Pending  the  effective  date  of  some  more  permanent 
and  better  thought-out  arrangement? 

Mr.  Babson.  Yes;  and  the  only  thing 

The  Chairman.  That,  also,  reqiiires  legislation  in  many  common- 
wealths? 

Mr.  Babson.  Yes. 

Mr.  Warren.  It  does  in  some  places;  but  in  most  places — I  judge 
from  what  I  have  heard  here;  I  am  only  familiar  especially  with 
Massachusetts  conditions — in  many  jurisdictions,  either  with  the 
commission,  the  supervising  State  commission,  or  the  municipal 
government  can  remove  the  fare  limitations  if  they  see  fit,  I  think. 
That  is  what  has  been  done  in  England,  if  I  understood  Mr.  Stanley's 
testimony.  They  had  an  upset  limit  to  the  fare.  And  so  Mr.  Secre- 
tary Baker  testified  this  morning.  That  was  first  temporarily  re- 
moved so  as  to  put  into  effect  the  5-cent  fare  with  1  cent  for  transfers, 
which  is  now  the  prevailing  fare  there.  That  is  1  cent  more  than  the 
maximum  limit  fixed  in  the  Taylor  franchise.  So  that,  I  think, 
if  a  recommendation  of  that  sort  seemed  wise  to  be  made,  and  if 
the  people  who  had  the  power  saw  fit  to  adopt  it,  in  almost  every 
case  it  would  be  possible  ^o  furnish  the  sort  of  relief  that  Mr.  Bab- 
son has  mentioned. 

Mr.  Babson.  I  believe  that  it  would. 

Mr.  Warren.  And  you  think  that  it  is  essential? 

Mr.  Babson.  Yes ;  I  think  it  is  essential. 

Mr.  Warren.  To  tide  over  this  situation? 

Mr.  Babson.  Yes. 

Commissioner  Sweet.  Although  you  mention  that  as  your  sec- 
ond step,  inasmuch  as  that  can  be  taken  immediately  and  the  re- 
lief from  these  various  taxation  burdens  could  not  be,  you  would 
take  your  second  step  first  then,  I  take  it;  that  is,  to  permit  the 
raising  of  fares  while  the  other  thing  was  being  done.    Is  that  right  ? 

Mr.  Babson.  Yes.  I  put  it  as  the  second  step,  because  I  feel,  if 
I  am  doing  an  injustice  to  a  man  and  owe  a  man  money,  I  had  bet- 
ter square  up  with  him  and  treat  him  right  before  I  give  him 
chiritv 

Commissioner  Sweet.  I  understand,  in  other  words,  you  make 
it  the  second  step  in  importance,  but  not  in  time  ? 

Mr.  Babson.  Yes. 

Mr.  Warren.  When  you  have  a  man  in  extremis  you  have  to 
give  him  whatever  medicine  is  at  hand. 

Mr.  Babson.  Yes.  In  that  way  I  put  the  first  step,  the  increas- 
ing of  fares  and  the  second  step  the  relieving  of  the  unnecessary 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1071 

burdens;  but  I  am  opposed  to  letting  down  on  service,  and  that 
seems  to  me  is  what  is  happening  ri^t  now  with  the  street  rail- 
^vays— that  they  are  not  giving  service,  and  the  ix>lling  stock  is 
dilapidated  and  they  are  pulling  off  the  cars.  And  in  every  other 
kind  of  business  when  we  feel  things  are  going  against  us  we  realize 
that  our  only  salvation  is  to  make  a  plunge  and  give  better  service 
than  the  other  fellow.  We  do  not  retard  our  ser\ace.  And  I  feel 
that  that  spirit  which  I  find  among  common  sti^et-railway  people 
and  among  some  municipalities  and  among  some  banking  interests, 
of  retarding  the  service,  cutting  it  down  and  simply  passing  the 
buck  on  to  the  community  is  going  to  have  a  backfire  which  will 
ultimately  be  bad  for  the  street-railway  security  holders  and  the 
community  and  €verybody  else. 

Commissioner  Sweet.  Don't  you  think  that,  although  a  man 
might  know  that  it  wiU  be  a  good  thing  to  paint  his  house  and 
tlrnt  it  would  last  longer  and  look  better,  if  he  did  not  have  the 
money  to  paint  it  with,  he  might  postpone  the  painting  job? 

Mr.  Babson.  Yes ;  but  I  do  not  think  that  the  community  should 
forbid  him  to  get  the  money. 

Commissioner  Sweet.  No;  certainly  not, 

Mr.  Babson.  No.  That  is  whai  they  are  doing  with  the  street- 
car people. 

Mr.  Warren.  It  comes  back  to  the  first  ^ep  again ;  let  the  com- 
panies first  increase  their  fares  and  then  direct  their  attention  at 
once  to  improving  the  service.  That  would  be  your  prescription; 
would  it  not? 

Mr.  Babson.  Yes;  and  I  tliink  the  commission  should  hold  them 
up  on  that  service,  I  think  the  commission  should  hold  them  up. 

Mr.  Warken.  If  they  can  get  the  additional  revenue. 

Mr.  Babson.  If  I  was  the  Public  Service  Commission  of  Massa- 
chusetts, for  in^ance,  I  w-ould  say  to  those  companies  in  Massachu- 
setts, "  You  can  charge  whatever  fares  you  want  to,  but  I  am  de- 
termined that  Massachusetts  shall  have  the  best  street  car-system 
in  the  country."  And  I  believe  that  on  that  platform  the  people 
would  be  happier  and  the  communities  would  be  better  off  and  the 
security  holders  would  be  in  a  safer  position. 

Mr.  \V^AKKEN.  But  under  tlie  present  financial  condition  of  those 
very  companies  tlie  commission  can  not  effectively  say  to  them,  ^'  You 
must  make  youi*  service  good." 

Mr.  Babson.  No. 

Mr.  Warben.  And  the  companies  could  not  make  it  good  if  they 
wanted  ta 

Mr.  Babson.  No;  absolutely. 

Mr.  Warren.  Until  the  first  step,  namely,  the  right  to  charge  more 
fares,  was  taken  care  of? 

Mr.^  Babson.  Yes. 

Mr.  Warren.  So  that  it  is  really  a  financial  impossibility  for  them 
to-da^^ ;  is  it  not  ? 

Mr.  Babson.  Yes;^but  on  the  other  hand,  I  think  there  are  some 
street-railway  people  who  feel  that  it  is  just  a  question  of  charging 
more  fares.    That  is  not  the  solution  of  the  problem.    For  instance 
just  befoi-e  I  came  here  I  went  around  to  the  Bay  State  office  and 
went  through  the  receipts  during  the  past  30  day^,  and  we  are  not 


1072     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


making  any  more  money  on  the  10-cent  fare  than  we  did  on  the  7 
or  8-cent  fare.    We  have  reached  the  point  of  saturation. 

Mr.  AVakren.  AVhen  you  said  you  thought  it  was  either  a  5  or  a 
10-cent  fare  you  meant  as  a  unit  of  collections,  I  judge. 

Mr.  Babson.  Yes. 

Mr.  Warren.  You  do  not  mean  necessarily  that  the  5-cent  fare 
should  be  the  old  5-cent  fare  covering  the  same  service  and  territory  ? 

Mr.  Babson.  No. 

Mr.  Warren.  But  that  the  ride  should  be  adjusted  to  what  a  5-cent 
fare  ought  to  give? 

Mr.  Babson.  Yes. 

Mr.  Warren.  And  shorten  the  distance?  • 

Mr.  Babson.  Yes.  For  instance,  on  our  Boston  Street  Railway 
it  is  10  cents;  that  is  the  minimum.  Well,  now,  I  think  it  is  very 
questionable  whether  the  road  would  not  make  more  money  if  they 
had  a  5-cent  zone.  On  the  other  hand,  I  realize  the  objection  to  the 
5-cent  zone.  It  would  tend  for  congestion  in  Boston,  which  should 
be  avoided.  We  should  really — Boston  is  better  off,  physically  and 
spiritually  and  socially,  to  have  the  people  move  out  from  the  center 
rather  than  congest  them  in  the  center.  So  that  as  a  social  proposi- 
tion I  am  opposed  to  the  zone  system,  but  as  a  money-making  propo- 
sition for  the  companies  I  think  the  companies  would  perhaps  make 
moi*e  money  with  the  zone  system.  But  I  feel  strongly  about  that 
along  other  lines.    For  instance,  jou  are  acquainted  in  Boston? 

Mr.  Warren.  Yes. 

Mr.  Babson.  If  you  and  I  owned  the  street-railway  system  in 
Boston  the  same  as  we  would  have  a  coal  business  there  or  a  dry- 
goods  store  and  could  do  just  as  we  wanted  to,  we  could  charge  25 
cents  to  come  in  from  Brookline  into  the  subway  and  we  could  get 
it,  because  we  could  get  people  in  there  quicker  for  25  cents  than 
any  other  possible  means  of  conveyance.  On  the  other  hand,  there 
are  other  lines  where  we  would  charge  only  5  cents.  That  would  not 
be  on  the  basis  of  mileage;  it  would  not  be  on  the  basis  of  zones, 
as  such;  it  would  be  on  the  basis  of  service  and  speed.  And  that 
is  where  I  think  the  thing  is  going  to  work  out. 

I  think  that  the  subways  and  the  elevateds  are  going  to  be  the  salva- 
tion of  the  city  properties,  and  the  bunkers  are  going  to  be  the  salva- 
tion of  the  interurban  property,  and  the  old-fashioned  street  railway 
that  we  are  all  trying  to  save  is  really  pretty  much  in  the  stagecoach 
class. 

Mr.  Warren.  The  former  stagecoach  class,  and  still  the  old  horse 
railroad,  as  a  matter  of  fact,  did  eliminate  -the  old  stagecoach,  did 
it  not? 

Mr.  Babson.  The  old 

Mr.  Warren.  The  old  horse  buses.  I  am  afraid  you  are  not  as  old 
as  I  am,  so  you  may  not  remember  them ;  but  the  old  horsa  buses 
which  used  to  run  into  Boston  from  Cambridge  and  Brookline,  and 
other  surrounding  suburbs,  were  all  eliminated  by  the  introduction 
not  of  the  electric  railroad,  but  of  the  horse  railroad. 

Mr.  Babson.  Yes. 

Mr.  AVarren.  So  that  there  was  something  about  the  vehicle  that 
was  drawn  over  the  rails  that  was  more  comfortable  and  appealed 
more  strongly  to  the  public  than  the  bus  which  was  drawn  over  tho 
pavement. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1073 

Mr.  Babson.  On  the  other  hand,  if  the  auto  bus  had  come  before 
the  street  railway  was  built,  do  vou  think  it  would  have  been  built  in 
a  good  many  of  those  instances?  Take  down  to  Lexington  and  Con- 
cord and  Salem? 

Mr.  Warren.  No,  no ;  I  think  in  some  of  those  territories  the  street 
railway  perhaps  ought  never  to  have  been  built  anyway. 

Mr.  Babson.  Yes.    • 

Mr.  Warren.  The  traffic  was  too  sparse,  the  population  was  too 
limited.    I  am  very  much  obliged.    That  is  all. 

Mr.  Babson.  I  thank  you  for  bringing  out  that  point  about  the 
Boston  situation,  distinguishing  it  from  the  Cleveland  situation.  I 
am  thoroughly  in  favor  of  the  Cleveland  plan.  The  Brunswick  plan 
is  my  first  choice. 

Mr.  Warren.  Which  is  the  Cleveland  plan  with  a  graduated  scale. 

Mr.  Babson.  With  a  sliding  scale,  so  as  to  induce  efficiencv  on  the 
part  of  the  management.  And  my  second  choice  is  the  Cleveland 
plan.  But  I  feel  that  the  Boston  plan  is  the  poorest  of  all,  because  it 
is  neither  municipal  ownership  nor  private  ownership  nor  public 
regulation;  it  is  everybody's  business  and  nobody's  business,  and 
sooner  or  later  there  is  going  to  be  a  backfire  from  it. 

(Witness  excused.) 

The  Chairman.  Mr.  Ogburn,  who  is  jour  next  witness ? 

Mr.  Ogburn.  Mr.  John  P.  Fox. 


STATEMENT  OF  MR.  JOHN  P.  FOX. 

The  Chairman.  State  your  name. 

Mr.  Fox.  John  P.  Fox,  55  West  Forty-fourth  Street,  New  York 
City. 

The  Chairman.  Whom  do  you  represent,  Mr.  Fox? 

Mr.  Fox.  I  appear  here  as  an  independent  student,  but  at  the  same 
time  I  am  with  the  city  of  Reading  as  transit  expert  in  their  rate 
case  with  the  Reading  Transit  &  Light  Co.,  which  we  have  been  on 
for  a  year  and  a  half.  We  are  in  the  midst  of  the  valuation  now,  and 
I  am  representing  the  city  in  all  these  matters. 

I  am  also  secretary  of  the  Public  Service  Club  of  the  city  of  New 
York.  We  are  quite  active  in  the  J^ew  York  situation,  although  I 
am  not  authorized  to  appear  for  them.  But  my  excuse  for  appearing 
here  is  an  experience  of  about  20  years,  particularly  along  the  lines 
of  trying  to  help  companies  to  increase  their  business  and  to  cut  their 
expenses. 

The  work  began  about  20  years  ago  in  Boston;  and  I  have  given  a 
great  deal  of  time  to  this  subject  without  any  idea  of  recompense, 
from  interest,  trying  to  help  the  companies  to  solve  some  of  these  prob- 
lems of  making  a  living,  also  giving  good  service.  I  have  worked  for 
a  number  of  cities.  I  was  with  the  city  of  New  York  four  years, 
under  the  Mitchel  administration,  as  expert  to  the  board  of  estimate. 
I  was  with  the  city  of  Pittsburgh  two  years,  and  besides  being  with 
the  city  of  Reading,  I  have  other  cities  and  towns,  such  as  Spring- 
field, Mass.,  in  the  recent  rate  case  there.  I  have  also  spent  consider- 
able time  in  Europe  during  the  last  25  years  in  trving  to  excliango 
experience,  and  particularly  in  trying  to  find  what  we  could  learn 

1G0G43 '- 10    VOL  2 6 


1074     PROCEEDINGS  or  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

from  Euroi>e  in  the  way  of  fares  and  methods  of  increasing  business 
and  economizing  at  the  same  time, 

I  went  to  Europe  in  1J)03  for  the  Boston  Elevated  Co.  to  report  on 
elevated  construction  and  surface  operation.  I  took  one  of  the  Stone 
&  Webster  men  in  1905  to  show  him  the  European  methods  of  econo- 
mizing—particularly the  one-man  car,  for  example— and  that  was 
more  as  a  friend  of  Stone  &  Webster  than  anything  else.  In  1907  I 
went  over  again  for  the  fourth  time  and  I  made  a  report  on  certain 
,  subjects  for  the  New  York  Rapid  Transit  Commission. 

My  work  has  been  more  along  public  lines  than  workmg  for  the 
companies,  because  I  got  pretty  well  discouraged  in  trying  to  get  the 
companies  introduce  new  methods,  either  oi  increasmg  their  mcome 
or  of  economizing.  . 

I  think  one  of  onr  great  troubles  has  been  that  onr  companies  have 
been  perhaps  too  pi-osperous.  We  have  not  felt  the  pinch  of  neces- 
sity as  they  have  m  other  countries,  and  as  the  result  we  have  not 
been  as  economical  as  we  should  have  been,  and  have  not  had  to  hustle 
for  business,  and  that  is  perhaps  the  reason  why  the  United  States 
is  worse  off  to-day  than  the  street-car  systems  in  other  countries  as 
a  whole.  While  they  have  raised  the  fares  in  other  countries,  you 
will  find  as  a  whole  that  the  street  railways  in  other  countries  are 
better  off  than  we  are.  For  example,  taking  the  10  largest  companies 
in  England— their  receipts  increased  about  40  per  cent  last  year  over 
the  years  before :  the  companies  of  South  America  and  Africa  and 
Australia,  all  of  them,  have  had  verj  large  increases,  while  on  the 
Continent  of  Europe  they  have  had  simply  fabulous  increases. 

Commissioner  Sweet.  You  speak  now  of  gross  receipts? 

Mr.  Fox.  Yes;  gross  earnings.  The  figures  have  just  come  through 
from  the  Berlin  company,  the  largest  in  Europe,  where  with  a  traffic 
last  year  of  something  over  600,000.000  people  there  is  an  increase 
of  64  per  cent  in  the  gross  earnings  and  75  per  cent  in  their  net 
earnings,  a  most  unheard-of  result.  I  can  not  imagine  how  they 
have  done  it.  Tliey  increased  their  fare  from  ^  cents  to  4  cents, 
but  how  that  unexampled  prosperity  came  to  that  company  T  do  not 
know,  and  I  am  quite  curious  to  find  out. 

Commissioner  Gadsden.  Tliey  must  have  changed  the  system  of 

bookkeeping.  -,..,, 

Mr.  Fox.  They  paid  a  7i  per  Cent  dividend. 

Commissioner  Gadsden.  Or  perhaps  used  the  suspense   account. 

Mr  Fox.  I  know  the  Berlin  company  very  well,  and  I  hope  to  get 
over  sometime  to  find  the  secret  of  that  extraordinary  showing. 

But,  seriously,  why  is  this  difference  among  these  companies?  I 
suspect  if  you  look  at  it  fairly  in  the  face  you  will  find  that  the  com- 
panies in  other  countries  have  not  had  the  fixed  charges  that  we 
ha\e  iiere,  and  that  is  one  great  difference.  And  again  the  New  Eng- 
land companies  are  reallv  in  a  way  different  from  the  companies  ^^ 
the  other  points  of  the  country,  especially  in  Massachusetts,  where 
they  have  had  very  strict  regulations.  That,  T  think,  is  the  reason 
whv  the  New  England  companies  are  so  badly  off  to-day,  because  they 
have  not  been  highlv  capitalized.  Up  to  the  present  time  they  have 
had  a  f airlv  prosperous  time,  as  a  whole,  and  when  the  pinch  of  the 
war  came  they  did  not  know  how  to  economize.  Now,  in  the  other 
parts  of  the  country  where  the  companies  had  excessive  charges  to 


PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1075 

pay,  they  knew  how  to  operate  economically,  but  did  not  know  how 
to  cut  down  their  fixed  charges. 

Take,  for  example,  two  companies  I  have  been  concerned  with  in 
rate  cases,  the  Springfield  Railway  Co.  and  the  Reading  Transit  & 
Light  Co.:  The  iSpringfield  company  in  1917  had  an  operating  ratio 
of  93  per  cent.  The  Reading  company  that  same  year  had  an  operat- 
ing ratio  of  69  per  cent  only.  Now,  Springfield's  fixed  charges  and 
dividends  and  everything,  after  taking  out  operating  expenses, 
amounted  to  25  per  cent  of  their  gross,  whereas  in  Reading  the  fixed 
charges  were  54  per  cent  of  the  gross.  The  i^esult  was  the  Reading 
company,  you  see,  ran  over  about  13  per  cent  over  their  income.  The 
Sprmgfield  company  had  a  very  bad  deficit  for  the  same  reason  the 
same  year.  Now,  if  you  could  exchange  those  companies  and  would 
give  the  Springfield  company  the  Reading  methods  of  operation  and 
give  the  Reading  companv  the  Springfield  conipany-s  fixed  charges, 
you  will  at  once  strike  a  balance  which  would  put  both  of  them  on 
their  feet.  If  the  Reading  company  had  only  25  per  cent  fixetl 
charges  instead  of  54  per  cent,  and  69  per  cent  operating  ratio,  they 
would  be  in  clover.  And  the  Springfield  company  the  same  way — if 
they  had  Reading  operating  ratio  of  69  per  cent  they  would  have  no 
trouble  either. 

Now,  the  question  is,  how  can  you  get  these  two  kinds  of  companies 
to  cut  down  their  expenses  ?  I  worked  very  hard  with  the  companies 
in  both  places  to  try  to  show  them  tlie  way.  At  the  same  time  that 
I  have  been  on  the  public  side  of  the  matter,  I  tried  in  eveiy  way  to 
help  them  out  of  their  difficulties.  The  Reading  company  really 
has  not  got  the  courage  to  reorganize;  and  you  can  not  blame  them, 
in  a  way,  because  they  are  one  of  the  companies  who  have  no  equity 
in  the  proi)erty;  that  is,  they  are  not  the  owners.  They  hold  the 
propei-ty,  but  they  hold  it  on  a  lease,  and  the  underlying  securities 
are  still  in  the  hands  of  the  original  investors.  Now,  if  they  were 
to  go  into  bankruptcy,  naturally  they  are  afraid  thev  would  lose  all 
the  money  they  have  put  into  that  property,  which  would  be  a  very 
serious  item. 

Mr.  Warren.  That  is  the  Reading  companv  vou  are  speaking  of? 

Mr.  Fox.  Yes ;  the  Reading  company.  '  S^ow,  the  difficultv  in 
Springfield  is  nof 

Commissioner  Gadsden.  Is  the  Reading  companv  earning  any- 
thing over  its  operating  expenses  to-day  ? 

Mr.  Fox.  No;  it  is  running  away  behind.  It  is  supported  by  the 
income  from  the  electric-lighting  end. 

Commissioner  Gadsden.  How  then  would  it  be  helped  bv  reorgan- 
izing its  capital  ?  r-         .  & 

Mr.  Fox.  By  reducing  that  54  per  cent  fixed  charges. 

Mr.  Gadsden.  But  you  say  it  is  not  earning  its  fixed  charges? 

Mr.  Fox.  If  it  would  reduce  the  capitalization  to  the  amount  the 
hpringheld  company  has  reduced  it,  it  would,  say,  have  25  per  cent 
to  pay  them.  *^ 

Commissioner  Gadsden.  Is  it  earning  that  to-day? 
Mr.  Fox.  Oh,  yes;  its  operating  ratio  is  sufficient  so  that  it  could 
^^V7  \\r    '^  ^^"^^^  reduce  its  fixed  charges  to  a  moderate  sum. 
Mr.  Warren.  What  is  its  operating  ratio? 

>.irril^''''Q^''-^^i'^;i  ''T  ^^'  ^'^^  ^*  ^^'^  «^»^^^  ti«i«  i<^  IS  somewhat 
nigher  tor  Springfield.    I  was  comparing  the  same  year. 


1076    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Commissioner  Gadsden.  When  was  this  date  you  gave  for  the 
Springfield  company? 

Mr.  Fox.  1917,  also. 

Commissioner  Gadsden.  Both  1917  ? 

Mr.  FoX.  Both  1917. 

Mr.  Warren.  You  said  that  was  93  per  cent  ? 

Mr.  Fox.  The  Springfield  ratio  was  93  per  cent  in  1917.  The  dif- 
ficulty in  Springfield  was  not  altogether  capitalization,  because  the 
company  is  capitalized  for  less  than  its  actual  cost,  but  there  the 
trouble  is  to  economize  in  operation.  And  there  the  company  finds 
itself  up  against  this  problem  of  meeting  the  war  costs,  and  it  did 
not  know  how  to  reduce  its  operating  charges.  The  men  are  work- 
ing faithfully  in  Springfield  and  are  on  to  the  business,  but  they 
simply  did  not  know  how  to  do  it,  and  to  change  their  methods  all 
at  once,  as  you  know,  is  very  difficult. 

I  tried  one  thing  to  help  those  companies  out  in  Springfield  and 
Reading.  I  tried  to  get  the  Massachusetts  company  to  take  one  of 
the  Eeading  men.  The  Massachusetts  company  had  an  enormous 
amount  of  work  to  be  done.  This  Reading  man  was  one  of  the  best 
in  the  country  in  his  line,  and  I  urged  the  Massachusetts  company 
to  take  him  on,  and  they  very  nearly  did  it;  they  wanted  to  come 
np  and  undertake  a  rehabilitation  on  an  enormous  scale,  but  at  the 
last  minute  they  could  not  get  the  money.  I  am  confident  if  the  Read- 
ing engineer  could  have  gone  to  Massachusetts,  he  could  have  shown 
that  compan}^  how  to  get  on  their  feet,  because  he  has  maintained  his 
road  in  the  best  possible  condition  w  ith  all  appreciations  and  every- 
thing for  17  per  cent  of  the  gross  earnings,  and  he  has  done  it  in  a 
wonderful  way.  The  maintenance  and  depreciation  in  Massachusetts 
runs  far  above  that  figure,  as  you  know.  And  my  opinion  is  that 
these  two  kinds  of  companies,  the  overcapitalized  and  the  undercapi- 
talized, had  better  exchange  experience.  The  overcapitalized  com- 
panies will  find  some  way  to  cut  down  their  charges  and  the  compan- 
ies who  have  had  an  easy  time  on  account  of  their  charges  must  find 
some  way  to  economize  in  operation  or  to  increase  their  earnings. 

The  Chairman.  According  to  that,  the  trouble  with  that  company 
is  largely  one  of  management  rather  than  capacity  to  earn  ? 

Mr.  Fox.  Which  company  do  you  mean  ? 

The  Chairman.  You  say  by  exchanging  managements  you  would 
improve  conditions  ? 

Mr.  Fox.  Well,  if  they  would  do  it  I  think  we  would  see  some  very 
interesting  results.  Now,  I  tried  every  way  to  get  the  Reading  com- 
pany to  employ  a  man  who  has  perhaps  done  the  most  work  in 
Massachusetts  to  help  the  Massachusetts  company,  to  go  down  there 
with  his  Massachusetts  experience  and  help  them  to  reorganize,  and 
he  has  been  down  there  two  or  three  times,  and  the  company  unfor- 
tunately thinks  I  am  trying  to  jret  him  a  job  instead  of  trying  to  help 
them,  and  on  that  account,  looking  at  it  from  the  wrong  perspective, 
they  have  not  employed  him. 

Mr.  Warren.  Do  you  mind  saying  who  that  is?  You  say  a  Massa- 
chusetts man. 

Mr.  Fox.  Well,  no;  I 

Mr.  Warren.  I  will  not  press  the  question,  but  I  wondered  whether 
you  did  object,  that  is  all. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1077 

The  Chairman.  The  witness  is  free  to  answer  or  refuse  to  answer 
questions.    He  is  not  sworn. 

Mr.  Fox.  I  hesitate  a  little  to  quote  some  people  who  are  earning  a 
living.    I  might  mention  his  name  and  somebody  might  get  a  little 

Srejudiced  against  him.    Because  I  am  not  earning  a  living  and  so  I 
o  not  mind  so  much ;  but  that  is  the  only  reason. 

Mr.  Warren.  I  thought  I  might  like  to  recommend  to  the  Spring- 
field officers  employing  him ;  that  is  all. 

Mr.  Fox.  Well,  they  know  him  very  well,  Mr.  Warren. 

Commissioner  Gadsden.  Instead  of  these  general  statements  as  to 
the  difference  in  the  efficiency  of  these  two  plants,  can  you  give  us 
some  figures  as  to  the  cost  of  operation  per  car-mile  or  something  like 
that  in  Springfield  and  Reading  so  we  can  follow  you  a  little  more 
intelligently?  Can  you  tell  us  what  is  the  production  cost  in  Read- 
ing, for  example,  or  the  transportation  cost,  and  then  some  of  us 
could  put  our  finger  on  where  the  trouble  is,  perhaps. 

Mr.  Fox.  I  have  not  those  tables  made  up  here,  I  am  afraid.  I 
will  see 

Commissioner  Gadsden.  It  might  be,  for  instance,  that  the  differ- 
ence IS  in  production  cost.  Reading  might  get  some  pretty  cheap 
coal     I  do  not  know.    I  was  wondering  what  would  account  for  it. 

Mr.  Fox.  The  Reading  power  is  the  highest  in  the  country.  They 
make  their  own  power  but  they  charge  themselves  a  very  high  price 
for  It.  It  IS  costing  them  17  mills.  What  does  Springfield  pay  now  ? 
Ihey  were  paying  about  11  when  I  was  there,  I  think- 

Mr.  Warren.  They  are  buying  it  now,  but  at  the  time  you  refer 
to  they  were  making  their  own  power  at  a  very  much  higher  price 
than  that  They  had  no  storage  facilities  and  were  paying  $8,  $9, 
JjjIO,  and  $11  a  ton  for  coal.  r-  j     ,=>  ^  ,  -v  y 

Mr.  Fox.  I  will  be  very  glad,  Mr.  Gadsden,  to  furnish  you  with 
some  of  those  figures.  *^ 

Commissioner  Gadsden.  I  thought  perhaps  you  had  them,  because 
It  would  throw  some  light  on  what  seems  to  be  a  very  remarkable 
(litterence  m  the  operating  costs.  Don't  let  me  stop  you.  Go  rio-ht 
ahead  with  your  statement,  Mr.  Fox.  *" 

n,^w  ^y""'  '^^'i!  ^""^^Tr?-^  i-eorganization  is  a  very  difficult  one. 
Our  feeling  in  New  York  City  is  that  the  New  York  companies  have 
nrLl  fr'^n-^^  ^"-^"^  they  will  get  anywhere.  My"^  committee 
.  urged  the  public-service,  commission  and  the  heads  of  the  different 
companies  to  get  together  and  form  one  company  for  New  York 
City,  for  example  as  Mr.  Nixon  has  already  suggested.  Here  you 
have  subways  and  surface  lines  and  elevateds,  the  New  York  lines 
competing  with  each  other,  and  the  subway  liAes  naturally  are Tt' 
nig  more  of  the  traffic.    You  have  one  company,  the  subway  com- 

v1  }f^7.K^  '^'  r^  f"^'^"f  ?^"^«'  ^"^  how  can  that  go  on  fm'ev^r 
without  the  surface  lines  losing?  ^uiever 

What  are  you  going  to  do  in  a  case  of  that  kind?    Those  surface 

tiansit  lines     Tlie  Interborough  Co.  could  take  the  passengers  off 
he  surface  lines,  and  if  those  surface  cars  were  put  Lt  as  feede  " 

a^^  moS  onT'  '^T  ''1^'  "".  ''''  subways^nd  they  S 
which  tre/dr.ntl'T^ri  ^^^^^^but  they  have  those  franchises- 

Hoirin  otL^^^^^^  ^"^  ^'''"i    ^y^  ^^  "^^  ^^^^^^  t^^  reorganiza- 

tion,  in  other  words,  they  are  afraid  to  take  the  undertaking  and  to 


1078    PROCEEDINGS  OY  FEDERAL  ELECTKIC  RAILWAYS  COMMISSION". 

possibly  run  the  risk  of  being  upsd;  in  court,  and  yet  without  some- 
thing of  that  sort  how  is  New  York  going  to  make  tliose  surface 
lines  pay  which  are  losing  money  day  after  day? 

One  trouble,  of  course,  in  this  reorganization  matter  is  that  the 
companies  are  afraid  they  will  lose  their  investment,  but  I  do  not 
believe  the  courts,  in  case  of  receivership,  are  going  to  permit  the 
underlying  companies  to  take  bfick  these  properties  and  take  back 
all  the  money  that  has  been  put  into  them.  In  other  words,  if  the 
Keading  Transit  &  Light  Co.  went  into  court  to-day  and  asked  for 
a  receiver,  would  the  United  States  courts  give  that  company,  the 
original  holders  of  the  securities,  all  that  the  Reading  Transit  & 
IJght  Co,  has  put  into  that  property  to-day  ?  I  do  not  believe  they 
would  for  a  moment. 

Now,  Mr.  Fagan  told  you  the  other  day  that  in  Pittsburgh  if  they 
are  broken  up  there,  the  system  would  have  to  be  broken  up  into  a 
constituent  part  I  do  not  believe  the  courts  in  Pittsburgh  would 
do  that  any  more  than  they  would  in  New  York  City.  Now,  Judge 
Mayer  in  New  York,  as  you  probably  know,  determined  against 
breaking  up  the  New  York  railway  system.  He  did  discontinue  the 
Eighth  Avenue  line,  but  he  decided  it  was  against  public  policy 
to  break  the  company  up  into  its  constituent  companies,  and  as  the 
result  the  New  York  Railways  Co.,  which  has  electrified  all  these 
horse-car  lines,  is  not  goin^  to  see  all  their  investment  thrown  away 
and  turned  back  to  the  original  company,  but  will  hold  them.  More- 
over, I  do  not  think  the  courts  would  sanction  the  breaking  up  of 
these  companies  on  account  of  the  public,  either.  The  operating 
system,  as  a  whole,  is  too  vital  to  the  public  to  permit  any  such 
breaking  up.  So  that  if  these  companies  will  only  face  the  ques- 
tion of  reorganization  as  they  have  been  urged  to,  many  of  them, 
again  and  again,  to  cut  down  their  fixed  charges,  there  you  are 
going  at  once  to  make  away  with  a  great  deal  of  their  trouble. 

The  Chairman.  How  much  saving  in  fixed  charges  would  be  made 
bv  this  consolidation  ? 

'  Mr.  Fox.  There  in  Reading  they  ought  to  cut  their  fixed  charges 
right  in  half;  say  they  are  50  per  cent  now,  they  certainly  ought 
to  l)e  cut  down  to  25. 

The  Chairman.  How  much  in  New  York  would  they  save? 

Mr.  Fox.  In  New  York  I  do  not  know. 

Commissioner  Gadsden.  Are  you  speaking  of  legitimate  invest- 
ment, or  just  what  do  you  mean  by  cutting  it  down  to  half?  Cut- 
ting the  real  value  in  half? 

•  Mr.  Fox.  No;  I  mean  cutting  down  the  charges  to  a  fair  return 
on  the  actual  cost  of  the  property.  For  example,  I  find  the  Reading 
property  is  about  equal  in  cost  per  mile  to  the  Springfield  property 
and  the  Springfield  property  is  very  similar  in  every  respect.  A 
little  later  on  I  can  make  a  more  careful  comparison.  The  Spring- 
field company  is  capitalized  at  about  half  of  what  the  Reading 
company  is  per  mile.  And  if  you  are  going  to  g^t  the  Reading  com- 
pany to  accept  a  valuation  based  on  actual  cost,  that  will  do  away, 
you  see,  with  a  very  great  deal  of  that  trouble.  I  feel  that,  for  one 
thing,  if  the  companies  will  go  to  the  public  and  say,  "Will  you 
go  to  the  courts  with  us  and  try  to  get  the  courts  to  protect  our 
investment  in  this  property  which  we  have  lost  V — the  courts  will 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1079 

work  with  the  companies  and  the  cities  m  reorganizing  these  com- 
panies, so  as  to  cut  down  these  fixed  charges. 

Now  is  that  a  practical  solution  of  this  reorganization  question? 
I  will  leave  that  to  you. 

Mr.  Warken,  Was  not  the  New  York  property  reorganized  a  few 
years  ago,  the  surface  lines  ? 

Mr.  Fox.  Yes ;  it  was  at  one  time ;  but  we  do  not  know  yet,  exactly, 
what  the  actual  cost  of  the  properties  was.  The  companies  have 
put  in,  in  this  present  case,  an  appmisal  which  the  city  has  not 
yet  been  able  to  obtain  and  go  over;  and  the  rate  increases  in  New 
York  City  have  not  been  based  on  any  valuation,  but  purely  on  an 
appraisal  submitted  by  the  companies.  So  that  we  do  not,  as  yet, 
know  what  the  actual  cost  is.  Dr.  Bemis,  if  he  were  to  testify  before 
you,  would  point  out  that  the  New  York  Railways  Co. 'has  its 
proi^erty  valued  at  not  more  than  $45,000,000,  and  that  on  that  valua- 
tion it  has  earned  in  the  past  10  years  an  average  of  over  7  per 
cent.  That  is  putting  its  value  at  a  very  high  figure.  That  is  a 
valuation  of  $300,000  a  mile  or  moi^.  It  is  more  than  double  the 
value  of  the  Capital  Traction  Co.  here  in  AVashington,  which  is  a 
similar  underground  trolley  system. 

When  we  get  to  the  actual  cost  of  the  New  York  property  we  can 
tell  what  the  fixed  charges  are.  At  the  present  time  it  is  very 
indefinite  and  uncertain.  I  will  take  up  a  little  later  the  question 
of  operating  economies. 

Now,  I  want  to  touch  on  the  matter  of  remedies  which  have  been 
suggested  to  meet  the  present  situation.  First  of  all  I  want  to 
tell  you  a  little  story,  by  way  of  illustration,  of  what  a  company 
did  to  meet  a  situation  like  this  in  another  city.  In  a  city  of  1,000-000 
people  a  railway  was  built,  something  over  10  years  ago,  at  modern 
prices— Mr.  Warren  has  heard  this  story  before— and  the  company 
had  just  got  well  under  way  when  the  value  of  the  currency  depre- 
ciated, just  as  it  has  as  a  result  of  the  war,  and  the  mana^rer  was 
right  up  against  it.  He  could  not  raise  his  fares  a  single  cent 
because  they  were  already  too  high.  He  had  jitney  competition  of 
the  intensest  kind  to  comWat,  and  the  company  was  threatened  with 
bankruptcy.  The  manager,  however,  had  had  training  in  a  school 
where  he  was  taught  to  find  out  what  to  do.  He  started  in  to  follow 
the  method  of  improving  his  load  factor.  His  load  factor  was  verv 
low.  He  sti^rted  out  to  try  to  increase  his  volume  of  traffic  and 
instead  of  raismg  his  fares  he  was  bold  enough  and  daring  enough 
to  lower  his  fares.  He  cut  his  fares  wherever  he  saw  a  diance  of 
getting  people  onto  his  cars.  He  cut  and  cut,  and  he  built  up  his 
traffic  until  he  filled  60  per  cent  of  his  seats  through  the  dav  with 
passengers.  His  load  factor  was  at  least  twice  as  high  as  that  of 
Jx)ndon.  London  to-day,  with  double-deck  cars  and  double-deck 
trams,  as  you  Ltiow,  seating  78  people  in  the  motor  cars  and  48 
people  m  the  double-deck  trailer,  has  a  load  factor  of  something 
like  30  per  cent-30  per  cent  of  its  seats  filled.  He  filled  64  per 
cent  of  his  seats.  He  carried  18  passengers  a  car-mile,  against  Sur 
American  average  of  &ve  or  c?iir  TT*.  li«rl  ±  ono  aaa  «i5<»'"*»^  "ui 
miin  ^/  ^,,«^u  „11:J   _    ^,    ..^^^:,  ^^  ^^^^.  4,000,000  passengers  per 


was  cutting  down  his  fares. 


1080    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Can  3-011  tell  us  what  point  he  cut  down  to? 

Mr.  Fox.  I  will  give  you  that  at  the  end  of  the  story. 

Commissioner  Sweet.  All  right. 

Mr.  Fox.  He  finally  built  up  his  traffic,  so  that  the  last  year  I 
have  the  figures  of,  he  earned  15  per  cent  on  the  cost  of  the  prop- 
erty, on  the  capitalization;  he  paid  10  per  cent  in  dividends,  and 
he  did  it  on  an  average  fare  of  0.8  of  1  cent. 

Mr.  Warren.  Where  did  you  say  that  was? 

Mr.  Fox.  You  will  all  laugh  when  you  see  where  it  is.  You  will 
say  that  is  not  a  case  to  be  considered  at  all.  That  was  in  Shanghai, 
China.  You  will  say  that  everything  is  different  in  Shanghai,  and 
that  it  could  not  be  comj^ared  at  all.  But  Mr.  McCall,  the  manager, 
is  a  man  that  can  even  show  the  English  managers  how  to  build 
up  their  business. 

Commissioner  Gadsden.  What  fare  did  he  start  with — do  you  re- 
call? 

Mr.  Fox.  I  think  the  fare  was  something  like  3  or  4  cents — ^the 
average  fare.    He  cut  it  about  in  half,  as  I  remember. 

They  are  increasing  fares  in  London,  and  this  same  manager — a 
Scotchman,  by  the  way,  he  was — ^to-day  is  the  severest  critic  of 
English  street  railways.  He  says  English  street  railways  to-day 
have  increased  their  fares  unnecessarily ;  and  he  points  out,  with 
force,  that  he  is  carrying  twice  as  many  passengers  with  twice  as 
good  a  loading  factor  as  the  English  County  Council,  and  making 
more  money  by  doing  it. 

Of  course  labor  in  Shanghai  is  very  low,  but  he  has  the  jinrikishas; 
to   compete   with,   with   coolies  dragging  them   around.     And   his 
property  is  all  built  at  modern-day  prices;  it  has  all  been  brought 
from  America  and  Europe.     So  that  there  you  have  a  suggestion 
as  to  the  method  of  doing  it. 

I  have  not  dared  to  breathe  the  question  of  lower  fares  in  this 
country  for  years,  because  everybody  would  laugh  at  me;  and  it 
was  not  until  Walker  Jackson  was  sent  over  to  England  by  Mr. 
McGraw  that  I  dared  to  breathe  that  matter  at  all.  Since  he  came 
back,  however,  and  has  suggested  these  *low  fares,  and  since  the 
Public  Service  Corporation  of  New  Jersey  has  decided  to  try  a 
3-cent  fare  for  their  first  zone,  I  have  felt  a  little  encouraged  in 
pointing  out  that  as  a  possible  remedy.  - 

A  few  years  ago  I  was  in  Cleveland  to  visit  Mr.  Stanley,  and  get 
some  ideas  for  Massachusetts,  and  Mr.  Stanley  told  about  his  1-cent 
fare  line  there,  from  the  Public  Square  to  the  public  docks.  He 
said :  "  When  Peter  Witt  wanted  me  to  introduce  that  line,  I  did 
not  believe  in  it.  I  could  see  nothing  in  a  1-cent  fare."  First  he 
refused  to  consider  it,  and  then  he  thought  he  would  try  it  out,  and 
he  agreed  to  it.  He  told  me  that  that  line  is  one  of  the  best  paying 
lines  in  Cleveland  to-day.  It  earned  35  cents  in  August.  Appar- 
ently he  was  entirely  satisfied  witli  the  experiment. 

Commissioner  Sweet.  How  long  a  line  is  that? 

Mr.  Fox.  Just  1  mile  long.  You  may  not  realize  it,  but  we  have 
in  New  York  quite  a  number  of  low-fare  lines.  We  have  got  the 
Van  Brunt  &  Erie  Basin,  and  the  Brooklyn  Bridge  lines,  and  the 
lines  over  the  Williamsburg  Bridge  and  the  Manhattan  Bridge  and 
the  Queensboro  Bridge.  The  other  day  I  thought  I  would  look 
up  those  lines  and  see  what  they  were  showing.    The  Williams- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1081 

burg  Bridge  line  has  the  heaviest  traffic  of  any  railway  in  the  world, 
the  greatest  density  of  traffic.  Its  density  last  year  was  9,000,000 
passengers  per  mile  of  track.  That  is  about  double  the  density 
of  any  line  in  Europe.  With  all  their  prosperity  in  Europe,  New 
York*  has  beaten  them  out  on  density  of  traffic.  The  average  over 
that  line  or  rather  the  fare  is  If  cents— 3  tickets  for  5  cents.  It 
.started  in  with  1^  cents  fare,  but  the  company  made  so  much  money 
that  the  city  felt  obliged  to  relieve  them  of  some  of  it,  and  kept 
cutting  the  fare  down  until  they  reached  the  fare  of  3  tickets  for 
5  cents,  and  that  has  resulted  from  this  short  line,  1.6  miles  of  single 
track.  It  operates  over  a  bridge,  so  that  it  is  not  a  line  through 
a  very  congested  section,  but  it  shows  what  you  can  do  with  a  low 
fare  on  a  line. 

Commissioner  Gadsdex.  With  a  short  haul. 

Mr.  Fox.  With  a  short  haul.  It  is  very  much  like  the  Cleveland 
line. 

The  Yan  Brunt  &  Erie  Basin  line  has  been  going  on  fifty-odd 
years,  and  it  has  an  average  fare  of  IJ  cents ;  a  cash  fare  of  3 
cents,  having  transfer  arrangements  with  the  B.  R.  T.  w^hich  gives 
them  one-third,  and  the  average  fare  is  IJ  cents.  That  company 
has  been  paying  dividends  and  jogging  along  in  the  same  old  way. 

Commissioner  Gadsden.  What  is  the  average  haul  there,  do  you 
know  ? 

Mr.  Fox.  I  think  that  line  has  an  average  line  of  about  a  mile 
and  a  half;  about  the  same  as  the  bridge-operating  company. 

Mr.  Warren.  Where  was  that  line? 

Mr.  Fox.  The  Van  Brunt  &  Erie  Basin  line,  from  Hamilton 
Ferry,  in  Brooklyn,  to  Columbia  Street,  along  the  Erie  Basin,  and 
the  Bobbins  dry  dock. 

That  line  has  a  very  interesting  schedule.  It  is  a  good  deal  like 
the  English  schedules.  They  have  the  same  service  all  day  long — 
no  peak  load.  It  is  a  line  with  a  splendid  load  factor.  They  run 
all  day  with  the  same  schedule,  like  clock-work — no  peak  load  at  alL 
That  is  one  reason  why  they  have* been  so  successful,  because  they 
have  none  of  this  peak-load  problem. 

Mr.  Warren.  You  could  not  apply  that  to  ordinary  street-railway 
lines  which  do  have  the  peak  problem  ? 

Mr.  Fox.  No.  There  are  very  few  lines  where  you  can  get  any 
such  schedule  as  that,  naturally.    That  is  almost  ideal. 

Mr.  Warren.  And  almost  unique  in  this  country,  is  it  not? 

Mr.  Fox.  I  think  so ;  yes.    But  it  is  the  ideal  we  want  to  work  for. 

Commissioner  Gadsden.  What  you  have  said  really  means,  stated 
in  another  way,  that  you  cut  your  fare  down  when  you  cut  your 
ride  down?  In  other  words,  you  advocate  a  low  fare  for  a  short 
ride — a  mile  or  a  mile  and  a  half — and  if  you  ride  another  mile 
you  get  another  cent  and  a  half?  That  is  what  the  illustrations 
you  have  given  signify? 

Mr.  Fox.  I  thinlv  that  we  can  make  the  most  money  in  this  coun- 
try if  we  keep  the  5-cent  fare  for  the  ordinary  travel  and  introduce 
a  low  fare  of  2J  cents  or  3  cents  for  the  short  haul — that  is,  to  build 
up  this  off-peak  travel. 

There  are  two  ways  of  building  up  the  off-peak  load.  One  way 
is  to  have  the  low  fare  for  all  the  system  in  off-peak  hours,  and  the 
other  way  is  to  simply  have  the  low  fare  for  short  rides. 


1082    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

In  this  country  our  rule  has  been  to  have  low  fare  at  the  rush 
hours,  which  is  the  worst  thing  of  all. 

The  low  fare  for  the  off-peak  hours  has  beeD  tried  out  West 
with  considerable  success.  On  one  line  it  was  tried  in  Lynn,  Mass., 
for  a  short  time,  but  not  long  enough  to  really  try  it  out. 

Mr.  Warren.  It  was  not  a  success,  though,  as  long  as  it  was  tried 

out  1 

Mr.  Fox.  No.  You  have  to  have  a  lot  of  advertising  for  any- 
thing like  that,  and  you  have  to  be  patient  until  it  is  built  up.  It 
can  not  be  done  in  a  moment. 

My  feeling  is,  however,  that  with  a  low  fare  for  a  short  haul  you 
have  the  safest  proposition,  and  the  most  feasible  one.  That  is, 
introducing  into  your  cities  what  Mr.  Stanley  did  in  Cleveland, 
what  we  have  in  New  York  City,  and  what  has  been  so  successful 
in  Europe. 

1  was  going  to  say  something  about  the  question  of  increased  fares 
and  their  effect  on  traffic,  but  you  will  probably  hear  a  great  deal 
about  that  from  other  people. 

I  tried  in  Massachusetts  very  hard  to  keep  some  of  the  companies 
from  increasing  their  fares,  particularly  Stone  &  Webster,  but  with- 
out much  success.  My  experience  has  been  that  the  increased  flat  fare 
has  not  been  a  success.  It  is  certainly  true  in  the  companies  that 
1  have  been  working  with.  It  is  particularly  true  in  Keading,  and 
it  has  the  unfortunate  result  that  it  makes  your  load  factor  woi-se, 
instead  of  better.  Right  there  in  Reading  to-day  the  cars  are  empty 
during  the  slack  hours.  They  are  full  during  the  rush  hours,  but 
the  slack-hour  traffic  is  almost  gone.  The  company  could  take  a  lot 
of  their  cars  right  off  in  the  slack  hours,  because  the  business  is  all 
gone  entirely.  The  manager  there  felt  the  same  way  I  did;  and  I 
tried  in  every  way  to  get  the  company  not  to  raise  their  fares  in 
Reading;  but  unfortunately  the  man  who  had  the  last  say  was  a 
banker  and  not  a  manager,  and  so  he  raised  the  fares,  and  the  man- 
ager was  overruled. 

Now,  may  I  point  out  one  or»two  instances  of  the  result  of  in- 
creased fares?  And,  by  the  way,  I  hope  the  commission  will  get 
the  facts  about  this  increased  fares  justification,  the  real  truth  of  it; 
and  in  doing  so  remember  that  we  must  compare  the  increased  fares 
with  the  normal  increase  which  would  have  taken  place  if  the  fares 
had  not  been  raised,  which  is  very  hard  to  get,  of  course. 

At  Dallas,  Tex.,  they  got  an  increase  of  33  per  cent  the  first  year 
under  the  new  franchise  there,  Mr.  Strickland  reports. 

Seattle  got,  in  May  of  this  year,  an  increase  of  16  per  cent  over 
last  year — an  extraordinary  increase.  You  are  probably  aware  of 
the  tact  that  Mr.  Strickland,  the  Dallas  president,  said  that  he 
would  rather  get  out  of  business  than  to  raise  his  fares.  He  ex- 
pressed himself  very  strongly.  He  said  the  increased  fares  had  been 
a  failure,  and  he  would  rather  resign  than  to  make  any  attempt  to 
put  them  into  force. 

Boston,  of  course,  has  got  an  increase,  but  it  has  got  it  at  an  enor- 
mous disadvantage  to  the  public  and,  it  seems  to  me,  a  gi'eat  dis- 
advantage to  the  company  itself. 

I  know  one  manager  who  takes  the  ground  that  the  way  to  make 
the  company  oi)ei-ate  to-day  is  to  find  every  passenger  who  has  got 
to  ride,  and  then  make  him  pay  the  price  and  soak  him. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1083 

None  of  us  would  take  that  extreme  view,  I  think,  and  yet  that 
is  the  tendency  in  certain  quarters;  is  it  not?  And  is  it  not  very 
unfortunate  for  the  companies  themselves,  particularly  on  account 
of  its  effect  on  their  load  factor,  accentuating  the  peak  load,  and 
making  things  worse  and  worse  ? 

I  am  doing  some  work  for  a  city  in  Massachusetts  to-day  where 
the  city  officials  would  like  to  see  all  the  street-cars*  taken  off  the 
streets  and  the  jitneys  put  in — jitneys  in  the  shape  of  buses. 

I  am  not  in  favor  of  the  jitney;  I  am  sorry  to  say  I  can  not  agree 
with  Mr.  Babson  on  that.  I  believe  the  sti-eet-car  should  have  the 
right  of  way.  I  think  it  is  to  the  advantage  of  the  public  to  have 
sti-eet  cars  have  the  main  traffic  on  our  streets,  and  I  believe  that  in 
the  end  if  you  will  operate  one-man  cars,  with  the  best  service  and 
the  cheapest  service,  that  the  street-car  every  time  will  demonstrate 
its  superiority  over  the  jitney.  And  yet  here  in  this  city  I  am  speak- 
ing of,  where  the  fare  is  now  so  high  that  the  people  have  deserted 
the  street-cai-s,  the  city  officials  are  in  favor  of  taking  all  the  cars  off 
entirely,  which  I  think  would  be  very  unfortunate  indeed. 

Mr.  Warren.  What  city  was  that  in  Massachusetts,  may  I  ask? 

Mr.  Fox.  That  is  the  city  of  Newton. 

The  reason  why  people  will  not  pay  more  than  5  cents  is  pretty 
well  understood.  It  is  the  psychology  of  it.  The  people  are  not 
willing  to  pay  more  than  a  nickel.  It  is  prejudice.  There  is  no 
reason  for  it.  They  simply  will  not  do  it.  They  say :  "  We  could 
afford  to  pay  more,  but  we  will  not  do  it." 

I  was  impressed  in  Springfield  with  the  fact  that  in  Springfield, 
where  everybody  is  willing  to  pay  increased  fares  whenever  increased 
fares  were  introduced,  the  traffic  fell  off.  In  Springfield  everybody 
was  on  the  side  of  raising  the  fares,  in  favor  of  raising  the  fares, 
and  I  could  not  get  my  clients  at  all  to  agree  to  extend  the  5-cent 
fare.  They  were  all  willing  to  pay  6  cents.  And  yet  when  the  in- 
creased fares  went  into  effect  the  riding  fell  off,  particularly  on  the 
6-cent  lines,  where  the  fare  was  not  raised  at  all. 

Mr.  Warren.  Where  do  you  get  that  information? 

Mr.  Fox.  From  the  public  service  commission.  That  was  when 
the  first  fare  raises  went  into  effect. 

Mr.  Warren.  That  the  falling  oft'  was  on  the  5-cent  lines? 

Mr.  Fox.*  Yes. 

Commissioner  Gadsden.  On  the  lines  where  there  had  been  no 
change  of  fare  at  all? 

Mr.  Fox.  Yes. 

C\)mmissioner  Gadsden.  How  do  vou  account  for  that,  psvcholos:- 
ically? 

Mr.  Fox.  There  were  some  people  there,  I  suppose,  who  had  a 
grudge  against  the  company.  I  do  not  know.  It  is  almost  unex- 
plainable. 

Mr.  Warren.  There  was  no  opposition  from  that  part  of  the  ter- 
ritory, was  there? 

Mr.  Fox.  It  has  occurred  in  more  than  one  city,  that  very  thing. 

Commissioner  Gadsden.  In  that  instance  they  would  seem  to  have 
resented  the  fact  that  the  fare  has  not  been  raised  on  that  line? 

Mr.  Warren.  That  is  like  the  case  in  the  West  where  we  went  to 
a  6-cent  fare  and  had  less  loss  of  traffic  than  we  had  the  month  beforo 
under  the  5-cent  fare. 


1084    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Fox.  It  will  take  some  psychologist  to  explain  some  of  these 
results.    I  think  they  are  above  any  practical  operatmg  man. 

Commissioner  Gadsden.  Have  you  followed  that  out?  Uhat  has 
been  the  subsequent  history  of  that?  ,     ,    .        x     ^  n 

Mr.  Fox.  No,  Mr.  Commissioner;  I  have  not  had  time  to  follow 

the  Springfield  figures.  .  .  -.        ^  * 

Commissioner  Gadsden.  When  was  the  rate  mcreased,  if  you  know  ? 
Mr.  Fox.  That  was  put  in  a  little  over  a  year  ago,  was  it  not,  early 

in  1918? 

Mr.  Warren.  It  was  put  in  May  1,  1918. 

Commissioner  Gadsden.  We  have  had  a  good  deal  of  testimony 
here  to  show  that,  while  there  was  a  falling  off  at  first,  running  from 
one  month  to  a  year,  eventually  the  traffic  came  back  on  some  of 
these  lines ;  and  1  was  wondering  whether  that  was  true  of  the  line 

you  spoke  about.  .       rr,,      r>.     •     /•  n 

Mr.  Fox.  Well,  I  could  not  tell  you,  sir.  The  Springfield  com- 
pany can  undoubtedly  give  you  some  facts  along  that  line. 

If  I  had  had  a  little  more  time  I  would  have  been  able  to  get 
more  figures  ready,  but  I  did  not  expect  to  testify  to-day,  and  I  have 
not  had  time  to  get  all  the  figures  together.  ^^     ^^  ,         ', 

Perhaps  I  had  better  make  this  suggestion :  When  Mr.  Ualrymple 
came  to  Chicago  for  Mayor  Dunne  in  1905,  he  was  not  very  well 
pleased  with  his  reception  in  America,  and  did  not  give  a  very  good 
report  OP  things  over  here,  especially  in  regard  to  municipal  owner- 
ship.    AVhen  he  got  back  to  England  he  expressed  himself  quite 

iI'PPl  V 

I  was  in  England  when  Mr.  Dalrymple  came  back,  and  I  had  the 
advantage  of  getting  at  some  of  his  personal  views;  and  his  views 
with  regard  to  fares  were  extremely  interesting. 

He  said  that  he  thought  the  American  companies  would  make  the 
most  money  if  they  had  the  5-cent  fare  with  free  transfers  as  their 
ordinary*  basic  fare,  and  a  lower  fare  for  short  haul,  not  more  than 
2  cents,' just  the  suggestion  I  made  a  little  while  ago;  and  he  felt 
very  stronglv  that  our  companies  were  throwing  away  busmess  by 
not  introducing  that  low  fare  for  short  hauls.  That  was  a  private 
opinion  not  expressed  for  publication  in  America,  of  a  man  who  had 
had  the  most  success  in  Europe  with  the  1-cent  fare,  as  you  know. 

At  that  time,  when  I  was  in  England,  I  thought  of  looking  into 
the  matter  of  the  low  fares  very  carefully.  So  I  got  hold  of  several 
Americans  in  England  that  I  laiew  in  the  street-railway  work  and 
asked  their  judgment  about  the  matter;  and  they  all  felt  the  same 
way  as  Mr.  Dalrymple  did— that  our  American  companies  would  get 
very  much  larger  receipts  from  what  you  might  call  a  zone  fare  of 
that  kind,  and  they  said:  "Don't  charge  more  than  2  cents.  If 
you  get  it  started  in  America,  don't  charge  more  than  2  cents." 

I  came  back  with  the  idea  of  suggesting  that  in  Boston  to  the 
Boston  Elevated  Co.  I  worked  for  a  long  time,  giving  them  sug- 
gestions- and  my  idea  was  in  Boston  to  put  in,  in  the  center  of 
Boston,  something  like  you  might  call  an  English  tramming  system. 
In  other  words,  to  put  in  the  center  a  series  of  short-haul  Imes. 
Boston  to-day  has  torn  up  most  of  the  surface  tracks  downtown, 
and  put  the  surface  cars  underground,  or  taken  them  off. 

Mr.  Warren.  You  do  not  mean  most  of  its  tracks? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1085 

Mr.  Fox.  The  surface  tracks  in  the  business  section  of  the  city.  It 
is  running  no  cars  in  Washington  Street,  very  few  on  Summer 
Street.    They  have  been  very  largely  taken  off. 

Mr.  Warren.  They  have  not  taken  up  many  of  those  tracks,  except 
on  Tremont  Street? 

Mr.  Fox.  But  they  operate  no  cars  on  Washington  Street  at  alL 

Mr.  Warren.  The  tracks  are  there. 

Mr.  Fox.  The  rails  are  there ;  yes. 

My  idea  was  to  get  down  more  instead  of  less,,  and  introduce  motor 
buses  on  some  of  the  streets  where  there  were  no  street-car  traclvs, 
like  Beacon  and  Arlington,  covering  Back  Bay,  Beacon  Hill 

The  Chairman.  And  have  the  motor  buses  operated  m  conjunction 
with  the  railroad  and  as  a  part  of  it? 

Mr.  Fox.  Yes;. just  as  is  done  very  largely  in  England  as  feedei-s 
and-  to  fill  up  the  links  in  the  system. 

The  London  County  Council  has  just  asked  for  the  right  to  oper- 
ate a  great  many  more  buses  as  connecting  links  between  detached- 
service  lines. 

The  Chairman.  The  time  for  adjournment  has  arrived,  Mr.  Fox. 
How  much  longer  will  it  take  you  to  complete  your  formal  state- 
ment ? 

Mr.  Fox.  I  do  not  quite  know,  Mr.  Chairman.  I  am  at  your  dis- 
posal only  as  long  as  you  are  really  interested. 

The  Chairman.  We  are  always  interested  in  any  new  phase  of 
this  problem. 

Mr.  Fox.  I  came  to  Washington  not  expecting  to  testify  to-day, 
but  to  fit  in  at  any  time,  and  I  was  expecting  to  stay  on  a  little  bit 
and  hear  some  of  the  others  first. 

The  Chairman.  Mr.  Warren,  and  the  rest  of  you,  we  have  a  long 
program  of  witnesses  here  for  this  week.  There  is  an  average  of 
about  six  persons  per  day. 

Mr.  Ogburn.  There  are  three  to  be  added  to  that  list,  Mr.  Chair- 
man. 

The  Chairman.  There  are  three  to  be  added  to  that  list,  and  Mr. 
Ogburn  has  filled  up  the  progi*am  for  Monday,  Tuesday,  Wednes- 
day, Thui^day,  and  Friday.  I  readily  see  that  we  have  got  to  go 
back  to  the  practice  of  night  sessions.  Are  you  so  fatigued,  Mr. 
Warren,  after  the  last  experience,  that  you  would  not  like  to  try  it 
over  again? 

Mr.  Warren.  I  am  entirely  ready,  Mr.  Chairman.  If  you  will 
guarantee  weather  like  this,  I  would  rather  have  evening  sessions 
than  one  day  of  the  kind  of  weather  we  had  before. 

The  Chair3ian.  We  will  take  an  adjournment  at  this  point  until 
10  o'clock  to-morrow  morning,  and  beginning  to-morrow  we  will 
have  night  sessions. 

(AVhereupon,  at  5  o'clock  p.  m.,  an  adjournment  was  taken  until 
to-morrow,  August  12,  1919,  at  10  o'clock  a.  m.) 


1086    PBOCEEDlJfifGS  OF  FEDERAL  ELECTRIC  BAILWAYS  COMMISSION. 

Washington,  D.  C,  August  12,  1919 — 10  a,  m. 

Met  pursuant  to  adjournment. 

Tresent:  Parties  as  before. 
.     The  Chairman.  Mr.  Ogburn,  who  is  your  first  witness? 

Mr.  Ogburn.  The  first  witness  is  Mr.  Carl  H.  Mote,  the  secretary 
of  the  Indiana  Public  Service  Commission. 

The  Chairman.  Mr.  Fox  was  on  the  stand,  but  he  has  kindly  con- 
sented to  permit  some  of  these  commissioners  and  others  who  must 
get  away  during  the  day  to  give  their  testimony  first. 

STATEMENT  OF  MR.  CAKI  H.  MOTE,  SECRETARY  OF  THE  IITOIANA 

PUBLIC  SERVICE  COMMISSION. 

Mr.  Mote.  Mr.  Chairman,  and  gentlemen  of  the  commission,  I 
have  prepared  a  brief  statement  with  respect  to  the  Indiana  situa- 
tion which,  if  it  pleases  the  commission,  I  will  read.  It  is  not  long. 
Then  I  will  answer  any  questions  which  the  commission  or  any  one 
here  may  see  fit  to  ask,  if  I  can. 

Indiana  has  somewhat  less  than  2,500  miles  of  electric  street  and 
interurban  railways.  They  have,  of  coui-se,  been  affected  by  the 
present  era  of  high  prices,  though  I  should  think  not  in  the  same 
degree  as  electric  railways  in  the  Eastern  States.  I  am  sure  our 
situation  has  not  been  identical  with  that  in  New  York,  Massachu- 
setts, Rhode  Island,  and  perhaps  other  Eastern  States,  for  the  reason 
that  the  fixed  charges  ot  the  Indiana  roads  have  always  been  much 
less  in  proportion  to  the  actual  valuation  than  in  many  of  the  ICast- 
ern  States,  from  which  I  understand  the  demand  has  come  for  the 
creation  of  your  commission. 

Still,  most  of  the  Indiana  roads  wei-e,  and  are,  overcapitalized. 
Our  public-service  commission,  which  assumed  full  and  complete 
jurisdiction  over  the  affairs  of  electric  interurban  i*ailways,  in  spite 
of  the  2-cent  fare  law,  which  I  will  interpose  and  say  was  applicable 
to  railroads,  and  our  commission  held  finally  that  an  electric  inter- 
urban is  not  a  railroad  but  a  public  utility  within  the  meaning  of 
our  public-service-commission  act,  and  within  that  meaning  took  full 
and  complete  jurisdiction  and  increased  subsequently,  as  I  will  set 
out,  the  f ai-es  of  these  roads. 

This  law  has  since  been  repealed  by  the  legislature,  in  1919.  Our 
commission  fii-st  increased  the  fare  of  a  single  road  to  2^  cents. 
Later,  all  the  roads  were  increased  to  2^  cents  and  still  later  with  one 
exception  they  were  all  increased  to  2J  cents.  Freight  rates  have 
been  increased  from  time  to  time  until  the  level  now  in  effect  on 
steam  roads  prevails  in  Indiana.  Our  commission  and  most  of  the 
carriers,  I  believe,  have  agreed  that  it  was  a  good  ix)licy  to  keep  pas- 
senger fares  on  the  electric  interurbans  slightly  below  the  level  of 
passenger  fares  on  steam  roads,  and  a  differential  of  one-fourth 
cent  now  prevails,  the  steam  rate  being,  of  course,  3  cents,  and  the 
interurban  rate  2}  cents. 

On  the  whole,  I  believe  this  policy  has  been  justified,  in  spite  of 
the  fact  that  some,  at  least,  of  the  neighboring  States  have  put  inter- 
urban on  a  straight  3-cent  basis. 

The  Public  Service  Commission  of  Indiana  has  granted  no  in- 
creases in  electric-railway  rates  without  a  tentative  valuation  of  the 


PROCEEDINGS  OF  FEDERAL  ELECJTRIC  BAILWAYS  CX)MMISSION.    1087 

property  involved.  In  some  cases,  we  have  had  to  face  situations 
where  fixed  charges  exceeded  the  normal  return  that  would  attach  to 
the  valuation  as  made  by  the  commission.  In  every  case  of  this 
cliaracter  we  have  been  rather  explicit  in  suggestions  that  finan- 
cial reorganizations  were  necessary.  The  roads  themselves,  in  a  goo<l 
many  instances,  have  responded  to  these  suggestions.  We  have 
reached  a  few  properties  also  in  merger  proceedings  and  accom- 
plished the  same  end.  In  the  reorganization  of  the  street-railway 
companies  of  Indianapolis,  the  fixed  charges  were  reduced  more  than 
$300,000  annually,  and  the  securities  from  $25,000,000  to  less  than 
$19,000,000.  One  of  our  larger  interurban  companies  is  now  going 
thix)Ugh  a  friendly  receivership,  as  a  consequence  of  which  outstand- 
ing securities  will  be  reduced  from  $18,000,000  to  $12,000,000.  This 
is  the  only  receivership  we  have  had  in  Indiana. 

The  Chairman.  What  is  the  process  of  reducing  these  securities? 

Mr.  Mote  If  it  is  bonds,  an  agreement  with  the  bondholders  is 
obtained  through  the  trustee  and  through  an  actual  canvas  of  the 
bondholders  to  accept,  in  lieu  of  securities  which  they  hold  at  the 
present  time,  securities  of  a  new  issue  in  a  lesser  amount  than  those 
previously  outstanding. 

The  Chairman.  How  about  stock? 

Mr.  Mote.  The  same  way.  In  the  Indianapolis  case  some  of  the 
stock  of  the  Indianapolis  Traction  Terminal  Co.,  which  was  the 
operating  company  in  Indianapolis,  was  held  by  the  Terra  Haute, 
Indianapolis  &  Eastern  Traction  Co.,  which  was  an  interurban  prop- 
erty, specifically  and  strictly  speaking.  The  Terre  Haute,  Indianajx>- 
lis  &  Eastern  had  pledged  this  stock  under  a  mortgage  and  there  was 
an  agreement  reached  by  which  that  stock  should  be  surrendered, 
withm  the  company  itself,  and  it  was  wholly  voluntary,  brought 
about  at  the  suggestion  of  our  commission,  but  neveitheless  and 
finall^^  it  was  voluntary. 

Mr.  Warren.  Mr.  Mote,  was  that  reduction  to  a  figure  that  the 
commission  felt  was  approximately  the  value  of  the  property? 

Mr.  Mote.  In  the  case  of  the  Indianapolis  Traction  Terminal  Co., 
or  rather  the  Indianapolis  Street  Railway  properties,  we  made  a 
tentative  valuation  of  the  property  and  found  that  the  value  was  any- 
where between  $14,000,000  and  $16,000,000.  We  brought  the  securi- 
ties down  to  $19,000,000  and  actually  they  will  be  subsequently  re- 
duced to  about  $18,000,000,  so  that  wilf  answer  your  question,  I 
think. 

The  Chairman.  Juj^t  one  further  question.  If  you  fixed  the  value 
which  you  regard  as  the  true  value  of  the  property  at  $14,000,000, 
how  do  you  permit  a  capitalization  to  be  rewritten  to  $19,000,000? 

Mr.  Mote.  Well,  this  was  in  a  merger  proceeding  and  the  law  of 
our  State  provides  that  the  securities  issued  in  case  of  a  merger 
shall  not  exceed  the  total  of  the  outstanding  securities,  and  anyway 
the  law  of  our  State  does  not  permit  us,  except  in  an  incidentarway, 
to  consider  securities  as  a  basis  for  rate  makmg. 

Mr.  Warren.  You  consider  the  value? 

Mr.  Mote.  We  consider  the  value  of  the  property. 

,  The    public   service   commission    has  also    tabooed    unreasonable 

smkmg-fund  charges,  where  the  plain  intention  was  to  amortize 

the   capital   invested.     Our   commission   required  the   Indianapolis 

street-railway  properties— and  I  say  properties  here  rather  than 


1088    PROCEEDINGS  OF  FEDEftAL  ELECTRIC  RAILWAYS  COMMISSION. 

company,  because  there  wei-e  one  or  two  underlying  companies  be- 
fore the  operating  company— to  reinvest  the  accumulated  surplus  in 
A/in  ^^l^u"^  ^"^^  ^^  physical  property,  amounting  to  about  $2,500,- 
000.  That  has  not  yet  been  done,  but  it  is  in  process  and  is  to  be 
done,  and  it  is  to  be  reinvested  in  improvements  to  the  property 
which  we  recommended  and  urged  should  be  made. 

Mr.  Warren.  Was  that  sinking  fund  included  in  the  valuation  as 
an  assets 

Mr.  Mote.  No;  it  was  not— and  to  discontinue  the  payment  of 
interest  on  sinking  funds  already  accumulated.  There  was  an  ar- 
rangement in  this  particular  case  whereby  a  given  amount  was 
paid  into  sinking  funds  on  two  bond  issues  each  year.  The  bonds 
were  not  canceled,  but  continued  to  draw  interest  even  though  they 
>yere  theoretically  in  the  treasury  of  the  company  and  taken  up  by 
the  company.  ^    " 

Our  commission  has  been  able  so  far  to  keep  the  electric  railways 
solvent  and,  m  a  period  of  great  stress,  to  maintain  fair  standards 
or  service. 

Frankly,  I  am  of  the  opinion— and  I  am  sure  it  is  the  unanimous 

opinion  of  our  commission  and  of  the  i>eople  of  our  State— that 

we  are  capable  of  handling  the  electric-railway  problem,  and  so  far 

as  we  are  concerned  we  look  upon  the  work  o*f  vour  commission— I 

say  this  m  all  kindness,  but  as  an  emphatic  statement  of  our  feeling 

with  respect  to  the  matter— so  far  as  our  local  situation  is  concerned, 

as  unnecessary.     During  the  war  period  we  have  kept  pace  with  the 

extraordinary  number  of  petitions  filed  and  have  acted  promptly  on 

petitions  for  release.    We  have  less  than  100  cases  on  our  docket 

now,  and  with  one  exception  where  we  doubted  our  jurisdiction  to 

uct,  we  have  generally  acted  within  one  month  from  the  date  of  filing 

of  an  application  for  increased  rates.  '^ 

Mr.  Warren.  Apparently,  you  have  a  record. 

Mr.  Mote.  I  think  so. 

Commissioner  Gadsden.  An  unusual  one,  too,  I  should  think,  ac- 
cording to  the  testimony  before  us. 

Mr  Warren.  The  average  in  Massachusetts  a  year  ago  was  four 
months:    I  think  it  has  been  reduced  since  then. 

Mr.  Mote.  We  had  on  our  docket  when  our  commission  was  re- 
organized m  May,  1917,  about  673  formal  cases.  During  the  first 
year,  from  May  1  1917  to  May  1,  1918,  we  disposed  of  Something 
more  than  2,100  formal  cases,  and  on  the  first  day  of  May,  19ia 
there  were  76  formal  cases  on  our  docket  at  the  close  of  one  year 
after  our  commission  was  reorganized.  And  we  proceeded  frankly 
on  the  theory  that  the  public-service  commission  is  an  administrative 
body  and  that  its  functions  fail  absolutely  unless  they  are  performed 
promptly,  and  that  is  the  theory  that  we  have  operated  on. 

Of  course,  I  recognize  that,  generally  speaking,  the  electric  rail- 
ways of  the  country  are  dead  broke,  but  our  people  from  over  the 
mountains  feel  pretty  keenly  that  the  creation  of  your  commission 
has  been  brought  about  by  electric  roads  and  as  a  consequence  of  con- 
ditions prevailing  in  States  other  than  Indiana.  Indiana  by  no 
means  has  escaped  the  effects  of  speculation  in  the  pioneer  days  of 
electric-railway  building  and  financing,  else  the  reorganizations  al- 
ready consummated  and  now  in  process  and  to  be  accomplished 
would  not  have  been  and  would  not  be  necessary.    I  believe  it  is  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1089 

theory  of  our  commission  that  we  are  not  called  upon  to  protect  the 
return  on  securities  that  represent  no  value  and  that  were  issued  iu 
pioneer  days  in  anticipation  of  future  earning  power  that  has  not 

been  realized. 

The  truth  is  that  the  electric  interurban  railway  has  been-  a  huge 
disappointment  to  the  hopes  and  judgment  of  their  promoters.  The 
advent  of  the  automobile  was  not  foreseen,  and  I  do  not  think  we 
have  reached  the  peak  of  its  effect  on  interurban  traffic,  either  passen- 
ger or  f i-eight.  The  building  of  hard  surface  roads  is  bound  to  bring 
the  motor-driven  truck  into  more  active  competition  with  the  electric 
railway  for  the  transportation  of  shoi-t-haul  freight,  and  the  tix)uble 
with  the  jitney  bus  is  already  well  recognized.  I  look  upon  their 
future  as  anything  but  promising. 

Our  policy  in  Indiana  is  to  deal  promptly  and  effectively,  with 
careful  consideration  of  all  local  factors,  in  maintaining  our  electric 
railways  so  far  as  humanly  possible.  We  shall  not  hesitate  to  in- 
crease rates  up  to  the  point  where  competition  operates  to  reduce 
rather  than  increase  revenue,  wl^ere  this  is  necessary  and  fairly 
proved. 

We  hftve  increased  street-railway  fares  to  a  straight  5 -cent  level 
and,  so  far,  have  had  good  results.  We  hesitate  to  go  above  this  level 
l)ecause  of  the  experience  elsewhere,  revenue  having  been  actually 
decreased  with  each  increase  in  rates  above  the  3-cent  level,  in  a  good 
many  places  at  least.  In  Indianapolis,  where  a  5-cent  fare  amounts 
to  a  16  per  cent  increase  in  rates,  revenue  was  increased  25  per  cent. 
The  difference  is  accounted  for  by  the  adoption  of  pay-as-you-enter 
cars  and  the  collection  of  fares  formerly  lost,  by  the  return  of  the  sol- 
diers, and  the  general  revival  of  social  and  business  activities  with 
the  end  of  the  war. 

Eight  here  I  want  to  interpose  something  that  is  not  in  the  state- 
ment. We  have  found  in  a  good  many  cases  bad  conditions  of  opera- 
tion. We  found  in  the  Indianapolis  case  a  tremendous  loss  of  power 
due  to  a  failure  to  have  built  substations.  We  found  the  company 
Avas  dissipating  power  of  tremendous  value  into  the  air  because  of 
the  want  of  these  substations,  and  on  some  of  our  interurban  proper- 
ties we  found  tremendously  bad  operating  conditions.  One  at  least 
of  the  interurban  companies  operating  in  Indiana  has  had  within  the 
last  six  months  three  pretty  bad  wrecks  that  ought  to  have  been 
avoided.  One  case,  where  block  signals  were  installed,  they  were  out 
of  repair ;  and  the  evidence  in  the  case  showed  that  it  was  the  prac- 
tice of  this  company  to  be  careless  with  the  maintenance  of  these  sig- 
nals. The  wreck  will  cost  the  company  $150,000.  It  ought  to  have 
been  avoided.  It  has  been  true  in  two  or  three  other  cases.  As  a 
matter  of  fact,  going  back  beyond  the  period  of  the  war  to  about 
1910  or  1911,  we  had  in  Indiana  a  great  number  of  very  bad  wrecks. 

The  Chairman.  Is  there  any  State  in  the  Union  where  you  have 
had  more  disastrous  wrecks  than  in  Indiana  ? 

Mr.  Mote.  I  doubt  it.  As  a  consequence  of  a  series  of  wrecks 
we  had  upon  a  number  of  roads  the  old  railroad  commission  ordered 
the  installation  of  block  signals,  and  that  work  was  being  done 
up  to  the  time  of  the  war  period.  Of  course,  it  was  suspended  at 
that  time  because  of  the  general  war  policy  to  avoid  construction 
work.     But  the  Fort  Wayne  &  Northern  Indiana  Traction  Co., 

160643"— 20— VOL  2 7 


1090    PROCEEDINGS  or  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

which  is,  I  see,  listed  in  the  announcement  of  your  commission  as 
one  of  the  roads  in  the  hands  of  a  receiver,  was  formerly  the  Fort 
Wayne  &  Wabash  Valley  Traction  Co.  It  had  a  wreck  m  Kmgs- 
land,  Ind.,  in  1911,  I  think  it  was,  which  must  have  cost  it  three 
quarters  of  a  million  dollai-s.  I  am  just  speaking  offhand,  and  I 
do  not  know,  but  I  think  there  were  40  people  killed  m  the  wreck— 
a  tremendous  disaster.  It  went  into  receivership  at  that  time  as 
a  consequence  of  the  tremendous  number  of  damage  suits  accu- 
mulated. Of  course,  it  ran  along,  and  now  it  is  going  through  this 
i^organization,  which  is  a  friendly  reorganization  to  reduce  its 
securities.    That  is  its  present  purpose,  as  I  understand  it,  largely. 

But  I  do  want  to  emphasize  that  we  have  found  the  roads  them- 
selves not  faultless  in  the  matter  of  oi)eration.  We  have  found  in 
some  cases  decidedly  poor  operation.  ^ 

The  Chairman.  Have  j^ou  suggested  economies  in  operation? 

Mr.  Mote.  Absolutely ;  in  every  instance,  specific. 

The  Chairmai^.  Can  you  indicate  the  general  nature  of  those 

suggestions?  ,      ^    ,.  ,.     o.      ^  t»  -i 

Mr.  Mote.  Well,  in  the  case  of  the  Indianapolis  Street  Railway 
Co.  the  company  was  told  that  these  substations  must  be  con- 
structed. They  had,  as  I  have  already  said  to  you,  $2,500,000  in 
this  sinking  fund.  We  said  to  them,  "  This  money  must  be  taken 
out  of  the  sinking  fund  and  applied  to  -the  rehabilitation  of  this 
road."  We  did  not  specifically  say  it  must  be  spent  in  the  building 
of  substations,  but  there  was  a  plain  implication  that  that  must 
be  done  immediately ;  and  they  frankly  understand  it  is  to  be  done, 

and  moreover _  ,  •     .,       •   i         .c     j 

Commissioner  Gadsden.  Was  not  that  money  m  the  sinking  fund 
there  by  reason  of  a  provision  in  their  mortgage? 

M^r  A^OTE   Yes. 

Commissioner  Gadsden.  The  company  was  helpless,  then;  was  it 
not?  You  say  they  did  not  put  this  up  voluntarily.  That  was 
a  condition  in  the  mortgage,  I  imagine,  was  it  not? 

Mr.  Mote.  That  is  correct.  ^    ^  i     •-.      x 

Commissioner  Gadsden.  Suppose  you  ordered  them  to  take  it  out ; 
they  can  not  take  it  out  unless  the  mortgage  provision  is  changed, 

Mr  Mote.  I  am  assured  fhat  will  be  done. 

Commissioner  Gadsden.  But  it  has  to  be  done?  The  impression 
that  I  got  was  that  the  company  was  making  so  much  money  that 
they  were  putting  money  in  a  sinking  fund-- —  ,  ,   ,  .     ^. 

Mr.  Mote.  Absolutely  not.  This  money  has  accumulated  in  the 
prosperous  years  of  the  company.  .  .         ,  1 1 

C(MTimissioner  Gadsden.  As  a  matter  of  fact,  the  company  would 
be  glad  to  get  money  to  put  into  these  things? 

Mr.  Mote.  Yes;  and  we  have  urged  them  to  do  it. 

Commissioner  Gadsden.  And  you  are  going  to  help  them? 

Mr  Mote  We  are  going  to  help  them  work  it  out.  Ihey  want 
to  use  it.     The  situation  is  altogether  friendly.     Does  that  answer 

your  question,  Mr.  Chairman?        ,,     ^    ,.  ,.  a     rt  ^     u  4. 

The  Chairman.  That  was  as  to  the  Indianapolis  road.    But  what 

others  ? 

Mr.  Mote.  Well,  they  made  a  survey  of  the  Union  Traction  Co.— 
their  power  situation.    They  have  had  a  great  deal  of  trouble  with 


proceedings  of  federal  electric  railways  COMMISSION.    1091 

respect  to  the  operation  of  their  cars  on  account  of  failure  of  power. 
We  found  the  trouble  in  their  power  houses.  Our  engineering  de- 
partment made  that  survey,  and  recommendations  have  been  made 
to  them   for  the  reconstruction  and  rehabilitation  of  the   power 

houses,  for  instance.  ,    .,    .  x  1      i-    •.  j 

Now,  in  the  case  of  this  one  wreck  that  I  speak  ot,  it  was  due 
to  a  failure  to  maintain  their  signals.  The  order  has  not  been 
issued,  but  it  will  require  this  company  not  to  give  orders  for  the 
disregard  of  an  entire  system  of  block  signals,  but  only  one  block 
signal  when  it  is  out.  of  repair,  which  will  automatically  operate  to 
ccmipel  the  company  to  maintain  its  signals  so  far  as  possible. 

The  Chairman.  Has  your  experience  led  you  and  your  commis- 
sion to  believe  that  one  of  the  prime  duties  of  a  commission  is  to 
inspect  tracks,  equipment,  power  houses,  and  all  things  in  con- 
nection with  service,  to  make  such  recommendations  ? 

Mr.  Mote.  We  found  it  necessary. 

The  Chairman.  Have  you  found  it  helpful,  in  the  public  in- 
terest ? 

Mr.  Mote.  We  have. 

The  Chairman.  Have  you  found  the  companies  opposed  to  the 
recommendations  which  you  have  made? 

Mr.  Mote.  Well,  in  a  few  instances  the  companies  have  said  that 
we  have  been  pretty  strict  and  pretty  rigid  in  our  requirements. 

The  Chairman.  Have  they  complied  with  your  requirements? 

Mr.  Mote.  Yes;  in  a  general  measure  they  have,  in  a  general 
way;  and  they  have  shown  a  disposition  to  in  those  cases  which 
are  pending.  Some  of  these  things  I  speak  about  are  still  pend- 
ing before  our  commission. 

Fifty  per  cent  of  revenue  collected  from  increased  fares  in  In- 
dianapolis was  set  apart  by  our  commission  for  increased  wages. 
Since  that  date,  a  further  increase  has  been  granted  voluntarily 
by  the  company.  Interurban-railway  wages  have  also  been  increased 
materially.  We  have  had  no  strikes,  and,  so  far  as  I  know,  no 
serious  unrest  among  electric-railway  workers. 

I  do  not  believe  we  have  any  applications  from  Indiana  in  the 
electric  railway  field  for  increased  wages  presented  to  the  Na- 
tional War  Labor  Board.  I  think  that  is  correct.  The  public-serv- 
ice commission,  while  it  has  no  direct  jurisdiction  in  the  matter 
of  wages,  has  seen  to  it  nevertheless  that  electric-railway  workers 
got  a  share  of  the  revenue  that  has  come  from  increased  rates. 

The  Indiana  Commission  would  approve  the  cancellation  of  fran- 
chise obligations  requiring  paving  between  the  tracks,  the  payment 
of  a  portion  of  earnings  to  municipalities  and  partial  relief  from 
taxation,  as  a  last  resort  only,  to  save  the  properties.  Generally 
speaking,  where  franchises 

The  Chairman.  On  that  point,  has  your  commission  or  the  legis- 
lature found  it  necessary  to  eliminate  any  of  the  taxes  or  paving 
requirements  to  preserve  any  of  these  industries? 

Mr.  Mote.  No,  sir. 

The  Chairman.  Not  yet? 

Mr.  Mote.  No.  Generally  speaking,  where  franchises  have  not 
been  surrendered,  as  provided  in  our  law,  I  believe  the  moral  effects 
of  relieving  electric-railway  companies  from  their  franchise  obliga- 


1092    PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION. 


tions  would  be  bad  and  unwarranted  except,  as  I  have  said,  as  a 
last  resort. 

The  Chairman.  Why  do  you  make  that  statement? 

Mr.  Mote.  For  the  reason  that  it  is  the  effect  upon  the  public, 
the  effect  of  the  company's  escaping  something  that  is  tangible, 
something  the  public  knows  is  being  given  up  or  taken  awav;  and 
they  have  come  to  depend  upon  that.  In  some  cases,  while  the 
ajiiount  of  money  that  would  be  paid  into  the  treasury  of  a  munici- 
pality as  a  franchise  tax  is  not  great,  yet  it  might  affect  the  opera- 
tion of  the  city,  and,  like  all  the  rest  of  the  country,  we  have  gone 
dry  in  the  State  of  Indiana,  and  that  has  affected  somewhat  our 
revenues,  and  so  our  cities  are  badly  pressed  at  the  present  time  for 
funds,  at  least  to  the  extent  of  readjusting  their  financial  affairs 
so  that  they  can  take  care  of  this  loss  of  revenue  which  had  not 
been  anticipated. 

Mr.  Wahren.  Are  you  going  to  speak  of  the  franchises  in  connec- 
tion with  the  jurisdiction  of  your  commission  before  your  statement 
is  finished? 

Mr.  Mote.  No;  I  will  be  glad  to  speak  of  that  now.  We  are  in 
this  situation  in  Indiana:  The  original  public-service-commission 
law  passed  in  1913  provided  that  public  utilities  might  surrender 
the  franchises 

Mr.  Warren.  Those  were  fixed  franchisee? 

Mr.  Mote.  Franchises  granted  locally  by  municipalities. 

Mr.  Warren.  But  for  a  fixed  term  of  years? 

Mr.  Mote.  Yes;  and  for  a  fixed  term  of  years.  That  was  sub- 
sequently extended  to  June  30,  1917.  It  was  extended  by  the  legis- 
lature of  1915  to  June  30,  1917,  during  which  period  a  number  of 
companies  did  surrender  their  franchises.  A  number  did  not.  For- 
tunately, there  was  incorporated  in  our  law  our  famous  section 
122,  which  is  the  so-called  emergency  section  under  which  we  are 
authorized  to  grant  relief  in  emergencies  without  respect  to  fran- 
chises. We  can  not  waive  a  franchise,  but,  so  far  as  rates  and  fares 
are  concerned,  we  can  suspend  them  temporarily.  That  is  under 
section  122  of  our  act,  which  has  been  upheld  by  our  courts. 

Mr.  Warren.  The  general  principle  being  that  the  surrender 
should  precede  the  granting  of  relief? 

Mr.  Moi-E.  That  was  the  theory  of  the  act,  but,  fortunately,  we 
were  saved  and  they  were  saved  by  section  122  of  our  act. 

Mr.  Warren.  When  they  surrender  the  franchise,  what  happens? 

Mr.  Mote.  They  will  get  what  is  termed  the  indeterminate  permit. 

Mr.  Warren.  That  is  the  policy  of  the  State,  I  judge? 

Mr.  Mote.  Absolutely. 

Mr.  Warren.  And  has  the  approval  of  the  commission  as  the  bet- 
ter form  of  franchise? 

Mr.  Mote.  Absolutely. 

Mr.  Warren.  And  what  you  said  about  not  relieving  them  from 
franchise  obligations,  even  if  they  were  unduly  onerous,  applied 
only  in  cases  where  they  refused  to  comply  with  that  theory  of  the 
act  by  surrendering  their  fixed  franchise  and  taking  an  indeter- 
minate one. 

Mr.  Mote.  Well,  it  applied  to  the  theory— if  I  may  explain  what 
I  mean  with  respect  to  what  the  law  is— it  just  applied  to  the  theory 


of  it.    I  was  discussing  it  as  a  policy. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1093 


Mr.  Warren.  That  is,  if  they  wanted  to  hang  onto  their  fran- 
chise because  they  thought  they  had  something  valuable  in  it,  then 
they  ought  to  be  relieved  of  these  burdens  imposed  by  the  franchise? 

Sir.  Mote.  They  ought  not  to  be. 

Mr.  Warren.  They  ought  not  to  be? 

Mr.  Mote.  Yes. 

The  Chairman.  Does  your  law  permit  future  legislatures  to 
modify  any  franchise  permits? 

Mr.  Mote.  Why,  one  of  the  last  questions  we  were  discussing  be- 
fore I  came  East — in  our  last  legislature  there  was  an  attempt,  as 
there  was  in  most  States,  to  repeal  our  law.  I  nerver  did  think  it  was 
very  serious  and  amounted  to  a  great  deal.  But,  as  a  consequence  of 
the  agitation,  there  was  introduced  and  passed  by  our  legislature  an 
act  providing  that,  where  public  utilities  had  surrendered  their 
franchises,  franchises  which  provided  for  service  at  special  rates 
or  fi*ee  service  to  municipalities,  this  free  service  or  this  service  at 
special  rates  should  be  rendered  regardless  of  the  fact  that  the  fran- 
chise had  been  surrendered. 

Xow,  that  is  a  mandate  to  our  commission.  And  we  have  a  num- 
ber of  applications  pending  just  now,, just  filed.  I  do  not  know 
why  we  happen  to  have  escaped  it  so  long,  but  several  applications 
are  pending  now  asking  that  the  public  utilities  be  required  to  fur- 
nish this  special  service,  or  service  and  special  rates,  or  free  serv- 
ice, as  the  case  may  be ;  and,  of  course,  it  is  up  to  us  to  decide  what 
they  shall  do  about  it.    I  do  not  know  what  we  shall  do. 

Mr.  Warren.  The  act  was  passed,  then? 

Mr.  Mote.  Yes,  sir;  the  act  was  passed. 

Mr.  Warren.  Is  it  confined  merely  to  free  or  reduced  service  to 
the  municipality  in  its  corporate  capacity,  the  city  employees  or 
things  of  that  kind,  or  to  the  public  generally? 

Mr.  Mote.  Just  to  the  city  in  its  corporate  capacity. 

Mr.  Warren.  So  if  the  franchise  had  a  rate  fixed  for 
public,  and.  the  franchise  has  been  surrendered- 


for  the  general 


Mr.  Mote.  It  would  not  apply  in  that  case  at  all. 

Mr.  Warren.  The  jurisdiction  of  the  commission  would  be  com- 
plete? • 

Mr.  Mote.  It  would  not  apply  in  that  case  at  all.  For  instance, 
heating  service  to  a  public  library  or  to  the  city  hall. 

Commissioner   Gadsden.  And  carrying   policemen   free? 

Mr.  Mote.  Well,  that  is  another  question.  The  legislature  of  1917 
passed  a  law  requiring  street-railway  companies  to  carry  policemen 
and  firemen  free  of  charge,  and  a  petition  was  filed  before  our  com- 
mission asking  that  one  of  our  companies  be  required  to  comply 
with  that  law.  Well,  we  could  have  dismissed  it  for  want  of  ju- 
risdiction or  for  any  one  of  a  number  of  reasons.  It  was  a  law, 
and  we  do  not  operate  as  a  court,  and  it  was  not  up  to  us  to  decide 
it.  We  did,  however,  enter  an  order  requiring  them  to  do  it  so  as 
to  get  a  record  before  the  courts,  and  they  brought  suit  to  set  aside 
the  order  and  that  is  still  pending. 

The  Chairman.  I  am  not  sure  that  you  answered  the  question  I 
asked. 

Mr.  :^foTE.  I  am  not  sure  whether  I  did,  either. 

The  Chairman.  My  question  was  whether  the  law  in  your  State 

permitting  the  surrender  of  a  franchise  and  taking  in  lieu  thereof 


1094    PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

an  indeterminate  permit  contains  the  provision  that  the  legislature 
at  some  future  session  can  change  that  law? 

Mr.  Mote.  It  contains  no  provisions  whatever  in  regard  to  that 
feature. 

The  Chairman.  Proceed. 

Mr.  Mote.  The  so-called  service-at-cost  program  is  actually  the 
program  we  are  supposed  to  follow  under  the  public-service  com- 
mission law  of  Indiana,  and  for  that  reason  we  hear  nothing  about 
it  in  our  State.  I  am  not  familiar  with  the  origin  of  the  phrase, 
but  I  imagine  its  inception  could  be  traced  to  some  municipality 
where  the  electric  railways  were  overloaded  with  fixed  charges  and 
where  it  was  designed  to  produce  sufficient  revenue  to  meet  exorbi- 
tant fixed  charges  as  well  as  actual  operating  expenses,  including 
maintenance  and  depreciation.  Service  at  cost  involves,  first,  a 
correct  valuation  of  the  property.  There  is  no  means  of  knowing 
what  the  cost  of  electric-railway  service  is,  unless  this  basis  is 
known.  I  should  think  cities  without  facilities  for  ascertaining 
valuation,  might  be  led  into  a  position  of  agreeing  to  provide  a 
i^turn  on  excessive  valuation,  in  which  case  there  would  not  be 
service  at  cost  at  all,  but  service  at  an  excessive  cost.  To  me  the 
phrase  represents  merely  a  sti*aining  to  name  a  process  <9r  a  theory 
already  in  practice  in  Indiana. 

The  electric-railway  situation  finally  may  get  beyond  control  of 
our  commission  because  of  the  generally  recognized  factors  which 
are  operating  everywhere. 

Mr.  Warren.  I  did  not  quite  catch  the  first  part  of  that  sentence. 

Mr.  Mote.  The  electric-railway  situation  finally  may  get  beyond 
the  control  of  our  commission  because  of  the  generally  recognized 
factors  which  are  operating  everywhere;  but  I  am  inclined  to  be- 
lieve that  the  Indiana  roads,  in  their  present  condition,  and  hav- 
ing in  view  the  policy  which  I  know  our  commission  has  pursued 
and  expects  to  pursue  with  respect  to  them,  will  be  the  last  to  hit 
the  rocks. 

Commissioner  Gadsden.  Just  what  have  you  in  mind  by  saying 
it  may  get  beyond  their  control  ? 

Mr.  Mote.  I  mean  there  may  come  a  situation  where  an  increase 
in  rates  will  amount  to  a  reduction  in  revenue. 

Commissioner  Gadsden.  Will  not  produce  revenue? 

Mr.  Mote.  Yes. 

Commissioner  Gadsden.  I  just  wanted  to  get  your  thought. 

Mr.  Mote.  And  where  revenue  is  absolutely  necessary  to  main- 
tain the  solvency  of  the  roads.  Now  that  would  be  beyond  our 
control,  I  think.  That  might  come.  We  do  not  know  what  is  in 
store  for  us. 

Commissioner  Gadsden.  What  has  been  tfne  experience  of  the 
Indiana  roads  on  increased  revenue  from  the  increased  rates  you 
have  given? 

Mr.  Mote.  It  has  been  very  satisfactory.  It  has  done  the  work; 
it  bas  produced  the  revenue.  When  we  fii^t  granted  the  increase 
to  the  Indianapolis  &  Cincinnati  Traction  Co.  from  2  to  2^  cents, 
it  was  during  the  war  period  and  the  results  wei-e  not  satisfactory 
over  a  period  of  about  three  months;  in  other  words,  there  was  a 
very  slight  increase  only  in  their  net  revenue,  but  subsequently  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1095 


result  was  very  much  improved  and  the  net  revenue  increased  ma- 
terially, and  even  increased  from  the  change  from  2J  to  2|  cents. 

The  Chairman.  That  was  a  suburban  line? 

Mr.  Mote.  It  was  a  line  running  from  Indianapolis  to  Conners- 
ville  some — well,  I  think  it  consists  of  TO  or  80  miles  of  track  run- 
ning out  to  two  towns  40  or  50  miles  from  the  capital,  an  interurban 
line. 

Conmiissioner  Gadsden.  What  has  been  the  experience  of  the  In- 
dianapolis road  itself,  the  city  road  ? 

Mr.  Mote.  A  16  per  cent  inci*ease  in  rates  yielded  25  per  cent 
increase  in  revenue,  but  those  figures  are  approximate. 

The  Chairman.  Have  you  finished  your  formal  statement? 

Mr.  Mote.  Yes. 

The  Chairman.  I  have  a  few  questions  to  ask  you.  Does  the 
State  authorize  your  commission  to  prescribe  maximum  rates  for 
sti^et  cai^  and  interurban  lines? 

Mr.  Mote.  It  contains  no  provision  about  maximum  rates. 

The  Chairman.  But  you  have  the  right  to  fix  the  rates? 

Mr.  Mote.  Yes. 

The  Chairman.  There  is  no  limitation  upon  your  power? 

Mr.  Mote.  No. 

The  Chairman.  Other  than  that  the  rate  shall  be  reasonable? 

Mr.  Mote.  That  is  all. 

The  Chairman.  Are  there  any  street-car  systems  in  Indiana  that 
charge  more  than  5  cents  at  the  present  time?    ■- 

Mr.  Mote.  No. 

The  Chairman.  Are  there  any  of  those  systems  in  the  hands  of 
a  receiver? 

Mr.  Mote.  The  one  case  that  I  mentioned,  the  Fort  Wayne  & 
Northern  Indiana  Traction  Co. 

The  Chairman.  That  is  not  a  street-car  line. 

Mr.  Mote.  It  includes  interurban  and  the  city  street  car  lines  in 
Fort  Wayne. 

The  Chairman.  How  many  miles  of  interurban  has  it? 

Mr.  Mote.  I  am  unable  to  say  offliand.  It  is  one  of  our  larger 
systems — three  or  four  hundred  miles  of  interurban,  I  think. 

The  Chairman.  Have  you  caused  investigation  of  that  system  to 
ascertain  why  it  went  into  tlie  hands  of  a  receiver? 

Mr.  Mote.  I  am  able  to  speak  in  general  terms.  I  personally 
have  not  handled  that  particular  case,  but  a  full  and  complete 
investigation  I  daresay  has  been  made.  One  of  the  purposes  of  its 
going  into  the  hands  of  a  receiver  was  to  reduce  its  securities,  the 
securities  outstanding  exceeding  the  value  of  the  property. 

The  Chairman.  Did  the  rate  situation  have  anvthin^  to  do  with 
the  receivership? 

Mr.  Mote.  The  revenue  was  increased,  if  that  is  what  you  mean. 
1  hat  is,  do  you  mean  by  that  did  it  operate  to  depress  the  earnings 
or  the  company?  ^ 

The  Chairman.  Yes. 

Mr.  Mote.  No  ;  it  did  not.    Now 

^  The  Chairman  The  evidence  before  this  commission  shows  that 
in  a  great  many  States  the  street  car  systems  have  been  obliged  to 
increase  their  rates  all  the  way  from  5  to  6,  7,  and  8  cents,  in  some 
cases  and  even  under  those  large  charges  they  have  not  been  able 
to  pay  operating  expenses  and  meet  their  fixed  charges.     If  that 


1096    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


is  £0  in  many  of  the  Eastern  States  and  in  some  of  the  Western 
States,  how  do  you  account  for  the  fact  that  the  systems  of  Indiana 
are  operating  without  difficulty  on  a  5-cent  fare? 

Mr.  Mote.  I  would  not  want  to  make  a  categorical  statement,  and 
I  really  have  substantially  made  it  at  that.  1  very  much  suspect, 
however,  that  the  fixed  charges  on  many  of  these  properties  are 
excessive. 

The  Chairman.  You  have  stated  that  the  sti-eet-car  systems  in 
Indiana  were  overcapitalized. 

Mr.  Mote.  Yes;  but  not  to  the  same  extent  I  suspect  as  they  are 
elsewhere. 

The  Chairman.  What  per  cent  of  overcapitalization  have  you 
found  in  Indiana? 

Mr.  Mote.  I  will  have  to  answer  it,  roughly  speaking,  for  the 
roads  as  a  whole ;  I  should  say  15  or  20  per  cent. 

The  Chairman.  How  many  street-car  companies  are  there  in  your 
State  ? 

Mr.  Mote.  What  do  you  mean  by  street-car  companies?  Interur- 
ban  companies  and  city  companies? 

The  Chairman.  I  am  speaking  now  about  street-car  companies 
performing  service  within  the  cities. 

Mr.  Mote.  Well,  I  will  name  them,  if  I  may  answer  your  ques- 
tion in  that  way:  Indianapolis,  Fort  Wayne,  Logansport,  South 
Bend,  Evansville,  Terre  Haute,  Richmond,  Lafayette,  New  Albany, 
and  Jeffersonville  are  the  principal  ones.  There  are  some  smaller 
cities  that  have  a  few  miles,  but  those  are  the  principal  cities. 

The  Chairman.  The  only  company  in  financial  difficulty  is  at 
Indianapolis? 

Mr.  Mote.  Well,  the  Fort  Wayne  &  Northern  Indiana,  which  has 
its  headquarters  at  Fort  Wayne. 

The  Chairman.  Yes. 

Mr.  Mote.  I  should  not  say  that  the  company  at  Indianapolis  is 
in  difficulty.  I  do  not  mean  to  say  by  that  that  it  has  not  been,  but 
under  the  present  conditions  I  should  not  say  that  it  is  in  trouble. 
It  may  be  almost  immediately.  Our  commission  may  have  to  in- 
crease fares  in  Indianapolis.  I  am  sure  I  can  not  tell.  They  have 
increased  wages  amounting  to  about  $125,000  a  year  there  within  the 
last  month  and  it  may  be  necessary. 

The  Chairman.  Does  the  5-cent  fare  apply  in  all  the  cities  you 
have  mentioned? 

Mr.  Mote.  It  does. 

The  Chairman.  Did  that  fare  also  exist  prior  to  the  entrance  into 
the  war? 

Mr.  Mote.  No;  in  almost  everv  case  there  were  fares  at  the  rate 
of  25  tickets  for  a  dollar,  or  6  tickets  for  a  quarter — I  think  in  prac- 
tically e\ery  case — and  our  increase  has  been  an  increase  from  that 
rate  to  a  straight  5-cent  basis. 

Mr.  Warren.  You  figure  that  at  about  16  per  cent  ? 

Mr.  Mote.  Yes. 

Mr.  Warren.  That  means  that  nearly  everybody  used  the  tickets. 

Mr.  Mote.  Yes.  I  had  to  estimate  it.  It  is  pretty  hard  to  arrive 
at  it  accurately,  but  that  is  about  what  it  is. 

The  Chairman.  The  companies  purchase  all  their  coal  from  the 
Indiana  mines? 


proceedings  of  federal  electric  railways  commission.  109T 

Mr.  Mote.  Substantially^  all  of  it. 

The  Chairman.  What  is  the  price  of  coal  in  Indiana  used  by 
these  companies? 

JVIr.  Mote.  Well,  the  price  has  varied  somewhat.  During  the  war 
period  I  thinlv  it  ran  as  high  as  $4.10.  I  believe  that  the  companiea 
now  are  paying  about  $2.90  to  $3, 

The  Chairman.  What  were  they  paying  prior  to  the  war? 

Mr.  Mote.  Around  about  $1. 

Mr.  Warren.  Was  that  delivered  at  the  power  station? 

Mr.  Mote.  No  ;  I  am  talking  about  the  price  at  the  mine, 

Mr.  WarRen.  At  the  mine? 

Mr.  Mote.  At  the  mine. 

The  Chairman.  How  do  your  wages  compare  with  the  scale 
adopted  by  the.  National  War  Labor  Board? 

Mr.  Mote.  They  are  less. 

The  Chairman.  How  much  less? 

Mr.  Mote.  Ten  or  15  per  cent. 

The  Chairman.  Have  there  been  any  strikes  in  your  State? 

Mr.  Mote.  No. 

The  Chairman.  No  labor  agitations? 

Mr.  Mote.  No,  sir. 

The  Chairman.  Is  the  cost  of  living  cheaper  in  your  State  than  in 
some  of  the  other  States? 

Mr.  Mote.  Yes ;  it  is  cheaper,  for  instance,  than  it  is  in  New  York 
City  and  Boston  and  the  larger  cities. 

The  Chairman.  I  should  hope  so. 

Mr.  Mote.  Or  Washington,  even. 

Mr.  Warren.  You  have  already  discovered  that;  have  you? 

Mr.  Mote.  Yes ;  I  have. 

The  Chairman.  Do  many  of  your  companies  extend  their  lines 
into  two  or  more  villages  or  cities  ? 

Mr.  Mote.  No;  we  have  not  that  situation  to  contend  with  very 
much.    They  are  not  built  up  in  that  way. 

The  Chairman.  Have  you  any  line  that  extends  into  more  than 
one  city? 

Mr.  Mote.  You  are  speaking  about  strictly  street  railways? 

The  Chairman.  Street  railways. 

Mr.  Mote.  Well,  yes;  in  the  northern  part  of  the  State,  Gary  and 
Hammond  and  East  Chicago;  of  course,  that  is  almost  one  city  there. 
I  here  are  Gary,  Hammond^  East  Chicago,  and  Whiting,  but  there 
are  separate  corporations  operating  in  some  of  these  cities.  I  think 
I  should  say  no  to  that  question,  generally  speaking. 

The  Chairman.  How  do  you  regard  the  commission  form  of  regu- 
lation of  these  utilities? 

Mr.  Mote.  What  do  you  mean,  Mr.  Chairman? 

The  Chairman.  Well,  is  it  the  best  method  of  regulating  these 
utilities,  both  for  themselves  and  for  the  public? 

Mr.  Mote.  I  think  so.    I  think  it  is  the  only  method. 

Ihe  Chairman.  Do  the  villages  have  any  control  over  either  the 
service  or  the  rates  of  these  street-car  lines? 

Mr.  Mote  Very  incidental;  they  have  an  incidental  control. 
1  here  are  a  few  things  that  are  within  the  power,  like  the  reffula- 
tion  of  speed  and ^         j  s    * 

The  Chairman.  And  stops? 


1098    PnOCEEDINGS  OF  FEDERAL- ELECTRIC  RAILWAYS  COMMISSION", 

Mr.  Mote.  And  stops,  but  there  is  an  appellate  jurisdiction  in  dur 
commission  even  in  those  cases. 

The  Chair3ian.  Do  the  cities  determine  where  new  constructions 
shall  be  made? 

Mr.  Mote.  They  have  that  power. 

The  Chairman.  With  the  right  of  appeal  to  your  commission? 

Mr.  Mote.  With  the  right  of  appeal. 

The  Chairman.  Has  that  right  of  appeal  been  exercised  in  any 
case  ? 

Mr.  Mote.  Yes. 

The  Chairman.  How  many  cases? 

Mr.  Mote.  Two  or  three. 

The  Chairman.  Have  you  found  that  that  plan  creates  any  real 
conflict  between  the  cities  and  the  State? 

Mr.  Mote.  I  do  not  think  so.  I  think  it  works  pretty  well.  We 
have 

The  Chairman.  Do  you  believe- 


Mr.  Mote.  May  I  just  add,  Mr.  Chairman,  we  have  not  had  an 
opportunity  to  try  that  out  for  the  reason  tliat,  just  emerging  as 
we  are  from  the  war  period,  at  a  time  when  all  kind  of  construction 
was  taboo,  we  have  not  exercised  6ur  power,  and  the  cities  have  been 
for  the  most  part  reasonable  with  the  companies. 

The  Chairman.  Do  you  believe  that  regulation  would  be  upon  a 
more  satisfactory  basis  if  the  State  had  absolute  power  over  the 
service  as  well  as  the  rates  and  the  location  of  new  lines,  leaving 
nothing  for  the  cit}^  to  do? 

Mr.  Mote.  No;  I  would  prefer  to  vest  the  power  to  order  exten- 
sions in  municipalities  with  appeal  to  the  public-service  commission. 
That  is  what  I  would  prefer. 

The  Chairman.  Should  the  municipalities  have  anything  to  do 
with  rates? 

Mr.  Mote.  Absolutely  none. 

The  Chairman.  Or  with  service? 

Mr.  Mote.  No.  The  functions  can  not  be  divided  with  respect  to 
service. 

The  Chairman.  In  all  cases  I  understand  that  you  value  the  prop- 
erties before  you  increase  the  rates? 

Mr.  Mote.  Yes. 

The  Chairman.  How  long,  generally  speaking,  does  it  take  you 
to  complete  a  valuation  ? 

Mr.  Mote.  Well,  of  course,  in  the  Indianapolis  Street  Railway 
case  it  took  about  three  months,  but  that  case  was  in  court.  That 
was  the  case  that  I  made  the  reservation  with  respect  to,  on  account 
of  our  jurisdiction  being  involved  there.  Ordinarily  we  would  make 
a  tentative  valuation  of  a  property;  we  would  be  able  to  make  it 
within  two  weeks  after  the  filing  of  an  inventory. 

The  Chairman.  In  those  valuation  proceedings,  do  you  find  a 
sharp  diffei-ence  between  the  estimates  of  j^our  engineers  and  those 
of  the  companies? 

Mr.  Mote.  In  many  cases,  yes;  because  in  many  cases  they  have 
sought  to  reproduce  the  property  on  a  basis  of  present  prices  or 
prices  over  an  average  period  of,  say  five  years,  including  the  high 
war  prices. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1099 

The  Chairman.  Have  the  companies  appealed  from  any  of  tho 
valuations  made  by  your  commission? 

Mr.  Mote.  No. 

The  Chairman.  You  stated  that  as  far  as  Indiana  was  concerned 
you  did  not  think  the  work  of  this  commission  was  necessary. 

Mr.  Mote.  Yes. 

The  Chairman.  That  does  not  mean  to  say  that  Indiana  is  not 
willing  to  cooperate  with  this  commission  in  every  way  possible  to 
work  out  any  improvement? 

Mr.  Mote.  We  are  here,  Mr.  Chairman. 

The  Chairman.  I  am  very  glad  you  are  here. 

Mr.  Mote.  Thank  you,  sir. 

Commissioner  Sweet.  When  was  your  State  commission  organ- 
ized? 

Mr.  Mote.  1913,  May  1. 

Commissioner  Sweet.  How  many  members  have  you? 

Mr.  Mote.  Five. 

Commissioner  Sweet.  How  are  they  appointed? 

Mr.  Mote.  By  the  governor. 

Commissioner  Sweet.  The  first  appointees  are  still  serving,  are 
they?     .  .   . 

Mr.  Mote.  None  of  the  original  appointees  are  now  on  the  com- 
mission. 
•  Commissioner  Sweet.  None  of  them? 

Mr.  Mote.  None  of  them. 

Commissioner  Sweet.  The  commission  has  charge  of  all  public 
utilities  as  well  as  sta*eet  railways,  interurbans,  etc.  ? 

Mr.  Mote.  Yes. 

Commissioner  Sweet.  What  was  your  business  before  you  went 
on  this  commission? 

Mr.  Mote.  Magazine  Writer  and  newspaper  man — editor  of  a  for- 
eign paper.  Farmer. 

Commissioner  Sweet.  Had  you  had  experience  in  connection  with 
public  utilities? 

Mr.  Mot::.  None  whatever;  that  is,  I  mean  except  as  a  magazine 
writer. 

Commissioner  Sweet.  But  not  as  an  operator? 
Mr.  Mote.  Not  as  an  operator ;  none  whatever. 
Commissioner  Sweet,  Had  vou  had  statistical  experience « 
Mr.  Mote.  Yes ;  a  great  deal  of  that. 

Commissioner  Sweet.  Had  you  tsken  a  college  course  involving 
that  ?  =* 

Mr.  Mote.  Yes. 

Commissioner  Sweet.  Where? 

Mr  MoTO.  Not  in  statistical  work.  I  graduated  at  De  Pauw  Uni- 
versity, taught  school,  and  was  superintendent  of  schools.  I  have 
had  a  lot  of  businesses. 

Commissioner  Sweet.  Wliat  is  your  position?  Are  vou  chairman 
of  the  commission? 

Mr.  MoTT-,.  Secretary  of  the  commission. 

Commissioner  Sm^et.  Your  interurbans,  if  I  understand  vou  cor- 
rectly, make  a  slightly  less  charge  than  the  steam  railroads?^ 

Mr.  Mote.  One-fourth  of  1  cent. 


1100    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  The  steam  railroads'  charge  being  3  cents 
per  mile  ? 

Mr.  Mote.  Yes. 

(commissioner  Sweet.  And  the  interurbans  2 J  cents? 

Mr.  Mote.  Yes ;  that  is  right. 

Commissioner  Sweet.  Do  the  interurbans  in  Indiana  parallel  the 
steam  railroads  to  any  extent  ? 

Mr.  Mote.  In  many  instances — practically  in  every  instance  they 
do. 

Commissioner  Sweet.  And  with  that  differential  the  interurbans 
are  getting  their  full  share  of  the  business,  are  they? 

I^lr.  Mote.  That  is  what  we  think. 

Commissioner  Sweet.  Is  that  purely  local  business  or  to  some  ex- 
tent a  through  business  ? 

Mr.  Mote.  Well,  we  have  through  service,  for  instance,  from  In- 
dianapolis to  Fort  Wayne.  The  electric  service  is  more  popular 
than  the  steam  service.  That  is  a  distance  of,  oh,  possibly  90  or  100 
miles,  I  should  say. 

Commissioner  Sweet.  Do  they  make  as  good  time? 

Mr.  Mote.  Yes;  they  do.  We  have  the  roadbed;  the  Indiana 
roadbeds  are  pretty  good.  They  do  make  pretty  good  time;  all 
the  interurbans  do  that. 

Commissioner  Sweet.  The  interurban  service  is  based  upon  a  rate 
per  mile  and  consequently  differs  in  that  respect  from  the  street 
railways  in  the  cities  ? 

Mr.  Mote.  Yes. 

Commissioner  Sweet.  In  the  cities  you  have  the  straight  5-cent 
fare,  as  I  understand  it,  within  the  city  limits  ? 

Mr.  Mote.  Yes. 

Commissioner  Sweet.  Without  regard  to  the  distance  ? 

Mr.  Mote.  Yes.  If  I  might,  I  would  like  to  interpose  something 
just  at  that  point  that  I  did  not  discuss  here. 

Commissioner  Sweet.  Yes. 

Mr.  Mote.  We  have  discussed  frankly  what  shall  be  our  policy  if 
further  increases  are  necessary — and  I  do  not  want  to  speak  for  the 
commission  in  this  respect — but  there  is  a  feeling  at  least  among 
some  of  the  members  of  the  commission  that  we  will  prefer  to  go 
to  a  G-cent  fare  rather  than  to  an  extra  charge  for  transfers.  AVe 
have  not  crossed  that  bridge  yet,  because  we  have  not  come  to  it, 
but  we  have  talked  about  it. 

Commissioner  Sweet.  All  the  transf-.Ts  are  without  charge  now? 

Mr.  Mote.  Absolutely. 

Commissioner  Sweet.  Have  you  considered  tJie  possibility  of  going 
to  the  zone  plan? 

Mr.  Mote.  Yes;  we  have  denied  petitions  to  do  that. 

Commissioner  Sweet.  You  have  what? 

Mr.  Mote.  We  have  denied  a  petition  asking  for  that. 

Commissioner  Sweet.  What  is  your  objection  to  the  zone  plan? 

Mr.  Mote.  Because  of  the  tendency  to  cause  congestion — ^the  social 
objections  to  it.  We  do  not  have  the  same  problems,  I  frankly 
recognize,  like  a  city  like  New  York  or  Boston  or  the  larger  cities. 
There  I  would  think  the  zoning  system  would  be  inescapable,  but 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1101 

I  do  not  think  that  is  true  of  our  State;  I  do  not  think  it  applies 
to  any  of  our  cities. 

Commissioner  Sweet.  What  is  the  population  of  Indianapolis? 

Mr.  Mote.  Three  hundred  thousand. 

Commissioner  Sweet.  How  many  square  miles  does  it  dover, 
about  ? 

Mr.  Mote.  Well,  roughlj^,  100. 

Commissioner  Sweet.  Were  it  not  for  the  objection  that  you 
speak  of,  the  tendency  to  congestion,  would  you  favor  the  zone  sys- 
tem in  Indianapolis  ? 

Mr.  Mote.  There  is  one  other  reason,  and  that  is  that  people  have 
built  their  homes  in  the  suburbs  upon  the  theory  that  they  are  going 
to  be  able  to  ride  downtown  as  cheaply  by  living  in  the  suburbs  as 
if  they  lived  down  at  Tenth  Street  or  Eleventh  Street  or  down  near 
town,  and  I  should  think  the  moral  effects  of  a  change  to  the  zone 
system  would  be  bad  in  our  city. 

Mr.  Warren.  These  suburbs  you  speak  of  are  within  the  city 
limits  ? 

Mr.  Mote.  Oh,  just  outlying. 

Mr.  Warren.  They  are  within  this  100  square  miles  ? 

Mr.  Mote.  Yes. 

Commissioner  Sweet.  But  they  are  served  by  the  same  system? 
Mr.  Mote.  Yes. 

Commissioner  Sweet.  You  do  not  think  it  would  be  a  square  deal 
to  require  those  people  to  pay  a  slightly  increased  fare  under  the 
zone  system  ?    * 

Mr.  Mote.  I  think  not.  But  the  principal  objection  I  have  to 
it  would  be  the  future  tendency  to  encourage  congestion. 

Commissioner  Sweet.  So  that  you  are  looking  at  that  from  the 
standpoint  of  general  public  policy  rather  than  that  of  the  interest 
of  the  street-railroad  companies? 

Mr.  Mote.  Well,  if  I  understand  the  attitude  of  the  street-railroad 
companies  of  our  State,  it  is  this,  that  they  are  not  particularly 
carmg  how  we  produce  additional  revenue  for  them  or  what  means 
we  devise  to  produce  it,  if  they  get  it,  if  it  is  necessary  for  them 
to  have  It.  Now  I  know  some  of  the  operators  have  told  me 
individually,  that  if  we  have  to  meet  that  proposition,  they  shall  not 
say  to  us  that  they  prefer  this  to  that. 

Commissioner  Gadsden  Suppose  you  were  faced  with  an  antaor- 
onism  between  the  interests  of  the  public  and  the  railway  on  that 
zone  system,  what  is  the  commission  going  to  do  ? 

Mr.  Mote.  I  beg  pardon? 

cr.^T'^'^!'?^^'''  Gadsden    Suppose  you  are  faced  with  the  contin- 
gency that  the  interests  of  the  public  and  the  railway  are  opposed 

solution  of  the  problem  in  a  given  case  so  far  as  the  investment  is 
concerned  is  the  zone  system.  ai'iucut  ib 

Mr.  Mote.  And  the  interests  of  the  public  are  otherwise « 
gofnTto  do  r'       ''"''^'''  ^^'^^'  '^  ^^^^  ^^^^  ^^'^y  ^^^'  ^^hai  are  you 

Mr.  Mote  I  can  only  answer  it  by  saying  that  mv  own  nersonaT 
opinion  is  that  I  would  have  to  be  shown  that  that  Ts  true.   ^ 


1102    PROCEEDINGS  or  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOlir. 

Commissioner  Gadsden.  But  suppose  it  is ;  would  the  public  make 
up  the  difference  to  the  railway  ?    That  is  what  I  am  coming  to. 
Mr.  Mote.  Absolutely,  they  would  have  to. 

Commissioner  Gadsden.  In  some  other  way?       ,     ,  ^     ,      .   .v   * 
Mr,  Mote.  In  some  other  way,  absolutely ;  no  doubt  about  that. 
Commissioner  Gadsden.  That' is  what  I  was  referring  to. 

J^r  IVIoTE    Yes. 

Mr.  Warren.  Your  wage  rate,  I  understand,  is  still  below  the 

War  Labor  Board  ? 

Mr.  Mote.  That  is  what  I  have  just  said. 

Mr.  Wakren.  And  you  have  noticed  the  increase  in  other  cities— 
85  cents  in  Chicago,  65  in  Boston,  and  56  in  Providence,  and  57  m 
Worcester  and  Springfield,  etc.  • 

Mr.  Mote,  Yes;  I  have  noticed  it  with  apprehension. 
Mr.  Warren.  I  have  made  a  computation  bearing  on  that,  and  I 
wondered  how  it  would  affect  your  rates  in  Indianapolis.  In  191T, 
the  wages  per  passenger  figured  on  the  census  returns  for  salaries 
and  wages  of  that  year  amounted  to  2.36  cents.  If  those  wages  had 
been  on  the  60-cent  rate,  which  seems  to  be  indicated  by  the  recent 
action  in  these  various  cities,  because  Boston  was  an  arbitration, 
Springfield  and  Worcester  had  57  cents  without  arbitration ;  Detroit, 
Cleveland,  Chicago,  and  Providence  were  all  after  a  strike  and,  I 
ihink,  following  the  strike  Providence  was  an  arbitration ;  was  it  not, 
Mr.  Clark? 
Mr.  Clark.  No. 

Mr.  Warren.  But  it  was  after  the  strike.    Assume'that  the  wages 
are  going  up  to  60  cents;  the  cost  per  passenger,  instead  of  being 
2.36  cents  as  in  1917,  would  have  been  4.5  cents,  the  1918  figures  with 
a  34-cent  maximum  rate  in  the  early  part  of  1919  figured  2.82  cents, 
at  the  60-cent  rate  applied  to  that  same  labor  pay  roll  in  1918,  the 
cost  of  wages  per  paasenger  would  have  been  4.98  cents, 
Mr.  Mote.  On  what  basis  was  that? 
Mr.  Warren.  That  is  on  the  60-cent  rate. 
Mr.  Mote.  I  thought  you  said  4.6  cents. 
Mr.  Warren.  That  was  1917. 

Mr.  Mote.  I  under  ,tood  you  to  say  the  1917  basis  was  2.36  cents. 
Mr.  Warren.  2.36  cents  m  1917,  and  in  1918,  2.82  cents. 
Mr.  Mote.  That  was  the  34-cent  basis? 
Mr.  Warren.  The  1917  basis  was  31i  cents. 

Mr.  Mote.  I  have  not  any  doubt  about  the 

Mr.  Warren.  Now,  applying  that  situation — of  course,  I  can  not 
vouch  for  the  exact  accuracy  of  those;  thev  are  based  on  those  figures 
and  involve  very  larc:e  amounts  in  the  census  figures,  but  I  think 
they  are  approximately  correct,  because  I  ascertained  on  the  Boston 
Elevated,  in  Boston,  in  December,  1917,  the  cost  per  passenger  then 
on  a  5-cent  faie  was  2.20  cents.  The  public  trustees  who  were  in 
control  and  operating  that  road  reported  in  May  of  this  year  that 
the  pay  roll  called  for  4.39  cents  for  each  revenue  passenger,  almost 
exactly  double,  you  see,  what  it  was  as  recently  as  December,  1917. 
Now,  suppose  you  were  confronted  with  that  situation  in  Indian- 
apolis, following  up  Mr.  Gadsden's  question,  would  it  not  be  neces- 
sary to  go  to  a  rate  not  only  higher  than  5  cents,  but  very  much 
higner  than  5  cents,  if  you  were  going  to  have  a  flat  rate? 


proceedings  of  federal  electric  railways  commission.  1103 

Mr.  Mote.  Undoubtedly. 

Mr.  Warren.  And  the  alternative  then  would  be  to  produce  just 
the  situation  he  questioned  you  about  and  pointed  out  to  you— an 
apparent  antagonism  between  the  advantage  to  the  city  and  the 
revenue  necessity  to  the  c<Mnpany;  and  would  not  the  only  solution 
from  the  revenue  necessity  of  the  company  be  some  sort  of  a  zone 

system  ? 

Mr.  Mote.  I  should  think  so. 

Mr.  Warren.  You  think  that  road  would  lose  too  much  short- 
haul  passenger  business  if  you  put  in  a  flat  rate  to  meet  such  a  labor 
situation  as  seems  to  be  confronting  the  roads? 

Mr.  Mote.  I  think  you  are  quite  right  about  it. 

Mr.  Fox.  Why  not  give  the  decrease  in  passengers  in  Boston 

Commissioner  Sweet.  I  had  not  quite  nnislied.  The  conditions 
you  have  described  in  Indiana 

The  Chairman.  I  think  for  the  purpose  of  the  record  I  would 
like  to  state  that  it  is  better  not  to  have  any  cross-questioning  among 
the  parties  interested  in  the  case.  Anything  that  is  said  ou^t  to  go 
in  the  record  in  the  regular  way. 

Mr.  Fox.  I  apologize,  but  I  wanted  to  get  Mr.  Warren  to  state  the 
reduction  of  passengers  in  Boston,  which  was  tremendous  on  the 
increased  fares. 

Commissioner  Sweet.  Indiana  companies  differ  in  a  number  of 
respects  from  most  of  the  other  States,  both  in  regard  to  expendi- 
tures and  cost  of  operation,  and  also  apparently  due  to  the  attitude 
of  the  people  toward  the  street  railways.  If  I  understand  you  cor- 
rectly, the  power  used  by  street-railroad  companies  in  Indiana  costs 
less  than  throughout  most  parts  of  the  country  by  reason  of  cheaper 
coal ;  is  that  true  ? 

Mr.  Mote.  I  imagine  that  is  true.  I  do  not  think  there  is  any 
doubt  about  that. 

Commissioner  Sweet.  On  the  other  side  of  the  account,  or  on  the 
labor  side,  wages  are  less  than  generally  prevail  throughout  the 
country. 

Mr,  Mote.  Possibly. 

Commissioner  Sweet.  I  do  not  think  you  need  to  give  any  expla- 
nation with  regard  to  the  cost  of  coal  except  the  proximity  of  the 
coal  mines.  I  suppose  that  has  a  great  deal  to  do  with  it,  and  the 
fact  that  Indiana  produces  a  large  amount  of  coal  that  is  suitable 
for  that  purpose. 

Mr.  Mote.  Well,  I  should  not  think  that  that  would  be  nearly  as 
great  a  factor  as  it  might  first  appear  to  be,  for  the  reason  that^  the 
minimum  freight  rates  on  coal  are,  as  you  may  already  know,  very 
hidb,  and  really  our  own  communities-^ur  own  municipalities — or, 
rather,  the  companies  operating  throughout  the  State,  do  not  g^t  the 
advantage  from  the  proximity  to  coal  mines  that  they  might  be  ex- 
pected to  get,  because  of  the  high  minimum  rates  on  coal.  We  used 
to  have,  of  course,  low  rates  on  coal,  based  somewhat  upon  the  miles 
?u  ^^^\  }  ^^^^  minimums  have  been  increased  to  such  an  extent 
that  that  advantage  has  been  lost  in  a  large  measure.  Of  course  we 
are  anticipating  perhaps,  further  increases.  I  have  no  doubt, 
though,  that  we  do  derive  an  advantage,  but  I  think  it  might  be  over- 
estimated.   I  would  be  very  glad  to  prepare  for  the  commission  an 


1104    PEOCEEDIlfGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION, 

analysis  of  our  coal  costs  if  it  would  be  helpful  to  you  in  any  way, 
or  have  it  done. 

The  Chairman.  Will  you  please  send  it  to  us? 

Mr.  Mote.  I  will  be  very  glad  to. 

Commissioner  Sweet.  With  regard  to  wages,  how  do  you  account 
for  the  fact  that  the  street-railway  companies  in  Indiana  are  paying 
less  wages  than  in  most  other  parts  of  the  country? 

Mr.  Mote.  AVell,  one  reason  is  they  are  not  organized. 

Commissioner  Sweet.  They  are  not  organized? 

Mr.  Mote.  Our  street  railway  workers  are  not  well  organized. 
They  have  an  orgivnization  in  Indianapolis,  but  the  organization  has 
never  been  officially  recognized  by  the  company.  I  should  think  that 
would  be  one  practical  reason.  And  then  I  think  the  cost  of  living 
is  lower  in  Indianapolis. 

Commissioner  Sweet.  What  are  you  paying  your  motormen  and 
conductors  ? 

Mr.  Mote.  I  think  the  minimum  is  39  cents  now.  There  may  be 
some  one  who  can  answer  that  here.  They  were  increased  either  IJ 
or  IJ  cents,  but  I  think  the  minimum  is  39  cents  now. 

Commissioner  Sweet.  The  minimimi  ? 

Mr.  Mote.  Yes;  and  it  runs  4  cents  higher  than  that. 

Commissioner  Sw^eet.  You  think  between  39  and  43  cents? 

Mr.  Mote.  And  43  cents— I  think  that  is  the  rate. 

Commissioner  Sweet.  What  are  the  hours? 

Mr.  Mote.  They  vary,  of  course.  We  have  had  to  deal  with  that 
problem,  not  ourselves,  but  it  was  dealt  with  by  our  commission 
some  three  or  four  years  ago  in  arbitration  proceedings,  and  the 
hours  were  shown  in  many  instances  to  run  10  and  12,  and  not  in- 
frequently does  a  man  serve  10  and  12  hours ;  but,  generally  speak- 
ing, the  service  is  8  to  9  hours.  Nine  hours,  I  should  think,  would 
be  the  average. 

Commissioner  Sweet.  Have  you  given  any  sjDecial  attention  to 
the  Cleveland  street-car  system? 

Mr.  Mote.  Well,  not  recently.  At  one  time  I  did.  I  made  a 
study  of  it,  but  that  has  l>een  a  number  of  years  ago  and  I  have 
forgotten  most  of  what  I  knew  about  it  at  that  time. 

Commissioner  Sweet.  Are  you  familiar  with  the  situation  in  Cin- 
cinnati ? 

Mr.  Mote.  I  am  not  familiar  with  the  present  situation  there. 

Commissioner  Sweet.  Secretary  Baker  said  yesterday  that  he  did 
not  believe  in  the  State-commission  plan,  for  the  reason  that  he 
thought  it  would  be  resented  to  a  considerable  extent  by  the  people 
in  the  cities  and  that  a  proper  degree  of  education  on  the  part  of 
the  people  involved  in  the  campaign  that  Tom  Johnson  carried  on 
in  Clevehmd  was  quite  essential  to  the  acceptance  of  a  proper  plan 
and  of  a  proper  cooperation  between  the  city  and  the  company.  I 
take  it  from  what  you  said  you  do  not  agree  with  that  statement. 

Mr.  Mote.  I  do  not  agree  with  it  so  far  as  our  State  is  concerned. 
If  I  lived  in  a  State  where  there  were  a  great  many  large  cities, 
I  think  perhaps  I  would  have  a  different  opinion. 

Commissioner  Sweet.  Well,  Indianapolis  is  a  pretty  larire  citv. 

Mr.  Mote.  Yes.  i        J        t=>         j 

Comftiissioner  Sweet.  You  have  not  found  a  condition  of  that 
kind  in  Indianapolis? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1105 

Mr.  Mote.  Our  own  system  works  very  well. 

Commissioner  Sweet.  I  think  that  is  all. 

Mr.  Warren.  This  question  may  have  been  asked  you,  but  my 
attention  was  diverted  for  a  moment:  Does  the  public  generally 
accept  with  satisfaction  the  decisions  of  the  commission  ? 

Mr.  Mote.  I  am  very  glad  to  answer  that  question.     I  have  al- 
ready called  your  attention  to  the  fact  that  there  were,  I  think  three 
bills  introduced  in  the  last  legislature  to  abolish  our  commission 
There  was  not  anything  substantial  behind  any  of  them,  and  there 
was  not   any  substantial  support  behind  any  of  them,  and  they 
were  all  introduced  in  the  lower  house,  our  assembly ;  none  of  them 
ever  got  to  the  senate.     We  have,  so  far  as  we  have  been  able, 
tried  to  deal  openly  and  frankly  with  the  public  in  our  State.    By 
that  I  mean  that  we  have  given  a  great  deal  of  publicity  to  the 
things  that  we  have  done  and  have  gone  to  considerable  pains  to 
tell  the  public  why  we  did  them.    We  have  in  no  cases  taken  snap 
judgment,  but  we  have  acted  carefully  and  methodically  and  alon^ 
well-recognized  principles  of  rate  making.     I  have   already  said 
that  we  have  increased  no  rates  without  tentative  valuations,  and 
the  feeling  has,  I  think,  come  to  be  pretty  general  in  Indiana  that 
our  commission  is  careful  and  I  believe  that  the  people  believe  in 
us,  and  1  believe  that  they  are  willing  to  accept  our  judgment  with 
respect  to  a  given  situation.  i-  j     e  n 

f.n^i-; JltT'';-^'''^'  '^fj'"''  ^^'^^  y^"  ^^^^^  ^^^  ^^le  to  make  these 
tentative  valuations  withm  a  couple  of  weeks  and  render  decisions 
within  a  month  on  the  application  ?  uecisions 

Mr.  Mote.  Yes. 

Mr    Warren.  And  you  have  endeavored  to  meet  the  exigencies 

se"wa5'co?pr5^^^^^^^^^  ^^  ^'^^^^^^^^  the  operation  of  a 

Mr.  Mote.  Precisely. 

Mr!  MotrY^s^""  ^^'"^^'''^  '""^"'y  "'"''  '"  Indianapolis? 
Mr.  Wabren.  I  do  not  suppose  you  know  what  proportion 

.1..  .bu^  of  ta».,.„,  £  irsfd  n„.  ™'k  ™r?'i  r  wfdfd  r, 

Mr.  Warren.  Why  ?  j     c 

Mr.  Mote.  Tlie  people  did  not  like  it. 

it  K™heJ^tSd^rr'"«  '^  -»*  f-  -  t--f-  -d  gettin, 
Mr.  Mote.  Yes. 

tha^^„fe7yot7eS"tl?r^  '^"'"P'^""-  -  Indianapolis?    Is 


^g 


1106    FROCEEWNGS  OF  FEM31AL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Wakren.  Is  it  subject  to  anybody's  re^latioTi? 

Mr.  Mote.  Yes;  subject  to  regulation  by  the  city.  We  feaT©  no 
State  kw  witb  resi^ect  to  jitmeys,  \mt  t^  i^emeiral  powers  of  our 
cities  and  towns  act  enipowei'  tiie  cities  to  act,  I  think,  without  <ionbt 
with  respect  to  jitneys. 

Mr.  Warren.  Have  they  act«d  to  any  great  extent? 

Mr.  Mote.  Oh,  they  have  licensed  th^i  in  a  few  cities,  I  think,  I 
am  not  just  certain  whether  they  have  or  not.  They  ai-e  going  to 
haves  to  do  it.  I  have  had  scMiie  conversations  toely  with  mayors 
and  city  attorneys  in  a  number  of  municipalities  wliere  thev  have 
not  acted,  but  say  they  are  reaching  a  point  where  they  will  have 

to  do  so. 

Mr.  WAitREN.  Is  that  on  the  tlieory  that  if  ihey  are  going  to  com- 
pete they  ought  to  be  subject  to  same  similar  requiaK?ment?>  in  the 

interests  of  the  city  ? 

Mr.  Mote.  Well,  it  is  on  the  theory  tiiat  ihey  are  more  or  less 
nuisances  in  some  places.  In  son*e  places  they  are  operating  to  such 
an  extent  that  the  life  of  the  public  is  involved. 

Mr.  Warren.  T1^  use  of  the  streets? 

Mr.  Moi-E.  They  ai^  operated  carelessly  in  some  cases.  That  is  one 
of  the  coiicerns  which  the  city  has.  The  other  concern  is  that  it  is  un- 
fair competition  and  that  they  have  got  to  r^^nhite  it  in  ordei*  to 
save  what  is  a  very  vital  function  of  their  city  life — ^that  is,  the  street 
railway. 

Mr.  Warren.  Would  yon  care  to  exj:)Pess  an  -opinion  as  to  wlietlier 
the  motor  bus  or  jitney  would  be  an  adequate  substitute  for  the  street- 
car service  ? 

Mr.  Mote.  Yes,  I  would.    I  do  not  think  it  would. 

Mr.  Warren.  You  do  not  think  it  would? 

Mr.  Mote.  Not  at  the  present  time.  I  do  not  know^  what  they  may 
develop  in  the  future. 

Mr.  Warren.  But  at  the  present  time  it  would  not  be? 

Mr.  Mote.  Certainly  not. 

Mr.  Warren.  Therefore  if  the  street-railway  serv  ice  is  to  l)e 
maintained  at  a  proper  degree  of  efficiency  it  ought  not  to  be  <rut  into 
by  the  compet-ition  of  something  which  can  not  talce  its  place? 

Mr.  Mote.  Absolutely. 

Mr.  Warren.  You  think  that  is  the  feeling  of  these  municipal  au- 
thorities who  have  conferred  with  the  commissicai? 

Mr.  Mote.  Yes ;  I  think  so. 

Mr.  Warren.  That  is  all. 

The  Chairman.  Looking  at  tihe  subject  of  regulations  in  its  broad 
aspect,  Mr.  Mote,  which  field  is  the  greatefrt  use  to  the  public — regu- 
lation of  rates  or  of  servi(^e  ? 

Mr.  Mote.  I  think  they  are  albout  equally  important;  one  must  go 
with  the  other.    We 

Mr.  Warren.  You  can  not  get  service  without  the  rates? 

Mr.  Mote.  Absolutely  not.  And,  of  <»ourse,  we  have  been  some- 
what lax  in  our  requirements — that  is,  menswred  by  noimal  tinges — 
but  we  are  looking  forward  to  the  time  when  we  can  i-equire  and 
establish  and  enforce  rigid  standards  of  the  service.  Now,  we  are 
requiring  the  Indianapolis  Street  Railwaj^  Co.  to  make  some  exten- 
sions; that  is  part  of  the  reorganization — ^requiring  them  to  extend 


imOCEEDINGS  or  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION,    1107 

numerous  lines  into  ontlying  districts  that  ought  to  be  ser\^  which 
have  no  service  now.  We  required  them  to  put  on  pay-as-you -enter 
cars;  we  required  thwn  to  buy  additi<3nal  cars  and  put  ikem  into 
service  on  the  lines  where  tlie  traffic  was  congested.  We  have  gone 
pretty  far  in  that  respect.  We  have  absolutSy  full  authority  over 
the  service.  It  goes  to  the  point  of  being  able  to  require  them  to  do  . 
anything  which  is  reasonable. 
( Witness  excused. ) 

The  Chairman.  Who  is  the  next  witness,  Mr.  Ogbumf 
Mr.  OGBtTRN.  The  next  witness  is  Mr.  Richard  T.  Higgins,  chair- 
man of  the  Public  Utilities  Commission  of  the  ^ate  of  Connecticut. 

STATEMENT  OP  JtlCHARD  T.  HIGGINS, 

The  Chairman,  You  may  state  your  name  and  positi=cm,  please. 

Mr.  HiOGiNS.  Richard  T.  Higgins,  chairman  of  the  Public  Utili- 
ties Commissi(Hi  of  the  State  of  Connecticut. 

The  Chairman.  Just  proceed  in  your  own  way,  Mr.  Higgins. 

Mr.  Higgins.  The  sti-eet-railway  situation  in  Connecticut  is  not 
materially  different  from  that  obtaining  in  most  otlier  States. 

There  are  in  Connecticut  10  operating  companies  operating  828.7 
miles  of  single  track,  two  of  these  companies  operating  more  th^m 
seven-eighths  of  the  t<^al  mileage. 

The  Ccmnecticut  Co.  is  the  principal  street  railway  in  Connecticut, 
operatmg  over  owned  and  leased  lines  503.8  miles  of  single  ti-ack 
through  more  than  50  different  cities  and  towns.  All  of  its  proper- 
ties are  located  in  Connecticut  and  all  of  its  business  is  intrastate 
Its  rate  of  fare  is  and,  since  October,  1917,  has  been  6  cents! 
Although  it  has  been  a,ble  to  me^  its  operating  expenses,  rentals  and 
overhead,  and  fixed  ch^i^es,  it  has  paid  no  dividends  on  the  capital 
invested  for  the  past  two  years,  and  with  the  increase  in  wageTfor 
thjs  year  the  indications  are  tliat  it  will  show  a  large  deficit 

The  next  largest  company  is  the  Shore  Line  Electric  Railway 
operating  212.6  miles  over  owned  and  leased  linens  in  35  different 
cities  and  towns  m  Connecticut  and  16.7  miles  in  the  State  of  Rhode 
Island.  Its  business  is  largely  intrastate.  Its  rates  of  fare  are  5 
cents  m  the  cities  of  New  London  and  Norwich,  due  to  ^tate  f  ran- 
cluse  requirements,  and  on  a  distance  ba^is  of  substantiallv  24  cents 
a  mile  over  its  properties  outside  of  New  London  and*  Norwich 

,3^1^  *i^  P^^^  ^T  '^  ^^l^^i]^^  *«  ^r^  its  operating  expenses  and 
i-entals.    Keceivership  or  abandonment  seems  imminent 

The  Hartford  &  Springfield  Street  Railway  Co.  operates  44  9 

ITowln'tli^^^r"!  ""^'^  -""^  '^^^^  ^«  '^^  ^^^^  This^coni^ny  is 
now  in  the  hands  of  a  receiver.  •' 

The  Danbury  &  Bethel  Street  Railway  €o.  operates  20  2  miles  of 
?eoeter^''^'  '^  '''*''^"  '^^  ^'"*«'  "''^^  now^n  LVhids  of  a 

of1^q?rt'?;'  commission  appointed  by  the  Connecticut  Legislature 
ot  1819,  after  an  exhaustive  bearing,  summarized  the  street-railwav 

miks  of^sf'^'"'";"*'"''*  ff  ^i^^^--  "With  the  exceSm  of  ill 
miles  of  street  railway  in  the  State  out  of  a  total  of  828  miles,  all  of 
the  lines  are  either  in  the  hands  of  receivers  or  are  S^nt  and 
must  have  their  service,  to  the  public  either  LrtiaTly  or  wmpLelv 
discontinued  iwd  portions  of  theix  lines  abandon^  anf  "old  £ 


1108    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

junk,  unless  substantial  temporary  relief  is  furnished  through  ade- 
quate legislation  by  the  general  assembly  of  1919." 

The  Chairman."  What  is  the  date  of  that  report  ? 

Mr.  HiGGiNS.  The  report  was  made  in  April,  1919. 

If  proper  action  is  not  taken  by  this  assembly,  it  will  be  too  late 
to  remedy  the  neglect  in  1921  and  an  irreparable  injury  will  be  done 
to  the  vital  transportation  arteries  of  the  State,  causing  suffering, 
personal  loss,  depreciation,  and  discontent  to  a  large  and  most  valued 
portion  of  the  population  of  the  State  who  have  as  a  result  of  street- 
railway  facilities  purchased,  built,  or  rented  their  homes  along  the 
street-railway  lines  or  near  them  and  are  dependent  upon  these  lines 
for  getting  to  and  from  their  daily  work,  obtaining  provisions  and 
supplies,  as  well  as  being,  in  many  cases,  investors  in  the  securities 
of  the  street-railway  lines  passing  their  properties. 

I  have  mentioned  the  number  of  cities  and  towns  through  which 
the  principal  companies  operate,  indicating  the  difficulty  if  not  im- 
practicability of  local  or  municipal  ownership  or  control. 

During  the  era  of  street-railway  development  many  lines  were  ex- 
tended into  rural  sections.  These  sections  developed  because  of  the 
extensions  and  became  dependent  upon  the  trolley  for  transporta- 
tion, but  the  volume  of  traffic  now  received  on  many  of  these  lines 
is  not  sufficient  to  pay  operating  expenses. 

The  increasing  use  of  privately  owned  automobiles,  as  well  as  the 
public-service  car  or  jitney,  has  materially  affected  street-railway 
revenues,  the  privately  owned  automobile  affecting  particularly  the 
rural  or  suburban  sections.  Jitneys  operate  in  populous  centers, 
getting  a  large  percentage  of  the  profitable  short-haul  traffic.  Public- 
service  cars  or  jitneys  are  unregulated  in  Connecticut  as  to  rates, 
routes,  schedules,  service,  etc.,  and  they  pay  no  State  or  street  tax 
other  than  the  ordinary  license  and  the  local-property  tax. 

I  think  it  is  universally  conceded  that  the  situation  which  most  all 
of  the  American  street  railways  are  in  to-day  is  exceedingly  serious, 
and  unless  some  immediate  and  substantial  relief  is  affordS,  many  of 
the  companies  will  fail,  street-railway  business  will  be  suspended,  and 
the  public  will  suffer  the  loss  of  a  utility  which  affords  a  necessary 
means  of  transportation. 

It  is  not  so  difficult  to  diagnose  the  ills  as  it  is  to  prescribe  the 
remedy.  I  presume  your  honorable  commission  has  listened  to  many 
suggested  remedies,  and  I  can  not  expect  to  add  any  new  thought ;  but 
to  m^  mind  the  relief  must  come  primarily  from  the  States  and  the 
municipalities  where  the  different  companies  operate,  and  must  be 
governed  somewhat  by  local  conditions,  but  should  involve  a  material 
increase  in  rates,  a  reduction  or  suspension  of  taxes,  substantial  relief 
from  State  and  municipal  obligations  pertaining  to  street  pavements, 
bridges,  etc.,  a  liberal  policj^  of  regulation,  and  a  similar  policy  of 
public  regulation  and  taxation  over  competing  transportation  agen- 
cies such  as  public-service  automobiles  or  jitneys. 

In  the  solution  I  would  avoid,  if  possible,  public  or  government 
ownership  or  control,  or  any  policy  which  takes  away  from  the  com- 
panies the  initiative  and  incentive  which  have  been  the  great  impel- 
ling factors  in  the  wonderful  growth  and  development  of  our 
country. 

Street  railways  afford  the  principal  medium  of  the  industrial 
short-haul  traffic.    The  trolley  car  is  the  poor  man's  means  of  trans- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1109 

portation,  and  its  only  revenues  are  provided  by  the  car  riders  who 
ride  as  a  matter  of  public  necessity,  not  as  a  matter  of  personal 
pleasure.  Under  present  conditions  there  is  just  as  much  if  not  more 
reason  for  relieving  the  trolley  companies  from  the  burden  of  public 
taxation  as  there  is,  for  example,  to  exempt  from  taxation  large 
private  and  heavily  endowed  colleges  and  other  institutions  of  learn- 
ing. 

Franchises  imposing  rate  limitations  should  be  amended,  eliminat- 
ing the  rate  restrictions. 

Let  me  add  right  here  that  I  believe  that  franchises  should  be  the 
mdeterminate  franchise.  That  is  the  case  of  all  franchises  of  street 
railways  m  Connecticut. 

Regulating  bodies  should  be  prompt  in  rendering  rate  decisions 
1  spirit  of  cooperation  between  utility  companies  and  the  public 
should  be  strongly  emphasized,  as  it  is,  to  my  mind,  one  of  the  most 
important  factors  m  bringing  about  a  healthy  condition  of  the  street- 
railway  situation,  and  I  feel  sure  that  the  report  of  your  commission 
will  have  a  large  influence  in  this  respect. 

The  nickel  unit  of  fares  appear  to  be  popular  with  the  ridinjr 
public,  and  if  this  unit  could  be  retained— shortening  the  zone  and 
giving  less  service  for  the  nickel— it  might  be  the  best  wav  of  in- 
creasing revenues  but  most  cities  are  included  within  one  zone,  and  it 
would  be  difficult  to  subdivide  a  city  area  into  two  or  more  zones.  In 
the  absence  of  such  reasoning,  a  flat  zone  increase  or  a  rate  based 
upon  distance  would  become  necessary. 

If  public  necessity  requires  a  continuation  of  street-railway  trans- 
portation-and  I  believe  it  does-the  business  of  such  transportation 
relieved  of  unnecessary  burdens,  should  be  self-supporting,  a^  the' 
cZpSn         "^        ^^^"^  P'^*'"''^  ^^^^'^  unfair  and  festructive 

^pl^n^ldJ^^te  ''  '^^  ^  ^^^'^  '^  -^''  ^  -^  ^-'  ^  ^^^^^y 
tiontnSSa'ring^  ^^^^^  ^^^  ^P-  ^  -itten  peti^ 

Any  commission-made  rate  can  not  be  changed  by  the  comoanv 
without  the  consent  or  approval  of  the  commission     ^  ^"^^P^^Y 

paSta^^^^^  ''^  street-railway  rates  in  Connecticut  are  corn- 
Something  has  been  said  about  the  question  of  service  at  cost 
Iheoretically  that  is  sound,  and  is  the  ^licy  that  our  commiS 
has  tried  to  follow;  but  practically  there  are  ^certain  obstacTeTt^Tts 
working  out  as  an  absolute  theory.     Street  railways  areTrkicallv  ill 
and  they  can  not  be  revived  and%ut  upon  a  sou^d  basis  o^^^^^^^^^^ 
If  this  s^rvice-at-cost  policy  were  to  be  adopted,  in  my  opfnion  f  nd 
a  rate  established  high  enough  to  meet  the  operating  expenses  fixed 
charges  and  overhead  charges,  and  pay  a  fair  dividend  uSn  the 
capital  or  the  value  of  the  property,  as  the  case  may  be,  the  ra^S 
of  fare  would  necessarily  be  so  high  as  to  be  prohibitivrwheL Tou 
aScifs     ""^'^^^^^^^^   '^^   unregulated   combing  tians^rtJZ 

I  believe  that  the  States  that  have  imposed  burdens  uoon  strPPt 
railway  companies  in  the  nature  of  streef  paving,  heavyTxp^^^^^^ 


1110    PROCEEDINGS  0¥  FEDERAL  ELECTRIC  RAILWAYS  OGMMISSIOIT, 

maititaifiing  hi^iway  brk^res,  and  so  <m  sii^aid  reduce  or  repeal 
those  impositions  if  we  ai^  ^mg  to  save  oar  street  railways. 

1  thmk  It  would  he  dimcvdt  for  »iiy  man  to  prophesy  what  effect 
ti^e  tutare  will  have  as  between  the  automobile  and  the  street  mil- 
way  ;  but  we  know  to-day  that  street  railways  are  absolutelv  esse*itial 
tor  the  handhng  of  the  traffic  in  our  populous  cities,  and  during  the 
transition  period  at  least  those  companies  and  the  public  should  be 
pix>tected  and  safeguarded  in  their  rights  until  si>ch  time  as  the 
Change  comes  about. 

Further  than  that,  if  ^e  are  in  a  transTtion  period,  where  the 
policy  of  transportation  is  changing  from  the  street-railway  car  to 
the  rubber-tired  vehicle,  I  believe  that  the  stre^-railwav  company's 
Iranchises  should  be  so  amended  as  to  permit  th^i  to  make  a  change 
m  keeping  witli  the  public  demand  and  to  protect  the  millwsas  of 
dollai-s  of  in\^estmeints  now  in  sti^eet-railway  propei1;ies  owned  by 
millions  of  people  ail  ov^-  our  country. 

I  sha;ll  be  very  ^ad  to  answer  *ny  questions  tfea;t  any  of  the  mem- 
bers of  the  commission  may  have  to  ask  ine. 

The  Chairman.  How  many  of  the  10  operating  compan^s  in  Con- 
necticut are  in  ike  h<a3ids  of  a  r«c^iver? 

Mr.  HioGiNs,  Tw  o  at  the  present  time. 

The  Chairman.  When  did  thev  go  into  the  hands  of  a  receiver « 

Mr.  Hi?6GiNs.  In  the  hitter  pait  of  191  a 

The  Chairman.  Had  tliey  applied  to  your  commission  for  an  »- 
creases  of  rates  prior  to  that  time  ? 

Mr.  HiGGiNS.  They  had  not,  because  thev  h«d  the  right  to  increase 
their  rates,  aaid  they  did  incre^ase  their  rates  somewlmt. 

The  Chairman.  And  still  they  were  not  permitted  to  meet  their 
fixed  charges  and  operating  expenses  ? 

Mr.  HiGGiNs.  No,  sir. 

The  Chairman,  Has  your  commission  valued  the  propeities  of 
these  companies,  or  any  of  tlietn  ? 

Mr.  Hkkhns.  Not  by  a  caiteftil  valuation;  na 

The  Chairman.  Is  it  your  purpose  to  value  these  properties  when 
rat«  increases  are  pending? 

Mr.  HiGGiNs.  When  that  question  becomes  a  ^dtal  question.  For 
instance^  in  1917,  the  Co*inecticut  Co.  increased  its  rate  to  f)  cents. 
We  had  a  petition  from  the  patrons  prote^ing  against  the  increase! 
We  had  an  exhaustive  hearing,  but  the  finding  of  fact^  was  that 
the  company  was  not  paying  any  dividends,  and  it  did  not  make 
very  much  difference  what  the  valuation  of  the  property  was;  and 
we  did  not  make  a  physical  valuation  of  the  property  at  that  time, 
but  we  pe-rmitted  the  ccHnpaiiy  to  maintain  the  6-cent  rate  which  it 
liad  established. 

The  Chairman.  Wh:at  rates  are  being  charged  by  these  two  com- 
panies that  went  into  the  hands  of  a  receiver? 

Mr.  HiGGiNs.  One  company,  the  Danbury  &  Bethel  Street  Railway 
Co^  had  a  5-cent  rate,  with  the  exception  of  one  line  to  a  pleasure 
resort,  wliich  was  a  lO-cent  rate.  The  Hartford  <fe  Springfield— I 
asd  sorry  to  say  that  I  can  not  give  you  ex^actly  what  that  was,  be- 
cause they  made  several  chai-ges;  it  went  from  a  zone  to  a  milea^re 
rate;  but  substantially,  at  the  time  of  the  receivership  it  was^'e 
cents  a  zone.    Since  that  time  it  has  been  raised. 


.      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    11 11 

The  Chairman.  Why  did  not  the  company  you  first  mentioned  as 
charging  the  5-cent  rate  make  a  higher  charge? 

Mr.  HiGGiNS.  That  might  be  so  with  all  (x>mpanies  where  they 
have  got  the  initial  right  to  change  a  rate. 

The  Chairman.  And  this  company  had,  you  sav? 

Mr.  HiGGiNs.  This  company  had  the  initial  right;  but  opposed 
to  that  was  very  strong  popular  sentiment.  In  the  pioneer  days  of 
street-railway  operation,  when  the  street-railway  business  was  more 
or  less  profitable  and  the  nickel  was  worth  a  good  deal  more 
than  it  IS  to-day,  the  spirit  of  greed  or  avarice,  high  fmancing,  pos- 

rl^  of  extension  of  unprofitable  lines,  ci-ept  into  many  companies. 

1  he  Chairman.  Does  that  apply  to  this  company  ? 

Mr.  HiGGiNS.  The  question  of  extension  of  lines  does  not  apply 

Ihe  Chairman.  How  about  overcapitalization  and  high  financ- 
ing s  ^^ 

Mr.  HiGGiNs.  There  might  have  been  some  high  financing. 
Ihe  Chairman.  How  much  in  the  case  of  this  company  f 
Mr.  HiGGiNs.  I  do  not  know  that  I  could  answer  you  that,  off- 
Mr.  Warren.  That  is  the  Hartford  &  Springfield  road  you  are 
speaking  about  now?  ^      »  j       *ic 

Mr.  HiGGiNS.  No:  it  is  the  Danbury  &  Bethel. 
ii7l^  Chairman.  Then  it  appears  that  the  Danbury  Ca  went  into 
the  hands  of  a  receiver  without  exhausting  its  efforts  to  get  a  suf- 
ficient revenue  by  rate  mcrease?  ^ 

Mr.  HiGGiNs.  Yes. 

The  Chairman.  Why  did  it  go  into  the  hands  of  a  receiver  then 
without  trying  to  work  out  its  own  salvation «  '  ' 

Mr    HiGGiNS.  Because  the  popular  sentiment  of  the  community 
would  not  permit  the  raising  of  rates  immunity 

Mr'  HmoiTs!  Ye?."^  ^''''  '*^  '^  ^""^  ^^'  '^^*  *^  ™^^*^  ^^^  ^^^^^ 
and^townl?'"'''^''*  The  Connecticut  Co.  operates  through  50  cities 
Mr.  HiGGiNS.  Yes. 

Ml.  HiGGiNs.  That  is  now  charging  a  6-cent  rate. 

Mr'  nf™^  Tf    '  *^^^^  PermittedV  your  commission  ? 
Mr.  HIGGINS.  It  was  permitted ;  yes. 

The  Chairman.  Is  that  property  valued « 

Mr.  HiGGiNS.  Its  capitalization  is  $40,000  000     «n    nt   fJ,»   o*     i 
owned  by  the  New  York,  New  Haven  &  HarS  Railroad  Pn^'^ 
Thl  vol     H  Fif ^'^'■"'  ^••"^'^^^  "n<l"  «»  oX  of  tlS^Sera?  court 

Mr'  Georl  F   sCr'^^'r^''^""T  ^^  '^'  ''^'•'<^-'  wheeled  nphj 
nionprKr^K     ^''V«.«'  <>*  Massachusetts,  showed  the  value  of  thi 


1112     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION?-. 

Mr.  HiGGiNs.  I  think  the  vahiation  is  in  excess. 

The  Chairman.  Have  the  villages  or  cities  any  control  over  the 
rates  of  the  company  ? 

Mr.  HiGGiNS.  They  have  not. 

The  Chairman.  Or  of  the  service? 

Mr.  HiGGiNs.  No ;  excepting  in  a  limited  sense,  as  to  rates  of  speed, 
in  certam  cities,  certain  streets. 

The  Chairman.  Then  the  real  judisdiction  over  rates  and  service 
rests  with  your  commission? 

Mr.  HiGGiNs.  Yes. 

The  Chairman.  Is  that  exercised  very  frequently? 

Mr.  HiGGiNS.  Yes;  more  especially  as  to  service  than  as  to  rate. 

The  Chairman.  Considering  the  local  conditions  in  Connecticut,  is 
it  practicable  to  have  purely  municipal  regulation  of  these  utilities? 

Mr.  HiGGiNS.  My  opinion  is  no. 

The  Chairman.  Why? 

Mr.  HiGGiNS.  Because  of  the  fact  the  communities  are  so  inter- 
locked and  the  business  is  so  connected  that  a  street  railway  must,  of 
necessity,  run  between  two  and  through  two  or  more  communities, 
and  it  would  bring  a  dual  regulation  ovev  the  operation. 

The  Chairman.  Are  they  so  intimately  associated  that  you  must 
have  the  same  rate  charged  in  each  of  the  villages  and  cities  through 
which  the  Connecticut  Co.  operates? 

Mr.  HiGGiNS.  I  think  so. 

The  Chairman.  What  form  of  regulation  will  work  out  the  best 
.  for  the  public  and  the  utilities  in  that  State  ? 

Mr.  HiGGiNS.  My  opinion  is  State  regulation. 

The  Chairman.  Giving  to  the  State  complete  control  of  rates  as 
well  as  service  and  extensions? 

Mr.  HiGGiNS.  Yes. 

The  Chairman.  Have  you  any  control  over  capitalization? 
Mr.  HiGGiNS.  We  have  not. 
The  Chairman.  Should  you  have? 
Mr.  HiGGiNS.  I  think  we  should. 

The  Chairman.  Has  an  effort  been  made  to  secure  that  control « 
Mr.  HiGGiNs.  At  one  time ;  yes.    It  failed  at  that  time. 
The  Chairman.  How  long  ago? 

Mr.  HiGGiNs.  That  is  four  or  five  years  ago;  nothing  recent. 
I  he  Chairman.  Is  there  any  sentiment  for  that  sort  of  control 
now? 

Mr.  HiGGiNs.  I  think  so. 

The  Chairman.  Could  the  cost-of -service  plan  be  applied  to  the 
Connecticut   Co.,  which  operates  through   50  cities   and   villages* 
1  ou  understand  the  cost  of  service,  according  to  the  Cleveland  plan 
means  entering  into  a  contract  with  each  municipality,  givin«r  it 
the  control  over  the  rate,  as  well  as  over  the  service  and  accountW 

Mr.  HiGGiNs.  It  would  be  very  complicated. 

The  Chairman.  Could  that  sort  of  a  plan  be  satisfactorilv  worked 
out  by  an  agreement  with  the  State  commission,  if  the  'law  per- 
mitted it  ?  '  r 

Mr.  HiGGiNs.  Allowing  the  valuation  of  the  company's  property 
in  each  locality  and  a  rate  for  each  locality  or  municipalitv,  vou 
mean?  ,  i        j?  j 

The  Chairman.  Are  you  addressing  that  question  to  me? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1113-' 

Mr.  HiGGiNs.  I  say,  you  mean  to  have  it  so  fixed  by  an  agreement 
with  the  commission  that  the  commission  determines  the  value  of 
the  company's  property  in  a  municipality  and  the  rate  that  the  com- 
j)any  should  charge  in  that  particular  municipality? 

The  Chairman.  Assume  that  to  be  the  question;  what  is  your 
answer? 

Mr.  HiGGiNS.  I  think  the  difficulty  would  come,  w^ith  us  in  Con-' 
necticut,   in  allocating  the   charges   connected   with   the   overhead 
charges  and  also  of  the  rolling  stock  that  operates  in  several  of  the 
communities. 

The  Chairman.  The  villages  and  cities  in  Connecticut  are  very 
close  together ;  are  they  not  ? 

Mr.  HiGGiNS.  Yes;  very. 

The  Chairman.  Is  the  company's  charge  a  mileage  rate  between 
these  villages? 

Mr.  HiGGiNS.  The  Connecticut  Co.  does  not.  The  Shore  Line 
Electric  Railway  Co.  does  at  the  present  time. 

The  Chairman.  When  you  travel  from  one  city  to  the  other^ 
what  is  the  charge  on  the  Connecticut  Co.  ? 

Mr.  HiGGiNs.  It  is  on  the  basis  of  6  cents  a  zone.  It  may  be  one 
zone  and  it  may  be  two  or  three. 

The  Chairman.  I  see.    The  whole  system  is  on  a  zone  basis  ? 

Mr.  HiGGiNs.  Yes. 

The  Chairman.  Has  there  been  any  agitation  in  Connecticut  for 
a  different  form  of  regulation? 

Mr.  HiGGiNS.  I  think  not.  I  will  qualify  that  by  saying  that 
there  has  been  some  discussion  in  some  of  the  municipalities,  prin- 
cipally Bridgeport,  of  the  question  of  taking  over  the  street  rail- 
ways within  the  State,  and  operating  them  as  a  municipal  plant. 

The  Chairman.  Do  you  believe  that  the  cities  and  villages  should 
have  more  control  over  these  utilities  than  they  now  possess? 

Mr.  HiGGiNS.  I  believe  that  they  should  have  control  to  the  extent 
of  regulating  the  issue  of  stocks  and  bonds,  that  we  have  not  got 
in  Connecticut. 

The  Chairman.  You  think  the  cities  and  villages  should  have 
that  power  ? 

Mr.  HiGGiNS.  Oh !  That  the  cities  and  villages  should  have  that 
power  ?    No ;  I  do  not. 

The  Chairman.  Read  the  question,  Mr.  Reporter. 

(The  reporter  repeated  the  question  as  above  recorded.) 

Mr.  HiGGiNS.  I  do  not  see  any  necessity  for  it. 
•     The  Chairman.  Has  the  National  War  Labor  Board  increased 
the  wages  of  companies  in  your  State  ? 

Mr.  IJiGGiNS.  Wages  have  been  increased;  whether  as  a  result  of 
that  or  otherwise,  I  am  not  prepared  to  say. 

The  Chairman.  Have  you  had  any  strikes  recently? 

Mr.  HiGGiNS.  We  have;  on  the  Shore  Line  Electric  Railway  Co. 
and  as  a  result,  during  the  past  month,  street  railway  service  has 
been  almost  entirely  suspended  in  eastern  Connecticut. 

The  Chairman.  Is  that  strike  still  in  existence? 

Mr.  HiGGiNS.  To  a  certain  extent.  It  is  gradually  working  out, 
we  think.    Some  cars  are  running  now. 

The  Chairman.  What  is  the  cause  of  the  strike? 

Mr.  HiGGiNS.  A  request  of  increased  wages. 


11 


iil4    PBOCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chaukmat^.  What  are  they  asking  for? 

Mr.  H1G6INS.  My  recollection  is,  60  or  62  cents;  I  am  not  sure  as 

to  that 

The  Chairman.  Have  you  made  a  calculation  to  determine  what 
rate  will  have  to  be  charged  to  meet  that  additional  labor  cost? 

Mr.  HiGGiNS.  I  have  not  the  figures. 
*   The  Chairman.  What  do  the  companies  claim  will  be  necessary? 

Mr.  HiGGiNS.  I  could  not  tell  you  offhand,  sir. 

llie  CmairmaNs  Are  the  companies  unionized  ?  Are  the  employees 
unionized  in  your  State? 

Mr.  HiGGiNs.  The>'  are. 

The  Chairman.  What  will  be  the  effect  upon  the  revenues  of  the 
companies  in  your  State  if  you  find  it  necessary  to  increase  the  fares 

above  6  cents? 

Mr.  HiGGiNS.  It  would  increase  the  revenues  provided  automobile 
competition  was  also  regulated. 

The  Chairman.  Do  >x)u  mean  the  jitney  conijjetition  ? 

Mr.  HiGGiNS.  Yes. 

The  Chairman.  Do  you  have  any  control  over  jitneys? 

Mr.  HiGGiNS.  None  whatever. 

The  Chairman.  And  the  municipalities,  I  understand,  only  have 
control  to  the  extent  of  a  license  tax? 

Mr.  HiGGiNS.  Yes. 

The  Chairman.  That  is  not  ample  protection? 

Mr.  HiGGiNs.  Nothing  more  than  the  ordinary  police  regulations. 

The  Chairman.  In  the  absence  of  regulation  of  jitney  competi- 
tion, what  will  happn  to  the  revenues  of  the  company  if  you  have 
to  charge  a  7-cent  fare? 

Mr.  HiGGiNs.  I  am  not  prepared  to  answer.  I  think  it  would  in- 
crease the  revenues. 

The  Chairman.  You  think  it  would  still  increase  the  revenues? 

Mr.  HiGoiNS.  Yes;  I  think  so. 

The  Chairman.  Would  it  likewise  increase  the  jitney  competition? 

Mr.  HiGGiNS.  I  think  it  would.  I  might  say  this,  in  regard  to 
jitney  c(»npetition :  The  last  legislature  did  make  this  concession 
regarding  the  jitney  operators — that  they  were  required  to  give  a 
bond  to  answer  questions  of  damages. 

The  Chairman.  Is  the  competition  between  these  two  transporta- 
tion companies  keen? 

Mr.  IIiGGiNS.  It  is,  decidedly. 

The  Chairman.  Is  the  jitney  business  increasing  or  decreasing? 

Mr,  HiGGiNS.  Increasing. 

The  Chairman.  Rapidly? 

Mr.  Higgins.  It  has  in  the  past  18  months,  and  for  the  past  six 
months  possibly.  The  bond  requirement  will  not  take  dFect  until  next 
January,  I  believe. 

Tlie  Chairman.  What  do  you  think  will  be  the  effect  of  the  re- 
quirement of  the  bond  upon  the  service  of  the  companies? 

Mr.  Higgins.  I  think  it  will  assist  the  companies,  by  eliminating 
a  Itnge  number  of  tlie  small-jitney  comj^etitors,  the  small  cars. 

The  Chairman.  Can  you  state  the  amount  of  the  bond  required? 

Mr.  Higgins.  My  recollection  is  that  it  is  a  $5,000  minimum,  and 
increasing  in  accordance  with  the  seating  capacity  of  tlie  car. 


PROCEEDINOS  OF  FEDERAL.  EI^ICTRIC  RAILWAYS  COMMISSION.    1115 


The  Chairman.  Has  Connecticut  been  affected  by  tlie  withdrawal 
of  a  large  number  of  its  citizens  during  the  war,  who  would  ordi- 
narily use  the  street  car? 

Mr.  Higgins.  It  has. 

The  Chairman.  Tbey  are  now  coming  back? 

Mr.  Higgins.  Yes. 

The  Chairman.  Then  you  look  for  a  larger  passenger  travel? 

Mr,  Higgins.  I  think  so ;  yes. 

The  Chairman.  Has  that  b^un  to  be  effective  ? 

Mr.  Higgins.  The  riding  in  1919  over  1918  has  materially  in- 
a^eased^  there  is  more  riding  in  1919  than  there  was  in  1918. 

The  Chairman.  Has  your  company  addressed  itself  to  the  ques- 
tion of  economies  that  might  be  made,  rather  than  by  increasing  the 
charge  ? 

Mr.  Higgins.  Somewhat^ 

The  Chairman.  What  conclusion  have  you  reached  ? 

Mr,  Higgins.  The  conclusion  is  rather  ind^nite,  I  believe  that 
some  system  should  be  devised  whereby  the  company  i^eceives  all  tl%e 
faixis  that  it  is  entitled  to  for  tlie  people  who  ride  on  tlie  cars,  which 
heretofore  they  have  not  been  receiving. 

Tlie  Chairman,  I  agree  with  you.  What  can  you  do  to  improve 
that  situation? 

Ml",  HioGiNS.  I  think  tlie  pay-as-yo«-eiiter  car  helps  considerably. 

The  Chairman.  Have  you  ordered  tlie  use  of  such  cai^? 

Mr.  Higgins.  We  have  not  ordered  any  of  thean.  Whenever  the 
company  gets  new  cars,  they  ha^'^  got  to  be  approved  by  oin-  "com- 
mission, and  all  of  its  new  cars  recently  have  beeii  pay-as-you-^iter 
cars. 

The  Chairman.  Does  that  get  the  money  ? 

Mr.  HiooiNs.  I  think  it  does. 

The  Chairman.  Have  you  suggested  any  other  improvement  in 
service  or  economies? 

Mr.  Hjggins.  There  is  the  question  of  using  the  one-man  car,  which 
seems  to  be  working  out  very  satisfactorily  in  Connecticut  in  certain 
sections.  They  travel  quicker,  pick  up  quicker,  and  do  not  take  so 
much  power  to  operate. 

The  Chairman.  How  does  the  public  regard  those  care? 

Mr.  Higgins.  Favorably,  where  operated.  The  city  of  Bridgei>ort, 
where  they  were  first  installed — first  put  in  service — ^tlie  mayor  and 
other  city  'dficials  speak  v^ry  highly  of  tliem. 

The  Chairman.  Have  you  ascertained  how  much  saving  there  is 
in  the  use  of  these  cars  over  the  equipment  which  they  already  have  ? 

Mr.  Higgins.  It  is  a  teclinical  que^ion  that  I  could  not  answer  in 
detail. 

The  Chairman.  Do  you  think  it  is  a  substantial  saving? 

Mr.  Higgins.  I  do. 

The  Chairman.  I  have  no  further  questions. 

Mr.  Warren,  Just  one  question :  Has  not  the  Connecticut  Co.  itself 
made  pretty  exhaustive  studies  and  efforts  to  reduce  the  cost  of  oper- 
at  ion  and  to  intixxluce  economies? 

Mr.  Higgins.  It  has. 

Mr.  Warren.  I  remember,  when  I  was  fuel  adviser,  Mr.  Storrs 
made  very  careful  figures  and  showed  very  gratifying  results  in  ex- 
amining the  use  of  fuel  and  getting  better  results. 


1116    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  WrRREN.  And  that  has  been  the  policy  of  the  company  quiti> 
generally,  has  it  not? 

Mr.  HiGGiNS.  I  think  so,  without  question.  a   '^  ^  .. 

Mr.  Warren.  So  that,  as  far  as  that  company  is  concerned,  it  has 
probably  introduced  a  good  many  economies? 

Mr.  HiGGiNS.  I  think  so.  u     ^4  fi.n. 

Commissioner  Sweet.  Have  you  any  criticism  to  make  of  the 
management  of  the  companies  of  Connecticut  generally  i 

Mr  HiGGiNS.  No;  I  have  not.  ^  ^^  a 

Conmiissioner   Sweet.  You  think  they   are  favorably  managed, 

with  reference  to  economy  ?  1.      •  * 

Mr.  HiGGiNS.  I  think  there  is  always  room  for  improvement. 
Commissioner  Sweet.  Oh,  certainly.  .       . 

Mr  Hi?«NS.  But  comparing  the  cost  of  operation  in  proportion 
to  the  revenues,  arid  comparing  that  with  other  companies,  it  would 
s^m  that  the  management  of  our  Connecticut  companies  compares 

*''¥;;:'^^rSLf  ort^rrnSment  with  whom  I  am  acquainted 
1  believe  to  be  doing  the  best  they  can.  I  w-ant  to  say  for  the  utili- 
ties of  Connecticut  of  all  classes  that  there  has  been  a  cordial  spirit 
of  cooperation  between  the  commission  and  the  companies. 

COTimissioner  Sweet.  Is  it  your  opinion  that  the  prejudice  which 
existed  against  public-service  corporations  has  been  wearing  away 

'Vr%ZZ  ills  rather  difficult  for  the  public  to  forget  the  sins 
of  the  past,  AVhen  the  stress  of  war  time  came  on  they  resented, 
even  then!  what  had  occurred  in  the  past.  However,  as  the  facts 
and  the  embarrassing  conditions  of  the  companies  have  become 
known  to  the  public  to-day,  I  think  there  is  a  very  much  better 
Sg  Voward^the  companies,  and  a  feeling  that  the  companies  • 
should  have  assistance  and  should  get  a  fair  deal.  •   „  (.„ 

Commissioner  Sweet.  You  think  the  genei-al  public  is  coming  to 
reaHz^  more  fully  its  dependence  upon  the  street-railway  company 

for  ft  service  that  is  indispensable?  .  . 

Mr.  H igg!ns.  I  think  they  are.  I  think  they  are  coming  to  realize 
th^r  dependence  upon  utilities  generally,  and  that  it  is  really  a 
laartnershiD  between  the  public  and  the  companies. 
P  Mr  wIrren.  You  spoke  of  Norwich  and  New  London,  in  con- 
neSn  wtth  the  Shore  Line  Railway.  Those  are  the  largest  places 
served  by  that  line  in  Connecticut,  are  they  not « 

Mr    W™N.S  you  mentioned  certain  franchise  restrictions 
under  which  they  could  charge  only  5  cents? 

-        Mr!  S^Trren.  Nobody  except  the  city,  I  suppose,  can  remedy  that 

"'m^  HiGGiNS.  Yes;  it  is  a  legislative  matter.  All  0"^/^;;^^^ ^^^^ 
in  Connecticut  are  granted  by  the  general  assembly  and  that  was 
a  restrS  put  in  the  original  charter.  I  understand,  however 
thrartheU  session  of  the  legislature  steps  were  taken  to. amend 
that  and  I  believe  that  recently  that  has  been  amended,  eliminatmg 
that' restriction  as  to  New  London  and  Norwich. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    HIT 

]Mr.  Warren.  Unless  that  were  done,  your  commission  could  not 
do  it,  because  the  company  initiates  th^  rate  ? 

Mr.  HiGGiNS.  We  could  not  change  a  franchise  right,  excepting 
the  legal  question  might  be  involved  whether  or  not  an  adminis- 
trative body  representing  the  legislature  could  assume  the  right  to 
change  a  rate  established  by  the  franchise. 

Mr.  Warren.  None  of  your  franchises  are  local  grants? 

Mr.  HiGGi^'S.  None  of  them;  no.  All  of  our  franchises  are 
granted  by  the  State  and  are  indeterminate  as  to  period  of  time. 

Mr.  Warren.  So  that  every  charter  is  a  special  charter? 

Mr.  HioGiNS.  Every  charter  is  a  special  charter. 

Mr.  Warren.  As  ours  used  to  be  in  Massachusetts. 

Mr.  HiGGiNS.  I  might  say  that  the  Connecticut  Co.  is  a  combina- 
tion of  many  special  charters. 

Mr.  Warren.  Are  you  familiar  with  the  general  service-at-cost 
act  which  was  passed  by  the  Massachusetts  Legislature  in  1918? 

Mr.  HiGGiNS.  I  have  read  it;  yes. 

Mr.  Warren.  That  contemplated  an  automatic  scale  up  and  down, 
to  be  submitted  by  the  company  to  the  commission,  and  when  ap- 
proved by  the  commission,  with  or  without  changes,  it  was  to  be- 
come effective.  I  suppose  if  you  could  fix  your  zones  in  the  Con- 
necticut Co.,  for  instance,  which  serves  so  many  municipalities — if 
you  could  fix  ^our  zones  at  a  satisfactory  distance  in  each  case,  you 
could  then,  with  the  valuation  of  the  system  as  a  whole,  apply  that 
scale,  making  it  apply  to  each  one  of  the  zones? 

Mr.  HiGGiNS.  Yes. 

Mr.  Warren.  And  that  would  be  about  the  only  way  you  could 
do  it;  would  it  not? 

Mr.  HiGGiNS.  About  the  only  way;  yes. 

Mr.  Warren.  Thank  you.    That  is  all. 

The  Chairman.  You  stated  that  you  were  in  favor  of  eliminat- 
ing taxes  and  paving  assessments,  and  the  cost  of  building  bridges. 
Is  that  correct? 

Mr.  HiGGiNS.  Yes ;  excepting  as  to  the  question  of  taxes.  I  should 
say  I  am  in  favor  of  the  elimination  of  them  at  the  present  time. 

The  Chairman.  That  is  what  I  was  going  to  ask  you. 

Mr.  H1GGIN8.  I  think  that  should  be  temporary. 

The  Chairman.  You  favor  that,  not  as  a  permanent  proposition 
but  simply  as  a  temporary  expedient? 

Mr.  HiGGiNs.  As  a  temporary  expedient,  so  far  as  taxation  is  con- 
cerned. 

The  Chairman.  Have  you  the  power,  under  your  law,  to  relieve 
the  companies  from  that  cost? 

Mr.  HiGGiNS.  We  have  not. 

The  Chairman.  Has  any  effoii;  been  made  to  secure  a  law  to  give 
you  that  power? 

Mr.  HiGGiNS.  Yes;  at  the  last  session  of  the  legislature. 

The  Chairman.  What  was  the  effect  of  that? 

Mr.  HiGGiNS.  Without  success. 

The  Chairman.  Thank  jou  verj^  much  for  j^our  statement,  Mr. 
Higgins. 

(Witness  excused.) 

Mr.  Warren.  Unless  the  commission  asked  Mr.  Mote  while  I  was 
not  listening  or  attending  to  something  else,  I  should  like  to  ask  him 


1118    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

what  the  policy  of  Indiana  is,  if  it  has  any,  regarding  the  one-man 
car.    Did  he  testify  as  to  that? 

The  Chairman.  He  did  not 

Mr.  Warren.  May  I  have  him  recalled  for  a  moment  on  that? 

The  Chairman.  Yes. 

STATEMENT  OF  CABX  H.  MOTE— Kcsumed. 

Mr.  Mote.  We  have  adopted  and  approved  the  one-man  car  in 
some  of  the  smaller  cities  in  Indiana,  and  it  has  worked  very  well. 
There  have  been  protests  in  a  few  cases  from  the  local  central  labor 
unions  against  its  adoption.  That  is  trne  at  Evansville.  At  Logans- 
port  and  Anderson  and  a  few  otlier  towns,  however,  we  have  had 
the  one-man  car,  and  it  has  worked  verv  well  in  the  smaller  towns. 

Mr.  Warren.  And  the  public  is  satisfied  ? 

Mr.  Mote.  I  think  so;  yes. 

The  Chairman.  Has  the  only  opposition  come  from  the  labor 

unions? 

Mr.  Mote.  With  the  exception  of  Evansville,  I  think  so. 

The  Chairman.  Are  there  any  further  questions? 

Mr.  Warren.  That  is  all  I  wanted  to  ask,  Mr.  Mote. 

Mr.  Mote.  I  should  like  to  add,  inasmuch  as  I  have  been  recalled 
for  the  moment,  just  one  statement  to  what  I  have  already  made. 

We  found,  by  a  survey  made  in  Indianapolis,  that  the  companies 
there  were  losing  13.8  per  cent  of  their  total  revenue  by  failure  to 
collect  the  fares. 

Mr.  Warren.  How  much? 

Mr.  Mote.  13.8  per  cent  of  the  total  revenue.     That  revenue  is 

now  being  collected. 

Commissioner  Beall.  Was  that  due  to  war  conditions,  the  differ- 
ent class  of  labor  that  you  had  during  the  war  conditions? 

Mr.  Mote.  Incidentally  to  that,  but  that  was  not  the  fundamental 

thing. 
*     Commissioner  Oadsden.  You  mean  knocking  down  ? 

Commissioner  Beaix.  You  think  that  was  a  condition  that  had 
endured  for  a  number  of  years? 

I^fi*  J^IoTE   Y^es. 

Commissioner  Beall.  I  know  a  great  many  companies  had  that 
trouble  during  the  war  period,  due  to  the  different  class  of  labor 
that  they  had  to  use.  How  do  you  account  for  it  in  that  case?  Did 
tliev  have  lower  grade  of  labor  than  most  other  cities  or  was  their 
svstem  incorrect? 

^  Mr.  Mote.  Well,  during  the  rush  hours  it  was  shown  to  be  a 
phvsical  impossibility  for  the  conductor  to  collect  the  fares. 

Commissioner  Beall.  Have  they  corrected  it?    AVhat  did  they  do? 

Mr.  Mote.  By  the  installation  of  the  pay-as-you-enter  cai-s. 

The  Chairman.  Has  that  increased  the  revenue? 

Mr.  Mote.  Absolutely.  For  instance,  a  16  per  cent  increase  in 
rate  has  given  the  company  a- 25  per  cent  increase  in  revenue. 

Commissioner  Beall.  Do  you  find  they  carry  as  many  people  as 
they  did  with  the  other  type  of  car? 

Mr.  Mote.  I  could  not  answer  that  question. 

Commissioner  Beall.  Have  not  a  good  many  of  the  compaiiies— 
not  in  the  medium-sized  cities,  but  in  the  larger  cities,  like  Indian- 


PROCEEDINGS  OF  FEDERAL  M^ECTRIC  RAILWAYS  COMMISSION,    1119 


ji polls — found  that  in  some  cases  tiie  pay-as-you-enter  cars  slowed  up 
tlieir  traffic? 

Mr.  Mote.  Thai  was  the  objection  to  introducing  the  one-imin 
car.    Frankly,  I  never  had  very  much  confidence  in  tliat. 

Commissioner  Beall.  I  do  not  mean  tlic  one-man  car 

Mr.  Mote.  No;  I  did  not  mean  the  one-man  car.  I  meant  tlie 
pay-as-you-enter  cars. 

Commissioner  Beall.  The  pay-as-you-enter  c^rs;  yes. 

Mr.  Mote.  We  did  not  feel  that  it  would  slow  up  traffic  very  much ; 
and  my  own  opinion  is — I  would  not  want  to  be  held  accountable 
for  it  as  to  the  details,  or  an  analysis,  because  we  have  made  none — 
my  opinion  is  that  it  has  not  slowed  up  traffic  very  much;  and  that 
is*  based  on  observation,  the  speed  with  which  tli^  cars  mov«,  aiid 
tlie  time  it  takes  the  pay-as-you-enter  car  now  to  go  from  one  point 
to  another  point,  and  the  time  it  formerly  took  with  the  other  type 
of  car. 

Another  objection  that  the  company  raised  to  introducing  the 
pay-as-you-enter  car  was  the  expense.  They  had  the  old-tjpe  car. 
We  worked  out  a  very  simple  modification,  however,  of  their  old- 
type  car,  which,  I  think,  did  not  co^  i^m  to  exceed  $50  or  $60  per 
car  to  convert  their  old-type  cars  into  pav-as-ywi-^iter  cars.  The 
gain  has  been  tremendous,  and  I  think  the  company  itself  would 
never  go  back  to  the  old  type  of  car  now. 

(Witness  excused.) 

Mr.  Ogburn.  We  have  received  several  requests  to  have  this 
lecord  show  what  the  recent  fare  adjustment  on  the  Public  Service 
Railway  Co.  of  New  Jersey  has  been,  in  v^w  of  the  fa<^  that  a  good 
deal  of  significance  is  attached  to  that,  and  in  view  of  the  fact  that 
two  weeks  a^  Dr.  Conway  testified  rather  fully  in  regard  to  the 
hearings  before  the  Public  Service  Commission  of  New  Jersey. 
And  the  Public  Service  Commission  of  New  Jersey  has  offered  to 
have  one  of  its  representatives  appear  here  the  latter  part  of  the 
week,  if  it  is  desired,  to  put  in  fuller  testimony  than  can  be  stated 
in  a  nutshell  now;  and  that  is  this:  That  after  those  prolonged 
hearings  on  the  question  of  the  fare,  based  upon  a  zone  plan,  the 
president  of  the  company,  Mr.  McCarter,  offered  voluntarily,  as  I  un- 
derstand it,  to  put  in  an  initial  fare  of  3  cents  for  the  first  zone ; 
that  is,  each  line  is  divided  into  mile  zones,  and  for  the  first  zone  the 
fare  would  be  3  cents,  and  for  eada  successive  zone  it  would  be  2  cefiits. 

One  of  the  main  criticisms  of  tl^  zone  plan  has  be^i  the  diffiNculty 
of  collecting  the  fares,  and  you  might  be  interested  in  the  plan 
adopted  for  the  company  there  for  that  purpose.  It  is  that  the  pas- 
senger boards  the  front  of  the  car  and  there  receives  a  coupon 
showing  the  number  of  the  zone  in  which  he  boards  the  car.  He 
then  rides  as  long  as  he  desires,  and  tlie  exit  is  at  the  rear  of  the  car, 
where  he  tlien  hands  to  the  conductor  this  coupon,  which  shows  the 
number  of  the  zone  in  which  he  entered  the  car;  and  the  conductor 
then  computes  the  number  of  zones  through  which  he  has  ridden, 
and  the  passenger  pays  accordingly. 

If  the  commission  desires  a  fuller  statement  of  that  situation 
the  Public  Service  Commission  of  New  Jersey  has  volunteered  to 
have  one  of  their  members  appear  here  and  give  you  that  ^ateofient. 
You  can  decide  that  at  your  meeting. 

The  Chairman.  Yes;  we  will  "decide  that  during  the  noon  hour. 


1120    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 
• 

Mr.  Ogburn.  The  next  witness  is  Mr.  F.  F.  Ingram,  of  Detroit. 
Mr.  Ingram  has  had  considerable  experience  as  a  citizen.  He  was 
connected  with  Mayor  Pingree,  of  Detroit,  a  number  of  years  ago, 
and  was  on  the  city  electic-lighting  commission  and,  I  believe,  he 
is  the  head  of  the  city  forum  of  Detroit. 

The  Chairman.  We  shall  be  glad  to  hear  from  Mr.  Ingram. 

STATEMENT  OF  MR.  F.  F.  INGRAM. 

The  Chairman.   Just  proceed  in  your  own  way,  Mr.  Ingram. 
Mr.  Ingram.  I  am  a  manufacturer  by  occupation,  and  my  busi- 
ness is  in  Detroit,  the  firm  being  Frederick  F.  Ingram  &  Co. 

I  did  not  know  until  a  few  minutes  ago,  Mr.  Chairman,  about  half 
an  hour  ago,  when  someone  reached  me  on  the  telephone,  that  I  was 
wanted  by  your  commission.  I  am  not  a  street-railway  man,  as  I 
have  explained,  and  my  only  vieAvpoint  is  that  of  an  interested  citi- 
zen, and  I  can  speak  from  that  viewpoint,  but  not  with  any  authority 
from  any  other  point  of  view. 

The  situation  of  Detroit  in  the  street-railway  matter  is  perhaps 
unique.  We  have,  from  the  citizens'  viewpoint,  been  suffering  there 
for  a  long  time  from  unsatisfactory  arrangements  for  street-railway- 
transportation  service. 

In  1908  I  was  elected  to  the  constitutional  convention  of  Michigan, 
wliich  adopted  the  present  constitution,  and  the  reason  why  I  was 
sent  was  a  desire  on  the  part  of  the  citizens  of  Detroit  to  get  home 
rule  and  municipal  ownership ;  and  my  predilections  were  that  way ; 
and,  as  a  consequence,  while  not  a  person  who  was  seeking  office,  or 
had  ever  sought  it  before,  I  was  elected  to  the  constitutional  conven- 
tion, and  we  secured  home  rule  and  municipal  ownership  in  our 
present  constitution. 

Then  we  proceeded  to  vote  upon  the  municipal  ownership,  and  the 
proposition  was  adopted  by  the  people  by  a  vote  of  80  to  20.  That 
was,  I  think,  in  1910,  nine  years  ago;  but*^we  have  not  got  municipal, 
ownership,  although  we  adopted  it  by  that  large  majority. 

The  consummation  of  that  desire  was  interrupted  by  negotiations 
l)etween  the  city  authorities  and  the  street-railway  authorities,  and 
those  negotiations  are  still  proceeding. 

We  had  a  strike  there  a  few  weeks  ago  which  perhaps  will  show 
the  sentiment  of  the  citizens  regarding  the  service.  The  strike  was 
universal ;  and  a  complete  tie-up  of  the  lines  resulted.  It  lasted  one 
week.  And  from  my  experience  in  getting  the  sense  or  the  opinion 
of  the  public  generally,  I  feel  that  it  was  a  disappointment,  perhaps, 
that  was  entertained  by  a  majority  of  the  workingmen,  at  least,  that 
the  strike  was  settled  and  the  cars  resumed.  That  seems  rather  a 
startling  statement  to  make,  because  we  are  a  large  industrial  city, 
and  our  industries  are  very  much  scattered,  and  nearly  all  of  our 
factorv  hands  must  take  the  street-car  to  get  to  their  work,  and  for 
a  week  we  had  no  street-cars  at  all,  with  no  other  form  of  trans- 
portation by  companies  like  the  steam  railways. 

The  first  day  of  the  strike,  in  my  own  factory  there  were  a  few 
of  my  employees  that  were  late,  but  there  was  none  late  after  the  first 
day ;  and  that  is  something  that  would  be  very  rare  to  occur  any  time 
during  the  time  the  street  railways  were  running.  The  way  we  over- 
came the  difficulty  was  by  the  univel^al  disposition  shown  by  all  the 


PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  C0MMISSI0I7.    1121 

manufacturers  to  employ  temporary  expedients  to  get  our  employees 

to  work. 

The  Chairman.  What  did  you  do? 

Mr.  Ingram.  We  used  our  automobiles  and  our  trucks;  and  the 
employees  looked  upon  it  largely  as  a  sort  of  a  picnic,  and  they  were 
]>leased  with  the  idea.  We  laid  the  city  out  into  zones — I  did,  myself, 
even  the  first  day — and  they  all  got  there  on  these  vehicles,  but  of 
course,  we  did  not  have  our  mobilization  complete.  After  that,  how- 
ever, I  think  that  all  of  the  shops  were  fairly  well  served.  I  do  not 
know  of  any  that  were  not  what  they  considered  well  served. 

Detroit  perhaps  is  more  fortunate  than  most  cities  in  having  so 
many  gasoline  machines  on  its  streets.  In  any  event,  at  the  end  of  a 
week  a  settlement  of  the  strike  was  effected,  and  the  cars  resumed, 
and  there  has  been  no  further  trouble  of  that  nature ;  but  it  developed 
a  thought  amongst  our  citizens  along  the  lines:  "Are  the  street-cars 
as  we  have  street-cars,  with  trolleys  and  with  rails,  necessary?" 

I  believe  if  the  vote  was  put  to  the  industrial  classes  of  Detroit  they 
would  vote  against  having  the  street-cars,  even  without  a  solution,  as 
there  is  no  known  solution  to  replace  the  street-car  at  the  present  time. 

The  Chairman.  May  I  interrupt  you  just  for  a  moment  to  ask  you 
a  question  at  this  point? 

Mr.  Ingram.  Certainly.  I  shall  be  glad  to  answer  anything  that  I 
can. 

The  Chairman.  Do  you  suppose  that  the  industrial  element  is  in- 
fluenced in  that  sentiment  by  reason  of  the  fact  that  the  employers 
hauled  them  to  and  from  their  factories  without  charge  ? 

Mr.  Ingram.  I  was  coming  to  that.  Of  course,  that  is  not  a  fair 
example  of  what  the  conditions  would  be — the  experience  during  that 
week ;  because  it  cost  none  of  our  employees  anything.  We  were  glad 
to  do  this,  to  keep  our  people  going  and  to  keep  the  business  going. 

Commissioner  Gadsden.  It  was  good  weather,  too,  was  it  not? 

Mr.  Ingram.  Yes ;  it  was  fine  weather.  That  was  a  very  fortunate 
circumstance.  Every  day  was  a  fine  day.  In  fact,  it  created  a  spirit 
amongst  the  employers  and  employees  that  was  really  beautiful,  and 
most  unexpected.  Of  course  that  was  all  done  without  price,  and  it 
was  looked  upon  largely  as  a  picnic  by  the  ejnployees. 

Now,  prompted  by  your  question :  We  have,  as  you  all  know,  the 
Ford  industry  in  Detroit,  and  Mr.  Sorenson,  one  of  Mr.  Ford's  expert 
mechanics,  some  time  preceding  the  strike,  had  had  considerable  to 
say  in  the  newspapers  regarding  the  gasoline  machine  to  replace  the 
street-car.  He  had  made  positive  statements  in  that  regard,  and  of 
course  it  is  an  everpresent  problem— the  street-car  problem  there ;  it 
is  discussed  all  the  time.  He  had  made  the  statement,  and  repeated  it 
several  times,  with  the  whip  of  criticism,  that  gasoline  machines — 
rubber-tired  machines — could  be  installed  in  Detroit  and  could  per- 
form this  service  better  than  the  street-cars,  and  at  no  gi-eater  cost 
to  the  passengers. 

That  probably  reconciled  the  people  to  the  strike,  and  also  prompted 
the  disappointment  that  they  felt  at  the  strike  being  settled,  because 
it  was  a  disappointment  to  many  of  the  employees,  as  they  took  pains 
to  express  themselves.  They  were  sorry  the  cars  ever  ran.  I  do  not 
think  the  employers  were  disappointed  at  all.  They  were  eager  to 
have  the  cars  run  again,  because  it  was  a  matter  of  exj)ense  to  them 

leOCMS"— 20— VOL  2 9 


1122    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

during  the  strike.  But  tlie  people  of  Detroit  have  lost  faith  in  private 
corporations  *runnin<r  street-cars.  This  may  be  owing  as  much  to  the 
fault  of  the  city  administration  as  to  the  street-car  corporation  that 
handles  the  traffic  in  our  city.  I  do  not  want  to  express  an  opinion 
upon  that ;  but  we  have  cultivated  a  municipal  ownership  sentiment 
there,  beginning  with  Mayor  Pingree,  as  you  know;  and  the  street- 
car people  were  giving  us  that  traffic  at  eight  tickets  for  a  quarter 
during  the  workingmen's  hours,  w^hich  were  liberal  hours,  enabling 
them  to  get  to  work  on  that  low  fare ;  and  on  one  of  the  lines,  the 
building  of  which  was  induced  by  the  then  Mayor  Pingree,  the  eight- 
for-a-quarter  tickets  lasted  until  eight  o'clock  at  night,  beginning  at 
five  o'clock  in  the  morning;  and  then  it  was  six  for  a  quarter.  So  we 
were  accustomed  to  cheap  fares.  Then,  this  municipal  ownership 
having  been  adopted  by  such  an  enormous  majonty,  and  its  realiza- 
tion being  delayed  by  the  public  thinking  by  more  or  less  collusion 
or  incapacity  on  the  part  of  our  government  officials,  and  then  the 
street-railway  company  abrogating  a  day-to-day  agi-eement  which 
they  had  entered  into  to  tide  ovei*  the  situation  until  municipal 
ownership  was  adopted,  the  people  have  lost  faith  in  private  cor- 
porations. They  do  not  believe  it  is  possible — and  my  opinion  is 
that  it  is  their  opinion  that  they  do  not  conceive  it  to  be  possible — for 
a  private  corporation,  whose  main  purpose  is  to  make  pi*ofit,  to  give  a 
satisfactory  service  in  Detroit.  Tliat  explains,  I  presume,  in  large 
measure,  why  our  strike  produced  so  little  trouble.  There  was  ao- 
solutely  no  trouble  at  all,  no  riots,  no  disturbances  such  as  have 
marked  previous  strikes  in  Deti»oit,  and  which  generally  come  more 
or  less  in  all  strikes. 

I  feel  that  I  am  intruding  upon  you,  because  I  am  not  an  expert, 
and  I  do  not  want  to  advance  any  more  talk  here,  but  I  shall  be 
glad  to  answer  any  questions  that  any  of  the  members  of  the  com- 
mission may  have  to  ask  me. 

The  Chairman.  You  have  given  us  a  very  interesting  narrative. 

Mr.  Ingram.  I  ^vould  like  to  say  that  I  was  a  member  of  the  public 
lighting  commission  for  six  years,  and  was  selected  as  president 
twice,  and  my  facilities  for  obtaining  a  survey  of  the  public  mind 
in  these  mattei-s  has  been  good.  I'  am  a  director  of  a  public  forum, 
and  that  brings  together  the  people  who  are  the  thinking  people  of 
the  town,  and  they  discuss  these  matters  very  largely,  and  that  is 
the  place  for  the  exchange  of  public  views,  which  inspires  me  with 
confidence  that  perhaps  I  am  in  a  position  to  know  what  those 
views  are. 

Commissioner  Beall.  You  have  had,  as  I  take  it,  from  your  tes- 
timony, comparativelv  low  fares  in  Detroit,  have  you  not? 

Mr.  Ingram.  I  uncferstand  they  are  about  as  low  as  they  are  any- 
where in  the  country. 

Commissioner  Beall.  Has  not  that  been  due  to  rather  unusual  cir- 
cumstances, in  this  respect :  Have  not  the  citizens  of  Detroit  had 
this  very  great  advantage,  that  they  really  have  been  getting  the 
service  at  less  than -cost  to  the  company,  arfd  that  the  only  reason 
that  the  Detroit  company  has  been  able  to  live  is  owing  to  a  very 
unusual  thing,  and  that  is  that  the  outside  lines,  the  interurban  lines 
which  they  own,  go  to  very  populous  districts  and,  unlike  most  sim- 
ilar cases,  have  been  very  profitable,  and  that  they  have  used  the 
net  earnings  of  those  outside  lines  to  offset  their  lines  in  the  city? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOlf.    1123 

Mr.  Ingram.  The  people  of  Detroit — the  man  in  the  street,  that 
is — one  of  his  charges  against  the  street  railway  in  Detroit  is  that 
they  are  supporting  the  interurban  *  lines  from  the  revenue  of  the 
city  lines. 

Commissioner  Beajll.  But  the  fact  is  really  just  the  opposite,  is 

it  not? 

Mr.  Ingram.  It  may  be. 

Commissioner  Beall.  But  is  not  that  so?  Does  not  their  pub- 
lislied  statement  of  earnings  show  that? 

Mr.  Ingram.  I  do  not  think  so. 

Commissioner  Beall.  I  understood  that  they  do.  I  am  quite  sure 
they  do. 

Mr.  Ingram.  There  are  certain  featui-es  in  connection  with  that 
that  our  Detroit  people  consider  grievances.  For  instance,  they  have 
turned  our  streets  into  switches  for  freight.  They  do  a  large  express 
and  freight  business  on  the  interurban  lines,  and  the  city  has  been 
trying  to  exact  from  them  certain  sums  for  that,  and  they  have  at 
times  failed  to  collect  it.  But  I  do  not  think  the  city  would  fail 
to  collect  it  if  they  felt  they  had  public  opinion  behind  them.  There 
is  a  public  opinion  there  that  perhaps  would  not  back  the  admin- 
istration in  being  too  arbitrary  in  that  direction;  but  there  is  a  big 
service  that  the  city  of  Detroit  is  affording  those  interurbans,  by 
bringing  those  cars  down  to  the  city  and  giving  them  the  transfer 
privileges,  and  all  that,  that  the  city  under  municipal  ownership 
would  treat  either  as  a  public  benefit,  without  charge,  or  for  which 
they  could  exact  a  charge  if  they  owned  the  inside  tracks. 

Conamissioner  Beall.  As  a  matter  of  fact,  as  a  manufacturer  and 
a  business  man  tliere,  it  may  be  that  perhaps  they  do  not  serve  your 
particular  plant  as  much  as  some  others;  but  isn't  that  switching 
and  freight  and  express  service  of  great  benefit  to  the  people  ot 
Detroit?     Wouldn't  they  far  rather  have  it  than  not  to  have  it? 

Mr.  Ingram.  It  is  a  convenience. 

Commissioner  Beall.  Is  it  not  a  very  great  convenience?  Don't 
they  get  the  regular  freight  and  express  much  cheaper,  more  con- 
veniently and  quickly  than  if  they  did  not  have  that  service? 

Mr.  Ingram.  In  some  instances.  But  there  is  another  side  to  that 
story. 

Commissioner  Beall.  We  are  just  asking  for  information,  of 
course- 
Mr.  Ingram.  I  understand  that.  I  understand  that  your  question 
is  not  partisan.  I  do  not  consider  it  so.  I  was  just  going  to  take  up, 
for  a  moment,  the  possible  implication  of  the  question.  We  had 
express  rates  of  15  cents — I  do  not  know^  whether  you  are  familiar 
with  the  surroundings  there,  or  not — to  Wyandotte  and  Monroe  and 
near-by  towns  within  12  to  20  miles ;  and  that  was  a  competitive  rate 
against  the  express.  They  raised  that  rate  to  25  cents.  I  do  not 
think  that  w^e  consider  that  w«  are  saving  ver}^  much  in  rates  bj^  the 
express  carried  by  the  interurbans,  but  it  is  a  convenience.  It  serves 
considerable  territory  that  the  steam  lines  do  not  serve  at  all.  Then 
some  of  us  have  a  habit  of,  without  consulting  economies,  sending  by 
the  interurbans.  They  are  performing  a  legitimate  service  and  a 
service  that  it  would  be  a  great  hardship  to  Detroit  to  have  done 
away  with.  So  far  as  rates  are  concerned,  however,  I  think  there 
is  an  inclination  to  maintain  a  rate  that  they  can  get,  and  that  they 


1124    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

charge  just  as  much  as  the  others  charge  under  the  competitive  cir- 
cumstances. But  they  do  not  charge  more,  I  don't  think,  where 
there  is  no  competition  from  the  others. 

We  are  still  considering  a  street-railway  problem  there  with  very 
serious  minds.  It  is  perennial  with  us;  and,  personally,  the  only 
solution  I  see  for  it  is — I  do  not  know  that  it  has  been  presented  to 
you  gentlemen  as  yet,  and  it  may  be  rather  too  much  of  an  innova- 
tion— my  opinion  is  that  if  you  keep  on  advancing  fares  you  are 
not  going  to  increase  your  revenue.  At  least,  you  will  reach  the 
point,  and  are  probably  very  near  to  it  now,  in  many  instances,  where 
with  further  increases  you  will  not  increase  your  revenue;  so  that 
you  can  not  look  to  that. 

The  people  must  be  transported  to  their  work,  and  my  idea  is  to 
charge  a  nominal  fare  without  reference  to  whether  it  will  pay  the 
revenue.  That  would  be  inaugurated,  in  my  mind,  under  municipal 
ownership,  and  I  do  not  know  whether  it  could  be  figured  out  under 
private  ownership  or  not;  but  under  municipal  ownership  I  do  not 
see  why  a  nominal  fare  could  not  be  charged,  and  then  the  balance, 
whatever  deficit  came,  be  taken  out  of  the  values  of  the  land,  the 
site  value  that  your  street-railway  benefits;  take  a  portion  of  that 
for  tlie  public  treasury,  to  support  the  street  railway  that  runs 
into  this  territory  that  is  benefited  by  it. 

That  solution  would  leave  the  expense  of  transporting  these  people 
with  the  people  who  were  transported,  and  it  w^ould,  it  seems  to  me, 
solve  it  without  too  much  distui-bance. 

On  the  other  hand,  if  you  charge  those  high  fares,  you  create  a 
rCvSentment  and  a  feeling  of  extortion  amongst  the  people  who  can 
not  understand  it,  and  who  are  suspicious  of  it,  particularly  if  it  is 
a  private  corporation. 

The  Chairman.  The  United  States  marines,  who  fought  at  Cha- 
teau-Thierry, are  just  going  by  on  Pennsylvania  Avenue,  and  I 
think  we  ouglit  to  adjourn  to  see  them  go  by. 

(Whereupon,  at  12.35  o'clock  p.  m.,  a  recess  was  taken  until  2 
o'clock  p.  m.) 

AFTER  RECESS. 

STATEMENT  OF  F.  F.  INGRAM—Continued. 

The  Chairman.  Mr.  Ingram,  just  as  we  adjourned  you  said  that 
you  had  a  solution  of  the  street-railway  question.  I  suppose  there  is 
no  community  in  the  country  that  has  had  more  to  do  in  studying 
this  question  than  Detroit,  and  of  course,  we  want  the  benefit  of 
your  suggestions  on  that. 

Mr.  Ingram.  Well,  Mr.  Chairman,  I  did  not  say  I  had  a  solution; 
I  did  not  si)eak  with  that  posit iveness.  I  had  a  suggestion  or  propo- 
sition. 

The  Chairman.  Well,  that  may  lead  to  a  solution. 

Mr.  Ingram.  Yes.  I  think  it  is  well  worth  considering.  I  want 
to  say  on  the  start  that  I  am  not  its  corporation  baiter  in  any  sense. 

The  corporation  that  runs  our  street  railway  in  Detroit  has  had  a 
very  rocky  road  to  travel  and  I  think  that  the  situation  perhaps  has 
been  made  worse  by  their  untactfulness  in  meeting  different  situa- 
tions as  they  have  come  up,  which  has  prejudiced  the  public  mind  in 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1125 

Detroit  very  much  against  private  corporations  running  street  rail- 
ways. So  far  as  they  have  abrogated  the  day-to-day  agreement  which 
is  holding  in  suspense  the  municipal  ownership  that  the  people  voted 
for,  and  have  given  them  in  the  meantime  six  tickets  for  a  quarter, 
they  prepared  the  public  mind  for  a  5-cent  cash  fare  by  telling  them 
how  much  better  service  they  would  get  when  they  came  to  a  5-cent 
fare;  which  they  did,  without  any  improvement  of  service.  Then 
comes  the  skip-stop  which  reduces  the  n\imber  of  stops  by  one-half 
for  the  benefit  of  the  service ;  but  the  people  do  not  see  any  benefited 
service,  but  they  did  see  a  very  material  reduction  in  the  cost  of 
running  the  street-cars.  Then  right  along  with  all  those  things,  the 
trailer,  for  instance — two  cars  tied  together — would  stop  the  con- 
gestion. Our  cars  have  been  horribly  crowded.  And  that  w^as  put 
over,  and  that  made  less  stops  again,  and  the  cars  were  crowded  just 
as  much,  and  as  the  population  grows,  even  more  so  perhaps.  So 
that  the  people  have  lost  faith  in  the  corporations,  and  that  causes 
our  public  officials  to  hestitate  about  giving  them  any  accommoda- 
tions or  the  consideration  that  perhaps  they  justly  deserve.  So  that 
the  next  step  is  municipal  ownei'ship. 

Now,  the  suggestion  that  I  have  named  would  be  operative,  I 
tliink,  without  any  complications  under  municipal  ownersliip.  Under 
private  ownership  whether  such  a  solution  could  be  put  in  force  I  do 
not  know. 

The  Chairman.  I  am  not  clear  that  you  made  your  suggestion  be- 
fore the  noon  hour.    Will  you  please  repeat  it,  if  you  did  ? 

Mr.  Ingram.  Well,  my  suggestion  was  that  the  passenger  be 
charged  a  nominal  fare  without  pretense  of  covering  the  cost  of  the 
service. 

The  Chairman.  What  should  that  fare  be? 

Mr.  Ingram.  Well,  three  or  four  cents. 

The  Chairman.  With  or  without  transfers? 

Mr.  Ingram.  With  the  transfer.  We  are  accustomed  to  transfers. 
That  would  make  for  tremendous  trouble,  to  educat-e  the  people  out 
of  the  transfer  idea,  at  least  in  Detroit.  Then  the  deficit,  whatever 
it  may  be,  should  be  assessed  against  the  land  that  is  affected  by  the 
service. 

The  Chairman.  How  would  you  apply  that  to  existing  street-car 
lines? 

Mr.  Ingram.  By  simply  passing  the  money  over  to  the  treasury  of 
the  street-car  company  and  assessing  it.  In  our  city,  we  are  consti- 
tutionally compelled  to  assess  our  land  separate  from  our  improve- 
ments, buildings,  etc. 

The  Chairman.  You  mean  the  lands  that  are  benefited  by  the 
street-car  lines? 

Mr.  Ingram.  Yes. 

The  Chairman.  They  are  to  be  assessed  each  year  to  make  up 
the  deficit? 

Mr.  Ingram.  For  the  preceding  or  following  year ;  that  is  a  book- 
keeping proposition,  what  that  deficit  takes  care  of,  either  on  an 
estimate  or  book  showing.  That  would  satisfy  the  street-car  riders, 
and  values  are  created  at  both  ends  of  the  line  and  along  the  line 
by  this  public  service,  and  it  is  taking  a  portion  of  it  to  pay  for  the 
service. 


1126    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 


The  Chairman.  Then  you  believe  that  this  deficit  should  be  borne 
by  property  that  is  benefited  rather  than  by  the  general  public 
tlu'oujrrh  taxation? 

Mr.  Ingram.  Yes;  I  do.  That  is,  the  ^neral  public  so  far  as  they 
own  that  land.  That  would  not  apply  to  the  building,  you  know ; 
the  buildings  are  not  benefited  by  the  facility  of  travel  but  the  land 
is;  and  why  should  not  it  bear  some  of  the  burdens  as  well  us  the 
passengers  on  the  cars  ?  It  Vould  not  create  any  great  apprehension 
among  the  landownei's,  it  seems  to  me,  and  it  would  be  a  satisfac- 
tory solution  so  far  as  the  cui*  rider  is  eoneerned. 

The  Chairman.  What  fare  are  tliey  charging  there  now? 

Mr.  Ingram.  They  are  charging  «i  straight  5-cent  fare,  with  the 
transfers. 

The  Chairman.  Is  the  company  paying  its  expenses  and  fixed 
charges  with  that  fare? 

Mr.  Ingram.  I  doubt  it.  It  is  being  agitated  now — a  charge  for 
transfei's ;  but  that  is  not  as  I  understand  it,  and  it  was  not  the  pro- 
posal of  the  street-car  company,  but  it  is  one  of  their  proposals  to 
get  out  of  the  trouble  they  are  in. 

The  Chairman.  Under  your  plan,  with  a  3-cent  fare,  might  it 
not  be  that  there  might  be  a  deficit  of  two  or  three  or  four  millions 
of  dollars  in  the  operation? 

Mr.  Ingram.  There  might  he. 

The  Chairman.  And  that  would  all  have  to  be  applied  to  the 
benefit  of  the  property? 

Mr.  Ingram.  Yes,  sir. 

The  Chairman.  Would  not  that  he  a  great  burden  to  the  property? 

Mr.  Ingram.  I  do  not  think  so;  no,  sir.     I  do  not  think  so. 

The  Chairman.  Have  you  ever  attempted  to  work  out  a  scale  for 
taxation  l)ased  upon  your  plan  to  see  how  it  would  affect  property 
in  Detroit? 

Mr.  Ingram.  Yes;  I  have.  I  mentioned  my  suggestion  advisedly 
because  I  had  thought  about  those  things.  In  I^ndon  when  they 
make  a  great  improvement  like  opening  a  new  street,  or  widening  it, 
they  do  not  assess  that  against  the  property  of  London  but  against 
the  property  that  is  benefited  by  extra  condemnations. 

The  Chairman.  That  is  new  constniction  ? 

Mr.  Ingram.  Yes;  excess  condemnation — that  is  construction:  yes. 
But  I  do  not  see  why  the  same  theory  would  not  work  as  works  in 
operation  in  this  country.  In  California  the  in-igation  in  dry  coun- 
ties is  done  on  that  ])asis.  The  cost  of  the  irrigation  waters  and 
maintaining  them  and  operating  them  is  assessed  pro  rata  against 
the  property  affected  by  it  and  it  is  very  satisfactory  to  the  ])r()]n]  v 
owners.  And  that  theory  applied  to  the  railroads,  I  do  not  see  any 
complications  in  the  railroad  proposition  that  are  not  equal  to  the 
California  experiment. 

The  Chairman.  Has  your  proposition  been  discussed  in  Detroit  ? 

Mr.  Ingram.  No,  sir;  not  to  anv  extent,  I  do  not  think. 

The  Chairman.  Do  ^ou  know  how  the  property  owners  look 
upon  it? 

Mr.  Ingram.  I  do  not.  T  could  not  speak  for  them.  I  only  speak 
for  myself.  I  do  know  that  a  good  many  I  have  discussed  it  with 
think  that  is  a  solution,  but  that  is  not  a'  matter  that  has  been  dis- 
cussed in  a  big  way,  you  know,  and  brought  out  for  discussion. 


PROCEEDINGS  OF  FEDERAL  FJ:.ECTRIC  RAILWAYS  COMMISSION.    1127 


The  Chapman.  I  presume  that  on  a  referendum  vote  on  that  ques- 
tion that  the  street-car  riders  who  do  not  own  property  or  who  may 
own  property  that  is  remote  from  the  street-ear  lines  would  all  vote 
for  that  sort  of  a  proposition  to  get  a  3-cent  fare. 

Mr.  Ingram.  I  think  the  property  owners  in  a  large  measure  would 
vote  for  it. 

The  Chairman.  You  think  they  would? 

Mr.  Ingra^i.  I  do.  I  do  not  think  that  that  would  be  received 
with  much  dismay  by  property  owners  that  appreciate  the  value  of 
good  service,  and  of  course  primarily  of  the  line  itself.  Our  property 
would  be  worth  very  little 

The  Chairman.  Are  you  going  to  have  municipal  ownership  in 
Detroit  ? 

Mr.  In^^ram.  I  do  not  see  what  is  going  to  prevent  it.  The  people 
have  declared  for  it.  I  might  say  that,  in  considering  that,  since 
they  voted  so  overwhelmingly  for  it,  there  have  been  two  measures 
proposed  that  they  have  voted  against;  but  they  voted  against  the 
measures  because  of  tlie  details  of  the  measures  which  they  did  not 
consider  reflected  their  views  when  they  voted  for  municipal  owner- 
ship. They  wanted  the  whole  hog  or  none.  But  I  do  not  think  there 
has  been  any  change  in  their  minds  regarding  municipal  ownership 
if  it  is  given  to  them  without  strings  tied  to  it.  But  they  have  be- 
lieved that  the  municipal  ownei*ship  that  they  were  given  was  a 
camouflage  for  a  private  corporation  or  for  some  other  reason,  and 
they  voted  against  it. 

The  Chairman.  Do  you  believe  that  municipal  ownership  could 
operate  those  plants  to-day  at  lees  than  5  cents? 

Mr.  Ingram.  I  do  not  know,  sir,  as  to  that.  I  am  not  posted  on 
that.  I  would  not  want  to  express  an  opinion.  I  do  believe,  though, 
that  they  would  operate  it  as  economically,  considering  the  service 
they  give,  as  a  private  company.  They  would  have  to  give  better 
service,  because  they  are  more  amenable  to  the  people.  And  that 
answers  also  an  objection  that  might  be  raised  to  my  proposition 
regarding  municipal  ownership — ^that  the  people  have  little  confi- 
dence in  their  public  officials,  as  little  perhaps  as  they  do  in  the  street- 
railway  officials. 

That  is  true  in  some  isolated  cases,  but  they  always  have  the  satis- 
action  of  getting  rid  of  those  public  officials  any  time  or  disci])lininir 


g 


them,  and  they  can  not  do  it  or  they  feel  helpless  before  the  men 
responsible  for  a  street-railway  company.  And  irrespective  of  the 
merits  of  the  service  the  people  that  they  can  not  touch,  that  they 
consider  are  irresponsible,  their  minds  are'so  prejudiced  against  theni 
that  they  will  be  dissatisfied  where  they  would  be  resigned  possibly 
to  the  same  service  under  municipal  ownership. 

The  CnAHiMAN.  We  thank  you  very  much. 

Mr.  Warren.  I  want  to  ask  just  one  question :  Did  I  understand 
you  that  during  the  strike  public  sentiment  was  that  the  city  could 
get  along  very  well  without  the  street  railway  ? 

Mr.  Ingram.  Well,  I  can  not  speak  for  public  sentiment.  Public 
sentiment,  as  it  appeared  to  me,  got  to  that  point  by  propaganda  that 
came  right  along  immediately  preceding  this  strike  from  Mr.  Soren- 
sen,  of  Ford's,  who  has  the  tractors  ready  for  it,  that  with  no  extra 
charge  and  no  greater  charge  for  the  faro  that  they  could  handle  it 
with  the  rubber-tired  wheel  and  without  the  trolley  in  the  track. 


1128    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  Could  not  the  city  get  rid  of  the  street  railway  over- 
night if  they  wanted  to?    Have  not  all  the  franchises  expired? 

Mr.  Ingram.  All  the  essential  franchises  have  expired;  yes,  sir. 

Mr.  Warren.  And  the  company  is  operating  there  at  the  caprice* 
and  will  of  the  city  government,  is  it  not? 

Mr.  Ingram.  They  have  not  any  franchises  on  their  important 
lines.    The  only  ones  they  have  are  little  tag-ends. 

Mr.  Warren.  Have  not  they  spent  something  like  $13,000,000  m 
the  last  8  or  10  or  12  years  on  lines  which  were  built  and  are  operated 
at  the  caprice  and  will  of  the  city  ? 

Mr.  Ingram.  At  what? 

Mr.  Warren.  At  the  caprice  and  will  of  the  city?  They  can  only 
stay  there  at 

Mr.  Ingram.  Well,  they  have  not  built  all  that  they  agreed  to  build 
with  the  city,  but  they  have  built  some  under  an  arrangement  whereby 
the  city  can  take  them  over  at  cost,  less  depreciation.  That  arrange- 
ment is  made  on  all  those  new  lines. 

Mr.  Warren.  And  on  the  expired  franchise  the  city  can  order 
them  out  without  any  trouble  ? 

Mr.  Ingram.  Under  the  so-called  Ford  decision  I  so  understand  it. 
It  has  gone  to  the  Supreme  Court  of  the  United  States  and  we  have 
been  given  that  authority. 

Mr.  Warren.  Nothing  has  been  done  under  that,  has  there? 

Mr.  Ingram.  Nothing  has  been  done  but  talk,  but  the  people  are 
not  languid  in  their  intei*est  in  the  matter  at  all. 

Mr.  Warren.  Don't  you  think  that,  if  the  people  of  Detroit  are  in 
a  state  of  mind  where  they  consider  the  street  railway  unnecessary, 
that  they  would  object  very  strenuously  to  your  suggestion  of  a 
nominal  fare  taxing  the  landowners  for  the  annual  deficit  of  opera- 
tion ? 

Mr.  Ingram.  I  do  not  know.  I  think  that  the  people  are  so  des- 
perate in  the  desire  to  get  out  of  the  suspense  they  are  in  on  our 
street-car  matters  that  they  would  not  object  to  that  as  a  solution. 

Mr.  Warren.  I  can  not  understand  a  public  caring  nothing  for  the 
service,  considering  it  of  no  use  to  them,  on  the  one  hand,  and  on  the 
other,  being  Avilling  to  tax  themselves  several  million  dollars  a  year 
in  order  to  keep  it. 

Mr.  Ingram.  That  exists  because  we  have  the  lines ;  we  can  not  get 
rid  of  the  lines  apparently  unless— there  is  one  of  two  ways;  my 
way,  which  has  not  been  discussed,  as  I  stated  to  the  chairman,  so  I 
can  not  say  what  the  public  will  is  in  the  matter;  and  the  other 
is  a  rubber-tired  wheel. 

Mr.  Warren.  And  ordering  the  tracks  out  ? 

Mr.  Ingram.  Well,  the  tracks  would  remain,  but,  of  course,  if  they 
were  found  useless  after  the  experiment  then  they  would  order  them 
out,  but  if  they  put  that  in  in  a  comprehensive  manner,  it  would  no 
doubt  paralyze  and  suspend  the  street  railway,  and  if  it  was  a  success 
the  street  railway  would  not  be  needed;  if  it  was  a  failure  it  would 
be  resumed  again. 

Mr.  \Varren.  I  thought  you  said  the  people  did  not  care  for  the 
street  railway  and  were  prepared  to  see  it  go? 

Mr.  Ingram.  I  stated  that  the  people,  so  far  as  the  laboring  classes 
are  concerned,  seemed  to  be  disappointed  that  the  street-railway 
strike  was  settled. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1129 

Mr.  Warren.  Thos^  were  the  ones  riding  at  the  expense  of  their 
employers  ? 
Mr.  Ingram.  Yes. 

Mr.  Warren.  But  how  did  those  members  of  the  community  feel 
who  were  paying  jitneys  sometimes  as  high  as  25  cents  for  a  ride? 
Did  they  look  at  it  as  a  picnic  also  ? 

Mr.  Ingram.  I  think  the  general  mind,  even  among  employers,  is 
that  we  are  getting  awfully  tired  of  agitation. 
Mr.  Warren.  You  want  peace  at  any  price  ? 

Mr.  Ingram.  Well,  peace,  anyhow.  And  it  looked  like  a  reason- 
able thing  from  the  data  that  was  being  supplied  almost  daily  there 
by  one  of  th^  largest  manufacturers  of  traction  vehicles  in  the 
world — and  he  has  never  disappointed  us  so  far  in  his  predictions  in 
those  matters. 

Commissioner  Gadsden.  I  would  like  to  ask  right  there  a  question 
on  this  line,  Mr.  Ingram :  What  was  the  congestion  on  the  streets — 
the  relative  congestion  on  the  streets — when  the  street-cars  were  run- 
ning and  during  the  strike  ? 

Mr.  Ingram.  Well,  our  city  runs  like  a  funnel,  right  into  one  place, 
and  the  transfei's  are  all  there,  so  that  for  an  hour  or  two  twice  a 
day,  when  the  street-cars  are  running,  it  is  extremely  congested. 

Commissioner  Gadsden.  What  was  the  situation  when  street-cars 
were  off  the  street  and  all  these  vehicles  were  there  ? 

Mr.  Ingram.  When  the  vehicles  were  running  the^^  would  run  the 
shortest  route,  without  any  reference  to  the  city  hall  point  of  the 
city,  where  all  these  lines  converge.  As  the  consequence,  the  conges- 
tion was  greater  in  the  outlying  streets,  but  not  so  great  at  the  city 
hall. 

Commissioner  Gadsden.  That  is  the  idea.  Outside  of  this  place 
of  concentration,  was  there  not  more  congestion  on  the  streets  during 
the  strike  than  when  the  cars  were  running  ? 

Mr.  Ingram.  There  was,  outside  the  main  Woodward  Avenue  and 
where  other  streets  intersected. 

Commissioner  Gadsden.  Does  not  that  suggest  a  very  important 
consideration  if  we  are  looking  forward  to  getting  rid  of  the  street 
railroads — whether  or  streets  will  not  be  so  congested  that  we  can  not 
get  around? 

Mr.  Ingram.  I  do  not  think  that  would  follow.  You  see,  there 
are  so  many  more  automobiles;  the  automobiles  can  go  anywhere,  and 
if  the  street  is  congested  it  will  go  to  a  parallel  street,  while  the  street- 
car line  on  a  track,  of  course,  is  rigid,  and  they  have  to  go  to  their 
points.  With  automobiles,  if  the  council  finds  a  certain  street  is  too 
congested,  they  will  have  one-way  traffic  on  that  street.  We  have 
tl-at  now  both  in  Boston  and  New  York  and  Detroit;  you  see  it  all 
oyer  town;  and  when  the  streets  get  so  much  more  of  that  rubber- 
tired  traffic  there  will  be  more  of  those  one-way  streets;  and  I  do 
riot  believe  that  the  congestion  will  be  increased;  at  least  the  dangers 
or  inconveniences  which  exist  and  the  congestions  being  scattered 
more,  I  think  will  be  an  advantage. 

Mr.  Warren.  Just  one  other  question.  That  vote  that  you  refer 
to  as  so  overwhelmingly  in  favor  of  municipal  ownership  was  ia 
1910,  was  it  not?  .  ^ 

Mr.  Ingram.  I  think  that  is  the  year. 
Mr.  Warren.  I  thought  that  is  what  you  said. 


1130    PROCEEDINGS  OF  FEDEEAL  EUICTKIC  RAILWAYS  COMMISSION. 

Mr  Ingham   IsaidIthoiujhttliatwastheyear;yes,  sir. 
fh-  Av!m  ^N.^ice  that  time  have  there  not  been  four  municipal- 
ownorship  propositions  submitted  to  the  citizens  of  Detix)it« 

Mr.  Ingram.  I  do  not  think  there  have  been  tour.    There  have  been 

thi"ee  defeated.  .  , 

Mr.  Wakhen.  There  has  been  one  this  year'  „*i,„„  ^„a 

Mr.  IN<MIAM.  Yes;  ovcrwiielmingly  defeated,  as  the  other  was 

adopted.  .     ,„,„, 

Mr.  Warken.  Was  there  not  one  in  1912' 

Mr.  Ingram.  I  daresay.    I  do  not  remember  tlie  dates,  but  I  was 
there  and  remember  the  votes.    There  were  two  or  throe  vot«s. 

rontn^ssiZr  Gadsden.  Did  you  vote  for  municipal  ownership 

•""mi-'^Inoram"  No;  I  did  not  vote  for  these  propositions  as  they 

^^Commissioner  Gadsden.  I  thought  you  said  you  believed  in  mu- 
nicipal  ownership. 

?LSone/GrD8i«:N.  You  did  not  vote  when  you  had  an  op- 
portunity to  acquire  the  property?  lou  voted  ^pinst  lU 
^  Mr.  INOKAM.  I  was  ^oing  to  explain  I  ^/^7\.f  "l^l^^f^^^^^^ 
anv  index  to  the  municipal-ownership  idea  of  Detroit  or  the  pub  ic 
opk  on  The  municipaf-ownership  people,  or  those  ^^^ho  have  here- 
tofore voted  for  it,  voted  tigainst  these  pi-opositions  sufficiently  to 
defeS  them,  becau'se  it  was  not  tl.e  kind  of  municipa  ownership 
thev  wanted  They  protested  asramst  the  submission  and  tried  to 
ifr^elt  these  part  cular  propositions  from  being  submitted :  and 
wh^  theTwere  submitted  they  voted  advei-sely  to  them  and  they 
weit  defeated.  But  if  they  had  a  vote  without  tW  attac^^^^^^^^^^ 
that  thev  objected  to  and  had  an  opportunity  to  vote,  I  think  they 
still  think  thev  would  carr^^  Detroit  and  no  question  about  it. 

clmmi^^^^^^^^     Gadsden.  Was  it  the   purchase   price   which   was 

""^KiNoiM.  That  in  part,  and  then  the  contracte  between  the 
owners  and  the  city  were  a  source  of  much  criticism  and  objection 
In  one  case  at  least  it  was  objectionable  as  to  the  price,  the  price 

was  to  he  determined  after  the  vote.  -     ^   a  a      a^(\ 

Mr.  Warren.  Some  of  the  propositions,  however,  included  a  defi- 
nite price?  _  ^ 

Mr.  Ingram.  The  last  one  did;  yes,  sir.  „ 

Mr.  Warren.  That  was  the  one  arranged  by  Mayor  Couzens?, 

Mr.  Ingham.  Yes.  .   ,     -r^     ,  i-,      •    u        *« 

Mr  Warren.  And  he  is  of  the  Ford  Co.,  is  he  not? 

Mr.  Ingram.  He  is  not  an  officer  of  the  company;  he  is  a  stock- 
holder. 

Mr.  Warren.  A  stockholder  f  . 

Mr.  Ingram.  Oh,  yes ;  and  he  was  very  prominent  as  an  otticer 
and  director  up  to  three  years  af^^o.  ^         ^-       a    ^a 

Mr.  Warren  So  that  both  when  the  price  was  not  mentioned  and 
was  left  indefinite  and  when  it  was  mentioned  and  was  dehnite, 
equally  in  both  cases,  the  voters  turned  down  the  proposition  f 

Mr '  Ingram.  Turned  down  the  proposition  for  diiferent  reasons, 
but  not  for  reasons  that  they  considered  incompatible  with  munici- 
pal ow^nership. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1131 


Commissioner  Gadsden.  It  looks  pretty  hopeless,  then. 

Mr.  Ingram.  It  does. 

Commissioner  Gadsden.  In  other  words,  you  want  it  but  you  will 
not  trust  anybody  to  fix  the  price. 

Mr.  Ingram.  Well,  that  is  human  nature. 

Commissioner  Gadsden.  I  say  is  not  that  the  real  trouble — that 
they  always  think  that  there  is  some  graft  in  the  price  somewhere? 

Mr.  Ingram.  The  public  is  suspicious. 

Commissioner  Gadsden.  Even  suspicious  of  Mr.  Couzens,  who  has 
been  pursuing  the  company  all  the  time  since  he  has  been  mayor  ? 

Mr.  Ingram.  You  know  that  suspicion  comes  from  their  untact- 
fnlness  in  all  these  changes.  AYhere  they  reduced  the  service,  if 
they  had  said  they  were  making  the  change  to  reduce  the  cost  of 
the  service,  the  people  w^ould  be  satisfied,  but  they  said  they  wen* 
making  the  change  because  they  had  permission  to  do  it  and  be- 
cause they  were  going  to  give  them  better  service;  but  they  gave 
them  service  which  was  not  better. 

Mr.  Warren.  I  suppose  you  will  agree  that  the  company  ought 
to  have  a  reasona\>le  return  on  the  value  of  the  property  they  use  ? 

Mr.  Ingram.  Yes,  indeed. 

Mr.  Warren.  And  if  the  property  is  taken  over  by  the  city  they 
ought  to  have  a  fair  price  paid? 

Mr.  Ingram.  I  fully  believe  in  that;  yes,  sir.  Oh,  yes.  I  have  not 
any  prejudice  against  the  corporations. 

Mr.  Warren.  No  ;  I  do  not  think  you  have. 

Mr.  Ingram.  No.    I  am  very  much  obliged  to  you,  gentlemen. 

(Witness  excused.) 

The  Chairman.  Who  is  the  next  witness,  Mr.  Ogburn? 

Mr.  Ogburn.  The  next  witness  was  to  be  Commissioner  Bliss,  of 
Ehode  Island,  who  was  to  testify  at  2  o'clock.  I  do  not  believe  he 
has  come  in  from  lunch. 

The  Chairman.  Have  you  some  other  witness? 

Mr.  Ogburn.  Following  him  is  Mayor  Couzens,  of  Detroit,  who 
was  scheduled  for  3  o'clock;  and  in  the  meantime  I  have  received  two 
statements,  one  a  statement  from  Mayor  Hanson,  of  Seattle,  who 
wishes  it  placed  before  the  commission,  and  another  is  a  statement 
from  Mr.  O'Shaughnessy,  sent  at  the  request  of  Mayor  Eolph,  of  San 
Francisco,  who  wishes  that  placed  before  the  commission.  If  you 
like,  I  could  either  read  this  to  the  commission  or  place  it  on  file. 

The  Chair3ian.  How  long  is  Mayor  Hanson's  communication  ? 

Mr.  Ogburn.  Mayor  Hanson's  communication  is  four  pages  long. 

The  Chairman.  You  had  better  read  it. 

Mr.  Ogburn.  He  writes  as  follows,  that  he  is  transmitting  for  the 
commission  the  following  information : 

First,  a  statement  showing  events  leadi^  up  to  the  purchase  of 
street-railway  properties  in  Seattle. 

Second,  a  financial  statement  for  the  period  April  1  to  July  1, 1919. 

Third,  copies  of  ordinances  affecting  the  purchase  of  street  railway 
properties. 

What  I  think  he  considers  of  primary  interest  is  this  statement 
leading  up  to  the  purchase  of  the  properties : 

Some  years  ago  tlie  I'uget  Sound  Traction,  Light  &  Power  Co.,  operating  most 
of  the  privately  owned  street-ruilwiiy  lines  in  Seattle,  filed  with  the  Public 
Service  Commission  of  the  State  of  Washington  an  application  to  be  relieved 


1132    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

from  certain  franchise  obligations  relative  to  paving  of  its  riglit  of  way,  pay- 
ment of  proportion  of  its  gross  earnings,  and  payment  of  bridge  rental  and  otlier 

fninchise  obligations.  ,*i,   t<.„ 

Because  of  this  pending  application  the  company  did  not  comply  with  its 
franchise  obligations.  A  decision  was  finally  rendered  by  the  public-service 
connnission  in  a  similar  case  coming  up  from  the  city  of  Tacoma,  wherein  the 
public-service  commission   decided   adversely   to  the   railway   company  s   eon- 

The  city  of  Seattle  also  was  successful  in  its  various  suits  in  the  superior  and 
the  supreme  courts  of  the  State  to  enforce  payment  of  gross  earnings,  taxes,  and 
pavment  of  proportion  of  bridge  rental.  The  long  recoi-d  of  litigation  between 
this  company  and  the  city  resulted  in  the  rapid  crystallizing  of  public  sentiment 
to  a  point  where  it  was  shown  that  the  Puget  Sound  Traction.  Light  &  Power 
Co.  could  no  longer  enjoy  the  good  will  necessary  to  operate  its  street-railway 

^"  Tlfe^^companv  was  also  in  dispute  with  its  employees  as  to  a  proper  scale  of 
wages  And  was  unable  at  the  scale  of  wages  it  was  Paying  to  secure  an 
nd^uate  number  of  men  to  operate  its  cars ;  it  had  as  much  as  20  per  cent  of 
its  equipment  in  the  barns  at  one  time,  although  these  cars  were  imperatively 
needed  to  take  care  of  the  transportation  of  the  shipyard  workers.  The  city 
ofUcials  endeavored  to  adjust  In  an  amicable  manner  the  Points  at  issue  beUveen 
the  company  and  the  city,  in  order  that  better  service  might  be  provided  for 
the  public ;  and  on  July  G,  1918,  I  sent  the  traction  company  a  communication 
in  which  I  indicated  willingness  to  cooperate  with  the  company  in  every  way, 
even  waiving  for  the  period  of  the  war  certain  franchise  obligations,  and  also 
cooperating  with  the  company  so  that  operating  economies  would  be  effected  m 

the  following  manner:  .    ,  i. 

(rt)  Inauguration  of  system  of  skip-stops  by  which  the  company  expected  to 

^^)lf  En'mina^oif  of%treet  congestion  due  to  standing  and  parking  of  motor 
cars  at  curbs.  This  the  company  expected  would  result  in  a  saving  of  approxi- 
mately $100,000  per  year,  as  a  faster  running  time  could  be  maintained  through 

*  ^%)"  Permission  from  the  city  to  use  new  bridge  in  the  north  section  of  the 
citv,  by  which  faster  running  time  could  be  made. 

(i)  Transfer  exchange  between  the  Municipal  Railway  lines  and  the  com- 

^^"e)^  The^right  to  use  Idle  cars  of  the  Municipal  Railways  on  a  fair  rental 

(/)  Emergency  interchange  of  power  between  city  and  company. 

iff)  Assistance  in  staggering  of  school  hours  and  stopping  hours  to  relieve 

iieak  loads 

(h)  Extra  charge  of  1  cent  for  transfers  on  certain  lines,  which  would  mean 
a  probable  extra  revenue  of  $200,000  iier  year  to  the  company. 

(i)  Discontinuance  of  service  on  certain  lines  where  service  was  being  mam- 
tained  only  to  hold  franchise.  .  ,     ^  ,        , ,. 

(i)  Relief  during  the  period  of  war  from  compliance  with  the  paving  obliga- 
tions of  the  company's  franchises.  The  unfulfilled  paving  obligations  to  this 
date  would  have  required  the  expenditure  of  approximately  $400,000. 

These  concessions  were  to  be  contingent  upon  the  company  s  consenting  to 
increase  the  pay  of  its  employees  so  that  $4  would  be  the  minimum  wage  for 
eight  hours,  and  also  to  pay  its  past  due  percentage  of  gross  earnings  and  to 
©Iterate  all  the  cars  available.  .  *.     i„ 

The  citv  then  entered  into  conference  with  the  company  on  the  points  in- 
volved and  on  July  11,  19JiP.  the  city  council  adopted  a  recommendation  of 
the  committee  of  the  whole,  reading  as  follows : 

"  That  it  is  the  sense  of  the  city  council  that  the  Puget  Sound  Traction,  Light 
&  Power  Co.  be  permitted  to  earn  on  its  railway  systems  during  the  period  of 
the  war  an  average  net  amount  equal  to  that  earned  during  the  years  1913, 
1914  1915,  1916,  and  1917  and  that  the  superintendent  of  public  ut  itles  be  ap- 
pointed to  report  to  the  council  what  increase  of  fare,  or  other  modifications  in 
the  charges  of  fare,  should  be  made  to  enable  it  to  provide  adequate  service  to 
the  public  and  fair  conditions  to  employees,  and  that  he  be  authorized  to  employ 
such  expi'i't  assistance  as  he  may  find  necessary  for  such  purposes. 

In  compliance  with  this  recommendathm  the  department  of  public  utilities 
submitted  on  August  17,  1918,  a  report  to  the  city  council. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1133 


During  the  discussion  of  this  report  I  made  an  offer  to  lease  for  the  i)eriod 
of  the  war  the  operating  street-railway  property  of  the  company  upon  the  under- 
stamling  that  the  property  was  to  be  kept  in  as  good  condition  as  when  turned 
over  to  the  city ;  that  the  company  would  receive  a  net  return  equal  to  the 
average  net  return  it  had  earned  on  its  properties  for  the  last  four  preceding 
years;  and  that  the  city  of  Seattle  would  purchase  direct  current  power  for 
the  railway  system  from  the  company  at  the  rate  of  1  cent  per  Ivilowatt  hour 
on  the  trolley  feeder  lines. 

The  city  council  on  September  6,  191S,  after  considering  the  book  valuation 
of  the  company,  as  shown  by  reports  made  by  the  auditor  of  the  public-utilities 
department  and  by  a  firm  of  accountants  employed  by  the  city  of  Seattle,  and 
also  after  considering  the  two  engineering  appraisements  showing  a  value  in  the 
street-railway  properties  of  the  company,  close  to  $20,000,000,  offered  to  pur- 
chase the  operating  street  railway  property  of  the  company  in  the  city  for  the 
sum  of  $15,000,000,  payable  in  utility  bonds  bearing  interest  at  the  rate  of  5 
per  cent  per  annum,  payable  semiannually,  and  to  purchase  direct-current 
power  from  the  company  at  the  rate  of  1  cent  per  kilowatt  hour  on  the  trolley 
feeders. 

On  September  13,  1918,  the  company  advised  that  it  would  accept  the  city's 
offer  and  that  it  was  ready  to  settle  the  details  of  the  transaction  at  an  early 
date. 

On  January  8,  1919,  ordinance  No.  39069,  providing  for  the  acquisition  of  the 
street-railway  lines  of  the  Puget  Sound  Traction,  Light  &  Power  Co.  was  ap- 
proved. This  ordinance  by  reference  to  ordinance  No.  39025  provides  that  the 
purchase  price  of  $15,000„000  shall  be  in  utility  bonds.  Ordinance  No.  39025,  ap- 
proved December  31,  1918,  provides  that  the  bonds  shall  bear  5  per  cent  interest 
payable  semiannually  on  the  first  days  of  March  and  September  and  also  pro- 
vides for  the  retirement  of  the  bonds  at  the  rate  of  $833,000  a  year,  beginning 
Fel)ruary  1,  1922,  to  and  including  the  year  1939,  when  the  final  payment  of 
$839,000  shall  be  paid. 

Ordinance  No.  39025  in  the  matter  of  the  payment  of  interest  charges  and 
rates  of  fare  provides  as  follows :  "  The  city  of  Seattle  further  bonds  itself  to 
establish  and  maintain  rates  for  transportation  upon  such  municipal  street- 
railway  systems  which  shall  provide  sufficient  revenues  to  permit  such  sums 
being  paid  into  such  special  fund  which  the  city  has  pledged  to  be  set  aside 
semiannually  for  interest,  and  annually  for  principal,  as  here  provided,  to  be 
applied  to  the  payment  of  principal  and  interest  of  the  bonds  herein  authorized, 
until  such  bonds  have  been  paid  in  full." 

In  the  litigation  Incident  to  the  purchase  of  the  street-railway  properties  the 
city  of  Seattle  was  successful  both  in  the  lower  court  and  in  the  supreme  court 
of  the  State,  which,  on  March  5,  1919,  confirmed  the  legality  of  the  proceedings 
by  which  the  city  aimed  to  acquire  the  property.  On  March  31,  1919,  the  pro- 
ceedings were  finally  consummated  and  municipal  operation  began  at  11 
o'clock  p.  m.  on  that  date; 

(Signed)  Ole  Hanson, 

Mayor  of  the  City  of  Seattle. 

Accompanying  that  is  this  financial  statement.  Probably  the  only 
item  you  would  be  interested  in  is  the  sum  total  and  not  the 
details,  for  the  Quarter  or  three  months  during  which  the  city  has 
run  it,  showing  that  during  that  time  the  total  expense  incurred  was 
$1,292,230.87  and  the  revenues  derived  from  transportation  and  from 
other  sources  were  $1,299,039.68,  showing  a  gain  for  the  three 
months  ending  June  30  of  $6,808.81.  "^ 

Commissioner  Gadsden.  What  do  they  include  in  operation  ? 

Mr.  Ogburn.  They  include — ^the  operating  report  here  is  in  con- 
siderable detail. 

Mr.  Warren.  Do  they  include  the  interest  on  the  bonds  ? 

Mr.  Ogburn.  Yes;  I  assume  that  is  the  total  interest  on  those 
bonds.     They  include  interest  in  the  sum  of  $198,781.26. 

Commissioner  Sweet.  That  would  be  the  interest  for  three  months  ? 

Commissioner  Gadsden.  No.     Did  you  say  $198,000? 


1134    PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION". 


Mr.  Ogburn.  Yes. 

Mr.  Warren.  Fifteen  millions  of  them,  are  there  not?  Would  not 
that  be  $750,000  a  year?     This  is  for  three  months,  approximately. 

Mr.  Ogburn.  Approximately. 

Mr.  Warren.  Do  they  incluite  anything  for  taxes? 

Mr.  Ogburn.  No;  the  other  items  are  insurance,  $20,000;  damagv^. 
claims,  $20,000;  and  under  depreciation,  this  note  is  made,  "An  aver- 
age for  depreciation  would  ordinarily  be  $75,000" — ^you  see,  nothinjc 
whatever  was  put  under  depreciation  in  this  statement.  "  Owin<r  t  > 
the  fact,  hoMever,  that  our  maintenance  charges  are  heavier  by 
$98,743.93  than  the  same  period  last  year,  we  feel  that  we  have  appre- 
ciated the  propeity  and  that  no  de|>reciation  sliould  be  charged.'' 

Commissioner  Gadsmjn.  Tliat  has  a  familiar  sound. 

Mr.  Warren.  I  think  you  will  find  all  our  maintenances  were 
heavier  during  the  last  three  months. 

Mr.  Ogburn.  Under  damage  claims  they  say :  "As  the  city  paid  out 
about  $1,000  for  damage  claims,  we  have  set  aside  arbitrarily  the  sum 
of  $20,000  as  a  proper  amount  to  be  chai'ged. 

Commissioner  Sweet.  What  were  the  other  sources  of  revenue  be- 
sides fares? 

Mr.  Ogburn.  Tliey  received  $3,900  from  station  and  car  privileges. 
Tliey  received  $8,400  for  the  use  of  tracks  ami  facilities,  which  is  four 
times  the  amount  received  for  the  same  period  the  previous  year. 
They  received  $835  for  rent  of  equipment.  Th-ey  received  $1,500 
from  miscellaneous  rent  revenue.  They  received,  in  addition  to  pas- 
senger revenue,  $182  from  parlor  sleeping-car,  dining-car,  and  si>e- 
cial-car  i-ev^nue;  $9,250  from  freigiit  revenue;  and  $1,8G0  from  cer- 
tain miscellaneous. 

Mr.  Warren.  Does  it  give  the  corresponding  figures  for  the  year 
bef  oi*e  ? 

Mr.  Ogburn.  Yes. 

Mr.  Warren.  What  does  it  give  for  taxes  the  year  before? 

Mr.  Ogburn.  That  is  not  shown. 

I^Ir.  Wakren.  For  either  yeai'? 

Mr.  Ogburn.  No.  Apparently  no  taxes  were  paid  during  that 
quarter,  and  nothing  is  shown  as  far  as  that  is  concerned. 

The  Chairman.  Before  you  start  with  the  other  statement,  may  I 
inquire  if  any  of  the  other  witnesses  are  present? 

Mr.  Ogburn.  I  understand  Mayor  Couzens  has  come  in. 

The  Chairman.  You  may  file  in  the  record  the  statement  of  Mayor 
Hanson,  and  we  will  now  hear  from  Mayor  Couzens. 

STATEMENT  OF  ME.  JAMES  COTIZEIirS,  MAYOR  OF  THE  CITY  OF 

DETEOIT. 

Mr.  CouzENs.  Grentlemen,  I  did  not  come  down  here  with  any 
canned  speech  or  canned  talk.  I  assumed  that  you  gentlemen  have 
been  in  session  long  enough  to  have  heard  and  absorbed  all  the  in- 
formation that  was  obtainable  on  urban  transportation.  Anj^thing 
that  I  might  say  with  respect  to  the  subject  as  a  whole  would 
probably  be  old  stuff  with  you  and  would  take  up  yoiu"  time  and 
accomplish  nothing.  I  came  down  here  particularly  because  I  was 
invited,  and  I  wanted  to  show  an  interest  in  the  problem,  which  is 


PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1135 

very  vital  in  Detroit  as  well  as  vital,  I  understand,  all  over  the 
country. 

I  do  not  know  whether  it  would  intere^  you  or  not  to  have  a  little 
of  the  history  of  the  street-railway  problem  in  Detroit 

The  Chairman.  Did  you  hear  Mr.  Ingram's  testimony  this  morn- 
ing? 

Mr.  Couzens.  No,  sir ;  I  did  not. 

The  Chairman.  Mr.  Ingram  told  us  something  about  the  constitu- 
tional convention  and  the  vote  of  the  city  by  which  they  voted  for 
municipal  ownership,  80  to  20,  and  also  he  stated  some  of  the  cojidi- 
tions  growing  out  of  the  recent  strike,  and  then  advanced  a  solution 
of  the  problem  by  which  the  city  should  own  the  plant  and  operate 
it  by  charging  3-cent  fares  and  then  assessing  the  deficit  against  the 
benefits  real  estate.    That,  in  brief,  was  his  testimony. 

Mr.  Couzens.  I  did  not  come  down  here  with  any  definite  solution 
as  to  how  we  should  bring  around  municipal  ownership  and  opera- 
tion, which  I  am  unalterably  in  favor  of.  I  believe  there  is  no  other 
solution  of  the  urban-transportation  problem  than  to  view  it  as  a 
social  problem.  I  think  it  is  purely  a  social  problem  in  identically 
the  same  manner  as  water  and  sewers. 

Commissioner  Sweet.  I  suggest  that  you  proceed,  Mayor  Couzens. 
Just  give  us  a  history  of  the  railways  of  Detroit. 

Mr.  Couzens.  I  can  not  recall  just  all  of  the  history,  but  I  will 
recite  a  little  bit  of  it  to  show  you  how^  difficult  it  is  to  really  solve 
the  problem  when  it  goes  to  the  vote  of  the  people,  as  it  has  to  in  our 
community. 

Our  citizens  are,-  in  my  judgment,  and,  as  expressed  by  two  votes, 
unalterably  in  favor  of  municipal  ownership  and  operation  of  our 
street-railway  systems;  but  when  it  comes  to  putting  up  a  concrete 
proposition  to  which  the  company  has  previously  agreed,  they  seem 
to  believe  that  there  is  a  "  nigger  in  the  woodpile  "  and  are  afraid  of 
us  so-called  politicians.  In  other  words,  this  little  history  will  show, 
over  a  period  of  years,  just  what  it  w^ould  have  meant  to  the  com- 
panies themselves  if  the  people  had  voted  to  accept  any  one  of  sev- 
eral propositions  that  the  public  officers  submitted  to  the  citizens  for 
a  vote.  ^ 

Now,  if  you  will  go  back  to  1906,  there  was  an  ordinance  submitted 
under  Mayor  Todd  at  that  time,  which  extended  all  of  the  fran- 
chises—there were  some  expired  and  there  were  a  lot  of  small  ends, 
stub  ends,  a  conglomeration  of  franchises,  which  it  was  planned  to 
have  expire  simultaneously;  and  that  was  on  December  4,  1924. 

That  vote  was  submitted,  and  the  plan  was  to  sell  tickets  6  for  a 
quarter  at  all  hours  of  the  day,  and  to  sell  them  at  10  tickets  for  a 
quarter  during  the  hours  from  5  to  8  in  the  morning  and  4  to  6.30  in 
the  afternoon — 10  for  a  quarter,  a  2J-cent  fare. 

The  vote  on  that  question  was  14,4ll  in  favor  and  30,97-8  against  it. 

The  Chairman.  That  is  surprising.     What  caused  that? 

Mr.  Couzens.  Because  it  was  a  deal  with  the  company.  They  did 
not  trust  the  company. 

Mr.  Warren.  Were  those  rates  agreed  to? 

Mr.  Couzens.  Yes;  those  rates  were  agreed  to  in  advance. 

Again,  on  Januai^  23,  1912,  only  seven  years  ago,  an  ordinance 
was  submitted  to  the  vote  of  the  people  which  terminated  all  the 


1136     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

franchises  on  the  same  date  as  the  previous  proposition,  namely, 
December  4,  1924;  and  at  that  basis  they  were  to  sell  eight  tickets 
for  a  quarter  from  5  o'clock  in  the  mornmg  until  8  o'clock  at  night, 
and  six  tickets  for  a  quarter  at  all  hours  of  the  day.  And  the  vote 
on  that  proposition  was  22,308  in  favor  and  30,733  against. 

Either  one  of  these  propositions,  had  they  been  carried  through, 
would  have  had  the  company  baiikl-upted,  on  their  present  statement, 
at  least,  3'ears  ago. 

Mr.  Warren.  What  year  was  that?     When  was  that  second  vote? 

Mr.  CouzENS.  That  was  on  January  23,  1912. 

A  charter  amendment  was  submitted  to  the  people  on  April  7, 
1913,  asking  the  people  to  determine  a  policy — ^the  alternative  being 
municipal  ownei-ship  and  operation  versus  private  ownership  and 
operation — and  on  that  vote  the  people  voted  40,531  in  favor  of 
municipal  ownership  and  operation  and  9,542  against  it — 5  to  1. 

In  November,  1915,  a  plan  was  submitted  by  the  board  of  street- 
railway  commissioners,  of  which  I  was  a  member  at  that  time,  pro- 
viding for  municipal  ownei*ship  and  operation  and  the  valuation  of 
the  property  by  the  six  circuit  judges  who  were  elected  by  the  people 
of  Wayne  County. 

That  proposition  was  voted,  32,514  in  favor  and  35,678  against  it. 
Ill  other  words,  they  called  it  a  blank-check  proposition,  because  the 
circuit  judges  were  to  fix  the  prices,  the  value  of  the  property,  after 
WQ  liad  taken  over  the  property  and  begun  to  operate  it. 

The  last  proposition  that  was  submitted  to  the  people  was  a  mu- 
nicipal ownership  and  operation  proposition  in  which  the  company 
and  the  municipal  officei*s  agreed  on  a  valuation  of  $31,500,000. 

The  vote  on  that  proposition  w^as  63,833  in  favor  of  it  and  70,271 
against  it ;  and  by  our  State  constitution  we  were  required  to  have  a 
CO  per  cent  vote  in  favor  of  the  proposition. 

The  Chair3ian.  How  do  you  explain  the  tremendous  growth  in  the 
Inst  vote?  •  ^ 

Mr.  CouzENS.  Well,  women  voted,  for  one  thing,  at  that  time,  and 
the  city  has  grown  by  leaps  and  bounds. 

Mr.  Warren.  Thei-e  was  not  even  a  majority  in  favor  of  it? 

Mr.  CouzENS.  No ;  the  actual  showing  was  47.6  per  cent  in  favor 
of  it. 

1  hat  is  the  history,  in  a  concrete  way,  of  Detroit's  problem  in  deal- 
ing with  the  transportation  company. 

The  Chairman.  As  far  as  the  last  vote  is  concerned  it  shows  that 
the  people  are  not  satisfied  with  municipal  ownership,  does  it? 

Mr.  CouzENS.  Oh,  no,  sir;  they  were  not  satisfied  with  that  specific 
deal.  In  other  words,  you  and  I  may  like  to  build  a  new  home, 
but  we  might  not  like  the  plan  submitted. 

The  Chairman.  Of  course,  this  has  been  voted  on  quite  a  number 
oi"  times,  and  I  understand  they  have  been  voting  upon  the  specific 
plan  suggested ;  and,  in  the  meantime,  has  there  been  a  development 
of  or  a  lessening  of  the  demand  for  municipal  ownership  ? 

^Ir.  CouzENS.  That  would  only  be  a  guess  on  my  part,  the  same 
as  anybody  else's  guess. 

The  Chairman.  Have  you  any  opinion? 

Mr.  CouzENS.  I  have  an  opinion — that  they  want  municipal  owner- 
ship and  operation,  but  they  do  not  want  to  be  loaded  up  with  the 
assets  of  the  old  company  that  now  is  on  the  streets. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1137 

The  Chairman.  Proceed. 

Mr.  CouzENS.  The  company,  in  my  judgment,  has  not  played  fair, 
and  the  people  are  acquainted  with  that  fact.  They  have  deliberately 
agreed  to  a  plan,  and  then,  directly  or  indirectly,  set  the  wheels  in 
motion  to  defeat  it.  They  would  probably  deny  it,  but  I  have  in- 
f oi-mation  which  leads  me  to  believe  that  they  deliberately  started  out 
to  defeat  a  plan  after  once  agreeing  to  it.  Either  they  do  it  directly 
or  through  their  associates,  financial  associates,  in  particular,  who 
underwrite  their  bonds  and  securities  from  time  to  time.  I  have 
reason  to  believe  that  probably  the  local  officers  might  like  to  be 
relieved  of  the  constant  turmoil,  but  those  who  have  nothing  to  do 
with  the  real  problem  of  carrying  the  people,  but  only  have  to  do 
witji  the  making  of  the  money  out  of  the  securities  naturally  do  not 
\yant  to  see  it  slip  away  from  private  ownership  to  municipal  opera- 
tion and  ownership. 

Commissioner  Sweet.  What  has  been  the  attitude  of  the  Detroit 
newspapers,  Mr.  Mayor? 

Mr.  CouzENs.  The  Detroit  newspapers  have  varied  in  the  different 
plans.  For  instance,  the  Detroit  News  has  consistently  been  in  favor 
of  municipal  ownership  and  operation. 

Commissioner  Saveet.  And  that  has  the  largest  circulation,  I  be- 
lieve? 

Mr.  CouzENS.  That  has  the  largest  circulation,  larger  than  all 
of  the  others  put  together,  I  believe. 

Commissioner  Sweet.  How  is  the  Free  Press? 

Mr.  CouzENS.  The  Free  Press  has  been  consistently  opposed  to 
municipal  ownership  and  operation. 

Commissioner  Sweet.  And  the  Journal? 

Mr!  CouzENS.  The  Journal  has  changed  ownership.  In  the  first 
cases,  on  the  old  ownership,  if  I  remember  correctly,  they  opposed 
municipal  ownership,  and  in  the  last  case  they  said  they  did  not 
like  it — under  the  new  ownership  they  did  not  like  municipal  owner- 
ship very  much,  but  saw  no  alternative,  and  said  they  hoped  the 
people  would  vote  in  favor  of  acquiring  the  lines.  So,  in  that  case, 
we  might  fairly  say  that  we  had  two  or  three  papers  for  it  and  one 
against  it. 

I  am  satisfied  that  you  gentlemen  are  going  to  take  into  considera- 
tion very  seriously  the  social  aspect  of  the  solution  of  this  matter, 
because  I  can  not  find  anyone  who,  at  this  age,  denies  the  fact  that 
it  is  a  social  problem. 

During  the  last  street-car  strike  the  great  pressure  that  was  brought 
to  bear  upon  the  local  administration  to  settle  the  strike  on  some 
terms  was  by  the  men  who  never  used  the  cars  at  all.  So  you  see 
that  they  were  not  interested  in  the  starting  of  the  cars  from  the 
standpoint  of  their  personal  convenience,  but  purely  from  the  stand- 
point of  their  business.  Every  one  of  these  men  used  motor  cars 
and  had  absolutely  no  use  for  the  street-cars  as  a  personal  service, 
but  simply  to  bring  the  customers  to  their  stores  or  to  take  their 
workmen  to  the  shops.  I  believe,  unless  this  question  is  solved  on 
the  social  basis,  the  time  will  arrive  when  it  will  be  the  duty  of  the 
manufacturer  to  go  and  get  his  help  and  send  it  home,  because  help 
can  not  continue  to  put  up  with  the  congestion  and  the  embarrass- 
160643''— 20— VOL  2 10 


1138     PKOCEEDINGS  OF  FEDERAL  ELECTKIC  RAILWAYS  COMMISSION. 

nient  and  the  inconvenience  that  they  now  have  to  put  up  with  in 
urban  transix)rtation,  so  far  as  it  is  applied  to  Detix)it. 

Xow,  men  will  say — and  J  think  proi^erly  say — if  tlie  men  who  ex- 
erted such  a  great  effort  at  the  last  strike  to  have  it  settled,  if  they 
display  such  a  great  intei^t  in  urban  transportation  when  thev  do 
not  use  the  service  themselves,  the  men  will  recognize,  and  I  believe 
you  will  recx)gnizc,  that  it  is,  therefore,  a  social  problem  in  which 
tliese  men  are  most  widely  interested  who  liave  nothing  to  do  with 
riding  on  the  cars  themselves. 

So  that  that  brings  up  the  question  as  to  whd:her  or  not  the  upkeep 
«nd  maintenance  of  a  transportation  system  should  at  all  times  be 
borne  entirely  by  the  car  rider. 

I  am  convinced  that  up  to  a  certain  point  the  ctu-rier  should  pay 
for  the  service ;  but  beyond  a  reasonable  point  tlie  cominunity  bfene- 
fiting  by  it  should  make  up  any  deficit. 

I  l)eliev€  there  are  many  ways  that  these  burdens  above  cost  of  the 
fares  might  be  borne  in  part,  probably,  by  the  suggestion  offered  by 
Mr.  Ingram  as  to  the  lines  being  paid  for  by  the  property  directly 
l)enefited,  if  it  is  in  newly  developed  territory.  But  if  it  is  for  the 
service  of  the  manufacturer  and  the  merchant  down  town,  or  the  big 
office  building,  then  it  seems  to  me  that  they  should  bear  a  part  of 
the  burden  to  get  their  employees  to  and  from  their  place  of  living 
in  a  comfortable  and  decent  manner. 

We  have  long  passed  the  point  where  our  individual  health  is  a 
question  of  our  own  concern.  The  public  has  recognized  all  over, 
DOW,  that  your  health  and  my  health  is  a  matter  of  public  concern ; 
and  whether  we  ever  have  diseases  or  not,  we  pay  to  reduce  the 
death  rate.  We  pay  to  collect  the  garbage,  we  pay  to  protect  tho 
health  of  the  community,  whether  we  have  incinerators  to  bnni  our 
own  garbage  or  not  And  it  is  as  much  a  community  problem  to 
carry  citizens  in  a  comfortable  and  decent  manner  to  and  from  the 
places  they  want  to  go  or  have  to  go  as  it  is  to  collect  our  garbage  or 
clean  our  streets  or  furnish  our  schools  or  preserve  our  health;  and 
if  that  is  recognized — w^hich  I  believe  it  will  be  soon  if  it  has  not 
reaclied  that  point  yet — we  will  then  recognize  that  it  is  a  service 
which  the  community  must  furnish  for  itself. 

I  venture  to  predict  here  that  there  will  be  no  other  solution  of 
tho  urban-transportation  pix)blem  until  it  is  put  into  the  hands  of  the 
municipality  itself  by  purchase  and  opei-ation, 

T  could  talk  more  about  the  things  that  you  undoubtedly  have 
lienrd  from  through  the  witnesses  who  have  appeared  before  you 
during  the  time  you  have  been  in  session,  but,  as  I  said  before,  I  do 
not  want  to  burden  you.  I  sliall  be  veiy  glad  to  answer  any  ques- 
tions that  any  of  the  commissioners  may  care  to  ask  me, 

Tlie  Chairman.  What  is  tlie  maximum  fare  which  should  be 
charged  by  these  companies? 

Mr.  CouzENs,  The  conditions  vary  from  time  to  time,  I  believe 
id  the  present  time,  inasmuch  as  a  nickel  is  a  unit  of  coin  made  by 
the  Government,  tliat  that  unit  would  not  be  objeetionabk  to  the 
citizens.    I  believe  they  would  be  satisfied. 

The  Chairman.  Do  you  believe  the  people  in  DetrcMt  are  willing 
to  jxiy  a  larger  fare? 

Mr.  CouzENS.  I  certainly  believe  they  would  not  be. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1139 

The  Chairman.  Would  the  increase  in  the  fare  to  6  cents  in  Detroit 
be  at  all  commensurate  with  the  increase  in  the  wages  that  have  been 
allowed  your  employees  and  others  in  the  city? 

Mr.  CouzENS  I  have  not  all  the  figures  here,  but  at  the  time  we 
had  our  stnke  I  looked  them  up,  and  I  was  satisfied  at  that  time  that 
it  would. 

The  Chairman.  It  Avould  ? 

Mr.  CouzENs.  Yes. 

The  Chairman.  Would  you  be  in  favor  of  having  the  plant  pri- 
vately operated  on,  say,  a  o-cent  fare,  or  a  less  fare,  and  to  have  the 
•itiir^«^^       "^^  ^        ^^^'  tlirough  a  tax  rate,  any  deficit  in  the  oper- 

^/'*  9,^^^^^^'  ^^'  ^^^' '  "^*  *^  ^  privately  owned  company. 

The  Chairman.  Then  I  take  it  that  the  only  condition  upon  which 
you  would  believe  that  the  city  should  be  taxed  for  a  deficit  is  when 
the  property  is  operated  and  owned  by  the  city « 

Ml*.  CouzENS.  Yes. 

«  ^'^^  .^?^'^i«?/^^^'-  ^o  your  street-car  lines  extend  beyond  the  con- 
fines of  the  city  of  Detroit  ? 

^^n£^^^f ^'^'  J^^'    ^^^^  company  which  operates  in  Detroit  has 
some  900  miles  of  street-railway  lines. 

The  CHAIR3IAN.  How  many  villages  and  cities  does  it  go  in? 

Mr.  C  ouzENS.  A  great  number ;  but  they  have  urban  fares  Thev 
do  not  come  under  the  one-zone  fares.  ' 

Mr.  Warren.  Interurban  fares^  you  mean,  do  you  not? 

Mr.  CouzENS.  Interurban  fares,  yes ;  they  have  interurban  fares. 

Ihe  Chairman.  Wlien  that  company  reaches  a  city  or  a  villao^e, 
does  It  then  have  a  street-car  fare? 

Mr.  CouzENS.  I  think  not  in  all  cases.  They  might  in  some  of  the 
lai^er  cities  bke  Flint,  possibly,  and  other  cities,  but  in  the  smaller 
cities  in  close  proximity  to  Detroit,  such  as  Royal  Oak  and  Birmin<r. 
iiam,  and  these  places,  and  Dearborn,  they  do  not.  "^ 

The  Chairman.  Would  you  favor  having  the  city  own  the  plant 
withm  as  well  as  without  the  limits  of  the  city,  assuming  that  the 
City  had  the  power  to  do  it? 

Mr.  Couzens.  The  city  has  the  power  under  our  constitution  and 
under  our  charter  to  own  10  miles  outside  of  the  city  limits 

The  Chairman.  Then  it  is  not  possible  for  the  city  to  own  that 
completed  system? 

Mr.  Couzens.  Oh,  no. 

in'^^M  ^,^'^}P^^^'  l^  the  city  should  purchase  the  plant  within  the 
10-mile  limit,  what  fare  do  you  suppose  it  could  operate  under? 

Mr.  Couzens.  We  proposed  at  the  last  agreement  we  came  to  with 
tlie  company  to  buy  only  within  the  city  limits.  We  did  not  propose 
to  ^o  outside  of  the  10-mile  zone.  We  did  not  propose  to  exercise  our 
right  to  go  10  miles  beyond  the  city  limits. 

The  Chairman.  What  would  happen  to  the  lines  that  lead  into  the 
city  if  you  purchase  just  the  lines  within  the  city? 

Mr  Couzens.  I  think  that  was  one  of  the  reasons,  probably  for 
our  defeat;  that  to  permit  the  interurban  service  to  enter  the  city 
over  a  cost-plus  basis,  they  would  pay  the  cost  of  operation  plus  4 
or  ?>0  per  cent  on  top  of  the  cost  to  the  city  for  that  privilege 

The  Chairman.  All  the  lines  in  the  city  now  are  operati'n^  with- 
out any  franchise  right,  are  they  not? 


1140    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CouzENS.  No. 

The  Chairman.  Some  of  them?  . 

Mr.  CouzENS.  Some  of  them  are  operatmg  without  franchises. 
That  was  the  purpose  of  these  different  propositions— to  have  them 
all  terminate  at  the  same  time— in  1924.  I  think  that  the  longest 
franchise  that  we  had— the  longest  one  that  I  have  in  mmd— ends 
in  1924.  There  are  some  little  franchises  of  no  importance  on  \vhich 
I  believe  the  company  placed  no  value  at  the  time  of  the  negotiations 
which  run  longer  than  that.  . 

The  Chairman.  What  per  cent  of  the  mileage  within  the  city  is 
now  operated  without  a  franchise  right? 

Mr.  CouzENS.  I  should  sav,  offhand,  about  three-fourths. 

The  Chairman.  What  is  the  solution  there?  You  have  voted  and 
voted  and  voted  and  here  you.  have  a  plant  that  has  not  any  right  to 

^^Mr  CouzENS.  That  is  absolutely  correct.  I  submit  these  figures 
to  you  because  I  understood  you  gentlemen  were  sitting  for  the  pur- 
pose of  aiding  us  in  arriving  at  a  solution.  ,  .       * 

The  Chairman.  We  hope  to  be  able  to  do  so,  but  I  am  asking  for 
your  opinion.  Our  conclusion  must  be  based  upon  evidence,  I  sup- 
pose, and  study.  ,  i  i   ^u    i:  ^^i 

Mr.  CouzENS.  I  know  of  no  solution  except  two,  and  both  of  them 

would  have  to  be  submitted  to  a  vote  of  the  people. 

One  is  condemnation  by  condemnation  proceedings,  which  was 
granted  by  the  last  legislature,  which  met  at  Lansing  this  year. 
They  passed  bills  which  enabled  us  to  condemn  under  those  bills,  and 
that  would  require,  before  we  could  proceed  undei^  that,  a  three- 
fourths  vote  of  the  people  to  authorize  us  to  proceed  with  the  con- 
demnation, and  I  hesitate  to  even  predict  whether  that  would  suc- 
ceed, because  of  the  uncertainty  as  to  what  award  the  jury  might 

give  to  the  company.  .     „      ,  x-         i       ^u 

The  Chairman.  They  had  practically  the  same  question  when  the 

judges  were  to  fix  the  value?  .       .       .     .    ,  .     c     .x. 

Mr.  CouzENS.  Yes;  when  the  six  circuit  judges  were  to  fix  the 

value. 

Mr!  Warren.  Are  those  judges  elected? 

Mr.  Couzens.  Yes;  they  are  elected  by  popular  vote. 

The  Chairman.  What  was  your  second  proposition? 

Mr  CouzENS.  The  second  proposition  is  one  which  I  am  heartily 
in  favor  of.  I  do  not  know  whether  the  people  would  approve  of 
that.  That  is  to  order  them  off  of  the  unfranchised  streets  and  pro- 
cood  to  operate  our  own  system. 

The  Chairman.  To  order  the  plant  off? 

Mr.  Couzens.  To  order  the  company  off  the  streets — off  the  un- 
franchised streets— and  proceed  to  operate  our  own  system. 

The  Chairman.  Would  you  have  the  company  tear  up  the  rails 

onrl  ties* 

Mr.  Couzens.  If  they  thought  that  that  would  be  more  valuable 
to  them  than  to  turn  them  over  to  us  at  practically  their  junk  value, 
which  would  be  all  they  would  be  worth  to  them ;  yes.    I  assume  they 

would  let  us  take  the  property.  ,     ,  ..        ,.        ..        u     i  j 

The  Chairman.  Suppose,  now,  that  the  latter  alternative  should 

be  adopted  and  the  city  should  later  purchase  that  plant  at  which 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1141 

you  call  the  junk  value,  how  much  would  that  be  less  than  the  capi- 
talized value  of  that  plant? 

Mr.  Couzens.  That  would  take  a  great  deal  of  work  on  the  part  of 
accountants  to  figure  out. 

The  Chairman    I  thought  perhaps  you  had  evolved  that? 
Mr.  Couzens.  No. 

The  Chairman.  Or  reached  a  figure? 

-Mr.  Couzens.  No.  Because  we  have  never  gone  far  enough  to 
submit  a  proposition  like  that  to  the  people;  we  have  not  studied 
just  what  it  would  amount  to. 

The  Chairman.  Might  it  not  result  in  a  practical  confiscation  of 
the  property? 

Mr  Couzens.  I  think  not,  in  view  of  the  fact  that  the  company 
took  those  main  franchises  under  a  specific  term,  and  set  up  no 
fund  lor  the  amortization  of  the  bonds,  and  practically  went  on 
and  carried  their  full  bonded  debt  during  the  entire  life  of  the 
franchise,  and  then  said,  "  We  are  here  now,  and  here  is  the  value 

rSl^^  property,  and  we  have  got  to  retire  these  bonds." 

Ihe  Chairman.  Has  the  company  been  on  a  good  earning  basis 
during  its  franchise  life?  &        « 

Mr.  Couzens.  Yes. 

The  Chairman.  It  has  paid  good  dividends? 

Mr.  Couzens.  Yes. 

'fi^^  Chairman.  What  has  been  the  rate  of  dividends  paid « 

Mr.  Couzens.  For  the  last  year  or  two  they  have  been  payinir  8 
per  cent  on  $15,000,000  of  capital.  ^  ^  ^ 

I  might  explain  that  what  I  might  say  in  that  respect  really  has 
no  si^ihcance,  because  it  is  one  company,  you  see,  that  owns  all 
the  mterurbans;  they  own  the  lines  in  Flint,  Pontiac,  Port  Huron, 
Ann  Arbor,  Ypsi  anti,  Jackson,  and  Detroit;  all  the  interurban 
lines  together  under  one  corporation;  and  they  have  bonds  out 
covenng  all  of  the  property,  a  blanket  bond  issue.  Then  they  have 
specific  bonds  covenng  certain  divisions  of  their  lines,  certain  sys- 
tems. Ihen,  as  I  say,  the  stock  issue  covers  all  the  properties,  and 
there  is  no  way  for  me  to  determine  or  for  you  to  determine  off- 
hand how  much  of  those  dividends,  if  you  please,  might  have  been 
earned  out  of  the  city  system. 

The  Chairman.  Have  stock  dividends  been  declared  ^ 

Mr.  Couzens.  I  think  not. 

tailzied  f^^^^^^^^'  ^^  *^^^®  ^  feeling  that  the  property  is  overcapi- 

Mr.  Couzens.  I  think  there  is  a  feeling  that  the  property  has 
been  overcapitalized.  i-    i      j 

The  Chairman.  To  what  extent? 

4^  ¥^l  ^^•Y^^'^fi  That,  as  I  say,  is  difficult  to  say,  because  of  the 
lact  that  it  IS  all  scrambled  with  the  other  properties. 

For  your  information  I  might  say— I  do  not  know  whether  Mr 
Ingram  spoke  about  it  or  not— that  during  our  last  strike  there  was 
a  tentativcT  agreement  with  the  company  that  they  were  to  resume 
service,  and  pay  the  employees  a  certain  amount  of  increase  in 
wages— not  all  that  they  asked  for,  but  a  very  liberal  increase  in 
wages,  and  the  company  was  to  begin  operation  on  a  5-cent  straight 
tare.    Previous  to  that  they  had  been  operating  60  or  70  miles  of 


1142     PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSIOIST. 

tlieir  property  on  a  3-cent  basis,  because  they  were  the  so-called 
old  Pingree-franchise  lines;  and  they  had  been  operating  the  5-cent 
franchise  lines  and  the  nonfranchise"^ lines  on  a  5-cent  basis;  and  we 
agreed  to  abolish  the  3-cent  fare  entirely,  and  i^ermit  them  to  charge 
5  cents  on  the  3-cent  lines,  to  make  the  fare  uniform  all  over  the 
system,  on  the  5-cent  basis,  with  universal  transfers  from  one  lino 
to  another,  with  the  understanding  that  Ave  would  put  accountants 
in  the  company^s  offices  and  keep  a  record  of  the  receipts  and  disburse- 
ments and  expenses  of  the  company  for  a  period  of  thi-ee  months, 
after  which  a  board  of  arbitration  was  to  sit  and  determine  whether 
they  were  entitled  to  what  they  had  claimed  in  the  first  instance, 
which  was  a  5-cent  fare  with  1  cent  for  transfers.  It  was  the  1 
cent  for  transfers  which  we  opposed. 

They  estimated  that  this  1-cent  transfer  would  increase  their  gross 
revenue  $750,000  a  year,  and  we  estimated  about  $900,000  a  year;  and 
we  also  estimated  the  waiving  of  the  3-cent  fare  on  the  3-cent  lines, 
and  the  other  increases,  would  net  them  a  substantial  increase  in  gmss 
revenue ;  in  fact,  enough,  we  estimated,  to  cover  the  increase  in  wages 
to  the  employees;  and  that  was  where  we  split.  We  said: '"  We  have 
allowed  you  enough  to  enable  you  to  pay  this  increase  in  wages,-'  and 

they  said  that  we  had  not. 

In  the  last  two  years  they  have  greatly  increased  their  depreciation 
fund,  which  we  rather  objected  to  being  put  on  at  this  particularly 
burdensome  time,  when  they  had  not  been  doing  it  all  the  time  in  the 
prosperous  years. 

The  Chairman.  Do  you  remember  the  per  cent  of  depreciation  ? 

Mr.  CouzENS.  I  do  not  remember  the  per  cent  of  the  depreciation ; 
but  the  board  of  arbitration  was  to  decide  whether  or  not  their  jearn- 
ings  over  a  three-months  period — which  we  afterwards  settled  at  as 
beginning  July  1,  July,  August,  and  September,  I  believe  it  was,  or 
June,  July,  and  August,  I  forget  which  were  the  three  months  ex- 
actly— if  the  board  of  arbitration  decided  that  the  amount  we  al- 
lowed them  in  the  extra  fares  was  sufficient  to  compensate  them,  they 
were  to  get  no  more ;  but  if  the  board  of  arbitration  decided  that  it 
was  not  enough,  they  were  not  to  allow  them  any  greater  increase 
than  would  bring  them  $750,000  a  year,  or  what  a  1-cent  transfer 
would  have  been. 

Personally,  I  am  opposed  to  the  transfer  system,  the  transfer 
charge;  because  they  have  adopted  it  in  many  cities  on  the  theory 
that  the  man  who  gets  the  transfer  gets  the  longest  ride ;  and  while  I 
have  not  got  into  the  percentage  of  transfer  passengers  who  get  long 
rides  and  short  rides,  I  contend  that  a  transfer  from  one  car  line  to 
another  is  inconvenient  to  the  passenger,  and  he  should  not  be  penal- 
ized, particularly  if  the  ride  is  not  a  longer  ride  than  he  would  get 
(m  a  straight  fare.  As,  for  example,  a  man  may  have  to  go  to  a  plant 
where  there  are  a  large  number  of  men  employed,  30,000  or  40,000, 
and  he  may  live  six  blocks  off  the  line  that  that  plant  is  on,  and  he 
may  have  to  ride  that  six  blocks,  and  then  from  15  to  20  blocks  to  the 
plant;  and  he  is  i>enalized  for  having  no  through  traffic.  In  other 
words,  he  not  only  has  to  get  off  in  all  lands  of  weather  and  under 
all  kinds  of  conditions  and  wait  for  cars  to  transfer  to,  but  he  is 
penalized  for  it.  That  is  the  reason  I  am  opposed  to  the  transfei* 
plan,  and  hope  some  other  plan  will  J^e  worked  out  that  will  obviate 
the  necessity  for  transfer  charges. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1143 

The  Chairman.  Of  coui^e,  the  public  is  thinking  a  great  deal 
about  this  question  there.  Which  of  the  two  alternatives  which  you 
suggested  is  being  given  the  most  favorable  coiLsideration  at  this 
time  ? 

Mr.  CouzENs.  Which  of  what  two  alternatives? 
The  Chairman.  The  two  that  you  suggested— one  of  condemnation, 
and  the  other  of  simply  taking  the  plant  at  scrap  value,  orderiiii? 
them  off  the  streets. 

Mr.  CouzENs.  I  have  tried  to  settle  it  on  two  occasions  in  an  or- 
derly fashion,  that  is,  to  pay  them  what  a  jurv— either  circuit  judges 
or  a  jury— would  think  the  property  was  worth.  I  thinlv  that  is  the 
orderly  way  to  do  it.  But  the  people  evidently  mistrust  the  com- 
panj^  and  probably  their  officers,  and,  I  don't  know,  maybe  theii^  pub- 
lic oftcei^s.  At  least,  they  have  mistrusted  some,  and  maybe  they  mis- 
trust us;  I  don't  know.  That  is  the  reason  I  am  skeptical  about  any 
such  plan  tis  that  bemg  carried  out  by  a  majority  of  the  people. 
The  Chairman.  The  first  plan,  the  condemnation  plan  ? 

Mr.  CouzENs.  Yes. 

The  Chairman.  How  about  the  second? 

Mr.  CouzENS.  The  second  plan  would  mean  that  we  would  have  to 
go  to  the  people  for  money,  for  a  bond  issue ;  which  would  metm  that 
we  would  have  to  have  a  fight  for  a  number  of  years.  We  would 
have  competition,  probably,  between  the  imfranchised  lines  and  the 
franchise<l  lines,  which  might  mean  the  temporary^  interruption  of 
the  traffic  while  the  change  was  being  ^nade;  but  I  believe  that  that  is 
the  only  way  that  we  will  ever  get  it  solved  in  Detroit. 

The  Chaik:vian.  You  say  it  will  take  several  yeai-s.  During  that 
interval,  are  you  going  to  permit  this  company  to  operate  on  the 
sti^eets  without  regulation  as  to  cliarges? 

Mr.  CouzENs.  Oh,  no. 

The  Chairman.  What  regulation  of  charges  would  there  be? 

Mr.  CouzENs.  We  have  now  an  ordinance  which  fixes  the  fare  on 
the  nonfranchised  lines. 

The  Chairman.  Oh!    You  are  regulating  the  company? 

Mr.  CouzENS.  Yes;  there  is  the  practical  difficulty,  however,  that 
some  of  the  lines  are  franchised,  and  if  we  give  the  company  the 
right,  or  if  they  thought  they  could  get  i>olice  protection,  they  prob- 
ably would  charge  two  fares— one  fare  on  the  franchised  lines  and 
one  fare  on  the  nonfranchised  lines. 

The  Chairman.  You  say  the  street-car  problem  is  a  social  one « 
Mr.  CouzENs.  Yes. 

The  Chairman.  Do  you  believe  that  the  citv  of  Detroit  can  own 
and  operate  the  street-car  lines  more  economically  and  efficiently  than 
privately  owned  corporations? 

Mr.  CouzENS.  I  believe  that  they  can,  absolutely. 

The  Chairman.  What  is  the  basis  of  that  belief? 

Mr.  CouzENS.  The  basis  of  that  belief  is  that  we  have  conducted 
a  water  system  for  a  great  many  years  on  a  veiy  economical  and 
rjuccessful  basis;  and  I  also  believe  that  until  you  put  responsibility 
upon  public  officers,  public  officers  will  not  carry  responsibility  I 
believe  that  you  will  never  solve,  or  properly  solve,  municipal  gov- 
ernment any  where— and  I  do  not  believe  it  lias  been  solved  in  this 
country  yet  in  a  proper  manner— until  you  make  it  a  job  for  a  man 


1144    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

who  can  do  it  to  do  it ;  and  not  allow  it  to  bo  shifted  to  incompetents 
through  political  favor  or  through  personal  popularity.  I  believe 
that,  when  we  get  the  municipal  ownership  in  control  and  operation 
of  our  urban  systems,  the  people  will  demand  an  entirely  ditterent 
class  and  higher  quality  of  municipal  officials.  '      .     ., 

The  Chairman.  Of  course,  there  is  a  large  difference  in  the  num- 
ber of  employees  used  in  a  water  system  and  in  a  street-railway  sys- 
tem.   Might  not  that  thing  of  itself  present  the  question  m  a  ditferent 

^  Mr  CouzENS.  I  do  not  think  so,  because  the  street-railway  em- 
ployees are  a  very  small  percentage  of  all  the  population.  Of  course, 
if  you  ai-e  going  to  have  cowards  in  public  office,  and  you  are  not 
coing  to  have  men  who  have  the  nei^ve  to  stand  up  and  do  the  right 
tiling,  you  may  have  some  trouble,  of  coui-se;  but  I  say  the  people 
will  demand  the  right  kind  of  officials.  ,     ,    ,  ^ 

The  Chairman.  We  have  had  a  year-and-a-half  experience  in 
operating  the  telephones,  telegraph  wires,  and  the  railroads  by  the 
Government.     Do  you  consider  that  as  a  fair  test  of  Goverament 

operation?  ,  .      t  xi.  ^^ 

Mr.  CouzENS.  No,  sir.  I  would  not  cai*e  to  discuss  the  govern- 
mental  operation  of  telephones  or  railroads  at  this  particular  time. 
In  the  first  place,  I  might  say  that  I  do  not  think  the  test  has  been 
fair,  even  if  you  were  to  use  it  as  a  basis  for  future  Government 
ownership  of  railroads  and  telephone  lines;  but  I  believe  that  the 
municipal  ownership  and  operation  of  the  street-railway  lines  is  not 
analogous  in  any  degree  with  the  proposition  you  have  mentioned; 
because  the  telephone  lines  and  the  railroads  have  been  operated  from 
Washington  at  long  range.  The  users  of  these  services  have  not 
been  able  to  get  in  touch  and  keep  in  touch  with  the  operating  man- 
agers. In  the  case  of  the  municipal  ownership  and  operation  ot  the 
street-railway  systems,  the  operating  officials— the  chief  executive 
and  all  of  the  officers-are  right  there  at  the  door  of  every  citizen 
of  the  towns  in  which  the  service  is  given  24  hours  a  day  and  every 
day  of  the  year,  and  they  can  demand  and  get  the  proper  kind  of 
service  and  proper  regulation  and  proper  efficiency. 

The  Chairman.  If  the  street-railway  system  of  Detroit  was  valued 
bv  competent  State  authorities  and  a  true  value  fixed,  and  the  rates 
fixed  by  a  State  board,  which  no  more  than  brought  in  a  fair  return 
upon  that  value  and  allowed  sufficient  money  to  pay  operating  costs 
iind  taxes,  do  you  think  the  city  of  Detroit-the  people  of  that  city- 
would  object  to  that? 

Mr.  CouzENs.  Most  decidedly. 

The  Chairman.  Well,  now,  why?      ,         ,       ,  u-  j 

Mr.  CouzENS.  Because  you  have  that  absentee  ownership  and 
absentee  control  that  I  just  referred  to.  It  is  the  same  thing  that 
happens  to  the  railroads  of  the  country  privately  owned  and  operated 
from  Wall  Street  and  gQ vernmentally  operated  from  Washington. 
It  is  absentee  management,  and  we  in  Detroit  have  fought  for  years 

for  home-rule  legislation.  ,         ,.  t^  .     -x  u     i 

The  Chairman.  Suppose  that  the  city  of  Detroit  by  law  was 
eiven  the  right,  in  the  first  instance,  to  fix  the  rates,  but  either  the 
city  or  the  utility  could  take  an  appeal  from  that  order  or  ordinance 
to  a  State  comniission,  where  the  whole  question  could  be  tried  out; 
would  not  that  afford  satisfaction  to  the  people  of  Detroit  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1145 

Mr.  CouzENS.  No,  sir. 

The  Chairman.  Why? 

Mr.  CouzENS.  If  you  are  going  to  take  purely  local  matters  over 
to  the  State,  what  is  the  use  of  having  municipal  government?  If 
you  are  going  to  send  to  Albany  or  to  Lansmg  or  to  some  other  point 
removed  from  the  locality  affected,  to  determine  what  those  locali- 
ties should  have,  then  why  not  let  them  operate  all  of  the  city's 
activities  from  the  State  capital  instead  of  from  the  local  com- 
munity ? 

The  Chairman.  Would  not  that  primarily  give  the  city  the  con- 
trol over  the  rates  and  the  plant? 

Mr.  CouzENS.  No,  sir;  because  you  would  be  giving  it  to  the 
State  capital. 

The  Chairman.  Providing  you  are  wrong,  they  would  have  the 
right  to  review,  of  course;  but  in  the  first  place,  you  would  have 
the  whole  problem  before  you. 

Now,  apply  the  same  question  to  that  of  service  and  of  exten- 
sions. Assuming  that  you,  in  the  first  instance,  have  the  right  to 
define  the  service  and  the  extension,  subject  to  the  right  of  an 
appeal  by  the  aggrieved  party  to  the  State  commission,  can  there 
be  any  substantial  objection  to  that  plan? 

Mr.  CouzENS.  A  very  substantial  objection,  because,  as  I  stated, 
it  is  a  purely  social  problem,  and  we  should  not  have  anybody  to' 
deal  with  but  ourselves.  If  we  believe  in  a  democracy,  and  if  we 
believe  in  self-determination,  we  must  determine  for  ourselves  what 
kind  of  service  we  shall  get  and  when  we  get  it  and  at  what  rates 
of  fare  we.  get  it.  I  see  no  reason  for  transferring  it  to  some  other 
locality  to  decide. 

The  Chairman.  Of  course,  you  concede  that  the  State  has  simply 
delegated  the  power  over  these  matters  to  the  city,  do  you  not  ? 

Mr.  CouzENS.  It  has;  and  we  fought  for  years  to  get  the  power- 
and  now  that  we  have  it,  we  do  not  want  it  transferred  back.  ' 

The  Chairman.  Where  the  State  has  simply  delegated  you  as 
an  agent,  should  you,  as  agent,  question  the  integrity  and  fionesty 
of  the  State  ? 

Mr.  CouzENS.  That  does  not  enter  into  it,  because  we  are  a  part 
of  the  State.  We  are  not  purely  an  agent.  We  are  a  part  owner 
of  the  State,  if  you  please.  We  are  a  part  of  the  State.  We  are  not 
the  same  as  an  owner  and  agent,  because  we  are  as  much  of  the  State 
as  the  legislature  which  delegates  us  that  particular  power.  It  is 
not  a  matter  of  agency  and  ownership. 

Cominissioner  Gadsden.  Do  you  think  it  fair,  from  the  railroad 
standpoint,  that  there  should  be  some  court  of  review  to  reverse  ar.v 
action  of  the  city  affecting  their  interests  if  the  city  were  wroncri '" 

Mr.  CouzENS.  The  company  always  has  the  right  to  get  oii^the 
streets  if  they  do  not  like  it. 

Commissioner  Gadsden.  That  means  at  practically  the  total  sac- 
rifice of  their  property  ?  * 

Mr.  Couzens.  It  does  if  their  franchises  have  expired;  and  there 
IS  no  reason  why  they  should  not  have  pix)vided  a  sinking  fund  for 
the  amortization  of  their  debt  when  they  got  the  franchise. 

The  Chairman.  Suppose  the  State  commission  had  control  over 
the  rates,  the  accounting,  and  the  service  of  this  utility  during  all 


1146     PROCEEDINGS  OIP  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

these  years,  and  had  had,  as  it  should  have,  the  right  to  prescribe  a 
depreciation  fund  or  sinking  fund  to  take  care  of  this  plant;  would 
not  that  have  simply  avoided  the  difficulty  that  now  confronts  vou  ? 

Mr.  CouzENS.  It  might  have  if  it  stai*ted  back  that  long  ago  f  yes. 

1  he  Chairman.  Would  not  that  have  been  satisfactory  i 

Mr.  CouzENs.  At  the  time  the  franchise  was  granted  I  assume 
tliat  it  would  have  been  satisfactory.  But  an  entirely  new  condition 
Jnus  arisen,  and  I  hardly  think  that  is  a  fair  comparison  to  take  us 
back  30  yeai-s,  when  we  granted  the  franchises,  and  tell  us  then 
^^1  ^^  J^^^^^  ^^^^^^  operated  all  right.    That  is  not  a  possibilitv. 

Ihc  Chairman.  I  was  just  trying  to  develop  if  perfect  regulation 
by  the  htate  with  the  cooperation  of  the  municipalitv  would  not 
afford  a  solution  of  this  problem. 

^^lir-^'^^^^^^'  ^^^  ^^^  ^^^  appear  to  have' been  the  case  with 
the  \Visconsin  Public  Service  Commission.  I  understand  and  am 
mionned  that  the  municipalities  are  very  much  dissatisfied. 

The  CnAiR3rAx.  They  are  dissatisfied,  are  they  not,  because  State 
regulation  has  resulted  in  increased  charges  in  a  ffood  manv  in- 
stances? C.  O  J 

Mr.  CouzENs.  And  an  indifference  as  to  the  needs  of  the  local  com- 
munities with  respect  to  extensions  and  to  the  number  of  cars  run 
and  things  of  that  sort. 

The  Chairman.  Would  not  that  question  of  indifference  be  wholly 
obviated  if  the  municipalities  in  the  first  instance  had  the  right  to 
pi-escnbe  the  service,  the  places  where  new  construction  should  bo 
extended,  and  so  on,  with  the  right  of  appeal  from  the  airffiieved 
paity  to  the  State?  ^^ 

Mr.  CouzENs.  That  might  have  solved  the  actual  putting  in  of 
the  extension,  but  deeper  than  that  is  under  what  terms  and  condi- 
tions will  these  extensions  be  built— whether  thev  will  be  built  for 
indehnite  use,  for  an  indefinite  term,  or  whether  the  return  shall  be 
what  the  company  thinks  it  ought  to  be,  or  what  the  municipality 
thinks  it  ought  to  be. 

The  Chairman.  I  concede  the  presence  of  difficulties;  but  sup- 
pme  you  had  an  indeterminate  permit,  with  the  final  right  of  the 
city  to  purchase  the  plant  at  a  value  to  be  fixed  by  the  State,  and 
also  including  these  other  regulatory  features  which  I  have  de- 
scribed;  would  that  afford  a  fair  solution? 

Mr.  CouzENs.  Xo,  sir;  it  would  not  afford  a  fair  solution  because 
It,  tor  example,  35  cents  per  hour  for  a  workman  in  1914  was  a  satis- 
factory wage,  and  he  is  now  getting  GO  cents  per  hour,  then  by  what 
reasoning  do  you  figure  that  6  per  cent  on  an  investment  in  1914  is 
a  fair  return  in  1919?  In  other  words,  if  vou  are  going  to  a&sume 
that  this  service-at-cost  basis  is  a  solution—^ 

The  Chairman.  I  have  not  suggested  the  service-at-cost  basis,  and 
your  answer  is  not  germane  to  my  question. 

Mr.  CouzENs.  It  is  as  I  understood  your  question.  If  you  will  re- 
peat it,  I  will  try  to  answer  it. 

(The  reporter  repeated  the  question  as  above  recorded.) 

Mr   CouzENs.  I  might  ask  what  are  the  other  regulatory  condi- 

The  CHAIR3IAN.  The  ones  which  I  have  described:  The  city  to  fix 
the  rates,  in  the  first  instance,  to  control  the  service,  and  declare 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1147 

Where  extensions  should  be,  subject  to  the  right  of  appeal  to  the 
btate  commission.  ^  *  ^ 

Mr.  CouzENs.  After  you  have  said  that,  however,  I  ask  under  what 
nXVllir  '^*'"^^^"'^  ^^^^"'^^  ^'  ^"i^^^  That  would  all  enter  into  it! 
.   The  CIIAIR3IAN.  I  said  that  could  all  be  taken  care  of  by  the  irrant- 

up^o„°?^v,s&b;teS '''''-' '''  '^'^  ''^  ^^^^^. 

upl'\h?im'e^n,?nts""'  ''^^«t"'"'"»««  Permit  must  fix  the  returns 

Tlie  Chairman.  Not  necessarily 
sions'if  ?hev'?;n"°r  is. tlie  company  ping  to  complete  these  exten- 

to  ^ve  theS  on    f"ff  h'^  ,"'*  'i'^'^f/  ■     ^^'^''J  »-'^t"™  ««■«  you  goinsr 
rS?^*i"^"^  "" 't,  if  they  do  raise  the  money?  •'       b      s 

if  Ti      '-^■*i«*"^'^-  In  .tl»e  indeterminate  franchise,  as  I  understand 

t  ^.?  T"  "P""  'T^^^  H  »°*  fi'^^'l-    You  are  mining  up  I  tel  eve 

fmnchte      '"'''  P'''"  *■"  Chreland  with  the  indete4in^ate  permit 

.  ¥':•  Coi^ZKxs.  Not  exactly  tliat;  because  I  contend  now  that  the 
indeterminate  franchise  must  have,  in  being  granted-ZL  have  in 
m  nd  a  return  for  the  company.  Now  that  £  Ihat  I  wa^i^to  know-^ 
what  you  will  have  m  that  indeterminate  fmnchise. 

you  puUnTXa'^TfTSSr  "'^^"*""  '"'  '  '""*'  ^"PP^"  ' 
Mr.  CouzExs.  Yes. 

The  Chairman.  Leaving  the  question  to  arbitration  as  to  whether 
m    Cn    '^'''''\tZ''\^  b^  J^igl^er  or  lower,  as  condftioL  eiranie 
Mr.  CouzENS.  That  does  not  enter  into  it  vou  see,  if  we  hadl^'n 
nicipal  ownership  and  operation.  *  '  ^  "^"" 

The  Chaibman.  I  am  getting  away  from  municipal  owner-hin  .mrl 
hEuggested."  *'-^""^  *^  «"^»  -*  ^^'-^  you  thfnk  oTlhe^'^^ri 

Mr.  CouzExs.  I  don't  think  anvthinc  of  the  »I»n  thnt  ,-«,.  i 
suggcste^,  because  you  will  have  tlie  eveflaski^^tSoil  and  Z  h«t 
we  are  having  now;  because  we  will  never  a|L  upon  arbkratoi^ 
if  you  please.    We  have  gone  throuo-h  all  this     T  linv«  Vi  ' 

ber  of  the  boai^  of  arbit?ation,  -nd^'V^io^rtl^l'^iJ^Z 
to  agree  upon  the  arbitrators.  We  have  i?one  thT-ni.,;i:  „.,  ?u"  ® 
and  .e  have  had  some  difficulty  in  agi^luf  ^pS  rirbrator '  w; 
do  not  even  know  then,  when  that  is  settl«l  whAfh«,  t^i  i  ^"  " 
going  to  be  dissatisfied.  That  is  a  sS  l^iich  the  '  nnl/l  ''"  "'! 
consented  to  by  vote,  but  only  their  oKhave  coS  ted  to'  T 
long  as  our  constitution  and  charter  is  as  it  is  w?h?vn  il  •,  'v 
these  propositions  to  the  people.  '  ^  '""*'  ^^  ''"•'^'* 

(I. J!!"  pi/iK^r-^^'-  Of  course  you  have  not  testified  direcMv  about 

he  cost-of -service  plan,  but  in  the  study  of  the  quest  on  vou  nu.^f 

liave  given  a  good  deal  of  thought  to  that?  'l"es"on  you  must 

Mr.  CouzExs.  I  have,  sir;  yes. 

The  Cii.winiAN   The  Secretary  of  War  was  before  us  yesterdav 
and  described  with  great  minuteness  the  plan  they  have  Iif  Clevt 
land,  and  pointed  to  the  restdts  of  that  plan   even  d  ..-in    k-      i 
no^al  period.    What  is  your  judgmeyi"o„rthe'crS£.vice 


1148    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CouzENs  My  own  judgment  about  the  cost-of-service  Dlan 
^  that  you  ehmmate  all  the  desire  for  the  company  to  perfoL  the 
i^warr"  ''"  '"'*'  economical  basis.    You  take  away  aH  the 

justify  Sirrertio^r  *•*'  '^P^"''"^  •"  "^''^^''^^  ^'  Cincinnati 
rWoia^Tfu^"  '^''^  street-railway  commissioner,  Mr.  Sanders  of 
on  thi  ?n1;  /"'  '"'  l'^-    ^  ^Vt  °"'y  ^''  statement.    He  has  L„ 

Teat  ittSLTo";  Sn.  *"'  '^  "^^  ^^^''^  *'^  ^^^^  ^«  ^^  ^^^  ^^ 
The  Chairman    Has  he  told  you  that  i-ecently  ? 
Mr.  CouzENS.  Yes;  within  a  month. 
Commissioner  Gadsden.  He  wants  to  amend  the  Cleveland  nlan 

^X'*P«?  '"  *"  i?''5^r-    Otherwise  he  thinks  the  plan  good  «^ 
Mr.  CouzENs.  He  did  not  say  that  to  me     He  said  hp  wa„t.^ 

municipal  ownei-ship  and  operation.  "*  ''^  '^*"**** 

Commissioner  Sweet.  That  is  what   Secretary  Baker  said— Ha 

would  hke  to  have  it  amended  in  that  respect.       ^  said-he 

Mr.  Warren.  To  put  in  an  inducement? 

the'^pr  olThTcomTany^'"''  ^"'  '"  '^^  '"^"•=«'"^'»*^  ^-^  ^^--y  - 

SnS^roTer  I^^^b^^VT  '"^  """'■^'^^'  ''^'^^'^^"P"  " 

nicYpdTCerrhiJ''^  "'^''''  ^"^^  ^^'"^  ^^^^^  ^^••-  Zander,  wanted -mu- 

Commissioner  Sweet.  I  understand. 

Mr.  CouzENs.  Yes;  that  is  a  two-edged  sword 

If  you  will  permit  me  to  be  personal  for  k  moment— when  T 
was  general  manager  of  the  Ford  Motor  Co.  I  d^S  a  plan  of 
takmg  our  45  branch  houses  and  giving  the  manageiTof  th^e  bmnch 
houses  a  percentage  of  the  proft;  and  I  just  Carried  it  oneT^^^^ 
when  I  found  a  disposition  on  the  part  of  the  managers  to  rnW^I 
customers.    In  other  words,  the  maLger  wanteTtoTt  ev^^^^^^^^ 
he  could  ou    of  the  customer  at  all  times.    He  did  i^t  want  to  b! 
generous  with  them;  he  wanted  to  dispute  whether  a  part  was  de 
fectiye  or  whether  it  was  not  defective,  and  we  found  a  m-elt  deal 
of  discontent  among  all  of  the  customers  throughout  the  country 
because  of  the  disposition  on  the  part  of  the  managers  to  W^^ 
profits  so  as  to  get  their  percentage  of  the  profitf    tLS^^^ 
abandoned  that  plan.    That  is  a  two-edffed  ^wnrrT     Tvf/ 1     ' 
was  trying  to  be^verefficient  so  as  to  ge?  a  bS  pJrcenr^for 
himself  to  the  detriment  of  the  custome^rs.    So  wrdSd  that  ^« 
would  regulate  the  service  to  the  customers  and  all  he  would  Lvp 
to  do  was  to  sell  the  goods.    So  that  if  you  put  an  inc^S  int^ 
this  cost-plus  plan  the  disposition  on  the^part  of  the  Tanm^^ 
then  IS  to  curtail  the  service,  to  fight  the^  service,  toTXt^very 
expenditure,  so  as  to  make  more  money  for  themselves     ^  ^ 

ownershi™'^""*         "'  ^'""^'^  *^'^  ^"*"^^*  ^^^  ^^*  ^^^^^  municipal 

Mr.  CouzENs.  I  am  not  willing  to  assume  it.     You  may 
iJ^^  Chairman   Just  for  the  purposes  of  this  question.  ^You  know 
the  local  sentiment,  and  I  want  to  develop  your  tliou-ht 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1149 

Let  us  assume  that  Detroit  can  not  have  municipal  ownership. 
Ihen  what  is  the  best  solution  of  your  problem «  What  is  vour 
best  thought  on  that  ?  "^ 

Mr.  CouzExs.  I  have  set  out  to  get  municipal  ownership  and  opera- 
tion, and  I  am  not  thinking  along  any  other  line. 

The  Chairman.  Oh,  but  you  must  have  some  ideas  about  the  regu- 
lation that  should  be  had  m  the  public  interest  in  the  absence  of 
municipal  ownership  ? 

Mr.  CouzENs.  There  is  no  plan  that  I  can  think  of  involving  a 
deal  with  the  company  or  an  arrangement  with  the  company  that 
would  be  favorably  voted  upon  by  the  people  of  Detroit. 

The  Chairman.  State  regulation  does  not  mean  an  agreement  with 
the  company,  does  it? 

Mr.  CouzENS.  Oh,  yes. 

The  Chairman.  How  so  ?  You  present  vour  facts  to  the  commis- 
sion and  it  decides  the  question.  1  ou  put  your  evidence  in  and  they 
flocide  what  the  rates  shall  be  and  what  the  service  shall  be  and  what 
the  extensions  shall  be,  and  they  pre,scribe  the  depreciation  and 

Mr.  CouzENs.  The  city  would  not  stand  for  that.  The  people,  by 
vote  would  not  stand  for  that.     The  city  wants  home  rule. 

1  he  Chairman.  If  you  can  not  have  home  rule,  then  will  this 
other  plan  be  satisfactory? 

Mr.  CouzENS  I  do  not  think  the  people  have  given  up  the  idea  of 
having  home  rule.  ^ 

n  ut^  Chairman.  Perhaps  not  in  your  case;  but  we  are  dealing  with 
a  big  problem,  nation-wide.  ^ 

Mr  CouzENs.  I  mean  that  nation-wide  problem  is  to  be  approached 
from  the  angle  of  social  interest,  as  a  social  viewpoint.  That  is  what 
1  tun  trying  to  get  across  with  you,  and 

The  Chairman.  I  clearly  understand  your  viewpoint. 

Mr   CouzENs.  And  that  we  must,  and  that  you  men  can  possibly 

vo  f vie  /n  Tr^'P'"^^^  i^fT  *^"  ^^^"^^^*  ^^^  consideratfon  tha^t 
V  ou  give  to  this  question— that  great  stress  may  be  laid  upon  this 
throughout  the  entii^  country;  and  I  want  you  honestlyT  think 
of  it  as  a  social  subject,  and  that  these  social  problems  can  only  be 
solved  properly  by  the  people  themselves.  ^ 

s.rs^oXhr  .STCSis."^'""^  "■' «""  ■«-'  "^" 

I  believe  Detroit  has  spent  more  money  probably— I  know  that  it 
has  spent  more  money  per  capita  than  any  other  cfty  in  the  country 

ovi'f  old  folks,  who  have  no  interest  in  recreation,  are  paying 
commnnir."iT-?  '"^'^'^^^'O"  commission  for  the  benefit  of 'all  thi 
oS  w^^r.  'l7  '"■^-  P'^g'-e?sing  along  certain  lines  to  that 
extent,  where  we  believe  m  providing  at  public  expense  oroner 
recreation  for  our  children  an3  for  our  children's  pareXlbecau^ 
we  are  doing  it,  and  particularly  among  the  foreigners-then  I  sa^ 
IS  not  the  transportation  of  these  citizens  in  comfort  a^d  in  decency 

actSthr^lf'  P™ -""  f-'.  '^'  *1"^^"'"'  «*  ^'"'^'^^  or  any  other 
activity  that  the  municipality  may  engage  in?  J        ^"^ 


1150     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

« 

The  Chairman.  The  evidence  before  this  commission  thus  far 
shows  that  a  great  many  plants  throughout  the  country  are  in  the 
hands  of  receivers  and  a  number  of  others  are  bordering  on  that 
condition,  and  a  good  many  are  having  great  difficulty  to  maintain 
operating  expenses  and  fixed  charges,  although  their  fares  have  been 
increased  from  5  to  6  and  7  cents.  In  view  of  that  general  statement, 
wliat  can  this  commission  do  now  to  i-elieve  this  present  situation  ? 

Mr.  CouzENs.  If  the  companies  are  not  honestly  capitalized  then 
the  receiver  should  sell  them  out  at  the  best  price  under  the  hammer. 
Tlien  you  would  get  a  price  which  the  returns  could  be  possibly  made 
on.  If  the  relation  between  operating  expenses  and  revenue  is  only 
considered  and  no  i*eturn  on  the  investment,  of  course,  that  does  not 
enter  into  it.  But  where  the  city  itself,  the  communitv  itself,  does 
not  ^varrant  municipal  ownership  and  operation,  then  I  see  no  alter- 
native than  to  relieve  the  companies  in  those  communities  of  some  of 

the  municipal  charges,  probablv  in  the  way  of 

The  Chairman.  Which  would  be  what? 

Mr.  CouzENS.  Taxes,  possibly,  or  special  percentages  on  gross 
revenues,  or  some  of  the  many  other  devices  which  have  been  created 
to  tax  public-utility  companies. 

The  Chairman.  Then,  is  it  you  feeling  that,  as  an  emergency 
solution,  the  commission  might  wisely  recommend  that  where  neces- 
sary the  communities  should  eliminate  taxation,  paving,  and  other 
assessments  ? 

Mr.  CouzENS.  If  the  community  would  satisfy  itself  in  advance 
tliat  the  elimination  of  those  charges  went  back  to  the  community 
itself  in  the  way  of  fares  or  improved  service,  yes. 

Commissioner  Sweet.  This  contention  betw*een  the  D.  U.  E.— that 
is  the  name  of  the  company,  is  it  not,  the  Detroit  United  Railways? 
Mr.  CouzENS.  Yes. 

Commissioner  Sweet.  And  the  city  is  of  very  long^  standing,  is  it 
not? 

Mr.  CouzENS.  Yes. 

Commissioner  Sweet.  My  home  city  is  Grand  Rapids;  and  I  have 
l)<?en  quite  familiar  with  the  Detroit  situation  for  a  good  many  years, 
although  I  can  not  remember  just  when  it  started.  I  know  that  a 
good  many  years  ago— I  think,  before  George  Todd's  time  as  mavor— 
and  I  know  during  that  period  there  was  quite  an  acute  question  be- 
tvveen  the  city  and  the  company.  I  personally  do  not  know  of  any 
city  in  the  United  States  where  there  has  been  so  much  feeling  be- 
tween the  community  and  the  company  as  in  Detroit ;  do  you  ? 
Mr.  CouzENs.  I  concur  in  your  conclusions,  sir. 
Commissioner  Sweet.  I  think  I  know  about  what  it  is.  For  that 
reason,  Mr.  Mayor,  I  have  a  sort  of  impression  that  your  problem  is 
not  a  typical  one  for  tlie  otlier  communities  of  tl^.  United  States.  Do 
yon  think  it  is? 

Mr.  Couzens.  Not  the  details  of  it,  Mr.  Sweet.  It  is  not  the  prob- 
lem of  all  the  communities,  but  the  social  problem,  the  question  of 
IJroper  service,  the  question  of  proper  extensions  is  as  much  applica- 
able  to  Pittsburgh  or  to  any  otlier  city  as  it  is  to  Detroit,  and  you 
only  have  ;to  patronize  the  cars  at  certain  hours  of  the  day  and  the 
service  in  a  tliinly  populated  section  to  realize  that  it  is  as  much  a 
problem  for  every  city  as  it  is  for  Detroit  There  may  not  be  so  much 
hatred  engendered  as  there  is  between  Detroit  and  the  company. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1151 

Commissioner  Sweet.  The  general  principles  you  think  extend 
throughout  all  the  communities  practicallv  ? 

Mr.  CouzENS.  Absolutely;  yes. 

Cominissioner  SwEEi'.  You  have  spoken  of  these  rather  peculiar 
votes  hat  have  been  taken  in  Detroit,  where  it  seemed  to  be  a  little 
difficult  to  arrive  at  the  reasons  for  the  i>eople  appai^ntly  wantin<. 
municipa  ownership  and  still  at  the  same  time  not  wantin/it.  or 
some  of  their  votes  have  seemed  to  be  inconsistent  with  others  Is 
not  tliat  so  ?  •      o 

Mr.  Couzens.  That  is  true;  yes,  sir 

hadTDpl!^?f -.^r^-J*"''''^^  me  think  of  a  situation  that  vou 

nn  "'t  .f       ;   *  ^  »•«=«»»  1"  connection  with  your  board  of  ediica- 

Ih    '.itL       "ot  know  .whether  you  remember  it  or  not,  but  some  of 

whiclf  tZl     n^nY*  rP""^,"  P^^'^  *<""  ^  '«*'•<*  of  education  by 
ru\t     1  ^^'«"l^l  H^  five  members  of  the  board  elected  at  lar«re 

liat  plan  was  ^nt  by  a  committee  of  Detroit  citizens  to  xSa 
cit!es  of  the  Lnited  States.    It  was  adopted  in  Indianapolis  aliZt 

"''"'^}JZ:r''^}  "r'  """''^^'^  admirably,     the  people  of  Kit   Xd 
o..  the  Detroit  plan  and  voted  it  down.    I  d'o  not  know  what  yS 

^  T^.    /t  *** •    H^  ^'*'"  **\^*'"f?  y°"''  ''""Id  of  education  at  large? 
eleft^ditX^"  ^"'  "^  "^''^  "  "^^'-^  «*  -•-  -*«'d  of^^ve, 

the^rbr=raf;raL^;tri^^^^^^^^ 

Mr.  CorzENS.  Yes. 

Commissioner  Sweet.  And  the  general  feeling  throughout  the 
State  was  that  there  was  a  good  deal  of  corruptfon  in  the  Detroit 
Board  of  Education ;  is  not  tliat  true  ?  i^iroit 

Mr.  Couzens  That  was  the  general  impression,  and  I  <ruess  there 
Wiu.  some  foundation  for  the  impression,  'and  that  wa.s  trSe 

Gonimissioiier  Sweet.  Is  it  not  a  fact  that  the  publisliere  of  text- 
books foimd  meaiLs  of  getting  their  books  introduced  i^to  Detro  t 
through  bribery  or  indirection  of  some  kind »  •L'etroit 

Mr.  CouzE.vs.  I  could  not  say  as  to  that.  I  only  have  a  ireneril 
impression  that  that  was  the  fe^lino-  ^  geneuil 

Commi^ioner  Sweet.  I  knew  iS  Grand  Rapids  we  adopted  the 
plan  of  a  board  elected  at  large  long  before  vou  did.  and  I  reSllect 

how  (C^'^lfH  T'^  '^T^I""^  ^i'^.^^'  ^  discuss  the  qU'^on  of 
how  brand  Rapids  had  solved  the  school-board  problem  But  if 
seems  to  me  that  the  people  of  Detroit,  although%.xce1din-Iy  fine 
people  ma  gr^t  many  ways,  are  rathe;  inclined  to  be  p^<rnacio  s 

Mr.  Couzens.  I  was  called  at  a  nonpartisan  election 
Commissioner  Sweet.  Which   was  absolutely  right  in  principle 
This  matter  of  home  rule  that  you  have  spoken  of  i^n  the  adoS 
of  our  State  constitution-I  helM  that  aloLg  all  I  ,>^sib  y  ^„,?M 
Mr.  CouzENS.  For  which  Detl^t  is  thankftd.  beci^  «c  .^Si  it 
Commissioner  Sweet.  Tliat  was  while  I   ^^  rn^-or  oTorl,  fl' 
Rapids  or  a  httle  afterwards,  but  we  voted  to  adopta  Upartis 
plan  of  eIect.on-perhai>s  you  recollect  our  oiScia  s  and      e  S  a  e 


1152     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

legislature  prevented  us  from  amending  our  charter  as  we  wanted 
to  in  order  to  elect  our  own  officials  in  our  own  way.  We  had  some- 
thing to  do  with  getting  this  measure  into  the  constitution.  Now, 
without  going  into  the  details  of  the  matter,  let  me  ask  you  if  you 
are  not  willing  to  admit  that  your  view  of  the  general  situation  is 
somewhat  tinctured  by  the  special  problem  that  you  have  there  in 
Detroit? 

Mr.  CouzENS.  Why,  I  must  admit  that  that  is  where  my  experience 
has  taken  place,  of  course,  and  you  gentlemen  probably,  who  are  un- 
biased jud^s,  are  better  able  to  determine  that  than  I  am. 

Commissioner  Sweet.  There  never  has  been  any  cooperation  be- 
tween the  people  of  Detroit  and  the  D.  U.  R.,  has  there? 

Mr.  CouzENS.  No,  sir. 

Commissioner  Sweet.  There  has  been  a  continuous  fight  and  scrap 
for  many  years. 

Mr.  CouzENS.  But  it  requires  two  persons  to  cooperate,  does  it  not  ? 

Commissioner  Sw^eet.  Yes ;  and  two  to  fight. 

Mr.  Couzens.  Yes. 

Commissioner  Sweet.  And  in  this  case  they  have  been  fighting. 

Mr.  Couzens.  And  if  the  company  would  never  live  up  to  a  single 
promise  it  made,  never  carried  out  a  single  improvement  or  lived  up 
to  a  single  ordinance  without  a  fight,  what  would  be  the  disposition 
of  the  people  naturally  ? 

Commissioner  Sweet.  I  am  not  criticizing  the  people. 

Mr.  Couzens.  Well,  you  said  we  were  pugnacious,  and  probably 
that  is  so. 

Commissioner  Sweet.  Well,  pugnacious  due  to  the  treatment  you 
think  you  have  received  and  perhaps  you  might  say  that  you  have 
received.  I  am  not  trying  to  fix  the  blame,  but  the  point  I  am  try- 
ing to  direct  your  mind  to  is  that  the  Detroit  situation  lias  involved 
a  continuous  running  warfare,  you  might  say,  for  many  years  that 
has  not  existed  in  a  great  many  of  the  cities  of  the  United  States. 

Mr.  Couzens.  I  think  that  is  true. 

Commissoner  Sweet.  If  there  had  been  a  company  there  that  was 
disposed  to  do  what  the  people  regarded  as  right  and  there  had  been 
a  proper  cooperation  between  the  company  and  the  citizens  the  feel- 
ing would  be  entirely  different  from  what  it  is  now,  would  it  not? 

Mr.  Couzens.  Of  antipathy  to  the  company ;  yes 

Commissioner  Sweet.  That  would  never  have  existed. 

Mr.  Couzens.  That  would  never  have  existed. 

Commissioner  Sweet.  So  I  am  not  altogether  sure  that  the  opinion 
of  a  person  who  has  based  his  judgment  largely  upon  Detroit  can  be 
taken  justly  and  fairly  with  regard  to  the  general  average  of  cities 
throughout  the  country.  Certainly  the  feeling  of  the  people  in 
Cleveland  toward  the  railroad  company  is  entirely  different  from 
what  it  is  in  Detroit. 

Mr.  Couzens.  I  believe  it  is  a  great  deal  different ;  yes. 

Commissioner  Swfj:t.  You  know  there  has  been  a  great  deal  of  co- 
operation there  resulting  probably  from  Tom  Johnson's  efforts  in  the 
education  of  the  people,  as  Secretary  Baker  puts  it;  is  not  that  true? 

jNfr.  Couzens.  That  is  probably  true. 

Commissioner  Sweet.  So  that  although  they  are  cities  of  some- 
where near  the  same  size — at  leust  they  have  been  rather  rivals,  have 
they  not,  in  the  way  of  population? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1153 

Mr.  Couzens.  Cleveland  and  Detroit? 
Commissioner  Sweet.  Yes. 

Mr.  Couzens.  But  you  see  Cleveland  is  having  a  row ;  they  have 
had  a  strike  and  they  are  now  rowing  about  the  returns  thev  should 
get.    They  ask  7  per  cent  instead  of  6  per  cent.    They  pa v  6  per  cent 
above  operating  expenses.    Why  do  they  have  to  do  that  ?    The  city 
maintains  a  commission  with  a  large  number  of  employees  to  reo-ulate 
a  private  company.    Why  not  regulate  its  own  company  ?    Why  have 
to  have  it  a  private  company  if  you  are  going  to  regulate  it  ?    I  can 
not  see  any  reason  for  going  around  the  corner  to  accomplish  the 
same  end     Now,  you  may  say  the  situation  may  not  be  so  acute  in 
Cleveland  and  other  communities  as  it  is  in  Detroit.    That  is  true 
But  we  have  scientists  all  over  the  country  studying  cancer,  whether 
we  have  cancer  or  not,  do  we  not?    We  do  not  wait  until  all  the  peo- 
ple get  cancer  before  we  start  to  prepare  and  get  a  remedv  for  it 
1  say  Detroit  has  street-railway  cancer  and  we  are  trying  to  solve  the 
problem,  which,  if  solved,  will  be  as  much  benefit  to  the  country  as 
a  whole  as  the  scientists  will  be  if  they  study  the  subject  of  cancer 
and  cure  it  and  do  not  wait  until  the  people  get  it.    So  you  do  not 
have  to  wait  until  you  have  street-caritis,  or  whatever  jou  want  to 
call  it,  before  you  find  a  cure.  . 

J}^^  Chairman.  You  want  to  cure  the  cancer  by  swallowino-  it « 
Mr.  Couzens.  No  ;  I  am  trying  to  take  it  out  of  the  comnTunity : 
remove  it  entirely  by  an  operation.  ' 

Commissioner  Sweet.  Of  course,  you  understand,  in  askino-  these 
questions  we  are  not  taking  the  position  that  municipal  ownership 
or  operation  is  necessarily  wrong,  but  we  want  to  get  your  reasons 
and  the  ground  for  it.  " 

Mr.  Couzens.  I  am  very  glad  to  give  you  them,  sir. 
Commissioner  Sweet.  Now,  I  am  perfectly  frank  to  say  to  you 
that  I  have  believed  for  a  long  time  that  Detroit  ought  to  have  the 

th.t^i  ?^,''  ''''^  H'^  ""'^^^  ^P  opei-ate,  but  my  judgment  has  been  that 
the  right  to  operate  could  be  used  to  prevent  collusion  on  the  part 
ot  the  private  corporation  or  private  corporations  in  bidding,  for 
instance,  upon  the  rental  of  the  street-railroad  system.  I  have 
thought  the  city  ought  to  own  its  own  tracks,  and  if  it  could  get 
proper  service  upon  a  fair  basis  from  a  private  corporation,  tliey 
would  get  better  results  than  they  would  to  operate  the  road  them- 
selves. Let  me  ask  you  this:  All  the  cities,  practically,  of  Michigan, 
or  nearly  all  of  them,  have  their  own  water  plants,  have  they  not? 
Mr.  Couzens.  I  think  so. 

Commissioner  Sweet.  You  have  spoken  of  that  in  Detroit « 
Mr.  Couzens.  Yes. 

Commissioner  Sweet.  Has  your  attention  been  called  to  the  fact 
that  only  comparatively  few  people  are  required  for  the  operation 
of  a  water  plant?  Some  of  them  have  their  own  lighting  plants 
and  some  do  commercial  lighting  and  some  simply  furnish  lights 
n?lh  'V"^^*^  ?"^  ""'^7  buildings.  Does  it  seem  to  you  that  the 
ZZ\hl  Pf.0P  e. employed  m  operating  a  street  railroad,  and  the 
I)os6ibie  political  influence  that  becomes  a  serious  objection  to  the 
operation  of  a  street  railroad,  where  it  might  not  apply  to  a  water 
plant  or  lighting  plant?  ffj^<^  wtttei 

1C0G43*'— 20— VOL  2 11 


1154    PROCEEDINGS  OP  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

a  wi'irhf  ^Tflt  iV'"'"'  °"'  {r'"^^*  *'*'!<"  I  '1°  »»«*  see  how  that  has 
nnT£  fu     **"' ^^.'^""SP'  in  the  first  instance,  we  have  civil  service 
and,  m  the  n«st  place  no  public  officer  knows  whether  lis  mm-or' 
the  men  working  under  his  administration-are  going    o  72  fo,- 

i^e'd^etfrSncir'Ti"'^*  "^  """>:  "'"'"'?  af.rg"fis*°enlSv  " 
IT  11-    "**"*'•     1  was  comffiissioner  of   nolice  for  two  A«a.-« 
and  I  beheve,  and  have  i^ason  to  believe,  that  SlTas  mam  ,S' 
men  vote<l  nga.nst  me  for  mayor  as  vot^l  for  me  ^  '  '    ''*^" 

llie  Chairman.  Maybe  you  were  too  strict 

you  would  do.    But  do  you  not  know    „5  as  «^^  ..i  rVn       a   '^'"'* 

Commissioner  Sweet.  I  am  workin<r  nn  *K^  fk^      ^v  ^  i 
Mr.  CouzENs.  And  thei-e  has  been  no  improvement? 

"i»SE'?5?T  -  ^■*.""  - '- -  °' '"" 

Ml.  eoLZENs.  Ics;  but  wlien  you  consider  that  these  emijlovees  of 

suppose  the  citizeLhii>-..Kl  we  n^  S^'woS  a  dS  votln." 
which  will  make  it  hkm-c  incumbent  inw.n  «=tT^/  ^  \ot'ng, 
administration  than  ever  Sfore^loX  you  think  tit""'"  •^''^"* 

= |::si  ^srsJTtrn^m'b:^^^^^^ 

municipal  officials?  I  may  li.se  an  anali^rcase  C  "  vo*;;.' 
own  home  do  not  care  who  collects  the  garbage  oi  brings  the  iT- 
the  groceries,  but  you  arc  very  much  interested  i„  who  wait^  1^„  . 
table  or  wl»  the  nurse  is  that  takes  care  of  vmn  <^n^  tI 
is  a  personal  contact  there  that  is  absoIuteTv  neci  sary  iL tv  T.  d^ 
ment,  for  proper  municipal  ownership  and  o^mtion  o™  oJ^  w 

vJT,u"\r''  anyth  ng  about  who  is  keepinrt  ^  ^,tei   the  >^ 


PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION.    1155 

wrong  in  some  places,  but  there  is  a  lot  of  it  that  is  good,  because 
there  is  a  lot  of  it  they  do  not  ever  think  about.  The  thinxr  vou 
make  the  fuss  about  all  the  time  is  that  which  you  come  in  contact 
with  all  the  time,  and  the  thing  you  come  in  contact  with  all  the 
tnne  will  be  the  kind  of  street-car  service  you  get,  the  kind  of  em- 
ployees you  have,  whether  they  are  polite  and  gentlemanly  or  in- 
solent. That  will  be  the  determining  factor  in  the  control  you  will 
get  and  you  will  never  get  that  until  the  employees  come  in  contact 
with  the  citizens. 

Commissioner  Sweet.  Have  you  not  omitted  the  most  imi^ortant 
point  of  It  all— and  that  is  the  business  handling  of  a  oreat  in- 
dustry, that  of  transportation  in  your  city,  and  if  that  is  not  con- 
trolled and  handled  by  men  of  intellect,  men  of  experience  and  men 
of  ability,  that  it  is  going  to  impose  upon  your  whole  community 
a  tremendous  taxation  that  ought  to  be  avoided  and  could  be  under 
some  other  form  of  management  ?    Is  not  that  true « 

ih^\^7T%  ^"  •  f  ^,?^^^?pti^i^  if  that  the  citizens  will  demand 
Sh  Kre^.en'^^"^^^^^^^^    ''  '""'^  ^^"^^^  ''  ^^^^^  ^^  ^  ^^^-^ 

and^o^Xrhi^^^^  ^'^^  ''''''''  ''~'  ^^"^^--  --^-^-^ 
Mr.  CouzENs.  Oh,  no. 

co2r  ifottact  sr """'  ''^  ^^'^'^''^^^  '^  '"'^'^  ^'^^  ^^-  --  ''^^y 

Mr.  CouzEX.*^  .\nd  the  amount  of  cars  and  the  condition  of  clean- 
rnh?  '^  the  frequency  of  the  cars;  that  is  the  reason  it  is  a  soci  1 
^on  W      I  ''-n  T'^'  ^  P\^  ^^  ^l^^^  ^^^^1  "^^^^  communitv  tha 

it  VX  Lf  ^^'  ^T''"-  .  ^^^  ^^'^'^'^  ^^^^PP^^^  ^''^  it  stops  traffic, 
It  IS  the  greatest  matter  of  interest,  showing  it  is  purelv  a  social 

matter,    ft  does  not  matter  so  much  if  it  is  a  private^planf  thei^'x^ 

a  dozen  private  plants  on  strike,  but  if  a  street-car  company-OS 

on^strike  it  is  carried  by  the  Associated  Press  all  over  the  coTm"tr^^ 

Comjnissioner  Sweet.  Your  idea  would  be  that  if  there  is  a  deficit 
It  would  be  paid  for  by  general  taxation.     Is  that  right  ^  ' 

Mr.  COUZENS.  Above  a  reasonable  amount,  yes,  for  fares     I  hnvc 
not  yet  reached  the  social  question  of  advocating  free  rides 

Commissioner  Sweet.  I  am  saying  now  on  what  you 'would  re- 

v^o.\.^Y  iV""  """T"^  ""^  compensation  that  the  companies  should 
leceive  for  those  who  use  the  street-cars,  sav  a  nickel,  if  that  proved 
insufficient  o  meet  tlie  requirements-that  is,  pay  the  opFv^nt 
exi^enses,  all  necessary  replacements  and  extensions  and  a  fair  in"- 
tei-est  upon  the  myestment,  such  interest  as  the  city  would  have  to 
};Y;/^.y  ^"^  tlie  money  it  borrowed  to  put  into  the  enterprise,  that 
It  It  failed  to  meet  tliat  requirement  and  there  was  a  deficiency— tliat 
deficiency  should  be  met  by  the  entire  population  or  the  taxpaying 
part  of  the  population.  l   ^^    ^ 

Mr.  CoTTZEXs.  Yes. 

Commissioner  Sweet.  Xo  matter  what  it  might  he, 
Mr.  CoTjzENs.  Yes. 

Coimnissioner  Sweet.  Of  course 

-Mr.  CouzExs.  I  want  to  say,  however,  in  admitting  that,  that  I 
clo  not  admit,  however,  that  it  is  necessary  under  municipal  opera- 
tion to  have  a  deficit  any  more  than  there  is  in  private  ownership 


1156     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  am  satisfied  that  had  the  city  of  Detroit  purchased  the  lines  in 
April  of  this  year,  when  it  voted  on  it,  that  we  would  have  been 
able  to  maintain  the  lines— outside  of  extensions,  of  course,  which 
IS  capital  investment — on  a  5-cent  fare. 

Commissioner  Sweet.  I  understand  youi'  position,  but  you  will 
admit,  I  think,  that  under  present  conditions  with  wages,  we  will 
say,  at  60  cents  an  hour,  and  materials  almost  double  what  they  were 
five  years  ago,  that  there  might  be  a  deficiency. 

Mr.  CouzENS.  That  is  true,  but  here  the  company  itself  only  seven 
years  ago  offered  2i-cent  fare  and  they  are  getting  100  per  cent 
increase  now.  The  company  itself  was  giving  eight  tickets  for  a 
quarter  on  part  of  its  lines  and  offered  eight  for  a  quarter  in  1912, 
and  in  1906  and  1907, 1  think  it  was,  offered  a  2J-cent  fare,  and  now 
they  are  getting  5  cents ;  so  they  have  not  been  without  increase  in 
revenue. 

Commissioner  Sweet.  I  am  not  saying  anything  at  all  now  about 
the  financial  situation  of  the  company  as  it  is  being  operated,  but 
I  am  simply  suggesting  that  the  conditions  that  have  occurred,  some- 
what unexpectedly  in  this  country,  and  such  as  njay  occur  hereafter 
might  produce  a  deficiency ;  and  of  course  you  would  not  deny  that. 

Mr.  CouzENS.  That  is  true. 

Commissioner  Sweet.  And  I  am  trying  to  look  forward  to  the  way 
in  which  that  would  be  met.  If  I  understood  you  right,  that  would 
l)c  by  general  taxation. 

Mr.  CouzENS.  Well,  that  must  be  qualified  to  the  extent  that,  if 
wages  and  everything  went  up,  that  I  would  not  say  that  the  fare 
would  have  to  be  stationary  forever.  Now,  the  Cleveland  plan  went 
from  3  cents  to  6  cents.  1  do  not  say  that  some  of  the  increase  in 
(he  increased  cost  of  operation  would  not  have  to  be  taken  care  of 
by  an  increased  fare.  I  could  not  say  you  would  have  to  maintain 
Ihe  fare  of  1914  in  1919. 

Commissioner  Sweet.  But  in  spite  of  all  that  you  might  do.  if 
you  were  running  the  road  as  a  city  proposition,  in  the  way  of  rais- 
ing fares,  you  do  not  deny  but  what  you  might  reach  a  point  where 
you  could  not  raise  enough  money  to  pay  all  the  expenses,  including 
the  interest  upon  the  investment,  so  that  there  would  be  a  deficiency 
to  be  met  in  some  way  ? 

Mr.  CouzExs.  Absolutely. 

Commissioner  Sweet.  And  if  there  was  that  ought  to  be  met,  I 
understand  you  to  say,  by  general  taxation? 

Mr.  CouzENs.  Yes;  or 'probably  if  there  had  been  much  put  in  the 
way  of  extension  of  operating  lines  that  are  not  self-sustaining  of 
themselves,  upon  the  property  benefited. 

Commissioner  Sweet.  If  a  street-railroad  company  owned  and 
oi^erated  by  a  private  corporation  were  to  receive  the  help  of  the 
general  public,  if  there  was  a  real  spirit  of  cooperation,  the  paving 
lietween  the  tracks  and  a  little  outside  being  removed  and  a  lot  of 
these  other  burdens  resting  upon  them  in  the  way  of  taxation  were 
removed,  do  you  not  think  at  the  present  time  the  street-railway 
situation  m  the  United  States  would  be  quite  different  from  wWt 
it  is  to-day? 

Mr.  CouzENs.  I  do  not  think  so,  because  the  companies  would  still 
be  wanting  more,  because  somebody  else  got  more.     You  know  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1157 

psychology  of  that  thing     If  you  raise  one  man's  income,  another 

wants  his  raised ;  and  if  the  going  is  good  and  everybody  is  grabb  ng 

A?  ^w^' *^'^  "^""^P^^y  ^^"^^  b^  ^n  demanding  theirs  ^'^^^^^^ 

Mr.  Warren.  Do  you  mean  the  company  or  the  employees? 

Mr.,  COUZENS    No;  the  company.    If  it  was  carryiif^tS  for  5 

T^^'f  /^  ^""^  ^^T  ^^'  ^  ^^^  P^^fit  «f  n  or  2  cen  sTan^hen  in 
1919  It  got  down  so  there  was  only  half  a  cint,  they  would  bl  in  for 
more  money  so  as  to  get  their  H  or  2  cents,  as  the  c^se  mav  bL  the 
^X^I&t^:''^'  ^^  ^^---  ^^  revenueln^tVoi^ 

TeirVaSroS:  SL^\^ 

examined  the^rh^^^^^      f^^''  speak-where  public  accountants  havi 

Mr  CouzENs   Well,  they  are  arbitrating  for  7  per  cent  now    Tl,<.v 
want  7  per  cent  now ;  and  that  is  not  an  unnatural  thW  ^ 

7  p?rrntTprt!rbonS ''  ^"-  ^"^  --"'  -  '^^'"^^y  -^  pay 

Mr.  CouzENs.  Yes;  upon  their  stock. 

Sr=r  srtreir'iS'^  ''^^^  ^^  ^^^  ^'^^  •'-^^^ 

Mr.  Warren.  That  is  at  Cleveland? 
Mr.  CouzENs.  That  is  Cleveland, 
j^  Commissioner  Sweet.  They  have  no  bonds  to  speak  of  in  Cleve- 

Mr.  CouzENS.  No ;  not  many. 

6  per  ceTt""'"-  '^'''^  '^''"°  ^^^  ''''^^  »«*  «««*  additional  stock  at 

able  tVr^iraVditiral^l^X Tr^^^^^^^  be 

ng  r^c^t  ^^the^r''^*  V^  ernot\Sald''w^hoX'a;' 
Mr  CouzEKs  Yn?,  IS  there  anything  unreasonable  in  that  ?       ^  ^ 

street-railway    lines      Sn     ,1W   '**"*    ^'"'^^  ^-P^'"  '^^^t  for  their 

and  4J  or  4.3  per  cent  tha't  D^ok^fg  Utfrn^ffo^^'^  """*' 

eno,^rtTpaTf?rThe  ft^T  ^Z"'^'  '^'''  '^^   "'"  ^hTt  borrowed 

creasf  its  dehMin,^f   •#  .«*'.eet-railwajr  system  would  so  largely  in- 

rease  its  debt  limit,  if  it  increased  its  own  bonds  for  the  purp<^, 


1158    PROCEEDINGS  OF  FEDERAL  ELECTPJO  RAILWAYS  COMMISSION. 

and  if  it  did  not  it  could  not  gH  th^  low  rate  voii  speak  of,  that 
If  the  city  of  Detroit  bought  the  Detroit  United  Railways,  it  could 
not  sell  its  bonds  on  the  same  interest  basis  it  does  to-day. 

Mr.  CouzENS.  That  is  not  true  of  other  cities  who  have  a  much 
larger  bonded  indebte<lness  than  Detroit— take  New  Orleans  or  San 
J^  rancisco. 

Commissioner  Beai.l.  I  would  not  agix-e  with  vou.  I  do  not  think 
""iL^^J.^  ^^^"^^  in  this  counti^  would  agree  with  that  statement. 

Mr.  CouzENS.  Well,  it  is  a  question  of  fact 

Comniissioner  Beall.  I  do  not  say  you  could  not  borrow  it  cheaper 
than  private  companies,  but  I  say  you  would  have  to  pay  a  good 
deal  more,  ^ 

Mr.  CouzExs  I  siiy  that  you  would  not  have  to  pay  a  good  deal 
more.  We  might  have  to  pay  a  little  more.  Take  New  Orleans  and 
ban  I^ rancisco  with  their  bonded  indebtedness;  they  do  not  pay 
much  more  than  Detroit  with  its  little  l)onded  indebtedness. 

Commissioner  Beaix.  It  pays  moi-e. 

Mr.  CouzEx.  Yes;  but  not  a  great  deal  more. 

•  ^fi'  l^lV^^^'^'-nA  ^f^^^  ^'*^«  I'^a^  ff<^n^  the  mayor  of  Seattle  stat- 
ing that  the  utility  bonds  issuerl  there  carried  o\^r  cent  interest,  I 
think.  ' 

Mr.  CouzENS.  Yes;  I  understood  that. 

Commissioner  Beall,  They  do,  and  you  could  not  sell  tliem  to-day 

Commissioner  Sweet.  If  it  were  deemed  a  matter  of  vital  im- 
portance that  money  should  be  borrowed  for  street-railway  pur- 
poses at  as  low  a  rate  as  possible,  could  not  that  be  accomplished 
by  the  municipality  guaranteeing  the  bonds  of  the  s-treet-raiiroad 
company  if  it  wanted  to? 

Mr.  CouzExs.  It  could ;  yes. 

Commissioner  Sweet.  And  get  it  at  as  low  a  rate  as  the  munici- 
pality could? 

^Ir.  CouzExs.  Well,  I  do  not  think  a  guaranteed  bond  is  quite 
as  ^ood  as  a  straight  obligation. 

Cx)mmissioner  Sweet.  But  approximately  at  as  low  a  rate, 

Mr.  CouzExs.  Tliere  is  some  difference.  ' 

Commissioner  Be.\lu  There  could  not  be  any  who  %vould  do  it 
unless  by  law  they  could  make  that  bond  good  ^y  municipal  taxes, 
and  if  you  do  that  vou  are  extending  the  credit  and  might  as  well 
issue  your  own  bonds. 

Commissioner  Sweet.  Yes;  it  woukl  amount  to  practically  the 
same  thing.  j       ^ 

Mr.  CouzEXs.  Tliere  is  not  Any  way— you  can  ^art  off  on  all 
kinds  of  roads  but  you  will  come  back  to  the  question  that  the 
municipality  itself  can  operate  its  system.  Even  if  it  costs  a  lit- 
tle more,  it  is  much  more  satisfactory  to  the  citizens.  I  still  con- 
tend that  government  is  organized  for  the  benefit  and  for  the  serv- 
ice and  conveni^ce  of  all  the  people.  It  is  not  so  much  the  ones- 
tion  of  one-eighth  or  one-quarter  i>er  cent  on  your  bonds  as  it  is 
to  give  the  i^eople  what  they  ought  to  have;  and  they  ouffht  to 
have  it.  ,7        t^       vv^ 

Commissioner  Sweet.  ^\liat  you  have  told  us  is  very  interesting 
Mr.  CorzEXs.  I  am  afraid  it  is  nothing  new. 
C^ommissioner  Sweet.  And  I  think  we  all  feel  verv^  grateful  to 
you  for  coming  here  and  giving  us  your  views. 


PROCEEDIKGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1159 

Mr.  CouzEXs.  Thank  you. 

Commissioner  Beall.  I  want  to  ask  the  mayor  a  question  just 
for  our  information,  you  understand-this  is  only  for  information. 
Is  It  true  that  m  Detroit  you  have  had  lower  fares  on  the  averacre 
for  quite  a  number  of  years  past  than  most  of  the  cities  of  approxi^ 
niately  the  same  size  ? 

Mr.  CouzENs.  I  could  not  answer  that.  I  think  it  is  true  in  the 
last  two  years. 

Commissioner  Beaix.  I  think  that  is  true 

Mr.  CouzENs.  I  think  it  is  true  in  the  last  two  years. 

Commissioner  Beall.  I  am  just  asking  this  for  information. 
JJoes  not  the  company  contend  that  it  is  an  unusual  situation,  that 
tlHiy  make  good  money  out  of  their  interurban  lines  that  has  en- 
abled them  to  carry  the  city  proposition  ? 

Mr.  CouzENs.  Do  you  say  they  make  that  statement  ? 

Commissioner  Beall.  I  think  they  do 

Mr.  CouzExs.  I  could  not  say.  I  know  they  have  asked  for  more 
money  on  some  of  the  interurban  lines. 

Commi^ioner  Beall.  Are  you  able  to  say  whether  that  is  true 
or  not?     I  have  understood  it  was  true  that  the  surface  fares  thev 

wWlf  1  n?f  '"  ^«'7?'\'^'d  "«t  '"■ing  ^  proper  return  on  the  money 
V  hich  had  been  put  in  the  property,  and  the  reason  they  were  abfe 
to  pay  their  fixed  charges  was  because  thev  were  very  fortunate 
unlike  most  similar  companies,  in  making  r'eal  money  out  of  their 
interurban  roads  As  a  role,  they  are  unprofitable;  but  in  their 
ease  they  are  profitable      Do  you  know  whether  that'  is  so  or  not « 

^n^!L\i'T'"'- .  ''''"'*f  "°f  ^^  ^"""^  ''"^^^^^"^  "^«y  Jia^e  made  that 
.'.jx'cific  statement  or  not.    A  representative  of  the  company  is  here 

and  can  tell  vou.    I  know  they  claim  they  do  not  make  enough  off 

vL.  1010^  ^'  ^"?^'  '''"»°"Sl»  "»  •""king  their  statement  to  us  fSr  the 
jeai  1919,  fagunng  no  return  except  interest  on  bonds,  thev  showed 
only  a  very  small  deficit,  even  of  the  completed  year 

Commissioner  Beall.  If  that  be  true— I  do  not  know  that  it  is 
m.nd  yon-that  wou  d  be  one  thing  you  would  have  to  contend  with 
m  mimicipal  ownership.  1  ou  could  not  give  the  same  service  thev 
are  giving  at  the  same  rate  of  fare  unless  you  had  a  deficit  which 
you  could  pay  out  of  general  taxes  or  in  such  way  as  you  deemed 

fof  informer  "'^"*""  ""^'^'^  '"  ""^'"^  ""^^     ^  ^^^^^  ^^i 

Mr.  CouzENs.  I  understand. 

Commissioner  Beall   And  I  do  not  know  that  that  is  true. 

Mr.  COUZEXS  \V  ell,  I  do  not  know  just  what  the  results  under 
the  operation  of  the  pre.sent  fare  will  be.  They  do  not  know  They 
are  guessing  at  it  and  we  are  guessing  at  it.     They  have  had  the 

Xt';^^^,^nVwm  S.^*'"*-^'^  ^"'^^-  "•"'  -^  ^«  -*  ^°-  i-' 

inr^^f  ?'°"'"'  wl"'*'  J  "^"^  speaking  of  the  time  before  their 
mereased  fare,  whether  they  were  not  really  running  at  a  loss  and 
making  it  up  on  their  interurban  lines.  ^  ^""^ 

¥ou  asked  TfThJ"!'  ^}'%'^.f^r^-  Their  figu«s  do  not  show  that. 
,t.^  I  <■  f^  •  i'*®^  claimed  it.  I  do  not  know  whether  they  have  or 
not,  but  their  figures  show  tliev  did  not 

eisliin"n!.llT'"  !!'''"'•  ""7/°"  «".y  %»>-es  as  to  nnmicij^al  own- 
eislup,  or  it  IS  rather  evolved  from  your  own  mind  ? 


1160    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CouzENS.  I  have  a  great  deal  of  information  in  regard  to 
street  railways  in  Europe,  but  not  in  this  country,  because  it  has  been 
tried  only  in  a  very  few  cases,  and  the  most  outstanding  one  is  San 
I  rancisco,  where  it  has  been  satisfactory. 

Commissioner  Beall.  The  European  companies  are  operating  on 
the  zone  system ;  are  they  not  ? 

Mr.  CouzENS.  Yes. 
^  Commissioner  Beall.  Is  not  the  municipal  street  railway  in  San 
Francisco  a  comparatively  shoi-t  line  and  operating  in  dense  streets 
where  they  get  dense  traffic?    You  could  not  apply  the  results  they 
would  obtain  if  they  were  operating  the  whole  city  system. 

Mr.  CouzENs.  I  think  we  could  because  they  have  competition, 
and  if  the  city  owned  all  the  lines  they  would  not  have  competition. 

Commissioner  Beall.  But  have  they  any  competition  in  the  sense 
vou  speak  of?  They  have  lines  only  on  short  streets  with  dense 
hauls  and  a  great  deal  of  traffic,  and  is  it  not  true  since  they  have 
made  a  few  extensions  it  has  pulled  their  profitable  operation  down 
quite  a  little? 

Mr.  CouzENS.  Their  chief  engineer,  who  was  in  Detroit  recently, 
said  they  had  competition  on  Market  Street  where  they  paralleled 
each  other. 

Commissioner  Beall.  But  that  is  the  best  street  in  the  city. 

Mr.  CouzENS.  Well,  I  can  not  tell  on  a  theoretical  basis  what  the 
i-esult  would  be.     You  are  talking  about  a  theoretical  condition. 

Commissioner  Beall.  You  know  in  Detroit  there  might  be  cer- 
tain streets  where  two  lines  would  pay  for  a  certain  distance,  but 
you  undoubtedly  do  know  there  are  certain  other  streets  where  two 
lines  will  not  pay. 

Mr.  Couzens.  But  you  asked  what  it  is  paying  in  San  Francisco? 
I  do  not  know. 

Commissioner  Beall.  But  you  could  not  meet  the  situation  for 
the  whole  city  on  a  few  short  streets,  could  you  ? 
^   Mr.  Couzens.  I  am  not  saying  that  they  could,  but  I  am  not  guess- 
ing at  it  because  I  do  not  know. 

Commissioner  Sweet.  The  zone  system  exists  in  Europe  a  good 
deal,  does  it  not? 

Mr.  Couzens.  Yes. 

Commissioner  Sweet.  Are  you  in  favor  of  the  zone  system? 

Mr.  Couzens.  I  would  not  like  to  say  offhand.  Under  certain 
circumstances  I  would  be  in  favor  of  it.  Under  some  system  of 
not  too  short  zones  I  might  be  in  favor  of  it. 

Commissioner  Sweet.  Would  not  the  zone  system  operate  against 
your  sociological  considerations? 

Mr.  Couzens.  Well,  they  claim  not.  I  was  talking— and  I  am 
talking  out  of  mouth  here,  without  knowing  the  facts,  or  givino-  any 
close  study  to  it— but  there  was  a  man  called  on  me  from  the 
American  Electrical  Journal— I  think  his  name  was  Mr.  Jackson— 
who  has  just  returned  from  Europe,  when  he  returned  a  month  or 
so  ago,  and  he  said  it  did  not  operate  that  way. 

The  Chairman.  He  will  testify  before  us  'in  a  few  days. 

Mr.  Couzens.  AVell,  this  may  be  subject  to  correction— but  he  said 
the  zone  system  did  not  operate  for  the  congestion  of  the  center 
districts,  much  to  his  surprise. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1161 

Commissioner  Sweet.  Would  not  your  own  judgment  tell  you 
that  if  peope  living  m  the  suburbs  or  out  maybe  8  o?  10  miles  from 
Detroit,  could  get  mto  Detroit  by  paying  a  icent  fare,  tha^  n  o^ 

fay'flo  ^nts  ?     "  "  '^""  ^"^^^'^'"^  ''''''  ^^  ^^^^  ^^^  '^  paj"  we  wm 
Mr.  Couzens.  That  is  my  judgment;  yes. 
Commissioner  Sweet.  It  would  look  that  way. 
.  Mr.  Couzens.  Yes.    You  asked  me  from  my  sociological  point  of 

tTa7  n^t'I  ?f  ''"V^  iT"^.^^  '^''^  ^i*h  t^-t;  andTshoZ  say 

K  so  as  ?o  ^nfeh^^      ]'  ^VK  K'^^'  ^^^  ^^ould  have  onl 
rare,  so  as  to  invite  the  people  out  into  the  countrv ;  but  I  am  defpr 

ring  now  a  conclusion  on  that  point  until  I  really  hkve  some  definite 
mformation,  because  I  was  only  talking  theoretical  y.  "^ 

\t  AX^.t'^'^'^^f^H'''^^.  '^^'y  ^^"^^^  obliged  to  you.  ^ 
Mr.  Warren.  May  I  ask  one  or  two  questions? 

Mr.  Mayor,  as  I  understand  your  meaning  of  this  beimr  a  social 
Tc  ty":  aiXT^^^^^^^  like  this  that  the  ftreet  trlnspoftad^^^^^^^^ 
and  the  deSment  nf  f^^^^  importance,  vital  to  the  health 

t  ine  aeveiopment  of  the  city  and  prosperity  of  the  neonle  tliat 
It  ought  to  be  furnished  at  cost  where  it  cin  hp-  W  i?  ?w  I 
rpflphpQ  a  r^r^iTif  o^  u;^i   i-u  J.  -V  1    ^^^«^«  At  can  De,  but  it  that  cost 

str^t,  and  when  you  extend  streets  out  into  the  communfty  for  p^S 
to  live  m  and  extend  water  and  sewers,  why  are  not  the/entitkd  to 

geSnVaride?  '""''  "'  ^'^"^^  ^""^  "^^  ^"  '^'  congested TorSf aS 
Mr.  Warren.  Except  that  you  are  not  prepared  vet  to  mike  <!trp«f 
railway  transportation  free  L  the  same  way  that  tUhSwafha; 

Mr    Couzens.  That  is  substantially  correct.     In  a  few  vears  I 
tef  rides'  "  «°"^l»«i°«.  after  e/perience,  that  I  woulf  favoj 

*I.i!!t  fw""'^''--  ^■^^'■'f  ^^^""^  P<^<>P^«  fa^or  ^^^^t-  But  you  do  not 
think  the  time  is  ripe  for  that  yet?  ^ 

Mr.  Couzens.  I  do  not  want  to  jump  at  that  yet.    I  want  to  wait 

^iTllttJ  ^'''"^  '^^^  "  -hy  D«tToit-I  thLk  somrbody  should 
s.tart  municipal  ownership  and  operation  of  these  urban  lines  so  as 
to  teach  the  lines  what  a  great  social  question  it  is  and  that  it  can  bf 
done  and  must  be  done  before  it  is  solved. 

..;A  ^^'^''''?''-  And  if  it  can  not  be  done  at  the  expense  of  the  car 
uder  except  by  restricting  his  use  of  it,  then  it  must  be  done  in  part 

mal  hi  A-  l^i  ?f^'"'"  ""^^^^  S^^^"-^!  P^l'lic,  however  that  expense 
Jiaily?    ^•«'"^»t''d  °^"-  th«  general  public,   'is  that  right,  subC 

Mr.  Couzens.  That  is  substantially  correct. 


1162     PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  That  is,  in  a  rough  way  the  taxpayer  must  help  out 
the  car  rider  if  the  cost  reaches  a  point  where  the  car  rider  can  not 
afford  to  meet  it  without. 

Mr.  CouzENS.  On  the  same  assumption,  if  a  factory  can  not  get  its 
help,  as  it  can  not  when  there  is  a  strike  on,  it  sends  and  gets  its 
help  and  brings  them  to  the  plant  and  hauls  them  home.  It  recog- 
nizes, does  it  not 

Mr.  Warren.  Yes. 

Mr.  CouzENS.  That  the  transportation  is  indispensable  to  its  whole 
existence ;  therefore  it  pays  for  it. 

Mr.  Warren.  And  you  think  that  the  community  as  a  whole  is  in 
that  same  position  ? 

Mr.  CouzENS.  Is  getting  there. 

Mr.  Warren.  Is  getting  there? 

Mr.  Couzens.  Yes. 

Mr.  Warren.  And,  as  I  understood  you  fuilher,  if  the  situation 
has  developed,  whatever  may  be  the  reason,  so  that  the  cost  of  the 
service  threatens  to  become  greater  than  the  car  rider  can  meet,  the 
public  in  some  way  must  bear  a  part  of  that  burden,  and  you  believe 
the  only  way  the  public  would  be  satisfied  to  bear  it  would  be  under 
some  form  of  municipal  ownersliip? 

Mr.  Couzens.  Absolutely;  I  loiow  they  will  never  agiee  to  turn  it 
over  to  private  persons. 

Mr.  Warren.  If  it  has  got  to  be  subsidized  or  helped  out  at  the 

public  expense? 

Mr.  Couzens.  Yes. 

Mr.  Warren.  Now,  Mr.  Mayor,  tliis  recent  proposition  which  you 
mentioned  as  having  been  voted  down  at  Detroit  for  municipal 
ownership  of  the  street  railways  was  at  a  price  of  $31,500,000, 1  think 

you  said? 

Mr.  Couzens.  Yes. 

Mr.  Warren.  AVas  that  price  reached  after  some  sort  of  valuation 
of  the  proi^erty  ? 

Mr.  Couzens.  It  was  reached  after  considering  a  number  of  valua- 
tions made  by  a  number  of  different  concerns,  and  it  was  a  compro- 

mise  v)rice. 

Mr.  Warren.  Did  the  city  have  some  valuation  made? 

Mr.  Couzens.  The  city  had  some  figures  made  by  Barclay,  Par- 
sons &  Clapp,  some  year'^and  six  months,  I  think,  or  a  year  previous 

to  that. 

Mr.  Warrex.  Do  you  recollect  what  that  was? 

Mr  Couzens.  Roughly,  I  think  it  was  somewhere  about  $27,000,000. 

Mr.  Wabren.  You  do  not  think  it  was  $30,000,000? 

Mr.  Couzens.  Oh,  no. 

Mr.  Warren.  I  had  an  impression  it  was  $30,000,000. 

Mr.  Couzens.  Xo.  If  I  remember  correctly,  it  was  about 
$27,000,000. 

]\Ir.  Warren.  You  spoke  of  your  solution  of  the  trouble  in  Deti-oit 
as  being  this,  if  I  caught  your  testimony  correctly,  that  all  these 
lapsed  franchises,  expired  franchises  which  represented,  roughly, 
three-quarters  of  all  m  the  city— that  was  right,  was  it  not,  thre§- 
qu  a  iters 

Mr.  Couzens.  Yes. 


PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION.    1163 

Mr.  Warren.  You  would  order  the  tracks  up? 

!Mr.  Couzens.  Yes. 

Mr.  Warren.  And  then  begin  oi>eration  by  the  city  ? 

Mr.  Couzens,  Yes. 

Mr.  Warren.  I  supjwse  you  had  in  mind  that  you  would  begin 
operations  by  the  city  on  the  tracks  which  the  city  had  orderevl  to 
be  taken  up. 

Mr.  Couzens.  That  would  depend  upon  the  attitude  of  the  com- 
pany. If  the  company  should  say  to  the  city,  "  We  can  not  afford  to 
take  those  tracks  up  and  replace  the  pavement  as  ordered  by  the 
supreme  court.  We  therefore  will  offer  you  the  rails  at  a  price 
which  may  be  a  little  more  than  we  could  get  out  of  them  for  scnip 
and  less  than  the  city  would  have  to  pay  for  new  rails  " — in  otlier 
words,  it  would,  then  seem  to  me  a  question  for  negotiation  as  to 
whether  the  company  would  actually  go  aliead  and  take  up  its  tracks 
and  replace  the  j^avement  or  sell  to  the  city. 

Mr.  AYarren.  But  your  idea  is  that  the  city  would  get  them  ap- 
proximately at  the  scrap  value  ? 

Mr.  Couzens.  Approximately;  yes. 

Mr.  Warren.  Have  not  these  tracks,  as  a  matter  of  fact,  two 
values;  very  different  values? 

Even  after  you  have  ordered  them  up,  you  have  ordered  them  up, 
but  they  are  still  in  the  streets.  As  far  as  the  street-railway  com- 
pany is  concerned,  you  look  at  it  that  it  is  only  a  scrap  value,  because 
if  they  take  them  up  they  have  to  replace  the  street,  and  they  have 
nothing  but  what  you  might  call  junk  for  sale? 

Mr.  Couzens.  Yes. 

Mr.  Warren.  On  tlic  other  hand,  the  city  wants  some  tracks  in  the 
street,  and  if  the  company  does  take  them  up  and  sell  them  for  junk, 
or  threatens  to,  have  not  the  tracks,  until  they  are  taken  up,  a  value 
to  the  city  which  is  represented  by  what  it  would  cost  the  city  to  take 
up  the  streets  again  and  lay  new  tracks  there,  less  whatever  depre- 
ciation there  is  in  this  junk? 

Mr.  Couzens,  Tliat  is  what  I  meant  by  saying  that  if  that  condi- 
tion arose  there  would  be  negotiations  between  the  companj^  and  tlie 
city,  whereby  we  would  probably  pay  more  than  what  they  would 
realize  for  them  as  junk,  and  we  would  get  them  for  less  than  what 
we  would  have  to  pay  for  them  if  we  replaced  them. 

Mr.  Warren.  8o  that  you  did  not  mean  to  give  the  impression  that 
you  would  order  the  tracks  up  in  order  to  get  them  at  junk  value? 

Mr.  Couzens.  Oh,  no, 

Mr.  Warren.  But  simply  to  bring  the  matter  to  a  head  ? 

Mr.  Couzens.  Y^s, 

Mr.  Warren.  Was  not  the  appraisal  or  valuation  that  Mr.  Bar- 
clay's firm  made  made  substantially  on  that  basis  ?  Did  he  not  figure 
on  what  those  tracks  were  worth,  less  depreciation? 

Mr.  (Couzens.  I  think  he  did. 

Mr.  Warren.  So  that  really  his  figure,  if  it  was  made  with  proper 
skill,  did  represent  certainly  not  more  than  the  value  of  those  tracks 
to.tiie  city,  if  the  city  were  going  to  operate  the  railwav?  I  suppose 
th^t  is  your  judgment,  or  you  would  not  have  submitted  it  to  the 
voters  anvwav? 

Mr.  Couzens.  It  was  repeatedly  said  during  the  campaign  that  the 
price  was  too  high;  but  it  would  avoid  loss  in  another  direction, 


1164    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

through  dehiy  in  getting  the  service.  We  wanted  to  avoid  delay  in 
getting  the  whole  matter  cleared  up,  so  that  the  city  could  progress 
along  the  lines  which  it  needed  to  progress  Upon. 

Mr.  Warren.  So  that,  under  all  the  circumstances,  in  your  judg- 
ment, the  proposition  was  a  fair  one  of  $31,500,000? 

Mr.  CouzENS.  No;  I  did  not  think  it  was  a  fair  one.  It  was 
the  best  I  could  get. 

Mr.  Warren.  It  was  good  enough  so  that  you  advocated  it? 

Mr.  CouzENS.  I  advocated  it  not  because  it  was  good  enough  but 
be.-ause  I  could  not  get  anything  better. 

Mr.  Warren.  You  could  not  get  anything  better  even  by  ordering 
up  the  tracks? 

Mr.  CouzENS..  Yes;  I  might  have  done  that;  but  I  would  have  to 
get  the  consent  of  the  people  to  do  that.  I  thought  I  could  get  at  it 
a  shorter  way.  I  thought  time  was  of  some  value,  and  I  was  willing 
to  pay  more  for  the  time  which  would  be  gained. 

Mr.  Warren.  The  city  government  could  not  order  up  the  tracks 
Avithout  a  vote  of  the  people  ? 

Mr.  CouzENs.  Well,  the  council  could  order  up  the  tracks,  but 
it  would  have  to  have  some  money  to  replace  them  with,  and  would 
have  to  have  a  vote  of  the  people  to  get  the  money  to  replace  them. 

Mr.  Warren.  You  spoke  of  the  fact  that  the  company  had  failed 
to  amortize  its  investment  during  the  life  of  the  franchises? 

Mr.  CouzENs.  Yes. 

Mr.  Warren.  Are  not  all  your  charters  in  Michigan  limited  in 
time  to  a  term  of  years?  Take  your  own  company — I  will  not  say 
your  own  company,  but  the  company  you  referred  to — the  Ford 
Motor  Co. :  Does  that  have  an  indefinite  charter,  or  a  30-year  char- 
ter? 

Mr.  CouzENS.  A  30-year  charter. 

Mr.  Warren.  I  do  not  suppose  you  would  think  it  proper  that 
the  Ford  Motor  Co.  should  lose  all  its  property  at  the  end  of  the 
30-year  charter? 

Mr.  CouzENs.  I  think  that  is  a  rather  ridiculous  question. 

Mr.  Warren.  I  think  it  is,  too;  but  I  think  the  assumption  that 
the  street  railway  should  lose  its  property  is  also  perhaps  in  the 
same  category. 

Mr.  CouzENs.  In  the  one  case  you  are  talking  about  a  charter 
and  in  another  case  we  are  talking  about  using  the  public  highways. 
In  the  one  case  it  is  a  private  charter,  a  charter  granted  by  the 
State  for  a  private  corporation,  not  using  any  public  facilities  or 
having  a  monopoly.  A  charter  granted  to  the  railroad  company 
is  for  a  specific  time  to  use  specific  streets.  And  I  am  not  talking 
about  the  company's  losing  its  charter.  I  do  not  care  anything  about 
that.  I  am  saying  that  the  time  when  they  had  a  lease  to  those 
streets  is  up,  and  they  should  have  taken  care  of  themselves  during 
the  time  that  they  had  that  right,  the  same  as  when  you  construct 
a  building  on  leased  property,  you  have  to  remove  the  building 
and  get  off  when  the  lease  is  up. 

Mr.  Warren.  Yes;  but  to  do  that  you  have  to  charge  a  !r^nt 
durinjr  the  time  of  lease  sufficient  to  amortize  the  cost  of  the 
building;  do  you  not? 

Mr.  CouzENS.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1165 

Mr.  Warren.  In  the  case  of  the  city  of  Detroit,  is  it  your  impres- 
sion, or  perhaps  your  knowledge— very  likely  you  know  the  fact^- 
that  the  rates  charged  by  the  company  have  been  sufficient  to  amor- 
tize this  $30,000,000  during  the  life  of  the  franchise? 

Mr.  CouzENs.  I  am  satisfied  that  the  rates  have  been  high  enough 
to  amortize  the  bonds  issued  against  the  company. 

Mr.  Warren.  And  the  stock? 

Mr.  Couzens.  I  can  not  answer  for  the  stock,  because  the  stock, 
as  I  said  before,  is  spread  over  all  their  property  in  and  out  of 
the  city. 

Mr.  Warren.  Put  it  in  another  way 

Mr.  Couzens.  If  they  did  not  scramble  their  accounts  so,  and 
scramble  their  books  so,  we  could  get  at  the  figures,  and  we  would 
know ;  but  we  can  not,  by  the  mere  statement  of  capitalization,  de- 
termine whether  that  is  so  or  not. 

Mr.  Warren.  Omit  the  bonds  and  stock,  and  take  the  valuation : 
Do  you  think  that  the  rates  they  have  charged,  which  I  understand 
you  to  say  so  far  as  you  know  are  among  the  lowest,  if  not  actually 
the  lowest  m  the  country,  have  been  enough  to  pay  a  fair 

Mr.  Couzens.  I  beg  your  pardon.  I  don't  want  to  let  you  get 
away  with  that  kind  of  a  statement.  I  did  not  say  that  the  fares  had 
been  the  lowest  in  the  country. 

Mr.  Warren.  I  beg  your  pardon.     What  did  you  say  then  ? 

Mr.  Couzens.  I  said  in  the  last  few  years. 

Mr.  Warren.  Oh,  yes. 

Mr.  Couzens.  Because  over  a  period  of  time  back  over  a  number 
of  years  the  Cleveland  street  railroad  had  a  much  lower  fare  than 
Detroit  had. 

Mr.  Warren.  Have  they  ever  been  over  5  cents  in  Detroit? 

Mr.  Couzens.  Yes. 

Mr.  Warren.  The  rates? 

Mr.  Couzens.  In  Detroit? 

Mr.  Warren.  Yes. 

Mr.  Couzens.  Not  that  I  know  of. 

Mr.  Warren.  Not  that  you  know  of  ? 

Mr.  Couzens.  I  think  not. 

Mr.  Warren.  Do  you  think  the  rates  have  been  high  enou<yh  in 
Detroit,  never  having  been  over  5  cents,  so  that  the  company  could 
have  paid  a  fair  return  on  the  value  of  the  property  which  it  had  in 
the  city  of  Detroit  and  amortize  the  entire  value  of  that  property? 

Mr.  Couzens.  It  would  depend  upon  what  basis  they  make  exten- 
sions. If  they  had  taken  the  original  value  of  the  property  and  the 
specific  franchise  that  was  granted  for  the  original  investment— be- 
cause the  franchises  have  been  staggered,  you  know ;  they  have  not 
all  been  alike — if  they  would,  on  each  piece  of  property,  have  made 
no  extensions  except  with  the  definite  understanding  as  to  the  length 
of  time  that  these  extensions  w^ould  be  permitted  on  the  highways, 
they  could  have  provided  a  fund  to  amortize  the  bonds. 

Mr.  Warren.  To  amortize  the  investment? 
,.Mr.  Couzens.  To  amortize  the  investment. 
(Mr.  Warren.  The  whole  investment? 

Mr.  Couzens.  Yes. 

Mr.  Warren.  You  think  they  could  ? 


1166    PROOEEDIKGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  CouzENS.  Less,  probably,  tlie  junk  value. 
Mr.  Warrex.  Yes;  less  the  Junk  value. 
Mr.  CouzENs.  Yes. 

Mr.  Warren.  How  long  liave  those  franchises  averaged;  do  you 
know  ? 

Mr.  CouzENs.  I  Uiink  that  the  Detroit  Railway,  so-called  Pingree 
lines,  were  25  years,  and  I  think  the  <^lier  was  30  years,  and  I  thinlv 
the  company  claims  some  in  perpetuity. 

Mr.  Warren.  But  ao  years  is  the  longest  you  know  of  that  have  a 
term  franchise? 

Mr.  CouzENS.  Yes. 

Mr.  Warren.  In  this  Pingi^ee  franchise,  which  carried  a  very  low 
fare,  the  city  built  the  foundation,  did  it  not,  for  the  tracks  and 
carried  the  pavement  expense  ? 

Mr.  CouzENS.  Yes. 

Mr.  Warren.  And  in  the  case  of  tlie  other  franchises  the  city 
did  not? 

Mr.  OouzENS.  They  did  not. 

Mr.  Waeren.  So  that  the  company  paid  that. 

Mr,  CouzENS.  Yes, 

Mr,  Warren.  That  is  all. 

(Witness  excused.) 

The  Chairman.  Wlio  is  the  next  witness? 

Mr.  Ogburn.  The  next  witness,  Mr.  Chairman,  is  the  chairman  of 
the  Rhode  Island  Public  Utilities  Commission,  Mr.  W.  C.  Bliss,  who 
ix^presents  the  commission  and  tJie  governor  of  Rhode  Island. 

STATEMENT  OF  MK.  WILLIAM  C.  BLISS. 

The  Ciiair:man.  Just  proceed  to  make  j^our  statement  in  your  own 
wav,  Mr.  Bliss,,  please. 

Ml'.  Bliss.  I  am  chairman  of  the  Public  Service  Commission  of 
Ixhode  Island. 

I  have  assumed  that  the  conunission  does  not  desire  detail,  but 
wishes  rather  the  general  conclusion  that  has  l)een  reached  by  the 
Public  X'tilities  Commission  of  Rhode  Island  and  the  history  of  what 
has  actually  taken  place  in  Rhode  Island  with  reference  to  dealing 
with  the  problem  tliat  Rhode  Island  trolleys  have  met  in  common 
with  the  trolleys  of  the  entire  coimtry. 

The  Rhode  Island  trolleys  consist*  of  four  companies,  the  Rhode 
Island  Co.  being  by  far  the  largest  one.  I  will  not  attempt  to  go  into 
detail  to  explain  the  details  of  the  Rhode  Island  Co.,  but  I  will  file 
with  the  commission  a  report  of  the  special  commission  for  the  inves- 
tigation of  the  affairs  of  the  Rhode  Island  Co.,  the  commission  con- 
sisting of  myself  as  chairman  of  the  public-utilities  commission,  the 
chairman  of  tlie  State  tax  commission,  and  the  State  bank  examiner, 
who  was  specially  appointed  by  the  legislative  enactment  in  April  qf 
101 T  to  make  a  report  upon  tlie  affairs  of  the  Rhode  Island  Co, 

That  report  was  filed  in  March,  1018,  with  the  legislature  and  con- 
tains in  detail  the  report  of  this  special  cmnmissiou  dealing  with 
the  problems  with  which  this  Federal  commission  is  now  concerned 
and  giving  the  detailed  valuation  of  the  properties  made  by  the  engi- 
neer employed  by  the  State  conunissioii,  and  also  the  valuation  as 
made  by  the  company's  engineers,  Ford,  Bacon  &  Davis. 


PROCEEDIXOS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION,    1167 

The  Chaikmax.  What  was  tlie  reason  for  tliat  inve^igation,  Mr. 
Bliss  ? 

Mr.  Bliss.  The  critical  condition  of  the  Rhode  Island  Co.,  which 
was  being  operated  by  trustees  appointed  by  the  Federal  court  of 
the  southern  district  of  New  York  as  trustees  of  the  stock  held  by  the 
New  York,  New  Haven  &  Hartford  Railroad  Co,  They  were  ap- 
ix)jnted  m  1013, 1  think,  so  that  since  1013  the  Rhode  Island  Co  has 
l>een  practically  m  cJiai^e  of  public  trustees  wlio  were  appointed  bv 
the  court  with  a  definite  instruction  to  manage  the  property  with  a 
due  regard  for  the  public  interest  and  convenience. 

They  managed  the  property  until  February  1, 1  think,  of  the  pi^s- 
ent  year,  when  the  operation  of  the  award  o£  the  War  Labor  Board, 
coupled  with  the  other  increased  costs,  forced  tlie  companv  into 
receivership  undei-  the  local  courts  in  Rhode  Island,  and  since  then 
the  proi^erty  has  been  operated  by  the  receivers,  and  at  the  present 
time  they  have  just  completed  a  strike  of  the  employees  coverinor  a 
period  ot  18  days,  which  wa^  finally  adjusted  by  agreement  upon  the 

•.Tro  f  f?''^^i?T  ^'''''''  maximum  wage-from  51  to  56,  comparing 
With  42  to  48,  which  wa.s  the  previous  wages. 

The  Chairman.  How  much  will  that  add  to  the  operating  costs? 

Mr.  Bliss,  It  will  a<ld  $640,000  a  year,  and  tlie  recovers  have  al- 
ready hied  application  with  the  commission  asldiig  for  increased 
rates  to  meet  the  situation  which  confronts  them. 

The  Chair:vxax.  What  rate  is  that  company  now  charging? 

Mr.  Bliss.  I  thought  perhaps  if  I  approached  the  subject*  of  the 
rates  ma  progressive  way  that  it  would  be  preferable.  Mr.  Chairman 

ine  Chair^ian.  I  beg  vour  pardon.    Proceed 

Mr.  Bliss.  And  I  will  try  to  deal  with  that  now. 

The  origmal  rates  of  the  Rhode  Island  to.  were  based  upon  a 
franchise  permitting  the  company  to  charge  a  5-cent  fare  within 
the   imits  of  each  city  and  town  within  which  the  company  operated 

The  municipal  limits  of  Providence,  the  extreme  limits  of  the 
city  of  Providence  A^^re  slightly  over  ^  miles;  and  while  the  oriffi. 
nal  hoi^se^ar  hues  did  charge  the  full  franchise  rate  into  tlie  outlvinir 
sections,  with  the  eiectiification  of  the  i-oad,  and  even  before  that 

.l^uTFu""^  ^""^  "^^^^  *?'  ^^  \*'  ^^^  ^'^^^^^^^^  ^"ia^g^  tl^ose  limits 
so  that  the  average  radius  from  the  traffic  center  of  the  citv  of  Provi- 

dence  was  about  4^  miles,  for  which  a  fare  of  5  cents  was  charged 
mere  were  some  exceptions,  however,  and  on  some  of  the  lines 

passengers  were  carried  a  distance  of  7i  miles  for  5  cents. 

Ihe  traffic,  however,  being  light  on  those  lines,  and  the  lines  beinor 

s^ste^  ^         '  ^^^^  ^^^  carried  by  tlie  other  parts  of  the 

The  transfer  limits  were  fixed  by  the  municipal  boundaries  of  ' 
J  ro^adence  so  that  the  5-cent  fare  limit  from  Providence  would 
average  4^  miles,  while  the  transfer  limit  onlv  extended  about  2^ 
iniles;  and  wherever  the  municipal  boandarv  happened  to  be  around 
tlie  traflic  center,  there  the  transfer  privilege  ceased. 
.  Vi^^  company  did,  where  there  were  irregular  -boundaries  or  iags 
m  the  city  of  Providence,  modify  that,  of  their  own  volition,  to 
arrive  at  a  somewhat  moro  equitable  limit  for  the  transfers 

1  hat  system  of  fares  was  in  oj>ei-ation  at  the  time  of  the  appoint- 
ment  of  that  special  commission  to  investigate  the  fares  of  the  Rhode 
island  Co.  m  the  spring  of  1017. 


1168     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  committee  was  authorized  to  make  an  investigation  into  the 
nrt'airs  of  the  Rhode  Island  Co.,  "to  make  an  investigation  into  the 
finances,  management,  property,  and  mode  of  operation  of  the  Rhode 
Ishind  Co.  and  other  matters  related  thereto,  tor  the  purpose  of  de- 
termining whether  or  not  the  company  is  furnishing  a  proper  trans- 
portation service  to  the  people  of  the  State,  and  whether  or  not  the 
net  income  of  the  said  company  is  a  fair  and  equitable  return  upon 
the  property  owned  and  controlled  by  it  and  devoted  to  the  public 
service." 

The  law  directed,  further,  that  "  upon  the  completion  of  its  in- 
vestigation the  commission  shall  determine  upon  such  modifications 
as  the  rates  of  fare  and  transfer  system  as  it  deems  just  and  equitable, 
and  to  certify  the  same  to  the  public-utilities  commission." 

The  public  utilities  commission  was  directed  to  order  the  Rhode 
Island  Co.  to  make  the  modfications  found  to  be  just  and  equitable 
by  the  special  commission,  and  certify  to  it. 

It  will  therefore  be  seen  that  the  Sta.te  law  which  provided  for 
the  investigation,  provided  not  only  for  a  report,  but  provided  for 
something  definite  to  be  accomplisned,  and  gave  full  authority  to 
place  it  into  effect. 

The  findings  of  the  commission  are  briefly  summarized  in  the  re- 
port which  I  will  leave  with  you,  and  which  I  believe  you  will  find 
will  give  vou  the  information. 

The  findings  were : 

That  the  Rhode  Island  Co.  is  furnishing  to  the  people  of  the  State  transpor- 
tation facilities  which  compare  favorably  with  that  furnished  in  other  cities 
of  approximately  the  same  size,  and  that  reasonable  provision  Is  made  for  the 
demands  of  the  traffic. 

Second,  that  the  Rhode  Island  Co.  does  not  receive  a  fair  and  equitable 
return  upon  the  property  owned  and  controlled  by  it  and  devoted  to  the  public 
service,  and  for  several  years  the  property  has  been  operated  at  a  heavy  loss. 

Third,  that  the  fair  value  of  the  property  owned  and  controlled  by  the 
Rhode  Island  Co.  and  devoted  to  the  public  service,  upon  which  the  company 
Is  entitled  ta  a  fair  and  equitable  return,  is  $29,000,000. 

That  compares  with  a  capitalization  of  $32,287,000,  and  compares 
with  a  valuation  of  the  company's  engineers  of  approximately  very 
near  $34,000,000,  and  compares,  as  the  body  of  the  report  will  show, 
with  an  investment,  as  nearly  as  it  could  be  determined,  of  $28.- 
802,590. 

The  Chairman.  Is  the  issue  of  capital  stock  and  bonds  under  the 
control  of  the  commission? 

Mr.  Bliss.  No. 

The  commission  has  been  in  existence  since  1912,  when  the  origi- 
nal act  was  passed.  The  membership  of  the  commission  has  remained 
intact  during  that  period.  There  has  been  no  proposed  legislation 
for  abolishing  the  commission  or  attempting  to  modify  its  powers, 
which  seems  to  be  the  favorite  practice  of  a  dissatisfied  public. 
Perhaps  we  have  avoided  it  on  account  of  the  small  size  of  our 
State. 

Commissioner  Meeker.  May  I  ask,  is  the  commission  appointed 
for  a  term  of  years? 

Mr.  Bliss.  Appointed  by  the  governor  for  a  term  of  six  years, 
with  the  advice  and  consent  of  the  senate. 

Mr.  Warren.  Did  you  say  how  many  commissioners  there  were? 

Mr.  Bliss.  There  are  three  commissioners. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1169 

I  might  say  that  I  am  by  profession  a  lawyer;  one  of  the  mem- 
bers of  the  commission  is  a  civil  engineer;  and  the  other  man  is 
the  editor  of  a  newspaper. 

Mr.  Warren.  The  vocations  are  not  a  part  of  the  statute  qualifi- 
cations I  siippose?  The  statute  does  not  indicate  what  callings  the 
appointees  shall  be  made  from,  does  it  ? 

Mr.  Bliss.  There  is  no  provision  of  that  kind  in  the  statute;  but 

uv  ^^J  provision  in  the  statute  that  they  shall  hold  no  other 
public  omce. 

.1  ^^^^, /9"^th  finding— and  I  diverted  from  it  a  little,  because  I 
thought  it  would  be  interesting  to  know  how  the  fair  value,  as  deter- 
mined by  the  comjnission,  compared  with  the  valuations  and  find- 
ings— is: 

Tliat  6  per  cent  is  a  fair  and  equitable  return  upon  tlie  property  owned 

^f'^  modification  of  the  present  system  of  fares  and  transfers  is  nec- 
essary to  provide  in  part  for  a  fair  and  equitable  return  upon  the  fair  vahfe 

The  recommendations  which  are  amplified  in  the  body  of  the 
report,  urst)  i 

That  primary  regulation  of  the  utility  be  by  the  public-utilities  commission. 

The  public-utilities  commission  has  revisory  power  over  all  fran- 
chises, ordinances,  rules  and  regulations  of  the  city,  but  the  city 
having  primary  regulation,  constantly  brings  about  the  opportunity 
tor  a  quarrel^  because  the  company  has  to  go  first  to  the  city  to  cet 
these  regulations,  and  if  they  are  refused  what  seems  to  the  company 
to  be  a  reasonable  regulation,  then  they  petition  the  commission  to 
override  the  local  city  government  there,  and  again  you  violate  the 
principle  of  home  rule,  which  I  assume  you  gentlemen  find  fre- 
quently meeting  you. 

The  Chairman  I  wish  you  would  develop,  Mr.  Commissioner, 
that  que^stion  of  the  quarrel  that  you  referred  to,  and  the  divided 
responsibility;  because  there  are  a  good  many  people  who  look  with 
the  St T^^  ^^^^  ^^  cooperation  between  the  municipalities  and 

Mr.  Bliss.  I  will  say,  as  a  matter  of  practice,  the  commission  have 
very  rarely  met  with  any  serious  difficulty  with  any  town  or  city 

We  have  encouraged  public  utilities,  not  only  the  traction  utili- 
ties,  but  other  utilities,  to  take  the  thing  up  with  the  city  authorities 
and  to  give  them  all  of  the  facts  of  the  case,  and  to  try  to  agree  with 
tiiem  before  coming  to  us.  j         b    ^  >viwi 

The  Chairman.  Can  they  come  to  you  first? 

Mr.  Bliss.  They  do  not.    We  encourage  them  to  go  to  the  cities. 

1  he  Chairalan.  But  can  tl^ey  come  to  you  first,  under  the  law  ? 

Mr  Bliss.  They  have  the  right  to  come  to  us  first ;  and  we  have 
lound  in  many  cases  thai  it  stirred  up  a  great  deal  of  ill  will  and 
very  serious  injury  to  the  utilities.  For  instance,  they  have  come  to  us 
fr  .iT  1  i^^""  fate  schedules  involving  an  increase,  without  a  word 
to  the  local  authorities  of  the  towns  and  cities  who  formerly  had 
jurisdiction  over  those  matters.  ^ 

As  a  matter  of  policy,  the  companies  who  have  done  that  have 
seriously  stirred  up  antagonism  in  the  communities,  and  now  the 

1G0643*'— 20— V(«,  2 12 


X170    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

companies  have  learned,  partially  tlirougli  the  advice  of  the  commis- 
sion, that  at  the  same  time  they  file  their  schedules  with  us,  provid- 
ing for  an  increase,  which  has  become  necessary  in  recent  years  with 
alinost  all  of  our  utilities,  they  should  file  copies  of  these  scheduloV 
with  every  municipality  affected,  and  a  copy  of  the  letter  explain- 
ing the  reasons,  and  an  offer  to  come  before  the  local  bodies  and  offer 
tiiUer  information,  if  desired.  That  has  been  largely  brought  aboiu 
through  the  advice  and  counsel  of  tlie  commission,  and  is  of  very, 
practical  importance,  though  not  at  all  required  by  the  law. 

The  Chairman.  Have  you  been  called  upon  to  pass  upon  many 
question  that  have  first  been  determined  by  the  local  municipalities'-^ 

Mr.  Buss.  Xo.  Very  few  questions.  1  tliink  perhaps  not  over 
three  or  four.  One  was  a  local  ordinance  prohibiting  the  operation' 
of  one-man  cars  in  a  small  town  just  outside  of  Newport,  E.  I. 

The  Ghairmax.  Did  you  affirm  or  overinile  their  order  in  that 
case  i 

Mr.  Bliss.  We  affirmed  the  ordinance  of  the  town,  because  upon 
examination  of  the  proposed  type  of  car  that  was  to  be  operated  we 
lound  that  it  did  not  contain  reasonable  safety  devices. 

Mr.  Warren.  May  I  just  ask  there:  Was  that  the  ground  on  which 
the  town  had  rejected  it  also? 

Mr.  Bliss.  The  town  had  passed  an  ordinance  prohibiting  the 
ojxM-ation  of  cars  unless  manned  by  two  men,  and  they  had  passed 
an  ordinance  to  that  effect,  the  ordinance  being  subject  to  the  reo-u- 
latorv  power  on  the  part  of  the  commission;  and  the  comnvssron 
upheld  the  town  ordinance  because,  upon  the  facts  as  presented  tlie 
car  did  not  appear  to  be  safe  for  one-man  operation. 

The  Chairmax.  What  were  the  other  questions  that  you  had  to 
pi^3s  upon?  *^ 

'r.  Bliss.  I  can  not  recall;  they  were  minor  questions,  and  I  can 
no    recall  them.    , 

ihe  Chairmax.  Do  you  recall  whether  you  affirmed  or  overruled 
thf»  municipalities  in  these  other  cases? 

^fr.  Bliss.  Well,  the  other  cases  were  cases  where-.!  think  in  the 
case  of  electric  lighting  rates  in  the  city  of  Providence,  where  certain 
features  of  the  franchise  agreement  that  had  been  entered  into  be- 
tween the  city  of  Providence  ajid  the  Narragansett  Electi-ic  Licrht- 
ing  Co.,  certain  minor  features  were  not  approved  by  tlie  commis- 
sion when  the  rat«  schedules  were  filed;  so  t^iat  it  was  by  indirec- 
tion rather  than  by  directly  passing  upon  tlie  validity  of  an  ordi- 
nance or  setting  aside  an  ordinance  or  rule  or  regulation  of  the  city 

I  he  Chairmax  From  your  experience,  do  you  think  tliat  a  satis- 
factory plan  can  be  worked  out  whereby  the  villages  have  the  origi- 
nal |urisdiction,  and  then  appeals  Avill  be  tal^n  to  the  State  com- 
m IS  ion? 

Mr  Bliss.  I  bel^ve  that  the  law  should  provide  somethinir  that 
would  meet  the  difficulty  of  the  feeling  of  tlie  locality  that  it  has 
the  right  of  home  rule;  and  there  is  not  a  State  in  the  tJnited  States 
wJiere  the  towns  are  so  built  up  on  tlie  principle  of  home  rule  as 
they  are  in  Khode  Island  and  in  New  England.  In  fact,  the  State 
is  built  up  around  the  municipalities.  The  towns  are  very  old.  and 
practically  they  have  home,  rule  in  all  of  Uieir  maUers  of  local 
concern. 


PROCEEDi:KrGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1171 

Now  when  you  attempt  State  regulation,  by  a  State  board,  you 
elimmate  that  almost  entirely.  But  we  did  recognize  the  principle 
of  home  rule,  by  permitting  the  localities  to  originally  deal  with 
these  things  and  give  the  power  of  appeal  to  the  comiiission.  In 
the  matter  of  fili^  rates,  however,  in  the  matter  of  ignoring  locality . 
and  going  directly  to  the  commission,  there  wa^  assort  of  void  in 
he  law;  and  I  believe  a  great  deal  of  that  difficulty  could  be  avoided 
by  making  certain  requirements  that  tlie  company  must  go  and  sub- 
mit its  proposition  to  the  localities  in  the  first  instance  as  weU  as 
hie  them  with  the  commassion;  and  for  that  reason  I  advised  that 

AW  effectitely^  ""^  ''""^  ''^'^'''''^^  ^^  ^^'^'  ^""^  '^  ^'^"  ^P^^^^^^ 

In  one  case,  where  the  Providence  Gas  Co.,  the  biggest  -as  com- 
pany  m  the  State,  ignored  the  city  of  Providence  and^ame^^rectTy 
to  the  commission,  they  stirred  up  an  antagonism  that  unquestioi 
ably  cost  the  company  thousands  of  dollars,  and  stirred  u^a  pS 

OnX"o  I'^T  ""^  ^'"^^  ^"""}^  ^'^'^  ^^^^  created  XS. 

On  the  other  hand,  all  up  through  the  Blackstone  Valley,  where 
the  large  cities  of  Pawtucket,  Woonsocket,  and  the  big  manu^t^iS 
hatlnUn  'Tlf  ^^  '^'  BlackBtone  Valley  Gas  &  ^eTtHc  cS'Th^ 
haAe  followed  the  advice  and  plan  laid  out  for  them  by  the  coim§- 
sion,  and  effec  ed  just  as  radical  increases  in  rates  wkhout  a^?d 
of  protest  reaching  the  commission  from  any  of  the  locaHtL 

Xlie  Lhaicmax.  Are  the  people  of  these  localities  satisfied  to  have 
the  appeals  taken  to  the  State  commission?  ^^^"snea  to  iiave 

Mr.  Bliss.  Well,  it  depends  upon  the  localities.    I  think  it  doe<% 
offer  a  fruitful  opportunity  for  a  person  who  desires  to  S  politick 
advantage  by  stirring  up  prejudice.     I  think  it  offers  a  f rukfu 
opportunity  for  the  officials  of  the  locality  to  bring  whatlhoidd  be 

advantage  of  the  locality;  it  lias  been  done  in  the  ci^  of  th  s  4i^ 

trolley  problem,  as  I  will  later  recount  to  you.  '^'^ 

Ihe  CiLUR2ifAx.  It  is  now  5  o'clock,  and  we  will  adiourn  until 

to-morrow  morning  at  10  o'clock.  'lujourn  until 

(Whereupon,  at  5  o'clock  p.  m.,  an  adjournment  was  taken  until 
to-moiTow,  August  13,  1919,  at  10  o'clock  a,  m.)  ^'^ 


M,  ..     Washixgtox,  D.  C,  A^ic^mt  13, 1919-10  a,  m. 

Met  pursuant  to  adjournment. 
Present :  Parties  as  before. 

nJna  Ch^^i«^^^ax.  Mr.  Bliss,  will  you  please  continue  your  state- 
SMTEMENT  OF  MR.  WILLIAM  C.  BLISS-Continued. 


1172     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

At  the  time  of  the  adjournment  yesterday  the  questions  of  the 
chairman  was  directed  to  the  matter  of  whether  it  was  possible  to 
devise  some  form  of  local  regulation  of  these  matters,  with  a  power 
over  to  the  State  Commission. 

I  think  perhaps  it  should  be  made  clear  with  reference  to  the 
situation  of  the  Rhode  Island  Co.,  our  principal  trolley  system,  as 
to  some  of  the  difficulties  that  would  result,  and  have  previously  re- 
sulted, m  attempting  to  permit  a  local  regulation  of  the  trolleys 

A  reference  to  the  map  will  at  once  show  that  the  lines  owned  and 
operated  by  the  Rhode  Island  Co.  operate  in  26  different  towns  and 
cities  which  are  travei*sed  by  the  company's  lines. 

Under  the  provisions  of  the  State  law  each  town  and  city  is  per- 
mitted to  negotiate  the  terms  of  its  exclusive  franchise  tax  with  the 
company,  leaving  the  company  to  deal  with  26  different  towns  and 
cities--with  26  different  ideas,  it  may  be,  of  what -is  proper  as  a  pay- 
ment for  an  exclusive  franchise  tax. 

It  is  very  possible,  and  it  has  happened,  that  ordinances  of  the 
various  towns  and  cities  may  conflict. 

The  power  of  the  city  of  Providence  or  the  city  of  Pawtucket  to 
route  the  cars  of  the  company  throughout  the  citv  may  operate  to 
discriminate  against  suburban  towns  and  communities,  and  has  been 
frequently  a  cause  of  complaint  on  the  part  of  suburban  commu- 
nities.   In  other  words,  the  cars  serving  the  population  of  the  city 
of  1  ro\^dence  are  routed  conveniently  for  the  citizens  of  Providence 
while  the  citizens  of  the  surrounding  towns  and  cities,  which  are 
practically  an  outgrowth  of  the  city  of  Providence,  and  a  part  of 
the  same  social  settlement  of  people,  are  subjected  to  an  inconvenient 
routing  of  the  cars;  and  there  is  a  constant  source  of  complaint 
w' ith  the  power  in  the  central  community  to  allocate  for  its  own  peo- 
ple and  not  consider  the  problem  from  the  standpoint  of  the  genera! 
welfare  of  the  community  that  is  centered  around  the  town  without 
reference  to  the  artificial  municipal  boundaries.     The  selfish  charac- 
teristics of  individuals  are  reflected  in  municipalities.    For  that  rea- 
son It  seems  to  me  that  it  would  be  difficult,  if  not  impossible,  to 
provide  a  proper  plan  of  regulating  trolley  companies  by  leaving  the 
original  power  with  the  municipalities.  ^In  other  words,  I  believe 
that  the  control,  especially  in  a  State  like  the  State  of  Rhode  Island 
where  the  population  is  compact,  and  where  some  400,000  of  our 
population  are  served  by  the  trolleys  of  this  company,  living  in  26 
different  municipal  subdivisions— that  it  is  very  desirable  that  the 
power  should  be  centralized,  and  that  a  body  should  consider  this 
from  the^ standpoint  of  the  welfare  of  the  entire  community,  rather 
than  with  repird  to  the  selfish  interests  and  the  artifical  boundaries 
of  the  municipalities. 

However,  in  dealing  with  the  situation,  it  presented  the  most  diffi- 
cult problem  m  the  framing  of  the  public-utilities  act.  At  the  time 
of  the  framing  of  the  act  I  was  a  member  of  the  house  committee 
upon  the  judiciary,  which  framed  the  original  public-service  act.  I 
had  previously  served  upon  that  committee  for  a  period  of  five  years 
and  the  great  difficulty,  really  the  only  obstacle  in  the  operation  of 
the  act,  was  how  to  deal  with  this  situation.  I  should  be  very  glad 
to  send  to  the  commission  the  section  of  the  act  which  dealt  with 
this  particular  feature. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1173 

The  Chairman.  You  may  do  so. 

..v^^?'^'®^;•^'''^  with  perhaps  a  lack  of  modesty,  I  will  say  that  I 
wiote  the  section  myself,  after  the  town  solicitoi-s  and  the  city  solicit- 
ors  of  the  various  towns  and  cities  had  been  unable  to  find  anything 
that  would  deal  with  the  situation;  I  sat  down  and  wrote  a  sectioS 
which  proved  immediately  agreeable  to  all  of  them,  which  left  the 
original  light  to  the  towns  and  cities  to  frame  these  franchise  con- 
tacts and  ordinances,  but  left  them  subject  to  the  continuing  control 
of  the  commission  in  the  exercise  of  the  powers  enumerated  in  the 
act :  and  in  effect  said  that  every  fi-anchise  agreement,  contract,  rule 
or  ordinance  should  be  deemed  to  be  subject  to  the  power  of  the 
public  utilities  commission.  However  written,  the  possibility  of  con- 
nHnofjiT/^  there;  and  it  is  very  easy  to  stir  up  the  people  on  the 
fhirfl!    """'f  rule   which  IS  ingrained  in  Rhode  Inland,  to  feel 

nf  fL  i  11^  .w  i^^i^'^^u"^  i'^"  ^'  *'^^^^"g  ^^^y  f'^o"^  them  some 

nl  low  fif  V^^Vu7  ^^^'^^^.  naturally  belong  to  them.  As  a  matter 
of  law  they  do  not  belong  to  them.  As  a  matter  of  law  the  legislative 
power  IS  supreme  and  the  artificial  boundaries  of  towns  and  cities 
could  be  wiped  out  almost  at  will  by  the  legislature.  That  seems  to 
be  the  universal  consensus  of  opinion  of  the  courts,  but  it  is  difficult 
to  make  the  mass  of  the  people  believe  that  the  muAicipalities  do  not 
fei^VTth^  '  '        '^"^  '''^^*  ^^""^  ^^^  legislature  can  not  inter- 

I  had  reached  a  point  in  setting  forth  the  recommendations  of  the 
commission--of  the  first  recommendation-that  primary  regulation 
of  the  irtihty  be  by  the  public-utilities  commission.  And  with  thi^ 
observation  I  will  pass  on  to  the  next  recommendation. 

taJesV^boH  "^^  ^'''^  ^^^^  ™-P^l   ^--^-^ 

The  third  recommendation  was: 

now'ex"r.mrbe^^n?rp?V.^^  "'•"f?''  ''T  '*«  P''^'"S  obligations  as  they 

uX^tuU^nZaToZZZlZnZi^Z^ ''-' "' ''" ''''-''  - 

be'';nade  as"s*n""^"pracSS""  recommended  by  the  commission's  engineers 

„Zl!'*'!f'^f'"%**f  fi^l'.ngs  and  recommendations  of  the  commission 
after  a  study  of  the  subj  ect  covering  a  period  of  nearly  a  year     Those 

mni^^loX/u'- 1  f  ""P^^  on>e  part  of  the  St  Jte  Jnd  the  cor 

n  t^::;.    ^  legislative  act  provided  that  they  should  share  equally 

m  the  expense  ofthe  commission-amounting  to  some  $50,000.  ^ . 

llie  trustees  of  the  Federal  court  operating  the  Rhode  Island  Co 
had  previously  expended  a  sum  of  nearly  $90,000  in  havinir  a  com 
Kl  R  r*'°^  ?f'^'  properties  made  ty  th'e  enginSg^firm  o 
l„f  '•  "1"°"  *. Davis;  and  their  detailed  report  is  attached  and  is 
contained  m  this  volume.  So  that  it  is  possible  to  make  the  exact 
comparisons  between  the  valuations  as  fixed  by  the  eng^eers  of  the 
commission  and  those  of  the  Rhode  Island  Co.  ""g^neers  of  the 

f hp  ft?r"*  *i     •  ^  "^'^^  *°  express  is  that  an  expenditure  which,  in 
the  final  analysis,  came  out  of  the  people  of  tie  State  of  Rhode 


1174     PROCEEDmGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Islancl,  of  approximately  $140,000  or  $150,000,  was  involved  in  mak- 
ing this  investigation  for  the  purpose  of  getting  all  the  essential 
facts  before  the  public  so  that  they  might  approach  this  problem  in- 
telligently, a        rr  f 

Contained  in  the  body  of  the  report,  which  comprises  onlv  50  or 
OU  pages,  IS  every  fact  connected  with  our  trolley  companies  froiu 
the  commencement  to  the  end.  If  there  is  any  essential  fact  witli 
reference  to  the  trolley  system  of  the  Rhode  Island  Co.  that  is  not 
contained  in  the  report^  nobody  has  called  any  attention  to  it  since 
the  report  of  the  commission. 

7>iJ¥  ^^i^^^jssion  presented  this  report  to  the  General  Assemblv  of 
Ivhode  Island  about  March  8,  1918. 

The  report  was  made  in  the  printed  fomi  which  has  been  pre- 
sented to  your  body  as  an  exhibit,  and  the  commission  prepared  the 
necessary  legislative  bills  to  carry  the  recommendations  into  effect, 
these  bills  being  introduced  in  the  house  of  representatives  on  the 
same  day  that  the  i-epoi-t  was  presented. 

On  the  following  day  the  legislative  leaders  of  the  house  pre- 
sented and  passed,  under  suspension  of  the  rules,  two  bills,  the  first 
specifically  repealing  the  section  of  the  speciid  act  of  the  previous 
year,  whereby  the  commission  was  authorized  to  place  its  determi- 
nation as  to  modification  of  rates  in  effect,  and  prohibiting  the  pub- 
lic utilities  commission  "  until  further  order  of  the  general  assemblv 
iix)m  in  any  way  modifying  the  rates  of  fare  of  the  Rhode  Island 

That  is  an  example  of  the  way  public  opinion  acts  there  when  it 
gets  m  a  hurry.  It  is  almost  the  same  method  of  reasoning  that 
occurs  m  benighted  Russia.  "^ 

The  second  act  created  a  joint  special  commission  of  the  senate  and 
house  of  representatives  to  conduct  an  investigation  of  the  company 
and  to  report  within  10  days  to  the  general  assembly.  ^ 

.    1  hese  bills  were  promptly  passed  by  the  senate,  and,  the  follow- 
ircr  (lay,  promptly  signed  by  the  governor. 

llie  legislative  committee  thereafter  conducted  hearings,  secured 
an  extension  of  time  within  which  to  report,  and  at  the  end  of  some 
three  weeks  pi-esented  a  divided  report,  a  bare  majority  favoring  the 
establishment  of  G-cent  fare  zones  to  replace  the  old  5-cent  fare  zones 
and  the  mmority  report  favoring  the  zone  plan  as  recommended  by 
tlie  special  committee.  -^ 

Neither  the  majority  nor  the  minority  committee  i-eport  made  any 
recommendation  with  reference  to  relief  from  franchise  taxes  and 
paving  obligations. 

.  The  House  acted  upon  the  report,  and  it  was  thei-e  voted,  the  vote 
being  49  to  4i  to  ratify  and  confirm  the  determination  of  the  special 
commission,  thereby  approving  the  zone  system  as  recommended  bv 
the  commission.  ^ 

The  Senat^  concurred  in  the  House  action  by  a  vote  of  19  to  17  on 
the  closing  day  of  the  session,  and  the  act  was  approved  by  the  ffov- 
crnor  on  April  19,  1918.  ^         ^ 

The  new  rates  became  effective  on  May  5,  1918,  the  special  com- 
mission having  ordered  them  in  effect  upon  April  1,  so  th^  the  com- 
pany lost  the  benefit  of  one  month  and  five  days  of  the  new  rates 

J  he  act  as  passed  by  the  legislature  provided  that  the  rates  should 
continue  for  the  duration  of  the  war  and  one  year  thereafter  unless 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1175 

:X'daSr^mf  law^  ^'"^^'  '^  ''^^  public-utilities  commission  in 

It  seemed  as  though  it  amounted  to  but  very  little  to  say  that  the 
rates  should  continue  for  the  duration  of  the  war  and  one  v4ai  tbei-^ 

Ill  tiie  public-utihties  commission. 

I  am  briefly  going  to  run  through  the  chronological  order  in  wire'. 
(lie  situation  has  changed  since  then. 

1  hese  rates  became  effectire  May  5, 1918. 

On  June  1,  1918,  under  the  terms  of  the  agreement  with  the  com- 
mission, increases  in  wages  of  $200,000  a  year  became  effecthe  a  I 
the  company,  in  order  to  retain  its 'help  and  attempt  to  ^e  me 

wljes  $lW,oSo'  '  ^'"*  "^"''^^  "*  '"^'^^  voluntarfly  inc^a^d  Uie 

tiofs  S$30^:SSo  mo1e1n';vaIei'  '''''  ""  ^""P^""^  ^^"-'^  *"^"«- 

th?l  "^"'^  ^^'i  ^^^^'  '^^^^^*^  *!'''  advance  that  had  been  made  to  the  men, 
the  men  made  an  application  to  the  War  Labor  Board  for  a  sub 
stantial  increase  m  wages.  ^^^^^^u  xui  a  buo 

On  August  15,  1918-the  action  of  the  War  Labor  Board  havin« 
been  carried  out  apparently  by  the  finding,  I  think,  in  the  Cleveland 
case,  where  the  rate  had  been  Axed  at  48  cents  per  hour-the  compa  v 
proceeded  to  file  with  the  commission  new  rate  schedules  which  won  d 
provide  for  an  estm.ated  increase  of  $2,100,000  in  revenuT. 
.   In  the  middle  ot  October,  1918,  the  award  of  the  War  Labor  Boirrl 

creases  ot  Jl^oO,000.    To  make  the  award  still  more  difficult  for  the 
company,  these  wage  increases  dated  back  to  Julv  19   Sving    h^ 
payment  of  back  wages  of  some  $300,000  on  the  part  of  the  clmpany 
thifthTef """"'  •"•  ^^^'''  ""^^"  ^""^  was^fixed,  may  Y7k,  Ji 

Mr.  Bliss   The  advance  was  to  34  cents,  June  1, 1913. 

in  Octn/iT  ti    fPP  '"'*'°"  ''■'**  T'^"  *"'•  '^  ^ti"  f"rtl»er  inci-ease,  and 
m  October  that  increase  was  made  to  48  cents,  dating  back  to  Julv  19 

tli-L V  ^  ■""^?'^  "^"^  ^^'^'^  34  cents  to  48  cents.    That  was 

the  maximum  wage  scale.  j-uai  n.it, 

On  October  19,  the  commission  having  completed  its  hearin"s  crave 
permissmn  to  the  company  to  place  in  Iffect  these  increl^^'rStes 

On   T?ir^n"\oi'o*r  »f  $2462000  increase  in  revenue.  ' 

Anrn  1^1^??.  H    '  ^^"^  ?^<^  I»l?nd  Co.  went  into  receiveiship. 

April  1,  IJIJ,  the  commission  havmg  on  October  19,  1918,  "ranted 
the  rate  increases  applied  for,  reduction  was  made  in  the  su1>iS 
through  rates,  the  application  of  the  rates  having  lomi  that  th" 

be^Snred  ns'i^lTr"  *'*rt^  the  inci-ea Jd  rates  that  had 
W  ni  *'*''  "^  ^*  W  ^f^^  u»<i""  tlie  othei-s;  and  it  was  deemed 
fedl  t"""P''"^u  f''^  ^y  the  commission  to  the  advantage  of  even- 
retli^rhXffi?'  ^"'"^•'-  "^"^  ^"*"  *«'•  *«  P"^!-^  ^f  trying^L 

M^r^BMsi^'Yes^'''*^''''  ^^''^  ""^^  *''*  suburban  rate? 

a  "  S:  h^u!!"  ""^erfying  companies  of  the  Rhode  Island 
^o.,  ^Ullch  had  leased  their  properties  to  the  Rhode  Island  Co. 


1176    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

under  a  rental  plan,  the  rentals  having  absolutely  ceased  under  the 
receivership,  were  forced  into  receivership.  Their  only  income  bein<r 
the  reiitals  of  their  property,  and  with  the  failure  of  these  rentals  tS 
be  paid,  the  underlying  companies  had  to  default  upon  their  bonds, 
and  receivei-ship  was  forced. 
Mr.  Wakren.  That  was  this  verv  last  July  ? 
Mr.  Bliss.  This  July;  yes.  '' 

On  August  8,  1919,  the  day  following  the  termination  of  a  strike 
of  the  men,  which  had  continued  for  a  period  of  18  davs— as  a  re- 
sult of  which,  by  agreement  between  the  receivers  and  the  men, 
tJiey  were  granted  a  wage  of  56  cents  per  hour,  involving  an  in- 
crease of  $640,000  a  year  in  wages— the  company  filed  with  tlie 
cc)mmission  a  petition  to  put  into  effect  a  still  further  rate  increase. 
Ihat  petition  is  pending.  The  first  hearings  will  be  held  upon  it 
upon  Tuesday  next.  * 

I  think  that  that  will  give  you  a  chronological  record  of  what 
has  been  done  m  the  way  of  changes  in  the  fare  systems. 

I  have  described  to  you  the  original  rates  that  were  in  effect 
prior  to  May  5,  1918,  and,  roughly,  I  will  repeat  and  say  that  the 
6-cent  fare  zones  around  the  city  of  Providence  averaged  about 
n  miies.  Ihis  may  be  seen  by  reference  to  the  map  appearing  on 
the  page  after  page  56  in  the  report  which  you  have  before  you. 

You  will  see  there,  indicated  by  the  red  line,  the  Providence  5- 

rri  fu^  i'"''^-  T"""  ^'^^^  f^^'  indicated  by  the  purple  lines  within 
that,  the  transfer  limits,  which  were  not  identified  with  the  5-cent 
fare  limits. 

You  will  note  the  same  with  reference  to  the  city  of  Pawtucket, 
where  the  radial  circles  are  shown  with  reference  to  Pawtucket 
Jiut,  roughly  speaking,  the  fare  system  around  the  traffic  center  of 
-Providence  was  4^  miles  on  the  average,  and  the  transfer  limit  was 
considerably  less. 

Commissicmer  Meeker.  May  I  ask,  in  reference  to  the  interur- 
ban  fares:  There  is  considerable  competition  with  the  steam  rail- 
ways and  the  electric  lines  operated  by  the  New  York,  New  Haven 
&.  Hai-tford  Railroad,  is  there  not? 

Mr    Bliss.  There  is;  there  are  but  three  lines   radiating  from 

Providence  where  there  is  no  direct  competition  by  the  steam  lines- 

J  he  one  line  known  as  the  Oakland  Beach  branch,  as  it  is  called* 

a  former  steam  line,  but  now  operated  by  the  trolley  company    is 

one  where  they  do  not  come  in  direct  competition,     the  Danielson 

line,  which  goes  across  the  State  westerly  to  Connecticut,  has  no 

steam  competition.    And  the  line  to  Chepachet,  running  to  the  north 

has  no  steam-railroad  competition.  ' 

If  it  is  desired  by  the  commission,  I  will  briefly  explain  the  method 

of  fare  increase  that  was  used  by  the  application  of  a  limited  central 

5-cent-fare  zone,  with  2-cent  zones  outside. 

The  zone  plane  of  May  5,  1918,  provided  that  the  Providence 
single  ;)-cent  fare  and  transfer  zone  should  include  the  area  within 
an  air-lme  radius  of  approximately  2\  miles  from  the  traffic  center 
of  I  rovidence,  excepting  in  the  direction  of  the  city  of  Pawtucket 
where  the  city  line  of  Providence  and  Pawtucket  was  continued  as' 
the  transfer  limit  of  the  two  cities.  In  other  words,  we  limited  the 
5-cent  ride  to  2^  miles  where  it  had  averaged  ^  miles  before 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1177 

The  Pawtucket  single  5-cent  fare  and  transfer  zone— Pawtucket 

p3  iWe"  itH;  P  ^'^^  55,000  people,  as  compared  MT^^^ 
people  in  the  city  of  Providence— the  Pawtucket  sino-le  5-cent  farp 

S"af  a'ir Ze"'^^^^^^^^  '}'  ''''  ""'''^'^  ^^^  State  of  RhodTlsland 
centei  excep  'h^^the^d^^^^^^^^^^  approximately  2  miles  from  the  traffic 
(iniei,  except  in  the  direction  of  Providence,  where  the  citv  linp  wo«i 
^•«"V""^f  as  the  fare  and  transfer  limit.  ^     ^  "^^ 

I  lie  VVoonsocket  single  5-cent-fare  and  transfer  zone  includpd  thp 
orea  in  the  State  of  Rhode  Island  within  an  air^Hn^  rS  of  an 
proximately  2  miles  from  the  traffic  center  of  Wooi^^cket  ^" 

And  agam,  on  the  Clyde  Square-river  points  th^sin^rle  5  cent 
fare  and  transfer  zone  included\n  area  within  a  radius  of  approxt 
mately  2  mile^  from  its  traffic  center,  Clyde  Square.  ^^ 

r.f^.  5-cent  fare  and  transfer  zones  were  established  for  the  tow-i 

the  qf  V^'ri^''^'"'  "  municipality  separated  from  pSence  by 
tne  feeekonk  River:  and  for  thP'  n'li^r  J^^  rv«^^*  Av/vivicut^e  uy 

arranged  to  care  1^  blSss"  e„rer  o  "otnTvAy  wSf„  Z 
city  of  Providence  in  the  midst  of  the  busy  manSurinrStriS 
Tljose  ^vere  the  only  modifications  of  tlie  general  plan       ^ 

Uutside  the  central  single  5-cent-fare  and  transfer  zones  ahnvA 
described  there  were  established  intermediate  zones  of  fa%S  I 
cents  for  travel  through  each  such  zone,  with  a  minfmum  fare  of  5 
cents  entitling  the  passenger  to  tmvel  through  two  of^uch  zoLes 
.    Upon  page  59  of  the  i-eport^and  I  will  not  attemot  to  read  it 

urbVnTiSf  '""'P'""  ''  ^'^  ?^*'''*'-  "*  thetSba^n  Tnd  sut 

.how*fl,i^!>/°l"r''''?^  ^-F'  P"^f  ^"'  '^  *0'^'"  t'le  tabulations  which 
,nTtK  •  *  ***'  j-'*^''  mileage,  the  track  mileage  local  to  each  end 
Zt  .  '  '"f  ™«i.ate  track  mileage  for  each  intlruban  and  suburban 
ner 'mfl7'f  It  the  nun.ber,  the  average  length,  and  the  rate"n  ^nte 
per  mile  of  the  intermediate  zones,  together  with  the  statement  «f 

dtt"eT  "^  "'^  '"'''  ""^^^  "*  '''''  ^^"^  increases  or  JecS^S"! 

Summarized,  upon  the   regular  suburban  lines  which   we  have 

separated  into  the  mterurban  and  suburban  lines,  the  ordinary  inter 

.ban  and  suburban  lines,  and  then  interurban  'and  submS  "be^ 

ith  low  rates  of  earning,  where  we  simply  had  to  put  ate^lutelv 

tlie  highest  rates  of  fare  tiat  the  traffic  would  beTr  because  ih^lhi^ 

to  be  supported  by  the  central  lines,  we  have  d  CtTated-  wi?h 

reference  to  them     So  that  contains  these  lines  of  low  earni  the 

milXKl."*  '"'•'  '"''''  ^^"^^^''"^  approximately  Tcenfs'^r 
Upon  these  lines  the  minimum  fare  of  5  cents  entitled  a  Dassenirer 
to  ride  through  three  of  such  zones.  Upon  the  other  interiXn^nr 
suburban  lines  the  average  length  of  such  zones  °S  from  1 18  to 
i.08  miles,  and  the  average  rate  from  0.96  of  a  cent  to  1.69^nte  pe? 

,].h3^  ?^^  ""^  *u^'?  "".^^  a  properly  advanced  through  rate  was 
determined  upon,  having  in  mind  the  existing  rates,  the  nature  3 
.lensuy  of  traffic,  and  the  public  effect  of  sufh  incr^a^Vrate  upon 

«inl  *!!'"  f  •'''''',  ""  t'xamination  of  the  determination  of  the  commis 
sion,  contained  in  pages  56  to  62  of  the  report,  will  give  a  comnW« 
description  of  the  method  that  we  followed  ^  complete 


1178    PROCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSION. 

a.Jl  TiiiT  "'''*  ^A'*'??'*  *"  "^"^  *^™»Sli  t*''^  ^'"Jous  zone  plans, 
;.\ffl  f  t''*^?^  ***  '.'"^  commission  the  effect  upon  revenues  and 
tiaftc  of  each,  rather  than  to  attempt  to  give  you  the  effect  unon 
revj^ues  and  traffic  now,  when  I  am  describing  the  plan. 

,.„J  ^^"*"''^'''-  '^*'^  *^«  different  zone  plans  indicated  in  this 
1  oport ' 

^ntll'  ^T",f-tli^"'i^  *'f  r^^"*  contracted  central  zone,  with  the  2-cent 
zones.    I  wiU  indiea  e  to  you  the  plan  that  was  later  adopted. 

OcTobe.?"9f  10  8  i^''"!.*^^,?*"''  **?y  ^'  1^1^'  <=ontinued  until 
Uctobei  2.3,  1918,  when,  after  the  award  of  the  War  Labor  Board, 

the  company  applied  for  permission  to  put  into  effect  a  wry  sub- 
stantially increased  rate.  ■' 

^J^^K^*-"''  *'"!*  'iT  **"  P]^""^  '"  effect  are  described  upon  page 
10  of  the  report  of  the  commission,  the  paragraph  at  the  top  of  the 
page,  a  copy  of  which  report  I  will  file  with  this  commission.  It 
can  briefly  bo  described  as  follows : 

a  J^  tCpvoXuii  S.  "^V  T''"'"*^."  "'  *"«  <*"t™»  5-oent-fare  zo:,o 
aiwiii  me  tio\uience  trafhc  center  from  2.5  m  les  air  line  to  2  mllM   witi. 

an  average  track  mileage  of  2.4  miles,  thereafter  a  serL  of  5<eut-?a re  zo . " 
tlic  first  extending  air  line  for  1.75  miles,  with  an  averse  track  mlfeaeeof^; 
miles,  tl,e  second  ami  succeeding  zones  extending  1  5  afr-Hne  Sl^  buf  nvlr 
agmg  about  17  track  miles  when  plaml  in  practi^I  operation  ■      '  "  "" 

2.,nrair!line';:2lLrS>rainr''"''^^'  ^''"'"^''^'  """  «'-'•  ^"'"^  "^ 

Diftieulties  Of  collection  and  difficulties  in  the  application  of  the  lai-e  increast^ 
of  fares  required  by  the  present  emergency  have  \%  Mr.  Emery- 

OYlio  was  the  representative  of  Ford,  Bacon  &  Davis,  who  had  car- 
ried on  the  investigation  with  the  commission  for  over  two  years) 

—to  the  belief  that  the  present  more  equitable  2-cent-zone  system  can  not  hP 
modified  to  meet  the  situation.  He  frankly  presents  his^an  as^n? desiifit 
to  best  meet  the  needs  of  the  present  emergency.  designed 

This  rate  scheclule  is  the  rate  schedule  that  is  now  in  effect,  except 
as  somewhat  modified  by  the  reduction  of  the  interurban  rates  of  fare 
to  meet  the  lines  of  traffic,  so  that  the  rates  are  substantially  higher 
than  ;>-cent  central-zone  rates  with  2-cent  succeeding  zones,  but 
lower  than  tljo  rates  that  are  created  by  the  commission's  order 

f  m  ^^^^t'/^'^  ^'f^^  l'^'?  ^'^  ^^''''^  ^^  *^e  highest  point  that  the 
traffic  Will  bear  for  the  benefit  of  the  traffic  and  the  benefit  of  the 
suburban  communities. 

8o  that  it  is  my  belief  that  it  is  impossible  to  increase  the  reve- 
nues of  the  conipany  by  increasing  the  suburban  and  interurban 
lares  any  moi-e,  because  you  can  ride  a  horse  to  water,  but  you  can 
not  make  him  drink ;  and  you  can  have  your  trolley  cars,  but  vou 
can  not  make  people  ride  upon  them  when  other  means  of  trans- 
portation--the  commutation  rate  upon  steam  lines,  privately  owned 
automobiles,  and  so  forth-can  furnish  those  people  a  similar,  if  not 
a  superior,  service  at  an  equal  or  lesser  rate.    And  it  is  my  belief  that 
the  remedy  for  this  situation  must  come  through  the  application  ot 
higher  rates— if  the  remedy  can  come  at  all  through  the  applica- 
tion of  higher  rates— only  when  those  are  applied  to  where  the 
popu  ar  centers  are  and  where  the  riding  is  heavy.    Otherwise  vou 
will  kill  the  goose  that  lays  the  golden  egg.    You  will  destroy 'the 
patron  of  your  road.  ^ 

As  I  have  stated,  subsequent  to  the  strike,  which  continued  ui>on 
this  road  for  a  period  of  18  days,  the  strike  was  settled  by  agree- 


PROCEEDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1179 

, ,  Ji  T  ffi°"'  h^fJ^y  ^"'?.S  *°  *°"*  "Pon  the  effect  upon  the  revenues 

and  traffic  of  the  application  of  these  different  plans.     The  find! 

gs  of  the  commission,  as  explained  in  detail  in  the  re^rt  showed 

Irh^S'lTll'^r-'  "*  K^  ''"""  '^'  commission  mad^ id  TeS 

tional  net  reveiuie:         ^  """       P™*^"**  $1,000,000  of  addi- 

•     tuJ^Z  ^"'"""ssion  recommended  that  the  rate  payer  contribute   bv 

l-an7nr*'°''  °^  'ncrceased  fares,  a  sum  that  was  estimated  to  bl 

S;  EboE  ofe.cln-^'P."^"","'-*  '^''  municipalities  ^ntibute! 

^.  b}X^^l--TS  IppeS V/aA""^^^^'^  -' 
Commissioner  Gadsden.  Away  in  the  back? 
Mr.  Bliss.  Yes. 

record?"'"''"""'  ^"''^'^-  ""'^  "^  ""^  ^^^^'  ''^^'^  "»«*  re'^d  into  the 

The  CHAiRjiLiK.  I  am  afraid  there  are  too  many  of  them 
.  Mr.  Bliss.  On  page  41  of  Appendix  B,  the  report  of  tirconnnk 
sion's  engineers,  are  indicated  all  of  the  taxes  plTbf  the  comZv 

The  commission  recommended  that  the  taxpayer 

thltlilTT^  f""^  ^  interrupt  you  just  for  a  moment?    'Docs 
tliat  give  the  total  amount  of  taxes  paid,  too  ? 
Mr.  Bliss.  Yes. 

getlLltal  on-tKc^rd."^'  ^"^  '''"^  ''"^  '^''''    ^  -"I<^  '^'^  to 

19??' wa?|:u?7fif '■''"'*  ^"^^  "^  *r"'  ^«'"  «»«  Je'ir  ending  June  30. 
1J17,  was  $o4e  (64,  an  average  of  one-half  of  a  cent  out  of  encl, 
5-cent  fare  that  was  received  or  each  5  cents  of  m"  nue  that  wal 
received  by  the  company.  In  other  words,  the  taxerrpproximald 
10  per  cent  of  the  gi-oss  revenues  of  the  company         ^PP»o-^»"'^ted 

»Ve  recommended  that  the  ratepaver— the  imn  wr.r>  ,.;j„    •     *i 

car contrihiite  •t'id.nnnn  ♦!,,.„.    iT-''^        V        *"  ^"*'  "des  m  the 

"iv7^?n  1  ic  !li  ■'  I'^^^'i?^  increased  rates;  that  the  taxpaver 
fl'^onn^  1  ful^f^^^  franchise  payments,  amounting  to  about 
!;>loO,000,  and  that  the  taxpayer  give  up  the  further  sum  nf  «Qn  nnn 


1180    PROCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

could  be  increased,  and  by  the  application  of  a  skip-stop  plan  and 
other  economies  as  recommended  by  the  engineers  of  the  commission, 
a  saving  of  nearly  $200,000  could  be  effected,  thus  producing  a  tota 

*T  no"o  no^'  ??*^''^°  *°.'"*'f  "'«  "1"»'«d  increased  revenue  f  f  abou 
!|>i,000,000  which  was  faced. 

That,  roughly  speaking,  was  the  finding  of  the  commission. 
In  the  final  analysis  I  thoroughly  believe  that  this  is  clearly  a 
question  between  the  taxpayer  and  the  fellow  who  pays  the  fare  in 

w/"?--  T,°"  '''■"?^'"'*  T"r  '*•  The  taxpayer  has  an  immediate 
interest  in  the  welfare  of  the  trolleys.  He  has  an  interest  that  is 
worth  money  to  him,  an  interest  that  he  can  afford  to  pay  money 
for;  and  the  man  who  rides  in  the  car  is  forced  to  have  an  interest 
m  the  trolley  ear,  because  by  necessity  he  must  use  it;  and  the  final 
solution  of  this  problem  can  not  come  through  simply  applvinjr  all 
of  the  increases  to  the  man  who  rides  in  the  car  Or  applying  all  of 
tlie  burden  of  taxation,  as  has  been  suggested  in  some  of  your  hear- 
ings to  the  taxpayer  to  furnish  service  free 

Commissioner  Sweet.  Eight  there,  Mr.  Bliss,  will  you  not  state  a 
little  more  m  detail  the  advantages  to  the  general  taxpayer  of  havinc 
the  street  railroads?  *" 

Mr.  Bliss.  The  advantages  to  the  taxpayer  of  having  the  street 
railroads  at  a  reasonable  rate  of  fare  are  that  the  whole  community 
is  opened  up  for  development.  The  man  can  choose  his  residence  as 
he  pleases,  intercommunication  between  distant  points  is  easily  af- 
loided,  and  social  relations  can  be  carried  out  conveniently 

Commissioner  Sweet.  In  addition  to  that,  the  taxpayer  who  is  not 
a  regular  car  rider  does  want  to  use  it  once  in  a  great  while,  perhaps, 
as  a  convenience.  '  *^        '^  ' 

Mr.  Bliss.  Yes ;  but  the  taxpayer  may  hold  rental  properties. 

Commissioner  Sweet,  Certainly. 

Mr.  Bliss.  Tlie  rental  value  of  his  property  is  dependent  upon 
reasonable  rates  of  fare  on  the  street  railroads 

Commissioner  Sweet.  Certainly.    He  has  both  of  those  interests. 

Mr.  Bliss.  The  servant  whom  the  taxpayer  employs  and  who  has 
to  use  the  car  is  much  better  satisfied,  and  accepts,  perhaps,  a  lower 
at  a  di'S''  ^'"'       '*  "'^  '""^^  opportunity  to  visit  her  friends 

C\)mmissioner  Sweet.  Yes ;  that  is  right. 

Mr.  Bliss  The  business  interests  are  vitally  affected.  The  cen- 
tralization of  business  is  entirely  dependent  upon  lowering  the  unit 
rate  of  fare.  I  am  goin|r  to  speak  a  little  later  of  the  ven^  marked 
effects  upon  decentralization  of  business  that  have  accompanied  very 
radical  increases  in  fare.  I  have  described,  and  I  do  not  want  to 
take  np  too  much  time  of  the  commission,  because  I  realize  that  you 
have  many  other  witnesses  to  hear  from,  but,  roughly  speaking.  I 
have  stated  to  you  the  problem  presented  to  the  commission,  aAd, 
roughly  speaking  I  have  stated  to  you  the  way  in  which  we  proposed 
that  It  should  be  fairly  treated.  ^  "puai^u 

hct  me  at  this  time  simply  call  to  your  attention  the  fact  that  the 
legislative  power  of  the  State  of  Rhode  Island  did  nothing  what- 
ever to  place  a  burden  upon  the  taxpayer.  The  legislative  power 
simply  provided  for  the  increased  ratei  o'f  fare  and  wit  off  andTef? 
the  problem ;  and  the  situation  to-day  as  it  exists  in  Rliodc  Island  is 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1181 

that  the  only  power  to  alleviate  this  situation,  without  le<nslatiye 
action,  without  consent  on  the  part  of  the  municipalitiel-thlt  it^« 
absolutely  impossible  to  secu,^,  because  tl^oseT  conf^^  of  the 
municipahties  do  not  dare  to  grant  or  consent  to  Xve  this  com! 
pany  from  its  obligations,  for  political  or  other  reason^the  only  re- 

iZi^t  f  '  "*"1*'?"- '"  ?^?^^  I^'«"'l  >""«*  come  from  Was"  ne  the 
rate  of  fare,  and  it  is  absolutely  impossible  to  ultimately  ded  with 
this  situation  through  mere  increa^es^n  the  rates  of  fare 

,v7w,7*^  increases  that  have  been  hurled  at  this  company  when 
Its  total  net  revenues  were  less  tlnn  «fi  nnn  nnn  „„ j  ^'J^^y-my,  wnen 
creases,  first  of  $300,000  J^nel  1918  i'l^oTri  ^  ^hen  wage  in- 
middle  of  Ortnltor  101  fi  J  J  r  1  V  'pM-^OjOOO  a  year  added  in  the 
iiuaciie  or  uctober,  1918,  and  dated  back  to  July  19   and  '*640  0nn  o 

Pjny,  I  am  .(md  Ih.t  we  will  .imply  hav.  lo  eo  teToSd  thlS 
of  Mciinng  menu.;  „  will  have  to  io,  in  othlr  wSS  li  .  EI 

eity  properly;  tlie  receivers  who  fre  in  cK  of  Z  nfL  ^  ^''°^' 

so^ue3irn!l"  ^r-  '•*  ''^!^^^  "°^'^'-  present  condidons  until  you  fitd 
r^rgi'^JetolfreSlofofrtts^"^-^^-  ^^ -^'«*-  <>*  ^^  tS 

vitally  interested  in  its  low  car  JareTvery  c^munitv  ITT^^J  '' 
the  right  to  go  out  and  bid  for  the  labo7t W  ^  ^i  *^"^i'*  *°  '^'^''^ 
cai^  and  get  ft  at  the  lowest  reaonableraLttt  caS '?  To"d''' 
It  can  not  be  done.  It  is  no  use  to  discuss  the  rea^ns^ftt ^  -T  1*^ 
It  can  not  be  done;  and  the  condition  of   abor  and "n  the  oL^hI"^ 

tljrT^'''"'  •'^  ^"''?'--, ''  '^  impossible  to  do'itTand  y5u  arel  rac" 
tically  at  tlie  mercy  of  the  labor  unions  4nd  wh^t  tJ,o?r\t  'i 
in  requesting  increases  of  the  Wa^Labor  Wd  nn7wf  T  fr^ 
have  done  by  trying  to  enforce  their  demands  by  J^^kZfJ)t^ 
W  in'""'-*'/"*  *°"°^  ^*rikes,  the  forced  solution tflherm-ob' 
h?t  a  <•  n,/?*"'"" '"  """^  without  full  and  fair  considerat^r  means 
that  a  child  having  once  earned  that  he  can  get  candy  by  cTvfn.^ 
for  It  will  cry  louder  and  louder  every  time  just  as  long^as  you  S 


Iil 


1182    PROCEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION. 

it  to  him.  The  public  are  entitled  to  go  out  into  the  labor  marked 
and  pay  for  the  labor  involved  in  carrying  on  their  public  utilities 
what  IS  a  reasonable  price  for  the  service  performed  as  compared 
t<.  tlie  price  being  paid  for  the  rest  of  labor.  And  the  public  ai-e 
entitled  to  protection,  I  thomughly  believe,  against  having  an  essen- 
tial public  service  taken  away  from  them  and  then  being:  forced  to 
pay  more  than  a  i-easonable  amount  for  labor. 

The  effect  upon  revenues  of  the  2-cent-zone  plan  which  remained  in 
operation  from  May  5  until  October  23,  1918,  produced  additional 
revenue—as  nearly  as- it  could  be  figured— -amounting  to  $505,000  a 
year,  compared  with  estimates  of  $540,000.  It  produced  that  reve- 
nue m  spite  of  the  following  factoi-s: 

During  the  montlis  of  May  and  June  it  produced  well  up  to  the 
estimates,  and  during  the  months  of  July  and  August,  the  street 
railway  companies  of  New  England  all  inflected  a  tremendous  loss 
ct  travel,  l^eople  were  busily  engaged  in  manufactui-es ;  the  ordinary 
outings  were  given  up,  the  dance  halls  that  were  operated  six  nidits 
a  week  were  open  only  on  three  nights  a  week ;  and  there  was  a  distinct 
lallingj)tt  in  tmvel  i-eflected  on  all  of  the  street-railway  lines,  which 
was  suttered  by  this  company  as  well  as  the  others. 

In  the  latter  part  of  September  and  during  October,  the  influenza 
epidemic  practically  depleted  it,  so  that  under  the  increased  rates 
of  fare  this  company  showed  less  gross  i-evenue  than  it  showed  the 
year  before. 

But  even  operating  under  all  those  unfortunate  conditions  the 
2-cent  zone  plan,  Avith  the  contracted  5-cent  center,  operated  in  Rhode 
Island  to  hold  the  traffic  on  the  cars.  Tliere  was  very  little,  if  any, 
W  of  ti-affic  on  the  pai*t  of  the  company,  and  it  was  believed  by 
the  commission  that  for  that  reason  this  easy  gradation  from  5  to 
i.  to  9  cents  would  hold  the  traffic,  and  the  result  of  the  operation  of 
ih(^  plan  sliowed  it  did  hold  the  traffic  and  it  did  not  woi-k  any  undue 
hunislup  or  any  injurious  economic  or  social  results. 

Tlie  5-cent-zone  plan— tliat  is,  with  the  still  further  contracted 
central  5-oent-zone  and  with  the  5-cent  units  outside,  which  operated 
to  place  a  large  part  of  our  population  pior  to  May  5,  1918,  paid  5 
cents  to  get  back  and  forth  to  the  centei^— -made  them  pay  10  cents 
and  was  estimated  to  produce  $1,250,000  worth  of  i-evenue  In  prac- 
tical operation  for  the  period  from  October  23  until  the  present  time 
that  lias  operated  to  produce  only  about  $350,000  out  of  the  $1,262,000 
that  Avas  estimated.  In  other  words,  it  fell  short  $912,000  of  pix). 
ducmg  the  revenue  that  was  estimated  for  it.  There  was  a  distinct 
Joss  of  travel  during  the  early  months  from  October  23  until  April 
1,  when  we  modified  the  interurban  rate.  Since  that  time  the  sliowW 
has  been  distinctly  better,  and  if  this  increase  had  been  based  upon 
the  showing  of  the  months  from  April  1  down  to  the  present  time,  the 
shortage  would  not  have  been  nearly  as  great. 

In  connection  with  the  5-cent-zone  plan  it  is  to  be  noted  that  pro- 
vision  was  made  for  the  application  of  a  1-cent  charge  for  transfers 
The  1-cent  charge  for  transfers  was  estimated  (p.  10  of  the  com- 
^^n^r?  ^"^^^"^^)  to  produce  $172,000  and  has  actually  produced 
$ao0,000  a  year,  whicli  has:  operated  to  reduce  the  use  of  ti-ansfers 
al)out  L>  per  cent.  It  seems  to  have  been  received  by  the  people 
without  any  complaint  whatever,  and  possibly  one  of  the  reasons  for 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1183 

that  is  tliat  we  have  retained  the  central  5-Gent  unit    -ind  I  thh.h 
many  of  the  pe<>ple  living  within  that  ai4.  f^fas  ?f  they  o^^^^ 
pay.  more  lor.tlieir  car  fares,  little  re^ilizing:  that  tiL  pilnS  in^ 
^oIvec  in  retaining  the  5-cent  central  unit  is  that  tiie  av^/a^^^^^^    the 
short-haul  travel  really  irud...  the  .horOhaul  traveLr  pay  far  n^^ 
than  he  sliould  pay  for  his  transportation.  ^^  '® 

llie  o^cent^zone  plan  as  modified  I  have  explained  to  vou  It  wm<, 
modified  simply  in  the  inteiv.ts  of  the  companrand  the  public  to 
try  to  get  more  revenue  out  of  tJie  people,  for  in  the  final  an-Eth^ 
rate  plus  the  t^^affic  represents  your  ff^ss  revenue  Yon V^?..^,ff' 
rate  up  and  drive  yo^ur  traffic\in\t^so  lo^  trt^ou^  a^^^^ 
tt  Som  ofl^'ll  """"i''''  -mn^ission  and  the  iSiVs  have  p^oS 
wW  l^c^,.      f~^  f''^-'^'''^"  ^^'^^^^^^  modification  of  this  rate  some- 

comLnv  iX^tpfnff    '^r.fV^''  ''''^''  ^^  ^"^^^  an  extent  tiiat    he 
company  is  better  off  with  tlie  lower  rate  tlum  with  the  higher 

andSaffic'   W  '""^'^'^^'^^^'^  briefly  the  effects  Ii^^onfhe  revenue 
cents  Providence  are  now  paying  10 

(histries  of  Pawtucket.  gieatly  stimulate  the  business  in- 

Oliieyville,  wliich  is  a  business  center,  to  the  nort1iw*«f  «*  u      • 
dence  and  a  natural  center  of  the  car  hn^Zx^Uh  .Ui        nv      *  ?'"■'"'• 
located  around  tliat  center^ias  sho^lrrtremendof,"lni?'*P"'-"*'r 
business  activities.   Tlie  people  comeln  and  trade  in  Oln^v^^?^^^  "I. 
than  to  pay  the  other  5  cints  to  get  onTprSnce       ^       '  ''*''"" 

rhe  same  thing  is  true  in  East  Providence.  Avhere  an  overlan  Pv:=f= 
The^^people  save  the  5,  cents  in  and  out  of  ProvidenTSZt 

nittTirtSir'Jf 'thi  S^  U°  ^"T^T  ''"^''"-^-  Th« 
the  10..  by  it,anritelte'tiir/S;;t„^^^^^ 

centralized  business  enterprises  ran  wpH  aff^^i  I  ^  ,  ^  *  *^^ 
i~,»,„<l  ,„  „„  which  ™S  £  invZin;''±w',,''"  f"  f'l  "'• 
chm  toe.  «i,<i  p,,i„g  obligatbnV™  IhfnM  f£  "^  ''?"' 


1184    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 


selves  instead  of  going  to  some  other  towns,  from  the  social  stand- 
point ? 

Mr.  Bliss.  Well,  I  assume  that  centralized  business  operations  can 
be  carried  on  with  the  greatest  economy,  and  I  presume  there  is 
greater  economy — I  think  it  is  shown  there  in  the  case  of  the  big 
public  markets  in  Providence,  which  are  carried  on  on  a  cash  basis. 
I  think  the  prices  reflect  the  ability  of  these  companies  to  do  busi- 
ness in  a  large  way  and  deal  with  a  large  number  of  people.  In 
other  words,  one  set  of  overheads  is  applied  to  larger  business  while 
the  separate  overheads  applied  to  smaller  markets  would  operate  to 
greatly  increased  cost. 

Commissioner  Gadsden.  But  they  have  been  doing  that  business 
heretofore  at  the  expense  of  your  railway  system,  have  they  not? 

Mr.  Bliss.  They  have  since 

Commissioner  Gadsden.  Under  the  prior  system. 

Mr.  Bliss.  Since  about  1912. 

Commissioner  Gadsden.  Under  the  prior  system  of  fares  these 
big  department  stores  have  been  centralizing  business  at  the  expense 
of  the  transportation  system? 

Mr.  Bliss.  Yes. 

Commissioner  Gadsden.  And  the  transportation  system  has  paid 
the  cost  by  going  broke  ? 

Mr.  Bliss.  Yes;  although 

Commissioner  Gadsden.  Now,  that  is  the  contribution  that  the 
transportation  system  has  made  to  the  solution  of  the  social  problem, 
is  it  not? 

Mr.  Bliss.  Well,  I  just  want  to  make  myself  clear.  I  do  not  be- 
lieve that  prior  to  1912  the  department  stores  were  doing  this  at  the 
expense  of  the  transportation  system.  I  think  it  is  only  since  1912  or 
1913,  when  these  very  large  costs  became  involved  and  w^hen  the  com- 
panies under  their  old  .franchise  agi-eements  w^ere  held  right  down 
with  their  nose  to  the  grindstone — from  that  time  on  the  company 
has  been  furnishing  the  public  with  more  than  it  paid  for,  and,  of 
course,  they  have  been  furnishing  the  department  stores  with  more 
than  they  paid  for;  and  the  department  stores  are  the  principal  bene- 
ficiaries of  a  low^  unit  rate  of  fare. 

Commissioner  Meeker.  If  the  department  stores  can  conduct  busi- 
ness' so  much  more  economically  than  the  smaller  stores  in  outlying 
communities,  will  the  people  not  eventually  learn  that  and  trade  in 
the  central  districts  of  Providence  as  they  did  before? 

Mr.  Bliss.  Well,  if 

Commissioner  Meeker.  If  the  economy  of  centralized  business  is 
sufficient,  then  the  people  of  Pawtucket  and  the  outlying  districts 
could  well  afford  to  pay  the  extra  street-railway  fare? 

Mr.  Bliss.  Well,  I  think  that  is  largely  a  question  of  psychology 
on  the  part  of  the  housewife.  When  the  housewife  figures  the  actual 
10  cents  that  she  has  got  to  pay,  or  20  cents,  to  go  in  and  out  of 
Providence  now  from  the  suburbs,  and  the  question  of  going  down 
to  the  corner  grocery  and  the  20  cents  that  she  can  see  plainly  that 
she  would  save  perhaps  by  the  lower-priced  goods,  that  she  perhaps 
can  not  see  that  so  plainly.  But  I  am  simply  pointing  out  to  you 
the  actual  effect  of  the  application  of  these  increased  rates,  so  far  as 
the  decentralization  of  business  is  concerned. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1185 

Commissioner  Meeker.  Yes;  we  have  to  recognize  that  man  is  far 
from  being  a  rational  animal.  He  does  not  act  jus  the  economic  man 
IS  alleged  to  act.  For  example,  when  the  price  of  milk  increased  1 
cent  m  Boston,  the  amount  of  milk  consumed  Avas  cut  in  half, 
although  at  that  increased  price,  milk  was  still  the  cheapest  food 
product. 

Mr.  Bliss.  Well,  the  same  thing  is  true  with  regard  to  trans- 
poi-tation.  There  never  has  been,  on  the  part  of  those  in  public  posi- 
tions or  on  the  part  of  the  press,  any  disposition  to  prevent  the  facts 
of  the  problem  being  clearly  presented  to  the  public;  and  the  public 
have  shown  an  animus,  and  with  the  application  of  these  increased 
fares  they  walked  down  to  the  5-cent  points,  and  everybody  was 
talking  against  the  company,  and  the  public,  acting  in  the  same 
irrational  manner  that  you  have  referred  to,  was  simply  hurting 
themselves,  because  every  bit  of  revenue  that  they  took  away  from 
this  company,  so  much  the  sooner  forced  a  still  fui-ther  fare  increase. 

Commissioner  Meeker.  I  do  not  want  to  internipt  your  direct 
statement,  but  I  think  this  is  rather  impoilant.  Do  you  not  think 
that  the  public  can  be  educated  to  understand  its  own  interests  so 
that  It  will  not  walk  or  refuse  to  patronize  cheap  transportation 
means  by  electric  railways  when  the  matter  is  placed  before  them 
fullf  ? 

Mr.  Bliss.  I  have  always  believed  that  the  public  is  absolutely 
reasonable.  I  have  had  experience  in  public  positions  and  public 
life  and  experience  upon  the  commissions— and  I  have  said  from 
start  to  finish  that  the  public  is  absolutely  reasonable,  if  the  public 
can  get  the  facts  fairly  presented  to  them.  I  do  not  care  about  the 
agitator;  he  will  agitate  anyway.  But  when  intelligent  men,  college 
men,  and  business  men  can  not  get  the  essential  facts  of  the  problem 
before  them,  how  can  you  expect  to  get  an  unprejudiced  and  fair 
conclusion  on  the  part  of  the  public? 

Now.  I  think  that  the  difficulty  with  the  situation,  as  has  been 
pointed  out  to  your  commission  here,  as  I  judge  bv  reading  it,  is 
that  the  public  are  not  permitted  to  get  the  essential  facts  of  this 
simple  problem  in  their  minds.  And  people  who  are  in  public  posi- 
tions, who  should  come  out  and  who  could  reassure  the  public  and 
who  could  control  public  opinion  and  whose  word  would  be  accepted 
as  to  the  facts— until  these  people  are  willing  to  do  that— until  these 
agencies  of  publicity,  of  the  press,  are  willing  to  come  out  and 
state  these  facts,  just  so  long  will  the  proper  solution  of  this  prob- 
lem with  the  mass  of  the  public  be  delayed. 

The  social  effects  have  not  been  so  marked.  That  is,  vou  would 
naturally  expect,  under  a  substantially  increased  fare  that  we  have 
applied,  that  you  would  have  the  centralization  of  residence  on  the 
pa-rt  of  the  people;  they  would  all  crowd  within  the  5-cent  area 
ilie  lack  of  housing  accommodations  has  operated  in  such  a  way 
as  to  show  but  very  little  effect  upon  the  people  socially  There 
seems  to  be  no  less  a  demand  for  tenements  outside  the  5-cent  limits 
than  within.  And  while  that  tendency,  I  think,  would  be  very 
marked  with  the  resumption  of  normal  conditions  and  the  resump- 
tion  of  building,  I  think  under  the  present  emergency  conditions 
there  has  been  no  serious  effect  from  that. 

1G0(J43*'— 20— VOL  2 13 


1186    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  wish  briefly  to  touch  upon  ^Yhat  I  believe  have  been  the  funda- 
mental causes  of  the  emergency  situation  that  exists. 

The  increased  cost  of  labor  and  material  is  absolutely  at  the  foun- 
dation of  the  problem.  It  is  because  of  increased  fares,  it  is  because 
of  receiverships  and  the  lack  of  prosperity.on  the  part  of  the  com- 
panies. I  believe  the  increased  cost  of  the  materials  could  have  been 
liandled  and  can  be  handled  by  the  company.  The  increased  cost  of 
labor,  I  see  no  definite  ^yay  of  handling.  I  do  not  know  any  way  in 
which  it  can  be  dealt  Avith  until  the  people  who  are  inconvenienced 
by  strikes — the  people  who  are  the  ones  who  have  to  pay  the  tremen- 
<lous  increased  burden  of  these  fares — until  those  people  rise  up  and 
educate  those  who  represent  them  in  legislative  bodies  to  the  fact  that 
some  authoritative  tribunal  must  pass  upon  these  matters  and  that 
the  public  convenience  must  be  considered  in  dealing  with  these 
things  and  somebody  must  stand  up  and  definitely  and  finally  decide 
w^hat  shall  be  a  fair  wage ;  and  strd^es  of  the  people  after  such  a  de- 
cision, or  organized  attempts  to  interfere  with  the  carrying  on  of 
business  should  be  punished  according  to  law.  That  may  be  the 
.  ultimate  way  out  of  it.  Under  the  present  conditions  I  do  not  see 
any  immediate  prospect  of  relief;  but  I  think  all  of  us  must  realize 
that  it  is  a  disorderly  way  of  dealing  with  the  problem  of  the  wages 
of  men  employed  in  street-railway  employment,  to  force  the  public 
to  suffer  the  incouAenience  of  strikes. 

The  most  remarkable  condition  that  accompanied  the  strike  situa- 
tion in  Rhode  Island  was  that  the  public  were  able  to  carry  on  their 
ordinary  business,  factories  carried  on  their  business  through  the  use 
of  motor  transportation  and  the  application  to  the  steam  roads,  and 
the  business  and  commercial  life  was  carried  on  for  a  period  of  18 
days  without  any  spontaneous  demand  whatever  on  the  part  of  the 
public  to  force  a  settlement  of  the  strike. 

I  think  that  the  second  cause  that  has  produced  this  result  is  the 
excessive  franchise  taxes  and  paving  obligations  which,  while  for- 
merly easily  borne  by  this  company,  under  the  low  labor  costs  and 
under  the  constant  improvement  which  tended  to  reduce  the  cost  of 
tnmsportation,  when  troublous  times  came — it  is  just  one  darned 
thing  after  another;  and  I  think  these  franchise  taxes  and  paving 
obligations  are  the  heaviest  burden  and  the  first  thing  that  should  be 
removed  by  legislative  enactment.  The  amount  of  franchise  taxes 
and  paving  obligations  would  go  a  ver}^  long  Avay  to  reduce  the  rates 
of  fare,  and  ceilainly  the  benefits  which  come  to  the  taxpayer  by 
having  a  low  rate  of  fare  would  more  than  offset  the  increased 
cost  of  his  taxes.  How  you  are  going  to  bring  it  about  I  do  not 
Imow.  We  tried  to  bring  it  down  in  Rhode  Island,  and  we  thought 
we  were  fortunate  in  securing  any  relief  at  all  for  the  company; 
but  those  bills  were  not  moved  from  the  conmiittee. 

The  third  cause  is  the  competition  of  the  privately  owned  auto- 
mobile. The  privately  owned  automobile  has  come  to  stay.  We  can 
not  interfere  with  that.  Tliat  is  going  to  remain.  And  the  only  way 
we  can  do  is  to  have  hard  times  and  force  people  to  dispose  of  their 
automobiles  and  ride  in  the  cars.  We  do  not  want  that  as  a  i^medy 
of  the  situation.  But  the  tremendous  increase  in  the  number  of  pri- 
vately owned  automobiles— the  influence  is  just  as  strong  in  Rhode 
Island  as  it  is  everywhere  else.    Every  improvement  of  State  hi<rh- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1187 

ways  tends  to  increase  the  number  of  these  automobiles  and  the  use 
of  the  roads. 

The  estimates  of  the  effect  of  jitney  competition,  as  shown  bv  actual 
ridings  taken  by  the  commission,  appear  in  the  report ;  and  if  I  may 
take  that,  I  will  i-ef er  you  to  the  page  so  you  will  have  it  in  your  rec- 
ord. It  appears  upon  page  31  of  the  report  of  the  commission, 
where  we  have  indicated,  that,  according  to  the  ridings  that  were  ♦it 
that  time  shown,  the  loss  in  gross  revenue  to  the  Rhode  Island  Co. 
was  probably  not  less  than  $300,000  a  vear.  With  the  application 
of  each  increase  m  fares  the  jitney  competition  becomes  all  the  more 
severe. 

The  regulation  as  it  exists  in  Rhode  Island  is  left  to  each  of  the 
localities.  In  the  city  of  Providence  and  the  city  of  Pawtucket, 
where  the  jitneys  are  in  principal  use,  the  i-equirement  is  a  $25  annual 
license  fee,  a  $oOO  bond  for  e^ch  passenger,  up  to  the  capacitv  that  is 
fixed  for  the  car— five  passengers  is  the  common  amount— and^i  $2,500 
bond  and  $25  license  fee,  and,  of  course,  the  ordinary  registration 
motor  vehicle  fee  to  the  State. 

The  jitneys  are  under  no  other  regulatiwi.  They  are  not  requii^ed 
to  operate  over  particular  routes;  they  are  not  required  to  operate 
upon  particular  schedules.  I  believe  that  the  jitney  furnishes  to  manv 
people  a  superior  service  to  that  of  the  trolleys,  and  I  believe  for 
that  reason,  that  it  will  be  impossible  to  abolish  the  jitneys.  I  believe 
they  should  be  placed  under  the  strictest  regulation.  I  think  thev 
should  be  i;equired  either  to  be  placed  under  the  supervision  of  the 
city  authorities  or  under  the  supervision  of  the  commission  and  re- 
quired to  run  uix)n  regular  routes  and  with  regular  schedules,  and 
they  should  be  required  to  furnish  statistical  data  if  required. 

Commissioner  Meeker.  You  spoke  of  putting  them  under  the 
strictest  regulations.  You  mean,  do  you  not,  the  same  regulations 
tJiat  apply  to  the  street-railway  companies  practically?  You  would 
not  make  the  regulations  more  severe  for  the  jitneys'^ 

Mr.  Bliss.  Xo  ;  but  I  mean,  for  instance,  the  safetv  features.  If 
you  could  see  some  of  the  jitneys  that  operate,  which  are  regularly 
licensed,  and  some  of  the  drivers,  you  would  think  they  ought  to  be 
du-ected  to  the  board  of  health  for  fumigation  and  some  of  the  ma- 
chines sent  to  the  car  shop  'for  repairs. 

Commissioner  Meeker.  And  do  you  think  that  the  jitney  would 
still  survive  as  a  severe  competitor  to  the  street  milwavs  if  it  were 
subject  to  severe  regulations— practically  the  same  regulations  as 
street  railroads? 

Mr.  Bliss  I  think  it  would  operate  to  hurt  the  sti^et  railways, 
but  I  thmk  they  would  be  very  greatly  induced  in  number.  In  the 
city  of  Providence,  our  great  difficulty  is  our  narrow  streets  and 
corners,  which  make  the  operation  of  these  large  cars  difficult  The 
congestion  of  the  streets  with  jitneys  and  with  the  other  automobiles 
tends  to  very  greatly  delay  the  movement  of  the  cai-s  through  the 
center  of  the  city.  That  is  one  reason  why  the  i-ecommendation  of 
tpv  .7^""''-^' '  engineers  of  refuting  these  lines  outside  the  cen- 
lei  ot  the  city— which  would  immediately  l^  objected  to  by  the  de- 
partment stores  who  want  every  car  to  go  by  their  doors*-such  a 
'  ^  ,«'.'^'"^^i  w«nld  operate  to  tremendously  increase  the  speed  of  the 
Cells,  and  we  estimated  that  an  average  increased  speed  of  10  per 


1188    PROCEEDINGS  OF.  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

cent  would  mean,  under  the  operations  of  1912,  $150,000.  The  jit- 
neys operate  to  delay  the  movement  of  cars.  They  crowd  in,  in  front 
of  cars,  and  delay  the  movement  of  loading  the  passengers;  and  the 
jitneys  which  are  unregulated  pull  right  in  between  (he  white  posts 
and  the  car  and  the  passengers;  and  all  of  that  dehiys  the  move- 
ment of  the  cars.  And  I  tliink  that  the  public  generally  would  wel- 
come proper  regulation  of  the  jitneys,  but  they  would  oppose  the 
absolute  suppression  of  the  jitney,  because  the  jitney  does  render  a 
superior  service  to  the  car.  It  gets  you  there  quicker.  We  have 
a  large  number  operating  between  Providence  and  Pawtucket  on  a 
lo-cent  rate,  compared  with  the  trolley-car  rate  of  10  cents;  and  they 
do  a  tremendous  and  profitable  business,  and  they  are  well  conducted 
and  proper  cars  and  run  on  a  businesslike  basis.  And  I  think  the 
public  are  willing  to  pay  for  that  service,  even  though  it  costs  half 
as  much  again  as  the  trolley  does.  But  to  leave  the  jitneys  unregu- 
lated and  permit  them  to  come  in  direct  competition  with  the  cars 
is  a  very  serious  cause  of  the  present  situation. 

Another  cause,  and  one  which  I  think  should  be  remedied  at  once, 
is  the  tremendously  increased  Federal  taxes  which  have  been  ap- 
plied to  the  street  railroads.  The  street  railroads  should  be  relieved 
from  the  obligation  of  the  Federal  taxes.  A  tax  upon  street  rail- 
ways is  simply  a  tax  upon  the  riders  in  the  car.  I  believe  the  wel- 
fare of  the  United  States  is  dependent  upon  the  average  man  who 
rides  in  the  cars.  And  when  the  business  is  being  conducted  under 
such  hardships  as  it  is  at  the  present  time,  I  think  the  application 
of  taxes  which,  during  the  last  two  and  a  half  years,  have  added 
to  the  cost  of  the  Rluxle  Island  Co.  over  $20,000  a  year  out  of 
their  net  income — I  think  they  should  be  relieved  from  it,  and  I 
think  every  other  street  railroad  should  be  relieved  from  the  appli- 
cation of  the  Federal  war  taxes. 

The  most  cruel  thrust,  however — the  thing  that  brought  the  pa- 
tient near  to  his  demise,  the  thing  that  made  your  commission  here 
partake  of  the  nature  of  a  coroner's  inquest  rather  than  a  consulta- 
tion of  doctors  as  it  should  have  been — is  the  application  of  the 
findings  of  the  War  Labor  Board.  To  take  a  .sick  patient,  like  the 
Rhode  Island  Co. — to  take  a  patient  who  is  struggling  under  tlie 
load  of  increased  costs,  jitney  competition,  and  less  traffic  due  to 
the  war — and  boldly  hand  out  to  him  a  dose  of  $1,250,000,  with 
these  beautiful  words  of  consolation:  "We  ai*e  not  concerned  with 
the  financial  condition  of  the  company,  its  ability  to  meet  these  in- 
creases. This  is  a  living  wage,  and  you  have  got  to  get  it  some- 
how." And  of  course,  this  motto,  or  this  warnmg,  was  passed  on 
to  the  public-service  commissions  of  the  various  States  and  to  the 
towns  and  cities.  The  towns  and  cities  did  not  respond.  Generally 
speaking,  over  the  country  the  trolley  situation  has  received  little 
assistance  through  the  action  of  the  municipalities.  I  believe  that 
the  commission — that  really  these  burdens  have  been  passed  out  in 
this  way— passed  out  without  regard  for  the  effect  of  it — have  been 
placed  fairly  and  squarely  before  the  public-service  commissions  of 
this  country.  We  have  had  to  stand  up  and  do  all  we  could  under 
the  terms  of  our  oath,  to  do  our  duty  imder  the  circumstances,  and 
it  has  been  a  difficult  position,  especially  when  we  can  see  that  no 
increase  in  rates  of  fare,  and  that  is  the  limitation  of  our  authority, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1189 

can  commence  to  scratch  the  surface  of  this  problem.  And  I  believe 
that  the  awards  of  the  War  Labor  Board  made  in  that  way — I  believe 
that  the  Federal  authority  should  have  exerted  itself  to  relieve  the 
situation  of  these  companies  and  then  grant  the  increases;  revive 
the  patient  fii-st  and  then  make  him  take  up  his  work  and  pay  the 
increased  wage^  Instead  of  that,  they  killed  the  patient  first;  and 
you  gentlemen  are  sitting  here  on  many  of  these  companies,  conduct- 
ing a  coroner's  inquest. 

Commissioner  Meeker.  A  question  there.  Suppose,  as  was  main- 
tained by  the  War  Labor  Board,  that  48  cents  per  hour  represented 
the  minimum  of  decency  for  the  average  workman's  familv,  are  not 
you  killing  the  patient  if  you  do  not  provide  a  sufficient  wage  in 
order  to  enable  the  company  to  keep  its  labor  force  ? 

Mr.  Bliss.  What  I  complain  about  is,  if  you  are  going  to  kill  the 
patient,  kill  him,  kill  him  mercifully,  but  do  not  torture  him  by 
stringing  it  out.  It  is  constant  torture  to  add  these  burdens  on  him. 
Let  us  see  what  happened  in  the  case  of  the  Rhode  Island  Co. :  The 
Federal  trustees  tried  to  operate  this  road  under  this  revenue,  and 
the  New  Haven  stockholders,  already  tremendous  losers  by  havin<r 
anything  to  do  with  trolley  roads,  and  robbed  in  all  kinds  of  other 
ways,  contributed  $300,000  in  cold  cash  during  the  period  of  the 
Federal  trusteeship  to  make  up  the  deficits  in  operation.  Now,  why 
should  the  poor  stockholder  of  the  New  York,  New  Haven  &  Hart- 
ford Railroad  be  bled  and  robbed  of  his  money  to  try  to  keep  this 
patient  alive,  if  he  is  going  to  be  killed  by  these  various  doses  that 
are  gom^  to  be  applied  to  him? 

Commissioner  Meeker.  But  how  about  the  workingman?  If  he 
can  not  live  on  less  than  48  cents  per  hour,  are  you  going  to  sub- 
sidize the  railroad  by  paying  him  less  than  a  minimum  subsistence 
wage  m  order  to  keep  an  industry  alive  and  save  the  stockholders 
from  losing  money?     That  is  a  prettv  fair  question. 

Mr.  Bliss.  If  you  are  going  to  apply  logic  to  the  proposition— if 
there  is  not  money  enough  in  the  business  tc  pay  a  liberal  and  livino- 
wage,  then  stop  the  business.  And  I  am  not  so  certain  but  what 
before  you  reach  a  solution  of  this  problem  you  have  go  to  let  this 
business  go  right  to  the  dogs  and  then  try  to  build  up  what  you 
can  out  of  the  rums.  I  do  not  know  how  you  are  going  to  get  an 
intelligent  public  opinion  applied  to  it  unless  you  treat  the  public 
cruell}'.  ^ 

You  can  tiike  a  child,  and  that  child  goes  over  toward  a  hot  stove— 
Jie  does  not  know  it  is  hot— and  he  starts  to  put  his  hand  on  it  You 
would  say  the  merciful  thing  to  do  is  to  take  that  child  and  reason 
with  him  to  the  extent  of  his  intelligence  and  explain  to  him  that 
It  is  hot  and  he  will  certainly  get  his  fingers  burned,  and  gradually 
keep  him  from  all  that  danger;  but  what  are  vou  going  to  do  if  the 
child  pays  no  attention  to  you  and  finally  puts  his  hand  on  the 
stove  i     He  is  burned  and  he  finds  it  out. 

I  am  not  so  certain  but  what  the  only  way  in  which  the  public 
^Mll  hnd  out  that  there  is  a  problem  here  and  to  find  out  that  it  is 
necessary  to  arrive  at  a  just  solution  of  it  is  to  permit  a  complete 
wrecking  of  these  companies ;  and  that  is  what  is  taking  place  with 
our  Rhode  Island  Co.  to-day.  The  application  of  these  verv  orreatlv 
increased  rates  that  are  asked  for  will  barely  pay  the  operktmg  ex- 


1190    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Ill 


penses  and  taxes  without  one  cent  of  return  upon  capital  investment 
m  any  way. 
How  are  we  ^inor  to  solve  the  problem  ? 

Conmiissioner  Meeker.  The  only  point  I  wish  to  make  there— the 
co^t  of  living  increased  before  the  wages  of  the  men  operating  street- 
railway  cars  were  increased.  Tliat  is  always  the  history  of  wage 
increases.  Now,  if  they  could  not  live  on  less  than  48  cents  per  hour 
wage,  it  was  merely  a  question  of  giving  them  a  wage  increase  which 
would  enable  the  street-railway  companies  to  keep  the  men  employed 
m  operating  street-railway  cars,  else  they  would  be  drawn  to  other 
systems  and  your  business  would  have  died  that  way. 

Mr.  Bliss.  Well,  the  thing  that  I  disagree  with,  and  I  am  yet  to 
be  convinced,  is  that  any  centralized  authority  should  be  able  to  say 
that  we  are  not  concerned  in  any  way  with  the  financial  condition 
of  these  companies  or  their  ability  to  meet  these  increases;  that  is  no 
concern  of  ours.  The  State  and  municipal  authorities  must  deal 
fairly  with  this  situation ;  and  then  hand  down  an  award  that  dates 
back  from  the  middle  of  October  to  July  19,  involving  $800,000  of 
back  pay  that  the  company  has  not  got,  after  taking  this  $500,000 
of  cash  to  make  up  operating  deficits  that  was  contributed  by  the  Xev; 
Haven  Railroad  to  the  trustees  foi^  the  purpose  of  trying  to*^keep  thl , 
thing  alive.  The  company  has  been  operating  since' by  its  failure  to 
pay  the  State  its  taxes,  involving  at  the  present  time  about  $180,000, 
and  thev  made  up  the  back  jjay  of  these  men  by  failing  to  pay  tho 
to^yns  the  property  taxes  upon  the  property.  The  men  had  to  be 
i:)aid  first.  Xow,  we  can  not  deal  with  this  situation  piecemeal;  and 
tlie  authority  that  can  sit  down  on  one  side  and  say  that  the  com- 
pany must  increase  its  expenses  20  or  25  per  cent  and  point  oat  no 
way  of  getting  the  increased  revenue  is  simply  complicating  a  situa- 
tion already  difficult. 

Xow.  I  wish  you  gentlemen  would  stop  me  whenever  you  get  ready, 
liecause  I  am  pretty  nearly  through  anyway.     I  think  that  the  remedy 
through  increased  rates  has  a  natural  limitation  that  we  have  almost 
reached,  if  not  passed,  in  Rhode  Island.    Cei^tainly  we  will  reacli  if 
not  pass  it  in  considering  this  application  now  pending  before  us. 
When  we  have  reached  that  point,  the  only  remedy  that  will  have 
been    applied   to   the   situation   in   Rhode  *  Island    will   have   been 
through    three    successive    and    substantial    increases    to    the    man 
who    rides    upon    the    car    without  any    relief    from    any    other 
source;  and  I  say  it  is  unfair  to  the  man  who  rides  in  the  car  to 
contribute  all    these  increases  when  the  property  interests  are  get- 
ting a  substantial  benefit  through  the  continuance  of  trolley  lines. 
And  for  that  reason  I  say  that  we  are  going  at  it  piecemeal.    Some 
centralized  authority  ought  to  be  able  to  deal  with  the  situation. 
I  sometimes  feel  that  the  old-fashioned  form  of  tribal  government 
was  pretty  effective,  where  when  trouble  arose  the  tribal  chief  sat 
up  there  and  decided  the  difficulty;  and  there  was  no  appeal  to 
successive  courts,  but  he  settled  it  right  then  and  there  and  it  was 
settled.    And  I  sometimes  think,  with  our  form  of  government,  with 
a  tendency  toward  centralization  of  authority  in  Washington,  there 
ought  to  be  some  way  where  all  the  various  elements  of  this  problem 
could  be  dealt  with  in  one  proceeding  rather  than  to  have  the  lalx)r 
end  taken  up  by  the  War  Labor  Board,  the  rate  end  taken  up  by  the 


PROCEEDINGS  OF  FEDIiRAL  ELECTRIC  RAILWAYS  COMMISSION.    1191 

public-utility    commission    imd    the    legislative   body,    and    public 
authorities  stand  there  shirking  their  duty.    All  three  things  ouoht 
to  work  together  to  accomplish  the  solution.     I  l3elieve  that  eveiT 
dollar  saved  through  relief  from  taxes— and  by  that  I  mean  the 
iranchisc  taxes  and  paving  obligations  and  Federal  taxes— will  nre- 
vent  destruction  of  traffic  that  results  from  the  increased  fares 
And  I  believe  the  real  serious  thing  is  tliat  you  ai*e  drivinor  our 
l^eople  to  other  expedients  of  transportation,  that  you  will  never  pet 
back  to  the  trolleys.     I  think  the  strike  in  Rhode  Island  hacf  a 
tendency  to  force  people  to  seek  other  expedients  of  transportation 
which  they  will  continue  to  use.     And  I  believe  that  the  relief  from 
taxes  in  Rhode  Island,  if  the  State  relieves  them  from  its  taxes,  part 
ot  which  are  franchise  taxes,  and  a  part  representing  the  relief  of 
the  bonds  and  stock  from  taxation  in  the  hands  of  the  holder— I  be- 
lieve that  relief  amounting  to  some  $300,000  would  go  a  great  wavs 
to  help  remedy  our  situation.  ^ 

But  the  ultimate  reinedy  has  got  to  come  from  relief  from  taxa- 
tion the  rates  at  the  highest  reasonable  point  you  can  put  them, 
a.id  the  rest  m  the  form  of  a  subsidy  on  the  part  of  the  municipaHty 
served  m  proportion  to  the  service  rendered.  "^ 

I  neglected  just  one  point,  and  I  wish  to  call  your  attention  to  the 
conimission  s  opinion,  on  page  5,  and  to  the  paragraph  at  the  foot 
of  the  page.  After  summarizing  the  figures,  showing  that  for  the 
calendar  year  191v  tlie  company  would  fall  short  of  paying  opeAt- 
ing  expenses  and  fixed^^charges  to  the  amount  of  $2,111,578  the  fol- 
lowing statement  appears :  '   .  ' 

These  conditions  Imve  been  created  in  a  considerable  degree  bv  the  direrf 
and  necessary  intervention  of  tlie  Federal  Government 

Note  the  estimated  annual  cost  of  coal  due  to  re'^ulatlon'<  of  tho  t?o,i^..oi 
Oov<.nment  and  based  upon  the  tonnage.  mm\oTuTL''Le''yJrf:ul 

.  I  asked  that  there  be  pvepaied  an  exhibit  showing  the  items  of 
mcieased  cost  of  coal  that  vyas  created  by  the  direct  and  necessarv 
intervention  of  the  Federal  Goveniuient,  and  those  figures   as  an 

SS  oU'"-  "'''''*'  '^'-rVY  of  the  iucreasehost%f"co?i; 
)t.l68,989  of  the  increase  was  fixed  absolutely  bv  the  direct  and  neces- 
sary intei-^ent.on  of  the  Federal  Government  in  increadngX S 
of  coal  at  the  imnes  from  what  it  was  previously.  inci?asing  the 
cost  of  transportation,  and  the  Federal  Shipping  Board's  Sas! 
ing  the  demuri^ge  charge  in  the  rate  of  transportation. 

The  increase  in  the  annual  Federal  taxes  paid  bv  the  Rhode  Island 
Co.,  due  to  war  conditions,  amounts  to  $90,300;  the  estimated  anninl 
mcrease  m  pay  rolls  due  to  increase  in  ra  es  of  wa^  b™rd  of 
War  Labor  Board-this  estimate  of  $1,046,670  was  ex^^Id.  making 
the  increase  aboirt  $1,230,000,  because  the  board  applied  a  42lcen"s^ 
an-hour  mmimum  wage  for  all  adult  emplovees.  ^ut  even  upon  the 
lower  basis  the  total  increases  due  to  the  necessities  of  the  Federal 
.  *T«A^'n"i  "^  indicated  by  the  duly  constituted  authoritv  amourted 
to  $1,605,959  out  of  a  total  of  $2,111,678  that  the  companv  appaSv 
needed  to  .simply  maintain  its  solvency.  "     *^^'""'"> 

That  shows  the  extent  to  which  the  problem  was  created  awiv 
from  home  and  coated  directly  by  the  fntervention  of  The  FeS 
Government.    And  under  those  circumstances  it  seems  to  me  that 


1192     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

we  in  the  States  were  left  in  a  rather  helpless  position  to  try  to 
remedy  the  difficulties.  The  other  people  applied  the  remedies,  and 
simply  said  to  us,  "  You  pay  the  bill."  And  we  had  to  try  to  pro- 
duce the  ntoney.  I  think  that  concludes  everything  that  t  have  to 
say,  except  to  refer,  in  the  body  of  our  report,  and  this  is  for  the 
purpose  of  the  record,  to  the  report  of  the  commission,  commencing 
on  page  25.  The  commission  calls  attention  to  the  more  important 
factors  which  impose  increased  cost  of  operation  upon  the  utility, 
and  which  are  entirely  beyond  its  power  to  remedy.  And  in  the 
subsequent  pages  are  indicated  the  taxation  feature,  the  municipal 
franchises  and  agreements,  the  paving  obli^rations,  the  system  of 
municipal  regulation,  and  the  jitney  competition.  That,  for  the  pur- 
pose of  the  record,  will  indicate  to  you  where  we  have  dealt  in  detail 
with  the  problem. 

The  Chairman.  The  testimony  shows  that  you  have  been  a  very 
close  student  of  the  problem,  Mr.  Bliss,  and  your  contribution  has 
been  exceedingly  valuable. 

Mr.  Warren.  May  I  ask  Mr.  Bliss  two  or  three  questions  ? 

As  I  understand  your  testimony,  Mr.  Bliss,  you  think  that  the 
Rhode  Island  Co.,  which  is  your  principal  trolley  company  in  that 
State,  could  have  taken  care  of  the  increased  costs  due  to  the  war 
except  for  the  increased  costs  of  labor.    Is  that  correct? 

Mr.  Bliss.  Yes. 

Mr.  Warren.  And  on  page  G  of  this  report  of  your  commission, 
No.  43,  dated  October  19,  1918,  appears  a  statement  of  the  operations 
of  the  company  for  the  year  1917.  Is  that  for  the  year  ending 
June  30?  J  t. 

Mr.  Bliss.  Yes. 

Mr.  Warren.  And  was  that,  or  were  those  figures,  relating  to  a 
period  before? 
Mr.  Bliss.  These  figures  are  for  the  calendar  year,  as  indicated. 
Mr.  Warren.  For  the  calendar  year  1917  ? 
Mr.  Bliss.  Yes. 

Mr.  Warren.  Were  these  figures  for  a  period  before  any  of  these 
increases  ih  rates  were  made? 

Mr.  Bliss.  In  1917  there  were  none. 

Mr.  AVarren.  There  was  no  increase? 

Mr.  Bliss.  There  was  no  increase  in  rates.  The  first  increase  in 
rates  was  May  5,  1918. 

Mr.  AVarren.  So  that  the  fare  at  this  time  was  5  cents? 

Mr.  Bliss.  Yes. 

Mr.  Warren.  And  the  gross  receipts  were  practically  $6,000,000? 
Mr.  Bliss.  Yes. 

Mr.  Warren.  And  the  number  of  passengers,  I  judge  from  that 
was  180,000,000?  f         b      ,      j     s  t, 

Mr.  Bliss.  Yes. 

Mr.  Warren.  On  page  7  of  Appendix  B,  in  your  large  report,  your 
earlier  report— Appendix  B  being  the  report  of  the  engineers  I 
think — near  the  bottom  of  page  7 ' 

Mr.  Bliss.  You  mean  the  preliminary  report  ? 

Mr.  Warren.  Yes ;  the  preliminary  report  of  the  engineers. 

Mr.  Bliss.  I  have  it. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1193 

Mr.  Warren.  Is  a  paragraph  relative  to  power,  in  which  it  is 
stated  that  nearly  39  per  cent  of  the  total  revenues  was  expended 
ror  labor?  ^ 

Mr.  Bliss.  Yes. 

f.^^'^oT-f"''^'"-  -^'2/^'^  '"'''^'^^  ''^''^'^  ^"  P^'g^  29  it  appears  that  labor 
took  6V.32  per  cent  ? 

Mr.  Bliss.  Yes. 

Mr  Warren.  Those  figures  would  indicate  that  nearly  2  cents 
out  of  each  nickel  went  for  labor  at  that  time;  would  they  not «  If 
it  had  been  40  per  cent,  it  would  have  been  just  2  cents  out  of  each 
nickel  for  labor? 

Mr.  Buss.  Yes. 

Mr.  Warren.  As  I  caught  the  fijrures  in  your  testimony  of  in- 
creases m  wages-all  of  which.  I  think,  ha<l  been  made  sinc^e  1917- 
iSfof  $2\l9o!oOof       '"^  '""*  ^^*'*''^^"'  $1,250,000,  $640,000,  or  a 

Mr.  Buss.  That  is  correct.    Those  figures  are  not  detailed  figure.s. 
but  they  are  practically  the  accurate  figures 
Mr.  Warrex.  They  are  practically  the  accurate  figures? 
Mr.  Bliss.  Yes.  ^ 

Mr.  Warren.  In  other  words,  the  40  per  cent  which  was  being 
paid  in  1917  on  $6,000,000  would  have  been,  roughly.  $2,400  000 
and  the  increases  since  then  have  been  almost  as  much,  with  n  $210"' 
000  of  as  much,  which  would  make  the  cost  per  pasin-er  of  1917 
almost  4  cents,  as  compared  with  about  2  cents  before-1- 

Mr.  Buss.  I  have  not  figured  that  to  be  true— your  computation 

Mr.  Warrex.  At  any  rate,  the  other  figures  are  correct  ?     P"'*'"^"' 

\y'  Tx^'**''      ^* '  "^^  °*'*^''  figi'^es  are  correct. 

Mr.  jVARREX  On  page  35  of  that  same  report  of  the  engineei-s 
Appendix  B-Appendix  B  in  the  report  of  March,  1918^f  the 
special  coimmssion-is  a  chart  giving  the  average  rate  of  wage  per 

in  1914  as  ihS''  '""'"  °"  "''  ™"^'  ''"''  "'»*  ^''^"^  ^^^  averal'rfte 
Mr.  Bliss.  The  average  of  all  ? 
Mr.  Warren.  Yes. 
Mr.  Bliss.  25.1  cents  per  hour. 
Mr.  Warren.  25.2,  is  it  not  ? 
Mr.  Bliss.  25.2 ;  yes. 
Mr.  Warren.  And  in  1917,  as  what^ 

an?a  f?acW  ^''  '''''''^'  '""'^  '''^'  '^'^^'^^^  ^''""  ^^  cents-28  cents 

Mr.  Warren   28  cents  and  a  very  small  fraction  over« 
Mr.  Bliss.  Yes. 

compitnyf ''^''*  ^''""^  ''  *^'  ''''''*'^'  '''*'  ^'^  ^^"''  ^^  ^^^  ^^^^^  «"  ^^^^ 

Mr.  Bliss.  Yes. 

Mr.  Warren.  And  the  figures  now,  as  a  result  of  this  last  settle- 

Ssfcen^?''™'""""^^"''"'^  ^"^  motormen-is,  I  lllf^^lTu 

Mr.  Bliss.  56  cents  is  the  maximum.    It  runs  from  51  to  56. 
Mr.  Warren.  But  the  high  rate  is  56  ? 
Mr.  Bliss.  Yes. 


11Q4    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

Mr.  Warren.  I  do  not  suppose  you  know  what  the  aggregate  pay 
roll  in  1914  was ;  do  you  ? 

Mr.  Bliss.  The  figures  are  all  in  the  report. 

Mr.  Warren.  Are  they?  The  entire  pav  roll?  If  they  are,  then  I 
can  find  them  at  my  leisure. 

Mr.  Bliss.  I  think  you  can  find  them  given  in  detail  in  this  report. 

Mr  Warren.  Roughly,  the  pay  roll  has  been,  so  far  as  that  rate 
would  indicate  in  the  chart  last  referred  to,  doubled  since  1914?  I 
think  you  said  the  rate  was  25.1  in  1914.  and  is  now  something  over 
50  cents,  the  high  rate  being  5G  cents? 

Mr.  Bliss.  Of  course,  you  have  referred,  in  speaking  of  page  35,  to 
the  average  cost  of  all  labor.  I  am  referring,  when  I  speak  of  this  50 
cents  to  the  maxmium,  to  the  cost  of  conducting  transportation. 

Mr.  Warren.  Oh,  that  is  the  transportation  cost? 

Mr.  Bliss.  Yes. 

Mr.  Warren.  In  connection  with  the  transportation  increases 
recently  made,  what  was  done  with  the  miscellaneous  labor? 

Mr.  Bliss.  They  received  their  proportionate  percentage  of  the 
increase. 

Mr.  Warren.  A  corresponding  increase  ? 

Mr.  Bliss.  A  corresponding  increase.  That  applied  to  all  lines  of 
labor. 

Mr.  Warren.  Are  you  familiar  with  the  reports  oii  the  National 
Industrial  Conference  Board? 

Mr.  Bliss.  I  am  not. 

:Mr.  Warren.  I  would  like  to  offer  that,  Mr.  Chairman. 

Dr.  Meeker  knows  better  than  I  how  much  value  to  place  on  it  •  but 
3  received  it  last  night,  and  it  presents  a  weighted  cost  of  livincr 
showing  the  increase  in  the  cost  of  living  from  July,  1914  to  July' 
1910,  at  70.8  per  cent— practically  71  per  cent.  ' 

The  Chairman.  Do  you  want  to  present  the  whole  report? 

Mr.  Warren.  Yes ;  I  do  not  care  to  put  it  on  the  record  but  those 
figures  I  have  given  will  go  on  the  record. 

I  believe  that  the  commission  will  find  that  since  1914  the  wa^^e  in- 
creases on  the  street  railways  have  been  very  nearly  if  not  quite^dou- 
bled ;  so  that  the  cost  of  living,  I  think— assuming  that  that  computa- 
tion of  the  cost  of  living  is  a  reasonable  and  proper  one— the  cost  of 
living  has  been  considerably  more  than  taken  care  of  in  the  increases 
of  wages.  I  know  that  is  true  on  certain  companies  with  which  I 
am  very  intimately  connected. 

The  Chairman.  I  have  just  one  question,  Mr.  Bliss:  You  stated 
that,  directly  due  to  the  Government's  intervention,  the  additional 
cost  of  coal  to  the  company  was  $468,989.  Do  you  want  to  leave  the 
impression  with  this  commission  that  in  the  absence  of  Government 
intervention  there  would  not  have  been  an  increased  cost  of  coal  to 
this  company? 

Mr.  Bliss.  Not  at  all.  I  simply  wanted  to  show  in  that  as  I  have 
stated,  that  these  conditions  have  been  created  in  a  considerable  de- 
gree by  the  directly  necessary  intervention  on  the  part  of  the  Gov- 
ernment. I  did  not  question  the  necessity  of  it.  I  said  the  necessary 
intervention,  and  I  do  not  want  to  create  any  such  impression  and 
did  not  intend  to.  You  will  note  further  on,  in  the  report,  upon  page 
13,  that  we  have  stated  that  "  the  wish  of  the  Federal  Government 


PROCEEDmoS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1195 

as  thus  expressed  through  its  duly  constituted  agencies  should  be  a 
command  in  the  present  emergency;  and  these  substantial  raises  of 
tare,  to  a  large  extent  made  necessary  by  Federal  action  as  herein- 
before  indicated,  should  be  accepted  by  the  public  in  such  a  spirit." 
In  other  words,  we  do  not  desire  to  criticise  the  Government  at  all, 
and  we  assume  that  those  things  were  absolutely  necessarv;  but  they 
were  fixed  by  an  agency  entirely  outside  of  the  control  of  the  com^ 
mission  and  an  agency  outside  of  the  control  of  the  company,  m 
agency  to  which  both  the  company  and  the  commission  should  bow 
in  an  emergency  as  it  existed.  ^n^uiu  uow 

Commissioner  Sweet.  But  you  do  not  doubt  but  what  there  would 

111  dXoVr  '"'"""'"  '''"''  '^  ^^'^  Government  had  not  interfered  at 

^;t;i'^  ^^'' 'w-  ^°*^  *^^'  «''g'»*est-    I  Jo  not  think  that,  under  the  con- 
ditions exLstmg  in  the  war,  there  would  have  been  anytliing  but  in - 

Xnf  .    'i'*/"'  ""'?«/^"!  ''-^"^  ^^'''^  ^^ith  was  that  the''am-a"e 
pi  ce  of  coal  for  a  period  of  10  years  in  Providence  was  about  $3  43 

ncrea^fn^Zirl^r.*  ""T^*^  '^'  ''''  ^"">  '^'^  P"«^  ^'^y  ^^^^ 
incieasmg  until  it  got  up  to  an  average  of  nearly  $10  a  ton-  niui 

therr  'YTnot'Z-  %  f>  '°"-"  *°  ''^''''^''  '''-'  -  ««  exis^  ^t 
meie.    l  do  not  think  there  is  any  prospect  of  its  goino.  below  tint 

n  oun?^    I  '„??f '"''  *"  over  90,000  tons  I  year,  is  a^ery  substant  a 
amount.    But  the  increases  that  were  due  to  the  Federal  Government 

wircondronsf'''"  "'*  *"*''  ''''  '^  ""  '^''  *'""'  •'''»»«  unde;  tLeT;."- 
Mr  AVAnifEN.  And  the  fuel  was  a  very  small  amount,  relative  to 

The  other  could  have  been  taken  care  of  and  met  by  the  remedfes 
that  we  wei-e  attempting  to  apply.  ^  lemeaie,^ 

(Witness  excused.) 

m^ n."""^''^f  ^%  Ogburn,  who  is  your  next  witness ? 
wlwC  •■  ^r-"F«^'-  Mi%  Chairman,  Mr.  Zenas  W.  Bliss,  of  Rhode  Island 

The  Ch-virman.  We  shall  be  pleased  to  hear  you,  Mr.  Bliss. 

STATEMENT  OF  MB.  ZENAS  W.  BUSS. 

Mr.  Bliss   I  might  state,  for  the  purposes  of  the  record  thit  T  nm 

chairman  of  the  Rhode  Island  State  ^ax  CommissTon   one  of  the 

eceivers  of  the  Rhode  Island  Co.,  appointed  at  the  sug^^on  of  t  e 

attorney  general.    I  do  not  represent  any  financial  iKsts  in  th^ 

roceivership.     I  was  also  chairman  of  the  commiss  on  which  sub 

kS  SLT '■*  ''  ''""'  '''  '''''  "^  ^•^^  GenelTASrof 

brfofl!"*f^-,.'"'  "*  r'!"'^  '°*""*'*  i"  ^^'^  connection  to  state  very 

) iicflj    the   complicated   system  of  taxation   which   Rhode   Island 

applies  to  Its  street  railroads.    There  is  no  State  centrXition  of 

the  taxing  power  in  Rhode  Island.     The  tax  comn^^slo^  has  no 


» 


1196    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


'ffi 


i 


plenary  powers  Avhatever;  merely  advisory.  The  tax  commission 
assesses  certain  taxes,  all  property  taxes,  except  in  the  case  of  cer- 
tnm  very  minor  franchise  taxes  upon  nonoperating  corporations. 
The  Rhode  Island  Co.  pays  a  property  tax— that  is,  upon  its  real 
estate  and  tangible  personal  property— in  all  of  the  municipal  juris- 
dictions in  which  it  operates.  It  is  also  liable  to  pay  a  franchise  tax 
in  each  municipal  jurisdiction.  These  franchise  taxes  are  somewhat 
controlled  by  the  general  law,  in  that  it  limits  them  both  up  and 
down.  In  some  municipalities  they  are  not  allowed,  under  the  gen- 
eral law,  to  charge  less  than  a  certain  per  cent.  In  others  they'^are 
allowed  to  charge  uj)  to  a  certain  per  cent. 

There  is  a  rather  peculiar  condition  in  some  of  our  towns,  Avherc 
tlie  town  is  divided  into  fire  districts.  They  have  delegated  to  them 
these  district— the  taxing  power— and  so  they  put  on  a  tax  in  addi- 
tion to  the  regular  municipal  tax,  based  upon  the  local  municipal 
valuation.  So  that  in  many  towns  the  railroad  companv  has  to  pay 
two  property  taxes. 

The  State  imposes  a  2  per  cent  gross-receipt  franchise  tax  and 
also  a  1  per  cent  gross-receipt  tax,  which  is,  or  at  least  has  been, 
up  to  the  present  time,  considered  a  property  tax  in  lieu  of  any 
tax  upon  the  stocks  and  bonds,  securities,  and  other  intangible  prop- 
erty in  the  corporation  in  the  hands  of  the  holder  or  owned  by  the 
corporation  itself. 

The  city  of  Providence  imposes  a  franchise  tax  of  5  per  cent  upon 
the  gross  receipts  of  this  corporation  within  the  city  liiuits,  that,  in 
addition  to  the  taxes  imposed  by  the  State,  making  8  per  cent  tax 
upon  the  gross  receipts  of  the  Rhode  Island  Co.  within  that  jurisdic- 
tion. Of  course,  that  is  the  largest  jurisdiction,  so  far  as  receipts 
are  concerned ;  and  about  65  per  cent  of  the  total  gross  receipts  of 
the  company  are  collected  within  the  municipal  boundaries  of  the 
city  of  Providence. 

I  have  not  the  figures  brought  down  exactly  to  date,  but  the  last 
available  information  is  to  the  effect  that  tlie  total  taxes  imposed 
upon  this  company  are  approximately  124  per  cent  of  the  gross  re- 
ceipts. It  is  one  of  the  most  heavil'y  taxed  public  utilities  that  I 
know  of  in  the  country,  and,  of  course,  the  taxation  is  very  excessive. 
The  commission  recommended  that  all  of  these  taxes,  except  the 
property  taxes  and  the  franchise  taxes  by  the  State,  be  eliminated; 
and  I  think  that,  in  view  of  recent  developments,  it  will  be  necessary 
for  the  franchise  tax  imposed  by  the  State  also  to  be  eliminated. 

The  property  tax  by  the  State— 1  per  cent  upon  the  gross  receipts 
in  lieu  of  any  tax  upon  the  stocks  and  bonds  in  the  hands  of  the 
holder  and  the  intangible  property  of  the  corporation— is  generally 
considered  by  the  business  men  of  the  community  to  be  a  very  fair 
tax,  and  one  advisable  for  the  company  to  pay  if  it  can.  It  provides 
a  perfectly  positive  method  of  collecting  at  the  source  the  tax  upon 
the  stocks  and  bonds,  and,  of  course,  relieves  the  holder  from  paying 
that  tax,  and  naturally  increases  the  value  of  those  securities  and 
makes  them  very  much  more  desirable  investments  for  local  in- 
vestors. That  is  considered  advisable  on  the  theory  that  it  is  ad- 
vantageous for  the  stocks  and  bonds  of  public  utilities  to  be  held,  so 
far  as  possible,  locally. 

I  think  a  great  improvement  in  this  matter  could  be  brought  about 
by  having  the  property  taxes  assessed  by  some  central  authority. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    li97 

Jt  would  relieve  the  company  of  a  great  deal  of  unnecessarv  ex])onse 
and  trouble.  1  hey  have  to  make  returns  in  26  jurisdictions,  and  in 
some  of  those  jurisdictions  two  returns;  and  you  get  the  ineniialitv 
which  always  accompanies  appraisal  by  a  number  of  different  ap- 
praising bodies  without  any  equalizing  influence  applied 

The  tendency  has  been  to  tax  the  property  of  this  company  at  a 
higher  percentage  of  its  full  value  than  other  property  in  the  same 
jurisdiction,  with  the  exception  of  the  city  of  Providence  There 
tlie  assessments  are  about  the  same  as  other  business  pronertv  be- 
tween 80  and  85  per  cent  of  the  full  value.  ^     ^ ' 

I  am  inclined  to  think,  or  I  am  of  the  opinion,  that  the  propei-tv 
taxes,  taxes  upon  the  real  estate,  buildings  and  improvements,  should 
be  maintained  I  see  no  reason  why  the  passenger  should  not  con- 
tribute  toward  paying  the  taxes  upon  the  property  which  he  uses. 

Ut  course,  if  we  are  confronted  with  a  situatioii  where  the  pas- 
senger can  not  pav  the  cost  of  his  transportation  and  it  must  be 
made  up  of  some  form  of  subsidy  as  well  as  by  reducing  taxation, 
wliy  then  of  course  the  tax  upon  the  real  property  as  well  as  the 
franchise  taxes  should  be  removed.  ^    i-      j  <i=>  tue 

Tlie  paving  obligations  and  other  obligations  imposed  bv  the 
municipalities  are  particularly  heavy  in  the  case  of  the  Rhode  Island 
Co  The  streets  are  very  narrow,  and  in  many  cases  crooked,  and 
that  means  that  under  the  present  agreement,  where  pavin^r  bet^ween 
the  tmcks  and  18  inches  on  each  sicfe  of  the  tracks  has  to  be  main 
tamed  by  the  company,  practically  the  whole  of  the  street-pa  vine, 
obligation  falls  upon  the  railroad  company.  Our  principal  business 
street  is  very  narrow  and  has  a  track  right  down  the  middle  of  the 
street;  and  1  should  think  that  the  track  and  18  inches  on  each  side 
is  more  than  half  the  total  width  of  the  street. 

The  climatic  conditions  in  Rhode  Island,  of  course,  in  the  winter 
are  very  severe  and  the  streets  being  cleaned,  so  far  as  the  tracks  are 
concerned,  bj^  the  snow  plows  of  the  company,  practically  throws 
all  of  the  traffic  onto  the  right  of  way  of  the  company  S^;  ma  Jv 
of  the  winter  months,  and  that  is  imposing  an  excessively"  heavy 
burden  of  wear  and  tear  upon  that  part  of  the  highway  maintained 
by  the  railroad  company,  thus  increasing  the  heavy  burden 

Certain  street  improvements  were  made.  They  were  undoubtedlv 
of  considerable  advantage  to  the  railroad  company,  and  the  railro-id 
company  should  pay  a  certain  proportion  of  the  cost  of  those  ?m 
provemen  s ;  and  now  the  road  being  bankrupt,  of  course  they  ^^n 
not  meet  their  obligations,  and  probably  never  will  be  able  to  meet 
liiose  obligations.  mcci, 

I  am  also  of  the  opinion  that  that  kind  of  an  expense  placed  unon 
a  trolley  company  is  very  inadvisable.  It  is  not  the  pro?^ce  o^the 
passengei-s  upon  a  trolley  company  to  pay  for  the  permanent  iin! 
provements  of  a  municipality.  A  man  coming  from  12  or  15  miles 
distant  with  no  interest  whatever  in  the  municipality  except  to 
trade  tliere,  under  that  agreement  is  forced  to  pay  part  of  the  im 
provements  which  accrue  to  the  benefit  of  those  people  whoa'eTn 
those  immediate  neighborhoods.  ^ 

That  is  all  I  have  to  present.    I  shall  be  very  glad  to  answer  anv 


119S    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  CiiAiKMAX.  I  think  you  have  presented  your  ideas  so  clearly 
that  cross-examination  will  not  make  them  any  clearer. 

Mr.  AVarren.  I  would  like  to  ask  one  question. 
^  Beginning  with  1914,  this  particular  company,  the  Rhode  Island 
Co.,  has  been  under  the  control  either  of  trustees  appointed  by  the 
Federal  court  or  of  receivers  appointed  by  the  State  court  of  Rhode 
Island;  has  it  not? 

Mr.  Bliss.  Yes. 

Mr.  Warren.  The  company  itself  has  not  at  any  time  been  in  con- 
trol of  the  company  ? 

r^Ir.  Bliss.  Not  since  1914. 

(Witness  excused.) 

The  CiL^iRMAN.  Who  is  your  next  witness,  Mr.  Ogburn? 

Mr.  Ogburn.  On  yesterday  I  called  to  the  attention  of  the  com- 
mission an  offer  made  by  the  Public  Utility  Commissioners  of  New 
Jersey  to  present,  if  necessary,  a  statement  relative  to  their  recent 
action  on  the  Public  Service  Co.  of  New  Jersey.  They  have  sent, 
this  morning,  a  report  which  states  it  so  fully  that  I  assume  it  is  not 
necessary  to  have  any  member  of  the  commission  come  in  person. 
We  have,  however,  present  Mayor  Gillen,  of  Newark,  N.  J.,  who  has 
consented  to  discuss  before  the  commission  certain  i)hases  of  the  New 
Jersey  situation. 

The  Chair3ian.  We  shall  be  glad  to  hear  Mayor  Gillen. 

STATEMENT  OF  ME.  CHARLES  P.  GILLEN. 

Mr.  Gillen.  You  gentlemen  want  me  to  give  you  some  idea  of 
conditions  as  they  pi*evail  in  our  section?     Is  that  the  idea? 

The  Chairman.  The  purpose  of  this  commission  is  to  ascertain 
the  general  situation  applicable  to  the  street-railway  industry,  and 
of  coui^e  the  local  situation  bears  upon  the  general  one,  so  we  shall 
be  very  glad  to  hear  anything  you  have  to  say  on  the  subject. 

Mr.  Gillen.  In  Newark,  N.  J.,  we  have  this  keen  competition 
going  on  now  between  jitneys  and  street  cai*s,  and  the  number  of 
jitneys  is  increasing  from  tune  to  time.  The  jitneys  came  about 
three  years  ago.  The  street-car  service  had  been  deteriorating  and 
was  inadequate,  and  we  needed  some  additional  transportation  facili- 
ties in  the  streets  of  Newark.  So  the  jitneys  came  in  time  to  help 
us  out.  We  now  have  operating  there  about  three  hundred  and  some- 
odd  busses. 

The  Chairman.  What  is  the  population  of  Newark? 

Mr.  Gillen.  About  half  a  million ;  and  there  is  about  another 
half  a  million  in  the  adjoining:  towns. 

The  trolley  fares  were  increased  within  a  year  to  7  cents.  We  used 
to  have  a  5-cent  fare  with  free  transfer  privilege.  Now  the  fares 
have  been  increased  to  7  cents,  with  1  cent  for  a  transfer. 

We  have  been  contesting  that  before  the  public-utilities  commis- 
sion and  in  the  courts,  and  the  higher  fams  were  upheld  in  the  State 
courts. 

Then  the  company  piomised  to  bring  in  a  zoning  plan,  which  has 
just  been  submitted.  The  company  wants  3  cents  for  the  initial  mile 
and  2  cents  for  each  mile  thereafter.  There  is  considerable  objection 
to  that  from  the  towns  near  the  city. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1199 

The  Chairman.  Is  that  rate  now  in  effect? 

Mr.  Gillen.  No.  It  is  going  into  effect  pretty  soon.  I  do  not 
know  just  the  exact  date.  I  think  the  utilities  commission  has  com- 
municated with  your  secretary  regarding  that,  has  it  not,  Mr. 
Ogburn?  ' 

Mr.  GiLLK.N  No.  The  trouble,  of  course,  with  our  street-car  prob- 
lem in  >ewark  is  the  trouble  that  they  have  in  many  other  munici- 
palities al  ov-er  the  country— the  amount  of  water  in  the  stoik.  For 
instance,  the  Public  Service  Railway  Co.  of  New  Jersey  has  outstand- 
.'Z,r'Jr!'oonoor"?H\'*°"'  *1C0,000,000,  and  it  is-estimated  that 
nn  Ann  '  *?'  ?^  ""'*  represents  actual  value,  and  about  $100,- 
000  000  worth,  water ;  and  they  are  asking  us,  f^om  time  to  time, 

TlJr^P^ hi,'    S*^'  •°'^  ^'"^^^  "'>  ""*  ^'•''**  ""'°""t  of  ^^'«tei-ed  stock.' 
iliis  l-ublic  Service  Corporation  operates  all  through  the  State 

They  have  gone  out  in  the  Sfate  in  Various  places,  aitd  tXn  ov^^ 
ittle  lines  that  had  a  very  small  amount  of  business,  and  the  opera- 
tion of  which  must  be  very  unprofitable;  and  in  Newark  'v^m-e  the 
business  is.very  profitable,  we  are  supposed  to  maintahi  all' these  little 
lines  running  through  the  country,  where  the  travel  is  very  sma  • 
and  we  are  supposec   to  pay  profits  on  these  and  all  this  watered' 

ttt'aa\"fc™ni;s*'"AT^^^^  '"^  '"-^'^  ''V  '-4  -tt  to 
uie  leased  companies     All  this  expense  is  very  heavy,  and  I  do  not 

Se^Id" fZ'^ThSe''  """V"P--  Th^p4Ie  o^ ecMo  the  in! 
ber^iitnlvs'iJnoJ  "  ^■'/'■'^  ^h^rging  only  5  cents,  and  the  num- 
Dei  ot  Jitneys  is  increasing  from  time  to  time;  and  I  think  eventuillv 

tS  Ch\?km1T  J^"%^"T^^  '"  ^^^"-^^  than  st.reet"car"busS 
car?      '""'''"-'•'^^-  D«  the  buses  run  in  connection  with  the  street- 

Ml-.  Gillen  No.  Almost  each  bus  is  owned  by  a  different  owner 
SuZ^-J^elSSe^^K:  •^"^^^'  •^"^  -  -'*  case^  ittTh!: 
b«S:rM?M:;oH"''"  '''^"'  •-•^^  ^^^  ^-^-^'^"-^  -"tromng  the 

Mr.  Gillen   They  have  to  take  out  a  policy,  a  liability  insm-inr-o 
policy,  and  file  it  with  the  local  authorities,  and  then  tfievTve  f« 
pay  5  per  cent  on  their  gi;oss  receipts,  and  th'ey  are  siAjected   o  care 
Son,T        "'  '"''  restrictions,  city  ordinanL,  and  K  reiuht 

Commissioner  Sweet.  Is  there  any  defined  route  ? 
Mr.  Gillen.  Oh,  yes ;  each  bus  has  its  own  i-oute. 
Commissioner  Sweet.  And  time  schedule « 

oais'-theXeTp'Wt^  tT  *°  ^'"''^  "  **"*^  f '^^"1^'  ''"^  '"  "'^ny 
idses  mey  Ji\e  up  to  it.    The  owners  on  each  route  set  to^ethpr 

pd  they  agree  on  a  certain  schedule.    The  city,  howem    d£  „„t' 

on  tw'  Tf!^'f!  ''^^^''^^  *«  ^"y  g»eat  e.xtent;Ct  they  derate 
on  that  schedule  themselves;  and  we  find  it  works  out  all  rLht 
gmmissioner  Sweet.  Wlien  were  you  elected,  Mr  Mayor « 
Mr.  GiLMx.  A  year  ago  last  November.  ^     ' 

the  carST  ^"'"-  "^"^  *'*  street-railroad  pn^blem  an  issue  in 

Mr.  Gillen.  It  has  always  been  an  issue  in  every  campaign. 


m 


1200    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  There  has  been  considerable  popular  senti- 
ment against  the  street  railroads,  has  there? 

Mr.  GiLLEN.  Yes ;  because  of  the  poor  service.  There  has  been 
considerable  discontent  over  the  service  there,  and  I  think  Newark 
has  suite  red  a  great  deal  from  poor  service — poor  street-car-service. 

Commissioner  Sweet.  Of  course,  Newark  has  been  growing  very 
rapidly. 

Mr.  Gili^en.  It  has.  It  has  grown  so  rapidly  that  it  grew  beyond 
the  powers  of  the  street-car  company  to  give  proper  service. 

Commissioner  Sweet.  Do  you  know  whether  the  street-car  com- 
pany of  Newark  now  is  receiving  enough  income  to  pay  its  running 
expenses? 

Mr.  GiLLEN.  It  claims  it  is  just  about  paying  expenses. 

Commissioner  Sweet.  Including  interest  upon  its  actual  value,  to 
say  nothing  about  the  watered  stock,. but  the  actual  value  of  the 
properties  ? 

Mr.  GiLLEN.  Yes ;  I  believe  so. 

Commissioner  Sweet.  You  think  it  pays  interest  on  that  and  op- 
erating expenses? 

Mr.  GiLLEN.  I  do  not  know  whether  they  are  getting  in  enough 
now  to  pay  dividends. 

Commissioner  Sweet.  I  did  not  understand  that. 

Mr.  GiLLEN.  I  do  not  think  they  are  getting  enough  now  to  pay 
dividends. 

Conmiissioner  Sw>:et.  Any  dividends  at  all  ? 

Mr.  GiLLEN.  You  see  they  have  been  changing.  In  April  it  was  a 
C)-cent  rate,  and  then  they  changed  in  May  again  to  a  7-cent  rate, 
and  they  are  just  figuring  as  they  go  along.  According  to  their  own 
statements  they  are  leadii^  a  sort  of  hand-to-mouth  existence. 

Commissioner  Sweet.  You  have  had  no  valuation  of  their  prop- 
erties ? 

Mr.  GiLLEN.  Yes. 

Commissioner  Sweet.  Have  you? 

Mr.  GiLLEN   Yes. 

Commissioner  Sweet.  And  that  is  $60,000,000,  about? 

Mr.  GiLLEN.  Yes;  our  experts  have  made  a  valuation  of  about 
$60,000,000. 

CommiSvSioner  Gadsden.  Has  the  commission  made  a  valuation? 
Has  not  the  commission  found  a  value  of  the  railway  pix)perty? 

Mr.  GiLLEN.  The  public-utilities  commission  ? 

Commissioner  Gadsden.  Yes. 

Mr.  GiLLEN.  I  do  not  know  that  they  have  made  any  valuation. 
They  have  testimony  from  both  sides. 

Mr.  Gadsden.  Are  not  they  predicating  thcvse  rates  on  a  valuation 
of  some  kind  ? 

Mr.  GiLLEN.  Yes. 

Conmiissioner  Gadsdn.  But  not  on  the  watered  stock?  I  mean, 
the  commission  is  acting  with  reference  to  the  real  value  of  the 
property  ? 

Mr.  GiLLEN.  No;  they  are  considering  the  watered  stock,  because 
all  these  leased  companies  have  to  be  paid  their  rentals.  The  rentals 
are  guaranteed  to  the  leased  company  and  they  have  got  to  pay  them, 
and  the  moment  they  stop  paying  those  rentals  the  lease  is  broken. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1201 

Commissioner  Beall.  When  you  say  $60,000,000  do  you  mean  the 
'•'",7^^>;Pr«Pe''ty-in  the  city,  or  does  that  include  anything  outside? 
Mr.  GiLLEN.  The  State.  ^        e 

Commissioner  Beall.  Have  not  they  more  than  that  in  the  State? 
^  Mr.  GiLLEN.  The  whole  property  of  the  Public  Service  Railway 

Commissioner  Beall.  You  are  speaking  of  the  Public  Service  Co. 
and  not  of  the  property  in  Newark? 
Mr.  GiLLEN.  Yes ;  all  their  property  in  the  State. 
Commissioner  Gadsden.  And  you  think  the  whole  railway  prop- 

7r  ^V^^®  ^^^^^.  ^^  ^^^^  ^^^  in  excess  of  $60,000,000?        ^  ^    ^ 
Mr.  GiLLEN.  Yes. 

Af.fvT^'"'''''''''  ^^^'^'^-  ^^^  ^''^  y""''  ^""y  ^^^^  ^hat  valuation,  Mr. 

Mr  GiLLEN.  Mr  Mark  Wolfe,  Dr.  Wilcox,  and  some  other  experts 
that  the  cities  of  New  Jersey  have  eneaged  recently  in  this  con- 
troversy  before  the  public-utilities  commisSon.  ^ 

Coinniissioner  Sweet.  Dr.  Wilcox  is  here 

Commissioner  Beall.  May  I  ask  one  question  ?     I  want  to  get  that 

M    ho^m '^  .  -'^^  5°*  t^\^  *¥'■"  ^•'^l"^  ^t^ted.    When  fou  s^y 
iK>0,000,000,  that  includes  the  leased  values,  too «  J         -^J 

Mr.  GiLLEN.  Yes. 

^.^T/!!'^^'?"^'"   ^^-^''^-  7^^y   ^^^^^  »   peculiar  system   up   there. 
Some  they  lease    some  they  own  all  the  securiti^  of,  some  they 

hrnii*.^"".*^'  i  ''"*  "Ithe  st^^^'  ""'^  •"  othei^  they  own  the  stock 

Mr.  GiLLEN.  Yes. 

mTgil^TyS''"''"  ^'  ^^^^^-^"^  ^i^^e  any  connection  with?      ' 

Mr*G™"?';i5w  iZ?"  *"^  °}h^''  statement  you  wish  to  make? 
T  ^■^•yi"'*^^,-  I  do  not  know.  I  did  not  come  prepared.  I  thought 
I  woud  be  asked  some  questions  about  local  conditions  there  whfch 
I  would  be  very  pleased  to  answer. 

The  Chairman  Well,  you  have  thoroughly  explained  the  iitnev 
allv^tt  re.?**  "*'  *f™  ^*  regulation;  aSd  ^ou  fhink  that  ev'S 

ai;Cnt%tc"mpetitfon1"  "'^^  ""*  '^  ^''^^  *"  ^"^-*  ^  "-*  -^^  --' 

^r.  GiLLEN.  Not  with  increased  fares. 

1  he  Chairman.  We  thank  you  very  much 

Commissioner  Gadsden.  I  would  like  to  ask  one  question  to  make 
the  record  a  little  clearer.  Does  the  city  of  Newark  resulatrthe 
operation  of  jitneys  by  ordinance?  regulate  the 

Mr.  GiLLEN.  By  ordinance. 

^Commissioner  Gadsden.  You  mean  the  rate* 

Mr.  GiLLEN.  There  is  a  State  law  first,  and  then  the  State  Inw 
gives  the  municipalities  additional  power  to  enforce  addLmd 
regulations.  The  State  law  compels  the  municipalitLs  to  forc^  the 

other  ;l^^a?"o„s!  "^  ^"'^'  ""^  '"  ^"^•^'  *"^  there^ai^/oi^e 

Commissioner  Gadsden.  Is  there  anything  else«     Doe«?  thp  nr^i 
nance  prescribe  a  certain  route  for  the  jitley^lmakVhim  ke^p  a 
certain  schedule  every  day  during  the  year?  ^ 

160643**— 2a-voL  2 14 


1202     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  GiLLEx.  Yes;  there  is  an  ordinance  which  gives  the  traffic 
officer  or  the  supervisor  of  traffic  the  right  to  prescribe  these  routes, 
and  permits  are  granted. 

Commissioner  Gadsden.  In  bad  weather,  when  the  jitney  does 
not  run,  what  happens  in  Newark?  Do  you  enforce  a  fine  on  him 
if  lie  does  not  run  that  route? 

Mr.  GiULEN.  Yes;  if  they  do  not  live  up  to  their  agreement  and 
ro^uhitions  their  license  is  taken  away — their  permit  is  taken  away^ 

Mr.  Warren.  How  large  is  the  bond?    How  is  tliat  fixed? 

Mr.  GiLLEN.  What  is  that? 

Mr.  Warren.  How  large  is  the  bond? 

Mr.  (jiLLEN.  $5,000. 

Mr.  Warren.  For  eacli  vehicle? 

Mr.  GiLLEN.  Yes. 

Mr.  Warren.  Regardless  of  the  size? 

Mr.  GiLLEN.  Yes. 

Mr.  AVarren.  A  little  Ford  would  pay  the  same  as  one  of  the 
big  buses? 

Mr.  GiLLEN.  There  are  very  few  Fords  now  running  as  buses; 
they  are  mostly  all  large  sizes. 

Mr.  Warren.  They  are  mostly  buses? 

Mr.  GiLLEN.  Yes. 

The  Chairman.  That  is  all,  Mayor  Gillen.  Tliank  you  very 
nnich,  indeed. 

Your  next  witness,  Mr.  Ogburn? 

Mr.  Ogburn.  I  think  it  might  be  well,  as  Mayor  *Gillen  has 
omitted  it,  to  state  the  effective  date  of  this  order  which  came  in 
this  morning,  which  makes  it  September  14,  I  believe. 

Tlie  next  witness  is  Mr.  Wilcox,  of  New  York. 

STATEMENT  OF  MK.  DELOS  F.  WILCOX. 

The  Chairman.  Mr.  Wilcox,  you  know  so  much  about  this  prob- 
lem that  the  commission  will  not  indicate  to  you  the  lines  you 
could  pursue.  AVhat  we  want  is  your  helpful  suggestions^  as  well 
as  your  comments  upon  the  problem. 

Sir.  Wilcox.  The  problem  *is  so  intricate  that  it  is  hard  to  tell 
where  to  begin  and  what  course  to  take  and  whei-e  to  end. 

AVhen  Sir  Eric  Geddes  introduced  the  Government's  bill  for 
a  ministry  of  ways  and  communications  in  the  House  of  Commons 
on  March  17  of  this  year  he  said : 

Except  in  the  one  bright  instance  of  tlie  municipal  tramways,  the  transpc^rta- 
iUm  systems  of  this  country  (that  is,  Great  Britain)  are  not  prosperous. 
Taiven  all  over,  these  undertakings  (the  municipal  tramways)  are  earnincj 
7  per  cent  on  their  caj)ital.  I  do  not  think  that  I  am  exaggerating  or  using 
extravagant  words  if  I  say  that  with  the  exception  of  the  municipal  trams, 
which  hereafter  I  will  leave  out  of  i-eference  altogether,  the  transiwrtatlon 
systems  of  the  country  are  financially  in  a  semiiwiralyzed  state. 

A^'hen  this  statement  was  called  to  my  attention  by  two  of  the 
tramway  managers  of  British  tramways,  in  correspondence,  it  struck' 
me  as  being  so  important  as  showing  the  contrasted  condition  be- 
tween the  municipal  tramways  of  Great  Britain  and  the  street  rail- 
ways of  the  United  States  that  it  required  study  and  explanation. 

There  are  two  or  three  conditions  which  distinguish  the  British 
policy  with  respect  to  tramways  from  the  American  street-railway 


proceedings  or  federal  electric  railways  commission.  1203 

policy  which  I  think  ought  to  be  pointed  out  as  bearing  upon  the 
problems  which  this  commission  has  before  it. 

In  the  first  place,  in  Great  Britain,  beginning  with  Glasgow  in 
1894,  practically  all  of  the  principal  cities  municipalized  the  trams 
prior  to  electrification,  and  therefore  electrification  and  the  sub- 
sequent expansion  of  the  tramway  service  was  made  subject  entirely 
to  the  dictates  of  public  policy.  * 

a  T}'^J^?r^T  5"^^".^^'  Liverpool,  Birmingham,  Manchester,  Shef- 
field, balford,  Bradford,  Hull,  Newcastle,  Belfast,  Aberdeen,  and 
about  a  hundred  other  British  towns  have  municipal  systems,  and  for 
the  most  part  the  company  systems  are  smaller  systems  in  the  smaller 
towns.     The  only  large  cities  that  I  know  of  that  have  company  sys- 
terns  now  are  Bristol  England,  and  Dublin,  with  the  London  omni- 
bus system  and  the  London  underground  system  privately  owned 
It  IS  unnecessaij  to  make  any  detailed  statement  of  the  contrasting^ 
facts  with  respect  to  conditions  in  this  country.    As  you  know,  th? 
first  important  municipal  experiment  in  ownership  and  operation 
of  street  railways  in  this  country  was  that  of  San  Francisco,  start- 
.  ing  m  December,  1912,  with  the  Geary  Street  Railroad,  Xch  has 
developed  into  a  very  considerable  municipal  system  which  is  beincr 
operated  in  competition  with  and  supplementing  the  system  of  the 
United  Railroads.     The  Seattle  exi>eriment,  taking  over  the  entire 
system  of  street  railways,  of  course  has  been  in  operation  only 
three  or  four  months.    And  the  Boston  experiment  is  not  an  experi- 
inent  in  public  ownership  and  operation  but  an  experiment  in  opera- 
tion by  public  trustees  on  behalf  of  the  private  owners 

Aside  from  this  matter  of  general  policy  as  distinguished  between 
municipal  and  private  ownership  and  operation,  the  first  thing  that 
strikes  one  who  has  studied  the  history  of  street  railways  in  thl 
country  and  has  become  somewhat  familiar  with  the  policies  abroad-- 
not  through  personal  study  abroad  but  through  studies  and  reports 
n  conversation  with  others-is  the  difference  between^the  consei va^ 
tive  constructive  financial  policy  pursued  by  the  British  tramways 
and  the  extremely  reckless  financial  policy  that  has  charact^rizS 

nv' '*'r^"'^'\''f^  ^^'"'"'^  ^?  ^^'''  ^^''''^'y  "^l^^^^st  universal  The 
promoters  and  banking  syndicates  that  got  control  of  the  street  rail- 
ways of  this  country  fn  the  nineties  at  the  time  of  electrification  I 
am  satisfied  as  the  result  of  my  study  and  observatioi^Se  the 
electrifica  ion  of  the  street  railways  the  occasion  for  doing  alf  that 

nnTf^"^"^'  ^rV'-?'  'P'^^T^'  ^^  '"'^'^  *h^  street-railwa7industn' 
and  the  results  of  it  ai-e  with  us  to-day  and  can  not  be  escaped  with- 
out a  thorough  housecleaning,  overhauling,  and  getting  the  street- 
railway  busmess  down  on  to  a  sound,  instead  of  Its  present  rotten 
financial  basis  I  think  that  is  almost  universal  in  the  IiLtoi  v^^^^^ 
development  of  elec  rification  and  the  expansion  of  the  street^a^W 
industry  following  in  connection  with  it  ^ 

ivSr^Outfi^^  ^''''^  ''•''*  *^^^{:^^'^^■^^l'  li"^s  and  proceeded  to  elec 
tirty.  Out  of  the  earnings  of  the  system,  with  low  fares  and  excel 
lent  service,  it  has  paid  off  every  dollar  of  the  cost  of  the  street  rai 
way  system,  so  that  it  does  not  have  a  penny  of  fixed  chaf^^  at  the 
present  time.  It  has  set  aside  in  addition  'to  payint  off  tli^  entS 
capital  a  arge  amount  for  depreciation  resei4  and  rLwnls  It 
has  contributed  something  like  $4,000,000  during  the  cour^'oi  tJe 


1204    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

23  years  to  the  relief  of  taxes  besides  paying  regular  rates  and  taxes 
which  in  1918  amounted  to  about  5  per  cent  of  its  gross  receipts, 
which  is  not  quite  as  high  as  some  American  systems  pay. 

Liverpool  is  a  close  second  to  Glasgow.  It  has  paid  off  half  of 
its  debt  and  has  accumulated  sinking  funds  for  about  60  per  cent 
of  the  other  half  and  it  has  depreciation  reserves  set  aside  and 
accumulated  which,  if  they  were  applied  to  the  debt,  would  finish 
the  payment  of  the  debt. 

Other  British  cities,  while  perhaps  the  results  have  not  been  quite 
as  striking,  have  pursued  and  are  pursuing  the  same  policy;  while 
in  this  country  under  private  management  it  has  been  the  rule,  and 
is  still  the  rule,  that  there  shall  be  no  reduction  in  the  capitalization 
unless  it  is  forced  through  receiverships,  and  then  the  reduction 
shall  be  made  as  little  as  possible.  The  effort  of  the  organization  is 
not  to  get  the  capital  down  as  low  as  possible,  generally  speaking, 
but  to  keep  it  as  big  as  it  can  be  kept  and  still  worry  along  in  some 
way  in  the  hope  of  the  future. 

Even  under  public  regulation  it  is  not  the  theory  of  State  regula- 
tion that  the  investments  in  street  railways  should  be  amortized. 
They  are  considered  as  a  perpetual  investment,  with  the  result  that 
on  the  basis  of  the  strict  system  of  accounts  the  benefit  of  the  doubt, 
if  any,  is  given,  I  think,  on  the  whole,  to  increasing  the  capital  ac- 
count rather  than  decreasing  it.  It  is  only  in  a  few  isolated  cases 
where  companies  have  to  have  franchises  under  which  a  portion  of 
their  property  at  the  end  of  a  certain  period  will  revert  without 
payment  to  the  city  that  the  commissions  reauire  the  amortization 
of  the  investment.  The  commissions  have  had  no  power  to  undo  or 
do  over  the  past.  They  have  merely  had  power  to  see  to  it  that  future 
securities  represent  property.  And  even  in  that  connection  the  dc- 
Bire  of  the  companies  to  issue  securities  at  comparatively  low  rates 
of  interest  has  resulted  in  the  issuance  of  a  great  amount  of  securi- 
ties, even  under  commission  regulation,  at  considerable  discounts, 
although  the  commissions,  as  a  rule,  require  that  the  bond  discount, 
amounting  sometimes  to  as  much  as  20  per  cent,  shall  be  amortized 
oyer  the  period  of  the  bonds.  The  commissions  have  had  no  juris- 
diction over  the  holding  companies  which  have  sprung  up  every- 
where for  the  purpose  of  manipulating  the  securities  of  street  rail- 
ways; and,  if  we  were  to  accept  their  description  of  their  function, 
financing  them.  So  that  the  process  of  piling  capitalization  up  has 
l3een  going  on  right  along,  ever  since  commission  regulation  went 
into  effect.  But  this  unregulated  capital,  these  bonds  and  stocks,  are 
not  bonds  and  stock  of  the  street-railway  companies  themselves,  but 
of  the  companies  that  control  the  street-railway  companies  and  con- 
trol their  policy.    So  that  in  an  important  sense  the  effect  is  the  same. 

I  do  not  know  anything  more  striking  in  the  way  of  contrast  be- 
tween two  policies,  and  I  know  nothing  more  striking  in  results, 
than  the  contrast  between  the  financial  policy  of  the  British  munici- 
pal tramways  and  the  financial  policy  of  American  street  railway 
companies. 

I  spoke  of  depreciation  reserves,  ample  depreciation  reserves,  being 
set  aside  by  the  British  municipalities.  In  this  country,  as  everybody 
who  has  studied  the  matter  at  all  admits  on  both  sides  of  the'argu- 
ment,  very  inadequate  allowances  have  been  made  for  depreciation, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1205 

often  none  at  all;  so  that  now  it  has  become  one  of  the  main  conten- 
tions  of  the^ electric  railways  before  courts  and  commissions  that  the 
property,  if  it  is  reasonably  well  maintained,  should  be  valued  for 
rate  purposes  as  if  it  were  not  depreciated  at  all-^irectly  contrary 
to  the  repeated  decisions  of  the  United  States  Supreme  Court.  But 
the  companies  have  not  made  provisions  for  depreciation.  Thev  have 
put  the  carrying  of  fixed  charges,  largely  the  result  of  inflations  be- 
fore  depreciation,  and  the  result  is  that  they  have  not  made  pwi'sion 

itciSd  afifTt  ^L''::^'''' '''''''  ^^^^  ^^-  ^-p^^^  - -^1^  - 

T  LZ'^mVT^^  '^.u''  ^'''^''^  contrast  between  the  two  sj^stems  that 
wrfhr  ^"^  '^'""'^^  J^!P^^^  *^  ^^^^«-  We  have  in  this  country-- 
both  the  companies  and  the  municipalities-cultivated  the  uniform 

ftv  Z'  whiT'^^'  -  the  boundaries  of  an  individual  municipa^ 
ity,  and  where  municipalities  are  close  together,  where  suburban 

•    area  and  S-cent  zone  is  even  extended  beyond  the  limits  of  the  mu- 
nicipality.   I  suppose  that  if  American  cities  can  be  said  to  have  had 

it  has  S  t'wthf  Pf  V'^Tl.  ''^""-^y'  ^^^  street-railway  seiW 
fei^  ^  ^       ^^  uniform  flat  fare  with  free  trans- 

Now,  in  Great  Britain— I  do  not  know  how  far  back  it  ffoes    Der- 

th?nValSn?i^t  '"  '^  beginning-but  as  far  back  as  I  kfow' a^^y- 
thing  about  It,  the  system  of  charges  has  been  entirely  different  The 
fares  have  been  arrang;ed  according  to  the  distance  traveled  and  the 
result  appears  to  have  been  that  the  municipalities  and  also  the  com^ 
panics  have  been  able  to  give  very  low  fares  for  short  ride^wMe 
the  long  rides,  because  of  the  low  initial  fare,  have  not  carried  a 

S  Kmrc^se?'^"^'  ^'^  ^^-^'  ^'  ---'  ^-  ^--^-  ^ 
To  illustrate  this  again  from  Glasgow— Glasgow  is  an  extremn 
Illustration,  because  Glasgow  is  the  premier  British  city  wUh  S^ct 
to  tramway  pohcy-m  the  year  endfng  March  31,  1918,  the  gSw 
tramways  received  40  per  cent  of  all  tlieir  revenues  from  passenfe.^ 
who  paid  only  1  cent  each-that  is,  a  half -penny.  OnTy  bSweenI 
fnlr  money  P«««engers  carried  paid  as  muc^  asTc^^ts 

,    In  most  of  the  British  cities,  on  account  of  war  conditions   and 
increasing  costs  which  have  struck  them,  as  well  as  American^reet 
rail^^y  systems,  they  have  been  compelled  to  increarthe^r  W 
but  they  have  increased  their  fares  either  by  shortening  the  zonL  or 

?/thetSeS'  ff P'T'^^"  ''"•*  -"^^'"^  the  n^nimVmwha 
IV^%  eq'»y*lent  of  2  cents  in  our  money.    Liverpool  and  most  of 
the  other  cities  have  done  that.    And  yet,  with  that  higher  fare  the 

3  perS^  ""  '  ""*'  ""  ^^*'''  *•"*"  in  Gl4ow,  between  2  Ind 
In  this  country  we  have  had  this  uniform  fare  with  either  the 
flat  o-cent  fare,  or  a  lower  fare  by  reason  of  the  sale  of  ticket^  or 
as  in  Cleveland,  a  3-cent  or  a  4-cent  fare  applying  unifomTv 
throughout  a  given  territory;  Now  that  the  costs  have  goVup  soThat 
the  companies  have  felt  the  need  of  greater  revenues  and  havr,.nml 
m  for  increases  in  fares,  the  increase!  the  uniform  flat  fare  loTI 


1206    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

cents  kas  had  a  very  bad  effect  upon  traffic,  and  if  fares  keep  on 
going  up— to  10  cents,  as  they  have  in  Boston  and  Pittsburgh — on 
a  flat- fare  basis,  we  do  not  have  to  know  anything  about  it  from 
experience  to  see  that  the  people  who  ride  because  it  is  convenient^ 
not  because  they  have  to — the  short  riders— will  stop  riding.  They 
will  take  otlier  means  of  transportation,  or  walk.  And  the  result  is, 
and  experience  so  far  as  we  have  had  it  in  this  country  now  shows, 
that  the  increase  in  tlie  unit  fare  above  5  cents  has  a  very  deleterious 
effect  upon  traffic,  especially  sliort-haul  traffic,  and  has  a  tendency 
to  develop  and  encourage  competition  by  other  means  of  trans- 
portation, with  the  result  that  the  street  railway  now  is  becoming 
every  day,  with  the  increases  of  fares  in  this  country,  less  of  a  public 
utility.  The  companies  feel  themselves  so  hard  pressed  for  funds 
that  they  are  not  concerned,  generally  speaking,  with  any  other 
policy,  with  any  other  question,  except  how  to  get  more  revenue; 
and  if  they  can  get  more  revenue  from  50  per  cent  of  the  traffic  they 
will  take  it  irrespective  of  the  ultimate  effect  upon  the  street-railway 
industry,  and  the  ultimate  effect  upon  the  street  railway  as  a  utility, 
and  the  effect  upon  the  public. 

Now,  it  seems  to  me  that  in  the  contnist  that  is  shown  between 
British  conditions  and  American  conditions  during  the  war  and  in 
this  great  economic  crisis,  the  advantages,  from  the  financial  point 
of  view  at  least  and  from  the  point  of  view  of  transportation  service 
to  a  large  number  of  people,  of  the  British  system  are  apparent. 

The  question  will  be  raised  and  has  been*^ raised  frequently  as  to 
the  effect  of  the  zone  system  upon  congestion  and  crowding,'  and  I 
do  not  suppose  that  enough  intensive  study  of  tlie  two  systems  has 
been  made  so  that  those  of  us  who  have  always  been  flat-fare  men, 
on  the  theory  that  the  flat  fare  would  tend  to  spread  out  the  popula- 
tion, would  be  justified  in  jumping  to  the  opposite  conclusion,  that 
the  zone  system  will  not  in  any  appreciable  degree  affect  the  hous- 
ing and  congestion  pi-obleui.  At  the  same  time,  a  more  careful  study 
than  I  ever  had  made  before  of  the  British  system,  based  largely  on 
the  detailed  reports  made  by  Mr.  Walter  Jackson,  who  went  abroad 
last  winter  and  si>ent  thi-ee  months  studying  this  very  problem  for 
the  purpose  of  making  the  exi>erience  of  Great  Britain  and  the  prac- 
tices of  Great  Britain  available  to  the  street-railway  industry  in  this 

industry  at  this  time  when  the  zone  system  is  being  considered 

based  upon  that,  I  say,  I  am  pretty  well  satisfied  that  we  have  at 
least  exaggerated  the  effect  of  the  flat  fare  in  spreading  out  popula- 
tion. 

Some  of  our  interurban  developments  are  not  really  in  line  with 
the  public  welfare.  I  know  no  particular  reason  why  a  city  should 
be  built  up  in  a  straggling  manner  with  realty  developments  away  out 
in  the  country  with  large  stretches  of  unoccupied  and  unbuilt-up  ter- 
ritory between.  The  flat  fare,  if  it  is  carried  to  too  great  an  extent, 
just  merely  caters  to  the  real-estate  speculators,  and  it  is  well  known 
that  many  of  the  street-railway  systems  of  this  country  have  been 
overbuilt  by  reason  of  the  pressure  brought  upon  the  companies  by 
people  interested  in  outside  real  estate— sometimes  the  owners  of  the 
companies  themselves. 

To  illustrate  perhaps  a  little  more  clearly  the  contrast  between  the 
American  and  British  situations  with  respect  to  finances  and  traffic, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  CX)MMISSI0N.    1207 

I  have  prepared  here  a  little  exhibit-it  was  not  prepared  for  this 
puipo^,  but  I  bring  It  here  and  will  hand  it  in-showing  certain  sta^ 

tS  iT  11^  'i^Tv'^^^  tramways  of  Glasgow  as  compared  with  sta- 
tistics for  the  Public  Service  Railway  Co.  of  New  Jersey. 

The  statement  referred  to  by  Dr.  Wilcox  is  as  follows: 

Glasoow  ^««;«J^^,^;"^«f ^  :«-'^  roith  PuUic  Service  RaiUcay  System 

una  lespect  to  traffic,  rereniwH,  caintalization,  etc, 

[Glasgow  data  taken  from  annual  report  for  vear  ended  \far  11  loia-  t>..ki:«  o  .^-     t,  ., 
from  annual  report  filed  with  board  of  puWic  uUIitv  Smhii^^^^^^  Railway  data  taken 

exhibits  in  the  Public  Service  Railway  rStecas"]^  commissioners  for  calendar  year  1918,  and  other 


Population  served 

Passengers  carried 

Bides  per  capita 

Total  passenger  revenue....         

Average  fare  paid  by  passengers..'." VAr* 

Passengers  per  car-mile .. ...!!!!!!!]! 

Kilowatt  hours  of  power  consumed  per  car-mite 

Mileage  of  main  track. 

Net  debt  per  mile.  

Net  capital  stock  per  liiite."  ;;■"■" ' 

Passengers  carried  per  mile  of  main  track. *. ' 

Passenger  receipts  per  mile  of  main  track  


Public 

Service 

Railway. 


1,150,000 
430,946,566 
375 
$6,833,102 
1.56 
2.25 
26,281,231 
16.41 
1.56 
198.25 
(») 
(») 
2,173,753 
f34,416.66 


»  2,111,955 

*  404,991,  768 

192 

$19,102,346 

4.72 

76.22 

53,250,832 

7.61 

3.73 

790. 2J 

<  $105, 367 

» $979, 756 

512, 498 

$24,173.15 


In^7J'S,iV?e1,?^(E'xmbFt•f-3f^pT45^^  'SluJ't^.^n?r^?i^%^."°^»*^  ^y  the  company 
-"  m  Glasgow,  whern  J^WlL^.h.^^r.  \tV.:  „^l"«  *l*e  number  of  transfer  passeneers.*^     ^ 


'i!f=o,r^^y.';f  ^^t^b^^-^^^^r.r.  g,vo„,    Thusl^e  ,.,™. 


b€r  of  passengers  cafrJert  mea„s'in"'Soh  c  ty  the  Z^Cot 
nasscnsrers  othpr  than  "  Hoo/ih«o/i„  '.         '     *^^   ^°^  numiiei  ot 


passengers  other  than  "  deadheads 


•Thp 


f^'nZ  ll^r^^Il^.%^.J''^^\'^.^y  the  city  in  1894  and 


separate  car  rides  given  to 


were  soon  thereafter 


lor   tne  reiier  of  taxation.      Of  this  nmonnr  «««!  nnn '       '         \"./"^      common  good" 
tram^ys  also  pay  taxo§  direVtIy    whSTn  'l9*18  *^rounT^'  tH'So-R^^  V!   »"*:     ''"'«' 

I'obllc  Service  Railway  sysSS  ^™'^*"'"  ^o..  a  Milwidiary  whose  trackage  is  included  in 


annum. 


ncluded  iu 
service    Uanway   Co.-pa;^^  T^^xcT c&rfc"*^^f^  ^''^v\f2r'^i 


Construction    cost   of   Glasgow    system,    including   power    plant 
shops,   and   everything  complete.  _  ^    ^  ^'^'**' 

Capitalization  of  Public  Service  KailwaV  s~vs"t~em  *i^'  k^A  ^^ 

Construction  cost,  Glasgow  system,  per  miieof  n"iain7ra"c"k" ^      '     ^'  ^^ 

Capitalization,  Public  Service  Railw 


$18,  798,  968 
514, 150 
$94, 825 

$203, 123 


track  _.I.:l._  ^^i^iee  itaiiway  system  per  mile  of  main 

Co^truction~cosT.~GTa~^o-^^systV.^^^ 
CMta^ 

.  cents 

Commissioner  Meeker.  This  is  for  all  New  Jersey? 

Mr.  WiLco.x   That  is  for  the  Public  Service  Railway  system  of  V 
Jersey.    The  Public  Service  Railway  system  of  WSv  oner«t;. 
in  Newark  and  the.siirroundinjr  community,  Jer^y  City  SX  s,  r 
roundmg  communities,  Elizabeth,  New  Brunswick,  Rahway    'nd 
central  Jersey  town.,,  and  also  in  Camden  and  the  surroundini' com 
munitiesj  also  m  Paterson  and  Passaic  and- '"ounaing  com- 

Commissioner  Be.^ll.  Was  there  any  particular  reason  for  com 
panng  that  with  the  Public  Service  Co.f  Because  thej^re  entire"; 


4.30 
39.67 


ew 


fi 


m 


■f 


:f 


1208    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

different  cla&ses  of  companies.  One  is  all  together  in  a  very  closely 
congested  city  and  the  other  spreads  over  an  entire  State,  and  the 
conditions  are  entirely  different.  Was  there  any  particular  reason 
for  comparing  them? 

Mr.  Wilcox.  The  reason  for  comparing  them  was  that  I  was  on 
the  New  Jersey  case  and  I  had  the  knowledge  about  the  New  Jersey 
case. 

Commissioner  Beaix.  Well,  you  see  what  I  mean.  They  are  not 
comparable  at  all. 

Mr.  Wilcox.  Certainly.  And  the  difference  due  to  the  fact  that 
Glasgow  is  a  city  system  while  New  Jersey  is  a  combination  of  city 
and  interurban  systems  no  doubt  emphasized  the  contrast.  But  in 
considering  this  exhibit  you  will  have  to  make  allowances  for  that. 
The  point  I  want  to  bring  out 

Commissioner  Beall.  I  would  like  to  ask  you,  too,  whSit  is  the 
mileage  in  the  city  of  Glasgow. 

Mr.  Wilcox.  One  hi^dred  and  ninety-eight  miles.  That  is  given 
on  the  exhibit. 

Commissioner  Beall.  In  any  American  city  with  that  population 
the  mileage  would  be  probably  three  or  four  times  that,  would  it  not  ? 

Mr.  Wilcox.  It  would  be  somewhat  more. 

Commissioner  Beall.  Well,  not  somewhat  more ;  it  would  be  a 
great  deal  more. 

Mr.  Wilcox.  Well,  it  would  be 

Commissioner  Beall.  It  would  be  two  or  three  times  as  much, 
would  it  not? 

Mr.  Wilcox.  Well,  it  would  be - 

Commissioner  Beall.  As  a  matter  of  fact,  Glasgow  does  not  serve 
the  population  like  American  cities  except  in  the  densely  congested 
districts. 

Mr.  Wilcox.  I  am  informed  by  Mr.  Jackson,  who  made  a  special 
study  of  Glasgow,  that  he  was  unable  to  find  any  lack  of  strec/t* 
railway  service  in  Glasgow  and  Aberdeen  and  the  British  cities  as 
compared  with  American  cities.  It  is  true  that  Glasgow  and  Aber- 
deen at  the  present  time  are  planning  to  build  certain  extensions, 
but  it  is  just  the  ordinary  amount  of  extensions  that  an  American 
city  is  building  from  time  to  time. 

Commissioner  Beall.  Now,  Glasgow,  compared  to  American  cities, 
has  made  practically  no  extensions,  has  it,  for  quite  a  number  of 
years  ? 

Mr.  Wilcox.  Well,  I  think  not  during  the  war.  I  think  that  they 
have  not  made  any. 

Commissioner  Beall.  Well,  I  mean  compared  to  an  American  city, 
they  have  spent  practically  nothing  on  extensions? 

Mr.  Wilcox.  Well,  various  American  cities  have  done  very  dif- 
ferently. Many  American  cities  have  not  built  any  extensions  for 
10  or  a  dozen  years  practically  before  the  war. 

The  Chairman.  Proceed  with  your  statement. 

Commissioner  Meeker.  May  I  ask  if  you  could  give  us  an  exhibit 
comparing  Newark  alone? 

Mr.  Wilcox.  I  can  not. 

Commissioner  Beall.  Or  with  Detroit,  some  similar  city. 

Mr.  Wilcox.    I  can  not. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1209 

The  Chairman.  Proceed  with  your  explanation. 
Mr.  Wilcox.  This  shows  that  the  population  of  Glasgow  as  given 
by  the  report  is  1,150,000,  while  the  population  served  by  the  Public 
Service  Railway  in  New  Jersey  in  1915  according  to  the  1915  census 
was  2,112,000,  approximately. 

The  number  of  passengers  carried  on  the  Glasgow  system  was 
430,000,000 ;  on  the  New  Jersey  system  about  405,000,000. 

I  should  explain  what  those  figures  mean.  In  Glasgow,  with  the 
zone  fare  and  the  low  initial  rate,  there  are  no  transfei-s;  conse- 
quently every  time  a  person  gets  on  a  car  he  is  counted  as  a  passenger. 
In  order  to  reduce  the  public-service-railway  figures  to  the  same 
basis,  I  took  the  number  of  passengers  for  1918  as  estimated  by  the 
company  in  its  zoning  report,  where  they  eliminated  the  double 
fares.  In  their  regular  statistics,  every  time*^  a  passenger  pays  5  cents 
he  is  counted  as  a  separate  passenger,  but  in  order  to  estimate  what 
would  be  the  result  of  the  zoning  system,  they  established  a  percent- 
age of  the  total  number  of  riders  who  paid  a  second  fare  and  applied 
it  to  the  revenue  passengers  and  got  a  figure,  which,  as  I  remember, 
was  335,000,000,  or  approximately  that;  I  have  not  the  exact  figures. 
But  at  any  rate,  I  took  that  figure  which  represented  all  of  the  indi- 
vidual passengers  who  paid  fares  and  added  to  it  all  the  transfer 
passengers  who,  under  the  Glasgow  system,  would  pay  fares. 
Commissioner  Sweet.  So  as  to  get  that  on  the  same  basis? 
Mr.  WiLCOx.  So  as  to  get  that  on  the  same  basis.  These  figures 
mean  rides.  . 

Now,  the  rides  per  capita  in  Glasgow  are  375 ;  in  New  Jersey,  192. 

With  a  larger  number  of  passengers  Glasgow  received  $6,833,000 
of  revenue,  while  the  Public  Service  Railway  received  $19,102,000 
of  revenue. 

The  average  fare  paid  in  Glasgow  was  1.56  cents  in  our  money. 
The  average  fare  paid  in  New  Jersey  was  4.72  cents.  That,  as  I  say, 
includes  the  transfer  passengers;  it  also  includes  the  7-cent  fare  for 
two  and  a  half  months  of  the  year,  from  October  15th  to  the  end  of 
the  year  1918. 

The  proportion  of  passengers  paying  5  cents  or  more  was  2.25  per 
cent  in  Glasgow.  On  the  Public  Service  Railway  system,  including 
the  transfers,  76.22  per  cent. 

The  number  of  car-miles  run  in  Glasgow  was  26,000,000  and  on  the 
Public  Service  Railway  about  double,  53,000,000. 

The  passengers  per  car-mile  in  Glasgow,  showing  the  density  of 
traffic,  were  16.41  and  on  the  Public  Service  system,  including  the 
transfers,  7.61.  ^ 

The  mileage  of  main  track  in  Glasgow  was  198.25  and  on  the  Pub- 
lic Service  Railway,  790. 

The  net  debt  per  mile  in  Glasgow  was  nothing.  On  the  Public 
Service  Railway  system  it  was  $105,367. 

The  net  capital  stock  in  Glasgow  was  nothing  and  on  the  Public 
Service  Railway  $97,756  per  mile. 

Passengers  carried  per  mile  of  main  track  in  Glasgow,  2,173  753  • 
Public  Service  Railway,  512,498.  &     j    j      ,       , 

The  receipts  per  mile  of  main  track  in  Glasgow  were  $34,416,  as 
contrasted  with  $24,173  on  the  Public  Service  Railway  system. 

The  Glasgow  construction  cost,  including  power  plant,  shops,  and 
complete  system,  was  $18,798,968.    The  capitalization  of  the  Public 


1210    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Service  Railway  system,  the  cost,  the  actual  cost  or  the  reproduction 
value  not  having  been  finally  fixed  as  yet,  was  $160,514,150.  So  that 
we  have  with  Glasgow  a  concentrated  city  system  with  power  station 
and  a  vast  amount  of  equipment,  frequent  service,  first-class  tracks, 
costing  $94,825  a  mile,  while  the  capitalization  of  the  Public  Service 
Kailway  system,  spread  all  over  the  State  of  New^  Jersey,  is  $203,000 
a  mile.  The  Public  Service  Railway  power  stations  have  been 
alienated;  so  they  are  not  now  represented  in  the  propei'ty,  though 
they  are  in  part  represented  in  the  capitalization. 

The  construction  cost  of  the  Glasgow  system  per  passenger  carried 
in  a  year  was  4.3G  cents,  while  for  the  Public  Service  Railway  system 
the  capitalization  per  passenger  carried  in  a  year  was  39.67  cents. 

The  Chairman.  Is  it  convenient  for  you  to  stop  at  this  point? 

Mr.  Wiix'ox.  Yes. 

The  Chairman.  We  will  adjourn  until  2  o'clock. 

(Whereupon,  at  1  p.  m.,  a  recess  was  taken  until  2  p.  m.) 


AFTERNOON  SESSION. 


STATEMENT  OF  D.  F.  WILCOX— Continued. 

Mr.  Wilcox.  I  had  practically  finished  the  discussion  of  that  ex- 
hibit. 

I  realize  perfectly  well,  and  would  not  wish  to  convey  any  different 
impression,  that  there  are  other  very  important  differences  of  con- 
ditions between  Glasgow^  and  the  Public  Service  Railway  system ;  but 
it  seemed  to  me,  for  the  purpose  of  bringing  out  in  a  striking  way  the 
distinction  between  the  British  and  the  American  policies  with  re- 
spect to  those  two  points — the  finances  and  the  treatment  of  invest- 
ment and  depreciation  and  the  development  of  traffic  through  low 
fares  for  short  rides — that  this  exhibit  would  be  very  interesting. 

You  have  to  discount  the  differences  tremendously  for  other  rea- 
sons, before  you  can  explain  away  the  great  contrast  on  these  two 
points;  and  while  I  think  the  Public  Service  Railway  Co.  in  a  measure 
represents  an  extreme  condition  with  respect  to  American  Street  Rail- 
v*  ays,  and  the  Glasgow  tramways  represent  a  somewhat  extreme  con- 
dition with  respect  to  British  tramways,  still  there  is  enough  left  of 
the  contrast  to  require  a  very  good  explanation. 

llie  C^HAunrAN.  ?vlay  I  interject  one  question  there,  Doctor? 

Mr.  Wii.(  ox.  Certainh^ 

The  Chairman.  The  evidence  before  us  in  a  number  of  cases  shows 
that  the  labor  cost  approximates  about  4  cents  per  passenger,  or  per 
5- cent  charge.  Is  there  a  sufficient  difference  in  the  labor  costs  of 
Glasgow  and  of  this  countiy  to  make  up  for  the  large  difference  in 
the  fares  charged? 

Mr.  Wilcox.  There  is  not  sufficient  difference.  The  British  labor 
rates,  generally,  as  I  am  informed,  are  now  since  the  increases  of  the 
war.  about  where  ours  were  for  traimnen  at  the  beginning  of  the 
war ;  so  that  there  is  no  doubt  now  a  very  considerable  differential  in 
favor  of  the  British  tramways,  on  account  of  lower  wages,  although 
wages  have  increased  there  100  per  cent  or  more  during  the  war. 

The  Chair^lvn.  Do  you  know  if  that  increased  wage  liad  any  effect 
upon  the  exhibit  which  you  h:ive  filed  ? 


il 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIf.    1211 

Mr.  Wilcox.  The  increased  wage,  so  far  as  I  know,  had  no  effect 
upon  this  exhibit,  because  this  exhibit  does  not  deal  with  expenses. 
It  deals  with  capital,  capital  charges,  traffic,  and  revenues. 

The  Chairman.  Oh,  yes. 

Mr.  Wilcox.  I  regret  that  I  have  not  been  in  a  position  to  pre- 
pare, and  have  not  prepared,  contrasts  which  would  show  the  rela- 
tive figures  for  other  British  cities  and  other  American  systems;  but* 
we  can  not  do  everything. 

The  Chairman.  Are  these  statistics  available  in  this  country  to 
show  the  cost  of  labor  on  the  systems  here  and  in  England? 

Mr.  Wilcox.  The  comparative  costs? 

The  Chairman.  Yes;  what  thev  are  here  and  there. 

Mr.  Wilcox.  I  think  so.    They  can  be  had. 

Commissioner  Gadsden.  Were  you  discussing  the  pay  of  tlie  train- 
men in  England? 

Mr.  Wilcox.  Well,  I  said  generallv  that  my  understanding  was 
that  the  wages  m  England  now  were  about  at  the  level  of  where  our 
trainmen\s  wages  were  before  the  Avar.  I  have  not  the  detailed 
figures. 

Commissioner  Gadsden.  Do  you  happen  to  know  that  up  to,  I 
think,  two  years  ago,  or  within  a  year—probably  two  years  ago— the 
scale  of  motormen's  and  conductors'  wages  were  about  6J  j^ence  an 
hour — 15  cents — maximum? 
Mr.  Wilcox.  It^rol:>ably  w  as. 
Commissioner  Gadsden.  Fifteen  cents  per  hour? 
Mr.  Wilcox.  I  do  not  laiow  exactly. 

Commissioner  Gadsden.  I  think  we  can  get  it  for  you  aiKl  put  it 
into  the  record. 

Mr.  Wilcox.  I  know  the  wages  were  lower,  of  course. 
Commissioner  Gadsden.  And  I  think  they  were  only  increased 
about  a  year  ago;  and  the  maximum  pay  for'motormen  and  conduc- 
tors, I  think,  was  about  15  cents  per  hour.    At  that  time  our  maxi- 
mum pay  was  48  cents — 38,  anyhow\ 

Mr.  Wilcox.  Well,  I  can  not  discuss  the  figures  in  detail,  but  the 
wage  increases  in  Great  Britain  during  the  war  up  to  the  present 
time— they  are  increasing  now  over  there— have  about  doubled  the 
rates  that  were  being  paid  when  England  went  into  the  war. 

Commissioner  Gadsden.  But  prior  to  the  war  the  wage  scale  there 
was  very  low  ? 

Mr.  Wilcox.  Of  course,  it  was  true  in  parts  of  this  country  that 
the  wage  scale  was  down  low. 

Commissioner  Gadsden.  But  nothing  like  that? 

Mr.  Wilcox.  On  lots  of  systems  in  this  country  before  the  war 
wa^es  were  down  to  18  and  20  cents  per  hour. 

Commissioner  Gadsden.  Now,  you  are  getting  to  something  that  I 
know  something  about.    I  live  there. 

Mr.  Wilcox.  Well,  isn't  that  so  ? 

Commissioner  Gadsden.  Xot  as  low  as  that. 

Mr.  Wilcox.  Eighteen  or  twenty  cents? 

Commissioner  Gadsden.  I  do  not  think  so. 

Commissioner  Beall.  Not  for  a  good  many  years. 

Commissioner  Gadsden.  It  used  to  be,  a  good  many  j^ears  R<ro' 
yes.  We  started  off  with  about  12^  cents  in  the  South,  but  we  hacl 
gotten  up  to  over  20. 


1212    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1213 


Commissioner  Beall.  I  remember  when  it  was  14:  but  that  was 
years  ago. 

Commissioner  Gadsden.  I  started,  in  Charleston,  paying  12J  cents 
in  1896 ;  but  that  is  a  long  time  ago — a  long  time  since  we  paid  any- 
thing like  that. 

Mr.  Wilcox.  When  did  you  get  up  to  20  cents  ? 

Commissioner  Gadsden.  Well,  about  1906,  1907,  or  1908,  or  some- 
thing like  that,  I  think. 

Mr.  Wilcox.  What  was  it  in  1914? 

Commissioner  Gadsden.  Twenty-five.  I  simply  wanted  to  bring 
out  that  the  wage  scale  over  there  was  exceptionally  low. 

Commissioner  Beall.  Does  Glasgow  give  any  Sunday  service  now  ? 

Mr.  Wilcox.  I  believe  so. 

Commissioner  Beall.  I  do  not  think  they  did  originally,  did  they  ? 

Mr.  Wilcox.  I  can  not  tell  you. 

Commissoner  Beall.  How  about  night  service?  I  do  not  think 
they  run  any  cars  after  a  very  early  hour. 

Mr.  Wilcox.  I  can  not  say  as  to  that. 

Commissioner  Beall.  You  see  w  hat  I  mean.  They  do  not  give  the 
kind  of  service  that  is  given  over  here. 

Mr.  Wilcox.  I  made  a  few  figures  also  in  regard  to  Liverpool, 
which  are  not  shown  on  that  exhibit,  taken  from  the  report  for  the 
calendar  year  1918.  Liverpool,  apparently,  was  very  prosperous  dur- 
ing the  war  period.  I  suppose  the  advent  of  the  American  and  Cana- 
dian soldiers  increased  the  traffic  considerably.  At  any  rate  the  re- 
j>ort  showed  that  the  passengers  carried  had  increased  from  about 
130,000,000  before  the  beginning  of  the  war  to  pretty  nearly  200,000,- 
000  last  year.  But  the  total  number  carried  last  year  was  195,000,000, 
and  the  average  fare  per  revenue  passenger  was  2.37  cents  in  our 
money.  The  percentage  paying  5  cents  or  more  was  2.2  per  cent, 
although  the  minimum  rate  was  not  a  halfpenny,  but  a  penny ;  that 
is,  2  cents  of  our  money.  The  number  of  passengers  per  car-mile  was 
15.98.  The  mileage  was  124  miles — small,  of  course,  compared  with 
our  American  cities. 

The  net  debt  still  outstanding,  representing  the  total  capitalization 
left,  was  $18,657  per  mile  of  track.  And,  as  I  stated  this  morning, 
the  depreciation  reserves,  if  they  were  applied  to  the  payment  of  the 
debt,  would  have  been  sufficient  to  wipe  that  out. 

Commissioner  Gadsden.  Would  you  mind  an  interruption  for  a 
moment  ? 

Mr.  Wilcox.  Not  at  all,  sir. 

Commissioner  Gadsden.  Don't  you  think  that  is  a  fair  illustration 
of  the  difference  in  the  systems  of  municipal  ownership  and  private 
ownei-ship,  that  in  a  great  city  like  Liverpool  you  have  such  a  small 
mileage?  Do  you  think  people  in  the  United  States  would  stand 
for  such  a  limited  traction  service  ? 

Mr.  Wilcox.  I  do  not  think  that  is  characteristic  of  municipal 
ownership  as  compared  with  private  ownership.  Of  course,  it  is  true 
that  an  American  city  would  not  have  extended  its  lines  all  over  cre- 
ation, covering  the  whole  State,  and  away  out  into  the  suburbs,  if  the 
system  had  been  municipally  owned,  because  there  w^ould  be  no  ob- 
ject in  the  city  doing  that 


Commissioner  Gadsden.  Thev  would  not  have  ffone  to  that  ex- 
treme  any  more  than  they  would  have  gone  to  that  other  extreme  in 
England? 

Mr.  Wilcox.  There  are  tw^o  extremes;  yes. 

San  Francisco,  which  is  building  up  a  pretty  important  compet- 
ing municipal  system,  is  building  lines  into  undeveloped  territory, 
and  I  have  no  reason  to  suppose  that  an  American  city  would  re- 
strict the  mileage  of  the  street  raihvays  unduly.  I  don't  know.  Of 
course  w^e  can  not  tell  what  would  happen  until  we  try  it,  but  there 
is  no  doubt  at  all  but  w^hat  a  great  many  American  systems  have  been 
overbuilt;  they  have  been  overbuilt  partly  because  of  the  influence, 
as  I  said  this  morning,  of  the  pressure  of  real-estate  men — sometimes 
people  who  were  interested  in  the  company,  and  sometimes  others. 

Commissioner  Gadsden.  Frequently  of  the  city  councils  ? 

Mr.  Wilcox.  Of  the  outlying  districts,  perhaps.  I  am  speaking 
•now  of  the  far-out  lines.  On  the  city  lines  themselves,  we,  in  this 
country,  have  had  our  systems  built  up  in  a  great  many  cases  as 
competing  systems,  w4th  a  duplication  of  lines  that  was  absolutely 
unnecessary ;  and  after  the  systems  have  been  consolidated,  then,  of 
course,  there  has  been  opposition  to  tearing  up  the  useless  track; 
but  the  street  railways  have  inherited  that  overbuilding,  and  it  is  no 
doubt  a  considerable  burden  upon  them.  Generally  speaking,  I 
think  it  is  true — although  I  do  not  want  to  profess  any  great  amount 
of  knowledge  of  foreign  city  conditions,  because  I  have  not  been 
there,  but  I  think  it  is  true — that,  in  general,  the  foreign  cities  are 
much  more  compact  than  our  American  cities,  so  that  the  same 
amount  of  mileage  would  not  be  required  to  give  the  same  amount 
of  service  there  as  here. 

I  think  no  one  can  dispute  that  there  is  trouble  now  in  the  street- 
railw^ay  business.  It  seems  to  me  that  a  commission  appointed  as 
this  one  has  been  to  look  into  the  problem  and  give  advice  which 
will  carry  weight  with  the  States  and  w  ith  the  municipalities,  be- 
cause the  investigation  is  presumed  to  be  impartial  and  not  too  much 
influenced  by  the  immediate  exigencies,  so  long  as  the  commission 
itself  can  not,  as  I  understand,  take  any  remedial  action,  and  can 
only  recommend  to  the  other  authorities  to  take  action — it  seems  to 
me  for  those  reasons  the  commission  ought  to  concern  itself  pretty 
carefully  w^ith  not  merely  the  temporary  causes  that  have  resulted 
in  the  condition  which  we  are  in  now,  but  the  causes  that  go  back 
quite  a  good  many  years ;  and  then,  in  the  light  of  all  those  causes, 
to  make  recommendations  which,  if  they  are  carried  out,  will  mean 
not  merely  a  temporary  tiding  over  of  to-day's  emergency,  but  the 
setting  of  the  street-railway  machine  back  on  the  track,  and  do 
something,  at  least,  tow^ard  a  permanent,  final  solution  of  the  street- 
railway  problem  from  the  point  of  view  of  public  policy. 

I  have  mentioned,  in  general,  the  matter  of  overcapitalization. 
That  is  a  more  or  less  sore  subject.  It  is  a  thing  that  we  would  like 
to  forget  about,  and  I  am  sure  the  cities  and  those  who  take  the 
public  point  of  view,  would  be  glad  to  let  bygones  be  bygones,  if  it 
were  possible  to  do  so ;  but  whenever  we  get  to  a  rate  case,  whenever 
we  get  to  the  question  of  the  cost-of -service  franchise,  whenever  we 
get  to  a  matter  of  purchase,  whenever  we  get  to  any  of  the  problems 
of  regulation,  or  a  solution  of  the  street-railway  problem,  from  the 


m 


1214    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


>! 


point  of  view  of  public  policy,  we  are  confronted  with  these  facts 
which  have  (leveloDed  a  good  many  years  ago^  but  which  have  never 
been  wiped  out.    They  are  there. 

For  example.  I  was  called  in  by  the  city  of  Scranton,  and  upon 
investigation  we  found  that  the  stock  control  of  the  Scranton  Rail- 
way had  been  acquired  from  a  syndicate  of  Philadelphia  bankers 
about  1905,  as  I  remember,  by  the  American  Railways  Co.,  a  hold- 
ing company,  which  holds  other  properties,  scattered  around  the 
country,  and  which  itself  is  controlled  by  another  holding  company 
that,  in  turn,  is  controlled  by  still  another  holding  company,  the 
ramifications  of  which  I  did  not  investigate  and  do  not  understand. 
But  the  American  Railways  Co.  stated,  and  we  had  no  reason  to 
doubt  the  fact,  that  14  years  ago  they  had  paid  $2,000,000  in  cash 
for  the  common  stock  at  par.  It  was  a  good  property,  seemed  to 
have  fine  earning  capacity,  and  during  the  period  of  13  years  they 
had  paid  dividends  amounting,  as  I  remember,  to  something  over 
$1,600,000  on  that  common  stock.  In  the  meantime  they  trans- 
formed one  million  and  a  half  of  preferred  stock  into  bonds  in  1917, 
bonds  bearing  the  same  rate  of  interest  as  the  rate  of  dividends  upon 
the  preferred  stock,  and  in  doing  so  increased  the  capitalization, 
as  I  remember,  12^  per  cent,  because  the  bonds  were  issued  at  a  dis- 
eoimt,  to  take  up  the  preferred  stock. 

The  total  amount  of  bonds  outstanding  at  the  present  time,  last 
3^ear,  was  $r;395,000. 

We  went  into  the  books;  we  could  not  get  all  of  the  details  of 
some  of  the  subsidiary  companies,  but  we  got  a  sufficient  record  of 
the  book  costs  to  make  us  fairly  certain  that  the  actual  amount  of 
money  invested  in  that  property  was  not  much  over  $5,250,000,  with- 
out any  reduction  on  account  of  depreciation  and  present  condition. 

The  property  was  pretty  badly  run  down,  and  if  an  ordinary, 
normal  depreciation  were  applied  to  it  on  the  basis  of  that  cost,  we 
figured  that  the  present  condition  of  the  physical  property  on  the 
basis  of  the  original  cost  was  about  $4,000,000.  As  I  said,  the  bonds 
alone  were  $7,395,000.  On  top  of  that  was  $2,000,000  of  stock  wliich 
had  been  paying  dividends.  The  company  said  that  in  1917  they 
Iiiul  paid  dividends,  and  had  neglected  maintenance,  and  they  had 
done^  it  deliberately,  because  it  was  more  im])ortant  to  keep  the 
<lividends  paid,  because  the  financiers  would  not  find  out  that  they 
were  neglecting  the  maintenance,  but  they  had  to  keep  the  dividends 
paid  in  order  to  keep  a  market  for  their  securities. 

Of  course,  the  figures  that  I  give  you  are  merely  the  figures  which 
I  found,  and  the  accountant  that  worked  with  me,  being  employed 
by  the  municipalities ;  there  was,  in  that  case,  no  physicfd  valuation 
of  the  property.  The  Pennsylvania  Commission,  in  rendering  its  de- 
<Msion,  did  not  pass  upon  the  value  of  the  property,  but  merely 
said,  "  Probably  this  property  is  greatly  overcapitalized." 

The  Chairjvian.  Were  the  records  kept  in  such  shape  that  you 
could  ascertain  the  actual  money  that  was  put  into  the  property? 

Mr.  Wilcox.  The  records  were  not  complete.  That  is,  I  mean 'to 
say,  they  were  far  from  being  ideal ;  but  by  the  exercise  of  consider- 
jible  ingenuity,  we  thought  we  had  found  substantially  a  correct 
figure  as  to  the  amount  of  money  that  was  put  in. 

The  manipulation  in  that  case  that  took  place  in  the  nineties  was 
such  that  it  seems  to  me  that  any  fair-minded  man  who  had  looked 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1215 


into  it  would  hang  his  head  for  shame  that  anything  like  that  could 
be  done  in  the  case  of  a  public  utility,  operating  under  a  public 
fi-anchise,  and  presumably  organized  for  tlie  purpose  of  rendering 
public  service. 

Now,  we  come  to  the  Public  Service  Railway  Co.  of  New  Jersey. 
That  is  made  up  of  119  companies,  going  back  to  18G0;  and  again  in 
the  nineties,  at  the  time  of  the  electrification  deals,  tlie  companies 
were  consolidated,  and  the  capitalization  increased  in  the  most  out- 
rageous ratios — in  some  cases  as  much  as  20  to  1^  as  the  result  of  a 
consolidation  or  deal  or  purchase  of  securities. 

Then  these  companies  were  leased,  and  under  the  lease  these  in- 
flated securities  were  made  the  basis  of  rental;  so  much — usually  a 
comparatively  low  percentage — on  the  inflated  securities  for  divi- 
dends on  the  stock,  and  so  much  for  the  bonds* 

Our  accountant  going  through  that  case  found  about  $73,000,000 
of  capitalization  that  was  just  created  in  these  deals,  the  net  amount 
cieated  in  these  deals,  taking  off  what  little  deflation  or  decreases 
were  made  in  a  few  of  them.  A  part  of  that,  a  large  part  of  that, 
is  covered  by  these  big  rentals. 

Now,  we  come  to  the  question  of  valuation  for  rate  purposes ;  and 
if  we  could  say,  "  We  do  not  consider  the  capitalization,"  and  kiss  it 
good-by  and  think  no  more  of  it,  we  could  proceed  to  make  a  valua- 
tion on  the  basis  of  original  cost,  or  on  the  basis  of  reproduction 
cost,  or  the  two  figures  combined,  and  have  a  basis  to  proceed  witli 
in  a  free  and  reasonable  manner;  but  the  company  has  $5,200,000  of 
fixed  charges,  of  which  $2,844,000  is  represented  by  these  rentals 
based  upon  this  old  capitalization. 

Tliese  fixed  charges,  mcluding  the  rentals,  have  to  be  paid,  or  else 
the  system  is  broken  up  or  the  company  goes  into  a  receiver's  hands ; 
and  when  you  come  forward  in  a  rate  case,  especially  during  the  war 
emergency,  they  say :  "  Oh,  you  must  at  leiist  keep  us  out  of  the  re- 
ceiver's hands— keejp  us  from  becoming  bankrupt.  We  must  at  least 
pay  this."  Then  they  figure  that  the  holding  company  which  came 
in  and  got  control  in  1903,  aiYd  actually  poured  in  a  good  many  mil- 
lion dollars  into  the  Public  Service  Railway  Co.  and  its  stock,  and 
although  that  may  have  sunk  below  the  level  in  order  to  fill  up  the 
vacuum  that  represented  the  underlying  stock  to  a  considerable  ex- 
tent, still  they  say,  "  It  was  our  money,  and  it  was  good  money,  and 
therefore  we  should  be  allowed  to  earn  a  return  on  this,  after  paying 
the  fixed  rentals." 

Mr.  Warren.  How  much  did  vou  say  the  rentals  were? 

Mr.  Wilcox.  $2,844,000. 

Not  only  that,  but  we  came  to  matter  of  valuation,  and  the  com- 
pany produced,  in  this  case— I  think  I  should  speak  fully  and 
frankly  about  it,  because  it  is  a  matter  of  great  public  importance, 
and  I  think  you  are  entitled  to  my  opinion  and  such  information  as 
I  can  give  about  it,  and  because  1  think  it  is  typical,  in  a  consider- 
able measure,  of  the  attitude  of  the  street-railway  ccHiipanies  at  the 
present  time,  and  is  typical  of  an  attitude  which  makes  it  very  diffi- 
cult to  solve  this  problem — a  valuation  made  by  Dean  Cooley,  as 
of  December  31,  1915.  That  valuation  was  made  without  apply- 
ing to  the  public-service  commission  or  the  municipalities  for  co- 
operation or  supervision.    It  was  a  private  valuation.    It  was  found 


i! 


;( 


1216    PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

last  year,  when  the  courts  had  determined  that  the  public-utilities 
law  gave  the  commission  the  right  to  abrogate,  to  set  aside  the  limit- 
ing features  of  the  municipal  contracts,  that  the  company  had  been 
preparing  for  the  time  when  this  w^ould  happen,  had  secured  this 
valuation,  and  was  getting  ready  for  a  rate  case. 

Now,  the  valuation  was  based  upon  the  reproduction  cost  theory. 
The  original  valuatio^^  did  not  include  war  prices.  The  valuation 
was  made,  as  I  say,  as  of  December  31, 1915. 

Commissioner  Gadsden.  Did  you  say  what  the  valuation  was! 

Mr.  Wilcox.  I  did  not.    I  will,  though. 

The  valuation  of  the  Public  Service  Kailway  property,  reproduc- 
tion cost  new,  as  of  that  date,  fixed  by  Dean  Cooley,  was  $79,000,000. 

What  do  we  find  when  we  look  into  it?  It  is  said  that  the  in- 
ventory and  valuation  cost  $150,000.  In  Dean  Cooley's  report  it 
J^how  s  that  there  were  nearly  150  men  employed  on  it  at  least  part 
of  the  time,  and  they  were  the  better  part  or  the  whole  of  the  year 
in  making  the  inventory  covering  the  State  of  New  Jersey. 

The  valuation,  as  reported  by  Mr.  Cooley,  and  as  presented  to 
the  commission,  copsists  of  a  typewritten  report  of  150  pages,  with 
the  summaries. 

The  appraisal  data,  the  valuation  itself,  is  contained  in  appraisal 
volumes  which  fill  two  bookcases  of  four  shelves  each,  some  of  the 
shelves  having  double  tiers — about  130  volumes  of  appraisal  data. 

Upon  investigation  wuthin  the  limited  time  w^e  have  this  year — 
I  say  this  merely  to  illustrate  the  methods — we  found  that  land, 
for  example,  wliich  consisted  of  536  different  parcels,  scattered  all 
over  the  State  of  New  Jersey,  had  been  appraised  by  local  appraisers 
employed  or  designated  by  Dean  Cooley,  each  one  appraismg  inde- 
pendently and  reporting  the  valuations,  which  were  then  incorpo- 
rated in  his  appraisal,  before  the  addition  of  the  overheads.  We 
found,  when  we  got  into  the  details,  that  there  was  nearly  $1,000,- 
000  of  property  that  was  vacant,  unused  for  street-railway  purposes. 
There  was  no  intimation  made — nothing  in  the  appraisal  as  reported 
to  the  commission  and  nothing  in  the  evidence  which  the  company 
put  forward — to  indicate  that  there  was  a  foot  of  land  which  was 
vacant  or  unused.  We  found  the  appraisers,  in  valuing  right  of 
way  in  the  two  most  important  sections,  had  gotten  the  right-of- 
way  value  on  a  basis,  as  they  figured  it,  of  the  market  value  of  ad- 
joining land,  and  then  had  multiplied  it  by  2 J  in  order  to  get  the 
value  of  land  for  railway  purposes. 

The  Chairman.  Simply  following  the  old  multiple  theory? 

Mr.  Wilcox.  A  multiplier  had  been  applied.  Nothing  was  said 
about  that.  We  knew  nothing  about  that  until  we  dug  into  these 
reports. 

We  found  an  old  right  of  way  that  had  been  abandoned  for  so 
many  years  that  if  you  go  down  there  now  and  look  for  it  you  will 
find  it  covered  with  houses,  and  you  can  hardly  trace  it.  In  fact, 
we  discovered  that  a  part  of  it  had  been  sold  and  was  in  private 
ownership  now.  This  old  right  of  way  had  been  valued  as  real 
estate  on  the  basis  of  the  value  of  the  adjoining  land,  and  then  to 
this  had  been  applied  the  multiplier,  and  it  was  put  in  at  two  and 
a  half  times  that  figure — that  is,  without  contesting  the  value  of 
the  land  as  such  made  by  the  different  appraisers  unchecked  by 
anybody. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1217 

The  Chairman.  Can  you  recall  the  figure  allowed  for  that  aban- 
doned right  of  way  ? 

Mr.  Wilcox.  The  base  cost  was  $103,800 — I  mean  the  cost  based 
upon  the  value  of  tlie  adjoining  land  was  $103,800,  and  it  w^as  boosted 
to  $-259,500  by  the  multiplier. 

'We  found  a  piece  of  property  in  Camden,  a  small  piece  of  real 
estate,  that  had  two  residence  blocks  on  it.  They  were  used  evi- 
dently for  residences.  I  do  not  know  how  the  company  came  by 
tliem  or  what  the  company's  use  of  them  was.  Perhaps  some  of 
tlieir  employees  have  lived  in  them;  but  at  any  rate  that  property 
Avas  appraised  at  a  certain  figure  as  land,  and  those  two  residence 
blocks  were  appraised — inventoried — filling  10  large  typewritten 
pages,  about  double  the  ordinary  letter-size  page,  giving  in  infinite 
detail  every  item  that  went  into  the  construction  of  those  residence 
blocks,  and  the  fence  around  the  property,  and  valuing  that;  and 
Avhen  Ave  added  the  value  of  the  land  as  appraised  and  tlie  value  of 
these  residence  blocks  as  appraised,  their  present  depreciated  value, 
and  added  the  overheads,  we  got  $18,000;  and  we  discovered  from 
the  company's  report  that  it  had  since  sold  the  property  for  $7,000. 

We  found,  when  we  looked  into  the  matter  of  depreciation,  that 
the  per  cent  condition  given  to  the  track  was  such  that  there  was 
only  13  miles  out  of  790  miles  that  was  in  less  than  20  per  cent  con- 
dition, meaning  that  there  was  only  13  miles  that  would  need  to  be 
replaced  within  five  years,  while  the  company  was  testifying  at  the 
same  time  that  it  must  rebuild  at  least  23  miles  of  its  track  every 
year;  and  we  found  that,  on  top  of  the  land  value  with  the  2 J 
multiplier  added  in  the  case  of  right  of  way,  overhead  percent- 
ages were  added — 2^  per  cent  for  law  expenses,  11  per  cent  for  in- 
terest during  construction,  2  per  cent  for  taxes  during  construction, 
and  that  was  added  to  the  base — and  then  12^  per  cent  was  added 
to  that  for  conception  of  tlie  project  and  the  preliminary  expenses 
and  the  promoter's  remuneration,  and  the  cost  of  money,  figuring 
out  practically  30  per  cent  additional  to  the  cost  of  land  after  the 
multipliers  were  on,  directly  contrary  to  the  ruling  of  the  United 
States  Supreme  Coui-t  in  the  Minnesota  rate  cases,  both  the  multi- 
plier and  these  overheads.  And  that  appraisal  was  made  two  or 
three  years  after  that  decision  was  rendered. 

AVe  found  that,  in  addition  to  the  base  cost  on  way  and  struc- 
tures, the  percentages  piled  up  amounted  to  46  per  cent,  and  on 
equipment  to  35.  We  found,  in  addition  to  that,  when  we  dug  into 
the  unit  prices,  that  at  almost  every  turn  a  percentage  had  been 
added  for  omissions  or  waste  or  specific  contingencies  for  this,  that, 
and  the  other  thing,  although  it  was  stated  that  the  unit  prices  were 
based  upon  the  company's  actual  costs  during  the  five-year  period 
ending  1915. 

For  example,  tracks  and  roadway  labor:  It  was  found  that  20 
per  cent  was  added  for  track  and  roadway  labor  to  the  figures  which 
were  taken  from  the  company's  books  as  charged  to  capital  account, 
on  the  theory  that  there  were  certain  overhead  expenses  that  the 
company  had  not  charged  to  capital  account,  but  that  should  be 
charged  to  capital  account. 

We  found,  from  a  study  of  the  company's  books,  for  the  period 
of  the  last  nine  years,  or  since  December  31,  1910 — since  it  has  been 
160643**— 20— VOL  2 15 


li 


1218    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

subject  to  regulation — that  the  actual  overhead  expenses  which  the 
company  has  paid  and  has  charged  to  capital  account,  was  t5.96  per 
cent,  as  compared  with  an  average  of  about  42  per  cent  allowed 
by  Dean  Cooley  on  the  entire  property  described  m  this  appraisal. 

Then  when  the  witnesses  were  produced  this  year,  they  said, 
"  Why,  this  appraisal  was  made  without  taking  into  consideration 
war  prices;  therefore,  now  it  should  be  jacked  up,  the  property 
should  be  worth  more  now  because  of  the  increase  in  prices  since 
December  31,  1915."  On  the  theory  that  war  prices  should.be  used, 
the  amount  that  the  appraisal  was  jacked  up  was  moderate,  about 
15  ner  cent  on  the  unit  prices  of  materials,  labor,  and  land. 

(Commissioner  Sweet.  Over  those  used  in  1915  ? 

Mr.  Wilcox.  Yes.  But  after  that  was  done  they  said,  "  Now  this 
is  the  physical  value,  pure  and  simple.  Now  there  is  a  development 
cost."  And  what  does  the  development  cost  consist  of?  Here  we 
get  back  to  these  rentals.  The  company  produced  figures  showing 
that  there  was  a  development  cost  of  $10,000,000  since  1903,  when 
the  present  company  came  into  control.  And  Dean  Cooley  testi- 
fied that  there  nuist  have  been  a  larger  cost  earlier — he  would  expect 
a  higher  rate  of  development  cost  during  the  early  period,  but  to 
be  conservative,  he  would  call  it  30  per  cent  on  the  physical  value. 
And  so  to  this  $16,000,000,  designated  as  known  development  cost, 
he  added  enough  to  make  up  the  cfifference  as  "  unknown  "  or  unas- 
certained development  cost.  In  that  way  the  claimed  value  of  the 
property  was  brought  up  to  $130,000,000. 

Now  what  did  this  $16,000,000  of  development  cost  contain,  or 
what  was  it  made  up  of?  It  was  made  up  in  part  of  advances  made 
by  the  holding  company  to  the  Public  Service  Railway  Co.,  which 
had  not  been  paid  back,  and  in  part  it  was  made  up  of  so-called 
operating  losses,  designated  as  such  on  the  company's  exhibits  for 
the  four  or  five  years  from  1903  to  1907.  Wlien  we  went  back  to 
find  out  what  the  operating  losses  represented,  they  were  not  oper- 
ating losses,  but  they  were  the  deficiencies  in  earnings  below  a  suffi- 
cient amount  to  pay  operating  expenses  plus  these  rentals  and  fixed 
charges  which  had  been  assumed  voluntarily  in  the  acquisition  of 
the  properties,  and  those  operating  losses  amounted  to  $2,800,000  in 
those  few  years,  and  those  had  been  cumulated  at  8  per  cent  per 
annum  compounded  until  in  the  figure  given  us  just  under  $8,000,- 
000  of  the  $16,000,000  represented  those  operating  losses  of  that  five- 
year  period  increased  by  compound  interest  at  8  per  cent  until  now. 
We  figured  out  that  if  at  the  same  rate,  assuming  no  further  losses, 
but  just  allowing  that  $2,800,000  of  operating  losses  to  go  on,  in 
50  years  from  now  it  would  amount  to  $370,000,000  to  be  added  to 
the  value  of  the  property  and  made  a  basis  for  rates. 

Well,  I  speak  of  these  things  which  illustrate  what  I  said  this 
morning  with  respect  to  the  financial  policy  which  the  companies 
have  pursued,  many  of  them,  and  also  because  they  illustrate  a  thing 
that  I  want  to  speak  about  now. 

Everybody,  I  think,  that  has  studied  the  problem  recognizes  that 
the  fundamental  and  essential  fact  to  be  ascertained  and  determined 
is  the  recognized  capital  value  of  the  property  that  is  devoted  to 
public  service.  You  can  not  get  anywhere  in  regidation  without 
establishing  that.     You  can  not  have  any  service  at  cost  without 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1219 

that.  You  can  not  go  to  public  ownership  without  that.  You  can 
not  do  anything  that  is  fundamental  in  regulation  or  in  the  develop- 
ment of  policy "Avithout  fixing  that  figure. 

The  Chairman.  Before  you  discuss  that  question  further,  may  I 
ask  you  just  one  question  ? 

Mr.  Wilcox.  Yes. 

The  Chairmax.  From  your  experience  and  study  can  vou  state 
whether  the  principles  of  valuation  used  by  Dean  Cooley  are  fairly 
representative  of  those  generally  used  by  the  street-railway  industrv  ? 

Mr.  Wilcox.  I  think  they  are.  I  think  they  ai-e.  I  'should  say 
in  that  connection  that  Dean  Cooley  very  stoutly  maintained  that 
the  property  was  worth,  as  I  have  stated  this  morning,  generally— 
that  the  property  should  not  be  depreciated  at  all  for  rate  pur- 
poses—that it  was  worth  100  per  cent  in  service,  and  that  it  should 
be  counted  at  100  per  cent.  He  had  established  a  pev  cent  condition 
merely  to  show  the  results  of  an  actual  examination.  And  in  that 
connection,  even  in  the  depreciation  which  he  establislied,  which  he 
said  should  be  disregarded  absolutely  in  a  rate  case,  he  did  not  de- 
preciate track  and  roadway  labor  at  all.  The  labor  that  goes  into 
the  laying  of  the  track  and  which  has  to  be  repeated  when  rails  are 
put  down  again  was  not  depreciated.  And  grading,  which  on  a  city 
track 

The  Chairman.  The  dean  was  before  our  commission  and  out- 
lined at  some  length  his  theory  of  valuation. 

Mr.  Wilcox,  les.  He  did  not  depreciate  the  grading  at  all.  He 
did  not  depreciate  the  ballast  at  all.  And  we  found  cars — for  ex- 
ample, 100  or  more  cars  that  had  been  retired — withdrawn  from 
service  and  retired  within  three  or  three  and  a  half  years  within  the 
date  of  his  appraisal,  and  they  were  appraised  at  from  50  to  GO 
per  cent  condition,  which  would  indicate  that  they  had  a  12  to  15 
years'  life  yet.  He  used  the  inspection  method  only,  so  far  as  it  was 
possible  to  do  so.  All  the  propert^r  that  he  could  see  he  went  and 
measured  the  wear  and  looked  at  it  and  said  it  was  in  such  and 
such  a  per  cent  condition.  And  obsolescence  and  inadequacy  and 
all  those  elements  of  depreciation  which  are  not  shown  by  measure- 
ment of  wear  were  disregarded  entirely  in  his  appraisal. 

Now,  as  I  was  going  to  sa}'— I  speak  of  this  for  two  reasons. 
What  I  have  said  with  reference  to  the  company's  history  and  also 
vv'ith  reference  to  the  difficulty  of  getting  together,  of  sitting  down 
around  a  table  and  bein^  reasonable  and  getting  together  and  fixing 
a  valuation  and  agreeing  upon  something.  The  companies  are 
largaly,  because  of  their  overcapitalization,  in  the  control  now  of 
men  who  represent  the  marginal  interests,  the  interests  that  with  a 
valuation,  a  conservative  valuation,  would  disappear.  And  they  ciui 
not  agree  on  a  conservative  valuation ;  they  can  not  agree  on  a  valu- 
ation that  is  from  the  public  point  of  view,  in  my  judgment,  a 
reasonable  and  fair  one,  because  if  they  did  they  would  wipe  them- 
selves out;  they  would  not  be  there  any  more.  It  would  be  some- 
body else  that  would  be  talking.  And  for  the  companies  to  do  what 
they  are  doing — come  forward  at  a  time  like  this  and  say  that  the 
very  conditions  which  have  made  it  impracticable,  almost  impas- 
sible, to  earn  a  fair  return  upon  a  conservative  investment,  that  those 
very  conditions  which  are  putting  the  industry  on  the  rocks  nuikc 


1220    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

their  property  worth  twice  as  much  or  50  per  cent  more  than  it  was 
before,  and,  as  a  result,  demand  that  they  shall  be  permitted  to  earn 
a  fair  return  upon  this  increased  value — it  seems  to  me  that  that  atti- 
tude makes  it  almost  impossible  to  reach  an  amicable  agreement  or 
settlement  on  the  basis  of  servic«-at-cost  or  any  other  basis  which 
requires  the  consent  and  the  agreement  of  the  two  parties. 

Now,  this  problem  from  a  financial  standpoint  would  be  com- 
paratively simple  if  it  were  merely  a  question  of  raising  rates;  if 
it  were  merely  a  question  of  saying,  "  All  right ;  everything  else  has 
gone  up ;  let  us  double  the  street-car  fare."  But  it  is  not  that.  The 
companies  themselves  recognize  in  large  measure  that  that  will  not 
solve  the  problem.  You  can  lead  a  horse  to  water  but  you  can  not 
make  him  drink.  And  there  is  no  way  that  I  know  of  by  which  you 
can  round  up  the  people  who  do  not  have  to  ride  and  make  them 
ride  in  order  to  help  support  the  street-railway  company.  And  the 
result  is  that  any  policy  which — through  increase  of  rates  based 
upon  a  large  valuation  or  any  of  the  elements  of  cost  that  enter  into 
th^  cost  of  service — adopts  a  system  that  drives  people  away,  that 
decreases  the  traffic,  means  ruin,  in  the  long  run.  They  get  a  little 
more  net  revenue  or  gross  revenue  for  the  time  being,  but  it  is  under- 
mining the  street  railway  as  a  public  utility,  and,  so  far  as  1  can  see, 
there  is  no  way  out  in  that  direction. 

The  whole  situation,  of  course,  is  well  illustrated  by  the  experience 
of  Boston.  I  did  not  know  how  ridiculous  the  situation  was  until 
the  other  day,  when  I  sent  for  and  received  the  latest  reports,  which 
included  a  statement  issued  by  the  trustees  in  connection  with  the 
establishment  of  the  10-cent  fare  which  was  to  be  effective  July  10. 
Now,  this  printed  statement  gives  the  results  up  to  the  end  of  May. 
But  along  with  it  came  the  monthly  reports,  including  the  June 
report.  Now,  going  back — and  I  think  you  have  had  the  facts  pre- 
sented here — the  fact  that  the  Boston  transit  was  taken  over  by 
trustees  on  the  1st  of  July,  a  year  ago,  established  the  7-cent  fare 
on  the  1st  of  August,  and  an  8-cent  fare  on  the  1st  of  December,  and 
a  10-cent  fare  on  the  10th  of  July  this  year — the  cost  of  service  in 
January,  under  the  Boston  Elevated  act,  was  $219,000  more  than 
the  revenue.    In  February 

The  Chairman.  What  month? 

Mr.  Wilcox.  The  month  of  January.  In  February  it  was  $285,000 
more.  In  March  it  was  $224,000  more.  In  Aprif  it  was  $316,000 
more.  They  put  this  explanatory  note  on  it:  "One  of  the  reasons 
for  the  larger  deficit  for  the  month  of  April  was  the  excess  of 
track  and  car-repair  work  above  a  fair  monthly  average  which  has 
necessarily  been  performed." 

In  the  month  of  May  it  was  $324,000,  and  they  added  the  note: 
"  One  of  the  reasons  for  the  larger  deficit  is  the  excess  of  track  and 
car-repair  work  above  a  fair  monthly  average. 

Now,  for  the  month  of  June,  which  was  not  injcluded  in  the 
monthly  reports,  the  loss  was  $535,000,  and  they  put  this  note  in: 
"  One  of  the  reasons  for  the  larger  deficit  for  the  month  of  Jun« 
was  the  excess  of  track  and  car-repair  work  above  a  fair  monthly 
average  which  has  necessarily  been  performed." 

And  prior  to  the  issuance  of  this  statement  they  had  determined 
ujjon  putting  in  a  10-cent  fare,  and  when  this  statement  came  out 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1221 

it  showed  that  the  cost  of  service  in  June  was  10.065  cents  per  pas- 
senger. Put  the  10-cent  fare  in  and  a  considerable  per  cent  of  the 
passengers  will  not  ride  any  more,  and  the  cost  of  service  must  now 
be  up  to,  perhaps,  12  cents  per  passenger;  and  I  can  not  see  how 
they  are  coming  out  in  that  way.  Under  their  law  they  are  sup- 
loosed,  although  the  State  has  to  make  up  this  deficit  of  about 
$5,000,000,  which  had  accumulated  in  this  last  year,  through  taxes — 
the  trustees  are  supposed  to  put  in  a  still  higher  fare  to  enable  them 
to  make  up  out  of  the  rates  that  deficit  and  pay  it  back  to  the  State. 
It  is  the  theory  of  the  law  that  the  fare  payers  shall  pay  the  full  cost 
of  service  and  that  deficits  made  up  out  of  taxes  shall  be  only  tem- 
porarily advanced. 

Commissioner  Gadsden.  And  yet,  Mr.  Wilcox,  that  is  a  case  where 
there  is  practically  no  water? 

Mr.  Wilcox.  In  that  case  the  stock,  as  I  understand  it,  substan- 
tially represents  investment.  Of  course,  nothing  was  taken  off  for 
depi-eciation ;  but  aside  from  that  it  substantially  represents  invest- 
ment. 

Mr.  Warren.  It  represents  considerably  more;  does  it  not?  Some 
of  the  stock  was  issued  as  high  as  155, 1  .think,  and  all  of  it  at  par,  or 
more. 

Mr.  Wilcox.  Well,  there  were  some  additions.  I  can  not  tell  you 
the  details  of  that,  although  that  would  be  only  a  small  percentage 
of  the  total. 

Now,  of  course,  Boston  has  the  subways.  In  Boston  the  subways 
are  built  by  the  city  and  i^ented  at  a  figure  which  will  pav  the  inter- 
est cost  and  the  sinking  fund  cost,  as  I  understand  it,  on  the  city's 
investment,  and  if  the  rentals  are  continued,  at  the  end  of  a  certain 
period  of  years,  when  the  bonds  are  due,  they  will  be  paid  and  the 
city  will  not  be  out  anything.  And  the  cost  of  elevated  roads  and 
of  subways  is,  of  coui-se,  very  heavy,  and  it  bears  very  heavily  upon 
the  cost  of  sei-vice,  and  especially  at  the  present  time  when  every- 
thing else  is  so  heavy. 

Now,  I  have  referred,  going  back  to  reasons,  to  overcapitalization, 
which  is  general,  although  not,  universal — the  overconsolidation  of 
systems,  which  reached  out  and  built  up  great  networks  going  all 
over  a  State  or  a  section  of  a  State,  for  the  purpose,  I  think,  pri- 
marily of  manipulation  of  securities  at  the  time,  and  conditions  de- 
•  veloped  where  the  city  lines  have  to  bear  the  burden  of  a  lot  of  out- 
side nonpaying  lines.  In  some  cases  that  has  been  beneficial  to  the 
community.  I  think  in  many  cases  it  has  been  much  overdone,  even 
from  the  point  of  view  of  the  benefit  to  the  merchants  and  others  who 
profit  from  the  unified  system  of  street-railway  service. 

Take  New  Jersey  again,  for  example.  Here  we  have  Camden  in 
the  southern  part  of  the  State,  with  a  line  .running  up  to  Trenton 
combined  in  operation  with  a  system  spreading  all  over  northern 
New  Jersey  with  no  connecting  link  between  them  except  a  line 
which  is  owned  and  operated  by  the  affiliated  company.  There  is  not 
any  reason  in  the  world  that  1  can  see  why  the  street-railway  busi- 
ness should  have  extended  to  the  extent  that  it  has  in  the  consolida- 
tion of  independent  and  separate  systems  serving  different  commu- 
nities. Every  consolidation  practically,  every  union,  every  lease,  has 
meant  an  increase  of  capitalization  or  of  fixed  charges  increasing  the 


1222    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

burdens  which  can  not  be  gotten  rid  of  except  by  a  disruption  of  the 
svstem,  and  of  course  a  disruption  of  the  system  is  much  more  pain- 
ful after  the  habits  of  travel  have  been  established,  and  all  that, 
than  the  keeping  of  the  systems  apart  would  have  been. 

Of  course,  one  of  the  big  things  that  has  entered  into  the  present 
trouble  has  been  the  franchise  contracts  with  the  inflexible  fare.  It 
has  entered  into  the  present  trouble  in  two  ways,  and  I  do  not  loiow 
but  what  one  is  as  important  as  the  other.  It  was  the  basis  of  this 
overcapitalization.  The  companies  in  many  cases  had  perpetual 
franchises,  the  right  to  charge  5  cents  forever— and  the  public 
thought  and  they  thought  that  there  was  great  profit  in  it  in  many 
cases— and  they  proceeded  to  capitalize  the  hopes  of  the  future. 
They  thought  the  cities  could  not  reduce  the  fares,  the  State  could 
not  reduce  the  fares,  and  they  were  secure  in  that  way.  The  result 
was  that  the  fixed  contract  with  the  fixed  fare  was  regarded  as  a 
great  asset,  as  something  of  enormous  value,  capitalized  and  made 
the  basis  of  fixed  charges;  and  now  they  are  in  trouble  for  it.  Now, 
when  it  comes  to  a  time  when  even  with  conservative  capitalization 
it  is  difficult  to  make  both  ends  meet  on  a  fare  as  low  as  5  cents  in 
most  communities,  the  contract  is  there;  it  is  something  which  is 
inflexible,  and  except  for  the  interference  of  the  State  commissions 
they  practically  have  been  tied  down  to  a  fare  which  was  estab- 
lished at  a  different  period  and  under  different  systems  of  cost,  so 
that  the  effect  has  been  doubled. 

Now,  I  do  not  know— working  through  all  of  these  causes  has  been 
the  development  of  the  hatred  of  the  community  toward  these  street- 
railway  companies,  and  that  hatred  is  based  not,  I  think,  upon  any 
essential  unfairness  on  the  part  of  the  American  public  or  any  essen- 
tial unwillingness  on  the  part  of  the  American  public  to  pay  for 
necessary  service  what  it  costs,  but  it  has  been  based  upon  these 
manipulations  and  the  feeling  that  here  is  a  private  interest  that  has 
gotten  a  grip  on  our  streets  and  we  can  not  shake  it  loose,  and  in  the^ 
old  times  it  was  making  lots  of  money;  a  good  many  men  were  tak- 
ing great  fortunes  out  and  leaving  the  industry  in  more  or  less  of  a 
crippled  condition;  and  the  public  hostility  was  developed,  and  it 
continues,  and  I  do  not  see  any  possible  way  of  overcoming  it  unless 
the  business  is  reorganized  and  put  upon  a  sound  financial  basis,  and 
these  old  obligations  that  were  in  part  illegitimate  at  the  time  they 
were  incurrecf  are  wiped  out  and  the  whole  system  is  put  upon  a 
sound  and  proper  basis.  

Now,  I  do  not  know  whether  that  will  do  it,  because  to  my  mind 
after  studving  this  problem  for  a  good  many  years  it  seems  to  me 
that  transportation  service  in  cities  has  become  so  much  a  matter  of 
public  necessity  and  public  importance  and  is  a  public  function  in  so 
vital  a  way  that  the  very  idea  of  private  companies  performing  this 
i)ublic  function  for  profit  tends  to  be  corrupting  and  disturbing  of 
th^  political  atmosphere  and  political  relation.  And  I  am  not  at 
all  certain  that,  even  under  the  best  management  or  on  the  best  basis, 
we'could  figure  out  a  continuation  of  private  ownership  and  private 
operation  of  the  street-railway  business  that  would  be  able  to  secure 
and  hold  for  anv  considerable  period  of  time  the  goo<l  will  and  co- 
owration  which' certainlv  now  are  necessary  if  the  business  is  going 
to  succeed  from  a  financial  standpoint  without  being  wrecked  as  a 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1223 


public  utility  by  a  decrease  of  service  so  that  only  a  comparatively 
few  people  ride. 

Another  thing  that  has  caused  the  trouble  has  been  the  restriction 
of  municipal  powers,  largely  through  the  influence  and  power  of  the 
companies  who  wished  to  retain  their  hold  upon  this  great  industry 
with  its  immense  earning  capacity,  enormous  investment,  and  its 
gi-eat  future,  as  it  appeared.  Legislation — liberal  legislation — ^grant- 
ing municipal  powers  which  would  liave  enabled  the  cities  to  exercise 
some  initiative  and  to  grapple  with  the  problem  in  an  intelligent 
fashion  has  been  withheld,  with  the  result  that  about  all  the  cities 
could  do  was  to  scold,  stir  up  trouble,  and  scold;  and  that  has 
tended  not  only  to  prevent  the  remedial  action  that  might  have  been 
taken  but  it  has  tended  to  further  develop  this  ill  feeling  and  mis- 
understanding which  now  prevails.  As  the  result  of  the  5-cent  fare 
and  the  profits  that  the  people  thought  the  companies  were  making 
and  that  the  companies  thought  they  would  make  when  they  overcapi- 
talized, the  people  got  after  them  on  special  taxation  and  they  said, 
"  They  hyq  using  our  streets,  and  they  have  got  their  franchises,  and 
in  some  cases  they  bought  them  and  paid  the  aldermen  instead  of  the 
city;  and  we  can  not  get  rid  of  them,  and  they  are  making  lots  of 
profit  running  on  our  streets  and  we  ought  to  get  some  of  it  back," 
and  so  all  sorts  of  burdens  were  placed  on  them.  I  do  not  believe 
that  a  public  utilit\^  of  this  nature  ought  to  be  subject  to  special  tax- 
ation. I  do  not  think  that  is  in  the  nature  of  the  business  that  we 
should  try  to  ''  soak '  the  car  riders  for  the  support  of  the  govern- 
ment, the  other  functions  of  government.  I  think  that  they  are  en- 
titled, from  social  and  political  reasons,  to  service  at  as  low  a  cost 
as  it  can  be  i-endered  to  them.  But  the  mischief  has  been  done,  and 
it  is  very  difficult  to  undo  it,  because  this  system  of  taxes  has  been 
woven  into  the  State  laws  and  into  the  municipal  charters  and 
ordinances  and  into  the  contracts,  and  while  some  can  be  remitted 
without  much  trouble,  with  respect  to  others  it  will  tend  to  upset 
the  whole  taxation  scheme  of  the  State. 

Commissioner  Meeker.  As  a  matter  of  fact,  did  the  tax  fall  in  its 
last  incidence  upon  the  car  riders  when  it  was  imposed? 

Mr.  Wilcox.  Well,  originally  not,  because  they  said,  "  Give  us  a 
5-cent  fare  and  let  us  operate  and  we  will  give  you  so  much  service 
and  agree  to  give  the  service  for  a  given  time  or  forever."  And 
under  those  circumstance  the  taxes  did  not  fall  upon  the  consumer, 
upon  the  car  rider,  excepting  in  cases  where  the  taxes  were  so  heavy 
as  to  make  the  companies  unable  or  unwilling  to  render  the  service 
which  they  otherwise  would  have  rendered. 

Commissioner  Sweet.  What  money  could  these  special  taxes  be 
paid  out  of  except  the  nickels  that  came  in  ? 

Mr.  Wilcox.  Well,  they  could  not  be.  That  is  all  the  money  the 
companies  could  get. 

Commissioner  Sweet.  But  at  that  time  the  car  riders  were  paying 
more  than  they  ought  to  psij  ? 

Mr.  Wilcox.  Yes,  that  is  true;  but  they  had  contracted  to  do  so. 
The  contracts  were  there,  and  there  was  a  5-cent  fare  for  20  years. 
^  Now,  you  are  making  lots  of  money  and  we  will  tax  you  to  get 
something  back,"  the  people  said. 

Commissioner  Sweet.  But 'every  dollar  for  tax  or  anything  else 
came  from  the  nickels  of  the  riders  ? 


il 


1224    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Wilcox.  Yes.  Now,  the  street-railway  taxes  have  become  a 
very  important  element  in  the  sources  of  revenue  of  cities,  and  it  is 
difficult  for  the  cities  which  are  hard  put  to  it  to  find  the  money  to 
carry  on  the  government,  it  is  hard  for  them  to  surrender  theai 
taxes;  and  as  I  sav,  in  some  cases  it  requires  an  entire  revision  of  the 
State  scheme  of  taxation,  and  in  some  cases  the  cities  could  not  vol- 
untarily do  it  if  they  wished  to.  Some  can  be  remitted.  But  the 
public,  again,  is  not  willing,  until  the  street-railway  business  is  on 
a  sound  basis  and  that  which  they  recognize  to  be  a  sound  basis, 
to  give  up  taxes,  and  especially  it  is  not  willing  to  go  further  and 
give  special  exemptions  which  would  favor  the  street-railway  busi- 
ness as  compared  with  other  businesses.  I  think  that  rather  than 
increase  rates  above  a  minimum  that  tends  to  develop  the  city  prop- 
erly and  furnish  cheap  and  sufficient  transportation,  as  a  matter  of 
policy  it  would  be  best  to  give  up  all  taxation,  if  we  could  have  an 
arrangement  by  which  w^e  are  sure  that  the  business  is  being  run  as 
a  public  business  and  that  the  people  who  give  up  the  taxes  are  get- 
ting the  benefit  of  giving  them  up.  That,  of  course,  is  one  of  the  big 
problems  that  you  have  before  you,  and  that  is  being  considered  in 
various  parts  of  the  country. 

Now,  another  thing  that  has  made  the  problem  difficult— it  has 
Contributed  somewhat  to  its  solution,  but  on  the  other  hand  it  has 
introduced  considerable  difficulties— is  the  establishment  of  the  State 
commissions,  with  power  to  abrogate  the  local  contracts.  Hei-e  are 
two  movements  which  have  been  going  along  side  by  side.  Cer- 
tain of  the  cities,  after  long  years  of  dispute  with  the  street-railway 
companies,  were  getting  to  the  point  of  adopting  modern  franclnses, 
modern  contracts  controlling  service  and  rates,  and  almost  simul- 
taneously the  State  commission  idea  came  into  effect,  and  it  has 
taken  several  years  for  the  full  force  of  the  movement  to  be  de- 
veloped and  shown  up.  But  now  we  find  that  these  two  movements 
run  counter  to  each  other.  The  city  that  wants  to  go  to  municipal 
ownership  ultimately  and  wants  a  trolley  service,  that  wants  trol- 
ley extensions,  that  wants  a  proper  local  transportation  as  part  of 
the  city  plan— as  something  in  which  the  local  people  have  a  pri- 
mary interest,  something  that  is  really  ancillary  to  the  municipal 
government— and  that  proceeds  to  try  to  get  these  things  through 
a  franchise  contract  with  a  private  company,  finds  that  after  the 
contract  is  all  signed,  sealed,  and  delivered  and  has  been  in  force  a 
few  years  and  is  presumably  a  valid  contract— some  morning  tho 
company  goes  to  the  State  commission  and  it  says,  "We  can  not 
live  under  this  contract.  We  want  all  the  things  in  this  'contract 
which  are  to  our  advantage— they  suit  us— but  the  things  that  are 
not  to  our  advantage  we  want  set  aside."  And  the  State  commis- 
sion, having  no  interest  in  who  owns  the  property,  having  no  in- 
terest in  the  matter  of  the  ultimate  policy  as  to  ownership,  view- 
m<r  the  matter  entirely  from  the  point  of  view  of  the  earnings  upon 
the  investment  and  the  general  character  of  service,  proceeds  to  ab- 
rogate and  set  aside  these  contracts.  The  result  is  that  now,  when 
a  city  wants  to  settle,  when  you  begin  to  talk  about  making  a  set- 
tlement with  your  company— a  cost  of  service  or  any  other  kind  of 
settlement— you  do  not  know  whether  the  contract  which  you  work 
out  through  years  of  elaborate  negotiations  is  more  than  a  scrap 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1225 

of  paper,  because  of  the  fact  of  this  force  representing  the  power  of 
the  State  which  assumes  to  surrender  on  behalf  of  the  city  the  ad- 
vantages which  the  city  secures  through  negotiations.    Now 

Commissioner  Gadsden.  I  do  not  want  to  interrupt  your  train  of 
thought,  but  just  what  have  you  in  mind  as  to  the  advantages  of  the 
city  which  are  sun-endered  and  the  advantages  which  the  company 
keeps?  I  do  not  quite  follow  you  there.  What  does  the  company 
keep  under  State  regulation  which  it  ought  not  to  keep  ? 

Mr.  Wilcox.  Well,  I  do  not  say  it  is  something  they  ought  not  to 
keep,  but  a  bargain  that  is  made 

Commissioner  Gadsden.  I  mean  that  was  in  the  contract.  I  do  not 
quite  follow  you  there. 

Mr.  Wilcox.  Take,  for  example,  the  contracts  we  discussed  before 
the  chamber  of  commerce  committee,  the  Chicago  contracts.  The 
company  agreed  to  furnish  transportation  for  5  cents  for  a  period  of 
20  years  and  agreed  to  divide  profits  with  the  city  on  that  basis.  It 
agreed  to  sell  to  the  city  at  a  given  figure  at  any  time  it  wanted  to 
come  in.  It  agreed  on  certain  standards  of  service.  Now,  after  a 
certain  period  the  company  is  dissatisfied,  because  of  the  increases  in 
expenses,  with  the  rate  of  fare.  It  goes  before  the  commission  and 
the  commission  assumes  jurisdiction  and  says,  "  Under  the  public- 
utilities  law  we  can  set  aside  that  part  of  the  contract ;  we  can  grant 
6  or  7-cent  fares  or  whatever  we  think  is  necessary."  But  in  this  par- 
ticular case,  at  the  time  of  the  first  hearing  and  decision  they  did  not 
do  so,  although  they  might  have  done  so ;  and  I  understand  hearings 
are  now  going  on  with  the  idea  that  they  may  do  so.  But  they  could 
not  set  aside,  and  did  not  attempt  to  set  aside,  the  obligation  of  the 
city  to  pay  the  fixed  value  in  case  it  wanted  to  purchase,  although 
they  found  that  that  fixed  value  was  grossly  excessive  with  respect  to 
the  present  value  of  the  property.  The  city,  so  far  as  its  plan  for 
ultimate  municipal  ownership  is  concerned,  is  stuck  by  the  contract. 
There  is  not  any  way  of  getting  out  of  it  unless,  outside  the  contract, 
it  is  possible  the  city  might  have  power  through  condemnation.  But 
so  far  as  the  contract  was  concerned  the  thing  that  was  the  most 
advantageous  to  the  city  remains  binding  upon  the  city 

Commissioner  Meeker.  The  most  disadvantageous  to  the  city  ? 

Mr.  Wilcox.  The  most  disadvantageous  to  the  city — remains  bind- 
ing on  the  city  while  the  other  is  subject  to  relief  of  the  company  by 
the  public-service  commission. 

Now,  in  saying  this  I  do  not  mean  to  say  that  I  am  opposed  to 
State  regulation,  but  I  do  think  that  we  have'set  up  ignorantly,  with- 
out trying  to  coordinate  them,  two  sets  of  forces  trying  to  solve  this 
problem  in  two  different  ways,  and  they  are  conflicting  and  we  are 
getting  nowhere.  And  I  do  think  that  the  solution  of  the  problem 
does  not  lie  in  exclusive  State  regulation,  because  I  do  believe  that 
every  municipality  has  a  vital  interest,  civic  and  municipal  interest, 
in  the  development  and  control  of  its  street-railway  system.  And  I 
have  thought  for  a  good  many  years  that  instead  of  this  seesaw  be- 
tween State  regulation  and  local  regulation  somebody  ought  to  work 
out  a  system  of  cooperation  between  State  and  local  authorities,  care- 
fully delimiting  the  functions  of  each  but  at  the  same  time  provid- 
ing in  the  setting  up  of  the  machinery  for  cooperation  rather  than 
going  along  the  way  mvq  are  now  with  the  municipalities  trying  to 


1226    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

claim  jurisdiction  and  the  State  commissions  taking  it  away  from 
them,  and  one  pai-ty  having  all  the  power  and  the  other  helpless  or 

vice  versa. 
Commissioner  Meeker.  You  think  a  cooperative  system  could  be 

worked  out 

Mr.  Wilcox.  I  believe  it  could. 

Commissioner  Meeker.  Which  would  be  superior  to  a  single  con- 
trol? .  .       ^    ,     , 

Mr.  WiLcox.  Between  the  State  and  local  authorities,  I  do  be- 
lieve so.  There  are  certain  functions  unquestionably — ^there  are 
certain  matters  relating  to  street-railway  operation  that  must  be 
controlled  through  State  agencies  and 

The  Chairman.  Well,  upon  that  point,  Doctor,  will  you  enumenito 
the  particular  things  which  the  city  should  control  and  those  which 
the  State  should  control? 

Mr.  Wilcox.  Of  coui^e,  it  is  not  possible  to  make  such  an  enum- 
eration that  would  be  applicable  to  all  conditions  everywhere;  be- 
cause in  a  State  like  Rhode  Island  or  a  State  like  New  Jersey  and 
in  certain  sections  of  other  Eastern  States  where  the  municipalities 
do  not  represent  the  normal  urban  community,  but  are  merely  arbi- 
tary  lines,  and  where  a  system  which  ought  to  be  operated  as  a  uni- 
fied svstem  overlaps  and  runs  into  several  municipalities,  we  would 
have  functions  which  would  have  to  be  taken  care  of  by  the  State 
or  a  larger  district  tlian  the  municipality  which,  in  other  cities,  where 
the  municipal  boundaries  pretty  well  cover  the  urban  district,  would 
be  taken  care  of  by  the  municipality.  But  with  that  qualification  I 
would  say  this,  undoubtedly  the  State  commission  should  have  con- 
trol of  capitalization,  of  the  issuance  of  securities 

Commissioner  Meeker.  If  it  will  not  interrupt  you,  I  would  like 
to  have  you  state  why  you  think  it  is  necessary  to  control  the  issu- 
ance of  securities  if  there  is  a  proper  control  of  the  capital  value 
of  investment.  What  difference  does  it  make  whether  they  issue 
$200,000,000  of  stock,  if  the  physical  value  or  the  value  of  the  plant 

is  fixed? 

Mr.  WiLCOX.  Well,  perhaps  I  answered  with  respect  to  securities 
too  easily.  I  will  say  that  unquestionably  such  contix)l  of  securities 
as  is  deemed  necessaiy  in  the  public  interest  should  be  vested  in  a 
State  commission,  without  going  into  the  pros  and  cons  as  to  whether 
or  not  we  can  take  the  lid  off  the  capitalization,  if  we  have  a  fixed 
capital  value.  From  the  point  of  view  of  the  city  that  establishes 
the  cost  of  service,  that  is  interested  merely  in  the  value  of  the 
pix)pei*ty  and  what  it  costs,  I  would  say  it  is  no  concern  of  the  city 
what  the  capitalization  is,  pix>vided  that  in  the  issuance  of  bonds 
the  interests  of  the  city  are  not  compromised  in  connection  with  the 
acquisition  of  the  property  and  the  control  of  the  property.  The 
next  thing  which  the  State  should  control  is  obviously,  I  think,  the 
whole  matter  of  accounting  and  forms  of  bookkeeping  and  reports. 

The  State  must  essentially  and  must  necessarily  control  and  hti\e 
full  control  over  lines  which  are  not  subject  to  municipal  control; 
that  is  intercity  lines  and  lines  whei-e  the  through  interest  is  pi-e* 
dominant  over  the  local  interest.  I  do  not  think  it  is  proper  that  a 
town  l)oard,  for  example,  should  be  able  to  prevent  the  construction 
of  an  interurban  line  by  trying  to  impose  some  outrageous  franchise 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1227 

provision  before  it  will  let  it  through,  if  it  is  to  the  interest  of  the 
State  as  a  whole  or  of  the  section  of  the  State,  as  determined  by 
the  State  commission,  that  such  a  line  should  be  built. 

The  State  must  also  have  full  control  of  intercity  operations,  or 
suburban  operations.  If  a  municipality  owns  the  system  and  op- 
erates outside  of  its  limits,  I  think  the  conditions  of  operation  out- 
side of  the  limits  should  be  subject  to  control  by  the  State  commis- 
sion the  siime  as  if  a  private  company  were  operating.  And  in  tluvsc 
times  there  are  many  things  in  connection  with  the  relations  between 
municipalities  and  the  corporations  that  would  have  to  be  ironed 
out  through  a  State  commission:  power  supply  and  various  things. 

Now,  when  it  comes  to  matters  of  service  and  rates,  I  believe  that 
fundamentally  the  urban  community — the  community  that  consti- 
tutes a  community  for  transportation  service,  through  its  organized 
agency — sliould  have  control  of  that  service  and  determine  how 
much  service  it  wants  and  pay  for  what  it  gets  in  one  form  or  an- 
other. I  think  the  municipality  should  have  control  of  the  policy 
of  rates,  as  to  whether  the  rates  should  be  the  zone  fare  or  the  flat 
fare,  whether  they  should  be  sufficient  to  meet  the  entire  cost  of 
service  or  whether  they  should  be  supplemented  by  subsidies  from 
taxation  or  by  special  land  taxes  or  other  means. 

I  think  the  whole  policy  of  what  the  service  shall  be  and  how  the 
cost  of  that  service  shall  be  paid,  admitting  frankly  that  the  whole 
cost  of  service  must,  of  course,  be  paid  by  the  public  in  one  form 
or  another — I  think  that  those  things  should  be  matters  of  municipal 
policy  wherever  the  municipalities  are  organized  in  such  a  way 
that  they  can  exercise  the  function. 

The  Chairman.  Should  the  State  commission  have  appellate  juris- 
diction over  those  rates? 

Mr.  AViLCOx.  In  what  I  stated  the  question  of  the  amount  of  money 
to  be  raised  was  not  involved,  except  to  the  extent  that  the  locality 
determines  the  amount  of  service,  and  that  is  reflected  in  the  cost. 

I  a&sumed  that  whatever  the  cost  of  service  was,  for  the  service 
tliat  the  municipality  or  the. group  of  municipalities  required,  it 
would  have  to  be  paid.  I  think  that  the  municipalit}'  or  group  of 
municipalities  ought  to  have  the  privilege  of  determining  how  that 
shall  be  paid. 

Now,  there  comes  this  question  of  valuation  and  of  the  super- 
vision of  operating  expenses. 

The  Chairman.  Before  you  reach  that  question,  did  jou  com- 
pletely answer  the  question  that  I  asked  ? 

Mr.  WiLcox.  This  is  a  part  of  that  answer. 

It  is  a  question  as  to  who  should  be  responsible  for  the  valuations. 
I  do  not  believe  that  it  is  advisable  for  municipalities  or  groups  of 
municipalities  in  general  to  attempt  to  agree  with  public  utility 
companies  upon  the  value  of  the  proj^erty.  I  do  not  think  it  is 
possible,  ordinarily,  to  conduct  negotiations  on  a  basis  where  a  fair 
result  will  be  reached. 

I  think  that  the  valuation  of  the  property  should  be  determined 
by  an  expert  agency  that  is  impartial,  and  if  the  State  commissions 
are  properly  protected  from  undue  influence  on  either  side  it  seems 
to  me  that  they  are  the  proper  agency  for  determining  valuations. 
1  think,  however,  that  >yhenever  a  question  of  valuation  in  which  a 


1228    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

city  is  interested  is  up  before  a  State  commission  the  city  or  group 
of  cities  should  have  full  authority  to  examine  the  property,  to  have 
access  to  the  company's  books,  and  to  make  an  appraisal,  just  the 
same  as  the  commission,  so  that,  if  they  wish  to  put  in  an  appraisal, 
if  they  wish  to  go  to  the  expense  of  putting  in  an  appraisal  contest- 
ing the  valuation  that  the  company  submits  to  the  commission  they 
shall  have  the  privilege  to  do  so.  It  seems  to  me,  however,  that  the 
function  of  making  the  valuation  is  a  function  that  can  best  be 
performed  by  a  State  utilities  commission. 

I  think  that  the  State  commission  should  have  general  jurisdic- 
tion in  the  matter  of  safety. 

I  think  that  the  State  commission  might  properly  be,  in  many 
casas,  the  board  of  arbitration — could  act  as  the  board  of  arbitration 
in  disputes  between  the  municipality  and  the  company  with  respect 
to  the  interpretation  and  application  of  the  contracts  that  exist  be- 
tween them.  For  example,  1  think  the  municipality  ought  to  have 
the  power  to  determine  what  extensions  shall  be  built ;  but  an  arbi- 
trary power  to  demand  extensions  at  any  time  anywhere  is  such 
that  it  might  l>e  used  to  ruin — bankrupt  the  company.  Presumably 
under  the  service-at-cost  plan,  if  it  is  fixed  so  that  it  will  actually 
work  out,  it  would  merely  go  into  the  cost  of  service,  and  it  would 
Tvork  out  all  right.  But  as  to  things  that  are  vital,  that  vitally 
affect  the  company's  rights,  I  think  they  ought  to  have  a  right  to 
appeal  from  the  city's  decision  to  the  State  commission  as  a  board 
of  arbitration,  or  the  city  should  have  the  right  to  appeal. 

Commissioner  Meeker.  That  would  include  rates;  would  it? 

Mr.  Wilcox.  No  ;  I  did  not  say  that  would  include  rates,  although 
perhaps  this  last  would  infer  it. 

The  thing  that  w^ould  be  subject  to  appeal  would  be  the  determi- 
nation of  the  cost  of  service.  After  the  cost  of  service  is  determined 
then  I  think  the  municipality  or  the  group  of  municipalities,  where 
they  are  organized  to  take  control  of  it,  should,  as  a  part  of  munic- 
ipal policy,  be  permitted  to  raise  the  rates,  or  raise  the  revenue  in 
any  way  they  please. 

Mr.  Warren.  By  the  cost  of  service,  do  you  mean  from  time  to 
time,  or  the  original  basis — the  valuation? 

Mr.  Wilcox.  I  mean  from  time  to  time. 

Mr.  Warren.  That  ought  to  be  a  State  commission  matter? 

Mr.  Wilcox.  I  think  that  the  rules  to  establish  the  cost  of  service 
ought  to  be  made  in  an  agreement,  in  a  contract,  and  it  ought  not 
to  be  a  contract  which  the  State  commission  can  set  aside  without  the 
consent  of  the  municipality. 

Now,  when  it  comes  to  interpreting  and  applying  the  terms  of  that 
contract,  I  think  it  very  well  for  the  State  commission,  as  an  impar- 
tial body,  to  be  the  party  to  determine  how  that  shall  be  applied. 

In  the  Cleveland  contract,  in  each  case  they  establish  a  board  of 
arbitration,  and  if  the  State  commission  were  efficient  and  as  it  ought 
to  be,  with  the  facilities  it  would  have,  it  could  very  well  serve  as  a 
board  of  arbitration  for  those  purposes. 

After  all  I  have  said  about  the  more  or  less  remote  causes  of  the 
present  trouble  of  the  street  railways — I  mean  remote  in  time,  ori- 
gin— I  should  not  omit  the  causes  upon  which  great  stress  is  being 
laid  and  which  are  extremely  important — namely,  the  new  conipeti- 


i         proceedings  of  federal  electric  railways  COMMISSION.    1229 

f^^ir.?^  motor  vehicles,  which  has  become  an  extremely  important 
factor,  especially  in  the  last  six  or  eiglit  years,  and  the  war  prices 

back         ^""^^^^  ^""^  ^^  ^"""^^  ^""^  *^''^^  ^"'^  breaking  the  camel's 

f nn!i  ^^^"^l  ^  °^^  f^^^^  ^^^  outlines  of  the  problem  bring  out  four 
?™  ^'^^  ^"^^^^  '^  ^^  ^^^^----^  -  -  -atter  of 

S Wl^•/^^^  '"  ^'i  ^?'  ^^'^  ^^^a^acter  of  investment  in  street  railways, 
fehall  It  be  speculative  or  nonspeculative  ?    That'means:    Shall  it  be 

risks"        ^^"^"^^"^"^^  ^^'  ^''  investment  in  which  the  investors  take 

Second,  shall  the  business  be  conducted  primarily  for  profit  or 
shall  It  be  conducted  primarily  for  service?  I  do  not  mean  Tn  ask- 
ing tliat  question,  that  the  two  can  be  entirely  separated.  I  mean  that 
J^vP^I^tfrir  ^^  P^^^"^*^  ^'  determined  is  as  to  Whether  or  not  at  any 

of  D  ofit  I'«lTlf7>.^'''^'i''''?'^  "^^^^^'^  «^  ^^"-'-'^^  «r  the  motive 

tI?.}    h  11^  ^^^  predominating  one,  and  determine  the  policy. 

disDutes  in  thpTrf 'Tl  '^^'''^^\^^  guaranteed,  and  shall  industrial 
clij^putes  in  the  transit  business  be  settled  without  strikes « 

fourth  shall  the  business  be  carried  on  through  public  agencies 
or  through  private  agencies  ?  ^     ^  ci^encies 

In  my  opinion,  the  investment  should  be  nonspeculative.  In  order 
to  make  it  nonspeculative,  certain  things  are  necessary:  First,  the 
amount  of  the  investment  must  be  determined,  fixed  ,•  second  the 
rate  of  return  to  be  allowed  upon  the  investment'must  be  fixed  ' 

Commissioner  Gadsden.  May  I  ask  you  right  there:  Fixed 'from 

Sstion."'''' """      "^  '''"""  ^"'  "^^  •    ^"'^"'^  *^^^^  ^^  ^  '''y  interesting 

frotVilS^dm'I""'  ''  ^'^'  ^"^^'  ""^  ''^'^^  ''  -— y'  fi-^ 

Conimissioner  Gadsden  As  the  cost  increases  or  decreases? 
,    Mr.  A\  iLcox.  Yes.    I  will  discuss  that  a  little  further,  because  that 
IS  an  important  issue.  '  "'''^''"^^  ^^^^ 

Some   scheme  must   be   provided   for  flexibility  in   i^venues  to 
enable  the  investment  to  receive  its  return  at  all  times.    Means  must 

Sseff'^^'Ttt  'V""''"\^^"'  permanent  integrity  of  the  investment 
self.  That  requires  the  physical  unkeep  of  the  property,  so  that 
he  basis  of  the  investment  shall  not  disappear.  It  requires  the  pro- 
tection of  the  in\^stment  from  ruinous  competition.  It  requires  that 
the  investment  shall  have  the  right  to  continue  in  service  until  It 
IS  taken  care  of,  unti  the  investors  are  paid.  As  a  matter  of  addi- 
tional  safety  it  invo  ves  I  think,  the  desirability  of  amortization 
of  the  capital  account,  at  least  m  part,  so  as  to  keep  the  capital  ac- 
count at  all  times  well  within  the  present  physical  value  of  the 
visible  property. 

Xow,  returning  to  the  question  which  Mr.  Gadsden  raised  with 
respect  to  the  rate  of  return :  The  rate  of  return  will,  of  course  be 
influenced  by  the  security  of  the  investment.  If  the  investment  it: 
self  IS  made  secure  m  all  the  ways  I  suggested,  and  if  the  earninor 
of  the  return  upon  it  fixed  from  year  to  year,  is  made  certaim 
then  the  rate  of  the  return  will  be  relatively  low.  In  other  words 
we  will  get  the  benefit  of  cheap  capital.  ' 

I  a&sume  that  the  question  Mr.  Gadsden  raised  was  with  respect 
to  whether  or  not  the  rate  of  return  upon  the  investment  in  the  prop- 


1230    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


erty  shall  be  changed  from  time  to  time  with  the  change  in  the  cur- 
rent rate  of  interest,  the  scarcity  of  capital.  I  do  not  think  that 
the  investment  which  has  been  fixed  need  have  the  rate  of  return 
upon  that  investment  changed.  Of  course,  it  will  be  necessary  that 
the  rate  of  return  upon  additional  investment  fluctuate  more  or  less 
if  financial  conditions  fluctuate!  That  is  taken  care  of  in  a  situation 
like  Cleveland,  where  the  return  upon  the  stock  is  a  fixed  amount 
and  the  return  that  is  allowed  for  interest  upon  the  money  secured 
through  bond  issues  is  the  actual  cost.  I  think  under  the  Cleveland 
franchise  it  is  limited  to  a  maximum  of  6  per  cent,  but  that  would 
not  be  necessary. 

Commissioner  Beall.  They  are  asking  for  7  now. 

Commissioner  Gadsdex.  If  I  may  interix>se  for  a  moment:  In 
Cleveland  the  difficulty,  as  I  understand,  now  is  that  they  can  not 
sell  their  G  per  cent  stock  at  par,  and  that  discount  the  company 
loses,  and  they  are  asking  an  increase.  How  are  we  going  to  meet 
that  situation  as  years  go  by? 

Mr.  Wilcox.  In  a  situation  like  Cleveland,  where  a  very  large 
proportion  of  the  investment — the  majority,  much  more  than  half  of 
the  investment — is  represented  by  G  per  cent  stock,  you  could  cer- 
tainly during  a  period  of  extraordinary  cost  of  money  get  the 
additional  funds  you  need  tlirough  bonds  and  pay  what  was  neces- 
sary. I  do  not  see  any  good  reason  why  the  rate  of  return  upon  the 
investment  should  fluctuate — I  mean  the  investment  that  stays  there. 

Commissioner  Beall.  Would  you  see  any  objection  to  putting  in 
any  necessary  discount  as  a  part  of  the  cost  of  the  property  and 
being  allowed  to  earn  on  that  the  G  or  7  or  8  per  cent,  whatever  was 
allowed  ? 

Mr.  Wilcox.  Bond  discomit  or  stock  discount? 

Commissioner  Beall.  Yes.  That  is  part  of  the  cost,  just  as  much 
as  steel  rails. 

Mr.  Wilcox.  I  would  object  to  its  being  put  in  as  a  part  of  the 
l^ernument  capitalization.  I  would  not  object  to  the  plan  which  is 
followed  by  the  public-service  commission  in  amortizing. 

Commissioner  Beall.  That  is  the  same  thing  in  a  different  wa}'. 

Mr.  Wilcox.  Only  you  get  it  out  of  the  i:)ermanent  capital.  I  be- 
lieve in  being  absolutely  conservative  with  reference  to  permanent 
capital. 

Answering  the  additional  questions  as  to  what  I  think:  I  think 
the  business  should  be  conducted  for  service  and  not  profit;  that  is, 
that  the  service  should  be  the  predominant  motive,  the  controlling 
motive,  at  all  times;  and  the  reason  for  that  is  that  I  believe  the 
service  is  an  essential  public  service,  so  vital  to  our  municipalities 
that  we  can  not  afford  to  permit  the  public  policy  with  respect  to 
transportation  to  be  determined  by  the  exigencies  of  profit. 

Transportation  facilities,  in  the  first  place,  should  be  developed 
and  operated  as  a  unit  for  every  urban  community.  It  is  a  part  of 
the  city  plan. 

Extensions  should  be  built,  I  think,  as  determined  by  public  au- 
thority. That  is  a  j^art  of  the  city  plan.  Rates  should  be  fixed  with 
an  eye  to  their  effect  on  urban  development. 

Take  Xew  York,  for  example.  Here  we  have  the  5-cent  fare, 
under  the  subway  contracts,  which  has  been  subsidized  by  the  city, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1231 

practically,  to  the  extent  of  two  or  three  hundred  million  dollars, 
llie  city,  whether  rightly  or  mistakenly,  had  the  idea  that  the 
enormous  congestion  m  Manhattan  could  be  in  part  relieved  by 

nn  fl"'^  ?       T^  '^'^J''  ?"^  ^  ^^^^'y  direction  and  providing  a  low 
f.  .iV^  for  everybody,  taking  people  out  into  the  suburbs.    If 

k  n  .II'T  'V^'*^''^  ""l  n'  P^^^'  ^^  development,  deteimines  that  that 
tZ  f.l/^  %  to  follow,  that  the.  flat  uniform  fare  and  the  low 
tio^.  .hnnl  ^T.^'^.'^^  ^^^^^  "P?^  ^i^y  development,  those  considera- 
fZtl  [^^  ^/1"'V''  ^^^^^'^^  ^^  ^^"^g  t^^e  ^^^^'  Of  course,  every- 
s&     ^".  ^T^  to  human  limitations;  and  when  I  say  that' service 

s  on^  oZr\  T'  *^'^^  P^^f  *  "^^^"^^  ^^^''^  ^^i^^^  I  "^^^n  that  service 
ex^^^l  of  T^'  ^'IV^  ^"^^.^^'^^  ^y  ^^'^  necessity,  where  the  necessity 
thMt  mnll-n"  5*«^-.'^'''''^P^>^'  ^^t  that  the  city  should  consider 
tl  an  n  fe^^y,"^'? "'^  ^''^  ^L*^^"''  ^^  necessary,  is  more  important 
mX  T  ci^f  !  ^''^'''^f  self-sustaming  if  the  rates  that  would 
devlpme?t     "  ""^    '""'^^  ^  deleterious  effect  upon  municipal 

lin^nf^h"'"' w*  }t^  ^.^f^  ^^'^"'  ^^  it  ^^'ill  i^«t  interfere  with  your 
tX  f  n  .^rf  *  v"^-'  fr^r  >^^"  '^^^'  «f  the  urban  community-. 
subint-^fn'T  ^'^''  >^";i^  York-do  you  include  the  Jersey  side,  the 

of  he'nrl.onT^\  ^''  ^f''  '^  ^^^''  ^'^'  ^^^^^^^ ^  When  you  speak 
elevi  ?  ^^^-^'^tory,  do  you   include  the  places  served  b^-  the 

Mr.  A^^Lcox.  In  Xew  York,  I  would  not  take  in  Jersey.  Jersey 
IS  separated  by  a  great  river  and  by  State  lines  which  are  more  or 
less  arbitrary,  and  as  long  as  it  is  'so  separated  we  will  have  to  d^ 
the  best  we  can  and  not  include  it.  I  should  say  that  with  respect  to 
Boston  the  metropolitan  district  should  be  the  unit.  Yoi  hav^ 
established  metropolitan  districts  for  other  purposes. 

mnnipin!]''^?^''"  ^^\u^^^''  7''''^^^  ^^^^^  '^^^^^1  ignore  the  technical 

Z^^t  i&lS  ^'"'^^""^  '"'^^^^'^'  ^^'^^^  '-'^''^  ^  i-^^  «f 

Mr.  Wilcox.  I  would  i^iore  those  lines  if  the  suburban  or  extra- 
municipal   development   is  sufficiently  imi>ortant  so  that  it   could 
not  be  taken  care  of  incidentally. 
Mr.  Warrex.  Yes. 

Commissioner  Sweet    But  you  would  not  have  one  unit  of  organi- 
zation in  tliat  case,  would  you,  to  carry  out  your  policies? 
.    7''-  VViLcox.  British  cities  have  this  policy  sometimes:  A  munic- 
ipal  system   ^ylll   be   built  within  the  municipal   lunits,   and   then 
the  municipality  will  acquire  the  right  from  the  adjoining  munici- 
pa  ity  to  lay  down  tracks  and  operate  them,  or  the  adjoining  munici- 
pality  will  supply  the  tracks  and,  through  an  agreement,  the  main 
municipality  will  operate  the  cars  over  theiiL    I  think  that  plan  is 
entirely  feasible  where  we  have  a  city  like  Chicago  or  like  Detroit 
mj,  where  the  principal  part  of  the  urban  community  comes  within 
the  municipal  lines  and  where  the  municipal  boundaries  are  beiui? 
extended  from  time  to  time,  so  that  anything  that  is  outside  is  out- 
side only  temporarily. 

When  it  comes  to  a  situation  like  Boston  or  Newark,  the  proba- 
bility js  that  we  would  have  to  have,  or  ought  to  have,  a  special 
distric  ,  a  street-i^ilway  district,  to  handle  that  problem,  which 
would  include  the  metrox^olitan  area. 


1232    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        ^ 

If  the  maximum  service,  if  it  is  not  wasteful,  can 'not  be  made 
self -sustaining  it  should  be  subsidized.  On  the  other  hand,  excess 
earning  should  be  put  back  into  the  business.  Special  taxes  should 
be  removed  when  you  have  this  scheme  in  operation. 

As  to  continuity  of  service,  I  believe  that  continuity  of  service 
should  be  assured,  and  that  the  street-railway  strike  should  be  made 
unnecessary  and  outlawed. 

I  think  that  the  employees  should  be  encouraged  to  organize  for 
their  nnitual  benefit,  and  as  a  means  for  securing  cooperation  in  dis- 
cipline and  management,  and  to  provide  an  agency  for  presenting 
their  grievances  in  an  authoritative  way,  and  securing  full  publicity 
and  prompt  attention  to  them. 

I  believe  that  even  some  of  our  Governmental  departments  might 
be  more  or  less  democratized  with  advantage. 

Commissioner  Meeker.  You  mean  by  that  that  they  should  give 
the  employees  more  of  a  voice  in  the  management  of  the  depart- 
ments ? 

Mr.  Wilcox.  I  was  deputy  commissioner  of  water  supply,  gas,  and 
electricity  in  New  York  for  three  or  four  years;  and  my  experience 
there  made  me  think  that  public  utilities,  publicly  operated,  would 
get  along  a  great  deal  better  if  the  right  of  the  employees  to  partici- 
pate in  the  formulation  and  determination  of  policy  in  a  reasonable 
way,  and  in  the  presentation  of  their  grievances  and  the  settlement 
of  disciplinary  questions  were  recognized  and  provided  for,  and  if 
machinery  were  established  and  recognized  for  that  purpose,  so  that 
the  individual  employee  would  not  be  isolated,  would  not  be  so  help- 
less in  a  great  machine,  and  so  that  there  would  not  be  so  much  of 
a  discount  upon  the  initiative  of  the  individual,  with  the  resultant 
discouragement  and  development  of  a  tendency  to  sort  of  lie  down 
on  the  job,  and  be  sore  on  the  city  or  on  the  Government,  and  get  out 
when  you  can,  and  slam  the  Administration,  and  all  that  sort  of 

thing. 

Connnissioner  Meeker.  You  spoke  of  strikes  being  outlawed. 
Will  you  extend  your  remarks  on  that? 

Mi\  Wilcox.  I  was  going  ahead  a  little  further  on  that.  I  think 
responsibility  for  fixing  the  wages,  hours,  and  conditions  of  labor 
should  l)e  assumed  as  a  public  function  to  be  performed  through  an 
appropriate  public  agency.  That  is  not  going  into  much  detail,  but 
we  have  got  to  the  point  where  we  can  not  leave  the  determination 
of  wages,  hours,  and  conditions  of  labor  to  the  private  companies 
without  public  control.  There  are  too  many  things  involved.  The 
welfare  of  the  community — even,  at  times,  the  very  stability  of  our 
institutions — may  depend  upon  the  keeping  of  order  and  the  main- 
tenance of  public-utility  services,  transportation  services. 

We  certamly  have  reached  the  point  where  Ave  can  not  leave  dis- 
putes as  to  wages  and  hours  and  conditions  of  labor  to  be  fought  out 
between  the  private  employer  and  the  men,  without  the  public,  that 
has  the  primary  and  ultimate  interest,  being  responsible  for  the 
final  settlement  of  the  dispute. 

My  third  statement  in  this  connection :  I  want  to  say  frankly  that 
I  believe  that  the  strike,  as  a  concerted  effort  to  interrupt  service  in 
local  transportation,  should  be  prohibited  and  effectively  -penalized. 
I  put  that  last  because  I  do  not  believe  that  such  action  should  be 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1233 

taken  except  after  the  basis  for  it  has  been  laid  by  providing  ade- 
quate means  for  the  prompt  and  effective  settlement  of  disputes  with 
justice  to  the  employees  through  other  measures  than  the  strike.  But 
I  can  not  see  how  we  can  possiblv  tolerate  the  continuance  of  the 
right  to  strike,  by  that  meaning  the  right  to  engage  in  a  concerted 
^^^  to  stop  service  on  a  public  utility — a  street-railway  system. 

That,  of  course,  is  a  very  difficult  problem  to  work  out  in  its  de- 
tails, but  it  is  a  vital  one. 

Coming  to  the  final  one  of  these  fundamental  questions — as  to 
wliether  the  street-railway  business  is  to  be  conducted  through 
public  or  private  agencies,  I  have  reached  the  conclusion  that  there 
is  no  ultimate  solution  of  the  problem  unless  we  frankly  undertake 
the  local  transportation  function  as  a  public  function  and  perform 
it  through  public  agencies. 

Local  transportation,  in  the  first  place,  as  I  have  said,  is  essentially 
a  part  of  the  city  plan.  It  is  a  public  function.  The  street  railways 
can  not  exist  except  through  the  possession  and  use  of  special  fran- 
chises in  the  public  streets.  Convenient  and  cheap  transit  has  come 
to  be  an  essential  for  the  public  convenience  in  large  urban  communi- 
ties. 

The  necessity  for  public  control  has  been  recognized  to  an  increas- 
ing extent,  until  now  the  street-railway  companies  could  not  possibly 
be  permitted  the  freedom  of  initiative  requisite  to  successful  private 
business  enterprises: 

Public  regulation  of  service,  maintenance,  wages,  and  other  operat- 
ing expenses  is  more  difficult  and  more  expensive  when  undei-taken 
indirectly  than  where  done  directly.     There  is  an  irreconcilable  con- 
flict between  the  interests  of  the  public  and  those  of  any  private 
company  operating  a  street-railway  system  for  profit.     The  result  is 
distrust,  hatred,  poisoning  of  the  political  atmosphere  in  cities.     In- 
stinctively the  American  people  see  that  private  operation  of  a 
public  function  for  profit  tends  to  be  corrupting.     The  public  will 
not  stand  for  the  new  privileges  and  exemptions  that  under  present 
conditions  would  be  necessary  to  enable  the  street  railways  as  a  pri- 
vate business  to  prosper  and  expand  to  meet  the  growing  public 
needs.     Chaos  has  been  introduced  into  the  field  of  regulation  by 
this  conflict  of  policy  between  the  State  commissions  and  the  local 
authorities,  to  which  I  have  already  called  attention,  and  regulation 
has  m  a  large  measure  broken  down.    The  condition  of  the  companies, 
the  condition  of  the  industry  at  the  time,  may  be  cited  as  Exhibit  A 
m  the  proof  thereof.     Of  course,  that  does  not  prove— that  is  an  as- 
sertion ;  it  does  not  prove— that  public  regulation  could  not  be  per- 
fected so  as  to  overcome  the  mistakes  that  have  been  made  and  the 
limitations  that  have   developed,   and   be  more   successful   in   the 
future  than  it  has  been  in  the  past.     I  think  the  difficulties  are 
fundamental  and  that  it  is  the  hardest  way  and  that  we  are  bound 
tc  come  to  the  other  conclusion  before  we  reach  any  solution. 

The  cost  of  new  capital  under  private  ownership  under  existing 
conditions  is  practically  prohibitive.  Let  us  go  back  to  what  we  were 
discussing  a  while  ago.  Take  companies  that  are  overcapitalized  and 
take  companies  that,  being  overcapitalized  and  not  being  able  to  earn 
a  fair  return,  by  that  very  reason  demand  a  higher  rate  of  return, 
8  per  cent  being  demanded  now.  The  higher  the  rate  of  return— that 
160643*'— 20— VOL  2 16 


1234    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

is,  the  more  the  risk — the  worse  off  the  company  is,  and  the  greater 
the  risk,  the  liigher  the  rate  of  return,  the  higher  the  cost  of  capital. 
And  if  we  were  to  allow,  even  after  a  substantial  compromise,  the 
companies-  claims  at  the  present  time  as  to  valuation  and  then  allow 
them  8  per  cent  return  upon  it,  we  would  be  paying  for  our  capital 
charges  for  the  street-railway  service,  I  think,  at  least  double  what 
capital  would  cost  undel*  public  ownei-ship  and  operation  on  a  con- 
servative capital  value  to  start  with.  Of  course,  if  a  city  in  taking 
over  the  companies  should  take  them  over  at  a  price  which  has  bank- 
rupted them,  the  cost  of  capital  for  the  city  would  continue  to  be 
excessive,  although  the  cost  of  additional  capital  would  not  be  so 
great. 

So  far  as  I  can  see,  reallv  conservative  financial  policies  under 
private  ownership  are  now  impracticable.  All  schemes,  of  private 
ownership  and  operation  break  down  because  they  are  inconsistent 
with  the  degree  of  public  control  that  is  made  necessary  by  the  nature 
of  the  business. 

Profit-sharing  and  service-at-cost  plans  under  private  ownership 
do  away  with  the  advantages  of  private  ownership  in  large  part  and 
entail  the  principal  disadvantages  of  public  ownership  without  its 
advantages. 

We  have  the  New  York  subway  plan,  a  hybrid  plan,  incorporated 
in  the  subway  contracts,  of  which  at  the  time  the  contracts  w^ere 
made,  I  made  this  criticism,  that  it  embodied  all. of  the  bad  features 
of  private  ownership  and  all  the  bad  features  of  Dublic  ownership 
without  many  of  the  good  features  of  either.  And  we  now  have  a 
situation  which  is  extremely  embarrassing.  Six  years  a^o  these  con- 
tracts were  entered  into.  The  city  said,  "  In  order  to  avoid  the  neces- 
sity of  public  operation  which  we  do  not  want  to  undertake  except 
as 'a  last  resort,  we  will  induce  the  existing  companies  to  operate  an 
expanded  rapid-transit  system,  to  agree  to  operate  extensions  as  we 
build  them  in  the  future,  to  supply  a  portion  of  the  capital  required 
for  this  expansion,  and  in  order  to  do  so  we  will  say  to  the  com- 
panies, you  will  be  guaranteed  for  the  next  50  years  as  a  preferential 
nil  of  the  profits  which  you  are  now  making,  plus  C  per  cent  upon  the 
additional  capital  which  you  furnish,  and  then  the  city,  after  that, 
will  take  a  percentage  on  the  capital  that  it  furnishes  sufficient  to 
balance  the  amount  that  you  are  allowed  as  a  preferential.  Then, 
after  tliat,  what  is  left  we  will  divide  50-50." 

As  it  seemed  then — it  has  proven  much  worse  than  we  expected — 
but  as  it  seemed  to  me  then,  the  preferentials  were  so  high,  and  the 
city's  preferential  put  into  the  contract  as  compensating  feature— 
the  citv's  second  preferential  being  more  than  the  cost  of  the  capi- 
tal--was  so  high  that  there  was  practically  no  chance  of  there  ever 
being  anything  to  divide,  and  that  being  obvious,  the  companies 
have  no  motive  left  except  to  earn  their  preferentials  and  spend  the 
city's  margin.  They  had  their  hands  in  the  city's  pocket  to  that  ex- 
tent. Now,  with  the  great  increase  in  costs,  it  has  got  to  the  point 
where,  contrary  to  everybody's  expectations,  the  companies  have  no 
l)ros])ect  of  earning  their  preferentials  and  are  now  bringing  groat 
pressure  to  bear  on  the  city  government  to  increase  the  fares.  They 
tinl\  point  to  the  increased  cost  of  service. 

They  say,  "The  subways  will  have  to  go  into  a  receiver's  hands; 
our  surplus  is  being  depleted  and  we  can  not  run  them  much  longer.''^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1235 

They  say,  "  Increase  the  fares.  The  city  will  get  the  benefit  of  it. 
We  will  earn  our  preferentials  and  then  the  city  will  have  something 
on  its  investment.  But  if  you  do  not  increase  the  fares,  we  w^on't  do 
anything,  we  are  going  to  hang  on  to  these  contracts.  Why?  Be- 
cause we  are  entitled  to  make  up  this  preferential,  and  if  we  do  not 
make  it  this  year,  we  have  50  years  to  make  it  up — it  is  cumulative — 
before  the  city  gets  a  cent  on  its  new  investment."  And  the  result 
is  that  we  have  contracts  for  50  years  which  we  will  have  to  move 
heaven  and  earth  to  get  the  companies  even  in  their  great  distress  to 
surrender  or  consent  to  modify. 

Xow,  what  is  at  stake?  If  the  fares  are  increased  on  the  surface 
lines,  where  the  companies  are  already  in  receivers'  hands,  without 
being  increased  on  the  subway,  it  looks  to  the  ordinary  man  that  it 
will  merely  drive  enough  traffic  to  the  rapid-transit  lines  so  that  the 
increase  will  not  do  the  surface  lines  any  good.  And  we  have  be- 
tween 30  and  40  separate  operating  street-railway  companies  in  New 
York.  They  are  combined  in  three  or  four  systems  under  common 
control,  under  these  holding-company  controls,  but  so  far  as  regula- 
tion is  concerned — ^the  power  of  the  commission — they  are  independ- 
ent operating  companies.  Now,  you  can  not  increase  rates  on  one 
that  is  in  a  position  of  competition  with  the  other  unless  you  increase 
rates  on  the  other,  without  dislocating  traffic  and  defeating  your  pur- 
pose. The  result  is  that  we  in  New  York,  so  far  as  I  can  see,  have 
before  us  as  a  preliminary  requirement  for  any  adequate  solution 
of  the  problem  getting  all  these  companies  and  all  this  property 
pooled  into  one,  operated  as  a  single  unit  and  financed  as  a  single 
unit.  We  never  in  the  world  can  induce  these  different  interests, 
some  of  them  having  a  sure  thing  and  some  of  them  just  hanging  on 
by  their  teeth,  to  come  voluntarily  into  a  combination  except  at  a 
prohibitive  price.  Again,  we  would  have  the  same  thing  over  again 
that  the  companies  in  Jersey  had  when  they  combined;  perhaps  not 
so  bad,  but  we  would  have  to  pay  an  enormous  price  to  get  the  sub- 
wa}',  for  example,  the  Interborough  Rapid  Transit  Co.,  to  surrender 
its  preferential  and  come  in  with  the  rest  of  the  companies.  And 
these  underlying  companies  that  have  these  guaranteed  leases,  rent- 
als, reaching  away  back  many  years — why  should  they  voluntarily 
surrender  their  rights  ? 

Now,  I  do  not  see  how — take  New  York — I  do  not  see  how  any 
solution  can  properly  be  worked  out  except  through  the  taking  of 
the  property  by  the  city  through  a  process — I  should  hope  it  would 
be  a  perfected  process — of  condemnation,  and  putting  the  proper- 
ties together. 

Commissioner  Gadsden.  Why  is  not  a  proper  solution  for  the  im- 
mediate present,  at  least,  of  that  particular  situation  an  increase  of 
fare,  as  elsewhere? 

Mr.  Wilcox.  Well,  of  course,  I  have  not  admitted  that  an  in- 
crease of  fare  anywhere  else  is  the  solution. 

Commissioner  Gadsdex.  I  said  for  the  present,  at  least.  I  am 
meeting  you  on  your  own  ground.  Why  is  not  the  temporary 
remedy  in  New  York  an  increase  in  fare,  as  it  apparently  is  else- 
v'here? 

Mr.  AViLcox.  If  you  increase  fares,  sec  what  you  would  have  to  do. 
You  would  have  to  be  absolutely  arbitrary.    You  have  30  or  35  op- 


(  it 


i! 

1 1  il 


if 


t . 


1236    PROCEEDINGS  01?  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

crating  companies,  operating  under  different  conditions  of  pros- 
perity or  aclversity.  In  order  to  have  an  increase  of  fare  work, 
you  need  to  make  it  uniform  to  all  these  companies  just  referred  to. 
That  is  contrary,  so  far  as  I  can  see,  to  the  powers  of  the  public- 
service  commission.  What  right  have  they  to  increase  fares  for 
everybody,  indiscriminately,  without  determining  the  value  of  the 
property  and  the  requirements  of  the  particular  line? 

AVe  are  confronted  with  the  prospect,  if  that  were  done,  of  the 
same  kind  of  trouble  that  they  nave  in  Boston,  so  far  as  I  can  see. 
Of  course,  I  do  not  know.  New  York  has  spent  $250,000,000  of 
its  own  money  that  it  has  put  behind  the  5-cent  fare  for  the  rapid- 
transit  lines  for  social  purposes.  Now,  to  give  that  up — to  say, 
we  give  that  all  up — New  York  has  broken  its  back,  practically,  to 
subsidize  the  5-cent  fare ;  it  has  assumed  a  burden  of  debt  that  has 
limited  its  possibility  of  carrying  on  other  improvements,  and  for 
many  j^ears  it  will  be  loaded  down  with  that  burden — it  involves 
a  revei-sal  of  policy  which  is  hard  to  justify  theoretically  and  ex- 
tremely hard  to  justify  politically. 

Commissioner  Gadsden.  It  would  ease  its  burden  and  mend  its 
back  by  making  its  own  securities  self-supporting,  and  they  would 
come  out  of  the  debt  limit. 

Mr.  Wilcox.  We  have  no  assurance  of  that. 

Commissioner  Gadsden.  But  I  say  if  it  did  it,  it  would  ease  its 
burden. 

Mr.  Wilcox.  I  know;  but  see:  First  the  company  comes  in  under 
this  famous  contract  of  ours,  the  companies  come  in  with  this  maxi- 
mum profit  prior.  Those  profits  represented  the  pi*ofits  of  conges- 
tion and  poor  service.  They  were  profits  that  were  abnormal, 
because  the  rapid-transit  lines  were  indecently  overcrowded.  And 
yet,  in  order  to  get  the  companies  to  cooperate,  the  city  and  the 
commission  felt  compelled  to  guarantee  those  profits.  Now,  before 
the  city  gets  any  benefit  from  an  increase  in  fares,  the  money  goes 
in  to  make  the  companies  absolutely  whole  for  those  preferentials, 
so  they  could  lose  nothing  by  reason  of  this  great  emergency  that 
has  come  upon  us.  Now,  wliether  there  would  be  sufficient,  with 
the  increasing  costs,  after  the  companies'  preferentials  are  met,  to 
meet  the  city  s  debt  charges,  no  one  knows.  If  it  works  out  the  way 
it  does  in  Boston,  the  chances  are  there  would  not  be  and  we  would 
have  our  trouble  for  our  pains. 

Commissioner  Gadsden.  I  do  not  want  to  prolong  my  discussion, 
but  my  reading  of  the  newspapers  indicated  to  me  that  the  Inter- 
borough  had  offered  to  give  the  city  1  cent  of  the  increase  so  that • 

Mr.  Wilcox.  I  believe  the  Interborough  did  say  that  1  cent  of 
the  increase  could  be  applied  to  the  city's  interest  and,  of  course,  if 
that  arrangement  were  made,  to  that  extent  it  would  be  so. 

Mr.  Warren.  AVell,  Dr.  Wilcox,  I  do  not  want  to  interrupt  you, 
but  do  not  your  figures  in  Boston  show  that  a  very  substantial  in- 
crease in  revenue  did  result  on  the  Boston  Elevated  lines  from  the 
increased  rates? 

Mr.  Wilcox.  Oh,  yes. 

Mr.  Warren.  In  other  words  it  would  not 

Mr.  Wilcox.  Oh,  yes;  there  is  a  considerable  increase  in  revenue, 
but  it  has  not  been  able  thus  far  to  keep  up  with  the  increase  in 
cost  of  service  under  the  Boston  act. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1237 

Mr.  Warren.  But  they  have  been  adding,  I  understand,  a  couple 
of  million  dollars  a  year  for  depreciation? 

Mr.  Wilcox.  True. 

Mr.  Warren.  And  4  per  cent  on  all  the  depreciating  elements? 

Mr.  Wilcox.  Yes. 

Mr.  Warren.  And  they  have  been  maintaining  their  property? 

Mr.  Wilcox.  Yes. 

Mr.  Warren.  Some  of  which  I  am  afraid  few  street  railways  else- 
where have  been  doing. 

Mr.  Wilcox.  It  may  be  that  ultimately  the  Boston  scheme  will 
work  out  as  the  trustees  hope,  so  that  they  may  be  able  to  work  out 
at  some  rate  or  other.  But  putting  a  10-cent  fare  into  effect  with 
a  $5,000,000  deficit  for  the  year  behind  you  and  with  the  cost  of 
service  the  last  month  of  that  year  being  10  and  a  fraction  cents, 
and  the  certainty  that  when  the  10-c«nt  fare  goes  into  effect  the. 
number  of  passengers  will  considerably  decrease,  does  not  look  like 
arriving  at  a  solution. 

Mr.  Warren.  Well,  f  course,  they  are  assuming  a  great  many 
burdens  which  formerly  were  not  assumed  by  the  company,  like 
this  $2,000,000  depreciation  and  a  very  large  amount  for  mainte- 
nance of  tracks.  You  can  not  go  about  Boston  without  seeing  more 
track-maintenance  work  going  on  this  summer  than  you  would  have 
seen  in  the  last  four  or  five  years. 

.  Mr.  Wilcox.  Well,  it  may  be  that  in  Boston,  under  the  public 
trustees,  the  property  will  be  rehabilitated  out  of  earnings  and 
turned  back  to  the  company  at  the  end  of  10  years  worth  a  great 
deal  more  than  it  was  when  they  took  it.  That  may  be;  I  do  not 
know.  But  unless  they  are  doing  that,  this  depreciation  is  an  essen- 
tial and  necessary  part  of  the  cost  of  service,  and  you  can  not  ignore 
it  without  getting  into  trouble  in  the  long  run. 

Now  Mr.  Gadsden,  I  believe,  said  that  he  would  not  let  me  off 
without  a  solution. 

Commissioner  Gadsden.  A  solution;  yes,  sir. 

Mr.  Wilcox.  Well,  I  have  got  a  number  of  things  noted  down  here 
that  should  be  done  and  should  not  be  done.     I  think 

Commissioner  Meeker.  Are  you  ready  to  present  your  solution 
now?     Have  you  got  to  that  point?  . 

Mr.  Wilcox.  Well,  I  do  not  know  really  whether  it  is  a  solution 
or  not.  I  think  that  a  declaration  should  be  made,  to  clear  the  air, 
that  public  ownership  and  operation  by  municipal  authority  where 
practicable  and  otherwise  by  district  or  State  authorities  is  the  ulti- 
mate public  policy  to  be  inaugurated  as  speedily  as  possible  undej* 
proper  conditions. 

That  the  enactment  in  all  the  States  of  the  necessary  constitu- 
tional amendments  and  statutes  conferring  powers  for  municipal 
ownership  and  operation  upon  the  municipalities  and  providing  for 
the  establishment  of  the  necessary  public-utility  districts  where 
municipal  operation  is  impracticable  diould  be  proceeded  with. 

That  the  enactment  of  the  necessary  constitutional  amendments 
or  statutes  putting  the  municipalities  in  a  positiop  to  utilize  their 
own  credit  as  well  as  the  security  of  the  transit  property  and  the 
transit  revenues  as  far  as  necessary  for  the  purchase  and  construc- 
tion of  the  transit  lines  should  be  put  througli. 


''  \ 


1238    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

In  that  connection,  we  have  the  illustration  of  the  way  in  which 
the  city  of  Seattle  was  enabled  to  take  hold  of  the  property  and 
take  over  the  local  lines  by  the  use  of  the  AVashington  law — which 
is  peculiar  to  Washington  and  one  or  two  other  States  in  the  north- 
west— which  permits,  in  the  case  of  the  acquisition  by  a  municipalr 
ity  of  a  public  utility,  the  issuance  of  bonds  outside  of  the  debt 
limit,  which  are  secured  not  on  the  city's  credit  and  not  on  the  prop- 
erty of  the  utility  but  on  the  revenues  of  the  utility.  The  return 
upon  the  investment — that  is,  the  bond  interest — is  made  a  first  lien 
upon  the  gross  earnings,  and  the  usual  j)rocess  or  way  of  dividing 
the  gross  earnings  is  reversed.  The  city  must  take  out  so  much 
Avhich  is  sufficient  to  pay  the  bond  interest,  and  pay  it,  and  then  if 
there  is  a  deficiency  it  has  to  make  it  up  out  of  taxes.  Now,  that 
has  been  passed  upon  by  the  Washington  State  Supreme  Court  and 
held  to  be  constitutional,  although  the  provision  limiting  the  debt 
in  Washington  is  in  general  similar  to  that  in  New  York  and  some 
other  States. 

Commissioner  Beall.  Did  you  say  make  up  any  deficit  from  op- 
eration out  of  taxes  ? 

Mr.  Wilcox.  If  necessan^. 

Commissioner  Beall.  Well,  are  you  sure  that  applies  to  Seattle? 

Mr.  Wilcox.  Yes. 

Commissioner  Beall.  I  do  not  think  it  does.  I  think  there  is  a 
question  on  that. 

Mr.  Wilcox.  I  Avent  into  it  very  carefully. 

Commissioner  Beall.  I  do  not  think  you  can  sell  those  bonds 
to-day. 

Mr.  Wilcox.  Well,  perhaps  you  can  not  sell  them,  but  the  com- 
pany who  oAvned  the  property  took  them  in  purchase. 

Commissioner  Beall.  I  know  they  did,  but  I  do  not  think  the 
company  could  sell  them. 

Mr.  Wilcox.  Well,  perhaps  they  could  not,  but  they  get  their  5 
jjer  cent,  though.  The  Supreme  Court  of  the  State  of  Washington 
passed  upon  that  very  issue  and  upheld  the  plan. 

Commissioner  Beall.  Well,  to  make  it  a  little  clearer,  regardless 
of  what  occurred  there,  you  would  favor,  in  case  the  revenue  of 
the  company  did  not  suffice,  that  then  the  city  would  have  to  levy 
taxes  to  make  good  that  deficit?- 

Mr.  Wilcox.  Oh,  certainly. 

Commissioner  Beall.  I  am  trying  to  get  at  vour  plan. 

Mr.  Wilcox.  Yes.  I  do  not  mean  to  say  that  I  favor  this  plan 
as  opposed  to  the  plan  of  the  use  of  the  city's  general  credit,  but  I 
do  say  that  this  plan  may  be  usable  in  States  where  it  is  imprac- 
ticable to  get  constitutional  provisions  changed. 

Mr.  Warrex.  But  in  either  case  you  would  expect  the  city  to  stand 
behind  the  bonds  ? 

Mr.  Wilcox.  Certainly.  The  enactment  of  a  public-utility  con- 
demnation law  or  laws  that  will  enable  a  municipality  or  a  public- 
utility  district  or  the  State  to  acquire  existing  transit  lines  at  a 
price  fixed  by  an  intelligent  tribunal  upon  the  submission  of  evi- 
dence by  either  or  both  parties,  the  award  to  be  based  upon  the  fair 
value  oi  the  company's  interest  in  the  property,  due  concideration 
being  given  to  the  effect  of  francliise  obligations,  should  be  enacted. 


u 


proceedings  of  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1239 

I  consider  that  very  important  because,  frankly,  from  the  public 
point  of  view,  the  people  are  very  much  averse  to  condemnation 
proceedings,  because  the  results  of  condemnation  proceedings  in  tak- 
ing private  lands  for  public  purposes  have  been  very  disappointing 
to  the  public.  That,  I  think,  is  based  upon  the  idea,  or  has  resulted 
from  the  idea,  that  private  property  taken  away  from  an  individual 
against  his  will  brings  a  situation  where  every  doubt  should  be  re- 
solved in  his  favor;  and  if  you  do  not  know  exactly,  if  there  is  a 
dispute  in  the  evidence  as  to  what  the  land  is  worth,  give  him  the 
benefit  of  the  doubt.  The  public  is  taking  it  away  from  Jiim.  Now, 
that  presumption,  I  think,  is  almost  universal ;  it  is  almost  a  matter 
of  law  in  ordinary  condemnation  proceedings.  Now,  if  it  is  possible 
to  work  out  a  public-utility  condemnation  law  which  would  change 
that  presumption,  I  think  it  should  be  done.  I  do  not  believe  that 
the  presumption  is  a  legitimate  one  in  the  taking  of  public-utility 
property  to  be  continued  in  public-utility  service.  It  is  already 
affected  with  a  public  interest;  it  is  devoted  to  public  service.  For 
the  State  or  the  city  as  a  matter  of  public  policy  to  take  that  prop- 
erty and  continue  it  in  that  same  service  through  a  direct  agency 
rather  than  tlirough  private  parties  does  not  legitimately  involve 
the  necessity  of  giving  the  benefit  of  the  doubt  to  the  private  owner 
and  paying  him  more  than  the  ordinary  fair  price. 

Commissioner  Gadsden.  Do  you  not  think  that  the  city  ought  to 
be  required  to  pay  that  price  upon  condemnation  and  not  have  the 
election  to  take  it  or  leave  it  ? 

Mr.  Wilcox.  I  think  that  when  the  city  has  determined  its  policy 
as  to  the  acquisition  of  property  and  a  reasonable  method  of  de- 
termining the  value  has  been  fixed  the  proceeding  ought  to  go 
through.  I  would  be  very  careful  from  a  public  point  of  view  and 
the  city's  point  of  view  about  getting  the  right  procedure  and  about 
submitting  the  right  evidence.  But  the  result,  I  think,  ought  to 
stick. 

Mr.  Warren.  But  you  would  provide  that  in  a  State  law? 

Mr.  Wilcox.  Oh,  yes. 

Mr.  Wakren.  Applicable  to  all  places  within  the  jurisdiction? 

Mr.  Wilcox.  Yes. 

Commissioner  Meeker.  Would  not  there  be  danger  of  the  munici- 
pality getting  stung  under  this  law  as  they  have  so  frequently  been 
stung  under  the  present  condemnation  law  ? 

Mr.  Wilcox.  Well,  of  course,  there  is  always  danger ;  there  is 
great  danger  if  you  enter,  or  try  to  enter,  into  an  agreement,  that  you 
may  get  overreached  and  stung.  I  do  not  know  how  far  it  would  be 
possible  to  go,  but  I  would  like  to  see  this  condemnation  law  go  some- 
what into  the  rules  for  the  establishment  of  value.  The  courts 
might  not  stand  for  it,  but  I  think  that  calling  attention  to  certain 
things  in  the  condemnation  law  will  at  least  put  the  cities  and  the 
attorneys  representing  their  interests  on  their  guard,  so  that  the 
proper  evidence  would  be  presented  before  the  condemnation  com- 
mission or  tlie  public-service  commission,  as  the  case  lasLy  be. 

I  mean  this,  for  example:  While  I  was  deputy  commissioner  of 
water  supph^  we  Avere  looking  into  the  value  of  certain  private 
water  companies  with  respect  to  the  possibility  of  reducing  rates 
and  also  with  respect  to  the  possibility  of  taking  over  their  property. 


1 


1240    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Now,  one  of  these  companies  had  a  lot  of  land  which  was  in  the  city. 
The  community  had  been  growing  up  around  it;  it  was  becoming 
less  and  less  valuable  all  the  time  for  water  purposes  and  more  and 
more  valuable  all  the  time  for  other  purposes.  Now,  I  think  public- 
utility  property  that  is  being  condemned  should  be  condemned  on 
the  theory  that  it  is  devoted  to  public  service  and  that  the  company 
is  not  free  to  release  it  from  public  service  and  sell  it  for  something 
else,  because  so  long  as  it  is  needed  for  that  service  it  is  bound  to 
]ye  used  for  that  service,  and  therefore  the  property  is  subject  to  the 
obligations  and  disabilities  of  property  so  used  and  is  not  worth 
as  much  as  it  would  be  if  the  owners  were  free  to  dispose  of  it  for 
any  purpose. 

Now,  I  believe  that  that  principle — it  might  not  be  of  very  great 
importance  in  connection  with  street  railways  generally — but  I  be- 
lieve that  principle  could  be  applied  to  condemnation  of  public  prop- 
erty and  that  it  would  tend  to  keep  the  valuation  from  being,  from 
the'  public  point  of  view  at  least,  what  would  seem  to  be  excessive. 

Mr.  Warren.  Your  plan,  of  course,  would  not  preclude  the  pub- 
lic agency,  whatever  it  was,  from  purchasing  by  negotiation  before 
it  resorted  to  this  condemnation  proceeding? 

Mr.  Wilcox.  No;  I  think,  however,  as  I  will  state  later — I  be- 
lieve that  any  contract  for  purchase  ought  to  be  subject  to  the  ap- 
pi-oval  of  the  State  commission,  because  sometimes  parties  that 
are  nominally  on  opposite  sides  of  the  table  are  really  on  the  same 
side  of  the  table  and  they  reach  agreements  which  need  to  be  viseed. 

Now,  with  respect  to  public-service  commissions:  Of  course,  they 
are  now  existing  in  nearly  all  the  States,  although  their  jurisdiction 
is  not  uniform.  I  think  that  wherever  it  is  still  necessary,  legisla- 
tion should  be  enacted  creating  State  public  service  commissions 
wnth  jurisdiction  over  street  and  interurban  railways  with  respect 
to  capitalization,  books  and  accounts,  and  interurban  service  and 
rates,  and  equipped  with  facilities  for  making  valuations  and  advis- 
ing municipalities  on  all  matters  relating  to  public-utility  operations 
or  control.  These  commissions  should  have  limited  jurisdiction  over 
municipally  owned  utilities  extending  to  matters  of  accounting  and 
reports  and  extra  territorial  operations.  That  is  repeating  some- 
what what  I  said  before. 

Legislation  should  be  enacted,  wherever  still  necessary,  authoriz- 
ing the  municipalities  to  enter  into  service-at-cost  contracts  with 
street-railway  companies,  with  the  right  to  purchase  at  a  price  fixed 
in  the  contract  and  approved  bv  the  State  commission  and  with  pro- 
vision for  the  amortization  of  the  purchase  price  out  of  eammgs 
wherever  desired,  and  with  the  option  on  the  part  of  the  municipal- 
ity to  prescribe  the  rates  of  fare  within  its  limits  and  make  up  out 
of  taxes  or  otherwise  any  deficits  occurring  under  such  rates  and 
certified  by  the  State  commission  as  actual  and  necessary ;  all  service- 
at-cost  contracts  to  be  subject  to  approval  by  the  commission. 

In  that  connection, '  the  question  was  asked  me  just  before  recess 
about  the  function  of  the  State  commissions  under  a  service-at-cost 
plan  with  respect  to  fixing  rates.  Perhaps  I  did  not  bring  out  clearly 
enough  this  fact :  The  theory  of  the  service-at-cost  plan  is  that  the 
amount  of  revenues  required  is  fixed  automatically,  or  nearly  so. 
The  principles  are  laid  down,  and  it  is  merely  a  question  of  applying 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1241 ' 

figures  to  determine  how  much  revenues  are  required.  There  would 
be,  however,  in  minor  matters,  in  the  interpretation  of  the  contract, 
questions  which  would  have  to  be  submitted  to  arbitration  or  to  an 
impartial  body.  I  think  it  is  quite  proper  that  that  body  should  be 
the  State  commission,  properly  organized. 

I  think  that  the  zoning  plan  on  street-surface  lines  might  well  be 
adopted  where  it  is  impracticable  to  continue  operation  at  a  5-cent 
fare,  not  on  the  basis  that  has  been  suggested  in  most  American 
zoning  plans,  of  the  5-cent  fare  or  6  or  7-cent  fare  as  a  minimum, 
but  on  the  basis  of  a  lower  minimum  for  a  shorter  ride,  so  that  we 
get  the  benefit  of  the  British  plan  of  developing  short-haul  traffic 
and  filling  up  the  cars  in  the  off-peak  hours.  Of  course,  the  rush- 
hour  traffic  is  most  expensive,  because  the  cars  that  are  used  then 
have  to  be  run  at  other  times  only  partly  full,  or  not  run  at  all. 
And  as  I  understand  the  results  of  the  British  fare  system,  one  of 
the  most  striking  results  has  been  the  leveling  up  of  the  load  so  that 
the  peaks — the  rush-hour  peaks — are  by  no  means  so  sharp  as  they 
are  in  this  country. 

Commissioner  Meeker.  Have  you  any  statistics  showing  the  num- 
ber of  cars  operated  at  different  hours  on  the  British  systems  and 
the  number  of  passengers  carried? 

Mr.  Wilcox.  I  have  not  any  available  now.  The  number  of  pas- 
sengers carried  per  car-mile  indicates  in  a  general  way. 

Commissioner  Sweet.  That  is  in  this  exhibit  ? 

Mr.  Wilcox.  Yes ;  it  is  given  there. 

Commissioner  Meeker.  However,  that  does  not  give  the  distribu- 
tion ;  and  if  you  could  get  that  material  it  would  be  very  useful. 

Mr.  Wilcox.  I  am  not  sure,  but  if  you  had  Mr.  Jackson,  who  has 
made  a  special  study  on  that,  he  could  give  you  all  that  information 
and  would  be  glad  to  do  so. 

Commissioner  Sweet.  Mr.  Jackson  is  coming,  is  he  not  ? 

The  Chairman.  Yes ;  Mr.  Jackson  is  going  to  be  here. 

Mr.  Wilcox.  Well,  he  can  give  you  that  much  better  than  I  can. 

The  Chairman.  He  has  accepted  the  invitation,  has  he  not? 

Mr.  Ogburn.  I  was  not  able  to  reach  him. 

Mr.  Wilcox.  He  told  me  that  he  would  be  glad  to  come  down  if 
you  wished  him. 

The  Chairman.  We  are  anxious  to  hear  him.  If  it  is  convenient 
we  will  adjourn  now  until  8  o'clock  to-night. 

(Whereupon,  at  5  o'clock  p.  m.,  an  adjournment  was  taken  until 
8  o'clock  p.  m.) 

evening  session. 

The  Chairman.  You  may  proceed,  Doctor. 

STATEMENT  OF  MR.  DELOS  F.  WILCOX— Continued. 

Mr.  Wilcox.  I  think  I  had  just  reached  a  point  where  I  was 
going  to  suggest  that  wherever  a  5-cent  fare  proves  to  be  inadequate 
a  zone  system  be  installed  with  a  lower  fare  for  the  initial  zone, 
for  the  purpose  of  developing  the  short-haul  business  and  filling 
up  the  cars  during  the  daytime  when  they  otherwise  run  pretty 
nearly  empty. 


1242    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

In  cities  having  rapid-transit  lines,  sucfi  as  New  York  and,  per- 
haps, some  other  cities,  I  think  it  would  be  advisable  to  maintain 
the  uniform  fare  for  the  rapid-transit  lines  and  develop- the  zone 
systems  on  the  surface  lines  for  the  purpose  of  taking  care  of  the 
short-haul  traffic  and  feeding  the  rapid-transit  lines.  Of  course, 
tliat  is  a  problem  that  has  got  to  be  worked  out  to  a  certain  extent 
in  each  community,  on  account  of  its  characteristics  and  the  traffic 
cliaracteristics. 

I  think  that  motor-bus  operation  should  be  installed  where  prac- 
ticable to  supplement  and  feed  the  street-car  lines,  but  not  to  com- 
pete with  them. 

The  Chairman.  To  be  a  part  of  the  system  ? 

Mr.  Wilcox.  To  be  a  part  of  the  system ;  yes. 

The  Chairman.  Is  that  tried  at  any  place  in  this  country  ? 

Mr.  Wilcox.  San  Francisco  is  doing  it  on  its  municipal  lines. 

Commissioner  Gadsden.  Mr.  Bradley  testified  that  Stone  &  Web- 
ster were  doing  it  on  several  lines. 

Mr.  Wilcox.  And  a  good  many  of  the  British  cities  are  doing  it 
wliere  the  traffic  is  not  dense  enough  to  warrant  the  cost  of  installing 
permanent  tracks. 

The  Chair^ian.  Does  the  use  of  the  bus  by  the  systems  prevent 
conii^etition  from  other  jitneys? 

Mr.  Wilcox.  Xo;  because  the  jitneys  would  not  render  service 
at  the  points  where  bus  lines  that  are  supplementary  would  run.  The 
jitneys  ordinarily  compete  for  the  dense  traffic,  while  these  bus 
lines' would  be  supplementary  for  the  purpose  of  taking  the  thin 
traffic,  the  outlying  traffic. 

I  know  no  way  of  escaping  from  the  effects  of  the  jitney  competi- 
tion, except  either  through  prohibition  or  through  the  zoning  plan 
at  so  low  a  fare  that  the  jitneys  can  not  thrive  on  the  competition. 

Commissioner  Gadsden.  Don't  you  think  proper  regulation  would 
put  most  of  them  out  of  business?  If  they  were  made  public  car- 
riers, would  not  that  be  effective? 

Mr.  Wilcox.  It  is  very  difficult,  from  the  point  of  view  of  public 
sentiment— it  certainly  would  be  in  Newark,  and  I  judge  it  is  in 
Massachusetts— to  put  regulations  on  the  jitneys  that  will  be  severe 
enough  to  destroy  the  competition;  and  it  becomes  more  and  more 
difficult  if  the  street-railway  rates  are  increased,  because  the  people 
will  not  stand  for  it.  If  the  jitneys  are  willing  to  carry  them  for 
a  nickel  why  should  they  be  driven  out  and  the  riders  be  com- 
pelled to  pay  ()  or  7  or  8  or  10  cents  to  the  street-car  ?  That  is  what 
they  will  say.  And  no  regulation  is  of  any  account  unless  it  can 
be  supported  by  the  community. 

Commissioner  Gadsden.  But  you  could  require  them,  for  instance, 
to  operate  18  hours  a  day,  like  a  street  car,  and  to  operate  during 
bad  weather  as  well  as  good,  could  you  not  ? 

Mr.  Wilcox.  That  could  be  done;  but  even  that,  if  it  resulted  in 
really  decreasing  the  service  that  they  rendered,  by  driving  them 
out-— I  do  not  believe  that  communities  in  a  place  like  Newark  would 

stand  for  it. 

Commissioner  Gadsden.  But  we  are  discussing  now  what  they 

ought  to  stand  for;  what  is  good,  in  the  ultimate  analysis,  lor  the 

community. 


PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION.    1243 

Mr.  AViLcox.  So  far  as  that  is  concerned,  I  do  not  believe  in  com- 
peting systems  of  local  transportation,  in  the  sense  of  a  street-rail- 
way system  and  a  jitney  system  competing  with  it.  I  believe  that 
the*^  local  system  of  transportation,  public  common-carrier  system, 
.should  be  operated  as  a  unit  and  coordinated  and  under  one  direc- 
tion, one  supervision,  and  that  the  whole  financial  returns  should  be 
})ooled,  and  proper  service  rendered. 

Commissioner  Gadsden.  Under  your  suggestion  of  municipal 
ownership,  you  would  not  think  the  city  would  permit  a  jitney  to 
compete  with  its  own  system? 

Mr.  Wilcox.  I  do  not  think  they  would.  They  probably  would 
not.  They  would  introduce  bus  systems  to  supplement  their  serv- 
ice, likeh%  and  they  simply  would  not  license  jitneys* to  compet<^  with 
them;  and  I  think  that  is  proper.  But  you  would  have  a  i)retty 
hard  time  getting  a  situation  like  Newark,  for  example.  I  know  a 
year  ago  I  made  a  traffic  study;  a  year  ago  last  winter  or  spring,  I 
made  something  of  a  traffic  stud}^  of  Newark,  and  I  had  made 
a  similar  one  five  yeai-s  before,  when  the  jitneys  were  not  there, 
and  it  was  simply  astonishing  how  they  had  developed;  and  y.iien 
we  had  our  hearings  in  the  emergency  case  last  year,  Mr.  Dan  forth, 
superintendent  of  the  Public  ^rvice  Railway,  testified  that  the 
jitnevs  during  the  rush  hour  were  a  godsend  to  the  Public  Service 
ilailway,  because  the  Public  Service  had  not  been  able  to  provide 
the  means  to  take  care  of  the  traffic.  But  my  obser\'ations  and 
counts  on  the  street  indicated  that  the  jitneys  were  carrying  a  larger 
l^roportion  of  the  nonrush  traffic  than  that  of  the  rush-hour  traffic; 
and  that  in  every  sense  they  were  a  deadly  competitor  of  the  street 
railway  of  Newark;  and  now,  since  the  T-cent  fare  went  into  effect, 
the  jitney  traffic  has  increased,  and  the  Public  Service  traffic  has 
decreased,  so  that  studies  which  Mr.  Danforth  made  in  March  in- 
dicated that  the  jitneys  in  New  Jersey,  in  Public  Service  territory, 
the  entire  territory,  were  taking  at  the  rate  of  about  80,000,000 
passengers  a  year,  as  compared  with  four  times  as  many  taken  by 
the  Public  Service.  In  other  words,  they  are  taking  20  per  cent  of 
the  total  traffic,  and  about  $4,000,000,  according  to  Mr.  Danforth's 
advices. 

In  the  city  of  Newark  itself,  where  the  jitneys  are  licensed  and 
have  to  report  their  receipts  and  pay  a  5  per  cent  tax  on  their  re-  . 
ceipts  every  week,  or  every  month,  the  returns  show  that  from  May, 

1918,  when  the  5-cent  Public  Service  fare  was  in  effect,  to  May, 

1919,  when  the  7-cent  fare  was  in  effect,  the  jitney  traffic  reported 
had  increased  107  per  cent,  while  the  Public  Service  Railway  traffic 
had  fallen  off  7  per  cent,  and  to  the  best  of  my  information,  the 
normal  increase  of  the  Public  Service  traffic  during  that  period 
would  have  been  very  nearly  10  per  cent,  because  1918  was  about 
on  the  level  of  1917,  and  1919  has  shown  a  big  jump  generally. 

So  the  situation  is  certainly  a  deadly  one  for  the  street  railways 
in  Newark,  and  the  same  is  true  to  a  large  extent  in  practically  all 
the  cities  in  New  Jersey. 

Commissioner  Gadsden.  Would  you  mind  giving  us  your  per- 
sonal views  as  to  the  relative  merits  in  the  future  of  that  competition? 
Have  you  any  conclusion  on  that? 

Mr.  Wilcox.  The  two  methods  of  transportation  can  not  live 
together.    I  do  not  think  that  the  bus  systems  can  be  adequate  to 


it 


'■i\ 


1244    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


furnish  local-transpoiiation  service  in  large  cities.  It  may  be  that  in 
cities  below  a  hundred  thousand  the  bus  system,  if  the  street  railways 
were  out  of  existence  entirely,  might  be  developed  reasonably  to 
supply  the  service,  and  it  might  be  that  if,  as  I  say,  there  were  no 
street  railways,  the  system  of  buses  would  be  established,  and  the 
street  railways  never  be  built  now.    I  am  not  sure  of  that. 

In  the  larger  cities,  however,  I  think  there  is  no  doubt  that  we  have 
got  to  have  the  street  railway  as  a  permanent  and  primary  factor  in 
the  distribution  of  traffic. 

My  next  suggestion  is  getting  rather  stale,  now — namely,  that 
lighter  cars  and  more  frequent  service  should  be  adopted  wherever 
jnacticable,  and  that  the  street  railways  should  be  operated  so  as  to 
furnish  cheap  and  convenient  service,  and  carry  as  many  people  as 
want  to  ride. 

Public-utility  commissions  ought,  I  think,  to  adopt  the  rule,  in  all 
i-ate  cases,  that  where  the  fair  present  value  of  the  property  is  no 
greater  than  the  par  value  of  the  bonds  and  other  obligations  out- 
standing upon  which  fixed  charges  are  paid,  the  rate  of  return  allowed 
upon  the  investment  shall  be  no  greater  than  the  rate  of  interest  paid 
on  such  bonds,  and  other  obligations,  to  the  end  that  stockholders 
having  no  capital  investment  represented  in  the  present  value  of  the 
property  shall  have  no  share  in  the  return  on  capital. 

I  think  that  is  important  for  this  reason :  We  have,  as  I  said  to- 
day, a  good  many  cases  of  gross  overcapitalization.  The  men  who  are 
now  in  control  come  forward  and  try  to  save  their  positions  in  two 
ways:  First,  by  finding  all  kinds  of  imaginary  value,  making  the 
property  appear  to  be  worth  a  great  deal  more  than  it  is;  that  is,  that 
IS  my  opinion,  from  the  pubRc  point  of  view — ^trying  to  make  it 
appear  to  be  worth  a  great  deal  more  than  it  is.  That,  of  course,  will 
tend,  if  they  can  get  away  with  it,  to  cover  up  the  overcapitalization. 
But  if  that  does  not  go,  they  say:  "Give  us  an  8  per  cent  return;" 
and  an  8  per  cent  return  upon  $50,000,000,  that  is  represented  by 
$50,000,000  of  bonds,  upon  which  interest  is  paid  at  5,  or  at  the  out- 
side 6  per  cent,  leaves  a  margin  of  three-eighths  or  one-fourth,  as  the 
case  may  be,  of  the  return  upon  the  investment  to  be  capitalized,  or  to 
be  taken  by  the  stockholders  as  an  equity  which,  from  the  capital 
standpoint,  does  not  exist.  I  do  not  think  that  where  the  par  value 
of  bonds,  obligations  which  must  ultimately  be  met,  is  equal  to  the 
full  value  of  the  property,  the  stockholders  or  the  managers 
should  be  allowed  anything  for  themselves  in  the  form  of  a  return 
upon  capital.  They  have  no  capital  interest  in  the  industry^  and 
their  return  or  reward  ought  to  be  just  like  that  of  any  other  man- 
agers— ^the  salaries  they  get,  or,  if  you  adopt  the  system  of  some 
scheme  of  bonus  for  good  management,  that  bonus,  or  that  reward, 
should  not  attach  to  capital  as  such,  but  to  management  as  such.  I 
think  that  should  be  recognized  clearly,  because  the  trouble,  when  we 
try  to  come  to  an  agreement  on  these  public-utility  matters,  is  that 
the  companies  are  all  the  time  trying  to  put  something  over  on  the 
public,  and  the  public  in  some  cases,  is  trying  to  put  something  over 
on  the  utility ;  but  to  take  the  plan  and  say :  "  All  right,  we  agree  to 
I  hat,''  and  then  to  fix  it  so  that  the  result  is  not  the  result  that  was 
intended,  does  not  promote  a  final  solution,  and  does  not  promote  good 
relations. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1245 

Mr.  Warren.  What  would  you  do,  Doctor,  if  the  entire  investment 
happened  to  be  represented  by  stock,  without  any  bonds,  as  occa- 
sionally does  happen  ?    I  mean,  as  regards  the  amount  of  return. 

Mr.  Wilcox.  Well,  I  will  tell  you.  I  think  that  under  the  plan 
that  I  would  favor,  of  security  of  the  investment,  6  jyer  cent  is  suf- 
ficient, by  and  large.  Of  course,  temporarily,  you  may  have  to  allow 
a  little  more  for  present  capital ;  but  I  have  no  doubt  that  6  per  cent 
is  sufficient  on  the  basis  of  complete  security,  both  of  the  investment 
and  of  the  return  upon  it. 

Commissioner  Beall.  If  I  may  ask  you  a  question— I  suppose  you 
know — if  I  understand  your  theory  coi*rectly,  on  that  basis  you  could 
not  raise  any  money  for  any  street  railway.  I  am  talking  about  a 
private  company — riot  where  it  is  owned  by  the  city.  You  could  not 
get  any  money  on  that  basis. 

Mr.  Wilcox.  You  mean  just  at  the  present  moment? 

Commissioner  Beall.  No  ;  I  mean  at  any  time. 

Mr.  Wilcox.  Oh,  yes ;  you  could. 

Commissioner  Beall.  No;  you  could  not. 

Mr.  Wilcox.  Oh,  yes;  you  could.  Note  what  I  said.  You  are  for- 
getting the  conditions  that  I  laid  down. 

Commissioner  Beai>l.  I  say,  if  I  understand  your  conditions. 

Mr.  Wilcox.  I  laid  down  the  condition  that  the  investment  in  the 
property  should  be  absolutely  secured,  that  the  property  representing 
the  investment  should  not  be  allowed  to  deteriorate,  should  be  prop- 
erly maintained;  that  the  franchise  should  not  be  permitted  to  ex- 
pire, so  that  the  property  could  not  go  on  serving  the  public  in  that 
use,  unless  the  property  was  taken,  unless  it  was  paid  for,  and  the 
money  paid  back ;  and  that  the  return,  the  fixed  return — now,  we  are 
talking  about  6  per  cent,  from  year  to  year — should  be  guaranteed. 

I  say  a  scheme  which  would  provide  the  necessary  revenues,  either 
from  rates  or  from  taxes  or  from  some  other  source;  and  there  you 
have  an  investment  where  the  investment  itself  is  secure,  is  not  going 
to  be  disturbed,  and  you  can  either  get  your  money  back  or  continue 
it  permanently. 

Commissioner  Beall.  But  you  can  not  raise  all  your  money  on  6 
per  cent.    I  don't  know  whether  you  understand  that  or  not. 

Mr.  Wilcox.  Well,  I  don't  know 

Commissioner  Beall.  No  ;  you  can  not.  Nobody  in  the  country  has 
handled  more  of  that  stuff  than  I  have,  for  30  years,  and 

Mr.  Wilcox.  But  you  have  never  had  such  a  proposition. 

Commissioner  Beall.  Well,  we  think  we  have  had  it. 

Mr.  Wilcox.  I  do  not  know  of  any  in  the  country.  Cleveland 
itself  is  not  such  a  proposition. 

Commissioner  Beall.  That  is  one  of  the  properties  that  I  have 
handled. 

Mr.  Wilcox.  Cleveland  itself  is  not  such  a  proposition,  because  in 
Cleveland  there  is  a  contingency ;  there  is  a  contingency  both  as  to 
the  security  of  the  investment  itself  at  the  end  of  the  time — ^the  city 
is  not  obligated  to  buy  it ;  it  is  not  obligated  to  renew  the  franchise. 
All  it  is  obligated  to  do  is  not  to  give  the  franchise  to  somebody  else 
unless  he  buys  it. 

Commissioner  Beall.  Yes. 

Mr.  Wilcox.  Now,  the  development  of  motor  buses,  of  under- 
ground transit  or  overhead  transit,  comes  along  and  makes  the  street 


1246    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAELWAYS  COMMISSION. 

railway  obsolete  or  Bufficiently  obsolete  so  tbat  no  company  is  going 
to  buy  that  property  at  that  price,  and  so  the  city  is  not  going  to 
buy  it  at  that  price — ^the  owners  of  the  property  have  no  final  secur- 
ity. I  admit  that  their  security  is  good,  but  it  is  not  as  good  as  what 
I  am  talking  about. 

Now,  on  tne  other  hand,  they  are  not  guaranteed  their  6  per  cent, 
because  there  is  a  limit  on  the  fare.  They  can  get  6  per  cent  if  they 
can  earn  it  within  that  limit  of  the  fare. 

Commissioner  Beall.  Let  me  ask  you  a  question :  You  know  wh^' 
the  Cleveland  railway  has  been  able,  up  to  this  time,  to  sell  their  0 
per  cent  stock  at  par  and  sometimes  a  little  over? 

Mr.  Wilcox.  I  do  not  know  that  I  do. 

Commissioner  Beall.  It  is  purely  an  artificial  condition.  It  is 
because  undel:  the  laws  of  Ohio  that  stock  is  legal  for  certain 
trustees  and  investors  free  of  taxes,  which  the  same  kind  of  a  prop- 
erty much  better  in  a  ^ood  many  other  States  would  not  be.  It  is 
just  like  certain  municipal  bonds  that  ai*e  legal  for  savings  banks  in 
certain  States,  and  that  gives  them  an  artificial  market,  which  i>er- 
haps  a  better  bond  has  not  got. 

What  I  am  trying  to  get  at  is:  Your  Cleveland  securities,  or 
stock,  which  I  have  never  handled  at  all — ^bonds,  would  not  sell 
where  it  does  as  a  purely  investment  proposition  in  the  general  mar- 
ket.   It  would  not  do  it. 

Mr.  Welcox.  I  did  not  know  that. 

Commissioner  Beall,  It  is  simply  due  to  artificial  conditions. 

Mr.  Wilcox.  But  you  can  take  the  New  York  subways.  That 
was  true  prior  to  the  war,  but  here  the  city  entered  into  a  proposi- 
tion, entered  into  an  agreement  with  these  companies  which  did  not 
give  these  companies  anything  like  as  good  a  guaranty,  as  it  has 
turned  out,  as  I  am  talking  about,  and  yet  Morgiin  &  Co,  furnished 
$165,000,000  at  G  per  cent  which  was  to  include  not  merely  the  rate 
of  interest  but  was  to  include  the  entire  amortization  of  that  prop- 
erty within  50  years  and  its  turning  back  to  the  city  without  the 
payment  of  a  cent. 

Xbey  made  a  mistake  in  estimating  what  the  subways  were  going 
to  do.    Of  course,  they  did  not  foresee  this  thing. 

Commissioner  Beall.  Nobody  foresaw  war  conditions.  That  is 
the  trouble. 

Mr.  Wilcox.  No.    They  did  not  foresee  that. 

As  far  a.s  I  can  see,  this  kind  of  a  proposition  that  I  am  talking 
about  is  practically  as  good  as  a  municipal  bond,  I  do  not  see  any 
real  difference. 

Commissioner  Beall.  The  subway  was  floated  largel}^  on  the 
strength  of  the  city's  investment.    That  is  what  put  it  over. 

Mr.  Wilcox.  True;  but  the  city's  investment  did  not  give  it  as 
good  a  security  as  what  I  am  talking  about. 

Conunissioner  Beall.  Well,  they  thought  it  did, 

Mr.  Warren.  As  I  undei^tand  it.  Doctor,  your  plan  would  be  a 
real  guamnty? 

Mr.  Wilcox.  Yes. 

Mr.  Warren.  You  say  0  per  cent,  with  a  real  guaranty? 

Mr.  Wilcox.  I  think  that  the  importance  of  the  street-railway 
business  is  such — it  is  u  public  function,  and  necessary  for  the  de- 


L 


proceedings  of  federal  electric  railways  commission.  1247 

velopment  of  cities — that  the  cities  can  afford  to  assume  the  risk  in- 
cidental to  the  investment,  carry  it;  I  do  not  think  they  can  afford 
to  let  anybody  else  do  it.  It  costs  them  too  much.  They  could  as- 
sume the  risk  and  pay  what  is  necessary  for  that  purpose,  and  it 
will  be  a  good  deal  less  than  what  they  have  to  pay  somebody  else  to 
assume  it. 

The  Chairman.  When  you  speak  of  assuming  the  risk,  you  mean 
municipal  ownership  ? 

Mr.  Wilcox.  I  mean  through  a  guaranty.  Municipal  ownership 
would  be  one  way,  but  not  necessaril}^  that. 

Commissioner  Beall.  How  would  you  enforce  that  guaranty,  if 
the  earnings  w^ere  not  sufficient?  You  mean  the  city  would,  itself, 
out  of  its  own  pocket 

Mr.  Wilcox.  That  is  what  I  said. 

Commissioner  Beal.  I  did  not  catch  that. 

Mr.  Wilcox.  I  said  a  service-at-cost  contract  which  would  pro- 
vide for  flexibility  of  revenues  sufficient  to  earn  the  fixed,  guaran- 
teed return  upon  the  investment ;  those  revenues  to  be  derived,  at  the 
option  of  the  city,  from  increases  in  fares  or,  if  the  city  preferred  to 
make  them  up  through  taxes  or  some  other  source,  it  could  do  it. 

Under  the  contract,  the  city  would  be  compelled  to  see  that  the 
revenues  were  produced,  and  that  the  company  got  its  money.  I  do 
not  think  that  the  public  generally  will  make  such  contracts,  because 
I  do  not  think  they  will  make  thein  with  private  companies.  I  think 
tlie  solution  is  public  ownership.  I  think  they  ought  to  have  the 
right  to  make  such  a  contract ;  and  if  they  did  make  such  a  contract 
the  company's  security  would  be  absolute — just  as  nearly  absolute 
as  you  can  get. 

Mr.  Warren.  That  is,  the  investors'  security  ? 

Mr.  Wilcox.  Yes. 

Commissioner  Beall.  That  is  making  it  practically  a  municipal 
obligation?  #      * 

Mr.  Wilcox.  It  certainly  is. 

Mr.  Warren.  How  does  that  differ  from  the  Boston  situation? 
The  Boston  Elevated  stock  does  not  sell  on  anything  like  a  G  per  cent 
basis  yet. 

Commissioner  Beall.  That  is  only  guaranteed  for  10  years. 

Mr.  Warren.  Yes.    You  think  that  would  make  a  difference  ? 

Mr.  Wilcox.  That  would  make  some  difference,  certainly. 

Mr.  AVarren.  It  does  not  seem  as  if  it  ought  to  make  as  much  dif- 
ference as  the  market  value  of  the  stock  is  selling  for — the  last  fig- 
ures I  recall  are  something  under  70,  with  a  5  per  cent  dividend  for, 
I  think,  three  years,  5^  for  two,  and  G  for  the  balance. 

Mr.  Wilcox.  Of  course,  it  may  be — I  am  not  much  of  a  financial 
expert — it  may  be  that  now,  when  capital  is  scarce,  when  it  has  been 
consumed  through  the  operations  of  the  war,  and  it  is  hard  to  get 
money,  it  may  be  that  temporarily  a  G  per  cent  rate  would  not  be 
sufficient  to  provide  that  money.  If  so,  then  the  people  who  are  hold- 
ing the  secm'ities  can  not  sell  them  at  par  at  that  time;  but  they  can 
keej)  them  and,  in  the  long  run  they  would  come  out  all  right. 

The  Chairman.  Do  you  mean.  Doctor,  that  you  believe  that  cities 
should  guarantee  a  return  to  a  privately  owned  and  privately  oper- 
ated street-car  system? 


1248    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1249 


Mr.  Wilcox.  I  believe  in  public  ownership  and  operation. 

The  Chairman.  I  know  you  believe  in  public  ownership,  but  a 
moment  ago  you  said  you  did  believe  the  city  should  have  the  riglit 
to  make  such  a  guaranty  for  a  private  company. 

Mr.  Wilcox.  I  say  I  believe  the  cities,  as  a  step  in  the  develop- 
ment of  an  ultimate  policy,  should  have  the  right,  subject  to  the  ap- 
proval of  the  State  commission,  to  enter  into  a  service-at-cost  con- 
tract with  the  street-railway  company;  I  would  not  permit  them  to 
enter  into  it  so  that  they  would  be  tied  up  hand  and  foot  and  not 
get  out  by  buying  the  property,  or  anything  of  that  sort;  but  I  would 
be  willing  that  the  cities  should  have  the  power,  subject  to  the  ap- 
l)roval  of  the  State  commission,  to  enter  into  just  such  a  contract  as 
I  have  mentioned. 

The  CnAiR3iAN.  That  the  guaranty  should  be  predicated  upon  a 
cost -of -service  plan? 

Mr.  Wilcox.  A  cost-of-service  plan,  undoubtedly;  and  coupled 
with  it  the  right — not  merely  the  barren,  nominal  right,  but  a  really 
fully-developed  right — with  all  the  financial  legislation  necessary, 
and  all  the  enabling  legislation  necessary,  so  that  the  city  can,  as 
a  matter  of  fact,  if  it  does  not  like  its  bargain,  take  the  property 
over.  I  do  not  care  anything  about  these  contracts  that  merely  say 
that  the  city  can  do  it  if  it  wants  to,  while  there  is  no  legislation 
that  enables  it,  practically,  to  adopt  the  plan,  and  legislation  which, 
when  it  tries  to  get  it,  may  be  blocked,  perhaps,  by  the  very  company 
that  the  city  has  made  a  contract  with,  because  the  company  may  not 
want  to  unload. 

I  think  that  municipal  contracts  limiting  rates  should  not  be  abro- 
gated until  the  value  of  the  property,  subject  to  the  limitations  of 
such  contracts,  has  been  fixed  and  a  reasonable  settlement  of  the 
capital  account  for  future  purchase  has  been  made. 

Of  course,  these  statements  I  make  are  quite  general,  and  all  of 
them  have  to  be  modified  to  a  certain  extent  in  applying  to  individual 
cases  and  when  you  ask  me  questions.  But  my  idea  there  is  this: 
The  street-railway  business  has  been  on  a  speculative  basis.  People 
came  in  and  got  their  franchises  and  went  out  and  treated  them  as 
property. 

If  we  wanted  to  buy  franchises,  to  buy  street-railway  property  a 
few  years  ago,  or  even  when  the  companies  came  in  and  wanted  a 
resettlement,  and  the  city  agreed  on  a  resettlement,  the  companies 
insisted  that  the  earning  power  of  those  franchises,  over  and  above 
the  physical  property,  should  be  capitalized,  paid  for  in  case  of  pur- 
chase, and  put  in  the  capital  account  in  case  of  resettlement. 

It  is  true,  even  in  Cleveland,  that  the  fag-end  franchises  that  had 
not  expired  in  1910  are  capitalized  and  in  the  value  now,  forever, 
unless  something  is  done  that  is  not  contemplated  in  the  contract. 

It  is  the  same  way  in  Chicago,  but  even  a  worse  case  was  Kansas 
City;  although  in  Kansas  City  they  made  some  provision  for  amor- 
tizing that  dead  capital  and  getting  it  out  ultimately,  if  the  earnings 
were  diffident. 

Now,  we  have  come  to  the  point  where  the  franchises  with  rate 
obligations  in  them  are  not  assets  but  liabilities;  and  I  do  not  think 
that  the  municipalities  ought  to  be  called  upon,  before  reaching  a 
definite  settlement  as  to  the  purchase  price,  to  abrogate  the  advan- 
tage which  they  hold  where  those  contracts  exist  with  definite  rate 


obligations  in  them.  If  ai  franchise  is  a  good  asset  to  sell  to  the  city 
when  times  are  good,  then  I  think  it  ought  to  be  a  good  liability  to 
sell  when  times  are  poor. 

We  talk  about  the  municipalities  being  easy.  We  criticize — ^the 
very  companies  and  the  very  people  who  are  opposed  to  municipal 
ownei*ship  tell  how  poorly  municipalities  are  run;  how  expensively 
they  are  run.  What  could  be  pooi-er  management  than  always  to 
take  the  short  end  of  the  bargain,  always  to  give  up  the  rights  that 
you  have  to  the  companies  with  whom  you  have  contracted,  while  if 
they  have  any  rights  they  are  enforced  to  the  letter? 

Of  course,  these  things  have  to  be  tempered  somewhat  in  actual 
settlement,  but  I  do  not  think  it  is  a  good  thing  to  break  these 
municipal  contracts  without  fii*st  having  a  resettlement  and  an 
establishment  of  the  value  of  the  property  as  a  basis  for  future  pur- 
chase. 

The  Chairman.  What  should  be  the  rule  in  a  case  of  this  kind: 
A  franchise  has  lived  its  life,  and  the  plant  is  operating  simply  as  a 
licensee.  It  has  not  set  aside  a  fund  to  take  care  of  its  investment. 
The  property  is  there,  capable  of  giving  good  service,  and  it  is  giving 
good  service.    The  city  wants  it.    What  should  the  city  pay  for  it  1 

Mr.  Wilcox.  The  United  States  Supreme  Court  has  settled  in  the 
Denver  and  Detroit  cases  the  law,  as  I  understand  it,  that  a  public 
utility  that  is  operating  without  a  franchise  is  entitled  to  earn  a 
fair  return  upon  the  fair  value  of  its  property. 

The  Chairman.  It  uses  the  term  "  Investment,"  I  believe. 

Mr.  Wilcox.  Investment.  And  that  the  fact  of  the  franchise  hav- 
ing expired  is  no  excuse,  and  gives  no  authority  to  the  city  to  treat 
the  property  as  scrap,  or  as  less  than  a  going  property,  in  fixing  rates 
while  the  city  continues  to  permit  the  company  and  require  the  com- 
pany to  render  service. 

AVhere  the  franchise  has  expired,  then  the  company  is  not  subject 
to  that  obligation.  It  has  no  franchise.  In  some  States,  at  any 
rate,  it  is  subject  to  the  will  of  the  communit^v,  which  can  if  it  wishes 
expel  it  from  the  streets;  but  practically,  the  community  does  not 
want  to  expel  it  from  the  streets,  and  will  not  do  it. 

I  think  under  such  circumstances  if  the  property  is  in  good  con- 
dition— I  mean,  is  the  kind  of  property  that  the  city  wants  to  ac- 
quire and  operate — it  ought  to  pay  the  price,  the  present  value  of  the 
physical  property. 

The  Chairman.  Do  you  believe  that  property  is  protected  by  the 
Constitution,  as  well  as  propert}-  that  is  operated  under  a  franchise  ? 

Mr.  Wiixox.  No.  It  is  not  protected  in  this  way :  If  the  munici- 
pality wants  to  throw  the  companies  out  of  the  streets,  it  can  do  so, 
r.nd  they  have  no  protection.  But  if  the  municipality  wants  the 
property,  if  it  wants  to  get  that  property  and  take  possession  of  it, 
it  has  got  to  pay  for  it ;  it  has  to  pay  for  what  it  takes,  not  on  the 
basis  of  scrap  value,  but  on  the  basis  of  its  actual,  going  value.  It 
would  not  have  to  pay  for  the  franchise,  because  there  is  no  fran- 
chise ;  and  it  can  not  deduct  any  franchise  obligation  from  the  value 
of  the  property,  because  there  is  no  franchise  obligation.  That  is 
my  idea  of  the  matter,  anyway.  I  think  that  rates  should  not  be 
increased  in  such  a  way  as  to  diminish  traffic  and  stimulate  competi- 
tion; and  under  no  conditions  should  the  street  railway  be  permitted 

160643°— 20— VOL  2 17 


1250    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


to  continue  in  operation  while  at  the  same  time  abandoning  its  funr;- 
tion  as  a  public  utility,  rendering  sei'vice  at  attractive  rates. 

As  I  said  before,  I  make  these  general  statements  as  a  general 
rule.  Now,  in  an  exigency,  in  tiding  over  an  emergency,  until  you 
can  get  on  a  permanent  basis,  inaugurate  a  permanent  policy li  if 
you  have  such  a  policy  to  inaugurate,  why  some  of  these  would  have 
to  be  modified  somewhat. 

I  think,  however,  that  nothing  should  be  done  in  an  emergency 
that  runs  counter  to  the  correct  permanent  policy  and  makes  it  moi*e 
difficult,  rather  than  less  difficult,  to  work  that  policy  out. 

With  regard  to  transfers,  I  think  that  where  the  fiat  fare  is 
retained,  transfers  should  be  free.  Where  a  zone  fare,  with  a  low 
initial  rate  is  installed,  with  the  proper  coordination  of  zone  limits 
to  transfer  and  heavy-loading  points,  no  transfers  are  necessary. 
.  My  reason  for  being  opposed  to  a  charge  for  transfers  under  the 
fiat  fare  is  that  it  seems  to  me  free  transfers  are  a  part  of  the 
theory  of  the  flat  fare  and  imiform  fare  within  a  given  limit. 

It  is  not  the  fault  of  the  car  rider  that  he  has  to  change  cars. 
There  is  no  reason  why  he  should  be  penalized  for  the  inconvenience 
and  trouble  that  he  is  caused  by  having  to  get  off  one  car  and 
wait  for  another,  perhaps  not  getting  a  seat  on  the  second  and 
taking  longer  to  get  to  his  destination  than  if  he  had  through 
service. 

The  system  of  transfers  is  really  established,  has  been  established, 
for  the  benefit  of  the  company  to  make  convenient  routing  of  its 
cars,  so  that  it  will  not  be  compelled  to  take  every  passenger  homo 
by  a  single  car. 

There  is  very  little  in  the  argument  that  a  transferred  passenger 
costs  more  than  a  passenger  who  rides  on  a  single  car,  assummg 
that  on  the  average  he  rides  no  further. 

There  is  something  in  the  accidents — the  on  and  off  accidents. 
There  is  a  little  something  in  the  printing  of  the  transfer  and  the 
handling  of  the  transfer;  but  those  items  are  almost  infinitesimal 
in  the  total  cost  of  the  street-railway  service ;  and  when  it  comes  to 
the  nuitter  of  accidents,  why  should  we  think  of  the  expense  to  the 
street-railway  compjmy  and  not  think  of  the  danger  to  the  pas- 
senger ?  If  he  has  to  run  the  risk  of  being  killed  or  maimed  by  trans- 
ferring, why  should  he  be  penalized  for  taking  that  risk?  We  can 
not  assume  that  he  is  better  off  if  he  is  hurt  than  if  he  is  not — 
although  it  is  possible  that  in  a  few  cases  that  might  be  so. 

Now,  with  respect  to  stops,  the  cost  of  stopping:  A  car  does  not 
stop  for  transfer  passengers  alone.  Transfers  are  always  given, 
practically  always  given,  at  points  where  passengers  would  1>e' 
alighting  and  getting  on  the  cars  anyway — heavy-loading  points. 
Consequently  there  is  no  justice,  so  far  as  I  can  see,  in  charging 
up  the  cost  of  extra  stops  to  the  transfer  passenger.  They  some- 
times say:  '*Why,  two  sets  of  trainmen  and  two  cars  work  for  this 
man."  That  is  absurd.  One  car  works  for  this  man  a  certain  dis- 
tance, and  then  goes  on  and  works  for  other  people,  about  its  busi- 
ness, and  another  car  picks  him  up,  which  has  been  working 
for  other  people,  about  its  business.  Two  cars  do  not  work  for  liim 
at  the  same  time.  If  he  did  not  transfer,  they  would  have  to  have 
just  as  many  cars  in  use;  and,  as  far  as  I  can  see,  there  is  almost 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1251 

no— almost  no  additional  cost  in  transferring  pa^engers;  and  what 
little  there  is  is  much  more  than  offiset  by  the  decrease  m  the  value 
of  the  service  to  the  transferred  passenger. 

Conmiissioner  Gadsden.  Don't  you  recognize  the  abuse  ot  it« 
What  about  the  abuse  feature  ? 

Mr.  Wilcox.  There  are  abuses  of  the  transfer  system  ;*  that  is  true. 
If  you  want  a  system  where  you  make  a  man  pay  a  penny  for  a  trans- 
fer and  get  a  rebate  when  he  uses  it,  to  prevent  that  abuse,  I  have  no 
objection  to  that.    Of  course,  thei-e  are  abuses  of  the  transfer  system. 

Commissioner  Sweet.  That  is  done  in  Cleveland,  is  it  not? 

Mr.  Wilcox.  At  times.    It  depends  on  the  stage  of  the  schedule 

The  Chairman.  You  condemn  the  use  of  transfers  where  the  flat 
fare  is  being  charged.  Then,  upon  what  theory  do  you  favor  it  where 
the  zone  system  is  used  ? 

Commissioner  Sweet.  He  does  not. 

Mr.  Wilcox.  I  do  not  favor  it.  I  say  there  should  be  no  transfers 
at  all— neither  transfer  nor  transfer  charges.  You  ride  a  short  dis- 
tance and  pay  for  a  short  ride,  and  then  get  off  and  ride  another  short 
distance  on  the  other  car,  and  pay  again.  There  is  not  any  particular 
need  of  transfers,  because  your  unit  fare  is  so  small. 

The  Chairman.  I  misunderstood  your  statement,  then. 

Commissioner  Sweet.  I  understood  his  position  as  he  has  just 

stated  it.  ^  ,  i  ^i 

Mr.  Warren.  You  would  have  no  transfers  where  you  have  the 

zone  svstem? 

Mr.  Wilcox.  If  you  have  a  sufficiently  low  rate. 

Mr.  Warren.  Initial  rate  ?  t        j  i. 

Mr.  Wilcox.  Yes;  and  have  the  zoning  points  properly  adjusted  to 
the  .heavy  loading  points.  .       ^^     ..,    •  a 

Mr.  Hall,  of  Nebraska.  May  I  ask  a  question,  Mr.  Chairman  i 

The  Chairman.  Yes. 

Mr.  Hall.  Where  you  have  the  flat-fare  system,  you  say  univeisal 
transfers  should  be  recognized— that  is,  where  you  have  no  zone 
system  ? 

T^Ir  WiLCOx.  ^  es. 

Mr.  Hall.  But  where  you  have  the  zone  system,  and  the  initial 
rate  is  low,  then  there  should  be  no  transfer,  because  the  initial  rider 
rides  a  short  distance  and  pays  a  low  fare,  and  he  gets  a  low  fare 
iKH-ause  he  rides  a  short  distance? 

Mr.  Wilcox.  Yes. 

Mr.  Hall.  Now,  I  would  like  to  ask  you:  Have  you  made  a  study 
as  to  the  effect  upon  the  short  rider— the  numbers  of  the  short  rider— 
v^'here  there  is  no  transfer  as  compared  with  the  transfer? 

Mr.  Wilcox.  It  is  difficult  to  do  that,  because,  as  I  understand 
your  question,  it  would  involve  a  comparison  of  the  riding  habit 
under  a  zone  system  as  it  is  practiced  in  England  with  riding  under 
our  system. 

Mr.  Hall.  Yes.  .    .  ^,    ^  x, 

Mr.  Wilcox.  And  it  is  true,  as  all  the  statistics  show,  that  the 
amount  of  short-haul  riding  under  the  British  zone  system  without 
transfers  is  simply  immense.  It  is  out  of  all  proportion  to  what  we 
have  in  this  country.  But  how  it  is  affected  by  the  absence  of  trans- 
fer I  don't  know. 


1252     PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

They  have,  as  I  understand,  in  certain  English  cities,  a  kind  of  a 
transfer  which  is  just  merely  a  ticket  to  indicate  that  the  passenger 
is  entitled  to  ride  a  certain  distance,  and  if  he  changes  his  car,  that 
indicates  that  he  has  paid  until  he  gets  to  the  end  of  that  ride.  Of 
course,  that  is  a  convenience,  and  if  the  zoning  points  were  not  prop- 
erly arranged,  or  if  the  initial  rates  were*  above  a  pretty  low  amount, 
it  might  be  desirable,  or  even  necessary,  to  have  such  an  arrange- 
ment; but  the  abuses  of  the  transfer  system,  and  the  difficulties  of 
handling  it  are  so  great  that  if  you  have  a  system  that  does  not  work 
any  great  amount  of  injustice  without  the  transfers  at  all,  it  is  better, 
I  think,  to  leave  them  out. 

Commissioner  Meeker.  Do  you  intend  to  give  us  your  ideas  about 
the  amount  of  the  initial  fare — of  the  single-zone  fare? 

Mr.  Wilcox.  We  are  in  an  experimental  stage,  so  far  as  zoning  is 
concerned,  and  there  has  not  been  very  much  study  that  I  know  of  of 
the  question  of  the  initial  fare  from  the  point  of  view  of  a  system 
like  the  British  system.  Most  of  the  studies  that  we  have  had  here, 
and  most  of  the  systems  that  have  been  proposed,  have  not  attempted 
to  go  below  the  old  standard  fare.  They  have  simply  said :  "  We  will 
charge  in  the  central  zone,  or  the  first  zone,  5  cents  or  6  cents,  or  7 
cents,  whatever  it  may  be,  and  then  add  on  the  additional  amount  for 
people  who  ride  farther." 

Commissioner  Meeker.  You  believe,  do  you  not,  that  a  great  deal 
would  be  added  to  the  number  of  passengers  riding  if  the  initial  fare 
were  less  than  5  cents? 

Mr.  Wilcox.  I  believe  so.  Of  coui-se  that  depends  upon  the  indi- 
vidual traffic  characteristics  of  the  community.  . 

In  New  Jersey,  as  a  result  of  Mr.  Jackson's  testimony — I  think 
Mr.  Jackson  and  Dr.  Whitten,  the  Cleveland  city  planning  expert, 
testified  on  zoning;  and  while  the  company  had  always  bitterly  op- 
posed any  thought  of  any  fare  less  than  5  cents  and  would  never 
think  of  considering  it  at  all — after  this  testimony  had  been  pre- 
sented, and  a  few  weeks  passed  on,  and  an  exigency  arose  through  a 
new  award  of  the  War  Labor  Board's  increasing  the  wages  more 
than  had  been  anticipated,  so  that  the  company  was  of  the  opinion 
that  it  had  to  have  still  more  money  than  its  own  zoning  plan  pro- 
vided for,  the  company  came  in  and  said :  "  We  have  been  impressed 
with  the  testimony  adduced  here  with  regard  to  the  minimum  fare 
in  other  jurisdictions.  We  are  very  grateful  to  the  municipalities 
that  it  has  been  produced,"  and  proposed  a  tentative  plan.  They 
proposed  three  rates,  either  one  of  which  they  thought  would  work 
out  and  give  them  the  money  that  they  felt  they  needed.  One  was 
a  flat  rate.  They  thought  they  required  9  cents  and  a  cent  for  a  trans- 
fer, in  order  to  get  the  money  that  they  required. 

Next,  they  proposed  a  5-cent  rate  for  the  first  two  zones,  and  then 
2- cents  a  mile  thereafter,  and  1  cent  for  a  transfer. 

Third,  the  rate  which  they  indicated  they  thought  was  the  best  one 
was  3  cents  for  the  first  mile  zone  and  2  cents  a  mile  thereafter,  with- 
out transfers. 

Mr.  Warren.  You  mean  without  i  r ansfer  charges  ? 

Mr.  WiLCox.  Without  transfers  or  transfer  charges. 

That  rate,  as  you  have  already  been  informed  by  the  commission 
and  Mayor  Gillen,  has  been  authorized  by  the  commission.    It  was 


i 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1253 

not  contested  by  the  municipality.  It  was  brought  in  as  an  ad  in- 
terim experimental  rate,  while  the  case  with  respect  to  the  valuation 
of  the  property  and  the  final  determination  of  how  much  money  the 
company  was  entitled  to,  and  the  final  determination  of  the  fare  was 
pending ;  and  that  fare  will  go  into  effect  on  the  14th  of  September. 

It  is  the  theory  that  after  the  valuation  is  made  and  we  know  how 
much  money  the  company  is  entitled  to,  after  we  have  found  out  what 
this  experimental  rate  will  really  produce,  the  commission  and  all 
parties  concerned,  will  be  called  in  to  agree,  is  possible,  upon  a  per- 
manent rate.  What  that  permanent  rate  will  be  I  don't  know.  I 
think,  personally,  that  while  the  initial  3  cents  is  good,  I  think  that 
2  cents  a  mile  beyond  the  3  cents  for  the  first  three  or  four  miles  is 
too  high. 

I  thint  that  for  the  proper  development  of  traffic  and  to  get  the 
benefit  of  the  zoning  system  and  the  small  initial  rate  it  ought  to  be 
low  enough  so  that  the  passengers  riding  three  or  four  or  five  niiles, 
which  would  cover  the  bulk  of  the  passengers  in  a  comparatively 
large  city,  would  get  their  transportation — ^the  longest  rider  within 
those  limits  would  get  his  transportation  for  not  more  than,  I  should 
say,  7  cents.  That,  of  course,  is  a  mere  arbitrary  statement — 7 
cents — it  might  be  a  little  different.  But  I  do  not  think  that  the  fare 
ought  to  go  above  that,  practically,  within  municipal  limits. 

Commissioner  Meeker.  This  initial  3-cent  fare  is  for  a  1-mile  ride? 

Mr.  Wilcox.  It  is  for  a  1-mile  ride,  to  start  anywhere.  It  is  not 
a  central  zone  at  all.  You  start  anywhere  and  ride  to  the  next  zone 
point  for  3  cents,  and  then  you  pay  2  cents  for  the  next  zone,  and 
so  on.  , 

Commissioner  Meeker.  But  in  no  case  can  you  ride  more  than  a 
mile  for  3  cents  ? 

Mr.  WiLCox.  In  no  case. 

Commissioner  Meeker.  Do  you  think  that  that  is  likely  to  produce 
the  maximum  revenue? 

Mr.  Wilcox.  I  am  inclined  to  think,  as  I  just  stated,  that  a  better 
result  would  be  produced  by  having  3  cents  for  the  first  mile  and  1 
cenfa  mile  up  to,  say,  5  miles. 

Commissioner  Meeker.  That  is  to  say,  you  would  pay  the  3  cents 
for  the  first  mile,  would  you  ? 

Mr.  Wilcox.  Well,  as  has  been  pointed  out,  as  I  wish  to  point  out 
and  as  has  been  brought  out  by  some  questions,  there  is  a  very  con- 
siderable difference  of  cost  in  transportation  between  British  condi- 
tions and  American  conditions,  because  of  the  higher  rates  of  wages 
and  other  things.  I  am  not  competent  to  say  just  how  much  that 
difference  is;  but  I  do  not  mean  to  indicate,  when  I  say  that  Glasgow 
got  40  per  cent  of  its  revenue  from  1-cent  passengers,  or  that  Liver- 
pool got  practically  as  much,  or  perhaps  more — I  have  forgotten  the 
exact  figures — from  2-cent  pasengers — I  do  not  mean  to  say  that  nec- 
essarily we  should  try  to  have  a  2-cent  fare  or  a  1-cent  fare  as  the 
minimums  over  here,  but  I  do  not  think  that  under  a  zone  system  it 
should  be  more  than  3  cents,  and  I  do  think  that  for  a  ride  of  3  or  4 
and  possibly  5  miles,  the  rate  ought  not  to  go  up  above  7  cents. 

Commissioner  Meeker.  What  struck  me  was  that  the  service  ren- 
dered for  3  cents — namely,  a  maximum  haul  of  1  mile — would  be 


1254     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

so  small  that  probably  very  few  would  avail  themselves  of  the  short- 
haul  service. 

Mr.  Wilcox.  You  must  remember  that— going  back  to  Glasgow 

Mr.  Warren.  What  is  the  zone  there,  Doctor? 

Mr.  Wilcox.  The  zone  there  is  1  mile.  It  is  not  exactly  a  mile,  but 
it  is  practically  a  mile. 

Mr.  Warren.  I  had  the  idea  that  it  used  to  be  half  a  mile  when 
they  first  took  it  over. 

Mr.  Wilcox.  I  think  it  did ;  but  they  extended  it.  It  was  their  way 
of  lowering  fares.  They  extended  the  zones.  You  see  a  proper  zon- 
ing system  is  very  flexible.  You  can  raise  the  fares  by  decreasing  the 
zones  a  little. 

Commissioner  Gadsden.  Before  you  leave  that  subject,  will  you 
put  into  the  record  the  reason  for  the  first  mile  being  3  cents  instead 
of  2  cents? 
Mr.  Wilcox.  I  do  not  know  that  I  want  to  go  on  record  on  that. 
Commissioner  Gadsden.  The  reason  assigned — not  your  reason,  but 
the  reason  that  is  given  for  it— on  the  readiness-to-serve  principle. 

Mr.  Wilcox.  Oh,  well,  the  public-service  zoning  plan  is  based,  I 
think,  on  logic  that  is  preposterous.  I  do  not  believe  in  this  stand- 
by and  movement  cost  as  the  basis  for  distribution  of  street-rail- 
way fares.  There  may  be  some  logic  in  it,  but  there  is  not  enough 
in  i)oint  of* view  of  theory  to  justify  its  use,  to  my  mind. 

For  example,  they  could  figure  out  and  they  did  it— they  said  the 
stand-by  cost  was  just  4  cents.  Well,  it  was  within  a  very  slight 
fraction  of  4  cents.  And  the  movement  cost  was  1  cent,  and  they 
got  it  by  juggling  a  lot  of  figures  on  the  basis  of  the  analysis  of 
terminal  and  movement  costs,*  an  analysis  that  was  first  worked 
out  for  another  purpose  by  the  Wisconsin  Commission  in  the  Mil- 
waukee fare-zone  case  in  1912. 

Commissioner  MeeivER.  Do  you  think  you  could  make  me  under- 
stand what  the  stand-by  cost  means?    I  am  a  mere  economist. 

Mr.  Wilcox.  Well,  it  is  easy  to  understand  why  there  should  be 
a  stand-by  cost  or  why  it  is  logical  to  have  a  stand-by  cost  in  water, 
telephone,  or  electric-lighting  service,  where  every  person  before 
he  can  make  use  of  the  service  has  to  have  his  property  connected 
physically  with  the  property  of  the  company,  whether  he  puts  that 
in  or  the  company  puts  it  in.  There  is  a  definite  connection  which 
represents  a  considerable  capital  expenditure.  It  represents  a  more 
or  less  definite  possible  call  upon  the  system  for  service.  In  order 
to  get  the  service  you  must  occupy  a  particular  location  and  you 
have  the  option  to  use  the  service  for  a  given  period.  Now,  a  stand- 
by charge  is  a  proper  element  of  cost  in  that  case,  I  think.  It  is 
entirely  different  with  the  street-railway  system.  You  do  not  have 
to  have  a  little  track  running  into  your  house  in  order  that  you  may 
use  the  sti-eet-car.  and  the  idea  of  having  the  same  individual  pas- 
senger every  time  he  boards  the  car,  whether  it  be  twice  a  day  or 
once  a  month,  pay  the  same  stand-by  cost,  to  my  mind  is  absurd. 

To  make  it  analogous  to  the  other  utilities,  the  householder,  the 
man  who  lives  in  a  house  which  is  within  reach  of  the  street-railway 
service  and  has  the  surface  road  going  by  his  door  every  day  where 
he  can  use  it,  if  he  wishes,  should  pay  a  tax,  a  special  tax  or  a  spe- 
cial contribution  which  gives  him  the  right  to  use  it.    Or  you  could 


proceedings  of  federal  electric  RAILWAYS  COMMISSION.    1255 

sell  a  man  a  commutation  ticket  or  make  him  buy  a  commutation 
ticket  that  would  give  him  the  right  to  use  the  property  for  a  month 
or  a  year.  That  would  be  logical,  I  think,  on  the  basis  of  stand-by 
costs  in  other  utilities.  But  I  do  not  think  there  is  anvthing  in  it 
in  the  manner  in  which  it  was  worked  out  by  the  Public  Service 
Kailway  Co. 

Commissioner  Meeiier.  I  am  looking  at  this  merely  from  the 
charging-what-the-traffic-will-bear  viewpoint  or  principle,  and  what 
strikes  me  in  the  3-cent  initial  fare  is  that  very  few  people  will  ride. 
I  will  watch  the  N'ew  Jersey  experiment  with  much  interest. 

Mr.  Wilcox.  Of  course,  I  do  not  know  what  is  going  to  happen. 
But  we  have  this  to  consider.  New  Jersey  street-railway  traffic  is 
shot  to  pieces  by  jitney  competition.  Tlie  jitneys  throve  when  the 
fai-e  was  the  same,  because,  partly,  of  inadequate  routing  facilities 
of  the  street  railways  and  partly  because  the  jitneys  go  faster  and 
pull  up  to  the  sidewalk,  and  partly  because  people  like  to  ride  in  an 
automobile,  it  is  supposed.  So  far  as  I  could  see  from  our  observa- 
tion, the  riding  was  infinitely  less  comfortable  in  the  jitneys  than 
in  the  street-cars.  They  were  more  crowded ;  they  were  much  more 
bumpy,  and  at  night  there  were  no  lights  practically ;  a  little — well, 
like  a  miner's  lamp  up  in  the  corner  of  the  jitney,  and  it  was  so 
dark  you  could  hardly  see  your  neighbor's  face,  and  all  that.  And 
still  it  appeared  that  the  people  rather  preferred  the  jitneys  at  the 
same  price.  Now,  of  course,  when  people  have  to  pay  higher  for  the 
street-railway  rides,  they  go  to  the  jitneys  in  droves.  I  think  with 
a  3-cent  fare  the  first  mile,  with  a  cent  a  mile  for  the  next  2  or  3  or  4 
miles — say,  4  miles — so  that  would  bring  it  up  to  7  cents  for  a  5-mile 
ride,  I  think  that,  except  where  the  route  is  inconvenient,  most  of  the 
people  would  take  the  street-cai*s  again  rather  than  the  jitneys.  But  I 
am  afraid  that  3  cents  for  1  mile  and  2  cent  for  each  additional  mile 
will  pile  up  too  quickly  to  a  higher  fare  than  the  jitney  to  really 
overcome  the  jitney  competition  as  much  as  it  ought  to  be  overcome 
for  the  benefit  of  the  street  railway. 

Mr.  Warren.  Is  it  your  observation,  Doctor,  that  the  jitneys  carry 
anybody  as  far  as  5  miles  for  5  cents  fare  in  Newark  ?  I  do  not  know 
anything  about  it,  but  those  I  have  seen — those  we  have  in  Massa- 
chusetts— carry  them  a  pretty  short  distance. 

Mr.  Wilcox.  Well,  there  are  very  few  that  go  as  far  as  5  miles,  at 
any  rate.  I  think  the  maximum  5-cent  rides,  practically  speaking, 
are  about  3  or  3J  miles. 

Commissioner  Sweet.  There  was  one  other  reason,  was  there  not, 
why  the  jitneys  have  prospered  the  way  they  have  in  Newark,  which 
was  mentioned  by  Mayor  Gillen,  and  that  is  that  the  street-car  serv- 
ice is  very  poor  ? 

Mr.  Wilcox.  Well,  as  Mr.  Danforth  said,  the  jitneys  during  that 
period  were  a  godsend  to  the  street-railway  company  because  the 
street  railway  company  could  not  supply  all  the  service.  I  think 
that  he  made  that  statement  rather  offhand  and  really,  perhaps,  he 
wishes  it  was  not  in  the  i-ecord. 

Commissioner  Gadsden.  He  meant  on  the  peak  load? 

Mr.  Wilcox.  Yes. 

Commissioner  Gadsden.  You  will  be  glad  to  give  them  all  the 
business  on  the  peak,  would  you  not?    You  could  go  out  of  business 


1253    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


up  against  anything  of  that 


on  the  peak  and  let  them  handle  it  if  they  would  take  it,  would 
you  not  5 

Mr.  Wilcox.  Well,  you  would  like  to  take  as  much  of  the  peak  as 
you  could  handle. 

Commissioner  Gadsden.  Then  it  would  not  be  the  peak ;  but  I  am 
talking  about  the  peak. 

Commissioner  Beall.  There  is  one  line  I  can  not  understand.  You 
may  have  run  across  it.  In  Jersey  City — I  can  not  remember  the 
street — there  is  a  bus  line  from  the  outskirts  of  Bayonne  into  Jersey 
City  and  they  charge  10  cents  and  they  run  over  the  rottenest  streets 
you  ever  saw  in  your  life.  The  street  car  company  on  the  same  streets 
only  charges  5  cents  and  the  buses  get  all  the  business  on  double  the 
fare.    Now,  I  know  that  because  I  have  observed  it. 

Mr.  Wilcox.  Well,  I  am  not  very  familiar  Avith  the  situation 
there. 

Commissioner  Beall.  There  is  only  one  way  I  can  account  for  it. 
I  think  from  my  observation  there  are  a  few  more  buses  than  cars, 
but  the  people  will  let  the  cars  go  by  and  wait  for  the  buses.  Now, 
I  do  not  know  whether  it  is  just  pei-sonal  feeling  against  the  com- 
pany or  not. 

Mr.  Wilcox.  I  imagine  there  is  some  personal  feeling. 

Commissioner  Beall.  Have  you  run  up  against  anythii 
kind  ? 

Mr.  Wilcox.  Well,  no. 

Commissioner  Beall.  It  is  a  very  remarkable  thing,  when  they 
charge  10  cents  as  against  5. 

Mr.  AViLCOx.  I  have  not  information  about  the  local  situation  in 
Jersey  City. 

Generally  speaking,  aLso,  I  do  not  think  that  rates  should  be  in- 
creased until  all  practicable  economies  have  been  effected,  nor  until 
all  practicable  increases  in  revenue  through  development  of  traffic 
have  been  secured,  nor  until  the  collection  and  return  of  fares  as 
nearly  100  per  cent  as  practicable  has  been  effected.  Of  course,  I  do 
not  mean  to  say,  in  an  emergency  when  you  have  not  the  money  to 
put  in  one-man  cars,  that  you  shall  require  tlie  improvements  before 
any  relief  is  given,  but  I  mean  to  say  that  the  thought  of  the  street- 
railway  men  should  not  be,  "  Fii-st,  give  us  more  fares,  more  fares, 
higher  fares ;  and  then  we  will  reform  afterwards  where  reforms  are 
needed,"  but  the  thought  should  be,  from  their  point  of  view  and  also 
from  the  point  of  view  of  the  regulatory  authorities,  that  reforms  and 
economies  tha>  are  demonstrated  as  practicable  should  be  put  into 
effect  prior  to  the  granting  of  fare  increases. 

Of  course,  things  have  got  to  a  pass  where  it  is  a  good  deal  easier 
to  get  the  other  fellow  to  give  you  the  money  and  then  make  a  good 
promise  about  what  you  will  do  if  he  gives  it  to  you  than  it  is  to  try 
to  do  it  first. 

I  want  to  say  just  a  word  about  the  scrvice-at-cost  plan  from  the 
point  of  view  of  its  practicability  under- private  operation. 

It  seems  to  me  that  the  most  difficult  thing  about  it,  and  the  thing 
that  makes  the  problem  almost  insoluble,  is  the  extreme  difficulty 
of  retaining  the  characterstic  motive  of  private  management  about 
which  so  much  is  said  under  a  system  of  such  minute  public  regula- 
tion as  is  contemplated  in  the  service-at-cost  plan,  particularly  with 
the  guaranteed  and  limited  return  upon  the  investment. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1257 

Efforts  have  been  made,  as  I  think  has  been  pointed  out  to  you 
here,  in  some  places  to  weave  in  some  kind  of  a  motive  which  would 
give  a  sort  of  an  artificial  stinmlus  to  the  private  motive  for  economy 
and  efficiency  under  such  a  plan.  But  so  far  as  I  can  see  that  prob- 
lem of  effectively  developing  and  enlisting  private  motive  under 
such  conditions  has  not  been  solved. 

The  Montreal  plan — I  was  called  in  on  that  to  a  certain  extent 
and  went  over  with  the  commission  up  there  the  financial  scheme 
which  was  devised  for  the  purpose  of  providing  that  motive — is  in 
some  ways  an  advance  upon  most  other  plans.  I  think  the  Cincin- 
nati plan  has  certain  advantages,  although  I  have  not  had  time  to 
m«ke  a  careful  study  of  the  Cincinnati  plan. 

The  Montreal  plan  provides  this:  All  the  gross  earnings  are  put 
into  a  fund.  There  is  a  permanent  commission  which  has  theoret- 
ically complete  regulatory  power  over  service,  extensions,  expendi- 
tures. This  commission  at  tlie  beginning  of  each  year  fixes  a  car- 
mile  allowance  for  operating  expenses,  instead  of  having  it  fixed 
in  the  franchise,  as  it  is  in  Cleveland,  subject  to  modification  by 
arbitration.  Then,  if  the  company  lives  within  that  allowance  for 
the  3^ear,  or  does  not  go  more  than  2J  per  cent  above  the  allowance, 
it  is  given  a  bonus,  an  operating  profit,  so  called,  amounting  to  one- 
eighth  of  1  per  cent  upon  the  capital  investment.  If  it  overruns 
this  operating  allowance  more  than  the  2^  per  cent  it  loses  that  bonus, 
and  if  the  bonus  is  not  sufficient  to  make  up  the  amount  that  the  al- 
lowance is  overrun  beyond  2^  per  cent,  the  company  has  to  make  it 
up  out  of  a  guaranty  fund  of  its  own  that  it  has  established.  But 
that  is  not  inflexible.  It  provides  that  if  the  company  comes  in 
Avithin  the  first  60  days  of  the  new  j^ear — either  at  the  time  or  within 
GO  days  after  the  close  of  the  year — and  demonstrates  to  the  satisfac- 
tion of  the  commission  that  these  operating  expenses  were  necessarily 
incurred  in  providing  the  service  which  the  commission  required 
should  be  provided,  then  the  penalty  is  remitted  and  the  company 
will  get  the  bonus  just  the  same.  In  other  words,  there  is  a  little 
semiautomatic  feature  there  which  is  subject  to  review  and  the 
application  or  judgment  through  a  commission  at  the  close  of  each 
year. 

Then  an  allowance  is  set  aside  also  for  maintenance.  The  city 
gets  its  pay,  $500,000  a  year,  in  lieu  of  the  old  payments  that  were 
made,  a  division  of  earnings.  The  company  has  to  put  aside  and 
develop  a  surplus  in  a  contingent  reserve  which  is  really  a  surplus 
belonging  to  the  business,  sort  of  a  steadying  fund.  It  is  to  take 
up  the  slack  in  case  the  drains  u]3on  the  gross  earnings  prior  to  it 
at  any  time  ^  are  not  sufficient.  Then  whatever  is  left  over  is  di- 
vided in  the  following  manner:  Twenty  per  cent  goes  to  the  com- 
pany to  do  wuth  as  it  pleases;  30  per  cent  goes  to  the  city  to  do 
yvith  as  it  pleases;  and  50  per  cent  goes  into  what  they  call  a  tolls 
reduction  fund — they  speak  of  tolls  there;  or  a  fare-reduction  fund. 
This  fare-reduction  fund  theoretically  accumulates  until,  when  it 
reaches  $1,000,000,  the  commission  may,  and  w^hen  it  reaches  $2,500,- 
000  the  commission  must,  reduce  the  fares;  and  they  reduce  the 
fares  in  this  manner: 

In  order  to  provide  a  certain  stability  in  fares,  they  appropriate 
one- fourth  of  the  amount  accumulated  in  the  fund  and  pour  it  back 


1258    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

into  the  gross  receipts,  and  then  they  reduce  the  fares  by  an  amount 
which  will  at  least  cover  the  amount  of  this  appropriation,  but 
will  not  take  up  more  than  75  per  cent  of  the  normal  flow  into  the 
divisible  profit  in  addition  to  the  appropriation.  So  that  they  can 
not  reduce  the  fare  theoretically  so  as  to  actually  stop  and  cut  off 
entirely  the  divisible  profit;  and  in  that  way  they  will  have  a  suffi- 
cient amount  in  the  fund  so  that  they  can  repeat  that  process  for 
at  least  four  years  and  keep  the  new  fare  stationary. 

That  was  put  in  on  the  theory — it  was  not  very  long  ago,  but 
we  thought  then  that  it  was  a  good  idea  to  have  fares  more  or  less 
stable  rather  than  changing  every  other  Aveek,  and  the  theory  was 
that  in  that  way  we  would  get  a  certain  stability  and  the  fares  would 
not  then  be  reduced  at  the  end  of  that  time  until  the  contingent 
reserve  fund  was  depleted  and  needed  to  be  replenished,  and  in 
case  that  occurred  then  it  was  the  duty  of  the  commission  to  in- 
crease the  fares. 

I  do  not  know  much  about  how  it  is  working  out,  and  I  do  not 
know  how  it  is  going  to  work  out.  The  present  fare  is  6  cents  with 
5  tickets  for  25  cents  and  certain  workmen's  tickets,  so  that  the 
average  fare,  I  believe,  is  a  little  less  than  5  cents.  But  the  last  I 
Iniew,  several  months  ago,  the  company  was  not  earning  the  cost 
of  service,  and  since  then  there  has  been  a  wage  increase,  and  the 
nev*'  r»\tes  for  the  coming  year  have  not  been  announced — or  at  least 
I  have  not  seen  them  announced  by  the  commission. 

Commissioner  Beall.  Well,  there  is  not  any  maximum  fare,  is 
there  ? — as  I  remember  it. 

Mr.  Wilcox.  In  Montreal? 

Commissioner  Beall.  Yes. 

Mr.  Wilcox.  Xo. 

Commissioner  Beall.  The  fare  may  go  up  to  a  quarter? 

Mr.  Wilcox.  Yes. 

Commissioner  Beall.  There  is  absolutely  no  limit  ? 

Mr.  Wilcox.  There  is  no  limit  up.  Tliat  was  based  in  a  certain 
measure,  although  the  franchise  itself — I  did  not  help  in  the  prep- 
aration of  the  franchise  as  a  Avhole  but,  to  a  certain  extent,  I  sup- 
lK>se  I  am  responsible  for  what  went  in  there.  I  went  up  and  talked 
to  the  commission.  I  was  taken  up  there  by  a  citizens'  organization, 
and  I  talked  the  theory  that  the  fare  was  the  last  thing  to  be  fixed ; 
they  should  ^x,  fii*st,  what  service  they  wanted,  what  the  value  of 
the  property  was  and  the  return  upon  it,  and  then  fix  the  fares  to 
meet  it.  And  that  feature  of  the  program  was  adopted.  I  do  not 
know  whether  I  stand  for  all  the  things  that  I  did  a  year  or  two 
ago  now  or  not. 

Mr.  Warren.  Most  of  us  in  the  industry  do  not. 

Commissioner  Gadsden.  You  probably  are  the  only  one  that 
would,  connected  with  the  railway. 

Mr.  Wilcox.  Of  course,  one  of  tlie  important  things  is  to  reduce 
and  do  away  with,  as  far  as  practicable,  the  thieving.  Now,  I  have 
a  little  pet  theory  of  my  own  which  is  that  the  characteristic  troubles 
of  the  street-railway  companies  in  respect  to  the  thieving  conductors 
are  due,  in  large  part,  to  the  condition  of  the  atmosphere,  the  con- 
dition of  public  sentiment  witli  respect  to  the  company,  and  the 
bad  example  that  the  companies  have  set,  and  a  great  many  of 
these  conductors  have  heard  Mr.  Bryan  tell  about  the  differences 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1259 

between  petty  larceny  and  grand  larceny  and  glorious  larceny,  and 
they  can  not  see  why  petty  larceny  should  be  punished  where  glorious 
larceny  has  been  carried  on  successfully  and  rewarded. 

I  really  seriously  believe  that  the  difficulty  with  respect  to  the 
collection  of  fares  is  largely  due  to  that  general  attitude  of  dis- 
trust which  the  public  has  with  respect  to  the  street  railways  and 
tlieir  financial  management;  and  it  has  grown  up  that  way.  Of 
course,  precautions  have  got  to  be  taken  for  the  collection  of  fare? 
under  any.  system,  but  I  think  that  has  a  good  deal  to  do  with  the 
trouble.    It  may  not  be 

Mr.  Warren.  Have  you  any  idea  how  much  it  amounts  to  ?  Have 
you  ever  studied  that  at  all  ? 

Mr.  Wilcox.  Well,  now,  I  have  not,  very  much ;  but  I  understand 
that  right  here  in  Washington,  after  Mr.  Beeler  made  his  investiga- 
tion last  summer,  there  was  a  remarkable  jump  in  the  fares  collected 
oil  the  Washington  Railway  &  Electric  Co.  I  think  75  conductors 
were  rounded  up  at  one  clip,  and  15  or  20  more  got  away ;  and  ho 
told  me  that  the  fares  increased  $500  a  day,  and  that  increase  was 
maintained. 

Mr.  Warren.  On  that  one  system? 

Mr.  Wilcox.  Yes.  And  I  know  that  on  the  Indianapolis  system 
the  Indianapolis  Commission  found  there  was  quite  a  heavy  loss  that 
was  not  being  taken  care  of  in  Indianapolis. 

I  think,  gentlemen,  I  have 

The  Chairman.  Do  you  know  what  the  estimated  leakage  in  tho 
fares  in  Buffalo  amounted  to? 

Mr.  Wilcox.  Xo;  I  do  not. 

The  Chairman.  Some  one  reported  to  me  it  was  about  $2,000  a  day. 

Mr.  Warren.  How  much? 

The  Chairman.  $2,000  a  day.  The  one  thing  that  the  public  is 
entitled  to  is  to  see  that  the  mo^ney  which  it  is  paying  for  its  service 
is  being  collected  and  accounted  for. 

Mr.  WiLcex.  There  is  no  doubt  about  that.  Now,  gentlemen,  I 
am  ashamed  of  the  time  I  have  taken,  but  I  think  I  am  through. 

The  Chairman.  Before  we  undertake  any  cross-examination,  may 
I  ask  if  you  have  any  thoughts  on  the  subject  of  economies  in  opera- 
tion or  service  ? 

Mr.  Wilcox.  Well,  I  think  this  one-uian  car  is  very  promising, 
and  for  a  great  portion  of  the  service  rendered  on  almost  any  system, 
l)oth  from  the  point  of  view  of  the  company  and  of  the  public,  can 
l)e  beneficially  adopted  and  put  into  operation,  with  the  advantage 
that  the  platform  expense  per  car,  per  car-mile,  is  cut  almost  in  two  ; 
the  power  consumption  is  more  than  cut  in  two,  and  on  the  streujirth 
of  those  economies  it  is  possible  to  improve  the  service  by  putting 
on  some  additional  cars  and  giving  more  frequent  service  and  in 
that  way  picking  up  the  people  who  rather  than  wait,  where  service 
is  infrequent,  would  walk.  I  think  that,  in  general,  has  been  the 
experience  of  the  companies  that  have  experimented  with  the  one- 
man  car.  And,  as  far  as  I  can  see,  it  is  an  element  with  very  great 
promise  in  the  future. 

Xow,  a  good  deal  has  been  said  about  the  skip-stop,  and  I  do  not 
know  that  I  ought  to  say  very  much  about  that,  because  I  have  not 
given  it  as  much  consideration  as  I  perhaps  should  have.     But  I  am 


1260    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

a  little  bit  opposed  to  the  extensive  develofjment  of  that  skip-st<)p 
plan,  especially  in  smaller  towns  where  service  is  comparatively  in- 
frequent. 

I  know  I  was  studying  last  year  the  Bethlehem  situation,  and  it 
was  then  proposed  to  drop  a  Jot  of  stops,  and  it  seemed  to  me  in  a 
town  like  that,  where  street-railway  service  was  infrequent  anyway 
and  where  the  great  majority  of  the  people  walked,  to  make  it  more 
inconvenient  for  people  to  get  the  car,  with  the  risk  that,  walking 
down  to  the  corner,  they  would  have  to  wait  for  another  car  be- 
cause it  would  not  stop  at  that  corner — it  seemed  to  me  it  was  not 
worth  while.  It  was  decreasing  the  service  where  an  increase  of 
service  in  every  way  was  necessary  in  order  to  develop  the  traffic  that 
was  good  for  the  system. 

Now,  if  you  have  a  situation  like  you  have  here  in  Washington 
or  in  the  dense-traffic  centers  where  a  car  is  coming  along  every  two 
or  three  or  four  minutes,  it  is  very  diffei-ent,  and,  of  course,  it  is 
important  that  these  stops  should  not  be  permitted  to  block  traffic 
downtown,  and  in  that  way  essentially  injure  the  speed  of  the  service. 
But  I  think  that  the  skip-stop  program  can  easily  be  overdone  in  the 
enthusiasm  to  cut  down  expenses,  and  by  cutting  them  down  drive 
away  traffic  where  the  service  is  none  too  good  anyway. 

Mr.  Warren.  Along  the  line  of  the  chairman's  question — liave  >^ou 
had  occasion  to  study  the  possibilities  of  municipal  aid  in  facili- 
tating the  movement  of  cars,  keeping  the  tracks  clear,  so  that  better 
headway  and  better  speed  could  be  made  ? 

Mr.  Wilcox.  Well,  I  know,  speaking  again  of  Bethlehem,  there 
were  great  complaints  there  of  the  interference  of  trucks.  That 
was  a  very  bad  winter,  with  the  snow  piled  up  on  the  streets  fort 
thi-ee  months,  a  year  ago  last  winter,  and  between  Bethlehem  and 
Allcntown  there  was  a  fine  highway,  but  it  was  not  cleared  of  snow 
and  practically  the  onjy  place  where  the  trucks  could  go  was  on 
the  street-car  tracks,  and  if  anything  happened  to  one  and  it  was 
blocked,  then  the  cars  were  blocked. 

Now,  I  think  undoubtedly  the  street-cars  should  have  the  right 
of  way,  and  that  the  municipality  should  cooperate  in  keeping  things 
off  th6  track  so  that  the  street-cars  can  get  along. 

I  know  there  I  recommended  on  Third  Street,  which  leads  up  to 
the  Steel  Works,  one  of  the  things  was  that  the  city  shoidd  clean 
the  streets  of  snow  and  ice  so  that  it  would  not  be  piled  up  there 
for  three  months  and  drive  all  vehicles  onto  the  car  tracks.  That, 
I  think,  occurs ;  of  course,  it  is  only  for  a  comparatively  aliort  time 
and  only  in  some  cities,  but  things  like  that  certainly  the  cities  ought 
to  do.  I  think  a  good  deal  can  be  done  in  a  good  many  communi- 
ties that  way. 

Mr.  Warren.  I  have  heard  it  was  done  in  Cleveland,  and  it  made 
a  difference  of — I  do  not  know — I  think  25  or  30  per  cent  in  the 
speed  of  the  cars  which,  of  course,  would  make  a  very  great  differ- 
ence in  the  expense  of  operation. 

Mr.  Wilcox.  I  do  not  know  the  details  of  that,  but  I  know  when 
Peter  Witt  was  street  railroad  commissioner,  he  made  a  special  point 
of  cooperation  and  speeding  up.  The  skip-stop  plan  was  put  in 
effect  there,  and  if  you  want  to  get  on  a  car  in  Cleveland  you  just 
have  to  hop.    And  as  I  remember  the  results  the  increase  in  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1261 

average  speed  was  about  2  miles  an  hour,  from  something  over  8 
to  something  over  10  miles,  which  of  course  is  a  good  idea. 

The  Chairman.  Have  they  kept  up  that  pace  ? 

Mr.  Wilcox.  I  do  not  know,  but  I  think  they  have  very  nearly, 
though.  I  might  say  that  I  think  there  is  no  doubt  whatever  that, 
of  all  the  schemes  that  have  been  tried  for  a  long  enough  time  to 
show  results  in  this  countr}^,  the  Cleveland  plan  has  worked  out 
better  than  any  other.  I  speak  now  of  the  contracts  with  private 
ownership. 

Commissioner  Meeker.  Do  you  think  the  one-man  car  could  be 
used  in  congested  districts  like  New  York  City  to  advantage? 

Mr.  Wilcox.  Well,  I  am  not  enough  of  an  expert  on  the  technical 
side  to  really  have  a  judgment,  except  what  other  people  tell  me. 
I  went  out  to  Brooklyn  and  rode  on  a  Birney  car  one  night  a  few 
weeks  ago,  and  I  would  not  think  that  the  car  would  be  really 
adapted  to  the  congested  traffic  of  New  York.  I  do  not  think  it  is 
really  necessary  to  apply  it  there.  But  there  are — oh,  the  propor- 
tion of  street-railway  service  throughout  the  country  to  which  the 
one-man  car  could  be  applied  is — well,  of  course,  I  could  merely 
guess  at  the  percentage,  but  I  would  imagine  that  it  could  be  applied 
to  60  or  75  per  cent  of  the  trackage  of  the  country.  That  would  not 
mean  GO  or  75  per  cent  of  the  traffic. 

The  Chairman.  Have  you  ever  investigated  to  see  as  to  the  best 
manner  of  collecting  and  retaining  fares? 

Mr.  Wilcox.  Well,  the  conductors,  some  of  them,  have  developed 
a  method. 

The  Chairman.  I  do  not  want  you  to  assume  that  I  meant  you 
have  investigated  it  from  that  side. 

Mr.  Wilcox.  No  ;  I  have  not.  The  Public  Service  Railway  in  con- 
nection with  its  zoning  plan  has  developed  a  plan  which  it  thinks 
is  pretty  nearly  thief-proof,  but  that  phase  of  the  case  I  have  not 
gone  into  closely.    It  is  a  little  beyond  me,  on  the  technical  side. 

Mr.  Warren.  Do  you  know  the  Rook  fare  box?  Have  you  studied 
that? 

Mr.  Wilcox.  No.    That  is  the  one  vou  hold  in  your  hand ;  is  it  not? 

Mr.  Warren.  I  think  so.    It  is  tfie  one  that  caused  the  strike  on 
the  Eastern  Massachusetts  line  for  quite  a  time. 
.  Mr.  Wilcox.  Because  they  have  to  reach  in  so  far. 

Mr.  Warren.  Yes;  they  claimed  it  was  dangerous. 

Mr.  Wilcox.  I  think  they  have  that  on  the  New  York  buses. 

Mr.  Warren.  They  have  it  on  the  Providence  lines,  and  have  had 
for  some  years,  I  think. 

Mr.  Wilcox.  I  talked  with  one  or  two  persons  about  that  strike, 
and  they  were  rather  of  the  opinion  that  the  men  were  to  a  certain 
extent  justified  on  those  open  cars  where  they  have  to  stand  on  the 
running  board  and  reach  in  this  way  [indicating],  and  wait  while 
they  try  to  make  change  with  the  people  on  the  far  end  of  the  seat. 

The  Chairman.  Is  municipal  ownei*ship  the  general  rule  in  Eng- 
land? 

Mr.  Wilcox.  Well,  municipal  ownership  is  the  general  rule  in  the 
large  towns,  and  as  I  recollect,  taking  all  the  electric-railway  enter- 
prises together,  the  number  of  municipally  owned  enterprises  is 
slightly  in  excess  of  the  privately  owned,  but  the  weight,  I  should 


1262    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

stiy,  would  be  at  least  75  per  centj  because  i)ractically  all  of  the  big 
towns,  Avith  the  exception  of  Bristol,  I  think,  and  Dublin,  and  a 
^ivat  many  medium-sized  towns,  have  municipal  ti*ams. 

The  Chairman.  Have  you  made  a  comparison  of  the  results  of 
operation  between  both  systems  in  England? 

Mr.  Wilcox.  I  have  not. 

The  CHAIR3IAX.  Then  you  do  not  know  whether  municipal  owner- 
ship is  an  advantage  over  private  ownership  in  that  country? 

Mr.  Wilcox.  Well,  I  think  that  the  municipal  policies,  because  of 
the  predominance  of  the  municipal  lines,  have  sort  of  set  the  pace 
for  the  entii-e  industry  in  England.  It  may  not  be.  Perhaps  it  is 
just  inherent  in  the  British  way  of  running  things. 

The  Chairman.  Do  you  know  how  fares  compare  between  both 
svstems  there  ? 

'  Mr.  Wilcox.  The  fares,  I  think,  are  much  the  same,  because  they 
are  limitetl  by  statute,  as  I  recollect,  to  a  maximum,  I  think,  of  a 
penny  a  mile— that  is,  2  cents  of  our  money. 

The  CiiAiRMAX.  There  is  evidence  before  us  to  show  that  the 
mileage  in  cities  of  the  same  popnlation  in  this  country  is  very 
greatly  in  excess  of  the  car-mileage  in  England. 

Mr.  Wilcox.  You  mean  the  track-miles? 

The  Chairman.  Yes ;  the  track-miles.    How  do  you  explain  that  ? 

Mr.  Wilcox.  Well,  I  asked  Mr.  Jackson  about  that.  That  is  one 
of  the  things  that  has  always  troubled  me.  And  the  only  answer — 
well,  there  were  two  answers  which  may  give  a  partial  explanation : 
One  is  that  the  systems  have  invariably  been  built  up  as  units  with- 
out the  competitive  construction  of  lines,  the  duplication  of  lines  which 
is  still  characteristic  of  a  good  many  American  cities.  That  the  sys- 
tem was  laid  out  for  the  purpose  of*^providing  the  maximum  amount 
of  service  with  the  least  amount  of  trackage.  Then  the  British  cities, 
as  a  rule,  are  more  compact  than  our  cities.  They  have  very  little  of 
the  lin^  running  beyond  the  city  limits,  except  where,  as  I  indicated 
earlier  m  the  day,  two  cities  lie  against  each  other,  and  one  city  fur- 
nishes the  service  in  the  other.  There  is  practically  nothing,  as  I  un- 
derstand it,  corresponding  to  our  interurban  lines,  because  England 
is  gridironed  with  steam  lines  which  take  care  of  that  service,  and 
there  has  been  no  occasion,  or  at  least  if  there  has  been  occasion,  it  has 
not  been  developed,  of  building  street  interurban  lines. 

Xow,  if  you  were  to  take  off  all  of  this  trackage  on  the  outside  of 
the  built-ujp  section  of  a  city,  and  then  if  you  would  take  out  dupli- 
cate trackage  built  by  reason  of  the  fact  that  originally  there  were 
competing  lines,  our  trackage  would  be  very  greatly  reduced.  I  do 
not  know  how  much  it  would  be  reduced,  but  it  would  be  reduced  a 

very  great  deal. 

The  Chairman.  Would  the  fact  that  England  is  an  old  settled 
country  and  the  villages  and  cities  were  established  long  before  the 
street-railway  systems  were  built,  while  in  this  country  we  are  com- 
paratively new  and  the  villages  and  cities  are  expanding  greatly, 
make  any  difference? 

Mr.  Wilcox.  Well,  I  presume  it  would,  to  a  certain  extent.  The 
older  cities  there,  their  characteristics  were  pretty  well  developed 
before  the  tramways  came  in;  that  is,  they  were  closely  built  up  and 
tramways  were  built  to  meet  the  needs  of  the  population,  while  here, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1263 

in  a  great  many  cases,  they  are  newer  cities,  and  the  street  railways 
luive  been  built  up  with  the  communities,  and  in  some  cases  have  gone 
considerably  ahead  of  the  community  development. 

The  CHAIR3IAN.  You  stated  that  in  England  it  is  the  practice  to 
amortize  the  investment  in  properties.  Has  that  resulted  in  a  de- 
creased fare? 

Mr.  Wilcox.  Well,  of  course,  Ihat  would  not  result  in  a  decreased 

fare  until  the  process  was  complete,  because 

The  Chairman.  It  is  complete  in  Scotland — Glasgow. 

Mr.  Wilcox.  It  is  complete  in  one  city.  Glasgow  is  the  only  city 
I  know  of  that  has  really  completed  it.  In  Liverpool  it  is  nearly 
complete.  The  fares  have  been,  while  that  process  was  going  on,  de- 
creased from  time  to  time,  and  the  experience  of  Glasgow  has  been 
that  with  each  decrease  in  fare,  there  has  been  an  increase  of  reve- 
nues*, until  the  point  has  now  been  reached,  so  I  am  informed — I  am 
not  very  well  informed  on  this  particular  point,  because  it  is  more 
recent — the  question,  on  account  of  increasing  expenses  in  Glasgow, 
the  very  greatly  increased  wages,  recently  has  come  up  of  getting  a 
little  more  fare.  I  suppose  they  do  not  want  to  decrease  the  amount 
they  contribute  to  the  common  good  perhaps  in  taxes.  But,  at  any 
rate,  the  question  was  raised  how  they  should  get  the  additional  reve- 
nue, whether  they  should  get  it  by  lowering  the  fare ;  and  poor  Mr. 
Dalrymple  said,  "  Deliver  us,  I  can  not  carry  any  more  passengers." 
I  do  not  know  what  was  done.  That  was  within  the  last  two  or  three 
months  that  I  saw^  some  notice  of  it  in  the  Electric  Railway  Journal. 
But  there  was  some  plan  for  readjusting  the  fares,  and  increasing 
them  somewhat.  Pretty  nearly  all  the  cities  except  Glasgow  and 
Aberdeen  and  Leeds,  I  think,  had  increased  the  fares  as  the  result  of 
the  war  condition,  so  that  the  minimum  was  up  to  1  penny,  2  cents, 
and  in  some  cases  they  effected  it  by  changing  the  stages,  the  length 
of  the  zones. 

The  Chairman.  You  stated  that  the  substantial  difference  between 
the  conditions  in  England  and  in  this  country  was  that  over  there 
they  were  operating  for  service  and  over  here  for  profits,  and  that 
there  was  actually  an  overcapitalization  and  manipulation  of  stocks 
and  bonds  in  this  country,  and  there  ought  to  be  a  housecleaning. 
How  would  you  make  that  housecleaning? 

Mr.  Wilcox.  That  is  a  very  hard  thing.  There  have  been,  as  you 
know,  in  our  experience  on  some  of  the  railroads  a  continuous  series 
of  receiverships,  a  few  years  apart,  and  the  receiverships  have  not 
been  confined  to  this  period  of  w^ar  trouble,  but  there  have  been  lots 
of  them  in  other  times.  Now,  unfortunatel3^  a  receivership  does  not 
necessarily  solve  the  problem,  because  when  property  goes  in  the 
hands  of  a  receiver,  it  is  primarily  with  the  thought  of  saving  the 
property  that  it  is  managed,  and  it  is  like  when  the  street  railways 
get  so  hard  up  that  they  can  think  of  nothing  but  more  money ;  the 
emphasis  on  service  and  on  the  public's  side  of  it  i^  lost,  to  a  certain 
extent,  and  through  lack  of  jurisdiction  of  the  commission  in  some 
cases  the  tendency  to  try  to  save  as  much  as  possible  out  of  the  wreck- 
age has  been  permitted  to  leave  the  capitalization  of  the  company 
still  excessive  after  the  reorganization.  Tliat  is  true  of  the  receiver- 
ships that  the  New  York  companies  went  through  a  few  years  ago. 
Part  of  the  present  trouble  of  the  surface  lines  is  that  they  persisted 


•zev- 


1264    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

in  ovcrcaDitalization  contrary  to  the  advice  and  attempted  control 
of  the  pXic  service  commission.  Now,  I  do  not  know  how  a  house- 
ciS  can  be  had  except  through  receiverships,  but  I  do  not  think 
t  vft  r^eiverships  will  do  it  unles^  you  have  a  plan  and  are  ready  to 
D  ^\wrpk3o  effect  in  connection  with  the  reorganization. 
^  T^P  ri?AiRMAN  Your  first  remedy  is  municipal  ownership,  That 
means  the  purchase  of  the  property  a't  a  fair  value  and  that  fair  value 
would  eliminate  water? 

Mr.  Wii«ox.  Yes.  ■    -^      n 

The  Chairman.  That  is  you  theory,  is  it  not  { 

The  cXmaI?  Now.  can  not  the  problem  be  worked  out  under 
a  system  of  private  operation  and  private  ownership  as  well,  by  hav- 
hie  the  State  fix  the  value  of  these  properties  and  then  w-ork  out  a 
svftem  of  reflation  by  which  the  State,  or  the  municipality  and  the 
State  worS  in  cooperation,  would  establish  a  reasonable  rate  and 
Kvecrse  control  of  tV  accounting  system,  of  the  expenditures,  capi- 
taT  imZvement,  as  well  as  maintenance,  require  correct  reports, 
and  very  careful  control  over  the  service  (  .     ,,  .^      „*  j„ 

Mr  Wilcox.  The  difficulty  that  I  have  seen  in  the  matter  of  de- 

termining'r  really  getting  '^V'>*1'^"h  w  rjfk  "KX'bU 
fixing  of  the  investment  as  a  basis  which  will  btick,  shoit  ot  puD no 
owSiip  is  the  fact  that  thus  far  we  have  not  developed  any  satis- 
fr,?orv  wav    so  far  as  I  see,  of  really  getting  at  that  value,  and 
foS  the^^ue  e^' 5  through  the  pimess  of  taking  the  property 
In  a  rate  case  it  is  true  the  value  of  the  property  for  rate  purposes 
is  fixed   Now  iUs  also  true  that  laws  mav  be  passed,  and  in  fact,  laws 
are  in  effert  in  some  States  so  that  in  tL  reorganization  of  a  prop- 
etv  that  has  become  bankrupt,  the  securities  can  be  limited  to  actual 
voilie  as  found  by  the  commission.    But  there  is  not  any  satisfactory 
way   s^  fai  as  I  can  see,  of  determining  for  all  purposes  the  value 
S  the  property  short  of  determining  it  for  the  purpose  of  taking  it. 
It  may  be  that  some  plan  can  be  worked  out      I  have  not  tried  to 
wolk  out  or  think  out  the  kind  of  legislation  that  would  be  necessary 
for  that  purpose. 

ThrCHAiR^.  Prinwily  the  value  fixed  by  the  State  would  be 
for  rate-making  purposes ;  would  it  not? 

S;  ^HAi'lfMAN^'And  the  Interstate  Commerce  Commission  has 
now  been  engaged  for  four  years  in  valumg  the  railroads  for  rate- 
making  purposes? 

Mr.  Wilcox.  Primarily,  yes.  . 

The  Chairman.  It  has  announced  its  decision  m  five  cases.  Don  t 
vou  think  that  the  principles  applied  by  the  Government  might  rea- 
Bonablv  be  applied  to  street-railroad  systems?  _ 

UvWii^col  We  made  very  good  use  of  the  decisions  of  the  com- 
mission  in  the  Texas  Midland  case  in  our  testimony  before  the  New 
Jei-sey  Commission  in  trying  to  establish  the  principles  of  valuation 
which  were  very  different  and  much  more  conservative  than  the  prin- 
ciples which  have  been  used  by  the  company  in  it^  apPrais^l.  But 
the  company  said,  when  this  evidence  was  produced, '  Well,  has  any 
court  passed  upon  these  principles?  "  "  No ;  no  court  l^as  passed  upon 
them.     The  Interstate  Commerce  Commission  has  made  these  ap- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1265 

praisals;  they  are  tentative;  they  are  not  being  used  for  any  par- 
ticular thing."  The  companies  have  the  idea  they  can  not  get  them 
into  court  until  they  are  applied  to  some  particular  thing;  and  it 
is  only  then,  and  we  do  not  know  when  that  will  be,  that  the  Supreme 
Court  will  really  pass  upon  and  establish  the  principles  of  valuation 
as  they  have  been  outlined  by  the  Interstate  Commerce  Commission. 

The  Chairman.  Of  course  that  is  going  to  be  done  sometime  ? 

Mr.  Wilcox.  Yes. 

The  Chairman.  And  it  may  be  done  very  soon? 

Mr.  Wilcox.  Yes.  Those  principles  in  general  can  properly  bo 
applied  to  street  railways. 

The  Chairman.  Now,  when  those  principles  have  been  estab- 
lished by  the  Supreme  Court,  do  you  not  think  they  can  be  applied 
to  street-railway  property  generally? 

Mr.  W1X.COX.  Yes. 

The  Chairman.  Then,  the  legal  principles  having  been  established, 
the  question  of  values  is  merely  one  of  fact  ? 

Mr.  Wilcox.  Yes;  primarily.    Of  course,  the  facts  are  complex. 

The  Chairman.  Oh,  I  will  concede  that 

Mr.  Wilcox.  There  is  always  a  difference  of  opinion. 

The  Chairman.  We  have  to  rely  upon  human  judgment  in  these 
matters. 

Mr.  Wilcox.  Yes. 

The  Chairman.  That  being  so,  you  can  start  off  with  a  value  for 
rate-making  purposes  which  would  be  fair  to  the  company  and  fair 
to  the  public? 

Mr.  Wilcox.  Yes. 

The  Chairman.  That  being  so,  can  not  you  build  up  a  system  of 
regulation  which  is  going  tol>e  protective  to  all  interests  concerned 
and  result  in  good  service  to  the  public? 

Mr.  Wilcox.  You  can  not  give  the  kind  of  security  which  is  re- 
quired by  the  service-at-cost  plan  or  by  the  plan  which  I  have  sug- 
gested here,  if  you  call  it  a  plan,  without  a  contractual  relation  which 
is  not  contemplated  by  the  regulatory  statutes,  not  contemplated  by 
tlic  jreneral  scheme  or  State  regulation. 

The  Chairman.  If  you  are  going  to  have  a  cost-of-sefrvice  plan, 
would  it  not  be  practicable  to  give  that  power  in  the  State  in  cases 
where  a  corporation  operates  through  more  than  one  cit}^  or  village? 

Mr.  Wilcox.  The  power  of  the  State  to  make  a  contract  ? 

The  Chairman.  Yes. 

Mr.  Wilcox.  It  would  be  possible  to  do  that.  I  do  not  think  that 
it  would  be  advisable,  merely  because  a  street-railway  company  runs 
beyond  the  limits  of  the  main  city  which  it  serves,  to  take  away  that 
city's  poAver  to  participate  in  the  settlement  entirely.  I  think  that 
that  could  properly  be  handled  where  necessary  through  a  local  dis- 
trict somewhat  larger  than  the  municipality,  but  where  the  system 
is  a  State  system  or  practically  a  State  system,  of  course,  that  power 
could  be  vested  in  a  State  commission  the  same  as  in  a  municipality. 
But  it  is  contrary  to  the  established  plan  of  regulation.  It  means 
departure 

The  Chairman.  Municipal  ownership  may  or  may  not  be  ac- 
cepted by  the  American  people.  Your  plan  may  be  right.  Do  you 
think  that  it  will  come  about  very  soon? 

ieOC43°— 20— VOL  2 18 


12t>6     PROCEEDINGS  OF  FEDERAI^  ELECTKIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION.    1267 


Mr.  Wilcox.  I  think  that  the  only  question  is  as  to  whether  it 
will  be  brou<rht  about  right  or  whether  it  will  be  brought  about 
in  a  wrong  and  blundering  way.  I  think  it  is  inevitable  that  with- 
in a  comparatively  short  period  of  years  the  street  railways  of  this 
country  will  drop  into  the  public  lap.  I  do  not  believe  that  under 
any  scheme  that  we  can  devise  we  can  put  off  indefinitely  the  as- 
sumption by  the  public  of  the  responsibilities  and  the  obligations  of 
maintaining  this  service. 

The  Chairman.  Having  in  mind  the  abnormal  condition  in  which 
we  now  live,  would  you,  as  a  street-railway  expert  and  economist  of 
note,  advise  municipalities  to  buy  the  properties  at  this  time? 

Mr.  Wilcox.  I  would  advise  them  to  buy  properties  at  this  time 
if  a  proper  and  conservative  plan  can  be  and  is  worked  out  for  the 
determination  of  the  purchase  price. 

The  Chairman.  You  have  had  some  experience  in  that  over  in 
New  Jersey.    What  do  you  think  about  the  success  of  your  plan? 

Mr.  Wilcox.  Well,  Ave  have  not  finished,  we  have  not  got  the 
decision  of  the  commission  in  New  Jersey. 

The  Chair^^ian.  But  you  do  know  there  is  a  very  radical  differ- 
ence of  opinion  between  yourself,  the  commission,  and  the  railroad 
company  as  to  the  value  of  the  property  ? 

Mr.  Wilcox.  I  knoAV  that  everywhere  Avhere  valuations  are  made 
ex  parte,  eminent  engineers  succeed — after  they  get  through  the 
process  of  counting,  on  the  one  side,  subtracting  and  dividing,  and 
on  the  other  side  multiplying  and  adding — in  getting  values  that 
are  away  apart  and  the  process 

The  Chairman.  And  no  one  knows  to-day  just  how  much  credit 
the  courts  are  finally  going  to  give  to  the  cost  of  reproduction  less 
depreciation  or  to  the  abnormal  prices  which  now  exist,  in  work- 
ing out  that  plan? 

Mr.  Wilcox.  Yes ;  that  is  true. 

The  Chairman.  Realizing  the  motive  which  prompted  the  ap- 
pointment of  this  commission,  have  you  any  idea  what  form  of 
recommendation  it  should  make  to  the  President? 

Mr.  Wilcox.  I  do  not  believe  I  could  answer  that  question  off- 
hanil  any  better  or  any  differently  than  I  have  answered  it  in  my 
general  testimony  or  statement  of  views.  I  do  not  think  that  the 
commission  should  recommend  any  plan  which  would  have  for  its 
effect,  if  carried  out,  the  diminution  of  the  service  which  the  street 
railway  as  a  public  utility  must  render  to  the  cities.  Therefore 
I  do  not  think  any  recommendation  which  merely  says  these  com- 
panies neecl  more  money;  therefore,  let  every  city  and  every  State 
grant  them  increased  rates  when  they  ask  for  them,  would  be  a 
proper  recommendation.  I  do  think  that  the  commission  ought  to 
call  attention  to  the  fact  that  the  troubles  in  which  the  street-rail- 
way industry  finds  itself  are  in  part  the  result  of  old  causes  which 
still  survive,  and  that  in  many  cases  it  is  not  in  the  interest  of  the 
public  or  in  the  interest  of  investors  to  do  something,  anything, 
to  prevent  a  receivership.  Because  in  many  cases  a  receivership  is 
essential,  the  only  method  by  which  a  reorganization  to  put  the 
Ibusiness  in  a  particular  community  upon  a  sound  financial  basis 
can  be  effected. 


Commissioner  Meeicek.  Are  not  receiverships  rather  expensive 
usually?  Is  it  not  a  good  deal  like  burning  the  barn  in  order  to 
get  rid  of  the  rats  ? 

Mr.  Wilcox.  Well,  the  receivers  and  their  counsel  profit  by  them. 
But  I  do  not  know  any  way — here  you  have  in  every  property  cer- 
tain classes  of  financial  interests.  One  is  subordinated  to  another, 
and  then  to  another;  and  there  is  not  any  way  that  you  can  get 
those  interests  together  to  agi*ee  voluntarily  to  compromise  and  give 
up  the  things  which  they  think  they  have  a  right  to. 

Commissioner  Meeker.  But  following  that  up,  you  have  indicated 
that  receiverships  have  not  resulted  in  diminishing  overcapitaliza- 
tion. Oftentimes  the  result  of  receivership  has  been  to  crystallize 
water  into  firm  rock  of  capitalization. 

Mr.  Wilcox.  I  would  not  like  to  have  my  statement  overempha- 
sized, or  I  would  not  want  it  to  carry  more  than  I  intended  it  to 
carry.  Generally,  I  should  say,  receivership  results  in  some  reduc- 
tion of  capitalization.  But  often,  and  perhaps  generally,  it  does 
not  result  in  a  sufficient  reduction  of  capitalization  on  the  basis  of 
what  the  experience  and  the  industry  and  the  facts  of  the  particular 
case  warrant. 

Now,  that  limitation  of  the  result  of  receivership  can  be  gotten 
around  in  part  by  the  control  which  is  now  exercised  in  some  States, 
and  could  be  exercised  in  all  under  particular  authority  by  the  State 
commissions  in  connection  with  reorganizations.  In  the  case  of  New 
York,  when  the  reorganizations  took  place  8  or  10  years  ago,  the 
commission  attempted  to  control  it,  but  the  companies  resisted  it 
and  went  to  the  court  of  appeals  and  the  court  of  appeals  held  that 
under  the  public-service  law  as  it  then  existed  the  commission  had 
no  power  over  reorganizations. 

Now  it  can  also  be  in  part  controlled,  and  I  think  even  more  effec- 
tively, by  the  adoption  in  any  community,  in  a  State  or  in  a  city 
where  a  receivership  is  on  of  some  kind  of  a  permanent  policy  for 
the  settlement  of  the  street-railway  difficulty.  If  j^ou  have  a  pix)gram 
and  you  say,  "  Now  3  ou  can  have  so  and  so,  you  can  have  security  for 
your  investment,  you  can  have  a  guaranteed  return  through  a  flex- 
ible fare  or  through  subsidies  or  whatever  may  be  necessary,  if  you 
will  bring  your  capitalization  down  to  bed  rock,"  the  receivership  is 
an  occasion  which  can  be  made  use  of  to  effect  that.  If  you  do  not 
have  any  policy,  if  you  just  stand  off  and  let  it  take  its  course  and 
the  public  has  no  initiative  and  does  not  know  v\iiat  it  wants  to  do, 
just  lets  them  go  through  in  the  normal  course,  the  result  of  a  re- 
ceivership may  not  be  very  important  in  the  matter  of  reduciiK^ 
overcapitalization. 

The  Chairman.  Will  not  the  correct  valuation  and  the  establish- 
ment of  a  correct  regulation  policy  have  the  same  effect  witliout  the 
same  cost? 

Mr.  Wilcox.  Tlie  establishment  of  a  correct  valuation  and  cor- 
rect regulation  will  not  prevent  receivership.  It  may  precipitate 
it  if  the  valuation  that  is  made  with  the  rate  of  return  that  is  fixed 
is  such  that  the  company  is  not  permitted  to  earn  its  fixed  charges 
that  have  been, assumed  through  rentals  and  bond  issues,  and  so 
forth,  in  the  past.  Of  course,  that  very  process  will  force  a  receiver- 
ship. 


II 


1268    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Would  you  advise  this  commission  to  recommend 
the  elimination  of  street  paving  and  special  assessments  and  taxa- 
tion in  all  cases  where  it  was  possible  to  do  so  to  keep  down  rates  ? 

Mr.  Wilcox.  I  think  that  those  things  should  be  eliminated  as 
nn  alternative  to  an  increase  in  rat^s.  I  do  think,  however,  as  I 
said,  that  the  obligations  which  have  been  put  upon  the  companies 
or  which  the  companies  have  assumed  ought  not  to  be  just  merely 
lifted  without  being,  wherever  practicable,  made  a  part  of  the  estab- 
lishment of  this  nmdamental  fact,  namely,  the  determination  of 
what  the  value  of  that  property  is  and  the  determination  of  a  plan 
by  which  the  property  will  be  secured  in  the  future  and  the  serv- 
ice will  be  secured  and  a  permanent  policy  worked  out.  If  you 
just  say,  "  Here,  they  are  in  distress.  We  will  relieve  them  from 
all  their  obligations,  we  will  give  them  everything  and  wait  and 
work  out  a  permanent  policy  afterwards,"  you  will  have  the  same 
old  trouble  over  again. 

The  Chairman.  Do  you  think  one  of  the  functions  of  this  com- 
mission is  to  study  the  franchise  plan  and  make  a  recommendation 
of  some  form  of  franchise  containing  certain  general  principles 
that  can  be  applied? 

Mr.  Wilcox.  Well,  I  am  embarrassed  in  answering  that  question 
by  the  consideration  which  I  called  attention  to,  namely,  that  a 
franchise  has  become  a  scrap  of  paper  in  large  measure,  and  we 
have  got  these  conflicting  things.  The  street-railway  business  can 
not  be  saved  except  through  public  ownership  or  contracts  and 

The  Chairman.  Up  to  the  present  time  these  contracts  have 
largely  been  a  question  of  bargain  and  sale  and  agreement  between 
the  parties  ? 

Mr.  WiLcox.  Yes. 

The  Chairman.  In  which  case,  generally  speaking,  the  utility  has 
})ossessed  some  advantage  by  reason  of  its  superior  knowledge  and 
experience  ? 

Mr.  Wilcox.  Yes. 

The  Chairman.  If  a  Government  commission  should  outline  cer- 
tain general  principles  which  should  be  incorporated  in  a  fran- 
chise, would  not  that  be  a  considerable  benefit  to  the  community  in 
working  out  these  plans  ? 

Mr.  Wilcox.  It  undoubtedly  would,  if  coupled  with  it  was  a 
recommendation  of  a  change  in  the  utility  laws  so  that  franchises 
granted  and  contracts  entered  into  following  those  principles  could 
be  enforced. 

The  Chairman.  Now,  on  the  question  of  franchise,  would  you 
favor  recommending  an  indeterminate  permit  with  the  right  of 
the  municipality  to  purchase  as  one  of  the  principles? 

Mr.  AViLcox.  I  am  in  favor  of  the  indeterminate  permit,  provided 
that  the  plan  of  amortization  of  capital  out  of  earnings,  if  that 
again  becomes  possible,  is  taken  care  of.  I  do  not  favor  an  iiide- 
terminate 

The  Chairman.  On  that  point,  why  should  there  be  any  amortiza- 
tion of  capital  in  the  case  of  a  franchise  which  has  a  continuous 

life? 

Mr.  Wilcox.  Well,  you  see,  I  can  not  get  away  from  my  point 
of  view.    I  can  not  get  away  from  the  deep-settled  conviction  which 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1269 

I  have  formed  a  good  many  years  ago — and  everything  I  have  seen 
since  has  confirmed  it  as  far  as  I  am  concerned — 1  can  not  get  away 
from  the  conviction  that  ultimately  the  ownership — at  the  very 
least,  the  ownership — of  these  utilities  must  be  in  the  public,  and 
if  so  it  is  of  considerable  importance  that  a  policy  should  not  be 
adopted  which  prevents  a  municipality  from  making  a  start  through 
a  contract  with  the  company  tow^ard  the  purchase  by  degrees  of 
the  existing  plant. 

The  Chairman.  How  can  the  city  get  the  benefit  of  an  amortiza- 
tion plan  through  a  contract? 

Mr.  Wilcox.  In  two  ways.  The  city  can  provide,  as  here  in  New 
York,  with  this  famous  contract,  although  the  city  gets  the  worst 
of  it  in  certain  respects,  it  gets  this  advantage :  The  companies  under 
these  contracts  are  putting  $175,000,000,  maybe  $200,000,000,  I  am 
not  familiar  with  the  latest  figures  on  the  cost  of  their  equipment, 
j)art  into  construction  and  part  into  the  equipment  of  the  subways. 
Now,  those  contracts  provide  that  that  investment  shall  be  amortized 
out  of  the  6  per  cent  which  the  companies  take  out  of  the  earnings 
and  at  the  end  of  50  years  all  that  property  theoretically  maintained 
to  a  high  standard  of  efficiency,  becomes  the  property  of  the  city 
without  further  cost,  and  the  city  may  sweat  a  good  deal  in  the 
meantime,  maintaining  its  own  investment,  and  the  taxpayers  may 
have  to  contribute  a  lot,  but  the  fact  will  be,  unless  the  contract  is 
broken,  when  that  time  comes  the  subways  will  belong  to  the  city 
M  ithout  any  further  cost. 

The  Chairman.  Then  the  cities  can  make  a  contract  that  the  prop- 
erty shall  be  theirs  at  the  end  of  a  certain  time? 

Mr.  Wilcox.  Yes. 

Commissioner  Beall.  Does  it  not  come  down  to  this,  Mr.  Elm- 
quist:  That  it  is  just  a  rate  of  fare,  instead  of  making  a  contract 
they  make  such  a  return  as  the  company  is  entitled  to,  that  it  enables 
them  to  amortize ;  if  they  would  rather  have  it  in  reduced  fares,  they 
can  make  it  in  a  less  contract  ?    That  is  about  what  it  comes  down  to. 

Mr.  Wilcox.  Of  course  on  an  adjustable  contract  or  an  equitable 
cvontract  something  like  that  would  have  to  be  done,  say  it  is  5 
cents 

Commissioner  Beall.  You  would  have  to  have  a  higher  rate  of 
fare  if  you  were  going  to  amortize  the  cost  of  your  property.  That 
stands  to  reason. 

Mr.  Wilcox.  You  will;  but  the  difference  is  very  slight.  Six- 
tenths  of  1  per  cent  running  for  50  years  at  a  comparatively  con- 
servative rate  of  interest  compounded  will  wipe  out  an  investment. 
Now,  0.6  of  1  per  cent — that  is,  slightly  over  one-half  of  1  per  cent 
upon  the  investment.  Now,  the  difference  between  the  security  of  an 
investment,  of  the  bonds  secured  by  property,  where  the  capital  is 
reduced  by  amortization  so  that  it  is  always  well  below  the  actual 
visible  value  that  is  there,  under  ordinary  circumstances  I  think 
would  be  more  than  the  cost  of  amortization. 

The  Chairman.  Now,  Doctor,  if  this  commission  should  find  that 
the  patient  is  very  sick  and  needs  immediate  help  pending  rehabili- 
tation, what  can  we  do? 

Mr.  AViLCOx.  Wellj  you  know,  no  matter  how  much  we  disliked 
a  person,  how  bad  we  may  think  he  is,  if  his  life  is  in  danger,  we  for- 


II 


1270    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

get  all  about  his  faults  arid  rush  to  his  rescue.  A  doctor  is  not  sup- 
posed  to  inquii-e  into  tlie  morals  of  the  patient  that  is  about  to  col- 
lapse, without  help.  I  think,  however,  that  using  that  figure  of 
speech,  you  should  apply  it  not  to  the  companies,  but  to  the  industry. 
If  you  find  that  the  patient— the  industry— is  very  sick  and  is  about 
to  collapse  and  die,  vou  are  justified  in  doing  almost  anything  to 
save  it.  But  that  does  not  mean  that  you  are  justified  doing  things 
that  will  hinder  the  proper  ultimate  solution  of  the  pix)blem,  to  save 
the  present  managements  of  the  companies. 

The  CiiAiRMAx.  Now,  I  have  just  one  or  two  more  questions.  As 
between  a  cost-of-service  plan  and  regulations  by  commission,  which 
do  you  favor? 

Mr.  Wilcox.  I  would  very  much  prefer  the  pix)i>er  service-at-cost 
plan,  because  I  do  not  consider  that  the  commission  regulation  gets 
anywhei-e  along  my  line.  Commission  regulation  assumes  that  the 
thing  is  permanently  in  private  ownership  and  makes  no  i^rovision 
for  purchase  price  and  makes  no  provision  for  anything  of  those 
things  looking  to  what  I  consider  the  ultimate  solution. 

The  Chairman.  I  understand  what  you  think  the  ultimate  solu- 
tion OMght  to  be,  but  I  am  trying  to  fmd  out  from  you  what  you 
think  the  best  solution  is  of  the  private  operation,  because  that  is 
also  a  question  which  we  have  got  to  consider  because  it  is  here, 

Mr.  Wilcox.  Well,  take  the  Montreal  contract,  which  was  pre- 
pared with  a  good  deal  of  pains  by  the  Montreal  Commission,  and 
especially  two  members  of  the  commission  who  were  made  a  special 
committee  on  the  di-aft  of  the  contract,  who  had  before  them  the 
experience  of  the  principal  American  cities  that  had  tried  these  va- 
rious systems;  and,  at  the  same  time,  the  Montreal  Commission  was 
limited  by  the  statute  under  which  it  was  acting  so  that  it  could  not 
pi-ovide  what  I  think  is  essential  in  a  service-at-cost  plan,  namely, 
a  scheme  by  which  public  ownership  can  be  undertaken  and  the  com- 
pany discharged,  if  it  proves  incorrigible,  or  if  the  city  wants  to 
do  that,  short  of  the  end  of  the  franchise  i>eriod,  in  that  case  35  years; 
but  that  plan,  with  that  limitation,  and  also  with  the  limitation  of 
the  fact  that  the  commission  did  not  have  authority  to  fix  the  value 
of  the  property  for  ultimate  purchase,  but  could  only  fix  it  for  the 
rate  of  i*eturn  during  the  continuance  of  the  contract:  with  those 
limitations,  the  commission  attempted  to  work  out  the  best  plan 
possible  for  enlisting  a  private  company's  interest  in  operating  the 
street  railways  from  the  point  of  view  of  the  public  service;  and, 
while  the  settlement  has  manj-  faults,  the  valuation  is  too  high,  in 
my  opinion,  and  those  other  limitations  are  very  important,  I  think 
that  there  is  a  good  deal  in  the  Montreal  plan  that  is  worthy  of 

study. 

The  Chairman.  Do  you  think  the  principles  there  are  satisfactory  ? 

Mr.  Wilcox.  I  think,  in  general,  the  correct  principles  are  adopted, 
with  these  limitations  I  speak  of. 

The  Chairman.  Mr.  Ogburn,  vvill  you  see  that  the  commission  is 
provided  with  a  copy  of  the  Montreal  contract  ? 

Mr.  Ogbukn.  Yes. 

Commissioner  Beall.  I  can  get  that. 

The  Chairman.  Just  one  other  (juestion.  Doctor:  You  had  ?ome 
comment  with  resj^ect  to  holding  companies.     Is  theixi  any  menace 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1271 

to  the  holding  company  in  cases  where  the  properties  have  been 
valued  and  there  is  the  proper  regulation  and  supervision  of  the 
property  ? 

Mr.  Wilcox.  Is  there  any  menace  on  account  of  the  holding  com- 
pany ? 

The  Chairman.  Yes. 

Mr.  Wilcox.  Theoretically  there  is  none ;  but  we  find  this  situa- 
tion :  The  holding  company,  as  holder  of  the  stock  of  the  operating 
company,  enters  into  certain  obligations  which  legally  are  not  bind- 
ing upon  the  operating  company,  but  which  are  effective  because  the 
stockholders  of  the  operating  company  have  agreed  with  somebody 
that  they  will  note  vote  the  stock  for  doing  certain  things;  and 
therefoixj  we  have  a  hidden  control.  The  operating  company  is  no 
longer  a  free  agent  in  the  development  of  its  policy  in  its  responsi- 
bility to  public  regulation  and  various  things;  and  so  long  as  that 
is  true  you  have  a  situation  that  is  confused  and  baffling;  because 
the  regulatory  authority,  the  city  that  is  trying  to  negotiate  with 
the  company,  can  not  get  to  a  free  agent.  We  had  a  case  like  that, 
of  course,  with  the  Interborough,  where  the  Interborough  Metro- 
politan Co.  has  pledged  its  stock— where  the  stock  of  the  Inter- 
borough Eapid  Transit  Co.  is  pledged  with  the  Inter.-Met.  bonds, 
as  I  understand  it,  and  there  is  practically  a  guaranty  of  paying 
a  certain  dividend  on  the  Interborough  stock. 

We  had  it  in  the  Scranton  case,  where  the  holding  company  had 
made  a  certain  agreement  with  its  preferred  stockholders  as  to 
what  the  Scranton  Co.  could  do  in  the  matter  of  issuing  additional 
securities,  and  the  commission  sees  nothing  but  the  Scranton  Co. 
If  the  commission  wants  to  investigate,  if  the  municipalities  want 
to  investigate,  they  are  not  permitted  to  look  at  the  books  of  the 
holding  company;  they  arc  not  permitted  to  learn  anything  about 
it;  and  here  is  just  this  baffling  situation  where  there  is  a  hidden 
power  which  has  agreed  that  this  nominally  free  agent  shall  not 
do  a  particular  thing.  I  do  not  think  that  is  consistent  with  effective 
regulation. 

Commissioner  Gadsden.  Supix)se  it  was  an  individual  that  held 
that  stock:  Would  it  not  have  the  same  effect?  Suppose  some  one 
man  owned  it— owned  a  controlling  interest — would  you  not  have 
the  same  situation  ? 

Mr.  Wilcox.  If  one  man  owned  it,  and  had  pledged  the  stock,  we 
would  have  a  similar  situation. 

Commissioner  Gadsden.  Exactly  similar. 

Mr.  Wilcox.  That  is  true. 

Commissioner  Gadsden.  You  could  not  avoid  that,  could  you? 

Mr.  Wilcox.  You  would  have  a  similar  situation. 

Commissioner  Gadsden.  Surely. 

The  Chairman.  Is  it  your  intention,  Mr.  Wilcox,  to  leave  for 
New  York  to-night? 

Mr.  Wilcox.  It  is. 

The  Chairman.  You  have  no  objection  to  remaining  on  the  stand 
a  little  after  10  o'clock?  * 

Mr.  Wilcox.  I  have  not. 

Commissioner  Sweet.  That  will  have  to  be  made  retroactive. 


1272     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  We  are  ^-atefiil  to  you  for  your  willingness  to 
accommodate  us.  I  have  no  further  questions.  I  have  a  lot  of 
questions  that  I  would  like  to  ask  you,  but  I  w  ill  not. 

Commissioner  Sweet.  I  would  like  to  ask  you  just  two  or  three 
questions.  I  think  maybe  the  subject  has  been  covered  so  fully 
that  you  can  answer  them  rather  briefly,  probably,  because  they 
will  apply  to  some  of  the  questions  that  you  have  already  discussed. 
But  I  want  to  ask  you  some  few  things  that  are  not  perfectly  clear 
to  me.    One  thing  refers  to  the  matter  of  strikes. 

You  say  you  favor  the  unionization  of  railroad  employees  under 
certain  conditions,  but  that  you  would  in  some  way  prevent  strikes. 
Have  you  any  definite  plan  to  suggest  as  to  how  that  could  be 
carried  out? 

Mr.  Wilcox.  Well,  two  years  ago  or  three  years  ago — 1916 — when 
the  threatened  strike  of  the  brotherhoods  was  so  prominent  in  the 
public  mind 

Commissioner  Sweet.  Yes. 

Mr.  Wilcox.  And  scared  the  country;  and  we  had  strikes  in  New 
York,  considerable  work  was  done  toward  the  development  of  defi- 
nite plans  for  preventing  strikes  through  a  proper  scheme  of  legis- 
lation. 

That  work  never  was  can-ied  thi*ough,  because  the  war  came  on 
and  it  did  not  seem  appropriate  to  press  it. 

Commissioner  Sweet.  Upon  what  principle  could  that  be  done  ? 

Mr.  Wilcox.  You  can  not  prevent  an  individual  from  resigning 
his  job  when  the  conditions  of  the  work  are  no  longer  satisfactoiy 
or  the  conditions  of  employment,  except  that  you  can,  of  course,  pre- 
vent a  person  from  dropping  a  thing,  unless  he  has  sufficient  reason, 
without  warning;  but  you  can  not  prevent  and  you  could  prevent 
the  street-railway  people  if  they  did  not  like  their  jobs,  did  not  like 
their  position,  and  could  not  get  their  condition  improved,  from  all 
going  off  and  quitting  and  going  to  something  else;  but  you  can 
make  it  a  penal  offense  for  street-railway  employees  or  the  employees 
of  any  other  essential  industry  to  conspire,  through  concerted  action, 
to  resign  and  quit — that  is  not  it — ^but  to  stop  the  works.  They  do 
not  resign.  They  expect  to  go  back.  They  have  not  quit  their  jobs. 
But  to  call  a  strike  or  to  agree  at  a  particular  time  that  service  shall 
stop.  I  do  not  think  there  would  be  any  difficulty  from  the  theoreti- 
cal point  of  view  in  drafting  a  la^v  that  would  be  effective  as  far  as 
that  is  concerned.  But  there  are  great  difficulties  from  a  practical 
point  of  view. 

Commissioner  Sweet.  As  to  the  enforcement  of  it? 

Mr.  WiLCOx.  Yes ;  and  in  getting  the  sentiment 

Commissioner  Sweet.  And  proper  evidence,  perhaps. 

Mr.  Wilcox.  I  do  not  think  there  would  be  great  difficulty  in  re- 
gard to  that.  You  can  not  make  a  strike  effective  without  sufficient 
publicity  so  that  you  can  get  the  evidence  to  prove  the  strike. 

For  one  thing,  under  a  plan  like  that,  if  people  quit  work,  they 
"would  not  be  employed  any  more.  They  would  not  have  any  stand- 
ing. They  would  be  gone  if  they  quit  That  is  resignation.  It  is 
not  mei^ly  trying  to  hold  you  up. 

But  the  real  difficulty  is  in  getting  a  plan  that  will  be  recognized 
as  effective  in  removing  the  legitimate  cause  of  strikes,  so  that  the 
public  will  feel  and  the  men  will  feel  that  their  interests  have  been 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1273 

taken  under  the  public  wing  and  are  not  at  the  mercy  of  a  private 
employer  and  will  be  properly  protected. 

Now,  of  course,  they  may  not  get  what  they  want  in  a  particular 
thing;  but  if  a  procedure  is  established  by  which,  tlirough  their  or- 
ganized committees  and  the  fullest  publicity,  the  fullest  hearing  and 
investigation,  and  bringing  everything  to  bear  upon  public  opinion 
and  upon  the  established  authorities,  the  decision  is  against  them 
finally,  and  they  find  that  the  conditions  of  work  are  intolerable, 
then  I  can  not  see  any  way  but  that  they  have  to  quit — not  strike, 
but  quit. 

Commissioner  Sweet.  Would  you  have  in  the  same  legislation  a 
provision  for  arbitration,  or  some  other  means  of  adjusting  the 
trouble  ? 

Mr.  Wilcox.  I  certainly  would.     I  would  make  that  first. 

Commissioner  Sweet.  And  provide  particularly  that  they  must 
continue  to  work,  and  the  transportation  must  proceed  pending  this 
investigation  ? 

Mr.  WiLcox.  Yes. 

Commissioner  Sweet.  Have  you  any  idea  that  at  the  present 
time  the  people  of  the  United  States  are  prepared  for  or  would 
favor  municipal  ownership  of  street  railways? 

Mr.  Wilcox.  Oh,  yes. 

Commissioner  Sweet.  Do  you  think  that  if  it  were  submitted  to 
a  referendum  vote  in  the  United  States  that  that  would  be  the 
result? 

Mr.  WiLCOx.  I  perhaps  answered  too  readily.  I  think  that  the 
majority  of  people  in  almost  every  city  of  the  United  States  favor, 
abstractly,  municipal  ownei^hip,  and  if  the  issue  were  submitted  to 
them,  as  a  general  proposition — the  principle — they  would  vote 
for  it. 

The  difficulty  comes,  however,  in  getting  a  sufficient  public  senti- 
ment m  favor  of  paying  the  price  that  is  fixed  in  a  particular  case 
or  approving  the  particular  plan.  In  some  cases  you  have  to  have 
two-thirds  or  60  per  cent  to  issue  bonds,  and  in  some  cases  the  price, 
they  think,  is  exorbitant;  and  vou  may  have,  as  you  have  had  in 
Detroit,  the  people  vote  repeatedly  for  public  ownei-ship,  when  they 
were  voting  on  that  issue  abstractly,  and  then  turn  down  the  specific 
proposition  submitted  to  them,  because  they  did  not  think  it  was 
satisfactory. 

I  think,  however,  on  the  principle— I  do  not  think  there  would 
be  any  serious  doubt;  I  do  not  mean  that  every  citv  would  vote  that 
way,  but  I  think  the  great  majority  of  the  cities  would. 

Commissioner  Gadsden.  That  is  on  the  principle  that  has  fre- 
quently been  exemplified  throughout  this  country  of  people  voting 
for  prohibition  and  electing  a  wet  governor,  is  it  not? 

Mr.  WiLcox.  Possibly  so. 

Mr.  Warren.  And  they  do  not  like  it  when  they  get  it. 

Mr.  Wilcox.  There  has  been,  I  have  no  doubt,  a  considei^ble  shift- 
ing  in  both  directions  of  public  sentiment  as  a  result  of  the  Govern- 
ment control  of  the  railroads.  There  has  been  a  pretty  widespread 
reaction,  certainly  in  large  classes  of  the  community,  against  Gov- 
ernment control,  on  what,  I  think,  is  the  basis  of  an  inadequate  ex- 
periment and  inadequate  evidence ;  but  on  the  other  hand  ttiere  has 


li 


I 


I 


1274    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


been  a  great  shifting  of  a  perhaps  still  larger  class,  perhaps  lower 
down  in  the  social  scale,  and  that  is  ordinarily  more  or  less  voice- 
less through  the  ordinary  channels  of  publicity,  in  favor  of  public 
ownership,  I  think. 

Connnissioner  Sweet.  That  is  a  sort  of  socialistic  idea  to  some 
extent  ^ 

Mr.  Wilcox.  Well — labor. 

Commissioner  Sweet.  It  is  taught  by  socialists,  is  it  not? 

Mr.  Wilcox.  Oh,  that  is  true ;  yes.  It  is,  of  course,  a  part  of  the 
socialists-  plan ;  always  has  been. 

Commissioner  Sweet.  But  I  did  not  have  so  much  reference  to 
a  vote  upon  the  abstract  principle  as  I  did  upon  a  definite  plan 
that  would  result  in  the  kind  of  municipal  ownership)  that  you  are 
advoiating  and  that  you  believe  in. 

Mr.  W^iLcox.  After  I  left  Grand  Rapids  in  1906,  I  went  to  De- 
troit, and  my  principal  work  in  Detroit  was  trying  to  get  a  con- 
stitutional convention  that  would,  among  other  things,  establish 
municipal  home  rule  with  respect  to  public  utilities.  The  city  of 
Detroit  for  many  years  prior  to  that  time  had  been  striving  toward 
municipal  ownership  of  the  street  railways. 

Commissioner  Sweet.  Yes. 

Mr.  Wilcox.  And  it  could  not  even  get  a  chance  to  vote  on  the 
subject;  could  not  get  an  amendment  to  the  constitution  submitted 
so  that  the  people  could  vote  on  it. 

I  became,  at  that  time,  quite  familiar  with  the  Detroit  situation. 

Now,  the  fact  is  that  since  then  two  plans,  specific,  definite  plans, 
have  been  submitted  to  a  vote  in  Detroit 

Commissioner  Sw^eet.  And  voted  down? 

Mr.  Wilcox.  Each  of  them  required  a  60  per  cent  vote. 

Commissioner  Sweet.  And  they  did  not  even  get  a  majority? 

Mr.  AV11.COX.  The  first  one  got  a  majority,  I  think. 

Commissioner  Sweet.  Did  it? 

Mr.  Wilcox.  I  think  so,  but  not  60  per  cent.  It  was  not  a  large 
majority.  It  was  pretty  nearly  even.  The  first  one  was  voted  down. 
I  looked  into  it,  although  I  was  not  in  Detroit ;  I  looked  into  it  and 
it  was  voted  down.  Of  course  the  people  who  were  opposed  to  mu- 
nicipal ownership  on  any  terms  were  against  it.  Also  the  radical 
clement,  those  who  had  led  the  fight  for  municipal  ownership,  and 
who  wanted  municipal  ownership  theoretically  more  than  anything 
else,  went  against  it,  and  the  reason  they  had  was  that  the  price  was 
not  fixed  in  the  contract  and  they  were  left  to  the  tender  mercies  of 
the  Wayne  Circuit  Court  to  determine  what  the  value  of  the  prop- 
erty should  be. 

i  looked  into  the  matter  very  carefully,  and  if  I  had  been  in 
Detroit  at  that  time,  and  my  opinion  had  not  been  changed  by 
further  light  from  being  there,  I  would  have  given  strong  support 
to  that  settlement. 

Now,  time  passed  on,  and  this  last  spring  another  plan  was 
submitted  to  Detroit,  and  if  anything,  I  have  betome,  every  year 
that  has  gone  by,  a  more  convinced  advocate  of  public  ownership 
of  street  railways;  but  with  the  light  I  had,  if  I  had  been  in  Detroit 
this  last  spring,  I  would  have  voted  against  it,  because,  under  the 
conditions  that  have  arisen,  it  seemed  to  me  that  the  price  was 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1275 

exorbitant — too  much  to  assume,  under  the  conditions  that  have 
arisen. 

Coimnissioner  Sweet.  Is  it  not  a  fact  that  when  a  bond  proposi- 
tion is  presented  to  the  public  and  a  vote  is  taken  upon  it,  a  great 
many  people,  even  those  wlio  pay  no  taxes  at  all,  have  an  idea  that 
they  are  voting  an  incumbrance  upon  themselves,  and  on  general 
principles  opix)se  it?  Is  not  the  tendency  rather  to  oppose  than 
support  a  proposition  of  that  kind  ? 

Mr.  Wnxrox.  It  goes  by  streaks.  In  particular  cities  for  a  period 
of  time  every  bonding  proposition  will  be  voted  down,  and  then 
some  cha,mber  of  commerce  or  somebody  will  get  up  a  campaign 
for  public  improvements,  and  then  any  bonding  proposition  that 
is  submitted  will  be  voted  through. 

Commissioner  Swteet.  Do  you  recall  how  many  times  we  tried 
in  Grand  Eapids  to  Ijond  the  city  for  a  pure  water  supply,  and  it 
was  voted  down  time  and  again?     Do  you  remember  that? 

Mr.  Wilcox.  I  do  not  remember  the  number  of  times. 

Commissioner  Sweet.  Well,  it  was  done  several  times.  Of  course, 
thei-e  was  a  private  company  there,  the  Grand  Rapids  Hydraulic 
Co.,  that  either  secretly  or  openly  opposed  it;  but  that  situation 
would  ai'ise  in  most  communities  with  tlie  street  railroads,  would  it 
not^  in  all  probability,  if  they  did  not  want  to  sell  out? 

Mr.  Wilcox.  Yes;  there  would  be  an  influence  of  that  kind. 

Commissioner  Sweet.  There  would  be  a  tendency  there  to  do  what 
tliey  could  to  pre^-ent  it ;  and  the  D.  U.  R.  in  Detroit  has  done  that 
tl)ing? 

Mr.  Wilcox.  In  the  last  campaign,  I  judge  from  what  I  heard, 
that  they  kept  their  hands  off  pretty  well;  at  least  the  vice  president 
of  the  corporation,  reporting  to  his  Montreal  stockholders,  was  re- 
ported in  the  Montreal  papei^  to  have  said  that  whichever  way  it 
w^ent  they  were  all  right;  that  a  wry  satisfactory  price  had  beea 
establislied,  and  if  they  took  it,  all  right,  and  if  they  didn't  take  it, 
all  right. 

Commissioner  Sweet.  One  factor,  in  discussing  before  the  public, 
if  a  vote  was  to  he  taken  ujwn  the  question,  and  probably  one  that 
would  have  a  good  deal  of  weight,  it  seems  to  me,  would  be  the 
presentation  of  actual  instances  wliere  a  plan  had  been  tried  else- 
wliere;  for  instance,  if  you  were  conducting  a  campaign  for  munici- 
pal ownership,  you  would  refer,  as  you  have  to  us  hei-e  to-day,  to  the 
experience  of  Great  Britain,  of  the  cities  in  England  and  Scotland  ? 

Mi\  W^iLCOx.  Yes;  I  certainly  also  would  refer  to  San  Francisco. 

Conmiissioner  Sweet.  Yes.  Do  you  think  that  the  experience  of 
San  Francisco,  which  has  been  %^r^^  short,  comparatively,  and  the 
experience  of  the  cities  of  Great  Britain  would  weigh  as  much  in 
the  public  mind  of  the  average  American  citv  as  the  experience  of 
Cleveland  ?  ^ 

Mr.  WiLOOx.  Well,  the  ex}>erience  of  Cleveland  would  not  weigh 
against  public  ownership.  It  would  weigh  as  a  better  plan  that 
the  oixiinary  plan  under  private  ownei^hip. 

Commissionr  Sweet.  Tlie  street-railroad  system  of  Cleveland  is 
not  m  tlie  sit*4ation  that  the  genei-al  sti-eet-railroad  systems  of  the 
L'nited  States  are. 

Mr.  Wilcox.  That  is  true;  yes. 


12  7G     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Commissioner  Sweet.  And  the  people  tliere,  as  I  undei-stand  it,  are 
quite  well  satisfied  with  their  plan. 

Mr.  Wilcox.  Well,  this  spring  this  question  came  up:  Under  the 
franchise,  if  the  company  comes  within  15  years  of  the  expiration 
of  its  franchise,  the  city  loses  control  of  service,  and  the  company 
has  the  right  to  put  in  the  highest  fare  in  the  schedule,  irrespective 
of  what  the  cost  of  service  is.  When  they  came  up  to  the  point 
where  the  municipality  had  got  either  to  renew  the  franchise,  ex- 
tend it,  or  else  lose  those  advantages,  the  mayor  of  Cleveland  came 
out  strongly  for  municipal  ownership,  and  supported  and  had  sub- 
mitted a  proposition  to  the  council,  and  it  failed  of  passage,  as  I 
remember  it,  as  I  was  informed,  by  just  an  even  vote. 

Commissioner  Sweet.  That  and  a  few  other  details,  I  think,  have 
been  found  objectionable.  My  understanding  is  that  Secretary  Baker 
believes  thoroughly  that  that  is  the  best  plan,  with  certain  modifica- 
tions.   He  does  not  say  that  the  Cleveland  plan  is  perfect. 

Mr.  Wilcox.  Yes. 

Commissioner  Sweet.  He  thinks  their  experience  would  demand 
certain  amendments,  certain  changes. 

Mr.  W^iLCOx.  Yes. 

Commissioner  Sweet.  But  that  with  those  changes  it  comes  about 
as  near  the  ideal  plan  as  any  that  has  been  tried.  Don't  you  think 
that  this  commission,  without  being  as  drastic  as  to  go  to  the  full 
extent  of  now  recommending  municipal  ownership,  might  recommend 
a  plan  similar  to  the  Cleveland  plan,  with  these  amendments,  or  such 
as  we,  from  our  best  information,  consider  to  be  improvements  upon 
that  plan,  and  provide  in  it  that  the  very  thing  you  are  recommend- 
ing most  strongly,  that  a  valuation  shall  be  made  upon  the  property 
that  would  be  as  careful  and  as  conservative  as  if  it  were  made  for 
the  purpose  of  purchase;  recommend  that  the  legislation  that  would 
be  required  to  enable  the  city  to  make  the  purchase,  should  all  be 
prepared  in  advance,  with  the  view  ultimately  to  have  the  city  take 
over  that  property  at  the  valuation  agreed  upon,  and  in  the  mean- 
time, let  a  private  corporation  carry  it  on,  as  is  done  in  Cleveland, 
with  these  changes?  Would  not  that  possibly,  if  the  private  man- 
agement, private  control,  were  not  entirely  satisfactory,  give  the 
city  an  opportunity  to  take  it,  and  one  that  it  naturally  would  resort 
to  without  any  great  amount  of  friction  or  objection  on  the  part  of 
the  people  of  the  community?  And  would  it  not  bring  about  the 
result,  in  case  satisfactory  results  were  not  obtained  under  private 
control,  rather  better  than  to  now  attempt  to  at  once  jump  right 
into  municipal  ownership? 

Mr.  Wilcox.  Oh,  well,  I  recognize  perfectly  that  preparation  for 
municipal  ownership  is  not  something  that  can  be  done  overnight, 
excepting  in  isolated  communities ;  that  it  is  a  matter,  at  the  shortest, 
of  years  to  get  the  obstacles,  the  legislative  and  constitutional  and 
financial  obstacles,  cleared  away  so  that  it  is  practicable  for  the  cities 
to  take  the  street  railways  over.    That  is  the  long  job. 

In  the  meantime,  the  service  has  got  to  go  on,  and  it  has  got  to  go 
on  in  most  cases  under  private  management. 

Now,  a  complete  program,  such  as  you  suggest,  that  does  not  put 
off  the  things  that  take  a  long  time  to  get  through,  but  makes  them  a 
part  of  a  program  which  has  a  temporary  or  immediate  object  in 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1277 

easing  the  situation  in  the  meantime  is,  of  course,  a  program  that  I 
could  not  oppose,  and  would  have  to  support.  It  is  the  kind  of  a 
thing  that  is  essential.  You  can  not  jump  from  here  to  a  distant  goal 
without  tfaverang  the  road  between. 

Commissioner  Sweet.  I  think  that  is  all. 

The  Chairman.  Doctor,  we  are  very  grateful  for  your  most  inter- 
esting and  valuable  testimony,  and  I  trust  we  have  not  worn  you  out. 

Mr.  Wilcox.  Not  at  all.    It  has  been  a  great  privilege  to  be  here. 

The  Chairman.  It  is  not  the  ordinary  Washington  experience  to 
run  witnesses  from  10  o'clock  in  the  morning  until  10  o'clock  at  night. 

Mr.  Warren.  I  should  like  to  have  asked  you  some  questions;  your 
statement  was  very  interesting.  However,  I  feel  that  I  ought  not  to, 
and  I  will  not. 

Commissioner  Sweet.  I  would  be  willing  to  sit  15  minutes  longer 
to  give  Mr.  Warren  a  chance  to  ask  his  questions. 

Mr.  Warren.  I  do  not  think  I  ought  to.  I  do  not  think  they  are 
very  material.  But  the  testimony  was  so  interesting  that  I  should 
like  to  have  asked  some  questions. 

Commission  Meeker.  Would  it  not  be  better  to  recall  Mr.  Wilcox 
at  a  later  period,  if  it  is  desirable  to  hear  him  further  ? 

The  Chairman.  Would  you  be  willing  to  come  down  here  some- 
time, if  we  have  hearings  at  some  future  time.  Doctor? 

Mr.  Wilcox.  To  express  a  different  view  or  simply  more  of  it  ? 

The  Chairman.  Of  course,  we  would  not  expect  you  to  express  a 
different  view,  but  if  the  commission  desires  to  examine  you  on  some 
of  these  questions  later  on,  in  view  of  other  testimony  that  may  be 
received,  would  you  be  willing  to  come  down  again  ? 

Mr.  Wilcox.  I  shall  be  glad  to  do  so,  if  I  can  arrange  it,  and  I 
have  no  doubt  that  I  could.  It  might  be  necessary  to  fix  a  date  some- 
what to  suit  me. 

The  Chairman.  Certainly. 

(Whereupon,  at  10.45  o'clock  p.  m.,  an  adjournment  was  taken  until 
to-morrow,  August  14,  1919*  at  10  o'clock  a.  m.) 

Washington,  D.  C,  August  ^4, 1919 — 10  a,  m. 

Met  pursuant  to  adjournment. 
Present:  Parties  as  before. 

The  Chairman.  We  are  ready  to  proceed.  Will  you  please  go 
ahead,  Mr.  Nixon,  and  give  your  statement  in  your  own  way  ? 

STATEMENT  OF  MR.  LEWIS  NIXON. 

Mr.  Nixon.  You  perfectly  understand,  of  course,  that  there  have 
been  certain  situations  which  have  required  practically  all  my  time 
in  the  recent  past,  so  that  it  has  been  impossible  for  me  to  prepare 
to  any  extent  for  this  hearing. 

The  street-car  situation  in  New  York  at  present  is  an  entangled 
one.  We  have  about  60  operating  companies,  about  35  holding  com- 
panies, and  these  are  expressed  in  three  great  systems. 

A  part  of  the  Interlx)iK)ugh  is  in  the  hands  of  the  receiver — the 
surface  roads.  The  Brooklyn  Rapid  Transit  in  its  entirety  is  in  the 
hands  of  a  receiver. 


1278     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMTSSIOK, 

Those  concerned  in  service  have  to  consider  not  only  a  safe,  de- 
pendable, and  cheap  service,  but,  in  view  of  the  fact  that  bankrupt- 
cies always  lead  to  deterioration  in  extent  of  service,  and  in  general 
running  down  of  equipment,  naturally  the  possibility  of  further 
bankruptcies  or  receiverships  must  engage  the  attention  of  the  com- 
mission. 

The  United  States  Govemment  has  $17,000,000  of  the  loan  cer- 
tificates of  the  Brooklyn  Rapid  Transit,  out  of  a  total  of  $57,000,000. 
The  securities  are  spread  throughout  the  city,  practically  through- 
out the  country.  Large  holdings  are  in  the  hands  of  the  insurance 
companies,  and  in  the  savings  banks.  Consequently  it  is  a  matter  of 
extreme  imix)rtance  that  further  bankruptcies  shall  be  prevented. 

Naturally,  too,  with  the  division  of  operation,  methods  of  financ- 
ing have  been  different.  After  the  contract  which  gave  the  Brook- 
lyn Rapid  Transit  large  differentials,  which  I  shall  explain  later, 
and  a  large  income,  very  large  dividends  were  declared. 

The  handling  of  the  Interboroiigh  was  along  more  conservative 
lines,  and  uj)  to  the  1st  of  this  July  they  had  a  surplus  which  en- 
abled them  to  pass  the  1st  of  July  without  a  i^ceivership.  I  very 
much  fear  that  they  can  not  pass  the  end  of  tlie  year.  Naturally 
it  has  engaged  the  attention  of  all  those  who  have  to  consider  the 
railway  situation  in  the  city  of  New  York  to  find  some  means  of  pre- 
venting furtlier  receiverships  and  bankruptcies,  and  to  aid  those  al- 
ready m  bankruptcy. 

The  labor  situation  also  confronts  us  in  a  menacing  way.  We  have 
been  able  to  bring  about  an  adjustmejit  of  the  labor  difficulties  of  the 
Brooklyn  Rapid  Ti^nsit,  and  it  may  be  of  interest  to  you  to  know 
something  of  that. 

The  Brooklyn  Rapid  Transit,  under  the  receiver,  had  i-efused  to 
recognize  the  unions,  but  had  amon^  its  employees  a  union.  They 
dealt  with  the  committee  of  this  union,  but  Receiver  Garrison  re- 
fused to  recognize  the  Amalgamated  Association,  saying  they  had 
but  a  meager  of  the  total  number  of  his  men. 

This  union  insisted  upon  a  i*ecognition  and  brought  about  a  strike. 
The  strike  in  a  few  days  brought  about  intolerable  conditions,  and 
had  to  be  adjusted.  . 

At  a  meeting  a  basis  of  discussion  was  obtained  by  all  the  parties 
agreeing  to  submit  all  questions  except  the  recognition  of  the  union 
to  arbitration.  As  the  basis  of  the  discussion,  the  rexieiver  was  asked 
to  at  least  give  the  same  measure  of  recognition  to  the  Amalgamated 
Association  union  as  was  given  to  the  Brotherhood  of  Locomotive 
Engineers,  the  smaller  union,  which  took  in  some  of  his  men,  upon 
the  understanding  that  they  should  show  that  they  controlled,  on 
midnight  of  the  Stli,  which  was  the  day  before  this  compromise  was 
suggested,  at  least  n  majority  of  all  the  trades  and  occupations 
which  would  naturally  come  within  the  scope  of  membership  of  this 
association. 

Tlie  determination  of  the  51  per  cent,  or  excess  of  50  per  cent,  was 
left  to  Federal  Judge  Julius  M.  Mayer,  who  has  from  the  first  en- 
deavored to  support  the  credit  of  these  various  transit  companies, 
and  who  has  used  every  effort  that  seems  possible  with  his  great 
office  to  conserve  the  interests  and  sustain  the  financial  strength  of 
all  these  various  companies. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1279 

The  division  of  the  percentage  was  left  to  Judge  Mayer  and  the 
commissioner  of  public  service. 

This  has  been  done,  and  the  matter  has  now  gone  to  arbitration. 
The  arbitration  committee  will  consist  of  one  member  of  the  union, 
the  receiver  or  some  one  to  whom  he  delegates  his  powers,  and  a 
third  person  to  be  chosen  by  the  consent  of  both. 

We  had  hoped  that  the  results  of  the  Brooklyn  Rapid  Transit 
strike  would  be  awaited  before  further  troubles  began.  I  am  still 
hopeful,  because  the  arbitration  committee  was  accepted,  not  only 
for  the  immediate  troubles  but  to  cover  future  troubles,  and  all  these 
matters  will  be  taken  up  immediately. 

That,  in  effect,  was  the  general  settlement. 

The  Brooklyn  Rapid  Transit  was  running  behind  to  such  an  extent 
in  its  returns,  and  also  the  New  York  Raihvays,  a  subsidiary  of  the 
Interborough,  that  it  was  essential  that  some  relief  be  given. 

While  no  one,  of  coui'se,  can  really  definitely  estimate  the  effect 
of  any  extra  charge,  there  was  an  opportunity  presented  to  study 
not  only  the  cost  of  such  extra  charge  upon  the  total  number  carried 
but  to  provide  some  measure  of  relief.  In  consequence  the  public- 
service  commissioner  took  upon  himself,  clearly  under  the  right 
winch  he  is  satisfied  comes  within  his  powers,  to  grant  a  2-cent 
charge  for  transfers  at  all  points  in  Brooklyn  and  on  the  New  York 
railways  that  were  not  covered  by  particular  franchise  requirements 
to  give  free  transfers. 

The  estimate  is  that  this  will  provide  about  $750,000  in  Manhat- 
tan, and  about  $1,250,000  in  Brooldyn. 

We  ai*e  naturally  awaiting  the  first  month's  report  with  great 
interest. 

This  charge  has  not  been  unpopular.  The  people  have  accepted  it 
practically  without  complaint,  realizing  the  absolute  necessity  of 
raising  money  if  the  service  was  to  continue. 

However,  it  is  being  vigorously  contested  by  the  city,  and  at  the 
request  of  the  city  government  a  hearing  was  ^ven,  and  under  the 
conditions  of  the  hearing  they  presented  certain  arguments.  Their 
brief,  which  will  be  received  in  due  time,  has  not  reached  the  com- 
mission. 

I  expect  the  transfer  system,  as  modified  in  this  way,  to  continue, 
as  it  is  most  essential  that  it  should  continue. 

We  are  now  faced,  as  I  say,  with  the  necessity  of  forcing  or  bring- 
ing about  some  more  return  for  the  Interborough  between  now^  and 
the  1st  of  January,  1920,  or  we  shall  be  faced  wath  a  very  similar 
situation  to  that  which  confronts  us  with  the  Brooklyn  Rapid  Tran- 
sit.   How  this  is  to  be  brought  about  has  not  as  yet  been  determined. 

The  contracts  are  clear  that  a  continuous  ride  shall  be  made  for  5 
cents.  To  just  w^hat  extent  power  may  be  given  to  modify  this  charge, 
by  decisions  of  the  Supreme  Court,  has  not  yet  been  determined. 

That  there  must  be,  if  we  are  to  escape  the  consequence  of  further 
receiverships,  a  modification  in  charges  for  traffic  which  will  bring 
about  a  further  return,  is  unquestioned. 

The  great  system  of  New  York,  with  its  transfers,  has  taken  a 
number  of  yeai^s  to  reach  a  high  state  of  efficiency,  and  it  was  with 
extreme  regret  that  the  transfer  charge  was  put  into  effect. 

The  general  desire  of  the  commission  is  that  a  modification  of 
existing  contracts  shall  be  brought  about,  both  sides  making  con- 


II 

il 


I 


1280    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1281 


cessions.  It  is  true  that  the  various  contracts  as  made,  or  particu- 
larly the  dual  contracts,  socalled,  were  strongly  criticised.  To  go 
into  all  the  details  as  to  the  need  of  money  at  that  time,  as  to  tl)e 
power  of  the  city  to  supply  it,  and  as  to  the  risk  and  obligations  of 
those  who  supplied  practically  $160,000,000,  would  take  entirely  too 
long,  and  is  pretty  well  known  to  the  general  public,  as  it  is  now. 
Suffice  it  to  say,  these  contracts  have  been  bitterly  criticised  as  being 
entirely  unfair,  especially  in  w^hat  is  called  the  differentials.  The 
diffei-entials  represented,  in  the  case  of  the  Interborough,  the  average 
receipts  for  1910  and  1911  on  the  elevated  roads,  and  these  were 
fixed  as  a  definite  charge  which  had  to  be  paid  from  returns  to  them. 

In  the  case  of  the  Interborough  it  amounted  to  about  $6,335,000. 

In  the  case  of  the  Brooklyn  Kapid  Transit,  $3,500,000,  not  based 
upon  actual  figures,  but  upon  prospective  profits  in  some  measure. 

These  preferentials,  of  course,  together  with  taxes,  maintenance, 
and  the  various  other  charges  which  are  associated  with  all  transit 
companies,  are  paid  before  the  city  of  New  York,  which  will  in  the 
end  put  in  over  $230,000,000,  is  able  to  get  any  return  upon  its  in- 
vestment. 

Whether  these  contracts  do  represent  exorbitant  charges  can  not 
be  passed  upon  by  the  commission,  as  the  contract  was  made  with  the 
city  government,  and  they  are  the  ones  who  must  modify  it,  if  it  is 
modified,  unless  it  is  decided  that  the  commission  has  the  right  to 
modify  fares. 

In  considering  the  question,  my  first  thought,  of  course,  was  that 
if  there  were  a  modification  it  was  essential  that  the  charges  of  the 
interest  upon  the  bonds  of  the  city  of  New  York  should  be  advanced, 
in  a  measure.  This  necessarily  would  be  by  subordinating  some  of 
the  charges,  which  now  go  first  to  the  operating  companies. 

According  to  the  comptroller  of  the  city,  the  city  of  New  York 
is  near  its  debt  limit ;  so  much  so  that  there  w^as  a  doubt  in  his  mind, 
officially  expressed,  as  to  whether  even  enough  money  could  be  raised 
in  the  early  future  to  complete  the  subways.  Hence,  if  we  could  re- 
lease large  or  small  blocks  of  these  bonds,  by  modification,  we  would 
then  make  these  bonds  self-supporting  and  automatically  take  them 
out  of  the  debt  limit,  and  enable  the  city  to  complete  this  beyond 
question. 

As  to  the  earnings  of  this  great  system  which,  when  completed, 
according  to  present  plans,  will  cover  636  miles  of  single  track — 
equal  in  the  aggregate  to  Chicago,  Paris,  and  London;  and  Ham- 
burg, Berlin,  Boston,  and  Philadelphia,  in  the  aggregate,  amount  to 
only  one-quarter  of  this — I  am  very  hopeful. 

In  some  cases  in  Brooklyn  bodies  of  passengers  are  handled  even 
three  times  to  get  them  to  Manhattan,  i  ou  will  understand  that  the 
transit  systems  of  New  York  bring  passengers  from  all  quarters  of 
this  greater  city  into  a  space  of  activity  practically  extending  from 
Fifty-ninth  Street  to  the  Battery,  which  is  one-fortieth  of  the  total 
area  of  the  city.  Here  you  will  find  the  amusements,  the  nerve 
center  of  manufacturing  and  commercial  activity,  and  to  this  great 
center  a  great  traffic  is  carried  six  days  in  the  week:  We  have  been 
carrying  on  the  average  about  2,000,000,000,  the  gross  receipts  of 
which,  as  you  will  see,  will  be  $100,000,000. 

The  normal  increase  in  New  York  has  been  about  80,000,000  a 
year.    A&  soon  as  the  influence  of  the  war  became  effective  this  fell 


down  to  about  40,000,000,  and  in  1918  was  20,000,000  less  than  it 
was  in  1917. 

This  great  increase  in  traffic  is  surging  back ;  and  we  must  under- 
stand that  we  have  to  take  care  of  it — not  only  the  volume  of  traffic 
that  we  had  at  the  beginning  of  the  war,  but  we  must  make  up  for  the 
loss  due  to  the  war  and  also  take  care  of  an  even  greater  normal 
increase. 

When  all  the  connecting  links  are  supplied,  so  that  the  plan  of 
operation  of  this*  great  system  can  be  brought  into  effective  work, 
I  look  to  see  an  even  less  charge  than  the  one  which  is  now  discussed. 

Of  course,  if  a  man  has  bien  receiving  a  certain  wage,  and  the 
standard  of  living  increases  enormously,  if  he  niust  continue  at  that 
wage  we  can  expect  a  reduction  in  his  standard  of  living.  In  a 
similar  way,  if  we  have  been  expecting  to  get  service  at  5  cents,  if 
it  must  be  continued,  there  will  be  depreciation  of  service. 

This  matter  of  a  solution  of  this  problem  can  not  be  arrived  at 
without  great  opposition.  The  city  government  is  committed  to 
municipal  ownership.  Frankly,  my  conception  of  the  problem  is  that 
in  the  fullness  of  time  municipal  ownership  will  come.  I  think  it 
will  be  caused  by  the  fact  that  in  a  great  city  like  New  York  it  is 
impossible  to  face  the  consequences  of  only  one  tribunal  to  which 
the  employees  can  appeal  for  the  settlement  of  differences  or  the 
adjustment  of  grievances;  that  is,  the  instrument  of  a  strike;  and 
that  must  be  stopped  and  subjected  to  some  form  of  arbitration 
which  is  unquestionably  in  the  hands  of  the  public  generally. 

At  the  present  time  we  should  require  enabling  acts  of  the  legis- 
lature to  bring  about  municipal  ownership.  It  may  be  that  some 
method  of  ownership  by  the  public,  with  municipal  operation,  shall 
come.  With  this  there  must  come  a  clear  conception  of  the  fact  that 
experts  in  this  line  can  not  be  subjected  to  the  possibilities  of  change 
or  the  limitations  as  now  exist  in  the  civil  service. 

The  handling  of  these  great  systems  requires  men  of  great  attain- 
ment. Throughout  this  country,  when  men  of  capacity  and  ability 
in  this  line  have  shown  such  ability,  they  have  been  brought  to  New 
York ;  and  it  naturally  follows  that  ibhe  accident  of  political  appoint- 
ment can  not  take  the  place  of  such  selective  choice  of  ability  through- 
out the  Nation. 

The  city  of  New  York  is  close  to  its  debt  limit,  and,  of  course, 
could  not  furnish  the  $600,000,000  or  $800,000,000  that  would  be 
necessary  to  purchase  these  lines. 

We  have  no  method  at  present  for  the  condemnation  of  land, 
outside  of  that  taken  for  water  purposes,  that  will  clearly  meet  the 
needs  of  these  conditions,  and  the  fact  that  franchise  rights  might 
be  considered  as  property  would  probably  make  it  extremely  diffi- 
cult for  any  power  at  the  present  time  to  take  over  these  properties 
and  pay  for  them,  even  if  the  money  were  forthcoming. 

Hence  it  will  be  a  subject  for  the  wisest  consideration  by  the 
legislature,  and  the  means  and  methods  of  condemnation  of  such 
properties  have  got  to  be  set  forth  in  such  a  way  as  to  make  our 
course  perfectly  clear  in  doing  so. 

Some  cities,  of  course,  have  issued  bonds  for  such  utilities,  based 
upon  the  property  itself,  such  property  in  operation  to  revert  to 
the  owners  of  the  securities  underlying  in  case  of  default.    Others 


II 


160643"— 20— VOL  2- 


-19 


1282     PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 


have  been  based  upon  the  gioss  earnings  for  security.  In  any  event 
this,  as  you  see,  will  require  new  lepfislation. 

The  city  govei^nment  has  said  that  the  clear-cut  contract  was  made 
tlnough  \vhich  these  various  companies  agreed  to  furnish  service  at 
5  cents  with  universal  transfers;  that  if  they  find  they  can  not  do 
this  they  should  retire  from  the  operation  and  turn  the  whole  thing 
over  to  the  city,  and  that  the  city  should  then  run  it. 

I  imagine  that  if  the  companies  themsehTs  wore  willing  to  do 
this  those  who  have  got  real  money  in  these  great  propeities,  i-ep- 
resented  by  bond  holdings,  would  ask  for  receivei'ships ;  so  that  any 
such  voluntary  relinquishment  is  impossible  at  the  present  time, 
and  is  not  a  suDJect  for  discussion. 

1  had  a  plan,  which  I  gave  to  the  press;  and  to  save  time  I  brought 
along  the  clipping  as  to  the  means  by  which  I  think  this  matter 
should  he  adjusted. 

Pei7)etual  franchises,  giving  control  of  the  roads,  naturally  bar 
an  adjustment.  So  in  any  and  all  plans  there  should  be  a  relin- 
quishment of  the  perpetual  franchise,  and  this  should  be  replaced 
by  term  fianchises,  or  ones  that  can  be  terminated  at  such  time  and 
under  such  conditions  as  the  city  might  desire. 

Inhere  is  another  question  which  has  given  great  concern  in  New 
York,  and  that  is  the  leases  underlying  many  of  these  contracts. 
You  will  understand  that  if  you  faced  a  situation  where  a  committee 
to-day  would  have  to  determine  as  to  price,  the  people  who  might  be 
willing  to  accept  this  price  might  find  that  their  underlying  obliga- 
tions were  greater  than  the  price  they  might  be  willing  to  accept. 
Take  the  case  of  Eighth  Avenue:  There  a  lease  amount  of  $215,000 
a  year  was  paid.  It  is  perfectly  true  that  the  New  Yoi*k  Railways 
Co.  promptly  put  in  a  number  of  millions  to  bring  this  system  to 
efficient  operation,  so  that  the  charge  that  these  leases  were  most 
exorbitant  and  that  they  represented,  on  $1,000,000  capitalization, 
an  income  of  21^  per  cent,  was  not  exactly  a  fair  one.  But  yet,  in 
face  of  direct  statements  from  the  commission,  as  represented  by 
myself,  that  the  leases  were  not  even  being  paid,  this  was  still  used 
as  an  argument  before  the  general  public.  But  in  any  event  the 
leases  must  be  modified,  and  I  am  hoping  that  there  will  })e  in  all 
States,  as  I  see  the  necessity  so  clearly  here,  and  power  given  to  the 
rei>Tilatory  commission  or  whoever  does  have  the  power  within  the 
St4ite,  even  if  it  is  the  legislature,  to  say  what  a  fair  amount  is  for 
lenses  of  this  sort. 

There  must  be  another  consideration  of  great  importance.  I  have 
told  you  that  one  great  company  was  saving  and  that  the  other 
dispersed  its  returns  in  the  form  of  dividends.  I  feel  that  there 
must  be  also  some  power  in  the  regulatory  commission  which  will 
limit  the  amount  to  be  distributed  in  the  form  of  dividends  upon 
public  service  stocks  and  force  in  that  way  a  surplus  which  will  take 
care  of  the  rainy  day  as  far  as  possible. 

Xo  definite  and  positive  and  unquestioned  valuation  is  in  existence 
of  the  various  properties  in  New  York  City.  This  should  have  been 
made  and  will  be  made.  Then  any  adjustment,  if  we  had  such  a 
valuation,  could  be  proceeded  with  clearly  and  surely  to  a  fair  and 
equitable  solution  of  the  many  questions  which  will  be  involved  in 
any  reorganization  or  any  amendment  of  existing  contracts. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1283 

Now,  as  to  the  fare :  New  York  Cit.y  has  suffered  extreme  conges- 
tion in  the  past  on  account  of  the  iacilities  for  travel  presented. 
You  all  know  that  in  a  city  where  jou  have  no  means  of  carrying 
the  public  at  a  low  rate  and  people  have  to  walk  you  probably  expect 
the  liinitation  of  that  city  to  be  about  4  miles  from  any  central  point 
of  activity,  and  with  hoi*se  transportation  from  7  to  8  miles.  Be- 
cause what  I  am  looking  at  now  is  that  there  seems  to  be  an  upper 
limit  of  development  based  upon  the  fact  that  to  your  place  of 
activity  you  should  not  exceed  an  hour's  travel.  I  think  you  will 
find  that  you  can  use  that  as  an  axiom  or  basis  upon  which  to  place 
many  of  your  general  conclusions. 

We  now  carry  men  20  miles  and  over  for  5  cents.  I  need  not  tell 
you  what  the  railroads  of  this  country  charge  for  that.  It  means 
that  we  must  conserve  the  short  haul  in  order  to  take  care  of  this 
long  haul  and  prevent  congestion  developing  in  the  city  throughout 
its  entire  area. 

So  rapid  have  been  the  improvements  in  transit  that  it  may  be 
that  the  present  outskirts  of  the  city  of  New  York  will  represent 
that  area  of  dense  activity  and  that  the  inventive  genius  of  this  coun- 
try will  bring  even  to  the  center  which  those  people  seek  great  out- 
lying areas  much  farther  than  any  that  now  are  in  contemplation. 
Probably  this  is  in  the  minds  of  those  who  have  put  mone^  into  such 
systems.  They  may  have  to  conclude  that  within  a  reasonable  time 
they  must  clear  off  their  investment  on  account  of  the  wonderful 
development  which  we  are  now  facing.  I  have  nothing  in  particular 
in  mind,  although  I  have  considered  it  as  to  how  this  will  be  brought 
about.  But  I  do  say  that  New  York,  no  matter  how  fast  it  builds 
or  develops  its  present  facilities,  will  find  itself  overwhelmed  and 
thajt  within  the  engineering  capacity  of  this  country  we  have  not 
the  power  to  even  keep  up  with  the  demands  which  are  now  forced 
upon  us. 

.  Now,  as  to  the  flexible  fare.  I  think  that  if  a  flexible  fare  were 
adopted  under  tlie  proper  conditions  with  a  give-and-take  feeling  on 
the  part  of  the  traction  companies  and  of  city  government  within 
three  or  four  years  with  universal  free  transfers  we  should  be  able 
to  sell  tickets  in  bunches,  say,  12  for  50  cents  and  possibly  even 
lower.  At  present  with  these  connecting  linl«  completed,  if  present 
conditions  prevail,  we  are  unable  to  look  forward  to  any  reduction 
below  the  6-cent  fare. 

I  put  this  clearly  as  it  struck  me  in  this  statement  I  refer  to,  and 
I  say  "  a  flexible  fare  should  be  established  whereby  fares  should 
be  automatically  adjusted  to  meet  the  cost  of  service,  together  with 
a  reasonable  return  both  to  city  and  investors  upon  tlie  agreed  fixed 
valuations  and  upon  the  cast  of  additions,  extensions,  and  improve- 
ments, the  variation  in  fare  to  be  secured  merely  by  maximum  and 
minimum  limitations  in  a  surplus  fund,  the  operation  of  which  shall 
be  so  simple  that  it  can  be  taught  to  and  understood  by  the  pupils 
of  our  public  schools." 

No  one  who  has  looked  at  this  problem  can  have  other  than  the 
greatest  admiration  for  the  genius  of  the  men  who  evolved  the  Cleve- 
land system  of  charging  for  transportation.  I  thought  that,  in  mak- 
ing this  modification,  the  city  should  have  a  representative  upon  all 
the  boards  of  directors. 


1284    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

These  were  in  general  the  points  that  I  had  in  mind,  outside  of  a 
limitation  of  the  power  to  declare  dividends  and  the  power  of 
some  regulatory  body  to  see  that  leases  or  mortgages  or  compensa- 
tions were  not  given  for  lines  to  be  taken  into  these  systems  at 
exorbitant  prices. 

The  other  day  I  was  faced  with  a  situation  of  three  lines  being 
abandoned  by  the  Third  Avenue  Railroad  Co.,  which  held  them; 
the  Twenty-eighth  and  Twenty-ninth  Street  line,  the  Pelham  Bay 
line,  and  the  Third  Avenue  Bridge  line.  They  presented  evidence 
on  the  fact  that  all  of  the  railroads  were  running  behind  and  said 
that  they  saw  no  means  by  which  they  could  get  further  money  to 
make  up  the  deficit,  the  holding  company  having  been  given  this 
money  to  cany  them  along.  While  the  determination  of  the  bridge 
abandonment  is  not  just  clear  as  yet,  I  can  not  see  a  way  to  prevent 
the  abandonment  of  these  lines.  *^And  I  called  the  att«rition  of  the 
city  government  to  the  fact  that  here  were  lines  which  were  aban- 
doned because  they  could  not  keep  up  operation  at  a  5-cent  fare. 
This  suggestion  that  the  city  government  might  run  them  itself  was 
rejected. 

There  are  certain  situations  to  which  I  wish  to  call  your  attention 
in  the  Interborough — a  condition  as  now  existing  and  which  is 
sweeping  along  toward  a  crisis.  They  took  over  the  elevated  lines 
with  the  undei-standing  that  among  \heir  payments  should  be  an 
amount  of  $1,500,000  of  net  profits,  together  with  a  certain  amount 
of  fixed  charges.  There  are  no  net  profits  now  and  no  fixed  charges, 
and  m  looking  through  the  multiplicity  of  conditions  affecting  the 
line  it  seems  that  here  is  probably  the  straw  which  will  break  the 
cameFs  back.  Of  course,  the  preferential,  unless  modified,  repre- 
sents their  great  return,  and  if  they  were  to  abandon  this  MaiAat- 
tan  Railway  Co.  rather  than  lose  their  preferential  under  contract  3, 
we  should  find  ourselves  faced  with  the  most  complex  problem. 

That,  in  general,  was  all  that  I  was  going  to  say,  and  I  have  really 
gone  a  little  further  than  I  expected  under  the  15  minutes  I  think 
I  was  to  have,  but  I  am  now  at  your  disposal  for  any  questions  you 
may  wish  to  ask. 

The  Chairman.  Commissioner  Nixon,  there  are  three  railway  sys- 
tems in  New  York? 

Mr.  Nixon.  Yes. 

The  Chairman.  Are  all  of  them  in  financial  difficulties? 

Mr.  Nixon.  Well,  the  Third  Avenue  seems  to  be  getting  along  very 
nicely,  but 

The  Chairman.  That  is  a  surface  line? 

Mr.  Nixon.  That  is  a  surface  line  running  up  on  the  east  side  of 
the  city  and  passing  over  into  the  rest  of  the  streets,  but  the  Inter- 
borough and  tlie  Brooklyn  Rapid  Transit  in  a  sense  are  affected, 
because  the  Interborough  has  its  New  York  Railways  system  under 
a  receiver's  hands— Job  Hedges,  receiver— and  the  i3rooklyn  Rapid 
Transit  has  all  its  system  under  a  receiver,  under  Judge  Garrison. 
There  are  complaints  constantly  coming  in  from  all  directions  and 
requests  for  aid. 

The  Chairman.  What  is  the  prime  reason  for  the  financial  dif- 
ficulties of  those  companies? 

Mr.  Nixon.  The  increase  in  cost  of  labor  and  material.  Of  course, 
that  includes  fuel. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMxMISSION.    1285- 

The  Chairman.  Would  you  be  able  to  relieve  them  of  their  dif- 
ficulties if  they  were  operated  under  a  flexible  fare  ? 
Mr.  Nixon.  Absolutely. 

The  Chairman.  Then  the  real  trouble  with  New  York  is  the  f ran- 
chise  fare? 

Mr.  Nixon.  Yes ;  certainly— the  constitutional  franchise  fare. 

Ihe  Chairman.  In  your  judgment,  would  you  be  able  to  operate 
all  of  those  systems  on  a  5-cent  fare  under  the  present  conditions  if 
they  were  consolidated? 

Mr.  Nixon.  At  the  present? 

The  Chairman.  Yes. 

Mr.  Nixon.  No. 

The  Chairman.  So  there  is  no  possible  economy  in  operation  or 
consolidation  that  can  permit  the  operation  of  those  systems  now  on 
a  5-cent  fare  ? 

Mr.  Nixon.  No;  consolidation  would  simply  save  possibly  a  few 
large  salaries,  but  which,  compared  with  one  hundred  millions  of 
income,  would  be  trifles.  You  see,  the  gross  return  upon  investment 
^^Tn^^^r.  ^^  one-third  of  what  it  is  in  Cleveland,  for  example. 

I  he  Chairman  Are  there  not  large  sums  paid  out  in  rental  to 
these  leased  lines  ? 

Mr.  Nixon.  Absolutely;  yes. 

The  Chairman.  Could  not  that  be  eliminated  if  you  had  a  con- 
solidation ? 

Mr.  Nixon.  Yes;  that  is  the  idea  of  having  the  consolidation,  to 
save  in  every  direction.  And  where  these  leases,  as  I  sav,  are  ex- 
orbitant, if  there  is  a  means  brought  about  to  cancel  them*^  and  then 
somebody  representing  the  legislature  of  the  State  has  the  power  to 
say,  1  his  IS  an  exorbitant  lease  and  should  be  upon  the  valuations 
which  we  have  established,"  and  establish  it  to  the  satisfaction  of 
all— if  it  is  exorbitant  it  must  be  cut  down  to  some  reasonable 
figur^there  would  be  a  large  saving  in  that,  but  not  a  saving  which 
would  save  the  situation. 

The  Chairman.  What  is  the  total  amount  paid  out  in  leases « 

Mr.  Nixon.  I  do  not  remember. 

The  Chairman.  Is  it  a  very  substantial  figure? 

Mr.  Nixon.  It  is  quite  a  substantial  figure. 

The  Chairman.  Is  there  a  public  sentiment  in  New  York  for  the 
consolidation  of  these  systems  ? 

Mr.  Nixon.  How  is  that? 

The  Chairman.  Is  there  a  public  sentiment  in  New  York  for  the 
consolidation  of  these  systems? 

Mr.  Nixon.  I  should  say  not. 

The  Chairman.  Is  it  possible  to  have  a  5-cent  fare  on  one  svstem 
and  a  higher  fare  on  another  ? 

Mr.  Nixon.  That  is  very  much  to  be  objected  to.  It  would  drive 
traffic  from  one  line  to  another.  Of  course,  if  we  had  one  ffreat 
owning  company  to  deal  with,  where  the  elevated  and  subways 
which  we  call  the  rapid-transit  lines  and  which  are  the  great  trunk 
lines  of  travel  and  to  w^hich  the  various  street  railways  are  feeders 
we  would  then  strike  the  ideal  solution  of  the  whole  question  Nat- 
urally, there  are  a  great  many  conditions  growing  out  of  fran- 
chises that  have  existed  for  years  which  were  obtained  at  a  time 


1286    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

when  tliey  had  to  be  obtained  probtibly  for  money,  and  these  have 
continued,  these  have  been  thrown  into  other  systems.  T  tell  yoii, 
there  are  60  different  companies— that  is,  in  round  fiji^ures — with 
about  35  operating  companies,  and  all  of  these  in  geneml  are  con- 
trolled by  3  great  companies. 

There  is  much  to  be  uncovered ;  thei^  is  much  to  be  disclosed ;  and 
of  course  we  have  absolute  records;  they  are  all  public— tliese  leases 
and  everything  of  that  sort— there  is  nothing  hidden  in  this  general 
situation,  because  the  records  that  I  found  in  going  into  the  public- 
service  commission  were  most  full.  The  only  criticism  that  I  have 
is  that  there  should  have  been  made  years  ago  an  afc^olutely  definite 
valuation  or  appraisal  which  could  be  added  to  or  correcW  from 
tune  to  tin^e,  so  that  every  man  that  had  to  do  with  or  assume  the 
responsibility  of  exercising  his  own  judgment  in  public  questions 
could  have  a  definite  basis  upon  which  to  act. 

The  Chairman.  Have  any  steps  been  taken  to  perfect  such  valua- 
tions ? 

Ma*.  Nixon.  Oh,  yes;  we  are  going  ahead  witli  them. 

The  Chairman.  On  all  lines? 

Mr.  Nixon.  No;  the  receiver  is  making  a  very  thorough  appraisal. 
But  after  he  makes  his  appraisal  it  then  must  be  criticized  by  the  city 
government.  What  I  would  like  to  see  brought  about  and  what  I 
hope  to  see  as  a  recommendation  in  the  very  near  futui^  is  a  board 
made  up  of  members  of  unquestioned  ability,  such  members  being 
appointed  by  those  interests  that  might  be  antagonistic  as  to  the 
general  findings  or  the  i^ult  of  findings,  so  that  when  we  did  get 
an  appraisal  it  should  be  unquestioned. 

The  Chairman.  Is  there  any  governmental  authority  at  this  time 
that  can  prescribe  a  valuation  for  those  systems  subject  to  an  appeal 
to  the  courts  ? 

Mr.  Nixon.  I  imagine  that  the  public-service  commission  has  the 
right  to  make  such  an  appraisal  and  I  am  examining  as  to  my  right, 
but  I  know  I  have  not  any  money. 

The  Chairman.  That  is  necessary  when  you  make  a  valuation. 
Are  you  suffering  from  jitney  competition? 

Mr.  Nixon.  The  jitney  competition  was  the  savior  of  a  crucial  sit- 
uation during  the  strike.  I  suppose  you  might  say  that  in  round 
figures  the  jitney  competition,  socalled,  would  amount  to  about 
$12,000,000  loss  to  the  transportation  systems  of  the  city  of  New 
York. 

The  Chairman.  Do  you  include  the  Fifth  Avenue  buses  in  your 
term  "jitney  competition"? 

Mr.  Nixon.  No  ;  the  Fifth  Avenue  buses  are  part  of  the  transpor- 
tation system. 

The  Chairman.  What  is  the  total  transportjition  earnings  of  the 
bus  system? 

Mr.  Nixon.  I  can  not  tell  you.  I  have  not  brought  any  of  those 
figures.  If  you  will  write  me  any  questions  I  will  be  glad  to  furnish 
such  figures.  I  did  not  burden  my  mind  with  them,  and  frankly,  I 
did  not  have  time  in  the  last  10  days  in  which  I  expected  to  get  you 
swne  data  which  you  had  asked  for,  but  I  will  be  glad  to  furnish 
anything  you  desire.    They  are  allowed  to  charge  10  cents. 

The  Chairman.  The  bus  system  has  extended  very  rapidly  in  New 


PR0CEEDIN<3S  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1287 

Mr.  Nixon.  Yes. 

The  Chairman.  Is  it  having  a  positive  or  substantial  effect  uijon 
the  revenue  of  the  transit  lines? 

Mr.  Nixon.  I  do  not  think  so ;  because  the  volume  of  traffic  is  so 
great,  the  demands  upon  all  systems  of  transportation  are  overwhelm- 
ing except  in  the  outlying  places  or  in  places  like  the  Twenty-eiplri  h 
and  Twenty-ninth  Street  line  or  lines  out  in  Queens,  for  instance, 
tliat  run  along  a  rapid-transit  line  and  parallel  it  at  close  distances. 

l^y  naturally  fall  oil  in  their  earnings. 

The  Chairman.  Has  the  War  Labor  Board  fixed  the  wages  for  anv 
of  your  systems?  '^ 

Mr.  Nixon.  Yes. 

The  Chairman.  The  recent  strike  involved  an  application  for  in- 
crease wage  as  well  as  for  the  recognition  of  the  union? 

Mr.  Nixon.  Recognition  of  the  union,  reduction  to  eight  hours, 
and  thev  asked  for  such  emplovees  as  were  covered  by  the  Amal- 
gamated Association  75  cents  an  hour. 

The  Chairman.  Was  any  adjustment  on  the  wage  made? 

Mr.  Nixon.  Not  as  yet.  They  are  about  up  to  49  cents  on  the 
Interborough,  starting  at  41,  and  taking  10  years  to  get  up  to  49 
cents.  "  ■  e        f 

The  Chairman.  How  much  money 

Mr.  Nixon.  By  the  way,  it  is  public  now  I  think.  Just  before  I 
left,  the  Interborough  had  issued  a  statement  to  the  effect  that  it 
was  going  to  give  all  of  its  employees  10  per  cent  increase. 

Commissioner  Gadsden.  And  what  will  that  make  their  maxi- 
mum ? 

Mr.  Nixon.  Well,  they  were  49;  that  would  be  about  54.     It  is 

T  i  J  ^^'  ^^  ^^^^  *^^^^^®-^  ^^^y  agreement.  There  is  an  agreement, 
1  think,  between  the  Public  Service  Corporation  there  and  the  Amal- 
gamated Association  that  they  shall  have  51  cents,  but 

The  Chairman.  How  mucjfi  was  involved  in  the  wage  applica- 
tion? ^^ 

iMo^^A^-^^^'^^f-  '^"^^^  Garrison  told  me  it  amounted  to  about 
^13,000,000,  but  half  of  it,  I  stated  publicly  and  made  a  very  rapid 
mental  calculation— half  of  what  they  asked  would  have  amounted 
to  over  $5,000,000. 

The  Chairman.  Adding  $5,000,000  to  the  wage  count  would  neces- 
sitate an  increase  in  fares? 

Mr.  Nixon.  Increase  of  fares  are  not  paying  the  men,  not  main- 
taining the  equipment  as  it  should  be.  And  the  equipment  through- 
^^i.T^  ^f  *^^  ^^  deteriorating  rapidly.     I  am  faced  by  that  situation. 

Ihe  Chairman.  What  fare  would  you  have  to  have  if  you  added 
$5,000,000  to  the  labor  cost? 

Mr.  Nixon.  I  think  within  two  months'  operation  of  this  transfer 
charge  I  can  establish  that  fairly  definitely.  At  present  I  have  not 
the  slightest  idea. 

The  Chairman.  You  have  not  a  guess  now? 

Mr.  Nixon.  I  do  not  want  to  guess  on  these  matters. 

The  Chairman.  Speaking  of  transfers,  and  applying  your  state- 
ment particularly  to  New  York,  do  you  believe  that  the  transfer 
system  should  or  should  not  be  recognized  in  New  York  City  ? 

Mr.  Nixon.  The  transfer  system  should  be  universal  in  applica- 
tion and  free  in  New  York  City. 


1288    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

T}^^  S"^'^^"^'xT^*  ^^  *^^^®  ^  transfer  bet;^veen  separate  systems? 

Mr.  Nixon.  No;  and  I  have  not  any  right  to  order  a  transfer  on 
tlie  same  system  between  an  elevated  and  a  surface  line,  but  I  look 
to  see 

Tlie  Chairman.  What  is  the  longest  haul  on  a  line  in  vour  city? 

Mr.  Nixon.  Something  in  excess  of  21  miles. 

The  Chairman.  And  do  you  believe  that  the  divisions  in  New 

1^    I'^nuire  a  flat  charge  for  anyone  traveling  the  whole  distance? 

Mr.  iMxoN.  The  zone  system  has  been  given  a  very  great  studv 
and  much  has  been  predicated  upon  the  fact  that  these  contracts 
wei^  made  and  that  passengers  should  be  taken  on  continuous  rides 
with  universal  free  transfers  as  far  as  possible  on  the  system  cov- 
ered by  the  lines  at  a  flat  charge  of  5  cents.  Our  congestion  there 
is  terrific. 

If  we  can  bring  a  man  to  his  work  from  outlving  districts  where 
he  can  live  under  better  conditions  for  himself  and  his  family,  of 
coui-se,  It  is  a  situation  that  we  must  arrive  at  if  possible.  We  haul 
the  man  that  long  dist^uice  at  the  expense  of  the  man  that  travels 
the^short  distance.  But  even  with  that,  while  theory  seems  to  point 
to  the  ftu^t  tliat  the  zone  system  is  the  most  e(iuitable,  we  hope  that 
we  shall,  as  we  complete  our  systems,  be  able  to  realize  the  gi-eat 
desire,  of  all  of  this  city  to  have  a  continuous  ride  with  free  transfers 
at  5  cents.     We  can  not  do  it  now. 

The  Chairman  Is  there  any  city  in  the  counti-y  which  has  a 
greater  congestion  ? 

Mr.  Nixon.  I  think  not. 

The  Chairman.  Do  you  believe  that  a  zone  system  properly  estab- 
lished would  tend  to  eliminate  that  congestion  and  spread  your  popu- 
Jation  and  your  industries  over  a  wider  territory? 
•  Mr.  Nixon.  Well,  if  a  man  has  to  pay  10  cents  a  day  for  to  live 
m  the  outside  districts,  that  60  cents  might  have  a  very  compellino- 
effect  upon  the  location  of  his  residence  and  he  would  get  Just  a1 
close  to  his  job  as  he  possibly  could  if  it  cost  him  more  to  eo  some- 
where else. 

The  Chairman.  Would  that  be  a  good  thing  or  not  for  New  York? 

Mr.  Nixon.  To  have  further  congestion? 

The  Chairman.  No;  less  congestion. 

Mr.  Nixon.  Unquestionably. 

The  Chairman.  And  decentralize  your  industries? 

Mr.  Nixon.  We  wish  to. 

The  Chairman.  Is  there  anything  that  would  cause  that  quicker 
than  a  proper  zone  system  ? 

Mr.  Nixon.  A  proper  zone  system,  as  I  told  vou— theoretically, 
from  all  the  points  of  view  of  finance  and  seemingly  of  common 
sense— the  zone  system  is  the  equitable  and  proper  wav  to  impose 

Ji^'    /V^  *^^  ^^^^  ^^^®  ^  ^^^P^  ^^  ^^  ^^^  ^-^^^^  ^^^^^  maintained. 

The  Chairman.  Evidently  you  believe  that,  after  normal  condi- 
tions have  been  resumed,  you  will  be  able  to  carry  passengers  for 
even  less  than  5  cents? 

Mr.  Nixon.  I  do,  absolutely. 

The  Chairman.  What  leads  you  to  reach  that  conclusion? 

Mr  Nixon.  By  a  careful  examination  of  the  costs  of  transporta- 
tion throughout  the  city  and  the  fiict  of  the  advantages  which  will 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1289 

come  with  the  completion  of  this  great  svstem  that  has  been  out- 
lined which,  as  I  tell  you,  in  its  inception  had  to  provide  for  bring- 
ing people  from  315  square  miles  of  territory'  into  a  city  of  tremen- 
dous activity  practically  covered  by  8  square  miles,  and  that  all  had 
to  pass  through  that.  There  is  some  little  competition  in  the  situa- 
tion. But,  as  it  is  developed,  provided  there  will  be  no  competition, 
and  provided  each  was  charged  the  same  amount,  and  a  man  by  no 
cut  across  could  save  any  particular  money  in  getting  to  his  home, 
the  5-cent  fare,  on  account  of  the  vast  volume,  the  normal  increase 
of  earning  w^hich  comes  from  the  continuous  operation  of  a  road, 
which  you  railroad  men  recognize,  as  the  points  of  difficulty  of 
transfer  and  so  forth  are  eased  up,  as  there  becomes  a  smoothness  in 
the  travel,  as  the  development  of  certain  lines  of  activity  are  decen- 
tralized to  a  certain  extent  and  men  know  just  where  they  have  to 
go  for  certain  lines  of  work,  I  believe  that  the  constant  increase  of 
earnings  w^ill  come  into  play  in  a  greater  and  greater  measure. 

The  Chairman.  Is  there  any  law  wliich  would  now  permit  any 
governmental  authority  to  reduce  the  fai'es  below  5  cents  if  condi- 
tions warranted  it  ? 

Mr.  Nixon.  No;  not  with  the  existing  contracts.  We  refused  to 
raise  the  fare  the  other  day  on  that  Dry  Dock  road,  running  from 
Brooklyn  down  to  the  dry  docks,  from  3  to  4  cents. 

The  Chairman.  Do  you  believe  that  jitney  competition  will  re- 
main in  New  York  City  ? 

Mr.  Nixon.  Well,  the  streets  are  pretty  well  congested  now,  and 
that  congestion  is  growing  to  su#h  an  extent  that  no  one  can  tell 
what  will  happen  in  five  years  from  now.  The  time  taken  to  go 
from  one  point  to  another  is,  in  a  sense,  beyond  reason.  How  it  is 
to  be  solved  no  one  at  the  present  time  can  tell.  For  instance,  take 
Sixth  Avenue:  If  you  ride  up  there,  with  the  pillars  practically 
right  in  the  line  of  drive  on  all  that  road — now,  it  will  cost  many 
thousands  and  probably  millions  of  dollars  to  move  all  those  posts 
out  to  the  side,  but  they  have  got  to  be  moved  because  there  is  an 
up-and-down  artery  of  travel  which  must  be  improved,  if  there  is  a 
j:)ossibility — and  there  is  a  possibility  there.  And  the  same  thing  is 
true  over  on  Third  Avenue.  There  are  many  things  that  can  be 
done  to  help  in  this  tremendous  congestion,  but  the  increase  of 
jitneys  w^ill — I  do  not  see  any  particular  objection  to  having  them 
if  they  can  help  solve  the  problem.  I  think  the  problem  is  so  com- 
pelling and  overwhelming  at  the  present  time,  or  certainly  in  the 
near  future,  that  every  aid  will  be  brought  into  play. 

The  Chairman.  Your  great  problem  is  to  get  people  moved  there. 

Mr.  Nixon.  That  is  the  great  problem  in  New  York  to-day,  and 
it  is  becoming  worse  every  day. 

The  Chairman.  Do  you  think  that  the  expansion  of  the  jitney 
competition  will  seriously  menace  the  operation  of  your  transit 
systems  ? 

Mr.  NixoN.  No;  I  think  at  the  present  time,  to  give  you  an  idea 
of  the  competition — I  should  say  it  amounts  to  about  $12,000,000 
a  year  that  they  take  in  which  otherwise  would  go  to  the  transit 
systems;  and  while  it  is  a  vast  sum  of  money  it  does  not  injure  the 
others,  because  they  are  going  to  do  in  a  little  while  all  they  can 
possibly  anyway. 


ji 


1290    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  You  expressed  the  hope  that  some  contract  or 
law  could  be  worked  out  by  which  the  city  could  ultimately  own 
iind  operate  these  plants  subject  to  the  provision  that  the  employees 
could  not  strike. 

Mr.  Nixon.  I  think  that  a  tribunal  to  which  men  can  apply,  whose 
findings  they  must  accept,  because  it  is  of  the  people,  will  be  of 
great  compeUing  force — that  will  bring  about  municipal  ownership 
or  municipal  control,  even  with  its  many  handicaps  as  they  now 
exist;  but  I  think  that  with  wise  laws,  carefully  drawn,  calling  a 
spade  a  spade  and  recognizing  the  real  dangers  and  not  being  afraid 
to  say  what  they  are,  will  remove  those  conditions.  But  conditions 
at  the  present  time  are  such  that  it  is  impossible  to  bring  that 
about. 

The  Chairman.  You  recognize  that  conditions  in  the  labor  world 
to-day  are  such  that  they  insist  upon  the  right  to  strike  even  as 
against  ^vemment  operation  and  ownership. 

Mr.  ISixoN.  I  believe  the  labor  organizations  are  reasonable  and 
that  they  will  not  take  the  position  that  if  there  is  a  possible  public 
service— I  want  to  distinctly  bring  about  a  recognition  of  the  fact 
that  in  operations  such  as  those  of  the  street  railways,  there  is  a 
quasi-public  service,  whether  they  are  operated  by  holding  cori)ora- 
tions  or  whether  they  are  operated  by  the  government,  and  that  in 
coming  into  those,  if  we  are  to  have  collective  bargaining,  I  am 
hopeful  enough  of  the  general  common  sense  of  the  laboring  men  of 
the  United  States  to  realize  that  they  will  enter  into  such  contracts 
with  an  understanding  that  they  are  going  to  keep  the  contracts. 

The  Chaikman.  Do  you  believe  that  the  Cleveland  plan  would  be 
fair  for  New  York  City  ? 

Mr.  Nixon.  With  some  modifications.  I  have  studied  the  Cleve- 
land plan  now  for  three  months  and 

The  Chairman.  What  modification  would  you  suggest? 

Mr.  Nixon.  Well,  there  is  the  question  of  the  surplus  and  its  dis- 
tribution. Of  course,  we  must  have  some  point  in  a  surplus  where 
at  the  top  the  existing  fare  is  reduced,  and  at  the  bottom  where  it 
is  increased;  but  I  am  not  prepared  to  tell  you  to  just  what  extent 
it  would  have  to  be  modified.  You  see  it  is  a  document  which  runs 
for  a  good  many  pages.  But  in  principle  it  is  the  most  hopeful  and 
most  equitable  and  clear  solution  of  this  problem  which  I  have  been 
able  to  see,  and  it  would  enable  any  city  to  return  to  the  conditions 
that  it  has  now  if  conditions  warrant. 

I  believe  we  have  arrived  at  a  new  level  of  prices  for  wage  and 
material,  and  I  do  not  look  forward  to  any  great  reduction  in  the 
present  costs  of  operation. 

The  Chairman.  You  have  said  you  have  to  have  the  same  fare 
on  all  systems  in  New  York. 

Mr.  Nixon.  We  have  not.  We  charge  on  the  buses  10  cents,  and 
they  are  filled  with  people  all  the  time. 

The  Chairman.  But  I  am  speaking  now  of  the  transit  systems. 

Mr.  Nixon.  Yes;  the  rapid-transit  systems. 

The  Chairman.  Yes, 

Mr.  Nixon.  The  buses  are  not  going  to  be  rapid-transit  lines,  and 
the  more  people  they  have  to  carry  the  slower  they  will  go. 

The  Chairman.  But  you  have  lo  have  it  on  your  transit  sys- 
tems ? 


PROCEEDmOS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1291 

Mr.  Nixon.  Yes. 

The  Chairman.  If  you  had  the  Cleveland  plan  applied  to  your 
rapid-transit  systems,  might  you  not  find  on  one  system  the  5-cent 
fare  and  on  another  the  6-cent  fare  and  on  another  a  4-cent  fare? 

Mr.  Nixon.  No. 

The  Chairman.  Providing  what  they  were  able  to  show  as  earn- 
ings? 

Mr.  Nixon.  I  would  make  it  on  the  general  working  of  the  whole 
system. 

The  Chairman.  Then,  under  the  Cleveland  plan  there  must  be 
a  consolidation  of  all  your  systems-? 

Mr.  Nixon.  A  consolidation  of  all  the  transit  systems  in  New 
York  will  come  just  as  a  matter  of  ordinar^^  common  sense.  It  may 
work  hardships  to  some  of  them  and  some  may  be  benefited  mor^ 
than  others.  That  is  a  question  for  the  city  government  to  deter- 
mine to  what  extent  it  will  go  in  that.  But  I  would  hope  that  a 
recognition  of  the  fact  that,  in  order  to  avoid  just  the  situation 
which  you  speak  of,  they  clearly  recognize  that  there  should  be 
such  understanding  of  the  whole  system  that  will  enable  everj^body 
to  pull  together  and  try  to  bring  about  one  corporation  by  which 
we  can  handle  it,  unless  the  city  gets  the  operation  itself. 

The  Chairman.  Are  you  hopeful  that  that  sort  of  situation  can 
be  brought  about  in  New  York? 

Mr.  >»ixoN.  I  am  absolutely  hopeful  it  can  be  brought  about  with- 
out delay. 

The  Chairman.  How  soon? 

Mt.  Nixon.  You  can  ask  Mr.  Burr  how  long  it  will  take  him  to 
consider  and  modify  these  contracts.  I  think  the  whole  thing  could 
be  done  in  three  months  with  the  knowledge  we  now  have,  provided 
we  can  have  appraisals,  which  we  have  not  had  made,  and  which 
should  hsLve  been  made  long  ago,  and  correct  up  to  date,  so  that 
eveiy  morning  almost  we  could  look  in  our  books  and  find  the 
value  of  every  part  of  these  systems.  But  we  have  not  it,  and  I 
have  not  any  power  to  ctmtrol  it.  I  would  order  it  now  if  I  had  the 
money,  but  I  have  not  the  money.  And  that,  of  course,  is  essential 
m  case  we  are  to  have  a  general  readjustment,  because  we  could 
not  then  ascribe  or  dt^t^rmine  the  degree  to  which  the  various  inter- 
ests should  be  considered. 

The  Chairman.  Now,  there  seems  to  be  a  conflict  between  you 
and  the  city  administration.  The  administration  is  for  government 
ownership  and  you  are  for  co^t-of -service  plan? 

Mr.  NixoN.  I  say  in  the  fullness  of  time  government  ownership 
must  come,  but  at  the  present  time  it  is  impossible. 

The  Chairman.  Then  your  suggestion  of  the  Cleveland  plan  or 
some  such  cost-of-service  plan  is  not  made  with  any  hostility  to 
ultimate  government  ownei^hip? 

Mr.  NixoN.  Absolutely  not.  I  am  not  hostile  to  the  city  govern- 
ment. 

Commissioner  Meeker.  Have  you  explained  in  your  previous  tes- 
timony why  you  think  that  municipal  ownership  is  imjwssible  at 
this  time  ? 

Mr.  Nixon.  Because— yes ;  I  think  I  explained  that. 

Commissioner  Meeker.  I  will  not  ask  you  to  repeat  it  then. 


1292     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1293- 


I 


Mr.  Nixon.  And  also  that  I  thought  in  the  fullness  of  time  it  had 
to  come. 

The  Chairman.  Do  you  have  paving  requirements  in  New  York 
City? 

Mr.  Nixon.  Paving  requirements  and  certain  forms  of  taxation 
should  be  done  away  with.  The  old  idea  of  paving  between  the 
tracks  was  when  we  had  horses  with  iron  shoes,  naturally,  and  they 
extended  their  hurtful  influence  outside  of  the  tracks — and  we  re- 
quired them  to  pave  a  certain  part  outside  of  the  track  as  well,  2 
feet,  I  think. 

The  Chairman.  Are  you  permitted  to  do  away  with  those  charges? 

Mr.  Nixon.  No;  they  are  part  of  the  franchise  obligations. 

The  Chairman.  They  are  part  of  the  franchise  obligations? 

Mr.  Nixon.  Naturally  the  communities — I  am  not  speaking  of 
New  York  alone — wanted  to  get  all  they  could  out  of  these  people. 
They  thought  they  had  concessions  of  great  value  and  they  taxed 
them  well  and  required  them  to  repair  the  pavements  and  various 
other  charges. 

The  Chairman.  What  system  of  taxation  do  you  have,  on  gross 
earnings  or  ad  valorem  ? 

Mr.  Nixon.  We  have  a  certain  fixed  charge  on  the  valuation. 

The  Chairman.  Do  you  believe  that  the  systems  should  pay  that 
tax? 

Mr.  Nixon.  Since  this  is  a  public  service,  I  am  under  the  im- 
pression that  both  paving  requirements  and  taxes  should  be  done 
away  with.  Now  understand,  that,  like  the  liquor  tax,  means  a  tre- 
mendous sacrifice  to  the  government  in  itself,  and  the  government 
of  the  city  has  not  any  too  much  money  now;  hence  it  would  be 
combated.  This  is  a  public  service.  The  streets  belong  to  the  people 
for  walking  on  them  or  driving  on  them  or  for  travel  on  these  cars. 
The  man  that  drives  and  walks — certainly  the  man  that  walks — pays 
no  special  tax.  The  automobiles  pay  their  tax  to  the  State ;  they  all 
equally  wear  upon  the  street;  but  the  streets  are  for  the  purposes 
of  the  city.  We  have  made  our  bridges  free,  and  it  seems  to  me 
that  proper  consideration  of  the  burdens  which  are  to  be  placed 
upon  these  companies  will  require  an  assumption  of  the  fact  that 
taxes  in  general  and  the  fixing  and  repairing  of  th6  streets  should 
not  be  paid  by  them,  because  we  must  not  lose  sight  of  one  fact — 
that  no  matter  what  it  costs,  the  people  are  going  to  pay  it  in  the 
long  run. 

The  Chairman.  Do  you  favor  eliminating  assessments  and  tax- 
ations when  the  company  is  operating  under  a  fixed  charge? 

Mr.  Nixon.  No;  not  at  all.  As  long  as  the  5-cent  fare  remains 
fixed  we  must,  I  think,  put  the  taxes  on  them. 

The  Chairman.  Suppose  you  abandoned  the  assessment  of  your 
taxes  and  paving  regulations  now,  would  that  permit  the  companies 
to  operate  on  a  5-cent  clmrge? 

Mr.  Nixon.  No. 

The  Chairman.  Then  that  is  not  the  solution? 

Mr.  Nixon.  That  is  not  the  solution.  It  is  a  helpful  factor  in  the 
solution.  For  instance,  you  take  the  $57,000,000  worth  of  7  per  cent 
securities.  If,  in  the  solution,  while  the  city,  of  course,  can  not  lend 
its  credit  to  private  enterprise,  there  could  be  some  refunding  of 


that,  say  at  4J  per  cent,  the  mere  change  in  that  amount,  if  it  were 
accepted  by  the  people  who  hold  the  notes,  I  have  no  question  would 
enable  us  to  put  a  large  block  of  the  city  bonds  into  the  self-support- 
ing plant,  and  so  outside  the  debt  limit. 

The  Chairman.  Should  the  up-State  commission  have  any  con- 
trol of  either  service,  capitalization,  or  rates  of  your  railway  system 
in  New  York  City  ? 

Mr.  Nixon.  Well,  that  would  be  an  implied  criticism  of  the  legis- 
lature, which  in  its  wisdom  drew  this  law,  if  I  would  say  one  way  or 
the  other.  They  would  have  a  sense  of  perspective,  possibly,  but 
they  would  not  have  that  constant  daily  contact  which  the  man  on 
the  spot  has. 

The  Chairman.  Do  you  find  that  the  situation  is  so  complicated 
in  New  York  City  that  it  requires  regulation  by  a  local  body  f 

Mr.  Nixon.  By  a  local  body;  or  the  general  commission  would 
have  to  have  on  the  spot  people  who  w^ould  give  the  same  constant 
and  daily  touch  with  the  situation  that  a  commission  which  is  lo- 
cated there  has  to  do.    It  would  not  make  much  difference. 

Commissioner  Sw^eet.  Do  you  know  that  the  situation  throughout 
the  country  is  very  acute  with  regard  to  these  railroads? 

Mr.  Nixon.  I  do. 

Commissioner  Sweet.  Do  you  think  it  is  the  duty  of  this  commis- 
sion to  elicit  all  the  facts  possible  and  make  recommendations  that 
would  tend  so  far  as  possible  to  help  that  condition  ? 

Mr.  Nixon.  I  think  it  would  be  most  helpful.  We  want  a  general 
sense  of  perspective  with  the  men  who  are  able  to  review  the  opera- 
tions of  all  these  great  municipalities  and  the  transit  systems 
throughout  the  country ;  because  if  we  went  to  New  York  and  found 
that  men  who  had  formerly  operated  lines  at  5  cents  were  praying 
for  relief,  and  found,  too,  that  in  every  other  city  in  the  country 
they  were  able  to  get  along  with  that  rate  of  5  cents,  we  should 
assume  there  was  some  lack  of  management  or  some  incapacity  on 
the  part  of  those  in  New  York.  But  if  it  reflects  a  universal  condi- 
tion which  you  gentlemen  have  been  able  to  review,  it  would  be 
most  helpful  to  apply  the  broad  general  facts  which  you  have  found 
in  the  solution,  and  I  am  sure  it  would  be  most  helpful  and  most 
welcome. 

Commissioner  Sw^eet.  Have  you  been  taking  any  notice  of  the 
hearings  that  have  already  been  held  by  the  commission? 

Mr.  Nixon.  Every  chance  I  got;  all  the  papers  I  could  read. 

Commissioner  Sw^eet.  Do  you  think  the  kind  of  publicity  that  is 
given  through  new^spapers  and  other  sources  is  conveying  to  the  gen- 
eral public  a  correct  idea  of  the  real  situation  and  doing  any  good? 

Mr.  Nixon.  As  you  know,  I  very  strongly  opposed  the  appoint- 
ment of  this  commission. 

Commissioner  Sweet.  I  did  not  know  you  did. 

Mr.  Nixon.  I  did,  and  in  the  papers.  I  have  always  reserved  the 
right  in  mv  thinking  to  change  my  mind;  and  I  believe  it  is  now 
rendering  tlie  most  valuable  service  to  the  country  and  giving  a  clear 
understanding  of  the  situation  all  over  the  country  and  from  all 
that  you  will  be  able  to  bring  about  general  lessons  which  will  be  of 
great  value  to  everyone  concerned. 


)i 


1294    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  You  were  present  in  New  York  when  ex- 
President  Taft  made  the  statement  that  he  thought  he  was  the  origi- 
nal suggestor  of  this  idea  of  this  Federal  commission.  Did  you  hear 
him  say  that  ? 

Mr.  Nixon.  Yes. 

Commissioner  Sweet.  He  was  sort  of  daddy  of  the  commission  f 
Mr.  Nixon.  Yes. 

Commissioner  Sweet.  At  that  time  you  did  not  agree  with  him? 
Or  did  you  ? 

Mr.  Nixon.  Well,  I  did  not  want  to  be  bothered.  I  had  so  much 
work  to  do  that  I  thought  you  would  hear  me  in  a  perfunctory  way 
and  make  recommendations.  I  think  now  you  are  really  going  into 
the  heart  of  the  whole  situation  and  will  be  of  great  help  to  me;  and 
I  am  very  glad  to  change  my  mind. 

Commissioner  Sweet.  What  I  wanted  to  get  at  is:  At  the  time 
former-President  Taft  made  that  statement,  and  you  heard  him  make 
it,  whether  you  agi^eed  with  him,  or  you  have  changed  your  mind 
since? 

Mr.  Nixon.  I  have  changed  my  mind  since.  I  have  changed  it 
wdth  the  way  you  have  done  your  work,  which  has  won  me  over. 

Commissioner  Sweet.  Thank  you.  Now,  Mr.  Commissioner,  at  the 
very  basis  of  the  whole  problem,  I  take  it  from  what  you  are  now 
saying  that  you  think  that  absolute  and  connect  knowledge  of  all  the 
facts  IS  one  of  the  most  essential  things  to  reaching  a  right  conclu- 
sion on  this  subject. 

Mr.  Nixon.  Well,  no.  A  man  who  will  give  an  opinion  on  facts 
which  are  inexact  and  facts  which  have  not  been  clearly  and  prop- 
erly determined  after  criticism  from  all  sides,  his  opinion  would  be 
worthless  anyway. 

Commissioner  Sweet.  Yes.  As  between  the  matter  of  profit  in  the 
conduct  of  a  public  service  like  street  railroads  and  the  quality  of 
the  service  itself,  from  the  viewpoint  of  the  public,  which  ought  to 
receive  the  preference? 

Mr.  Nixon.  Service. 

Commissioner  Sweet.  Service  always? 

Mr.  Nixon.  Always  service.  And  I  want  to  say  here  that  New 
York  City — and  I  have  been  in  practically  all  the  great  cities  in  the 
world — has  the  best  service  in  the  world,  and  to  such  an  extent  that 
people  expect  more  probably  than  ought  to  be  given.  I  know  that 
when  we  changed  the  H  system  there,  we  used  to  run  down  the  West 
Side  of  New  York  from  the  northern  part  of  the  city  and  then  cross 
over  and  go  down  the  East  Side  on  Broadway.  When  we  stopped 
going  across  there  in  a  continuous  ride  and  men  were  landed  on 
Church  Street,  I  got  a  number  of  complaints.  The  fact  that  they 
used  to  be  able  to  be  discharged  on  Broadway  and  now  they  were 
discharged  on  Church  Street,  which  was  about  200  feet  away— they 
objected  to  even  that  extra  walk.  Now,  that  can  not  be  governed  by 
the  transit  systems  of  the  city — stopping  for  a  man  at  his  doorstep 
and  carrying  him  to  his  office,  but  we  are  almost  doing  it. 

Commissioner  Sweet.  Passing  upon  the  question  as  to  whether  a 
flat  rate  or  a  zone  plan  should  be  put  in  practice  in  New  York,  if 
I  understand  you  right,  you  favor  the  flat-rate  plan  upon  the  ground 
that  it  tends  to  better  distribute  the  population  so  far  as  their  homes 
are  concerned? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1295 


Mr.  Nixon.  Yes. 

Commissioner  Sweei\  You  are  giving  almost  sole  attention  to  the. 
matter  of  service  in  that  respect,  and  general  advantages  of  the  pub- 
lic, rather  than  to  the  matter  of  profit  to  the  operating  company  ? 

Mr.  Nixon.  Yes.  I  say  we  must  carry  these  long  hauls  at  the 
expense  of  the  man  traveling  on  the  short  haul. 

Commissioner  Sweet.  That  is  it,  exactly.  But  the  chief  considera- 
tion, in  your  mind,  is  the  public  good  ? 

Mr.  Nixon.  Absolutely.     Service  comes  first.     Really,  safety  comes 

first,  and  then  dependable  service. 

Commissioner  Sweet.  .Of  course ;  so  that  you  are  giving  first  at- 
tention to  the  subject  of  service  ? 

Mr.  Nixon.  Safety  first,  and  then  service,  adequate  and  dependa- 
ble. 

Commissioner  Sweet.  Isn't  safety  a  part  of  service  ? 

Mr.  Nixon.  Yes.    It  goes  without  saying,  of  course. 

Commissioner  Sweet.  Your  next  consideration  is  that  of  rea- 
sonable return? 

Mr.  Nixon.  No  ;  the  next  consideration  is  keeping  the  systems  up. 
Of  coui'se  that  is  service,  as  well ;  keeping  the  systems  up  to  a  high 
state  of  efficiency. 

Commissioner  Sweet.  I  include  all  that  in  service. 

Now,  when  you  come  to  the  other  grand  division — of  profit,  or 
return  upon  investment — that  can  not  he  ignored,  of  course;  no  con- 
tinuous service  can  be  rendered  unless  it  pays  a  reasonable  return 
upon  investment,  can  it? 

Mr.  Nixon.  Absolutely  not.  You  must  understand  here  that  both 
the  city  and  outside  corporations  have  put  money  into  the  systems. 

Commissioner  Sweet.  I  understand  that. 

Mr.  Nixon.  And  the  trouble  is  that  one  gets  his  money  first,  and 
the  other  fellow  comes  afterwards. 

Commissioner  Sweet.  I  understand.  But  in  my  question  now  I 
am  thinking  to  some  extent  of  the  general  subject  throughout  the 
country,  as  well  as  New  York. 

Mr.  Nixon.  All  right.     I  will  try  to  answer  you. 

Commissioner  Sweet.  So  that  a  plan  must  be  devised  by  which 
under  all  conditions  a  reasonable  return  can  be  produced  from  what 
is  paid  by  the  car  riders  ? 

Mr.  Nixon.  Well,  if  municipalities  would  disregard  the  rights  of 
property  whenever  they  wanted  to,  you  would  get,  in  the  future, 
very  little  investment. 

Commissioner  Sweet.  Absolutely. 

Mr.  Nixon.  The  man  is  entitled  to  a  return  upon  his  investment  as 
long  as  property  rights  exist. 

Commissioner  Sweet.  That  would  be  carrying  the  service  idea  to 
rather  an  absurd  point  otherwise,  and  would  involve  considerable 
taxation  on  the  part  of  the  public  to  meet  deficiencies,  if  the  service 
was  continued. 

Mr.  Nixon.  The  people,  in  the  long  run,  pay  for  it  anyway. 

Commissioner  Swtjet.  Yes;  the  people  in  the  long  run  pay  for  it 
anyway. 

Mr.  NixoN.  Always. 

Commissioner  Sweet.  That  brings  up  a  question  that  I  wanted  to 
get  your  views  upon,  and  that  is  the  consideration  of  the  car  riders 
as  distinguished  from  the  balance  of  the  community. 


1296    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Do  you  consider  that  this  old  traditional  paving  of  the  tracks, 
between  the  tracks  and  just  outside,  that  you  have  spoken  of,  places 
an  unfair  burden  upon  the  car  rider  as  compared  with  the  general 
community  ? 

T  ^^- ^i^^^-  Well,  the  general  community  should  take  care  of  that. 
Just  because  the  car  rider  has  to  ride,  I  do  not  think  he  should  be 
taxed. 

Commissioner  Sweet.  Exactly.  The  car  rider,  under  that  system 
of  taxation,  actually  pays,  or  it  is  paid  out  of  the  nickels  that  the 
car  riders  give  for  the  sen^ice  ? 

Mr.  Nixon.  Unquestionably. 

Commissioner  Sweet.  And  do  you  consider  that,  as  between  the 
two  elements  in  the  community,  unjust? 

Mr.  Nixon.  I  think  it  would  be  more  just  rather  to  charge  it  to  the 
general  community. 

Commissioner  Sweet.  And  more  in  confonnity  with  our  general 
institutions  if  it  is  properly  understood  ? 

Mr.  Nixon.  Yes. 

Commissioner  Sweet.  Do  you  think  the  general  public  really 
understands,  or  has  come  to  an  appreciation  of  the  fact  that  the  car 
rider  is  bearing  a  burden  there  that  should  be  borne  by  the  whole 
community  ? 

Mr.  Nixon.  Well,  I  do  not  know.  It  is  rather  hard  to  tell  about 
the  general  public.  The  general  public  is  becoming  very  enlightened. 
The  men  that  we  used  to  consider  as  not  knowing  about  these  general 
questions  are  taking  the  keenest  interest  in  them,  and  they  talk  about 
them  and  discuss  them,  and  they  Imow ;  they  know,  for  instance, 
that  they  can  not  get  10  cents'  worth  of  service  for  5  cents,  or  6  cents^ 
worth  of  serv^ice  for  5  cents ;  and  they  know  that  there  should  be  such 
a  condition  that  if  they  can  ever  produce  that  service  for  radically 
less  than  5  cents  they  should  get  the  advantage  of  that. 

Commissioner  Sweet.  In  Washington,  as  you  know, 
street-railway  companies. 

Mr.  Nixon.  Yes. 

Commissioner  Sweet.  One  fairly  prosperous  and  the  other  far 
from  it;  and  that  produces  a  complication  with  regard  to  what 
should  be  done  in  connection  with  fares.    You  have  three? 

Mr.  Nixon.  Yes. 

Commissioner  Sweet.  If  I  understand  you  right,  you  think  that 
the  street  railroads  of  a  city  are  a  natunil  monopoly,  in  the  sense 
*hat  they  ought  at  least  to  be  under  one  greneral  holding  company? 

Mr.  Nixon.  At  least  three  separate  railway  corporations;  I  would 
say  three,  and  have  them  all  reduced  down  to  that;  and  the  ultimate 
ideal  to  aim  at  is  the  whole  thing. 

Commissioner  Sweet.  If  they  cover  the  same  territory  and  there 
IS  any  element  of  comi^etition  between  them— as  there  is  in  the  case 
of  the  Washington  companies  and  some  of  your  own  companies? 

Mr.  ^ixoN.  Yes. 

Commissioner  Sweet.  Is  not  an  embarrassing  and  unnecessary 
feature  introduced  that  interferes  somewhat  with  equitable  control 
and  regulation  of  the  companies  on  the  part  of  the  public,  where 
they  are  under  different  ownership? 


Washington,  as  you  know,  we  have  two 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1297 

Mr.  Nixon.  You  are  probably  referring  to  San  Francisco,  where 
there  is  practically  municipal  operation  of  one  line,  which  can  cut 
down  and  charge  it  to  the  public  and  club  the  other  fellow  ? 

Commissioner  Saveet.  Under  the  system  of  having  two  private 
corporations,  as  is  the  case  in  Washington  here,  if  one  covers  a  part 
of  the  territory,  or  has  a  more  efficient  management,  or  for  any 
reason  is  prosperous  and  getting  along  very  well  under  present  con- 
trol, and  at  the  present  fares,  and  the  other  is  losing  money  all  the 
time  and  needing  public  assistance  in  some  way  and  asking  for  an 
increase — it  would  be  rather  embarrassing  to  give  authority  to  one 
that  would  not  be  given  to  the  other  in  the  way  of  an  increase  of 
fares,  would  it  not? 

Mr.  Nixon.  Yes. 

Commissioner  Sweet.  And  so  far  as  they  competed,  it  would  de- 
feat its  own  purpose,  because  you  would  throw  business  to  the  on© 
that  had  the  lowest  fares? 

Mr.  Nixon.  That  is  the  reason  I  do  not  want  to  see  this  relief  or 
amendment  done  piecemeal  in  New  York. 

Commissioner  Sweet.  And  under  a  single  management  that  condi- 
tion would  not  occur,  would  it,  where  the  whole  thing  was  centered 
in  one  corporation,  or  one  holding  company,  as  you  say  ? 

Mr.  Nixon.  That  is  correct. 

Commissioner  Sweet.  I  understand  you  to  theoretically  like  the 
zone  plan,  but  you  think  that  the  interests  in  New  York  are  better 
served  by  the  flat  rate  ? 

Mr.  Nixon.  By  the  flat  rate ;  yes. 

Commissioner  Sweet.  Just  one  thing  further,  and  only  one,  and 
that  is  with  regard  to  the  prevention  of  strikes.  You  have  spoken 
of  there  being  two  elements,  material  and  labor,  that  created  the  pres- 
ent serious  situation  throughout  the  country,  the  very  high  costs? 

Mr.  Nixon.  Yes. 

Commissioner  Sweet.  I  suppose  you  know  that  in  Chicago  a  de- 
mand of  85  cents  per  hour,  or  something  like  that,  has  been  made? 

Mr.  Nixon.  Sixty-five  has  been  given.  I  know  it  is  a  very  large 
increase. 

Commissioner  Sweet.  And  the  demand  was  for  85  cents.  They 
have  just  been  climbing  up  and  up  and  up;  have  they  not? 

Mr.  Nixon.  Yes. 

Commissioner  Sweet.  Do  you  consider  that  transportation,  either 
on  the  steam  roads  or  on  the  electric  roads  is  in  a  class  by  itself,  and 
ought  to  occupy  a  different  relation  toward  labor  from  other  indus- 
tries of  the  country? 

Mr.  Nixon.  Absolutely.    I  consider  it  a  quasi-public  service. 

Commissioner  Sw^eet.  You  think  that  the  public  is  so  interested, 
has  such  a  deep,  vital  interest  in  the  subject  of  transportation  that 
it  ought  not  to  be  held  up  by  strikes  ? 

Mr.  Nixon.  It  must  not  be  held  up  by  strikes.  The  distress  in  a 
great  city  like  New  York  is  something  that  we  must  avoid. 

Commissioner  Sweet.  Now,  as  to  the  practical  way  of  preventing 
them :  I  think  you  made  a  remark  in  your  direct  statement  to  the 
effect  that  you  thought  a  contract  might  be  made  with  the  individual 
workers  when  they  are  taken  on  ? 

160043°— 20— VOL  2 20 


1298    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Mr.  Nixon.  Oh,  no,  no.  I  said  that  there  could  be  collective  bar- 
gaining, common  collective  bargaining.  I  mean  a  committee  repre- 
senting the  men  could  get  together  and  make  a  contract  And  1  be- 
lieve the  good  common  sense  of  the  labor  people  of  the  country  would 
stand  by  such  a  contnu-t  and  carry  it  out. 

Commissioner  Sweet.  That  would  presuppose  their  being  union- 
ized ? 

Mr.  Nixon.  Unquestionably.  We  might  as  well  admit  these  facts. 
We  can  not  make  anything  by  dodging  them. 

Commissioner  Sweet,  So  that  that  contract  or  understanding 
would  be  collective,  and  made  in  advance? 

Mr.  Nixon.  Yes. 

Commissioner  Sweet.  Would  you  favor  a  law  that  would  make  it  a 
conspiracy  or  a  crime,  or  punishable  by  fine  or  imprisonment,  or  both, 
to  bring  on  a  strike  and  tie  up  transjportation,  either  of  street  rail- 
roads or  steam  roads? 

Mr.  Nixon.  That  is  a  question  of  compulsory  arbitration,  and  that 
is  a  matter  which  we  have  got  to  work  out  through  a  term  of  years, 
dei>ending  upon  tlie  common  sense  and  upon  the  general  under- 
standing and  patriotism  of  the  labor  unions.  If,  every  time  we  are 
able  to  give  an  increase  in  fares  to  help  all  conditions,  it  must  alto- 
gether be  applied  to  a  raise  of  wages,  we  will  come  to  the  point  where 
there  is  no  limit  in  the  amount  to  be  charged.  But  if,  for  instance,  a 
situation  should  arise  where  a  demand  is  made  upon  a  company  that 
is  not  now  making  sufficient  to  make  the  service  that  we  require  to 
maintain  its  equipment  in  the  perfect  condition  that  we  want,  and 
which  we  have  the  right  to  enforce  and  must  enforce  under  our  duty, 
and  it  is  falling  behind,  and  has  neglected  certain  things  wherever 
it  could,  and  it  is  then  asked,  as  a  condition  of  avoiding  strikes,  to 
give  some  more,  that  is  a  great  problem  which  will  have  to  be  solved 
by  the  city  government  of  New  York,  in  so  far  as  our  local  situation 
is  concerned. 

Commissioner  Sweet.  If  a  collective  contract  such  as  you  have 
mentioned,  should  be  made  and  should  be  broken  by  the  employees, 
what  w'lU  be  the  remedy  ? 

Mr.  Nixon.  Then  I  think  that  in  a  very  short  time  they  will  lose 
the  general  support  of  the  public.  They  have  it  now.  They  have 
their  sympathy  all  over  the  country.  If  they  show  that  they  are 
entirely  unreasonable,  then  they  will  not  keep  that  great  public  sup- 
port and  sympathy  and  wil]  have  to  be  handlexl  in  another  way. 

We  had  a  situation  the  other  day  in  Staten  Island  that  I  might 
mention  in  this  connection.  The  men  were  about  to  go  out  on  strike. 
They  had  signed  a  contract  through  the  same  union  which  brought 
about  the  strike  in  the  Brooklyn  Rapid  Transit.  And  the  president 
said :  "  You  can  not  strike.  We  have  signed  up  for  a  year,  and  you 
can  not  strike.  If,  on  the  1st  of  January,  when  this  agreement  lapses, 
I  find  that  you  have  real  grievances  and  ought  to  have  it,  I  will  be  the 
first  to  fight  for  you;  but  you  have  signed  this  agreement,  and  you 
have  got  to  abide  by  it."  When  we  get  a  few  men  like  that— and 
there  is  a  lot  of  common  sense  in  the  men  in  the  unions  to-day,  be- 
cause they  know,  as  everybody  else  knows,  that  they  need  the  sup- 
port and  sympathy  of  the  public  and  that  when  they  are  undue  in 
their  demands  they  will  lose  that  sympathy— it  greatly  facilitates  the 
settlement  of  the  problem.    But,  just  as  I  say,  if  they  get  what  they 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1299 

want— if  they  get  wages  which  will  give  them  the  standard  of  living 
which  they  had  before,  when  the  purchasing  power  of  the  dollar  was 
greater,  and  they  then  make  unreasonable  demands  which,  as  fast  as 
we  get  rates  of  fare  increased  would  absorb  these  increases  by  the 
increase  of  wages,  we  would  get  to  a  circle  w^hich  simply  would  run 
around  itself,  and  the  increase  of  wages  would  chase  the  increase  of 
fares,  and  probably  be  a  little  ahead  of  it  all  the  time,  and  that  would 
be  an  insuperable  condition. 

As  to  penalizing  men  who  sign  an  agreement  and  do  not  keep  it, 
I  can  not  tell  about  that.  We  had  a  condition,  for  instance,  on  the 
municipal  ferries.  They  struck,  and  men  were  brought  over,  even 
policemen,  by  the  mayor,  and  that  situation  was  handled  in  rather  a 
drastic  way;  and  the  men  went  back  to  work.  Whether  you  could 
make  it  a  crime  to  strike  I  do  not  know,  but  I  should  say  not. 

Commissioner  Sweet.  Would  you  include  in  this  collective  con- 
tract that  you  spoke  of  a  just  and  equitable  form  of  arbitration  or 
settlement  of  disputes? 

Mr.  Nixon.  I  would  include  provision  for  the  settlement  of  griev- 
ances always.    We  have  that  now. 

In  connection  with  the  settlement  of  the  strike  in  Brooklyn  the 
other  day,  there  was  an  arbitration  committee  formed,  first  of  a 
representative  of  tlie  union,  and  second,  the  receiver  and  one  man  to 
be  unanimously  chosen  by  the  two,  to  whom  these  various  grievances 
are  to  be  presented;  and  they  agree,  by  written  instruments  signed 
by  the  officials  of  the  union  and  by  the  receiver  to  agree  to  such  an 
arbitration.  Not  only  do  they  agi^ee  to  the  arbitration  then,  but  as  to 
future  questions;  so  that  we  thought  we  had  it  all  settled  when  this 
trouble  sprang  up  in  the  Interborough. 

Conmiissioner  Sweet.  If  you  were  a  member  of  this  commission, 
Mr.  Commissioner,  would  you  be  willing  to  recommend,  as  you  view 
tlie  subject  now,  the  general  adoption  through  the  country  of  a 
somewhat  modified  and  amended  and  slightly  improved  Cleveland 
plan  as  the  on^  for  cities  that  are  in  trouble  and  have  an  old  system 
that  they  are  dissatisfied  with  and  operating  under  ? 

Mr  Nixon.  I  especially  think  it  is  the  best  and  most  equitable 
plan  for  the  situation  that  has  come  about  that  I  have  seen  in  any 
city  of  the  country. 

Commissioner  Sweet.  Thank  you.  That  is  all. 
Commissioner  Meeker.  I  would  like  to  ask  a  few  questions. 
How  do  you  explain,  in  New  York,  that  the  street-railway  systems 
are  in  financial  distress  and  can  not  pav  operating  costs,  while  trans- 
portation congestion  there  is  the  greatest  to  be  found  any  place  on 
earth,  while  in  other  cities  with  a  less  amount  of  passenger  trans- 
portation carried,  the  railroads  are  able  to  get  along? 

Mr.  Nixon.  I  told,  in  general,  a  matter  which  would  appeal  to  al- 
most anyone.  For  instance,  take  Cleveland  and  New  York:  The 
gross  receipts  as  to  percentage  on  the  money  invested  are  one-tWrd 
m  New  York  what  they  are  in  Cleveland.  *Now,  you  have  not  the 
congestion  in  Cleveland  that  3^ou  have  in  New  York,  but  the  conges- 
tion carries  ?  tremendous  service  over  long  distances  at  a  loss,  and  it 
does  not  carry  it  enough.    The  figures  speak  for  themselves. 

Connnissioner  Meeker.  Eeferring  to  the  zone  system,  do  you  not 
think  that  a  zone  system  might  fill  up  the  holes  in  the  transportation 


1300    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

curve  and  equalize  the  passenger  transportation  throughout  the  day, 
and  thereby  add  very  materially  to  the  revenues  of  the  New  York 
companies  and  enable  them  to  take  advantage  of  the  peculiar  situa- 
^lon  of  New  York— namely,  the  immense  congestion  of  population? 

Mr.  Nixon.  I  have  told  vou  that  originally  the  zone  system  is  the 
best  system  that  can  possibly  be  adopted,  because  you  make  a  man 
pay  for  what  he  gets.  But  we  have  contracts  in  New  York  City  that 
require  us  to  furnish  long  or  short  hauls  for  5  cents:  and  while  we 
might,  in  the  congested  parts,  for  instance,  or  loading  from  some 
center,  charge  3  cents  or  5  cents  for  the  first  mile  and  1  cent  for  each 
mile  after  that,  as  they  do  in  New  Jersey,  it  would  tend  to  break  the 
faith,  to  a  certain  extent  anyway— to  a  large  extent— upon  which  a 
tremendous  amount  of  city  building  was  predicated ;  outlying  dis- 
tricts have  grown  up  overnight,  almost,  and  flourishing  centers, 
through  the  fact  that  they  knew  they  could  get  transportation  for 
5  cents  to  the  great  center  of  New  'York's  activity,  which  is  one- 
fortieth  of  its  total  area.  Now,  if  you  ^o  back  and  charge  this  man 
more  for  his  20-mile  ride  he  will  come  m  there  and  live,  and  he  will 
have  families  in  one  room  in  tenement  houses  instead  of  in  an  open 
house  with  light  and  air  all  around.    That  seems  to  be  the  idea. 

You  are  limited  by  that  consideration,  by  the  force  of  congestion, 
which  we  are  trying  to  avoid,  and  also  by  the  fact  that  already  the 
city  has  made  contracts,  and  the  people  of  the  city  liave  made  their 
investments  for  many  years  with  the  general  idea  that  there  would 
not  be  a  zone  system  established. 

Commissioner  Meeker.  Your  principal  objection  is  the  existing 
contracts  and  franchises? 

Mr.  Nixon.  Yes;  but  even  with  the  existing  contracts  and  fran- 
chises I  believe  it  to  be  perfectly  possible  to  arrive,  in  a  few  years, 
after  the  intimate  operation  of  the  system  has  been  established, 
after  the  connecting  links  have  been  supplied  which  are  now  in 
process  of  completion,  to  get  back  not  only  to  a  5-cent  fare,  but  to 
a  better  fare. 

Commissioner  Meeker.  Have  you  considered  the  effect  that  a  zone 
system  might  have  in  distributing  not  primarily  population  but 
industries? 

Mr.  NjxoN.  Yes.  It  might  force  industries  away  from  the  con- 
gested districts,  where  the  men  could  get  to  them. 

Commissioner  Meeker.  That,  I  think,  was  the  purport  of  the 
chairman's  question. 

Mr.  Nixon.  I  tell  you  logically,  from  the  point  of  common  sense, 
the  system  which  places  upon  each  man — as  nearly  as  can  be  done 
in  the  handling  of  such  a  great  and  intricate  problem — a  charge 
practically  in  proportion  to  what  he  gets  is,  of  course,  the  common- 
sense  solution  of  any  problem.  But  you  take  a  letter  to  San  Fran- 
cisco for  the  same  price  as  you  take  it  across  the  street  here  in  Wash- 
ington. 

Mr.  Warren.  What  is  your  opinion — I  do  not  quite  get  either  your 
opinion  on  the  chairman's  question  or  Commissioner  Meeker's  ques- 
tion— do  you  think  the  zone  system  in  New  York  would  spread  the 
industries  so  that  you  would  have  a  number  of  industrial  centers 
instead  of  the  one  great  congested  center? 

Mr.  Nixon.  It  would  tend  to.  And  while  argument  is  against  it, 
I  say  that  in  view  of  the  fact  that  the  people  have  been  educated  to 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1301 

the  idea  of  a  general  ride  for  5  cents,  with  so  many  disturbing  ele- 
ments not  to  be  considered,  we  shall  probably,  in  any  general  adjust- 
ment, keep  to  this  one  fixed  fare. 

Commissioner  Meeker.  A  readjustment  must  be  made,  and  before 
you  can  get  to  a  permanent  basis  at  all  are  you  not  obliged  to  get 
lid  of  the  terrific  congestion,  which  is  growing  worse,  as  you  have 
testified? 

Mr.  Nixon.  It  is  growing  worse  all  over  the  city.  I  was  talking 
then  of  congestion  on  the  streets  of  Manhattan.  The  congestion  on 
the  streets  of  Manhattan  is  getting  to  the  point  where  it  is  going  to 
take  hours  to  get  from  one  end  of  the  city  to  the  other. 

Commissioner  Meeker.  As  long  as  you  have  the  5-cent  fare  the 
people  are  going  to  live  in  Newark,  and  even  away  out  in  Connecticut, 
are  they  not? 

Mr.  Nixon.  They  can  not  go  there  for  5  cents.  As  soon  as  you  get 
over  into  New  Jersey  they  charge  anything  they  want  to.  I  think 
now  from  Perth  Amboy  to  New  Brunswick  it  is  over  30  cents — 31 
cents  or  32  cents — when  it  was  only  15  or  16  cents  a  few  months  ago. 
Every  other  city  in  the  country  is  raising  fares,  as  you  know,  iu 
meeting  the  present  situation.  We  are  standing  pat  on  the  5-cent 
fare. 

Commissioner  Mkeker.  As  long  as  you  have  your  5-cent  fare  you 
will  have  yoiir  population  living  in  widely  distributed  centers  and 
coming  into  New  York  to  fill  up  your  streets  and  give  you  an  impos- 
sible transportation  situation? 

Mr.  Nixon.  I  know  that;  but  it  means  so  many  spider  webs  over- 
lapping; as  we  develop  these  centers  of  industry  we  are  going  to  be 
congested  all  over. 

You  must  remember  that  we  are  adding  over  100,000  men  every 
year  in  the  city  of  New  York.  We  are  carrying  80,000,000  more  pas- 
sengers every  year.  We  can  not,  no  matter  what  we  do,  keep  pace 
with  the  needs  of  the  city.  I  think  the  whole  city  will  build  up,  so 
that  you  will  get  your  spider  web  of  increased  fares  from  one  center, 
and  in  a  very  few  years  you  would  have  to  overlap  those  with  a  whole 
lot  of  other  spider  webs. 

It  seems  to  me  that  having  predicated  so  much  upon  a  fixed  fare 
the  city  will  have  to  stand  by  it.  I  am  not  attempting  to  defend  it 
logically.  I  can  not.  On  all  your  railroads,  if  you  carry  a  man  10 
miles,  you  charge  more  than  you  do  for  5.  That  is,  in  all  the  railroad 
systems.  In  practically  all  of  the  cities — in  most  of  the  cities — they 
are  arriving  at  that  solution  of  the  problem,  and  I  can  not  defend 
the  5  cents.  I  only  tell  you  that  on  account  of  the  vast  interests  that 
are  predicated  upon  the  universal  5-cent  fare  and  in  the  light  of  the 
fact  that  the  city  has  signed  for  it  and  pledged  its  good  faith  to  a 
contract  I  do  not  believe  that  you  will  bring  about  a  zone  system  in 
the  city  of  New  York.  It  is  a  belief,  not  a  conviction  based  upon  my 
own  logic,  I  assure  you. 

Commissioner  Meeker.  Do  you  give  as  your  answer  to  my  first 
question,  then,  that  the  difference  between  the  bankruptcy  of  the 
New  York  City  street-railway  lines  and  the  lack  of  bankruptcy  in 
the  lines  of  some  other  cities  where  apparentlj'^  there  is  not  as  much 
transportation  at  least  to  be  conducted  and  where  apparently  the 
income  could  not  be  as  great  to  meet  fixed  charges — do  you  think 


1302    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

that  that  difference  is  due  primarily  to  the  difference  in  cost  of  con- 
struction in  New  York  as  compared  with  the  other  places? 

Mr.  Nixon.  No.  Take  New  York  and  Cleveland.  Cleveland  is  the 
best  example  we  have  got.  You  get  three  times  the  income  on  your 
investment  that  you  do  in  New  Yoric.  You  get  10  cents  on  a  dollar 
in  New  York  and  you  get  30  cents  on  your  investment  in  Cleveland. 
And  that  10  cents  has  to  carry  everything  with  us.  In  other  words, 
we  carry  2,000,000,000  people  practically  for  $100,000,000,  and  that  is 
10  per  cent,  as  the  investment  is  about  a  billion  dollars  in  rouad 
numbers. 

The  general  idea  would  be — if  New  York  is  so  greatly  congested, 
and  so  many  people  are  traveling,  the  cars  are  full  to  overflowing — 
that  we  must  nec^essarily  make  more  money  on  the  investment  than 
anywhere  else,  because  "^there  we  get  the  greater  use  of  the  plant. 
But  we  do  not.  We  make  less  than  in  the  smaller  centers  even.  Tliat 
is  a  matter  of  fact.  It  shows  the  wonderful  efficiency  of  that  sys- 
tem. It  is  the  wonder  of  the  world — the  handling  of  the  people 
in  the  city  of  New  York;  and  they  are  getting  the  greatest  service 
for  the  least  money  on  the  face  of  the  earth. 

Coiumissioner  Meeker.  It  is  because  of  the  long  haul  and  the 
extensions. 

Mr.  Nixon.  I  am  not  talking  about  the  money  so  much,  but  wbut 
you  get  in  tlie  way  of  service.  Here  is  a  service  whicli,  when  it  is 
finished— which  it  will  be  in  a  short  time — will  be  equal  to  London 
and  Paris  and  Chicago  put  together. 

Commissioned  Meeker.  How  do  you  explain  that  in  New  York 
you  have  had  a  49-cent  maximum  wage  per  hour,  plus  10  per  cent? 

Mr.  Nixon.  That  is  what  the  Interborough  is  now  giving.  They 
start  at  41  cents,  and  work  up  to  49  cents.  And  it  is  only  a  few 
years  ago  that  $1.60  per  day  was  thought  to  be  a  big  figure. 

Commissioner  Meeker.  In  Boston,  I  believe,  they  have  a  62-cent 
maximum. 

Mr.  Nixon.  Yes;  and  in  Chicago  they  have  just  given  65. 

Commissioner  Meeker.  Yes;  Chicago,  65,  and  Detroit,  60. 

I  have  just  completed  a  countrywide  cost-of-living  survey;  and 
we  all  knew,  before  making  the  survey,  that  New  York  was'  rather 
an  expensive  place  in  which  to  li\'^ ;  it  probably  ranl^  about  third  or 
fourth,  I  should  judge,  in  expensiveness,  cost  of  living,  of  the  cities 
of  the  United  States. 

Mr.  Nixon.  Yes. 

Commissioner  Meeker.  How  has  it  been  possible  to  maintain  this 
difference  in  wages? 

Mr.  Nixon.  Well,  they  make  it  to  the  advantage  of  the  man;  he 
gets  certain  advantages  m  the  way  of  day  runs,  and  all  that  through 
length  of  service.  They  take  good  care  of  them.  They  have  very 
good  rooms  for  them,  and  everything  like  that.  In  other  words,^ 
they  try  to  make  the  men  contented,  as  far  as  they  can. 

In  New  Jersey  they  have  just  agreed  with  the  Amalgamated  Asso- 
ciation, if  I  remember,  on  51  cents.    That  takes  in  Newark — — 

Commissioner  Gadsden.  Fifty  cents. 

Mr.  Nixon.  Was  it  50  cents  or  51?     '•   , 

Commissioner  Gadsden.  Fifty. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOl^.    1303 

Mr.  Nixon.  And  that  is  1  cent  over  New  York.  In  the  case  of 
the  Interborough  you  start  at  41,  and  it  takes  10  years  before  you 
get  to  49.  If  they  give  10  per  cent  more,  that  is  practically  54 
cents.  You  can  not  understand  why  the  New  York  men  work  for 
less  than  they  do  in  other  places.  I  only  know  that  they  do.  But 
tliey  are  asking  for  more. 

Take  the  65  cents;  and,  as  I  told  you,  it  represents — making  a 
mental  calculation,  and  taking  into  account  the  number  of  indus- 
tries and  occupations  coming  under  the  Amalgamated  membership 
that  are  raised  to  65  cents — it  amounts  to  over  five  and  a  half  million 
dollars  added  to  the  pay  roU. 

Mr.  Warren.  What  do  you  mean  by  jitney  service  in  New  York, 
when  you  refer  to  that? 

Mr.  Nixon.  Jitney  service  has  not  developed  in  New  York  as  it 
has  in  New  Jersey,  where  it  competes  directly  down  the  various  big 
streets;  but  in  many  outlying  districts  we  have  it.  Roughly,  I  as- 
sume the  jitney  service  is  a  small  charge  for  a  number  of  men  packed 
into  an  automobile  or  a  coach  or  a  bus  or  something  like  that.  Wo 
tried  to  make  an  estimate  of  that,  and  it  was  a  fair  estimate,  as 
closely  as  we  could  understand  the  factors,  and  we  thought  that  its 
effect  upon  the  transportation  system  was  to  reduce  their  receipts 
about  $12,000,000. 

Mr.  Warren.  You  mean  the  same  thing  that  we  ordinarily  un- 
derstand by  jitney  service? 

Mr.  Nixon.  I  do  not  mean  an  automobile  picking  up  one  passen- 
ger, like  a  taxi. 

Mr.  Warren.  You  do  not  refer  to  taxi  service,  of  course. 

Mr.  Nixon.  No;  but  where  they  crowd  a  number  of  men  into  one 
vehicle  and  charge  a  low  rate. 

Mr.  Warren.  You  think  that  amounts  to  $12,000,000,  excluding 
the  Fifth  Avenue  buses? 

Mr.  NixoN;  Oh,  yes.    The  buses  are  not  taken  into  account. 

Mr.  Warren.  That  jitney  service  does  not  exist  much  on  Man- 
hattan Island  itself? 

Mr.  Nixon.  No.    It  is  in  Brooklyn  and  places  like  that. 

Mr.  Warren.  That  is  all. 

The  Chairman.  We  are  very  much  obliged  to  you,  Mr.  Nixon. 

(Witness  excused.) 

The  Chairman.  Who  is  your  next  witness,  Mr.  Ogburn? 

Mr.  Ogburn.  Mr.  Chairman,  we  have  several  more  witnesses  for 
to-day,  possibly  due  to  a  misunderstanding  in  dates  on  the  part  of 
one  or  two.  There  are  several  of  the^e  who  will  only  speak  on  a 
limited  phase  of  the  subject  rather  briefly. 

In  order  to  preserve  the  continuity  of  this  present  discussion  the 
next  witness  will  be  Mr.  William  P.  IBurr,  corporation  counsel  of  the 
city  of  New  York. 

STATEMENT  OF  MR.  WILLIAM  P.  BURR. 

The  Chairman.  Just  proceed  in  your  own  way,  Mr.  Burr,  if  you 
please. 

Mr.  Burr.  Gentlemen  of  the  commission,  I  can  only  hope  to  give 
you  some  insight  into  the  legal  aspects  of  the  situation  in  tlie  city 
of  New  York,  so  far  as  the  street-railroad  systems  are  concerned. 


1304     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


The  street  surface  railroads  of  the  city  of  New  York  are  them- 
selves, in  my  opinion,  responsible  for  their  present  position.  It  is 
the  i-esult  of  extravagant,  high  finance  in  the  past.  The  veriest  tvro 
in  municipal  ownership  could  do  no  worse  than  the  great  financiers 
who  shaped  the  destinies  of  these  great  properties  in  the  past. 

In  Manhattan  they  founded  individual  companies,  with  individ- 
ual franchises  calling  for  a  5-cent  fare.  These  companies  were  or- 
ganized and  obtained  the  municipal  consent  for  the  purpose  of  pro- 
moting the  welfare  of  the  traveling  public,  and  by  emulation  and 
competition  to  attract  patronage. 

Years  ago,  under  the  sanction  of  procured  legislation,  these 
various  companies  were  consolidated  into  one  system,  the  law  pro- 
viding as  a  safeguard  against  such  manipulation  that  no  more  than 

5  cents  could  be  charged  for  a  continuous  ride  from  one  part  to  an- 
other thereon. 

The  history  of  that  system,  the  Metropolitan  Street  Railway  svs- 
tem,  is  a  history  of  speculation,  peculation,  and  fraud,  with  bank- 
ruptcy in  the  end. 

Upon  the  ruins  of  that  company,  in  the  bankruptcy  court,  a  new 
company  was  organized— the  New  York  Railways  Co. 

Certain  of  the  lines  forming  part  of  the  system,  like  the  Third 
Avenue  line,  were  dissevered,  and  other  lines  were  held  under  heavily 
weighted  leases,  costing  the  new  company  nearly  $2,000,000  per 
annum.  This  was  in  1912.  Its  financial  burden  consisted  of  $18,- 
000,000  of  fundamental  4  per  cent  bonds,  $70,000,000  of  investment, 

6  per  cent  interest  payable  on  and  when  earned,  and  $18,000,000  of 
stock. 

^  Since  the  reorganization  in  1912,  so  far  as  I  can  learn,  neither  the 
interest  on  the  investment  5  per  cent  bonds  or  the  $18,000,000  of 
stock  has  ever  been  paid,  except  that  interest  was  paid  one  year  on 
the  investment  5  per  cent  bonds. 

The  war  came  on,  with  its  high  prices  and  scarcity  of  labor.    It 
Wiis  not  the  cause  of  this  company's  distress.    It  but  added  to  it. 
^   The  real  solution  of  the  street-railway  problem  in  New  York  City 
is  municipal  ownership,  which  means  operation  for  service,  not  for 
profit,  and  m  the  interests  of  all  the  people  of  the  city. 

Transportation  is  just  as  necessary  as  water,  and  the  city  now 
owns  and  operates  successfully  the  greatest  municipal  waterworks  in 
the  world. 

The  city  owns  the  subways  and  will  ultimately  operate  them.  It 
should  also  own  and  operate  the  surface  railways. 

With  regard  to  the  New  York  Railways  Co.,  there  are  about  150 
miles  of  revenue  or  running  track.  Prof.  Bemis,  who  made  an  ex- 
amination of  this  railroad  for  me  for  the  city,  stated : 

With  only  150  miles  of  track,  my  estimate  that  the  fair  value  of  the  nron- 
erty  which  has  no  power  house  was  probably  under  rather  than  over  $45  000  000 
becomes  increasingly  probable,  for  it  means  over  $330,000  per  mile,  which  is 
tvNice  what  I  found  to  be  the  value  of  a  similar  system  In  Washington   DC 

The  return  of  6  per  cent   or  $2,700,000,  might  be  a  fair  return  on' the  $45,- 
000,000;  even,  say,  7  per  cent  return  would  only  be  $3,150,000 

The  company  earned  much  more  than  this  prior  to  1917. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1305 


The  following  table  brings  this  out  very  clearly,  showing  the  situation  for 
the  fiscal  year  ending  June  30,  in  each  case: 


Year. 

Street 

railway 

operating 

income. 

Profit  on 
145,000,000. 

1913 

1914 

1915 ;.' 

1916 

1917 

14,749,011 
4,800,759 
3,805,476 
4,392,330 
2,593,288 
2,179,430 
606,313 
1,200,000 

Per  cent. 
10.6 
9.0 
9.4 
9.8 
5.8 

1918 

1919  (10  months) 

1919  (12  mouths,  estimate) 

2  7 

Average  return 

7.3 

If  the  present  property  of  the  New  York  Railways  had  a  cost,  less  deprecia- 
tion, of  considerably  less  than  $45,000,000,  as  may  well  have  been  the  case, 
the  profits  would,  of  course,  have  been  a  very  much  larger  percentage. 

Examination  of  the  above  table  will,  therefore,  show  that  the  profits  In  excess 
of  6  per  cent  of  $45,000,000,  or  $2,700,000,  were  as  follows : 

Profits  in  excess  of  6  per  cent  on  $J^5,000,000. 

IqJ! ^2, 049,  on 

li.i 1'  308,  759 

1915 1, 105,  476 

191 6 I  692,  330 

1917  (deficit) 106  712 

1918  (deficit) 520,570 

1919  (deficit) 1,500,000 

Total  profits  above  6  per  cent  on  $45,000,000,  $4,028,294. 

The  surface  lines  of  the  Brooklyn  Rapid  Transit  Co.  have  for  several  years 
embraced  substantially  500  miles  of  revenue  track;  that  is,  track  over  which 
cars  run  in  the  carrying  of  passengers,  as  distinguished  from  track  in  car-barns 
and  storage  barns. 

These  surface  lines  may  be  taken  as  the  Brooklyn  Rapid  Transit  system,  ex- 
cept the  New  York  Consolidated,  which  is  mostly  elevated  and  subways. 

Since  the  transfer  situation  and  the  question  generally  of  fare,  now'  under 
discussion,  relate  to  the  surface  lines,  those  lines  are  here  considered. 

The  estimated  reproduction  cost  new  of  both  the  surface  and  the  elevated 
lines  of  the  Brooklyn  Rapid  Transit  was  made  by  Byron  J.  Arnold  and  a  large 
staff  of  assistants  for  the  public  service  commission  in  1909,  but  depreciation 
was  not  deducted,  save  in  the  case  of  the  Coney  Island  and  Brooklyn  road. 

Since  his  appraisal  most  of  the  power  houses  have  been  placed  under  the 
management  of  a  separate  but  afliliated  organization,  from  which  the  surface 
lines  buy  their  power.  Hence  this  investment  should  no  longer  be  computed 
as  that  of  the  surface  line. 

From  such  examination  as  I  have  thus  far  been  able  to  make  of  the  Arnold 
appraisal,  properly  adjusted  jtvith  respect  to  depreciation,  power-house  invest- 
ment, additions  since  1908,  and  so  on,  and  from  my  experience  in  the  appraisal 
of  similar  properties  elsewhere — 

This  is  Prof.  Bemis  speaking — 

I  believe  that  the  cost  at  the  time  it  was  constructed  of  the  property  now  in 
use,  less  accrued  depreciation,  is  under  $100,000  a  mile  of  single  track  *or  under 
$50,000,000  for  the  entire  property. 

The  latter  figure  may,  however,  be  assumed  at  the  present  time  for  purposes 
of  discussion. 

Bearing  in  mind  that  6  per  cent  of  this  $50,000,000  would  be  $3,000,000  a 
year  and  7  per  cent  $3,500,000,  and  ignoring  for  the  time  being  the  minor 
changes  which  took  place  in  the  property  from  year  to  year  through  additions, 
depreciation,  and  so  forth,  the  following  table  may  be  given  as  approximatelv 
representing  net  earnings  after  caring  for  depreciation   and  taxes,   and  the 


1306  PBOCEEDINGS  OF  FEDEBAI^  ELECTRIC  RAILWAYS  CO^.IMISSION. 


ratio  of  this  to  $50,000,000,  and  also  tlie  excess  of  the  eaiiiings,  until  the  eur- 
rent  year  above  7  per  cent,  or  $3,500,000.  In  view  of  the  way  in  which  spcuri- 
ties^  and  especially  bonds  paying  5  per  cent,  could  be  floated  at  about  par  in 
1915,  it  is  believed  that  a  6  per  cent  return  would  be  sufficient;  but  for  pur- 
IK5ses  of  computation  a  7  per  cent  return  is  here  used. 

The  time  covered  in  every  year  is  for  the  fiscal  year  ending  June  30.    Profits 
of  5-cent  fare  and  free  transfers,  Brooklyn  surface  lines: 


Year. 


1913 
1SH4 
1915 
1916 
1917 
1918 


Profits. 


|5,9A3,544 
6,045.803 
5, 880, 675 
5,914,357 
5,421,813 
4,447,283 


Per  cent  on 
$50,000,000. 


11.9 

12.5 
11.8 
11.8 
10.8 
8.9 


Excoss  ovor 

7  per  cent 

return. 


$2,463,544 

2,545,8.'V1 
2,380,675 
2,414,357 
1,921,813 
947,283 


July  1,  1018,  to  May  31,  1919,  $1,36(1,429. 

June,  1919,  estimated,  $233,571. 

June  30,  1918,  to  June  30,  1919,  $1,600,000;  profit,  3.2  per  cent;  $1,900,000 
deficiency. 

r>espite  the  decline  below  7  per  cent  of  $1,900,000  in  1919,  the  last  eight  yeai-s 
have  shown  a  profit  in  excess  of  7  per  cent  of  $10,773,525.  It  would,  therefore, 
seem  that  a  profit  of  only  3  per  cent  in  1919  need  not  be  considered  serious. 
Kven  if,  as  is  not  likely,  the  profit  in  1920  should  be  only  4  per  cent,  yet  the 
average  profits  of  the  eight  years  on  an  Investment  of  $50,000,000  would  still 
be  over  9  per  cent.  Moreover,  conditions  are  beginning  to  improve  rapidly,  as 
shown  by  the  following  table,  giving  the  street-railway  operating  income — that 
is,  the  profits  from  railway  operation  of  the  surface  line; 

October-December,  1918,  $111,907.15  profit 

January-March,  1919,  $40,591.30  deficit 

April,  1919,  $51,276.59  profit 

May,  1919,  $176,161.41  profit 

Since,  with  a  day  less,  the  net  revenue  from  street  railway  traffic  was  in- 
cn^ased  $50,000  in  June  over  the  month  of  May,  it  may  be  safely  assumed  that 
the  net  operating  income  of  June  would  be  over  $50,000  larger  than  in  May. 

It  is  evidently  necessary  to  go  Into  a  thorough  appraisal  of  the  Brooklyn  Rapid 
Transit  sujrface  lines  in  oitler  to  detennine  how  far  the  fair  value  of  the  prop- 
erty may  be  from  the  $50,000,000  used  previously  in  this  letter.  It  may  well 
be  that  the  cost  of  the  property  now  in  use,  less  depreciation,  is  considerably 
under  $50,000,000,  Init  even  if  it  be  $60,000,000,  the  earnings  of  the  company 
during  the  last  six  or  eight  years  have  been  a  large  percentage  thereon.  If 
fares  are  to  be  raised  every  time  profits  fall,  of  course  they  should  be  reduced 
when  profits  rise,  but  any  service-at-cost  plan  could  not  be  considered  without 
the  establishment  in  the  first  placft  of  a  fair  value. 

And  I  may  say  in  this  connection,  since  the  New  York  Railways 
and  the  Brooklyn  Rapid  Transit  have  gone  into  the  hands  of  re- 
ceivers that,  at  the  earnest  request  of  the  city  as  well  as  other  parties 
interested,  an  investigation  was  ordered  by  Judge  Mayer  into  the 
affaii-s  of  the  two  systems— the  New  York  Railways  and  the  Brook- 
lyn Rapid  Transit.  Stone  c^  Webster  have  been  employed  to  malce 
such  an  appraisal.  We  not  only  want  the  financial  history  of  the 
two  systems,  but  we  want  the  financial  history  in  detail  of  each  of 
the  individual  lines  going  to  make  up  each  system. 

Now,  that  we  have  ncjver  been  able  to  get,  and,  in  my  judgment, 
Ijefore  thei-e  can  be  any  sensible  or  intelligent  attempt  to  readjust 
or  reconstruct  these  railroads,  we  must  have  that  investigation  and 
that  report.  But  it  does  seem  that  Stone  &  Webster  have  been  able 
Uj  supply  the  railroads  themselves  with  all  the  data  and  information 
which  they  deemed  necessaiy  in  order  to  malre  tlieir  application  for 
an  increase  of  fare. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1307 


Mr.  Warren.  You  say  it  does  or  does  not  seem? 

Mr.  Burr.  It  does  seem  that  they  are  able  to  supply  to  the  rail- 
load  companies  themselves  this  information. 

Now,  these  leases  which  I  have  referred  to  in  the  case  of  the  New 
York  Railways  Co, — the  leases  which  were  taken  over  as  the  result 
i^  the  reorganization  in  1912  in  the  bankruptcy  court,  imposed  upon 
this  New  York  Railways  system,  I  figure  as  follows: 

To  the  Bleecker  Street  &  Fulton  Ferry  Railroad  Co.  the  New 
York  Railways  Co.  agreed  to  pay,  under  lease,  dividends  of  IJ  per 
cent  on  $900,000  common  stock,  $13,500. 

Corporate  charges,  maintaining  secretary,  office,  and  office  sup- 
plies, annually,  $601.14. 

Taxes,  real  estate  used  in  operation,  $1,973.57. 

A  total  of  $19,074.71. 

Which  equals  2.12  per  cent  on  tJiis  road's  capital  stock  and  also  in- 
terest on  $700,000  4  per  cent  mortgage  bonds. 

To  the  Broadway  &  Seventh  Avenue  Railroad  Co. : 

Dividend  of  10  per  cent  on  $2,100,000  common  stock,  $210,000.  • 

Taxes  on  real  estate  used  in  operation,  $123,450.20. 

Revenue  on  real  estate  not  used  in  operation,  $41,771.23. 

Taxes  in  excess  of  revenue  from  that  real  estate,  $81,678.97. 

Making  a  total  of  $291,678.97,  or  13.9  per  cent  on  the  capital  stock 
of  this  corporation. 

To  the  Central  Crosstown  Railroad  Co. : 

Interest  on  $250,000  6  per  cent  mortgage  bonds,  $15,000. 

To  the  Christopher  &  Tenth  Street  Railroad  Co. : 

Dividend  of  8  per  cent  on  $630,000  common  stock,  $52,000. 

Corporate  (administrative)  charges,  $1,500. 

Taxes,  less  revenue  from  nonoperating  real  'estate,  $3,694. 

Making  a  total  of  $57,194,  or  8/10  per  cent  on  the  capital  stock  of 
this  corporation. 

The  Chairman.  Mr.  Burr,  is  that  exhibit  you  have  in  such  shape 
that  you  can  file  it  for  the  record  ? 

Mr.  Burr.  Yes ;  I  will  file  that  for  the  record,  and  I  will  give  you 
the  totals. 

The  Chairman.  It  is  quite  difficult  for  us  to  carry  those  figures  in 
our  minds  as  you  read  them  into  the  record. 

Mr.  Burr.  Do  you  suggast  that  I  submit  it  for  the  record  ? 

The  Chairman.  You  may  give  us  the  total  and  file  it  in  the  record. 

Mr.  Burr.  The  fixed  rental  on  these  roads  is  $1,936,887.60. 

The  paper  submitted  by  Mr.  Burr  is  as  follows : 

[Extracts  from  report  of  commissioner  of  accounts  to  the  mayor.] 
THE   NEW   YORK  RAILWAYS   CO. 

Percentage  paid  by  holding  company. 

To  the  Bleecker  Street  &  Fulton  Perry  Railroad  Co.,  under  lease: 

Dividends  of  1\  per  cent  on  $900,000  common  stock $13,  500.  00 

Corporate   char?:es,    maintaining   secretary,    office,   and   office 

supplies,    annually 001. 14 

Taxes,  real  estate  used  in  operation 4, 073.  57 

Total  of 19,074.  71 

Equals  2.12  per  cent  on  this  road's  capital  stock  and  also  in- 
terest ou. $700,000  4  per  cent  mortgage  bonds. 


1308    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

To  the  Broadway  &  Seventh  Avenue  Railroad  Co.: 

Dividend  of  10  per  cent  on  $2,100,000  common  stock $210, 000.  00 

Taxes  on  real  estate  used  in  operation $123, 450.  20 

llevcnue  on  real  estate  not  used  in  operation 41,  771.  23 

Tuxes  in  excess  of  revenue  from  that  real  estate 81,  G78.  97 

Making  a  total  of 291,  678.  9T 

Or  13.9  per  cent  on  the  capital  stock  of  this  corporation. 
To  the  Central  Crosstown  Railroad  Co. : 

Interest  on  $250,000  6  per  cent  mortgage  bonds 15,  000.  00 

To  the  Christopher  &  Tenth  Street  Railroad  Co. : 

Dividend  of  8  per  cent  on  $650,000  common  stock ,  52,000.00 

Cori>orate    (administrative)    charges 1,  500. 00 

Taxes,  less  revenue  from  nonoperating  real  estate 3,694.00 

Making  a  total  of 57,194.00 

Or  8/10  per  cent  on  the  capital  stock  of  this  corporation. 
To  the  Forty-second  &  Grand  Street  Railroad  Co. : 

Dividend  of  18  per  cent  on  $748,000  common  stock 134,  640.  00 

Taxes,  less  revenue  from  nonoperating  real  estate 32, 906.  75 

Making  a  total  of__i 167, 546.  75 

Or  22.4  per  cent  on  the  capital  stock  of  this  coi-poration. 
To  Twenty-third  Street  Railroad  Co. : 

Dividend  of  18  per  cent  on  $600^000  common  stock 108, 000.  00 

Corporate  charges   1,  500.  00 

Taxes,  less  revenue  from  nonoperating  real  estate 29,  289.  99 

Making  a  total  of 138,  789. 99 

•  — ^  ■ 

Or  23.13  per  cent  on  the  capital  stock  of  this  corporation. 
The  New  York  Railways  Co.,  as  stock  owner,  receives  from 
this  company  annually  In  dividends  the  sum  of  $91,350. 
To  Eighth  Avenue  Railroad  Co.: 

A  fixed  rental  of 215,000.00 

Taxes,   less   revenue  from   nonoperating   property 50,675.37 

Making  a  total  of 265,675.37 

Or  26i  per  cent  on  a  capitalization  of  $1,000,000. 
This  company  pays  Its  stockholders  17  per  cent  dividend ;  out 
of  the  difference  of  10  per  cent  paid  by  the  New  York  Railways 
Co.,  6  per  cent  Is  paid  on  an  issue  by  the  Eighth  Avenue  Railroad 
Co.  of  $750,000  certificates  of  Indebtedness. 
To  the  New  York  &  Harlem  Railroad  C-o. : 

A  fixed  rental  of _ 400,000.00 

Taxes 46,350.  53 

Corporate   charges   2, 500.  00 

Making  a  total  of 448,850.  53 

Or  15.74  per  cent  on  a  capitalization  of  $2,850,544. 
To  tlie  Sixth  Avenue  Railroad  Co.: 

A  fixeil  rental  of 145,000.00 

Taxes,  less  revenue  from  nonoperating  property 30, 690. 35 

Making  a  total  of 175,  G90.  35 

Or  8.78  per  cent  on  a  captalizatlon  of  $2,000,000. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1309 


To  the  Ninth  Avenue  Railroad  Co.: 

A  fixed  rental  of $64,000.00 

Corporate   charges 2,  500.  00 

Taxes,  less  revenue  from  nonoperating  proi>erty 32. 170.  35 

Making  a  total   of 98,670.35 

Or  12.33  per  cent  on  a  capitalization  of  $800,000. 

The  Fort  George  &  Eleventh  Avoiiue  Railroad  Co.  is  owned  en- 
tirely by  the  New  York  Railways  Co.  and  does  not  pay  dividends. 

The  Thirty-fourth  Street  Crosstown  Railroad  Co.  under  an 
agreement  pays  the  interest  on  $1,000,000  5  per  cent  mortgage 
bonds  and  nothing  on  its  common  stock. 

Income  and  operating  expenses. 

The    gross    operating    revenue    for    the    fiscal    year    ending 

June  30,  1918,  was $11,920,033.77 

Less  operating  expenses  for  same  period 8, 131.  470.  70 

Balance  net  operating  revenue 3,  788,  563. 07 

Less    taxes 1, 170, 223.  73 

Leaving  an  operating  income  of 2,618,339.34 

In  addition : 

Nonoperating  revenue  from  dividends 318, 983.  67 

Nonoperating  revenue  from  securities,  etc 162,866.71 

Nonoperating  revenue  from  rents,  etc.  (net) 118,959.08 

Nonoperating  revenue  from  bridge  locals 26,308.41 

Making  a  gross  Income  of 3, 245,  457.  21 

Deductions  from  gross  Income: 

Interest  on  bonds,  notes,  etc $1,  292,  491.  41 

Track  and  terminal  privileges 46,961.44 

Rents 115,035.71 

Amortization,  debt,  and  discount 7,  714.  92 

Fixed  rental  of  leased  roads 1,936,887.60 

3,  399,  091.  08 

Leaving  a  net  deficit  of 153,  633.  87 

If  the  large  dividends  now  paid  to  the  stockholders  of  the  various  lines 
were  reasonably  reduced  this  deficit  would  soon  be  made  up. 

Mr.  Burr.  Now,  I  want  to  say,  with  regard  to  these  leases,  when 
the  difficulties  of  the  New  York  Railways  Co.  arose  and  they  asked 
for  an  increase  of  fare,  these  lessor  companies  were  unwilling  to 
cut  down  one  jot,  tittle,  iota,  or  one  farthing,  the  amounts  that  were 
agreed  to  be  paid  in  19i2. 

The  Chairman.  Are  those  long-standing  contracts? 

Mr.  Burr.  Yes.  Before  that,  they  were  assumed  before  the  bank- 
ruptcy of  the  old  Metropolitan  in  1912.  These  people  say  they 
have  a  contract,  and  they  are  going  to  hang  to  their  contract  and 
they  want  their  rent  paid — they  want  their  pound  of  flesh. 

I  will  just  give  you  one  illustration :  The  Eighth  Avenue  Railroad 
Co.,  with  a  fixed  rental  of  $215,000,  taxes  less  revenue  from  non- 
operating  property,  $50,675.37,  making  a  total  of  $265,675.37,  or  26J 
per  cent  on  a  capitalization  of  $1,000,000.  This  company  pays  its 
stockholders  17  per  cent  dividend  out  of  the  difference  of  10  per 
cent  paid  by  the  New  York  Railways  Co.,  6  per  cent  is  paid  on  an 
issue  by  the  Eighth  Avenue  Railroad  of  $750,000  certificates  of  in- 
debtedness.   To  the  New  York  &  Harlem  Railroad  Co.  a  fixed  rental 


1310    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

of  $400,000;  taxes,  $46,350.53;  corporate  charges,  $2,500;  making  a 
total  of  $448,850.53,  or  15.74  per  cent  on  a  capitalization  of  $2,850,544. 

Commissioner  Sweet.  Do  these  leases  expire  at  different  times  ? 

Mr.  Burr.  These  leases  are  irrevocable,  except  when  the  rentals 
are  not  paid. 

Commissioner  SwEirr.  No  expiration  is  fixed  in  the  leases  ? 

Mr.  Burr.  Well,  999  years. 
_  Commissioner  Beall.  Wliat  did  you  say  the  capitalization  of  the 
l^^ifrhth  Avenue  line  was,  Mr.  Burr? 

Mr.  Burr.  Making  a  total  of  $265,675.37  or  25J  per  cent  on  a 
capitalization  of  $1,000,000. 

Commissioner  Beall.  As  a  matter  of  fact,  have  not  some  ap- 
praisals shown  that  that  property  has  a  real  value  of  somethinir 
like  $4,000,000?  "^ 

Mr.  Burr.  Yes ;  and  that  is  the  fact,  that  the  Eighth  Avenue  line 
not  only  has  taken  this  rental  during  the  time  of  the  lease  but,  now 
Uiat  its  lease  has  been  broken  and  that  it  is  dissevered  from  the  New 
York  Kaalways  system,  it  takes  the  properties  for  which  the  New 
York  Railways  Co.  has  paid,  to  the  extent  of  $4,000,000  besides. 

Commissioner  Beall.  But  what  I  mean  to  say  is  that  rental  is 
not  really  26  per  cent  on  $1,000,000.  As  a  matter  of  fact,  the  gross 
sum  IS  on  a  propei-ty  that  has  cost  over  $4,000,000.  I  mean,  is  not 
that  statement  a  little  misleading?  We  are  seeking  information, 
you  understand. 

Mr.  Burr.  That  is  not  misleading.  That  is  an  extract  from  the 
report  of  the  commissioner  of  accounts  exactly,  his  report  to  the 
mayor  as  to  what  he  found. 

Commissioner  Beall.  I  know,  but  do  vou  think  that  is  a  correct 
statement,  if  a  property  is  worth  $4,000,000— if  it  has  that  value 
to-day,  or  approximately  that— do  you  think  it  is  fair  to  say  it  is 
only  worth  what  it  may  be  capitalized  at? 

Mr.  Burr.  Well,  I  say  under  the  lease  it  gets  this  rental,  and 
under  the  lease  it  also  takes  the  property  when  the  lease  ends 

Commissioner  Beall.  I  know ;  but  I  do  not  see  how  that  alters 
the  tact.    Under  the  lease  I  suppose  they  have  to  keep  it  up 

Mr.  Burr.  Well,  that  is  the  record,  and  it  speaks  for  itself. 

Commissioner  Beall.  But  your  statement,  if  I  understand  it, 
Ti'^nnnif^  "f  *^  believe  that  the  property  was  nominally  worth 
{^1,000,000  and  was  receiving  something  like  26  per  cent;  while  as 
a  matter  of  fact  that  is  only  a  nominal  capitalization  in  stock,  or 
whatever  it  is,  stock  and  certificates  of  $1,000,000,  and  represents 
property  which  is  to-day  worth  $4,000,000. 

Commissioner  Meeker.  Does  the  million  dollars  repmsent  the 
actual  capital  invested? 

Mr.  Burr.  I  could  not  tell  you  tis  to  that.    I  am  quotino^  now 

Commissioner  Beaix.  Was  there  not  an  examination  made  some 
years  ago--I  do  not  know  by  whom  it  was  made,  whether  it  was 
htone  &  Webster,  but  some  reputable  firm— that  at  that  time  gave  a 
value  to  that  pix)perty,  the  physical  property,  of  $4,000,000,  or  ap- 
proximately so?  ^  7       ?      5  r 

Mr.  Burr.  I  do  not  recall  that.    I  do  not  know  as  to  that. 
The  Chairman.  I  do  not  undei-stand,  Mr.  Beall,  that  the  witness 
has  attempted  to  place  a  value  upon  these  properties. 


PROCEEDINGS  OP  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1311 


Mr.  Burr.  No;  I  am  not  giving  you  any  value. 

The  Chairman.  He  is  referring  to  the  capitalization  of  the  com- 
panies. 

Commissioner  Beall.  But  they  are  not  earning  20  per  cent  on  their 
value. 

The  Chairman.  He  has  not  said  so. 

Mr.  Burr.  I  am  giving  you  the  figures  as  they  appeared  upon  the 
report,  and  they  have  not  been  denied.  They  may  be  characterized 
or  explained,  but  those  figures  are  not  denied  anywhere. 

Commissioner  Beall.  We  are  only  seeking  information. 

Mr.  Burr.  Th«  commissioner  of  accounts,  in  making  his  report 
showing  the  fixed  rentals  of  $1,936,887.60,  called  attention  to  the 
fact  that,  if  these  rentals  were  reasonably  reduced,  the  deficit  which 
existed  at  that  time  when  he  made  the  report  of  $153,633.87,  would 
soon  be  made  up.  He  says  th«  New  York  Railways  Co.  was  incor- 
porated as  a  reorganization  of  the  Metropolitan  Street  Railway  Co. 
on  December  29,  1911,  its  funtions  being  the  operation  under  stock 
ownership  and  leaseholds  of  several  of  the  railroad  properties  in  the 
Borough  of  Manhattan.  The  several  lines  acquired  are  not  operated 
as  individual  routes  but  as  routes,  the  ix)utes  using  trackage  of  tlieir 
own  line  and  parts  of  others,  and  as  the  accounts  are  kept  as  one  sys- 
tem it  is  not  possible  to  determine  the  financial  operation  of  any  in- 
dividual company,  route  or  line. 

Now,  as  to  the  Interborough.  The  subway,  on  August  31,  1918, 
the  Interborough  Rapid  Transit  Co.  through  its  president,  Mr. 
Shouts,  issued  a  statement  when  it  desired  to  float  $33,400,000  Inter- 
borough Rapid  Transit  Co.  notes,  in  which  it  is  stated : 

The  urgent  necessity  of  providing  tlie  enlarged  rairid-transit  facilities  ia 
flemonstratetl  by  the  rapid  growth  of  traffic  and  earnings  of  the  comijany's 
lines  since  the  oi)ening  of  the  subway,  exclusive  of  the  subway  mileage  con- 
structed as  tlie  result  of  the  contracts  made  with  the  city  in  1913,  for  the  en- 
larged system,  as  shown  by  the  following  figures. 

And  there  he  gives  the  figures  for  the  year  ended  June  30,  1905: 
Passengers  carried,  339,104,820 ;  operating  revenue,  $17.201,083 ;  and 
for  the  year  ended  June  30,  1918,  passengers  carried,  770,998,335, 
with  an  operating  revenue  of  $4:0,49t,728. 

And  Mr.  Shonts  continues: 

During  the  10-year  period  of  1907-1917,  in  which  the  older  subway  was 
operated  as  a  complete  unit  and  under  normal  conditions,  the  company's 
gross  revenue  increased  from  $22,902,579  to  $39,866,146,  or  74  per  cent,  and 
the  net  income  available  for  interest  increased  from  $4,483,110  to  $12,514»996, 
or  179  per  cent.  This  exi>erience  of  the  past  would  justify  the  expectiition 
of  continuing  expansion  of  traffic  and  earnings  of  the  enlarged  rapid-transit 
system,  although  a  iieriod  of  transition  is  to  be  auticii>ated  during  which  the 
dense  traffic  currents  shift  from  old-established  routes  to  the  new  ones. 

Mr.  Warren.  When  was  that?    I  did  not  get  the  date. 

Mr.  Burr.  August  31,  1918.  And  referring  to  those  dense  traffic 
currents,  the  fact  is  that  the  preferential  of  $6,356,000 — I  think  it  is — 
w^hich  the  Interborough  is  entitled  to,  is  based  upon  the  operation 
of  the  subway  in  New  York  and  Manhattan  to  the  point  of  satura- 
tion. In  other  words,  the  earnings  of  $6,000,000  and  odd  w^ere  based 
upon  what  they  were  earning  at  the  time  the  conti^ct  was  made  from 
the  suffocating  conditions  resulting  fioni  the  overcrowding  of  the 
subways  at  that  time  and  the  earnings  they  were  making  at  that 


1312    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

time.  So  that  as  that  condition  is  remedied,  or  disappears  through 
the  opening  up  of  new  branches  of  the  subways,  the  overhead 
charges  increasmg,  the  profits  will  not  be  so  great. 

Owing  to  war  conditions — 

Says  Mr.  Shonts  in  this  letter — 

it  seems  probable  tbat  with  tlie  present  rate  of  fare  the  amount  of  preferential 
earnings  to  which  the  company  is  entitled  wljl  not  at  first  be  fully  earned, 
and  the  city  will  therefore  receive  no  retu*^?-  ^XUfMi  its  investment  in  tlie  new 
subways,  but  the  estimate  of  independent  (  ffneers  indicates  that  the  income 
available  to  the  company  will  be  insufficient  \  to  provide  for  the  $11,520,(X)0 
required  for  estimated  interest  and  sinking  fund  charges  payable  out  of 
income  in  1919. 

The  estimate  of  the  engineers  on  the  basis  of  a  5-cent  fare  is  as  follows: 
1919,  gross  revenue,  $45,600,000.  Total  income  available  under  contracts  for 
retni-n  to  company,  $12,440,000.  The  Increased  cost  of  operation  in  1918 
reflects  conditions  which  are  common  to  similar  enterprises  throughout  the 
country  as  a  consequence  of  the  war,  and  in  view  thereof  the  company  has 
made  an  application  for  ah  increase  in  fare,  which  is  now  pending  before  the 
public  authorities.  The  granting  of  this  necessary  increase  would  enable  the 
city  to  obtain  sooner  a  return  upon  its  investment  in  the  new  Interborough 
subways. 

Now,  the  city  is  not  worried  about  the  sooner  return  that  he 
refers  to.  The  city  has  invested  over  $200,000,000  in  the  subways 
upon  the  basis  of  a  6-cent  fare,  and  for  that  purpose  and  to  secure 
that  5-cent  fare  it  is  willing  to  wait  for  its  return  upon  the  money. 

Now,  I  heard  Commissioner  Nixon  say,  while  I  say  here,  what 
is  the  fact,  that  any  increase  in  fare  in  the  city  of  New  York  would 
be  detrimental  unless  it  is  made  to  all  the  companies.  That  is,  if, 
for  instance,  to-morrow  the  fare  of  the  Third  Avenue  Railroad  was 
increased  to  7  cents,  it  would  ruin  the  Third  Avenue  Railroad. 
There  are  in  the  whole  city  of  New  York  the  B.  R.  T.  system,  em- 
bracing the  surface  and  the  subway  lines;  the  New  York  Railways 
Co.,  the  surface  railroad  in  the  city  of  New  York;  and  the  Inter- 
borough subway.  Then  there  is  the  Third  Avenue  system,  and 
there  is  the  Second  Avenue  system,  which  is  in  the  hands  of  a 
receiver  and  has  been  in  the  hands  of  a  receiver  for  many  years; 
and  there  is  another  line,  the  Fifty-ninth  Street  Crosstown  line.  If 
the  Third  Avenue  line  fare  was  increased  people  would  seek  the 
Fourth  Avenue,  or  any  parallel  line,  to  come  down ;  in  other  words, 
they  would  seek  the  cheapest  transportation.  And  if  the  fares  on  the 
surface  lines  were  raised  the  result  would  be  that  they  would  seek 
transportation  on  the  subways.  So  that  is  the  complication  in  New 
York.  I  think  we  are  differently  situated  in  New  York  from  any 
other  city  in  the  country. 

It  can  not  be  settled  in  three  months  nor  can  it  be  settled  without 
additional  legislation,  as  I  think  you  asked  Mr.  Nixon,  for  this  rea- 
son: Franchises  for  street  railroads  in  the  city  of  New  York  have 
been  granted  since  1832.  And  in  1874  the  constitution,  adopted  at 
that  fime,  which  went  into  effect  in  1875,  provided  that  thereafter 
no  tracks  could  be  laid  in  the  city  of  New  York  without  the  consent 
of  the  local  authorities.  And  in  those  consents,  since  1875,  the  city 
has  invariably  fixed  the  5-cent  fare  as  a  condition.  And  anterior  to 
that  time,  by  the  consents  granted  by  the  local  authorities,  the  5-cent 
fare  was  also  made  a  fundamental  jiart  of  the  local  consents. 

There  are  some  legislative  grants  directly  to  the  railroads  and 
those  also  embraced  the  5-cent  fare.     But  in  1897~these  were  all 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1313 

perpetual  franchises  I  have  referred  to— the  new  charter  went  into 
effect,  and  under  the  new  charter  the  city  can  not  grant  any  rights 
except  in  the  manner  provided  by  the  charter— that  is,  by  resolution 
by  the  board  of  estimate  and  apportionment.  Formerly  it  was  by 
the  board  of  aldermen  but,  as  amended  in  1905,  by  the  board  of  esti- 
mate and  apportionment,  and  must  be  for  the  period  of  25  years  with 
one  renewal  of  25  years,  and  at  the  end  of  the  new  period  the  prop- 
erty becomes  the  property  of  the  city,  in  the  streets,  the  tangible 
property,  and  the  property  and  plants,  and  so  forth,  may  be  taken 

over  on  an  appraisal. 

So  that  to-day  if  these  railroad  companies,  having  these  perpetual 
franchises  applied  to  the  citv  of  New  York  for  a  modification  of 
their  franchise  or  to  fix  a  diifferent  fare  in  their  existing  perpetual 
franchises  than  that  originally  fixed  under  the  conditions  that  I 
have  stated,  the  city  government  is  powerless  to  do  it ;  it  could  not 
legally  do  it.  It  would  be  necessary  for  these  companies  to  surrender 
their  perpetual  franchises  and  come  in  and  apply  for  a  new  fran- 
chise under  the  new  conditions  existing  under  the  Greater  New  York 
charter.  In  other  words,  the  perpetual  franchises  would  have  to  be 
surrendered  and  a  limited  franchise  granted  instead. 

So  that  could  not  be  done  in  three  months,  nor  if  it  was  desired, 
or  if  the  legislature  desired,  to  give  the  city  authority  to  increase  the 
fares  in  the  perpetual  franchise,  and  instead  of  granting  a  limited 
franchise  to  grant  them  a  perpetual  franchise  for  7  cents  or  10  cents, 
that  would  have  to  be  empowered  by  the  legislature. 

Now  that  question  arose  in  New  York  in  the  Quinby  case,  and 
here  recently  in  the  International  Railway  Co.  v.  Rann  in  Buffalo.  In 
the  Quinby  case  the  court  of  appeals  decided  that  the  public-service 
commission  had  no  power  to  change  or  alter  or  affect  in  any  waj^  the 
fare  fixed  in  the  franchises  granted  by  the  municipal  authorities 
under  the  authority  or  power  vested  in  them  by  the  constitution. 
And  in  the  Rann  case,  the  International  Railway  Co.  case,  the  ques- 
tion came  up  twice.  It  came  up  in  1918  and  went  to  the  court  of 
ajDpeals  and  the  court  there  held  that  the  5-cent  fare  was  a  property 
right  and  that  it  could  not  be  taken  away  from  the  people  of  the  city 
of  Buffalo  except  as  provided  by  the  charter  of  the  city  of  Buffalo, 
and  the  charter  of  the  city  of  Buffalo  provided  that  no  rights  of 
the  people  of  the  city  of  Buffalo  could  be  taken  away  except  by  a 
referendum,  and  that  question  of  the  increase  of  fares  was  referred 
to  the  people  of  the  city  of  Buffalo  and  defeated  by  37,000  votes,  I 
think,  or  something  of  that  kind. 

Now  then,  the  railroad  applied  itself  again  to  another  endeavor 
and  sought  to  mandamus  the  public-service  commission  to  increase  the 
fare,  notwithstanding  that  referendum,  upon  this  theory  that  this 
whole  question  of  the  rates  in  Buffalo  was  the  subject  of  an  agree- 
ment known  as  the  Milburn  agreement,  made  some  years  ago,  at 
which  the  rate  was  fixed  at  5  cents,  but  in  that  agreement  it  was 
si>ecifically  provided  that  nothing  herein  shall  be  construed  as  taking 
away  from  or  limiting  in  any  way  the  power  of  the  legislature  itself 
to  fix  the  rates  of  fare.  So  that  upon  this  last  opinion  the  court  held 
that  that  was  different  from  the  situation  presented  in  the  Quinby 
case ;  and  here  there  was  no  question  of  the  municipal  consents,  that 
here.there  was  a  clear  intent  both  on  the  part  of  the  city  and  of  the 

160643*'— 20— VOL  2 ^21 


1314    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

railroad  company  that  the  legislature  should,  whenever  it  deemed  it 
necessary,  to  change  or  increase  the  rates,  and  that  therefore  the 
public-service  commission,  being  the  delegate  of  the  legislature,  has 
the  power  to  increase  the  rates.  But  you  will  see  that  that  situation 
was  entirely  different  from  the  situation  which  is  embraced  in  the 
constitutional  consent  of  the  local  authorities. 

Commissioner  Gadsden.  On  that  point,  do  not  some  members  of 
vour  New  York  bar  construe  that  last  decision  as  applicable  to  your 
local  condition? 

Mr.  Burr.  As  being  applicable  to  the  condition  to  Buffalo  or  to 
New  York? 

Commissioner  Gadsden.  To  New  York. 

Mr.  Burr.  Well,  some  do. 

Commissioner  Gadsden.  That  is  a  controverted  question  at  pres- 
ent ;  is  it  not  ? 

Mr.  Burr.  I  can  not  see  that.  The  judge  intimates  there  that — I 
will  just  read  you  from  his  decision.  Judge  Cordoza  points  out — 
this  is  an  analysis  I  made  of  the  opinion — that  the  5-cent  fare,  when 
made  a  condition  in  consents  by  municipalities  to  street-railroad 
operation,  has  tlie  force  of  what  is  called  in  law  "  a  condition  subse- 
quent," for  a  failure  to  live  up  to  which,  the  municipality  would  have 
the  right  to  revoke  its  consent.  From  this  well-settled  doctrine, 
Judge  Cordoza  makes  certain  deductions  which  are  of  great  value  to 
the  city  in  this  situation,  and  which  are  important  for  the  future 
guidance  of  all  parties  concerned.    Judge  Cordoza  says : 

A  municipality  may  be  willing  to  liave  an  electric  railroad  in  its  streets;  It 
may  be  unwilling  to  liave  a  road  run  by  steam.  It  may  be  willing  to  liave  a 
railroad  that  can  furnish  cheap  transportation;  it  may  be  unwilling  to  have 
another. 

Judge  Cordoza  then  points  out  that  if  a  city  is  unwilling  to  have  a 
raili-oad  operate  on  its  streets  for  more  than  a  5-cent  fare  it  may  not 
only  impose  that  condition,  but  it  may  enforce  that  condition  ll3y  re- 
voking the  franchise  if  the  condition  is  violated.  On  the  other  hand, 
he  concedes  to  the  legislature  a  certain  regulatory  power  in  this 
matter,  saying : 

The  legislature  may  say  that,  subject  to  the  conditions  subsequent  annexed 
to  the  consent  of  tlie  locality,  there  shall  be  a  change  of  motive  power  or  an 
increase  of  the  rates.  It  may  say  that  if  tlie  local  authorities  do  not  promptly 
manifest  the  election  to  revoke,  the  condition  will  be  waived. 

The  practical  inference  from  the  suggestion  thus  made  by  the 
court  of  apfjeals  is  that  the  legislature  may  pass  a  law  authorizing 
the  commission  to  increase  rates  which  will  become  effective,  unless 
the  municipal  authorities  will,  within  a  reasonable  period  prescribed 
in  such  law,  take  action  to  revoke  the  franchise. 

Eeading  between  the  lines  of  his  opinion,  it  is  not  unreasonable  to 
deduce  therefrom  that  the  court  wished  to  let  all  concerned  realize 
that  a  law  (such  as  the  Careon-Martin  bill)  baldly  seeking  to  override 
f a,re  i>rovisions  in  municipal  consents  would  be  of  such  doubtful  con- 
stitutionality that  its  enactment  ought  not  be  attempted.  Following 
this  up  the  court  has  pointed  out  another  coui^e  open  to  the  legislature, 
viz,  to  authorize  the  public-service  commission  to  increase  rates  pro- 
\4sionally  upon  the  consent  of  the  local  authorities  forthwith  to  elect 
whether  they  wish  to  revoke  the  franchise  in  the  streets  rather  than 
permit  the  increase. 


PROCEEDINGS  OF  FET^RAL  ELECTRIC  RAILWAYS  COMMISSION.    1315 

This  is  a  solution  of  th«  matter  which,  after  all,  would  leave  in 
the  city  authorities  that  power  for  which  they  have  right  along  con- 
tended in  the  interest  of  the  people  of  the  city.  The  decision,  there- 
fore, even  more  distinctly  than  did  the  Quinby  case,  recognizes  the 
right  of  the  people  of  the  city  to  insist  that  the  sti*eet-railroad  com- 
panies may  operate  in  the  streets  only  so  long  as  they  live  up  to  the 
terms  of  their  franchise  contracts,  including  the  5-eent  fare  provi- 

S1.CH1.S. 

Only  thi'ougii  modification  by  the  city  itself  of  the  contracts,  or 
through  a  surrender  of  the  perpetual  franchises  for  new  short-term 
irrants  under  the  Greater  New  York  charter,  can  the  companies  ob- 
tain the  privilege  of  charging  increased  fares. 

That  is  as  we  view  that  decision. 

Mr.  Warren.  There  is  not  any  question  but  what  the  city  could 
j«i*mit  a  change  if  it  wanted  to  through  its  proper  authorities  ? 

Mr.  BuRB.  If  we  had  tlie  authority  I  just  spoke  of  as  lacking, 

Mr.  Warren.  Is  there  a  question  as  to  whetlier  you  liave  the  au- 
thority ?  Assuming  you  chose  to  make  a  change,  can  not  you  make 
itf  Can  not  ihe  same  city  government  which  consented  originally 
consent  to  a  modification  ? 

Mr.  BufiiL  In  the  way  I  spoke  of.  You  can  not  do  it  under  the 
conditions  that  prevail  now.  You  can  take  the  old  style  of  perpetual 
franchise  and  you  can  surrender  it  and  you  can  get  a  new  franchise 
under  the  new  conditions,  a  limited  frai^chise,  but  the  city  has  no 
power  to-day  to  change  the  fceims  of  tlie  original  i^erpetual  fran- 
cliise  and  make  a  perpetual  5-eent  franchise  into  a  perpetual  10-cent 

franchise. 

Mr.  Wakren.  It  is  your  view  that  the  only  thing  they  can  do  is  to 
substitute  this  25-year  francliise  that  is  renewable  ? 

Mr,  Burr.  Yes, 

Mr.  Warren.  But  thej  can  not  modifj^  any  of  the  terms  of  the  old 
oites  and  let  it  continue  in  otlier  resped:s  ? 

Mr,  Burr.  No;  because  the  chai-ter  distinctly  provides  that  any 
resolution  affecting  rights  in  tlie  streets  must  l>e  by  legislation  of 
the  board  of  estimate  and  in  the  manner  provided  by  the  charter,  and 
that  is  the  manner  provided  by  the  charter. 

Commissioner  Gadsden.  Could  the  city  waive  its  right  to  fix  a  fare 
and  leave  it  to  the  commission  ? 

Mr.  Burr.  The  commission  has  no  power.  I  am  now  testing  the 
power  of  the  commission,  or  Commissioner  Nixon.  Commissioner 
Nixon  is  very  sincere  about  what  he  has  in  mind ;  he  is  very  desirous 
of  increasing  tiie  fare  and  giving  transfers,  and  all  that  sort  of  thing. 
Of  course,  naturally,  we  are  strict  constructionists  in  that  regard.  I 
must  necessarily  look  out  for  the  interests  of  the  jDeople  and  see  that 
nothing  is  unduly  waived  or  given  away.  We  hold  to  our  contract. 
The  companies  have  all  the  time  from  time  immemorial  held  in 
sftcredness  of  ihe  contract  and  insisted  that  their  rights  must  be  pro- 
ted^ed  under  the  contract,  and  that  they  can  not  he  taken  away  ex- 
cept by  due  process  of  law.  And  if  ever  an  attempt  was  made  during 
the  time  they  were  making  all  this  money  to  redu(^  the  fare  to  3 
cents  we  would  have  been  confronted  with  the  contention  that  we 
had  ourselves  fixed  the  rate  at  5  cents. 

And  in  all  the  glowing  accounts  that  have  been  made  to  inve^x)rs — 
for  instajice,  in  the  subway  case,  that  has  been  accentuated  and  great 


1316    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 


stress  laid  upon  it — that  the  5-cent  fare  is  sure,  it  can  not  be  even 
changed  by  the  legislature,  it  is  a  contract,  and  we  say  it  is  a  contract, 
we  say  we  have  $200,000,000  there  to  back  up  that  contract  for  the 
benefit  of  the  people  of  the  city  of  New  York.  That  contract  can 
not  be  changed,  and  that  we  will'contest  to  the  end. 

Now,  I  think  that  cheap  transportation  is  as  necessary  as  cheap 
water  in  a  great  municipality  like  the  city  of  New  York.  I  think 
transportation  is  tied  up  with  better  housing.  We  had  serious  diffi- 
culty in  the  city  of  New  York  quite  recently  through  lack  of  accom- 
modations and  through  this  rent  profiteering.  People  were  unable 
tc  get  houses  and  get  any  sort  of  accommodations.  And  everybody 
knows  that  that  is  tied  up  to  health  and  morals,  the  kind  of  habita- 
tion or  housing  that  is  afforded.  And  the  only  solution  of  that  in 
my  judgment  is  cheap  transportation. 

I  think  it  would  even  pay  a  great  city  like  New  York  to  operate 
its  transportation  system  at  a  decided  loss  for  the  purpose  of  giving 
the  people  opportunity  to  spread  out  and  not  to  live  in  the  congested 
districts.  I  think  that  would  be  to  the  interest  of  the  public  wel- 
fai-e  and  the  interest  of  public  morals  and  public  safety.  And  that 
is  the  situation  as  we  find  it  in  New  York. 

I  simply  wanted  to  call  attention  in  addition  to  the  statement  filed 
by  the  Interborough  with  the  bureau  of  statistics  and  accounts  of  the 
public  service  commission  on  August  6,  1919,  which  apparently 
shows,  on  a  capital  stock  of  $35,000,000,  that  from  1904  to  1918,  De- 
cember 31,  they  earned  187^  per  cent  dividends,  or  $65,625,000. 

Now,  as  I  say.  gentlemen,  the  temporary  solutions  of  the  difficul- 
ties in  New  York  are  not  easy,  because  of  the  legal  impediments  that 
I  have  referred  to.  AVe  introduced  in  the  legislature  last  session  a 
bill  authorizing  municipal  ownership.  This  administration  was 
elected  by  an  overwhelming  vote  on  a  platform  of  municipal  owner- 
ship. It  requires  thought,  of  course,  and  ways  and  means  to  be  de- 
vised to  take  over  these  properties,  but  as  I  have  said,  we  already 
recognize  in  New  York  need  for  municipal  ownership,  because  we 
have  made  money  through  the  operation  of  the  greatest  municipal 
water  plant  in  the  world. 

We  own  the  subways  and  we  have  spent  $200,000,000  to  have  them 
operated  for  the  benefit  of  the  people,  and  those  subways  will  eventu- 
ally—in 1967,  if  not  earlier — revert  to  the  city  of  New  York.  And 
the  (juestion  of  the  surface  railroads;  they  seem  to  be  unable  to  make 
them  a  success.  This  is  the  second  time  that  the  New  York  Railways 
has  been  in  the  bankruptcy  court,  and  that  does  not  speak  well  for 
the  great  men  who  have  been  managing  this  great  property.  As  I 
say,  I  til  ink  that  a  city  which  is  able  to  conduct  successfully  a  great 
water  plant  such  as  we  have  should  be  able  to  operate  successfully  its 
transportation  system. 

Then,  again,  in  the  charter,  just  as  I  have  stated,  the  principle  of 
eventual  municipal  ownership  is  recognized  by  a  limited  franchise 
which  is  now  permissible  with  the  reverter  to  the  city  at  the  end  of 
that  time. 

1  forgot  to  siiy,  in  connection  with  the  leases,  for  instance,  that  in 
the  Bix)oklyn  Rapid  Transit,  the  Brooklyn  Rapid  Transit  which 
owns  the  Brooklyn  Heights  Railroad  Co.  under  a  999-year  lease, 
pays  the  Brooklyn  Heights  Railroad  Co.  interest  on  a  funded  debt 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1317 

of  $6,925,000,  10  per  cent  dividend  on  common  stock  of  $12,000,000, 
and  an  allowance  for  organization  expenses.  It  also  pays  to  main- 
tain the  demised  railroads  in  good  condition  and  repair,  replace  all 
buildings  and  property,  keep  all  equipment  in  good  repair  and  re- 
placement, and  pave  and  keep  in  good  repair  the  streets  in  accord- 
ance with  statutory  or  municipal  regulation.  Nothing  is  paid  to  the 
other  subsidiary  companies  in  the  system,  they  being  the  property 
of  the  Brooklyn  Rapid  Transit  Co.  through  ownership  of  stock,  and 
their  earnings  are  taken  into  that  company. 

And  I  may  say,  after  a  careful  study  for  a  solution  of  the  difficul- 
ties that  exist,  we  also  introduced  a  bill  in  the  legislature  to  abolish 
the  holding  company  in  the  operation  of  the  street  railway  and  the 
.  reorganization.  The  municipal-ownership  bill  was  defeated  and  the 
holding-company  bill  was  also  defeated,  and  that  is  the  situation  as 
it  stands  now.  I  am  hopeful  that,  from  the  many  facts  which  have 
arisen  and  the  general  attention  which  has  been  attracted  to  the 
situation  in  New  York,  it  will  result  in  the  legislature's  giving  us 
some  sort  of  real  constructive,  up-to-date  legislation  next  year. 

We  had  a  strike.  I  think  Mr.  Nixon  referred  to  it  in  his  testimony. 
Now,  the  receiver  of  the  B.  R.  T.  set  himself  up  as  an  authority  to 
deny  recognition  of  the  labor  unions.  In  fact,  on  examination  he 
testified  before  the  public-service  commissioner,  Mr.  Nixon,  that  the 
demands  of  the  men  for  an  increase  in  wages  he  realized  were  merely 
secondary;  that  he  knew  that  their  chief  and  fundamental  demand 
•  was  recognition  of  the  union,  and  that  he  never  would  and  never  in- 
tended to  give  them  recognition  of  the  union.  Well,  at  the  request 
of  the  maj'^or  I  called  the  attention  of  the  judge  who  appointed  him 
to  that  situation,  because  I  had  in  mind  that  all  through  this  country 
the  labor  unions  have  been  recognized  generally;  and  I  remember 
that  in  the  great  trouble  they  have  had  in  England  the  labor  unions 
have  been  recognized ;  in  fact,  I  remember  reading  that  Lloyd-George 
regretted  that  there  was  a  disposition  to  ignore  the  heads  of  the  labor 
unions,  so  that  no  agreements  could  be  made ;  and  "I  remember  hear- 
ing Lord  Reading  when  he  was  here  state  that  a  great  catastrophe 
was  averted  in  England  when  they  held  a  labor  convention  at  which 
over  500  representatives  of  labor  and  employers  got  down,  with 
the  result  that  a  committee  of  ten  was  appointed,  and  they  brought 
in  a  platform  which  was  agreeable  to  all  concerned,  and  a  .great 
catastrophe  was  thus  averted.  So  that  having  that  in  mind,  I 
appealed  to  Judge  Mayer  to  direct  his  receiver  to  meet  his  men 
and  to  confer  with  them,  and  the  judge  came  down  and  Mr.  Nixon 
had  a  talk  with  the  men,  and  they  all  met  in  conference,  and  the 
result  was  that,  having  heard  everybody  pro  and  con,  he  called  us  in 
and  \\e  agreed  upon  a  basis  of  settlement,  and  that  strike  was  settled. 

Now,  those  men  were  more  desirous  of  having  that  recognition 
than  they  were  of  anything  else;  and  they  cheerfully  signed  an 
agreement  to  arbitrate  the  other  things,  as  to  whether  they  were  en- 
titled to  an  increased  rate  per  hour. 

Apparently  without  waiting  for  anything  to  be  done  by  the  men, 
the  companies  have  agreed  to  increase  their  wages  right  off,  10  per 
cent.  I  do  not  know  whether  that  is  done  for  the  purpose  of  forc- 
ing the  issue  as  to  the  increase  of  fare,  but  I  think  that  the  men,  the 
workmen,  the  labor  unions,  realizing  perfectly  that  they  are  now 


1318    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


cngiiged  as  workmen  for  a  bankrupt  company,  having  obtained  rec- 
ognition of  their  union,  are  in  no  hurry  to  press  their  claims  for  in- 
creased rates  or  wages  until  there  can  be  an  adjustment  of  the  diffi- 
culties presented  by  the  situation  of  these  companies. 

The  Chairman.  The  noon  hour  has  arrived.  Have  yoii  completed 
for  formal  statements 

Mr.  BuBK.  Yes. 

The  Chaikman.  May  I  a^k  you  just  two  or  three  questions  before 
we  adjourn  ?  Has  any  tribunal  fixed  die  value  of  the  several  leased 
2>ropei*ties  which  you  referred  to  tliis  morning  ? 

Mr,  BuRfi.  No,  sir. 

The  Chairman.  Then  you  can  not  furnish  us  with  anv  information 
bearing  upon  the  value  of  those  several  pix>perties? 

Mr.  Burr.  Xo  ;  tliat  is  what  we  are  very  anxious  to  get,  as  I  said. 
Stoiie  &  Webster  are  now  s4ipi>osed  to  be  engaged  in  making  thai 
valuation- 

The  Chairman.  So  the  tabulation  tkat  you  filed  here  this  morning 
showing  the  large  earnings  is  simply  a  computation  of  tlie  return 
upon  the  capitalized  value  of  those  properties? 

Mr.  Burr.  You  me^n  what  I  read  of  Prof.  Bemis's? 

The  Chairman.  Yes. 

Mr.  BuBR.  Upon  the  assumption  that  the  value  of  tlie  railroads  is 
as  he  stated,  $45,000,000,  because  we  have  not  been  able  to  get  the 
complete  detailed  tabulation  or  appraisal. 

The  Chairman.  Now,  if  public  sentiment  in  New  Y'ork  favored, 
municipal  ownersliip  and  the  legislature  would  pass  suitable  laws, 
what  would  be  the  earliest  possible  time  that  that  consiunmation 
could  be  obtained? 

Mr.  Burr.  Well,  I  could  only  make  a  guess  as  to  that. 

The  Ch^virman.  Yes. 

Mr.  BuKR.  That  would  be  largely  dei>endent.  For  instance,  under 
the  constitution  >ve  may  not  exceed  the  debt  limit,  but  where  we  issue 
bonds  wltere  they  are  self-pi'oducing,  self-supporting — for  instance, 
the  water  bonds — they  are  not  counted  in  the  debt  limit  because  they 
are  self-supporting,  and  it  would  be  merely  a  matter  of  arrangement 
between  the  city  and  the  financiers  representing  this  whole  system 
first  to  ascertain  what  was  the  true  Talue,  what  is  the  true  basis,  and 
arrive  at  a  modus  operandi  by  which  they  could  be  taken  over.  Or 
it  might  be  that  a  tempoi*ary  expedient  would  be  resorted  to.  For 
instance,  there  might  be  a  modification  of  tlie  time  within  which  the 
s^ibway  would  be  taken  over.  We  can  take  it  over  in  10  years.  We 
might  arrange  to  have  the  whole  thing  thrown  into  one  company 
an<l  these  franchises  surrendered  and  diort-time  franchises  granted 
under  conditions  to  be  named  in  those  franchises  which  would  per- 
mit the  gradual  taking  over  of  the  proj^erties  by  the  city  and  eventu- 
ally munic4i>al  OAvnership.  That  would  all  be  a  matter  of  good  faith 
and  good  workmanship. 

The  Chairman.  But  it  would  take  considerable  time? 

• 

Mr.  Burr.  It  would. 

The  Chairman.  Now,  in  tbe  interim,  if  it  does  appear  that  these 
proj^erties  or  some  of  them  can  not  pay  their  operating  expenses  and 
fixed  charges,  or  some  part  of  the  fixed  diarges,  on  their  present  5- 
C€9it  fare,  w^hat  is  the  solution! 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1319 

Mr.  Burr.  They  will  have  to  call  in  some  capable  engineers  and 
reconstruct  or  reroute  their  present  plan  of  operation.  Because  as 
the  result  of  this  consolidation  into  a  system — mind  you,  originally 
these  franchises  were  granted  to  create  competition— but  when  they 
came  into  a  system  then  they  discontinued  and  disconnected  and 
abandoned  here  and  there  and 

The  Chairman.  Then  the  remedy  is  through  economies  of  opera- 
tion and  consolidation  rather  than  by  an  increased  rate  ? 

Mr.  Burr.  I  think  so. 

The  Chairman.  We  will  stand  adjourned  until  2  o  clock. 

(Whereupon,  at  1  o'clock  p.  m.,  a  recess  was  taken  until  2  o'clock 

p.  m.) 

afternoon  session. 

The  Chairman.  Who  is  the  next  witness,  Mr.  Ogburn? 
Mr.  Ogburn.  Prof.  Irving  Fisher,  who  will  talk  on  the  depre- 
ciation of  money. 

STATEMENT  OF  PEOF.  lEVING  FISHEE. 

The  Chairman.  Do  you  prefer  to  make  your  statement  without 
interruption,  Professor  ? 

Mr.  Fisher.  No  ;  I  prefer  to  be  interrupted. 

In  the  first  place,  I  would  put  on  record  the  way  in  which  I  came 
here.  One  of  the  men  associated  with  the  electric-railways  indus- 
try came  to  me  and  asked  me  if  I  would  appear  before  the  commis- 
sion, representing  them,  and  for  a  fee,  and  I  replied  that  I  would 
not.  Not  that  I  objected  to  taking  fees,  but  that  I  was  very  ambi- 
tious to  have  all  the  weight  that  anything  I  might  say  might  have, 
because  I  felt  it  so  important,  and  it  might  be  regarded  as  being  ex 
parte  when  it  is  not,  because  it  would  squint  in  that  direction. 
Thei-efore  I  came  at  the  invitation  of  your  commission  and  have 
not  even  my  expenses  paid. 

I  have  tried  in  previous'  cases  to  avoid  being  in  any  other  than  a 
judicial  attitude  in  such  matters,  where  I  tried  to  give  expert  testi- 
mony as  an  economist.     • 

I  spoke  in  1915  on  this  subject  in  Boston,  at  an  arbitration  pro- 
ceeding between  the  Bay  State  Electric  Railway  Co.  and  the  union 
of  motormen  and  conductors.  I  was  asked  at  that  time,  to  appear 
in  behalf  of  the  union,  and  I  refused  to  take  a  fee,  and  took  the 
ground  that  the  electric  railways  should  paj^  the  wages  that  the  men 
deserved,  sufficient  to  compensate  for  the  higher  cost  of  living,  irre- 
spective x)f  whether  they  could  afford  to  do  so  or  not,  which  seemed 
a  very  strong  ground  to  take,  and  I  took  it  strongly,  partly  because 
I  felt  the  electric  railway  was  a  public-service  corporation,  and  that 
no  part  of  the  cost  ought  to  be  borne  by  the  operatives  of  the  indus- 
try. And  when  asked  how  the  railwaj^s  would  recoup  themselves, 
I  said  by  raising  the  fare  from  5  to  6  cents,  or  whatever  is  necessary. 
And  that  view  was  not  taken  by  the  majority  of  the  arbitrators. 

The  reason  that  I  made  that  statement  then  and  make  correspond- 
ing statements  to-day,  is  that  I  believe  this  whole  subject  is  one  of 
monetary  depreciation,  primarily. 

"When  Ave  talk  about  the  high  cost  of  living,  we  are  really  talking 
about  a  low  purchasing  power  of  money,  and  this  problem  with 


1320    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


which  you  are  dealing  hei*e  is  really  a  twin  problem  with  the  high 
cost  of  living.  They  both  are  parts  of  the  problem  of  depreciated 
money,  as  I  see  it. 

This  morning  one  of  the  witnesses  spoke  about — I  think  the  chair- 
man mentioned  the  fact  that  this  problem  is  not  a  local  problem,  and 
can  not  be  dealt  with  locally ;  I  understand  that  that  is  one  thought 
among  those  who  are  interested  in  these  proceedings — that,  through 
the  publicity  you  get,  it  shall  be  understood  to  be  a  national  problem. 
It  is  not  only  a  national  problem,  but  it  is  a  world-wide  problem. 
It  is  not  only  a  problem  of  the  electric  railways,  but  a  problem  con- 
cerning every  one  who  is  involved  in  any  form  of  contract. 

I  would  like  at  some  length,  if  I  may — I  shall  be  very  glad  to  be 
asked  to  abbreviate  if  I  am  unduly  extending  any  part^to  go  into 
the  evidence  for  the  statement  that  I  have  just  made,  that  the  prob- 
lem is  one  of  the  depreciation  of  money. 

My  old  master  in  economics  used  to  say,  "When  you  have  a 
social  situation  to  deal  with  and  investigate,  divide  your  subjects 
under  four  heads:  First,  what  is  it?  Second,  why  is  it?  Third, 
what  of  it?  Fourth,  what  are  you  going  to  do  about  it?  "  I  would 
like  to  take  those  four  subjects  up  in  order. 
Fii-st,  as  to  the  facts  to  be  explained. 

The  level  of  prices  to-day  is  substantially  double  what  it  was  in 
this  country  before  the  war.  According  to  the  figures  of  Commis- 
sioner Meeker,  the  wholesale  index  number  as  last  reported  was  ex- 
actly 200  per  cent  of  the  index  number  for  1913,  and  for  retail 
prices,  182  per  cent. 

Abroad  prices  have  risen  more  than  that. 

I  think  we  can  say  that  outside  of  Russia,  where  they  have  risen 
immeasureably — no  one  has  ever  measured  it;  perhaps  one  hundred 
or  a  thousandfold — the  price  level  has,  on  the  average,  probably 
been  tripled  by  the  war. 

In  this  country  the  price  level  is  triple  what  it  was  in  1896. 
All  these  measurements  are  on  the  basis  of  index  numbers,  with 
which  Dr.  Meeker  has  made  us  all  familiar. 

An  index  number  is  a  number  that  expresses  the  average  percentage 
rise  or  fall  of  prices. 

If  wheat  has  risen  4  per  cent  since  last  month  and  steel  has  risen 
10  per  cent,  on  the  average  the  two  together  have  risen  7  per  cent, 
midway  between  4  and  10,  or  4  plus  10  divided  by  2  is  7.  So  the 
index  number  for  those  two  commodities  would  be  called  107,  on 
the  basis  of  100  per  cent  for  the  previous  month. 

Commissioner  Meeker.  You  are  not  taking  the  weighted 

Mr.  Fisher.  No.  That  is  counting  the  two  equally.  If  you  count 
the  10  per  cent  increase  as  relating  to  wheat  as  twice  as  important 
as  the  4  per  cent  increase  relating  to  steel,  then  the  average  is  found 
by  counting  the  wheat  twice.  So  you  take  the  average  of  10  and  10 
and  4,  which  is  24,  divided  by  3,  or  8  per  cent;  or  if  the  other  data 
is  twice  as  important,  then  you  count  the  4  twice — 4  plus  4  plus  10^ 
divided  by  3,  which  would  be  6.  But  all  the  results  agi^ee  very 
closely— 6  per  cent,  7  per  cent,  8  per  cent^-the  increasing  does  not 
make  very  much  difference. 

Of  course,  the  same  method  applies  to  more  than  two  commodi- 
ties. Mr.  Meeker  has  300  commodities  in  his  index  number  whole- 
sale prices.    When  you  have  so  many  commodities,  it  makes  still  less: 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1321 


difference  whether  you  count  the  commodities  all  equally,  or  count 
some  as  more  important  than  others. 

(Commissioner  Meeker.  Do  you  not  think  it  would  he  well,  for  the 
record,  to  explain  that  all  our  index  numbers  are  weighted? 

Mr.  Fisher.  Commissioner  Meeker's  index  numbers  are  carefully 
weighted,  the  wholesale  index  numbers,  on  the  basis  of  the  volume 
of  transactions,  or  the  value  of  the  volume  of  transactions  of  the 
different  coirmiodities.  The  commodities  which  are  sold  in  the 
markets  in  large  quantities  have  a  greater  importance  in  the  average 
than  the  commodities  which  are  sold  in  small  quantities.  So  that  it 
is,  I  think,  the  most  scientific  index  number  that  we  have  had  in 
the  world. 

This  instrument,  the  index  number,  is  a  very  approximately  ac- 
curate measure  of  changes  in  the  price  level,  as  is  shown  by  the  fact 
that,  whether  your  index  number  is  scientific  or  unscientific,  it  gives 
very  much  the  same  result. 

We  find  the  index  number  of  prices  has  constantly  changed.  It 
is  not  a  question  simply  of  a  changed  price  level  since  the  war. 

Some  people  seem  to  talk  about  reaching  a  new  level  of  prices, 
as  though  we  were  going  to  keep  them  up.  We  are  not  going  to 
keep  them  up.  We  never  have  kept  a  price  level  for  five  years  at 
a  time.  It  constantly  changes.  We  were  complaining  about  the 
high  cost  of  living  before  we  entered  the  war.  There  had  been  a 
rise  of  50  per  cent  in  the  price  level  between  1896  and  1914,  when 
we  entered  the  war,  and  there  had  been  a  great  fall  in  the  price 
level  prior  to  1896,  going  back  to  1873  in  the  world  in  general,  and 
to  1862»-1865  in  the  United  States  in  particular.  And  before  that 
the  price  level  had  changed. 

I  am  sorry  I  have  not  a  chart  of  a  number  of  other  diagrams.  I 
constructed  about  300  diagrams  of  the  sort  you  have  on.  the  wall,  and 
one  of  them,  for  England,  goes  back  to  1782;  and  the  price  level 
has  changed  year  by  year,  according  to  its  index  number,  from  1782 
to  the  present  time. 

There  have  been  many  occasions  in  history  when  the  price  level 
has  suffered  a  great  upheaval.  That  was  true  as  far  back  as  the 
sixteenth  century,  and  it  has  been  true,  usually  in  times  of  war,  when 
there  has  been,  especially^  paper-money  inflation. 

It  is  not  true  that  every  war  raises  prices,  and  it  is  not  true  that 
prices  fall  after  every  war. 

I  have  there,  in  that  long  chart  on  the  wall  nearest  the  commission, 
a  »et  of  diagrams  showing  the  behavior  of  prices  before  and  after 
the  end  of  the  various  wars.  I  think  perhaps  I  had  better  go  over 
there  and  use  the  pointer  on  that  chart. 

The  Napoleonic  wars  began  at  this  point  and  ended  at  this  point 
[indicating  on  chart]. 

The  ending  of  each  war  is  represented  by  that  dark  line,  so  that 
yon  can  compare  the  various  wars  with  each  other. 

The  Napoleonic  wars  in  England  showed  this  change  in  prices 
[indicating] . 

The  dotted  line  represents  the  prices  as  translated  into  terms  of 
gold. 

The  dark  line  represents  the  prices  as  quoted,  which  were  in  paper, 
which  was  depreciated  relatively  to  gold,  and  therefore  the  prices 
were  higher  than  when  translated  into  terms  of  gold. 


1322     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


You  will  notice  that  in  terms  of  gold  the  price  level  did  not  fall 
after  the  Napoleonic  War,  except  for  one  year,  and  on  the  whole,  for 
several  yeai*s,  remained  as  high  as  it  had  been  before  the  war. 

The  War  of  1812  in  the  United  States  showed  a  fall  of  prices  after 
the  war,  due  to  conditions  of  the  export  and  import  trade. 

The  Mexican  War  did  not  affect  the  price  level,  apparently.  It 
did  happen  to  be  going  down  both  before  and  after  the  close  of  the 
Mexican  War. 

The  Crimean  War  showed  no  particular  effect. 

The  Civil  War  was  like  the  Napoleonic  War  for  England.  You 
notice  that  in  terms  of  paper  our  greenback  standard,  the  price 
level  rose  rapidly  during  the  war,  and  almost  immediately  after  the 
war  fell  very  rapidly  the  first  six  months,  and  gradually  after  that, 
though  it  took  15  years  after  the  Civil  War  to  get  down  to  the  level 
before  the  war. 

In  terms  of  gold  there  was  not  even  a  fall  of  prices.  There  was 
some  oscillation,  but  translating  in  terms  of  gold  you  can  see  the 
price  level  remained  more  or  less  constant.  It  oscillated  up  and 
down,  showing  no  gi*eat  tendency  to  go  either  up  or  down. 

The  Chairman.  Were  there  any  unusual  facts  in  this  country  that 
caused  the  price  level  to  remain  stationary-  for  quite  a  while  after 
the  Civil  War? 

Mr.  Fisher.  You  mean  in  terms  of  gold  ? 

The  Chairman.  Yes. 

Mr.  Fisher.  No  ;  I  do  not  know  of  any  unusual  circumstance  that 
would  answer  that  question. 

Of  course,  the  prices  in  terms  of  paper  did  oscillate,  enoi^nously, 
and  the  unusual  circumstance  there  was  the  measure  of  the  cur- 
rency. 

The  Chair3han.  Would  the  tremendous  extension  of  railroad  de- 
velopment and  other  enterprises  have  a  tendency  to  keep  up  your 
price  level  ? 

Mr.  Fisher.  No;  I  think  it  would  have  a  tendency  to  reduce  the 
price  level,  because  it  would  increase  the  general  volume  of  trade. 

There  is  the  price  level  for  England,  France,  and  Germany  [indi- 
cating on  chart].  I  might  say  that  all  these  curves  are  plotted  on 
what  are  called  a  ratio  chart,  a  method  of  plotting  that  Commissoner 
Meeker  is  now  using,  and  which  has  this  advantage :  That  when  any 
of  these  curves  liave  the  same  slope  or  slant,  there  is  the  same  per- 
centage rise  or  fall  of  prices.  In  ordinary  plotting  that  is  not  true, 
but  with  this  method  of  plotting  that  result  is  given  all  the  time.   • 

In  the  Franco-Prussian  War,  you  will  notice  that  after  the  war 
the  prices  in  France  did  not  change  very  much,  but  in  Germany  there 
was  quite  an  upheaval  of  prices,  and  then  a  subsidence  afterwards. 
I  attribute  that  to  the  indemnity  that  was  paid  by  France  to  Ger- 
many, which  inflated  Germany's  currency. 

Commissioner  Meeker.  Would  not  that  cause  a  fall  of  prices  in 
France?    It  was  an  actual  payment  of  gold ;  was  it  not? 

Mr.  Fisher.  Yes;  it  would  tend  to  produce  a  fall,  of  course;  and 
there  was  a  fall  within  a  year  and  a  half  of  the  close  of  the  war.  * 

The  Spanish- American  War  I  do  not  think  affected  price  levels. 
They  were  going  up  both  before  and  after  the  war. 

I  do  not  think  the  Boer  War  affected  the  price  level  in  England 
materially,  or  the  Russian-Japanese  War  in  Russia  and  Japan. 


PKOCEEDIN<SS  OF  FEDERAL  EUECTBIC  RAILWAYS  COMMISSION,    13.23 

This  last  gives  the  price  level  in  the  United  States  and  England 
during  the  World  War.  You  will  notice  from  the  slope  of  these  two 
curves  how  rapidly  prices  went  up — ^just  about  at  the  same  speed 
that  they  went  up  duiiiig  ihid  Civil  War. 

The  war  is  ended  and  the  index  number  for  the  following  year,  of 
course,  is  not  yet  available. 

The  question  is :  Will  this  price  level  fall,  as  most  people  expected 
it  to,  immediately,  as  it  did  after  the  Civil  War,  will  it  remain  con- 
stant, or  will  it  rise? 

No  one  can  answer  that  questioa.  I  attempted  several  months  ago 
to  make  my  guess  on  that,  and  it  was  that  prices  would  not  fall  for 
some  time.  I  still  make  that  guess.  We  have  no  reason  to  think  that 
prices  will  fall  back  to  what  they  were. 

If  you  like,  I  will  go  into  the  evideiKje  of  this  a  little.  So  far  as  the 
first  point  of  the  four  points  that  I  was  going  to  emphasize,  the  facts 
in  the  case,  are  concerned,  tlie  point  is  that  the  price  level  has  always 
changed;  in  other  words,  tlie  purchasing  power  of  a  dollar  is  n<tt 
constant-  When  prices  rise,  the  puichasing  powei*  of  a  dollar  falls. 
That,  of  coui«e,  is  merely  stating  ihe  same  thing  the  other  w^ay 
around.  If  the  piiee  level  is  double,  tl^  purchasing  power  of  tl^ 
dollar  is  cut  in  two;  and  vice  versa,  if  the  price  level  is  cut  in  two, 
the  purcliasing  power  of  the  dollar  is  doubled. 

Having  this  fact  before  us,  tliat  the  price  level  is  constantly  chang- 
ing, the  next  que^ion  is:  Why  is  it?  And  wh\%  in  particular,  is  the 
price  level  to-day  high  ? 

All  soits  of  explanations  have  been  alleged  This  is  a  list  of  the 
causes  that  I  have  seen  mentioned:  Speculation;  the  middle  man; 
foreign  demand;  the  war;  labor  unions;  short  hours  of  labor  and 
limitation  of  output;  trusts;  patent  monopolies;  the  tariff;  cold  stor- 
age; longer  hauls  on  railroads;  marketing  by  teleplione;  the  free- 
delivery  system ;  the  individual  package ;  the  enforcement  of  sanitary 
laws;  the  tuberculin  testing  of  cattle ;  the  destruction  of  tainted  meat; 
sanitary  milk;  the  elimination  of  i^enovated  butter  and  of  ^'  rots  "  and 
"  spots "  in  eggs;  food  adulteration;  advertisiiig;  unscientific  manage- 
ment; extravagance;  higlier  standards  of  living;  the  increasing  cost 
of  govermnent;  the  increasing  cost  of  old-age  pensions  and  of  better 
pauper  institutions,  hospitals,  insane  asylums,  reformatories,  jails, 
and  other  public  institutions;  the  increasing  cost  of  insurance  again^ 
accident  and  disease;  the  increasing  burden  of  unemj3loyn>ent  and 
crime;  investments  in  public  undertakings,  such  as  railways,  public 
works,  etc. ;  the  growing  cost  of  military  establishments,  both  before 
and  during  the  Great  War;  the  destriietion  of  wealth  by  war;  the 
withdrawal  of  labor  to  war ;  the  conceiitration  of  population  in  cities ; 
the  high  price  of  land;  private  ownership  of  land  and  other  natural 
resources;  impoverishment  of  the  soil;  the  displacement  of  the 
near-by  farmer  as  the  chief  source  of  food  supply;  the  fact  that 
farmers'  wives  no  longer  compete  with  large  establishments  in  butter- 
making  or  poultry  raising;  drouglit;  hoarding  by  housewives;  daily 
purchases  by  house wii-es  and  their  abandonment  of  home  storage  in 
attic,  smoke-rooms,  and  cold  cellars. 

And  when  piices  were  falling,  as  they  did  between  1873  and  1896, 
VO\i  will  find  a  similar  li^  of  reasons  why  thev  fell. 

Commissioner  AIeekeil  This  same  list  of  reasons  being  alleged  ? 


1324     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Mr.  Fisher.  Sometimes  the  same  reasons  being  alleged. 

In  my  opinion,  without  taking  up  your  time  to  discuss  each  one  of 
these  alleged  reasons,  none  of  them  are  of  any  importance  except 
the  war;  and  the  war  is  important,  in  my  opinion,  indirectly, .not 
directly.  It  has  raised  prices  through  inflation,  through  monetary 
inflation.  I  have  not  been  able  to  find  any  evidence  that  it  has  sub- 
stantially affected  the  general  price  level  in  any  other  way.  It  has, 
of  coui-se,  in  other  ways  affected  particular  prices.  The  price  of 
paper  has  gone  up  because  of  its  scarcity,  and  the  prices  of  some 
other  things  have  gone  down  because  their  market  was  cut  off;  but 
the  general  price  level  has  not  risen  because  of  a  scarcity  of  goods 
in  question,  and  the  President,  in  his  message  to  Congress  on  that 
subject,  recently  brought  forth  fresh  data  to  prove  that.  I  was  very 
glad  to  see  that  he  emphasized  that  point  as  one  that  those  of  us 
interested  in  this  subject  have  been  trying  to  work  out  for  the  last 
two  years,  and  of  which  Wesley  Claire  Mitchell  has  been  making 
some  studies.  All  the  evidence  I  can  get  at  indicates  that  goods  have 
not,  in  this  country  at  least,  been  scarce,  either  between  1896  and 
1914,  before  the  war,  or  in  general  between  1914  and  1917,  when  we 
entered  the  war,  or  between  1917  and  the  present,  while  we  were  in 
the  war. 

There  was,  of  course,  a  kind  of  a  sense  of  dearth  of  goods  for  civil 
consumption,  because  we  swung  over  from  that  kind  of  consump- 
tion to  war  consumption ;  but  the  general  volume  of  goods  in  trade 
was  probably  greater  during  the  war  than  before,  according  to  the 
figures  that  I  have  tried  to  give  on  that  subject  for  what  I  call  the 
et  I  nation  of  exchange. 

Now,  the  trouble  with  all  these  reasons  is  that  they  look  on  the 
w  rong  side  of  the  market,  or  they  give  a  reason  which  is  not  a  reason, 
but  merely  "  passes  the  buck  "—if  I  may  use  that  slang— on  to  some 
other  cause. 

There  is  a  great  deal  of  circular  reasoning.  Any  expert  in  trade 
will  immediately  give  the  proximate  explanation  for  the  rise  of 
prices  that  he  is  accused  of  making.  He  will  say:  "It  is  not  my 
fault,  but  the  man  I  buy  of  has  raised  the  prices  on  me."  The  re- 
tailer blames  it  on  the  wholesaler  and  the  wholesaler  blames  it  on 
the  jobber  and  the  jobber  blames  it  on  the  manufacturer,  and  so  on. 
.  And  they  are  all  more  or  less  right.  The  price  of  any  one  of  them 
IS  raised  because  the  price  antecedent  has  risen.  But  that  does  not 
really  explain  why  they  all  have  risen,  and  you  can  not  get  an  expla- 
nation by  moving  in  a  circle. 

The  trouble  is,  as  I  say,  that  we  have  been  looking  on  the  wrong 
side  of  the  market.  The  price  level  is  the  resultant  of  the  compara- 
tive importance  of  the  volume  of  goods  on  one  side  and  the  volume 
of  the  circulating  medium  on  the  other  side. 

To  be  more  specific,  you  have  an  equation  of  exchange  always 
absolutely  true  between  them :  The  money  in  circulation  multiplied 
by  the  velocity  of  its  circulation,  plus  the  money  in  banks  on  deposit 
(or  what  we  call  deposits,  or  what  should  be  called,  properly,  de- 
posits in  banks— the  individual  refers  to  it  as  the  money  he  has  in 
banks;  :t  is  not  really  money  but  credit— bank  deposits)  multiplied 
by  their  turnover,  or  the  activity  of  the  bank  accounts,  is  equal  to  the 
volume  of  the  trade  multiplied  by  the  price  level. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1325 

To  put  it  in  figures,  according  to  the  calculations  I  made  for 
1918,  the  money  in  circulation — that  is,  outside  of  the  Treasury  and 
the  banks — was  (I  will  give  approximate  figures,  because,  as  yod 
remarked  this  morning,  Mr.  Chairman,  you  do  not  like  to  have  too 
many  decimals)  two  and  a  half  billions,  and  its  velocity  was  30  times 
a  year. 

The  deposits  in  the  banks  were  twelve  and  a  half  billions,  de- 
posits subject  to  check,  that  is;  and  their  turnover  was  95  times  a 
year. 

Those  two  products  added  together  are  equal  to  the  volume  of 
trade,  which  is  641,000,000,000  units,  each  unit  being  the  dollar's 
worth  of  trade  in  1909,  the  base  year  from  which  all  these  calcula- 
tions are  made,  multiplied  by  approximately  200  per  cent,  the 
price  level,  based  on  the  price  level  of  1909. 

The  price  level,  as  I  believe  and  tried  to  show  in  full  in  my 
book  called  "Purchasing  Power  of  Money,"  is  the  passive  element 
in  this  equation,  and  it  is  the  resultant  of  the  other  factors  in  the 
equation ;  that  is,  it  is  the  result  of  the  money  in  circulation  at  its 
velocity,  the  credit  in  circulation  at  its  velocity,  and  the  volume 
of  goods,  and  it  is  always  a  question  of  fact  which,  at  any  one 
time,  is  the  guilty  factor,  or  which  are  the  factors  responsible  for 
the  change  in  prices. 

While  we  have  not  as  good  data  for  the  volume  of  trade  as  for 
these  other  factors,  all  the  evidence  that  we  do  get  seems  to  show 
elearl}?^  that  the  volume  of  trade  does  not  change  very  greatly  from 
year  to  year.  It  shifts  gradually  as  compared  with  these  other 
things,  and  almost  never  is  the  outstanding  cause  of  the  change  in 
the  price  level.  It  may  be,  and  probably  is,  in  this  particular  time, 
in  the  war-ridden  parts  of  Europe,  the  outstanding  feature*  but 
with  that  exception  there  are  very  few  cases  where  we  would  say 
that  was  a  fact,  and  almost  always  a  state  of  facts  indicates  that 
the  guilty  factor  is  monetary — either  the  money  itself  or  the  deposits, 
generally  the  two  together,  and  very  often  their  velocities  of  circu- 
lation. 

Now,  I  would  like  to  summarize  the  arguments  which  prove  that. 
This  is  true  irrespective  of  the  facts  as  we  have  them  in  statistics. 
In  the  first  place,  from  the  standpoint  of  probability,  it  stands  to 
reason  that  a  single  explanation  is  simpler  and  more  probable  than 
a  compl'ox  explanation.  If  you  throw  nine  coins  in  the  air,  you 
would  not  be  surprised  if  four  came  up  heads  and  five  came  up  tails; 
but  you  would  be  very  much  surprised  if  they  all  came  up  heads 
or  if  they  all  came  up  tails.  There  would  be  only  one  chance  in 
several  hundred  that  that  would  occur. 

Now,  all  the  nine  groups  o.f  prices  which  are  recorded  in  the 
Bureau  of  Labor  Statistics  have  risen,  if  I  remember  right — I  have 
the  facts  here,  but  I  will  not  stop  to  go  into  them — perhaps  there 
was  one  that  fell  between  1896  and  1914.  But  since  that  time  I 
think  they  all  have  risen. 

Now,  it  would  be  very  surprising  if  that  was  an  accident.  It  would 
be  still  more  surprising  if  almost  all  of  the  300  commodities— I  think 
some  275  of  them  had  risen,  as  it  were,  by  accident— had  just  hap- 
pened to  do  so;  that  there  happened  to  be  a  simultaneous  scarcity 
of  these  commodities. 


1326     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOST, 


It  is  far  more  probable  that  the  other  side  of  the  market,  tlie 
monetaiy  side,  is  the  varying  element. 

We  have  here,  it  seems  to  me,  very  much  the  same  problem  that 
the  astix)nomei-s  had  when  Ave  thought  we  saw  the  sun  and  moon 
and  stars  rise  and  set  every  day;  and  for  a  long  time  all  the  world 
l^elieved  that  they  actually  did  rotate  in  24  hours  around  the  eartli, 
which  was  fixed.  And  it  took  a  great  deal  of  ar^ment  and  much 
evidence  and  the  overcoming  of  a  tremendous  prejudice  to  establish 
the  Copernican  system  as  against  the  old  Ptolemaic  system  of  as- 
tronomy, and  what  finally  w^on  as  much  as  anything  was  the  prob- 
ability in  the.  case.  It  is  a  far  simpler  explanation  to  assume  the 
simple  turning  of  the  earth  around  an  axis  to  explain  this  daily 
rotation;  and  I  think  we  have  got  to  have  a  similar  revolution  of 
ideas  in  economics  and  come  to  see  that  while  commodities  do  move, 
just  as  the  stars  do  move,  the  most  of  the  motion  that  we  see  which 
appears  to  be  due  to  them  is  due  to  the  movement  of  the  dollar,  on 
which  we  stand,  so  to  speak. 

So  much  for  the  ai*gument  of  probability. 

Then,  the  argument  from  fact  indicates  the  same  thing,  as  I  have 
said.     There  are  many  statistics  to  show  that. 

I  do  not  know  how  much  time  you  would  like  to  have  me  take, 
and  I  do  not  know  how  much  detail  you  would  like  to  have  me  go 
into ;  but  somebody  else  has  gone  into  this  also,  and  that  is  Mr.  O.  P. 
Austin,  statistician  of  the  National  City  Bank,  formerly  Government 
statistician  liei^  and  if  I  may,  I  would  like  to  quote  from  what  he 
says : 

Uaw  silk,  for  example,  for  which  the  war  made  no  special  demand,  and 
wliich  was  produced  on  tiie  Hide  of  the  globe  opposite  that  in  which  tlie  hos- 
tilities were  occurring,  advanced  from  $2  per  pound  in  the  country  of  produc- 
tion in  1913  to  $4.50  per  pound  in  1917,  and  over  $6  per  iwuud  in  the  closing 
months  of  the  war. 

Manila  hemp,  also  produc«l  on  the  oi>posite  side  of  the  globe  and  not  a  war 
requirement,  advanced  in  the  country  of  production  from  $180  per  ton  in  1915 
to  $437  per  ton  in  191S. 

Goatskins  from  China,  India,  Mexico,  and  South  America  advanced  from 
25  cents  per  pound  in  1914  to  over  50  cents  per  pound  in  1918,  and  yet  goat- 
skins \veve  in  no  sense  a  special  requirement  of  the  war. 

Sisal  grass,  produced  in  Yucatan,  advanced  from  $100  per  ton  in  1914  at 
the  place  of  production  to  nearly  $400  per  ton  in  1918. 

And  Egyptian  cotton,  a  high-priced  product,  and  thus  not  used  for  war  pur- 
poses, jumped  from  14  cents  per  pound  in  Egypt  in  1914  to  35  cents  per  pound  in 
1918- 

Even  the  product  of  tlie  diamond  mines  of  Soutli  Africa  advanced  from  60 
to  100  per  cent  in  price  per  karat  when  compared  with  prices  existing  in  the 
opening  months  of  the  war. 

The  prices  are  in  all  cases  those  in  the  markets  of  the  country  in  which  tlie 
articles  were  produced,  and  in  most  cases  at  points  on  the  globe  far  distant 
from  that  in  which  the  war  was  being  waged.  They  are  the  product  of  coun- 
tries fiaving  a  plentiful  supply  of  clieap  labor  and  upon  whidi  there  has  been 
no  demand  for  mon  for  sei-vice  in  the  war.  The  advance  in  the  prices  quoted 
is  in  no  sense  due  to  the  high  cost  of  ocean  transportation,  since  they  are 
those  denmnded  and  obtained  In  the  markets  of  the  country  of  production. 

Why  is  It  that  the  product  of  the  labor  of  women  and  children  who  care  for 
silkworms  in  China  and  Japan,  of  tlie  Filipino  laborer  who  produces  the  Manila 
hemp,  the  Egyi)tlan  fellah  who  grows  tlie  high-grade  cotton,  the  native  workman 
in  the  diamond  mine  of  South  Africa,  the  Mexican  peon  in  the  sisal  field  of 
Yucatan,  the  Chinese  coolie  in  the  tin  mines  of  Malaya,  or  the  goatherd  on  the 
plains  of  C^ina,  India,  Mexico,  or  South  America  has  doubled  in  price  during 
the  war  period? 


PROCEEDIJJTGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1327 

Ijord  d'Abernon,  who  has  studied  that  subject  in  England,  has 
compiled  statistics  of  the  prices  of  products  and  luxuries,  wiiich 
seem  to  be  influenced  not  at  all,  or  only  very  remotely,  by  the  increase 
in  the  cost  of  labor  and  materials,  so  as  to  get  something  the  price  of 
which  would  not  depend  on  any  of  the  alleged  reasons  which  I  have 
quoted.  He  took  old  books,  f)rints,  and  coins,  for  instance ;  and  they 
advanced,  roughly,  50  per  cent  in  price.  And  there  is  lots  more  of 
it  in  that  line,  showing  that  you  can  not  allege  that  war  is  a  direct 
cause  of  prices;  it  is  only  that  the  war  has  produced  inflation  that 
explains  in  any  considerable  degree  the  general  rise  in  prices 
throughout  the  world. 

A  third  reason  to  believe  that  it  is  money  that  is  at  fault  is  that 
we  find  that  the  price  levels  always  follow  the  money  standards ;  that 
two  countries  having  the  same  money  standards  will  have  the  same 
price  movements. 

For  instance,  the  United  States  and  Canada,  the  United  States  and 
England  and  Germany  before  the  war,  and  all  the  other  gold-stand- 
ard countries,  had  very  similar  price  movements.  I  have  some  dia- 
grams of  that,  but  I  have  not  got  them  here,  and  they  show  it  very 
clearly.  In  fact,  taldng  the  seven  principal  countries  for  which  we 
have  a  good  index  number  and  plotting  their  statistics,  there  is  a 
very  strong  family  resemblance. 

In  the  same  way,  take  two  silver-standard  countries,  or  three  silver- 
standard  countries — China,  Japan,  and  India — who  were  on  the  sil- 
ver standard  between  1873  and  1893,  and  you  find  a  strong  family  re- 
semblance in  their  price  movements. 

Then  you  find  that  countries  with  unlike  standards — monetary 
standards — ^have  unlike  price  movements. 

Take  the  period  between  1873  and  1893,  and  gold-standard  coun- 
tries had  a  rise  in  price  of  about  25  per  cent — I  mean  the  silver- 
standard  countries  showed  a  rise  in  price  of  about  25  per  cent — the 
two  moving  in  opposite  directions. 

Then  we  find  that  the  price  level  shows  the  same  relation  to  the 
supply  of  money.  That  second  diagram  indicates  that.  There  i^ 
Dun's  index  number,  which  I  have  used  because  it  is  published  more 
promptly  than  that  of  the' Bureau  of  Labor  Statistics.  It  is  not 
quite  as  good  an  index  number,  but  it  is  always  a  little  closer  down 
to  date.  Dun's  index  number  by  montlis  is  plotted  on  the  upper 
curve,  and  the  money  in  circulation  is  plotted  on  the  lower  curve 
[indicating  on  diagram].  There  I  mean  by  "  money  in  circulation  " 
to  include  the  money  in  banks  as  bank  reserves,  which  is  the  basis 
for  bank  credit.  All  the  money  that  does  work  is  put  down  there 
[indicating],  all  the  money  outside  of  the  United  States  Treasury. 

You  will  notice  that  in  August,  1915,  money  in  circulation  began 
to  increase  in  this  country. 

At  first,  when  the  war  broke  out,  at  the  announcement  of  war, 
there  was  a  little  convulsion  in  both  money  and  prices,  which  could 
be  specially  explained,  but  that  does  not  concern  us  here.  But  we 
did  not  really  begin  to  have  money  inflation  until  August,  1915, 
wlien  gold  began  to  be  imported  from  Europe.  Europe  had  to  buy 
materials  of  us,  and  she  had  to  pay  us  in  gold,  and  gold  began  to 
flow  across  the  Atlantic  in  great  quantities;  and  altogether  we  ab- 
sorbed  $1,000,000,000   between   that   time   and   now,   which   is   the 


1328    PBOCEKDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION. 

chief  cause  of  inflation  and  the  high  cost  of  living  here,  in  my 

''^  Whel;  that  movement  began,  one  month  later  Dun's  index  number 

''"At  thTpoint  the  money  in  circulation  begins  to  ascend  [indicating 
on  chart]  ;  one  month  later  prices  began  to  ascend. 

Finally,  money  in  circulation  stops  rising  and  reaches  a  soit  of 

xf^e  months  later  the  same  thing  happened  to  the  price  level. 

Then,  at  this  point  [indicating  on  chart]  money  in  circulation 
shoots  up  again.  '^Two  months  later  Dun's  index  number  shoots  up. 

ThenThefe  is  another  angle,  followed  two  months  later  by  a  cor- 
responding angle  of  the  other  curve  [indicating  on  chart]  and  on— 
almost  riglit  along,  the  lag  sometimes  being  one  T ''^V^erS 
three,  sometimes  two,  and  in  one  case  four  months.  Very  liUely 
in  some  cases  these  a^e  coincidences.  .1  can  not  P"*  t^^uch  stre^ 
on  this  diagram ;  but  it  is  extremely  interesting,  and  I  bel'eve,  in  a 
general  way  at  least,  significant,  there  is  so  much  correspondence 

between  the  two  curves.  .        ,,.<,..  i,'  i. 

There  are  many  kinds  of  inflation.  There  is  gold  inflation,  which 
we  have  suffered  from  primarily;  and  paper-money  inflation,  which 
has  alwavs  been  recognized  as  a  cause  of  high  prices ;  and  there  )s 
cmlft  iXtion;  and  these  three  kinds  of  inflation  may  be  due  to 

various  causes.  ,    .      •       j     •       *!,„  ,„„,. 

Now.  the  primary  cause  of  the  upheaval  of  prices  during  tlie  wai, 
I  believe,  is  credit  inflation,  which  has  been  due  in  turn  to  war 
finance.  In  Germany,  the  way  in  which  the  bonds  were  subscribed 
for  was.  after  the  fii-st  issue  of  bonds,  for  the  would-be  lender  to 
the  Government  to  take  the  bond  that  he  got  on  the  firet  issue  and 
deposit  it  at  a  bank,  which  had  the  right  to  use  it  as  the  basis  for  the 
issue  of  notes.  These  notes  were  then  let  to  the  person  who  would 
end  to  the  Government,  and  he  lends  these  notes  to  the  Government 
and  the  Government  pays  its  bills  with  them  and  they  go  into  cir- 
culation. It  is  really  an  indirect  form  of  greenbackism,  such  as  we 
h^^  1  n  a  crass  and  more  direct  form  in  the  Ciy.l  War.  We  came 
very  close  to  it  in  this  country.  I  hpatd  one  speaker  during  the 
war  tell  his  audience  to  subscribe  for  Liberty  bonds;  that  it  was  no 
trouble  at  all ;  that  you  could  take  the  bond  to  the  bank  and  take 
the  money  which  you  borrowed  from  the  bank  on  the  bond  and  lend 
it  to  the  Government.  In  other  words,  you  are  making  something 
out  of  nothing,  and  nothing  is  saved. 

And  to  the  extent  that  this  war  has  been  paid  for,  not  out  of  sav- 
ings but  out  of  credits,  it  has  not  been  paid  for  at  all  by  those  who 
did  the  nominal  lending  to  the  Government,  but  is  really  paid  for 
.    bv  thoL  who  paid  theliigh  prices  to  the  corner  grocery  through 
the  high  cost  of  living  caused  by  this  operation. 

However,  in  this  country  that  has  not  been  the  important  cau^ 
of  high  pr  ces.  Most  of  our  inflation  occurred  before  we  entered 
the  war,  as  that  last  diagram  will  show.  Our  prices  rose  very  rap- 
idly during  the  period  of  gold  inflation,  and  when  we  entered  the 
wa^  we  almost  i^ached  a  plateau  of  prices.  There  is  quite  a  dis- 
ti"t  angle  there,  and  the  price  level  has  risen  much  more  slowly 
since  that  time. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS*  COMMISSION.    1329 

In  general,  taking  a  world-wide  view,  we  may  say  that  money  in 
circulation  in  the  world  outside  of  Russia  has  increased  during  tlie 
war  from  15  billions  to  45  billions.  Bank  deposits  in  the  15  princi- 
pal countries  have  risen  from  27  billions  to  75  billions.  Thus  both 
money  and  deposits  have  trebled,  and  prices  on  the  average  have 
probably  trebled  also.  Russia  has  issued,  altogether,  $80,000,000,000 
under  the  Bolshevik  regime,  or  more  money  than  all  the  rest  of  the 
world  put  together. 

Now,  people  have  the  idea  that  gold  is  stable,  and  the  notion  of  gold 
inflation  is  a  very  difficult  one  to  get.  And  some  people  bolster  up  the 
idea  that  gold  is  stable  by  pointing  to  the  fact  that  the  price  of  gold  is 
constant.  Once  in  talking  with  my  dentist  I  asked  him  if  he  had  suf- 
fered from  the  high  cost  of  living.  He  said  he  had.  I  asked  him, 
"  Has  it  affected  your  supplies?  "  He  replied,  "  Yes."  I  said,  "  Your 
gold,  for  instance?  "  I  was  joking,  but  he  did  not  seem  to  notice  it, 
and  he  had  not  kept  track  himself,  and  he  sent  his  clerk  into  the  next 
room  to  find  out  what  had  happened  to  the  price  of  gold.  She 
came  back  and  said  it  was  almost  the  same  as  it  had  been  for  40 
years  that  he  had  been  in  business. 

He  said,  "That  is  surjjrising.  Gold  must  be  a  very  stable  com- 
modity." I  said,  "  It  is  just  as  surprising  as  that  a  quart  of  milk 
is  always  two  pints."  He  says,  "  I  don't  get  you."  I  asked  him, 
"What  is  a  dollar? "  He  replied,  "I  don't  know."  I  says,  "That 
is  the  trouble.  One  dollar  is  one-twentieth  of  an  ounce  of  gold, 
and  therefore  gold  is  woi-th  $20  an  ounce,  just  as  there  are  2  pints  of 
milk  in  a  quart,  therefore  a  quai*t  is  always  worth  2  pints." 

A  gold  miner  can  take  a  pound  of  gold  to  the  mint  and  have  it  cut 
up  into  $20  gold  pieces  and  handed  back  to  him  and  he  thinks 
he  has  sold  his  gold  at  $20  an  ounce.  He  has  merely  coined  it  and 
got  it  back,  and  naturally  he  has  got  back  the  same  quantity  he 
handed  in.  So  you  have  a  fixed  price  of  gold  as  long  as  you  have 
a  fixed  weight  of  the  dollar.  But  that  does  not  mean  j^ou  have  a 
fixed  value  of  gold. 

If  we  took  something  else  as  a  standard,  the  same  thing  would 
be  true.  If  we  called  a  dozen  eggs  one  dollar,  eggs  would  always  be 
a  dollar  a  dozen ;  and  if  the  hens  did  not  lay  the  price  of  eggs  would 
not  go  up,  but  the  price  of  everything  else  would  go  down,  and  if 
the  eggs  were  a  drug  on  the  market  the  cost  of  living  would  go  up 
and  people  would  be  wondering  what  was  causing  the  hi^h  cost 
of  living. 

Supply  and  demand  gets  its  work  in  in  one  way  or  another,  and  if 
it  can  not  affect  the  price  of  gold  it  will  affect  the  price  of  every- 
thing else ;  and  that,  I  think,  most  economists  agree  is  the  primary 
cause  for  these  price  movements  that  we  suffer  from. 

It  would  help  us  to  understand  this  if  we  could  look  at  it  from 
the  viewpoint  of  other  countries  and  see  ourselves  as  others  see  us. 
It  is  the  foreigner  who  has  a  different  monetary  standard  from  ours 
who  can  understand,  he  thinks,  why  our  prices  have  moved  in  a 
certain  direction ;  and  we,  on  the  other  hand,  can  explain,  we  think 
sometimes,  why  prices  have  moved  differently  in  China  from  what 
they  have  here. 

Bet^yeen  1873  and  1896,  as  I  said,  prices  rose  in  silver-standard 
countries  and  fell  m  gold-standard  countries.    And  it  was  then  said 

160043"— 20— VOL  2 ^22 


11 


1330    PROCEEDINGS  T)F  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

in  London:  "Of  course,  we  can  understand  why  prices  in  China 
have  risen.  It  is  from  the  depreciation  in  silver.''  But  the  China- 
man would  say  the  opposite :  "  We  can  understand  why  prices  have 
taiJen  m  London.  It  is  because  of  the  appreciation  of  gold."  They 
were  l3oth  right,  generally  speaking. 

Sir  David  Barbour  in  his  book  on  the  standard  of  value  men- 
tioned an  instance  of  that  kind.  He  shows  a  merchant  in  India  who 
was  surprised  when  he  was  told  that  there  had  been  a  serious  fall  in 
the  value  of  the  rupee.  He  said  he  had  not  heard  of  it.  He  said 
he  had  had  his  agents  in  Calcutta  everv  week  and  none  of  them  had 

^•1  ^^^^l^^^  ^^"*  *^^^  ^*^^  ^^  ^^^^  rupee;  and,  after  a  pause,  he 
said :  They  did  mention  the  rise  in  the  price  of  gold,  and  perhaps 
that  may  be  what  you  are  thinking  of."  He  was  thinking  in  terms 
of  rui^ees,  and  therefore  to  him  it  was  the  price  of  gold  that  had 
changed,  whereas  the  Englishman,  thinking  in  terms  of  the  pound 
sterling,  would  blame  it  on  the  rupee ;  and  in  that  each  can  see  the 
other  better  than  he  can  see  himself. 

Now,  the  way  in  which  this  inflation  operates  is  so  subtle  that  it 
IS  very  hard  for  any  one  of  us  to  follow  it.  The  price  of  butter  in 
the  corner  grocery  goes  up,  and  you  ask  the  corner  grocervman  why 
the  price  of  butter  has  gone  up,  and  he  says  it  is  because^  he  has  to 
pay  more  for  his  butter.  Well,  where  does  inflation  come  in?  It 
comes  m  at  every  stage.  It  comes  in  partlv  right  there  at  the  corner 
grocery.  The  men  who  buy  the  butter  have  a  little  more  money  than 
they  had  before  and  spend  it  a  little  more  freely  if  there  is  infla- 
tion. That  would  explain  perhaps  a  fraction  of  1  per  cent  in  the 
price  that  he  is  able  to  make  for  his  butter,  but  he  is  quite  ri<Tht 
when  he  attributes  99  per  cent  of  it  in  the  rise  of  the  price  of  the 
wholesaler  to  him.  But  when  you  go  back  to  the  wholesaler  and 
ask  why  his  price  has  risen  he  will  say  the  jobber  has  raised  his 
price  on  him ;  but  1  per  cent  of  the  explanation  can  be  nailed  rio-ht 
there  to  the  wholesaler.  It  is  because  there  is  more  money  in  cir- 
culation among  his  customers,  and  only  99  per  cent  or  98  per  cent 
of  the  total  can  be  paid  to  the  manufacturer. 

And  so  on,  as  you  go  back  and  back.  If  we  had  a  microscope 
we  would  always  ascertain  1  per  cent  that  was  due  to  inflation,  and 
it  would  add  up  100  per  cent  when  you  got  through,  and  all  this 
circular  explanation,  where  one  is  laying  the  blame  on  the  other  fel- 
low, would  gradually  be  eliminated,  very  much  like  a  boat  on  the 
tide.  It  rises  and  the  man  in  the  boat  can  not  see  what  has  raised 
the  water,  but  it  is  the  increased  volume. 

Now,  the  third  question  is.  What  of  it?  What  are  the  evils  in- 
volved? And  this  comes  closer  to  the  particular  pi^blem  with 
which  you  are  dealing.  I  hope  I  am  not  going  too  far  afield,  and 
I  hope  the  chairman  will  not  liesitate  to  tell  me  if  lie  thinks  I  am. 
But,  to  my  mind,  this  problem  can  not  be  solved  by  treating  electric 
railways  alone  any  more  than  you  can  solve  the  electric  problem 
separately  in  New  York  City  from  the  rest  of  the  country. 
It  is  not  a  local  problem;  it  is  not  a  particular  industrial  problem; 
but  it  is  a  world  economic  and  monetary  problem. 

Some  people  would  be  inclined  to  say  that  the  rise  of  prices  is 
i-eally  simply  the  depreciation  of  money.  If  prices  are  now  twice 
as  high  as  they  were  before  the  war  simply  because  we  have  a  50-cent 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1331 

dollar,  so  to  speak,  then  it  ought  to  make  no  difference  to  anybody, 
because  if  everybody. has  twice  as  much  money  and  every  price  is 
doubled  nobody  is  iJetter  or  worse  off.  And,  in  fact,  that  is  true  if 
the  pi-emises  were  correct.  The  trouble  is  the  premises  are  not 
correct. 

In  this  upheaval  there  are  some  things  that  can  not  step  lively  as 
the  other  things  do ;  some  tilings  that  lag  behind.  All  those  things 
that  are  fixed  by  contract — if  there  is  a  contract  price,  it  must  be 
kept,  even  though  it  would  naturally  be  raised.  If  there  is  a  law 
or  a  franchise  fixing  a  5-cent  fare  it  can  not  be  changed  with  the  in- 
flation which  changes  other  prices.  If  a  Government  clerk  has  a 
salary  of  $2,000  it  is  not  going  to  change  as  the  prices  of  wheat 
change  in  the  market;  it  will  stay  unchanged  for  years  at  a  time. 
If  a  wage  earner  has  a  certain  wage  scale  it  will  not  be  adjusted 
automatically  to  the  change  in  the  cost  of  living.  And  there  is  where 
our  great  industrial  problems  come,  and  I  think  Lord  d'Abernon  is 
near  the  truth  when  he  says  80  per  cent  of  our  unrest  to-day  is  due 
to  the  depreciation  of  money  and  the  maladjustments  that  have  come 
from  that.  Those  are  far  greater  than  have  generally  been  recog- 
nized. 

For  instance,  consider  a  savings-bank  depositor.  Take  a  working 
girl  who  puts  $100  in  the  savings  bank  just  before  the  war.  Now  she 
will  have  about  $120,  but  when  she  comes  to  spend  that  $120  she 
will  get  for  it  only  60  per  cent  of  what  she  coidd  have  gotten  if  she 
had  spent  her  $100  four  years  ago.  So  she  has  really  been  cheated 
out  of  all  her  interest  and  40  per  cent  of  the  principal  as  well  by  the 
depreciation  of  the  dollar. 

Now,  the  fault  is  not  in  the  groceryman  or  the  tradesman  from 
whom  she  buys  the  high-priced  goods;  it  is  not  in  the  savings  bank; 
but  it  is  in  the  dollar,  in  terms  of  which  her  account  has  been  kept. 
Tliere  has  been  a  wrong  yardstick  used  in  measuring  her  accounts 
and  the  accounts  of  the  rest  of  us. 

In  the  same  way  a  bondholder  has  not  been  getting  any  real  in- 
come since  1896.  That  is  a  startling  statement  to  make,  but  it  is^ 
absolutely  true;  and  the  fact  that  it  is  not  appreciated  is  simply 
due  to  the  fact  that  people  do  not  talk  in  terms  of  monetary  depre- 
ciation when  they  ought. 

But  you  take  a  widow  who  was  left,  say,  a  fortune  of  $100,000  in 
1896.  This  is  invested  in  4  per  cent  coupon  bonds,  and  she  cuts  her 
coupons  and  gets  $4,000  a  year  and  lives  on  it  between  that  tune  and 
this.  As  a  matter  of  fact,  she  has  been  eating  up  her  capital,  and 
that  IS  all  she  has  been  doing,  because  while  nominally  she  still  has 
$100,000  of  capital,  that  to-day  is  onljr  one-third  of  the  capital  with 
which  she  started,  in  actual  purchasing  power.  She  has  used  up 
two-thirds  of  her  actual  purchasing  power  m  this  time. 

And  so  it  is  that  bondholders  have  not  been  making  any  money 
since  1896.     They  are  among  the  ones  who  have  been  losing  money 
On  the  other  hand,  between  1873  and  1896  it  was  the  bondliolder  who 
w^as  getting  rich  because  of  the  appreciation  of  the  dollar  in  terms 
of  which  his  bonds  were  reckoned. 

On  the  other  hand,  the  stockholder— excepting  the  stockholder  in 
concerns  hke  electric  iniilways,  where  the  price  of  the  product  is  the 
thing  that  does  not  change— the  stockholder  has  been  winning  what 


1332     PROCEEDINGS , OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tlie  bondholder  has  lost,  and  losing  what  the  bondholder  has  gained 
Between  1873  and  1896  the  stockholder  was  losing  and  the  inckpend- 
ent  producer  generally  was  losing,  the  farmer  was  losing;  and  that 
iX""^^^  ?  grievance  which  culminated  in  the  Bryan  campaign  in 
1896,  which  was  largely  a  Populist-  and  farmer  discontent.  The 
debtor  class  was  much  mentioned  there.  People  who  had  farms 
which  were  mortgaged  could  not  pay  their  mortgages  because  the 
mortgage  was  a  millstone  around  their  neck  and  getting  heavier  and 
heavier  while  the  price  of  wheat  was  going  down.  It  was  really  the 
appreciation  of  money  which  was  ruining  the  farmer,  and  that  pro- 
duced a  form  of  discontent  at  that  time  called  Populism,  which  died 
down  as  the  price  turned  the  other  way,  and  you  can  not  find  a 
Populist  in  Kansas  to-day  because  the  conditions  which  generated 
that  condition  have  disappeared. 

Now  we  have  the  opposite  situation,  and  we  find  the  bondholder 
and  tlie  savings-bank  depositor  is  losing,  the  salaried  class  is  losing, 
and  the  utilities  corporations,  like  electric  railways,  are  losing: 
and  the  gam  is  being  absorbed  by  the  stockholder,  and  we  are  dub- 

.iJ'^^u^t.T  *J'^Pi_'*''^*,f "; ,  '^U^*  ^«  ^^  ^^^^  ^^e  nicknamed  the  bondholder 
the  bloated  bondholder "  and  complained  of  him,  so  now  we  are 
nicknaming  the  man  who  gets  the  gam  "  the  profiteer." 

Commissioner  Meeker.  You  are  not  including  the  stockholders  in 
the  street  railways  among  the  "  bloated  profiteers,"  are  vou « 

Mr  Fisher.  Not  the  street-railroad  companies,  but  I  think  the 
stockholders  m  general  are  the  so-called  profiteers  to-day.  The 
profiteering  to-day,  which  we  hear  so  much  of,  is  one  of  these  conse- 
quences of  this  maladjustment,  and  not  because  of  the  price  level 
Ihey  are  the  by-product.  And  I  lament  the  fact  that  the  public 
eye  is  fixed  so  much  on  this  to-day  as  to  cause  a  class  hatred  which  is 
not  justified,  instead  of  a  realization  of  an  impersonal  cause  as  the 
^•ue  reason.  I  do  not  mean  that  there  is  not  criminal  profiteering 
ihere  is,  or  I  suppose  there  is,  but  it  certainly  is  not  responsible  for 
this  rise  in  prices.  i-  v^j. 

This  has  switched  billions  and  hundreds  of  billions  of  dollars  worth 
of  wealth  from  one  class  to  another.  You  will  find  on  Fifth  Avenue, 
1  undei'stand,  an  entirely  new  class  of  rich  people  to-day  compared 

r '^  'ooi'^u  ^^''^  ^^^^^  ^^  *^^  ^^^  ^^  th«  long  period  of  falling  prices 
In  1896  there  were  the  old  Knickerbocker  "families  with  thefr^p^op: 
erty  invested  m  bonds  who  were  having  a  comfortable  home  and 
living  at  the  low  prices  very  well,  but  they  could  not  stand  the  gaff 
when  prices  began  to  go  up.  They  did  not  see  that  their  money 
was  depreciating  and  so  they  were  losing  all  their  income.  They 
expressed  It  m  terms  of  commodities  but  not  of  money,  and  they 

profiteers  ^^  "^^""^  ^''''^'  ^"""^  *^^^'  ^""^^  ''''^  ^"^  ^^'^  stockholders-thi 
Now  all  this  appears  in  the  price  level,  and  the  purchasing  power 
of  money  introduces  a  great  confusion  in  our  accounts.  I  notfced  for 
instance,  the  last  witness  here  gave  some  figures  which  I  do  not  doubt 
were  entirely  correct  as  he  gave  them,  but^hich  were  very  mislead 
ing,  and  doubtless,  I  assume,  were  not  intended  by  him  to  be  mislead- 
mg  very  likely  he  did  not  realize  them.  He  spoke  about  the  income 
which  the  investor  m  street  railways  was  getting  to-day  and  tried 
to  make  out  that  he  was  getting  a  fair  return  !n  his^nvLtm^^^^^^^ 


PROCEEDINGS  OF  FE^PERAL  ELECTRIC  RAILWAYS  COMMISSION.    1333 

Now,  if  6  per  cent  was  a  fair  return  on  a  company  which  was  capi- 
talized before  the  war  at  a  certain  amount,  12  per  cent  is  a  fair  re- 
turn to-day  on  that  same  capitalization,  because  the  price  level  has 
doubled.  Twelve  per  cent  to-day  is  only  6  per  cent  on  the  basis 
of  a  recapitalization  in  terms  of  our  present  cheaper  dollar,  our  50- 
cent  dollar.  That  is,  he  made  the  mistake  of  counting — suppose  a 
concern  was  capitalized  at  $100,000,000  before  the  war  and  is  earning 
$6,000,000  to-day,  he  says  that  is  6  per  cent;  but  it  is  not  6  per  cent,  it 
is  only  3  per  cent.  $6,000,000  to-day  are  6,000,000  little  dollars,  and 
he  is  taking  the  ratio  of  6,000,000  little  dollars  to  100,000,000  big  dol- 
lars. He  either  ought  to  recapitalize  in  terms  of  present  prices, 
which  one  of  the  members  of  the  commission  suggested — calling  the 
capitalization  two  hundred  millions  in  terms  of  modern  purchasing 
power,  in  which  case  he  is  getting  six  millions  at  3  per  cent — or  he 
ought  to  transplant  his  6,000,000  little  dollars  to-day  into  the  big 
dollars  of  the  prewar  period,  and  they  would  be  only  3,000,000  of 
those  big  dollars. 

To  show  clearly  this  shift,  suppose— to  go  back  to  an  ordinary 
case  of  a  stockholder  and  bondholder  in  a  corporation  that  does  ad- 
just the  price  of  its  product  quickly  and  easily,  an  ordinary  indus- 
trial corporation — suppose  it  was  incorporated  for  $2,000,000,  1,000,- 
000  in  stock  and  2,000,000  in  bonds,  before  the  war;  and  suppose,  to 
take  simple  figures,  that  the  income  is  5  per  cent  on  both  of  those: 
That  would  be  an  income  of  $50,000  to  the  bondholder  and  $50,000  to 
the  stockholder.  To-day  if  the  prices  of  this  concern  have  been 
doubled,  as  other  prices  have  been,  and  the  cost  of  producing  labor 
and  materials  has  also  doubled,  the  profits  of  the  concern  will  also 
be  doubled,  and  the  total  income  will  be,  instead  of  $100,000,  $200,000; 
but  the  bondholder  of  this  $200,000  will  no  longer  get  half,  he  will 
still  get  the  $50,000  which  he  is  entitled  to  under  the  terms  of  his 
contract,  and  that  leaves  $150,000  to  the  stockholder,  who  gets  there- 
fore three  times  as  much,  the  bondholder  getting  one-half  of  his 
value,  getting  nominally  the  same  value  and  the  stockholder  getting 
three  times  the  nominal  value  that  he  had  before,  $150,000  instead  of 
$50,000.  And  if  the  stocks  were  sold  on  that  new  basis,  the  stocks 
ought  to  go  up  three  times,  they  ought  to  be  selling  at  three  times 
what  they  w^ere. 

Now  that  is  called  profiteering.  It  is  a  necessary  consequence  of 
the  change  in  the  price  level,  but  it  is  not  the  cause  of  the  change  in 
the  price  level.  I  did  not  mean  to  take  up  so  much  time,  and  I  am 
trying  to  skip  as  best  I  can  and  still  get  in  the  points  I  wish  to  lay 
before  you.  •^ 

Commissioner  Gadsden.  Could  you,  for  the  purpose  of  the  record, 
apply  that  reasoning  to  the  nickel  fare  of  the  street  railway  ? 

Mr.  Fisher.  Yes ;  I  intended  to  do  that  when  I  spoke  of  a  6  per 
cent  return  on  an  old  capitalization  not  being  fair  to-day.  Twelve 
per  cent  return  ought  to  be  the  fair  return  if  6  per  cent  were  fair 
before,  and  the  fare  ought  to  be— to  go  back  to  1896,  if  the  fare  of 
5  cents  was  right  in  1896,  and  if  the  prices  and  labor  and  materials 
in  general  have  averaged,  to  keep  pace  with  the  general  rise  of 
prices— that  is,  have  trebled— then  the  corresponding  fare  to-day 
would  be  15  cents.  If,  on  the  other  hand— I  do  not  mean  to  say  that 
that  is  what  the  fare  ought  to  be,  because  5  cents  may  not  have  been 


l;3E- 


I 


1334    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION 

.ni^T*  ^  ''"  ""*  ''"°^  anything  about  the  labor  and  materials  Yon 
men,  of  co.iree,  are  going  mto  that  and  will  inform  youSes  vhethpr 
there  have  been  improvements  iustifvin.,  «  /"*'".•>  ""P^i*«s  whether 
and  whether  the  f are  wTrexcSe    n^18<i?     S"F.T  ^^'■^'  ""^  '*°'' 

Commissioner  Meeker.  Just  there   Pm?   FJcI.I^  ;_  ^  x        . 

per  cent  return  and  a  12  pe    Jnt  ^tii^-n   the  wl'   ".  ''^^^'^  *"•*  P 

Mr.  Fisher.  Yes. 

Mr.  Fisher.  Yes. 

Commissioner  Meeker.  That  has  occurred  ? 
Mr.  Fisher.  Yes. 

MrF^H^^.^^?^^       ^^  "'"^^'^^  ^^'^^^^  historically? 
Commissioner  Meeker.  If  we  were  ^oinfr  in  *riv..  „  10 
turn  upon  a  bonded  debt—will  von  £r^f^     1^^  ^  ^^  ^^^  ^^"^  ^' 

holder,  because  I  am  thinlHno-  ..f  ^u^l     -   \  "^^  ^^  *"®  bond- 

,        au.e  ±  am  tnmkmg  of  the  typical  corporation,  that  this 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1335 

exceptional  case  that  you  have  to  deal  with  is  not  perhaps  adequately 
emphasized. 

Commissioner-  Gadsden.  On  a  larger  scale  is  not  your  position 
proved  and  substantiated  by  the  fact  that  of  all  the  phases  of  human 
effort,  all  lines  of  activity,  commercial,  industrial,  and  otherwise,  the 
only  ones  which  apparently  have  suffered  during  the  war,  we  will 
say,  are  those  the  prices  of  whose  product  have  been  fixed  by  law  ? 

Mr.  Fisher.  Yes ;  fixed  by  law  or  contract. 

Commissioner  Gadsden.  Steam  railroads,  telephones,  telegrapii, 
gas,  electricity,  and  street  railways;  everybody  else  has  profiteered, 
if  you  want  to  put  it  that  way. 

Mr.  Fisher.  Bondholders,  teaphers,  clerks,  and  to  some  extent 
wage  earners. 

Commissioner  Gadsden.  Yes. 

Mr.  FiSHEl?.  Now,  this  produces  a  kind  of  social  injustice.  While, 
of  course,  we  have  to  keep  our  contracts  literally — you  can  not  make 
an  adjustment  after  you  have  made  a  contract — it  remains  true  that 
there  is  a  grave  social  injustice  done  where  money  has  depreciated 
to  the  salaried  man,  the  bondholder,  and  the  investor  in  street-railway 
industries,  where  the  fare  is  fixed  by  law,  franchise,  custom,  or 
contract. 

Mr.  Hall.  May  I  ask  just  one  question,  Mr.  Chairman? 

If  the  purchasing  poAver  of  a  dollar  has  been  so  decreased^  which 
we  all  concede  that  it  has,  why  is  it  that,  speaking  of  the  return  alone 
in  and  of  itself,  the  people  all  over  the  United  States  are  ready  and 
willing  to  take  up  Liberty  bonds,  going  to  the  hundreds  of  millions, 
at  4J  per  cent,  speaking  snnply  of  the  i^eturn — not  of  (he  stability  of 
the  security — but  irom  the  standpoint  of  return? 

Mr.  Fisher.  Primarily  because  the  investor  can  not  tell  which  way 
the  cat  is  going  to  jump.  He  is  speculating  on  the  dollar  whenever 
he  invests,  but  he  does  not  know  what  is  going  to  happen  to  him. 

Commissioner  Meeker.  Prof.  Fisher,  have  not  I  indicated  the  an- 
swer to  that — that  the  rate  of  interest  is  more  or  less  independent 
of  changing  price  levels  ? 

Mr.  Fisher.  Yes;  but  as  I  understand  it,  the  question  is  if  bonds 
are  so  bad  an  investment  and  have  been  since  1896,  why  do  people 
invest  in  bonds  ? 

Mr.  Hall.  Yes;  speaking  from  the  standpoint  of  the  rate  of  re- 
turn, not  from  the  security  standpoint. 

Mr.  Fisher.  Yes.  They  have  not  had  any  return,  they  have  had 
a  minus  return.  There  has  not  been  any  return  on  bonds  since  1896. 
I  made  that  point. 

Mr.  Hall.  Yes;  because  you  say 

Mr.  Fisher.  They  have  had  a  nominal  return,  but  a  real  loss.  But 
they  did  not  know^  it  when  they  invested,  or  they  would  not  have 
invested.  Really  every  investor  is  speculating  in  the  dollar,  in  gold, 
when  he  invests,  because  he  takes  a  chance  of  what  the  dollar  will  buy 
when  he  gets  it  back* 

Now,  there  are  people  who  have  taken  this  into  account  to  a  cer- 
tain extent,  and  business  men  in  general  finally  get  a  notion  that 
prices  are  rising  or  falling;  and  when  prices  are  rising  they  say 
"Bonds  are  not  a  good  buy,"  and  the  consequence  is  they  hold  off 
and  buy  stocks  instead,  and  that  lowers  the  price  of  stoclis  and  raises 


1336     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

pensation  for  the  raising  price  level,  or  decreasing  dollar     And  if 
t  were  scientific  or  perfect  there  would  be  a  way  to^recoup^ 
tL'prirotr'dollLT^'  amount  to  this:  W^en  priceTrfse  wS 
of  iKst  wofdH  hi  V  •  ^^Pf  ^^^-^^^^  ^bout  1  per  cent,  then  the  rate 
pLdation  "^  ^  ^"^  '^"*  *^  compensate  for  that  de^ 

But  it  does  not  work  out  as  it  should,  according  to  this  theorv  • 
which  shows  that  people  do  not  forecast,' but  when  tW  to  dav  b^^ 
theni,  assuming  a  dollar  is  a  dollar  and  is 'going  t^s^ay  ^doH^ 
IS  where  the  evil  comes  in;  and  when  they  do|et  stu4  laS 
not  attribute  it  to  this  cause,  which  the/ should  atSuL  it  to   b"? 
o  the  machinations  of  Wall  Street  or  s^me  profiteer  ,  or  so^^^^^^^ 

veif HttTel^dT^w  i'*r^^'  ?^  ""^l''^''  '''  ^^'^-'  has  nothinror 
Aeiy  little  to  do  with  it;  and  then  they  are  very  anffiv  at  somethincr 

which  ought  not  to  bear  all  the  brunt,  at  lea^f  of  thL  ra^r  Anf 
the  most  dangerous  kind  of  discontent  is  when  a  per^n  fs  hard  hU 
and  iT.  •^''  ii"r  T'"'  ^'''  ^^'  ^^^'  because  tLriT ton    art^^^ 

uSet  thV'^ooL^oTt^^^^^^  '^^  "  "  ^"  ^^^^^^^^^  ^^^  b^^^k  -i'dows, 
tSs  AnH  T  l^V  '''''''?^''^^SrpcevymRn,  and  do  all  kinds  of 
tilings  And  I  believe  our  bolshevism  to-day,  which  is  sDrearlin^ 
throughout  the  world,  is  the  product  of  this  long  period  of  rhe^f 
prices^n  just  the  same  way  that  Populism  was  fhrproduct  of  the 
ong  period  of  falling  prices.  And  if  we  could  stabiC  the  dol  ar 
this  bolshevism  would  die  out  in  a  few  years  lust  is  Pnnnlic,^^;!:? 
out  when  the  price  level  stopped  falling         '  ^  Populism  died 

The  Chairman    Your  argument  would  eventually  reach  the  mn 
elusion  that  at  a  time  when  money  is  at  its  lowest  puXLfvXe 
the  investors  should  put  their  money  in  bonds «        ^''"^^^^^^"g  value 

Mr   Fisher    Yes;  that  is,  when  a  fall  of  prices  is  impending  vou 
should  invest  in  bonds.     When  you  know  prices  areSff  to  rie 
invest  in  stocks.    That  is  very  good  advice  ^    ^  ' 

Commissioner  Meeker.  All  you  have  to  know  is  to  know 

Mr.  Fisher.  Yes;  all  you  have  to  know  is  to  know 

fessor?  ''''•  ^^''''''^  ^""^  ^'^^  "'  ^  ^'^^^^  *^P  ^^  ^^^  «id^'  P^o- 

Mr.  Fisher.  Yes;  this  is  my  tip^that  we  stabilize  the  dollar  so 
that  we  can  know.  We  ought  to  have  a  dollar  that  we  canep^nd 
on  and  that  we  do  know  instead  of  a  dollar  that  we  do  not  know  It 
IS  this  uncertainty  m  business  that  is  producing  all  this  distress 
and  producing  this  particular  distress  that  has  caused  the  appoint! 
ment  of  this  commission,  and  it  is  causing  the  excitement  about  the 
high  cost  of  living,  industrial  discontent,  tnd  class  hatred 

]Sow,  It  IS  easy  to  stabilize  the  dollar,  and  plans  for  that  purpose 
have  been  drawn  up  They  have  been  associated  with  my  name  too 
inuch,  as  a  matter  of  fact.  Many  others  had  independently  reached 
the  same  conclusions,  one  man  back  as  far  as  1824.  Simon  Newcomb 
of  this  city,  perhaps  the  most  distinguished  scientist  this  city  or 
this  country  has  produced,  devised  precisely  the  same  scheme  that  I 
am  advocating,  and  on  which  I  am  writing  a  book,  the  manuscript  of 
which  I  have  before  me-a  plan  by  which  we  can  keep  a  stable  price 
level.  There  would  be  no  necessity  for  the  appoinrvAenc  of  h^s  com- 
mission, there  would  be  no  high-cost-of-living  problem,  no  problem 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1337 

of  the  bankruptcies  when  the  fall  in  prices  comes  to  the  farmer,  none 
of  these  great  problems,  so  many  of  which  grow  out  of  this  constant 
change  in  price  levels.  As  I  haA^e  occupied  so  much  time  in  other 
ways  I  feel  that  you  want  to  get  at  the  next  witness,  and  I  will 
therefore  make  very  brief  the  description  of  this  plan,  or  leave  it 
out  altogether,  just  as  you  like;  but  I  would  strongly  suggest  that 
you  go  into  it,  because  I  believe  you  are  after  remedies  and  I  be- 
lieve you  want  to  get  vital  remedies  and  not  superficial  remedies. 

You  do  not  want  to  have  something  variable  to  regulate  cold- 
storage  plants  or  get  a  municipal  market  in  New  York  to  regu- 
late the  price  level  throughout  the  world.  You  w^ant  to  treat  the 
problem  according  to  its  diagnosis  as  a  problem  in  the  depreciation 
of  money;  and  therefore  you  should  recommend  that  money  should 
cease  to  depreciate  or  should  cease  to  appreciate,  either,  and  could 
remain  stable;  and  it  is  just  as  easy  to  make  it  stable  as  to  leave 
it  as  it  is. 

I  might  say  before  I  describe  this  plan  that  it  is  not  only  not  new 
in  conception  but  it  has  not  altogether  got  to  run  the  gauntlet  of 
expert  opinion — it  has  alread}^  done  that.  For  several  years  it  has 
been  before  the  economists,  and  the  economists  of  the  country  have 
almost  unanimously  indorsed  it  to-day.  They  did  not  at  first,  but 
found  a  lot  of  fault  with  it.  Some  50  objections  have  been  raised, 
all  of  which  have  been  answered,  and  a  committee  of  the  American 
Economic  Association  last  year  was  appointed,  consisting  of  the 
five  men  in  this  country  who  have  made  the  chief  studies  on  this 
subject,  and  they  universally  recommended  that  the  dollar  ought  to 
be  stabilized,  and  that  statesmen  and  business  men  and  economists 
should  take  the  subject  under  immediate  consideration.  The  idea 
has  been  indorsed — the  plan  has  been  indorsed— by  not  only  the  chief 
leading  economists  but  by  many  important  bankers,  like  Frank  A. 
Vanderlip,  who  went  over  it  very  carefully  and  looked  into  all  the 
objections,  spending  several  houi*s  with  me  on  the  subject ;  John  Per- 
ham,  the  chief  banker  on  the  Pacific  coast ;  Henry  Lee  Higginson,  in 
Boston;  and  numerous  other  bankers  and  important  business  men 
like  John  Hays  Hammond  and  John  Forgan ;  and  important  organ- 
izations like  the  Bridgeport  Chamber  of  Commerce,  the  Waterbury 
Chamber  of  Commerce,  the  New  England  Association  of  Purchasing 
Agents,  and  others.  So  it  is  not  altogether  a  new  subject,  although 
no  attempt  has  yet  been  made  to  bring  it  prominently  before  Con- 
gress. 

The  Chairman.  Now,  what  is  this  plan? 

Mr.  Fisher.  This  plan  in  brief  is  this:  We  now  have  a  dollar 
which,  as  we  have  seen,  is  variable  in  purchasing  power,  because  it 
is  fixed  in  weight.  We  want,  therefore,  a  dollar  which  is  invariable 
in  purchasing  power  and  therefore  variable  in  weight.  The  varia- 
tions in  weight  to  be  made,  not  capricioush^  or  at  the  discretion  of 
any  official  but  by  rule — ^by  the  use  of  index  numbers. 

We  now  have  an  instrument  for  measuring  and  therefore  for  regu- 
lating the  dollar  which  we  did  not  have  until  recently.  And  I  be- 
lieve historically  a  thousand  years  from  now,  when  we  look  back 
on  these  barbarous  times  when  we  have  an  unstabilized  dollar,  peo- 
ple will  explain  it  in  that  way  and  will  say  it  was  only  a  little  while 
before  the  dollar  was  stabilized — that  people  had  any  way  of  doing 


1338    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

it,  an  instrument  for  measuring  it.  We  never  stabilized  the  pound 
until  we  had  the  scales;  we  never  stabilized  the  kilowatt  until  we 
imd  instruments  for  measuring  it;  and  we  could  not  stabilize  the 
cloJlar  until  we  could  measure  it;  but  we  can  measure  it  now  and  can 
stabilize  it  by  the  use  of  the  index  numbers. 

I^  or  instance,  if  we  should  try  to  stabilize  prices  where  they  are 
now—l  would  not  for  a  moment  suggest  that  we  go  back  to  prewar 
levels;  I  hope  we  would  not;  I  do  not  think  we  shall,  but  it  would 
be  the  gi;eatest  misfortnne  if  we  should— I  doubt  even  if  electric-rail- 
way conditions  would  be  improved,  because  general  conditions  would 
be  hurt  so  much.  I  believe  we  should  level  ^p  and  not  down.  As 
I  said  m  Boston  m  1915,  wages  ought  to  be  leveled  up  to  the  cost  of 
living,  rents  ought  to  be  leveled  up  to  the  cost  of  living,  and  fares 
ought  to  be  leveled  up  to  the  cost  of  living,  and  evervthing  ought  to 

kLp'it  thel^^  '"''"^  ""^  ^'^'''^'    "^"^  ^'''"  ^^^  your  price  levll  and 

So  suppose  we  adopt  the  price  level  as  it  is  to-dav,  or  verv  close 
to  it ;  perhaps  o  or  10  per  cent  below  it.  There  ought^to  be  an  expert 
commission  to  determine  where  we  should  start  off,  and  I  am  not 
going  into  that;  but  suppose  we  start  off  somewhere  near  where  we 
are^  which  I  think  we  ought  to  do,  and  call  that  100  per  cent 

^low,  suppose  at  any  future  date  that  the  price  level  happens  to 
be  101  per  cent-that  is,  is  1  per  cent  above  par,  1  per  cent  Mgher 
than  It  ought  to  be  according  to  our  scheme— that  would  be  the 
signal  and  the  authorization  to  the  Secretary  of  the  Treasurv  to  add 
1  l^r  c^nt  to  the  weight  of  the  dollar.    Now,  that  might  not  abso- 
lutely bring  the  dollar  back  to  par,  but  it  would  tend  in  tliat  direc- 
tion; It  It  did  not  succeed  and  if  a  couple  of  months  later  when  the 
next  adjustment  is  to  be  made  or  the  next  index  number  is  figured. 
It  is  found  to  be  still  101  per  cent,  that  is  again  the  signal  and  au- 
thorization to  add  another  1  per  cent  to  the  weight  of  the  dollar 
And  if  It  persists  m  being  even  a  little  above  par,  it  is  loaded  and 
loaded  and  repeated-every  two  months,  I  would  say,  to  have  a 
periodic  reckoning-until  it  is  pushed  back;   it  gets  heavier  and 
heavier  until  it  weighs  an  ounce  or  a  pound  or  a  ton,  if  necess^^y 
and  if  a  gold  do  lar  weighed  a  ton  I  think  it  ought  to  buy  moie  tha^n 
t  does  now;  but  long  before  it  weighed  very  much  more  the  piSe 
level  would  be  reduced.    And  if  the  price  level  swung  the  other  way 
to  say,  99  per  cent,  you  would  unload  the  dollar  1  per  cent  ^' 

1  ought  to  have  begun  by  taking  something  that  vou  will  all  ad- 
mit. The  Mexican  dollar  is  half  of  our  dollar  in  weight,  and  as 
we  all  know  on  the  other  side  of  the  Kio  Grande  the  prices  ^re  twice 
as  high  as  they  are  on  this  side,  in  Mexican  dollars.  Thev  have  to 
be,  as  they  are  a  half-dollar  dollar.  If  the  Mexicans  shoiild  adopt 
our  dollar  what  would  happen?  Of  course,  prices  would  im  ned 
ately  be  cut  in  two  m  Mexico.  They  would  be  brought  under  the 
American  or  Canadian  standard.  Canada  has  the  sanie  weight  dol 
lar  we  have.  On  the  other  hand,  supi)ose  we  should  adopt  ^  Mexi- 
can  dollar  and.should  cut  our  dollar  in  two;  then  we  would  double 

sequence.         '^"'^  ^^'''''  '^'"  ^'''''  ^''^'^  ^"^^^  ^  ^^^^^^^^  ^«  ^  "<^" " 

If  you  admit,  at  any  rate,  that  the  increase  in  weight  of  the  dollar 

decreases  prices,  and  the  decrease  in  the  weight  of  the  dollai  in- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1339 

creases  prices,  you  have  the  mechanism  for  stabilizing  the  dollar, 
and  it  is  a  very  simple  mechanism,  and  all  the  objections  can  be 
easil}^  answered.  I  do  not  doubt  many  of  them  spring  into  your  mind 
at  once  when  you  are  asking.  How  are  you  going  to  change  the 
weight  of  a  dollar  ?  You  are  thinking  of  a  mint  dollar,  but  the  mint 
dollar  does  not  exist  to-day  to  any  considerable  extent,  and  there  is 
no  reason  why  it  should  exist.  We  could  omit  the  mint  dollar  and 
still  the  gold  standard  would  exist. 

Our  gold  standard  operates  through  the  buying  and  selling  of  gold 
bars.  The  gold  miner  or  the  importer  brings  gold,  gold  bars,  gold 
coin,  any  old  thing  that  is  gold,  if  it  is  standard,  and  he  can  de- 
posit it  with  the  subtreasury  of  the  United  States  and  get  gold 
certificates  for  it  at  the  rates  of  $1  of  yellow  backs  for  23.22  grains 
of  pure  gold.    That  is  at  the  rate  of  $20.67  an  ounce  for  the  gold. 

On  the  other  hand,  the  exporter  or  dealer  can  go  to  the  subtreas- 
ury with  the  yellowbacks  and  get  them  redeemed — in  other  words, 
buy  gold  with  them  at  the  same  rate  of  $20.67  an  ounce,  or  23  grains 
of  gold  per  dollar.  That  is  the  operation  of  our  gold  standard  to-day, 
and  that  is  all  there  is  to  it.  Gold  flows  in  from  the  mines  and 
imports,  and  paper  is  taken  in  its  stead,  the  gold  being  deposited 
and  the  paper  circulates  as  its  substitute.  Gold  circulates  in  this 
coimtry  only  by  proxy,  practically. 

Then,  on  the  other  side,  gold  is  taken  out  for  export  or  for  the 
melting  pots  of  the  jeweler  by  the  inverse  process.  Those  tjvo  things 
are  inflating  and  deflating  our  currency  all  the  time.  And  it  is 
because  of  the  inflation  being  so  great  while  imports  during  the  war 
were  taking  place  that  we  have  had  the  high  cost  of  living  in  this 
country.  It  is  a  secondary  effect  of  the  war  which  all  neutral 
countries  felt. 

We  just  placidly  let  the  gold  flow  in  and  out  at  $20.67  an  ounce, 
instead  of  varying  it  accoi-ding  to  what  it  is  worth.  When  I  say 
we  raise  the  weight  of  the  dollar,  it  is  the  same  thing  as  saying  wo 
lower  the  price  of  gold. 

At  present  the  Secretary  of  the  Treasury  is  instructed  to  buy  and 
sell  gold  at  a  fixed  price  always,  no  matter  what  it  is  w-orth.  It  is 
obviously  a  silly  w^ay  of  regulating  the  standard  on  which  all  the 
contracts  of  the  Avorld  depend.  You  would  not  ask  the  coi-ner 
grocer  always  to  sell  sugar  at  a  fixed  price.  Gold  ought  to  be  bought 
and  sold  at  a  price  regulated  by  the  index  number.  When  gold  goes 
down,  it  should  be  marked  down,  and  when  it  goes  up,  it  should  l)e 
marked  up.  It  could  be  done  by  the  index  number.  When  I  speak 
of  enlarging  the  gold  dollar,  I  do  not  talk  about  coining,  but  about 
lowering  the  price  of  gold  bars. 

Commissioner  Gadsden.  Would  not  that  work  great  injustice  on 
the  creditors  of  the  world? 

Mr.  Fisher.  You  mean  if  we  started  on  the  present  price  level  ? 

Commissioner  Gadsden.  They  would  loan  out  their  money  and  <'et 
paid  back  in  cheap  money ;  would  they  not  ? 

Mr.  Fisher.  It  would  work  no  more  injustice  than  is  already 
worked. 

Commissioner  Gadsden.  They  have  a  chance  now,  have  they  not, 
to  get  a  run  for  their  money  ? 

Jj^ir.  Fisher.  Well,  they  have  a  mighty  slim  chance. 


i 


m 


1340     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commisvsioner  Gadsden.  But  they  have  it,  or  thev  think  they  have. 
They  think  that  in  15  or  20  years  they  will  get  a  run  for  their 
money. 

Mr.  Fisher.  That  is  perfectly  true. 

Commissioner  Gadsden.  Take  all  the  Governments  who  have  bor- 
rowed their  people's  money — real  money — would  it  not  be  paid  back 
in  depreciated  money? 

Mr.  Fisher.  Put  it  this  way:  It  would  galvanize  the  injustice  on 
old  contracts  which  now  have  been  wrought. 

Commissioner  Gadsden.  Forty  and  50  and  100  year  bonds? 

Mr.  Fisher.  Yes. 

Commissioner  Gadsden;  Government  bonds? 

Mr.  Fisher.  The  Government  bonds  are  all  floated  at  the  high 
price  level. 

Commissioner  Gadsden.  Lots  of  them  are  out  on  the  low  level,  are 
they  not? 

Mr.  Fisher.  Not  in  this  country. 

Notice  in  that  curve  over  there  on  the  chart — the  price  level  has 
not  risen  much  since  we  entered  the  war,  and  the  average  price  level 
of  our  bonds — if  I  remember  right ;  I  worked  it  out ;  I  have  it  here — 
is  180,  about. 

Commissioner  Meeker.  That  is,  bonds  purchased  at  the  price  level 
of  180  percent? 

Mr.  Fisher.  On  the  average,  on  the  basis  of  1913. 

You  remember  after  the  Civil  War  we  had  the  same  problem  when 
we  were  talking  about  resuming  specie  payments;  and  somebody 
finally  said — I  think  it  was  Sherman — that  "  The  way  to  resume  is  to 
resume." 

You  have  got  to  cut  the  Gordian  knot  somewhere.  Somebody  is 
losing,  or  has  lost.  You  can  never  reach  him.  You  will  never  com- 
pensate him  by  going  back  to  the  old  price  level.  You  will  never 
catch  the  man  who  has  lost.  Somebody  else  will  get  a  loss  now,  and 
a  new  wrong  or  social  injustice  will  happen ;  and  two  wrongs  do  not 
make  a  right. 

Commissioner  Meeker.  Don't  you  think  that  the  bondholders 
stand  in  more  danger  of  a  further  loss  through  additional  increases 
in  prices  than  they  will  to  gain  by  falling  prices? 

Mr.  Fisher.  I  do.    As  a  matter  of  fact,  I  do. 

I  had  a  lot  of  data  on  that  subject,  as  to  what  will  happen  to  prices 
here,  but  I  am  afraid  that  is  a  little  too  far  away  from  your  subject. 

The  Chairman.  Your  belief  is  that  the  present  price  level  is  here 
to  stay  for  some  considerable  time? 
Mr.  Fisher.  Yes. 

The  Chairman.  And,  therefore,  if  these  utilities  are  in  a  critical 
condition  due  to  increased  costs  of  material  and  supplies  and  wages, 
that  there  is  not  very  much  hope  of  an  early  reduction  in  those  prices 
and  in  their  operating  cost  ? 
Mr.  Fisher.  Exactly. 

The  Chairman.  Your  conclusion  is  that  there  must  be  some 
remedy  found  which  will  galvanize  these  particular  industries  and 
permit  them  to  do  service? 

Mr.  Fisher.  Yes;  and  while  I  think  the  primary  remedy  for  this 
particular  case  will  probably  be  found  in  the  rise  in  the  fare,  there 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1341 

ought  to  be  a  general  adjustment  of  all  the  things  that  have  not  been 
adjusted  to  the  new  level  yet,  and  the  fares  among  other  things 
should  be  adjusted. 

I  think  that  in  order  to  prevent  a  recurrence  of  this  problem  20 
years  from  now  or  5  years  from  now,  we  ought  to  stabilize  the  price 
level  and  have,  for  once,  a  really  scientific  money  and  unit  of  money, 
which  is  standardized  as  every  other  unit  is  standardized;  and  it 
would  have  in  this  particular  industry  the  effect  of  encouraging  in- 
vestment. Where  investment  has  been  hesitant  and  always  will  be 
hesitant  when  it  has  been  stung  several  time — I  think  there  have 
been  sometimes  as  many  as  three  reorganizations  of  these  concerns 
because  of  the  rising  prices.  Mr.  Babson  was  telling  me  that  that  was 
so  last  night.  He  said  he  had  made  some  study  of  this.  The  investor 
is  getting  rather  timid  about  going  into  a  thing  of  this  sort  where 
the  nickel  is  the  conventional,  fixed" fare. 

I  remember  talking  with  Mr.  C.  W.  Barron,  owner  of  the  Wall 
Street  Journal,  some  years  ago,  before  the  war,  on  this  subject.  He 
said  that  he  had  a  talk  with  Mr.  Mellen,  president  of  the  New  Haven 
Railroad,  and  Mr.  Mellen  had  told  him  that  he  had  just  purchased  a 
number  of  electric  railways  in  New  England  at  a  certain  price — I 
have  forgotten  what  it  was — but  I  think  it  was  $30,000,000.  And 
Mr.  Mellen  said :  "  I  think  it  is  worth  a  good  deal  more  than  that. 
What  do  you  think,  Mr.  Barron  ?  "  And  Mr.  Barron  said :  "  I  think 
that  depends  on  the  South  African  gold  mines."  Mr.  Mellen  saidr 
"  I  do  not  understand  what  you  mean."  Then  Mr.  Barron  pointed 
out  to  him  that  you  have  a  fixed  fare  of  5  cents  that  you  will  not 
be  able  to  adjust  to  a  change  in  the  purchasing  power  of  the  nickel 
and  that  is  at  the  mercy  of  the  conditions  of  gold  mining  and  of 
other  things  that  may  affect  it.  You  see,  w^e  have  had  our  monetary 
standard  the  football  of  the  cj^anide  process,  gold  discoveries,  bank 
issues,  issues  of  paper  money,  wars  abroad,  the  particular  policies 
adopted  by  particular  statesmen,  etc. 

If  we  had  had  a  stabilized  dollar  before  the  war,  this  influx  of  gold 
would  not  have  hurt  us.  We  would  let  it  flow  in,  but  we  would  have 
raised  the  weight  of  the  dollar  so  that  we  would  have  had  a  smaller 
number  of  dollars  than  we  have — about  the  same  number  that  we  had 
at  the  time  of  the  war — but  heavier  dollars. 

As  a  matter  of  fact,  Holland  did  something  a  little  like  that.  They 
put  a  stop  to  the  import  of  gold,  and  Spain  did  something  like  that 
also. 

Those  are  the  two  countries  which  did  try  to  defend  themselves 
against  this  golden  flood. 

The  Chairman.  Did  that  stabilize  prices  over  there? 

Mr.  Fisher.  To  some  extent ;  yes.  It  had  a  very  curious  effect  also 
in  making  their  paper  money  at  a  premium  with  gold.  It  is  one  of 
the  few  cases  in  history  where  paper  money  has  been  higher  than  gold. 

The  Chairman.  The  commission  is  very  much  obliged  to  you,  Prot. 
Fisher.     We  thank  you  for  coming. 

(Witness  excused.) 

The  Chairman.  Who  is  your  next  witness,  Mr.  Ogburn? 

Mr.  Ogburn.  The  next  witness  is  Mr.  Grenville  S.  MacFarland. 


I 


! 


1342     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 


'  Twl 


STATEMENT  OF  ME.  GKENVILLE  S.  MacFAELAND. 

Mr..  MacFarland.  Mr.  Chairman  and  gentlemen,  I  do  not  think 
til  at  I  can  contribute  very  much  to  the  discussion.  I  do  not  think  I 
AA'ould  have  come  had  the  chairman  not  thought  that  possibly  I  could 
say  something  that  was  worth  w^hile. 

It  seems  to  me  that  this  problem  involves  fundamentals  and  not 
details,  and  that  it  is  going  to  be  solved  by  the  social  and  political 
prejudices  that  are  involved  in  it  rather  than  by  a  scrutiny  of  the 
history  of  the  companies  and, of  the  financial  ti^nsactions  behind  the 
companies,  excei>t  so  far  as  a  consideration  of  the  history  of  those 
transactions  lias  already  given  us  points  of  view. 

I  think  that  it  resolves  itself  into  two  fundamental  and  divergent 
plans  of  relief — one  the  so-called  cost  of  service,  with  government 
relief  immediately  by  extension  of  credit  and  indirectly  by  increase 
of  fares,  and  the  other  by  practically  the  same  methods  temporarily, 
but  with  /I  fundamental  change  in  operation  and  in  tlie  character  of 
ownei-ship ;  that  is,  public  ow  nership  and  operation.  I  mean  I  do  not 
think  that  the  commission  will  be  very  much  affected  concerning  those 
two  questions  by  its  examination  of  the  record.  We  have  all  general 
information;  tlie  record  is  practically  closed,  and  the  general  infor- 
mation which  gives  us  our  points  of  view  on  that  question  is  already 
in  our  possession. 

•  I  suppose  that  the  naturally  conservative  man,  who  opposes  all 
changes,  would  be  like  the  committee  in  the  Ohio  town  which  refused 
to  allow  tlie  promotei's  of  a  i*ailroad  to  have  tlie  public  called  to  discuss 
the  advantages  of  bringing  a  railroad  to  tliat  town  upon  the  ground 
that  it  was  perfectly  absurd  to  think  that  anything  that  made  so 
m.ich  noise  and  could  go  so  fast  was  ever  contemplated  by  God,  and 
certainly  was  not  mentioned  in  the  Bible.  And  in  the  same  way  the 
people  of  several  counties  in  England  resolved  against  the  building 
of  a  railroad  through  their  county  on  the  ground  that  the  noise  of  it 
would  prevent  hens  fixwn  laying  and  would  affect  women  in  delicate 
condition.  And  the  same  sort  of  opposition  arose  in  Berlin  when  the 
proposal  came  to  light  the  streets.  They  had  all  kinds  of  queer  objec- 
tions to  lighting  the  streets.  Fundamentally  the  same  objection  ran 
through  them  all — that  it  was  a  ehange — and  some  men  are  so  con- 
stituted that  tliey  would  rather  suffer  the  ills  they  know  than  the  ills 
that  they  do  not  know.  They  are  very  much  afraid  of  dangers  in  the 
dark. 

Now,  Prof.  Fisher  gave  us  an  educated  guess  as  to  what  the  con- 
dition of  prices,  w^liat  the  price  level  in  this  country  was  to  be  in 
the  next  fe>v  years,  at  least  during  the  j^eriod  beyond  which  this 
discussion  will  not  relate;  and  he  said  that  tlie  prices  will  not  go 
down.  That  means,  of  course,  that  there  is  not  any  remedy  which 
the  railroads  can  perceive  which  will  help  them  that  does  not  in- 
volve an  increase  in  their  revenue.  I  think  that  is  to  be  accepted 
as  a  fundamental  proposition.  They  have  got  to  have  an  increase 
in  their  revenue  in  some  way.  The  question  is — wlietlier  they  are 
to  have  it  under  the  old  private  management,  and  with  what  t  per- 
sonally believe  to  be  its  very,  very  serious  evils,  evils  that  are  not 
only  serious  economically  and  financially,  but  still  more  serious 
politically. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1343 

Personally,  I  would  ratKer  see  the  community  suffer  some  loss, 
some  economic  loss,  on  the  assumption  that  the  opponents  of  public 
ownership  and  operation  are  right,  that  public  operation  would  in- 
volve some  economic  waste,  some  inefficiency.  I  would  rather  see 
that  loss  occur  than  to  see  continued  the  old  practices  of  the  public 
utilities  under  private  management,  wdiicli  I  think  are  inherent  in 
the  situation,  as  they  are  based  upon  human  nature  in  its  operation 
upon  the  relations  of  men  performing  a  public  function  for  private 
profit. 

I  do  not  think  there  is  an  exami^le  in  the  world,  from  the  most 
ancient  records  in  the  Old  World,  and  in  the  ancient  times  down 
to  the  present  day  that  does  not  show^  an  abuse  which  indicates  the 
inherent  difficulty  in  attempting  to  make  a  i^rivate  property  out  of  a 
necessary  public  function. 

You  remember  what  an  awful  situation  grew  out  of  the  practice 
of  the  Romans  to  farm  out  the  collection  of  taxes.  Of  all  the  abuses 
which  grew  up  under  the  Roman  Republic  in  later  days  none  was  so 
great,  so  intolerable,  as  the  abuse  of  the  farmers  of  the  taxes.  Just 
as  has  been  the  case  wdth  the  abuse  of  private  management  of  public 
utilities,  it  involved  men  of  distinguished  names,  men  who  in  pri- 
vate life  probably  would  not  have  been  giiilty  of  mean  and  dishonest 
transactions. 

The  other  day  I  read  a  letter  from  Cicero  to  one  of  his  friends 
in  Rome  when  he  was  proconsul  in  the  East,  complaining  of  the 
terrible  abuse  of  power  by  Brutus  in  that  respect,  the  methods  by 
which  he  collected  taxes,  so  that  he  could  fill  his  ow^n  private  pocket, 
as  well  as  get  the  revenue  for  the  government — oppressive  fore- 
closures for  the  taxes,  in  order  to  get  property  values  that  were  far 
in  excess  of  the  government's  demand  for  taxes.  It  was  an  abuse 
that  w^as  widespread — universal.  All  of  them  indulged  in  it.  It 
was  so  great  that  you  remember,  in  the  Bible,  Christ  w  as  almost 
stoned  by  the  population  because  He  dared  to  speak  to  a  tax  col- 
lector; and  one  of  the  greatest  miracles  which  He  is  supposed  to 
have  performed  was  the  conversion  of  a  tax  collector,  and  making 
him  disgorge  some  of  his  ill-gotten  gains. 

Yesterday  I  was  in  a  southern  State  and  talking  with  a  banker; 
and  our  conversation  happened  to  run  upon  a  man  who  had  made  a 
very  large  private  fortune  not  so  long  ago,  and  I  asked  him  how  he 
made  it — he  was  a  personal  friend — and  he  said,  "  Well,  he  went 
down  in  a  certain  State — he  went  into  a  certain  State  and  he 
bought  up  some  lumber  interests  there,  far  from  a  certain  railroad. 
Then  he  went  to  the  president  of  that  railroad,  and  he  asked  him 
to  put  a  branch  of  the  railroad  down  there,  and  the  president  said, 
very  properly:  'I  do  not  see  that  that  would  be  justified  by  the 
business  that  would  come  to  us.'  '  Well,'  he  said,  '  I  will  give  you 
a  half  interest' — or,  I  think  it  was  one-third  interest,  I  think 
there  w^as  another  man  involved — he  said,  'I  will  give  you  a  one- 
third  interest  in  the  profits  if  you  will  get  the  road  down  there.' 
And  he  did." 

Prof.  Fisher  has  worked  out  a  theory  as  to  the  cost  of  living's 
being  based  upon  the  fluctuation  of  the  monetary  exchange.  That  I 
do  not  challenge.  I  imagine  that,  as  a  general  propositi<Mi,  it  is 
probably  true.     But  its  practical  value,  I  guess,  is  limited  by  the 


I 


I 


i 


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1 1 


h 


ji 


1344    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

the  cost  oriivLthi?'TJ-''  ^''rPt'""^  ««  I  have  just  cit^  upon 
firoHnn    #V  Il^~*^^  building  of  a  railroad  without  economic  iusti- 

NoUon^at'  f  wl'f  ^''^''t  ?*  "^  '"''"  ^»'<'  controlled  Itejilfcy. 
win  a  man  who  hT  '*"'"*i  '"?"  ^""^  °*  ^^^^  beneficiaries  under  a 
railroads  nn7l,a^.°''*="P'-^'*/>""<'  ""  "'"*»•  Position  in  one  of  our 
meS  abUi  vln^'  ^'"?-'*^  it  ^^ry  long.  He  was  a  man  of  ver^ 
of  a  m  llinn  !^  -n  ^  education.  He  died  worth  over  three-quartei^ 
portion  Thefe-„nn  ^^'  ""'  '^''^^  «  '^•^"^  be^O'^  ^e  to1>k  that 
box  and  eJami  pH  h^f  J^^^f""  ^^"'''ed.  and  ^ben  we  went  to  his 
wyie"t  waT  a  ot^^l Toi^ht' tA'"'""  Perfectly  apparent  that 
lliat  transa<.ion?rfToULraLt^he^^^^^^^^^^^ 
:i£ni^2'3,if  eh?-'-  of  the  fluctuation  !f  ^Ur^ 

nefrf;'a'minion"dow3' ^'rir  ^''^  ^'^^  »?«  *»>«*  ^e  made 

and  corrupt.  "»creased  cost  of  living,  and  that  it  was  wasteful 

Ihifnti^tnVr   ''**  ^^"""A^  ""y.  ""'"^'^  »f  instances. 

tha?a\SS%%T^^.StT5;X  ^^vlfi'i  'T' 
"  ThTNew-H«v-    7'*^  '^  ""  ^t'itio/t^  the  colt  of    v"int    "  "" 

wYnTiSr^i^VKrr  a^totecc;  SoSi"",  T- 

been  shared,  of  coui-se,  by  the  communltv  thl  .,*        '  •^"'''  ^*''® 

"'tet"^  ft  «t<x.khol  Jers  inZ"  loi^^/5  V  detr'"^  ''°""""- 
Ine  Interstate  Commerce  Commicci^r,    t  "r.'"'^'""'- 

found  that  the  income  oi  X  tax  .mnrth'o  I  *'>'"'^'/?'ne  Jears  a^o 
roads  would  amount  if  it  werellvTf^  fK*  "n«"™e<l  mcome  of  rail- 
a  year.  '  *  ®  ^"^'^  ^  ^^e  railroads,  to  $700,000,000 

giis:1.T4aft?.USliS^^^^^^^^  in  Con- 

alone,  whfch  had  been  lar"plv  r^ffoi-  a  '°  ^''^  western  railroads 
of  New  England,  New  SknSlnf'  ^"""1*"*^  '"  "'"^^  *«  "11 
of  the  niiddje-weke™  sTaTi^^ToS  r^^Jie^^^^^  SeT^l«,f  ---J 

Now  fh/'ir  "''  ^!.™«"y  »'•  Austria  oJ^Hunfarf'  '^"'^  ^'^** 
Now,  those  things  add  to  the  cost  of  livine 

looking  at  the  situation  merely  from  its  pconnm.V  .t     j     ■  .   t 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1345 

Of  coui*se,  there  is  going  to  be  graft  in  public  ownership  and  opr 
eration.  There  will  be  graft  somewhere  always  until  you  change 
human  nature.  In  every  so  many  men  there  are  so  many  crooks, 
and  so  many  men  who  are  near  crooks  and  who  can  assuage  their 
consciences  very  easily;  but  the  graft  in  public  operation  will  be 
like  graft  in  the  Government  service — it  will  be  more  or  less,  or 
comparatively  petty  graft;  and  occasionally  it  will  be  discovered 
and  men  will  be  sent  to  jail  for  it.  It  will  never  be  in  such  propor- 
tions; it  will  never  enjoy  such  immunity  as  will  enable  men  to  found 
great  fortunes  and  great  families  and,  instead  of  going  to  jail,  go 
into  society. 

Conmiissioner  Meeker.  Do  you  mind  an  interruption,  Mr.  Mac- 
Farland? 

Mr.  MacFarlaxd.  Not  at  all. 

Commissioner  Meeker.  Does  Government  service  suffer,  perhaps, 
through  inefficiency  as  much  as  private  service  suffers  through  graft  ? 

Mr.  MacFarland.  I  think  it  suffers  less  through  inefficiency.  I 
think  so.    But  I  would  not  place  a  great  deal  of  value  upon  that. 

I  again  quote  Mr.  Mellen.  He  told  me  that  private  management 
of  railroads  was  fearfully  inefficient  for  the  reason  that  under 
banker  control  the  operating  men  do  not  have  the  freedom  of  action, 
do  not  have  the  right  to  operate  the  road  according  to  their  practi- 
cal experience ;  that  the  road  was  run  at  the  stock  ticker  and  not  as 
a  tiansportation  proposition. 

Commissioner  Meeker.  Do  you  think  that  public  operation  would 
be  as  efficient  as  private  operation? 

Mr."  MacFarland.  Yes;  I  think  it  would  be  more  efficient  in  the 
long  run  if  given  time  to  stabilize. 

Commissioner  Gadsden.  Do  you  think  it  is  fair  to  take  Mr. 
Mellen's  experience  as  typical  of  the  railroads  of  the  country  ?     . 

Mr.  MacFarland.  Yes;  I  do.  I  think  his  experience  makes  him 
more  of  an  expert  than  most  others. 

Commissioner  Meeker.  I  wish  you  would  expand  that  idea  of 
public  efficiency  in  operation. 

Mr.  MacFarland.  For  example,  nobody  denies  the  efficiency  with 
which  the  German  Government  operates  its  railroads.  I  think  all 
people  who  have  pretended  to  be  disinterested  have  admitted  that 
the  foundation  of  Germany's  great  power,  economic  power,  was  in 
the  use  she  made  of  her  railroads. 

Commissioner  Beall.  Were  not  the  rates  on  the  German  rail- 
roads higher  before  the  war  than  they  were  in  this  country,  with  less 
wages  and  less  construction  costs  and  everything  else? 

Mr.  MacFarland.  No ;  that  is  not  true.  It  is  like  not  failing  to 
make  a  distinction  between  nominal  and  real  wages.  The  German 
cost  depended  largely  upon  the  short  haul.  You  know  the  cost  of 
transportation  is  not  in  the  haul.    It  is  in  the  terminal  charges. 

Commissioner  Beall.  I  know. 

Mr.  MacFarland.  The  German  haul  was  very,  very  much  shorter, 
which,  of  course,  directly  affected  the  relation  between  the  haul 
and  the  terminal  charges.  The  terminal  cost  as  compared  with  the 
total  cost  of  transportation  was  very  much  greater  in  Germany  than 
in  the  United  States  where  the  distances  are  greater. 

1G0G43**— 20— VOL  2 23 


m 


1346    PROCEEDINGS  OF  FEDERAL  ELECTMC  RAILWAYS  COMMISSION. 

Moi-c  important  than  that  is  that  the  Germans,  instead  of  sup- 

mTTL  ,  Tf  "''"?'"'•  f^J^'loP^f  them.    Our  railroads  bought  them 
HI),  or  bought  up  legislatures  that  had  the  power  to  suppiiss  them 
anc   did  suppress  them.    It  is  only  recently  that  we  have  c^me^ 
realize  the  importance  to  the  country,  the  will-being  of  the  counti v 
of  the  develoiJinent  of  our  canals.  mc  coumij,, 

in  thoTvI^iL^'^T*'?"  ""^  ?'"■  ™i'roads  we  had  progiessed  further 

vor  d     Zt/fn***  canal  systenis  than  any  otter  country  in  the 

,"  „f  thlT>     ^''  '•»«  P'^^tion  oi  our  railroads  and  up  to  tL  open- 

f  devSonnW  Tf  ^'"'*l  Zf  ""^'^  ^'"''^^^y  "»«  ""ost  backward  in 
tlic  development  of  canals  than  any  other  country  in  the  world— 
any  other  comparable  nation.  j  "i  "le  woi  ici 

The  Gernians  saw  the  economic  advantage  of  the  develoDment  of 
iZJ?  Tnd  •'tSr^'f*  low-grade  freiglft,  and  owning  tE^U 
P^,,,!  't^r,  '  *bef  fore,  having  no  object  in  robbing  PIter  to  pav 
Paul,  they  developed  those  canals  for  the  purpose  of  transportino- 
t  o.r  low-grade  freight  The  low-grade  freight  taken  off  the  r^"! 
roMis  gives  the  railroads  only  the  high-grade  freiirht  If  von  t^l 
our  low-grade  fi-eight  from  of.r  railroilsf  ^u  woufd  see  the^aveS 
co.st  level  go  aw^y  up.  It  is  the  low-g^de  freight,  whchcaTb^ 
haulecU-in  which  the  time  of  haul  is  not  important  and  in  which 
other  features  operate  to  make  it  possible  to  transport  it  profitably  at 

?,i?1./''*t~*''"'  "^T'H  *^*»^«  '""""••^-  "  ^ve  tiok  that  low-Sde 
freight  out  of  our  calculations  of  average  cost,  you  would  find  am 
differer.t  situation  and  if  you  also  took  out  the  different  relations  be^ 
tween  terminal  charges  in  Germany  and  in  this  country  terminal 
co^s,  you  would  find  the  situation  different.  ^'  leiminal 

Commissioner  Beall.  Were  not  their  passenger  rates  higher?  T 
think  they  wei-e.  And  their  train  service  was  not^  fast,X  was 
the  service  so  good.  ' 

Mr.  MacFabl.'^nd.  I  think  the  service  was  better:  so  much  better 
with  resi)ect  to  safety  that  there  is  no  comparison 
C  ominis.sioner  Beall.  Yes;  but  when  you  say'  "safety."  vou  are. 

"""ll  H^}""^  ^'''^^  ''n  the  short  hauls;  are  you  not?  ^     ^ 

Mr.  MacFakland.  No. 

Commissioner  Beall.  If  you  take  the  number  of  passengers  car- 
correct  ■     '  '^''*""'*'  ^  *'''"''  y°"  ^'"  fi'»d  that  tLt  is  Sot  quite 

th^figu^^^^^^^^^^  i  t--Lr.r-i;z 

I  am  basing  my  argument  not  so  much  upon  the  economic  side  of 
the  question  although  I  am  perfectly  clear  i^y  mind  that  the  advo 
ca  es  of  public  ownership  and  operation  have  the  better  of  it  on  that 
ft^t;  ,1  ^"'  ^'u^  i*  '".P^"  *he  danger  to  democracy  which  flows 
fmm  the  inevitable  tendency  of  men  performing  a  public  function 

SSic^aT^^^we^rTtKinTr^  ^  ^''"^-^^  '^  "-^"--"'^  ^^^^^ 

that  the  fortunes  of  the  Bockefellers  and  the  VandfrSVd  til 
Huntmgtons  and  the  Hills  and  the  Morgans  and  Strathconas  are 


PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION",    1347 

additions  to  the  cost  of  living.  I  remember,  and  probably  you  all 
do,  it  was  Adam  Smith  who  spoke  of  a  certain  English  nobleman,  in 
his  Wealth  of  Nations,  who  had  2,000  retainers.  He  kept  them  for 
his  pleasure  and  the  advantages  of  display  rather  than  for  any 
economical  use.  He  said  it  was  probably  an  exaggeration,  but  where 
there  was  so  much  smoke  there  must  be  some  fire — the  number  of 
retainers  must  have  been  outrageous;  and  he  discussed  how  that 
affected  the  cost  of  living,  both  in  withdrawing  these  men  from  pro- 
duction, where  they  did  do  some  work,  and  in  changing  the  course 
of  production,  in  producing  things  which  cater  to  the  appetite  of 
the  few  and  not  to  the  average  man  and  tended  to  reduce  the  cost 
of  living  to  the  few  and  increase  it  on  the  law  of  supply  and  demand 
to  the  remainder. 

If  I  had  my  way  and  were  obliged  to  admit  all  that  the  opponents 
of  public  ownership  charge  against  the  inefficiency  of  public  opera- 
tion, I  would  still,  because  I  believe  in  government  of  and  by  and 
for  the  people,  advocate  public  ownership. 

^  Commissioner  Beall.  Is  it  not  true  that  in  Europe  as  a  whole, 
France,  Spain,  and  Italy,  that  their  railroad  systems — I  know  they 
were  in  France  and  Italy — have  been  getting  w^orse  every  year,  even 
before  the  war?  In  the  French  Chamber  of  Deputies  every  year 
they  have  to  increase  the  appropriation  for  the  deficits  of  the  French 
roads,  and  the  same  is  true  in  Italy,  and  the  populace  were  almost 
on  the  verge  of  rising  against  it,  the  costs  kept  going  up,  the  service 
worse,  and  accidents  more  frequent.  We  are  just  speaking  for  in- 
formation, you  understand,  but 

Mr.  MagFarl.vnd.  There  are  two  answers.  In  the  first  place,  the 
complaint  was  justified  as  general  concerning  the  private  roads. 

Commissioner  Beall.  Not  in  France. 

Mr.  MacFarland.  Yes;  in  France.     * 

Commissioner  Beall.  Well,  I  think  not;  not  from  the  statistics 
I  liave  seen 

Mr.  MacFarland.  I  do  not  pretend  to  speak  authoritatively,  but 
I  think  it  was.  And  in  the  second  place,  a  publicly  operated  utility, 
a  public  function,  is  not  for  profit,  and  as  our  post  office  does,  a 
public  function  tends  to  perform  a  public  service  without  reference 
to  profit,  and  at  times  at  a  loss,  if  there  is  a  superior  public  use  to 
be  found  in  it,  in  the  judgment  of  the  statesmen  who  direct  its 
policy. 

Now,  our  Government  assumes  there  is  a  superior  public  use  in 
carrying  mail  matter  to  the  farthest  reaches  of  the  country,  to  the 
remotest  and  uttermost  parts  of  the  land  at  a  loss,  for  the  purpose 
of  giving  us  an  intellectual  homogeneous  people,  for  the  purpose  of 
giving  us  an  intelligent  electorate,  keeping  our  people  oound  to- 
gether by  the  exchange  of  communications,  the  exchange  of  intelli- 
gence. They  transport  magazines  and  newspapei^s  for  less  than 
cost  for  the  same  purpose  or  the  same  theory. 

In  Australia  they  transport  agricultural  implements  and  other 
heavier  freight  for  the  same  reason.  It  is  impossible  to  compare 
public  and  private  operation  unless  you  know  all  the  facts,  econom- 
ically and  financially,  upon  which  the  comparison  is  based. 

Now,  take  the  point  I  was  coming  to  when  I  was  interrupted,  on 
the  matter  of  the  German  railroad:  Tlie  German  railroads  were 
efficient;  nobody  denies  that.     Of  course,  the  argument  which  the 


!      t 


J 


1348    PBOCEEDIKGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

crrsst„^d1^?efa"7ffiT  but  f '-«y«,  ""^king  is  to  atten,pt  to 
capable  of  managins  aTilo  Vnnnt;  ^''n*''?^  "^  democracy  is  not 
the  German  autocrfcv  f'^"*  '"n"^*'""  I'ke  that  as  economically  as 
our  post  office  better  ^  J  rU  l^'.J^  ^""^"i  nevertheless,  managed 
story'^ofo„r;:sSc;andcomSr?dTt^'iffir  7^"  examined  f he 

the  world    tha    has  handle??^.^  ""  ^^^  ^^"'^^^  *»'  ''"^  <=''»'>try  in 

world  of  half-tolerable  ev^ls  ht.t  wlin  „  .  >^^T*  '^''P'^  '"  t^^ 
involves  so  much  ^ftL  public  1  Irest  th^t^T  ''''°'"''-  ^.  ^r^^t, 
be  intolerable,  we  are  the  most  Sfif  °.  ^^  ""?"«  '"  '*  '«  to 
will  not  tolemte  it,  and  w^  neverCve  TrFj%  'V^''  ''*"'^'^.-  ^e 
operation  of  our  railroads  wouWbrin.,tn.K-  "^^  "^'"""'g  '"  ^^e 
results  evil  results  J W  f  J  *  u  ?^  ^"?^  immediate  commanding 
stand  t  for  r  moment  Ld  ^^^^'71*^"  American  people  woulf 
attempt  it  I  c^iTot  beHe4  vot wo.  ,^fi T  ^"7''"^^  ^""'^  dare 
allowances  for  he  mLtakes  forthp Tffi  u"**'  t**^""  y"'?  ^""^^  '"««'« 
formation  and  t  4ns  on-f  £  not  th  S  von  l*"',^^  H'"^  "*  t'''^^^- 
at  all  relatively,  in  the  operatroVS'^^'^t^^rrXtr  ''"^  ^^''""^ 

plo^-^s'^oTare^ir-  te-Sg^.  S  stfficlS^^^^^^^  T" 
the  kind  of  work  they  do?  ^  suflicient,  you  thmk,  for 

Mr.  MacFarland.  I  do  not  know.    Thev  used  to  hp     Ti,.        * 
office  clerk  used  to  be  the  most  intelligent  of  J,f.i„      -.u^^  P"^*' 
an.l  was  the  best  naid  before  thrwtXt°centi;—"  '^'  '"""*'y' 

3ti2^rrraV:s?;"vSr^^^^^^ 

Mr.  MacFarland.  Yes. 

Commissix.ner  Meeker.  You  think  that  salaries  sufficient  to  rp 
voteTb?thrpe3T'-^  '"'^"''^"-^  ^^'  superintende"nt;lS  ^e" 

opSation  y^wln-  m^^  TUs'Sni'V'^?  you  once  get  public 
the  country.  You  wiH  get-rblicTenicSVon't  Hp*^'  ""■  ?!."*^? 
gocKl-natured  tolerance  b^y  alfeged  s^cce^^^? J^uL^'ss  Tef 't^^^ 

hi;"iS:o\^-;-£^4iir^rur^^^^^^^^ 

democratic  standard  of  things  ^'«erent  and  better  and  more 

puTthiTeii^l'bVct?o\l5o'VTl- 'il"'*  the  n-ar-probably  I  should 

fhat  Roo'^sevd^  tt^^a^ntiiLtf  to^l^^^^^^^ 

say  10  years  ago  and,  to  a  great  extent,  up  to  tya'^VeteasZllSe* 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1349 

value,  the  importance  of  a  man — we  measured  liis  ability  by  his  in- 
come, whether  it  was  deserved  or  whether  it  was  not;  and  a  business 
man  who  through  accident  or  some  adventitious  advantage  or  merit, 
or  whatever  it  might  be — and  it  did  not  make  any  difference — the 
point  is  it  made  no  difference  whether  it  was  by  accident  or  adventi- 
tious advantage  or  by  merit,  so  long  as  his  income  was  great — he 
looked  with  good-natured  tolerance  and  with  considerable  declivity 
of  view  upon  the  public  servant  who  earned  a  smaller  salary. 

Now,  I  think  the  great  good  of  public  operation  will  be  to  change 
that  considerably,  change  our  social  standards,  so  that  public  service 
will  be  considered  important,  so  that  a  man's  children  will  not  say 
to  him,  "  So  and  so's  father  has  got  this  and  that  and  the  other — he 
has  got  a  Pierce  Arrow  car  and  we  have  got  only  a  Ford.  Why 
aren't  you  as  able  as  he  is?  "  Tliat  is  a  strong  appeal  to  a  man.  The 
children  do  not  say  it  as  bluntly  as  that,  but  children  very  often  act 
it,  and  a  man's  wife  does,  too,  and  it  tends  to  deteriorate  the  public 
service ;  it  tends  to  make  men  seek  money,  money  that  does  not  give 
them  a  great  deal  of  pleasure,  because  above  the  necessaries  of  life, 
the  pleasure  that  money  gives  you,  and  the  satisfaction,  is  subject  to  a 
very,  very  great  law  of  diminishing  returns. 

You  have  all  probably  heard  of  Tom  Lawson.  I  was  appointed  as 
a  special  district  attorney  some  years  ago  in  Boston  to  prosecute  a 
crooked  operator  on  the  market  and  Lawson  was  very  much  inter- 
ested in  getting  him  put  away  because  that  man  was  bear-baiting 
Lawson  and  had  been  for  some  time.  So  he  sent  word  to  me  that  he 
could  give  some  evidence  on  this  man ;  he  had  been  making  some  in- 
vestigation. And  I  had  several  long  talks  with  him,  and  he  proved 
to  be  one  of  the  most  enteitaining  men  I  ever  met,  one  of  the  most 
charming  conversationalists.  And  among  other  things  he  told  me 
about  the  failure  of  money  to  give  satisfaction.  I  do  not  know 
whether  there  are  reporters  here  or  not.  If  there  are,  I  do  not  want 
to  tell  this  story. 

The  Chairman.  It  will  not  be  repeated  if  you  make- the  request. 
Mr.  MacFarlakd.  I  do  make  the  request. 

The  Chairman.  This  story  will  not  be  published.  It  will  not  be 
taken  in  the  transcript. 

(The  ensuing  narrative  was  not  reported,  as  per  the  above  request  ) 
Mr.  MacFarland.  That  is  a  system,  that  is  a  false  standard  of 

values  concerning  men  that  has  largely  grown  up  in  America of 

course,  it  had  an  older  origin  in  Europe  with  the  old  feudal  system— 
but  in  America,  out  of  the  enormous  fortunes  which  are  made  in  a 
few  years  by  men  operating  these  public  utilities.  The  Harriman 
fortune,  $80,000,000  in  10  years;  Gould's,  about  the  same  amount  in 
the  same  period;  with  all  the  accompanying  political  degi-adations 
out  of  which  those  fortunes  were  accumulated  and  through  which 
they  were  accumulated.  That  is  a  standard  that  your  public  owner- 
ship will  tend  to  destroy  or  to  convert  into  a  better  standard  and  will 
give  us  much  better  public  service,  besides  not  threatening  democracy 
through  the  control  of  public  servants  by  these  private  manipulators 
and  private  managers,  and  the  accustoming  of  the  people  to  the  fact 
that  there  is  such  a  thing  existing,  that  democracy  is  not  a  fact  but 
only  theory  in  the  country;  that  there  is  invisible  ^government  and  a 
few  bankers  in  Wall  Street  can  determine  the  course  of  legislation. 


!i 


i! 


1350    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

wph^t^;/""'  *^"*  ^^  P"i^"?  t^**'  *«™  of  democracy  is  no  proof  that 
wfltet       "^  "''  ^""^  '*'  •"  "^^  P'^*  th^*  ^'X'^^r  or  late^  the  form 

vas  ainrthe  haS  o^tlTo  F^l^r*  ""7,  democracy,  that  the  poLr 

mmed  by  themse  ves  and  i-ecoverabfe  b/themselves  at  wUl    d^r 
cLtar^  Str Ctctnaf^^  wa^'fivrThTliitVoriaf  t."*  ^Z"- 

rllsiiiSilllig 

as  the  period  of  his  dictatorial  service  wal  over     Whil^^atls'^^ 
kind  of  an  autocracy,  it  is  not  the  autocracy  that  we  oblect  to   jm! 

detotlcr and!  if  J^S^;  ''  "  ^'^^  ^^S-t  Sprlss^M 

ti^STaroZ-n  'e'LirS'^-i>^£:S 
wP'^l'^'S  '"'^'''  ''"•^  "'«  P'»«te  companies?  ^   "Peiatois, 

Mr  MacFaruand.  I  do  not  think  there  is  any  doubt  <ibo,.t  if     T 

do  not  see  why  there  slxould  not  be.    Under  the  tf  systein^with'tl.; 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK.    1351 

private  operators  controlling  the  sources  of  political  power  they 
were  always  the  submerged  tenth,  except  as  the  power  of  the  strike 
gave  them  some  influence.  But  now  they  may  have  both,  assuming 
the  propriety  of  allowing  the  power  of  the  strike  to  continue  against 
the  Government,  a  question  that  I  have  not  reached  any  conclusions 
on,  I  think  it  is  full  of  doubt  whether  we  ought  to  allow  men  to 
strike  against  the  Government.  But  assuming  that  that  power  is  to 
continue,  they  will  have  not  only  the  addition  of  their  greater  politi- 
cal power  as  members  of  the  communitj^  due  to  the  greater  democracy 
of  the  Government,  but  they  will  have  the  added  power  of  the  strike. 

Then  again  there  is  another  thing :  The  public  is  notoriously  a  gen- 
erous paymaster  and  always  has  been  and  there  is  no  reason  why  it 
should  not  continue  to  be,  so  long  as  the  demands  of  labor,  any  par- 
ticular class  of  labor,  do  not  exceed  what  is  fair,  what  is  conceded  to 
be  fair. 

Commissioner  Meekeu.  Well,  is  that  likely  to  be  a  notoriety  that 
may  work  for  inefficiency  and  a  vast  system  of  transportation?  You 
can  have  too  generous  and  too  easy  paymasters. 

Mr.  MacFaeland.  Well,  yes;  you  can  be  too  generous,  but  I  do  not 
think  you  will  find — I  made  a  reservation  there,  that  so  long  as  it  is 
not  an  unfair  demand.  For  example,  1  am  much  interested  to  notice 
the  ti-eatment  which  the  public  in  some  cities  have  given  what  may  or 
may  not  have  been — I  do  not  know  the  facts  well  enough  to  say — 
the  excessive  demands  of  policemen.  The  matter  was  referi^  to  the 
public,  and  they  were  \^ry,  very  severely  turned  down,  if  you  can 
consider  a  large  majority  an  evidence  of  severity.  I  do  not  think  you 
will  Ixave  any  difficulty  in  getting  justice  for  the  employees  so  long 
as  they  do  not  undei^ke  to  get  more  than  their  fair  share  or  divi- 
dend out  of  the  general  i5rosperity. 

Commissioner  Meeker.  Are  you  acquainted  with  the  municipally 
owned  and  operated  street  railways  in  England  ? 

Mr.  MacFarland.  At  one  time  or  other  I  have  been.  Those  things 
do  not  last  long  in  my  mind,  the  details  of  them. 

Commissioner  Meeker.  Mr.  Chairman,  I  would  like  to  say  for  the 
record  that  when  I  recently  visited  Manchester  I  called  upon  the 
municipal  authorities  operating  the  various  public  utilities  there  and 
I  heard  from  those  men  expressions  regarding  labor  conditions  that 
indicated  an  autocratic  pressing  down  of  the  common  working  people 
in  the  municipally  operated  utilities  that  was  more  shocking,  I  will 
say,  to  me  than  anything  I  have  known  under  private  management, 
and  that  is  the  thing  I  am  trying  to  draw  out. 

Will  public  ownership  and  operation,  in  your  opinion,  result  in 
the  better  understanding  or  not?  Will  it  result  in  acquiescing  too 
readily  to  the  demands  of  the  men  or,  as  I  have  frequently  observed, 
result  in  keeping  them  down,  in  failing  to  grant  wage  demands  and 
other  that  seemed  to  be  very  reasonable  demands?  Have  you  given 
much  study  or  thought  to  that  ? 

Mr.  MacFarland.  Well,  take  your  English  excimple:  I  take  it  that 
3^ou  did  not  consult  the  statistics  relating  to  the  pav  which  the  street 
railways  under  private  management  and  the  English  gas  and  elex^tric- 
light  companies  under  private  management  to  the  wages  paid  under 
public  management.  Now,  the  difference  is  very  marked,  as  I  recall 
it.    It  is  one  of  the  very  first  things 


1352    PHOCKmKOS  0.  ....H^  ,^^,,  ^^^^^  ^^^^^^^^^^ 

Commissioner  Meeker.  At  the  nrespnf  tim^  tu       ■ 
ference.  "^  present  time  thei-e  is  very  little  dif- 

Mr.  MacFarlajjd  WpIT  ;*  «, ». 

fore  the  war  the  d^ff^r^nce  u^^vpr,  °"  ''^<=°"'>t  »*  the  war  but  bo- 
the  very  fii^t  things ThTckv  of  plL  "'"J^f "   ,^  '•^member  one  of 
street  railways  was  to  increase  tS^"'"  ^'^  ^^^?  '*  ^°^  over  its 
wages,  but  t6  provide  the  men  I^k''"^''  "^'^^'^^V  to  increase  tlie 
to  provide  thei^  own  unifoms  beS-e      /°Tv  ^'^'i     ^^^^^  J'«d  had 
increase  in  wages.    And  j^u  will  find  thi"!'*  T't  "i  ^"'"y  '»«'-'^<'<' 
public  utilities  publicly  managed  in  Vn^l.    f  -^^^^^  °*  '^'^g^*  i"  "la 
jeai-s  ago,  very  much  £rreatet?h«^  i^""'?  J''  °''  ^^^  five  or  six 
and  there  has  been  no  coSint  t  fn  ?"^"*?^y  ""r^^ed  utilities, 
has  been  too  generous  wh^th!^  men  *"'  ^  ''^'""  t'^**  ^^^  P"''"^ 

MrfMfS^^^o""^^^^""  ^"'"J^'^*^'^  y-r  formal  statement? 

l-^^em^rS^^  of  the   opinion    that    this 

Mr.  MacFahland.  Yes. 

by  ti:  ."o'Jlf  themitei^r'""^  ''  ''  "  'J"-"-  th»*  -ust  be  settled 
Mr.  MacFarlaxd.  I  think  so. 

^ir.  MAci^ARLAND.  Yes. 

l»~».c  .  pS'o  ,;ini"v,'Ji,"°  «*  "  ''"  'l*™i"'«i  that  f.et  it 
Mr.  MAcF«LA>,n.  It  do,,.  ' 

permitted  to  make  the  distr„ction  '  difference,  ,f  I  may  be 

1  lie  (  HAiRMAN.  Yes 

bet^^n'^Kar^rni^i^Sfr^^^  *''?*  ?>f  <='-  -'='*- 
the  power  of  eminent  doU^  rn^^tTttXe^f'^lSSt,^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1353 

which  are  given  to  what  the  courts  call  public  utilities,  do  not  bring 
them  as  close  to  the  Government  and  do  not  permit  them,  indeed 
force  them,  to  meddle  with  political  power,  and  therefore  they  do 
not  have— the  argument  is  not  so  strong,  if  it  has  any  strength  at  all, 
that  they  should  be  taken  by  the  public  in  order  to  get  rid  of  an  un- 
democratic power. 

The  Chairman.  Might  that  not  be  a  difference  in  the  abstract 
more  than  its  result? 

Mr.  MacFarland.  It  depends  upon  what  importance  you  attach 
to  the  danger  to  democracy,  to  a  government  formed  of  the  people, 
"yj      P^^^^r  which  has  been  exercised  by  these  gentlemen. 

The  Chairman.  Recently  there  has  been  a  good  deal  of  discussion 
about  the  packers.  If  the v  dominate  the  prices  at  the  source  as  well 
as  to  the  consumer,  and  if  they  control  a  gi^eat  many  other  necessi- 
ties of  life,  such  as  food  products,  might  it  not  reasonably  follow 
that  they  would  become  affected  with  a  public  interest  and  thus  sub- 
ject  to  public  control  or  ownership  ? 

Mr.  MacFarland.  To  the  extent  that  it  is  an  economic  evil,  I  think 
you  are  right.  And  also  there  is  this  further  consideration  with  re- 
spect  to  the  packers.  I  have  noticed  a  disposition  on  the  part  of  the 
packers  to  increase  their  volume  of  newspaper  advertising  whenever 
they  are  under  fire.  Now,  the  newspapers,  the  fourth  estate— if  you 
can  not  have  your  newspaper  free,  measurably  free,  from  undemo- 
cratic control,  you  are  not  m  as  much  danger  as  the  direct  control  of 
the  public  utility,  but  you  are  in  great  danger,  and  where  monopoly 
gets,  by  virtue  of  its  monopoly,  a  great  financial  power  and  can  thus 
control  the  newspapers  it  becomes  a  danger  to  democracy  which 
would  make  me  tend  to  classify  them  with  the  so-called  legal  public 
utility.  '- 

And  there  is  another  element  in  the  packers'  case.  They  got  their 
power  largely  by  railroad  rebates,  and  in  that  wav  thev  have  an  in- 
direct connection  with  the  railroads  and  with  the  public  utilities 

Commissioner  Meeker.  Do  you  suggest  that  the  newspapers  be 
taken  over  by  the  public? 

Commissioner  Gadsden.  It  might  quiet  the  packers  to  put  the 
newspapers  under  public  control.  • 

.1  ^  X  MacFarland  Well,  I  do  not  know.  I  would  do  anything 
that  I  thought  would  tend  to  make  democracy  safe.  I  think  it  is  the 
greatest  desideratum  in  our  life. 

?  I^u  9"/^^^"^^^-  ^¥^^^.  hav^  ^^een  witnesses  here  who  have  pointed 
out  that,  due  to  constitutional  and  legislative  and  other  difficulties  it 
would  be  a  long  time  before  municipalities  can  concentrate  the  de- 
mand for  public  control  of  these  utilities.    Do  you  agree  with  that? 

Mr.  MacFarland.  No;  not  for  a  moment. 

The  Chairman.  In  many  places  there  has  to  be  legislative  enact- 
ment. 

Mr.  MacFarland.  Oh,  you  mean  there  are  legal  difficulties « 
The  Chairman.  Yes. 

Mr.  MacFarland.  Well,  if  the  difficulties  are  great  enough  thev 
can  be  overcome  quickly.  "^ 

The  Chairman  For  example,  it  has  been  pointed  out  here  that 
the  shortest  possible  time  m  which  the  city  of  New  York  could  ob- 
tain control  of  the  industry  there  would  be  about  one  year  and  nine 


1354  PBocEEmxGS  o^  fbdekai,  elbcteic  kailways  commission. 

-liS"a^^1^r^s  Li"e"1/£'^  *'*''*  '^-  '^-    I*  d«P-ds  upon 

>s  prohMy  true-they  Sm*f^  ot«v.  P"'•*=^•^  R"«e,  I  think  that 
But  if,  onthe  other  h^T  twlre  ioiLiTf'^f''''''^  amendment, 
as  that  which  we  imdert ,^t  1^  lif  ^  i?^  *«  adopt  some  such  method 
is  any  necessity  foi  ft    I  till"Z'''^'''^"«'^  I  do  not  think  there 

lawyers  can  ge^t  thi^h'Sn.^'^ae  dm^A^^^^  "^  '"^^'^ 
.   The  Chairkax.  Do  von  lieJillv.  ti,!*  •  ?*  ^^^^  measure. 

m  the  country  it  might  bL  a  font  Hm  'L^  S^'od  many  communities 
the  control  oi  these  P^-tuJ^"^        *'  "^^"''^  '^^^  ««"W  take  over 

^.  &  S^rButSj^^s^irat*''''^^^'"  «-• 

Mr.  MacFarl.4nd.  I  think  verv  i;i«l,.  if         1 1 

ent  communities,  depending  ^  the  t turoi^^tr"^  '"  ^'^^  '''*''■- 
have  been  made  to  them.  In  ^mp7„«T  A  ^^^  aiguments  tliat 
upon  one  side  of  the  argument  rLZm'ti  f-^  11 ""  «'»*''*  default 
sentiment  tlian  yo,,  w^Tl  Kheri  "^  '"  ^''^^  '^'^^«  '^  different 

by  thl  Ame'rk^n'ji^;^  Penlrthe'detr  "^'^^  «"?"y  ^^^P^^ 

M  "m^*  I'  *<*  "^^"^  with  ?&,f  fi£|™'""''^"  ">'  "'«*  1"es- 

Mr.  MacFarl.\nd.  Well    T  Hr>  n«*  *k-  i   /u 

to  be  done  with  them.    I  do  not  ?h  nt  wo  „?T.  f  T^^^^  needed 

well.     In  his  period  of  convX~  i       ®"^^*  ^  ^^^  the  devil  get 

while  he  is  in'that  cZv^'^J^JLTT^  'l-^  *  "«»''■•  ""d 
professions.  ^  '^°"'d  make  him  act  up  to  his 

to-morrow,  and  take  it  the  next  dav1wM.il  *<?  >n<^rease  the  dose 
the  next  day,  and  take  it  the  dav  afterti  If  ?"  ''^''^*«  •"'^''ease  it 
the  opposite  from  cumulative  and  if  ^  thf '  ^T^^  "*^  ^^^^^'s  ara 
rfjip  oomes  along  vou  mav  be  <^ vpri  •  -^J.  meantime  public  owner- 
That  is  what  I  think  ^Ztt^muLttnCLT  T  «?^g  *«  die. 

The  Chaibmak   Can  voi,  irJli?!;  Jk  A*  "*^t  «'  service 

point  of  private  owne"4^p  ^a  mfvl^"''*'*'';- "''^  ^''"^  '^'  ^tand- 
that  is  to  be  the  status  o7thS  mSrieTthrri    ^^T"""^  "'«* 

though? th^^^^^r-doT  -  ^a"  "^"S^s^'-  r"-«*^  i--'g~t 

winch  Prof.  Fislier  lias  describS  of  f^lf,^^^  •''"""?  ^'^^^^  P^-'ods 
lated  with  the  communities  whll^V^  P,"*'*'*  ^'^^  they  stipu- 
considerations,  that  thTnrLrof V.l^  served  generally  for  bog  s 
and  that  they  would  not  inc^a^  it  1^^  "i^"'^.  "«*  be  diminislfed 
any  State  or  nation  ex<^^tlTa-,on,Z^tt''^,  ''  "***  f"^  P^^^^r  in 
Uaaed  States  Constitutio^„  ^'^'at^o^rSSarcZtTaSiS 


PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1355 

the  wish  of  the  street  railways,  and  there  is  not  any  sensible  person 
that  believes  that  the  street  railways  would  have  consented  to  the 
breaking  of  it  if  it  was  to  their  disadvantage.  Now,  the  cat,  as  Prof. 
Fislier  said,  jumped  the  other  way,  and  they  are  paying  the  fiddler. 
1  hey  had  their  dues  and  they  are  now  kicking  at  it,  for  having  io 
pay  the  fiddler.  '  ^ 

Commissioner  Gadsden.  Who  are  you  talking  about? 

Mr.  MacFarland.  The  street  railroads. 

Commissioner  Gadsewex.  Are  you  including  the  bondholders  and 
stocldiolders  ? 

.  Mr.  MacFarland.  Constructively,  of  course,  the  bondholder  and 
stockholder  is  responsible  for  the  act  of  his  agent  who  made  this 
contract. 

Commissioner  Gadsden.  The  bondholders  certainly  had  nothing 
to  do  with  this  situation. 

Mr.  MacFarland.  Yes;  constructively  they  did;  and  the  bond- 
holder is  not  suffering  a  great  deal  now.*  His  bonds  are  not  in  verv 
much  danger,  except  bonds  which  are  in  the  nature  of  preferred 
stock  and  not  really  bonds  at  all. 

The  Chairman.  Then,  your  answer  is  that  we  should  let  these 
utilities  struggle  on  under  the  conditions  and  limitations  of  their 
ordinances  and  franchises  and  things  of  that  kind? 

Mr.  MacFarland.  Yes.  I  should  say  to  them,  "  Go  back  to  your 
respective  communities  and  work  out  your  problem.  We  recommend 
that  you  work  it  out  by  public  operation." 

The  Chairman.  Now,  you  have  an  experience  up  there  in  Boston. 
,  Did  they  have  a  contract  for  fare  there? 

Mr.  MacFarland.  Yes. 

The  CHAiR3tAN.  That  did  not  work  out,  did  it  ? 

Mr.  MacFarland.  It  did  not.  In  consideration  of  the  public 
operation  taking  o^er  the  possession  of  the  property  we  agreed  to 
give  them  a  return  on  their  investment  which  they  could  not  possibly 
earn  under  the  contract,  and  in  consideration  of  that  they  agreed  to 
turn  over  the  possession  of  their  property. 

The  Chairman.  Do  you  think  that  was  a  fair  solution  of  the  prob- 
lem ?  ^ 

Mr.  MacFarland.  I  do  think  it  is  a  fair  solution  with  this  quali- 
fication :  At  the  time  a  very  good  bargain  was  not  driven  by  the 
pubhc.  I  do  not  think  anybody  in  Boston  who  Avas  acting  oil  the 
public  side  had  any  idea  of  the  extent  to  which  that  propertv  v/as 
gutted;  that  is  to  say,  the  extent  to  which  dividends  were  paid  out  of 
capital,  and  obsolescence  and  maintenance  had  been  neglected,  and 
the  railroad  had  been  allowed  to  run  down.  And  now  the  public, 
of  course,  has  got  to  rebuild  it  and  make  a  new  milch  cow  out  of  it : 
that  is  to  say,  if  the  old  stockholders  ever  contemplate  taking  it 
back  again.  And  m  any  event  they  are  building  it  up  against  them- 
selves if  they  ever  decide  to  purchase  it. 

llie  Chairman.  Kates  are  going  up  by  leaps  and  bounds  in  Boston  ? 

Mr.  MacFarland.  Well,  they  have  gone  up  to  10  cents,  and  the 
counsel  for  the  railroad,  who  is  here,  just  told  me  that  tliey  are 
making  money. 

Mr.  Warren.  They  are  what? 

Mr.  MacFarland.  Making  money. 


1356    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION 

Mr.  AVarren.  Did  they  ? 

Mr.  A\  ARREN.  I  did  not  know  that. 

Mr.  MacI-  arland.  The  trustees. 

M^  MArFfp^!;^'"!,*''?  P,"^''"  representatives? 

co„.missioP„e..  or  y^„"  C  ^ZmLl^rr  P"'''"  P^^^^  "••  "**^'- 
i  he  Chairman.  Then  the  money  that  is  Ix-inir  cnonf  f^ 

It ta/t^f;^rti;Var^b:i:^''oSaS^^^^^^^    T''.  T-"*- 
nt?:s?o«r\:St  SbKtSti4'  ^^ir;i  n^^^*-^  ^•^^ 

pan^V  for  private  operation  undef  ptrbrLS,  iSt^^.'^^Z 

sit?/atic^TstTin'"  ^^^^^^^  P'^^9  evil  of  the  present 

rate  control..  For  fnstancerGkSw  fo     9  vefrTir  eVai&P"- 
sh,p  and  private  control,  and  it"  did  not  w^ork '   t  was  L  mi,3" 

been^^e^classic  e.a.p.e^  of  the^cct  oCu^SaT^iilt 

,    Under  private  ownership  and  public  operation    if  th.  ^^      *• 

IS  complete  and  the  separation  between  the  owne^^^ 

tion  IS  as  complete  as  it  i<5  imrlo^  7.!l     i  ^^"^^"'P  ana  the  opera- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1357 

not  considered  to  have  anything  to  say  about  the  operation  of  the 
road.  Now  you  convert  them  into  Government  bondholders,  scarcely 
havmg  more  interest  m  the  operation  of  the  road  than  a  Govern- 
ment bondholder  has  in  the  operation  of  the  United  States  Govern- 
inent,  and  m  that  way  you  get  your  money.  You  arbitrarily  seize 
the  use  of  their  money. 

The  Chairman.  I  believe  in  your  opening  statement  you  said 
the  solution  was  government  ownership  or  some  cost-of-service  plan  • 
did  you?  ^       ' 

Mr.  MacFarlani).  Yes;  I  say  that  because  that  is  what  the  gentle- 
men who  are  opposed  to  public  ownership  seem  to  suggest.  It  is  a 
catch  phrase,  and  it  does  not  mean  anything. 

The  Chairman.  What  do  you  think  of  the  cost-of-service  plan  in 
Cleveland,  for  example? 

Mr.  MacFarland.  I  think  it  has  worked  pretty  well  in  Cleveland 
under  special  circumstances,  under  circumstances  that  you  will  not 
be  able,  without  great  struggle,  to  effect  in  other  cities,  and  under 
circumstances  to  bring  about  which  I  think  you  would  find  the 
owners  of  the  street  railways  would  prefer  public  ownership  and 
operation.  That  is,  they  went  through  a  reorganization  in  Cleve- 
land at  the  beginning  of  the  cost-of-service  plan,  and  that  reorgani- 
zation squeezed  out  a  great  deal  more  water  than  you  are  liable  to 
get  the  stockholders  of  these  convalescent  roads— I  will  not  say  con- 
valescent roads  but  sick  roads— to  consent  to  even  in  their  contrite 
mood  now.  Their  cost-of-service  plan  contemplates  the  cost  of 
service  after  paying  the  cost  of  the  capitalization  which  now  exists 
in  the  roads. 

.1  "^^^  Chairman.  Now,  referring  to  the  principle  involved  rather 
than  to  the  practical  difficulties,  do  you  believe  that,  if  the  property 
of  the  plant  is  properly  valued,  either  by  the  city  or  by  some  State 
tribunal  and  the  contract  made  which  secures  the  proper  return  to 
the  capital  invested  with  efficient  regulation  over  the  service  and 
capital  expenditures,  the  maintenance  requirements  and  of  the  ac- 
counting, would  that  be  satisfactory  and  properly  safeguard  the 
public  interest? 

Mr  MacFarland.  For  a  while,  while  the  public  was  interested  in 
it.  It  would  be  like  a  new  broom  that  sweeps  clean,  But  just  as 
surely  as  those  things  have  worked  out  in  that  way  in  the  past,  in 
the  long  run,  the  man  who  is  interested  in  the  private  property  in 
the  company  under  that  management,  will  find  ways  by  stealth  or 
hook  or  crook  of  cumulating  a  profit  that  was  not  contemplated  in 
the  original  contract.    It  always  has  been  so  and  always  will  be  so. 

Commissioner  Gadsden.  Then  you  believe  in  the  purchase  event- 
ually  •  ^ 

Mr.  MacFarland.  Well . 

Commissioner  Gadsden.  Then  there  is  an  option  to  purchase  al- 

Mr.  MacFarland.  Well,  that  option  is  likely  to  be  exercised  just 
as  It  will  now,  if  we  take  public  ownership.  It  is  like  locking  the 
barn  door  after  the  horse  is  stolen.  After  they  have  accumutated 
tnjs  situation,  the  public  will  have  to  take  it  at  that  price. 

The  Chairman.  Do  you  know  any  better  system  for  private  opera- 
tion and  control  than  the  cost-of-service  plan  ? 


1358  PROCEEDmos  of  federal  electric  railways  commissiok. 

Mr.  MacFabland  Do  you  mean  a  real  cost  of  service? 
1  he  Chaimiak.  A  real  cost  of  service. 

tl.»r'fK5^^^'"1ff:  ^"^^  P"^«t«  management-I  do  not  know 
that  there  is  any  better  system. 

The  Chairman.  Then  do  you  think  that  this  commission  mi.Irl 
be  done  by  the  American  communities— either  to  purchase  the  nrnn 

S  bai^potcorf'^  P""'^  ^"^'^r*'^/'  -  *"  >-^  new'^  r 
i>     oasecl  upon  cost  of  service  properly  safeguarded « 

diSn^'^  pXnX'To'  '  *4  *^^tV-^are1he  horns  of  the 
uueinma.    i^eisonally,  if  I  were  the  commission  I  would  not  refnm 

.end  anything  but  public  operation-public  ownership  and  oiZ-' 
tion  or  public  opei-ation  under  a  proper  99-year  lease,  Jky        ^ 

The  Chairman.  I  am  very  much  interested  in  tl,rauestion  of 
public  ownei^hip.  Yesterday  we  had  a  witness  her^w^rtoW  us 
^^^^m  "*  ">V^«tems  „  Rhode  Island  operated  through  50  cities 
t£eV     ^'"       °"  """''*  ^*'"  "°?^  ""'  tS;  public-owKip  pl'an 

Mr  MacFabland.  How  do  they  work  it -out?  The  Post  Offi... 
Department  operates  in  10,000  cities  and  villages.    ^''^^"'*  "*^*= 

rhe  Chairman.  Well,  you  referred  to  public  ownershio  then  a, 
'^*^^  °?:ne>^h'P  rather  than  as  municipal  ownership  ?^  ^ 

Mr.  MacFarland.  I  think  that  is  a  local  problem      In  Boston 
we  liave  operation  by  State  trustees  because  tEe  S  ramifViSo 
a  gi^eater  territory  tlian  the  city  of  Boston.    Where  you  hav^ 
shjr  '^«^«^^^-  Y""^-  Pl''"  ^-nbraces  State  as  welf  as  1^'al  owner- 
Mr.  MacFarland.  Yes. 

be  that  it  ouX  tn  L  ^T'^  ^^^"^^  '^  ^^^^  ^""^l  State,  and  it  may  - 
oe  tnat  it  ought  to  be  State  operation  of  one  unit  of  those     Knw  m.V 

problem  is  a  little  d  fferent  than  that.  It  "s  halfway  bSw^n  a 
thriT't'"?  '°*'f  ^^  '?  "^  "tJ^  "mit«  and  of  a  rYad  oSed 

xMi^WAR^iv'  '^'^  ^*  '^'  ^'*'»  '*  '"  *  compromise  w  ay  ^  *^ 
me^t  oygov™Iy*'^  ""^'"^  °^^''"^'"P  '^y  ^o'-e  P»Wi«  depart- 

Mr.  MacFarland.  Yes. 

Mr.  Warren.  Whether  it  is  a  State  or  city  or  district  or  town  ac, 
the  circumstances  mav  suggest »  uu>tiici.  or  town,  as 

Mr.  MacFarland.  Yes. 

hal'^pa^vTn^raxes?''"  ^'"  '''^''''  '^"'  '^^^  ^^^^^'^^^  ^'^^^^^  ^lH>uld 

Mr.  MacFarland.  Should  they  pay  what? 

lir     Vf '^  T^.'^"^^^'-  -Paving  taxes  or  assessments  ? 
anSroS-^""""  ''''^   '   '°  ""*•    ^  ^'^^'^  *hat  is  rather  an 

any,' M?  Wa^S  ^  ^"^"  ""^  *'"■"'"'•  l"^^"""-    ^^^  ^O"  wish  to  ask 
Mr.  Warren.  No. 

7whe^"upon"?t5l'.:'^"  ^'""d  ?<lioui-ned  until  8  o'clock  to-night. 
(  n  neieupon,  at  o.Oo  p.  m.,  an  adjournment  was  taken  until  8  p.  m.) 


PROCEEDmGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1359 

EVENING  SESSION. 

STATEMENT  OF  MR.  THOMAS  L.  HALL. 

The  Chairman.  You  may  proceed,  Mr.  Hall. 

Mr.  Hall.  I  am  chairman  of  the  Nebraska  State  Railway  Commis- 
sion. I  do  not  conceive  that  it  is  necessary  for  me  to  make  any  state- 
ment on  the  record  of  my  qualifications  and  experience  in  the  matters 
which  are  now  before  your  commission. 

The  Chairman.  The  fact  that  you  are  chairman  of  the  Nebraska 
State  Railway  Commission  is  sufficient  to  make  us  interested  in  what 
you  have  to  say. 

Mr.  Hall.  I  may  say  that  I  have  spent  eight  years  of  my  life  in 
college  training,  specializing  in  public-utility  work,  city  administra- 
tion, and  then  the  law,  and  then  banking  experience,  from  collector 
on  our  streets  to  president  of  both  national  and  State  banking  insti- 
tutions, then  the  practice  of  law,  for  nine  vears,  and  have  now  spent 
eight  years  on  the  Nebraska  State  Railway  Commission,  and  am 
now  chairman  of  it. 

I  have  something  to  say  to  this  commission  that  I  want  to  say  in  a 
spirit  of  frankness,  but  wishing  it  to  be  understood  that  I  say  them 
kindly,  without  any  feeling  of  bitterness,  but  speaking  as  one  who 
i-eprcsents  the  public  and  the  corporations  alike,  undertaking  to 
stand  fairly  and  squarely  between  those  who  serve  and  those  that 
are  served. 

In  the  matters  that  I  want  to  talk  to  you  about  now,  electric  trans- 
portation, it  is  useless  for  me  to  say  that  I  am  talking  unbiasedly  I 
have  gone  through  long-continued  studies,  and  I  have  written  official 
opinions.  I  have  come  to  definite  conclusions,  and  I  now  want  to 
tell  }^ou  the  result  of  those  conclusions;  and  I  want  to  prove  to  vou 
every  figure  that  I  submit  to  you ;  and  the  figures  that  I  use  have 
never  been  contradicted,  not  in  the  slightest,  in  our  courts  by  the 
utilities  that  are  contesting  the  work  of  our  commission  now  in  the 
State  court  and  also  in  the  Federal  court. 

You  will  all  i^member  that,  prior  to  1893  and  1894  and  1895  many 
of  our  western  cities  were  enjoying  what  was  called  the  great  citv 
boom,  great  city  development. 

I  now  want  to  take  up  the  history  of  Lincoln,  the  capital  of  Ne- 
braska, and  the  Lincoln  Traction  Co. 

The  Chairman.  May  I  suggest,  Mr.  Hall,  that  in  discussmg  this 
question  you  do  not  go  into  too  many  figures  and  details,  becau^  this 
IS  not  the  trial  of  a  case.  What  we  want  is  your  general  opinions 
and  your  conclusions. 

Mr.  Hall.  I  understand ;  but  if  this  commission  is  to  come  to  gen- 
eral conclusions,  it  will  be  necessary  for  the  commission  to  have  more 
or  less  of  the  details.  I  shall  generalize  just  a$  much  as  possible  bv 
using  totals.  ^ 

During  the  period  of  the  boom  in  our  western  cities,  the  city  of 
Lincoln  had  many  new  additions  laid  out,  some  of  them  quite  remote 
from  the  city.  Men  interested  in  those  additions  to  the  city,  having 
no  street-car  transportation  to  those  cities,  organized  companies  and 
lines  were  run  out  in  different  directions  from  the  city.         '        ' 


1360    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

« J'l!**  "^"^  H'^  "^**''  ^  ^'^^  go"«n  "It  of  my  university  first  course 
Walt^rrT^K^  i^'^^Vx,^'!"  •'*"'^«'  *•'«  P-^'dent  of  which  m^s' 

inte  Ste^i  inar^fJT^'  ^''^^^  *  ^"«'"' '  """^  ^r.  Ricketts  was 
inteiestecl  in  one  of  tliose  projects.     I  remember  discussing  those 

a'Sntride;:"  p™"*"^-  ^•'•"^  ^  -''^  -"'•'-g  -  *"«  -^-k  - 

abSdoifed '''Rf.t  ^.7,'"'f':«ble  failure.   The  line  was  all  torn  up  and 
aoanaonecl.    liut  at  that  time  it  prew  unt     there  were  seven  com 

CrunS'out  in^T'^r '  °P«^>i"^.-  *•>«  city  of  Lfncoln'Z 
lines  running  out  in  almost  every  direction  from  the  city 

ComniissioncT  Sweet   What  was  the  population  of  Lincoln  then? 
1«^   180^     -.  J  ^°'^^-     ^   ^'i^^'e  t'"it  is  about  ri2ht^l893 

Sml  oarrorZ^f  r/«rf ''  -^  ^r  '^"  '^"°^-  ^o  dty  in  the 
lTt?le  cit?  of  Lincoln      ^"^  ^"''''  ""'  '"*  '"^'■^^••'  ^  «"«^'  ^^an  the 

we'e  iftt'han'dTnf'"'^  " "  "'  '^^l^'^^^^S^^  facilities  and  services 
tTii^  years  '''■'^-    "  '''*'  J""'  *  slaughter  for  those 

Co^"  The  Lrncnln*"Tr"/  ^*?,°'-ganized  known  a,s  Lincoln  Traction 
Tmction  Co   w«l  tM?  ^-  If  *^^  P'^^"*  company.     Lincoln 

keeo  thos^rii  J^„.H^^  company  that  was  organized  in  1898.  Just 
Keep  tliose  distinctions  in  mind,  please.  One  is  Lincoln  Trirfinn 
Co  and  the  other  is  The  Lincoln  Traction  Co 

Commissioner  Gadsde.v.  This  is  No.  2  in  the  series? 

Mr.  Hall.  Yes ;  except  the  last  one  has  "  The  "  in  it 

Mr.  Warren.  This  is  No.  1,  isn't  it? 

but  ?hlS"o"'l  inXr''-  ^*'-  K"^  *^*  ^""""P  «'  ^^«»  indciiendcnts, 
out  tnis  IS  ISO.  2  m  the  series,  as  I  understand. 

ilar    ■  ■      '"'"*  *°  ^^*  that  plain,  the  two  names  being  so  sim- 

me^t?  ^^'^""^''-  ^»*  '^«  «"«  ^it'>  th«  article  came  after  the  assign- 
Lincol  "'"'''■  ^""^  ^^^^  '^  *^*'  P'""'*^"^  company  that  is  operating  in 

wasTekteir'  ""'"'•  ^'  **""  ""  *™"  ^'-  ^"''^^'^  ^""^  i"*"  i*'  or 
1  ^^r- Hall.  Mr.  Scudder  came  in  at  that  time.    I  would  not  snp«k 

Sfh'fcaKndiiites.  "°^  ""^^^"^^  •"^-•*  '^"-^  — -' 
Wlien  the  new  company,  Lincoln  Traction  Co.,  was  organized 

haSofXtclS^  '""'"^^  ""'^  "^^^  «^  -•-'--  natuil^'The 


_ v.^^«.^^.*.ij  wj^ciateu  until  lyuy,  reDruary  1 

inior?J  f  ^"\""^^  tliat  the  oricrinal  bonds  and  sto;^k  that  was  issued 
n  1908  by  the  new  company  represc^nted  a  par  value;  that  they  at 

lor  h'Tt^'ttrtimr^  """''^'^  -^  ''''  P^^^^^^i^^  were  mxsonTbly 

^':^cS::sSz  ?oiits"'^"^^^^^^^"' ''''  ^^  ^^^^'  ^^--  ---^-s 

cre^ledfe^Ior'il.i'"''^"''^  ^P?^^'  the  preferred  stock  was  in- 
creiised  ^it,oOO;  the  common  stock  was  increased  $112,950;  making 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1361 

a  total  increase  of  $340,450;  making  the  total  outstanding  capitali- 
zation in  1909,  $1,280,000.  I  do  not  think  I  need  to  give  the  details 
of  those  amounts. 

The  Chairman.  No;  just  the  amounts. 

Mr.  Hall.  In  1902  Lincoln  Traction  Co.  took  from  its  operating 
income  and  built  a  heating  plant,  and  organized  a  corporation  within 
itself.    That  amounted  to  some  $98,000  or  $99,000. 

They  borrowed  on  bonds  on  the  heating  plant  seventy-odd  thou- 
sand dollars,  and  entered  into  a  contract  with  themselves — ^that  is, 
with  the  parent  company — that  the  heating  company  should  issue 
$150,000  in  stock,  turn  it  all  over  to  Lincoln  Traction  Co.,  and  Lin- 
coln Traction  Co.  should  furnish  the  steam  without  charge  for  20 
years  to  the  heating  plant. 

Commissioner  Beall.  What  was  that — exhaust  steam  from  their 
own  station? 

Mr.  Hall.  It  was  exhaust  steam;  and  they  were  to  pay  a  certain 
amount  for  the  live  steam  that  was  turned  in  to  the  heating  plant, 
which  amounted  to  but  a  few  dollars  in  all  the  years.  There  was  a 
little  payment  there,  but  it  was  only  in  the  hundreds  of  doUai^.  It 
did  not  amount  to  $1,000. 

Commissioner  Gadsden.  What  did  they  do  with  the  exhaust  steam 
before  they  utilized  it  for  heating  purposes?  What  became  of  it? 
Was  it  a  high-pressure  plant  or  a  condensing  plant  ? 

Mr.  Hall.  That  was  a  steam  plant  then,  presumably.  I  don't 
know  how  they  handled  the  exhaust  steam  at  that  time. 

Commissioner  Gadsden.  The  chances  are  that  the  exhaust  steam 
up  to  that  time  was  wasted  in  the  atmosphere. 

Mr.'  Hall.  They  undertook  to  establish  the  fact  that  the  exhaust 
steam  was  simply  a  by-product  later. 

While  this  heating  plant  was  organized  by  a  ring  within  the  ring, 
Lincoln  Traction  Co.,  at  the  same  time,  out  of  the  operating  income 
of  the  traction  company,  began  to  install,  and  did  install,  light  and 
power  facilities,  all  covered  by  the  stocks  and  bonds  of  Lincoln 
Traction  Co.,  and  having  nothing  to  do  with  the  heating  company. 
While,  in  fact,  the  name  of  the  heating  company  is  the  Lincoln 
Heat,  Light  &  Power  Co.,  the  name  is  Heat,  Light  &  Power  Co., 
but  it  does  not  own  or  operate  any  light  and  power  facilities.  The 
light  and  power  facilities  are  a  part  of  the  properties  of  The  Lin- 
coln Traction  Co.,  presumably  covered  by  the  same  securities. 

In  1906  and  1907  a  new  street-car  company  was  organized,  known 
as  the  Citizens  Railway  Co.  and  Citizens  Interurban — there  were 
two  of  them;  one  was  the  Citizens  Railway  Co.  in  the  city  and 
the  other  was  the  Citizens  Interurban;  but  in  the  consolidation  it 
was  all  treated  as  one;  and  when  I  speak  of  it  I  mean  both  the 
interurban  and  the  city  property.  It  was,  in  fact,  all  the  same  com- 
pany, except  the  interurban  part  of  it  had  to  come  under  a  separate 
corporation,  under  a  different  statute. 

Those  properties  were  operated  down  until  February  1,  1909,  in 
strong  competition  with  Lincoln  Traction  Co. 

Mr.  Warren.  They  were  organized  by  different  interests? 

Mr.  Hall.  They  were  organized  by  different  interests  entirely. 
No  stock  had  ever  been  issued  to  the  investors  in  the  new  company. 
It  was  all  represented  by  checks  or  money  paid  in  in  book  accounts. 

160643°— 20— VOL  2 24 


1362    PROCEEDINGS  or  FEDERAL  ELECTEIC  RAILWAYS  COMMISSION. 

ancTneSMvaslSed    ''"^^'  ^"'  "^'  ^''^^  ^^'^'l  ^^^^^  ^*^  ^^^'^^ 

.1,^^  ;li<*ction  to.,  which  was  a  new,  distinct  organization  for  the 

"e  S^L  Cr  ht  urK«*':'  consolicktion  a^emlnt  provided  tha? 

("o    «!;,l  tw  *r  T  •       ,  "^.'"eV^^d  m  with  the  properties  of  Lincohi 

L^^on  S  of  thP  n^^"  V°'  1'""  .^  ^»*  $1,02(^000  in  first  mortga^ 
nrt?  *  ?      ,        *"*  properties  for  the  purpose  of  taking  ud  thp  "Rfon 

pSfeISock*'*™f''"^  "^'^'  '  "-tionelawMIe  So'^fhSoO.S  i^ 
ll^t^VS;;;^? o^L^nX'S**"  '"^^  "'  $1^80,000,  total  out- 

But  tlie  $700,000  of  preferred  stock  was  drawing  6  per  cent  intpr 
est,  and  they  converted  it  into  bonds  drawing  5^er  ^nt  ^d  lev 
agreed,  on  account  of  such  convei-sion,  tliat  a  10  per  cent  wemiT^ 
|rro,!ik     '^"'"  "  ^'"^  '"  ""  preferred  stoc£"wh1chS^ 

So  you  liave  $170,000  of  bonds  developed  out  of  the  $700  OftO  «f 

tKSdSlSrTes'""''^'  ^^'"^"^  ^^-"^  ^^'^  ^--  -  ^'^  "? 
11ns  Lincoln  i'o.  then  had  outstanding,  representing  its  equitv  in 
the  propeit.es  over  and  above  the  $1,020  000,  the  $3^,0«)  cotton 
stock.    I  hope  you  wil  just  get  tliat  one  item  fixed  in  your  Ss 

i^^oTllow.      ""^ ''  "  '■"■^'  '"^1*'"**°'  i^  the  consideratZof  w^at 

inl!l ?•*'?."%-?:  '"■"■'  '®  '^'^''"•^ ""  "*  't^  n«»ev  kuk  that  it  Imd 
invested  in  the  Citwens  property  in  preferre<l  stock.     . 

After  a  long,  laboiious  effort,  itfinnlly  got  tli*  lK)oks-  and  the- 
boofa  corroborated  exactly  what  they  did  clo  Tlie  books  sh^  that 
the  Citizens  Co.  had  invested  $:i3^,000,  which,  up  to  the  tia^of  the 
consolidation.  n«.h^te<l  all  of  the  u>oney  pad  n,  with  7^.  cent 
mteiest  on  it.  to  that  date.  There  wa«  ^  liitle  disaepan^r^ere  of 
a  few  dollars — vety  sniall.  j'  "^nc  oi 

Over  and  alwve^  this,  however,  it  was  agreed  that  the  Citizens  Co. 
^^°"'^ '-^^'Te  %2i  per  cent  tamus  in  pi^f erred  stocl^  wWch  mack 
$83,000  on  op  of  tlie_  $:»;i.OGO:  making  a  total  of  $ii5/)00  whtch 
the  stockholders  of  tlw  Citi^^ns  Co.  actiiallv  received,  and  wWeh 
was  a  bonus  of  25  i^r  cent  alx>ve  the  grand  total  of  L,C  pfe  7 
per  cent  that  had  ever  Iwen  paid  in.  ^  ^ 

I  know  this,  becaiise  I  have  checked  tlie  books  of  private  individ- 
uals who  have  their  bank  che«-ks  to-day :  and  I  have  photostat  eopes 
of  them  and  of  theu-  origmal  stock  in  both  comities,  trac^c  it 
down  to  exact  certaintj-.  ^  '  ""^"'fe  "■ 

But.  IJiKoln  Tniction  Co.  said:  "If  we  issuo  vnn  ^uiKnnn  t 

boGcl5.f  \\  elK    they  Sivid,  "  we  liave  built  tkat  lieatinir  oHnt  ^nrl 

built  that  lieatm^.  plant.  an<l  it  i^  aa  equity  m  tbero  that  mZLI 
to  us,  and  we  are  consolidating  with  yoiu  wo  will  take  'm^^cZt 
JIpZ;-' 'Ztir  $^^^^aOOO  p..foi-L]  stock  i.  the'  iZl  el 
coiiipany.      Tluit  m  ™w  at  the  fact,  now,  tkit  they  had  built  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1563 

heating  plant  ovit  of  the  operating  income  in  the  past,  that  they 
had  given  the  Citizens  Co.  a  25  per  cent  bonus  for  the  money  that  it 
had  put  into  the  Citizens  property.  That  was  agreed  to.  That  was 
issued. 

So  we  start  out.  in  1909,  with  $1,020^000  first  mortgage  bonds^  and 
$1,075,000  preferred  stock— the  $660,000  plus  $415,000.  You  have 
that  now"  ? 

The  Chairman.  Yes. 

Mr.  Hall.  If  the  program  of  high  finance  had  stopped  there 

Mr.  Warrex.  This  is  all  preferred  that  you  are  speaking  of  ? 

Mr.  Hall.  $1,000,000  bonds  and  $1,075,000  preferred ;  yes. 

The  Citizens  Co.,  you  will  readily  see,  holding  stock  at  6  per 
cent  upon  which  a  25  per  cent  bonus  was  given,  in  fact  was  getting 
74  per  cent  upon  the  real  investment;  and  that  would  apply  equally 
to  the  $660,000  to  the  stockholders  of  ihe  Lincoln  Co.  That  is, 
they  got  their  200  per  cent,  but  they  said  tliat  our  heaing  plant  plus 
this  25  per  cent  bonus  brings  it  up  to  tJie  $660,000^ 

But  the  shrewd  financier  immediately  saw  that  when  the  interest 
was  paid  upon  the  bonds  and  the  dividends  upon  the  preferred  stoelc, 
if  some  day  down  the  line  the  pioperties  would  be  able  to  earn  a 
dollar  more,  who  would  get  it?  If  lie  reached  his  Itand  into  the 
treasury  and  took  it,  somebody  might  be  in  trouble.  How  will  we 
divide  that  dollar,  and  how  will  we  get  it  out?  We  will  just  issue 
some  common  stock.  Then  the  question  was:  How  Avill  we  divide 
the  dollar  between  the  Citizens  fellows  and  the  old  Lincoln  Co.? 
And  they  agi*eed — I  am  giving  you  this  which  is  all  in  the  record, 
sworn  to;  there  is  no  question  alxiut  the  facts — that  they  would  di- 
vide upon  the  basis  of  the  relative  earning  power  of  tl^  twa  com- 
jianies,  which  they  determined  was  about  five  to  one.  Lincoln  Coi 
five  to  one,  as  compared  to  the  Ckizens  Co. 

So  they  said:  "We  will  give  you  Citizens  fellows  80  per  cent  in 
common  stock  of  your  $415,000  and  we  will  take  out  400  per  cent  in 
common  stock  of  our  $330XK)0,  which  made  a  grand  total  of  commoa 
stock  of  $1,652^000.     We  are  off.     Started  to  operate." 

Commissioner  Gadsden.  What  does  that  make  the  total  capitali- 
zation ? 

Mr.  Hall.  The  total  capitalization? 

Commissioner  Gadsden.  Yes.    I  did  not  put  it  down. 

^Ii-.  Hall.  Let  me  see;  $1,020,000.  $1,075,000.  $1,652,000 

Mr.  Warren.  About  $3^347,000,  I  make  it. 

Mr.  Hall.  Yes;  $3,747,000. 

Commissioner  Gadsden.  That  Ls  right, 

Mr.  Hall.  February  1,  1909. 

Mr.  AYarren.  AVliat  did  vou  make  it.  Mr.  Hall? 

Mr.  Hall.  $3,747,000. 

Mr.  Warren.  Yes ;  that  is  what  I  made  it. 

Mr.  Hall.  No  one — and  it  was  announced  in  the  papers  and  dis- 
cussed in  the  papers  at  the  time — no  one  expected  to  pay  any  divi- 
dends upon  the  commcm  stock.  That  was  discussed  all  over  tlie  city, 
lip  and  down  and  around ;  and  they  did  not  pay  any.  But  when  the 
properties  Avere  brought  together  there  were  duplicate  lines,  dupli- 
cate facilities,  both  overhead  construction  and  the  surface  lines  and 
the  power  plants  that  had  to  be  worked  over  and  unified. 


1364    PROCEEmKGS  OP  FEDEKAL  ELECTHIC  RAILWAYS  COMMISSION. 

doJ?  vet'^Tlf  of  fl.  ^^"  ^""'P^  ""  ^^^°»Sh  the  yeai^,  and  it  is  not 
ponti:  i  cifai^d  to'thSn'  "•"  ""'•SV'*^  r"'"-  G-"nds  have  al 

out  Ann  Streetf  whkh  paralkW^^^^  ""«« '■"""^"g 

torn  up,  running  off  Jnfnfli       *T  '"a'n.c'ty.  street  of  O  Street,  all 

rate-pi5inrp"&ref^  amoAlVd"  N^th  Twl'T'  f-  f''^^  ^"^'"^ 
same.  The  whole  line  J^fwln  nn  twenty-third  Street,  the 
taken  up.  ^*^''"   ^°"^«e   View   and   Normal,   all 

Mr^ «!',■*/"  v^"'-  "^'^  amortized,  with  your  consent? 

Mr:  Hr^Yes^"  ""*  P"'"  ""*  '''  earnings  all  through? 

Mr'  mr^'^nu  ^■»°'-ti='ed  out  of  earnings  ? 

Mr"  Wj^n^S  \^!!lf^l^'T^  ^'^e  amortized;  yes. 

Mr  HtJ^TiirJ  ,u^  *'"^  '^*"l^  ""<^«''  the  law  of  Nebraska  ? 

Mr  wIrre?  I  r^.*i'  ^r*'  ""^  ^'^^  P''^*y  commission-no. 

Mr!  H^L   No  '         "'^'■«^''  **"**  y**"  ^P^ok  of  ? 

Mr'  HalT  Thi^K  i*  "^  ^^^J""'^^  corporation  ? 
tutTonafbo'dy  Kin^ltS^^^^^f  ^^^  Commission  is  a  consti- 
eral  control  If  all  Son Tar^er^""  "^*''  "'^^  ''"^^  ^"'^i''^'  «»*  g^n- 

in?909Trd'taTStnv' am  "^^^  ^  *'^^^  ••"^••^^■-  ^^"^  l""- 
mission 'had  complete  pSovp^'.tT  ?*  ^3"*  °?'?'^"  *•"»*  t^e  com- 
at  that  time,  the  commCn  Z  no^  '''''^^  and  bonds  and  mergers 
the  stock  and  bondT^cf  copied  from^t^"'^'""V"';'"*''<=«°»  ™til 
passed  in  1909;  but  this  meSer  wf^^fJ  %?^'^  Y^rk  statute,  was 
and  bonds  act  went  into  St  ^       "  ^^^"""^^  ''**°''«  **»«  ^^^^k 

Mr.'  HArOh'^lV*  ""  -^  ''^'"•»^'^''  corporation? 

dividends  upon  the  preferred  ft^k  ^n^if'l*''^*'  upon  the  bonds,  thi 
and  depreci*ation  r^servi    a-^S^  '''"■*  ?*  "^'^  maintenance 

about  b?  the  unificaCnTf'thH  ante  but  Si^fV^^"-*  ''^""^^t 
pay  on  the  common  stock  $19l,«)o"n  dividends  """^^^^  *° 

Mr.  Warren   Over  what  period  ? 

M^"  w  ^'^      ®li  "'''^'  ^  "m  not  quite  certain 

Jlr.  Warrek.  Never  mind  then^    I  just  wondered  what  the  rate 

The^^t'JX^'J'aKsTn  'mUsT^'  ^^^To^^  ?«/  -"*- 
Jur.  vvakhln.  AVhat  was  the  total  they  paid? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1365 

Mr.  Hall.  The  total  they  paid  was  $198,000.  During  the  period 
I  gave  the  company  credit  for  all  the  increase  in  working  capital 
which  had  been  built  up  out  of  the  rates. 

The  short-time  notes  and  bills  payable  I  gave  the  company  in- 
crease for  all  of  the  difference  that  had  accrued  out  of  the  rates  in 
that  account,  and  charged  the  company  up  with  simply  the  $198,000 
in  dividends  paid  upon  the  common  stock  and  three  hundred  and 
some  thousand  dollars  into  actual  betterments  into  the  properties 
which  made  a  total  of  $514,000.  ' 

While  the  company  was  paying  out  the  dividends  upon  the  com- 
mon stock,  and  after  it  had  made  the  investments  in  extensions  and 
betterments  to  the  properties,  it  drained  its  treasury  so  dry  that  it 
was  necessary  to  go  to  the  banks  and  borrow  money  in  order  to  do  it. 

Prior  to  this  an  application  was  made  to  the  commission  to  estab- 
lish zone  rates,  which  the  commission  granted,  leaving  the  regular 
base  rate,  six  tickets  for  a  quarter,  and  5  cents  to  the  outside  towns. 
There  are  five  little  suburban  towns. 

Commissioner  Gadsden.  What  date  are  you  speaking  about  now  ? 
Have  you  gotten  up  to  the  war? 

Mr.  Hall.  Oh,  yes;  that  was  three  years  before  the  war. 

Commissioner  Gadsden.  Three  years  before  the  war? 

Mr.  Hall.  Yes;  then  this  application 

Mr.  Warren.  Was  that  a  zone  system— that  base  rate,  plus  5  cents? 

Mr.  Hall.  No  ;  the  regular  base  rate,  6  tickets  for  a  quarter,  or  5 
cents  on  the  cars  m  cash,  or  5  cents  straight  to  all  of  the  outside  zone 
from  the  center  of  the  city. 

The  company  then  brought  an  application  before  the  commission 
for  an  increase  m  the  rates  in  the  spring  of  1917,  I  believe,  but  this 
tindmg  is  brought  down  to  January  1,  1917. 

The  company  refused  to  take  an  inventory  of  its  property  al- 
tlough  the  city  of  Lincoln  had  filed  motions  with  the  commission 
asking  the  commission  to  direct  them  to  do  it.  The  commission  had 
requested  it ;  the  attorneys  for  the  company  insisted  that  they  had  a 
right  to  make  their  record  and  make  their  case  as  they  saw  fit  before 
the  commission. 

I  was  conducting  the  hearing,  and  I  took  the  company  at  its  word  • 
and  the  result  was  the  opinion  that  the  commission  entered  refusing 
the  company  any  further  relief. 

The  supreme  court  reversed  the  case— remanded  it  to  the  com- 
mission, I  should  say,  stating  that  the  rates  should  be  based  upon 
'   L^'^Vir  ^^  *^^^  property ;  which  I  conceded,  of  course. 

Mr.  AVarren.  That  is  the  Supreme  Court  of  Nebraska « 

Mr.  Hall.  The  Supreme  Court  of  Nebraska. 

When  the  mandate  came  down  from  the  Supreme  Court  of  Ne- 
braska, the  company  immediately  started  a  separate,  independent, 
emergency  rate  case,  and  filed  it  with  the  commission,  and  imme- 
lUately  started  injunction  proceedings  in  the  Federal  court  of  the 
Lnited  btates  to  prevent  the  commission  from  enforcing  its  own 
1  a  les. 

The  Federal  court  ordered  a  valuation,  inventory,  and  depreciation 
stiKlies  to  be  made  immediately. 

Mr.  Warren.  The  Federal  court  did? 


1366    PROCEEDmoS  OF  FEDEIIAL  ELECTRIC  RAILWAYS  COMMISSION.      ■ 

TcekS:      ^         valuation,  a  temporary  rate  should  be  put  in  of 

apSLSnT^-  ^'^  '^'  ^'^'■^'  <=»'"•'  -»«  --y  -Junction  on  that 
Mr.  Hall.  Yes,  sir. 
Mr.  Warre.^  Against  the  commission? 

soSdhtre:i^^i:^''^'  ""^  '^'*"'^^'  ^-^  -'"  t-t-     ^Ve  wiU  I^vo  that 

of  ^r-  an  'W  on -and  'ttS?\^  ^^  '"''  ^^«  ^"^  ^Pi-^-"- 

of  our  commSn  or  mv4Tf  Kn^lt't'^  •'''^".f  °*  *^«  '^'^^''^^ 
jrive  a  r'ii>«.  t«  ti,^  .;,„/•'         Personally,  advising  tlie  company  to 

durinV'he  imerTf  %^^^  conductors,  three  differen^t  raises 

thatit^aLTeaualtoth.fixwf  T*  ^Pe'-^ting  income  fell  so  low 
ness.  ^  ^^  ^-^^'^  ^'''^S^s  "Pon  the  bonded  indebted- 

ni2''^Xsitmbe";T  W^S^'  Tt  "  '-?^°'  «*™'^J^*  f'''-^'  begin- 
tim  epidemkTf  the  "flu"      '      "'^  ''"'  ^-nmediately  folIoWedSy 

novl''n,^fi       *  r^^.^'f  °'''"*b,  and  we  find  $2,600.    We  ^o  to  tl.P 

on  completely.  woi-sit  and  the  ban  Wiis 

Mr.  Warkrex   Tlwt  is  after  paving  the  preferred  dividends' 

deJlitf  aS  Sfen  tdS  r  $lV«?'r"'"'-^"''  ^'^.'^'^^  ^^^'^^  t^^^* 

wL'S'"""^^'  '^"^  '^"  "^  ^'^^  '«"d-^  '-P-  trp^efilck 
In  December  that  deficit  amounted  to  $338 

Ihe  CHAIRMAN'.  Was  depreciation  charged  for  du'rine  that  timp? 
,   Mr.  Hall.  Tlie  depreciation  had  been  increiqed  nV  JL  h„;      *  f, 
investigation   when  tlie  case  was  up  in  wh  ^h  S  IS  we  ^  e2t' 
lished;  the  book  accounts  showed  that  the  donrp^UKL  J!     ^''" 
amounted  to  $1,900,000     The  comoanv  h„,f  depreciable  properties 

iipon  my  persond  insistence  it  wasSd  ?o  of  3  T  .^'■- '''^•"*'- T^' 
that  it  should  be  increased  to  6  ^'  ''^'""  insisted 

men  stock,  of  course  were  fightinir  the  increase  tlv  t  ?hl       •  w  ?^"'" 
a  net  surplus  in  order  to  pay^ut'fit^e^'d"^^^^^^^^^^^ 

1  he  6  per  cent  was  figured  upon  the  $1,900^0  dowrtrSenSer 
1918,  when  the  commission  insisted  that  the  6  per  cent  slS  l^^^ 


PEOCEEDIXGS  OE  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1367 

figured  upon  not  only  tlue  $1,900,000  but  upon  all  of  the  additions  and 
betterments  that  had  been  put  in,  the  depreciable  properties,  from 
*^^^^^^^.®  ^®  started  with  the  figure  of  $1,900,000,  which  brought  it  up 
to  $2,240,000.  ^      y      .  to  I 

Since  September,  the  6  per  cent  for  maintenance  and  depreciation 
iias  been  figured  upon  the  total  depreciable  property,  $2,240,000  and 
some  odd. 

It  inclu€les  not  only  that,  but  it  includes  all  amortizations  of 
discounts  and  sales  of  securities,  taxes,  losses,  and  the  amortizing 
ot  these  duplicate  properties  that  are  being  taken  out  of  the  prop- 
erties which,  of  course,  the  traction  company  will  not  have  to  meet 
in  the  future. 

Mr.  Warrex.  Did  you  say  those  figures  included  tlie  lieht  and 
powers 

Mr.  Hall.  Yes;  this  includes  eveiything.  I  am  giving  the  totals, 
the  total  results  of  the  entii^e  company. 

Mr.  Warren.  You  have  not  given  the  street-railway  figures  sepa- 
rately? ^  -o  r 

Mr.  Hall.  I  am  coming  to  that. 

Mr.  Warrex.  I  do  not  like  to  interrupt  you,^  but  it  is  a  little  coa- 
f using  to  follow. 

Mr.  Hall.  Yes.  That  is  very  proper.  That  is  where  one  of  the 
principal  differences  lies  between  the  company  and  the  commission. 
These  figures  I  am  giving  you  are  the  company's  owu  figures,  re- 
ported to  us,  by  months. 

Mr.  Warrex.  I  assumed  so. 

Conamissioner  Gadsden.  I  was  wondering  wl^tlier.  in  order  to 
etstablish  the  general  principles  which  vou  are  doubtless  leading  up 
to,  you  will  find  it  necessary  to  go  into  so  much  detail,  Mr.  HalL 

Mr.  Hall.  I  jim  going  to  try  to  generalize  from  now  on. 

Commissioner  GADSDJiN.  Yes ;  we  could  follow  vou  a  little  better 
I  think,  if  you  would.  "  * 

Mr.  Hall.  Yes. 

So^  we  find  the  results  of  operation  for  tlw  entire  company,  with 
all  af  its  doings— heat,  light,  power,  traction^  and  evervtliinir  com- 
bined, jumping  from  an  $11,000  deficit,  of  having  sufficient  to  pay 
all  of  the  dividends  upon  the  preferred  stock,  which  I  have  shown 
IS  reallVy  in  fact,  7^  per  cent  dividend  upon  any  reasonable  invest- 
ment, and  taking  care  of  all  losses  and  discounts  and  amortization- 
jumping  from  the  $11,000  defk^it  to  an  average  gain  of  $3  000  oer 
month  for  the  first  five  montlis  of  1919.  ^  y        k^ 

The   fact  that  the   heating   company   properties   were  installed 
out  of  the  operating  income  and  that  The  Lincohi  Traction  Co. 
tor  that  money  furnished  the  heating  companv  holds  the  $15(>,00a 
installed,  the  company  says  that  wliatever  we  made  out  of  the  heat 
light,  and  power,  is  no  ccmceiti  of  the  traction  md  of  it.  ' 

I  gnint  you  that  the  patrons  of  the  street-car  companv  should  pay 
tor  the  operation  of  the  streetcar  facilities,  and  maintenance,  and 
the  dividends  upon  the  value  of  the  property,  and  so  with  the  man 
who  buys  the  light  and  the  man  why  buvs  the  heat  and  the  power. 
Ihat  is  very  true.  But  if  the  company,  by  its  own  doings,  rechiced 
Its  own  charges  to  the  light  and  power  companv.  for  instance.  i>er 
kilowatt,  in  order  to  make  a  big  profit  out  of  the  light  and  power 


1368    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

end  of  it,  and  thereby  lay  the  foundation  that  it  would  come  to  the 
commission  and  say :  "  We  are  losing  money  on  our  traction  end  of 
It,    and  then  go  back  to  the  people  for  a  raise  in  rates,  I  then  beffin 


-_^^  ^..x.  .*v^«v,  xt^zit.,  uiiKi  puvYtri  IS  maue  on  me  proper  oasis, 
and  1  want  to  know  the  cost  of  production  of  the  steam,  and  the 
cost  of  production  of  the  light  and  the  power,  and  the  distribution 
of  the  light  and  the  power.     I  want  to  know  the  entire  relation 
between  those  properties.     When  I  find  that  they  then,  with  the 
ring  within  a  ring,  sell  the  current  at  2i  and  turn  around  and  sell 
it  to  their  own  company,  with  the  same  manager  over  it,  at  2J,  with- 
out one  wire  or  one  transformer,  or  one  nickel  invested  in  the  light 
and  power  facilities,  then  it  begins  to  look  to  me  as  if  this  outside 
common  carrier  that  bought  the  power  from  The  Lincoln  Traction 
1  o.  should  pay  that  money  directly  to  Lincoln  Traction  Co.  and  The 
11^^      Traction  Co.  should  £:et  thp.  full  benefit  of  it. 
But  what  I  am  telling  you  now  is  the  real  basis  for  the  contention 
t)ctween  the  commission  and  the  traction  company,  so  far  as  the 
relation  of  the  heat,  light  and  power  and  traction  facilities  are  con- 
cerned.   And  their  idea  is,  of  course,  to  wring  out  of  the  public  a 
return  upon  the  common  stock. 

I^t  us  see  what  took  place.  In  the  inception  of  the  company, 
when  It  started  to  operate,  following  1909,  the  great  contest  canie 
up  between  the  stockholders  as  to  who  was  to  manage  and  operate 
the  properties,  and  the  stockholders  began  to  slip  around  amon<r 
themselves  and  undertake  to  buy  up  the  common  stock,  because  the 
2V^in!^?w2/  incorporation  provided  that  the  bonds  shall  not  exceed 
^•1,000,000,  and  upon  the  approval  of  the  commission  those  bonds 
have  been  increased,  all  of  the  money  checked  in,  to  the  $1,500  000 
the  preferred  stock  of  $1,075,000  has  been  increased  to  $l,186,70o' 
by  authority  of  the  commission;  but  the  articles  of  incorporation 
limit  the  preferred  stock  to  $1,500,000,  and  the  common  stock  to 
$2,000,000;  but  they  had  issued  $1,652,000  common  stock,  an  amount 
higher  than  the  preferred  stock,  right  at  the  outset,  purely  without 
consideration. 

Then  came  the  time  of  trying  to  buy  this  up,  in  order  that  a  certain 
crowd,  one  of  the  two  factions,  could  have  the  control  of  the  prop- 
erties. 

It  resulted  in  the  Moore  interests  of  Detroit— Mr.  Sharp  and  Judo-e 
Heiner,  their  particular  ring  of  friends— paving  as  high  as  85 
cents  on  the  dollar.  Mr.  Moore,  of  Detroit,*^  has  somethin<r  like 
$500,000  invested  in  8,000  shares,  and  Judge  Heiner  has  100,000—1 
don't  know  just  what  it  cost  him,  but  I  understand  over  $50,000. 

Then  came  the  contest,  after  they  got  control  of  the  plant,  to  try 
to  get  their  money  back  that  they  had  paid  to  their  brother  stock- 
holders in  oixier  to  get  control  of  the  properties:  and  that  is  the 
great  struggle,  in  order  to  get  back  from  the  public  now  the  money 
that  they  paid  for  the  common  stock,  which  was  paid  for  the  pur- 
pose of  buying  the  control  of  the  corporation. 

The  Railway  Commission  6f  Nebraska  keeps  its  cards  on  the 
table,  all  the  time,  trying  to  make  a  rate  that  will  operate  the  proper- 
ties, maintain  the  properties,  build  up  depreciation  reserves  great 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   1369 

enough  to  take  care  of  any  reasonable  unforeseen  contingency  that 
migjit  arise,  pay  the  interest  on  the  bonds,  and  dividends  upon  the 
preferred  stock,  provided  we  do  not  have,  as  right  along  in  the  past, 
to  continue  to  pay  out  dividends  upon  the  common  stock. 

The  company  now,  when  the  war  came  on,  comes  in  and  says, 
'  We  have  a  great  value  in  the  common  stock.    The  properties  have 
gone  up  100  per  cent.    It  is  ours,  and  we  are  entitled  to  earn  upon 
it,  and  we  propose  to  earn  upon  it." 

Now,  the  question  is,  if  we  are  to  make  rates  to  pay  dividends 
upon  the  value  of  the  property  as  measured  by  war-time  prices 
The  railway  commission,  in  all  probability,  after  it  inventories  the 
properties  and  valuations  have  been  made,  would  find  a  greater 
value  in  those  properties  than  simply  the  preferred  stock  and  the 
bonds.  If  that  is  to  be  the  attitude  of  the  courts,  if  it  is  the  repro- 
duction new  less  depreciation,  without  any  further  qualification^* 
but  we  finally  have  got  in  our  supreme  court,  when  they  took  the 
second  turn  in  the  opinion  to  say  that  the  railway  commission  shall 
take  into  consideration  all  past  earnings  in  determining  the  fair 
present  value. 

In  other  words,  with  the  amount  of  extensions  and  betterments  that 
have  gone  into  the  properties,  if  they  are  to  be  capitalized  and  used  as 
a  basis  for  the  return  to  the  stockholders,  then  that  amount  that  has 
gone  m  out  of  the  operating  income'  shall  be  charged  up  to  the  stock- 
holders as  a  profit  received.  I  am  contending  for  that  and  shall  con- 
tinue to  contend  for  that  until  I  know  that  the  highest  court  of  the 
land  has  spoken. 

I  think  so  far  as  this  is  concerned,  you  have  all  you  want  on  this 
Lincoln  Transit  Co.  matter.    It  is  unending  in  the  discussion  of  it. 

In  Omaha  we  have  a  more  glaring  situation.  The  Hon.  John  L. 
Webster  admitted  to  the  commission  that  the  hurried  valuation  that 
they  threw  up  to  the  commission  was  100  per  cent  above  normal 
prices. 

The  Chairman.  When  was  that  valuation  made  ? 
Mr.  Hall.  But  in  order  to  bring  it  up 

Commissioner  Gadsden.  Was  that  the  property  Mr.  Waters  was 
president  of? 

Mr.  Hall.  Yes,  sir.  In  order  to  get  those  properties  up  to  their 
understanding  of  the  value,  with  ten  million  of  bonds,  four  millions 
ot  preferred  stock,  and  five  millions  of  common  stock,  and  not  hnvm<r 
paid  one  cent  for  the  common  stock  into  the  ])ublic  service,  it  took  an 
J?}^^*^^^®^  ^^  "^^^  prices,  in  order  to  bring  the  properties'  up  to  the 
$19,000,000  approximately 

Mr.  Warren.  What  property  is  that  ? 

Mr.  Haix.  I  am  speaking  of  the  Omaha  properties ;  and  in  speak- 
ing of  the  Omaha  properties,  I  am  speaking  of  one  of  the  finest  elec- 
tric transportation  facilities  in  the  United  States. 

The  Chairman.  When  was  that  valuation  made  ? 

Mr.  Hall.  Just  recently. 

Mr.  Warren.  Stone  &  Webster,  did  you  say? 

Mr.  Hall^  The  Hon.  John  L.  Webster,  attorney  for  the  corpora- 
tion. Mr.  1  earance,  of  New  York,  I  believe— thev  started  the  case 
as  an  emergency  rate  case  and  had  1,200  signatures  of  laboring  men 
demanding  that  the  commission  give  a  raise  in  rates  and  the  company 


1370    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOlf. 

would  give  them  a  raise  in  wages,  and  laid  down  a  physical  valuation. 
I  hey  said  it  did  not  amoimt  to  anything  so  far  as  an  emergency  rate 
ease  was  concerned  but  they  thought  it  would  please  the  commission. 
It  turned  out  that  Mr.  Yearance  had  been  out  there  10  days,  single 
Handed  and  alone,  and  without  even  a  stenographer,  and  that  the  dif- 
ferent departments  of  the  traction  company  turned  over  to  him  some 

^10  nnn  nnK'"''^'^^*^  Statement;  and  in  10  days  he  makes  a  valuation  of 
Jt>iy, 000,000  on  the  property. 

Commissioner  Gadsden.  *^How  much  mileage  ? 

Mr.  Hall.  One  hundred  and  thirty-something;  I  can  not  lust  recall 
now.  •' 

Comniissioner  Gadsdex.  I  was  trying  to  get  at  how  much  ner  mile 
he  probably  made  his  estimate  on,  which  is  done  by  taking  such  a 
iigure  per  mile. 

Mr.  Hall.  AVell,  the  Omaha  properties  are  very  fine  properties 
Commissioner  Gadsden.  You  say  they  are  in  good  condition,  so  I 

think  he  could  get  a  pretty  good  line  on  the  property,  if  he  was  not 

new  at  the  business. 

Mr.  Hall.  Yes;  they  are  good  properties.  But  upon  our  investi- 
gation it  was  shown  that  the  company  had  cash  and  working  capital 
on  hand  of  over  $900,000,  and  that  the  total  amount  of  surplus  in- 
vested in  property,  in  cash  and  material  on  hand,  was  over  $2,300,000. 

Ihe  commission  was  of  the  opinion  that  with  that  gre-at  amount 
of  money  invested  in  additions  and  betterments  and  over  $900  000 
m  money  and  materials  and  supplies,  that  we  had  a  reasonable  time 
to  make  an  investigation  as  to  the  value  of  those  properties.  The 
company  appealed  to  the  supreme  court  and  the  supreme  court  re- 
manded the  case  to  the  commission,  and  said  that  the  commission 
was  right  m  not  accepting  the  valuation  they  laid  before  us,  that 
a  proper  valuation  should  be  made  of  the  proj^erties  and  suff<rested 
that  a  6-cent  rate  be  put  in  pending  this  valuation. 

Mr.  Warren.  What  were  they  asking  for? 

Mr.  Hall.  They  were  asking  for  a  7  cents,  8  cents— Well,  one  of 
the  complications  in  the  Omaha  properties  is  that  the  Council  Bluff 
property  and  the  Missouri  Bridge  properties  are  leased  properties 
for  which  they  pay  something  like  $150,000  a  vear  and  do  c-ertain 
maintenance  and  furnish  the  equipment  and  power  and  all  those 
things  which  come  mto  it. 

Mr.  Warren    Is  that  the  company  which  had  an  interstate  ciise? 
Mr.  Hall.  \es. 

Mr.  Warren.  Which  went  to  the  Supreme  Court? 

Mr.  Hall.  Some  years  ago. 

Mr.  Warren.  Yes. 

Mr  Hall.  In  which  the  Supreme  Court  of  the  United  States  de- 
cided the  question  of  railroads  and  railways? 

Mr.  Warren.  Yes. 

Mr.  Hall.  That  is  the  case.  The  commission,  of  course,  could 
not  come  to  proper  conclusions  until  it  knew  the  relation  of  those 
leased  properties  that  were  being  operated  over  in  Council  Bluffs, 
Iowa,  witli  the  power  furnished  over  in  Nebraska  and  the  rollin^r 
stock  in  Nebraska  going  over  the  bridge.  We  had  to  have  the  datS 
to  make  proper  allocations  between  the  propei-ties  to  know  what 
should  be  paid  in  Omaha.  ^    ^    .  "^*^    >^"^*' 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1371 

Then  they  have  another  little  corporation  known  as  the  Ooiaha 
&  Southern,  running  down  to  Fort  Crook,  which  is  a  separate 
corporation  within  the  corporation,  wliich  does  not  amount  to  much, 
but  all  those  things  would  have  to  be  Imown  by  the  commission 
before  we  could  come  to  any  definite  conclusions. 

But  the  question  of  an  increased  wage  came  up  the  other  day,  or 
the  men  were  going  to  strike.  The  city  commission  and  the  traction 
company  held  a  conference  in  which  they  invited  the  commission. 
I  took  the  position  that  the  city  and  the  traction  company  should 
come  to  their  own  conclusion  iii  regard  to  the  strike  and  the  wage 
proposition  up  there,  and  wiiatever  they  agreed  upon  as  the  increased 
wage  that  the  commission  would  recognize  that  and  would  imme- 
diately make  a  rate  sufficient  to  cover  the  increased  cost  pending 
the  physical  valuation  and  inventories  of  the  properties.  While 
the  Supreme  Court  had  suggested  that  we  make  it  6  cents,  we  did 
make  it  four  tickets  for  a  quarter,  or  T  cents  straight  fare  on  the  cars, 
but  four  tickets  for  a  quarter. 

Neither  in  Lincoln  nor  in  Omaha  has  the  action  of  the  commission 
caused  aiiy  uprising  of  the  people.  The  people  have  taken  it  philo- 
sophically, splendidly,  with  only  very  little,  very  little  criticism  of 
the  commission. 

Going  badv  to  the  Lincoln  Traction  Co.  for  just  a  moment,  the 
one  great  difficulty  of  The  Lincoln  Traction  Co.  so  far  as  its  financing 
itself  IS  concerned  is  that  when  it  began  to  see  the  necessity  of  a  ri^ 
in  rates  they  immediately  published  articles  in  the  papers  and  talked 
it  on  the  street,  that  their  securities  were  all  going  to  nothing  and 
that  they  were  facing  bankruptcy  and  receivership,  to  the  extent  that 
the  commission  s  time  was  taken  up  a  great  deal  by  individual  stock- 
holders coming  to  the  commission  and  wanting  to  know  what  dire 
calamity  the  company  was  in.  And  they  were  offering  to  sell  their 
preferred  stock  as  low  as  70  cents  on  the'doUar,  until  I  went  into  the 
papers  and  advised  everybody  not  to  sell  a  dollar's  worth  of  pre- 
ferred stock,  if  they  were  satisfied  with  6  per  cent  quarterly  paid 
dividends ;  and  while  things  were  temporarily  tied  up,  the  commis- 
sion was  ready  at  all  times  to  make  a  rate  which  would  m^ike  the 

preferred  stock  iis  good  as  gold.    But,  of  course 

The  CmuRMAx.  Did  that  stop  the  sale  ? 

Mr.  Hall.  Well,  there  has  not  been  any  sold,  of  coui^e— oh,  yes: 
so  far  as  I  know.  The  president  of  the  company  went  on  the  kreet 
and  offered  $20,000  for  70  cents  on  the  dollaV-Mr  Shan)  Of 
course,  you  know  and  I  know  that  such  doings  as  that  will  wreck  any 
company  so  far  as  selling  additional  securities  is  concerned  for  ex- 
tensions and  betterments.  I  am  the  last  person  in  the  world  to  charge 
people  with  bad  motives,  but  I  can  well  see  that  such  doings  as  that 
only  enabled  tlie  powerful  to  crowd  to  the  wall  the  Httle  stockholder 
When  things  get  down  to  their  lowest  ebb  and  then  buy  it  in  at  as 
great  a  discount  as  possible,  knowing  full  well  that  the  rates  arc 
going  to  be  inade  to  absolutely  take  care  of  those  securities 

It  1  may  just  digress  a  moment  on  thequestion  of  physical  valua- 
tion of  properties  on  the  basis  of  reproduction  now,  less  depreciation! 
1  think  the  theoiy  is  wrong.  I  do  not  think  it  will  work-  and  it 
seems  to  me  t  i.at  it  makes  it  absolutely  impossible  for  a  company 
to  finance  itself  at  these  times.    Who  is  goLg  to  put  in  a  ceS 


1372    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

?^^«  "^i  ?u  "'?''^^  '1^''  "^"^  properties  at  present  price  of  construc- 
w«?/  11     ^^     u  "^  }}'^^  to-morrow,  if  prices  should  turn  the  other 
way,  the  very  heart's  blood  of  their  property  is  going  to  be  taken 
away,  and  taken  away  by  the  commission,  because  the  court  has  so 
ordered  it  to  be  done  that  way  ?    It  would  seem  to  me  it  would  be 
the  act  of  a  maniac.    If  you  are  going  to  say  that  the  honest  dollar 
put  in,  when  that  dollar  is  invested  in  property,  that  that  property 
IS  endowed  with  the  public  service,  that  which  the  corporation  can 
not  remove  or  discontinue  without  the  authority  of  the  Nebraska 
Commission— and  I  wish  to  say  here,  to,  that  the  Constitution  of  the 
United  States  says  that  Congress  shall  have  the  power  to  re^rulate 
commei-ce  between  the  several  States  and  the  Indian  tribes  and  for- 
eign nations.    The  Nebraska  constitution  says  that  the  Railway  Com- 
imssion  of  Nebraska  shall  have  jurisdiction  of  rates,  of  service,  and 
of  general  control  of  all  common  carriers;  certainly  as  broad  and 
as  mclusive  as  that  of  the  Constitution  of  the  United  States.    Cer- 
tainiy  the  Railway  Commission  of  Nebraska,  so  far  as  Nebraska  prop- 
erty IS  concerned^  has  all  the  power  that  Congress  itself  has  over 
properties  under  its  jurisdiction.    Now,  if  the  commission  is  clothed 
with  such  power,  and  every  time  the  Supreme  Court  of  Nebraska  has 
spoken  it  has  declared  the  law  to  be  more  inclusive,  every  time  that 
It  has  spoken,  until  all  of  the  opinions  together  certainly  have  con- 
clusively announced  that  the  Railroad  Commission  of  Nebraska  has 
plenary  powers  over  all  common  carriers  for  rates,  service,  and 

general  control,  and  that,  of  course,  would  even  go  to  the  wajre 

Commissioner  Gadsden.  Do  you  think  you  can  fix  the  wage,  you 
mean?  •=  '  ^ 

Mr.  Hall.  Yes ;  we  can  fix  the  wage. 

Commissioner  Gadsden.  Under  your  constitution  ? 

Mr.  Hall.  Yes. 

Commissioner  Gadsden.  Have  you  ever  done  it  ? 

Mr.  Hall.  Not  by  order;  but  I  have  personally,  with  consultation 

ordered  a  raise  three  tunes  last  summer,  and  they 

Mr.  Warren.  What  ?  ^ 

.J^'f.^J^'^'  ^^^F^^^VV'^  company  personally  three  times  last  sum. 
mer  to  give  a  raise^  Now,  let  us  look  at  that.  Service  inclusively 
means  facilities.    You  can  not  think  of  service  without  thinking  of 

fn^l  i^'^'i*.-^''"^^"  "^^  *^^^^  ^^  ^"^^^^  ^i*l^«"t  thinking  of  service 
and  facilities.  You  can  not  think  of  service  without  thinking  of  the 
employee,  can  you  ?  ^lyr^ui^  oi  uie 

Commissioner  Gadsden.  I  was  wondering  how  you  would  enforce 
your  orders  if  the  men  did  not  take  your  rafse  eniorce 

Mr  Hall.  On  that  point  I  do  not  think  it  can  be  forced  •  no  I 
do  not  think  so.  I  do  not  know  how  you  can  enforce  it.  But  I  mean 
to.say  we  can  enforce  the  order  so  far  as  the  company  is  concenied 

Mr.  Warren,  lour  commission  is  in  the  constitution?    '''''^^'^"^'^• 

Mi\  Hall.  Yes ;  we  are  a  constitutional  party. 

Mr.  \\  arren.  You  cover  the  railroads,  too  ? 

Mr.  Hall.  Yes. 

Mr.  Warren    You  cover  the  other  utilities? 

nesf ^5"h^\•p  .LT"  I' .*^    trouble  in  this  heat,  light,  and  power  busi- 
Af '  \^/^'^^^  ^^"i  capitalization,  but  do  not  have  the  rates 
Mr.  Warren.  I  was  just  wondering 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1373 

Mr.  Hall.  There  is  the  trouble.  I  would  just  like  to  say  a  word  on 
the  strike  business,  if  I  may.  I  have  been  through  some  serious  ex- 
periences in  such  matters,  and  we  only  have  very  limited  ideas  that 
finally  develop  out  of  all  of  our  serious  experiences.  But  if  we  are 
to  deal  with  labor  unions  and  enter  into  collective  bargaining,  it 
would  occur  to  me  that  the  union  should  in  some  way  guarantee  to 
perform  the  service  without  striking. 

It  seems  to  me  that  that  might  be  brought  about  by  the  union's 
entering  into  a  proper  contract  with  the  carrier  that  the  individual 
employee  receive  such  a  wage  that  he  is  enabled  to  create  a  savings 
account— I  think  that  ought  to  be  true  in  all  normal  living— that 
that  savings  account  be  deposited  with  the  company ;  that  the  com- 
pany use  that  money  as  an  operating  capital;  that  the  company  pay 
to  the  employee  dividends  upon  that  money  or  interest  upon  that 
money  as  high  as  the  highest  rate  of  dividends  that  it  pays  out  upon 
its  stock ;  that  the  contract  should  provide  that  the  individual  should 
give  notice  through  his  proper  union  officials  as  to  quitting— a  cer- 
tain number  of  days. 

Mr.  Warren.  Unless  the  company  should  waive  it  in  any  special 
case? 

Mr.  Hall.  Yes;  unless  the  company  should  waive  it  in  any  special 
case.  The  statement  that  I  have  just  made  is  simple,  but  it  is  com- 
plex in  its  practical  carrying  out,  I  realize.  But  it  does  seem  to  me 
that  something  of  that  kind  could  be  done  that  would  bring  about  a 
good  feeling  between  the  employer  and  the  employee  and  also  be- 
tween the  public  and  the  companies. 

The  greatest  work  that  we  all  have  to  do— you  commissioners,  all 
of  us  in  our  official  life— is  to  bring  about  a  proper  coordination  and 
proper  feeling  between  our  fellow  men,  between  the  corporations  and 
the  public ;  and  the  man  that  can  do  a  little  bit  of  that  and  lend  a 
little  helping  hand  along  that  line  is  a  benefactor  to  society ;  he  is  a 
benefactor  to  posterity. 

I  have  been  criticized  and  I  know  what  it  is  to  stand  up  against 
the  fire,  and  yet  I  have  been  able  to  rise  above  it  and  stand  through 
the  storm  for  the  years  until  where  I  know  that  I  enjoy  the  con- 
fidence of  my  own  people.  And  I  am  not  a  person  that  is  a  politician 
m  the  strictest  sense  of  a  politician.  I  am  almost  ashamed  sometimes 
to  admit  that  I  am  m  politics,  because  I  am  afraid  that  the  officials 
of  the  world  are  the  ones  that  bring  upon  us  the  dire  calamities  of 
the  world  and  not  the  common  people ;  and  I  believe  that  it  is  up  to 
us,  from  us  little  fellows  to  you  big  fellows  and  on  to  the  bigger  fel- 
lows, to  perform  a  duty  and  render  a  service  that  will  last  and  last 
for  ages;  and  now  is  the  time  that  you  and  all  of  us  should  not  get 
jealous  of  each  other's  standing  and  what  each  other  is  doing  and 
all  those  things,  but  jump  in  and  take  each  other  by  the  hand  and 
work  an(l  with  an  untiring  effort  try  to  avert  somewhere  away  down 
the  line  ^uch  tragedies  as  the  world  has  been  going  through.  And 
if  we  can  not  settle  it  with  the  laboring  element  we  are  drifting,  and 
Ave  are  drifting  to  a  condition  in  the  United  States  that  you  will  see 
the  red  flag  of  anarchy  waving  on  our  streets  from  the  Atlantic  to 
the  Pacific  Oceans.  And  I  do  not  wish  to  be  understood  as  being 
pessimistic  now,  but  I  do  want  to  be  understood  as  being  serious  and 
feeling  the  weight  of  the  burden  of  the  things  we  are  talking  about. 


1374    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

IVIiv  Wabren.  Is  your  commission  elected  or  appointed  I 
Mr.  Haix.  We  are  elected. 
Mr.  Warrex.  Three? 

Mr.  Hall.  Yes;  I  am  serving  my  second  term — or  my  first  term 
was  a  half  term. 
Mr.  Warken.  How  long  is  the  term? 
Mr.  Hall.  Six  years. 

Mr.  Warren.  Is  the  whole  board  elected  at  the  same  time? 
Mr.  Hall.  Oh.  no ;  one  every  two  years.  I  will  say,  almost  on  the 
side  now.  that  frojn  the  time  I  stepped  my  foot  into  the  commis- 
sion the  issue  of  Eepublicanism  and  Democracy  was  to  be  forgotten 
and  we  now  pay  no  attention  to  the  politics  of  an  employee;  for 
instance,  when  the  legislature  gave  me  money  to  hire  special  counsel, 
Mr.  Hugh  McMaster,  who  is  eminent  as  a  lawyer  in  our  State  and 
who  is  a  Democrat;  and  the  members  in  our  working  force  are 
Democrats  and  Republicans  alike ;  I  do  not  know  the  ix)litics  of  all 
of  them,  by  any  means. 

The  Chairman.  Have  you  completed  your  formal  statement? 
Mr.  IL\LL.  Yes;  unless  you  care  to  ask  me  some  questions.     It 
has  been  rambling,  I  know.    I  have  not  come  down  here  with  any 
prepared  speech. 

The  Chairman.  Just  a  few  questions.  You  have  stated  two  in- 
stances that  have  come  under  your  direct  observaticm.  Evidently 
your  commission  lias  followed  the  statute  in  prescribing  what  you 
regard  as  proper  i-egulation  for  tlK)se  companies.  Now.  from  your 
experience  with  those  companies  and  other  utilities  what  do^ou 
reg-ard  as  the  best  form  of  regulaticMi  that  will  protect  tlie  i>ublic 
and  result  in  good  service  and  result  in  adequate  returns  to  the  in- 
vestment in  the  property  ? 

Mr.  Hall.  Do  you  mean  under*  commission  regulation? 
The  Chairman.  Yes;  either  commissicMi  or  public  regulation. 
That  question  has  nothing  to  do  with  municipal  or  public  ownership. 
Mr.  Haix.  Under  private  ownership,  to  be  regulated  by  the  public^ 
first  of  all.  there  must  be  a  starting  point  arrived  at  in  the  value  of 
the  properties.  Then  the  rate  of  return  must  be  fixed.  I  advocate  a 
sliding  scale;  officers  that  are  honest  and  undertaking  to  render  a 
service  that  is  of  the  highest  class.  If  a  complaint  came  in  from  the 
public  and  I  was  to  pass  upon  it  and  I  found  that  the  company  was 
making  8  per  cent  retnrn  but  the  service  was  such  that  it  could  iwt  be 
coniplametl  of,  every  dollar  that  was  spent  was  spent  with  cai-e  and  a 
doUar-s  return  got  for  it,  I  would  undertake  to  reward  that  company 
by  allowing  them  a  pretty  liberal  rate  of  return.  But  if  you  do  not 
have  the  starting  point  and  then  when  you  get  the  starting  point 

once,  that  starting  point  is  fixed 

The  Chairman.  What  is  your  starting  point? 
Mr.  Halu  Proper  valuaticMi,  inventories,  and  tlepreciation  studies. 
We  have  got  to  come  to  some  conclusion  as  to  what  tlie  company  is 
entitletl  to  a  return  upon.  That  is  why  I  have  taken  exceptions  to 
The  lincolu  Traction  Ca^  in  that  I  have  been  tasking  for  them  to 
make  a  return  to  us  as  to  their  pix)perties  by  classes,  as  to  where 
their  pro^x?vties  are  located:  for  instance,  pavement  and  the  quality 
of  [)aveinent  «>f  certain  streets,  that  we  might  have  our  engineering 
depai-tiikent  inspcx^t  it,  place  a  unit  price  upon  it,  and  try  to'start  out 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1375 

on  a  proper  value.  As  long  as  the  $1,625,000  common  stock  is  out- 
standing they  can  say,  "  Oh,  well,  we  have  the  value  of  the  property 
and  pay  dividends  upon  it." 

The  Chairman.  ^Now  you  have  your  property  value? 

Mr.  Hall.  Yes. 

The  Chairman.  What  is  the  next  step  in  a  perfect  system  of  regu- 
lation ? 

Mr.  Hall.  Then  for  the  commission  to  make  a  rate  that  will  take 
care  of  the  operation,  maintenance,  depreciation,  taxes,  losses,  and 
damages,  create  depreciation  and  maintenance  reserves,  and  take  care 
of  future  contingencies  that  might  arise  and  this  return  to  the  com- 
ixiny.  But  we  thought  we  were  building  up  depreciation  reserve 
through  the  years  to  take  care  of  just  such  things— I  say  such 
things— any  contingency  that  might  come  upon  us.  And  when  the 
storm  broke  both  the  companies  said  all  the  surplus  we  made  in  the 
past  is  ours;  it  is  none  of  your  concern;  we  made  it  under  a  legal 
rate,  and  it  is  ours.  When  they  admitted  to  us  all  through  the  years 
that  they  should  be  capitalized,  when  the  time  came  that  the  money 
should  be  jjlaced  back  in  operating  income  to  be  used  in  maintaining 
and  operating  the  properties,  and  as  soon  as  the  prices  went,  as  they 
have,  and  soared,  they  immediately  said  we  must  make  a  rate  to  take 
care  of  the  increased  cost  of  operation  and  disregard  the  surplus 
that  we  have  built  up  in  the  past. 

The  Chairman.  After  the  commission  has  secured  all  of  these 
powers,  should  it  collaborate  in  any  way  with  municipal  officers? 

Mr.  Hall.  No;  in  Nebraska  I  do  not  see  really — well,  we  set  our 
cases  down  for  hearing  out  over  the  State— all  over  the  State— that 
we  miglit  get  right  onto  the  ground  and  have  personal  observation 
and  make  it  convenient  for  witnesses  to  appear  before  the  commission 
without  having  them  come  several  hundred  miles.  I  do  not  believe 
that  under  the  constitution  the  municipal  officers  have  any  thin  or  to 
say  about  it,  as  such.  They  have  a  right,  certainly,  to  api^ear  before 
the  commission  and  offer  such  testimony  as  they  desire. 

The  Chairman.  Laying  aside  the  provisions  of  =  the  constitution 
tor  a  moment,  do  you  l)elieve  the  municipalities  fit  into  a  perfect 
scheme  of  regulation  ? 

Mr.  Hall.  No,  sir;  not  until  you  get  to  the  metropolitan  city, 
winch  IS  great  enough  and  powerful  enough  to  equip  itself  with 
engineers,  statisticians,  and  lawyers  that  can  cope  with  the  physical 
valuation  and  rate-making  duties  that  have  to  be  performed.  A 
little  town,  of  course 

The  Chairman.  Are  any  of  the  cities  in  Nebraska  large  enoucrh 
to  do  that  ?  ^  ^"^ 

T>  ^J'  Hall.  Well,  when  the  Omaha  case  started  the  Hon.  Ed. 
.  •  ^f}^}}  ^n^  Corporation  Counsel  Lambert  filed  objections  to  the 
jurisdiction  of  the  commission  because  they  found  in  the  charter  of 
Omaha  a  clause  saying  that  Omaha  should  make  street  car  rates 
And  1  held  that  the  commission  did  have  jurisdiction,  that  the  con- 
stitution of  the  State  creating  the  commission  certainly  annulled 
all  such  statutes.  '^ 

The  Chairman.  I  am  asking  for  your  opinion  now. 

Mr.  Hall.  Well,  I  will  quote  this  first.  The  case  had  progressed 
a  (lay  when  the  corporation  counsel  came  around  and  said  that  he 


1376    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

hoped  that  the  commission  would  not  take  their  motion  as  to  the 
jurisdiction  of  the  commission  seriously,  because  he  realized  that 
the  commission  was  much  better  equipped  to  handle  the  matter  than 
Omaha  itself  was. 

Lincoln  is  not  prepared  at  all.  For  instance,  if  you  were  to  go  to 
the  city  of  Lincoln  and  ask  the  city  officials  as  to  depreciation 
studies  and  maintenance  and  upkeep  of  the  city  electric-lighting 
plant,  the  information  that  you  would  get  would  be  very  meager 
indeed;  and  so  with  the  waterworks. 

The  Chairman.  Do  you  think  the  city  should  have  any  control 
over  the  question  of  service',  speed,  stops,  location  of  lines,  etc,  ? 

Mr.  Hall.  On  the  location  of  lines — ^you  are  speaking  in  general 
now? 

The  Chairman.  Yes. 

Mr.  Hall.  I  think  the  citv  certainly  should  have  the  say  as  to 
what  streets  should  be  used  for  electric  transportation,  but  I  doubt 
if  it  should  go  further  than  that. 

The  Chairman.  You  heard  Mr.  MacFarland  this  afternoon? 

Mr.  Hall.  Yes. 

The  Chairman.  He  is  for  municipal  ownership. 

Mr.  Hall.  Yes. 

The  Chairman.  Is  there  any  sentiment  for  municipal  ownership 
in  Nebraska? 

Mr.  Hall.  Yes,  sir.  Personally,  I  believe  in  municipal  ownership, 
public  ownership  of  some  sort,  but  only  for  the  reason  that  it  would 
eliminate  high  financing  and  stock  jobbing ;  that  is  all.  I  would  have 
the  commission  control,  in  some  form,  ]ust  the  same,  but  a  State 
commission  control  over  all  the  public  utilities  is  prepared  to  make 
comparative  studies  as  between  the  different  utilities  and  as  to 
service.  I  know  what  efforts  I  had  to  make  in  order  to  get  tlie 
near-side  stop  in  Lincoln  and  Omaha.  I  had  been  making  a  study 
of  that  for  several  years  in  the  cities  of  the  United  States,  and  i 
finally  got  the  near-side  stop  in  without  a  dissenting  voice  almost, 
but  I  could  not  have  done  it  if  it  had  not  been  for  the  war.  I 
slipped  one  little  word  into  the  opinion,  that  the  near-side  stop 
would  save  a  certain  amount  of  fuel,  and  people  took  it  for  granted 
that  that  was  true,  and  they  all  adopted  the  near-side-stop  proposi- 
tion. Then  the  question  through  the  Fuel  Administration  came 
up  as  to  the  skip-stop. 

We  just  issued  a  peremptory  order  and  put  in  the  skip-stop  until 
the  Fuel  Administration  raised  the  ban  on  fuel,  and  then  we  set 
down  the  matter  for  hearing  in  Omaha,  as  to  whether  it  should  be 
discontinued  or  not;  and  to  our  surprise  tliere  was  only  one  ob- 
jector— after  notifying  all  the  newspapers,  the  Omaha  Commercial 
Club  and  the  city  officials — there  was  only  one  objection  to  the  skip- 
stop  system.  However,  it  was  modified  to  have  the  stops  made  at 
every  block  in  the  business  sections  of  the  city  and  the  skip-stop 
recognized  in  the  residence  portion. 

The  Chairman.  You  said  there  was  sentiment  for  municipal 
ownership  in  your  State.    Is  it  pronounced? 

Mr.  Hall.  Tliere  is  a  pronounced  sentiment  for  municipal  owner- 
ship in  the  city  of  Lincoln  especially,  up  until  the  company  took  the 
position  that  they  wanted  to  sell  to  the  municipality  on  the  basis 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1377 

'  of  war  prices.  Well,  then  it  went  like  a  wave  over  the  city  and,  of 
course,  the  city  did  not  want  to  buy  property  on  the  basis  of  war 
prices.  And  there  is  some  question  now  as  to  whether,  under  the 
new  statute  giving  the  city  the  power  to  buy  the  property,  whether 
the  city  commission  is  going  to  call  an  election  or  not.  It  was  just 
the  day  I  left  that  I  heard  discussion  of  that  by  some  of  the  promi- 
Lent  citizens  of  the  city. 

The  Chairman.  I  have  no  other  questions. 

Mr.  Warren.  I  would  like  to  ask  what  kind  of  franchise  those 
companies  have  in  Nebraska.    Is  it  limited  in  time? 

Mr.  Hall.  Yes;  I  do  not  know  how  many  years  it  has  to  run.  On 
the  Omaha  property  a  number  of  the  franchises  on  certain  lines 
have  expired,  but^ 

Mr.  Warren.  Have  you  had  occasion  to  study  what  is  called  the 
indeterminate  term? 

Mr.  Hall.  Very  little.    I  would  hardly  be  able  to  discuss  it. 

Mr.  Warren.  You  would  not  have  an  opinion  to  express  ? 

Mr.  Hall.  No  ;  I  would  not  venture  an  opinion. 

The  Chairman.  The  commission  is  very  much  obliged  to  you,  Mr. 
Hall. 

(Witness  excused.) 

The  Chairman.  Mr.  Ogburn,  who  is  your  next  witness? 

Mr.  Ogburn.  We  shall  ask  next  Mr.  Connell,  mayor  of  Scranton, 


Pa. 


STATEMENT  OF  MK.  ALEXANDER  T.  CONNELL. 


The  Chairman.  Will  you  speak  loud,  Mr.  Mayor,  so  we  can  all 
hear  you? 

Mr.  Connell.  Yes;  and  I  will  speak  short,  too,  because  I  am  the 
shortest  witness  you  have  had,  I  will  venture  to  say. 

Commissioner  Beall.  Do  not  be  too  short,  because  we  want  to 
hear  you. 

Mr.  Cx)NNELL.  Well,  when  I  received  Mr.  Ogburn's  invitation  to 
appear  down  here  I  thought  the  conference  was  going  to  be  like  the 
governors'  and  mayors'  conference  we  had  last  March.  Later  on 
I  heard  it  was  a  congressional  committee  investigating  railroads 
Of  course,  I  figured  that  congressional  committees  had  a  good  time 
investigating  and  making  their  report  to  Congress  or  to  the  proper 
committees,  and  that  is  all.  Now,  I  see  you  gentlemen  are  trvine  to 
make  an  honest  effort  to  put  your  finger  on  the  festering  sore  of 
the  street-raihvay  business,  and  I  want  to  help  you.  I  have  all  the 
data  in  my  office  m  Scranton.  I  did  not  bring  it  down  with  me  I 
did  not  think  you  wanted  that  kind  of  data. 

This  gentleman  who  preceded  me  is  the  first  man  I  have  heard  I 
see  now  that  you  want  the  data,  and  I  have  it  in  mv  office,  and  I 'am 
going  to  send  it  to  you  just  as  soon  as  I  get  home;  and  I  think  it 
""-^V/^^^^^^/horter  time  to  write  it  out  for  you  and  make  a  statement 
ot  the  hght  we  made  before  the  Public  Service  Commission  of  Penn- 
sylvania against  the  increase  to  the  street-railway  company  of  Scran- 
ton a  few  months  ago.  We  have  the  data  on  that  line  for  15  or  16 
years.    That  is  back  far  enough  for  you  gentlemen  to  go,  anyhow 

1  came  down  here,  gentlemen,  with  an  unprejudiced  mind  against 
the  street  railway.    As  the  mayor  of  Scranton,  I  want  to  see  the  in- 
100043"— 20— VOL  2 25 


1378     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

yestor  get  the  proper  return- on  his  money— I  do  not  care  whether  he 
is  a  small  investor  or  a  millionaire.  But  I  am  dead  set  against  any 
man  or  set  of  men  getting  dividends  on  securities  they  did  not  pay 
any  money  for.    I  am  dead  set  against  water  security. 

Tho  Chairman.  Does  that  situation  exist  in  your  city? 

Mr.  CoNNELL.  That  is  the  situation  as  we  find  it  exists.  These 
figures  were  taken  by  oilr  city  solicitor  and  an  expert  we  had  hired  in 
our  fight  before  the  public-service  commission,  and  they  were  not 
denied:  The  capital  stock  of  the  Scranton  Railwav  Co.  is  $9,070,- 
550  59.    Inflation  or  water,  $3,825,505.11.    Honest  capital,  $5,251,000. 

Now,  m  my  opinion,  the  Scranton  Railway  Co.  is  trying  to  pay 
dividends  on  $9,000,000  of  capital,  and  the  people  of  Scranton  can 
not  stand  for  that. 

The  CiiAiitMAx.  What  is  the  company  paying  upon  that  capital 
now  ? 

Mr.  CoNNELL.  Well,  now,  the  company  has  not  fared  so  badly.  In 
190 <  it  paid  0  per  cent;  1908,  8  per  cent;  1909,  8  per  cent;  1910,  6  per 
cent;  1911,  G.85  per  cent;  1912,  6  per  cent;  1913,  8.74  per  cent;  June, 
1914,  9.4  per  cent;  December,  1914,  4.G5  i>er  cent,  two  dividends  that 
year ;  1915,  5  per  cent ;  1916,  G  per  cent ;  1917,  5  per  cent. 

Now,  that  is  not  so  bad  after  being  in  the  war  since  1914. 

The  Chaikman.  What  was  it  in  1918? 

Mr.  CoNXELL.  We  have  not  got  that.  In  our  argument  before  the 
public-service  commission  this  data  will  all  be  sent  to  you,  but  I  have 
a  little  memorandum  I  would  like  to  read  to  vou,  or  I  can  hand  it 
over. 

1  he  Chair.man.  Before  you  do  that,  has  the  companv  maintained 
its  ])roperty  sufficiently? 

Mr,  CoNNELL.  AVell,  no  sir;  I  do  not  think  it  has  as  well  as  it 
ouglit.  \A  0  have  discovered  that  the  company  has  set  aside  money 
for  betterments  and  then  converted  it  into  dividends.  Unfortunately 
all  the  shareholders  of  the  Scranton  Railroad  Co.  are  nonresidents  of 
Scranton.  And  there  is  no  better  managed  railroad  property  in  the 
world  than  when  some  of  the  shareholders  are  in  the  city  in  which 
It  is  operated. 

The  Chairman.  Was  any  part  of  the  capital  issued  for  money 
which  was  taken  from  earnings? 

Mr.  Con  NELL.  Yes. 

The  Chairman.  How  much? 

Mr.  Con  NELL.  I  do  not  remember.  We  have  explained  that  to  the 
public  service  commission  in  our  fight— that  they  were  paying  some 
of  the  dividends  out  of  capital  stock,  and  I  do  not  think  that  has  been 
denied.    I  have  not  the  report  with  me. 

The  (yHAiRMAN.  Now  you  may  read  the  report  you  have. 

Mr.  CoNNELL.  This  is  all  I  have  to  offer  now,  but  I  am  sorry  I 
did  not  bring  down  my  other  data,  because  I  see  what  vou  want  and 
I  am  going  to  send  it  to  you. 

Xow,  this  is  not  my  language.  This  is  the  argument  used  bv  the 
representatives  of  the  city  of  Scranton  in  their  argument  before  the 
State  public-service  commission  at  Harrisburg,  but  I  subscribe  to,  it : 

It  is  universally  recognized  tliat  difficult  times  have  come  uiwn  tlie  stieet- 
Kiilway  business. 

If  legitimate  investments  in  tliis  business  are  to  Iw  protected,  and  if  the 
ti-ansit    service   necessary   for   urban    development   is   to   be    i-endered,    over- 


PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1379 

capitalized  street  railways  must  be  reorgauizetl  and  put  upon  a  conservative 
basis.  To  try  to  bolster  up  invested  pyramids  of  false  capitalization  is  only 
to  palter  with  a  problem  of  immense  public  importance  and  to  iwstiwne  the 
evil  day  a  little  and  make  the  final  readjustment  harder. 

Fictitious  capitalization  is  prohibited  by  the  laws  of  most  States.  It  is  also 
contrary  to  public  policy,  especially  in  the  case  of  a  public-service  corporation. 
It  destroys  financial  credit  and  imposes  unwarranted  hardships  upon  the 
public.  It  can  not  be  condoned  in  the  case  of  any  public-utility  corporation, 
but  must  be  corrected  as  the  primary  condition  of  good  service  and  reasonable 
profits  in  the  future.  Some  people  ask  how  are  we  going  to  wipe  out  fictitious 
capital  or  "water"  without  injuring  a  lot  of  innocent  purchasers  of  these 
"  water  "  securities.  I  answer  that  by  saying  the  welfare  of  the  general  public 
must  be  considered  before  the  welfare  of  the  few.  The  few  innocent  pur- 
chasers of  these  "  water  "  securities  must  suffer  or  the  consuming  public  must 
suffer. 

It  is  said  that  "  what  can't  be  cure<l  must  be  endured  " ;  let  us  say  instead, 
*'  What  can't  be  endured  must  be  cured."  And  overcapitalization  in  the  street- 
railway  business  is  an  evil  that  can  not  be  endured.  It  is  a  constant  source 
of  peril  to  legitimate  investment  and  to  a  service  that  is  vital  to  the  develop- 
ment and  welfare  of  communities.  The  street  railways  can  not  be  put  upon 
a  safe  and  efficient  basis  without  a  tliorough  house  cleaning. 

Public-utility  companies,  like  other  corporations  and  individuals,  must  to 
some  extent  "  take  the  lean  years  with  the  fat,"  and  bear  some  loss  of  income 
without  flinching.  Before  a  company  demauds  emergency  increase  in  its 
before-the-war  rate,  it  should  level  off,  average,  and  absorb  its  excessive  earn- 
ings of  other  years.  The  fat  of  those  past  years  must  serve  to  carry  it 
through  the  lean  years  of  the  uncertain  future. 

Urban  transit  senice  and  the  rates  charged  affect  the  public  visibly  and 
almost  universally.  For  this  reason  public  opinion  is  more  sensitive  to  in- 
justice in  connection  with  transit  operations  perhaps  than  in  connection  with 
any  other  utility.  Therefore  a  requirement  that  an  overburdened  public  shall 
pay  higher  fares  in  order  that  inflated  securities,  shamelessly  manipulated  in 
the  past  by  absentee  speculators  may  be  preserved  and  guaranteed  in  perpetuity, 
would  tend  to  inflame  the  public  mind  at  a  time  when  it  is  most  important  for 
the  interests  of  bona  fide  investors  that  just  policies  be  adopted  and  that  the 
integrity  of  sound  popular  government  be  preserved. 

Now,  tliat  is  part  of  the  argument  used  by  our  representatives  in 
Harrisburg,  and  I  want  to  place  it  on  your  record  here,  if  I  may. 

The  CHAiR3fAN.  Who  is  the  author  of  that  statement? 

Mr.  CoNNELL.  I  do  not  know.  It  is  either  the  city  solicitor  or 
the  expert  we  had  hired.  We  had  engaged  an  ex])ert  to  go  through 
the  books. 

The  Chairman.  Who  was  the  expert? 

Mr.  CoNNELL.  I  will  think  of  his  name  in  a  minute.  He  was  a 
New  York  man. 

The  Chairman.  Was  it  Mr.  Wilcox? 

Mr.  CoNNELL.  Yes;  Wilcox. 

The  Chairman.  I  thought  that  language  sounded  kind  of  familiar. 
You  read  a  list  of  the  dividends  that  have  been  paid  over  a  long 
period  of  years  up  to  1917.     What  rate  applied  during  all  that  timeJ 

Mr.  CoNNELL.  Well,  I  was  going  to  send  you  that  data.  We  have 
all  that. 

The  Chairman.  Do  you  know  whether  it  was  a  5-cent  fare  ? 
Mr.  CoNNELL.  Yes;  the  5-cent  fare.     I  thought  you  meant  the 
amount  of  the  dividend. 

The  Chairman.  What  is  the  amount  of  fare  no\v  ? 

Mt  CoxNELL.  Seven  cents  cash,  and  four  tickets  for  a  quarter,  or 
b]  cents. 

The  Chair^ian.  Have  you  ever  had  a  higher  fare? 
Mr.  Con  NELL.  Yes;  8  cents. 


1380    PEOCEEDINGS  OP  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 
The  Chairman    When  was  that  8-cent  fare  charffed? 

cZplFn??'"""-  *"  '""  "«""  ".^'.fSr  .  S;Sg  upon  . 

Mr.  CoNNBxi,.  I  think  it  was  1917. 

mI'  r^*^^^^-  T""  *''?  '"  «»'''°i'  there,  Mr.  Mayor. 

Mr.-  ?.J^™  ¥hlli%Er'"^  ^^^^"^-^  ""«'  *^-*— 
toSe  P^^I^^a^^^^^  P-^'"^  the  argument  as 

f.ot6  ceTtsr8?e"n\s''*°"  '"^  ''^^™«"*  ^^  -— <^  the  fare 
nodce.^'"'"'''''-  '^^^  ^°"^^^^  *'•«  ^*'^t"t<»7  process  and  gave  30  days' 
Mr.  Co.VNEn.  Yes;  you  did  not  do  anything  ille<ral  it  all 
E   Cox3^.^^^'*  i^A^'^  th«'  have  Si  thfridfn'  habit » 

firSna^L^frornVfo'Snte 'i^^  ''''f  ^^^  ^^'^  The 
proportion-well,  before  the  6  r^tf^  number  of  passengers  in 
28.000.000  passei^-e"  that  vear^L  l^'^^!'^  "i*°  ^^^'^t  they  carried 
effect  for  tCe  or  four  months  t  hi""  *^'  •*'■*=""*  ^""'^  ^«"t  into 
rate  of  6.000.000  a  year  for  thosL  tLr'^  T""^  passengers  at  the 
words   they  cari^d  Kt'^^Sj^^^^^^^^^^  ^^  other 

Mr'  CWll.  y1"  we  h'i"''"T\^''"«  •"  '"  tlfat^Sriod? 

sic£;tfo"n:C'^  W^VatL^rtS'^irr  ^V^^y^^^^^  con. 
20  people/and  that  redZs  Veltr'^aVrnfomr*'"  ''''  "*""*  ^^^''^ 

io?b;fhrro7th?vs  w  "'"*  p^^  ""^■*'*  p--»«-  -«« 

Mr.  CONNELL.  No. 

8-S  f^reT"''-  ^^"'  "''  •''""P''"^  ^•'^•"S  '"*'n«y  -»>-  i*  "sed  tho 
Mr.  CoNNELL.  I  think  so. 

the^;;tSXldii.r<;^^^^^^  -  h»--  activities  and 

public  ,>rS;i^^n.t^ir'i,v  T""  •'^'"  "  *T  '«  '""^a^d  first  tlie 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1381 

The  Chairman.  Do  you  know  whether  the  company  is  earning  as 
much  witli  a  6-cent  fare  as  with  an  8-cent  fare  ? 

Mr.  CoNNELL.  I  do  not;  and  we  can  not  find  that  out. 

Mr.  AiNEY.  Just  for  the  accuracy  of  your  record,  I  think  you  would 
like  to  have  him  use  6J  cents  and  7  cents. 

Mr.  CoNNELL.  Yes;  four  tickets  for  a  quarter.  We  have  no  G-cent 
fares  now. 

The  Chairman.  Does  the  city  assess  paving  requirements? 

Mr.  CoNNELL.  Between  the  tracks,  and  a  foot  on  each  side. 

The  Chairman.  Do  you  believe  that  should  be  maintained? 

Mr.  CoNNELL.  I  do. 

The  Chairman.  Do  the  street-cars  impose  a  burden  upon  the  city 
streets?  "^ 

Mr.  CoNNELL.  I  think  so. 
The  Chairman.  In  what  way  ? 
Mr.  CoNNELL.  I  think  the  running  of  a  street-car  over  a  street  has 

"^^f  ^V^^  ^^^^  *^®  damage  of  the  pavement  than  any  other  vehicle. 
The  Chairman.  Explain  how  that  is. 

Mr.  Connell.  It  goes  over  the  joint— bouncing  over  the  joint— and 
breaks  the  pavement.    - 

The  Chairman.  If  it  was  necessary  for  the  city  to  eliminate  pav- 
ing and  other  investments  in  order  to  keep  a  fare  at  the  5-cent  level, 
would  you  favor  it?  • 

Mr.  Connell.  No,  sir;  I  woiild  not. 

Commissioner  Gadsden.  What  about  the  car  rider?  Do  you  think 
he  would  favor  it  ? 

Mr.  Connell.  I  can  not  tell  that. 

Commissioner  Gadsden.  He  is  the  man  who  is  paying  for  it? 

Mr.  Connell.  He  is  the  man  who  is  paying  for  it;  yes. 

Commissioner  Gadsden.  The  chances  are  they  woiild  favor  it« 

*  1 1     V^f^^i.^'^^^*  ^y?^^'  ^^  ^^  ^^^i^g  ^^  individually,  and  I  can*  not ' 
tell  what  the  car  riders  would  say.    I  say  I  would  not  be  in  favor  of 
It.     1  hat  IS  a  legitimate  revenue  that  the  city  ought  to  set  for  the 
use  of  the  streets.  ./       &  & 

The  Chairman.  What  control  have  the  city  authorities  over  the 
street  car  line? 

Mr.  Connell.  None  at  all. 

The  Chairman    No  control  over  the  question  of  reasonable  stops? 
Mr.  Connell.  No.  . 

The  Chairman.  Or  where  the  tracks  are  to  be  laid? 

Mr.  Connell.  Oh,  of  course,  if  the  tracks  are  not  in  good  repair 
we  can  make  them  keep  the  tracks  in  repair  all  right.  We  do  not 
dictate  to  them  where  they  shall  stop,  because  they  stop  at  every 
^^J?l^^'-    ^"^  ^^"^P'^^J^y  gives  good  service  there. 

1  he  Chairman.  Have  you  anything  to  say  about  where  new  xjon- 
struction  can  be  made? 

Mr.  Connell.  Oh,  yes ;  a  lot  of  new  construction  should  be  made 
ilie  Chairman.  But  can  you  determine  where  it  shall  be  and 
when?  ^ 


you  mecin? 


The  Chairman.  Yes. 


1S82    PBOCEKDINGS  OF  FEDERAL  ELECTKIC  RAILWAYS  COM 


MISSION. 


tliJfe*;  ^'^'"''^'^  ^^'  ^  ^^^  ^^^  ^li  yo»-     That  will  be  in  rny  report 

The  Chairman^ Well,  have  you  that  power? 
■       Mr.  (.  ONXELL.  The  power  to  make  them  repair? 

linlX'betx^^^^^^^^^^         ''^  ^"""-  '"  ^^^^^-  --  construction,  new 
tho^tnit^r'^TT-  ^Tf  ^'  ^  '^^'^^i*  ^^'"^^^^  *^^^^^  I  ^'^'-^  «!'  »ot,  to  tell  you 

Mr^  Co'nxel'^^^^  '^^^^  "^  *^^^  one-man  car  there? 
The  Chairmax.  Has  that  been  tried  ? 

Mr*  W^R^^^v  •  K^"'  II''^''  r  "^^  ^'^  ''''^'^  ^^^'^  '^^^  fi^e  cars, 
road  yet  ?  ^'  ^^''''  ^''"  ""''^  ^^^^^^  ^'^^l"*^^ti«^^  "^^^de  of  that 

Mr.  CoNXELL.  Physical  valuation? 
Mr.  \Varren.  Official  valuation. 
Mr.  CoNNELL.  By  the  city  authorities? 

Mr.  CONXELL.   No. 

Mr*  Co™i:  A.^tn^h^""'  -J^^,^^'^  -^^"/^^^'^  ^^  ^ffi^'i^l  valuation? 
TLT     !:i?^^^i'i-^As  to  the  capitalization? 

Mr.  \\arrex.  1^0 ;  of  the  value. 

Mr*  WK^^l't'  tJ\^'''''^  It^'^'^  *^«^  f^«»«  tl^eir  own  books. 
Mr!  S;^^.  ^i'^^  ''^'^  *^^  capitalization,  was  it  not  ? 

fmrn'the  S  "'  ''  ^'^"^'^"^  '^''  "^««*^«»-     Those  are  t..ken 

Mr.  Warrex.  That  is  taken  from  the  books,  too? 

Mr.  LoxxELL.  les. 

Mr.  Warrex.  By  Mr.  Wilcox  ? 

Mr.  CoxxELL.  Yes. 

Mr  JoxTpf;  ^n"  ill^^^i^^t^.-PPioved  by  the  commission? 
nia?     ^'^'"'^^^^  ^y  ^^^  ^'"bl^c  Service  Commission  of  Pennsylva- 

Mr.  Warrex.  Yes, 

Mr.  CoxxELL.  I  do  not  k-now.  We  fought  against  an  incix^ase  and 
they  gave  them  an  mcrea^.  I  do  not  know  what  the  public^rv  r^ 
commission  thought  about  our  argument  pu  Wic-sei  a  ice 

Mr.  Warrex.  Did  Mr.  Wilcox  claim  that  he  had  found  all  the 
books  and  data  necessary  to  make  the  valuation?  ^ 

riJ"    ',  .{"'^f^^'  ^  '^'^  """^  J'"'''' •    I  ^«  not  think  he  ever  said  that     I 
do  not  thmk  we  ever  asked  him  that  question.     I  do  not  think 

IV -1  ^^y'^^^•  ^^  ^  !?o*  ^  "^'^tter  of  fact  that,  at  the  close  of  Mr 
\\i Icox  s  tes  imony  before  the  commission,  Mr.  Gill  inoved  L  stHke 
it  all  out  as  immaterial  and  irivlevant? 

Mr.  CoxxELL.  Well  it  was  not  stricken  out,  though :  was  it  ? 

Mr.  TixGLEY.  Xo:  It  was  pernntte<l  to  go  in  because  the  commis- 
sion IS  not  bound  by  the  strict  rules  of  evidence  commis- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1383 

Mr.  CoNNELL.  No;  of  course  not. 

Mr.  Warren.  Is  the  commission  making  a  valuation  now  ? 

Mr.  CoxxELL.  No. 

Mr.  AixEY.  May  I  ask  a  question?  I  think  the  mayor  would  be 
very  glad  to  answer  a  question  or  two,  and  while  I  do  not  wish  to 
interrupt  the  line  of  your  thought  and  I  have  some  hesitancy  as  to 
the  propriety  of  my  asking  any  questions  with  respect  to  a  matter 
which  is  still  pending  before  the  public-service  commission,  I  think 
though  the  mayor  would  like  to  tell  you— and  I  will  put  it  in  the 
form  of  an  interrogatory  to  him — that  the  commission's  decision  was 
that  the  rate  of  6J  cents  or  four  tickets  for  a  quarter  or  7  cents  flat 
fare  should  go  into  effect  for  the  period  of  one  year. 

Mr.  CoNXELL.  Yes. 

Mr.  AixEY.  The  6J  cents,  however,  to  ^o  into  effect  only  for  the 
first  six  months  and  then  the  question  of  its  retention  would  be  de- 
termined by  the  riding  habit  as  developed  under  that  arrangement. 

Mr.  CoxNELL.  Correct. 

Mr.  AixEY.  And  it  was  also  directed  that  an  inventory  and  an  ap- 
praisal be  had  of  the  physical  properties  ? 

Mr.  CoxxELi..  Correct. 

Mr.  AiXEY.  So  that  we  could  pass  upon  the  question  as  to  whether 
there  was  this  overcapitalization  and  as  to  whether  or  not  there  was 
physical  property  to  support  an  increase  in  rates. 

Mr.  CoxxELL.  That  is  right. 

Mr.  AiXEY.  I  believe  that  is  correct. 

Mr.  CoxxELL.  That  is  correct. 

Mr.  AiXEY.  And  do  you  also  recall  that  at  the  end  of  Mr.  Wil- 
cox s  testimony  he  stated  in  answer  to  an  interrogatory  on  the  part 
of  counsel  for  the  railway  company,  I  think  it  was,  that  his  investi- 
gation ot  the  books  was  not  sufficient  to  justify  therefrom  the  bas- 
ing of  any  rate,  but  only  sufficient  to  evidence  to  his  mind  and  upon 
which  to  predicate  an  argument  to  the  commission,  that  a  valua- 
tion was  necessary  before  permanent  rates  should  be  made?  You 
recall   that,   do   you  not? 

Mr.  CoxxELL.  Correct.  I  do  not  want  to  make  any  mistakes,  Mr. 
Chairman.    That  will  be  all? 

¥^;  -"^Vi^^-.  I  tlii»l^  the  mayor  has  stated  the  matter  very  fairly 
and  frankly,  indeed.  . 

^il;.f  ^^'^''''^^-  "^^^^^^  ^^'^^^  ^^^^  ^^  "^  t^^e  data  before  this  commission. 
(VVitness  excused.) 

The  Chairmax.  Mr.  Ogburn,  have  you  anything  else  to  present 
this  evening? 

Mr  Ogburx.  One  or  two  communications  I  think  should  be 
brought  to  the  attention  of  the  commission. 

One  IS  a  telegram  from  Mayor  Thompson,  of  Chicago.     I  have 
not  It  with  me,  but  he  expresses  his  regret  that  he  can  not  be  here 
Jle  expected  until  the  last  moment  to  come,  but  he  was  detained 
on  account  of  very  urgent  official  business. 

Ti^    )^yf  ^V\  ^^**^i''  '^  Poi'tion  of  which  I  should  like  to  read,  from 
Ui\  Otto  Kahn,  of  New  York,  in  which  he  says : 

,,.  V^W^!*^'^*l^^  ^""y  «»e  fur-miching  iniDortance  of  the  problem  which  your 
clistinguished   c()iiiinis.sioii   is   iuvestigatinj;  and    the   line  public   spirit   of   the 
inenibers  of  the  eoniinission  in  devoting  their  time  and  thought  to  that  task 
I  realize,  accordingly,  that  it  is  incumbent  upon  every  citizen  to  comply  with 


1384    PROCEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION.      ' 
X.!^V  would  t'™;n«,v'mf,Jo„r^^^^^^    '"'?V\   ''  ^  •''■"'•*»«•  """-"ver. 

And  then  he  discusses  tlie  steam-raihoad  question 
J!T\  )^?*V  «*A'»>any.  N.  Y.,  said  that^.e  desired  to  be  lepre- 
Ct't:\?p\VsSl;.''"'  ''^  "^'^•'^  ^^«"^'—  SanCCof'rw 

Congi-essman  Sanford  wrote  that  the  only  thing  he  could  brin.-  to 

SYS'T.   S!  Ar"''""  "'^^  in  refei^ncei  local  concE: 
jn  jiiDany   that  the  Albany  company  has  within  tlie  oast  vear  rp 
ceived  an  increase  in  fare  of  from  5  to  6  cents,  and  that    hev  have" 
wi  hm  the  past  few  weeks  adjusted  their  difficulties  wkh  thmr  em 

^  C'irsilThS'el?  "7-  r'"^t\be  Pleasa„t  and  i.a^io'u". 
«eie  IS  soinetlang  else  which  probably  shou  d  be  broucht  to  vour 

TcZ'l'f  n-,''  re^o'l'tion.  adopted   by  the  Central  Labor  Union  of 
Kansas  City,  m  winch  it  calls  attention  to  the  fact  that  the  Cnsns 

I  believe  those  are  the  only  communications, 
o'clock  t"mrrow  morning  ""''''°  """  '"""''^  "'^^""'"^'^  """'  '" 
FrlSTS  lt\Xu0^oKa^tr— *  ^^^  ^"^^  "^^ 


Washington,  D.  C,  August  IS,  1919—10  a.  m 
Met  pui-suant  to  adjournment. 
Present:  Parties  as  before, 
in  J''^  Chairman.  Mr.  Ogbum,  who  is  our  first  witness  this  morn- 

ren^;3?=rkT^w5trD.l^^^^^  ^^^^  ^----  of 

STATEMENT  OF  MB.  WIIXIAM  D.  B.  AINEY. 

Tn^f"!  ^^^Y:  "^u-   Chairman  and  gentlemen  of  the  commission  • 
In  Oder  not  to  be  overdiscursive  I  sliall  follow  my  not~dTf  at 

jh.^d'jo'KtX?r  ""^  ^^'^'^  ^"^  '^-^  *»  -k  I  ^^^^  -;* 

a  distinguished  service  which  you  are  perfimingrforrin^iaiately 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1385 

are  the  interests  of  all  the  people  connected  with  the  well  bein<y  of 
these  railways  that  interference  with  the  functionings  of  the  latter 
in  their  public  service  works  an  injury  to  an  immense  majority  of 
our  citizens,  and  I  count  with  great  confidence  upon  the  helpfulness 
of  your  deliverances,  the  conclusion  of  your  labors. 

Without  adequate  electric-railway  service  the'conomic,  social, 
and  industrial  life  of  the  Nation  is  seriously  affected  if  not  para- 
lyzed. Its  continuance  upon  a  sound  and  efficient  basis  is  of  para- 
mount importance,  and  that  continuance  can  not  be  assured  to  the 
public  without  affording  to  these  companies  adequate  revenues 
enabling  them  to  produce  it. 

My  acceptance  of  your  invitation  to  appear  before  vou  is  not 
predicated  upon  the  assumption  of  the  possession  of  aiiy  fund  of 
knowledge  on  my  part  which  would  enable  me  to  present  to  you  a 
four-coniered  plan  by  the  application  of  which  the  difficulties  sur- 
rounding  the  railway  would  disappear.    I  shall  content  myself  by 
suggesting  for  your  consideration  a  line  of  inquiry  which  I  believe 
has  m   it  elements  of  substantive   helpfulness.     I   have   some   ob- 
jection of  placing  myself  in  the  position  of  a  mere  doctrinaire  and 
an  abhorrence  for  the  vacuum  of  iimnature  theories.     I  am  con- 
vinced,  nevertheless,  after  some  careful  consideration  of  the  diffi- 
culties toward  which  you  are  devoting  your  attention,  that  there  is 
no  single  plan  of  general  applicability  to  all  companies  and  to  all 
localities  and  to  all  conditions.    I  can  not  accede  to  the  suggestion 
that  you  have  a  problem  before  you ;  on  the  contrary,  I  must,  with 
clue  deference  to  these  distinguished  gentlemen  who  differ,  insist  that 
you  are  confronted  by  several  problems  predicated  upon  different 
tactors  and  requiring  various  answers  as  differentiating  circum- 
stances play  upon  particular  companies  and  localities. 

If,  then,  I  may  with  full  appreciation  of  these  problems  as  thev 
affect  the  railway  and  the  public  help  in  clearing  away  the  under- 
brush, so  that  we  may  obtain  an  unobstructed  vision  into  tlie  fields 
beyond,  I  shall  have  at  least  fulfilled  the  actuating  purpose  of  my 

.1  ^'ii;f-  There  are  widely  varying  conditions  both  with  respect  to 
the  ^tate  laws  and  the  economic  policies  enforced  therein  under 
which  electric  railways  are  permitted  to  operate. 

becond.  Within  each  State,  the  localities  which  these  companies 
serve  vary  so  radically  as  to  prevent  a  conclusion  which  we  miorht 
reach  with  regard  to  one  being  applicable  to  another. 

ihircl.  Ihe  companies  vary  with  respect  to  their  corporate  history, 
the  circumstances  under  which  their  roads  were  constructed,  and  the 
extent  and  character  of  the  population  which  they  serve 

xNecessarily  the  increases  in  cost  of  operation  will  not  equallv  affect 
the  net  returns  of  all  these  companies;  and  so  we  may  have  5,  6,  7, 
quateTeUims!'  '"''  ^"""^  reasonable  and  severally  yielding  ade' 

Tii WW "^"^  ^^  ^}'''^''^  ^"^1^^'^  ""^r^""'  however,  if  we  did  not  recog- 
nize that  every  electric  railway  of  the  land  has  felt  the  heavy  weight 
of  these  increases.  They  exist  and  must  be  paid.  It  is,  thereforfa 
part  of  our  duty  to  ourselves,  and  to  the  public  which  need  them  'to 
hi' iVZ^''^^''  selfish  interests  if  for  no  other  reasons,  in  maintain- 
ing the  railways  as  efficient  public  servitors.  - 


''If™ 

I 


I' 


I* 

i 


1386    PROCEEDINGS  Oi'  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

te,Sa?s  zniuiir  ^~"^-*^- ''''-'' '"'  ""^^  ^"^^^^^^ 

laUrodd,  ■which  is  one  of  the  paramount  pioblems,  is,  te  a  certain  ex- 
tent, a  psychologic  one;  and  it  leads  me  to  make  this  very' general 

cnJTme?  ''       "''*'''*  *°  "''  ""'*"*^'  "^  "*^  P"^"*=  ""^^^  at^tlfe  Jres- 

m^eriaT  wnfor  'j?'^"«,f  «}>>•  ^r-^  «™il''i-  to  those  which  affect  the 
^pnt^l  f.r  i'  "'■  ^'^^  ,*""''  ^"^'"g  •'  '^«e»'s  as  if  the  centrifugal 
mental  forces  have  gained  ascendency.    We  are  inclined  to  be  t 

oi7thnkil"''^v"flV"  our  attitudJand  we  lack  cohesiSneL t 
om  thinking.     We  fly  away  from  common  ground  and  we  deoen- 
trahze  in  thought  and  purpose,  but,  in  the  inevitable  swin^  ofthe 
pndulum,  we  are  bound  to  come  back  to  the  place  whercentdLtal 
influences  again  e.xert  themselves  and  attract\,s  to JethertTa  unity 
of  broadmmdedness   to  the  place  of  concensus  of ^opinbn     I  law 
groat  confidence  in  the  fairmfndedness  of  the  American  people  when 
they  are  rightly  informed.    The  problems  which  youTre  eS^S  in 
solving  are,  m  the  last  analysis,  tlieir  problems;  Wd  f.aSsf  and 
dehmteness  are  prerequisites  to  public  acceptance.        "*'"''"*'*"  »"'' 
Ihe  public  which  constitutes  the  patrons  and  provides  the  rcvo 
nues  will  not.  m  my  judgment,  have  the  least  dilcultyln  a<.ree'nt 
with  the  carriers  that  the  increased  costs  of  operation  ou4t?r^lT^ 
.yes,  must  be-reflected  in  the  rates  of  fare  wlifch  thev'are  c-iiTpTi 
upon  to  pay.     Neither  will  they  controvert  the  fact  diatraHw^v 
service  IS  a  national  necessity  in  the  con.luct  of  the  bus  ness  and  ^n 
providing  for  the  convenience  of  the  country;  but  time  are  oU.ei 
natters  concernmg  which  tliey  are  in  doubt  and  is  to  which     ey  1    ve 
not  been  advised,  and  every  man  is  inclined  to  resolve  the  doubt    n 
his  own  more  immediate  interest.    They  are  entfttl  to  tl  e  Sur 
ances  which  can  only  come  to  them  through  defini  e  "lea i^c  t    n 
foruKition.  freed  fro.n  vague  generalizationsT  If  I  a  ,,  ab Ic  to      d^e" 
the  psychological  influences  which  are  at  work  agains    the  p  l.ffc 
acceptance  of  increased  fares  are  that  there  is  a  belief  that  some  com 
panics  are  overcapitalized  or  are  extravagantly  manaSKb^ 
the  incomes  are  diverted  and  the  public  overburdened     Ths  is  the 
psjcholo^  of  the  case;  and  no   more    imjxntanr  service    can      o 
•endered  by  you  than  by  the  enunciation  of  the  basic  principes  on 
iiiereascd  allowances.  ^    mc^ipit^b  on 

In  this  connection  and  as  emphasizing^  this  point,  let  nie  exDrcs<=; 
n  no  unfriendly  spirit  of  criticism,  my  astonishment  at  the  irf: 
eei-titude  and  c'onfnsion  with  respect  to  remedies  wliich  appear  in  th-^ 
testnnony  of  the  railways  and  allied  interests  which  hXTe^n  pre 
s^^nted  before  you.  Notwithstanding  many  notable  and  instructive 
statements,  there  was  generally,  on  the  part  of  the  rai  ways  a  rc- 
Jo'bf  doL^^^      '^  '^^^"'^'^  ^^'  ^•^'^^^^•"^•tive  suggestion  as  to  wh^at'c;l,ght 

I  might  interject  that  I  have  read  with  verv  much  interest  and 
with  very  genera    approval  the  statements  of  M,-.  Pardee    but  it^^^^^ 

T\a}s,  ci  lemarkable  lack  of  cohesive  or  constructive  sugjrestion  as  to 
whaf  ought  to  be  done.    And  I  frankly  say  to  them,  a^  I  urge  upon 


PROCEEDmCS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1887 

Tou,  that  it  occurs  to  me,  to  clarify  the  mental  situation  no  more  im- 
portant service  could  be  i-endered— not  only  to  them,  but  to  the 
i)ublic— than  if  the  railway  association,  say,  were  to  lay  before  you, 
as  officially  as  they  could,  a  definite  idea  with  respect  to  the  basis 
upon  which  they  would  seek  and  demand  relief  from  the  public.  It 
would,  at  least,  afford  us  a  fair  opportunitv  for  discussion.  It  would 
afford  you  all  the  benefit  that  would  arise  if  it  were  a  legal  case 
through  definiteness  in  the  pleadings.  It  would  relieve  many,  like 
public  service  commissions,  of  some  difficulty  in  presenting  \heir 
views.  We  are  not  at  all  advised  as  to  whether  the  position  which 
we  take  is  antagonistic  to  the  railways,  or  whether  it  is  in  keepino- 
and  in  harmony  with  their  views.  ^ 

In  fact,  I  have  not  yet  been  advised  as  to  just  what  basis  it  is  that 
the  railways  would  seek  before  you  to  have  established  as  their  theory 
of  that  which  is  their  due  and  would  enable  them  to  be  the  most 
efficient  public  servants. 

The  Chairman.  Just  on  that  point,  Mr.  Ainey,  and  before  you 
proceed  with  your  statement  further— in  connection  with  the  suo-- 
gestion  just  made,  will  you  look  over  the  recommendation  which*!: 
now  hand  to  you  and  see  if  it  contains  a  policy  or  plan  which  has 
any  elements  which  you  appix)ve  [handing  paper  to  Mr.  Ainey]. 

Ti^^^y;,^^^'''^^-  P^  y^^  ^^^^^'^  "^^  t^  pause  long  enough  to  read  this, 
Mr.  Chairman? 

The  Chairmax.  If  you  will.  Because  it  is  right  in  connection 
witli  your  suggestion. 

Mr.  Ainey.  To  answer  your  question  categorically,  I  say,  no*  it 
doe^  not  meet  the  situation  which  confronts  us. 

To  answer  that  I  object  to  the  suggestions  contained  in  that  paper 
as  being  either  wise  administi-ative  suggestions  or  applicable  in  cer- 
tain instances  to  the  ultimate  solution  of  the  questions,  I  find  mvself 
large  y  in  harmony  with  everything  that  has  been  said;  and  to  safe- 
guard myself  I  ought,  however,  to  say  that  in  the  cui-sorv  readinor 
of  It  there  are  phrases  and  statements  to  which  I  might  take  some 
exception ;  but  following  it  in  the  major  way,  my  mind  runs  in  har- 
mony with  It.  But  I  am  trying  to  dii-ect  mV  thought  at  the  present 
time  to  the  relationship  between  the  public  and  the  companies 
whereby  a  riding  public  willing  to  pay  rates  of  fare  may  be  found. 

A  very  simple  statement  of  what  the  railways  ask,  spread  about 
across  the  land,  to  my  mind,  would  be  very  helpful,  without  which  a 
statement  of  that  kind  will  be  of  no  l)enefit  in  securing  the  o^eneral 
approval  of  the  public.  ^     ^^^^ 

You  had  an  illustration  last  evening.  The  distinguished  mayor 
ot  fe<?ranton  was  here,  and  you  Siiw  very  clearlv  the  attitude  of  his 
mind  with  respect  to  that  Not  a  single  thought  that  is  suggested 
m  that  paper  would  clarify  his  views  with  respect  to  the  pi^blein 
Which  he  thinks  confronts  the  people  of  Scranton  and  whose  voice 
is  his  voice. 

Will  you  permit  me  to  follow  this  a  little  further;  and  I  think 

possibly  you  will  be  able  with  a  little  more  clarity  to  see  what  I 

ha  ve  uppermost  in  my  mind,  and  then,  if  you  desire,  we  will  resume 
that. 

The  Chairman.  I  would  like  to  have  the  i-ccord  show  that  the 
plan  which  I  submitted  to  you  was  that  offered  by  Mr.  Clark,  at  one 
ot  the  former  hearings. 


1388    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  It  is  my  iind^-standin^  that  that  is  the  plan 
recommended  by  the  companies.    Is  it  not,  Mr  Warren «    ^ '"^  P'^'' 

Mr.  Warren  I  can  not  say  that  it  is  officially  recommended  by 
the  companies,  but  it  is  submitted  by  one  who  is  very  much  in  touch 

dSry      '""^''"^"^  '"^  ''''^  '^''  ''''''  ^^  "^^^y  members  of  the Tn 

nofni'V  w"?""*  V"""'  """r^'"  T^''''^  y^"  ^^^^^^  receiyed  is  exactly  the 
point  that  I  am  trying  to  make— that  you  will  not  win  public  favor— 
and  I  understand  from  the  statements  that  haye  been  ma  le  that  that 
IS  what  we  are  all  seeking  to  do;  the  Public  Service  Snm  s^don  ^^^ 

tW^u'iri''-''  '""i^'^''  *^^*  '}  "^^y  ^'^'^^^^  i^«  decisions  in  a  way 
that  will  bnn^  about  results  favorable  to  the  retention  of  the  com- 
panies as  efficient  publ  c  servants,  is  exceedingly  cWoiis  that  aU 

deJi^ionT«r%'^'"  ^^^?  P.f  V^  ^"PP^^"^-  ^^^>  ^  Without  that  our 
decisions  are  of  no  use  to  that  company.     And  I  frankly  sny  that 

picking  up  the  morning  paper  and  reading  of  the  delivLanLs  be^ 

fore  you-it  may  be  and  I  doubt  not  that  tlfere  have  b^n  very  splen^ 

did  suggestions  made  by  this  man  or  that  man;  but  on  the  other 

hand,  there  have  been  some  very  extreme  stateinents  niade  before 

you;  and  how  are  the  public  in  the  absence  of  some  unHy  of  actbn 

and'savfu^"  t>?n  'f '  ""'"%'  ^"  ''''.  presenting  of  a  ^nlre  e  p  Z 
and  saying  thus  far  we  will  go  and  no  further,  and  we  ask  thic; " 
and  then  seek  to  gain  public  support  of  that-1  o'^arthe  pub  ic 
to  differentiate  and  come  to  a  just  judgment?  Because  in  the  final 
arialysis  the  thing  that  the  public-service  commiSs  do,  and  the 
things  that  you  will  say,  will  stand  or  fall  on  whether  they  will  be 
accepted  by  the  peopje  of  the  United  States.  They  hav^  T  veto 
power;  and  that  veto  power  is  in  withholding  patronage 

I  may  say  that  I  think  there  is  no  class  of  utiftti^s  no^^  certainly 
coming  under  the  jurisdiction  of  the  Commonwealth  of  Penn^S^^ 
that  are  so  who   y  dependent  upon  the  good  will  of  their  patmns  as 
are  the  street  railways.    Water  the  peopTe  must  have.    Elec^t^-  Xht 
to  a  certain  extent.     But  the  people  who  patronize  the  street  rai  way 
they  have  the  alternative  of  walking,  the  alternative  of  ridbg  in  thef; 
automobiles,  and  m  certain  instances  and  to  quite  an  extent  tley  have 
the  altei-native  of  the  jitney.     Therefore  the  railways  occupy  a  differ^ 
ent  relation  to  the  public  than  the  railroads  or  any  S  t^lLe  otW 
classes  of  utilities  I  have  mentioned.     If  they  are  to  succeed    thpv 
must  have  the  support  of  the  public.    They  m^a^  win  rn^Tud^^^^^^^ 
they  may  win  the  judgment  of  tMe  courts;  they  may  win  the  i Kent 
of  your  honorable  body  in  the  elaboration  of  their  problem "buT  at 
the  risk  of  redundancy  of  statement,  I  am  exceedingly  anxious  fn 
heir  interest,  and  exceedingly  anxious  in  the  interest  of  the  public 
that  the  public  and  the  railways  be  brought  together,  and  it  is  not 
because  I  am  desirous  that  they  shall  state  a  formal  method  by  wh?ch 
all  this  can  be  accomplished,  but  that  they  will  state  clearly  and  defi- 
nitely and  m  very  simple  terms  what  they  ask,  in  a  way  that  the 
public  will  understand,  and  that  this  be  done  in  connection  with  the 
pi-oniulgation  of  whatever  conclusions  you  reach;  otherwise  they  will 

be  of  no  benefit,  any  more  than  decisions  of  the  publ ic-service  com 
missions.  ^  -^^m.^k.^.k^ui- 

We  may  order  a  10-cent  fare  because  we  believe  it  is  absolutely  just 
to  do  so.    If  people  do  not  accept  it,  what  is  the  result  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1389 

I  fear  I  have  gone  over  that  a  little  too  much  and  taken  up  too 
much  of  your  time  in  this  discussion. 

I  have  no  doubt  that  these  many  suggestions  which  have  been  made 
before  you,  like  the  suggestion  of  Mr.  Clark,  are  the  result  of  an 
attempt  to  nationalize  this  subject,  to  generalize  where  generalization 
was  impossible,  and  to  hazard  conclusions  which  might  have  applica- 
tion in  some  State  and  in  some  localities,  but  not  in  all. 

Take  the  following  which  were  carried  extensively  in  the  public 
press  and  consider  their  effect  upon  the  car  riders  whose  good  will  it 
is  admitted  by  the  railways  must  be  won :  I  have  gathered  from  a  hur- 
ried perusal  of  your  hearing  records  that  they  range  from  the  ad- 
vocacy of  municipal  ownership,  not  as  an  effective  remedy,  but  on  the 
penalizing  theory  that  it  was  bad  and  that  the  public  when  suffi- 
ciently punished  would  in  a  repentant  frame  of  mind  give  more 
friendly  support  to  private  ownership. 

To  pause,  with  respect  to  that  statement,  I  have  no  doubt  what- 
ever that  every  railway  or  every  municipal-ownership  man  who  has 
given  careful  thought  would  repudiate  that  as  a  statement.  But  that 
has  been  carried  in  the  press  of  our  land  with  a  great  deal  more  em- 
phasis than,  possibly,  the  really  substantial  arguments  that  might 
be  advanced  with  respect  to  the  municipal-ownership  program.  And 
I  am  simply  trying  to  keep  our  minds  directed  to  the  psychologic  re- 
lation of  rider  and  railway. 

Then,  it  has  been  stated  very  strongly  before  you,  and  the  news- 
papers have  carried  it  with  considerable  emphasis,  that  the  public 
should  pay  a  fair  return  on  watered  stock.  Well,  you  know  how 
quick  the  American  people  are  to  seize  those  expressions.  We— 
all  of  us  m  America— are,  I  think,  too  apt  to  seize  particular  ex- 
pressions, and  thereby  overgeneralize.  But  the  effect  upon  the  pub- 
lic is  not  a  good  one,  and  to  overcome  that,  I  am  coming  back  to 
the  thought  that  I  believe  there  is  no  better  service  that  the  rail- 
ways could  furnish  for  themselves  in  the  course  of  these  delibera- 
tions than  a  clear-cut  basis  of  that  beyond  which  they  would  not 
ask  and  that  to  which  they  think  they  would  require. 

There  have  also  been  indirect  statements,  if  not  direct  ones,  intimat- 
ing that  pubhc-utihty  commissions  were  politically  created,  and  as 
such,  with  ears  continually  to  the  gi'ound,  were  too  timid  or  dis- 
inclined to  grant  the  full  measure  of  relief  to  which  the  railways 
were  entitled.  It  is  such  expressions  that  bring  doubt  in  the  pub- 
Jic  mmd  as  to  the  good  faith  of  these  companies  and  undermine 
the  public  s  confidence  in  the  integrity  and  fair-mindedness  of  com- 
mission decisions.  Particularly  is  this  likely  to  be  so  when  these 
decisions  support  increases. 

Again  emphasizing,  as  I  believe  I  have  the  right,  my  full  and 
sympathetic  appreciation  of  their  difficulties,  I  think  I  should  be 
permitted  to  state  that  it  appears  to  me  that  the  electric  railways 
have  pyramided  an  admittedly  serious  situation  which  requires  at 
your  hands  most  careful  and  helpful  attention  by  at  least  a  mild 
form  of  hysteria  which  does  not. 

Suggestions  that  patrons  pay  dividends  on  watered  stock  or  on  capi- 
talized hopes,"  that  dividends  on  all  capital  be  doubled  because 
of  the  lessened  value  of  the  dollar,  do  not  go  far  in  winning  pub- 
lic conlidence  or  gaming  public  support  when  read  by  these  pa- 


1390    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

troiis  in  daily  newspapers.  It  necessarily  detracts  all  our  minds 
from  the  pomt  m  issue— from  increased  costs  of  maintaining  serv- 
ice to  mcreased  dividends  to  stockholders.  If,  therefore,  the  com- 
panies which  are  burdened  with  ovei-capitalization  or  unnecessary 
corporate  complexity  will  put  their  houses  in  order  fairly  and  fear- 
lessly they  will  have  laid  the  foundation  upon  whicli  they  may  es- 
tablish public  confidence  and  receive  public  support. 

^u  T?  y*'^^"^^^"  ^'^"^^^  *^^'  rate-making  purposes,  in  every  State  in 
the  Union  where  i-egulatory  authority  is  exercised,  rests  primarily 
under  the  law  upon  original  costs  and  reproduction  costs  new;  in 
other  words,  upon  the  fair  value  of  the  property  devoted  to  public 
service.  Lpon  that  fair  value  every  company  is  entitled  to  receive 
a  tair  rate  of  i-eturn  in  addition  to  the  costs  of  operation,  includ- 
ing the  mci-eases  m  labor  and  material  items  and  a  reserve  fund  for 
depreciation ;  and  I  am  quite  content  to  add  an  allowance,  when  tan- 
gibly expressed,  for  economies  in  operation,  and  I  believe  these 
allowances  should  be  generous  and  not  trimmed  to  the  bone. 

Are  the  electric  railways  willing  to  stand  actually  as  well  as 
theoretically  upon  these  revenue  grounds?  If  so,  I  need  make  no 
promises  for  the  Pennsylvania  l\iblic  Service  Commission.  Its 
deliverances  from  time  to  time— and  some  of  which  have  been  spe- 
cifically called  to  your  attention— are  sufficient  to  establish  that  it 
will  fearlessly  and  justly  perform  its  duty  with  due  regard  to  the 
carriers  and  the  public. 

Of  course,  operating  costs,  including  increases  for  labor  and 
inaterial,  must  be  met  out  of  the  imposed  rates  of  fare.  The  public 
have  no  just  ground  for  objecting,  nor  can  I  conceive  of  a  public 
service  commission's  placing  an  obstacle  in  the  way;  but  the  prob- 
lem is  not  fully  stated  in  public's  estimation  by  calling  attention 
to  the  heavy  increases  m  operating  costs  and  to  the  materially  lower 
net  return.  Between  these  two,  to  their  minds,  are  numerous  inter- 
vening factors,  and  inquiry  into  which  we  must  turn  our  attention 
it  we  would  emerge  from  the  chaos  of  the  pi-esent  situation. 

When  an  epidemic  touches  a  locality  its  effect  upon  the  individual 
depends  m  part  upon  any  organic  or  fundamental  physical  weakness 
which  that  individual  possesses.  It  is  an  axiom,  I  think,  that  dis- 
ease usually  makes  its  most  sinister  attack  upon  the  weaker  organ 
of  the  patient.  A  physician  in  diagnosis  would  be  recreant  if  he 
did  not,  therefore,  take  into  consideration  these  fundamental  diffi- 
culties in  each  patient.  While  analogies  are  not  always  logical,  it 
is  without  question  that  the  high  costs  of  labor  and  material  the 
lessened  purchasing  ix)wer  of  the  dollar,  perhaps  the  changing  rid- 
ing habits  of  the  people,  have  borne  down  upon  the  electric  railway 
interests  of  the  land  most  heavily  in  places  where  there  are  funda- 
mental weaknesses  in  corporate  history,  management,  or  general 
conditions. 

Shall  we  stop  short  of  inquiring  into  these  weaknesses?  If,  then, 
these  higher  costs  are  liable  to  be  continued,  the  companies  in  order- 
to  survive  and  meet  the  responsibilities  of  the  new  conditions  under 
which  they  are  called  upon  to  oi^rate  must  not  deceive  themselves. 
They  must  not  gloss  over  any  organic  difficulties,  if  they  exist,  but 
even  at  the  expense  of  much  travail  subject  themselves  to  rigid 
stlf-examination.  It  has  l)een  remarked  before  you,  I  understand, 
that  some  companies  have  capitalized  "hopes."    It  would  be  inex- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1391 

pedicnt  for  me  to  name  or  even  have  in  mind  particular  companies; 
but  making  a  composite  statement  of  several  to  which  my  attenticm 
has  been  directed,  let  me  inquire  what  you  would  recommend  to 
public-service  commissions  who  were  seeking  to  determine  the  fair 
return  in  the  cases  of  companies  which,  on  outlays  of  from  two  million 
to  three  million  dollars,  without  an  additional  rail,  spike,  car,  or 
dollar  of  investment,  capitalizing  such  properties  at  seven  or  eight 
million  dollars.  Where  increases  were  not  made  on  the  basis  of 
money  invested  or  upon  the  physical  value  of  the  proi)erty  devoted 
to  public  service,  but  the  then  or  anticipated  net  incomes  were  capi- 
talized, these  incomes  have  necessarily  been  lessened  by  the  increased 
costs.  Naturally  such  companies  do  not  wish  to  readjust  their 
capital  issues  to  meet  pi-esent  net  incomes  on  the  basis  they  were 
established,  but  they  now  desire  to  increase  their  income  to  mee*- 
their  former  increases  in  capital. 

The  payment  by  the  public  of  a  fair  return  uix)n  watered  stock  on 
the  ground  that  that  stock  had  passed  into  the  hands  of  widows  and 
orphans,  no  matter  how  just  or  equitable  it  might  appear  to  the 
advocate  of  such  a  policy,  nor  how  strongly  entrenched  in  law,  nor 
persuasive  the  argument  as  an  ad  kominem  appeal,  would  with  diffi- 
culty secure  a  consenting  riding  public  to  support  it,  and  v,ould,  of 
course,  require  changes  in  the  organic  law  of  every  State  regulatory 
body  of  the  land ;  for  valuation  for  rate-making  purposes  is  by  law 
based  primarily  upon  original  costs  and  reproduction  costs*^  new, 
neither  of  which  would  i-espond  to  such  a  suggestion.  Moreover,  we 
would  then  be  confronted  by  a  situation  in  which  the  company  whose 
capital  issues  bore  fair  relationship  to  the  value  of  its  property  de- 
voted to  public  service  faring  much  worse  than  the  one  burdened 
with  watered  stock. 

I  am  deeply  concerned  then,  as  a  public  official  charged  with  grave 
responsibility,  with  respect  to  the  matters  before  you  and  acting  in 
the  interest  of  the  public  and  these  companies,  that  the  carriers  shall 
]Dlace  their  appeal  for  relief  squarely  upon  the  only  tenable  and  legal 
gi'ounds  which  would  entitle  them  to  consideration  at  the  hands' of 
the  public-utility  commissions  of  the  land  and  not  predicate  their  de- 
mand upon  arguments  and  theories  which,  under  the  law,  as  it 
exists,  would  be  bound  to  close  the  door  of  helpfulness  of  every  re<ni- 
latory  body  of  the  Nation.  * 

If  we  are'  agreed  upon  the  legal  and  equitable  standards  for  fair 
value  and  a  fair  rate  of  return  as  the  basis  upon  which  the  railways 
are  entitled  to  relief,  then  I  submit  that  in  the  larger  aspect  there 
are  no  regulatory  difficulties,  except  perhaps  in  a  negative  sense, 
standing  in  the  way  of  an  adequate  solution  of  the  railway  problems. 
Tlie  equation  stands:  adequate  service  on  the  one  side  and  a  payinor 
public  on  the  other.  To  create  the  ideal  situation,  the  railway  com*-^ 
panics  and  their  patrons  must  be  brought  into  harmonious  relations 
in  which  adequate  service  is  rendered  and  reasonable  and  comi>en- 
satory  rates  are  paid. 

At  the  risk  of  being  trite  and  also  redundant — it  is  recognized 
(hat  ^ the  companies  must  have  adequate  revenues,  sufficient  to  pay 
the  cost  of  operation,  provide  for  proper  reserves,  and  to  yield  a 
fair  return  upon  the  value  of  the  property  devoted  to  public  service 
Ihe  public,  of  coui-se,  must,  out  of  rates  of  fare,  provide  such  i*eve- 


1392    PBOCEEDINGS  OF  FEDERAL  ELECTMC  RAILWAYS  COMMISSION. 

nues;  but  it  does  not  He  within  the  power  of  public  utility  c«nimis- 
sions  nor  .n  statutory  enactments  nor  with  the  deliverances  T your 
distinguished  body  to  provide  a  riding  public  wiUinc  to  nav  thi 

Krainrd  by  th^lnfr ''""T"?  *°  ^-^4^%  -quirSfet^iSnu's 
Snies     lii^Vv.^  £^'  «ffi«en7.  and  business  acnmen  of  the  com- 
r»,^,f,f;;„^  *"®      J  "*  ""y  ^*^'  <>i"der,  or  recommendation  of 

bf  nn.  r^  T  recommendatory  bodies,  municipalities,  or  legislatures 
Seir'^Sro.I'age'  "  ^^^^^''-^^-^  -*«'  i^r  tlfey  ma^  stiU^wiJhhold 
In  States  and  in  localities  where  statutes  or  municipal  ordininces 
have  fixed  rates  to  which  conipanies  have  heretofore  assene"l"nd 
which,  under  the  law  of  those  States,  are  beyond  thrreeuhto.v«» 
thority  of  comm  ssions  to  change,  the  harried  are  legaUnd  not  ad 
ministrative,  and  the  relief  must  be  found  by  appeals ..?o  the  ^u 
thorities  which  imposed  and  may  remove  those  b'uiiprr    H^ 
your  distingu^hed' body  generalL  over  such  condion^     fc'do 
not  obtain  mPeiinsy^vania.    They  do  not  exist  in  some  o  her  Stes 
It  was  held  by  the  Pennsylvania  Commission,  in  an  opbion  wh  ch 
I  had  the  privilege  of  preparing  (Wilkinsburg  case)    tl  at  notwith 
standing  the  constitutional  provision  authorising  munkbXtrs  to 
grant  or  withhold  consent  to  the  laying  of  tracks  uprreCnicU' 
highways   when  such  grants  were  made  and  accepted  bv^le  com 
l>an.es  with  conditions  fixing  the  rates  of  fare  to  be  clfarold    t'hl 
commission  had  authority  to  inquire  into  and  detern^ne  the  reason 
ableness  of  fidd  rates  which  were  in  excess  of  thoSpres^Hrefrbv 
ordinances.     That  opinion  has  recently  been  affirmed  bT  the  s^f 

SnilTff 'ff^rr^'  T^'""'  ''^'  ^"^••"''^  against ^im^sing 
x.^^^TJn  *V  ■  \  u^?l  ^'  '"&•>«•■  '■«*es  has  not  existed  in  PennsvK 
vania  since  the  establishment  of  the  public-service  commission  thp 
companies  file  their  rates  which,  upon  30  davs'  nXe  n.tom^ticnllv 
without  approval,  become  effective.  If  compraints  "re  fitd  )f ' 
afte"  PinT  '"^  ^''^^'  "'^"^  '""^  commissioners  TdeKanc: 

While  this  that  I  desire  now  to  briiiff  to  vonr  fiHaryr^^r.  -c      ^      -. 
n  the  right  place  with  respect  to°  thTCo'^my^tugh?,  it  "„^  Xd 
to  me  that  I  might  call  your  attention  to  an  element  in  thTpenn 
sylyanja  public  service  company  law  that  is  somewha    interiin"" 
It  is  that  all  agreements  between  municinalities  .mH  t^.Ii;  "^' 

companies  must  be  approved  by  the  publfc  i'rvU  co-Son"  H 
you  will  think  of  what  flows  from  that.  I  am  sure  you  w,"    be  annre 
?  n'!f  °5t'^«,l'^n«fits  that  result  from  that  feature  of  o,u  law  ffi" 
I  understand,  does  not  obtain  in  the  statutes  under  whidi  manv 
public  service  companies  of  other  States  operate.  ^ 

This  establishes  that  the  electric  railways  of  Pennsylvinin  «r» 
operating  under  ]eg.i  and  regulatory  conditions  Juite  different 
from  those  obtaining  m  other  States,  a  difference  which  wi^th  dn« 
deference,  I  submit  you  are  bound  to  note  in  v«^v!.  !!X  •  ^ 
Nearly  all  the  electrfc  carriers  of  the  State  were^Zrat^n'  "''T 
municipal  ordinance  fixing  rates  of  f  irt^I  ,„P«n  thT  ^  ""''*'" 
ing  under  ordinances  whic-h  aSdatecutTL  rbHshm?ntT^^^^ 
lic^eryice-commission  law ;  and  by  the  decision  to  w^ifch  I  &. 
called  your  attention  in  the  Wilkinsburo-  case  wp  hoW  f  il  7  ♦u 
ordinances  did  not  preclude  their  increa'^n^^i^rrati^tn  thesi 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1398 

increases  were  just  and  reasonable;  and  consequently  all  the  in- 
creased rates  that  now  obtain  in  the  State  of  Pennsylvania  are  follow- 
ing  the  justification  which  they  have  under  the  decision  of  the  public- 
service  commission  in  the  case  referred  to,  which  has  been  sup- 
ported by  the  superior  court. 

Pern^it  me  to  excerpt  from  the  report  in  one  case  where  there  was 
a  rate  fixed  by  ordinance.  The  commission  made  this  following  pro- 
nouncement upholding  a  T-cent  fare  as  against  a  5-cent  municipally 
imposed  rate:  •^ 

To  expect  public  service  of  these  carriers  without  permitting  them  sufficient 
revenues  to  produce  it  is  as  fallacious  in  economic  suggestion  as  to  demand 
bricks  without  straw  or  to  require  faithful  toil  from  the  muzzled  ox. 

It  is  therefore  a  matter  of  ordinary  business  prudence  and  sagacity  that 
the  public  generally  should  come  to  an  appreciative  understanding  of  what 
that  service  means  to  the  industrial  and  commercial  life  of  the  State,  and  to 
each  locality  within  it,  and  to  recognize  that  the  terms  upon  which  it  can  be 
continued  for  their  use  and  enjoyment  are  that  it  shall  receive  at  their  hands 
as  ratepayers  sufficient  to  furnish  it. 

If  the  public  are  to  be  adequately  served,  railways  must  be  permitted  to 
earn  out  of  imposed  rates  of  fare,  revenues  large  enough  in  amount  to  pay 
operating  costs,  a  fair  return,  and  to  provide  for  the  Maintenance  of  the 
property,  provided  always  that  the  rates  imposed  are  not  unjust  or  unreason- 
able. 

I  call  that  to  your  attention  that  you  may  understand  how  the 
Pennsylvania  Commission  is  attempting  to  support  its  decisions  by 
presenting  the  fairness  of  them  to  the  man  who  is  the  car  rider  and 
whose  judgment  as  to  conditions  is  not  going  to  be  influenced  in 
large  measure  by  the  hearings  that  are  had  except  as  the  results 
ot  those  hearings  are  carried  from  day  to  day  in  the  press.  And  I 
am  calling  these  matters  to  your  attention  for  the  further  purpose 
of  stressing  two  points,  that  Pennsylvania,  both  in  its  law  and  under 
the  commission's  broad  policy,  has  dealt  fairly  with  the  electric- 
railway  interests  of  the  State,  and  to  establish  before  you  that  regu- 
latory authority  has  not  stood  in  the  way  of  these  interests  obtain- 
ing adequate  returns. 

In  that  connection,  you  will  be  interested  to  note  that  we  have  up- 
ward of  130  operating  companies  in  the  State,  with  about  5,000  milea 
of  track ;  and,  as  I  am  informed,  not  more  than  8  are  in  the  hands  of 
receivers.  Of  these,  7  have  180  miles  of  track,  and  one  has  605  miles. 
In  other  words,  the  mileage  all  hovers  about  the  one  company.  For 
two  of  these  companies  receivers  were  appointed  in  early  1914  They 
operate  39  miles  of  track,  so  I  am  informed.  Over  two  of  them  re- 
ceivers were  appointed  in  1915,  and  they  operate  60  miles  of  track 
And  the  remainder  were  appointed  later. 

After  some  slight  examination,  and  with  some  hesitancy  about  ex- 
pressing an  opinion  with  respect  to  individual  companies,  even  in 

:  >our  presence,  I  feel  it  not  unfair  to  these  companies  or  to  the 
commission  or  to  the  public  to  say  that  in  every  instance  where  re- 
ceivers were  appointed  it  was  due,  in  very  large  measure,  to  special 

J,  circumstances.  In  one  of  these  cases  it  was  a  notable  special  cir- 
cumstance. A  small  company  had  a  railway  accident  in  which  a 
very  large  number  of  persons  were  killed,  the  resultant  damages, 
as  determined  in  the  court,  wiped  out  the  capital  of  the  company ; 
and,  of  course,  a  receivership  was  absolutely  essential. 

160643"— 20— VOL  2 26 


■"'11 


ji 


m 


m 


1394    PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

ronnPp!i!fH  wfff *  f*  these  companies  I  ain  sure  tliose  most  intimately 
connected  with  its  activities  would  not  seriously  disagree  with  rae 
m  the  statement  that  the  difficulties  of  tljat  compa^  aro^  and 
wei-e  rapidly  focusing  long  prior  any  of  these  inc?ea4  to^hkh 
you  are  devoting  your  attention  at  the  present  time.  I  think  the 
Xlt^^'"  ^'f  !f  ^  «f  tl'^^t  '^'^^P'^^y^  by  rLson  of  its  corporate  com 
Rei^^Lt^^  t^tlf  «ff  "^ft'^ces,  was  leading  it  in  that  direction. 
Kegulatory  authority  when  properly  exercised  is,  therefore,  not 
a  primary  obstac  e  confronting  ttese  utilities.  In  fact,  in  some 
W^nl  nf^f  States  tlie  want  of  such  authority  is  manife^t,Td 
because  of  it  coiupames  have  not  been  permitted  perhaps  to  increase 
rates  where  rates  ought  to  be  increased.  ^     ^        mciease 

In  recent  addresses  I  have  adverted  to  the  fact  that  no  two  com- 
panies have  the  same  corporate  and  financial  history.  Their  rail- 
ways have  been  constructed  under  widely  varying  conditions-  thev 
«nve  different  types  of  localities  in  whicSi  the  confes^C of  p,^pX 
tion,  geographic  and  topographic  features,  and  riding  habits  olav 
important  parts  Take  two  of  our  largest  milway  com|anies:  C^ 
has  been  affected  by  the  increases  in  labor  and  material.^  In  the  one 
the  company  has  met,  in  fact,  anticipated,  the  demand  for  increa^d 
wages,  has  continued  to  pay  accustomed  dividends  on  i^^  sto^k  and 
mterest  on  ite  bonds,  and  it  has  not  increased  its  rates  of  fare^wWch 
are  continued  at  the  basic  5-cent  rate.  ' 

Tlie  Chaibman.  Name  the  company 
Mr.  AiMiT.  The  Philadelphia  Rapid  Transit  Co. 
1  quote  briefly,  m  passing,  from  one  of  the  newspapers  of  Phila- 
delphia of  Friday,  August  8,  with  respect  to  that  company 

fo«rr  ';.£Tt'  !^%s^t^S^x^^  F^ 

Elevated  motormen,  61  cents  per  hour. 

Surface  motormen  and  conductors,  58  cents  per  hour 

.iirbrSe^^i^  coSmrwTthnL'pTn  ^kTSrf,/"  ^^"^.^  departments 

wa^^S"^^t.^.^r]^:l.XS^^^  or 

xvn^es  and  other  costs,  as  against  the^lternative  of  rTfsing  faref  "^ 

src^oTo7Set=^^"^  "^^ "~  ^'  ^^^-^^^^S'^::s^^^ 

Now,  the  other  case :  The  second  largest  company— the  comoanv 
tt  S^'lVr f.  '^  ^"'f  T.  '^^^  cent^is^in  the  CO 
penses  '  ''™'^  ^^'''^^^  ^^^"^^^  *«  P^3^  operating  ex- 

And  here  I  again  stress  the  i^oint  of  the  error  of  generalization  in 
seeking  our  remedies.     With  tLse  two  localities  before  list^narlj 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIf.    1395 

influenced  by  the  wage  increases  and  higher  labor  costs,  it  would  lead 
to  doubtful  conclusions  that  either  the  5-cent  fare  or  the  10-cent 
fare  were  wrong  when  it  is  possible  that  with  the  other  factors  before 
us— topographical  difference  and  difference  in  congestion  of  popu- 
lation—both may  be  considered  reasonable. 

have^^uE"rtfer'^d't^^^^  ^^^  ""^^"^^  ^^^  second-largest  company  you 
Mr.  AiNEY.  Pittsburgh  Railways  Co.     In  bringing  these  matters 
to  your  attention,  I  would  do  violence  to  my  own  personal  convictions 
if  I  were  to  seek  to  have  you  gain  that  it  was  my  impression  or  view 
that,  because  the  Philadelphia  company  is  able  to  operate  on  a  5-cent 
rate  of  tare,  therefore  all  other  companies  would  be  able  to  do  so 
1  am  only  trying  to  stress  the  point  that  overgeneralization  with  re- 
spect to  remedies  would  lead  us  into  confusion.     I  frankly  say  that 
there  are  differences,  serious  topographical  difference*,  confronting 
the  Pittsburgh  company  against  which  the  Philadelphia  company 
does  not  have  to  contend      But  I  did  like  to  bring  this  to  the  attention 
of  the  conimission  as  I  find  the  expression  in  the  paper  as  evidencinirr 
that  to  which  I  shall  later  advert  with  your  pleasure,  the  dutv  of 
these  railway  companies  to  consider  the  merchandising  side  of  their 
responsibility.  ■ 

Now,  possibly  you  will  find  that  some  of  these  difficulties  which 
ditterentiate  companies  arise  from  intercorporate  complexities  I  in- 
vite your  attention  to  another  economic  difficulty  which  confronts 
^me  but  not  all  the  railways,  expensive  intercorporate  complexities 
An  operating  company  of  Pennsylvania  typical  of  some  others— I 
only  mention  it  because  I  have  the  figures  with  respect  to  that-^on- 
trols  directly  or  indirectly  by  stock  ownership  or  leases  som^sl 

.JJ'^t^^^r^  ^^^^  ?  ^"^  "°*  *-^'''^  «»«Ii  conditions  can,  under  this 
stress  of  modern  requirements  that  are  visited  upon  these  companies 

^r^ZTX'^^f  •'""'  the  standpoint  of  econoi^  and  efficiency  any 

taf  T.'J''*'  ,«^P«nse  of  maintaining  these  corporations,  the  Federal 

nstanZ    !n!l  f'  '*f'  T'"*'  '""^^  ^  «""™°"«  «™  i^  alraoTaU 
T^^!1T'      "^J  •^^"*"''^  ^  ^"y'  ^'tli  two  companies  that  I  do  not 

$1  000  LT?^  '"  ^""l  ^ri*^'  ^^'^^  •*  w«"l<i  ">»  from  $500,000  to 
*1,000,000  a  year  m  each  of  these  instances.    The  expense  of  miin 

s  al^uSr  whi^'^r^/?^^*'^^""'*''  *^«  duplicE  of  ?  xes 
IS  a  burden  which  ultimately  comes  out  of  the  revenues  of  the 

operating  company;  and  whether  it  comes  out  of  a  rite  paver  or 

miteS  fo'""''  °"*  °!  '}'  *"'?  ^^*«™  «f  the  stockholders^^'  inv 
t^  hTvef  W  K^  J'"'^*^  discussion  to  consider.    It  is  at  least  unwii 

lo  ttTutfc  Sr^Sr  rSr    ''  ""'^^  ''°  ""'"^  ^"^^"^  ^'*'- 

nd  W^"  h^'  li  '^  *  ""'**^  "^h'ch,  at  least  in  Pennsylvania,  must  be 
b  mSS  the  companies  rather  than  by  the  commission,  but  it 
IS  important,  I  think,  for  your  consideration. 


i 


ii 


1396    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  hesitate  to  mention  specific  things  because  I  do  not  desire  to 

?  1  ?u^.  ^^^  ^^*^^"^  ^^^^  P^^'^^  ^^  *^^  semijudicial  attitude  which  I 
teel  that  commissions  can  always  well  occupy  and  to  invade  the 
administrative  responsibility  which  rests,  and  ought  to  rest,  in  order 
to  the  highest  efhciency,  upon  each  company.  Were  I  to  criticise 
commission  regulation,  it  would  be  in  the  fear  that  sometimes  it 
might  interfere  with  that  initiative  which  ought  to  rest  with  the 
companies,  and  enable  them  to  be  the  most  efficient  public  servants. 
1  do  not  believe  that  it  is  a  wise  thing  for  commissions  to  substitute 
their  judgment,  with  respect  to  many  of  the  operating  responsibili- 
ties that  come  upon  the  company,  for  the  company  judgment.  They 
should  correct  evils  and  errors  when  they  see  them,  rather  than  to 
decide  which  of  two  methods,  either  of  them  reasonable  and  leffal, 
ought  to  be  adopted  by  the  companies.  And  therefore  I  shall  hesi- 
tate very  much  in  attempting  to  discuss,  or  permitting  myself  to 
discuss,  which  of  two  methods,  if  I  were  the  president  of  a  milwav, 
1  would  adopt  in  one  thing  or  the  other. 

But  there  are  some  companies  carrying  passengers  for  distances 
which,  at  most  rates,  are  less  than  the  cost  of  the  carriage.  Why 
should  there  not  be  some  readjustment  of  rates  to  avoid  these  in- 
equalities^ When  the  short-distance  rider  awakens  to  the  fact  that 
he  must  be  charged  a  larger  rate  in  order  to  give  some  other  person 
a  partially  free  ride,  there  ought  not  to  be  any  serious  local  diffi- 
u^^J"!^  accomplishing  the  change.  Whether  that  readjustment 
should  be  made  upon  a  strict  zoning  basis  I  am  not  at  all  convinced 
but  prefer  to  leave  the  matter  under  the  general  statement  that 
rates  of  fare  must  be  based  upon  some  fair  proportion  to  the  service 
rendered. 

Is  it  too  much  to  ask  that  companies  give  careful  attention  to 
economies  m  operation?  Surely  the  Philadelphia  situation  is,  to 
a  very  considerable  extent,  the  result  of  their  studies.  And  I 
have  been  now  watching  with  some  interest  to  see  if  you  had  invited 
or  if  there  had  appeared  before  you,  the  representatives  of  that 
company  who  could  give  you,  out  of  a  page  of  their  successful  ex- 
perience, that  which,  to  a  very  large  degree,  is  somewhat  theoretical 
and  perhaps  somewhat  removed  as  it  comes  from  the  mouth  of  the 
present  and  possibly  other  witnesses. 

The  Chairman.  Can  you  suggest  the  name  of  the  best  person 
for  us  to  mvite  ? 

Mr.  AiNEY.  Well  there  is  a  representative  of  that  company  pres- 
ent, and  I  would  prefer  not  to  suggest  anyone.  I  presume  Mr.  Joyce 
AVI  11  take  cognizance  of  that  and  speak  to  the  chairman. 

I  am  going  to  take  the  liberty,  though,  of  just  briefly  referrino- 
to  that  which  otherwise  I  would  not,  the  so-called  cooperative  plan 
of  the  Philadelphia  Rapid  Transit  Co. ;  and  I  am  doing  so  because 
Mr.  Joyce,  this  morning,  was  kind  enough  to  hand  me  a  copy  as 
they  send  it  out.  And  if  you  desire  that  I  shall  file  that,  I  shall  be 
yery  glad  to  leave  it  with  you. 

The  Chairman.  Yes. 

Mr.  Ainey.  I  think  you  will  find  it  very  interesting.  It  shows 
how  the  Philadelphia  Rapid  Transit  has  been  uble  to  deal  with  its 
labor  problem;  and  I  think  if  there  be  any  feature  of  success  that 
might  be  well  stressed  it  is  the  cooperative  labor  scheme  under 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1397 

which  the  eniployees  and  the  employer  conduct  the  Philadelphia 
Rapid  Transit.  And  it  has  led  to  efficiency  in  management — and 
efficiency  always  means  economy— and  it  has  led,  in  my  own  personal 
experience,  to  a  politeness  in  dealing  with  the  public  on  the  part  of 
the  platform  men  that  I  have  not  always  experienced  in  other  cities. 

Commissioner  Sweet.  Perhaps,  Mr.  Joyce  would  furnish  a  copy 
to  each  member  of  the  commission.    Would  you  ? 

Mr.  Joyce    Yes,  Mr.  Commissioner ;  I  can  do  that. 

Mr.  Ainey.  Of  course,  if  there  is  any  particular  point  in  any- 
thing I  have  said,  I  think  it  would  arise  out  of  the  desire  which  the 
public-service  commission  has  sought  to  emphasize  in  its  contact 
with  utilities  and  the  public,  and  that  is,  to  attempt  to  establish 
the  most  cordial  relations  between  them  and  the  public.  If  we  are 
not  able  to  function  in  that  way,  nine-tenths  of  the  value  of  our 
service  is  lost,  and  therefore  the  cordial  relationship  that  we  desire 
to  have  established  at  all  times  between  the  public  and  the  com- 
panies, in  order  that  the  service  may  be  adequate  to  the  public 
need  and  in  order  that  the  company  may  be  provided  with  funds 
with  which  to  render  that  adequate  service,  leads  me  to  view  with 
jealous  care  anything  that  comes  up  to  interfere  with  that  relation- 
ship. 

Let  us  assume  that  each  company  has  reached  the  goal  of  eco- 
nomic efficiency  and  each  company  has  done  its  part  and  the  re- 
quired gross  revenue  is  to  be  raised  by  rates  of  fare.  Here  comes 
the  severe  test  of  operative  discretion.  The  gross  amount  to  be 
raised  is  made  up,  of  course,  of  two  factors— the  anticipated  number 
of  passengers  and  the  rate  of  fare  to  be  applied  to  that  number  of 
passengers.  Is  it  not  an  axiom  of  everyday  business  judgment  that 
patrons  should  be  retained  and  others  gained  if  it  is  possible  to 
do  so? 

I  shall  not  burden  this  commission  with  any  extended  discussion 
of  this  phase  of  the  question.  This,  too,  is  a  matter  involving  the 
exercise  of  the  business  judgment  in  the  light  of  local  conditions, 
congested  centers  and  study  with  respect  to  potential  riders. 

In  two  recent  addresses  I  have  discussed  at  some  length  the  in- 
fluence of  the  rate  of  fare  on  the  riding  habit  and  have  sought  to 
emphasize  the  fact  that  the  street-railway  companies  might  profit 
by  the  merchants'  experience  and  methods.  Having  car  rides  to 
sell,  why  should  not  the  companies  adopt  adequate  methods  for  sell- 
ing the  rides?  The  percentage  of  increase  in  rates  has  not  followed 
by  the  same  ratio  the  increase  which  they  have  made  in  revenues. 
Increased  rates  have,  in  many  instances,  been  followed  by  a  flattened 
curve  in  the  number  of  car  riders.  It  has  been  pointed  out,  of 
course,  that  that  flattening  of  the  curve  has  at  times  been  caused  by 
unusual  conditions— for  instance,  the  winter  of  1917-18,  the  draft 
and  by  the  later  epidemic;  and  undoubtedly  those  had  very  material 
influences  upon  the  riding  habit  at  that  particular  time, 
u-i  1?  i*^  ^as  also  been  noted  that  the  jitney  and  private  automo- 
bile have  taken  away  a  considerable  number  of  patrons.  Never- 
theless, there  remains  a  very  appreciable  number  who  have  been  in- 
fluenced by  the  rate  of  fare ;  and,  of  course,  no  business  house  would 
be  content  to  lose  such  a  large  percentage  of  its  customers  without 
making  a  stupendous  effort  to  retain  them.     Many  of  these  lost 


1398    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

patrons  would  not  be  casual  ones  but  permanent  ones.  Is  it  worthy 
of  suggestion  to  the  railways  that  in  some  localities,  monthly 
commutation  tickets  at  a  lower  rate  might  be  established^  as  the  rail- 
ways have  done  ? 

This  matter  must  be  measured  not  only  in  the  terms  of  the  rev- 
enue of  tlie  company  but  by  the  potential  good  will  of  these  riders 
in  their  respective  communities,  a  good  will  that  is  reflected  in  local 
2)olitical  sentiment  and  otherwise.  I  look  upon  the  loss  of  car 
riders  as  being  a  serious  menucc*  to  the  well-being  of  any  company; 
and  it  is  not  an  answer  which  should  satisfy  the  companies  tlmt 
increased  fares  give  tliem  a  revenue  sufficient  to  meet  their  needs, 
if  it  has  to  be  secured  from  selected  patrons  at  the  loss  and  conse- 
quent cost  of  a  considerable  number  of  their  former  patrons. 

We  frankly  say  that  all  these  matters  do  not  affect  all  of  these 
companies,  and  no  doubt  many  of  them  are  wholly  free  from  many 
of  these  problems  that  I  have  adverted  to;  but  where  they  do  exist 
that  company  can  no  longer  afford  to  ignore  them  in  its  own  interest 
as  well  as  that  of  the  public. 

Let  me  say  in  conclusion  that  the  public  and  those  charged  with 
administrative  and  legal  responsibilities  will  welcome  from  your 
distinguished  body  a  clear  and  definite  statement  of  the  facts  which 
confront  the  railways. 

First,  they  should  be  advised  of  your  conclusions  as  to  the  extent 
to  which  increased  costs  have  entered  into  railway  expenditures. 

They  should  be  advised  by  you  as  to  the  basis  upon  which  you 
would  grant  or  withhold  increases  to  meet  the  situation.  And  you 
could  clarify  the  issues  very  much  if  you  eliminated  some  of  these 
impressions,  falsely  grounded  probably,  but  which  confront  the 
Public  Service  Commission  of  Pennsylvania  in  practically  every  rate 
case  that  conies  before  us^  irrespective  of  whether  it  is  a  railway  or 
affects  other  utilities. 

Third.  Your  deliverances  could  well  clarify  our  vision  with  respect 
to  the  importance  of  the  railways  in  carrying  on  our  business,  and 
advise  us  in  a  definite  way  as  to  the  results  which  would  follow  the 
failure  to  provide  adequate  revenues. 

The  public,  the  railways,  State  commissions,  municipal  authorities, 
legislatures,  and  executives  have  several  duties  and  responsibilities, 
the  performance  of  wliich  awaits  in  some  instances  definite  utterances 
and  programs  as  expressed  by  your  body. 

The  interdependence  of  the  railways  and  the  patrons  can  not  be 
overemphasized,  in  which  the  railways  must  supply  the  service  and 
the  riders  must  provide  revenues. 

The  injustice  to  the  car  rider  as  well  as  to  the  company  and  the 
economic  fallacy  of  certain  franchise  restrictions  imposed  on  the  car- 
riers should  be  corrected. 

Railways,  if  they  are  to  be  continued,  must  be  operated  under  con- 
ditions not  heretofore  confronting  them.  The  jitney,  the  autobus, 
and  private  automobile  have  no  doubt  deflected  many  fares.  Tlieir 
advent  in  such  large  numbers  htis  not  only  affected  revenues,  but  it 
has  placed  a  competitive  service  in  action,  in  a  sense ;  and  these  public 
and  private  competitors  must  be  met  by  a  readjustment  of  the  operat- 
ing conditions  by  the  railways,  if  the  railways  are  to  survive. 

If  they  are  to  survive,,  they  must  meet  that  competition,  whether  it 
is  private  or  public,  by  efficiencies  and  economies  in  operation.  And 
there  is  a  wida  range  for  study  and  recommendation  in  these  respects. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1399 

Too  long  rides  for  fares  less  than  cost  are  sometimes  provided. 
The  short-distance  rider,  of  course,  foots  the  bill. 

Coal  must  produce  more  current,  cars  more  riders,  and  miles  of 
track  more  service. 

Some  railroads  were  constructed  with  more  optimism  than  good 
judgment.  Without  patronage  to  support  them,  of  course  they  can 
not  survive,  and  we  can  not  burden  our  statistics  in  such  cases. 

I  might  pause  to  say  that  I  am  fully  convinced  that  under  the 
competition  of  the  privately  owned  automobile  there  are  certain 
mileages  of  track  in  Pennsylvania  that  serve  no  longer  a  real  public 
use. 

Jitney  service  where  it  exists  must  be  a  regulated  service. 

On  the  part  of  companies  corporate  complexities  should  be  elimi- 
nated where  possible  for  them  to  be,  and  if  it  holds  any  promise  there 
must  be  some  spare  relationship  between  capital  issues  and  property 
devoted  to  public  service.  And  the  mind  of  the  public  should  be 
clarified  by  your  deliverances  on  that  point. 

I  thank  you,  gentlemen. 

The  Chairman.  You  state  there  are  130  operating  companies  in 
Pennsylvania,  of  which  8  are  in  the  hands  of  receivers  ? 

Mr.  AiNEY.  I  think  8.  I  had  to  get  that  hurried  information  yes- 
terday morning  from  our  bureau :  and  in  the  hurry  of  the  call  he 
gave  me  a  tabulation  of  8  companies. 

The  Chairman.  And  about  15  per  cent  of  your  mileage  is  affected 
by  those  receiverships? 

Mr.  AiNET.  Well,  yes;  about  15  per  cent  of  the  mileage  is  affected. 

The  Chairman.  All  but  two  of  these  companies  went  into  the 
hands  of  receivers  before  we  entered  the  European  war? 

Mr.  AiNEY.  Yes. 

The  Chairman.  And  the  other  two,  vou  think,  were  heading  that 
way  and  would  eventually  have  gone  into  receivership  ? 

Mr.  AiNEY.  I  think  every  receivership,  without  exception,  in 
Pennsylvania  can  be  attributed  to  other  causes  than  the  war— other 
pmnarv  causes,  focused,  it  is  true,  by  reason  of  these  increases. 

Ihe  Chairman.  What  is  the  prevailing  rate  of  fare  in  vour  State? 

Mr.  AiNEY.  We  have  no  prevailing  rate  of  fares  in  our  State. 

1  he  Chairman.  Are  there  many  companies  operating  on  a  5-cent 
fare  ? 

Mr.  Ainey.  I  am  not  able  to  tell  you  how  many  are  operating  on 
a  5-cent  fare,  because  with  the  enormous  number  of  utilities  that 
are  under  the  jurisdiction  of  the  Pennsylvania  Commission— we 
have  3,750  I  thmk— only  those  to  which  our  attention  has  been  di- 
rectly called  are  those  from  which  I  could  answer. 

I  do  not  recall  any  of  the  'larger  companies  operating  on  a  5-cent 
tare  except  the  one  to  which  we  have  adverted. 

The  Chairman.  Philadelphia? 

Mr.  Ainey.  But  there  are  other  companies  that  are  of  consider- 
able size  If  that  would  be  serviceable  to  you,  I  would  be  very  glad 
^•fwi!  .  ""^'^/.^^  ^"^  ^"^^^"  gi^'^  you  a  list  of  these  companies 
r^n  1  SH^  ""^i/u"*^  """^  the  percentage  applied,  and  file  that  with 
you  and  that  will  be  more  definite  than  any  statement  I  can  give 

ihe  Ci^virman  Under  your  law  companies  can  file  rates  which 
go  into  effect  without  the  approval  of  your  commission? 


ii! 


1400    PKOCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Mr.  AiNEY.  Yes. 

have'£  fiTedf  ■  ^"^  ^°"  "'^"'"'^  ""'^^^^^^  '"''"^  '"*=•»  applications 
Mr.  AiNEY.  Many  such  rates  have  been  filed. 

two  yeai^?'"""*'''      ^"^  ^"""^  ""^^^  ^"^'^  ^^"  ^'^^^  ^'^hin  the  last 

Mr.  AiNEY.  I  think  to  a  very  large  extent  the  130  companies  have 
increased  their  rates.  Probably  most  of  the  rates  that  were  fiW 
increasmg^r  many  of  the  rat^  which  were  fiLd-lincrea^n-.  ,  a tes 
of  fare  were  where  companies  were  operating  in  munic"paS  ^.^^,  h 
had  imposed  upon  them  a  condition  fixing^'the  rate  and  werrmpf 
by  objections  that  the  constitutional  prote^ction  of  mmiciri  y  Z- 

fh^J  'J^  *T^'  ""•"''  *''»*  '^'^  ^'^^^'  '^te  could  be  obta  ned;  ami 
those  wei*  the  primary  questions  raised   before   the  commission 
Tlwre  were  a  very  large  number  of  complaints  of  that  kiT 

can  vou  s^v"'whp'J"hi;:7f  '"^  ""^  "'**  i"^"'*'y  '^  y«"  state  as  a  whole, 

Sir  AiNPT   T  tbinV  nir  ''  ""*  '"  ^  '^™"?  fi'»«"<=''^l  condition? 
Mr.  AINEY.  1  think  there  are  some  compan  es  in  our  State  that 

are  and  some  that  are  not.    To  avoid  answering  your  questiw,  either 

ves  or  no  I  would  like  to  say  this,  that  I  thiKat  all  comptntes 

in  our  State  are  in  duty  bound  to  scan  with  greater  care  the?r  eCn 

ditures  and  to  resort  to  operating  efficiencies  as  perhaps  tZr^m 

not  inclined.    With  that  general  statement,  I  think  thatlnth^ 

tL  C„Trr  Do^vri^';''"'\r/"  «?^  operating  condition 
„«„        «-HAiRMAN    Do  you  believe  that  a.s  far  as  Pennsvlvani-i   i« 
concerned  there  is  any  reason  for  the  appointment  of  Uircom! 

ha?e'mtr^^W;k"thr:f,  ?J'"?/''*'^  the  suggestions  which  I 
ii<ue  maae.     1  tliink  that  all  the  utterances  that  can  be  mode  hv 

disinterested  and  distinguished  bodies,  and  particularly  oi^callS 
together  under  the  high  authority  which  gathers  you  her"  wh  rh 
would  relieve  the  mmd.s  of  the  public-whifh,  to  aCnsiSbfe  ex 
tent,  IS  the  public  mind— that  the  railways  were  not  tntifLJ  i 
were  not  seeking-if  you  can  find  such  to  be  tie  fact-S  to  oav 
on  exorbitant  overcapitalization,  would  help  us  admTn  strativ^elv 
to  make  our  ordinance  useful  to  the  public  and  wou™  helof  d 
in  enabling  these  companies  to  win  street-car  riders  ^ 

ment  of  "abou^^i  (^^00^""^"''  «"«  «?.•" P»ny  th»t  had  an  inve^t- 
Snnoft  nL^'  '  ^  ?f*l  *  capitalization  of  something  over 
!r/.WO,000.    Did  you  name  that  company  ?  ■{,  over 

Mr.  AiNEY.  I  did  not. 

The  Chairman.  Do  you  care  to  do  it « 

mi^I'if  ''^''-  ^  '•?  "?*;  ^*  '^  "  composite  statement.  I  purposely 
b'?o  the  reco^r"''  '**■*''"""*  ''"''''''  ^  ^°  ""*  -^^^^  ^  ca^rr^tW 

utmts  b^oTstateT  ''^"*  ^^^'^'^^  "-  — -  practice  among 

n  .Sum1,n  p^ractiS  trtheSg^e^flJu^li'itKrfto'^  """^^"^^ 
go  back  into  the  history  of  fheUpanrwhet'S^ 

phiinfis'fi!'^'^  ''"^  ^^•^'™'"--^  invLtfgl^rZtrafte't'tm! 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1401 

The  Chairman.  Is  it  your  practice  to  make  a  physical  valuation  of 
the  railroads  in  all  rate  cases  which  are  tried  before  you? 

Mr.  AiNEY.  No ;  it  was  the  policy  of  the  public-service  commission 
during  these  unusual  times  to  avoid  valuations  where  we  could.  For 
instance 

The  Chairman.  Have  you  made  many  valuations? 

Mr.  AiNEY.  Yes. 

The  Chairman.  Where  these  have  been  made  have  you  determined 
that  there  is  excessive  water  in  the  plants  ? 

Mr.  AiNEY.  Well,  we  have — you  mean  officially  determined  that? 

The  Chairman.  Yes. 

Mr.  AiNEY.  I  would  have  to  call  your  attention  to  the  fact  that 
stocks  and  bonds  have  no  place  in  our  valuation  program  except 
they  have  a  market  value,  and  therefore  they  do  not  enter  into  the 
answer  which  we  give. 

The  Chairman.  Well,  to  put  it  another  way,  have  you  found  your 
value  is  more  or  less  than  the  outstanding  capitalization  ? 

Mr.  AiNEY.  Both. 

The  Chairman.  Which  prevails? 

Mr.  AiNEr.  Oh,  I  could  not  give  you  an  answer  to  that. 

The  Chairman.  But  it  would  be  of  very  great  assistance  to  you 
and  the  public  if  a  means  could  be  adopted  which  would  eliminate 
any  prejudice  against  companies  due  to  overcapitalization? 

Mr.  AiNEY.  Yes. 

The  Chairman.  Would  a  physical  valuation  meet  that  situation? 

Mr.  AiNEY.  I  think  so. 

The  Chairman.  Then,  is  not  the  first  requisite  in  efficient  regula- 
tion of  utilities  the  establishment  of  a  physical  value,  or  a  true  value, 
upon  which  rates  can  be  predicated? 

Mr.  AiNEY.  Yes;  and  the  reason  that  the  Pennsylvania  Commis- 
sion did  not  undertake  that  in  all  cases  was  because  of  the  emergency 
conditions  which  confronted  us,  and  the  remedy  which  would  have 
had  to  be  postponed  for  a  long  time  would  have  been  as  serious  as 
any  error  of  judgment  which  the  commission  might  make  in  at- 
tempting to  determine  what  the  rate  of  fare  would  be  for  a  definite 
period. 

Take  a  case  that  was  adverted  to  by  one  of  the  witnesses  yesterday. 
We  did  not  have  a  physical  valuation  in  that  case,  but  for  a  limited 
period  of  time,  under  all  the  evidence  that  we  could  get  and  in  order 
to  do  the  best  we  could,  we  reached  a  conclusion  and  we  fixed  a  rate 
tliat  would  not  be  operative  longer  than  a  year — and  part  of  that 
rate  only  operates  in  six  months— to  test  out  what  ttie  result  would 
be  in  getting  back  the  car  riders.  Now,  had  we  taken  the  other 
and  gone  into  a  valuation  of  this  property,  during  the  intervening 
time  we  would  have  had  no  commission  rate,  and  it  was  certainly 
much  more  satisfactory  both  to  the  carrier  and  to  the  local  com- 
munity that  we  attempted  a  short  method.  The  commission  has 
endeavored  to  preserve  the  interests  of  the  public  and  of  the  carriers 
during  these  unusual  times  in  which  it  was  impossible  to  engage  in 
valuation  work. 

The  Chairman.  Do  you  believe  that  the  street-car  question  is 
essentially  a  local  one? 

Mr.  AiNEY.  Well,  it  is  certainly  local.  Immediately  you  get  by 
the  admittedly  increased  costs  of  labor  and  materials,  I  think  that 


14  j2   proceedings  of  federal  electric  railways  commission. 

CYery  railway  in  Pennsylvania  that  has  no  heart  disease-to  follow 

li'oJf'''^  I  ™y,i:T-''^  "^J  ^.^'^^  '^  *^^^«^«  you-has  no  funda- 
mental weakness  that  is  applicable  to  it  and  not  applicable  to  some 
other  company,  will  have  no  difficulty  other  than  the  difficulty  of 
^^•(mio:  out  just  as  the  merchant  goes  out  to  sell  his  goods,  to  get  his 

The  Chairman.  Now  you  said  that  in  your  State  the  fares  vary 
from  5  cents  up  to  9  cents.  ^ 

Mr.  AiNEY.  Well,  we  have  10-cent  fares. 

The  Chairman.  Ten  cents.  And  therefore  there  can  be  no  fixed 
I  ule  as  to  fares  to  apply  to  the  industry  in  your  State  ? 

Mr.  AiNEY.  No. 

The  Chairman  Of  course,  that  is  true.  What  does  it  necessarily 
follow  from  that?  That  there  are  not  certain  general  principles  of 
regulation  which  are  applicable  to  all  industries  of  that  klnd« 

Mr.  AiNEY.  Yes,  unquestionably ;  that  is  the  one  thing  that  I  have 
suggested  would  be  very  helpful  to  us  and  them  in  Pennsylvania— 
If  the  railway  people  could  advise  the  public  that  the  basis  upon 
wJiK  h  they  seek  relief  does  not  include  in  it  some  things  that  would 
not  gain  the  public  favor. 

The  Chairman  Is  it  your  idea  that  paving  requirements  should 
or  should  not  be  charged  against  the  company? 

Mr.  AiNEY  If  I  were  to  answer  that  I  would  have  to  answer  it  as 
a  purely  academic  question.  They  are  charged  against  the  company, 
in  many  instances.  It  is  not  within  the  jurisdiction  of  the  commis- 
sion to  cliange  that. 

The  Chairman    Is  it  a  substantial  burden  upon  the  dompanies? 
Mr.  AiNEY.  I  think  so,  in  some  instances. 

1  he  Chairman.  Is  it  such  a  burden  that  it  is  in  the  public  interest 
to  relieve  the  company  from  it?  t^  ^ 

^\^'  '^^^*'^*  ^  *^""k  in  some  instances  it  is. 
;.  h      <^HMRMAN.  Do  you  think  that  a  general  rule  could  apply,  or 
IS  It  something  that  could  be  governed  by  the  local  conditions? 
fJnn  fVl^^'T      *r!"     ^  a  certain  extent  you  must  give  some  atten- 
tion to  local  conditions.    My  mmd,  as  I  am  trying  to  resolve  your 
question    would  say  that  the  burden  of  the  stree"  railway  on^the 
streets  of  some  cities  is  quite  different  from  the  burden  in  other  lo 
cahties     I  do  not  think  that  the  imposition  of  these  burdens  should 

ri?  ^'f.  nature  of  a  revenue  base  to  the  community 
u2'.t^:Z^ci:^^  "'^^^  ''  ''''  Philadelphia  company  pays 
swe^'ihttTestLr '^  "''"  ''''  Philadelphia  company  would  an- 
*^ii\'"^i*  gentlemen    inasmuch  as  all  of  the.se  companies  are  liable 

m  the  position  of  either  declming  to  answer  them  or  of  prejudicing 
a  case  that  might  come  before  me.  ^  ^juuii^mg 

fuV'^  ^^lfr'\'':  ^^'  \"  ""'>'  examination,  I  ask  you  any  question 
that  woiUd  tend  to  embarrass  you  in  that  direction  at  all    I  hope 

coJLts'^rme.'^'^'''^'''  '^]'''     ^'""  ^^^^^  ^^^^  '^^'y  ^^^^'  ^"^^  ^^ry 
The  Chairman.  I  surely  do  not  want  to  embarrass  you  at  all. 


proceedings  of  federal  electric  railways  commission.  1403 

Mr.  AiNEY.  Ac5  a  general  statement,  I  think  that  in  many  instances 
there  have  been  iniposed  burdens  upon  many  utilities  requiring,  at 
the  hands  of  municipalities,  consent  to  operate  in  local  territory, 
and  that  has  arisen  largely  because  of  the  utterances  of  our  own 
Supreme  Court  in  an  earlier  day,  when  probably  one  of  the  most 
learned  of  our  judges,  who  occupied  the  bench  of  that  distinguished 
body,  emphasized  very  strongly,  in  frequent  opinions,  that  franchises 
belonged  to  the  people  and  were  exceedingly  valuable  and  ought  not 
to  be  handed  out  to  private  corporations  or  semipublic  ones  unless 
there  was  a  very  appreciable  return  that  would  go  into  the  public 
treasury  of  that  local  municipality.  And  that  has  led  to  conditions 
in  certain  places  in  Pennsylvania. 

The  Chairman.  Your  franchises  are  all  limited  in  time? 

Mr.  AiNEY.  Some  of  the  modern  ones  are  not. 

The  Chairman.  What  is  your  opinion  with  respect  to  the  fran- 
chise? Should  it  be  for  a  limited  period  or  should  it  be  perpetual, 
subject  to  the  right  of  the  public  to  purchase  ? 

Mr.  AiNEY.  Our  own  decisions  with  respect  to  it — and  now,  in 
answer  to  that,  I  had  better  bring  forth  for  your  enlightenment  in 
regard  to  our  local  conditions  this  thought  that  I  mentioned  a  mo- 
ment ago:  The  public-service  commission  is  now  able  to  control,  in 
large  measure,  the  future  with  respect  to  franchises,  because  we  have 
to  approve  them.  They  come  before  us.  Therefore  it  seems  to  m& 
that  the  remedy  for  the  future  is  already  in  the  hands  of  the  State 
through  the  medium  of  the  public-service  commission. 

The  Chairman.  Generally  speaking,  what  is  the  term  of  life  of 
the  new  contracts  that  are  being  made? 

Mr.  AiNEY.  You  mean  street-railway  contracts? 

The  Chairman.  Yes. 

Mr.  Ainey.  I  do  not  recall  a  single  street-railway  contract  that 
has  come  to  our  attention.    I  do  not  know  of  any. 

Commissioner  Gadsden.  There  are  not  apt  to  be  many  more  new 
ones  built ;  are  there  ? 

Mr.  AiNET.  Well,  possibly  I  ought  to  withdraw  that.  The  mu- 
nicipality—the city  of  Philadelphia,  I  think,  is  attempting  to  build 
a  very  large  amount  of  railway,  and  your  colleague  can  probably 
give  you  more  definite  information  as  "to  the  extent  of  that  than  I 
can.    I  think  some  $140,000,000  was  the  anticipated  amount. 

The  Chairman.  Have  you  given  consideration  to  the  features  of 
the  indeterminate  franchise? 

Mr.  AiNEY.  No ;  not  in  a  way  to  be  enlightening  to  your  commis- 
sion. 

The  Chairman.  As  far  as  your  study  is  concerned,  do  you  feel 
that  if  properties  are  properly  valued  and  the  law  is  left  ^as  it  is, 
that  your  commission  will  be  able  to  deal  fairly  by  the  companies 
and  the  public,  and  that  most  of  these  utilities  will  be  permitted  to 
gi\'e  proper  service? 

Mr.  Ainey.  I  notice  that  Mr.  Tingley  and  President  Pardee  shook 
hands  with  me  when  I  came  in,  as  did  also  the  distinguished  mayor 
of  Scranton.  I  am  rather  inclined  to  think  that  we  have  established* 
a  basis  of  confidence  on  the  part  of  the  utilities  and  also  on  the  part 
of  the  thinking  public  as  to  the  fairness  of  our  deliverances  and  the 
justness  of  our  conclusions. 


li 


III 


li 


14  ?4     PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

^oof?  nn']invth!;f^^°T''-  ^^^^P^  *}^^y  ^le  practicing  some  of  that 
good  policy  tliat  you  have  suggested. 

Mr.  AiNET.  I  read  one  of  the  decisions  of  the  commission  to  evi- 

ances.  I  want  to  say,  gentlemen,  that  we  have  been  perfectly  fear- 
less in  our  utterances  with  respect  to  what  we  thoSghH^re  the 
rights  of  the  utility  and  the  rights  of  the  public;  and  it  has  even 

strnt?:t[^.i*°K*Vtrf '^'^  *^^  ^'•''H'»^»*  ^^^^^  I  read  Irrathe 
fiT^  TK       1 '  ^"*  *''**  y'^^^  particular  case  where  we  felt  it  ought 
tL  l;.f    /  «'>ly,<Jefense  in  that  particular  case  that  was  put  up  was 
mfJnl  lii^i  contract,  and  because  there  was  a  contract  thfs  company 
must  be  held  to  it,  even  to  the  destruction  of  the  property. 

o.SrsWp  In  yoiTr  StaS?''  "  P™"»""««d  ««»"--'  ^^r  municipal 
Mr.  AiNET.  I  do  not  think  so. 

.^n J^rff  2.^^-'''^''^  Has  your  commission  given  consideration  to  the 
cost-of-service  plan,  or  have  you,  individually  ? 
Mr.  AiNEY.  No;  we  have  not. 

pla^nY  ^''^'''^'^'''  ^^^^  y^^  ^^'^  n«^  billing  to  comment  upon  that 

Mr.  AiNET  Any  comment  that  I  might  make  would  not  be  based 
upon  sufficient  experience  or  knowledge"  to  be  valuable,  and  I  do  not 
wish  to  get  into  the  theoretical.  I  have  theoretical  views  on  it  very 
strong  aiid  positive  ones;  but  practical  experience  might  turn  those 
down  I  would  prefer  not  to  give  any  expression  in  regard  to  it  I? 
would  not  be  helpful  to  you,  and  it  would  not  be  one  that  I  would  be 
willing  to  bind  my  own  mind  upon.  vouia  dc 

^Jf^L^i''^Ti^^\  ^^  ''''"'•'^.'  ^  i""'*  '^^^^"^^  *^  contradict  vour 
statement.    I  think  any  opinion  from  you,  theoi-etical  or  practical 
would  be  of  very  great  value  to  this  commission.  Piaciicai, 

Mr.  AiNEY.  Let  me  answer  it  then,  indirectly.  I  have  not  ffot 
to  the  point  of  where  I  believe  the  public  will  get  the  best  ser^^ce 
except  that  the  initiative  for  that  service  is  in  the  hands  of  Wate 
interests,  largely  uncontrolled,  except  to  the  extent  that  it  must 
at  all  times  be  a  reasonable  service,  and  must  be  at  a  reasonable  rate 
I  have  no  reason  to  doubt  that  the  present  methods  are  adequate,  in 
r'ennsylvania.  ^        ' 

Take  Pittsburgh :  The  whole  talk  that  has  arisen  there  on  the 
part  of  a  few  with  respect  to  municipal  ownership  arises  out  of  the 
inability  of  tliat  company,  over  a  number  of  years,  to  function.  If 
It  had  functioned  as  other  companies  in  Pennsylvania  have  func- 
tioned, you  would  not  have  heard  anything,  even  locally,  with  re- 
spect to  the  claim  for  municipal  ownership. 

The  Chairman.  Has  you  commission  instituted  zone  fares  in  anv 
l^iace  s  v 

Mr.  AiNEY.  No;  and  we  shall  not. 
;     The  Chairman.  You  are  opposed  to  tliat  system? 

Mr.  AiNEY.  No;  I  am  not  opposed  to  it.  I  think  there  are  ele- 
ments of  very  substantial  equity  in  the  zone  system,  but  still,  lean- 
ing back— until  some  company  that  believes  that  the  zone  system  is 
the  proper  kind  of  a  system  and  the  proper  method,  and  puts  it 
into  effect,  and  it  is  tried  out  in  the  house  of  its  friends,  I  think 
It  would  be  a  dangerous  thing  to  enunciate  a  general  policy  to  have 


PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1405 

that  theory  tried  out  in  the  hands  of  the  lukewarm  or  of  those  who 
are  opposed  to  it. 
The  Chairman.  Have  you  not  got  the  plan  in  Pittsburgh? 
Mr.  Ainey.  The  zone  system? 

The  Chairman.  Yes. 

Mr.  AiNEY.  Oh,  no ;  not  the  zone  system  in  Pittsburgh,  properly 
speaking.  I  am  not  familiar  with  just  what  is  involved  in  this  new 
application  of  the  10-cent  fare.  I  am  going  out  to  hear  that  on 
the  20th.  I  take  up  the  hearing  of  that  case  then.  But  take  th«3 
one  just  before:  They  had  a  combination,  5  and  7  cents.  That,  to 
my  mind,  was  very  unwise,  and  did  not  work  out;  and  I  think  I 
took  the  liberty  of  saying  to  the  gentlemen,  both  on  the  part  of  the 
city  and  on  the  part  of  the  railway,  that  I  did  not  think  it  could 
work  out.  Probably  Mr.  Welsh  has  the  figures  that  would  carry  it 
down.  I  have  no  figures  with  me  with  respect  to  it.  I  do  recall, 
however,  that  over  a  short  priod  of  time  in  the  application  of  that, 
it  worked  out  badly;  but  it  did  not  work  out  badly  in  a  way  to 
either  prove  that  a  zoning  system  was  the  improper  method  or  to 
establish  that  it  would  be.  They  made  a  central  area  in  the  city  of 
Pittsburgh ^ 

The  Chairman.  That  method  has  been  explained  here. 

Mr.  Ainey.  Then  it  is  not  necessary  for  me  to  go  into  it. 

Was  it  explained  to  you  that  for  a  considerable  period  of  time, 
at  least,  there  vras  a  very  large  increase  in  the  riding  habit  under 
the  5  cents,  which  was  not  the  increase,  and  was  in  the  territory 
where  they  did  not  expect  any  increase  in  the  riding  habit;  and 
that  where  the  7-cent  fare  was  in  operation,  and  where  there  might 
have  been  a  reasonable  expectation  of  an  increase,  they  did  have 
no  inci-ease,  but  they  had  not  only  the  loss  that  they  measured— 10 
per  cent  on  200,000,000  passengers— but  they  lost  about  ten  or  twelve 
million  more  on  the  yearly  basis?     • 

Commissioner  Sweet.  I  understand  you  to  say  that  you  have  been 
following  up,  to  some  extent,  the  proceedings  of  the  commission  and 
the  testimony  that  has  been  given  here? 

Mr.  Ainey.  Yes. 

Commissioner  Sweet.  Perhaps  you  have  noticed  that  heretofore 
on  several  occasions  the  Pennsylvania  Commission  and  the  Pennsyl- 
vania law  with  regard  to  public-utility  commissions  has  been  re- 
ferred to? 

Mr.  Ainey.  I  have  not;  no,  sir. 

Commissioner  Sweet.  Of  course,  the  publicity  that  would  reach 
you  would  be,  necessarily,  somewhat  limited  in  extent? 

Mr.  Ainey.  Unquestionably  so. 

Commissioner  Sweet.  But  permit  me  to  say,  for  j^our  informa- 
tion, that  that  is  the  fact;  and,  so  far  as  I  am  aware,  always  in  a 
complimentary  manner,  both  as  to  the  law,  the  method  by  wliich  the 
public-service  corporations  may  increase  the  rates,  and  the  way  in 
which  the  commission  is  authorized  to  pass  upon  them,  and  the  way 
in  which  the  commission  has  passed  upon  them;  they  have  all  been 
referred  to,  I  think,  in  rather  a  favorable  and  complimentary  way. 

Mr.  Ainey.  I  assure  you  that  that  is  very  gratifying  to  me. 

Commissioner  Sweet.  I  want  to  say  that  I  am  very  glad  indeed 
that  you  have  been  willing  to  come  here  and  give  us  'the  benefit  of 


' 


1406    PROCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSION. 

your  information,  so  as  to  help  us  in  what  1  regard  as  the  two  essen- 
tiiil  features  of  our  work: 

One,  the  gathering  of  facts  which  must  necessarily  come  from  i 
inore  intimate  knowledge  of  what  is  being  done  and  whLThas  b^eu 
done  and  the  actual  system  in  different  localities;  and  the  other" 
point  upon  which  you  seem  to  be  a  trifle  reluctant  to  speak!  and  th.t 

situaLrtL?'"'?  •^'^tL^'  «^"^™'  ^'*"**i«"  «">d  the  reS^s  for  St 
situation  that  exists.    Because  upon  those  two  things  we  are,  in  th  • 

f^t  *r'?;"!'  °'?'i^''^  ^  Z^'^*  ""'■  °*n  conclusio^-largely  u,Z 
the  facts  that  exist,  and  the  opinions,  the  advice  that  is  given  TZ 

Sis's^C^rthln^wTno:^",  ^'''  '^'r  T'^  1°"?-  eonsiCio^  to 
uiib  subject  than  we  possibly  can  as  to  what  are  the  proper  remedies 

tbp  Jn'^'l*  to  "isk  you  a  few  questions  that  will  bear  somewhat  upon 
the  general  subject,  because  f  think  you  have  gone  very  fully  and 
sa  .sfactorily  into  the  Pennsylvania  situation  Ind  have^  b^n  very 
helpful  in  telling  us  what  that  situation  is.  ^ 

1  ou  have  referred  to  the  possible  benefit  that  may  accrue  to  the 
country  from  the  work  of  this  commission.  Let  me  a^k  you  "f  you  do 
not  agree  with  me  that  it  is  along  those  two  lines,  practicaUy   ^Don"t 

L7o  eTheibl  "thp'f 'r'/V^"  Kl'^'^'-'^y  "5"^1»  lS-pl"°ng 
Detoie  the  public  the  exact  facts  as  they  are,  good  and  bad— if  no,- 

fw'  '^  '"'''•''  ^''^,1^^^  '^^  P"'''i«  ^"l  f«el  *•>»»*  it  knows  all  al^ut 
these  companies,  will  go  a  long  way  toward  solving  the  difficulty^ 

Mr.  AiNET  les;  I  do.  I  think  tliat.  But  I  would  like  to  aSl'  fo 
my  answer  that  I  believe  it  would  be  exceedinX  helpful  both  o 
you  and  also  to  the  Pennsylvania  Commission-and  I  w  11  not  attempt 
to  speak  for  my  associates  on  other  commission^if  our  raUway  op- 
erators would,  in  and  of  themselves,  clear  away  any  miscon^eptbn 
ns  to  their  demand  for  that  which  the  public  thinLthev  a  rfr 
wo"ulcrbt  hrinf"^"'T.*'^  public  thinks  thS-  are  not  enit&trtSt 

Taf }o'u^  KLi  .^"'^t.!5:-i^r^tT:nt^  \t=hr?^"i 

qj^^ion  which,  after  all,  is  the  n.osf  JLs%hSg  w^hSn  pS 

tv.^  i''^'^  •*'"•'■  ^^^  T'J'"'"'  ''^"■y  "'«"•  I  liave  still  some  confidence  that 
the  commission  is  able  to  deal  iusflv  xcith  ti,„  ,,„„ki     ^""""*'"^e  mat 

assurance  that  the  public  in  KnSlvaS.  botro  r^n^,  ^''^^  """^^ 
the  particular  cases,  has  confident  n  the  dec  sions  of  the^'Zmi," 
sion;  but  anything  that  might  be  said,  even    n  PennsylvanTaThat 

^uf^'CiJtttonM'l""  'T*  '?¥  "^  y""'  ''-d^  would  be'lSp- 
r,!:-     fu  l\.u       ?  "'^'  ^  predicated  upon  a  statement  by  these  com 
panics  that  they  do  not  ask,  do  not  demand  any  of  the^  tE  th  t 

^IkingltS  VrofVhic^  ''^^  r  ^7"'".'^'"^  aid  diSTf^y'Jr 
n^King    anci  a  type  of  which  was  shown  by  the  utterances  of  mv  rli« 

hXf.fl "^/"'"^  who  closed  your  hearing  last  night-it  wmildb; 
helpful  ,n  framing  public  opinion.  Can  there  be  any  doubt  of  that  * 
Commissioner  Sweet.  I  think  not.  It  seems  to  mrthat  in  each 
part  cular  case  where  a  street-railroad  company  is  in  d^tress  iti^ 
absolutely  essential  that  the  public  should  be  fu  ly  "nformed'as  to 
all  of  the  facts  connected  with  that  company  its  canitX^Hnr.  tK^ 
value  of  Its  property-and  that,  undoubSly,  shmilS  b^aSd  a? 
b>  some  process  that  will  be  perfectly  satisfactory  to  the  subTect 
and  the  purpose  of  V,  company  should  be  clearly  Stated,  LJoisa^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1407 

SO  that  the  public  may  know  exactly  what  the  situation  is  and  what 
is  wanted;  and  then  is  it  not  your  opinion  that  the  public,  so  advised, 
will,  as  a  general  proposition,  do  the  fair  thing? 

Mr.  AiNEY.  Yes. 

Commissioner  Sw^eet.  I  think  so,  too. 

Mr.  AiNEY.  Unquestionably. 

Commissioner  Sweet.  I  have  felt  a  little  disappointment  at  one 
thing  you  said,  because  it  indicates  that  the  publicitv  that  is  given 
to  the  hearings  has  not,  as  I  see  it,  been  quite  fair;  and  that  is  that 
you  have  derived  the  opinion  from  newspaper  notices  you  have  seen 
with  regard  to  these  proceedings  that  a  demand  is  made  by  the  com- 
panies for  a  return  upon  overcapitalization  or  watered  stock.  So  far 
as  I  can  recall,  I  do  not  remember  that  that  has  been  their  attitude. 
In  fact,  I  know  that  in  most  cases  it  has  been  exactly  the  reverse. 

Mr.  AiNEY.  Mr.  Commissioner,  I  certainly  have  not  made  my  posi- 
tion plain  if  you  gathered  that  impression  from  me.  I  did  not  mean 
to  intimate  that  I  thought  that  the  railway  companies  had 

Commissioner  Sweet.  Not  that  you  thought  that  they  had,  but 

Mr.  AiNEY.  Or  that  they  had  made  such  a  demand  before  yoiL 

Commissioner  Sweet.  I  thought  you  said  you  had  seen  newspaper 
statements  to  that  effect  ? 

Mr.  AiNEY.  I  have  seen  newspaper  statements  to  that  effect  and 
the  names  of  the  individuals  who  made  the  statements  have  been  car- 
ried. I  have  purposely  avoided  giving  prominence  to  them.  The 
newspapers  have  headlined  them.  Now,  I  say  if  going  out  coexten- 
sively  with  those  statements  would  be  a  plain  declaration  on  the 
part  of  these  railways  that  they  were  not  asking  that — and  I  am 
thoroughly  satisfied  that  the  position  of  the  railways  is  just  and 
right  in  respect  to  it ;  but  it  is  not  sufficient  to  leave  it  without  giv- 
ing it  the  same  emphasis  that  these  unusual  expressions  give,  whicli 
I  am  thoroughly  satisfied  do  not  meet  the  views  of  the  railway  peo- 
ple generally;  but  an  extreme  statement  is  the  one  that  is  always 
picked  up  and  the  one  most  frequently  read ;  is  it  not  ? 

Commissioner  Sweet.  Yes. 

Mr.  Ainey.  I  want  to  put  that  right  beside  the  extreme  state- 
ments—which I  am  sure  probably  might  not  represent  1  per  cent  of 
the  people  who  have  appeared  before  you;  but  the  public  can  not 
ftaiige  Avhat  is  going  on  before  you,  and  they  are  verv  apt  to  say: 
"  Oil,  well,  that  is  what  the  railroads  are  down  there  arguing  for." 

After  all,  you  are  dealing  with  people  who  are  not  trained  with 
respect  to  these  problems.  You  are  dealing  with  people  as  you  might 
gather  them  in  a  jury  box;  and  your  appeal,  and  the  railway  com- 
pany's appeal,  in  the  final  analysis,  is  the  appeal  that  must  be  made 
to  a  body  of  12  men  sitting  in  a  jury  box;  and  I  am  keeping  the  good 
will  of  tho:^e  men  in  mind— their  opinion  not  in  a  technical  way,  but 
with  respect  to  the  underlying  qualities:  First,  the  demand  on  the 
pail  of  the  plaintiff,  clearly  defined,  and  then  the  defense  which  the 
defendant  puts  up.  Then  they  will  reach  the  verdict  of  support,  or 
withholding  their  support. 

Commissioner  Sweet.  Of  course,  you  realize  that  no  one  connected 
with  this  commission,  and  none  of  the  witnesses  that  appear  before 
It  has  any  control  over  the  publicity  that  the  newspapers  may  see  fit 
to  give  to  what  occurs  herej  and  if  misstatements. are  made,  or  if 


i 


1408     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

« 

statements  are  made  that  are  somewhat  peculiar,  quite  different  from 
the  general  run  of  the  statements,  and  they  are  unduly  emphasized 
by  newspapers,  it  is  something  we  can  not  help. 

Mr.  AiNEY.  But,  Mr.  Commissioner,  why  should  there  not  be  a 
plain  declaration  upon  the  part  of  the  railway  people  before  you— a 
composite  statement  of  what  they  demand  ?  I  have  heard  nothing  of 
that  kind,  except  it  is  involved  in  that  statement  there.  Why  should 
there  not  be  a  clear-cut  statement  ? 

Commissioner  Sweet.  I  do  not  know  of  any  reason  why  there 
should  not  be. 

Mr.  AiNEY.  It  would  clarify  the  issue. 

Commissioner  Sweet.  Possibly  that  may  be  true.  From  the  stand- 
point of  the  commission,  Mr.  Ainey,  let  me  state  that  our  view  of  our 
function  is  to  elicit  from  those  engaged  in  the  business,  from  those 
representing  the  general  public,  from  those  representing  the  em- 
ployees of  the  street  railroads,  and  from  every  possible  source,  all  the 
information  that  we  can;  and  no  matter  how  peculiar  the  ideas  may 
be  that  are  expressed  before  us,  we  have  no  responsibility  whatever 
with  regard  to  that. 
Mr.  Ainey.  Not  at  all. 

Commissioner  Sw^eet.  We  simply  receive  it  and  endeavor  to  give  it 
whatever  weight  it  is  entitled  to. 

Mr.  Ainey.  I  would  be  very  glad  if  my  friends  of  the  railways 
would  offset  those  statements  which  I  have  referred  to. 

Commissioner  Swj:et.  Now,  Mr.  Ainey,  you  have   compared    the 
manager  of  the  street-railroad  company  to  the  merchant,  in  respect  to 
going  after  business  and  aggressive  methods,  I  think,  to  a  certain  ex- 
tent, have  you  not  ? 
Mr.  Ainey.  Yes,  sir. 

Commissioner  Sweet.  Of  course,  you  recognize  one  very  great  dif- 
ference, and  that  is  that  the  merchant  has  been  able  to  adjust  his 
prices  according  to  conditions,  whereas  the  street-railway  manager, 
as  a  rule,  has  not,  under  franchises  that  have  limited  the  fare  ? 

Mr.  Ainey.  That  is  so,  outside  of  Pennsylvania.  It  is  not  so  in  my 
own  exj^erience,  of  course. 

Commissioner  Sweet.  I  understand  that.  But  you  know  that  to  be 
correct  ? 

Mr.  Ainey.  Unquestionably  so. 

Commissioner  Sweet.  Where  the  rate  of  fare  is  limited  by  the 
franchise? 
Mr.  Ainey.  Yes. 

Commissioner  Sweet.  That  inflexibility  which  exists  in  many  parts 
of  the  country  produces  a  rather  unjust  and  undesirable  condition; 
does  it  not  ? 

Mr.  Ainey.  That  produces  a  legal  barrier  against  the  exercise  of 
the  ordinary  regulatory  authority  of  the  commissions  in  that  par- 
ticular case,  turning  it  back  into  the  commission  line  of  thought. 
It  is  a  legal  barrier  not  an  administrative  difficulty  that  confronts 
them. 
J       Commissioner  Sweet.  That  is  true. 

In  your  judgment,  ought  there  to  be  in  all  cases  flexibility  with 
regard  to  tlie  rate  of  fare? 

:Mr.  Ainey.  You  mean  ought  the  rate  at  all  times  to  be  responsive 
to  the  conditions? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1409 

Commissioner  Sweet.  Yes. 
Mr.  Ainey.  Surely  so. 

Commissioner  Sweet.  Have  you  given  any  attention  at  all  to  the 
Cleveland  plan? 

Mr.  Ainey.  No.    Well,  I  want  to  say  that  in  a  limited  sense. 

Commissioner  Sweet.  No  special  attention  ? 

Mr.  Ainey.  No. 

Commissioner  Sweet.  You  know,  in  a  general  w^ay,  that  they  are 
getting  along  pretty  well  in  Cleveland  ? 

Mr.  Ainey.  Yes. 

Commissioner  Sa\t:et.  Under  a  service-at-cost  plan? 

Mr.  Ainey.  Yes. 

Commissioner  Sweet.  But  you  would  not  care  to  express  any 
opinion  as  to  the  desirability  of  adopting  that  plan? 

Mr.  Ainey.  Any  more  than  I  would  want  to  express  the  opinion 
as  to  the  desirability  of  adopting  any  particular  plan  in  Philadel- 
phia, where  they  are  getting  along  very  well. 

Commissioner  Sweet.  You  have  stated,  and  I  think  very  justly, 
that  no  detailed  plan  could  be  possibly  suggested  that  would  be  ap- 
plicable to  all  localities,  that  they  have  their  local  problems,  and 
must  adjust  them  according  to  their  necessities  and  conditions? 

Mr.  Ainey.  The  two  companies  I  cited  are  the  best  evidence  of 
that. 

Commissioner  Sw^eet.  Certainly.     It  is  undoubtedly  true. 

In  connection  with  the  usual  provision  in  franchises  with  regard 
to  paving  between  the  tracks  and  a  foot  or  two  outside  have  you  given 
thought  to  the  fact  that  it  is  placing  a  burden  upon  the  car  rider, 
whose  nickels  must  ultimately  be  resorted  to  for  the  payment  of  that 
expense  that  ought  to  be  borne  by  other  parts  of  the  community 
rather  than  entirely  by  the  car  rider  ? 

Mr.  Ainey.  Yes ;  my  mind  has  been  leading  me  along  in  the  con- 
sideration of  that  problem. 

Commissioner  Sweet.  Is  there  not,  in  the  adjustment  of  this  ques- 
tion, and  as  quite  an  important  part  of  it,  a  consideration  as  to  what 
is  right  and  just  as  between  one  part  of  the  community  and  another? 

Mi\  Ainey.  If  I  understand  your  question,  you  are  differentiating 
now  between  the  inarticulate  public  and  the  articulate  public  consti- 
tuting the  municipality.    Do  I  follow  you  there? 

Commissioner  Sw^eet.  What  I  have  reference  to  is  this:  If  the 
street-car  rider  is  paying  for  paving  expense  or  any  other  expense 
so  that,  m  order  to  produce  a  proper  return  that  you  have  already 
very  clearly  described,  he  pays  a  higher  fare  than  would  otherwise 
be  required— if  it  is  something  like  the  paving  of  the  street  that 
either  the  abutting  property  owner  or  the  general  public  might  more 
properly  and  justly  pay— don't  you  think  the  attention  of  the  public 
ought  to  be  called  to  that  fact  and  the  atmosphere  cleared,  so  that 
the  rights  and  justice  of  the  matter  might  be  determined  ? 

Mr.  Ainey.  Yes,  Mr.  Commissioner;  I  think  no  greater  service 
could  be  rendered  by  your  commission  than  by  a  w^ell-supported 
declaration  upon  that  question. 

Commissioner  Sweet.  Is  it  your  opinion  that  the  best  public  policy 
requires  that  the  rates  of  fare  should  be  just  as  low  as  they  can  be 
1G0G43°— 20— VOL  2 27 


I  r. 


1410    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

consistently  with  producing  the  amount  of  revenue  required  to  do 
wmt  you  consider  it  to  be  necessary  to  do? 

Mr^Al^EY.  I  have  said  to  the  contrary  a  moment  ago.  T  think 
that  utilities  and  carriers  sliould  have  revenues  generously  sufficient; 
and  I  have  adverted,  in  your  presence,  to  an  allowance  over  and 
above  that  for  operating  costs,  for  reserves  for  depreciation,  and 
for  fair  return  which  might  enter  into  fair  return,  if  you  please,  and 
that  would  be  a  recognition  of  efficiency  and  economy  in  management. 

Commissioner  Sweet.  I  think  perhaps  you  did  not  catch  my  ques- 
tion.   I  will  ask  the  reporter  to  repeat  it. 

(The  reporter  repeated  the  question  as  above  recorded.) 

Mr.  AiNEY.  Oh,  I  think  in  a  general  sense  that  is  true,  but  I  do 
not  mean  thereby  that  we  should  pare  to  the  bone  in  determining 
wliat  those  rates  are.    I  agree  with  your  statement,  absolutely. 

Commissioner  Sweet.  You  have  made  that  perfectly  clear  in  your 
direct  examination  that  you  want  to  be  generous  with  the  company; 
but  that  is  what  I  referred  to  in  the  latter  part  of  my  question. 

Mr.  AiNEY.  Yes, 

Commissioner  Sweet.  But  in  accomplishing  that  purpase,  I  wanted 
to  know  whether  or  not  you  consider  it  to  be  good  general  policy  to 
make  the  fare  just  as  low  as  it  consistently  can  be. 

Mr.  AiNEY.  Yes. 

Commissioner  Sweet.  In  other  words,  you  look  upon  the  street 
railroad  as  primarily  being  for  the  service  of  the  public? 

Mr.  AiNEY.  Yes;  otherwise  I  presume  I  would  not  be  a  public- 
service  commissioner.  That  is  the  theory  of  my  appointment,  I  sup- 
pose. 

Commissioner  Sweet.  Can  there  be  any  reasonable  question  about 

that? 

]Mr.  Ainey.  I  do  not  think  there  is  any  ground  for  differentiating 
adversely  to  that  thought. 

Commissioner  Sweet.  Then  from  an  economic,  as  well  as  a  socio- 
logical view,  the  matter  of  low  fares  and  the  more  general  use  of 
this  utility  are  desirable? 

Mr.  AixEY.  Yes. 

Commissioner  Sweet.  In  the  raising  or  granting  of  any  raises  of 
fare,  you  have  taken,  unquestionably,  very  ^reat  pains  to  consider 
that  phase  of  the  question  and  do  justice,  as  far  as  you  could,  to  the 
street-car  rider  as  well  as  to  the  company ;  have  you  not  ? 

Mr.  AixEY.  Yes. 

Commissioner  Sweet.  And  that  is  really  essential? 

Mr.  Ainey.  Yes. 

Commissioner  Sweet.  You  have  also,  of  course,  given  considera- 
tion to  the  demands  of  labor  in  connection  with  employment  upon 
street  railways — very  serious  consideration? 

Mr.  Ainey.  We  have  given  consideration  to  the  amount  of  those 
demands. 

Connnissioner  Sweet.  To  the  amount  of  those  demands  ? 

Mr.  Ainey.  As  reflected  in  operating  costs. 

Commissioner  Sweet.  It  is  a  very  large  percentage  of  the  cost  of 
operation  of  a  street  railroad  ?  - 

Mr.  Ainey.  Yes. 

Commissioner  Sweet.  And  necessarily  forms  a  large  part  of  the  ex- 
pense ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1411 

Mr.  Ainey.  Yes. 

Commissioner  Sw'Eet.  Have  you  any  distinct  views  that  you  would 
be  willing  to  express  as  to  whether  strikes  in  connection  with  street 
railroads  or  transportation  matters  ought  to  be  prevented  or  restricted 
by  law? 

Mr.  Ainey.  As  a  private  citizen,  I  have ;  but  you  are  carrying  me 
now,  Mr.  Commissioner,  into  a  realm  that,  functioning  as  a  public 
service  commissioner,  is  outside  of  our  jurisdiction. 

Commissioner  Sweet.  I  understand  that. 

Mr.  Ainey.  I  have  no  hesitancy  in  giving  a  private  opinion — but  I 
dislike  very  much  to  intermingle  my  private  opinions  with  respect  to 
policies  with  the  commission  authority,  because  those  reading  it 
might  assume,  immediately,  that  it  was  my  official  view.  We  have 
had  efforts  made  to  interject  the  labor  controversy  before  our  com- 
mission. Had  we  jurisdiction  in  the  premises  we  would,  of  course, 
fearlessly  undertake  the  consideration  of  that  subject ;  but  in  a  deci- 
sion which  we  made  some  year  or  so  ago  we  took  occasion  to  say  that 
that  was  a  closed  door  so  far  as  our  authorit}^  was  concerned,  and 
therefore,  it  being  a  closed  door  to  us,  we  felt  that  we  would  not 
open  up  an  academic  discussion  of  it. 

Connnissioner  Sweet.  I  did  not  know  but  that  perhaps  you  might 
be  willing  to  give  your  personal  opinion  on  that,  and  that  if  you 
could,  in  view  of  your  experience,  we  would  be  very  glad  to  hear  it. 

Mr.  Ainey.  You  must  bear  in  mind,  Mr.  Commissioner,  and  I  trust 
you  will,  that  I  have  pending  several  hundred  cases  in  Pennsylvania 
involving  every  kind  and  character  of  utility,  and  in  which  theso 
questions  come  up  for  ruling  on  frequent  occasions.  I  do  not  want 
to  get  into  a  discussion  of  the  labor  problem,  because  what  I  might 
say  privately  would  be  quoted  to  me  publicly  next  week  in  Pittsburgh. 

Commissioner  Sweet.  That  is  perfectly  all  right,  then. 

Mr.  Ainey.  If  I  had  the  power  to  consider  this,  I  w^ould  hope  to 
apply  a  remedy.  Anything  I  might  say  on  the  labor  problem,  how- 
ever, would  be  misunderstood,  because  I  could  not  be  able  to  divest 
my  personal  views  from  my  official  ones  when  tlie  matter  might  con- 
front me  next  week,  say,  in  Pittsburgh,  or  the  week  after  in  Wilkes- 
Barre,  or  at  a  later  period. 

Commissioner  Sw^eet.  I  have  no  criticism  whatever  to  make  of 
your  reason  for  feeling  the  way  you  do.  I  do  not  know  but  that  I 
should  feel  the  same  if  I  were  in  your  place. 

I  would  like  to  ask  you  one  further  question :  With  regard  to  tho 
hearings  of  this  commission,  as  I  have  outlined  our  purpose  to  you, 
have  you  any  suggestions  to  make  that  might  lead  to  better  results? 

Mr.  Ainey.  I  have  only  the  thought  which  I  took  up — of  ex- 
pressions to  you  for  the  railway  company  themselves—and  which  I 
apprehended  will  be  followed  to  a  certain  extent,  and  in  so  far  as  the 
conduct  of  your  proceedings  is  concerned,  the  method  that  has  been 
adopted  by  you  to  gather  information  from  the  four  corners  of  our 
country,  I  have  nothing  but  expressions  of  the  highest  appreciation 
to  give.  I  think  you  have  adopted  a  very  broad-minded  plan.  You 
have  attempted  to  get  every  type  of  thought,  and  ai-e  seeking  to 
correlate  them  in  a  way  that  certainly  excites  my  highest  admira- 
tion, sir.  As  I  have  already  mentioned,  I  am  counting  on,  out  of 
the  results  of  the  information  which  you  are  thus  gathering,  a  de- 
termination and  recommendations  that  will  be  of  the  very  greatest 


[1 


1412     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

importance  to  the  carriers,  the  public-service  commissioners,  to  the 
public,  to  members  of  the  legislatures,  to  the  executives,  and  to  the 
several  municipalities,  all  of  whom  touch  in  one  way  or  another 
some  phases  of  this  problem  that  is  engaging  your  attention. 

Commissioner  Sweet.  Thank  you,  Mr.  Ainey. 

Mr.  Warren.  May  I  ask  you^  just  a  question,  Mr.  Ainev  ?  Do 
vou  happen  to  know  whether  in  Philadelphia,  on  the  Philadelphia 
Kapid  Transit  lines,  there  is  a  transfer  charge  at  many  points? 

Mr.  Ainey.  I  think  so.  The  Philadelphia  Rapid  Transit  Co.  has 
never  been  before  the  public-service  commission  on  any  rate  com- 
plaint, and  we  have  never  made  any  investigation,  and  therefore  my 
knowledge  of  conditions  there  is  gathered  largely  from  what  I  hap- 
pen to  see  when  I  am  in  Philadelphia  or  a  chance  reading  of  a  news- 
paper. 

Mr.  Warren.  You  referred  to  the  feeling  about  overcapitalization 
and  your  attention  was  called,  I  think,  by  the  chairman,  to  the 
statement  of  Mr.  Harlow  C.  Clark.  In  his  testimoRv  Mr.  Clark 
stated  the  plan  he  there  suggested  was  the  result  of  liis  study  of 
street-car  questions,  and  he  is  editor  of  the  street-car  journal  called 
Aera,  and  of  his  discussions  of  the  street-railroad  problems  with 
many  street-railway  men,  and  that,  so  far  as  he  was  aware,  it  ex- 
pressed the  general  consensus  of  their  judgment  and  was  not  dis- 
agreed to  by  any  street-railroad  man.  I  should  like  to  read  that 
particular  paragraph  on  valuations  to  you  and  know  whether  or 
not  you  would  be  willing  to  say  if  it  would  reasonably  meet  the 
situation.  It  is  paragraph  A  in  the  permanent  plan  that  he  sub- 
mitted : 

The  ascertainment  of  the  amount  upon  which  the  enterprise  should,  in  fair- 
ness and  justice  to  both  the  investors  and  the  public,  be  allowed  to  earn  a 
return 

Mr.  Ainey.  May  I  burden  you  to  read  that  again? 

Mr.  Warren  (reading) : 

The  ascertainment  of  the  amount  upon  which  the  enterprise  should,  in  fair- 
ness and  justice  to  both  the  investors  and  the  public,  be  allowed  to  earn  a 
return. 

That  was  the  initial  step  and  the  foundation  of  all  his  other 
suggestions. 

Mr.  Ainey.  Now,  your  inquiry,  predicated  upon  that,  is  what? 

Mr.  Warren.  Whether  that  would  be  the  feeling  that  there  may 
be  overcapitalization  in  these  companies,  and  that  that  overcapitali- 
zation ought  to  be  taken  care  of  in  fixing  rates  and  in  determining 
the  treatment  a  company  should  receive  ? 

Mr.  Ainey.  I  do  not  think  that  that  answers  at  all  the  criticisms 
that  I  have  made.  Now,  if  you  are  asking  me  whether  I  assent  to 
that  and  if  that  is  a  good  statement,  I  do;  I  think  that  is  all  right; 
I  find  no  fault  with  the  statement.  But  I  am  not  speaking  of  the 
reaction  upon  my  mind  of  statements  of  that  kind,  but  I  am 
speaking  of  the  reaction  upon  the  minds  of  the  riding  public,  upon 
whom  these  railways  are  dependent,  in  order  to  get  the  money  nec- 
essary to  their  continued  existence.  The  man  who  has  not  the 
technical  knowledge  that  you  have,  or  these  gentlemen  to  my  right 
have — does  that  give  any  information  in  definite  terms,  with  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1413 

utterances  of  Mr.  Edison,  recently  made,  that  companies  should 
have  watered  stock  capitalized  and  a  rate  of  return  paid  by  the 
ratepayers,  and  which  the  ratepayers  never  will  accept — does  that 
give  them  any  information  with  respect  to  that  ? 

:Mr.  Warren.  That  is  the  individual  statement  of  Mr.  Edison,  I 
suppose  ? 

Mr.  Ainey.  I  understand  it  is;  and  I  have  tried  to  dijfferentiate 
between  the  splendid  work  that  this  commission  and  you  gentlemen 
representing  all  phases  of  the  question  are  doing  and  the  reaction 
of  that  work  in  the  minds  of  the  public  who  get  these  expressions 
of  Mr.  Edison  and  others.  Now,  the  public  are  apt  to  give  more 
weight  to  the  statement  of  a  distinguished  man  like  Mr.  Edison 
than  I  assume  they  would  give  to  me.  But  if  there  was  an  authori- 
tative utterance  that  the  railways  were  not  asking  to  have  their 
rates  predicated  upon  Mr.  Edison's  theory,  would  not  that  imme- 
diately dispel  the  false  impression  that  may  exist  in  the  minds 
of  the  990,000  who  come  before  us  either  directly  or  indirectlv  and 
constitute  rate  complainants? 

Mr.  Warren.  Do  you  not  think  that  this  is  an  answer,  Mr. 
Ainey?  This  is  the  view,  so  far  as  I  know,  of  all  street-railway 
men,  and  that  is  not  a  request 

Mr.  Ainey.  Well,  if  it  is  an  answer,  why  not  do  what  some  gen- 
tlemen are  seeking  to  do  with  respect  to  the  League  of  Nations 
treat}',  define  the  terms? 

Mr.  Warren.  That  may  be  a  very  good  suggestion. 

The  Chairman.  The  commission  is  very  grateful  to  you.  Com- 
missioner Ainey. 

(Witness  excused.) 

Mr.  Ogburn.  Mr.  Chairman,  there  are  five  or  six  more  witnesses 
who  are  scheduled  for  to-day.  Some  of  them  will  speak  only  on 
very  limited  phases  of  the  subject.  One  of  them  is  the  next  wit- 
ness, who  will  speak  on  a  very  interesting  subject,  however;  that  is 
the  maintenance  of  traffic,  with  certain  other  phases.  This  witness 
is  Prof.  Dugald  C.  Jackson,  who  is  professor  of  electric  engineer- 
ing of  the  Massachusetts  Institute  of  Technology. 

STATEMENT  OF  MR.  DUGALD  C.  JACKSON.  '  ♦ 

Mr.  Jackson.  Gentlemen,  I  do  not  come  here  with  the  expecta- 
tion of  presenting  to  you  a  cure-all.  When  the  very  courteous  in- 
vitation of  Mr.  Ogburn  to  appear  before  vou  came  to  me  I  thought 
Jit  first  that  this  sort  of  a  sitting  was  the  kind  that  I  generally 
listen  at  rather  than  participate  in;  but  in  thinking  it  over  it 
occurred  to  me  it  might  be  interesting  to  you  if  I  set  forth  the 
results  of  certain  inquiries  and  investigations  that  I  made  just  prior 
to  the  war  and  which  indicated  the  trend  of  the  street-railway 

industry  at  that  time,  so  that  you  could  have  before  you  definitelv 

if  it  has  not  already  been  set  before  you— the  situation  as  it  stood 
independent  of  the  very  unusual  conditions  that  have  been  caused 
by  the  entry  of  the  United  States  into  the  Avar. 

As  a  professor  of  the  Massachusetts  Institute  of  Technology  and 
the  head  of  the  department  of  electrical  engineering,  it  has*^  been 
necessary,  of  course,  for  me  to  be  quite  familiar  and  to  study  care- 
fully the  operations  of  public-utility  companies,  in  view  of  the  fact 


M! 


I,, 

■-  • 


\ 


1414    PROCEEDmcS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tlirtt  SO  many  of  them  eitlier  use  or  produce  electric  service  or  com 
pete  w,th  electnc  service.     And  al.^,  as  a  consulting  engineer    f 
huve  been  qmte  familiar  with  the  aifairs  of  many  pubHc  utTlitv 
concei-ns  and  also  with  tl,e  State  relations.  ^  ^  ^ 

}.^tLT     .^""^  '^''^'^  ^^  "^''  Institute  of  Technology  I  have  also 
lectured  on  the  organization  and  management  of  pubTic-utilitv  co  n 
panie^  which  has  led  me  to  study  this  question.    In  colS  Sh 

testis^tior  wX'/"*  P/'T  *"  ."'•"  ^"'••'  I  '»"''«  "  ^^^  ''"refill    n 
vestigation    with  the  aid  of  certain  assistants,  of  the  status  of  the 

electric  railway  companies,  which  I  finally  wrote  up  in  a  report 

Now,  betoi-e  I  go  at  this  I  want  to  expi4  my  own  personan"ti- 
ficat.on  at  the  appintment  of  a  commfssion  of  this  kind  imdef  the 
very  high  terms  it  has  been  appointed  and  in  the  character  of  its 
personnel.  I  have  great  hopes  that  there  will  be  a  ere  it  ve  resu  t 
as  the  consequence  of  the  labors  of  this  commission 
_  One  of  the  factors  that  you  obviously  understand  you  will  have 
to  con.sider  ,s  the  relations  of  the  public-utility  commit  ions  of 
the  States  in  dealing  with  this  sort  of  intrastate  industry  It  is  a 
very  important  factor.     I  have  believed  and  I  still  be  ev-e',  in  spite 

??on°o'?'n,Tn"'"''  "'"•*  "''  ^on^t'^ntly  arising,  that  the  nti J,  c- 
tion  of  public  supervision  and  control  of  the  public  utilities  bv  the 
State  commissions  IS  one  of  the  very  important  developments  of 
Amencan  communit;^  practice.  ueveiopments  ot 

There  are  certain  indications  that  all  does  not  go  well,  in  spite 
of  he  magnificent  fashion  in  which  most  of  the  cSmmiss  ons  Im^ 
dealt  with  their  very  troublesome  and  cliangingTroblemr  One 
of  tl|o«,  indications  is  the  fact  that  in  the  State  of  Massachuset^ 
which  has  had  most  able  and  experienced  commissioners  ma, w 
years,  when  the  street  railways  had  finally  come  to  a  cWsis  a  st '7 
ute  was  passed  viituallv  taking  the  control  and  supervfsion  of  s^Vv-" 
»ee  and  ft.i-e.s  out  of  tL  hanSs  of  the  commissioners  and  placing 
them  m  the  hands  ot  .special  public  trustees  for  each  street  n  ilw  v 
that  took  advantage  of  the  law;  at  the  same  time  essentTally  S 
mg  a  community  g„,u;anty  of  return-a  limited  I'eturn,  to  te  Tu le 
but  a  return— on  the  investment.  '  ' 

Now,  that  point  illustrates  one  of  the  features  that  I  want  to  em- 
phasize.    As  far  as  I  can  see-and  let  me  interject  a  parenthe^; 
Jere   saymg  that  the  specific  details  of  the  transfer  of  iTink  two 
of  the  most  important  railways  in  Massachusetts  to  public  trTs 
tees  m  this  session  under  the  new  law  have  been  carried  ouduHu*^ 
my  ateence  in  army  service  in  France,  so  that  I  do  not  know    hf 
e.xact  trend  ot  the  discussions  at  the  time  the  transfer  was  i^rde- 
but  as  far  a.s  I  can  see,  to  return  to  the  point,  the  public  can  Sin 
nothing  in  either  physical  or  money  advantag^  by  such  a  t^anfft-r 
because.  ,n  Massachusetts  there  has  "been  a  long-time  law  to  the  ef' 
feet  that  the  securities  of  the  street-railway  companieHha^l  repre 
sent  actual  money  in  the  plant.    Bonds  mav  be  sold  undei  nar  b^?t 

mission  supervision,  as  far  as  the  physical  servfce  is  concerned,  aM 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1415 

the  monejr  expenditures  by  the  public,  who  are  the  riders,  provided 
the  commission  has  had  the  adequate  statutory  privileges  and  has 
had  the  adequate  staff. 

The  problem  becomes  a  psychological  problem;  that  is,  it  be- 
comes a  question  whether  the  public  is  satisfied  to  have  a  commis- 
sion which  is  doing  many  things  supervise  these  particular  matters 
in  addition  to  the  other  matters  that  they  have  in  hand,  or  whether 
the  public  is  better  satisfied  to  have  a  set  of  public  trustees  who  are 
giving  their  whole  attention  to  this  specific  railway. 

Now,  I  am  not  going  to  answer  whether  the  public  will  gain 
psychological  advantages  or  not.  I  think  that  is  a  very  important 
question  for  this  commission  to  study. 

I  will  add  one  more  thing.  Even  if  Massachusetts  finally  goes 
further,  if  they  find  the  public  gain  in  money  and  service  by  this 
change,  if  they  then  go  further  by  then  going  into  public  ownership, 
there  still  is  going  to  be  exactly  as  poor  a  situation  with  respect  to 
service  and  money,  if  it  is  a  poor  situation,  as  they  liave  now.  They 
can  psychologically  gain  only  provided  the  payments  for  the  prop- 
erties when  they  go  into  public  ownership  is  an  actual  payment  for 
the  money  that  has  gone  into  the  property.  Now,  that  is  one  of  those 
cold  and  definite,  logical  facts  that  it  is  hard  to  get  before  the  pub- 
lic and  that  the  public  will  not  take  from  any  public-service  corpo- 
ration, but  they  may  see  some  of  these  ix)ints  from  a  report  from 
such  an  important  commission  as  this  one  which  you  compose. 

Now,  I  am  not  going  to  touch  upon  the  imjx)rtance  of  the  industry 
by  laying  statistics  before  you.  That  has  been  put  before  you 
plentifully,  I  have  no  doubt,  by  street  railway  men.  Nor  am  I  going 
to  deal  with  such  questions  as  methods  of  valuation  and  matters  of 
finance,  as  I  liave  no  doubt  they  have  been  put  before  you  by  other 
engineers  and  by  financial  men.  1  have  very  definite  views  in  regard 
to  the  desirability  of  valuations.  I  have  had  a  great  deal  of  ex- 
perience in  it.  I  suppose,  including  my  armj  experience  in  making 
estimates  of  how  much  the  physical  damage  in  France,  Belgium,  the 
Balkan  States,  and  Italy  came  to  from  the  ravages  of  war,  I  have 
probably  made  more  actual  dollars  of  valuation  than  any  other  en- 
pneer.  Altliough  this  army  valuation  had  to  be  done  very  hastily — 
it  was  perhaps  a  little  like  the  10-day  valuation  that  was  referred 
to  in  Omaha — I  will  say  that  this  army  valuation  was  done  with  a 
great  deal  of  fidelity;  and,  curious  to  relate,  the  American  figures 
when  they  were  done  agreed  very  closely  with  some  other  estimates 
that  had  been  made  covering  a  much  longer  period. 

I  will  not  deal  with  wages  and  man  power.  I  will  speak  generally 
of  the  street-railway  industry.  But  remember  that  there  are  certain 
cities  which  are  very  unusual.  One  is  New  York  City,  and  especially 
Manhattan,  with  its  great  subway  and  elevated-railway  systems^ 
and  you  must  keep  in  mind  that  most  of  my  remarks  relate  to  the 
affaii^  of  surface  street  railways  in  the  usual  cities  of  the  United 
States. 

Now,  the  problem  placed  in  the  hands  of  your  eminent  commis- 
sion is  not  correctly  couched  in  the  phrase,  "  Save  the  electric  rail- 
ways," which,  at  the  time  I  came  back  from  France,  I  found  was 
punning  through  the  newspapers  and  being  talked.  It  seems  to 
me  the  real  problem  is  "  Save  and  more  firmly  establish  systematic 


1416    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

local  transportation  in  our  larse  pitiM "    Thnf  ;o  »  ,„ 

iiie  inv estors  that  have  their  money  m  the  proiects. 

if  thrextensi,Tet.7H^  ^  "''  ^''''^  ^"''"."«'  disturbance  arising. 

And  I  agree  vvith  Judge  Ainey  that  the  matter  is,  in  a  sense  a  local 

Tour-  M  citfes  fZ'  ''''''  ''  "1  ^i  '  ^'^  «*  locrd^ffidut  e 
t  beconferof  d  e  "tL,f  ■  ""^^  f"  absolutely  country-wide  matter; 
It  uecomes  or  the  utmost  importance  to  every  citizen  in  pverv  r>^4 

-  ^s  atTmi";^'  l"^.  ^?"««q"«ntly  it  needs  to^ deal?  with  ni  o^nl? 
as  a  local  matter  but  also  as  a  country-wide  matter  ^ 

J  he  continuation  of  business  in  American  cities   whether  indi,.! 

l^kr^rZS'ri.ftl^'Y'^''''''  is  dependent  on  sy'^iTtf  fc^a'p- 
fZtL.fPi.^}ng  available,  and  the  activities  and  com- 
fort of  the  great  majority  of  individual  citizens  are  likewise  d^ 

Cs    be  pTeseTv  dTnd'  ^T'  ^^^^"^1^   '''^'''''-     "-h   S«e 
tTem  adanted  tniho  1      '^r^'-'^.!"  ""  character  which  will  maintain 
iiiem  aaaptea  to  the  characteristics  of  the  oitipcj     Tn  in^r  ri^^^  ^^i 

ways  of  accomplishing  this  is  a  broad  large  and  impSant  Zder 
taking  gentlemen,  and  it  is  that  problem  w'hich  k  fn  vour  hands 
makp"mnr'  ""^  rl^}^  dealing*^with  it  fundamentalircan  you 
missio"       '"'■^'''''''l*'  *'»«  '•^^"Its  of  the  deliberations  of  ^^our  com 

wiU  not  feel  at  all  hurt  and  I  wfu  simply  strike  out  my  remarics 
The  present  situation  may  be  described  as  a  state  of  pubhcTrrira: 
tion  over  increasing  unit  fares  for  travel  accompanied  by  critic  sm 
of  the  service  and  at  the  same  time  the  railway  companieTare  S 
ing  into  bankruptcy  caused  by  the  condition  of  w^r  laees  and' 
cost  of  materials,  the  unfortunate  status  of  local  passenlef  trans 
portat.on  companies,  however,  is  not  wholly  war  procK  In" 
creased  fares  have,  as  a  rule,  only  partially  offset    nTresed  wa^^ 

panie™tTheZl  SlTIf  ''^. -"r"«d,  a/d  the  trend  ofThe  S 

panics  to  the  bad  has   therefore^  been  accelerated  by  the  war   but 

he  trend  was  unmistakably  present  before  the  war,  and  therefore   t 

ier^he  faff ""  "^  determining  what  were  the  cau4  and  wW 

Most  street  railways  have  been  organized  and  work  under  orovi 
Sions  of  some  agreement  tetween  representatives  of  a  citv  and  renil 
sentatives  of  the  stockholders.    The  agreements  have  LdmaXd 
differences  in  different  cities,  but  they  have  all  had  certain  featuios 
more  or  less  m  common     The  street-railway  conditions  are  different 
from  ordinary  mereantile  and  industrial  buiiness-I  am  goinSn - 
rather  rao.dly;  I  hope  I  do  not  talk  too  fast  for  you  to  fallow  iI'Jhv^ 
if  I  do,  bndly  tell  me-the  street-railway  conditions  are  c  ifferenf 
from  ordinary  mercantile  and  industrial  businesses  and  /n  thtfh^t 
partake  of  the  characteristics  of  other  pub^c  'i«tities     The  str^t 
railways  stand  in  the  position  of  undertakfng  the  local  passenger  tra^ 
portation  m  the  cit.es  under  certain  limitations,  but  ?he  cf  nd  [fo"  ; 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1417 

/jilTer  from  agreements  in  ordinary  businesses.  An  ordinarj^  business 
contractor,  such  as  one  who  undertakes  to  execute  for  a  fixed  sum 
some  large  work,  like  the  erection  of  a  large  building,  the  construc- 
tion of  a  dam,  or  the  building  of  a  portion  of  a  railway,  usually  has  a 
definite  undertaking  to  perform.  The  capital  which  he  himself  in- 
vests is  often  small  compared  with  the  aggregate  cost  of  the  work, 
for  he  is  not  uncommonly  paid  monthly  on  estimates  made  by  the 
architect  or  engineer,  so  that  the  "  turnover  "  of  his  capital  is  rapid. 
This  enables  him  to  assure  himself  a  fair  return  on  his  capital  and  a 
sufficient  profit  to  represent  adequate  pay  for  his  own  time  and 
ability.  In  fact,  if  conditions  turn  out  eminently  favorable,  he  has 
before  him  the  possibility  of  making  a  large  profit  beyond  a  minimum 
^  compensation  for  his  capital,  his  time,  and  his  brains.  But  if  condi- 
I  tions  turn  against  him  so  that  he  finds  himself  leading  toward  bank- 
ruptcy, he  may  as  a  final  resort — and  once  in  a  while  it  is  resorted 
to — refuse  to  go  forward  with  the  work,  forfeit  his  bond,  and  allow 
the  work  to  be  completed  by  the  owner  of  the  property.  Most  busi- 
ness activities  have  characteristics  of  this  nature.  There  is  a  chance 
for  unusual  profits  to  the  man  of  particular  capacity  and  skill,  a 
rapid  turnover  of  the  capital,  little  external  interference  with  the 
methods  used"  provided  they  are  lawful,  and  a  chance  to  liquidate 
with  little  waste  of  time  and  little  disturbance  other  than  the  loss  of 
money  to  the  JDusiness^man  himself,  if  any  loss  has  been  incurred. 

Such  principles  which  relate  to  ordinary  businesses  seem  to  have 
had  large  influence  in  the  negotiations  between  officers  acting  for 
cities  and  officers  acting  for  street-railway  companies  when  agree- 
ments relating  to  the  occupancy  of  the  streets,  the  character  of  the 
service,  and  the  price  to  be  paid  for  rides  have  been  drawn  up. 

Both  city  representatives  and  company  representatives  have  beeu 
at  fault  in  the  past  in  not  recognizing  the  special  and  peculiar  condi- 
tions which  come  into  play  in  electric  street-railway  enterprises.  A 
company  directorate  who  accept  an  agreement  to  make  a  fixed  fare 
within  city  limits  which  are  not  defined  and  may  be  largely  ex- 
panded, place  their  company  in  a  situation  where  the  ultimate  bank- 
ruptcy of  the  enterprise  is' likely  to  result,  in  case  the  area  of  the 
I  city  grows  in  large  measure,  as  has  been  characteristic  of  American 
cities,  unless  a  later  modification  of  such  an  agreement  can  be  made. 
And  a  city  council  which  insists  on  such  a  provision  promotes  the 
ultimate  strangulation  of  service  as  the  city  grows  and  the  company 
is  put  to  a  struggle  to  make  ends  meet,  while  it  is  carrying  out  the 
letter  of  its  agreement,  its  written  obligations — whether  you  call  it  a 
contract  or  not,  it  has  written  obligations  to  carry  out. 

I  could  cite  many  other  provisions  that  have  entered  into  agree- 
ments between  cities  and  traction  companies  which  are  producing 
like  results.  In  my  opinion,  and  I  want  to  emphasize  this  point  in 
your  mind,  the  cities  and  companies  alike  have  been  at  fault  in  in- 
troducing, without  foresight  and  expert  judgment,  such  inflexible, 
drastic  and  impracticable  provisions  into  relations  between  them; 
but  the  real  difficulty  has  been  to  find  a  better  way.  With  the  advent 
of  State  public-utility  commissions  the  execution  of  some  of  the  pro- 
visions may  have  yielded  here  and  there  to  judgment.  But  even  then 
there  has  often  been  a  failure  to  correlate  the  facts  of  the  industry  so 
as  to  bring  out  the  essential  meaning  of  the  tendencies  in  the  industry. 


1418    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

The  introduction  of  supervision  by  public-utility  commissions  was 
essentially  a  move  which,  uniformly  and  fairly  applied  woudre^.k 
m  providing  go,xl  service,  at  cost,  when  a  fair  return  on  the  invest 
Sr  nn/°f'"^'^  f^  ^""^  "^  '^e  cost  in  addition  to  the  ordinary 

u,  tv  fn.  ;^T''1  '^'^f  "'*''•  ^'  *h«  '^""^  ti™«'  it  afforded  oppor^ 
tunity  tor  a  street  railway  operated  with  particularly  able  fore- 
sghted  management  and  giving  notably  good  serv4  to  profit 
through  receiving  a  larger  return  on  its  investment  than  the  average 

wh  ch  th^Jv  r*'^'  ^^J'\f'-''^  coinmission  has  a  certain  ranjrovir 
which  tjiey  inay  within  the  satisfaction  of  the  public  allow  Returns 
Ihe  present  slogan  tor  service  at  cost  adds  to  this  the  additional 
feature  ot  guarantee  by  the  taxpayers  of  a  return  on  the  investn.ent 
associated  with  operation   under  public  authority.     Ths  addition 
has  been  adopted  in  certain  instances,  but  it  is  fldng  conswt.ble 

bintTTftr'aZr;^"*'' ''  't:  '^  ^^^"^  *»  fei&from  ^  S 

mntj.  It  tlie  actual  return  on  the  investment  is  fixed  at  the  upwer 
level  and  can  not  be  modified  as  changing  conditions  in  the  value 
ot  money  progressed.  There  must  be  the  same  flexibility  from  le 
standpoint  of  return  on  the  investment  as  there  is  from  the  sTand! 
point  ot  wages  and  other  things,  in  order  that  the  prSectecan  be 
maintained  and  extended  as  the  city  requirements  requ  re 
Commissioner  Gadsden.  Won't  you  develop  that  thought  iust  a 

iVt'^ZTt  *7  ^f  P'"^  '^'  r*"™  °"  »^  investmenfLx  b  e? 
Mr    Jackson.   Prof.  Irving  Fisher,  part  of  whose  statement  T 

heard,  gave  you  an  iUustratiofi  of  tlie  difference  b^tw^n  the  Set 

I  [hinktith^r  h':''  ""'f  *"■  '""'H  T^''  differeTcZlitnTa  Id 
L  T.  .u.  u^  *''■  P«';l'aps  one  of  the  commissioners  brought  out 
the  fact  that  where  one  has  service  at  cast  with  a  fixed  return  to  the 
pro,x<rty  holders,  one  practically  puts  the  stockholde,^  [n  the  aspect 
ot  bondholdei-s  under  ordinary  conditions,  because  they  have  a  sub- 
stantia guaranty  from  their  communities  that  they  shah  get  so  much 
and  after  that  they  do  not  get  anything  more.  Now,  that  °sTe?y 
good  for  the  time  the  adjustment  is  made,  and  it  may  he  good  indefi^ 
n.telj,  but  with  the  very  wide  changes  of  conditions  wl^ch  are  oc- 
curring m  this  country  and  also  in  the  world,  the  rates  at  whiVh 
money  mav  be  obtained  varies.     We  used  to  think  thawthour  per 

i^i^TV^""  '**;  ""'  "?"='^  ",'?"^y  '^""IJ  ^^  ''l>t^ined  was  going  to 
fall  in  this  country  and  would  continue  to  fall.    It  was  lowef  in 

the  European  countries--tlie  great  centers  of  money  capital  of  Grelt 

Bntam  and  France  and  Germany-and  we  thougk  we  were  in  the 

dn-ection  of  coming  to  somewhat  shi.ilar  rates  for  money  which 

would  be  put  into  enterprise.    But  as  an  actual  fact  the  wa?  overset 

hat    and  consequently  our  judgment  as  to  what  the  future  would 

be.  was  a  1  wrong     i;fot  only  has  the  rent  of  money  increased    n 

this  country   but  it  has  been  changed  entirely  in  all  the  Eirropean 

countries.    It  has  ,ncre.ised  greatly!'   Whether  that  increases  going 

clTdZtions  ;ini'  pSt'r  ''''■  /k*  f^''^''  "P°»  -"«  ^'^^^ 
coiisiaerations  that  i'raf.  Fisher  put  before  you,  and  which  are  so 

large  that  I  have  not  very  much  confidence  in  their  being  ^ttl^  ^ 

promptly  as  he  seemed  to  hope.     In  other  words,  we  are  fn  a  Sod 

and  ai-e  going  to  remain  in  a  period,  in  all  probabihty    of     ncer 

tamty  in  regard  to  how  much  return  a  man  who  has  /dollar  a^^^^ 

IS  willing  to  put  it  into  a  street  railway  will  receive 


'         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1419 

The  Chairman.  Would  you  favor  changing  the  return  on  tlie 
bond? 

Mr.  Jackson.  No;  I  would  not  favor  changing  the  return  on  the 
bond,  because  that  is  an  agreement  that  was  made,  and  when  a  man 
makes  a  contract  he  ought  to  be  expected  to  stand  by  it  under  such 
circumstances. 

The  Chairman.  Where  would  your  inflexible  term  come  in,  then, 
as  to  the  issuance  of  new  stock  or  capital  ? 

Mr.  Jackson.  I  was  going  to  explain  that,  Mr.  Chairman.  When 
a  return  on  a  bond  under  a  pailicular  mortgage  becomes  less  than 
that  at  which  people  are  willing  to  let  out  their  money,  a  company 
having  fixed  the  rate  by  means  of  its  mortgage,  a  company  sells 
additional  bonds  either  at  a  price  materially  lower  than  j)ar,  so  as 
to  raise  the  return  and  meet  the  market  situation,  or  else  it  fails  to 
sell  bonds.  If  the  return  is  larger  than  seemed  necessary  to  get  the 
money,  they  may  do  something  in  the  way  of  refinancing  so  as  to 
issue  additional  bonds,  if  they  wish  to  issue  bonds  under  a  new 
mortgage  with  other  provisions  in  respect  to  returns. 

Now,  with  the  fixed  i*eturn  of  the  stockholders  one  is  in  the  situa- 
tion where  he  can  not  sell  to  vary  the  return,  as  you  can  with  a 
bond.  Although  the  return  on  the  par  may  be  fixed  by  the  mort- 
gage, by  selling  at  different  prices  below  par  you  can  vary  the  re- 
turn. But  if  a  stock  must  be  put  out  at  par  for  money  and  you  have 
a  fixed  return,  it  is  absolutely  inflexible,  and  this  process  therefore 
puts  the  stockholder  in  a  situation  that  is  even  less  flexible  than  the 
bond  contract  of  old  as  to  the  bondholder. 

Commissioner  Gadsden.  Would  not  that  be  met  by  the  general 
adoption  of  the  plan  of  issuing  nonpar  stock  and  sell  the  stock  from 
time  to  time  on  the  market  ? 

Mr.  Jackson.  If  you  sell  nonpar  stock,  how  are  you  going  to  guar- 
antee the  return  to  the  stockholders — excuse  me,  Mr.  Commissioner. 
You  started  the  trend  in  ray  mind  and  I  came  right  back  at  you  with 
a  question  without  thinking. 

Commissioner  Gadsden.  Well,  the  profit  on  the  property  devoted 
to  the  public  use  is  divisible  among  the  holders  of  the  common 
stock,  is  it  not  ? 

Mr.  Jackson.  Yes;  but  you  will  have  to  fix  your  guaranty  on 
the  basis  of  the  money  put  in,  and  therefore  each  dollar  gets  ex- 
actly the  same,  whether  it  is  represented  by  a  certificate  which  is 
without  par  or  whether  it  is  a  certificate  of  $100  per  share,  and  I 
do  not  think  you  avoid  the  difficulty.  On  the  other  hand,  I  should 
not  like  to  dogmatize  upon  that  question,  because  I  have  not  re- 
flected upon  it. 

Commissioner  Gadsden.  It  is  a  very  interesting  subject. 

Mr.  Jackson.  Yes;  however,  offhand  I  do  not  think  it  >vould  solve 
the  difficulty.  There  is  undoubtedly  some  way  of  solving  all  these 
difficulties,  and  such  a  commission  as  yours  may  be  a  great  aid  in 
arriving  at  it. 

Now,  another  solution  would  be  to  add  to  the  powers  of  the  pub- 
lic-utility commissions,  when  they  have  not  sufficient  powers,  giv- 
ing them  sufficiently  experienced  engineers  and  accounting  staffs  so 
that  they  can  fully  audit  the  companies'  affairs  and  correctly  ad- 
vise the  public  in  respect  to  the  problems  of  extension  and  operation 


II 


1420    PKOCEEDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION 

^ilP]^t^^SZ^^^  °^  *^«  — ^-    That 

tion  was  the  fixed  retwn  allmviri  ^k"/?,"^  the  principal  objec- 
have  to  that  phin?  ^''-     ^'  *^''*  *"»«  ""'y  objection  you 

minor  obieS  Jh,?.*  ''  *''•  °"^  '""J"''  objection.    Every  plan  has 
"  plan  S  "llrs^Sf  co^^^l.r  ftuStf  f/  ^  ^"^^^ 

require  an  Angel  Gab,  'l  with  hk  «"''*"''"'  '"•lF°">Plex  enough  to 
future,  if  theyfre  to  be  solvprl  will^T"'''^"?'  ^''  foresight  of  the 
pick  o'ut  thos^e  plans  which  have  ^^Ir/  '^'"'"'K^^i'^g^'-  ^^"t  ^^ 
vantage,  as  agnfnst  thl  diL^ntages^'^^^^^^^  <"■  ^^- 

disadvantage  which  occurs  tr.  m«  „r*i  ^  '®  *"®  ""'.V  major 

the  only  mfjor  dfsadSge^  Tnd  ff  ttt^cTh*'  ''"^  ^  *.^>"'^  ''  '« 
protect  the  public  and  -.ittl  I  .•  '^"'^  ^^  corrected  so  as  to 
holders,  I  brieve  that  tLcnJT  *""^  P^^  *^'"  ^"^^  the  stock- 
one,  although  FalsriSLXtw"'''^^'''':  '^  •!"'*«  '^  desirable 
operated  under  sipervis  on  of  ^nf  °'*  ^stances  it  ought  to  be 
urate  commisJons  becau^  th!  ^^^^  commissions  rather  than  sep- 
maintain  the  nretsaiyTupeJwscr ^^^^^    "'^  '^  '»''*  ^-S-  — gh  L 

viewf"!  cr.?herafat 'inX&i^r'  ''"^"^"'^'^  ^^  ?— ^ 
vitation.  I  have  not  cJnsuItoH  win  '  ^^""!,^  >°"  ^""^  "^e  an  in- 
them  about  it,  and  I  am  Hv-ln™  ^  *Tf '  °''  ^''^^  ^^'J^^d  with 
a  student  of  this  sort  of  tl^nT^  ^""  "^  ''''*''"*«  P^'^^"''!  views  as 

.viSntlL^tlTsSVati  ^i^  ^'^J^.  ^^-^  compared 
to  establish  the  tendencies  of  thrndustrv    and  nf  *'*..'"'"'^  ^''^^ 
has  Its  capital  converted  into  «till  T.       ■^'  *"« .".'en  the  company 
ground  and  it  cTn  nofrevoluSiW  ftf  J^  and  brick  rooted  to"^  the 
it  can  not  liquidate  withnirt  i„r-?         ''^  methods  immediately  and 
still  more  impoXt-w£ut  cfusZ^'{f^°^^  "*  ""^  '^^''^^  ^^d- 
individuals  u?,o  are  bound  to  hp^fO?      ^'"''  '"''onvenience  to  the 
service,  as  welf  as  eSe  dislocatin^TfT'"'- ""*'  ^>'P«"d  upon  its 
which  it  has  served     m  truth  of  tT  "^.''"s.ness  in  the  territory 
by  experience  durkig  recent  strike,  of  if  "T  «t?te«nent  is  fortified 
certain  of  our  cities.    The  causes  then  wlfil^l'''^"^  employees  in 
lem  into  your  hands  m^v  bn  t?!^^  ".        *  ^""l^  brought  this  prob- 

-hich  thjl  special  L"iiL^:rbTenZirwh'ff'rV''ii"lt""y  '« 
and  the  companies,  and  the  wnr  ha»  -li  *"  ^^  ''°*''  ^^e  cities 

and  brought^more  quickly  iTnon  the  t/„  exaggerated  the  troubles 
which  was  creeping  u pon  tfienr  Thi<f .  V""  i^niP«nies  a  crisis 
problem  of  local  paXnger  T^nsSr^H^P^*''''  ''''^'^V'*'  ''"''  «P«"al 
dealt  with  without  coSrS^f/iT  """K^^  successfully 
from  ordinary  commercfal  merc^ntil  distinguishing  conditions 
Now,  if  vou  ar^wfllinj'  I  wflUnif'  """^  in^t'stnal  Susinesses. 

.he  public  „,„<,ins .!» '<;lSL""„?Eis.:.i?;^tX'i'f 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1421 

prises  that  most  American  individuals  are  most  familiar  with,  and 
I  know  this  from  my  own  experience  in  having  some  little  relation 
with  some  manufacturing  and  other  things  of  that  nature.  I  know 
very  well  that  I  would  not  have  a  real  understanding  of  the  differ- 
ences if  I  were  not  also  carefully  studying  the  differences  and  having 
something  to  do  with  the  i^ublic-utility  oiDerations  through  having 
been  consulting  engineer. 

A  shoe  store  or  other  specialty  store,  for  instance,  may  pay  a  fine 
profit  to  its  owner  in  case,  after  all  out-of-pocket  expenditures  have 
been  paid,  it  nets  only  10  per  cent  of  the  gross  sales  for  the  stock- 
holders; and  a  department  store  may  lead  its  proprietors  to  wealth 
when  netting  little,  if  any,  more  than  5  per  cent  on  its  gross  sales. 
This  results  from  the  fact  that  the  turnover  of  capital  is  rapid  in 
these  mercantile  businesses,  the  gross  sales  in  a  year  equaling  or 
exceeding  invested  capital;  but  the  individuals  familiar  with  these 
businesses  are  not  unusually  familiar  with  the  fact  that  35  per  cent 
of  the  annual  gross  revenue  of  a  street-railway  company  usually  is 
no  more  than  6  per  cent  of  the  invested  capital  of  the  company,  and 
may  be  materially  less,  on  account  of  the  slow  turnover  of  capital 
inherent  to  this  industry,  in  which  the  annual  gross  receipts  are  but 
a  small  fraction  of  the  money  that  has  been  put  in  the  permanent 
way,  power-generation  plants,  electric  circuits,  rolling  stock,  and 
other  fixtures  relating  to  the  business.  And  it  is  incredible  to  the 
average  man  of  the  street,  the  average  man  of  the  public,  that  when 
they  are  interested  in  a  corner  grocery  or  corner  meat  shop  or  a  bit 
of  a  pharmacy,  and  recognize  the  rate  of  turnover  on  their  capital — 
it  is  incredible  that  35  per  cent  of  the  gross  receipts  of  a  big  public 
utility,  which  looks  to  them  like  many  fortunes,  should  represent 
only  as  much  as,  say,  6  per  cent,  or  perhaps  a  little  different  from 
that  on  the  actual  money  that  has  been  put  in.  And  I  am  satisfied 
that  that  is  one  of  the  grounds  of.  suspicion  and  of  doubt  in  regard 
to  public-utility  managements  that  resides  in  the  minds  of  the 
public. 

The  so-called  jitney  buses,  even  when  they  are  established  in  sys- 
tematic and  permanent  routes  which  are  properly  planned  to  give  a 
reliable  service,  have  a  business  which  produces  a  more  rapid  turn- 
over of  the  invested  capital  than  the  street  railways,  for  reasons  that 
I  will  later  recur  to. 

Thei'e  will  probably  be  no  dissent  from  the  proposition  that  sys- 
tematic, reliable  local  passenger-transportation  service  is  essential  to 
the  life  in  American  cities,  but  it  may  be  well  for  me  to  here  dwell 
further  on  that  point. 

The  ordinary  American  city  is  a  center  for  financial,  commercial, 
and  industrial  businesses  associated  with  residence  territories.  The 
regions  utilized  for  different  business  activities  and  for  residences  are 
to  a  certain  degree  segregated,  the  commercial  and  mercantile  busi- 
nesses and  some  of  the  industrial  businesses  tending  toward  the 
heart  of  the  cities,  the  principal  industrial  businesses  tending  toward 
the  suburbs,  and  the  residential  regions  tending  toAvard  a  belt  sur- 
rounding the  financial  and  mercantile  center  and  individual  suburbs 
which  grow  up  around  the  principal  industries.  Of  course,  that  is 
just  a  broad,  general  view  to  get  a  certain  visualization  of  the  cities 
which  call  for  transportation.  The  cities  vary  in  shape,  many  of 
our  most  important  cities  being  located  on  the  sea,  or  upon  a  lake,  or 


1422    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tipon  a  river  so  that  their  development  may  be  described  as  of  tl,P 

&rthi"wr."e  ^•'"^  ^  tLnhiT^t;con^^te.™r^^^^^^ 

an-ier  ^  thp  fl«w  ^T     ^  fT"  '"^"''M^  *"  "»»ke  a  relatively  small 
instance,  at  I'aris,  m  the  main  portion  of  the  oitv    iha  ^l\r.^  • 

SSn'3,:;"Se';s  zr!r  sir  I'" » ~» " 

concernpf^       Anrl  T  r.^^^         ui  '  ^^/^^/^s  tHe  flow  of  population  is 

jij  eveij  otner  djock.     Ihev  are  verv  wpII  pontar»f  i^  ^u^,.       ^ 
bndge  per  town  between  themselves  Lrttrsut rLs  Shnther 

(mS^ron^a;  tV^''  P'''"*  ^'  ^'"  "i^J""™  ""ti'  2  o'clock. 
^  wnereupon,  at  1  p.  m.,  a  recess  was  taken  until  2  p.  m.) 

AFTERNOON  SESSION. 

STATEMENT  OF  MB.  D.  C.  JACKSON-Continued. 
The  Chairman   Professor,  you  may  resume. 
pe!I  ci  fe?amTolr'l?winT  °'  '""^  '^'^"T''  ^'^"^^  '^^  ^^^^^ 
koF£^iF~|-^^^^^ 

whole  are  mo.-e  anxious^o  kL^tha^    S;Tvera?of 'the  inHh--/'  ^ 
rides   per   anm^m   on   th^'^averSe   ner   1.^'^n  ^-  'i!'?:^  ""'"^•-  «* 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1423 

in  good  weather.  And  particularly,  we  can  not  rest  with  the  erratic 
kind  of  service  which  is  sufficient  in  the  comfortable  daj'S  of  the 
spring,  summer,  and  autumn,  but  which  disappears  from  the  streets 
in  part  or  in  whole  in  the  extremely  rugged  days  of  winter.  The 
American  people  must  have  systematic,  definite,  and  reliable,  local 
passenger  transportation  for  their  cities.  It  can  not  be  obtained  by 
sporadic  jitney  service.  It  can  only  be  obtained  by  the  definite  serv- 
ice which  can  be  held  accountable  for  providing  the  requirements 
equally  in  foul  weather  as  in  fair.  There  is  also  a  great  need  in  the 
American  cities  of  a^ervice  which  will  carry  passengers  distances  of 
many  miles,  perhaps  10  to  15  miles,  but  which  partakes  of  the  charac- 
teristics of  the  local  passenger  service,  and  which  at  the  same  time 
affords  a  satisfactory  local  passenger  service  for  people  who  travel 
but  short  distances,  often  not  more  than  a  mile,  and  in  large  pro- 
portion, for  instance,  not  exceeding  two  miles.  This  service  again  is 
one  which  can  not  satisfy  the  needs  if  provided  in  a  sporadic  fashion. 
The  effort  of  the  American  street  railways  has  been  to  provide  the 
short  haul  local  passenger  service  and  the  long-haul  local  passenger 
service  by  the  same  means  and  for  the  same  fare  within  a  city  area. 

Recognizing  that,  we  must  have  all  of  the  local  passenger  transpor- 
tation which  the  street  railways  have  desired  to  give,  and  in  fact, 
have  been  giving,  the  question  is  wliether  the  present  needs  can  be 
met  even  in  normal  times  for  one  fixed  fare,  in  the  old-time  fashion 
of  the  American  street  railways. 

Our  present  street-railway  -service  is  an  outgrowth  of  horse-car 
service  which,  naturaly,  dealt  alone  with  the  short  haul,  and  the 
electric-railway  fares  were  chosen  and  fixed  by  habit  on  the  basis 
of  the  horse-car  service. 

I  am  speaking  of  this  out  of  personal  experience,  because  I  was 
engaged  in  consideration  of  electric  railways  in  the  days  when  we 
were  replacing  horse  cars  by  electric  cars.  Consequently  it  is  a  mat- 
ter of  personal  experience  as  well  as  study  when  I  make  these  state- 
ments. We  took  a  different  motive  power  and  simply  grafted  it 
onto  an  existing  system,  without  modification  of  many  things  which 
existed.  In  the  horse-car  service  tlie  investment  per  passenger-mile 
haul  was  less  than  in  the  modern  electric  service. 

For  instance,  speaking  of  having  made  a  study  of  electric-railway 
conditions  and  having  written  a  report,  in  that  report,  which  was 
published  as  a  book,  finally,  one  page  shows  a  chart  of  the  aggregate 
of  street-railway  conditions  in  Massachusetts,  beginning  with  the 
year  1890  and  going  doAvn  to  1^15. 25  years. 

The  year  1890  was  just  about  the  opening  of  activities  in  elec- 
trification, and  a  small  proportion  of  the  then  horse  railroads  of 
Massachusetts,  or  track-mileage  of  horse  railroads  of  Massachusetts, 
had  been  electrified,  and  electrification  was  growing  rapidly. 

From  1890  onward  the  ratio  of  investment  to  passengers  carried 
per  annum,  you  might  say  the  investment  per  passenger  which  can 
be  carried  in  a  year,  had  a  substantial  and  steady  increase — not 
large,  but  it  has  been  an  increase.  In  other  words,  more  invest- 
ment has  to  be  put  down  for  carrying  passengers  now  than  formerly 
for  an  equal  number  of  passengers  carried  per  year.  At  the  same 
time,  for  the  first  half  of  the  past  year,  the  number  of  passengers 
carried  per  mile  of  track  tended  toward  a  decrease,  and  then  began 


? 


|l 


1424    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

to  incitntse  again,  but  it  has  not  come  up  yet  to  the  density  of  traffic 
whicJi  existed  at  the  time  the  hoi-se  railways  were  in  operation. 

The  service  itself  has  been  entirely  changed  by  the  introduction 
of  the  electric  car,  which  made  practicable  longer  hauls  and  resulted 
m  the  consolidation  of  street  railways  so  that  a  single  fare  was  paid 
for  hauls  which  previously  cost  the  passenger  two  or  three  fares 
spent  on  connecting  horse  railways,  when  he  reluctantly  spent  the 
-  time  necessary  to  make  the  passage.  The  speed  of  transportation 
has  been  raised  by  means  of  the  electric  car.  The  old  horse-car 
service  averaged  a  speed  of  perhaps  6  miles  per  hour,  and  our  city 
transportation  service  is  now  carried  on  at  an  average  speed  of  50 
per  cent  higher,  which  has  again  increased  the  investment  per  pas- 
songer-mile  haul  as  well  as  increasing  certain  factors  of  the  operat- 
ing expenses. 

Since  it  is  necessary  to  maintain  both  the  short-haul  and  the 
long-haul  traffic,  it  may  be  inquired  whether  the  electric  car  is 
adapted  to  this  double  service.  As  a  consequence  of  the  character- 
istics of  this  service  the  street  railways  have  gradually  made  them- 
selves strong  competitors  of  the  suburban  railways  for  hauls  up  to 
15  miles  in  many  of  our  cities ;  and  the  cars  have  Wcome  so  crowded 
with  their  passengers  that  the  short-haul  service  is  no  longer  satis- 
factory. Should  the  short-hauf  traffic  be  provided  for  by  moans  of 
buses  running  on  the  streets?  Or  should  provisions  be  made  for 
tailing  caie  of  both  the  short-haul  and  the  long-haul  traffic  on  the 
systematic,  definite  lines  of  transportation  furnished  by  car  tracks 
in  the  streets «  The  following  considerations  bear  stronglv  upon 
this  and  answer  that  most  of  the  traffic  should  be  taken  care  of  by 
the  definite  system  of  transportation  running  on  rails,  and  th  it  the 
so-called  jitney-bus  service  may  be  made  an  important  auxiliary 
thereto,  but  it  ought  to  be  definitely  associated. 

The  CiiAiK^iAN.  You  say  most  o'f  the  traffic  should  be  taken  care 
of  on  rails? 

Mr,  JACK80N.  I'os. 

The  CiiAiiniAN.  What  do  you  think  it  will  be  in  the  future? 

Mr.  Jackson.  I  think  it  will,  if  the  street-railway  service  is  looked 
upon  in  the  proper  iiglit.  In  other  words,  as  a  matter  of  community 
economy,  we  are  actually  better  off  with  the  street-railway  service 
on  rails. 

Now,  we  may  not  look  at  the  thing  from  the  standpoint  of  com- 
munity economy,  but  we  may  look  at  it  from  other  aspects,  particu- 
larly the  psychological  aspects,  and  in  that  case  it  is  quite  impossible 
to  foretell  w  hat  the  development  may  be. 

What  I  said  this  morning  about  \he  Massachusetts  svstem  is  no 
criticism  of  the  action  which  has  been  taken  there.  It  may  be  right 
or  it  may  be  wrong.  When  you  analyze  it,  however,  in  cold  logic, 
the  advantage,  if  there  is  an  advantage,  is  psychological  strictly. 

In  the  same  way,  if  the  street  railways  lose  their  short-haul  traffic, 
it  is  not  to  the  community  advantage  in  money  or  in  quickness  of 
handling,  and  that  sort  of  thing,  reliability  of  service,  but  it  will 
be  determined,  due  to  the  fact  that  the  street  railw^ays  have  not  been 
able  to  plan  their  methods  in  such  a  way  as  to  hold  their  short-haul 
traffic  while  caring  for  the  long-haul  traffic,  or  else  the  psychological 
influences  of  the  public  will  turn  in  the  direction  of  independent 
buses — individual  buses. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1425 

I  believe  the  psychology  of  the  public  is  such  that  it  flows  along 
the  most  economical  and  desirable  lines,  pravided  it  is  given  fair 
opportunity;  and  that  is  why,  if  the  street-railway  people  see  to  it 
that  they  should  give  the  proper  service  for  the  short  haul  at  a 
reji^onable  price,  if  it  can  be  worked  out  in  any  way,  they  will  get 
the  traffic. 

Commissioner  Sweet.  But  the  public,  I  suppose  you  think,  can 
feel  prejudice  and  resentment  and  do  foolish  things,  the  same  as 
individuals  can  ? 

Mr.  Jackson.  Oh,  yes.  Every  individual  of  the  public  is  a  part 
of  the  public,  and  we  are  all  very  much  alike.  All  our- daily  life  is 
more  or  less  influenced  by  our  individual  prejudices  and  our  knowl- 
edge of  our  own  affairs  as  it  leads  us  to  look  upon  other  people's 
affairs.  When  you  take  that  whole  thing  as  collective  public  opin- 
ion, some  of  the  characteristics  become  accentuated;  but  it  is  just 
human;  it  is  the  most  natural  thing  in  the  world,  and  one  has  to 
look  forward  to  seeing  it. 

Mr.  Warren.  May  I  interrupt  you  with  a  figure  that  bears  that 
out?  The  official  figures  published  by  the  trustees  of  the  Boston 
Elevated  showing  the  investment  per  dollar  of  income  from  the  start 
of  the  road  down  to  the  present  time,  I  think  very  strongly  confirms 
what  you  have  said,  speaking  generally. 

In  1897  the  investment  per  dollar  of  income  was  $2.90.  In  1918 
it  was  $6.37  on  that  one  system. 

In  1919,  for  nine  months,  it  dropped  to  $5.38,  as  a  result  of  the 
higher  fares  introduced  by  the  trustees. 

Mr.  Jackson.  I  have  not  seen  those  figures,  but  I  have  no  doubt 
they  are  correct. 

Mr.  Warren.  I  would  like  to  file  that.    It  might  be  of  interest  to 

the  commission. 

The  Chairman.  All  right. 

Mr.  Warren.  It  is  the  trustees'  compilation,  and  not  the  com- 
pany's. .  •         i?    1 

Mr.  Jackson.  Here  is  a  thing  that  affects  this  question  of  the 
drift  to  the  bufees.  You  must  remember  that  practically  half,  or  some- 
where in  the  neighborhood  of  half,  of  the  total  fixed  investment  of 
the  street  railways  is  in  the  permanent  w^ay  and  paving.  It  is  fixed. 
It  is  that  part  that  is  corresponding  to  the  street  service.  That  pro- 
portion has  slowly  increased  during  the  past  years.  The  increase  in 
proportion  has  not  been  very  marked,  but  it  has  slowly  increased. 

The  jitney  buses,  whether  they  are  of  the  sporadic  kind  or  regu- 
lar system  line  buses,  which  run  at  will  on  the  street  surfaces,  are 
freed  from  this  investment.  That  puts  them  in  a  position  where, 
perhaps,  unless  the  difference  in  circumstances  is  understood  by  the 
public,  the  drift  toward  the  buses  will  continue,  and  will  actually 
take  care  of  a  good  part  of  the  present  surface  hauling  of  the 

street  railwavs. 

If  the  public- fully  understands  the  situation,  I  think  the  buses 
will  not  be  looked  upon  as  being  so  favorable  as  they  are  now 
looked  upon  as  being. 

I  am  putting  these  things  just  in  the  way  of  common,  eveij- 
day  logic.  I  am  not  considering  my  personal  view  or  anybody 
else's  view,  whether  it  is  that  of  the  company  or  that  of  the  ridmg 
public.    It  is  a  question  of  just  simply  what  are  the  logical  facts. 

1G0643''— 20— VOL  2 2S 


t 


! 


1426    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Xow.  the  jitney  buses  do  not  have  thi«?  invAcfm/.r.*      t  .i    • 

-VHus  .ontribu/bv  taxes  and  Ii!"nse £  towarcUhe  colt  of  par 

otl  or  S  ?r.iv ''■  J"""  P^""?"""*  way  which  is  used  jointlyby 
otlur  stieet  traftic     Moreover,  the  street  railways  make  heavv  invp«f 
nionts  m  power  plants  of  the  most  econo.nica^  Zru'tL,    wh?ph  t 

dornoT'^^Th  ''"^"^  "^^  "■*^"  ''^  ^  ^'-'''y  f«'  -onomyTlSVhe   itney 
does  not.     These  considerations  make  the  jitney  bus  mess  moro  mre 

0  ennkHl  ":;r.''l  ^'^^'^Tr-^^  *«  ■•^^P'-ct  of \he  rapidity  of    urLve 
afed^^itll'C'fier"''"  '*  '°  '^""^^  "'*''  sti J-car^service  ojl^r- 

cSrS put  a  moment  a^o "''  "^■'"'^"^'  ^^  *'"  ^^^'"''^  "-'  '^^^ 

«„'^''*VT-"^'^  ''^  the  effeSt  on  the  street  traffic  congestion  in  cities 

nSter  oJ'Xr'if^ff '™*"l  °'  ^''i'-d^'Phia  or  Bolton  Tnd"aTa^5 
ni  moer  ot  othere  if  the  surface-street-railway  service  wa^  reolared 
by  bus  service  of  equal  reliability?    Many  of  the  Amerl^n^fti^ 

more  tZn  iX  ''°"  ""'%  *"'*  *!"'*«  *!'''■««  nutber-^Lh  h^;; 
CJi^  '        ^  operating  on  street  railways  dming  their  rash 

To  replace  such  a  service  with  buses  would  require  severil  timr., 
as  niany  vehicles,  thereby  adding  to  the  wel Jr  of  ^trMt  tr.ffic  in 
the  heart  of  each  city.  ''These  vehicles  would  caiisfroretlfan  ^ 
proportionate  addition  to  the  traffic  confusion,  because  they  would 

SL'^thllriike'thf  f  r^'^'  l^  "^"^  clllTJt'ZTn 
wouW  have  to  fe  V>.lrl  1  ■^^^''^''"'?u  Moreover,  additional  streets 
rupport  this  bu^  ?™ffi^      R    ^"""^^^  pavement  at  great  expense  to 

stS  lilp  FifH.  A  •  -^"^^^  J'"}  ^^'^y  "'^U  on  smooth  paved 
siieets,  like  I'lftii  Avenue,  New  York,  and  certain  sfrootc  ^f  n  u- 

more  or  Newark,  but  few  American  ci  ies  pave  suffic  SrLtsS^ 

smooth  pavements  of  the  quality  enabling  them   tT  stand   heavv 

traffic,  and  the  cities  would  find  it  necessarf  to  make  enormous  ad 

ditions  to  their  investments  in  pavements  before  jitney  busS  would 

meet  the. general  needs  of  local  transportation.    In  additoTt^^his 

low  ^iv"""*'"  "n  *""?*  ''"^^  *»'■  P^^i"?  maintenance  wouW  foT-' 
T^'  K      -!"  ^*''."'"y  systematic  and  relialle  service  by  street-cars 
and  by  jitney  buses,  community  economy  stands  with  the  sti^t 
car  for  service  in  main  channels  *"®®'^" 

1  am  satisfied  that  that  opinion  is  correct  community  economv- 
that  IS,  dollars  and  cents-when  you  have  equal  physi^?  Ste 
in  the  way  of  service;  but  it  may  not  be  that  wh  eh  satisfies  the 
public  best,  and  if  it  is  not  that  which  satisfies  the  pub  c  £   tSe 

its  slfortraul.""''  '"'"'  ""'^  "'"  '''''  ^^^^^^«  practic'ally  relSuish 

fh^n^'/r^  *''**,!/  *l'e  PnWic  had  the  full  conditions  clearly  before 
then  ,  they  vvould  be  for  community  economy,  becaui  pe^o^aHv 
I  believe  just  as  much  mental  satisfaction  can  be  had  from  dealing 
with  street-<ar  service  as  with  a  bus-line  service.  I  thTid^  if  thef 
are  bad,  they  are  both  likely  to  be  bad.    If  one  is  likely  to  be  bad 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    142  7 

the  other  is  likely  to  be  bad,  and  if  one  can  be  good  the  other  can 
be  made  good.  That  is  the  reason  I  do  not  believe  that  the  psychol- 
ogy of  the  thing  is  ripe  for  the  general  introduction  of  buses  to 
the  exclusion  of  rail  service,  if  everybody  knew  the  economic  rela- 
tions. 

The  jitney  may  be  made  serviceable  for  certain  special  conditions. 
It  should  also  be  observed  that  the  use  of  subways  to  divert  some  of 
the  surface  traffic  from  the  surface  in  cei-tain  parts  of  the  city,  as  is 
done  in  Boston  and  Philadelphia,  and  as  is  talked  of  in  Chicago, 
Cleveland,  and  elsewhere,  would  be  less  i-eadily  accomplished  and 
less  safe  for  railless  traffic  than  for  rail  transportation. 

All  of  these  considerations  point  to  the  fact  that  it  is  necessary 
under  our  present  conditions  of  city  life  to  maintain  the  rail  traffic 
at  a  high  degree  of  completeness.  And  when  comparisons  are  made 
between  the  passenger  mile  cost  by  street-car  and  by  jitney,  it  is 
necessary  to  give  full  consideration  to  the  fact  that  substantially 
50  per  cent  of  the  investment  of  the  street-car  service  is  fixed  in 
the  permanent  way  on  which  the  cars  may  roll,  and  that  the  money 
for  this  is  furnished  by  stockholders  of  the  companies,  while  the 
general  public,  through  its  tax  rates,  pays  for  the  street  surface  on 
which  the  jitney  buses  roll;  because  there  is  a  little  shifting  of  tho 
cost  and  the  return  on  that  investment,  because  for  the  jitney  bus 
the  rolling  surface  is  furnished  by  all  the  taxpayers,  while,  as 
we  now  have  it,  for  the  street-cars,  the  return  on  that  investment 
is  paid  for  by  the  ridei^s,  the  permanent  way  and  the  paving  that 
the  street-railway  people  have  to  take  care  of. 

I  may  be  going  over  4;his  thing  in  too  great  detail  for  you  gen- 
tlemen, and  if  so,  I  hope  you  will  tell  me. 

The  Chairman.  I  think  your  discussion  of  the  competition  be- 
tween the  jitney  and  the  rail  has  been  exceedingly  valuable. 

Commissioner  Gadsden.  Along  that  line,  have  you  had  time-— 
I  do  not  suppose  you  have  since  you  came  back — to  make  an  investi- 
gation as  to  the  congestion  of  the  streets  where  there  is  a  street 
railroad  strike  on,  caused  by  vehicular  travel  ?  The  results  are  very 
interesting. 

Mr.  Jackson.  I  have  not  made  any  investigation,  Mr.  Commis- 
sioner. I  had  the  opportunity  to  personally  observe  it  for  a  few 
days  in  Boston  and  in  suburbs. 

The  Chairman.  In  the  recent  impleasantness  ? 

Mr.  Jackson.  In  the  recent  brief  strike  which  existed  on  the  ele- 
vated railway;  and  I  am  satisfied  that,  if  the  necessary  traffic  had 
really  been  taken  care  of  by  jitney  service,  the  streets  would  have  be- 
come utterly  impassable.  Only  part  of  the  necessary  traffic  was 
taken  care  of,  and  the  streets  were  very,  ven^  bad.  ATHiether  or  not 
tl\e  frightful  welter  of  traffic  might  be  straightened  out,  untangled 
by  divei-sions,  and  so  forth,  with  police  control,  I  am  unable  to  say, 
because  I  have  not  really  investigated  that  point.  I  do  know,  how- 
ever, from  that  observation,  as  well  as  from  general  observations 
at  various  times  and  through  years,  that  the  additions  to  welter  of 
traffic  through  trying  to  care  for  it  with  buses  and  jitneys  would  be 
something  amazing. 

Of  course,  a  good  deal  of  the  tremendous  density  of  traffic  in  cer- 
tain parts  of  London  is  due  to  the  fact  that  buses  and  taxicabs  vir- 


' 


1428    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


tiially  take  the  place  of  street-cars  in  those  parts  of  that  city,  and  I 
think  the  streets  would  be  much  more  passable  in  certain  parts  of 
London  if  they  really  had  rail  service  on  those  streets.  To  what 
degree  that  would  improve  matters  there,  I  would  not  undertake  to 
say  without  more  investigation ;  but  I  am  satisfied  that  there  would 
be  an  improvement.  We  must  also  take  fully  into  account,  in  any 
analysis  of  this  important  problem,  that  the  cost  of  laying  additional 
paving  is  paid  for  by  the  general  public  either  directly  by  taxes  or 
indirectly  through  increased  rents,  increased  prices  of  goods  which 
thejr  purchase  in  the  stores  where  the  rents  are  increased  on  account 
of  increased  taxes,  and,  in  general,  as  a  part  of  the  cost  of  living  of 
the  individuals. 

I  made  the  remark  that  the  rolling  surface  for  the  buses  was 
paid  for  through  the  general  tax  rate.  We  must  not  let  our  minds 
be  diverted  into  the  idea  that  that  comes  out  of  the  pocket  of  prop- 
erty holders,  because  the  man  that  owns  a  store  and  pays  extra 
taxes  because  more  paving  has  to  be  paid  for,  or  greater  paving 
maintenance,  sooner  or  later  gets  it  apportioned  into  his  rents,  and. 
sooner  or  later  tKe  fellow  that  has  rented  the  store  and  is  selling 
goods  therein  gets  it  apportioned  into  the  prices  of  his  goods,  and  the 
general  public  pays  for  it  in  the  end.  It  means  all — everybody  con- 
tributes, instead  of  the  street-car  rider.  That  is  all.  But  the  street- 
car riders,  after  all,  are  now  pretty  nearly  all  the  general  public 
except  the  relatively  few  who  can  afford  to  ride  in  automobiles;  so 
that  it  comes  to  practically  the  same  thing  in  the  end,  as  a  matter  of 
community  economy. 

This  is  an  indirect  payment  for  transportation  in  the  streets — this 
payment  through  taxes  for  paving — but  it  falls  most  heavily  upon 
the  man  of  small  means,  who  is  least  able  to  bear  it,  because  it  comes 
as  a  factor  in  all  of  his  purchases. 

If  we  allow  the  street  railway  to  decline  and  the  jitney  to  partially 
take  its  place,  it  is  possible  that  the  direct  transportation  cost  of  the 
individuals  in  the  community  will  decrease  compared  with  the  cost 
under  present  conditions,  but  the  total  cost,  considering  the  sum  of 
the  direct  and  indirect  costs,  will  actually  be  increased,  and  the  final 
result  of  allowing  our  local  transportation  by  street  railways  to  de- 
cline will  lead  us  into  a  less  satisfactory  ultimate  condition,  al- 
though the  immediate  effect  may  appear  to  be  improved. 

I  present  that  as  a  conclusion  there,  and  you  may  or  may  not 
agree  to  it.  A  lot  of  people  would  say  that  it  was  purely  academic, 
that  there  is  nothing  to  it.  I  am  satisfied  it  is  right.  The  average  of 
the  public  may  not  feel  that  it  is  a  way  to  follow.  It  may  be  thrown 
overboard;  in  other  words,  a  sacrifice  of  community  economy  may 
be  made  for  the  sake  of  other  things.  That  is  a  matter  for  the  public 
to  decide — not  for  me. 

It  is  also  a  matter  of  great  interest  to  a  commission  such  as  yours, 
because  you  are  here  tr^^ing  to  educate  the  public,  if  my  idea  that  I 
suggested  at  the  beginning  of  your  great  responsibilities  is  correct; 
that  is,  it  relates  to  the  saving  and  betterment,  enlarging  of  the  local 
passenger  traffic  for  the  cities,  pointing  a  way  for  doing  that. 

In  my  opinion,  no  amount  of  repressive  regulation  will  be  ade- 
quate to  do  away  with  the  competition  which  jitney  buses  produce. 
You  can  make  repressive  legislation  all  you  choose,  and  then  it  will 
not  do  away  with  them,  if  the  public  believes  they  are  right.     The 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1429 

street-railway  man  who  says,  "  If  they  would  only  regulate  these 
jitneys  off  tne  streets  we  would  be  all  right" — that  street-railway 
man  should  look  into  his  mental  processes  and  see  what  is  the  matter 
with  his  management  that  allows  the  jitney  to  come  up;  because  you  . 
can  not  get  rid  of  them  by  repressive  legislation  if  the  public  be- 
lieves they  are  necessary. 

Commissioner  Gadsden.  Would  you  include  in  that  regulations 
as  to  time  of  service  and  hours  of  work  and  things  of  that  kind  ? 

Mr.  Jackson.  Oh,  no. 

Commissioner  Gadsden.  You  do  not  mean  that,  do  you  ? 

Mr.  Jackson.  I  believe  that  the  present  sporadic  jitney  is  a  scheme 
that  will  soon  lose  popular  favor ;  and,  in  fact,  at  one  time  in  certain 
cities  it  was  very  rife — anybody  would  buy  a  Ford  and  run  it  for 
a  while,  and  it  was  in  great  favor ;  but  in  most  of  those  cities  where 
it  was  in  the  greatest  favor  for  a  time  it  is  in  much  less  favor  now. 

Commissioner  Gadsden.  You  do  not  mean  the  wildcatting  busi- 
ness ? 

Mr.  Jackson.  That  kind  of  service  is  not  wildcatting  business ;  but 
where  you  have  regular,  definite  lines  and  have  systematic  transpor- 
tation that  sort  of  regulation  is  right.  But  that  is  not  repressive 
regulation. 

Commissioner  Gadsden.  I  understood  you,  but  I  wanted  to  make 
the  record  clear. 

Mr.  Jackson.  That  is  not  repressive. 

The  Chairman.  The  kind  of  legislation  which  you  have  in  mind 
is  that  in  the  interest  of  the  public,  rather  than  that  in  the  interest 
of  the  street-railway  system?  , 

Mr.  Jackson.  Yes;  and  I  say  that  regulation  of  the  jitneys  which 
is  in  the  interest  of  the  public  aids  the  public,  because  it  makes  sys- 
tematic transportation  out  of  it. 

Legislation  or  regulation  which  is  in  favor  of  the  street-railway 
company,  which  is  repressive  on  the  jitneys,  will  never  put  the  jitneys 
out  of  business,  because  the  public  will  have  them  if  the  public  thinks 
they  want  them. 

The  one  way  to  put  the  jitneys  out  of  business,  I  am  satisfied,  is 
for  the  street-railway  people  to  make  their  service  satisfactory  and 
their  prices  so  reasonable  that  the  public  are  satisfied  to  ride. 
Whether  that  can  be  done  with  the  short  haul  or  not  is  a  very  great 
problem,  I  will  admit.  I  am  hoping  great  constructive  suggestions 
will  come  out  of  your  honorable  and  eminent  commission. 

I  have  written  this  down  in  a  little  different  fashion,  which  I  will 
read : 

If  the  street-railway  service  can  not  be  made  complete  and  ade- 
quate to  the  needs,  some  other  service,  such  as  jitnej^  service,  will 
come  in  as  a  competitor.  In  fact,  it  ought  to  come  in  and  be  en- 
couraged unless  means  can  be  provided  to  make  the  street-railway 
service  adequate  to  the  needs;  and  the  necessities  of  the  present  are 
to  find  the  best  ways  of  making  the  street  railway-service  adequate, 
ill  view  of  the  fact  that  it  is  ultimately  the  cheaper  service. 

After  having  studied  carefully  the  conditions  of  local  transporta- 
tion in  American  cities  under  the  normal  conditions  of  cost  prior 
to  the  war,  I  became  convinced  that  a  considerable  part  of  the  diffi- 
culties of  the  present  street-railway-transportation  systems  is  due 
to  their  effort  to  satisfy  the  needs  of  long  haul  at  the  expense  of  the 


1430    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

iieeds  of  the  short  haul.  These  conclusions  are  set  forth  in  a  stutis- 
tioal  report  on  the  subject  published  in  1917  in  a  book  entitled 
•  Street  Railway  Fares,  Their  Relation  to  Len^rth  of  Haul  and  Cost 
0£  hervice,  by  Jaxjkson  &  McGrath.  In  the  first  chapter  of  this 
book  are  set  forth  a  summary  and  general  conclusions.  I  wish  to 
call  your  attention  to  seven  paragraphs  of  specific  facts  regjirdin^ 
street  railways  which  this  investigation,  in  my  opinion,  established 

1.  Density  of  traflic  is  the  most  fimdamental  factor  in  establishing 
the  cost  of  service  per  passenger.  The  higher  the  density  of  trafHc, 
t.ie  lower  the  investment  charges  and  operating  expenses  per  pas- 
senger. In  this  connection  density  of  traffic  is  a  term  used  to  niean 
passengers  carried  per  car-mile  run,  and  passengers  carried  per  mile 
or  track  per  annum. 

2.  Long  hauls  tend  to  decrease  densitv  of  traffic,  thus  decreasing 

the  eiu-nings  per  car-mile,  and  increasing  the  cost  per  passenger. 

3  The  average  length  of  passenger  haul  increases  with  the  lenirth 
of  line.  *= 

4.  The  density  of  traffic  becomes  large  in  medium-sized  cities,  but 
as  the  cities  spread  out  and  become  very  large,  the  density  of  traffic 
t^nds  to  decrease  again  because  of  long  hauls  into  thinly  settled 
suburbs. 

5.  Increased  unit  fares  have  a  tendency  to  decrease  traffic,  while 
decreiised  unit  fares  tend  to  increase  traffic. 

6.  For  a  number  of  individual  roads  studied,  as  well  as  for  the 
aggregate  of  all  street  railways  in  Massachusetts  combined  statistic- 
ally as  a  single  system,  it  has  been  found  that  the  average  actual 
investment  per  revenue  passenger  carried  per  annum  has  been  in- 
creasing,  and  the  average  rate  of  return  has  been  decreasing.  This 
has  been  associated  in  the  last  few  years  (considering  conditions 
prior  to  the  European  war  only)  with  an  upward  tendency  of  operat- 
ing cost  per  revenue  passenger. 

7.  Fares  in  British  cities  are  somewhat  lower  than  on  American 
street  railways,  and  are  almost  invariably  based  upon  the  distance 
the  passenger  rides.  In  general,  they  approximate  about  1  cent 
( I'nited  States  money)  per  mile  and  the  average  ride  is  usually  only 
about  2  miles.  Lower  rates  abroad  mav  be  ascribed  partially  to  a 
f:reater  density  of  traffic  which  results  from  a  much  greater  density 
of  population  per  mile  of  track,  while  wage  scales  are  much  lower  in 
British  cities  than  m  this  country,  and  free  transfers  between  lines 
are  seldom  issued. 

In  addition  to  those  7  specific  facts,  10  paragraphs  of  conclusions 
are  set  forth,  and  these  conclusions  I  will  here  repeat.  It  is  to  be 
noted  that  the  stated  conclusions  relate  to  the  conditions  prior  to  the 
European  war.  At  the  j^resent  time  the  purchasing  power  of  the 
dollar  has  fallen  to  between  perhaps  50  and  60  per  cent  as  compared 
with  h\e  years  ago,  and  therefore  specific  statements  of  expenses 
and  rates  of  fare  do  not  now  hold ;  but  the  relations  still  hold,  and  the 
conclusions  appear  to  me  to  have  been  strengthened  by  the  expe- 
riences of  the  war  years.     The  conclusions  are  as  follows; 

1.  The  street  railway  is  a  private  enterprise,  granted  monopoly 
privileges  by  the  public,  and  in  return  it  owes  the  public  good  service 
at  reasonable  rates,  such  rates  to  be  adjusted  so  as  to  be  fair  to  all 
users  of  the  service,  and  sufficient  to  allow  the  owners  of  the  railway 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1431 

a  fair  and  just  return  upon  their  investment.  These  owners  are  just 
as  much  a  part  of  the  public  as  the  car  riders,  and  are  entitled  to  just 
treatment  and  equal  protection  by  the  laws,  and  no  more. 

2.  Many  companies  are  not  earning  a  fair  return  at  the  present 
time,  others  are  obviously  making  ample  earnings.  A  great  many  in 
between  these  extremes  may  be  classed  as  doubtful — that  is,  each 
would  require  a  special  investigation  to  determine  its  actual  condi- 
tion. 

3.  Practically  all  street  railways  have  continued  to  operate  upon  a 
5-cent-fare  basis,  despite  increased  costs  of  investment  and  opera- 
tion, and  despite  increases  in  the  length  of  ride  offered  for  the  o-cent 
fare.  Public  opinion  and  authority  have  been  largely  instrumental 
in  causing  the  continuance  of  this  system. 

4.  The"5-cent  fare  has  been  not  only  a  convenient  unit,  but  it  has 
probably  aided  to  some  extent  in  the  healthy  expansion  of  city  areas. 
Nevertheless,  it  puts  a  high  rate  per  mile  upon  the  short  riders  for 
tlie  benefit  of  the  long  riders.  If  costs  of  operating  street-railway 
service  continue  to  increase,  increased  fares  will  become  inevitable, 
and  if  6,  8,  and  even  10-cent  flat  rates  are  resorted  to,  the  inequality 
between  long  and  short  riders  will  become  intolerable. 

5.  Some  attempts  have  been  made  already  to  meet  increased  costs 
by  increasing  unit  fares  to  6  cents  or  more.  It  is  clearly  shown  by 
data  submitted  with  this  report  that  increased  unit  fares  almost  in- 
variably result  in  a  reduction  in  total  passenger  traffic.  Short  riding 
is  discouraged,  if  not  entirely  eliminated,  by  higher  unit  fares.  So 
far,  no  city  system  of  importance  has  yet  experimented  with  6-cent 

fares. 

6.  It  seems  impossible  as  a  practical  matter  to  accurately  correlate 
the  cost  of  service  with  varying  lengths  of  ride,  and  as  a  matter  of 
fact,  the  length  of  each  individual  ride  and  the  exact  cost  thereof 
are  relatively  unimportant.  The  main  controlling  factor  in  the  aver- 
age cost  of  service  per  passenger  is  density  of  traffic.  This  factor,  in 
turn,  is  moje  or  less  directly  influenced  by  the  length  of  haul  and 

other  factors. 

7.  While  it  seems  impracticable  to  allot  the  exact  share  of  the 
complex  cost  of  the  street-railway  service  to  varying  lengths  orf 
ride,  it  would  be  both  impracticable  and  inexpedient  to  base  rates 
wholly  upon  the  exact  cost  of  each  service,  even  if  it  were  known ; 
but  some  approximation  to  costs  should  be  attempted  in  the  rates. 

8.  Goods  or  products  are  almost  always  sold  at  a  total  price  de- 
pending upon  the  quantity  involved,  subject,  of  course,  to  certain 
modifications  and  classifications.  Transportation  on  the  street  rail- 
ways is  a  product  and  should  be  subject  to  the  same  economic  law. 
Passenger  rates  on  the  steam  railroads  are  based  on  mileage  rates 
of  2  to^3  cents,  with  certain  reasonable  reductions  for  multiple  trip 
or  monthly  tickets  and  for  very  long  trips. 

9.  To  meet  increasing  cost  of  service  and  to  properly  prepare  for 
extensions  of  existing  systems,  the  street  railways  in  the  United 
States,  both  urban  and  *  suburban,  will  sooner  or  later  be  forced 
to  adopt  a  system  of  rates  based  more  nearly  on  the  length  of  the 
haul.  A  mileage  system  of  rates  is  probably  not  desirable  in  Ameri- 
can cities.  It  may  be  desirable  in  certain  cities  to  retain  the  nickel 
fare  by  putting  a  reasonable  and  proper  limit  on  the  length  of 


J 


1432    PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

the  ride  pennitted  for  that  rate  but,  in  general,  something  shorter 
and  more  uniform  than  our  present  irreguhir  and  unsystematic  5- 
cent  zones  must  be  adopted,  possibly  with  lower  unit  rates  than  5 
cents.  A  mmimum  or  initial  fare  of  5  cents  may  perhaps  be  re- 
tained m  certain  cases,  but  there  is  some  evidence  to  support  the 
opmion  that  reasonably  limited  areas  may  be  served  at  less  than 
5  cents. 

10.  Every  individual  street  railway  presents  a  special  problem 
in  Itself  and  must  be  studied  separately  before  detailed  recommenda- 
clations  as  to  proper  rates  of  fare  can  be  made.  After  the  purely 
hnancial  and  economic  sides  of  the  question  have  been  investigated, 
a  full  and  thorough  consideration  must  be  given  to  the  possible 
effect  on  sociological  conditions  of  any  change  in  rates  or  systems 
of  fares  and  quality  of  service,  and  also  to  the  psychological  as- 
P^^^s— that  is,  the  possible  effect,  on  the  minds  ajid  feelings  of  the 
public  at  large,  since  the  public  must  be  depended  upon  for  the 
tinancial  success  or  failure  of  any  public-utility  enterprise. 

The  foregoing  conclusions  all  point  to  the  necessity  of  some  zone 
plan  of  fares  for  our  large  cities.  Where  it  is  pointed  out  in  the 
conclusions  that  a  mileage  system  of  rates  is  probably  not  desirable 
m  American  cities,  it  is  the  intention  to  urge  the  fact  that  trans- 
portation, like  other  branches  of  business,  has  a  certain  proportion 
of  overhead  cost  which  is  reasonably  independent  of  the  bulk  of 
the  business,  and  that  therefore  the  short-haul  passengers  may  be 
expected  to  pay  a  larger  per  passenger-mile  apportionment  than  the 
long-haul  passengers,  and  that  the  zone  system  should  be  laid  out 
recognizing  that  fact.  Zones  which  might  have  been  based  on  a  3- 
cent  fare  under  prew^ar  cost  would  to-day  call  for  a  5-cent  or  larger 
fare.  ^ 

Most  of  the  street  railways  of  the  United  States  have  wished  to 
avert  the  introduction  of  zone  fares,  partially  on  account  of  the  dif- 
ficulty of  adequate  auditing  of  the  fares  collected.  In  the  European 
cities  where  zone  fares  have  been  used  for  several  decades,  the  plan 
has  been  usually  founded  upon  a  straight  mileage  charge  without 
consideration  of  the  stand-by  charges,  and  measures  for  adequate 
auditing  have  not  been  introduced.  This  is  undesirable  in  American 
practice  since  we  have  a  much  heavier  passenger  flow  which  calls 
for  larger  loads  on  our  cars  and  makes  the  collections,  according  to 
European  methods,  impracticable.  Moreover,  the  American  public 
is  more  inclined  to  criticize  loose  methods  of  fare  collection  than  the 
foreign  public,  and  the  American  public  have  become  more  accus- 
tomed to  methods  of  checking  money  collections  in  all  lines  of  busi- 
ness, as  is  illustrated  by  the  very  general  use  of  cash  registei-s  in 
the  mercantile  lines,  than  is  the  characteristic  of  the  Europeans. 

Some  of  our  American  street-railway  people  suggest  that  the  in- 
troduction of  accurate  methods  of  accounting  for  fares  is  a  reflection 
upon  the  honesty  of  the  platform  men  on  the  cars  but,  in  my  opinion 
this  is  an  inaccurate  inference  in  respect  to  the  attitude  of  the  true 
man.  No  true  man  can  fairly  object  to  the  use  of  a  cash  reo-ister  in 
a  corner  grocery,  or  in  a  department  store,  which  puts  him  upon  his 
mettle  to  do  his  work  accurately,  and  is  to  his  advantage  rather  than 
his  disadvantage,  if  he  is  honest.  Similar  accurate  methods  can  be 
introduced  in  association  with  zone  fare  collections  on  street-railway 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1433 

cars.  The  passengers  rely  upon  paying  only  for  that  which  they 
get,  and  likewise  rely  upon  the  company  receiving  a  full  accounting 
from  the  collectors.  .         .  . 

Reverting  to  the  mileage  system  of  foreign  cities— such  as  Glas- 
gow, Manchester,  London,  and  so  forth— where  you  pay  an  equal 
amount  per  stage  for  any  number  of  stages,  at  least  up  to  a  consider- 
able number— for  instance,  if  you  ride  two  stages,  you  pay  twice  as 
much  as  you  do  if  you  ride  one,  and  if  you  ride  three  stages,  you  pay 
three  times  as  much  as  if  you  ride  one,  and  so  on,  up  to  the  tune 
when  you  are  going  a  gi-eat  ways.  That  system  I  doubt  as  being  an 
effective  one  in  the  United  States,  because  it  is  reasonable  and  proper 
to  recognize  that  there  is  an  extra  cost  due  to  what  some  people  call 
readiness  to  serve  and  some  call  terminal  costs;  in  other  words,  the 
costs  of  stopping  and  starting  the  cars,  for  power,  wear  and  tear,  and 
the  delay  which  is  thereby  caused,  due  to  increasing  the  number  of 
cai-s  that  are  necessary  to  give  a  ceitain  amount  of  service,  and  the 
number  of  hands  that  must  be  employed  on  the  platforms,  which 
makes  an  additional  cost,  so  that  the  stopping  and  starting  is  a 
cost  of  its  own,  in  addition  to  the  mere  rolling  of  the  cars  by  furnish- 
ing power,  and  the  return  on  the  investment  involved,  m  the  tracks, 

power  houses,  cars,  and  so  forth.  j_    .  ^.        i  •  i 

A  modification,  however,  which  includes  this  characteristic,  whicli 
brings  about  zone  handling,  somewhat  after  the  style  of  Milwaukee, 
I  am  satisfied  we  will  have  to  put  into  effect  in  some  of  the  large 
cities,  or  else  the  jitneys  will  take  a  great  deal  of  the  hauling  for  the 

shorter  hauls.  ^    ,  ,        ^  ^i      i      i  • 

Cleveland  has  not  needed  that  sort  of  thing,  because  Cleveland  is 
a  relatively  small  city  in  area.  The  passenger  lines,  as  I  remember 
it  only  run  about  3  or  3 J  miles  in  all  directions  except  one,  and  it 
has  been  generally  accepted  by  the  street-railway  commissioners,  I 
think,  in  Cleveland,  that  in  that  direction  it  is  a  pretty  long  haul 
for  the  fare  that  they  have  been  obtaining. 

A  proper  zone  just  at  the  present  time,  which  was  on  a  5-cent 
basis,  might  be  expected  to  ultimately  bring  about  a  lesser  fare  if 
we  have  a  readjustment  of  prices  downward,  as  has  always  ulti- 
mately followed  the  great  wars  of  the  past,  but  which  Prof.  Fisher 
said  the  other  day  probably  would  not  follow  this  time.  I  supposed 
it  would  follow,  but  I  believed  that  there  had  been  such  terrible 
destruction  of  property  and  human  power  that  it  would  take  several 
years  before  we  began  to  feel  the  influence  of  the  dov.nward  trend 

of  prices.  .,       ^      ^      -i  i 

The  introduction  of  the  zone  system  upon  the  street  railwaj^s  does 

not  mean  an  increases  of  fares  above  fair  and  proper  figures.  It 
means,  indeed,  an  ultimate  decrease  of  the  unit  fare  for  the  short- 
haul  passengers  as  compared  with  the  prices  which  they  have  paid 
in  the  past  With  the  normal  conditions  of  commodity  costs  grad- 
ually returning,  as  we  may  expect  them  to  return  ultimately,  the 
unit  fare  may  go  below  the  nickel,  so  that  a  proportion  of  the  pas- 
sengers carried  should  pay  less  than  the  traditionally  established 
nickel  fare,  while  those  passengei-s  who  travel  distances  will,  and 
ought,  to  pay  more  than  the  nickel  fare.  ,      .^.  • 

Voice  has  been  given  to  much  well  meant  but  incorrect  criticism 
of  zone  fares  for  American  cities.    This  has  generally  been  based 


ill 


% 


it 


if! 


I        f^i 


1434    PROCEEMNGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

upon  an  allegation  that  zone  fares  would  increase  the  concentration 
of  population  in  the  cities.  My  study  has  satisfied  me  that  thesis 
premises  are  erroneous  and  the  criticism  incorrect.  The  family 
that  has  gone  to  the  suburbs  for  the  purpose  of  obtaining  better  liv- 
ing conditions,  as  a  rule,  is  able  to  pay  a  slight  increase  of  fare  witli- 
out  oveilhrowing  its  margin  of  advantages.  If  such  fares  are  not 
increased  above  5  cents,  provided  the  distance  to  the  suburb  is  greater 
than  a  passenger  can  be  carried  for  5  cents,  then  the  loss  from  carry- 
ing such  passengers  for  5  cents  must  be  borne  by  others.  If  this  loss 
is  assumed  by  the  State  or  by  the  city  and  the  suburban  village,  the 
suburban  dwellers  will  ultimately  pay  more  than  the  extra  fare,  on 
account  of  the  increase  of  taxes,  or  from  the  apportioning  of  taxes 
m  rent,  and  in  the  cost  of  the  various  articles  of  food  and  clothino- 
purchased.  ^ 

In  other  words,  when  one  pays  for  something  indirectly,  it  ulti- 
mately costs  him  more  than  if  he  had  paid  for  it  directly.  While  he 
may  not  know  that  he  is  paying  for  what  he  got  at  less  than  cost, 
he  actually  is,  and  he  is  paying  more  for  it. 

We  can  not  escape  the  proposition  that  the  general  public  pays 
lor  all  such  costs  which  are  assumed  by  government,  and  that  the 
cheapest  way  of  meeting  the  costs  is  by  direct  payment,  rather  than 
the  indirect  payment  through  taxa.tion.    Moreover,  there  is  a  large 
proportion  of  unskilled  working  people  living  in  cities  on  whom 
the  payment  of  even  5-cent  fares  falls  heavily,  and  these  with  their 
families  are  now  constrained  to  live  in  definite  portions  of  our 
cities  oft«n  denominated  "  slums,"  which  are  near  the  locations  of 
centers  of  employment,  because  the  individuals  are  unable  to  pay 
transportation  charges  and  must  live  near  their  work.     The  zone 
plan,  properly  introduced  at  the  present  time,  may  not  aid  this  por- 
tion of  the  population  now,  but  with  the  gradual  decrease  of  the  cost 
ot  commodities  and  the  consequent  reduction  of  the  price  of  trans- 
portation there  will  be  an  ultimate  reduction  of  the  unit  price  per 
zone,  which  will  enable  such  passengers  to  get  a  ceitain  amount  of 
transportation  at  less  than  5  cents  per  passenger.     The  ultimate 
result  of  the  zone  system  introduced  properly  into  American  citifes 
will  improve  the  present  situation  by  tending  to  spread  the  area 
withm  which  It  IS  practicable  for  unskilled  working  people  to  live. 

1  hat  IS  quite  contrary  to  the  thesis  that  is  presented  by  most  peo- 
ple belonging  to  the  class  generally  called  uplifters,  but  I  think  diat 
It  IS  consistent,  and  I  submit  it  to  you  as  being  well  worthy  of  your 
scrutiny  at  least,  as  a  matter  of  importance  to  the  future  of  Ameri- 
can cities. 

The  circumstances  under  which  the  local  passenger  transportation 
agencies  are  now  operating,  and  the  crisis  which  they  are  facin<r 
are  the  results  of  the  very  rapid  growth  of  the  American  cities,  with 
the  consequent  expansion  of  their  areas. 

I  have  made  my  remarks  somewhat  forcible,  and  you  may  think 
J  am  criticizing  the  street  railways  and  criticizing  the  public  but 
1  am  not  intending  to  do  either.  I  am  trying  to  present  these 
things  to  you  as  logical  deductions  that  have  come  to  mv  mind  and 
bear  no  criticism  of  either. 

The  fact  is  that  the  street-railway  systems  have  endeavored  to 
meet  the  transportation  requirements.     Mistakes  have  been  made, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1435 

but  the  transportation  needs  have  been  provided  for  in  a  manner 
which  is  encouraging,  and  for  which  those  directly  connected  wui 
the  industry  should  be  complimented.  The  industry  started  with 
the  horse  railway,  for  which  the  flat  5-cent  fare  was  reasonabie. 
The  electric  railways  have  expanded  into  a  situation  where  the 
present  flat-fare  arrangement  is  unreasonable,  and  it  is  necessary  to 
face  these  facts  in  order  to  solve  the  problem  which  is  before  your 
eminent  commission,  in  addition  to  considering  the  special  condi- 
tions that  the  war  has  introduced  upon  us. 

I  thank  you,  gentlemen.  , ,.      .  ,  i 

The  Chairman.  We  are  very  much  obliged  to  you  for  your  val- 
uable statement. 
(Witness  excused.) 

STATEMENT  OF  MR.  FREDERICK  J.  MacIEOD. 

Mr.  MacLeod.  Mr.  Chairman  and  gentlemen,  I  should  judge  from 
the  extent  to  which  Massachusetts  is  participating  m  the  proceed- 
ino^s  to-day  that  your  commission  is  interested  m  knowing  what 
has  been  going  on  in  Massachusetts  in  the  street-railway  field  duniig 
the  last  four  or  ?i\e^  years.  I  have  prepared  a  statement  which  at- 
tempts to  give  in  rather  condensed  form  a  comprehensive  survey 
of  the  situation  in  Massachusetts  in  its  most  important  public 
aspect,  that  I  should  like  to  have  the  opportunity  of  reading,  and 
either  during  the  progress  of  this  prepared  statement  or  at  its 
conclusion  I  should  be  glad  either  to  answer,  so  far  as  I  may  be 
able,  any  questions  of  any  of  the  commissioners  or  to  develop  in 
greater  detail  any  particular  matter  on  which  you  would  like  to 
have  additional  light  thrown.  xx    •    j 

The  crisis  in  the  street-railway  situation  in  Massachusetts  is  due, 
in  the  main,  to  the  same  general  causes  and  conditions  which  have 
been  described  in  the  testimony  already  given  before  vour  com- 
mission. The  problem  with  which  we  have  been  confronted  in 
Massachusetts  has,  however,  been  in  certain  respects  more  than  or- 
dinarily difhcult  and  complex,  owing  to  certain  special  conditions 
resulting   from  the  history  of  street-railway   development  in  our 

State. 

i.  Street  railways  have  been  in  operation  in  Massachusetts  since 
1860,  a  longer  period,  I  believe,  than  in  any  other  State.  Massachu- 
setts has  been  the  pioneer  State  in  the  development  of  the  horse 
railway,  the  electric  railway,  and  the  underground  subway.  The 
losses  due  to  experimentation  in  successive  stages  of  street-railway 
development  and  to  replacements  and  renewals  made  necessary  at 
frequent  intervals  by  successive  advances  in  the  art  have  been 
heavier  in  Massachusetts  than  in  most  of  the  other  States. 

In  Massachusetts  the  financial  stability  of  the  street-railway  in- 
dustry has  been  impaired  by  overproduction.  Massachusetts  has 
more  street-railway  mileage  in  proportion  to  its  population  and  area 
than  anv  other  State  in  the  Union,  and  this  mileage  is  not  only  large 
in  amount,  but  in  many  cases  badly  located.  This  condition  is  the 
result  of  the  era  of  speculation  in  street-railway  building  which  set 
in  with  the  advent  of  electrification.  Comj^etitive  lines  were  built 
where  there  were  traffic  possibilities  for  a  single  line  only,  and  the 


S 


/     1436    PROCEEDINGS  OF  FEDERAL  ELECl'RIC  RAILWAYS  COMMISSION. 

lines  were  extended  anywhere  and  everywhere  into  the  sparsely  set- 
tled rural  districts  where  there  was  no  reasonable  financial  excuse 
for  building  at  all.     It  might  have  been  better,  in  the  long  run,  if 
this  boom  period  had  been  allowed  to  run  its  natural  course,  if  un- 
neccssaij  Imes  had  then  been  abandoned  and  if  a  number  of  small 
companies  which  had  sprung  up  during  this  period  of  mushroom 
growth  had  reorganized  by  scaling  down  their  securities  to  corre- 
spond with  the  traffic  possibilities  of  the  territories  they  served, 
instead,  these  speculative  companies  were  saved  from  prospective 
bankruptcy  or  the  scrap-heap  by  the  policy  of  consolidation,  under 
which  they  were  taken  over,  with  all  their  questionable  debts  and 
obligations,  on  a  share-for-share  basis  by  the  more  prosperK)us  urban 
companies.     Lrom  this  union  of  prosperous  and  potentially  bank- 
rupt companies  there  emerged  a  number  of  street-railway  systems 
with  just  sufhcient  vitality  to  keep  their  heads  above  water  ^urinff 
tair  weather,  but  incapable  of  meeting  jthe  stress  of  hard  times  and 
war  conditions. 

Our  Massachusetts   companies  undertook  the  disastrous   experi- 
ment of  trying  to  extend  to  the  country  districts  the  ordinary  type 
of  street-railway  service  which  had  been  developed  to  meet  city 
conditions.    In  most  other  sections  of  the  country  the  city  compa- 
nies  perform,  m  the  main,  a  purely  urban  service,  while  the  inter- 
urban  service  is  furnished  by  separate  interurban  companies  which 
operate  for  the  most  part  with  infrequent  stops  at  a  high  rate  of 
speed  under  private  rights  of  way  and  do  a  large  freight  as  well 
as  a  passenger  business.     While  electricity,  rather  than  steam,  is 
used  as  a  motive  power,  they  furnish  to  all  intents  and  purposes 
a  railroad  rather  than  a  street-railway  service;  they  are  adminis- 
tered under  the  railroad  rather  than  the  street-railway  law    their 
passeiiger  rates  are  fixed  on  a  mileage  basis,  and  the  amount  charged 
is  substantially  the  same  as  in  the  case  of  the  railroad  companies. 
Under  that  system  the  attempt  at  least  has  been  made  to  develop 
the  interurban  lines  on  a  self-supporting  basis,  though  many  of 
them  have  failed  to  pay  and  have,  at  one  time  or  another,  Wn 
forced  into  receiverships.     In  Massachusetts,  however,  the  inter- 
urban lines  have  been  merely  appendages  to  the  city  system,  with 
similar  fares  and  methods  of  operation.     Our  present  hybrid  and 
diversified  street  railways  were  built  up  on  the  theory  that  the  city 
lines  would  prove  sufficiently  profitable  with  a  5-cent  unit  of  fare 
to  absorb  the  losses  on  the  suburban  and  interurban  lines      For  a 
time  a  downward  trend  of  prices,  as  the  result  of  improved  methods 
of  industrial  production  and  the  comparatively  low  cost  of  upkeep 
Willie  the  properties  were  new  offered  some  encouragement  that  the 
experiment  might  prove  successful.    As  soon,  however,  as  prices  be- 
gan to  rise,  and  the  need  of  extensive  renewals  arose,  it  was  found 
that  the  money  which  was  needed  for  the  proper  upkeep  of  the  more 
prosperous  city  lines  had  to  be  expended  in  the  reconstruction  of 
the  cheap  y  built  promoters'  lines  which  were  taken  over,  and  in 
meeting  the  deficits   from  their  operation.     Companies  originally 
prosperous  then  found  themselves  unequal  to  supporting  the  burdens 
imposed  by  the  consolidation  of  unprofitable  lines.    The  lifeblood 
that  was  generated  at  the  heart  of  urban  systems  became  impover- 
ished by  circulating  to  the  ends  of  the  long  antennae  which  ex- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1437 

tended  in  all  directions  into  country  districts,  and  the  decline  imme- 

^  While  In^  the  early  days  a  substantial  amount  of  water  was  iii- 
iected  into  street-railway  securities,  most  of  the  electric-railway  lines 
in  Massachusetts  have  been  built  under  rigid  State  f ^^P^rvision  of 
security  issues.  Generally  speaking,  the  stocks  and  bonds  of  Mas- 
sachusetts street  railway  companies  represent  an  equivalent  amount 
of  money  paid  in  in  cash  and  expended  for  legitimate  corporate 
purposes.  In  all  cases,  moreover,  the  bonded  indebtedness  has  been 
protected- by  the  issue  of  an  equivalent  amount  of  stock  paid  tor 
in  cash  at  par  or  better.  tj  <.;  *  „i 

This  policy,  in  conjunction  with  the  policy  of  consolidation  al- 
ready referred  to,  has  resulted  in  giving  an  extended  lease  of  life 
to  properties  which  would  otherwise  long  ago  have  been  faced  witlT 
bankruptcy  and  forced  to  abandon  operation,  and  m  saving  Massa- 
chusetts until  recently  from  the  frequent  failures  of  street-railway 
companies  which  have  marked  the  financial  history  of  other  htate:,. 
This  policy,  however,  in  its  immediate  effect  has  been  m  many  ways 
beneficial  'from  the  public  standpoint,  as  it  has  made  possible  longer 
rides  and  additional  transfer  privileges  for  former  units  of  fare, 
has  prevented  the  unwholesome  congestion  in  the  cities,  has  made 
possible  more  healthful  living  conditions  for  a  large  part  of  our 
population,  and  has  largely  increased  property  values  and  other- 
wise contributed  to  the  prosperity  of  our  suburban  communities. 

The  prevailing  fares,  however,  were  insufficient  for  many  years 
prior  to  the  war  to  enable  the  companies  to  maintain  themselves 
in  sound  financial  condition.  Depreciation  requirements  were  al- 
most wholly  neglected  and  many  companies  were  not  even  making 
adequate  provision  for  current  repairs  and  maintenance.  Ihe  com- 
panies, in  other  words,  were  not  meeting  current  expenses  out  of 
current  revenues,  but  were,  in  effect,  paying  dividends  by  drawing 
upon  invested  capital.  During  all  this  period  the  conipanies,  m- 
fluenced  by  the  necessity  of  preserving  their  financial  credit  in  order 
to  obtain  new  capital,  affected  an  air  of  prosperity  and  shrank  from 
disclosing  their  real  financial  situation,  even  to  obtain  an  increase 
of  rates,  and  were  thus  left  in  an  impoverished  condition  with  no 
reserve  of  financial  strength  to  stand  the  shock  of  war-time  prices 

and  conditions.  ,     .     .i     i  j. 

The  Chairman.  Does  that  statement  apply  to  the  large  systems  m 

Boston  and  the  surrounding  suburbs? 

Mr.  MacLeod.  That  applies  to  them  all.  .,  ,  ,,  ^  ^  -i 
Owing  to  the  conditions  which  I  have  described,  the  street-rail- 
way problem  in  Massachusetts  during  the  past  four  or  five  years 
has  I  believe,  assumed  a  more  acute  form  than  m  any  other  part 
of  the  country.  As  the  companies  had  no  reserve  funds  to  draw 
upon,  the  heavy  increases  in  the  cost  of  operation  at  a  time  when 
large  expenditures  were  necessary  for  overdue  renewals  and  replace- 
ments, necessitated  a  corresponding  increase  in  revenue  if  the  com- 
panies were  to  be  saved  from  bankruptcy  and  if  the  public  were  lO 
retain  adequate  street-railway  facilities.  Since  1914  successive  ap- 
plications  for  fare  increases  to  meet  the  constant  rise  in  prices  havo 
been  made  by  almost  every  company  m  the  State,  and  have  from 
time  to  time  been  granted,  in  whole  or  in  part,  by  the  commission. 


f 


i    \ 


1438    PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

In  considering  proposed  increases  of  rates,  the  commission  has 
tried  to  do  justice  both  to  the  companies  and  to  the  public,  and  in 
every  instance  has  fully  recited  the  facts  and  its  findings,  in  order 
that  there  might  be  no  doubt  as  to  the  basis  for  its  decision.  The 
decisions  of  the  commission  have  been  based  upon  the  principle  that 
in  the  long  run  the  rate-paying  public,  as  well  as  the  investing  public, 
will  be  best  served  by  r^cognizmg  that  our  public- utility  companies 
are  entitled  to  charge  such  rates  as  will,  under  honest,  efficient,  and 
economical  management,  produce  revenue  sufficient  to  meet  operating 
costs,  including  proper  provision  for  depreciation  and  other  reserve 
funds  in  order  to  prevent  an  impairment  of  assets,  and  to  pay  taxes, 
interest  charges,  and  a  moderate  return  on  invested  capital  based, 
not  upon  the  cost  of  reproduction  with  or  without  depreciation,  but 
fipon  the  capital  honestly  and  prudently  invested  in  the  property. 
On  the  other  hand,  the  commission  has  emphasized  the  fact  that 
in  any  proper  method  of  dealing  with  street-railway  rates,  the  pub- 
lic can  not  be  expected  to  pay  dividends  upon  watered  stock,  or 
interest  upon  indebtedness  improperly  incurred,  or  to  make  good  any 
losses  due  to  mismanagement.  Any  inflation  of  this  chanicter  must 
be  wiped  out  by  the  stockholders  or  carried  at  their  own  expense. 

Under  proper  public  regulations  dividends  do  not  represent  profits, 
but  merely  interest  upon  invested  capital.  To  construct  and  main- 
tain our  street-railway  properties,  capital  and  labor  are  both  re- 
quired, and  one  is  as  essential  as  the  other.  It  is  just  as  impracticable 
to  expect  capital  to  be  supplied  gratuitously  or  at  less  than  the  going 
rate  as  to  expect  the  men  who  operate  the  cars  to  work  without  pay, 
or  for  less  than  a  livinjr  wasre.  The  man  who  invests  his  money 
in  §treet-railway  stock  is  entitled  to  the  prevailing  interest  rate  for 
the  use  of  his  money  equally  with  the  man  who  makes  his  investment 
in  the  form  of  bonds.  Indeed,  in  so  far  as  the  stockholder  assumes 
the  risk  of  having  his  principal  impaired  or  entirely  wiped  out  be- 
fore the  bonds  are  affected,  he  is  entitled  to  something  more  than 
the  bond  interest  rate.  Public-service  companies,  however,  should 
be  so  managed  and  regulated  that  the  risk  to  the  investor  and  other 
speculative  elements  shall  so  far  as  possible  be  eliminated,  and  the 
dividend  return  practically  limited  to  the  going  interest  rate.  But 
if  the  possibility  of  speculative  profit  is  removed,  it  is  essential  that 
the  investment  be  reasonably  secure,  or  private  capital  will  not  enter 
the  field.  To  sum  the  matter  up,  public-service  corporations  do  not 
afford  a  proper  field  for  speculation  or  exploitation,  but  in  order 
to  enable  them  to  furnish  proper  service  and  accommodations  to  the 
public  their  property  values  must  be  kept  intact,  and  the  payment 
of  all  costs  of  operation,  including  a  reasonable  interest  rate  upon 
legitimate  investment  must  be  reasonably  assured  in  order  that 
needed  capital  may  be  obtained. 

In  the  past  history  of  our  street-railway  companies  there  has  un- 
doubtedly been  some  waste  and  extravagance,  and  the  management 
has  not  always  been  as  alert  and  efficient  as  it  might  have  been,  but 
the  main  trouble  has  been  that  the  revenues  of  the  companies  for  a 
considerable  period  in  the  past  have  been  insufficient  to  meet  the 
actual  and  proper  costs  of  operation. 

Commissioner  Gadsden.  To  restate  it,  what  that  means  is  that  the 
electrical-railway  industry  as  an  industry,  so  far  as  Massachusetts 
is  concerned,  has  never  been  on  a  sound  financial  basis  ? 


ri 


If 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1439 

Mr.  MacLeod.  Never  been  on  a  sound  financial  basis.  The  con- 
ditions of  the  companies  just  prior  to  the  entry  into  the  war  were 
substantially  the  same  as  they  had  been  for  the  last  20  years.  It 
was  not,  so  far  as  the  returns  indicated,  in  any  substantially  worse 
condition  except  that  the  effect  upon  the  property  as  the  result  of  tli;^ 
cumulative  effect  of  deferred  maintenance  and  depreciation  had  leit 
the  property  in  a  poorer  financial  condition  to  stand  the  strain  or 
extraordinary  new  expenses. 

The  Chairman.  Was  the  phvsical  condition  of  the  property  such 
that  the  companies  could  not  give  good  service? 

Mr.  MacLeod.  Yes, 

Mr.  Warren.  To  put  it  in  another  way,  it  would  be  true,  would 
it  not,  that  the  income  has  never  been  sufficient  to  keep  up  the  com- 
panies and  properly  operate  them?  .  . 

Mr.  MacLeod.  I  think  I  state  that  immediately.  The  legitimate 
investor  has  been  receiving  a  very  moderate  return,  usually  less 
than  the  current  interest  rate,  and  is  confronted  with  the  prospect  of 
a  substantial  loss  of  principal  if  forced  to  realize  upon  his  invest- 
ment. The  public  have  had  much  to  put  up  with  in  the  way  of 
poor  service,  but  this  service  has  not  the  less  been  furnished  in 
many  cases  for  less  than  cost,  and  at  the  expense  of  the  properties 
and  the  investors.  Broadly  speaking,  the  deterioration  of  the  prop- 
erties and  service  of  our  street-railway  companies  is  due  to  deferred 
maintenance,  and  that  in  turn  is  due,  in  pai*t  at  least,  to  deferred 
increases  of  rates.  As  between  the  car  rider  and  the  investor,  the 
car  rider  has,  up  to  the  present,  had  much  the  better  of  the  bargain. 

I  take  it,  however,  that  you  are  less  interested  in  the  statement  of 
abstract  principles  of  regulation  than  in  the  practical  results  of 
their  application  in  our  Commonwealth.  Recent  fare  increases  in 
Massachusetts  have  been  greater,  both  in  number,  variety,  and  extent, 
than  in  any  other  State,  and  the  effects  of  such  increases  upon  traffic 
and  revenue  are  deserving  of  careful  consideration  by  street-railway 
officials  and  public  authorities  in  other  States.  I  am  submitting  here- 
with a  tabular  statement  showing  how  the  various  fare  increases 
allowed  in  the  case  of  11  principal  street-railway  companies  since 
1914,  with  the  comparative  revenue  results  under  successive  fare 

schedules. 

That  is  included  with  two  or  three  other  exhibits  which  I  have 
prepared  for  each  of  the  commissioners  and  they  are  in  separate 
envelopes  on  the  secretary's  desk,  so  if  you  care  to  consult  them 
later  they  will  be  available. 

In  analyzing  these  figures  it  is  important  to  bear  in  mind  that 
fluctuations  in  revenue  have  not  been  wholly  occasioned  by  readjust- 
ment of  rates.  Variations  in  weather  conditions  during  successive 
years,  the  influenza  epidemic  of  last  year,  increases  or  decreases  in 
service  and  cnr-mileac:e  operated,  the  development  of  jitney  com- 
petition and  the  increased  use  of  private  automobiles,  a.nd  the  dis- 
turbance of  ordinaiw  economic  and  social  conditions  during  the  war 
period,  have  resulted  in  marked  fluctuations  in  the  volume  of  traffic, 
even  where  the  rates  have  remained  unchanged. 

Making  every  allowance,  however,  for  the  influence  of  these  con- 
ditions, if  the  revenue  results  of  the  companies  which  increased 
their  fares  are  compared  from  year  to  year  with  these  of  other  com- 
panies which  made  no  fare  increase  during  the  same  period,  there 


1440    PROCEEDINGS  OF  FEDEEAL  ELECTRIC  RAILWAYS  COMMISSION. 


I 


is  little  evidence  to  indicate  that  an  increase  of  rates  offers  a  panacea 
for  the  present  ills  of  our  street-railway  companies.  In  some  years 
the  companies  increasing  their  rates  have  shown  a  smaller  gam  in 
revenue  than  those  which  retained  the  former  5-cent  fares,  and  if 
tlie  revenues  for  the  year  ended  June  30,  1919,  are  compared  witli 
the  revenues  for  the  year  ended  June  30,  1914,  in  order  to  show 
the  cumulative  effect  of  all  increases  allowed,  it  appears  that  the  10 
companies  wiiich  increased  their  rates  during  this  period  show  an 
average  increase  in  passenger  revenue  of  31.92  per  cent,  while  the 
remaining  company  which  retained  its  former  5-cent  fares,  showed  an 
increase  of  24.16  per  cent  during  the  same  five-year  period.  If,  in 
order  to  afford  a  fairer  basis  of  comparison,  the  Boston  Elevated 
Railway  is  excluded,  it  appears  that  the  normal  increase  of  traffic 
on  the  Union  Street  Railway  under  the  old  5-cent  fare  yielded  a 
greater  increase  in  revenue  than  was  received  on  the  average  by 
the  other  nine  companies  as  the  result  of  their  successive  fare  in- 
creases. 

When  it  is  pointed  out  that  interurban  fares  in  Massachusetts  are 
now  generally  on  the  basis  of  about  2J  cents  a  mile,  that  a  straight 
lO-cent  fare  is  now  charged  in  23  of  our  cities  and  a  7-cent  fare, 
with  a  6^-cent  or  6i-cent  ticket  rate  in  the  remainder,  it  can  hardly  be 
claimed  that  the  experiment  of  increasing  fares  has  not  been  given 
a  fair  trial.  The  results  of  fare  increases  for  the  smaller  companies 
are  still  more  significant,  as  it  has  been  demonstrated  that  the  traffic 
possibilities  of  the  territories  which  they  served  have  in  many  cases 
proved  insufficient  to  support  the  companies  under  any  scale  of 
rates  which  they  might  see  fit  to  charge. 

The  Chairman.  In  that  connection,  Mr.  Commissioner,  will  you 
state  how  long  these  10-cent  fares  have  been  in  effect  ? 

Mr.  MacLeod.  There  have  been  some  10-cent  fares  on  some  of 
these  little  companies  that  have  since  gone  out  of  existence  estab- 
lished, I  should  say,  three  or  four  years  ago,  the  commission  at  that 
time  realizing  that  a  10-cent  fare,  especially  from  the  going  standard 
of  that  time,  w  as  a  very  extraordinary  fare,  but  feeling  at  the  same 
time  that  these  small  companies  •were  in  such  a  desperate  financial 
condition  that  they  ought  to  be  given  every  opportunity  that  was 
available  for  them  to  increase  their  revenues  and  retain  the  service, 
and  allow^ed  these  10-cent  fares  to  go  into  effect  on  some  of  the  small 
companies.  But  it  had,  so  far  as  they  were  concerned,  little  or  no 
benefit,  and  I  think  in  some  places  may  have  precipitated  the  final 
collapse.  The  10-cent  fares  have  not  been  in  effect  except  for  a 
period  of  a  little  OA-er  a  month  in  Boston. 

The  Chairman.  These  other  places  where  you  had  10-cent  fares, 
back  several  years,  can  you  give  the  population  of  some  of  the  vil- 
lages where  they  had  this  10-cent  fare  ? 

Mr.  MacLeod.  At  the  present  time? 

The  Chairman  No;  you  said  there  w^ere  a  number  of  companies 
that  had  10-cent  fares  that  had 

Mr.  MacLeod.  For  the  most  part  those  were  country  lines,  con- 
necting small  country  towms.  There  were  no  city  fares  on  a  10-cent 
basis  until  within  the  last  month  or  two.  Since  January  of  the 
present  year  the  fares  on  the  Bay  State  Co.,  whose  lines  affect  a 
large  number  of  our  cities— Mr.  Warren  can,  perhaps,  tell  me  how 
many 


niOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1441 

Mr.  Warren.  I  think  ninety-odd  cities  and  towns. 

Mr.  MacLeod.  Yes ;  but  of  cities  alone  I  should  think  there  must 
be  10  or  a  dozen  cities — the  cash  fare  was  put  on  a  10-cent  basis, 
but  tickets  were  sold  on  a  7-cent  basis,  and  most  all  the  traffic  moved 
on  the  ticket  rate,  and  it  was  not  until  the  1st  of  July  on  the  Bay 
State  Co.,  and  the  10th  of  July  on  the  Boston  Elevated  Co.,  that  a 
flat  10-cent  fore  has  been  put  in  effect  in  any  of  our  cities,  except  a 
little  earlier,  I  think  in  May  of  last  year,  there  was  a  zone  system 
put  in  in  the  city  of  Springfield,  which  necessitated  a  cash  fare  of 
12  cents,  I  think  it  was 

Mr.  Warren.  Ten  cents. 

Mr.  MacLeod.  Ten  cents  originally  and  then  12  cents  for  rides 
from  the  center  to  the  outlying  city  zones,  preserving,  first,  a  6-cent 
and  then  a  6-cent  fare  area  in  the  central  section  of  the  city.  That 
city,  by  the  way,  is  the  only  city  of  any  importance  in  the  State,  I 
think,  as  I  recall  it,  the  only  city  in  the  State  that  has  experimented 
with  the  zone  system.  That  experiment  has  been  tried  in  some  of  the 
other  cities,  but  it  did  not  prove  to  be  satisfactory  either  from  the 
standpoint  of  the  company  in  the  matter  of  revenue  or  from  the 
standpoint  of  the  public.  The  public  disliked  it,  and  they  went 
back,  practically,  to  the  flat-fare  basis. 

Mr.  Warren.  In  Springfield  it  has  been  operating  satisfactorily 
as  a  revenue  producer ;  don't  you  think  so  ? 

Mr.  MacLeod.  I  think  those  are  all 

Mr.  Warren.  Better  than  the  flat  fare. 

Mr.  MacLeod.  I  should  very  much  doubt  as  to  whether  the  rev- 
enue results  in  Springfield  under  that  zone  system  are  any  better 
than  they  have  been  in  Worcester  under  a  flat  fare. 

Mr.  Warren.  I  think  they  have  been. 

Mr.  MacLeod.  They  have  been? 

Mr.  Warren.  Yes. 

Mr.  MacLeod.  Well,  that  may  be  a  good  basis  of  comparison. 

Several  companies  have  torn  up  their  tracks  and  dismantled  their 
properties,  10  companies  have  entirely  abandoned  operation,  and 
other  companies  are  in  the  hands  of  receivers  and  on  the  verge  of 
financial  collapse.  For  the  weaker  companies  the  outlook  seems 
hopeless,  unless  the  communities  which  they  serve  are  prepared,  by 
some  form  of  subsidy,  to  bear  a  portion  of  the  burden  of  their 

operation. 

These  results  have  been  due  to  the  law  of  diminishing  return — 
as  traffic  tends  to  decrease  as  fares  are  increased.  Eather  than  pay 
the  higher  fare  passengers  wall  forego  all  mere  convenience  riding, 
will  walk,  change  their  place  of  residence,  or  remain  at  honie,  will 
patronize  the  iitneys,  or  use  the  railroads  where  lower  rates  in  many 
cases  are  available  through  the  purchase  of  commutation  tickets. 
The  revenues  received  even  by  the  larger  and  more  prosperous  sys- 
tems under  the  high  fares  now  prevailing  fall  far  short  of  meeting 
the  legitimate  costs  of  service  under  present  high  prices.  As  a 
practical  matter,  a  maximum  limit  for  fare  increases  is  fixed  by 
what  the  traffic  will  bear,  and  increases  beyond  that  point  will  de- 
crease rather  than  increase  gross  revenue.  It  is  possible  that  some 
further  increase  of  revenue  may  be  obtained  by  raising  fares  still 
higher,  although  it  would  appear  that  the  saturation  point  must  be 

1G0G43°— 20— VOL  2 29  , 


I     p' 


1 
( 


I 


1442    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RATL^VAYS  COMMISSION. 

almost  reached  with  fares  already  on  a  10-cent  basis.  If  further  in- 
creases are  made,  it  is  clear,  in  any  event,  that  the  burden  impose^  I 
upon  the  earners  will  be  wholly  disproportionate  to  any  benedt 
which  the  companies  can  possibly  receive. 

The  unsatisfactory  revenue  results  from  fare  increases  under  the 
old  re^ilatory  system  have  stimulated  efforts  to  solve  the  fctrct- 
railway  problem  through  new  legislation.  Last  year  the  Massachu- 
setts Legislature  passed  a  general  act  to  provide  for  service  at  cobt 
by  street-railway  companies.  The  plan  embodied  in  that  act  recog- 
nized the  necessity  of  securing  greater  flexibility  in  fare  adjust- 
ments, so  that  the  revenue  shall  always  be  enough  and  never  more 
than  enough  to  meet  the  costs  of  service  under  fluctuations  in  prices 
and  other  changes  in  conditions.  A  moderate  interest  rate  upon  pri- 
vate capital  contributed  to  the  public  service  is  included  in  the  cost 
of  operation,  but  any  possibility  of  profit  through  a  larger  return 
IS  eliminated.  Under  this  plan,  the  amount  of  the  legitimate  in- 
vestment and  the  requirements  for  depreciation  are  fixed  by  the 
commission.  Funds  are  provided  for  a  gradual  rehabilitation  of  the 
properties.  A  reserve  fund  is  created  to  act  as  a  barometer  of  rev- 
enue requirements,  and  as  this  fund  falls  or  rises  fares  automatically 
go  up  or  down  in  accordance  with  a  determined  sliding  scale  of 
rates.  The  control  of  the  commission  over  methods  of  operation  is 
enlarged  and  strengthened,  and  the  public  are  allowed  to  partici- 
pate in  the  control  and  management  of  the  properties.  No  com- 
pany, up  to  the  present  time,  has  availed  itself ,  of  the  provisions 
of  that  act. 

The  service-at-cost  principle  has,  however,  been  recognized  in  two 
special  acts  providing  for  the  public  operation  of  the  two  principal 
street-railway  companies  in  the  Commonwealth— the  Boston  Elevated 
and  Bay  State  companies,  representing  together  approximately  46 
per  cent  of  the  mileage,  and  about  72  per  cent  of  the  capital  invest- 
ment of  all  street  railways  in  the  Commonwealth.  Under  the  plans 
emlx)died  in  these  special  acts  the  properties  of  the  company  are  in 
effect  leased  to  the  Commonwealth  for  a  period  of  10  years,'and  the 
entire  direction  and  control  of  the  properties  is  placed  in  the  hands 
of  public  trustees  appointed  by  the  governor.  The  trustees  are  re- 
quired to  advance  the  fares  from  time  to  time  as  may  be  needed  in 
order  to  meet  the  cost  of  service,  including  return  on  legitimate  in- 
vested capital  as  determined  by  the  commission  at  a  rate  of  a  little 
over  5  per  cent,  in  the  case  of  the  Boston  Elevated  Co.,  and  of  6  per 
cent  in  the  case  of  the  Bay  State  Co.  The  Boston  Elevated  act  also 
provides  that  any  deficit  in  the  amount  necessary  to  meet  the  cost  of 
service  may  temporarily  be  raised  by  assessing  it  on  the  communities 
served,  but  must  ultimately  be  repaid  by  the  car  riders. 

Under  the  terms  of  these  acts  the  public  trustees  of  both  companies 
have  found  it  necessary  to  establish  a  regular  10-cent  fare.  During 
the  year  ended  June  30,  1919,  the  fares  of  the  Boston  Elevated  Co. 
were  successively  advanced  to  7  cents  and  8  cents,  but  even  under  this 
increase  the  company  failed  to  meet  the  cost  of  service  by  nearly 
$5,000,000.  The  present  10-cent  fare  on  that  company  has  been  in 
effect  only  since  July  10  of  this  year.  A  general  strike  on  the  com- 
pany's lines  and  other  abnormal  conditions  during  that  month  make 
It  difficult  to  draw  conclusions  from  the  revenue  figures  thus  far 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1443 

available,  but  there  appears  to  be  little  reason  to  anticipate  that  the 
company  will  prove  self-supporting  even  on  that  basis. 

The  Chairman.  Will  you  repeat  that  statement,  please? 

Mr.  MacLeod.  Even  on  the  10-ccnt  fare  basis,  unless  the  company 
iu  some  way  curtails  its  maintenance  and  depreciation  program,  or 
imless  there  should  be  some  general  change  in  economic  conditio] is 
for  which  there  seems  to  be  absolutel}?^  no  reasonable  hope  at  the 
present  time,  there  appeal's  to  be  little  reason  to  anticipate  that  thc^ 
company  will  prove  self-supporting  even  on  that  basis. 

The  Chairman.  Right  at  that  point:  Since  that  company  was 
taken  over  by  trustees  has  the  maintenance  been  upon  a  higher  stand- 
ard than  before  ? 

Mr.  MacLeod.  Distinctly.  The  maintenance  charges  on  the  Boston 
Elevated  during  the  past  year  have  exceeded  the  maintenance  ex- 
penditures for  the  year  before  by  substantially  $2,500,000  which 
represents  pretty  nearly  double  the  expenditures  for  maintenance 
alone,  and  there  has  been  an  expenditure  of  a  little  over  $2,000,000 
of  depreciation  reserves  over  and  above  that  amount,  of  which  $1,650,- 
000  repi*esents  the  increase  over  the  previous  year.  In  other  words, 
the  company's  maintenance  and  depreciation  programs  together  have 
represented  an  expenditure  of  over  $4,000,000  more  under  public 
control  than  was  expended  under  private  control,  and  that,  of  course, 
has  been  one  very  significant  element  in  bringing  about  the  financial 
situation  and  developing  the  increased  operating  cost  which  has 
necessitated  an  advance  in  fares. 

Another  principal  reason,  of  course,  has  been  the  advance  in  wages 
which,  during  the  year  that  the  trustees  were  in  control,  represented 
an  increase  of  $4,400,000.  In  other  words,  your  maintenance  and 
wage  pix)gi-ain  together  represented  an  increase  of  over  $7,000,000 
and  the  total  increase  in  operating  ex^jense  was  something  in  tho 
neigliborhood  of  $10,000,000.  There  were  certain  other  elements 
which  came  in,  such  as  increased  subway  rentals,  owing  to  the  open- 
ing up  of  new  subways,  increased  power  cost  thi-ough  inci-eased  cost 
of  coal  and  a  number  of  minor  elements  that  entered  into  it.  Tlie 
situation,  roughly  speaking,  being  that,  while  the  passenger  revenue 
increased  bv  about  $4,500,000  during  that  period,  the  operating  costs 
went  up  by  about  $10,000,000. 

The  Chairman.  It  has  been  shown  hei^e  in  testimony  before  us 
that  the  increased  cost  of  material  used  in  construction,  repaire,  and 
equipment  has  gone  up  all  the  way  ivom  50  to  250  per  cent.  I  was 
wondering  how  much  of  this  additional  maintenance  was  represented 
in  the  increased  cost  of  material. 

Mr.  MacLeod.  It  is  represented  in  some  degi-ee,  but,  of  course,  there 
is  not  really  any  comparative  basis  on  your  depreciation  reserve, 
because  the  company,  broadly  speaking,  was  not  making  any  except 
a  very  limited  depi-eciation  reserve  in  the  past,  and  the  program  of 
rebuilding  of  tracks,  the  physical  evidences  of  the  change  in  policy 
are  patent  to  everybody  who  knows  anything  about  the  conditions 
of  the  company.  The  reconstruction  program  has  been  enormously 
larger  than  it  ever  had  been  before  in  the  history  of  the  company 
since  I  have  known  anything  of  its  history. 

The  Chairman.  What  is  the  remaining  life  of  this  contract? 

Mr.  MacLeod.  About  9  years  or  more.  The  period  was  10  years, 
and  it  went  in  a  year  ago. 


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1444    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Assumin|r  that  the  present  standard  of  mainte- 
nance of  construction  is  maintained,  what  will  be  the  condition  of 
that  plant  at  the  end  of  the  contract? 

Mr.  MacLeod.  At  the  end  of  the  contract— I  personally  do  not 
believe  that  the  scale  of  expenditure  for  maintenance  and  deprecia- 
tion, such  as  IS  now  being  followed  by  the  trustees,  will  be  necessary 
for  the  entire  10-year  period.  The  trustees'  program  has  been  based 
largely  upon  an  extended  and  very  careful  expert  engineering  inves- 
tigation of  the  property  made  by  Mr.  John  A.  Beeler,  who  is  down 
hei-e  m  Washington,  and  with  whom  you  are  doubtless  all  familiar, 
and  was  based  upon  the  requirements  necessary  to  put  the  prop- 
erty back  into  good  physical  operating  condition.  In  other  words, 
it  represents  part  of  a  rehabilitation  program  which  ought  to  be 
completed  within  3  or  4  or  5  years,  and  after  that  the  scale  of 
expenditures  would  be  likely  to  be  lower,  and,  of  course,  if  it  is 
possible  for  the  company,  as  it  will  be,  to  cumulate  a  depreciation 
fund  and  invest  that  in  new  shop  facilities  and  labor-saving  ma- 
chinery, and  that  sort  of  thing,  there  are  possibilities  of  reducing 
maintenance  cost  as  soon  as  they  can  get  a  chance  to  get  new  money 
from  some  source  to  put  into  the  property  and  make  those  improve- 
ments. 

The  Chairman.  Is  the  company  charging  all  its  depreciation  and 
maintenance  to  operation? 

Mr.  MacLeod.  It  is  charging  all  to  operation.  So  far  as  the 
depreciation  requirement  is  concerned,  it  is  significant  to  remember 
that  this  depreciation  fund  is  not  intended  to  cover  depreciation  in 
roadway  and  track;  that  renewals  in  ties  and  paving  and  roadway 
are  made  as  part  of  the  maintenance  charge.  Now,  in  accounting 
practice  it  has,  I  think,  been  most  common  to  include  the  deprecia- 
tion of  your  rails  and  the  depreciation  of  your  ties  except  perhaps 
so  far  as  minor  renewals  and  patching  up  is  concerned  as  coming 
under  your  depreciation  program.  But  under  the  system  adopted 
by  the  trustees,  which  was  in  accordance  with  the  plan  outlined  in 
Mr.  Beeler's  report,  this  maintenance  program — this  entire  program 
of  track  reconstruction — is  charged  up  to  maintenance  and  not 
charged  to  depreciation. 

The  Chairman.  Now,  if  the  board  continues  this  practice,  at  the 
end  of  10  years  you  are  going  to  have  a  splendidly  equipped  plant 
to  turn  back  to  the  corporation.  The  cost  of  putting  that  plant  in 
condition,  charged  to  operating  expenses,  is  all  borne  out  of  the 
revenue.  That  means  that  the  cost  to  the  taxpayers,  or  rather  to 
the  passengers,  has  been  excessive  during  that  10  years.  What 
method  has  been  adopted,  if  any,  to  reimburse  the  public  for  the 
money  which  it  expends  for  that  purpose? 

Mr.  MacLeod.  There  has  been  no  method  adopted ;  and  that  is 
simply  one  point,  and  perhaps  the  most  conspicuous  point,  of  several 
points  that  might  be  mentioned  where  the  public  interest  was  not 
adequately  served  in  the  legislation  that  was  passed.  I  know  when 
that  matter  came  up,  the  commission  in  a  prepared  statement— and 
I  myself  orally  before  the  committee— argued  as  strongly  as  I  pos- 
sibly could  the  lack  of  equity  in  the  very  point  that  you  have  raised 
and  suggested  that  the  act  in  that  respect  should  be  drawn  upon  the 
analogy  of  the  law  and  practice  of  the  Kailroad  Administration 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1445 

where  ample  provision  is  made  protecting  the  public  from  having  the 
investors'  profit  at  their  advantage  by  any  increments  of  value  added 
to  the  property  during  the  period  of  public  control.  But  no  such 
safeguards  have  been  put  into  the  Massachusetts  act,  although  the 
commission  used  all  its  efforts  to  see  that  a  provision  of  that  kind 
was  embodied  in  it. 

The  Chairman.  Then,  in  a  nutshell,  the  State  took  over  a  run- 
down plant  and  i^  going  to  built  it  up  and  make  it  perfect,  turn 
it  back  to  the  corporation  and  get  none  of  the  cost  back? 

Mr.  MacLeod.  Of  course,  a  large  part  of  this  expenditure  repre- 
sents current  maintenance  and  current  depreciation  requirements.  I 
might  say  while  this  10-year  period  is  in  operation  there  is  a  cer- 
tain amount  of  depreciation  going  on  during  that  period  in  addi- 
tion to  what  has  occurred  in  the  past,  but  I  have  no  doubt  in  my 
own  mind,  and  I  think  I  am  supported  in  that  by  investigation 
made  of  the  matter  by  our  engineering  department,  that  the  present 
maintenance  and  depreciation  expenditures  on  the  Boston  Elevated 
property,  while  absolutely  desirable  and  proper  from  the  standpoint 
of  putting  the  property  as  soon  as  possible  into  good  physical  con- 
dition, and  a  policy  which  I  believe  in  the  long  run  will  be  of  ad- 
vantage to  the  public,  does  for  the  immediate  present  impose  upon 
the  public  an  additional  burden  owing  to  the  necessity  of  making  up 
neglected  depreciation  in  the  past. 

Commissioner  Gadsden.  If  I  understand  your  general  statement,  it 
was  to  the  effect  that  rates  in  the  past  have  never  been  sufficient  to 
yield  a  proper  and  fair  return  on  the  property  and  set  up  the  proper 
depreciation  and  that  these  properties  had  been  allowed  to  run  down, 
so  far  as  their  physical  condition  was  concerned,  in  order  to  pay  the 
dividends.  Now  If  that  is  so,  is  it  not  entirely  proper  that,  when 
the  public  takes  over  the  property  in  the  hands  of  the  public  trustees, 
the  public  should  pay  a  fare  to  put  the  property  in  good  operating 
condition,  which  it  has  not  done  in  the  past?  Is  there  really  any 
injustice  in  that?  Is  not  the  public  only  now  paying  what  it  should 
have  paid  all  these  years? 

Mr.  MacLeod.  I  think  that  is  an  element  that  undoubtedly  must 
be  recognized  in  the  situation ;  that  is  to  say,  if  it  can  be  shown  that 
the  properties  failed  to  earn  their  way  in  the  past,  by  reason  of  being 
prevented  from  charging  a  proper  fare,  and  the  public  has  had  the 
benefit  of  those  lower  fares,  and  saved  a  certain  amount  of  money 
that  it  would  otherwise  have  paid,  it  might  be  said  that  it  was  only 
just  that  the  public,  who  had  been  the  beneficiaries  of  the  old  scheme, 
should  pay  the  cost  of  making  that  up,  and  put  on  to  one  generation 
the  burden  that  ought  to  have  been  borne  perhaps  by  the  former 
generation. 

At  the  same  time,  I  believe  that  that  is  a  problem  to  be  worked  out 
by  the  companies  themselves,  under  the  general  economic  scheme  of 
regulation  and  supervision,  and  when  there  is  a  new  phase  of  the 
problem,  by  reason  of  the  public's  stepping  in  and  temporarily  taking 
charge  of  the  properties,  that  all  that  could  reasonably  be  expected  of 
them  would  be  to  turn  the  properties  back  in  the  same  condition,  and 
then,  at  the  end  of  that  period,  if  the  companies  believe  that  they 
can  put  back  the  values  into  the  property  by  charging  increased 
fares,  there  is  no  reason  why  they  should  not  do  so. 


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1446    PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION". 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  CO?.I MISSION.    1447 


Of  course,  this  whole  matter  is  affected  by  the  underlying  problem 
as  to  how  far  those  past  values  can  be  put  back  into  the  properties  by 
any  system  of  fares  which  may  be  charged. 

The  Chairman.  Have  you  not  permitted  the  companies  at  any 
time  to  come  before  your  commission  to  ^t  adequate  revenues? 

Mr.  MacLeod.  That  is  true;  and,  broadly  speaking,  no  claim  can 
be  made — at  least,  I  have  never  heard  of  any  claim  at  any  time  from 
any  responsible  source  up  to  the  present  time — that  the  unfortunate 
financial  condition  of  the  companies  in  Miissachusetts  was  due  to 
the  fact  that  they  asked  for  an  increased  fare,  which  was  denied; 
because  there  was  absolutely  no  justification  for  any  such  claim. 

^n  Massachusetts  the  rate-making  power  began  only  in  1913. 
The  old  railroad  commission  simply  had  a  power  to  deal  with  rates 
upon  complaint  and  never  really  took  any  active  part  in  matters 
of  rates  at  all;  and  the  most  that  was  done  in  the  whole  period  of 
the  existence  of  the  old  railroad  commission  was  to  put  in  a  few 
little  minor  rate  adjustments  at  ceiiain  points,  not,  however,  based 
upon  any  valuation  of  the  company  or  any  detennination  as  to  how 
nnich  money  the  company  was  entitled  to  earn,  but  upon  the  basis 
of  making  the  fares  between  points  A  and  B  consistent  with  the 
general  fare  scheme  which  the  company  itself  voluntarily  had  put 
into  effect  for  its  entire  system;  in  other  words,  merely  to  correct 
discriminations. 

The  Chairman.  Then,  in  so  far  as  they  are  charging  higher  fares 
now  to  permit  the  company  to  build  up  its  proj^erty,  it  is  penalizing 
the  present  passengers  for  the  delinquencies  of  the  company  in  the 
leasts 

Mr.  MacLeod.  I  think  that  is  probably  true. 

It  must  be  borne  in  mind  that  the  companies  were  placed  in  an 
exceedingly  difficult  position,  because  it  was  absolutely  necessary, 
as  it  is  necessary  now  and  necessary  always,  that  the  company  should 
be  kept  in  gooa  financial  credit,  because  a  new  inflow  of  capital  is 
constantly  necessary  and  in  order  to  get  that  capital  they  had  to  keep 
on  paying  dividends,  and  they  had  to  put  a  good  financial  face  on 
their  properties.  The  moment  that  they  would  come  in  to  a  commis- 
sion to  ask  for  an  increase  of  rates  they  would  have  to  disclose  their 
needs,  and  the  disclosing  of  the  actual  condition  of  the  company 
would  undoubtedly  have  affected  their  credit. 

The  Chairman.  Do  not  the  financiers  or  the  investors  up  in  your 
country  do  more  than  examine  the  operating  sheet?  Do  they  not 
always  send  some  one  over  the  line  to  look  at  its  physical  condition 
and  make  a  report  upon  that  and  its  possibilities  as  an  earning 
property  ? 

Mr.  MacLeod.  In  my  experience,  the  investors  in  the  past  have 
been  about  the  blindest  aggregation  of  men — full-grown  men — that 
1  know  of  in  any  line  of  activity. 

The  ordinary  investor  looks  at  his  return,  and  if  his  dividend 
comes  in  he  does  not  give  the  condition  of  the  propeity  a  second 
thought.  It  is  only  when  his  dividends  begin  to  fall  off  that  he  be- 
comes sufficiently  interested  in  the  property  to  look  into  it. 

Of  course,  so  far  as  the  investors  in  the  large  sense  are  concerned, 
meaning  the  banking  institutions  that  are  supposed  to  follow  those 
matters  up,  the  banking  institutions  were  in  so  dee]p  already  in  most 


of  these  street-railway  properties  tliat  lliey  weie  practically  in  the 
siime  boat  with  the  ordinary  investor,  and  they  had  to  carry  things 
along  in  lines  of  least  resistance. 

The  Chairman.  But  were  the  new  issues  of  this  company  handled 
by  investment  bankers? 

*  ^Ir.  MacLeod.  A  great  part  of  the  street-i*ailway  management 
of  the  State  and  a  large  number  of  the  companies  in  the  State,  very 
much  more  than  the  majorit}^ — outside  of  the  Boston  Elevated  Co. — 
is  represented  by  holding  company  control,  and  the  securities  under- 
lying the  street-railway  company  are  taken  over  by  the  holding 
company,  either  as  a  single  asset  or  in  conjunction  with  the  assets  of 
other  companies ;  and  the  holding  company  floats  a  set  of  new  quasi- 
securities  of  its  own  and  markets  those,  and,  of  course,  those  are 
handled  through  the  investment  bankers  in  the  same  way  as  ordi- 
narv  industrial  issues. 

The  Chairman.  So  that  the  investment  bankers  were  putting  out 
a  security  then  without  examining  the  physical  condition  of  the 
property^ 

Mr.  MacLeod.  I  do  not  know  to  what  extent  they  examined  it, 
but  an  examination  ought  to  have  disclosed,  if  it  wera  an  intelligent 
examination,  the  fact  that  the  property  during  this  entire  period 
was  not  on  a  self-supporting  basis. 

Commissioner  Gadsden.  I  would  like  to  ask  you,  right  there— I 
think  you  are  developing  a  very  interesting  phase  of  this  question: 
Now,  looking  at  it  in  its  broader  aspects,  these  railroads  in  Massa- 
chusetts are  practically  roads  which  have  been  financed  properly. 
It  is  asserted  that  there  is  very  little,  if  any,  watered  stock;  so  that 
the  values  were  there. 

Now,  was  there  not  always  an  implied  contract  between  the  pub- 
lic and  the  company  that  the  public  should  pay  that  company  for 
the  public  service  it  was  rendering,  the  cost  of  operation  plus  a  fair 
return  on  the  property  involved,  including  the  necessary  reserve? 

Now,  if  the  public  has  not  paid  that  during  a  period  of  10  years, 
for  any  cause,  or  for  one  cause  or  another,  it  is  the  same  public  that 
has  been  getting  the  service,  and  in  equity  is  it  not  perfectly  fair 
that  during  the  next  10  years,  we  will  say,  the  public  should  re- 
store to  that  property  what  it  has  taken  out  of  it  ?  Whether  the  stock- 
holders were  delinquent  or  not,  it  is  a  public  service,  it  is  a  public 
company. 

Mr.  MacLeod.  Well,  that  is  a  perfectly  reasonable  point  of  view 

to  take,  and 

Commissioner  Gadsden.  In  the  interest  of  the  public,  I  mean- 
not  the  stockholders. 

Mr.  MacLeod.  And  it  is  a  point  of  view  that  must  fairly  be  kept 
in  mind;  and  the  commission  has  several  times  called  attention  to 
that  situation  as  one  that  would  justify  the  exercise  of  a  somewhat 
generous  policy  in  dealing  with  public-service  companies,  where 
thei-e  is  reasonable  evidence  to  believe  that  the  financial  condition 
of  the  properties  has  been  due  not  to  graft  or  exploitation  or  cor- 
ruption or  extravagance  or  mismanagement,  but,  broadly  speaking, 
to  the  fact  that  they  have  been  giving  the  public  more  than  they 
have  been  getting,  'and  that  the  public,  during  this  period,  has 
profited  by  having  the  opportunity  of  riding  relatively  long  dis- 


IF 


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1448    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tancos  for  a  very  short  fare.  All  these  suburban  communities  have 
been  built  up  practically  as  the  result  of  the  street-railway  develop- 
ment and  the  policy  puimied;  and  that  is  an  aspect  of  the  matter 
Which  must  fairly  be  given  due  weight  and  consideration;  and  I 
believe  that  it  was  the  controlling  consideration  which  led  to  the 
enactment  of  the  legislation  of  the  Boston  Elevated  with  respect  to 
those  particular  matters  in  the  form  in  which  it  was  finally  enacted; 
It  was  a  recognition  of  that  principle. 

At  the  same  time— and  this  matter  is  discussed  a  little  bit  later— 
1  believe  that  there  are  certain  phases  of  the  situation  where  it  is 
impossible  under  any  theory  of  regulation,  to  fix  responsibility 
on  the  public  and  where  the  public  can  be  placed  under  no  possible 
obligjition  to  recoup  for  losses,  and  that  I  will  refer  to  brieflv  a 
little  later.  '^ 

Upon  the  application  of  the  Bay  State  Co.  for  the  establishment 
of  a  uniform  10-cent  fare  upon  its  system,  the  commission,  in  Janu- 
ary of  this  year,  allowed  a  minimum  cash  fare  of  10  cents,  but  re- 
quired the  company  to  establish  a  ticket  rate  of  7  cents,  under  which 
the  main  volume  of  traffic  has  been  handled.     The  company  took 
an  appeal  from  this  decision  upon  the  ground  that  the  finding  of 
the  commission  was  confiscatory,  but  the  decision  of  the  commission 
was  sustained  by  the  court.     For  the  six  months  ending  June  30, 
1919,  the  increase  in  revenue  under  the  fares  established  by  the 
commission  amounted  to  21.72  per  cent.     On  July  1  of  this  year, 
the  properties  having  meantime  passed  into  the  control  of  public 
trustees,   a  straight   10-cent  fare   was  established   upon   all   lines, 
in  conformity  with  the  original  plan  presented  by  the  company  to 
the  commission.     Under  the  10-cent  fare,  the  increase  in  revenue 
for  the  month  of  July  has  been  only  10.06  per  cent,  which  is  less 
than  half  the  percentage  of  increase  under  the  former  7-cent  fare. 
In  so  far  as  July  figures  can  be  taken  as  typical — and,  of  course, 
that  must  be  accepted  with  certain  reserves,  because  the  period  is 
i-eally  not  long  enough  to  warrant  the  drawing  of  any  confident  gen- 
eral deductions— but  on  the  only  evidence  available,  it  would  appear 
that,  so  far  as  the  Bay  State  is  concerned,  it  has  already  passed  the 
point  of  saturation  on  the  point  of  the  10-cent  fare ;  and  that  under 
the  7-cent  fare,  which  the  commission,  in  its  opinion,  when  it  ren- 
dered its  decision  in  the  case,  said  that  in  its  judgment  would  yield 
a  larger  gross  revenue  than  the  fares  which  the  company  themselves 
asked  to  charge — that  it  would  appear,  as  I  say,  that  in  going  from 
7  to  10  cents  they  had  passed  the  point  of  saturation  and  if  they 
wanted  to  get  more  revenue  they  would  have  to  recede  and  charge 
lower  fares  instead  of  carrying  any  further  the  process  of  charging 
higher  fares. 

That  is  made,  as  I  say,  with  due  qualification  from  the  fact  that 
we  have  only  one  month's  experience  available,  and  that  is  not 
really  a  safe  bo  sis  for  drawing  any  confident  general  deductions; 
but  the  experience  in  that  case  is  so*^  nearly  in  line  with  the  general 
trend  of  revenue  results  in  the  case  of  the  other  companies  where, 
as  I  stated  a  moment  ago,  as  to  the  Union  Street  Eailwav  in  New 
Bedford,  the  increase  as  a  result  of  normal  growth  of  traffic  in  this 
entire  five-vear  period  has  been  actually  larger  than  the  receipts  on 
the  other  nine  companies,  which  take  in  all  the  principal  railways 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1449 

except  the  Boston  Elevated,  which  is,  in  many  ways,  a  peculiar  prob- 
lem by  itself — it  was  actually  greater  than  the  cumulative  result 
of  all  the  increases  made  on  all  the  other  companies ;  and  that  is  not 
only  true  during  the  five-j^ar  period,  but  if  you  desire  to  analyze  the 
revenue  results  in  detail  in  this  tabulated  statement  I  have  filed,  you 
will  see  that  it  is  practically  borne  out  by  the  receipts  from  each 
year;  and  while  there  are  differences  in  local  conditions  from  time 
to  time,  it  would  seem  to  me  that  the  experience  is  broad  enough, 
and  the  number  of  companies  taken  large  enough,  to  absorb  and 
offset  any  individual  peculiarities  coming  from  the  situation  of  any 
one  company.  And  that  whole  showing,  if  I  were  to  prepare  a 
table  showing  the  revenue  results  of  these  companies  from  year 
to  year,  and  ask  you  or  anyone  else  who  knew  nothing  about 
the  fare  history  of  those  cases,  to  pick  out  the  companies  that  had 
been  given  a  fare  increase  during  that  period  and  subdivide  that 
by  picking  out  the  ones  that  had  the  larger  fare  increases,  I  would 
venture  to  say  that  you  would — if  you  started  on  the  basis  of  believ- 
ing that  those  fare  increases  would  be  represented  in  revenue — you 
would  be  wrong  about  three  times  out  of  four. 

Commissioner  Gadsden.  Would  not  the  receipts  per  car-mile  show 
an  increase? 

Mr.  MacLeod.  The  receipts  per  car-mile  would  show  an  increase 
in  some  cases,  and  do. 

Commissioner  Gadsdex.  Would  they  not  almost  universallv  show 
an  increase  on  the  roads  that  had  gotten  an  increase  of  fares 

Mr.  MacLeod.  That  is  true,  if  you  are  just  comparing  the  results 
in  Company  A  with  the  same  company  a  year  ago. 

For  that  reason,  in  making  this  comparison,  I  drew  it  up  in  such 
a  way  that  you  could  compare  the  revenue  results  of  a  company  that 
had  no  increase  during  the  period  with  those  that  had. 

Broadly  speaking,  these  general  conditions  in  regard  to  curtail- 
ment of  car-mileage,  and  that  sort  of  thing,  and  general  economic 
conditions  and  changes,  fluctuations  of  traffic  up  and  down,  were 
more  or  less  general  in  their  character,  and  ought  to  be  reflected  in 
the  revenue  results  of  the  companies  that  did  not  increase  their  fares 
in  just  the  same  way  as  in  the  case  of  those  that  did. 

During  the  present  year  further  attempts  have  been  made  to  se- 
cure remedial  legislation  for  our  street-railway  companies,  but  the 
various  plans  presented  all  failed  of  enactment.  The  gravity  of  the 
present  situation  under  the  conditions  disclosed  is  so  great  that  the 
governor  of  the  Commonwealth  has  found  it  necessary  in  the  public 
interest  to  appoint  a  special  commission  for  an  expert  study  of  the 
problem,  and  to  provide  for  the  calling  of  a  special  session  of  the 
legislature  in  the  latter  part  of  this  year  in  order  to  enact  appro- 
priate legislation. 

In  considering  the  remedies  which  are  open,  it  must  be  clearly 
kept  in  mind  that  no  legislative  enactments  can  override  the  opera- 
tion of  ordinary  economic  laws.  The  street-railway  companies  have 
no  revenue  except  that  which  is  received  from  the  public,  and  unless 
the  public,  in  one  form  or  another,  contributes  an  amount  sufficient 
to  meet  the  legitimate  cost  of  operation,  service  must  deteriorate  or 
be  entirely  abandoned.  Every  effort  must,  of  course,  be  made  to 
secure  the  greatest  possible  economy  and  efficiency  of  operation,  but 


1 


:fff 


1450    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

the  chief  problem  is  to  determine  the  method  by  which  the  burden 
of  street-railway  cost  can  be  distributed  with  least  detriment  to  the 
jniblic  interest. 

In  our  judgment,  street-railway  service  should  be  supported 
thionc^h  the  fares  paid  by  the  car  riders  in  so  far  as  this  can  rea- 
sonably be  done  without  unduly  interfering  with  the  freedom  of 
traffic  which  is  essential  for  the  business  prosperity  of  the  coni- 
luunities  served.  But  when  fares  have  been  raised  to  a  point  where 
a  further  increase  is  likely  to  prevent  the  public  from  availing  them- 
selves with  reasonable  freedom  of  the  service  and  facilities  fur- 
nished, and  where  the  burden  upon  the  car  riders  is  likely  to  be 
wholly  disproportionate  to  any  revenue  benefits  received  by  the 
company,  any  additional  revenue  needed  to  maintain  the  service 
should,  we  believe,  be  contributed  by  the  communities  served  out  of 
the  general  tax  levy. 

I  believe  that  where  rides  of  substiintial  length  are  furnished  there 
would  be  little  public  protest  and  little  diminution  of  riding  if 
fares  were  established  on  the  basis  of  G  cents,  or  possibly  higlier. 
If  that  is  so — and  the  fact  can  only  be  determined  in  the  light  of 
experience  in  each  particular  case — thei'e  is  no  convincing  reason, 
on  account  of  historic  reasons  or  a  mere  accident  of  coinage,  for 
l)reserving  fares  at  the  old  5-cent  level.  There  are,  however,  mani- 
fest advantages  as  a  matter  of  convenience,  as  well  as  a  matter  of 
psychology,  in  retaining  the  5-cent  unit  of  fare,  and  that  may  prove 
to  be  the  wisest  policy.  The  present  policy  of  constant  raises  in 
fares,  resulting  in  large  traffic  losses  and  little  or  no  advantages  to 
the  company,  is  not  only  a  grave  menace  to  the  j)rosperity  and  wel- 
fare of  the  whole  community,  but  is  wasteful  in  the  extreme.  As 
the  burden  of  the  increased  cost  of  operation  is  surely  heavy  enough 
in  itself,  the  existing  economic  scheme,  which  in  effect  doubles  or 
trebles  that  burden  for  the  car  rider,  sliould  no  longer  be  t(^leiated. 
Any  excess  I'evenue  required  above  that  which  can  be  obtained  under 
a  reasonable  system  of  fares  should  be  directly  contributed  out  of 
public  taxation. 

What  I  mean  by  that  is  the  fact  that  if  you  start  with  the  theory 
that  the  public  have  got  to  support  the  cost  of  the  service,  and  the  car 
rider  has  got  to  reacli  into  his  pockets  and  pay  out  $20  in  fares  in 
order  to  get  anywhere  from  $2  to  $10  into  the  treasury  of  the  com- 
pany, you  are  simply  creating  a  condition  where,  inst-ead  of  the  car 
rider  nieeeting  the  legitimate  advances  in  the  cost  of  operation  and 
i-eflected  in  his  ear  fare,  he  is  obliged  to  pay  for  them  three  or  four 
times  over;  and  that  is  something  for  which  nobody  gets  any  benefit, 
and  the  whole  community  suffers;  and  the  car  rider,  as  I  believe,  as 
tlie  individual,  is  the  least  sufferer. 

The  community  itself,  where  the  fredom  of  traffic,  the  mobility 
of  labor,  and  all' that  sort  of  thing  is  adversely  affected,  is  by  far 
the  more  serious  sufferer,  more  so  even  than  the  individual  car  rider 
who  may  have  to  pay,  through  increased  fares,  three  or  four  times 
as  much  as  the  increased  cost  of  living  and  the  increase  of  prices 
would  seem  to  warrant. 

Tender  that  plan  the  financial  drain  upon  the  communities  sei-ved 
would  be  enormously  less,  and  the  advantages  resulting  from  the 
free  movement  of  traffic  would  inure  mainly  to  the  benefit  of  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1451 

merchant,  the  manufacturer,  and  the  real-estate  owner,  and  would 
tlius  more  than  offset  any  amount  paid  through  increased  taxation. 
Any  payments  so  made,  it  is  true,  are  likely  to  be  passed  on  to  the 
ultimate  consumer  through  increased  rents  and  higher  prices  paid 
to  the  local  merchant  or,  broadly  speaking,  to  the  same  class  of  per- 
sons who  constitute  the  present  body  of  car  riders ;  but  the  economic 
v;aste  under  the  existing  system  will  be  eliminated. 

Other  remedies  l)esides  an  increaae  of  fares  may  be  available  as 
a  means  of  increasing  the  net  revenues  of  the  companies,  such  as 
new  shop  machinery  and  lalx)r-saving  devices  and  improved  equip- 
ment, including  the  one-man  cai-s,  which  may  permit  of  a  sufficient 
frequency  of  operation  to  reclaim  a  considerable  portion  of  the  traffic 
which  has  been  lost  to  the  jitney.  No  substantial  saying  can,  how- 
ever, be  effected  without  new  capital;  and  the  credit  of  the  com- 
panies is  such  that  the  necessarj  capital  can  not  be  obtained. 

It  may  well  be  that  the  ultimate  solution  of  the  street-railway 
problem  must  be  found  through  public  ownership.  No  other  method 
offers  any  reasonable  prospect  for  the  restoration  of  the  companies' 
credit,  which  is  necessary  to  provide  needed  capital.  The  figures 
presented  to  your  commission,  indicating  the  decline  in  the  street- 
railway  riding  per  capita,  emphasizes  the  fact  that,  with  the  growth 
of  motor  transportation ,  street-railway  service  is  no  longer  a  public 
necessity  to  the  same  degree  as  heretofore.  The  street  railway  is 
no  longer  in  undisputed  possession  of  the  field  of  urban  transporta- 
tion, and  the  possibilities  of  profit  are  correspondingly  curtailed. 
While  no  other  agency  of  transportation  yet  devised  can  supplant 
the  street  railway  company,  and  the  retention  of  street-railway 
service  is  vital  in  public  interest,  it  is  extremely  doubtful  if  the 
street  railway,  under  present  ecoiiomic  conditions,  can  be  supported 
wholly  by  private  investment.  As  a  matter  of  abstract  theory, 
private  operation  may  have  many  advantages  over  public  operation, 
but  where  a  public  utility  must  be  retained  in  the  interest  of  public 
service  rather  than  as  a  possible  source  of  profit,  and  where  private 
capital  continues  to  occupy  the  field  only  in  the  hope  of  salvaging 
the  investment  already  made,  recourse  must  be  had  to  public  credit 
if  adequate  service  is  to  be  retained. 

It  is  unnecessary  at  this  time  to  enter  upon  any  extended  discussion 
of  the  problem  of  public  ownership,  as  the  views  of  our  commission 
are  developed  at  length  in  our  last  annual  report,  copies  of  which 
are  submitted  herewith. 

If  it  should  be  deemed  necessary  or  advisable  in  any  case  for  the 
public  to  acquire  existing  street-railway  properties,  many  difficult 
questions  will  arise  in  regard  to  the  terms  of  purchase.  In  deter- 
mining the  proper  purchase  price,  while  consideration  should  be 
given  to  the  investment  cost  and  perhaps  also  to  the  cost  of  repro- 
duction less  depreciation,  the  most  important  factor,  in  my  judg- 
ment, is  the  actual  or  potential  earning  power  of  the  companies. 
If  it  can  reasonably  be  shown  that  the  actual  results  of  operation 
are  due  to  restrictive  legislation  or  supervision  through  the  denial 
of  needed  increases  in  fares,  the  value  of  the  property  should  not 
be  depreciated  because  of  losses  due  to  that  policy  but  should  be 
based  upon  its  revenue  potentialities  under  the  maximum  fare  which 
the  traffic  will  bear.     On  the  other  hand,  the  investors  must  assume 


\  m 


MM 


1452    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

the  losses  incident  to  a  decline  of  business  from  general  economic 
causes,  wliich  would  have  operated  even  if  the  companies  had  been 
tree,  like  the  ordmary  business  corporation,  to  fix  the  price  of  their 
product  at  the  point  which  would  yield  the  maximum  return.  If, 
tor  example,  the  Ford  car  has  made  it  impossible  for  street  railways 
to  operate  at  a  profit,  under  no  conceivable  theory  can  the  public 
be  held  responsible  for  the  results  or  be  expected  to  make  good  the 
Joss.  In  other  words,  while  the  public  may  reasonably  be  expected 
to  deal  fairly,  or  even  generously,  with  the  honest  street-railway 
investor,  he  can  not  expect  to  be  wholly  relieved  from  the  results  of 
a  business  error  of  judgment  in  making  an  unduly  optimistic  fore- 
cast of  the  revenue  possibilities  in  the  street-railway  field. 

Massachusetts,  as  already  pointed  out,  has  already  embarked  upon 
the  policy  of  public  operation  for  about  half  the  street-railway  mile- 
age of  the  State  through  the  lease,  rather  than  the  purchase,  of  street- 
railway  properties.  While  this  experiment  has,  up  to  the  present 
time,  not  proved  in  all  respects  as  successful  as  was  hoped,  there 
is,  as  far  as  I  can  judge,  absolutely  no  public  sentiment  whatever 
m  favor  of  a  reversion  of  the  properties  to  the  old  system  and  insofar 
as  there  is  agitation  for  change,  it  is  directed  toward  the  outright 
purchase  of  these  properties.  But  even  if  we  should  be  forced  into 
public  ownership  as  the  only  way  out  of  our  present  street-railway 
difficulties,  it  must  be  borne  in  mind  that  no  change  in  ownership 
of  the  properties  will  materially  affect  the  cost  of  the  service,  and 
that  under  any  form  of  operation,  the  public  can  obtain  in  the  way 
of  service  just  so  much  as  it  is  willing  to  pay  for,  and  no  more. 
^  The  Chairman.  Is  that  deficiency  paid  by  the  State  at  large,  or 
]ust  the  municipalities  that  receive  the  service? 

Mr.  MacLeod.  What  I  have  presented  represents  the  view  of  the 
commission. 

The  Chairman.  I  was  asking  as  to  the  present  law. 
Mr.  MacLeod.  Oh !  That  has  not  received  and  outright  recogni- 
tion m  the  present  law  at  all,  except  that  a  special  act  was  passed 
by  the  legislature  of  last  year  permitting  contributions  toward  the 
cost  of  operation  and  fixed  charges  of  street  railways  by  municipali- 
ties up  to  50  cents  on  the  dollar  for  the  cities  and  one  dollar  a  thou- 
sand for  towns,  which  has  not  had  much  practical  effect,  and  the 
provision  m  the  Boston  Elevated  act,  which  permits  of  an  assess- 
ment of  the  deficit  through  a  levy  on  the  State  treasury;  but  that 
amount  is  ultimately  assessed  back  upon  the  community  served ;  but 
under  the  terms  of  the  act  that  is  recognized  merely  as  a  temporary 
expedient,  and  that  any  amount  so  paid  out  of  the  public  treasuries 
must  be  reimbursed  by  the  car  riders,  if  it  can  be  reimbursed. 

The  Chairman.  As  far  as  the  commission  is  concerned,  Mr. 
MacLeod,  your  statement  is  so  complete  that  no  cross-examination 
is  necessary. 

Mr.  Warren.  I  am  very  much  pleased  with  the  statement,  al- 
though I  am  not  surprised,  because  I  knew  the  chairman  of  the 
Massachusetts  Commission,  through  his  thorough  familiarity  with 
the  situation  would  be  able  to  give  you  a  comprehensive  view  of  it 

There  are  two  or  three  questions  that  I  should  like,  through  the 
chairman  of  the  Massachusetts  commission,  to  call  to  your  atten- 
tion, bearing  on  the  Elevated  situation.  My  information  may  not 
be  right,  but  I  think  it  is. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1453 

You  asked,  Mr.  Chairman,  about  the  advantage  the  stockholders 
would  get  in  case  of  the  rehabilitation  of  the  Boston  Elevated  under 
the  public  control  by  the  trustees. 

I  think  the  act  provides,  Mr.  MacLeod,  that  in  addition  to  any 
other  power  in  taking  over  the  property,  the  public  may  take  the 
property  over  at  par  of  the  stock. 

Mr.  MacLeod.  That  is  right. 

Mr.  Warren.  *  At  the  end  of  10  years  ? 

Mr.  MacLeod.  Although  the  stock  cost  on  the  average  about  $110 
a  share. 

Mr.  Warren.  Yes;  and  that  includes  the  West  End  stock  at  par 
also,  as  soon  as  that  becomes  Elevated  stock;  and  that  also  cost 
about  $110. 

The  Chairman.  What  was  that  stock  at  the  time  the  trusteeship 
started  ? 

Mr.  Warren.  It  was  pretty  low  at  the  time  the  trusteeship 
started;  but  this  $110 — do  not  think  of  that  as  the  market  condi- 
tion— it  is  $110  paid  into  the  treasury  and  invested  in  the  property ; 
and  I  think  the  par  on  the  two  classes  of  stock,  the  West  End, 
which  is  under  lease  now  but  is  to  be  merged,  and  the  Elevated,  in 
round  numbers  is  something  like  $5,000,000 — ^the  premium  on  the 
West  End  and  the  Elevated. 

Mr.  MacLeod.  Just  about. 

Mr.  Warren.  And  also  under  the  act,  I  think  it  is  a  fact,  is  it 
not,  that  the  dividend  return  on  this  Boston  Elevated  stock  which 
has  cost  $110,  on  the  average,  is  limited  for  all  time  to  6  per  cent, 
even  though  the  property  is  returned  ? 

Mr.  MacLeod.  That  is  correct. 

Mr.  Warren.  In  other  words,  tKe  stock,  as  a  result  of  this  public- 
trustee  control,  is  shorn  of  the  right  which  it  formerly  enjoyed  of 
paying  larger  dividends  provided  it  could  earn  them  ? 

Mr.  MacLeod.  Yes. 

Mr.  Warren.  And  it  is  also  a  fact,  Mr.  MacLeod — I  do  not 
know  whether  you  have  this  in  mind  or  not — that  the  Elevated 
Railway  upon  its  own  $25,000,000  of  stock  has  never  paid,  since  the 
company  stalled,  over  6  per  cent  on  the  par  value. 

Mr.  MacLeod.  Over  a  considerable  period  of  time,  the  Boston 
Elevated  investor  who  bought  at  the  market  was  getting  not  over 
4  per  cent  on  his  money.  The  stock  at  one  time  sold  as  high  as 
$190  a  share,  and  at  the  time  just  before  this  public-control  act 
went  through,  it  fell  as  low  as  27 ;  and  immediately  upon  the  public- 
control  act  going  through  the  stock  jumped  up  to  about  80. 

The  Chairman.  Experience  would  seem  to  suggest  that  there 
are  three  things  that  the  people  up  there  ought  to  avoid:  The 
"  flu,"  the  smallpox,  and  railroad  securities — steam,  as  well  as 
electric. 

Mr.  Warren.  Reference  has  been  made  to  the  blindness  of  the 
street-railway  investors.  I  may  also  say  that  I  am  one  of  the  un- 
fortunate blind  men,  who  stands  before  you. 

The  Boston  Elevated  was  supposed  by  every  investor — I  think 
Mr.  MacLeod  will  agree  with  me  in  this — practically  every  investor 
in  Massachusetts,  to  be  just  as  safe,  or  almost  as  safe,  as  a  Gov- 
ernment bond.    I  think  well  over  half  of  the  bonds  of  the  company 


>t 


If 


i 


hi 


1454    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

weie  actually  in  the  savings  banks  as  ultraconservative  investments. 
I  should  guess— I  don't  know,  but  I  should  guess— that  half  of  the 
stock  was  in  the  hands  of  trustees^  under  probate  and  testamentary 

pi  o  visions.  .      . 

1  think  the  average  dividends  on  the  stock,  from  its  inception, 
was  a  little  over  4.^  per  cent,  which  was  not  much  more,  Mr.  MacLeod, 
I  think,  than  the'average  rate  on  the  subway  bonds  which  the  city 
issued  to  build  the  subways,  and  which  the  road,  in  part,  runs. 

Mr.  MacLeod.  The  financial  situation  of  the  Boston  Elevated  and 
its  decline  from  its  former  high  estate  wa.s  due,  I  believe,  more  than 
to  any  other  cause,  to  an  overstimulation  of  rapid-transit  develop- 
ment. It  was  believed  that  the  construction  of  subways  and  elevated 
lines  would  reduce  operating  cost  to  an  extent  that  would  make  the 
investment  of  capital  justiiied,  from  an  earning  standjwint.  But 
on(»  very  significant  phase  of  the  report  made  by  Mr.  Boeler  into 
tJie  situation  of  the  Boston  Elevated  properties  was  the  fact  that, 
according  to  Mr.  Beeler's  investigation,  the  surface  lines  of  the 
Boston  Elevated  were  then  l)eing  operated  under  the  5-cent  fare 
on  a  basis  that  would  have  allowed  a  complete  provision  for  deprecia- 
tion and  some  profit  over  and  al)ove  that,  but  that  the  transiwrtation 
on  the  subway,  through  the  subway  and  on  the  rapid-transit  lines, 
for  which  the  company  received  5  cents,  cost  them  anywhere  from 

7  cents  to  8  cents.  .  ,    ,    ^ 

While  I  think  it  is  true  that  investors,  in  the  main,  believed  that 
the  lk)ston  Elevated  securities  wei-e  absolutely  sound  and  stable, 
from  every  point  of  view,  I  know  that  some  veiy  shrewd  investors 
10  years  ago  saw  the  handwriting  on  the  wall  so  far  as  the  Elevated 
was  concerned.  One  man  said  to  me  at  that  time:  "All  you  have 
to  do  is  to  look  at  the  curve  showing  the  investment  per  capita,  the 
rise  in  that  compared  with  the  rise  in  income,  the  very  small  pro- 
poi-tionate  rise  in  income,"  and  he  sjiid,  "That  spread  can  only  go 
along  a  little  further  until  there  is  a  collapse."  That  was  his  view 
of  it  10  yeiirs  ago;  and  he  showed  more  prescience  in  the  matter  per- 
haps than  the  public  at  large. 

Mr.  Warren.  Than  some  of  the  rest  of  us. 

Those  figures  which  I  handed  to  you,  Mr.  Chairman,  illustrate 
that,  I  think,  since  1897  the  investment  has  more  than  quadrupled 
per  dollar  of  income. 

^,h\  MacLeod.  I  would  just  like,  before  I  close,  to  emphasize  this 
one  point  that  perhaps  I  have  not  sufficiently  emphasized  in  my 
prepared  statement,  and  I  do  not  know  that  it  has,  perhaps,  been 
emphasized  as  it  should  l^e  in  testimony  that  has  been  given  hereto- 
fore, so  far  as  I  have  had  the  opportunity  to  read  it. 

The  difficulty  of  the  street-railway  problem,  as  I  view  it,  is  not  so 
much  in  providing  means  for  meeting  the  current  costs  of  operation, 
although  that  problem  is  difficult  enough,  God  knows,  but  it  is 
the  problem  of  getting  in  them  new  capital. 

It  is  an  absolute  essential  that  if  this  industry  is  going  to  go  on, 
you  have  to  get  new  capital  in. 

For  various  reasons  the  street-railway  securities  have  received  such 
a  black  eye  that  investors  will  have  nothing  whatever  to  do  with 
them;  and  I  can  not  see  any  possibility  by  fare  increases  of  any 
extent  of  restoring  the  companies  to  a  condition  where  the  investors 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1455 


will  be  willing  to  buy  their  stock  on  any  reasonable  basis;  and  if 
you  start  with  the  theory  that  you  have  got  to  build  up  fares  and 
the  street  railway's  return  to  a  point  where  you  are  going  to  make 
that  investment  attractive  to  the  people  who  have  money  to  invest, 
you  have  got  to  make  your  returns  so  much  that  they  are  going  to  l>e 
absolutely  out  of  sight  of  what  anybody  ever  supposed  was  within 
the  bounds  of  possibility  as  a  reasonable  return. 

It  is  that  phase  of  the  situation,  more  than  the  difficulties  of  meet- 
ing current  operating  charges,  that  has  made  me  pessimistic  as  to 
the  outlook  of  permanently  sustaining  these  properties  entirely 
through  private  control;  and  the  stimulus  and  help  of  public  credit 
is  more  essential  in  my  viewpoint,  in  order  to  get  in  this  new  capital, 
than  it  is  in  sustaining  the  properties  to  meet  present  current  oper- 
ating re(j|uiremfnts. 

Commissioner  Meeker.  May  I  ask  a  question,  there?  Unfortu- 
nately I  did  not  hear  all  of  your  statement ;  but  from  what  I  gather, 
you  conceive  that  the  building  of  the  subways  was  not  altogether  a 
wise  thing  in  Boston;  that  it  entailed  an  expensive  operation,  a 
capital  cost  that  could  not  be  recouped  in  the  returns  to  the  oper- 
ating company  ? 

Mr.  MacLeod.  It  was  not  a  wise  policy  from  the  standpoint  of 
the  investors.  Of  course,  it  was  a  good  thing  so  far  as  the  public 
was  concerned.  But  the  management,  partly  because  they  may  have 
been  in  a  generous  mood,  but  partly,  I  believe,  because  they  made 
a  miscalculation  as  to  the  savings — the  operating  savings  that  would 
result  from  the  creation  of  these  subways — went  ahead  with  the 
program  too  fast.  Boston  and  the  suburban  district  of  Boston  has 
a  more  highly  developed  and  expensive  rapid-transit  development 
than  any  other  city  in  the  world  ih  proportion  to  its  size  and  pop- 
ulation. 

Commissioner  Meeker.  You  say  that  it  went  ahead  too  rapidly. 
Do  you  think  it  will  ever  catch  up  with  its  program?  One  remark 
you  made  led  me  to  think  that  you  conceived  this  as  a  permanently 
insolvent  institution,  because  of  the  enormous  expenses  of  construc- 
tion of  the  subways,  and  perhaps  some  other  things. 

Mr.  MacLeod.  I  personally  would  not  want  to  express  any  opin- 
ion that  the  Boston  Elevated  Co.  was  at  the  present  time  or  poten- 
tially in  a  bankrupt  condition. 

There  are  potentialities  of  traffic  in  that  district  that  ought  to 
make  the  Boston  Elevated  Co.  a  sound  financial  company,  if  there 
are  any  possibilities  of  return  or  profit  in  the  street-railway  enter- 
prise anywhere. 

I  believe,  to  follow  out  your  question,  that  it  should  be  possible 
to  a  certain  extent  to  catch  up.  The  rapid-transit  development  pro- 
gram as  it  has  been  laid  out  has  been  pretty  well  completed  up  to 
the  present  time.  There  is  some  further  subway  extension  which 
may  be  required  for  a  short  distance  out  in  the  Dorchester  district 
in  Boston,  but  broadly  speaking,  the  rapid-transit  development  has 
been  pretty  well  completed  to  meet  the  needs  for  the  next  10  or  a 
dozen  years,  I  should  think. 

Commissioner  Meeker.  You  catch  the  drift  of  my  (question?  If 
there  is  no  possibility  of  catching  up  with  the  construction  program, 
it  would  seem  to  me  a  policy  of  abandonment  should  be  at  once 
instituted. 


> 


in 


1456    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

It  may  be  the  duty  of  this  commission,  I  judge,  from  the  testimony 
I  have  heard,  to  recommend  that  investors  in  street-railway  securi- 
ties, at  least  in  Boston,  should  be  incarcerated  in  an  institution  for 
the  feeble-minded. 

Mr.  MacLeod.  I  do  not  know  that  the  investors  in  street-railway 
securities  in  other  cities  showed  any  alarming  amount  of  acumen. 

Mr.  Warren.  Thank  you,  Mr.  MacLeod. 

Mr.  MacLeod.  Judging  from  the  experience  of  traction  compa- 
nies in  other  States,  where  I  think  you  will  find  that  in  almost  every 
big  city  in  the  country  the  local  transit  history  has  been  one  of  suc- 
cessive receiverships  and  reorganizations,  while  certain  financiers 
may  have  profited  out  of  those  events,  the  ordinary  everyday  in- 
vestor was  not  getting  rich  on  those  occurrences. 

Commissioner  Meeker.  I  hope  you  will  not  think  I  was  singling 
Massachusetts  out.  It  was  merely  that  Massachusetts  was  before  us 
at  this  moment. 

Commissioner  Gadsden.  I  would  like  to  ask  you  a  question  on  that 
point,  Mr.  MacLeod.  We  have  had  a  very  considerable  amount  of 
testimony  before  the  commission  from  various  sources  suggesting  as 
one  of  the  prime  causes  of  the  breakdown  of  the  street  railways 
throughout  the  country,  the  watering  of  stock,  and  wrong  financial 
methods. 

As  I  understand  you,  the  situation  in  Massachusetts  is  certainly  as 
bad,  if  not  worse,  than  in  most  States,  so  far  as  street  railways  are 
concerned,  and  those  street  railways  have  been  consen^atively  and 
properly  financed.    Is  that  so  ? 

Mr.  MacLeod.  Those  two  statements  are  true;  but  I  think  it  is 
post  hoc  ergo  propter  hoc. 

Commissioner  Gadsden.  Would  not  that  seem  to  indicate  that  the 
charge  that  the  street-railway  industry  has  broken  down  largely  by 
high  finance  is  not  sound,  but  that  the  same  economic  causes  have  been 
at  work  all  over  the  United  States  ? 

Mr.  MacLeod.  Yes;  I  think  the  statement  might  be  made  even 
broader  than  that,  that  in  essence  the  conditions  in  the  street-railway 
field  are  simply  one  manifestation  of  general  economic  conditions 
that  are  upsetting  the  industrial  conditions  all  over  the  country ;  that 
is  to  say,  it  is  one  of  the  results  of  this  extraordinary  rise  in  the 
prices  of  wages  and  materials,  and  not  only  has  it  been  large  in 
amount,  but  it  has  been  successive  and  consecutive,  and  our  experience 
during  the  last  three  or  four  years  in  Massachusetts  has  been  that  the 
company  might  get  an  increase  in  fares,  and  get  a  little  advantage, 
or  it  might  show  a  little  advantage  in  traffic  without  an  increase  in 
fares,  and  the  street-railway  officials  would  come  around  to  our  office 
and  would  begin  to  perk  up  and  show  a  little  evidence  of  cheer,  and 
then  the  next  week  the  men  would  demand  a  large  increase  in  wages, 
and  their  last  state  would  be  worse  than  their  first. 

That  has  been  the  constant  history  of  the  situation  in  Massachu- 
setts during  the  past  thi^e  or  four  years,  that  any  little  advantage 
that  might  come,  not  only  from  an  increase  in  gross  revenue  but 
from  the  adoption  of  various  forms  of  economies  of  operation,  which 
have  really  concealed  to  a  certain  extent  the  actual  influence  of  the 
rise  in  prices — the  high  operating  costs  have  absorbed  the  total  ad- 
vance gained;  and  this  thing  seems  to  be  mounting  up  higher  than 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1457 

the  traffic  possibilities  of  the  street-railway  field  will  enable  them  to 
follow. 

If  this  program  of  increased  wage  costs — ^to  take  one  illustration — 
keeps  on  going  much  further,  you  are  going  to  get  to  a  point  whoie 
the  conditions  which  recently  arose  on  the  Berkshire  Street  Railway 
Co.  of  our  State  are  goin^  to  be  typical  of  other  companies. 

The  Borkshii^e  Street  Railway  Co.  is  one  of  our  large  systems  serv- 
ing the  western  part  of  the  State.  They  were  confronted  with  re- 
quests for  wage  increases,  which  were  granted,  and  the  company  saw 
no  means  in  sight  by  which  it  could  beg,  borrow,  or  steal  the  amount 
of  money  necessary  to  pay  the  wages  on  that  basis;  and  it  simply 
went  into  a  receivership,  and  put  the  cars  in  the  bam.  The  reserve 
financial  strength  in  the  companies  at  large  is  not  so  great  that  they 
can  withstand  the  successive  application  of  that  principle  without 
other  companies  getting  into  substantially  the  same  condition  unless, 
in  some  way,  public  credit  comes  to  their  rescue. 

Commissioner  Meeker.  I  take  it  that  in  Boston,  while  they  pur- 
sued a  conservative  financial  policy,  they  did  resort  somewhat  to  high 
engineering  construction,  that  was  almost  as  damaging  as  high 
finance  has  been  to  other  railway  systems. 

Mr.  Warren.  The  city  did  that. 

Commissioner  Meeker.  That  was  at  the  order  of  the  city? 

Mr.  Warren.  Yes ;  the  city  and  the  legislature.     The  legislature. 

Mr.  MacLeod.  The  city  has  built  the  subways. 

Mr.  Warren.  I  do  not  think  the  companv  petitioned  for  any  of 
those  subways,  did  it?     It  did  for  the  one  at  Cambridge,  I  think. 

Mr.  MacLeod.  The  last  subway  extension,  the  Scollay  Square  ex- 
tension, I  think,  the  company  did  offer  some  resistance  to,  which  was 
not  vei-y  pronounced ;  but  up  to  that  time,  whatever  views  the  com- 
pany may  have  maintained,  it  accepted  all  these  acts  with  apparent 
alacrity.  That  is  to  say,  these  subway  construction  acts  were  all 
made  subject  to  acceptance  by  the  company. 

Finally,  when  it  came  to  a  question  of  putting  in  a  new  subway 
station  the  company  finally  got  its  back  up  and  said  that  it  would 
not  accept  that  particular  act,  and  up  to  date  it  has  got  away  with 
it;  but  that  was  the  first  time  it  really  stood  up  and  refused  to  follow 
the  suggesting  of  the  legislature  by  accepting  acts  providing  for  this 
subway  construction. 

The  Chairman.  I  have  just  been  informed  that  Judge  Sanders, 
of  Cleveland,  must  leave  in  15  minutes.  I  will  ask  3^ou,  if  you  do  not 
mind,  to  give  way  to  him  briefly  for  that  reason. 

Mr.  MacLeod.  I  shall  be  very  glad  to  do  so. 

STATEMENT  OF  ME.  FIELDEB  SANDERS. 

The  Chairman.  We  have  had  the  Cleveland  plan  fully  developed 
by  Secretary  Baker,  by  Mr.  Wilcox,  and  by  Mr.  Culkins,  I  believe, 
of  Cincinnati,  and  I  think  the  commission  is  quite  fully  informed  as 
to  the  details  of  the  plan. 

Mr.  Sanders.  I  am  very  glad  of  that. 

The  Chairman.  What  we  would  like  to  have  from  you  is  your 
opinion  as  to  the  policy  of  that  sort  of  a  contract,  the  effect  that  it 
has  upon  the  efficiency  of  labor,  how  the  city  can  control  and  super- 

160643**— 20— VOL  2 30 


ft 


1458    PROCEEDINGS  OF  FEDERAL  ELIXTIUC  KAU.WAYS  COxMAIISSION. 

vise  the  expenditures  and  operation,  and  how  under  that  plan  the 
public  can  be  assured  of  getting  ^ood  service. 

^fr.  Sanders.  I  take  it  that  the  commission  wishes  to  get  from  me 
more  than  any  tiling  else  an  impression  and  opinion  as  to  the  advan- 
tages and  the  disadvantages  very  shortly  stated? 

The  Chairman.  Yes. 

Mr.  Sanders.  I  will  state  it  in  five  minutes,  if  I  am  able. 

The  plan  has  undoubtedly,  in  my  judgment,  been  a  success  from 
the  company  standpoint.  I  think  that  is  undisputed.  The  stock- 
holders are  amply  protected.  They  have  secured  then*  6  per  cent 
dividends  when  the  company  was  losing  money  in  1917  and  1918. 
The  franchise  is  practically,  so  far  as  the  constitution  of  Ohio  al- 
lows, a  flat  guaranty. 

The  property  has  been  built  up,  has  been  maintained,  and  has  been 
built  up  to  such  an  extent  in  the  last  nine  years  that  it  is,  in  the 
opinion  of  the  street-railway  jcommission,  the  finest  surface  line  in 
the  country,  to  such  an  extent  that  the  Tax  Commission  of  Ohio,  with- 
in the  last  two  montlxs.  has  made  a  return  upon  it  for  tax  valuation  at 
the  par  value  of  its  stocks  and  bonds,  levSs  debits  and  credits,  setting 
one  off  against  the  other,  assuming  thei*eby  that  the  physical  value 
(jf  the  company,  or  its  value  as  a  going  concern,  is  equal  to  its  stocks 
and  bonds,  less  its  credits,  is  something  like  $3^,000,000.  We  are  dis- 
puting that ;  but  that,  at  least,  is  the  opinion  of  the  Tax  Commission 
of  Ohio. 

It  has  been  an  entire  success  from  the  street-railway  standix)int. 
It  has  been,  I  will  be  frank  to  say,  very  largely  a  success  from  the 
public  standpoint. 

In  the  first  place,  building  up  this  very  fine  propei-ty  has  been 
a  good  thing  for  the  car  riders,  because  the  finer  the  property  the 
better  the  equipment,  the  better  the  cars,  the  faster  the  service,  and 
so  forth,  the  more  satisfied  the  people  are,  naturally. 

The  service  has  been  good.  It  has  been  criticized  in  spots  but, 
genei'ally  speaking,  the  Cleveland  service  is '  considered  to  be  very 
good. 

The  fare  has  been  uniformly  low.  Tliere  is  no  question  about 
tiiat. 

The  company  is  in  a  very  fine  financial  situation  so  far  as  the 
stockholders  are  concerned.  The  stock  is  selling  on  the  market  now 
at  102.    It  has  sold  as  high  as  114. 

The  operation  of  the  company  has  been  so  successful  in  the  last 
nine  months  that  on  the  8th  of  July  the  fare  was  reduced  8  per  cent 

or  more. 

The  Chairman.  To  what? 

Mr.  Sanders.  The  fare  went  down  from  a  straight  5-cent  fare  to 
11  tickets  for  a  half,  with  a  penu}^  charge  for  transfers. 

At  tlie  same  time,  the  wages  of  all  the  employees  of  the  company, 
tlie  office  force,  the  clerks,  the  trainmen,  the  trackmen,  the  shopmen, 
the  inspectors,  the  division  superintendents,  all  went  up  a  uniform 
25  per  cent,  which  is  rather  an  accomplishment  in  street  railroading 
in  this  day  and  generation. 

This  new  rate  of  fare  of  11  tickets  for  a  half  is  not  quite  holding 
its  own  now.  It  is  losing,  perh.'vps,  at  the  rate  of  $80,000  a  montli ; 
but  I  luive  been  in  hopes  that,  wlien  the  increased  summer  main- 
tenance expense  was  at  an  end  and  the  winter  season  comes  on, 


I'ROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION'.    1459 

this  rate  of  fare  of  11  tickets  for  a  half  will  carry  the  company 
through.  That  is  all  on  the  assumption  that  there  is  no  extra  labor 
tronble  or  cost,  and  so  forth. 

So  that  I  would  say  it  is  certainly  a  success  from  the  company 
standpoint,  and  very  largely  satisfactory  and  a  success  to  the  citi- 
zens of  Cleveland. 

Now,  you  may  ask  me  why  that  is.  In  my  judgment,  that  condi- 
tion is  due  to  first,  the  low  valuation,  with  which  you  are  familiar; 
everybody  admits  that.    It  is  due  to  the  franchise  exemptions 

The  Chairman.  It  is  low  in  the  sense  that  it  is  unreasonably  low  ? 

Mr.  Sanders.  Not  unreasonably  low;  but  it  was  a  low  valuation 
at  the  time  it  was  made  and,  of  course,  since  that  time  the  additions 
have  just  simply  gone  in  at  current  market  prices.  I  would  not  call 
it  unreasonably  low,  but  it  is  very  much  lower  than  other  street 
railways.  Then,  the  franchise  exemptions,  of  course,  tend  toward 
keeping  down  the  operating  expenses — that  is,  the  exemption  from 
mill  taxes,  bridge  taxes,  paving  taxes,  cleaning-the-streets  taxes, 
getting  out  of  the  way  of  public  improvements,  and  so  forth ;  pav- 
ing and  all  the  line  of  so-called  extraordinary  taxes  do  not  exist 
in  Cleveland  at  all.  In  Cleveland  the  car  rider  pays  only  the  cost 
of  transportation. 

It  is  due  to  the  development  of  the  very  latest  ideas  in  operation, 
such  as  the  skip-stop,  keeping  fast  schedules,  keeping  the  tracks 
clear,  and  so  forth;  proper  equipment,  I  might  say.  Of  coui-se, 
Cleveland  is  a  town  where  operating  conditions  are  easy,  also,  and 
that  has  helped,  because  it  is  a  level  town.  Our  average  ride  is  not 
as  long,  j>erhaps,  as  it  is  in  other  cities.  I  think  on  the  five  long- 
est lines  of  the  city,  the  average  ride  is  about  a  miles— that  is.  for 
the  payment  of  a  fare. 

But,  in  my  judgment,  I  think  the  success  of  the  plan  is  due  largely 
in  addition  to  all  these  things  which  have  all  helped,  it  is  due  not 
only  to  the  support  of  the  franchise  by  the  city  of  Cleveland,  the 
support  of  the  credit  of  the  company  by  the  citv  of  Cleveland,  the 
support  of  the  operating  of  the  company  by  the  city  of  Cleveland, 
such  as  keeping  the  tracks  clear  of  vehicles,  and  so  forth,  and  per- 
mitting economies  to  be  introduced  that  could  not  be  done  under 
any  purely  private  operation — it  is  not  only  due  to  that,  which,  of 
course,  is  a  very  powerful  factor,  but  it  is  due  to  the  confidence 
that  the  car  rider  in  Cleveland  has  in  the  operation  of  the  last 
eight  or  nine  years.  In  other  words,  the  settlement  made  in  1910 
and  1909  is  supported  by  popular  opinion.  We  have  no  crucial 
street-railway  question  in  Cleveland.  The  car  riders  there  rode 
for  a  good  many  years  at  3  cents.  When  the  fare  was  suddenly 
raised  to  5  cents  they  continued  to  ride.  A  great  many  of  the  people 
of  Cleveland,  I  think,  believe  that  this  company  is  municipally 
operated,  and  a  large  part  of  the  confidence  of  the  car  rider  in  the 

rate  of  fare  comes  from  that  fact,  because  he  thinlts  and  believes 

and  a  great  many  of  them  know,  and  many  of  them  think—that  the 
service  is  being  actually  maintained  at  cost.  I  think  that  the  real 
secret  of  the  success  of  the  plan  is  that  it  has  the  supix)rt  of  the 
people.  Everybody  turns  in  in  Cleveland  and  helps  to  oi^erate  this 
railroad.  There  is  not  any  knocking;  there  is  not  anv  criticism; 
there  is  not  any  holding  back  by  the  people.  They  ride*^on  the  cars 
and  pay  their  fai-es  cheerfully*^  because  they  thiiik,  as  I  say,  that 


! 


Ml 


14t)0    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

this  line  is  not  only  operated  at  cost,  but  a  large  number  of  them 
think  it  is  operated  by  the  city. 

Now,  that,  in  shoi-t,  is  the  way  I  size  up  the  advantages  of  this 
plan.  Now,  whether  that  would  obtain  in  other  towns  besides  Cleve- 
land, I  can  not  say.  This  is  a  local  company  in  Cleveland.  Four 
thousand  eight  hundred  of  its  stockholders  live  in  Cleveland.  The 
operation  of  the  line — that  is,  the  service — is  controlled  by  local 
authorities,  by  the  council  and  through  myself,  who  am  only  the 
technical  adviser  of  the  council.  In  other  words,  it  is  a  Cleveland 
outfit,  a  Cleveland  enterprise. 

Now,  whether  a  service-at-cost  plan  with  variations  of  that,  and 
without  the  preliminary  training  of  the  people  in  this  fundamental 
idea,  is  going  to  be  popular  enough  to  attract  the  car-riding  public 
to  the  extent  it  does  in  Cleveland  so  as  to  make  its  operation  pos- 
sible, I  can  not  say.  It  is  a  fundamental  for  me  to  tell  you  that  a 
railroad  can  not  operate  unless  people  ride  on  it.  You  have  heard 
that  in  the  last  two  or  three  weeks,  I  suppose,  30,000  times,  so  I 
will  not  take  up  time  to  tell  you  that.  The  people  in  Cleveland 
do  ride  on  the  railroads  and  pay  their  fares,  and  they  help  instead 
of  impeding  it. 

Now,  I  will  be  frank  with  you 

The  Chairman.  How  about  the  disadvantages? 

Mr.  Sanders.  The  disadvantages  are  two.  In  the  last  two  or 
three  years  there  have  been  two  glaring  things  happened  to  this 
franchise  which  are  disadvantages.  One  of  them  is  what  happens 
to  all  private  operation  and  ownership-:-namely,  a  reluctance  to 
extend  the  lines ;  in  other  words,  a  closeness  of  figuring  in  building 
new  extensions.  That  fact  obtains  under  the  Cleveland  grant  almost 
as  strongly  as  it  does  under  purely  private  ownership  and  operation 
without  any  private  control. 

The  Chairman.  Why  should  that  reluctance  exist  when  the  capi- 
tal is  guaranteed  in  its  return? 

Mr.  Sanders.  For  this  reason :  The  franchise  provides  that  the  city 
may  not  require  any  extensions  to  be  built  which  will  impair  their 
security,  which  will  impair  their  ability  to  earn  6  per  cent.  And  in 
the  last  two  years — not  quite  so  much  now  as  it  was  in  the  last  two 
Ye.vis5 — but  in  the  last  two  years  they  have  refused  to  build  extension 
after  extension  because  of  the  fact  that  they  were  not  quite  sure  of 
their  security. 

I  am  of  the  opinion  that  it  is  an  absolute  guaranty,  but  that  reluc- 
tance to  build  extensions  obtains  under  the  Tayler  grant  as  w^ell  as 
under  private  operation. 

But  the  second  fault  is  a  more  serious  one  than  that.  We  could 
get  past  that.  The  second  fault  is  the  labor  trouble,  which  is  as  in- 
herent in  this  as  in  a  private  franchise.  In  other  words,  this  com- 
pany controls  its  own  operation.  All  the  city  does  is  to  regulate. 
The  city  does  not  operate.  The  city  has  no  more  control  of  Mr. 
Stanley's  motormen  and  conductors  than  this  commission  has.  He 
hires  men  and  discharges  them.  He  pays  them  such  wages  as  he  sees 
fit.  In  case  of  labor  disputes  the  City  of  Cleveland  is  practically 
helpless.  The  City  of  Cleveland  and  the  car  riders — although  they 
are  the  people  who  lose  and  not  the  stockholders  of  the  company — 
are  the  innocent  bystanders. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1461 


The  Chairman.  Has  the  city  any  veto  over  the  wage  allowance  ? 

Mr.  Sanders.  The  city  has  a  veto  over  the  wage  allow^ance  to  this 
extent,  that  it  can  refuse  to  give  the  company  the  monev  to  pay 
wages  with,  and  then  in  that  case,  the  question  must  be  arbitrated; 
but  the  city  can  not  compel  the  company  to  pay  the  wages  that  the 
city  thinks  it  ought  to  pay.  In  other  w  ords,  the  company  fixes  its 
own  wages. 

Now,  we  have  had  two  strikes  in  Cleveland  in  the  last  seven 
months.  One  of  them  was  about  the  women  conductors,  which  was 
settled  in  two  or  three  days  after  two  or  three  all-night  sessions  of 
the  city  council,  etc.  Mr.  Stanley,  the  president  of  the  railroad 
company,  insisted  that  he  would  employ  women  conductors.  The 
authorities  down  here  in  Washington  made  two  or  three  conflicting 
decisions  on  it,  and  the  strike  resulted.  The  city  of  Cleveland  was 
finally  able  to  settle  that  strike  by  intervening  and  settling  it  as  a 
matter  of  agreement. 

Only  about  a  month  ago,  just  a  month  ago,  about  the  6th  of  July, 
the  blue-uniformed  men  on  the  Cleveland  railway  line  demanded  a 
very  large  increase  in  w^ages  and  threatened  to  strike.  The  railroad 
company  quite  properly  represented  to  the  city  authorities  that  they 
could  not  pay  any  such  increase  in  wages  without  an  increase  in  their 
what  we  call  allowances— that  is,  the  fund  out  of  which  they  pay  it. 
The  city  council  considered  that  matter  for  some  two  or  three  meet- 
ings and  finally  came  to  the  conclusion  that  they  would  allow  that. 
But  notwithstanding  that  fact,  after  the  city  council  had  allowed  the 
railroad  company  the  money  with  which  to  pay  these  wages,  the 
company  refused  to  pay  them  unless  certain  big  concessions  were 
given  by  the  city  of  Cleveland  in  other  matters  totally  unrelated  to 
this  labor  question  whatsoever.  The  result  was  that  the  men  struck 
and  were  out  two  days. 

The  Chairman.  Name  the  other  questions  that  grew  out  of  this. 
Name  those  matters  which  you  said  had  no  relation  to  the  wao-e  ques- 
tion. .  ^    ^ 

Mr.  Sanders.  Well,  one  of  them— they  wished  an  increase  in  their 
operating  allowance;  they  wished  an  increase  in  their  maintenance 
allowance;  they  wished  their  franchise,  although  the  same  had  only 
been  entered  into  60  days  before,  amended  so  as  to  strike  out  the 
maximum  and  minimum  in  it  for  the  whole  period  of  25  years. 
They  wanted  their  rate  of  interest  return  raised  from  6  per  cent 
to  7  per  cent  for  the  benefit  of  their  stockholders.  And  in  my  judg- 
ment—and I  would  say  it  if  Mr.  Stanley  were  here— the  last  was 
the  moving  consideration  in  the  action  of  the  railroad  company  in 
refusing  these  wages.  Because  the  railroad  company  had  openly 
said  on  the  floor  of  the  council  that  if  wages  were  to  be  increased 
25  per  cent,  from  47  cents  to  60  cents  an  hour,  the  stockholders' 
return  ought  to  be  increased,  although  the  stockholders'  return  is 
a  matter  of  contract  and  is  fixed  for  25  years.  And  that,  inasmuch 
as  the  company  had  made  a  profit  of  about  $1,200,000  in  the  last 
nine  months'  operation  under  this  5-cent  fare,  the  men  should  not 
have  it  all. 

Now,  wholly  irrespective  of  the  merits  of  this  thing,  those  two 
questions  had  no  relation,  because  the  company  was  amply  pro- 
tected by  the  allowances  of  the  council,  by  the  increased  operating 


1462    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

allowances  of  the  council,  in  paying  the  wages.  Now,  that  strike 
resulted;  and  it  resulted  f rwn  the  fact  that  we  have  no  more  con- 
trol over  the  operation  of  those  lines  in  Cleveland,  aside  from  keep- 
ing the  safety  valve  on  the  expenses,  than  I  have  over  the  action 
of  this  Federal  commission  in  its  judgment. 

Now,  that  is  the  fundamental  difficulty  of  this  franchise.  It  is 
a  difficulty  that  has  been  pointed  out  several  times.  The  party  who 
makes  the  rates  does  not  fix  the  wages.  The  wages  are  fixed  by 
the  private  conc^erns  and  strikes  are  just  as  liable  to  come — and  do 
come — to  the  tremendous  detriment  of  business  interests  in  Cleve- 
land, under  tliis  system  as  they  would  under  any  private  system 
whatsoever. 

The  Chairman.  Do  you  believe  the  city  ought  to  have  the  power 
to  regulate  wages  under  the  contract  ? 

Mr.  SAif&ERs.  I  believe  the  city  ought  to  have  tlie  power  to  regu- 
late wages  under  the  contract,  i)rovided  the  company  is  secured  in 
its  investment,  as  it  is. 

Commissioner  (taDvSden.  The  men  fix  wages,  do  they  not? 

Mr.  Sanders.  The  men? 

Commissioner  (tadsden.  Yes.  I  do  not  see  anv  difference  between 
your  system  and  any  other  system.  The  men  fix  the  wages  and  not 
the  company. 

Mr.  Sanders.  I  expect,  Mr.  Gadsden,  in  this  present  con<lition  the 
men  ^x  the  wages  all  over. 

Commissioner  (tadsden.  That  is  what  I  say. 

Mr.  Sanders.  But  we  would  have  had  this  advantage  if  the  city 
officials  in  office  had  been  fixing  wages — we  would  have  had  only 
one  party  to  deal  with  instead  of  two.  We  wmdd  have  given  them 
their  wages  or  not  and  taken  the  consequences,  whereas  as  it  was, 
we  coidd  not  compel  a  settlement  between  those  two  contending 
forces,  in  which  the  city  of  Cleveland  was  getting  the  worst  of  it. 
Now,  that  strike,  I  was  going  to  say,  cost  the  company  $80,000.  It 
did  not  cost  the  company  a  cent 

The  Chairman.  It  cost  the  car  riders? 

Mr.  Sanders.  It  cost  the  car  riders  $80,(X)0.  The  strike  last  De- 
cember cost  the  riders  $120,000.  The  officials  of  this  comi)any  draw 
their  salaries,  the  stockholders  draw  their  interest,  etc.,  wholly  irre- 
spective of  this  thing;  so  there  is  no  reason  why  that  company  could 
i\ot  keep  on  having  these  strikes  all  the  time,  so  far  as  I  can  see. 

Last  spring  in  the  amendments  of  the  franchise  we  suggested  in 
Cleveland  that  the  company  do  one  of  two  things — either  permit 
the  city  to  have  some  share  in  oi)erating,  some  kind  of  a  supervision 
and  control  of  operating  by  which  they  could  regvdate  this  incessant 
labor  trouble,  at  least  ^o  that  the  business  men  and  the  public  of 
Cleveland  would  not  be  harmed,  or  else  let  the  city  arbitrate  this 
labor  trouble,  otl'ering  to  guarantee  to  the  company  that  in  the  arbi- 
tration their  investment  should  not  be  hazardous  nor  should  their 
6  per  cent  dividend  be  liazardous.  But  the  company,  for  reasons 
sufficient  to  themselves,  refused  that  amendment.  It  is  an  entirely 
proper  amendment,  because  all  you  gentleinen  know  that  a  strike  on 
a  public  utility  is  a  calamity. 

The  Chairman.  Have  you  any  other  amendments  to  suggest  to  the 
Cleveland  plan  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1463 


Mr.  Sanders.  I  would  suggest  an  amendment  to  the  extensions.  I 
think  the  company  ought  to  be  forced  to  build  extensions  so  long  as 
they  get  tlieir  6  per  cent- 

The  Chairman.  Is  there  any  amendment  which  can  be  made  to 
such  a  contract  as  will  permit  efficiency  in  operation  ? 

Mr.  Sanders.  The  only  one  I  can  suggest  is  to  give  the  city  part  of 
the  share  in  the  operating  control,  and  then  the  city  has  every  in- 
centive, of  course,  to  efficiency,  because  they  are  subject  to  recall  at 
the  vote  of  the  people  and  it  is  to  their  interest  to  keep  costs  down 
and  service  up  every  minute. 

The  Chairman.  It  has  been  suggested  that  it  might  be  amended  by 
adding  in  the  contract  tliat  as  the  rate  of  fare  goes  down  the  rate  of 
return  goes  up.    What  do  you  think  about  that? 

Mr.  Sanders.  Six  months  ago  I  was  very  much  in  favor  of  that. 
Academically  that  is  a  very  good  thing,  but  practically  I  do  not  be- 
lieve it  will  work,    I  have  commenced  to  change  my  mind  on  that. 

The  Chairman.  Whv? 

Mr.  Sanders.  In  the  first  place,  the  street-railroad  sd:tlement,  a 
franchise,  must  be  founded  on  popular  approval.  The  fixed  rate  of 
I'etui-n  has  popular  approval.  The  people  like  it.  They  know  what 
they  are  getting.  If  there  is  a  sliding  scale  of  i*eturn,  they  do  not 
know  what  they  are  getting.  There  is  always  suspicion  tliat  the  op- 
erators of  the  railroad  are  getting  something  out  of  it  which  Avill 
detract  from  the  proper  operation.  That  is  a  political  i-eason ;  it  may 
be  good  or  bad,  but  as  a  public  officer  it  strikes  me  as  a  good  reason. 

In  the  second  place,  there  is  always  a  tendency  with  tlie  operators 
with  a  sliding  scale  to  skimp  the  property  and  not  render  to  the 
riders  what  they  are  entitled  to.  In  a  corporation  the  size  of  the 
Cleveland  Railway,  which  si:>ends  $2,500,000  to  $a^00,000  a  year  in 
maintenance,  1  per  cent  on  its  stock,  which  would  be  $300,000,  could 
be  lost  sight  of  in  that  maintenance.  It  would  be  an  easy  matter  to 
skimp  that  property  $300,000  a  year  and  get  that  extra  per  cent,  but 
in  the  long  run  the  car  riders  would  pay  for  it. 

In  the  third  place,  I  do  not  believe  a  dividend  to  the  stockholders, 
if  you  will  grant  that  you  need  the  incentive,  would  get  your  reac- 
tion. You  ought  to  give  a  dividend  to  the  operators.  They  are  the 
people  that  make  for  efficiency ;  it  is  not  the  stockholders.  Now,  if 
the  salaries  of  the  operators — if  tlie  president,  general  manager,  and 
the  head  of  the  maintenance  department  have  their  salaries  raised 
dependent  on  how  much  they  save  out  of  their  allowance,  I  can  see 
how  some  results  could  be  obtained. 

Tlie  Chairman.  If  the  results  of  efficiency  in  labor  go  only  to  the 
stockholders,  the  employees  miglit  be  a  little  bit  stubborn  ?  , 

Mr.  Sanders.  That  is  possible. 

The  Chairman.  Do  the  employees  feel  tliey  are  working  for^^he 
company  or  for  the  city? 

Mr.  Sanders.  Both.  They  play  one  against  the  other.  They  get 
what  they  can  out  of  the  company  and  then  come  down  to  the  city. 

The  Chairman.  Does  that  result  in  good,  efficient  labor  service? 

Mr.  Sanders.  Really,  I  think  we  do  very  well  in  Cle^'eland.  I 
think  our  men  are  as  efficient  as  they  are  anywhere  in  the  country, 
and  probably  more  so. 

The  Chairman.  What  is  their  scale  of  waces? 


1464    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Sanders.  Since  the  6th  of  July  it  has  been  60  cents  an  hour. 
Before  that  it  was  48  cents. 

There  is  one  other  thin^,  before  I  finish.  It  is  in  effect  in  Cin- 
cinnati and  it  is  in  effect  in  Montreal.  I  have  no  figures  on  Mon- 
treal at  all.  The  figures  I  have  for  Cincinnati  do  not  indicate  it  is 
any  benefit,  because  the  fare  has  gone  up  from  5  cents  to  7  cents  in 
nine  months.  I  would  not  say  that  is  any  evidence  that  this  is  a 
good  plan. 

Commissioner  Gadsden.  They  started  late. 
Mr.  Sanders.  Yes,  sir. 

Commissioner  Gadsden.  How  about  the  indeterminate  feature? 
Mr.  Sanders.  The  indeterminate  feature? 
Commissioner  Gadsden.  Yes;  instead  of  a  fixed  term. 
Mr.  Sanders.  Theoretically  and  academically  it  ought  to  be  per- 
manent; practically,  I  think  it  is  terminable  with  a  renewal  clause 
such  as  we  have  in  our  franchise.    I  say  that  from  the  standpoint 
of  public  opinion. 

Mr.  Warren.  Yours  is  practically  indeterminate  the  way  it  oper- 
ates; is  it  not? 

Mr.  Sanders.  Yes;  the  way  it  operates  it  is,  to  all  intents  and 
purposes,  a  perpetual  franchise,  because  it  is  so  drawn  up  as  to 
make  it  desirable  for  the  city  to  renew  it  in  10-year  periods. 

The   Chairman.  You  have  said  it  works  there  because  poj)ular 
sentiment  supports  it  and  they  understand  it? 
Mr.  Sanders.  Yes. 

The  Chairman.  You  have  not  time  to  answer  my  question  now, 
but  at  your  convenience  will  you  send  a  letter  to  this  commission 
answering  the  question  I  am  going  to  propound?  How  will  the 
Cleveland  plan  operate  in  cities  like  New  York,  Philadelphia,  Wash- 
ington, Boston,  Baltimore,  and  other  substantially  large  cities  where 
the  public  do  not  "thoroughly  understand  the  advantages  or  dis- 
advantages of  that  plan? 
Mr.  Sanders.  Well.  I  will  try  to  do  that,  Commissioner. 
The  Chairman.  I  want  your  best  judgment. 
'  Mr.  Sanders.  That  is  a  large  contract,  but  I  will  do  the  best  I  can. 
Before  I  leave,  I  want  to  make  this  clear  at  this  point:  There  is 
considerable  talk  of  municipal  ownership  in  Cleveland — a  great 
deal  of  talk  of  municipal  ownership  in  Cleveland.  Notwithstanding 
the  fact  that  this  plan  has  worked  fairly  well,  there  is  a  great  deal 
of  talk  of  municipal  ownership  in  Cleveland;  but  it  is  not  because 
of  antagonism  to  the  company — they  are  satisfied  with  the  com- 
pany— but  because  the  people  there  think  it  is  a  step  forward;  they 
think  some  of  the  defects  of  this  plan  can  be  cured  by  municipal 
ownership  and  operation,  whether  it  is  municipal  ownership  or  only 
mi^icipal  operation.  I  have  been  quoted  myself,  many  times,  and 
I  am  still  of  the  opinion  that  municipal  operation  would  cure  this 
labor-trouble  defect  I  have  mentioned,  and  also  make  the  exten- 
sions possible.  I  am  a  firm  believer  that  the  people  ought  to  get 
exactly  what  they  want  and  are  willing  to  pay  for. 

The  Chairman.  Do  you  believe,  aS  a  matter  of  fact,  that  munici- 
pal operation  in  Cleveland  would  give  you  better  results  and 
cheaper  service  than  you  are  getting  now  ? 

Mr.  Sanders.  I  would  not  say  it  w^ould  be  cheaper  service.  The 
people  of  Cleveland  might  be  willing  to  pay  more  for  service  if 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1465 

the  service  were  extended  out  into  the  country.  They  might  cheer- 
fully pay  a  higher  rate  of  fare;  I  do  not  know.  I  do  not  say  it 
would  be.  I  do  not  think  it  would  be  any  more  expensive,  but  I 
would  not  undertake  to  say  that  a  lot  of  money  would  be  saved, 
because  municipal  bonds  are  pretty  nearly  on  a  6  per  cent  basis 
now. 

Commissioner  Meeker.  You  have  excellent  service  to  your  parks, 
and  any  place  that  I  ever  wanted  to  go  in  Cleveland  I  never  had 
any  difficulty  in  reaching  it. 

Mr.  Sanders.  I  am  glad  to  hear  that.  The  city  controls  the 
service  and  prescribes  the  service,  and  I  am  glad  to  hear  that  you 
think  the  service  is  good.  We  do;  but  it  has  been  very  severely 
criticized  by  some  street-railway  operators.  I  will  try  to  answer 
that  question. 

The  Chairman.  I  hope  you  w  ill.  It  is  too  bad  you  can  not  stay 
longer. 

(Witness  excused.) 

The  Chairman.  Mr.  MacLeod,  had  you  finished  your  statement? 

Mr.  MacLeod.  I  am  all  through,  unless  there  are  some  other 
questions  you  want  to  ask. 

The  Chairman.  We  thank  you  very  much,  indeed,  Mr.  MacLeod. 
Your  next  witness,  Mr.  Ogburn  ? 

Mr.  Ogburn.  State  Senator  Walsh,  of  Massachusetts,  is  here, 
and  he  desires  to  supplement  Commissioner  MacLeod's  testimony 
very  briefly. 

The  Chairman.  We  will  be  very  glad  to  hear  from  the  senator. 

STATEMENT  OF  MR.  JOHN  J.  WALSH. 

Mr.  Walsh.  I  am  a  member  of  the  State  Senate  of  Massachu- 
setts and  a  member  of  the  special  commission  created  by  the  legis- 
lature of  1919  on  street-railway  problems. 

Mr.  Chairman  and  commissioners,  I  realize  w^ith  some  sense  of 
gratification  that  much  of  what  I  would  say  would  be  practically 
a  repetition.  I  am  practically  an  indorser  of  Commissioner  Mac- 
Leod's statements,  which  are  irrefutable;  and  I  merely  want  to 
call  attention  to  the  value  of  a  report  issued  by  his  commission  and 
transmitted  to  the  legislature  in  February,  1919.  I  think  he  has 
made  mention  of  it,  but  it  is  too  valuable  to  be  regarded  in  a  casual 
sense,  because  it  contains  statements  of  facts  which  can  not  be 
disregarded. 

Commissioner  Meeker.  Did  he  file  that  report  ? 

Mr.  Wai^h.  I  believe  he  has. 

Mr.  MacLeod.  That  is  included  with  the  exhibits  I  left  with  the 
commission. 

Mr.  Walsh.  I  should  also  like  to  make  mention  of  a  valuable  docu- 
ment containing  the  opinion  of  the  supreme  court,  contained  in  the 
Journal  of  the  Senate  for  April  2,  1919,  and  given  by  the  supreme 
court  in  answer  to  the  communication  of  the  senate  as  to  the  con- 
stitutionality of  the  bill  filed  by  me  which  focused  attention  origi- 
ivally  on  the  5-cent  fare  with  a  subsidy  to  be  granted  by  the  Com- 
monwealth and  reimbursed  to  the  Commonwealth  by  the  several  cities 
and  towns  in  which  the  Boston  Elevated  operated. 


P 


! 


^ 


t 


1466    PROCEEDINGS  OP  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


0 


That  bill  was  origiaally  presented  in  the  course  of  business  before 
the  railway  commission  and  an  adverse  import,  with  reference  to  the 
next  general  court,  which  is  a  complimentary  disposition,  very  largely 
c(mip]imentary  to  the  proponent  of  the  bill,  to  let  him  down  easy 
rather  than  give  him  the  leave  to  withdraw.  Afterwai'ds  there  was 
a  chance  in  the  legislature  to  attach  a  rider  providing  for  a  basic 
5-cent  fare  in  an  attempt  to  rehabilitate  the  State,  and  that  was  on 
my  motion  and  was  successful;  and  the  success  of  that  marked  the 
changed  public  sentiment  and  the  changed  legislative  sentiment  in 
refei*ence  to  a  very  rapidly  developing  and  stressful  situation,  includ- 
ing successive  raises  of  fai*e  and  growing  discontent  on  the  part  of 
tlie  public. 

There  was  not  only  a  popular  clamorous  demand,  but  there  was 
a  demand  which  w  as  shared  by  the  leading  merchants  of  the  city  of 
Boston.  I  have  here  evidences  of  tliat  in  the  form  of  newsi>aper 
accounts  and  interviews  with  people  in  such  fashion  as  that  [indicat- 
ing] :  ••  Bostoii  merchants  favor  5-cent  fare,"  including  accounts  of 
the  several  opinions  of  leading  men. 

The  basis  of  their  support  came  from  bitter  experience.  With  each 
successive  rise  in  the  price  they  at  once  noticed  a  diminution  of 
receipts,  plainly  due  to  the  absence  of  that  force  which  creates  that 
term  which  socialists  are  so  fond  of  dwelling  upon,  the  unearned 
increment — in  otlier  woixls,  the  cix)wd — the  crowd  was  absent,  and 
it  was  absent  because  it  had  not  been  transported  to  the  scenes  of 
action,  meaning  to  the  tradesmen. 

Now,  with  that  preliminary,  I  should  like  to  say  that  I  am  trying 
to  lay  emphasis  on  the  value  of  these  two  reports — this  one  of  the 
public-service  commission,  a  trusted  institution,  one  of  the  trusted 
institutions  of  Massachusetts,  and  the  decisive  utterance  of  the  su- 
preme court,  establishing  beyond  peradventure  the  conviction  of 
the  supreme  couii  that  transportation  is  an  indispensable  jDublic 
utility,  and  as  such  may  be  dealt  with  as  other  indispensable  public 
utilities  are  dealt  with — namely,  by  throwing  some  of  the  cost,  if 
not  all  of  the  cost,  upon  the  entire  political  party  concerned.  The 
citiitions  are  numerous  and  widespread,  and  in  that  regard  I  think 
it  may  be  safely  a  guide  as  to  the  legal  side  of  the  question  which 
determines  us.     It  determines  all  of  them. 

The  Chairman.  I  do  not  think  there  is  any  question  about  that; 
that  is  purely  legislative. 

Mr.  Walsh.  So  far,  as  long  as  there  is  an  interpretation  not 
strained,  there  is. 

The  Chairman.  You  will  leave  it  with  us? 

Mr.  Wal.h.  I  had  intended  to  send  to  you  copies  which  are  not 
marked.  For  my  own  purpose  I  had  emphasized  certain  things  in 
this,  especially  the  stress  laid  by  the  supreme  court  on  the  social  fea- 
tures of  this  question,  on  which  I  wish  to  dwell. 

Putting  the  argument  in  brief  and  distinct  form,  I  would  say,  in 
behalf  or  the  idea  of  State  contribution  to  the  cost  after  tlie  public 
has  contributed  all  that  it  will  without  any  reluctance — in  other 
words,  all  that  it  will  pay  without  noticing  tliat  it  is  doing  anything, 
that  extra  amount  to  be  reimbursed  to  the  State  by  tlie  several  cities 
and  towns  served,  I  should  like  to  seek  to  establish  these  propositions : 

First  as  to  the  economy  of  tlie  proposal.  It  capitalizes  the  good 
will  inherent  in  a  5-cent  fare  by  a  large  increase  m  riding  witliout 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1467 


proportional  increase  in  cost  of  equipment,  personnel,  or  overhead 
expense.  That  is  significant  in  many  ways,  in  spite  of  the  fact  that 
we  have,  as  every  city  has,  peak  loads — tney  are  the  rare  things,  tak- 
ing the  whole  day — there  is  still  ample  opportunity  for  an  increase  in 
traffic  and  hours  which  are  not  peaK-load  hours.  That  may  be  dona 
by  having  an  attractive  fare ;  a  fare  that  makes  it  not  only  advisable 
in  a  business  way  to  travel  but  more  or  less  pleasant  as  a  diversion  to 
travel. 

It  makes  for  easier  collection,  smaller  number  of  collectors,  and 
generally  lower  cost  of  administration.  The  establishment  of  the 
fare  involving  the  use  of  pennies  called  upon  the  Elevated  to  set 
many  persons  to  work  at  a  considerable  wage.  That  is  an  administra- 
tive charge  of  some  moment. 

It  minimizes  the  temptation  to  practice  fraud  upon  the  road.  Many 
feel  justified  in  evading  the  10-cent  fare  now.  It  is  marvelous  what  a 
relation  there  is  between  what  the  public  conceives  to  be  a  fair  charge 
and  the  disposition  to  be  criminal  in  respect  to  a  charge  which  the 
public  does  not  consider  to  be  fair.  It  is  extraordinary  how  flexible 
ethics  are  when  applied  to  railway  situations. 

It  will  noticeably  increase  the  number  of  short-haul  riders,  a  very 
large  number  of  whom  w^ould  be  patrons  in  nonrush  hours.  The 
pleasure  riders  will  be  far  more  numerous  at  5  cents,  and  pleasure 
riders  make  velvet  income.  In  a  sense,  that  means  that  the  pleasure 
riders,  since  they  take  no  more  equipment,  no  more  operating  ex- 
penses, ride  in  the  same  cars  except  that  they  fill  them  to  nearer  ca- 
pacity, will  be  a  source  of  ahnost  velvet  income.  I  use  the  term — I 
think  it  may  be  understood  in  Washington  as  it  is  in  Boston;  the 
word  "  velvet "  has  a  fairly  colloquial  meaning. 

The  Chairman.  I  think  it  is  well  understood  in  Minnesota,  also. 

Mr.  Walsh.  It  holds  up  the  values  of  suburban  properties  and  also 
adds  to  the  value  of  downtown  realty  b}'  keeping  up  the  normal  rate 
of  increase  in  every  metropolis.  Mercantile  houses,  or  retail-in-town 
establishments,  all  theaters  and  places  of  amusement  and  gathering 
places  of  p  ople,  markets — in  fact,  every  business  propert}'  so  used 
will  benefit.  It  is  the  bulwark  of  wliat  is  called  by  economists  the 
miearned  increment. 

It  makes  the  hated  zone  system  unnecessary.  In  Boston  we  have 
a  peculiar  objection  to  the  zone  system.  While  there  is  reason  for 
establishing  it  in  direct  lines  of  travel  between  separated  towns, 
there  is  no  justification  in  view  of  what  has  happened  in  Boston, 
namely,  that  all  our  rapid-transit  legislation  has  been  based  and 
pivoted  upon  the  desire  of  the  administration,  municipal  and  State, 
to  scatter  population,  develop  suburban  property  and  eliminate  that 
Boston  sore — I  imagine  it  is  not  by  any  means  unique  so  far  as 
Boston  is  concerned — the  congested  area.  And  all  our  legislation — 
and  it  has  been  expensive  legislation  in  Boston — and  our  iai)id-tran- 
sit  construction  has  been  theoretically  upon  the  idea  that  by  con- 
tributions of  the  entire  city  without  stint  we  should  distribute  our 
population  and  avoid  the  necessary  political,  social,  and  economic 
disadvantages  of  having  congested  areas.  We  have  too  many  such 
in  Boston  now. 

I  may  cite,  by  way  of  sanction  for  what  I  say  in  that  regard,  that 
I  am  a  member  of  the  Boston  City  Planning  Board  since  its  or- 


i 


i^ 


1468    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

ganization,  which  has  to  do  largely  with  questions  of  housing  and 
congestion  and  the  disposition  of  the  city  as  a  place  of  abode. 

The  zone  system  would  take  away  values  from  the  remote  sec- 
tions and  for  the  time  being  transfer  them  to  the  older  and  more 
congested  areas  without  giving  substantial  and  permanent  values, 
for  the  reasons  that  as  soon  as  these  values  began  to  appear  in  the 
downtown  section  they  would  immediately  be  transferred  to  the  new 
residents  who  come  to  take  advantage  of  the  low  fare,  and  therefore 
the  advantage  which  is  apparent  at  first  will  be  nullified  by  the 
natural  greed  of  the  landlord  who  possesses  himself  of  the  advan- 
tage of  the  law  of  supply  and  demand.  Of  course,  that  needs  no 
elaboration,  now  when  the  housing  question  is  so  imperative  and 
demanding  our  attention. 

As  to  the  fairness  of  the  proposal :  It  distributes  the  burden  of  an 
indispensable  public  utility  which  affects  everyone  in  the  com- 
munity, in  an  equitable  manner.    I  think  that  needs  no  elaboration. 

I  have  here  a  special  item,  that  it  safeguards  stockholders  as 
does  the  act  of  1918.  Of  course,  this  refers  to  my  own  bill.  Un- 
happily I  was  forced  to  recognize  what  I  regard  as  one  of  the  most 
daring  and  outrageous  pieces  of  legislative  acts  in  all  the  domain 
of  railroad  procedure.  In  1918  the  situation  briefly  was  just  this: 
The  Elevated  was  bankrupt.  It  sought  just  before  there  began  to 
be  legislative  activity  seeking  or  addressing  itself  to  relief — it  was 
quoted  at  27.  When  that  legislative  act  under  which  the  Elevated 
is  now  operated  became  law  that  stock  rose  to  80.  There  were 
many  beneficiaries;  some  of  them  are  officials,  some  were  the  com- 
mon and  keen  public,  some  were  the  stock- jobbing  speculating  houses 
which  had  already  to  a  large  degree  manhandled  all  the  railway 
situation  in  Massachusetts. 

The  contract  was  indefensible  from  any  point  of  view  except  one, 
and  that  one  was  that  in  the  absence  of  some  alleviative  measure  the 
public  would  have  been  forced  to  accept  a  receivership  for  the  Ele- 
vated with  the  necessary  corollary  that  the  receiver  would  have  to 
act  under  the  dominion  of  the  court  and  have  to  collect  a  fare  from 
the  public  adequate  to  pay  the  cost  of  maintenance.  That,  of  course, 
gave  an  excuse  for  avoiding  it.  And  the  keen  stockholders,  repre- 
sented by  counsel — some  of  the  most  eminent  in  the  city — made  a 
proposal  to  the  legislature  which,  in  effect,  was  converted  into  a 
legislative  propositive  proposition. 

In  substance  it  was  this :  The  legislature  said  to  the  stockholders, 
"  You  go  out  and  raise  $3,000,000,  and  for  the  $3,000,000  we  will  give 
you  a  preference  at  7  per  cent,  preferred  as  to  all  other  liabilities 
except  the  underlying  liabilities  of  the  contract  between  the  Elevated 
and  the  former  West  End  Street  Railway  Co.,  which  is  the  basis 
of  the  Elevated  system,  the  larger  part  of  it."  That  West  End  stock 
was  then  paying  8  per  cent  and  7  per  cent,  preferred  and  common. 

Not  merely  was  there  a  guaranty  of  a  dividend  on  the  amount 
paid  in,  or  rather  the  par  value  of  all  that  was  paid  into  the  Boston 
Elevated,  about  $102,000,000— -a  dividend  which  provided  for  the 
payment  of  5  per  cent  for  the  first  two  years,  5^  per  cent  for  the  next 
two  years  and  6  per  cent  thereafter— but  there  was  this  amazing 
feature  which  rendered  it  most  offensive  to  the  public,  that,  after 
the  period  of  public  operation  had  been  concluded,  if  it  ever  should 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1463 

be,  the  stockholders  would  take  back  the  road  free  of  the  dominion 
of  the  public-service  commission  with  respect  to  rates  and  could  fix 
a  rate  by  itself  which  w^as  calculated  to  produce  a  6  per  cent  revenue. 
As  a  financial  engineering  proposition  that  naturally  Engaged  the 
attention  of  the  people. 

The  Chairman.  Does  that  carry  with  it  the  requirement  on  the 
part  of  the  commission  to  see  thereafter  that  the  rate  brings  in  6 
per  cent? 

Mr.  Walsh.  No;  absolutely  free  of  any  control  of  any  arm  or 
agent  of  the  State.  It  was  entirely  a  private  enterprise  which  was 
permitted  to — I  wish  to  be  semijudicial;  I  do  not  wish  to  say  loot  the 
public,  but  charge  the  public  a  pretty  heavy  rate  on  a  defunct  enter- 
prise. 

Mr.  Warren.  You  do  not  mean  the  public-service  commission 
would  have  no  control  after  the  road  was  returned;  do  j'^ou? 

Mr.  Walsh.  After  it  was  returned,  absolutely  no  control.  Chap- 
ter 159  of  the  Acts  of  1918,  which  permitted  the  public-service  com- 
mission to  have  jurisdiction  of  the  rates.  Rates  were  to  be  fixed  so 
that  they  would  net  6  per  cent.  Of  course  that  was  the  limit.  I 
ought  to  qualify  it  by  saying  that  the  jurisdiction  of  the  public-serv- 
ice commission  began  when  the  rate  was  6  per  cent  but  not  before. 
Now,  that  was  a  provision 

The  Chairman.  Well,  Senator,  that  is  an  exercise  of  a  sort  of 
power  from  the  State.  Can  not  the  State  at  some  future  time  change 
that  provision  as  to  the  rate? 

Mr.  Walsh.  Unhappily  this  was  held  to  be  an  inviolable  contract 
on  the  authority  of  the  famous  Dartmouth  College  case;  and  the 
supreme  court  on  my  own  bill  has  so  found  it  and  had,  before  that 
time,  intimated  it  and  has,  since  that  time,  so  pronounced  it;  so  it 
has  the  triple  sanction  of  having  been  pronounced  a  valid  contract 
and  indefeasible — a  question  which  has  a  distinct  relation  to  the 
question  of  public  ownership  which  I  shall  refer  to — if  we  exercise 
the  right  of  eminent  domain  or  take  it  with  those  contractural  rights 
added,  which  add  an  amazing  amount  to  the  element  of  damage — 
which  will  necessarily  be  taken  into  account. 

All  the  people  have  paid  for  the  development  of  rapid-transit 
legislation  upon  the  theory  that  all  the  people  were  interested  in 
it.  They  were  invited  to  rely  upon  this  scheme  of  development  in 
buying  surburban  lands  and  building  thereon.  Their  way  of  life 
was  pivoted  upon  low  transit  fares. 

Now,  I  come  to  what  I  regard  as  the  real  fundamental  philosophy 
of  all  this  investigation  and  all  this  railway  inquiry,  and  that  ip 
the  social  value. 

It  helps  to  reduce  congestion.  Everybody  deplores  and  seeks  to 
prevent  overcrowding  of  humans.  We  try  even  to  prevent  over- 
crowding of  animals  in  freight  cars  on  humane  grounds.  Conges- 
tion lowers  public  morals,  makes  pessimists;  from  pessimists  come 
those  who  are  easily  poisoned  by  bolshevism.  Congestion  lowers 
human  values  in  industry  and  commerce  by  taking  the  spring  out 
of  men  and  women  and  shutting  them  out  from  the  amenities  of 
life. 

The  present  scheme  is  an  undue  burden  on  the  poor.  At  a  10-cent 
fare,  which  is  now  in  force,  a  person  obliged  to  use  the  Elevated 


1470    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

twice  daily  on  the  average  pays  an  excess  of  $36.50  a  year;  a  house- 
hold of  two  riders  pays  an  excess  of  $73;  a  household  of  three 
riders  pays  an  excess  of  $101).50;  a  household  of  four  riders  pays 
an  excess  of  $146;  and  so  on  in  pi-opoi-tion  to  the  numl)er  of  riders 
from  any  one  household.  Even  if  rents  were  raised  to  meet  a 
subsidy  tax,  they  never  could  be  niised  so  as  to  absorb  the  gain  fi-oni 
a  5-cent  fare. 

Taking  it  on  the  basis  of  a  $3  increase  in  the  tax  rate,  in  order  to 
produce  the  extra  cost  to  one  individual  represented  in  increased 
i*ental  he  would  have  to  add  to  the  value  of  his  property  $12,000. 
Obviously  no  such  value  would  l>e  added  because  of  the  wide  dis- 
tribution of  the  extra  cost,  the  amount  always  being  much  less  than 
is  represented  in  the  difference  between  5  and  10  cents. 

On  the  Ijasis  of  the  $3  increase  in  the  tax  rate,  these  figures  would 
mean  $36.50,  an  increase  of  $12,000 :  $73  would  mean  an  increase  of 
8;24,000  plus;  $100.50  would  mean  an  increase  of  $36,000  plus;  and 
$146  would  mean  an  increase  of  $48,000  plus. 

If  the  loss  of  patronage  through  high  fares  equals  50,000,000 
nickels  a  year,  that  amount  is  taken  from  the  pockets  of  those  who 
must  ride.  In  other  words,  the  car  riders  who  must  ride  are  paying 
for  those  who  do  not  ride,  because  of  high  fares.  Taking  a  normal 
increase  of  25,000,000  riders  as  one  extreme  and  a  decrease  of  a  like 
number  under  abnormally  high  fares,  we  see  where  we  lose  $2,500,- 
000.  Under  a  5-cent  fare  the  amoTint  of  deficit  to  be  made  up  is 
that  much  less  than  the  difference  between  the  total  of  5-cent  fares 
and  the  total  of  a  higher  fare.  Why  throw  away  that  amount  of 
money?  As  a  matter  of  fact,  my  estimate  of  $2,500,000  in  the  case 
of  the  Boston  Elevated  is  very  moderate,  because  I  have  this  after- 
noon computed  from  the  figures  in  my  possession  from  the  Elevated 
that  the  difference  in  the  loss  is  realljj  near  5,000,000,  because  the 
loss  of  patronage  exceeds  8.000,000  a  month  that  we  lose,  using  the 
extreme,  that  is  highest  under  5  cents  and  lowest  under  10.  I  have 
no  doubt  that  the  president  of  the  Elevated  will  furnish  you  with 
a  very  orderly  set  of  figures  on  that  basis. 

Under  the  political  value  of  the  proposal — and  I  am  using  that 
word  "  political  value  "  in  its  broadest  sense — the  5-Gent  fare  will  make 
friends  for  the  Elevated  Railroad  and  for  the  principle  of  public 
control.  It  will  silence  the  kicker  and  appease  him.  It  will  please 
the  great  majority  who  are  the  car  riders  and  restore  their  confi- 
(]ence  in  public  operation.  It  is  the  business  of  legislators  and  per- 
sons charged  with  administration  to  please  the  public  unless  the 
demands  of  the  public  are  unreasonable.  Now,  suppose  the  public 
has  distinct  social  and  political  interest,  it  prevents  the  sowing  of 
the  winds ;  and  we  have  been  sowing  the  winds  because  we  have  been 
neglecting  the  pleasure  of  the  people.  We  need  to  refer  back  at 
times  to  our  teaching  concerning  the  duty  of  the  prince  and  the 
people,  taught  in  days  that  perhaps  may  seem  medieval  to  us,  but 
nevertheless  containing  the  genesis  of  sound  political  philosophy. 
We  have  not  made  an  effort  to  please  the  ]3eople  where  that  pleasure 
did  not  cost  the  sacrifice  of  principle  or  the  transfer  of  values  from 
one  set  of  people  to  the  other.  And  I  trust  it  may  not  be  amiss  to 
ask  that  at  least  the  subject  be  referred  to  in  your  report — ^the  idea 
that  the  people  should  be  recognized  in  their  demand. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1471 

It  will  make  the  work  of  employees  easiei'  and  the  troubles  of 
the  trustees  lighter.  I  am  one  of  those  who  believe  that  public  ad- 
ministratives  should  have  their  work  surroundetl  by  the  be>:t  condi- 
tions. It  is  hard  enough  for  honest  men  to  serve  the  public  under 
the  best  conditions.  It  is  a  sacrifice  at  best.  Their  work  ought  to 
be  lightened  in  their  own  interest  and  in  the  interest  of  the  public. 
A  public  administrator  is  more  likely  to  give  a  contribution  to  the 
public  good  when  he  is  in  a  happy  frame  of  mind  than  a  man  w^ho 
is  displeased  and  grouchy,  who  is  pursued  by  an  eager  and  irre- 
sponsible and  unreasonable  public,  generally  unjustly.  As  Cardinal 
Newman  once  said,  we  certainly  would  not  expect  good  service  from 
a  servant  whom  we  are  constantly  abusing.  We  are  more  likely  to 
receive  it  from  a  servant  whom  once  in  a  while  we  pat  on  the  back. 

So  I  have  not  found  it  amiss  to  include  in  the  justice  of  a  5-cent, 
or  any  fare  that  is  proper,  the  pleasure  and  comfort  of  those  who 
must  administer  it.  I  dare  say  the  people  will  be  more  tolerant  of 
annoyance  through  poor  and  inadequte  service.  I  think  it  is  only 
a  truism  to  say  we  are  a  very  docile  public.  Nobody  needs  any 
further  proof  of  the  docility  of  the  American  people  after  the 
service  draft.  That  is  a  most  splendid  example  in  the  history  of 
docility  of  a  great  and  free  people.  Now,  they  will  tolerate  any- 
thing if  they  see  an  attempt  made  to  please  them,  and  they  will 
tolerate  many  annoyances  Avhich  now  they  rebel  at,  because  they 
think  they  are  trying  to  be  served. 

Commissioner  Meekek.  Do  you  think  the  public  sliould  be  made 
to  tolerate  the  abuses^ 

Mr.  Walsh.  No;  I  think  they  themselves  will  set  a  happy  stand- 
ard. 

Commissioner  Meeker.  I  phrased  my  question  unfortunately.  I 
think  you  catch  my  meaning.  Is  there  not  danger  tliat  they  may 
become  too  tolerant  of  public  servants? 

Mr.  Walsh.  I  do  not  know  that  I  am  competent  to  answer  the 
question  academically.  I  have  never  found  that  the  public  was  re- 
miss in  kicking.  They  will  do  enough  kicking.  I  think,  on  the 
average,  they  can  be  trusted  to  that  extent.  They  will  be  more 
tolerant  of  annoyances.  I  ought  to  extend  that.  I  ought  to  say 
now  they  are  looking  for  a  chance  to  protest.  If  a  car  stops  by  rea- 
son of  some  unavoidable  mishap,  they  are  disposed  to  protest  against 
it  and  condemn  the  whole  enterprise. 

A  pleased  public  is  a  distinct  asset  in  every  conmiunity,  and  this 
pleasure  is  reflected  uix)n  every  member  of  the  community.  On  the 
other  hand  a  dissatisfied  public  is  a  serious  menace  to  progressive 
legislation,  for  every  measure  will  ]ye  viewed  with  suspicion.  A 
light  public  spirit  is  as  pleasing  as  a  light  spirit  in  an  individual. 

I^t  us  take  a  little  example.  When  the  father  of  a  family — ^now 
I  am  thinking  perhaps  of  Boston  particularly,  because  we  have  al- 
luring reason  for  going  to  the  summer  resorts;  we  are  fortunate  in 
our  social  opportunities  for  pleiisure  in  that  regard — when  tlie 
father  of  a  family,  perhaps  a  workingman,  talces  his  wife  and  chil- 
dren for  a  trolley  ride  in  these  hot  days  or  nights  he  will  feel  him- 
self a  better  citizen  if  the  trip  cost  him  5  cents  for  each  than  if  the 
c<X5t  is  10  cents.  But  we  wlio  are  prosperous  and  fortunate  in  life's 
possessions   are  sometimes  unfortunately  blind  to  what  a   10-cent 


t^ 


¥ 


{ 


V 


1472    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

fare  means  of  the  income  of  the  thousands  who  are  receiving  a  niini- 
niiim  wage.  There  are  still  a  large  class  of  employers  who  believe 
in  the  minimum  wage  because  they  pay  it ;  like  the  man  in  Pennsyl- 
vania who,  asked  if  he  believed  in  it,  said,  "Certainly  I  do;  I  pay 
it."  And  we  must  remember  those  are  made  up  of  the  people  whose 
salaries,  by  reason  of  the  nature  of  their  work,  must  be  small — clerks 
in  stores,  attendants,  messenger  boys,  and  that  class  of  people;  and 
yet  they  are  subject  to  the  same  demand  for  being  transported  to 
their  work  as  is  the  broker  and  the  banker,  if  indeed  he  rides  in  the 
railways  at  all. 

Now,  the  proportion  must  be  considered,  because  it  is  the  propor- 
tion that  makes — it  is  the  extra  amount  that  makes  for  poverty  or 
wealth—the  percentage.  It  is  not  amiss  at  all  for  us  to  recall  that 
Russell  Sage  walked  down  Fifth  Avenue  one  day  with  a  friend  and 
entering  a  haberdashery  store  sought  to  buy  a  pair  of  suspenders. 
He  found  the  price  was  50  cents  and  he  walked  three  blocks  over 
to  Seventh  Avenue  and  bought  them  for  44  cents,  and  when  the 
friend  remonstrated  with  him  that  he  would  do  a  thing  like  that,  he 
held  up  a  silver  dollar  and  he  said,  "  My  boy,  it  is  6  per  cent  I  have 
saved  on  that  dollar."  And  the  basis  of  industrial  activity  is  much 
the  same.  We  have  to  consider  how  much  the  poor  man  can  save. 
That  small  saving  is  a  fortune  to  him.  It  is  the  way  we  have  made 
our  Russell  Sages,  and  we  need  to  make  a  few  small  additions  to  our 
Russell  Sages  in  our  population. 

The  Chairman.  This  commission  runs  from  10  o'clock  in  the  morn- 
ing until  10  O'clock  at  night,  Senator,  and  we  have  been  doing  it 
regularly  since  Monday  morning.  The  adjournment  hour  has  passed. 
AVill  it  be  convenient  for  you  to  be  here  this  evening? 

Mr.  Walsh.  I  had  almost  concluded. 

The  Chairman.  Well,  we  will  hear  you. 

Mr.  Walsh.  As  a  matter  of  practical  politics,  I  would  have  in  all 
tax  bills  in  the  cities  and  towns  affected  an  item  called,  for  exanipic, 
''Transportation  subsidy,"  so  that  the  people  would  know  just  what 
tiiey  were  paying  for  this  service.  This  new  item,  representing  a 
daily  actual  saying  to  each  citizen,  may  be  used  to  justify  economy 
in  other  municipal  expenditures,  and  make  municipal  administrators 
keen  against  waste  and  inefficiency.  It  will  force  economies  in  opera- 
tion to  keep  down  the  tax  rate. 

There  are  now  no  cheery  riders  on  the  Elevated,  no  cheery  em- 
ployees, and  no  cheery  managers.  Everybody  is  sore  and  vindictive, 
and  they  rail  in  vain  against  the  wrongs  of  the  irretrievable  past. 

This  has  been  commented  on  in  your  inquiries  of  Commissioner 
MiicLeod :  The  5-cent-f are  bill  with  the  subsidy  takes  nothing  from 
anybody  and  gives  much  to  everybody.  The  soundest  fare  for  metro- 
politan areas  is  the  limit  the  public,  mostly  fairly  disposed,  will  pay 
without  reluctance. 

As  to  dividends,  they  should  not  be  proportioned  to  original  in- 
vestment or  par  value  but  to  actual  present  value.  There  is  no  public 
sympathy  for  railway  security  holders  because  their  investment  was 
pi-edicated  on  the  hope  of  heavy  speculative  returns.  They  ought  to 
stand  or  fall  with  the  varying  fortunes  of  their  gamble  without  any 
political  pulmotors  like  the  public  control  bill  of  1918  passed  by 
the  Massachusetts  Legislature, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1473 


I  ought  to  call  attention  to  the  fact  that  the  public  control,  munic- 
ipal control,  is  out  of  the  question  so  far  as  Massachusetts  is  con- 
cerned, because  of  the  character  of  service.  It  extends — for  instance, 
in  Boston — through  the  Elevated  to  many  cities  and  towns  which  are 
not  political  members  of  Boston;  and  therefore  a  municipal  enter- 
prise could  not  stand  on  the  limits  of  Boston — it  would  have  to  be 
State  control.  And  I  trust  that  in  the  matter  of  the  advisability  of 
State  control,  which  in  some  measure,  I  expect  is  necessary — in  fact, 
I  think  it  inevitable  because  of  the  fact  there  is  no  private  money 
for  railways,  and  thei^  is  only  a  choice  of  two  methods,  one  public 
control  with  private  ownership  and  the  other  private  management 
and  operation ;  so  that  I  think  it  is  futile  to  address  ourselves  in  the 
present  state  of  the  financial  world  to  any  other  inquiry  except  as 
to  whether  we  should  take  it  under  the  form  of  contract,  as  was  made 
with  the  Elevated,  giving  something  to  the  old  investors  and  taking 
it  as  it  stands  as  a  going  concern  and  operating  it  through  State  con- 
ti-ol  with  no  tenure  of  office  on  the  part  of  the  trustees  to  safeguard 
a/2ninst  the  fluctuation  made  by  politics,  Avhich  generally  costs  the 
ultimate  consumer  something. 

Mr.  Warren.  Before  the  Senator  goes,  because  I  know  he  does 
not  want  to  leave  a  wrong  impression  as  to  the  law,  I  want  to  call 
the  commission's' attention  and  the  Senator's  attention,  in  order  to 
get  it  on  the  record,  to  chapter  159  of  the  Special  Acts  of  1918.  If 
the  comniission  should  get  the  impression  that  this  act  was  a  contract 
binding  upon  the  Commonwealth  except  in  certain  respects  indi- 
cated in  it,  it  would  be  a  reflection  not  only  on  the  legislature  which 
passed  it  but  upon  the  attorney  general's  department  which,  I  under- 
stand, was  supposed  to  be  safeguarding  the  interests  of  the  Common- 
wealth in  withdrawing  it.  I  knew  nothing  about  it  myself  at  the 
time,  as  I  was  down  here  with  the  Fuel  Administration.  But  the 
art  ^)rovides  in  section  18,  "  None  of  the  provisions  of  this  act  shall 
be  construed  to  constitute  a  contract.binding  upon  the  Commonwealth 
other  than  the  provisions  Avhich  define  the  terms  and  conditions 
under  which,  during  the  period  of  public  management  and  operation, 
the  property  under  lease  or  operated  by  the  Boston  Elevated  Rail- 
road Co.  shall  be  managed  and  operated  by  the  said  trustees,  and 
the  provision  of  section  13,  which  provision  shall  constitute  a  con- 
tract binding  upon  the  Commonwealth."  Section  13,  I  think,  relates 
to  the  maintenance  of  the  property  in  good  operating  condition  dur- 
ing the  period  of  public  control  and  the  return  of  the  reserve  fund 
unimpaired  at  the  end  of  the  period. 

Mr.  Walsh.  I  think  you  will  find  that  there  is  pi-ovision  in  there 
which  says  that  they  shall  be  able  to  fix  such  a  rate  of  fare  as  will 
insure  a  6  per  cent  return. 

Mr.  Warren.  Yes;  but  subject  to  that — I  will  not  read  all  of  sec- 
lion  15;  but  after  using  the  words  "After  the  discontinuance  of 
public  operation,"  ending  one  sentence,  it  goes  on : 

The  coinpauy  shall  thereafter  he  subject  to  public  regulation  and  supervision 
in  such  manner  as  may  be  determined  by  the  general  court,  but  such  regulation 
and  supervision  shall  not  be  exercised  so  as  to  reduce  the  income  below  the 
reasonable  cost  of  the  service  as  defined  in  this  act. 

Mr.  Walsh.  Which  included  the  6  per  cent. 

Mr.  Warren.  Which  included  the  6  per  cent  on  stock. 

1G0643''— 20— VOL  2 31 


I 


1474    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


msm. 


Ml'.  Walsh.  That  is  my  meaning.    We  are  not  disagrceinfr  at  all. 
Ml".  Warren.  We  are  not? 
Mr.  Walsh.  Xo. 
Mr.  Warren.  All  right. 

The  Chairman.  We  will  take  a  recess  at  this  point  until  8  o'clock. 
Are  there  any  other  witnesses  here  for  to-night,  Mr.  Ogburn  ? 
Mr.  Ogburn.  Yes;  Mr.  Jackson,  representing  the  mavor  of  At- 
lanta. 

( Where iiix>n,  at  5.20  o'clock  p.  m.,  a  recess  was  taken  until  8 
o'clock  p.  m.) 

EVENING   SESSION. 

The  Chairman.  Had  you  finished  your  statement,  Senator? 

Mr.  Walsh.  Practically;  yes. 

Commissioner  Gadsden.  I  had  a  question  that  I  wanted  to  ask. 

STATEMENT  OF  HON.  JOHN  J.  WALSH— Continued. 

Commissioner  Gadsden.  Before  you  left,  Senator,  I  wanted  to  ask 
you  to  give  us  your  idea  as  to  how,  under  your  plan,  you  would 
handle  the  labor  question? 

Mr.  Walsh.  I  am  handicapped  in  making  a  reply,  because  it  so 
happens  that  I  am  counsel  for  several  labor  unions. 

Commissioner  Gadsden.  So  much  the  better. 

Mr.  Walsh.  That  does  not,  by  any  means,  mean  that  I  accord  my 
mind  to  their  purposes. 

Commissioner  Gadsden.  I  do  not  mean  organized  labor  alone,  but 
how  do  you  handle  demands  for  repeated  increases  imder  your  plan  ? 

Mr.  Walsh.  In  the  first  place,  there  must  come  a  point  which  is 
generally  recognized  as  marking  the  limits  of  a  fair  deal,  with  re- 
spect to  the  service  of  the  public  and  the  welfare  of  the  men  who 
furnish  that  service.  I  do  not  knoAv  that  thei*e  is  any  better  judge 
of  that  than  the  parties  themselves.  That  is  to  say,  they  create  the 
issue,  and  when  a  settlement  is  demanded  one  way  or  the  other, 
necessarily  it  must  be  related  to  public  sentiment  as  well  as  to  the 
power  of  the  enterprise  to  pay  what  is  demanded. 

If  a  portion  of  the  cost  of  maintenance,  the  cost  of  transportation, 
is  to  be  paid  by  the  public,  they  will  have  a  larger  voice  in  express- 
ing themselves  on  the  labor  question,  if  labor  is  going  to  enter, 
as  it  does,  as  the  largest  factor  of  increases  in  transportation  costs. 
And  the  very  fact  that  the  public  is  saddled  generally — not  the  car 
rider  alone,  but  the  whole  public — is  saddled  with  a  portion  of  the 
expense  will  make  that  public  mucli  keener  on  the  question  of  what 
is  a  just  reward  for  labor. 

For  one,  I  do  not  believe  there  is  any  hardship  in  distributing  the 
wealth,  the  substance  of  America  reasonably,  as  long  as  there  is  not 
thereby  created  a  class  which  is  preferred  us  a  laboring  class  above 
other  laboring  classes,  by  taking  something  from  the  substance  of 
the  other  class,  and  thereby  have  the  public  make  a  specially  highly 
paid  labor  class  not  Avarranted  in  making  demands  which  really 
ought  not  to  be  made  except  where  a  special  kind  of  service  is 
rendered. 

The  ordinary  railway  service  is  not  a  service  which  requires  either 
long  tutelage  or  training.     Indeed,  conductors  and  motormeii  are 


PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  OOMMISSIOlif.  •  1475 


made  with  about  four  or  five  day^'  training.  That  has  been  actually 
done.  It  is  not  what  niay  be  classed  as  a  highly  intellectual  pursuit. 
It  is  more  nearly  common  labor,  with  ordinary  common  sense  as  the 
keystone  of  the  arch. 

Commissioner  Gadsden.  Under  your  plan,  where  the  car  rider  only 
l*ays  a  nickel  and  the  balance  of  it  has  to  be  contributed  in  some  way 
by  the  public,  is  it  not  probable  that  the  carman  will  say  to  the 
operators  of  the  railroads :  "  What  difference  does  it  make  to  j-oii  ? 
It  doesn't  come  out  of  you.  You  can  go  and  get  it  from  somebody. 
What  do  you  stand  in  our  way  for  ?  " 

Mr.  Walsh.  It  is  true  that  our  political  mechanism,  as  it  has 
been  operating  for  the  past  few  years,  seems  to  be  devoid  of  com- 
munity courage;  but  I  do  not  thmk  that  is  going  to  last.  I  think 
somebody  is  going  to  rise  and  make  it  an  accepta£le  American  doc- 
trine that  the  American  public,  as  a  public,  will  assert  its  rights 
as  between  contending  labor  forces  and  municipal  or  State  conduct 
of  public  utilities. 

There  is  one  thing  to  bear  in  mind:  If  the  municipality  or  State 
has  an  active  part,  the  very  fact  that  the  tax  rate  is  involved  will 
make  the  very  persons  who  always  make  a  slogan  of  a  low  tax  rate 
quite  alert  to  see  that  there  shall  be  no  undue  addition  to  it. 

I  have  hoped,  in  that  way,  that  there  would  be  a  sort  of  compromise 
or  balance  established  between  the  inordinate  demands,  if  there  be 
such.  That  can  only  be  determined  by  the  special  set  of  circum- 
stances. 

Commissioner  Meeker.  Has  the  low-tax  slogan  been  effective  in 
keeping  tax  rates  down? 

Mr.  Walsh.  I  am  a  radical  on  the  question  of  tax  rates.  I  think 
we  have  made  a  fetish  of  low  taxes  and  ignored  the  substance.  The 
tax  rate  is  a  symbol.  It  means  or  it  does  not  mean  values  returned. 
The  burden  that  the  administrator  in  politics  declines  to  take  is  the 
educational  burden  of  telling  the  public  what  tlie  public  is  actually 
receiving. 

Tlie  public,  for  want  of  information,  is  likely  to  be  deceived  by 
taking  the  symbol  for  the  substance — the  tax  rate  rather  than  what 
is  given  for  it. 

It  would  be  very  much  better,  althougk,  of  course,  it  may  sound 
a  bit  altruistic,  to  say,  to  educate  your  public,  and  reframe  your  poli- 
tical conduct  by  going  out  and  saying :  "  I  do  not  hesitate  to  add  to 
the  tax  rate,  because  I  purpose  to  give  you  one  dollar  for  every  dollar 
and  possibly  more  than  one  dollar  for  every  dollar,  which  I  shall 
add  to  the  tax  rate. 

Commissioner  Meeker.  You  think  that  if  the  public  officials  take 
that  attitude,  it  will  be  impossible  for  the  union  men  or  the  plat- 
form men  to  demand  exorbitant  wages  ? 

Ml*,  Walsh.  I  do.  The  union  men  are  successful  because  of  the* 
cowardice  of  those  they  opi>ase;  not  because  of  the  intrinsic  merit, 
always,  of  their  demands.  It  is  parroting — political  gaiToting,  It 
is  forced  by  the  discliplined  small  army  against  a  disorganized  larger 
mass,  and  the  want  of  that  Rooseveltian  courage  which  the  country 
sadly  needs,  every  pait  of  it. 

I  have  hopes,  even  as  counsel  for  labor  unions — I  know  there  is 
a  strong  residuum  of  intelligence  and  patriotism  in  organized  labor. 


I 


1476    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

It  is  largely  submerged.  It  is  largely  submerged  by  the  vociferous 
who  are  usmg  the  old  slogan  that  appealed  to  the  greed  of  men.  I 
do  not  suppose  we  are  going  to  settle,  in  this  generation,  the  question 
of  human  greed. 

The  Chairman.  Is  it  safe  for  the  public  to  permit  the  continuance 
of  a  state  whereby  organized  labor  imposes  its  might  against  the 
imorganized  mass? 

Mr.  Walsh.  Not  admitting  that  the  question  is  applicable  to  this 
situation  alone,  I  am  perfectly  willing  to  answer  that  no  such  thing 
is  safe ;  because  the  statement  proves  it — "  imposing  its  will,"  sounds 
in  arbitrariness.  That,  taken  alone,  would  cause  me  to  say,  *^  No,  by 
no  means  is  ii  safe." 

The  Chairman.  You  said  that  organized  labor  could  not  be  suc- 
cessful unless  the  public  will  favored  it? 

Mr.  Walsh.  I  think  that  is  true. 

The  Chairman.  To  what  extent  did  the  public  will  in  Boston 
help  to  adjust  the  recent  labor  controvei*sy  ? 

Mr.  Walsh.  The  public  will  in  Boston  was  almost  unanimously 
against  the  strikers.  The  best  leaders  of  the  union  forces  themselves, 
notably  their  own  counsel,  strove  in  vain  to  arrest  them  in  the  ac- 
complishment of  their  purpose.  So  did  their  candidate  for  governor, 
who  was  the  Democratic  nominee  on  two  successive  occasions,  Fred- 
erick W.  Mansfield,  who  told  me,  without  any  imposition  of  confi- 
dence whatever,  that  they  were  making  a  mistake. 

The  Chairman.  Who  was  victorious  in  that  contest? 

Mr.  Walsh.  The  strikers. 

The  Chairman.  In  spite  of  the  fact  that  the  public  will  was 
against  that  ? 

Mr.  Walsh.  In  spite  of  the  fact  that  the  public  will  was  against 
them. 

The  Chairman.  Then  where  does  the  public  will  play  its  part  in 
these  controversies? 

Mr.  Walsh.  Because  it  is  either  unorganized  or  disorganized. 
Knterprises  which  could  be  benefited  by  an  educated  and  instructed 
public  have  waited  until  the  last  minute  to  engage  its  attention, 
which  has  permitted  the  thing  to  drift  until  the  issue  was  so  keen 
that  the  public  interest  was  involved  so  immediately  that  any  salva- 
tion was  better  than  none.  It  was  simply  a  question  of  coming  in 
out  of  the  rain. 

Commissioner  Meeker.  Have  you  any  evidence  that  the  public 
consciousness  can  be  so  organized  that  it  will  be  effective  in  control  ? 

Mr.  Walsh.  Yes. 

Commissioner  Meeker.  Not  merely  in  controlling  inordinate  de- 
mands for  wages  on  the  part  of  laborers,  but  in  conducting  the  public 
.business  effectively  and  efficiently? 

Mr.  Walsh.  I  think  that  the  status  has  changed  now.  I  think 
the  tide  of  public  sentiment  is  running  strongly  against  organized 
labor  at  the  present  moment,  insofar  as  organized  labor  ignores  its 
sacred  contracts  and  compacts,  and  seizes  opportunity  by  mere  force 
of  organization. 

It  may  not  be  so  easily  manifest  that  that  good  will  has  been 
alienated  from  the  labor  unions,  but  I  think  the  successive  tests 
that  are  to  ensue  will  show  it  is  so,  especially  where  large  public 
interest  is  involved.    It  would  not  be  so  keen  in  the  matter  of  a  shoe 


1 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1477 

manufacturer,  for  example,  who  was  advertising  in  the  financial 

journals  that  he  could  afford  to  give  a  7  per  cent  preferred  issue  of 

stock,  and  that  assets  back  of  that  7  x>er  cent  were  four  or  five  times 

that  offer  to  the  public.    You  see  the  difficulty  is  that  our  labor  forces 

J)ave  begotten  for  themselves  a  wonderful  education,  compared  with 

,    the  old  labor  class.    The  relation  of  master  and  slave  does  not  exist 

,     so  much  now.    There  is  an  intelligence  in  the  labor  class.    Sometimes 

/    it  is  misled,  it  is  true,  but  nevertheless  in  the  aggregate  it  is  very 

I     much  greater,  and  makes  a  closer  approximation  to  capital  in  brains 

i    than  ever  before.    And  they  are  reading  not  merely  labor  papers, 

)     but  they  know  how  to  read  the  financial  papers;  and  when  they  see 

j     a  statement  in  a  financial  paper  entirely  inconsistent  with  the  rep- 

}     resentations  which  are  being  made  of  poverty  and  inability  to  dis- 

J     tribute,  by  raising  wages,  some  of  the  earnings  of  the  business,  it 

\    does  not  lie  well  in  the  mind  of  either  the  labor  leader  or  the  ordi- 

!    nary  fairly  well  educated  laboring  man. 

\        You  see,  we  have  forgotten  somehow  that  our  educational  trend 
\    has  been  toward  compulsory  education.    We  have  raised  the  school 
'    age  in  many  of  the  States  to  16  years.    No  longer  does  the  boy  go 
out  to  make  his  way,  illiterate,  at  14  or  13  or  at  a  younger  age. 

What  I  am  speaking  of  now — I  ought  perhaps  to  confine  myself 
to  some  section  of  the  country— but  I  would  like  to  be  able  to  speak 
of  my  country  as  doing  that  generally,  raising  the  school  age,  so 
that  compulsory  education  is  a  part  of  a  boy's  accomplishment  and 
attainment. 

That  has  an  effect,  naturally,  because,  after  all,  while  financiers 
seek  to  make  finance  a  mysterious  thing  there  is  nothing  mysterious 
about  it.  It  is  simply  a  question  of  whether  there  is  a  pot  in  sight 
and  whether  it  will  remain  or  diminish,  or  increase  or  diminish. 

Commissioner  Meeker.  Do  you  think  a  tripartite  arrangement 
of  management,  such  as  contemplated  in  the  Plumb  plan— I  do  not 
mean  the  Plumb  plan  necessarily,  but  something  similar  to  that, 
associarting  the  workers,  the  management,  and  the  public  in  a  three- 
legged  arrangement  could  be  worked  out? 

Mr.  Walsh.  Not  at  all ;  no,  sir.  The  element  of  human  greed  is 
too  strong.  With  the  obvious  fact  that  profits  are  in  sight  the  ques- 
tion of  division  will  never  be  equitably  settled. 

There  arise  new  demands;  there  arise  new  occasions  for  making 
the  demands,  and  there  will  be,  not  unnaturally,  a  larger  demand 
on  the  part  of  labor  for  the  product — the  increment— 4)ecause  tiie 
laborer  says  that  thereby  he  will  increase  his  stature  as  a  man,  hence 
his  citizenship  and,  from  the  accumulation  of  that,  the  country  will 
advance. 

Who  shall  resist  that  ai^ument  if  made?  It  is  a  very  catchy 
political  argument. 

As  long  as  we  are  a  democracy  where  heads,  not  always  brains,  are 
going  to  turn  the  tide,  it  is  going  to  be  effective. 

Commissioner  Meeker.  Do  you  believe  in  public  operation  of 
utilities  as  they  are  carried  on  now,  the  public  officials  to  manage 
the  affairs  of  the  utility  and  hire  men  at  the  market  price  and  settle 
labor  difficulties  as  best  they  may  as  they  arise? 

Mr.  Walsh.  I  think  there  is  only  one  equitable  way:  Let  capital 
have  a  smaller,  but  certain  reward,  and  let  labor  have  the  specula- 
tive larger  reward  which  it  produces,  capital  being  the  avenue 


if 


If? 


1 


1478    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

through  which  labor  travels  to  a  better  condition,  but  capital  not 
being  disdained. 

Now,  it  is  disturbing  to  find  anywhere  that  men,  by  a  little  com- 
bination, a  little  pool,  can  put  their  wealth  together  and  thereby 
make  a  reward  wliich  not  any  one  of  them  could  make  for  himself, 
merely  by  the  power  of  money. 

^  In  these  i)ublic  enterprises  one  of  the  strongest  arguments  for 
State  control  is  that  there  is  no  inducement,  there  is  no  capital  in- 
volved except  that  which  can  be  borrowed  at  a  very  low  rate,  vary- 
ing from  4  to  5  per  cent.  Massachusetts  can  borrow  money  at  4.16, 
and  has  borrowed  money  at  that  rate.  I  suppose  if  our  ^States  go 
into  a  large  share  of  public  ownership  of  utilities,  such  as  railways, 
that  the  borrowing  rate,  by  that  fact,  under  the  law  of  supply  and 
demand,  will  go  a  little  higlier,  but  not  appreciably,  because  tlie 
whole  State  is  behind  it. 

That  i^minds  me  that  I  forgot  something,  and  that  is  that  those 
who  are  interested  in  railway  securities,  and  who  now  know  that 
private  enterprise  has  fallen  down  and  is  likely  never  to  be  re.stored 
to  full  working  capacity  ought  to  be  satisfied  with  the  same  return 
from  the  State  that  they  would  from  the  Nation.  If  they  are  satis- 
fied to  buy  Government  bonds — and  before  the  war  they  were  satis- 
fied to  buy  them  at  3  per  cent — ^they  ought  to  be  well  satisfied  to  take 
assurances  of  the  State  at  the  price  the  State  itself  has  to  pay. 

Now,  if  we  have  public  control,  a  contract  such  as  the  Boston  Ele- 
vated has,  I  see  no  reason  why  G  per  cent  should  be  guaranteed,  es- 
pecially when  it  is  on  a  false  basis;  but  I  should  be  siitisfied  with 
4  per  cent,  or  4J  per  cent. 

Commissioner  ^Iekker.  I  do  not  want  to  discuss  the  economics  of 
risk  taken  at  all.  I  do  not  think  that  it  has  much  to  do  with  the 
problem  that  confronts  this  connnission;  but  I  would  like  you  to 
explain  a  little  the  statement  you  have  just  made.  I  liad  understood 
that  you  were  in  favor  of  State  ownership  and  operation.  You 
sjjoke  just  now  of  the  reward  to  capital,  making  that  a  fixed  re- 
ward. 

Mr.  Wai^h.  I  hope  I  have  not  been  recorded  fully  as  advocating 
State- ownership.  I  am  simply  accepting  it  as  almost  inevitable,  in 
view  of  the  fact  that  private  capital  will  not  be  forthcoming.  I 
regard  private  incentive  as  tremendously  more  valuable  than  official 
inertia. 

I  am  verv  sure  that  there  is  no  enterprise  that  will  not  be  tainted, 
when  run  by  the  general  public,  with  a  certain  degi-ee  of  inertia, 
merely  because  it  is  everybody's  concern. 

Commissioner  Mj:eker.  Will  there  be  counterbalancing  advan- 
tages that  will  outweigh  the  inefficiency? 

Mr.  Walsh.  Well,  tlie  elimination  of  the  cheap  attack  that  sonie- 
l>ody  is  grafting  or  somebwly  is  getting  more  than  his  share,  or 
that  capital  is  unduly  rewarded  is  perhaps  an  asset  that  ouglit  not 
to  he  disdained. 

If  we  remove  from  the  public  their  querulous  attitude  toward 
public  utilities,  I  do  not  know  but  what,  on  the  whole,  tliat  ought 
to  be  counted  as  almost  of  money  value. 

We  hear  so  much  talk  now  as  to  discourage,  in  all  these  large 
enterprises  like  railroading,  the  application  of  brains  of  men  who 


!' 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1479 

would  love  to  do  public  service  for  a  very  small  reward  if  they  were 
not  beset  by  the  i^ublic. 

We  have  the  public  trustees  in  Boston,  every  one  of  them  men  of 
admirable  equipment,  but  they  are  made  goats— I  think  I  may  prop- 
erly say  "  goats  " — of  the  public  distrust  of  general  railroad  enter- 
prise, because  of  an  irretrievable  past. 

You  ought  to  know  that  in  private  hands  there  was  much  ineffi- 
ciency in  the  management  of  the  Boston  Elevated,  made  by  the 
political  demand.  We  had  "  students'"  on  the  pay  rolls.  We  called 
them  students.  Perhaps  they  may  be  known  in  other  States.  Stu- 
dents are  men  placed  on  the  pay  roll  at  the  behest  of  some  political 
office  holder  or  seeker,  who  do  no  work  but  simply  draw  their  salary ; 
and  they  are  put  on  merel^r  because  thej^  happen  to  have  a  vote  or 
an  influence  with  the  politician  who,  using  his  power  over  the  en- 
terprise, is  able  to  have  his  reward  in  that  manner.  That  is  com- 
mon. 

Commissioner  Meeker.  Do  you  think  that  would  increase  under 
public  ownership  and  operation  ? 

Mr.  Walsh.  I  do  not  know.  I  am  somewhat  appalled,  at  times, 
to  think  of  plunging  all  the  employees,  especially  in  view  of  the 
fact  that  Aye  are  compelling  them  to  be  American  citizens  for  the 
most  part,  into  the  vortex  of  politics. 

On  the  other  hand,  if  they  go  into  politics  as  a  body,  they  may, 
by  that  fact,  force  an  organization  of  other  people  against  them. 
AVhen  the  public  recognizes  that  there  is  a  single,  selfish  group  at 
work  to  undo  the  public,  it  is  not  at  all  strange  that  the  public 
itself  should  take  measures  in  its  own  behalf. 

Commissioner  Meeker.  Just  one  more  question,  Mr.  Chairman. 
I  am  through  with  that  subject,  and  I  would  like  to  go  to  anotlier 
one,  if  you  do  not  mind,  Senator. 

Mr.  Wai^h.  At  your  pleasure. 

Commissioner  Meeker.  You  spoke  very  strongly,  vigorously,  in 
favor  of  a  5-cent  flat  fare  ? 

Mr.  Walsh.  Yes. 

Commissioner  Meeker.  Have  you  given  much  consideration  to  a 
zone  system  ? 

Mr.  Walsh.  I  have  given  a  great  deal,  so  far  as  it  pertains  to 
the  Boston  Elevated;  and  I  differentiate  between  the  Boston  Ele- 
vated and  the  other  lines,  because  there  is  topographically  a  dis- 
tinction, and  financially  a  distinction;  topographically,  because  if 
\vc  were  laying  out  new  territory  it  would  be  unreasonable  to  estab- 
lish any  long- fare  district  for  a  single  fare;  it  would  be  perfectly 
natural  to  establish  a  fare  which  had  relation  to  the  distance  traveled. 

In  a  city  a  different  reason  prevails.  We  seek  in  all  our  housing 
enterprise  to  decentralize  population,  to  send  it  out  on  what  may 
be  called  the  periphery  of  the  city  circle,  in  order  to  avoid  the 
evident  dangers  of  congestion. 

Commissioner  Meeker.  That  is  the  point  that  I  am  pursuing. 
You  may  decentralize  population,  or  you  may  decentralize  industry! 

Mr.  Walsh.  Yes. 

Commissioner  Meeker.  A  flat  fare  seems  to  me  to  have  the  ten- 
dency to  centralize  industries,  and  thereby  increase  the  difficulties 
of  transportation,  properly  caring  for  transportation;   whereas  a 


1430    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

zone  system  will  in  time  decentralize  your  industries;  so  that  you 
will  have,  instead  of  the  main  municipal  industrial  center,  perhaps 
many  industrial  centers. 

Mr.  Walsh.  That  is  highly  desirable. 

Commissioner  Meeker.  With  population  scattered,  perhaps,  even 
more  widely  than  under  a  fiat-fare  system. 

Mr.  Walsh.  As  a  member  of  the  city  planning  board,  I  have 
given  a  great  deal  of  attention  to  the  question  of  zones  with  refer- 
ence to  the  location  of  industries  and  residential  zones,  distinguish- 
ing them  and  endeavoring  to  frame  legislation  addressed  to  the 
solution  of  that  problem. 

Of  course,  the  difficulty  is  that  when  we  establish  a  zone,  we 
also  have  to  consider  the  fact  that  there  must  be  some  proximity 
of  residence  to  that  of  working  district.  Wliile  thev  are  zones, 
they  are  so  near  as  to  overlap  one  the  other.  It  is  a  difTicult  ques- 
tion to  establish  those  zones.  In  Boston  we  have  a  peculiar  place 
in  respect  of  the  zone  system. 

South  Boston  has  a  veiy  dense  population — about  75,000 —  and  it 
is  all  within  a  2-mile  radius  of  the  statehouse;  they,  of  course,  are 
paying  the  10-cent  fare  like  those  who  live  5  or  6  or  7  miles  away. 

Of  course  they  cry  out;  and  their  cry  is  nothing  more  than  the 
greedy  expression  that  they  ought  not  to  pay  as  much  as  the  others, 
although,  as  a  matter  of  fact,  the  people  who  live  in  the  otlier  section 
contributed  quit^  as  much  as  they  did  to  the  cost  of  rapid-transit 
legislation,  all  transit  construction,  or  development.  Neighbor  is  set 
against  neighbor  by  the  establishment  of  the  zone  system. 

If  you  have  the  zone  system  in  Boston,  the  immediate  effect  will 
be  to  raise  the  rents  in  the  area  of  the  smaller  charge.  It  has  been 
so.  It  has  been  so  to  the  extent  of  the  people  moving  where  they 
could  walk  to  the  central  business  areas,  leaving  in  the  north  and 
west  ends,  which  are  densely  populated,  a  population  that  would 
not  be  tolerated  anywhere  else  and  is  only  tolerated  in  Boston  be- 
cause the  undoinj^  of  it  is  so  expensive. 

I  had  a  bill  in  the  legislature  asking  for  an  appropriation  of 
$5,000,000  to  reconstruct  the  north  end,  and  it  was  rejected  because 
the  city  finances  were  not  adequate  to  justify  its  passage,  although 
the  thing  sought  to  be  done  and  the  manner  in  which  it  was  to  be 
done  were  both  commended. 

You  see,  once  you  establish  your  congestion  area,  it  is  very  hard 
to  undo  it  except  by  converting  it  to  a  larger  and  more  profitable 
use,  industrial  or  commercial. 

In  the  noilh  end  the  character  of  the  north  end,  in  spite  of  fact 
that  it  is  all  within  a  single  mile  of  the  statehouse,  is  such  that  it  is 
still,  after  50  years,  60  per  cent  residential.  Thirty-five  thousand  peo- 
ple jive  in  a  very  small  area,  leaving  scarcely  any  open  space. 

That  is  all  because  of  the  fact  that  they  are  close  to  their  work 
and  need  not  pay  any  fare  to  get  to  it. 

The  fare,  even  at  5  cents,  under  the  old  conditions,  was  still  a  con- 
siderable burden ;  60  cents  a  week,  it  used  to  be  calculated. 

The  west  end  is  not  unlike  it.  The  west  end  is  our  Ghetto.  There 
is  a  tremendously  increasing  population  in  the  last  years  in  tlie  west 
end,  increasing  by  building  four  and  ^\e  story  buildings  and  undue 
congestion. 


i 


PROCEEDINGS  OF  FEDERAL  EJ^CTRIC  RAILWAYS  COMMISSION.    1481 

The  zone  system  would  not  apply  to  Boston  with  any  justice  at 
all.     Moreover,  it  would  take  away  the  suburban  values. 

One  of  the  greatest  reasons  for  the  development  of  the  suburban 
areas  in  Boston  was  because  the  realty  men  made  a  great  slogan  of 
tlie  fact  that  their  territoiy  was  within  the  5-cent  fare. 

I  remember  25  years  ago,  when  West  Roxbuiy  was  being  developed, 
which  is  a  part  of  my  district,  that  the  fact  that  it  was  within  the 
5-cent  area  was  the  great  appeal. 

People  went  out  tliere  and  built  houses,  some  of  them  very  sub- 
stantial. They  are  what  might  be  called  the  middle-class  people. 
They  built  houses  that  are  worth  $5,000  per  house,  probably,  which 
is  not  very  much  nowadays,  but  20  years  ago  it  was  a  considerable 
investment,  and  it  marked  the  middle-class  man  having  a  salary 
of  $2,500  or  $3,500  or  possibly  more.  We  have  that  class  of  popula- 
tion living  there,  and  even  they  rebel  against  the  10-cent  fare;  be- 
cause they  adjust  their  way  of  living,  and  having  adjusted  it,  they 
do  not  want  any  change,  unless  that  change  is  accompanied  by  in- 
creased income. 

The  Chairman.  We  are  very  much  obliged  to  you,  Senator. 

Mr.  Walsh.  You  are  very  welcome,  I  am  sure. 

(Witness  excused.) 

STATEMENT  OF  MR.  M.  M.  JACKSON. 

The  Chairman.  Will  you  please  state  your  position,  Mr.  Jackson? 
Mr  Jackson.  I  am  an  attorney  by  profession,  and  I  am  speaking 
for  Mayor  James  L.  Key,  of  Atlanta,  as  his  representative.  - 

TJ^^  9^'"^^^^^*^^-  ^^  y^^  occupy  any  official  position  in  Atlanta? 

Mr.  elACKsoN.  No;  I  am  not  an  official  of  the  city.  I  am  simply 
speaking  as  the  personal  representative  of  the  mavor  at  this  hearing 

The  Chairjian.  You  may  proceed. 

Mr.  Jackson.  We  believe  that  municipal  ownership  is  the  only 
solution  of  this  problem,  and  the  situation  in  Atlanta,  I  think,  is  a 
demonstration  in  itself  as  to  why  that  is  true  and  why  ultimately 
and  at  present  it  is  the  only  one  which  the  public  will  finally  accept. 

I  think  that  we  have  in  Atlanta  the  best  representation  of  opera- 
tion by  private  ownership,  and  I  think  at  the  same  time  it  supplies 
the  best  illustration  of  why  private  ownership  has  fallen  down 
and  why  it  is  impossible  for  it  to  continue.  ' 

I  have  been  surprised,  in  reading  the  hearings,  the  accounts  of 
tlie  hearings  that  have  been  sent  out,  and  in  the  two  days  that  I 
Inive  been  attending  here,  at  the  lack  of  reference  to  the  connection 
ot  the  power  company  with  the  street  railway.  It  seems  to  me  that 
ilie  two  are  necessarily  linked  together,  and  that  the  two  have  to  be 
regarded  together. 

To  get  a  grasp  of  the  Atlanta  situation,  you  have  to  go  back 
about  20  years,  when  the  street-railway  situation  there  was  controlled 
by  what  is  known  as  the  Atlanta  Consolidated,  under  the  presidency 
of  Mr.  Hurt.  '^ 

Mr.  Hurt  saw  the  connection  between  the  street  railway  and  the 
power  company  and  the  sale  of  electricity. 

So  the  development  started  out  there  to  bring  the  street  railway 
into  supplying  the  city  and  the  residences  of  the  city  with  electric 
current. 


1482    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

At  that  time  the  electric-light  business  of  the  city  of  Atlanta  and 
the  power  business  of  the  city  of  Atlanta  was  controlled  by  the 
Georgia  Electric  Light  Co.,  whose  president  is  Mr.  Harry  Atkinson. 
And  I  wish  to  say  in  listening  to  the  evidence  of  tlie  commissioner 
from  Massachusetts,  that  Mr.  Atkinson  is  a  citizen  of  Massachusetts, 
and  I  do  not  think  that  the  history  of  his  handling  of  Uie  properties 
of  which  he  has  been  in  charge  in  the  city  of  Atlanta  would  coincide 
witli  the  history  of  the  handling  of  the  Massachusetts  property,  from 
the  history  which  the  commissioner  gave  here  this  morning,  as  to 
their  failure  to  produce  results.  However,  I  am  getting  a  little  bit 
fdiead  there. 

Mr.  Hurt  decides  to  go  into  the  electric-light  business,  and  there 
stai-ts  in  the  city  of  Atlanta  a  fight  between  these  two  interests. 

At  that  time  the  Atlanta  Consolidated— and  I  wish  you  to  bear 
these  figures  in  mind,  because  they  are  at  the  bottom  of  our  feeling 
with  regard  to  municipal  ownership,  largely— at  that  time  the  At^ 
lanta  Consolidated  was  capitalized  at  $2,000,000  of  common  stock 
and  $2,000,000  of  bonds;  I  think  $2,275,000  of  bonds. 

Tlie  Consolidated,  headed  by  Mr.  Hurt,  decides  to  go  into  the  elec- 
tric-light business. 

The  electric  company,  backed  by  Mr.  Atkinson,  decides  that  the 
street  railway  will  not  go  into  the  electric-light  business,  but  that  the 
electnc-hght  company  will  go  into  the  street-railway  business.  And 
they  clash  on  that. 

The  fight  for  something  like  two  or  three  years,  if  my  memory 
is  correct,  goes  on. 

The  Atlanta  Consolidated  becomes  what  is  known  as  the  Atlanta 
Eailway  &  Power  Co.  The  $2,000,000  of  stock  in  the  Atlanta  Con- 
solidated represented  no  investment  of  money.  The  only  money 
which  went  into  the  Consolidated  was  in  the  bonds. 

The  Atlanta  Railway  &  Power  Co.  now  appears— I  think  it  was 
m  1809— possibly  about  that  time,  with  a  bond  issue  of  $5,000,000, 
and  $2,000,000  of  stock.  Again  the  stock  represents  no  investment 
of  money,  the  bond  issue  representing  the  investments  of  cash. 

The   Atlanta   Railway  &   Power   Co.   is   a   consolidation   of   the 

Atlanta  Consolidated,  and  one  or  two  small  roads,  and,  I  thinlc, 

there  was  in  that  issue  of  bonds  an  amount  which  was  to  supply  the' 

•  electric-light  plant  to  develoj)  the  situation,  so  that  electric  li^^ht 

could  be  supplied.  '^ 

A  Georgia  Electric  Light  Co.  starts  with  the  Atlanta  Rapid  Tran- 
sit—these  companies   come   into   the    situation:    now   the    Atlanta 
Rapid  Transit  and  the  Georgia  Electric  Light  Co.  are  combined 
and  the  fight  is  on  in  the  city.  ' 

The  Atkinson  interests  employ  the  shrewdest  counsel,  leadin<r 
lawyers  there  in  Atlanta,  and  men  who  know  the  political  situation 
and  how  to  handle  human  nature  as  well  as  legal  questions;  and 
when  the  fight  is  over,  Mr.  Hurt  has  not  gone  into  the  electric-light 
business,  but  has  gone  out  of  the  street-railway  business;  and  the 
electric-li<rht  company,  under  the  name  of  the 'Georgia  Railway  & 
Electric  Li^ht  Co.,  has  taken  over  the  properties  known  as  the 
Atlanta  Railway  &  Power  Co.,  the  Georgia  Electric  Light  Co.,  and 
the  Atlanta  Rapid  Transit.    This,  I  think,  was  in  about  1901  or  1902. 

The  capitalization  of  those  three  companies— I  think  the  capital 
stock  of  the  three  companies,  if  I  am  correct  in  my  memory,  was 


PROCEEDtSTGS  OF  FEDERAL  EUJCTRIC  RAILWAYS  COMMISSION.    1483 


something  like  $3,870,000.    Their  bonds  outstanding  were  something 
like  $7,787,000 — somewhere  around  that  amount. 

The  Georgia  Railway  &  Electric  Light  Co.  is  then  organized,  with 
a  bond  issue  of  $7,787,000,  $5,000,000  of  common  stock  and  $1,800,000 
of  preferred  stock,  making  a  total  capitalization  against  these  prop- 
erties, in  1902,  of  something  like  $14,587,000,  in  round  numbei-s. 

That  is  from  1899  to  1902  that  that  capitalization  has  come  into 
being. 

The  Georgia  Railway  &  Electric  Light  Co. 

The  Chairman.  How  much  new  money  was  put  into  these  prop- 
erties during  that  time? 

Mr.  Jackson.  I  personally  believe  that  the  only  new  money  that 
was  put  in  there  was  the  difference  between  the  total  amount  of  the 
bonds  of  the  combined  companies  and  the  bonds  of  the  companies 
before.  I  do  not  l)elieve  that  the  stock  that  was  issued  at  that  time 
represented  any  cash  investment  at  all. 

If  my  memory  is  correct,  there  is  a  iK)ssible  cash  investment — I 
think,  in  recalling  the  evidence  of  the  president  of  the  Georgia  Rail- 
way &  Power  Co.  before  the  railroad  commission,  that  there  was 
jx)f-sibly  an  investment  in  cash  in  that  issue  of  $6,800,000  of  stock — 
I  think  there  was  an  investment  in  cash  of,  possibly,  $500,000  to 
$(jfX),(K)0.  The  balance  of  it,  in  my  personal  opinion,  was  water, 
pure  and  simple. 

Mr.  Wabrex.  I  do  not  want  to  shorten  your  history  of  those  trans- 
actions,  but  has  thei*e  not  been,  since  those  transactions  were  all 
completed,  a  valuation  by  the  railway  commission  or  corresponding 
body  of  Georgia? 

Mr.  Jackson.  I  think  not.  At  the  time  of  the  hearing  on  the  ques- 
tion of  the  raise  in  rates  for  light  and  for  street-railway  fares,  the 
milway  commission  fixed  its  own  valuation  from  a  valuation  which 
was  made  by  the  company's  engineers,  some  yeai'S  prior  to  that  time. 

I  was  not  [iresent  at  the  hearing,  but  that  is  my  recollection  of  the 
hearing,  from  reading  the  evidence. 

I  do  not  believe  that  there  has  been  a  valuation — that  is,  a  going 
over  of  th(»  entire  property  and  a  valuation  such  as  would  be  con- 
sidered a  valuation  by  the  commission.  I  do  not  believe  that  that 
has  ever  l^een  done. 

Commissioner  Gadsden.  Has  the  commission  fixed  a  valuation  suf- 
ficient for  the  purpose  of  rate  making? 

Mr.  Jackson.  I  will  come  to  that  a  little  bit  later,  and  as  to  how 
that  valuation  was  fixed. 

That  was  in  1002 

Mr.  Warren.  If  you  w^ere  not  pi"esent  at  the  hearing,  we  are  ad- 
vised that  there  was  an  order  and  opinion  of  the  railroad  commission 
of  Georgia,  rlecided  August  14,  1918,  on  the  application  of  the  Geor- 
gia Railway  &  Power  Co.  for  increiised  fares. 

^Ir,  Jackson.  I  have  that  order  here,  if  you  would  like  to  see  it. 

Mr.  AVauken.  I  would  like  to  know  if  it  did  not  show  a  valuation. 

Mr.  Jackson.  It  shows  a  valuation  in  that  way.  There  was  a 
valuation  made  for  the  company  by  the  compan^^'s  engineers.  That 
is  my  recollection. 

Mr.  AVabren.  It  was  adopted  by  the  commission? 


I 


i 


1484    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Jackson.  Which  the  commission  used  in  fixing  its  valuation. 
Tlie  question  of  a  valuation  of  the  property  is  at  present  an  open 
question  there. 

The  city  requested  a  valuation,  and  the  commission  offered  to  ap- 
ix)int  valuation  experts  to  go  into  it,  and  the  citv  requested  that  the 
city  should  be  permitted  to  appoint  one  of  the  engineei-s  to  make  that 
valuation.  The  commission  declined  to  sanction  that,  and  so  an  offi- 
cial valuation  of  the  pi-operties  has  not  yet  been  made  other  than  by 
the  company's  own  engineers. 

Mr  Warren.  You  do  not  think  they  decided  the  value  of  the  prop- 
erties ? 

Mr.  Jackson.  They  decided  it  tentatively. 
Mr.  Warren.  Have  you  the  order  right  there? 
Mr.  Jackson.  Yes;  I  have  the  order  here. 

Mr.  Warren.  I  should  think  it  might  perhaps  shorten  it  to  put 
that  order  in.  ^ 

The  Chairman.  The  witness  said  that  he  would  reach  the  question 
of  valuation  m  due  time. 

Mr  Warren.  All  right.  I  thought  that  possibly  if  it  had  been 
valued  by  the  State  commission,  it  might  shorten  it  to  put  that  re- 
port in. 

The  Chairman.  I  understand  the  witness  wants  to  finish  in  time 
to  catch  a  19  o'clock  train,  so  we  will  let  him  proceed 
Mr.  Jackson.  This  was  1902  that  the  Georgia  Failway  &  Elec- 

J7%h'%ln  ^dP^'inA^.'A^^^?'''^'"^  ^^^^^^^  '^  ^^  ^^"^^'  i"  i^"nd  numbei-s, 
^^78<,000,  $0,000,000  of  common  stock  and  $1,800,D00  of  preferred 
stock.    That  was  in  1902. 

•  -^."n.^Fl  *^i^  ^^"1^  against  the  road  had  jumped  from  $7,787,000; 
in  1912  the  bonds  had  jumped  to  $12,493,000.  The  preferred  stock 
had  become  $2,400,000.  The  common  stock  had  become  $8,514,600 
A  total  of  stocks  and  bonds  against  the  Georgia  Railway  &  Electric 
J-ight  Co  which  was  doing  the  street-railway  business  and  the  elec- 
tnc-light  business  of  the  city  of  Atlanta  of  $23,467,600. 

And  on  that  issue  of  stock  of  something  like  $10,900,000,  the  com- 
pany m  1912  had  been  paying— and  this  is  why  I  say  there  is  a  con- 
trast betwe^en  the  situation  in  Georgia  and  the  situation  in  Massa- 
chusetts—the company  had  been  paying,  for  a  number  of  years- 
one  or  two  or  three  years,  I  think  it  was— a  dividend  of  8  per  cent 
on  the  common  stock  and  a  dividend  of  5  per  cent  on  the  preferred 
stock  at  that  time. 

Prior  to  that  time  they  had  paid  a  smaller  dividend  of  6  per  cent 
I  can  not  go  back  over  it  year  by  year,  but  for  a  number  of  years 
past  they  had  been  earning  and  they  had  been  paying  a  dividend 
and  during  the  two  years  prior  to  1912  they  had  been  paying  a  divi- 
dend of  8  per  cent  on  the  common  stock  and  5  per  cent  on  the  pre- 
ferred stock.  At  that  time,  in  1912,  they  had  a  surplus  also  in  their 
treasiwy. 

Commissioner  Gadsden.  After  setting  up  depreciation* 
Mr.  Jackson.  I  do  not  believe  that  depreciation  was  set  up  against 
it.  as  is  now  being  ruled.  ^ 

Commissioner  Gadsden  That  was  just  the  situation  testified  about 
Massachusetts;  they  paid  the  dividends  at  the  expense  of  the  cap- 
italization. *  ^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1485 

Mr.  Jackson.  I  understand;  but  the  difference  between  this  and 
Massachusetts  is  that  the  capitalization  in  Massachusetts  was  cash 
paid  in.  This  is  stock,  and  the  majority  of  it  water,  in  my  judg- 
ment and  opinion,  with  the  exception  of  $500,000  to  $600,000;  and 
then  a  part  of  that  stock  was  also  issued  in  payment  for  the  stock  of 
the  Atlanta  Gas  Light  Co. 

I  could  not  give  the  exact  proportion  in  which  that  stock  was  paid 
over,  but  a  part  of  it  was  used  as  a  consideration  for  buying  up  the 
stock  of  the  Atlanta  Gas  Light  Co.,  which  was  also  owned  by  the 
Georgia  Railway  &  Electric  Light  Co.  at  that  time. 

In  1911,  the  year  before  1912 — and  I  wish  you  would  bear  in 
mind  the  year  1912 — the  gross  earnings  of  the  company  were  $4,493,- 
309, 1  think  it  was. 

Their  net  earnings  that  year  were  $2,387,824,  if  my  figures  are 
correct. 

In  1912,  according  to  Poor's  Manual,  the  company  had  available 
for  dividends  $1,637,688. 

In  1912 — I  have  been  speaking  now,  of  the  Georgia  Eailway  & 
Electric  Light  Co. 

Commissioner  Gadsden.  This  is  railway,  gas,  and  electric  compa- 
nies' business,  is  it,  now  ? 

Mr.  Jackson.  Yes ;  it  owns  the  stock  of  the  Atlanta  Gas  Light  Co. 

Commissioner  Gadsden.  These  net  results  are  the  net  result  of  the 
three  utilities  in  Atlanta? 

Mr.  Jackson.  Yes. 

Commissioner  Gadsden.  Not  the  railway  alone? 

Mr.  Jackson.  I  gather  that  some  returns  from  gas  go  in  there. 

Commissioner  Gadsden.  I  do  not  want  the  commission  to  think 
that  there  was  ever  a  street  railroad  that  made  any  money  like  that. 

Mr.  Jackson.  I  think  my  recollection  of  the  amount  paid  by  the 
gas  company  was  only  a  very  small  part  of  that  money. 

Commissioner  Gadsden.  What  was  the  electric  light? 

Mr.  Jackson.  It  is  the  marvelous  Massachusetts  brain  operating 
in  Georgia  as  distinguished  from  operating  in  Boston.  I  think  it  is 
the  effect  of  the  climate. 

Mr.  "Warren.  Was  there  not  some  water  power,  too?  There  was 
some  water  power,  was  there  not  ? 

Mr.  Jackson.  Yes;  there  was  some  water  power  at  that  time. 

Now,  in  1912  we  come  to  another  company.  That  year  there  ap- 
peared on  the  scene  the  Georgia  Railway  &  Power  Co.  The  Geor- 
gia Railway  &  Power  Co.  was  incorporated  at  approximately  that 
time. 

I  want  you  to  go  back  in  the  history  of  the  Georgia  Railway  & 
Power  Co.  a  little.  I  could  spend  the  night  here  if  I  had  all  the 
facts  with  regard  to  the  various  companies  that  preceded  the  Geor- 
gia Railway  &  Power  Co.,  but  I  wish  to  mention  a  few  of  them. 

There  was  the  Atlanta  Power  Co.,  which  had  a  capitalization  of 
$50,000  and  appears  on  the  scene  at  one  time  as  subscribing  for  a 
million  and  a  half  dollars  of  stock  of  the  Georgia  Power  Co.;  that 
is  another  company — not  the  Georgia  Railway  &  Power  Co.,  but 
the  Georgia  Power  Co.j  and  some  $1,500,000  of  bonds  of  the  Geor- 
gia Power  Co. 


i 


1486    PROCEEDINGS  OF  FEDERAL  ELECTBIC  RAILWAYS  COMMISSION. 

There  is  another  company  which  comes  into  the  scene,  the  Blue 
Ridge  Electric  Co.,  which  was  capitxilized  at  $i>0,000,  with  a  bond 
issue  of  $1,350,000,  I  believe. 

Now,  these  two  companies  were  formed  in  an  effort  to  reorganize 
what  was  known  as  the  North  Georgia  Electric  Co. 

The  North  Georgia  Electric  Co.  in  1908,  according  to  a  report 
made  by  Mr.  Charles  E.  Parsons,  liad  a  capital  stock,  authorized, 
of  seven  and  a  half  million  dollars.  It  had  bonds  authorized  of 
seven  and  a  lialf  million  dollars.  Of  the  stock  there  had  been  issueil 
only  $917,000,  and  of  the  bonds  there  had  been  issued  at  that  time 
something  like  $13,000,  with  the  exception  of  $450,000  that  were  held 
under  a  trust  agreement. 

The  assets  of  that  company,  with  that  authorized  stock  and  bondf?, 
the  assets  of  that  company  were  given  at  $884,704  in  this  report  of 
Mr.  Pai'sons. 

Tlien  there  comes  in  another  company,  the  Etowah  Power  Co., 
which  was  capitalized  at  $274,100. 

I  will  not  undertake  to  go  into  the  various  deals  between  those 
companies,  because  I  could  not  give  them  all  clearly  myself;  but 
tiie  long  and  the  short  of  it  is  that  out  of  those  three  companies 
comes  the  Georgia  Power  Co.,  which  starts  out  with  the  proposal  to 
issue  $20,000,000  of  bonds  and  $1,550,000  of  common  stock. 

They  go  back  to  tlie  railroad  commission  two  or  tliree  different 
times,  on  a  different  deal  each  time;  there  was  evidently,  from  read- 
ing the  record  of  it,  some  difficulty  in  getting  the  thing  financed, 
the  stock  and  bond  issues  all  properly  adjustSl;  but  the  long  and 
the  short  of  it  is  that  the  Georgia  Power  Co.  appears  ultimately  on 
the  scene  with  $10,000,000  of  bonds  and  $10,000,000  of  stock 

It  entei's  into  a  contract  with  the  Northern  Construction  Co. — 
and  here,  I  believe,  we  come  across  one  of  the  greatest  of  the  evils, 
in  my  judgment — we  come  to  the  Northern  Construction  Ck).  or  the 
Northern  Contracting  Ca,  one  or  the  other — and  the  Georgia  Power 
Co.  enters  into  contract  with  the  Northern  Construction  Co.  to  turn 
over,  for  the  development  of  certain  properties  in  north  Geoi*gia, 
the  $10,000,000  of  bonds  which  are  to  be  sold  to  finance  the  devel- 
opment, and  tlK?n  the  $10,000,000  of  stock  is  to  be  turned  over  to 
tliis  construction  company.  In  otlier  words,  the  bonds  and  tho 
stocks  of  this  company  are  practically  to  be  turned  over  to  this  con- 
struction company  for  the  development  of  the  company's  property. 

Now,  Ave  have  come  down  to  about  the  period  of  1911  or  1912. 
We  have  these  various  companies  centering  up  in  the  Georgia  Power 
Co.  with  $10,000,000  of  bonds  and  $10,000,000  of  common  stock. 

There  then  appears  on  the  scene  the  Georgia  Railway  &  Power 
Co.  with  an  authorized  bond  issue  of  $30,000,000,  $2,000,000  of  fir?^ 
pi-eferred  stock,  $10,000,000  of  second  preferred  stock,  and  $15,- 
000,000  of  common  stock. 

The  Chairman.  A  total  of  how  much? 
Mr.  Jackson.  A  total  of  $57,000,000. 

All  of  those  bonds  have  not  been  issued.  I  think  something  over 
half  of  them  are  to  be  issued.  They  are  to  be  issued  as  the  property 
develops.  But  that  is  what  (ieorgia  and  Atlnnta  are  looking  for- 
ward to. 

Now  you  have  come  down  to  the  situation  where  you  are  con- 
fronted with  two  companies:   The  Georgia  Railway  &*Electric  Co., 


m 


PBOCEBDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1487 

which  is  doing  the  street-railway  and  the  lighting  business  of  the 
city  of  Atlanta,  with  a  capitalization  of  $23,407,600  and  odd,  with 
more  bonds  authorized  there;  they  are  authorized,  ultimately,  to 
issue  $20,000,000  of  bonds  against  the  Georgia  Railway  &  Electric 
T^ight  Co. 

But  at  that  time  the  outstanding  securities  against  that  company 
Avere  $23,407,600;  that  is,  in  the  city  of  Atlanta,  doing  the  street- 
railway  and  electric-light  business  in  the  city  of  Atlanta  in  1911, 
paying  8  per  cent  dividends,  and  putting  up  a  money  surplus  in  their 
treasury,  and  having  available,  as  Poor's  Manual  shows,  for  divi- 
dends, m  the  year  1910,  $1,637,688. 

Now,  the  Georgia  Railway  &  Power  Co.  buys  out  the  Georgia 
Power  Co.  That  company  disappears  from  the  scene;  and  you  se^ 
only  the  Georgia  Railway  &  Power  Co.  owning  the  Georgia  Power 
Co.,  and  with  all  of  that  various  ramification  in  stock  running  back 
and  culminating  in  that  authorized  issue  of  $57,000,000  of  securities. 

The  Georgia  Railway  &  Power  Co.  now,  and  the  Georgia  Railway 
&  Electric  Light  Co. — ^the  Georgia  Railway  &  Power  Co.  makes  a 
lease,  and  this  lease  is  somewhat  different  in  its  results  from  the 
leases  that  I  have  heard  mentioned  here  in  New  York  as  to  their 
effects  on  the  company. 

I  think  that  like  the  leases  though  it  is  the  center  and  the  heart 
of  the  whole  trouble,  so  far  as  private  ownership  is  concerned. 

The  Georgia  Railway  &  Power  Co.  leases  all  of  the  properties  and 
franchises  of  the  Georgia  Railway  &  Electric  Co. 

In  consideration  of  that  lease,  it  guarantees  a  dividend  of  8  per 
cent  on  the  common  stock  of  the  Georgia  Railway  &  Electric  Co. 
and  5  per  cent  on  the  preferred  stock. 

It  turns  over  to  the  stockholders  of  the  Georgia  Railway  &  Elec- 
tric Co.— I  think  it  is  $3.12  per  $100  of  stock,  of  the  first  preferred 
stock,  and  then  turns  over— that,  bv  the  wav,  I  think,  in  round  num- 
bers amounted  to  something  like  $260,000;  $200,000  odd  of  the  first 
preferred  stock  which  it  turned  over  to  the  Georgia  Railway  &  Elec- 
tric Co.— then  it  turns  over  $10,000,000  of  second  preferred  stock  to 
the  stockholders  of  the  Georgia  Railway  &  Electric  Co.,  and  its  con- 
tract is  to  pay  this  dividend  annually  of  8  per  cent  on  this  stock,  5 
per  cent  on  the  preferred  stock,  to  pay  all  maintenance  charges,  to 
keep  the  property  up,  to  pay  all  taxes,  and  to  return  the  property 
in  as  good  shape  as  it  was  when  turned  over  to  them  at  the  expira- 
tion of  that  lease.    They  made  a  wonderfully  good  trade. 

That  year,  as  I  have  stated,  available  for  dividends  was  $1,637,688. 

For  some  reason  now,  which  I  can  not  account  for,  and  which  I 
should  like  some  expert  street-railway  man  to  account  for  for  me,  the 
next  year  the  earnings  go  down,  the  year  after  the  lease,  1912,  ap- 
parently, was  the  high-water  mark. 

In  1912,  according  to  Poor's  Manual,  they  had  available  for  divi- 
dends $1,430,805. 

In  1914  they  had  available  for  dividends  $1,365,242. 

In  1915  they  had  available  for  dividends  $1,231,461. 

Immediately  after  the  lease  the  money  which  was  available  for 
dividends  immediately  began  to  go  down.' 

Commissioner  Gadsden.  After  1912? 

Mr.  Jac^ksox.  Yes.  And  after  the  making  of  the  lease  between 
the  Georgia  Railway  &  Electric  Co.  and  the  turning  over  of  their 


J 


I 


( 


• 


1488    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

property  to  the  Georgia  Railway  &  Power  Co.,  the  earnings,  appar- 
ently, of  the  Georgia  Railway  &  Electric  Co.  began  to  go  down  im- 
mediately. 

Commissioner  Gadsdex.  ^Vliat  is  voiir  deduction  from  that? 

Mr.  Jackson.  I  can  not  account  for  it. 

Commissioner  Gadsdex.  Because  we  have  had  testimony  to  show 
that  that  was  the  trend  on  nearly  all  the  street  railway  companies 
throughout  the  country  after  1912. 

Mr.  Jacksox.  My  investigation  of  the  reports  of  the  Georgia  Rail- 
way &  Power  Co.  to  the  Railroad  Commission  of  Georgia  would  indi- 
cate that  their  income  from  the  street  railways  at  that  time  did  de- 
crease. However,  they  still  had,  and  I  want  to  call  the  attention 
of  the  commission  to  this— that  figure,  there,  of  $1,637,000  the  year 
that  lease  was  made— and  this  is  what  gets  into  the  Atlanta  citizen's 
mmd  who  has  studied  this  subject  out— that  amount  was  sufficient 
to  have  oaid  a  dividend  of  over  80  per  cent  on  Mr.  Hurt's  little  Con- 
solidated back  there.  It  was  sufficient  to  have  paid  a  dividend  of 
over  42  per  cent  on  the  combined  stocks  of  these  companies  which 
went  m  to  make  up  the  Georgia  Railway  &  Electric  Co.  the  year 
that  lease  was  made. 

All  of  that  money,  all  of  that  stock,  in  the  minds  of  the  public, 
99  per  cent  of  it,  is  water.  We  are  confronted  with  this  loss.  We 
are  confronted  with  another  situation  with  regard  to  it,  and  if  the 
war  had  not  come  on  and  no  other  catastrophe  had  come  on  here  is, 
in  my  judgment,  the  thing  which  would  have  caused  the  Georgia 
Railway  &  Power  Co.  insuperable  trouble  in  the  end,  if  the  law  with 
regard  to  rate  making,  as  I  understand  it,  is  strictly  construed  and 
followed  out. 

In  their  issues  of  bonds  they  are  limited  to  a  cei-tain  amount  of 
improvements   from   their  bonds.     In  other  words,  if  they  sell  a 

bond— and  all  the  bonds,  I  believe,  have  been  sold  at  from  80  to  85 

I  think  the  limit  of  improvements  from  issues  of  bonds  is  75  to  80 
per  cent.  The  balance  has  to  come  from  somewhere.  They  have  to 
get  the  money  from  somewhere  to  put  it  in.  They  can  not  get  the 
money  from  their  stock,  because  their  stock  has  all*  been  issued  prac- 
tically, and  if  it  were  not  issued,  no  one  would  buy  the  stock,  in  my 
judgment,  to  put  the  money  into  it  on  account  of  these  securities 
and  on  account  of  the  conditions.  But  they  have  got  to  get  for  each 
$1,000  bond  that  they  sell  and  put  into  improvements  the  difference 
between  85  and  par  to  make  up  the  thousand ;  then  they  have  got  to 
get  the  difference  between  the  amount  they  are  permitted  to  invest 
from  their  bonds  from  the  balance.  In  other  words,  they  have  got 
to  get  something  like  30  to  40  per  cent  of  the  amount  that  goes  in 
from  their  earnings. 

Now,  I  know  of  no  law  or  theory  of  law  which  justifies  rate 
making  for  the  purpose  of  making  permanent  improvements.  When 
the  application  of  the  Georgia  Railway  &  Power  Co.  was  made 
during  the  course  of  the  war  for  authority  to  increase  all  rates  on 
electricity  and  authority  to  increase  the  street-railway  fares  one 
of  the  pleas  which  was  made— and  I  believe  it  was  the  deciding  plea 
that  controlled  the  issue— was  that  there  were  certain  contracts 
which  had  been  made  for  the  development  of  certain  of  the  prop- 
erties of  tliat  company  in  north  Georgia ;  that  unless  they  got  that 


i^ 


^1 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1489 

money  from  their  fares  and  their  sales  of  current  they  simply 
could  not  meet  their  obligations  in  connection  with  their  contracts. 
One  of  their  obligations  was  the  transfer  of  a  dividend  from  a 
dividend  to  a  fixed  charge ;  that  is,  8  per  cent  on  that  common  stock 
of  the  Georgia  Railway  &  Electric  Co.  and  5  per  cent  on  the  preferred 
stock  has  now  become  a  fixed  charge  against  the  people  of  Georgia 
in  the  development  of  that  property.  They  have  got  to  get  the 
money  from  somewhere  to  make  up  this  difference  between  the 
amount  that  they  sell  their  bonds  for,  the  amount  which  they  put 
into,  not  keeping  up  their  property,  but  in  developing  their  prop- 
erty in  north  Georgia.  And  the  citizens  of  Atlanta  who  have  de- 
voted some  study  to  it  do  not  feel  that  the  property  there  in  the 
city  of  Atlanta  should  be  used  for  the  purpose  of  developing  the 
property  up  there,  when  these  fares  and  the  rates  which  are  be- 
ing charged  are,  in  their  judgment,  exorbitant. 

Now,  I  want  to  call  attention  to  a  few  figures  which  I  have  gotten 
hastily  from  the  reports  of  the  company  and  showing  the  results 
of  the  street-railway  operations  there  in  Atlanta.  According  to  the 
reports  made  to  the  railroad  commission  the  operating  revenues  of 
the^  street  railway  for  the  year  ending  December  31,  1918,  were 
$e3,731,212.41.  The  operating  expenses  (luring  that  year,  according 
to  this  report,  if  I  understand  it  correctly,  were  $2,144,570.31 ;  mak- 
ing the  net  from  the  railway  alone  $1,586,642.10. 

Now,  bear  that  figure  in  mind  and  consider  this:  That  applies 
purely  to  the  operation  of  the  street  railway.  Now,  they  also  got 
by  this  lease  an  electric-light  plant.  They  got  their  customers,  they 
got  the  business  in  the  city  of  Atlanta,  which  should  also  be  added 
to  that.  To  arrive  at  that,  the  railroad  commission  in  its  decision 
stated  that  the  average  price  paid  for  current  in  the  city  of  At- 
lanta was  a  little  over  1.3  cents  per  kilowatt  hour.  I  wish  to  say 
that  I  do  not  agree  with  that.  I  think  there  is  a  wide  difference 
there,  but  I  am  accepting  their  figures. 

Commissioner  Gadsden.  1.3  cents? 

Mr.  Jackson.  1.316 — that  that  is  the  average  rate.  If  you  will  in- 
vestigate you  will  find  that  there  are  only  149  customers  of  the 
Georgia  Railway,  Light  &  Power  Co.  that  can  ever  get  down  to  that 
rate,  out  of  all  of  their  thousands  of  customers.  Therefore,  I  do 
not  think  it  is  a  correct  statement  of  the  average,  but  I  accept  it, 
as  the  railroad  commission  has  stated  it  is  the  average  and  it  has 
been  used  several  times  by  the  company  as  being  the  average.  There 
are  10,950  homes  in  the  city  of  Atlanta  that  use  electricity.  Charg- 
ing the  company  simply  with  the  average  rate  for  current  or  a  lit- 
tle above  it,  1.4  cents,  and  figuring  that  the  average  home  in  At- 
lanta uses  $4  worth  of  current  a  month,  that  would  make  the  net 
income  from  electricity  $433,620,  simply  from  Atlanta  homes. 

Mr.  Warren.  May  I  interrupt 

The  Chairman.  Is  not  your  average  pretty  high  ? 

Mr.  Warren.  Do  you  know  how  low  the  charge  goes?  Does  not 
the  charge  for  some  customers  go  as  low  as  4  mills  ? 

Mr.  Jackson.  Yes ;  to  the  149  that  I  refer  to. 

Mr.  Warren.  That  includes  them? 

Mr.  Jackson.  We  have  an  extraordinarily  low  manufacturing 
rate  in  the  city  of  Atlanta. 

100C43**— 20— VOL  2 32 


il 


14yU    PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioiior  Gadsden.  Could  not  you  get  tlie  exact  figuros  from 
the  commission?  t>  ^ 

Mr.  Jackson.  Yes;  I  have  tliem. 

(^ommissioner  Gadsden  Wliy  do  you  estimate  them  when  the 
exact  figures  are  available? 

Mr.  Jackson.  I  estimate  it  because  I  can  not  get  the  exact  amount 
of  current  each  man  burns  in  that  way. 

Commissioner  Gadsden.  I  think  your  ?4  is  prettv  liberal. 

Mr.  Jackson.  Well,  you  could  reduce  it 

Commissioner  Gadsden.  Especially  at  a  low  rate  like  that. 

^/,^\^  ,'^^''^\  ^"*  ^Jr'''  '^''."""^'  ^^  ^^'''^'  "That  is  where  my  quarrel 
with  the  low  rate  is  There  is  not  one  of  those  10,950  homes  that  can 
ever  get  a  single  kilowatt  of  current  at  that  i-ate.  The  lowest  rate 
that  they  can  ever  pay  for  a  single  kilowatt  of  current  in  an  Atlanta 
residence  is  4  cents;  that  is  mv  recollection. 

Commissioner  Gadsden.  AVhat  is  the  highest  they  pav^ 
Mr.  Jackson  Eight  cents.  It  was  raised  from*7\o  8  cents  bv 
this  hearing  Now,  in  the  city  of  Atlanta  there  are  3,545  business 
customers  of  the  company.  'Their  maxinuim  is  8  cents  I  have 
figured  as  an  average  for  them— and  while  possibly  I  have  fieiued 
the  home  average  too  high,  I  think  I  have  possibly  figured  this  a 
Jittle  too  low— tliat  the  average  business  customer  will  nse  which 
would  amount  to  something  like  $15.  That  would  make,  after 
cJiarging  the  company  the  average  price  and  deducting  it,  their 
income  from  that  class  of  customei^  $518,988. 

,Tj^*fy  J^ave  1,375  retail  power  users  in  Atlanta.  I  think  I  figured 
a  ittle  bit  low  here  again.  I  have  figured  thev  would  average  500 
kilowatts  and  an  average  bill  of  approximately  $21.  Ajjain  charcr- 
ing  the  company  simply  its  average  rate,  I  find  that  the  income  from 
liToonnr^^    '^^''^^^^    ""^    customers    on    those    averages    would    be 

«pl,loo,i)Uo. 

Xow,  to  get  the  figures  for  last  year— for  the  year  1918— the  rate 
-was  noj;  raised.  To  figure  what  it  would  have  l)een  if  it  was 
at  the  (-cent  rate  I  have  deducted  $150,580.  to  get  it  at  the  7-ceiit 
i^t«.  Ihe  earnings,  then,  for  the  companv  for  that  vear  fi-om  these 
three  classes  of  customers  alone  would  l^  $1,033,028,  which  should 
also  be  added  to  that  net,  up  there,  which  comes  in  from  the  sti-eet 
railway  under  this  lease,  which  this  companv  is  drawing  under  this 
lease.  ' 

Commissioner  Gadsden.  That  is  not  net,  is  it?    That  is  gross 
Mr.  Jackson.  Xo:  I  gave  you  the  net  income,  too;  I  ^aye  vou 
the  operating  expenses.  *^ 

Commissioner  Gadsden.  That  is  gross  for  tlie  light  and  power 
business,  is  it  not?  -  «=•  i 

Mr.  Jackson.  No;  you  did  not  catch  what  T  was  doing. 

Commissioner  Gadsden.  No.  . 

Mr.  Jackson.  For  instance,  the  companv  savs  the  average  price  of 
electricity  is  1.3  cents.  Xow,  out  of  each  custonier's  bill  there  I  have 
deducted  that  amount  In  other  words,  I  have  said  that  the  cost  to 
the  company  was  simply  the  average  at  which  it  savs  it  sells  power  in 
Atlanta,  which  I  think  is  a  fair  base  to  figure  on.  If  the  avera<'e  sell- 
ing price  in  Atlanta  is  1.;^— if  tliat  is  the  average,  then  it  is  fair  to 
assume  that  it  does  not  cost  the  companv— that  their  operatino^  ex- 
penses are  not  more  than  the  average  selling  price  in  the  city    "So  t 


PBOCEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION.    1491 

have  deducted  that,  and  I  figure  that  that  figure  is,  in  my  judgment, 
net.    Of  course,  it  is  subject  to  the  criticism  that  it  is  an  estimate. 

That  is  only  three  classes  of  customers,  mark  you.  That  leaves  the 
cream  of  the  business  to  the  company — that  is,  for  manufacturing. 

Now,  there  is  another  source  of  income  which  comes  in  there  which 
also  has  to  be  borne  in  mind.  The  Georgia  Railway  &  Power  Co. — 
the  circular  selling  its  stock  refers  to  its  contract  for  G5  years  for  the 
sale  of  electric  current  to  the  Georgia  Railway  &  Electric  Co.  There- 
fore, there  should  properly  be  added  also  the  profit  which  the  Georgia 
Railway  &  Power  Co.  is  making  on  the  sale  of  that  electricity  to 
that  company.  If  my  recollection  of  Mr.  Arkwright's  evidence  before 
the  railroad  commission  is  correct,  the  amount  of  current  which  that 
company  used  in  the  city  of  Atlanta  during  the  year  1917  was  some- 
thing like  35,000,000  kilowatts — quite  a  considerable  sum,  which 
should  also  be  added  to  tlie  profits  from  that  lease  which  this  Georgia 
Railway  &  Power  Co.  is  drawing  from  the  street  railway. 

I  want  to  call  your  attention  to  this :  The  operating  revenue  of  the 
railway — I  am  leaving  out,  now,  the  electric  current — increased  ac- 
cording to  the  reports  to  the  commission,  during  the  year  1918,  $587,- 
084.38.  That  is  strictly  the  railway.  The  operating  expense  increased 
during  the  year  1918,  $433,011.10.  In  other  words,  the  operating  rev- 
enues increased,  during  the  year  1918,  $154,073  more  than  the  operat- 
ing expense  increase.  The  i*evenue  is  going  up  above  the  operating 
expense. 

The  total  operating  revenue  of  the  Georgia  Railway  &  Power  Co. — 
this  is  from  all  sources,  now — during  the  year  1918  was  $7,584,362, 
an  increase  of  $920,004.84. 

The  Chairman.  Over  the  prior  year? 

Mr.  Jackson.  Yes.  Tlie  total  operating  expense  in  1918,  according 
to  these  reports,  Avas  $4,790,940.40,  an  increase  over  1917  of  $781,- 
147.97.  In  other  words,  the  operating  revenue  in  1918  increased 
$139,000  and  odd  more  than  the  operating  expenses  increased. 

I  want  to  call  your  attention  also  to  this  fact — and  this  brings  you 
back  to  our  contention  with  i*egard  to  the  railway  in  the  cit}-  of 
Atlanta  being  used  to  carry  these  developments:  ^Miile  the  operating 
re\'enue  of  the  railway  increased  $154,000  and  odd  more  than  its  cx- 
l>ense,  the  operating  revenue  of  all  of  tlie  companies  combined  in- 
creased less  than  that — something  like  $139,000,  if  my  figures  arc 
correct,  and  I  think  they  are. 

Now,  the  operating  revenue — I  want  to  go  back,  because  it  shows 
each  year — the  operating  revenue  is  increasing  and  keeping  ahead 
of  the  operating  exj^ense  each  year. 

The  operating  revenue  on  the  road  in  1917  was  $3,144,128.03.  The 
oiierating  expense  of  the  road  in  1917  was  $1,711,559.22,  leaving  net 
from  the  road  $1,532,508.81.  The  operating  revenue  increased  in 
1917  $308,763.54,  th6  operating  expenses  increased  $205,539  and  odd 
c^nts,  makinir  the  revenue  increase  over  the  operntins:  expense  of 
$103,000  during  that  year. 

Commissioner  (iadsden.  Can  you  give  us  the  increased  charges  on 
the  capital  account  as  you  go  along? 

Mr.  Jackson.  Xo. 

Commissioner  Gadsden.  I  suppose  they  were  spending  money  on 
bett^nnents  and  cars,  so  tlie  interest  charges  were  iiicreitsing,  but  it 


1492    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

would  be  interesting  to  see  if  that  increase  was  not  more  than  con- 
sumed by  the  mcreased  capital  account. 

Mr.  Jackson.  In  connection  with  these  figures  I  wish  to  call  at- 
tention to  this :  That  m  my  examination  of  the  report  in  the  rail- 
road commissioner's  office  I  found  a  difference  in  figures  which  was 
evidently  an  error;  but  still  should  these  figures  ever  come  into 
question  one  way  or  the  other  I  wish  to  call  attention  to  that. 

ilie  1J18  report  in  the  railroad  commission's  office  gives  the  oper- 
ating revenue  of  the  road  as  $3,056,872.86  in  a  certain  place.  The 
liL]'7a^'^AP''^^  '''^'^^  ^'''^  apparently  intended  for  that  same  figure, 

.J^  <l^l^^'!  .f  back  again-the  operating  revenue  of  the  road 
was  ;t>^,»do,478.18  and  the  operating  expense  $1,506,019.68,  leaving 
the  net  income  from  the  railway  alone  $1,329,448.50. 

Aow,  I  have  not  each  year  gone  over  those  details  with  regard 
to  the  rates  from  current;  but  I  wish  the  commission,  in  considering 
tins  thing,  to  bear  in  mind  our  contention  that  each  year  to  that  net 
from  the  railwa,y  should  be  added  the  net  from  the  electric-light 
business  m  the  city  of  Atlanta,  which  the  Georgia  Railway  &  Power 
L  o.  took  over  by  virtue  of  this  lease. 

Now,  before  passing  into  the  general  subject  with  regard  to  this, 
there  was  one  other  item.  The  first  six  months  of  1919  the  operat- 
mg  revenue  of  the  road  was  given  at  $2,090,051.90.  The  expenses 
given  m  that  statement  as  $1,301,794.67,  leaving  the  net  from  the 
railway  for  the  first  six  months  of  this  year,  $788,257.23.  The  oper- 
ating expense  increased  during  that  time  $273,546.  The  operating 
revenue  mcreased  during  that  time  $250,708.  For  the  first  time  the 
expense  increased  apparently  more  rapidlv  than  the  revenue.  But 
to  relieve  that,  the  street-railway  returns  for  July  show  that  during 
the  month  of  July  the  street  railway's  income  was  $106,142.66  greater 
than  it  was  during  July  of  last  year,  so  that  you  can  see  that  the 
same  thing  is  really  keeping  up  now  and  that  operating  revenue  is 
really  going  up  all  the  time  faster  or  in  a  greater  amount  than  the 
operating  expense. 

Now,  this  situation :  Go  back  now  in  mind— and  this  is  why  I  say 
that  municipal  ownership 

The  Chairman.  You  have  completed  your  detailed  analysis,  have 
you  f  ' 

Mr.  Jackson.  Yes;  practically.  The  Atlanta  man  who  has  studied 
this  subject— and  a  number  of  them  have— looks  to  that  capitaliza- 
tion in  1902  of  $3,870,000  or  thereabouts,  $3,000,000  or  $4,000,000  of 
capital  stock  outstanding  against  these  properties  and  a  bond  issue 
of  a  little  over  $7,000,000  standing  against  them  in  1902,  and  they 
turn  to  1912  and  see  overshadowing  them  in  the  Atlanta  properties 
alone  $23,000,000,  and  then  this  Georgia  Railway  &  Power  Co  on 
top  of  it,  making  a  total  capitalization  that  will  be  in  force  at  the 
expiration  of  30  years,  or  less  than  30  years,  of  $87,000,000  against 
these  properties.  And  it  does  not  set  well  with  us.  Those  of  us  who 
believe 

The  Chairman.  What  conclusion  do  you  derive  from  the  factsi* . 

Mr.  Jackson.  The  conclusions  that  I  derive  from  them,  Mr.  Conl- 
missioner,  are  that  any  way  you  get  at  it,  there  is  a  large  volume  of 
water  in  this  property  that  only  an  audit  and  a  valuation  will  ever 


PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION,    1493 

bring  out  and  prove  conclusively  as  to  what  it  was,  and  that  there  is 
a  large  volume,  millions  of  dollai-s; 

For  instance,  at  the  time  this  lease  was  made  and  this  whole  prop- 
osition came  up  before  the  Railroad  Commission  of  Georgia  for  ap- 
proval, two  of  our  commissioners,  when  the  proposition  first  came 
up,  declined  to  sanction  this  issue  of  stock.  I  think  they  cut  off  of 
the  amount  that  was  applied  for  10  or  11  millions  of  dollars. 

The  Chairman.  Have  accountants  examined  the  property  to  ascer- 
tain the  amount  of  the  original  cost? 

Mr.  Jackson.  If  accountants  representing  the  public  have  ever 
done  that  I  have  never  come  in  contact  with  their  figures. 

The  Chairman.  So  the  commission  has  only  made  the  valuation 
in  the  way  that  you  have  outlined  in  the  beginning  of  your  state- 
ment ? 

Mr.  Jackson.  Yes.  The  commission  has  been  once  or  twice  on  the 
verge  of  making  a  valuation  of  the  property.  At  one  time  back  a 
few  years  ago  there  was  a  fight  between  the  city  of  Atlanta  and  the 
company,  one  of  these  recurring  pleasantries  which  will  always  occur 
when  private  ownership  is  in  existence ;  and  they  were  on  the  verge 
of  having  a  valuation  and  the  then  city  administration  and  the  com- 
pany got  together  and  the  $5,000  or  more  that  was  in  sight  to  pav  for 
a  valuation  disappeared  and  the  subject  of  valuation  was  forgotten. 

The  Chairman.  I  think  they  might  as  well  have  forgotten  it,  if 
you  only  had  $5,000  to  do  the  job  with. 

Mr.  Jackson.  Now,  this  last  time  that  the  question  of  valuation 
came  up  there  was  also  a  question  of  money  involved,  but  there  was 
also  the  question  of  who  should  make  the  valuation.  Tlie  railroad 
commission  had  handed  down  a  decision  using  as  a  basis  for  their 
valuation  the  valuation  that  had  been  made  by  the  employees  of  the 
company. 

The  Chairman.  That  is  they  took  the  inventory  ? 

Mr.  Jackson.  They  took  the  inventory  and  went  over  it.  And 
from  their  knowledge  of  the  properties  they  took  that  and  formed 
their  conclusions  from  that. 

The  Chairman.  And  what  conclusions  did  they  reach? 

Mr.  Jackson.  I  can  give  you  the  exact  figures.  I  think  the  total 
valuation  of  all  the  properties  together  was  $39,000,000— $35,000,000 
to  $39,000,000.  But  neither  the  commission  nor  the  city  were  satis- 
fied with  that  valuation,  I  think.  Then  the  proposal  came  that 
experts  should  be  appointed  and  a  certain  amount  should  be  put  up 
by  the  city  and  the  power  company  to  make  a  valuation.  Then 
came  the  city's  contention  that  in  this  valuation  which  was  then 
made  the  city  should  have  the  right  to  select  one  of  the  valuers  of 
the  property,  and  there  is  the  snag  that  the  present  valuation  has 
been  held  up  on.     In  other  words 

Commissioner  Gadsden.  Who  objected  to  that,  the  company  or  the 
commission  ? 

Mr.  Jackson.  The  commission  objected  to  it. 

Commissioner  Gadsden.  Are  you  before  us  in  the  sense  of  an  ap- 
peal ,from  the  action  of  your  own  commission  or  from  the  companv's 
action  ?  *^ 

Mr.  Jackson.  No,  sir;  I  am  here  before  you  not  appealing  from 
our  commission,  because  we  can  settle  our  own  difficulties  down  there 
between  us. 


1494    TROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Commissioner  Gadsden.  But  to-day  you  are  not  protesting  against 
their  action  ? 

Mr.  Jackson.  Tersonally  I  am  not  in  accord  with  the  commission's 
findmg  on  that,  and  I  am  hoping  when  the  supreme  court  hands  down 
Its  decision— they  have  held  it  up  a  long  time,  so  you  gentlemen  are 
evidently  not  tlie  only  ones  worrying  over  these  problems— but  the 
decision  is  now  before  the  supreme  couii;,  unless  the  decision  has  been 
handed  down  since  I  left  Atlanta,  on  which  this  whole  question 
hinges. 

I  am  trying  to  give  to  you  gentlemen  here  a  picture  of  what  to  my 
mfhd  proves  conclusively  the  impossibility  of  a  privately  owned  con- 
cern and  a  city  and  a  perfectly  honest  and  competent  commission  ever 
settling  this  problem.  In  other  words,  that  as  long  as  there  is  the 
interest  of  the  public  and  the  interest  of  the  property  owner  trying 
to  get  his  returns  out  of  it,  tliere  will  be  an  iitterminable  row  that 
can  not  be  settled.  But  I  wish  to  be  particularly  understood  as  not 
appealing  to  you  from  the  situation  there.  I  am  simply  giving  you 
a  picture  of  the  conditions  as  they  strike  me. 

The  Chairman.  What  street-car  fare  has  been  charged  down 
there  ? 

Mr.  Jackson.  Six  cents  at  present. 
The  Chairman.  When  did  it  become  G  cents? 
Mr.  Jackson.  I  think  it  went  into  effect  about  April  last,  if  my 
recollection  is  correct — April  or  May. 

The  Chairman.  Does  the  company  keep  its  propertv  in  good  con- 
dition? 

Mr.  Jackson.  I  should  say  that  the  property  was  in  fair  condition 
in  the  city.  I  think  we  suffer  somewhat  from  flat  wheels,  and  a  few 
other  things. 

Mr.  Arkwright.  That  has  nothing  to  do  with  maintenance, 
does  it?  ' 

Mr.  Jackson.  No,  no ;  and  the  wiring. 

Mr.  Warren.  The  commission  spoke  of  it  as  being  especially  well 
maintained,  did  it  not  ? 

Mr.  Jackson.  Yes.  As  I  stated  at  the  outset  I  think  for  a  privately 
managed  property— in  other  words,  if  we  have  got  to  have  private 
ownership,  we  would  rather  have  the  present  men  in  charge  of  it  than 
any  others  that  I  know  of.  But  we  are  violently  opposed— we  are 
sti-ongly,  not  violently,  opposed  to  those  gentlemen  remaining  in 
charge  of  the  situation  there. 

Xow,  I  have  devoted  so  much  time  to  that,  but  I  want  to  call  your 
attention  to  a  few  things  about  this  situation  generally. 

The  Chairman.  Will  you  bear  in  mind  that  you  have  to  leave  here 
jit  10  o'clock  ? 

Mr.  Jackson.  Yes;  but  I  would  pjrefer,  because  I  have  not  seen 
these  facts  presented,  to  miss  that  train  than  miss  the  opportunity  of 
giving  them  to  you  as  to  the  situation  elsewhere.  It  will  take  me  only 
a  few  minutes. 

I  want  to  call  your  attention  to  the  situation  as  to  the  only  com- 
modity that  lias  been  mentioned  in  this  country  that  has  ^^one  down 
in  price.  At  the  very  time  that  the  Georgia  Railway  &  l^ower  Co. 
was  appealing  to  the  Railroad  Commission  of  Georgia  for  a  raise 
m  its  electric  rates,  Mr.  Beck,  chairman  of  the  Ontario  Commis- 
sion, was  before  the  Water  Powers  Committee  of  Congress  here 


proceedings  of  federal  electric  railways  commission.  1495 

giving  the  history  of  that  wonderful  development  of  the  munici- 
palities up  thei*e  in  handling  the  electric-light  problem  and  the 
electric-current  problem,  where  the  rates  have  been  reduced — the 
rates  from  which  we  are  suffering  in  Atlanta  and  Georgia — down 
to  two,  three,  and  in  some  cases  five  times  below  what  Georgia  has. 
During  the  years  that  this  country  has  been  at  w^ar  the  rates  in 
Canada  have  been  going  down  each  year  on  these  municipally 
operated  power  plants  through  the  hydroelectric-power  commis- 
sion. They  are  just  about  to  indulge  in  the  operation  of  their 
street  railways  and  their  interurban  railways;  that  is  the  next  stej) 
in  that  development  up  there.  All  of  this  problem  is  being  handled 
in  that  way. 

Xow,  I  have  heard  the  question  here  of  the  lack  of  initiative  and 
of  development.  Those  plants  up  there,  according  to  reports  Avhich 
come  down,  are  developing  power  more  rapidly  than  the  water 
powers  down  in  Georgia  under  the  wonderful  management  which 
we  have  there  under  private  ownership;  and  the  difference  between 
the  capital  accounts  is  simply  appalling.  I  look  at  the  situation  over 
the  whole  State  of  Georgia  and  I  see  companies,  owning  companies 
and  leasing  companies,  and  I  see  a  capitalization  being  piled  up 
against  the  State  and  against  these  properties  of  approximately 
$175,()(K),0()0-plus  and  a  development  of  horsepower  in  the  State  of 
(ireorgia  of  only  280 .(KK)  horsepower;  and  I  see — if  Mr.  Beck  was 
here  he  could  confirm  it — that  in  Canada  they  have  developed  310,- 
(K^i)  horsepower  and  they  have  spent  only  $70,000,000  and  they  ex- 
\wct  to  develop  by  1921,  750,000  horsei>ower  and  by  that  time  their 
capital  expenditures  were  to  l)e  in  the  neighborhood  of  $110,000,000 — 
if  my  memory  is  correct — approximatelv. 

Therefore  when  a  man  sj^eaks  to  me  of  the  lack  of  initiative  and 
going  ahead  I  look  at  what  those  225  towns  have  done  up  there. 
Then  I  go  across  to  the  situation  in  England ;  and  this  was  the 
situation  that  I  wished  to  call  to  your  attention,  because  I  have  not 
seen  it  mentioned  in  any  of  the  hearings,  and  certainly  as  often  as 
England  has  been  mentioned  and  the  conditions  over  there,  this  thing 
has  not  l)een  mentioned  that  I  have  seen. 

Last  year,  1918,  there  was  a  hearing  of  a  committee  of  Parlia- 
ment that  I  compare  very  much  to  this:  only  instead  of  making 
recommendations  as  to  saving  the  whole  situation  they  were  ap- 
pealed to  by  the  body  of  representatives  of  the  tramways  of  Great 
Bntain  to  get  an  amendment  of  the  law  so  that  the  board  of  trade 
in  England  would  have  the  autliority  to  raise  the  rates.  Apparently 
there  was  some  defect  in  the  law  from  the  standpoint  of  the  tram- 
ways that  the  board  of  trade  did  not  have  the  authority  to  raise 
the  rates,  and  as  an  emergency  proposition  they  appealed  to  Par- 
liament. 

Xow  this  is  what  took  place :  The  spokesman  for  the  tramways  of 
England,  or  i-epreseiiting  himself  as  the  spokesman  of  the  tram- 
ways of  England,  said  that  he  represented  80  corporations — and  in 
England,  as  you  know,  the  corporation  means  the  city  and  not  a 
corporation  as  we  speak  of  it.  When  lie  presented  his  data  to  the 
committee  of  Parliament  it  w^as  found  that,  instead  of  presenting 
the  data  with  regard  to  80  cities,  he  had  presented  the  data  with 
regard  to  only  5  cities,  and  a  member  of  the  committee  asked  him, 
"  Well,  you  say  you  are  representing  80  cities.    Do  you  mean  that 


1496    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION*? 

these  5  cities  who  are  presenting:  their  figures  here  are  on  a  chari- 
table expedition  for  the  benefit  of  these  others,  that  you  have  just 
volunteered  this  ?  Why  are  not  the  figures  here  with  regard  to  these 
others?"  He  says,  "  Before  we  can  pass  on  this  situation  we  want 
the  figures  with  regard  to  each  of  those  80  municipalities."  And  the 
figures  were  presented  to  that  committee,  and  this  developed— that 
out  of  80  towns  and  cities  operating  their  own  tramways,  in  the 
middle  of  1918  at  the  time  of  this  great  war  stress,  there  were  only 
24  of  those  80  who  were  then  charging  the  maximum  fare  that  was 
permitted  to  the  tramways.  All  the  others  were  charging  below 
the  maximum. 

The  Chairman.  What  is  the  maximum? 

Mr.  Jackson.  It  was  in  the  neighborhood  of  2  cents,  2  or  3  cents ; 
I  do  not  recall  accurately.     It  is  about  that. 

Commissioner  Meekkr.  It  varies  from  city  to  city? 

Mr.  Jackson.  It  varies;  yes,  very  much.  Now,  there  were  44  of 
them  who  were  charging  the  maximum  on  workmen's  fares,  which 
were  less  than  the  ordinary  fares.  Now,  that  is  the  situation  with 
regard  to  the  municipally  operated  tramway  in  the  time  of  war 
stress  in  England  at  the  very  time  this  country  is  being  harried  to 
raise  the  rate. 

When  you  come  down  to  the  facts,  there  are  only  these  few  cities 
appealing  there  in  England,  and  back  of  them  are  a  whole  host  of 
the  privately  operated  companies,  and  this  was  the  appeal  of  the 
privately  operated  company,  and  the  spokesman  for  the  tramways 
in  London  said  in  making  this  appeal — I  do  not  quote  his  exact  lan- 
guage— we  wish  (that  is,  the  privately  owned  tramways  wish)  you 
to  bear  in  mind  that  in  raising:  our  rates  we  wish  to  get  a  rate  suffi- 
cient to  make  good  our  capital  before  the  municipality  takes  it 
over,  because  that  day  is  near.    The  few  remaining  roads 

The  Chairman,  Can  you  supply  this  commission  with  a  copy  of 
that  report? 

Mr.  Jackson.  I  could  not,  but  you  can  get  it  at  the  Congressional 

Library,  where  I  saw  it. 

The  Chairman.  Mr.  Ogburn,  will  you  see  that  the  commission  is 
furnished  with  a  copy? 

Commissioner  Gadsden.  I  think  I  can  get  a  copy  of  it. 

Mr.  Jackson.  I  wish  to  call  attention  that  while  these  capital 
accounts  have  been  going  up  in  America,  and  while  cities  like  Boston 
can  not  operate  on  a  10-cent  fare — that  simply  staggers  me  when  I 
hear  it,  I  have  profound  respect  for  the  men  and  the  State,  but 
when  I  am  confronted  with  the  fact  that  Boston  can  not  operate  on 
a  10-cent  fare,  and  yet  that  the  city  of  Glasgow  can  pay  for  its  entire 
street-railway  system,  and  I  know  that  the  trackage  is  not  as  great 
as  in  Boston*  but  that  it  can  pay  for  its  entire  street-railway  system, 
where  during  the  last  year  40  per  cent  of  the  travelers  on  that  road 
paid  a  fare  of  only  1  cent — and  I  wish  to  call  your  attention  to  this 
with  regard  to  Glasgow,  that  in  the  year  1915.  in  addition  to  their 
contribution  to  what  was  known  as  the  common  good,  they  paid  to 
the  dependents  of  their  men  serving  in  France  $400,000  and  odd,  and 
in  the  next  year  they  paid  $450,000  to  the  dependents  of  their  men 
serving  in  France,  yet  at  the  same  time  they  wii>ed  out  the  entire 
capital  debt  against  that  system. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1497 

Commissioner  Gadsden.  Would  it  help  you  to  understand  the  dif- 
ference if  you  realized  that  at  60  cents  an  hour  almost  all  the  5  cents 
goes  to  the  motorman  and  conductor  ? 

Mr.  Jackson.  I  appreciate  that  fact  that  there  is  a  large  difference. 

Commissioner  Gadsden.  Does  not  that  help  us  to  understand  why 
il>ey  can  not  charge  those  cheap  rates? 

Mr.  Jackson.  1  do  not  expect  to  get  a  1-cent  rate  in  America. 

Commissioner  Gadsden.  Well,  could  you  get  4  cents  when  nearly 
5  cents  goes  to  the  platform  men  ? 

Mr.  Jackson.  Well,  I  am  confronted  also  with  this  fact- 

Commissioner  Gadsden.  That  is  a  fact,  or  at  least  I  am  so  advised. 

Mr.  Jackson.  I  appreciate  that,  but  I  am  also  confronted  by  this 
fact,  that  in  the  city  of  San  Francisco  the  wages  are  up  and  they 
are  making  money  at  a  5-centfare,  but  in  the  city  of  Seattle — and 
this  is  one  of  the  great  troubles  which  was  mentioned  by  Mr.  Ainey 
this  morning;  my  whole  trip  to  Washington  was  repaid  hj  having 
heard  his  testimony ;  while  I  did  not  agree  with  all  he  said,  but  the 
clearness  and  all — but  one  thing  he  said  was  with  regard  to  publicity 
and  getting  proper  facts  before  the  public.  Xow,  in  our  situation 
in  Atlanta  Ave  have  been  agitating  for  some  time  there  to  get  legis- 
lation to  enable  the  municipality  to  do  its  own  business.  We  were 
confronted  with  an  advertisement  from  the  Georgia  Railway  & 
Power  Co.,  quoting  from  a  paper — I  think  it  is  the  Aera — in  which 
the  statement  was  made  that  the  city  of  Seattle  had  taken  over  its 
street  railways  and  that  they  had  at  once  found  out  that  they  had 
to  raise  the  fare  to  6  cents.  And  another  statement  was  that  Seattle, 
instead  of  making  money  out  there  out  of  this  situation,  was  losing 
money  at  the  rate  of  forty  to  fifty  thousand  dollars  or  more  per 
month. 

Well,  I  and  the  gentlemen  with  whom  I  was  associated  were  some- 
what astounded  at  that  and  we  wired  out  there  to  the  superintendent 
of  the  roads,  and  we  got  back  a  wire  that  the  city  of  Seattle  had  no 
idea  of  increasing  its  fare  to  6  cents,  that  they  were  operating  on  the 
5-cent  fare  with  universal  free  transfers  and  that  that  would  con- 
tinue. That  there  was  one  small  piece  of  road  in  the  city  that  was 
still  operated  by  a  private  corporation,  and  that  that  road  had  in- 
creased its  fair  to  6  cents  but  that  the  municipally  operated  road  had 
no  idea  of  increasing  its  fare.  And  I  have  not  heard  of  an  appraisal 
from  out  there. 

I  am  also  confronted  with  this  fact — that  Mr.  Brooks,  I  think  it  is, 
the  president  of  the  street-railway  companies  in  Detroit — I  saw  the 
published  statement  from  him  that  if  they  were  allowed  to  do  away 
with  the  3-cent  fare  in  Detroit,  that  the  companies  out  there  could 
navigate  at  the  5-cent  fare.  And  I  have  heard  the  evidence  here  that 
the  fare  at  Cleveland  has  gone  back  to  5  cents  and  a  little  bit  lower 
in  some  instances  than  5  cents. 

Therefore,  I  can  not  get  through  my  own  brain  a  clear-cut  reason 
for  the  situation  in  Boston  as  compared  w4th  these  places. 

Now,  I  find  with  regard  to  all  these  cities  in  England — for  instance, 
I  have  here  the  figures  with  regard  to  the  Oldham  Corporation 
tramwavs,  where  their  capital  expenditures  in  1914  were  £444,000 ;  in 
1915,  £453,000 ;  and  in  1916,  £460,000.  Now,  I  find,  going  right  along- 
side  of  that,  that  while  those  capital  expenditures  had  increased  over 


1498    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tliere,  the  amount  outstanding  each  year  against  the  city  is  going 
down.  The  capital  account  outstanding  against  the  Oldham  Cor- 
poration in  1914  was  £311,000;  in  1915  it  was  £303,000;  in  191G  it 
was  £292,000.    I  am  leaving  off  the  odd  pounds. 

Take  the  city  of  Cardiff:  The  capital  expenditures  in  1915-lG  in 
Cardiff  Avere  £813,000  and  odd,  an  mcrease  over  1914  of  a  few  thous- 
and pounds.  In  1914,  there  were  £811,000,  In  1913  they  were  £780,- 
000.  And  those  were  the  total  capital  expenditures.  When  you  come 
to  the  amount  outstanding  against  the  city  in  1915-lG.  the  amount 
outstanding  is  only  £465,000  and  odd.  In*  1914  it  was  £485,000.  In 
^^1913  it  was  £514,000.  In  other  words,  a  steady  reduction  in  the 
amount  outstanding. 

I  find  every  one  of  those  cities  over  there  contributing  to  the  re- 
lief of  taxes.  I  find  every  one  of  theju  contributing  to  the  benefit  of 
those  men  who  were  serving  at  the  front,  and  I  find  these  capital 
accounts  outstanding  going  down.  Thei-efore,  I  turn  back  and  I  say 
there  is  the  only  solution  of  our  problem. 

Xow,  there  has  l>een  mentioned  here  the  Cleveland  plan  several 
times,  and  I  wanted  to  call  attention  to  the  fact  that  the  Cleveland 
plan  was  regarded  as  a  makeshift  by  Mr.  Johnson  at  the  time  it  was 
put  in,  and  it  was  put  in  force  and  effect  because  municipal  owner- 
ship was  not  possible  in  Ohio  at  that  time.  And  the  evil  of  the  plan, 
and  the  only  evil  that  I  can  see,  has  developed  here  in  the  last 
few  months,  whicli  will  develop  every  time  that  you  have  private 
ownership.  It  would  develop  if  I  or  any  other  man  owned  the  road. 
That  is,  there  comes  a  time  whel'e  the  owner  of  the  capital  invested 
in  it  wants  increased  return.  And  while  it  was  organized  back  tlieie 
on  a  basis  of  6  per  cent,  this  year  they  want  7  and  next  year  they  will 
be  after  more,  and  each  year  it  will  go  on  up. 

The  Chairman.  Your  solution  of  your  own  problem  is  municipal 
or  State  ownership? 

Mr.  Jacksox.  Municipal  ownership,   and    where   the    interurban 
proposition  comes  in,  regulation  by  the  railroad  conmiission. 
.   The  Chairman.  Under  the  constitution  of  Georgia  is  Atlanta  per- 
mitted to  engage  in  municipal  ownersliip  ? 

Mr.  Jackson.  Not  yet. 

The  Chairman.  So  there  would  have  to  be  a  constitutional  amend- 
ment ? 

^Ir.  Jackson.  And  there  is  one  of  my  chief  quarrels  with  the  pres- 
€4it  owners. 

The  Chatr^ian.  Can  you  amend  the  constitution 

Mr.  Jackson.  It  is  not  the  constitution.  The  charter  forbids  us. 
The  charter  does  not  permit  us  to  own  and  operate  our  utilities.     * 

The  Chair3ian.  Can  that  charter  be  changed  by  the  consent  of  the 
city  or  does  it  require  an  act  of  the  legislature  ? 

Mr.  Jackson.  No;  it  requires  an  act  of  the  legislature.  I  am  also 
attorney  for  the  Municipal  League  of  Georgia.  I  am  not  appearing 
for  it  here;  but  we  have  just  gone  through  quite  an  experience  there. 
The  legislature  has  just  adjourned,  and  we  are  endeavoring  at  present 
to  get  for  all  the  cities  of  Georgia  authority  to  operate  their  public 
utilities.  '  ^ 

The  Chairman.  Was  such  a  bill  before  the  legislature? 
Mr.  Jackson.  Yes, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1499 

The  Chairman.  Did  it  succeed? 

Mr.  Jackson.  AVe  have  succeeded  in  getting  it  introduced  and 
having  a  hearing  before  the  judiciary  committee,  and  the  judiciary 
committee  was  almost  unanimous  in  disapproving,  for  the  reason  that 
we  have  a  local  situation  down  there  of  the  State  against  the  towns, 
and  it  was  very  clearly  demonstrated  to  the  members  of  that  ju- 
diciary committee  that  if  that  bill  went  through  it  meant  that  the 
city  of  Atlanta  would  gobble  up  all  the  water  powers  and  street  rail- 
w\iys  in  Georgia. 

The  Chairman.  When  does  the  legislature  convene  again? 

Mr.  Jackson.  The  legislature  convenes  in  June  or  July  of  next 
year. 

The  Chairman.  So  nothing  can  be  done  until  after  that  legislature 
meets  ? 

Mr.  Jackson.  Nothing  can  be  done. 

The  Chair3ian.  In  the  meantime,  assume  for  the  purpose  of  this 
inquiry  that  the  industry  or  many  of  the  companies  are  in  serious 
difficulty,  can  we  meet  that  difficulty  simply  by  recommending  mu- 
nicipal ownership  or  by  doing  something  else? 

Mr.  Jackson.  I  think  Mr.  Ainey  was  right  in  the  statement  that 
each  of  these  localities  has  to  be  handled  as  a  different  proposition, 
and  my  main  interest  in  appearing  before  you  is  to  make  only  one 
plea— which  is  almost  unnecessary:  That  the  commission  do  not 
make  such  a  general  rei>ort  that  would  be  in  any  way  used  as  a  club 
at  the  next  session  of  the  legislature,  not  only  Georgia  but  in  other 
places,  as  an  argument  against  municipal  ownership.  In  other  words, 
whether  municipal  ownership  is  put  into  force  and  effect  or  not,  the 
finding  of  the  National  ('ivic  Federation  several  years  ago,  when  Mr. 
Clark  signed  a  report— Mr.  Clark  who  has  figured  in  some  of  vour 
hearings  here,  I  think 

Commissioner  Gadsden.  No;  you  have  an  entirelv  different  man. 

Mr.  Jackson.  Well,  it  Avas  a  Mr.  Clark  who  at  that  time  was  with 
the  (leneral  Electric. 

Commissioner  Gadsden.  Oh,  you  mean  the  witness,  W.  J.  Clark? 

Mr.  Jackson.  Yes;  Mr.  Clark,  who  was  with  the  General  Electric, 
was  a  member  of  tliat  committee  of  which  Mr.  ]\£  Ingalls  was  chair- 
man; and  that  committee  stated  that  subject  all  over  this  world,  and 
while  I  do  not  belive  they  were  in  favor  of  municipal  ownership, 
they  stated  one  thing  they  were  a  unit  on,  and  that  was  that  every 
city  should  have  the  right  to  operate  its  public  utilities,  and  that  that 
right  would  probably  insure  better  service  on  the  part  of  the  public- 
utility  corporation. 

The  Chairman.  I  do  not  see  how  there  can  be  any  disagreement  on 
that  question. 

Mr.  Jackson.  I  can  not.  But  we  have  found  disagreement, 
though,  and  I  think  that  has  been  the  universal  experience — that 
wherever  this  question  comes  up  to  a  legislatui*e  the  privately  owned 
corjx)ration  is  there  to  try  to  block  legislation,  and  that  fight  has  io 
be  met. 

Commissioner  Gadsden.  What  about  your  constitutional  debt  limit 
in  Atlanta  ?    Have  you  enough  credit  to  buy  a  property  like  this  ? 

Mr.  Jackson.  The  constitution  was  fortunately  amended  last  year 
in  a  way  which  gives  a  city  of  the  size  of  Atlanta  authority  to  issue 


1500    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

any  amount  of  bonds  practically,  if  it  has  the  approval  of  the  legisla- 
ture and  a  certain  percentage  ot  the  population  votes  for  it. 

Now,  I  would  like  to  say  this.  I  do  not  wish  to  represent  that 
tliere  is  any  wild  outburst  for  municipal  ownership  in  the  city  of 
Atlanta  or  the  State  of  Georgia.  I  do  wish  to  state  this,  though — 
that  the  city  of  Atlanta  has  twice  voted  in  favor  of  municipal  owner- 
ship of  its  public  utilities — did  you  have  a  question  of  a  correction, 
Mr.  Arkwright? 

Mr.  Arkwright.  All  of  the  public  utilities? 

Mr.  Jacksox.  All  public  utilities. 

Mr.  Arkwright.  Are  you  not  mistaken,  Mr.  Jackson? 

Mr.  Jackson.  That  is  my  information. 

Mr.  Arkwright.  Was  it  not  the  electric-light  plant  inside  the  city 
of  Atlanta  ? 

Mr.  Jacksox.  No. 

Mr.  Arkwright.  Did  they  ever  vote  on  municipal  ownership  of 
street  railroads? 

Mr.  Jacksox.  T  think  on  municipal  ownership  of  public  utilities, 
is  my  understanding. 

Mr.  Arkwright.  No;  you  arc  mistaken. 

Mr.  Jackson.  Well,  that  is  a  difference  as  to  memory,  but  this 
statement  is  unequestionably  correct — that  our  present  mayor,  for 
whom  I  speak,  was  elected  mayor  of  the  city  Atlanta  on  a  straight 
platform  of  municipal  ownership  of  street  railways,  electric  lights, 
and  all  public  utilities  of  the  city. 

The  Chairmax.  Is  there  any  complaint  of  the  service  given  by  this 
company  ? 

Mr.  Jacksox.  They  complain  of  the  capitalization  situation  and 
the  raise  of  rates. 

The  Chairman.  I  am  speaking  now  purely  of  service. 

Mr.  Jacksox.  Can  you  divorce  service  from  the  charge  that  they 
take  out  of  a  man's  pocket? 

The  Chairmax.  AVc  generally  differentiate  a  rate  from  a  service. 

Mr.  Jacksox.  Well,  I  think  w^e  haAC  a  far  better  service  in  Atlanta 
than  you  have  in  Washington. 

The  Chairmax.  The  main  criticism,  if  I  understand  you  right, 
grows  out  of  the  belief  that  there  is  water  in  the  stock  and  the 
mounting  capitalization,  with  the  natural  result  that  you  can  not 
get  reduced  rates. 

Mr.  Jacksox.  And  that  under  their  issues  of  bonds,  as  they  are 
issued  at  present,  it  is  impossible  for  them  to  navigate  continuously 
without  rates  going  up. 

The  Chairmax.  Could  a  large  pai-t  of  this  public  grievance  be 
cared  for  if  the  public-service  commission  would  make  a  fair  valua- 
tion of  that  plant  and  a  very  careful  examination  of  the  accounts 
to  determine  the  original  cost  of  that  property? 

Mr.  Jacksox.  Mr.  Commissioner,  I  do  not  think  that  it  could  ever 
possibly  settle  it,  for  the  simple  reason  that  one  of  the  few  things 
that  I  have  dift'ered  from  some  suggestions  that  I  have  heard  here 
was  in  your  definition  of  public  utilities  on  yesterday,  in  whicli  j^ou 
included  packers  and  manufacturers  and  other  things.  I  do  not 
understand  by  public  utilities  that  those  things  are  included. 
The  Chair3iax.  They  are  not,  but  the}^  may  be. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1501 

Mr.  Jacksox.  I  know  they  may  be,  but  a  public  utility,  to  my 
undei-standing,  a  private  public  utility  is  a  private  corporation  that 
is  carrying  on  really  a  government  function,  the  maintenance  of  a 
highway  or  the  maintenance  of  the  light 

The  Chairmax.  We  will  not  argue  over  the  terms. 

Mr.  Jacksox.  I  know,  but  Mr.  MacFarland — I  might,  if  I  started 
out  here  and  go  back  even  further — could  state  that  King  Hezekiah 
started  a  waterworks  system  for  Jerusalem,  and.  it  came  on  down. 
But  the  evil  that  he  mentions,  of  turning  over  a  function  of  gov- 
ernment to  a  private  corporation  can  not  possibly  be  eradicated, 
however  high-minded  the  gentlemen  who  may  serve  on  a  commis- 
sion may  be,  because  you  can  not  possibly  keep  the  peace  between 
the  private  corporation  and  the  city.  It  is  inevitable  that  there  will 
be  a  constant  clash  of  interests. 

Commissioner  Saveet.  If  you  could  find  a  way  to  value  the  prop- 
erty of  the  street-railway  company  by  itself  separate  from  every- 
thing else,  that  would  be  so  fair  and  just  that  the  people  of  Atlanta 
were  convinced  that  the  physical  value  of  the  property  was  there 
and  that  a  reasonable  return  allowed  upon  that  value  in  addition  to 
the  operating  expenses  and  so  forth,  with  the  good  service  that  you 
are  getting,  could  you  possibly  expect  under  municipal  ownership 
anything  better  in  regard  to  rates  or  service  ? 

Mr.  Jacksox.  It  is  an  impossible  thing  for  me 

Commissioner  Sweet.  No;  do  not  say  it  is  impossible.  It  is  a 
supposititious  case  on  my  part.  I  am  saying  that  if  the  valuation 
could  be  determined  on  such  a  fair  basis  that  the  people  of  Atlanta 
would  admit  its  justice  and  fairness,  separate  from  the  light  and 
power  and  all  these  other  companies,  and  then  a  reasonable  return 
allowed  upon  that  valuation  with  the  good  service  you  say  you  are 
getting  and  the  rate  that  that  would  give — could  the  people  of  At- 
lanta ask  for  anything  better  than  that  under  municipal  ownership 
or  anything  else? 

Mr.  Jacksox.  Providing  that  you  would  change  human  nature 
that  would  be  all  right,  but  I  am  simply  putting  myself  in  the  posi- 
tion of  the  owner  of  the  public  utility.  The  time  would  come  when 
I  would  see  everything  else  going  up  and  I  would  want  to  see  my  in- 
come from  my  property  going  up,  and  I  would  forget  all  about  the 
fact  that  this  was  not  my  property  individually ;  I  would  forget  that 
it  was  the  property  of  the  people  that  had  only  been  intrusted  to  me 
for  a  time;  and  I  would  try  to  get  the  largest  return  on  my  dollar 
that  I  possibly  could.  And  I  do  not  believe  that  the  constitution  of 
the  average  man  is  different  from  that.  Then,  on  the  other  hand, 
the  resident  of  the  city  is  always  Avanting  to  bring  down  his  rate  so 
long  as  he  is  human.  The  minute  you  put  in  his  hands  where  it  is 
his  own  business,  then  you  do  that — you  remove  the  fight. 

Commissioner  Sweet.  You  do  not  answer  my  question.  I  asked 
you  if  you  or  any  citizen  could  reasonably  expect  any  better  result 
than  that?  You  say  the  management  is  capable  and  is  giving  you 
good  service  and  you  are  getting  better  results  than  we  are  here  in 
Washington ;  that  the  service  is  all  right.  Now,  then,  if  you  figured 
the  investment  at  what  it  ought  to  be  figured  at,  its  real  valuation, 
squeezing  all  the  water  and  everything  that  ought  not  to  be  there  out' 
you  will  admit  that  under  municipal  administration  or  oi^eration  if 


1502    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

that  precise  valuation  wore  found  that  the  same  thing  would  have  to 
be  done  unless  you  resorted  to  taxation  to  make  up  a  deficit? 

Mr.  Jacksox.  Excepting  this— that  the  municipality  can  always 
borrow  money  at  less  than  the  private  corporation.  In  other  words, 
a  i)rivately  run  and  operated 

Commissioner  Sweet.  Then  tlie  advantage  that  vou  see  in-munici- 
pal operation  would  be  first,  I  take  it;  now,  the  sentiment,  a  sort  of 
sentmient  on  the  part  of  the  people  that  has  nothing  to  do  with 
realities  ? 

Mr.  Jackson.  No. 

Commissioner  Sweet.  Well,  you  mentioned  it  first  a  while  ago. 

Mr.  Jacksox.  I  should  put  if  purely  as  a  question  of  cost  and  that 
the 

Commissioner  Sweet.  Very  well.  It  would  simply  be  that,  instead 
of  paying  G  per  cent  on  the  investment  or  whatever  would  be  paid  on 
the  bonds  of  a  private  corporation,  the  difference  in  favor  of  munici- 
pal ownership  and  operation  would  be  the  difference  between  that 
advantage  and  whatever  the  city  would  have  to  pay  if  it  made  the 
loan? 

Mr.  Jacksox.  Yes.  May  I  call  your  attention  right  there  though 
to  the  diflference  that  a  cent  makes  ?  For  instance,  the  raise  of  1  cent 
m  the  street-railway  fares  in  Atlanta,  if  the  same  number  of  passen- 
gers travel  these  roads  this  year  that  traveled  them  last  year  and  pay 
that  0  cents  that  paid  the  5-cent  far#  last  vear,  that  1  cent  puts  an 
additional  tax  on  the  city  of  $700,000.  In  30  yeiirs'  time,  the  life  of  a 
bond,  that  interest  compounded  at  5  per  cejit  will  amount  to  ap- 
proximately $49,000,000  out  of  that  1-cent  raise  in  fare.  That  $49,- 
000,000  is  $10,000,000  more  than  the  railroad  conuuission  says  that 
the  whole  street-railway  system  and  power  compan\  and  all  are 
worth  to-day.  Therefore  a  difference  of  1  cent,  when  you  figure  it 
up  in  the  aggregate,  amounts  to  considerable. 

Commissioner  Sw^eet.  If  your  argument  is  sound,  and  if  cities 
ought  to  own  and  operate  -their  street-railway  systems  because  they 
can  borrow  money  at  a  lower  rate  of  interest  tlian  private  corpora- 
tions can,  why  would  it  not  be  wise  for  cities  to  also  raise  money  to 
go  into  the  banking  business  and  loan  out  money  to  private  indi- 
viduals at  a  lower  rate  than  they  can  get  it  for  otherwise? 

Commissioner  Gadsdex.  They  do  that  in  North  Dakota. 

Mr.  Jacksox.  They  are  doing  it  in  North  Dakota. 

Commissioner  Gadsdex.  Would  you  recommend  that  for  Georgia  ? 

Mr-  Jacksox.  Not  to-day;  no.  As  to  what  we  will  come  to  ulti- 
mately I  will  not  undertake  to  say.  But  the  thing  that  I  stand  for 
to-day  is  the  taking  out  of  private  hands  the  operation  of  things 
which  belong  strictly  to  the  government.  It  has  nothing  to  do  with 
the  packing  business  nor  has  it  anything  to  do,  in  my  juc^ment,  Avith 
tlie  banking  business  or  sale  of  dry  goods.  That  is  an  altogether 
different  question,  which  opens  up  a  large  field  that  I  would  not 
undertake  to  try  to  settle. 

Commissioner  Sw^eet.  I  want  to  say,  Mr.  Jackson,  I  am  not  op- 
posed to  the  right  of  a  city  to  own  its  street  railwavs  under  proi^r 
conditions,  possibly,  and  operate  them.  I  do  not  know.  I  am  not 
asking  you  the  question,  and  I  have  not  asked  you  the  question  yet, 
because  I  am  opposed  to  your  principle  of  municipal  ownersliip 


PROCEEDIN.GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIS".    1503 

or  operation,  but  I  do  not  think  tliat  your  argument,  w^hich  is  ap- 
l)arently  based  upon  a  condition  in  Atlanta  and  part  of  Georgia, 
that  does,  we  must  admit,  prevail,  or  at  least  has  counterpart  in 
many  other  parts  of  the  country — I  do  not  think  that  that  necessarily 
makes  out  a  case.  I  think  that  municipal  ownership  may  be  sus- 
tained upon  other  grounds,  but  I  do  not  believe  that  the  evils  that 
have  arisen  through  watered  stock  and  a  whole  lot  of  complications 
arising  fix)m  leases  such  as  you  mentioned,  and  all  that  sort  of 
thing — it  emphasizes,  perhaps,  an  evil  which  has  existed  in  the 
t-ountry,  but  I  do  not  think  it  is  a  necessary  evil,  and  I  do  not  think 
it  is  as  large  an  evil  to-day  as  it  was  10  or  15  years  ago ;  and  I  think 
that  the  valuation  of  the  property  upon  the  proper  basis  would,  for 
the  future,  eliminate  the  difficulties  that  you  find  arising  from  this 
old  situation.  • 

Mr.  Jacksox.  Now,  Mr.  C/ommissioner,  may  I  just  answer  that 
suggestion  with  this?  You  speak  of  my  arguing  simply  from  the 
situation  in  Atlanta.  Now,  I  wish  to  call  your  attention  to  this, 
that  I  look  at  the  situation  in  Atlanta  and  I  am  honest  in  my  state- 
ment that  I  think  for  private  operation  we  are  well  off  in  the 
management  and  the  way  in  which  it  is  being  done,  so  far  as  private 
ownership  is  concerned.  But  when  1  take  the  situation  in  Atlanta, 
under  the  management  of  men  in  whom  I  have  confidence,  and  look 
at  the  fact  that  I  am  paying  more  for  mj'  street  railway  tliere  than 
I  would  be  paying  in  Seattle,  than  I  would  be  paying  in  any  of 
these  cities  abroad,  and  when  I  look  at  the  fact  that  while  these 
cities  abroad — Sir  Eric  Geddes,  in  introducing  his  bill  for  the 
(Joveniment,  called  attention  to  the  fact  that  the  only  transportation 
companies  in  England  that  w^ere  making  good  and  did  not  need  to 
be  worried  about  by  the  (Government  were  those  that  were  operated 
by  municipalities- 


Commissioner  Sweet.  Let  me  call  your  attention- 


Mr.  Jacksox.  Just  let  me  finish  there,  if  I  may — ^and  then  I  come 
to  the  difference  in  the  rates  for  current  and  find  1,853  cities 
operating  their  own  power  plants  and  I  find  these  cities  everywhere 
in  the  same  class  with  Atlanta,  where  the  municipal  plant  is  oper- 
ated, enjoying  rates  at  about  one-half — or  not  one-half,  but  rates 
mucli  less  than  the  Atlanta  rate — then  I  think  that  I  am  arguing 
from  a  pretty  good  series  of  facts. 

Commissioner  Sweet.  Is  not  3'our  higlier  rate  paid  in  Atlanta 
simply  and  solely  because  you  ai-e  seeking  to  pay  now — ^you  are  pay- 
ing in  fact — upon  a  valuation  that  is  materially  higher  than  tfie 
actual  value  of  the  property? 

Mr.  Jacksox.  That  is  possibly  true 

Commissioner  Sw^eet.  Now  ,  then,  you  say  there  is  a  difficulty  in 
getting  at  the  actual  value  of  the  property,  but  if  you  resort  to 
municipal  ownership  you  have  to  get  that  valuation,  do  you  not? 

Mr.  Jacksox.  Ultimately;  yes. 

Commissioner  Sweet.  Very  well.  Now^,  it  seems  to  me  if  you 
wanted  to  retain  private  ownership  you  could  resort  to  the  same 
method  and  find  your  valuation,  and  then  the  evil  that  you  complain 
of  tvould  be  wiped  away. 

Tlie  Chair:max.  May  I  suggest,  Mr.  Jackson,  that  you  make  your 
answer  brief,  be^.ause  we  have  some  further  business  to-night. 


m 


15U4.    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  I  do  not  want  to  follow  it  up,  but  I  wanted 
to  present  that  phase  of  it. 

Mr.  Jackson.  I  have  finished,  Mr.  Commissioner,  so  far  as  I  am 
concerned. 

Commissioner  Sweet.  I  have  finished. 

(Witness  excused.) 

Mr.  Warren.  I  fear  the  commission  will  hate  the  sight  of  a  Boston 
man  as  well  as  the  mention  of  Boston,  but  we  have  some  things  that 
I  want  to  put  in,  and  if  the  commission  will  bear  with  me  for  10  or  15 
minutes  I  would  like  to  file  certain  exhibits  asked  for  at  the  previous 
hearings.  Shall  I  leave  them  right  on  this  table?  There  are  10 
copies  of  each.  I  would  like  to  mention  what  they  are  for  the  pur- 
pose of  the  record. 

The  first  one,  which  I  think  is  something  which  the  commission 
asked  us  for  at  the  other  hearings,  is  a  summary  of  the  cities  in 
which  fares  have  been  increased,  showing  the  name  of  the  city,  popu- 
lation, company  operated,  date  of  increase,  present  and  former  rate 
revised  August  9,  1919.  It  is  prepared  by  the  American  Electric 
Railway  Association.  And  I  might  mention  incidentally  that  I 
notice  Seattle,  which  was  just  mentioned,  is  paying  a  6-cent  fare. 

The  next  statement,  also  prepared  by  the  same  association  under 
date  of  August  9,  1919,  is  effect  of  increased,  rates  of  fare  on  pas- 
senger revenues  and  tabulation  of  125  companies,  showing  compari- 
son on  monthly  basis  at  theoretical  or  actual  percentage  increase  in 
passenger  revenues.  Those  companies  are  believed  by  the  association 
to  be  typical.  I  should  like  to  say  regarding  them,  in  looking  at  tlie 
figures,  I  hope  the  commission  will  bear  in  mind  certain  extraordinary 
periods  of  time  in  the  period  covered  by  these  reports.  Some  of  them 
are  for  a  few  months,  some  of  them  for  longer  periods.  The  first 
compauA^  here  happens  to  be  the  Boston  Elevated,  and  under  the 
7-cent  fare  in  October  their  revenue  gain  was  only  2.91  per  cent. 
Tliat  was  the  month  of  the  influenza,  for  ex^imple,  and  there  are 
other  special  matters  of  that  kind  which  it  will  be  necessary  to  keep 
in  mind. 

It  may  interest  the  commission  to  know  that  on  the  8-cent  fare  the 
seven  months'  average  on  the  Boston  Ekvated  showed  an  increase  of 
43.84  per  cent. 

Conunissioner  Meeker.  That  is  an  increase  over  the  5  cents? 

Mr.  Warren.  Over  the  5  cents,  over  the  year  before.  In  other 
words,  on  a  theoretical  60  per  cent  increase,  over  two-thirds  was 
saved. 

The  next  exhibit  is  one  entitled  "  Confidential  information  concern- 
ing wages  of  trainmen.  Supplement  to  edition  No.  2  of  bulletin  No. 
121."    Dated  August  11,  1919. 

That  is  confidential  in  the  sense  that  it  is  obtained  by  the  associa- 
tion for  the  confidential  use  of  the  members;  but  they  are  perfectly 
willing  to  file  it  here.  It  happens  to  be  the  way  it  is  prepared  and 
entitled. 

Commissioner  Gadsden.  There  is  very  little  secrecy  nowadays 
about  the  wage  scale  paid  ? 

Mr.  Warren.  Yes;  I  did  not  want  to  make  you  think  that  we 
•were  putting  it  in  as  if  it  were  confidential. 

The  next  statement  is  a  tabulation  showing  wages  demanded  by 
trainmen  during  the  sirring  and  summer  of  1919;  and  whether  that 


PROCEEDINGS  OE  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1505 

shows  all  the  demands  may  be  doubtful,  because  the  demands  grow 
with  the  rapidity  of  mushrooms;  but  it  shows  many  of  them  and 
bears  upon  the  labor  question. 

These  are  all  prepared  by  the  American  Electric  Railway  Associa- 
tion. 

The  next  shows  the  distribution  of  securities  of  electric  railways, 
based  on  replies  to  data  sheet  No.  192,  sent  out  by  the  American 
Electric  Railway  Association  July  17,  1919. 

I  would  like  to  read  tlie  summary,  because  it  is  very  brief : 

1.  Twenty-seven  companies  report  4,665.462  shares  of  stock  outstandins,  hold 
by  80,492  individuals,  or  an  average  of  loS  shares  to  each  holder. 

2.  Ninety-eight  companies  rei)<)rt  $440,867,735.80  wortli  of  stock,  pav  value, 
outstanding  held  by  32,788  individuals,  or  an  average  of  13,446  of  stock  to  each 
holder. 

3.  Forty-nine  companies  report  $240,347,825  in  bonds  outstanding  held  by 
448,475  individuals,  an  average  of  $535.92  to  each  holder. 

We  could  not  get  this  data  from  a  great  many  companies.  We  got 
it  from  such  companies  as  we  could  get  it  readily,  after  your  i-equest 
was  made  for  the  information. 

Commissioner  Meeker.  The  exhibit  shows  the  distribution  of  hold- 
ings, does  it,  by  the  number  who  held  one  share,  two  shares,  etc.  't 

Mr.  Warren.  No  ;  it  does  not,  sir.  I  think  that  exhibit  shows  only 
what  I  read ;  but  here  is  one  that  shows  a  little  more : 

Distribution  of  the  capital  stock  of  11  electric  railways  among  men,  women, 
and  fiduciary  institutions,  showing  the  number  of  shareholders  and  the  number 
of  shares  held  in  each  class. 

I  will  read  one  company  to  indicate  what  it  shows : 

Commonwealth  Power,  Railway  &  Light  Co. :  Common  stock,  1,475  men  hold- 
ers; number  of  shares  held,  83,339;  preferred  stock,  1,657  holders;  number  of 
shares  held,  92,818. 

And,  then,  the  same  for  women,  the  same  for  fiduciary  institutions, 
and  the  total  of  that  company. 

And  the  footing  at  the  bottom  of  the  page  shows  11,324  men,  10,941 
women,  1,686  fiduciary  institutions ;  in  all,  23,952  holders,  and  1,273,- 
870  shares,  and  the  average  number  of  shares  of  each  stockholder, 
etc. 

The  last  one  of  these  exhibits  is  a  comparison  of  valuation  and 
capitalization  of  26  electric  railways,  based  upon  letters  to  the  Amer- 
ican Electric  Railway  Association  and  records  of  valuation  and  fare 
cases,  August  11, 1919;  the  total  of  the  26  companies  operating  7,221 
miles  of  track  showed  a  valuation  of  $779,772,472,  or  in  round  num- 
bers almost  $780,000,000.  The  capitalization  represented  a  total  of 
$864,102,936. 

The  ratio  of  capitalization  to  valuation  was  110.8. 

In  other  words,  the  capitalization  exceeded  the  valuation  by  be- 
tween 10  and  11  per  cent. 

Commissioner  Gadsden.  I  imagine  that  is  valuation  less  deprecia- 
tion, too ;  is  it  not  ? 

Mr.  AVarren.  I  think  so.    I  think  these  are  all  official  valuations. 

Commissioner  Gadsden.  Depreciated  value? 

Mr.  Warren.  I  think  so.    I  have  not  the  details  in  all  cases. 

Some  of  the  valuations  exceed  the  capitalization  and  some  are 
below.  The  average  per  mile  of  single  track,  the  valuation  was 
$107,985,  and  the  capitalization  was  $119,663. 


1(30643°— 20— VOL  2- 


-33 


1506    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


of  the  opinion  of  the  Railroad  Commission  of  Georgia  in  which 
both  the  chairman  and  the  vice  chairman,  Hon.  Charles  Muipliv 
C  andler,  chairman,  and  George  HiUyer,  vice  chairman,  are,  I  think, 
citizens  of  Atlanta.  ' 

There  are  only  two  or  three  paragraphs  that  I  want  to  read : 
The  commission  is  abundantly  satisfied  that  it  can,  without  diflieultv   arrivv 
at  a  very  conservative  estimate  of  the  minimum  value  of  the  pro^rtv' oT  hi ; 
company  in  the  public  use.     The  company   may  complain   at  X  use  of   a 
minimum  value,  rather  than  the  fair  value,  but  certainly    he  publican  no 

?ourt'ottVe"u'n!^^^^^^^^^^  '^'  ^""^  f  the  methods  approved  Che  Supreme 

i^^omt  of  the  United  States  and  we,  of  course,  are  not  confined  in  such  an  in- 
quiry to  the  one  method  of  estimated  reproduction  new  and  depreciat^l 

And  regarding  the  figure  which  is  given  in  our  tabulation,  the  com- 
mission said: 

vi!lL''"r^''  estimated  the  naked  physical  properties  of  the  Georgia  Railwav  & 

J^,  hi  vnnnfn'^f/  'T^'T'^"^  ''"*""'  "^  $18,002,89^  to  which  adding  $3,.10(U)n 
for  the  Atlanta  Gas  Light  Co.,  and  $500,000  for  the  Atlanta  Northern  Hall- 
way Co  we  have  $22,602,895  as  the  minimum  value  of  the  physical  propertio': 
leased  to  the  Georgia  Railway  &  Power  Co.     In  addition,  $465,678  of  other 

S'>qi^;«''-.r  ^]Tlf  T"*  '''^^^  *^^*^  ^*^^'^*^  Vhy^icfxX  properties,  making,  in  all, 
,'!.-,i^H>fS,o<.^.  It  there  be  recognized  any  additional  value  in  the  properties  for 
unification  and  adaption  and  for  franchises  for  which  the  public  made  or 
makes  charges,  the  value  of  these  leased  properties  at  this  time  can  hardlv  be 
less  than  $25,000,000.  A  net  rental  therefon;  of  $1,605,572,  or  6.42  per  cent  in 
our  opinion  is  not  unreasonable,  considering  the  character  of  the  business  and 
properties  and  the  many  contingencies  which  may  materially  affect  earnings. 

On  the  question  of  labor,  I  referred  the  other  dav  to  some  figures 
of  the  Boston  Elevated,  and  I  Avould  like  to  put  these  in,  because  I 
think  they  are  authentic  statements.  At  any  rate  Mr.  Barnham, 
counsel  for  the  trustees,  and  formerly  assistant  attorney  general, 
kindly  furnished  them  to  me. 

The  fii-st  is  one  of  the  nickel  diagrams,  with  which  the  commis- 
sionei-s  are  familiar,  for  the  month  of  December,  1917,  in  which  is 
the  stateinent  that  the  operating  expenses  took  3.607  cents  of  each 
nickel,  of  which  wages  were  2.21  cents. 

Then  here  is  the  monthly  statement  of  i-eceipts  and  cost  of  service 
for  June,  1919.  At  that  time  the  companv  was  operating  on  the  48- 
cent  rate  for  trainmen,  conductors,  and  motormen.  The  total  op- 
ei-atmg  expenses  for  June  were  $2,173,961,  of  which  $1,282,499.03 
wsis  wages — more  than  half. 

Then,  in  the  cost  of  service,  at  the  bottom  of  the  statement,  appears 
this  recital:  ^^ 

''Cost  of  service  per  revenue  passenger,  10.065  cents,  of  which 
la!  or  costs  4.518  cents,"  or  a  little  over  4^  cents. 

The  Chairmax.  Does  that  include  capital  charges  in  that  cost  of 
seivice  there? 

Mr.  Warren.  Yes;  it  does. 

The  net  loss  for  the  month  was  $585,000. 

T  think  It  is  tnie  that  all  the  capital  charges  on  the  bonds  of  the 
loascHl  iwd,  the  bonds  of  the  Boston  Elevated,  and  the  stock  of  the 
Boston  Elevated  might  be  omitted  and  there  would  still  be  a  loss 


PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION.    1507 

It  is  fair  to  say  about  that  two  things:  First,  that  in  the  month 
of  June  the  company  was  doing,  as  has  been  testified  here  by  some  of 
the  Boston  witnesses,  more  track  work  than  would  be  normally 
done  in  an  average  month;  and,  of  course,  that  would  swell  to  some 
extent  the  pay  rolls. 

It  also  should  be  called  to  your  attention  that  there  was  some  loss 
of  traffic  in  June  as  compared  with  June  of  the  previous  year,  as  is 
shown  by  the  figures  I  referred  to  where,  with  theoretically  a  60 
per  cent  increase  of  income,  the  actual  increase  was  something  like 
46  or  43.  That  might  reduce  that  cost  in  cents  i>er  passenger  some- 
what, in  comparing  it  with  the  previous  month  in  1917 — December. 

As  against  that,  however,  the  arbitration  award  on  the  Avages  has 
been  made  since  this  return  was  made,  and  figures  about,  as  I  under- 
stand from  Mr.  Barnham,  20  per  cent  increase  on  the  entire  pay  roll ; 
and  I  know  that  it  represented  exactly  25  per  cent  on  the  carmen, 
because  it  went  up  from  48  to  60  cents.  That  would  a  good  deal  more 
than  offset  any  deduction  tliat  should  be  made  from  this  4J  cents. 

There  is  another  thing  that  I  would  like  to  call  to  your  attention, 
because  I  feel  as  if  the  evidence  may  not  have  emphasized  it  as  con- 
cretelv  and  consecutivelv  as  should  be.  and  that  is  the  tremendous 
significance  of  this  labor  element  in  the  increased  cost  and  the  very 
embarrassed  situation  of  these  companies. 

There  is  a  statement  here  of  the  trustees  of  receipts  and  cost  of 
service  for  12  months  ending  June  30,  last.  That  is  the  first  year  of 
the  public  control.  It  gives  the  total  operating  expense  as  some- 
thing over  $22,000,000— $22,362,171— of  which  $13,554,684  was  wages ; 
that  is,  over  thirteen  and  a  half  million  dollars. 

With  that  is  a  statement  prepared  by  the  trustees  showing  the 
total  income  and  the  total  operating  expense  for  each  year  since  the 
company  began  operation  in  1897. 

Two  years  ago,  or  1917,  the  entire  operating  expenses  of  the  Bos- 
ton Elevated  system  were  $13,547,124,  or  a  little  less  than  the  i^ay  roll 
alone  in  the  12  months  ending  June  30. 

Those  I  should  like  to  file. 

The  CiiAir:>rAN.  Very  well.    That  may  be  done. 

Mr.  Warrex.  There  is  just  one  otlier  thing,  and  I  will  start  to 
go  back  to  Boston. 

San  Francisco  has  been  referred  to,  and  I  have  here  two  certified 
copies  of  two  documents  of  the  city  of  San  Francisco.  I  should  like 
to  read  one,  which  is  not  very  long,  although  I  should  like  to  file 
both,  because  the  other  is  referred  to  in  this  and  is  the  basis  for  tliis. 

The  Chairman.  Suppose  you  just  hand  to  the  reporter  the  matter 
which  you  desire  to  have  put  in  the  record. 

Mr.  Warrex.  It  is  as  follows: 

TlKPorT  OF  Municipal  Railway  Depreciation. 

REPORT    OF   FINANCE    COMMITTEE   ON    DEPRECIATION    FUND   OF    MUNICIPAL    RAILWAY. 

San  Francisco,  July  21,  1919 

Board  of  Supervisors. 

Gentlemen  :  The  finance  committee  has  on  the  calendar  to-ilay  a  resohition 

transfoirinf?  $10,247  from  the  depreciation  fund  of  the  Municipal  Railway  to 

the   Municipal    Railway    fund,    which    the   board   of   public    works    will    cover 

^he  increase  in  wages  for  July  of  employees  of  the  railroad,  making  their 

wages  $5  per  day. 


II 


1508    PROCEEDINGS  OF  TEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

In  tho  jiuljjmont  of  the  committee  it  will  be  most  unwise  to  attempt  a  re- 
flnttion  of  the  18  per  cent  of  gross  revenue  set  aside  for  depreciation.  As  a 
matter  of  fact,  a  study  of  this  problem  and  comparison  with  reports  of  other 
cities  indicate  that  the  depreciation  percentage  sliould  be  raised  instead  of  low- 
ere<l.  This  statement  is  substantlattnl  by  a  very  complete  report  presented  by 
the  city  engineer,  whicli  is  attached  to  and  made  a  part  of  this  report. 

To  meet  the  extraordinary  charges  now  being  imposed  upon  the  Municipal 
Railway  it  will  be  nei^essary  for  the  board  of  public  worlvs  and  the  superin- 
tendent of  the  Municipal  Railway  to  inaugurate  most  rigid  economies  in 
operating  expenses  and  wherever  pofsslble  eliminate  excess  service.  The  com- 
mittee is  advised  that  some  economies  may  be  made  without  impairment  of 
the  excellent  service  being  given  by  the  Municipal  Railway.  These  economies 
may  bring  about  partial  restoration  of  the  financial  balance  which  makes  for  the 
protitable  oi>eration  of  our  nuniicipal  street  railway. 

After  a  very  thorough  investigation  the  ccmmittee  l>elieves  that  the  true 
solution  is  an  increase  In  street-car  fare  to  6  cents  or  more,  but  does  not  rec- 
onnnend  that  such  action  be  taken  at  this  time  for  this  reason : 

Increase  in  street-car  fare  can  only  be  successfully  installed  after  education 
of  the  public. 

The  committee  has  before  it  rei^^rts  from  other  cities  where  fares  have  been 
increasetl  in  some  instances  as  high  as  10  cents,  as  in  Boston.  Other  cities 
have  increased  to  6,  7,  and  8  cents.  It  is  a  question  that  should  be  brought  to 
the  attention  of  the  public,  and  when  the  cost  of  labor,  material,  and  all  neces- 
sities of  life  is  doubled  and  trebled  there  is  no  reason  why  street-car  fares 
shonld  not  be  raised  proportionately. 

To  contiiuie  the  $5-a-day  wage  on  the  railroad  the  committee  will  from  time 
to  time  recommend  to  this  board  transfers  from  the  depreciation  fund  of  a  suffi- 
cient amount  to  meet  the  ])ay  rolls.  A  3  per  cent  reduction  of  the  present  18  i)er 
cent  would  not  be  sufhcient  to  meet  the  increase  which  has  been  grante<l. 

The  attention  of  the  board  of  supervisors,  board  of  pu<)lic  works,  and  the 
public  is  directe<l  to  the  questions  of  extenshms  of  the  Municipal  Railway,  an<l 
under  existing  financial  conditions  it  is  certain  there  can  be  no  further  exten- 
sions of  the  Municipal  Railway  financed  out  of  revenues.  Future  extensions 
can  only  be  made  by  a  bond  issue  or  by  some  method  of  financing  other  than 
fro!n  revenue.  And  unless  there  is  a  marked  increase  in  revenue,  in  all  proba- 
bility the  board  of  supervisors  will  be  compelle<l  in  future  years  to  provide  for 
bond  interest  and  re<lemption  in  whole  or  in  part  from  the  annual  tax  levy. 

Respectfully  submitted. 

Ralph  McLearn, 
j.  c.  kortick, 
F.  St'hr,  .Jr., 
Finance  Committee. 


REPORT  OF  CITY  ENGINEER  ON  DEPRECIATION  FUND,   MUNICIPAL  RAILWAY. 

San  Francisco,  July  19,  1919. 
To  the  finance  committee,  hoard  of  ^supervisors,  San  Franci<8co. 

(wKNtlemen  :  In  accordance  with  resolution  passed  by  the  board  of  super- 
visifTs,  I  beg  leave  to  submit  the  following  statement  with  relation  to  the  depre- 
ciation fund  being  set  aside  from  tlie  gross  earnings  of  the  Municipal  Railway 
of  this  city : 

Before  proceeding  with  the  actual  figures  I  would  take  this  opportunity  to 
state  the  purpose  of  the  depreciation  fund. 

Every  jx>rtion  of  railway  plant  or  equipment  is  either  worn  out,  lost,  or  be- 
comes so  old  as  to  be  unsatisfactory  for  use,  and  will  have  to  be  replaced  at 
some  future  time  If  the  service  which  it  has  been  giving  is  to  be  continued.  All 
of  you  can  rememl)er  the  types  of  cars  which  were  operated  in  San  Francisco 
30  years  ago,  20  years  ago,  and  possibly  longer.  You  do  not  see  this  class  of 
equipnient  to-day,  as  it  lias  been  retired  and  new  cars  purchased  and  placed  in 
8(»rvice  to  take  the  place  of  the  older  vehicle. 

TJkewlse,  the  existing  tracks  are  not  those  of  20  years  ago;  trolley  wire  is 
change<l  from  time  to  time. 

Further  than  that,  the  systems  have  changed ;  the  old  horse  cars  had  to  give 
way  to  the  cable  cars,  and  the  cable  cars  have  largely  had  to  make  room  for 
the  electric  cars.    The  eJectric  cars  may  in  their  turn  be  replaced  with  something, 
more  efficient. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1509 

To  replace  these  cars,  tracks,  and  systems  has  cost  money,  and  funds  are 
necessary  in  order  to  continue  the  high-class  operation  of  any  service-giving 
enterprise  for  any  considerable  length  of  time.  To  be  a  successful  enterprise  it 
must  supply  its  own  funds  for  such  purposes. 

Every  farseeing  financier  has  been  careful  to  make  some  such  provision  in 
a  prudent  handling  of  either  corporate  or  public-service  properties.  The  neces- 
sity for  a  depreciation  fund  Is  recognized  by  all  of  the  State  public-service  com- 
missions of  the  country  and  the  United  States  Government.  At  the  time  that  the 
Municipal  Railway  of  San  Francisco  was  placed  in  service  it  was  detennlned 
that  a  depreciation  reserve  would  be  established.  There  was  some  discussion  as 
to  the  best  way  of  arriving  at  the  amount  which  should  be  set  aside,  and  after 
much  careful  deliberation  it  was  determined  to  set  aside  14  per  cent  of  gross 
receipts  for  depreciation  of  property  Investment  and  4  per  cent  of  gross 
i-ecelpts  for  accidents  and  damages,  making  a  total  of  18  per  cent  for  both  pur- 
poses. The  question  at  the  present  time  is :  Can  the  amount  which  is  annually 
being  set  aside  be  consistently  reduced? 

In  order  to  answer  this,  I  have  not  only  studied  our  own  problem  but  have 
carefully  investigated  what  Is  being  done  by  other  railways  in  the  United  States, 
and  set  forth  the  following  data: 

Very  complete  reports  from  the  public-service  commission  for  the  first  district 
of  New  York  are  before  me.  These  reports  Indicate  several  different  ways  of 
arriving  at  the  amount  of  the  depreciation  reserve.  The  Interborough  Rapid 
Transit  Co.  has  been  setting  aside  funds  on  the  basis  of  so  manv  cents  per 
revenue  car-mile  operated.  One  road  has  been  setting  aside  a  fixe<l  percentage 
of  the  operating  revenue.  A  number  of  the  others  have  figured  on  a  percentage 
of  the  gross  revenue;  some  have  taken  annually  a  certain  i^rcentage  of  the 
cost  of  the  property,  and  another  a  fixed  annual  .sum.  Those  using  a  percen- 
tage of  the  transportation  revenue  or  of  the  total  revenue,  as  it  is  classed  in  our 
accounting,  include  the  Brooklyn  Heights;  Br<>oklyn,  Queens  County  &  Sub- 
urban; Coney  Island  &  Brooklyn:  Coney  Island  &  Gravesend ;  Nassau  Electric; 
and  the  New  York  Railways.  The  minimum  percentage  set  aside  by  any  of 
these  is  by  the  Coney  Island  &  Brooklyn,  which  sets  aside  20  per  cent.  The 
Brooklyn,  Queens  Couuty  &  Suburban  sets  aside  22.7.5  per  cent. 

The  roads  which  set  aside  their  depreciation  fund  on  the  basis  of  cents  per 
revenue  car-mile  are  six  in  number,  and  the  amounts  varv  from  3.5  cents  to 
9  cents  per  revenue  car-mile.  Only  one  of  the  roads  has  the  former  sum  the 
next  lowest  road  setting  aside  5  cents,  the  next  after  that  5.66  cents,  follow- 
ing which  one  road  sets  aside  61  centss  and  two  9  cents  per  revenue  car-mile 

During  the  year  ending  .Tune  30,  1918,  the  14  per  cent  of  passenger  receipts 
set  aside  by  the  Municipal  Railway  amounted  to  .$330,367.05.  During  the 
mme  period  the  Municipal  Railway  operated  6.9.35,000  passenger  car-miles 
This,  figured  on  even  the  basis  of  5*  cents  per  car-mile,  would  produce  the  figure 
of  $351,429.95,  as  compared  with  the  $a30,367.05  produced  bv  the  present 
method. 

The  city  of  Cleveland  in  1911  set  aside  for  its  renewal  fund,  during  six  months 
of  the  year.  4  cents  per  car-mile;  during  one  month,  5  cents;  and  for  the 
remaining  five  months  of  the  year,  6  cents  per  car-mile.  In  a  report  issued 
in  1913,  it  was  stated  that  the  amounts  which  had  been  set  aside  were  not 
sufticient  to  care  for  the  road  properly.  This  necessitated  an  increa.se  in  the 
amount  annually  alloted  to  depreciation  reserve. 

In  Chicago,  muler  the  resettlement  plan,  8  per  cent  of  the  gross  receipts 
have  been  turned  into  the  depreciation  fund.  That  this  has  not  proven  sufficient 
is  evinced  by  the  following  quotation  from  the  publication  of  the  Chica«'o 
Municipal  Ownership  League,  dated  April,  1919:  -  " 

"  Regardle.ss  of  what  decision  may  be  eventually  reached  in  reference  to 
the  purchase  of  the  property  now,  in  the  future,  the  city  council  and  the  board 
of  supervising  engineers  should  at  once  change  the  basis  of  depreciation  reserve 
re(iuirements  from  8  per  cent  to  at  least  20  per  cent  of  the  gross  earnings  so  as 
to  reestablish  the  integrity  of  the  property  value  as  nearly  as  may  be'  The 
present  requirement  of  8  per  cent  of  the  gross  earnings  is  totallv  inadequate 
The  true  basis  of  depreciation  reserve  should  not  be  less  than  5^  per  cent  mv 
annum  on  the  cost  value  of  the  property.  The  depreciation  reserve  now  falls 
short  of  meeting  the  requirements  of  honest  conservative  financing  by  about 
$5,000,000  a  year.    The  total  deficiency  is  now  not  far  from  $70,000,000." 

In  Table  5,  on  page  75,  of  the  Annual  Reiwrt  of  the  Bureau  of  Engineerino- 
for  the  year  ending  June  30,  1918,  will  be  found  a  summary  of  the  capital  ex*^ 
penditures  made  ou  tlie  property  of  the  railway.    This  shows  a  total  investment 


^1 


1510    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION* 

of  $6,2.j1, 400.53.  The  matter  of  valuing  street  railways  for  both  rate  fixing 
and  sale  purposes  has  been  very  carefully  gone  into,  and  there  is  much  infor- 
mation on  the  subject.  The  Boston  Transit  Commission,  the  New  York  Public 
Service  Commission,  the  Wisconsin  Public  Service  Commission,  the  United 
States  Government,  and  many  engineers  of  high  standing  have  reported  on  the 
subject  of  values.  Such  reports  always  include  a  depreciation  table  for  the 
purpose  of  arriving  at  the  present  value  of  the  pror)erty.  All  of  these  men  have 
not  agreed  on  the  probable  life  of  the  parts  of  a  railway.  There  are,  however, 
sufficient  reports  which  are  fairly  well  agreed  to  make  it  possible  to  state 
quite  positively  what  may  be  exi)ected  from  the  various  classes  of  construction. 
For  instance,  railway-shop  tools  and  etiuipmont  may  reasonablv  be  expected  t!> 
have  a  life  of  between  13  and  14  years.  This  would  mean  that  if  we  were  to 
consider  establishing  a  fund  which  would  replace  this  equipment  it  would  be 
necessary  to  set  aside  7^  per  cent  of  the  original  investment  each  year.  As  ihi' 
amount  of  money  involved  in  the  shop  equipment  is  $31,100.58,  this  i)ercentage 
would  be  .$2,339.29  annually.  All  of  the  items  entering  into  the  make-up  of 
the  system,  when  similarly  treated,  indicate  that  the  .sum  of  $383,138.71 
should  annually  l>e  set  aside  to  replace  the  present  plan  and  equipment  at  the 
end  of  its  normal  useful  life. 

The.se  figures  do  not  take  into  consideration  the  matter  of  obsolescence  or,  in 
other  words,  the  chances  that  some  of  the  material  will  have  to  be  replaced 
before  it  is  actually  worn  out,  on  account  of  the  development  of  a  more  satis- 
factory type  of  material,  becau.se,  as  in  the  case  of  our  cars,  they  become  so  old- 
fa  sliione<l  and  out  of  date  that  they  will  no  longer  l>e  .satisfactory.  B\)r  this 
reason  I  have  not  added  to  the  above  figures  the  intere.st  which  ndght  accrue 
on  the  funds  thus  set  aside, 

*oIl*i?^^^'^"  ^^*^"^^  "^^^^  *^^''^  ^^^^'^  "^"^'^  $383,138,  is  more  by  $52,370  than  the 
$330,<6<  Mhich  was  set  aside  last  year.  This  means  that  the  1917-18  reserve 
was  but  86*  per  cent  of  the  amount  which  might  properly  have  been  placed  in 
I'oserve. 

In  this  connection  T  would  like  to  call  your  attention  to  the  rapid  rate  at 
which  the  cost  of  nmterial  is  rising.  In  1914  we  purchase<l  cro.ssties  for  the 
various  lines  built  during  that  year  for  58  cents  apiece.  Recently  we  have  had 
to  pay  9U  cents  for  the  same  material.  The  trollev  wire  on  tlie  original 
(?eary  Street  Railway  cost  less  than  15  cents  i>er  pound.*  We  have  recently  had 
to  pay  over  33  cents  for  this  same  material.  Rail,  which  cost  $41.65  per  ton  in 
1914,  cost  $122.10  per  ton  in  Fel)ruary  of  this  year.  Track  bolts,  which  co*»t 
$-.10,  are  now  $8.o0.  Track  special  work,  which  is  no  small  part  of  the  cost 
of  the  installation  of  the  Municipal  Railway,  has  also  made  a  considerable  ad- 
vance. The  unit  of  a  right-nngle  crossing  is  now  worth  $416,  whereas  when 
they  were  originally  purcha.sed  the  price  wns  $132.  Standard  switches,  which 
originally  co.st  $171,  nf)w  cost  $404. 

None  of  us  can  tell  what  the  prices  will  be  at  the  time  it  is  necessarv  to 
replace  the  present  construction.  Judging  the  future  bv  the  past,  we  can  pre- 
dict that  rails  to  replace  the  present  ones  will  be  considerablv  higher  than  thev 
were  when  the  track  was  first  built. 

Lalwr,  which  enters  very  largely  into  the  cost  of  constructing  a  i-ailwav  has 
very  materially  increased,  as  you  know.  Therefore,  when  the  time  com4s  to 
replace  the  existing  construction  it  will  not  only  Ik«  necessarv  to  pay  out  the 
original  cost  of  construction,  but  alsi)  enough  more  monev  to  equal  the  ad- 
vanced costs. 

Tlie  Municipal  Railway  at  the  present  time  has  a  vers-  enviable  reputation 
Its  track  is  good  and  its  cars  are  new.  It  depends  verv  la'rgelv  on  the  deprecia- 
tion fund  as  to  whether,  after  a  few  years  of  oi)eration,  the  track  is  allowed 
to  run  down  and  the  cars  are  not  replaced  with  new  and  up-to-date  equipment 
If  the  Municipal  Railway  does  not  earn  and  place  aside  the  money  necessarv 
to  keep  up  its  roadbed  and  cars,  the  public  at  large  can  truthfully  sav  that  the 
undertaking  of  municipal  ownership  in  San  Franci.sco  has  Ix-en  a  failure 

The  question  of  meeting  the  increased  cost  of  operation  has  l>een  confronting 
all  of  the  street  railways  in  the  Unite<l  States.  In  everv  ca.se,  rather  tluiii 
cut  into  the  depreciation  resene  fund,  the  fare  has  been  increased.  Increases 
in  fare  in  various  cities  in  the  Unitwl  States  have  l)een  fmm  5  cents  to  6  c^-nts 
or  upward.  The  fare  on  the  street  railways  in  Pittsburgh  has  for  some  time 
past  been  10  cents  and  Boston  is  just  now  going  to  the  10-cent  fare  The 
Boston  roads  are  under  pul)lic  control,  the  stockholders  having  nothim;*  what- 
ever to  say  in  regard  to  the  oi)eration  of  the  road  and  the  amount  of  fare 
charged.     A  sum  in  excess  of  $2,000,000  is  the  annual  amount  set  aside  for 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1511 

de|ireciation.  This  reserve  is  based  ui>on  indei)endent  expert  opinion  as  to  what 
siiould  be  set  aside  yearly  in  order  to  provide  for  renewals  and  replacements  as 
necessity  arises.  Since  the  first  of  the  year  one-half  cent  i>er  passenger  has  l>een 
set  Jiside.  This  same  one-half  cent,  if  applied  to  the  number  of  passengers  car- 
ried by  the  Municipal  Railroad,  whose  density  of  travel  is  not  nearly  so  great, 
would  have  produced  $312,000  in  1917-18.  Neither  labor  nor  material  necessary 
to  make  replacements  is  as  expensive  in  Boston  as  in  San  Francisco. 

I  believe  the  foregoing  furnishes  sufllcient  data  to  indicate  the  grave  re- 
sponsibility which  would  have  to  be  assumed  in  reducing  the  amount  annually 
set  aside  for  depreciation.  However,  it  is  a  matter  of  public  policy  which  your 
lM>ar(l  will  have  to  decide  under  the  abnormal  social  and  industrial  conditions 
following  the  five  years  of  European  war. 
Respectfully, 

W.  M.  O'Shaughxessy,  City  Engineer. 

Total  receipts,  six  months,  January  1  to  June  30,  1919 $1, 253,  759.  20 

Total  expenditures,  January  1  to  June  30,  1919   (June  approx- 
imated)          864,  978,  20 

Excess  of  receipts  over  expenditures 388,  781.  00 

Depreciation  fund,  18  per  cent  of  gross  passenger 

i-evenue $223,  984.  49 

Injury  insurance  fund,  liability  compensation 12,  741. 98 

Interest    on    outstanding    bonds 121,524.18 

358, 250.  65 

Net  credit  to  ^Municipal  Railway  fund  six  months,  to  July 

30,  1919 30,  530.  35 

Mr.  Warren.  The  report  of  the  engineer  referred  to  in  that  states 
tliat  the  depreciation  charge  is  not,  in  his  opinion,  large  enough. 
This  report  is  considering  a  transfer  of  $10,000  from  the  deprecia- 
tion fund  which  Mr.  O'Shaughness}',  the  engineer,  thought  was  not 
large  enough.  This  transfer,  in  order  to  meet  the  "wages  for  July, 
which  have  been  made  $5  a  day 

Commissioner  Meeker.  This  is  the  municipally  operated  railway? 

Mr.  Warrex.  Yes. 

Commissioner  Sweet.  Is  that  the  report  of  the  committee  of  the 
legislative  body  ? 

Mr.  Warrex.  It  is  the  report  of  the  finance  committee  on  de- 
])reciation  fund  of  the  Municipal  Railway.  Tliere  are  three  signa- 
tures, and  it  is  called  the  finance  committee.  It  is  certified  by  the 
clerk  of  the  board  of  supervisors,  city  and  county  of  San  Francisco. 

I  want  to  file  two  other  papers  here,  which  I  think  were  asked 
for  but  which  I  will  not  read.  One  is  several  copies  of  income 
statements  of  certain  companies  controlled  by  the  American  Rail- 
ways Co.,  and  testified  to  by  Mr.  Tingley  at  the  previous  hearings, 
ana  one  of  the  members  of  the  commission  asked  for  these  income 
statements.     I  think  there  are  five  of  each,  which  I  will  file. 

Th^  other  is  a  statement  of  J.  E.  Emery,  submitted  to  the  Fed- 
eral Electric  Railway  Commission  July  25,  1919,  and  it  is  an  analysis 
of  the  income  accounts. 

The  Chairman.  These  may  be  filed. 

Mr.  Warren.  I  think  that  is  all. 

The  Chairman.  Mr.  Ogburn,  have  you  any  remarks  to  make? 

Mr.  Ogburn.  Just  this:  Mr.  Jackson's  testimony  concluded  the 
evidence  submitted  on  behalf  of  the  representatives  of  the  public. 

When  this  special  session  was  announced,  it  was  known — we  let 
it  be  known — that  any  representative  of  the  public  or  of  any  numici- 
pality  who  cared  to  present  his  views  would  be  invited  and  be 
welcomed  here. 


1512    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 


P^ 


In  addition  to  that,  I  sent  a  letter  to  every  State  public-utility 
c<»mmissioner  in  the  United  States  inviting  him  to  come,  and  to  the 
mayors  of  a  number  of  cities. 

The  owners  have  been  heard;  the  public  has  been  heard;  and  tl^e 
third  interested  party,  labor,  as  you  know,  has  asked  to  be  heard, 
in  i-esponse,  really,  to  our  invitation,  to  the  Amalgamated  Associa- 
tion of  Street  and  Electric  Railway  Employees  of  America,  whos3 
president,  Mr.  Mahon,  is  a  member  of  this  connnission;  and  tliey 
have  stated  that  they  would  like  to  present  a  program  as  a  con- 
tiibution  to  the  study  being  made  by  this  conmiission,  and  that 
they  would  like  for  this  conmiission,  if  it  can,  sometime  during  the 
month  of  September,  to  hear  the  counselors  and  the  economists  who 
will  present  that  program. 

The  Chairman.  On  that  point,  Mr.  Ogburn,  will  you  communicate 
with  Mr.  Mahon,  or  those  who  have  that  program  in  charge,  and 
ascertain  what  pai-t  of  September  will  be  agreeable  to  them? 

Mr.  Ogburn.  Yes;  I  will.  They  have  already  indicated  that  they 
would  like  as  much  time  as  possible,  because  they  are  preparing  a 
brief  but  a  very  thorough  program. 

In  connection  with  the  labor  situation,  in  view  of  the  fact  that 
a  good  deal  of  testimony  presented  before,  this  commission  has  dealt 
with  the  increase  in  wages  awarded  by  a  national  body,  a  national 
commission,  for  this  record  I  would  like  to  have  it  shown  that  the 
war-time  scale  established  by  that  national  labor  board,  whicli 
was  48  cents  maximum  in  the  larger  cities,  has  this  week  been  still 
further  increased  by  a  revision  of  awards  in  eight  companies,  by 
iJie  National  War  Labor  Board  itself — the  increase  being  a  flit  12 
per  cent  increase  over  the  wages  awarded  one  year  ago;  that  1-2  \wv 
cent  being  based  largely,  if  not  altogether,  oil  the  increase  in  the 
cost  of  living. 

In  addition  to  that,  in  several  other  cities,  private  boards  of  arbi- 
tration and  the  companies  themselves,  through  negotiation,  have  in- 
creased the  48-cent  scale,  or  scale  established  by  the  War  Labor 
l>oard,  by  as  much  as  25  to  35  per  cent. 

So  that  those  increases  should  be  shown,  I  think,  in  the  record 
we  are  now  making. 

The  Chairman.  What  maximum  scale  is  established  by  this  recent 
increase  of  the  National  War  Labor  Board? 

Mr.  Ogburn.  The  highest  established  is  54  cents,  in  the  city  of 
l^ittsburgh. 

I  would  like  to  say  there  that  a  very  peculiar  situation  existed 
in  the  submission — that  the  receiver  of  the  company,  under  the  order 
of  the  court,  made  a  conditional  submission  that  the  receiver  would 
not  accept  the  award  of  the  board  if  it  were  not  satisfactory;  and  the 
men — since  one  party  agreed  not  to  accept  it — likewise  reserved  tlie 
same  right  to  reject  it  if  it  were  not  satisfactory;  and  since  it  was 
made,  a  maximum  of  54  cents  being  established,  the  men  have  rejected 
the  award,  as  they  reserved  the  right  to  do,  and  last  night  they  went 
out  on  strike. 

Mr.  Warren.  As  they  have  in  East  St.  Louis,  I  hear, 

Mr.  Ogburn.  I  do  not  know. 

Mr.  Warren.  There  is  one  other  thing  that  I  forgot. 

The  December,  1918,  Aera  contained  the  Oakland  resettlement 
ordinance,  which,  I  think,  was  referred  to  by  Mr.  Creed,  the  attor- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1513 

ney  of  some  of  the  companies  in  Oakland,  on  San  Francisco  Bay. 
That  company  would  like  to  have  copies  of  this  magazine  filed  with 
the  commission  that  you  might  see  the  outline  of  that  ordinance.  I 
w^ill  file  this  as  an  evidence  of  good  faith,  and  send  Mr.  Ogburn 
additional  copies. 

The  Chairman.  If  there  are  no  further  witnesses,  renewing  our 
apology  of  the  first  day  for  these  extended  and  strenuous  sessions, 
the  commission  will  stand  adjourned  sine  die. 

(Whereupon,  an  adjournment  was  taken  sine  die.) 


Washington,  D.  C,  SeptemJ^er  29^  1919. 

The  commission  met  pursuant  to  notice  in  the  Interstate  Commerce 
Commission  hearing  room  at  10  a.  m. 

Present :  Parties  as  before. 

The  Chairman.  Gentlemen,  the  commission  is  advised  that  there 
are  a  large  number  of  witnesses  who  desire  to  be  heard  this  week, 
and  unless  further  notice  is  received,  we  will  continue  the  usual 
modest  working  hours,  from  10  o'clock  in  the  morning  until  10 
o'clock. at  night. 

Who  is  your  first  witness,  Mr.  Ogburn? 

Mr.  Ogburn.  The  first  witness  is  Mr.  Joyce,  representing  Mr. 
Mitten,  of  the  Philadelphia  Eapid  Transit  Co. 

STATEMENT  OF  MR.  C.  J.  JOYCE. 

The  Chairman.  You  may  proceed.  Mr.  Joyce. 

Mr.  eloYCE.  I  am  here  in  the  capacity  of  representative  of  Mr.  T. 
E.  Mitten,  president  and  chairman  of  the  executive  committee  of 
the  Philadelphia  Rapid  Transit  Co. 

I  have  here  a  formal  statement  addressed  by  Mr.  Mitten  to  the 
commission  and,  with  your  indulgence,  I  shall  read  it.  After  read- 
ing this  statement  I  shall  supplement  it  with  such  additional  data 
as  seemed  to  me  to  be  of  interest  to  the  commission,  and  I  shall  be 
ready  to  supply  other  data  as  the  commission  may  ask  for  it,  either 
now,  if  I  have  the  data  with  me,  or  later  by  mail  to  the  secretary. 

This  is  addressed  to  Hon.  Charles  E.  Elmquist,  chairman: 

Your  request  that  I  give  information  relative  to  the  Philadelphia  solution  of 
the  traction  question  has  been  received. 

In  coniplianoe  therewith  there  is  now  in  immediate  preparation,  under  my 
instructions,  a  condensed  review  of  the  PhiUidelphia  traction  story,  in  whicii 
is  being  included,  for  your  information,  summaries  and  extracts  from  the 
original  pai)ers  and  statements  that  we  have  printed  along  the  vt'ay.  It  may 
be  you  wiU  desire  to  make  this  forthcoming  word  picture  a  part  of  your 
records. 

Pending  its  completion,  I  am  sending  this  brief  forecast  of  what  the  finished 
story  will  show. 

1.    RESULTS    SECURED    UNDER    COOPERATIVE    PLAN,     1911-1919. 

A.  Eight  months'  report  of  operation,  .January-August,  1910,  just  Issued, 
showing  proportionate  amount  of  all  yearly  charges  and  the  5  iier  cent  divi- 
dend earned  with  a  continued  5-cent  fare;  operating  ratio  (excluding  taxes) 
61.79  per  cent. 

B.  Eight-year  report  for  period  ending  December  3,  1918,  showing  as  it  does, 
the  result  of  cooperative  effort.    Public  patronage  increased  from  288  to  over 


!l 


1514    PROCEKDIXaS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

400  rides  por  capita  siiico  1910.  Fares  dcoreasod  from  average  of  4.13  cents  to 
3.98  cents  per  passenjrer.  Car  equipment  modernized  and  service  much  im- 
proved. Wages  increased  154  per  cent  from  averaj?e  of  $622  to  $1,589  per 
annum.  Collective  barfcaining:  aiKl  c<x»perative  welfare  established  ^ith  pro- 
t<M'tiou  of  $1,000  life  insurance  to  every  employee.  Transformation  of  the  in- 
herited 1910  deficit  of  $318,006  into  a  surplus  of  $4,482,119  in  1918,  $3,597,578 
in  a<hlition  being  meanwhile  imxUI  to  Philadelphia  Kapid  Transit  stockholders 
in  dividends  at  the  rate  of  5  per  (^nt  per  annum  commencing  in  1916. 

i\  Abstract  from  annual  rejwrts  of  Philadelphia  liapid  lYansit  covering  the 
period  from  formation  of  the  comittiny  in  1W2  up  to  incoming  of  Stotesl)ury-Mit- 
ten  ]Management  in  1911,  showing  the  trend  of  events  resulting  in  transforma- 
tion of  earned  surplus  in  1903,  $405,888,  to  a  deficit  from  operation  of  $1,222,735 
for  the  year  1910,  with  the  accompanying  exhaustion  of  corporate  assets  and 
impending  bankruptcy.  To  this  will  be  added  extracts  from  the  pamphlet  de- 
scribing "Proposed  Loan  of  1911"  embracing  as  it  does  the  several  letters  out- 
lining the  scope  of  ami  reasou  for  Mr.  Stoterfmry's  imdertaking  the  task.  It 
might  be  well  to  explain  thiit,  as  n  first  bid  for  public  support,  the  interest  of 
every  newspaper  was  at  the  outset  secured  by  my  personally  urging  the  right- 
eousiioss  of  our  undertaking  and  the  nee<l  of  establishing  public  confidence  by  a 
frank  and  fair  statement  of  every  change  as  made  and  the  actuating  reason 
tlierefor.  The  flu  campaign,  with  its  aggressive  publicity,  and  the  successful 
fight  for  skip-stop  continuance  will  l>e  referred  to  as  will  also  the  committee  of 
thirteen  and  their  wonderful  work,  as  showing  the  need  of  broad-minded  ac- 
tivities and  also  of  untiring  persistence  in  the  interest  of  continuing  economies 
essential  to  the  low  operating  costs  which  made  possible  the  basic  fare  of  5 
cents. 

2.    THE   rOOPERATm:   PLAX    OF    1911-1019. 

A.  Abstract  of  the  printed  booklet  containinj,  the  cooi)ei*ative  plan,  issue.s  in 
1918  following  the  indorsement  of  the  War  Labor  Board,  will  review  at  some 
length  the  struggles  of  the  period  1911-1918  and  will  describe  the  collective- 
bargaining  feature. 

The  fact  that  the  election  of  employee's  representatives  by  secret  ballot  in 
1918  was,  at  the  request  of  the  War  I<<abor  Board,  conductetl  under  the  personal 
dir(H-ti<»n  of  the  War  Labor  B<iard's  representative,  is  notable,  as  this  completed 
the  performance  necessary  to  the  unqualified  indorsement  evidenced  by  letter 
of  the  War  I^d)or  lioanVs  chief  examiner,  Mr.  E.  B.  Womls,  under  <late  of  I>e- 
cember  10,  1918,  stating  that  the  j^Jan  for  collective  bargahiing  established 
auKmg  the  workers  of  the  Phihwlelphia  UaiMd  Transit  Co.  was  not  onl,y  in- 
dorsed by  Mr.  Taft  and  Mr.  Walsh,  but  that  in  addition,  the  entire  Ixiuird 
unanimously  agreed  that  the  general  intent  and  spiiit  of  its  provisions  were 
entirely  in  accord  with  the  principles  of  the  l>o«rd. 

}?.  The  two-day  picnic  of  the  employees,  Septeml>er  3  and  4,  1919,  at  WilUnv 
<wrove — the  50,000  nttendanoe,  the  99^  i>er  <*ent  membership,  the  expre-ssions  of 
the  men  as  containeil  in  tlK^  talks  of  the  employees'  representatives,  the 
speeches  of  Chairman  Elmquist  and  Chairumn  Aijiey,  and  my  own  talk  at  the 
picnic  dinner  >vill  l)e  repi-oduced  for  the  information  of  the  connnission.  In 
these  ti-oublous  times,  it  will  be  diflicult  for  tlie  members  of  the  commission  to 
understand  how  this  oasis  in  the  desert  cjin  pt>ssibly  exist  and  I  am  ouly  sorry 
that  the  whole  commission  c*oukl  not  have  been  at  the  picnic  to  absorb  the  atmos- 
phei"e  of  confidence  awl  contentment  which  provoked  tlie  notable  expression 
containe<l  in  diairman  Elmquist's  speecli,  giving  to  cooperation  an  added  mean- 
ing, in  that  to  us  it  now  also  spells  "  Patriotism." 

C  The  Cooiierative  Booklet  (N>ntaining  the  i>l«n  of  August,  1911,  descril)ing 
the  putting  aside  of  22  per  cent  of  gross  earnings  into  a  wage  fund,  will  be 
in  evideiiee  as  will  ali>M>  all  printe<l  matter  significant  of  the  various  moves 
undertaken  from  time  to  time  to  inspire  confidence  in  the  good  intent  of 
the  management,  and  to  show  the  firm  stand  maintainetl  in  support  of  the 
well-defined  principles  and  establislied  i)olicy  us  set  forth  iu  the  plan. 

In  the  cooperative  jdan  of  1918  it  was  made  n(K*essary  to  depart  from  the 
ide;i  of  i>articipfltion  in  pro<*eeds  as  contaiiio<l  in  tlie  cooperative  plan  of  1911, 
as  a  war-time  expedient  to  bridge  over  a  veiy  difficult  i)eritHL  Higli  wages 
will  Ih?  Ci^ntinued,  and,  in  addition,  the  return  to  a  plan  of  i«irticipation  by 
our  employees  in  the  results  of  their  extraordinarily  effective  service  is  now 
being  givei*  c:*reful  consideration. 

The  coof^erative  plan,  as  pres*»nted  to  tlie  unions  In  1911,  and  tlieir  signed 
agreement  to  abide  l)y  the  vote  and  thereafter  cooperate  imder  the  plan  will 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1515 

be  of  interest.  The  troublous  days  of  misunderstanding  and  misrepresentation 
will  be  reviewed  from  the  Cooperative  Bulletins  1  to  27,  which  carried  the 
men  and  management  through  to  the  clearer  understanding  and  complete 
confidence  of  the  present  day. 

D.  As  showing  progress  along  the  way,  there  will  be  introduced  an  account 
of  the  hearings  of  the  earlier  Federal  Industrial  Relations  Commission  with 
which  Mr.  Walsh  was  so  prominently  identified  and  before  which  I  gave 
evidence  at  the  Philadelphia  hearings  in  1914. 

E.  Dashboard  and  bulkhead  advertising  and  its  effect  in  spurring  on  the 
activities  of  the  men  have  been  most  useful  in  securing  cooi>eration  as  l)etween 
men,  management,  and  car  rider.  The  letters  issued  in  folder  form  to  all  <'iii- 
ployees  under  dates  of  May  28  and  August  13,  1919,  urging  salesmanship  and 
increased  patronage  to  overcome  increased  cost,  which  received  such  v.ide 
publicity  through  the  press,  represent  a  high  note  in  this  endeavor.  The  bulk- 
head, showing  that  "  high  fares  make  riders  walk — low  fares  make  walkei-s 
ride — more  fares  make  low  fares  "  represents  top  notch  in  keeping  the  att^'ii- 
tion  of  the  car  rider  on  what  we  are  trying  to  do  and  creating  a  desire  on 
his  part  to  cooperate  in  making  it  an  accomplished  fact 

3.    PHILADELPHIA'S    EXPERIENCE. 

The  view  of  the  IMiiladelphia  situation  will  be  considerably  clarified  when 
it  is  understood  that  Mr.  Stotesbury's  interest  in  the  situation  is  not  one  of 
ownership,  in  that  neither  he  nor  I  have  any  financial  interest  in  the  securi- 
ties of  the  street-railway  company. 

Mr.  ►Stotesbiiry  Is  interested  in  accomplishing  something  worth  while  for 
the  city  of  Ids  birth,  while  my  own  ambition  in  this  regard  is  to  demonstrate 
that  there  is  a  I'cal  and  rational  way  by  which  the  vexed  problem  may  be 
solved.  My  long  experience  covering  nearly  25  years  of  continuous  active 
service  has  l)ee?i  devoted  to  this  task,  viz : 

1895-19(H)  Milwaukee. — From  superintendent  to  general  manager. 

1900-1905  Buffalo. — From  superintendent  to  general  manager. 

1905-1911   Chicauo. — From   vice  president   to   president. 

1911-1919  Philadelphia. — Chairnjan  executive  committee. 

Results  here  secured  are  thrown  into  bold  relief  by  comparison  with 
tions  existing  elsewhere.  Philadelphia  Rapid  Transit,  with  almost 
<ent  less  employees  in  1910.  is  now  producing  over  98  per  cent  more  effect^ive 
traffic  units  per  employee.  This  as  against  results  secured  on  the  Pennsyl- 
vania Railroad,  contained  in  a  speech  by  Vice  President  W.  W.  Atterbury 
as  reported  in  the  public  press,  wherein  the  number  of  employees  is  Siiid  to 
have  been  increaseil  14  per  cent,. the  output  (or  effective  traffic  units)  being 
11  per  cent  less  than  in  prewar  days.  The  case  of  the  Pennsylvania  Railroad, 
showing  decreased  production,  is  but  one  of  ^  the  many  instances  wherein 
the  effort  to  increase  production  has  given  way  to  the  great  struggle  upon 
the  part  of  labor  to  secure  a  larger  wage  for  a  small  amount  of  work. 

Aside  from  the  urgent  necessity  of  helping  to  make  up  for  the  shortage 
of  necessaries  occasioned  by  the  war  in  Europe,  it  stands  to  reason  that 
capital  and  labor  can  not  divide  that  which  does  not  exist  and  that  more  of 
everything  e.ssential  must  now  be  produced  in  order  that  there  may  be  more 
with  which  to  supply  our  needs.  If  the  forces  of  labor  and  management 
will  combine  so  effectively  as  to  produce  almost  100  per  cent  more  per  man, 
as  we  are  doing  here  through  cooperative  effort,  much,  if  not  all,  that  is 
required  to  overcome  the  higher  cost  of  living  will  have  been  accomplished. 

The  keystone  of  all  success  as  Ix^tween  man  and  management  is  confidence. 
Distrust  breeds  discontent.  Confidence  begets  confidence,  and  cooi>erative 
effort  then  becomes  possible.  The  confidence  of  the  men  in  the  management 
and,  likewise,  the  confidence  of  the  management  in  the  men,  is  what  makes 
Philadelphia  stand  out  in  accomplishment 

Philadelphia  is  almost  alone  in  its  position  of  antagonism  to  "cash-box: 
fare  collection,"  or  any  system  which  tends  to  show  a  lack  of  confidence  in 
the  conductor.  It  can  hardly  be  expected  that  a  self-respecting  employee  will 
take  seriously  the  statement  that  he  is  our  partner  if  we  require  the  action 
of  the  passenger  to  assure  us  that  the  fare  collections  are  being  properly 
made. 

So  much  for  confidence  and  its  godchild,  cooperation. 

Frank  statement,  fair  dealing,  and  honest  purpose,  with  patience  and  per- 
severance, may  be  counted  on  in  the  long  run  to  win  the  support  of  a  com- 
munity. 


condi- 
5    per 


i 


Hi 


1516    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  public  have  for  so  lonp  been  befooled  and  be^leviled  that  they  are  now 
in  a  mood  to  question  the  demands  not  only  of  capital  but  also  of  labor. 
This  feeling  is  jrrowing  in  its  intensity  as  the  citizen  of  inquiring  mind 
discovers  that  while  all  about  is  heard  the  demand  for  a  living  wage,  yet  all 
evidence  of  merchants  is  to  the  <'flFect  that  the  wage  earner  is  now  demanding 
the  most  expensive  class  of  goods  and  buying  with  great  prodigalitv.  The 
owners  of  automobiles  among  the  wage  earners  have  become  legion,*  and  it 
would  seem  that  the  difflt-ulty  now  is  as  much  with  the  higher  price  of  gaso- 
line as  with  the  increased  cost  of  our  daily  bread. 

My  own  statement  before  the  Peimsylvania  Public  Service  Commission 
in  the  Three-cent  P]xchange  case  may  be  taken  as  an  example  of  frank  state- 
ment showing  the  willingness  of  this  management  to  jeopardize  its  own  case 
rather  than  refrain  from  putting  forth  nil  of  the  facts  necessary  to  the 
knowledge  of  the  public-service  conunission.  This  statement  will  also  be 
useful  in  setting  forth  our  position  as  against  city  paving  and  other  burdens 
of  like  character  being  placed  on  the  back  of  the  car  rider  and  reiterates 
our  conviction  that  such  charges  should  be  covered  by  general  taxation  and 
that  the  car  rider  should  be  given  the  fullest  value  for  his  5-cent  piece  that 
c(M)i)eration  between  the  public,  the  men,  and  the  management  can  be  made 
to  produce. 

4.    THE  EXPERIENCE   OF  OTHER  CITIES. 

The  so-called  service-at-cost  plans  are  already  proving  a  disappointment,  for 
tlie  reason  that  neither  men  nor  management  are  paid  according  to  the  excel- 
lence of  their  work. 

Boston  is  one  example,  where  expenses  have  mounted  skyward  and  no  fare 
possible  of  collection  has  been  found  sutHcient  to  meet  the  added  cost  of  pro- 
duction. 

Cleveland  has  already  nullified  Tom  Johnson's  accomplishment  of  sweating 
profits  from  the  owners,  and  thus  reducing  rentals,  by  showing  an  inability  to 
now  produce  its  very  short  ride  at  5  cents  without  charging  an  extra  1  cent 
for  transfer.  The  city  of  Cleveland  paves  its  own  streets,  and  in  addtion  pays 
its  street  railways  in  money  for  services  sometimes  required  to  be  supplied 
gratis  by  the  sUvet  railways  in  other  cities.  The  public  of  Cleveland  stands 
for  much  latitude  in  operating  methods,  in  order  to  keep  the  fare  down,  while 
the  contest  between  the  men  and  the  managemetit  as  to  which  should  get  added 
comi)ensation  first  goes  merrily  on.  Surely  the  answer  lieth  not  in  this  direc- 
tion. 

n.    THE  FUTURE  IN   THE   LIGHT  OF   PHILADErPHIA's  EXPERIENCE. 

Receiverships  will  in  the  near  future  make  necessary  many  adjustments  as 
between  companies  and  communities.  lU^adjustinents  should  be  approached  in  a 
spirit  of  fairness  by  both  parties;  and  no  advantage  should  be  sought  by  com- 
munities because  of  the  present  condition  of  the  companies  in  so  far  as  it  has 
been  occasioned  by  the  European  war  and  tlie  excessive  costs  resulting  there- 
from. 

Valuation  of  properties,  \vhen  resorted  to  as  a  basis  of  fare  adjustmcTit, 
slumld  be  made  upon  the  then  cost  of  reproduction,  together  with  the  added 
cost  of  producing  a  condition  of  readiness  to  serve.  I  have  no  patience  witli 
the  contention  that  any  connnunity  may  now  properly  expect  a  valuation  to  be 
based  on  pre-war  prices  or  the  cost  of  earlier  years.  The  only  justification  f(.r 
such  a  claim  would  lie  in  the  supposition  that,  instead  of  enjoying  increase] 
values  in  connnon  with  others,  the  companies  were  to  be  in  some  way  assured 
of  a  continued  reasonable  return  upon  the  invested  capital.  Connnunities  did 
not  give  street-railway  comi»anies  any  such  assurance.  The  companies  took 
the  same  risks  of  profit  and  loss  as  did  the  investor  in  other  kinds  of  prop- 
erty, conequently  in  such  a  time  of  readjustment  it  seems  only  lust  that  the 
connnunities  should  be  willing  to  establish  a  farp  suflicient  to  pay  a  proper 
return  on  that  .sum  representing  the  amount  which  it  would  cost  the  city  itself 
to  reproduce  the  property  use<l  and  usable  in  transporting  the  people. 

Philadelphia's  plan  is  not  offered  as  a  cure-all  for  other  cities.  Every  situa- 
tion has  its  own  peculiar  difiiculties  to  overcome,  but  in  the  light  of  thi/?  ex- 
perience it  is  our  plain  duty  to  decry  the  thought  that  there  is  anv  cure  for  tlie 
pres<Mit  trouble  excciiting  that  which  lies  in  honest  dealing— efficient  manage- 
ment— effective  workers. 

Mr.  Joyce:  With  that  as  an  outline,  I  shall  present  these  various 
exhibits  and  offer  such  comment   as  may   seem  to  be  pertinent. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1517 

I  have  here  an  income  statement  of  the  Philadelphia  Rapid  Transit 
Co.  for  the  eight  months  ended  August  31,  1919.  I  shall  offer  this  in 
evidence  and  point  only  to  the  comparison  between  1919  and  1918, 
showing  that  1919  is  fairly  well  holding  its  own  in  spite  of  the  in- 
creased wages  to  trainmen  and  to  other  employees. 

Operating  revenues  for  the  eight  months  in  1919  were  $22,900,000 ; 
m  1918,  $20,400,000. 

Operating  exj^enses  and  taxes  in  1919  were  $15,800,000;  in  1918, 
$13,400,000. 


rev 


The  fixed  charges  in  1919  were  $6,483,000;  in  1918,  $6,406,000. 

Leaving  a  net  income  available  for  dividends  on  tlie  stock  of  the 
company,  1919,  $1,001,594;  in  1918,  $1,056,100. 

In  the  eight  months  of  1919  we  liave  earned  more  than  the  pro- 
portion of  the  dividend  of  5  per  cent  upon  the  $30,000,000  of  capital 
stock,  so  that  if  we  continue  at  the  present  rate  of  net  income  we  will 
have  earned  more  than  our  5  per  cent  dividend  this  year. 

The  paper  just  referred  to  was  thereupon  marked  "  Exhibit  No.  1, 
Witness  Joyce,"  and  is  as  follows: 

Income  account  of  Philadelphia  Rapid  Tramsit  Co, 


Operating  revenue 

Operation  and  taxes 

Operating  income 
Nonoperattng  income. . 

Gross  income 

Fixed  charges 

Net  income 

Operating  revenue 

Operation  and  taxes...., 

Operating  income 
Nonoperating  income . . . 

Gross  income , 

Fixed  charges , 

Net  income 


July,  1919. 


12,872,717.46 
2,031,219.28 


841,498.18 
46,113.17 


887,611.35 
816,141.54 


71,469.81 


July,  1918. 


12,672,710.18 
1,694,968.92 


977,741.26 
53,552.78 


1,031,294.04 
799,865.38 


231,428.66 


August,  1919. 


$2,916,816.55 
2,093,034.15 


August,  1918. 


$2,076,465.06 
1,857,622.77 


823,782.40 
43,462.57 


867,244.97 
813,721.64 


818,842.29 
48,725.68 


867,567.97 
803,97"^  53 


53,523.33 


03,592.44 


Operating  revenue 

Operation  and  taxes 

Operating  income 
Nonoperating  income. . 

Gross  income 

Fixed  charges 

Not  income 


Eight  mouths  ended  Aug.  31— 


1919 


1918 


$22,964,499.82 
15,833,330.50 


7,131,169.32 
354,089.38 


7,48.5,258.70 
6,483,004.05 


1,001,594.05 


$20,444,555.42 
13,402,587.13 


7,041,968.29 
420,391.06 


7,4(>2,359.35 
6,406,258.44 


1,056,100.91 


1518    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

Commissioner  Sweet.  Will  you  explain  a  little  more  fully  with 
repird  to  the  fares  paid?  I  undei*stand  it  is  a  5-cent  fare,  paid  in 
cash;  and,  then,  are  the  tickets  sold  at  a  lower  rate? 

Mr.  Joyce.  Tlie  5-cent  fare  is  paid  in  cash.  The  average  fare,  of 
3.1)8  cents,  is  obtained  bv  dividing  the  total  number  of  passengers, 
including  the  3-cent  exchange  passengers,  transfer  passengers,  with 
the  5-cent  passengers,  and  that  gives  us  the  showing  of  3.08  cents. 

Commissioner  Wehle.  You  spoke  of  a  3-cent  transfer? 

Mr.  Joyce.  There  are  certain  points  of  transfer  in  the  city  at 
whicli  transfer  tickets  are  obtained  only  by  paying  therefor  3  cents. 
I  will  advei-t  to  that  later  and  give  you  the  detail  of  it,  if  you  care 
to  wait  that  long,  or  I  will  give  it  to  you  now. 

Commissioner  AVeiile.  Just  in  connection  with  that  will  you  ex- 
plain how  you  used  number  of  3-cent  transfer  passengers?  Do  you 
use  them  in  your  compilation  in  order  to  arrive  at  the  average  fare 
jiaid  ? 

Mr.  Joyce.  Yes. 

Commissioner  Wehle.  That  is,  you  treat  the  3-cent-transfer  pas- 
senger as  a  passenger  ? 

Mr.  Joyce.  Yes;  and  also  free  transfers.  Therefore,  a  passenger 
who  obtains  a  transfer,  whether  he  pays  for  it  or  not,  counts  in  our 
statistics  as  two  passengers — tAvo  rides.  Eeally  it  should  l)e  de- 
scribed in  terms  of  rides  rather  than  in  terms  of  passengers. 

When  the  Stotesbury-Mitten  management  took  control  of  tlie  Kapid 
Tnvnsit  Co.  in  1911,  the  company  had  failed  by  $1,300,000  to  earn 
its  fixed  charged  in  1910.  It  had  passed  through  several  disastrous 
strikes,  and  another  strike  seemed  imminent.  Its  track  and  struc- 
tures were  run  down  and  its  cars  were  obsolete  and  dilapidated. 

Steps  were  immediately  taken  to  rehabilitate  the  road  and  to  ac- 
quire a  sufficient  number  of  modern  cars  to  supply  the  needs  of  the 
community. 

It  was  early  recognized  that  the  most  imijortfint  element  in  suc- 
cessful operation  was  the  current  upkeep  of  the  property,  and  it  was 
determined  that  for  this  purpose  a  sum  equal  to  15  per  cent  of  the 
gloss  revenue  would  be  required  per  annum. 

Prior  to  1911  the  sums  appropriated  for  that  i)urpose  were  not 
more  than  12  per  cent  of  the  gross. 

To  meet  the  requirements  for  the  rehabilitation  of  the  property 
an  issue  of  $10,000,000  of  bonds  was  authorized,  which  when  guaran- 
teed by  one  of  the  lessor  companies  were  marketed.  It  was  necessary 
to  get  that  guamnty  before  the  bonds  could  be  sold. 

After  a  careful  study  of  the  labor  situation,  Mr.  Mitten  evolved  a 
plan  of  cooperation,  which  I  shall  describe  later,  whereby  the  men 
sliould  share  in  economies  and  efficiencies  accomplished  through  their 
elfoi-ts.  The  plan  was  readily  adopted  by  the  men,  and  the  company 
entered  upon  a  new  era  of  cooperation  and  mutual  confidence. 

A  report  issued  by  the  company  to  its  stockholders  and  to  the  pub- 
lic recently,  a  coj)y  of  which  is  before  you,  reviews  briefly  and  con- 
cisely the  accomplishment  of  the  management  for  that  period. 

That  report  shows  that  in  1910  the  company  carried  445,000,000 
passengers — and  by  "  passengers  '■  there  I  mean  again  rides — at  an 
average  rate  of  fare  of  4.13  cents  per  passenger,  taking  revenue  and 
transfer  passengers  combined,  while  in  1918  it  carried  707,000,000 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RA^WAYS  COMMISSION.    1519 

passengers  at  an  average  rate  of  3.98  cents.     It  is  confidently  ex- 
pected that  in  1919  the  company  will  carry  850,000,000  passengers. 

In  1910  the  maximum  wa^es  of  trainmen  were  23  cents  per  hour, 
while  in  1918  the  men  received  48  cents,  and  this  has  since  been 
increased  to  58  cents. 

In  1910  the  population  of  Philadelphia  rode  an  average  of  288 
rides  a  year  per  capita,  while  in  1918  the  average  is  nearly  400,  and 
in  1919  exceeds  400. 

The  gross  earnings  of  the  Eapid  Transit  Co.  in  1910  were  $19,000,- 
000;  while  the  gross  earnings  in  1919  bid  fair  to  exceed  $35,000,000, 
an  increa^se  of  82  per  cent. 

During  this  period  the  yearly  wages  of  the  employees  were  in- 
creased from  $622  to  $1,581. 

The  company  has  paid  a  5  per  cent  dividend  annually  since  1910, 
while  the  deficit  from  operation  of  $1,300,000  has  been  changed  to 
an  accumulated  surplus  of  $4,482,000  at  the  close  of  1918. 

Six  thousand  and  seventy-eight  trainmen  are  now  taking  in  $34,- 
000,000  of  passenger  earnings,  while  in  1910  more  trainmen  were 
required  to  take  in  $19,000,000  of  earnings.  Mr.  Mitten  credits  this 
accomplishment  to  the  greater  efficiency  of  the  men,  who  have  dur- 
ing this  period  increased  their  effective  transportation  per  man,  to 
the  esprit-  de  corps  through  all  departments  of  the  company,  and 
particularly  to  the  active  and  enthusiastic  cooperation  of  the  train- 
men does  Mr.  Mitten  give  a  great  share  of  the  credit  for  the  suc- 
cess of  his  management. 

As  an  indication  of  the  effectiveness  of  this  cooperative  plan,  a 
glance  at  the  statistics  of  dismissals  and  resignations  among  the 
trainmen  is  illuminative. 

I  want  to  read  here  a  table  of  dismissals  and  resignations  which 
I  had  prepared: 

In  1911  there  were  appointed,  2,453  men;  resigned,  1,10G;  dis- 
charged, 1,031.  The  average  number  of  motormen  and  conductors 
in  service  was  6,880.  The  per  cent  of  labor  turnover  in  that  depart- 
ment, 35.14. 

In  1912  there  were  appointed,  1,256 ;  resigned,  986 ;  discharge,  566. 
Average  number  in  service,  6,908.    Per  cent  turnover,  18.18. 

In  that  year  you  will  see  the  advantage  of  cooperation  was  al- 
ready beginning  to  show  itself. 

In  1913  there  were  only  794  men  appointed,  547  resigned,  365 
were  discharged.  There  were  an  average  of  6,552  in  service,  and  a 
turnover  of  12  per  cent.  , 

In  1914  there  were  229  men  appointed,  232  resigned,  and  203  were 
discharged;  6,165)  was  the  average  numlDer  of  men  in  service.  Per 
cent  of  turnover,  3  per  cent. 

In  that  year  there  was  considerable  change  in  the  routing  of  thb 
cars,  with  a  decrease  in  the  number  of  men  in  service ;  so  that,  there- 
fore, the  figure  for  1915  will  reflect  some  of  the  results  of  that 
change. 

A  change  in  the  rerouting,  reducing  the  number  of  men,  and  the 
necessarily  fewer  appointments  is  reflected;  there  were  no  men  dis- 
charged by  reason  of  the  rerouting,  but  the  ordinary  labor  turn- 
over was  depended  upon  to  take  up  the  slack;  so^'that'^in  1915  there 
were  only  83  men  appointed,  177  resigned,  110  discharged.    AVe  had 


I 


i    'I 


dl 


W 


1520    TROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

an  average  of  5,929  in  service.    The  labor  turnover  was  one-tenth  of 
1  per  cent. 

In  1916  we  bep\n  to  feel  the  effects  of  the  war.  That  year  there 
were  appointed,  1,839;  resigned,  509;  discharged,  564;  average  num- 
ber, 5,962 ;  per  cent  of  turnover,  22  per  cent. 

In  1917,  1,994  were  appointed;  resigned,  1,574;  discharged,  285; 
a\  erage  number  in  service,  6,131 ;  per  cent  of  turnover,  32. 

In  1918,  appointed,  4,817;  resigned,  3,551;  discharged,  1,014;  aver- 
age number  in  service,  6,114;  per  cent  of  turnover,  (8  per  cent. 

In  1918  we  had  the  full  brunt  of  the  war  and  the  draft  and  the 
high  wages  paid  in  the  munitions  factories  and  the  resultant  high 
l)er  cent  of  turnover. 

In  1919,  for  eight  months,  appointed,  1,139;  resigned,  774;  dis- 
charged, 450;  average  number  in  service,  6,143;  turnover,  18  per 
cent. 

We  are  returning  now  to  normal  conditions.  The  men  who  left 
the  Amalgamated  Association  of  Street  and  Electric  Eailw^ay  Em- 
ployees of  America  in  1911  continued  at  times  to  disrupt  the  har- 
mony created  by  the  Cooperative  Association,  and  in  1916  attempted 
to  lead  their  fellow  employees  to  strike,  but  without  success. 

In  1918  an  attempt  was  made  under  the  same  leadership  to  take 
advantage  of  the  depleted  forces  on  account  of  the  war,  but  the  com- 
pany was  able  to  show  by  testimony  of  representatives  of  the  ship- 
yards and  the  munitions  works  that  service  had  not  been  interrupted, 
and  the  appeal  made  by  the  strike  leaders  to  the  War  I^abor  Board 
was  dismissed  following  the  voluntary  undertaking  of  the  manage- 
ment to  adopt  the  scale  then  being  made  effective  by  the  War 
Labor  Board  to  govern  the  cities  of  Chicago,  Cleveland,  Detroit,  and 
Buffalo,  thus  discontinuing  the  22-per  cent  fund  which  had  been 
established  and  undertaking  to  give  the  objective  employees  an 
oi)portunity  of  continuous  employment.  These  leaders  continued, 
however,  to  press  claims  of  discrimination  before  the  War  Labor 
Board  resulting  in  an  investigation  of  the  cooperative  plan  by  the 
agents  of  the  War  Labor  Board.  This  investigation  and  the  exami- 
nation of  those  who  appeai-ed  representing  the  cooperative  plan 
directed  the  attention  of  the  management  to  certain  points  in  the 
plan  there  shown  as  capable  of  being  misrepresented  and  misunder- 
stood. This,  together  with  the  abolition  of  the  22-per  cent  fund, 
the  establishment  of  the  War  Labor  Board  basis  for  the  new  wage 
scale  and  the  apparent  desirability  of  broadening  and  enlarging 
cei-tain  features  of  the  plan  made  necessary  the  preparation  of  an 
amended  plan,  which  was  submitted  to  the  employees  by  means  of 
the  United  States  mail  and  adopted  by  a  vote  of  8,053  out  of  a 
total  of  9,075  eligible  employees.  The  plan  was  submitted  to  the 
War  Labor  Board  and  approved.  I  shall  present  a  printed  copy  of 
tliat  plan. 

Commissioner  Mahox.  You  say  in  1918  the  Amalgamated  men 
attempted  another  strike  on  your  road? 

Mr.  Joyce.  Not  the  Amalgamated  men.  The  men  who  were  led 
out  of  the  Amalgamated  at  an  earlier  period  by  a  leader  whose  name 
is  C.  O.  Pratt  and  who  was  not  affiliated  with  the  Amalgamated  at 
that  time. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1521 

I  will  give  a  brief  synopsis  of  the  plan  so  you  may  have  it  in 
your  minds  and  ask  such  questions  and  such  enlargement  of  the 
data  as  you  may  care  to. 

Mr.  Warren.  Before  you  do  that,  I  thought  vou  spoke  of  9,000 
men. 

Mr.  Joyce.  The  9,000  men  embraces  the  men  in  other  departments 
who  were  permitted  to  enjoy  the  benefits  of  the  cooperative  plan 
under  the  new  arrangements.  Prior  to  that  time  that  plan  had 
been  confined  only  to  trainmen. 

Mr.  Warren.  The  figures  you  have  been  giving  previously  are  all 
trainmen  ? 

Mr.  Joyce.  Yes,  sir.  Employees'  representatives,  two  for  each 
branch  or  station.  Term  of  office,  one  year.  Qualifications,  two 
years'  service  and  regular  assignment  for  duty.  Nominations  and 
elections;  candidates  file  nomination  papers  signed  by  seven  or  more 
electors.  Dates  and  hours  of  election  set  so  as  to  insure  every  quali- 
fied voter  an  opportunity  to  vote.  Secret  ballot.  Election  super- 
vision by  committee  of  three  chosen  by  and  from  respective  depart- 
ment committees  for  employees.  Vacancies  filled  by  special  elec- 
tions. Notice  of  election  is  posted  conspicuously  at  each  branch  21 
days  in  advance.  I  am  submitting  a*  set  of  forms  used  in  these  elec- 
tion proceedings. 

The  ballot  and  notice  of  election,  the  provision  for  nominations, 
which  may  be  compared  to  the  primary  election,  the  ballot  which  is 
posted  before  election,  and  a  diagram  of  the  voting  place  and  a 
picture  taken  at  the  time  of  election 

Commissioner  Meeker.  Have  you  duplicates  of  those  papers? 

Mr.  Joyce.  I  have  two  copies  of  the  picture  that  you  can  exam- 
ine. That  shows  a  typical  election  place  at  one  of  the  car-barns  of 
the  company. 

Who  may  vote :  Any  employee  who  has  been  in  the  service  of  tho 
company  six  months,  who  is  regularly  assigned  to  duty.  Persons 
holding  official  positions  of  any  character  with  the  company  are 
excluded. 

The  company  representatives  are  appointed  by  the  president  of 
the  company,  not  to  exceed  the  number  of  employee  representatives. 

The  jurisdiction  is  unlimited  as  to  collective  bargaining. 

The  organization  consists  of  branch  committees  consisting  of  two 
employees'  representatives  for  each  branch  and  two  company  rep- 
resentatives. The  department  committees  consist  of  all  branch  rep- 
resentatives elected  in  a  particular  department  and  an  equal  num- 
ber of  company  representatives. 

The  following  department  committees  are  organized :  Transporta- 
tion, rolhng  stock  and  buildings,  electrical,  way,  and  general  offices. 

There  are  two  chairmen  for  each  committee,  one  for  the  employee 
members  and  one  for  the  company  members. 

When  a  vote  is  taken  by  any  joint  committee,  each  side  has  the 
right  to  retire  and  cast  its  vote  in  secret  caucus.  The  majority  vote 
of  each  side  is  regarded  as  a  unit  vote.^  When  the  vote  of  both  sides 
of  a  joint  committee  is  in  agi-eement,  the  controversy  is  settled. 

Branch  committees  meet  whenever  necessary.     Department  com- 
mittees hold  regular  bimonthly^  meetings.     The  general  committee 
1G0643''— 20— VOL  2 34 


■I! 


1522    PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

nicots  regularly  once  each  month  and  conducts  si>ecial   meetin^rs 
whenever  necessary.  "^ 

The  general  committee  has  power  to  review,  modify,  or  reverse 
any  hndnig  or  decision  of  the  departmental  committees.  When  the 
lower  authorities  are  unable  to  reach  an  agreement,  grievances  are 
carried  to  the  higher  authorities  in  the  following  order; 

^'^^*st.  They  originate  in  the  branch  committees, 

Second.  Api>eal  to  the  departmental  committee. 

Third.  Appeal  to  the  general  committee. 

The  decision  of  the  general  committee  shall  be  final  and  bindin^r. 
If,  however,  the  general  committee  should  fail  to  reach  an  agree- 
ment, an  appeal  is  made  to  arbitration.  One  arbitrator  is  choseu 
by  tlie  general  committee  for  employees  and  another  by  the  general 
committ^  for  employers.  The  two  arbitrators  so  chosen  select  a 
tlm-cl.  l^ailmg  unanimous  decision,  the  decision  of  any  two  of  the 
tiiree  arbitrators  shall  be  binding.  In  the  event  that  the  two  arbitra- 
tors ai;e^  unable  to  agree  upon  a  third  arbitrator,  then  the  provost 
of  the  University  of  Pennsylvania,  the  chairman  of  the  Public  Serv- 
ice Commission  of  Pennsylvania,  and  the  president  of  the  Chamber 
ot  Commerce  of  Philadelphia  shall  be  requested  to  serve  as  addi- 
tional arbitrators,  or,  failing  so  to  do,  to  appoint  their  personal  rep- 
resentatives to  act  as  such  additional  arbitrators. 

Amendments  to  the  plan  may  be  made  by  a  decision  of  the  gen- 
eral committee.  ^ 

Miscellaneous  provisions.  At  least  once  in  eveiy  tliree  months 
there  shall  be  an  opportunity  for  the  meeting  of  the  workers  at 
each  branch  when  reports  shall  be  made  by  the  local  branch  com- 
mitteemen to  their  fellow  employees. 

Employees'  representatives  are  paid  for  the  committee  work  at 
their  regular  rates  of  wages  from  the  funds  of  the  cooperative  wel- 
fare association.  Tlie  company  representatives  receive  regular 
rates  of  pay  from  tlie  company. 

All  expenses  incident  to  the  operation  of  the  cooperative  plan  are 
paui  from  the  funds  of  the  cooperative  welfare  association. 

Ihere  is,  m  addition  to  that  and  running  along  parallel  with  it 
a  cooperative  welfare  association,  tlie  membership  in  which  is  open 
to  employees  one  year  or  over  in  the  service  and  over  16  years  of 
age,  without  initiation  fee ;  $1  per  month  will  be  deducated  from  the 
pay  of  each  member,  and  the  dues  will  entitle  members  to  life  insur- 
ance, siek  benefits,  and  pensions. 

The  company,  during  the  period  of  this  management  has  paid 
into  the  various  funds  representing  sick  benefits,  pensions,  death 
benefits,  and  other  benefactions  at  the  rate  of  appix)ximately  $90  000 
per  annum.  Under  the  cooperative  plan  of  1918  the  company  will 
contribute  a  lump  sum  of  $10,000  per  month  to  the  cost  of  carryinff 
out  the  conditions  contained  therein.  That  has  recently  been  in- 
creased to  $20,000  per  month  so  long  as  the  men  maintam  a  mem- 
beiship  of  95  per  cent  or  over. 

Should  the  income  realized  by  the  payment  of  $1  per  month  from 
the  membei-s  and  tlie  contributions  of  the  company  be  found  insuf- 
ficient to  nieet  the  expenditures  of  the  association,  the  dues  of  the 
members  will  be  inci-eased  sufficiently  to  prevent  a  deficit  in  the 
funds  of  the  association  and  no  increase  in  the  amount  paid  by  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1523 

company  shall  be  made  until  the  total  amount  paid  monthly  by 
the  menibers  equals  the  $10,000  paid  monthly  by  the  company.  There- 
after all  increases  shall  be  borne  equally  by  both.  The  company, 
however,  will  not  reduce  its  minimum  payment  of  $10,000  per  month 
sliould  the  present  dues  of  $1  per  month  create  a  surplus  in  the 
funds  of  the  association. 

A  life-insurance  policy,  a  blanket  policy,  is  issued  by  the  Metro- 
]W)litan  Life  Insurance  Ca,  insuring  the  lives  of  the  employees  of 
the  {ompany  desiring  to  avail  themselves  of  this  protection  through 
tlie  medium  of  the  cooperative  welfare  association- 

Certificates  of  insurance  providing  for  $1,000  life  insurance  have 
been  delivered  into  the  possession  of  each  member  of  the  association, 
to  remain  in  full  force  and  effect  so  long  as  the  member  continues 
in  the  employ  of  tlie  company  and  retains  membership  in  the  asso- 
ciation, 

This  replaces  the  death  benefit  of  $150  formerly  paid  under  the 
cooperative  plan  of  1911^  to  which  the  members  contributed  25  cents 
per  month,  and  also  replaces  the  $500  given  by  the  company  ta 
dependents  of  deceased  employees  who  had  been  over  two  years  in 
its  service. 

The  Metropolitan  Life  Insurance  Co.  makes  payment  of  benefits 
and  insurance  under  its  policy  direct  to  the  beneficiaries  of  the  mem- 
bers of  the  cooperative  welfare  association. 

Each  certificate  of  insurance  for  $1,000  issued  by  the  Metropolitan 
Life  Insurance  Co.  entitles  the  holder,  upon  leaving  the  employ  of 
the  company,  to  reinsure  for  the.  same  amount  with  the  insurance 
company  without  medical  examination,  at  rates  based  upon  the 
member's  then  attained  age.  Any  such  member  subsequently  return- 
ing to  the  employ  of  tlie  company  will  again  become  eligible. 

The  special  feature  of  this  insurance  is  a  provision  that  in  case 
of  total  and  j>ermanent  disability  accruing  be  fare  the  members  diall 
have  attained  GO  years  of  age,  from  causes  arising  after  the  issit- 
ance  of  insurance,  the  insured  will  be  entitled  to  receive  from  the 
insurance  company  the  $1,000  covered  by  the  policy  in  monthly  or 
yearly  installments  as  set  forth  in  the  certificate. 

^k  benefits  are  payable 

The  Chairman.  Can  you  answer  one  qne^ion  now? 

Mr.  Joyce.  Certainly. 

The  Chairman.  Does  the  insurance  company  require  a  physical 
examination  beftwre  it  issues  the  policy  ? 

Mr.  Joyce.  No.  Sick  benefits  are  payable  at  tlie  rate  of  $130 
per  day,  ec»nmeneing  with  eight  days'  illness,  for  a  period  not  to 
exceed  100  days  in  any  consecutive  12  months.  This  rejdaces  the 
former  sick  relief  of  $.1  per  day  for  100  days  in  any  consecutive  12 
months. 

Pensions  of  $40  per  month  are  payable  to  incapacitated  employees 
who  have  reached  65  years  of  age  and  have  been  continuously  in 
the  service  for  25  years;  meritorious  cases  of  long  service,  but 
falling  short  of  these  requirements,  to  be  given  special  considera- 
tion. 

This  increases  the  former  pennon  plan  from  $20  to  ^0  per  mcmth. 

The  a^irs  of  the  cooperative  welfare  association  slmll  be  ad- 
ministered] by  a  cooperative  courncil  consisting  of  the  combined  mem- 
bership of  the  two  general  committees  foar  collective  bargainings 


■wBBf 


1524    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  administration  of  the  cooperative  welfare  association  shall  be 
entirely  separate  and  distinct  from  the  function  of  collective  bar- 
gaining. 

The  cooperative  council  shall  act  as  trustee  of  insurance  for  the 
cooperative  welfare  association  and  shall  also  authorize  the  ex- 
penditures of  all  money,  including  payment  of  sick  benefits. 

The  cooperative  council  shall  also  pass  upon  the  issuance  of  in- 
surance certificates  and  the  validity  and  merit  of  all  applicants  for 
pensions. 

The  president  of  the  cooperative  welfare  association,  who  shall 
also  act  as  chairman  of  the  cooperative  council,  shall  be  elected 
annually  from  the  membership  of  the  association  by  the  majority 
vote  of  all  the  members  of  the  several  committees  for  employees. 

The  chairman  of  the  board  of  directors  and  the  presitient  of  the 
company  shall  be  the  honorary  chairmen  of  the  cooperative  council. 

The  secretary-treasurer  of  the  cooperative  council  and  the  assist- 
ant secretary-treasurer  shall  be  appointed  by  the  president  of  the 
company.  The  association  shall  employ  such  other  assistants  as  may 
be  required. 

The  company's  auditing  and  treasury  departments  are  to  be  placed 
at  the  disposal  of  the  cooperative  council  for  the  purpose  of  keep- 
ing the  accounts  and  safeguarding  the  funds  of  the  cooperative 
welfare  association. 

Commissioner  Meeker.  Have  you  more  than  one  copy  of  the  co- 
operative plan? 

Mr.  Joyce.  Yes,  sir. 

Commissioner  Mahon.  You  say  the  war  board  has  indorsed  that 
plan.    Do  you  know  that  to  be  a  fact  ? 

Mr.  Joyce.  I  will  submit  here  at  this  point,  if  the  commission 
f  lease,  a  letter  dated  December  10,  1918,  addressed  to  Mr.  Robert 
M.  Kernaghan,  secretary  of  Division  No.  477,  1007  Foulkroyd 
Street,  Philadelphia,  Pa. : 

Mr.  Robert  M.  Kernaghan, 

Secretary,  Division  No.  ^77, 

1007  Foulkroyd  Street,  Philadelphia,  Pa. 

Dear  Sir:  Answering  your  inquiry  of  December  2,  directed  to  the  honor- 
able Franlj  P.  Walsh  and  referred  to  me  for  attention,  permit  me  to  inform 
you  that  you  have  not  only  been  correctly  informed  by  Mr.  Caskie  that  the 
plan  for  collective  bargaining?  now  being  established  among  the  workers  of 
the  Philadelphia  Rapid  Transit  Co.  was  indorsed  by  Mr.  Walsh  and  Mr.  Taft, 
but  the  entire  board  unanimously  agreed  that  the  general  intent  and  spirit  of 
its  provisions  were  entirely  in  accord  with  its  own  principles,  and,  by  way  of 
cooperating  in  the  carrying  out  of  the  initial  elections  to  be  held  in  accordance 
with  such  plan  of  collective  bargaining,  they  directed  me  to  appoint  an  ex- 
aminer to  supervise  such  elections. 

The  plan  of  collective  bargaining  provides  for  its  amendment  to  meet  future 
conditions,  and  we  believe  that  after  giving  the  same  a  fair  trial  it  wUl  be 
found  to  substantially  meet  the  requirements. 
Very  truly,  yours, 

(Signed)  E.  B.  Woods, 

Chief  Examiner  National  War  Labor  Board. 

Following  that,  the  War  Labor  Board  sent  three  examiners  to 
Philadelphia  to  conduct  that  election,  and  they  conducted  it  to  the 
exclusion  of  all  employees  of  the  Philadelphia  Rapid  Transit  Co., 
and  the  results  of  the  election  were  signed  by  the  committee  con- 
ducting the  election.    I  have  a  copy 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1525 

Commissioner  Mahox.  That  is  all  the  evidence  you  have,  then, 
that  the  War  Board  indorsed  that  plan  ? 

Mr.  Joyce.  We  have  letters  which  you  will  find  printed  in  the  co- 
operative-plan booklet  which  I  have  submitted. 

Commissioner  Mahon.  From  whom? 

Mr.  Joyce.  A  letter  addressed  to  the  joint  chairmen  by  President 
Mitten  under  date  of  November  4,  1918 ;  a  letter  addressed  to  Presi- 
dent Mitten 

The  Chairman.  On  what  page  of  the  booklet  ? 

Mr.  Joyce.  On  page  34  of  the  booklet. 

Commissioner  Mahon.  Addressed  to  whom  ? 

Mr.  Joyce.  Addressed  to  the  general  chairmen  by  President 
Mitten,  and  their  reply  written  by  Mr.  W.  Jett  Lauck,  secretary  of 
the  National  War  Labor  Board,  under  date  of  November  9.  A 
further  letter  addressed  by  President  Mitten  to  the  general  chairmen 
under  date  of  November  21.  Those  letters  and  the  letter  of  Chief 
Examiner  Woods  are  the  evidence  that  we  have  of  the  approval  of 
the  War  Labor  Board. 

Commissioner  Mahon.  Well,  the  letter  of  Mr.  Lauck  is  not  an  in- 
dorsement of  the  board.  You  have  no  further  evidence  to  show  the 
indorsement  of  the  board? 

Mr.  Joyce.  No  further  evidence. 

I  have  here  the  proceedings  of  the  annual 

Commissioner  Mahon.  I  would  like  to  ask  you,  while  you  are  on 
that  cooperative  plan,  how  you  fix  the  wages  now  ? 

Mr.  Joyce.  The  wages  are  now  fixed  by  agreement  with  the  men 
based  upon  the  average  of  the  wages  paid  in  the  four  cities  which  at 
the  time  were  the  four  best  cities  from  the  standpoint  of  the  men,  I 
believe;  namely,  Chicago,  Cleveland,  Detroit,  and  Buffalo. 

Commission  Mahon.  How  do  you  fix  that  wage,  then? 

Mr.  Joyce.  When  any  change  is  made  in  the  wages  paid  in  any  of 
those  cities  a  new  average  is  struck.  For  example,  when  Detroit 
went  up  we  struck  a  new  average,  resulting  in  an  increase  in  the 
w^ages  in  Philadelphia.  When  Chicago  went  up  we  struck  another 
new  average  resulting  in  a  further  increase. 

Commissioner  Mahon.  How  do  you  average  them? 

Mr.  Joyce.  By  adding  the  four  together  and  dividing  by  four  for 
the  maximum  and  minimum. 

Commissioner  Mahon.  What  wages  are  you  paying  your  men 

now  ? 

Mr.  Joyce.  58  cents. 

Commissioner  Mahon.  You  get  that  by  averaging  the  wages  for 
the  four  union  cities  ?     * 

Mr.  Joyce.  Yes,  sir ;  61  cents  to  the  trainmen  on  the  elevated. 

Mr.  Warren.  58  cents  is  surface  ? 

Mr.  Joyce.  Yes ;  58  cents  to  the  surface. 

Commissioner  Meeker.  It  is  not  a  weighted  average? 

Mr.  Joyce.  No. 

Commissioner  Meeker.  That  is,  you  do  not  multiply  the  rates  by 
the  number  of  men? 

Mr.  Joyce.  No  ;  it  is  not  a  weighted  average. 

Commissioner  Mahon.  Can  you  tell,  or  have  you  any  figures  to 
show,  the  number  of  cars  operated  and  the  number  of  men  employed 
in  1903  as  compared  with  the  number  in  1917  or  1918? 


II  i 


\  i 


1526    PR0CEEDi:7GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK. 

Mr.  Joyce.  I  have  not  those  figures  with  me,  Commissioner  Mahon, 
but  we  can  prepare  them  and  send  them  to  the  commission. 

Commissioner  Mahon.  But  there  was  a  rerouting  and  reconstruct- 
ing of  all  that  property  in  that  period,  was  there  not? 

Mr.  Joyce.  In  1913  and  1914  there  was  a  general  rerouting  of  cars 
to  take  advantage  of  unified  operations. 

Commissioner  Mahon.  And  that  meant  a  reduction  in  the  number 
of  men? 

Mr.  Joyce.  Yes;  that  was  reflected,  as  you  will  remember,  in  the 
table  of  labor  turnover  that  I  read. 

Commissioner  Mahon.  And  tliere  was  a  change  in  the  condition  of 
hours,  was  there  not? 

Mr.  Joyce.  I  think  not.  I  think  no  change  in  the  condition  of 
hours  at  that  time. 

Commissioner  Mahon.  That  is  an  important  item  in  what  you  are 
showing  here  that  I  think  this  commission  ought  to  be  in  possession 
of  clearlv. 

Mr.  Joyce.  A  statement  as  to  whether  there  was  a  change  in  the 
number  of  hours  ? 

Commissioner  Mahon.  Yes ;  as  to  the  change  of  hours  and  condi- 
tions and  as  to  the  change  that  has  taken  place ;  that  is,  to  my  mind, 
you  have  reduced  considerably  the  number  of  cars  that  were  in  opera- 
tion and  curtailed,  of  course,  the  expenses  of  operation  while  you  are 
carrying  a  greater  number  of  people  on  a  much  less  number  of  cars 
and  for  much  less  cast  to  your  comi>any  than  before.  I  think  that  is 
an  important  matter. 

Mr.  Joyce.  Yes;  we  increased  by  the  changes  in  equipment  the 
seating  capacity  of  cars  o^jerated  through  the  bu&iAess  district  during 
the  evening  rush  liours  by  *G5  per  cent. 

Commissioner  Meeker.  That  is,  the  number  of  seats  ? 

Mr.  Joyce.  That  is,  the  number  of  seats  operated  during  the  rush 
hours,  by  65  per  cent. 

Commissioner  Meekek.  That  was  between  what  dates? 

Ml*.  Joyce,  That  was  as  a  result  of  the  introduction  of  a  new  and 
larger  car  shortly  after  the  Mitten  management  in  1913  and  1914. 
The  Mitten  management  was  not  able  at  one  blow  to  bring  into  effect 
all  of  its  planned  changes,  but  the  introduction  of  tliose  betterments 
was  postponed  due  to  the  delivery  of  equipment  and  to  the  financing 
and  to  the  cooperation  of  the  men  and  the  cooperation  of  the  public, 
which  was  very  necessary. 

The  Chairman.  Perhaps  you  can  answer  Mr.  Mahon's  question  or 
else  supply  the  information.  He  wants  to  know  if  that  rerouting  re- 
sulted in  a  lesser  number  of  cars,  and,  if  so,  how  many? 

Mr.  Joyce.  It  did  result  in  a  few  less  cars;  how  many  I  do  not 
know,  but  we  can  obtain  that  data  for  vou  and  submit  it. 

Commissioner  Mahon.  You  showed  one  important  thing  there ;  a 
difference  in  the  seating  capacity  of  65  per  cent  more  people  during 
the  rush  hours.  What  I  wanted  to  ask  was  this :  Philadelphia  was 
considered  at  that  time,  as  we  call  it  in  the  railroad  world,  an  over- 
railroaded  town  when  Mr.  Mitten  went  in,  and  it  was  all  readjusted, 
was  it  not  ?  ' 

Mr.  Joyce.  Yes,  sir;  there  was  a  very  complete  i^adjustment  of  the 
rmming  of  the  cars.    Where  cars  came  down  town  from  the  north 


PROCEEDI^^-GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION-.    1527 

and  turned  and  made  various  toiluous  routes  through  the  business 
district,  through  the  heavy  traffic  they  were  routed  through  from 
north  to  south  and  their  routes  were  straightened  out  so  as  to  improve 
the  headway  and  the  speed  of  the  cars  and  to  lessen  delays  of  traffic. 
That  I  think  everybody  in  Philadelpliia  now  regards  as  a  very  bene- 
ficial change,  both  to  the  service  and  to  tlie  community. 

Commissioner  Mahon.  Undoubtedly.  I  am  not  criticising  that. 
The  point  I  wanted  to  show  is  you  cheapened  the  cost  of  operation  to 
u  greater  extent  possibly  than  any  other  railroad  in  the  country. 

Mr.  Joyce.  I  wish  to  review  to  some  extent  the  cooperative  plan  as 
it  was  first  introduced. 

It  Tyas  born  out  of  a  feeling  upon  Mr.  Mitten's  part  that  it  was 
essential  that  there  be  a  greater  degree  of  team  work  among  the 
motormen  and  conductors.  Tliis,  it  was  believed,  could  only  be 
secured  by  eliminating  that  constant  cause  of  disagreement  due 
to  the  fact  that  there  were  rival  labor  organizations.  It  was  be- 
lieved that  there  should  be  a  more  definite  understanding  between 
the  men  and  the  management  to  insure  a  lasting  peace  and  a  gen- 
eral upbuilding  of  the  property  and  that  whatever  plan  of  co- 
operation was  determined  upon  should  be  concurred  in  by  so  larre 
a  i^roportion  of  the  men  as  to  establish  that  which  is  necessary  to 
the  success  of  any  undertaking.  It  Avas  believed  that  this  degree 
of  cooperation  could  be  obtained  and  would  find  its  expression  in 
everyday  earnest  effort  to  render  more  efficient  service  when  it  had 
been  made  clear  to  the  men  that  they  sliould  share  in  the  increased 
earnings  due  to  the  added  effort  on  their  part  and  efficiency. 

It  was  found  then  that  tl*e  total  wages  pai<i  trainmen,  plus  the 
amount  of  sick  benefits  and  other  payments  corresponding  to  re- 
muneration for  service,  aggregated  a  sum  equal  to  21,8  per  cent  of 
the  gross  passenger  revenue.  It  was  believed  that  it  would  be  im- 
possible for  the  company  to  survive  if  it  increased  the  proportion 
of  its  earnings  then  paid  to  the  trainmen,  for  already  the  company 
had  fallen  short  by  over  $l,e300.000  of  meeting  its ^  fixed  charges, 
but  the  management  recognized  that  there  were  great  possibilities  in 
that  i>ercentage  of  gross  if  it  could  secure  the  cooperation  of  the  men. 

Mr.  Mitten  called  the  men  togetlier  and  explained  the  situation 
to  them  and  promised  them  tliat  if  tliey  would  cooperate  with  llis 
management  imder  the  plan  which  he  had  developed  he  w<Hiid  set 
aside  22  cents  out  of  every  dollar  which  the  company  should  re- 
ceive in  fares  as  a  fund  to  be  used  for  the  wages  of  the  trainmen. 

He  went  to  each  barn  and  met  the  men  in  session  and  explained 
his  plan  to  tliem. 

The  question  as  to  whet^ber  tl^  management  \\^uld  deal  with  its 
trainmen  as  individuals  or  as  an  organized  body  would  have  to  be 
determined  If  with  tlie  men  individually,  the  plan  would  be  made 
effective  as  soon  as  tlie  fact  had  be&i  dkermined.  If  with  an  or- 
ganization, it  could  not  only  be  with  sudi  an  organization  as  would  be 
willing  to  enter  into  an  agreement  to  cooperate  with  the  manage- 
ment m  its  efforts  to  improve  service.  The  management  did  not 
wish  to  take  a  ix^sition  either  for  or  against  eitl^r  of  the  organi- 
zations having  membership  among  its  men.  The  management  de- 
cided  to  submit  the  matter  to  a  vote  of  the  men.  with  tlie  under- 
standmg  that  if  two-thirds  of  tlie  men  by  secret  ballot  d^ermlned 


■SI 

f! 


1528    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

that  a  contract  should  be  made  by  the  company  with  organized  labor 
the  company  would  make  such  a  contract,  and  while  it  could  not 
require  any  of  its  men  to  belong  to  a  labor  union,  it  could,  if  there 
>vas  so  large  a  majority  as  two-thirds  of  its  men  desirous  that  such 
a  contract  be  made  with  the  members  of  the  labor  organization,  pay 
from  the  22  per  cent  fund  the  sum  of  the  dues  of  every  man.  In 
other  words,  if  the  company  dealt  with  the  union,  the  company 
would  undertake  to  collect  the  union  dues  and  pay  them  out  of  the 
wages  of  the  men.  It  would  collect  from  every  man  and  it  could 
not  undertake  to  do  that  without  as  large  a  vote  as  two-thirds. 
It  was  thought  by  so  doing  the  management  could  eliminate  that 
continual  cause  of  trouble  by  collectors  of  dues  at  the  car-barns, 
of  organizing  men  on  the  cars,  and  the  constant  quarreling  and  dis- 
turbance occasioned  thereby. 

The  representatives  of  both  the  Amalgamated  and  the  Keystone 
organizations  agreed  to  this  plan  and  at  the  request  of  the  Amalga- 
mated such  a  vote  was  taken.  The  agreement  under  which  that 
vote  was  taken  is  an  interesting  document.  It  is  signed  by  the  repre- 
sentatives of  the  organization  and  I  happen  to  have  a  copy  of  it 
here  and  will  place  it  before  you. 

The  paper  is  as  follows: 

PHILADELPHIA   RAPID   TRANSIT   CO.— INFORMATION    TO    CONDUCTORS    AND    MOTORMEN. 

I.  What  you  arc  toting  on.— The  Amalgaumted  Association  has  asked  that  the 
vote  be  taken  on  the  following  question  : 

Question  :  Shall  the  Araalgamatetl  Association  of  Street  and  Electric  Rail, 
way  Employees  of  America,  division  No.  477,  make  a  contract  with  the  Phila- 
delphia Rapid  Transit  Co.  upon  the  basis  of  the  "  Mitten  plan  "  as  published  in 
book  form  and  dated  August,  1911?  i^  vu 

I  vote . 

If  you  vote  "yes"  you  vote  to  have  the  Amalgamated  Association  repre- 
sent  all  the  men  affected  in  carrying  out  the  plan  of  August,  1911 

If  you  vote  "  no  "  you  vote  to  have  the  plan  cartied  out  by  the  Stotesbury 
management  but  without  having  the  Amalgamatetl  Association  act  as  vour 
representative.  ^ 

II.  Who  can  vote— The  22  per  cent  relates  to  gross  passenger  earnings  only 
and  IS  appropriated  solely  for  the  benefit  of  employees  engaged  In  passenger 
service,  viz:  Motormen  and  conductors  of  passenger  street-cars,  and  motormen 
nmr conductors,  guards,  or  trainmen  of  the  Market  Street  Elevated  This  to 
include  such  new  men  as  have  completed  their  work  as  students  and  have  been 
accepted  as  employees  of  the  company  prior  to  the  date  of  this  notice  but 
does  not  Include  men  assignetl  to  other  duties  who  have  not,  during  the  three 
iiionths  preceding  tlie  date  of  this  notice,  been  actually  engaged  in  the  owra- 
tion  of  cars.  * 

The  earnings  derived  from  mail,  express,  ash,  and  freight  service  are  not 
included  in  the  22  per  cent  fund.  Motormen  and  conductors  engaged  in  thi«i 
service  are  not  therefore  entitled  to  vote. 

In  order  to  show  exactly  who  can  vote,  lists  have  been  prepared  at  each  de- 
pot giving  name  and  badge. number  of  all  motormen.  conductors,  trainmen  or 
guards  who  are  entitled  to  vote.  These  lists  are  posted  herewith  and  are  sub- 
ject to  correction  upon  application  to  the  division  superintendent  at  any  time 
up  to  6  o  clock  Monday  evening,  October  30,  after  which  they  will  be  certified 
by  the  division  superintendents,  and  only  those  then  on  the  lists  can  vote 

III.  When  and  how  the  vote  win  be  taken.— The  vote  will  be  taken  at  Horti- 
cultural Hall  on  Wednesday,  November  1,  beginning  at  8  a.  m.  and  closing  at 
10  p.  m.,  or  as  soon  thereafter  as  all  the  men  then  present  can  deposit  their 
ballots. 

The  vote  will  be  a  secret  one  and  so  conducted  that  no  person  in  the  man- 
agement or  among  the  men  can  tell  how  any  man  voted.  The  men  must  vote 
in  uniform  and  be  Identified  by  their  badges. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1529 

r.^T  wi^™^^^^™*'^*^'^  Association  and  the  Keystone  Association  will  each  ap- 
point three  men  to  supervise  the  election,  and  the  company  will  ask  the  news- 
S,^?r?  ^  .fPP'^i"*,  ^  i^^""^  committee  of  disinterested  citizens  for  the  same 
So  rp,^°®  judge  from  each  of  these  committees  will  be  on  duty  at  all 
tunes.  The  votes  will  be  counted  under  the  supervision  of  three  judges  as 
aforesa  d  and  the  result  certified  by  a  representative  of  each  of  the  three 
committees. 

The  company  urges  every  man  to  vote  on  this  question 

Approved    for    the    executive    com-  Philadelphia  Rapid  Transit  Co. 

"""^^'m    J.    .,  ^,    .  ^y  Chas-  O.  Kruger,  President. 

T.  E.  Mitten,  CJiairman.  Amalgamated     Association     op 

Approved  for  the  general  executive  Street  and  Electric  Railway 

Doard.  Employees  of  America,  Divi- 

^.  J.  feHEA.  eioN  No.  477. 

By  Committee: 
Peter  Driscoll,  President, 
Hugh  Barron,  Secretary, 
C.  O.  Pratt,  Business  Agent, 
Arghie  Chambers, 
Harry  F.  Flynn, 

T»  ^  RojJERT  M.  Kernaghan, 

Philadelphia,  October  25,  1911.  ^ 

Attached  to  this  is  a  ballat  which  reads  as  follows  : 

BALLOT. 

Question:  Shall  the  Amalgamated  Association  of  Street  &  Electric  Railway 
^l!!u  ^^^^'^%  ^'""^r^?'  Division  No.  477,  make  a  contract  with  the  Philadel- 
ni't  ^""^^  ^''?"f '*  ?''•  "P"""  "'*^  ^'^^is  of  the  "  Mitten  plan,"  as  published  in 
book  form,  and  dated  August,  1911?  i  uunsneu  lu 

I  vote . 

of^Str^^f  i'^Fw/ri^'^R  contract  being  made  with  the  Amalgamated  Association 

vvriL'trJTorr-No'MrtU^  "^^  Amalgamated  Association. 

Now  the  result  of  that  vote,  which  was  conducted  in  a  downtown 
hall  in  the  center  of  the  city,  and  which  was  presided  over  bv  a 
committee  consisting  of  representatives  of  the  newspapers,  repre- 
sentatives of  the  men,  and  representatives  of  the  company,  was  that 
the  men  fell  short  by  253  votes  of  reaching  the  required  two-thirds 
majority  in  favor  of  the  collective  dealing. 

Shortly  after  this  and  before  the  company 

The  Chairman.  How  many  of  the  men  voted  ? 

Mr.  Joyce.  I  believe  that  85  per  cent  of  the  men  voted.  The 
voting  continued  all  day  and  well  into  the  night 

Mr.  Warren^^  Was  it  to  be  decided  by  two-thirds  of  those  voting? 

Mr.  Joyce.  By  two-thirds,  as  to  whether  the  company  would  deal 
with  the  organization  or  with  the  individual  men 

Mr.  Warren.  Of  those  voting  or  of  the  total  number  of  em- 
ployees ? 

Mr.  Joyce.  Of  those  voting,  I  believe. 

Before  the  company  had  come  to  a  decision,  however,  there  was  a 
split  in  the  Aflialgainated  Association  and  that  division  and  a  fac- 
tion led  by  Mr  C.  O.  Pratt,  who  was  then  business  agent,  broke  off 
from  the  Amalgamated,  so  that  we  then  had  in  Philadelphia  three 
unions  the  Amalgamated,  the  followers  of  C.  O.  Pratt,  and  the  so- 
called  Keystone  Union,  known,  I  believe,  as  the  United  Carmen  of 
America,  and  all  of  these  organizations  put  together  did  not  make 
up  a  total  of  40  per  cent  of  the  men. 


1530    PHOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOI^. 

The  company  therefore  elected  to  deal  with  the  individual  men. 
The  plan  was  put  into  effect  and  at  the  outset  there  was  much  bitter 
feeling  between  the  men  and  it  was  difficult  to  know  how  to  get 
Tepresentatives  selected  at  the  various  car-l^arns,  so  that  in  the  be- 
ginning the  representatives  of  the  men  were  selected  by  the  super- 
intendents. At  the  end  of  tlie  first  year  an  election  was  held  and  tlie 
selection  of  the  men  submitted  to  a  vote,  with  the  result  that  the  vote 
w  as  divided  at  each  bam  in  about  the  proportion  of  the  division  of 
the  men  at  that  barn  among  tlie  various  labor  organizations.  It  was 
decided  to  select  two  representatives  then  from  each  division,  these 
two  being  men  taken  from  the  highest  votes,  so  that  possibly  a  rep- 
resentative of  the  warring  labor  factions  would  be  upon  the  com- 
mittee. 

It  was  lound  that  approximately  98  per  cent  of  the  men  voted  at 
this  election,  and  that  about  80  per  cent  of  the  men  voted  for  the 
men  selected  for  the  various  depots.  At  the  same  time  there  was 
formed  the  cooperative  welfare  association,  with  sick  benefits  of 
$1  a  day  for  100  days  and  $150  death  benefits,  the  company  con- 
tributing to  this  beneficial  association  an  amount  equal  to  the  total 
contribution  of  the  men.  Prior  to  that  time  there  had  been  11  in- 
dependent sick-benefit  associations  among  the  men.  The  cooperative 
committee  produced  a  cooperative-buying  plan  with  the  aid  of  the 
management  by  which  all  employees  were  enabled  to  make  a  saving 
of  8  per  cent  on  tlie  purchase  of  the  necessaries  of  life.  The  plan 
was  to  designate  stores  thi^oughout  the  city  where,  by  agreement  with 
the  merchants,  coupons  obtained  by  the  men  from  the  cooj>erative 
committee  at  a  discount  of  8  per  cent  would  be  accepted  at  face 
value  in  payment  for  merchandise.  This  plan  continued  in  opera- 
tion for  some  time,  and  was  finally  abandoned  because  of  lack  of 
interest  on  the  part  of  the  men.    That  plan  is  not  now  in  operation. 

As  sliowing  the  flower  and  the  fruit  of  this  cooperative  plan,  I 
wish  to  refer  again  to  the  table  showing  the  turnover  in  labor,  the 
few  resignations  and  dismissals  imder  the  plan  as  compared  with 
the  many  before  the  plan  was  adopted,  and  the  small  turnover  in 
labor. 

On  September  3,  1919,  and  September  4,iiiere  was  held  at  Willow 
Cirove  Park  an  outing  or  picnic  to  afford  the  men  an  opportunity 
to  get  together  and  with  their  families  meet  for  two  days  of  holiday 
and  there  to  mingle  with  the  representatives  of  the  company  and  to 
hold  the  annual  dinner,  or  the  cooperative  dinner. 

At  this  dinner  the  representatives  of  the  men  were  called  upon  for 
remarks,  and  it  would  be  inteiesting  to  read  the  remarks  of  these 
men.  I  will  present  this  to  you  so  that  you  will  have  a  complete 
copy  of  them,  and  you  will  be  a;ble  to  get  the  atmosphere  of  the  din- 
ner as  well  as  one  can  by  reading  the  proceedings.  We  had  them 
reported  by  a  stenographer  so  that  we  would  be  able  to  publish  the 
result. 

I  will  i-efer  briefly  to  Mr.  Mitteri's  appeal  to  the  public  throu^ 
publicity  and  thi^ugh  an  effort  on  his  part  to  gain  the.^ood  will  of 
the  car  riders. 

^Ir.  Mitten  regards  the  continued  confidence  and  support  of  the 
public  as  one  of  the  most  essential  conditions  to  successfiU  street- 
railway  operation.    It  is  his  aim  to  instill  in  the  public  mind  tli© 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1531 

conviction  that  street  railways  are  their  property  in  the  true  sense 
of  the  word,  since  they  are  supported  solely  by  the  people,  and  tliat 
tlierefore  whatever  burdens  are  placed  upon  the  street-railway  com- 
pany by  the  municipality  or  by  any  group  of  citizens  constitute  a 
burden  upon  the  whole  people  of  the  city. 

T^lien  a  street  railway  company  appeals  to  the  municipality  for 
relief  from  burdensome  license  fees  and  other  municipal  charges,  if 
it  speaks  simply  as  a  corporation  in  business  for  the  purpose  of 
enriching  its  stockholders,  it  is  not  likely  to  liave  public  support  in 
its  appeal,  and  without  public  support  it  stands  a  small  chance  of 
obtaining.  If  it  can  succeed,  however,  in  substituting  the  public  for 
the  corporation,  so  that  when  it  is  appealing  for  relief  it  is  appeal- 
ing in  the  name  of  the  public,  then  its  chance  of  success  is  good. 

ulienever  a  street-raOway  company  endeavors  to  introduce  econ- 
omies by  rerouting  its  cars  or  by  abandoning  service  where  service 
is  not  required  and  is  not  profitable,  if  the  abandonment  of  such 
service  should  cause  even  slight  inconvenience  to  a  small  portion  of 
its  patrons,  the  efforts  of  the  company  to  effect  such  economies  are 
likely  to  fail,  unless  it  has  the  public  support  which  follow^s  the 
feeling  on  the  part  of  the  public  that  the  interest  of  the  traction 
company  in  such  matters  is  identical  with  the  interest  of  the  car 
riders. 

For  example,  the  Philadelphia  Eapid  Transit  Co.  some  years  ago, 
by  careful  traffic  studies,  determined  that  service  on  Passayunk 
Avenue  in  Philadelphia  was  unnecessary,  that  the  territory  was 
adequately  served  by  many  other  lines,  that  the  running  of  cars 
on  that  street  was  a  burden  of  something  over  $60,000  a  year  to 
the  company,  Avhjch  was  not  justified  by  the  service  rendered.  It 
therefore  took  steps  to  abandon  that  street. 

There  was  strenuous  objection  on  the  part  of  the  storekeepers  on 
that  street,  to  the  effect  that  their  business  would  suffer  by  reason  of 
lifting  the  car  tracks  from  that  street,  although  it  was  proven  con- 
clusively that  the  riding  on  that  street  was  practically  negligible, 
that  the  service  was  infrequent,  and  that  the  real  service  to  the  pub- 
lic was  performed  by  other  lines. 

^Y\\en  the  company  had  obtained  the  permission  of  the  public- 
service  commission  to  lift  those  tracks,  those  storekeepers  formed 
theniselves  into  a  business  men's  association  and  appealed  the  case, 
and  it  is  now  in  the  courts. 

Now,  if  the  company  has  not  full  public  support  in  its  efforts  in 
that  direction^  it  is  not  able  to  stand  against  tliat  kind  of  oppo- 
sition. Those  who  object  will  meet  w4th  public  support  against 
tlxe  company^  imless  the  company  has,  by  enlisting  the  confidence 
of  the  public  on  its  side,  established  itself  in  such  a  position  that 
it  can  come  before  the  public  and  liave  behind  it  the  support  of  the 
public. 

One  of  the  first  moves  made  by  Mr.  Mitten  upon  assuming  the 
responsibilities  of  management  was  to  call  personally  upon  the  re- 
sponsible heads  of  tli«  several  newspapers  printed  in  Philadelphia 
and  to  explain  liis  plan  to  them.  This  was  followed  by  continued 
cooperation  and  continued  co^ial  relations  between  Mr.  Mittea 
and  the  public  prints ;  so  that  whenever  he  put  forward  a  new  idea 
tlie  papers,  instead  of  attacking  his  idea,  would  support  it  if  it  had 


1532    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

been  demonstrated  to  them  that  it  was  for  the  improvement  of 
service. 

During  the  influenza  epidemic  in  1918,  Mr.  Mitten  became  perhaps 
the  leading  force  m  Philadelpliia  in  combating  that  terrible  scourge. 
Me  used  his  cars  as  mediums  for  conveying  the  advice  of  the  health 
ofticials  and  of  the  self-constituted  committees  of  physicians  of  the 
city  by  spreading  broadcast  their  advice ;  and  he  caused  the  equip- 
ment of  the  company  to  be  placed  at  the  disposal  of  the  city  depart- 
ments for  sprinkling  the  streets  to  keep  down  dust,  and  caused  his 
entire  organization  to  be  enlisted  in  facilitating  the  distribution  of 
preventive  medicines  and  advice  for  strengthening  his  men  against 
contagion. 

He  issues,  concurrentlv,  letters  to  his  trainmen  and  to  the  other 
employees  urging  upon  them  the  education  of  the  public  by  stopping 
promiscuous  spitting  upon  the  cars  and  upon  the  platforms  of  the 
company.  In  that  way  he  demonstrated  conclusively  that  his  com- 
pany was  an  agency  for  good  in  the  community. 

He  found  that  his  publicity  campaigns  urging  the  public  to  coop- 
erate with  the  company  had  a  stimulating  effect  upon  his  men ;  that 
a  man  riding  upon  a  car  that  carried  a  slogan  of  advice  to  the  com- 
inimity  to  cooperate  would  put  forth  better  efforts  to  supplement  the 
efforts  of  the  company. 

This  campaign  was  followed  by  a  campaign  for  increasing  the 
number  of  riders  upon  the  cai^. 

I  wish  to  call  attention  particularly  to  the  letters  addressed  by 
Mr.  Mitten  to  his  employees  urging  salesmanship. 

His  letter  of  May  28,  1919,  a  copy  of  which  has  once  before  been 
presented  to  the  commission,  and  his  letter  of  August  13,  1919,  are 
referred  to  in  this  connection.  In  both  of  these  letters  he  urges 
courtesy  to  the  car  riders,  and  urges  upon. the  men  the  necessity  for 
looking  out  for  business. 

I  have  here  a  copy  of  the  various  units  of  publicity,  a^  they  were 
used  through  the  letters,  and  through  the  advertising  on  the  cars, 
and  I  shall  pass  them  up  for  the  inspection  of  the  commission  and 
then  ask,  later,  to  take  them  with  me ;  but  the  exhibit  which  I  shall 
liave  prepared  will  contain  it  in  a  better  form  than  that. 

As  a  fruit  or  flower  of  this  campaign  for  good  feeling  on  the  part 
of  the  public  and  cooperation  on  the  part  of  the  trainmen,  I  wish 
to  refer  to  an  editorial  printed  in  the  Philadelphia  North  American 
under  date  of  September  26,  1919.  It  is  the  only  editorial  of  that 
day.  It  is  headed:  "A  triumph  of  cooperation,"  occupies  two  col- 
p.mns  of  Sj)ace  of  the  paper,  and  I  will  submit  it  to  the  commission 
and  a  sufficient  number  of  copies,  I  believe,  for  each  commissioner 
to  have  a  copy.  It  is  a  review  of  the  cordial  relations  existing  be- 
tween Mr.  Mitten  and  his  management  and  the  public  of  Philadel- 
phia.   It  is  as  follows : 

A  TRIUMPH  OF  COOPERATION. 

In  the  present  epoclial  industrial  controversy,  projecting  drastic  economic 
nnd  social  cluinpres,  no  problems  are  more  complex  than  those  concerning  public 
Utilities.  And  of  tliese  enterprises  wliich  must  be  operated  to  the  satisfaction 
of  tlie  men,  the  managements,  and  the  public,  none  presents  greater  difficulties 
than  urban  street  railways. 

Upon  the  management  of  such  a  system  devolves  the  triple  task  of  earning 
dividends  upon  tlie  securities,  nearly  always  inflated,  of  kewpiug  the  employees 


'      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1533 

satisfie<l  and  efficient,  and  of  rendering  adequate  service  to  the  public.  The 
melancholy  histories  of  the  great  traction  systems  of  New  York,  Chicago, 
Boston,  San  Francisco,  Pittsburgh,  and  scores  of  other  cities  show  how  for- 
midable are  the  obstacles  to  success  in  such  undertakings. 

The  city-traction  industries  of  the  country  have  be<-n  established  and  con- 
ti-ollod  by  strong  financial  interests.  The  men  directing  them,  successful  leaders 
in  great  enterprises,  have  spared  neither  money  nor  effort  to  provide  able 
manngements.  Yet  in  virtually  all  cases  the  investors  have  suffered  heavy 
losses,  the  employees  have  been  almost  constantly  in  a  state  of  discontent  and 
antagonism,  with  frequent  strikes,  while  inadequate  senice  has  created  wide- 
spread public  condemnation. 

An  example  is  the  situation  in  New  Jersey. .  The  Public  Service  Corporation, 
which  operates  the  trolley  lines,  is  repeating  errors  committed  by  many  other 
short-sighted  managements.  In  order  to  obtain  increased  revenues  fares  have 
been  raised,  upon  the  theory  that  the  public  would  be  compelled  to  use  the 
transportation  at  any  price.  A  great  outburst  of  public  indignation,  mani- 
fested even  in  a  boycott  movement  and  mob  violence,  is  the  result. 

If  this  article  had  been  written  nine  .vears  ago,  and  were  to  include  a  list  of 
the  most  shameful  failures  in  street-railway  enterprise,  at  the  head  of  it  we 
should  have  placed  the  Philadelphia  Rapid  Transit  Co.  Among  the  companies 
giving  the  public  the  most  inconsiderate  treatment  and  the  worst  service,  pay- 
ing the  lowest  wages  and  pursuing  the  most  unenlightened  policy  toward 
employees,  and  possessing  in  the  greatest  degree  the  ill  will  of  the  community, 
we  should  have  designated  this  corporation  as  preeminent. 

Moreover,  the  Philadelphia  Rapid  Transit  Co.  at  that  time  was  a  decrepit 
and  discredited  enterprise;  in  physical  equipment  and  financial  condition  a 
derelict.  During  the  12  months  just  preceding  the  passing  of  the  concern  to 
the  present  control  there  was  a  deficit  of  $1,300,000,  without  a  cent  paid  for 
dividends  on  millions  of  Philadelphia  Rapid  Transit  money  invested,  and  de- 
spite bookkeeping  jugglery  that  concealed  more  than  $1,000,000  in  bills  pavable. 

If  we  were  to  make  a  list  to-day  of  the  street-railway  systems  of  the  country 
giving  the  best  service,  notable  for  loyalty  and  efficiency  of  their  employees  and 
the  good  will  of  their  communities,  we  should  be  compelled  to  give  the  Phila- 
delphia Rapid  Transit  Co.  first  place. 

What  has  brought  about  this  astonishing,  almost  inspiring  transformation? 
If  the  question  were  put  to  Thomas  E.  Mitten,  whose  genius  wrought  the  change 
and  to  E.  T.  Stotesbury,  who  placed  Mr.  Mitten  in  charge  and  backed  his  ef- 
forts, the  answer  from  each  man  would  be  given  in  a  single  word   "  Coonera- 
tion."  ^ 

That  term  has  come  to  have  an  elastic  meaning:  it  has  been  much  used  and 
not  a  little  abused  in  discussions  of  industrial  matters.  Spokesmen  for  capital 
and  labor  both  employ  it  rather  as  a  slogan  than  as  defining  a  solution  thev 
are  prepared  whole-heartedly  to  accept.  But  in  the  Philadelphia  traction  situa- 
tion it  means  exactly  what  it  says. 

The  foundation  of  the  Mitten  plan  is  confidence  between  the  men  and  the 
management,  based  upon  mutual  interests  clearlv  recognized  and  iustlv  ad- 
ministered througli  committees  representing  both  factors.  Cooperation  thus 
established  automatically  translates  itself  into  good  public  service ;  good  public 
service  increases  the  business  of  the  company;  and  the  benefits  are  shared  by 
employees  and  the  company,  inspiring  continued  effort  toward  improvement 

When  Mr.  Mitten  assumed  direction  of  the  company  in  1910  he  gave  lii.s 
attention  first  to  the  men,  the  great  human  factor  in  the  complex  problem  he 
had  been  called  upon  to  solve.  He  devised  at  the  outset  a  wage  svstem  based 
upon  the  principle  of  profit  sharing.  Instead  of  undertaking  to  buv  labor  as 
a  commodity  at  the  lowest  price  obtainable,  the  company  announced  that  there 
would  be  set  apart  for  wages  22  cents  out  of  every  dollar  of  gross  income  This 
guaranteed  to  the  men  a  direct,  personal  interest  in  increased  business 

The  proposal,  although  not  fully  understood  at  fii*st,  was  attractive  enough 
to  allay  the  restlessness  and  discontent  which  had  long  pervaded  the  ranks 
of  the  traction  employees  and  gradually  stimulated  them  to  give  better  service 
But  their  interest  became  keener  and  more  active  w^hen  the  cooperative  system* 
showed  results  in  a  rising  wage  scale.  Prior  to  1910  the  pav  of  Philadelphia 
street-railway  employees  had  advanced  less  than  7  cents  an  hour  in  a  period  of 
27  years ;  but  between  1910  and  1919  the  rate  has  risen  from  23  cents  an  hour 
to  58  cents  an  hour. 

An  essential  part  of  Mr.  Mitten's  plan  was  the  establishment  of  a  system  of 
collective  bargaining.    Here  he  met  with  his  most  serious  difficulties.    Before 


ii 


1534    PKOCEEDIXGS  OF  FEDEKAL  KI^CTBIC  EAILWAYS  COMMISSION. 

!i^.Uh' i';!;r:;frth'one'roXVm&^,r"'  T''""'  '■'"^  •""""«  »■«'  associations 
afflliatod  With  the  AmSrFXaur'or'ia,"'   ^""'"   '^"""^   K.nplo.vees. 

dnn'oTi^^r^roTLYon^JrlavoSr  '"•.•>'"""",  ""'<'«  "  ^-'-  •"«'  "•' 

tluu  the  men  slmuld  get  to°Xi  in  oun.t,nW  h'^"m'''''PC  ""'  ""  '"''  '»«'«' 

varioui  neAvspapeiN  Bv  •.  n-.rmw  ..,  ?"P?"'«'«'  of  representatives  of  tlio 
Mitten  plan  foriSn.Stl'.s.  U  .^  I'^n"  h"  """;  •^"""'^  'f*"'  "  f'^l  «'  the 
other  vote,  in  which  Zm^n»t!.B,^,/f,f'-""r'  "'  "'"'  P'"-'«1  *''«'-e  was  an- 
plan  us  a  Wrnraneut  >ivstem     tIi  f5  '""J""  >'  *"«  given  for  adoption  of  the 

.ooperatlve  memh^R  an.t  H. J  i  '^i  "'*'';  ^^^  ***  P*""  '*"'  ««  «>»  "ieu  arl 
vanished:       '"*'"'**'^'   ""'l    «"«   Anu.Jga mated    and   other    associations    lave 

s.Ji.[^lll^™v"iu™tlon'  Si"","'"*  '"^  *'"^"'  transformation  In  the  Philadelphia 
irrefutable  factsZlXl^       ^operation  worl<s  out  in  practice  Is  told  by 

..."t™nl^^!f.e''Sm  I'riJX  or^vti'^H^^^  ^''"^^  '"  ^h"^'  »'^  ■^>--nt 
demand  an  mcrea«>     It  iTthe  liJ.        ^.!''*  management  has  not  move<l  to 

l.n.ise  to  the  tnu^;„  maLgLe^  t  in^n'^'^n  ^  l^"^"  '^  P"""^  ^"'^  ^<>"J"'^ 
are  satisfied  and  lo^I  '""""S^™*'''*  ""•l  ^  which  the  street-railway  employees 

nhw  f^«  n'J     Th!     ""*'  '''."'*°  employed  now  Is  20  pA-  cent  kws^han 

work  are  no  Ion"ei'   and  tl,^,,.  S^L  *"  *''J'  '""P'oye**     Their  hotu-s  of 

increaml  98  per  cen^  as^owf  h^  Z  TZ^"^"T1  *""  ^^^'  <"'"<•"'"<•>•  ''••>« 
...rried  ami  a  ^martable  i^w^^^  thf  "^'k"'  *\*  ""'"*•*'■  "^  P»'^'«"ngers 
their  efficieney  has  r^n  98^?1Int  ihJ?    '"""^*"'■  "'  ««<''<J«»t«-     And  while 

woVt  /.ifs  "SrSfflr-^'-  =-r:,irn'^tar„rrn„7,e"^ 

localise  he  has  devised  and  ma,i!^\,irl]7L  "^^P^"**  ha\e   failed   to   accomplish 
oxploiting.  labor     HrprZdrereo—s,.".^»?cv  ^''I  «»"««"?.  not 

wuntrj-.  '^ujent  ot  atl  the  other  street-railway  managements  of  the 

from  «re*X^,rhfr^Krta%'^^^  ""^"^  ^-^"f-  -^v""'^ 

l«rtatlon  s,-stems  in  the  ftfnri^i^*  2f  .f""""^^^   ?°:2***  ««  the  nrban  tra.)s- 

orease,!  bnsiness-the  "  »lng  oT  .^  f r^n""  rir°    H?tl  '»'*!'•  b"t»I.on  lo- 
"^?|h1SJirrj-r.-^"^-=  tl^l^-ila^eUlir  ^"^  '*"---' 

Low  fares  make  walkers  ride. 

More  fares  make  low  fares 

his  ™nc:JSt^'''S^ort"^'jL«t  hir^  '"'■•'  «^™-«'^"«t*«  the  sonrntoess  of 
it  has  i«ir,^\\yl^ZTZ^^'t^^t''"^''"'''''  ''"P^'ving  service; 

..Virtual  .«n.ruptcy  foTp^'t-h^-^.f^L't^tn^^^  ^^tVnXIntS^ 

men^'ltTtc^u'e*^  *Vrait^%rt'1!-;:'ta,^t'^."'*''  "^  --"«- 
loyalty  and  leejtlm»te  self  w^oLl    i  •      *  transit  employees,  inspired  by 

say,  tieir  PrSjuctru-,^";  I'm  ;er^^^t'"^r;'.  f^^f^'^'^'^^y^'t  is  to 
.-oudltious  revealed  In  a  recent  Ztwue^tL-  Aii    J»  '!  ^"^'i'"*  contrast  to  tl.e 


rROCEEDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1535 

The  operatiou  of  the  Mitten  plan  has  already  attracted  nation-wide  attention 
from  industrial  and  financial  experts  and  from  the  Federal  Government,  wliicii 
is  striving  to  help  in  the  solution  of  problems  of  this  nature.  Philadelphia  has 
tlie  distinction  of  being  the  laboratory  in  which  the  great  experiment  has  been 
worked  out  to  success,  but  the  basic  principles  are  applicable  to  public  utilities 
everywhei*e,  and  indeed  to  all  industries. 

Leaders  of  the  forces  of  capital  and  labor  will  be  wise  to  give  careful  study 
to  this  demonstration  of  a  system  which,  starting  with  the  most  disadvan- 
tageous conditions,  has  brought  immense  benefits  to  both  and  to  the  community 
as  well.  To  capital  conceraed,  the  Mitten  plan  has  given  security  and  pros- 
perity ;  to  labor  it  has  given  just  treatment,  Iiigiier  wages,  and  self-respecting 
contentment ;  to  the  public  it  has  given  adequate  and  steadily  improving  service. 

Tlie  lesson  for  the  capitalist,  the  labor  leader,  and  the  consumer  is  plain, 
i'hihidelphla's  model  traction  system  has  been  achieved  through  increased  pro- 
duction. That  is  the  secret  of  Pliiladelphia's  unique  enjoyment  of  a  5-cont 
street-i-aitway  fare,  and  it  Is  the  essential  factor  in  any  effective  formula  for 
leducing  the  high  cost  of  living  in  every  other  direction. 

I  wish  also  to  refer  bnefly  to  the  hearing  in  Philadelphia  in  1914: 
l)efore  the  Federal  Industrial  Relations  Commission,  of  which  Mr. 
AValsh  was  chairman,  and  which  sat  in  Philadelphia  to  hear  the 
testimony  of  Mr.  Mitten  and  some  of  his  assistants  upon  the  coopei-a- 
trve  plan  as  then  developed^. 

To  show  that  Mr.  Mitten  has  been  accustomed  to  dealing  with  the 
inen  as  an  organization,  I  want  to  submit  a  certificate  or  testimonial 
pfiven  to  Mr.  Mitten  as  president  of  the  Chicago  City  Railway  by 
Division  No.  260  of  the  Amalgamated  Association  of  Street  &  Elec* 
trie  Railway  Employees  of  America,  wherein  the}^  say  : 

We  desire  to  present  to  you  this  testimonial  of  the  sincere  estimate  and  goofl 
will  of  our  membership  on  your  retirement  fi-om  tlie  presidency  of  the  Chicago 
(Uty  Railway  Co.  We  tender  yon  this  because  of  the  harmonious  relations  that 
have  existed  on  the  part  of  tlie  systeni  duriitg  yotir  administration. 

Tinisting  your  future  will  be  as  successful  as  the  past,  we  remain. 
Respectfully,  yours, 

Rowland  Shkltox,  President, 
John  McLain. 
Edward  8.  Bkchtt.oft. 
Thomas  F.  Br^BNs. 
JosKFH  J.  Cblla. 

Introduced  and  passed  at  the  executive  board  meeting  December  2S,  1911, 
awl  ratified  at  the  regular  meeting. 

Ahhough  it  is  a  little  out  of  the  order  of  my  talk,  I  wish  to  refer 
here  to  the  condition  of  the  Philadelpliia  l^ipid  Transit  Co.  and  the 
condition  of  the  street-railway  industry  in  Philadelphia  at  the  time 
that  the  Stotesbury-Mitten  management  came  iitto  control. 

I  have  already  referred  to  the  labor  situation. 

The  financial  condition  of  the  company  was  such  that  its  credit 
was  exhaustecl,  and  it  was  redirce^l  to  the  expedient  of  selling  the 
securities  in  its  insurance  fimd  to  ^et  working  capital.  Up  to  this 
time  no  dividend  had  evei-  been  paid  on  the  $30,000^000  of  capital 
fctock  actually  paid  in  and  expended  in  tlie  constructic«i  and  exten- 
sion of  the  system. 

In  this  emergency  it  was  decided  by  the  directors  of  the  company 
and  the  infiiiential  stoc^kholders  to  appeal  to  Mr.  E.  T.  St(^;esbury, 
of  Philadelphia,  in  tlie  belief  that  if  lie  wuld  be  prevailed  upon 
to  assume  responsibility  for  the  policy  and  business  management  of 
the  company,  means  might  be  found  by  him  to  meet  its  financial 
lequii-ements. 


!l! 


Ill 


1536    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Accordingly,  on  October  3,  1910,  a  petition  signed  bj  the  directors 
rnd  a  number  of  the  stockholders  of  the  Union  Traction  Co.,  one  of 
the  underlying  companies,  and  by  the  directors  of  the  Philadelphia 
Eapid  Transit  Co.  and  some  of  its  stockholders  was  presented  to 
Mr.  Stotesbury,  from  which  I  quote: 

The  undersigned  stockholders  of  the  Philadelphia  Rapid  Transit  Co.  and 
the  Union  Traction  Co.  take  this  method  of  bringing  their  request  to  you, 
thiit  you  enter  the  board  of  directors  of  the  Philadelphia  Rapid  Transit  Co., 
with  such  associates  as  you  may  select,  in  order  to  give  this  property  not  only 
the  great  practical  advantage  of  your  large  experience  In  business  and  as  a 
linancier.  but  also  because  of  the  full  measure  of  public  confidence  which 
will  result  from  the  participation  of  yourself  and  associates  In  the  dii*ectorate 
and  control  of  the  company.  This  move  is  made  with  the  knowledge  and 
assent  of  the  present  officers  and  directors,  and  with  the  assurance  that  suffi- 
cient vacancies  on  the  board  will  be  available  to  enable  the  interests  which 
may  come  in  with  you  to  control  the  policy  and  business  of  the  company. 

There  Is  no  other  enterprise  which  touches  so  closely  the  general  welfare 
of  the  city  and  the  convenience  and  comfort  of  Its  citizens.  This  Is  especially 
true  in  Philadelphia  by  reason  of  the  close  relationship  between  the  company 
and  the  city  under  the  1907  contract. 

We  believe  that  nothing  will  do  as  much  to  rehabilitate  the  company  in 
public  confidence  and  so  add  to  the  prosperity  of  the  city  as  a  management 
which  will  be  recognized  as  having  as  its  first  consideration  the  city's  interest. 

We  turn  to  you  as  the  citizen  who,  in  our  opinion,  can  accomplish  most 
along  these  lines,  and  we  appeal  to  your  well-known  civic  pride  to  give  to  the 
public  service  your  services,  and  through  It  to  the  city  the  benefit  of  your 
personal  and  business  Interests  and  association. 

Mr.  Stotesbury  replied,  in  part: 

An  earnest  desire  to  advance  the  welfare  of  the  general  public,  as  well  as 
the  business  interests  of  the  city,  prompts  me  to  comply  with  your  request. 
I  have  given  thought  to  the  problem  and  have  sought  the  advice  of  experts 
in  the  conduct  and  operation  of  similar  properties,  particularly  Mr.  Tiiomas  E. 
Mitten,  who  has  had  wide  experience  in  such  matters,  and  is  now  at  the  head 
of  the  Chicago  Railway  system. 

Again,  as  expressive  of  the  intent  and  spirit  in  which  the  new 
management  entered  the  Philadelphia  traction  situation,  I  wish  to 
quote  from  a  letter  to  Charles  O.  Kruger,  then  president  of  the 
Philadelphia  Eapid  Transit  Co.,  where  Mr.  Stotesbury  says : 

I  desire  to  have  my  position  in  regard  to  this  matter  clearly  understood 
both  by  yourself  and  the  public  generally.  I  shall  undertake  it  solely  from  a 
desire  to  promote  the  business  Interests  of  Philadelphia  and  those  fellow 
citizens  whose  confidence  in  my  ability  to  solve  this  problem  I  appreciate  and 
liope  to  preserve ;  but,  as  I  accept  a  heavy  responsibility  without  remuneration 
and  at  a  sacrifice  of  time  which  I  can  ill  afford  to  make,  I  must  be  allowed 
to  use  my  own  judgment,  to  spend  such  moneys  as  are  neces.sary  to  secure 
the  most  expert  advice  and  assistance  obtainable. 

Mr.  Mitten  was  then  called  upon  to  make  a  report  uj)on  the  situa- 
tion, and  he  made  a  report  wherein  he  urged  the  necessity  of  setting 
aside  15  per  cent  of  the  gross  revenue  for  upkeep  and  maintenance; 
and  he  urged  the  immediate  expenditure  of  aoout  $10,000,000  in 
rehabilitation,  in  new  cars,  new  track  extensions,  and  various  other 
improvements. 

Now,  I  wish  to  refer  briefly  to  some  of  the  concrete  things  that 
have  been  done  under  Mr.  Mitten's  management  to  improve  the 
income. 

I  have  already  referred  to  the  rerouting  of  the  cars.  No  small 
proportion  of  the  success  of  the  management  may  be  attributed  to 
the  daily  study  of  traffic  statistics  and  the  consequent  routing  of  cars 
to  more  fully  and  economically  serve  the  public 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1537 

At  the  time  of  the  incoming  of  the  management  in  1910  little  or 
nothing  had  been  done  in  the  way  of  rerouting  cars  so  as  to  take 
advantage  of  unified  operation.  There  were  92  separate  routes  upon 
the  system,  many  of  which  were  originally  established  by  the  differ- 
ent operating  companies  in  competition,  resulting  in  waste  and  dupli- 
cation of  service. 

After  the  rerouting  of  the  cars,  there  are  76  routes,  which  com- 
prise the  system  as  now  operated. 

The  changes  have  been  made  as  rapidly  as  the  confidence  of  the 
public  and  the  cooperation  of  the  employees  would  permit,  the  most 
recent  change  being  the  consolidation  of  two  lines  made  within  the 
last  month,  and  resulting,  we  confidently  expect,  in  a  saving  to  the 
company  of  more  than  $60,000  a  year;  and  this  combination  of  two 
lines  resulting  of  the  setting  bacK,  in  the  language  of  the  men,  the 
setting  back  of  some  30  or  more  trainmen;  setting  them  back  in 
priority ;  and  in  spite  of  this,  instead  of  opposition  on  the  part  of 
the  men  to  that  measure  of  economy,  the  superintendent  of  trans- 
portation had  a  complimentary  expression  from  the  men  operating 
those  two  lines  upon  the  economies  effected  and  the  common  sense 
of  joining  those  two  lines  into  one.  Not  only  that,  but  the  joining 
of  the  two  lines  has  resulted  in  improved  income,  increased  riding, 
and  a  better  gross  on  that  one  single  than  on  the  two  lines  as  formerly 
operated.  Tlie  passenger  receipts  per  car-hour  have  increased  from 
$2.19  in  1910  and  $3.48  in  1918. 

Passenger  receipts  per  car-mile  have  increased  from  27  cents  in 
1910  to  38  cents  in  1918. 

Much  light  is  thrown  upon  these  comparative  results  by  the  fact 
that  the  average  speed  in  miles  per  hour  for  the  system  has  increased 
from  8.08  miles  per  hour  in  1910  to  9.06  in  1918.  This  increase  in 
speed  has  been  accomplished  through  improvement  in  various  factors, 
as  for  example,  reduction  in  the  number  of  stops,  the  cutting  down 
of  the  time  consumed  at  each  stop,  through  the  introduction  of  the 
near-side  and  center-exit  doors  and  the  equipping  of  all  cars  with 
door-operating  and  time-saving  devices. 

Prior  to  1911  the  time-table  department  was  operating  many  lines 
upon  all-day  solid  tables,  meaning  that  a  line  having  been  desig- 
nated as  5-minute  lines,  the  cars  would  be  scheduled  for  a  5-minute 
headway  all  the  time,  with  perhaps  trips  for  the  morning  and  eve- 
ning rushes;  but  in  the  main  the  schedules  were  not  based  upon 
authentic  checks  to  determine  the  varying  riding  characteristics  of 
each  line  at  the  different  houi-s  of  the  day.  The  elimination  of 
wasted  effort  in  the  schedule  under  the  present  management  has 
included  a  very  close  adjustment  of  car  schedule  to  the  traffic  of  the 
line,  and  on  some  lines  the  headways  are  scheduled  to  change  as 
often  as  five  or  six  times  in  the  24  hours,  with  entirely  new  sched- 
ules for  Saturdays,  for  Sundays,  and  for  holidays,  based  upon  traffic 
observations  which  were  made  in  several  ways  by  special  slips  turned 
in  by  the  conductors  showing  the  maximum  number  of  rides  on  the 
car  each  trip  by  trained  observers  placed  at  strategical  observation 
points  along  the  line,  who  report  the  number  of  passengers  boarding, 
the  number  alighting,  and  the  number  of  passengers  on  the  car  at 
these  points;  analytical  studies  of  the  transfers  issued  and  collected 
at  dominating  points;  and  by  these  and  other  means  the  riding 

1G0G43*'— 20— VOL  2 ^35 


I-I 


1538    PROCEEDINGS  OF  FEDERAL  ELECTRH;  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1539 


characteristics  of  each  line,  for  each  hour  of  the  day,  for  diffei-ent 
days  of  the  week,  and  for  different  seasons  of  the  year  are  deter- 
mined and  are  checked  from  time  to  time. 

The  car  service  is  then  scheduled  to  put  the  cars  upon  the  lines 
wlien  and  where  the  riding  public  needs  them.  A  typical  line  would 
show  a  definite  headway  from  the  early  morning  hours,  this  head- 
way becoming  more  frequent  to  meet  the  morning  rush,  then  be- 
coming longer  to  a  minimum  for  the  hours  of,  say,  between  10 
and  12  in  the  middle  of  the  day,  and  then  becoming  more  frequent, 
the  interval  between  the  cars  reaching  their  greatest  fi^equency  at 
the  peak  of  the  evening  rush,  and  then  tapermg  off  again  until  7, 
when  there  is  a  slight  increase  to  take  care  of  the  theater  and  after- 
dinner  traffic;  again  becoming  less  frequent  from,  say,  1  to  12  at 
night,  and  falling  into  the  ''  owl  "  or  all-night  service. 

Traffic  analysis  is,  of  course,  not  peculiar  to  Philadelphia,  but 
the  maintenance  and  accuracy  of  these  studies  are  perhaps  unique, 
as  is  also  the  success  attained  by  the  present  time-table  experts  in 
di^'iding  the  car  runs  into  car  hours  to  meet  the  desires  of  the  ma- 
jority of  the  trainmen. 

Here  is  whei*e  cooperation  again  comes  in.  Each  new  schedule, 
l^fore  it  becomes  effective,  is  submitted  to  the  cooperative  commit- 
teemen from  the  depot  concerned  and  is  subject  to  scrutiny  by  the 
Iraiimien  involved,  the  declared  policy  of  the  department  being 
til  at  the  cars  must  be  placed  upon  the  streets  exactly  in  accordance 
witli  the  needs  of  the  traveling  public,  but  the  division  of  the  car 
runs  into  crews  and  crew  runs  is  accomplished  to  meet,  so  far  as 
possible,  the  convenience  of  the  men  who,  it  may  be  said,  now  fully 
appreciate  that  increase  in  their  wages  is  closely  affiliated  with  the 
success  of  the  managment  in  fitting  the  car  service  to  the  traffic 
without  what  we  call  Avasted  effort. 

I  submit,  as  part  of  the  study  in  this  matter,  a  paper  read  by 
our  traffic  engineer,  Mr.  R.  H.  Horton,  a  description  of  the  traffic 
studies  conducted  by  the  Philadelphia  Rapid  Transit  Co.  We  con- 
sider it  an  important  contribution  to  the  literature  upon  the  sub- 
ject 

The  skip-stop  was  installed  in  cooperation  with  the  Federal  Fuel 
-Vdministration,  in  order  to  conserve  coal  by  reducing  the  number 
of  stops,  upon  the  theory  that  the  electrical  energy  consumed  in  the 
acceleration  or  starting  of  a  car  is  greater  than  that  required  to 
keep  the  car  in  motion  after  having  gained  momentum. 

1  lie  application  of  the  skip-stop  plan  has  resulted  in  reducing  the 
number  of  stops  in  the  city  by  moi-e  than  1,700  out  of  a  total  of  some- 
thing less  than  0,000.  It  is  difficiUt,  if  not  impossible,  to  estimate 
the  total  savings  from  this  plan,  but  a  definite  saving  of  more  than 
$100,000  in  pay  rolls,  due  to  the  conservation  of  the  time  of  the 
operating  crews,  and  a  saving  of  $300^000  per  annum  in  electrical 
current  has  been  demonstrated  beyond  doubt.  By  comparison  of 
the  per  car-mile  cost  of  oi)eration  for  a  calendar  month  before  the 
skip  stop  was  installed,  with  the  same  coet  for  a  like  period  after 
the  installation,  the  company's  engineers  estimated  a  saving  of  1.7 
cents  per  car-mile,  or  a  total  saving  of  $1,318,000  per  annum;  and 
they  estimated  an  ultimate  saving  of  approximately  $100,000  per 
annum  additional,  due  to  releasing  equix>ment  from  service. 


I  have  a  very  interesting  study  upon  that  here,  which  I  shall 
submit,  our  engmeers'  detail  working  out  of  that  saving. 

The  Chairman.  Mr.  Veedcr  will  appear  before  the  commission 
this  week  and  discuss  the  skip-stop  plan. 

Mr.  Joyce.  Very  well.  I  have  a  memorandum  here  to  refer  briefly 
to  the  savings  effected  by  the  safety  campaigns  of  the  company. 

Mr.  Delbridge.  Your  honor,  would  the  gentleman  object  to  tell- 
ing us  what  the  cost  per  car-mile  is  in  Philadelphia  of  operating? 
He  spoke  of  the  safety. 

Mr.  Joyce.  28.59  cents.  Peiliaps  the  most  interesting  develop- 
ment in  Philadelphia  is  this  campaign  for  safety  and  for  accident 
prevention. 

Commissioner  Mahon.  Did  you  say  you  had  a  detailed  statement 
on  skip-stops  which  you  were  submitting,  which  you  did  not  read? 

Mr.  Joyce.  Yes.  For  the  eight  years  ending  1910 — that  is  prior 
to  the  Mitten  management — G.08  per  cent  of  the  gross  earnings  of 
the  company  was  spent  for  accident  claims,  and  as  a  result  of  acci- 
dents there  was  an  unpaid  liability  not  estimated  involved  in  a 
total  of  4,953  unsettled  suits  at  December  31,  1910.  With  the  intro- 
duction of  modern  equipment  and  the  ecjuipping  of  the  cars  with 
every  known  safety  device,  a  crusade  was  undertaken  to  reduce  the 
number  of  accidents  iuid  particularly  accidents  to  children.  A  spe- 
cial bureau  was  created  under  the  direction  of  a  capable  young 
woman,  who  soon  became  known  throughout  the  city  as  "  Miss 
Safety  Fii*st."  Both  school  authorities  and  the  police  department 
rendered  cheerful  and  enthusiastic  cooperation.  A  system  of  lec- 
tures to  school  children  on  safety  devices  was  devised  and  executed, 
and  more  than  100,000  children  are  addressed  annually  on  safety. 
This  young  woman  goes  about  from  school  to  school,  assembles  tlic 
children  in  their  assembly  rooms  and  lectures  to  them  on  safety 
precautions.  She  organizes  the  boys  into  safety-first  scouts  and  drills 
them  so  that  at  the  letting  out  of  school  each  boy  in  that  scout 
squad  knows  a  certain  point  at  which  he  is  expected  to  station  him- 
self to  protect  his  fellow  school  children  in  crossing  the  streets. 

During  the  eight-year  pei'iod  of  this  miinagement  the  accident 
cast  was  reduced  from  6.08  per  cent  in  1910  to  3.4  i>er  cent  of  gross 
earnings  in  1918,  and  the  number  of  pending  suits  was  decreased 
from  4,953  to  2,524  at  December  31,  1918. 

This  reduction  in  accident  costs  represents  a  saving  of  $5,392,000. 
While  the  police  reports  for  1918  show  an  increase  of  1,980  street 
accidentjp  over  1911,  the  records  of  the  Philadelphia  Rapid  Transit 
Co.  show  a  decrease  of  752  trolley-car  accidents  in  the  same  period. 

In  1911  there  was  one  accident  for  every  18,640  passengers  car- 
ried, while  in  1918  the  ratio  was  one  accident  to  every  41,622. 

The  crusade  against  accidents  amongst  children  during  the  past 
four  years  resulted  in  a  showing  of  32  fewer  deaths  from  accidents 
to  children  as  compared  with  the  preceding  four  years. 

Under  the  head  of  "fire  insurance"  I  have  a  memorandum  to 
note  that  the  conipiuiy  in  1910  carried  $18,500,000  of  fire  insurance 
at  a  premium  of  50  cents  per  hundred.  Adequate  and  effective  in- 
spection has  reduced  this  cost  to  25  cents  per  hundred,  and  in  this 
way  a  Siiving  of  $25,000  per  annum  net,  after  paying  the  cost  of 
inspection,  was  accomplished  and  many  collateral' benefits  derived 


1540    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


from  the  regular  and  careful  inspection  of  the  property.  From 
1911  to  1918  over  $600,000  was  paid  in  premiums  to  insurance  com- 
panies, and  the  company  received  in  return  less  than  $60,000  for 
fire  losses. 

At  December  31,  1918,  the  company  assumed  33  per  cent  of  its  fire 
risk.  A  careful  survey  of  the  property  demonstrated  that  the  great- 
est possible  loss  that  could  be  sustained  in  one  fire  would  not  exceed 
$250,000.  The  insurance  fund  discontinued  in  1910  to  aid  the  com- 
pany in  meeting  obligations  has  been  reestablished,  with  assets  of 
over  $1,000,000. 

Under  "  Car  advertising,"  I  wish  to  refer  to  the  fact  that  in  1910 
the  rapid-transit  company  obtained  an  annual  revenue  of  $160,732. 
In  1919  it  will  get  $300,000  from  this  source  alone.  That  is  due  to 
careful  study  of  the  advertising  spaces  upon  the  cars,  better  bargain- 
ing for  the  spaces,  and  better  salesmanship  in  disposing  of  it. 

Commissioner  Mahon.  Does  the  company  control  that  or  lease  it? 

Mr.  Joyce.  The  company  leases  it,  but  under  very  careful  super- 
vision. 

I  wish  to  refer  to  the  Willow  Grove  Park,  perhaps  the  only  trac- 
tion park  in  America  that  is  showing  a  profit.  To  the  north  of  the 
city  at  a  point  reached  by  three  lines  of  track  and  by  several  routes 
of  cars  the  company  maintains  a  resort  known  as  Willow  Grove  Park, 
imique  in  supplying,  free  of  charge,  concerts  by  Sousa,  Pryor,  Con- 
way, Franko,  and  others.  This  park,  depending  entirely  upon  the 
income  derived  from  the  amusement  concessions,  was  a  constant 
money  loser  up  to  the  incoming  of  the  Mitten  management,  the  loss 
running  anywhere  from  $50,000  to  $100,000  per  year.  For  the  year 
1918  it  earned  a  surplus  of  $103,000.  One  hundred  thousand  persons 
in  a  single  day  is  not  an  unusual  attendance.  We  expect  this  park  to 
show^  an  earning  of  over  $150,000  for  this  year. 

I  wish  at  this  point  to  refer,  although  it  is  a  little  out  of  order,  to 
a  study  made  of  the  psychology  of  the  round-sum  charge  for  admis- 
sion to  amusements  as  bearing  upon  the  round-sum  charge  for  street- 
railway  transportation. 

At  this  park  the  amusement  enterprises  are  leased  out  to  conces- 
sionaires and  they  have  full  freedom  to  fix  the  rate  of  admission  to 
their  amusement.  The  net  result  of  all  of  the  Willow  Grove  conces- 
sions shows  13  per  cent  increase  over  last  year.  The  two  carrousals, 
w  hich  are  the  5-cent  ride  with  1  cent  for  war  tax,  making  it  6  cents, 
showed  for  No.  1  a  loss  of  $1,977,  as  compared  with  the  preceding 
year,  and  for  No.  2  a  loss  of  $3,399,  as  against  its  keeping  up  with 
last  year.  These  figures  are  significant  that  6  cents  does  not  always 
bring  in  more  than  5  cents.  Now,  there  is  a  place  where  the  public 
were  free  without  any  necessity  of  every-day  life  to  go  or  not  to  go 
into  these  amusements.  The  addition  of  a  cent  for  admission  there 
resulted  in  a  loss  in  one  case  of  over  $1,900,  and  in  the  other  case  of 
over  $3,000,  as  compared  with  the  preceding  year  with  an  increase  in 
the  number  of  people  attending  the  park. 

Commissioner  Gadsden.  What  year  was  that — 1918  ? 

Mr.  Joyce.  1919  compared  with  1918. 

I  wish,  now,  to  refer  to  statistical  tables  which  were  specially  pre- 
pared for  submitting  to  this  commission,  but  which  had  been  com- 
pleted and  just  about  ready  when  Mr.  Mitten  was  ready  to  present 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1541 


his  case  in  the  Three-Cent  Exchange  Ticket  complaint  before  the 
public-service  commission  and  which  were  presented  by  him  there 
to  that  commission  and  then  bound  in  the  booklet  covering  his  testi- 
mony, a  copy  of  which  I  have  here  and  copies  of  which  will  be  given 
to  each  commissioner. 

Table  A,  statement  showing  new  capital  invested  in  the  street-rail- 
way properties  operated  by  the  Philadelphia  Rapid  Transit  Co.  since 
January  1,  1911.  This  table  show^s  in  this  period  a  total  of  $26,231,- 
110  has  been  expended  in  extensions  and  improvements,  of  which 
$14,540,000  was  contributed  by  the  stockholders,  $17,066,000  obtained 
from  the  proceeds  of  loans,  $3,913,151  advanced  by  the  United  States 
Government  to  provide  additional  facilities  for  war  industries,  $3,- 
551,246  was  appropriated  out  of  income,  and  $1,686,472  expended  out 
of  the  renewal  funds. 

This  shows  that  during  this  period  it  has  been  necessary  to  make 
continuous  extensions  and  to  keep  pouring  money  into  the  property 
in  order  to  keep  up  the  public  service.  That  in  spite  of  the  fact  that 
in  1910,  as  Mr.  Mahon  told  you,  Philadelphia  was  considered  to  be 
much  overtracked,  much  overdeveloped  in  the  way  of  street-car 
facilities. 

Table  B,  which  is  a  condensed  income  account  and  statement  of 
exchange-ticket  revenue  from  1910  to  1919,  shows  that  for  the  year 
1910  the  gross  earnings  were  $19,232,622,  while  for  the  six  months 
ended  June  30, 1919,  a  half  year,  the  gross  was  $17,439,479. 

Of  the  gross  income  for  this  six  months'  period,  $744,000, 


or  4.2 


per  cent,  was  obtained  from  the  sale  of  the  three-cent  exchange  or 
transfer  ticket. 

Table  C,  statement  of  operating  expenses,  shows  the  upward  trend 
of  operating  costs  since  1910  stated  in  costs  per  car-mile.  This  state- 
ment shows  that  operating  costs  have  increased  from  $10,655,000  in 
1910  to  $18,498,000  in  1918,  and  that  the  total  operating  expenses 
for  the  six  months  ended  June  30,  1919,  were  $10,643,000  or  almost 
equal  to  the  operating  expenses  for  the  entire  year  1910. 

In  1910  the  operating  expenses  per  car-mile  were  14.51  cents;  for 
the  first  six  months  of  1919  they  averaged  24.58  cents. 

General  expenses  continued  to  decrease  from  1911  to  1915  and  the 
war  increases  in  general  expenses  in  1916  brought  them  to  only 
slightly  more  than  they  were  in  1910.  This  shows  conclusively  that 
the  cost  of  management  has  not  increased  in  proportion  to  the  other 
costs. 

Mr.  Warren.  What  w^as  your  statement  as  compared  to  1910  for 
1916?    Did  you  say  the  general  expenses 

Mr.  Joyce.  1910  to  1918. 

Mr.  Warren.  1918? 

Mr.  Joyce.  1918.    You  will  find  that  in  the  table. 

Mr.  Warren.  I  see  it  now,  Table  C-1. 

Mr.  Joyce.  Yes.  Table  C-2  is  a  study  of  costs  of  particular  items 
going  into  the  operation  and  construction  of  the  road,  comparing 
costs  in  1912  wdth  costs  in  1919.  The  per  cents  of  increase  are  shown 
in  the  right  hand  column.  You  will  note  that  they  range  from  some 
as  low  as  8  per  cent  to  as  high  as  232  per  cent. 

Table  C-3  is  a  tabulation  of  wages  paid  to  trainmen,  motormen, 
and  conductors,  comparing  1910  with  1919.     Surface  trainmen  23 


n 


If 


1542    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  CO'mMISSION. 

cents  in  1,910,  58  cents  in  1919.  Elevated  motormen  26  cents  in  1910, 
Gl  cents  in  1919.  Conductors  23  cents  in  1910,  58  cents  in  1919. 
Guards  19i  cents  in  1910,  56  cents  in  1919. 

I  have  another  table  sliowing  that  in  great  detail  that  I  shall 
submit. 

Table  D  shoAvs  the  classes  of  fares  and  the  revenue  therefrom  Jan- 
uary 1,  1910,  to  Jime  30,  1919.  You  will  there  observe  the  compara- 
tive insignificance  of  the  revenue  obtained  from  the  3-cent  exchanire. 

Table  K "" 

Commissioner  Wkhlk.  What  is  the  basis  of  the  3-cent  exchange? 
Is  that  a  regular  transfer  charge? 

Mr.  Joyce.  It  is  a  transfer  charge  which  we  inherited  from  the 
former  management  and  which  was  in  turn  inherited  bv  them  from 
the  days  of  competition  in  Philadelphia  when  the  lines  were  operated 
by  many  different  companies  and  when  to  go  from  the  line  of  one 
company  to  the  line  of  another  you  would  have  to  pay  3  cents.  A 
little  later  on  I  will  refer  at  length  to  that  in  quoting  Mr.  Mitten's 
statement  on  the  subject  before  the  public-service  commission. 

Commissioner  Wehle.  How  does  the  number  of  passengers  car- 
ride  on  the  free  transfer  compare  with  the  number  of  passengers  car- 
ried on  the  3-cent  transfer? 

Mr.  Joyce.  I  can  answer  that  in  thiy  wav — that  17  per  cent  of  all 
l)assengers  are  carried  on  free  transfers  and  6  per  cent  of  all 
passengers  are  carrie<l  on  the  3-cent  exchange. 

We  submit  also  a  table  showing  fare  adjustments  in  various  cities. 
This  was  prepared  by  our  statisticians,  and  we  considered  that  it 
would  be  of  interest.  It  refers  particularly  to  fare  changes  in  tiie 
State  of  Pennsylvania,  but  it  refers  also  to  other  fare  changes,  in 
such  cities  as  Baltimore,  Boston,  Chicago,  Cincinnati,  Cleveland, 
Denver,  Detroit,  Kansas  City,  Los  Angeles,  Milwaukee,  Kew  Jersey, 
and  then  on  to  the  cities  in  Pennsylvania. 

Commissioner  Wehle.  What  is  the  date  of  this  Table  F? 
Mr.  JoYiF^  We  made  an  effort  to  bring  it  up  to  the  date  of  the 
hearing  on  the  3-cent  exchange,  jin<l  that  was  September  19.     It  may 
not  be  exactly  up  to  that  <late. 

Commissioner  Weule.  I  notice  the  Cincinnati  Traction  Co.  is  set 
out  here  as  having  a  6i-cent  ticket  and  a  7-cent  cash  fare.  Is  tliat 
the  present  arrangement? 

Mr.  Joyce.  I  am  not  able  to  an.swer  you  on  that.  I  did  not  pi-e- 
pare  that  table.  It  was  prepared  by  our  statisticians,  but  I  shall,  if 
you  wish,  obtain  that  data  and  have'it  supplied  to  the  commission. 

I  had  intended  in  my  scheme  of  presentation  of  this  matter  to 
cover  the  relationship  of  tlie  conipanv  with  the  city  in  one  place,  and 
I  havQ  now  arrived  at  the  l)lace  where  I  wish  to  go  into  that. 

I  shall  first  give  you  a  short  description  of  tlie  situation  in  Phila- 
delphia before  tlie  1907  contract,  which  is  now  the  single  franchise 
under  which  we  are  operating  in  Philadelphia. 

While  under  the  laws  of  Pennsylvania  street  railways  are  char- 
tered by  the  State,  they  obtain  their  rights  to  operate  on  the  city 
streets  ivom  the  l(K'al  authorities  and  onlv  upon  such  conditions  as 
may  be  reserved  in  franchise*  grants.  From  the  very  beginning,  to 
secure  some  remuneration  for  the*  privilege  of  constructing  and  op- 
erating street  railways,  the  city  imposed  three  obligations,  namely, 


Iff 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1543 

firsK  to  pave,  repave,  and  repair  the  streets  which  they  occupied. 
Second,  to  pay  to  the  city  a  tax  on  annual  dividends  in  excess  of  G 
per  cent.  And  third,  to  pay  a  license  fee  for  each  car  intended  to  be 
run. 

The  original  franchise  ordinances  are  supplemented  later  by  other 
ordinances,  general  in  their  nature,  confirming  and  defining  these 
obligations. 

Thus  in  1857  an  ordinance  was  passed  requiring  that  all  railroad 
conii>anies  as  aforesaid  shall  be  at  the  entire  cost  of  paving,  i-epaving, 
and  repairing  that  may  be  necessary  upon  any  road,  street,  avenue, 
or  alley  occu2:)ied  by  them. 

In  187G  the  supreme  court  defined  the  obligation  of  the  companies 
under  thefce  ordinances,  as  follows,  quoting  from  tlie  supreme  court's 
decision : 

That  these  companies  are  bound  to  keep  in  repair  the  entire  roadway  of  tlie 
street  which  they  occupy,  not  only  the  part  between  the  raibs,  but  the  whole 
roadway  from  curb  to  curb.  Whatever  streets  they  traverse  they  are  bound  to 
pave  throughout  their  whole  route  and  that  not  partially  but  wholly  and 
thoroughly.  It  is  a  part  of  the  price  which  the  legislature  exacted  for  the 
privilege  granted. 

In  1892,  Avhen  ordinances  were  passed  granting  the  companies  the 
right  to  use  electric  traction,  the  grant  was  almost  invariably  accom- 
panied by  the  requirement  that  the  company  should  pave  the  streets 
from  curb  to  curb  with  modern  paving;  and  in  1896  the  city  of 
Philadelphia  was  considered  the  most  poorW  paved  city  in  tho 
United  States,  the  result  being  that  the  companies  were  at  the  cost 
of  re{)aving  the  entire  city,  because  if  you  will  take  a  map  of  Phila- 
delphia upon  which  street-cars  run  it  looks  like  a  gridiron — every 
street  has  a  track  on  it. 

In  1896,  four  years  later,  it  was  estimated  by  the  city  that  repav- 
ing  done  by  the  companies  since  1891  cost  them — the  companie.-; — 
$9,000,000.  That  estimiite  was  made  by  the  then  superintendent  of 
the  bureau  of  highways  of  the  city  of  Philadelphia. 

The  dividend  tax  has  been  a  continuing  source  of  revenue  to  the 
city.  This  tax  is  levied  on  all  dividends  in  excess  of  6  per  cent. 
Some  were  obliged  to  pay  G  per  cent  on  the  entire  dividend  while 
others  were  required  to  pay  6  per  cent  only  on  the  excess  of  the  divi- 
dend above  6  per  cent. 

The  third  form  of  obligation  is  the  tax  on  cars  of  $50  per  car  with 
an  additional  tax  of  $50  on  each  car  regularly  operated  on  a  line 
wliich  cmsses  a  bridge  owned  by  the  city. 

The  companies  were  also  obliged  to  keep  streets  which  they  oper- 
ated on  free  from  ice  and  snow  in  the  winter. 

^  In  addition  to  these  city  charges,  the  companies  are  subject  to  a 
State  charge  of  0.8  per  cent  on  their  gross  receipts,  0.5  per  cent  on 
the  assessed  value  of  their  capital  stock,  and  0.4  per  cent  on  their  cor- 
porate loans,  which,  while  levied  on  tlie  bondholders,  is  usually  paid 
by  the  companies. 

Tlie  contract  of  1907:  In  1907  the  company  entered  into  an  agree- 
ment Avith  the  city  for  a  term  of  50  yeai-s  revising  and  confirming 
the  various  fmnchise  grants  that  liad' theretofore  been  made  by  the 
city  to  the  company  and  its  jiredec^ssor  and  lassor  companies.  This 
contract  provides  among  otlier  things  that  the  comimny  shall  be 
relieved  of  its  obligations  to  pave,  repave,  and  clean  the  streets  of  tlie 


1544    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  .RAILWAYS  COMMISSION.    1545 


WH 


'H 


ii 


city,  and  of  its  car-license  fees,  and  that  in  lieu  thereof  the  company 
should  pay  to  the  city  a  sum  of  money  amounting  to  $500,000  per 
annum  for  the  first  10  years  of  the  contract  and  increasing  by  $50,000 
per  annum  for  each  additional  lO-j-ear  period  until  in  the  final 
period  of  the  term  the  payment  will  be  $700,000  per  annum.  The 
company  also  agrees  to  pay  into  a  sinking  fund  for  the  use  of  the  city 
in  acquiring  the  property  of  the  company  an  annual  sum  amounting 
to  $120,000  per  annum  for  the  first  10  yeai^  and  increased  by  $00,000 
per  annum  for  each  additional  10-year  period  until,  in  the  final 
period  of  the  term,  the  sinking  fund  payments  will  be  $360,000  per 
annum. 

The  paving  and  sinking-fund  payments  under  this  contract  now 
amount  to  $670,000  per  annum  and  during  the  last  10-year  period 
will  amount  to  $1,060,000  per  annum. 

The  city  reserves  the  right  after  50  years,  upon  six  months'  notice, 
to  purchase  the  property  of  the  company  by  paying  the  par  value 
of  the  stock  of  the  company  and  assuming  the  liabilities  of  the  com- 
pany, and  this  right  will  be  assignable  by  the  city  and  may  be  put 
up  at  auction.  The  company  reserves  its  franchise  as  a  corporation 
and  reserves  the  right  to  become  a  bidder  for  that  francliise,  a  bidder 
for  the  right  to  operate  the  street-railway  lines. 

The  contract  of  1907  also  provides  that  the  company  shall  call  on 
its  stockholders  for  certain  assessments  for  improvements.  That 
the  company  shall  submit  all  future  increases  in  its  capital  stock  and 
funded  debt  to  the  city  for  approval.  That  the  city  may  determine 
that  new  lines  of  street  railways,  subway  or  elevated  railways  should 
be  constructed  and  that  if  the  company  should  fail  or  decline  to 
construct  and  operate  the  same  the  city  may  offer  the  right  to  con- 
struct and  operate  to  others.  That  the  mayor  of  the  city  and  two 
citizens  designated  by  the  council  shall  be  members  of  the  board  of 
directoi-s  of  the  company.  That  the  company  shall  file  with  the 
city  council  statements  of  income  and  that  the  city  comptroller  shall 
examine  the  books  of  the  company  to  verify  the  same.  That  the  city 
shall  share  with  the  company  all  net  earnings  over  and  above  6  per 
cent  per  annum  upon  its  capital  stock.  That  the  company  shall  sur- 
render its  franchise  for  the  construction  of  a  subway  in  Broad 
Street. 

Commissioner  Weiile.  Will  you  repeat  the  sentence  before  that, 
about  the  sharing  of  profits  ? 

Mr.  Joyce.  Above  6  per  cent  on  the  stock  if  the  company  should 
ever  earn  that  much,  the  city  shall  share. 

Commissioner  Wehle.  Share  equally  ? 

Mr.  Joyce.  Yes ;  share  equally.  I  shall  submit  a  copy  of  the  con- 
tr;i  ct  for  you  to  study  in  detail. 

The  company  had  the  right  to  build  subways  in  Broad  Street. 
Under  the  1907  contract  it  surrendered  that  right.  The  city  con- 
lirmed  the  various  franchises  of  the  company  and  its  predecessor 
and  lessor  companies  and  surrendered  any  right  of  repeal  or  right 
of  purchase  or  taking  it  may  have  under  such  franchises. 

That  is  a  brief  summary  of  the  provisions  of  that  contract.  The 
booklet  which  I  have  here  descriptive  of  the  Three-Cent  Exchange 
ease  contains  a  copy  of  that  contract. 

Commissioner  Mahox.  How  does  the  city  elect  its  members  on  the 
board  of  directors? 


Mr.  Joyce.  They  are  designated  by  the  mayor. 

Commissioner  Mahon.  Appointed  by  him? 

Mr.  Joyce.  Appointed  by  the  mayor. 

The  Three-Cent  Exchange  case  grew  out  of  an  effort  on  the  part 
of  the  business  men's  association  of  what  is  known  as  the  northwest 
section  of  Philadelphia,  a  limited  area  lying  between  Schuylkill 
Kiver  and  Broad  Street.  The  business  men  in  that  section  got  the 
idea  that  their  section  was  discriminated  against  in  the  matter  of 
the  3-cent  exchange  as  compared  with  the  people  in  West  Phila- 
delphia and  other  sections  of  the  citjr,  and  they  brought  their  com- 
plaint to  the  public-service  commission  on  the  basis  of  discrimina- 
tion. The  commission  ordered  hearings  on  the  matter,  and  the  final 
hearing  was  held  in  Philadelphia  on  September  19.  The  company, 
I  believe,  demonstrated  beyond  doubt  that  there  was  no  actual  dis- 
crimination against  the  northwest  business  district  as  compared 
with  the  other  districts  of  the  city  that  might  reasonably  be  com- 
pared with  it,  and  Mr.  Mitten  took  that  occasion  to  present  to  the 
public-service  commission  his  view  upon  the  3-cent  exchange.  That 
view  is  contained  in  his  statement  to  the  commission  which  is  printed 
in  this  booklet  at  the  front  of  the  book. 

He  reviews  the  history  of  the  3-cent  exchange  and  refers  to  the  ex- 
hibits that  are  submitted.  He  shows  there  that  the  following  pay- 
ments are  now  made  to  the  city  annually  under  the  1907  contracts: 
*One  hundred  and  fifteen  thousand  dollars  franchise  tax — that  is, 
the  dividend  tax,  the  tax  upon  dividends  above  6  per  cent;  and 
those  are  the  dividends  paid  by  the  underlying  companies  out  of 
the  rentals  received  from  the  Philadelphia  Rapid  Transit  Co. — 
$550,000  cost  of  paving  and  street  cleaning  and  the  car-license  fee; 
$120,000  sinking  fund ;  making  a  total  of  $785,000  per  annum. 

Mr.  Mitten  there  offered  to  discontinue  the  charge  of  3  cents  for 
exchange  tickets  which  now  brings  in  a  revenue  of  $1,600,000;  he 
offered  to  discontinue  that  charge  and  to  give  up  that  revenue  of 
$1,600,000  if  the  city  would  agree  to  give  up  its  annual  charges  for 
street  cleaning,  sinking  fund,  and  franchise  of  $785,000. 

It  was  thought  by  the  attornej^s  in  that  case  that  Mr.  Mitten  was 
jeopardizing  his  Three-Cent  Exchange  Ticket  case  by  making  any 
such  offer,  but  he  preferred  to  take  advantage  of  that  opportunity  to 
put  himself  upon  record  as  opposing  the  3-cent  exchange.  Because 
he  says  that  it  sets  up  artificial  dams  or  barriers  to  the  natural  flow 
of  the  traffic.  We  find,  for  example,  that  people  instead  of  trans- 
ferring, if  they  go  from  point  A  to  point  B,  and  point  C  is  the  rea- 
sonable place  for  them  to  transfer — if  that  is  a  3-cent  exchange  point 
they  will  not  transfer  there,  but  they  will  ride  around  for  perhaps 
35  minutes  until  they  reach  a  free  transfer  point  and  there  transfer, 
causing  jamming  of  the  traflSic  due  to  that  toll  of  3  cents  for  ex- 
change tickets. 

Commissioner  Gadsden.  The  proposition  is  to  make  these  ex- 
change places  free  transfers? 

Mr.  Joyce.  Making  the  exchange  places  free  transfers,  and  then 
the  flow  of  the  traffic  will  be  normal  and  natural. 

Now,  as  a  light  upon  that  3-cent  exchange,  I  wish  to  direct  the 
attention  of  the  commission  to  the  report  of  eight  years'  operation 
which  you  will  find  printed  in  the  Three-Cent  Exchange  booklet, 
and  to  a  table 


III 


I 


1546    PROCEEDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Coiniiiissioner  Wehle.  On  wliat  page? 

Mr.  Joyce.  The  booklet  is  not  paged  throughout,  but  you  will 
hnd  the  eiglit  years  report  toward  the  back  of  the  book.  It  is  the 
Just  thing  printed.  On  page  8  of  tliat  i-ei>ort  you  will  find  an 
analysis  of  the  fare  reduction  there,  sliowing  the  relationship  of  the 
tJ-cent  exchange  to  the  total  passengers  carried,  which  shows  that 
the  3-cent  exchange  in  1918  was  obtained  from  43,000,000  pas- 
sengers, which  IS  5.70  per  cent  of  all  the  passengers;  free  transfers 
were  given  to  130,000,000, 17  per  cent  of  the  totalf 

I  wish  there,  too,  while  we  are  on  that  table,  to  call  attention  to 
the  column  containing  the  fai^  per  passenger  beginning  with  191/) 
at  4.13  cents  and  gradually  decreasing  as  the  number  of  free-trans- 
ler  jjlaces  were  increased. 

•  ^nln^^^^^  observe  an  increase  in  the  free-transfer  points  from  210 
m  lylO  to  320  in  1918,  and  a  decrease  in  the  3-cent  exchange  iK)ints 
from  65i>  m  1910  to  580  in  1918.  * 

A  il^"  Tmn^i'^^o'n?  ^^^^*^^the  fare  per  passenger  has  decreased  from 
4.13  in  1910  to  3.91  in  1915.  It  remained  at  3.91  in  1916  and  1917, 
and  went  up  to  3.98  in  1918;  and  the  only  way  that  we  can  account 
tor  that  increase  is  that  prosperous  war  workers  no  longer  care  to 
take  the  3-cent  exchange  at  the  3-cent-exchange  points,  but  the 
2  cents  IS  not  worth  enough  to  them  to  ask  for  a  3-cent  exchange, 
and  they  would  rather  pay  another  nickel  on  the  next  ride.  That 
IS  tJie  only  way  we  can  account  for  that;  and  our  traffic  men  make 
that  accounting  for  it. 

Mr.  Warrex.  You  mean  they  do  not  care  to  take  the  free  trans- 
ters,  do  you  not,  Mr.  Joyce  ?  I  notice  your  number  of  free  transfers 
actually  decreased  in  that  year. 

Mr  Joyce.  That  is  true,^Mr.  Warren.  That  element  is  also  men- 
tioned as  a  reason  by  our  traffic  experts. 

Commissioner  Wehle.  Will  you  give  us  a  few  points,  Mr.  Jovce, 
about  this  contract  of  1907,  before  you  leave  it  too  far  behind?* 

Mr.  JoYCE.^  The  contract  of  1907  you  will  find  printe^l  In  the 
Ihree-Cent  Exchange  booklet  after  the  statistical  tables  that  were 
introduced. 

The  statistical  tables  run  up  to  page  18,  and  then  next  appears  the 
contract  of  190  <,  which  is  again  paged  independently  from  one  to 
nine.  It  is  a  comparatively  brief  document,  containing  only  nine 
pages  of  printing.  "^ 

Commissioner  Weule.  In  connection  witli  that  contract  I  should 
like  to  ask  you  what  kind  of  accounting  supervision  has  been 
actually  developed  by  the  city  of  Philadelphia  to  control  or  to 
check  up  the  accounting  of  the  railway  ? 

Mr.  Joyce.  Each  year  the  city  of  Philadelphia,  through  its  comp- 
troller, employs  a  firm  of  public  accountants.  The  firm  that  has  so 
far  represented  them  in  that  respect  is  the  firm  of  Lybrand,  Ross 
Bros.  &  Montgomery,  of  Philadelphia.  The  city  sends  Lybrand, 
Koss  Bros.  &  Montgomery  into  the  office  of  the  company  once  a 
year  to  check  up  its  income  account  and  the  additions  made  to  tlie 
property  accounts,  and  to  make  a  general  audit  of  the  books  of  the 
company:  and  the  accountants  report  to  the  couiptioller,  and  the 
conmtroller  m  turn  reports  to  council,  and  that  repoi-t  is  printed 
and  issued  as  a  public  document. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1547 

In  the  administration  of  the  22  per  cent  fund  of  the  street-car 
men  under  that  1911  agreement  the  carmen  accepted  the  audit  of 
the  city's  auditors  of  that  fund,  and  the  carmen  appointed  a  com- 
mittee to  sit  with  the  city's  auditors  when  they  Avere  compiling  their 
final  figures  and  to  ask  questions  with  regard  to  charges  against 
that  fund. 

There  is  great  confidence  on  the  part  of  the  public  in  that  audit. 
It  is  accepted  in  Philadelphia  as  a  thoroughgoing  audit.  The 
standing  of  the  firm  of  Lybrand,  Ross  Bros.  &  Montgomery  is  a 
factor  in  that,  as  well  as  the  standing  of  the  present  city  comptroller 
Df  Philadelphia,  who  is  regarded  as  a  leader  among  city  accounting 
officials  in  the  United  States. 

Conmiissioner  Wehle.  Does  the  contract  give  any  regulatory 
[>ower  to  the  city  in  connection  with  the  audit,  or  only  a  reporting 
[)ower  ? 

Mr.  Joyce.  A  reporting  power  only. 

Commissioner  Wehle.  In  connection  with  extensions,  does  it  in 
any  way  undertake  to  limit  the  affirmative  power  of  the  company 
to  make  extensions? 

Mr.  Joyce.  Xo;  so  far  as  I  know  it  has  not.  There  have  been 
very  cordial  relations  between  the  city  and  the  company  in  that 
resj)ect. 

The  city  undertook,  in  1913  and  1914,  during  the  administration 
of  Mayor  Blankenburg,  the  construction  of  a  vast  system  of  under- 
ground railways,  and  appropriated  money,  obtained  special  legisla- 
tion, and  approved  and  issued  a  special  bond  issue,  running  over 
$100,000,000.  That  is  discussed  and  referred  to  in  the  Eight- Year 
ie)K)rt  at  page  15. 

The  city  went  ahead  with  this  work,  and  did  a  lot  of  work  under 
the  city  hall  in  Philadelphia,  in  the  construction  of  stations,  under- 
ground stations,  and  beginning  the  construction  of  its  subway  in 
P>road  Street.  Its  plans  were  very  aml)itious,  and  it  entered  into  a 
contract  with  the  Philadelphia  Rapid  Transit  Co.  for  the  operation 
of  tho.-e  subways  when  completed. 

That  contract  was  pi-actically  forced  upon  the  rapid  transit  com- 
pany. The  rapid-transit  company  was  not  in  sympathy  with  the 
plan.  The  officials  of  the  rapid-transit  company  recognized  that  no 
rate  of  fare  that  could  be  charged  would  make  those  subways  pay. 
However,  it  was  obliged  to  enter  into  the  contract. 

The  contract  was  submitted  to  the  public-service  commission,  and 
was  before  that  body  for  nearly  a  year.  Finally  the  public-service 
connnission  disapproved  the  contract;  and  it  throws  the  thing  back 
now  to  where  it  was  before  the  contract  was  started,  with  the  city 
left  with  a  big  investment  in  underground  tunnels,  a  big  liability  for 
further  construction,  and  with  an  elevated  railway  to  Frankford 
about  5  miles  long,  stopping  short,  by  about  half  a  mile  of  connect- 
ing with  the  elevated  of  the  Philadelphia  Rapid  Transit  Co.,  and 
now  in  the  ]DOsition  of  having  to  deal  with  the  Philadelphia  Rapid 
Transit  Co.  for  the  operation  of  the  Frankford  elevated. 

All  of  those  questions  are  now  in  an  unsettled  state.  Mr.  Mitten 
cx^iects  to  go  befoi*e  council  this  year  with  a  proposition  for  settling 
some  of  them,  the  3-cent-exchange-tioket  question  ]>aiticularly;  and 
since  the  city  is  going  ahead  with  the  completion  of  the  Frankford 


1548    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

elevated,  the  time  is  not  long  when  the  company  will  have  to  enter 
into  contract  relationship  with  the  city  for  operation  of  that,  be- 
cause it  would  not  be  possible  to  operate  it  as  a  separate  thinj^. 

Commissioner  Weiile.  Is  the  Market  Street  subway  owned  by  the 
city  ?     Was  it  built  by  the  city  in  the  fii-st  instance  ? 

Mr.  Joyce.  It  was  built  by  the  company  and  it  is  owned  by  the 
company. 

Commissioner  Weiile.  The  Broad  Street  subway,  which  has  been 
bopin,  running  under  the  city  hall  and  up  and  down  Broad  Street, 
north  and  south ;  that  is  being  built  by  the  city  ? 

Mr.  Joyce.  By  the  city;  yes. 

Commissioner  Wehle.  Has  there  been  any  attempt,  or  will  there 
be  any  attempt,  to  levy  assessments  against  property  holdei-s  for 
accretion  in  value  of  their  holdings  due  to  the  building  of  the  new 
fcubway  and  elevated  to  Frankford? 

Mr.  Joyce.  I  do  not  know.     I  have  not  heard  it  mentioned. 

Commissioner  Wehle.  Has  there  been  any  study  or  survey  made 
of  the  situation  with  reference  to  such  a  plan  as  that? 

Mr.  Joyce.  There  has  been  a  study  made  for  the  sake  of  com- 
parison. The  Real  Estate  Board  of  iPhiladelphia  made  a  study  of 
the  increase  in  properties  in  West  Philadelphia  due  to  the  con- 
struction of  the  Market  8treet  elevated;  and  they  estimated  that 
]>roperty  values  have  increased  $130,000,000  in  West  Philadelphia 
due  to  that  construction,  and  that  therefore  a  like  increase  in  property 
values  in  Frankford  will  result  from  the  constmction  of  the  Frank- 
fr'rd  elevated  and  the  operation  of  it. 

Notwithstanding  that,  the  Market  Street  elevated  and  the  subways 
have  never  paid  6  per  cent  upon  the  investment. 

Commissioner  Wehle.  You  mean  notwithstanding  the  fact  that 
the  property  values  have  increased  so  greatly,  the  line  itself  which 
created  such  property  values  has  never  paid  for  the  investment  ? 

Mr.  JorcE.  That  is  right. 

Commissioner  Weiile.  And  yet  the  accretion  in  property  values 
has  been  very  greatly  in  excess  of  the  cost  of  the  subway  ? 

Mr.  Joyce.  Yes.  In  other  words,  the  rapid-transit  company  made 
West  Philadelphia  without  getting  adequate  return  upon  its  invest- 
ment. 

The  Chairman.  We  will  take  a  recess  until  2  o'clock. 

(Whereupon,  at  1  o'clock  p.  m.,  a  recess  was  taken  until  2  p.  m.) 

AFTER  RECESS. 

STATEMENT  OF  ME.  C.  J.  JOYCE— Continued. 

The  Chairman.  You  may  proceed,  Mr.  Joyce. 

Mr.  Joyce.  I  wish  to  give  at  this  point  some  general  data  that  will 
perhaps  answer  questions  with  regard  to  the  situation  in  Philadel- 
pliia;  a  brief  historical  sketch  of  the  street  railways  in  Philadelphia. 

The  history  of  local  transportation  in  Philadelphia  begins  in  1831 
with  the  introduction  of  stagecoaches  rendering  hourly  service  from 
8.30  o'clock  a.  m.  until  4.30  o'clock  p.  m.  on  Chestnut  Street.  This 
was  followed  by  others  and  the  omnibuses  continued  as  the  only 
means  of  transportation  until  January  20, 1858,  when  the  first  street- 
car line  was  opened  in  the  face  of  much  opposition. 


proceedings  of  federal  electric  railways  commission.  1549 

During  the  years  1857  to  1874,  39  separate  passenger  railway  com- 
panies were  chartered  to  operate  in  Philadelphia.  Most  of  these 
companies  constructed  their  lines  and  operated  independently.  How- 
ever, they  early  realized  the  benefits  of  combination  and  formed  an 
t^ssociation  known  as  the  board  of  presidents  of  city  passenger  rail- 
way companies,  for  the  regulation  of  competition.  Some  actual 
consolidations  took  place,  and  in  187G  there  were  17  operating  com- 
panies in  Philadelphia,  with  a  total  of  289  miles  of  track.  In  1883 
one  company  controlled  70  miles  of  track  and  another  44  miles. 

With  the  coming  of  electric  traction  came  a  great  impetus  toward 
consolidation  on  a  large  scale.  In  1895  the  business  was  divided 
among  only  four  companies  and  in  1898  one  company  controlled  all 
the  lines,  save  one,  which  operated  24  miles.  Tliis  consolidation  was 
created  principally  upon  a  network  of  leases  with  but  few  actual 
mergers  of  corporations,  the  original  companies  continuing  in  ex- 
istence and  receivinjg  rentals  for  the  use  of  their  properties,  which 
tliey  in  turn  distributed  to  their  bond  and  share  holders  as  interest 
and  dividends. 

The  Philadelphia  Rapid  Transit  Co.  was  formed  in  1902  with  a 
capital  stock  of  $30,000,000  to  lease  and  operate  the  properties  of 
all  of  the  then  existing  street-railway  companies,  to  make  extensions 
to  the  system  and,  among  other  things,  to  construct  and  operate  a 
system  of  subways  and  elevated  railways.  The  subway  and  elevated 
Avere  commenced  in  1907  and  were  fully  in  operation  in  1910. 

The  Philadelphia  Eapid  Transit  Co.  has  a  practical  monopoly  of 
tlie  street-railway  business  in  Philadelphia.  Its  surface  lines  com- 
prise 638  miles  of  single  track,  occupying  450  miles  of  streets  and 
ighways.  It  has  6^  miles  of  subways  and  17  miles  of  elevated  rail- 
way, single-track  measurement.  The  elevated  railway  is  located 
on  Market  Street,  west  of  the  Schuylkill  River,  except  for  a  small 
portion  at  the  terminal  on  the  Delaware  River.  The  subway  is 
located  entirely  on  Market  Street,  east  of  the  Schuylkill.  The  ele- 
vated trains,  commencing  at  the  Delaware  River  terminal,  descend 
to  the  subway  and  come  to  the  surface  at  the  Schuylkill  River,  as- 
cending to  the  elevated  structure  west  of  the  river  over  a  bridge 
owned  by  the  company. 

Prior  to  1913,  the  company  generated  all  of  its  power  in  four  large 
power  houses.  Since  1913  it  has  been  taking  a  continually  increasing 
portion  of  its  power  from  the  Philadelphia  Electric  Co.  In  1918 
the  company  generated,  in  its  own  power  houses,  203,143,891  kilowatt 
hours  of  electric  current  and  it  bought  during  the  same  year  from 
the  Philadelphia  Electric  Co.  143,374,863  kilowatt  hours.  The  com- 
pany owns  2,785  cars  and  operates  2,667.  During  the  year  1918  the 
system  carried  741,140,866  passengers,  operated  85,318,787  car-miles, 
and  9,576,108  car  hours. 

The  rate  of  fare  is  5  cents.  At  320  points  of  intersection  free 
transfers  are  issued  and  at  580  points  a  charge  of  3  cents  is  made  for 
transfers.    The  average  fare  per  passenger  in  1918  was  3.98  cents. 

Philadelphia  has  a  population  of  approximately  1,800,000.  The 
rapid-transit  company  also  serves  a  suburban  population,  which 
brings  the  total  population  of  the  territory  served  to  approximately 
2,000,000.  The  area  of  the  city  is  129  square  miles.  The  area  of  the 
territory  served  is  169  square  miles.    The  principal  portion  of  the 


1 


tf 


1550    PPwOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEMNGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1551 


eity  lies  between  the  Delaware  and  Sehuykill  Rivers,  but  for  upward 
of  15  years  there  has  been  a  stix)ng  tendency  for  the  population  to 
locate  Avest  of  the  Sehuykill  River. 

East  of  the  Delaware  is  the  city  of  Camden,  N.  J.,  not  served  by 
the  company. 

Philadelphia  is  an  important  market,  seaport,  and  financial  cen- 
ter. It  is  preeminently  a  manufacturing  city.  The  principal  indus- 
tries are  textile  mills,  shipyards,  iron  and  steel  works,  locomotive 
works,  oil  refineries  and  car  works. 

The  Hog  Island  shipyards  of  the  Emergency  Fleet  Corporation 
ai*e  adjacent  to  the  city  on  the  Delaware  River  and  the  league  Island 
Navy  1  ard  is  within  the  citj-  limits. 

To  the  south  of  the  city  are  Eddystone,  Essington  and  Cliester  on 
the  Delaware  River,  Here  are  located  the  Westinghouse  Works,  and 
the  Baldwin  Locomotive  AYorks  which,  during  the  war,  attained 
great  proportions  as  manufacturei*s  of  munitionsv 

The  topography  of  Philadelphia  is  flat,  and  fi*om  this  standpoint 
presents  little  or  no  obstacles  to  street-railway  operation.  Its  streets, 
however,  arc  narrow  and  are  laid  out  mostly  at  right  angles.  Only 
a  few  street*;  are  wide  enough  to  permit  of  double  tracks. 

The  people  live  in  individual  one-family  houses  there.  There  are 
but  few  houses  of  the  flat  or  apartment-house  type.  Tliis  tends  to  a 
thinning  out  or  spreading  of  the  population  as  compared  with  the 
highly  congested  conditions  in  some  other  eastern  cities. 

I  wish,  in  addition  to  the  booklets  that  have  l>oen  intro<^luced  and 
referred  to  during  the  testimony,  to  place  before  you  the  cooperative 
plan  of  1911  as  officially  issued  by  the  company. 

We  have  already  presented  the  cooperative  plan  of  1918,  the  con- 
tract of  1907  with  the  city,  the  eight-year  report,  the  eight-months' 
repoi-t,  and  I  wish  also  to  direct  attention  to  the  letters  printed  in  the 
Three-Cent  Exchan^  booklet  exchanged  betw^een  the  members  of  the 
committee  of  council  and  the  heads  of  the  street-railway  system  in 
19)1,  when  there  was -before  council  the  proposition  to  approve  an 
issue  of  $10,000,000  of  bonds  to  finance  extensions. 

The  Chairman.  You  referred  to  a  contract  in  1911.  In  what  re- 
spect does  that  differ  from  the  present  ? 

Mr.  Joyce.  1907. 

The  Chairmax.  1907? 

Mr.  Joyce.  That  is  the  one  existing  now. 

Tliat  is  all  that  I  have  prepared  to  submit,  Mr.  Cliairman,  and  I 
wish  to  say  to  the  commission  that  we  are  ready  to  supply  any  addi- 
tional data  that  the  commission  may  desire,  that  the}'  may  tliink  f)f 
now  or  that  they  may  think  of  later. 

The  Chairman.  You  spoke  of  the  turnover  in  1918  being  very 
much  larger  than  in  prior  years.  Have  you  figui*es  to  show  what  per 
cent  of  the  men  who  left  your  service  entered  the  service  of  the  Gov- 
ernment ? 

Mr.  JoY(^.  I  think  we  have  that  data.  I  have  not  it  with  me,  but 
it  is  available,  and  we  will  gladly  supply  it. 

The  Chairman.  Will  you  also  give  tHe jper  cent  of  men  who  went 
into  other  lines  of  work,  such  as  the  Hog  Island  shipyards? 

Mr.  Joyce.  I  am  not  so  sure  that  we  would  have  that  data,  Mr. 
Chairman,  but  such  as  we  have  we  will  be  glad  to  supply  to  you. 

The  Chairman.  Did  many  of  your  men  enter  that  service  ? 


Mr.  Joyce.  Yes;  I  believe  that  quite  a  number  of  our  men  were  at- 
tracted to  the  war  industries,  but  our  men  wei^  not  attracted  in 
that  direction  in  the  same  proportion  tliat  men  were  attracted  to 
some  other  fixed  industries  in  Philadelphia;  at  least,  we  have  been 
given  to  understand  that,  and  to  believe  it  from  the  contact  of  our 
managers  with  the  managers  of  other  industries  in  the  city. 

The  Chairm.vn.  Tlie  wages  in  tlie  Hog  Island  yard  were  very 
much  larger  than  those  paid  by  your  company? 

Mr.  Joyce.  Yes;  not  only  in  tlie  Hog  Island  yards,  but  in  the 
Eddystone  and  Essington  munitions  factories.  They  were  i>aying 
ill  most  any  wages  to  skilled  mechanics,  or  uien  who  had  any  skill 
at  all  to  pursue  mechanical  work,  to  operate  mechanical  equipment, 
and  our  motormen  were  qualified  for  some  of  that  work. 

The  Chairman.  Referring  ,  to  your  i>lan  of  cooperation :  Yon 
dourly  pointed  out  1m>av  the  employees  themselves  select  tlieir  rep- 
resentatives. I  am  not  sure  that  the  testimony  shows  how  the  com- 
pany selects  its  representatives  and  from  whom  tli«y  are  selected. 

Mr.  Joyce.  The  company's  representatives  are  selected,  presum- 
ably by  the  president,  but  actually  they  consist  at  each  barn  of  the 
su})orintendent  and  the  assistant  superintendent.  That  is  generally 
understood — that  those  are  the  two  men  who  will  represent  the 
barn. 

The  Chairman.  Does  the  company  have  tlw  exact  number  of  rep- 
resentatives th^t  the  employees  have? 

Mr.  Joyce.  Yes.     They  are  matched  evenly  on  each  committee. 

The  Ch^urman.  Your  plan  also  contemplates  an  arbitration  board 
to  decide  questions  that  can  not  be  settled  by  the  employees  and 
the  industry? 

Mr.  Joyce.  There  are  questions  on  appeal  from  the  general  com- 
mittee. 

The  Chair:man.  From  the  general  committee? 

Mr»  Joyce.  Yes. 

The  Chairman.  How  many  questions  have  been  i*ef erred  to  an 
arbitration   board   during  the   Mitten-Stotesbury   regime? 

Mr.  Joyce.  Xone. 

The  Chairman.  Then  there  are  no  questions  undi^osed  of? 

Mr.  Joyce.  Xo.  Most  of  the  questions  are  decided  in  the  depart- 
mental committees.     Very  few  of  them  reach  the  general  committee. 

The  Chairman.  What  percentage  of  the  questions  get  to  the 
general  committee? 

Mr.  Joyce.  I  can  not  answer  that,  but  I  can  obtain  that  data  for 
vou. 

Tlie  Chairman.  Has  the  general  ccwnmittee  the  right  to  consider 
questions  which  have  not  been  before  the  local  committee? 

Mr.  Joyce.  Yes,  There  is  no  limit  upon  the  questions  that  may 
rest  with  the  general  committee. 

The  Chairman.  Is  there  anything  in  yo*u*  plan  wdiich  prevents 
strikes? 

Mr.  Joyce.  Nothing  specifically.  The  plan  itself  is  the  great  safe- 
guard against  that  kind  of  trouble.  Troubles  tliat  usually  lead  to 
strike,  such  as  dissatisfaction  with  working  conditions,  are  settled 
in  the  branch  and  departmental  committees. 

The  Chairman.  The  employees  have  the  right  to  strike  if  they 
choose  to  exercise  it? 


» 


m 


1552    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Joyce.  Oh,  yes.  There  is  no  restriction  placed  upon  the  men 
in  that  repird.  There  is  no  restriction  placed  upon  their  organiza- 
tion.    They  are  free  to  organize  if  they  please. 

The  Chairman.  Are  they  permitted  to  join  the  American  Fed- 
eration of  Labor? 

Mr.  Joyce.  They  are. 

The  Chairman.  Does  this  plan  of  cooperation  lead  to  radical  or 
conservative  judgment  by  the  men? 

Mr.  Joyce.  To  conservative  judgment,  I  would  say. 

The  Chairman.  Since  when  did  your  company  begin  to  j)ay 
$20,000  a  month  into  its  insurance  or  protection  fund  ? 

Mr.  Joyce.  I  think  within  the  last  two  months.  That  is  condi- 
tioned upon  the  men's  maintaining  a  membership  of  95  per  cent  of 
the  total  eligible.  That  is  to  keep  the  interest  in  that  association, 
and  to  keep  the  men  keyed  up  to  keepins:  up  that  membership. 

The  Chairman.  You  formerly  paid  $10,000  a  month? 

Mr.  Joyce.  Yes. 

The  Chairman.  During  that  time  the  men  paid  $1  per  month 
into  this  fund? 

Mr.  Joyce.  Yes. 

The  Chairman.  Are  they  paying  the  same  amount  now,  when  you 
pay  $20,000  into  the  fund  ? 

Mr.  Joyce.  Yes;  there  has  been  no  increase  in  the  dues. 

The  Chairman.  Will  this  raise  a  larger  fund  than  is  required  for 
the  purpose? 

Mr.  Joyce.  That  I  can  not  tell.  It  will  certainly  put  off  the  day 
when  the  men  would  have  to  contribute  any  further  to  the  fund. 

The  Chairman.  Has  your  testimony  clearly  shown  the  benefits 
which  employees  get — that  is,  the  sick  benefits  and  other  benefits 
which  they  get — from  this  dollar  which  they  contribute  into  the 
fund  ? 

Mr.  Joyce.  That  is  perhaps  most  pointedly  shown  in  an  exhibit 
of  circular  letters  issued  during  the  "  fiu  "  campaign,  giving  a  list  of 
the  number  of  men  who  lost  their  lives  in  that  epidemic  and  who  had 
l)een  paying  dues  into  the  fund  only  a  few  months,  the  estate  of  each 
of  whom  received  $1,000. 

A  circular  issued  in  October,  1918,  shows  that  since  September  1, 
1918,  to  the  date  of  the  issues  of  that  circular,  31  employee  members 
who  have  died  since  December  1  are  fully  insured  and  will  receive  the 
payment  of  $1,000.    At  that  time  13  had  already  received  payment. 

The  Chairman.  Your  employees  are  paid  58  cents  per  nour? 

Mr.  Joyce.  Yes;  that  is  the  maximum. 

The  Chairman.  Was  that  wage  fixed  by  agreement  between  the 
men  and  the  company? 

Mr.  Joyce.  That  wage  was  fixed  by  the  War  Labor  Board.  There 
was  a  wage  scale  fixed  by  the  War  Labor  Board  for  the  cities  of 
Chicago,  Cleveland,  Detroit,  and  Buffalo. 

In  1918  the  company  accepted  that  wage  scale  voluntarily  and 
it  went  into  effect.  It  then  entered  into  an  agreement  with  its  men 
that  as  the  wages  in  these  four  preferred  cities  should  improve,  the 
Philadelphia  Rapid  Transit  Co.  wages  would  improve  in  proportion, 
taking  the  average  of  the  four  cities. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1553 

Then,  as  Detroit,  Cleveland,  and  Chicago  were  each  in  turn  in- 
creased, there  was  a  corresponding  increase  in  the  Philadelphia 
Kapid  Transit  Co.'s  men's  wages  to  keep  that  average. 

The  Chairman.  You  stated  that  it  is  the  intention  of  the  com- 
pany to  reduce  all  transfer  points;  did  you  not? 

Mr.  Joyce.  AVhat  is  that,  Mr.  Chairman? 

The  Chairman.  That  it  is  the  plan  of  the  company  to  reduce  all 
charges  at  transfer  points? 

Mr.  Joyce.  It  is  the  policy  of  the  company  to  eliminate  charges 
for  transfers  as  soon  as  it  can  be  done. 

The  Chairman.  What  effect  will  that  have  upon  the  present  rate 
of  fare  that  is  being  charged? 

Mr.  Joyce.  It  will  have  the  effect  of  reducing  the  average  rate  of 
fare,  counting  transfer  passengers  as  passengers. 

The  Chairman.  Will  you  be  able  to  make  that  reduction  in  trans- 
fer points  where  charges  are  made  and  still  maintain  your  present  5- 
cent  fare? 

Mr.  Joyce.  Mr.  Mitten  is  confident  that  he  can  do  that,  provided, 
of  course,  that  the  city  remits  the  $785,000  a  year  charged  against 
the  company  for  franchises,  paving,  and  sinking  fund. 

The  Chairman.  So  the  only  condition  upon  which  you  can  elim- 
inate these  charges  at  transfer  points  is  for  the  city  to  relieve  the 
company  of  these  assessments? 

Mr.  Joyce.  That  is  right. 

The  Chairman.  Does  the  gross  revenue  received  from  the  transfer 
charges  exceed  the  amount  which  the  company  asks  the  city  to 
assume  ? 

Mr.  Joyce.  Yes.  The  amount  of  income  from  the  3-cent  exchange 
is  $1,600,000  per  annum.  The  amount  that  the  company  asks  the 
city  to  forego  in  the  way  of  taxes  and  assessments  is  $785,000  per 
annum. 

The  Chairman.  Is  that  question  under  consideration  by  the  coun- 
cil now? 

Mr.  Joyce.  It  has  not  yet  been  formally  presented  to  them,  but 
will  be  early  in  October  by  President  Mitten. 

The  Chairman.  What  is  the  longest  single  line  you  have  in  Phila- 
delphia? 

Mr.  Joyce.  The  longest  round  trip  ?     That  I  am  not  able  to  answer. 

The  Chairman.  Secretary  of  War  Baker  testified  here  that  one 
of  the  reasons  that  Cleveland  could  operate  for  so  long  a  time  under 
a  3  or  3J-cent  fare  was  because  of  its  congested  lines — to  use  a  figure 
of  speech,  he  says  that  the  lines  there  are  a  good  deal  like  a  fan, 
with  one  single  line  and  the  branches  radiating  out  from  that,  and 
that  the  average  haul  is  short. 

In  what  respect  does  Philadelphia  differ  from  Cleveland,  as  far 
as  operating  conditions  are  concerned  ? 

Mr.  Joyce.  I  would  say  that  the  average  haul  in  Philadelphia  is 
longer  than  in  the  average  city ;  that  is,  the  average  length  of  route 
is  longer.  ^ 

The  cars  go  from  South  Philadelphia  to  North  Philadelphia 
straight  through  the  business  district  without  turning;  and  that  is  a 
long  haul. 

160643°— 20— VOL  2 36 


1554    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Tliey  go  from  the  Delaware  River  across  the  Schuylkill  and  to 
the  outward  boundaries  of  the  city  without  breaking  in  the  business 
district. 

The  Chairman.  Do  you  have  lines  that  do  not  pay  their  way? 

Mr.  Joyce.  AVe  have  some  lines  now,  in  the  outlying  districts  in 
Delaware  County,  that  do  not  fully  pay  their  way. 

We  have  lines  running  to  the  north  of  the  city,  what  we  know  as 
the  Glenside  line,  wliich  is  a  duplication  of  the  service  rendered  on 
the  York  Road  line,  but  which  has  developed  a  territory  that,  with- 
out that  service,  woidd  be  entirely  without  transportation  service, 
and  that  therefore  the  company  can  not  abandon.  Those  lines  do 
not  pay  their  way. 

The  Chairman.  Do  you  think  that  operating  conditions  in  your 
city  are  more  or  less  difficult  than  in  some  of  the  other  large  cities 
in  the  country  like  New  York,  Washington,  Baltimore,  or  Chicago^ 
or  Boston — we  must  not  forget  Boston. 

Mr.  Joyce.  I  would  say  that  they  are  not  any  more  difficult  than 
those  cities,  and  less  difficult  than  hilly  cities  like  Pittsburgh  and 
Cincinnati;  but  the  cities  that  you  have  mentioned  are  of  about 
the  same  topography  as  Philadelphia. 

The  Chairman.  1" o  what  do  you  attribute  the  ability  of  that  com- 
panv  to  operate  imder  the  present  high  oi>erating  charges  at  5  cents? 

Mr.  Joyce.  Principally  to  the  enthusiastic  cooperation  of  the  men, 
to  the  good  will  of  the  public,  and  to  the  friendly  relationship  exist- 
ing between  the  company  and  the  public  administrations,  tlie  city 
and  the  State. 

The  CiiAiKMAN.  Is  your  company  giving  reasonable  service? 

Mr.  Joyce.  Yes;  we  have  no  complants  upon  the  service. 

The  Chairman.  What  is  the  condition  of  the  equipment? 

Mr.  Joyce.  The  equipment  in  Philadelphia,  I  would  .say,  is  first 
class,  and  perhaps  will  compare  favorably  with  that  in  any  city  in 
the  United  States. 

The  Chairman.  Have  you  kept  up  your  re|)airs  during  the  war? 

Mr.  Joyce.  Yes.  We  are  now  remodeling  all  of  our  cars  to  permit 
of  more  economical  handling  of  the  traffic,  by  the  intriHluction  of 
a  si  do- door  exit. 

The  Chairman.  What  is  the  condition  of  the  track? 

Mr.  Joyce.  The  condition  of  the  track  is  good. 

The  Chairman.  Have  you  kept  that  in  good  condition? 

Mr.  Joyce.  Yes.  We  have  recently  had  it  inspected  by  strect- 
rr.il  way  experts  who  pronounce  it  in  good  condition. 

i  he  Chairman.  Have  you  paid  out  more  or  less  mone}'^  for  main- 
tenance of  track  and  for  your  repairs  during  the  past  two  years 
tb*ni  you  had  in  prior  years? 

Mr.  Joyce.  That  I  am  unable  to  say  in  comparative  figures,  but 
W('  have  kept  up  maintenance. 

i  he  Chairman.  Have  any  extensions  been  made  during  the  past 
two  or  three  years? 

Mr.  Joyce.  No  n^jor  extensions.  We  have  renewed  rail,  and 
done  our  fair  proportion  of  that  kind  of  upkeep,  but  no  extensions 
to  s[3eak  of.  There  has  been  some  extension  in  the  neighlx)rhood  of 
war  industries;  but  on  the  whole  it  would  not  l>e  appreciable. 

The  Chairman.  In  what  department  of  your  service  do  you  find 
the  greatest  benefits  growing  out  of  this  cooperative  plan? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1555 

Mr.  Joyce.  Particularly  in  the  transportation  department,  but 
it  runs  through  also  the  mechanical  departments,  the  car  repair 
shops,  the  way  departments,  upkeep  of  road.  We  are  saved  much 
money,  we  believe,  by  the  enthusiastic  work  on  the  part  of  our  shop- 
men, their  splendid  cooperation  with  the  shop  superintendents  in 
effecting  repairs,  and  doing  pinch  Avork  in  times  of  stress. 

The  Chairman.  How  can  your  plan  improve  the  work  of  the 
motorman?  The  motorman  has  a  ceitain  run  to  make  and  he  has 
to  run  on  scheduled  time.  How  could  he  give  you  any  better  service, 
under  your  plan,  than  he  can  ui>on  any  other  plan? 

Mr.  Joyce.  He  can,  by  the  careful  operation  of  his  car,  save 
power.  He  can,  by  spacing  his  stops,  observing  the  people  about 
to  board  his  car,  make  stops  in  a  convenient  way  for  the  public; 
and  he  can  gain  public  favor  in  that  way.  He  also  aids  the  con- 
ductor in  the  handling  of  the  traffic  at  loading  points  to  s*3me  ex- 
tent—of course,  not  to  any  great  extent;  but  he  can  render  some 
little  help  in  that  direction. 

The  Chair3Ian.  Will  you  answer  the  same  question  as  to  the  con- 
ductor? 

Mr.  Joyce.  The  conductor,  by  politeness  to  his  public,  the  ur«:ing 
of  them  to  space  themselves  wkhin  the  car,  by  handling  the  traffic 
in  and  out  of  the  car,  by  watchfulness  in  turning  on  and  off  lights — 
notliing  is  considered  too  small  to  deserve  the  attention  of  the  man- 
agement, and  therefore  the  directing  of  the  attention  of  the  o|ierat- 
ing  men  to  it. 

The  Chairman.  In  what  res^ject  docs  it  affect  the  work  of  your 
trackmen  ? 

Mr.  Joyce.  It  is  difficult  to  answer  that  except  insofar  as  an  em- 
ployee who  is  satisfied  with  his  job  and  satisfied  with  his  working 
conditions  is  a  better  workman  than  one  Avho  is  not.  The  men  on  the 
way  are  out,  scattered  all  along  the  right  of  way  of  the  company, 
doing  their  Avork  without  much  supervision  bcj^ond  that  of  a  fore- 
man who  is  little  above  the  average  workmen,  and  the  opportunities 
for  laying  down  on  the  job  are  perhaps  greater  with  them  than  with 
liny  other  men  in  the  service. 

The  Chairman.  Are  you  satisfied  you  are  getting  good  results 
fnmi  their  work? 

Mr.  Joyce.  We  are. 

The  Chairman.  How  does  it  apply  in  the  shops  ? 

Mr.  Joyce.  In  the  shops  good  relations  exist  between  the  foremen 
and  their  men;  the  same  general  satisfied  condition  of  the  men;  their 
willingness  to  meet  extraordinary  situations  by  extraordinaiy  effort; 
team  work  in  doing  their  work  we  consider  of  vast  importancre. 

The  Chairman.  Do  you  classify  labor  in  tlie  shops? 
Mr.  Joyce.  Yes. 

The  Chairman.  Do  the  employees  themselves  have  anything  to 
do  with  that  classification? 

Mr.  Joyce.  Yes. 

The  Chairman.  To  what  extent?' 

Mr.  Joyce.  I  am  not  able  to  answer  you  directly  on  that;  but  the 
classification  of  skilled  mechanics  in  the  shops  was  submitted  to  tlie 
men  themselves,  and  the  present  classification  is  practically  the  result 
of  their  work. 


1556    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  And  is  the  classification  acceptable  to  the  em- 
ployees generally  ? 

Mr.  Joyce.  Yes. 

The  Chairman.  Have  many  complaints  about  your  service  or  other 
conditions  been  referred  to  the  puolic-service  commission  in  recent 
years? 

Mr.  Joyce.  No.  We  have  been  remarkably  free  from  complaints 
on  service. 

The  Chairman.  Has  the  council  or  any  local  regulative  body  at- 
tempted to  regulate  your  service  during  the  past  few  years? 

Mr.  Joyce.  No;  it  is  generally  undei'stood  in  Philadelphia  that 
the  rapid-transit  company  is  rendering  as  good  service  as  it  can 
render.     We  have  had  no  suggestion  of  change  in  the  service. 

The  Chairman.  When  the  management  was  taken  over  by  Mr. 
Stotesbury  and  Mr.  Mitten,  was  the  property  valued  ? 

Mr.  Joyce.  No. 

The  Chairman.  It  has  never  been  valued  ? 

Mr.  Joyce.  No;  it  was  taken  over  then  on  the  basis  of  the  fixed 
charges  then  in  effect. 

The  Chairman.  Then  there  is  no  w  ay  at  the  pi*esent  time  of  say- 
ing that  the  capitalization  is  above  or  below  the  real  value  of  the 
property  ? 

Mr.  Joyce.  No. 

The  Chairman.  Is  tliei^e  any  suspicion  in  Philadelphia  that  the 
prov)erty  is  watered  ? 

Mr.  Joyce.  Yes. 

The  Chairman.  Have  any  concrete  figures  been  presented  to  show 
that? 

Mr.  Joyce.  No  ;  there  have  been  effoi-ts  to  show  by  the  amounts  of 
the  rentals  paid  by  the  company  that  the  amounts  of  the  rentals  are 
high  in  propoi-tion  to  the  capitalization  of  the  underlying  companies 
to  which  those  rentals  are  being  paid. 

The  Chairman.  To  how  many  companies  are  rentals  being  paid  ? 

Mr.  Joyce.  Twenty-two. 

The  Chairman.  Do  the  employees  make  many  demands  for  changes 
in  service  or  hours  or  conditions? 

Mr.  Joyce.  The  demands  made  by  the  employees  in  that  direction 
are  presented  by  them  to  their  branch  committees  and  to  the  de- 
partment committees,  and  as  indicative  of  the  manner  in  which  those 
demands  are  presented  and  met  I  brought  with  me  the  minutes  of 
the  branch  committees  of  the  transportation  department  and  the  roll- 
ing-stock department  to  give  you  some  idea  of  about  the  kind  of 
complaints  that  are  presented  here.  I  have  only  one  copy  of  this 
and  therefore  am  not  able  now  to  leave  it  with  vou. 

The  Chairman.  But  every  complaint  that  is  brought  up  is  treated 
locally  and  minutes  of  the.proceedings  kept  ? 

Mr.  Joyce.  There  are  no  minutes  of  the  branch  committees.  They 
consist  of  four  men,  two  men  representing  the  employees  and  two 
men  representing  the  management.  A  complaint  is  brought  there  by 
the  men.  It  is  either  granted  or  denied.  If  it  is  denied,  then  it  goes 
to  the  department  committee,  and  it  is  there  recorded.  The  depart- 
ment committee's  proceedings  are  recorded,  but  the  branch  com- 
mittee's proceedings  are  not  recorded. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1557 

The  Chairman.  I  understand  that  you  have  filed  for  the  record 
testimony  given  by  some  of  these  department  heads  at  the  dinner 
recently  held  in  Philadelphia? 

Mr.  Joyce.  Yes. 

The  Chairman.  Do  those  minutes  or  do  the  statements  made  by 
those  men  fairly  reflect  the  sentiment  of  the  employees  of  the  com- 
pany ? 

Mr.  Joyce.  Yes. 

Commissioner  Sweet.  In  speaking  of  the  rentals  that  are  being 
paid  by  the  company,  I  got  the  impression  that  perhaps  more  is 
being  paid  in  the  way  of  rental  than  ought  to  be,  or  at  least  that 
the  public  have  that  idea.    Is  that  correct  ? 

Mr.  Joyce.  Yes. 

Commissioner  Sweet.  Do  you  think  yourself  that  the  rentals  that 
are  being  paid  are  high  ? 

Mr.  Joyce.  Yes. 

Commissioner  Sweet.  If  the  rented  roads  and  parts  of  roads  were 
all  owned  by  the  company  at  a  fair  valuation,  increasing  the  capital 
of  the  main  company  to  the  'amount  that  would  be  necessary  to 
actually  own  them,  do  you  think  that  the  showing  of  the  company 
would  be  better  than  it  is  now  ? 

Mr.  Joyce.  They  would  have  to  pay  less,  perhaps,  in  fixed  charges, 
and  therefore  their  net  showing  would  be  better. 

Commissioner  Sweet.  How  long  do  these  rentals  continue?  Do 
they  expire  at  different  times  ? 

Mr.  Joyce.  There  is  practically  no  limit  to  them;  they  are  99  or 
999  year  leases. 

Commissioner  Sw^eet.  Without  any  immediate  prospect  at  least  of 
getting  rid  of  them? 

Mr.  Joyce.  That  is  true. 

Commissioner  Sweei\  You  spoke  about  the  lines  running  from 
South  Philadelphia  to  North  Philadelphia  and  from  the  Delaware 
River  west,  but  you  did  not  give  the  mileage.  Could  you  state  that 
in  each  case  ? 

Mr.  Joyce.  I  am  not  able  to  state  it  exactly  and  that  is  why  I  did 
not  state  it.  I  can  estimate  it,  that  from  the  farthest  south  in  South 
Philadelphia  that  we  run  to  the  business  district  is  approximately 
4  miles,  and  that  from  the  business  district  north  to  the  point  where 
most  of  the  north  and  south  lines  goes  is  approximately  6  miles. 
That  beyond  that  some  lines  go  to  Willow  Grove,  which  is  another 
2  or  3  miles. 

Commissioner  Sweet.  That  is  where  this  picnic  place  or  resort  is  ? 

Mr.  Joyce.  Yes;  and  there  is  considerable  realty  development 
along  those  lines  in  recent  years. 

Commissioner  Sweet.  Is  there  an  extra  charge  to  Willow  Grove? 

Mr.  Joyce.  Yes ;  it  is  a  10-cent  fare. 

Commissioner  Sweet.  Now,  is  the  fare  5  cents  from  the  center  of 
the  city  each  way,  or  from  one  end  to  the  other  ? 

Mr.  Joyce.  From  one  end  to  the  other. 

Commissioner  Sweet.  So  that  would  be  a  total  then  north  and 

south  of 

Mr.  Joyce.  Five  cents. 


it 


1558  prvOCP:EDiNGS  of  federal  electric  railways  commission. 

Coiiiinissioner  Sweet.  Oh,  I  know;  but  the  distance,  the  total  dis- 
tance from  one  end  to  the  other,  the  longest  ride  for  a  nickel  — 

Mr.  Joyce.  About  10  miles.  I  will  have  exact  data  on  that.  I 
am  not  able  to  testify  positively  that  those  distances  are  correct,  but 
I  will  have  exact  data  presented  to  you  on  that. 

(Commissioner  Sweet.  You  spoke  of  welfare  work  among  the  men. 
What  is  the  exact  style  of  it? 
Mr.  Joyce.  The  c(X)perative  welfare  association. 
Commissioner  Sweet.  The  cooperative  welfare  association? 
Mr.  Joycf:.  It  is  a  death  and  accident  insurance. 
Commissioner  Sweet.  Yes;  I  understand.    In  connection  with  that 
are  there  reading  rooms  or  anything  of  that  nature? 

Mr.  Joyce.  Xo;  there  are  no  places  of  annisement  of  that  kind  con- 
ducted by  the  company,  but  it  does  maintain  at  each  depot  very  com- 
modious and  sanitary  cfuarters  for  the  men  to  assemble  for  their  work 
and  to  wait  for  their  time  to  go  out:  and  they  are  supplied  time-pass- 
ing games  and  other  conveniences  for  the  men.  Paiticularly  is  that 
true  at  the  dei)ots  recently  constructed  and  constructed  s'ince  the 
Mitten  management  came  into  contmJ. 

Connnissioner  Sweet.  That  is  well  liked  by  the  men;  is  it? 
Mr.  Joyce.  Yes;  and  I  think  it  is  highly 'appreciated  bv  the  men. 
The  sanitary  conditions  around  the  car  barns  of  the  Philadelphia 
Ivapid  Transit  Co.  leave  little  to  be  desired  in  that  direction. 

Connnissioner  Sweet.  This  morning  you  s|x>ke  about  placing  con- 
fidence in  the  men;  and  I  judged  fi'om  what  you  said  that  it  was 
t]u)uglit  it  had  had  a  good  effect.  For  instance,  among  the  conduc- 
tors with  regard  to  fares. 

^Ir.  Joyce.  Yes;  we  think  so.  We  think  it  is  a  very  important  psy- 
diologicnl  considei^ation  to  show  the  men  that  you  trust  them  aiid 
tliat  you  do  not  suspect  that,  because  a  nickel  touches  the  hands  of  a 
conductor  it  thereby  is  in  danger  of  being  lost  to  the  company. 

Commissioner  Sweet.  Do  you  use  no  devices  of  any  kmd 

Mr.  Joyce.  No  devices  of  'any  kind.  We  believe  we  have  less  pil- 
fering on  our  lines  than  anywhere  else  in  the  United  States,  and  we 
have  reason  to  l)elieve  that.  Our  men  have  observed  other  lines  and 
are  constantly  observing  our  own ;  and  that  is  the  conclusion  our  op- 
erating officials  have  come  to,  that  the  men  respond  to  that  kind  of 
trust. 

Commissioner  Sweet.  Of  coui-se,  you  have  no  accurate  means  of 
knowinor  whether  money  is  stolen  or  not,  or  how  much  ? 

Mr.  Joyce.  Not  reduced  to  the  dollar-and-cents  accuracy ;  no. 
Mr.  Sweet.  Have  you  ever  tried  the  one-man  car? 
Mr.  Joyce.  I  may  say  no;  generally.  We  are  now  experimenting 
with  it,  trying  it  on  these  outlying  lines  to  which  I  referred  a  mo- 
ment ago  as  being  nonpayers.  We  have  some,  what  we  call  country 
lines  in  Delaware  County,  serving  a  sparsely  settled  territory,  and  we 
are  trying  the  one-man  cars  there. 

Commissioner  Sweet.  What  make  of  car? 
Mr.  Joyce.  The  Birney  car. 

Commissioner  Sweet.  They  are  using  them  at  Trenton,  are  they 
not? 

Mr.  Joyce.  I  think  so ;  yes,  sir. 

Connjiissioner  Sweet.  You  have  not  yet  tried  them  enough  to 
know  whether  it  is  going  to  be  an  economy  or  not  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1559 

Mr.  Joyce. -No;  we  have  one  little  line  on  wdiich  we  installed  two 
Birney  cars  for  one  of  the  old  type,  and  the  revenue,  the  gross,  has 
increased  about  25  per  cent.  Of  course,  the  fi^quency  of  service  may 
account  for  the  increase  in  the  gross  there.  But  I  may  say  we  have 
not  had  any  such  experience  that  would  be  of  any  value  here. 

Connnissioner  Sweet.  Have  you  had  any  jitney  opposition? 

I\Ir.  Joyce.  Practically  none. 

Connnissioner  Sw^eet.  Is  Philadelphia  much  of  an  automobile  city 
as  compared  with  other  cities? 

^Ir.  Joyce.  Yes. 

Commissioner  Sweet.  Can  you  see  that  the  use  of  automobiles  has 
int'.^rfered  with  your  business? 

^Ir.  Joyce.  Well,  we  know^  in  a  general  way  that  it  has,  but  we 
have  not  any  statistics  that  Avill  point  it  out  exactly. 

Commissioner  Sweet.  Your  figures  show  that  the  business  of  tho 
company  has  been  increasing  right  along? 

Mr.  Joyce.  Yes.    It  has  had  a  normal  increase. 

Conmiissioner  Sweet.  It  has  increased  more  rapidly  than  the  pop- 
ulation has  increased,  has  it  not? 

Mr.  Joyce.  Yes.  The  riding  habit  has  increased;  the  number  of 
rides  per  capita  of  population  has  increased. 

Commissioner  Sweei\  That  would  not  look  as  if  the  automobile 
had  cut  into  your  business  very  much,  would  it?  Or  do  3^ou  figure 
tliat  it  reduces  your  business,  and  then  your  better  service,  etc.,  and 
popularity  have  increased  it  more  than  enough  to  offset  the  loss  by 
automobile  riding;  is  that  it? 

Mr.  Joyce.  That  is  right.  Frequency  of  service  on  our  lines,  I 
think,  tends  to  a  large  increase  in  short  riding. 

Commissioner  Saveet.  Apparently  you  have  gone  to  the  use  of 
larger  cars  in  the  center  of  the  city? 

Air.  Joyce.  Yes. 

Connnissioner  Sweet.  And  you  have  found  them  to  be  economical? 

Mr.  Joyce.  Yes;  enabling  us  to  carry  more  people  in  proportion 
to  the  numl>er  of  men  employed  to  carry  the  people. 

Commissioner  Sweet.  But  at  some  increased  expense  in  the  way 
of  power,  I  suppose? 

Mr.  Joyce.  Yes;  and  it  requires  the  most  careful  study  of  the 
traffic  to  make  sure  that  .you  are  not  operating  too  many  cars  and 
that  you  are  operating  enough  cars  at  the  times  that  it  is  necessary 
to  operate  many — the  peak  hours. 

Commissioner  Sweet.  You  sj^)oke  of  the  local  conditions  in  Pitts- 
burgh, on  account  of  the  hills,  being  quite  different  from  Phila- 
delphia? 

Mr.  Joyce.  Yes. 

Conmiissioner  Sweet.  Are  you  sufficiently  familiar  with  condi- 
tions at  Pittsburgh  to  give  any  opinion  as  to  whether  a  street -rail- 
road system  could  be  operated  there  at  a  reiisonable  profit  or  make 
reasonable  returns  on  the  investment  at  a  5-cent  fare? 

Mr.  Joyce.  I  do  not  think  it  can  be  done  under  present  conditions. 

Commissioner  Sweet.  You  think  that,  if  all  of  the  good  things 
that  you  have  told  us  al)Out  in  the  Philadelphia  system  could  be  i>ut 
into  operation  in  Pittsburgh,  the  local  conditions  with  regard  to 
hills,  etc.,  would  prevent  success  on  a  5-cent  rate  of  fare? 


1560    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1561 


Mr.  Joyce.  That  is  right.  Pittsburgh  has  so  many*  difficulties  as 
compared  to  Philadelphia  in  the  matter  of  grades  and  the  difficul- 
ties of  topography,  the  location  of  the  rivers,  the  location  of  the 
population,  the  long,  unremunerative  hauls,  that  there  is  practically 
no  comparison  between  the  two  cities.  And  while  we  are  sailinij: 
along  very  close  to  the  wind  in  Philadelphia  on  5  cents,  Pittsburgii 
would  simplj  not  be  able  to  run  at  all  on  5  cents.  We  have,  as 
compared  with  Pittsburgh,  nuiny  advantages,  and  we  are  just  able 
to  make  ends  meet.  Pittsburgh  would  not  under  those  conditions 
be  able  to  run  at  all. 

Commissioner  Sweet.  You  account  for  a  great  deal  of  your  suc- 
cess on  the  popularity  and  the  general  cooperation  and  good  feeling 
of  the  public,  if  I  understand  you  correctly  ? 

Mr.  Joyce.  Yes. 

Commissioner  Sweet.  As  well  as  your  own  employees? 

Mr.  Joyce.  Yes. 

Commissioner  Sweet.  You  are  losing  nothing  by  way  of  strikes 
and  labor  disturbances.  Your  system  is  such  as  to  bring  about  an 
amicable,  peaceful  adjustment  of  any  difference  of  that  kind? 

Mr.  Joyce.  Yes. 

Commissioner  Sweet.  And  the  general  public  has  been  advised  of 
your  financial  situation  and  everything  that  is  going  on,  and  what- 
ever prejudice  there  may  have  been  in  the  years  past  has  been 
broken  down  in  Philadelphia,  as  I  understand  you,  practically? 

Mr.  Joyce.  Yes. 

Commissioner  Sw^eet.  So  that  the  riding  habit,  as  you  phrase  it, 
has  been  materially  increased  by  reason  of  that  popularity.  Is  that 
vour  view? 

Mr.  Joyce.  Yes;  I  believe  that  a  considerable  proportion  of  the 
success  of  the  company  may  be  attributed  to  that;  and  as  evidence 
of  the  good  feeling  existing,  the  editorial  in  the  North  American, 
which  I  introduced  this  morning,  is  very  much  in  point  there.  The 
papers  were  at  one  time  very  hostile  to  the  street-car  company. 
Mr.  Mitten  has  convinced  them  that  he  deserves  their  good  opinion, 
and  he  has  it;  and  that  editorial  is  not  the  only  one  that  has  ap- 
peared in  the  Philadelphia  daily  papers.  Nearly  every  paper  in 
the  city  has  commented  editorially  upon  the  management  and  com- 
mended it. 

Commissioner  Sweet.  You  would  not  claim  that  all  cities  that  are 
as  level  as  Philadelphia  could  take  the  Philadelphia  plan  and  reach 
a  satisfactory  result  on  a  5-cent  fare,  would  you  f 

Mr.  Joyce.  No. 

Commissioner  Sweet.  There  are  other  elements  which  come  in, 
as  the  outlying-district  runs,  long  or  short,  etc.,  that  have  to  bei 
made — and  the  general  character  of  the  city  ? 

Mr.  Joyce.  Yes. 

Commissioner  Sweet.  They  all  play  a  part  ? 

Mr.  Joyce.  Yes. 

Commissioner  Sweet.  For  instance,  compare  Chicago  with  Phila- 
delphia. Do  you  think  the  Philadelphia  system,  if  incorporated  in 
Chicago,  would  work  as  satisfactorily  as  it  does  in  Philadelphia? 

Mr.  Joyce.  It  is  almost  impossible  to  conceive  of  putting  the 
Philadelphia  system  in  operation  over  night.  It  is  tlie  growth  of 
several  years. 


Commissioner  Sweet.  Of  course,  that  could  not  be  done;  but  it  is 
a  mere 

Mr.  Joyce.  If  the  same  growth  had  obtained  in  Chicago  that  has 
in  Philadelphia,  I  do  not  know  what  the  answer  might  be. 

Commissioner  Sw^eet.  Is  it  your  opinion  that  there  are  many  cities 
of  the  United  States,  like  Boston,  Pittsburgh,  and  others,  in  which 
the  solution  of  this  question  is  to  be  found  in  an  increase  of  the 
rates  of  fare  ? 

Mr.  Joyce.  Increase  in  revenues;  certainly.  As  to  whether  that 
increase  in  revenue  is  to  be  obtained  by  further  increases  in  fares, 
I  can  not  answer. 

Commissioner  Sweet.  That,  of  course,  requires  a  certain  amount 
of  public  education,  does  it  not? 

Mr.  Joyce.  Yes. 

Commissioner  Sweet.  I  think  that  is  all. 

Commissioner  Maiion.  What  hours  do  your  men  in  miscellaneous 
and  shop  departments  work? 

Mr.  Joyce.  I  believe  the  nine-hour  day  Is  the  basic  day.  As  to 
that,  I  am  not  certain. 

Commissioner  Mahon.  You  have  not  put  in  any  wages  in  this 
statement  for  those  departments;  all  you  have  referred  to  is  train- 
men, is  it  not? 

Mr.  Joyce.  That  is  right. 

Commissioner  Maiion.  And  you  presented  there  the  minutes  of  the 
committees.    Does  you  company  keep  those  minutes? 

Mr.  Joyce.  The  secretary  of  the  committee  keeps  the  minutes. 

Commissioner  Mahon.  You  have  access  to  them? 

Mr.  Joyce.  Yes. 

Commissioner  Mahon.  That  is  all  I  want  to  ask. 

The  Chairman.  Are  those  minutes  accessible  to  all  parties? 

Mr.  Joyce.  Yes. 

Commissioner  Wehle.  Is  it  your  opinion,  Mr.  Joyce,  that  the 
general  effoi-ts  which  have  been  made  in  Philadelphia  to  effect 
economies  in  operation  have  been  attempted  in  cities  other  than 
Philadelphia? 

Mr.  Joyce.  I  am  not  able  to  answer  you.  I  would  say  that  cer- 
tainly till  managements  looking  forward  would  make  efforts  at 
economy,  and  I  dare  say  you  would  find  these  efforts  at  economies 
perhaps  not  exactly  duplicated,  but  other  effoi-ts  made  that  would 
look  in  the  same  direction. 

Commissioner  Wehle.  But  it  is  a  fact,  I  suppose,  that  in  Phila- 
delphia the  various  campaigns  which  you  described  this  morning 
have  been  pursued  to  almost  a  unique  degree  in  the  electric  street 
railway  world.    Is  that  true? 

Mr.  Joyce.  I  think  you  may  say  that  Philadelphia  has  had  a 
unique  development  in  that  regard. 

Commissioner  Wehle.  The  Mitten  system  of  going  after  one  fea- 
ture and  then  another  feature,  and  then  still  another  feature,  fol- 
lowing over  a  course  of  several  years  of  the  street-railway  business 
in  order  to  make  it  more  effectual,  has  not  as  yet  been  followed  by 
any  other  property  than  the  Philadelphia  property,  has  it? 

Mr.  Joyce.  None  that  I  know  of. 

Commissioner  Wehle.  Of  course,  such  a  system  as  that,  if  you  can 
call  it  a  system,  has  been  the  work  to  a  very  unique  degree  of 


II 


1562    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS 'COMMISSION. 

managerial  skill  wd  their  capacity  for  handling  men  and  impressing 
the  ])ersonalitv  of  the  manager  on  the  whole  community? 

Mr.  Joyce.  Yes ;  to  a  marked  degree  that  is  true. 

Commissioner  Wehle.  Do  you  think  there  are  cities  in  the  United 
States  other  than  Philadelphia  which,  in  their  general  conditions 
with  i^eference^  to  the  street-railway  pro|>erties,  are  sufficiently  similar 
to  Philadelphia  to  hold  out  a  promise  of  greatly  increased  ixivenues 
through  the  putting  into  operation  of  the  various  remedies  which 
have  been  put  into  operation  by  Mr.  Mitten? 

Mr.  Joyce.  I  don't  know.  I  do  not  know  what  effect  any  one  of 
these  efforts  of  Mr.  Mitten  would  have  in  any  other  city.  We  only 
know  that,  as  a  whole,  they  have  been  successful  in  Philadelphia. 
Whether  any  one  of  them  or  all  of*  them  would  be  successful  in  any 
other  city  nolx>dy  can  tell. 

Commissioner  "Wehle.  Has  the  American  Electric  Railwuv  Asso- 
ciation ever  interested  itself  in  the  Philadelphia  plan? 

Mr.  Joyce.  I  do  not  know  that  the  association  has,  as  an  associa- 
tion :  but  there  have  been  published  from  time  to  time  experiences  of 
the  Philadelphia  Co.  All  of  the  outstanding  featureii  of  Philadel- 
phia's management  have  been  described  at  times  in  the  publications 
of  the  society,  the  Railway  Journal  and  the  Journal  of  the  American 
Electric  Railway  Association. 

C\)mmissioner*  Weiile.  Has  the  Americinn  Electric  Railway  Asso- 
ciation ever  undertaken  officially  to  press  upon  its  individual  mem- 
bership the  importance  of  effecting  these  economies  in  oi^eration 
wliicli  have  been  so  vividly  described  with  reference  to  Phila- 
delphia? 

Mr.  Joyce.  I  do  not  know  that  they  have  specifically  picked  (^ut 
Philadelphia  and  offered  it  as  a  moclel.  I  believe  that  the  whole 
tone  of  the  American  Electric  Railway  Association  is  in  the  direc- 
tion of  better  service  and  better  things  for  the  association.  That  is 
the  only  excust>  they  have  for  living  that  I  can  see. 

Commissioner  Wehle.  Do  you  think,  as  proving  that  their  efforts 
are  in  the  right  direction — and  I  think  we  will  all  agree  that  they 
are — do  you  think  that  they  could  do  more  than  they  have  done  in 
instructing  the  leading  street  railway  companies  of  tliis  counti-y 
in  more  effectual  and  economic  operation  ? 

Mr.  Joyce.  I  do  not  know.  That  is  a  difficult  question  to  answer, 
and  I  would  not  undertake  to  answer  it. 

Commissioner  Wehle.  We  were  speaking  a  little  while  ago  about 
the  increased  real  estate  values  which  were  created  in  suburbs  by 
the  building  of  extensions  or  by  improving  the  existing  facilities 
and  you  were  speaking  of  the*  Market  Street  subway  in  Phila- 
delphia and  the  improvements  which  were  reflected  from  that 
operation  in  the  i-eal-estatc  values  of  AVest  Philadelphia? 

Mr.  Joyce.  Yes. 

Commissioner  Wehle,  How  much  greater  were  the  real-estate 
values  that  were  created  by  the  improvement  than  the  cost  of  the 
improvement  itself? 

Mr.  Joyce.  I  have  only  very  vague  information  u[X)n  the  increase 
in  real-estate  values.  I  have  only  the  public  reports  of  tJie  estimate 
of  the  Real  Estate  Board  of  Philadelphia  t^>  the  effect  that  real- 
estate  values  have  improved  over  $130,000,000  in  West  Philadelphia 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1563 

alone,  and  the  cost  of  construction  of  the  subway  and  elevated  in 
Pliiladelphia  will  run  along  about  $30,000,000. 

Commissioner  Wehle.  Could  you  send  to  the  reporter,  to  be  in- 
corporated into  the  record  here,  a  copy  of  that  report  ? 

Mr.  Joyce.  Of  the  report  of  the  real-estate  board  ? 

Commissioner  Wehle.  Yes. 

Mr.  Joyce.  I  am  not  sure  that  it  took  the  form  of  a  definite  re- 
port. I  do  not  know.  If  it  has,  and  I  am  able  to  procure  it  from 
the  real-estate  board,  I  shall  certainly  be  happy  to  send  it  to  you. 

The  Chahoian.  I  presume  you  just  want  that  part  of  the  report 
that  relates  to  that  particular  question? 

Commissioner  Wehle.  Yes. 

Is  it  your  belief,  Mr.  Joyce,  that  the  capitalized  value  on  which 
the  public  is  obligated  to  pay  interest  could  be  held  down  if  the 
extensions  of  street-railway  systems  were  paid  hereafter  by  means 
of  assessments  on  the  property  that  is  improved  in  value  by  the 
extension,  with  the  obligation  of  the  street-railway  company  to 
make  up  to  the  city  whatever  deficit  there  might  be  remaining, 
clue  to  the  fact  that  the  increased  real-estate  values  do  not  equal 
the  cost  of  the  impi-ovement  ? 

Mr.  Joyce.  Do  you  mean  that  when  you  lay  a  street-car  track  in 
the  street  and  put  wires  over  it  and  equip  it  for  street-railway  oper- 
ation all  of  that  cost  would  be  assessed  against  the  abutting  prop- 
erty in  the  same  Avay  that  paving  is  now  assessed  in  some  States? 

Commissioner  Wehle.  That  is  the  principle  that  I  had  in  mind, 
although  I  should  not  limit  it  quite  as  you  have  in  your  interpreta- 
tion of  my  question.    I  should  not,  for  instance,  tax  only  the  abut- 
ting property. 
•Mr.  Joyce.  You  would  tax  all  the  property  in  that  vicinity? 

Commissioner  Wehle.  It  might  be  that  the  property  w^ould  have 
to  be  taxed  considerably  beyond  the  abutting  proi>ei*ty,  if  the  report 
of  the  assessors  justified  such  taxation,  by  i-eason  of  accretion  in 
value.  Then  if  the  city  should  finance  the  building  of  the  extension, 
after  the  city  itself  has*^ approved  of  the  building  of  the  extension  and 
were  then  to  recoup  itself  from  the  proi>erty  ow^nei^  in  the  vicinity 
of  the  improvement,  by  special  assessments  or,  to  the  extent  that 
it  could  not  recoup  itself,  have  recourse  upon  the  railway  company 
for  the  balance  of  the  cost  which  w^as  not  caj^able  of  being  recovered 
from  the  property  owners — then  you  would  have,  in  general  outline, 
the  plan  which  I  meant  for  you  to  consider. 

Mr.  Joyce.  And  your  question  is  as  to  whether  that  would  tend  to 
further  extend  or  to  restrict  the  further  extension  of  street  railways? 

Commissioner  AVehle.  No.  My  question  was  this:  Whether  that 
would  not  tend  to  reduce,  as  time  goes  on,  the  capital  on  which  the 
riding  public  is  asked  to  pay  dividends  to  the  investors  in  the  prop- 
erty ?^ 

Mr.  Joyce.  My  answer  is  yes. 

Commissioner^ Wehle.  Do  you  know  of  any  instance  where  that 
kind  of  plan  has  been  put  into  operation? 

Mr.  Joyce.  No. 

Commissioner  Wehle.  What  would  you  think  of  such  a  plan? 

Mr.  Joyce.  There  are  difficulties  in  it — difficulties  in  assessing  the 
benefits,  as  you  seem  to  recognize  when  you  say  that  i^erhaps  the  city 


1564    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


er  seen  it  proposed? 


would  not  be  able  to  ^et  out  of  the  benefit  assessments  the  full  cost — 
that  perhaps  would  be  almost  insurmountable;  but  there  is  an  eco- 
nomic soundness  in  the  theory,  I  think. 

Commissioner  Wehle.  You  have  nev( 

Mr.  Joyce.  Xo. 

Commissioner  Wehle.  I  was  wondering  whether  perhaps  it  had 
been  proposed  in  connection  with  this  comparison  of  figures  which 
had  been  made  by  the  real-estate  people  in  Philadelphia. 

Mr.  Joyce.  No.  The  real-estate  people  are  interested  in  improving 
the  condition  of  real  estate.  They  do  not  care,  particularly,  whether 
the  street-car  line  i^ays  or  not.  They  are  in  business  to  sell  lots  and 
houses. 

Commissioner  Wehle.  Do  you  think  that,  if  fares  were  lowered  in 
some  cases  a  greater  revenue  would  result  than  if  they  were  raised — 
using  5  cents  as  the  standard? 

Mr.  Joyce.  I  have  really  no  opinion  upon  that  subject.  In  some 
instances  perhaps  your  answer  would  be  yes,  and  in  some  others  no. 
Commissioner  Wehi^.  I  was  wondering,  in  connection  with  your 
Phihulelphia  situation  as  you  described  it,  whether  a  lowering  of 
the  fare  during  the  hours  oi  thin  traffic,  a  lowering  of  the  fare  below 
5  cents,  say  during  the  hours  from  10  to  V2  in  the  morning,  and  per- 
haps from  2  to  4  in  the  afternoon,  and  again  from  9  to  10  at  night, 
might  produce  a  greater  uniformity  of  travel  and  perhaps  increase 
revenues  ? 

Mr.  Joyce.  I  have  heard  that  discussed. 
Commissioner  Wehle.  You  have? 

Mr.  Joyce.  I  have  heard  that  discussed,  but  I  have  not  heard  any- 
body who  had  any  fixed  opinion  upon  the  subject. 

Commissioner  Wehle.  It  would  tend  to  reduce  your  peak  load, 
would  it  not? 

Mr.  Joyce.  Perhaps  it  would  keep  people  from  going  shopping  at 
the  peak  hours  if  they  could  find  a  cent  or  two  advantage  in  the  fare 
would  make  it  worth  their  while  to  go  shopping  in  the  off-peak  hours. 
There  might  be  some  of  that,  but  it  is  very  doubtful. 

Comniissionor  Mahon.  It  would  be  mighty  limited,  would  it  not? 
Would  not  that  be  your  opinion? 

Mr.  Joyce.  Yes,  I  would  say  so;  because  the  amount  involved  is 
not  very  great,  and  in  America  they  do  not  seem  to  care  much  for 
those  odd  cents. 

Conunissioner  Maiiox.  And  the  persons  that  Could  be  induced  in 
that  way  would  be  very  limited? 
Mr.  Joyce.  That  is  true,  I  think. 

Commissioner  Mahon.  That  is  the  result  of  all  the  investigations 
that  I  have  ever  studied  about  it  and  of  my  own  observation. 

Conunissioner  Wehle.  To  what  extent,  if  at  all,  has  the  freight 
business  or  express  business  been  developed  by  the  traction  system  in 
Pliiladelphia? 

Mr.  Joyce.  I  have  refrained  from  discussing  that,  because  it  is  not 
a  sufficiently  large  factor  in  our  gross;  but  I  may  say  that  we  have 
had  a  constantly  improving  freight  service,  and  we  are  now  very 
closely  studying  the  possibilities  of  it. 

Commissioner  Wehle.  Does  it  not  seem  to  you  that  there  is  in  the 
package  service — intracity  package  service — a  considerable  potential 
source  of  revenue,  if  it  is  properly  developed? 


proceedings  of  federal  electric  RAILWAYS  COMMISSION.    1565 

Mr.  Joyce.  We  think  so;  and  we  think  so  well  of  it  that  we  are 
now  giving  that  subject  very  considerable  study  witli  a  special  corps 
of  freight  experts  and  traffic  experts  to  develop  the  possibilities  of 
that  kind  of  service. 

Conunissioner  Wehle.  If  you  were  to  use  your  subways,  particu- 
larly for  that  purpose,  during  the  hours  of  from  midnight  to  5  o'clock 
in  the  morning,  would  you  not  get  a  considerable  realization  on  your 
interests — that  is,  running  during  the  night? 

Mr.  Joyce.  There  are  physical  difficulties  in  the  way  there,  Mr. 
Commissioner.  The  idea  is  a  good  one,  but  there  are  physical  diffi- 
culties in  the  way  of  handling  freight.  The  handling  of  the  freight 
is  frequently  higher  than  the  cost  of  the  transportation,  and  where 
you  have  a  short  haul  the  handling  of  the  freight  at  the  terminals  is 
the  most  important  part  of  the  cost  of  the  handling  and  transporta- 
tion to  the  company.  So  that  you  can  conceive  of  the  difficulty  of 
carrying  freight  up  onto  the  structure  that  we  use  for  a  termmal, 
and  then  the  taking  of  it  out  of  the  subway  and  delivering  it  on  the 
surface.  There  are  many  difficulties  in  that  direction  that  preclude 
the  possibility  of  that  use  of  the  subway  now.  However,  the  subject 
of  freight  carrying  by  street  railways  is,  as  I  say,  now  being  care- 
fully studied  by  our  people. 

Commissioner  Wehle.  Have  there  been  any  reports  made  on  that 
subject  in  other  cities? 

Mr.  Joyce.  I  do  not  know. 

Commissioner  Wehle.  Is  your  report,  or  are  any  preliminary  re- 
ports which  have  been  made  for  the  Philadelphia  system,  available  at 
this  time? 

Mr.  Joyce.  No. 

Commissioner  Wehle.  Are  you  able  to  state  for  the  record  any 
general  conclusions  which  seem  to  be  suggested  by  the  investigation 
which  has  taken  place  up  to  this  time  in  Philadelphia? 

Mr.  Joyce.  No.  We  have  a  general  freight  agent  and  a  freight 
department,  and  we  are  making  some  money  out  of  freight,  but  I 
am  not  able  to  give  you  anything  that  would  be  of  value  to  you. 

Commissioner  Wehle.  Are  there  any  other  sources  of  saving  or 
of  effectualization  for  the  Philadelphia  system  which  are  in  the 
minds  of  the  management  and  which  it  is  the  intention  of  the  man- 
agement to  develop? 

Mr.  Joyce.  They  are  almost  without  end,  Mr.  Commissioner.  We 
have  a  corps  of  men  who  do  nothing  else  but  study  the  probabilitiRS 
of  economies  and  coordination  to  the  end  of  serving  the  public  bet- 
ter, at  a  lower  cost,  rearrangement  of  schedules,  rearrangement  even 
of  the  offices,  rearrangement  of  the  departments,  the  location  of  the 
offices  at  convenient  points,  and  the  arrangement  of  the  machinery 
in  our  shops,  the  arrangement  of  the  repair  bajs  in  our  barns; 
and  all  of  those  things  and  many  others  that  I  can  not  enumerate 
are  the  subject  of  constant  study,  and  the  day  hardly  passes  that 
something  new  is  not  done  in  the  way  of  improvement. 

We  have  just  recently,  by  a  rearrangement  of  the  offices  on  the 
subway  elevated,  effected  a  saving  of  time  of  20  people,  and  were 
able  to  drop  that  many  people  from  the  pay  roll  without  any  ap- 
preciable change  in  the  service  to  the  public  and  with,  in  many 
cases,  an  improvement  in  that  service. 


1566    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1567 


Conditions  change  from  day  to  day,  and  a  schedule  of  duty  assign- 
ments that  will  obtain  to-day  may  not  fit  the  conditions  at  all  six 
months  from  to-day.  The  time  of  reporting  on  duty  and  off  duty 
for  certain  people  to  relieve  stress  at  certain  times,  such  as  we  have 
in  the  system  of  collection  of  fares  on  the  subway  elevated,  changes 
from  year  to  year. 

Connnissioner  Wehle.  But  those  aixj  really  improvements  in  effi- 
ciency, generally  spcakmg,  arc  they  not,  that  you  now  refer  to? 

Mr.  Joyce,  Yes. 

Commissioner  Wehle.  Efficiency  in  office  management  or  some- 
thing of  that  sort  ? 

Mr.  Joyce.  Efficiency  in  management  in  the  broad  sense. 

Connnissioner  Wehle.  In  a  broad  way^     In  a  general  way? 

Mr.  Joyce.  Yes. 

Commissioner  Wehle.  Applicable  everywhere  in  the  system? 

Mr.  JoYi'E.  Yes, 

Connnissioner  Wehli-:.  I  was  wondering  whether  you  had  any 
definite  category  of  expenditure  or  of  activity  in  mind  where  the 
management  was  expecting  to  effect  economies  on  a  large  scale? 

Mr.  Joyce.  No. 

Commissioner  Wehle.  To  turn  back  to  our  discussion  a  moment 
ago  alx)ut  freight:  On  page  2,  in  that  part  of  the  Three-Cent  Ex- 
change i^amphlet  which  you  have  handed  to  us,  there  is  an  annual 
report  of  the  Philadelphia  Rapid  Transit  Co.  showing  an  income 
account  for  the  years  ended  Deceml>er  31,  1918  and  191T,-and  there 
ai)i>ears  there  for  1918,  in  addition  to  the  item  '*  gross  passenger 
earnings,  $80,000,000  plus,"  the  item  "receipts  from  otlier  sources, 
Jj;  1,000,000  plus.]' 

Mr.  Joyce,  Yes. 

Connnissioner  Wehij:.  What  does  that  "receipts  from  other 
sources ''  refer  to? 

Mr.  Joyce.  It  refers,  among  other  tiling's,  to  freight  receipts. 

Commissioner  Meeker.  Advertising? 

Mr.  Joyce.  Advertising  on  the  cai-s  and  on  the  platforms;  con- 
cessions on  the  platforms;  the  Willow  Grove  receipts  would  be  in 
that.    IVrhaps  that  would  cover  the  list.    There  nmy  be  others. 

Commissioner  Wehle.  But  the  freight  item  does  not  play  a  very 
iniimrtant  i)art  in  that  $1,000,000  plus? 

Mv.  Joyce.  It  does  not.  The  freight  item  does  not  play  a  very 
im{)ortant  part  in  our  gross. 

Commissioner  Weulk.  That  is  all. 

Commissioner  (jadsden.  Mr.  Joyce,  you  have  attended  quite  a 
number  of  our  sessions,  have  you  not  ? 

Mr.  Joyce.  Yes. 

Commissioner  Gadsden.  You  have  heard  the  testimony  as  to  the 
condition  of  railway  properties  generally  throughout  tlic  country? 

Mr.  Joyce,  Yes,  sir;  and  I  ha\e  re4Kl  that  which  I  have  not  heard. 

Commissioner  Gadsden.  You  are  very  familiar  with  it? 

Mi'.  Joyce.  Yes. 

Commissioner  Gadsden.  And  vou  are  familiar  with  it  outside  of 
that  ? 

Mr.  Joyce.  Yes. 

Commissioner  Gadsden.  I  do  not  take  it  that  it  is  tlie  intention 
of  Mr.  Mitten  or  yourself  to  leave  the  impression  on  this  commission 


that  if  all  of  those  properties  had  been  managed  by  Mr.  Mitten  the 
trouble  would  have  disappeared?  You  have  no  idea  of  leaving  any 
i-uch  impi-ession  as  that,  have  you? 

Mr.  Joyce.  No. 

Commissioner  Gadsden.  The  fact  that  you  have  been  able  to  obtain 
certain  results  in  Philadelphia  does  not  lead  you  to  say  that  the  same 
results  would  be  obtainable  in  other  places  necessarily,  does  it? 

Mr.  Joyce.  No. 

Commissioner  Gadsden.  Nor  that  the  increase  of  fares  which  other 
properties  throughout  the  United  States  have  found  necessary  were 
not  necessarv? 

Mr.  Joyce.  No. 

Commissioner  Gadsden.  It  is  not  inconceivable  that  a  whole  indus- 
try should  go  by  the  board  for  failure  of  proper  management  ?  That 
would  be  the  indictment,  would  it  not? 

Mr.  Joyce.  Yes. 

Commissioner  Gadsden.  That  is  a  great  industry,  ranking  second 
or  tliird  of  the  industries  in  the  United  States,  had  been  mismanaged, 
would  it  not? 

Mr.  Joyce.  Yes. 

Commissioner  Gadsden.  Which  is  inconceivable? 

Mr.  Joyce.  That  is  right. 

Commis^oner  Gadsden.  Therefore,  is  it  not  also  true  that  the 
problems  in  many  respects  are  local  largely? 

Ml'.  Joyce.  Yes. 

Commissioner  Gadsden.  And  that  it  is  not  fair  to  take  one  prop- 
erty and  compare  it  with  another  and  say  that  if  you  can  obtain 
certain  results  in  Washington,  we  will  say,  you  ought  to  get  the  samo 
results  in  Richmond? 

Mr.  Joyce.  That  is  right. 

Commissioner  Gadsden.  You  would  not  say  that — or  anybody  else 
who  knows  the  business — would  you  ? 

Mr.  Joyce.  No. 

Commissioner  Gadsden.  The  Mitten  management  are  members  of 
the  American  Electric  Railway  Association,  are  they  not? 

Mr.  Joyce.  Yes. 

Commissioner  Gadsden.  And  take  an  active  part  in  its  delibera- 
tions and  operations,  do  they  not? 

Mr.  Joyce.  Yes, 

Commissioner  Gadsden.  So  that  anvthinir  which  the  Mitten  man- 
agcment  have  been  able  to  accomplish  for  the  betterment  of  the 
industry  has  been  available  for  the  industry,  through  the  associa- 
tion, has  it  not? 

Mr.  Joyce.  Yes. 

Commissioner  Gadsden.  And  there  is  no  conflict  in  policy  of  aims 
between  anythiHg  that  Mr.  Mitten  may  have  attempted  to  do  for 
the  industry  and  what  the  best  thought  of  the  industry  outside  of  it 
may  have  attempted?     Isn't  that  true? 

Mr.  Joyce.  That  is  true,  as  far  as  I  know. 

Commissioner  Gadsden.  For  instance,  I  notice  here  one  of  tlie 
elements  which,  to  my  mind,  helps  to  differentiate  Philadelphia 
from  most  cities  that  I  know  of  is  this  very  fact  of  the  3-cent  ex- 
change. Isn't  that  a  very  unusual  provision  nowadays  in  American 
cities? 


-: 


1568    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Joyce.  Unusual  in  that  there  is  a  charge  for  the  transfer? 
Commissioner  (jadsden.  3  cents. 

Mr.  Joyce.  Unusual  that  there  is  a  charge  at  all,  or  that  the  charge 
is  8  cents? 

Commissioner  Gadsden.  Before  the  war  that  there  was  a  charge 
at  all. 

Mr.  Joyce.  Well,  I  know  that  we  used  to  pay  a  cent  for  a  transfer 
in  Cleveland  at  times. 

Commissioner  Gadsden.  But  as  a  general  rule  there  are  universal 
transfers,  are  there  not — free  transfers? 

Mr.  Joyce.  In  Pittsburgh  there  were  no  transfers  except  at  a  few 
places,  and  in  some  other  cities  with  which  I  was  familiar  the  trans- 
fer privileges  were  restricted. 

Commissioner  Gadsden.  I  mentioned  that  because  I  noticed  that 
you,  for  instance,  on  that  item  alone — your  estimate  is  that  you  get 
$1,000,000  for  1919,  which  is  over  5  per  cent  of  your  entire  gross. 
If  you  had  not  had  that  3  cents,  you  probably  would  not  have  had 
a  surplus  at  all  in  1918,  because  your  surj^lus  was  less  than  a  million 
and  a  half  dollars.    Isn't  that  true? 

Mr.  Joyce.  Yes. 

Commissioner  Gadsden.  Therefore  if  there  had  not  been  in  Phila- 
delphia the  3-cent-exchange  charge,  the  situation  in  Philadelphia  in 
1918  would  not  have  earned  a  surplus.  I  am  only  ment^ning  that 
as  one  item. 

Mr.  Joyce.  That  is  a  possibility. 

Commissioner  Gadsden.  As  we  go  along  I  am  only  mentioning  that. 

Mr.  Joyce.  Yes;  that  is  a  possibility. 

Commissioner  Gadsden.  Therefore  those  are  different  phases  of 
situations  that  present  themselves;  so  that  you  can  not  generalize  in 
that  way,  can  you — it  is  not  safe  to  do  it? 

Mr.  Joyce.  No;  I  think  that  is  quite  right. 

Commissioner  Gadsden.  I  am  only  bringing  that  out. 

Mr.  Joyce.  I  think  you  are  quite  right  there. 

Commissioner  Gadsden.  I  knew  Mr.  Mitten's  attitude  and  I  wanted 
to  put  it  properly  before  this  commission. 

Mr.  Joyce.  That  is  his  attitude,  I  think,  exactly. 

Commissioner  Meeker.  You  spoke  a  moment  ago  of  the  fact  that 
your  company  was  sailing  close  to  the  wind.  I  suppose  the  company 
is  considering  the  possibility  of  increased  revenues  or  decreased 
expenditures.  Is  it  a  fact  that  the  company  is  about  to  ask  for  an 
increase  of  the  5-cent  fare? 

Mr.  Joyce.  Xo. 

Commissioner  Me:eker.  You  are  not  contemplating  that? 

Mr.  Joyce.  No:  we  are  not  contemplating  that. 

Commissioner  Meeker.  Has  the  company  made  any  study  of  zone 
fares  with  a  possibility  of  adopting  them  in  Philadelphia? 

Mr.  Joyce.  I  do  not  know  that  they  have  made  it  with  any  idea 
of  possible  introduction  of  it ;  but  the  zone  fare  has  for  a  long  time 
been  the  subject  of  much  study  and  discussion  in  the  street-railway 
industry,  and  I  believe  that,  in  common  with  all  other  subjects,  the 
company  has  given  that  some  thought.  I  do  not  know,  officially,  that 
they  have;  but  I  would  say  that  no  doubt  that  subject,  being  one 
much  mooted  in  the  industry,  the  management  has  thought  of  it 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1569 

But  as  to  using  it  as  a  possible  means  of  improving  the  income  of 
the  company,  no  movement  in  that  direction,  so  far  as  I  know,  has 
been  made. 

Commissioner  Meeker.  The  company,  then,  is  centering  its  at- 
tention rather  upon  economies  in  operation  than  upon  means  of  in- 
creasing revenues  ? 

Mr.  Joyce.  Economies  in  operation,  movements  in  the  way  of 
putting  service  at  the  disposal  of  the  public  at  times  when  the  pub- 
lic wants  it,  and  therefore  improving  the  riding  habit  and  improv- 
ing the  revenue  in  that  direction,  and  increasing  the  riding  habit. 

For  example,  the  company  has  now  embarked  upon  a  campaign 
of  advertising,  urging  the  public  to  ride  in  the  cars.  The  cars  now 
carry  on  the  dashboard,  on  the  front  of  the  car  outside  where  the 
passerby  can  see  it,  a  large  sign  about  IJ  feet  high,  with  letters 
about  8  inches  high,  carrying  the  legend :  "  Ride  with  us."  And  on 
the  inside  of  the  car  they  carry  dashboard  advertisements  such  as  is 
referred  to  in  Mr.  Mitten's  letter,  carrying  the  legend :  "  Low  fares 
make  walkers  ride.  High  fares  make  riders  walk.  More  fares  make . 
low  fares." 

And  there  are  other  ways  of  advertising  that  the  company  uses 
to  urge  the  people  to  ride  in  the  cars. 

Commissioner  Meeker.  Do  you  have  any  means  of  checking  up 
the  effectiveness  of  these  advertisements? 

Mr.  Joyce.  No. 

Commissioner  Meeker.  You  display  them  because  you  think  they 
bring  results? 

Mr.  Joyce.  Yes ;  we  do  that  in  the  same  hope  that  merchants  ad- 
vei-tise  their  wares.  It  is  a  difficult  matter  for  them  to  trace  improve- 
ment in  their  business  to  adveilising,  or  to  any  particular  advertis- 
ing. Efforts  are  made  in  that  direction,  but  the  results  are  not  al- 
ways tied  up  to  the  particular  advertising,  or  to  advertising  at  all. 

Commissioner  Meeker.  Mention  has  been  made  several  times  of 
Mr.  Mitten's  management.  A  part  of  the  success  of  the  Philadel- 
phia Rapid  Transit  Co.  is  due  to  the  good  relations  existing  between 
the  public  and  the  management  and  between  the  management  and 
the  employees;  isn't  that  true? 

Mr.  Joyce.  Yes;  that  is  true. 

Commissioner  Meeker.  And  that  does  not  always  exist  in  other 
municipalities  ? 

Mr.  Joyce.  That  is  right. 

Commissioner  Meeker.  If  other  municipalities  could  adopt  either 
this  plan  or  some  other  plan  that  would  bring  those  results  they 
would  probably  be  in  a  better  situation  to-day  than  they  are  ? 

Mr.  Joyce.  I  believe  those  things  always  tend  to  improvement. 

Commissioner  Meeker.  In  so  far,  then,  as  Mr.  Mitten  has  suc- 
ceeded in  gaining  the  confidence  of  the  public  in  the  rapid-transit 
company  and  gaining  the  confidence  of  the  employees,  the  success 
of  the  Philadelphia  Rapid  Transit  Co.  is  due  to  his  management? 

Mr.  Joyce.  I  think  that  is  true. 

Commissioner  Meeker.  And  that  successful  management  might  be 
instituted  in  any  municipality  in  the  country  with  beneficial  re- 
sults ? 


160G43°— 20— VOL  2- 


-37 


mi 


1570    PROCEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Joyce.  Yes ;  I  can  only  point  to  the  comparison  between 
oi>ei;ations  in  Philadelphia  under  Mr.  Mitten^s  management  and  op- 
erations in  Philadelphia  under  the  pHor  management. 

Commissioner  Mekkeb.  Are  there  differences  in  the  traffic  condi- 
tions that  have  come  about  since  Mr.  Mitten's  management  that 
might,  ih  pai-t,  explain  that  difference  in  result? 

Mr.  Joyce.  I  do  not  know  what  they  would  be.  In  the  more  re- 
cent past  there  has  been  an  increase  in^lctivity  in  Pliihidelphia,  duo 
to  the  war ;  but  the  tide  had  tiu'ned  long  before  tliat  in  Mr.  Mitten's 
favor,  or  in  favor  of  the  company,  due  to  his  management.  ITio 
tide  had  turned  and  he  was  in  a  position  only  of  being  able  to  take 
advantage  of  the  further  improvement,  and  then  to  be  able  with 
that  to  offset  too  high  costs  that  followed. 

Commissioner  Meeker.  You  six)ke  of  the  street-car  advertising 
being  rigidly  supervised  or  supervised  carefully  by  the  company. 
Just  what  did  you  mean  by  that? 

Mr.  Joyce.  To  study  tlie  possibilities  of  expanding  that  revenue, 
of  improving  the  revenue  from  our  advertising,  laying  open  to 
advertising  additional  space  in  the  cars. 

Commissioner  Sleeker.  I  think  you  said  tliat  you  expected  dur- 
ing this  current  year  to  receive  something  like  $700.000 

Mr.  Joyce.  $3(X),000. 
Commissioner  Meeker.  5?300,0()0? 
Mr.  Joyce.  $80<X000  net  we  expect  from  that  alone. 
Commissioner  Meeker.  Have  you  any  idea  what  is  the  income  of 
the  company  to  Avhom  you  lease  advertising  space? 

]Mr.  Joyce.  They  have  an  income  based  upon  a  division  of  the 

gross.     I  am  n()t  able  to  give  you  now  that  division.     I  have  not 

it  in  mind.     It  is  liased  iipj>n  a  division  of  a  per  cent  of  the  gross. 

Commissioner  Meeker.  The  only  thing  I  wanted  to  bring  out  was 

just  wliat  you  meant  by  ^^supervising"  of  advertising. 

Mr.  Joyce,  You  might  let  out  your  advertising  to  an  agent  and 
then  sit  back  and  depend  upcai  him  to  develop  it  to  its  possibilities, 
or  you  might  let  it  out  and  then  supervise  your  agent  and  supplement 
his  efforts  by  bringing  to  his  notice  things  thiit,  perhaps,  lie  liad 
overlooked,  as  we  have  done  in  Philadelphia. 

( Commissioner  Meeker.  You  think  that  the  income  received  by  the 
street-raihyay  corporation  is  a  fair  income  for  the  space  utilized 
for  advertising  purposes? 
Mr.  Joyce.  Yes. 

Commissioner  Meeker.  You  spoke  of  your  labor  turnover  figures, 
and  they  are  astonishingly  favorable.  I  think  you  referred  to  one 
year  in  which  your  labor  turnover  was  .3  of  1  per  cent 

Mr.  Joyce.  Yes;  that  year,  Mr.  Commissioner,  I  pointed  to  the  " 
fact  that  that  was  the  year  either  in  whicli,  or  immediately  foUow^- 
ing,  the  year  in  which  we  made  important  changes  in  the  rerouting 
of  cars;  resulting  in  a  release  of  men,  and  that  instead  of  releasing 
those  men,  we  allowed  the  ordinary  turnover  to  take  up  tliat  slack; 
and,  of  course,  that  would  reduce  the  turnover  for  that  year. 

Commissioner  Mekker.  But  in  other  years  where  that  condition 
did  not  obtain,  I  think  your  turnover  was  as  low  as  3  per  cent,  was 
it  not,  or  thereabouts? 
Mr.  Joyce.  Yes. 


PBOCEEDIXGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION.    1571 

Commissioner  Meeiier.  And  for  this  present  year,  1919,  it  is  now 
18  per  cent? 

Mr.  Joyce.  Yes. 

Commissioner  Meeker.  Computed  on  the  annual  !>asis? 

Mr.  Joyce.  Yes. 

Commissioner  Meeker.  Do  you  ascribe  that  favorable  record  in 
labor  turnover  to  the  labor  jx>licies  of  the  company? 

Mr.  Joyce.  Yes.  Mr.  Mitten  ascribes  the  improvement  in  the 
labor  turnover  to  the  fact  that  the  men  are  better  satisfied. 

Commissioner  Meeker.  Y^ou  spoke  of  your  men  as  having  in- 
creased in  efficiency;  that  is,  in  their  ability — I  can  not  quote  your 
words — but  in  substance  it  meant  in  their  ability  to  handle  traffic 
units  ? 

Mr.  Joyce.  Yes. 

Commissioner  Meeker.  Will  you  elaborate  that?  How  can  a 
street-railway  conductor  or  motorman  handle  traffic  more  efficiently 
because  he  has  been  long  in  the  service  of  a  particular  company? 

Mr.  Joyce.  The  improvement  in  the  number  of  traffic  units  han- 
dled by  the  trainmen  may  be  attributed  to  not  any  particular  cause. 
The  business  has  increased,  and  the  company  by  skilful  management 
of  its  cars  has  succeeded  in  taking  care  of  the  increase  with  the  same 
number  of  men,  resulting  in  an  increased  proportion  per  man.  Now, 
how  much  of  that  is  due  to  the  efforts  of  the  individual  man  I  don't 
know.  I  could  not  answer  that  question  specifically  for  Mr.  Chair- 
man Elmquist;  but  certainly  we  attribute  a  goodly  proportion  of  it 
to  the  fact  that  our  men  are  putting  forth  efforts  in  handling  the 
business. 

Commissioner  Meeker.  Can  you  submit  to  me  now  your  figures 
of  labor  turnover? 

Mr.  JoYCF^  Yes;  and  I  think  that  I  have  an  extra  copy  that  I  may 
let  you  have  now.  If  I  have  not,  I  shall  mail  one  to  you  as  soon 
as  I  get  back  to  Philadelphia. 

Commissioner  Meeker.  Tliat  is  all. 

Commissioner  Mahon.  In  your  turnover  you  do  not  call  atten- 
tion though  to  the  reduction  of  the  number  of  men  over  L.000  in  the 
service  of  the  company.  Those  men  went  on  to  the  extra  list  and 
wei*e  there  to  supply  the  shortage  of  labor,  were  they  not  ? 

Mr.  Joyce.  Yes.  I  did,  I  believe,  make  some  reference  to  that, 
Mr.  Commissioner. 

Commissioner  Maiiox.  I  did  not  notice  any  reference  to  that,  and 
in  Mr.  Meeker's  questions  there  it  did  not  come  out.  That  must  not 
be  lost  sight  of — that  that  would  be  part  of  the  turnover. 

Commissioner  Meeker.  I  so  understood  Mr.  Joyce  to  answer  the 
question.  I  understood  it  in  exactly  tliat  way.  The  reduction  in  the 
labor  force  was  not  counted  as  a  part  of  the  turnover. 

Commissioner  Mahon.  But  it  would  be  a  part.  * 

Commissioner  Meeker,  It  is  according  to  what  we  mean  by  "  labor 
turnover."    I  w4sh  the  term  had  nevei'  been  invented. 

Commissioner  Mahon.  So  do  I.  But  if  there  are  1,000  men  ]jut 
biick  in  the  extra  list  by  the  decreasing  of  service,  they  fill  the  i^lace 
of  new  men  that  wculd  have  come  in  nr.d  would  take  the  place  of 
your  turnover  if  you  were  figuring  it  on  tlie  basis  these  men  figure 
I  lie  turnover. 


Mi 


M 


1572    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Coniniissioner  Meeker.  Mr.  Chairman,  may  I  be  permitted  to 
make  this  suggestion:  It  seems  to  me  it  would  be  very  much  more 
intelligible  if  we  used  the  term  "labor  flow"  and  interpreted  or 
defined  that  expression  to  take  care  of  both  hirings  and  separations, 
so  that  then  whether  the  company  was  increasing  its  labor  force  or 
decreasing  its  labor  force  we  would  have  an  accurate  measure  of 
jii.^t  Avhat  was  going  on  in  that  corporation  or  company. 

The  Chairman.  Point  4  in  the  statement  submitted  by  Mr.  Mitten 
this  morning  deals  with  the  experience  of  other  cities  in  the  cost-of- 
Sirvice  plan.    Have  you  made  a  study  of  the  service-at-cost  plan  ? 

Mr.  Joyce.  Only  in  so  far  as  it  has  been  developed  here  before  this 
commission. 

The  Chairman.  I  observe  Mr.  Mitten  says  that  the  street-car  sit- 
uation is  one  of  peculiar  difficulties  and  is  essentially  a  local  question. 
Do  you  believe  that  applies  to  the  cost-of-service  plan,  or  is  it  one 
which  can  be  applied  generally  throughout  the  country? 

Mr.  Joyce.  I  think  yes.  I  do  not  believe  that  the  mere  fact  that 
j^ou  are  operating  under  a  cost-of-service  plan  would  change  the 
situation  much.  The  so-called  ^ood  will  that  the  lines  get  from  the 
people  when  they  get  a  realization  that  it  is  their  own  property  in 
that  sense  does  not,  I  think,  change  the  situation  much.  If  you  get 
their  good  will  in  any  other  way,. it  is  their  good  will  that  counts 
in  that  direction. 

The  Chairman.  Have  you  anything  to  add  to  Mr.  Mitten's  state- 
ment on  that  particular  point? 
jVfr.  Joyce.  No ;  I  have  not. 

Mr.  Warren.  May  I  ask  Mr.  Joyce  two  or  three  questions? 
The  Chairman.  Yes. 

^fr.  Warren.  It  is  such  an  interesting  statement  of  the  situation 
in  Philadelphia  that  I  would  like  to  clear  up  two  or  three  matters 
which  I  am  not  sure  about. 

In  a  way,  you  hfive  a  sort  of  service  at  cost  in  Philadelphia;  that 
is.  you  have  certain  of  the  supposed  advantages  of  it — the  mayor 
and  two  citizens  or  two  representatives  of  the  city  government  are 
on  your  directorate  under  your  agreement? 
Mr.  Joyce.  Yes. 

Mr.  Warren.  So  to  that  extent  there  is  an  active  public  participa- 
tion, or  possible  active  public  participation,  in  the  conduct  of  the 
corporation  ? 

Mr.  Joyce.  That  is  right. 

Mr.  Warren.  And  that  undoubtedly  conduces  to  a  more  favorable 
attitude  on  the  part  of  the  public? 
^fr.  Joyce.  Perhaps. 

Mr.  Warren.  It  is  intended  to,  I  suppose,  at  any  rate? 
Mr.  Joyce.  Yes:  I  think  so. 

Conunissioner  Weiile.  You  will  not  say,  Mr.  Warren,  that  that 
was  an  essential  element  in  the  service-at-cost  plan? 

^fr.  Warren.  I  think  so.  I  think  Mr.  Secretary  Baker  brought 
that  out  very  clearly— I  do  not  know  whether  it  was  he  who  made 
this  particular  statement,  but  it  was  either  he  or  Mr.  Sanders— that 
many  of  the  people  in  Cleveland  felt  it  was  their  road  and  it  was 
because  of  the  participation  of  the  city  through  the  public  street- 
railway  administrators;  and  it  struck  me  as  I  looked  over  this  con- 
tract hastily  that  that  was  perhaps  not  an  essential  feature,  but  a  very 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1573 


desirable  feature  sought  to  be  obtained.  In  the  Massachusetts  statute, 
for  instance,  which  has  not  been  availed  of  by  any  company  as  yet, 
there  is  a  provision  for  two  directors — I  think  to  be  named  by  the 
city  or  town  or  the  governor  or  something  of  that  kind  on  the  board 
of  directors. 

Then  about  fares;  as  I  understand  it,  you  have  all  your  revenue 
passengers,  the  initial  revenue  passengers,  pay  a  5-cent  fare. 

Mr.  Joyce.  Yes. 

Mr.  Warr'en.  Do  they  transfer  free  from  surface  lines  to  elevated 
and  subway  lines  and  vice  versa? 

Mr.  Joyce.  At  points ;  yes,  sir. 

Mr.  Warren.  Not  at  all  points? 

Mr.  Joyce.  Not  at  all  points ;  no,  sir. 

Mr.  Warren.  Are  some  of  these  3-cent-exchange  points  points  of 
transfer  between  the  rapid-transit  and  surface  lines  ? 

Mr.  Joyce.  Yes,  sir. 

Mr.  Warren.  What  proportion  of  the  transfer  points  should  you 
say  were  free  or  rather,  what  proportion  of  the  riders  transferring 
from  surface  to  rapid-transit  lines  do  so  without  charge? 

Mr.  Joyce.  I  would  not  be  able  to  give  you  figures  on  that,  but  I 
can  only  give  you  something  out  of  my  own  experience.  I  live  along 
the  elevated  line  at  one  of  the  important  cross-town  arteries  in  West 
Philadelphia,  and  all  passengers  getting  off  at  that  point  get  a  trans- 
fer to  the  surface  lines  on  that  street.  The  same  is  true  at  four  other 
very  important  cross-town  arteries,  and  the  number  of  3-cent-ex- 
change tickets  that  are  used  in  transferring  to  the  subway  is  com- 
paratively small.  I  would  say  that  the  great  number  of  people  who 
transfer  to  and  from  the  elevated  subway  do  so  free,  but  I  can  give 
you  exact  statistics  on  that  if  you  desire  it  for  this  record. 

Mr.  Warren.  I  think  it  might  be  interesting  to  have  it  for  the 
record.  In  Boston,  you  know,  there  is  an  absolutely  free  transfer, 
and  in  New  York,  on  the  other  hand,  I  think  there  is  no  transfer 
whatever  from  surface  lines  to  rapid-transit  lines;  and  apparently 
Philadelphia  falls  in  somewhere  between  those  two  extremes,  and  I 
wondered  just  where  it  fell. 

Approximately  your  3-cent  transfer  passengers  added  to  your  free- 
transfer  passengers  would  represent  a  little  less  than  an  average 
charge  of  1  cent  for  a  transfer  on  all  transferred  passengers,  I  should 
judge  from  what  you  say. 

Mr.  Joyce.  I  have  not  made  that  calculation,  but  I  would  not  be 
surprised  if  that  were  true. 

Mv.  Warren.  So  that,  to  that  extent,  it  would  be  something  like 
the  Cleveland  charge  of  1  cent  for  transfers. 

Mr.  Joyce.  If  that  were  true,  perhaps. 

Mr.  Warren.  If  that  were  true? 

Mr.  Joyce.  Yes.    I  do  not  know. 

Mr.  Warren.  In  looking  over  the  report  for  the  year  1918, 1  notice 
the  total  investment  is  not  given  of  the  leased  lines  and  the  rapid- 
transit  lines  and  the  explanation  is  given  for  why  it  is  not  there— 
because  the  city  comptroller  thought  better  to  omit  it. 

Mr.  JorcE.  Yes. 

Mr.  Warren.  I  wondered  whether  j^ou  had  in  mind  roughly  how 
much  the  total  book  investment  is  of  both  the  leased  lines  and  the 
rapid  transit. 


1574    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Joyce,  I  have  not. 

Mr.  Warrex.  There  is  given  here  the  funded  debt  of  the  leased 
lines,  not  the  stock. 

Mr.  Joyce.  I  do  not  have  that  data  ready  at  hand. 

Mr.  Warren.  Then,  as  I  understood  you — I  just  want  to  make  sure 
•about  this — ^the  figure  given  as  rentals  in  your  fixed  charges  includes 
both  the  interest  on  the  funded  debt  on  the  leased  roads  and  what- 
ever they  have  available  for  dividends  on  the  stocks  of  the  leased 
roads  also. 

^Ir.  Joyce.  Yes ;  excepting  only  where  we  have  directly  guaranteed 
or  taken  over  the  payment  of  the  fixed  charges  or  the  interest  on 
the  underlying  debts.  Wherever  we  have  done  that  it  is  set  forth  as 
interest. 

Mr.  Warren.  But  that  you  have  not  done  to  any  great  extent,  I 
think  you  said. 

Mr.  Joyce.  Thei-e  is  a  list  there  in  that  report  of  tlie  fixed  charges 
tliat  we  have  undertaken,  I  think  on  page  3  or  4  of  the  8-year  reports. 

Mr.  Warren.  There  is  a  list  of  tlie  funded  debt  on  page  6. 

Mr.  Joyce.  Yes;  that  is  it. 

Mr.  Warren.  Have  you  assumed  the  obligation  of  all  of  that? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  And  that  api>ears  in  the  interest  charge? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  For  the  year? 

Mr.  Joyce.  That  is  right. 

Mr.  Warren.  Then  the  i-entals  are  additional  to  that? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  And  tliat.  of  course,  is  additional  to  the  interest  on 
your  own  issues  of  securities? 

Mr.  Joyce.  On  our  own  funded  debt  of  $16,000,000. 

Mr.  Warren.  On  the  wages — if  I  understand  you,  you  have  in- 
creased the  wages  fi'om  48  cents,  the  maximum  for  the  surface  train- 
men, to  58  cents? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  A  little  over  20  per  cent? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  When  was  that  effective,  Mr.  Joyce? 

Mr.  Joyce.  I  do  not  know  the  exact  date,  but  it  is  within  the  last 
three  months. 

Mr.  Warren.  It  is  since  tlie  1st  of  July  ? 

Mr.  Joyce.  I  think  so ;  yes,  sir. 

Mr.  Warren.  That  is  based  on  the  new  rate  in  Chicago  and  De- 
troit ? 

Mr.  Joyce.  Yes ;  it  is  based  on 

Mr.  Warren.  Those,  I  think,  were  all  since  that  date. 

Mr.  Joyce.  Yes ;  there  were  two  or  three  increases  there,  and  each 
time  that  the  other  cities  increased  we  increased  to  keep  our  average. 

Mr.  Warren.  To  keep  |>ace 

Mr.  Joyce.  To  keep  our  agreement  with  the  men.  As  soon  as  tlie 
announcement  was  made  of  an  increase  in  Chicago,  the  next  day  or 
that  day  that  the  announcement  was  made  we  announced  that  our 
men  would  be  increased  accordingly. 


PROCEEDII^GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1575 

Mr.  Warren.  These  figures  which  appear  in  the  printed  report 
showing  the  earnings  and  expenses  for  six  months  are  probably  based 
on  the  old  wage  rate  of  48  cents. 

Mr.  Joyce.  For  eight  months,  do  you  mean? 

Mr.  Warren.  For  six  months.    Tliat  would  be  to  July  1,  I  think. 

Mr.  Joyce.  To  some  extent ;  to  the  extent  that  those  wages  apj)lied  ; 
yes,  certainly. 

Mr.  Warren.  I  do  not  suppose  you  have  made  any  estimate  of 
what  the  effect  of  that  increased  wage^'ate  in  the  last  half  of  this  year 
is  going  to  be  on  your  income;  have  you? 

Mr.  Joyce.  Only  in  a  general  way — in  the  way  that  men  opera  tin  jr 
a  property  have  some  hunch  or  sixth  sense  of  determining  whether 
they  are  going  to  get  through. 

Sir.  Warren.  When  you  told  Mr.  Meeker  that  Mr.  Mitten  hoped  to 
get  by  with  the  5-cent  fare,  did  you  mean  including  tlie  payment  of  a 
f)  per  cent  dividend  this  year? 

Mr.  Joyce.  Yes,  sir. 

Mr.  Warren,  Notwithstanding  that  increase  in  wages? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  I  notice  in  Mr.  Mitten's  statement  which  you  read, 
near  the  end  of  it,  this :  "  It  seems  only  just  that  the  proper  return 
on  that  sum  representing  the  amount  which  would  cost  the  city  itself 
"to  reproduce  the  property  used  as  usable  in  transporting  the  people.*' 
Has  any  deterjnination  ever  been  made  of  what  that  value  is  in  tho 
case  of  your  company  ? 

Mr.  Joyce.  No. 

Mr.  Warren.  It  is  not  one  of  the  companies  that  has  had  a  valu- 
ation ? 

Mr.  Joyce.  No  ;  it  has  never  had. 

Mr.  Warren.  So  that  you  could  not  tell  how  that  would  be  ? 

Mr.  Joyce.  No;  we  can  not. 

Mr.  Warren.  Except  what  you  did  say  in  your  direct  statement? 

Mr.  Joyce.  Tliat  is  true. 

Mr.  Warren.  Have  you  any  idea  w^hat  Mr.  Mitten's  idea  is  of  a 
proper  return  there ;  what  he  means  ? 

Mr.  Joyce.  I  have  not  heard  him  say  positively,  but  I  have  never 
heard  him  say  that  the  policy  of  the  Pennsylvania  Commission, 
which  seems  to  be  7  per  cent  on  the  utilities  that  have  so  far  come 
before  it— and  I  may  say  that  there  have  not  been  any  adjudica- 
tions of  street-car  cases,  down  to  the  fineness  of  determining  the  rate 
of  return—but  in  the  other  utility  cases  which  have  come  before 
the  commission  it  has  Seemed  to  establish  a  policy  of  allowing  7 
per  cent,  and  I  have  never  heard  Mr.  Mitten  complain  that  that 
was  low.  I  can  not  quote  him  as  to  whether  he  considers  that  suffi- 
cient for  street  railways. 

Commissioner  Wehle.  Does  that  mean  7  per  cent  net? 

Mr.  Joyce.  Seven  per  cent  fair  return  on  the  value  of  the  prop- 
erty. That  would  mean  7  per  cent  out  of  which  to  pay  fixed  charges 
and  dividends. 

Commissioner  Weiile.  The  valuation  as  of  what  time? 

Mr.  Joyce.  Under  the  public-service-commission  law^  in  Pennsyl- 
vania the  commission  is  allowed  great  latitude  as  to  the  basis  of 


li 


il1^ 


1576    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

valuation.  In  fact,  the  question  is  left  so  open  that  the  commission 
is  practically  free  in  that  regard,  and  nobody  as  yet — well,  I  may 
say  that  there  is  no  case  so  far  decided  by  that  commission  that 
commits  it  to  any  particuar  policy  on  that.  Some  say  that  they 
get,  from  the  commission's  opmions,  that  it  leans  toward  the  ori-T:!- 
nal-cost  method,  and  some  others  say  that  it  leans  toward  the  re- 
production-cost method,  present  prices;  but  it  is  difficult  to  ob- 
tain that  from  the  reports. 

Commissioner  Wehle.  Then,  when  Mr.  Mitten  said  that  7  per 
cent  on  valuation  was  all  right  or  seemed  to  him  proper,  he  may 
have  been  speaking  of  7  per  cent  on  original  cost? 

Mr.  Joyce.  I  do  not  know  that  he  has  ever  said  that  7  per  cent 
is  proper.    I  do  not  say  that  he  does  not  consider  it,  though. 

Commissioner  Wehle.  I  beg  pardon.  I  understood  you  in  your 
ansAver  to  Mr.  Warren  to  say  that  Mr.  Mitten  had  thought  that  7 
per  cent  was  a  proper  figure  for  the  net  revenue  on  valuation. 

Mr.  Joyce.  My  answer  was  that  I  had  never  heard  Mr.  Mitten 
complain  that  7  per  cent,  wliich  seems  to  me  the  allowance  of  the 
commission  in  other  utility  cases,  was  low.  Now,  there  has  not 
been  a  street-railway  case  before  the  commission  where  they  had  to 
adjudicate  down  to  the  fineness  of  determining  what  would  be  a 
fair  return,  so  that  that  is  still  open  in  Pennsylvania. 

Mr.  Warren.  Have  you  any  idea  what  Mr.  Mitten's  view  of  de- 
preciation is,  how  it  should  be  taken  care  of  and  what  allowance 
should  be  made  for  it? 

Mr.  Joyce.  I  know  that  his  view  is  that  a  very  ample  provision 
should  be  made  for  renewals  and  replacements  out  of  gross  revenue, 
and  when  he  examined  the  property  in  1910  he  estimated  that  it 
would  require  15  per  cent  of  the  gross  to  take  care  of  renewals  and 
replacements  and  maintenance ;  and  a  fund  equivalent  to  that  amount 
was  created  by  yearly  contributions.  Now,  against  that  fund  there 
were  charged  those  items  that  the  management  considered  to  be 
proper  charges  against  that  sort  of  fund,  with  the  result  that  there 
was  developed  there  sufficient  to  take  care  of  many  of  the  large  re- 
newals in  equipment  after  the  first  big  purchase  of  equipment  un- 
der the  $10,000,000  bond  issue  in  1911. 

Mr.  AVarren.  And  that  fund  is  the  one  that  shows  in  the  balance 
sheet  under  renewals? 

Mr.  Joyce.  Yes;  that  is  the  fund. 

Mr.  Warren.  Renewals,  $1,126,801. 

Mr.  Joyce.  Yes;  that  is  the  fund. 

Mr.  Warren.  Has  that  allowance  been  increased  at  all  with  the 
increased  cost  of  materials  and  labor  of  the  last  few  years  ? 

Mr.  Joyce.  No,  sir. 

Mr.  Warren.  It  remains  the  same — 15  per  cent? 

Mr.  Joyce,  I  believe  there  has  been  a  change  in  it  due  to  that 
increased  cost,  a  change  in  that  the  costs  are  now^  charged  directly 
against  the  revenue.    Of  that  I  am  not  certain. 

Mr.  Warren.  Costs  of  maintenance,  etc.? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  But  you  think  those  total  charges  are  still  kept 
within  the  15  per  cent? 

Mr.  Joyce.  I  am  not  able  to  answer  that. 


'I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1577 

Mr.  Warren.  They  apparently  were  last  year,  if  I  read  the  re- 
port correctly.  When  this  increase  was  made  in  wages  of  train- 
men was  an  increase  also  made  to  the  other  men,  miscellaneous 

Mr.  Joyce.  Yes,  sir;  throughout  the  company. 

Mr.  Warren.  All  the  employees? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  Apparently  your  earnings  are  not  running  high 
enough  to  make  any  such  a  return  as  7  per  cent.  As  I  understand, 
you  have  been  paying,  since  1915,  5  per  cent  on  the  rapid-transit 
stock  ? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  And  the  rate  of  interest  on  a  great  deal  of  your 
debt,  or  your  underlying  debt,  is  as  low  as  4  per  cent  ? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  Have  you  any  idea  how  Mr.  Mitten  would  proceed 
to  increase  his  revenue  to  the  point  of  getting  a  return  approximat- 
ing 7  per  cent? 

Mr.  Joyce.  I  did  not  get  the  question. 

Mr.  Warren.  I  mean,  what  plan  would  he  adopt  to  increase  his 
revenue  beyond  the  plan  which  he  has  already  adopted  of  intro- 
ducing these  very  remarkable  economies  which  he  has  succeeded  in 
bringing  about? 

Mr.  Joyce.  I  do  not  know. 

Mr.  Warren.  You  do  not  know  his  view  on  that  at  all  ? 

Mr.  Joyce.  No;  I  do  not. 

Mr.  Warren.  You  also  spoke  of  having  put  on  larger  cars? 

Mr.  Joyce.  Yes,  sir;  in  1912,  1913,  and  1914. 

Mr.  Warren.  And  those  were  substantially  larger  than  the  aver- 
age cars  previously  used? 

Mr.  Joyce.  Yes;  much  larger. 

Mr.  Warren.  And  much  heavier? 

Mr.  Joyce.  Much  heavier;   much  better  equipment  throughout. 

Mr.  Warren.  Have  they  been  used  long  enough  for  you  to  form 
a  pretty  definite  judgment  as  to  whether  they  increased  the  track 
maintenance,  owing  to  their  greater  weight? 

Mr.  Joyce.  I  have  not  heard  anything  to  that  effect.  I  do  not 
know. 

Mr.  Warren.  In  this  Exhibit  C 

Mr.  Joyce.  Mr.  Fairchild  called  my  attention  to  the  fact  that  the 
new  car  introduced  in  1914  was  not  heavier  than  the  car  that  it 
superseded,  but  that  the  seating  capacity  was  increased. 

Mr.  Warren.  Simply  a  larger  seating  capacity,  without  any 
greater  weight? 

Mr.  Fairchild.  A  much  lighter  car. 

Mr.  Warren.  Were  they  both  double  truck? 

Mr.  Fairchild.  They  were  both  double-truck  cars,  but  by  adopt- 
ing— if  I  may  be  permitted,  Mr.  Chairman 

Mr.  Warren.  Yes;  go  on  and  explain. 

Mr.  Fairchild.  By  doing  away  with  the  rear  platform  as  an  exit 
or  entrance  and  continuing  the  seats  in  a  curve  around  the  rear  plat- 
form, the  new  type  of  car  having  its  exit  and  entrance  by  way  of 
the  front  platform,  the  seating  capacity  of  the  car  was  very  mate- 
rially increased,  but  the  length  of  the  car  over  all  was  practically  the 


1578    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


illl 


same- 


-about  60  feet  over  all — and  the  weight  of  the  car  was  reduced 
about  900  pounds  per  seat  as  against  the  weight  of  1,200  pounds  per 
seat  for  the  type  of  ear  that  we  found  in  Philadelphia  when  we 
came  there. 

Mr.  Warren.  In  Table  C-2,  which  is  on  pages  8  and  9  of  the  Threo^ 
Cent  Exchange  case,  giving  the  increase  in  costs  of  various  units  o2 
materials,  have  you  had  occasion  to  make  up  any  weighted  average 
of  the  increase  of  cost  of  materials,  taking  those  which  are  used,  the 
quantities  ordimirily  used  by  the  street  railway? 

Mr.  Joyce.  No  ;  that  has  not  been  done. 

Mr.  AVarren.  You  have  not  done  that  either,  Mr.  Fairchild  ? 

Mr.  Faikchild.  We  have  some  studies,  but  we  have  not  any  figures. 

Mr.  Warren.  It  makes  a  very  interesting  figure,  and  I  wonderctl 
whether  you  had  it. 

Mr.  Fairchild.  The  Government  reports,  though,  do  show  that  on 
many  items. 

Mr.  Warren.  But  not  as  applied  to  our  use  though. 

Mr.  Fairchild.  Xo.    That  would  be  a  very  interesting  study. 

^Ir.  Joyce.  I  wish  at  this  point  to  correct  an  answ^er  I  made  to 
Commissioner  Mahon  with  regard  to  the  hours  of  labor  in  the  shops. 
The  shops  have  recently  been  placed  upon  an  eight-hour  basis. 

Commissioner  Maiion.  How  long  ago? 

Mr.  Joyce.  Within  the  last  three  months,  I  believe.  Also  at  the 
time  of  the  rerouting  there  was  a  guaranty  to  the  men  who  were  i)ut 
back  on  the  extra  list  at  that  time  of  a  minimum  wage  of  $12  i)er 
week,  which  at  that  time  was  considered  a  fair  wage. 

Commissioner  Meeker.  These  men  who  were  put  back  were  guar- 
aritccd  a  wage  of  $12  a  week? 

Mr.  Joyce.  Yes. 

(Commissioner  Maiion.  What  are  your  hours  for  trainmen  now? 
AViiat  hours  do  tliey  work? 

Mr.  Joyce.  I  do  not  know. 

Mr.  AVarren.  Do  you  know  what  their  outside  time  is? 

Mr.  Joyce.  I  think  the  maximum  outside  is  14  hours.  I  am  not 
able  to  give  you  data  on  that,  but  I  shall  be  glad  to  supply  it. 

Mr.  Warren.  If  you  take  your  revenue  passengers  only,  counting 
them  once,  not  counting  them  twice  when  they  use  a  transfer  or  an 
exchange,  then  your  average  fare  would  be  over  5  cents,  would  it 
not  ? 

Mr.  JoYCK.  Something  over,  I  would  say ;  yes. 

Mr.  Warren.  I  am  much  obliged,  Mr.  Joyce. 

The  Chairman.  Did  you  work  for  the  Pennsylvania  Public  Serv- 
ice* Commission? 

^Ir.  Joyce.  Yes;  I  was  chief  accomiting  ofiicer  of  the  commission 
for  five  years. 

The  Chairman.  How  long  have  you  been  with  this  present  com- 
pany? 

Mr.  Joyce.  Since  April  1,  this  year. 

The  Chairman.  And  what  is  your  position? 

Mr.  Joyce.  Si>ecial  assistant  to  Mr.  Mitten,  the  president. 

The  Chairman.  Are  there  any  furthei-  questions  of  tliis  witness? 

Commissioner  Wehle.  Does  tlie  outstanding  capital  stock  of  tho 
Phihidelphia  Iiax>id  Transit  Co.  rex^resent  rash? 


PBOCEEDIJ^GS  OF  FEDBBAL  ELECTRIC  RAILWAYS  COMMISSION.    1579 

Mr.  JorcE.  Yes ;  that  $30,000,000  is  cash. 

Commissioner  Wehi^.  Is  that  the  entire  common  stock  ? 

Mr.  Joyce.  That  is  the  entire  stock  of  that  company. 

Commissioner  Wehle.  Is  there  any  outstanding  stock  on  which 
this  5  per  cent  dividend  is  being  paid  that  does  not  represent  actual 
cash  put  into  the  company  ? 

Mr.  Joyce.  No. 

Commissioner  Wehle.  Have  there  been  any  reorganizations  from 
time  to  time  of  the  Philadelphia  street-railway  interests  ? 

Mr.  Joyce.  Yes.  This  afternoon  before  you  arrived,  Mr.  Com- 
missioner, I  gave  a  brief  history  of  the  street-railway  transportation 
in  Philadelphia,  detailing  the  various  combinations  that  has  been 
made. 

Commissioner  Wehle.  I  am  sorry  I  missed  that.  Then,  the  5  {yer 
cent  dividend  is  being  paid  out  on  actually  invested  capital  ? 

Mr.  Joyce.  Yes,  sir ;  that  $:30,000,000  is  conceded  by  all,  even  the 
most  virulent  critics  of  the  rapid-transit  company,  as  being  paid. 

Commissioner  Wehle.  Does  that  $30,000,000  represent  a  scaling 
down  or  reduction  as  the  result  of  all  these  combinations  ? 

Mr.  Joyce.  No  ;  that  is  $30,000,000  of  new  money  put  into  the  ccm- 
l>any,  put  into  the  mpid-transit  situation  in  Philadelphia,  and  that 
$30,000,000  went  without  dividends  until  1915. 

Mr.  Warren.  Did  that  go  into  the  construction  of  subways  and 
elevated? 

Mr.  JorcE.  Some  of  it  went  into  the  subway  construction. 

Commissioner  Wehle.  Mr.  Joyce,  I  was  asking  you  a  little  while 
ago  whether  the  $30,000,000  of  common  stock  in  the  Philadelphia 
JKapid  Transit  Co.  represents  cash  paid  in  and  actually  expended  by 
the  company  in  its  properties.  Your  answer,  I  believe,  was  that  the 
$30,000,000  does  represent  that  cash  ? 

Mr.  Joyce.  Yes. 

Commissioner  Wehle.  And  can  be  treated  for  accounting  pur- 
poses as  fully  paid? 

Mr.  Joyce.  Yes,  sir. 

Commissioner  Wehle.  Are  there  or  not  underlying  companies  to 
which  the  Philadelphia  Rapid  Transit  Co.  is  paying  rentals? 

Mr.  Joyce.  Yes,  sir. 

Commissioner  Wehle.  How  many  of  such  companies  are  there  ? 

Mr.  Joyce.  I  think  I  answered  that  this  morning,  Mr.  Commis- 
sioner.   I  will  count  them  again. 

Commissioner  Sweet.  Twenty-two. 

Mr.  Joyce.  Twenty-two.  I  think  I  answered  that — 22 — this  morn- 
ing.   I  counted  that  list  I  have  here. 

Commissioner  Wehle.  Is  there  or  not  any  watered  stock  in  those 
companies  outstanding? 

Mr.  Joyce.  As  to  whether  or  not  the  stock  is  watered  I  am  not  able 
to  say.  I  have  many  times  heard  that  charge  made  in  Philadelphia 
and  in  Harrisburg.  As  to  the  truth  of  it  I  can  not  say  positively. 
No  valuation  has  ever  been  made  of  the  properties  that  those  com- 
panies brought  into  the  system,  and  therefore  no  just  appreciation 
of  that  fact  can  be  obtained  without  a  valuation. 

Commissioner  Wehle.  The  Philadelphia  Rapid  Transit  Co.  is 
leasing  some  22  different  companies? 


1580    PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Joyce.  Yes,  sir.  Xot  directly  to  the  Philadelphia  Rapid  Tran- 
sit Co.,  but  throngli  some  of  the  underlying  companies;  the  struc- 
ture is  a  growth  of  one  combination  after  another  until,  when  the 
rapid-transit  company  was  organized,  there  was  one  operating  com- 
pany called  the  T^nion  Traction  Co. 

Commissioner  Wehle.  Do  these  rentals  that  are  paid  bv  the 
Philadelphia  Rapid  Transit  Co.  to  the  owning  companies  yield  a 
dividend  on  all  of  the  outstanding  stock  in  those  companies? 

Mr.  Joyce.  Yes,  sir. 

Commissioner  Weht.e.  Do  they  yield  a  dividend  as  high  as  6  per 
cent  on  all  of  that  stock  ? 

Mr.  Joyce.  Yes,  sir. 

Commissioner  Wehle.  Do  they  yield  a  dividend  higher  than  6  per 
cent? 

Mr.  Joyce.  Yes,  sir;  in  many  instances. 
Commissioner  Wehle.  How  much  higher? 

Mr.  Joyce.  Some  of  them  go  as  high  as  28  per  cent— the  smaller 
ones. 

Commissioner  Wehle.  How  much  water  there  may  be  in  the  stock 
of  these  companies,  you  do  not  know  ? 

Mr.  Joyce.  I  do  not.  You  will  understand  that  when  a  company 
leases  its  property  its  outstanding  stock  may  not  be  an  adequate 
measure  of  the  value  of  its  property. 

Commissioner  Wehle.  Yes. 

Mr.  Joyce.  The  outstanding  stock  may  be  $500,000,  where  the 
value  of  the  property  mav  be  ten  times  that;  and  if  it  were  capital- 
ized at  the  real  value  of  the  property  the  return  would  be  smaller. 

Commissioner  Wehle.  But,  at  any  rate,  the  net  result  in  net 
revenue  of  the  5-cent  fare  in  Philadelphia  to-day  is  sufficient  to  pay 
5  per  cent  on  the  $30,000,000  common  stock  of  the  Philadelphia 
Rapid  Transit  Co.  and  at  the  same  time  pay  a  dividend  of  from  0 
per  cent  all  the  way  up  to  as  high  as  28  per  cent  on  the  common  stock 
of  all  of  the  22  imderlying  companies  which  are  getting  the  benefit 
of  the  operation  of  the  Philadelphia  Rapid  Transit  Co.  through  re- 
ceiving rentals,  and  of  the  common  stock  so  belonging  to  the  under- 
lying companies  there  are  varying  reports  as  to  the  amount  which  is 
watered  stock;  that  is,  which  does  not  represent  actual  money  put 
into  the  properties? 

Mr.  Joyce.  That  is  right,  sir. 

Commissioner  Wehle.  And  you  have  no  idea  how  much  of  that 
stock  is  watered  stock? 

Mr.  Joyce.  I  have  not;  and  I  do  not  believe  that  it  has  ever  been 
properly  presented  in  any  proceeding,  although  it  has  frequently 
been  referred  to. 

Commissioner  Wehle.  I  think  that  is  all. 

Commissioner  Gadsden.  I  would  like  to  ask  one  question  that  has 
been  suggested  to  me  there:  Mr  Joyce,  if  a  valuation  were  made  of 
those  properties  as  of  to-day,  don't  you  think  it  might  be  likely  that 
the  value  of  the  property  would  equal,  if  not  exceed,  the  capitaliza- 
tion? 

Mr.  Joyce.  Yes,  sir ;  exceed. 

Commissioner  Wehle.  What  kind  of  valuation  are  you  now  dis- 
cussing—a valuation  based  upon  the  present  cost  of  reproduction  or 
a  valuation  based  on  the  original  cost  of  production  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1581 

Commissioner  Gadsden.  He  means  the  value  of  the  properties 
to-day ;  do  you  not,  Mr.  Joyce  ? 

Mr.  Joyce.  I  mean  the  value  of  the  property  to-day.  I  don't  know 
what  you  mean  by  the  value  of  the  property  under  original  condi- 
tions. You  would  have  to  broaden  that  a  bit  to  get  my  mind  clear 
on  it. 

Commissioner  Wehle.  Well,  I  was  only  asking  j^ou  to  amplify 
your  answer  to  Mr.  Gadsden  a  little  more  by  defining  what  kind  of 
valuation  you  had  in  mind — w^hether  it  was  valuation  based  upon 
the  original  cost,  whether  it  was  a  cost  valuation,  or  whether  it  was  a 
valuation  based  on  present  cost? 

Mr.  Joyce.  That  would  depend,  Mr.  Commissioner,  if  you  please, 
somewhat  upon  what  definition  you  w^ould  place  upon  "original 
cost";  and  there  are  as  many  definitions  of  tliat  term  as  there  are 
men  who  talk  about  it. 

Commissioner  Wehle.  I  am  simply  wondering  whether  you  could 
make  your  answer  to  Mr.  Gadsden  a  little  more  definite. 

Mr.  Joyce.  Yes.  My  answer  to  Mr.  Gadsden  is  that  taking  things 
as  you  find  them  to-day,  the  property  will  inventory  and  appraise 
higher,  far  higher  than  its  outstanding  issues. 

Mr.  Warren.  Put  it  in  another  w^ay,  if  there  were  no  property 
there,  and  the  people  of  Philadelphia  wanted  just  such  a  transporta- 
tion system  as  they  now  actually  have,  it  would  cost  them  the  entire 
capitalization  to  get  it? 

Mr.  Joyce.  And  more,  yes.  It  would  inventory  higher  than  the 
present  capitalization.    I  have  no  doubt  on  that  point. 

Commissioner  Gadsden.  Is  there  any  class  of  property  that  can  be 
bought  in  the  market  to-day  at  what  it  cost  originally  ? 

Mr.  Joyce.  No. 

Commissioner  Gadsden.  Is  not  everything  sold  on  current  market 
prices  ? 

Mr.  Joyce.  That  is  true. 

Commissioner  Gadsden.  Is  not  that  the  economic  law  that  governs 
all  propeity,  as  far  as  you  know  ? 

Mr.  Joyce.  Yes. 

Commissioner  Mahon.  Is  it  not  true  that  many  of  these  old  or- 
ganizations can  be  traced  back  into  horse-car  days? 

Mr.  Joyce.  Yes. 

Commissioner  Mahon.  Has  not  that  28  per  cent  many  times  paid 
for  the  actual  valuation  of  this  property  ? 

Mr.  Joyce.  The  instance  in  which  that  rate  amounts  to  28  per 
cent,  Mr.  Commissioner,  may  be  an  isolated  case  and  in  the  total 
capitalization  or  the  total  value  of  this  property  would  be  a  very 
small  proportion  of  the  whole;  so  that  you  give  that  28  per  cent 
there  an  importance  that  is  not  due  it ;  when  I  say  "  you,"  I  do  not 
mean  you  individually,  but  you  impersonally,  as  anybody  who  comes 
to  the  question. 

Commissioner  Mahon.  Take  your  Kidge  Avenue  property:  My 
recollection  of  that  and  its  valuation  was  that  15  per  cent  was  being 
paid  upon  that  for  many  years. 

Mr.  Joyce.  I  believe  that  you  are  right.  Commissioner.  That  was 
a  particularly  prosperous  company,  had  ^ood  territory  and  paid  good 
dividends.  Now,  to  what  extent  the  capitalization  there  represented 
the  true  value  of  the  property,  I  don't  know. 


lit 


1^62    FKOCIilEDIIfGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COJOCISSKX^. 

Let  US  see.  Eidge  Avenue  was  capitalized  at  $750,000.  That 
$750,000  may  have  represented  the  value  of  that  property  and  it  may 
not.  If  it  got  15  per  cent  on  $750,000,  and  the  actual  value  was,  wo 
will  say,  $2,000,000,  that  would  be  less  than  7  per  cent  on  $2,000,000. 

Commissioner  Mahon.  There  is  not  much  danger  of  that  being 
$2,000,000  going  back  into  its  horse-car  organization,  is  there? 

Mr.  Joyce,  i  don't  know,  sir. 

Commissioner  Mahon.  So,  if  its  real  valuation  was  $750,000  and 
15  pel*  cent  was  paid  upon  that  for  the  last  30  or  40  years,  it  has  been 
paid  for  over  and  over  several  times? 

Mr.  JorcE.  That,  sir,  is  a  fallacy.  You  may  as  well  say  that,  when 
1  put  money  in  the  bank  and  get  4  per  cent  per  annum^  after  a  cer- 
tain number  of  years  the  bank  has  paid  me  all  my  deposit,  and  tliere- 
foro  owes  me  nothing. 

Commissioner  Mahon.  Well,  there  are  two  ways  of  looking  at  it, 
of  course,  when  you  go  back  into  the  horse-car  days.  If  I  went  out 
to-day  and  bought  a  horse  and  gave  $100  and  my  note  for  it,  I  would 
pay  it  all.  We  know  that  this  property — horses  and  cai*s  and  every- 
thing else — has  gone  out  of  use  for  many,  many  years,  and  there  is  no 
reason  why  the  people  to-day  should  be  paying  dividends  upon  the 
dead  horses  of  40  years  ago. 

Mr.  Joyce.  That  also,  sir,  is  a  fallacy,  because  those  horses  and 
those  old  cars  have  been  replaced  by  other  means  of  locomotion  and 
transportation,  and  you  can  not  say  that  you  are  paying  a  return  on 
those  dead  horses. 

Commissioner  Mahon.  According  to  your  arrangement,  you  have 
been  raising  capital  to  replace  that  and  are  still  charging  upon  that, 
are  vou  not  ? 

Mr.  Joyce.  That  goes  back,  sir,  to  the  question  of  investment  of 
income  in  property.  It  may  be  that  we  start  out  with  a  small  com- 
pany and  earn  enough  to  replace  that  investment  with  more  modern 
equipment,  and  to  perhaps  add  something  to  it  out  of  income.  The 
quei»tion  as  to  whether  that  income  belongs  to  us  oi'  not  is  gei'mane 
there. 

Commissioner  Mahon.  Don't  you  think  that  any  business  ought 
to  establish  a  sinking  fund  that  would  take  care  of  and  write  off 
its  depreciation  ? 

Mr.  Joyce.  Its  depreciation,  to  keep  up  the  property? 

Commissioner  Mahon.  As  it  wears  out,  yes. 

Mr.  JorcE.  Yes ;  that  is  undoubtedly  sound. 

Comjiiissioner  Mahon.  And  that  was  not  done  in  the  street-rail- 
way business,  was  it  ? 

ilr.  Joyce.  It  was  not  done  specifically  and  called  depreciation; 
but  if  you  take  a  depreciation  fund  ancl  observe  its  operation  for 
a  period  of  years,  you  will  come  to  about  this  result:  You  will  set 
aside  each  year  a  certain  proportion  of  your  earnings  for  deprecia- 
tion, and  then,  year  by  year,  you  make  renewals,  and  you  will  charge 
the  renewals  against  that  fund,  instead  of  against  current  operating 
costs;  and  the  result  will  be  that  that  depreciation  fund  will  take 
u])  the  renewals  and  the  extraordinary  costs,  and  that  at  any  one 
time,  if  you  strike  a  balance,  the  amount  in  that  depreciation  reserve 
fund  will  be  comparatively  small,  because  you  have  used  it  to  re- 
place worn-out  properties. 


PEOCEEDIKTGS  OF  FEDERAL.  ELECTHIC  RAILWAYS  COMMISSION.    1583 

Now,  you  will  get  exactly  the  same  result  if,  instead  of  charging 
against  the  dei)reciation  fund  these  renewals,  you  charge  them 
against  current  income.  The  result  will  be  that,  instead  of  an  even 
flow  of  your  operating  expenses,  you  will  have  a  stream  that  at  times 
will  bulge,  whenever  you  have  to  make  an  extraordinary  replacement, 
such  as  the  purchase  of  100  or  more  cars,  that  you  have  to  charge 
that  against  revenue  that  year,  and  your  revenue  will  be  distorted. 

If  you  have  a  depreciation  fund  to  take  it  up,  it  will  take  that 
much  of  the  depreciation  fund  and  the  flow  of  your  operating 
expenses  will  continue  normal. 

Commissioner  Mahon.  Well,  that  is  recent  financing  of  railroads. 
Do  you  recall  where  the  bonds  have  been  issued  and  arrangements 
made  to  take  up  the  bonds  ? 

Mr.  Joyce.  That,  I  believe,  is  the  common  practice  in  public- 
utility  finance — to  renew  and  replace  existing  issues  with  new  issues 
•     as  they  fall  due. 

Commissioner  Mahon.  Counting  on  appreciation  taking  care  of 
depreciation  ? 

Mr.  Joyce.  Xo,  sir. 

Commissioner  Mahon.  That  lias  been  the  policj^,  has  it  not,  up 
to  recent  years  ? 

Mr.  Joyce.  I  don't  know.  Tliat  is  anotlier  question,  Mr.  Coininis- 
sioner,  if  you  will  permit  me  to  say  so.  The  renewal  of  existing 
issues  by  the  issue  of  other  issues  to  take  their  places  is  not  involved 
in  depreciation.  The  steam  railroads  have  never — or  at  least  it  has 
not  been  their  policy  generally  to  keep  sinking  funds  such  as  indus- 
trials arc  obliged  to  keep  by  the  bank.  If  an  industrial  goes  to  a 
bank  and  asks  for  a  bond  issue,  the  bankers  insist  that  he  have  a 
sinking  fund  sufficient  to  retire  the  bond  at  maturity.  If  a  public 
utility  goes  to  a  banker,  the  banker  is  content  if  he  keeps  up  the 
property  and  leaves  to  tlie  future  the  arrangement  for  refunding 
that  issue ;  so  that  there  is  that  difference  between  public  utility  and 
ordinary  business. 

Commissioner  Mahon.  But  there  was  the  consideration  of  taking 
up  bonds  and  tlie  issuing  of  bonds  for  street  railways  in  their  early 
history? 

Mr.  Joyce.  I  believe  it  was  the  policy  to  refund  an  issue  as  it  fell 
due. 

Commissioner  Mahon.  Was  it  not  a  fact  that  they  counted  on  ap- 
preciation taking  care  of  depreciation,  and  the  reissue  of  bonds  to 
take  up  the  old  bonds,  and  add  the  burden  on  the  property? 

Mr.  Joyce.  That  I  do  not  know,  sir;  but  the  policy  of  retiriii^  one 
issue  by  the  issue  of  another  is  not  involved  in  offsetting  depreciation 
with  appreciation. 

Commissioner  Mahon.  Well,  you  and  I  might  argue  the  question 
all  day  long.  I  do  not  care  to  enter  into  an  argument.  I  simply 
waiited  to  ask  you  those  questions. 

Tlie  Chairman.  You  have  made  no  studj  to  sliow  the  original  cost 
of  these  subsidiary  or  underlying  companies? 

Mr.  Joyce.  We  have  not,  sir. 

The  Chairman.  And  your  statement  that  the  securities  might  be 
le-^s  than  the  present  value  of  those  properties  is  simply  hypothetical? 

Mr.  Joyce.  Xo,  sir.    We  know  about  what  the  total  of  the  seciu-i- 


1584    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1585 


f 


>l 


ties  amounts  to,  and  we  can  make  an  estimate  of  the  probable  in- 
ventory value  of  the  property;  and  there  is  no  hypothesis  there. 

The  Chairman.  Has  that  been  done? 

Mr.  Joyce.  It  has  not  in  exact  figures,  in  the  way  that  we  are 
obliged  to  do  that  kind  of  thing  for  rate  investigations;  no,  sir. 

The  Chairman.  There  are  $750,000  outstanding  against  this  Ridge 
Avenue  property? 

Mr.  Joyce.  Yes. 

The  Chairman.  How  many  miles  long  is  that  property? 

Mr.  Joyce.  I  do  not  know. 

The  Chairman.  You  do  not  know  what  the  capitalization  is  per 
mile? 

Mr.  Joyce.  I  do  not. 

The  Chairman.  That  is  all. 

Commissioner  Wehle.  What  do  yoii  think  the  total  value  to-day 
is  of  all  the  properties  that  are  operated  by  the  Philadelphia  Rapid 
Transit  Co.  ? 

Mr.  Joyce.  I  do  not  know.  That  is  a  broader  question  than  I  care 
to  answer.  That  would  involve  an  exact  valuation  of  the  entire 
property,  and  that  has  not  been  done 

Commissioner  Wehle.  The  5-cent  fare  that  Mr.  Mitten  is  operat- 
ing under  in  Philadelphia  is  paying  the  5  per  cent  dividend  on 
$30,000,000  and  is  also  paying  from  6  to  28  per  cent  on  the  out- 
standing stock  of  all  of  these  other  companies;  that  is  correct,  is  it 

not?  ^         . 

Mr.  JoYOfj,  Some  of  those  go  as  low  as  4  per  cent,  Mr.  Commis- 
sioner. 

Mr.  Warr?:^c.  There  is  a  large  funded  debt  is  there  not,  that  car- 

y'i-f,  a  pretty  low  rate  of  interest? 

Mr.  Joyce.  Yes ;  and  some  of  those  dividends  go  as  low  as  4  per 
tent.  You  might  be  able  to  get  some  appreciation  of  that  by  con- 
jjidering  the  total  paid  in  fixed  charges  and  considering  the  mileage. 

Commissioner  Wehle.  But  the  capitalization  of  all  of  these  under- 
h'rfig  companies  j^ou  do  not  know? 

Mr.  Joyce.  I  do  not.  I  have  not  it  here  with  me  now.  That  ought 
;o  be  available  to  you  if  you  wish  it.  I  am  sure  the  company  will 
be  able  to  supply  that  data. 

Commissioner  Wehle.  It  would  be  interesting  to  have  it,  I  think, 
for  the  record — would  it  not,  Mr.  Chairman  ?  Or  do  you  think  we 
are  not  going  deeply  enough  into  the  Philadelphia  situation  to  be 

assisted  %  it? 

The  Chairman.  Does  not  the  statement  from  which  you  read  show- 
ing the  number  of  underlying  companies  also  show  the  capitaliza- 
tion ? 

Mr.  Joyce.  It  shows  the  outstanding  capitalization ;  but  to  prepare 
a  statement  showing  the  entire  capitalization,  you  would  have  to 
take  that  capital  stock  and  whatever  there  is  ot  bonds  and  whatever 
there  is  of  stock  of  the  rapid-transit  company  itself  and  its  bond 
securities;  and  it  would  be  such  a  presentation  as  I  would  not  care 
to  make  here  on  the  witness  stand. 

The  Chairman.  If  the  commission  desires  that  statement  you  will 
be  informed. 

Mr.  Joyce.  Yes;  and  we  will  be  ready  to  supply  it. 


Commissioner  Mahon.  You  say  there  are  22  companies  that  you 
spoke  of.  Originally,  then,  there  must  have  been  some  52  underlying 
companies  that  were  consolidated  into  those  22  before  the  consolida- 
tion? 

Mr.  JoYCBi  Yes,  sir.  I  think  the  tree  entirely  embraces  about  68 
companies.  We  refer  to  it  as  about  52  companies,  because  many  of 
the  companies  are  mere  paper  companies,  and,  by  one  combination 
after  another,  they  were  reduced,  and  22  has  no  significance  in  itself ; 
it  was  only  an  accident  that  it  happens  to  be  22  at  the  instant  at 
which  this  was  struck. 

Commissioner  Wehle.  Then  some  of  the  paper  companies  have 
outstanding  stock? 

Mr.  Joyce.  Stock  held  by  the  other  companies. 

Commissioner  Wehle.  That  stock  is  also  getting  dividends  paid 
on  it ;  is  it  not  ? 

Mr.  Joyce.  No  ;  it  would  be  stock  held  by  some  of  the  active  com- 
panies, and  would  not  get  a  specific  dividend  on  that  stock.  The 
capital  of  the  owning  company  would  be  based  upon  the  ownership 
of  that  stock,  and,  therefore,  no  dividend  on  tliat  underlying  stocks 
You  get  the  idea  ? 

Commissioner  Wehle.  Yes ;  I  think  so. 

The  Chairman.  Are  there  any  further  questions  of  this  witness  ? 

I  believe  that  is  all,  Mr.  Joyce. 

(Witness  excused.) 

The  Chairman.  Mr.  Ogburn,  is  there  anything  you  would  like  to 
present  before  Mr.  Jackson  proceeds? 

Mr.  Ogburn.  Secretary  Baker,  as  you  recall,  told  you  of  the  very 
excellent  study  which  has  been  made  of  the  street-railway  problem 
by  Mr.  Thomas  L.  Sidlo,  of  Cleveland,  and  he  indicated  to  you  that 
Mr.  Sidlo  w^ould  be  willing  to  appear  before  the  commission  and 
testify  if  the  commission  desired  it. 

The  Chairman.  Who  is  Mr.  Sidlo  ? 

Mr.  OonuRN.  He  is  an  attorney  of  Cleveland ;  he  is  a  law  partner 
of  Secretary  Baker  and  a  man  who  has  given  a  great  deal  of  study 
to  the  Cleveland  traction  problem.  Mr.  Sidlo  was  not  able  to  appear 
here  without  considerable  inconvenience  to  himself,  as  he  was  en- 
gaged in  a  very  important  law  case  this  week.  He  did  send  this 
statement,  which  is  contained  in  about  five  pages,  and  I  understood 
it  was  your  desire  that  this  statement,  sent  really  by  TVIr.  Baker  him- 
self, be  read  into  the  record  of  this  proceeding. 

The  Chairman.  You  may  read  it. 

Mr.  Ogburn.  This  statement  is  as  follows  [reading] : 

A  new  approach  to  the  problem,  or  properly  speaking,  the  plight  of  the 
American  street-railway  industry  must  be  made.  We  may  as  well  forget  the 
past,  for  it  merely  revives  controversy,  and  simply  profit  by  its  teachings. 
In  the  prolonged  inability  or  unwillingness  to  understand  each  other,  it  is 
doubtful  which  side  has  been  oppressed  more  severely.  One  fact  stands  out 
clearly — needless  hardship  has  been  caused  on  each  side  which  experience 
should  henceforth  make  impossible.  Whatever  may  have  been  its  shortcom- 
ings in  the  past,  there  is  no  doubt  the  street-railway  business  has  been  thor- 
oughly chastened  by  events  of  recent  years.  As  for  the  public,  after  succumb- 
ing again  and  again  to  the  sweet  strains  of  the  charlatan,  it  has  at  last 
awakened  to  the  truth  of  that  ancient  axiom  that  one  can  not  expect  to  get 
something  for  nothing. 

The  street  railway  Is  a  public  utility,  existing  primarily  for  public  use 
and  convenience  and  indispensable  to  an  adequate  municipal  life.    The  people 

100643°— 20— VOL  2 38 


1586    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

\v1jo  have  put  up  the  money  to  make  and  sustahi  so  ujw>ful  a  social  agency 
qro  entitled  to  have  their  investment  treated  as  a  legitimate  one  and  deserving 
of  an  adequate  return.  This  Is,  of  course,  platitudinous,  and  yet  it  will  bear 
iei»etition  in  order  to  emphasize  upon  everybody's  mind  tlie  mutuality  of  in- 
itMest  involvetl  in  providinjx  and  maintaining;  modern  street-railway  service. 
So  lonj;  as  private  ownership  continues  this  reciprocal  condition  will  pen^isi, 
viz.  the  duty  of  tlie  utility  to  serve  and  the  moral  obligation  of  the  comnmnity 
tu  pay,  and  every  effort  to  disregard  it  will  result  in  the  future,  as  it  has 
in  the  r»«ist,  in  ctxstly  folly.  When  municipal  ownership  comes,  if  it  does  conio, 
the  industry  is  transferred  from  private  to  public  haudis,  the  i>artnership  re- 
lation will  be  terminatetl,  but  the  fundamental  principle  will  remain.  Ina^v 
ntuch,  however,  as  this  eventuality  is  still  quite  distant,  we  nniy  as  woil 
(rufine  our  attention  to  things  as  they  are.  Municipal  ownership  is  surely 
no  panacea  and  there  is  nothing  automatic  or  assured  about  its  succvss.  it 
is  highly  desirable  when  and  where  it  works,  it  is  highly  undesinible  wljt>« 
and  where  it  doesn't  work.  Its  desirability  is  fundamentally  a  pnictinil  ques- 
tion, not  necessarily  ethical  or  political. 

If,  therefoi'e,  the  problem  is  tackled  in  tlte  cool  atumsphere  of  justice,  cer- 
tain lessons  from  the  past  are  manifest  and  certain  steps  or  methods  us  to 
the  future  api)ear  to  be  wi.se  and  promising. 


VALUK    OF    R.VT1-:    OF    RETURN. 

tTndwlying  the  entire  sitiuition  is  tht»  neeil  for  a  mutual,  frank,  and  openly- 
arrived-at  finding  of  the  real  value  of  each  street-railway  proi^erty  and  ii 
Jixing  of  a  proper  i-ate  of  retuni  thereon.  Kxcept  in  some  isolated  cases,  w»' 
h:ive  no  such  plan  of  procedure  to-day.  Valuation  and  oipitalizations  usmilly 
are  simply  what  they  happen  to  be.  Even  when  fixed  judicially,  or  detemiinetl 
i»y  the  quasi-public  agencies  like  State  commissions,  tliey  seldom  have  a  ihmi- 
ciiant  for  accuracy  or  equity.  When  they  have  been  tixe»l  by  politiciaiLH,  or 
that  elusive  thing  calle<l  public  opinion,  tliey  have  usually  l>een  d»\ngennLs  an<l 
uisfalr.  When  they  have  been  fixed  by  restrained  action  of  the  companies 
they  have  been  all  that  the  traffic  would  bear.  In  any  event  they  now  gen- 
eniily  ai>pear  as  a  mis.shjipen  thing  that  has  gn>wn  and  expiiiMled  mnshroom- 
like  in  the  i>eri<Kls  of  public  generosity  or  carelessi>ess  and  been  dwarfetl  and 
fc;tunted  during  intervals  of  public  unrx^nsonableness  and  indignation. 

Ortainly  there  is  nothing  scientific  or  w^ell  balanced  about  the  capital  ac- 
count of  the  average  American  street  rjiilway.  C*apital  value  must  be  n»- 
v:!mi>e(l  and  rewritten,  but  not  necessarily  imdenvritteu.  It  must  \w  simplitied 
and  <laritie<l  so  as  to  be  understamlable,  mast  bear  some  rejil  relation  to 
proi)erty  or  plant  value,  and  when  determined,  be  frankly  ami  conclusively 
afcej>te«l  by  the  owners  and  by  the  connnunity.  Until  this  is  d«»ne  no  street-rail- 
way proi^erty  anywhere  will  do  otherwise  than  continue  to  stumble  along  in  its 
public  pt)llcy.  in  its  remliti<»n  of  service  and  in  its  financing.  When  it  is  done, 
hi  wever,  the  first  i^rmanent  and  tangible  step  will  be  taken  in  the  .sohition 
of  the  pwbleuu  So  far  as  the  public  is  concerned,  this  Ls  a  job  that  cjui  l>e.<*t 
W  left  to  sonte  one  other  than  the  politician  or  tlu»  profes.sional  reformer.  So 
far  u»  tlie  ctMupany  is  co«cenie<l,  the  occasion  is  not  one  for  the  professional 
ex|>€»rt  m*  professional  adv»»cate.  It  is,  on  the  contrary,  a  job  for  outstanding 
and  repnsentative  citizens  in  each  coiumunity,  wIm>  fi-om  their  disinterested- 
n<vss  can  comnmnd  both  the  confidence  of  the  public  and  the  company,  wlu>  an^ 
s«.  iircumstanced  as  to  be  able  to  do  the  job  without  fear  or  favor  ami  wIhiso 
decisions  both  the  connnunity  and  tl>e  company  are  bound  to  agree  sliall  ?>«» 
birding  and  unim|>eachable. 

T«>  the  same  bmly  should  Ik»  left  the  determination  of  the  question  of  the 
rate  of  return.  If  left  alone  the  rate  would  sooner  or  later  he  fixed  by  tUt* 
sway  of  economic  factors.  Consequently  the  real  function  of  this  bourtl  would 
be  to  detennlne  what  an  investment  of  this  clmracter,  s<irro«iKled  by  the  ciivuui- 
stnnces  and  conditions  which  play  upon  it^  must  connnaiMl  in  the  way  of  a 
i-eturn  in  order  at  all  times  to  invite  investing  capital.  Now,  as  to  a  "fair'* 
rate  of  return.  Whatever  may  be  sahl  of  an  unfair  rate  of  return,,  there  is  m» 
such  thing  as  a  fair  rate  of  return.  If  so,  then  which  is  fair,  fairer,  or  less 
fair — a  4}  \\er  cent  return  on  a  United  States  IJberty  IkmmI,  a  Ty  pel*  cent  return 
on  a  Pennsylvania  Ilailrtwd  Iwml,  a  6  iier  cent  return  on  ('leveland  Railway 
st«>ck,  a  7  iH^r  cent  retunj  on  a  Monongahela  Traction  &  light  slK>rt-terw  nose, 
or  an  8  i^r  cent  return  on  an  Kmpire  Gas  &  Fuel  i>refentHl  stock?  The  first 
is  the  prime  security  of  the  world,  the  remainder  are  tiuaj<i-p\iWic  securitiea 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1587 

of  varving  standards.    From  the  standpoint  purely  of  I'^turn   whidi  represe^^ 
?iL  f.  ir  r-ite'    Can  anyone  say?    He  must  be  a  modern  oracle  of  Delphi  nnIio 
^^uld  ha^4  the  teL^^^      to  auWr.    Frankly,  while  there  are  certain  ratcjs  of 
r^im  that  are  manifestly  unfair,  i,  e.,  such  rates  as  are  oppressive  or  usurious 
theii  is  no  such  thing  as  a  fair  rate  of  return.     Until  we  are  prepared   t ) 
ussL  to  Ln^  or  to  .some  group  of  men  in  each  community  the  paton 

orauthori??  for  finding  and  fixing  some  rate  which  he  or  they  will  aiioh  t 
as  fail  and  reasonable,  we  might  as  well  rest  in  the  assurance  the  rates  c. 
return  a?e  fixed  by  the  uncontrolled  and  inexorable  competition  of  persons  lik.^ 
von  and  me  wlio  have  money  to  invest  or  speculate  with  and  who  are  still  free 
under  the  present  rules  to  place  it  anywhere  we  please.  Hence  the  task  of  th^s 
bmrwin  rS  to  fix  a  return  (which  may  vary)  that  will  insure  keeping 

the  property  financed  and  growing. 

CHARACTER  OF  THE  SECURITY  ISSUED. 

It  is  unnecessary  to  rehearse  the  difficulties,  embarrassments,  and  tragedies 
in  street-railway  history  that  have  resulted  from  financing  by  means  of  mort- 
gage  indebted,^^^^^^    It  is  pretty  generally  agreed  by  everybody  who  has  made 
f  study  of  street-railwav  tinaiices  that  it  will  be  a  happy  day  when  the  lien 
hokler  is  eliminated  from  stiS^t-railway  ownership.    His  presence  has  been  aj 
ir  ful  to  tbe  companv  as  to  the  connnunity.     He  has  been  the  chief  cause  of 
l^l  spirit  of  absenteeis^^    in  street-railway  management,  and  has  Probably  done 
more  to  bring  the  industry  into  disrepute  than  the  old-fashioned  "  public  >e- 
Lmned  "  o^^^^^^^         But  how  eliminate  him?    With  an  efficient  cost-of -service 
1       mortgage  bonds  are  unnecessary  as  a  mode  of  financuig.    A  property  can 
e  flnaS  by  sel  ing  shares,  and  selling  shares  exclusively.    Aiul  these  can  be 
^Id  to  p^chisers  living  in  the  community  in  which  the  utility  is  loca  ed  and 
Xuld  be  S  sold     The  property  will  thus  require  an  alert,  informed  body  of 
cXrs   wlio  vdll  desire,  along  with  security  and  certainty  of  return  on  their 
i  ives  meit  that  proper  and  adequate  service  shall  be  rendered  the  community. 
Si^a  Wof  s^^        holders,  and  none  other,  will  see  to  it  that  tbe  proi>er  .v 
has  a  nianagement  that  recognizes  and  is  able  to  administer  the  piH)ht-imiking 
siyect  of  the  job  not  only,  but  the  publicsservice  aspect  as  well.    The  vahe  of 
iXirt  of  ownersliip  amingement  has  been  eminently  demonstrated  }n  Clove- 
and     The  fact  that  at  the  present  time  there  is  relatively  no  bonded  indebtejl- 
e^' but  on  the  contrary  a  predominant  bo<ly  of  resident  shareholders  is  inaU'- 
^ihe  Cleveland  plan  a  success  as  much  as  any  other  factor.    The  statistics 
of  the  ownership  of  the  Cleveland  Railway  Co.  are  worth  incorporating  here: 

CAPITALIZATION  OF  CLEM2LAND  RAILWAY  CO. 

Fit- St  mortgage,  5  per  cent  bonds,  1931,  amount  outstanding $5, 495. 000 

Capital  stock  outstanding  (Aug.  1,  1919) ?-»'  'o'Soo 

Number  of  stockholders,  Mar.  21,  1910 -'  ^'^ 

Number  of  stockholders,  .lune  12,  l^l^---- ^^  ^ 

Average  amount  per  holder.  Mar.  21,  1910 ^^^  ^<- 

Average  amount  per  holder,  June  12,  1919 ^^'  ^-^ 

On  June  12,  1919,  67  per  cent  of  the  stockholders  owned  less  than  $5,000  each 
(>f  capital  stock ;  55  per  cent  less  than  $2,500  each.  Those  who  ow^ed  $,sOOO 
or  l^  each  couJtituted  75  per  cent  of  the  whole  number  of  stockholders;  those 
who  owned  $2,500,000,  or  less,  57  per  c*ent. 

Niimlv^ne  l^ient  of  all  the  stock  is  owned  by  residents  of  Ohio.  On  .Ian- 
uaVv  1,  1919,  of  a  total  of  5.168  stockholders,  4,619  were  residents  of  Ohio,  and 
of  this  number  3,522  resided  in  Cuyahoga  County.  In  other  word^  about  two- 
thirds  of  all  of  the  company's  stockholders  reside  in  Cleveland  or  its  environs. 

It  is  noteworthy  that  the  settlement  plan  that  has  been  in  process  m  Tolejlo. 
the  proposed  Community  Tracti<m  Co.,  contemplates  this  type  of  local  ownership 
as  one  of  the  chief  arrangements.  The  time  is  ideal  for  creating  m  each  com- 
munitv  in  this  country,  through  the  agency  of  the  stock  of  the  local  street-rail- 
wav companv,  an  investment  bearing  a  return  larger  than  that  earned  by 
suvings-bank\leix)sits,  possessing  inherent  certainty  and  security  and  providing 
an  o^n  and  ready  channel  for  investment  funds  of  those  who  have  neither 
meuiis  noi'  leisure  for  studying  the  investment  field. 


1588    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1589 


RELATION   BETWEEN   COMMUNITY  AND  COMPANT. 

The  arrangement  between  the  community  and  the  company  should  be  founded 
upon  the  basis  of  service  at  cost  and  control  of  service  vested  in  the  community. 
The  latter  should  be  permitted  to  require  any  quantity  or  quality  of  service 
deemed  necessary  or  desirable  for  its  proper  life  and  growth,  provided,  how- 
ever, that  it  is  ready  to  pay,  in  the  shape  of  an  adequate  rate  of  fare,  whatever 
cost  its  service  requirements  shall  entail.  There  should  be  no  limit  upon  the 
city's  right  to  prescribe  service,  except  obvious  impossibility  of  performance. 
At  the  same  time  there  should  be  no  limit  to  the  company's  right  to  collect  such 
a  rate  of  fare  as  will  pay  for  the  cost  of  service  ordered. 

CONTROL   OF   8ER^^CE. 

Control  of  service  should  be  exercised  through  the  agency  of  a  competent 
technical  representative,  who  should  be  equipped  with  the  necessary  informa- 
tion and  facilities  to  enable  him  to  prescribe  the  kinds  and  amounts  of  service 
that  changing  conditions  of  community  life  require.  Service  orders  should  be 
final  and  without  appeal  by  the  company,  except  where  they  are  obviously  in- 
ordinate or  Imposible  to  meet,  or  where  the  city  is  unwilling  or  unable  to  pay 
the  cost  of  the  service  it  is  requisitioning. 

COST  OF  SERVICE. 

This  cost  should  include  the  labor  charge,  the  operating  charge,  the  power 
charge,  the  maintenance  charge,  etc.,  all  according  to  the  market.  In  addition, 
it  should  include  the  "money  charges'* — that  is,  the  return  to  the  company's 
security  holders  on  their  investment.  This  return  should  not  be  "  fair "  or 
*•  fixed,"  but  it  should  be  certain  and  in  accord  with  the  prevailing  cost  of 
money  for  this  kind  of  capital  requirement.  In  other  words,  it  should  be  sub- 
ject to  ascension  or  declension,  according  to  the  necessities  of  the  money  situ- 
ation ;  perhaps,  however,  with  a  fixed  minimum  which  should  always  be  assured. 
The  reason  for  this  is  obvious.  The  cost  of  money  is  just  as  important  and 
inevitable  an  item  entering  into  the  cost  of  service  as  labor  and  material  and 
Is  as  susceptible  to  the  control  of  economic  influences.  This  fact  should  be 
recognized  and  accredited.  This  applies  especially  where  the  type  of  security 
Is  to  be  common  shares,  either  exclusively  or  predominantly,  and  where  the 
effort  will  be  made  to  keep  these  shares  actively  at  par  or  in  the  region  of  par, 
or  in  a  price  range  that  will  be  sufficiently  attractive  to  invite  fresh  capital. 
The  rate  of  return  should  not  be  susceptible  to  frequent  or  violent  changes. 
This  might  give  a  gambling  quality  to  the  stock,  but  the  rate  should  not  l)e  so 
Immutably  fixed  as  to  make  it  impossible  to  recognize  and  meet  changing  money- 
market  conditions. 

THE   LABOR    SITUATION. 

This  is  the  most  vexing  and  obstreperous  problem  confronting  the  street- 
railway  industry.  From  present  indications  it  is  likely  to  be  still  more  trouble- 
some in  the  future.  No  adequate  solution  has  yet  been  found.  In  recent  times 
street-railway  employees  have  found  the  strike  an  unfailing  weapon  to  enforce 
their  demands.  At  present  it  seems  as  if  there  were  no  definite  limit  to  its 
possibilities.  Some  system  of  bonuses  or  some  plan  of  "  profit  sharing  "  must 
be  devised  to  bring  the  employees  into  the  partnership  relation  and  to  force 
them  thus  to  accept  the  responsibility  their  type  of  employment  owes  to  the 
public.  The  need  for  some  such  solution  is  irresistible  unless  the  present  situa- 
tion with  regard  to  wages  changes  in  a  very  marked  way.  In  recent  years 
street-railway  labor  although  not  of  a  high  order  of  skill,  has  not  been  in 
competition  with  the  rest  of  the  labor  market.  Wages  have  been  determined 
by  the  coercive  strength  of  the  "  local."  The  suggestion  that  seems  most  hope- 
ful at  this  time  contemplates  a  system  of  liberal  annual  percentage  bonuses, 
based  on  a  schedule  of  seniority  and  continuity  of  service,  and  with  no  other 
••  strings  "  to  the  plan. 

An  aspect  of  the  problem  that  Is  not  at  all  clear  relates  to  the  question  of  the 
extent  to  which  public  officials  should  take  a  hand  in  labor  disputes.  From  one 
standpoint  a  "hands-ofl!"  policy  seems  highly  desirable.  This  has  the  ele- 
mentary advantage  of  leaving  the  decision  of  the  dispute  to  its  merits.  On 
the  other  Imud,  allowing  the  interested  parties  to  fight  it  out  to  tlie  bitter  end 


flsually  means  public  suffering,  an  emerging  of  the  mob  spirit,  violence,  etc. 
For  that  reason  it  is  necessary  for  the  public  interest  to  be  represented.  The 
best  way  to  achieve  this  recognition  of  the  public  interest  is  through  com- 
pulsory arbitration  of  all  labor  difficulties.  This  method  will  settle  disputes 
without  general  punishment,  will  protect  the  rights  of  the  employees,  and 
will  not  seriously  interfere  with  the  employment  relation  or  break  down  dis- 
cipline.    Its  introducti<m  in  this  country  has  already  been  delayed  too  long. 

To  summarize,  then,  this  memorandum  contends  for  these  things  as  con- 
ducive to  a  permanent  and  just  settlement  of  the  street-railway  problem  in 
America : 

1.  A  recognition  of  the  inevitable  mutuality  of  public  and  private  interest 
In  producing  street-railway  service  and  in  paying  in  full  for  such  sei*vice. 

2.  Settling  the  questions  of  property  value  and  an  adeciuate  return  to  the 
ownei-s  free  from  deftiagogery  on  the  one  hand,  and  private  greed  on  the  other, 
and  referring  that  determination  to  representative,  disinterested  citizens. 

3.  Banishing  mortgage  indebtedness  as  rapidly  as  ix)ssible  in  favor  of  stock 
ownership  by  the  people  of  the  community  served. 

4.  Service  at  cost,  but  not  less  than  actual  cost,  and  unlimited  control  of 
service  by  the  community. 

5.  Competent,  technical  administration  of  the  problem  of  service  by  a  quali- 
fied representative  of  the  public. 

6.  In  order  to  insure  uninterrupted  service,  making  the  employees  responsible 
partners  in  the  enterprise,  by  offering  adequate  money  rewards  for  length  of 
service,  and  establishing  compulsory  arbitration  of  all  labor  difficulties. 

Thomas  L.  Sidlo. 
Cleveland,  Ohio. 

The  Chairman.  Mr.  Jackson,  you  were  to  have  taken  the  stand, 
but  perhaps  we  had  better  adjourn  now  until  8  o'clock  to-night.  If 
you  will  be  here  then  we  will  hear  you  at  that  time. 

(AVhereupon,  at  4.55  p.  m.,  an  adjournment  was  taken  to  8  p.  m.) 

EVENING    SESSION. 

The  Chairman.  You  may  proceed,  Mr.  Jackson. 

STATEMENT  OF  ME.  WALTEE  JACKSON. 

Mr.  Jackson.  Gentlemen  of  the  commission,  before  taking  up  the 
subject  of  my  paper,  or  these  notes,  I  would  like  to  advert  to  a  remark 
made  by  Commissioner  Gadsden.  In  talking  to  Mr.  Joyce,  he  asked 
the  question  whether  it  was  conceivable  that  an  entire  industry  could 
go  wrong.    Do  I  interpret  that  correctly,  Mr.  Gadsden  ? 

Commissioner  Gadsden.  In  the  operation  of  the  property ;  yes. 

Mr.  Jackson.  In  the  operation  of  a  single  property  ? 

Commissioner  Gadsen.  In  the  operation  of  the  property ;  yes. 
.     Mr.  Jackson.  In  the  operation  of  an  industry  ? 

Commissioner  Gadsden.  Yes.  They  might  be  wrong  on  theories  or 
policies,  but  when  it  comes  to  an  operating  plan 

Mr.  Jackson.  I  did  not  understand  it  in  that  sense;  because  I 
would  say  that  there  have  been  cases  where  an  entire  industry  has 
gone  wrong  on  a  matter  of  policy. 

Commissioner  Gadsden.  On  an  economic  principle;  yes.  But  my 
question  was  directed  to  this :  It  is  conceivable  that  a  whole  industry 
will  go  wrong  in  operating  that  industry,  so  that  you  have  got  to 
go  to  people  on  the  outside,  for  instance,  to  find  out  how  to  operate 
cars  on  a  street  railroad  or  how  to  operate  a  pow  er  house  ? 

Mr.  Jackson.  On  matters  of  technique  ? 

Commissioner  Gadsden.  Yes. 


1590    PfiOCEEM25'GS  OF  FEDERAL  ELKCTEIC  EAILWAYS  COMMISSIOlSr. 

Of  course,  it  is  entirely  within  the  bounds  of  possibility  that  the 
ip\  liole  industry,  in  fact,  the  whole  generation  conceivably  will  go 
wrong  on  an  economic  principle,  so  far  as  that  is  concerned. 

Mr.  Jackson.  I  had  in  mind  when  you  made  that  remark  the  sad 
history  of  the  liquor  business,  because  they  went  on  the  rocks  through 
tlieir  association  with  worse  vioes  than  liquor  drinking.  It  is  a  fact 
that,  for  many  years,  within  the  ranks  of  the  liquor  business  itself 
tliere  was  a  great  deal  of  agitation  for  the  clean  saloon,  and  there 
Fere  plenty  of  far-sighted  men  in  the  business  who  said.  "  We  are 
going  to  be  wiped  off  the  face  of  the  earth  if  we  do  not  quit  our 
evil  associations."  They  were  laughed  at  by  the  majority,  and  the 
rpsult  was  that  the  liquor  business  was  wiped  out  a  great  deal 
quicker  than  any  of  us  expected. 

As  for  the  subject  of  my  notes,  your  commission  has  heard  so 
man^r  dark  things  about  the  electiic-railway  industry  that  you  must 
be  fairly  well  saturated  with  gloom. 

Xow,  I  do  not  come  to  you  with  any  alkahest  or  universal  solution, 
but  merely  with  an  analysis  akmg  certain  lines  so  that  your  com- 
mission or  any  other  commission  when  it  has  before  it  the  case  of 
an  individual  electric  railway  seeking  help,  may  be  able  to  deter- 
mine to  some  degree  whether  it  is  worthy  of  the  help  of  the  State. 

I  do  not  believe  that  the  public  would  countenance  the  subsidiza- 
tion of  a  private  industry,  but  I  do  believe  that  if  you  can  show,  as 
an  electric  railway,  that,  granted  financial  help  to  do  certain  things, 
you  could  keep  the  fares  down  within  better  limits,  or  give  better 
service  that  would  warrant  a  higlier  rate  of  fare,  you  wfil  find  the 
public  with  you. 

The  sentiment  in  the  industry  on  the  subject  is  somewhat  divided. 
I  believe  a  great  many  of  the  older  men  in  the  business,  who  liave 
been  brought  up  in  the  atmosphere  of  old  times,  do  not  seem  to  think 
that  there  is  any  way  out  of  it  The  power  of  will  is  lacking,  but 
there  arc  others  who  are  optimistic,  who  have  faith  in  the  American 
public,  and  who  say,  pra€ti<ially :  "  Let  us  get  down  to  date  and  see 
wliat  happens." 

Tlie  chief  difficulty  I  have  felt  about  the  increased  flat  fare  was 
thut  we  had  become  so  used  to  a  very  convenient  single  coin  that  any 
change  from  tliat  makes,  in  itself,  a  sort  of  friction ;  and  it  is  need- 
less to  repeat  now  that  the  coming  of  the  imreased  fare  has  had  the 
dire  i-esult  of  decreasing  the  usefulness  of  the  electric  railway  to  the 
public. 

Perhaps  the  larger  difficulty  of  the  electric-railway  industry  is  not 
merely  the  gi-eatly  increased  cost  of  operation  due  to  the  war,  or* 
accelerated  by  the  war,  but  the  ne<'essity  of  changing  its  points  of 
view  from  that  of  a  monopoly,  a  monopolistic  industry^,  to  that  of  a 
business. 

When  the  electric  railway  was  a  monopoly  it  did  not  have  the 
necessity  to  progress  that  is  common  in  any  commercial  undertaking. 

If,  for  example,  an  improvement  in  apparatus  were  brought  be- 
fore an  electric  railway,  the  failure  to  adopt  that  impi*ovement  would 
not  be  as  dire  and  show  up  in  as  bad  a  light  the  operator  as  would 
be  the  case  where  a  manufacturer  rejected  an  improvement.  Ilic 
rejection  of  an  improvement  by  a  competing  manufaeturei-  speJIs 
ruin.    Kejection  of  an  improvement  by  a  monoj>oly  does  not  spell 


PROCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSION.    1591 

ruin  immediately,  but  spells  lower  income  and  poorer  service.  There 
is  not  the  same  means  for  checking  up  whether  that  monopoly  is 
efficient. 

The  electric  railway  had  a  double  handicap  as  compared  with  other 
public  utilities.  Monopoly,  in  itself,  dulls  the  spirit  of  enterprise; 
but  when  you  add  to  that  the  handicap  of  being  obliged  to  sell  your 
product  at  a  given  price  regardless  of  quantity  or  quality  you  have 
a  factor  that  well-nigh  makes  it  impossible  for  men  to  exhibit  a 
spirit  of  enterprise  comparable  with  commercial  life. 

We  therefore  find,  in  comparing  various  public  utilities,  that  the 
eloctric-light  and  gas  man  shows  a  greater  spirit  of  enterprise  than 
the  electric-railway  man — very  often  departments  in  the  same  com- 
pany. Apparently  the  gas  and  electric  men  act  under  the  stimulus 
of  competition.  Ti^heir  respective  fields  overlap  to  a  degree,  and  they 
also  liave  the  advantage  of  having  something  tangible  to  sell.  In 
addition  to  selling  electricity  or  gas,  as  the  case  may  be,  they  sell 
utensils,  appliances  of  one  kind  or  another  which  promote  the  in- 
creased use  of  the  intangible  article  that  they  have ;  but  the  electric- 
railway  man,  who  has  just  one  intangible  thing — transportation — • 
has  not  the  same  incentive. 

Tlie  electric  railways,  particularly  the  larger  ones,  did  not  appre- 
ciate the  necessity  of  going  to  a  different  method  of  selling  their 
product  until  the  automobile  jitney  competitor  came  along. 

The  Chairman.  Strictly  speaking,  can  you  call  an  electric-railway 
company  a  monopoly,  in  view  of  the  automobile  and  other  com- 
petition? 

Ml-.  Jackson.  Not  to-daj^,  Mr.  Chairman.  That  is  the  point  I  am 
trying  to  make — that  we  are  in  a  readjustment  period.  A  monopoly 
is  changing  over  into  a  business;  and  business  implies  competition. 

That  feeling  that  3^ou  could  sell  your  product  did  not  impress 
itself  upon  the  electric  railways  until  the  coming  of  the  automobile 
jitney  competitor.  This  competitor  chose  to  sell  only  a  certain 
quantity  of  transportation,  leaving  to  the  electric  railway  the  long 
rider  at  the  same  flat  price.  It  took  something  of  that  kind  to  bring 
out  the  illogical  system  of  affairs  that  had  been  built  up  in  America. 

It  stands  to  reason,  of  course,  that  the  electric  railways  alone 
were  not  to  blame  for  that.  You  may  say  this  was  an  American 
policy  and  a  municipal  policy;  the  flat  fare  was  very  often  the  price 
)aid  for  consolidation.  Nevertheless  it  was  one  of  the  factors  that 
kept  the  electric-railway  operator  from  developing  into  a  busi- 
ness man. 

With  the  coming  of  the  automobile  competitor,  the  first  effort 
of  the  railway  operator  was  to  get  hmi  off  the  streets  on  the  plea  ol 
unfairness;  that  the  competitor  did  not  pay  the  same  taxes,  share 
the  same  burdens,  and  so  forth.  In  fact,  it  was  declared  to  be  a 
breadi  of  contract  to  pennit  him  to  operate  on  the  streets  at  all. 

Be  that  as  it  may,  no  sooner  had  the  public  tasted  a  better  mode 
of  transportation,  a  greater  frequencj^  of  transportation,  greater 
spe*ed,  greater  convenience,  that  no  condition  of  unfairness  at  all 
will  cause  the  permanent  elimination  of  tlie  competing  form  ot 
transi>ortation. 

You  can  not  conceive,  for  example,  that  in  a  citj^  where  people  are 
used  to  getting  a  jitney  every  two  or  three  minutes  the3'  will  permit 


I 


i 


( 

I  I 


1592    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

]  5^,nfnIIirc  "  t"!  T**'"  '^'*^'"?  *;•?"«>' <^«»-s  come  at  intervals  of  10  or 
nL"f  i  *  •  **  "^  inconceivable.  They  will  not  permit  that.  The 
question  of  fairness,  gentlemen,  does  not  enter  at  all,  because  people 
are  swayed  by  motives  of  selfish  convenience  ^ 

1  need  only  call  to  your  attention  this  fact,  that  in  England, 
whe  0  so  inany.of  the  tramways  are  owned  by  the  municipalities,  it 
ha^  been  impossible  to  secure  a  law  that  would  place  the  motor  bus 
on  the  same  basis  as  the  street-car.  The  street-car,  operated  by  the 
city,  pays  taxes  to  the  ctiy  far  in  e.xcess  of  the  motor^us,  operated 
by  a  private  company.  If  the  public  of  England  would  not  per- 
nt  the  taxing  of  the  niotor  bus  to  a  degi-ee  that  would  make  it 
impossible  to  compete  with  the  tramway,  even  though  the  tramways 
are  owned  so.  large  y  by  the  cities,  what  hope  have  we  that  the 
American  public  will  oblige  the  privately  operated  electric  railway 
m  that  direction?  *^ 

Some  otlier  means  nuist  be  found  to  eliminate  that  competition. 
1  hat  means,  of  course,  is  good  service,  to  which  I  shall  refer  later. 

1  also  believe  that  the  American  electric  railway  is  not  a  100  per 
cent  modern  electric  railway  unless  it  includes  any  motor-bus  serv- 
ices that  may  be  required  m  the  community.  In  other  words,  all 
the  popular  or  mass  transportation  of  a  community  ought  to  bo 

;^'fiT  vT%'''"*'^'^  direction.     That  is  a  lesson  that  we  can  study 
piohtabJy  from  experiences  on  the  other  side. 

If  the  electric  railway  could  not  produce  mass  transportation 
to-day  cheaper  than  any  other  form  of  locomotion,  it  woidd  be  on 
its  way  to  Dodo  Land;  but  we  do  know  that  you  can  to-day  still  pio 
duce  electric-rai  way  transportation  cheaper  and  more  satisfactorily 
than  any  other  kind.  It  therefore  remains  to  ask  what  the  electric 
railways  of  the  country-  can  do  to  produce  that  transportation  more 
of  offerin^k       ''     ""'^^"^  produced  it  more  cheaply,  sell  it  instead 

In  the  period  preceding  the  war  the  adoption  of  improvements 
materfaT  ^''"^  '''"  "^''^^  *^'  '^^^^^  '''^^  ^^^^  of ^labo"  and 

With  the  coming  of  the  war  period,  it  must  be  said  that  the  indus- 
a?o,ifckl7««  tV  '  not  accelerated  the  adoption  of  improvements 
as  quickly  as  the  rapidly  increasing  costs  of  labor  and  material 

comStbn''''''  '^  ''^"^^'^  "^'''''  ^""^^  ^^"^""^^  "^""^^^^y  for  meeting 
For  example,  it  is  almost  like  handling  poison  ivy  to  talk  to  a 
grea  many  electric-railway  men  about  the  bus.  It  appeared  in  the 
hands  of  a  pirate  competitor,  and  therefore  they  hate  it-instead  of 
saving,  "  Now.  this  is  a  tool.    What  can  we  do  with  it  ?  " 

It  IS  impossible  to  offer  any  universal  remedy,  or  to  say  that  any 
group  of  improvements,  such  as  I  describe  hereinafter,  would  in- 
evitably pull  the  railways  out  of  the  slough  of  despond 

Ihere  are  a  great  many  electric  railways  in  this  country  that 
simply  have  not  got  enough  customers.  The  grocery  business  is  an 
essential  business    but,  grocers  fail  because  they  live  Tt  enough 

slmeT."'-  T^t  f  ^^r^^^^il^'T'  ^^  "^^^y  communities,  are  in  the 
IIh!    ti.        '^'    ''''  instance  the  cross-country  lines  of  Massachu- 

fw  ■    n   ^''^  '"  ""?  "i1^^^  f  operation.    There  are  no  economies 
that  will  save  roads  of  that  character. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1593 

On  the  other  hand,  we  have  a  large  number  of  electric  railways 
that  are  blessed  with  an  abundance  of  present  and  possible  cus- 
tomers, and  it  is  with  them  that  we  have  to  deal,  to  see  whether  they 
ought  not  to  try  some  self-help  first  before  crying  too  much  for  out- 
side help. 

A  privately  owned  undertaking  can  hardly  ask  for  any  other 
relief  from  the  community  than  remission  of  unjust  taxes  upon  it- 
self, and  imposition  of  just  taxes  upon  its  competitors,  until  it  has 
shown  that  it  has  exhausted  the  resources  of  the  art,  or  that  it  is 
willing  to  exhaust  those  resources,  if  the  community  will  help  it 
to  get  the  funds  necessary  for  modernization. 

What  are  those  resources,  and  to  what  extent  have  they  been 
applied  ? 

Now,  in  the  operation  of  an  electric  railway  there  are  two  very 
large  items.    One  of  these  items  is  the  cost  of  power. 

A  great  deal  has  been  done  in  making  our  power  plants  and  dis- 
tributing systems  efficient.  Very  recently  there  has  come  the  auto- 
matic substation  which  will  be  a  boon  to  interurban  railways,  espe- 
cially in  cutting  down  the  cost  of  attendants,  in  saving  copper,  in 
giving  a  higher  voltage,  which  means  better  schedules;  so  that  we 
may  say  that  in  the  generating  and  distributing  end  electric  rail- 
ways are  very  efficient.  It  is  a  curious  fact,  however,  that  in  the 
use  of  that  power  electric  railways  are  not  as  efficient  as  they  might 
be.  Within  the  same  schedules  it  is  possible  for  motormen  to  show 
a  variation  of  25  to  50  per  cent  in  the  use  of  power.  There  is  no 
way  of  making  the  motorman  efficient  in  the  use  of  power  except 
first  by  personal  instruction  and  then  by  the  use  of  some  instrument 
that  will  check  the  correct  use  of  energy  for  a  given  service.  Such 
instruments  have  been  used  abroad  for  a  period  of  some  15  years, 
and  I  would  say  that  in  Great  Britain  and  on  the  Continent  the 
majority  of  cars  have  been  equipped  with  devices  of  that  sort.  In 
the  United  States  that  development  has  come  later,  and  to-day  we 
find  that  not  more  than  20  per  cent  of  the  cars  in  the  United  Sates 
are  equipped  with  a  power-checking  device.  I  would,  therefore, 
say  that  if  an  electric  railway  asked  for  funds  to  enable  it  to  pur- 
chase devices  of  that  kind  it  would  be  a  worthy  thing  to  encourage 
and  to  help  along. 

But  far  and  beyond  the  cost  of  power  is  the  item  of  conducting 
transportation,  and,  of  course,  the  bulk  of  that  item  lies  in  the  plat- 
form expense.  For  many  years  the  electric  railway  has  failed  or  did 
fail  to  consider  the  true  function  of  a  car.  The  purpose  of  a  car  is 
the  manufacture  of  car-miles.  You  have  got  to  make  car-miles  in 
order  to  get  revenue.  Now,  if  you  consider  a  car  in  the  same  light 
as  a  machine  tool,  then  anything  that  you  can  do  to  automatize  that 
car  means  a  greater  production  of  mileage.  That  is  what  we  under- 
stand to-day  really  by  the  expression,  "  the  automatic  car."  If  you 
substitute  for  the  slow  accelerating  control  a  fast  accelerating  con- 
trol, for  the  hand  brake  an  air  brake,  for  the  hand-operated  door  an 
air-operated  door,  for  a  high  step  a  low  step,  so  on,  you  are  turn- 
ing a  hand-tool  operated  by  two  men  into  an  automatic  tool  attended 
by  one  man. 

The  coming  of  the  one-man  operation  thus  made  possible  has  been 
a  great  deal  slower  than  one  would  expect.    There  have  been  a  num- 


i 


1514    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

ber  of  reasons  offered,  but  instead  of  going  too  extensively  into  tbat 
for  the  moment,  I  wish  to  present  to  you  some  figures  obtamed  by  me 
last  week  in  Terre  Haute  from  Mr.  E.  M.  Walker,  general  manager 
of  the  Terre  Haute,  Indianapolis  &  Eastern  Traction  Co.  AVhat  Mr. 
Walker  has  done  in  that  city  can  be  done  on  several  hundred  other 
l)roperties.  I  say  that  confidently  because  I  have  been  on  hundreds 
of  properties  in  the  United  States  at  one  time  or  another.  Some 
three  years  ago  I  began  making  missionary  trips,  you  might  say,  on 
this  subject.  I  have  followed  up  each  safety-car  installation  as  fast 
as  it  was  made  and  tried  to  settle  in  my  mind  whether  that  car  had 
possibilities  for  a  wider  and  wider  circle  of  use. 

The  Chair3ian.  Under  wliose  ausj^ices  were  you  making  this 
study  ? 

Mr.  Jackson.  The  Electric  Railway  Journal.  I  might  say  even  at 
home  there  was  not  much  confidence  in  it.  A  good  many  of  the  staff 
said,  "  That  is  just  a  village  proposition." 

I  mention  Terre  Haute  because  within  the  next  month  or  so  it  will 
be  the  first  city  of  75,000  people  to  be  completely  equipped  with  these 
cars.  You  will  pardon  me  if  I  read  directly  from  this,  because  I 
have  some  interesting  figures. 

The  case  of  Terre  Haute  is  particularly  interesting  because  it  is 
not  even  a  good  sti*eet-railway  town,  according  to  American  city 
standards.  Although  its  population  is  75,000,  its  passengers  per  car- 
mile  have  been  little  more  than  four  at  any  time,  so  that  the  earnings 
under  the  average  fare  of  ^  cents  were  but  21.9  cents  per  car-mile 
during  1918  and  under  the  straight  5-cent  fare  of  1919  have  been  but 
21.95  cents  on  the  older  cai-s  and  20.62  cents  on  the  smaller  safety 
cars.  Any  electric-railway  man  who  is  not  getting  30  or  35  cents  per 
car-mile  even  under  the  5-cent  fare  would  feel  he  had  pretty  jwor 
lines. 

A  railway  which  announces  its  intention  to  continue  on  the  5-cent 
fare  despite  the  comparatively  sparse  traffic  must  have  done  some 
things  worth  quoting.  It  has.  On  December  1,  1918,  the  company 
began  installation  of  these  cars.  At  this  writing  31  safety  cai*s  are 
on  hand,  of  whicli  number  25  are  in  daily  use.  So  popular  and  eco- 
nomical have  these  cars  proved,  in  comparison  with  their  predeces- 
sors and  those  still  left,  that  the  company  has  recently  placed  an 
order  for  25  more  to  permit  all  of  the  service  in  Terre  Haute  to  be 
safety-car  service. 

The  most  significant  feature  about  this  second  order  is  that  the 
money  for  these  cars  is  being  furnished  by  Terre  Haute  and  Indian- 
apolis bankers.  The  company  had  to  take  the  chance  in  the  first 
instance,  but  it  is  able  to  show  the  local  people  what  it  can  do. 

Mr.  Warrex.  What  people  did  you  say? 

Mr.  Jackson.  Terre  Haute.  In  introducing  the  new  operation  the 
company  substituted  C  and  7-minute  intervals  for  10-minute  intervals 
between  cars.  Tlie  improvement  in  service  was  made  even  more 
marked  by  an  increase  in  the  schedule  speed  from  8  to  9  miles  an 
hour  to  10  and  even  11  miles  an  hour.  Inasmuch  as  these  cars  are 
arranged  for  fast  acceleration  and  fast  bniking,  near-side  entrance 
and  air-operated  doors  and  steps,  and  so  on,  the  schedule  speed 
actually  is  raised  without  an  increase  in  the  maximum  running  speed. 
In  other  words,  these  cars  are  faster  because  their  standing  time  is 


raOCEEDINGS  OP  FEDERAL  ELECTBIC  RAILWAYS  COMMISSION.    1595 

shorter.    That,  of  course,  is  a  very  important  item  in  operating  on  a 
street  with  six  or  seven  or  eigltt  stops  a  mile. 

The  effect  of  this  better  service  is  shown  by  the  reduction  of  jitneys 
from  25  to  a  mere  5  or  6,  and  it  is  doubtful  if  any  jitneys  will  be  left 
after  all  the  cars  are  of  the  new  type.  Still  mor«  obvious  i^  the  great 
increase  in  riding,  the  surest  sign  of  public  approbation.  During  tlie 
perioil  January  1-August  31,  1919,  the  safety  cars  of  Teri^  Haute 
were  responsible  for  53  per  cent  of  t\\e  mileage  run.  In  that  perio:l 
tlie  «afety-car  lines  had  an  increase  in  traffic  of  43  pei-  cent,  which 
dosely  paralleled  the  incretise  in  service  offered  to  the  public.  It 
will  be  shown  later  that  it  would  have  been  financially  impossible  to 
have  offered  this  increase  in  service  with  the  older  cars  operated  with 
two  men  and  no  automatic  and  up-to-dat<*  sjifety  appliances. 

Tlie  traffic  statistics  of  Teire  Haute  show  that  the  banner  yetir  of 
the  past  was  1913,  when  the  gross  earnings  from  the  passenger  trans- 
iwrtation  were  $435,000.  In  1918,  with  but  4  per  cent  of  the  mileage 
made  by  safety  curs,  the  appi'oximate  gross  was  only  $367,222,  on  the 
basis  of  4^  cents  per  revenue  pjissenger.  In  1919,  however,  tlie  esti- 
mated gross  will  be  $490,000  to  $500,000.  In  1913,  Terre  Haute's  pop- 
ulation was  66,000  and  its  average  riding  index,  or  rides  per  inhabi- 
tant per  annum,  on  the  basis  of  a  4i-cent  fare,  148.  In  the  meantime, 
the  number  of  lic^ensed  auto  vehicles  has  gone  to  3,600,  or  fivefold, 
and  the  riding  index  has  gradually  deci-eased.  A  53  pei-  cent  upi^licH- 
tion  of  modernized  ear  medicine  has  already  brought  the  riding 
increase  up  to  153,  and  there  is  no  doubt  tliat  a  100  i)er  cent  appli- 
cation in  1920  will  bring  it  beyond  the  palmiest  days  that  Terre 

Haute  ever  had. 

In  1917  the  Terre  Haute  lines  carried  8^66,472  revenue  passengei's 
and  but  8,160,492  revenue  passengers  in  1918  at  the  same  average 
fare  of  ^  cents.  The  up-to-date  operati<m  has  definitely  stoiiped  that 
tendency  downward. 

I  have  said  that  the  best  index  to  popular  approval  of  the  service 
is  the  increased  riding.  It  may  be  of  i^me  interest  to  add  that  Tcne 
Haute  is  a  strong  labor  town  with  two  newspapers  definitely  repre- 
senting labor  interests.  Also,  it  is  a  great  mining  center.  Also,  that 
the  cars  when  first  put  on  the  street  met  with  some  ridicule,  and  to 
this  day  are  referred  to  as  "  green  bugs.*'    Nevertheless,  they  made 

their  way. 

These  cars  have  certainly  justified  their  name  of  safety  car.  .For 
the  first  eight  months  of  1919  tlieir  average  accident  cost  of  1.000 
car-miles  run  was  $3.86,  compared  with  $13.51  by  the  older  cars  on 
the  basisof  865,000  safety-car-miles  run.  Tlie  average  cost  per  safety- 
car  accident,  including  i-epairs,  w-as  $16.72,  compai-ed  with  $65.78  by 
older  cars.  Mr.  Walker  estimates  that  the  saving  in  accidents  alone 
is  equivalent  to  a  return  of  5.9  i^er  cent  on  the  entire  investment. 
Further  experience  should  produce  still  better  record  as  the  opera- 
tors and  the  public  become  better  acquainted  with  the  si^eedier 
acceleration  of  these  cars.  Up  to  September  16,  191^,  Terre  Haute's 
safety  cars  made  1,000,000  miles  without  serious  trouble  from  either 
the  dectrical  or  air  equipment.  .        n^ 

No  difficulty  has  been  found  in  training  men  for  this  service.  Th© 
first  ofjci'ator  was  a  miai  who  has  been  at  the  front  end  as  raotorman 
ibr  82  y^irs,  or  a  h<M.*se-car  driver,  lio  doubt,  beyond  that.    The  second 


1596    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1597 


oldest  man  ffave  up  the  safety  car  temporarily,  saying  it  was  a  bit 
tvo  fast  for  Jiim;  but  he  soon  asked  to  be  restored.  Safety-car  runs 
are  now  coveted  by  the  men.  Platform  wages  in  Terre  Haute  are  39 
to  42  cents  an  hour,  with  5  cents  an  hour  additional  for  safety-car 
operators.'  Of  course,  other  railways  are  paying  higher  wages  than 
these,  but  we  must  not  forget  that  the  gross  earnings  per  car-mile  in 
Terre  Haute  are  also  very  low. 

In  addition  to  the  reduction  of  platform  expense  and  augmenta- 
tion of  revenue,  these  cars  are  also  very  economical  in  the  use  of 
power.  A  test  recently  conducted  by  students  of  Rose  Polytechnic 
showed  only  1.1  kilowatt  hours  per  car-mile  covering  traction,  light, 
lieat,  and  energy  for  all  the  air-operated  devices.  This  is  easily 
one-half  to  one-third  of  the  energy  requirements  of  big  cars  through- 
out the  United  States,  although  the  old  cars  of  Terre  Haute  are  not 
exceptionally  heavy.  With  such  low  energy  consumption  and  the 
advantage  of  a  modern-size  car,  it  is  unnecessary  to  try  such  un- 
satisfactory expedients,  unsatisfactory  to  the  public,  as  the  skip-stop. 

I  cry,  "Peccavi;"  I  have  sinned  on  that.  I  see  that,  too.  Of 
course,  the  smaller  car  contains  the  skip-stop  in  itself.  A  car  of 
that  size,  seating  32  or  35  passengers,  will  average,  of  course,  a  smaller 
number  of  stops  naturally,  so  that  you  approach  the  ideal  of  taking 
the  passenger  on  wherever  he  is  and  letting  him  off  wherever  he 
wants  to  get  off.  That  is  the  ideal  condition  which  can  not  be  ob- 
tained in  practice,  certainly  not  with  large  cai*s. 

Summarizing  the  costs,  Mr.  Walker  finds  the  following  covering 
the  first  six  months  of  1919 : 

Safety  cars  earned  20.62  cents  per  car-mile  and  cost  11.25  cents 
per  car-mile,  leaving  9.37  cents  per  car-mile  available  for  taxes,  fixed 
charges,  rentals,  dividends,  etc. 

Ordinary  cars  earned  21.95  cents  per  car-mile  and  cost  19.81  cents 
per  car-mile,  leaving  2.11  cents  for  taxes,  fixed  charges,  i*entals,  divi- 
dends, etc. 

The  charges  against  safety-car  operation  include  the  wages  of 
eight  crossing  flagmen.     There  are  a  number  of  grade  crossings  there. 

The  operating  ratios,  excluding  taxes,  of  the  two  types  of  cars 
compare  as  follows — these  are  for  the  months  of  1919: 


January.. 
February 

March 

AoVil 

May 

Juii3 


Per  cent. 
61.85 
58.17 
54.16 
53.05 
49.39 
51.76 


other 
cars. 


Per  cent. 
94.66 
89.82 
93.09 
86.56 
77.74 
102.23 


The  safety -car  ratios  are  reminiscent  of  the  good  old  days;  the 
other  ratios  spell  bankruptcy. 

It  may  be  worth  while  to  say  in  conclusion  -what  the  change  in 
operation  and  equipment  standards  promises  to  do  for  Terre  Haute 
based  upon  the  costs  of  1919  and  1918. 

Now^,  I  will  say  briefly  that  I  took  the  mileage  made  by  the  old 
cars  in  1918  and  have  found  that  at  the  costs  then  prevailing  thero 


was  available  for  taxes,  fixed  charges,  rentals,  and  dividends  $88,395. 
Had  the  same  cars  been  operated  in  1919,  to  give  this  100  per  cent 
service,  and  had  10  per  cent  more  mileage  been  given  with  those  old 
cars  to  take  care  of  the  natural  growth  of  the  traffic,  what  remained 
for  those  items  mentioned  of  taxes  and  so  on  would  have  been  only 
$41,837,  because  the  operating  expenses  had  increased  from  17  cents 
per  car-mile  to  19.81  cents  in  one  year,  cutting  more  than  half  the 
amount  available  for  these  various  fixed  charges  and  taxes. 

Had  it  been  possible  to  ^ive  100  per  cent  safety-car  service  in 
1919  based  upon  the  experience  of  these  nine  months  and  at  33 J 
per  cent  increase  in  mileage,  not  10  per  cent,  there  would  have  been 
available  $224,257,  because  the  safety-car  operation  cost  11^  cents 
and  not  19.84  cents.  Instead  of  giving  1,982,780  car-miles  with  the 
old  cars,  thepublic  would  have  received  2,393,360  car-miles  wuth  the 
new  cars.  Thus  the  old  cars  in  1910  would  have  left  only  $41,837 
for  the  several  charges  and  the  new  cars  $224,257,  leaving  a  difference 
of  $182,420  to  be  credited  to  the  installation  of  the  modern  car. 

Now,  the  question  arises 

Commissioner  Gadsden.  Are  you  including  in  those  figures  the 
interest  on  this  additional  investment? 

Mr.  Jackson.  I  would  not  say  that  that  is  so — yes,  fixed  charges. 
Mr.  Walker  said  that  was  the  case.  But  I  might  say,  in  making 
up  these  figures  it  w^as  necessary  for  Mr.  Walker  to  estimate  just 
what  he  should  charge  to  the  city  division  of  Terre  Haute.  There 
are  interurban  cars  there.  And  1  assure  you  that  Mr.  Walker  him- 
self would  be  about  twice  as  enthusiastic  as  I  am. 

Commissioner  Weiile.  How  about  depreciation?  That  is  rather 
an  uncertain  quantity  with  reference  to  a  new  car,  is  it  not? 

Mr.  Jackson.  In  my  talk  last  w^eek  wnth  Mr.  Walker,  that  did 
not  come  up,  but  when  I  spoke  to  him  a  couple  of  months  ago  I  said, 
"  Mr.  Walker,  you  want  to  assume  that  those  cars  are  going  to  last 
only  five  years.  Work  them  to  death  and  throw  them  on  the  ash 
heap."  He  said,  "That  is  one  of  the  things  I  am  arguing  about 
with  the  people  higher  up."  I  do  not  know  whether  he  is  assuming 
a  10  or  a  5-year  lite. 

Commissioner  Wehle.  Those  figures  which  you  just  read  show- 
ing a  margin  or  difference  between  the  ordinary  car  and  this  new 
type  of  car  were  based  upon  a  certain  assumption  with  reference 
to  depreciation  of  new  cars  ? 

Mr.  Jackson.  Oh,  yes;  that  is  correct. 

Commissioner  Wehle.  We  do  not  know  what  that  assumption  is. 

Mr.  Jackson.  I  am  not  certain  whether  it  is  5  years  or  10  years, 
but  it  really  does  not  matter  very  much,  because  here  is  a  car  that 
is  going  to  pay  for  itself  in,  say,  about  a  year  and  a  half,  and  the 
theory  that  1  hold  about  the  car  to-day  is  that,  in  view  of  the  appe- 
tite for  something  better  and  novel  in  transportation  that  the  auto- 
mobile has  brought,  the  street-car  ought  deliberately  to  be  made 
like  a  tin  can ;  run  to  death,  get  60,000  or  70,000  miles  out  of  it  per 
annum  instead  of  40,000,  if  that  is  what  you  get  out  of  a  good  car. 
In  my  analysis  of  what  railways  are  really  getting,  I  find  some  of 
them  get  as  low  as  15,000  miles  per  annum  out  of  a  car,  which  means 
they  are  making  three  cars  do  the  work  whioli  ought  to  be  dono 
by  one. 


16^    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COlVtMISSIOiT. 


i     > 
i     J 


Now,  the  obvious  question  which  must  come  to  anybody  is^  if  these 
things  are  true,  could  not  they  be  seen  by  analysis?  If  a  car  weiglis 
14,000  pounds,,  obviously  it  takes  much  less  energy  than  if  it  weighs 
3o,000  pounds.  If  it  has  one  man  does  it  not  cost  less  than  two? 
One  may  well  ask  why  the  safety  car  or  automatized-car-operation 
in  general  has  not  been  adopted  more  quickly.  I  would  like  to  add 
that  when  I  speak  of  the  safety  car,  I  do  not  always  mean  new 
cars.  A  new  car  is  generally  tlte  most  desirable  thing  to  have,  but 
there  are  a  great  many  existing  cars  which  can  be  changed  over  for 
amounts  ranging  from  $400  to  $750 — automatized,  as  I  would  say. 
Those  who  have  been  tardy  have  offered  three  reasons:  The  objec- 
tion of  the  public;  the  objection  of  the  platform  worker;  and  the 
difficulty  of  getting  new  money.    These  may  be  dealt  with  in  order. 

The  objection  ot  the  public  almost  invariably  has  arisen  in  those 
cases  where  the  railway  made  no  noticeable  improvement  in  the 
equipment  of  the  car  or  in  the  headway  between  cars.  On  the  con- 
trary, such  half-heai'ted  and  mistaken  attempts  at  one-man-car 
operation  were  often  accompanied  by  an  increase  in  fare.  The 
scores  of  safety  or  automatic-car  installations  now  in  service  surely 
prove  beyond  further  argument  that  the  public  welcomes  modern 


traveled  from  Florida  to  tlie  State  of  Washington  and  back  three 
times  to  study  tl>ese  things  on  the  ground,  and  I  assui-e  you  that  what 
I  say  is  not  merely  what  railway  men  told  me^,  but  what  I  got  from 
contact  with  the  public — the  riders. 

So,  too,  the  platform  man  has  objected  very  properly  to  that  kind 
of  one-man-cai'  operation  which  simply  doubled  his  labor,  causing 
him  to  run  at  a  lower  rate  of  speed  and  yet  incrciising  the  hazard  of 
accidents.  Sometimes  the  platform  men  have  objected  to  actual 
automatic  cai*s  on  the  grotmd  that  they  would  lose  their  jobs.  It  is 
obvious,  so  far  as  this  obj-eetion  is  concerned,,  that  ^ectric  railways 
ai*e  not  run  primarily  to  keep  the  maximum  number  of  men  in  em- 
ployment any  more  than  a  shoe  factory  would  refrain  from  using 
automatic  machinery  for  the  same  reason.  As  a  matter  of  fact,  this 
fear  of  losing  jobs  is  not  justified  by  i)ractical  results.  Continued 
two-men-car  operation  would  deprive  all  men  of  their  jobs  eventually 
on  most  of  our  railways.  On  the  other  liand,  one-man-car  operation 
not  only  j^ermits  the  continued  existence  of  the  electric  railway,  bnt 
also  permits  the  operation  of  poor  service  with  more  cars. 

You  have  seen  that  Terre  Haute  gives  at  least  33^  per  cent  more 
service  and  other  eompanies  are  giving  50  per  cent  more.  Tlie  ordi- 
nary situation  is  that  the  turnover  on  an  electric  railway  is  so  fast 
that  it  outstrips  the  production  of  the  safety  car,  with  the  net  result 
of  slopping  both  hiring  and  firing.  At  the  same  time,  the  men 
that  are  employed  on  these  cars  can  be  paid  a  higher  wage,  wlule 
future  employees  can  be  engaged  with  an  eye  to  their  ability  as 
salesmen  rather  than  to  their  ability  to  stop  a  30,000-pound  car  by 
brute  strength. 

In  other  worils,  in  the  past  the  platform  man  at  tlie  front  end 
partit'ularly  has  had  t©  be  a  man  of  physique— that  was  th«  first 
consideration.    When  you  hire  a  cashier  in  a  restaurant  you  do  not 


PROCEEDDfGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1599r 


look  for  physique,  or  when  you  hire  a  salesman  you  do  not  look  for 
])hysique.  The  automatizing  of  the  car  makes  it  possible  to  broaden 
the  scope  of  employment.  The  conditions  of  automatic-car  opera- 
tion are  so  much  more  agreeable  than  the  old-style  car  that  in  the 
future  we  may  expect  a  much  slower  rate  of  turnover  than  in  the 
past.  The  car  platform  will  then  be  no  longer  the  last  resource  of 
the  man  looking  for  a  job. 

The  objection  of  the  railway  that  it  has  no  money  for  either  re- 
habilitated or  new  automatized  cars  is  freqiiently  a  valid  one,  but  it 
does  not  offer  an  insuperable  obstacle.  The  losses  due  to  compe- 
tition would  have  bought  a  great  many  new  cars,  if  the  persistence  of 
such  competition  had  been  realized  in  time  and  met  by  increased 
service.  However,  in  most  cases  it  is  not  essential  to  have  new  cars, 
although  the  latter  are  more  economical  to  run  and  better  traffic 
magnets.  For  $400  or  $500  up  to  $750  it  is  possible  to  automatize 
any  car,  the  lower  figures  applying  to  a  single-end  car  already 
equipped  with  air  brakes.  With  such  equipment  a  saving  of  $8  a 
day  can  be  secured,  if  we  assume  a  16-hour  day  and  50  cents  an 
hour  pay  for  the  superseded  second  man  of  each  shift.  At  least  75 
per  cent  of  the  existing  cai^s  ouglit  to  be  converted  to  one-man  labor- 
less-car  operation  in  this  manner. 

If  the  railway  can  raise  the  money  for  new  cars,  it  will  not  only 
make  a  great  saving  in  labor  expense  but  also  secure  a  great  reduc- 
tion in  power  cost.  The  reason  i»  that  it  will  have  to  propel  only 
400  pounds  instead  of  800  to  1,200  pounds  of  dead  weight  per  seated 
passenger.  So  striking  have  been  tlie  savings  of  these  li^it- weight 
one-man  cars  that  arrangements  have  been  made  to  sell  them  on  the 
car-equipment  trust  plan ;  but  as  I  have  already  indicated  in  the  case 
of  Terre  Haute,  one  more  demonstration  is  sufficient  to  insure  the  rais- 
ing of  money  for  more  cais  at  home.  Indeed,  there  is  practically  no 
risk  in  loaning  money  for  safety-car  installation,  because  the  equip- 
ment is  standard  and  can  be  used  elsewhere  should  the  first  buyer 
fail  to  make  good.  The  great  adaptability  of  tlie  safety  car  has 
been  brought  out  recently  in  a  most  effective  way  through  a  moving 
])icture,  which  shows  the  car  in  actual  service  under  a  great  variety 
of  conditions  of  traffic. 

I  lielped  to  take  that  picture,  and  it  was  very,  very  little  staged. 
All  the  traffic  scenes  are  genuine  scenes — the  people  did  not  know 
the}^  were  being  pictui*ed.  That  movie  will  be  on  view  at  the  con- 
vention next  week.    I  wish  you  could  all  see  it. 

Hitherto  we  have  considered  only  the  reduction  in  operating  cost 
afforded  by  one-man  car  operation  of  the  right  kind.  It  is  in  order 
now  to  show  why  it  also  increases  the  gross  earnings. 

In  the  old  days  when  the  sti*eet  railway  Avas  a  monopoly,  there  was 
little  belief  in  such  a  creature  as-  riding  habit.  It  is  true  that  much 
effort  was  made  to  secui*e  park  and  other  pleasure  riding,  but  few 
inanageis  tried  to  attract  the  more  substantial  300-days-a-year  rid- 
ing, tlirough  such  devices  as  commutation  tickets,  special-hour  shop- 
ping tickets,  cut-rate  tickets  for  any  liours,  etc.  The  flat  toe  also 
stood  in  the  way  of  building  up  short-haul  ti^affic  tdirough  the  pro- 
vision of  zone  fares. 

Nothing  could  illustrate  tlie  old  viewpoint  better  than  the  vogue 
of  tha  big  car.    Operatoi^  saw  that  the  larger  tlie  cai-,  tlie  less  wa& 


•ii 


i    '. 

;i 

■  ^* 
■'  f 


1600    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

the  ratio  of  platform  cost.  They  did  not  see  that  the  lengthening  of 
headway,  which  followed  the  use  of  bigger  cars,  retarded  and  discour- 
aged the  growth  of  the  most  desirable  traffic — the  off-peak  business. 
Many  operators  seemed  to  see  nothing  but  the  rush  hour,  overlooking 
the  fact  that  a  car  moderately  filled  in  each  direction  is  far  more 
l)rofitable  than  a  car  overloaded  in  one  direction  and  empty  in  the 
other.  This  rush-hour  viewpoint  accounted  also  for  the  large  pro- 
portion of  longitudinal  seats  which  do  facilitate  ingress  and  egress 
and  do  permit  a  large  load  of  standers,  but  which  are  the  last  thing 
to  use  to  attract  voluntary  riding.  The  desire  of  each  railway — 
whether  big-town  or  small-town — ^to  use  the  largest  care  its  clearances 
permitted  was  the  prime  cause  of  the  lack  of  car  standardization 
that  added  hundreds  of  dollars  and  months  of  delay  to  the  cost  of 
every  car. 

With  the  coming  of  the  private  auto  and  the  jitney  in  large  num- 
bers electric  railw^ays  began  to  realize  that  the  big-car,  long-head- 
way system  had  failed  to  secure  anything  like  saturation  of  traffic. 
Thus  came  the  32-35-seat,  short-headway,  one-man  car  in  place  of 
the  50-seat  two-man  car.  These  cars  did  more  than  drive  out  the 
jitney;  they  created,  as  well  as  recaptured,  traffic.  Their  work  was 
a  hint  that  no  one  can  foresee  just  how  much  the  riding  public  will 
do  until  a  trial  is  made.  In  many  cities  the  increase  in  patronage  has 
run  neck-and-neck  with  the  increase  in  service  offered. 

Increased  service  with  any  kind  of  car  would  bring  more  travel, 
but  there  is  no  doubt  that  the  public  patronizes  the  service. with  new 
cars  still  better.  This  is  natural,  in  view  of  the  taste  for  novelty 
introduced  by  the  auto.  People  who  compare  a  20-year  to  30-3^ear 
street-car  with  a  2  or  3-year-old  auto  are  not  likely  to  use  the  street- 
car quite  so  readily  as  in  the  old  days.  Changes  in  competing  forms 
of  transportation  are  so  fast  and  furious  that  the  electric-railway 
cars  will  have  to  be  built  upon  the  same  basis  of  intensive  use  for  a 
few  years  and  then  the  scrap  heap,  in  favor  of  the  latest  design 
available.  If  cars  are  built  of  extremely  light  materials,  as  in  auto- 
mobile practice,  and  used  not  more  than  five  years,  the  railway  will 
get  its  money  back  quickly  enough  to  be  able  to  present  the  riding 
public  with  attractive  novelties  instead  of  tinkering  and  retinkering 
power-w^asting  and  track-ruining  cars. 

Gentlemen,  you  will  hardly  believe  how  much  money  has  been 
put  into  some  of  the  cars  that  you  see  on  the  streets  to-day.  They 
may  have  cost  $2,500  apiece,  and  at  least  $2,500  more  has  been 
put  into  them  at  one  time  or  another. 

This  does  not  preclude  standardization,  for  each  new  type  of 
automatic  car  will  simply  have  a  new  set  of  improvements  from  year 
to  year,  as  is  the  case  with  automobiles. 

The  zone  fare  as  a  second  way  of  increasing  patronage  and  rev- 
enue. 

We  have  seen  that  frequent  service  with  one-man  light-weight  cars 
is  by  all  odds  the  surest  road  to  decreased  costs  and  increased  rev- 
enue. There  is,  however,  a  second  way  of  more  limited  application, 
and  that  is  the  sale  of  transportation  according  to  quantity — in  other 
words,  the  zone  system. 

W^hile  a  pioneer  in  advocating  the  modern  one-man  car,  I  also 
held  the  opinion  that  the  increasing  flat  fare  was  a  poor  way  of 


PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION.    1601 

securing  more  revenue,  since  it  would  tend  to  drive  away  the  short, 
profitable  rider  and  discourage  off-peak  traffic  generally.  So  long 
as  the  5-cent  fare  met  the  desires  of  the  electric-railway  operator 
of  America,  little  thought  was  given  to  the  distinction  between  long 
and  short  riders,  compulsory  riders  or  voluntary  riders  and  the  pro- 
poitions  of  each.  The  same  people  who  received  more  than  their 
money's  worth  were  also  expected  to  pay  for  less  than  their  money's 
worth.  They  didn't,  of  course.  With  the  coming  of  increased  flat 
fares  the  distinction  between  the  two  kinds  of  riders,  or  rather 
the  discrimination  against  the  short  rider,  became  aggravated.  The 
losses  in  traffic  showed  that  even  under  the  5-cent  flat  fare  there  were 
10  to  20  per  cent  of  higlily  profitable  riders  who  did  not  have  to 
use  the  street  railway.  That  it  might  be  worth  while  to  retain  the 
5-cent  rate  for  these  riders  occurred  to  a  few  operators  w-ho  installed 
the  central-area  system  for  lack  of  acquaintance  with  true  zone  sys- 
tems. The  central-area  system  retained  the  5-ceMt  riders  of  the 
central  business  district,  but  did  not  recapture  the  short  riders  in 
other  districts. 

Nor,  of  course,  did  it  make  allowance  for  those  cities  in  which 
there  are  a  number  of  neighborhood  centers.  Pittsburgh  is  an  ex- 
ample of  that.  More  people  are  carried  in  the  district  outside  of 
the  5-cent  zone  than  in  it,  1  believe. 

Realizing  that  the  need  for  more  data  on  zone  systems  w  ould  soon 
arise,  I  made  a  detailed  study  of  fare-collection  j)ractices  on  the 
ground  in  Great  Britain  and  Ireland  under  the  auspices  of  the  Elec- 
tric Railway  Journal.  Later  I  supplemented  these  studies  by 
analyses  of  zone-fare  operation  in  Australia  and  New  Zealand  where 
the  conditions  of  living  are  equal  to,  or  better,  than  those  in  tho 
United  States. 

The  first  thing  that  I  gathered  from  these  studies  was  that  the 
true  zone  fare  inevitably  brings  out  a  large  proportion  of  people  who 
ride  one  mile  or  less ;  and  this  has  been  found  to  apply  under  a  great 
variety  of  topographical  density  and  other  conditions  ranging  from 
the  tenement-house  condition  of  Glasgow  through  the  smaM-house 
cities  of  England  to  the  more  scattered  construction  of  the  newer 
cities  of  Australia.  This  indicates  clearly  that  the  minimum  fare 
must  be  one  that  will  attract  the  walker.  In  Great  Britain  this 
minimum  fare  is  usually  one  penny;  in  Australia  with  conditions 
closer  to  our  own,  it  is  more  likely  to  be  IJ  pence  or  3  cents  for  an 
initial  zone  up  to  1^  miles  or  so. 

If  any  American  city  of  reasonably  compact  population  can  show 
only  10  to  20  per  cent  of  its  riders  within  a  1-mile  ride,  it  is  obvious 
that  it  would  do  something  with  a  lower  fare  for  the  shorter  distance. 
It  would  be  unwise  to  specify  any  particular  scale  of  fares  for  uni- 
versal application.  In  many  towns,  there  might  be  but  few  situa- 
tions where  the  additional  revenue  from  a  differential-fare  system 
would  make  the  extra  cost  and  complication  worth  while.  I  would 
always  wish  first  to  exhaust  the  teclinical  resources  of  the  art.  Ideal 
places  for  the  zone  fare  beginning  with  a  rate  to  attract  present 
walkers  are  such  cities  as  Boston,  Providence,  New  York,  Philadel- 
phia, thereby  making  the  street  railway  of  maximum  value  to  the 
public. 

100043"— 20— VOL  2 39 


1602    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK. 

I  just  mention  tJiose  to  be  specific.    Cities  that  are  not  of  that  type 
ftie  San  Diego  and  East  St.  Louis. 

The  second  tiling  gathered  from  studies  of  the  zone  fare  was  that 
Hiere  is  little  or  no  connection  between  the  zone  fare  and  congestion. 
Zone  fares  are  found  in  almost  every  kind  of  community.  The 
character  of  housing  often  appears  to  be  a  national  characteris- 
tic, as  the  tenements  of  French  cities  and  the  individual  homes  of 
Knghsh  one^3.  Furthermore,  the  expansion  of  American  cities  has 
been  promoted  largely  by  the  ease  of  securing  land,  there  being  no 
century-old  estates  to  interfere.  Where  a  city  has  had  a  zone  faro 
Irom  the  beginning,  it  must  be  obvious  that  the  higher  fare  on  the 
outskirts  is  offset  m  some  measure  by  the  lower  cost  of  land.  In  tho 
United  States,  contrariwise,  the  realty  man  has  fattened  upon  the  ex- 
pansion of  the  electric  railways  far  beyond  the  true  needs  of  the 
community.  The  municipality  itself,  as  Dr.  Whitten  has  pointed  out, 
has  also  been  paying  a  bonus  to  the  realty  operator  in  over-rapid  ex- 
tensions of  its  streets,  water  system,  and  other  utilities.  In  any 
event,  it  is  noticeable  that,  under  a  correct  zone  system,  the  fare  is 
not  absolutely  cumulative,  so  that  the  further  a  man  lives  away  from 
the  center,  the  less  his  fare  per  mile.  For  example,  Australian  roads 
make  a  concession  to  the  suburbanite  just  as  the  companies  and  the 
municipal  tramways  of  London  do. 

Conimissioner  Wehu:.  How  is  that  done  ?  In  what  form  is  that 
brought  about? 

•  ^r-  Jackson.  In  Australian  cities  they  follow  this  general  prac- 
tice:  Them  will  be  three  fares.  In  Sydney,  I  believe  there  are  five 
sections.  The  maximum  fare  is  the  fare  for  three  sections.  A  man 
who  rides  four  sections  or  five  sections  does  not  pay  any  more. 

In  London,  the  maximum  fare  of  the  London  County  Council 
Tramways  vis  4  pence— 8  cents.  That  applies  whether  you  are  ridin<r 
eight  sections  or  two  sections  to  a  zone— two  laps,  or  any  distanc? 
beyond  that. 

The  reason  is  this :  That  the  total  number  of  people  riding  that 
inaximum  distance  is  too  small  to  bother  with  the  printing  of  a  spa- 
C/iai  iiicivei/. 

I  will  come  to  that  in  discussing  the  Public  Service  System  in  this 
country.  "^ 

Commissioner  Wehle.  The  cities  in  Australia  where  the  zone  sys- 
tem IS  m  tovce  are  how  many  ? 

^y-  'Jacksox.  Practically  all  of  them.  The  cities  that  I  have 
specifaed  here  are  Sydney,  Melbourne,  Brisbane,  and  Adelaide  All 
have  the  zone  system.  Of  course,  a  very  small  city,  naturally  would 
not  have  a  zone  system,  because  if  you  have  not  got  lines  of  at  least 
two  miles  long  there  is  no  use  subdividing  them. 

Commissioner  Wehle.  How  large  a  city  is  Adelaide? 

Mr.  Jackson.  I  have  these  populations  right  here.    It  is  145,000  • 

Brisbane,  170,000;  Melbourne,  708,000;  and  Sydney,  750,000. 

Commissioner  Wehle.  Did  you  obser\'e  those  cities  yourself? 

Mr  Jackson.  No.  My  analysis  of  Australia  is  made  from  official 
repoi*ts. 

Commissioner  Wehle.  Then,  when  you  say  that  the  zone  fare  has 
no  relation  to  congestion,  you  do  not  base  that  on  your  observation 
of  the  cities  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1603 

Mr.  Jackson.  Xot  in  the  case  of  Australia,  because  Australian 
cities,  if  you  have  examined  photographs  of  those  cities,  and  seen 
them  in  the  movies,  you  will  observe  that  they  are  built  pretty  scat- 
tered, like  any  new  American  city.  .,,.,,  n.,    x  •    ^ 

The  British  custom  is  to  live  in  single-family  houses.  Ihat  is  true 
even  in  the  poor  sections  of  I^ndon,  lilvc  Westham.  They  do  not  like 
to  live  in  tenements.  It  is  true  that  in  the  last  few  years  there  has 
been  excessive  crowding,  but  it  is  a  curious  fact  that  when  I  was  in 
Dublin  and  talking  to  the  city  treasurer  about  housing,  he  sprang 
this  article  on  me :  "  Housing  employees,  an  important  factor  m  labor 
maintenance," '  from  "  Industrial  Management  for  December,  191  i ; 
and  the  author  speaks  about  places  in  this  country  like  Youngstown, 
Bridgeport,  lots  of  cities  through  New  England  and  the  East,  and 
even  in  California,  where  the  people  are  terribly  overcrowded ;  and  if 
you  have  been  in  New  Bedford  and  places  of  that  sort,  you  know  that 
there  is  no  lack  of  space.  It  is  due  to  greed  by  the  landlords,  or  some 
other  condition  which  they  take  advantage  of.  I  was  in  Youngstown 
a  few  days  ago,  and  they  said,  "  Yes;  this  is  one  of  the  towns  whei-e 
the  people  sleep  in  beds  in  relays — 8  hours  to  a  shift." 

Commissioner  Wehle.  Those  are  all  munition  centers  that  you 
have  mentioned,  mostly,  are  they  not— Youngstown  and  Bridgeport, 
and  what  other  towns  were  there  that  you  mentioned  ? 

Mr.  Jackson.  He  mentions'  California,  Texas,  Pittsburgh,  Boston, 
Fall  Kiveiv  Bridgeport.    I  do  not  know  that  Fall  Eiver  was  a  mu- 
nition center,  but  we  can  grant,  of  course,  that  the  munition  condi- 
,    tion  aggravated  conditions. 

Commissioner  Wehle.  It  was.  Then  we  can  hardly  use  those 
places  as  illustrative  of  the  idea  that  zone  fares  have  no  relation  to 
congestion,  and  tliat  we  are  just  as  apt  to  have  congestion  without 
zone  fares? 

Mr.  Jackson.  Yes. 

Commissioner  Wehi^.  Those  are  not  normal  instances? 
Mr.  Jackson.  For  instance,  if  you  are  traveling  thix)ugh  Great 
Britain  you  will  notice  this  condition :  You  will  find  Edinburgh  and 
Glasgow^  are  cities  of  tenement  houses.  That  is  ascribed  partly  to  the 
French  influence,  because  the  French  and  the  Scotch  were  very  inti- 
mate before  the  union  with  England,  and  it  is  ascribed  in  the  case  of 
Edinburgh  to  a  topographical  condition,  a  condition  of  defense.  The 
houses  were  built  around  the  fort,  the  citadel  on  the  hill. 

You  go  to  Aberdeen,  and  you  will  find  the  typical  house  is  a  one- 
family  house.  The  so-called  tenement  in  Aberdeen  is  a  gray  granite 
house,  six  families,  three  floors,  two  families  to  a  floor. 

Go  through  England  and  in  English  cities,  as  a  rule,  you  will  find 
one-family  houses.  It  is  true  they  are  solidly  built  up.  The  best 
parallel  I  can  give  you  is  to  look  at  Philadelphia,  Baltimore,  Tren- 
ton, and  Richmond,  and  you  will  have  a  picture  of  a  British  city  as 
regards  housing — not  big  houses  but  compact  development. 

Commissioner  Wehle,  Those  cities  were  likely  built  before  the 
tramways  came  into  existence  on  any  large  scale,  were  they  not  ? 

Mr.  Jackson.  I  was  astonished,  Mr.  Commissioner,  to  see  the  rapid 
growth  of  some  of  these  cities  in  tlie  last  50  years.  Yes ;  some  before 
the  tramways,  but  the  growth  of  a  great  many  cities  has  been  rapid 
with  the  coming  of  the  manufacturing  era,  from  about  the  year 


1604    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

1825  or  1830.    Glasgow  lias  grown  tremendously,  and  Sheffield  and 
J^eeds;  they  were  all  comparatively  small  places. 

C  ommissioner  Wehle.  And  Manchester? 

Mr.  Jackson.  And  Manchester. 

I  would  say  this—what  I  was  going  to  come  to  is  a  readjustment 
period  IS  the  thing  that  causes  difficulties. 

There  is  no  doubt  that  the  change  from  a  flat  fare  in  this  country 
to  a  zone  fare  is  going  to  upset  and  disturb  realty  values;  but  the 
question  is,  arr  the  electric  railways  to  go  on  the  rocks  because  the 
man  out  here  has  property  that  is  worth  double  on  account  of  the 
5-cent  fare? 

Commissioner  Weiile.  We  are  not  concerned,  are  we,  with  realty 
values  so  much  m  this  country,  or  even  with  the  effect  on  the  railway, 
as  we  are  with  the  happiness  of  the  people  that  live  in  the  cities  and 
their  healthful  conditions  of  life?  But  the  community,  presumably, 
can  pay  whate^;er  is  necessary  to  get  that,  and  if  it  has  to  pay  more 
for  the  street  railways  in  order  to  have  them  operate  under  conditions 
that  are  more  conducive  to  healthful  city  life,  presumably  it  will  do 
It— the  community  will  do  it  when  it  learns  what  the  real  bearing  of 
the  facts  indicate.  ^ 

I  just  suggest  to  you— it  is  only  my  pei-sonal  view— that  we  could 
Tvell  approach  this  question  from  the  point  of  view  of  the  health  of 
the  community  and  its  welfare,  when  we  are  discussing  the  effect  of 
a  zone  system  upon  the  life  of  the  people.  It  is  not  from  the  point  of 
view  of  the  realty  values.    It  is  from  the  point  of  view  of  health. 

Mr.  Jackson.  That  aspect  has  been  treated  very  ably  by  Dr  Whit- 
ton  m  his  testimony  in  the  public-service  case.  Dr.  ^\^iitten  is  the 
city.plannmg  expert,  and  his  remarks  upon  the  influence  of  zone 
fares  were  predicated  exactly  on  the  items  you  have  mentioned— the 
general  welfare  and  healthfulness  of  the  community. 

Dr.  Whitten  pointed  out  that  there  had  been  an  overexpansion,  a 
spotted— I  think  he  termed  it— a  spotted  development  in  too  many 
Americun  cities.  As  an  example,  I  may  mention  East  St.  Louis, 
wliich  I  have  visited  a  number  of  times.  You  go  to  East  St.  Louis 
and  you  come  upon  a  clump  of  houses— a  dozen  houses,  and  then 
the  trolley  line  runs  three-quarters  of  a  mile  to  a  mile  of  absolute 
prairie  and  then  there  is  another  clump  of  houses,  and  then  more 
prairie,  and  m  the  meantime  the  track  is  going  out  there  and  has  to 
be  paid  for,  and  the  people  at  the  end  of  that  6  or  7  miles  expect  to 
keep  on  getting  a  o-cent  fare. 

Commissioner  Wehle.  So  you  use  the  zone  fare  in  that  ca^e  as 
a  tool  for  the  purpose  of  condensing  the  population  and  brinmnff 
about  a  uniform  development? 

Mr.  Jackson.  A  more  uniform  development. 

Commissioner  Wehle.  By  the  same  token  that  can  do  that  and 
produce  such  a  magic  result  as  that  with  a  zone  fare,  does  it  not 
necessarily  follow  that,  by  applying  the  zone  fare  in  a  city  that  is 
already  uniform  y  enveloped,  you  are  going  to  bring  another  com- 
pensation  into  the  life  of  that  community  and  augment  the  tene- 
ment evils?  ^  e 

Mr.  Jackson.  In  the  recent  discussions  in  England  on  fares  a 
point  was  made  somewhat  along  those  lines.  Some  of  the  managers 
actually  argued  that  the  very  low  minimum  rate  of  Glasgow    for 


ij 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1605 

instance,  tended  to  keep  the  people  down  in  the  center.  I  will  say 
that  is  ridiculous,  after  having  been  there.  I  was  surprised  that 
a  British  manager  should  have  made  that  statement.  Mr.  Dal- 
rymple,  manager  of  the  Glasgow  tramways,  contradicted  him.  As 
a' matter  of  fact,  in  Glasgow  the  house  that  is  built  at  the  extreme 
end  of  the  town  is  exactly  the  same  kind  of  a  house  that  is  in  the 
center  of  the  town.  And  the  city  of  Glasgow  is  building  a  number 
of  tenements,  or  apartments,  as  they  call  them,  which  may  be  rented 
out  to  people  who  are  earning  a  certain  minimum.  The  ordinary 
artisan  can  not  get  into  those  houses.  Yet  those  houses  are  out  at 
Kennvhill,  among  other  places,  which  is  away  out— 4  miles  or  so — 
and  for  them  the  diiference  is  made  up  in  the  rent.  The  rent  is 
less;  one  thing  offsets  the  other.  The  realty  man  in  the  United 
States  has  been  a  parasite  on  the  electric  railway  and  he  has  been 
a  parasite  so  long  that  he  regards  that  as  a  God-given  right  or 
privilege.  Mr.  Stanley,  in  Cleveland,  has  inaugurated  the  policy 
with  regard  to  extensions  that  is  along  the  right  lines.  He  makes 
the  realty  people  pay  for  it. 

Commissioner  Wehle.  Take  your  case  of  the  tenement  house  or 
your  apartment  house  that  the  city  of  Glasgow  is  building  out  on 
the  outskirts  of  the  town,  where  the  children  can  presumably  get 
better  and  healthier  living  conditions  and  less  noise,  and  where  the 
general  surroundings  for  family  life  are  probably  more  healthful ; 
and  it  is  the  fact  that  the  ordinary  Glasgow  type  of  multiplis- 
family  house  is  used  in  building  out  there  at  all  a  conclusive  argu- 
ment against  the  proposition  that  you  get  a  better  kind  of  life  if 
you  allow  people  to  move  out  a  long  distance  from  the  center 

Mr.  Jackson.  No  ;  my  contention  is  there  that  it  is  a  habit.  They 
brought  some  British  munition  workers  to  Glasgow,  and  these  peo- 
ple would  not  live  in  those  houses  under  any  circumstances,  and 
they  had  to  build  single  individual  cottages  for  them  on  the  Clyde, 
because  they  were  Englishmen,  and  an  Englishman's  house  is  his 
castle.  That  is  a  matter  of  habit.  Why  is  it  in  the  city  of  New 
York  the  apartment  house  has  followed  the  subway?  When  I 
was  a  kid  in  Brooklyn  we  did  not  have  any  apartment  houses.  It 
was  hard  to  get  over  to  Brooklyn.  You  had  to  take  a  horse-car  ride 
across  Manhattan,  and  a  ferry,  and  you  paid  3  cents  on  the  ferry 
and  might  have  to  take  two  more  horse-car  lines  to  get  to  your 
destination  in  Brooklyn,  and  we  had  no  tenements  in  Brooklyn. 
Wherever  the  rapid-transit  lines  go  in  the  Bronx  or  Brooklyn  the 
great  bi^  apartment  houses  go  with  them,  and  the  answer  is  that 
the  people  m  New  York  are  used  to  living  in  apartment  houses, 
and  when  they  leave  Manhattan  they  do  not  want  to  go  to  a  cottage 
and  build  a  fire  and  do  a  lot  of  other  things  that  they  have  lost  the 
faculty  or  desire  for  doing.  They  simply  want  to  get  into  an  apart- 
ment nouse  that  has  still  less  work  for  them  to  do,  so  that  the 
Manhattanese  has  the  apartment-house  habit,  just  as  the  Phila- 
delphian  has  the  house  habit. 

Commissioner  Wehle.  Is  not  perhaps  one  of  the  reasons  the 
apartment  house  follows  the  traction  lines  this,  that  just  as  fast 
as  the  traction  lines  goes  out  to  your  suburban  community  real-estate 
values  go  away  up  at  once  I 


1606    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Jacksox.  That  is  true  in  the  case  of- 


Commissioner  \\  ehle.  And  the  little  fellow  can  not  afford  to 
build  a  six-rooni  house  out  on  land  that  has  received  such  a  tre- 
mendous accretion  m  value,  and  the  only  man  that  can  build  on  that 
lot  IS  some  fellow  who  has  enough  capital  to  build  an  apartment 
Jiouse,  and  he  breaks  that  up  into  apartments  and  rents  it  out,  and 
this  i>Gor  fellow  who  may  be  seeking  peace  but  can  not  find  it 

Sdit        ''''''  """^  ^'^"""^  ''^'^''^'  ^"''"^^'  ^"^  ^'"'^  ''''  ^^"   ^^*' 

Mr.  Jackson.  Well,  the  average  New  Yorker  does  not  want  to 
ine  in  anything  but  an  apartment  house.  I  know  that  personally. 
But  to  go  on,  I  found  that  this  was  the  case,  that  national  char- 
acteristics, and  in  a  smaller  measure  local  characteristics,  have  a 
gi-eat  deal  to  do  with  housing.  Now,  on  the  Continent  you  will  find 
the  smallest  village  in  Switzerland  or  France  consists  of  three  or 
four-story  buildings  all  huddled  together  and  any  amount  of  land 
around  them.  It  is  a  survival  of  feudal  times.  "^It  is  a  desire  to 
economize  on  fuel  and  building  material  and  so  on,  and  that  is  a 
habit  carried  down  from  generation  to  generation. 

bor  example,  Berlin,  so  far  as  the  street  railways  are  concerned, 
IS  a  unit-fare  town ;  10  pfennigs  was  the  fare,  except  on  some  of 
the  suburban  lines,  where  it  was  15.  Hamburg  was  a  unit-fare 
town;  nothing  but  great  big  solid  houses  as  far  out  as  you  could 
go  five  or  six-storv'  liouses,  and  the  onlv  place  vou  would  see  indi- 
virlual  houses  was  known  as  millionaires'  row,  for  good  reasons. 
(>n  the  other  hand,  on  down  to  Cologne,  a  much  smaller  city,  it  also 

has  the  same  kind  of  houses.    Go  to  a  place- 

Commissioner    Meeker.  Take    Leipsic.      Leipsie    is    the    second 
largest  city  m  (xermany.    That  has  the  zone  system,  and  there  vou 
have  simply  a  collection  of  village  communities  widely  scattered. 
Mr.  Jackson.  That  is  -soutliern  Gei-many. 
Commissioner  Meeker.  Yes. 
Mr.  Jackson.  jSo  it  goes. 

Commissioner  Meeker.  As  a  matter  of  fact,  have  vou  found  such 
congestion  in  the  zone-fare  towns  in  Europe  as  vou  find  in  our  flat- 
lai-e  towns  m  America? 

Mr.  Jackson  Well,  you  could  not  find  anything  worse  than  tl^ 
Cherry  Hill  section  ot  New  York. 

commissioner  Meeker.  Have  you  been  in  any  of  our  minino^ 
towns  in  the  W  est,  the  copper-mining  towns  I  "^ 

Mr.  Jackson.  No  ;  I  have  not.  I  have  been  in  Butte  i^nd  cities 
ot  that  size— Butte  and  Deer  Lodge,  but  of  coui-se  Deer  Lodge  is 
not  a  congested  place. 

C^ommissioner  Meeker.  The  reason  I  mention  it  is  that  for  the 
reason  that  you  pomt  out  in  some  of  those  communitias  the  con- 
gestion of  population  is  simply  appalling  and  has  nothing  what- 
ever to  do  with  street  railways,  fiat  fares,  or  zone  fares. 

The  Chairman.  Have  you  completed  your  formal  statement,  Mr. 
Jackson  ?  ' 

Mr.  Jackson.  No;  I  have  not. 

Tlie  «i>y  serious  thing  we  have  to  consider  is  that  in  chanffinff 
froui  a  flat  to  a  zone  system  we  necessarily  disturb  die  realty  values 
of  a  generation.  Hence  it  is  wise  to  make  the  changes  in  fare  as 
reasonable  as  the  conditions  permit,  but  it  would  not  be  wise  to 


fi 


PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION.    1607 

refrain  from  increasing  fares,  because  such  increase  would  deprive 
realty  ownei^  of  unearned  increments,  unless  the  community  itselt 
is  prepared  to  make  up  the  electric-railway  deficits. 

The  third  thing  gathered  from  studying  the  zone  fare  m  practice 
was  the  uselessness  of  comparing  track  mileage  to  population  lor 
the  purpose  of  comparing  the  zone  fare  versus  the  universal  fare. 
The  older  European  cities  show  a  comparatively  small  amount  of 
tmcks  to  population,  whether  they  have  flat  fares  or  zone  fares. 
The  new  American  cities  and  new  Australian  cities  show  liberal 
trackage,  although  the  Americans  have  flat  fares  and  the  Australians 
have  zone  fares.    All  in  all,  it  is  true  that  European  cities  have  too 
little  track,  whereas  American  cities  certainly  have  too  much,  be- 
cause formerly  competitive  railways  still  have  their  tracks  m  place, 
although  they  have  long  been  consolidated.     A  reduction  m  track 
mileage  would  be  a  healthful  blood-letting   for  many  American 
cities.    I  may  add  that,  wiiile  British  ^cities  have  so  little  track  in 
proportion  to  population,  it  does  not  appear  that  their  operators 
feel  the  need  for  much  more.    The  tendency  is  to  serve  the  suburbs 
first  with  buses  or  trackless  trolleys  and  to  refrain  from  putting 
down  costly  track  until  the  population  is  dense  enough  to  pay  for, 
say,  a  10-minute  lieadway.    This  is  common  sense.    In  other  words, 
instead  of  having  that  development  out  in  East  St.  Louis  with  its 
very  costly  track  construction,  running  out  for  miles  and  miles, 
because  there  was  too  much  optimism  or  too  much  pressure  fi*om 
realty  developers,  you  would  put  down,  as  the  Englishman  does, 
two   or  three  buses  and   say  we  will   give  a  bus  service   every  30 
minutes  and  if  the  population  out  here  grows  we  aviII  put  on  some 
more  buses,  and  bye  and  bye  we  will  put  on  a  trackless  trolley  or 
perhaps  put  down  a  track  when  we  know  it  is  there.    We  are  not 
going  to  take  a  chance  on  building  something  that  is  going  to  be  a 
dead  dog  on  our  hands  afterwards.  ^  , 

The  fourth  thing  to  be  gathered  from  a  close  study  of  British  prac- 
tice is  that  the  success  of  the  zone  fare  depends  as  much  upon  close 
headways  as  upon  a  short  fare  for  a  short  ride.  It  is  obvious  that 
people  will  not  wait  10  to  15  minutes  in  order  to  ride  one-fourth  of 
a  mile  to  a  mile.  In  Glasgow,  where  the  minimum-fare  zone  is  1.16 
miles,  fully  02  per  cent  of  the  passengers  ro<le  within  that  distance 
last  year,  and  it  is  a  long  city,  along  a  river  valley;  and  it  must  be 
clear  that  they  would  not  have  done  so  much  short  ridmg  if  the 
car  service  had  been  infrequent.  It  does  not  follow,  of  course,  that 
the  cai*s  themselves  are  as  good  as  our  own  in  comfort  and  uphol- 
stery. Generally,  they  are  not,  although  the  provision  of  cross- 
seats  on  the  upper  declis  and  permission  to  smoke  there  are  much 
appreciated.  Jitney  experience  in  this  country  indicates  that  people 
tend  to  take  the  first  vehicle  that  offers,  a  shabby  auto  being  often 
preferred  to  a  finely  upholstered  car,  because  the  jitney  is  there  and 
the  <'ar  is  not. 

The  fifth  thing  to  be  gathered  from  a  study  of  zone-fai-e  systems 
was  that  they  are  not  to  be  judged  in  connection  with  the  wages 
paid  to  the  carmen  unless  we  were  to  use  the  same  scale  of  fares. 
As  a  matter  of  fact,  the  British  carman  to-day  is  earning  prewar 
American  wages,  has  an  8-hour  day,  and  gets  certain  privileges — 
like  payment"  for  reporting  time,  uniforms  fvcQ  and  vacations — 
that  make  tl-c  platform  cost  just  as  dominant  as  here.    On  this  new 


1608    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

basis  most  fares  are  still  1  penny  or  2  cents  minimuni.  On  the 
other  hand,  the  zone  fare  in  Australia  has  be^n  applied  for  years 
on  railways  which  were  paying  American  wages.  No  matter  what 
the  wages  are,  a  zone  system  can  be  worked  out  on  the  plan  of  maxi- 
mum revenue  from  maximum  riders,  as  against  the  plan  of  8,  9, 
and  10-cent  fares  for  all  who  can  be  compelled  to  pay  them. 

I  may  remark  that  in  Pittsburgh,  a  couple  of  days  ago,  I  saw  a 
statement  by  one  of  the  receivei-s  of  the  Pittsburgh  railways  to  the 
effect  that  he  thought  the  fare  would  have  to  go  over  10  cents.  Mr. 
Tome  made  that  statement.  Mr.  P\ngan,  a  coreceiver,  differed.  He 
was  satisfied  that  they  had  gone  far  enough  now. 

Mr.  Warren.  What  is  it  now  ?  10  cents  ? 

Mr^  Jackson.  It  is  7 J  and  10  cents;  10  cents  for  the  cash  rider 
and  7i  cents  for  the  man  who  buys  tickets — two  for  15  cents,  I 
think  it  is. 

Until  the  Public  Service  Eail way  of  New  Jersey  installed  its 
zone  system,  beginning  September  14,  1919,  the  United  States  did 
not  have  a  single  example  of  an  electric  railway  in  which  an  effoit 
is  made  to  get  the  same  high  proportion  of  less-than-a-mile  riders 
found  wherever  the  zone  system  has  been  in  use  for  a  number  of 
years.  I  may  say,  in  Milwaukee  there  has  been  a  correct  zone  sys- 
tem, but  it  is  a  5-cent  basis. 

A  discussion  of  the  Public  Service  case  mav  serve  to  illustrate  the 
traffic-building  possibilities  of  the  zone  fare  as  applied  to  America. 

Early  in  March,  1919,  the  Public  Service  Railway,  at  the  request 
of  the  New  Jersey  Board  of  Public  Utility  Commissioners,  pre- 
sented a  proposal  for  a  zone  system  of  fares  in  which  5  cents  was 
established  as  the  fare  for  the  first  mile  and  1  cent  for  every  mile 
thereafter.  Transfers  of  the  usual  time-limit  type  were  to  be 
charged  for  at  the  rate  of  2  cents  for  the  first  mile  on  the  connecting 
line  and  1  cent  thereafter. 

At  the  hearings  conducted  on  this  proposal  before  the  board  the 
representatives  of  the  league  of  Municipalities  laid  stress  on  two 
things :  That  a  zone-fare  scheme  ought  to  be  one  that  would  recover 
the  enormous  losses  of  traffic  to  the  jitney  and  motor  bus  and  that 
would  include  a  fare  low  enough  to  transform  walkers  to  riders. 
In  short,  as  much  as  possible  of  the  additional  revenue  ought  to 
come  out  of  increased  patronage  instead  of  being  drawn  wholly 
out  of  the  passengers  compelled  to  use  the  service.  Accordingly,  the 
w  riter  suggested  a  fare  of  3  cents  for  the  first  mile  and  2  cents  for 
each  increment  of  a  mile  or  more  thereafter.  To  shade  the  fare  for 
the  long  rider,  he  suggested,  in  place  of  a  strictly  cumulative  fare, 
one  in  which  the  first  additional  zone  would  be,  say,  1  mile,  the  sec- 
ond, say,  li,  the  third  IJ,  and  so  on.  This  would  not  always  be 
l)racticable  because  of  the  encroachments  upon  a  series  of  zones 
emanating  from  a  neighboring  city  but  indicates  the  general  prin- 
ciple of  showing  some  consideration  to  the  long  rider,  whose  fare  is 
so  severely  increased  at  best,  as  the  London  bus  suburban  practice. 
Furthermore,  the  writer  believes  that  electric  railways  of  street- 
railway  character  ought  not  to  encourage  extra  long-haul  traffic 
when  the  faster  service  of  a  steam  railroad  or  electric  interurban  is 
available.  This  is  peculiarly  the  case  on  the  Public  Service  Rail- 
way, which  had  been  giving  some  extraordinarily  long  rides  for  5 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1609 

and  10  cents,  so  that  the  change  from  a  flat  to  a  zone  system  of 
any  kind  meant  a  great  increase  in  fare  for  people  who  had  no 
regard  for  the  value  of  their  time.  I  believe  that  it  is  far  better 
fpr  an  electric  railway  to  lose  the  small  percentage  of  such  long- 
distance riders  than  to  lose  or  fail  to  attract  the  enormously  greater 
number  of  short-distance  riders  for  whom  the  electric  street  railway 
was  created. 

You  know  in  the  case  of  the  Public  Service  you  have  a  railway 
made  up  of  a  great  many  subsidiary  companies,  and  just  because  the 
tracks  abut  one  another  all  the  way  across  the  State,  it  has  become 
the  habit  of  the  people  there,  encouraged  by  the  through  routing 
methods  of  the  company,  to  take  the  fullest  possible  advantage  of 
long  rides.  People  would  ride  all  the  way  across  Jersey  City  and 
all  the  way  across  Newark  for  10  cents  and  get  an  extraordinary  ride 
and  be  on  the  cars  two  hours,  Avhen,  if  they  had  gotten  on  the  train 
in  New  York  and  paid  5  or  10  cents  more,  they  would  have  gotte.n 
there  in  about  one-third  the  time.  Now,  that  is  a  ridiculous  condi- 
tion. 

I  might  say  that  the  tables  of  the  company  show  that  the  propor- 
tion of  that  class  of  passengers  is  really  very  small  in  comparison 
to  the  short  rides;  that  taking  the  riders  beyond  7  miles,  probably 
not  more  than  10  per  cent  of  the  traffic  comes  from  that  class  of 
riders,  and  that  it  would  not  be  a  bad  scheme  where  you  can  shade  the 
fare  for  the  long-distance  rider  and  where  you  can  not  get  rid  of  him 
altogether  to  borrow  the  scheme  of  London  and  have  a  certain  maxi- 
mum fare.  But  the  Public  Service  system  suffers  under  the  disad- 
vantage of  trying  to  make  an  electric  railway  do  the  work  of  both 
the  street  railway  and  an  interurban,  an  impossible  combination. 

The  decision  handed  down  by  the  board  of  public-utility  commis- 
sioners covering  a  3-cent  fare  for  the  first  mile  and  2  cents  a  mile 
thereafter  followed  a  statement  by  President  McCarter,  of  the  Public 
Service  Railway,  in  which  he  declared  that  a  flat  fare  of  9  cents  was 
one  of  the  alternatives,  but  that  he  could  not  favor  such  a  fare  be- 
cause it  would  still  further  impair  the  usefulness  of  the  street  rail- 
way to  the  public.  In  p'articular,  in  a  statement  before  the  board 
made  July  29, 1919,  he  discussed  the  plan  finally  accepted  as  follows : 

Now,  as  we  have  gone  on  with  this  matter,  we  have  been  impressed  by  the 
testimony  that  has  been  adduced  here  with  rejjard  to  tlie  possibility  of  a  low 
mininuim  rate.  I  frankly  pay  a  debt  of  gratitude  to  Mr.  Sommer  [counsel  for 
th.e  League  of  Municipalities!  for  the  testimony  that  was  adduced,  through 
his  efforts,  of  the  working  of  the  zone  fare  in  other  jurisdictions.  It  is,  of 
course,  a  very  radical  move.  But  we  are  so  disturbed  al)out  the  whole  future 
of  this  ele(-tric-railway  situation,  and  we  are  so  anxious  to  put  into  effect  a 
rate  that  will  reasonably  satisfy  the  public  and,  at  the  same  time,  produce  a 
revenue  at  least  sufficient  for  our  minimum  needs,  and  we  are  so  desirous  of 
having  the  public  realize  and  believe  that  we  want  to  meet  their  reasonable 
wishes  that  I  may  say,  contrary  to  the  experience  of  this  industry  for  a  genera- 
tion in  this  country,  contrary  to  the  views  that  I  myself  have  always  enter- 
tained heretofore,  we  are  willing  to  try,  with  the  concurrence  of  this  com- 
mission, to  put  into  effect,  if  the  commission  please,  a  third  rate,  and  that  is  a 
rate  wldch  shall  be  3  cents  for  the  minimum  charge  and  ride  of  one  zone  mile 
and  2  cents  a  mile  thereafter,  without  transfers. 

Now,  that  [rate  of  3  cents  for  the  first  mile  and  2  cents  a  mile  thereafter! 
will  produce,  we  think,  the  minimum  amount  of  money  upon  which  the  company 
can  live.  We  think  it  will  go  further  toward  alleviating  public  sentiment, 
toward  making  the  public  feel  that  we  are  endeavoring  to  go  as  far  as  the 


1610    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1611 


'H  ™  1 


nature  of  our  business  will  admit  in  providing  a  reasonable  rate.  It  will  be 
better  than  any  other  rate  that  Is  at  all  practicable,  reduce  and  minimize  the 
jitney  situation,  and  all  things  considered,  if  It  will  produce  the  revenue 
which  we  think  it  will  and  hope  it  will,  though  it  departs  from  the  accuracy 
of  the  stand-by  and  movement  costs  in  its  worliing  out  to  the  literal  conclusion 
somewhat,  in  that  it  lowers  the  minimum  below  what  it  costs  to  carry  a  passen- 
ger for  a  short  distance,  we  nevertheless  feel  that  it  is  a  rate  we  are  ready  to 
try  and  which  we  think  will  accomplish  the  ends  that  I  have  spoken  of  better 
tlum  any  other  rate. 

You  ai*e,  of  course,  aware  that  the  introduction  of  the  zone  system 
on  the  Public  Service  Kailways  has  not  been  without  its  difficulties, 
but  it  must  be  borne  in  mind  that  the  system  of  fare  collection 
also  has  been  radically  altered  at  the  same  time  and  that  neither 
the  platform  men  nor  the  patrons  could  be  expected  to  handle  it 
smoothly  within  a  few  weelvs.  The  Public  Service  zone  system  be- 
ing operated  on  the  pay-leave  plan  also  loses  one  of  the  great  ad- 
vantages that  a  differential  fare  possesses  on  foreign  systems,  namely, 
in  securing  the  selfish  interest  of  the  passenger  in  the  transaction. 
On  all  other  zone  systems  the  passenger  pays  before  he  gets  most  of 
his  ride.  There  are  some  of  the  little  fare  receipts  from  the  London 
line  [handing  tickets]. 

Now,  under  the  foreign  system  the  passenger  gets  a  receipt  for  his 
fare  and  it  is  to  his  personal  interest  to  sec  that  the  receipt  is  cor- 
rect. That  London  ticket  is  a  combination  of  the  plans  used  over 
there.  Some  companies  use  numbered  zones  and  others  use  street 
names  or  other  indications.  In  London  they  are  going  to  numbei*s 
gradually  and  they  were  using  both  the  numbers  and  the  name  during 
the  change-over  period. 

The  Chairman.  May  I  avsk  one  or  two  questions  ahout  these?  I 
see  this  ticket  is  numbered,  beginning  on  the  right-hand  corner  "  1," 
and  running  down  to  ''  8,''  and  on  the  left-hand  corner  '""  9,"  running 
up  to  "16.''    What  do  these  numbers  represent? 

Mr.  Jackson.  Sections — two  sections  to  a  zone.  Every  section 
along  the  line  has  a  definite  number  or  name.  If  you  are  taking  a 
4-penny  ride  or,  we  will  say,  a  3-penny  ride,  the  conductor  will 
punch  six  sections  ahead,  there  being  two  sections  or  two  laps  for 
every  penny. 

The  Chairman.  Do  you  pay  as  you  enter? 

^Ir.  Jackson.  Xo;  not  usually.  The  upi>er-deck  passengers  on 
some  systems  pay  as  you  enter.  That  is  simply  an  accommodation. 
When  the  women  conductors  came  on  they  wanted  to  help  them 
along.  But  the  British  car  is  not  adapted  for  prepayment,  for  the 
reason  that  the  stairwa};  is  on  the  back  platform  and  leaves  almost 
no  room  for  a — well,  it  is  impossible  to  have  four  or  Rye  passengers 
stand  in  line  on  a  car  of  that  kind.  The  differential  fare  in  itself, 
of  course,  is  also  a  bar  to  immediate  payment. 

The  Chairman.  When  is  this  ticket  released? 

Mr.  Jackson.  If  you  look  on  the  back  of  that  ticket  you  will  find 
the  passenger  is  requested  to  throw  the  ticket  into  a  bag.  That  wiis 
a  paper-saving  campaign.  You  do  not  keep  the  tickets.  You 
throw  them  away.  It  has  been  suggested  that  people  ought  to  give 
up  the  tickets;  that  is,  in  this  counti-y:  but  I  know  that  is  im- 
practicable, because  it  can  not  be  done,  even  on  an  iiitoinrban  rail- 
way, if  there  is  not  something  to  show  what  he  has  got.    He  gets  a 


pad.  These  tickets  are  serially  numbei*ed.  He  begins  liis  day's 
work  with  a  number  of  pads  of  tickets.  They  are  really  receipts, 
and  for  every  receipt  he  gives  out  he  mu^  have  an  equivalent  of 
money. 

Commissioner  Mahon.  They  do  not  use  any  register  at  all ;  they 
have  a  ticket? 

Mr.  Jackson.  Xo;  they  have  a  little  punch  which  is  a  sort  of 
check  to  that.  The  bell  punch  counts  up  the  number  of  tickets 
used;  it  does  not  count  the  amount  of  money.  For  instance,  a  man 
might  issue  a  number  of  penny  tickets — 25,  and  2-penny,  50,  and 
S-penny  tickets,  but  his  punch  would  show  the  total  number  of 
tickets  issued,  but  not  the  denominations.  But  when  he  starts  out 
for  the  day's  work  he  is  given  so  many  tickets,  and  an  accounting 
of  those  tickets  is  shown  on  a  waybill.  We  will  say  he  started  out 
with  a  ticket  marked  "ZZ,"  500  to  550.  Those  are  penny  tickets. 
Another  will  have  "  XX,"  600  to  650.  Xow,  in  tlie  course  of  the 
day,  he  gives  up  these  receipts.  He  has  got  to  turn  in  his  remaining 
tickets  and  the  money^  the  equivalent  to  the  receipts  given  out.  In 
other  words,  he  is  giving  out  a  series  of  vouchers. 

Mr.  Warren.  Does  he  have  a  different  pad  of  tickets  for  each 
denomination  ? 

Mr.  Jackson.  Every  denomination  is  a  different  color,  all  the  way 
from  1  penny  up  to  i.  Ordinarily — we  will  take  the  case  of  Glas- 
gow— they  go  up  to  4  pence.  As  63  per  cent  of  the  tickets  are 
penny  tickets,  those  of  the  higher  denominations  are  usually  kept 
in  a  little  closet  back  of  the  man.  He  is  not  liable  to  have  them  in 
his  hand  at  all. 

Commissioner  Meeker.  Very  frequently  the  conductor  finds  that 
a  man  who  asks  for  a  penny  ticket  really  rides  further  than  he 
should,  and  he  comes  around  and  collects  an  additional  fare? 

Mr.  Jackson.  Yes.  The  zone  system,  or  the  fare-receipt  system, 
of  Great  Britain  practically  makes  it  impossible  for  the  conductor 
to  get  anything  that  he  should  not  get^  but  it  is  necessary  to  see  that 
the  pa^nger  does  not  get  more  than  his  money's  worth.  He  can 
get  it  in  two  ways.  In  the  first  place^  since  prepayment  is  very  rare, 
he  may  be  on  the  car,  he  may  have  had  a  quarter  of  a  mile  ride  be- 
fore the  conductor  comes  around.  Of  course,  the  fare  is  always  up 
to  the  next  zone  point,  wherever  that  may  be.  But  it  is  conceivable 
that  a  man  may  get  on  just  before  a  fare  stage,  for  instance,  and  get 
quite  a  bit  of  a  ride  before  he  begins  paying  for  it.  But  the  thing 
you  have  to  look  at  eventually  is  1m>w  much  money  gets  to  the  treas- 
ury of  the  company.  It  is  to  be  admitted  that  there  is  overriding 
w^hich  is  checked  only  partially  by  the  inspectors  who  board  the  cai*s 
at  intervals.   The 

Commissioner  Meeker.  People  even  override  in  our  own  country. 

Mr.  Jacivson.  Oh,  yes. 

Commissioner  Meeker.  And  fail  to  })ay  tlieir  fares. 

Mr.  Jackson.  Yes;  there  is  no  doubt  of  that.  But  I  would  say 
that  the  only  way  to  judge  those  matters  as  to  what  you  get  by  the 
zone  system  is  how  much  gets  into  the  treasury  of  the  company.  '  And 
you  will  find  that  under  the  zone  system  the  number  of  fare  collec- 
tions per  car-mile  will  run  from  14  to  20  or  more  on  what  the  con- 
ductor actually  gives  an  accounting.    We  find  in  tlie  case  of  Liver- 


1612    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

pool  that  the  average  earnings  for  the  last  fiscal  year  were  38  cents 
a  car-mile  with  a  minimum  fare  of  a  penny — 2  cents. 

Commissioner  Gadsden.  Were  you  not  proceeding  to  describe  the 
Public  Service  System  for  us? 

Mr.  Jackson.  Yes.  On  all  other  zone  systems  the  passenger  pays 
before  he  gets  most  of  his  ride,  and  he  has  a  selfish  interest  in  seeing 
that  he  pays  only  for  what  he  gets.  The  regular  passenger,  espe- 
cially, can  not  be  said  to  care  greatly  what  the  conductor  does  with 
his  money  if  he  pays  upon  leaving  the  car.  In  any  event,  no  zone  sys- 
tem can  be  as  convenient  as  a  one-fare  system,  but  that  it  can  handle 
extremely  heavy  traffic  is  evident  from  the  fact  that  the  average 
number  of  fare  collections  in  British  cities  is  14  to  20  per  mile,  com- 
pared with  less  than  half  that  number  from  here.  In  other  words, 
we  say,  is  this  system  practicable  ?  Can  the  conductor  really  make  the 
collections?  The  answer  is  he  does.  In  this  country  if  we  have 
seven  or  eight  passengers  per  car-mile  we  think  we  have  very  good 
business.    Over  that  we  consider  it  very  good  business. 

To  conclude  as  to  the  zone  system:  A  zone-fare  street  railway, 
with  a  combination  of  good  will,  low-based  fares,  and  short  head- 
ways, will  get  the  maximum  revenue  from  a  maximum  number  of 
patrons  and  leave  little  or  nothing  for  the  jitney. 

You  know  that  the  zone  system  on  the  Public  Service  was  put  in 
under  considerable  difficulties.  They  did  not  have  the  practice,  and 
instead  of  trying  it  out  on  a  couple  of  lines  here  and  there  and  get- 
ting the  pei^onnel  absolutely  familiar  with  it,  they  slapped  it  on  all 
over  at  one  time.    That  is  contrary  to  ordinary  human  practice. 

Can  the  one-man  car  and  the  zone  system  go  together?  It  is  nat- 
ural to  ask  how  one-man  car  operation  and  the  zone  fare  can  go  to- 
gether. Obviously,  we  can  not  expect  one  man  to  handle  four  or 
^ve  different  kinds  of  fares  in  addition  to  running  the  car.  The  way 
to  avoid  this  will  be  through  the  operation  of  one-zone  and  two-zone 
cars  with  one  nuin,  reserving  the  larger  cars  for  long  through  runs 
in  multizone  service.  There  is  no  good  reason  why  the  service  as 
well  as  the  fares  should  not  be  zoned  in  accordance  Avith  the  density 
of  traffic.  In  other  w^ords,  the  same  route  could  be  composed  of 
through  cars  with  two  men  each,  going  from  one  extreme  terminal 
to  another,  while  one-man  cars  should  shuttle  back  and  forth  over 
1,  2*  or  3  mile  sections  of  the  same  route. 

To  make  myself  clear  with  a  concrete  application:  The  Public 
Service  Railway  operates  through  a  large  number  of  cities  of  vary- 
ing sizes — from  Newark,  of  350,000  or  so,  down  to  places  of  15,000  or 
20,000.  It  has  a  large  number  of  through  runs.  The  car  starts  in 
one  of  these  cities  and  goes  across  country  and  gets  into  the  other 
city  and  goes  right  through  it,  and  there  is  not  the  adaptation  of  the 
service  to  local  communities  that  there  ought  to  be  in  order  to  get  the 
short-haul  rider  with  a  short-ride  fare.  I  have  in  mind  a  place  like 
Rahway,  N.  J.,  where  you  will  always  find  some  motor  buses  waiting 
for  you  when  you  get  off  a  train;  but  it  will  be  just  a  matter  of 
accident  to  find  a  car  coming  along  at  that  time,  because  the  car  ema- 
nates from  another  town  and  runs  through  Rahway  without  any  par- 
ticuhir  regard  to  the  needs  of  the  people  in  Rahway. 

Therefore,  in  a  situation  of  that  kind  your  through  car,  which 
might  be  continued  in  operation  for  a  certain  class  of  passengers, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1613 

would  be  a  zone-fare  car;  but  there  could  be  any  number  of  small 
cars  in  these  individual  towns  to  give  a  local  service,  just  as  you 
give  a  local  and  express  service. 

I  have  in  mind  some  of  our  large  systems,  where  the  present 
method  of  operation  calls  for  long,  through  routes  with  large  two- 
men  cars  at  a  sacrifice  of  local  traffic  opportunities  m  the  towns 
through  which  these  cars  pass.  Such  local  traffic  can  be  developed 
only  with  small  one-man  cars  operated  within  the  two  at  frequent 

iritervals 

For  short-route  towns  it  is  not  practicable  to  use  a  zone  or  a  mul- 
tiple-fare system.  It  is  possible,  however,  to  work  out  various  forms 
of  commutation  tickets  based  upon  giving  a  reduced  rate  to  those 
who  average  more  than  two  rides  a  day.  In  a  practical  workuig  out 
such  a  ticket  or  pass  is  a  fair  deal  to  both  the  long  rider  and  the  short 
rider,  since  the  short  rider  has  more  opportunities  to  ride,  as  m  going 
home  for  lunch,  where  the  long  rider  would  lack  the  time.  Such  a  ticket 
would  be  far  more  convenient  to  passenger  and  car  operator,  as  it 
avoids  all  need  for  making  change,  issuing  transfers,  and  arguing 
about  the  time  limits  and  use  of  the  latter. 

I  want  to  come  back  to  the  matter  of  bus  operation.  I  might 
say  first  with  regard  to  this  matter  of  fares  in  a  small  town  or  many 
towns  that  the  idea  of  cut-rate  tickets  for  certain  hours  of  the  day, 
while  it  is  an  appealing  one,  is  not  so  attractive,  because  it  does  add 
greatly  to  the  work  of  the  conductor  and  is  a  source  of  friction  with 
tiie  public,  just  as  the  transfer  is.  People  come  on  a  car  at  10  min- 
utes to  10  with  a  10  o'clock  ticket,  a  shopping  ticket,  and  want  to  get 
on  the  car  at  that  time,  or  they  present  it  after  4  o'clock,  perhaps. 
That  has  been  the  experience  where  tickets  of  that  kind  have  been 
tried.    So  that  it  is  not  desirable  to  do  that. 

At  the  same  time  it  is  also  not  desirable  to  follow  the  opposite 
policy  of  charging  a  prohibitive  fare  for  the  so-called  casual  rider. 

Who  is  the  casual  rider?  Very  often  women  shoppers.  And  the 
business  men  of  a  community,  as  a  rule,  are  likely  to  resent  a  rate  of 
fare  of  that  kind  that  keeps  off  the  people  that  do  business  with  them. 

We  have,  therefore,  tried  to  develop  a  ticket  on  railways  in  this 
country  based  on  the  thought  that  anybody  that  is  already  riding 
more  than  2  times  a  day,  12  times  a  w6ek,  is  entitled  to  get  his  excess 
or  off-peak  riding  at  a  reduced  rate — really  an  unlimited-ride  ticket. 
It  is  based  upon  the  practice  of  the  London  underground  railways. 

Commissioner  Wehle.  Has  that  been  done  in  London? 

Mr.  Jackson.  Yes.  In  London  they  have  season — so-called  sea- 
son tickets— sold  for  a  month's  or  three  months'  riding.  They  are 
unlimited-ride  tickets.  They  differ  from  the  tickets  that  we  have 
worked  out  here,  being  for  different  rates  of  fares  because  of  the 
length  of  the  subway  lines.  The  man  who  lives  out  at  Hampstead 
pays  one  price,  and  if  he  lives  two  or  three  stations  farther  in  he  pays 
another  price;  but  he  can  ride  as  much  as  he  pleases  on  that  ticket, 
simply  showing  it.  Theoretically  it  is  made  out  only  for  the  holder. 
Practically,  of  course,  anybody  that  has  it  uses  it.  Consequently  in 
devising  a  ticket  of  this  kind  tor  this  country  I  suggested  that  there 
be  no  limitation  of  that  kind  at  all,  because  it  was  not  practicable. 


1614    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Commissioner  Wehle.  I  imdcrstood  you  to  say  something  about 
off-peak  riding.  Did  you  mean  that  some  arrajQJpmSnt  Jiad  been 
made  whereby  the  customer — or  the  rider 

Mr.  Jackson.  Call  them  customers.  I  am  beginning  to  look  at 
them  m  that  way. 

Commissioner  Wehle.  Could  ride  off-ixiak  more  cheaply  than  at 
other  times  ? 

Mr.  Jacksox.  Practically,  in  this  sense:  Wliere  you  sell  tickets, 
say  on  the  basis  of  six  for  a  quarter,  as  was  commonly  the  case,  the 
people  who  bought  those  tickets  were  largely  those  who  had  fixed 
ridmg  habit— the  man  who  went  to  work  in  the  morning  and  re- 
turned at  night.     That  man  was  riding  during  the  period  when  it 
was  most  expensive  to  serv  e  him.    He  was  not  doing  you  a  favor, 
and  yet  he  was  getting  advantage  of  any  reduced  rate  that  was 
available.    Xow,  suppose  you  say  to  that  man  that  if  he  will  be  a 
good  sport  and  ride  just  a  little  bit  more,  pay  a  little  more  every 
week,  that  he  can  get  all  the  extra  riding  he  wants  for  that  increment. 
And  it  IS  obvious  that  he  can  take  that  extra  riding  only  during 
the  off-peak  hours ;  because  he  already  is  a  rush-hour  customer. 
In  conclusion  I  just  want  to  say  something  about  bus  operation. 
It  is  time  for  the  electric  railways  of  the  United  States  to  take 
a  hint  from  British  practice  and  make  more  use  of  the  motor  bus 
in  handling  extensions  and  giving  a  de  luxe  service  on  good  shop- 
ping and  other  show  streets  of  a  special  rate  of  fare.    The  greater 
flexibility  and  all-around  usefulness  of  the  motor  bus  can  not  and 
s^iould  not  be  ignored  by  the  street-railway  operator  just  because 
It  happened  to  be  used  by  a  pirate  competitor  first.    Because  of  its 
experience  in  routing,  scheduling,  and  other  transportation  tech- 
nique, the  electric  railway  is  the  logical  operator  of  bus  service. 
All  popular-priced  transportation  should   be   under   one   head,   as 
a  matter  of  course. 

I  have  been  asked  to  offer  an  opinion  as  to  the  relative  merits 
of  British  and  American  street  railways.  The  most  direct  and 
shortest  statement  w  ould  be  to  say  that  America  excels  in  mechanical 
and  electrical  equipment  standards  except  in  track  maintenance  and 
that  the  British  excel  in  the  selling  of  transportation.  The  lat- 
ter, it  seems  to  me^  is  logical  because  of  the  use  of  a  system  of  fares 
which  compels  the  growth  of  a  more  businesslike  attitude  than 
where  you  sell  all  classes  of  customers  at  one  price.  Perhaps  the 
Bntish  car  would  strike  an  American  as  too  plain;  on  the  other 
hand,  our  companies  have  given  altogetlier  too  much  for  the  nickel 
both  in  length  of  ride  and  expense  of  car  upholstery.  ' 

I  did  not  find  any  essential  difference  in  the  operating  standards 
of  British  tramways  because  of  private  or  public  ownership.  Most 
of  the  larger  properties  are  publicly  owned.  They  are  certainly 
conducted  m  a  most  efficient  manner,  and  rather  than  classing  them 
«s  extravagant,  I  sliould  say  that  the  tendency  is  toward  par^mony. 
Ihe  middle-class  councilmen  always  want  fai-es  that  will  bring  a 
large  surplus  for  reduction  of  taxes,  while  the  Labor  Party  coun- 
cilmen strive  for  low  fares  regardless  of  profit.  Neither  the  private 
nor  public  railways  are  in  the  precarious  condition  of  the  American 
electric  railway,  because  they  have  had  more  success  in  raising  fares 
Avithout  diminishing  traffic,  but  the  increases  in  operating  costs  and 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1615 

materials  have  been  even  greater  than  h^re.  So  it  is  only  a  ques- 
tion of  time  before  the  British  railways  will  have  to  hitch  up  their 
fares  another  notch  despite  the  fact  that  they  are  not  embarrassed 
by  an  adverse  public  sentiment,  a  multiplicity  of  subsidiary  corpo- 
rations, and  the  like.  ^ 

The  Chairman.  You  spoke  of  encouraging  buses  at  a  special 
rate  of  fare.  Do  you  mean  that  the  fare  is  higher  or  lower  than 
the  street-car  fare  ? 

Mr.  Jackson.  Higher.  I  have  just  made  an  analysis  for  a  large 
city  in  which  I  have  demonstrated  conclusively  that  the  bus  will  lose 
money  at  10  cents. 

Tlie  Chairman.  ^Vhat  city  is  that? 

Mr.  Jackson.  Detroit;  and  the  statements  that  have  been  pub- 
lished by  the  Boughton  Co.  concerning  Chicago  motor-bus  operation 
and  its  future  and  possibilities  are  grossly  exaggerated  on  tlie  basis 
of  their  own  past  history. 

The  Chairman.  Are  the  busses  in  England  operated  m  connection 

with  the  tramway  companies? 

Mr.  Jackson.  Generallv  they  are  and  have  been. 

Here  is  a  peculiarity  of  English  law :  A  private  oi>erator,  a  private 
person  or  company,  can  go  into  the  bus  business  with  no  other  pre- 
liminaries than  securing  police  approval  for  the  form  of  bus.  It 
must  comply  with  certain  safety  regulations  and  speed  conditions 
and  weighty  and  thereupon  you  can  go  into  the  bus  business  just  as 
cheerfully  as  people  go  into  the  jitney  business  here. 

On  the  other  hand,  if  the  municipally  owned  railway  wants  to  go 
into  the  bus  business,  it  has  to  apply  to  Parliament  for  a  special 

privilege. 

The  British  Electric  Traction  Co.,  which  operates  over  30  proi)er- 
ties,  has  bus  operation  in  comiection  with  IG  or  17  of  them,  and  the 
I^eds  Municipal  Tramways  operate  motor  buses  and  trackless  trol- 
leys. Edinburgh,  which  has  just  acquired  the  system^  lias  laid  out 
half  a  dozen  motor-bus  routes,  and  Al>erdeen  is  putting  in  motor-bus 
routes,  and  Glasgow  is  considering  them. 

The  British  idea  for  using  buses  is,  so  far  as  most  of  those  prop- 
erties are  concerned,  the  development  of  the  sulxirban  traffic,  to  know 
w^here  you  stand.  A  comparable  case  is  tliat  of  the  Municipal  Rail- 
way of  San  Francisco  in  developing  bus  service  across  Golden  Grate 
Park  and  other  places.  The  Stone  &  Webster  interests  in  Washing- 
ton run  a  number  of  bus  lines  and  feedei-s  to  the  interurbans.  They 
do  not  make  money  on  them.  They  did  make  a  little  money  on  one, 
but,  generally  speaking,  you  give  a  bus  service  because  you  lose  less 
money  cm  it  than  on  the  track,  and  you  feel  that  you  have  to  give  it 
because  you  are  a  utility  aiwl  there  is  a  demanxl  for  it. . 

The  buses  in  Leeds  are  run,  say,  on  a  30-miniite  headway,  and  the 
trackless  trolleys  about  20 ;  and  when  the  sei-vice  justifies  10  minutes, 
they  will  put  down  track,  but  not  before. 

The  Chairman,  Do  they  operate  upon  the  same  streets  as  the  tram- 
ways? 

Mr.  Jackson.  Yes.  Well,  a  good  many  of  these  lines  operate  over 
the  tracks  or  alongside  of  the  tracks  for  a  certain  distance^  and  then 
go  out  into  the  country. 

The  Chairman.  How  is  their  fare  as  compared  with  the  electric 

line? 


i 


i 


1616    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Jackson.  The  British  Electric  Traction  Co.  follows  this  pol- 
icy. It  sets  a  prohibitive  rate  of  fare  on  the  short  rider  on  the  bus ; 
that  is,  on  the  city  end.  Where  you  can  get  the  tramway,  it  makes 
you  pay  perhaps  50  per  cent  more  for  the  bus. 

In  IJondon,  where  the  bus  and  the  tramway  are  in  competition,  the 
I^ondon  General  Omnibus  Co.  charges  practically  the  same  rate  of 
fare,  except  that  where  fares  are  cumulative;  that  is,  they  do  not 
stop  at  12  pence,  the  way  the  Ixjndon  County  Council  does,  because 
the  buses  go  out  into  the  country,  and  are  very  long  lines;  but  where 
the  bus  has  no  competition  it  has  been  forced,  even  in  the  past,  to 
charge  about  30  per  cent  more  on  an  average. 

Connuissioner  Mahon.  The  bus  in  London,  where  it  competes  with 
the  railroad,  charges  the  same  rate  of  fare,  but  when  it  gets  away 
from  the  street  railways  it  charges  higher? 

Mr.  Jackson.  Yes;  about  30  per  cent,  Mr.  Commissioner.  They 
compete  up  to  4  pence.  The  tramway  does  not  charge  any  more  than 
4  pence,  and  I  guess  it  is  a  good  theory^  because  who  on  earth  wants 
to  ride  on  a  street-car  more  than  8  sections,  which  means  more  than 
an  8-mile  ride? 

The  Chairman.  Can  the  bus  entirely  supplant  the  street  railway 
in  cities  in  this  country  ? 

Mr.  Jackson.  Certainly  not. 

The  Chairman.  Why? 

Mr.  Jackson.  It  is  a  matter  of  capacity  as  well  as  operating  ex- 
pense. The  buses  proposed  in  this  country  do  not  exceed  50  seats. 
A  bus  operation  calls  for  no  standei*s.  In  this  country  it  is  being 
developed  along  the  lines  of  a  de  luxe  line,  with  10-cent  fares,  and 
the  biggest  excuse  or  the  best  reason  they  have  got  for  asking  the 
double  fare  is  that  there  is  a  seat  for  every  passenger. 

The  ratio  of  labor  expense,  platform  expense,  on  a  bus  is  far  more 
unfavorable  than  on  a  street-car. 

Take  the  comparison  in  London :  The  London  County  Council  car 
seats  78  passengers  and  has  two  operators.  The  London  bus  now  in 
use  seats  34  passengers  and  has  two  operators.  In  one  case  you  have 
got  39  passengers  to  each  employee  and  in  the  other  case  you  have  got 
17  passengers  to  each  employee. 

Commissioner  AVehle.  What  is  j^our  definition  of  a  bus? 

Mr.  Jackson.  A  bus  is  a  vehicle  on  tires,  primarily,  whether  run 
by  gasoline  or  electricity — a  carryall. 

Commissioner  Wehle.  How  many  does  it  carry,  necessarily?  1 
mean,  is  there  necessarily  a  limit? 

Mr.  Jackson.  There  is  a  limit ;  yes.  The  weight  is  a  limit,  because 
the  laws  in  this  country  prohibit  the  construction  of  motor  trucks 
and  similar  veliicles  of  more  than  a  given  weight.  Furthermore,  a 
gas  engine  is  not  suited  primarily  for  frequent-stop  service.  Just 
as  soon  as  you  increase  the  size  of  the  bus  beyond,  say  40  passengers, 
you  begin  to  get  as  many  stops  as  a  street-car,  and  ^ou  thereupon  get 
a  very  uncomfortable  riding.  Ask  anybody  who  rides  these  Chicago 
buses  what  they  think  about  that  tank  service — and  those  buses  in 
Chicago  have  been  in  use  only  two  or  three  jears — and  they  are  all 
clattering  around  in  a  most  awful  way. 

Commissioner  Wehle.  How  have  they  paid  ? 

Mr.  Jackson.  What  is  that? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1617 

Commissioner  Wehle.  How  have  they  been  as  an  investment 
proposition  ? 

Mr.  Jackson.  Why,  in  this  circular  issued  by  the  Broughton  Co. 
they  said  that  the  buses  of  Tx)ndon  had  been  highly  profitable. 
Maybe  they  have  been.  That  is  in  the  past  tense — very  much  past. 
You  might  as  well  try  to  sell  electric-railway  stock  to-day  on  what 
the  electric  railway  did  10  years  ago.  The  fact  is  that  the  London 
General  Omnibus  Co.  for  a  number  of  years  paid  something  like  5 
or  6  per  cent.  These  last  two  years  it  has  not  made  enough  money 
to  pay  a  dividend  out  of  the  actual  earnings  of  the  bus  company. 
They  have  paid  dividends  out  of  a  general  fund  of  the  London  Un- 
derground system,  and  the  earnings  for  the  last  quarter,  or  probably 
the  first  quarter  of  1919,  show  an  actual  deficit. 

For  the  first  time  the  London  General  Omnibus  Co.  has  shown 
all  its  operating  costs.  There  was  published  a  few  months  ago  the 
result  of  an  official  audit. 

The  reason  those  costs  came  out  was  that  the  company  said  that 
it  had  to  have  higher  fares,  and  the  Government  said :  "  Well,  show 
us."    This  audit  shows  very  distinctly  that  they  need  them. 

Conmiissioner  Wehle.  How  did  their  fares  at  that  time  compare 
with  the  fares  that  the  street  railways  were  receiving  ? 

Mr.  Jackson.  Where  they  were  in  competition  the  bus  charge  the 
same  rate.  Now,  up  to  March  of  this  year  the  London  County 
Council  and  some  of  the  other  tramways  there  gave  1.8  miles  for  a 
j)enny.  They  have  recently  increased  the  fare,  giving  only  IJ  miles 
for  a  penny,  and  the  bus  has  sort  of  trailed  alon^  with  that. 

I  was  privileged  in  London  to  see  all  the  inside  data,  and  I  ob- 
served that  the  distances  given  for  a  penny  vary  enormously. 

Contrary  to  what  an  American  operator  would  do,  they  give  you 
moi-e  for  your  money  where  the  traffic  is  thin,  for  the  sound  reason 
that  if  you  are  only  running  about  one-quarter  full  and  3  ou  can  run 
three-quarters  full,  you  can  get  more  passengers  by  cutting  your 
fare  in  half.    That  is  what  has  been  done  in  London. 

Commissioner  Wehle.  Was  the  fare  on  the  buses  raised  at  exactly 
the  same  time  that  the  fare  on  the  tramways  was  raised?  You  said 
something  about  the  buses  trailing  along. 

Mr.  Jackson.  Yes. 

Commissioner  Wehle.  Then,  as  I  understand  you :  First  the  tram- 
ways raised  the  rates,  and  then  the  buses  thought  they  could  not 
exist  on  what  they  had? 

Mr.  Jackson.  That  was  the  cause  for  that  audit. 

Commissioner  Wehle.  Their  fare  that  they  were  then  allowed  to 
charge  tniiled  along  and  equalized  the  fare  of  the  tramways,  and 
they  made  a  showing,  while  they  were  applying  for  the  higher  rate 
to  the  effect  that  they  could  not  get  along  on  what  they  were  getting? 

Mr.  Jackson.  Yes.  In  making  this  increase  in  fare  on  a  zone  sys- 
tem, like  the  London  bus,  they  do  not,  of  course,  increase  all  the 
fares  in  the  same  ratio  all  over.  They  increase  them  here  or  there 
just  as  the  traffic  will  bear. 

Commissioner  Wehle.  Just  to  get  your  conclusions  a  little  bit 
more,  without  asking  you  to  go  so  much  into  the  narration  of  detail : 
Going  back  to  the  Chicago  situation—have  the  buses  of  Chicago 
operated  at  a  profit  or  not? 


ie0643°— 20— VOL  2- 


40 


1618    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  CGxMMISSION. 

Mr.  Jackson.  They  laid  aside  $18,000  for  depreciation  last  Aear 
for  50  buses~$18,000  and  some  hundred  dollars.  When  we ^  say 
"  profit,"  we  want  to  find  out  how  much  depreciation  is  allowed. 

Commissioner  Mahon.  They  charge  the  10-cent  fare,  tliough? 

Mr.  Jackson.  They  charge 'the  10-cent  fare;  and  if  they  had  laid 
aside  the  proper  proportion  of  depreciation,  as  I  understand  the 
life  of  a  bus,  they  probably  would  have  shown  next  to  no  profits,  if 
any.  Because  $18,000  surely  is  not  a  sufficient  depreciation  for  50 
buses. 

Commissioner  Weiile.  How  is  the  Fifth  Avenue  bus  service  pav- 
ing, if  at  all  ?  ^  ^ 

Mr.  Jackson.  I  do  not  know  just  what  dividends  they  pay.  I 
i^???^^  A^^'^^"  *^^^^*  figures  veiy  recently.  In  the  early  years  the 
I^  ifth  Avenue  Bus  Co.  made  no  money  at  all  because  of  the  rapid 
obsolescence  and  depreciation  of  the  buses.  In  the  last  three  or  four 
years  Ihey  have  done  fairly  well.  I  would  say  that  they  have  made 
no  extravagant  profits  or  anything  like  that. 

Commissioner  Wehle.  They  have  been  making  a  profit,  have  they  ? 

Mr.  Jackson.  They  have  been  making  some  money. 

Commissioner  Wehle.  What  does  the  stock  sell  for  ? 

Mr.  Jackson.  I  do  not  know. 

Commissioner  Wehle.  Is  it  above  par? 

Mr.  Jackson.  I  think  the  stock  is  held  by  the  Interborough  inter- 
ests very  largely.    Is  it  not,  Mr.  Warren  ? 

Mr.  Warren.  Some  of  it.     I  do  not  understand  the  majority  is. 

Mr.  Jackson.  It  is  a  sort  of  associated  company. 

Mr.  Warren.  I  understood  they  held  less  than  control.  They 
charge  a  10-cent  fare,  of  course. 

Mr.  Jackson.  I  might  bring  out  this  fact  of  interest:  That  th^ 
average  number  of  passengers  per  bus  mile,  the  average  earnings 
of  tlie  Fifth  Avenue  Bus  Co.  for  the  last  fiscal  year  up  to  Jun'^ 
1918,  showed  only  3^  passengers  i^er  bus-mile.  That  is  35  cents! 
Althougli,  in  other  words,  they  chai-ge  10  cents  and  have  a  wonderful 
highway  to  work  on,  they  do  not  earn  per  bus-mile  any  more  than 
a  reasonable,  decent  car  line. 

C\)mmissioner  Gadsden.  It  is  a  long-haul  line.  People  do  not  ^at 
on  and  off  in  two  or  three  blocks.  *^ 

Tv^^H';  J-^CKsoN.  One  point  I  brought  out  in  my  analysis  of  Detroit, 
Mr.  Commissioner,  was  this:  I  said  I  could  not  see  the  alleged  hicrh 
profits  for  Detroit,  because  the  Fifth  Avenue  bus  line  was  gettin«r 
only  3o  cents  per  bus-mile,  and  yet  in  the  case  of  the  Fifth  Avenue 
buses  the  long  haul  was  diluted  to  some  extent  bv  the  shoppin<» 
travel  on  Fiftli  Avenue  itself.    I  said  that  if  all  the  riders,  or  most 


.     .     ,  ,,       ,  .,  . .^aptcv  long  ago.    i„ 

IS  just  the  short  rides  on  Fifth  Avenue  that  saves  them.  I  made 
the  point  that  if  a  street  railway  could  not  live  at  5  cents,  a  bus 
compaivv'  can  not  live  at  10  cents. 

The  Chairman.  From  your  study  of  the  electric-railway  industry, 
do  you  advocate  cstablisliing  a  zone  fare  in  all  of  the  cities  of  tins 
country? 

Mr.  Jackson.  Oh,  that  would  be  out  of  the  question. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1619 

The  Chairman.  Then,  what  is  the  determining  factor? 
Mr.  Jackson.  A  thoroughly  compact  development  of  the  city.  I 
should  say  the  lines  ought  to  be  at  least  2  miles  or  2J  miles  long. 
There  ought  to  be  the  possibility  of  getting  at  least  two  kinds  of 
passengers.  I  have  mentioned  specific  cities,  to  give  you  a  pictuio 
of  that.  New  York,  for  example,  is  a  wonderful  town  for  the  zone 
fare  on  the  surface  cars.  The  city  is  committed  to  a  universal  fare 
for  the  rapid-transit  lines,  but  the  surface  ears  obviously  can  not 
compete  with  the  rapid-transit  lines  on  that  basis;  and  they  ought 
to  sell  their  merchandise  on  a  different  \)lan,  because  they  have  got 
something  different  to  offer. 

The  greatest  mistake  in  Manhattan  Island,  as  I  see  it  to-day,  is  to 
try  to  shoot  up  the  surface-car  fares  instead  of  dividing  the  town  into 
sections.  Anybody  in  New  York  City  that  wants  to  take  a  long  ride 
will  have  the  subway  available.  There  is  no  excuse  for  a  person 
riding  4  or  5  miles  on  a  surface  car  in  New  York. 

The  CHAIR3IAN.  Is  it  your  idea  that  the  real  competition  between 
the  surface  and  subway  should  be  by  having  a  lower  fare  on  the 
surface  line  than  there  is  on  the  subway? 

Mr.  Jackson.  A  lower  fare  for  short  rides.  In  other  words,  the 
surface  lines  of  Manhattan  serve,  or  should  serve,  a  distinctly  dif- 
ferent purpose  from  the  rapid-transit  lines. 

The  Chairman.  I  believe  you  advocated  the  zone  system  upon  the 
New  Jersey  lines? 

Mr.  Jackson.  I  did  not  have  to  advocate  it.  The  company  advo- 
cated it  itself.  But  my  contention  in  that  case,  as  a  witness  for  the 
League  of  Municipalities,  was  that  no  zone  system  hitherto  con- 
structed showed  the  peculiarities  of  the  Public  Service  system — that 
is,  the  ratios.  The  minimum  fare  was  5  cents  and  the  next  fare  was 
20  per  cent  higher,  and  so  on. 

Without  entering  too  extensively  into  theory,  I  showed  that 
wherever  a  zone  system  had  been  applied  in  other  countries  the 
ratios  were  1,  2,  3,  4,  or  1,  1^,  2,  etc. 

I  was  very  much  interested  to  observe  that  Mr.  Magden,  director 
of  the  British  Electric  Traction  Co.,  has  recently  prepared  a  paper 
in  which  he  attempts  to  allocate  standing  and  running  charges  for 
a  zone  system,  just  as  was  attempted  in  the  Public  Service  case;  and 
the  ratios  which  he  reaches  are  ratios  that  have  been  distinctive  of 
the  zone-fare  systems  hitherto,  before  any  theorizing  of  the  matter 
was  done.  It  was  just  a  feeling  that  the  initial  fare  in  most  places 
ought  to  be  1 J  pence  rather  than  1,  and  the  next  fare  should  be  2 
or  2^  pence.  In  other  words,  the  first  fare  was  not  five  times  or  four 
times  or  three  times  the  increment  of  the  successive  fares,  but  was 
only  1^  times  the  increment. 

The  Chairman.  They  had  a  good  deal  of  trouble  down  in  New 
Jersey  when  they  installed  this  system,  did  they  not  ? 

Mr.  Jackson.  I  do  not  think  they  raised  a  fuss  because  they  had 
to  pay  5  cents  for  the  first  mile  and  3  cents  for  the  second.  I  think 
those  are  largely  matters  of  good  will. 

The  Chairman.  What  is  the  situation  down  there  now? 

Mr.  Jackson.  I  understand  in  the  Camden  district  the  service 
on  some  lines  has  been  suspended.  I  have  been  out  of  the  city  for 
the  last  two  and  a  half  weeks  and  have  not  seen  any  consecutive 


m 


1620    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

account,  except  that  I  understood  that  the  people  in  the  Camden 
district  who  caused  most  of  the  trouble  were  extremely  long  riders, 
which  would  be  accounted  for  by  the  fact  that  they  are  now  being 
served  by  the  steam  railroads,  and  that  is  the  service  that  they 
ought  always  to  have  had. 

The  Chairman.  Has  the  service  been  suspended  because  the  peo- 
ple would  not  permit  the  company  to  operate  or  because  it  is  not 
getting  money  enough  to  operate? 

Mr.  Jackson.  I  think  they  suspended  the  service  because  of  the 
assault  and  battery  on  the  motormen  and  conductors  and  the  smash- 
ing of  property. 

Commissioner  Mahon.  Do  you  know  there  is  a  bus  system  opening 
up  in  Detroit  this  week? 

Mr.  Jackson.  It  is  not  the  system  I  have  in  mind,  because  they 
are  trying  to  raise  money.  The  Detroit  Motor  Bus  Co.  is  the  one 
that  has  been  trying  to  get  the  money,  but  I  have  seen  the  circular 
of  some  other  company. 

Commissioner  Mahon.  I  have  l)een  away  from  home,  but  they  told 
me  when  I  got  home.  They  had  one  on  the  street  on  exhibition, 
a  double-decker  similar  to  the  London  buses,  and  next  week  they 
expected  to  open  with  some  40  or  50  buses. 

Mr.  Jackson.  It  may  be  they  are  going  to  show  a  sample  of  the 
goods,  but  what  they  have  been  trying  to  do — Mr.  Mead,  who  was 
formerly  general  manager  of  the  Fifth  Avenue  Coach  Co.,  of  New 
York,  is  promoting  the  Detroit  Motor  Bus  Co.,  and  he  has  been  try- 
ing to  secure  indorsements  from  the  Better  Business  Bui-eau  of 
Detroit.  I  was  one  of  the  men  to  whom  they  submitted  his  figures, 
and  I  found  them  altogether  too  optimistic.  There  was  nothing  that 
could  make  me  believe  that  anybody  who  operated  outside  of  Wood- 
ward Avenue,  just  on  the  boulevards,  could  expect  to  get  as  much 
money  per  bus  mile  as  the  New  York  company  gets  under  the  most 
favorable  conditions  in  this  country. 

The  Chairman.  Is  there  some  hope  of  having  the  bus  supplant  the 
electric  line  in  New  York  ? 

Mr.  Jackson.  It  is  not  a  case  of  supplanting,  it  is  a  case  of  supple- 
menting. The  Woodward  Avenue  line  is  now  carrying,  or  least  did 
carry  during  the  rush  of  the  war  period,  more  passengers  than  the 
original  Interborough  subway  of  New  York.  Thev  were  giving  it 
two-car  train  service  24  hours  a  day.  Is  not  that  right,  Mr.  Mahon? 
Commissioner  Mahon.  Yes. 

Mr.  Jackson.  And  pretty  good  speed.  Now,  the  bus  company 
would  not  be  permitted  on  Wodward  Avenue  because  it  is  already  a 
congested  street.  But  that  is  the  real  street  of  Detroit  as  regards 
shopping.  They  would  i>ermit  the  operation  of  the  buses  only  on 
certain  boulevard  lines. 

Commissioner  Mahon.  It  may  be  helped  a  lot  by  the  awfully  con- 
gested condition  of  the  city.  They  tried  the  jitney  upon  Woodward 
Avenue,  and,  of  course,  it  was  an  absolute  failui-e. 

Mr.  Jackson.  Was  that  the  time  of  the  Couzens  experiment  ? 
Commissioner  Mahon.  When  the  jitney  first  came  out  they  tried 
the  jitney  out,  and,  of  course,  the  jitney  failed. 

Mr.  Jackson.  It  all  gets  down  to  si)ecial  conditions— the  use  of  the 
space.    You  can  not  accelerate  the  buses  as  fast  as  street-cars  can  be 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1621 

accelerated  and  you  can  not  get  the  capacity  for  a  given  amount  of 
urea,  although  the  double-deck  bus  in  this  country  indicates  that  we 
could  have  double-deck  cars,  possibly. 

Commissioner  Wehle.  What  is  your  impression  about  the  bus  sys- 
tem which  is  just  being  installed  on  some  of  the  crosstown  streets  of 
New  York  by  the  city  government  of  New  York? 

Mr.  Waren.  Downtown. 

Mr.  Jackson.  That  is  an  absolute  necessity.  Whether  it  is  going 
to  make  any  money  or  not  is  a  question.  1  think  it  has  a  better 
chance  of  making  money  than  the  street-cars,  because  the  street-cars 
were  terribly  handicapped.  They  were  just  little  storage-battery 
affairs.  They  could  not  make  any  kind  of  speed.  They  could  not  butt 
any  opposing  traffic  out  of  the  way.  The  bus  will  run  close  to  the 
curb  and  pick  up  a  lot  of  people  and  carry  them  short  distances  who 
would  never  think  of  using  the  street  car  for  that  purpose.  I  believe 
very  strongly  in  the  use  of  buses  for  those  east-side  streets.  Anybody 
that  goes  downtown  in  New  York  about  5  or  6  in  the  evening  will  see 
the  sidewalks  black  with  people  walking  crosstown  from  the  lower 
west  side  to  the  lower  east  side,  and  it  is  for  that  class  that  a  bus 
service  would  be  a  boon. 

Commissioner  Wehle.  Do  you  think  that  that  bus  service  is  going 

to  pay  ? 

Mr.  Jackson.  I  do  not  think  it  would  pay  at  a  5-cent  flat  rate,  but 
I  think  it  would  pay  if  they  were  to  divide  the  lines  up  into  sections 
of  about  a  mile  and  charge  5  cents  for  each  section.  That  is  the  place 
where  I  would  like  to  see  the  zone  fare  tried. 

The  Chairman.  If  there  are  no  further  questions  we  will  stand 
adjourned  until  10  o'clock  to-morrow  morning. 

(Whereupon,  at  10  p.  m.,  the  hearing  was  adjourned  to  Tuesday, 
September  30, 1919,  at  10  a.  m.) 


Washington,  D.  C,  September  30, 1919. 

The  commission  met  pursuant  to  adjournment  at  10  o'clock  a.  m. 

Present:  Parties  as  before. 

The  Chairman.  Mr.  Ogburn,  who  is  your  first  witness  this  morn- 
ing? 

Mr.  Ogburn.  Our  first  witness  is  Mr.  R.  S.  Bauer,  of  Lynn,  Mass. 
Before  Mr.  Bauer  goes  on,  I  would  like  to  make  this  announcement : 
It  was  expected  that  Mr.  Henry  Ford  would  appear  here  this  morn- 
ing to  explain  the  operation  of  his  self-propelled  street-car. 

Mr.  Ford  wired  that,  in  view  of  the  fact  that  tests  had  not  been 
completed,  he  would  not  care  to  make  an  explanation  or  statement 
in  regard  to  the  car  until  those  tests  had  been  completed;  and  the 
Kihlman  Co.,  of  Cincinnati,  who  are  building  the  body  for  him, 
wrote  also  that  they  would  withhold  any  statement  of  the  operation 
of  the  car  until  these  tests  had  been  finally  completed. 

The  Chairman.  Have  you  any  information  as  to  when  the  tests 
will  be  completed? 

Mr.  Ogburn.  They  did  not  know. 

The  Chairman.  Will  you  take  the  stand,  Mr.  Bauer? 


1622    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

STATEMENT  OF  MK.  EALPH  S.  BAUER. 

The  Chairman.  What  is  your  full  name? 

Mr.  Bauer.  Ralph  S.  Bauer. 

The  Chairman.  And  your  i-esidenc^e? 

Mr.  Bauer.  Lynn,  Mass. 

The  Chairman.  You  mav  proceed,  Mr.  Bauer. 

Mr.  Bauer.  In  1908,  as  president  of  the  Lynn  Board  of  Trade,  I 
first  beciime  interested  in  the  trolley-car  operation  fi-om  the  stand- 
ix)int  of  service.  Our  organization  had  had  a  transportation  com- 
mittee for  a  great  many  years  but,  unfortunately,  no  member  of 
the  committee  had  either  the  time  or  the  inclination  to  devote  him- 
self to  the  problem  seriously  and  try  in  some  way  to  find  a  solution 
for  the  troubles  that  then  existed,  which  were  purely  troubles  of 
service. 

We  were  in  a  territory  that  was  operated  by  the  Bay  State  Street 
Kailway  system,  a  system,  as  you  probably  know,  having  1,000  miles 
of  track  and  operating  in  91  cities  and  towns  in  eastern  Massa- 
chusetts. 

It  w;as  a  banker-controlled  street-railway  utility.  The  service  at 
that  time  was  inefficient,  miserable,  and  creating  protests  all  over 
the  district.  Mind  you,  at  that  time  there  was  no  question  as  to 
rates  of  fai*e  at  all. 

Satisfying  myself  that  someone  from  the  organization  should  at- 
tempt to  devote  a  large  amount  of  personal  time  and  effort  in  study- 
ing the  problem,  I  took  the  job  upon  myself  and  visited  cities  all 
over  tlie  country,  making  a  survey  of  their  operating  systems,  their 
types  of  equipment,  the  manner  by  which  they  were  controlled,  and 
all  that  sort  of  thing,  and  in  tliat  way  I  became,  as  I  thought  and 
as  others  thought,  quite  well  equipped  from  the  standpoint  of  a  lay- 
man  to  discuss  intelligently  the  troubles  that  we  were  then  trying  to 
solve,  which  were,  as  I  said,  troubles  of  service  purely. 

In  that  survey  I  found  that  conditions  in  Lynn,  my  own  city 
were  about  similar  to  those  of  other  cities  everywhere.  ' 

In  the  early  days  of  the  street-car  service  *  there  were  four  com- 
peting companies  in  Lynn,  each  one  of  them  to  a  very  large  extent 
paralleling  or  feeding  into  the  other's  territory,  a  waste  of  invest- 
ment, a  waste  of  service,  a  condition  that  really  forbade  if  extended 
to  any  great  extent,  a  return  on  the  capital  invested.        ' 

Then  I  found  that  a  little  later  on  in  the  nineties  banking  inter- 
ests in  JSew  England  became  interested  in  the  street-railway  prob- 
lem, and  believed  that  by  consolidating  these  competing  companies 
there  could  be  evolved  from  such  consolidation  a  unit  system  which 
would  pay  tremendous  profits,  vSecurities  were  advertised  and  sold 
with  that  statement  connected  with  them  through  the  most  respon- 
sible banking  houses  in  New  England.  " 

It  created  a  state  of  mind  in  everyone  that  the  street-railway 
service  was  a  tremendous  profit-producing  arrangement,  and  that 
all  anyone  had  to  do  was  to  invent  in  securities  and  in  a  year  or  two 
lie  back  and  reap  in  the  reward. 

I  found,  further,  that  the  ground  hogs  in  the  different  communi- 
ties--the  land  speculators— had  brought  certain  influences  to  bear 
on  the  local  governments  which  compelled  the  street  railways'  to 


PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1623 

build  extensions  into  property  for  the  sake  of  adding  ijntal  and  sale 
values  to  pasture  land,  and  the  politicians  in  charge  of  the  localities 
in  those  tunes  brought  sufficient  influence  to  bear  on  the  railroads  to 
compel  them  to  build  that  kind  of  extensions,  which  were  never 

profit-producing  lines.  •  i    •       n     i^ 

So  when  the  unit  system  was  eventually  formed  it  took  m  all  ot 
these  miles  of  nonproductive  track,  together  with,  of  course,  a  cer- 
tain number  of  miles  of  very  productive  track. 

The  Bay  State  system  has  around  1,000  miles  of  trackage.  Out 
of  that  1,000  miles  there  are  about  320  miles  that  were  built  purely 
for  speculative  or  competitive  purposes,  that  have  never  been  pix)fit 
producing  from  the  time  they  were  first  laid.  They  would  not  be 
profit  producing  to-day  at  any  rate  of  fare  that  the  people  would 
pay  to  ride  on  the  trolleys. 

So  the  systems  bectime  so  water-logged  by  abuses  from  witliout 
and  abuses' from  within  that  when  tlie  day  of  high  cost  of  materials 
and  standardized  cost  of  labor  on  an  hour  basis  nither  than  on  a 
weekly  basis  arrived,  it  became  no  longer  possible  to  make  any  kind 
of  a  'return  on  the  capital  invested,  except  by  way  of  allowing 
the  property  to  become  obsolescent  and  by  refusing  to  keep  up  the 
property  anywhere  near  efficient  condition  for  operation,  and  deteri- 
oration effects  of  that  kind.  j  v  • 
So  for  years — a  few  years — profits  were  really  shown,  and  divi- 
dends were  really  paid  on  securities  because  of  the  fact  that  they 
allowed  the  properties  to  deteriorate;  which,  in  my  judgment,  is  an- 
other way  of  watering  stock  backwaixi. 

So  when  the  time  of  stabilized  costs  of  materials  and  stabilized 
costs  of  labor,  based  on  an  hour  basis  rather  than  a  weekly  basis, 
arrived,  the  properties  became  in  a  very  precarious  condition,  and 
service  has  been  abandoned,  service  has  been  cut  down,  and  the  com- 
munities everywhere  have  been  retarded  in  their  expansion,  in  their 
growth — financial,  industrial,  and  social — Jind  instead  of  looking  at 
the  problem  as  I  did  at  the  start,  purely  from  a  transportation-busi- 
ness arrangement,  I  kept  finding  further  and  further,  as  I  looked  into 
it  and  analyzed  it,  that  the  whole  proposition  of  street-car  trans- 
portation was  so  closely  interrelated  to  every  effoii:  of  progress  nnd 
prosperity  of  the  community  that  it  never  should  be  regarded  as  a 
transportiition-business  arrangement  at  all.  The  transportation 
problem  of  our  street  railways,  to  my  mind,  is  purely  a  social  prob- 
lem, and  if  it  is  ever  solved  at  all  it  must  be  solved  from  that  slant 
and  from  no  other. 

The  arrangement  was  started  wrong,  and  it  has  been  kept  in 
operation  wrong,  and  it  never  will  h^  right  until  it  is  based  on  a 
foundation  that  is  right — fundamentally  right. 

The  car  rider  and  the  communities  and  the  sti^eet  railroads — their 
interrelating  conditions — have  never  been  propei'ly  understood,  and 
attempt  lias  always  been  made  to  finance  the  street  railroads  from 
the  car  rider,  which,  in  my  judgment,  is  absolutely  wrong,  and  never 
can  be  right. 

Tlie  car  rider  is  a  message  of  prosperity  if  he  is  anything  at  all. 
Every  time  he  <K)mes  into  a  community  he  brings  either  labor  with 
hiis  hands,  effort  of  his  brain ;  he  comes  in  to  transact  some  business, 
professional  or  otherwise ;  he  comes  in  for  the  sole  purpose  of  doing 


1624    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


sometliing  that  leaves  a  permanent,  profitable  asset  to  the  conimunity 
as  a  community. 

I  have  never  yet  found  anyone  who  could  controvert  that  state- 
ment; and  if  that  is  so  fundamentally,  why  should  we  tax  the  car 
rider  every  time  he  tries  to  come  into  the  community  to  leave  some- 
thing there  that  is  a  permanent  benefit  and  asset  to  the  community? 

The  factors  in  the  community  that  have  made  the  ever-increasing, 

tremendous    profits   out   of   street-car   operations   have    never   been 

called  upon  to  contribute  a  fraction  of  a  dollar  to  the  operating  costs 

of  the  very  factor  that  has  made  those  profits,  those  ever-increasing 

.     expansions,  potential  possibilities,  possible. 

Take,  for  example,  the  largest  department  stores  in  the  center  of 
m\y  city.  They  could  not  be  anything  more  than  a  successful  store 
in  a  country  town,  were  it  not  for  the  fact  that  the  street-railway 
systems  for  miles  in  all  directions  bring  messengers  of  prosperity 
in  the  shape  of  car  riders  into  their  district,  and  leave  them  there, 
quickly,  efficiently,  inexpensively,  for  the  department  stores  and 
other  merchants  to  exploit.  It  is  the  fundamental  reason  for  their 
profit-producing  and  prosperity-making  possibility.  Yet  the  depai-t- 
ment  stores  have  never  contributed  a  fraction  of  a  copper  to  the  up- 
keep of  that  service  which  makes  that  profit  to  them  possible,  and 
the  only  thing  which  makes  it  possible. 

Take  the  manufacturers — a  large  manufacturer  who  makes  his 
profits  by  ever-increased  production  rather  than  on  a  unit  sale,  as 
the  street-car  companies  insanely  try  to  do  at  the  present  time.  He 
uiakes  his  profit  from  production  because  it  is  possible  for  him  to 
have  landed  at  his  factory  gates  at  7  o'clock  in  the  morning,  from 
rniles  in  all  directions,  workers  who  take  his  raw  materials  and  work 
them  into  the  commodity  that  he  puts  onto  the  market  for  the  serv- 
ice of  the  world.  Those  workers  are  brought  there  by  street-car 
arrangements.  There  is  no  other  way  on  earth  of  getting  them 
there,  and  if  it  were  not  for  that  street-car  service  these  large  manu- 
facturers could  not  exist  on  the  same  scale  that  they  now  do,  oi)erate 
or  make  the  profits  that  they  do  year  after  vear;  and  yet  the  manu- 
facturer has  never  contributed  a  fraction  of  a  copper  to  the  upkeep 
of  the  very  factor  that  makes  the  tremendous  product  of  his  busi- 
ness possible,  the  factor  that  brings  his  workers  to  the  doors  at  7 
o'clock  in  the  morning. 

The  outlying  land  values,  both  rental  and  sale,  the  land  values  of 
every  part  of  the  city,  both  rental  and  sale,  the  office-building  possi- 
bilities from  a  rental  profit-producing  standpoint  and  everything 
of  that  nature  is  only  there  as  it  is  because  it  is  within  striking  dis- 
tance of  a  street-car  service  that  makes  that  particular  district  avail- 
able to  thousands  of  people  scattered  in  all  directions,  and  from  that 
district  these  profits  are  made.  Yet  any  one  of  these  factors  up  to 
the  present  moment  has  never  contributed  a  fraction  of  a  copper  to 
the  upkeep  of  that  very  system  that  makes  their  life  possible. 

Gentlemen,  I  tell  vou  the  thing  is  fundamentally  wrong.  It  was 
,  never  founded  on  a  firm  foundation.  It  has  been  carried  forward  as 
a  speculative  dollar-producing  arrangement  when  really  it  is  the 
very  life  of  every  community  it  operates  in.  And,  as  1  analyzed 
these  different  factors  which  make  up  the  street-car-transportation 
arrangement  and  the  assets  and  profits  and  values  created  by  them, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1625 

it  brings  to  me  more  and  more — and  I  can  not  shake  it,  and  I  ven- 
ture to  say  if  you  men  start  in  and  analyze  the  question  from  the 
standpoint  of  really  finding  out  what  the  trouble  is  that  you  will 
arrive  at  the  same  conclusion ;  and  that  is  that  the  whole  arrangement 
of  local  transportation  is  purely  fundamental  and  never  can  be 
anything  else  except  a  social  problem,  and  from  that  slant  it  must  be 
drawn.  No  other  solution  of  it  is  anything  more,  to  my  mind,  than 
a  temporary  expedient,  further  annoying  and  further  aggravating 
every  factor  in  the  community. 

The  banker  control  of  our  street  railways  has  been  the  rejd  reason 
of  their  existing  during  all  these  years  without  anyone  finding  what 
the  i-eal  question  was,  without  anyone  understanding  the  philosophy 
i-elating  to  the  community  on  the  one  side,  the  car  riders  on  the  other, 
and  the  street-railway  system  as  a  factor  in  both.  They  have  re- 
garded it  purely  as  a  speculative  dollar-producing  arrangement, 
nothing  else.  Their  whole  drive  has  been  along  that  line.  And  the 
time  has  come  now  that  any  rate  of  fare  which  will  pay  a  return  on 
the  capital  invested  is  a  larger  rate  than  that  at  which  the  people 
will  ride.  Therefore,  the  thing  that  presents  itself  to  you  men,  as 
I  see  it,  is  to  recommend  some  readjustment  of  the  railway  service 
that  will  restore  to  the  communities  the  service-producing  posibili- 
ties  that  the  communities  are  entitled  to  have  from  that  factor. 

This  service-at-cost  plan,  so  called,  is  a  plan  that  is  only  a  tem- 
porary expedient,  because  of  the  fact  that  there  are  no  measuring 
standards  of  efficient,  economic,  and  careful  operation  by  which  the 
public  who  ride  on  the  cars  can  determine  whether  or  not  those  costs 
have  been  proper  ones. 

The  public-trustee  plan  as  worked  out  by  the  Boston  Elevated  Rail- 
road, in  my  judgment,  is  a  colossal  blunder.  It  nullifies  every  effort 
to  careful,  efficient,  and  economical  street-railroad  management.  The 
trustees  as  appointed  by  the  governor  are  most  all  of  them  lawyers ; 
no  one  of  them  street-railway  operating  men;  they  have  shown 
neither  courage  nor  initiative  in  handling  the  property,  and  they 
have  chased  the  rates  of  fare  up  to  a  point  now  that  the  people  ride 
on  the  street-cars  at  a  10-cent  cash  fare  about  the  same  as  they  do 
on  ambulances — only  when  they  have  to.  The  cars  are  running  in 
New  England,  in  the  Bay  State  territory,  and  the  Boston  Elevated 
territory  on  a  10-cent  cash  fare.  Eighty  per  cent  empty  18  hours  out 
of  every  20 ;  only  2  hours  out  of  the  20,  one  in  the  morning  and  one 
in  the  evening,  are  they  performing  a  real  public  service.  And  I 
doubt  very  much  whether  there  can  be  any  solution  that  will  bring  a 
return  to  the  capital  invested  based  on  any  rate  of  fare  that  the  peo- 
ple will  pay  and  ride. 

I  sometimes  think  that  the  street-railway  proposition  is  passing 
through  the  same  process  of  elimination  that  the  stagecoaches  did 
in  the  foi-ties  and  fifties;  that  the  tremendous  investment  necessary 
to  get  the  electricity  into  the  controller  box  onto  the  street-car  so 
that  the  car  may  be  propelled  is  so  great  that  no  rate  of  fare  at 
which  people  will  ride  will  ever  pay  a  return  on  it.  That  makes  it 
an  economic  impossibility. 

I  am  not  prepared  to  say  that  the  jitney  bus  is  the  immediate  solu- 
tion; it  certainly  is  not  in  the  larger  cities  with  their  narrow  con- 
gested streets.   But  from  an  economic  operating  standpoint,  the  gaso- 


1626    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMIiiSIOK. 

liiie  engine  based  on  the  capital  invested  has  got  it  all  over  the  trolley 
car  to  such  an  efxtent  tliat  you  just  simply  can  not  talk  about  it. 

I  could  give  you  a  concrete  example  of  the  most  productive  inter- 
urban  piece  of  track  in  the  Bay  State  system,  operating  between 
Lawrence,  Mass.,  and  Salem,  Mass.,  17  miles  of  track,  single  track, 
with  turnouts  for  cars  coming  in  the  opposite  direction.  It  is  the 
inost  pix)ductive  piece  of  interurban  track  that  that  entire  system 
has,  yet  it  involves  a  capital  investment  of  over  $500,000  for  that 
li  miles.  The  cars  make  a  run  once  an  hour.  It  takes  an  hour  and 
a  half  to  go  the  17  miles,  because  of  the  waits  on  the  turnout. 
I  hey  get  a  5o-c^nt  fare.  Any  commercial  manufacturing  institu- 
tion would  not  operate  a  proposition  like  that  for  a  minute;  they 
would  wii>e  that  investment  right  off  the  slate  and  begin  all  over 
again. 

You  can  invest  on  that  line  $30,000  in  six  automobile  buses,  using 
only  four  of  them,  holding  two  for  emergency,  make  the  run  in 
im  hour  as  against  an  hour  and  a  half  for  the  electric  car,  make 
two  trips  an  hour  instead  of  one  trip  an  hour  as  with  the  electric  car 
and  carry  people  for  40  cents  instead  of  55  cents  and  then  show  a 
tremendous  profit,  because  you  only  have  to  make  a  return  on  a  total 
investment  of  $10,000. 

Commissioner  Gadsdex.  Is  it  being  done? 

Mr.  Bauek.  Xo;  it  is  not  being  done. 

Commissioner  Gadsden.  Why? 

Mr.  Bauer.  The  railroad  ijeople  can  not  see  it. 

Commissioner  Gadsden.  Why  don't  you  up  into  it,  or,  I  mean, 
some  independent  person  go  in  and  make  money  ? 

Mr.  BAuiai.  They  will. 

Commissioner  <jadsden.  Well,  they  have  not  gone  in  yet. 

Mr.  Bauek.  They  have  not  gone  in  yet. 

Commissioner  Gadsden.  Is  not  that  the  answer? 

Mr.  Baleu.  That  is  the  answer,  absolutely.  There  is  an  invest- 
ment of  $30,000  on  the  one  liand  tliat  will  give  a  twice-an-hour 
service  for  40  cents  against  an  investment  of  $500,000  on  the  other 
hand  that  gives  an  hourly  service,  an  liour  and  a  half  to  make  the 
trip,  ^t  i)i)  cents. 

Now,  that  is  the  condition  «v«iywhere — not  only  there,  but  that 
IS  typical  of  interurban  service  of  that  cliaracter.  The  investment 
is  so  tremendous  to  get  the  electricity  into  tl>e  contix)ller  box  of  tlie 
car  that  no  rate  of  fare  under  pi^sent  modern  conditions  will  ever 
again  enable  people  to  ride  so  that  those  cars  will  perform  a  public 
service. 

Now,  what  does  that  mean  to  the  communities?  What  does  it 
mean  to  every  factor  in  the  communities  everywhere,  unless  some- 
thing is  done  to  diange  that  character  of  serviceless  transportation 
into  a  character  of  transportation  that  will  enable  the  communities 
to  further  expand,  f urtlier  prosper,  and  further  grow  ? 

To  my  way  of  thinking,  if  it  was  good  business  for  the  people  to 
take  over  toll  roads  and  toll  biidges  and  spend  hundreds  of  millions 
of  dollars  m  rebuilding  them  and  repairing  them  and  keeping  them 
up,  it  is  better  business  for  the  communities  to  take  over  tlie  movin<r 
high  ways,  which  are  the  street  railways,  and  c^irry  the  i>eople  abso"^ 
lutely  free  of  any  fare  and  get  the  tremendous  benefits  accruim 
trom  the  intercommunication  of  people  with  oth6r  communities 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1627 

can  not  see  any  doubt  about  it.  It  is  economic ;  it  is  progressive ;  there 
is  nothing  revolutionary  about  it.  It  is  merely  placing  another 
milestone  in  the  path  of  progress.  That  it  all.  The  moving  high- 
vays  are  of  more  importance  to  the  communities  from  prout- 
inoducing  and  expension-producing  standpoints  than  elevators  are 
Ir  25-story  buildings ;  and  the  theory  of  free  elevators  in  those  build- 
inirs  is  that  the  riders  on  the  elevators  coming  into  the  building  leave 
something  with  the  tenant  of  the  building  that  adds  to  his  proht 
or  prosperity.  That  is  the  only  theory  upon  which  elevators  are 
operated  in  an  office  building.  ,«  ,     ,  .     •  ic 

Now,  if  that  is  good  for  a  mere  handful  of  tenants  in  an  ottice 
building  and  it  really  makes  possible  prosperity  and  profit  for  them, 
it  is  to  a  much  larger  extent  most  beneficent  if  you  extend  it  to  en- 
tire communities.  .  -      \^    j.    .  •    i    ;« 

Then  there  is  another  side  of  this  question  that,  to  my  mind,  is 
probably  the  most  important  of  them  all,  and  that  is  the  oppor- 
tunity that  the  great  masses  of  our  working  people  will  have  to  have 
a  little  place  in  the  country  where  their  children  can  play  under 
their  own  trees  in  God's  sunshine  and  fresh  air  and  enjoy  all  the 
benefits  from  that  kind  of  home  environment  as  against  the  con- 
irested  40  and  60  families  in  a  block  condition  now  existing  in  our 
factory  districts  all  over  this  country ;  a  social  condition  that  is  un- 
moral as  well  as  immoral;  that  prevents  every  particle  of  home  en- 
vironment that  should  be,  and  makes  it  impossible  for  people  to  live 
and  bring  their  children  up  as  the  kind  of  citizens  we  would  like  to 

have  them.  ,    .      ,  ^        i  * 

In  Lynn  a  short  time  ago  I  had  the  honor  conferred  on  me  of 
beiniT  director  general  of  a  patriotic  census.  We  wanted  to  find  out 
who  was  who  in  the  whole  territory,  both  the  suburbs  of  Lynn  and 
the  city  itself.  And  being  interested  in  this  street-car  matter,  1 
had  the  men  who  made  the  canvass— and  we  made  a  house-to-house 
canvass  for  a  distance  of  about  25  square  miles— report  to  me  the 
empty  tenements  in  the  outlying  districts  and  the  empty  tenements 
in  the  manufacturing  districts,  which  were  so  thoroughly  canvassed 
by  them.  And  I  found  that  when  we  made  the  canvass  in  191G,  or 
the  early  part  of  1917  and  lattor  part  of  1916,  in  the  factory  zones 
of  the  city  of  Lynn,  there  were  217  empty  tenements,  many  ot  them 
with  their  windows  boarded  up  to  keep  boys  from  throwing  stones 
tluough  them,  and  that  sort  of  thing,  and  in  the  outlying  districts 
there  were  only  19  empty  tenements. 

In  1919  I  hail  those  same  places  checked  over,  m  May  of  this  year. 
In  1916,  when  wc  made  the  report,  it  was  under  a  5-cent  fare  without 
any  zone  arrangement  at  all,  a  flat  fare  carrying  people  from  the 
4^ 'miles  in  all  directions  from  the  center  of  Lynn  for  a  nickel,  or 
across  that  circle  for  a  nickel.  But  in  1919  that  fare  had  developed 
so  that  the  outlying  zone  was  a  15-cent  zone  instead  of  a  o-cent  zone, 
and  the  empty 'tenements  instead  of  being  19  had  increased  to  109, 
and  the  empty  tenements  in  the  factory  district  instead  of  being  21  < , 
as  they  were  under  the  5-cent  fare  arrangement,  had  decreased  to 
27  So  it  shows  that  it  is  gradually  forcing  the  families  back  into 
walking  distance  of  the  place  where  they  work.  .     ^,      , 

Many  <rirls  are  boarding  in  Lynn  m  boarding  houses  in  the  fac- 
tory districts.  They  can  not  live  at  home  any  longer,  at  Feabody 
and  places  like  that  right  around  Lynn,  because  of  a  15  or'lS-cent 


1628    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

fare  or  larger,  so  they  come  into  the  boarding-house  district  of 
I^ynn ;  and  the  boarding  houses  are  full  of  girls  who  have  left  their 
homes  in  the  suburbs  because  of  that  economic  barrier  of  carfare  be- 
tween them.  Now,  I  leave  it  to  you  men,  how  long  will  a  coYidition 
like  that  exist  and  produce  tlie  kind  of  social  effect  that  you  and  I 
would  like  to  see  produced? 

Commissioner  Mahon.  Is  that  on  the  theory  that  it  is  cheaper  to 
pay  board  than  to  pay  the  fare? 

Mr.  Bauer.  Yes;  time  taken  to  go  and  come  and  everything  of 
that  kind. 

Commissioner  (tadsden.  Well,  they  took  the  time  before. 

Mr.  Bauer.  Yes ;  they  took  the  time  before. 

Commissioner  (tadsden.  Time  is  a  common  miantity,  then. 

Mr.  Bauer.  But  it  all  enters  into  the  factor,  I  suppose,  when  they 
determine  the  thing;  the  rate  of  fare  is  the  main  drive. 

Commissioner  Gadsden.  Don't  you  think  it  likely  that,  while  that 
may  be  an  immediate  effect,  the  permanent  effect  of  that  zone  system 
will  see  a  decrease  in  rent  in  the  suburbs  which  will  very  much  more 
than  overcome  the  increase  in  fare?  Will  not  real  estate  go  down 
there  and  will  not  rents  go  down,  and  will  not  that  more  than  off- 
set it  ? 

Mr.  Bauer.  If  under  a  zone  system  it  could  be  arranged  so  that 
people  could  come  and  go  inexpensively  and  quickly,  your  conten- 
tion might  be  practical  and  a  helpful  contention,  but  I  do  not  believe 
that  any  rate  of  fare  on  a  zone  system  will  be  a  rate  of  fare  that  will 
induce  the  people  to  ride  in  continuallj^  from  that  zone.  It  will 
rather  compel  them  to  move  in  within  easy  distance  of  the  place 
where  they  work  and,  in  that  way,  it  will  produce  a  social  condition 
that  will  be  a  community  crime  in  a  few  years.  That  is  another 
phase  of  this  outside  of  the  other  factors  that  I  have  gone  over. 

It  seems  to  me  that  it  may  be  that  this  is  the  beginning  of  the 
passing  of  the  electric  trolley,  that  because  it  is  no  longer  an  economic 
method  of  transportation  some  other  economic  method  is  going  to 
take  its  place.  You  laugh  at  the  crudeness  of  the  jitney  buses,  and  I 
agree  that  on  an  equal  rate  of  fare  they  are  an  economic  waste.  I 
put  in  a  bill  in  the  Massachusetts  Legislature  to  that  effect  a  few 
years  ago  and  made  the  argument  along  that  line.  But  at  a  rate  of 
fare  of  a  nickel  as  against  a  dime,  they  become  an  economic  neces- 
sity and  are  no  longer  an  economic  waste. 

Now,  if  it  is  a  fact  that  the  overhead  investment  necessary  to  get 
electricity  into  the  controller  box  of  the  car  is  so  great  that  only  a 
very  high  rate  of  fare  will  pay  a  return  on  that,  then  I  say  tliat 
method  of  transportation  is  no  longer  desirable  and  is  being  un- 
economical and  is  absolutely  nullifying  the  benefits  that  the  com- 
munity has  always  enjoyed  from  a  low  rate  of  flat  fare  which  enables 
the  suburbanite  to  bring  his  efforts  of  profit-producing  property  into 
the  community  at  the  same  rate  of  fare  as  anybody  else,  that  it  is 
bound  to  be  supplanted  by  a  gasoline-driven  vehicle  which  can  be 
operated  without  any  such  tremendous  investment  in  order  to  get  the 
power  in  the  car.  And  as  foolish  as  the  jitneys  now  look,  if  you  will 
get  the  old  wood  cuts  of  the  steam  engine  in  the  forties  and  fifties 
and  look  them  over  and  see  what  they  did  to  the  stagecoaches,  even 
as  foolish  as  they  looked,  you  will  find  that  the  gasoline-engine-driven 
vehicle  as  it  exists  to-day  has  made  more  progress  in  10  years  than 
the  steam  engine  did  in  its  first  25  years. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1629 

Commissioner  Wehle.  If  the  electric-railway  properties  are  on 
the  verge  of  becoming  completely  obsolete,  how  would  you  propose 
tliat  the  public  should  pay  for  them?  In  the  form  of  taxation,  by 
making  tliem  free  ? 

Mr.  Bauer.  I  believe  it  would  be  a  good  investment  for  the  com- 
munities to  take  those  properties  at  their  present  physical  value, 
their  present  worth,  whatever  that  may  be,  and  operate  them  as  a 
public  function ;  because  it  really  belong  there.  There  is  no  question 
about  it;  to  a  man  who  will  apply  himself  to  this  question  more 
than  superficially,  there  is  no  otner  answer  that  dawns  on  him.  It 
is  a  purely  public  function,  and  they  should  be  taken  over  at  their 
present  physical  value  as  they  stand  to-day,  and  the  improved  eco- 
nomic means  of  transportation  as  they  develop  will  then  be  owned 
by  the  people,  not  for  the  sake  of  producing  speculative  dollars  for 
private  owners,  but  for  the  sake  of  rendering  a  better,  more  econonii- 
cal,  more  flexible,  and  more  efficient  service  back  to  the  communities 
that  really  profit  so  tremendously  from  that  character  of  service. 

Commissioner  Mahon.  I  do  not  get  you  quite  clear  on  that,  Mr. 
Bauer.  You  say  that  the  electric  railway  is  passing  through  the 
same  process  of  elimination 

Mr.  Bauer.  I  say  that  it  may  be  that  that  is  so.  I  will  not  say 
that  it  is  so ;  but  it  appears  to  me  that  that  is  the  tendency. 

Commissioner  Mahon.  That  was  your  declaration  earlier  in  your 
I'emarks,  was  it  not? 

Mr.  Bauer.  Yes,  sir. 

Commissioner  Mahon.  Now  you  say  though  that  the  public  should 
assume  and  purchase  these  properties,  and  I  can  not  understand  why 
you  want  the  public,  if  they  are  passing  through  that  process  of 
elimination  and  about  to  be  wiped  out — vdiy  you  want  the  public  to 
assume  the  cost  of  them. 

Mr.  Bauer.  Because  if  they  do  not,  through  the  same  capital  that 
has  panhandled  the  street-railway  service  m  every  community  in 
this  country — the  banking  interests  that  have  only  a  Shylock  interest 
in  those  public-service  properties,  are  the  controlling  factors  of 
them — if  the  people  do  not  place  themselves  in  a  position  where  they 
themselves  can  get  the  benefits  of  these  tremendous  improvements, 
these  speculative  financial  men  then  will  again  be  placed  in  a  posi- 
tion where  they  can  further  exploit  peojHe  with  new  bunches  of 
securities,  based  upon  the  economic  operating  advantages  of  a  new 
service. 

Commissioner  Mahon.  Why  not  take  the  new  service  then  instead 
of  assuming  this  enormous  cost  of  the  old? 

Mr.  Bauer.  It  would  be  more  economic  to  take  and  take  advan- 
tage of  it  as  it  develops,  in  my  judgment.  This  is  like  everything 
else — it  does  not  develop  over  night.  It  takes  months  and  some- 
times a  series  of  yeai^s  to  bring  about  the  perfect  development  of 
any  kind  of  arrangement  that  means  economic  transportation  serv- 
ice, and  in  that  development,  in  that  evolution,  the  people,  if  they 
were  the  owners  of  the  properties,  if  they  were  the  owners  of  these 
moving  highways — which  they  are — would  be  in  a  position  to  take 
advantage  of  those  developments,  not  for  the  speculative  dollar, 
but  for  the  service  they  would  produce,  the  additional  service  they 
would  produce. 


1630    PKOOEEDINGS  OF  FEWSRAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  have  a  point  here,  a  few  statements  that  I  have  collected  from 
association  with  some  of  the  best  electrical  engineers  in  this  country, 
•^'ou  men  may  know  that  the  Thomson- Houston  Co.,  of  Lynn, 
Mass.,  first  developed  the  successful  electric-railway  transportation; 
the  entire  arningement  emanated  by  patient  and  progressive  work 
of  the  electrical  engineers  connected  with  the  Thomson-Houston  Co., 
which  is  now  a  branch  of  the  General  Electric  Co, 

Here  are  some  of  the  profit-producing  advances  in  the  arts  and 
science  of  making  electricity  and  in  applying  it  to  the  operation  of 
street  railroads.  Great  as  they  are,  they  have  not  been  fast  enough 
or  shown  economy  enough  to  overcome  the  fact  that  the  entire  basis 
of  oi>erating  street  railroads  was  built  on  a  foundation  of  sand- 
that  is,  they  tried  to  get  the  entii-c  operating  cost  from  the  car  rider, 
who,  in  my  judgment,  is  a  messenger  of  pit)si^erity,  and  should  not 
be  taxed  at  all;  but  e\^ry  inducement  should  he  made  to  him  to 
come  into  the  community  oftener  than  he  docs,  easier  than  he  did, 
and  more  frequently,  if  possible,  in  every  way. 

In  1890  it  cost  $150  per  kilowatt  to  equip  "power  houses. 

In  1916  it  cost  $40  per  kilowatt,  a  reduction  of  275  per  cent 

This  is  all  caused  by  the  advance  of  the  science  and  art  of  all 
street-railway  electric- power  generation. 

In  1890  it  took  7^  pounds  of  coal  to  make  1  kilowatt  with  a  belt- 
driven  genemtor. 

In  1916  it  took  2J  pounds  of  coal  to  make  1  kilowatt  with  a  turbo- 
generator, showing  a  reduction  of  5  pounds  of  coal  \yeT  kilowatt;  and 
now  they  have  further  reduced  it  so  that  it  only  takes  IJ  pounds 
of  coal  to  make  a  kilowatt  of  electrical  energy. 

In  1890  a  car  fully  equipped  cost  $4?000,  and  seated  22  passengers, 
which  figures  out  $181  per  passenger  seat. 

In  1916  a  car  fully  equipped  cost  $6,000,  seats  57  passengei^,  bring- 
ing the  cost  per  passenger  seat  from  $181  down  to  $105;  whei*e  a 
ti-ailer  car  is  used,  at  a  further  exj^ense  of  $3,000  for  the  car,  this 
brings  the  cost  per  passenger  seat  down  to  $70,  as  against  $181  in 
1890. 

Labor  costs:  In  1890  conductors  and  motormen  received  20  cents 
per  hour,  a  total  of  40  cents  per  hour  for  two  men  operating  tlie  car, 
or  1.8  of  a  cent  i>er  passenger  seat. 

In  1916  conductors  and  motormen  received  35  cents  per  hour,  a 
total  of  70  cents  per  hour  for  two  men,  or  1.2  per  passenger  seat 
per  hour.  Where  the  trailer  car  is  used  it  still  further  reduces  the 
labor  cost  i>er  passenger  seat  to  .09  of  a  cent  per  passenger  seat  per 
hour. 

Now,  with  all  of  the  economies  shown  by  that  tremendous  advance- 
ment in  the  science  of  electrical  propulsion  of  street  railways,  yet  the 
street  railways  have  been  worse  off,  in  so  far  as  paying  a  return  on 
the  capital  and  oi>erating  cost  is  concerned,  than  they  were  in  the 
nineties,  when  costs  were  so  much  greater  in  every  way. 

It  shows  further,  to  my  mind,  that  for  the  last  15  years  the  street- 
car arrangement,  except  with  a  very  few  i>ossible  exceptions,  has 
been  carried,  not  oii  a  net  pix)fit  prmluced  by  its  operating,  but  at  the 
expense  of  the  upkeep  of  the  proj^rty :  and  in  these  15  years  the 
street  railroad  properties  all  over  the  country  have  deteriorated, 

their  class  of  equipment  has  become  so  obsolescent  that  40  per  cent 

I  feel  safe  in  saying— of  the  security  values  of  all  the  railroads  have 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1681 

only  a  scrap  value  as  their  present  worth.  That  has  all  seemed  nec- 
essary to  the  bankers  controlling  these  properties  in  order  to  produce 
a  return  on  capital  sufficient  to  enable  them  to  borrow  more  money 
to  put  into  the  property. 

The  Chairman.  You  have  made  a  particular  study  of  the  liay 

State  line?  j.   ,     t^ 

Mr.  Bauer.  Yes.    I  have  made  a  very  particular  study  of  the  liay 

State  line. 

The  Chairman.  AVhich  operates  through  91  cities? 

Mr.  Bauer.  Which  operates  through  91  cities  and  towns  in  eastern 
Massachusetts. 

The  Chairman.  You  say  it  has  320  miles  of  purely  speculative 

railroad  ? 

Mr.  Bauer.  Purely  speculative,  nonproductive  track. 

The  CHAIR3IAN.  Are  those  still  in  service. 

Mr.  Bauer.  Many  of  them  are ;  some  of  them  are  not.. 

The  Chairman.  How  many  miles  have  been  abandoned? 

Mr.  Bauer.  I  could  speak 'exactly  on  that.  Mr.  Loring,  chairman 
of  the  board  of  public  trustees  of  the  Bay  St.ate  system,  will  be  be- 
fore you  to-day,  and  he  can  answer  that  question  to  you  absolutely 
ac(  urately ;  I  could  not  say. 

The  Chairman.  Is  your  thought  that  the  lines  remaining  of  these 
spe  ulative  lines  can  not  pay  a  return  upon  the  investment? 

Mr.  Bauer.  Under  present  conditions  they  can  not  pay  a  return 
ujK)n  the  investment,  except  in  one  way,  and  that  is  that  the  public 
treasuries  are  called  upon  to  make  up  their  deficits. 

Tlie  Chairman.  In  your  judgment  the  electric-railway  problem 
was  begun  from  the  wrong  angle? 

Mr.  Bauer.  Absolutely. 

The  Chairman.  It  is  purely  a  social  problem,  you  believe? 

Mr.  Bauer.  No  doubt  about  it. 

The  Chairman.  And  ought  to  be  maintained  by  the  city  or  the 

State  ? 

Mr.  Bauer.  There  is  no  doubt  about  it— by  the  public,  the  city,  the 
State,  or  the  district,  whatever  it  may  be. 

The  Chairman.  In  your  judgment  what  would  be  the  condition 
of  the  street-railway  industry  in  this  country  if  the  problem  had 
been  treated  in  that  way? 

Mr.  Bauer.  I  think  it  would  have  been  a  great  deal  different  from 
the  present  condition  of  affairs.  We  would  have  had  a  greater  serv- 
if  e,  because  the  ownership  of  the  property  of  a  public  utility  is  so 
entirely  different.  Where  the  people  own  a  public  utility,  the  only 
thing  they  are  interested  in  is  service  to  the  oommunity. 

The  Chairman.  Apply  that  to  your  Bay  State  system  which  runs 
through  91  cities. 

Mr.  Bauer.  Yes. 

The  Chairman.  AVould  you  have  that  owned  by  the  State  or  by 
the  different  municipalities? 

Mr.  Bauer.  I  would  have  it  owned  by  the  district. 

The  Chairman.  You  would  have  it  owned  by  the  district? 

Mr.  Bauer.  By  the  district. 

The  CiiAiRiiAN.  What  do  you  mean  by  the  distiict? 

Mr.  Bauer.  By  the  cities  and  towns  through  which  it  operates  as 
a  system. 


1632     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIST. 

The  CHAiR:\rAX.  So  that  it  would  be  joint  operation  between  the 
city  and  the  township  or  district? 

Mr.  Bauer.  It  has  to  be.  It  is  continiions,  noi-th  of  Boston,  out- 
side of  the  metropolitan  district,  and  south  of  Boston,  outside  of  the 
metropolitan  district. 

^  The  Chairman.  Then,  you  would  have  ownership  of  this  Bay 
btixte  system  by  91  cities  and  districts,  would  vou? 
Mr.  Bauer.  Yes,  sir. 

The  Chairman.  Then  there  would  be  91  separate  owners  of  that 
one  system  ? 

Mr.  Bauer.  There  would  in  dividing  it  up  that  way;  yes. 
The  Chairman.  How  would  you  work  it  out  if  you  did  not  divide 
it  up  that  way  ? 

Mr.  Bauer.  It  would  have  to  l)e  done  under  State  legislation,  which 
\yould  organize  a  transportation  area,  if  you  please,  and  a  commis- 
sion of  thi-ee  people  or  five  people  to  take  charge  of  and  operate  the 
lines  in  that  area. 

The  Chairman.  Suppose  the  people  living  in  one  of  those  dis- 
tricts were  not  disposed  to  invest  any  money  in  the  transportation 
system,  how  would  you  get  from  one  district  through  that  to  another 
district  ? 

Mr.  Bauer.  It  would  have  to  l)e  done  as  ever}i;hing  else  is  done 
of  a  public  community  benefit:  The  people  of  a  single  part  of  the 
district,  if  their  objection  wa,s  detrimental  to  a  greater  number  of 
I)eople  in  other  parts  of  the  district  that  were  for  it,  would  have  to 
be  overcome  by  nullifying  their  objections. 

The  Chairman.  And  these  railroads  should  haul  all  passengers 
free  of  charge  ? 

Mr.  Bauer.  No  doubt  about  it;  the  same  as  an  elevator  does  in  an 
oflice  building. 

The  Chairman.  Should  the  same  rule  apply  to  steam  railroads? 

Mr.  Bauer.  I  «m  not  so  sure  that  the  same  principle  applies. 
AVhether  it  would  work  out  the  same  or  not  I  don't  know.  The 
steam  railroads  are  a  different  proposition.  They  operate  on  pri- 
vately owned  property.  They  operate  vast  distances,  connecting 
up  the  country.  It  would  be  a  different  problem  and,  to  my  mind, 
would  require  a  different  kind  of  a  study.  There  is  no  doubt 
about  it. 

The  Chairman.  In  paying  the  cost  of  this  service  you  would  have 
to  levy  a  tax  upon  the  community  ? 
Mr.  Bauer.  Yes. 

The  Chairman.  You  have  pointed  out  that  the  department  store 

and  the  apartment  house 

Mr.  Bauer.  And  the  office  building. 

The  Chairman.  And  the  office  building  and- 


Mr.  Bauer.  And  the  bank  and  the  manufacturer 

The  Chairman.  Are  all  getting  special  benefits? 

Mr.  Bauer.  And  the  real-estate  owners. 

The  Chairman.  They  are  aU  getting  special  benefits? 

Mr.  Bauer.  Yes. 

The  Chairman.  In  your  taxing  process,  you  would  have  to  at- 
tempt to  levy  a  special  assessment  upon  these  different  kinds  of  prop- 
erty which  are  benefited  by  the  street-car  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1633 

Mr.  Bauer.  No  ;  to  my  mind  the  benefits  are  so  interrelated  to  the 
entire  community  that,  next  to  the  public  schools,  the  street-cars  are 
the  greatest  community  factor  in  the  proper  development  of  its  social 

life. 

The  Chairman.  But  would  you  have  a  higher  tax  upon  a  depart- 
ment store  than  you  would  upon  a  grocery  store  ?       ' 

Mr.  Bauer.  No;  I  would  have  a  uniform  tax  on  all  stores,  the 
same  as  you  have  a  uniform  tax  on  all  property  for  school  pur- 
poses—even property  owned  by  bachelors  and  old  maids. 

The  Chairman.  Would  you  have  the  same  rate  of  taxation  on  a 
department  store  that  you  had  upon  a  farm  in  an  outlying  district? 

Mr.  Bauer.  The  same  proportion;  yes. 

The  Chairman.  Then  there  would  be  no  special  assessment  upon 
the  department  store  or  upon  the  apartment  ? 

Mr.  Bauer.  There  can  not  be  in  Massachusetts.  It  might  be  that 
in  some  of  the  other  States  the  beneficiaries  of  the  service— the  chief 
beneficiaries  of  the  service — could  be  segregated  in  such  a  way  that 
they  could  be  specially  taxed  by  a  graded  scheme  of  taxation. 

The  Chairman.  You  would  have  to  change  the  law  ? 

Mr.  Bauer.  But  in  Massachusetts  the  law  provides  that  all  tax- 
ation must  be  proportionate. 

The  Chairman.  So,  before  3^ou  could  work  out  your  plan  in  its 
fulfillment,  you  would  have  to  have  a  change  of  the  constitution  in 
a  great  many  of  the  States  ? 

Mr.  Bauer.  In  order  to  tax  special  interests ;  yes. 

The  Chairman.  Do  the  cities  in  Massachusetts  own  their  water- 
works ? 

Mr.  Bauer.  Most  all  of  them.    I  think  all  of  them. 

The  Chairman.  Do  they  give  the  water  to  the  public  free  of 

charge  ? 

Mr.  Bauer.  No,  they  do  not ;  but  they  do  the  next  thing  to  it — they 

wash  the  slate. 

The  Chairman.  Do  they  own  the  gas  companies? 

Mr.  Bauer.  No.    Some  of  them  do. 

The  Chairman.  Do  they  give  the  service  free  of  charge? 

Mr.  Bauer.  No ;  but  at  a  greatly  reduced  price. 

The  Chairman.  Do  they  own  the  electric-lighting  companies? 

Mr.  Bauer.  Some  of  them  do. 

The  Chairman.  Do  they  give  that  service  free  of  charge? 

Mr.  Bauer.  At  a  greatly  reduced  price. 

The  Chairman.  Why  w^ould  you  have  one  rule  for  gas  and  water 
and  electricity  owned  by  the  municipality,  and  another  for  street- 
car operations? 

Mr.  Bauer.  Because  of  the  enormous  value  of  the  factor  as  a  com- 
munity proposition.  The  street-car,  in  my  judgment,  is  next  to  the 
public  school,  the  greatest  social  factor  in  any  community.  The  other 
properties  are  a  little  different. 

The  Chairman.  In  your  judgment,  the  gasoline  car  wuU  displace 

the  electric  car? 

Mr.  Bauer.  I  believe  it  is  more  economic  and  will  carry  people 
at  a  lower  rate  of  fare — a  far  lower  rate  of  fare — and  pay  a  return 
on  the  investment  as  against  the  electric  car. 

1G0643*'-  -20— VOL  2 41 


1634    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  And  if  you  are  going  to  substitute  the  gasoline 
car  for  the  electric  car,  it  means  eventually  writing  off  this  large 
investment  in  the  electric  industry  ? 

Mr.  Bauer.  The  same  as  the  stagecoach  investment  was  written 
off  in  the  forties  and  fifties,  exactly. 

The  Chairman.  It  is  your  judgment  that  the  public  ought  to 
carry  that  loss,  and  not  the  investor? 

Mr.  Bauer.  I  think  the  compensating  advantages  to  the  public 
because  of  operating  the  properties  as  a  public  function  would  be 
enough  to  warrant  the  public  in  carrying  that  loss. 

The  Chairman.  Then  you  answer  my  question  yes. 

Mr.  Bauer.  Yes. 

The  Chairman.  That  is  all. 

Mr.  Warren.  When  you  suggest  the  gasoline  car  as  a  substitute 
for  the  trolley,  do  you  mean  such  a  car  as  Mr.  Ford  is  supposed  to 
be  experimenting  with — a  car  to  run  on  rails,  but  with  a  self-con- 
tained motor — or  do  you  mean  either  the  present  or  some  improved 
jitney  bus,  running  at  large  on  the  streets? 

Mr.  Bauer.  I  mean  both,  Mr.  Warren. 

In  cities  of  great  congestion,  like  New  York  and  Boston  and  cities 
of  that  character,  there  will  always  have  to  be  cars  operating  on 
tracks,  as  I  see  it.  There  is  no  other  method  of  bringing  the  people 
in  and  taking  them  out  in  an  orderly  way,  except  on  tracks. 

In  the  smaller  cities,  such  as  Newark,  N.  J.,  for  example,  or 
Worcester  or  Springfield  or  Lynn,  a  more  flexible  kind  of  transpor- 
tation, such  as  an  improved  jitney,  in  my  judgment  would  be  the  most 
desirable,  because  it  takes  people  from  the  sidewalk  and  leaves  them 
on  the  sidewalk,  and  there  is  no  necessity  of  diving  through  half  a 
streetful  of  rapidly  moving  vehicles  at  risk  or  life  and  limb;  there 
is  no  delay  or  waiting  because  some  truck  has  broken  down  on  the 
car  line,  or  matters  of  that  kind,  and  it  is  a  more  economic,  faster, 
more  flexible  means  of  transportation  for  those  cities  where  the 
streets  will  permit  it. 

Of  course,  where  the  congestion  and  the  streets  are  against  that 
kind  of  operation,  in  my  judgment  the  operation  will  have  to  be  done 
on  tracks  with  some  such  device  as  Henry  Ford  is  now  experimenting 
with;  but  the  day  of  the  trolley  service,  electrically  operated  from 
the  tremendous,  expensive  power  houses,  with  their  enormous  invest- 
ments that  are  required  to  get  that  fluid  into  the  controller  box  on  the 
car,  is  passing.  They  are  going  as  surely  as  can  be.  It  is  no  longer 
an  economic  force  in  our  business  life  or  social  life. 

Mr.  Warren.  It  is  not,  however,  that  cost  which  has  made  the 
necassitv  for  increasing  the  fares,  is  it — the  power  end  of  it  ? 

Mr.  Bauer.  Power  and  labor  and  materials  all  enter  into  it;  and 
we  will  never  see  them  again  so  that  they  can  be  taken  advantage  of, 
in  my  judgment,  and  give  the  community  a  low  rate  of  fare  at  which 
the  people  will  ride  as  often  as  they  desire  to. 

Now,  when  you  place  a  barrier  tJetween  where  the  people  are  and 
where  they  want  to  go,  so  that  it  retards  or  diminishes  their  desire  to 
ipo,  you  do  the  community  a  positive  injury;  because  it  is  the  greater 
intercommunication  between  people  and  communities  that  makes  pos- 
sible community  expansion,  socially,  financially,  or  in  any  other  way; 
and  that  is  not  possible,  as  I  see  it,  any  longer  under  electric-street- 
car operation. 


PROCEEDII^GS  of  federal  electric  railways  C0MMISSI03ST.    1635 

See  the  cars  all  over  where  they  have  a  high  rate  of  fare.  I  was  in 
Newark  nine  weeks  ago  appearing  before  the  Public  Service  Com- 
mission of  New  Jersey,  and  those  great  bi|?  50,000-pound  cars  were 
pounding  their  heads  off  through  the  streets  of  Newark,  18  hours  out 
of  the  24,  and  running  80  or  90  per  cent  empty  with  "  Public  Service  " 
on  the  outside.  A  joke.  They  were  rendering  no  public  service.  No 
private,  palatial  car  arrangement  on  earth  could  ever  compete  with 
them.  They  were  exclusive,  mostly,  for  the  crew  and  a  few  passen- 
gers. I  told  them  that  they  ought  to  be  arrested  for  operating  under 
false  pretenses,  that  it  was  impossible  to  perform  a  public  service 
imder  that  arrangement ;  and  it  is  so. 

In  the  business  district  of  Newark  for  3  miles  I  rode  all  one 
forenoon,  and  in  that  whole  forenoon  I  could  not  find  a  single  pas- 
senger getting  on  and  off  the  car  in  the  business  district;  which 
meant  t£at  the  greatest  productive  territory  for  rides  that  they  had 
was  a  dead  zone,  caused  by  the  uneconomic  Tate  of  fare. 

Mr.  Warren.  You  spoke  of  the  transportation  area.  You  mean 
something,  I  suppose,  like  the  Metropolitan  Park  District 

Mr.  Bauer.  Yes. 

Mr.  Warren.  Or  the  Metropolitan  Water  District. 

Mr.  Bauer.  Yes. 

Mr.  Warren.  Which  contain  something  like  15  or  20  independent 

cities. 

Mr.  Bauer.  Yes.  That  would  decentralize  the  operating  arrange- 
ments of  the  railroads  and  allocate  them  to  certain  districts,  which 
to  my  mind  is  very  desirable  and  very  necessary. 

Mr.  Warren.  And  those  districts  have  existed  for  some  years,  have 
tliey  not — I  mean  the  water  district  and  sewer  and  park  districts  ? 

Mr.  Bauer.  Yes. 

Mr.  Warren.  And  have  been  administered  by  commissions  ap- 
pointed by  the  governor  ? 

Mr.  Bauer.  And  splendidly  administered.  There  is  no  scandal 
connected  with  any  of  them. 

Mr.  Warren.  No  one  of  the  communities  has  a  veto  on  the  general 
plan. 

Mr.  Bauer.  No  one. 

Mr.  Warren.  You  think  something  of  that  kind  should  be  worked 
out? 

Mr.  Bauer.  Yes,  sir;  it  is  desirable. 

Commissioner  Sweet.  Is  it  not  a  fact,  Mr.  Bauer,  that  sometimes 
farmer  boys  and  girls  want  to  come  into  town  for  wrong  purposes 
as  well  as  good  purposes  ? 

Mr.  Bauer.  Oh,  yes;  that  will  always  be  so  as  long  as  human  life 
lasts. 

Commissioner  Sweet.  For  unmoral  or  immoral  purposes. 

Mr.  Bauer.  But  I  claim,  and  I  think  I  know  a  little  about  it — I 
live  in  the  summertime  in  a  farming  community  up  on  the  New 
Hampshire  line  and  I  associate  a  great  deal  with  farmers — there  is 
as  much  morality — I  will  say  there  is  more  morality — among  the 
young  people  on  the  farms  than  there  ever  was  among  the  young 
people  in  the  cities. 

Commissioner  Sweet.  I  am  not  att^icking  the  morality  of  farmers. 

Mr.  Bauer.  Of  course,  there  is 


1636    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Wait  a  minute- 


Mr.  Bauer.  There  is  some  allurement  always  because  of  a  low  rate 
of  fare  to  bring  them  in  for  those  purposes,  if  they  are  so  disposed. 

Commissioner  S\^t:et.  Now,  the  question  is  this:  Where  people 
wish  to  use  this  facility  which  you  think  ought  to  be  furnished  by 
the  public  without  charge,  for  a  wrong  purpose — burglars,  thieves, 
anything,  escaped  murderers— you  think  that  the  public  should  fur- 
nish that  free  of  charge  just  as  much  as  they  should  for  good  pur- 
poses ? 

Mr.  Bauer.  I  do  not  think  that  you  can  put  the  thing  up  to  the 
public  that  way,  because  the  public  does  not  countenance  the  exist- 
ence of  any  such  factor  as  that  in  its  social  make-up.  Whenever 
they  find  them,  they  take  care  of  them.  The  only  ones  that  operate 
are  those  who  have  not  been  caught. 

Commissioner  Sweet.  And  those  that  have  not  been  caught — you 
think  the  public  ought  to  pay  their  fares  on  the  street  railroads:  do 
you  ? 

Mr.  Bauer.  I  think  that  is  one  of  the  factors  of  our  social  existence 
that  you  can  not  very  well  avoid.  You  can  not '  legislate  from  a 
community  standpoint  or  any  other,  in  my  judgment,  on  immorality 
or  anything  pertaining  to  it.  You  may  penalize  it,  you  may  in  a  way 
prohibit  it,  but  as  for  absolutely  overcoming  it,  it  can  not  be  done. 

Commissioner  Sweet.  Yes;  but  the  public  can  avoid  giving  some- 
thing for  nothing  to  any  part  of  the  community. 

Mr.  Bauer.  Yes;  but  that  is 

Commissioner  Sweet.  To  crooks  or  the  decent  part  of  the  com- 
munity. 

Mr.  Bauer.  The  public  takes  children  and  gives  them  an  education 
who  afterwards  prove  to  be  awful  charges  on  the  community,  either 
in  insane  asylums  or  jails  or  prisons;  but  the  public  is  not  to  blame 
for  that  particular  feature  of  it,  in  that  way.  That  is  the  educa- 
tional part  of  it. 

Commissioner  Sweet.  The  education  is  supposed  to  make  them 
better  children  and  better  citizens,  is  it  not  ? 

Mr.  Bauer.  Surely. 

Commissioner  Sweet.  That  is  one  of  the  grounds  for  the  public's 
furnishing  that  service. 

Mr.  Bauer.  But  the  transportation  of  people  from  community 
to  community  hj  street-car  arrangement,  in  my  judgment,  is  funda- 
mentally a  public  function.  It  never  should  have  been  anything  else. 
I  am  not  so  sure  but  the  steam  railroads  should  have  been  started 
as  nationally  owned  post  roads  rather  than  as  speculative  opportu- 
nities for  making  fortunes.  But  of  course  they  were  started  the  other 
way,  the  development  has  been  along  the  other  line  and  in  view  of 
the  other  philosophy,  and  a  correction  of  that  evil  might  at  the  pres- 
ent moment  bring  disaster  to  the  Nation.  But  when  Congress  em- 
powered the  Government  to  take  over  any  highway  in  the  Nation 
for  post-road  purposes,  the  Government  very  indifferently,  in  my 
judgment,  neglected  to  take  advantage  of  that  authority  when  steam 
railroads  came  into  being  and  operate  them  as  post  roads,  which 
they  are  in  every  sense  of  the  word.  And  had  that  been  done  from 
the  start  we  would  have  a  different  kind  of  social  arrangement  all 
over  the  Nation.    We  would  have  developed  the  country  faster;  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1637 

country  would  have  been  built  up  with  a  different  character  of 
people— the  character  of  the  people  would  have  been  ditterent. 
The  pursuit  of  the  dollar,  the  speculative  dollar  by  the  factors 
which  were  allowed  to  develop  the  railroads  has  been  responsible 
for  the  labor  conditions  that  we  are  now  passing  through,  m  my 
judgment,  more  than  anything  else.  The  world  is  passing  through 
the  same  conditions.  We  have  no  monopoly  on  that.  It  is  a  world- 
wide condition.  ,  ,  -r^  i.  •  « 
Commissioner  Sweet.  You  are  aware  that  European  countries 
where  the  railroads   are   owned  by  the   Government,  have   labor 

troubles  ? 

Mr.  Bauer.  Surely.  ,  .      ,  •     au  i« 

Commissioner  Sweet.  Would  you  carry  this  down  in  the  scale 
as  well  as  up,  and  in  little  communities  that  had  no  railroads  at  all 
would  you  tax  the  community  to  send  jitneys  or  scmiething  out 
into  the  rural  districts  to  bring  them  in?  i.  j  :^^ 

Mr  Bauer.  No  doubt  about  it.  There  is  no  reason  for  not  doing 
it  The  segregated  community  is  as  much  a  part  of  our  community 
life  as  if  it  existed  where  the  transportation  facilities  had  access  to  it. 
We  take  communities  that  can  not  afford  to  mamtam  high  schools 
and  grammar  schools  and  nothing  higher  than  a  little  red  school- 
house  in  education,  and  we  spend  our  State  funds  m  educating 
children  from  those  schools  in  high  schools  and  other  schools ;  do 
we  not «  Is  it  not  good  business  for  us  ?  Is  it  not  equally  good  busi- 
ness for  us  to  bring  in  touch  with  the  larger  centers  of  civilization 
and  social  order  those  parts  of  the  country  that  are  not  at  the 
present  time  in  touch  with  them?  It  is  simply  a  step  in  progress. 
No  man  can  say  that  because  it  is  uneconomic  to  reach  that  place 
it  should  not  be  reached,  if  we  are  operating  it  as  a  social  problem. 
Of  course,  if  we  are  operating  it  for  the  profit  of  the  dollar  it  is  a 
different  proposition :  You  can  not  discuss  it  on  the  same  philosophy 

^^But  I  say  that  it  is  a  public  function  to  do  these  things;  and 
while  I  may  be  a  little  in  advance  of  the  order  of  things  as  they 
exist  to-day,  if  you  analyze  the  trend  of  public  functions  for  the 
past  60  yeare  you  will  satisfy  yourself,  in  my  mmd,  that  this  is  the 
next  step-no  doubt  about  it.  It  is  the  most  desirable  step;  it  is 
economic ;  it  will  not  cost  as  much  to  operate  as  it  does  now.  Ail 
the  awful  wastes  of  operation  which  enter  into  banking  control  of 
our  public  utilities  will  be  eliminated;  all  the  awful  expenditures  for 
legislative  fix-it  lawyers  will  be  eliminated;  it  will  be  no  longer 
necessary  to  pay  a  law  firm  $500,000  in  five  years  to  go  to  the 
legislature  to  protect  their  interests.  r^  •  ^ 

The  thing  is  economic.  The  operation  m  the  metropolitan  district 
operated  by  the  Boston  Elevated  to-day  could  be  done  at  an  increase 
of  $10  on  $1,000  in  the  entire  district  and  carry  them  absolutely  tree. 
What  does  $10  on  $1,000  mean  ?  We  now  have  a  10-cent  fare  in  that 
district.  It  means  that  a  man  that  has  to  rid«  at  all  pays  $1.20  a 
week  to  go  and  come  from  his  work.  If  his  wife  and  daughter  go 
down  town  shopping  once  a  week  it  means  that  there  is  an  additional 
£  cents  gone  there^  K  he  and  his  wife  and  daughter  come  down 
town  only  one  evening  a  week  to  go  to  the  movies  it  is  an  additional 
60  cents  there  a  week. 


1638    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

That  man  may  live  in  a  property  that  is  valued  at  $4,000.  That 
would  be  the  average  valuation,  either  of  his  home  or  if  he  rented,  • 
of  the  property  that  he  occupies.  It  costs  him,  under  the  present 
arrangement — under  a  10-cent  fare — ^$120  a  year  for  the  most  re- 
stricted kind  of  car  riding — a  car  riding  that  does  the  community 
a  damage  because  it  keeps  these  people  from  coming  in  as  often  as 
they  wish  to.  Under  the  carry-them-free  arrangement  it  coukl 
be  done  at  an  expense  to  him  of  $40  a  year,  $10  on  every  $1,000 
valuation,  giving  him  unlimited  car-riding  possibilities,  not  only 
for  himself  but  for  everyone  else  in  the  community. 

Can  jou  say  that  that  is  not  economic  ?  $120  a  year  at  a  10-cent 
fare  with  the  most  restricted  kind  of  intercommunication  between 
that  little  family  and  the  center  of  the  community  they  want  to 
ride  into,  as  against  $40  a  year  with  no  limit  at  all  as  to  the  riding 
possibilities  into  that  community?  There  is  the  problem.  It  is 
simple  enough.  A  slight  calculation  will  show  you  that  the  figui*es 
are  not  inaccurate. 

Commissioner  Mahon.  Mr.  Bauer,  you  have  made  a  great  study 
of  that  matter.  I  want  to  ask  you  if  you  have  ever  thought  about 
controlling  your  car  conditions.  You  know  something  about  that, 
of  course? 

Mr.  Bauer.  Yes. 

Commissioner  Mahon.  How  would  you  control  that? 

Mr.  Bauer.  We  could  regulate  the  abuses  of  riding  the  same  as 
we  regulate  the  use  of  the  streets  and  sidewalks  at  the  present  time. 
We  control  traffic  on  our  streets,  or  try  to.  We  control  congestion 
on  our  sidewalks,  or  try  to.  We  could  do  the  same  thing  with  the 
free  rider,  or  try  to.  There  would  be  no  need  of  conductors  under 
that  plan. 

Commissioner  Mahon.  That  is  what  you  sav,  and  yet 

Mr.  Bauer.  One-third  of  the  expense  of  operating  street-cars 
to-day  is  the  conductor-platform  expense  and  the  auditing  of  the 
fares  as  collected.  That  would  be  wiped  off  immediately.  There 
would  be  nothing  like  that  at  all.  But  under  any  kind  of  public 
functioning  there  is  always  possibly  a  chance  for  abuses  to  creep 
in ;  but  they  are  so  minor  when  you  weigh  them  against  the  benefits 
derived  from  it  that  really  you  can  not  argue  from  it  at  all. 

Commissioner  Mahon.  I  think  you  overlook  a  big  item  there. 
Now,  I  have  some  experience  as  a  railroad  man  and  I  know  some- 
thing about  running  cars  where  there  have  been  free  conditions, 
and  as  to  our  trouble  in  controlling  the  passengers  riding  on  free 
cars. 

Mr.  Bauer.  Has  it  been  a  mixed  condition,  or  is  it  all  free? 

Commissioner  Mahon.  I  have  seen  it  where  we  have  had  stub 
ends  of  lines  and  where  we  have  cal-ried  people  free  for  a  certain 
distance.  I  have  in  mind  my  own  city  at  one  time,  and  we  had  all 
the  trouble  in  the  world  with  conductors  on  the  cars,  to  keep  it 
controlled,  because  the  crowds  would  come  on  and  we  could  not 
regulate  the  riding.  The  minute  we  would  throw  that  condition 
©pen  to  a  big  city,  in  a  district  where  thousands  of  men  and  women 
are  coming  at  the  congested  hours,  without  any  conductor  or  any- 
thing else  as  you  propose  in  your  plan — how  are  you  going  to  control 
and  operate  that  system! 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1639 

Mr.  Bauer.  Thei^  would  undoubtedly  be,  in  tbe  early  stages  of  a 
new  departure  of  that  kind,  considerable  confusion.     1  here  is  in 
everything  we  attempt  that  is  evolutionary.     It  always  creates  at 
the  start  wnsiderable  confusion.    But  I  have  enough  faith  in  the 
J^pTe  ofThe  communities,  in  their  right  thinking,  ^  their  vision 
Sthe  fact  that  this  service  is  their  service,  and  when  they  abuse  it 
thev  abuse  themselves;  that  with  modem  tyi^e  of  equipment    with 
automatic  closing  steps  and  closing  doors,  that  a  man  ^^  ^he  plat- 
form operating  the  car  could  come  nearer  regulating  the  proposi- 
tion better  than  is  done  at  the  present  time;  because  there  is  a  teel- 
ini  of  (intention  at  the  present  time  between  the  people  who  want 
o  ride  and  the  railroad  companies.     The  railroad  ^o^^P^^^^^'  ^^^^ 
ustly  very  often  and  also  justly  very  often,  have  created  as  %of 
mind  in  the  riding  public  that  the  average  passenger  ^^ys.     Oh 
they  can  go  to  h— ,  they  are  no  good  anyhow.    We  will  see  about 
this  "     Bft  if  the  pciple  themselves  owned  that  property  it  would 
not  be  a  great  whilTbBfore  that  would  disappear  entirely  and  they 
would  come  to  the  st^e  of  mind  that  that  was  their  property  and 
if  thev  abused  it,  it  simply  meant  that  they  abused  their  own  privi- 
Wes     tocreVher   with   certain   reasonable   regulatory    arrangements 
Sas  wf  have  now  for  traffic  on. the  f^ee^igh^^ys  and  th^^^^^^^^ 
sidewalks;  why,  there  is  no  doubt  m  my  mind  but  what  the  thing 
could  be  ;^ifed  out  pleasantly,  efficiently,  and  m  a  way  so  as  to 
briiiff  the  greatest  possible  prosperity  to  the  communities. 

of  courl.  a  man  has  to  have  faith  in  the  people  who  make  up 
the  community,  and  my  experience  with  the  average  people  has  been 
.  that  the?  want  to  do  the  ri^ht  thing.  If  you  can  show  them  m  a 
i-easonable  way  what  the  ri^t  thing  is  they  will  follow  it. 
^rhe  Chairman.  Mr.  Bauer,  you  have,  presented  us  a  very  inter- 
esting summary  this  morning  of  your  views,  and  we  thank  you  for 

"it^B^.  Mr.  Chairman,  I  feel  it  is  the  duty  of  every  citizen 
in  this  country  who  has  made  any  study  at  all  of  the  street-car 
iranSSi/to  give  this  commission  the  benefit  of  it,  because  of 
the  fact  that  it  is  l>  vital  to  the  prosperity  and  progress  of  the  com- 
munitv  itself.  And  it  is  the  lack  of  appreciation  of  that-tl^  lack 
^underSing  of  that  philosophy-that  has  brought  the  condi- 
tions of  street-car  operation  more  than  any  other  factor  tx)  their 
present  existing  condition.  •         ^«   4.1.^ 

^  The  Chairman.  We  are  very  glad  to  have  your  views  on  the 

record.  *  -j.        » 

Mr.  Ogburn,  who  is  your  next  witness?  ,,-01  a   \jf^ 

Mr   Ogburn.  The  next  two   witnesses  are  Mr.   Beeler  and  Mr. 
Lorinff     In  view  of  the  references  to  the  Bay  State  system,  or  the 
Eastern  Massachusetts  street  railways  by  Mr.  Bauer,  and  m  view 
of  the  fact  that  Mr.  Loring's  testimony  is  rather  brief,  it  might 
preserve  the  continuitrs^  of  this  hearing  more  to  have  Mr.  Ix)ring 
precede  Mr.  Beeler,  if  that  is  entirely  satisfactory  to  Mr,  Beeler. 
Mr    Beeo:r.  That  is  satisfactory  to  me. 
The  Chairman.  Mr.  luring,  are  you  ready  to  proceed  ? 
Mr.  Ogburn.  Mr.  Loring  is  chairman  of  the  board  of  trustees  of 
the  Eastern  Massachusetts  Railway, 


i 


1 


Ti 


^will 


1640    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

STATEMENT  OF  ME.  HOMEE  LOEING. 

The  Chairman.  You  may  proceed,  Mr.  Loring. 

Mr.  LoRiNG.  I  have  not  come  here  to  impress  upon  the  commis- 
sion anv  particular  panacea  for  the  street-railway  situation,  but 
Mr.  Ogburn  thought,  and  I  agreed  with  him,  that  over  in  Massa- 
chusetts on  the  Bay  State  Street  Railway,  we  had  perhaps  in  the 
last  few  months  proven,  at  least  in  that  particular  case,  some  things 
which  other  companies  have  not  yet  had  the  opportunity  to  try  out. 

The  Bay  State  system,  as  you  know,  comprises  the  system  north 
and  south  of  Boston  in  eastern  Massachusetts.  It  is  long  in  mile- 
age, but  short  in  prosperity.  The  company  has  over  900  miles  of 
track.  It  was  a  consolidation  of  72  different  roads  over  a  period  of 
about  30  years,  and  they  were  finally  drawn  together  into  one  prop- 
erty. The  rising  cost  of  everything  caught  them  with  an  income 
practically  stationary  as  the  result  of  the  encroachment  of  the 
automobiles  and  other  things,  and  the  company  went  into  the  re- 
ceiver's hands  in  December,  1917.  It  was  reorganized  this  year, 
and  public  trustees  took  control  on  June  1  under  a  special  act  oi 
the  legislature. 

Now,  the  main  features  of  this  act — perhaps  you  are  not  familiar 
with  it — are  first,  control  by  pmblic  trustees  appointed  by  the  gov- 
ernor; second,  the  regulation  of  fares  on  a  service-at-cost  basis;  third, 
a  6  per  cent  return  to  the  money  actually  invested ;  and,  fourth,  the 
important  point  that  the  State  came  forward  and  gave  financial  aid 
to  the  company. 

Other  features  which  are  important  were:  Rdease  from  paving 
for  a  period  of  two  years;  a  part  of  this  act  permitting  cities  and 
towns  to  contribute  to  the  support  of  the  company  in  order  to  keep 
in  operation  small  lines  which  might  otherwise  be  abandoned;  and 
finally,  a  provision  for  public  ownership  in  the  event  that  later  on 
it  should  be  advisable. 

The  governor  appointed  a  commission  wholly  nonpolitical — and 
as  a  matter  of  fact  I  do  not  to-day  know  the  political  views  of  any 
one  of  the  trustees,  and  I  do  not  think  they  know  my  own — a  wholly 
nonpolitical  commission,  and  made  up  very  largely  of  those  who 
were  able  to  give  a  great  deal  of  time  to  the  profits  of  the  company. 

The  funds  for  improvement,  of  course,  were  absolutely  necessary. 
The  State  provided  those  by  guaranteeing  to  pay  at  maturity,  if 
the  company  were  unable  to  do  so,  $2,500,000  of  serial  bonds.  These 
bonds  were  secured  by  mortgage  under  the  general  mortgage  on  the 
property,  and  that  enabled  the  company  to  sell  those  6  per  cent  bonds 
and  they  realized  par  for  them,  and  that  has  provided  us  with  ample 
funds.  Including  what  the  reorganization  committee  provided — 
about  $1,000,000— we  have  ample  funds  for  two  to  three  years  in 
all  probability. 

The  trustees  have  been  able  to  discontinue  lines;  and  that  is  a 
feature  which  I  feel  is  of  growing  importance  in  street-railway 
business.  The  receiver,  during  the  receivership,  abandoned  about 
45  miles  of  track.  The  trustees,  after  careful  study,  discontinued 
the  operation  on  September  1  of  about  65  miles  of  track.  We  have 
under  suspicion,  as  it  were,  probably  from  150  to  200  miles  more. 

The  trustees  have  divided  the  property  up  into  operating;  districts, 
each  district  wholly  independent,  and  the  fares  in  each  district  are 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1641 

to  be  fixed  according  to  the  earnings  and  expenses  in  each  district ; 
and  the  result  is  we  at  once  have  gained  a  great  deal  of  support  m 
the  abandonment  of  lines,  because  if  there  are  some  poor-paying 
lines  in  a  district  that  district,  in  order  to  get  low  fares,  is  not  only 
willing  but  anxious  to  throw  out  this  poor  mileage.  The  result 
is  that,  for  the  first  time,  we  are  able  to  take  up  this  subject  of 
discontinuance  with  strong  backing  by  the  communities  near  by. 
That  has  been  very,  very  helpful  and  I  think  it  will  enable  us  to 
either  discontinue  the  unprofitable  mileage— or  what  I  hope  wil 
happen— will  be  that  the  cities  and  towns  directly  affected  will 
come  forward  and  be  willing  to  help  support  that  mileage.  The 
provision  in  the  act  that  I  refer  to  enabling  the  cities  and  towns  to 
contribute  is  rather  complicated,  and  up  to  the  present  time  no 
cities  and  towns  have  availed  themselves  of  it,  largely  because  there 
will  be  four  or  five  towns  involved  on  a  line,  and  there  is  always 
some  one  town  that  sits  back  and  says,  "  We  guess  we  can  get  the 
advantages  without  paying  anything,^'  and  that  has  blocked  the  sit- 
uation so  far  in  every  case.  1  hope  the  legislature  will  straighten 
that  out  at  the  time  of  this  extra  session. 

The  trustees,  of  coilrse,  have  absolute  authority  over  fares.  In 
the  first  instance,  we  are  permitted  to  fix  fares  at  what,  in  our  judg- 
ment, will  be  the  cost  of  service.  After  that  fares  are  to  operate  on 
the  service-at-cost  basis  automatically,  somewhat  similar  to  Cleve- 
land. We  will  fix  fares  for  each  district,  and  then  two  above  and 
two  below,  and  they  will  operate  automatically.  Of  course,  this 
ability  to  fix  fares  as  we  please— we  have  only  had  for  a  very  few 
months,  but  we  can  already  see,  as  you  can  imagine,  very  great 
advantages  from  it. 

Commissioner  Wehle.  What  do  you  mean  by  two  above  and  two 
below  ?    Will  you  explain  that  a  little  more  fully  ? 

Mr.  Loring.  Well,  I  can  not  explain  it  very  fully,  because  we  have 
not  fixed  it  yet,  but  the  intent  of  the  act  is :  For  instance,  if  we  should 
start  the  Fall  River  district  with  a  6-cent  fare,  then  the  act  compels 
us  to  perhaps  fix  4  tickets  for  a  quarter  as  the  stage  upward,  and  a 
further  stage  of  perhaps  7  cents  and  two  also  below  the  6  cents,  and 
then  when  the  reserve  fund — we  have  provided  for  a  reserve  fund 
similar  to  Cleveland's — when  the  reserve  fund  is  reduced  or  increased 
to  a  certain  amount,  the  fares  will  automatically  increase  or  decrease. 

The  history  of  fares  on  the  Bay  State  Railway 

Commissioner  Wehle.  Excuse  me  just  a  minute.    At  what  point 
does  the  reserve  fund  come  into  the  list  of  expenditures,  which  are 
made  by  the  company  before  the  dividends  come  into  being? 
Mr.  Loring.  Let  me  see  if  I  catch  your  point. 
Conmiissioner  Wehle.  What  is  the  list  of  items  which  the  nickel 

has  to  take  care  of,  or  the  10-cent  piece,  or  whatever  it  is 

Mr.  Loring.  Including  the  cost  of  service,  is  that  what  you  mean? 
What  items  are  included  in  cost  of  service  according  to  the  act  ? 
Commissioner  Wehle.  Yes. 

Mr.  Loring.  Operating  expenses,  all  maintenance,  depreciation, 
which  in  the  judgment  of  the  trustees  is  ample,  and  a  6  per  cent 
return  upon  the  money  invested,  as  fixed  by  the  public-service  com- 
mission. That  is,  the  money  actually  invested  was  determined  in  a 
rate  case  decided  in  1916  by  the  public-service  commission.    And  that 


1G42     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

hns  bwii  onliirged  by  the  moiioy  since  spent,  all  items  having  to  ba 
j*pprx)ved  by  the  public-service  commission,  and  that  becomes  the 
amount  upon  which  6  per  cent  interest  goes  into  cost  of  service. 

(Commissioner  Wehle.  The  valuation  then  is  not  valuation  on  the 
basis  of  cost  of  repix)duction  to-day,  but  is  the  money  actually  in- 
vestetl  at  the  time  it  was  invested,  and  on  that  6  per  cent  is  allowed. 

Mr.  LoKiNG.  The  money  actually  invested,  but  in  the  so-called  Bay 
State  valuation  in  1916  the  public-service  commission  very  liberally 
slashed  capitalization  to  take  care  of  what  they  thought — they 
thought  there  was*evidence  of  an  inflation  in  the  early  days  of  the 
company,  so  they  took  that  out  with  great  care.  Of  coui-se,  we  have 
had,  as  you  understand,  stock- watering  laws  in  Massachusetts,  which 
liave  been  fairly  effective — since  1892,  is  it  not,  Mr.  Warren? 

Mr.  Warren.  So  far  as  street  railways  are  concerned,  it  runs  back 
as  far  as  1874  on  the  stock. 

Mr,  LoKix<i.  Yes;  but  in  the  early  days  water  did  creep  in  in  some 
few  instanc-es,  and  the  public-service  conmiission  in  making  its  actual 
cost  appraisal,  as  they  did,  took  out  many  millions  which  tliey  sus- 
pected, and  I  have  no  doubt  rightfully  so,  was  water. 

Commissioner  Wehle.  That  was  in  the  1916  decision  of  the  pub- 
lic-service commission  ? 

Mr.  I..ORING.  The  case  was  started  in  1915  and  decided  in  1916; 
was  it  not,  Mr.  Warren  ? 

Mr,  Warren.  Yes. 

Mr.  LoRiNG.  The  fare  history  of  the  Bay  State  has  been  com- 
paratively brief — not  covering  a  brief  period,  but  there  have  been 
very  few  changes. 

Commissioner  Wehle.  Pardon  me  a  moment  before  you  proceed. 
I  want  to  get  accurately  the  items  that  you  mentioned:  Tliey  are, 
first,  operating  expenses;  second,  depreciation;  third,  your  6  per 
cent  on  money  invested?    Are  those  tfie  three  items 

Mr.  LoRiNG.  Those  are  the  three  main  items.  The  act  particularly 
provides  that  depreciation  nmst  be  charged,  which  the  trustees  be- 
lieve to  be  ample,  recognizing  that  those  charges  had  been  too  small 
in  the  past. 

There  are  only  three  changes  in  the  fares  which  can  be  considered 
imi>ortant,  and  those  have  all  been  made  within  the  last  18  months. 
The  first  was  the  increase  to  6  cents.  There  were  one  or  two  little 
minor  changes,  not  worth  consideration.  Then  there  was  the  in- 
crease to  7-cent-ticket  fare  and  10-cent  cash  fare,  January  8,  1919, 
and  the  increase  which  the  trustees  made  to  10-cent  straiirht  fare  on 
July  1,  1919. 

We  are  able  to  get  from  those  changes  some  data  that  has  inter- 
ested us  very  much  and  I  think  will  interest  you.  For  instance,  the 
change  was  made  to  7-cent-ticket  fare  and  10-c«it  cash  fare  in  Janu- 
ary, January  and  February  were  abnormal  months  this  year.  They 
were  months  with  no  snow  and  were  hardly  comparable  with  the  very 
stormy  months  last  year.  So  we  simply  cast  those  aside  in  considera- 
tion of  the  matter. 

When  we  get  to  April  and  May,  however,  we  reached  really  com- 
parative conditions,  and  we  made  an  increase  of  25  per  cent  in  April 
and  almost  25 — 24:  and  a  fraction  per  cent — in  May  over  the  previous 
year. 


.       PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION.    1G43 

We  now  go  back  another  year  to  the  5-cent  fare,  and  we  made  an 
increase  of  36  per  cent  over  the  5-cent  fare  of  two  years  ago  in  April 
and  37  per  cent  in  May.  ,..  ,    ^,  .     n 

In  June  we  had  a  strike  lasting  many  days  which  threw  out  all 

comparisons.  .  , .  ,       ,•    •     . 

On  July  1  we  increaised  the  fares  to  10  cents  straight  by  eliminat- 
ing the  tickets.  In  July,  although  it  was  a  normal  month— yes ;  it 
was  really  a  normal  month ;  we  had  one  or  two  more  stormy  days, 
but  it  can  be  considered  as  close  as  you  can  compare— in  July  our 
fi:ain  in  gross  went  down  to  14  per  cent;  that  is,  with  the  10-cent 

fare 

Comparing  the  earnings  of  that  month  with  two  years  ago  with 
the  5-cent  fare,  we  made  a  gain  of  19  per  cent,  with  100  per  cent 

increase  in  fare.  ..i    .v 

In  August  we  made  a  gain  of  18  per  cent  compared  with  the  year 
before,  and  a  gain  of  25  per  cent  compared  with  two  years  before 

with  the  5-cent  fare.  . 

Of  course,  although  two  months  is  not  conclusive,  nevertheless  we 
drew  the  conclusions,  and  I  think  anyone  would  draw  the  same  con- 
clusion—that somewhere  between  7  and  10  cents  we  passed  the  eco- 
nomic point  for  getting  the  largest  amount  of  earnings  out  of  our 
population.  And  where  it  is  we  do  not  know.  We  have  made  many 
experiments  to  find  out.  .  . 

The  reasons  for  the  results  we  figure  to  be  these :  Our  cities  are 
comparatively  small.  Our  largest  city  has  about  140,000  population. 
We  have  four  cities  above  100,000.  But  in  cities  of  that  size  the 
average  ride  is  short.  Those  are  industrial  cities,  and  like  most  of 
our  New  England  industrial  cities  they  started  by  the  population 
centering  around  the  mills,  and  it  has  grown  up  from  that  point. 

The  result  is  our  average  ride  in  cities  like  Lowell,  Lawrence,  and 
Fall  River,  and  probably  Lynn,  will  not  exceed  a  mile  and  a  quarter. 

We  have  come  to  the  conclusion  that  that  is  responsible,  to  a  very 
great  extent.  All  you  have  to  do  is  to  go  in  the  hours  of  the  morn- 
ing and  see  the  people  walking  to  fully  appreciate  that  the  right  to 
fix  fares  on  our  road,  and  to  raise  them,  is  not  a  very  valuable  right. 
We  have  already  passed  the  point  and  must  reduce.  We  have  gone 
beyond  it  for  all  time. 

Another  element,  of  course,  that  must  be  considered,  is  the  jitney; 
and  on  that  I  will  give  you  a  few  observations  later. 

Mr.  Warren.  If  I  may  interrupt  for  a  moment — 

Mr.  LoRiNG.  Certainly,  Mr.  Warren. 

Mr.  Warren.  Have  you  any  figures  that  show  how  much — what 
percentage  of  the  public  ride  on  the  7-cent  ticket  and  on  the  10-cent 
cash  fare? 

Mr.  LoRiNQ.  I  am  sorry  to  say  that  we  have  not,  for  this  reason: 
We  installed  fare  boxes  a  year  ago,  which  count  the  money  instead 
of  counting  the  passengers,  and  the  result  is  that  at  that  time  we  en- 
tirely lost  count.  We  have  made  some  very  close  estimates  in  cer- 
tain cities. 

We  are  taking  the  cities  and  studying  them  one  at  a  time;  and  we 
find  that,  taking  July  and  August,  with  the  10-cent  fare  and  two 
years  prior  with  the  5-cent  fare,  we  have  lost  in  many  cases  as  much 
as  40  per  cent  of  the  traffic — M)  per  cent  of  the  passengers  are  actu- 


I  ■ 


WT'"S 


1644    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       - 

ally  walking  or  finding  some  other  means  of  conveyance  less  than 
two  years  ago. 

Of  course,  our  operation  as  trustees  has  been  only  a  few  months. 
We  have  drawn  certain  observations  which  may  be  of  interest  to  you. 
In  the  first  place,  we  are  gradually  getting  the  confidence  of  the 
public  back;  and  I  assure  you  that  the  confidence  of  the  public  was 
entirely  lost  to  the  old  company;  and  although  four  months  is  a 
short  time,  we  feel— and  I  think  the  public  officials  all  over  the  Bay 
State  feel— that  the  trustees  are  really  public  trustees;  that  we  are 
trying  to  give  them  the  service  that  we  can  at  as  low  fares  as  we  can, 
subject  to  the  conditions  imposed  upon  us  by  the  act. 

I  really  believe  that  12  months  of  public-trustee  operation,  if  it  is 
successful,  and  we  hope  it  will  be,  will  get  the  public  back  to  work 
with  us;  and  the  public  has  not  worked  with  the  Bay  State  almost 
within  the  memory  of  man.    They  have  worked  against  them. 

We  have  concluded  that  many  experiments  are  necessary  in  order 
to  find  what  fare  is  the  proper  one.  As  we  view  it  now  a  great  mis- 
take was  made— to  take  the  Bay  State  territory  as  a  whole,  900  miles— 
and  try  to  find  one  fare  that  would  fit  every  city.  The  conditions  are 
completely  different ;  and  as  we  view  it  now,  it  was  as  impossible  as 
to  find  a  suit  of  clothes  that  would  fit  men  of  all  sizes. 

We  are  now  taking  each  city  by  itself  and  are  studying  it  with  the 
idea  of  finding  what  will  bring  us  the  largest  returns. 

Of  course,  under  the  act  and  under  the  broad  authorities  that  we 
have  we  can  do  that;  but  it  has  convinced  us  that  with  almost  all 
street  railways  a  large  amount  of  experimenting  must  be  done  before 
you  can  find  out  what  fare  the  public  will  take  to.  They  are  very, 
very  peculiar,  and  they  differ  in  all  of  our  cities. 

The  results  of  the  10-cent  fare — while  I  have  given  you  the  average 
results,  the  results  vary  widely  in  different  cities,  and  naturally  be- 
cause of  the  average  haul. 

Take  the  Boston  Elevated  Railroad  with  an  average  haul  supposed 
to  be  over  4  miles,  and  the  results  which  they  have  obtained  from  the 
10-cent  fare  have  been,  I  consider,  exceedingly  satisfactory.  They 
made  a  31  per  cent  gain  in  August  with  a  10-cent  fare,  as  compared 
with  7  last  year.  There  is  31  per  cent  from  a  theoretical  45.  They 
told  me  that  in  September  they  were  making  a  much  larger  gain, 
part  of  which  they  attributed  to  the  influenza  last  year;  but  if  there 
is  anything  we  can  conclude  from  their  experience  and  ours  in  the 
same  general  territory,  it  is  that  the  successful  results  from  raising 
fares  is  very  much  in  accordance  with  your  average  haul.  Is  it  easy 
for  the  people  to  walk  ?  If  so,  they  w'ill.  If  the  distance  is  longer 
you  will  get  better  results.  The  broad  powers  we  have  had  have  en- 
abled us  to  combat  the  jitney  situation  and,  to  my  mind,  that  is  our 
greatest  problem  to-day.    The  jitneys  are  our  greatest  problem. 

We  have  made  a  coui.t  in  all  of  our  cities  every  month  to  de- 
termine the  number  of  jitneys  and  the  passengers  they  are  actually 
carrying;  and  the  number  of  jitneys,  from  our  May  count  to  our 
August  count,  more  than  doubled ;  and  the  amount  of  money  which 
they  are  taking  away  from  us  increased  during  that  90  days  from 
$18,000  to  $41,000  a  week,  or  more  than  $2,000,000  a  year. 

Commissioner  Gadsden.  It  naturally  would  increase  in  sunmier, 
would  it  not,  and  decrease  in  winter,  Mr.  Loring  ? 


'       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1645 

Mr.  Loring.  I  do  not  know,  Mr.  Gadsden.  The  jitneys  that  we 
are  encountering— although  in  some  cities  it  is  the  Ford  automo- 
bile, in  others  it  is  buses  seating  40  people,  inclosed  buses,  which 
certainly  have  been  built  with  the  idea  that  they  can  operate  365 

^^hrCiiliRMlN.  Have  your  higher  fares  stimulated  that  jitney 

^Mr^  Loring.  There  is  no  question  that  the  higher  fare  has  stimu- 
lated it.  At  the  same  time,  we  have  an  interesting  case  over  in 
Massachusetts,  at  New  Bedford.  New  Bedford  undoubtedly  has 
criven  for  years  the  best  service  of  any  city  m  the  State,  and  it  has 
been  in  a  class  by  itself,  and  it  is  still  running  on  a  5-cent  fare, 
although  they  are  about  to  try  to  get  a  higher  one. 

Up  to  the  time  that  they  compelled  ]itneys,  about  May  1.  to  pro- 
vide a  surety-company  bond,  they  had  more  jitneys  in  New  Bedford, 
with  the  5-cent  fare  and  with  better  service  than  any  other  city, 
than  in  any  other  city  in  the  State;  they  had  250  of  them  there.  I 
use  that  frequently  when  someone  comes  in  and  says.  If  you  will 
reduce  your  fares  the  jitneys  will  drop  out."  We  had  jitneys  with 
the  5-cent  fare.  To  be  sure,  we  did  not  have  as  many  as  we  have 
to-day:  but  the  men  returning  from  the  war  have  been  quite  an  m- 
fluenci  in  their  increase.  Then,  of  course,  the  automobile  people  are 
exploiting  the  jitney  business  to  an  extent  that  I  did  not  realize 
until  a  few  days  ago.  The  department  stores  are  exploiting  them. 
One  department  store  in  Salem  has  loaned  $29,000  to  people  to  buy 
jitneys  and  bring  the  people  in  to  that  particular  store.  The  ]itney 
question  is  a  very  large  one.  .    .         ac     t 

The  Chairman.  In  that  case  of  that  depai-tment  store,  Mr.  Lor- 
ing, were  the  department  store's  advertisements  on  the  side  of  the 

i  itnev  * 
Mr.  Loring.  No;  but  they  ran  to  and  parked  in  front  of  that 

store.    They  saw  that  that  was  the  center.  .^  j  ^t 

We  had  an  interesting  case  the  other  day.  We  notihed  the  city 
of  Quincy  that  on  what  is  called  Howe's  Neck  Road,  about  4  miles 
long,  we  would  abandon  the  road  and  discontinue  service  on  the 
1st  of  October  unless  they  restricted  jitneys.  They  said  that  they 
would  not  do  it.  Finally,  however,  they  put  it  to  a  popular  vote 
of  every  property  owner,  and  the  vote  was  700  to  17  in  favor  of 
the  street  railway.  That  was  the  first  real  encouragement  we  have 
had  over  in  our  territory.  . 

We  take  the  position  that  the  two  can  not  live  in  the  same  com- 
munity, in  the  same  city.  I  do  not  think  any  halfway  measure  is 
going  to  help  jitneys,  and  the  street  railway  can  not  live.  It  is 
wholly  unfair  and  unreasonable  competition; 

Commissioner  Gadsden.  Did  you  say  that  that  vote  w  as  by  prop- 
erty owners'  vote  or  citizens'? 

Air.  Loring.  Property  owners. 

Commissioner  Gadsden.  Not  citizens  generally? 

Mr.  Loring.  Property  owners  on  the  line.  The  property  owners 
on  that  line  were  given'the  right  to  choose  which  they  would  have — 
jitney  service  or  the  railway. 

Commissioner  Gadsden.  Not  the  general  public.  That  was  not  a 
popular  vote? 


i 


1646    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK.      ^ 

ma^or  t^a'mPtW  I  "*"  1^"^^""  }"•  ^^^^  ^r.  Commissioner:  The 

mayor  told  me  that  he  would  do  nothing;  that  he  would  see  the  m..<I 

n  fiell  befor*  he  would  do  away  with  the  jitneys     He  went  bad.  «nH 

iw  it  nnt  A        1  i****  'i^*"™  PP^^^^  ""'■d-     We  knew  nothing 
aoout  It  until  the  postal  cards  were  in  their  hands.    We  took  no  in 

terest jn  ,t  whatever,  because  we  had  an  idea  that  they  th^ucht  u^ 

^yanted  to  abandon  the  line  and  we  thought  that  thaf  was  flod 

st,Ue  to  leave  them  m.    The  result  was  a  surprise  to  em-ybody 

The  Chairman.  How  was  the  question  formed?    **'"^°""^- 

onf or  uTo'ifh'pr  lin^  \T  ''™P'^.  ^''^^^  *^  «'^«'^^'  »«d  to  cross  out 
f^«"  \^ilu  1  ?•  ^n«,^JJs-  •'  Do  you  prefer  street-railway  serv- 
ice^     And  the  other  wa.s :  "  Do  you  prefer  jitney  service  '"Then  it 

Seys*o'iS**T„=  "^''?  l*"^*  railway  ^will^not'oS-te^rtl 
juneys  operate.    You.must  choose  one  or  the  other."    It  was  a  ner 
fectly  fair  test,  however,  and  to  my  mind  was  a  very  vei  vTmnnrLiii 
one.    It  has  so  encouraged  the  may^or  of  Quincy  thaf  I  fee^l  tLuSc 
«fa'r  chance  ot  getting   itneys  out  of  the  entire  city.  ^ 

Ihe  Chairman.  \ou  think  he  has  changed  his  mind  and  that  lie 
will  invite  you  to  come  back  on  earth  again  ? 

xVIr.  LoRiNo.  M^ell,  I  don't  know;  700  to  17  is  quite  a  maioritv  «n,l 

most  mayoi-s  would  pay  some  attention  to  it  majority,  and 

Of  coui-se,  we  have  a  great  many  cities  who  are  interested  in  their 

itney  service  and  say  that  it  ought  to  be  continued.    rCc^^tMon 

IS  ^  unreasonable,  however,  that  it  can  not  continue         *=*""P*t"^'»" 

pakrin'tnxes*^so''oon'ir'"*/**'  f^  °*  ^^r"  *•»«  *^''«'-  ^^V  that  we 
Y'lVn  'i'3p,000  in  rent,  and  we  ran  about  40  regular  cars-  that 

IS  ^. 50  per  car,  figured  in  that  way.  The  jitney  bus  seats  20  or^O  nnrl 
1  pays  an  average  of  about  $25.  ^Now,  ol  cou^hatls  competition 
that  the  street  railway  can  not  meet;  and  so  far  as  I  can  see  t^e  oX 
position  that  we  are  going  to  take  is  that  they  can  not  exi^  in  ?£ 
same  city,  and  the  people  ultimately  must  choose  between  ihem  t- 

ItZiltnT'       "^  ""^"""  "''"'  '''''  '''  "*'*  *^«^^^y  restSdls 
So  far  BE  the  restrictions  are  concerned,  nothing  amoiinf<i  fn  ««,r 
thing:  except  a  rigid  bond.    We  have  jitneys  Cnin/rS^^^ 
apparently,  the  regulations  are  stringentf  but  thev^do  not  1^^^  to 
provide  a  surety  lx>nd  and  they  can  ^get  'some  near  rela^f^    or  th^ 
c   y  treasurer  is  not  very  careful  about'it,  and  does  not  deter  them  at 

no'  ma&fonef  Th^ '  """^^  ^'''¥  ^^hey  tell  us  thaJ  thev  do 
ever  if  fs  ZtTv  J^'^V  ^  T^''''^  changing  of  ownership.  How- 
e^er,  it  is  pretty  attractive.  A  man  savs,  "If  I  run  a  iitnev  I  Pon 
be  my  own  boss,  and  go  home  to  lunch  when  I  want  to  "and  thev 
would  rather  work  for  less  compensation,  I  think,  Tder  tW  condT 

thTvJ  ^'''''''i  ^^^  rj"^^  ^^^^  "«^^^  ^^'^^  conditions  Sark^^^ 
thjin  they  would  work  for  us  to  run  a  car.  • 

Mr.  Warren   Does  what  you  are  saying  applv  to  the  iitnev  hii^? 
A\  hen  you  say  "  jitney,"  do  you  mean  the!  20  or  30  seateJsT^  ^"'  ^ 

l.Z\i^Zt  lo"'-  '  ""^^^  ^"^^'^^^  ^^^-  ^^^  ^-^  ^  th^-'that  we 

*i.^,''T''^T''^''  Gadsden.  Did  your  investigation  lead  vou  to  think 
that  these  buses  are  an  economical  success?^  Can  they  Crate  ^^^ 
cessfully,  commercially,  in  your  judgment?  ^    ^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1647 

Mr.  LoRiNG.  Mr.  Gadsden,  there  is  a  grave  question  about  it.  The 
Ford  jitney  makes  high  speed.  Some  of  the  mills  told  me  that  their 
help  said  that  they  could  take  the  Fords  and  load  up  with  four  or 
five  of  the  help  and  run  to  the  other  side  of  the  city,  with  no  stops, 
and  they  could  get  their  lunch  and  return  that  way.  Now,  it  was 
pretty  hard  to  give  any  good  argument  as  to  why  they  should  not 
do  that.  We  can  not  do  it  with  our  street  railway,  because  the  more 
people  you  carry  the  more  stops  you  have  to  make  and  the  slower 
your  running  time.  That  is  exactly  what  happens  as  the  ]itney 
buses  increase  in  size.  The  time  slows  down  a  great  deal,  particu- 
larly in  the  city.  ^        ,  .  . 

So  I  gravely  doubt  whether  they  have  a  broad  economic  use  in  our 

cities. 

I  think  it  is  going  to  be  a  serious  matter  in  the  future,  anyway, 
Mr.  Gadsden,  handling  the  public  in  our  cities.  Our  streets  are 
fixed  in  width,  the  traffic  in  them  has  increased  enormously  m  the 
last  few  years,  and  it  stands  to  increase  greatly  in  the  next  few  years, 
and  I  do  not  believe  that  there  is  any  way  found  yet  to  transport 
people— I  am  talking  about  city  traffic— as  well  as  by  street-cars 
holding  a  good  many  people  and  occupying  a  certain  place  in  the 
street.     I  doubt  it  very  much.     However,  of  course,  it  remains  to 

be  seen. 

Now,  just  a  few  suggestions  that  have  occurred  to  us  from  our 
experiences  there :  The  first  is  that  every  city  differs  from  every  other 
city,  and  each  street  railway  must  diagnose  its  own  case  by  intensive 
Study  and  pay  very  little  attention  to  what  other  cities  are  doing. 
I  think  that  has  been  a  great  mistake.  Conditions  do  vary.  Take 
Fall  River  and  Lowell,  two  manufacturing  cities  of  practically  the 
same  population,  and  they  are  not  alike  in  any  way. 

I  just  want  to  mention  one  thing  there  which  I  did  not.  We  are 
now  starting  extensive  experimenting  in  fares.  Our  fares  are  10 
cents.  We  have  put  in  a  monthly  ticket  in  Fall  River.  It  has  been 
now  about  three  weeks.  We  sell  50  rides,  to  be  used  in  the  calendar 
month,  for  $3— at  the  rate  of  6  cents.  The  whole  purpose,  of  course, 
is  that  when  we  sell  a  man  a  ticket  we  have  him  for  50  rides  that 
month ;  and  we  hope  it  is  going  to  get  the  people  back  on  the  cars. 

We  have  done  considerable  investigating  there,  and  it  is  having 
that  effect  to  a  certain  extent.  People  are  going  home  to  lunch  who 
have  not  been  doing  so  before.  It  does  not  seem  reasonable-^he 
difference  of  8  cents,  with  the  cost  of  everything  in  restaurants — 
would  induce  a  man  to  go  home  to  lunch,  but  they  are  affected  by 
those  little  things. 

We  have  tried  in  Lowell  16  tickets  for  $1.  Those  went  on  sale 
last  week.  Those  are  from  an  inside  zone  to  the  center,  with  transfer 
only  to  the  depot.  In  that  way  we  are  trying  the  idea  of  a  fare  to 
the  center  and  doing  away  with  transfers.  That  has  started  off  with 
a  great  deal  of  popularity  and  we  are  hopeful  of  the  results  there. 

We  have  taken  Taunton,  another  city — and,  by  the  way,  we  are 
doing  this  experimenting  in  the  cities  which  have  not  jitneys,  be-, 
cause,  of  course,  we  can  afford  to  carry  people  cheaper  there.  In 
Taunton  we  have  sold  14  tickets  for  $1,  recognizing  that  each  city 
is  different,  that  some  deserve  cheaper  fares  than  others,  and  we  are 
trying  to  find  out  what  is  the  best. 


1648    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  personally  believe  there  is  something  in  the  monthly  ticket,  par- 
ticularly  with  the  short-haul  rides.  ^ 

As  It  is  now,  if  the  weather  is  fair  and  crisp,  they  walk.  If  you 
can  sell  them  a  monthly  ticket,  which  they  must  only  use  a  compara- 
tively few  times  to  make  their  cost  equal  to  that  number  of  detached 
rides,  1  believe  it  is  going  to  induce  them  to  ride.  I  think  we  havo 
got  to  fand  some  way  to  get  the  people  back  on  the  cars. 

VV  e  expect  in  the  next  six  months  in  Bay  State  territorv  to  try 
fu^!*!l*  i"'"''-^  experiments,  and  I  fully  believe  it  is  only  by  doing 
that  that  we  can  find  the  right  way;  and,  of  course,  under  the  ordi- 
nary, common  form  of  regulation  that  is  very  difficult.  In  a  famous 
my  ^tate  case  the  decision  was  rendered  14  or  15  months,  I  think, 
after  the  case  was  tried,  and  all  the  conditions  had  changed  during 
that  time,  but  the  case  was  decided  finally  on  the  conditions  almost 
a  year  and  a  half  previous. 

Commissioner  Wehle.  Have  any  rates  by  the  Bay  State  been 
brought  down  through  the  ticket  system  below  5  cents  ? 

Mr.  LoRiNG.  No.  There  is  great  pressure  upon  us  to  do  that. 
Ihere  is  great  pressure  upon  us  to  try  5  cents.  They  will  say,  "  Let 
us  try  5  cents."  But  the  trustees  fear  that  the  5-cent  fare  is  gone 
for  all  time,  excepting  for  a  very  limited  ride. 

Commissioner  Wehle.  Has  the  ticket  system  led  to  a  reduction 

Vi"^  ir*^^^  ^"^  ^J'y  ^^^^^^  ^^  ^^^^  England  that  you  know  of? 

Mr.  Warren,  lou  mean  recently,  Mr.  Commissioner? 

Mr.  LoRiNG.  No ;  I  think  not. 

Mr.  Warren.  Not  recently.  It  did  in  one  or  two  some  years  ago, 
before  these  high  costs  struck  us.  ^  ^' 

Commissioner  Wehle.  What  cities  were  they « 

Mr.  Warren    There  was  a  ticket  in  Fall  River,  I  think 

Mr.  LoRiNG.  Six  for  a  quarter;  yes. 

Mr.  Warren.  Six  for  a  quarter. 

Mr.  LoRiNG  Then  there  was  another  over  in  Lynn-there  was  a 
fare  all  over  the  Bay  State  18  months  or  2  years  ago,  an  off-peak  fare 
of  less  than  5  cents,  but  it  did  not  induce  any  traffic.  Everyone  was 
disappointed  m  it.  No  one  could  quite  explain  why  it  wa&  But  it 
IS  difficult  to  make  people  ride  when  they  do  not  want  to  ride,  even 
for  the  saving  of  a  fraction  of  a  cent. 

I  think  our  experience  in  the  large  cities— Boston,  for  instance^ 
has  proven  that  if  permitted  to  do  so  the  large  cities-and  I  refer 
to  a  city  of  500  000  or  over-could  work  out  their  own  salvation  by 
an  increase  m  fares.  Their  haul  in  most  cases  is  long,  and  people 
are  more  metropolitan  in  the  larger  cities,  and  they  are  willing  to 

Commissioner  Gadsden.  Do  you  feel  that  Boston  is  goin^  to  suc- 
ceed m  working  its  problem  out  ?  &      ^  ^ 

Mr.  LoRiNG.  Absolutely. 

Commissioner  Gadsden.  There  has  been  a  good  deal  of  testimony 
here  to  the  contrary,  and  doubt  expressed  about  it.  The  commission 
wouJd  be  interested  in  having  your  opinion  on  that. 

Mr.  LoRiNG  I  had  a  great  deal  to  do,  Mr.  Gadsden,  with  the 
Boston  legislation-the  legislation  that  brought  that  about-being 
interested  during  that  session  of  the  legislature  in  an  association  of 
securities  owners.  But  the  trouble  was  that  everyone  expected  from 
the  Boston  plan  wholly  unreasonable  results.  f       ^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1649 

You  take  the  financial  results  of  the  first  year,  which  will  by  all 
means  be  the  worst  year;  the  deficit  was  about— a  little  less  than — 
$4,000,000;  $2,000,000  of  that  was  a  depreciation  charge.  Prior  to 
that  time  the  largest  depreciation  charge  the  company  had  ever  set 
up  was  $200,000  in  any  one  year.  The  trustees  at  once  put  that  up 
to  $2,000,000,  realizing  that  the  property  needed  a  great  deal  of 

money  spent.  ,    n      i  i 

Then  the  maintenance  on  the  property  has  been  wholly  abnormal 
during  the  year.  The  company  has  been  starved,  necessarily  so  be- 
fore ;  and  the  trustees,  very  properly,  I  think,  appreciated  that  what 
should  be  done  first  was  to  put  the  property  in  condition,  which  they 
have  done  exceedingly  well  with.  Then,  of  course,  the  matter  of 
wages  nobody  foresaw;  nobody  had  any  idea  that  there  would  be 
such  a  large  increase  in  wages  during  the  year.  ,    ,,    •. 

You  take  the  item  of  wages,  the  item  of  depreciation,  and  the  item 
of  abnormal  maintenance,  which  would  not  occur  and  will  not  occur 
after  the  property  is  once  brought  up  into  condition,  and  you  have 
overcome  more  than  your  entire  deficit.  ^ 

I  feel  that  the  Boston  plan  is  working  fully  as  well  as  those  who 
studied  it  beforehand  and  who  really  formed  their  expectations  by 
careful  study  anticipated.  .  . 

Commissioner  Meeker.  Would  the  zone  fare  increase  the  income? 

Mr.  LoRiNG.  Nobody  knows.     You  mean  in  the  elevated  case,  do 

you  ?  •  1  J.I,  i. 

Commissioner  Meeker.  I  would  like  to  get  your  ideas  on  that. 

Mr.  LoRiNG.  We  are  going  to  try  a  zone  fare  as  soon  as  some- 
body can  show  us  how  to  collect  the  fares.  We  are  watching  this 
New  Jersey  experiment  with  a  good  deal  of  interest,  and  if  a  way 
is  found,  we  are  very  anxious  to  try  the  experiment  in  some  of  our 

cities,  of  a  zone  plan.  , ,.  ,  •  j- 

Commissioner  Meeker.  Do  you  contemplate  establishing  a   tare 

lower  tlian  a  5-cent  fare  for  the  initial  zone? 

Mr.  Warren.  We  have  not  yet  determined  that.  As  I  say  again, 
we  are  watching  the  New  Jersey  experiment  with  a  good  deal  of  in- 
terest, and  if  it  works  well  thei*e,  we  should  be  very  much  inclined 
to  try  something  along  the  same  line  in  one  of  our  cities. 

But  the  particular  point  I  want  to  make  is  that — and  from  our  ex- 
perience I  have  changed  my  views  the  last  few  years  on  it — the 
companies  must  do  an  enormous  amount  of  experimenting,  and  un- 
less the  commissions  are  urged  to  be  broadminded  about  it,  realiz- 
ing that  they  are  experiments,  and  permitting  them  promptly,  I  do 
not  see"  how  the  companies  are  ever  going  to  find  out  the  real  road 
to  their  salvation. 

I  feel  that  in  our  particular  case,  after  perhaps  a  year  of  experi- 
menting, we  ought  to  be  able  to  decide  what  fare  in  each  of  our  cit- 
ies will  gain  us  the  largest  income ;  but  I  do  not  hesitate  to  say  that 
we  will  experiment,  and  experiment  again,  and  if  we  were  ham- 
pered, and  long  public  hearings  were  necessary  in  order  to  do  it, 
it  would  simply  be  impossible. 

Commissioner  Meeker.  You  spoke  of  the  street-railway  car  as 
necessarily  being  a  car  that  would  seat  somewhere  about  50  peo- 
ple.   You  have  tried  on  your  line  the  one-man  car? 

KKXHS**— 20— VOL  2 42 


ym 


1650    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  IxniiNo.  We  have  ordei-ed  200.  The  first  ones  will  be  deliv- 
ered some  time  in  October. 

Commissioner  Mekkek.  Do  you  think  they  will  be  superior  to  the 
type  ot  bus  you  were  speaking  about  a  moment  ago,  that  seats  about 
the  same  number  of  people  ? 

1  ^fi-  I^«J-^;«.  yes;  they  will  be  more  comfortable.  They  will  !)e 
heated,  and  I  thmk  there  is  no  question  that  they  will  be  much  more 
comfortable.  ,  *^ 

Commissioner  Meeker.  Then  the  limitation  in  area  covered  by  the 
fort?  ""^^  ''''^"^'^  ^"^  "''''*^  *^'*'^  overcome  by  this  element  of  com- 

Mr.  LoRiNo.  I  think  it  will  be  partially  overcome,  anyway. 

Mr.  Meeker  Do  you  think  it  is  possible  to  run  a  one-man  car  in 
conjunction  with  a  zone  system  of  fares? 

Mr.  LoRiNG.  It  is  entirely  possible  for  two  zones,  and  most  of  our 
local  cars  do  not  go  outside  of  the  second  zone.  We  are  runninir 
now  m  Lowell  on  these  new  fares  we  have  put  in— we  have  a  pa>^ 
wmfw""    P^^r^^'i?  '^'AT^  ^y  ""^^"^^  ^^  ^^-^^  t^ke  care  of  two  zones 

Tn^Ttn  ^T^\  ^^  "^"f  ^'  ^^^"^"^^  ^^^^  ^^^-"^^'^  ^«^s  we  hope 
to  do  what  others  do  m  certain  cases  of  weak  lines-we  hope  to 

save  some  operating  expense;  but  much  oftener  we  hope  to  increase 
our  frequency  of  service  and  give  better  service  at  the  same  expense. 
That  is  what  we  are  really  hoping  to  gain. 
Commissioner  Meeker.  In  Lynn,  what  is  the  initial  fare? 

pr^nt^mT  ''''*'*     ^^'^'^  ^'  ^  '^^^'  ^^^^  ^^  ^^^^^  ^^  ^^'^ 

vlri^'^l'^'^r''^  ?n^^^^^^   How  can  you  hope  to  induce  walkers  to 
lide  at  a  rate  of  10  cents  as  the  lowest  fare? 

Mr.  LoRiNG.  We  are  rapidly  finding  out  that  they  will  walk  on 
a  lU-cent  tare. 

Coramissioncr  Mekkkh.  Do  you  think  if  you  instituted  a  5-cent 
initial  fare  more  people  would  ride? 

Mr  LoRiNG.  Undoubtedly  the  lower  the  fare  the  more  they  would 
rule;  but,  of  course,  our  situation  in  Lynn,  since  we  have  taken  hold 
ot  It,  IS  complicated  by  very  serious  jitney  competition,  and  we  have 
served  notice  on  Lynn  that  if  they  ^yill  eliminate  the  jitneys  we  will 
immediately  take  up  the  subject  of  lower  fares;  but  it  is  useless  to 
cxiK-ct  lower  fares  so  long  as  jitneys  continue  to  operate 

Regarding  the  public  control,  I  believe  that  it  may  be  a  step  in 
between  the  private  control,  as  we  have  had  in  yeai-s- gone  by,  and 
public  ownership  which  we  may  have  to  face  in  the  future 

1  thmJf  by  State-appointed  trustees  it  oifers  the  reasonable  cer- 
tainty of  careful,  economical  management,  particularly  if  removed 
from  politics,  and  I  believe  that  the  public  trustees  can  in  time  get 
the  complete  public  conhdence  and  I  believe  it  has  a  great  deal  to 
favor  It.  Ot  course,  it  has  not  been  of  long  standing,  and  I  appre- 
ciate, as  Mr.  Gadsden  said,  that  the  public  was  very  much  irritated 
in  IJostoii  over  the  10-cent  fares  which  they  did  not  really  think 
po^jsible.  and  there  has  been  an  inclination  to  blame  the  trustee  plan 
for  the  10-cent  fares.  But  they  are  not  to  blame  in  any  way  exceiH 
probably  if  it  had  not  b^n  for  the  trustees  the  public-service  c^- 
niKisfon  would  have  held  the  fares  down  and  the  company  would  have 
gone  into  the  hands  of  receivers.    I  think  that  probably  would  have 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1651 

been  the  result;  because  it  had  to  be  done,  and  done  very,  very 

'"'Sf  colLe,  the  question  of  credit,  to  my  mind  is  the  most  ™Portant 
thine  that  you  gentlemen  have  to  consider.  It  is  difficult  enough  to 
estrWi^cr^it  fnyway,  and  it  is  doubly  difficult  to  reestablish  credit 

after  it  has  once  been  lost.  .  ,    ^  xi    •       ,,^.i;f 

Now,  the  street  railways  of  the  country  have  lost  their  credit 
With  few  exceptions,  I  think  it  is  very,  yery  doubtful  whether  they 
are  going  to  bo  able  to  get  the  credit  back  while  under  private  man- 
agement and  of  coulter  that  becomes,  to  my  mind,  the  most  impor- 
tant argument  in  favor  of  public  ownership.  But  through  some  fonn 
of  Dubfic^ontrol  by  which,  as  we  are  trying  in  Massachusetts,  the 
nromrtv  is  run  by  public  ti'ustees;  but  the  directors  of  the  company 
arSre  wHh  certain  duties-an'd  they  certainly  wa  eh  with  care 
what  the  tnistees  are  doing;  it  is  a  safeguard  and  an  admirable  safe- 
cuarf  wit  public  control.'  Then  the  State  can  proi^rly  assist,  at 
S  unTil  it^s  determined  whether  it  is  going  to  be  possible  to  re- 

"fS^rS^^:^  be  restored  except  wi«i  certain  ex 
c-eptions  under  private  management  The  public  is  in  a  state  of 
mind  which  means  that  it  will  giant  the  companies  few  «  an>, 
favors  The  investors  know  that.  There  are  so  many  good  invost- 
mente 'to-day  that  I  can  not  even  see  in  the  near  future  any  market 
for  street-railway  securities.  ^    , 

Of  cmU  a  street  railway  has  got  to  improve.  It  ha.  got  t-  grow 
with  the  community.  If  it  stops,  dissatisfaction  results.  Tliat  is  so 
w  the  Bay  State.  That  was  so  with  the  Boston  Elevated,  when 
rhey  were  unable  longer  to  get  money  and  spend  it  for  improvements. 
Then  the  public  began  to  get  unreasonable  and  peeved  over  it. 

So  that  I  feel  that  through  public-trustee  operation  is  a  possible 
avenue  by  which  the  State  will  be  justified  in  advancing  money,  as 

it  is  done  in  this  cti.se.  ,  ^     i      i-i      c^«^«    ^^ 

Of  course,  the  otlier  step  is  tlie  actual  guaranty  by  the  htate,  as 
was  done  in  the  elevated  case.  That  means,  of  course,  a  valuation; 
but  I  feel  very  strongly  that  all  companies  have  got  to  meet  this 
question  of  valuation.  I  feel  also  that  the  sooner  they  meet  it  the 
bett^^r  off  they  will  be,  because  I  think  the  public  will  tighten  up  in 
its  views  of  valuation  as  time  goes  on.  I  have  felt  for  some  two  or 
three  years  that  street  railways  had  enough  to  offer  sound  valua- 
tions;*that  is,  while  they  might  not  be  everything  they  would  exi^ect, 
they  would  be  much  worse  in  the  future. 

I  am  a  believer  in  the  Elevated  plan  m  many  instances.  I  believe 
in  all  large  cities  it  is  an  admirable  plan.  Where  the  fare  can,  with 
reasonable  certainty,  produce  receipts  which  will  equal  the  cost  ot 
service,  the  guaranty  should  not  be  a  serious  matter,  and,  ot  course,  1 
am  a  believer  in  the  fact  that  the  taxpayer  should  properly  con- 
tribute to  a  certain  extent  I  think  in  the  Bay  State  that  is  going 
to  be  done  generally  by  our  cities  there.  ^       j.^       j      s 

I  had  the  mayor*^and  a  committee  wait  on  me  the  other  day  trom 
one  of  our  cities,  asking  whether  there  was  anything  to  permit  them 
to  decide  what  fare  they  would  pay  and  then  have  the  general  tax- 
payer pay  the  balance,  and  tliey  proposed  to  go  liefore  the  legisia- 
ture  and' ask  for  special  legislation  to  do  tha4:.  There  is  a  feeling 
that  has  grown  most  rapidly. 


1*1 


i 


1652    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Gadsden.  I  thought  you  had  an  act  in  Massachu- 
setts along  that  line. 

Mr.  LoRiNO.  We  have  an  act,  Mr.  Commissioner,  which  is  a  good 
start,  but  all  that  they  can  contribute  is  50  cents  per  thousand  for 
towns  and  $1  a  thousand  for  cities.  The  amount  is  enough  to  con- 
tribute enough  to  keep  us  from  abandoning  the  lines,  but  it  is  not 
enough  to  affect  the  fares. 

Commissioner  Meeker.  What  is  this  50  cents  a  thousand  and  $1 
a  thousand  ?    What  does  it  mean  ? 

Mr.  LoRiNG.  On  the  assessed  valuation.  Let  me  show  you :  It  will 
mean  in  Fall  River  $75,000  to  $100,000.  Of  course,  that  would  not 
have  a  great  influence  on  Fall  River's  fare. 

Commissioner  Meeker.  It  means  50  cents  per  $1,000  of  taxable 
valuation  ? 

Mr.  LoRiNG.  Of  taxable  property ;  yes. 

Commissioner  Gadsden.  It  really  recognizes  the  principle,  does  it 
not? 

Mr.  LoRiNG.  They  have  recognized  the  principle,  and  it  has  grown 
very  rapidly  in  the  last  two  years.  Where  you  seldom  met  a  man 
among  thinking  people,  the  taxpayers  themselves,  who  felt  it  ought 
to  be  done,  only  a  short  time  ago,  now  you  find  them  everywhere. 

The  trustees  introduced  in  the  last  legislature  a  bill  that  we  called 
the  "  50-50 "  bill.  It  recognized  the  principle  that  the  taxpayer 
ought  to  contribute,  but  it  also  tried  to  get  away  from  what  I  think 
is  a  great  mistake,  to  tell  the  car  rider :  "  You  will  pay  5  cents  or  6 
cents  and  then  whatever  additional  expense  there  is  the  taxpaj^er 
will  pay." 

The  50-50  bill  divided  50-50  the  cost  of  service  in  excess  of  5 
cents.  So  that  if  it  were  10  cents  the  car  rider  would  pay  equal  to 
7i  cents  and  the  taxpayer  the  balance. 

I  would  anticipate  great  trouble  with  the  car-riding  public  if  it 
was  guaranteed  that  its  fare  would  be  this  amount  and  no  more, 
notwithstanding  what  the  company  spent.  I  think  that  is  a  great 
error;  although  I  believe  there  is  a  strong  feeling,  particularly 
over  in  our  community,  that  that  should  be  done. 

That  50-50  bill  had  the  support  of  some  of  the  largest  tax-paying 
corporations  in  the  State  of  Massachusetts  who  believed  that  it  was 
in  the  interest  of  their  employees  that  fares  should  be  kept  down, 
and  they  were  willing  to  pay  something  in  addition. 

Commissioner  Wehle.  All  of  the  stock  in  the  Bay  State  is  owned 
locall3%  is  it  not? 

Mr.  LoRiNG.  Practically  all  owned  in  Massachusetts ;  yes. 

Commissioner  Wehle.  It  is  very  largely  and  widely  distributed, 
is  it  not,  in  the  cities  and  small  towns  of  the  State  where  the  com- 
pany operates? 

Air.  LoRiNG.  Fairly  widely;  only  fairly,  Mr.  Commissioner. 

Commissioner  Wehle.  That  circumstance  would  contribute  some- 
what to  the  recent  developments  of  which  the  50-50  bill  is  an  in- 
stance? 

Mr.  LoRiNG.  Yes;  it  would  somewhat;  but  I  do  not  think  it  did 
to  any  great  extent. 

Commissioner  Wehle.  Has  it  inclined  public  opinion  somewhat 
toward  the  proposition  of  the  State's  assuming  part  of  the  cost  of 
operation  in  the  event  that  the  fares  did  not  bring  sufficient  revenue? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1653 

Mr.  LoRiNG.  That  probably  had  some  influence,  but  I  do  not  think 
it  had  a  great  deal.  Of  course,  the  50-50  bill  was  not  passed  by 
the  legislature.  They  did  not  pass  it.  They  turned  it  down.  Since 
that  time,  however,  people  who  argued  against  it  there  in  the  com- 
mittees have  come  to  me  and  said  they  felt  that  is  was  the  only  way 
that  it  could  be  done  in  cities  of  moderate  size  where  it  is  perfectly 
evident  you  can  not  get  the  cost  of  service  out  of  the  car  rider. 

Commissioner  Gadsden.  What  about  direct  ownership? 

Mr.  TURING.  How  do  you  mean?    My  own  views? 

Commissioner  Gadsden.  Yesj  what  is  your  view?  What  do  you 
think  ?  We  have  had  a  very  distinguished  citizen  of  Massachusetts 
here  express  his  views  on  it  heretofore. 

Mr.  I^RiNG.  I  should  dislike  to  see  public  ownership  tried  at  pres- 
ent. It  presents  a  great  many  difficulties.  In  the  first  place,  is  it  go- 
ing to  be  State  ownership  or  is  it  going  to  be  municipal  ownership  ? 

Our  lines  are  a  tangled  network  of  lines,  and  if  the  cities  were 
allowed  to  own  it,  very  serious  complications  would  ensue. 

I  fully  believe  that  the  present  plan  that  is  being  tried  has  all  the 
advantages  of  public  ownership,  with  the  possible  exception  of  the 
fact  of  a  lower  interest  rate  that  might  be  obtained  if  they  were  all 
direct  obligations  of  the  State.  Outside  of  that,  however,  I  think  it 
has  the  advantages  of  public  ownership.  The  State  is  justified  in 
advancing  money  to  make  improvements,  and,  of  course,  it  does 
assure,  if  the  commission  is  carefully  selected,  absolutely  nonpartisan 
management.  I  should  be  very  much  afraid  to  see  the  cities  own 
their  lines,  and  I  should  dislike  to  see  the  State  own  them  at  the 

present  time. 

The  Chairman.  Had  you  concluded  your  formal  statement,  Mr. 

Loring  ? 
Mr.  LoRiNG.  I  think  so,  Mr.  Chairman;  yes.     I  have  nothing 

fui-ther  excepting  on  this  matter  of  credit. 

I  feel  very  strongly  that  that  is  the  big  question  that  the  street- 
railroad  business  of  the  country  has  before  it  now,  and  I  am  afraid — 
the  fact  is,  I  know — ^that  in  many  cases  in  many  cities  it  is  put  to  one 
side.  It  belongs  right  at  the  front  I  believe  at  all  times.  The  com- 
panies can  not  run  and  serve  the  public  well  without  credit.  There 
is  a  constant  demand  for  better  facilities,  and  personally  I  believe 
to-day  the  only  way  they  can  be  bridged  over  this  exceedingly  uncer- 
tain period  which  confronts  them  is  through  some  form  of  public 
credit.  And  that  leads  me  to  say  that  if  the  public  is  going  to  lend 
its  credit  to  them,  the  public  must  have  a  decided  hand  in  the  opera- 
tion of  the  properties  during  the  period  for  which  the  credit  is 

extended. 

Commissioner  Wehle.  What  was  your  connection  w^ith  the  street- 
railway  business  prior  to  your  present  connection  as  trustee  under 

the  statute? 

Mr.  LoRiNG.  I  have  been  in  the  banking  business,  Mr.  Wehle,  and 
in  that  way  interested  in  the  operation  oi  some  street  railways  and 
interurban  lines  and  others  throughout  the  country.  For  the  last 
two  years  I  have  spent  a  great  deal  of  time  on  the  subject — for  the 
first  year  in  connection  with  the  legislation  in  Massachusetts  the 
service-at-cost  legislation  which  led  up  to  the  Elevated  bill  and  also 
the  Bay  State  bill.    Then  when  they  formed  the  trusteeship,  it  was 


m 


*nHH 


1654    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION/ 

a  thankless  task,  and  I  unwisely  said  I  would  try  it  for  a  year  and  st^e 
what  we  could  work  out  from  it.  But  my  viewpoint  is  not  from  the 
standpoint  of  a  professional  street-railway  man.  It  is  rather  that  of 
one  who  has  been  more  or  less  connected  with  it,  but  only  very  inti- 
mately in  the  last  two  or  tliree  years;  so  that  I  have  been  able  to 
bring  a  rather  different  viewpoint  to  the  business. 

Commissioner  Wehle.  Has  the  Bay  State  Company  undertaken 
to  borrow  money  within  the  last  year  or  two  ? 

Mr.  LoRiNG.  Well,  it  went  into  receivers'  hands  in  December,  1917, 
and  it  had  no  credit  for  some  time  before  that.  xVs  a  matter  of  fact, 
the  banks  that  loaned  it  money  for  two  or  three  years  prior  to  that 
time  lost  a  large  percentage  ot  it  in  the  reorganization. 

Of  course,  we  have  ample  funds  at  the  present  time.  As  a  matter 
of  fact,  the  trustees  have  about  $2,000,000  now  invested  in  short- 
time  securities  drawing  0  per  cent  until  we  need  the  money. 

Now^  the  State  very  wiselv  provided  us  and  the  reorganization 
committee  with  enough  funds  to  take  us  with  a  liberal  depreciation 
account— I  hope  it  will  take  us  three  years,  but  the  test  will  come 
within  that  time  i\s  to  whether  we  can  then  walk  alone  or  not. 

Commissioner   Wehle.  The   50-50   plan   you   say   has   not   been 

a<lopted  in  any  f onn  ?  .     •,     ^    i  •  x  rpi 

Mr.  TORINO.  The  50-50  plan  was  not  adopted  in  any  form.     Ihe 

legislature  felt  that  it  was  too  radical.     But  as  I  say,  the  people 

who  opposed  it  six  months  ago  have  since  been  to  me  and  said  it 

looked  conservative  in  view  of  their  later  views. 

Commissioner  Wehle.  Do  you  expect  it  will  be  pushed  at  the  next 

session  of  the  legislature  ?  i    •.   iir     w  i  i     j^      .i  • 

Mr.  LoRiNG.  No;  we  are  not  going  to  push  it,  Mr.  \\  ehle,  for  this 
reason:  We  have  made  recommendations  to  a  street-railway  com- 
mission that  is  sitting  there  now ;  I  sent  them  in  last  night  before  I 
left  for  AVashinjjton.  We  have  bowed  to  the  view  that  cities  must 
have  more  control  over  these  matters.  The  50-50  bill  was  compul- 
sory ;  the  city  had  nothing  to  say  about  it  The  trustees  were  able  to 
jissess  the  cost  against  them.  The  cities  have  told  us  since  that  they 
would  much  prefer,  and  they  thought  the  same  results  would  be  ac- 
complished by,  permissive  legislation  by  which  the  cities  could  them- 
selves decide ^just  what  part  of  the  cost  service  each  one  would  pay; 
and  we  have  suggested  a  bill  of  that  kind. 

Commissioner  Wehle.  So  there  is  a  general  sentiment,  you  think, 
in  Massachusetts  which  would  bring  about  a  participation  on  the  part 
of  the  public  through  taxation  of  the  burden  of  operating  street  rail- 
ways of  Massachusetts  ? 

Mr.  LoRiNG.  The  sentiment  was  so  strong  in  the  last  two  wet^ks  of 
the  last  legislature  that  I  have  no  doubt  if  the  governor  had  not 
stopped  the  fire  by  appointing  a  commission,  the  legislature  would 
have  passed  a  law  putting  the  Ii^levated  fares  at  5  cents,  the  balance 
to  be  borne  by  taxation,  and  probably  the  Bay  State.  The  sentiment 
was  so  strong  that  I  think  there  wsis  no  question.  It  had  already 
passed  one  branch  of  the  legislature;  it  had  passed  the  senate,  I 
think  it  was,  and  w^as  up  before  the  house,  and  the  governor  thought 
it  was  hasty  action. 

Commissioner  Wehle.  AVhat  was  the  feature  of  that  bill  as  to 

ownership? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1655 

Mr  LoRiNG.  There  was  no  change.  The  elevated  fare  was  to  bo 
5  cents  and  the  balance  borne  by  taxation,  and  in  our  case  the  same. 

Commissioner  Weiile.  The  bill  did  not  have  a  municipal-owner- 
ship feature  in  it? 

Mr.  LoRiNG.  Well,  the  Elevated  bill  has  a  clause  permitting  the 

city  or  the  State  to  buy  it  if  they  see  fit. 

Commissioner  Wehle.  The  Elevated  bill? 

Mr.  LoRiNG.  Yes;  and  the  Bay  State  also. 

Commissioner  Wehle.  That  is,  the  bills  that  were  pending  before 
the  close  of  the  legislature  ? 

Mr.  LoRiNG.  Xo;  the  present  bills. 

Commissioner  Wehle.  Oh,  the  laws?  ,   ^        , 

Mr.  LoRiNG.  Yes;  the  original  acts  provided  for  the  contingency 
of  State  ownership  or  municipal  ownership.  j,  ^,     ^      a^  ^ 

The  Chairman.  You  stated  that  the  depreciation  of  the  i3ay  btate 
this  year  was  $2,000,000?  ,,     ^,    . 

Mr.  TURING,  That  was  the  Elevated,  Mr.  Chairman. 

The  Chairman.  The  Elevated  ? 

Mr.    LoRixG.  We    are   setting    aside    a    depreciation    account    of 

$1,041,000.  ,        ^      ,         1       w 

The  Chairman.  And  that  is  much  larger  than  has  been  heretotoro 

rjhnrged?  ,  ,      , 

Mr.  TURING.  Oh,  six  times;  I  think  $150,000  was  about  the  largest 

amount  thev  had  ever  charged. 

The  Chair^iax.  Is  it  your  view  that  the  depreciation  that  you  have 
charged  oft'  fairly  represents  what  should  be  charged  in  the  future, 
or  is  there  some  abnormal  condition? 

Mr.  Loring.  Of  course  that  matter  is  affected  very  largely  by  the 
prices  of  material.  A  million  dollars  depreciation  in  the  old  days 
of  the  Bay  State  would  have  been  a  very  large  amount,  but  it  buys 
now  the  same  nuiterial  and  labor  that  $500,000  would  have  bought 
then.  The  trustees  were  reluctant  about  studying  the  figure  as  high 
as  $1,000,000,  but  after  very  careful  figures  of  the  cost  of  everything 
that  that  would  buy  which  went  into  the  tracks  and  the  power  plant 
and  cars,  we  made^  up  our  minds  that  since  the  law  directed  us  to 
chai-ge  an  adequate  amount,  no  smaller  amount  would  be  adequate. 

The  Chairman.  Since  the  board  took  charge  you  have  added 
iargelv  to  the  maintenance  account? 

Mr.LoRiNG.  No;  we  have  not.  We  have  done  all  we  could,  but  the 
trouble  was  we  did  not  take  charge  until  June  1  and  there  was  no 
maintenance  organization;  it  was  just  as  before  we  could  get  it  or- 
ganized, so  we  have  had  really  only  about  half  of  a  maintenance 
season.  We  have  done  more  than  they  have  done  in  previous  years, 
but  much  less  than  we  should. 

The  Chair^ian.  What  was  the  physical  condition  of  the  pi-operty 
when  you  took  it  over? 

Mr.  Lorixg.  Bad. 

The  Chairman.  Was  thei*e  much  deferred  maintenance  there? 

Mr.  Lorixg.  Yes.  You  take  the  tire  account  alone.  On  191G,  1917, 
ami  1918  there  is  a  deficiency  in  the  tircy  account  of  more  than 
$300,000  to  be  made  up. 

The  Chairman.  Is  it  the  purpose  of  the  board  to  rehabilitate  this 
pi-operty  and  put  it  in  good  condition? 


1656    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

Mr.  LoRixG.  Just  as  rapidly  as  we  can. 

Tlie  Chairman.  You  have  five  years  in  which  to  operate  these 
properties  ? 

Mr.  LoRiNG.  The  period  of  public  control  is  10  years.  The  present 
trustees  are  appointed  for  ^\e  years. 

1  he  Chairman.  At  the  end  of  that  10-year  period  must  the  prop- 
erties go  back  to  private  ownership  unless  the  State  chooses  to  hold 
them  ? 

Mr.  LoRiNO.  The  property  revei-ts  if  the  States  does  not  choose  to 
hold  it;  yes. 

The  Chairj^ian.  What  will  be  done  to  i-epay  the  State  for  the  large 
amount  of  money  which  it  is  putting  into  this  property  to  build 
it  up? 

^Ir.  TORINO.  Well,  of  course,  that  is  a  consideration  that  the  State 
pays  for  the  security  owners  turning  over  control  of  the  property. 

The  Chairman.  So  it  is  not  expected  that  the  State  can  be  re- 
couped for  any  expenditure  which  is  made  for  taking  care  of  de- 
ferred maintenance  or  putting  the  property  in  good  shape? 

Mr.  LoRiNG.  No;  not  so  far  as  deferred  maintenance  is  concerned. 

The  Chairman.  That  is  to  be  a  contribution  by  the  State? 

Mr.  LoRiNo.  That  is  to  be  a  contribution  by  the  State.  At  the 
same  time,  we  are  not  fixing  the  amount  of  depreciation,  Mr.  Chair- 
man, at  any  larger  than  a  normal  amount.  In  other  words,  the 
amount  we  are  fixing  to-day  is  insufficient  to  take  care  of  past  de- 
firioncies. 

The  Chairman.  Under  the  law  the  State  has  the  right  to  pur- 
chase this  property  at  the  end  of  10  3^ears? 

Mr.  Ix)RiNG.  Yes. 

The  Chairman.  Does  the  law  permit  the  State  to  deduct  from  the 
value  the  money  which  has  been  paid  in  for  building  up  the  plant 
during  the  control  by  the  trustees? 

Mr.  LoRiNG.  No;  the  law  permitting  the  State  to  purchase  has  two 
portions:  One  is  that  it  allows  the  State  to  buy  it  for  the  amount  of 
outstanding  security  and  the  other  is  that  nothing  in  the  law  pro- 
hibits the  State  from  taking  it  by  means  of  our  laws  of  eminent  do- 
main, and  undoubtedlv  the  latter  would  be  resorted  to  in  case  the 
State  would  purchase  it. 

Commissioner  SwEi<rr.  You  place  the  matter  of  credit — the  ability 
of  street-railway  companies  to  get  new  funds  and  further  funds  with 
which  to  improve  and  extend  their  road — as  the  big  question^  I  think 
you  said? 

Mr.  Ix)RiNG.  Yes. 

Commissioner  Sweet.  And  the  fact  that  the  street-railway  com- 
panies of  the  country  have  lost  their  credit,  speaking  generally,  is  in 
your  mind  the  most  important  fact  in  connection  with  the  subject? 

Mr.  Ix)RiNG.  I  think  it  is  the  most  difficult  to  cure  of  any. 

Commissioner  Sweet.  And  you  think  that  we  have  a  big  job  on 
our  hands  to  even  attempt  to  get  things  in  such  shape  as  to  cure 
that  difficulty  and  enable  the  companies  to  get  necessary  funds  to 
keep  up  their  property? 

Mr.  LoRiNG.  Yes. 

Commissioner  Sweet.  Don't  you  think,  Mr.  T^oring,  that  the  matter 
of  public  sentiment  in  regard  to  riding  on  street-cars,  good  will 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1657 

toward  the  companies,  is  a  very  important  factor  with  regard  to 
credits  and  with  regard  to  the  solution  of  this  whole  question  ? 

Mr.  LoRiNG.  Very  important,  indeed,  Mr.  Sweet;  yes. 

Commissioner  Sweet.  Have  you  not  found  out,  as  a  trustee,  that 
you  can  take  a  horse  to  water  but  you  can  not  make  him  drink ;  you 
can  have  legislation,  or  your  trustees,  of  whom  you  are  one,  can 
arbitrarily  fix  your  rates  of  fare  without  increasing  the  income; 
in  fact,  you  hafe  already  discovered  you  can  raise  it  to  a  point  at 
Avhich  you  diminish  the  mcome,  have  you  not  ? 

Mr.  LoRiNG.  No;  we  have  never  reached  that  point.  Our  earnings 
have  always  increased  with  everv  increase  in  fares,  but  the  increase 
is  a  steadily  less  proportion  of  the  theoretical  increase  for  each  suc- 
cessive raise.  We  have  gained  on  the  10-cent  fare,  we  have  gained 
18  to  20  per  cent. 

Commissioner  Sweet.  You  have  gained,  say,  a  little? 

Mr.  Tx)RiNG.  Yes;  it  is  comparatively  little. 

Commissioner  Sweet.  But  you  have  greatly  diminished  the  car 
riding. 

Mr.  LoRiNG.  Very  greatly. 

Commissioner  Sweet.  You  have  simply  from  a  much  smaller  num- 
ber of  people  got  double  the  amount  of  money,  and  that  has  made  a 
comparatively  slight  increase  in  the  total  revenue? 

Mr.  Ix)RiNG.  We  feel  it  is  a  very  unfortunate  situation  that  a 
public  utility  as  it  ceases  to  serve  the  public,  as  the  part  of  the  public 
it  serves  is  cut  down,  its  functions  are  shrunken  just  that  much. 

Commissioner  Sweet.  In  order  to  increase  the  revenue  very  little 
you  have  decreased  the  value  of  the  utility  to  the  public  a  great  deal  ? 

Mr.  TURING,  We,  as  trustees,  have  determined  on  the  course  of 
trying  to  get  the  income  we  need  from  as  many  people  as  possible. 

Commissioner  Sweet.  That  is  it  exactly.  You  want  to  keep  up 
in  value  as  a  public-service  utility. 

Mr.  IjORing.  That  is  the  course  we  want  to  follow ;  yes. 

Commissioner  Sweet.  So  you  would  not  recommend  to  this  commis- 
sion any  adoption  of  a  report  or  the  formulation  of  conclusions  that 
would  produce  the  revenue  nex^essary  for  immediate  use  at  the  sacri- 
fice of  the  real  purpose  for  which  these  organizations  exist — that  is, 
service  to  the  public — unless  their  very  existence  depends  upon  doing 
so.    You  would  deem  that  a  very  last  resort,  would  you  not? 

Mr.  LoRiNG.  Yes;  I  would  say  I  would  try  other  things  first.  Of 
course,  assuming  you  have  got  to  raise  the  money  to  continue  the 
company's  credit — if  no  other  way  can  be  found  you  have  got  to 
get  your  revenue  from  a  few  people,  but  I  think  it  is  very  un- 
fortunate if  that  course  has  to  be  followed. 

Now  that,  of  course,  is  what  is  happening  in  the  Boston  Elevated 
situation  to  a  less  extent  than  in  ours.  They  are  now  getting  the 
money.  I  understand  they  hre  getting  now  their  cost  of  service  out 
of  the  public,  but  of  course,  they  are  getting  it  through  a  sub- 
stantial loss  in  the  number  of  car  riders.  I  think  it  far  better  to 
get  it  that  way  than  not  at  all,  because  they  are  maintaining  good 
service  and  serving  the  people  well,  and  if  that  is  the  only  way, 
all  right;  but  I  think  it  would  be  very  much  better  if  the  same 
amount  could  be  obtained  in  some  way  from  more  fare-earning.  But 
that  can  only  be  done  by  experimenting  with  fares  rather  than  by 
trying  to  get  out. 


W! 


!l 


1658    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Coiiiniissioner  Sweet.  Is  it  your  belief  that  a  ^reat  deal  of  the 
falling  olf  of  patronage  is  due  to  ill-will— to  a  sort  of  resentment  on 
the  part  of  the  public  against  these  corporations  in  the  belief  they 
ought  to  give  them  the  service  at  a  small  price? 

Mr.  LoRiNG.  There  is  no  question  about  it  in  my  mind.  I  have 
seen  proof  of  it  again  and  again  and  again.  AVhen  we  raised  the 
fare  to  10  cents,  it  resulted  in  a  virtual  boycott  in  some  cities,  and  1 
imderstand  in  one  city  now — the  manager  of  a  factory  told  me  that 
in  that  city  now  the  help  that  rode  on  the  street-cars  were  jeered 
by  the  other  people.  But,  of  course,  that  is  wholly  lack  of  informa- 
tion. 

Mr.  Gadsden.  That  will  wear  off  in  time;  will  it  not? 

Mr.  LoRiNG.  AVell,  I  presume  it  will. 

Connnissioner  Sweet.  AVere  you  here  yesterday  morning? 

Mr.  LoRiNG.  No;  I  was  not. 

Commissioner  Sweet.  You  did  not  hear  the  testimony  with  re- 
gard to  the  Philadelphia  Rapid  Transit? 

Mr.  LoRiNG.  No ;  I  did  not. 

Commissioner  Sweet.  It  appears  that — perhaps  you  are  familiar 
w4th  what  has  been  done  there. 

Mr.  LoRiNG.  Yes;  I  am.    I  have  been  following  it  very  closely. 

Commissioner  Sweet.  I  presume  then  you  are  aware  of  the  fact 
that  the  car-riding  habit  in  Philadelphia  has  been  considerably  in- 
creased by  the  policy  adopted  by  Mr.  Mitten  ? 

Mr.  LoiuNG.  Yes. 

Commissioner  8%VTi:ET.  From  your  practical  experience  during  the 
time  you  have  been  a  trustee  of  this  company  and  your  experience 
as  a  banker  previous  to  that^  do  you  think  that  a  process  of  educa- 
tion of  that  kind  is  feasible  in  Boston,  for  instance,  and  other  com- 
munities, in  the  cities  that  you  serve? 

Mr.  LoRiNG.  I  absolutely  think  it  is ;  yes. 

Commissioner  Sweet.  In  other  words,  you  think  this  prejudice 
a  part  of  which,  as  it  has  been  often  said  here,  may  have  been  well 
founded,  going  back  to  years  past,  but  a  great  deal  of  it  without 
reasonable  foundation — you  think  that  that  may  be  broken  down 
by  taking  the  public  into  the  confidence  of  the  companies  and  show- 
ing them  where  their  real  interests  lie;  that  that  prejudice  can  be 
broken  down  and  the  people  will  pay  what  it  is  actually  worth.  Is 
that  your  judgment  now? 

Mr.  LoRiNG.  I  think  it  can  be  broken  down.  But  remember,  Mr. 
Sweet,  it  is  the  growth  of  years  and  years. 

Commissioner  Sweet.  Surely. 

Mr.  LoRiXG.  And  what  takes  a  long  time  to  grow  frequently 
takes  a  similarly  long  time  to  remove;  and  I  do  not  believe  that 
the  public  education  is  anything  that  cjui  be  accomplished  soon 
enough.  I  L^elieve  it  ought^  to  be  attempted  everywhere,  but  I  do 
not  believe  it  can  be  accomplished  soon  enough  to  help  the  situation 
as  it  exists  to-day. 

Now,  we  hope  in  a  year's  time  to  have  a  different  feeling  in  every 
one  of  our  cities.  We  have  a  great  deal  different  feeling  in  s^me 
of  them  alread3\  They  are  different  in  character.  In  one  we  lupe 
a  French  Canadian  population  and  in  another,  another  kind  of  popu- 
lation, but  they  all  have  to  be  treated  and  handled  differently,  so 
that  it  will  take  a  much  longer  time  in  some  than  in  others. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1659 

Commissioner  Sweet.  Then,  in  your  case  you  have  the  special 
advantage  of  being  disinterested  outsiders  to  a  certam  extent. 

Mr.  LoRiNG.  Yes.  i ,.     ,     i  i-  ,.  ;ii 

Commissioner  Sweet.  So  that  the  public  had  no  reason  foi  11 
feeling  against  you  to  start  with,  such  as  they  had  against  the 
officers  of  an  existing  company  ?  • 

Mr.  LoRixG.  None  at  all.  *       ,  ,  • 

Commissioner  Sweet.  And  yet  you  have  found  more  or  less  preju- 
dice that  it  is  necessary  to  break  down  before  you  can  really  get 
them  interested  ? 

Mr.  LoRiNO.  Absolutely;  yes.  .    ,  .,    ^  -i.  •      u    i  f  i,r 

Commissioner  Sweet.  That  makes  you  feel  that  it  is  absolutely 
hopeless  for  us  to  think  of  accomplishing  anything  that  would  be  • 
of  real  service  to  the  companies  in  this  situation  that  exists  to-day 
inthe  way  of  breaking  down  public  prejudice?  ^    ^    ^    y,f 

Mr.  LoRiNG.  Oh,  well,  I  think  you  can  help  a  great  deal,  Mr 
Sweet,  but  the  public  has  got  to  be  shown.     The  public  does  not 
take  arc^uments  very  seriously.     Now,  we  hope  to  get  the  public 
with  us  in  our  territory  by  showing  them  that  we  really  mean  it 
when  we  say  Ave  want  to  carry  as  many  people  as  possible.     We 
want  the  fares  to  be  as  low  as  possible  in  our  territory,     ^ow    it 
we  merelv  made  that  statement  it  would  not  go  very  tar.      Ihey 
would  say,  "  We  have  heard  a  great  deal  of  it  in  the  last  20  years. 
But  the  minute  we  started  to  experiment  with  fares  and  to  say  to 
this  city  "  If  you  will  support  this  kind  of  a  fare,  we  will  continue 
it"  we  aroused  a  tremendous  amount  of  enthusiiism  and  a  really 
helpful  feeling  among  the  people  for  the  company;  so  it  has  got 
to  be  by   deeds  rather  than  words.     But   if  every   company   was 
allowed  to  handle  that  matter  as  it  saw  fit,  Mr.  Sweet,  I  believe 
they  could  all  accomplish  it  in  just  the  same  way  that  we  are  going 
to  attempt  to  accomplish  it.  ,  ,  j.  .i 

Commissioner  Sweet.  Is  there  not  another  phase  of  the  matter 
that  is  going  to  have  great  influence  on  the  public,  and  that  is 
precisely  the  consideration  that  induced  your  people  there,  or  the 
])eople  in  the  vote  that  you  told  us  about;  when  the  question  is 
brought  squarelv  before  a  community  as  to  losing  a  facility  of  this 
kind  that  it  has*^enjoyed  for  a  great  many  years  and  that  possibility 
is  staring  them  in  the  face,  don't  you  think  their  attitude  of  mind 
IS  quite  different  toward  it  than  when  they  have  a  kind  of  easy-gomg 
feeling  that  it  is  always  going  to  be  there? 

Mr.  LoRixcj.  It  is  like  a  good  many  things,  we  do  not  realize,  until 
we  are  face  to  face  with  the  possibility  of  losing  it,  what  it  means 

Commissioner  Sweet.  Or  until  we  actually  do  lose  it,  and  thea 
wo  u^member  what  a  great  blessing  it  was  wlien  it  existed. 

Mr.  LoRiNG.  Of  course,  the  fact  that  we  abandoned  Go  miles  on 
the  first  day  of  September  has  had  a  great  effect  on  those  who  were 

on  the  Aveak  lines.  .         ,  .        .,  ,      • 

Commissioner  Sweet.  As  you  view  it,  taking  the  general  view 
of  the  street-railway  situation  of  the  country— don't  you  think 
that  as  things  are  goini;,  to  the  loss  of  credit  and  with  the  disposi- 
tion in  every  directicn  and  the  failure  to  keep  up  the  physical  prop»- 
erties  and  all  that  sort  of  thing,  that  the  street-railroad  comx>anies 


if  it 


If  ■> 


Ml 


« 


1660    HROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

of  many  coinimmities  are  bound  to  go  out  of  existence  entirely 
unless  some  radical  change  is  made  to  build  up  their  credit  and 
enable  tliem  to  get  the  money  necessary  to  keep  up  their  properties 
and  continue  business?  Don't  you  thmk  that  the  communities  are 
going  to  lose  that  service  as  things  are  going? 

Mr.  LoRiNG.  In  time,  yes.  In  time,  of  course,  they  are  going  to 
get  poorer  and  poorer  and  more  unsatisfactory.  Of  course,  to  say 
actually  lose  the  service  in  a  city  of  any  size,  we  are  quite  a  ways 
from  that  at  the  present  time,  although  we  are  tending  toward  it, 
unquestionably. 

Conmiissioner  Sweet.  Most  of  these  companies  are  losing  money, 
are  they  not,  and  many  of  them  at  a  pretty  rapid  rate? 

Mr.  LoRiNG.  Oh,  yes;  practically  all. 

Commissioner  Sweet.  A  great  many  of  them  in  the  hands  of 
receivers  ? 

Mr.  Ix>RiNG.  Yes. 

Commissioner  Sweet.  And  the  receivers  are  not  making  ends 
meet  in  many  cases,  are  they  ? 

Mr.  LoRiNG.  No. 

Commissioner  Sweet.  That  surely  can  not  ffo  on  indefinitely,  can 
it? 

Mr.  I^RiNG.  Surely  not. 

Commissioner  Sweet.  Don't  you  think  that  a  considerable  part 
of  the  good  that  can  be  performed  by  this  commission  consists  in  the 
statements  made  by  men  like  you  of  facts  of  that  kind,  through  the 
newspapers  and  other  means  of  publicity,  getting  into  the  minds  of 
the  public  the  exact  situation  as  it  stands?  Dont  you  think  a  good 
deal  of  the  value  consists  in  that? 

Mr.  I^RiNG.  Absolutely.     I  do  not  think  the  i^ublic  realizes  it. 

Commissioner  Sw^eet.  That  is  it,  exactlv. 

Mr.  Ix>RiNG.  I  told  you  of  that  vote  on  the  Quincy  line,  and  how 
the  receiver  threatened  to  abandon  that  line,  and  there  was  then  a 
meeting ;  and  I  was  told  by  a  man  who  attended  both  meetings  that 
instead  of  the  greatest  antagonism  which  existed  at  the  previous 
meeting,  the  same  people  who  got  up  and  damned  the  road  up  and 
down  at  the  previous  meeting  got  up  and  were  mighty  thankful 
if  was  there,  and  said,  What  would  happen  to  their  property  if  it 
had  to  go  out  of  existence  ? 

I  believe  the  public  does  not  realize  it.  I  think  this  commission 
can.  and  I  hope  it  will,  make  statements  strong  enough  about  the 
condition  of  things  to  bring  it  sharply  to  the  minds  of  the  people 
that  this  is  not  merely  a  bugaboo  which  is  being  talked  about  by 
street-railway  people,  but  that  it  is  the  existing  fact.  I  think  it 
is  very  important. 

Commissioner  Sweet.  If  we  can  perform  any  valuable  function  at 
nil,  the  chief  beneficiaries  of  that  will  be  the  general  public.  Is  not 
that  true? 

Mr.  LoRiNG.  Surely:  absolutely. 

Commissioner  Mahon.  I  wanted  to  ask  you,  on  the  Philadelphia 
situation:  You  do  not  believe  that  in  Philadelphia  the  relief  t}iat  is 
presented  in  their  financial  situation  is  alone  due  to  this  welfare 
talk,  do  you? 

Mr.  LoRiNG.  How  do  you  mean,  Mr.  Mahon— the  "  welfare  talk  "  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1661 

'  Commissioner  Mahon.  Mr.  Sweet  asked  you  the  question  about 
the  roads  in  Philadelphia,  and  the  fact,  to  my  mind,  in  Philadelphia, 
is  that  there  has  been  an  abnormal  condition,  or  an  extraordinary 
condition,  owing  to  the  war  work  and  other  things  that  has  created 
riding  in  Philadelphia  that  is  rather  abnormal. 

Mr.  I^RiNG.  I  consider  Philadelphia  a  very  remarkable  street- 
railway  city — very  remarkable.  Just  the  same,  you  can  go  to  New 
Bedford,  which  1  spoke  of  before,  right  in  our  own  State.  New 
Bedford  is  a  city  next  to  Fall  River — it  is  only  a  few  miles  away — 
they  are  both  cotton-mill  cities.  If  you  go  from  one  to  the  other 
ypu  would  say  they  are  about  the  same,  but  there  are  differences  in 
traffic  conditions  in  New  Bedford  which  make  a  5-cent  fare  still 
possible,  and  we  are  charging  10  cents  in  Fall  River,  and  we  have 
found  no  fare  in  Fall  River  at  which  we  can  break  even;  and  if  a 
man  went  and  examined  casually  the  two  cities  he  would  say  there 
was  no  difference  in  them,  but  there  is  a  great  difference  in  traffic 
characteristics ;  and  I  feel  that  that  is  the  situation  in  Philadelphia. 

Mr.  Warren.  But  is  it  not  a  fact,  if  you  happen  to  know,  that  the 
New  Bedford  road  itself  now  has  pending  a  petition  before  the 
public  service  commission  for  quite  a  substantial  increase  in  its  fare, 
even  by  cutting  off  the  5-cent  fare  at  the  center,  or  something  of 
that  sort? 

Mr.  LoRiNG.  Yes ;  they  are  before  the  commission  now  to  cut  their 
main  line  in  two,  making,  practically,  a  zone  on  either  side. 

The  Chairman.  We  will  stand  adjourned  now,  until  2  o'clock,  but, 
before  we  leave,  you  are  excused,  Mr.  Loring. 

(Whereupon,  at  1  o'clock  p.  m.,  a  recess  was  taken  until  2  o'clock 

p.  m.) 

afternoon  session. 

The  Chairman.  Mr.  Warren  has  a  statement  which  he  wishes  to 
make. 

Mr.  Warren.  Mr.  Chairman,  I  wanted  to  read  into  the  record  the 
statutes  of  Massachusetts  which  Mr.  Loring  referred  to.  I  think  it 
may  be  of  value  in  the  record. 

The  Boston  Elevated  act  is  Special  Acts  of  Massachusetts,  1918, 
chapter  159:  '*An  act  to  provide  for  the  public  operation  of  the 
I3oston  Elevated  Railway  Co." 

The  Bay  State  act  is  Special  Acts  of  1918,  chapter  188 :  "An  act 
relative  to  the  Bay  Street  Railway  Co." 

The  general  act  to  which  he  referred  of  service  at  cost  in  Massa- 
chusetts is  General  Acts  of  Massachusetts,  1918,  chapter  218:  "An 
act  to  provide  for  service  at  cost  of  street-railway  companies." 

The  Chairman.  Your  next  witness,  Mr.  Ogburn  ? 

Mr.  Ogburn.  Mr.  Beeler.  Mr.  Morris  L.  Cooke  will  follow  Mr. 
Beeler. 

STATEMENT  OF  MR.  JOHN  A.  BEELER. 

Mr.  Beeler.  Mr.  Chairman  and  gentlemen,  with  your  permis- 
sion I  will  just  skim  through  this  article  which  I  will  file  with  you. 

'Ihe  Chairman.  Very  well. 

Mr.  Beeler.  I  will  read  the  opening  paragraph : 

The  crisis  which  we  are  considering  to-day  is  almost  unprece- 
dented in  the  history  of  industry.    A  superessential  business — the 


1662    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

ol<H!tric  railway— is  literally  begging  for  the  right  to  live.  From 
the  popular  notion  of  it  as  an  investor's  paradise,  where  every  dollar 
planted  was  expected  to  bring  two,  it  has  turned  into  a  slough  of 
despond  that  is  engulfing  stocks,  notes,  and  bonds  with  terrifvinff 
impartiality.  * 

The  imniediate  reason  is  apparent.  Tlie  margin  between  income 
and  outgo  has  been  wiped  out  by  the  rise  in  costs  of  materials,  lalK)r, 
taxes,  and  interest.  The  underlying  causes  are  much  more  difficult 
to  determine,  and  having  been  found,  the  proper  remedies  must  still 
be  applied. 

The  industry  got  started  wrong.  Thirty  years  ago  the  streeti- 
i-dilway  man  thought  he  had  discovered  a  bonanza  when  he  replaced 
the  hoi^.  that  wore  out  in  four  to  six  years  with  a  motor  that  was 
supposed  to  last  forever.  Electee  motoi-s  of  10  horsepower  were 
attached  to  the  cars  over  niglit  and  the  horses  led  out  to  pasture. 
Hut  the  early  motors  did  not  last  as  long  as  the  horse,  and  20,  30,  40 
and  50-horsepower  motors  followed  in  rapid  succession.  Many  of 
these  changes  were  capitalized  in  the  hope  that  the  last  one  would 
be  hnal  and  that  perfection  liad  at  last  been  attained.  Experience, 
however,  showed  that  tracks  and  things  geenrallv  wore  out  even  more 
rapidly  than  before.  Light  cars  passed  out  with  the  horse,  and  the 
demand  for  weight  ran  riot.  A  limit  to  the  length  of  ride  for  one 
fare  was  scarcely  thou^^t  of.  The  amount  of  taxation  that  the  elec- 
trie  railway  was  supposed  to  be  able  to  stand  was  almost  unlimited. 

Thic  Indcstby  Classified. 

The  electric-railway  industry  can  be  divided  according  to  the 
character  of  the  service  into  three  classes: 

1.  Rapid-transit  lines,  including  elevated  and  subway. 

2.  City  and  suburban  surf a<je  car  lines,  principally  in  the  public 
streets  and  highways. 

a  Interurbjin  lines,  operating  partly  on  highways,  but  largely  on 
private  right  ot  way.  ./  ^  &    j 

Few  roads  are  included  in  the  first  ^oup.  They  are  confined  to 
certain  populous  distrK-ts  where  large  capital  expenditures  and  con- 
sequent high  investment  charges  were  considered  warranted  when 
they  were  built  They  operate  at  a  much  lower  i-atio  of  expense 
than  the  other  classes.  Such  roads  constitute  a  special  problem  quite 
d liferent  from  that  of  the  surftice  lines. 

The  second  groiip  carries  probably  four-fifths  of  all  the  electric- 
raii way  riders.    This  is  the  class  under  consideration  at  present 

Ihe  third  class  comprises  Uie  interurban.  It  is  dependent  on  a 
different  patronage  from  the  city  systems  and  opens  up  another  set 
of  problems. 

PRESKXT  Conditions. 

The  situation  on  the  average  street  railway  in  the  United  States 
iM^^^  ^^^"^  1^^  follows :  The  earnings  are  40  cents  per  car-mile 
or  ^i.S^  per  car  hour,  the  speed  being  6.4  miles  per  hour.  Tlie  train- 
men s  wages  average  55  cents  i>er  hour.  The  operating  ratio  is  75 
per  cent,  and  $4  is  invested  for  each  dollars  worth  of  business  done 
On  most  of  the  systems  insufficient  provision  or  none  at  all  is  made 
for  replacements  to  plant  and  equipment  due  to  ol)solescence  or  m-xde 
necessary  by  the  progress  of  the  art,  it  being  held  that  current  re- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1663 

pairs  are  all  required  to  keep  the  property  in  a  perpetual  100  per 
cent  operating  condition.  This  is  one  reason  that  operating  costs 
are  so  high  to-day.  The  junk  that  is  in  operation  in  many  of  our 
cities  ought  to  be  in  a  museum  for  antiquities.  No  wonder  there  arc 
GO  automobiles  for  every  street-car  and  millions  ride  in  jitneys. 

The  Operating  Statement. 

The  condensed  operating  statement  of  a  company  doing  annually 
a  million-dollar  business  under  the  average  conditions  cited  above, 
with  an  allowance  of  3  per  cent  on  two-thirds  of  the  investment, 
to  cover  depreciation  or  replacement  charges  that  can  not  be  covered 
by  ordinary  repairs,  and  interest  at  6  per  cent  on  the  investment, 
is  given  in  the  following : 

Gross  income ^1'  ?ij?'  ^ 

Operating   expenses t.)u,vif^ 

Earnings  from  operation 2oO,  000 

^'i^^^°e°/  i «50. 000 

Replacement  fund ^??'??? 

Interest  6  per  cent  on  $4,000,000 ^^Q><^        ^^^  ^^ 

Deficit 1^'^ 

From  the  foregoing  it  is  seen  that  the  average  company  is  to-day 
falling  short  by  12  per  cent  of  earning  its  way.  Tliere  are  but  two 
ways  of  overcoming  the  deficit:  Tlie  first,  to  increase  the  receipts; 
the  second,  to  reduce  the  expenditures.  The  alluring  method  is  to 
raise  the  flat  fare  to  6,  7,  8,  or  10  cents  with  or  without  a  transfer 
charge.  This  procedure  often  proves  like  chasing  the  pot  of  gold 
at  the  end  of  the  rainbow. 

Taxation.  ^J 

The  subject  of  taxation  presents  a  field  where  the  authorities  can 
relieve  the  situation  materially.  There  seems  to  be  no  good  reason 
why  a  railway  should  pay  more  or  less  than  does  any  other  business 
on  'its  phvsical  property.  Special  f i-anchise  or  license  taxes  should 
be  done  away  with,  as  in  many  cases  to-day  tTie  franchise  is  a  lia- 
bility and  not  an  asset.  Paving  taxes  should  be  abrogated  generally. 
Then  the  average  rate  of  taxation  would  fall  from  5  per  cent  of  the 
gioss  income  to  about  2  per  cent,  reducing  the  expenditure ;  of  a 
million-dollar  company  by  $30,000.  To  make  both  ends  meet  this 
company  would  have  to  save  the  remaining  $90,000  of  its  deficit 
from  operating  costs.  The  condensed  statement  would  then  be  as 
follows : 

Gross  income ^^'  ?^'  JJ^ 

Operating  expenses ""________ 

Eiirnings  from  operation 340,  000 

De<]\i^tions : 

.Replacements «'^'^. 

Interest,  6  per  cent  on  $4,000,000 240.000 

a40,  OUU 

Surplus  . 


1664    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

With  operations  reduced  to  66  per  cent  and  taxes  lowered  to  an 
average  of  2  per  cent,  the  concern  would  be  enabled  to  pay  its  ex- 
penses and  charges. 

Now,  that  is  the  average  situation,  75  per  cent  operating  ratio,  so 
it  would  take  a  9  per  cent  reduction,  bringing  it  down  to  60,  in  order 
to  make  an  average  street  railway  pay  with  an  investment  of  $4  per 
$1  of  business,  which  is  very  nearly  the  average  of  electric  railways. 
Of  course,  electric  high-speed  lines,  subways  and  elevateds,  have  a 
much  higher  investment ;  but  we  are  not  discussing  that  in  this  paper, 
because  that  presents  a  special  problem. 

Mr.  Warren.  Before  you  leave  those  figures— I. did  not  catch  the 
depreciation  figure  on  your  million-dollar  operation. 

Mr.  Beeler.  I  said  it  took  a  ratio  of  3  per  cent  for  depreciation 
on  the  depreciated  property  and  took  two-thirds  of  the  investment 
value  as  the  value  of  the  depreciable  value,  which  would  really  be  2 
per  cent  on  the  investment  value. 

Mr.  Warren.  And  what  would  that  figure  on  your  hypothetical 
million  dollars  of  income  there? 

Mr.  Beeler.  With  $4  invested,  that  would  figure  $80,000.  That 
would  figure  on  the  company  earning  $1,000,000  with  $4,000,000  in- 
vested ;  2  per  cent  on  that  would  be  $80,000  per  annum. 

Mr.  Warren.  Eight  per  cent  of  the  gross? 

Mr.  Beeler.  Eight  per  cent  of  the  gross. 

Mr.  Jackson.  You  use  the  constant  4  instead  of  5  ? 

Mr.  Beeler.  I  do  in  this  case,  because  I  am  discussing  street  rail- 
ways. Five  would  be  right  if  we  were  discussing  the  average  of 
everything,  elevated  and  subways  included. 

Commissioner  Gadsden.  We  have  been  using  five,  and  I  won- 
dered  

Mr.  Beeler.  That  is  right.  If  we  were  considering  elevateds,  sub- 
ways, and  all ;  but  as  a  matter  of  fact,  elevateds  and  subways  will 
run  from  7  to  10  or  more  per  dollar  of  business.  They  have  the 
advantage  of  a  lower  operating  ratio  and  can  pay  a  higher  charge 
on  overhead  on  that  account.  I  think  the  average  operating  ratio 
on  a  rapid-transit  line  will  be  20  cents  on  the  dollar  less  than  on  the 
average  surface  line,  which  would  enable  them  to  pay  interest  on 
over  $7  in  that  way  instead  of  $4. 

Operation    Economies. 

The  question  of  opierating  economies  thus  becomes  paramount. 
They  are  many,  and  most  of  them  can  be  applied  to  every  com- 
pany, regardless  of  the  fetish  of  local  conditions. 

Schedules. 

The  most  impoilant  items  in  any  company's  operations  are: 
(1)   Frequency,    (2)    regularity,    (3)    speed.      With   these   items 
right,  almost  any  company  will  succeed.     They  have  such  a  far- 
reaching  effect  on  the  operations  that  many  an  otherwise  good  con- 
cern has  gone  on  the  rocks  on  account  of  poor  schedules. 

AVhat  an  increase  of  1  mile  per  hour  will  do  in  the  operations 
of  the  average  company  is,  perhaps,  the  most  potent  illustration  that 
can  be  had.    A  company  with  an  average  schedule  speed  of  8.4  miles 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1665 

per  hour,  which  is  practically  the  average  of  street  railways  in  tho 
United  States,  as  near  as  can  be  obtained,  is  represented  by  A,  while 
B  has  been  speeded  up  to  9.4  miles  per  hour.  Note  well  the  dif- 
ference : 


Fpced,  miles  per  houi^ 

Earnings  per  car-mile 

Earnings  per  ear-hour 

Expenses  per  car-hour ^.^rcpnt" 

Operating  ratio perceni.. 


A. 


8.4 

$0.40 

$3.36 

$2.52 

75 


B. 


9.4 

$0.40 

$3.76 

$2.52 

67 


With  the  same  identical  car-mile  earnings  this  increase  m  speed 
alone  will  come  within  one  point  of  making  an  average  company  self- 
sustaining,  as  it  has  been  shown  already  that  with  an  operating  ratio 
of  66  per  cent  sufficient  will  remain  to  provide  proper  replacement 
charges  and  return  6  per  cent  on  the  investment. 

The  acceleration  and  braking  should  be  increased.  The  average 
road  will  show  about  1.5  miles  per  hour  per  second,  while  2.5  will 
provide  much  speedier  operation,  increasing  schedules,  say,  10  per 
cent.  The  duration  of  stops  will  also  automatically  be  shortened  as 
passengers  get  used  to  good  operation.  They  invariably  prefer  it  to 
the  slow,  halting,  undecided  movements  now  prevalent  on  so  many 

I'oads 

The  importance  and  advantages  of  higher  schedule  speeds  for  elec- 
tric railways  has  been  set  forth  fully  in  an  article  by  the  writer  in 
the  issue  of  the  Electric  Railway  Journal  for  September  27, 1919. 


LAY-OVERS. 


The  elimination  of  excessive  lay-overs  is  most  important.  The 
ratio  of  lay-over  time  to  actual  running  time  varies  from  2  to  25  per 
cent.  Long  lay-overs  are  given  frequently  as  a  concession  to  labor 
when,  if  the  nature  of  the  resultant  trouble  were  fully  understood, 
labor  would  not  want  them. 

As  an  example,  apply  the  extremes  to  two  systems  each  earning  40 
cents  per  car-mile  and  making  a  running  speed  not  including  lay- 
overs of  9.33  miles  per  hour.  The  line  with  the  2  per  cent  lay-over 
will  earn  $3.67  per  car-hour,  while  that  with  the  25  per  cent  lay-over 
will  bring  in  but  $2.79.  After  paying  the  trainmen  at  the  rate  of 
$1.10  per  car-hour,  there  remain,  respectively,  $2.57  and  $1.69.  The 
long  lay-over  is  a  great  handicap.  The  other  line  has  50  per  cent 
more  of  its  receipts  left  after  paying  wages.  The  only  feature  that 
is  swift  about  a  road  with  long  lay-overs  is  the  rapidity  with  which 
it  approaches  the  receiver. 


THE  ROUTING. 


It  is  of  the  utmost  importance  that  the  lines  provide  the  shortest, 
quickest,  and  most  convenient  routes.  Many  cities  to-day  maintain 
routes  and  service  designed  for  traffic  conditions  of  a  generation  ago. 
This  subject  deservas  the  closest  scrutiny.  Rerouting  coming  under 
my  observation  has  worked  wonders  in  bettering  service  for  the  pub- 
lic and,  at  the  same  time,  saving  money  for  the  company. 

160843'— 20— VOL.  2 43 


'Mil 


1666  PROCEEDii^GS  OF  pei^erAL  Ilectric  railSv^ays  commission. 

Through  routing  to  eliminate  overlajiping  service  frequently  proves 
u  tremendous  force  in  reducing  both  .expense  and  congestion,  as  both 
are  synonymous.  Short -iinin":  and  turn-back  service  will  frequently 
enable  a  company  to  accommodate  twice  as  many  people  during  the 
rush  as  where  all  cai's  are  run  through  irrespective  of  the  length  of 
line. 

ABANDONMENT  OF  SKRVICB. 

Some  nonessential,  nonpayment  lines,  especial!y  those  closely  par- 
alleled by  other  service,  may  be  abandoned  profitably.  Frequently, 
however,  such  lines  can  be  made  to  carry  their  operating  expenses 
when  run  as  shuttle  lines  or  with  one-man  cars.  After  a  line  has  been 
built  and  equipped  it  should  not  be  abandoned  except  when  it  is  pos- 
sible to  earn  operating  expenses  alone,  as  the  interest  on  the  invest- 
ment will  be  lost  in  abandonment  anyway. 

EQUIPMENT. 

Because  adequate  allowances  for  replacement  were  not  provided 
from  earnings,  many  electric  railways  operate  to-day  with  dingy, 
dilapidated  equipment  that  actually  repels  custom.  These  cars  are 
usually  much  heavier  than  necessary.  They  ix)und  the  track  and 
paving  to  pieces,  while  their  excessive  demands  for  power  eat  up  the 
coal  pile.  In  operating  such  cars  an  indifferent  motorman  can  waste 
readily  several  dollars  a  day  for  power  alone.  Yet  only  5  per  cent 
or  less  of  the  cars  in  the  United  States  are  equipped  with  devices  to 
check  up  the  motorman's  skill  and  assist  him  in  becoming  efficient. 
The  older,  heavier  cars  are  costly  to  run  and  to  maintain.  They  must 
be  replaced  bv  far  lighter,  faster,  and  more  accessible  cars  with  full 
automatic  equipment  before  the  full  degree  of  success  is  had. 

Standardization  of  equipment  and  a  complete  change  in  manufac- 
turing methods  must  come.  Cars  must  be  turned  out  ready  to  run 
like  automobiles,  in  large  quantities,  and  at  a  fraction  of  the  present 
costs.  They  must  be  light  and  attractive.  Cross  seats  should  always 
be  employed,  as  comfort  is  a  prime  requisite;  and  to  sit  with  one's 
feet  in  the  jpassageway  with  nothing  to  look  at  but  a  jam  of  passengers 
gives  the  patron  a  bad  impression  of  the  management.  I  think 
one  of  the  most  impoiiant  things  is  tittractive,  economical  rolling 
stock.  I  think  that  one  of  the  vital  troubles  to-day  with  a  great  many 
of  the  companies,  is  in  the  rolling  stock — ample  provision  has  not 
been  made  by  most  of  the  companies.  It  should  be  kept  in  good  re- 
pair, but  when  it  comes  to  discarding  the  property  it  is  like  a  modern 
merchant :  When  he  wants  to  put  in  new  fixtures  he  hAs  to  write  off 
the  old.  And  if  the  industry  is  to  remain  prosperous  it  must  recognize 
that  fact  and  provide  attractive  equipment  and  write  it  off  as  it  goes 
along. 

Two  or  three  car  types  will  be  sufficient  to  meet  the  varying  condi- 
tions throughout  the  coimtry.  Car-trust  certificates  will  then  be  at- 
tractive to  the  investor,  especially  when  he  knows  that  the  car  has 
lull  value  on  other  lines. 

When  older  rolling  stock  is  in  use  it  should  be  segregated  by  types 
and  the  service  made  as  nearly  uniform  by  lines  or  districts  served 
as  possible,  so  that  the  cars  will  not  run  hit-or-miss  in  heterogeneons 
bunches.    The  motor  characteristics  and  speed  should  be  classified 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1667 

with  care  and  cars  used  on  lines  where  they  best  fit  the  schedule 

requirements.  .  ,.       ,,    ^  i,     i.  ia 

I  have  in  mind  an  actual  illustration  on  a  line  that  was  about  10 
miles  long  where  a  dozen  different  types  of  equipment  were  used. 
Some  of  the  cars  on  that  line  had  a  maxunum  speed  of  considerably 
over  30  miles  an  hour— 33  or  35  miles  an  hour;  others  had  a  speed  ot 
18  miles;  and  tliey  were  all  making  the  full  length  of  the  line,  bo 
you  can  imagine  what  kind  of  schedule  economy  you  got  on  a  line 
of  that  kind.    They  invariably  ran  in  bunches  with  the  slower  car 

leadins:  the  procession.  .„       ,     v.    .        i    j  i  -ui 

Often  a  change  in  the  gear  ratio  will  make  faster  schedules  possible. 
All  equipment  should  be  kept  clean  and  well  painted,  brilliantly 
lighted,  And  wear  an  inviting  look  .  ,  ^  ,     .,  •  , 

The  use  of  specially  constructed  lightweight  trailer  cars  in  rush 
hours  and  other  periods  of  heavy  tl'affic  has  proved  of  immense  value 
in  augmenting  the  service  with  a  minimum  of  expense.  Such  cars 
will  aid  to  give  more  service  at  less  cost.  The  light  weight  saves 
power  and  wear  and  tear. 

Power  Economies. 

If  we  go  back  to  the  power  stations,  frequently  it  is  found  that  they 
are  generating  power  at  a  higher  cost  than  if  the  electricity  for  a 
locality  were  obtained  from  a  single  control  generating  plant  that 
provides  the  whole  community  with  power  and  light  as  well  as  the 
railway.  But  assuming  that  the  railway  is  generating  power,  this 
branch  of  the  business  presents  a  fertile  field  for  economies,  among 
which  mav  be  mentioned  the  following:  ^ 

Consolidation  of  power  plants,  shutting  down  less  efficient  ones 

when  demand  permits.  ,        .     ,    -,.       i.  ^t_  xi_      i. 

Economies  in  central-station  generation,  including  both  the  steam 
and  electrical  plant,  handling  of  coal  and  ashes,  and  the  many  details 
that  go  with  a  generating  plant. 

Purchase  of  part  of  the  power  if  necessary. 

Reduction  of  distribution  losses,  proper  feeder  system,  track  bond- 
ing and  negative  return,  automatic  substations,  etc. 

Thermostat  regulation  to  cut  out  heat  automatically  in  crowded 

and  overwarmed  cars.  -,  i     •      i  j 

Elimination  of  the  use  of  power  as  far  as  possible  m  shops  and 
elsewhere  during  the  transportation  peak.  Keep  work  and  freight 
cars  off  the  line  at  such  times. 

A  great  field  for  saving  is  the  conservation  of  power  at  the  car 
itself.  The  installation  of  an  efficient  checking  device  will  reduce  ex- 
cessive power  consumption  to  a  minimum.  To  my  personal  knowl- 
edge, as  high  a  saving  as  25  per  cent  of  the  power  used  to  propel  the 
cars  was  effected  bv  such  a  means.  As  the  combined  fuel  bill  of  the 
electric  railways  is*^not  far  from  $50,000,000  annually,  a  20  per  cent 
saving,  which  could  be  obtained,  would  release  a  large  amount  of 
fuel  which  could  be  diverted  to  other  essential  uses. 

Miscellaneous  Savings. 

In  the  case  of  the  track,  war  conditions  have  shown  the  need  of 
standardization,  and  how  little  excuse  there  is  for  demanding  special 
rail  sections  that  add  many  dollars  to  every  ton  bought.    The  fault 


ill 


m 


1668    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

may  sometimes  be  clicarged  to  the  city  engineer,  but  it  is  just  as  likely 
to  bo  due  to  the  way  the  company  engineer's  theories  ai*e  aided  and 
iibettod  by  the  utterly  needless  increase  in  the  weight  of  cars. 

Electric  switches  automatically  thrown  by  manipulation  of  the 
motorman's  controller  save  time  and  money.  Automatic  signals  on 
single  track  lines  are  vastly  more  efficient  than  the  hand-operated 
type  so  frequently  used  on  many  nonprogressive  lines. 

The  location  of  car  stops  is  of  prime  importance.  They  should 
be  so  placed  that  a  standmg  car  will  not  interfere  with  other  cars 
or  general  street  traffic,  and  where  lines  branch  off  thej^  should  be 
placed  so  as  not  to  block  the  main  line.  The  exact  location  of  each 
stopping  place  should  always  be  indicated  plainly  by  a  sign,  so  that 
passengers  will  not  delay  the  car  movement  unnecessarily  by  walking 
to  the  car  after  it  has  stopped.  A  walk  of  a  car  length  adds  in 
excess  of  eight  seconds  to  the  regular  stopping  time,  reducing  the 
car's  earnings  proportionately. 

Considerable  might  be  said  on  the  methods  of  organization,  tele- 
phone dispatching,  the  operation  and  location  of  division  head- 
quarters, methods  of  accounting,  fare  collection,  and  registration,  use 
and  abuse  of  transfers,  prepayment  areas,  reduction  of  nonpro- 
ductive miles  to  and  from  car  houses,  advantages  of  good  track, 
spiraled  curves,  smooth  special  work,  effects  of  corrugation,  bad 
joints,  poor  drainage,  excessive  use  of  sand,  methods  of  greasing 
curves,  accident  prevention,  and  scores  of  other  equally  important 
items  all  having  a  direct  influence  on  the  operations  and  expenses. 
For  the  purpose  of  this  paper  it  is  unnecessary  *  to  do  more  than 
enumerate  them. 

Cooperation  by  tite  Public. 

Staggering  of  the  hours  of  business  could  be  carried  out  to  a 
larger  extent  than  now  done,  so  as  to  enable  the  rush-hour  traffic 
to  be  spread  over  a  longer  period  and  with  a  minimum  of  equipment. 
This  would  materially  benefit  the  service  and  eliminate  a  great  deal 
of  the  overcrowding  of  cars,  which  is  not  only  a  cause  of  popular 
dissatisfaction,  but  is  alwaj^s  a  menace  to  the  health  of  the  com- 
munity. 

Another  kind  of  teamwork  is  the  application  of  the  skip-stop 
by  which  the  practice  of  stopping  at  every  street  intersection 
is  abandoned  in  favor  of  spacing  the  stops  farther  apart  and 
in  accordance  with  traffic  conditions.  Instead  of  imposing  a  hard- 
ship on  the  public,  the  decrease  in  the  number  of  stops  insures 
a  quicker  journey  and  more  comfortable  riding.  At  the  same  time 
the  reduction  in  starts  and  stops  leads  to  a  considerable  saving  in 
power.  It  is  significant  that  one  of  the  fii*st  steps  of  the  Fuel 
Administration  was  to  urge  electric  railways  to  install  the  skip-stop 
wherever  practicable. 

Cooperation  by  the  Authorities. 

First  and  by  far  the  most  important  step  is  to  secure  the  coopera- 
tion of  the  local  authorities  in  all  matters  pertaining  to  faster  opera- 
tion on  the  streets,  not  by  increasing  the  maximum  speed,  but  by 
reducing  delays  and  removing  causes  of  congestion  along  the  tracks. 

Loading  platforms  should  be  placed  at  all  heavy  loading  and  un- 
loading points  where  street  width  permits.     They  concentrate  pas- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1669 

sengers  at  the  proper  point  ready  for  quick  loading,  reduce  the 
heights  of  the  step  into  the  car,  save  time,  provide  a  safe,  com- 
fortable place  for  the  patrons  to  stand,  prevent  accidents,  and  per- 
mit the  general  street  traffic  to  proceed  without  delay,  thus  mightily 
relieving  congestion.  Few  people  would  guess  that  the  humble 
loading  platform  has  a  direct  bearing  on  the  rate  of  fare,  but  by 
enabling  the  car  to  make  better  time,  operating  expenses  are  kept 
down.  Where  raised  platforms  are  impossible,  the  next  best  sub- 
stitute is  the  so-called  marked  safety  zone ;  but  for  efficiency,  safety, 
and  comfort  it  does  not  begin  to  compare  with  the  loading  platform. 

Traffic  officers  should  always  give  precedence  to  the  street-cars 
over  all  other  classes  of  traffic,  as  they  carry  20  to  1  by  all  other 
means.  By  traffic,  I  do  not  mean  fire  departments  or  police  patrols 
or  ambulances,  but  of  general  traffic. 

The  police  should  assist  in  keeping  tracks  clear  from  trucks  and 
other  vehicles.  The  left-hand  turn  for  all  vehicles  should  be  pro- 
hibited at  congested  intersections,  such  as  Fifteenth  Street  and  New 
York  Avenue,  in  Washington,  or  Forty-second  Street  and  Fifth  Ave- 
nue, in  New  York.  The  rule  of  one-way  traffic  on  narrow  and  con- 
gested streets  should  be  enforced. 

Parking  of  automobiles  should  be  regulated  so  that  traffic  will 
not  be  forced  on  the  car  tracks  or  otherwise  interfere  with  the  free 
operation  of  the  street-cars  in  the  congested  districts. 

Double  berthing  of  street-cars  should  be  the  rule  in  all  congested 
locations  so  as  to  save  unnecessary  stops. 

The  abolition  of  all  steam-railroad  grade  crossings  is  also  an  item 
of  great  importance  to  speed  and  safety. 

Jitneys  should  be  regulated  and  their  operating  requirements  made 
no  less  onerous  than  those  imposed  on  the  street-cars. 

These  important  things,  which  are  of  great  financial  benefit  to 
the  electric  railways  and  of  equal  value  to  the  public,  can  be  done 
without  spending  a  dollar  if  there  is  cooperation  between  the  rail- 
ways, the  local  regulating  bodies,  and  the  public.  They  will  insure 
higher  schedule  speed  with  consequent  increase  in  street  capacity  for 
a  given  number  of  cars,  thus  affording  the  public  an  increase  in 
service  with  no  additional  expense  to  the  electric  railway.  In  fact, 
better  traffic  regulations  will  tend  to  reduce  operating  expenses 
despite  increases  in  serv^ice. 

The  electric  railways  were  for  so  many  years  unaccustomed  to 
regulation  that  they  came  to  respect  much  too  slowly  the  value  of 
cooperation  with  State  and  municipal  regulatory  bodies.  To-day, 
when  the  electric  railway  needs  all  the  cooperation  it  can*  get,  it  finds 
that  it  has  been  a  demoralizer  of  public  confidence  in  these  very  com- 
missions and  local  authorities  whose  help  would  now  be  so  valuable. 

I  think,  if  the  average  railway  endeavored  to  raise  its  fare  with- 
out the  authority  of  a  commission  or  regulatory  body,  that  the  effects 
to  the  railway  would  be  disastrous;  and  I  think  that  is  now  gen- 
erally recognized  by  the  railways  themselves. 

INCREASING    THE    EARNINGS. 

I  think  this  is  a  very  important  thing  which  should  go  with  the 
economies,  because  it  helps  to  bring  them  about.  Attention  will  now 
be  turned  to  methods  of  increasing  the  gross  earnings,  which  tend  to 


1670    PROCEEDTITGS  OF  FEDEIlAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

reduce  the  operating  ration.  This  subject  sliould  have  first  consid- 
eration always.  Every  route,  every  department,  every  branch  arid 
detail  of  the  biTSiness  should  be  studied  with  this  in  view. 

The  street  railway  is  a  retailer  of  transportation.  A  successful 
retailer  drills  his  employees  to  be  courteous  and  polite.  He  studies 
his  customers,  how  to  i)lease  them  and  add  to  their  conifdrt,  thus 
increasing  his  sales.  Where  are  these  elements  so  scarce  as  in  the 
street-railway  industry?  Let  the  operating  force  of  the  average 
street  railway  take  charge  of  any  prosperous  department  store  and 
accord  the  same  arrogant,  uncivil  treatment  to  its  patrons  that  car 
riders  are  so  used  to,  and  that  store  will  soon  have  urgent  need  of 
the  sheriff.  It  may  be  that  this  feature  has  no  connection  with  the 
fact  that  so  many  traction  lines  are  in  receivers'  hands.  But,  do 
3^ou  know  of  any  single  instance,  however,  where  the  management 
of  a  street  railway  has  carefully  studied  its  customers'  wants  in  an 
effort  to  furnish  good  service  with  attractive  and  comfortable  cars, 
where  drilled,  disciplined,  and  affable  employees  have  made  riding 
a  pleasure,  that  is  to-day  in  a  receiver's  hands  ? 

There  may  be  such  a  case,  but  I  venture  that  such  a  company  will 
not  be  long  in  arranging  with  the  local  authorities  some  satisfac- 
tory method  of  increasing  its  receipts. 

Encouraging  Business. 

In  the  past  it  has  been  largely  considered  that  people  ride  from 
necessity  only  as  in  going  to  and  from  work.  Pleasure  riding  was 
supposed  to  consist  principally  in  taking  long  trips.  Curiously 
enough,  almost  the  only  attempt  to  induce  people  to  ride  aside  from 
strictly  necessary  purposes  was  made  in  the  establishment  of  parks 
at  considerable  distances  from  the  homes  of  the  riders.  This  meant 
that  a  large  investment  was  carried  for  the  sake  of  hauling  people 
a  maximum  distance  perhaps  90  days  in  the  year. 

Until  recently  few  have  believed  that  tlie  way  to  create  traffic  is 
to  give  so  frequent  a  headway  with  such  attractive  cars  that  people 
would  voluntarily  quit  walking  except  for  a  very  short  distance. 
Experience  in  many  towns,  especially  with  the  automatic  safety  car 
has  demonstrated  conclusively  that  there  is  such  a  thing  as  a  "  riding 
habit."  People  wilLand  do  ride  for  short  distances  that  are  profit- 
able to  the  railway  many  more  times  a  day  than  was  considered  pos- 
sible. In  other  words,  the  electric  railway  is  coming  around  to  tlie 
standpoint  adopted  by  some  of  the  more  enterprising  gas  and  elec- 
tric companies  a  decade  ago,  when  they  discovej-ed  that  there  are 
many  more  ways  for  selling  their  products  than  following  the  take- 
it-or-leave-it  plan. 

One  of  the  most  striking  examples  of  this  is  found  in  one  of  the 
largest  cities  in  America,  where  the  management  has  been  able  to 
retain  the  5-cent  fare  by  impi*oving  and  popularizing  the  service. 
Their  motto  is:  "High  fares  make  riders  walk;  low  fares  make 
walkers  ride ;  more  fares  make  low  fares." 

BETTER  HEADWAY   PAYS. 

Often  a  line  is  suffering  from  too  infrequent  a  headway.  Patrons 
Walk  who  might  be  induced  to  ride.  I  have  in  mind  a  line  that  made 
the  following  record  as  the  service  was  gradually  increased.    This 


PllOCEEDmGS  OF  FEBERAL  ELECTRIC  RAILWAYS  COMMISSION.    1671 

Was  my  own  personal  experience  arid  was  "brought  about  in  a  period 
of  a  year : 

Earnings 
per  car 

Headway :  ^^'  ^^y- 

8  minutes • ^^1 

5  minutes - —     ^5 

4  minutes ^9 

3  minutes ^ 

2\  minutes ^^ 

Of  course  it  does  not  follow  that  that  is  applicable  to  all  lines. 
This  line  was  developed  in  less  than  one  year  from  a  nonpaying  line 
to  one  of  the  best  on  the  system  simply  by  giving  more  service. 

Where  the  headway  is  comparatively  infrequent  it  should  always 
be  some  even  part  of  an  hour,  as  30,  20,  15,  or  10  minutes,  and  not 
42,  28,  19,  13,  or  9  minutes,  as  is  often  the  case.  The  rider  readily 
learns  when  to  expect  a  car  under  one  plan  and  can  tell  nothing 
about  it  under  the  other. 

Relations  Bei'ween  Employees  and  Public. 

Perhaps  the  most  important  feature  in  selling  transportation  is 
the  human  factor  of  polite  employees  on  the  care.  All  employees, 
especially  the  trainmen  and  supervisory  transportation  force,  should 
be  trained  in  the  elements  of  successful  salesmanship,  courtesy,  and 
politeness.  The  long  face  and  the  gruff  manner  must  be  permanently 
interned.  Publicity,  smiles,  and  the  same  cheerful  "thank  you" 
that  is  customary  in  a  well-regulated  store  are  bound  to  put  the 
electric  railway  on  more  nearly  the  same  plane  of  good  will  as  any 
other  business  in  a  community. 

Each  employee  should  be  a  publicity  agent  for  the  system.  Delays 
due  to  traffic  and  other  causes  beyond  the  control  of  the  company 
can  be  explained  to  complaining  patrons  in  a  few  courteous  words 
by  the  men  and  sympathy  gained^  for  the  company  and  its  employees. 

Some  companies  operate  safety  cars,  each  carrying  a  holder  with 
a  card  giving  the  name  of  the  operator  on  duty.  Thus  he  is  given 
an  identity  that  means  something  to  the  patron  and  much  to  the  men 
and  niore  to  the  service. 

Platform  labor  alone  amounts  to  50  per  cent  or  more  of  all  the 
operating  costs.  Wages  are  now  miich  higher  and  should  attract 
intelligent,  efficient  help.  Both  motormen  and  conductors  should 
be  of  the  courteous  sales  type  of  employee  rather  than  the  type 
found  driving  a  truck  or  found  in  other  unskilled  labor. 

Intensive,  systematic  instruction  must  supplant  the  slipshod  and 
haphazard  methods  now  employed,  and  will  work  wonders  with  raw 
material.  If  wages  are  to  remain  at  a  high  level,  the  cost  of  the 
turnover  should  be  reduced  enormously;  because  with  the  higher 
rate  of  pay,  employees  will  stay,  and  the  company  can  well  afford 
to  spend  a  considerable  amount  on  the  instruction  of  each  indi- 
vidual. 

So  much  has  been  said  and  Written  regarding  this  tj-pe  of  car  that 
a  description  would  be  superfluous  here.  About  1,100  are  now  in 
use  in  the  United  States.  Few  managements  to-flay  realize  the  full 
significance  of  this  car  and  the  tremendous  possibilities  that  lie 
before  it.    Probably  the  best  way  to  give  an  idea  of  its  worth  is  to 


fijf 


1672    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

apply  the  concrete  illustration  of  what  should  be  expected  if  the 
average  company  mentioned  in  the  foregoing  part  of  this  paper 
decided  to  adopt  it  in  lieu  of  the  present  equipment  of  two-man 
cars. 

Before  entering  the  detailed  discussion,  the  following  facts  must 
be  borne  m  mind : 

1.  The  safety  car  is  capable  of  making  nearly  20  per  cent  better 
schedule  speed  without  being  capable  of  as  high  a  maximum  speed 
as  the  average  car  now  in  use. 

•2.  It  was  designed  primarily  to  furnish  service  on  a  more  frequent 
headway  than  that  now  given  with  the  big  two-man  cars,  and  not  to 
reduce  the  number  of  trainmen  employed. 

Lines  now  operating  on  a  30-minute  headway  should  be  put  on  a 
15  or  a  10.  Those  now  having  a  10  should  be  placed  on  a  5  or  3, 
and  so  on.  The  car  was  designed  to  encourage  and  develop  the 
riding  habit.  Wherever  it  has  been  so  used  it  has  demonstrated  that 
It  will  do  this.  An  increase  of  100  per  cent  in  the  number  of  cars 
per  hour  brings  in  a  50  per  cent  increase  in  business,  a  50  per  cent 
increase  m  cars,  a  25  per  cent  gain  in  receipts,  and  so  on. 

Now,  the  average  company  doing  a  million  dollars'  worth  of  busi- 
ness annually  will  require  available  for  daily  service  approximately 
r5  cars,  including  extra  for  shops  and  emergency.  To  substitute 
safety  cars,  135  would  give  double  service  on  the  basis  of  a  10  per 
cent  increase  m  schedules  (instead  of  the  maximum  of  20  per  cent 
obtainable). 

At  the  present  time  this  number  of  cai-s  would  cost  fully  equipped 
about  $6,000  each,  or  a  total  of  $810,000.  The  old  cars  should  be 
sold  for  whatever  they  will  bring.  Meantime  the  new  equipment 
must  be  paid  for  and  the  increased  intei^est  provided.  Increased 
earnings  occasioned  by  the  double  service  should  be  at  least  50  per 
cent.  To  be  conservative,  however,  an  increase  of  but  35  per  cent 
is  assumed.  Compare  this  operating  statement  with  that  of  the 
average  company  under  old  methods  of  operation : 

Gross    income ^1^  333  qqq 

Operating   expenses $750, 000 

Add  10  per  cent  purchase  price  of  new  cars 81, 000 

'- 831,000 

Earnings  from  operation w _  gQo  qqq 

De<luctions:  "' 

Taxes   (adjusted) $20,000 

Replacement  fund go  000 

Interest  on  new  cars 27*  000 

Interest,  6  per  cent  on  $4,000,000 III-_I 240,000 

^ 367,000 

Surplus 135,000 

In  going  into  the  details,  it  is  found  that  the  miles  run  by  the  com- 
pany have  increased  from  two  and  one-half  millions  to  five  millions. 
The  earnings  per  car-mile  have  not  gone  down  to  half,  but  are  de- 
creased from  40  cents  to  26.6  cents.  The  car-hour  earnings  have  been 
reduced  only  from  $3.36  to  $2.46,  and  the  operating  ratio  has  gone 
from  75  per  cent  down  to  63  per  cent.  This  is  in  spite  of  the  change 
from  the  attitude  that  cars  are  going  to  last  indefinitelv  to  using  them 
intensively  and  obtaining  the  full  value  of  them  in  'lO  years,  after 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1673: 

which  they  can  be  rephiced,  as  you  would  an  automobile,  with  the 

latest  model. 

With  the  one-man  safety  car  alone  an  average  company  now  oper- 
ating with  a  deficit  can  be  made  to  carry  all  its  present  burdens,  pay 
out  for  the  new  cars  on  a  basis  of  10-year  life,  and  earn  a  comfortable 
surplus  which  can  be  used  to  (1)  reduce  the  fares;  (2)  still  further 
improve  the  service. 

I  believe  the  safety  car  has  a  much  wider  range  of  applicability 
than  has  yet  been  attempted.  Even  large  companies  can  undoubt> 
edly  use  many  of  them  to  advantage. 

If,  after  everything  has  been  done  to  increase  business,  effect 
operating  economies,  and  lower  taxes  to  a  normal  basis  a  deficit  still 
remains  after  providing  for  the  necessary  and  proper  fixed  charges 
a  raise  in  the  rates  of  fare  should  be  granted.  There  are  a  number  of 
ways  to  do  this,  as  follows:  (1)  A  charge  for  transfers;  (2)  an  in- 
crease in  the  flat  rate;  (3)  zone  fares,  or  fares  based  on  distance. 

A  1-cent  charge  for  transfers  will  usually  yield  from  3  to  5  per 
cent  additional  revenue.  An  increase  in  the  flat  rate  of  fare  can 
scarcely  be  called  a  success  as  yet.  An  increase  of  1  cent  usually 
leads  to  2  or  3,  an.d  as  the  flat  rate  goes  up,  the  number  of  ridera 
decreases  correspondingly.  A  number  of  cities  have  gone  to  10  cents 
with  disappointing  results  financially.  High  fares  encourage  walk- 
ing, and  the  short-haul  patron  disappears.  He  js  the  only  profitable 
customer  the  street  railway  has  had  in  years.  Lose  him  and  the  en- 
tire burden  falls  on  the  shoulders  of  the  long-haul  patron,  who  must 
thereafter  produce  the  entire  revenue.  One  who  lives  beyond  the 
walking  limits  suffers  most,  for  he  must  ride  while  the  others  caa 
walk. 

As  patronage  diminishes,  the  company  naturally  operate  fewer 
cars  and  the  space  between  them  becomes  greater.  The  service  con- 
sequently deteriorates  and  the  whole  city  suffers,  but  no  one  suffers 
as  much  as  those  who  live  far  out.  As  the  patronage  falls  off  the 
expenses  must  be  shared  by  fewer  and  the  rates  of  fares  keep  going 
higher.  Outside  property  values  will  undoubtedly  feel  the  most 
disastrous  effects. 

Provided  the  fare  has  to  be  raised  it  should  be  done  so  as  to  retain 
and  encourage  the  short-haul  rider,  develop  community  riding,  and 
increase  the  receipts.  Experience  has  shown  that  a  high  flat  rate 
does  not  accomplish  this.  The  successful  merchant  gives  an  apt  illus- 
tration when  with  rising  costs  he  reduces  the  contents  of  the  package 
and  keeps  the  price  the  same  or  even  lowers  it. 

Automobile  and  Bus  Competition. 

At  present  a  great  deal  of  publicity  is  being  given  to  the  possibili- 
ties of  motor  buses  to  replace  nonpaying  street-car  lines,  and  it  has 
even  been  predicted  that  the  street-railway  industry  is  doomed. 
These  predictions  are  based  largely  on  the  operations  of  jitney  lines, 
where  the  buses  are  running  in  competition  with  the  street-cars  and 
skimming  off  the  best  of  the  short-haul  business,  or  where  operations 
of  the  buses  are  made  possible  by  higher  fares  such  as  on  the  Fifth 
Avenue  Coach  Co.  of  New  York  City,  where  a  10-cent  fare  has  been 
charged  for  years. 


^i 


1674     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION*. 

The  bus,  with  its  limited  cariying  cai>acity,  recjiiiires  a  higher  ratio 
of  man  power  per  passenger  carried.  The  greater  nuniher  of  units 
increases  the  congestion  and  street  accidents.  The  cost  of  fnel  and 
repairs  is  mnch  higher  per  c^r-mile.  The  bus  has  higher  deprecia- 
tion. The  ^reet-car  wears  out  its  own  roadway  of  steel  rails  while 
the  bus  wears  out  the  paving  laid  at  great  expense  by  the  public. 
AVhere  any  con^derable  volume  of  traffic  exists,  motor-bus  service, 
considering  everything,  costs  more  than  good  street-car  transporta- 
tion should.  There  are  many  places,  however,  where  the  bus  can  be 
employed  to  the  great  advantage  of  both  public  and  company.  There 
are  other  places  where  the  bus  should  not  be  allowed.  Unquestion- 
ably, however,  the  companies  should  study  this  with  a  view  of 
coordinating  bus  service  with  the  car  sendee,  where  use  is  warranted 
as  a  part  of  the  general  transportation  scheme. 

FuTiTiE  6V  Electric  Traction. 

To-day,  in  spite  of  the  fact  that  there  are  upward  of  6,000,000 
passenger  automobiles  in  operation  in  the  Unit<?d  States,  the  demand 
tor  rapid,  safe  transportation  was  never  so  great,  nor  were  there  so 
many  people  to  be  moved.  Good  street-railway  transportation  is 
not  only  desirable  but  is  indispensable.  In  fact,  on  the  quality  of 
the  service  rendered  bv  the  local  traction  systems  dej^ends  hugely 
the  degree  of  prosperity,  importance,  and  growth  of  the  locality 
served. 

In  order  that  the  street-'railway  industry  be  placed  on  a  firm  finan- 
cial footing  and  be  enabled  to  grow,  it  must  be  made-  to  pay.  As 
a  whole,  it  is  not  doing  so  to-day.  Therefore  either  the  outgo  must 
he  reduced  or  the  income  increased,  or  both.  To  accomplish  this 
l)etter  methods  of  financing  and  operating  must  be  employed.  Man- 
agements must  employ  all  the  arts  of  suc^'essful  salesmanship  com- 
bined with  economies. 

One  of  the  fundamentals  that  must  be  recognized  is  that  repairs 
alone,  no  matter  how  efficiently  done,  will  not  make  antiquated  equip- 
ment attractive  or  efficient.  Keplacement  costs  covering  obsolescence 
of  rolling  stock  and  plant  must  be  provided  the  same  as  any  other 
operating  charge. 

Cooperation  of  the  public  and  authorities  is -important,  not  only 
to  the  company  but  much  more  so  to  the  j^cople  and  the  community 
seived.  High-class,  efficient  urban  transportation  makes  for  busi- 
ness prx)sperity. 

Recapitulation. 

To  enable  the  street  railways  to  get  out  of  the  serious  situation  in 
which  they  now  are,  the  following  can  be  done : 

Reduce  taxation  to  place  the  street  railways  on  a  par  with  other 
industries. 

P^mploy  operating  economies,  such  as:  Better  and  faster  schedules, 
reduction  of  lay-overs,  improvement  of  routing,  abandonment  of 
nonessential  service,  standardization  of  equipment,  saving  of  power, 
eliminate  waste. 

Obtain  the  cooperation  of  the  authorities  and  the  public  in  the 
following:  Installation  of  loading  platforms,  cooperation  of  the  po- 
lice, regulation  of  street  traffic,  contix)l  of  parking,  elimination  of 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    16^5 

steam-railroad  grade  crossings,  regulation  of  jitney  and  the  compe- 
titioii,  staggered  hours  of  business,  skip  stops. 

Employ  methods  to  increase  the  gross  receipts,  as:  Encourage 
<^hort-haul  riding,  shorten  headways,  replace  insolence  and  inatten- 
tion with  courtesy,  drill  employees  in  principles  of  salesmanship, 
reroute  to  increase  business,  use  the  safety  car  and  more  attractive 
cai^  generally. 

A  raise  in  fare  by  itself,  without  employing  methods  to  induce 
and  encourage  profitable  riding  or  without  employing  more  efficient 
methods  of  operation,  will  fail. 

Autoinobile  and  bus  transportation  is  far  less  economical  than 
efficient  electric-railway  service.  By  the  adoption  of  the  remedies 
})roposed,  good  street-car  transportation  will  be  retained  and  the 
industry  made  self -supporting. 

The  Chairman.  Have  you  any  general  comment  that  you  wish  to 
submit,  Mr.  Beeler,  in  addition  to  this  statement? 

Mr.  Beeler.  I  think  not. 

The  Chairman.  What,  iii  your  judgment,  is  the  trouble^  with  the 
istreet-car  industry,  speaking  of  it  as  a  whole  ? 

Mr.  Beeler.  Well,  it  is  a  complication  of  things,  Mr.  Chairman. 
The  earnings  in  the  past  have  not  been  sufficient  to  enable  the  aver- 
age company  to  make  provision  for  replacement  of  plant  and  equip- 
ment. That  is  one  fundamental  principle  that  has  been  wrong  in 
the  past.  That  principle  has  not  been  fully  realized,  and  until  it  is, 
until  we  get  the  street-car  industry  more  fully  developed  on  more 
progressive  lines,  like  the  automobile,  the  street  car  industry,  to  my 

mind,  will  suffer. 

You  would  not  think  of  running  an  automobile  that  is  10  years 
old.  The  average  automobile  does  not  last  over  4  or  5  years.  The 
average  bus  in  jitney  service  has  a  limit  of  about  4  years,  or  25  per 
cent  depreciation  per  annum. 

The  street  cars  dodged  the  issue  in  hopes  that  business  would  be 
better  or  that  something  else  would  t^rn  up,  and  we  are  running  on 
lines  to-day  equipment  that  is  little  better  than  horse  car  equipment 
on  many  lines,  simply  with  motors  in  place  of  horses,  simply  for  the 
reason  that  the  companies  did  not  save  enough  out  of  earnings  to 
replace  that  equipment. 

The  Chairman.  Prior  to  the  war  period  wei-e  the  companies  as  a 
whole  making  sufficient  revenue  out  of  the  5-cent  fiare  to  maintain  a 
proper  depreciation  charge  or  account? 

Mr.  Beeler.  There  were  very  few  of  them,  to  my  notion,  that  were 
maintaining  sufficient  depreciation  charges. 

The  Chairman.  Was  that  due  to  reluctance  or  to  a  shortage  in 

revenue  ? 

Mr.  Beeler.  Principally  due  to  a  shortage  in  revenue,  and  the 
more  unattractive  the  service  becomes  the  shorter  the  revenue  be- 
comes, and  there  we  have  a  vicious  circle.  We  discourage  business 
and  the  fare  is  increased,  the  flat  rate  of  fare,  and  the  walkers  are 
encouraged,  and  when  patrons  once  start  to  walk  the  walking  habit 
is  developed ;  it  is  hard  to  get  them  back,  especially  to  ride  on  dingy 
and  ill-kept,  out-of-date  equipment. 

The  Chairman.  Then,  you  feel  that  in  the  future  the  companies 
must  maintain  a  greater  depreciation  charge? 


m 


1676    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Mr.  Beeler.  Repairs  will  take  care  of  a  certain  amount  of  depre- 
ciation. For  instance,  repairs  can  be  made  to  take  care  of  the 
tracks  absolutely.  You  can  reconstruct  so  many  miles  of  track  per 
annum  and  charge  it  to  repairs.  You  know  your  average  life  of  rails 
on  one  system  is  18  years  and  on  another  system  is  20  years  and  on 
another  system  it  is  25  yeai^.  That  replacement  can  be  charged 
right  direct  to  repairs,  when  the  tracks  wear  out.  But  to  replace  an 
obsolete  type  of  car  means  that  you  have  to  buy  a  new  car,  the  same 
as  you  have  to  buy  a  new  automobile. 

i^ou  can  paint  this  car  and  keep  it  up  and  keep  it  attractive  as 
long  as  you  have  to  use  it,  but  if  it  is  heavy  and  uneconomical, 
equipped  with  wasteful  motors,  and  has  narrow  doors,  so  that  en- 
trance and  egress  are  slowed  down  and  altogether  out  of  date,  there 
is  only  one  thing  to  do,  and  that  is  to  buy  a  new  model,  and  that  takes 
fresh  capital.  ^ 

The  safety  cars  are  the  only  standard  type  of  cars  that  I  know  of 
that  can  be  bought  on  a  car  trust.  There  is  no  reason,  however, 
why  other  cars  should  not  be  bought  on  a  car  trust,  if  they  were 
standardized,  and  that  would  enable  a  company,  by  more  efficient 
operation  and  more  revenue,  to  pay  for  new  equipment  out  of  the 
earnings,  out  of  the  increased  earnings  or  savings  in  operation. 

To  my  notion,  I  believe  that  the  minimum  fares  should  be  retained 
nt  5  cents,  and  shorten  the  haul,  if  necessary,  but  make  the  service 
attractive,  gather  up  the  people  off  the  sidewalks  and  haul  them. 

The  equipment  to-day  is  running  idle,  running  less  than  one-half 
filled  12  hours  a  day  on  many  lines. 

Now,  if  we  can  pick  up  these  short-haul  riders  and  encourage 
them  and  get  their  business,  practically  no  increase  of  operating  ex- 
penses will  result,  and  we  get  the  benefit  of  the  increased  revenue. 

The  Chairman.  Is  your  idea  that  the  companies  have  not  been 
taking  proper  steps  to  develop  this  short-haul  traffic? 

Mr.  Beeler.  I  am  of  the  opinion  that  sufficient  attention  has  not 
been  paid  to  that  and  that  more  attention  should  be  paid  to  it. 

The  Chairman.  Can  you  dev^elop  that  short-haul  traffic  on  a  5-cent 

*  Mr.  Beeler.  It  takes  more  than  fare  to  develop  traffic.    It  takes 
convenient,  attractive  rolling  stock. 

The  Chairman.  Assuming  that  you  have  that,  can  you  develop 

the  traffic  on  a  5-cent  fare  ?  j,  ,      V 

Mr.  Beeler.  You  certainly  can.  It  takes  frequency  of  headway 
and  regularity  of  service.  Some  of  the  companies  will  tell  you  that 
they  are  operating  12  cars  an  hour.  That  would  average  up  to  b©, 
gay,  5-minute  service ;  but  in  actual  practice  you  will  find  those  cars 
a  re  going  along  in  bunches  of  3  every  15  minutes. 

Commissioner  Gadsden.  Right  there,  is  not  a  lot  of  that  occasioned 
by  congestion  in  the  streets,  beyond  the  control  of  the  railway  com- 
pany ?  ,     ,     - .    .  -11 

Mr.  Beeler.  Some  of  it  is.  A  great  deal  of  it  is  occasioned  by  con- 
gestion. ,  ,.     ,  110 

Commissioner  Gadsden.  That  i^  where  the  public  have  to  help  i 
Mr.  Beeler.  The  cooperation  of  the  authorities  should  come  in 
to  assist  in  keeping  the  tracks  clear.     But  there  is  considerable  of 
that  in  the  schedule  making  itself.    No  attention  has  been  paid  to  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    167T 

leaving  time  out  of  the  end  of  the  line  than  the  fitting  of  the  sched-^ 
ules  into  the  regularity  on  the  main  arteries  so  as  to  bring  about  a 
regularity  of  spacing  on  the  main  arteries.  AVhen  they  get  to  the 
main  arteries,  oftentimes  the  schedules  will  bunch  them,  especially 
if  you  have  one  line  on  a  l7-minute  headway  and  another  line  on  a 
15-minute  headway  and  another  line  on  a  13-min*te  head way---t hose 
lines  will  run  hit  or  miss  all  day.    They  will  be  more  or  less  in 

I  am  a  great  believer  in  even  schedules.  I  think  that  a  20-minute 
headway  is  better  than  an  18-minute  headway.  I  think  a  15-minute 
headway  is  better  than  a  13-minute  headway  for  the  patron,  because 
he  then  knows  when  to  cat^h  his  car;  but  if  it  is  every  13  minutes, 
he  just  simply  takes  a  chance  on  it,  and  he  invariably  feels  that  he 
has  iust  missed  a  car  whether  he  has  or  not.  .      .-  .     t 

The  Chairman.  You  have  outlined  quite  a  comprehensive  list  of 
the  improvements  in  service  and  economies  in  operation.  If  the 
companies  applied  themselves  diligently  to  the  reforms  that  you 
liave  suggested,  do  you  believe  that  we  might  look  for  a  reduction  m 
fares  as  well  as  an  increase  in  the  riding  habit?  ^ 

Mr  Beeler.  Unquestionably  you  can  lower  operating  expenses  by 
these  means  of  economies;  and  I  think  to  increase  riding  you  have  got 
to  stimulate  and  develop  the  principles  of  salesmanship,  not  only  m 
the  way  of  improved  equipment  but  also  in  the  training  of  the  men 
in  the  principles  of  salesmanship.  I  think  very  largely  the  men 
reflect  the  attitude  of  the  management  toward  the  public. 

The  Chairman.  There  has  been  a  good  deal  said  here  about  credit^ 
and  you  have  also  touched  on  that.  Do  you  believe  that  it  would 
be  possible  to  inaugurate  a  system  by  which  the  benefited  property 
and  the  public  generally  should  pay  for  new  construction  of  street- 
car properties  or  for  extensions? 

Mr.  Beeler.  There  is  no  doubt  but  what  property  values  have  been 
immensely  increased  by  the  construction  and  operation  of  street  rail- 
ways, and  the  property  owner  has  been  almost  the  sole  beneficiary, 
except  that  the  community  is  benefited  by  increased  taxes  on  account 
of  the  rise  in  value  of  the  property  served. 

That  is  a  very  large  question,  as  to  who  should  pay  for  extensions 
and  improvements.  A  great  many  lines  have  been  built  with  sub- 
sidies, where  in  the  past  they  were  subsidized  by  property  owners, 
in  order  to  build  out  in  this  district;  and  generally  the  property 
owners  put  the  price  of  the  property  up  so'  high  that  the  develop- 
ment was  so  slow  that  the  railway  had  been  much  better  off  had  it 
never  built  the  line.    I  know  of  a  great  many  instances  of  that  kind 

myself. 

*The  Chairman.  You  are  from  Boston,  I  understand  ? 

Mr.  Beeler.  My  home  has  been  the  West  for  30  years.  I  have 
"been  in  Boston  considerably  for  the  last  two  years  or  three  j^ears. 

The  Chairman.  You  are  familiar  with  the  cost-of -service  plan? 

Mr.  Beeler.  I  am  more  or  less  familiar  with  the  plan ;  yes. 

The  Chairman.  Do  you  believe  that  affords  a  solution  of  the  street- 
car question? 

Mr.  Beeler.  I  think  as  a  whole  it  is  a  good  plan. 

The  Chairman.  Does  it  afford  a  solution? 

Mr.  Beeler.  I  thinlc  it  may. 


1678    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Under  what  conditions? 

Mr.  BeeliER.  I  think  it  is  largely  a  question  of  management. 

The  Chairman.  Has  it  been  tried  out  long  enough  in  this  country 
to  warrant  the  assertion  that  it  will  solve  the  street-car  problem  ? 

Mr.  BEEL15R.  No;  I  could  not  say  that  it  had  been.  I  do  not  be- 
lieve it  has. 

I  think  that  the  whole  street-railway  situation,  whether  it  is  mu- 
nicipal ownership  or  private  ownership  or  State  ownership,  it 
seems  to  me  that  it  is  right  noW  a  question  of  management  and 
financing. 

If  municipal  ownership  will  finance  a  line  and  will  provide  equally 
competent  management,  then  municipal  ownership  would  be  a  good 
thing.  On  the  other  hand,  if  private  capital  and  private  ownership 
can  continue  to  finance  and  manage  the  line  that  would  be  the 
proper  thing.  It  seems  to  me  that  it  is  largely  a  question  of  manage- 
ment and  cooperation  with  the  public. 

In  order  for  any  manaj^ement  to  be  successful  they  have  got  to 
employ  all  of  these  operating  economies  and  tlie  principles  of  sales- 
manship and  recognize  the  fact  that  cars  wear  out  and  that  people 
will  not  ride  in  them — that  they  Want  a  change.  I  think,  regardless 
of  Whether  the  State  owns  it  or  the  municipality  or  the  private 
company,  that  these  fundamental  principles  have  got  to  be  recog- 
nized and  provided  for. 

The  Chairman.  Have  you  reached  any  conclusion  as  to  whether 
municipal  ownership  will  give  a  greater  guaranty  of  good  service 
and  a  larger  facility  to  investment  than  private  ownei^ship  and 
operation  ? 

Mr.  Beeler.  I  think  that  is  simply  a  question  of  individual  opinion. 
It  might,  under  certain  circumstances.  Municipal  ownership  or  State 
ownei*ship  would  have  this  advantage:  The  money  for  financing 
could  be  obtained  at  a  lower  rate  of  int^re.st,  and  could  be  readily 
obtained.  To  my  mind,  that  is  the  only  advantage  that  I  can  see  for 
municipal  ownership  or  State  ownei'ship. 

Commissioner  Gadsden.  Is  not  that  the  greatest  question  before  the 
street  railroads  to-day — getting  new  mortey? 

Mr.  Beeler.  It  is ;  but  I  think  tlie  greatest  question  before  us  to-day 
is  a  question  of  policy.  If  they  are  to  continue  to  operate  on  the 
same  policy  that  they  have  in  the  past,  if  they  get  the  new  money, 
they  will  be  in  the  same  shape  again  in  a  few  years ;  and  the  successf ill 
companies  to-day  are  those  that  have  been  rehabilitated  in  the  past 
few  years.  They  have  had  new  plants,  new  equipment,  and  aiv 
operating  successfully,  most  of  those  companies,  on  low  fares — the 
5-cent  fare.  Some  of  those  companies  may  have  provided  for  this; 
they  have  provided  for  the  new  capital  in  different  ways.  However, 
in  whatever  manner  they  have  provided  for  it,  they  are  operating 
more  economically  to-day  than  the  companies  that'  have  not  been 
rehabilitated. 

So  that  it  seems  to  me  that  A  comprehensive  plan  providing  for 
rehabilitation  of  the  properties,  other  than  making  of  repairs  must 
be  adopted  before  the  street-railway  industry  will  be  financially 
sound. 

The  Chairman.  Assuming  that  the  public  can  purchase  capital 
more  cheaply  than  the  private  company,  do  you  believe  that  the  dif- 


proceedings  or  federal  electric  railways  commission.  1679 

ference  is  substantial  enough  to  really  affect  the  substantial  operation 

of  the  industry  ?  ^    ^t.  •        • 

Mr  Beeler.  Given  the  same  efficient  management,  the  saving  in 
interest  would  be  very  substantial.  With  an  average  of  $4  invested 
per  $1  of  business— that  is  the  trouble  with  the  street-car  business; 
it  requires  such  a  high  investment  to  do  business— the  average  com- 
pany—surface-street-car company— with  $4  invested  must  provide, 
at  6  per  cent,  24  cents  out  of  every  dollar  to  pay  its  interest  at  6  per 
cent.  Now,  if  the  municipality  could  borrow  that  at  4  per  cent,  there 
would  be  16  cents  against  24  cents,  a  saving  of  8  cents  on  every  dollar, 
which  would  make  a  tremendous  difference  in  the  operating  ratio; 
but  it  would  not  take  very  long  for  an  inefficient  management  that 
was  careless,  or  that  was  favoring  certain  sections  of  the  city,  to  throw 
away  that  8  cents  on  each  dollar. 

The  Chairman.  Which  do  you  think  is  the  most  effective  system  of 
regulation :  The  cost-of -service  plan,  or  to  have  the  propei-ties  fairly 
valued  by  an  appropriate  tribunal  with  adequate  powers  given  to  a 
State  commission  to  regulate  the  rates  and  the  service  and  the  ac- 
counting, leaving  the  requisite  local  control  to  the  municipalities  i 

Mr.  BtJELER.  I  do  not  believe  there  would  be  any  difference. 

The  Chairman.  You  think  it  all  comes  back  again  to  the  question 

of  management?  .         -  x      j 

•     Mr.  Beeler.  I  think  it  is  99  per  cent  a  question  of  management  and 

financing.  .  /.      .     xi.  i. 

Commissioner  Mahon.  What  companies  do  you  refer  tx)  that  are 

successfully  operating  now  at  5  cents?  ,     ^^     -^  i  a. 

Mr.  Beeler.  There  is  One  right  here  in  this  city,  the  Capital  irac- 
tion  Co.;  Philadelphia  has  another;  Cleveland  is  another.  This 
Capital  Traction  Co.  right  here  in  Washington  I  consider  one  of  the 
most  successfully  managed  and  operated  companies  m  the  United 

States.  .  .         mi        1  ^4. 

Philadelphia  is  a  much  larger  proposition :  They  haVe  a  great 
tnany  long  lines,  and  they  have  a  great  many  poorly  paying  lines  in 
Philadelphia.  On  the  other  hand,  they  have  a  great  many  tre- 
mendously good  lines,  and  they  are  doing  as  well  to-day,  if  not  better 
than  ever  before,  I  understand,  with  the  straight  5-cent  fare. 

.  Cleveland  has  the  5-cent  fare,  and  they  are  doing  very  well.  They 
are  doing  much  better  than  any  company  I  can  think  of  that  is 
operating  on  a  higher  fare. 

I  do  not  want  to  give  the  impression  that  I  think  the  5-cent  faro 
should  be  the  limit  of  the  fare.  I  think  that  the  companies  would 
do  well  if  they  made  their  minimum  fare  5  cents  anywhere  on  the 
system;  have  your  minimum  fare  5  cents  and  an  extra  charge  for 
these  long  hauls,  over  and  above  a  certain  limit. 

Mr.  Warren.  You  would  shorten  the  zone? 

Mr.  Beeler.  I  would  shorten  the  haul  for  5  cents;  but  I  would 
keep  the  minimum  fare  at  5  ceiits.  Tt  is  a  piece  of  money  that  we 
all  have  in  our  pockets — everybody  has;  you  do  not  have  to  have 
any  tickets  or  special  apparatus  or  paraphernalia,  and  we  are  used 

to  it.  •        «  r      •  •  J!  1 

Commissioner  Gadsden.  That  is  hardly  practicable  m  a  city  of  less 
than  100,000,  is  it?    The  distance  is  too  small. 
Mr.  Beeler.  Well,  you  mean  the  zone  system? 
Commissioner  Gadsden.  I  mean  to  shorten  the  zone. 


Ml 


1680    PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Beeler.  To  shorten  the  zone  system,  I  do  not  know  why  it 
should  not  be,  in  the  event  it  is  necessary.  Look  at  Ix)ndon.  In 
London  they  luaul — practically  all  the  riding  for  any  distance  is  on 
the  measured  basis. 

Commissioner  Gadsden.  They  do  not  start  off  with  a  minimum  of 
a  nickel,  though. 

Mr.  Beeler.  It  starts  off  with  a  lower  minimum  than  that. 

Commissioner  Gadsden.  Yes. 

Mr.  Beeler.  But  it  is  on  a  measured  basis,  and  thev  have  many 
more  passengei-s  per  mile  than  we  have  in  America.  AVe  run  about 
six  per  car-mile.  We  are  running  now  from  six  to  eight  per  car- 
mile  and  they  run  as  high  as  fifteen  to  twenty. 

Commissioner  Sweet.  Mr.  Beeler,  in  this  city  one  of  the  com- 
panies, as  I  understand  it,  is  doing  well  and  the  other  not  well.  That 
is  the  fact,  is  it  not  ? 

Mr.  Beeler.  That  is  the  fact ;  yes. 

Commissioner  Sweet.  Do  you  ascribe  that  difference  to  the  differ- 
ence in  management,  entirely  ? 

Mr.  Beeler.  No;  I  do  not.  The  company  that  is  not  doing  well 
has  a  very  large  number — or  a  very  considerable  portion  of  its  busi- 
ness conducted  on  long  suburban  lines,  very  long  hauls.  It  is  the 
lonf^  haul  that  handicaps  that  company,  unquestionablv. 

Commissioner  Sweet.  The  Capital  Traction  Co.,  which  is  doing 
well  is  peculiarly  favorably  situated  with  regard  to  nonpaying  por- 
tions of  its  road,  is  it  not  ? 

Mr.  Beeler.  Yes;  it  is. 

Commissioner  Sweet.  As  a  matter  of  fact,  if  you  do  not  mind 
telling  us,  do  you  consider  that  there  is  a  difference  in  management 
that  is  favorable  to  the  Capital  Traction  Co.  ? 

Mr.  Beeler.  Every  management  has  its  personal  equation.  That 
is  very  largely  a  question  of  opinion.  I  would  rather  not  express 
myself  on  that. 

Commissioner  Sweet.  I  thought  perhaps  vou  would  rather  not. 
Do  you  not  think,  Mr.  Beeler,  that  in  order  to  attract  the  short- 
haul  customer  and  wean  him  from  the  walking  habit  to  the  riding 
habit,  it  would  be  wise  to  have  a  lower  fare  than  5  cents  for  a  certain 
portion  .of  the  trip  ? 

Mr.  Beeler.  Well,  that  may  come  later,  but  at  this  time  I  would 
not  advocate  it ;  but  I  think  it  would  be  well  to  give  as  much  of 
a  ride  for  5  cents  as  the  company  can.  And  5  cents  is  really  no  more 
to-day  in  the  average  workingman's  pocket  than  10  cents  was  10 
yeai-s  ago. 

Commissioner  Sweet.  As  a  matter  of  fact,  is  it  not  true  that  the 
objection  to  the  10-cent  rate  which  they  have  in  so  many  parts  of 
x\merica  is  fanciful? 

Mr.  Beeler.  I  should  say  3  cents  was. 

Commissioner  Sweet.  My  question  to  you  is  whether  there  is  not 
a  great  deal  of  fancy  and  misunderstanding  of  real  facts  in  the  oppo- 
sition to  the  10-cent  fare? 

Mr.  Beeler.  Well,  the  opposition  to  the  10-cent  fare  comes  largely 
from  the  people  who  are  riding. 

Commissioner  Sw^eet.  But  as  a  matter  of  fact  is  the  10-cent  fare 
any  more  in  purchasing  power  and  in  reality  than  the  5-cent  fare 
was  five  years  ago  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1681 

Mr.  Beeler.  No  ;  not  in  labor  and  materials,  but  it  is  in  the  inter- 
est charges  on  the  investment. 

Commissioner  Sweet.  Very  true.  But  the  car  rider,  at  least  a 
great  majority  of  the  car  riders,  are  not  investors,  are  they? 

Mr.  Beeler.  That  I  could  not  say.    I  presume  not. 

Commissioner  Sw^eet.  The  street  railroad  is  often  called  the  poor 
man's  carriage,  is  it  not? 

Mr.  Beeler.  Well,  there  are  a  great  many  people  who  prefer  the 
street-cars  to  ride  on,  even  though  they  could  afford  other  means  of 
transportation.  It  is  safer  and  more  convenient  to  a  great  many 
people  and  there  are  really  a  great  many  people  riding  in  other 
means  of  transportation  that  ought  to  be  on  street-cars. 

Commissioner  Sweet.  Undoubtedly. 

Mr.  Beeler.  I  think  the  street-car  is  really  the  universal  trans- 
portation of  a  city.  It  is  the  fundamental  transportation  that  any 
city  is  dependent  upon. 

Commissioner  Sweet.  Although  we  find,  as  a  matter  of  fact,  a 
great  many  people  of  large  means  who  ride  on  street-cars  and  a 
great  many  people  with  small  means  who  ride  in  automobiles,  still 
as  a  matter  of  fact  it  is  true,  is  it  not,  that  the  automobile  is  the 
means  of  conveyance,  speaking  generally,  of  the  wealthier  part  of 
the  population,  and  the  street-car  of  the  moderately  well-to-do  part 
of  the  population? 

Mr  Beeler.  It  goes  without  saying  that  that  is  so.  The  cost  of  the 
ordinary  trip  in  an  automobile  I  had  occasion  to  figure  up  a  number 
of  years  ago  in  a  certain  western  city,  and  it  approximated  15  cents 
for  each  passenger  carried  each  trip  in  the  city,  as  against  5  cents 
on  a  street-car. 

Commissioner  Sweet.  Did  you  hear  Mr.  Bauer's  testimony  this 

morning? 

Mr.  Beeler.  I  did. 

Commissioner  Sweet.  Do  you  agree  with  him  in  regard  to  the 
relative  economy  of  electric  power  as  a  means  of  propelling  vehicles, 
and  gasoline? 

Mr.  Beeler.  There  is  no  question  but  what  in  the  present  state  of 
the  art  it  costs  more  to  operate,  including  your  wear  and  tear  on  the 
equipment,  an  auto  bus  than  it  does  a  street-car.  It  costs  more  to 
operate  a  two-man  onto  bus  than  it  does  to  operate  a  two-man  street- 
car. It  costs  more  to  operate  a  one-man  auto  bus  than  it  does  to 
operate  a  one-man  street-car. 

Commissioner  Sweet.  That  was  not  Mr.  Bauer's  idea,  was  it? 

Mr.  Beeler.  I  do  not  know  that  it  was.  I  did  not  hear  that  part 
of  his  testimony.    I  only  heard  a  part  of  it. 

Commissioner  Mahon.  It  was  just  the  opposite. 

Commissioner  Sweet.  That  is  my  understanding  of  it.  If  I  under- 
stood him  correctly,  his  view  was  that  the  public  ought  to  buy  the 
street-railroad  properties  throughout  the  country  and  then  prac- 
tically, in  the  course  of  time,  scrap  them  and  run  everything  on  the 
automobile  or  auto-bus  basis. 

Now,  he  did  not  say  that  in  so  many  words,  but  I  think  what  he 
said  was  capable  of  that  understanding. 

Mr.  Warren.  I  do  not  know  that  I  want  to  have  this  go  on  the 
record,  because  he  is  not  here,  but  that  was  the  impression  I  got, 

160643°— 20— VOL  2 44 


PI 


1682    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

and  I  asked  Mr.  Bauer  after  the  hearing  if  he  meant  that.  I  said  it 
was  rather  a  curious  thing  to  purchase  street  railways  in  order  to 
scrap  them.  He  said,  "  I  do  not  mean  that.  I  mean  they  ought  to 
be  purchased,  because  if  run  by  the  public  at  low  fares  they  represent 
a  very  necessary  public  convenience,  but  if  they  are  going  to  be  nm 
at  the  high  fares  I  think  they  may  go  up— the  people  will  not  use 
them  enough  to  keep  them  going." 

Commissioner  Sweet.  Well,  it  struck  me  as  rather  curious  any- 
way. I  understood  him  to  say  that  this  transportation  problem  Avas 
^li^irely  a  social  problem,  Mr.  Beeler.    Is  that  your  understanding  ? 

-"Ar.  x>EELER.     Jl  eS. 

Commissioner  Sweet.  Don't  you  think  there  is  some  truth  in 
that  ? 

Mr.  Beeler.  Undoubtedly  iliere  is.  The  question  of  transporta- 
tion is  one  of  the  most  vital  problems  of  civilization.  Community 
life  IS  dependent  more  or  less  upon  good  transportation  to-day. 

Commissioner  Sweet.  Do  you  think  that  phase  of  the  street-i*ail- 
w^ay  problem  is  properly  understood  and  considered  by  the  jreneral 
iniblic?  "^  "^ 

Mr.  Beeler.  I  doubt  if  it  is  properly  understood.  I  doubt  if  it  is 
even  partially  appreciated.  I  know  oi  one  instance  where  an  entire 
city  was  shut  down  by  a  tremendous  snowstorm,  where  the  snow 
fell  to  a  depth  of  between  5  and  C  feet  in  a  few  hours,  and  it  was 
about  three  days  before  a  normal  car  service  was  restored,  and  after 
that  the  entire  population  had  an  ^tirely  different  feeling  with 
i-eference  to  tlie  local  street-railway  comi>any. 

Commissioner  Sweet.  I  do  not  know  whether  you  expressed  your 
view  with  regard  to  the  social  influence  of  th*e  zone  plan.  *But 
whether  you  have  or  not,  will  you  tell  m.e  what  you  think  of  it 
from  that  standpoint? 

Mr.  Beeler.  Well,  there  are  so  many  different  kinds  of  zone  fares, 
riie  zone  system  is  a  study  by  itself.  It  seems  to  me  that  the  prin- 
ciple of  leaving  for  what  you  get  measured  by  a  distance  basis  is  the 
ultimate  solution.  It  may  be  by  a  series  of  fixed  zones  or  it  may  be 
by  something  along  tlie  lines  of  the  Public  Service  Corporation. 
They  have  marked  off  each  mile— tlie  first  mile  is  so  much  and  the 
second  mile  is  so  much  additional.  Any  step  in  that  direction,  it 
seems  to  me,  is  a  step  in  the  right  direction.  It  may  be  that  ihe 
methods  employed  by  some  companies  are  not  as  equitable  to  the 
public  as  they  might  be,  but  the  zone  system  and  the  measured-service 
principle  is  universally  recognized  abroad  and  seems  to  be  giving 
the  very  best  sjitisfaction  there  on  lines  that  are  doing  a  much  ^r^ter 
volume  of  business  than  the  lines  are  in  tiiis  country,  and  they  at- 
tribute it  very  largely  abrcmd  to  the  fact  that  they  cater  to  tlie 
short-haul  patron. 

Commissioner  Swej:t.  In  this  country  we  have  liad  generally  in 
use  the  flat-fare  system,  have  we  not?  that  hiuj  been  tlie  prevailimr 
system  here  ? 

Mr.  Beelek.  Yes. 

Commissioner  Sweet.  And  the  suburbs  of  many  of  our  cities  liave 
been  built  up  under  the  flat-fare  system.    Is  not  that  true? 
Mr.  Beeler.  That  is  true. 

Commissioner  Sweet.  Do  you  think  there  is  any  moral  resi)onsi- 
bihty  resting  upon  the  public  that  that  system  is  maintained  because 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOl^.    1683 

of  the  fact  that  the  suburbs  have  been  built  up  under  that  system  and 
an  implied  contract  that  it  would  continue  so?  .      ,    p      ^i 

Mr.  Beeler.  If  the  flat-fare  system  has  to  be  retained  tor  tlie 
simple  reason  that  suburbs  and  outlying  sections  have  been  developed 
on  account  of  the  flat  fare,  it  would  seem  to  me  that  it  would  react 
not  only  upon  the  long-haul  rider  but  upon  the  property  owner,  if 
bv  raising  the  fare  to  a  higher  flat  rate  of  fare,  so  that  you  lose  prac- 
tically 40  per  cent  of  your  business,  as  was  shown  in  Boston,  that 
the  ontii-e  burden  must  then  be  placed  upon  the  shoulders  of  the  man 
or  the  patron  who  can  not  walk;  if  the  system  is  allowed  to  drive 
away  the  profitable  short-haul  rider  l^ecausc  the  man  on  the  outskirts 
wants  a  flat  rate,  it  seems  to  me  it  is  up  to  him.  If  he  would  prefer 
a  hiffh  flat  fare  all  over  the  town  and  bear  the  entire  burden,  the 
man  down  town  will  have  little  or  no  kick  coming,  because  he  can 

Commissioner  Sweet.  You  think  that,  in  order  to  enable  the  com- 
panies to  live  on  the  flat-fare  plan,  the  fare  would  have  to  be  made 
so  high  that  it  would  be  a  burdensome  perhaps  to  the  suburban 
customer  as  the  zone  plan  would  be  and  maybe  more  so? 

Mr.  Beelkk.  I  think  the  suburban  customer  would  probably  get  a 
lower  fare  than  he  would  by  means  of  a  flat-rate  fare  if  all  of  the 
short-haul  riding  is  developed  or  i-etained  by  the  system. 

Commissioner  Sweet.  But,  of  course,  what  you  are  saying  now 
would  depend  upon  local  conditions  in  any  one  particular  com- 
munity, I  suppose?  ^    ,.   ,     ,      ,       ,         j-x-       J.I 

Mr.  Beeler.  No;  I  think  not.  I  think  the  local-condition  theory 
is  all  wrong.  I  think  too  much  attention  has  been  paid  to  local  con- 
ditions. Mr.  Ford  makes  a  machine  that  runs  just  as  well  over  the 
prairies  of  Kansas  as  it  does  on  Fifth  Avenue,  New  York.  I  think 
the  secret  of  the  whole  thing  is  simply  o}Xiration  wherever  it  niay  be. 
There  may  be  a  slight  variation  in  the  gear  ratio  or  something  of 
tliat  kind,  but  what  the  &treet-raih>'ay  investor  needs  is  light,  attrac- 
tive cars  and  have  general  attractiveness  of  the  whole  business. 

Commissioner  Sweet.  Don't  you  think  tlieie  is  a  very  material 
diffei-ence  in  the  attitude  of  tiie  public  in  different  communities 
toward  the  street-railway  companies? 

Mr.  Beeixr.  Well,  there  is  some  difference. 

Commissioner  Sweet.  In  Philadelphia  and  Cleveland  is  there  not 
a  more  friendly  sentiment  to  the  railroad  companies  than  in  Pitts- 

burgli,  we  will  say? 

Mr.  Beelek.  There  is  unquestionably  a  difference  on  the  sentiment 
of  the  communities  toward  the  local  railroads,  but  that  is  again 
largely  a  question  of  i^st  management  and  history  and  the  attitude 

of  5ie  i^wspapers. 

Commissioner  Sweet.  Tlie  real  policy  that  has  been  in  vogue  m 
the  United  States  in  regard  to  sti^t  i-ailroads  has  been  exactly  the 
opposite  of  that  recommended  by  Mr.  Bauer,  has  it  not?  In  other 
words,  instead  of  looking  upon  it  from  tlie  matter  of  ti-ansportation 
standpoint,  something  that  ought  to  be  free  as  water,  in  most  com- 
munities we  have  been  putting  an  extra  obligation  u^jon  the  car 
riders  as  comj^ared  with  tlie  balance  of  the  cHHiimunity,  have  we  not? 

Mr.  Beeler.  That  is  true. 

Couunissioner  Sweet.  This  matter  of  paving  between  the  tracks  is 

an  example,  is  it  not? 


ilf 


absolute  inconsistency,  is  it  not? 


1684    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Beeler.  Tliat  is  true. 

Commissioner  Sweet.  Is  not  that  all  wrong? 

Mr.  Beeler.  That  is  what  I  said  in  the  beginning.  The  street- 
oars  have  been  paymg  for  pavements  that  the  jitneys  have  been  wear- 
ing out.  It  seems  to  me  entirely  wrong  in  principle  to  allow  a  iitnev 
service  or  a  bus  service  to  come  in  and  by  means  of  unfair  competi- 
tion render  a  service  inoperative  that  they  can  not  replace  them- 
selves. 

Commissioner  Sweet.  But  taking  the  view  of  the  situation  that 
people  of  moderate  means  are  those  who,  in  the  main,  constitute  the 

I'hofVK  f'  'i  '^  r''*i^,'\  ^"i"-^*i?  ^^'^  a  very  unjustifiable  situation 
that  the  burden  should  be  placed  upon  the  car  ridei*s,  and  this  paving 
done  from  the  nickels  that  they  contribute,  rather  than  from  thi 
owners  of  automobiles  who  actually  get  much  more  use  of  that  pav- 
m^  than  the  people  who  ride  on  the  cars? 

Mr.  Breler.  Certainly. 

Commissioner  Sweet.  It  is  an  a 

Mr.  Beeler.  Yes,  sir;  it  is. 

Commissioner  Sweet.  And  one  that  ought  to  be  corrected  every- 
where. ^'^*j 

Mr.  Beeler.  I  think  so. 

Mr.  Warren.  May  I  ask  Mr.  Beeler  two  or  three  questions?  You 
examined  in  a  genexal  way,  did  you  not,  the  Boston  Elevated  Rail- 
way  for  the  Public  Service  Commission  in  Massachusetts? 

Mr.  Beeler.  I  did ;  yes,  sir. 

Mr.  Warren  Did  you  hear  Mr.  Homer  Loring's  statement  this 
morning  that  the  trustees  were  charging  off,  I  think,  $2,000,000  a 
year  for  depreciation?  «=       j  jv  ,      , 

Mr.  Beeler.  Yes ;  I  did. 

Mr.  Warren.  Do  you  think  that  is  an  excessive  char^re? 
Mr.  Beeler.  No  ;  I  do  not. 

Mr.  Warren.  If  an  adequate  depreciation  charge  is  made,  as  thev 
are  making  there,  what  if  any  figure  ought  to  be  the  normal  mainte- 
nance  charge  for  the  company,  wh  t  proportion  of  its  gross  receipts? 
I  do  not  mean  now  the  Boston  Elevated,  but  take  your  typical  com' 
pany  of  a  million  dollars.  " 

Mr.  Beeler.  Well,  it  is  very  difficult  to  determine  what  proportion 
of  the  earnings  should  go  into  maintenance,  for  the  reason  that  so 
much  depends  on  the  volume  of  business.  The  average  line,  we  will 
say,  has  a  volume  of  business  of  $20,000  or  $25,000  per  mile  of  track 
per  annum  Another  line  may  have  a  volume  of  business  of  $60,000 
iVow,  that  line  that  has  the  greatest  volume  of  business  will  require 
the  lowest  percentage  of  gross  receipts  to  pay  for  operations.  That 
IS  rather  difficult  to  determine,  but  I  would  say  that,  roughly  speak- 
ing,  on  a  surface  line,  if  you  take  about  3  per  cent  depreciation  on 
two-thirds  of  its  value,  you  strike  very  nearly  to  a  rough  average  of 
tiie  replacement  value  required  to  be  set  aside. 

Mr.  Warren.  Then  could  you  give  a  rough  figure  for  the  amount 
of  maintenance  for  such  a  line  or  the  limit,  say,  from  such  a  figure  to 
such  a  figure  ?  b        ^ 

Mr.  Beeler.  Well,  say  15  to  20  per  cent. 

Mr.  Warren.  After  taking  care  of  the  depreciation? 

Mr.  Beeler.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1685 

Mr.  Warren.  Does  the  maintenance  cost  a  great  deal  more  now? 
I  mean,  given  about  the  same  amount  of  earnings,  the  fare  not  hav- 
ing been  changed,  would  you  have  to  charge  up  more  for  maintenance 

now? 

Mr.  Beeler.  Maintenance  is  higher. 

Mr.  AVarren.  Because  of  the  cost  of  labor  and  materials  ? 

Mr.  Beeler.  Maintenance  is  higher  on  account  of  labor  and  ma- 
terials, and  it  does  take  a  slightly  higher  percentage  than  it  did  be 
fore,  even  considering  the  increase  in  the  volume  of  business. 

Mr.  Warren.  The  one-man  car  of  which  you  spoke:  Is  it  your 
opinion  that  that  can  be  used  on  the  peak-load  in  most  cities,  per- 
haps not  cities  of  the  very  first  class  like  New  York  or  even  Boston, 
but  cities  of  200,000  or  300,000  people? 

Mr.  Beeler.  There  is  no  question  but  what  the  one-man  car  can  be 
used  in  many  cities — almost  exclusively  in  smaller  cities. 

Mr.  Warren.  Cities  of  150,000  to  200,000? 

Mr.  Beeler.  Yes;  and  there  is  no  question  but  what  its  use  can  bo 
very  largely  adopted  in  the  larger  cities  on  certain  lines,  not  only 
during  the  rush  hour  but  at  all  periods  of  the  day. 

Mr.  Warren.  Yes;  I  think  it  can  at  other  hours,  but  I  wondered 
whether  you  thought  it  could  during  the  rush  hours. 

Mr.  Beeler.  Oh,  yes. 

Mr.  Warren.  There  is  no  danger  of  its  doing  what  the  motorman 
might  do — I  think  you  suggested — of  getting  the  congestion  so  great 
til  at  it  could  not  move  the  people  ? 

Mr.  Beeler.  Well,  the  one-man  car  will  haul  as  many  people  as 
three  motor  buses.  I  have  seen  the  one-man  car  during  the  rush 
liour  loaded  with  80  people.  Now,  you  take  the  average  jitney 
motor  bus,  and  you  have  a  big  load  when  you  get  20  on  it.  Of 
course,  if  you  take  the  Fifth  Avenue  Coach  Co.,  their  buses  will 
seat  42  to  44,  but  that  traffic  on  a  line  of  that  kind  is  very  erratic. 
In  inclement  weather  nobody  will  go  up  above  and  the  seating 
capacity  is  reduced  by  more  than  half  when  they  are  confined  to 
the  downstairs  portion  of  the  bus ;  therefore  you  have  got  to  consider 
the  ultimate  all-the-year-round  capacity.  I  would  say  that  there 
is  no  comparison  between  a  street-car  and  a  bus  to-day  as  far  as 
capacity  goes.  The  ordinary  bus,  such  as  operated  in  Newark 
to-day  in  jitney  operation,  will  seat  about  12,  and  by  crowding  them 
in  you  can  get  20  in,  but  it  is  a  very  uncomfortable  operation;  and 
if  any  street  car  company  attempted  to  give  any  such  service  as 
that  I  think  they  would  soon  be  put  out  of  business  by  the  public. 

Mr.  Warren.  You  spoke  of  Cleveland  as  giying  better  service,  I 
think,  at  around  5  cents  than  many  if  not  most  of  the  companies 
that  have  raised  their  fares.  Are  the  conditions  in  Cleveland  ma- 
terially different  from  those  in  many  cities,  as  regards  the  length 
of  haul — not  possible  haul,  but  actual  haul  ? 

Mr.  Beeler.  I  think  there  is  about  the  average  condition  obtaining 
there.  Cleveland  was  one  of  the  first  cities  to  adopt  the  elimina- 
tion of  unnecessary  stops  and,  by  so  doing,  they  speeded  up  their 
schedules,  and  Cleveland  to-day  gets  a  higher  scheduled  speed  than 
most  of  the  average  cities.  At  the  same  time,  they  rehabilitated  and 
put  on  attractive  equipment,  and  the  result  is  that  their  car-hour 
earnings  are  much  higher  than  the  average;  their  car-mile  earnings 
are  about  the  average. 


1^, 


1686    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

Mr.  Wakben.  Is  there  a  direct  relation  between  the  speed  and  the 
operating  expense? 

Mr.  Beelek.  There  is. 

Mr.  Warren.  If  you  increase  your  speed  25  per  cent  is  that  the 
same  as  reducinc:  your  operating  expenses  25  per  cent? 

Mr.  Beeler.  Not  the  same;  but  it  has  a  very  marked  influence. 
Take  an  average  line  that  is  earning  40  cents  a  car-mile  and  makin«r 
a  speed  of  8  miles  per  hour— it  will  be  earning  $3.20  an  hour. 
Take  another  line  that  is  earning  40  cents  a  car-mile  with  the  same 
kind  of  equipment  and  making  10  miles  per  hour— it  will  be  earn- 
ing $4  per  hour.  Now,  the  expenses  are  practically  the  same,  al- 
most the  same.  The  vmy  speed  is  made  is  by  better  acceleration  and 
faster  braking,  eliminating  the  stops  and  delays;  and  that  all  has 
a  tendency  to  reduce  the  operating  ratio,  for  the  reason  that  your 
wages  are  paid  on  the  hourly  basis.  Practically  all  the  income  of 
a  street  railway  goes  out  on  an  hourly  basis  or  on  a  time  basis,  and 
the  receipts  come  in  on  a  mileage  basis,  for  it  is  transportation  that 
is  being  sold.  Now,  the  more  miles  that  we  can  get  out  of  a  street- 
car, the  less  operating  ratio  and  the  less  the  ratio  of  fixed  charges 
and  everything  else. 

Mr.  Warrex.  Cleveland  has  a  very  high 

Mr.  Beeler.  It  has  a  high  scheduled  speed. 

Mr.  Warrex.  And  that  was  produced  almost  entirely,  was  it 
not,  through  the  cooperation  between  the  city  and  the  company? 

Mr.  Beeler.  That  was  brought  about  very  largely  through  the 
etl'orts  of  Mr.  Peter  Witt,  avIio  was  at  that  time  a  city  transit  com- 
missioner. He  had  made  a  study  of  the  situation:  the  schedules 
were  slow,  and  he  eliminated  all  of  what  he  considered  unnecessary 
stops  and  put  the  stops  farther  apart  generally  throughout  the  city, 
and  the  speed  was  increased  something  like  a  mile  and  a  half  per 
hour.  Not  only  did  that  increase  the  receipts  per  car-hour  but  it 
.also  increased  the  receipts  per  car-mile,  because  it  popularized  the 
service  and  more  people  rode. 

Mr.  Warrzx.  But  he  also  incidentally  cleared  the  track  too,  did 
he  not? 

.Mr.  Beeler.  Tie  cleared  the  track  and  secured  the  cooperation 
of  the  police  at  street  intersections  and  in  every  other  way  pos- 
sible. 

Mr.  Warrex.  Much  of  that  except  with  cooi^eration  from  the 
municipal  authorities  would  have  been  beyond  the  power  of  the 
company  to  bring  about,  would  it  not? 

Mr.  Beeler.  The  cooperation  with  the  authorities  to  obtain  the 
full  result  is  absolutely  necessary;  yes,  sir. 

Commissioner  Meeker.  You  spoke  of  the  large  cars  over  against 
the  small  one-man  car.  I  understood  you  to  imply,. at  letist,  that  the 
larger  cars  could  carry  more  people  in  a  given  timethan  the  smaller 
car.    Did  I  understand  you  correctly? 

Mr.  Beeler.  No;  I  do  not  remember  that  statement  exactly. 

Commissioner  Meeker.  It  was  in  answer  to  a  question  asked  by 
-Mr.  AVarren  in  regard  to  the  rush  hour  handling  of  traffic  by  the 
sill  a  II  car. 

Mr.  l^EELER.  I  said  I  thought  that  the  safety  car  should  be  used 
during  the  rush  hour  as  well  as  during  the  nonrush  hour;. that  I  had 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1687 

seen  them  loaded  with  80  passengers  during  the  rush  hour,  which  was 
three  times  the  load  of  the  average  jitney  bus. 

Commissioner  Meeker.  Do  you  think  that  the  small  safety  car 
can  handle  the  peak-load  of  traffic  as  well  as  the  larger  heavier  cars  ^ 

Mr.  Beeler.  I  think  it  can  on  lines  that  are  not  too  congested  with 
too  many  of  the  large  cars.  You  take  the  small  car  in  Seattle :  tlie 
small  car  in  Seattle  runs  in  between  long  lines  that  employ  the  large 
cars,  and  the  management  when  they  put  the  small  car  on  were  rather 
fearful  that  the  small  car  would  delay  them,  especially  durnig  the 
rush  hour,  but  the  results  were  just  the  opposite.  The  sniall  car  was 
closely  following  the  large  car  almost  invariably  and  it  has  been 
proven  almost  conclusively  that  the  small  cars  will  make  an  increased 
scheduled  speed  as  high  as  20  per  cent  over  and  above  the  ordinary 
two-man  average  car  that  is  now  in  use;  and  I  think  the  average 
results  show  something  between  10  and  15  per  cent  that  are  used,  and 
they  are  used  in  cities  such  as  Fort  Worth,  Dallas,  and  Houston, 
Tex.,  where  the  loads  were  tremendous,  especially  during  the  Army 
'1  f  *  1 1 V 1 1 1  es 

Commissioner  Meeker.  So  if  100  per  cent  of  your  cars  were  the 
small  safety  cars,  they  would  be  able  to  handle  the  peak-load  of 
traffic  just  as  well  as  the  larger  cars? 

Mr.  Beeler.  If  you  increased  your  service  100  per  cent  or  if  you 
give,  instead  of  12  cars  an  hour,  24  an  hour,  Avith  a  smaller  car  you 
can  actually  increase  your  car  riders. 

Commissioner  Mahox.  Cleveland's  success  w\as  not  due  to  small 

cars,  was  it?  ,        ,      / 

Mr.  Beeler,  No,  indeed.  Cleveland's  success  was  largely  due  to 
speeding  up  the  schedules  and  the  use  of  trailers.  The  trailer  is  also 
a  one-man  car 

Commissioner  Mahox.  It  was  due  to  the  trailer,  was  it  not? 

Mr.  Beeler.  And  it  is  light  and  it  does  not  add  a  great  deal  to 
the  peak-load  on  the  power  station;  and  on  lines  of  that  character 
where  travel  is  very  heavy  and  fairly  long  and  the  stops  fairly  long 
apart,  the  trailer  operation  is  ideal. 

The  Chairmax.  We  thank  you  very  much.  Mr.  Cooke,  will  you 
take  the  stand  at  10  minutes  of  4  ? 

(Whereupon,  a  recess  was  taken  for  5  minutes.) 

STATEMENT  OF  ME.  MORKIS  LLEWELLYN  COOKE. 

Mr.  CooKE.  Mr.  Chairman,  I  have  never  had,  as  you  know,  any 
administrative  relations  to  the  street-railway  problem,  and  perhaps 
for  the  purposes  of  the  record,  I  should  say  that  my  contact  with 
the  whole  utilitv  problem  comes  through  having  been  director  of 
public  works  in* Philadelphia.  While  holding  that  position  I  con- 
ducted, under  the  instructions  of  the  city  council,  a  rapid-transit 
study  which  ultimately  led  to  the  formation  of  the  city  transit  de- 
partment, and  under  the  charter  of  the  city  I  was  chargexl  with  either 
the  conduct  or  the  oversight  of  all  other  municipal  utilities. 

For  a  number  of  years  I  have  been  acting  director  of  the  Utilities 
Bureau  in  Philadelphia,  and  through  that  position  I  have  advised 
with  the  officials  of  a  number  of  xlmerican  cities  on  street  railways — • 
New  Orleans,  P>uifalo,  Atlanta,  Seattle,  Boston,  and  others:  and  dur- 
ing the  war  I  had  various  contacts  with  utility  matters  on  behalf  of 


1688    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

the  Government,  including  street  railways;  and  organized,  or  at  least 
built  the  preliminary  organization  for  the  passenger  transportation 
department  of  the  Emergency  Fleet  Corporation. 

1  simply  want  to  say  that  Wause,  not  having  any  administrative 
contact  with  the  problem,  it  occurred  to  me  that  it  might  be  useful 
to  you  gentlemen. 

Mr.  Warren.  Was  that  bureau  a  municipal  body  that  you  men- 
tioned in  Philadelphia  ? 

Mr.  Cooke.  The  Utilities  Bureau? 

Mr.  Warren.  The  Utilities  Bureau.  Was  that  a  part  of  the  mu- 
nicipal government? 

Mr.  Cooke.  No;  the  Utilities  Bureau  was  an  intercity  agency  that 
was  organized  in,  1914  by  the  mayors  of  about  100  American  cities; 
and  up  to  the  time  of  the  war  published  a  magazine  and  performed 
various  other  functions. 

Our  street  railroads  constitute,  broadly  speaking,  the  most  com- 
pletely discredited  feature  in  the  administration  of  a  city.  The  pub- 
lic, remembering  not  only  past  wrongs,  but  having  in  mind  present- 
day  inefficiencies,  not  only  takes  no  interest  in  lightening  the  bur- 
dens of  those  who  are  responsible  for  the  operation  of  these  proper- 
ties, but  seems  actually  anxious  to  precipitate  the  final  stages  of  what 
ma\'  easily  develop  into  a  national  tragedy. 

In  the  widespread  antipathy  to  the  owners  of  these  properties  and, 
further,  in  the  conviction  so  generally  entertained  by  the  public  that 
all  adventure  has  gone  out  of  the  street-railroad  business  operated  as 
a  private  undertaking,  this  commission,  I  believe,  will  find  the  great- 
est obstacle  to  putting  into  effective  operation  such  constructive  sug- 
gestion as  it  may  make. 

Continued  adversity  might  possibly  win  over  the  most  obdurate 
and  old-fogey  director  to  enlightened  management  and  a  square  deal ; 
but  without  the  hearty  cooperation  of  the  public  almost  nothing  can 
be  done. 

My  own  impression  is  that  the  differences  between  the  public  and 
private  interests  involved  have  become  irreconcilable.  The  operators 
of  these  propeilies,  and  especially  their  promoters,  have  erred  so 
grievously  against  the  public  that,  except  with  isolated  properties 
and  where  conditions  are  exceptional,  no  compromise  is  likely.  In 
most  situations  with  Avhich  I  am  familiar  it  would  seem  to  me  highly 
improper  that  a  compromise  should  be  reached  on  any  basis  thus  far 
suggested  by  the  private  interests  involved. 

While  I  am  not  opposed  to  government  ownership  as  such,  and 
especially  not  for  the  reasons  usually  advanced  against  it,  I  would 
view  with  more  than  concern  any  considerable  or  immediate  broad- 
ening of  the  functions  and  responsibilities  of  our  municipal  adminis- 
tratoi-s.  We  are  doing  far  too  much  of  our  present  task  in  an  indif- 
ferent fashion  to  make  it  wise  to  add  to  the  burdens. 

For  this  reason  I  would  welcome  any  scheme  which  would  permit 
of  a  further  period  of  private  operation;  but,  frankly,  in  view  of  the 
public  attitude  and  in  the  light  of  the  history  of  this  industry,  much 
of  this  attitude  is  warranted,  I  see  no  adequate  solution  which  does 
not  involve  a  maximum  of  public  control  and  probably  of  public 
ownership  and  public  operation. 

Before  making  an  effort  to  suggest  the  constructive  steps  which  I 
believe  must  be  taken  before  the  street  railroads  can  be  put  on  any- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1689 

thing  approaching  a  satisfactory  basis  I  would  like  to  point  out  a 
number  of  specific  obstacles  which  at  present  stand  in  the  way  of  «, 
satisfactory  settlement  of  this  problem.  Because  the  profits  ha^e 
been  made  through  financing  these  properties,  rather  than  through 
operating  them  as  public  services,  the  valuation  factor  has  from  the 
first  been  overemphasized.  In  fact,  up  to  a  recent  date  one  hardly 
ever  heard  of  the  efficiency-of -operation  factor. 

As  a  result  of  my  contacts  with  the  utility  situation  in  nearly  all 
the  large  cities  of  the  country  I  estimate  that  on  July  1,  1914,  the 
face  value  of  the  outstanding  securities  of  these  municipal  undertak- 
ings represented  almost  twice  what  might  be  considered  the  fair 
value  as  estimated  by  fair  men  unschooled  in  the  equivocations  and 
mirages  so  assiduously  conceived  by  versatile  lawyers  and  valuation 
experts  during  the  last  20  years.  While  my  inquiries  in  the  street- 
railroad  field  had  not  been  as  conclusive  as  in  the  electrical  field, 
everything  points  to  alleged  value  bearing  to  real  value  a  ratio  of  at 
least  two  to  one. 

The  unity  of  the  banking  control  back  of  these  properties,  usually 
seeking  through  such  organizations  as  the  American  Street  Railway 
Association,  the  American  Gas  Association,  and,  to  my  way  of  think- 
ing, the  especially  vicious  National  Electric  Light  Association, 
which  makes  its  headquartei^s  in  the  Engineering  Societies'  Building 
in  New  York,  makes  it  possible  to  determine  even  illicit  policies  and 
plans  and  put  them  promptly  into  pretty  general  practice  through- 
out the  country. 

These  associations,  while  nominally  distinct  and  each  interested 
in  a  different  industry,  work  in  the  closest  possible  harmony.  Prac- 
tically the  same  group  of  what  might  be  called  "  investment  finan- 
ciei*s ''  virtually  control  all  these  associations. 

Notwithstanding  this  organization  for  united  and  nation-wide  ac- 
tion on  the  part  of  the  private  interests  involved,  there  is  no  admin- 
istrative agency  to  unite  and  safeguard  the  public  interests;  and,  as 
it  is,  many  obvious  wrongs  have  been  permitted  simply  because  there 
was  no  adequate  way  of  voicing  opposition. 

The  Ignited  States  Bureau  of  Standards,  the  Association  of  State 
Public  Service  Commissioners,  and  the*  Utilities  Bureau  have  done 
what  they  could  with  hopelessly  inadequate  funds  to  fill  the  breach. 

The  valuation  of  these  street  railroads  and  other  municipal  prop- 
erties under  several  different  systems,  according  to  the  use  such 
valuations  are  to  be  put,  such  as  taxation,  rate  making,  issuing 
securities,  etc.,  introduce  further  complications. 

It  is  because  those  in  charge  have  had  their  attention  centered  on 
financial  rather  than  on  operating  considerations  that  past  and  pres- 
ent untoward  tendencies  have  not  been  discounted  and  offset  more 
effectually. 

I  have  had  a  good  deal  to  do  with  the  printing  industry,  where  the 
plant  charge  per  dollar  of  product  is  very  high,  and  where,  owing 
to  invention,  development  of  one  kind  and  another,  it  has  been  nec- 
essary to  anticipate  changes  and  to  mark  up  pretty  heavy  deprecia- 
tion; and  in  the  street-railroad  world — in  tact,  in  the  utility  world 
pretty  generally,  but  I  think  it  is  more  marked,  of  course,  in  the 
street-railroad  world — there  has  been  relatively  little  attention  paid 
to  that  feature  of  business. 


'tilt 


1690    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Tlie  present  deplorable  state  of  our  street  railroads  was  not  reached 
overnight  and  is  not  due  to  any  one  single  cause.  If  their  managers 
had  been  on  their  jobs  these  i*emedial  measui^s  which  you  are  now 
discussing  would  have  been  inaugurated  years  ago. 

The  point  I  want  to  make  is  that  while  the  situation  has  doubtless 
been  precipitated  by  the  war,  conditions  incident  to  the  war  had 
really  very  little  to  do  with  it. 

The  attitude  of  the  owners  of  these  propei-ties  is  such  as  to  make 
It  very  difficult  for  the  public  to  get  at  the  real  facts.  Propaganda 
supporting  officially  authorised  theories  of  valuation,  methods  of  ac- 
counting, principles  of  management,  and  so  forth,  are  carried  on  in 
every  direction. 

It  was  the  American  Street  Railway  Association,  which  seven 
years  ago,  or  some  years  ago,  startled  the  country  with  its  plan  for 
influencing  education  at  the  source. 

I  read  as  follows  from  "  Snapping  Cords,"  a  title  given  to  two 
lectures  on  utilities,  delivered  in  1915  in  several  eastern  universities: 

u  /^^*"  }^^^  ^^^^^  ^^^^  American  Electric  Railway  Association  gave  forth  a 
Code  of  Pniioiples,"  which  advocated,  among  othor  things,  fair  returns  on 
capitalization,  no  matter  how  extravagantly  watered,  exclusive  State  control 
of  the  k>oal  utilities  and  the  holding  company  .  The  same  report  advocated 
the  <)i>eration  of  a  financed  bureau  of  public  relations,  which  is  to  have  among 
its  various  functions  that  of  "Influencing  the  sources  of  public  education  par- 
ticularly by  (a)  lectures  on  the  Ohatauqua  Circuit,  and  (b)  formation' of  a 
coininittee  of  prominent  technical  educators  to  promote  the  formulation  ami 
teaching  of  correct  principles  on  public-service  questions  in  technical  and 
eononiic  departments  at  American  colleges,  through  courses  of  lecture^  and 
otlierwise. 

(Commissioner  Meeker.  From  what  is  that  quoted  ? 

Mr.  ('coke.  That  is  quoted  from  Code  of  Principles,  of  the  Ameri- 
can P^lectric  Railway  Association;  and  my  quotation  including  that 
quotation  is  from  a  pamphlet  of  my  own — two  lectures  given  at 
several  universities— that  I  published  under  the  title,  *' Snapping 

I  will  leave  this  with  the  commission. 

Those  who  seek  to  uphold  any  measure,  device,  or  system  which 
will  run  counter  to  that  which  has  received  official  sanction  hy  these 
associations  are  subjected  to  a  relentless  and  usually  quite  effective 
pressure.  There  has  been  established  an  essential  solidarity  in  these 
industries  which  is  frequently  antisocial,  if  not  illegal,  and  which 
discourages  initiative  and  enshrouds  the  whole  utifity  world  in  a 
maze  of  autocracy,  secrecy,  and  ultimate  inefficiency. 

It  may  help  to  an  undei-standing  of  the  whole  situation  to  men- 
tion anotlier  difficulty  in  the  path  of  street-railway  reconstruction. 
Owing  to  the  manner  in  which  this  industry  was  developed,  the  en- 
gineers who  practice  in  the  utility  field  are  almost  without  excep- 
tion sulK)rdinate  to  and  usually  subservient  to  the  financial  men. 
In  a  paper  entitled  "  Some  Factors  in  Municipal  Engineering,''  read 
before  the  American  Society  of  American  Engineei-s  in  1914  this 
subject  was  discussed  as  follows:  ' 

There  are  certain  kinds  of  engineering  in  which  financial  and  nhmrM  all 
other  kinds  of  preferment  depends  on  an  attitude  of  mind  which,  while  not 
necessarily  antisocial,  does  not  provide  suflicient  opportunitv  for  entertaining- 
a  virile  imblic  point  of  view.  As  a  repn»sentative  of  the  public  rather  than 
private  interest  it  is  my  duty  in  choosing  the  advisors  of  the  city  which  I  have 


PROCEEDINGS  OF  FEDERAL  .ELliGTRIC  RAILWAYS  COMMISSION.    1691 

the  honor  of  serving,  to  satii^fy  myself  not  only  as  to  the  ability  of  those  we 
eniDlov,  but  also  as  to  their  disinterested— yes,  their  public  point  of  \ievN. 

Xo  matter  how  able  a  man  may  be,  how  broad  his  expenencjynor  how  high 
i.is  standing,  his  iiitei-est  to  those  who  employ  him  must  at  all  times  be  ^•;>"- 
sistent  with  the  public  interest  if  from  my  point  of  view  he  is  to  be  available 
for  Dublic  employment. 

7iid-ed  bv  this  standard,  there  are  in  certain  fields  of  eugineermg  almost  no 
engineers  who  are  at  present  available  for  the  service  of  the  public  and  who  at 
the  same  time  have  sufficient  experience  for  large  undertakings.  In  the  past 
few  years  we  have  had  unusual  opportunities  for  seeing  at  close  range  the  jn-o- 
fessional  attitude  of  those  equipi>ed  with  the  technical  knowledge  i-equired  m 
nllvisors  to  cities  on  utility  matters.  It  has  been  practically  impossible  to  se- 
cure the  services  of  those  with  reputations  already  made  in  the  electrical  field. 
^Ce  of  our  experienms  could  be  considered  on  the  ^^^^^^J^ZI^^ 
it  not  for  the  fact  that  wc  are  left  under  the  obvious  conclusion  that  for  the  a^el- 
•.4  city  ofticial  to  get  good  advice  on  these  matters  is  well-nigh  impossible. 
What  s  moi^  objectionable  is  that  this  condition  is  one  quite  generally  recog- 
nized is  tX  by  c^ty  oflicials.  We  hear  a -good  deal  of  complaint  on  the  part 
oTe  g?neei"  that,  as  a  pix)fession,  we  are  not  chosen  moi-e  frequen  ly  to  serve 
on  pubScservi^V-ommis^^^^^  similar  technicaM^'ork.    Perhaps  m  our 

experience  mav  be  found  at  least  part  of  the  reason  for  that  condition.  Of 
ccmrserwhe^a  city  wants  advice  on  a  subject  such  as  this,  the  matter  is  usually 
one  of  considerable  importance,  often  involving  large  sums  of  money ;  and  in 
reaching  conclusions  the  city  official  should  not  be  dependent  for  advice  on 
junior  members  of  the  profession. 

I  had  a  rather  interestinjr  experience  in  that  connection  in  tlie 
draftinor  of  a  contract  with  the  Pennsylvania  and  Balbmore  &  Ohio 
Pxailroads.  Paragraph  IG  of  that  contract  had  to  do  with  the  utiliza- 
tion of  a  belt  line  owned  by  the  city  of  Philadelphia,  and  my  asso- 
ciates and  nivself,  who  repi^sented  the  city  in  those  negotiations, 
spent  a  iri-eat  deal  of  time  in  trying  to  locate  a  man  who  was  compe- 
tent to  advise  the  city  in  a  matter  such  as  that,  and  we  were  unable  to 
discover  but  one  man  upon  whom  there  was  general  unanimity  ot 
o]>inion  that  he  not  only  had  the  ability  to  serve  us  but  that  his  pro- 
fessional and  other  commitments  and  relationships  wei-e  such  as  made 

•it  possible  for  him  to  do  so. 

This  situation  has  improved  somewhat  recently  because  of  tlie 
larorer  number  of  engineei^  employed  by  State  commissions  and  on 
public-owned  utilities;  but  as  long  as  the  private  mtei-ests  pay  sal- 
aries so  out  of  proportion  to  that  paid  by  the  public,  and  so  long  as 
'they  are  allowed  to  discourage  and  even  ostracize  those  practicing  as 
public  engineers,  the  most  experienced  talent  will  be  found  serving 
the  private  companies.  .       . 

I  may  sav  that,  unless  they  have  changed  it  withm  the  last  few 
n^onths*,  no "^  electrical  engineer  «in  belong  to  the  American  Street 
Eailway  Association  unless  he  is  affiliated  in  the  employ  of  some  com- 
pany member.  Thev  have  a  class  C,  I  think  it  is,  of  membei-s,  for 
college  professors  and  others  of  that  kind,  but  they  must  be  i-eelected 
to  that  membership  once  a  year.  I  know  of  no  other  organization, 
technical,  social,  or  otherwise,  whei'e  a  man  has  to  be  reelected  once 
a  y^ur.  To  me  it  is  a  highly  improper  and  dangerous  pmctice  in  a 

deniocratic  community.  .  ^ -d  -i 

Commissioner  Wehle.  When  you  say,  "  American  btreet  Kailway 
As.sociation,"  do  you  mean  the  American  Electric  Association? 

Mr.  Cooke.  The  association  I  was  then  referring  to  is  the  ^tational 
FJectric  Light  Association.  There  are  two  associations :  The  Ameri- 
can Sti^eet  Kailway  Association  and  the  National  Electric  Light  As- 
sociation. They  are  two  absolutely  independent  associations  m  their 
organization. 


",! 


;  If 


present  association, 


1692    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Warren.  You  do  not  make  that  charge  against  the  American 
Electric  Railway  Association? 

Mr.  Cooke.  No.  This  Chiss  C  membership  is  the  National  Elec- 
tric Light  Association. 

Commissioner  Wehle.  When  you  have  spoken  at  other  times  about 
the  American  Street  Eailway  Association 

Mr.  CooKE.  I  meant  the  American  Street  Railway  Association. 

Commissioner  Weiii^..  There  is  also  an  American  Electric  Rail- 
way Association.    That  is  different,  is  it? 

Mr.  Cooke.  I  can  give  you  the  official  title. 

At  the  time  this  Code  of  Principles  was  brought  out  it  was  the 
American  Electric  Railway  Association.  I  believe  the  name  has 
since  been  changed.     I  am  not  sure  of  that. 

Mr.  Warren.  I  think  that  is  its  present  name. 

Mr.  CooKE.  The  American  Electric  Railway  Association. 

Couunissioner  Wehle.  That  is  the  name  of  the  present  ai 
is  it  not? 

Mr.  Warren.  Yes. 

Mr.  CooKE.  I  am  convinced  that  no  engineer  or  valuation  expert 
has  any  right  to  practice  on  both  sides  of  these  questions.  There  are 
gocHl  men  practicing  on  either  side,  but  to  practice  on  both  sides, 
with  the  terminals  as  far  apart  as  they  ai^  to-day,  and  have  that 
practice  fair  to  the  public  is  a  hopeless  undertaking. 

This  commission  can  not  be  without  especial  interest  in  the  valua- 
tion work,  much  of  it  in  the  street-railway  field  done  by  engineers 
of  the  type  of  George  F.  Swain,  professor  of  civil  engineering  at 
Harvard  University  and  past  president  of  the  American  Society  of 
Civil  Engineers,  and  Mortimer  E.  Cooley,  dean  of  the  school  of  en- 
gineering at  the  University  of  Michigan  and  at  present  president  of 
the  American  Society  of  Mechanical  Engineers.  Without  a  study 
of  the  extent  to  which  valuation  w^ork  has  been  carried,  as  illustrated 
in  the  work  of  these  men,  no  accurate  picture  of  the  present  situa- 
tion of  this  industry  can  be  obtained. 

In  my  opinion  much  of  the  public  clamor  against  the  street  rail- 
roads is  in  protest  against  the  effort  to  base  rates  on  fictitious  values. 
The  engineering  profession  will  eventually  declare  such  antisocial 
and  unscientific  conduct  to  be  unprofessional.  In  the  meantime  the 
country  must  be  on  its  guard. 

A  good  many  suggestions  for  i-elief  have  been  made  which  would  be 
acceptable  except  for  the  fact  that  there  is  no  equitable  or  confidence- 
inspiring  method  of  putting  them  into  effect  For  instance,  I  would 
be  in  favor  of  paying  out  of  the  tax  rate  such  portion  of  the  expense 
of  an  obviously  desirable  and  nonselfsupporting  improvement  as  the 
Cambridge  subway,  in  Boston,  as  might  be  shown  to  belong  to  the 
community  as  a  whole,  rather  than  to  those  who  used  it,  if  the  book- 
keeping methods  current  in  the  utility  world  were  different  from 
what  they  are,  and  if  the  public  stood  a  somewhat  better  chance  in 
getting  dependable  technical  advice  in  making  the  bargain.  It  is 
because  there  are  so  many  details  to  cope  with  and  so  many  ways  of 
avoiding  the  essence  of  an  order  that  regulation  is  unable  to  cope  with 
the  pmblem  single  handed  in  a  way  to  command  public  conficfcnce. 

At  least  theoretically  we  are  all  for  some  kind  of  a  tx)st-of -service 
plan.    But  I  am  opposed  to  the  kind  which  has  been  principally 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1693 

stressed  before  this  commission,  first,  because  it  will  have  a  tendency 
to  validate  excessive  valuations,  and,  second,  because  it  will  inevi- 
tably capitalize  inefficiency. 

The  proposal  is  quite  comparable  to  the  profit-sharing  schemes  so 
strenuously  urged  now  as  a  cure-all  for  industrial  disorders.  Labor 
is  not  a  bit  interested  in  profit  sharing,  because  labor  has  no  confi- 
dence that  it  understands  the  rules  of  the  game  and  has  had  no  hand 
in  developing  those  rules.  Any  cost-of- service  plan  initiated  now 
would  rest  in  most  instances  on  a  discredited  financial  base  and  be 
operated  under  accounting  methods  designed  for  an  altog^ether  dif- 
ferent purpose  than  the  one  which  I  take  it  we  all  have  in  mind  now — 
that  is,  the  service  of  the  public. 

It  is  futile  to  lift  the  handicaps  under  which  this  industry  suffers, 
unless  it  be  preliminary  to  making  constructive  suggestions  which 
are  not  only  possible  oi  execution  but  wiiich  give  promise  of  relief. 
I  am  convinced  that  any  program  for  the  rehabilitation  of  those 
properties  to  be  successful  must  have  efficient  operation  as  its  primary 
plank. 

After  all,  it  is  much  more  fundamental  to  ask  how  these  properties 
are  to  be  operated  than  who  is  to  operate  them.  It  is  all  very  well 
to  recognize  that  no  industry  with  scandal  for  its  background  can 
thrive.  Personally,  I  do  not  see  how  a  technical  man  or  any  other 
kind  of  a  man  can  be  happy  in  working  for  a  street-railroad  com- 
l^any  or  an  electric  company  that  has  outstanding  se<;urities  in  ex- 
cess of  $50,000,000  when  its  actual  value  in  the  language  of  the  man 
in  the  street  is  half  of' that.  I  do  not  see  how  it  is  possible  to  attract 
to  it  the  type  of  men  that  can  efficiently  operate  it. 

Again,  it  is  easy  to  point  out  that  cornipt  politics  and  effective 
street-railway  service  are,  in  the  long  run,  imcompatible.  To  correct 
such  conditions  is  a  more  difficult  matter.  They  do  not  yield  to  a 
direct  attack.  I  do  not  believe  that  good  habits  result  from  good 
principles.  I  believe  that  good  principles  result  from  good  habits. 
Therefore  I  believe  the  real  relief  in  this  situation  is  going  to  come 
about  through  effecting  efficient  operation,  and  in  that  way  making 
odious  practices  in  finance  or  in  any  other  department  that  are  not  in 
hannony  with  the  best  modern  ideal  as  to  efficient  management. 

I  believe  that  one  of  the  best  illustrations  I  can  cite  of  the  ac- 
complishment of  efficient  management  is  the  record  which  has  been 
made  on  the  Philadelphia  Rapid  Transit  Co.  during  the  last  8  or 
10  years  under  the  administration  of  Mr.  T.  E.  Mitten. 

I  do  not  believe  that  even  Mr.  Mitten  would  claim  he  had  struck  12. 
On  the  contrary,  I  am  of  the  opinion  that  he  is  only  beginning  to 
discover  what  can  be  accomplislied  when  the  exclusively  financial 
control  which  has  heretofore  obtained  is  assigned  its  proper  place 
in  the  whole  field  of  the  enterprise,  and  when  operating  experts  are 
given  a  real  chance.  This  means,  of  coui*se,  a  gradual  change  in  the 
type  of  men  employed.  For  instance,  officers  and  other  employees 
who  are  useful  when  legislatures  had  to  be  bought  and  public  officials 
needed  to  be  placated,  yield  their  places  to  engineers,  statisticians, 
and  labor  experts. 

In  industry  there  has  been  gradually  developed  a  science  of  cost 
keeping,  in  the  absence  of  which  effective  or  efficient  management  is 
absolutely  impossible. 


1694    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  C0MMISSI02T, 

III  an  ai-ticle  which  appeal^  in  the  January,  1919,  issue  of  In- 
dustrial Engineering,  under  the  title  "True  cost  finding— what  it 
can  do  for  the  railroads,"  I  said: 

The  cost  factor  is  the  best  measure  of  performaiiee  known,  regardless  of 
whether  the  performance  desired  bo  Avxir-making  capacity,  reasonable  freight  or 
pas.seuger  rates,  economy  in  hibor  or  material,  returns  on  the  dollar  invested,  or 
any  other. 

But  there  is  almost  no  cost  keeping  on  American  street  railways. 
AVhat  is  evien  more  astounding  is  that  most  street  railway  men  con- 
sider it  impossible  to  secure  costs.  That  Day  &  Zimmerman,  operat- 
ing the  Penn  Central  and  other  utility  properties,  have  developed  a 
thoroughly  satisfactory  system  is  almost  unknown  among  utility  men. 
To  hQ  perfectly  frank,  intelligible  accounting  methods  and  securir.g 
of  unit  costs  are  both  inconsistent  with  tlie  basic  objects  for  which 
our  ]>ublic  utilities  have  been  operated. 

I  had  the  pleasure  some  three  or  four  months  ago  of  taking,  I 
think,  tlie  highest  accounting  officials  of  the  Railroad  Administra- 
tion and  the  Interstate  Commerce  Commission,  with  a  member  of 
the  commission,  to  Philadelphia  to  inspect  this  cost-keeping  system 
that  IS  in  use  in  this  Penn  Central  property,  which  has  a  street  rail- 
road connected  with  it,  I  tliink.  It  is  rather  a  small  one:  and  al- 
though two  of  those  three  men,  if  not  all  three,  went  to  Philadel- 
phia quite  as  doubting  Thomases  as  to  whether  it  was  possible  to 
obtain  costs  on  a  utility  property,  and  if  obtained,  whether  thev 
weiH3  worth  going  after,  they  all  expressed  themselves  altogether 
convinced  by  their  experience  on  that  trip  that  it  was  not  only  pos- 
sible but  well  worth  while,  and  they  made  a  recommendation  to  the 
Director  (jeneral  as  to  the  application  of  those  methods  on  steam 
raih'oads. 

Of  course,  aft^r  operating  effectiveness  has  been  substituted  for 
tlie  financial  and  pseudo-financial  incentives  which  have  heretofore 
obtiiined,  there  is  gradually  developed  throughout  tlie  svstem  and 
in  all  departinents  a  genuine  science  in  management. "  Pick-up, 
gains,  economies,  and  new  ways  of  increasing  efficiencv  become  the 
rule.  The  management  becomes  imbued  tliroughout  with  the  spirit 
of  progress,  and  men  who  look  upon  the  industry  as  static  and 
nw^thods  without  present-day  value  ai-e  eliminated. 

It  is  as  futile  to  make  constant  demands  for  increased  fares  in  the 
absence  of  some  genuine  and  enlightened  effort  toward  more  efficient 
management  as  it  is  for  labor  to  const^intly  demand  shorter  hours 
and  increased  wages  without  making  provision  for  increased  pro- 
duction. Carried  beyond  a  certain  point  it  is  equivalent  to  the  effort 
to  ci-eate  something  out  of  nothing. 

The  qM«stion  of  what  shall  be  done  about  the  excessive  valuation 
or  watered  stock  remains  to  be  answered.  Where  there  is  an  exces- 
sive difference  to  be  absorbed,  as  is  the  case  in  many  cities,  I  sup- 
pose there  is  nothing  to  do  but  let  nature  take  her  course.  In  any 
such  case  the  readjustments  incident  to  a  receivership  and  a  jeduc- 
tion  in  the  property-investment  account  will  come  as  the  inevitable 
retribution  for  past  mistakes.  It  will  be  found  that  our  old-time 
friend,  the  ''widow  and  orphan,"  will  not  suffer  as  much  in  this  as 
we  ai-e  sometimes  led  to  believe.  Some  years  ago  I  examined  the 
investir.ont  lists  of  four  of  the  lai\c:t^st  sjivings  funds  in  Philadel- 
phia   aud    found    that    among    investments    totaling    hundreds    of 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1695 

millions  there  was  not  one  dollar  in  municipal-utility  securities.  In 
other  words,  careful  investors  have  been  on  notice  for  some  time. 

But  where  the  excessive  valuation  is  not  too  gi*eat  and  where  effi- 
cient management  has  been  installed,  adjustments  reasonably  fair 
to  all  concerned  and  not  involving  too  radical  readjustments  should 
'  be  possible.  Here  again  we  can  turn  to  Philadelphia  for  an  illus- 
tration. Everyone  knows  that  thei'e  is  in  the  Philadelphia  Rapid 
Transit  a  large  underlying  layer  of  the  purest  water,  running  into 
the  tens  of  millions.  1  think  it  is  a  fair  statement  that,  as  the  re- 
sult of  the  past  10  years  of  careful  management,  a  part  of  this  over- 
capitalization may  be  said  to  have  been  absorbed.  If  Mr.  Mitten 
continues  his  activities  and  along  the  most  promising  lines,  I  think 
it  will  be  altogether  possible  for  him  to  further  reduce  the  disciep- 
ancy  between  real  and  alleged  value.  If  present  prices  are  main- 
tained, of  course  his  task  will  be  the  easier.  I  can  then  conceive  that 
at  some  future  date  there  can  be  reached  some  conclusion  as  to  what 
the  shortage  is,  and  that  this  can  be  in  part  validated  in  an  open 
and  aboveboard  manner  by  a  public  which  is  not  without  some 
measure  of  responsibility  for  its  existence,  and  in  part  covered  by  a 
cancellation  of  outstanding  securities.  After  all,  neither  the  city 
nor  the  security  holders  should  advocate  the  revolutionary  route  of 
a  I'eceivei'ship  if  the  necessary  adjustments  can  be  made  by  a  more 
orderly  process.  Any  such  settlement  is  contingent  upon  full  evi- 
dence of  good  faith  on  the  part  of  the  company  and  the  establish- 
ment of  a  progressive  and  efficient  management  of  the  property.  In 
this  Philadelphia  situation,  unless  the  adjustment  is  reached  by  some 
such  method  ac  suggested,  the  community  will  ultimately  insist  upon 
a  valuation  made  very  largely  for  the  purpose  of  exposing  past 
wrongs,  and  without  any  desire  to  give  tlie  management  even  a 
si>orting  chance. 

I  believe  that  another  place  where  the  management  of  these  prop- 
erties has  been  grievously  in  error  is -in  the  management  of  its  labor 
problem. 

I  am  net  altogether  in  favor  of — in  fact,  I  have  some  very  serious 
misgivings  about — the  Philadelphia  plan.  But  it  has  represented 
to  me  an  earnest  endeavor,  up  t  othe  lights  who  put  it  into  effect — an 
endeavor  toward  bringing  order  out  of  what  was  certainly  hell  in 
Philadelphia  up  to  the  time  of  the  present  management. 

Taking  the  country  as  a  whole,  however,  the  management  of  these 
])roperties  has,  I  believe,  more  ignored  the  labor  problem  than  been 
autocratic.  I  think  they  have  been  very  much  afraid  of  it.  But,  no 
matter  what  the  motive  wa«,  they  are  very  much  to  blame,  in  my 
opinion,  for  having  made  almost  no  start  toward  establishing  tliat 
mutuality  of  interest  and  cordiality  of  relationship  which  has  not 
gone  any  too  far  in  any  industry,  hvk  the  foundations  for  which  have 
been  laid  and  much  more  satisfactory  foundations  for  which  have 
been  laid  in  other  industries. 

Theie  were  one  or  two  points  in  Mr.  Beeler's  testimony  that,  in 
closinfi:,  I  Avould  like  to  refer  to. 

I  want  to  protest  against  his  statement  that  the  question  of  man- 
i\genient  is  a  question  of  personal  opinion.  I  am  not  sure  that  Mr. 
I>eeler  W{^  just  the  man  to  exj^ress  an  opinion  as  to  which  of  the  two 
Washington  companies  had  the  best  management;   but  I   do  not 


ij. 


1696    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

believe  we  will  get  anywhei-e  unless  we  assume  that  there  are  cer- 
/"  u  iu"**  performance  of  the  management,  certain  standards  by 
which  tiie  managements  of  two  companies  can  be  compared.  And  I 
do  not  believe  that  either  the  public  or  labor  or  the  investor  or  any 
other  element  interested  in  this  problem  will  get  anywhere  until  they 
have  devised  some  sort  of— 20  questions,  we  will  sav— some  yard- 
stick that  they  can  lay  down  on  the  management  of  the  company 
and  see  whether  it  measures  up;  because  we— all  of  us— know  in- 
stances of  the  management  of  street  railroads  at  the  present  time  that 
are  simply  deplorable  and  we— all  of  us-know  some  that  are  pretty 

lu-  ^^'  i^i'^  T.  ^^®  ^"^  ^^'^^'^^  ^"^  "^^^^  constitutes  performance  in 
this  held  and  what  constitutes  failure  or  near  failure,  I  do  not  think 
that  we  will  have  done  our  task. 

Xow,  in  the  matter  of  the  remission  of  paving  charges,  I  agree  with 
Mr.  Beeler  and  Commissioner  Sweet  in  feeling  that  there  are  a  lot  of 
these  thin^  that  do  not  read  right.  To  make  a  street-railway  com- 
pany  pay  for,  m  some  instances,  paving  between  the  rails,  and  in 
some  instances  paving  from  gutter  to  gutter,  and  in  some  instances 
paying  half  the  charge  is  an  old  woman's  rule;  it  is  an  old-fogey  way 
ot  accomplishing  the  purpose. 

Paving  charges  are,  of  course,  only  one  such  item ;  but  at  the  time 
the^e  bargains  were  made,  it  was  a  catch-as-catch-can  proposition 
and  many  of  those  things  were  used  as  what  a  book  agent  would  call 
^talking  points     by  the  company  that  wanted  to  secure  the  fran- 
chise—it  seemed  like  a  whole  lot. 

Now  some  of  those  things  have  gone  against  the  company  and 
some  of  them  have  gone  against  the  city.  The  paving  thing  has  ffone 
outrageously  against  the  company,  because  in  Philadelphia  we  had 
some  roads  that  were  to  be  maintained  that  were  dirt  roads,  or  vir- 
tually dirt  roads,  at  the  time  this  bargain  was  made,  and  now  they 
have  a  very  expensive  pavement.  I  think  the  worst  case  is  where 
the  road  was  a  macadam  road  nnd  where  with  a  minimum  of  atten- 
tion It  could  be  maintained  under  the  kind  of  traffic  it  carried  at  that 
time,  but  in  recent  years,  with  the  heavier  traffic,  it  is  not  possible  to 
maintain  it ;  it  has  to  be  rebuilt,  and  the  company  is  caught  between 
two  millstones. 

But  to  simply  let  it  go  out  from  these  hearings  that  all  such 
things  are  to  be  wiped  out  without  an  equivalent  of  some  kind 
without  their  being  made  coins  in  a  new  game  or  elements  in  a  new 
bargain,  I  think  would  be  most  unfortunate. 

May  I  close  by  saying  that  I  do  not  believe  there  is  any  way 
of  working  this  thing  out  except  we  can  put  the  industry  on  a  basis 
where  it  can  carry  on  its  negotiations  with  the  city  largely  as  two 
traders  do  in  their  industries.  We  have  got  to  get  the  cards  on 
the  table,  and  that  community  that  will  not  play  the  game  in  that 
way  ought  to  be  made  to  suffer  for  it,  and  the  management  of  any 
company  that  insists  on  trying  to  hold  on  to  the  old  methods  of 
the  past  and  at  the  same  time  take  advantage  or  try  to  take  ad- 
vantage of  the  new  day  ought  to  be  driven  to  the  wall.  There  is 
m  my  opinion,  no  ultimate  solution  except  we  can  get  it  on  to  a 
basis  of  a  contract  that  is  continually  advantageous  to  both  parties 
and  the  shorter  the  term  of  that  contract  and  the  easier  it  is  for 
either  side  to  change  it  the  better  it  would  be,  in  my  opinion 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1697 

The  Chairman.  What  would  j^ou  have  in  that  contract? 

Mr.  CooKE.  Well,  I  do  not  believe  I  get  your  question,  Mr.  Chair- 
man. 

The  Chairman.  You  said  it  would  be  necessary  to  get  the  two 
parties  together  in  a  contract  to  permit  of  the  successful  operation 
of  the  plant.  It  is  very  important  to  know  what  elements  should 
be  included  in  that  contract,  first,  as  to  franchise  requirements; 
second,  as  to  fares,  as  to  purchase,  as  to  operation,  and  as  to  return 
on  capital. 

Mr.  Cooke.  Starting  in  with  good  management — understand  I  am 
not  interested  in  working  out  any  problem  unless  you  have  good 
management  or  there  has  been  some  evidence  that  the  company  is 
not  only  willing  to  put  in  good  management  but  knows  what  good 
management  is— I  dare  say  that  9  out  of  10  men  in  this  industry, 
in  the  management,  are  firmly  convinced  that  they  have  now  good 
management,  and  unless  you  can  change  that  point  of  view  then 
1  think  it  is  perfectly  hopeless. 

My  idea  of  management  is  that  it  is  something  that  is  not  static; 
that  the  better  management  you  have  to-day  the  larger  the  oppor- 
tunities for  improvement  just  ahead  of  you.  In  other  words,  the  in- 
dusti'ial  establishments  with  which  I  am  familiar  that  are  already 
on  the  best  plane  of  management  are  the  ones  that  are  looking  for- 
ward most  to  the  improvements  and  economies  and  forward  steps  of 
the  future.  It  is  the  man  that  is  down  at  the  heels  that  thinks 
management  is  static. 

As  to  the  franchise,  it  seems  to  me,  Mr.  Chairman,  that  we  have 
our  franchise  experts.  I  am  not  a  franchise  expert,  but  as  I  come 
in  contact  with  those  men,  given  the  broad  basis  on  which  you  are 
going  to  work — that  is,  if  you  are  going  to  get  together  and  have 
peace  and  have  efficiency — there  ought  to  be  no  difficulty  in  arriving 
at  the  terms  of  such  a  franchise.  But  there  are  some  conclusions 
to  which  the  company  officials  have  got  to  arriv^e  be  fore 'they  can  get 
there.  They  can  not  simply  start  in — most  of  them  can  not  start 
from  their  present  platforms. 

The  Chairman.  Well,  has  your  new  deal  got  to  stait  with  an 
agreed  valuation  of  the  propert}^  ? 

Mr.  CooKE.  I  should  say  that  if  a  company  expressed  a  desire  to 
accept  the  best  advice  that  could  be  obtained  in  the  matter  of  the 
management  of  that  propert}^,  and  then  said  that  they  were  willing 
to  have  a  fair  showdown  on  the  matter  of  valuation,  that  I  would 
have  a  great  deal  of  hope  of  getting  ahead.  Personally,  I  think 
Mr.  Mitten's  plan  is  a  little  more  adroit — I  do  not  want  to  use  that 
word,  because  it  has  a  disagreeable  application.  I  think  Mr.  Mitten 
has  been  going  ahead  and  demonstrating  the  efficacy  of  good  man- 
agement and  perhaps  postponing  the  question  of  valuation  or  those 
financial  adjustments,  if  I  am  right,  and  they  are  going  to  postpone 
them  until  after  he  has.  made  some  progress  on  his  management  of 
the  road.     I  think  perhaps  that  is  the  better  policy. 

The  Chairman.  Should  the  contract  provide  for  a  fixed  or  a 
fiexible  fare? 

Mr.  CooKE.  You  mean  to  change  according  to  the — There  again, 
Mr.  Commissioner,  a  city  official  is  in  two  positions ;  that  is,  he  can 
take  two  positions.  He  can  be  a  bargainer  or  he  can  be  convinced 
IGOG^S**— 20— VOL  2 45 


L 


«l 


1698    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tli»t  tho  people  on  the  other  side  really  want  to  play  an  open  and 
iiboveboard  game.  Now,  if  they  are  going  to  play  an  open  and 
iiboveboard  game,  a  fixed  fare,  in  my  opinion,  is  not  the  ultimate 
sohition.  If  you  are  going  to  continue  the  past  method  of  bargain- 
ing, I  do  not  believe  that  you  can  blame  the  average  city  official  for 
utilizing  everything  he  has  in  his  locker  in  the  way  of*  public  psy- 
chology ( oncerning  the  nickel  and  a  good  many  other  things. 

The  Chairman.  Do  you  believe  that  the  contract  should  fix  the 
return  U])on  capital  invested? 

Mr.  CcoKE.  I  have  not  reached  a  conclusion  on  that. 

The  Chairman.  Should  it  provide  for  the  purchase  bv  the  public 
of  the  plant?  ^         ^ 

Mr.  Cooke.  I  rather  think  so,  because  I  am  not  an  optimist  about 
the  continuance  of  the  private  operation  of  the  properties.  As  I 
tried  to  explain  on  a  number  of  occasions,  I  am  opposed  at  the. 
present  time  to  the  widening  of  our  municipal  activities— that  is, 
the  public  officials— and  for  that  reason  I  would  be  glad  to  see  the 
present  scheme  go  forward  indefinitely  as  far  as  I  am  concerned. 

The  Chairman.  In  your  judgment,  what  is  the  best  method  by 
which  to  regulate  these  corporations— the  method  for  regulating 
these  corporations? 

Mr.  CooKE.  I  believe  we  have  to  have  State  commissions  to  per- 
form two  functions;  to  be  the  whole  thing  for  most  of  the  cities  of 
the  Stixte  and  for  matters  in  which  more  than  one  city  is  intereste/J, 
and  to  standardize  such  things  as  accounting  practice  and  working 
conditions,  and  all  such  things,  but  I  believe  that,  where  the  city 
is  large  enough  to  retain  adequate  technical  advice,  a  good  many  of 
the  matters  in  connection  with  the  regulation  of  local  utilities  ought 
to  be  in  the  hands  of  municipal  authorities.  I  would  put  it  this  way, 
Mr.  Chairman,  that  what  can  be  best  done  by  the  locality  ought 
to  be  done  by  the  locality,  but  there  are  many  things 

The  Chairman.  To  the  exclusion  of  the  State  ? 

Mr.  CooKE.  Yes;  but  there  are  many,  many  things  that  can  not 
be  done  efficiently  by  the  localities,  as  you  know  only  too  well.  For 
that  reason  I  believe  in  building  up  a  strong  State  commission. 

'  The  Chairman.  Have  you  any  comment  to  make  on  the  cost-of- 
service  plan  that  has  been  so  freely  discussed  ? 

Mr.  Cooke.  Yes.  I  think  in  the  cost-of-sorvice  plan,  as  I  have 
heard  it  described  and  as  it  has  been  presented  here,  you  are  going  to 
step  from  the  frying  pan  into  the  fire.  I  do  not  believe  that  its  pro- 
moters  realize  the  temper  of  the  public  or  the  trouble  it  is  coinir  to 
get  them  in.  ^      ^ 

The  Chairman.  What  is  the  difficulty,  if  any,  that  may  arise? 

Mr.  Cooke.  I  think  primarily  the  difficulty  is  that  it  is  based  on 
the  theory  that  such  a  matter  as  this  can  be  arranged  by  a  fixing  of  a 
new  standard,  such  as  the  rate  of  return  and  the  fare  and  a  few 
things  of  that  kind,  and  the  big  questions  involved,  questions  of 
efficiency  of  management  and  cultivation  of  the  public  and  the  solu- 
tion of  the  labor  problem,  escape  them.  They  are  the  things  that  we 
have  been  talking  about  in  the  past  more  than  the  things  we  are 
going  to  talk  about  in  the  future. 

Commissioner  Wehle.  Do  you  think  the  service-at-cost  plans  as 
they  have  been  developed  so  far  do  not  sufficiently  stimulate  the 
motives  of  efficiency  and  economy  ?    Is  that  your  objection  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1699 

Mr.  Cooke.  That  is  one  of  my  objections  to  it. 

Commissioner  Wehle.  How  would  you  set  about  bringing  those 
motives  into  play  automatically  by  any  system  that  you  can  think  of? 

Mr.  Cooke.  Well,  I  thmk  in  the  utility  field  the  simplest  indus- 
try is  the  electric  industry,  and  it  seems  to  me  it  is  possible  to-day  to 
go  before  a  State  commission  and,  granted  in  every  instance  that 
you  have  the  most  efficient  management,  to  go  before  a  commission  to 
have  rates  fixed  and  allow  them  to  be  operative  for  a  short  period — 
three  to  ^ve  years — and  give  the  company  a  chance  to  have  extrii 
earnings  during  that  period  if  they  make  further  improvements. 

I  do  not  know  enough  about  the  details  of  the  street-railway  indus- 
try to  see  the  application  of  that  method  to  that  industry,  but  I  have 
gone  into  it  quite  deeply  in  the  electrical  industry,  and  there  do  not 
seem  to  be  any  insuperable  obstacles  to  it.  But  you  have  to  educate 
the  public  up  to  it  and  you  have  to  educate  the  commissions  up  to  it 
and  you  have  to  have  open  and  aboveboard  cost  amounting  in  order 
to  make  everybody  feel  that  the  game  is  on  the  level. 

Commissioner  Wehle.  Is  there  any  way  to  bring  about  a  checking 
up  by  the  city  of  the  efficiency  and  economy  and  bookkeeping  of  the 
company  other  than  by  practically  duplicatiixg  its  inspection  and 
accounting  organization? 

Mr.  CooKE.  Yes ;  there  is.  It  has  not  been  applied  in  this  field,  but 
there  is — that  is,  you  can  go  to  other  industries  and  find  those  norms, 
factoi-s  of  performance.  We  are  just  beginning  to  get  them  really— 
I  mean  the  public  is  just  beginning  to  understand.  We  have  all 
been  so  intent  on  seeing  that  the  workman  did  what  we  called  a  full 
day's  work  that  we  have  not  put  as  much  time  and  thought  in  on  the 
same  tests  for  the  management,  but  those  tests  have,  during  the  last 
few  years,  been  developed  and  there  is  no  reason  why  they  will  not 
ultimately  be  installed  in  this  industry. 

Commissioner  Wehle.  Now,  to  what  extent  have  they  been  de- 
veloped in  the  electrical  industry?    And  in  what  way? 

Mr.  Cooke.  Well,  you  take  the  cost  end  I  have  already  referred  to, 
the  very  satisfactory  development  of  cost  keeping  on  that  Penn 
Central  propxerty.  But  I  know  of  no  utility  where  the  standards  of 
performance  of  the  management  other  than  costs  have  been  developed. 

Commissioner  Wehle.  Well,  when  you  speak  of  costs,  do  you  not 
take  in  all  the  activities  of  the  company,  including  those  of  the 
management  ? 

Mr.  CooKE.  Yes;  but  a  company  might  have  a  very  low  unit  of 
costs  when  it  had  something  to  do,  but  if  it  did  not  have  enough 
to  do  to  keep  it  busy  more  than  half  the  time,  in  such  an  instance, 
unless  the  management  could  bring  an  act  of  God  as  an  excuse  for 
it,  they  would  be  to  blame.  I  mean  in  large  silk  mills  or  some 
metal-working  concerns  that  I  know  of,  they  set  a  standard  ot 
being  busy  80  per  cent  of  the  time,  getting  out  a  certain  product 
which  their  plant  is  designed  to  get  out.  It  is  somebody's  fault — 
they  may  not  have  orders,  they  may  not  have  materials,  the  routing 
may  be  so  inefficient  that  the  stuff  they  want  is  not  at  the  right  place 
at  the  right  time,  or  inefficient  labor — there  are  a  thousand  and  one 
reasons  why  the  plant  should  remain  idle  in  those  industries.  Now, 
idle  capital  is  not  supposed  to  earn  any  more  than  idle  labor,  and 
it  becomes  an  expense  to  be  absorbed  in  another  way. 


^. 


mm 


1700    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Coiimiissionor  Meeiver.  May  I  interpose  a  question  at  this  point  ? 
Do  you  mean  m  getting  at  the  cost  accounting  that  you  wish  to 
account  for  every  item  of  expense,  and  that  then  it  is  up  to  the 
nKinagement  to  see  what  items  of  expense  may  be  reduced  by  more 
etticient  management?  For  example,  labor  costs:  You  spoke  of 
them,  lou  spoke  of  the  labor  management  in  the  street-railway 
industry  as  bemg  peculiarly  inefficient,  even  judged  by  the  rather 
metticient  standards  m  labor  management  in  other  businesses  in  this 
country.  Is  it  your  meaning  that  only  by  having  a  sensible,  sane 
cost-accounting  system  can  we  determine  what  savings  are  possible 
in  the  management  of  labor  and  in  all  other  matters  connected  with 
the  conduct  of  the  street-railway  business  ? 

Mr.  CooKE.  Absolutely ;  every  unit  of  service.  Now,  when  I  say 
unit  of  service,  I  believe  I  mean  something  different,  something 
more  ultimate,  a  smaller  subdivision  j  but  every  unit  of  service  must 
be—the  cost  of  that  unit  of  service  is  dealt  up  by  10  elements,  and 
imder  any  particular  system,  any  one  of  those  10  you  should  be 
able  to  further  subdivide  and,  perhaps,  one  of  those  subdivisions 
must  still  be  further  subdivided,  and  you  must  have  a  standard  of 
nomenclature,  so  when  you  refer  to  a  unit  of  service  on  this  road 
you  mean  exactly  the  same  thing  as  you  mean  by  the  same  unit  of 
service  on  other  roads,  and  you  place  alongside  of  that  other  the  10 
or  100  or  1,000  subdivisions  of  that  cost  to  see  who  is  making  the 
best  record.  ^ 

Comniissioner  Meeker.  Do  you  think  that  the  labor  costs— and 
they  make  up  a  very  considerable  part  of  the  expense  of  conducting 
the  street-railway  business— do  you  think  the  labor  costs  have  been 
disproportionately  high  in  that  business? 
Mr.  CpOKE.  I  really  do  not  know. 

Commissioner  Meeker.  Taking  the  exi^ense  of  labor  turnover,  so- 
called,  has  that  been  unnecessarily  great:  do  you  know ? 

Mr  Cooke.  No;  I  really  do  not.  I  do  not  believe  they  utilize— 
and  there  again  it  is  only  a  question  of  degree— no  industry  has 
utilized  the  initiative  of  the  workmen. .  I  do  not  think  the  initiative 
of  the  workmen  has  been  used  practically  at  all  in  this  industry 

Commissioner  Meeker.  Do  you  suggest  some  scheme  of  participa- 
tion m  management  by  the  employees  ?  ^  f 

Mr.  CooKE.  That  would  seem  to  me  to  be  a  very  easy  industry  in 
which  to  introduce  such  participation. 

Commissioner  Meeker.  Do  you  care  to  elaborate  that  point 
further,  and  give  briefly  some  outline  of  such  a  plan? 

Mr.  Cooke.  Well,  one  of  the  most  intelligent  handlers  of— I  do 
not  like  to  use  that  word— one  of  the  most  intelligent  leaders  of 
street-railway  labor  explained  to  me  recently  that  his  feeling  was 
that,  if  they  would  hire  and  get  all  the  help  they  could  in  studying 
the  problem  of  platform  men  so  that  they  knew  what  constituted  a 
good  motorman  or  a  good  conductor  and 'then  trained  their  hundreds 
and  thousands  of  men  so  that  they  came  up  to  that  standard,  they 
were  doing  all  that  they  should  m  the  cultivation  of  their  labor 
Now  It  seems  to  me,  that  is  just  getting  at  it  in  the  wrong  way* 
and  that  you  are  handing  down  from  the  top  all  the  information 
about  the^  job  and  more  or  less  making  men  intelligent  automatons. 
1  believe  that,  where  you  have  so  many  employees  that  are  doing  on© 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1701 

thing,  it  ought  to  be  relatively  easy  to  tap  their  information  in  such 
a  way  that  would  make  the  information  they  have — the  observations 
that  they  make  in  their  day-to-day  contact  with  the  job — one  that 
would  constantly  change  the  jobs  of  motormen  and  conductors,  and 
that  they  would  not  see  a  street-railway  company,  as  has  been  fre- 
quently in  the  past,  going  along  for  a  year  or  two  making  mistakes 
that  are  quite  obvious  to  people  that  patronize  the  lines.  In  other 
words,  I  think  it  is  going  to  be  possible  to  organize  the  men  so  as 
to  obtain  from  them  a  much  larger  initiative.  Then  I  think  that 
the  men  ought  to  be  given  the  opportunity,  not  of  criticizing  the 
management — I  do  not  mean  that — but  it  ought  to  be  up  to  the  men 
to  request  of  the  management 

Commissioner  Gadsden.  They  have  never  surrendei*ed  that  privi- 
lege, have  they? 

Mr.  Cooke.  Well,  that  is  what  I  hope  is  of  the  pa,st,  Mr.  Gadsden. 
But  it  ought  to  be  possible  for  the  men  to  call  on  the  management 
for  any  sort  of  reports  that  they  thought  w^ould  help  them  in  the 
conduct  of  their  affaii*s.  This  very  matter  of  labor  turnover,  inter- 
mittency  of  employment,  and  that  sort  of  things  I  think  that  men  are 
entitled  to  have  that  information,  and  I  think  they  are  entitled  to 
that  type  of  leadership  which  feels  that  it  can  not  get  along  without 
having  that  information.  I  do  not  know  whether  it  is  true  in  this  in- 
dustry, but  you  take  in  praetically  every  industry  I  am  associated 
with — it  is  not  unemployment  that  is  the  bane,  it  is  the  discontinuity 
or  intermittency  of  employment  after  you  have  got  a  job.  There  are 
100  different  reasons  why  people,  after  they  have  got  a  job,  are  not 
allowed  to  work  full  time.  I  think  the  workers  in  any  such  estab- 
lishment are  entitled  to  know  what  that  record  is;  whether  this 
employer  keeps  his  employees  cmgaged  70,  80,  or  90  per  cent  of  the 
time;  and  they  are  entitled  to  see  and  analyze  the  reason  for  their 
failing  to  make  100  per  cent.  Say  a  manager  keeps  his  people  going 
()6§  per  cent  of  the  time,  which  is  probably  a  fair  per  cent  for  the 
men's  clothing  industry,  which  is  considered  quite  seasonal;  I  think 
the  men  are  entitled  to  know  how  that  33^  per  cent  is  distributed, 
how  much  is  due  to  not  having  orders,  how  much  is  due  to  not 
haTing  the  materials,  how  much  is  due  to  sickness,  and  how  much 
is  due  to  other  causes.  When  you  begin  to  go  after  operating  figures 
and  costs  it  seems  to  lead  on  and  on;  there  is  no  stopping.  Now, 
we  j-ecently,  in  one  factory  that  I  was  connected  with,  put  in  six 
months  on  half  time,  and  it  led  finally  to  an 

Commissioner  Meeker.  Just  elucidate  that.  Six  months  steady 
half  time? 

Mr.  CooKE.  Xo.  From  the  1st  of  January  this  year  to  the  1st 
of  July  this  particular  group  of  2,500  employees  only  worked  three 
da3^s  a  week;  and  not  only  that  concern  but  other  concerns  in  the 
same  line  suffered  through  not  having  material.  A  committee  was 
appointed  of  the  employees,  very  largely  at  the  instance  of  the  men, 
to  w  ait  on  the  people  who  made  the  raw  material  that  we  used.  We 
did  not  get  our  raw  material  on  account  of  a  strike  in  that  indus- 
try, and  our  people  waited  on  them  and  told  them  that  we  were 
hereafter  not  without  interest  in  strikes  in  their  industry,  because 
if  they  had  strikes  in  their  industry  and  could  not  give  us  an  even 
lioAv  of  raw  material,  we  were  not  able  to  keep  our  people  engaged. 


1702     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

• 

In  the  same  way  I  feel  that  in  any  industry  the  workmen  can 
l:>e  very  usefvil  in  pressing  on  the  management  of  the  company ;  and 
iliat  is  tlieir  legitimate  sliare  in  the  management — pressing  on  the 
management  for  the  data  with  regard  to  any  condition  which  affects 
the  efficiency  of  that  company.  And  if  the  management  does  not 
initiate  it,  the  men  ought  to.  And  that  is  another  example  of  wliat 
J  niean  by  participation.  Now,  as  we  take  these  first  steps  in  par- 
ticipation, I  am  optimist  enough  to  believe  that  other  ways  will 
open  up  and  that  vou  are  going  to  bring  the  management  and  the 
men  together,  not  because  they  work  short  hours,  not  because  tliey 
pay  high  wages,  but  because  you  really  have  made  their  worJt  a 
mutual  problem. 

Commissioner  Meeker.  As  a  matter  of  fact,  the  so-called  turn- 
over of  labor  in  the  street-railway  industry,  platform  men  and  other 
men — shopmen,  too — has  been  low.  Have  you  any  opinion  to  ex- 
plain that?  It  has  been  low  as  compared  with  iron  and  steel  and 
coal  mining  and  any  other  industry  that  I  have  studied. 

Mr.  CooKE.  Well,  it  was  very  high,  of  course,  in  Philadelphia  up 
to  the  time  Mr.  Mitten  came  there.    He  told  me 

Commissioner  Meekek.  Not  particularly. 

Mr.  Cooke.  Well,  of  course,  it  was  for  the  immediate  period  ahead, 
when  there  were  strikes  and  acute  labor  troubles  in  that  company. 
But  he  told  me,  or  one  of  his  men  told  me,  some  time  ago  that  his 
turnover  was  only  8  per  cent.  Of  course,  when  people  talk  about 
turnover  you  know  sometimes  they  mean  one  thing  and  sometimes 
another ;  but  that  is  exceedingly  low.  I  have  never  heard  of  a  lower 
figure  than  that,  if  it  is  true. 

Commissioner  Meeker.  It  has  been  even  lower  than  that  at  times 
on  that  particular  street  railway,  but  I  should  say  the  average  for 
tlie  country  would  be  somewhere  between  20  and  35  per  cetit,  as  com- 
piled by  my  own  bureau,  which  used  the  uniform-standard  method 
which  makes  the  figures  comparable  among  the  different  lines. 

Mr.  Cooke.  I  believe  8  per  cent  is  too  low  a  turnover.  I  do  not 
believe  you  are  promoting  enough  people  out  of  the  business. 

Commissioner  Meeker.  Well,  the  reason  I  bring  that  up  i&- 


Mr.  Cooke.  I  think  if  they  have  a  turnover  of  25  per  cent  there 
is  very  little  to  criticize  in  that. 

Commissioner  Meeker.  Is  it  not  usually  accepted  as  an  indication 
of  understandable  labor  conditions,  where  the  turnover  hovers  about 
100  per  cent? 

Mr.  CooKE.  Oh,  yes.  That  is  the  average  for  this  country.  I  am 
convinced  that  the  average  American  gets  a  job  once  a  year. 

Commissioner  Mejuier.  The  street  railways  have  been  far  below 
that  in  normal  times.  Of  course,  during  the  war  the  turnover  has 
been  greatly  increased.  Does  that  indicate  that  the  street-railway 
companies  have  been  lax  in  their  labor  policies;  that  their  labor  poli- 
cies nave  been  behind  the  labor  policies  of  business  in  general  in  the 
country  ? 

Mr.  CooKE.  I  would  not  know  how  tp  account  for  it  without  in- 
vestigating it. 

The  Chairman.  Mr.  Cooke,  the  hour  of  adjournment  has  arrived 
and  one  of  the  commissioners  desires  to  cross-examine  you  further. 
Can  you  be  back  at  8  o'clock  this  evening  ? 


PROCEEDIN^GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1703 

Mr.  Cooke.  It  is  pretty  cruel.    I  will  have  to  do  it.    I  had  another 

engagement. 

The  Chairman.  W^e  will  stand  adjourned  until  7.45  o'clock  to- 
night. Before  retiring  please  let  me  make  this  announcement.  To- 
morrow and  Thursday  will  be  devoted  entirely  to  the  labor  progiani. 
We  have  two  other  witnesses  for  to-day,  Mr.  Purdy  and  Mr.  Del- 
bridge,  and  we  will  try  to  hear  these  witnesses  to-night,  or  get  along 
as  well  as  we  can. 

(Whereupon  at  5.05  p.  m.,  an  adjournment  was  taken  until  7.45 
p.  m.). 

EVENING  SESSION. 

The  Chairman.  WTio  is  your  first  witness  this  evening,  Mr. 
Ogburn  ? 

Mr.  Ogburn.  Mr.  Delbridge,  I  believe.  Mr.  Delbridge  represents 
tlie  Citizens'  Referendum  League  of  St.  Louis,  who  telegraphed  to 
us  asking  if  they  could  present  certain  views  on  this  prdblem ;  and 
they  have  sent  us  their  representative  with  his  credentials,  Mr.  Del- 
bridge. 

The  Chairman.  We  shall  be  very  glad  to  hear  from  you,  Mr.  Del* 
bridge. 

Mr.  Delbridge.  Thank  you. 

STATEMEFT  OF  ME.  C.  L.  PELBBIDGE. 

Mr.  Delbridge.  Mr.  Chairman  and  gentlemen,  I  have  been  doing 
auditing  work  for  the  owners  of  street  railways  and  steam  railways 
for  about  85  years.  However,  for  the  last  15  or  l(j  years,  my  work 
has  been  devoted  mostly  to  compiling  and  tabulating  mathematical 
books  that  are  used  by  auditors  instead  of  doing  the  actual  auditing 
work  myself.  There  are  four  or  five  of  my  books,  and  I  will  say, 
without  any  spirit  of  apology  on  the  one  hand  or  boastfubiess  on  the 
other,  but  merely  as  a  statement  of  fact,  that  I  am  the  author  of  over 
100  mathematical  books  that  are  used  by  auditors  in  this  and  similar 
lines  of  work. 

The  Chairman.  Are  you  responsible  for  that  big  red  book  over  on 
the  table  there? 

Mr.  Delbridge.  Yes ;  that  is  one  of  the  100.  That  is  used  by  rail- 
road people  in  prorating  reducing  locals,  figuring  passenger-mileage, 
ton-mileage  and  things  of  that  kind. 

As  I  understand  it,  the  question  before  this  commission  is  to  see  if 
it  is  possible  to  find  some  solution  of  the  problem  that  confronts  the 
people  of  this  country  in  regard  to  their  street-railway  matters. 

I  am  sorry  to  say  that  I  have  listened  to  a  great  deal  of  testimony 
in  the  last  few  days,  and  the  burden  of  virtually  all  of  that  testimony 
has  been  in  a  different  light  altogether  from  what  I  assume  this  com- 
rtiission  really  wants  to  hear.  I  do  not  think  this  commission  has 
been  appointed  for  the  purpose  of  finding  how  to  solve  the  problem 
as  to  what  fare  will  bring  the  largest  income  nor  what  is  the  most 
effective  method  of  driving  the  jitneys  or  any  competition  to  street- 
cars out  of  business.  Therefore,  I  shall  not  devote  any  of  my  time 
to  discussing  that  subject. 


1704    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


What  I  want  to  do,  and  I  assume  what  this  commission  wants  to 
do,  is  to  find  a  sohition  of  the  street-railway  problem — how  it  is 
possible  to  conduct  this  business  in  such  a  way  that  it  will  give  satis- 
faction to  the  people  whom  it  serves. 

As  an  actual  matter  of  fact,  the  conditions  that  confront  the  people 
in  the  street-railway  business  of  the  country  has  been  foreseen  for 
20  years.  Twenty  years  ago,  as  far  as  I  can  recollect,  in  the  year 
1900,  the  street-car  company  of  St.  Louis,  which  is  capitalized  at 
$104,000,000,  sent  for  me  and  they  said :  "  Mr.  Delbridge,  will  you 
accept  the  position  of  auditor  of  the  street  railroads  herel" 

We  discussed  that  for  about  10  days  or  a  week  and  so  on,  and  I 
finally  told  them:  "Gentlemen,"  I  said,  "I  can  see  tiiat  your  idea 
is  to  get  me  into  your  office  to  do  your  clerical  work  of  auditing. 
I  can  not  l)e  worth  one  cent  to  you  in  that  capacity,  where  I  could  be 
worth  a  dollar  to  you  in  an  advisory  capacity.  Now,  if  you  want 
me  to  help  arrange  your  schedules  and  discuss  those  problems  with 
you,  I  shall  be  glad  to  take  the  place ;  but  if  you  want  me  to  do  the 
clerical  work  in  your  office,  I  can  not  afford  to  accept  the  place." 
They  asked  me  why.  They  said,  "  If  you  get  a  certain  amount  of 
pay  what  do  you  care  what  you  do?"  I  said,  "  For  this  reason :  In  a 
reasonable  time — it  may  come  within  one  year,  or  it  may  be  20  years 
coming — but  the  people  of  St.  Louis,  a  i-easonable  portion  of  them, 
are  going  to  catch  on  to  what  you  people  are  doing  out  here;  and 
when  they  do,  they  are  going  to  come  out  here  and  lynch  every  one 
of  you ;  and  when  that  time  comes,  I  don't  want  to  be  in  your  offices." 
I  told  them :  "  If  you  don't  put  jrour  business  on  a  legitimate  basis 
and  conduct  it  as  a  business  institution,  the  time  will  come  when  it 
will  be  swept  out  of  existence,  just  exactly  like  slavery  was  swept 
out  of  existence,  and  it  ought  to  be." 

That  ended  the  negotiations,  and  I  never  heard  anything  from 
them. 

What  you  want  to  do  is  to  find  out  what  it  costs  to  haul  a  street- 
railway  passenger.  That  is  a  much  more  simple  problem  than  a 
pei-son  would  assume  at  first  glance.  Taking  the  sworn  statements 
of  the  street-car  companies — for  instance,  according  to  their  sworn 
statements — the  average  cost  of  hauling  a  street-car  upon  the  various 
streets  of  the  cities  of  the  United  States  is  20  cents  per  car-mile; 
sometimes  it  runs  18  cents,  19  cents,  20,  21,  or  22  cents,  and  I  believe 
the  highest  figure  that  I  have  ever  seen  claimed  was  in  Pittsburgh, 
where  one  year  it  was  claimed  that  it  went  to  23  cents. 

Of  course,  this  data  were  gathered  before  the  war — that  is  previous 
to  three  or  four  years  ago.  Now,  it  is  probably  a  little  higher.  In 
fact,  I  believe  in  Philadelphia  the  gentleman  here  the  other  day 
testified  that  it  was  27  cents. 

Then  they  tell  us  and  swear,  under  oath,  and  I  can  give  you  the 
date,  if  the  commission  wants  it,  where  it  cost  them  20  cents  per 
mile  to  haul  a  street-car  through  the  streets  of  the  city,  and  then 
the  same  officials  of  that  same  company  get  up  and  make  the  state- 
ment, as  I  have  heard  them  repeatedly  do  under  oath,  that  they  can 
not  figure  how  many  cars  to  put  on  the  streets  in  order  to  give  the 
people  a  reasonable  service  and  seats,  because  we  don't  know  how 
many  people  will  be  standing  at  a  certain  corner,  and  anyway,  it 
would  make  very  little  difference,  because  the  avevage  person  does 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1705 

not  object  to  standing  in  the  street-car,  because  the  average  ride 

is I  have  heard  them  make  the  statement — seventeen-twentieths  of  a 

mile  or  nineteen-twentieths  of  a  mile,  and  also  about  a  mile. 

AVlien  you  realize,  according  to  their  own  sworn  statements,  that 
they  claim  they  haul  the  average  passenger  1  mile,  in  some  instances 
they  have  made  it  nineteen-twentieths  of  a  mile,  and  according  to 
their  own  sworn  statements  again,  if  that  costs  them  20  cents  to 
haul  a  car  a  mile,  then  when  you  point  to  a  car  that  will  seat  50 
people,  with  every  seat  occupied  and  50  people  standing,  paying  5 
cents  apiece,  that  gives  them  $5  per  car-mile  receipts  against  a 
cost  of  20  cents  per  car-mile,  according  to  their  own  oaths — gentle- 
men, there  is  absolutely  no  explanation  for  such  a  statement  as  that. 
Wq  knpw  that  that  money  is  not  expended  in  hauling  those  pas- 
sengers. 

That  is  only  one  feature.  TVTien  you  realize  that  any  steam  rail- 
road in  the  country  wull  haul  a  passenger  train  for  $1.60  a  train- 
mile  with  10  coaches,  which  makes  15  cents  a  car-mile,  and  when 
you  realize  that  it  costs  twice  as  much  to  build  and  equip  the  aver- 
age steam  railroad  as  it  does  the  average  street-railway  line,  and 
that  a  coach  will  seat  70  people,  and  that  they  can  be  hauled  a  mile 
for  15  cents,  we  see  how  absolutely  absurd  and  ridiculous  are  their 
statements  that  there  is  no  profit*^  in  their  business.  For  instance, 
take  freight :  According  to  the  reports  of  the  Interstate  Commerce 
Commission,  the  gross  receipts  of  the  steam  railroads  of  the  United 
States  are  9  mills  per  ton  per  mile.  In  other  words,  for  every  2,000 
pounds  of  dead  freight  that  the  steam  railroads  haul,  their  gross 
receipts  are  9  mills — a  little  bit  less  than  1  cent. 

If  freight — that  has  to  be  loaded  and  unloaded  on  the  cars,  and 
trucked  across  the  platforms,  and  be  receipted  for,  and  the  com- 
pany has  to  be  responsible  for,  carried  to  its  destinations,  the  seals 
broken,  and  trucked  across  the  platforms  and  receipted  for  there^ 
gentlemen,  if  2,000  pounds  of  freight  can  be  hauled  for  9  mills, 
do  we  not  see  how  absolutely  absurd  and  ridiculous  is  their  conten- 
tion that  they  can  not  haul  2,000  pounds  of  freight  that  loads  and 
unloads  itself,  and  that  does  not  have  to  be  receipted  for,  for  2^ 
(;ents  per  car-mile,  or  80  cents  per  car-mile?    It  is  absolutely  absurd* 

Now,  what  is  the  solution  of  the  problem?  The  Citizens'  Ref- 
erendum League  of  St.  Louis  have  worked  on  that  question  for  just 
about  a  year,  and  we  have  arrived  at  this  conclusion:  There  is  but 
one  solution  of  that  problem.  If  thei-e  had  been  any  other  solution 
of  the  problem  we  would  have  found  it. 

At  this  point  I  want  to  just  digress  a  little  bit  with  something 
which  really  bears  on  the  siSject.  Eemember,  up  to  10  years  ago 
there  was  a  great  commotion  throughout  our  country,  from  one  end 
to  the  other,  about  the  extortions  and  the  infamies  practiced  by  the 
express  companies.  Conventions  were  held  and  Congress  appointed 
a  commission — or  I  believe  it  was  the  Interstate  Commerce  Com- 
mission that  appointed  a  committee— to  hear  testimony,  just  exactly 
as  you  gentlemen  are  hearing  testimony  now,  with  the  idea  in  view 

of  remedying  the  evils. 

I  was  called  before  that  commission,  and  I  want  to  say  to  you  gen- 
tlemen that  you  represent  now  here  one  of  the  most  important  com- 
missions and  you  have  got  the  most  important  question  to  solve  that 


1  706    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAH. WAYS  COMMISSIOl^". 

huft  ever   been  liiindled  in  this  country  since  the  dtiys  of  George 
Washington. 

1  ho  Interstate  Commerce  Commission  settled  that  problem  simply 
by  extending  the  services  of  th(»  Post  Office  Deimrtment  to  take 
in  tlie  parcel  post;  and  for  the  last  eight  or  nine  yeai-s  we  have 
nobody  ever  comi)laining  about  expre^is.  It  has  solved  the  problem 
absolutely. 

We  must  do  the  same  thing  with  the  question  that  is  before  us — 
the  street- rail w^ay  business. 

^"ow,  gentlemen,  according  to  the  sworn  affidavits  of  most  of  the 
street-railway  officials  of  tlie  country,  whom  I  can  name  if  you, 
would  like  to  have  them,  the  average  cost  of  building  and  equipping 
a  street-railway  line  in  8t.  Louis,  according  to  sworn  reports  is 
$16,000  per  mile. 

Now,  if  a  street-railwo-y  line  can  be  built  and  equipped  for  $16,000 
a  mile,  what  is  the  sol  ution  of  the  problem  ? 

Just  sim2>ly  have  the  city,  the  State,  or  the  Nation — ^just  simply 
pick  any  city  and  go  down  in  the  suburbs  where  they  need  street-car 
service,  go  to  some  streets  that  have  no  street-car  service,  and  just 
simply  build  a  mile  or  2  miles  or  3  miles  or  4  miles  of  timck,  and  after 
they  build  that  track,  put  on  a  car  or  two  cars  or  three  cars  and  em- 
ploy a  motornian,  and  put  the  motorman  on  the  car  and  say  to  that 
niotonnan :  "  Here,  you  make  a  round  trip  every  5  minutes  or  every 
10  minutes  or  every  15  minutes  or  every  half  hour,  as  -the  cast>  might 
be,  and  let  a  person  get  on  the  car  and  ride  through,  as  long  as  they 
please  and  where  they  please  and  when  they  please,  and  do  not  col- 
lect any  fares  at  all." 

A  person  at  first  glance  would  assume  that  that  is  giving  some- 
thing for  nothing,  but  it  is  not.  That  motorman  comes  down  to  the 
city  hall  at  the  end  of  the  month  and  gets  a  check  for  his  montli's 
pay,  just  like  a  fireman  or  a  school-teacher  does. 

Why  do  we  do  that?  We  do  ifot  want  to  give  anything  to  anj'body 
for  nothing.  I  think  it  is  a  bad  idea.  We  do  not  want  anything  for 
nothing.  But,  under  the  conditions  that  prevail  to-day  throughout 
the  le^gislatures  of  this  country  from  end  to  end,  and  throughout  the 
city  halls  of  this  countiy  from  end  to  end,  this  str«et-car  business 
has  become  so  nefarious  and  so  iniquitous  that  it  is  absolutely  neces- 
sary for  the  person  to  pay  5  cents  or  6  cents  or  7  cents  or  8  cents  or 
10  cents  in  order  to  get  a  street-car  service  that  it  costs  one-half  of  1 
cent  to  render. 

That  is  all  there  is  about  it.  We  must  get  rid  of  that.  Now,  I 
was  connected  with  the  auditing  department  some  years  ago  of  one 
of  the  largest  systems  in  this  country.  It  was  generally  understood — 
the  ordei-s  came  into  the  office — that  this  request  was  made  by  old 
man  Russell  Sage  himself;  of  course,  that  part  I  knew  notlijng 
about ;  but  anyway  the  request  came  in :  "  We  want  you  men  in  the 
auditing  department  to  give  us  a  solution  of  the  street  railway  and 
the  interurban  probleins.  Now,  this  was  foreseen  by  Russell  Stige 
25  years  ago.  "  Conditions  are  not  what  they  ought  it)  be  and  we 
want  you  to  find  what  is  the  solution."  After  a  year's  investigation 
we  reported  this,  that  there  is  no  system  that  has  e\ er  been  devised 
of  c{)lle(  ting  sti'eet-car  fares  on  a  street-cai*.  where  each  person  gets  on 
aiid  he  gives  his  money  to  the  conductor  and  the  conductor  has  got 


PR0CEEDIl!fGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1707 

to  drop  it  into  a  box  or  a  slot  somewhere  and  register  it— there  has 
been  no  system  devised  that  would  not  cost  more  money  to  audit  that 
5-cent  fare  dropped  in  the  box  than  it  does  to  render  the  service  for 
which  the  fare  is  paid.  Therefore,  the  proposition  is  to  afford  v\r 
service  through  taxation.     Let  us  pay  our  car  fares  through  the 

city  hall..  ,.    •     i 

We  reported  this,  that  this  could  be  done  with  an  unlimited  car 
service,  that  it  could  be  put  on  in  any  city  regardless  of  the  fact 
whether  that  mileage  was  1,  2,  5,  50,  500,  or  50,000  miles  long;  let 
anybody  get  on  the  car,  whether  it  winds  all  around  the  city  or  a 
State  or  slap  across  the  continent  from  Boston  to  San  Francisco. 
Just  simply  say,  "  Now,  here,  these  cars  are  for  the  people.  You  get 
on  and  ride  free  whenever  you  want  to,"  and  if  it  could  be  done  that 
way,  we  reported  that  the^  average  ride  would  never  equal  1  mile 
and  the  average  cost  of  operating  that  service  would  never  exceed 

one-half  of  1  cent.  ^ 

Under  prevailing  conditions  we  have  got  to  pay  10,  or  8,  or  <,  or  6 
cents  in  order  to  get  what  can  be  given  to  us  for  one-half  of  1  cent 
And,  gentlemen,  that  is  the  cause  of  the  unrest  of  the  people  in  this 
country. 

Now,  a  man  might  say  "  Here,  what  right  have  you  to  assume  that 
they  would  not  ride  but  a  mile?"  I  can  prove  that  to  the  satisfaction 
of  anybody.  For  instance,  on  the  Manhattan  Elevated  Road  a  man 
can  get  on  at  Rector  Street,  and  between  Rector  Street  and  the  north- 
ern terminus  there  are  probably  25  different  stations  where  the  north- 
bound and  the  southbound  trains  are  served  by  a  single  platform. 
Of  course,  there  you  pay  your  fare  when  you  get  on  the  platform 
and  not  when  you  get  on  the  cars.  Therefore,  a  person  could  see- 
saw up  and  down  the  Manhattan  Elevated  road  for  a  month  or  a 
year  by  the  payment  of  one  single  fare.  We  auditors  took  that  ques- 
tion up  and  we  could  never  figure  out  just  exactly  how  few  people 
did  it.  They  can  get  the  service  free,  but  simply  because  they  can 
get  the  service  free  they  did  not  take  any  advantage  of  it.  And 
practically  every  man  who  goes  to  New  York  does  that  once  to  seu 
if  he  can  do  it,  but  that  is  the  extent  of  his  riding  free. 

Now,  we  will  take  another  angle  of  the  proj)osition.  We  have  in 
every  large  city  these  office  b*iildings.  We  have  in  St.  Louis  buildings 
20  stories  high  with  free  elevator  service.  Those  are  built  for  busi- 
ness purposes,  for  the  purpose  of  earning  dividends  on  the  money 
invested  in  the  buildings.  Those  gentlemen  who  put  up  those  build- 
ings— the  first  proposition — they  go  to  the  auditors  and  ask,  "  Can 
we  erect  such-and-such  a  building  which  will  pay  us,  invest  a  cer- 
tain amount  of  money  tlmt  will  pay  a  certain  profit?"  Then  they 
have  to  figure  out  what  that  elevator  service  will  cost  in  those  build- 
ings and  the  management  puts  on  a  tax,  probably  of  50  cents  or  $1 
a  month  extra  for  each  office  in  the  building  to  cover  the  cost  of 
the  elevator  service  that  will  be  rendered  to  their  patrons. 

A  man  who  has  occasion  to  go  up  and  see  a  man  on  the  tenth  floor 
steps  on  the  elevator  at  the  street  floor,  rides  up  to  the  tenth  floor, 
gets  out  and  transacts  his  business  and  comes  back  and  ste})s  on  the 
elevator  and  rides  down  and  steps  out  and  thinks  no  more  of  it. 
Gentlemen,  as  a  nuitter  of  fact,  it  costs  just  as  much  money  and  the 
average  is  practically  the  same  to  haul  a  person  in  the  average  ele- 
vator of  the  buildings  of  the  United  States  as  it  does  to  haul  a  person 


1708    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

on  the  average  street  railway  of  the  United  States.  For  instance, 
you  take  a  dead  straight  lift,  say,  of  10  feet,  the  average  floor;  it  takes 
as  much  power  to  carry  that  man  up  10  feet  as  it  does  to  push  him  a 
block  over  the  rails  of  the  street-car  lines  and  the  average  cost  in  each 
case  is  .7  of  1  cent.  The  cost  of  rendering  the  elevator  service  and 
also  the  street-car  service  is  .7  of  1  cent. 

Now,  they  tell  us  "  Well,  we  can  not  do  that  for  the  simple  reason 
that  our  gross  receipts  are  so-and-so  and  our  expenses  are  so-and-so 
and  we  have  enormous  overhead  expense."  I  have  had  a  great  many 
street-railway  reports  submitted  to  me  for  analysis.  I  had  to  go  into 
those  repoi-ts,  and  I  want  to  say  that  they  are  pyramided  and  padded 
to  the  absolute  limit  of  an  auditor's  ability.  And  it  is  astonishing  to 
what  an  extent  they  can  go.  For  instance^  a  month  ago  I  was  put  on 
the  stand  as  a  witness  down  here  in  a  hearing  in  St.  Louis. 

Now,  those  men  swore  that  their  property  was  worth  $104,000,000. 
They  made  that  statement  there.  They  claimed  though  that  "if 
you  will  give  us"— asking  the  commission—"  a  fare  of  8  cents,  it  will 
enable  us  to  pay  a  6  per  cent  dividend  upon  a  $60,000,000  valua- 
tion." The  commission  had  previously  fixed  that  valuation  at  $60,- 
000,000.  They  were  demanding  a  fare  that  would  pay  all  the  ex- 
penses and  leave  6  per  cent  after  all  expenses  were  paid  for  the 
owners  of  stock  and  the  bonds. 

I  took  a  certified  copy  of  their  sworn  statement  made  by  the  same 
officials  for  the  same  company  on  the  7th  day  of  May,  1914,  where 
they  swore  that  their  property  w^as  worth  $6,783,973.  In  other  words, 
they  are  asking  that  commission— making  a  sworn  statement  that 
their  property  is  worth  $60,000,000— where  on  another  sworn  state- 
ment, which  was  held  right  opposite  to  it,  the  same  officials  swore 
it  was  worth  just  about  one-ninth  of  $60,000,000.  Now,  when  you 
come  to  a  proposition  like  that,  there  is  absolutely  nothing  that  can 
get  around  it.    That  is  their  sworn  statement. 

We  will  take  another  feature  of  it 

The  Chairman.  What  was  the  sworn  statement  of  the  first  figure 
for? . 

Mr.  Delbridge.  They  swore  that  they  had  out  stocks  and  bonds 
to  the  amount  of  $104,000,000. 

The  Chairman.  Now  that  $6,000,000  figure  ? 

Mr.  Delbridge.  They  swore  that  the  property  for  taxation  was 
Tvorth  $6,783,000.  But  now  where  the  $60,000,000  came  in,  the  com- 
mission had  rejected  their  $104,0(K),(X)0  affidavit  and  placed  a  value 
of  $60,000,000,  that  they  were  entitled  to  those  dividends  on. 

Now,  according  to  their  own  sworn  statement  held  right  up  at 
them  in  parallel  columns,  for  every  $100  of  stock  and  bonds  that 
they  had  out  those  men  had  invested  $6.52J  in  the  property  and  had 
stuck  dow^n  into  their  boots  the  difference  which  was  just  simply 
$93.47^  on  every  $100  invested.  Now,  that  is  their  sw^orn  statement, 
that  is  all  there  is  about  it. 

Now,  gentlemen,  where  does  this  money  go  ? 

The  Chairman.  Do  you  believe  either  one  of  those  sworn  state- 
ments ? 

Mr.  Delbridge.  I  know^  that  this  sworn  statement  of  $6,783,973  is 
absolutely  correct,  because  I  was  paid  $450  one  summer  by  one  of 
the  owners  to  make  an  analysis  of  that  statement. 


PROCEEDINGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION.    1709 

And  then  again,  a  few  yeai-s  before  that,  in  the  condemnation  pro- 
ceedings where  one  line  wanted  the  right  to  go  over  the  rails  of 
another  line  for  a  few  blocks,  another  manager  who  had  been  ousted 
swore  that  the  property  had  been  built  and  equipp^ed  for  $16,000  a 
mile,  which  tallies  with  this  $6,783,000. 

Now,  we  have  come  to  this  feature:  Where  does  this  enormous 
amount  of  money  go — their  gross  receipts  ? 

Now,  w^hen  you  come  to  auditing  your  company's  books,  gentle- 
men, I  want  to  be  perfectly  candid  with  you.  I  have  been  an  auditor 
for  35  years,  but  for  15  years  I  have  done  no  special  work  that  I 
could  get  out  of — only  for  old  customers.  I  have  simply  been  pre- 
paring material  for  other  auditors  to  use.  But  I  want  to  be  perfectly 
candid  with  you."  Whenever  a  company  wants  a  certain  statement  it 
just  simply  writes  down  what  it  wants  to  show,  and  it  hands  it  to  the 
auditor,  and  the  auditor  goes  to  the  books  and  he  makes  it  fit  what- 
ever that  company  wants.  That  is  all  there  is  about  it.  In  other 
words,  one  of  the  best  auditors  that  I  ever  knew  used  to  come  and 
spend  a  good  deal  of  time  with  me  at  the  Broadway  Central  Hotel 
in  New  York.  And  he  uses  my  books,  too.  I  says  to  him,  "Mr. 
Davis,  what  is  the  first  thing  you  do  when  you  check  up  a  company 
and  settle  the  books?"  He  looked  at  me  and  he  said,  "Delbridge, 
you  know  as  well  as  I  do,  but  if  you  want  to  hear  me  say  it,  I  do  not 
object  to  making  the  statement  at  all.  I  can  take  a  set  of  books  two 
years  old,  and  a  pen,  and  a  bottle  of  ink,  and  make  those  books  show 
anything  you  want  them  to  show,  from  a  50  per  cent  loss  to  a  50 
per  cent  gain,  and  I  will  take  my  statement  on  the  stand,  subject  to 
any  cross-examination  on  earth  and  there  is  not  an  examiner  who  can 
go  behind  me  and  point  out  an  error  in  my  report,  for  the  simple 
reason  that  there  will  be  no  error  there.  All  he  can  do  is  to  dispute 
my  valuations,  and  when  he  does  that  it  is  merely  a  difference  of 
opinion." 

Now.  where  does  this  difference  between  what  the  passenger  gives 
and  what  it  costs  to  render  the  service  go?  Where  does  that 
money  go? 

It  is  an  easy  matter  to  solve  that  problem.  I  will  say  this — ^that 
there  is  not  an  auditor  in  the  United  States  but  who  can  take  a  set 
of  books  and  he  can  fix  them  up  in  such  a  way  as  to  make  any  report 
he  wants,  and  he  can  do  it  in  such  a  way  that  he  himself  can  not  go 
back  over  those  books  two  weeks  after  he  did  it  and  point  out  the 
discrepancies,  unless  he  kept  a  record  of  where  he  made  the  discrep- 
ancy or  from  bare  memory. 

It  is  like  a  man  walkingacross  the  river  on  the  ice.  A  good  expert 
could  follow  him  by  his  tracks  on  tlie  ice,  but  after  a  few  days  the 
sun  comes  out  and  melts  the  tracks  away  and  he  could  not  himself 
follow  his  trail  unless  he  did  it  from  bare  memory. 

Now,  we  will  come  to  this  angle:  Where  does  this  difference  in 
money  go  to  ?  Now,  these  troubles  of  the  street-car  companies  of  the 
United  States  started  really  in  St.  Louis  in  1910.  Lee  Merriwether 
in  St.  Louis  ran  for  mayor  on  the  municipal-ow^nership  ticket  in 
1001.  In  that  election  there  was  a  great  deal  of  crooked  work  done 
in  order  to  count  Merriwether  out,  but  in  the  90  days  of  that  cam- 
paign we  educated  the  people  of  St.  Louis  to  the  enormous  profits 
in  the  street-railway  business  to  such  an  extent  that  notwithstanding 


1710     PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1711 


the  fact  that  Merriwether  was  counted  out,  within  one  year  from  the 
day  those  polk  were  closed  the  officials  at  the  city  hall  went  to  the 
street-railway  representatives  and  they  said  to  them,  "Here,  you 
have  been  foolii^  us  about  this  tiling.  The  jirofits  in  this  business 
are  more  than  you  have  been  pretending,  and  your  taxes  are  going 
to  be  increased  $400,000  a  year,"  and  those  street-railway  officials 
accepted  it  without  question  and  paid  the  additional  taxes  of  $400,000 
a  year  more  than  they  had  been  paying  previous  to  this  campaign. 

Not  only  that,  but  just  about  that  time  Mr.  Folk,  who  lives  here 
in  Washington  now — ^he  is  an  attorney,  and  he  was  attorney  for  the 
Interstate  Commerce  Commission — he  was  on  the  ticket  there  that 
was  counted  in,  or  elected,  and  Mr.  Folk  was  a  clean,  straight  man 
and  there  was  some  crooked  work  done,  and  out  of  19  members  of  the 
lM)ard  of  aldermen — Mr.  Folk  simply  had  the  [)rosecuting  attorney 
fasten  a  ball  and  chain  around  the  ankles  of  18  of  thase  men  and 
sent  them  to  the  penitentiary  at  Jefferson  City  for  accepting  bribes 
from  street-car  companies;  18  out  of  19  of  theboard  of  aldermen  of 
8t.  Louis  were  sentenced  to  the  Jefferson  City  penitentiary  by  Folk. 
Of  course,  all  of  them  did  not  do  time ;  some  or  them  escaped  on  bond, 
but  18  were  sentenced  there.  So  that  attracted  the  politicians  to  the 
enormous  profits  in  the  street-car  business,  by  Folk's  prosecution. 
They  admitted .  that  every  year  they  would  get  a  check  from  the 
street-car  company  for  $5,000,  and  they  were  expected  to  give  the 
street-car  company  whatever  legislation  it  wanted,  and  they  did. 

The  Chairman.  Did  each  one  of  those  men  admit  they  were  paid 
$5,000  a  year? 

Mr.  Delbridoe.  Yes,  sir ;  each  one  of  them  admitted  on  the  witness 
stand  that  they  were  paid  $5,000.  The  nineteenth  one  would  not 
accept  it.    He  was  sent  a  check  for  $5,000,  but  he  refused  to  accept  it. 

Commissioner  Gadsden.  It  was  not  enough  ? 

Mr.  Delbridoe.  Well,  no;  he  told  the  people  how  it  was;  but  any- 
way, just  a  little  while  after  that  there  was  what  they  called  the 
central  traction  franchise  bill  which  came  up  and  the  officials  saw 
just  how  much  this  thing  was  worth;  and  there  was  one  case  where 
I  believe  he  was  a  member  of  the  city  council,  a  little  higher  than 
the  alderman,  and  in  some  kind  of  a  proceeding  after  that  he  got 
on  the  stand  and  made  this  statement : 

"  They  came  to  me,"  mentioning  the  name,  "  Mr.  Snyder,"  he  said. 
*'  Mr.  Snyder  came  to  me  and  says,  '  I  will  give. you  $50,000  if  you 
will  vote  for  that  bill.'  I  told  him  all  right.  He  gave  me  the  $50,(K)0 
and  I  put  it  in  my  pocket.  I  kept  the  money  in  my  pocket  for  four 
or  five  days  and  I  took  it  back  to  Mr.  Snyder  and  I  handed  it  to 
him  and  I  says,  *  Here,  I  will  not  vote  for  that  bill  for  $50,000.  Here 
is  your  money ;  take  it.'  Mr.  Snyder  says  to  me,  '  What  will  you 
vote  for  it  for?'  'Well,'  I  said,  'I  consider  my  vote  worth  $100,- 
000,'"  and  he  admitted  under  oath  that  Snyder  said,  "'AH  right; 
vote  for  the  bill  and  I  will  give  you  $100,000,'  and  a  few  days  later 
when  the  measure  came  up  I  voted  for  the  bill." 

Now,  that  is?  only  one  angle.  If  you  will  take  the  Associated  Press 
dispatches  of  the  18th  day  of  April,  1919,  this  year,  you  will  find 
that  Mr.  George  F.  Thompson,  who  was  the  chairman  of  the  street- 
railway  committee  of  the  New  York  Legislature,  made  the  state- 
ment before  tiie  legislature  that  "  I  was  offered  $500,000  for  to  vote 


for  the  bill  giving  the  street-car  company  the  right  to  raise  their  fare 
from  5  cents  to  G  cents,"  and  in  a  day  or  two  later  the  statement  was 
made  that  the  man  who  offered  Thompson  this  bill  was  paid  $50,000 
for  approaching  him  with  the  $500,000  bribe. 

There,  gentlemen,  is  where  these  enormous  amounts  of  money  go, 
and  those  are  the  conditions  that  exist. 

Now,  we  will  take  another  little  angle  to  the  case.  In  this  hearing 
down  here  that  was  held  a  month  ago  in  St.  Louis,  the  street-car 
company  made  this  statement :  "  We  have  a  great  deal  of  litigation. 
Our  attorneys  who  are  retained  by  the  year  find  it  impossible  to  at- 
tend to  all  our  litigation  and  we  have  to  employ  outside  attorneys; 
and  on  an  average  it  costs  us  $500  to  defend  every  suit  that  is  filed 
against  us."  And  at  another  time  they  made  the  statement  that  one- 
half  of  the  litigation  of  that  county  was  street-railway  litigation. 
Consequently,  according  to  that,  the  courthouse  hangers-on  and  tlie 
courts  managed  to  get  $500  for  every  bill  that  is  filed  in  a  suit 
against  the  street-car  companies.  Therefore  we  can  not  exj)ect  any 
hel})  from  the  courts  of  our  country  in  dealing  with  the  situation, 
because  directly  and  indirectly  they  get  $500  for  every  bill  filecl 
against  the  company;  therefore  it  complicates  the  situation  a  great 

deal. 

Now,  to  simplify  the  situation,  what  can  we  do?  It  is  not  a  practi- 
cal thing  to  try  to  fix  a  valuation  on  anything,  because  where  there 
is  an  inclination  to  dispute  the  valuation  it  can  be  extended  in- 
definitely, and  the  thing  to  do  is  not  to  bother  with  existing  lines, 
not  to  condemn  them,  but  to  absolutely  ignore  them.  Just  simply 
build  your  2  miles,  or  3  miles  or  4  miles  or  5  miles  of  track  in  the 
suburbs  and  extend  it  toward  the  heart  of  the  city;  and  after  you 
have  done  it  simply  put  on  your  car  and  let  the  motorman — have  no 
conductor  at  all — let  the  motorman  run  the  car,  and  on  the  average, 
no  matter  what  the  mileage  might  be,  it  will  only  cost  through  the 
taxpayers  one-half  of  1  cent  to  render  that  service,  and  we  will  have 
infinitely  better  service  than  we  have  now,  which  is  costing  6,  8,  and 
10  cents. 

Commissioner  Wehle.  Where  do  you  get  the  figure  one-half  of 
1  cent? 

Mr.  Delbrtdge.  I  will  tell  you  where  we  get  that.  Now,  Mr.  Wehle, 
when  you  count  that  according  to  the  street-car  company's  own 
statement  it  costs  them  20  cents  a  mile  to  haul  a  street-car,  and  that 
the  average  haul  is  seventeen-twentieths  or  nineteen-twentieths,  or 
OS  they  expvei  it  sometimes,  about  a  mile,  when  we  know  that  an 
average  car  will  seat  50  people  and  that  frequently  50  people  stand  in 
the  car — that  gives  100  passengers.  Now,  if  that  car  costs  50  cents 
a  mile,  that  would  be  exactly  one-half  of  1  cent,  if  there  are  only 
50  passengers,  assuming  that  there  are  50  in  the  car 

Commissioner  Wehli:.  You  mean  that  if  there  are  100? 

Mr.  Delbridge.  Yes ;  if  there  are  100. 

Commissioner  Wehle.  But  there  are  not  100  in  every  car. 

Mr.  Delbridge.  No;  there  are  not,  by  any  means;  but  when  we 
recognize  the  fact  that  when  you  make  your  comparison  there  under 
existing  conditions,  there  are  enormous  overhead  expenses — for  in- 
stance, the  conductor  is  paid,  and  under  a  free  car  service  there  would 
not  be  any  conductor  at  all,  because  you  would  only  have  your  motor- 
man  and  the  electricity. 


1712     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1713 


I 


Commissioner  Meeker.  Why  pay  the  motorman? 

Mr.  Delbridge.  To  operate  the  car  and  stop  the  car. 

Commissioner  Meeker.  Why  not  let  the  people  run  the  car  ? 

Mr.  Delbridge.  Well,  that  part,  I  suppose,  would  be  impracticable. 

Now,  when  we  know  the  cost  of  hauling  a  steam  car  per  mile,  we 
know  that  3,000  pounds  of  dead  freight  can  be  hauled  1  mile  for  9 
mills,  the  gross  charge.  We  know  very  well  that  under  proper  con- 
ditions freight  that  loads  and  unloads  itself  ought  not  to  be  taxed 
96  times  as  much  as  that  kind  of  freight. 

Commissioner  AVehle.  Does  this  50  cents  per  car-mile  represent 
the  cost  of  operating  the  street-car  ? 

Mr.  Deij^ridge.  What  is  that? 

Commissioner  Wehle.  Did  you  say  50  cents  per  car-mile  represents 
the  cost  of  operating  the  street-car  ? 

Mr.  Delbridge.  I  say  20  cents  a  mile  is  the  average  cost  according 
to  their  reports,  but  in  their  reports  there  is  an  enormous  amount  of 
illegitimate  expense  that  ought  not  to  be  there.  Ten  cents  per  car- 
mile  would  do  the  work.  This  gentleman  from  Terre  Haute  to-day 
gives  the  average  cost  of  hauling  a  car  a  mile  there  as  only  10  cents 
in  Terre  Haute. 

Commissioner  Mahon.  Where  do  you  get  your  figure  of  the  aver- 
age of  a  passenger  riding  to  be  1  mile? 

Mr.  Delbridge.  I  get  that  from  the  sworn  report  made  by  Capt. 
McCullough,  who  at  that  time  was  president  of  the  street  railroads  in 
St.  Louis,  where  he  frequently  went  before  the  commissioner  and 
made  this  statement  under  oath  that  the  average  passenger  does  not 
object  to  standing  in  a  street  car  because,  on  an  average,  he  rides 
only  about  a  mile — sometimes  he  would  qualify  that  by  saying  a  little 
bit  less  than  a  mile,  and  sometimes  he  would  make  the  statement  of 
seventeen-twentieths  of  a  mile — and  that  it  was  so  short  he  did  not 
object  to  standing. 

Commissioner  Mahox.  The  average  here  as  shown  in  the  Boston 
case  was  4  miles. 

Mr.  Delbridge.  I  asked  that  gentleman  that  question  there,  but 
the  truth  of  the  matter  is  that  he  admitted  that  in  that  case  of  Boston 
it  was  very  exceptional,  that  practically  all  of  the  people  there  lived 
away  out,  and  that  they  rode  long  distances.  But,  your  honor, 
counting  it  4  miles — my  gracious,  if  a  car  can  be  hauled  4  miles 
for  80  cents,  why  under  heaven's  sun  should  the  people  pay — why 
should  100  people  pay  $10  for  the  privilege  of  being  hauled  4 
miles?  In  other  words,  the  company  gets  $10  for  what  they  admit 
it  costs  them  80  cents  to  perform.  That  is  what  is  bringing  about 
this  dissatisfaction  among  the  people  of  this  country.  They  realize 
tli£se  infamous  conditions  that  have  been  gradually  growing  up  for 
the  past  generation  and  they  are  going  to  do  away  with  it. 
The  Chairman.  You  may  proceed,  Mr.  Delbridge. 
Mr.  Delbridge.  The  question  was  raised  here — I  believe  it  was  by 
the  gentleman  from  Lynn — would  not  the  people  ride  too  much  if 
they  could  ride  free?  Would  they  not  stay  on  the  cars  all  the  time? 
Well,  we  have  satisfied  ourselves  absolutely  on  that  question  in  the 
Keferendum  League  of  St.  Louis. 

We  did  it  in  this  w^ay:  We  went  down  to  the  elevators  in  the 
buildings,  and  asked  the  men  who  were  operating  those  elevators. 


We  said  to  them :  "  You  don't  charge  anything  for  rides  in  these  ele- 
vators. Don't  you  find  school  boys  and  girls  coming  down  here  and 
riding  up  and  down  in  the  elevators  because  they  can  i:ide  free?" 
One  of  the  men  says  to  me :  "  I  have  been  operating  this  elevator  for 
nine  years,  and  I  have  never  known  a  person  to  get  on  this  car  and 
take  an  unnecessary  ride."  There  was  only  one  instance  of  that 
kind  that  ever  came  up.  There  was  a  lady  who  came  in  and  wanted 
to  see  a  man  in  one  of  the  offices  upstairs  in  the  building,  and  the 
man  w^as  not  there,  and  she  got  on  the  car  and  said,  "  I  will  just 
simply  ride  downstairs  again  and  wait  for  him,"  and  the  elevator 
man  said,  "  You  can  just  stay  on  the  car  and  ride  up  and  down  with 
me,  if  you  like,  until  he  comes."  She  said,  "  No,  I  don't  want  to  do 
that,  I  would  rather  wait  here.  I  am  afraid  some  accident  might 
happen." 

That  is  the  only  case  where  anybody  was  ever  even  invited  to  take 
any  advantage  of  it,  and  she  refused  to  do  it. 

Now,  they  speak  of  local  conditions.  They  say  that  the  conditions 
here  are  different  from  what  they  are  over  there,  and  therefore  no 
rule  and  no  solution  of  the  problem  can  be  arrived  at,  simply  because 
this  town  happens  to  have  a  hill  or  that  town  over  there  happens  to 
have  a  hill  tliat  is  not  quite  as  high.  Gentlemen,  that  is  all  rank 
nonsense.  There  is  not  a  single  bit  of  truth  in  it.  If  that  is  true, 
why  does  the  Interstate  Commerce  Commission  hx  passenger  rates 
at  a  certain  amount  per  mile,  regardless  of  what  territory  it  runs 
through,  almost.  It  does  not  make  any  difference  whether  the  coun- 
try is  mountainous  or  whether  the  country  is  prairie. 

If  we  all  get  on  this  free  proposition  of  street-car  service,  which 
is  the  only  solution  of  the  problem — it  can  not  be  solved  in  any  other 
way;  I  have  been  paid  a  good  deal  for  working  that  thing  up  for 
30  years,  and  if  there  was  any  other  solution,  we  would  have  arrived 
at  it  a  long  time  ago. 

This  man  who  was  on  the  stand  as  a  witness  here  told  us  that 
conditions  in  Fall  Eiver  are  such  that  it  is  necessary  to  have  a  10- 
cent  fare,  but  3  miles  away,  at  New  Bedford,  the  conditions  are  such 
that  it  is  only  necessary  to  have  a  5-cent  fare.  Gentlemen,  that  is 
rank  nonsense.  I  have  been  in  both  places,  and  it  is  simply  a  ques- 
tion of  management. 

If  the  street-car  people  had  just  simply  said,  "  We  wash  our  hands 
of  this  matter,"  and  if  they  had  gone  before  the  people  and  said  that 
the  people  should  pay  the  fares,  to  pay  the  dividends  on  the  money 
invested  in  the  property,  there  never  would  have  been  anything  of 
this  kind  come  up,  and  the  people  would  be  entirely  satisfied.  But 
under  the  prevailing  conditions,  they  are  so  deep  in  the  mire  that  it 
is  absolutely  impossible  to  arrive  at  any  solution  of  a  problem  that 
they  have  anything  to  do  with. 

There  is  no  compromise  possible  there,  in  my  opinion. 

Commissioner  Mahon.  You  do  not  think  welfare  w< 
out? 

Mr.  Delbridge.  No,  sir;  I  do  not. 

Commissioner  Gadsden.  This  seems  to  be  more  of  an  auditing 
proposition  than  a  managing  proposition  from  your  standpoint,  does 
it  not,  Mr.  Delbridge? 

160043**— 20— VOL  2 16 


would  work  it 


Tin 


1714    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Delbridoe.  No,  sir.  Let  the  management  submit  that  propo- 
sition, a  proposition  of  this  kind  to  the  auditors.  The  railroad  com- 
panies do  it.    They  leave  those  questions  to  the  auditors. 

Now,  they  make  the  ar/grument  this  way,  that  the  street-car  com- 
l)anies  pay  more  moiiey  than  the  jitneys  pay,  and  consequently  the 
jitneys  ought  to  be  driven  out  of  biisiness.  The  street-car  companies 
do  not  pay  a  bit  more  percentage  than  the  jitneys.  Both,  I  believe, 
are  taxed  absolutely  fair  and  square. 

Why  in  the  world  should  this  commission  listen  to  arguments  upon 
the  ground  that  because  we  pay  more  taxes  to  pave  the  streets,  you 
must  devise  some  scheme  that  will  enable  us  to  put  the  jitneys  out 
of  business?    In  other  words,  it  would  be  just  as  if  a  grocer  should 


sell  him  those  apples."  Or,  "  if  he  has  a  been  bush  in  his  back 
yard,  or  a  potato  vine,  make  him  quit  raising  potatoes,  because  I 
will  not  be  able  to  sell  him  potatoes,  if  he  raises  them."  There  is 
just  about  as  much  sense  and  justice  in  that  as  in  the  other  propo- 
sition. 

Now,  as  far  as  the  p\irchase  of  any  street  railway  is  conccmed, 
their  stock  is  so  hopelessly  watered — on  an  average  I  do  not  doubt 
but  that  it  is  watered  at  least  8  to  1.  For  instance,  in  my  little  pam- 
phlet there,  the  Catechism  of  Street  Kaihvays — of  which,  if  you 
gentlemen  have  not  got  copies,  I  shall  be  very  glad  to  furnish  them 


sidered  an  authority  in  those  lines.  Since  I  have  printed  that,  how- 
ever, I  have  heard  the  statement  that  the  census  report  makes  it 
$111,000  a  mile.  If  the  average  amount  of  stocks  ana  bonds  issiied 
by  the  street  railroads  is  $111,000  a  mile,  then  the  average  cost,  ac- 
cording to  the  best  and  absolute  evidence  is,  $16,000  a  mile.  In  other 
woi'ds,  tliey  have  got,  on  an  average  for  every  $16  they  have  in- 
vested— they  have  got  out  $111  of  stocks  and  bonds. 

Therefore  that  thing  is  so  hopelessly  tangled  that  it  would  lie  im- 
possible for  any  commission  to  arrive  at  any  value  that  they  oould 
not  liold  it  up  in  court  foi;  the  next  30  or  40  years. 

That  same  thing  came  up  in  connection  with  the  parcel -post  busi- 
ness, when  we  were  fighting  for  the  parcel  post  here.  The  railway 
ofticials  and  the  express  companies  were,  of  course,  all  the  same  thing. 
They  made  an  awful  argument  this  way:  That  the  Government  could 
not  issue  enough  bonds  to  buy  the  express  companies,  and  there- 
fore there  was  no  use  talking  about  the  parcel  post,  because  the  parcel 
post  could  not  be  operated  unless  the  Government  owned  the  express 
companies;  and  the  express  companies  and  the  railroads,  being  so 
closely  identified  that,  in  order  to  buy  the  express  companies  it  would 
also  be  necessary  to  buy  all  the  railroads.  That  was  the  argument 
they  made ;  and  they  fought  us  and  fought  us  on  that  line  for  years, 
but  we  got  the  thing  through.  The  Government  did  not  buy  a 
dollar's  wortli  of  the  express  material.  It  did  not  buy  a  horse  and 
it  (lid  not  buy  a  wagon  from  them  at  all.  It  just  simply  went  ahead 
and  let  tlie  express  companies  run  the  business  or  go  out  of  business, 
as  suited  them. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1715 

That  is  the  solution  of  the  street  railway  problem.  No  city,  no 
State  or  Nation  should  attempt  to  buy  one  dollar's  worth  of  rolling 
stock  or  any  equipment  whatever  of  any  existing  company.  If  they 
want  to  sit  in,  let  them  sit  in.  We  have  nothing  to  do  with  that. 
We  have  not  got  to  protect  their  investments.  It  is  their  own  look- 
out. If  they  want  to  sell  out  or  don't  want  to  sell  out,  that  is  a  matter 
for  them  to  decide.  But  we  have  got  the  right  to  lay  our  rails 
on  sti*eets,  even  if  they  have  their  rails  there.  We  can  just  parallel 
their  rails,  and  have 'them  four  or  five  inches  apart,  and  run  one 

cars,  and  run  them  free. 

I  was  astounded  to  hear  this  statement  made  on  the  stand — a  gen- 
tleman made  the  statement  that— I  believe  it  was  at  Boston— that 
they  had  100  per  cent  rides  at  the  5-cent  fare,  making  $5,  but  when 
they  raised  the  fare  to  10  cents  they  got  $6;  in  other  words  they 
o-ot  60  per  cent  of  the  passengers  at  a  10-cent  fare,  which  gave  them 
at  10  cents,  $6.  In  other  words,  they  deliberately  forced  40  people  to 
subject  themselves  to  disease  by  reason  of  exposure  to  the  weather 
in  walking  in  order  to  get  $1  more  fare — in  other  words,  to  raise 
their  gross  revenues  from  $5  to  $6. 

That  is  wrong,  and  it  is  ju.st  such  things  as  that  that  have  got  this 
country  torn  up  like  it  is  to-day.  ^ 

I  will  say  this:  In  the  last  10  years — there  are  about  600  civic 
organizations  in  St.  Louis,  and  there  has  not  been  a  single  fortnight, 
a  j>eriod  of  two  weeks,  when  I  have  not  been  invited  to  go  befoi^e 
some  of  those  civic  organizations,  or  a  committee  appointed  by  those 
civic  organizations,  and  detail  the  data  that  I  am  giving  you  here; 
and  that  is  one  thing  that  has  raised  the  row  there  in  St.  Louis— the 
absolutely  false  rei>orts  that  those  fellows  make. 

For  instance,  they  issued  tlieir  report— report  after  i^eport,  and  a 
month  ago  they  issued  to  the  auditors  instructions :  "  We  have  to 
make  a  report  to  the  commission  to  get  this  6  per  cent  on  $60,000,000 
valuation.  You  make  your  reports  so  that  we  can  show  a  cost  of  7.58 
cents  to  haul  a  paSvSenger  in  St.  Louis."  And  they  did.  The  audi- 
tors took  those  reports,  and  when  you  figure  it  up  they  had  7.58 
which  it  cost  them  to  haul  a  passenger  in  the  city  of  St.  Louis,  when 
the  average  passenger  on  a  car  knows  that  it  cost  that  company  20 
cents  per  car-mile  to  haul  the  car,  and  yet  they  insist  on  him  paying 
8  cents,  and  putting  98  or  99  other  people  in  that  car.  Gentlemen,  it 
i^  going  to  cause  trouble,  and  it  ought  to  cause  trouble. 

The  street-car  owners  of  the  United  States  are  just  exactly  like  my 
father  and  grandfather  were  in  slavery  times  before  the  war,  who 
lived  in  south  Alabama.  That  is  all  there  is  to  it.  The  slaves  were 
freed.  My  father  and  iny  grandfather  and  those  other  southern  peo- 
ple, if  they  wanted  to  do  it  could  go  out  and  look  at  the  star  of  civili- 
zation and  progress  in  going  through  its  orbit  in  the  heavens,  and 
say  to  that  star :  "  You  must  stop  because  we  have  got  a  title  to  these 
slaves,  and  if  you  don't  stop,  you  will  take  this  title  away  that  we 
have  to  these  slaveys.  Therefore,  you  stop."  They  took  their  guns 
and  they  went  out  in  the  battle  fields  and  tried  to  stop  the  march  of 
human  progi*ess ;  but,  gentlemen,  they  could  not  do  it.  These  holdere 
of  these  street-railway  securities  when  they  come  before  our  legisla- 
tures and  our  commission  say :  "  Here,  the  march  of  human  pix)gress, 
of  civilization,  has  got  to  come  to  a  stop  because,  now,  if  it  goes  any 
further  my  stock  is  liable  to  go  down,  and  it  has  got  to  stop." 


1716    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.. 


Gentlemen,  they  can  stand  there  if  they  want  to,  but  we  are  not 
going  to  stop.  We  will  not  even  hesitate.  Their  stock  is  doomed  if 
thev  take  that  stand,  and  it  ought  to  be  doomed. 

There  is  one  important  feature  that  has  been  brought  out  by  Mr. 
Wehle  over  there,  and  that  is  this :  Should  or  could  the  cost  of  con- 
struction be  met  by  an  especial  assessment  on  the  property  benefited  ? 

We  have  figured  that  out  a  great  deal  for  the  benefit  of  the  Refer- 
endum League  of  St.  Louis,  and  we  have  prepared  data — in  fact,  we 
have  got  a  bill  now,  that  we  are  getting  petitions  on  that  is  going  to 
force  the  city  council  to  put  that  question  to  a  vote,  for  free  street- 
car service  in  St.  Louis.  The  way  this  bill  has  met  that  proposition 
is  this 

Commissioner  Wehi^.  Where  is.the  bill? 

Mr.  Deujridge.  It  has  been  prepared  by  the  Referendum  League, 
and  it  is  now  only  in  the  shape  of  a  petition ;  but  when  we  get  17,000 
signatures  to  that  petition  that  will,  under  the  law,  compel  the  city 
council  to  put  the  question  to  a  vote. 

Commissioner  Wehle.  Has  the  bill  been  drafted  ? 

Mr.  Delbridge.  Yes ;  the  bill  has  been  drafted  and  printed  and  we 
are  now  getting  signatures  to  the  petition.  The  bill  is  in  the  petition; 
it  is  a  part  of  the  petition. 

Commissioner  Wehle.  Could  you  send  a  copy  of  that  bill  here  for 
the  i*ecord? 

Mr.  Delbridge.  We  would  be  delighted  to  do  so.  I  will  write  to 
them  to  do  so ;  yes. 

We  have  been  getting  out  those  petitions  now  for  about  two  weeks. 
They  have  been  in  circulation  for  about  two  weeks. 

Commissioner  Wehle.  What  does  the  bill  provide? 

Mr.  Delbridge.  It  provides,  first  of  all,  a  free  ^reet-car  service ; 
that  is,  that  the  city  shall  start  to  build  a  few  miles  of  track,  and 
never  permit  the  workmen  who  build  the  track  to  drop  the  tools 
until  every  nook  and  corner  of  the  city  has  been  provided  with  a  car 
line,  free  street-cars. 

Our  idea  is,  and  the  bill  provides 

Commissioner  Gadsden.  Why  don't  you  substitute  moving  side- 
walks ? 

Mr.  Delbridge.  We  consider  the  street-car  a  moving  sidewalk. 
That  is  exactly  what  we  are  going  to  make  out  of  it. 

Anyway  the  bill  or  the  measure  provides  this:  That  in  case 'it 
should  be  necessary — we  do  no.t  think  it  is  going  to  be  necessary  to 
make  any  special  practice  at  all;  this  improvement  is  going  to  be 
so  gradual  that  it  is  not  going  to  be  done  in  a  day  or  in  a  month 
or  in  a  year  or  in  two  years;  it  is  going  to  take  10  or  12  years  to 
build  500  or  600  miles  of  track  in  the  city  there,  and  that  work  can 
be  taken  care  of  very  easily  by  the  ordinary  receipts  of  the  city. 
However,  in  case  we  find  it  necessary  to  issue  special  stocks  or 
bonds  it  is  going  to  be  done  in  this  w^ay:  That  a  board  will  be 
appointed,  I  suppose  the  public-service  commission,  and  will  de- 
clare every  certain  number  of  square  feet  on  streets  that  are  served 
by 'this  line  shall  bear  a  certain  percentage  of  the  cost  of  the  line. 
Those  one  block  away  shall  bear  a  little  bit  smaller  percentage, 
and  those  two  blocks  away  a  little  bit  smaller  percentage,  and  so 
on  until — well,  we  think  about  half  a  mile  will  be  about  as  far  as 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1717 

it  will  be  benefited.  That  depends  on  the  location,  of  course.  And 
the  city  is  going  to  go  to  the  property  owners  and  say;  "We  are 
going  to  tax  you  for  the  building  of  this  street-car  line,  but  we  are 
going  to  refund  you  this  money.  Our  tax  receipt  will  be  virtually 
a  bond  on  the  part  of  the  city,  agreeing  within  20  years  to  refund 
to  you  the  money  which  you  have  loaned  us  now  for  the  purpose 
of.  improving  your  property  by  building  this  street-car  line  now, 
and  we  agree  to  have  the  city  redeem  those  bonds  in  20  yeai*s  without 
interest. 

Commissioner  Mahon.  How  are  you  going  to  redeem  them? 

Mr.  Delbridge.  We  are  going  to  redeem  them  in  this  way:  Now, 
every  person  has  to  pay,  on  an  average,  in  St.  Louis,  $21  per  capita 
per  year  for  street-car  service.  Under  free  service  he  will  have  to 
pay  from  $3  to  $5  a  year,  and  we  are  going  to  raise  the  taxes  that 
$3  or  $5  a  year,  and  with  that  $3  or  $5  a  year  we  are  ^oing  to 
create  enough  sinking  fund  to  take  up  those  bonds  without  interest. 

Commissioner  Mahon.  You  are  going  to  put  a  head  tax  on  ? 

Mr.  Delbridge.  I  do  not  know  whether  it  will  be  simply  a  per 
capita  tax  or  just  simply  an  increase  of  the  general  taxation.  We 
believe,  however,  that  an  increased  tax  of  10  cents  on  $1,000  per 
annum  will  pay  the  cost  of  operating  free  car  service,  after  we  have 
got  300  or  400  miles  built. 

I  think  that  answers  Mr.  Wehle's  arguments,  or  his  questions,  in 
regard  to  the  method  that  we  propose  to  use  in  building  that  system. 

Commissioner  Wehle.  My  questions  addressed  this  mornmg  to 
one  of  the  witnesses  had  reference  to  special  assessments  against 
property  holders  whose  property  would  be  improved  in  value  by 
the  building  of  an  extension  of  a  street  railway  m  the  vicinity. 

Mr.  Delbridge.  I  do  not  know  whether  he  stated  it  in  exactly 
those  words,  but  he  estimated  that  the  property  had  been  benefited — 
I  believe  it  was  in  Boston— $133,000,000,  when  the  cost  of  building 
that  line  was  some  $30,000,000.  Therefore,  if  we  built  a  line  at  a 
cost  of  $30,000,000,  we  only  expect  to  ask  property  owners  to  put 
up  $30,000,000  for  20  years,  without  interest,  and  they  keep  getting 
the  benefit  of  the  difference  between  $30,000,000  and  $133,000,000 
increased  valuation. 

Commissioner  Mahon.  Have  you  not  a  petition  in  St.  Louis  to 
purchase  the  roads  that  are  there  now,  or  did  you  not  have  a  peti- 
tion like  that? 

Mr.  Delbridge.  No,  sir;  we  did  not.  In  fact,  the  petition  in  that 
line  reads  this  way :  That  the  city  shall  build  and  equip  the  street- 
railway  lines,  or  if  found  desirable,  they  would  have  the  right  to 
purchase,  in  case  it  should  be  found  desirable  by  the  committee. 
But  our  predominating  idea  is  to  build  and  equip,  and  leave  the 
roads  to  do  as  they  please;  and  most  of  our  organization  are  op- 
posed to  having  any  effort  whatever  made  to  buy  them  at  all,  but 
just  to  let  them  run  or  not  to  run,  to  suit  themselves. 

Commissioner  Mahon.  What  was  the  referendum  petition  on 
which  the  lawsuit  is  now  pending,  in  which  they  were  accused  of 
having  sold  the  petition? 

Mr.  Delbridge.  The  referendum  petition  was  this:  The  charters 
of  two  or  three  of  the  lines  were  about  to  expire  in  a  few  years  and 
they  asked  for  an  extension  of  31  years,  and  the  city  council  granted 


1718    PROCEEDINGS  OF  JFEDERAL.  ELECTEIC  RAILWAYS  COMMISSION". 

them  the  extension  of  their  charter  for  31  years.  It  raised  such  a 
})itter  row  that  the  Referendum  League  went  out  and  got  petitions 
to  nullify  the  act  of  the  council.  Now,  under  the  law  we  had  to 
file  those  petitions  one  Monday — Monday  was  the  last  day;  but  we 
were  afraid  to  risk  filing  them  the  last  day,  because  we  knew  the 
crowd  we  were  dealing  with.  They  are  just  about  like  street-car 
people  are  all  over  the  United  States.  We  were  afraid  to  risk  them, 
so  we  filed  the  petitions  or,  at  least,  intended  to  file  them  one  Satur- 
day morning  about  11  o'clock,  but  on  Friday  night  the  safe  where 
we  had  17,000  petitions  was  drilled  and  blown  open  and  the  pe- 
titions were  stolen,  and  it  was  sworn  that  they  were  burned  up  in 
the  power  house  of  the  U.  K.  We  read  in  the  papers  Saturday 
morning  that  17,000  had  been  stolen ;  they  were  not  all  kept  in  the 
same  safe.  But  the  public  indignation  was  so  ^eat  that  the  public 
poured  into  the  headquarters  and  by  Monday  night  at  11  o'clock  we 
19,(XX)  new  ones.  So  the  street-car  company  then  went  to  the  council 
them.  The  public  had  replaced  the  17,000  stolen  signatures  with 
19,000  new  ones.  So  the  street-car  company  then  went  to  the  council 
and  said  the  best  thing  to  do  is  to  repeal  the  bill,  so  we  can  kill  it 
that  way,  and  the  council  repealed  the  bill. 

Commissioner  Mahon.  It  is  standing  that  way  yet  ? 
Mr.  Delbridge.  No,  sir.  The  ma}  or  under  the  charter  had  the 
right,  and  he  granted  that  extension  and  signed  the  bill  at  the 
Missouri  Athletic  Club  that  night  and  extended  their  charter  for 
21  years,  so  now  they  have  an  extension  of  their  charter  which  has 
been  pronounced  valid  by  the  city  law  department,  good  for  21 
years. 

Commissioner  Mahon.  Twenty-one  years? 

Mr.  Delbridge.  Yes;  but  we  are  paying  no  attention  to  their 
charter.  We  are  going  right  ahead  getting  up  our  referendum  pe- 
titions and  we  are  going  to  have  free  street-car  service  in  St.  Louis. 
Now,  when  they  get  to  talking  of  the  cost  of  building  lines  I 
want  to  give  you  a  statement  here.  The  city  of  St.  Louis  has  some 
w^orks  at  the  Chain  of  Rocks  some  few  miles  up  the  river.  In  order 
.  to  get  their  workmen  to  and  from  this  place  they  asked  the  street- 
railway  company  there  to  build  a  street-car  line  up  to  the  Chain  of 
Rocks  so  they  could  transport  their  workmen.  The  street-car  line 
refused  to  do  it.  Mr,  Kelly  introduced  a  bill  in  the  council  to  build  a 
street  car  line,  and  they  built  and  equipped  6  miles  of  street-railway 
line  to  ac<iommodate  the  workmen  at  the  Chain  of  Rocks  and  it  cost 
them  $27,000  to  build  and  equip  that  6  miles,  and  that  line  was 
operated  free  for  a  few  years  after  it  had  been  built.  Any  passenger 
could  get  on  it  by  simply  netting  a  permit  from  the  city  hall  and 
ride  free  on  that  line.  But  of  course,  after  this  example  and 
illustration  had  been  goin^  for  three  or  four  years,  the  street-railway 
interests  saw  that  that  thing  would  not  do,  and  they  got  a  bill 
through  that  forces  them  to  charge  fares  on  the  city-owned  lines. 

I^t  us  come  to  another  proposition  now.  How  do  they  get  these 
Rwful  legitimate  values  that  are  fixed  up  in  such  a  way  that  they 
could  be  classed  as  legitimate?  When  you  come  to  the  question  of 
valuation,  I  will  say  this,  that  a  man  would  naturally  assume  it  is 
possible  to  ^x  a  value  on  a  thing,  but  it  can  not  be  done — tliat  is,  an 
undisputed  value.    I  was  ordered  to  come  before  the  Interstate  Com- 


PROCEEOINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1719 

merce  Commission  some  years  ago  and  I  was  notified  that  the  ques- 
tion of  valuation  was  going  to  be  an  -important  feature.  In  order 
to  simplify  that  question  as  much  as  possible  I  will  tell  you  what 
I  did.  There  is  a  pocket-knife  I  paid  $1.50  for  15  years  ago.  After 
I  had  used  that  knife  for  five  pr  six  or  seven  years  i  simply  took  it 
to  a  knifesmith  and  I  said,  "  You  take  that  knife  intx)  as  many  parts 
as  you  possibly  can."  I  went  back  the  next  day  and  he  handed  me 
10  pieces  of  knife  in  an  envelope  and  says,  "There  is  your  knife." 
I  took  that  out  to  four  or  fiveM)ther  concerns  and  I  said,  "  What  will 
you  make  me  this  blade  for,  and  this  blade  for? "  And  I  took  two 
or  three  parts  to  another  concern  and  says,  "  Wliat  will  you  make 
that  for  ?  "  When  I  had  got  around  I  had  sworn  affidavits  to  the 
valuas  of  those  parts  and  what  they  would  make  them  for,  and  I  put 
it  together  and  it  was  $23.  So  I  got  on  the  train  with  this  pocket- 
knife  with  those  sworn  affidavits  and  I  submitted  that  evidence. 

Now,  gentlemen,  if  it  is  possible  to  fix  a  legal  valuation  on  a  sec- 
ond-hand pocket-knife  that  is  worth  65  or  60  cents  into  a  legal  valua- 
tion of  $23,  what  under  heaven's  sun  can  an  expert  auditor  do  when 
it  comes  to  a  street-car  line  with  5,000  different  parts?  There  you 
are,  right  there. 

Now,  there  is  another  proposition.  I  want  to  say,  I  told  you  all 
when  I  first  was  a  young  fellow  my  exclusive  work  was  auditing. 
This  proposition  that  is  bothering  us  all  here  to-night  is  nothing  new 
to  me.  I  have  been  having  to  do  that  all  my  life  for  nnself  and 
other  people.  As  a  natural  effect,  for  tlie  last  15  years  I  will  tell 
you  this:  When  a  man  submits  to  me  an  auditing  proposition,  I  say 
to  him,  "  Get  somebody  else ;  but  if  you  can  find  nobody  who  can  do 
it,  bring  it  to  me  and  I  will  do  it  for  you."  I  never  take  a  special 
job  unless  it  is  one  thai  everybodv  else  has  abandoned  and  declared 
to  be  impossible.  There  is  a  book  there  that  has  about  1,000  pages, 
and  each  page  contains  1,100  calculations.  When  I  first  went  into 
au<liting  there  was  not  any  such  thmg  as  that  to  be  had.  I  lived 
in  Atlanta,  Ga.,  at  that  time  and  most  all  my  work  was  with  the 
large  cotton  factors  of  the  South.  They  would  buy  their  cotton  all 
over  Georgia  and  Alabama  and  they  would  send  their  tickets  in  to 
me  when  they  bought  a  bale  or  so  many  bales  of  cotton  at  a  certain 
pric|,  at  9{i  cents,  so  many  pounds,  and  they  would  give  the  fellow 
the  original  copy,  keep  the  duplicate,  and  send  me  the  triplicate  to 
Atlanta,  and  I  would  audit  their  tickets  and  charge  them  $4  a  hun- 
dred for  the  auditing.  And  I  would  send  the  tickets  back  to  them 
O.  K.,  or  if  any  error  was  found,  with  the  error  pointed  out.  Be- 
tween the  time  the  man  paid  for  the  cotton  and  mailed  me  those 
duplicates  or  triplicates  and  the  time  I  audited  them  in  Atlanta,  it 
was  generally  just  about  a  week  that  would  elapse,  or  five  or  six 
days.  Of  course,  most  of  the  farmers  lived  out  5  or  6  or  8  or  10 
miles.  Then  if  there  was  an  error,  the  next  time  the  farmer  canie 
to  town  the  merchant  would  call  his  attention  to  it  and  refund  it. 
That  went  on  for  five  or  six  years,  and  I  made  a  living  at  it.  Thei*e 
is  a  proposition  where  I  was  getting  $44  for  a  given  amount  of 
work  and  I  thought :  This  thing  is  obsolete ;  we  must  devise  some 
simpler  plan  than  this.  Sometimes  they  would  telegraph  me  to  be 
careful  to  get  these  off  to-night,  and  it  was  a  responsible  job.  I 
concluded  that  the  thing  was  to  devise  some  scheme  which  would 


1720    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

render  it  possible  for  a  bookkeeper  in  the  office  to  do  his  own  work, 
and  those  books  are  the  result  Of  that. 

To-day  we  are  selling  for  2  cents  and  making  more  money  than  we 
used  to  sell  the  special  work  and  get  $44  for.  It  is  simply  a  difference 
of  system.  We  have  chang-ed  that.  What  we  give  the  man  to-day  for 
2  cents  does  his  work  better  than  we  could  do  it  when  we  got  $44 
for  it. 

Xow,  I  told  the  street  milroads  in  St.  Louis  20  years  ago — I  said, 
"  Let  me  tell  you,  if  you  people  will  drop  your  fares  to  3  cents,  you 
won't  have  to  do  any  briberv  business;  you  can  save  all  that  money, 
and  you  will  absolutely  make  more  money  than  you  are  at  5  cents. 
You  will  educate  the  people  to  ride  on  the  cai*s." 

Lender  the  recent  conditions  you  stand  at  every  car  door  with  a 
club  and  you  say  to  this  man  that  gets  on  this  car,  "  You  fool,  keep 
off  of  those  cars."  They  do  not  knock  a  man's  brains  out  and  make 
him  keep  off  of  those  cars,  but  they  do  everything  else  they  can  to 
induce  him  to  keep  off  the  cars,  and  we  have  got  to  change  the  system ; 
we  have  got  to  sweep  all  that  nonsensical  stuff  out  of  existence  and 
eliminate  this  enormous  unnecessary  expense  of  car  operation;  and 
that  is  just  simply  to  have  the  free  car  service.  In  the  first  J>lace,  the 
ver}^  first  thing  you  save  is  your  overhead  expenses  and  franchise 

Commissioner  Meeker.  1  notice  that  during  the  rush  hour  here  in 
Washington  and  other  cities  the  street-cars  simply  can  not  handle  the 
traffic  even  with  the  5-cent  fares  and  fares  in  excess  of  that.  Would 
it  not  be  extremely  difficult  or  impossible  to  handle  the  traffic  with 
no  fares  at  all? 

Mr.  Deujridge.  Your  honor,  I  will  say  this,  that  when  we  get  into 
this  peak-load  business  that  is  being  taken  advantage  of  to  the  ut- 
most limit  by  the  street-car  companies  by  threatening  that  they  can 
not  put  on  the  cars.  Now,  there  are  plenty  of  men  who  work  a  cer- 
tain number  of  hours  a  day,  and  they  will  say  to  their  boss,  "  Now, 
here,  I  will  work  for  you  up  to,  say  5  o'clock,  because  from  6  to  7  the 
car  company  w  ill  give  me  75  cents  an  hour  and  I  could  work  the  two 
hours" — or  a  dollar  or  a  dollar  and  a  quarter  an  hour,  and  it  will 
solve  the  problem  in  that  way. 

Now,  it  it  is  possible  for  a  car  company  to  operate  the  cars  and  get 
as  much  money  for  a  strap  service  as  they  do  for  a  seat  service,  does 
it  not  stand  to  reason  that  they  will  extend  the  strap  service  to  every 
hour  in  the  day  that  they  can^  If  that  argument  holds  good,  let  me 
cite  you  an  example.  In  my  work  I  pay  very  little  attention  to  the  time 
of  day  or  night.  I  do  not  look  at  the  clock.  I  get  up  and  go  down 
to  my  office  and  do  my  work.  Now,  a  little  while  ago  I  had  occasion 
to  go  to  my  office  one  Sunday  morning  at  half  past  3.  I  would  not 
call  Sunday  morning  at  half  past  3  oxjlock  a  rush  hour,  yet  I  want 
to  say  to  you  that  that  crowd  I  got  into  on  that  car — I  found 
when  I  went  to  get  out  that  two  of  my  vest  buttons  had  been  scraped 
off  getting  into  that  crowd  on  the  car.  They  simply  put  on  the  cars 
and  feed  them  out  on  the  streets  at  such  intervals  as  they  think  would, 
as  one  gentleman  expressed  it,  give  them  the  largest  income,  and  that 
is  the  only  idea  on  earth  they  think  about. 

In  the  first  place,  they  should  not  be  permitted,  if  they  collect  fares 
at  all,  to  have  two  fares  for  the  same  class  of  service,  nor  have  two 
classes  of  service  for  the  same  fare.  The  courts  have  held  that  to  be 
absolutely  illegal,  and  under  existing  laws  I  believe  it  is  illegal  for 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1721 

a  car  company  to  collect  6  cents  from  one  man  and  give  him  a  seat 
and  charge  another  5  cents  unless  they  give  him  a  seat.  And  when- 
ever the  time  comes  when  they  want  to  solve  that  problem  enough 
cars  will  be  put  on  to  give  every  passenger  a  seat. 

A  few  years  ago  I  was  at  Birmingham,  Ala.,  and  they  had  a  big 
baseball  game  out  at  the  park.  There  were  thousands  of  people 
there.  But  do  you  know,  that  company  had  enough  cars  on  the  side 
track  to  give  every  passenger  a  seat.  If  they  want  to  do  it,  they  will 
do  it,  but  they  will  never  do  it  under  prevailing  conditions. 

The  Chairman.  What  motive  do  they  have  in  not  giving  good 

service  ? 

Mr.  Delbridge.  Well,  your  honor,  what  motive  did  the  Southern 
people  have — what  motive  did  we  have  in  the  South  for  holding 
slaves?  When  my  father  and  grandfather  and  my  uncle  went  out 
among  their  people  and  said  to  them,  "  Here,  the  time  has  come  for 
slavery  to  be  abolished,"  they  hooted  at  them  and  they  said,  "No; 
we  will  hold  our  slaves."  And  they  went  into  that  war  and  they 
lost  one-half  of  the  best  blood  of  the  South  and  every  dollar  on 
earth  they  had  besides  the  slaves,  and  they  lost  the  slaves  in  the  end. 
Why?  fiecause  the  Southern  people  were  just  simply  that  stupid. 
Now,  the  motive  that  these  street-railway  officials  have  in  rendering 
bad  service  is  just  simply  because  they  have  not  got  any  better  sense. 
They  are  just  that  stupid ;  that  is  all. 

Now,  this  question  of  depreciation.  That  question  has  been  raised 
here  a  great  deal.  Do  yOu  know,  as  an  absolute  matter  of  fact,  that 
I  heard,  under  oath,  Perkins,  the  general  manager  of  the  street-car 
lines  in  St.  Louis,  admit  within  the  last  30  days  that  his  company 
had  sworn  on  the  7th  of  May,  1914,  that  their  gross  property  was 
worth  $6,783,000,  and  that  in  the  last  12  years  they  had  charged  off 
to  depreciation  $33,000,000.  How  in  this  world  can  property  worth 
$6,000,000  depreciate  $33,000,000  in  12  years? 

Now,  on  cross-examination  they  asked  him,  "Mr.  Perkins,  don't 
you  think  that  is  an  excessive  depreciation  account?"  Well,  no; 
he  did  not  think  so.  The  truth  of  the  matter  is  up  to  two  years  ago 
they  had  been  charging  2  per  cent  a  year  instead  of  10  per  cent,  and 
they  asked  him  if  he  spent  this  money  in  repairing  the  cars.  No. 
Then  they  took  the  auditor's  report  and  showed  where  last  year 
they  simply  took  from  depreciation  account  and  redeemed  $500,000 
worth  of  bonds. 

In  the  first  place,  depreciation  account  in  almost  all  cases  is 
simply  and  solely  a  slush  fund.  If  a  window  is  broken  out  of  a  car 
or  if  the  car  is  damaged,  it  is  rolled  into  the  shops  at  night  and  that 
car  is  repaired.  The  depreciation  is  taken  care  of  in  the  pay-roll 
account  and  in  the  purchase  of  supplies ;  therefore,  there  is  virtu- 
ally no  depreciation  at  all  that  ought  to  be  charged,  and  it  is  purely 
a  slush  account. 

Now,  gentlemen,  there  is  a  little  red  book  that  I  wish  to  submit 
here  in  evidence.  There  is  the  auditor  who  cracked  that  safe  for  the 
benefit  of  the  street  railroads  of  St.  Louis.  That  is  his  statement, 
and  this  book  has  been  sworn  to  under  oath  before  the  grand  jury  in 
St.  Louis.  This  auditor,  in  every  paragraph  in  that  book,  tells 
about  spending  thousands  and  hundreds  of  thousands  of  dollars  in 
bribery,  and  in  trying  to  defeat  labor  organizations  there  in  St. 


1722    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Louis.  Yet,  gentlemen,  not  one  dollar  of  that  appears  in  that  com- 
p:iny  report — ^not  a  dollar. 

Where  did  that  money  come  from?  Where  did  that  money  come 
fruiii  that  was  spent,  that  this  man  detailed— millions  of  dollars 
there,  and  not  one  cent  of  it  shows  in  tlieir  report?  It  just  simply 
comes  from  the  depreciation  account  and  from  tliousands  and  thou- 
sands of  other  accounts. 

Commissioner  Gadsden.  You  don't  think  they  should  keep  any 
dcoieciation  account? 

Mr.  Delbridge.  That  is  purely  questionable.  The  depreciation 
IS  always  taken  care  of  in  the  pay  roll  and  in  the  purchase  of 
supplies. 

Now,  gentlemen,  I  want  to  come  to  an  issue  that  is  more  vital  than 
anything  that  we  have  touchetl  uix>n  yet. 

On  account  of  my  familiarity  with  street-railway  bookkeeping 
and  data,  when  I  first  went  to  St.  rx)uis  about  20  years  ago,  of  course, 
I  realized,  after  I  had  been  there  for  two  or  three  days,  the  condi- 
tions. (I  knew  nothing  especially  about  the  street-railway  business 
at  Atlanta.)  But  if  you  put  a  mouse  in  a  room  where  there  is  a  rat- 
hole  he  knows  where  the  rat  is  going  to  go,  and  he  does  not  have  to 
do  much  investigating  to  find  the  hole.  He  knows  there  is  a  hole 
there,  and  ho  knows  just  about  where  to  look  for  it.  That  is  just 
about  the  w«y  it  is  with  an  auditor  on  a  proposition  like  that. 

I  saw  by  the  enormous  number  of  accidents  happening  on  the 
line  there,  that  it  was  rather  a  bad  propostion.  That  was  to  me 
a  much  more  serious  projxxsition  than  the  enormous  amounts  of 
watered  stocks.  According  to  their  own  sworn  statements,  they  have 
pyMi  on  every  $100  worth  of  stock  and  bonds,  and  they  have  pock- 
eted or  paid  to  some  authorities  $98.47^.  That  is  accoi-ding  to  their 
own  sworn  stat^^ments,  and  I  suppose  it  is  about  true. 

^Vhat  appealed  to  nie  strongest  was  the  enormous  number  of  acci- 
dents. Of  course,  knowing  something  about  the  rules  of  percent- 
ages, I  knew  if  they  had  a  thousand  cars  on  those  streets,  and  they 
averaged  each  car  running  10  houi-s  a  day,  that  would  give  them 
1(),0(X)  car-hours  a  day;  and  I  realized  that,  if  I  traveled  on  the 
cars  an  average  of  an  hour  a  day  and  if  I  saw  an  accident  onr^  a 
week,  or  once  a  month,  or  once  in  two  months,  the  ratio  would  hold 
good,  and  that  there  was  an  enormous  numl)er  of  accidents. 

That  made  me  very  indignant.  I  realized  that  it  was  all  brought 
about  by  the  attempts  to  operate  their  cars  at  such  a  speed  as  to 
enable  them  to  take  in  enough  money  to  pay  dividends  on  $100  with 
an  actual  investment  of  $6.52^.  I  realized  that  that  meant  not  only 
dangerous  but  absolutely  murderous  service. 

I  took  up  that  question  in  the  Republic  on  January  9,  1913.  The 
sti^'et-car  companies  admit  in  a  report  there  that  they  injure<l, 
maimed,  nm\  killed  for  the  previous  year  5,949  people.  I  took  that 
up  with  the  street-car  men,  and  I  said,  "  Gentlemen,  it  looks  to  me 
like  your  legal  expense  in  regard  to  all  this  stuff  would  be  so  gi'eat 
tliat  it  would  i)ay  you  to  put  on  a  sufficient  number  of  cars  to  enable 
you  to  operate  the  cars  carefully  enough  to  keej)  from  maimin<r, 
injuring,  and  killing  this  vast  number  of  people."  '^ 

They  talked  the  thing  over,  and  finally  they  said,  "  The  truth  of 
the  matter  is,  we  have  gone  over  the  thing  and"  figured  it  all  out,  and 
we  do  not  care  to  make  any  change." 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAmWAYS  COMMISSION.    1723 

In  other  words,  they  told  me  this :  "  That  it  costs  us  more  money 
to  operate  our  cars  in  such  a  way  that  we  do  not  kill  men,  than  it 
does  to  kill  the  men.  Consequently,  we  will  just  let  things  run  along 
as  they  are  now." 

So, 'in  the  Republic  of  January  9,  1913— they  admitted  injuring, 
maiming,  and  killing  for  the  previous  year  5,949  people;  so  that  on 
the  18th  of  March — it  took  me  quite  a  little  while,  it  took  me  about 
thi-ee  months  to  work  that  out — on  the  18th  of  March  I  saw  that  the 
thing  to  do  was  to  force  them  to  put  on  more  care ;  but  the  proposi- 
tion was  how  to  force  them  to  put  on  more  cars.  I  knew  at  the  city 
hall  we  could  get  no  chance,  and  that  at  the  legislature  we  could  not 
get  any  chance,  so  I  then  figured  it  out  this  way :  If  I  could  start  a 
movement  of  paying  3  cents  unless  we  got  a  seat,  it  would  do  the 
work. 

So,  on  Marcli  18th,  I  got  on  a  car,  and  I  says  to  the  conductor: 
"  I  don't  see  any  seats  in  this  car.  Here  are  three  cents.  I  will  pay 
the  other  2  cents  if  I  get  a  seat  before  I  get  down  town." 

He  didn't  say  anything.  He  asked  me  what  my  name  was,  and 
asked  me  for  a  card,  and  I  gave  him  two  or  three  of  them. 

The  next  morning  there  was  a  little  bit  of  a  row  about  that. 

That  kept  up  there  every  day  for  about  10  days. 

On  the  29th  of  March,  the  conductor  says  to  me :  "  You  drop  the 
fare  in  tlie  box ;  the  fare  on  this  car  is  5  cents,  and  you  drop  that 
other  2  cents  in  the  box  or  I  will  have  you  arrested." 

l*y  that  time  I  was  up  around  the  middle  of  the  car  and  to  be  can- 
did,*! am  not  very  modest,  and  I  didn't  object  to  all  the  passengers  in 
the  car  knowing  exactly  what  was  being  done.  So  I  straightened  up, 
and  I  said  to  him :  "  All  right,  old  man,  there  is  a  police  station  down 
the  street  just  nine  blocks,  and  in  order  to  see  that  you  don't  forget 
to  have  me  arrested,  I  will  let  you  know  when  we  get  there,  but  I 
will  not  pay  that  other  2  cents  until  you  give  me  a  seat." 

We  shot  by  that  police  station  at  about  25  miles  an  hour.  About 
half  a  block  before  we  got  there,  I  sung  out:  ''  Here  is  the  police  sta- 
tion only  half  a  block  away.  If  you  want  to  have  me  arrested,  you 
had  best  begin  to  slack  up."    But  we  didn't  slack  up  at  all. 

When  I  got  down  town  I  had  not  got  a  seat,  and  I  said  to  him: 
"  Why  didn't  you  have  me  arrested?"  He  looked  at  me  and  smiled 
and  said,  "  You  will  have  to  pick  a  younger  man  than  I  am." 

From  that  day  for  five  years  in  not  a  single  instance  did  I  ever 
pay  but  3  cents  unless  I  got  a  seat.  The  street-car  company -officials 
just  simply  issued  instructions  to  say  nothing  about  it;  and  a  good 
many  were  doing  the  same  thing.  What  was  the  result  ?  In  the 
Post-Dispatch  of  May  5,  1914,  they  published  a  report  which  showed 
that  thev  injured,  maimed,  and  killed  the  previous  year,  3,720  peoi)le. 
In  other  words,  they  had  injured,  maimed,  and  killed  2,229  fewer 
people  than  thev  had  in  the  previous  year;  and  they  admitted,  in  the 
report  published  June  3  of  that  same  year  that  they  had  put  on  112 

additional  cars. 

In  other  woixls,  by  our  forcing  them  to  put  on  112  additional  cars 
they  admitted  that  they  injured,  maimed,  and  killed  2.229  fewer 

people  in  a  single  year. 

In  the  Times  of  October  19,  1915,  a  year  later  still,  they  admitted 
that  they  injured,  maimed,  and  killed— that  in  two  years'  time  those 


1724     PROCEKDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

fellows  reduced  their  accidents  from  5,549  to  3,050.  In  other  words> 
they  injured,  maimed,  and  killed  2,899  fewer  people  Tvithin  a  single 
veai'. 

*       ■■■, , 

The  conunission,  however,  about  this  time  passed  a  rule  that  the 
legal  car  service  should  be  a  service  where  all  the  cars  preceding  a 
given  car  for  15  minutes  and  also  following  for  15  minutes,  contain 
60  seats  for  every  100  passengers — CO  or  70  seats  for  every  100  passen- 
gers, which  rendered  it  impossible  for  me  to  make  anything  like  a 
successful  suit  in  case  I  was  put  off  for  refusing  to  pay  fare ;  and  that 
stopped  it,  but  I  kept  it  up  for  two  or  three  years  after  the  commis- 
sion passed  this  rule. 

How  is  it  possible  for  all  these  favors  to  be  granted  by  commis- 
sions and  by  legislatures  and  by  city  councils  ?  It  costs  money  to  do 
that. 

It  is  not  the  cost  of  the  rise  in  materials;  it  is  not  the  cost  in  the 
rise  in  the  price  of  labor  but,  gentlemen,  they  are  asking  increased 
fares  in  order  to  meet  the  additional  cost  of  bribery,  and  tor  no  other 
purpose  in  this  world.    That  is  it. 

Now,  wait  a  minute.  I  have  been  an  auditor  for  companies  for  a 
long  time,  and  I  have  talked  with  these  officials  about  their  labor 
costs,  and  there  is  not  a  man  who  is  a  manager  of  a  railroad  in  the 
United  States,  nor  a  factory  that  employs  1,000  people,  but  who  will 
tell  you  fairly  and  squarely  that  it  is  not  the  cheap  labor  that  turns 
out  a  unit  of  product  at  the  lowest  cost,  but  the  best  labor  and  the 
most  expensive  labor ;  and  any  other  statement  is  a  lie. 

You  take  the  labor  in  those  concerns  I  am  connected  with — and  my 
gracious,  I  see  a  boy  at  work,  and  I  want  to  see  what  the  habits  of 
that  boy  are ;  how  much  you  are  paying  him  ?  And  if  you  pay  that 
boy  the  limit  you  will  get  good,  honest,  sincere  work,  and  if  you  can 
not  do  it,  you  let  that  boy  go,  but  don't  cut  down  his  wages.  That 
is  the  way  to  get  it.  It  is  not  the  cheap  labor  that  does  the  cheap 
work.  It  is  the  good,  honest  labor,  the  expensive  labor  that  does  the 
cheap  work,  and  when  the  street-railway  men  tell  j-ou  that  they  have 
increased  the  wages  of  their  men  from  40  to  50  cents  or  60  cents  an 
hour,  and  it  costs  them  more  money  to  do  it,  it  is  a  lie;  it  does  not, 
because  the  work  of  those  men  is  that  much  more  efficient,  and  they 
have  fewer  accidents,  and  they  handle  their  work  in  a  more  satisfac- 
tory w  ay,  and  they  make  better  time.  That  applies  to  all  classes  of 
labor. 

I  say  this :  There  is  some  profiteering — a  little  bit.  But  I  want 
to  impress  this  commission  with  this  fact:  You  can  sit  here  for  a 
year,  if  you  want  to,  or  for  two  years,  or  for  50  years,  but  there  is 
only  one  solution  of  the  street-railroad  problem  that  is  going  to 
do  the  work,  and  that  is  to  put  on  a  free  car  service.  Let  it  be  done 
by  the  city ;  let  it  be  done  by  the  State ;  let  it  be  done  b}^  the  Xation ; 
but  any  system  of  auditiug  where  you  attempt  to  collect  each  fare, 
and  go  to  the  expense  of  preparing  for  that,  costs  more  mone}^  to  do 
that  than  it  does  to  render  the  service  for  which  the  fare  is  paid. 
i\Ve  have  got  to  eliminate  that  if  we  want  to  solve  the  problem. 

This  question  was  asked  me — I  have  had  to  appear  before  a  great 
many  commissions  and  committees  and  bodies — and  one  of  our  law- 
yers asked  me,  on  the  stand,  when  that  public-service  commission 
submitted  their  report  showing  it  cost  the  7.58  cents  to  haul  a  street- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    172S 

railway  passenger  in  St.  Louis,  he  says  to  me:  "  Do  you  believe 
these  reports  are  made  with  any  idea  of  anybody  believing  these 
reports?"  And  I  says,  "No;  I  do  not.  The  thing  is  so  raw;  it  is 
fio  black  and  so  infamous,  so  outrageously  and  infamously  bad  that 
I  sincerely  believe  they  do  not  expect  anybody  to  believe  it,  but 
merely  to  provide  interested  and  bribed  individuals  with  an  excuse 
for  claiming  that  they  do  believe  it."     That  is  what  those  things 

are  done  for. 

Let  us  take  an  honest  cost  proposition.  Here  is  an  absolute  case: 
Capt.  Schinker,  in  St.  Louis,  owned  some  property  outside  of  the 
city,  and  he  wanted  a  street-car  line  out  to  that  property,  and  he 
asked  the  street  railway  if  they  would  build  it,  and  they  said  no. 
So  Capt.  Schinker  built  3^  miles  of  track  and  equipped  it,  and 
built  a  power  house,  and  provided  for  electricity  and  everything,  at 
a  gross  cost  of  $66,000  for  the  3^  miles  of  track. 

He  gradually  sold  out  his  property  there,  and  decided  that  he 
would  go  out  of  the  street-railway  business.  So  then  he  went  to  the 
street-railway  company  and  told  them  that  he  wanted  to  be  per- 
fectly honest  with  the  people.  He  said :  "  I  have  sold  this  property 
to  them.  I  sold  them  this  property  one  day  when  there  was  a 
street  car  line  running  there,  and  I  promised  them  that  that  line 
would  continue  to  run.  Now,  what  will  you  give  me  for  this  prop- 
erty and  continue  to  operate  the  line?"  They  said,  "We  will  not 
give  you  anything  for  it."  He  says,  "All  right ;  then  I  will  give  it 
to  you."  So  he  presented  the  street-railway  companies  there  with 
that  street-railway  line,  costing  him  $66,000  to  build,  under  a  con- 
tract that  they  would  continue  to  operate  the  line. 

A  little  later  they  had  a  reorganization  in  St.  Louis,  and  that 
line  was  sold  to  the  new  company  for  $600,000. 

In  other  words,  the  stockholders  and  bondholders  there  are  re- 
quiring the  people  of  St.  Louis  to  pay  enough  to  pay  6  per  cent 
upon  a  $600,000  investment  that  did  not  cost  them  one  single  soli- 
tary cent.  Now,  the  reorganization  company  paid  $600,000.  They 
gave  somebody  $600,000  in  stocks  and  bonds,  and  they  could  claim 
that  it  cost  them  that  amount  of  money  because  they  did  issue  stocks 
and  bonds  to  the  amount  of  that. 

I  was  mighty  sorry  to  see  that  Mr.  Bauer  got  confused  on  the 
stand  to-day.  He  did.  He  made  this  statement :  He  said  that  elec- 
tricity costs  so  much  to  get  it  into  the  controller  box  to  operate  the 
car  that  it  was  impossible  for  the  rider  to  pay  enough  fare  to  pay 
the  cost  of  that  electricity.  There  never  was  a  greater  mistake  in  the 
world.  He  is  honest  enough,  but  that  is  all  a  mistake.  For  instance, 
every  elevator  in  the  office  buildings  of  St.  Louis,  where  they  operate 
from  just  a  little  after  sun-up  until  about  dark,  continuously— the 
average  cost  of  the  electricity  for  an  elevator  is  only  $20  a  month. 
Now,  if  an  elevator  that  lifts  a  dead  weight  up  and  down  can  be  oper- 
ated a  month  at  a  cost  of  $20,  is  it  not  absolutely  absurd  to  assume 
that  it  costs  the  street-car  company  any  more  than  that?  The  power 
used  is  about  the  same  in  each  case ;  therefore  the  cost  of  electricity  for 
a  street-car  is  not  over  $20  a  month.  I  do  not  care  how  they  pad  the 
figures,  or  anything  about  that,  but  I  want  to  show  you  how  that 
padding  is  done.    In  St.  Louis,  they  have  the  Keokuk  Dam,  up  at 


1726    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Kookuk,  Iowa.  I  am  told  that  there  are  five  distributiiiff  com- 
panies between  the  place  where  the  power  is  ^nerated  and  the  car 
tliat  uses  the  power;  that  one  company  buys  it  from  another:  that 
another  company  buys  it  fix)m  that  company;  and  another  com- 
pany buys  it  from  that  company.  Gentlemen,  do  vou  know,  if  vou 
taiie  a  product  that  costs  $1  to  sell  it,  that  sells  Jor  a  dollar  and 
winch  l)earg  a  profit  even  at  the  dollar  that  it  is  sold  for,  if  you  will 
pas^  that  through  four  middlemen's  hands,  and  assume  that  the  cost 
of  domg  busmess  of  each  middleman  is  20  per  cent,  and  he  wants  a 
proht  of  20  per  cent,  that  the  man  who  buys  it  from  the  fourth 
dealer  has  got  to  pay  $13£6  in  order  for  each  one  of  those  to  get 
that  20  per  cent  profit  i  That  is  one  of  the  ways  those  things  are 
done.  Of  course,  there  are  thousands  and  thousands  of  ways  that 
is  done.  -^ 

Now,  another  thing • 

The  Chairman.  \  ou  have  suggested  several  times  that  there  is  a 
solution,  and  that  is  for  the  city  to  operate  these  plants  without 
charging  passengers. 

Mr.  Delbridck.  Yes. 

The  Chairman.  It  is  your  real  solution,  is  it  not? 

Mr.  Delbridge.  That  is  the  onlv  solution ;  yes,  sir. 

The  Chairman.  How  is  that  solution  to  be  brought  al)out« 

Mr.   DELBRiDGfi.  That   solution   is  to  be  brought   about  bv   iust 
simply  increasing  your  general  tax  rate  a  little.    We  estimate^ in  St 
Loms  that,  after  we  have  got  the  entire  city  gridironed  with  street 
railroads,  the  mcrease  in  taxes  will  be  10  cents  on  a  thousand  dollars 
in  order  to  operate  a  free  car  service.  ' 

The  Chairman.  Now,  this  commission  has  been  ap]X)inted  to 
f^tmly  the  present  condition  of  the  street-car  industry  and  to  make 
recommendations.  *^ 

Mr.  Delbridge.  Yes. 

i7H  ^|'^^^?5^N-  ^  we  were  to  agree  with  you  and  recommend  that 
all  ot  the  cities  and  communities  in  the  country  should  purchase 
these  plants  and  operate  them  free,  would  you*  think  our  recom- 
mendation would  operate  to  relieve  the  situation  ? 

Mr.  Delbridge.  If  you  recommend  to  purchase  the  plants,  I  think 
It  would  complicate  the  situation;  but  if  vou  recommend  for  each 
city  to  build  and  purchase  nothing  except  the  material  to  build 
your  street  railway  and  equip  it  with,'but  simply  build  2  or  3  miles 
of  track  as  a  start  and  keep  it  up  until  it  extends  throughout  the 
city,  I  am  thoroughly  satisfied  that  it  will  be  adopted.  In  fact  it 
IS  going  to  be  adopted  anyhow.  F    ^      ^n  laci,  it 

The  Chairman.  Then  your  ultimate  solution  is  for  the  city  to 

build  its  own  plant ^ 

•  Mr.  Delbridge.  Yes,  sir. 

The  Chairman.  Until  after  a  while  it  will  completely  supplant 
the  present  privately  owned  company  ?  ^        J       i  F     *»- 

Mr.  Delbridge.  Yes,  sir:  al)solutely. 

The  Chairman.  What  will  happen  to  the  investment  in  the  nri- 
vately  owned  railroad?  ^ 

Mr  Delbridge.  Just  exactly  what  will  happen  to  a  dollar  if  a 
man  has  a  hole  in  his  pocket  and  goes  out  on  the  street  and  it  drops 
out  of  the  hole ;  he  has  simply  lost  his  investment.  ^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1727 

The  Chairman.  Assuming  that  the  investment  is  honestly  made 
in  a  utility  that  was  giving  good  public  service,  would  you  favor 
sacrificing  their  property  ? 

Mr.  Delbridge.  I  say  this,  your  honor:  That  my  family  owned  a 
paper  mill.  A  patent  came  along  that  changed  the  paper  business. 
AVe  did  not  go  to  anybody  and  ask  anybody  to  reimburse  us  for  our 
loss.     We  simply  sold  the  thing  for  what  we  could  get  for  it. 

The  Chairman.  That  was  due  to  an  improvement  in  an  art,  but 
here  you  are  asking  the  city  to  build  the  same  kind  of  a  street-cnir 
line  and  operate  it  in  competition  with  a  privately  owned  system, 
and  which  will  result  in  destroying  the  investment  in  the  privately 
owned  system. 

Mr.  Delbridge.  Your  honor,  I  deny  that.  I  do  not  think  it  will 
result  in  destroying  it  at  all.  Here  is  what  will  actually  result.  It 
will  result  in  this:  The  owners  in  that  street-car  line  when  that 
city  has  built  the  1  or  2  miles  of  track  w  ill  simply  go  and  get  some 
competent  man  to  manage  that  line  and  they  will  say  to  him,  "  You 
put  on  service  that  will  comi>ete  wij:h  the  city's  service,  and  if  he 
can  not  do  it  he  must  go  out  of  business,  and  inside  of  a  few  years 
his  property  will  be  worn  out  anyway  and  he  can  not  rebuild  it. 

The  Chairman.  How  would.it  be  possible  for  a  privately  owned 
concern  charging  a  fare  to  compete  with  a  publicly  owned  concern 
that  does  not  charge  a  fare? 

Mr.  Delbridge.  For  the  reason  that  the  privately  owned  concern 
has  500  miles  of  track,  or  in  St.  Louis  350  miles,  and  the  publicly 
owned  concern  has  2,  3,  or  4  miles,  and  when  that  privately  owned 
concern  shows  the  people  fairly  and  squarely  and  honestly  that  they 
are  rendering  them  the  service  for  which  they  pay  and  not  rendering 
them  a  half-a-cent  service  for  a  10-cent  fare,  then  the  city  will  simply 
slowly  make  the  extensions;  they  will  not  do  that  inside  of  ten  years 
or  dye  years. 

The  Chairman.  What  association  do  you  represent  here  to-night? 

Mr.  Delbridge.  The  Citizens'  Referendum  League  of  St.  Louis. 

The  Chairman.  How  many  members  belong  to  it  ? 

Mr.  Delbridge.  We  liave  in  active  members  about  three  or  four 
hundred,  but  we  have  about  60,000  members  in  St.  Louis.  We  have 
got  that  many  signatures. 

The  CiiAiiiMAN.  You  have  that  many  signatures? 

Mr.  Delbridge.  Yes;  66,000. 

The  Chairman.  Did  those  60,000  members  in  St.  Louis  indorse 
your  view  ? 

Mr.  Delbridge.  Yes,  sir;  I  will  tell  you  how  that  was.  The  ques- 
tion was  brought  up  for  some  little  time  and  they  met  it  this  way : 
That  we  must  recognize  that  we  do  not  do  all  the  voting  in  St.  Louis. 
We  must  devise  a  plan  that  will  appeal  to  the  voters,  and  the  best 
thing  to  do  is  to  suggest  this  plan :  Let  the  first  two  yeai*s  be  a  5-cent 
fare,  the  next  two  years  a  4-cent  fare,  the  next  two  years  a  3-cent 
fare,  the  next  two  years  a  2-cent  fare,  the  next  two  yeai-s  1  cent,  and 
then  nothing.  Then  that  was  thrashed  out  and  was  thought  a  good 
deal  of.  Then  they  suggested — well,  our  annual  meeting  is  only  a 
few  weeks  off  and  we  will  postpone  that  questidn  until  the  annual 
meeting.  Then  they  appointed  Mr.  Lawrence,  who  is  one  of  our 
most  able  men,  and  his  idea  was  very  strong  that  we  must  put  the 


1728    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

fare  for  the  first  two  years  5  cents.  They  appointed  Mr.  Lawrence 
to  debate  that,  and  I  should  debate  the  free  proposition.  We  were 
each  given  our  time,  and  I  told  them  to  give  Mr.  Lawrence  the 
opening  and  closing",  just  to  suit  him.  So  w^hen  the  time  came  we 
had  our  argument  and  this  meeting  was  announced  in  the  press,  and 
when  the  vote  came  the  chairman  says,  "  We  want  everybody  to 
rise  " — and  that  hall  was  packed — "  who  favor  the  free  car  service 
from  the  very  start  or  indorse  Mr.  Delbridge's  idea."  Every  person 
in  that  hall  but  four  rose.  Then  he  says,  "  I  want  everybody  who 
favoi^s  the  graduated  scale  to  rise,"  but  there  was  not  a  person  who 
rose.     It  was  by  a  unanimous  vote. 

The  Chairman.  Did  you  understand  that  vote  to  mean  that  those 
people  favored  a  free  street-car  ride  upon  the  condition  that  they 
could  destroy  the  existing  property  of  the  investment  that  is  in  it  ? 

Mr.  Delbridge.  Your  honor,  if  a  man  makes  a  bad  investnient  I 
do  not  think  the  public  should  be  called  upon  to  recompense  him. 

The  Chairman.  Do  you  take  that  vote  as  representing  that 
opinion  ?       . 

Mr.  Delbridge.  I  take  that  vote  as  representing  the  idea  of  the 
people  of  St.  Louis  in  regard  to  it,  because  I  sincerely  think  they 
are  better  educated  on  that  point  than  in  any  other  city  in  the  coun- 
try. Yes,  sir;  they  are  perfectly  willing  for  the  street-railway  offi- 
cials and  stockholders  and  bondholders,  if  they  had  invested  any 
honest  money  in  that  thing,  to  lose  what  it  is. 

The  Chairman.  What  is  the  difference  between  confiscation  of 
property  in  that  way  and  the  soviet  form  of  government  we -hear 
so  much  about  now? 

Mr.  Delbridge.  Your  honor,  I  will  tell  you.  I  believe  that  the 
Interstate  Commerce  Commission  has  held  that  a  public  carrier  is 
entitled  to  6  per  cent  per  annum  upon  its  money  and  that  any  amount 
that  he  receives  above  6  per  cent  is  money  that  he  is  entitled  to. 
Now  if,  ever  since  1851  these  stockholders  and  bondholders  have  been 
receiving  $3,000,000  a  year,  as  they  are  trying  to  get— $4,800,000  a 
year — upon  an  investment  of  $6,783,000,  according  to  their  sworn 
statements,  they  have  not  got,  and  for  20  years  have  not  had,  one 
dollar  invested  in  the  street  railroads  of  St.  Louis,  for  the  simple  rea- 
son that  they  have  received  enough  over  6  per  cent  to  reimburse  them 
for  the  money  they  paid  in;  and  that  will  apply  to  every  city  in 
the  United  States. 

The  Chairman.  You  say  that  for  taxation  purposes  the  company 
swore  that  the  property  was  worth  $6,783,000  in  round  figures  ? 

Mr.  Delbridge.  Yes. 

The  Chairman.  Was  that  the  taxation  simply  upon  its  franchise 

value  ? 

Mr.  Delbridge.  No,  sir;  that  was  the  physical  property. 

The  Chairman.  The  physical  property? 

Mr.  Delbridge.  Yes,  sir;  the  roadbed  and  all  their  rolling  stock 
and  buildings  and  all. 

The  Chairman.  And  yet  the  public-service  commission  of  that 
State  found  the  property  to  be  worth  $60,000,000  ? 

Mr.  Delbridge.  Yes. 

The  Chairman.  Did  they  make  a  careful  inventory  of  that  prop- 
erty? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1729 

■ 

Mr.  Delbridge.  Your  honor,  they  claimed  that  they  made  a  care- 
ful inventory  of  that  property. 

The  Chairman.  Do  you  know  that  they  did  make  an  inventory 

of  that  property  ? 

Mr.  Delbridge.  Well — oh,  such  an  inventory  as  I  made  of  the 
ifocketknife;  yes,  sir;  just  such  an  inventory  as  that. 

The  Chairman.  Well,  you  took  the  pocketknife  apart  and  knew 
how  many  pieces  there  were  and  found  out  in  your  own  way  the 
A^alue  of  those  pieces  ? 

Mr.  Delbridge.  Yes. 

The  Chairman.  Then  you  put  it  together  again? 

Mr.  Delbridge.  Yes. 

The  Chairi^ian.  Did  the  commission  go  to  work  and  find  out  the 
number  of  ties  and  rails  and  bolts  and  cars  and  everything  else  of 

that  company? 

Mr.  Delbridge.  I  got  the  word  there  from  one  of  the  commission- 
ers  I  heard  him  say  this  (it  was  not  in  that  particular  valuation)  — 

1  heard  him  say,  "  We  took  their  values  as  they  gave  them  and  we 
deducted  40  per  cent  from  their  values,  because  we  never  heard  of 
a  company  claiming  more  than  a  40  per  cent  unjust  valuation  and 
therefore  we  deducted  40  per  cent." 

The  Chairman.  Do  you  know  what  they  found  the  rails  to  be 

worth  ? 

Mr.  Delbridge.  No;  I  do  not. 

1  he  Chairman.  Do  you  know  what  they  fownd  the  equipment  to 

be  worth?     . 

Mr.  Delbridge.  No,  sir ;  I  do  not.  .    .     .  ,  . 

The  Chairman.  You  do  not  know  what  they  found  the  labor  cost 
of  reproducing  that  property  to  be? 

Mr.  Delbridge.  No;  I  do  not.  .         j,       ^ 

The  Chairman.  And  yet  you  say  that  that  commission  after  hav- 
ing studied  the  question  and  determined  the  value  to  be  $60,000,000 
was  wrong  to  the  extent  of  $53,000,000? 

Mr.  Delbridge.  I  do;  yes,  sir.  , ,.    ,     ,     •     .,    ^  c^  x  « 

The  Chairman.  And  they  are  a  public  body  m  that  State? 

Mr.  Delbridge.  Yes,  sir.  ,,.,., 

The  Chairman.  What  was  done  by  the  public  when  the  commis- 
sion made  that  sort  of  a  vaUie  ?  .      ,         .  ^,  .  ,  Ti. 

Mr.  Delbridge.  Just  exactly  like  it  does  m  everything  else,  it 
did  exactly  the  same  thing  when  the  commission  passed  the  rule 
there  that  a  street  car  traveling  on  a  certain  highway,  that  every 
car  pi-eceding  it  for  15  minutes  if  it  had  70  feet,  and  every  car  fol- 
lowing with  70  feet  was  a  legal  service ,  ,         >        j. 

The  Chairman.  Does  the  law  permit  appeals  to  be  taken  from 
an  order  found  by  the  commission  fixing  the  value  ? 

Mr.  Delbridge.  Well,  I  do  not  know  about  that.  If  it  does,  I  do 
not  think  it  would  be  practicable.  ,    ^  .,    ^ 

The   Chairman.  Why   did   you   not  take   an   appeal   from   that 

finding?  ,    ^        xi  x  i 

Mr.  Delbridge.  Because  I  have  been  before  the  courts  so  much 
that,  as  one  gentleman  expressed  it  in  St.  lK)uis,  I  had  just  as  soon 
have  a  case  against  the  devil  at  a  courthouse  in  hell  as  to  have  a 
suit  against  a  public-service  corporation  in  St.  Louis. 
160643**— 20— VOL  2 i7 


1730    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  But  you  also  have  the  supreme  court  to  go  to. 
Mr.  DEi.BiniKJE.  Yes,  sir;  we  have  a  supreme  couit  there. 
The  Chairman.  Then  you  have  not  got  very  much  resi>ect  for  tho 
public  officials  or  courts  or  law  in  St.  Louis  or  Missouri? 

i\fr.  Delbridge.  Well,  your  honor,  to  be  perfectly  candid  with  you, 
I  will  say  this,  that  it  does  look  like  to  me,  from  all  the  experience 
and  information  that  I  can  possibly  gather,  and  I  believe  that  every 
man  in  the  United  States,  virtually,  from  Maine  to  California,  has 
got  to  the  point  whore  tliey  no  longer  look  upon  our  courts  as  a 
place  where  justice  between  man  and  man  is  administered,  but  merely 
as  a  refuge  and  a  haven  for  the  murderer,  the  robber,  the  burglar, 
and  the  thief. 

The  Chairman.  I  hope  that  you  will  not  believe  for  one  moment 
that  any  member  of  this  commission  entei-tains  that  sort  of  idea. 

Mr.  Delbridge.  Well,  of  coui-se,  your  honor,  you  asked  me  what 
my  l)elief  Avas.    You  asked  me  what  my  belief  was. 

The  Chairman.  It  is  also  your  belief,  I  supix)se,  that  every  man- 
ager and  officer  of  a  street-car  company  is  a  rogue  and  a  thief  ? 
Mr.  Delbrid(je.  Well,  now,  I  would  not  want  to  say  that;  but  I 

will  answer  that  question 

The  Chairman.  At  least,  they  are  in  St.  Louis. 
Mr.  Delbridge.  Yes— well,  now  I  will  answer  that  question.  In 
St.  Louis  I  was  on  a  car,  sitting  on  a  seat  very  close  to  the  con- 
ductor. A  man  came  along  and  paid  his  fare  and  asked  for  a  cer- 
tain transfer,  and  the  conductor  punched  the  transfer  and  handed 
it  to  him.  And  a  gentleman  standing  or  sitting  there  by  the  con- 
ductor says,  "  Look  here,  you  ought  not  to  have  given  that  transfer ; 
he  is  not  entitled  to  it."  And  the  conductor  turns  around  to  tliat 
man  and  said,  "  Look  here,  now,"  he  says,  "  You  need  not  think  be- 
cause all  you  people  out  at  the  offices  are  thieves  that  we  conductors 
are  thieves,  too.  because  we  are  not.  I  gave  the  man  the  transfer 
because  he  was  entitled  to  a  transfer."    I  heard  that  reply  made. 

The  Chairman.  It  is  your  general  notion  that  public  officers  are 
not  to  be  relied  upon? 

]Mr.  Delbridge.  Well,  I  don't  think  that  is  a  fair  question.  I  will 
say  this,  that  of  all  the  auditing  that  I  have  ever  done,  when  it  comes 
to  fighting  a  corporation  in  the  courts  I  do  not  look  upon  an  in- 
dividual as  having  any  chance  in  those  courts.  The  thing  is  not  so 
much  any  dishonesty  upon  the  part  of  the  official,  but  it  is  the  out- 
growth of  the  precedents  -and  the  customs  and  this,  that,  and  the 
other  thing,  that  no  one  individual  is  responsible  for. 

Take  this  question  confronting  the  street  railroads.  If  an  officer 
went  in  there  with  the  best  intentions  in  the  world,  my  gracious,  he 
has  got  thousands  of  stocks  and  bonds  that  were  issued  before  he 
Avas  born,  and  he  has  got  to  do  the  host  he  can  with  wiiat  is  before 
him,  with  what  confronts  him. 

The  CHAIR3IAN.  I  do  not  think  this  commission  cares  to  hear  any 
more  from  a  witness  who  indicts  practically  our  whole  social  sys- 
tem and  our  whole  judicial  system. 
^  You  have  come  here  with  a  very  interesting  sort  of  propaganda. 
You  have  given  us  some  figures  that  I  can  not  Ixilieve  are  correct.  I 
can  not  believe  for  one  moment  that  that  huge  street-car  system  in 
St.  Louis  is  only  worth  $G,TOO,000,  because  to  believe  that  means  that 


TKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1731 

I  must  also  believe  that  the  public-service  commission  of  that  State 
is  dishonest,  and  I  refuse  to  believe  that.  So  this  meeting  stands 
adjourned  until  to-morrow  morning  at  10  o'clock. 

Mr.  Delbridge.  I  can  only  give  you  their  sworn  statements. 

(Whereupon,  at  9.45  o'clock  p.  m.,  an  adjournment  was  taken  until 
to-morrow,  October  1, 1919,  at  10  o'clock  a.  m.) 


Washington,  D.  C,  Octoher  i,  1919 — 10  a.  m. 

Pres'ent :  Parties  as  before. 

ISIet  pursuant  to  adjournment. 

Commissioner  Sweet.  Gentlemen,  come  to  order.  Mr.  Ogburn, 
what  is  the  first  thing  on  the  program? 

Mr.  Ogburn.  Mr.  Chairman,  the  hearing  for  to-day  and  to-morrow 
will  be  taken  up  by  the  Amalgamated  Association  of  Street  and  Elec- 
tric Railway  Employees  in  putting  on  their  program  giving  the 
labor  side.  This  program  is  in  charge  of  Mr.  W.  Jett  Lauck,  a  very 
T/ell-known  economist,  who  will  make  an  opening  statement  and  then 
put  on  some  witnesses  in  connection  with  his  program.    Mr.  Lauck. 

STATEMENT  OF  MR.  W.  JETT  LATJCK. 

Mr.  Lauck.  Mr.  Chairman  and  gentlemen,  a  great  many  of  our 
exhibits  are  more  or  less  technical  and  analytical,  and  for  that  reason 
I  thought  it  would  be  better  to  make  an  opening  statement  as  to  the 
points  we  wish  to  develop,  so  the  commission  could  have  them  clearly 
in  mind  as  we  proceeded. 

The  data  and  exhibits  which  we  shall  submit  will  cover  five  main 
points : 

First.  We  shall  show  by  an  analysis  of  the  operating  statistics 
and  performance  of  the  street  railways  that  the  present  deplorable 
condition  in  which  they  find  themselves  has  not  been  due  to  an  ad- 
vance in  operating  costs  arising  from  increased  wage  outlays  to  labor. 
On  the  contrary,  we  shall  attempt  to  prove  that  the  productive  effi- 
ciency of  motormen  and  conductoi*s  has  steadily  increased,  and  that 
labor  costs  of  operation  have  not  advanced  proportionately  with 
other  costs  of  operation,  the  increase  in  the  cost  of  trainmen  for 
each  passenger  carried  ranging  only  from  one-fourth  to  one-third 
of  a  cent  during  the  past  18  years.  Payments  to  employees  in  the 
industry,  it  will  be  shown,  have  had  no  real  effect  upon  the  present 
finances  of  the  companies. 

Second.  We  shall  show  that  the  present  financial  condition  of  the 
street-railway  industry  has  arisen  primarily  from  the  past  financial 
management  of  these  public  utilities.  We  shall  submit  a  brief 
review  of  the  past  financial  history  of  representative  street-railway- 
corporations,  which  will  disclose  the  fact  that  the  extraordinary 
gains  in  revenue  which  have  arisen  from  the  growth  in  the  popula- 
tion of  cities,  the  granting  of  special  franchises,  the  development  of 
trade  and  industry  in  and  around  urban  centers,  the  adoption  of 
mechanical  devices  and  improved  methods  of  operation,  have  to 
a  large  extent  been  absorbed  by  fictitious  capitalization  or  dissipated 
by  improper  or  misguided  financial  management.     As  a  result  of 


■feWUHIMita 


III 

i'.    if 


1732    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tliese  practices,  we  shall  attempt  to  show  further  that  the  past  pro- 
<liu  tivc  efficiency  of  employees  has  been  absorbed  by  fictitious  capi- 
talization, and  that,  if  existing  methods  and  security  issues  are 
allowed  to  be  continued  into  the  future,  the  fruits  of  the  labor  ot 
employees  as  yet  unborn  will  be  absorbed  by  fictitious  securities 
already  issued;  and  our  conclusion  on  this  point  will  be  that  unless 
the  past  basis  of  financial  management  and  control  of  the  industry 
is  changed,  the  future  is  without  nope  to  the  employees  of  the  street- 
railway  companies  or  to  the  general  public.  We  do  not  charge  the 
j>resent  managements  with  these  malpractices  or  past  misdeeds,  but 
they  are  the  victims  of  the  acts  of  their  predecessors  and  therefore 
will  have  to  sufi'er  more  or  less  for  the  acts  of  their  predecessors. 

Third.  We  shall  show  that  financial  management  of  the  street- 
railway  companies  has  invariably  been  followed  by  a  lack  of  the 
l^roper  development  of  operating  efficiency  and  service  to  the  public, 
and  also  bv  the  failure  to  adopt  operating  policies  which  would 
bring  out  the  maximum  of  productive  efficiency  of  the  employees. 

Fourth.  As  to  the  actual  rates  of  pay  received  by  labor  in  the 
industr}^  we  shall  show  that  the  earnings  of  motormen  and  con- 
ductors before  the  war  were  actually  below  a  subsistence  level  and 
were  entirely  inadequate  to  maintain  a  proper  standard  of  living; 
that  wage  increases  received  during  the  war  by  awards  of  the  Na- 
tional War  Labor  Board  and  by  other  agencies  and  methods  were 
very  moderate,  and  that,  in  general,  the  cost  of  living  has  increased 
much  faster  than  the  rates  of  pay  of  trainmen;  that  as  a  conse- 
quence the  earnings  of  trainmen  are  even  more  inadequate  now  than 
they  were  before  the  war  and  not  sufficient  to  maintain  a  standard 
of  living  based  on  health  and  reasonable  comfort;  and  finally  that 
the  wage  increases  received  in  other  industries  during  the  past  five 
years  have  been  greater  than  those  secured  by  motormen  and  con- 
ductors, and  that  out  of  approximately  100  leading  industrial  occu- 
pations the  conductors  and  motormen  are  the  lowest  paid  of  any. 

Fifth.  Finally,  we  shall  submit  evidence  to  show  that  our  own 
Government,  by  official  proclamation  of  the  President  during  the 
war,  and  the  leading  industrial  and  commercial  nations  of  the  world, 
by  their  sanction  of  the  treaty  of  peace  since  the  armistice,  have 
accepted  as  fundamental  rights  of  labor  the  principles  of  an  8-hour 
day,  a  living  wage,  and  union  recognition,  and  we  shall  contend 
that  these  principles  are  no  longer  debatable  and  that  this  commis- 
sion should  accept  these  principles  as  an  essential  condition  to  any 
recommendations  which  it  may  make  for  the  rehabilitation  of  the 
street-railway  industry. 

And  at  the  conclusion  of  this  testimony  it  is  planned  to  have  the 
head  of  the  organization  set  forth  his  own  constructive  ideas  as  to 
the  rehabilitation  of  the  properties. 

In  starting  out  on  our  program  we  would  like  to  depart  some- 
what from  the  outline  as  I  have  given  it  here,  for  the  reason  that  we 
have  two  witnesses,  one  from  Cleveland  and  one  from  Detroit,  who 
find  it  necessary  to  return  immediately  on  account  of  the  duties 
they  have  there ;  and  we  would  like  to  introduce  their  testimony  first, 
which  will  cover  the  lon^  hours  of  work  as  to  the  general  policy  pi 
the  Amalgamated  Association  in  dealing  with  the  employers  and 
making  trade  agieements.    And,  if  there  is  no  objection,  we  will 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1733 

have  these  two  gentlemen  appear  first  and  then  take  up  our  regular 
order  as  I  have  outlined  it. 

Commissioner  Sweet.  There  is  no  objection  to  your  taking  that 
course. 

Mr.  Lauck.  The  first  gentleman  I  would  like  to  have  appear  is 
Mr.  Ferguson. 

STATEMENT  OF  MK.  CAEEY  FERGUSON. 

Mr.  Lauck.  Mr.  Ferguson,  will  you  please  state  your  official  con- 
nection with  the  Amalgamated  Association,  and  your  experience  in 
the  negotiation  of  wage  matters? 

Mr.  Ferguson.  I  have  been  a  conductor  in  the  employ  of  the 
Detroit  Electric  Railways  for  17J  years. 

For  the  last  two  yeai*s  I  have  represented  our  division  as  business 
agent  of  the  division. 

Mr.  Lauck.  You  have  prepared  a  statement  which  you  wish  to 
read  to  the  commission,  have  you  not? 

Mr.  Ferguson.  We  have  prepared  a  statement,  yes,  that  I  would 
like  to  read  to  the  commission,  addressed  to  the  gentlemen  of  the 
commission. 

AVe  appear  before  y(vi  as  representatives  of  the  Amalgamated  As- 
sociation of  Street  &  Electric  Railway  Employees  of  America,  for 
the  purpose  of  presenting  information  to  you  upon  two  subjects: 
F'irst,  as  to  the  policy  of  the  Amalgamated  Association  in  making 
written  contracts  with  the  employing  companies  and  its  policy  in 
carrying  out  and  living  up  to  those  contracts;  and,  second,  we  want 
to  inform  you  as  to  the  conditions  under  which  the  street  and  elec- 
tric men  of  America  are  compelled  to  work.  We  have  evidence  to 
show  you  that  our  work  is  arduous  and  our  hours  are  long,  and  for 
that  purpose  we  have  brought  with  us  schedules  which  will  show  you 
the  working  conditions  of  Cleveland,  Ohio,  and  Detroit,  Mich., 
which,  in  our  opinion,  are  typical  of  the  working  conditions  pre- 
vailing throughout  the  United  States. 

We  desire  nrst  to  call  your  attention  to  the  policy  of  the  Amalga- 
mated Association  in  making  and  adhering  to  its  written  contracts. 
Our  reason  for  submitting  this  information  is  that  we  have  noted 
in  reports  that  have  come  from  the  evidence  which  has  been  sub- 
mitted to  your  commission  that  there  has  been  some  criticism  and  a 
claim  made  that  our  association  did  not  adhere  to  its  contracts.  We 
believe  that  the  report  of  the  international  president  of  our  associa- 
tion to  our  convention,  which  was  held  in  Chicago  during  the  month 
of  Sepitember  of  this  year,  will  best  explain  to  you  the  policy  on 
contracts  and  the  number  of  same  which  are  in  existence  between 
this  organization  and  employing  companies.  The  president  in  his 
report  to  the  convention  had  the  following  to  say  upon  agreements: 

The  policy  of  our  association  to  secure  written  contracts  covering  wages  and 
working  conditions  for  a  given  period  with  the  employing  companies  has  been 
followed  during  this  term  as  it  has  in  the  past  with  good  and  satisfactory 
results.  Our  old  divisions  have  been  able  to  renew  their  agreements  in  prac- 
tically every  case,  and  the  great  majority  of  newly  formed  divisions  have  been 
able  to  secure  written  agreements  with  their  companies.  The  reports  at  the 
Providence  convention  two  years  ago  showed  that  we  had  at  that  time  250 
written  contracts  with  the  different  employing  companies.  During  the  past 
two  years  76  divisions  have  secured  written  contracts  with  their  respective 


ii  - 


1734    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

companies,  which  brings  the  totul  now  of  written  conti-aets  prevailing  between 
our  local  divisions  and  employing  companies  to  326. 

Now,  my  advice  is  that  the  policy  of  securing  written  contracts  be  continued. 
It  is  the  1>est  way  of  dealing— it  is  the  rudder  by  which  we  steer  this  organiza- 
tion successfully,  and  therefore  its  continuance,  in  my  opinion,  is  necessary 
to  the  proper  success  of  the  organization. 

Now,  as  to  the  policy  of  our  organization's  living  up  to  its  con- 
tracts, we  would  inform  you  that  the  great  majority  of  our  local 
organizations  and  the  membership  composing  them  have  adhered 
to  and  strictly  carried  out  their  contracts  with  the  employing  com- 
panies, with  very  few  exceptions.  There  have  been  some  three  or 
four  cases  where  our  local  divisions  have  acted  contrary  to  this 
principle.  We  might  also  point  out  to  you  where  several  street-rail- 
way companies  refused  to  adhere  to  their  written  contracts  and 
violated  them;  not  only  with  our  association,  but  in  some  cases  with 
municipalities,  refusing  to  further  continue  under  the  tenns  of  their 
franchises,  which  are  nothing  more  or  less  than  written  contracts 
with  municipalities;  but  the  policy  of  our  association  is  clearly 
shown  in  the  cases  of  the  Bay  State  roads  of  Massachusetts,  where 
several  of  our  divisions,  in  violation  of  their  contracts,  suspended 
work  in  the  month  of  June  of  this  year.  The  i^ords  show  that 
the  international  president  and  general  executive  board  of  our 
association  compelled  these  organizations  U>  return  to  work  and 
adhere  to  their  cH>ntracts.  Another  case  is  that  of  Pittsburgh,  Pa., 
Avhero  only  a  few  weeks  ago  the  local  division  refused  to  comply 
with  its  contract  arrangements  and  went  on  strike,  but,  due  to  the 
position  taken  by  the  international  president  and  the  general  execu- 
tiA-e  board,  they  were  compelled  to  return  to  work  and  adhere  to 
their  contract,  and  at  our  recent  convention  in  September  this  matter 
was  brought  up  by  the  international  president  in  his  rei)ort  to  the 
convention,  and  in  his  report  on  this  subject  he  says: 

I  would  remind  you  that  the  Integrity  of  this  organization  is  at  stake.  In 
the  past  we  have  home  the  reputation  of  living  up  to  our  contracts.  If  con- 
tnicts  are  to  be  disregarded  and  our  laws  cast  aside  we  can  not  ask  anyone 
to  have  conlidence  in  us,  and  l)y  such  actions  we  will  be  destroying  what  we 
have  sti-uggled  for  for  yea  in— namely,  the  right  of  collective  bargaining.  It 
is  a  serious  matter  and  one  that  calls  for  consideration  and  action  at  your 
hands. 

The  convention  in  considering  this  subject  fully  indorsed  the 
position  that  had  been  taken  by  the  international  president  and  the 
general  executive  board  and  laid  down  the  policy  that  organizations 
in  the  future  must  strictly  adhere  to  and  live  up  to  their  contracts 
if  they  were  to  remain  a  part  of  the  Amalgamated  Association  of 
Street  &  Electric  Eailway  Employees  of  America.  And  we  desire 
that  your  commission  shall  knoAv  fully  what  our  position  is  upon 
the  subject  of  contracts  and  of  our  living  up  to  them,  in  order  that 
the  statements  heretofore  made  may  be  corrected  and  the  true  policy 
of  our  association  known. 

Mr.  Lauck.  That  completes  your  official  statement  as  to  the  policy 
of  the  organization  relative  to  collective  bargaining  and  the  mainte- 
nance of  its  contracts  when  they  are  once  entered  into? 

Mr.  Ferguson.  Yes;  that  completes  the  statement. 

Mr.  I^vucK.  As  T  undei-stand  it,  you  have  prepared  also  a  state- 
ment sliowing  the  working  conditions  so  far  as  hours  of  work  and 


PR0CEEDi:5^GS  OF  FEDEPvAL  ELECTRIC  RAILWAYS  COMMISSION.    1735 

lengths  of  rmi  are  concerned,  which  is  based  upon  an  exhibit  sub- 
mitted by  the  street  railways  in  a  former  arbitration  which  you  had ; 
is  not  that  true? 

Mr.  Ferguson.  That  is  true. 

Mr.  Lauck.  I  think  it  would  be  well,  Mr.  Ferguson,  if  you  would 
explain  to  the  commission  the  origin  of  this  exhibit,  and  then  give 
a  summary  statement  as  to  what  the  exhibit  shows,  as  to  the  lengths 
of  run  and  the  hours  of  duty  and  the  hours  paid  for. 

Mr.  Ferguson.  Tlie  statement  as  we  prepared  it  for  the  arbitration 
board  in  the  spring  of  1917  analyzed  in  full  the  schedule  conditions 
as  they  existed  at  that  time,  and  of  which  a  complete  analysis  appears 
in  the  proceedings  of  the  convention,  known  as  volume  No.  2  of  the 
arbitration  proceedings.  Our  presentation  was  a  full  analysis  of 
each  line  throughout  the  entire  system,  and  in  connection  with  that, 
the  company  submitted  a  table  showing  the  condition  as  it  affected 
the  total  number  of  runs  in  the  entire  system. 

Mr.  Lauck.  If  I  may  interrupt  you  just  a  moment,  Mr.  Ferguson, 
this  is  what  is  known  as  the  Grinnell  arbitration  in  Detroit,  in  1917, 

is  it  not? 

Mr.  Ferguson.  It  is  spoken  of  as  the  Grinnell  arbitration ;  yes. 

Mr.  Lauck.  And  the  basic  material  consists  of  an  exhibit  sub- 
mitted by  the  Detroit  United  Electric  Railways  at  that  time,  does  it 
not  ? 

Mr.  Ferguson.  Yes.  This  table  was  submitted  by  the  Detroit 
United  Railway  covering  that  condition,  and  this  book  is  identical 
with  this  [indicating]  only  that  it  Is  detailed ;  it  is  fully  analyzed  as 
it  affects  each  line  of  the  entire  system. 

Mr.  Lauck.  In  other  words,  the  blue  print  is  a  summary  statement 
of  basic  da  til,  so  to  speak,  which  was  submitted  by  the  railroads,  and 
your  object  is  to  show,  from  that,  the  extent  of  runs  and  the  time  on 
duty,  the  hours  of  service  and  the  time  actually  paid  for,  as  typical 
of  the  operating  conditions  in  Detroit  ? 

Mr.  Ferguson.  Yes. 

Mr.  Lauck.  I  just  wanted  to  get  that  clear.    Proceed. 

Mr.  Ferguson.  At  that  time  in  the  entire  system  there  was  a  total 
number  of  l,6e39  runs.  The  average  pay  time — by  that  I  mean  the 
platform  time,  the  actual  time  for  which  they  received  compensa- 
tion— was  9  hours  and  28  minutes  for  each  iim  average. 

Out  of  that  number  of  runs  there  were  792  in  which  tlie  men  had 
to  report  twice  to  complete  their  day's  work — what  are  known  as  two- 
piece  runs ;  and  there  was  a  total  of  242  in  which  they  had  to  report 
three  times  to  complete  their  day's  work,  known  as  three-piece  runs ; 
of  straight  runs  there  was  a  total  number  of  (>05.  There  were  1,035 
of  those  runs  that  were  completed  inside  of  12|  hours,  in  which  the 
outside  time  did  not  extend  beyond  12J  hours. 

Mr.  Lauck.  I  think  it  would  be  well  to  explain  to  the  commission, 
Mr.  Ferguson,  what  you  mean  by  "  witside  time."  You  spoke  of  pay 
time  as  9  hours  and  58  minutes.  Now,  you  are  using  the  term  "  out- 
side tiu>e."    Will  you  explain  that,  please? 

Mr.  Fekguson.  By  outside  time  we  mean  the  time  that  elapses  be- 
tween the  time  that  a  man  starts  his  sclieduled  day's  work  and  the 
time  tliat  he  finishes  it.  For  instance,  a  man  starts  a  run  at  6  o'clock 
in  tho  morning,  and  works  until  11  o'clock  in  the  forenoon,  and  goes 


1736    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

on  again  at  2  o'clock  in  the  afternoon,  and  completes  his  day's  work 
at  6.30  in  the  evening;  we  would  say  that  his  outside  time  was  12^ 
hours  on  that  run ;  inasmuch  as  it  takes  12J  hours  in  which  to  com- 
plete his  day's  work. 

Mr.  Lauck.  That  is  the  whole  spread  of  time  that  he  was  on  duty, 
but  within  that  time  he  was  only  paid  an  average  of  9  hours  and  28 
nnnutos — about  3  hours  that  he  was  not  compensated  for?' 

Mr.  Ferouson.  Three  hours  that  he  was  off  duty  as  far  as  com- 
l>ensation  was  concerned,  but  his  time  was  not  his  own.  There  were 
1.035  of  those  runs  that  were  completed  inside  of  12^  houi-s.  Prob- 
ably over  half  of  those  runs  went  beyond  12  hours  in  which  to  com- 
I»lete  them.  It  is  a  rare  thing  for  a  run  in  which  a  man  has  to  report 
twice  a  day  to  complete  it,  to  be  completed  in  less  than  12  hours. 
There  were,  however,  60  of  those  runs  that  were  completed  in  be- 
tween 12J  and  13  hours,  and  there  were  95  that  went  beyond  13 
hours  and  were  completed  before  the  expiration  of  13^  hours. 
•  There  were  114  of  them  that  were  completed  between  13^  and  14 
houi-s.  There  were  96  completed  between  14  and  14^  hours.  There 
were  54  completed  between  14J  and  15  hours;  45  of  them  went 
beyond  15  hours  and  were  completed  in  less  than  15 J  hours;  39 
were  completed  in  from  15 J  to  16  hours;  30  were  completed  in 
from  16  to  16J  hours;  24  of  them  were  completed  from  16J  to  17 
houi-s;  30  of  them  were  completed  between  17  and  17^  hours;  16 
were  completed  in  from  17J  to  18  hours;  and  1  went  beyond  18 
hours  and  was  completed  inside  of  18^  hours. 

Commissioner  Mj^hox.  You  say  30  runs  went  17  hours;.  How 
many  men  would  that  affect? 

Mr.  Ferguson.  That  would  affect  at  least  60  men.  It  is  impos- 
fcible,  of  course,  to  tell  from  this  table  Avhether  it  would  affect  more 
than  that  or  not,  but  it  is  quite  possible  that  it  did,  because  of  the 
fact  that  the  runs  on  the  lines  on  which  trailers  are  operated  require 
three  men  to  operate  a  run — two  conductors  and  one  motorman — so 
if  any  of  those  runs  were  on  the  lines  on  which  trailers  are  used, 
there  would  be  three  times  the  number  of  runs  that  are  spoken  of 
here.  If  there  were  only  two  men  to  the  car,  that  would  represent 
60  men.  But  if  they  happened  to  be  all  trailer  runs  there  would  be 
J>0  men. 

The  same  way  with  the  runs  that  go  from  17J  to  18  hours.  In 
case  there  were  trailers  used  on  all  those  runs,  there  would  be  48  men 
affected. 

Commissioner  Mahon.  When  you  speak  of  your  schedule  run 
there— for  instance,  the  12i-hour  runs— does  that  actually  tell  the 
time  that  those  men  may  have  worked  ? 

Mr.  Ferguson.  Oh,  no;  this  is  the  schedule  work  to  which  they 
are  assigned.  For  instance,  in  connection  with  that,  it  might  be 
well  to  unfold  one  of  these  schedules  that  we  brought  along  for  the 
benefit  of  the  commission,  if  they  care  to  look  at  them.  For  in- 
stance, this  represents  a  scheduled  day's  work  that  the  man  holding 
run  No.  33  is  assigned  to.  He  is  assigned  regularly  to  go  out  at 
4.55  in  the  morning,  and  gets  relieved  at  12.33  midday,  and  goes  on 
again  at  4.27  in  the  afternoon  and  completes  his  day's  work  at  6.06. 
That  is  his  scheduled  day's  work.  Now,  he  may  be  rightfully  called 
upon  to  perform  some  more  service  after  that  or  before  that,  if  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1737 

nm  was  so  situated  that  he  could  be  used  before  going  out,  or  in 
til  is  relief  period  from  12.43  at  noon  until  4.27  in  the  afternoon — he 
may  be  called  upon  in  there.  In  fact,  his  time  is  not  his  own  at 
uny  of  the  time.  He  may  be  rightfully  called  upon  at  any  time  to 
jierform  services  other  than  provided  for  in  his  schedule  run.  How- 
ever, that  table  only  applies  to  the  scheduled  day's  work. 

Commissioner  Mahon.  It  would  not  show  the  extra  work  that  tho 
man  might  have  to  do  in  addition  to  his  regular  scheduled  time? 

Mr.  Ferguson.  No;  there  is  nothing  shown  in  that  submission 
other  than  the  regular  schedule  work. 

Commissioner  Mahon.  But  is  there  extra  work  beyond  that? 

Mr.  Ferguson.  Oh,  a  great  deal  of  it.  It  is  a  rare  thing  for  a  day 
to  pass  in  which  a  good  many  men,  especially  on  the  large  lines,  are 
not  called  upon  to  perform  some  extra  work  in  connection  with  the 
operation  of  this  scheduled  day's  work. 

Commissioner  Gadsden.  That  would  be  overtime  work? 

Mr.  P'erguson.  That  would  be  overtime  work,  known  as  extra 
work.  If  a  night  man  is  called  out  in  the  morning  to  perform  extra 
work  and  he  happens  to  perform  five  hours,  he  does  not  happen  to 
get  any  extra  pay.  He  works  at  the  straight  regular  rates  of  pay. 
Time-and-a-half  additional  affects  the  day  men,  however,  if  they 
are  called  upon  after  the  performance  of  their  regular  day's  work. 

Commissioner  Mahon.  It  does  not  affect  the  night  man  if  he  is 
called  out  in  the  morning? 

Mr.  Ferguson.  Not  if  he  performs  that  much  work ;  he  has  to  do 
it  at  certain  times. 

Commissioner  Mahon.  A  man  getting  in  at  12  o'clock  to-night 
might  be  called  out  in  the  morning  to  do  this  extra  work? 

Mr.  Ferguson.  He  might  be  called  out  to  take  a  car  out  at  5 
o'clock  and  work  until  10,  for  which  he  would  receive  the  straight- 
day  regular  rates  of  pay. 

Commissioner  Mahon.  Does  that  happen? 

Mr.  Ferguson.  Yes;  in  a  great  many  cases. 

Commissioner  Gadsden.  Do  you  mean  regular  men  or  extra  men? 

Mr.  Ferguson.  Regular  men. 

Commissioner  Gadsden.  Men  with  regularly  assigned  runs? 

Mr.  Ferguson.  Men  with  regularly  assigned  runs.  They  are  the 
men  who  are  holding  these  runs  further  down  on  the  schedule.  For 
instance,  that  man  there  is  regularly  scheduled  to  go  out  at  3.17  in 
the  afternoon  and  complete  his  run  at  11.39  at  night.  He  will  oper- 
ate that  run  and  then  he  may  be  called  out  to  operate  that  run  at  5 
o'clock  the  next  morning  and  work  until  10.  He  would  only  receive 
straight  pay  for  that — straight  pay  all  the  way  through.  Any  of 
these  men  from  here  down  on  the  schedule  may  be  called  out  the 
next  morning  and  work  until  10.  He  would  only  receive  straight  pay 
for  that — straight  pay  all  the  way  through.  Any  of  these  men  from 
here  down  on  the  schedule  may  be  called  out  in  the  morning. 

Commissioner  Mahon.  The  fact  is,  Mr.  Ferguson,  that  this  table 
reflects  the  actual  conditions  there  as  to  the  hours  of  labor  and  gives 
this  commission  the  real  condition  that  prevailed  at  that  time  in 
Detroit  ? 

Mr.  Ferguson.  Yes. 

Commissioner  Mahon.  That  is  the  point  of  this  exhibit.  In  the 
arbitration  case  we  both  agreed  upon  the  same  schedule,  and  that  is 


1738    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAH.WAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1739 


their  analysis  of  the  schedule,  and  we  have  the  same  analysis  and 
a  different  one,  but  we  thought  it  best  to  use  theirs  as  there  is  no 
dispute  about  that,  as  it  was  submitted  by  them.  Now,  that  was  in 
what  year  ? 

Mr.  Ferguson.  The  spring  of  1017. 

Commissioner  Mahox.  What  are  the  conditions  now,  Mr.  Fergu- 
son, in  comparison  with  that?    Is  there  any  change? 

Mr.  Ferguson.  There  are  some  changes,  but  the  conditions  have 
not  been  improved  for  the  reason  that  some  of  those  long  outside 
hours  have  been  reduced,  but  they  have  been  reduced  by  compelling 
these  men  up  here  at  the  top  of  the  lines  who  are  the  old  men  20  and 
30  years  in  service  to  sacrifice  their  straight  day's  work  which  they 
had  previously,  and  they  are  compelled  to  work  runs  now  which  ex- 
tend over  a  long  period  of  time.  For  instance,  here  is  one  of  the  last 
schedules  out  on  one  of  the  largest  Yino^  in  tlic  city,  in  which  the 
8ccond-oldest  crew  on  the  division  is  compelled  to  go  out  at  4.58  in 
the  morning,  g^ets  relieved  at  10.39  for  dinner  hour,  goes  on  again 
at  1.57  in  the  afternoon  and  completes  his  day's  work  at  5.28  at  night, 
tlie  company  taking  advantage  of  the  complete  limit  of  time  in 
which  tliey  are  allowed  to  complete  tliat  run,  which  is  12^  hours, 
for  which  they  only  receive  9  hours  12  minutes  compensation.  That 
affects  the  second-oldest  crew  on  tliat  divisioil,  who  are  probably 
30  years  in  the  service;  and  there  is  only  one  crew  on  that  entire 
division  which  is  allowed  now  the  privilege  of  working  a  straight 
day's  work.  It  begins  at  4.32  and  completes  its  work  at  2.30  in  the 
afternoon.  Previous  to  that  time  there  Avere  a  greater  percentage 
of  those  runs.  The  outside  hours  have  been  somewhat  reduced 
through  the  efforts  of  the  organization  and  the  award  that  was  giveji 
after  this  evidence  was  submitted,  but  at  the  sacrifice  of  these  ol(U»r 
men  in  service. 

These  runs  here — I  tabulated  a  few  of  them.  The  second  one,  as  I 
stated,  is  required  to  put  in  12  hours  and  30  minutes  outside  time  to 
complete  his  day's  work,  and  he  i-oceives  9  horn's  12  minutes.  The 
third-oldest  crew  is  required  to  put  in  12  lioui^  and  20  minutes — ^that 
is,  the  consumed  time — and  he  receives  9  hours  and  23  minutes  plat- 
form time.  The  fourth  ntan  uses  tlie  full  limit,  12  hours  and  30 
minutes,  and  he  receives  9  hours  and  33  niinutes.  The  fifth  has  12 
hours  and  28  minutes  outside  time,  and  he  i^ceives  9  hours  and  31 
minutes.  The  sixth  man  has  12  hours  and  29  minutes  outside  time, 
and  he  receives  9  hours  and  18  minutes.  The  seventh  man  uses  12 
hours  and  29  minutes,  and  he  receives  9  hours  and  36  minutes. 

Conmiissioner  Mahox.  There  is  but  one  run  upon  that  schedule 
that  would  complete  its  straight  time  in  9  hours? 

Mr.  F'EifGusox.  Just  one  day  run.    There  are  four  night  runs. 

Commissioner  ^Iahon.  So  if  there  is  anything,  it  is  in  worse  condi- 
tion than  it  was  before  the  War  Lalx)r  Board  award  ? 

^fr.  Fehgusox.  Well,  before  the  award  of  the  arbitration  board. 
This  was  the  award  of  the  Grinnell  arbitration. 

CV)mmissioner  Mahon.  That  was  not  clianged  by  the  War  Labor 
BoaiHi? 

Mr.  Ferguson.  No  ;  it  did  not  touch  those  conditions. 

Commissioner  Gadsdex.  Do  you  jiresent  that  as  a  typical  case  of 
tiie  entire  country  or  just  as  bearing  upon  Detroit? 


there  that  the 


Commissioner  Mahon.  We  think  it  is  typical  of  the  industry. 

Connnissioner  Gadsden.  You  only  have  one  run  tl 
man  completes  in  time? 

Mr.  Ff:RGusox>  Yes.  That,  of  course,  is  on  the  one  line ;  that  is  on 
the  (iratiot  Avenue  line. 

Commissioner  Maiiox.  What  is  the  next? 

Mr.  Ferguson.  There  is  the  Woodward  schedule,  in  which  there  are 
10  crews  on  that  line  who  complete  their  day's  work  straight,  but 

Commissioner  Mahon.  How  many  crews  work? 

Mr.  Ferguson.  Out  of  94  runs  there  are  16  runs  in  which  the  day's 
work  is  completed  straight,  but  it  has  resulted  in  the  distribution  of 
the  other  work  being  such  that  the  men,  or  a  great  number  of  theui, 
are  required  to  report  three  times  in  order  to  complete  their  day's 
work. 

Commissioner  Gadsden.  Can  you  give  us  the  percentage  of  the 
total  runs  that  are  completed  straight?  I  think  we  get  rather  a  one- 
sided view — at  least  I  got  a  wrong  impression  by  reading  only  one 

division. 

Mr.  Ferguson.  Well,  I  have  not  the  exact  figures 

Mr.  Lauck.  We  have  that  here.  That  shows  605  straight  runs  and 
1,039  altogether,  which  would  be  about  39  per  cent  altogether  of 
straight  runs. 

Mr.  Ferguson.  Well,  that  was  the  condition  which  existed  in  the 
spring  of  19i7,  but  that  percentage  has  been  reduced  greatly  since 
tlien,  as  I  explained,  as  a  result 

Mr.  Lauck.  Now,  on  this  best  railroad  you  mentioned  16  out  of  94, 
or  only  17  per  cent 

Mr.  Ferguson.  W^hat  is  that? 

Mr.  Lauck.  That  is,  on  the  Woodward  line,  which  you  said  was 
the  best  line,  there  are  only  16  out  of  94,  which  would  be  16  or  17 
per  cent  ? 

Mr.  Ferguson.  Yes.    This  is  a  recent  schedule  of  the  Woodward 

line. 

Commissioner  Mahon.  The  fact  is  that  the  War  Labor  Board  re- 
quirements were  that  we  would  remain  on  the  conditions  that  we  had 
when  the  war  broke  out,  and  this  arbitration  established  the  condi- 
tions. Thoso  were  the  conditions  prevailing  in  1917,  arbitrated  upon, 
and  they  are  practically  the  conditions  that  prevail  on  that  system 
to-day.  Of  course  there  is  a  variation  in  the  different  systems,  but 
Detroit  and  Cleveland  are  typical  of  the  big  cities.  They  are  typical 
of  the  big  city  conditions,  with  the  exception  that  in  Chicago  under 
our  new  arrangements  we  have  established  the  eight -hour  day.  That 
is  what  we  are  struggling  for.  The  old  conditions  of  labor  we  arc 
complaining  of— this  is  typical  of  them  in  the  large  cities.  There 
is  a  dift'erencc  in  the  smaller  cities  where  the  opportunity  of  making 
better  schedules  prevails  than  in  the  big  cities. 

Mr.  Warren.  You  have  the  eight-hour  day  in  Boston,  Mr.  Mahon? 

Commissioner  Mahon.  We  have  the  eight-hour  day  in  Boston 
and  the  eight-hour  day  in  Chicago— two  big  cities.  That  is  what 
we  are  struggling  for  and  one  of  the  things  that  we  want  this  com- 
mission to  take  into  consideration  in  any  i-ecommendation  that  it 
makes  for  these  people,  and  for  that  reason  we  are  showing  this  old 
condition  that  prevailed  that  we  are  struggling  to  get  away  from. 


1740    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1741 


We  do  not  want  to  take  any  too  much  of  the  time  of  the  commission 
on  that,  but  I  think  that  reflects  the  conditions  pretty  generally  in 
the  hir^e  cities. 

Mr.  Fergi  SON.  There  is  another  feature  that  has  not  been  men- 
tioned here  that  is  not  brought  out  in  any  of  the  tables  or  anything 
of  that  nature,  and  that  represents  a  considerable  volume  of  com- 
plaint from  our  men,  and  that  is  the  unreasonable  dinner  hour  they 
are  compelled  to  accept.  In  some  instances  it  is  as  early  as  8.80  in 
the  morning,  and  that  the  only  relief  period  they  have,  and  thoy 
may  be  called  back  again  at  10  or  11  perhaps  to  complete  their  day's 
work.  Here  is  one  of  the  Trumbull  schedules.  The  man  is  relieved 
at  8.34  for  his  dinner  hour  and  another  at  8.51  and  another  at  8.59; 
another  at  8.89  and  another  at  8.45.  Those  are  the  hours  at  which 
they  are  relieved  to  go  and  get  their  dinner. 

"fhis  schedule  affects  the  Grand  Belt  on  the  West  Side.  It  only 
has  one  run  in  which  the  crew  complete  their  day's  work  in  one 
period  of  work. 

The  Trumbull  schedule  I  just  previously  spoke  of  has  none;  in 
fact,  the  oldest  crew  on  the  division  has  to  repoit  at  5.15  in  the 
morning,  get  relieved  at  12.05,  go  back  on  again  at  3.11,  and  they 
are  relieved  at  4.26  and  go  back  on  again  at  4.46  and  get  through  at 
5.43;  three  periods  of  works  to  the  oldest  crew^  on  the  division,  for 
which  they  receive  9.22  minutes  time. 

The  Chairman.  Is  it  possible  to  rearrange  your  schedule  so  that 
all  the  men  can  be  relieved  at  certain  times? 

Mr.  Ferguson.  We  do  not  expect  that  all  men  can  be  relieved  at  a 
certain  time.  That  is  out  of  the  question.  Their  contention  in  that 
respect  is  that  they  should  be  relieved,  providing  they  are  going  to 
be  compelled  to  operate  a  run  in  which  a  dinner  hour  is  provided; 
that  is,  a  run  other  than  what  is  known  as  a  straight  run,  that  the 
dinner  hour  should  be  somewhere  near  the  dinner  time. 

Tha  Chairman.  What  is  your  suggestion  along  that  line? 

Mr.  Ferguson.  Well,  we  think  that  11.30  or  around  11.30  is  a 
reasonable  time  to  be  relieved  where  a  man  is  compelled  to  go  back 
at  1  or  1.30.  whatever  the  cSse  may  be.  Where  a  man  goes  out  at  5 
in  the  morning  and  is  compelled  to  report  twice  to  complete  his 
day's  work,  which  consumes  the  entire  day,  he  would  naturally  want 
his  midday  meal  around  the  noon  hour. 

Of  course  we  expect  variation  in  that,  as  they  could  not  all  be 
reJieved  at  the  same  time,  but  we  think  in  our  occupation  that  there 
should  be  at  least  a  large  percentage  of  the  runs  in  which  the  men 
can  complete  their  day's  work  in  a  straight  period  of  time,  because 
it  is  a  strenuous  occupation  and  can  not  be  given  any  too  much  con- 
sideration along  that  line.  Where  the  day  is  chopped  up,  taking  it 
all  the  way  from  12 J  to  16  or  17  hours  in  which  to  put  it  in,  and 
they  are  compelled  to  work  overtime  in  connection  with  that,  they 
are  simply  a  worn-out  lot  of  employees  all  the  time.  It  is  one  thing 
that  the  company  has  never  given  a  proper  amount  of  considera- 
tion to.  The  occupation  is  hard  and  the  strain  on  them  is  great, 
and  they  are  compelled  to  operate  their  cars  through  crowded  sec- 
tions of  the  city,  and  the  hours  have  been  long. 

Commissioner  Mahon.  This  table  reflects  also  the  interurban  men, 
does  it? 


Mr.  Ferguson.  Yes. 

Commissioner  Mahon..  Why  not  read  that  into  the  record,  so  that 
the  commission  will  understand  the  hours  prevailing  for  interurban 
men  as  well? 

Mr.  Ferguson.  That  which  I  have  read  was  the  total  of  all — city 
and  interurban. 

Commissioner  Mahon.  I  thought  you  read  the  total  of  the  city? 

Mr.  Ferguson.  No  ;  I  read  the  total  of  all.  The  bottom  total  here 
is  the  total  of  all. 

Commissioner  Mahon.  I  see. 

Mr.  Ferguson.  Of  course,  it  is  separated  here,  however. 

Commissioner  Mahon.  Why  not  give  us  both  the  city  and  the 
interurban  so  that  the  commission  will  clearly  understancl  the  con- 
dition ? 

Mr.  Ferguson.  Well,  that  would  be  very  easy.  The  total  number 
of  runs  in  Detroit  City  is  1,382,  and  the  average  pay  time  in  Detroit 
City  was  9  hours  and  29  minutes,  which  was  one  more  than  the  aver- 
age of  the  entire  system. 

The  number  of  runs  out  of  that  1,328  that  were  completed  in  12 J 
hours  or  less  was  826. 

The  number  that  went  beyond  12J  and  were  completed  inside  of 
13  was  39. 

From  13  to  13J  the  number  was  87. 

From  13i  to  14  it  was  108. 

From  14  to  14^  it  was  94. 

From  14^  to  15  it  was  53. 

From  15  to  15^  it  was  39. 

From  15i  to  16  it  was  38. 

From  16  to  16^  it  was  29. 

From  l^  to  17  it  was  22. 

From  17  to  174  i*  was  30. 

Commissioner  Mahon.  Thirty  what? 

Mr.  Ferguson.  Thirty  runs.  This  is  all  runs  that  I  am  speak- 
ing of. 

Commissioner  Mahon.  To  do  what? 

Mr.  Ferguson.  In  which  to  complete  their  day's  work;  from  17j 
to  18  hours  there  were  16  runs. 

From  18  hours  to  18^  there  was  one  run. 

Then,  on  the  interurban  and  interurban  cities  there  were  209  runs 
that  were  completed  inside  of  12^  hours. 

Commissioner  Meeker.  What  is  the  total  number  of  runs  ? 

Commissioner  Mahon.  Give  the  swing  of  all  of  that  right  straight 
through  ? 

Mr.  Ferguson.  The  total  number  was  257. 

Mr.  Lauck.  That  is  interurban? 

Mr.  Ferguson.  Interurban  and  interurban  cities — small  cities  out- 
side. 

Mr.  Lauck.  That  is  all. 

Mr.  Warren.  What  was  the  pay  time  on  those  ? 

Mr.  Ferguson.  The  average  platform  time  you  mean? 

Mr.  AVarren.  Yes. 

Mr.  Ferguson.  That  is  not  averaged  here  by  itself.  Yes,  it  is,  too. 
It  is  9  hours  and  19  minutes.  Then  there  were  21  of  those  runs  that 
were  completed  inside  of  12J  and  13  hours. 


I 


U 


1742    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAH.WAYS  COMMISSION. 

There  were  eight  of  them  that  went  between  13  and  13 J  hours  in 
which  to  complete;  6  of  them  between  13J.and  14;  2  between  14  and 
14};  1  from  14J  to  15;  6  from  15  to  15}  hours;  1  from  15}  to  16;  1 
from  16  to  16}  hours;  2  from  16}  to  17  hours  in  whicli  to  complete  it. 

The  Chairman.  Do  you  intend  to  place  that  chait  in  the  record, 
"Mv.  Ferguson? 

Mr.  Ferguson.  Yes;  I  will  gladly  submit  this. 

The  Chairman.  Well,  that  speaks  for  itself.  The  figures  are 
there. 

Mr.  Ferguson.  Yes;  it  is  all  analyzed.  Of  course,  these  things  arc 
not  easily  undei-stood  sometimes  by  those  who  are  not  so  much 
familiar  with  them. 

The  Chairman.  Just  put  the  chart  in  with  a  very  few  explana- 
tions, and  then  it  is  perfectly  undel'standable,  I  think. 

Mr.  Ferguson.  Yes.  This  is  the  detailed  analysis  of  the  schedule 
conditions  at  that  time  which  were  fully  analyzed  by  the  association 
when  we  presented  our  case;  in  which  each  line  is  analyzed  by  itself. 
If  the  commission  Avould  care,  I  would  gladly  submit  that,  if  I 
might  have  it  back.  It  is  kept  with  the  records  of  the  arbitration, 
and  it  is  the  only  copy  that  I  have. 

Commissioner  Mahon.  You  can  have  that  prepared  and  send  it  to 
the  commission. 

Mr.  Fer(}uson.  Yes ;  I  can  do  that.  Of  coui'se,  all  it  is  is  an  anal- 
ysis of  the  blue  print.    That  has  the  totals  of  everything. 

The  Chairman.  You  may  either  do  as  Commissioner  Mahon  sug- 
gests or  else  leave  that  with  us  and  we  will  see  that  it  is  returned. 
Suit  your  own  convenience. 

Mr.  Ferguson.  That  will  l)e  all  right;  if  I  can  be  sure  that  it  will 
be  returned,  I  would  just  as  soon  leave  it. 

The  CnAnniAN.  It  will  be.  Mr.  Ogburn  will  see  that  it  is  returned 
r.s  soon  as  we  have  reported  our  findings. 

Mr.  Ferguson.  Very  well,  sir. 

These  schedules  I  brought  along,  and  if  the  commission  cares  to 
have  those  submitted,  I  will  gladly  submit  those  in  the  same  way. 
They  are  taken  out  of  our  files  in  the  office,  and  I  suppose  they  could 
W  looked  after  the  same  as  the  other:  if  they  arc  of  any  advantage 
to  the  commission  I  shall  be  glad  to  submit  them. 

The  Chairman.  Very  well.  •  You  will  see  to  it,  Mr.  Ogburn,  that 
the  files  that  the  witness  leaves  with  us  are  returned? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  How  long  have  you  been  connected  with  the  Detroit 
railways? 

Mr.  Ferguson.  Seventeen  and  one-half  years. 

Mr.  Lauck.  You  are  now  the  official  of  the  local  organization  in 
Detroit,  the  executive  head? 

Mr.  Ferguson.  The  business  head  of  the  organization.  I  have 
been  for  two  vears. 

Mr.  Lauck.  The  question  I  would  like  to  ask  you  is :  Do  you  con- 
sider the  work  of  motormen  and  conductors  as  a  skilled  occupation, 
as  a  result  of  your  experience  of  17}  years?  You  have  mentioned 
eomewliiit  of  the  pressure  and  hardship  of  the  work,  and  also  of  the 
strain  on  the  men  in  going  down  through  the  crowded  city  districts. 
Do  you  consider  it  a  skilled  occupation  i 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1743 

Mr.  Ferguson.  Yes ;  I  do. 

Mr.  Lauck.  Can  you  state  any  reasons  why  you  consider  it  as  such 
as  distinguished  from  ordinary  labor? 

Mr.  Ferguson.  Well,  one  feature  of  it  is  that  we  do  not  receive  our 
highest  rate  of  pay  until  after  the  expiration  of  a  ye^ir  from  the  time 
we  enter  tlie  service ;  and  other  features  of  it  that  I  mentioned — it  is 
something  that  everybody  can  not  do. 

Mr.  Lauck.  You  consider  that  there  is  a  year's  apprenticeship 
from  the  fact  that  you  have  to  wait  a  year  before  you  get  your  maxi- 
mum rate  of  pay  ? 

Mr.  Ferguson.  Yes.  We  do  not  receive  our  maximum  rat«  of  pay 
until  after  the  expiration  of  a  year,  and  in  some  instances  13  months^ 

Mr.  Lauck.  Of  course,  there  is  a  large  element  of  responsibility 
in  the  occupation  both  as  regards  property  and  human  lives,  is 
there  not? 

Mr.  Ferguson.  Yes;  there  is. 

Mr.  Lauck.  You  spoke  of  the  nervous  -  strain  of  going  through 
heavy  traffic.  That  is  what  suggested  the  question  to  me.  Is  there 
any  mechanical  knowledge  required? 

Mr.  Ferguson.  Well,  some;  yea.  More  of  the  interurban  men 
than  there  is  of  the  city  men.  There  is  some  difference  there.  Of 
course,  the  mechanical  department  looks  after  the  majority  of  that 
line  of  work  in  the  city. 

Mr.  Lauck.  The  motorman  has  to  understand  the  mechanism  of 
the  car? 

Mr.  Ferguson.  Oh,  yes;  because  emergencies  are  arising  every 
little  while  in  which  he  is  required  to  handle  some  situation  that 
he  is  confronted  with,  in  which  that  feature  of  it  enters. 

Mr.  Lauck.  Just  one  more  question:  Is  this  Local  26,  of  which 
you  are  the  head,  composed  mostly  of  motormen  and  conductors? 

Mr.   Ferguson.  Yes. 

Mr.  Lauc.x.  What  percentage?     Almost  all? 

Mr.   Ferguson.  Practically  all. 

Mr.  L.\ucK.  There  is  one  other  thing  I  wanted  to  ask  j^ou  about. 
What  are  the  regular  hours  in  Detroit?  There  are  no  statutory 
houi-s,  of  course;  but  are  there  any  hours  by  agreement  as  to  what 
constitutes  a  regular  run? 

Mr.  Ferguson.  Any  run  paying  8  hours  or  over  is  recognized  as 
a  regular  run,  if  it  is  completed  within  the  required  number  of  hours, 
which  is  12  hours  or 

Mr.  Lauck.  You  mean  you  have  a  workdav  of  12  hours  in  which 
3^ou  have  a  pay  period  of  9  hours  and  28  minutes  ?  That  *is  the 
average  experience ;  but  what  is  your  standard  workday ^the  spread, 
in  other  words — and  what  is  supposed  to  be  the  working  time  within 
that  spread? 

Mr.  Ferguson.  The  contract  provides  that  the  workday  shall  be 
as  near  9  houi^  as  it  is  possible  to  make  it,  and  the  company  is  al- 
lowed 12J  hours  in  which  to  complete  that  day's  work. 

Mr.  Lauck.  In  other  words,  you  have  a  9-hour  day  which  must  be 
completed  within  12  hours  or  12 J  hours? 

Ml*.  Ferguson.  Understand  that  only  affects,  necessarily,  52  per 
cent  of  the  runs  on  each  schedule.  The  other  48  per  cent  of  the  runs 
may  go  over  an  elapsed  time  or  spread  j^eriod  of  any  limit;  but  there 


I 


1744    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

must  be  52  per  cent  of  them,  at  least,  on  each  schedule  that  are  com- 
pleted inside  of  12J  hours. 

Mr.  Lauck.  Does  actual  experience,  operating  performance,  bear 
out  that  contract?  There  is  not  50  per  cent  of  the  runs  completed  in 
that  period,  is  there? 

Mr.  Ferguson.  Yes;  there  is  52  per  cent  of  them  at  least  com- 
pleted inside  of  that.  In  a  great  many  instances  the  division  point  is 
about  the  limit.  Of  coui-se,  occasionally  a  real  small  line,  in  which 
there  is  nothing  much  operated,  only  just  regular  service  by  two  or 
three  or  thi-ee  or  four  cars — of  course,  the  percentage  would  go  up 
to  practically  100:  but  in  practically  all  cases  where  any  volume  of 
•men  are  affected,  the  percentage  is  clown  just  about  to  the  limit.  In 
fact,  in  some  cases  that  are  fresh  in  my  memory  now,  it  is  down 
to  absolutely'  the  limit;  one  more  run  would  throw  it  outside.  It  is 
just  inside,  and  that  is  all. 

Mr.  Lauck.  Your  contract  work  day,  then,  is  12J  hours  itself,  is 
it  not — time  on  duty,  required  to  be  on  duty? 

Mr.  Ferguson,  les.  The  contract  work  day  is  12  hours.  All  runs 
must  Im?  completed — it  reads  something  like  this:  That  52  per  cent  of 
the  runs  shall  pay  8  hours  or  over,  as  nearly  9  hours  as  possible,  and 
shall  be  completed  inside  of  12  consecutive  hours;  but  where  it  is 
absolutely  necessary  to  accommodate  the  service  or  complete  the 
schedule  they  are  allowed  a  half-hour  leeway  in  which  to  make  these 
runs,  which  would  give  them  12^  hours  in  which  to  complete  them. 

The  result  of  that  is  that  they  take  advantage  of  the  half-hour  in 
practically  all  cases ;  in  fact,  in  the  second  run  on  that  large  schedule 
that  I  refer  to,  they  use  the  full  limit  of  12|  hours,  which  is  a  half- 
hour  outside  of  the  spirit  of  the  agreement,  which  is  that  it  should  be 
completed  inside  of  12  hours;  but  it  w\as  understood  that  in  cases  of 
emergency  they  might  be  allowed  a  half-hour  in  which  to  complete  a 
run,  and  they  take  advantage  of  the  half-hour  and  apply  it  to  practi- 
cally all  of  the  runs  in  which  relief  period  is  made.  Have  I  made 
that  clear? 

Mr.  Lauck.  I  just  wanted  to  bring  out  what  the  standard  workday 
was  by  agreement,  which  is  12  hours,  is  it  not  ?  They  may  require 
you  to  work  12  hours  ? 

Mr.  Ferguson.  Yes. 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  You  gave  us  some  instances  there  where 
men  were  on  duty,  if  I  understood  you  correctly,  about  18  hours,  did 
you  not? 

Mr.  Ferguson.  Yes;  there  is  one  instance.  Thiere  was  one  crew — 
whether  it  would  be  two  men  or  three  men,  of  course,  I  have  no  way 
of  knowing  from  this  table,  because  as  I  explained,  where  a 
trailer  is  used  on  one  of  these  runs  there  are  three  men  affected,  and 
where  there  is  no  trailer  there  would  be  two  men — there  was  one  run 
that  went  l)eyond  18  hours  and  another  18J.  It  was  completed  some- 
where in  that  half-hour  period  between  18  and  18J  hours.  For  in- 
stance, it  w^as  beyond  18  hours,  the  time  elapsed  between  the  time  he 
started  his  schedule  run  and  the  time  he  completed  his  day's  work 
was  beyond  18  hours — ^between  18  and  18J. 

There  were  16  of  them  that  went  beyond  17J  hours  and  were  com- 
pleted in  18  hours  or  less. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1745 

Commissioner  Sweet.  Were  the  conditions  of  that  kind  provided 
for  in  the  contract  that  you  have  referred  to,  with  regard  to  the  12 
hours  or  12J  hours,  making  the  half-hour  leeway? 

Mr.  Ferguson.  As  I  stated,  there  must  be  at  least,  according  to 
our  contract,  52  per  cent  of  the  rvms  on  each  line  completed  in  12J 
hours  or  less. 

Commissioner  Sweet.  I  see.  And  the  other  48  per  cent  of  the 
runs  ? 

Mr.  Ferguson.  The  other  48  per  cent  of  the  runs  are  these  runs 
that  I  described  as  going  over  unreasonably  long  hours. 

Comuiissioner  Sweet.  I  understand  now. 

Mr.  Ferguson.  They  have  that  privilege  and  still  have  it.  It  did 
not  relieve  the  condition — only  in  a  financial  way. 

Commissioner  Sw^eet.  With  regard  to  the  48  per  cent  was  there  a 
limit  of  18  hours? 

Mr.  Ferguson.  No;  no  limit  on  it. 

Commissioner  Sweet.  There  was  no  limit  on  it? 

Mr.  Ferguson.  None  whatever. 

Commissioner  Sweet.  Take  a  man  who  was  included  in  the  52  per 
cent  class;  would  the  time  outside  of  the  12  hours  oi^  12 J  hours  be 
entirely  his  own,  or  could  he  be  called  upon  in  emergency  by  the 
company  ? 

Ml'.  P'erguson.  He  could  be  called  upon. 

Commissioner  Sweet.  He  could  be  called  upon? 

Mr.  Ferguson.  Yes.  He  could  be  called  upon  at  any  time;  either 
before  his  run  goes  out  or  during  that  relief  period,  which  is  supposed 
to  be  his  dinner  hour,  or  after  he  had  completed  that  day's  work. 

Commissioner  Sweet.  If  he  is  called  upon  to  work  in  addition  to 
the  12i-hour  period,  would  he  get  extra  pay? 

Mr.  Ferguson.  Yes.  If  he  was  a  day  man,  a  man  holding  a  day 
run,  and  he  was  called  upon  to  perform  work  after  having  completed 
that  day's  work,  or  during  that  relief  period,  he  would  receive  time- 
and-a-half  for  that  work.  That  condition  did  not  exist  until  the 
National  War  Labor  Board  gave  us  that  in  their  award  a  little  over 
a  year  ago. 

Commissioner  Sweet.  What  do  the  men  care  most  for — their 
time  or  the  extra  pay  ?  In  other  words,  do  they  like  to  be  called  upon 
to  do  extra  work,  if  they  get  extra  pay? 

Mr.  Ferguson.  They  do  not.  They  are  perfectly  satisfied  to  go 
home  when  they  get  the  day's  work  completed. 

Commissioner  Savpet.  That  is  their  preference? 

Mr.  Ferguson.  That  is  the  preference  of  practically  all  of  them. 

Commissioner  Sweet.  Has  it  been  a  common  thing  on  the  Detroit 
railway  to  call  on  them  to  do  extra  work  for  extra  pay  ? 

Mr.  Ferguson.  It  is  customary  to  call  on  them  to  do  the  extra 
work.  As  I  say,  we  never  had  any  extra  pay  until  after  the  award 
from  the  National  War  Labor  Board  came  down.  But  it  is  custom- 
ary, and  always  has  been,  to  call  upon  them. 

Commissioner  Sw^eet.  When  did  that  award  go  into  effect? 

Mr.  Ferguson.  That  award  went  into  effect  on  June  1,  1918. 

Commissioner  "Sweet.  Since  that  time  has  there  been  very  much 
call  upon  the  men  to  do  extra  work  for  extra  pay? 

Mr.  Ferguson.  Oh,  yes ;  a  good  deal  of  it. 

1G0643*'— 20— VOL  2 48 


iB^A 


1746    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  For  which  they  are  paid  time-and-a-half? 
Mr.  Ferguson.  They  are,  with  the  exception  of  a  night  man,  a  man 
oi)erating  regularly  a  night  run;  if  he  is  called  out  in  the  morning 
to  perform  extra  service,  in  a  great  many  instances  he  gets  no  extra 
compensation  for  that  whatever. 

C'omissioner  Saveet.  Is  that  provided  for  in  the  contract? 
]Mr.  Ferguson.  It  is  provided   for  in  the  National  War  Labor 
Board's  award. 

Conmiissioner  Sweet.  In  the  award? 

Mr.  Ferguson.  Yes;  which  is  a  part  of  the  contract,  of  course. 
Commissioner  Sweet.  That  is  all. 

Commissioner  Maiion.  AVhat  wages  did  you  receive  under  the  Na- 
tional War  Labor  Board  award  ? 

Mr.  Ferguson.  We  received  40  cents  an  hour  for  the  first  3  months, 
40)  cents  for  the  next  9  months  and  48  cents  thereafter. 
Commissioner  Maiion.  After  the  expiration  of  one  year? 
Mr.  Ferguson.  After  the  expiration  of  one  yearj  yes. 
Commissioner  ^Iahon.  What  wages  are  you  receiving  now? 
Mr.  Ferguson.  Fifty  cents  for  the  first  three  months'  service,  55 
cents  for  the  next  nine  months  and,  after  the  expiration  of  the  year, 
GO  cents.    Of  course,  we  have  a  i^eculiar  condition  there,  too,  in  which 
some  men  are  required  to  work  13  months  before  they  get  tl>eir  maxi- 
nuim  rate  of  pay.    That  is  owing  a  contract,  of  course;  but  it  works 
a  hardship  on  some  men  to  the  extent  of  working  an  extra  month 
witliout  receiving  the  high  rate  of  pay,  which  makes  their  apprcniice- 
sliip  13  months  instead  of  12. 

Commissioner  Mahon.  Commissioner  Swe^t  asked  j'ou  about  men 
Avorking  overtime.  Is  it  not  a  fact  that  during  the  entire  war  period 
Detroit  was  shoi-t  two  or  three  hundred  men,  and  all  your  men  hail 
to  work  overtime  all  the  time? 

Mr.  Ferguson.  I  believe  the  average  ^^hortage,  if  my  memory  serves 
me  right,  was  about  400  men  during  tlie  war  ixuiod.  It  averaged  that 
all  the  time,  about  400  men  short,  which  resulted  in  practically  all 
men  being  required  to  work  overtime  nearly  every  day. 

Commissioner  Sweet.  Was  that  with  or  without  extra  pa}^? 
IVIr.  Ferguson.  It  was  with  extra  i)ay  with  the  exception  of  some 
cases  where  a  man  was  called  upon  to  perform  an  extra  morning 
service;  in  those  cases  they  got  no  extra  pay  for  it. 

Commissioner  Mahon.  That  extra  pay  came,  however,  after  the 
War  Labor  Board  award  ? 
Mr.  Ferguson.  Yes. 

Commissioner  Mahon.  But  your  men  cheorfully  met  it  during  the 
wliole  period  of  the  war? 

Mr.  Ferguson.  They  met  it  the  siime  before  as  after  the  war. 
They  were  called  upon  to  i3erform  this  extra  service  and  performed 
it.  The  overtime  which  was  performed  by  men  at  tliat  time  probably 
vrould  surprise  as  all  if  it  was  tivbulated.  Tliey  were  working  all 
jiours. 

1  he  Chairman.  How  do  the  men  regard  their  present  wage 
sche  lule  ? 

Mr.  Ferguson.  Tlielr  wage  schedule? 
The  Chairman.  Yes. 

Mr.  Ferguson.  They  do  not  think  it  is  sufficient  to  meet  the  costs 
that  they  arc  confronted  with. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1747 

The  Chairman.  Are  they  at  this  time  asking  for  an  increase  in 
rates? 

Mr.  Ferguson.  Xot  at  this  time ;  there  are  no  negotiations  on.  Of 
course  there  are  a  great  many  of  them  disappointed. 

Mr.  Lauck.  The  schedules  you  spoke  of  are  normal  schedules,  are 
they  not?  These  hours  are  not  due  to  abnormal  wartime  conditions, 
but  they  are  schedules  worked  out  between  your  men  and  the  com- 
pany? 

Mr.  Ferguson.  Yes;  both.  There  were  no  abnormal  conditions 
existing  at  the  time  these  tables  were  prepared  or  the  schedules  I 
have  shown  here,  because  those  are  late  schedules. 

Mr.  Lauck.  They  are  regular  runs,  are  they  not,  made  by  agree- 
ment ? 

!Mr.  Ferguson.  Yes;  there  is  none  of  the  work  that  has  been  de- 
scribed on  these  tables  that  in  any  way  tells  the  story  of  overtime  or 
extra  work. 

Mr.  Lauck.  That  is  what  I  was  getting  at. 

Mr.  Ferguson.  Xo  ;  that  is  all  in  the  dark.  There  is  ijo  way  of  tab- 
id ating  it  without  going  over 

Commissioner  Maiion.  It  is  all  in  addition  to  these  schedules? 

Mr.  Ferguson.  Yes;  the  work  day  we  have  outlined  here  is  the 
regular  schedule  workday  that  men  are  required  to  Avork  every  day. 

Mr.  Lauck.  That  is  all. 

The  Chairman.  Do  you  wish  to  ask  this  witness  any  questions.  Mr. 
Warren  ? 

Mr.  Warren.  I  just  wish  to  ask  one  tiling.  Of  course  it  is  per- 
fectly clear  to  the  commission  as  it  is  to  the  street-railway  men  here, 
I  think :  The  time  outside  of  the  platform  time  which  you  are  work- 
ing is  ordinarily  a  man's  own  time,  is  it  not;  I  mean  he  is  not  re- 
(juired  to  be  on  duty  ? 

Mr.  Ferguson.  Xot  without  special  notification. 

Mr.  Warren.  Yes;  that  is  what  I  mean. 

Mr.  Ferguson.  For  example,  we  might  illustrate  it  this  way:  If 
a  man's  relief  hour  is  11  o'clock  in  the  morning  he  is  scheduled  to 
report  again  at  2  in  the  afternoon,  or  1  in  tlie  afternoon,  as  the  case 
might  be,  of  coui^se  that  time  in  there  is  his  own  to  some  extent.  He 
can  go  home  and  get  his  dinner — that  is  about  all  it  amounts  to.  If 
not  notified  to  perform  some  extra  work  during  that  time,  his  time 
is  his  own,  to  that  extent.  Of  course  there  is  no  opportunity  to  do 
anything  but  go  home  and  get  his  meals,  but  he  is  not  required  to 
stay  around  the  car-barns.  I  suppose  that  is  the  point  you  desire  to 
bring  out. 

Mr.  Warren.  Yes. 

Mr.  Ferguson.  Xo  ;  he  is  not  required  to  stay  around  the  car-barns 
unless  specially  notified. 

Mr.  AYarren.  And  any  work  he  is  asked  to  do  beyond  his  regular 
time  he  is  paid  either  straight  time  additional  or  time-and-a-half, 
ju cording  to  the  circumstances? 

Mr.  Ferguson.  Yes;  any  platform  time  he  is  i-equired  to  perform 
in  excess  of  that  he  would  receive  excess  compensation  for,  either  at 
the  straight  rate  of  pay  or  time-and-a-half. 

Commissioner  Mahon.  That  only  affects  your  52^  per  cent,  does  it 

lM>t? 

•Mr.  Ferguson.  No;  that  affects  them  alL 


lira 


1748    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Mahon.  I  do  not  know  that  you  get  my  meaning  of 
that. 

Mr.  Ferguson.  Maybe  not. 

Commissioner  Mahon.  It  affects  them  all ;  the  men  over  the  52  per 
cent  are  practically  on  duty  all  the  time  and  are  subject  to  call  all 
the  time,  are  they  not  ? 

Mr.  Ferguson.  Yes.  In  fact,  they  are  subject  to  call  all  the  time. 
They  can  all  be  called  any  time  that  they  see  fit  to  call  them.  Of 
course,  he  is  known  as  an  extra  man.  The  men  included  in  the  48 
l>er  cent  are  known  as  extra  men  and  subject  to  the  extra  men's  con- 
ditions, if  that  is  your  point. 

Commissioner  Sweet.  Is  it  a  common  thing  among  the  conductors 
or  motormen  for  men  to  break  down — their  health  give  way — nervous 
breakdowns;  are  they  frequent? 

Mr.  Ferguson.  Yes;  I  would  say  that  it  is  in  a  good  many  cases 
in  our  local.  Of  course^  in  that  respect,  outside  of  records,  as  it 
affects  the  entire  association,  I  can  only  speak  of  our  own  local,  but 
I  know  of  a  pood  many  cases  where  they  practically  go  all  in.  They 
have  to  be  given  some  other  line  of  work  or  else  Have  to  seek  other 
work. 

Commissioner  Sweet.  Your  own  health  appears  to  be  good. 
Mr.  Ferguson.  Oh,  well,  yes;  but  then  I  started  in  the  business 
when  I  was  rather  young. 

Commissioner  Sweet.  But  you  never  had  any  nervous  breakdown 
because  of  it  ? 

Mr.  Ferguson.  No  ;  I  have  not  had  any  nervous  breakdowns. 

Commissioner  Sweet.  You  look  the  picture  of  health. 

Commissioner  Mation.  For  the  benefit  of  Mr.  Sweet,  I  have  a  com- 
plete tabulated  death  list  of  the  membership  of  our  organization  for 
the  past  two  years  showing  every  cause  of  death  to  our  membership, 
which  is  in  my  report,  and  it  will  give  him  a  correct  description  of 
what  the  men  of  this  occupation  have  to  contend  with. 

Tlie  Chairman.  Does  this  report  make  a  comparative  study  of  the 
condition  of  health  in  your  industry  as  compared  with  other  lines  of 
industry  ? 

Commissioner  Mahon.  No.    Of  course,  that  is  a  big  undertaking. 

Commissioner  Sw^eet.  But  that  will  go  into  the  record,  will  it  ? 

Commissioner  Mahon.  Well,  I  can  put  it  in.  Your  question 
brought  it  to  my  mind.  I  have  it  tabulated  over  two  years  and  it 
shows  every  cause,  and  I  think  it  will  surprise  a  great  many  people; 
that  it  will  show  a  great  many  of  our  people  have  died  from  tubercu- 
losis, due  to  the  occupation. 

Mr.  Ferguson.  That  copy  I  brought  with  me  I  can  submit  to  the 
commission. 

The  Chairman.  You  are  excused,  Mr.  Ferguson. 

Your  next  witness,  Mr.  Lauck. 

Mr.  Lauck.  We  would  like  to  call  Mr.  William  M.  Rea. 

STATEMENT  OF  MR.  WILLIAM  M.  REA. 

Mr.  Lauck.  Will  you  state  your  name  for  the  record  ? 
Mr.  Re^v.  William  M.  Rea. 

Mr.  Lauck.  You  are  at  present  actively  employed  as  a  conductor 
on  the  Cleveland  Railway  Co.? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1749 

Mr.  Rea.  No;  I  am  financial  secretary  of  Division  268  of  the 
Amalgamated  Association  and  have  been  for  seven  years. 

Commissioner  Gadsden.  Where  is  that,  Cleveland  ? 

Mr.  Rea.  Cleveland;  yes. 

Mr.  Lauck.  You  are  a  representative  of  the  local  organization 
there  and  have  had  a  number  of  yeai-s'  experience  with  this  company, 
have  you  not? 

Mr.*^  Rea.  Prior  to  the  time  I  entered  the  office  I  had  eight  years' 
exi:>€rience  as  a  conductor. 

Mr.  Lauck.  And  seven  years  since;  so  you  have  had  15  years' 
experience  witli  the  company? 

Mr.  Rea.  Yes. 

Mr.  Lauck.  Is  your  local  composed  practically  of  all  motormen 
and  conductors? 

Mr.  Rea.  All  of  them  with  the  exception,  I  mi^lit  say,  of  men 
who  have  retained  their  membership  since  they  left  the  employ- 
ment; but  we  only  represent  the  motormen  and  conductors. 

Mr.  Lattck.  Have  you  a  copy  of  the  1914  schedule  and  also  of  the 
l^resent  schedule  which  will  explain  to  the  commission  the  hours  of 
duty  and  rate  of  the  runs  and  so  forth  ? 

Mr.  Rea.  Yes. 

Mr.  Lauck.  Will  you  please  produce  that?  You  had  better  take 
lip  each  line  in  order — like  the  St.  Clair  line,  and  ^o  through  with  it. 

Mr.  Rea.  This  1914  schedule  data  was  prepared  at  that  time  to  go 
before  an  arbitration  board. 

On  the  St.  Clair  Avenue  schedule;  Schedule  No.  844,  in  effect 
October  1,  1913: 

There  are  4  men  who  complete  their  day's  work  in  9J  hours;  4 
men  complete  their  day's  work  in  11^  houi*s;  9  men  complete  their 
day's  work  in  12  hours;  51  men  complete  their  day's  work  in  12J 
hours;  12  men  in  13  hours;  26  men  in  13J  hours;  6  men  in  14  hours; 
4  men  in  15J  hours;  8  men  in  16  hours;  2  men  in  16J  hours;  4  men 
in  18  hours;  14  men  in  18^  hours — that  is,  required  to  complete  their 
day's  work. 

The  schedule  on  the  same  line,  effective  May  16,  1919,  Schedule 
Xo.  1573: 

There  are  6  men  who  complete  their  day's  work  in  8  hours.     These 

are  the  night-car  men,  which  change  was  made  in  the  award  of  the 

National  War  Labor  Board,  effective  last  August — that  is,  August, 
1918.  ^  »        fe      » 

There  are  2  men  who  complete  their  day's  work  in  9J  hours;  2 
in  10  hours;  1  in  12  hours;  26  men  in  12J  hours  (I  would  just  like 
to  say  that  these  figures  I  am  reading  are  all  men;  they  are  not 
runs)  ;  67  men  in  13 hours;  20  men  in  13J  hours;  23  men  in  14  hours; 
6  men  in  14J  hours;  16  men  in  15  hours";  6  men  in  15 J  hours;  3  men 
in  17^  hours;  9  men  in  18  hours;  11  men  in  18^  hours;  5  men  in  19 
hours. 

The  next  schedule  is  Superior  Avenue. 

Commissioner  Mahon.  What  is  the  pay  time  on  that  run? 

Mr.  Rea.  The  average  pay  time  on  the  St.  Clair  run,  under  the 
schedule  effective  in  1914,  was  8  hours  36  minutes.  The  average 
time  of  completion  was  13  hours  43  minutes.  The  average  lost  time 
per  man  on  that  schedule  was  5  hours  7  minutes. 


1750    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Lauck.  Suppose  you  just  give  us  those  averages  for  the  other 
lines— for  the  Euclid  run,  the  Woodland  run— that  is,  the  avera<ie 
outside  time,  the  average  pay  time,  and  the  average  time  lost — that 
is,  for  the  Superior,  Euclid,  Woodland,  and  so  on.  Have  you  that 
convenient,  so  you  can  state  it ? 

:Mr.  liEA.  Do  you  just  want  the  average  on  the  present  scheduk*  i 
Commissioner  Mahon.  I  think  you  ought  to  give  it  on  all  of  them 

{IS  you  go  along. 

Mr.  Kea.  Well,  I  am  willing  to  give  you  all  the  information  1 
have  liere,  whatever  is  the  shoilest. 

On  the  present  schedule— that  is,  schedule  1572— St.  Clair  run, 
effective  May  IG,  1910,  the  average  time  of  completion  on  that  sched- 
ule per  man  was  13  hours  4G  minutes.  The  average  time  paid  was 
10  hours  15  minutes  per  man  and  the  average  time  lost  per  man  was 
2  hours  31  minutes. 

Commissioner  Sweet.  Just  exactly  what  do  you  mean  by  time 
lost  ?    The  time  he  was  not  working  ? 

Mr.  Re.\.  The  time  a  man  starts  to  work  in  the  morning  until  he 
eoiupletes  his  day's  work  at  night. 

Commissioner  Mahon.  The  time  he  does  not  get  paid  for. 

Commissioner  Sweet.  Read  my  question  again. 

(The  i)revious  question  was  then  read  as  above  i-ecorded.) 

Mr.  Rea.  That  is  tlie  time  he  is  not  working,  that  he  does  not  get 
paid  for.  A  great  many  of  these  runs  aroimd  13,  14,  and  15  hours — 
these  men  show  up  for  work  around  4.35  to  5.30  in  the  morning. 
They  work  for  probably  two  and  one-half  hours  and  are  relieved  for 
maybe  an  hour  or  an  hour  and  a  quarter,  return  to  work,  work  piob- 
!ibry  two  and  one-half  or  three  hours,  again  have  another  reliei,  go 
on  in  the  evening  and  work  until  probably  8  or  0  at  night. 

Then  the  olher  men,  who  require  from  V>  up  to  18  or  19  liours  to 
complete  tiieir  work,  go  to  work  around  5  to  o.i\0  in  Uui  morning; 
they  work  probably  three  and  a  half  or  four  hours.  They  are  then 
comi^elled  to  return  in  the  evening  around  4  o'clock  and  vrork  until 
12.30  or  1  o'clock  that  night  and  again  return  for  duty  on  the  fol- 
IcAving  mornmg  at  5  o'clock. 

Commissioner  Sweet.  And  what  you  speak  of  as  lost  time  is  the 
time  they  are  actually  working? 

Mr.  Rea.  They  are  not  actutdly  working.  But  take  a  man  >yho 
is  compelled  to  show  up— especially  on  what  we  call  our  three-swing 
run — he  might  as  well  be  working,  because  he  has  not  time  to  do  a 
thing.  He  is  relieved  for  an  hour  in  the  forenoon  and  an  hour  or  two 
in  the  afternoon . 

Commissioner  Sweet.  I  know ;  he  is  subject  to  call  in  that  period. 

Mr.  Rea.  And  it  is  not  always  iK)ssible  for  all  men  to  live  within 
walking  distance  of  the  car-barns,  because  in  some  districts  where 
the  car-biirns  arc  the  rent  is  so  high  they  can  not  afford  to  live  in 
those  districts  and  their  entire  time  in  those  swings  is  taken  up  in 
going  to  and  from  in  that  period,  which  makes  a  man  practically 
un  duty  all  tlie  time.    Does  that  answer  your  question? 

Commissioner  Meekfir.  Tlie  men  are  paid  only  for  the  time  they 
actually  work? 

Mr.  Rea.  Actually  work.  Take  on  that  St.  Clair  schedule  that  I 
spoke  of:  Tlie  men  are  paid  8  hours  and  34  minutes,  or  30  minutes, 
and  it  takes  them  13  hours  and  43  minutes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1751 

Commissioner  Maiiox.  That  is  the  average? 

Mr.  Rea.  That  is  the  a^  erage. 

Commissione;r  Mahox.  What  is  the  longest  time  on  that  line? 

Mr.  Rea.  On  that  line?  AVell,  now,  there  are  5  men  that  require 
19  hours,  11  men  18^V  hours,  and  9  men  18  hours. 

Mr.  Warrex.  What  are  the  actual  working  hours  of  those  5  men, 
A\hen  they  report  and  when  they  stop?    Have  you  given  those? 

^Ir.  Rea.  I  have  it  in  another  blue  print.  Now,  a  man  who  re- 
(|uires  19  hours  to  complete  a  day,  he  reports  in  the  morning  for  his 
run  at  5.18;  he  works  until  7.20;  returns  to  his  work  at  4.2G  p.  m.; 
completes  his  day's  work  at  12.23  a.  m.  The  next  day  he  has  to  go 
through  the  same  procedure,  returning  to  work  at  5.18  in  the  morn- 
ing. 

Mr.  Warrex.  He  has  a  longer  lay-off  in  the  middle  of  the  day 
thnn  he  has  at  night,  apparently? 

Mr.  Rea.  He  has;  yes.  There  is  no  time  on  these  runs  where  a 
man  can  get  8  hours  consecutive  rest,  although  in  the  State  of  Ohio 
we  have  a  law  that  requires  that  all  men  shall  be  off  duty  8  consecu- 
tive hours.  And  you  will  notice  in  that  schedule  or  in  a  great 
many,  if  3^ou  want  to  go  over  them,  that  they  have  just  obeyed  that 
hiw.  That  man  might  take  45  minutes  to  go  home  and  he  has  to 
eat,  because  he  arose  so  early  in  the  morning,  and  that  takes  him,  all 
told,  possibly  an  hour  and  a  half,  and  then  he  has  to  prepare  in  the 
evening  to  come  to  work  again,  and  it  is  impossible  for  him  to  get 
more  than  5^  hours  sleep  in  the  day  and  almost  impossible  to  get 
any  fit  night,  because  he  has  to  ride — on  account  of  the  night-car 
condition,  he  might  not  get  home  until  half-past  1  and  still  might 
have  to  leave  home  at  half  past  3  to  get  to  the  barn  again. 

Mr.  Warrex.  You  do  not  have  any  law  limiting  the  hours  except 
that  8-hour  law  ? 

Mr.  Rea.  Xo  ;  that  is  the  only  one  we  have.  Now,  those  runs  that 
1  spoke  of  that  had  around  14  hours  for  completion;  just  as  an  ex- 
ample, here  is  a  man  who  goes  to  work  at  5.10  in  the  morning;  he 
works  until  8.59;  returns  at  11.31  a.  m.;  is  off  at  2.01  p.  m. ;  goes  on 
duty  at  3.19  p.  m.;  off  at  7.18  p.  m.  It  requires  him  14  hours  and 
8  minutes,  and  he  is  practically  on  duty  from  5.10  a.  m.,  until  7.18 
J),  m.     This  schedule  contains  a  great  number  of  such  runs  as  that. 

Are  you  ready  for  the  next  schedule,  Mr.  Lauck? 

Mr.  Lauck.  I  think  you  just  started  on  the  Superior  Avenue  run. 

Mr.  Rea.  This  is  the  Superior  Avenue  schedule  in  effect  OctolMji' 
1,  1918,  schedule  Xo.  878.  Do  you  want  me  to  read  the  following 
schedules  the  same  as  I  did  the  St.  Clair,  showing  the  number  of 
men  that  required  a  certain  number  of  hours,  or  just  the  average? 

Mr.  Lauck.  I  believe  it  would  be  better  to  give  the  averages,  un- 
less there  are  exceptional  conditions  on  the  line  that  you  want  to 
point  out,  or  unless  someone  wishes  to  bring  out  some   point. 

Commissioner  Sweet.  If  those  already  given  are  typical  of  the 
entire  situation,  do  you  think  it  is  necessary  to  put  in  all  of  them? 

Mr.  Lauck.  We  would  just  like  to  put  in  the  averages,  which 
will  take  but  a  short  time. 

Commissioner  Sweet.  We  want  to  shorten  it  if  we  can. 

Mr.  Rea.  On  this  schedule  the  average  time  of  cx)mpletion  j^er  man 
is  13  hours  13  minutes;  the  average  pay  time  per  man  is  8  hours 
54  minutes;  the  average  lost  time  x^er  man  is  4  hours  19  minutes. 


I 


il 


1 


1752    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Superior  schedule- 


^mt^M- 


\    ■  ^t* 


Mr.  Lauck.  That  was  in  1914? 

Mr.  Rea.  In  1913  and  what  we  exhibited  in  1914;  it  was  in  effect 
in  1914. 

Mr.  Lauck.  Can  yon  give  the  same  thing  for  the  yesiv  1919? 

Mr.  Rea.  Superior  schedule  1622  in  effect  July  1,  1919:  The  aver- 
age time  of  completion  on  this  schedule  was  12  hours  57  minutes  per 
man;  the  average  time  paid  was  8  hours  28  minutes  per  man;  the 
average  time  lost  4  hours  29  minutes  per  man. 

Mr.  Lauck.  Just  go  ahead  with  the  Euclid  and  Woodland  lines, 
giving  the  averages. 

Mr.  Rea,  Euclid  Avenue,  schedule  No.  832,  in  effect  September  16, 
1913:  The  average  time  of  completion  per  man  is  13  hours  15  min- 
utes; the  average  time  paid  was  9  hours  39  minutes  per  man;  the 
average  time  lost  3  hours  36  minutes  per  man. 

Under  the  present  schedule,  Euclid  Avenue  schedule  1545,  in  ef- 
fect December  2,  1918,  and  still  in  operation :  The  average  time  of 
completion  per  man  is  13  hours  2  minutes;  the  average  time  paid 
per  man  9  houi*s  48  minutes;  the  average  time  lost  per  man  3  hours 
14  minutes. 

Woodland  Avenue,  schedule  No.  746,  in  effect  October  31,  1913: 
Average  time  for  completion  per  man  was  13  hours  and  1  minute; 
average  time  paid  per  man,  8  hours  and  50  minutes;  average  time 
lost  per  man,  4  hours  and  28  minutes. 

Woodland  Avenue,  schedule  No.  1502,  in  effect  November  1,  1918, 
and  in  operation  at  this  time:  Average  time  of  completion  per  man, 
12  hours  and  58  minutes;  average  time  paid  per  man,  8  hours  and  14 
minutes;  average  time  lost  per  man,  4  hours  and  44  minutes. 

Broadway,  schedule  No.  859,  in  effect  December  1,  1913 :  Average 
time  of  completion  per  man,  13  hours  and  36  minutes;  average  time 
paid  per  man,  9  hours  and  1  minute;  average  time  lost  per  man,  4 
hours  and  35  minutes. 

Broadway,  schedule  No.  1499,  in  effect  October  16, 1918,  and  in  op- 
eration at  the  present  time:  Average  time  of  completion  per  man 
\^as  12  hours  and  47  minutes;  average  time  paid,  9  hours  and  17 
minutes  per  man;  average  time  lost  per  man,  3  hours  and  eSO  minutes. 

Bridge  Avenue,  schedule  No.  854,  in  effect  October  1,  1913:  Aver- 
age time  of  completion  per  man,  13  hours  and  25  minutes;  average 
time  paid  per  man,  9  hours  and  17  minutes;  average  time  lost  per 
man,  4  hours  and  8  minutes. 

Bridge  Avenue,  schedule  1634,  in  effect  August  4,  1919,  and  in 
effect  at  the  present  time:  Average  time  of  completion,  13  hours  and 
1  minute;  average  time  paid  per  man,  9  hours  and  12  minutes;  aver- 
age time  lost  per  man,  3  hours  and  49  minutes. 

Detroit  Avenue,  schedule  793,  in  effect  April  14,  1913:  Average 
time  for  completion  per  man,  13  hours  and  17  minutes;  average  time 
paid  per  man,  9  hours  and  22  minutes;  average  time  lost  per  man, 
3  hours  and  55  minutes. 

Detroit  Avenue,  schedule  No.  1505,  in  effect  November  1,  1918,  and 
in  operation  at  the  present  time:  Average  time  of  completion  per 
man,  12  hours  and  50  minutes;  average  time  paid,  9  hours  and  12 
minutes;  average  time  lost  per  man,  3  hours  and  38  minutes. 

Mr.  Lauck.  How  many  days,  on  an  average,  does  your  experience 
indicate  tliey  worked  during  the  year  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1753 

Mr.  Rea.  Motormen  and  conductors? 
Mr.  Lauck.  Yes. 
Mr.  Rea.  About  325. 

Mr.  Lauck.  You  have  not  a  combined  average  for  all  lines,  all 
divisions,  have  you,  Mr.  Rea? 

Mr.  Rea.  I  have  not.  These  are  typical  schedules  that  are  in  op- 
eration on  all  lines  in  the  city  of  Cleveland. 

Mr.  Lauck.  That  completes  what  you  have  to  submit  to  the  com- 
mission, does  it? 

Mr.  Rea.  Yes;  that  completes  what  I  have  to  submit.  I  have  the 
schedules  from  every  line  in  the  city  which  will  show  the  same  condi- 
tion as  I  have  read  on  these  schedules. 

Mr.  L  vucK.  If  the  commission  does  not  wish  to  ask  any  questions, 
that  is  all. 

Commissioner  Mahon.  Have  you  any  short  runs  that  are  not 
scheduled  ? 

Mr.  Rea.  We  have  a  number  of  five-hour  runs,  tripper  runs,  that 
are  worked  by  extra  men. 

We  have  a  guaranty  under  the  agreement  with  the  railway  com- 
pany that  every  man  shall  be  paid  five  hours  per  day.  Those  men  are 
compelled  to  work  a.  m.  and  p.  m.  trippers,  m  most  cases,  some  few 
schedules  are  just  p.  m. 

A  nian  that  receives  the  5-hour  minimum,  Mr.  Mahon,  that  is 
required  to  go  to  work  around  6  o'clock  in  the  morning— 5.30  to  6 
o'clock  in  the  morning — completes  his  duties  around  6.30  in  the 
evening. 

Commissioner  Mahon.  Is  that  a  condition  under  the  Cleveland 
scliedule  at  the  present  time 

Mr.  Rea.  Yes,  sir. 

Commissioner  Mahox.  To  what  extent  does  this  condition  exist 
that  the  men  are  only  getting  5  hours'  pay  now  ? 

Mr.  Rea.  On  the  Superior  Avenue  schedule  there  are  22  men  work- 
ing for  5  hours'  pay  per  day,  and  it  required  those  22  men  259  hours 
to  complete  their  day's  work,  and  they  received  compensation  for 
110  houi-s. 

Commissioner  Mahon.  How  many  hours  did  you  say? 

Mr.  Rea.  259  hours. 

Commissioner  Mahon.  In  what  period? 

Mr.  Rea.  In  one  day. 

Commissioner  Mahon.  How  many  men  was  that? 

Mr.  Rea.  Twenty -two  men. 

Commissioner  Mahon.  Oh,  yes;  I  see. 

Mr.  Rea.  In  addition  to  working  a.  m.  and  p.  m.,  if  the  schedule 
time  is  not  5  hours,  they  are  subject  to  call  at  any  time  during  the 
day  to  work  out  the  5  hours. 

Commissioner  Mahon.  To  what  extent  is  that?  Is  there  any  more 
of  that  than  you  pointed  out  on  the.  one  line  ? 

Mr.  Rea.  Every  schedule  has  similar  conditions.  Some  of  them 
not  as  bad  as  that  one. 

On  Euclid  Avenue  we  have  two  men  who  are  working  for  5 
hours;  one  man  5  hours  and  25  minutes;  another  man  7  hours;  an- 
other man  7  hours  and  5  minutes;  two  men  7  hours  and  10  minutes. 

Commissioner  Mahon.  The  men  are  sacrificing  this  time  in  order 
to  make  this  schedule  condition  at  Cleveland  a  success,  are  they  ? 


If 


iL. 


■dH 


1754 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Mr.  Rea.  Yes,  sir. 

Comniissioncr  Maiiox.  I  want  the  commission  to  pay  particular 
attention  to  this  condition  at  Cleveland,  because  it  has  been  held 
np  as  one  of  the  shining  examples  for  the  street  railways  to  be  ^^uided 
])y.  C)ne  of  the  gentlemen  yesterday,  Mr.  Beeler,  in  his  testmiony, 
pointed  it  out  as  one  of  the  successful  cities.  Part  of  that  success 
is  due  to  the  sacrifice  that  these  men  made  who  are  working  there  to 
helj)  it  to  success.  Here  are  a  number  of  men  who  get  5  hours'  pay 
for  their  workday.  Under  our  contract  with  the  Cleveland  coni- 
l)any  the  lowest  amount  that  a  man  can  be  paid  is  5  hours'  time,  and 
advantage  is  taken  of  that. 

Mr.  Rea.  Woodland  Avenue,  schedule  Xo.  1502,  in  effect  Xoveui- 
l)er  1,  1918:  There  are  ?1  men  on  that  schedule  that  receive  only 
r>  hours'  time;  2  men,  5  hours  and  30  minutes;  4  men,  5  hours  and 
S5  minutes. 

Commissioner  Meeker.  May  I  ask,  is  the  showing  of  hours  in 
Cleveland  rather  worse  than  in  other  cities?  Will  you  i^ut  in  evi- 
dence, Mr.  Lauck,  of  hours  in  other  cities  for  comparison  ? 

Mr.  Lauck.  We  were  depending  upon  Mr.  Mahon's  knowledge 
to  explain  to  the  commission  whether  or  not  these  were  typical  in 
representative  cities,  or  whether  they  were  unusual.  This  is  all  the 
evidence  Ave  have  at  this  time  to  submit.  We  could  put  iu  all  the 
schedules  if  desirable.  We  thought  Mr.  Mahon  could  advise  the  coni- 
mission  whether  these  were  representative  and  typical  or  not — in 
other  words,  cover  your  question. 

Coinmis-sioner  Meeker.  The  point  of  my  question,  of  course,  is 
this:  Is  the  service  at  Cleveland  dei>endent  upon  making  greater 
demands  upon  the  men  operating  the  cars  than  is  the  case  in  other 
cities  that  have  not  as  good  a  record  financially  as  Cleveland? 

Mr.  Lauck.  Mr.  Rea  would  not  \ye  in  a  position  to  testify  as  to 
that.    Mr.  Mahon  could  probably  answer  that. 

Connnissioner  Mahon.  Mr.  Rea  is,  of  course,  only  familiar  with 
Cleveland.    He  is  the  secretary  of  the  Cleveland  union. 

Connnissioner  (jadsden.  These  men  who  make  only  five  hours  are 
on  the  extra  list,  are  they  not? 

Mr.  Rea.  Yes. 

Commissioner  Gadsden.  How  long  does  a  man  stay  on  the  extra 
li,st  in  Cleveland  before  he  gets  a  regular  run? 

Mr.  Rea.  Prior  to  the  war  we  had  nu\ny  lines  in  the  city  of  Cleve- 
land that  had  men  on  the  extra  list  for  a  period  of  six  years. 

Mr.  Gadsden.  Xow  I  mean. 

Mr.  Rea.  At  the  present  time,  of  course,  we  have  not  got  back  to 
i*eally  normal  conditions  yet. 

Mr.  Gadsden.  Xo. 

Mr.  Rea.  But  I  would  be  safe  in  saying  that  the  average  from  now 
on  will  be  from  two  to  three  years  in  the  number  of  men  that  are 
employed  in  the  city  of  Cleveland, 

Commissioner  Gadsden.  He  gradually  works  himself  up  from  the 
extia  list  and  gets  better  assignments,  does  he  not,  so  that  he  works 
out  of  that  5-hour  class? 

Mr.  Rea.  Yes;  he  does. 

Commi.-sioner  Ciadsden,  How  gradual  is  the  improvement  until 
he  gets  a  regular  run? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1755 

Mr.  Rea.  He  graduates  into  the  7-hour  class.  /  '  .  ^ 

Commissioner  Gadsden.  Yes. 

Mr.  Re.v.  It  takes  him  about  IG  or  17  hours  to  put  in  7  hours. 

Commissioner  Mahon.  Mr.  Gadsden  does  not  think  that  that  is  a 
condition  that  should  prevail — that  men  should  have  to  graduate 
fjom  that  condition? 

Commissioner  Gadsden.  I  do  not,  but  I  did  not  want  the  commis- 
sioner to  understand  that  these  men  were  permanently  working  five 
hours.    There  is  a  gradual  improvement  in  their  condition. 

Commissioner  Sweet.  IVliat  are  the  requirements  of  these  extra 
men  as  to  the  time  outside  of  that  in  which  they  are  regularly  em- 
ployed ? 

Mr.  Rea.  In  Cleveland  the  extra  men  are  first  marked  on  these 
tripper  runs.  Then  if  there  are  any  men  available,  extra  men,  over 
and  above  the  tripper  runs,  and  the  regular  man  is  off,  they  mark 
him  for  the  regular  route.  Our  experience  has  been,  however,  that 
with  so  many  of  these  tripper  runs  on  the  schedule,  and  men  only 
earning  5  hours  a  day  for  4  or  5  days  out  of  the  week,  they  quit 
very  rapidly  on  some  of  the  larger  lines,  with  the  result  that  a  gi'eat 
many  men  are  compelled  to  still  work  on  the  extra  list  for  the  5 
hours  for  a  number  of  weeks.  We  had  a  complaint  at  our  last  meet- 
ing of  men  saying  that  they  had  worked  6  days  of  the  previous  week 
5  hours  every  day. 

Commissioner  Sweet.  What  control  does  the  company  have  over 
these  men  during  the  other  19  hours  of  the  day  ? 

Mr.  Rea.  The  other  19  hours? 

Commissioner  Sweet.  Yes. 

Mr.  Rea.  AVe  have  a  stipulation  and  agreement  that  these  5-hour 
runs  must  be  completed  within  13  consecutive  hours. 

For  example,  if  a  man  makes  one  a.  m.  tripper  and  it  takes  an 
hour,  and  he  makes  two  p.  m.  trippers  which  require  2  hours,  that 
would  be  3  hours  platform  time;  he  then  has  2  more  hours  that  he 
owes  the  company,  they  claim;  they  claim  that  he  is  indebted  to 
them  2  hours,  and  they  can  call  him  out  at  noon  to  make  a  shop  trip, 
or  they  can  hold  him  after  he  completes  his  run  in  the  morning  until 
he  has  worked  his  5  hours'  time  during  that  day. 

Commissioner  Sweet.  Is  he  required  to  be  at  the  barns,  or  at  any 
particular  place? 

Mr.  Rea.  He  is  required  to  be  there.  The  contract  reads  that  he 
is  subject  to  the  call  of  the  dispatcher. 

Commissioner  Saveet.  Can  he  remain  at  his  own  home  while  not 
on  duty? 

Mr.  Rea.  If  he  is  not  told  by  the  dispatcher  to  stay  there  or  to 
return,  he  can ;  yes.  But  they  use  these  men  for  taking  all  crippled 
cars  to  the  shops,  carrying  the  magazines  from  the  fare  boxes  from 
the  cars  into  the  office,  and  throwing  the  switches  around  barns,  meet- 
ing cars;  so  that  they  see  that  practically  all  of  tl^se  men  work 
their  5  hours.    . 

Commissioner  Sweet.  Yes ;  but  I  am  talking  about  the  other  hours ; 
whether  they  have  control  of  their  time  at  all,  or  whether  it  is  prac- 
tically nil  subject  to  call  from  the  company.    . 

Mr.  Rea.  Yes.  An  extra  man  is  subject  to  the  call  of  the  com- 
pany at  any  time.  They  can  send  to  his  home  at  any  time  for  him 
to  return  to  work. 


1756    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Conimissioner  Meeker.  You  meaA  at  any  time  within  the  24  hours? 

Mr.  Kea.  \es;  at  any  time  within  the  24  hours.  If  he  does  not 
respond,  he  is  discharged  from  the  service 

Commissioner  Meeker.  On  the  first  offense? 

Mr.  Rea.  On  the  first  offense.  If  a  man  refuses  to  work,  he  is 
di.^hai-^ed  immediately  from  the  service  of  the  company. 

Ihe  Chairman.  Does  it  make  a  full  day's  wage  for  5  hours'  work? 

Mr  Kea.  rhese  men  practically  all  are  worked  on  a  55-cent  per 
hour  basis.    Our  rate  is  55,  58,  and  60  cents. 

The  Chairman.  If  they  only  work  5  hours,  they  would  be  paid 

Mr  Kea.  $2 wo.  The  man  I  just  spoke  of  that  worked  that  6  days 
out  of  the  week  earned  $16.50.  '^ 

Commissioner  Mahon.  Do  you  know  whether  the  rules  of  the 
Cleveland  company  specify  that  a  man  can  not  engage  in  any  other 
business  or  not  ?  o  &  j 

Mr.  Rea.  They  are  not  allowed  to  engage  in  any  other  line  of 
occupation  except  that  of  the  street-car  worker. 

Commissioner  Sweet.  Is  the  motive  of  the  men  taking  those  jobs 
that  they  expect  to  learn  the  business  and  get  better  jobs  after  they 
\7  completed  their  education,  so  to  speak?    Is  that  the  motive » 

Mr.  Rea.  Being  a  victim  myself,  I  suppose  that  the  majority  of 
men  enter  the  occupation  the  same  as  I  did,  not  having  any  knowl- 
edge of  the  conditions  that  confronted  me.  I  knew  nothino-  of  it 
until  I  was  m  the  occupation. 

Commissioner  Sweet.  You  had  the  privilege  of  leavino-  it? 
Mr.  Rea.  Yes,  sir.  ^ 

Commissioner  Sweet.  Why  didn't  you  do  it,  after  you  found  you 
had  been  victimized?  *^ 

Mr.  Rea.  The  conditions  when  I  worked  on  the  cars  were  not 
nearly  as  bad  as  what  they  are  to-day  in  the  city  of  Cleveland  We 
had  no  such  things  as  these  5-hour  trippers  on  the  line  that  I  worked 
on. 

Commissioner  Sweet.  You  do  not  answer  my  question.  You  say 
vou  were  a  victim.  Do  you  mean  by  that  that  you  did  not  know  be- 
fore you  went  m,  just  exactly  what  you  were  going  into « 

Mr.  Rea.  I  did  not ;  no,  sir. 

Commissioner  Sweet.  After  you  got  in  and  found  out  what  you 
had  gone  into,  why  didn't  you  quit  ?  *^ 

Commissioner  Mahon.  He  has  explained  that  to  you,  that  he  did 
not  have  the  conditions  that  now  prevail. 

Commissioner  Sweet.  I  know,  but  he  says  he  was  a  victim 

Commissioner  Mahon.  Yes. 

Commissioner  Sweet.  The  conditions  were  such  that  he  did  not 
like  It,  and  he  did  not  know  himself  before  he  went  in  just  what  the 
conditions  were.    That  is  what  I  understood  him  to  say. 

Commissioner  Mahon.  Yes. 

Commissioner  Sweet.  My  question  is,  after  he  did  find  out  what 
the  conditions  were,  why  didn't  he  quit  the  business  ? 

Commissioner  Mahon.  Probably  because  another  job 

Commissioner  Sweet.  He  is  more  capable  of  answering  than  vou 
are,  I  think.  *^  ^ 

Mr.  Rea.  I  want  to  say  this:  I  said  that  the  conditions  at  that 
time  were  not  nearly  as  bad  as  they  are  at  the  present  time. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1757 

Commissioner  Sw^eet.  But  you  used  the  word  "  victim  "  ? 

Mr.  Rea.  Like  a  great  many  of  the  men.  I  was  in  hopes  that  con- 
ditions would  improve.  I  am  not  subject  to  return  to  the  cars  at 
tlie  disposal  of  the  men  of  my  division.  I  am  elected  to  office,  but  I 
would  have  to  return  under  worse  conditions  now  than  when  I  left 
the  employment  several  j^ears  ago. 

Commissioner  Sw  eet.  Then  you  did  not  mean  what  I  thought  you 
did.  I  thought  you  meant  you  w^ere  a  five-hour  man  when  you  first 
went  with  the  company,  and  that  you  considered  yourself  victimized  ? 

Mr.  Rea.  We  only  had  one  tripper  run  on  the  schedule  that  I 
worked  on. 

Commissioner  Sw^eet.  What  is  the  motive,  then — will  you  please 
explain,  for  the  benefit  of  the  commission — for  men  to  keep  their 
jobs ;  these  jobs  in  w^hich  they  can  earn  only  $2.75  a  day? 

Mr.  Rea.  I  might  say  this,  that  there  are  a  great  many  men  who 
have  been  working  on  the  cars  in  Cleveland — I  did  have  that  per- 
centage some  time  ago — and  80  per  cent  of  the  men,  I  believe,  had 
been  there  for  a  period  of  over  8  years.  A  man  who  has  followed 
the  occupation  of  a  street-railway  worker  for  a  period  of  8  or  10  or 
15  years  is  not  in  physical  condition  to  follow  any  other  line  of  oc- 
cuj)ation  where  there  is  any  physical  strength  required. 

Commissioner  Sweet.  My  understanding  from  what  you  pre- 
viously said  was  that  these  5-hour  men  ordinarily  did  not  retain 
that  5-hour  position  permanently,  but  expected  to  get  more  hours, 
more  work  later  on.  Now,  my  question  is :  What  is  the  motive  that 
keeps  a  man  there  earning  only  $2.75  a  day?  Is  it  the  hope  of 
getting  longer  hours  and  more  pay  later  on,  or  w^hat  is  the  idea  ? 

Mr.  Rea.  I  presume  it  is,  but  I  might  say  that  the  turnover  in 
our  division,  out  of  about  2,700  members,  of  which  2,400  are  city 
men,  our  turnover  is  an  average  of  something  like  1,200  a  year. 
Those  are  mostly  extra  men.  New  men  come  and  w^ork  for  a  period 
of  2  or  3  or  4  or  5  or  6  months — less  than  a  year — and  leave  the 
occupation.  That  can  practically  be  verified  by  my  reports  to  our 
international  office. 

Commissioner  Mahon.  The  fact  is  that  the  men  do  not  remain 
in  it? 

Mr.  Rea.  They  do  not  remain. 

Commissioner  Meeker.  However,  that  is  not  a  high  labor  turnover 
as  I'dhoT  turnover  runs  in  other  industries.  It  runs  well  above  100 
per  cent  at  the  present  time,  I  should  guess. 

Mr.  Rea.  I  only  gave  the  figures  of  the  men  who  are  members  of 
our  organization.  They  operate  a  car  for  60  dajs  in  Cleveland  be- 
fore they  become  members  of  our  organization.  I  should  imagine 
that  that  is  about  100  per  cent  too  low,  because  I  really  honestly 
believe  that  there  are  more  men  that  leave  the  service  before  60 
days  than  those  who  leave  after  they  have  been  there  60  days. 

Commissioner  Meeker.  That  is  the  usual  experience  in  industry.' 

Mr.  Rea.  I  have  not  a  copy  of  the  report  that  was  submitted  by 
the  superintendent  of  employment  of  the  Cleveland  Railway  Co.  last 
year,  which  would  show  the  turnover  of  the  men. 

Commissioner  Meeker.  I  think  that  would  be  interesting,  and  if 
you  can  obtain  it,  I  would  ask  for  its  submission  for  the  record  here. 


1758    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Air.  Rea.  I  might  ask  Mr.  Lauck :  Do  you  remember  such  a  re- 
j>ort  as  that  being  submitted  to  the  National  War  Labor  Board  at 
^^^f     r^^  on  the  conductorettes'  c^se  last  year? 

Mr.  Lauck.  I  do  not  recall  that.  There  was  a  great  deal  of  docu- 
mentary evidence     T\e  can  have  it  looked  up  and  transferred. 

C  ommissioner  Sweet.  Are  all  the  men  on  the  Cleveland  street  rail- 
Avays  members  of  your  union  ? 

Mr,  Re.v.  I  think  we  have  16  men  in  Cleveland  that  are  not  mem- 
l»ei'b>. 

^^^y^'>^^^l^ssioner  Mahox.  They  do  not  become  members  until  after 
00  (lays? 

Mr.  Rea.  Yes. 

Commissioner  Sweet.  Those  who  are  not  are,  for  the  most  part 
men  who  have  not  been  there  60  days? 

Mr.  RfLv.  Those  16  men?  No.  I  will  just  explain  it  to  you.  When 
we  organized,  the  company  entered  into  an  agreement  with  us  tliat 
tliev  would  recommend  that  all  emplovees  become  members 

C  ommissioner  Sweet.  Yes, 

Mr.  Rea.  And  those  who  entered  the  occupation  in  the  future 
niter  the  probationary  i)eriod  of  60  days  must  become  members  of 
the  organization  with  the  result  that  I  think  the  last  figure  was  16 
old  men  who  had  not  yet  joined  the  organization. 

(Commissioner  Sweet.  That  is  what  I  supposed.  Do  you  laiow 
now  that  is  in  Detroit  ? 

Tvi'^'^V?^^*  ^^;    I  could  not  answer  for  Detroit.    Mr.  Ferguson  or 
Mr.  Mahon  probably  could  answer. 

Commissioner  Mahon.  All  motormen  and  conductors  in  Detroit 
are  members  after  a  period  of  00  days.    They  have  a  probationary 
period  there  ot  90  days,  and  if  s;itisfactorv  to  the  company  at  the 
end  of  90  days,  they  become  members  of  the  organization:  that  is 
motormen  and  conductors.  ' 

Mr.  Rea.  Our  contract  on  working  conditions  provides  that  the  run 
should  be  completed  in  12  consecutive  hour.s,  with  a  leewav  of  half  an 
hour  to  complete  the  schedule  with  the  exception  of  ^swing-runs, 
which  shall  be  completed  in  the  shoi-te^^t  number  of  hours  possible 

1  ou  will  notice  that  m  the  majority  of  these  runs  advantage  has 
l)een  taken,  as  Mr.  I^  erguson  said  in  Detroit,  of  that  half-hour  period 
and  also  advantage  has  been  taken— with  the  exception  of  swin^- 
runs,  which  shall  be  completed  in  the  shortest  number  of  hours  liossl- 
ble— in  the  greatest  percentage  of  our  runs,  run  a  way  over  124  hoiirs 

Commissioner  Mahox,  Mr.  Rea,  what  is  the  fare  i-ate  in  Cleve- 
land r    Is  it  univei-sal  5-cent  fare  now  ? 

Mr^  Rea.  No,  sir.  The  present  rate  imder  the  Tavler  ordinance 
IS  a  o-cent  ivasli  fare  with  a  i^enriy  cJiarge  for  a  transfer,  with  m> 
rebate;  11  tickets  for  oO  cents  and  a  pemiy  charge  for  transfer  with 
no  rebate.  ' 

(ommissioner  Mahon.  That  is  the  present  fare? 

Mr,  Rea.  That  is  the  onc^iat  is  in  operation  at  the  present  time. 

Commissioner  Gadsden.  Wliat  was  it  in  1914,  Mr  Rea  ^ 

Mr.  Rea.  In  1914,  it  was  3  and  1. 

Commissioner  Gadsden.  3  cents  and  1  cent  for  a  transfer  <> 

Mr.  Rea  les;  I  beg  your  pardon.  That  is  the  wav  we  have  of 
spoi'kiug  of  It  commonly  in  Cleveland— 3  and  1— meinincr  3  cents 
fare  and  1  cent  for  a  transfer.  *" 


PEOCEEDIXGS  of  federal  electric  railways  COMMISSION.    1759 

Commissioner  Gadsdex.  Yes;  I  understand. 

Commissioner  Meeker.  With  a  rebate? 

Mr.  Rea.  Three-cent  fare  and  a  penny  charge  for  a  transfer. 

Commissioner  Gadsdex.  So  that  it  has  gone  up  fully  2  cents  ? 

Mr.  Rea.  Yes. 

Commissioner  ^Ieekek.  How  about  the  rebate  in  1914? 

Mr.  Rea.  A  portion  of  the  time  they  had  a  rebate.  If  you  men 
have  studied  the  Tayler  ordinance,  you  know  that  the  interest  fund 
is  the  barometer  which  regulates  the  rate  of  fare  that  shall  exist. 
If  that  interest  fund  goes  beyond  $700,000,  and  the  fare  is  3  and  1, 
with  no  rebate,  then  the  next  lower  rate  of  fare  is  3  with  a  rebate. 

Commissioner  Mahox.  A  rebate  of  a  penny  for  the  transfer? 

Mr.  Rea.  Yes. 

Commissioner  Gadsdex.  Do  you  know  how  the  barometer  stands 
to-day  ? 

Mr.  Rea.  Xo;  I  have  not  seen  any  official  report  lately.  They  did 
hold  one  back  some  time  ago,  and  I  don't  know  whether  they  are 
holding  this  one  back  for  the  same  purpose  or  not. 

Commissioner  Gadsdex.  When  was  the  last  change  in  i^te  ?  How 
long  ago? 

Mr.  Rea.  It  was  supposed  to  go  into  effect  July  1,  and  it  did  not  go 
into  effect,  I  believe,  until  the  Gth — on  Sunday.  Mr.  Stanley  was 
away,  and  I  believe  it  was  on  the  Gth,  or  the  following  Sunday — any- 
how after  the  1st  of  July,  that  it  went  into  effect. 

Commissioner  Gadsdex.  What  was  the  attitude  of  the  Cleveland 
public,  according  to  your  observation,  as  to  these  successive  in- 
creases? Did  they  take  it  good-naturedly,  or  was  there  friction  on 
the  part  of  the  public  growing  out  of  these  increases? 

Mr.  Rea.  With  some  classes,  yes;  because  the  penny  charge  for  a 
transfer  makes  the  man  who  toils  pay  a  higher  rate  of  fare — I  mean 
tlie  man  who  toils  with  his  hands — pay  a  higher  rate  of  fare  than 
the  man  that  toils  with  his  brain,  as  a  rule,  because  they  have  to 
transfer.  They  are  the  men  who  have  to  transfer,  from  the  east  to 
the  west  side;  and  the  average  business  man,  lawyer,  and  so  forth, 
located  in  the  downtown  district,  rides  to  the  public  square  for  a 
nickel.  Those  that  liave  to  go  across  the  river,  either  east  or  west, 
must  pay  G  cents. 

Commissioner  Gadsdex.  Still  thei'e  was  less  friction  in  Cleveland 
than  in  some  other  places  you  know  arising  out  of  the  increase  of 
fare;  was  there  not? 

Mr.  Rea.  I  believe  that  is  true ;  yes. 

Commissioner  Gadsdex.  Chicago,  for  instance? 

!Mr.  Rea.  Yes. 

Commissioner  Mahox.  There  were  no  riots  or  anything  like  that 
in  Cleveland? 

^fr.  Rea.  Xo. 

I  kind  of  thought  that  it  was  sort  of  brought  about  through  edu- 
cation during  the  war.  We  were  so  used  to  i-aises  and  the  high  cost 
of  living  that  the  people  had  begun  to  take  it  as  a  sort  of  form. 

(Commissioner  Gadsdex,  People  did  not  take  it  that  way  elsewhere. 
I  am  trying  to  (r^t  at  wliy  they  should  have  taken  it  in  Cleveland  so 
l)hilosophically,  whereas  in  other  places  they  had  riots  and  protests 
of  various  kinds.    What  is  3'our  explanation  of  it? 


I  ! 


1760    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

Mr.  Rea.  The  only  reason  that  I  could  give  for  that  is  due  to 
the  fact  that  the  newspapers  carried  on  a  campaign  for  a  short 
while,  explaining  to  the  people  just  exactly  what  the  Tayler  ordi- 
nance was,  and  that  is  that  it  was  a  service-at-cost  plus  6pet*  cent. 

I  imagine  the  people  have  begim  to  understand  the  Tayler  ordi- 
nance better  than  they  did.  I  want  to  say  now  that  I  think  there  are 
other  men  in  Cleveland  who  understand  the  Tayler  ordinance  better 
that  they  did  at  that  time,  because,  as  I  said  a  while  ago  about  the 
schedule  conditions  when  I  entered  the  occupation,  and  even  when  I 
left  it,  some  few  years  ago,  they  cut  down  on  the  base  schedule. 
What  we  mean  by  the  base  is  the  schedule  that  is  in  operation  dur- 
ing the  day,  after  the  rush-hour  period  in  the  morning — between 
that  and  the  rush-hour  period  in  the  evening,  and  then  again  after 
the  rush  hour  in  the  evening.  They  cut  down  on  the  base-  schedule 
and  added  tripper  service  in  the  morning  and  evening,  with  the 
result  that  it  cfestroyed  what  little  schedule  conditions  we  did  enjoy 
in  the  city  of  Cleveland,  and  we  had  to  operate  under  that  for  a 
I^eriod  of  two  or  three  years  with  the  actual  time  on  these  trippei*s 
1  hour  and  10  minutes;  which  you  can  see  by  these  blue  prmts, 
Finally,  we  were  able  to  force  a  5-hour  minimum  for  these  men.  We 
asked  for  8  and  received  5. 

Commissioner  Gadsden.  Does  Local  268  think  well  of  this  Tayler 
ordinance?  Do  you  men  think  this  is  a  good  solution  of  the  street- 
railway  problem  in  Cleveland? 

Mr.  Rea.  Well,  I  do  not  know  what  the  spirit  of  the  membership 
is  on  that,  Mr.  Gadsden.  I  know  that  at  the  time  the  conditions 
were  destroyed  they  were  very  bitter  against  the  ordinance  at  that 
time ;  and  to  what  extent  they  have  become  reconciled  I  can  not  tell 
you,  because  conditions  are  not  improving  as  rapidly  as  we  exj^ected 
they  would.  It  seemed  to  me,  just  to  be  honest  with  you,  as  repre- 
senting those  men,  that  the  opinion  was  that  all  the  saving  to  be 
made  in  Cleveland  should  be  made  at  the  expense  of  the  cannen  in 
the  wa}^  of  schedule  conditions. 

Now,  on  some  lines — the  ones  that  I  can  speak  of;  the  Supe- 
rior Avenue — prior  to  that  time,  these  men  were  making  8  trips 
for  their  10-hour  workday,  or  thereabouts,  and  after  that  they 
were  compelled  to  make  9  trips  for  a  less  pay  time  than  what  they 
had  originally  only  made  8  trips  for. 

Commissioner  Gadsden.  But  those  schedules  are  not  controlled 
by  the  ordinance;  those  schedules  are  controlled  by  your  contract 
with  the  Cleveland  company,  are  they  not  ? 

Mr.  Rea.  These  schedules  are  controlled  1  y  the  supervision  of  the 
street-railway  commissioner.  He  says  what  kind  of  service  shall 
be  oi>e lilted  on  every  line  in  the  city  of  Cleveland.  He  hands  down 
the  headway  to  the  Cleveland  Railway  Co.  and  allows  so  much  time 
to  make  that  round  trip — an  hour,  or  an  hour  and  10  minutes,  or 
whatever  it  may  be — and  then  they  distribute  the  running  time  to 
different  points  and  distribute  the  service  in  the  schedule  of  runs 
as  he  has  prescribed  in  his  reconmiendation  to  them. 

Commissioner  Mahon.  That  comes  from  the  commissioner  of 
railways  to  the  company  I 

Mr.  Rea.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1761 


The  Chairman.  Then  the  commissioner  of  railways  is  really  re- 
sponsible for  the  routing  and  the  schedule  of  service  in  Cleveland, 
is  he? 

Mr.  Rea.  He  says  he  is  responsible  for  the  service  that  the  people 
receive;  but  they  have  always  been  passing  that  buck  across  268 
all  the  time,  about  who  really  was  responsible  for  the  condition. 

The  Chairman.  Since  this  plan  was  inaugurated,  have  jou  found 
a  conf-tant  improvement  in  the  kind  and  quality  of  men  employed  in 
the  service  ? 

Mr.  Rea.  No;  we  always  felt  that  we  had  just  a  little  bit  the  best 
class  of  men  in  Cleveland  on  the  cars  that  they  had  anyhow. 

The  Chairman.  It  could  not  be  improved? 

Mr.  Rea.  No. 

The  Chairman.  That  is  a  good  way  to  think.  Have  you  found 
any  difficulty  in  securing  wage  adjustments  under  this  cost-of -serv- 
ice plan  that  you  had  before? 

Mr.  Rea.  Well,  I  can  not  speak  to  a  very  lengthy  time  on  that, 
because  we  were  organized  in  1906,  and  that  was  the  time  that  the 
Johnson  and  Stanley  fight  was  on  in  the  city  of  Cleveland,  which 
had  lasted  then  18  years,  and  the  final  settlement  was  made  in  1910. 
They  had  a  strike  in  1908  and  did  not  return  to  work  until  1909,  so 
we  did  not  have  much  of  an  opportunity  for  a  demonstration  from 
the  company  as  to  what  they  really  would  do,  although  they  did 
increase  our  wages  immediately  after  we  were  organized. 

The  Chairman.  Under  the  present  system,  how  do  you  get  wage 
increases? 

Mr.  Rea.  Under  the  present  system? 

The  Chairman.  Yes. 

Mr.  Rea.  W^e  apply  to  the  street-railway  company. 

The  Chairman.  In  this  negotiation  do  you  have  anything  at  all 
to  do  with  the  railway  commissioner  of  the  city  ? 

Mr.  Rea.  At  one  time  he  sat  in  the  hearing,  and  the  last  time,  the 
last  two  hearings  we  held,  he  was  not  present. 

The  Chairman.  Was  he  invited  to  be  present? 

Mr.  Rea.  No,  sir ;  not  by  the  railway  company,  because  the  coun- 
cil and  also  the  street-railway  commissioners  have  always  held  that 
they  had  nothing  to  do  with  the  rate  of  wage  to  be  paid  to  the  em- 
ployees. 

The  Chairman.  In  these  wage  adjustments  do  you  find  that  the 
representatives  of  the  company  are  as  active  in  opposing  increases 
as  they  are  where  the  company  must  assume  the  full  responsibility 
of  the  increase  ? 

Mr.  Rea.  Yes;  I  believe  they  are,  because  we  have  not  surpassed 
any  of  these  cities  yet  that  do  not  have  the  supervision  over  the 
companies  that  they  have  in  Cleveland. 

The  Chairman.  Do  the  men  feel  that  it  is  easier  to  get  increases 
or  adjustments  of  schedules  under  the  cost-of -service  plan  than  with- 
out the  cost-of -service  plan? 

Mr.  Rea.  Well,  I  do  not  believe  that  it  is;  I  do  not  think  it  is. 
I  really  think  that  it  would  be  if  everybody  would  take  the  spirit 
of  the  ordinance  that  is  in  existence  and  apply  it  according  to  its 
spirit;  then  it  would  be  easy  enough  to  adjust  it. 

160643^— 20— VOL  2 49 


' 


! 


1762    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Under  your  contract  it  does  not  make  any  differ- 
ence what  your  wage  may  be,  the  fare  has  got  to  be  adequate  to  take 
cai"e  of  all  the  fixed  charges  and  operating  costs? 

Mr.  Rea.  Yes,  sir. 

The  Chairman.  And  therefore,  is  there  an  obligation  resting 
upon  the  management  of  the  company  to  try  to  keep  wages  down? 

Mr.  Rea.  Yes;  I  think  so. 

The  Chairman.  You  think  there  is? 

Mr.  Rka.  Yes;  I  think  they  felt  that  obligation  when  they  ac- 
cepted the  Tayler  ordinance.  That  is,  I  speak  of  the  Tayler  ordi- 
nance because  that  is  the  one  in  existence  in  Cleveland. 

The  Chairman.  Have  you  found  anywhere  among  your  men  a 
spirit  like  this:  Well,  the  public  has  got  to  pay  this  charge  any- 
way— our  wage  anyway — through  higher  rates,  therefore  let  us  go 
and  get  just  as  much  as  we  can? 

Mr.  Rea.  Xo,  sir. 

The  Chairman.  You  do  not  find  that  spirit? 

Mr.  Rea.  Xo,  sir;  we  would  not  permit  that  to  exist  in  our  or- 
ganization. 

The  Chairman.  Has  it  not  been  debated  at  all  among  your  men? 

Mr.  Rea.  Xot  that  I  know  of. 

The  Chairman.  Do  you  believe  that  this  contract  might  tend  to 
develop  that  sort  of  sentiment  among  the  employees? 

Mr.  Rea.  Well,  no ;  I  do  not  think  so. 

The  Chairman.  You  think  that  all  tlie  men  want  under  any  form 
of  contract  is  a  fair  wage  ? 

Mr.  Rea.  Tliat  is  all  they  want. 

Tlie  Chahjman.  And  fair  working  conditions? 

Mr.  Rea.  Tliat  is  it. 

Tlie  CiiAHiMAN.  Supposing  that  the  radical  element  should  get 
control  of  your  men  and  they  should  set  out  to  get  wages  of,  let 
us  say,  $1  an  hour,  which  would  i-esult  in  i>erhaps  increasing  the  fares 
to  8  or  9  cents;  how  would  you  control  that  situation  under  your 
Cleveland  plan  ^ 

Mr.  Rea.  Well,  we  have  always  held  pretty  good  control  of  our 
membership  in  Cleveland,  but  have,  I  will  say,  a  dissatisfied  buncli 
of  men  there  under  the  pi"esent  schedule  conditions. 

The  Chairman.  Suppose  that  dissatisfied  element  should  be  in  the 
majority  and  would  start  out,  say,  to  get  $1  an  hour  at  a  minimum, 
we  will  say,  of  $8  a  day;  what  is  there  in  the  Cleveland  plan  that 
wculd  prevent  that  sort  of  demand  from  being  put  over  ? 

Mr.  Rea.  Well,  I  think  I  see  what  your  question  is.  Before  the 
company  could  grant  that,  or  before  they  will  grant  us  any  in- 
crease in  wages,  they  go  before  the  city  council  and  ask  them  for 
an  increased  allowance  for  tlieir  operating  expenses,  in  order  to 
meet  with  the  increased  cost  of  wages.  And  they  say  to  us,  "AVo 
will  grant  this  wage  after  we  have  come  to  an  agreement  on  a  sj^eci- 
fied  rate,  and  we  will  grant  these  rates  of  wages  to  you  men  sub- 
je<t  to  the  approval  of  the  city  council." 

The  Chairman.  Then  there  is  some  sort  of  check  upon  the  ex- 
treme action  of  the  employees,  is  there  ? 

Mr.  Rea.  Absolutely.  Anything  that  the  council  thinks  too  high 
they  have  the  right  to  refuse  to  grant  the  allowance  to  the  com- 


PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1763 

pany  for,  and  the  company  comes  back  to  us  and  says,  "We  can 
not  pay  it  because  they  will  not  give  us  the  money." 

The  Chairman.  Do  you  think  such  a  check  is  necessary  in  the  in- 
terest of  the  public? 

Mr.  Rea.  Do  I  think  so? 

The  Chairman.  Yes. 

Mr.  Rea.  Xo;  I  do  not  think  so.  Although  it  has  worked  out 
there,  I  suppose,  very  satisfactorily,  only  to  this  extent,  that  it 
compels  us,  when  we  are  after  more  money,  to  go  down  and — what 
we  call — ^battle  with  the  city  hall  before  we  are  able  to  get  our  in- 
crease. 

The  Chairman.  Don't  you  believe,  in  the  interest  of  the  public 
as  a  whole,  there  ought  to  be  some  way  to  withstand  unusual  de- 
mand either  by  capital  or  labor  ? 

Mr.  Rea.  I  think  you  are  right;  there  should  be  some  regulation 
in  there — some  stipulation  on  the  rate  of  interest,  and  so  forth. 

The  Chairman.  As  well  as  the  rate  of  pay  ? 

Mr.  Rea.  Xo;  I  do  not  think  so,  because  you  can  not  tell  what 
the  conditions  are  going  to  be  from  day  to  day  in  labor  conditions. 
If  we  knew,  then  that  would  be  all  right.  If  they  would  say  to  us, 
"  It  is  not  going  to  cost  you  only  a  dollar  a  day  to  live  from  now 
on,"  during  the  rest  of  their  life,  naturally,  we  could  set  a  rate  of 
wages  for  the  rest  of  our  lives,  I  suppose;  but  not  under  tliese  con- 
ditions, as  changeable  as  they  have  been  for  the  past  two  years. 

The  Chairman.  Have  you  not  found  that  the  authorities  in  Cleve- 
land have  been  fairly  disposed  to  treat  the  laboring  men  well? 

Mr.  Rea.  Yes;  they  have  treated  us  fair  in  some  respects,  but,  on 
the  other  hand,  we  feel  that  we  have  been  more  than  fair  with  them. 

The  Chairman.  Well,  there  ought  to  be  perfect  cordiality  of  feel- 
ing between  the  employees  and  the  city,  ought  there  not? 

Mr.  Rea.  There  is,  absolutely. 

The  Chairman.  As  well  as  with  the  employer? 

Mr.  Rea.  There  is  between  the  employing  company  and  our  organi- 
zation and  also  between  the  street-railway  commissioner's  office  and 
our  organization  perfect  harmony. 

The  Chairman.  Looking  at  the  system  as  a  whole,  does  labor  pre- 
fer the  cost  of  service  to  the  plan  that  formerly  existed  in  Cleveland 
and  which  so  generally  prevails  in  other  cities? 

Mr.  Rea.  Well,  now,  as  I  said  before,  our  experience  there  was 
very  short  under  private  ownership — that  is,  under  operation  of  the 
private  company — and  I  could  not  speak  for  other  cities.  Xo  doubt 
Mr.  Mahon  will  be  able  to  answer  that  for  you,  because  he  has  dealt 
Avith  nearly  every  company  in  the  country  and  he  knows  what  their 
attitude  is.  But  we  have  gotten  along  very  nicely  at  all  times  with 
our  company  on  almost  all  subjects,  providing,  however,  that  we 
would  make  all  the  sacrifices  and  permit  their  suggestions  to  go 
through ;  we  had  perfect  peace  and  harmony  at  all  times. 

The  Chair^ian.  Under  the  present  system  any  sacrifice  that  you 
might  make — does  it  or  does  it  not  inure  to  the  benefit  of  the  com- 
pany ?  ^ 

Mr.  Rea.  Yes. 

The  Chairman.  As  I  understand  it,  the  company  gets  G  per  cent 
upon  its  investment. 


I    ti 


1 764    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Rea.  No  financial  benefit. 

The  Chairman.  No  financial  benefit  to  the  company? 
Mr.  Rea.  No  financial  benefit  to  the  company,  because  that  fund  is 
divided 

The  Ciiair:man.  Who  does  benefit  by  any  sacrifices  made  by  labor? 

Mr.  Rea.  The  traveling  public. 

The  Chairman.  The  traveling  public? 

Mr.  Rea.  Yes,  sir. 

The  Chairman.  So  you  have  gotten  away  from  the  conflict  that 
might  exist  between  labor  and  capital,  so  now  it  is  really  an  issue 
between  labor  and  the  public  ? 

Mr.  Rea.  No;  I  do  not  think  so.  I  think  we  still  have  a  conflict 
with  capital  and 

The  Chairman.  Well,  how?. 

Mr.  Rea.  Well,  because,  I  might  say,  no  doubt  the  men  who  operate 
the  car  lines  m  Cleveland  are  interested  in  other  lines  in  other  parts 
of  the  country,  and  they  do  not  want  to  see  a  rate  of  wages  estab- 
lished in  our  city  that  is  beyond  that  in  other  cities,  for  the  reaction 
it  would  have  against  those  other  companies. 

Commissioner  Sweet.  Is  that  the  fact— that  they  are  interested  in 
other  companies?    Do  you  know  it  to  be  a  ftict? 

Mr.  Rea.  They  are  interested  in  New  York  State  railways,  as  I 
understand,  and  always  have  been— the  Stanley  and  Andrews  inter- 
ests. I  do  not  know  to  what  extent;  I  would  not  like  to  make  that  as 
a  statement,  because  I  do  not  know  to  what  extent  they  are  interested. 

The  Chairman.  How  are  the  employees  and  the  management  get- 
ting along  now  ? 

Mr.  Rea.  Well,  there  is  perfect  harmony  existing  between  the  man- 
agement and  employees,  as  much  as  could  be  expected  under  such 
scliedule  of  conditions  as  I  have  stated  to  you  this  morning.    But  you 

made  a  statement  about  the  conflict  between  capital  and  labor that 

it  had  been  set  aside.  Now,  as  I  stated  before,  that  has  not,  and  then, 
on  the  other  hand,  they  have  added  to  that  a  third  party— in  fact, 
you  might  say  a  fourth  party— in  our  operation,  although  that  is 
being  eliminated  to  a  ceilain  extent.  We  have,  as  I  said,  to  appear 
at  the  city  council  for  that  allowance,  and  we  are  requested  as  officers 
of  the  organization,  which  Mr.  Mahon  knows,  to  appear  before  the 
city  council  to  explain  to  them  the  living  conditions  of  our  men ;  and 
then,  on  the  other  hand,  we  have  the  traveling  public,  who  naturally 
want  to  see  the  lowest  rate  of  fare  in  existence  that  is  possible. 

The  Chairman.  Now,  in  case  of  an  issue  between  the  employees 
for  an  increased  wage  and  improved  working  conditions,  do  you  be- 
lieve you  are  getting  fairer  treatment  from  the  employer  than  you 
are  from  the  general  public? 

Mr.  Rea.  Now,  you  are  getting  into  municipal  ownership,  and  I 
am  not  enough  of  a  student  of  that,  I  believe,  to  answer  that  question, 
because  that  is  what  that  would  finally  result  in  when  you  are  dealing 
with  the  traveling  public. 

The  Chairman.  Well,  not  necessarily.  Under  your  Cleveland 
plan,  vou  say  that  the  traveling  public,  represented  by  tlie  officials  in 
Cleveland,  have  a  sort  of  a  veto  power  upon  operating  costs  so,  as  a 
matter  of  fact,  when  you  are  asking  for  an  increased  wage  the  issue  is 
between  yourself  and  the  traveling  public,  is  it  not? 

Mr.  Rea.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1765 

The  Chairman.  Now,  then,  that  being  so,  are  you  going  to  receive 
better  treatment  from  the  public  than  you  are  from  the  industrv? 

Mr.  Rea.  Well,  we  must  not  lose  sight  of  the  fact  that  they  have 
not  anything  to  say  about  what  the  conditions  shall  be.  That  is  still 
left  to  the  employing  company.  We  deal  directly  with  our  com- 
pany, the  same  as  Mr.  Ferguson  deals  with  the  Detroit  United.  We 
have  to  make  all  our  adjustments  right  in  their  office:  especiallv  on 
grievances  and  discharge  cases,  of  which  we  have  hundreds  %'ind 
hundreds  every  year.  That  is  handled  absolutely  by  the  managers 
of  the  Cleveland  Railway  Co.  and  no  outside  party  has  anything  to 
say  about  that. 

Commissioner  Meeker.  How  about  your  schedule  of  runs? 

Mr.  Rea.  Nothing  to  say,  only  the  company. 

The  Chairman.  But  upon  the  big  issue"  which  involves  an  in- 
creased fare  to  the  public,  are  you  going  to  receive  better  treatment 
from  the  public  than  you  will  from  the  corporations? 

Mr.  Rea.  Well,  I  do  not  know  that  we  would.  I  could  not 
say  that.  I  would  not  like  to  say  that,  because  I  have  never  had  that 
experience.     My  experience  has  been  confined  to  Cleveland. 

CommiFsioner  Meeker.  I  would  like  to  ask  further  about  the 
schedule  of  runs.  I  understood  you  to  say  that  the  commissioner  of 
street  railways  of  Cleveland  issues  the  schedule  of  runs.  That  surely 
is  a  condition  of  labor.  Now,  has  he  absolute  control  there  or  is  it 
the  company  that  controls? 

Mr.  Rea.  I  will  answer  that  in  a  lengthy  answer,  if  you  do  not 
mind. 

Commissioner  Meeker.  I   would  like  to   have   it  explained. 

Mr.  Rea.  The  street-railway  commissioner  keeps  in  his  office  a 
number  of  men  that  they  term  "checkers,"  and  every  so  often  he 
sends  those  men  out  on  different  lines  to  check  up  the  travel.  Then 
they  bring  in  their  report,  and  they  determine  the  service  that  shall 
be  granted  to  that  particular  line  by  the  number  of  passengers  that 
they  haul.  If  they  want  to  change  the  service — just  for  an  example, 
you  might  take  Superior  Avenue:  If  they  had  a  five-minute-base 
table  and  they  found  that  the  cars  were  not  sufficient  to  carry  the 
people  and  they  wanted  to  increase  it  to  a  four-minute-base  table 
and  put  on  another  car  there,  they  would  submit  that  to  the  railway 
company  and  tell  them  they  had  checked  up  the  Superior  Avenue 
schedule  and  found  that  the  service  is  insufficient,  "  and  we  request 
you  to  place  in  operation  a  four-minute  headway  irom  such  and  such 
a  hour  until  such  and  such  an  hour;"  and  that  is  all  they  do.  Then 
the  company  distributes  that  out  over  the  blue  print  and  the  men 
have  to  work  accordingly. 

Commissioner  Meeker.  But  you  hold  the  company  responsible 
for  these  tripper  cars  and  the  unsatisfactory  hours  or  distribution 
of  hours  worked  by  the  extra  men? 

Mr.  Rea.  Well,  we  think,  due  to  the  fact  we  are  compelled  to  deal 
directly  with  the  company,  there  is  no  one  else  we  can  hold  responsi- 
ble except  the  company  in  placing  them  on  the  schedule,  although 
they  say  to  us,  "  This  is  forced  upon  us  by  the  street-railway  com- 
missioner." The  old  term  they  have  used  for  a  number  of  years  is, 
"  They  send  us  down  the  goods  for  a  pair  of  pants  and  expect  us  to 
make  a  suit  of  clothes  out  of  it." 


P 


1766     PROCEEDINGS  OF  FEDERAT^  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Meeker.  That  would  bear  upon  the  question  asked 
by  Chairman  Ehnquist  as  to  the  public  versus  a  private  corporation 
in  dealing  with  the  men.  I  think  I  brought  out  the  fact  that  1 
wanted  to  bring  out.    That  is  all. 

Commissioner  Mahon.  You  have  the  same  contract  with  that  coni- 
pau}'  as  pi-evails  throughout  the  association,  do  you  not —  providino^ 
arbitration  and  all  other  means  of  settling  disputes? 

Mr.  Rea.  Yes,  sir;  practically  the  same  contract  exists  every- 
where. 

Commissioner  Mahox.  It  is  the  association  contract. 

Mr.  Rea.  Yes.  All  matters  that  can  not  be  mutually  adjusted 
between  the  company  and  the  association  are  to  be  submitted  at 
tlie  request  of  either  party  to  a  board  of  arbitration  of  three  men. 

Commissioner  Mahox.  Has  there  been  a  wage  arbitration  in  Cleve- 
land since  the  Tayler  plan  ? 

Mr.  Rea.  In  1910.  The  rate  of  wages  at  that  time  was  26  cents 
maximum. 

Commissioner  Mahon.  It  was  submitted  to  arbitration  and  deter- 
mined by  arbitration  since  you  have  been  under  the  Tayler  plan? 

Mr.  Rea.  Yes.  Last  year  it  was  submitted  to  the  National  War 
LalK)r  Board. 

Mr.  Warren.  You  had  a  i*ecent  wage  increase,  did  you  not,  Mr. 
Rea? 

Mr.  Rea.  Yes,  sir;  in  July. 

Mr.  Warren.  And  a  strike  in  connection  with  that? 

Mr.  Rea.  Yes. 

Mr.  Warren.  What  was  the  cause  of  that,  exactly  ?  What  led  up 
to  that  strike?  Did  the  Tayler  ordinance  have  anything  to  do  with 
that  one  way  or  the  other? 

Mr.  Rea.  Well,  we  entered  into  negotiations  with  the  company 
and  askod  them  for  a  12-cent  increase  which  would  make  it  55,  58, 
and  60  cents,  and  the  company  then  sent  a  communication  to  the 
city  council  asking  for  the  allowance  necessary  to  pay  that  increuse. 
There  was  some  delay  in  the  matter  and  finally  the  city  council  acted 
favorably  upon  it.  But  in  conjunction  with  asking  for  the  inci'esise 
in  operating  allowance  sufficient  to  cover  our  increase  in  wages,  they 
had  asked  for  some  other  things  for  the  company.  One  of  them 
was  that  the  rate  of  intei*est  to  the  stockholders  be  increased  to  7 
per  cent  from  0  per  cent.  And  the  city  council  did  not  grant  that, 
and  one  or  two  other  things,  with  the  result  that  the  company 
would  not  put  into  effect  the  rate  of  wages  and  our  organization 
went  on  strike.  And  finally  the  council  and  the  city  railway  com- 
pany, through  the  street-railway  commissioner,  made  an  adjustment 
of  the  differences  between  those  two  parties,  and  after  they  made 
their  adjustment,  we  adjusted  our  grievance  and  we  returned  to 
work. 

The  Chairman.  What  was  that  adjustment? 

Mr.  Rea.  Well,  they  agreed  to  submit  the  matter  of  increased 
rate  of  interest  to  a  board  of  arbitrators  and  are  now  arbitrating 
that  matter,  or  they  wei*e  when  I  left  Cleveland.  There  were  some 
other  things  pertaining  to  increasetl  allow^ances  for  maintenance,  and 
so  forth,  but  that  was  all  satisfactorily  adjusted  betw^een  the  com- 
pany and  the  city  council.  The  only  thing  that  was  left  in  abeyance 
was  the  rate  of  interest. 


■i 


i 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1767 

Commissioner  Mahox.  There  was  no  dispute  between  the  city  and 
your  organization,  or  the  company  and  your  organization  about  3  our 
rate  of  wages? 

Mr.  Rea.  Xo,  sir. 

Commissioner  Mahox.  It  was  all  over  the  interest  and  proi>er 
allowances  that  the  company  w^anted? 

Mr.  Rea.  That  is  it  exactly. 

Mr.  Warrex.  Both  the  city  and  company  were  satisfied  with  the 
schedule  that  you  asked  for — ^the  GO  cents? 

Mr.  Rea.  Yes;  both  parties  agreed  we  were  entitled  to  what  we 
were  asking  for.  Even  the  mayor  of  the  city  announced  on  the  floor 
of  the  council  chamber  that  we  were  entitled  to  every  cent  that  we 
were  asking  for,  and  so  did  a  number  of  councilmen  prior  to  the  time 
of  acting  lavorably  upon  it. 

Mr.  Warrex.  AVho  increased  that  allowance,  the  council  or 

Mr.  Rea.  The  council. 

Mr.  Warrex.  So  it  has  to  go  to  the  council  ? 

Mr.  Rea.  Yes. 

Mr.  Warrex.  Has  there  been  any  increase  in  the  fare  rate  since 
that  adjustment  of  wages? 

Mr.  Rea.  Xo,  sir. 

Mr.  Warrex.  It  is  still  just  the  same,  5  cents,  11  tickets  for  half 
a  dollar,  and  the  1  cent  for  transfer? 

Mr.  Rea.  With  no  rebate. 

Mr.  Warrex.  That  is  just  what  it  was  before? 

Mr.  Rea.  Xo;  the  rate  of  fare  before  was  a  straight  5  cents,  a 
penny  charge  for  transfer  with  no  rebate. 

Mr.  Warrex.  Before  this  adjustment  was  made? 

Mr.  Rea.  Yes.  The  only  change  that  w^as  made  was  11  tickets  for 
50  cents,  which  makes  it  for  the  persons  using  tickets  a  trifle  less 
than  a  5-cent  fare,  but  still  they  have  to  pay  a  penny  charge  for 
transfer  without  rebate. 

Mr.  Warrex.  You  do  not  loiow  how  they  are  getting  along  under 
that  rate? 

Mr.  Rea.  I  have  not  seen  any  reix)rt  lately.  I  do  not  think  they 
have  submitted  one. 

(Witness  excused.) 

Mr.  Lauck.  Mr.  Chairman,  we  would  like  to  call  Mr.  Arthur  Stur- 
gis  as  our  next  witness. 

STATEMENT  OF  MK.  AETHTJR  STTIRGIS. 

Mr.  Lauck.  Will  you  please  state  your  profession  or  business  at 
this  time  ? 

Mr.  Sturgis.  I  am  an  electrical  engineer. 

Mr.  Lauck.  And  your  address,  please? 

Mr.  Sturgis.  My  office  address  is  40  Central  Street,  Boston. 

Mr.  Lauck.  What  has  been  your  educational  training  for  that  pro- 
fession ? 

Mr.  Sturgis.  I  was  graduated  from  the  engineering  department  of 
Harvard  University  in  1900  and  went  at  once  to  Elmira  in  the  pits 
and  in  the  shops.  I  was  also  used  as  an  extra  conductor  and  motor- 
man  and  I  was  there  about  two  years,  and  went  to  the  Baj'  State 
Street  Railway  in  the  construction  department  on  power  stations.    I 


d 


1768    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

was  there  four  yeai-s.  I  was  in  charge  of  the  drafting  room  and  the 
electrical  engineering.  Then  I  left  them,  and  since  that  time  I  have 
been  in  the  engineering  business.  For  the  first  several  years  I  was 
chiefly  engaged  in  preparing  the  data  for  presentation  before  the 
Public  Service  Commission  of  Massachusetts  and  the  legislature,  and 
in  about  1914  I  l)egan  to  spend  a  great  deal  of  my  time  in  preparing 
statistics  for  street-railway  arbitration. 

I  was  in  charge  of  the  statistical  matter  on  the  Bay  State  arbi- 
tration, on  the  Rhode  Island  Co.,  Providence,  R.  I. ;  Holyoke  Street 
Railway  Co.,  Middlesex  &  Boston,  Boston  &  Worcester,  Danbury  & 
Bcthe!,  and  prepared  a  great  deal  of  data  for  the  street-railway  men 
for  their  use  in  conferences. 

Mr.  Lauck.  After  that  time  you  became  connected  with  the  War 
Labor  Board,  did  you  not? 

Mr.  Sturgis.  Yes. 

Mr.  Lauck.  And  you  there  were  an  administrative  examiner 
chaiged  with  the  interpretation  and  application  of  the  awards  of  the 
board  to  actual  working  conditions,  were  you  not? 

Mr.  Sturgis.  On  street  railways;  yes,  sir. 

Mr.  liAUCK.  Then  recently  you  were  appointed  by  Mr.  Taft  as  an 
arbitrator  in  the  Trenton  case,  were  you  not? 

Mr.  Sturgis.  Yes;  Trenton,  N.  J.     There  were  two  cases  there. 

Mr.  Lauck.  You  have  prepared  an  exhibit  for  this  case.  Will  you 
Ftate  to  the  commission  how  long  you  have  spent  on  it — the  time 
and  effort? 

Mr.  Sturgis.  I  started  about  the  middle  of  August — I  think  it  was 
August  14,  and  I  have  been  working  quite  a  number  of  hours  a  day. 
We  had  several  men  on  it  with  me.  Mr.  Rice  prepared  a  great  many 
charts  to  be  presented  in  connection  with  this  exhibit  which  you  have 
before  you. 

Mr.  Lauck.  You  had  other  clerical  help,  did  you  not? 

Mr.  Sturgis.  A  great  deal ;  yes. 

Mr.  Lauck.  Will  you  please  read  the  title  of  the  exhibit? 

Mr.  Sturgis  (reading).  "Analysis  of  electric-railway  operating 
costs  and  the  costs  of  living  as  related  to  wages  of  conductors,  motor- 
men,  and  other  trainmen." 

Mr.  Lauck.  I  think  you  had  better  state  also  the  source  of  your 
information  and  the  data  from  which  it  was  prepared. 

Mr.  Sturgis.  The  sources  of  part  1  are  the  United  States  Census 
figures  for  the  census  years  1902-1907  and  1912,  and  the  advance 
reports  of  that  bureau  for  the  year  1917.  We  have  those  figures  here 
if  you  want  us  to  put  them  in. 

For  the  year  1918,  we  took  the  estimates  of  Mr.  Welsh  of  the 
American  Electric  Railway  Association,  but  as  he  gave  no  estimate 
of  wages  for  trainmen  for  1918,  I  estimated  that  at  the  same  per- 
centage of  the  total  cost  of  conducting  operations  as  took  place  in  the 
year  1917,  which  was  75  per  cent;  that  is  essentially  the  same  figure 
that  it  was  in  1912  when  it  was  75.9  per  cent. 

Then  to  supplement  these  we  have  prepared  some  200  charts  of 
individual  roads,  35  individual  roads,  taking  them  mostly  from  tlw 
Interstate  Commerce  Commission  reports.  We  selected  all  roads 
reporting  to  the  Interstate  Commerce  Commission  of  over  150  miles 
of  road.  And  as  the  list  thus  obtained  was  predominantly  interur- 
ban,  we  added  about  8  of  the  smaller  urban  properties  to  the  list. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOlSr.    1 769 

We  also  added  about  8  or  10  roads  from  New  York  State  when  the 
reports  of  the  commission  were  such  that  the  data  we  wanted  were 
a\ailable,  and  we  added  the  Philadelphia  Rapid  Transit  and  the 
Capital  Traction  Co.  of  Washington  to  the  list,  which  gave  35  roads 
in  support  of  these  census  figures. 

Mr.  Lauck.  Mr.  Sturgis,  your  idea  there  was,  was  it  not,  that  in  the 
census  the  roads  all  being  considered  as  one  system,  you  would  test 
your  results  by  individual  cases? 

Mr.  Sturgis.  Yes.  Well,  it  was,  in  effect.  It  was  to  see  if  the  census 
figures  could  be  relied  upon.  And  we  made  a  com^xisite  chart  of 
these  35  roads  and  found  that  the  census  figures  checked  very  closely 
indeed.  The  mileage  of  the  35  roads  was  a  trifle  over  7,000  miles, 
which  is  about  one-fourth  of  the  mileage  of  road  in  the  country. 

Commissioner  Gadsden.  How^  much  of  that  mileage  is  interurban? 

Mr.  Sturgis.  I  could  not  say. 

Commissioner  Gadsden.  It  Is  rather  important  to  know,  is  it  not? 

Mr.  Sturgis.  Well,  a  great  deal  of  it  was  neither  interurban  nor 
urban.  Mileage  like  the  Bay  State  Street  Railway  which  is— well, 
of  course,  it  is  interurban  in  the  sense  that  it  is  between  cities,  but 
it  is  more  of  a  city  road  operating  in  the  country. 

Commissioner  Gadsden.  All  of  these  roads,  according  to  the  In- 
terstate Commerce  Commission,  or  practically  all  of  them,  are  inter- 
urban roads? 

Mr.  Sturgis.  The  Detroit  United  reports  and  the— here  is  the  list, 
Mr.  Commissioner. 

Commissioner  Gadsden.  That  would  be  better.  Just  see  what  the 
list  is.  It  would  answer  my  question  to  say  what  companies  were 
included. 

Mr.  Sturgis.  The  Bay  State  Street  Railway,  The  Berkshire  Street 
Railway  Co.,  Capital  Traction  Co.,  Chattanooga  Railway  &  Light 
Co.,  Cleveland  Southwestern  &  Columbus  Railway,  Cumberland 
County  Power  &  Light  Co.,  Detroit  United  Railway,  Duluth  Street 
Railway,  Fort  Dodge,  Des  Moines  &  Southern  Railroad,  Fort  Wayne 
&  Northern  Indiana  Traction  Co.,  International  Railway,  Kansas 
City  (Metropolitan)  Street  Railway,  Lewiston,  Augusta  &  Water- 
ville  Railway,  Michigan  Railway  Co.,  Northern  Ohio  Traction  & 
Light  Co.,  Ohio  Electric  Railway,  Oklahoma  Railway,  Oregon  Elec- 
tric Railway,  Portland  Railway,  Light  &  Power  Co.,  The  Rhode 
Island  Co.,  St.  Louis,  Springfield  &  Peoria  Railroad,  Spokane  & 
Inland  Empire  Railroad,  Springfield  Street  Railway,  Terre  Haute, 
Indianapolis  &  Eastern  Traction  Co.,  United  Traction  Co.  of  Indiana, 
AVorcester  Consolidated  Street  Railway,  Washington  Railway  &  Elec- 
tric Co.,  Binghamton  Railway,  Brooklyn  Rapid  Transit,  Elmira 
Water,  Light  &  Railroad  Co.,  New  York  State  Railways,  Orange 
County  Traction  Co.,  Philadelphia  Rapid  Transit,  Poughkeepsie 
City  &  Wappinger  Falls  Electric  Railway. 

I  can  give  you  the  mileages,  if  you  like. 

Commissioner  Gadsden.  That  is  not  necessary.  That  gives  me  just 
what  I  want.     I  think  that  is  a  fairly  representative  group. 

Mr.  Lauck.  There  is  one  question  there.  These  companies  you 
got  from  the  Interstate  Commerce  Commission's  returns  and  they 
include  urban  operation  along  with  the  interurban,  do  they  not? 

Mr.  Sturgis.  Yes. 


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1770    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Lalh'k.  But  it  was  a  composite  result,  not  an  interurban 
result? 

Mr.  Stukgis.  Botli  together. 

Mr.  Lauck.  The  Bay  State  were  all — urban  and  interurban  to- 
gether, the  Detroit  Electric,  and  so  on.     Isn't  that  correct? 

Mr.  Sturgis.  Yes ;  for  the  Detroit  Electric.  The  Bay  State  there 
is  no  way  of  separating,  but  in  the  Detroit  Electric  system  there  are 
several  companies  which  make  separate  reports,  and  we  took  the  re- 
port of  the  Detroit  Electric  proper,  which  is  mostly  city. 

Mr.  Lauck.  That  is  what  I  want  to  get  at. 

Mr.  Sturgis.  And  does  not  include  the  rapid-railroad  system  of  the 
Toledo  Short  Line  or  the  Chicago-Jackson  road,  and  it  does  not  in- 
clude the  Canadian  roads. 

Mr.  Lauck.  In  other  words,  you  aimed  to  get  urban  companies, 
but  where  you  could  not  get  urban  companies  you  have  a  composite 
of  urban  and  interurban,  have  you  not? 

Mr.  Sturgis.  I  tried,  as  nearly  as  I  could,  to  get  an  even  number 
of  each ;  and  that  is  why  we  took  about  eight  of  the  urban  roads  that 
were  under  150  miles,  in  order  to  even  up  the  numbers  of  companies. 

iVIr.  Lauck.  I  think  if  you  will  start  at  page  2  and  make  an  exposi- 
tion of  your  study  and  its  results  it  would  be  the  quickest  way  to 
get  the  data  before  the  commission,  passing  it  briefly  and  making  an 
exposition  as  you  go  along. 

Mr.  Sturgis.  The  first  comparison  that  I  made  was  the  relation- 
ship between  the  wages  of  trammen  and  the  total  salaries  and  wages 
paid  by  the  company. 

The  classification  of  trainmen  is  almost  entii'ely  motormen  and  con- 
ductors. It  also  indudes,  where  they  have  them,  guards  and  other 
men  of  that  description. 

There  is  a  difference  of  about  3  per  cent  l)etwecn  the  trainmen  and 
motormen  and  conductors;  that  is  to  say,  the  classification  of  train- 
men is  about  3  per  cent  more  than  the  motormen  and  conductors. 

The  first  chart,  the  long  curve,  is  the  total  salaries  and  wages  from 
1902  to  1918.  Lender  that  the  two  curves  that  are  together  are  the 
curves  of  wages  of  trainmen  and  wages  and  salaries  of  other 
employees. 

The  bent  curve  that  is  above  that  is  the  ratio  between  the  wages 
of  trainmen  and  the  total  salaries  and  wages. 

You  will  note  that  the  wages  of  trainmen  in  proportion  to  the 
total  salaries  and  wages  falls  materially  from  1902.  The  biggest 
part  of  the  fall  comes  between  1902  and  1907. 

From  1912  until  1917  there  is  a  very  slight  rise,  and  from  1917 
to  1918  it  is  a  standstill  at  4.91  per  cent. 

If  it  were  thought  desirable  to  restore  the  ratio  that  existed  in 
1902  it  could  be  done  by  increasing  the  1918  w^ages  of  trainmen  by 
19.G  per  cent.  In  other  words,  if  the  1918  wages  of  the  ti-ainmen  were 
increased  by  18.G  per  cent,  the  lutio  that  would  then  exist  between 
the  two  items  would  be  the  same  that  existed  in  1902. 

Commissioner  Meekek.  Is  that  fall  in  the  ratio  due  to  a  fall  in 
the  ratio  in  the  numbers  of  motormen  and  conductors  as  compared 
with  other  employees,  or  is  it  both  a  fall  in  numbers  and  relative — 
I  do  not  like  to  use  tlie  term  "  decrease,"  but 

Mr.  Sturgis.  I  do  not  know  about  the  actual  average  wage,  but 
I  do  know  that  the  numbers  fall.    As  far  as  the  groups  that  are 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION-    1771 

reported  are  concerned,  the  numbers  fall.     I  will  take  that  up  next, 
showing  the  ratio  between  the  different  numbers  in  the  groups. 

The  Chairman.  Have  the  wages  in  the  other  classes  of  service 
increased  more  i^pidly  than  tliose  of  trainmen? 

Mf.  Sturgis.  The  aggregate  have,  and  so  far  as  I  have  it,  the 
individual  wages  have;  yes.  I  mean  by  that  that  the  aggregate 
wages  paid  to  the  other  employees  have  increased  more  than  the 
aggregate  wages  of  trainmen.  Partly,  as  I  said,  because  the  num- 
bers of  the  other  classes  have  increased  moi^,  but  as  far  as  I  have  it, 
as  far  as  the  census  figures  can  show  it  to  me,  the  individual  wages 
of  the  other  classes  have  also  increased. 

Commissioner  Meeker.  How  about  the  salaried  employees? 
They  are  included  in  the  total  salary  and  wages  group? 

Mr.  Sturgis.  Salaried  employe^^s  are  included  in  there;  yes. 

Commissioner  Meeker.  Have  their  salaries  increased  proportion- 
ately or  more  rapidly  than  the  wages  of  the  trainmen  ? 

Mr.  Sturgis.  The  salaries  of  managers  and  superintendents  have 
increased  about  the  same  per  cent — a  trifle  more — tliey  have  in- 
creased 2  per  cent  morp,  but  they  received  their  increase  earlier  than 
the  motormen  and  conductors  received  their  increase. 

Commissioner  Meeker,  You  will  pi^bably  bring  out  these  points 
as  you  go  along  with  the  exposition? 

Mr.  Sturgis.  Yes. 

Mr.  Lauck.  There  is  one  point  right  tl^re,  Mr.  Sturgis,  that  you 
had  better  explain  in  passing.  He  said  that  if  it  were  thought  de- 
sirable to  restore  the  old  ratio  conditions.  You  did  not  mean  to  state 
that  you  consider  it  desirable  or  urge  that? 

Mr.  Sturgis.  Xo. 

Mr.  Lauck,  You  are  just  making  an  interesting  comparison  there, 
as  I  take  it. 

Mr.  Sturgis,  Yes;  that  if  the  present  wages  were  increased  18 
]>er  cent,  then  the  old  ratio  would  be  re^stored. 

Mr,  Warrex.  This  chart  is  based  solely  upon  the  census,  is  it  not  ? 

Mr.  Sturgis.  It  is  based  solely  on  the  census  with  the  exception 
of  the  year  1918,  which  is  the  estimate  that  Mr.  Welsh  introduced, 
v^'ith  the  exception  of  my  estimate  for  wages  of  ti*ainmen. 

The  next  chart,  following  page  5,  shows  the  cost  per  car-mile  of 
trainmen's  wages,  and  total  salaries?  and  wages,  the  ratio  curve,  of 
course,  being  the  same. 

Mr.  Lauck.  This  cost  is  in  cents  per  revenue  car-mile,  is  it  not? 

Mr.  Sturgis.  Yes. 

Mr.  Lauck.  That  is  the  upward  curve? 

Mr.  Sti:rgis.  Yes. 

The  Chairman.  Will  you  describe  how  yon  reached  those  figures 
or  does  your  exhibit  show  that? 

Mr.  Sturgis,  On  page  6  it  gives  the  full  data,  Mr.  Chairman, 

The  CnATR:MAX.  Very  well.     Proceed. 

Mr,  Sturgis.  The  fii-st  column  is  the  year,  the  second  column  is 
the  revenue  car-miles  in  millions,  taken  direct  from  the  census,  with 
the  exception  of  the  year  1918;  the  next  column  is  the  total  salaries 
and  wages,  and  the  next  column  in  the  division  of  total  salaries  and 
wages  by  the  revenue  car-miles,  and  down  below  is  the  same  for 
the  motormen's  and  conductors'  wa^es. 


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iNi 


1772  procp:edings  of  federal  electric  railways  commission. 

Mr.  Laitck.  Your  conclusion  there  is  that  total  salaries  and  wages 
per  car-mile  have  increased  faster  than  motormen's  and  conductors' 
l)cr  car-mile;  is  it  not? 

Mr.  Stitrgis.  Yes.  They  have  increased  from  7.8  cents  to  15.3,  or 
9()  per  cent,  while  the  wages  of  trainmen  in  the  aggregate  have  in- 
creased only  74  per  cent;  that  is,  the  trainmen  by  their  increases 
have  not  absorbed  so  much  of  the  increased  cost  per  car-mile  as  have 
other  employees. 

I  want  to  point  out  that  the  two  curves  that  I  have  shown — one 
is  total  salaries  and  wages  and  the  other  one  is  the  wages  of  train- 
men— of  course,  the  total  salaries  and  wages  includes  the  wages  of 
the  trainmen.  In  other  words,  if  I  had  segregated  it  and  plotted 
the  wages  of  trainmen  against  other  employees,  there  would  have 
been  a  trifle  greater  fall  in  the  ratio. 

The  next  group  I  will  not  say  very  much  about.  It  shows  the  same 
relation  per  mile  of  track — Chart  A-2. 

Mr.  Lauck.  It  shows  practically  the  same  thing? 

Mr.  Sturgis.  Yes. 

The  next  chart,  following  page  9,  is  A-3,  and  shows  the  costs  of 
the  two  items  of  wages  per  revenue  passenger. 

Mr.  Lauck.  Is  not  that  the  best  standard  of  ultimate-cost  unit, 
you  might  say  ? 

Mr.  Sturgis.  It  is  a  very  good  standard.  I  do  not  know  that  it 
is  any  better  than  the  car-mile  or  the  car-hour  comparison,  but  the 
cost  per  revenue  passenger  is  very  good,  especially  when  you  are  con- 
sidering fares. 

Mr.  Lauck.  When  we  are  speaking  of  efficiency,  the  car-mile 
might  be  better,  but  when  you  are  comparing  with  a  certain  rate  of 
fare,  you  get  your  costs  in  terms  of  that  fare,  do  you  not? 

Mr.  Sturgis.  It  is  more  easily  understood ;  yes! 

From  this  curve  it  is  seen  that  the  wages  oi  trainmen  per  revenue 
l)assenger  increased  exactly  .37  cent,  wiiich  is  a  trifle  over  one-third 
of  a  cent  per  revenue  passenger,  due  to  the  increase  in  the  wages  of 
trainmen. 

The  Chairman.  Why  have  you  separated  your  exhibits  into  the 
wages  of  trainmen  and  all  other  wages  ? 

Mr.  Sturgis.  I  did  not  quite  get  your  question,  Mr.  Chairman. 

The  Chairman.  You  have  separated  the  salaries  and  wages  of 
trainmen  from  the  salaries  of  all  other  employees  ? 

Mr.  Sturgis.  Yes. 

The  Chairman.  AVhat  is  the  significance  of  that? 

Mr.  Sturgis.  I  w^anted  to  show^that  the  trainmen  w^ere  not  getting 
as  much  in  the  aggregate  as  the  other  employees. 

Mr.  Lauck.  I  might  explain  that  the  organization  is  chiefly  com- 
posed of  conductors  and  motormen,  Mr.  Chairman,  usually  desig- 
nated trainmen;  and  Mr.  Sturgis  is  mainly  concerned  with  making 
jin  exposition  for  them. 

Mr.  Warren.  What  did  you  say  about  37  per  cent  a  moment  ago  ? 

Mr.  Sturgis.  I  said  .37  of  a  cent. 

Mr.  Warren.  Oh,  .37  of  a  cent? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1773 

Mr.  Lauck.  A  little  less  than  a  cent,  was  it  not?    It  is  on  page  11. 

Mr.  Sturgis.  It  was  .95  of  a  cent.    It  increased  from  1.87  to  2.82. 

Mr.  Lauck.  In  other  words,  the  total  labor  cost  of  operation  in- 
cluding salaried  officials  increased  .95  of  a  cent  per  revenue  passen- 
ger, of  which  .37  of  a  cent  w^as  attributable  to  motormen  and  con- 
ductors or  to  trainmen? 

Mr.  Sturgis.  Yes. 

The  Chairman.  How  late  does  this  exhibit  run? 

Mr.  Sturgis.  To  December  31,  1918. 

The  Chairman.  So  that  your  figures  do  not  include  any  of  the 
increases  that  have  l)een  allowed  during  the  year  1919? 

Mr.  Sturgis.  That  is  true.  It  does  include,  however,  most  of  tho 
War  Labor  Board  awards. 

The  Chairman.  In  1918? 

Mr.  Sturgis.  Yes.    And  most  of  them  were  in  1918. 

The  Chairman.  Are  many  of  the  wages  paid  throughout  tho 
country  based  upon  the  orders  of  the  National  War  Labor  Board  ? 

Mr.  Sturgis.  I  think  so,  yes;  that  is  to  say,  the  National  War 
Labor  Board  had  an  effect  even  outside  of  the  direct  awards  that 
were  made  by  that  board.  For  instance,  in  this  city,  here  in  Wash- 
ington, they  raised  their  rates  up  to  the  National  War  Labor  Board 
scale  before  there  was  any  award  here. 

The  Chairman.  You  say  that  in  1918  the  total  is  a  little  over — 
well,  about  2.9,  is  it  not? 

Mr.  Sturgis.  Per  what?     Per  revenue  passenger? 

The  Chairman.  Per  revenue  passenger. 

Mr.  Sturgis.  2.82. 

The  Chairman.  2.82? 

Mr.  Sturgis.  Yes. 

The  Chairman.  Would  the  increases  which  have  been  allowed 
during  the  present  year  increase  that  figure? 

Mr.  Sturgis.  They  would  increase  it. 

The  Chairman.  To  how  much  ? 

Mr.  Sturgis.  I  can  not  say. 

The  Chairman.  You  are  not  able  to  approximate  that? 

Mr.  Sturgis.  No.  I  know  of  some  increases  that  have  been  made, 
but  all  I  know  of  are  very  few.  There  are  about  1,000  roads  in  the 
country,  I  think. 

The  Chairman.  Have  there  been  increases  large  enough  to  sub- 
stantially influence  that  figure? 

Mr.  Sturgis.  They  would,  if  all  the  roads  in  the  country  had  re- 
ceived those  same  increases;  yes.  The  increases  I  know  of  have 
been  large,  but  how  much  that  would  increase  the  average  of  the 
entire  country  I  do  not  know. 

Mr.  Warren.  They  have  been  on  large  roads,  too,  have  they  not, 
generally  speaking,  Mr.  Sturgis — the  increases? 

Mr.  Sturgis.  Generally  speaking,  the  increases  that  I  know  of 
have  all  been  on  large  roads. 

Mr.  Warren.  They  have  been  large  increases  on  large  roads? 

Mr.  Sturgis.  Yes.  In  Philadelphia— I  was  told,  but  I  am  not 
sune — I  was  told  that  they  are  increased  from  48  to  54  cents. 

Mr.  Warren.  It  was  testified  that  it  was  55  cents  a  day  or  two  affo, 
I  believe.  ^  ^  ' 


ill 


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i. 


Mr.  Sturgis.  I  think  it  was  nearly  a  cent. 


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ll    ■^■. 


1774    PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1775 


m 


Mr.  Ogburx.  Fifty-eight. 

Mr.  Sturgis,  The  Newark  road  was  increased  from  45  to  50,  the 
Bay  State  Railway  from  45  to  51,  The  Boston  Elevated  from  48  to 
CO,  Chicago  from  48  to  65,  Detroit  &  Cleveland  from  48  to  60. 

Then  there  were  some  smaller  Massachusetts  roads  that  were  in- 
creased from  about  41  or  4J3 — they  were  increased  to  from  54  to  57 
cents. 

Commissioner  Gadsden.  Philadelphia  was  also  increased,  was  it 
not? 

Mr.  Sturgis.  I  mentioned  the  Philadelphia  increase,  from  48  to 
54;  and  there  was  a  small  road  in  Connecticut  that  was  increased 
from  35  to  44;  and  that  is  all  the  increases  that  I  know  of. 

Mr.  Lauck.  In  other  words,  out  of  the  1,000  roads,  you  have  had 
about  20  roads  increased,  have  you  not — 20  or  30? 

Mr.  Sturgis.  I  would  not  say  tliat — but  all  I  Iniow  about ;  yes. 

Mr.  Lauck.  As  far  as  your  knowledge  goes,  there  have  not  been 
a  very  great  many  then,  you  might  say? 

Mr.  Sturgis.  I  think  there  have  been  very  few. 

Mr.  Lauck.  Then  did  not  the  War  Labor  Board,  in  making  its 
increases  subsequently — the  awards  that  are  now  in  effect;  and  as 
I'eflected  in  your  figures,  the  only  awards  practically  there  were 
made  were  about  10  awards  recently  made  in  New  York,  where  the 
increase  Avas  about  12  per  cent,  the  basis  of  that  award  being  that 
the  cost  of  living  had  increased  12  per  cent  since  July  1,  1918 — and 
most  of  these  awards,  were  based  upon  that  base;  and  with  the  ex- 
ception of  Boston,  Chicago,  Cleveland,  and  Detroit,  the  increases,  if 
anv,  as  indicated  by  your  statement,  have  been  about  12  per  cent? 

Mr.  Sturgis.  Yes.  That  would  add  some  to  my  list.  I  forgot 
those.  That  would  add  Pittsburgh  and  a  small  road  outside  of 
Cleveland  and  three  roads  in  East  St.  Louis,  and  I  think  Portland, 
Greg. ;  and  I  think  that  is  all. 

Mr.  Lauck.  So  you  might  say,  so  far  as  there  have  been  increases 
on  a  comparatively  small  number  of  roads,  that,  as  a  rule,  it  would 
be  about  one-eighth  increase  in  your  labor  costs  and  other  costs  as 
shown  there  for  those  roads ;  would  it  not  ? 

Mr.  Warren.  How  much? 

Mr.  Lauck.  One-eighth,  12^  per  cent  or  12  per  cent. 

Mr.  Sturgis.  For  those  roads. 

Mr.  Lauck.  For  those  roads  only;  it  would  not  affect  your  gen- 
eral figure  hardly  at  all  probably. 

Commissioner  Gadsden.  I  think  it  would  be  interesting  to  the 
commission,  however,  to  show  what  would  be  the  effect  provided 
the  same  rate  of  increase  which  has  already  been  granted  to 
these  roads  that  you  spoke  of  is  applied  to  the  industry,  l^ecause 
that  is  one  of  the  situations  we  have  all  got  to  face — whether  these 
increases  which  have  been  allowed  since  the  1st  of  January,  1919,  arc 
to  be  confined  to  these  specific  properties  or  whether  they  indicate  a 
general  move  throughout  the  entire  industry.  And  therefore  if  you 
can  reasonably  conveniently  do  so,  I  would  like  to  have  you  give  us 
a  rectifying  constant  that  we  could  apply  to  that  and  see  what 
Avould  be  the  effect  on  those  charts,  provided  this  increase  which  has 
come  about  since  the  1st  of  January,  1919,  in  these  properties  you 
have  mentioned,  should  apply  generally  to  the  industry. 


Mr.  Sturgis.  I  do  not  see  how  that  could  be  figured  out.  The 
qtiestion  of  hours  comes  into  that,  too.  For  instance,  in  Boston,  at 
the  same  time  that  they  receive  their  inci-ease  from  48  to  60  cents, 
llieir  liours  were  reduced  from  about  9,  where  they  used  to  be,  to 
about  8.  That  reduction  in  hours  itself  was  a  saving  to  the  company ; 
the  company  saved  1^  cents  per  hour  per  man  by  reducing  the  hours 
that  way,  according  to  the  company's  figures. 

So  the  increase  in  wages  per  week  to  the  men  in  Boston  was  about — 
well,  between  11  and  12  per  cent. 

In  Chicago 

Mr.  Warrex.  Between  11  and  12  cents? 

Mr.  Sturgis.  Per  cent. 

Mr.  Warrex.  It  went  up  from  48  to  60? 

Mr.  Sturgis.  Yes. 

Mr.  Warrex.  Less  IJ  cents  which  you  say  they  saved? 

Mr.  Sturgis.  I  said  the  increase  in  wages  per  week  to  the  men  be- 
cause of  the  fact  that  they  went  from  a  nine-hour  day  to  an  eight- 
hour  day. 

Mr.  Warrex.  Oh,  you  are  speaking  of  the  week? 

Mr.  Sturgis.  Yes.  The  increase  in  wages  per  week  to  the  men  was 
between  11  and  12  per  cent.  There  was  a  similar  reduction  of  hours 
in  Chicago,  but  I  do  not  know  whether  that  resulted  iu  a  saving  to 
the  company  or  not. 

The  Chairman.  But  the  net  result  of  the  Boston  increase  on 
wages,  was  that  a  saving  in  actual  output  to  the  company  ? 

Mr.  Sturgis.  Xo;  not  the  net  result;  because  at  the  same  time 
that  the  reduction  in  hours  came  there  was  an  increase  in  wages.  If 
there  had  been  no  increase  in  wages  there  would  have  been  a  saving 
to  the  company  of  IJ  cents  per  man  per  hour. 

Mr.  Warrex.  By  going  to  an  eight-liour  day  ? 

Mr.  Sturgis.  Yes.  In  other  words,  the  company  could  have 
afforded  to  pay  the  men  which  it  used  to  pay  48  cents — it  could  have 
afforded  to  pay  them  49J  cents  and  reduced  their  hours,  and  come  out 
at  the  same  point  financially. 

Commissioner  Meeker.  Do  you  mean  to  say  that  the  company 
could  have  conducted  the  operation  of  the  Boston  lines  with  the 
same  number  of  men  on  an  eight-hour  day  tliat  they  formerly  eiu- 
plo>'cd  on  a  nine-hour  day? 

Mr.  Sturgis.  Yes^  I  do. 

Commissioner  Meeker.  They  did  actually  do  so? 

Mr.  Sturgis.  Those  schedules  were  worked  out.  The  reason  for 
that  is  this,  if  you  are  interested  in  it:  That  the  company  has  in  its 
employ  a  number  of  men  they  call  extra  men.  These  extra  men  re- 
ceive, when  they  do  any  work,  a  guaranty  of  6J  hours  a  day.  Under 
that  eight-hour  schedule,  the  company  was  able  to  utilize  the  services 
of  these  extra  men  and  give  them  eight  hours'  actual  work  and  pay 
Ihem  eight  hours'  pay,  whereas  before  they  gave  them  perhaps  four 
hours'  work,  and  gave  them  6J  hours'  pay. 

The  Chairman.  We  stand  adjourned  until  2  o'clock. 

(Whei-eupon,  at  1  o'clock  p.  m.,  an  adjourmnent  was  taken  until 
2  o'clock  p.  m.) 


li 


III 


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1776    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

AFTERNOON   SESSION. 

STATEMENT  OF  MR.  ARTHUR  STURGIS— Continued. 

Mr.  Lauck.  I  believe  you  were  at  page  12  when  we  adjourned 
for  luncli. 

Mr.  Sturgis.  Yes;  I  was  just  starting  in  on  the  next  section  of  the 
nu  tter 

Conuiiissioner  Gadsden.  Before  you  touch  that,  and  to  complete 
what  you  were  saying,  I  have  a  memorandum  here  to  ask  you.  Will 
you  put  in  the  record  just  what  was  the  net  result  of  the  increase  in 
Boston  ? 

Mr.  Sturgis.  The  net  result  to  the  men  was  an  increase  of  between 
11  and  12  per  cent  in  their  weekly  wages.  I  do  not  know  what  the 
net  results  was  to  the  company.     They  saved 

Commissioner  Gadsden.  It  was  the  result  to  the  men  which  I 
directed  my  attention. 

Mr.  Sturgis.  Yes.  Well,  that  was  the  direct  result  of  the  train- 
men. On  the  miscellaneous  employees,  the  board  of  arbitration 
fixed  12J  per  cent  as  a  basic  increase  in  the  weekly  wages,  reducing 
at  the  same  time  their  hours,  but  they  departed  from  that  12J  per 
cent  in  several  cases;  in  some  cases  they  gave  them  only  3  or  4  per 
cent  and  in  other  cases  higher,  I  think  one  went  as  high  as  20  per 
cent.     I  think  that  was  the  highest. 

Conunissioner  Gadsden.  Just  one  other  matter.  You  referred  to 
Philadelphia  as  54  cents.  Mr.  Joyce  on  Monday  testified  that  their 
wage  scale  is  now  58  cents,  separate  trainmen,  from  23  cents  in  1910 
to  58  cents  in  1918. 

Mr.  Sturgis.  Well,  I  stated  that  I  was  not  sure  what  it  was,  but 
my  information  was  54  cents. 

Commissioner  Gadsden.  My  recollection  was  it  was  58,  but  I  just 
wanted  to  get  it  correct. 

Mr.  Lauck.  That  ought  to  be  correct,  because  that  would  amount 
to  about  5  per  cent. 

Commissioner  Gadsden.  Yes;  I  just  wanted  to  get  the  record  cor- 
rec  t. 

Mr.  Sturgis.  I  was  careful  not  to  give  it  as  my  own  information. 
I  was  told  54  cents. 

Commissioner  Gadsden.  Yes;  I  just  wanted  to  get  the  record  cor- 
re  t. 

Mr.  Sturgis.  The  next  section  I  have  taken  up  is  a  comparison 
of  the  numbers  of  motormen  and  conductors  compared  with  the 
numbers  of  total  employees,  and  in  this  case  I  have  not  taken  the 
numbers  of  trainmen  but  the  numbers  of  motormen  and  conductors, 
be  ause  that  is  the  way  it  is  given  in  the  census  report. 

The  first  comparison,  Chart  B,  plots  the  numbers  of  motormen 
and  conductors,  the  numbers  of  employees  on  salary,  the  number 
of  employees  exclusive  of  motormen  and  conductors  and  salaries, 
and  the  ratios  of  those  three  classes  to  the  total  number  of  employees. 

You  will  note  that  the  top  curve  of  all  shows  that  the  ratio  of  the 
numbers  of  conductors  and  motormen  to  the  total  number  of  em- 
ployees falls,  whereas  the  other  two  ratio  curves  increase  from  1902. 

In  order  to  restore  the  ratio  that  existed  in  1902,  it  would  be  neces- 
sary to  hire  53,000  additional  conductors  and  motormen  or  else  dis- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1777 

charge  54,000  employees.  I  do  not  say  that  either  of  those  two  is 
possible  or  desirable.  It  is  not.  But  that  is  what  would  have  to  be 
done  in  order  to  restore  4^hat  ratio. 

That  curve  is  also  a  measure  of  efficiency,  not  direct,  not  absolute 
efficiency,  but  relative  efficiency.  Because  the  conductors,  and  motor- 
ment  in  1917  as  compared  to*^  them  in  1902  are  doing  the  work  of 
209,000  men  with  only  136,000  men.  In  other  words,  their  efficiency 
has  increased  54  per  cent  as  compared  to  the  other  employees. 

Mr.  Lauck.  You  would  be  willing  to  concede  thei'e,  would  you 
not,  to  be  perfectly  frank,  that  this  may  be  brought  about  by  a  better 
capital  equipment,  or  by  outlays  of  ca'pital?  There  might  be  larger 
cars  or  a  larger  number  of  passengers  per  car-mile  made  possible  by 
added  capital  investments,  to  be  perfectly  frank  about  it  ? 

Mr.  Sturgis.  It  would  be  possible  also  by  addition  of  trailer  cars 
and  one-man  cars. 

Mr.  Lauck.  Yes. 

Mr.  Sturgis.  It  would  also  be  brought  ahout  this  way :  It  is  pos- 
sible that  the  companies  have  felt  the  necessity  of  analyzing  their 
costs  more  and  have  increased  the  number  of  their  office  force,  as  they 
have  very  largely — their  clerks. 

Commissioner  Gadsden.  Don't  you  think  that  another  explanation 
is  that  the  equipment  gets  older  each  year  and  the  car-barn  forces 
are  materially  increased? 

Mr.  Sturgis.  You  mean  getting  more  and  more  run  down  and  de- 
preciated each  year? 

Mr.  Gadsden.  Yes. 

Mr.  Sturgis.  Well,  of  course,  it  would  not,  if  they  kept  it  up. 

Mr.  Warren.  Are  there  not  more  men  employed  on  the  i-oad  or 
might  not  there  be? 

Mr.  Sturgis.  As  trackmen  ? 

Mr.  Warren.  Yes. 

Mr.  Sturgis.  Yes;  in  the  same  way  with  the  equipment,  if  the  road 
is  allowed  to  be  run  down 

Mr.  Warren.  I  mean  inspectors  and  guards  and  that  soi-t  of  thing. 

Mr.  Sturgis.  I  do  not  know,  Mr.  Warren.    It  might  be ;  yes. 

Mr.  Lauck.  The  thing  that  Mr.  Gadsden  mentions— the  point 
there  that  it  was  quite  comparable  with  the  steam  railroads,  where 
A'ou  examine  their  costs;  there  you  find  the  trainmen  costs  per  train- 
inile  have  gone  down  but  the  other  labor  costs  have  gone  up,  because 
it  takes  a  larger  force  for  maintenance  and  upkeep. 

Commissioner  Gadsden.  Yes;  that  is  in  my  mind.  I  do  not  say 
that  the  figures  are  especially  significant  one  way  or  another  in  this 
inquiry. 

Mr.  Lauck.  They  would  be  significant  from  the  standpoint  of  the 
motormen  and  trainmen,  showing  that  they  are  doing  more.  It 
would  not  be  significant  from  the  standpoint  of  the  company,  because 
they  would  have  tremendously  higher  labor  costs  and  so  forth. 

Commissioner  Gadsden.  Yes.  I  mean  compared  with  the  larger 
problem. 

Mr.  Sturgis.  By  taking  the  census  reports  which  give  the  total 
salaries  paid  to  the  different  groups  and  also  give  the  absolute  num- 

160643*'— 20— VOL  2 50 


m 


i 


1778    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


bers  in  certain  of  the  groups,  we  are  able  to  plot  Chart  B-1,  which 
is  the  next  one  which  follows— page  15. 

Cliart  B-1,  the  top  curve  shows  the  average  yearly  salary  of  sal- 
aried officei*s.  The  middle  full  line  shows  th6  average  yearly  salaries 
of  managers  and  superintendents  and  the  last  full  line^sliows  i\\} 
average  yearly  wage  of  conductors  and  motormen.  Plotted  in  dash 
and  dot  is  shown  the  increase  since  1902  in  per  cent  of  salaried  offi- 
cers, inanagers  and  superintendents,  and  conductors  and  motoruuMi. 

That  is  the  question  that  Dr.  Meeker  asked;  or  was  it  you,  Mr. 
Gadsden? 

Commissioner  Gadsden.  No  ;  I  think  it  was  Dr.  Meeker. 

Mr.  Sturgis.  The  salaried  officers,  you  will  note,  increased  78  per 
cent ;  managers  and  superintendents  increased  55  per  cent ;  motormen 
and  conductors  increased  54  per  cent.  Those  are  average  salaries  of 
individuals. 

Commissioner  Gadsden.  But  not  the  gross  amounts. 

Mr.  Sturgis.  It  is  not  the  aggregate;  it  is  the  average  individual. 

Xow,  I  can  put  right  in  here,  in  case  you  wish  it,  this  information : 
The  average  for  motormen  and  conductors  in  1902  was  $606  a  year; 
in  1907,  $655;  in  1912,  $727;  in  1917,  $934. 

Now,  it  is  possible  to  make  an  estimate  of  1918  by  assuming  the 
same  increase  in  yearly  wage  as  took  place  in  average  hourl}^  rates; 
that  is,  assuming  the  same  number  of  hours.  That  would  bring  the 
1918  yearly  wage  to  $990.  If  you  make  that  same  assumption,  you 
can  estimate  the  1919  wage  for  motormen  and  conductors  at  $1,200. 

Now,  checking  that  up  in  this  way,  in  1902  the  average  hourly  wage 
was  1  S.5  cents  an  hour.  If  that  is  multiplied  by  10  hours  and  by  325 
davs  -i  year,  it  brings  $601  per  year,  wliich  compares  with  the  census 
hgnr-.  of  $606. 

Now,  that  10  hours  is  about  what  it  was  in  1902  on  the  small  num- 
ber or  roads  that  I  am  familiar  with.  I  think  it  was  about  the  aver- 
age fdl  over  the  coimtry.  The  325  days  a  year  is  the  figure  that  has 
been  usually  taken  as  the  average  number  of  days  that  a  trainman 
works.  Tliat  was  the  figure  that  was  first  brought  out,  to  my  knowl- 
edge, in  the  1913  Boston  Elevated  arbitration.  It  came  up  again  in 
the  JRhode  Island  Co.  arbitration  in  figures  offered  by  the  company 
and  has  been  affirmed  by  various  companies  before  the  War  Labor 

Board. 

1  was  interested  the  other  day — I  asked  Mr.  Rea  what  his  estimate 
was  and  he  said  the  same — 325  days  a  year.  I  think  he  testified  to 
that  this  morning. 

In  1017  you  can  get  a  check  by  applying  the  average  wage  rate, 
which  was  then  30  cents  an  hour,  multiplying  it  by  9^  hours — the 
hours  have  been  slightly  reduced — and  325  days,  which  gives  you 
$926  a  year  as  against  the  census  figure  of  $934. 

In  1919  my  estimate  of  $1^00  can  be  checked  by  taking  the  hourly 
wage  of  41  cents  an  hour,  which  was  the  average  rate  on  January  1, 
1919,  and  nuiltiplying  that  by  9  hours  and  325  days,  which  gives 
$1,199  a  year. 

Commissioner  Sweet.  Can  you  bring  tliat  down  to  date  ? 

Mr.  Sturgis.  It  brings  it  down  to  date,  assuming  that  the  wages 
of  1919  are  going  to  continue  throughout  the  year  for  the  average  all 
over  the  country. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1779 

Commissioner  Sweet.  But  they  have  been  raised  since  the  1st  of 
January,  1919,  in  some  places. 

Mr.  Sturgis.  There  have  been  raises  in  about  20  roads  that  I  know 
of  out  of  a  trifle  over  1,000  in  the  country,  but  the  average  will  be 
increased. 

Commissioner  Sweet.  You  have  no  means  of  giving  us  an  estimate 
of  what  that  would  be? 

Mr.  Sturgis.  No;  and  when  I  say  I  know  20  roads  I  do  not  mean 
to  say  that  none  of  the  other  980  have  i-eceived  no  increases. 

Commissioner  Gadsden.  Could  not  you,  for  our  purposes,  deter- 
mine what  the  percentage  of  increase  on  those  20  roads  has  been  and 
let  us  take • 

Commissioner  Sweet.  Assume  they  have  all  been  raised  in  that 
same  ratio  or  proportion. 

Mr.  Lauck.  You  could  do  that,  could  you  not? 

Mr.  Sturgis.  I  do  not  see  how  I  could  do  it,  on  account  of  the  dif- 
ference in  hours  that  has  taken  place. 

Mr.  Lauck.  You  can  get  more  or  less  of  an  approximation.  If  I 
understand  Mr.  Gadsden's  point,  he  thinks  they  will  have  to  meet  it 
in  the  future  anyhow  and  assume  what  it  would  be 

Commissioner  Gadsden.  I  think  it  is  fair  to  the  inquiry  to  take  this 
for  a  supposition,  which  is  a  serious  one,  I  think,  that  these  wages 
generally  probably  will  go  up  here.  No.w,  they  have  already  gone  up 
m  certain  localities  10,  12,  or  15  per  cent.  Now,  if  we  arrive  at  the 
average  of  that  percentage  and  apply  it  to  the  entire  industry,  it 
would  give  approximately  what  the  increased  burden  on  the  public 
will  be. 

Mr.  Lauck.  I  think  we  can  do  it. 

Mr.  Sturgis.  I  could  not  do  it  offhand. 

Mr.  Lauck.  I  mean  you  can  submit  it  to  the  commission  later. 

Mr.  Sturgis.  I  can  make  -a  pretty  goo<l  stab  at  it,  but  I  do  not 
know  what  value  it  will  be.    I  will  do  what  I  can  on  it. 

Commissioner  Gadsden.  Just  one  other  question  in  that  ccmnec- 
tion:  These  yearly  receipts  which  you  have  given  us  do  not  take  into 
consideration  any  overtime? 

Mr.  Sturgis.  the  census  figures  take  in  the  whole  story,  because 
those  are  the  total  amounts  paid  by  the  companies  in  wages.  My 
figure  that  I  used  as  a  check  does  not  take  in  anv  of  the  amounts 
used  as  overtime,  but,  on  the  other  hand,  my  figiire  is  the  averaoe 
of  the  maximum  Avage  i-ates.  It  takes  no  account  of  the  graduated 
scale,  so  my  figure  that  I  used  as  a  check  is  really  higher  than  the 
average  wage  rate  that  actually  exists,  and  the  fact  that  the  two 
figures  compare  makes  me  think  that  wliat  is  paid  as  overtime  about 
balances  the  discrepancy  Ix^tween  the  actual  wage  rate  and  the 
average  maximum  wage  rate. 

Mr.  Lauck.  In  other  woi-ds,  you  took  the  total  labor  costs  and 
divided  it  to  get  the  average  actual  earnings,  did  you  not  ? 

Mr.  Sturgis.  The  total  labor  costs  for  the  group,  and  divided  it 
by  the  number  of  individuals  in  the  group  as  i-eported. 

Mr.  Lauck.  That  would  include  overtime  and  all  other  arbitrary 
allowances^  *^ 

Mr.  Sturgis.  It  includes  everything  tluit  is  paid  for  the  labor  of 
tlmt  gi-oup. 


)* 


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1780    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Now,  I  plotted  another  curve,  B-2,  to  show  what  the  wages  of  the 
trainmen  would  have  been  if  they  had  received  the  same  per  cent 
in  increase  which  was  received  by  the  salaried  officers.  That  is 
Chart  B-2,  and  follows  page  18.  The  dotted  line  is  the  average  wage 
as  it  would  have  been,  and  the  full  line  is  the  average  yearly  wage 
as  it  actually  was.  The  vertical  difference  between  the  two  curves 
represents  for  that  year  the  amount  of  dollars  the  average  motor- 
man  and  conductor  lost  in  that  year  through  his  inability  to  obtain 
the  same  percentage  increase  that  was  given  to  the  salaried  officers. 

The  1917  loss  was  $146.  The  total  loss,  adding  together  the  ver- 
ticals for  each  year  since  1902  to  and  including  1917,  is  $1,805,  which 
represents  the  total  loss  of  a  nuin  who  has  been  employed  for  the 
full  period  of  time — the  full  15-year  period — and  multiplying  that 
$1,805  by  the  average  number  of  motormen  and  conductors  in  the 
employ  of  the  company  from  1902  to  1917,  it  would  cost  the  com- 
panies over  $200,000,000  to  make  up  this  amount  to-dav. 

The  next  curve.  Chart  2-BA,  shows  that  in  a  graphic  form — the 
same  thing.  The  upward  steps,  yearly  increments,  is  the  amount 
lost  that  year,  and  the  distance  from  the  top  of  any  one  step  down 
to  the  zero  line  is  the  amount  lost  since  1902  up  to  that  year.  Of 
coui*se,  if  a  motorman  and  conductor  entered  the  service  of  the  com- 
pany in  1912,  he  would  lose  the  difference  only  from  the  1912  step 
up  to  the  1917  step. 

Commissioner  Gadsden.  Who  do  you  include  under  the  term 
"salaried  officials"?    Do  you  mean  salaried  employees? 

Mr.  Sturois.  No. 

Commissioner  Gadsden.  Or  do  you  mean  what  you  say  ? 

Mr.  Sturgis.  That  is  not  salaried  employees;  that  is  the  census 
figure  used,  salaried  officers.  It  is  more  the  general  officers;  it  does 
not  include  for  instance  the  managers  and  superintendents.  The 
managers  and  superintendents  as  showrf  by  Chart  B-1  have  received 
an  aggregate  percentage  increase  since  1902  of  56  per  cent ;  the  motor- 
men  and  conductors  54  per  cent. 

Commissioner  Gadsden.  This  is  just  what  it  means  then;  it  means 
the  officers  of  the  company. 

Mr.  Sturgis.  Salaried  officers. 

Commissioner  Gadsden.  I  thought  maybe  it  included  everybody 
on  a  yearly  salary.  ^ 

Mr.  Sturgis.  No  ;  it  does  not  include  the  clerks. 

Mr.  Lauck.  It  means  just  the  general  officers? 

Mr.  Sturgis.  Yes. 

Mr.  Warren.  It  does  not  include  the  clerical  force  in  the  offices? 

Mr.  Sturgis.  No  ;  it  does  not. 

Mr.  Lauck.  Have  you  the  census  reports  here,  Mr.  Sturgis? 

Mr.  Sturgis.  Yes;  the  bottom  book. 

Mr.  Lauck.  If  you  read  that  classification — maybe  it  is  given  there. 

Mr.  Sturgis.  On  one  of  those  photostat  plates  that  is  stuck  in  is 
where  I  got  the  material  from. 

Mr.  Lauck.  You  mean  those  advance  sheets  ? 

Mr.  Sturgis.  No. 

Mr.  Lauck.  I  thought  maybe  the  census  itself  stated  what  it  meant. 

Commissioner  Sweet.  Mr.  Sturgis  knows  himself  what  he  included 
under  the  head  of  salaried  officers  and  his  statement  is  entirely  satis- 
factory. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1781 

Mr.  Lauck.  All  right. 

Mr.  Sturgis.  Taking  up  these  respective  numbers  of  the  three 
groups  per  car-mile  and  per  mile  of  track  and  per  revenue  passenger, 
it  is  shown  in  the  next  three  charts,  B-3,  B-4,  and  B-5. 

On  page  25  I  have  got  the  change  per  car-mile  from  1902  to  1907. 
The  number  of  conductors  and  motormen  have  decreased  9.9  per 

cent 

Commissioner  Sweet.  Is  that  on  B-3  ? 

Mr.  Sturgis.  That  is  chart  B-3;  and  on  page  25  I  have  summed 
up  the  showing.  The  number  of  conductors  and  motormen  per  car- 
mile  has  decreased  9.9  from  1902  to  1917.  The  number  of  employees 
on  salaries  has  increased  101  per  cent  and  the  number  of  all  other 
employees  has  increased  29.8  per  cent,  showing,  as  I  said,  a  reduction 
in  the  number  of  conductors  and  motormen  and  an  increase  in  the 
other  two  groups. 

On  page  27  there  are  summed  up  the  miles  of  track  which  I  will 
not  read,  and  on  page  29  there  are  summed  up  the  revenue  passengers, 
as  follows:  Per  revenue  passenger  the  number  of  conductors  and 
motormen  has  decreased  29.4  per  cent;  the  number  of  emploj^ees  on 
salary  has  increased  59  per  cent,  and  the  number  of  all  other  em- 
ployees has  increased  9.1  per  cent. 

Another  way  of  presenting  these  figures  is  to  show  the  average 
number  of  revenue  passengers  handled  per  car  crew^  per  year,  which 
is  shown  on  Chart  B-6;  the  lower  of  the  two  curves  showing  the 
per  cent  increase.  It  shows  that  the  average  car  crew  handled  40 
per  cent  more  passengei^  per  year  than  it  did  in  1902. 

Mr.  Lauck.  They  did  that  in  less  hours,  too,  did  they  not? 
Mr.  Sturgis.  Yes ;  their  hours  decreased  at  the  same  time. 
Mr.  Lauck.  So  their  efliciency  would  be  greater  than  that  per 
hour? 

Mr.  Sturgis.  I  call  attention  that  that  shows  revenue  passengers 
and  not  transfer  passengers.  Now,  those  35  roads  that  I  spoke  to 
you  about;  the  efficiency  curves  are  shown  in  a  set  of  charts  which 
were  prepared  by  Mr.  I.  A.  Rice.  By  the  efficiency  I  mean  the  rev- 
enue passengers  handled.  I  was  not  able  to  obtain  from  the  Inter- 
state Commerce  Commission  the  numbers  of  motormen  and  conduc- 
tors. They  show  only  the  number  of  transportation  employees, 
which  includes  motormen  and  conductors,  and  also  includes  other 
employees  engaged  in  transportation.  It  would  include  car  cleaners 
and  men  employed  in  the  car  house,  not  on  repairs;  it  would  in- 
clude switchmen,  crossing  tenders,  and  others  of  that  class.  But 
the  motormen  and  conductors  are  the  largest  items. 

The  roads  from  New  York  State,  however,  which  are  in  this  book, 
although  we  have  labeled  the  curves  revenue  passengers  per  trans- 
portation employees,  to  have  them  all  uniform — ^the  roads  from  New 
York  State  are  motormen  and  conductors  only.  We  could  obtain 
that  in  New  York,  where  we  could  not  obtain  it  elsewhere. 

We  made  no  composite  chart  of  these  efficiency  curves  for  the 
reason  that  some  of  them  were  per  transportation  employees  and 
some  of  them  for  motormen  and  conductors.  But  taking  them  as 
they  are,  the  average  increase  of  those  35  roads  from  1912  to  1917  is 
20.5  per  cent,  whereas  the  census  figures  from  1912  to  1917  show  an 
increase  of  16.1  per  cent.  That  is  not  a  very  close  check,  but  that  is 
the  way  it  came. 


k 


i 


1782    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

If,  instead  of  taking  the  efficiency  as  represented  by  the  number  of 
j>assengers  handled,  it  is  taken  as  representing  the  amount  of  operat- 
ing revenue,  per  car  crew,  the  relationship  is  shown  on  Chart  B-7. 
The  per  cent  increase  in  operating  revenue  per  car  crew  from  1D02 
to  1917,  being  5.45  per  cent,  and  if  the  decrease  in  hours  is  taken 
into  account,  that  wouki  be  rather  higher. 

Commissioner  Gadsden.  Mr.  Sturgis,  right  there,  without  refer- 
ence to  the  relative  merits  of  this  chart  you  have  prepared,  insofar 
at>  n>otormen  and  conductors  are  concerned,  looking  at  the  industry 
as  a  whole  from  the  standpoint  of  the  public,  this  chart  would  seem 
to  indicate  that  the  electric-railway  industry  had  increased  in  effi- 
ciency— that  is,  handling  more  passengers? 

Mr.  Stuugis.  Handling  more  passengers  per  car  ? 

Commissioner  Gadsden.  Yes;  at  a  lower  ratio  of  expense? 

Mr.  Stukgis.  Well,  that,  in  itself,  would  tend  to  lower  the  ratio 
of  expense;  yes. 

Commissioner  (xadsden.  Yes.  Irresi>ective  of  what  quaiTels  there 
may  be  between  the  management  as  to  the  division  of  that,  it  would 
seem  to  prove  that  the  industry,  as  an  industry,  has  been  working 
out  for  itself  some  very  substantial  efficiencies^  would  it  not? 

Mr.  Sturgis.  These  curves  show  essentially  the  same  thing  as  were 
shown  by  the  curves  introduced  by  Mr.  Welsh. 

Commissioner  (jadsdkn.  Yes.  1  wanted  to  bring  that  out  for  the 
lienefit  of  the  commission.  While  we  may  quarrel  as  to  whether  one 
chirks  got  their  pro|>er  share,  as  an  industry,  these  charts  seem  to  go 
a  long  way  toward  establishing  the  fact  that  we  have  been  Increas- 
ing in  efficiency,  have  been  rentlering  more  service  to  the  public. 
Isn't  that  true? 

Mr.  SruRiiis.  Yes,  I  think  so. 

Commissioner  Gadsden.  And,  of  course,  from  the  standpoint  of 
this  commission,  that  is  a  \erj  impoilant  fact ;  because  what  we  are 
trying  to  bring  before  the  public  is,  if  this  industry  needs  relief, 
we  must  Imj  able  to  show  that  it  has,  itself,  been  endeavoring  to  work 
out  efficient  operation. 

Mr.  Sturgis.  Yes.  I  am  trying  to  bring  out  that  same  fact  that 
Mr.  Welsh  brought  out,  but  I  am  going  a  little  bit  further  than 
he  did  by  claiming  that  that  efficiency  is  the  result  of  the  motormen 
and  conductors. 

Commissioner  Gadsden.  Yes;  I  appreciate  that. 

Mr.  Sturgis.  I  do  not  mean  to  say  that  the  motormen  and  con- 
«luctors  went  out  and  drummed  up  trade  for  their  cars.  They  could 
not  do  that;  but  their  increase,  the  increase  in  the  efficiency  of  the 
motormen  and  the  conductors,  resulted  in  an  increase  in  efficiency 
of  the  companies. 

Mr.  Lauck.  You  are  willing  to  concede  further,  are  you  not,  Mr. 
Sturgis,  that  this  efficiency  might  have  been  made  possible  by  added 
capital  investment  on  the  part  of  the  company  in  heavier  equip- 
ment, but  that  if  the  wages  were  increased  it  had  a  j)ractical  effect 
in  not  increasing  labor  costs  on  the  part  of  the  company  for  motor- 
men  and  conductors?  In  other  words,  your  main  idea  is  to  show, 
is  it  not,  that  as  a  result  of  this  efficiency,  wl^rever  emanating,  the 
w  age  increiises  have  not  resulted  in  liigher  labor  cost  to  the  company 
commensurate  with  the  increase  in  the  wage  rate  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT.    1783 

Mr.  Sturgis.  Yes;  that  is  just  it,  Mr.  Lauck. 

The  next  section  takes  up  the  wages  of  trainmen  as  compared  with 
the  operating  revenue,  and  the  first  chart  is  Chart  C. 

It  is  seen  from  Chart  C 

Commissioner  Gadsden.  What  page  are  you  on  now,  Mr.  Sturgis  ? 

Mr.  Sturgis.  Following  page  33. 

From  Chart  C  it  is  seen  that  in  1902,  the  wages  of  trainmen 
amounted  to  1.7  per  cent  of  operating  revenue. 

The  ratio  dropped  from  1902  until  1912.  In  1912  it  was  18.3  per 
cent  of  the  operating  revenue.  It  then  started  to  go  up :  In  1917 
it  was  20.1  and  in  1918  it  was  22.3  per  cent.  It  also  shows  that 
while  the  operating  revenues  increased  in  the  aggregate  $444,000,- 
000,  the  wages  of  trainmen  increased  in  the  aggregate  $106,000,000. 

I  have  got  that  same  curve  here  plotted  for  these  35  individual 
roads  under  Part  II. 

Mr.  Warren.  Before  you  get  to  that :  Could  you  tell  in  Chart  C, 
approximately  where  that  ratio  line  would  go  on  the  chart  if  you 
assumed  an  increase  of  20  per  cent  in  1919? 

Mr.  Sturgis.  In  what? 

Mr.  Warren.  In  wages  of  trainmen. 

Mr.  Sturgis.  What  would  you  assume  for  the  revenue  ? 

Mr.  Warren.  Suppose,  in  the  first  place,  it  remained  the  same? 

Mr.  Sturgis.  Supposing  it  remains  the  same? 

Mr.  Warren.  Yes. 

Mr.  Sturgis.  It  would  go,  roughly,  to  26.75.  That  is,  assuming 
that  the  revenue  remains  the  same. 

Mr.  Warren.  If  the  revenue  increased  in  the  same  proportion  as 
the  wages,  would  they  both  go  along  together? 

Mr.  Sturgis.  They  would  both  go  along  together,  practically,  if 
the  increase  is  the  same. 

On  the  composite  curve,  which  is  the  first  curve,  I  would  like  to 
call  your  attention  to  the  check  that  that  gives  to  the  census  figures. 

In  1912  the  census  ratio  is  18.3,  and  the  composite  ratio  is  18.68. 

In  1917  the  census  ratio  was  20.1,  and  the  composite  ratio  20.87. 

In  1918  the  census  ratio  was  22.3,  and  the  composite  ratio  22.8. 

I  do  not  want  to  call  attention  to  any  of  these  individual  roads. 
Some  of  them  are  fairly  good.    Some  of  them  are  not. 

There  is  one  curve  tliere — that  is  the  Binghampton  Railway  Co. 

which  is  toward  the  end,  Chart  128-A.  For  the  Binghampton  Rail- 
way it  shows  the  ratio  of  the  wages  of  conductors  and  motormen  to 
the  operating  revenue  has  gone  down  very  rapidly  until  1917,  and 
then  had  an  upshoot. 

I  believe  that  the  Binghampton  road,  however,  is  in  tlie  hands  of 
a  receiver,  is  it  not  ? 

Commissioner  Meeker.  It  is. 

Mr.  Sturgis.  The  next  thi*ee  charts  which  follow  page  35,  C-1, 
C-2,  and  C-3,  show  the  operating  revenue  and  the  wages  of  train-' 
men,  respectively,  per  car-mile,  per  mile  of  track,  and  i>er  revenue 
passengers. 

I  can,  if  you  wish,  give  you  the  composite  figures' also. 
1  er  car-mile  the  census  figure,  the  railwav  openUinic  revenue  per 
car-mile  was  27.9,  the  composite  was  27.94.    ' 
In  1917  the  census  was  30.4,  the  couiposite  30.49. 


■ 


1784    PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

In  1018  tlie  census  was  33.7,  the  composite  34.55. 

The  increase  from  1902  to  1918  is  shown  on  page  39. 

Per  revenue  per  car-mile,  operating  revenue  increased  11.8  per 
cent;  wages  of  trainmen,  3.19  of  a  cent  per  revenue  passenger;  the 
operating  revenue  increased  .98  of  a  cent;  and  the  wages  of  train- 
men .37  of  a  cent. 

Commissioner  Meeker.  I  thought  your  figure  for  operating  reve- 
nue was  .95  instead  of  .98? 

Mr.  Sturgis.  That  .95  was  the  increase  in  total  siilaries  aiul 
wages. 

The  composite  curves  of  wages  of  trainmen  per  revenue  passc^n- 
ger  do  not  show  quite  as  big  an  increase  as  the  census  curve  of 
wages  and  trainmen  per  revenue  paSvSenger.  Instead  of  showing  .37 
of  a  cent  between  1912  and  1918  they  show  only  .26  of  a  cent.  I 
say  between  1912  and  1918.  You  notice  the  census  curve  between 
1902  and  1912  showed  no  change. 

The  balance  of  operating  revenues  per  revenue  passenger,  after 
paying  off  the  trainmen,  increased — I  have  not  got  this  c|i  any  page, 
but  it  is  a  fairly  important  figure,  and  I  think  it  would  be  well  to 
write  it  in  on  page  38 — in  1902  the  balance  of  operating  revenue  per 
revenue  passenger  after  paying  trainmen  was  4.22  cents.  In  1907 
it  was  4.40  cents.  In  1912  it  was  4.70  cents.  In  1917  it  was  4.59 
cents.    In  1918  it  was  4.83  cents. 

Tlie  next  chart  is  C-4.  It  plots  the  figures  reported  by  the  census 
showing  the  ratios  to  operating  revenues  of  the  three  classes  of  em- 
ployees which  they  give,  namely,  conductors  and  motormen,  em- 
ployees on  salaries,  and  employees  exclusive  of  those  two. 

You  notice  on  Chart  C-4  that  the  ratio  of  wages  of  conductors  and 
motormen  goes  down,  while  the  other  two  go  up. 

Mr.  Warren.  Mr.  Sturgis,  those  figures  that  you  said  should  bo 
written  in  on  page  38,  are  those  taken  from  your  composite 

Mr.  Sturois.  No  ;  those  are  the  results  of  the  census  figures. 

Mr.  Warren.  How  about  1918?  That  is  from  the  Electrical 
Association? 

Mr.  Sturgis.  1918.  The  number  of  revenue  passengers  I  took 
from  Mr.  Welsh's  estimates;  and  the  railway  operating  revenue  I 
took  from  his  estimate ;  and  the  wages  of  tniinmen  I  took  at  75  per 
cent  of  the  item  of  conducting  transportation  as  he  estimated. 

On  Chart  C-5  I  have  compared  the  wages  of  trainmen  with  the 
total  income  of  electric  railways,  from  all  sources,  including  in  the 
total  income  items  which  have  nothing  to  do  with  operation. 

It  is  not  a  usual  comparison  to  make,  by  any  means,  but  it  shows 
that  the  ratio  of  trainmen's  wages  in  1918  was  essentially  the  same  as 
it  was  in  1902.  In  other  words,  in  1902  the  companies  had  available 
81  per  cent  of  their  total  income  from  all  sources  with  which  to  pay 
all  their  other  operating  expenses,  dividends,  and  all  the  interest. 

In  1918  they  also  had  81  per  cent.  So,  as  far  as  net  income  is  con- 
cerned, after  operating  expenses,  the  wages  of  trainmen  has  no  effect 
upon  it.  The  increase  in  the  wages  of  trainmen  has  had  no  effect 
upon  it. 

Mr.  Warren.  What  year  did  you  take — 1918,  and  what  was  the 
earlier  vear? 

Mr.  Sturgis.  1902. 


a 


PROCEEDINGo  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1785 

Mr.  Lauck.  The  actual  figures  for  that  are  shown  on  page  42 ;  are 
they  not?  x-  ©        . 

Mr.  Sturgis    On  page  42;  yes.    I  say  no  effect.    Of  course,  in  1902 
fhe  ratio  IS  19.4,  and  m  1919  the  ratio  is  19.8.    There  is  an  effect. 

Mr.  Warren.  A  very  slight  effect? 

Mr.  Sturgis.  Yes. 

Mr.  Warren.  Is  that  1918  figure,  the  one  at  the  end  of  the  year 
that  you  spoke  of— the  wage  rate  in  1918  ? 

Mr.  Sturgis.  It  is  not  the  wage  rate. 

Mr.  Warren.  Oh,  it  is  the  total  ? 

Mr.  Sturgis.  It  is  the  total. 

Mr.  Warren.  From  the  census? 

Mr.  Sturgis.  Well,  Mr.  Welsh's  estimate. 

Commissioner  Meeker.  I  am  not  quite  clear.  Does  that  contain 
the  latest  information  obtained  by  Mr.  Welsh? 

Mr.  Sturgis.  In  1918;  yes. 

Mr.  Lauck.  Of  course,  you  are  not  denying  there  are  other  in- 
creases  in  operating  expense,  but  proving  the  immunity  of  the  train- 
men I 

Mr  Sturgis.  The  other  operating  expenses  have  increased,  Mr. 
Lauck.  Por  instance,  I  gave  you  the  balance  of  the  operating  rev- 
enue per  revenue  passenger  after  paying  the  trainmen.  Now!  per- 
haps you  would  like  the  balance  after  all  operating  expenses,  per 
revenue  passenger?  &       i  >  f^^ 

In  1902  that  was  2.28  cents. 
Commissioner  Meeker.  Is  that  shown  here? 
Mr.  Sturgis.  No;  I  did  not  show  that. 
^  Li  1902,  2.28;  in  1907,  2.11;  in  1912,  2.39;  in  1917,  2.03;  in  1918, 

Mr.  Lauck.  In  other  words,  you  concede  that  the  margin  of 
safety  has  decreased,  but  has  not  been  due  to  trainmen  ? 

Mr.  Sturgis.  It  has  decreased  very  much. 

Mr.  Lauck.  But  the  trainmen  ai-e*^  not  responsible « 

Commissioner  Gadsden.  If  you  had  the  1919  figures  there  we 
would  probably  lose  that  .74  and  get  under  the  flat  1  ^ 

Mr  Sturgis.  You  would  lose  something,  I  think.  I  don't  know 
wliether  you  would  lose  the  .74  or  whether  vou  would  lose  the  1 

Commissioner  Gadsden.  Or  the  1.74?      ^ 

Mr  Sturgis  The  next  comparison  is  really  the  most  important  of 
all.  It  shows  the  wages  of  trainmen  as  compared  to  railway  oDerat- 
ing  expenses,  and  the  first  chart  under  it,  is  Chart  D,  following  page 
^1-3,  which  shows  the  ratio  between  the  wages  of  trainmen  and  the 
19(^  ^I'^^'^^^^g  expenses.    It  shows  that  the  ratio  has  decreased  since 

I  will  put  in  here  Part  III,  showing  the  comi^osite  charts. 

In  1902,  the  census  ratio  was  34.8. 

In  1907,  it  was  30.5. 

In  1912,  it  was  30.8,  and  the  composite  was  31.11. 

In  1917,  the  census  was  31.1,  and  the  composite  was  31  41 

In  1918,  the  census  was  30.9,  and  the  composite  was  30.55 

A  fairly  close  check,  but  since  1912,  up  to  1918,  there  is  a  very 
Slight  increase  m  the  census,  and  a  slight  decrease  in  the  individual 
I  oads. 


I 


ill 


n 


_,l  , 


1786    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Do  you  want  me  to  take  time  to  go  through  the  individual  roads, 
Mr.  Lauck? 

Mr.  Lauck.  I  think  not.  I  think  the  genei*al  principles  will  suf- 
fice. Just  ttt  the  pleasui-e  of  the  commission.  I  suppose  the  com- 
mission will  be  more  interested  in  the  established  general  principle, 
rather  than  in  the  individual  roads? 

The  Chairman.  Yes.    The  books  will  be  available? 

Mr.  Lauck.  Yes. 

Mr.  Sturgiss.  In  looking  through  this  exhibit,  it  is  interesting  to 
see,  in  general,  the  curve  of  wages  of  conductors  and  motormen  to 
operating  expenses  falling,  and  the  curve  of  fuel  generally  rising, 
particularly  since  1916. 

Taking  the  first  road,  for  instance — ^the  Bay  State  Sti*eet  Rail- 
way  

Mr.  Warren.  Which  pai-t  is  that  you  are  i-eferring  to  now  ? 

Mr.  Sturgis.  Part  III.  the  last  one. 

The  Chairman.  On  what  page  do  you  find  the  Bay  State,  Mr. 
Sturgis  ? 

Mr.  Sturgis.  It  is  the  first  chart  after  the  composite  chart.  They 
are  in  numerical  order. 

With  the  Bay  State  the  ratio  of  conductors  and  motormen  fell  off 
slightly  arid  fuel  had  a  marked  increase. 

The  Berkshire  is  rather  complicated.  That  is  the  next  one.  Con- 
ductoi-s  and  motormen  have  fallen  off,  and  fuel  increased  considerably 
since  191G,  power  purchased  remaining  constant. 

In  the  next  one.  the  Capital  Traction  Co.,  the  ratio  of  conductors 
and  motormen  increased  from  1917  to  1918. 

The  next  one.  Chart  D,  lO;^.  Chattanooga,  power  purchased  in- 
creased so  much  that  I  do  not  think  you  can  j^ay  much  attention  to  it. 

The  next  one  is  the  Cleveland  South westerli  &  Columbus:  (Con- 
ductors and  niotormen  fell  off  except  for  the  slight  upkick,  and  fuel 
goes  up  tremendously. 

The  next  one  is  the  Cumberland  County,  of  Portland.  Me.  The 
next  one  is  the  Detroit  Ignited.  The  next  one  is  Duluth.  Fort 
Dodge,  Des  Moines  and  Southern. 

The  Chahiman.  This  exhibit  s})eak.s  for  itself,  does  it  not? 

Mr,  Si'URGis.  It  does;  yes,  sir.    I  think  I  will  leave  it  there. 

I  want  to  call  your  attention  to  an  exhibit  of  Mr.  AVelsh.  His 
chart  was  numbered  C-155. 

That  chart,  which  I  have  reproduced  as  my  Chart  D-O,  is  really 
somewliat  of  an  optical  illusion,  because  it  is  composed  of  cumulative 
figures;  each  line  in  the  chart  is  the  sum  of  all  the  other  items  below 
it.  The  i-esult  is  that  the  top  group  always  looks  as^  though  it  had 
increased  more  than  it  actually  has  increased.  That  illusion  is 
souicwhat  helped  by  the  slant  of  the  line. 

My  next  chart.  Chart  D-O-1,  I  have  taken  those  same  figures  and 
charted  them  upside  down,  putting  the  wages  of  trainmen  on  the 
bottom  and  traffic  and  general  on  the  top.  I  showed  thosc^  two 
cuives  to  several  jx'ople,  without  telling  them  what  it  was,  and  they 
Avould  not  believe  that  they  were  the  same  figures.  The  second  chart 
lcK)ks  as  though  wages  of  trainmen  had  increased  very  little,  whereas 
the  traffic  in  general  has  inci-eascnl  a  lot.  I  do  not  claim  anything 
for  thi.s  fc-econd  chart.    The  illusion  is  jur^t  as  bad  as  the  first  one. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1787 

But  after  having  criticized  cumulative  charts  in  that  wav,  I  am 
going  to  introduce  one  of  my  own,  Chart  D-O-2.  That  is  open  to 
all  the  criticism  that  I  have  already  made  of  the  other  two,  with 
this  exception — that  the  lines  are  liiore  horizontal,  so  the  illusion 
does  not  show  up  so  much,  but  there  is,  even  in  this,  a  certain  amount 
of  illusion. 

This  chart  shows  the  operating  expenses  of  the  different  items  per 
operating  revenue,  the  top  line  of  all  being  what  is  called  the  operat- 
ing ratio. 

The  operating  ratio  from  1902  to  1918  increased' from  56.7  to  72; 
that  is  an  increase  of  15.2  points.  You  can  not  say  it  is  an  in- 
crease of  15  cents;  it  is  an  increase  of  15.3  points,  as  I  call  it.  I 
have  shown. the  make-up  of  that  increase  on  page  49.  Wages  of 
trainmen  contribute  2.6  points;  other  conducting  transportation,  2.5 
points;  power,  2.8  points;  way  and  structures,  3.7  points;  equip- 
ment, 3.3  points;  traffic  and  general,  .4  of  a  point.  You  might  say 
the  increase  due  to  the  wages  of  trainmen  was  17  per  cent  of  the 
total;  that  is,  2.6  is  17  per  cent  of  15.3;  but  that  figure  does  not 
mean  so  very  much. 

The  next  chart,  D-O-3,  are  the  per  cents  of  total  operating  ex- 
penses per  revenue  passenger,  plotted  as  they  are,  and  not  cumu- 
hited.  And  that  is  another  ratio  curve.  And,  coming  on  to  the 
next  chart,  D-0-4,  you  get  the  absolute  number  of  cents  for  revenue 
passenger  that  it  costs  to  operate  for  the  different  accounts. 

The  next  curve.  D-0-5,  shows  the  increase  in  jjer  cent  of  the 
different  accounts  per  revenue  passenger. 

Mr.  Lauck.  At  that  point,  Mr.  Sturgis,  may  I  ask  this  question : 
In  your  comparison  of  operating  ratios,  the  ratio  of  these  other 
items  to  operating  expenses,  there  are  two  variables,  are  there  not  ? 
That  is,  it  may  be  something  affecting  revenue  or  higher  wages,  I)ut 
here  you  have  an  absolute  standard,  have  you  not  ? 

Mr.  Sturgis.  Yes;  these  are  the  actual  number  of  cents,  revenue 
passenger,  that,  it  casts  for  the  different  items  and  the  increase  in 
each  of  the  items.    Now,  the  increase  is  shown  on  page  53. 

Wages  of  trainmen  increased  35.9  per  cent  per  i-evenue  passenger. 
Other  conducting  transportation  increased  78.8  per  cent;  power^ 
57.2  per  cent;  way  and  structures,  1)6.5  per  cent;  equipment,  76.2; 
traffic  and  general,  21.8.  So  all  those,  with  the  exception  of  traffic 
and  general  wages  of  trainmen,  increasetl  the  least  per  cent.  The 
increase  in  actual  number  of  cents  I  have  not  shown,  but  it  is  as 
follows : 

AVages  of  trainmen,  .37  ccuits:  other  conductinor  transpoi-tation, 
.20  cents;  power,  .28  c(>nts;  way  and  structure,  .28  cents;  equipment, 
.27  cents;  traffic  and  general,  .12  cents. 

The  total  increase  in  oj)erating  expenses  i>er  revenue  i^assentrer 
is  1.52  cents.  Tliat  compares  with  the  increase^  in  revenue  per  reve- 
nue passenger  which  was  .9  cents;  which  shows  the  operating 
expenses  have  increased  .6  more  than  revenues  have  increased. 

Of  this  1.52  the  increase  of  conductors  and  trainmen,  which  was 
.37,  amounts  to  24.4  per  cent.  In  other  words,  the  wages  of  train- 
men are,  i-esponsible  for  24.4  per  cent  of  the  total  increase  in  cost  of 
ojx^rating  expenses  per  revenue  passenger. 

Mr.  Lauck.  That  is  for  18  yeai-s,  is  it  not?    Or  1902  to  1918? 


I 


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m\ 


1788    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Sturgis.  1902  to  1918;  yes,  sir.  That  is  taking  the  census 
figures. 

Mr.  Warren.  That  means  in  the  aggregate,  I  suppose — the  aggre- 
gate wages  of  trainmen? 

Mr.  Sturgis.  Per  revenue  passenger;  yes. 

Mr.  Lauck.  That  is  the  hibor  cost,  is  it  not,  Mr.  Sturgis? 

Mr.  Sturgis.  It  is  the  hibor  unit  cost.  The  following  three  curves, 
as  before,  sliow  the  ratios  per  revenue  car-mile,  per  mile  of  track  and 
per  revenue  passenger. 

Tlie  last  parts,  Part  IV  and  Part  V,  show  the  individual  roads 
for  the  years.  I  will  not  take  the  time  to  read  these  checks,  be- 
cause they  are  about  the  same  as  they  were  before. 

Mr.  Lauck.  The  per  cents  in  the  composite  figures  a're  about  the 
same  ? 

Mr.  Sturgis.  Yes.  On  page  57  is  the  result  from  the  census.  The 
per  revenue  car-mile  wages  of  trainmen  have  gone  up  3.2;  total 
operating  expenses  11.9.  Per  revenue  passenger,  wages  of  train- 
men have  gone  up  0.37  per  cent;  total  operating  expenses  1.52. 

Chart  D-4  shows  the  same  groups  that  are  shown  in  the  census, 
showing  the  per  cent  that  wages  bear  to  operating  expenses.  This 
ratio  is  given  right  in  the  census  reports — that  is  why  I  have 
l)lotted  it.  It  shows  that  the  employees  on  salaries  ratio  went  up; 
wages  of  employees  exclusive  of  conductors  and  motormen  and  sala- 
ries went  up  from  1902,  although  they  have  fallen  in  1907 ;  wages  of 
conductors  and  motormen  have  fallen  steadily.  When  I  say  the 
wages  have  fallen,  I  mean  that  the  ratio  of  wages  to  operating 
expenses  has  fallen. 

If  you  segregate  the  operating  expense  and  instead  of  plotting 
the  total  operating  expenses  against  wages  of  trainmen,  if  you  plot 
the  balance  of  the  operating  expense  against  wages  of  trainmen  you 
w^ill  get  Chart  5.  Of  course,  the  total  operating  expense  includes  the 
wages  of  trainmen. 

On  Chart  D-5  subtract  the  wages  of  trainmen  from  the  total 
operating  expense  and  plot  the  result  against  wages  of  trainmen. 
The  curve  has  the  same  general  shape  as  before,  but  the  fall,  of 
course,  is  greater.  The  fall  is  from  53.4  per  cent  in  1902  to  44.7 
in  1018. 

The  next  chart,  which  is  D-6,  plots  first  the  actual  wages  of  train- 
men, and  above  it  plots  the  wages  of  trainmen  as  they  would  have 
been  if  they  had  been  increased  in  the  same  proportion  as  the  other 
railway  operating  expenses. 

In  1918  if  that  had  happened  it  would  have  cost  the  companies 
$30,000,000  more  than  it  did  cost;  and  that  is  an  increase  of  19.5 
per  cent — nearly  20  per  cent.  If  you  aggregate  those  losses  from 
1902,  the  total  loss  to  the  trainmen  is  $277,000,000,  due,  as  I  say,  to 
their  inability  of  obtaining  the  same  increase  as  took  place  in  the 
other  operating  expenses. 

Commissioner  Mahon.  From  what  year? 

Mr.  Sturgis.  From  1902  to  1918.    The  total  is  $277,000,000. 

Mr.  Lauck.  Mr.  Sturgis,  you  do  not  claim  that  they  should  have 
had  those  increases  but  are  stating  that  that  is  what  it  would  have 
been  if  they  had  had  proportionate  increases,  as  I  understand. 

Mr.  Sturgis.  Yes,  sir.  If  you  turn  that  statement  just  around 
and  calculate  what  the  saving  to  the  company  would  have  been  if 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1789 

they  had  kept  their  other  operating  expenses  down  to  the  same  in- 
crease that  they  gave  to  the  trainmen,  you  get  the  next  chart,  which 

^?  1.  J  "  ^^  ^^^^  ^  ^^^^  ^y  ^^^^'  ^^  ^^^^ir  operating  expenses 
they  had  succeeded  m  keeping  reduced  in  the  same  way  that  they 
kept  the  motormen  and  conductors  reduced,  then  the  railways  would 
have  sjived  in  the  year  1918,  $55,000,000,-  and  the  aggregate  saving 
since  1902  would  have  been  $524,000,000. 

Commissioner  Gadsdex.  Mr.  Sturgis,  is  there  not  another  way  of 
stating  that,  that  the  wages  have  lagged  behind  the  cost  of  material  ? 
Mr.  Sturgis.  Yes;  most  largely  the  cost  of  material;  of  course, 
other  things  go  into  it. 

Commissioner  Gadsdex.  Of  course,  that  is  true  of  all  industries. 
Mr.  Sturgis.  I  could  not  say  about  that. 

Commissioner  Gadsdex.  That  their  wages  lag  behind  the  material. 
Mr.  Sturgis.  I  do  not  claim  that  the  company  could  have  made 
this  saving,  Mr.  Gadsden ;  I  am  not  criticizing  the  company.    It  is 
merely  another  way  in  showing  in  graphic,  and  I  think  rather  start- 
ling, form— perhaps  too  startling— that  the  wages  have  lagged. 

Commissioner  Gadsden.  Yes.  I  am  trying  now  to  bring  out 
whetlier  that  is  not  a  general  rule— that  wages  do  lag  behind  ma- 
terial; wages  are  the  last  to  respond  to  increases.  The  material 
costs,  of  course,  are  first,  and  that  is  what  has  happened  not  only 
m  this  industry  but  in  all  industries. 

Mr.  Sturgis.  I  think,  to  a  large  extent,  that  is  true  in  all  indus- 
tries, but  I  could  not  do  any  more  than  generalize.  I  could  not  quote 
any  figures  on  that. 

Commissioner  Gadsden.  That  is  all  I  am  doing. 
Mr.  Sturgis.  The  only  figure  I  could  quote  on  that  is  what  the 
gentleman  said  about  the  cost  of  those  Birney  cars.    He  says  that  a 
few  years  ago  the  costs  were  50-50  for  material  and  Tor  labor,  and 
now  the  cost  is  about  two-thirds  for  material  to  one-third  labor. 

Commissioner  Mahon.  In  that  increase,  Mr.  Sturgis,  the  other 
officials  have  had  the  benefit  of  that  increase  over  the  employees? 
Mr.  Sturgis.  The  general  officers? 

Commissioner  Mahon.  The  general  officers  of  the  company. 
Mr.  Sturgis.  Yes;  their  increase  was  T8  per  cent.  I  think  you 
were  out,  Mr.  Gadsden— you  asked  a  question  this  morning  about 
the  individual  wages.  That  is  shown  on  Chart  B-1,  which  follows 
page  15.  The  general  officers  since  1902  increased  78  per  cent  up 
to  1917,  whereas  the  conductors  and  motormen  increased  only  54  ner 
cent.  "^        ^ 

Commissioner  Gadsden.  I  was  here,  but  I  asked  vou  a  question 
whether ^  ^ 

Mr.  Sturgis  (interposing).    Yes;  you  asked  me  this  morning. 

Commissioner  Gadsden.  Yes;  I  understand  that. 

Mr.  Lauck.  Mr.  Gadsden,  if  I  might  answer  your  question— I 
looked  It  up  during  the  recess,  and  it  means  the  salaried  officers  of 
the  corporation. 

Commissioner  Gadsden.  That  is  what  Mr.  Sturgis  stated. 

Mr  Sturgis.  The  next  chart,  F,  is  a  chart  that  Mr.  Welsh  over- 
Jooked  and  I  could  not  resist  the  temptation  to  put  it  in.  It  shows 
that  the  efficiency  of  capital  of  the  company  has  increased.  It  shows 
the  net  capitalization  per  dollar  of  income;  in  other  words,  dividing 


1790    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1791 


m 


the  income  of  the  company  by  the  capitalization,  the  capitalization 
in  1917  {)er  dollar  of  income  is  less  than  1902. 

Commissioner  Gadsdex.  That  might  be  due  to  squeezing  the  water 
out. 

Mr.  Sturgis.  It  would,  if  the  cost  per  mile  had  gone  down,  but 
the  cost  per  mile  has  not  gone  down.  It  has  gone  up.  It  depends 
upon  what  you  mean  by  squeezing  water  out.  It  means  that  capital  is 
being  used  more  efficiently  than  it  was. 

Conmiissioner  Gadsden.  That  is  another  wav  of  stating  it,  is  it 
not? 

Mr.  Stukgis.  No  ;  not  necessarily.  The  water  may  be  in  there,  but 
you  may  be  using  the  water.  But  if  the  water  once  gets  in  there  you 
can  not  squeeze  it  out  imless  you  put  in  actual  money  to  represent  it, 
and  this  does  not  mean  that  you  have  done  that.  This  means  you 
are  using  your  equipment  better,  and  by  better  I  mean  more  than 
you  have  before. 

Commissioner  Gadsdex.  It  means  as  an  industry  you  are  render- 
ing more  service  for  the  same  capitalization  ? 

Mr.  Sturgis.  Yes. 

Commissioner  Gadsdex.  Which  is  another  way  of  earning  your 
water  1 

Mr.  Sturgis.  No. 

Commissioner  Gadsden.  So  far  as  the  public  is  concerned. 

Mr.  Sturgis.  If  water  once  gets  in  you  can  not  get  it  out  unless 
you  take  it  out. 

Commissioner  Gadsdex.  I  know;  but  so  far  as  the  public  is  con- 
cerned it  is  getting  more  for  its  money  in  1917  than  in  1902  by  sev- 
eral millions  of  dollars. 

Mr.  Sturgis.  Well,  I  won't  say  it  is  getting  more  for  its  money. 
It  is  getting  rhove. 

Commissioner  Gadsdex.  It  is  getting  more? 

Mr.  Sturgis.  Yes;  I  think  it  is  getting  more  for  its  money,  but  I 
do  not  think  this  shows  it. 

Mr.  Warrex.  You  might  get  it  out  through  reorganizations,  might 


you  not? 


Mr.  Sturgjs.  That  is  taking  it  out  with  a  vengeance. 

Mr.  Warren.  But  it  does  take  it  out. 

Mr.  Sturgis.  You  bet  it  does. 

Mr.  Warrex.  There  have  been  some  of  those  in  the  last  15  years, 
have  there  not? 

Mr.  Sturgis.  Yes ;  but  the  cost  per  mile  has  gone  up  even  with  that. 

Mr.  Warrex.  That  might  be  because  of  the  increased  cost  of  ma- 
terial and  labor  and  new  construction  cost,  I  suppose. 

Mr.  Sturgis.  Yes;  it  might.  The  next  chart  shows  the  riding 
habit  as  I  figure  it.  Mr.  Welsh  showed  the  riding  habit,  and  I  agree 
witli  him  up  to  1917 — in  fact,  he  used  census  figures — but  I  do  not 
agi*ee  with  him  in  1918,  because  he  did  not  subtract  from  the  ix)pula- 
tion  of  the  country  four  million  and  some  odd  men  who  were  with- 
drawn from  civil  life  for  the  use  of  the  Army  and  Navy.  If  you 
subtract  the  Army  and  Navy  from  the  population  your  riding  habit 
still  goes  up,  not  so  much  as  it  had  in  the  past,  but  it  still  goes  up 
slightly. 

I  figured  the  i-iding  habit  in  1918  as  110  rides  i>er  inhabitant.  He 
figured  it,  I  think,  at  lOG. 


The  next  thing  I  did  was  to  attempt  to  plot  the  wage  rates  of  the 
motormen  and  conductoi-s  against  the  cost  of  living. 

Tlie  data  for  that  was  this :  I  was  able  to  secure  the  wage  rates  of 
the  different  locals  of  the  Amalgamated  Association  for  1902  and  in 
1917,  1918,  and  1919.  Now,  there  were  only  32  locals  in  1902  that 
were  also  in  existence  in  1917.  So  I  pieced  together  the  relative  of 
those  two  years  with  the  relative  obtained  by  taking  all  the  locals 
that  existed  in  1917,  1918,  and  1919  and  in  that  second  group  I  was 
able  to  get  227  locals. 

As  a  check,  the  average  wage  of  the  32  locals  in  January,  1917, 
was  29.73  cents,  whereas  of  the  227  locals  it  was  30.01  cents. 

Mr.  Lauck.  Page  70,  is  it  not  ? 

Mr.  Sturgis.  Seventy-six;  yes.  I  furthermore  added  a  third  set, 
taking  the  fi^ires  from  the  book,  Wages  in  the  War,  by  Hugh  S. 
Hanna  and  W.  Jett  Lauck,  on  page  64,  giving  me  the  wage  rates 
in  1912,  1914,  and  1917.  The  1917  checked  up  with  my  figure  for 
1917 — the  1917  rate  was  for  December  and  I  checked  it  up  w^ith  my 
figure  for  December,  1918,  as  follows:  Their  figure  was  32.03  and 
mine  was  31.09;  that  is  a  difference  of  0.41  cent.  Taking  all  those 
three  groups  I  figured  the  relative,  which  is  shown  in  the  last  col- 
umn, taking  January,  1914,  as  100,  on  Charts  H  and  H-1,  which 
are  these  two  charts  right  there,  I  plotted  that  relative  against  the 
Bureau  of  Labor  Statistics  figures  for  the  retail  food  price  and  the 
figures  they  have  published  from  time  to  time  on  the  cost  of  living. 
These  two  charts  are  on  the  same  basis,  except  they  are  on  a  different 
scale,  and  Chart  H  goes  back  to  1902. 

I  do  not  think  the  relationship  between  food  and  wages  between 
1902  and  1914  is  of  very  much  value,  .because  I  have  not  plotted 
the  intervening  years,  except  in  1912,  and  the  shape  of  the  curve 
might  change,  but  the  relationship  in  each  of  the  years  1902  and 
1912  and  for  1914  and  from  1914  on  can  be  taken. 

This  curve,  and  especially  Chart  H-1,  shows  that  since  1914  the 
average  wage  rates  of  motormen  and  conductors  have  not  gone  up 
as  fast  as  the  cost  of  living. 

On  January,  1917,  taking  this  from  page  85,  wages  had  advanced 
8  jier  cent  sinc*e  1914;  the  cost  of  living  had  advanced  16  i>er  cent. 
January,  1918,  wages  had  advanced  15  per  cent  and  the  cost  of  liv- 
ing 41  per  cent. 

January,  1919,  wages  had  advanced  48  per  cent  and  the  cost  of 
li\'ing  72  i^er  cent. 

Wages  have  advanced  an  unknown  amount  since  then  and  the  cost 
of  living  also  has  advanced  somewhat.  I  have  the  figures  of  the  cost 
of  living  for  1919  up  to  July,  and  it  went  up  from  172,  as  it  was  in 
December,  to  175  in  July.     Dr.  Meeker  is  raising  it  every  month. 

Commissioner  Meekisi.  It  is  lower  for  September,  almost  as  low 
as  in  July. 

Mr.  Sturgis.  Almost  as  low  as  in  July,  did  you  notice  he  said  ? 

Mr.  Lauck.  How  far  have  wages  lagged  behind  the  increased  cost 
of  living,  1914  to  1919 1 

Mr.  Sturc.is.  The  wage  rates  would  have  to  be  increased  about  16 
per  cent  in  order  to  bring  them  up  to  the  cost  of  living  as  it  then 
existed.  The  wage  rates  now  would  have  to  be  advanced  something 
higher  than  that  to  bring  them  up  to  the  present  cost  of  living,  which 
is  higher  than  it  was  last  December. 


H? 


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1792    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1793 


m 


Mr.  Warren.  Sixteen  per  cent? 

Mr.  Sturcis.  Sixteen  per  cent  to  bring  them  up  to  the  December 
level  of  the  cost  of  living. 

Mr.  Warren.  And  somewhat  higher  to  bring  them  up  to  the  pres- 
ent cost  of  living? 

Mr.  Sturois.  Yes. 

Commissioner  Meeker.  May  I  ask  a  question  there?  You  are  giv- 
ing here  the  retail  food  prices  only? 

Mr.  Stl  R<.is.  Merely  for  comparison.  You  can  not  say  that  the 
cost  of  living  varies  with  the  retail  food  prices.  It  generally  does 
not  go  u})  as  much  as  retail  food  prices  go  up;  especially  before  1914, 
when  clothing  did  not  have  the  big  increase  that  it  has  had  since 
1014. 

Commissioner  Meeker.  It  would  be  easy  for  you  to  make  the  com- 
parison with  our  index  of  cost  of  living  for  the  months  of  Decem- 
ber and  June,  which  would  be  an  interesting  comparison.  I  have 
not  those  figures  here,  but  they  can  easily  be  supplied  to  the  commis- 
sion if  it  so  desired. 

Mr.  Sturois.  Well,  I  have  the  cost  of  living  on  here,  Dr.  Meeker, 
in  that  dotted  curve. 

Commissioner  Meeker.  Well,  you  have  not  it  listed  here  in  your 
table,  have  you? 

Mr.  Sturois.  Yes;  I  took  every 

Mr.  Lauck.  We  have  an  exhibit  on  the  cost  of  living  which  has 
not  as  yet  been  presented  to  the  commission,  and  Mr.  Sturgis  is 
anticipating  it,  in  a  way — going  up  to  June.  We  will  submit  that 
when  Piof.  Ogburn  comes  on. 

Mr.  Sti'Rci".  The  wage  awards  of  the  National  War  Labor  Board 
were  made  in  about  90  street  railways.  The  average  increase  per 
company  unweighted  amoimted  to  23|  per  cent  and  the  average  in- 
crease per  trainman  weighted  amounted  to  22J  per  cent.  The  result 
of  those  awards,  as  you  see  by  the  curve,  during  the  period  that  the 
War  Lal)or  Board  operated — the  wage  rates  of  conductors  and  mo- 
tormen  kept  alx)ut  parallel  with  the  rise  in  the  cost  of  living,  but 
the  wage  awards  of  the  War  Labor  Board  found  them  at  a  low  point 
and  left  them  at  a  low  point.  They  did  not  restore  them  to  the  cost- 
of-living  curve.  Mr.  Taft  made  the  statement  in  one  of  the  cases — 
the  case  of  the  Bay  State  Street  Railway,  which  he  heard  in  Decem- 
ber— that  street-car  men  were  and  had  been  more  or  less  notoriously 
underi)aid.  But  in  spite  of  that  he  did  not  increase  them  up  to  the 
same  standard  that  they  were  in  1914. 

That  finishes  the  exhibit,  Mr.  Lauck. 

Mr.  Lauck.  I  was  going  to  ask  you  to  read  your  conclusions,  but 
I  think  the  points  have  been  brought  out  so  well  that  it  would  be 
probably  simply  a  repetition.  I  have  no  further  questions  to  ask, 
unless  the  commission  has. 

The  Chairman.  The  exhibits  are  so  complete  that  the  chair  does 
not  care  to  cross-examine. 

Mr.  Lauck.  Mr.  Warren,  have  you  any  questions? 

Mr.  Warren.  There  are  just  one  or  two  questions  I  want  to  ask. 

You  are  going  to  try  to  bring  some  of  these  figures  up  to  include 
the  1919  increases,  I  understood,  approximately! 


Mr.  Sturois.  Yes.  Now,  what  would  be  the  best  way  of  doing 
that,  Mr.  Warren  ?  I  can  file  a  list,  getting  Mr.  Mahon  to  help  me, 
showing  all  the  increases  that  we  know  about  and  can  think  of. 

Mr.  Warren.  I  should  think  that  would  be  helpful.  It  is  simply 
as  to  the  tendency  since  January  1,  1919,  which  is  your  latest  date, 
I  think. 

Mr.  Sturois.  Yes. 

Mr.  Warren.  When  you  had  an  average  of  41  something  ? 

Mr.  Sturgis.  Yes;  41  cents. 

Mr.  Warren.  Of  course,  we  all  know  in  a  general  way  that  many 
of  the  large  cities  have  had  very  large  increases,  and  I  have  had  an 
impression — I  might  say  a  hope  that 

Mr.  Sturgis.  That  the  others  would  have  the  same? 

Mr.  Warren.  That  they  had  overtaken  the  cost  of  living  in  the 
last  8  months.  I  know  that  in  certain  companies  that  I  personally 
represent  I  think  that  is  true.  Whether  it  would  be  true  generally 
I  do  not  know.  But  if  you  could  make  up  that  list,  like  New  York, 
Brooklyn,  Chicago,  Detroit 

Mr.  Sturgis.  1  do  not  know  anything  about  Brooklyn. 

Mr.  Warren.  You  do  not?    Probably  Mr.  Mahon  could  help  you. 

Commissioner  Meeker.  May  I  ask  there  that  in  computing  these 
wage  rates,  you  do  not  make  weiglited  averages  ? 

Mr.  Sturgis.  No;  it  is  not  weighted  at  all.  But  for  1917,  1918, 
and  1919,  taking  the  227  companies,  I  think  that  will  come  pretty 
close  to  the  correct  figure. 

Commissioner  Meeker.  And  in  your  weight  computation  which 
you  are  talking  about  now,  you  will  take  those  same  227  companies  ? 

Mr.  Sturgis.  I  got  all  I  know^  anything  about. 

Commissioner  Meeker.  The  point  is,  I  think  it  would  be  unfair 
to  consider  companies  merely  as  single  units,  if  those  companies  are 
going  to  include  such  very  important  companies  as  the  Boston 
Elevated,  the  New  York  rapid  transit,  and  such  very  large  systems. 

It  would  seem  to  me  that  it  would  be  necessary  to  make  some  sys- 
tem (ff  weighting,  even  though  it  be  an  arbitrary  system  of  weight- 
ing, unless  you  are  going  to  include  all  the  companies 

Mr.  Sturgis.  May  I  ask  Mr.  Mahon  a  question?  Commissioner 
Mahon,  would  it  take  long  to  get  from  the  Detroit  office  those  227  that 
I  have  taken,  which  existed  in  1917,  1918,  and  1919  as  locals — to  get 
their  actual  wages  to-day  ? 

Commissioner  Mahon.  No  ;  it  would  not  take  long. 

Mr.  Sturgis.  Why  is  not  that  the  best  way  of  answering  the 
question  ? 

Commissioner  Mahon.  We  can  wire  to-night  to  the  office  and  have 
them  made  up  in  a  few  minutes.  We  have  a  list  of  wages  of  each, 
and  the  cori*ections  every  day  as  they  come  in  of  the  local  organiza- 
tions, and  it  would  only  take  a  few  minutes  to  correct  up  the  list  and 
forward  it  on  to  you. 

The  Chairman.  That  can  be  filed,  even  after  you  conclude  your 
testimony. 

Commissioner  Mahon.  What  he  wants  to  do  is  to  make  a  com- 
parison of  the  conditions  of  w  age  as  a  general  proposition. 

160643*'— 20— VOL  2- — 51 


1794    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEIMIRAL  ELECTRIC  RAILWAYS  COMMISSION.    1795 


Mi 


IHH 


!«! 


Mr.  Sturgis.  That  would  be  very  easy  when  it  arrives.  We  can 
just  put  it  through  an  adding:  machine  and  get  the  result  very 
quickly. 

Mr.  Lauck.  Mr.  Gadsden  wanted  to  go  further,  Mr.  Chairman. 
He  wanted  to  assume  that  the  wage  increases  that  had  already  been 
granted  in  the  natural  course  of  events  would  be  granted  to  all  other 
companies  in  the  United  States 

Commissioner  Maiion.  We  hojie  so. 

Mr.  Lauck.  And  thei-eby  anticipate  the  condition  which  he  would 
bo  confronted  with  in  the  future,  or  which  the  commission,  as  I 
gather  from  his  point,  would  be  confi-onted  with  in  recommending 
as  to  the  financial  rehabilitation  of  the  roads. 

I^ut  mv  point  is,  if  there  has  been  an  increase,  commensurate  with 
the  increased  cost  of  living  since  1914,  we  would  be  perfectly  willing 
to  see  that  put  in — which  I  do  not  think  is  true — but  if  it  were — 
because  we  are  going  to  claim  that  the  1014  .wages  were  entirely  in- 
adequate, and  that  even  if  the  entire  living  was  secui-ed,  they  would 
be  entirely  inadequate  at  the  present  time  to  maintain  a  proper 
standard  of  living. 

Mr.  Warrex.  In  other  words,  if  60  cents  did  balance  with  the  in- 
creased cost  of  living  since  1914,  the  employees  would  expect  further 
inci*eases  to  oifset  the  original  lack? 

Mr.  Lauck.  We  were  going  to  a^  the  commission  to  i-ecommend 
that  the  principle  of  a  living  wage  be  established  in  the  industry, 
irrespective  of  any  wage  increases  from  1014  to  1010;  because,  if  you 
increase  the  wages  which  were  in  effect  in  1014,  even  to  the  extent  of 
the  increased  cost  of  living,  being  inadequate  in  1014,  you  would 
simply  be  perpetuating  inadequacies. 

Commissioner  Meeker.  Are  you  going  to  submit  a  standard 
budget? 

Mr.  Lauck.  Yes;  we  arc  going  to  submit  a  budget. 

Mr.  AVarren.  Are  the  227  companies  the  ones  that  are  listed  here 

on  page  TO? 

Mr.  Sturgis.  Yes.  I  make  two  lists  there.  The  first  list  on  i)age 
78  of  the  82  com))anies  on  which  locals  existed  in  both  1002  and  1017. 

Mr.  Warrex.  Yes. 

Mr.  Sturgis.  Following  that  on  pages  70  and  80  and  81  and  82 
and  83  and  84  are  the  227  locals. 

Mr.  AVarren.  And  those  are  the  ones  that  >Ir.  Mahon  thinks  he 
could  readily  obtain  for  you? 

Mr.  Sturgis.  Yes.  Those  are  the  locals  that  existed  in  the  three 
years  1017,  1018,  and  1018. 

Mr.  Warren.  Yes. 

Mr.  Sturgis.  There  are  certain  other  locals  that  have  been  formed 

since  1017  in  there. 

Commissioner  Mahon.  Oh,  yes;  thei-e  are  nearly  100  more  local 
orgauizations;  possibly  more.  'This  ends  at  730.  The  number  now 
would  run  near  000. 

Mr.  Sturgis.  Yes. 

Commissioner  Mahon.  There  are  possibly  100  more  local  organi- 
zations affecting  practically  that  number  of  cities  that  are  not  in 

this. 
J^Ir.  Warren.  For  instance,  Brooklyn  would  not  be  in  here? 


Commissioner  Mahon.  Brooklyn  is  not  in  here,  and  it  would  be 
in  the  other  one;  yes. 

Mr.  Sturgis.  I  have  here,  Mr.  Warren,  the  wages  of  the  motormen 
and  conductors  who  are  members  of  the  Amalgamated  Association 
of  Street  &  Electric  Railway  Employees  of  America. 
^  On  February  1, 1017,  the  highest  number  of  the  local  divisions  was 
736.  That  does  not  mean  that  there  were  736  locals  that  year 
because  some  of  the  charters  had  expired;  but  that  is  the  highest 
number. 

On  January  1,  1010,  the  highest  number  was  865. 

Mr.  Warren.  The  other  question  I  wanted  to  ask  is  this :  All  I 
am  after,  and  I  guess  we  are  all  after  the  same  thing  really,  is  to  see 
what  the  tendency  of  wages  is  at  present  and  what  it  is  likely  to  be 
in  the  future,  because  I  think  that  is  important. 

Referring  to  your  chart  or  figures  on  page  42,  Mr.  Stui^is,  where 
you  give  the  ratio  of  wages  of  trainmen  to  the  total  income,  have 
3^ou  figured  anywhere  the  ratio  of  those  wages  to  the  net  income  of 
the  companies? 

Mr.  Sturgis.  No. 

Mr.  Warren.  You  have  not? 

Mr.  Sturgis.  The  net  income  fell  off  very  fast.  I  have  shown  the 
actual  net  income  on  Chart  E.  It  fell  off  considerably  since  1012, 
with  increased  rates  since  1017.    Chart  E  is  after  page  65, 

Mr.  Warren.  Yes. 

Mr.  Sturgis.  Of  course  if  you  figure  the  ratio  of  wages  to  that 
of  net  income,  the  ratio  would  rise,  I  should  sa}-,  very  largely. 

Mr.  Warren.  And  it  could  be  easily  figured  from  those  two  charts  ? 

Mr.  Sturgis.  Oh,  yes.  I  can  give  it  to  you,  roughly,  if  you  want 
me  to,  in  a  very  few  minutes. 

Mr.  Warren.  I  will  not  delay  the  commission  for  that,  because  I 
can  figure  it  out  myself.  I  just  wanted  to  make  sure  of  the  raw 
materials. 

Mr.  Sturgis.  If  you  want  the  figures  of  net  income,  they  are  on 
page  56,  the  actual  net  income  starting  with  $30,000,000  and  endinff 
with  $20,000,000.  :'      '  6 

Mr.  Warren.  Oh,  yes;  page  56? 

Mr.  Sturgis.  Yes. 

Mr.  Warren.  I  think  that  is  all. 

(Witness  excused.) 

The  Chairman.  You  may  procc-ad,  Mr.  Lauck. 

Mr.  Lauck.  We  would  like  to  call  Prof.  Ogburn,  of  Columbia. 

STATEMENT  OF  PEOF.  WILLIAM  F.  OGBirEN. 

The  Chairman.  What  is  your  address,  Mr.  Ogburn? 

Mr.  Ogburn.  Columbia  L^niversity,  New  York  City. 

Mr.  Lauck.  Prof.  Ogburn,  will  you  please  state,  for  the  informa- 
tion of  the  commission,  briefly,  your  educational  training  and  your 
present  professional  work?  You  are  now  at  Columbia  University, 
ai"e  you  not? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  Will  you  state  that  briefly? 

Mr.  Ogburn.  I  am  at  the  present  time  a  professor  in  Columbia 
Iniversity  in  New  York  City. 


■A 


1i 


1796    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     •' 

Previous  to  that  I  occupied  a  position  as  special  a^rent  in  the 
Bureau  of  Labor  Statistics,  and  prior  to  that  was  an  examiner 

Mr.  Lauck.  As  special  agent  of  the  Bureau  of  Labor  Statistics, 
you  were  connected  with  tlie  cost-of-livin<^  investi<^ations  and  studies 
of  standards  of  living,  wei*e  you  not? 

Mr.  Ogburn.  Yes.  The  Bureau  of  Labor  Statistics  has  been  mak- 
ing a  very  important  survey  of  the  cost  of  living  throughout  the 


of  living,  and  submitting  memoranda  as  to  the  standard  of  living, 
for  the  information  of  the  board,  were  you  not  ? 

Mr.  Ogburn.  Yes.  I  was  director  of  the  cost-of-living  depart- 
ment of  the  National  War  Labor  Board  during  the  period  of  the 
war;  the  latter  part. 

Mr.  Lauck.  And  before  that  you  were  at  the  University  of  Wash- 
ington ? 

Mr.  Ogburn.  Yes ;  I  was  professor  at  the  University  of  Washing- 
ion  just  prior  to  coming  to  the  War  Labor  Board. 

Mr.  Lauck.  And  you  taught  before  that  ? 

Mr.  Ogburn.  Yes;  at  Reed  College,  in  Portland,  before  that;  and 
lit  Princeton  prior  to  going  to  Reed  College. 

Mr.  Lauck.  During  this  period  you  have  been  interested  in  the 
study  of  budgets  of  working  people  and  the  study  of  the  cost  of 
living  as  affecting  those  budgets,  have  you  not? 

Mr.  Ogburn.  Yes.  I  have  been  more  or  less  engaged  in  study 
ftlong  that  line,  particularly  statistical  studies  of  this  nature. 

Commissioner  Meeker.  Would  it  not  be  well  to  i*ead  into  the 
record,  or  have  Prof.  Ogburn,  the  very  excellent  cost-of-living  studies 
he  made  in  Seattle? 

Mr.  Lauck.  Yes,  sir.  I  have  thought  of  that  and  was  going  to 
take  it  up  a  little  later.  In  our  booklet  on  standards  of  living  we 
reproduce  that.  I  w^as  going  to  have  him  explain  that  to  the  com- 
mission when  he  took  that  up.  I  think  that  is  a  very  important 
l)oint. 

Before  getting  to  that,  though,  I  would  like  for  Mr.  Ogburn  to 
take  the  exhibit  wiiich  is  bawd  upon  the  Bureau  of  Labor  Statistics 
study,  with  which  he  is  familiar,  and  explain  briefly  the  inci*eased 
cost  of  living  since  1914,  and  the  methods  by  whicli  that  has  been 
arrived  at. 

Mr.  Ogburn.  I  understand  the  general  question  concerns  the  in- 
crease in  cost  of  living  during  the  recent  >var  period  and  since. 

I  would  like  to  state,  in  the  first  place,  that  it  is,  of  course,  quite 
difficult  to  measure  accurately  the  increased  cost  of  living,  inasmuch 
as  it  is  necessary  to  take  a  verv  large  list  of  articles.  To  base  them 
upon  food  prices  alone  would  hardly  be  satisfactory;  neither  would 
it  be  satisfactory  to  take  wholesale  prices. 

For  purposes  of  wage  adjustment  it  seems  desirable  to  measure 
the  increased  cost  of  living  upon  articles  which  the  family  will  pur- 
chase at  retail  prices  in  their  dailv  living.  This  necessitates  getting 
actual  prices  on  a  very  large  number  of  articles  wliich  a  family  con- 
sumes. 

In  order  to  combine  these  into  a  single  number,  it  became  neces- 
sary to  weight  them,  as  we  say,  or  multiply  them  by  some  number 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1797 

corresponding  to  the  particular  impq^tance  which  it  occupies  in  the 
workingman's  family  budget. 

These  surveys,  on  account  of  the  perplexity  and  the  difficulty  in 
gathering  the  figures,  really  necessitate  collection  at  first  hand  by 
trained  experts;  and  even  trained  experts  must  continually  be  on 
their  guard  in  order  to  get  the  most  accurate  figures. 

Such  a  work  has,  I  believe,  been  done  only  by  one  agency  in  the 
United  States.  I  refer  to  the  United  States  Bureau  of  Labor  Sta- 
. tistics. 

There  were  one  or  two  earlier  studies  made  by  the  Shipbuilding 
Labor  Adjustment  Board  of  this  sort,  but  I  believe,  with  the  excep- 
tion of  an  occasional  local  study,  the  only  other  source  is  the  National 
Industrial  Conference  Board,  which  has  made  some  studies  which 
conform  fairly  closely  to  the  United  States  Bureau  of  Labor  Sta- 
tistics' figures.  While  not  wishing  to  criticize  their  figures  par- 
ticularly, I  think  it  is  worth  calling  attention  to  the  fact  that  their 
data  was,  a  good  deal  of  it,  collected  by  what  we  call  the  question- 
naire method — sending  out  questions  through  the  mail  to  rental 
agencies  and  chambers  of  commerce,  which  I  think  do  give  certain 
information,  but  I  believe  are  not  quite  so  accurate  as  the  method  of 
collection  by  trained  agents,  which  the  Bureau  of  Labor  Statistics 
has  undertaken. 

Of  course,  the  War  Labor  Board  did,  under  my  direction,  make 
several  studies  for  particular  pieces  of  wage  adjustment  which  it 
was  necessary  for  them  to  make ;  but  I  think  in  a  general  way,  one 
could  say  quite  accurately  that  the  Bureau  of  Labor  Statistics  is  by 
far  our  best  source  of  supply  for  information  on  this  matter. 

Mr.  Lauck.  May  I  interrupt  for  a  moment? 

Mr.  Ogburn.  Certainly. 

Mr.  Lauck.  During  the  war  was  not  the  Bureau  of  Labor  Statis- 
tics practically  designated  by  the  President  as  the  official  indicator 
of  the  increased  cost  of  living,  and  the  President,  from  his  own  funds, 
extended  financial  aid  to  this  bureau  for  working  up  the  increased 
cost  of  living  so  that  it  might  be  available  for  all  wage  adjustment 
boards  and  all  agencies  of  the  Government  in  determining  increases 
m  wages? 

Mr.  Ogburn.  Yes;  that  is  my  understanding. 

It  first  began  by  the  Bureau  of  Labor  Statistics  being  requested  by 
a  (jovernmental  agency,  the  Shipbuilding  Labor  Adjustment  Board, 
to  give  them  figures;  and  there  was  an  extension  of  their  work  later 
on,  I  believe,  at  the  President's  request  and  the  granting  of  funds, 
especially,  that  they  undertake  this  work. 

So  much  in  regard  to  the  method  by  which  we  arrive  at  our  figures; 
and  I  may  say  that,  insofar  as  I  have  investigated  the  figures  from 
Luropean  countries,  I  think  the  figures  which  we  have  in  the  United 
fetates  are  somewhat  better  than  those  collected  abroad.  I  have  had 
occasion  to  look  into  the  figures  which  have  been  collected  in  Eng- 
land, and  I  believe  that  they  are  probably  the  best  of  the  European 
figures,  and  I  think  ours  are  somewhat  better. 

Mr.  Lauck.  Will  you,  then,  take  up  and  sketch  briefly  the  in- 
creased cost  of  living  set  forth  in  exhibits  since  1914? 

The  Chairman.  Before  he  does  that,  may  I  ask  just  one  question? 

In  every  city  there  is  a  wide  variation  in  the  retail  price  of  ai-ticles, 
of  foodstuffs  and  other  things  in  different  stores,  dependent  upon 


1  : 


m 


1798    PEOCEiaJlNGS  OF  F£D£1RAL  ELECTKIC  RAILWAYS  COMMISSIOX^ 

their  quality,  the  inv<?stment,  perhaps  the  distance  from  the  centers 
of  popuhition.  When  you  sen(f  your  n^nts  to  a  city  to  get  this  in- 
formation, do  you  attempt  to  get  the  prices  at  the  stores  where  the 
Ldxuing  i)eople  aiv  most  apt  to  trade? 

Mr,  Ogiu'bn.  Yes;  the  stoi-es  are  selected  as  Ijeing  those  where  the 
so-called  workingman's  family  tirades.  In  some  cities  it  is  a  little  bit 
diflicult  to  do  that.  Take  a  city  like  Seattle :  Tlie  woi-kingmen  have 
no  particular  stoi-es  as  such;  tliey  trade  all  over  tlie  citj.  And  tliat 
is  surprisingly  true  in  a  good  many  cities.  However,  in  some  of  the 
localities — perhaps  it  may  be  near  tlu?  stockyard  district  in  Cliicago — - 
tliere  are  special  stoi^es  fcr  the  worldngmen.  I  think  a  point  right 
along  that  line  which  they  did  stress  was  the  fact  tliat  it  was  neces- 
sary to  take  a  pivtty  fair  sample  of  stores  *nd  not  just  one  or  two 
stores;  but  I  do  not  know  just  exactly  what  tiieir  numbei*  was.  I 
ijuagine,  however,  that  it  would  vary  from  12  to  25  stores  for  a 
single  article;  so  that  it  would  take,*i'eally,  quite  a  little  while  to 
make  a  single  study.  But  I  think  tliat,  by  that  precaution  of  select- 
ing tlie  stores,  as  much  as  poesibleM,  where  tlie  working  [>eople  traded, 
and  by  taking  a  sufficiently  large  nuial>er,  that  difiiculty  of  valuation 
was  obviated  or  oveiromc. 

Mr.  Lau<"k.  Then  after  \(m  got  these  prices,  how  did  you  find 
out  a  particular  weight  in  the  workingnian  s  family  ?  For  instance, 
porterlK>use  steak,  oi*  an  article  of  clotliiiig,  or  soup — anything  of  that 
kind  ?  I  tliink  it  Avmild  be  well  to  explain  how  the  Bul^eau  of  Ltib<:>r 
Statistics  arrived  at  a  method  of  weighing  the  different  articles  after 
t^y  had  found  tlie  average  price  for  the  artick^. 

Mr.  Ogbu»x.  Yes;  the  method  of  weighting  is,  in  general,  deter- 
mined by  selecting  a  workiiigman's  Inulget,  tmd  finding  out,  for 
instance,  the  amounts  spent  or  the  number  of  qnantities  of  a  particu- 
lar article  purchaseil  in  that  family. 

If  you  compute  \tMir  peix*entage  on  ^ach  article,  then  you  will 
multiply  it  by  the  total  weight  in  the  budget.  On  the  otl^r  hand, 
if  you  took  the  \wk^^  yoti  woukl  maltiply  it  by  tbe  qiiantity.  In 
eitlicr  case  they  give  the  same  results.  The  result,  however,  is  ob- 
tained, and  can  only  lie  we^ighted  at  all,  by  wmL-mg  a  study  of  the 
workingman's  budir^t  as  such.  That  is,  it  is  not  onlv  necessary  to 
get  the  prices  from  the  stares,  h^  to  laK>w  what  a  workingman's 
btidffet  is,  in  order  to  ^et  tifce  result. 

^Ir.  Lauck.  You  found  that  out,  or  the  Bureau  of  Labor  Statistics 
did,  by  collecting  tliousawiiof  wurkia^fiHien's  biidgrts  and  averaging 
them  lip  then,  as  to  what  the  typical  faMiily  spent  for  eadi  article, 
then  giving  it  that  weight  or  thait  qualities'  that  they  ii^sed  ? 

Mr.  Ogbfex.  The  Bureaa  of  Labor  StatialicB  wamiit  quite  a  famous 
study  in  190L  which  covered,  I  think,  uaybe  some  20^900  «r  mm 
families,  and  the  preportioBK,  as  deteoBiBedi  then,  pcaUblj  will  not 
greatly  differ  from  those  of  the  present  time. 

They  liad  also  quite  a  few  studies  made  bj  the  SfaippiB^  Beard  in 
tlie  eariv  part  of  the  war. 

Eecently  they  have  completed  ahmit  sonie  lajOOO— 10,000  or  lojOOO 
family  budgets,  also  of  a  recwit  period. 

Commissioner  Mixker.  I  think  tkat  the  WLWBoher  of  budgets  eol- 
lected  was  about  SOjOOO. 

Mr.  Ogbubx.  About  M/080L 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  BAIL  WAYS  COMMISSION.    1799 

Mr.  Lauck.  So  you  had  the  experience  of  30,000  families  as  to  what 
they  actually  did  s^^end  to  find  out  how  the  relative  increases  in  prices 
would  affect  their  expenditure  and  weighing  them  according? 

Mr.  Ogburx.  Yes ;  we  had  that  experience. 

Mr.  Lauck.  Will  you  then  please  explain  the  general  increase  in 
cost  of  living  since  1914,  pointing  out  the  increases  there  from  your 
own  information,  or  using  the  data  referred  to  ? 

Mr.  Ogburn.  Yes 

Mr.  Warren.  May  I  suggest  one  question  before  you  go  into  that? 

Mr.  OoBURN.  Yes. 

Mr.  Warren.  Wien  jou  determined  the  budget  did  you  determine 
it  some  years  ago  or  since  the  period  of  higher  wages?  These  30,000 
budgets  that  Dr.  Meeker  refers  to,  for  instance,  were  collected  when ? 

Mr.  Ogburn.  The  30,00  budgets  to  which  he  referred  were  col- 
lected in  a  study  made  in  1901,  prior  to  the 

Commissioner  Meeker.  No;  they  were  the  latest  figures  we  ob- 
tained in  1918. 

Mr.  Ogburn.  Yes. 

Mr.  L.VUCK.  You  had  the  25,000  and  some  families  in  1901  as  I 
understand  it,  and  then  during  the  war  Dr.  Meeker  made  a  special 
study  of  families  in  the  shipyards  and  in  160  other  cities,  and  by 
studying  the  relative  weights,  and  so  on,  arrived  at  ike  weights 
which  should  be  ^iven  to  different  articles,  not  basing  it  on  the  pres- 
ent high  expenditures  entirely,  but  working  as  near  as  could  be  to 
the  normal  weights,  did  he  not  ? 

Mi\  Ogburn.  These  weights  fluctuated  scmiewhat  in  this  way:  It 
is  quite  possible  that  rents  as  a  weight  may  l>e  less  than  they  were  in 
1901,  however,  due  to  the  fact  that  rents  have  not  risen  as  much  as 
otlier  articles.  Clothing,  on  the  other  hand,  would  be  a  great  deal 
higher,  and  particularly  furniture,  as  that  has  gone  up  somewhat. 
Fuel  and  light  would  be  somewhat  diminished  as  a  weight,  but  that 
would  be  a  change  which  would  be  noted  over  that  period. 

And  in  regard  to  the  increased  cost  of  living  as  worked  out  in 
this  way.  the  most  noticeable  thing  is  that  the  increased  cost  of  living 
ex^n-essed  itself  most  noticeably  about  the  late  summer  or  early  fall 
of  1915.  There  has  been — indeed  prior  to  that  time:  that  is,' since 
1914 — a  slight  increase  in  the  cost  of  living,  but  probably  not  very 
much.  If  a  curve  is  plotted  it  runs  just  a  sli^t  rise,  liardly  per- 
ceptible, except  perhaps  for  certain  articles.  Food  increased  a*  little. 
But  the  marked  increase  in  the  cost  of  living  began  in  the  late  sum- 
mer of  1915. 

The  Chairman.  Do  you  mean  to  say  during  the  depression  in  1914 
there  was  a  slight  increase  in  the  costof  lining? 

^Ir.  Ogburn.  I  said  since  we  went  into  the  war,  in  1914,  there  was 
m  slight  increase  up  to  the  late  summer  of  1915,  when  it  began  to 
move  op  at  a  fairly  sharp  angle,  and  it  continued  to  rise  with  a  fair 
d«^ree  of  steadiness  in  the  slope  of  the  line  until  around  the  point 
of  the  armistice.  It  rose  probably  a  little  less  than  2  per  cent  a 
month,  one  might  think  of  it:  of  course,  there  is  some  little  qnefltion 
how  best  to  compute  those  things,  because  it  involves  interpolation, 
if  you  get  it  down  to  iMOths:  but  as  a  general  understanding,  it  was 
about  that  rate. 

After  the  signing  of  the  armistice,  the  course  of  the  cost  of  lir- 
ing  has  been — we  have  not  so  very  many  total  prices  of  all  com- 


*  1 1 

II 


i 


1798    PBOCEEDINGS  OF  FEDERAL  ELJiCTIUC  HALLWAYS  COMMISSION* 

their  quality,  the  investment,  perhaps  the  distance  from  the  centers 
of  popuhition.  When  you  sencf  your  agents  to  a  city  to  get  this  in- 
formation, do  you  attempt  to  get  the  prices  at  the  stores  where  the 
laboring  })eople  are  most  apt  to  trade  ? 

Mr.  Ogbubn.  Yes;  the  stoi*es  are  selected  as  Ijeing  those  where  the 
so-called  workingujan's  family  tradeii.  In  some  cities  it  is  a  little  bit 
difficult  to  do  that.  Take  a  city  like  Seattle:  Tlic  voi-kingmen  have 
no  paiticular  stores  us  such ;  tliey  trade  all  over  tlie  city.  And  tliat 
is  sui-prisingly  true  in  a  good  many  cities.  However,  in  some  of  the 
localities — perhaps  it  may  be  near  tlie  stockyard  district  in  Chicago — 
there  are  special  stores  for  the  workingmen.  I  think  a  point  right 
along  that  line  which  they  did  stress  was  the  fact  tliat  it  was  neces- 
sary to  take  a  pretty  fair  sample  of  stores  ^nd  not  just  one  or  two 
stores;  but  I  do  not  know  just  exactly  what  tiieir  number  was.  I 
imagine,  however,  that  it  would  vary  from  12  to  25  stores  for  a 
single  article;  so  that  it  would  take,  really,  quite  a  little  while  to 
paake  a  single  study.  But  I  think  tliat,  by  that  precaution  of  select- 
ing the  stores,  as  much  as  ix)6sible,  where  tlie  working  people  traded, 
and  by  taking  a  siifficiontly  large  numl>er,  that  difticulty  of  vaiiation 
was  obviated  or  overeome, 

Mr.  Lau<:k.  Then  after  you  got  these  prices,  how  did  you  find 
out  a  particular  weight  in  the  workingman's  family  ?  For  instance, 
lX)rterlK)use  ^eak,  oi-  an  article  of  clotiiing,  or  soup — anything  of  that 
kind  ?  I  think  it  would  be  well  to  explain  how  the  Bureau  of  Labor 
Statistics  arrived  at  a  method  of  weighing  the  different  articles  after 
they  liad  found  tlie  average  price  for  the  articles. 

Mr.  Ogbukx.  Yes;  the  method  of  weighting  is,  in  general,  deter- 
mined by  selecting  a  workiiigmun's  budget,  and  finding  out,  for 
instance,  the  amounts  spent  or  the  number  of  <jiiantitics  of  a  particu- 
lar article  purchased  in  that  famUy. 

If  you  compute  your  percentage  on  each  article,  then  you  will 
multiply  it  by  the  total  Aveight  in  the  budget.  On  tlie  other  hand, 
if  you  took  the  price,  ymi  would  multiply  it  by  the  quantity.  In 
either  case  they  give  the  same  results.  Tlie  result,  however,  is  ob- 
tained, and  can  only  he  weighted  at  all,  by  making  a  study  of  the 
workingman's  budget  as  such.  That  is,  it  is  not  only  necessary  to 
get  the  prices  from  the  stores,  Imt  to  know  wliat  a  workingman's 
budget  is,  in  oi-der  to  get  the  result. 

A&.  Lauck.  You  found  that  out.  or  the  Bureau  of  Labor  Statistics 
did,  by  collecting  tliousands  of  workingnien's  budgets  and  averaging 
them  lip  then,  as  to  what  the  typical  family  spent  for  each  article, 
then  giving  it  that  weight  or  that  quantity  that  they  used  ? 

Mr.  OcBuny.  The  Bureau  of  Labor  Stati^ics  ma<fe  quite  a  famous 
study^  in  1901,  which  covered,  I  think,  maybe  some  20,000  or  more 
families,  and  the  proportions,  as  determined  tlien,  probably  will  not 
greatly  differ  fixMii  those  of  the  present  time. 

They  had  also  quite  a  few  stwiies  made  by  the  Shipping  Board  in 
the  early  part  of  the  Avar. 

Recently  they  have  completed  about  some  15,000 — 10,000  or  15,000 
family  budgets,  also  of  a  recent  period. 

Commissioner  Meeker.  I  think  that  die  number  of  budgets  coi- 
fected  was  about  30,000. 

Mr.  Ogbubn.  About  30,000. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMLSSIOX.    1799 

Mr.  Lauck.  So  you  had  the  exi^erience  of  '60,000  families  as  to  what 
they  actually  did  si>end  to  find  out  how  the  relative  increases  in  prica^ 
would  affect  their  expenditure  and  weighing  them  according? 

Mr.  Ogburx.  Yes ;  we  had  that  experience. 

Mr.  Lauck.  Will  you  then  please  explain  the  general  increa.se  in 
cost  of  living  since  1914,  pointing  out  the  increases  there  from  your 
own  information,  or  using  the  data  referred  to  ? 

Mr.  Ogburx.  Yes 

Mr.  Warrex.  May  I  suggest  one  question  before  vou  go  into  that? 

Mr.  Ogburx.  Yes. 

Mr.  Warrex.  AVhen  you  determined  the  budget  did  you  determine 
it  some  years  ago  or  since  the  period  of  higher  wages  ?^  These  30,000 
budgets  that  Dr.  Meeker  refers  to,  for  instance,  were  collected  when  ? 

Mr.  Ogburx.  The  30,00  budgets  to  which  he  referred  were  col- 
lected in  a  study  made  in  1901,  prior  to  the 

Commissioner  Meeker.  No;  they  were  the  latest  figures  we  ob- 
tained in  1918. 

Mr.  Ogburx.  Yes. 

Mr.  KvucK.  You  had  the  25,000  and  some  families  in  1901  as  I 
undei-stand  it,  and  then  during  the  war  Dr.  Meeker  made  a  special 
study  of  families  in  the  shipyards  and  in  IGO  other  cities,  and  by 
studying  the  relative  weights,  and  so  on,  arrived  at  tke  weights 
which  should  be  given  to  different  articles,  not  basing  it  on  the  pies- 
ent  high  expenditures  entirely,  but  working  as  near  as  could  be  to 
the  normal  weights,  did  he  not  ? 

Mr.  Ogburx.  These  weights  fluctuated  somewhat  in  this  way:  It 
is  (|uite  possible  that  rents  as  a  weight  may  be  less  than  they  were  in 
1901,  however,  due  to  the  fact  that  rents  have  not  risen  as'  much  as 
other  articles.  Clothing,  on  the  other  hand,  would  be  a  great  deal 
higher,  and  particularly  furniture,  as  that  has  gone  up  somewhat. 
Fuel  and  light  would  be  somewhat  diminished  as  a  weight,  but  that 
would  be  a  change  which  would  be  noted  over  that  period. 

And  in  regard  to  the  increased  cost  of  living  as  worked  out  in 
this  way,  the  most  noticeable  thing  is  that  the  increased  cost  of  living 
ex^iiessed  itself  most  noticeably  about  the  late  summer  or  early  fall 
of  1915.  There  has  been — indeed  prior  to  that  time;  that  is,"^ since 
1914 — a  slight  increase  in  the  cost  of  living,  but  probably  not  veiy 
much.  If  a  curve  is  plotted  it  runs  just  a  slight  rise,  hardly  per- 
ceptible, except  perhaps  for  certain  articles.  Food  increased  a  little. 
But  the  marked  increase  in  the  cost  of  living  began  in  the  late  sum- 
mer of  1915. 

The  Chairmax.  Do  you  mean  to  say  during  the  depression  in  1914 
there  was  a  slight  increase  in  the  cost^of  living? 

Mr.  Ogburx.  I  said  since  we  went  into  the  war,  in  1914,  there  was 
a  slight  increase  up  to  the  late  summer  of  1915,  when  it  began  to 
move  up  at  a  fairly  sharp  angle,  and  it  continued  to  rise  with  a  fair 
degree  of  steadiness  in  the  slope  of  the  line  until  around  the  point 
of  the  armistice.  It  rose  probably  a  little  less  than  2  per  cent  a 
month,  one  might  think  of  it;  of  coui-se,  there  is  some  little  question 
how  best  to  compute  those  things,  because  it  involves  interpolation, 
if  you  get  it  down  to  months;  but  as  a  general  understanding,  it  was 
about  that  rate.  ^ 

After  the  signing  of  the  armistice,  the  course  of  the  cost  of  liv- 
ing has  been— we  have  not  so  very  many  total  prices  of  all  com- 


1800    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 


modities  by  which  to  measure  it,  but  by  using  wholesale  figures  and 
prices  of  food  and  the  studies  we  have,  we  are  inclined  to  think 
there  is  a  slight  drop  in  the  cost  of  living  following  the  armistice 
until  about  March  or  April  of  this  spring.  And  it  seemed,  then, 
to  move  up  slightly  until,  perhaps,  in  June  it  was  a  little  bit  more, 
perhaps,  than  it  was  in  December  or  at  the  period  of  the  armistice. 
Just  what  the  trend  in  the  cost  of  living  has  been  since  June  of 
this  year,  certain  judgments  can  be  made,  although  there  have  been 
no  general  large  studies  made  since  that  time  by  the  Bureau  of  Labor 
Statistics.  But  since  June  until  the  middle  of  September  food  has 
risen  from,  I  believe,  an  index  number  of  180  or  181  to  an  index 
number  of  192,  which  is  an  increase  of  around  8  per  cent  in  food. 
There  is  an  index  number,  I  should  state,  published  monthly  as 
to  food,  so  we  can  keep  tab  on  the  increased  cost  of  living  rather 
easily  by  that  figure.  The  wholesale  price  indexed  shows  something 
of  a  trend  also  of  the  prices,  although  it  fluctuates  somewhat  more 
widely  than  the  retail  figure.  The  wholesale  index  number  of  the 
United  States  Bureau  of  Labor  Statistics  was  207  in  June  and  in 
July  was,  I  believe,  about  217 ;  and  they  tell  me  now  that  for  August 
it  is  226.  I  think  those  are  the  figures  which  the  Bureau  of  Labor 
Statistics  gave  me  to-day.  So  that,  in  so  far  as  the  wholesale  prices 
go  and  the  retail  food  prices  go,  it  looks  as  if,  up  to  the  beginning 
of  September  or  the  late  summer  of  this  year,  there  has  been  quit© 
an  increased  jump  in  the  cost  of  living,  so  conspicuous  as  to  make 
it  comparable  with  the  sums  which  occurred  during  the  war  pe- 
riod ;  so  we  should  have  to  add  on,  therefore,  something  since  June, 
which  was  the  period  of  the  last  general  cost-of-living  survey,  in 
regard  to  the  figures  as  a  whole;  and  you  will  probably  be  inter- 
ested in  knowing  what  the  numbers  are.  They  are  made  by  locali- 
ties, and  usually  tabulated  according  to  cities.  We  began  it  first 
by  using  the  shipbuilding  centers,  and  then  extended  over  to  a  very 
large  number  of  cities,  small  cities  and  cities  in  which,  indeed,  there 
were  no  war  activities. 

And  it  seems  that  up  to  June  in  the  shipbuilding  centers  the  cost 
of  living  has  risen  about  80  per  cent  over  the  prewar  period,  say 
1914.  And  for  the  large  number  of  cities,  including  a  great  many 
smaller  cities  where,  particularly,  there  was  not  any  marked  in- 
crease of  war  activities,  shipbuilaing  and  munition  making,  the  in- 
crease was  somewhat  less.  We  will  say — I  believe  the  figures  in 
the  exhibit  here  are  exactly  70  per  cent.  And  when  the  two  are 
thrown  together — the  populations,  I  believe,  are  about  the  same  in 
each  of  them — they  will  show  an  increase  up  to  June  of  about  75 
per  cent  over  the  prewar  period. 

This  is,  therefore,  simply  an  average  of  the  detail  studies  by 
localities  made  by  the  Bureau  of  Labor  Statistics,  and  I  think  would 
be  the  best  single  number,  if  you  wanted  a  number. 

These  figures  have  been  worked — I  worked  them  up,  not  split- 
ting them  apart  this  way,  and  then  they  have  been  worked  up  in  an 
exhibit  which  Mr.  Lauck  is  introducing  here,  and  they  are  found, 
I  believe,  on  the  first  page  of  the  pamphlet  called  "  Changes  in  the 
Cost  of  Living." 

I  notice  that  in  this  pamphlet  they  figure  the  increased  cost  since 
June  up  to  August,  they  say,  based  on  incomplete  data,  and  they 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1801 

figure  the  increase  has  been  about  three  points,  or  probably  2  per 
cent,  which  I  think  I  would  say  offliand  would  be  a  conservative 
figure.  I  mean,  I  would  be  inclined  to  guess  that  probably  the  cost 
of  living  may  have  risen  up  until  the  1st  of  September  a  little  bit 
more  than  that.  I  think  the  figures  in  the  pamphlet  since  the  1st  of 
June  are  fairly  conservative  figures ;  that  probably  it  is  quite  conceiv- 
able that  the  cost  of  living  may  have  increased  more  than  is  listed 
here,  although  we  have  not,  of*^course,  the  detail  study  upon  which 
to  base  the  result. 

Mr.  Lauck.  If  you  will  refer  to  page  12,  I  would  like  to  have 
your  opinion  as  to  how  this  figure  was  arrived  at  by  the  bureau  which 
prepared  this.  You  will  notice,  on  page  12,  up  to  June  the  cost  of 
living  for  18  shipbuilding  centers  over  June,  1914,  was  relatively  80 
per  cent  increased.  Then  in  other  cities  outside  of  shipbuilding 
centers,  which  of  course  were  more  or  less  congested  and  marked  by 
marked  conditions,  it  was  170  per  cent.  Tlien  the  conference  board 
practically  goes,  if  I  recall  it,  to  about  73  per  cent,  or  something 
about  that.  Anyhow  it  was  considered  fair  to  strike  a  mean  between 
the  abnormal  and  the  normal  at  175  per  cent,  and  this  was  borne  out 
by  all  the  data  which  could  be  secured.  In  other  words,  taking  the 
country  as  a  whole,  irrespective  of  localities,  say  that  it  increased  ap- 
proximately about  76  per  cent  up  to  June  and  80  or  78  per  cent  up 
to  September.  Does  that  seem  a  fair  method  to  you  and  a  conserva- 
tive method? 

Mr.  Ogburn.  Well,  yes.  I  should  think  that  the  combination  of 
these  two  extremes  of  prices  here  would  depend  to  a  certain  extent 
i.pon  the  population  area  they  represent,  and  I  understand  these 
larger  cities — the  shipbuilding  and  abnormal  areas,  as  you  speak  of 
them — represent  a  population  about  equal  to  the  other  cities ;  which 
would  seem  to  justify  our  taking  the  simple  average. 

Mr.  Lauck.  Yes;  they  represent  a  population  of  about  20,000,000, 
if  I  recall. 

Mr.  Ogburn.  Yes.  There  may  be  some  particular  interest  to  the 
commission  in  the  increase  in  the  relative  commodities  of  a  family 
budget.  This  has  been  worked  out  and  is  found  on  page  16  of  the 
pamphlet  which  you  hold  in  your  hand. 

In  Table  5  for  the  shipbuilding  centers,  one  gets  a  fair  relative 
idea,  with  perhaps  a  slight  exaggeration,  of  the  rent  figure,  food 
having  increased  71  per  cent,  clothing  a  good  deal  more,  128  per 
cent — that  is,  128  per  cent  over  1914;  housing,  about  17  per  cent; 
fuel  and  light,  about  45  per  cent;  furniture  and  furnishings,  most 
of  all — 130  per  cent ;  and  miscellaneous  items,  71  per  cent.  So  that 
vou  can  see  that  the  various  elements  going  to  make  up  a  household 
budget  have  varied  somewhat  in  their  relative  increase.  I  should 
say,  on  the  whole,  that  the  variation  as  between  cities  is  somewhat 
less  in  the  matter  of  food  and  clothing  and  is  somewhat  greater  in 
the  matter  of  rent.  Cities  will  vary  more  in  that  matter,  and  there 
is  also  some  variation  in  the  cities  as  regards  fuel  and  light,  particu- 
larly of  light. 

Mr.  Lauck.  You  can  get  a  differential  between  cities,  if  anyone 
was  interested,  by  w  orking  out  these  differences,  could  you  not  ? 

Mr.  Ogburn.  Yes;  a  sufficiently  large  number  of  cities  are  listed 
by  the  Bureau  of  Labor  Statistics  to  make  this  figure  applicable  to 


I 


1802    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

ulniost  any  particular  locality  desired.  The  reason  of  making  this 
so  extended  was  particularly  due  to  the  needs  of  the  War  Labor 
I'oard,  I  may  say,  where  adjustments  were  made  in  various  locali- 
ties and  it  seemed  desirable  to  have  particular  localities  studied; 
«nd  therefore  we  have  a  rather  wide  list  of  them. 

The  Chairman.  What  would  happen  to  that  third  column— the 
housing— if  you  had  the  AVashington  rents  in  there? 

Mr.  Ogburn.  Well 

Commissioner  Meeker.  We  may  ha^e  obtained  the  Washington 
rents  so  far  as  they  are  obtainable;  they  show  very  small  increases. 
Tlie  increases  are  in  the  future. 

Mr.  Lauck.  The  general  increase  has  been  about  76  per  cent,  would 
you  say,  up  to  June,  and  about  78  per  cent,  conservatively  speaking, 
up  to  September  ? 

Mr.  Ogburn.  Yes ;  I  usually  think  of  it  as  l>etween  75  and  80  per 
cent.  It  is  questionable  whether  you  can  figure  it  to  the  exact  frac- 
tion of  a  per  cent,  but  I  would  say  for  the  country  as  a  whole  from 
75  to  80  per  cent  would  be  a  fairly  scientific  estimate  of  the  increase. 

Commissioner  Gadsden.  From  June,  1914? 

Mr.  Ogburn.  Well,  yes.  Of  course,  the  average  of  1914  or  the 
close  of  1914. 

Commissioner  Gadsden.  I  mean  the  close  of  1914. 

Mr.  Ogburn.  From  the  prewar  period;  yes. 

Mr.  Lauck.  If  the  commission  does  not  wish  to  ask  any  questions 
as  to  the  cost  of  living,  I  will  now  ask  Mr.  Ogburn  to  take  up  the 
exhibit  on  standards  of  living,  unless  you  have  something  further 
to  say.  We  simply  wanted  to  establish  the  general  increase  in  the 
cost  of  living. 

Mr.  Warren.  Before  you  go  to  that,  I  just  want  to  know  if  ho 
has  explained  how  he  makes  up  his  budget,  or  is  he  going  to  do  that 
later  ^ 

Mr.  Lauck.  I  think  you  had  better  ask  liim  now. 

Mr.  Warren.  I  wondered  what  weight  he  gave  to  the  different 
items  appearing  in  the  budget.     Does  that  appear  in  the  pamphlet? 

Mr.  Ogburn.  No;  it  does  not.  The  weights  were  varied  from  city 
to  city — just  a  little  variation;  but  food,  on  the  whole,  would  run 
around  42  to  43  per  cent,  rents,  perhaps  17  or  18  per  cent,  clothing 
was  15  per  cent,  fuel  and  light  5  or  G  per  cent,  and  the  miscel- 
laneous was  20  per  cent. 

There  would  be  a  slight  variation.  The  weights  were  varied  for 
each  city,  but  they  would  be  approximately  as  indicated.  Those 
weights  are  found  in  the  Labor  Review,  and  I  could  dig  them  up 
for  you  very  easily. 

Mr.  Wariien.  On  the  miscellaneous,  did  you  go  into  the  various 
items  there? 

Mr.  Ogburn.  Yes. 

Mr.  Warren.  For  instance,  street-car  fares ;  hov/  much  weight  was 
given  to  that? 

Mr.  Ogburn.  I  have  forgotten  exactly  what  the  weight  was  for 
street-car  fares,  but  I  think  the  amounts  spent  for  street  car-fares 
for  a  workingman's  family  would  vary,  say,  in  between  $30  and 
$00 — ^somewhere  in  between  there. 

Mr.  Warren.  But  you  did  not  figure  it  in  per  cent? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1803 

Mr.  Ogburn.  Yes.  If  you  put  your  weights  on  the  basis  of  dol- 
lars. If  you  figure  that  as  a  per  cent  of  the  total  budget  it  would 
be  simply  dividing  $1,500,  the  total  budget,  by  $45,  say,  as  the 
amount  spent  for  street  car  fare. 

Mr.  Warren.  That  is  what  you  took  as  your  bnse  in  getting  the 
per  cent  on  the  other  articles,  $1,500? 

Mr.  Ogburn.  Yes.  Well,  it  was,  say,  aix)und  that  figure.  Tliat 
would  vary  from  city  to  city,  too;  but  that  was  determined  by  the 
actual  income  which  the  Bureau  of  Labor  Statistics  found  in  the 
particular  cities,  where  they  collected  the  budgets,  but  it  would  be 
around — maybe  a  little  higher  than  that — ^somewhat  higher. 

Mr.  Warren.  Based  on  actual  experience.  Dr.  Ogburn,  and  not 
on  any  hyj^othetical  basis? 

Mr.  Ogburn.  Yes.  In  regard  to  the  question  of  the  standard  of 
living,  it  has  been  my  custom  in  connection  with  the  wage  adjust- 
ments of  the  War  Labor  Board  to  think  of  the  cost  of  living  in  quite 
two  separate  categories — one  being  the  category  of  the  increase  or 
decrease,  as  the  case  may  be,  in  the  cost  of  living,  and  that  was 
oftentimes  used  by  the  board  in  adjusting  the  increases.  However, 
in  some  cases  it  was  claimed  by  parties  in  dispute  or  in  the  arbitra- 
tion that  it  would  be  unfair  to  adjust  wages  by  the  amount  in  the 
increased  cost  of  living,  although  that  might  be  measured  fairly 
satisfactorily,  for  the  reason  that  in  the  prewar  period  the  living 
as  enjoyed  by  the  workingman's  family  was  inadequate.  That  was 
met  in  a  number  of  disputes  and  is  claimed  by  the  working  people 
quite  frequently. 

Well,  you  see,  if  that  point  is  raised,  it  would  seem  that  the  satis- 
factory way  to  meet  that  is  to  make  some  study  as  to  what  is  an 
adequate  standard  of  living.  That  brings  up  a  question  therefore 
of  a  studj^  of  levels,  or  standards,  of  living  irrespective  of  any  iu- 
creases — just  a  static  concept  of  how  much  does  it  take  to  live. 

Now,  that  question  is,  of  course,  one  of  immense  difficulty  in  deter- 
mining. It  is  one,  however,  which  students  in  economic  and  social 
sciences  have  been  engaged  in  studying  for  a  number  of  years.      * 

In  studying  the  question  of  the  standard  of  living  they  have 
focused  their  attention,  I  should  say,^'ather  largely  on  what  might 
be  called  a  minimum-subsistence  level,  or  a  hare-sui)sistence  level,  as 
it  is  sometimes  spoken  of.  You  can  very  readily  see  tliat  there  will 
be  various  levels  of  livingr  according  to  the  income  which  a  family 
enjoys.  And  so  one  might  conceivably  study  a  level  at  any  particu- 
lar point  in  the  scale.  But  attention  has  been  focused,  I  should  say, 
most  upon  what  is  called  a  I )a re-subsistence  level. 

Tlie  idea  originated  a  number  of  years  ago  on  the  ])aii:  of  social 
reformers  and  statesmen  who  were  interested  in  wliat  they  Ciilled 
setting  a  minimum.  You  find,  for  instance,  in  the  Ljiitecl  States 
that  a  good  many  States  have  set  minimum  wages  in  regard  to  the 
living  of  an  immarried  woman;  and  you  will  find  in  some  of  the 
European  countries,  and  particularly  Australia  and  Xew  Zealand, 
that  the  States  have  set  a  minimum  stiindard  of  living  for  a  family^ 
as  well  as  for  an  immarried  woman. 

These  mininmm  ideas  have  been  considered  quite  a  little  by  charity 
organization  societies  and  relief  agencies  in  our  larger  cities,  settle- 
ment-house workers,  and  so  on.    The  idea  seems  to  be  spreading,  and 


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1804     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

according  to  prediction,  I  would  think  bids  fair  to  become  quite  an 
imi)ortant  point  in  our  national  policy.  The  British  labor  move- 
ment seems  to  be  very  much  concerned  with  this  same  idea,  which 
they  phrase  as  a  "national  minimum,"  and  the  platform  of  their  party 
states  it  this  way:  "That  there  shall  be  a  line  drawn  across  society 
below  which  no  familv  shall  be  permitted  to  live."  The  idea,  as  we 
express  it  in  America,  is  sometimes  phrased  this  way:  That  the 
minimum  standard  of  living,  or  the  minimum-bare-subsistence  level, 
is  a  level  below  which  when  wage  earners  fall  in  a  particular  indus- 
trv,  that  industrv  is  said  to  be  parasitic; "  that  is  to  say,  the  theory 
or  policy  of  the  minimum  wage  is  that  the  States  should  not  permit 
an  industry  to  pay  less  than  a  living  wage.  I  mean  to  say,  if  it  goes 
into  effect,  that  thev  should  not  permit  an  industry  to  pay  a  less  than 
livino'  wage.  That  has  gone  into  effect  so  far  as  unmarried  women 
go  but  that  is  the  theorv,  that  the  State  would  be  justified  m  using 
its' authority  as  a  Stat«  in  forcing  an  industry  to  pay  these  wage^  or 
force  it  to  clesist.  As  I  say,  they  have  not  by  use  of  the  State  author- 
ity applied  it  to  the  United  States  to  families. 

That  is  the  general  position  by  which  the  minimum,  wage  concept 
comes  into  our  political  and  social  life.  Now,  a  great  deal  would 
naturally  center  around  the  question  of  the  measurement  of  this 
point.  That  is  to  say,  how  can  you  determine  what  this  point  is? 
Naturally,  minimum-wage  legislation  and  studies  will  be  successful 
to  the  extent  that  they  are  able  to  scientifically  determine  a  point  or 
a  standard ;  and  by  a  point  or  a  standard  I  mean  to  set  some  point 
in  which  there  is  some  scientific  validity.  For  instance,  one  might 
state  that  the  temperature  of  a  room  should  be  kept  at  78°  in  the 
winter.  One  would  think  of  that  78°  therefore  as  bein^  accepted. 
It  is  quite  conceivable  that  there  might  be  some  individuals  who 
might  thrive  better  when  the  temperature  is  less  than  78°  and  others 
who  might  require  more;  but  there  is  sufficient  evidence,  we  might 
sav,  from  phvsiology  to  justify  this  particular  figure  of  78.  Well, 
that  is  the  dream  or  hope  which  students  of  this  question  of  minimum 
wages  have.  They  want  to  set  a  point  which  will  be  somewhat 
similar  to  this  temperature  figure  which  would  be  considered  as  a 

standard.  •  .      i  .v 

Now,  the  question  is.  How  do  they  measure  it ;  how  can  they  say 
that  one  thing  is  a  standard  or  one  particular  point  is  a  standard  ? 
Well,  the  approach  centers  around  the  question  of  what  you  call 
subsistence.    And  it  is  a  subsistence  of  a  fami^^^ 

Now,  there  are  a  good  many  indexes  of  what  you  would  call  sub- 
sistence. One  very  important  standard  of  subsistence  for  the  family 
would  be  measured— that  is,  one  index  would  be  the  infant  mortality. 
You  can  very  readily  see  how  that  would  be  a  measure  of  the  subsist- 
ence of  a  family,  because  if  infants  die  rapidly  or  frequently  one 
might  therefore  say  that  a  family  is  not  existing  at  that  particular 

point.  ... 

Now,  in  regard  to  that  one  concept  as  a  test  of  a  minimum  wage, 
there  have  been  a  number  of  studies  made  particularly  by  the  Chil- 
dren's Bureau  Department  of  the  Bureau  of  Labor  here  in  Washing- 
ton.  Their  first  study  of  this  sort  was  in  Johnstown,  Pa.,  where 
they  showed— this  was  in  the  prewar  period — that  where  the  father 
earned  $10  a  week  or  less  the  infant  death  rate  was  256;  and  by  in- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT.    1805 

fant  death  rate  they  mean  the  number  of  infants  out  of  a  thousand 
who  die  before  they  get  to  be  1  year  old.  In  other  words,  that  is,  one 
in  every  four  die.  On  the  other  hand,  they  found,  where  the  father 
earned  $2;)  a  week  or  more,  that  the  death  rate  for  infants  was  84. 
And  they  have  since  extended  these  studies  to  some  8  or  10  cities,  I 
believe,  and  they  find  in  general  that  where  the  father  earned  in 
these  prewar  days,  say  $1,250,  which  is  equivalent  to-day  to  about 
$2,200,  the  death  rate  is  about  65  out  of  1,000  for  infants  the  first 
year;  whereas,  when  the  father  earns,  say  $550,  which  is  equivalent 
to  $950  now,  more  or  less,  that  as  many  as  150  will  die  before  they 
reach  the  first  year. 

I  was  talking  to  a  young  woman  working  in  the  Children's  Bureau 
the  other  day  who  was  working  on  this  point  of  trying  to  plot  on  a 
curve  this  infant  death  rate;  and  she  had  figures  which  led  her  to 
think  that  the  infant  death  rate  would  decrease  at  a  certain  point  and 
then  go  straight.  For  instance,  if  you  can  get  a  curve  running  up  like 
that  and  then  breaking,  that  point  right  there  would  be  a  good  index 
of  the  subsistence  level.  This  study  has  not  been  finished  on  account 
of  the  fact  that  for  the  higher  incomes  there  is  not  sufficient  data 
gathered  from  these  cities  to  make  a  sufficient  number  of  studies  to 
get  a  stable  index  number,  but  that,  I  think,  gives  you  one  idea  of  the 
subsistence  level,  and  these  infantile  death  rates  are  the  things  which 
help  one  to  determine  a  particular  point. 

Another  standard  which  one  has  m  mind  in  setting  a  bare-sub- 
sistence level  centers  around  the  question  of  nutrition.  There  have 
been  a  good  many  studies  made  in  the  schools  of  our  cities  on  the 
question  of  nutrition,  and  a  particularly  noteworthy  one,  on  a  rather 
large  scale,  was  the  one  made  a  few  years  ago  in  New  York  City 
where  they  estimated  20  per  cent,  I  believe,  basing  it  on  100,000  chil- 
dren who  suffered  from  malnutrition.  That  is  about  1  in  5.  Of 
course,  it  is  not  claimed  by  students  of  malnutrition  that  malnutri- 
tion is  the  economic  basis  or  minimum,  because  it  is  quite  conceiv- 
able it  may  be  hereditary,  or  there  may  be  psychological  factors; 
but,  on  the  other  hand,  it  is  admitted  that  there  is  quite  a  large  factor 
in  malnutrition. 

The  Chairmax.  Have  those  figures  as  to  nutrition  in  New  York 
been  disputed? 

Mr.  Ogburn.  I  do  not  think  thej^  have ;  at  least  I  am  not  familiar 
with  it.  I  notice  that  in  a  recent  pamphlet  put  out  by  the  Children's 
Bureau  those  are  the  ones  chosen,  I  believe,  as  most  representative, 
or  as  they  are  the  oldest  citations.  I  think  there  is  considerable 
dispute  as  to  what  is  the  cause  of  malnutrition,  but  I  think  the  fact 
is  that  there  are  a  large  number  of  children  suffering  from  mal- 
nutrition in  that  city. 

Another  point  which  helps  us  locate  the  level  of  living  has  been 
suggested  by  the  experience  in  drafting  men  for  the  United  States 
Army.  In  the  draft  of  men  between  21  and  31,  which  was  supposed 
to  be  one  of  the  healthiest  periods  of  life,  at  least  as  measured  by 
the  death  rates — the  death  rates  are,  perhaps,  the  lowest  at  that 
time — in  the  Provost  Marshal's  general  report  he  shows  that  for 
the  United  States  as  a  whole,  only  70  out  of  every  100  chosen  were 
accepted  as  qualified  physically  for  general  military  duty. 


:f 


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Ml 


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1806     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

So,  if  30  out  of  100,  or  3  out  of  10,  are  rejected,  it  is  certainly  a 
matter  for  coivsideration.  It  seems  to  me  in  the  study  of  this  theory 
of  a  minimum  wage  that  that  has  a  bearing. 

You  may  ask  what  bearing  this  elimination  from  th^  draft  has 
on  the  minimum  subsistence.  It  is  associated  with  the  same  eco- 
nomic cause.  As  I  say,  the  economic  cause  would  not  account  for 
all  disbarments  on  the  draft,  because  of  various  physical  ailments 
which  may  not  be  due  to  economic  causes.  On  the  other  liand,  how- 
ever, a  very  large  number  of  them,  i)erhaps  one-half,  may  be  said  to 
)ye  attributable  to  economic  causes.  That  is  to  say,  that  if  the  eco- 
nomic welfare  were  somewhat  improved  these  would  not  exist. 

Commissioner  Gadsden.  Do  you  supix)se  tliat,  on  that  particular 
item,  they  analyzed  the  rejections  to  find  out  what  percentage  of 
them  came  from  the  class  of  people  who  were  likely  to  be  suffering 
from  want  of  sufficient  nutrition?  Did  they  go  far  enough  to  do 
that? 

Mr.  Ogburn.  I  do  not  believe  they  could  do  that.  I  do  not  think 
they  took  any  statistics  of  that  kind. 

Commissioner  (tadsden.  I  should  think  that  would  be  a  very  im- 
reliable  generalization. 

Mr.  Ogburn.  I  do  not  believe  that  in  examining  men  for  the  draft 
they  did  that. 

Commissioner  Gadsden.  I  do  not,  either. 

Mr.  Ogburn.  The  only  classification  which  thev  made  which 
seemed  to  be  especially  significant  was  the  classification  as  between 
the  city  and  the  country.  I  believe,  if  I  am  correct,  that  there  were 
about  one-quarter  more  rejections  from  the  city  than  there  were 
from  the  rural  districts ;  and  that  has  a  possible  bearing  u})on  the 
nutrition  question,  I  think. 

I  think  that  that  point  is  considered,  or  at  least  it  was  suggested, 
I  am  told,  by  Lloyd-G^orge,  who  is  rejiorted  as  having  made  the 
i^mark  that  if  they  had  had  a  better  mininmm  wage  in  England 
they  would  have  had  1,000,000  more  men  with  which  to  defend  the 
country.  So  that  I  should  say  that  would  be  another  thing  that 
would  help  to  delineate  this  point  of  what  we  call  the  standard  of 
living. 

Another  thing  that  is,  to  a  certain  extent,  associated  with  it,  is  what 
you  might  call  housing  conditions.  Housing  has  a  good  deal  to  do 
with  health,  particularly  in  questions  of  overcrowding;  and  the  Chil- 
dren's Bureau  has  nuule  certain  studies  of  housing  in  i^gard  to  rents. 

I  have  made  a  note  of  some  of  these  here  which  I  can  quote.  I  do 
not  hold  them  right  in  mind  at  the  present  time,  but  I  remember  one 
study  which  the  Children's  Bureau  made  before  the  war,  in  Man- 
chester, N.  H.,  in  which  tliey  showed  that,  where  the  rent  of  a  house 
was  $7.50,  in  this  prewar  period,  the  death  rate  of  infants  was  211 ; 
when  the  rent  was  $7.50  to  $12.50— this  is,  per  month— the  infant 
death  rate  was  172  per  tliousahd;  and  when  the  rent  was  $12.50  to 
$13.50,  the  death  rate  of  infants  was  15G;  and  where  it  was  $17.50 
and  over,  the  death  rate  was  approximately  1  in  10,  or  100  to  the 
thousand. 

Thus,  you  see  that  there  seems  to  be  in  this  study  a  correlation 
between  the  amount  of  rent  paid  and  the  infantile  death  rate.  It 
dro2>s  like  this:  211, 172, 15C  and  100. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1807 

They  made  some  studies  as  regards  the  number  of  pei^sons  per 
room.  For  instance,  when  there  was  less  than  one  jx^rson  per  room 
in  this  particular  town,  they  found  the  death  rate  of  infants  to  be 
123  per  thousand;  where  the  number  of  persons  i>er  room  was  be- 
tween one  and  two,  the  death  rate  for  infants  moved  up  to  177,  and 
where  there  were  over  two  persons  to  the  room  the  death  rate  went 
up  to  262. 

There  is  just  one  other  point  on  that  I  might  si>eak  of  in  connec- 
tion with  the  question  of  what  are  the  criteria  for  determining  this 
particular  level  of  living,  and  that  centers  around  the  question  of 
food.  I  referred  indirectly  to  it  in  speaking  of  malnutrition  a  whilo 
ago ;  but  a  diet  is  considered  to  be  a  highly  important  factor  in  main- 
taining a  general  well-being.  Of  course,  it  is  essential  in  what  we 
call  existence.  The  most  convenient  and  common  index  of  the  diet 
value  is  an  energy  unit  called  the  calorie.  In  other  words,  to  keep 
the  human  machine  going,  it  has  to  be  fed  fuel,  just  as  an  engine  will 
have  to  bo  fed  coal  to  make  the  machinery-  turn  around;  and  this 
food  generates  these  fuel  units  called  calories. 

The  question  arises.  What  should  be  the  supply  of  this  energy 
value  to  a  man  ? 

It  has  usually  been  set  for  a  man  at  moderately  hard  mui^cular 
work  as  being  3,500  calories  per  man  per  day.  This  is  the  standard, 
I  believe,  set  by  Atwater,  and  it  is  the  standard  employed,  I  think, 
by  the  Department  of  Agriculture  of  the  United  States  Government. 

In  that  connection,  I  should  like  to  say  something  in  regard  to  what 
the  Nation  considered  was  the  necessary  fuel  value  for  a  man  in  the 
training  camps. 

There  have  been  a  good  many  figures  quoted  as  to  the  rations  of 
food,  but  the  actual  rations  of  food  are  shown  to  be  somewhat  unre- 
liable as  figures,  because  there  was  considerable  waste  in  the  matter. 

So  a  special  study  was  made  of  the  camps  in  the  United  States 
where  the  soldiers  Avere  in  training,  and  these  experts  measured  over 
a  period  of  a  week's  time,  I  believe,  the  actual  amount  of  food  actually 
consumed ;  that  is,  going  into  the  mouth  and  into  the  system. 

As  a  result  of  this  study,  which  has  been  recently  published  in  the 
Journal  of  Public  Health,  it  was  shown  that  during  the  winter 
months  3,900  calories  were  actually  consumed  by  the  soldier  in  train- 
ing in  the  camps,  and  I  think  in  the  summer  time  it  was  somewhat 
less,  perhaps  about  200  calories  less,  making  3,700. 

I  think,  therefore,  one  may  be  justified  in  saying,  insofar  as  the 
life  of  the  soldier  goes,  pcrliaps  3,700  to  3,900  calories  would  be  a 
good  figure. 

There  has  been  recently  a  reaction  somewhat  against  the  calorie 
standard  on  this  theory :  That  while  food  is  a  source  of  energy,  that 
is  not  necessarily  the  full  value  of  food.  Food  has  other  values, 
other  than  furnishing  energy.  It  has  a  certain  repair  value.  When 
tissues  are  burned  up,  through  muscular  use,  food  replenishes  those 
tissues.  This  replenishment  of  the  tissues  requires  proteins  and 
requires  various  chemicals,  particularly  phosphates;  and  blood  is 
supposed  to  require  iron.  There  is  also  a  good  deal  of  calcium 
needed  for  the  bones.  So  that  one  thinlfs,  therefore,  of  a  well-bal- 
anced diet  as  perhaps  having  from  80  to  100  grams  of  protein, 
perhaps  100  to  125  grams  of  fat,  perhaps  450  to  500  grams  of  carbo- 
hydrates, 0.7  of  a  gram  of  calcium,  perhaps  about  0.015  of  a  gram 


1808    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

of  iron,  and^  say,  1.3  grams  of  phosphate,  certain  proportions  of  ash, 
and  so  on. 

They  get  these  out  of  various  foods.  All  of  these  chemicals  and 
minerals  are  not  to  be  found  in  any  one  food,  but  in  various  ones. 

There  are  also  certain  other  undetermined  chemical  constituents 
which  we  know  a  man  needs,  but  which  have  not  yet  been  ascer- 
tained. 

Suffice  it  to  say,  however,  that  the  general  rule  or  method  which 
they  apply  is  that  when  a  diet  for  a  man  contains  3,500  calories  a 
day,  It  is,  on  the  average,  an  adequately  balanced  diet,  necessarily 
so;  and  one  could  conceivably  get  a  proper  balance  of  these  chemi- 
cals without  haying  3,500  calories;  but  I  imagine  a  domestic  expert, 
a  home-economics  expert,  could  balance  up  a  dietary  properly  with 
less  than  3,500,  but  the  ordinary  housewife,  not  particularly  trained 
m  these  matters,  would  probably,  on  the  average,  not  get  an  ade- 
quately balanced  dietary  unless  she  computed  it  on  a  basis  sufficiently 
liberal  to  furnish  3,500  calories  per  man  per  day. 

In  this  study  which  the  Bureau  of  Labor  Statistics  has  made 
they  went  to  considerable  pains  to  get  good  food  figures,  and  they 
went  to  a  large  cost  to  get  these  things  analyzed,  and  this  is  a  point 
which  I  am  about  to  mention  now,  which  I  think  is  very  important 
in  coming  to  this  question  of  a  satisfactory  living  standard. 

The  bureau  took  about  300  dietaries,  wliich  yielded  3,500  calories 
per  man  per  day;  that  is,  they  analyzed  these  dietiiries,  and  then 
they  added  up  the  pric«  of  them  themselves  for  the  year  1918 
appi-oximately. 

They  found  that  in  1918  for  a  famil3:  of  3.35  adult  male,  his  wife, 
and  children— children  being  split  up  in  fractions,  according  to  the 
amount  they  consumed— that  $575  was  required  to  purchase  for  this 
size  family. 

Food  has  probably  increavsed  since  that  time  about  15  per  cent 
which  would  bring  the  cost  of  3,500  calories  for  this  size  family 
up  to  about  $650  or  $660.  -^ 

This  particular  unit  of  3.35  is  somewhat  smaller  than  the  unit 
customarily  used  by  students  for  measuring  the  family.  They  come 
nearer  using  one  of  3.8  or  3.9.  If  you  bring  it  up  to*  that  figure,  it 
will  bring  the  cost  of  an  adequate  dietai-y  up  then  as  found  m,  say, 
12  cities  scattered  in  representative  sections  of  the  ITnited  States,  to 
between  $700  and  $750  at  the  present  time;  and  I  think  that  is  a 
figure  which  is  very  much  worth  while  considering  because  of  the 
big  importance  which  food  bears  in  the  budget,  and  which  the  other 
items  bear  in  their  relation  to  food. 

I  believe  the  commission  is  fairly  fortunate  in  being  able  to  get  a 
figure  like  this,  because  if  this  study  had  not  been  made  it  is  very 
questionable  whether  you  could  have  had  any  such  good  or  accurate 
figure  as  this  one.  I  therefore  set  a  good  deal  of  stock  by  this  par- 
ticular point,  that  it  will  take,  on  the  average,  for  the  United  States 
m  these  cities,  from  $700  to  $750  for  a  man,  his  wife,  and  three 
children  of  the  conventional  age  stated. 

Mr.  Lauck.  That  is  just  for  food? 

Mr.  Ogburn.  That  is  just  for  food. 

Mr.  Lauck.  And  food  is  about  what  proportion  of  the  total  family 
expenditure  ?  ^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1809 

Mr.  Ogburn.  At  the  minimum  level  of  bare  subsistence  it  has  been 
supposed  to  center  around,  well,  from  30  to  45  per  cent.  If  it  were 
50  per  cent  then  the  budget  would  be  $1,500,  and  if  it  w^ere  more  than 
50  per  cent  it  would  run  up  to,  say.  $1,600  or  $1,700. 

Mr.  Lauck.  That  would  be  on  t.ie  bare-subsistence  budget? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  Your  conclusion  from  that  would  be,  if  I  may  inter- 
lupt  you  for  a  moment,  that  to  cover  adequately  just  the  physical 
needs  of  a  man  with  an  average  family  he  would  require  from  $700 
to  $775  for  food  alone,  which  would  represent,  if  he  had  relative  pro- 
portions in  other  directions,  an  income  of  from  $1,500  to  $1,700?  You 
might  say  it  would  be  necessary  for  him  to  earn  that  to  maintain 
a  subsistence  standard  of  living? 

Mr.  Ogburn.  Computed  by  that  one  index ;  yes. 

Mr.  I^ucK.  Just  to  cover  food,  shelter,  and  clothing? 

Mr.  Ogburn.  Yes;  that  has  been  one  of  the  ways  by  wliich  they 
have  measured  it. 

I  have  used  three  or  four  other  different  ways  by  Avhich  to  measure 
it,  but  using  that  one  you  would  come  to  somewhat  the  conclusion 
stated. 

Commissioner  Sweet.  Do  the  others  bring  about  somewhat  that 
same  result  ? 

Mr.  Ogbi^rn.  Yes.  I  worked  on  this  for  the  National  War  Labor 
Board  in  June,  1918,  to  some  extent,  and  I  used  about  four  or  ^y^ 
different  methods.  At  that  time  I  set  the  bare  subsistence  at  about 
$1,380  and  some  odd— between  $1,350  and  $1,400  at  that  time— and 
I  did  it  by  using  this  food  quotation,  this  method. 

Then  I  took  three  budgets,  which  are  somewhat  well  recognized 
and  which  authorities  have  accepted.  I  took  Prof.  Chapin's  budget, 
made  in  New  York  in  1907,  a  very  careful  study.  I  took  the  New 
York  Board  of  Estimate  budget,  drawn  up  by  the  city  government 
for  its  own  employees,  and  I  took  a  budget  made  by  the  New  York 
Factory  Investigating  Commission,  a  legislative  commission.  I  took 
each  of  those  budgets,  and  considering  the  increases  in  the  cost  of 
living,  brought  them  up  to  date,  so  to  speak,  and,  with  the  exception 
of  one,  they  came  to  between  $1,450  and  $1,500.  The  New  York 
Factory  Investigating  Commission  came  to  $1,320  and  some  odd  dol- 
lars,* but  that  budget  was  considerably  inadequate  in  some  of  the 
sundries  or  miscellaneous  items.  It  left  out  a  good  many  things 
w^hich  a  family  would  have  to  have  in  order  to  live. 

So  that  I  came  to  the  conclusion  at  that  time  that  what  I  would 
call  a  fair  subsistence,  which  would  be  really  a  bare  physical  sub- 
sistence— and  it  would  be  very  conservative;  it  would  not  be  an  exair- 
geration  at  all — would,  at  that  time,  run  between  $1,350  and  $1,400, 
judged  by  these  four  or  five  different  standards. 

The  Chairman.  What  is  included  in  your  item,  "bare  subsist- 
ence ?  "    What  general  factors  ? 

Mr.  Ogburn.  Wliat  were  the  other  items  of  the  budget? 

The  Chairman.  For  bare  subsistence. 

Mr.  Lauck.  If  I  may  interrupt,  on  page  8  of  the  standard  of  liv- 
ing that  budget  is  reproduced. 

Commissioner  Sweet.  It  covers  house  rent,  clothing,  and  so  on  % 

The  Chairman.  Yes. 


160643"— 20— VOL  2- 


-52 


J^w^g 


1810    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Ojburn.  Yes ;  fuel,  rent,  a  little  saving,  and  so  on. 

Mr.  Laitck.  On  page  8  you  will  find  the  different  it^nis. 

Mr.  Warren.  Did  you  say  what  date  that  was? 

Mr.  Ogburx.  June,  1918.'  That  budget  I  find  drawn  uj)  on  pjige  8. 

Connnissioner  Sweet.  Does  that  allow  anything  for  street-car  fanvs 
and  matters  like  that? 

Mr.  Ogburx.  Yes. 

Commissioner  Gaixs»en.  $40. 

Mr.  Ogburn.  I  put  down  a  fairly  liberal  estimate  for  street -car 
fares;  probably  a  little  more  than  tlie  average  spent. 

Commissioner  Sw^-iet.  And  schoolbooks? 

Mr.  Ogburn.  Yes;  I  put  down  something  for  that.  Of  course, 
that  will  vary  in  different  cities.  There  are  some  cities  that  furnisli 
schoolbooks  iree,  and  there  are  others  that  <lo  not. 

I  may  say  to  you  that  this  budget  which,  as  I  say,  was  drawn  up 
in  the  summer  of  1918,  in  June — when  I  drew^  this  up,  I  had  the  l^ene- 
fit ,  of  course,  of  certain  studies  of  workingnien's  families;  I  had  the 
benefit  of  the  Bureau  of  Labor  Statistics  studies  in  shipbuilding  cen- 
ters. 

Since  that  time — that  is  just  al)out  a  month  ago — I  have  taken 
the  recent  results  made  in  1918,  actually,  by  the  Bui-eaii  of  Labor 
Statistics,  and  I  have  tabulated  what  a  family  with  an  income  of  ap- 
I)roximately  $150  spent,  as  based  upon  those  recent  studies,  and  it 
coincided  with  really  surprising  accuracy  to  the  budget  which  I  have 
set  forth  here.  Thei*e  were  some  differences.  I  had  put  down  a 
little  larger  item  for  food  than  they  actually  consumed. 

You  understand  when  you  set  a  standard  budget,  you  do  not  neces- 
sarily make  it  an  actual  budget.  I  therefore  allowed  a  little  bit 
more  for  food  than  they  spent,  and  I  allowed  a  little  bit  more 
for  medicine,  sickness,  than  was  actually  spent,  and  a  little  bit  more 
for  car  fare  than  was  actually  spent  by  the  family  in  1918. 

Commissioner  Mj^eker.  You  mean  families  that  had  an  expendi- 
ture of  approximately  $1,350? 

Mr.  Ogden.  Yes. 

Commissioner  Meeker.  That  consisted  of  husband,  wife,  and  ihvQe 
children  ? 

Mr.  Ogbubx.  Yes. 

Commissioner  Meeker.  Of  2,  5,  and  11  years? 

Mr.  Ogburn.  Yes.  But  the  fact  that  your  figui^es,  actually  col- 
lected in  1918,  correspond  with  the  exception  of  those  few  points 
fairly  closely  lends  considerable  confidence  to  this  particular  budget 
as  a  standard  budget. 

The  Chairman.  You  are  a  little  bit  short  on  religion  and  laundry, 
are  you  not? 

Mr.  Ogburn.  I  think,  as  a  matter  of  fact,  I  may  be  a  little  generous 
on  i-eligion,  as  compared  with  the  actual  figures  spent. 

Commissioner  Gadsden.  I  do  not  see  why  you  combined  fuel  and 
light  on  this.     I  think  most  of  that  is  fuel,  not  light. 

Mr.  Ogburn.  It  is  almost  impossible  to  sepai^te  those.  Tliey  will 
bum  gas  for  light  and  they  will  burn  gas  for  cooking.  And  you 
can  not  tell  how  much  gas  they  use  for  light  and  how  much  they  use 
for  cooking.  We  would  like  to  sepai-ate  it  but  it  is  hai^dly  practi- 
cable to  do  it. 


TROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION,    1811 

Commissioner  Gadsden.  I  was  thinking  of  coal  that  they  use  in 
the  northern  climates.  They  do  not  use  much  gas  for  cooking.  They 
heat  the  house  by  coal. 

Mr.  Ogburn.  Then  in  that  connection  the  point  might  be  raised 
as  to  how  much  of  the  coal  was  used  for  heating  and  how  much  was 
used  for  cooking.  They  warm  themselves  around  the  cooking  stove. 
It  is  almost  impossible  to  separate  those  items. 

Mr.  Warren.  Street-car  fares  are  rather  less  than  3  per  cent  of 
the  total — on  page  8  ? 

Mr.  Ogburn.  Yes. 

Mr.  Warren.  As  I  understood  you,  that  is  rather  more  than  you 
found  the  actual  expenditures  to  be? 

Mr.  Ogburn.  I  think  the  average  street-car  fare  as  given  here  may 
be  a  little  high  for  what  was  actually  spent  on  the  average. 

Mr.  Lauck.  That  covers,  does  it,  just  the  head  of  the  family  going 
to  and  returning  from  work,  and  possibly  one  of  the  children  going 
to  school,  or  something  like  that? 

Mr.  Ogbut?n.  Yes.  That  is  a  low  level.  That  is  what  we  call  a  car 
fare  at  a  low  level. 

Mr.  Lauck.  This  budget  in  June,  1918 — this  represents  a  bare 
level  of  physical  existence,  you  say — ^the  cost  of  living  has  increased 
about  12  per  cent  since  that  time,  has  it  not,  or  more  than  that — since 
June,  1918  ? 

Mr.  Ogburn.  Yes.    It  has  increased  just  about  that  figure. 

Mr.  Lauck.  Then  that  would  amount  to  $166 ;  and  adding  that  to 
the  $1,386  would  require  an  outlay  of  $1,552  on  the  basis  of  your 
estimate  there  at  the  present  time  to  maintain  a  subsistence  level  ? 

Mr?  Ogburn.  Yes ;  I  think  you  can  pretty  well  substantiate  to-day 
the  fact  that  it  will  take  between  $1,550  and  $1,600  to  maintain  the 
bare  subsistence  level  to-day.    I  believe  so. 

I  may  say  that  there  was  a  recent  study  made — I  think  I  am  per- 
mitted to  quote  this  study — by  the  Bureau  of  Municipal  Research 
in  Philadelphia.  The  study  is  to  be  published  by  MacMillan  &  Co. 
While  it  is  not  out  of  press  yet,  I  have  had  the  manuscript  and  have 
been  authorized  by  them  to  quot«  their  figures,  and  their  figure  runs 
around  $1,600.  I  think  their  budget  allowance  was  perhaps  a  little 
bit  more  liberal  than  mine  here. 

Mr.  Lauck.  That  is  bare  physical  subsistence? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  What  is  the  next  level  about  that?  What  do  vou  call 
that  ? 

Mr.  Ogburn.  I  think  that  perhaps  I  ought  to  say  I  have  always 
found  some  confusion  when  I  speak  about  budgets,  unless  it  is  borne 
in  mind  that  there  may  be,  conceivabl}',  various  levels  of  budgets. 
I  mention  this  one,  because  most  of  the  work  has  been  done  it;  but 
there  are,  I  think — and  it  must  be  borne  in  mind — various  other 
levels. 

I  think  of  one  level  being  under  this  which  is  customarily  called 
the  "  pauper  level,''  and  another  term  is  the  '•  charity  level.''  These  are 
two  different  levels — the  charity  level  being  inadequate  in  sundries, 
aiKl  the  pauper  level  where  one  gets  in  debt,  and  so  foilli. 

There  have  been  levels  differentiated  above  this  level  here  which 
have  been  variously  called — the  first  one  that  I  knew  about,  or  one 


1812     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

of  the  most  important  was  drawn  up  by  the  faculty  of  economics 
and  sociology  of  the  University  of  Washington  and  accepted  by  the 
Seattle  Street  Eailway  Arbitration  Commission,  that  was  then  sit- 
ting on  a  strike,  and  this  was  drawn  up  and  called,  at  that  time,  a 
minimum-comfort  budget. 

Mr.  Lauck.  If  I  may  interrupt  again — that  is  on  page  30, 1  think. 

Mr.  Ogburn.  In  this  pamphlet. 

Mr.  Lauck.  Yes. 

Mr.  Ogburn.  That  particular  budget  was  drawn  up  in  1917  and 
is  found  on  page  30,  and  comes  to  about  $1,500  at  that  time.  That 
is  a  budget  which  is  somewhat  above  what  we  call  the  bare-sub- 
sistence level. 

Since  that  budget  was  drawn  up  and  discussed  there  have  been 
various  other  individuals  who  have  drawn  up  this  budget  and  dis- 
cussed it  at  this  level,  particularly  Jessica  tiexotto,  an  authority 
on  this  matter,  and  at  the  University  of  California  a  study  of  a 
level  somewhat  above  this. 

The  fact  that  there  seems  to  be  considerable  pressure  for  delinea- 
tion and  description  of  a  level  above  what  we  call  the  bare-sub- 
sistence level  led  me  to  work  on  this  thing  in  the  summer,  June,  1918, 
and  I  drew  up  a  budget  for  the  War  Labor  Board  which  I  called 
the  minimum-comfort  budget,  which  at  that  time  came  to  about 
$1,700,  or  a  little  more. 

Mr.  Lauck.  You  used  that  in  the  Packers'  case,  did  you  not  ? 

Mr.  Ogburn.  Yes;  I  introduced  that  budget. 

Mr.  Lauck.  We  have  a  reproduction  of  it,  or  the  bureau  has, 
rather.    It  is  at  page  13. 

Mr.  Warren.  That  was  the  summer  of  1918? 

Mr.  Ogburn.  1918. 

Mr.  Warren.  The  summer  of  1918  ? 

Mr.  Ogburn.  June. 

Mr.  Lauck.  Will  you  explain  that  budget.  Prof.  Ogburn? 

Mr.  Ogburn.  This  budget  which  we  are  now  discussing  is  sup- 
posed to  delineate  a  level  above  what  we  call  the  minimum  sub- 
sistence, and  is  variously  called  the  minimum  health  and  decency,  or 
the  minimum  comfort,  or  the  minimum  health  and  comfort.  I  shall 
refer  to  it  as  the  minimum  comfort  budget.  It  is  somewhat  more 
liberal  in  food,  although  the  food  in  the  two  budgets  does  not  vary 
so  very  much.  The  rent  figure  is  somewhat  more  liberal.  I  par- 
ticularly set  down  there  a  larger  item  for  insurance  and  savings. 
That  figure  of  insurance  and  savings  is  one  very  debatable  as  to 
what  should  be  set  down.  I  have  set  down  a  health  figure  nearly 
the  same  as  in  the  minimum  budget.  I  have  given  somewhat  more 
in  clothing,  because  it  does  seem  to  me  that  comfort,  social  position, 
and  so  on,  center  around  rent  and  clothing. 

The  Chairman.  Is  it  convenient  to  you  to  stop  at  this  time.  Pro- 
fessor ? 

Mr.  Ogburn.  Yes. 

The  Chairman.  And  we  will  convene  again  at  8  o'clock  to-night. 

(Whereupon,  at  5  o'clock  p.  m.,  a  recess  was  taken  until -8 
o'clock  p.  m.)  I 


i 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1813 

EVENING   SESSION, 

STATEMENT  OF  MR.  WILLIAM  F.  OGBURN— Continued. 

Mr.  Lauck.  Prof.  Ogburn,  I  believe  when  you  closed  at  the  after- 
noon session  you  were  just  beginning  to  discuss  a  minimum -comfort 
wage,  as  you  had  prepared  it  for  the  War  Labor  Board,  on  page  13 
of  the  Standards  of  Living. 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  Would  you  explain  that  budget  to  the  commission,  for 
the  reason  that  we  expect  to  use  that  budget  as  the  basis  for  our  con- 
tention as  to  the  principle  of  a  living  wage? 

Mr.  Ogburn.  Yes.  The  theory  of  a  minimum-comfoi^t  budget  is 
not  quite  as  clearly  delineated  as  the  theory  of  a  bare-subsistence  bud- 
get. But  one,  as  I  say,  thinks  of  a  minimum-comfort  budget  as  being 
a  living  which  all  industries  ought  to  pay  their  workingmen;  at 
least,  that  is  the  theory  of  those  who  hold  to  the  living- wage  theory. 
Whereas  the  bare-subsistence  budget  does  not  necessarily  imply  that 
it  is  an  adequate  budget  or  that  it  is  satisfactory  to  the  labor  people 
or  that  it  is  even  necessarily  wholly  desirable  in  a  democracy;  where- 
as a  budget  that  is  somewhat  more  liberal  I  think  comes  nearer  meet- 
ing an  actuality. 

Now,  the  minimum-comfoi-t  budget  is,  I  think,  not  wholly  a  theo- 
retical proposition.  That  is  to  say,  it  is  a  description  of  an  actual 
situation,  and  the  fact  that  it  has  been  received  and  commented  upon 
rather  widely  and  the  fact  that  there  have  been  various  individuals 
working  at  this  particular  level  seems  to  indicate  that  there  is  a  level 
which  is  in  considerable  demand  above  what  you  would  call  a  bare- 
subsistence  level. 

Looking  at  that  budget  from  the  point  of  view  of  different  items, 
in  June  of  1918,  when  I  first  drew  up  a  minimum-comfort  budget,  I 
put  down  $625  for  food,  which  is  a  little  bit  more  than  the  item  for 
food  in  a  bare-subsistence  budget,  although  you  can  very  readily  see 
that  the  food  item  would  be  very  nearly  the  same  in  the  two  budgets. 
Now,  the  food  item  I  arrived  at  in  this  way — and  that  is  the  corner- 
stone of  the  work — I  took  four  or  five  dietaries,  worked  out  by  differ- 
ent individuals,  and  priced  them  on  the  market  at  that  time  and 

The  Chairman.  What  page  are  you  referring  to  ? 

Mr.  Ogburn.  Page  13.  One  of  these  dietaries  was  worked  out  by 
Prof.  Jaffa,  who  is  professor  of  nutrition  at  the  University  of  Cali- 
fornia. 

Mr.  Lauck.  That  is  on  page  31,  if  you  wish  to  refer  to  it. 

Mr.  Ogburn.  Prof.  Jaffa's  statement  is  on  page  31  of  this  particu- 
lar pamphlet. 

As  I  say,  I  took  his  budget  and  {)riced  it  on  the  market,  and,  in 
general,  that  is  the  food  item  which  you  see  at  the  bottom  of  page  13. 
Now,  at  the  same  time  I  got  the  professor  of  domestic  science  of  the 
University  of  Washington  to  work  out  a  budget  somewhat  differ- 
ently balanced  and  priced  her  budget,  and  it  came  to  approximately 
the  same  figure.  And  then  I  had  two  or  three  other  budgets  which 
I  also  priced,  and  they  all  came  very  nearly  to  the  same  figure,  which 
would  seem  to  indicate  or  lend  strength  to  this  particular  food  item. 


'■It 


1814    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


!il 


That  is,  the  subsistence  budget  is  somewhat  more  rigidly  pared  down 
for  foods  than  this,  although  you  see  they  are  very  nearly  the  same. 

And  in  the  matter  of  the  clothing,  which  you  see  on  pages  14  and 
15, 1  was  a  little  bit  more  generous  in  clothing  there  than  in  the  bare- 
subsistence  budget. 

Mr.  Lauck.  I  was  just  going  to  ask  you  there— I  thought  you  were 
A^ery  conservative  in  clothing.    You  have  one  man's  overcoat,  $6.50. 

Mr.  OoBURN.  That  means,  of  .course,  he  does  not  buy  an  overcoat 
for  $6.50,  but  that  figure  represented  at  that  time  an  overcoat  wl|lch 
would  last  three  yeai*s  at  an  average  cost  of  about  $19.50.  Tha',  was 
in  June,  1918. 

Mr.  Lauck.  That  is,  he  had  one-third  of  an  overcoat  a  year?  . 

Mr.  Ogburn.  Yes.  But,  of  course,  you  can  look  back  to  the 
prices,  if  you  know  very  nmch  in  a  general  way  about  the  prices 
a  year  and  a  half  ago,  and  $19.50  of  course — it  would  take  a  little 
stretch  to  make  a  $19,50  overcoat  hvst  over  three  years.  And  the 
sweater  is  $2.50  there,  which,  of  course,  means  that  the  sweater  will 
last  over  a  period  of  years.  And  a  suit  or  uniform — I  allowed  one 
of  those  a  year,  and  an  extra  pair  of  trousers  at  $8. 

Mr.  Lauck.  That  is,  he  would  have  one  extra  i^air  of  trousers  in 
addition  to  his  suit?  ♦ 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  And  he  would  have  to  work  in  that  suit,  would  he 
not.  according  to  3'our  standard  there,  if  he  only  had  one  suit  a  year, 
unless  he  was  working  in  his  last  year's  suit  or  something  of  that 
kind  ? 

Mr.  Oc.BURN.  Yes. 

Mr.  Lauck.  I  just  wanted  to  i^oint  out  that  it  seemed  to  me  very 
conservative. 

Mr.  Ogburn.  Yes:  and  the  way  they  usually  work  this  suit-and- 
uniform  proposition  is  that  they  will  buy  one  a  year  and  then  wear  it 
until  it  wears  out;  but  the  average  will  probably  run  around  that 

iigui'e. 

Mr.  Lauck.  How  was  it  in  shoes  ?  How  many  pairs  of  shoes  did 
you  allow  each  year  for  $15?     Is  that  two  {yairs  of  shoes? 

Mr.  Ogburn.  Well,  usually  that  iteui  for  shoes  ran,  I  believe,  for 
a  pair  of  Oxfoixi  slioes,  I  believe  once  every  two  years,  and  about 
two  pairs  of  shoes  plus  the  i*epairs  would  just  about  make  the  $15. 
That  was  about  the  allowance- 
In  i-egard  to  the  details  of  the  clothing  and  in  regard  to  the 
clothing,  I  may  say  that  I  took  the  United  States  Bureau  of  Labor 
Statistics'  study  made  during  the  year  1918,  and  we  took  families 
of  five — a  husband,  wife,  and  three  children — and  computed  them 
very  accurately,  just  what  is  spent  for  clothing;  and  it  dovetailed — 
that  is  to  say,  for  a  tiguix?  ai*ound  $1,700  or  $1,800,  very  closely,  the 
details  of  this  clothing  budget  which  I  have  here.  But  I  think  that 
you  can  get  a  .sort  of  idea  of  the  amount  of  comfort.  It  does  not 
take  any  particular  technical  training  or  understanding  to  look  over 
this  clothing  budget  and  see  that  there  is  not  any  very  gi-eat  amount 
of  comfort  allowed,  for  instance,  when  a  man  spends  $92.50  a  year 
and  a  wonuui  $87.  ?r^ 

Mr.  Lauck.  I  was  going  to  say  the  woman  seems  to  be  particu- 
larly conservatiN  e ;  just  the  most  needful  clothes  and  no  clothes  for 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1815 

practical  dress  purposes,  are  there?     I  mean  for  anything  except 
what  would  be  comparatively  needful? 

Mr.  Ogburn.  Yes.  In  regard  to  women's  clothing  we  find  this 
usually :  That  the  higher  the  income,  the  larger  the  ratio  of  cost  of 
women's  clothing  to  men's  clothing.  Where  the  income  is  extremely 
low,  for  instance — below  what  you  would  call  a  subsistence  level — 
the  wife  in  a  workman's  family  will  not  be  allowed  to  spend,  say, 
more  than  half  Avhat  the  man  spends.  That  is  pretty  generally 
found  out.  And  on  the  other  hand,  when  you  get  up  near  the  mini- 
mum-subsistence level  it  Avill  run  up  maybe  three  quarters,  varjnng 
from  place  to  place ;  and  as  the  income  rises  above  the  minimum-com- 
fort level  and  gets  up  to  a  point  sometimes  referred  to  as  a  reason- 
ably adequate  living,  one  finds  that  the  woman's  clothing  costs  the 
same  as  the  man's,  and  as  it  gets  beyond  that,  the  woman's  clothing 
goes  up  more  and  more. 

Children's  clothing  very  seldom  shows  any  such  fluctuation  as 
that.  Childiten  seem  to  be  looked  after  first  and  the  woman  really 
suffers  the  most,  as  she  gets  the  most  when  the  wage  goes  up;  but 
you  can  see  there  the  figure  is  somewhat  under  that  of  a  man,  which 
I  think  is  about  Avhat  you  find  at  the  so-called  minimum-comfort 
stage. 

Mr.  Lauck.  A  top  coat  for  the  wife,  or  the  woman — that  is,  com- 
puted on  the  basis  of  an  overcoat  for  the  man,  one-third  a  year  and 
one  new  top  coat  every  three  years. 

Mr.  Ogburn.  Yes;  $24. 

Mr.  Lauck.  And  her  suit? 

Mr.  Ogburn.  One  every  two  years. 

Mr.  Lauck.  That  would  be  half  a  suit  a  year. 

Mr.  Ogburn.  Half  a  suit  a  year. 

Mr.  Lauck.  So  there  is  not  anything  excessive  about  that.  I  mean 
no  display  or  extravagance,  but  a  woman  would  get  one  new  suit 
every  two  years  and  a  new  top  coat  every  three  years? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  Only  what  she  would  absolutely  need,  practically. 

Mr.  Ogburn.  Yes.  Of  course,  in  regard  to  clothing,  a  working- 
man's  family  is  often  pretty  hard  on  clothing,  particularly  when  they 
are  doing  muscular  work,  etc. ;  it  is  particularly  hard  on  underwear, 
of  course,  and  really  in  so  far  as  the  number  of  garments  go,  I  think 
a  workingman's  family  really  needs  more  perhaps  than  one  in  the 
middle  classes  would  be  inclined  to  think. 

The  items  for  some  things— like  gloves  perhaps,  and  overalls,  and 
so  on,  vary  quite  a  little  bit  from  group  to  group;  and  the  item  of 
$6  for  gloves  there  I  think  might  be  somewhat  nearer  the  figure  for 
street-car  men's  gloves;  at  least  where  I  have  investigated  the  street- 
car trades,  they  do  seem  to  wear  out  a  good  many  gloves.  That 
would  also  be  true,  to  a  certain  extent,  of  the  packing  industry ;  but 
it  is  hard  to  make  a  general  average  for  the  United  States  on  details 
of  that  sort. 

Conunissioner  Mahon.  The  motormen  wear  the  gloves. 

Mr.  Ogburn.  Well,  there  are  a  good  many  conductors  that  wear 
them,  too;  at  least,  where  I  investigated  in  Seattle  there  are  quite  a 
number  of  them. 


>i 


1816    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

T  allowed  in  this  minimiim-ccmfort  budget  for  the  two  younger 
children  no  sum  for  underwear  and  nightgowns,  assuming  that  they 
Mould  make  over  the  underwear  of  the  other  members  of  the  family 
and  cut  them  down  and  make  their  garments.  Some  little  sewing  is 
therefore  allowed  in  the  budget. 

Mr.  Lauck.  May  I  ask  you  a  question  there,  Prof.  Ogburn? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  The  clothing  does  not  seem  to  be  much  above  what 
>yould  be  the  minimum  requirements — that  is,  of  a  minimum  sub- 
sistence. You  were  speaking  a  while  ago  of  a  minimum  physical 
subsistence — the  necessary  food  to  sustam  life  and  prevent  under- 
feeding and  undernourishment,  etc.,  but  this  clothing  would  not  be 
any  more  than  the  minimum  of  comfort,  it  seems  to  me.  Is  that 
correct  ? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  We  might  say  it  is  the  minimum  of  comfort,  the  mini- 
mum subsistence  for  properly  clothing  the  members  of  the  family. 
Could  you  indicate  then  where  the  difference  is,  principally,  between 
this  budget  and  the  subsistence  budget  which  you  have  spoken  about  ? 
On  the  preceding  page  it  gives  the  other  item. 

Mr.  Ogburn.  Yes.  I  would  like  to  just  preface  that,  Mr. 
Lauck 

Mr.  Lauck.  Do  not  let  me  interrupt  you. 

Mr.  Ogburn.  By  saying  that  there  are  various  ways  of  making 
these  budgets,  but  here  is  the  way  it  seems  to  me  the  thing  is  a|)- 
l)roached :  It  is  very  hard  to  say,  for  instance,  that  for  ties,  collars, 
and  handkerchiefs  $2  is  necessary  for  subsistence,  you  see.  I  mean 
to  say,  when  you  get  down  to  the  detail  of  that  sort  you  can  see  your- 
self that  $2  per  year  would  not  be  very  much  in  the  way  of  ties, 
handkerchiefs,  and  collars. 

The  Chairman.  $2  for  underwear  would  indicate  they  would  only 
use  it  on  Sundays  and  holidays. 

Mr.  Ogburn.  Yes.  And  how  can  you  say  just  exactly  what  point 
the  thing  has  reached?  Well,  I  figure  in  a  good  many  of  these  de- 
tails you  can  not  say;  that  is,  I  have  no  scientific  standard  by  which 
I  can*^say  that  $2  and  only  $2  and  just  $2  can  be  spent  for  ties,  collars, 
and  handkerchiefs;  but  what  we  do  is  this — we  find  out  how  nuich 
food  there  should  be  and  we  find  what  the  medical  costs  should  be 
and  we  find  out  something  about  what  the  rent  figures  should  be, 
and  we  have  therefore  about  four  or  five  fairly  good  criteria  that 
really  indicate  what  the  level  should  be.  And  then  we  take  these  cri- 
teria and  find  what  the  family  will  spend  along  those  other  lines 
when  they  si>end  just  those  sums  on  those  particular  criteria,  and  it 
so  happens  under  these  conditions  they  will  spend  so  much  for  shoes, 
or  so  nnich  for  ties,  collars,  arid  handkerchiefs.  In  other  words,  there 
are  certain  criteria  or  guiding  points  or  high  lights  which  help  us  in 
determining  these  particular  levels,  and  some  of  the  other  sundries 
or  miscellaneous  items  are  simply  determined  as  the.  result  of  obser- 
vation, set  that  way  by  these  determining  indices.  I  do  not  know 
whether  I  have  made  that  clear  or  not;  but  it  seems  to  me  tbat;i^ 
somewhat  the  way  one  goes  about  it,  and  that  is  the  way,  anyway, 
that  we  differentiate  between  these  two  budgets. 

Conunissioner  Meeker.  You  mean,  do  you,  that  the  standard  in  the 
particular  social  sets,  so  to  speak,  in  which  the  workingman  dwells 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1817 

pi-escribes  certain  expenditures  for  display — ties  and  collars  and  so 
on — and  that  is  determined  in  the  way  that  you  have  indicated? 

Mr.  Ogburn.  Yes ;  but  it  is  a  little 

Conunissioner  Meeker.  In  other  words,  there  are  other  items 
which  are  capable  of  precisement. 

Mr.  Ogburn.  Yes.  You  will  find,  for  instance,  that  working  fami- 
lies that  are  right  down  on  the  bare  poverty  line  or  even  below  the 
poverty  line  will  do  without  food — that  is  to  say,  they  w411  sacrifice 
their  food  and  I'ent  scale  and  physicians,  and  not  get  any  medical 
assistance  at  a  time  when  thej'  need  it,  but  at  the  same  time  they  will 
buy  certain  pieces  of  furniture  which  you  may  not  think  are  neces- 
sary, perhaps,  or  will  take  in  certain  amusements.  Now,  that  might 
not  be  what  some  Piu'itanical-minded  individual  would  think  was  a 
reasonable  allotment  for  a  budget;  but  you  have  to  take  human  na- 
ture as  you  find  it,  and  as  a  matter  of  fact,  the  more  we  study  human 
nature  and  psychology,  the  more  we  find  the  care  and  treatment  of 
instinctive  life  is  as  essential  as  the  care  of  the  nutritive  life.  If,  for 
instance,  you  find  them  underfed  or  undercared  for,  so  far  as  physi- 
cians go,  and  spending  a  certain  amount  for  recreation,  then  you 
simply  have  to  assume,  since  you  are  not  having  any  all-wise  Deity 
direct  the  expenditures  of  these  families,  that  those  things  are  a  ne- 
cessity, and  what  you  have  to  do  is  to  set  the  particular  level  where 
they  get  a  reasonably  adequate  supply  of  food  and  medical  attend- 
ance and  then  see  wHat  happens  in  regard  to  recreation  or  joining  a 
lodge  or  whatever  other  these  sundries  may  be ;  and  whatever  those 
sundries  may  be,  these  seem  to  be  determined  therefore  by  these  par- 
ticular indices.  And  that  is  about  the  wav,  as  I  told  vou,  that  I 
formed  the  average  budget.  They  cut  down  really  almost  to  the  limit 
to  get  to  the  bare-subsistence  budget.  In  order  to  get  the  minimum- 
comfort  budget,  I  took  four  or  five  rather  ordinary-  dietaries — such 
as  one  finds  in  practice,  not  pai*ticularly  scientific — and  I  priced  them 
and  found  they  all  came  to  about  the  same  thing.  That  more  or  less 
determines  the  food  level.  But  I  know  from  other  studies  what  the 
expenditures  for  sundries  are  when  that  much  is  spent  for  food,  and 
that  determines  that  particular  level. 

In  regard  to  house  rent,  w^e  have  a  good  deal  of  information  in 
regard  to  houses.  We  know  as  the  result  of  the  various  studies  about 
what  you  can  get  in  the  different  cities  for  house  rent;  and  one 
thinks  of  a  fairly  good  5-room  house,  we  will  say,  with  a  bath  in  it  as 
probably  costing  at  this  particular  time  when  this  budget  was  worked 
out  a  little  less  than  $20  a  month. 

The  Chairman.  Do  you  proceed  upon  the  theory  that  all  of  these 
laboring  people  are  renters? 

Mr.  Ogburn.  Well,  that  brings  up  a  question.  We  do  assume  that 
they  are  renters,  although  there  may  be  a  good  many  who  will  own  a 
home.  This  will  be  particularly  true  in  some  of  the  far  western  cities 
and  Texas  cities  and  the  smaller  towns.  But  this  budget  is  made  out 
for  families  who  rent.  And  that  brings  up  a  point,  I  may  say,  that 
most  budgets  are  really  set  for  something  that  you  speak  of  as  the 
average  or  the  mode.  There  will  be  deviations  from  it  of  one  sort  or 
another,  but  if  .you  ever  do  anything  by  way  of  wage  legislation  you 
have  to  do  it  by  sort  of  an  average,  or  mode. 

Commissioner  Meeker.  From  an  examination  of  our  schedules, 
would  you  s&y  expenditures  for  housing  were  less  or  greater  on  the 


1818    PROCEEDIlsJ'GS  OF  FEDERAL  FJLECTRIC  RAILWAYS  COMMISSION". 

part  of  workingmen  who  own  their  own  homes,  or  at  least  the  title 
to  mortgaged  homes  ?  Were  their  expenses  more  or  less  for  housing 
than  renters? 

Mr.  Ogburx.  That  is  to  say,  what  the  house  which  they  own  would 
rent  for  if  it  were  rented,  or  what  they  pay 

Conmiissioner  Mkeker.  No;  so  far  as  we  gather  the  data,  the  actual 
expenses  on  the  part  of  those  who  own  their  own  houses,  as  they  term 
it,  as  compared  with  the  expenses  for  housing  of  those  who  rent 
them  ? 

Mr.  Ogbukn.  That  is  to  say,  payment  of  mortgage,  taxes,  etc.? 

Commissioner  Meeker.  Yes. 

Mr.  Ogburn.  I  did  not  look  into  that  thoroughly,  but  in  one  of 
the  western  cities  I  looked  into  the  bureau's  figures;  the  expenses 
were  somewhat  greater  where  they  owned  their  home  than  where 
they  rented  it — that  is,  for  taxes  and  payment  on  the  mortgage,  etc. 

Commissioner  Mekkeji.  That  is  the  point  I  wanted  to  make. 

Commissioner  AVeiile.  Do  you  not  find  frequently  that  a  man  who 
has  the  title  for  his  home  is  still  paying  for  it? 

Mr.  Ogburn.  Oh,  yes;  that  is  quite  a  common  occurrence. 

Commissioner  Wehijc.  Or  that  he  has  a  mortgage  on  it? 

Mr.  Ogburn.  Yes. 

Commissioner  Weiile.  And  he  has  had  to  borrow  money? 

Mr.  Ogburn.  Yes. 

Commissioner  Weiile.  You  say  you  have-not  had  the  opportunity 
to  see  whether  there  is  an  equivalent  expenditure  there  or  not? 

Mr.  OfJBURN.  Yes;  state  that  question  again. 

Commissioner  Wehle.  I  say  you  have  not  had  the  opiX)rt unity  to 
determine  whether  there  is  an  equivalent  expenditure  on  the  average 
where  a  man  owns  his  house,  as  Mr.  Meeker  has  just  said,  and  where 
he  rents  his  house? 

Mr.  Ogburn.  Yes ;  I  say  that  in  the  one  city  where  I  had  occasion 
to  see  the  figures  on  the  expenses  for  a  man  who  owned  his  house  they 
were  somewhat  greater  than  whei^e  he  rented  it,  and  I  looked  into 
quite  a  number  of  houses  and  what  the  houses  which  they  owned,  if 
rented,  would  bring  in,  which  was  a  little  more  than  others,  of  the 
same  class  are  renting  for. 

Commissioner  Miucker.  Will  it  not  l>e  sufficient  for  the  record  to 
say  that,  in  general,  taking  it  by  and  large,  the  expenditures  for 
housing  on  the  part  of  workingmen  who  own  their  own  homes  ai-e 
greater  than  the  expenditures  for  housing  on  the  part  of  workers  who 
rent,  and  that  is  the  universal  experience  of  the  bureau  in  its  studies, 
and  that  does  not  include  any  payment  on  the  mortgage  of  the  house  ? 

The  Chairman.  You  mean  just  the  interest  on  the  investment  and 
the  repairs  and  taxes  result  in  a  larger  item  than  the  rental? 

Commissioner  Meeker.  It  does.  If  there  is  a  small  expenditure, 
it  is  usually  taken  out  by  not  attending  to  the  upkeep.  It  is  cheaper 
to  rent  than  to  own,  and  that  is  quite  general. 

Commissioner  Wehle.  Dr.  Meeker,  in  making  your  calculations  in 
the  Bureau  of  Statistics  of  the  Department  of  liabor  on  the  cost  of 
owning  your  o^yn  home,  do  you  figui-e  as  the  chairman  suggested,  t]^ 
interest  on  the  investment  as  a  part  of  the  cost?  /| 

Commissioner  Meeker.  Of  course,-  that  should  enter. 

(Commissioner  Weule.  It  has  not  been  used  ordinarily,  has  it,  by 
the  Bureau  of  Statistics? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1819 


Commissioner  Meeker.  Yes;  the  investment  is  figured  at  the  ac- 
cepted rate  of  interest  and,  of  course,  payments  upon  the  mortgage 
are  not  included  in  rental. 

Commissioner  Weiile,  You  treat  the  workingfnan's  home,  then, 
in  figuring  what  it  costs  him  to  live  in  his  own  house,  in  the  same  way 
you  would  figui'e  the  property  investment  of  a  railroad — ^that  is,  you 
take  your  interest  as  a  fixed  exi>enditure  and  the  interest  which  tlie 
workingman  would  have,  if  he  had  invested  his  money  in  a  security 
of  some  soit  rather  than  in  a  home. 

Commissioner  Meekfjj.  As  a  matter  of  fact,  we  have  uiade  enough 
investigations  so  that  in  making  up  these  budgets  we  chose  houses 
which  w^ere  rented,  having  assumed  the  fact  that  it  is  cheai>er  to 
rent  than  to  own  a  home. 

The  Chairman.  You  may  proceed,  Pi*of.  Ogburn. 

Mr.  Ogburn.  In  i-egard  to  the  liealth  item — that  is,  the  amount 
sixjnt  for  physicians,  drugs,  and  dentists — the  figure  of  $60  was  put 
down  as  the  same  in  both  cases,  on  the  advice  of  Mr.  Warren  of  the 
United  States  Public  Health  Service,  who,  in  testimony  before  the 
War  Labor  Board,  had  a  good  deal  to  say  in  regard  to  the  number 
of  days'  sickness  whicli  a  workingman,  on  the  average,  suffers  and 
the  approximate  amount  which  it  should  cost  him,  and  he  figured 
about  $60.  And  the  figures  of  a  workingman  at  this  level,  as  col- 
lected by  the  Bureau  of  Labor  Statistics,  show  a  sum  just  a  little  bit 
under  this.  I  think  it  will  j^robably  be  nearer  $50  than  $60,  but  the 
figure  there  of  $60  is  therefore  more  of  a  standard  than  an  actual 
experience,  although  it  is  not  very  much  above  it. 

I  did  put  down  in  this  budget  $150  for  insurance  and  savings, 
which,  I  may  say,  is  considerably  larger  than  the  families  ever  do 
save  or  put  up  even  during  the  campaign  of  Liberty  loans  at  this 
particular  level.  That  is  another  departure  from  the  actual  budget 
and  is  a  point  in  making  the  standard. 

Commissioner  Meeker.  Is  that  amount  actually  above  the  com- 
bined amount  for  insurance  and  savings  at  this  level  ? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  What  was  your  idea  in  doing  that,  Prof.  Ogburn? 

Mr,  Ogburn.  Perhaps  I  should  have  stated  this,  that  what  I  was 
doing  in  these  two  cases  wiis  setting  what  I  conceived  to  be  a  stand- 
aitl  budget.  The  question  often  arises  as  to  whether  a  standard 
budget  is  exactly  the  same  as  an  actual  budget.  I  figure  that  it 
ouglit  to  be  ver\'  nearly  the  same  as  an  actual  budget  and  not  too 
purely  refined — that  is  to  say,  there  is  no  question  about  the  fact  that 
hiunankind  smokes,  humankind  drinks,  and  so  on — that  humankind 
expects  certain  expenditures  for  recreation.  Therefore  you  can  not 
leave  these  things  out.  You  have  to  make  it  fairly  approximate  and 
close  to  the  actual  expenditure.  But  I  have  varied  here  and  tliere — - 
I  have  put  a  little  bit  more  for  food  and  a  little  bit  more  for  sickness 
and  savings — simply  as  it  would  seem  to  be  the  concept  of  v.iiat  a 
standard  budget  should  be. 

Mr,  Lauck.  A  man  at  the  subsistence  level  would  be  simply  "  get- 
tiiiig  by  "  every  month,  wouldn't  he — if  I  may  use  a  slang  phrase  to 
express  it  ? 

Mr.  Ogburn.  Yes, 

Mr.  Lauck.  Whereas  if  he  had  S{>me  chance  to  buy  insurance  lie 
would  protect  his  family  against  deaths  and  sickness  and  would  make 


I 


1820    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

some  savings,  which  he  ought  to  do,  he  would  be  providing  for  un- 
foreseen contingencies  which  miglit  arise — okl  age,  sickness,  some- 
thing that  woukl  come  up  out  of  the  usual.  In  other  words,  he 
would  not  be  on  an  absolute  ragged  edge  all  the  time,  but  would  have 
a  chance  to  bridge  over  these  things  ? 

Mr.  OOBURN.  Yes;  in  the  bare  subsistence  I  put  down  $40  for  in- 
surance and  savings,  whereas  I  put  in  the  minimum  comfort  $150 
for  the  insurance  and  savings.  I  think  that  perhaps  my  item  for 
furnishings  is  a  little  low.  It  is  very  hard  to  get  good  figui-es  on 
fumiture  and  furnishings;  there  ai^e  so  few  families— you  have  to 
collect  such  a  very  large  number  of  families  before  you  can  get 
accurate  figures. 

I  have  put  down  only  $50  for  furniture  and  furnishings.  As  a 
matter  of  fact,  families  at  this  level,  according  to  the  Bureau  of 
Labor  Statistics,  spnd  a  little  bit  more  than  that  for  furniture  and 
furnishings.  I  think  that  item  is  a  little  underestimated.  It  is  cer- 
tainly \evy  little  for  furniture  and  furnishings,  particularly  at 
the  price  furniture  is.     They  actually  spend  more  than  that. 

Commissioner  Meeker.  Prof.  Ogburn,  that  item  of  $50  for  fur- 
nishings merely  means  the  upkeep  of  the  furniture? 

Mr.  Ogburn.  Yes. 

Commissioner  Meeker.  It  has  nothing  to  do  w^ith  the  setting  up 
of  the  family  in  housekeeping? 

Mr.  Ogburn.  No;  just  the  upkeep. 

Commissioner  Mahon.  Keeping  up  the  bedding  and  the 

Mr.  Ogburn.  Cooking  utensils  and  the  tools  around  the  house, 
brooms 

Commissioner  Mahon.  Table  cloths? 

Mr.  Ogburn.  And  table  cloths. 

Commissioner  Mahon.  How  much  do  you  make  that? 

Mr.  Ogburn.  Fifty  dollars.  In  the  minimum-comfort  budget,  as  I 
pay,  I  think  that  item  is  a  little  low.  If  I  were  making  the  budget 
over  again,  I  think  it  should  be  raised. 

Mr.  Lafck.  What  does  education  cover?  The  children  going  to 
school  and  the  books  and  newspapers,  and  so  forth? 

Mr.  Ogburn.  Yes;  I  put  down  for  newspapers,  magazines,  books, 
and  children's  expenses  $20,  to  cover  that. 

Commissioner  Wehle.  Does  that  include  car  fare  of  children  going 
to  school? 

Mr.  Ogburn.  No  ;  that  is  not  supposed  to  include  the  car  fare. 

Mr.  Lauck.  That  is  a  very  conservative  figure,  is  it  not? 

Commissioner  Wehle.  Does  your  $55  car  fare  include  the  car  fare 
of  the  children  ? 

Mr.  Ogburn.  It  is  intenderl  to  include  going  to  and  from  work, 
and  of  the  wife  and  the  children. 

The  church  item  is  put  down  at  $9,  which  is  very  near  the  figure 
which  families  of  that  particular  income  actually  spend.  Perhaps 
it  may  be  a  little  bit  more. 

Mr.  Lauck.  You  have  $24  for  church,  labor,  and  other  organiza- 
tions, have  you  not?  Nine  dollars  of  that  for  church,  and  the  other 
for  labor-union  dues  and  societies,  and  so  forth? 

Mr.  Ogburn.  Yes.  I  put  down  $15  for  organizations— labor  and 
other  organizations — $15  a  year. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1821 

Commissioner  Mahon.  That  is  too  low. 

Mr.  Ogburn.  This  was  in  the  summer  of  1918.  Probably  it  was 
very  low  then. 

Mr.  Lauck.  The  comforts  are  very  conservative,  are  they  not,  or 
very  low — $8  for  tobacco,  candv,  Christmas  gifts,  and  everything 
of  that  kind  ? 

Mr.  Ogburn.  Yes;  considering  the  fact  that  if  you  really  look  at 
human  nature  frankly,  of  course,  that  is  very  low ;  there  is  no  ques- 
tion about  that.  I  think  that  when  you  get  into  a  question  of  the 
minimum-comfort  budget — as  the  questions  of  Mr.  Lauck  have  been 
headed  in  that  direction — you  really  have  to  form  the  conception 
that  there  is  still  another  budget  level. 

I  mean  to  say  that  I  do  not  believe  that  you  could  look  at  this 
budget  and  think  of  it  as  an  adequate  budget  for  working  people. 
I  mean  to  say,  if  you  were  to  think  as  being — well,  it  is  perfectly 
possible  to  conceive  of  another  budget  level  where,  if  they  had  a 
telephone,  or  if  they  had  a  nurse  occasionally,  when  someone  was 
sick  in  the  house  or  where  they  had  a  somewhat  better  type  of  hous- 
ing, where  they  took  more  opportunities  in  education,  and  were  able 
to  send  their  children  through  the  high  school — we  figure  that  only 
less  than  10  per  cent  get  through  the  high  schools — I  think  you 
would  have  to  conceive  of  a  budget  level  as  being  above  this. 

The  point  I  make  is  that  this  minimum  budget  is,  strictly  speaking, 
a  minimum  budget  of  a  certain  level  and  it  is  not  necessarily 
designed  or  set  as  a  maximum  budget  at  all,  or  perhaps  even  what  the 
working  people  would  call,  necessarily,  an  adequate  budget.  It  is 
along  the  line  of  those  minimum  budgets. 

Mr.  Lauck.  It  really  seems  to  provide  for  food  and  clothing  to 
keep  them  warm  and,  you  might  say.  just  removes  the  specter  of 
want,  or  the  possibility  of  want,  from  the  door,  does  it? 

Mr.  Ogburn.  That  is  the  idea :  ves. 

Mr.  IjAuck.  That  is,  they  have  some  slight  hold  on  the  future  by 
savings  and  insurance;  they  are  adequately  clothed,  so  far  as  com- 
fort is  concerned,  and  fed  properly? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  But  beyond  that  there  is  nothing  to  waste  or  nothing 
to  develop  or  expand  on  ? 

Mr.  Ogburn.  Yes.  I  would  like  to  introduce  one  piece  of  evidence 
here  bearing  upon  the  point  I  am  discussing,  which  I  think  is  of 
considerable  value  in  regard  to  food  budgets. 

What  we  did  over  at  the  Bureau  of  Labor  Statistics  was  to  take 
families  of  husband  and  wife  and  three  children  with  specific 
incomes— say.  $2,000,  $1,800,  $1,600,  $1,400  $1,200,  and  $1,000,  and 
we  analyzed  their  dietaries,  and  took  an  average  of  all  their  foods 
which  they  ate  and  reduced  it  to  a  permanent  basis,  and  analyzed 


those  cities  when  the  income  is  $2,000 — this  is  in  1918 — ^the  purchase 
off  calories  was  3,533 ;  that  is  the  actual  number  of  calories  pur- 
chased when  the  income  was  $2,000. 

Conimissioner  Meeker.  Will  you  explain  that  ?    That  is  that  many 
calories  per  adult  male? 


II 


1822     PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 


Mr.  Ogburn.  That  many  calories  per  adult  male;  yes. 

Commissioner  Sweet.  That  was  below  what  was  actuallv  needed 
then? 

Mr.  CkiBURX.  Xot  net'essarily.    It  was  probably  a  little  bit  above. 

Commissioner  Sweet.  What  wa«  the  figure?  I  thought  you 
said 

Mr.  Ogburn.  This  is  3,533. 

Commissioner  Sweet.  Oh,  I  misunderstood  your  figure. 

Mr.  Ogburn.  When  the  income  is  $1,800,  the  actual  number  of 
calories  purchased  was  3,400. 

At  $1,600  the  number  of  calories  purchased  Avas  3,278  avenige; 
that  is  about,  a  little  over  3,200. 

At  $1,400  the  calories  pui-chased  were  3,217. 

When  the  income  was  $1,200,  for  this  size  family,  the  calories 
purchased  were  3,015— about  3,000  calories. 

When  the  income  was  $1,000  the  food  that  they  purchased  yielded 
2,935  calories. 

Those,  I  think,  are  about  as  good  figures  as  you  will  find  any- 
where in  existence  bearing  upon  the  calories  purchased  according 
to  income. 

Therefore  it  is  only  when  they  get  pay  over  $1,600,  and  around 
$1,800  or  $2,000  that  they  actually  buy  a  sufficient  number  of 
calories. 

The  Chairman.  Will  the  reduction  of  500  calories  mean  that  tlie 
family  is  undernourished  ? 

Mr.  OtiBURN.  In  i^gard  to  that  point,  Mr.  Chairman,  I  think  that 
it  is  only  fair  to  say  that  there  is  considerable  variation  in  a  fam- 
ily's needs.  They  figui-e  that  a  man  that  is  tall  and  hea\n^'  and 
young  would  need  a  good  many  moi-e  calories  than  a  man  who  is 
short,  slight,  and  older.  There  will  be  a  considerable  variation  in 
that  way.  There  is  a  certain  variation  according  to  occupation. 
They  figure,  if  you  are  working  as  a  logger  in  the  Maine  woods, 
you  would  probably  need  nearer  6,000  calories.  On  the  other  hand, 
if  your  work  is  quite  light  and  indoors  a  good  deal,  you  might,  con- 
ceivably, not  need  in  calories  more  than  2,500. 

The  Chairman.  Apply  that  to  your  street-car  employees.  Would 
3,000  calories  sufficient  nourish  street-car  employees? 

Mr.  Ogburn.  I  do  not  know  of  any  particular  studies  of  street- 
car employees  as  such;  but  I  should  be  inclined  to  think  that  a 
street-car  employee  would  be  classed  as  moderately  hard  muscular 
work.  Of  course,  I  do  not  know ;  but  I  should  be  inclined  to  think 
they,  perhaps,  would  need  around  3,500  calories. 

Mr.  Lauck.  In  those  lower-income  groups,  after  your  purchase 
of  calories,  they  have  very  little  left  to  purchase  anything  else, 
have  they  not?  I  mean  the  percentage  of  the  income  absorbed  by 
the  purchase  of  food  in  the  lower-income  groups— $1,000  and  $1,200 — 
left  Aerv  little  over? 
Mr.  Ogburn.  Yes. 

Mr.  Laux'k.  You  stated  this  afternoon  that  it  would  take  about 
$600  or  $700 — $775,  I  believe,  was  the  figure — to  purchase  the 
needed  number  of  calorics;  so  that  you  would  liave  very  little  left 
for  clothing  or  housing,  and  then  there  would  be  overcrowding,  or 
they  would  not  be  properly  clothed,  if  they  did  get  the  calories 
needed  ? 


PKOCEEDIXGS  OP  FEDERAL*  ELECTRIC  RAILWAYS  COMMISSION.    1823 

Mr.  OoBURN,  Yes.  If,  at  this  time,  the  3,500  calories  would  have 
cost  about  $600,  or  a  little  over,  out  of  $1,000,  there  would  only  be 
$400  left.  But  they  do  not  do  it  that  way.  When  they  have  only 
$1,000  to  spend,  what  they  do  is,  they  do  not  buy  enough  calories. 
Tliey  are  not  subsisting.    They  neglect  themselves. 

We  have  very  good  evidence  on  that,  because  we  find  that  in  these 
siime  12  cities  nearly  20  per  cent — very  nearly  20  per  cent — of  the 
families  are  consuming  2,500  calories  or  less.  That  seems  to  me  to 
be  rather  a  significant  point,  even  granting  that  some  of  those  20 
per  cent  are  small;  that  is,  some  of  the  men  may  be  small  in  statuio 
and  may  not  need  very  many  calories,  but  when  3,500  calories  is 
the  desired  number,  there  must  be  considerable  underfeeding  when 
they  only  consume  2,500.  I  do  not  think  you  could  get  away  from 
those  figures.  It  would  be  considerable  underfeeding ;  and,  of  course, 
that  means  that  they  become  a  prey  to  disease  and  do  have  a  hard 
time  subsisting. 

I  fhink  those  figures  do  indicate  what  happens  when  they  get 
low  incomes. 

Commissioner  Meeker.  That  explains,  in  part,  the  high  mortality 
rates  which  you  mentioned  this  afternoon? 

Mr.  Ogburn.  Yes. 

Commissioner  Sweet.  The  desire  for  amusement  and  other  things 
prevents  them  from  taking  the  amount  of  nourishment  they  really 
ought  to  have  ? 

Mr.  Ogburn.  Yes. 

Commissioner  Swe&t.  And  might  have  with  that  income,  if  they 
would  devote  it  to  that  purpose  ? 

Mr.  Ogburn.  Yes;  if  some  all-wise  Deity  were  to  lay  it  off  for 
them  and  could  guide  theij^  in  making  their  expenditures  this  way 
and  that  way ;  but  with  human  nature  as  it  is,  which,  of  course,  has 
to  be  more  or  less  taken  that  way 

Commissioner  Sweet.  Certainly. 

Mr.  Ogburn.  That  is  the  result. 

Commissioner  Meeker.  Do  you  think  that  an  all- wise  Deity  would 
cut  out  amusements? 

Mr.  Ogburn.  According  to  soa^e  theological  conceptions,  I  would 
think  so ;  but  I  do  not  know  how  all-wise  He  might  be. 

Mr.  Lauck.  Is  it  not  six  of  one  and  half  a  dozen  of  the  other  ?  If 
you  allow  them  enough  to  eat,  so  that  they  will  not  be  underfed,  then 
they  have  not  got  enough  to  clotlie  themselves  on,  with  these  low 
incomes,  or  to  house  themselves  properly,  therefore  they  are  over- 
crowded and  not  properly  clothed  and  have  no  amusements?  Let  us 
eliminate  amusements  altogether.  If  you  assume  that  they  eat,  they 
can  not  clothe  themselves  or  house  tliemselves;  and  if  you  assume 
that  the}'  do  not  eat,  they  practiwilly  have  sufficient  to  house  them- 
selves and  clothe  themselves. 

Commissioner  Sweet.  Have  you  any  data  which  would  tell  us  in 
cases  of  that  kind,  where  the  income  is  too  small  to  really  give  the 
family  what  food  it  ought  to  have,  whether  the  whole  family  suffer 
from  it,  or  does  the  mother  deny  hei-self  and  let  the  children  have 
allHiey  need,  and  does  the  old  man  get  all  he  wants? 

Mr.  Ogbi  Rx.  In  regard  to  that,  I  am  afraid  I  have  not  got  very 
good  figures.    I  have  some  on  some  other  things. 


1824     PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

There  was  a  study  published  in  the  American  Journal  of  Public 
Health,  written  by  a  man  named  Harris,  where  he  tended  to  show 
what  happened  when  the  cost  of  living  went  up  and  wages  did  not 
go  up;  and  I  believe  he  showed  in  this,  not  only  the  details  of  the 
foods  that  were  cut  out — butter  was  eliminated  and  so  on — but  I  be- 
lieve in  this  article  he  showed  that  the  mother  was  the  one  who  tended 
to  be  sacrificed  and  the  children  were  the  last  to  be  sacrificed.  That 
is  certainly  the  theory  in  regard  to  clothing. 

Commissioner  Sweet.  I  think  that  would  be  human  nature,  too, 
don't  you  ? 

Mr.  OoBiJRN.  I  guess  if  it  happened  that  way,  that  is. 

Commissioner  Wehle.  How  were  the  comparative  calories  studies 
made  ?    You  say  you  made  these  studies  in  these  different  cities  ? 

Mr.  Ogburn.  Yes.  What  we  did  was  to  collect  the  dietary  in  con- 
siderable detail;  I  think,  into  about — for  food— about  125  items,  and 
these  were  analyzed  by  a  food  expert. 

Commissioner  Wehle.  How  did  you  collect  the  evidence  as  to  how 
much  a  man  bought  with  the  money  he  put  into  food  ?  How  did  you 
find  out  how  much  food  he  consumed? 

Mr.  Ogburn.  If  I  understood  your  question  correctly,  the  analyses 
were  made  upon  food  as  bought — not  food  as  consumed. 

It  is  quite  conceivable  that  one  might  even  reduce  those  figures 
somewhat,  by  knocking  off  a  certain  percentage  for  waste. 

Commissioner  Meeker.  I  think  Mr.  Wehle  means :  How  did  we  get 
the  quantities  of  food  purchased  by  the  families?  The  budgets  ob- 
tained were  quantity  budgets — pounds  of  meat  of  different  descrip- 
tions, pounds  of  fish,  pounds  of  beans,  pounds  of  bread,  etc.,  through- 
out the  whole  food  budget. 

Mr.  Ogburn.  I  described  that  just  a  litlie  bit  this  afternoon.  You 
were  not  here,  Mr.  Wehle. 

The  Chairman.  Through  the  questionnaire  and  agency  systems? 

Mr.  Ogburn.  Through  field  investigators. 
.  Commissioner  Wehle.  Do  not  repeat  it,  then,  if  you  have  it  in  the 
record  already.    I  do  not  want  to  have  you  repeat  anything  that  is 
already  in  the  record. 

Mr.  Ogburn.  There  are  just  two  ways  by  which  the  thing  is  done 
at  all  acurately :  One  is  to  have  the  thing  weighed  as  it  comes  in  and 
weighed  as  it  goes  out,  by  keeping  the  agent  in  the  house.  That 
is  what  the  Department  of  Agriculture  does,  at  times. 

The  other  method  is  to  get  the  record  of  the  housewife  for  a  week 
and  then  estimate  on  the  basis  of  this  week's  record  what  it  is  for 
the  year.    But  it  is  collected  by  an  agent  in  the  field. 

There  may  be  some  error  in  them,  but  for  practical  purposes  it  is 
about  the  only  thing  you  can  do. 

Commissioner  Meeker.  I  would  suggest,  Mr.  Lauck,  that  you  put 
in  evidence  the  prices  and  costs  of  living  separate  issued  by  the 
Bureau  of  Labor  Statistics.  Mr.  Wehle  can,  by  perusing  them,  find 
out  all  about  how  we  did  it. 

Commissioner  Wehle.  I  think  it  would  be  very  unfair  of  us 
not  to  give  ourselves  the  benefit  of  what  the  Bureau  of  Labor  1^- 
tistics  has  produced  on  this  subject. 

Mr.  Ogburn.  I  have  similar  data  on  housing  which  is  to  be  pub- 
lished in  the  September  Labor  Review,  and  I  have  the  proofs  here 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1825 

before  me,  as  regards  the  extent  of  overcrowding  in  the  families.    We 
have  here,  for  about  12  cities,  the  proportion  of  the  families  investi- 

fated,  where  there  is  less  than  one  room  per  person.  You  remember 
quoted  some  infantile  death  rates  to-day. 

They  run,  for  the  cities,  like  this:  52  per  cent,  31  per  cent,  37 
per  cent,  57  per  cent,  84  per  cent,  46  per  cent,  55  per  cent,  and  so 
forth;  I  should  say  running  between  35  and  40  per  cent  of  the 
families. 

Then  for  those  families  that  have  less  than  .7  of  a  room  per  person, 
it  would  be  somewhat  lower,  perhaps  around  15  or  20  per  cent  of 
the  families  investigated;  knowing  that  there  is  a  certain  amount  of 
overcrowding. 

That  varies  from  city  to  city.  It  is  rather  notable  in  Atlanta, 
Ga.,  and  fairly  high  in  Boston.  In  some  of  the  western  cities  it 
is  not  so  high. 

Mr.  Lauck.  Prof.  Ogburn,  are  you  familiar  with  the  study  made 
by  the  Children's  Bureau  relative  to  the  effect  of  overcrowding  upon 
infantile  mortality  and  the  relation  of  that  to  income? 

Commissioner  Sweet.  He  gave  us  that  this  afternoon. 

Mr.  Ogburn.  I  quoted  that  this  afternoon.  I  gave  the  rates  and  so 
forth  in  that  connection  this  afternoon. 

Mr.  Lauck.  I  beg  your  pardon  then.  Are  you  through  with  the 
budget  ? 

Air.  Ogburn.  Yes. 

Mr.  Lauck.  There  is  one  question  that  I  wanted  to  ask  you. 
This  was  June,  1918,  was  it  not? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  To  bring  that  up  to  date,  if  this  was  a  minimum- 
comfort  budget  then,  on  the  basis  of  the  increase  in  the  cost  of 
living,  it  must  be  more  now;  must  it  not? 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  What  would  you  estimate  it  is  to-day,  at  the  present 
time — the  minimum  requirements? 

Mr.  Ogburn.  I  should  think  it  would  be  around  $2,000. 

Mr.  Lauck.  You  would  apply  the  12  per  cent  increase  or  approxi- 
mately that  to  June,  1919,  and  you  would  estimate  then  that  this 
budget  which  was  the  minimum  requirement  as  to  health  and  com- 
fort would  cost  about  $2,000  at  the  present  time  ? 

Mr.  Ogburn.  Yes;  I  did  bring  that  up  to  date  somewhat  in  this 
fashion :  I  took  the  latest  food  figures  which  the  Bureau  of  Labor 
Statistics  had  and  I  multiplied  the  quantities  of  food  by  the  prices  of 
the  Bureau  of  Labor  Statistics'  food  items,  and  then  I  had  some 
estimates  in  regard  to  the  clothing;  I  knew  shoes  had  gone  up 
rather  sharply,  for  example,  and  I  knew  that  some  clothing  had 
gone  up  pretty  well,  and  I  estimated  that. 

Mr.  Lauck.  You  had  the  wholesale  index,  too  ? 

Mr.  Ogburn.  Yes.  Out  of  that  estimate  I  figured  out  that  $1,950 
to  $2,000  would  be  the  cost  now  of  what  I  might  call  the  minimum- 
comfort  budget. 

When  you  think  of  that  figure  in  terms  of  wages,  you  think  the 
wages  may  sound  pretty  big;  but  when  you  think  of  it  in  terms  of 
the  details  of  the  budget,  it  really  does  not  buy  so  very  much. 

160043°— 20— VOL  2 53 


1826    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Lauck.  It  is  just  keeping  Avant  from  the  door,  so  to  speak, 
is  it  not? 

Mr.  Ogburx.  It  is  providing  minimum  comfort;  yes. 

Mr.  Lauck.  Do  you  know  what  tluit  woukl  be  at  325  davs  a  year 
and  8  hours  a  day  i 

Mr.  Ogburx.  1  have  not  figured  that  out. 

Mr.  Lauck.  It  woukl  be  70  cents  per  hour 

Mr.  Ogburx.  Ye.s;  that  would  be  just  about  it. 

Mr.  Lauck.  There  is  another  question  I  would  like  to  ask,  if  I 
may  interrupt  you  for  a  moment 

Mr.  Ogburx.  Certainly. 

Mr.  Lauck.  You  remember  Dr.  Chapin's  conclusions  in  1907,  as 
to  the  relations  of  incomes  at  that  time  to  the  standards  of  living? 

Mr.  Ogburx.  In  a  general  way;  yes,  I  remember  that. 

Mr.  Lauck.  He  says  an  income 'under  $800  is  not  enough  to  per- 
mit of  the  maintenance  of  normal  standard;  is  that  correct? 

iMr.  Ogburx.  Yes;  I  think  it  is  pretty  generally  accepted. 

Mr.  Lauck.  I  am  talking  about  before  the  war  now. 

Mr.  Ogburx.  Yes. 

Mr.  Lauck.  And  an  income  of  $900  or"  a  little  over  permits  of  the 
maintenance  of  a  normal  standard,  at  least  as  far  as  the  physical 
man  is  concerned  ^ 

Mr.  Ogburx.  What  I  call  the  bare-subsistence  level. 

Mr.  Lauck.  Before  the  war? 

Mr.  Ogburx.  Yes. 

Mr.  Lauck.  Mr.  Sturgis  testified  this  morning  that  in  1914  the 
average  annual  earnings  of  the  street-railway  motormen  and  con- 
(hictors  were  $8C4;  so  that  on  that  standard  of  comparison  it  w^ould 
be  below  a  subsistence  level,  would  it  not  ? 

Mr.  Ogburx.  Yes;  considering  that  Mr.  Chapin's  figures  are  fairly 
conservative. 

Mr.  Lauck.  And  his  figures  were  made  in  1907,  seven  years  be- 
fore 1914.  "^ 

Xow,  Mr.^  Sturgis  testified  this  morning,  if  I  remember  correctly, 
that  in  1907  the  average  annual  earnings  of  a  motorman  and  con- 
ductor were  $655.  Mr.  Chapin  says,  in  1907  that  an  income  under 
$300  was  not  sufficient  to  permit  of  the  Biaintenance  of  a  normal 
standard,  so  that  he  would  be  underfed,  underclothed,  underhoused, 
and  subnormal.  Then,  in  1914,  this  figure  of  $864,  according  to  Dr. 
Chapin's  standard,  would  be  below  the  subsistence  level,  and  ac- 
cording to  your  own  standard  or  the  results  of  vour  own  study  at 
that  time? 

Mr.  Ogburx.  Yes;  Chapin's  figure  might  be  a  little  higher  than 
that.  I  mean,  it  might  be  a  little  over  900  by  1914  on  account  of 
food  having  gone  up. 

Mr.  Lauck.  There  were  seven  years  there  that  were  not  provided 
for? 

Mr.  Ogburx.  Yes. 

Mr.  Lauck.  Anyhow,  it  would  indicate  that  these  earnings  were 
entirely  inadequate,  would  it  not,  according  to  your  conclusions  as 
to  the  subsistence  level  ? 

Mr.  Ogburx.  Well,  yes;  one  would  think  so. 

Mr.  Lauck.  Prof.  Ogburn,  you  prepared  a  budget  in  the  Seattle 
Street  Railway  arbitration  that  is  reprinted  in  this  pamphlet  on 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION".    1827 

page  30.  Could  you  explain  that  budget  to  the  commission  ?  That  is 
another  minimum-comfort  budget.  Was  tliat  budget  awarded  by 
the  board  and  made  the  basis  of  the  rate  of  pay  to  the  Seattle 
emploj^ees? 

Mr.  Ogburx^.  What  page  is  that  on  ? 

Mr.  Lauck.  Page  30. 

'Mi\  Ogburx.  Yes ;  that  budget  w^as  made  somewhat  in  the  follow- 
ing manner;  There  w^as  trouble  on  in  Seattle  in  regard  to  the  rail- 
way- situation  out  there,  and  I  believe  they  had  a  strike  of  two  or 
three  weeks,  and  they  submitted  it  to  a  board  of  arbitration,  of 
which  Dr.  Suzzalo,  president  of  the  university,  was  chairman.  And 
Dr.  Suzzalo  asked  his  department  of  economics  and  socioiogj^  to 
make  a  study  of  the  living  costs  of  motormen  and  conductors''  fami- 
lies and  set  a  budget  in  Seattle.  That  was  in  1917,  I  believe.  And 
Prof.  Parker  and  myself  and  several  of  the  other  men  conducted  an 
investigation  over  the  city  and  set  this  figure  of  $1,505.  And  they 
discussed  this  budget,  I  am  told — I  was  not  at  the  meeting  or  on  the 
board — but  they  discussed  it  a  couple  of  days,  I  understand,  and 
accepted  it  without  a  single  change  at  tliat  time.  And  that  budget 
there  of  $1,505  in  Seattle  in  1917  was  what  I  conceived  to  be  a 
minimum-comfort  budget  at  that  time;  that  is  to  say,  it  compares 
with  my  $1,700  budget  somewhat  later  on. 

Mr.  Lauck.  To  bring  it  up  to  date,  it  would  be  approximately 
what  3'our  minimum-comfort  budget  would  be  now  in  terms  of 
nioney  ? 

Mr.  Ogburx%  Yes. 

Mr.  Lauck.  Between  $1,900  and  $2,000? 

Mr.  Ogburx.  Yes;  approximately  that. 

Mr.  Lauck.  The  board,  headed  by  Dr.  Suzallo,  of  the  University 
of  Washington,  adopted  this,  and  there  was  a  representative  of  the 
company  on  the  board? 

Mr.  Ogburx.  Yes. 

Mr.  Lauck.  As  the  result  of  your  studies  there  in  the  faculty  of 
the  L^niversity  of  AVashington  ? 

Ml*.  Ogburx.  Yes. 

Mr.  Lauck.  They  worked  that  out  in  terms  of  hourly  rates  which 
they  gave  to  motormen  and  conductors  ? 

Mr.  Ogburx.  Yes. 

Mr.  Lauck.  You  referred  to  another  budget,  of  Dr.  Piexotto. 

Ail'.  Ogburx.  Yes;  Dr.  Piexotto  is  quite  a  prominent  student  of 
budgets  and  has  been  very  active  in  social  matters  on  the  Pacific 
coast;  and,  of  course,  anything  that  she  draws  up  in  regard  to 
budgets  is  worthy  of  ^ery  careful  consideration,  because  she  is  very 
much  of  a  trained  worker.  And  she  set  a  budget  at  about  the  same 
time  as  the  Seattle  budget  I  have  just  been  speaking  about,  of  ap- 
parently the  same  level,  of  $1,476,  which  is  approximately  the  same 
figure  as  the  oi^  we  set  at  Seattle.  I  think  that  budget  was  per- 
haps for  the  Pacific  coast,  which  would  be  quite  comparable  with  the 
Seattle  situation,  I  imagine. 

Mr.  Lauck.  As  I  recall,  it  was  for  an  arbitration  board  of  the 
Oakknd  (Calif.)  Street  Railway. 

Mr.  Ogburx.  I  am  not  sure  about  that.    Maybe  it  was. 

Mr.  Lauck.  But  that  was  approximately  your  minimum-comfort 
level  if  brought  up  to  date,  was  it  not  ? 


*) 


ifif 


1828    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  So,  I  gather,  your  general  conclusions  are  that  wages 
to  be  adequate  now  should  be  based  on  an  income  approximately  of 
$1,900  to  $2,000  after  making  allowance  for  the  increased  cost  of 
living  since  these  budgetary  standards  have  been  worked  out. 

Mr.  Ogburn.  Yes.  I  would  not  necessarily  say  that  would  be  a^e- 
qiuite.  It  might  not  necessarily  be  adequate,  but  it  would  give  them 
a  little  bit  more  than  a  fair  subsistence.  It  would  give  them  what  I 
call  a  minimum-comfort  allowance.  It  would  be  a  minimum-comfort 
budget. 

Mr.  Lauck.  You  might  say  it  would  remove  the  element  of  inade- 
quateness  and  make  them  barely  adequate. 

Mr.  Ogburn.  Yes;  I  would  say  that. 

Mr.  Warren.  It  would  give  them  the  equivalent  of  what  $1,760 
would  have  given  them  in  June  a  year  ago. 

Mr.  Ogburn.  Yes. 

Mr.  Lauck.  I  believe  these  are  all  the  questions  I  have  to  ask. 

Mr.  Warren.  Mr.  Lauck,  before  the  questions  Were  asked,  you  said 
something  about  76  cents  an  hour. 

Mr.  Lauck.  Yes. 

Mr.  Warren.  Was  that  on  the  $1,900  or  the  $2,000  estimate? 

Mr.  Lauck.  I  was  estimating  that  if  Prof.  Ogburn's  budget  of 
June,  1918,  if  brought  up  to  June,  1919,  was  increased  12  per  cent, 
making  it  $1,941,  then  I  applied  Mr.  Sturgis's  325  days  a  year  and 
assumed  an  eight-hour  day,  and  that  would  make  it  76  cents  an  hour, 
because  we  were  going  to  contend  for  an  eight-hour  day,  and,  there- 
fore, I  developed  this  hypothetical  rate  as  being  an  adequate  rate 
on  that  basis. 

Commissioner  Wehle.  What  is  the  average  number  of  hours  a  day 
of  service  of  a  platform  man  ? 

Mr.  Lauck.  I  am  not  at  all  an  expert  on  that,  but  I  think  it  was 
about  9J  or  9  hours. 

Mr.  Warren.  Nine  to  nine  and  one-half. 

Mr.  Lauck.  That  is  the  time  paid  for. 

Commissioner  Wehle.  Is  the  overtime  beyond  eight  hours  ordi- 
narily paid  at  time-and-a-half? 

Mr.  Warren.  Beyond  nine  hours. 

Commissioner  Wehle.  Beyond  nine? 

Mr.  Warren.  Mr.  Sturgis  testified  this  morning  that  Chicago  and 
Boston  have  eight  hours,  but  I  think  he  said  those  were  the  only 
places. 

Mr.  Lauck.  Do  you  care  to  ask  anything  further  ? 

Mr.  Warren.  I  suppose  you  have  not  studied  the  cost  of  living  of 
street  railways  as  supported  by  the  nickel,  have  you.  Prof.  Ogburn? 

Mr.  Ogburn.  No,  sir.  I  notice  a  little  news  on  that  in  the  subway 
every  morning  as  I  ride  down  in  New  York ;  but  other  than  that 

Mr.  W^arren.  You  do  not  know  any  reason  why  the  cost  of  living 
has  not  gone  up  in  the  same  proportion  ? 

Mr.  Ogburn.  No;  I  imagine  the  nickel  has  shrunk  for  the  owners 
of  the  street-railway  lines  as  much  as  it  has  for  the  workmen. 

Mr.  Warren.  You  said  that  $2,000  looked  large,  but  when  meas- 
ured by  what  it  would  get  it  w^as  not  very  much. 

Mr.  Ogburn.  Yes. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1829 

Mr.  Warren.  That  might  be  true  even  of  a  10-cent  piece  now  ? 

Mr.  Ogburn.  Yes.  I  think  the  raw  materials  we  speak  of  as  going 
into  industry  have  gone  up  just  as  much  as  the  cost  of  living,  if  not 
more.  Wholesale  prices  shift  somewhat  more  widely  than  retail 
])rices. 

Mr.  Warren.  And,  if  anything,  have  gone  up  faster. 

Mr.  Ogburn.  Yes;  usually  they  go  up  a  little  bit  earlier  and  per- 
haps swing  a  bittle  bit  more. 

Commissioner  Gadsden.  I  would  like  to  ask :  In  the  investigations 
for  the  War  Labor  Board  which  you  have  made,  what  industries  you 
found,  if  any,  having  practically  in  effect  this  minimum  wage.  I 
do  not  mean  street  railroads  now,  but  I  mean  unregulated  industries, 
we  will  say.  Are  there  many  of  them  whose  wage  scales  comply  with 
this  budget,  in  your  judgment? 

Mr.  Ogburn.  Well,  I  do  not  know  that  I  am  qualified  to  answer 
that  question.    I  can  give  you  an  opinion  in  a  way. 

Commissioner  Gadsden.  I  want  to  ask  you  within  the  limit  of  3^our 
investigation  for  the  War  Labor  Board.    I  put  it  that  way. 

Mr.  Ogburn.  Yes.  I  believe  the  awards  of  the  War  Labor  Board, 
for  the  lowest-paid  labor  in  the  industries  they  made  awards  in, 
were  sufficiently  high  to  equal  if  not  surpass  the  subsistence-level 
budget  when  computed  on  the  basis  of  earnings.  Now,  for  instance, 
if  you  take,  say,  42  cents  an  hour  and  work  an  eight-hour  day  with 
a  couple  of  hours  overtime  at  time-and-a-half,  that  would  have  come, 
at  the  time  the  War  Labor  Board  was  functioning — at  the  time  they 
set  their  precedents  and  decisions — ^to  about  between  $1,350  and 
$1,400,  which  was  the  bare  subsistence  budget  at  that  time.  Of 
course,  the  War  Labor  Board  did  set  wages  in  a  good  many  cases 
over  that  figures  for  various  employees  in  what  you  would  call  skilled 
labor.*  I  do  not  happen  to  remember  what  the  figures  for  skilled 
labor  were,  but,  of  course,  they  would  vary  widely  from  plant  to 
plant. 

Commissioner  Gadsden.  I  was  trying  to  develop  this  thought: 
Whether  outside  of  the  utilities  and  regulated  industrj^,  industry 
generally,  which  could  put  any  price  it  pleased  on  its  product  sub- 
ject to  the  laws  of  supply  and  demand,  were  paying  their  labor 
in  accordance  w^ith  a  budget  of  this  kind,  so  we  could  tell  how  we 
stood  with  untrammeled  industry. 

Mr.  Ogburn.  As  I  was  saying,  the  awards  of  the  War  Labor 
Board,  insofar  as  the  lowest  paia  labor  go,  did  equal  and  cover  this 
subsistence.  I  do  not  think  they  but  rarely  made  an  award  unless 
it  was  in  a  small  town  off  somewhere,  which  would  yield  returns 
less  than  the  bare  subsistence. 

Commissioner  Gadsden.  You  mean  42  cents  an  hour  with  two 
hours  overtime? 

Mr.  Ogburn.  Yes. 

Commissioner  Gadsden.  That  is  about  what  the  War  Labor  Board 
did  in  a  good  many  cases  in  the  case  of  street  railroads,  42  cents  an 
hour  with  an  hour  or  two  overtime. 

Mr.  Ogburn.  Yes. 

Commissioner  Gadsden.  So  on  that  basis  the  street-railway  in- 
dustry was  on  the  basis  of  those  awards  measuring  up  to  the  same 
standards  with  those  other  industries  ? 


fi 


11  Ml 


1830    PEOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOI^. 

Mr.  OoBUKx.  Tlmt  is  to  say,  42  cents  an  hour  on  the  sti-eet  rail- 
ways would  be  equivalent  to  42  cents 

Commissioner  Gadsden.  Yes;  the  same  42  cents  with  the  same 
couple  of  hours  overtime  would  produce  the  same  $1,350  or  $1,400, 
would  It  not  ?  y  V  ,      , 

Mr.  Ogburx.  Yes;  that  would  be  true. 

Commissioner  Gadsdex.  Then  how  do  you  reconcile  those  fi^rures 
with  Mr.  Sturgis's  figures  showincr  that  the  street  railway  wage  was 
much  less  than  that  ?  . 

Mr.  Ogburx.  I  do  not  remember  his  figures.  I  do  not  know  what 
they  were. 

.  ^'^n^^niissioner  Gadsdex,  Well,  my  recollection  is  that  he  said  that 
m  1900  It  was  $990  and  in  191G,  I  think,  or  in  1917,  $1,200.  Now 
what  I  am  trymg  to  develop  is  that  the  War  Liibor  Board  set  a 
standard  of  about  42  cents  an  hour  in  the  street-railway  industrv  and 
you  have  claimed  credit  for  the  other  industries  of  the  hour  or  two 
of  overtime.  That  is  really  the  point  I  am  getting  at.  You  have 
allowed  for  other  industries  in  addition  to  the  42  cents  an  hour  and 
the  eight  or  nine  hours  a  day  an  hour  or  two  overtime.  :N^ow,  of 
course,  is  it  not  fair  to  it  that  that  same  hour  or  two  overtime  should 
be  credited  to  the  street-railway  industry  if  it  is  ci'edited  to  other  in- 
dustries m  making  a  minimum  wjige  ? 

Mr.  Ogburx.  Well,  I  look  at  it  in  somewhat  this  wav— that  during 
the  war  period  labor  entered  in  upon  the  arena  with  a  certain  wao-e 
level  which,  in  a  good  many  instances,  was  what  one  might  call  in- 
adequate as  the  standard  goes,  particularly  when  one  thinks  of  what 
IS  called  common  labor,  and  pei^iaps  in  so  far  as  the  subsistence  level 
would  enter  into  it. 

Now,  most  of  the  industries  that  I  happen  to  have  known  about  in 
which  the  War  Labor  Board  made  their  decisions  were  industries 
m  which  there  was  considerable  pressure  for  working  overtime*  at 
least,  during  the  war  times  it  was  a  question  of  production  and 
driving  the  forces,  to  a  considerable  degi-ee,  and  yet  the  temper  of 
their  decisions  seemed  to  be  on  the  basis  of  earnings  rather  than 
rates.  That  is,  I  think  the  fact  that  a  familv  got  so  much— at  least 
during  the  summer  time  of  1918,  when  the'War  Labor  Board  was 
shaping  its  plicies,  its  common  labor  awards— resulted,  when  the 
use  of  overtime  was  in  vogue,  in  a  very  large  number  of  cases,  in 
giving  them  a  minimum  of  bare-subsistence  level.  But  what  they 
may  have  done  in  i-egard  to  skilled  labor,  I  am  not  at  all  sure  ex- 
actly what  may  have  happened  there.  And  I  do  not  know,  necas- 
sarily,  what  the  situation  may  be  now  when  the  drive  for  produc- 
tion is  not  so  great  as  it  was  and  the  overtime  does  not  come  in  so 
very  much. 

<biTfc  ^"fiR^'-^^^-  On  page  8  you  propose  a  minimum  budget  of 
$1,386,  and  on  page  13  you  propose  a  budget  of  a  level  above  the 
minimum  subsistence  of  $1,760.50.  Both  of  those  budgets  are  marked 
out  for  families  of  R\e.  Now,  have  you  any  figures  here  to  show 
what  a  budget  should  be  for  families  of  four  or  three  or  two,  or  for 
an  individual? 

Mr.  Ogburx.  No;  I  have  not. 

The  Chairmax.  Naturally,  if  this  budget  of  $1,386  provides  just 
the  minimum  subsistence  for  a  family  of  five  it  might  be  fairly  lib- 
eral  for  a  family  of  two  or  three,  might  it  not? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1831 

Mr.  Ogburx.  Of  course,  it  would  go  further  with  a  family  of 
two ;  there  is  no  question  about  that. 

The  Chairmax.  Do  any  of  the  industries  classify  wages  according 
to  whether  a  person  is  married  or  unmarried  or  whether  he  has  a 
family  of  Rvg,  three,  or  two  ? 

Commissioner  Mahox.  Or  seven  or  nine  ? 

The  Chairmax.  That  is  right. 

Mr.  Ogburx.  No.  But  the  point  you  are  speaking  of  now  is  usu- 
ally looked  at  in  this  way :  It  is  quite  a  job  to  work  out  these  budg- 
ets and  plan  them  out  and  make  careful  studies,  and  so  forth,  and 
students  of  social  problems  who  work  them  out,  work  them  out  for 
a  family  of  fixe  on  this  basis:  That  three  children  are  approximately 
necessary  on  the  average  for  the  survival  of  the  race.  That  is  to 
say,  a  man  and  wife  in  dying  should  be  succeeded  by  two  individu- 
als, and  two  children,  therefore,  should  grow  to  manhood  and 
womanhood,  to  the  marrying  age,  and  if  one  allows  the  chances  of 
death  to  strike  off  one  during  that  period  during  which  they  are 
growing  into  manhood  and  womanhood,  a  man  naturally  thinks  of 
three  children. 

The  Chairmax.  Is  that  the  average  family  in  this  country? 

Mr.  Ogburx  Very  nearly.  Then  there  is  a  good  deal,  of  course, 
which  centers  around  the  question  of  what  about  men  who  are  not 
married,  and  so  on.  It  is  supposed  to  be  a  pretty  good  ix>licy  to  en- 
courage early  marriage.  It  is  supposed  to  be  rather  a  desirable 
thing  for  the  health,  welfare,  morals,  and  so  forth,  of  the  commu- 
nity; and  it  is  also  considered  to  be  somewhat  better  for  marriage 
to  occur  early  and  have  children  to  be  born  fairly  early.  And  for 
all  these  reasons  it  would  seem  unwise  for  a  State,  inasmuch  as  it 
concerns  itself  with  the  minimum  race,  and  so  on,  to  set  anything 
lower  than  a  family  of  five.  That,  at  least,  has  been  the  policy  in 
the  past.  This  has  been  discussed  and  worked  out  after  considerable 
research.  Mr.  Rountree,  in  a  chapter  in  his  recent  book,  has  con- 
cerned himself  with  this,  and  he  takes  all  the  various  exceptions  that 
arise,  where  a  man  has  a  large  family  and  where  a  man  has  a  small 
family,  and  he  figures  on  stai-ting  in  and  saving  and  equipping  a 
home,  and  the  pressure  of  childi-en  as  they  come  on,  and  so  forth,  and 
he  has  a  good  deal  to  say;  and  I  may  say  the  result  of  his  conclusions 
particularly  justify  the  size  of  his  family.  I  think  it  has  been  ques- 
tioned by  others,  but  the  only  question— I  l^elieve  someone  was  tell- 
ing me  of  an  industry  in  Chicago  Avhich  was  thinking  of  consider- 
ing a  different-size  unit,  a  smaller  unit,  and  I  think  perhaps  on  one 
or  two  occasions  that  may  have  come  up  before  the  War  Labor 
Board— but  as  a  general  thing  there  has  not  been  very  much  dis- 
cussion on  that  point,  I  think. 

Commissioner  Meeker.  As  a  matter  of  fact,  Prof.  Ogbum,  is  not 
this  standard  family  chosen  rather  as  the  medium  ?  It  is  not  the  most 
expensive  family,  I  mean,  or  the  least  exi^ensive  family ;  it  is  about 
the  medium. 

Mr.  Ogburx.  Yes. 

Commissioner  Meeker.  The  theory  is  that  the  young  man  and 
the  young  woman,  according  to  the  War  Labor  Board,  should  be 
paid  the  same  wage  for  the  same  work  and  that  both  can  save  and 
.«:hould  save  in  order  to  start  housekeeping. 

Mr.  Ogburx.  Yes. 


■.,»■! 


1832    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Meeker.  And  when  they  have  started  housekeepin^r 
they  do  not  start  with  a  family  of  three  children  of  2,  5,  or  11  or  any 
other  age ;  they  start  without  any  children ;  and  in  that  period  the v 
ctm  and  should  save  against  the  greater  demands  that  will  come  with 
the  mcrease  of  the  family.  It  is  not  the  most  expensive  family.  The 
most  expensive  family  is  one  consisting  of  children  of  higher  ages. 
With  that  family  it  would  be  wholly  impossible  for  the  family  on  the 
income  indicated  to  make  both  ends  meet.  It  would  be  necessary 
for  it  to  set  aside  savings  in  order  to  pass  the  peak-load  period  when 
the  family  has  attained  the  greatest  degree  of  expensivcness.  Have 
I  made  that  clear  ? 

Mr.  Ogburn.  Yes. 

The  Chairman.  Any  further  cross-examination?  You  are  ex- 
cused, Prof.  Ogburn. 

Mr.  Lauck.  We  would  like  to  introduce  Mr.  L.  Magnusson. 
STATEMENT  OF  MK.  LEIFUR  MAGNUSSON. 

Mr.  Lauck.  You  have  stated  your  name.  Will  you  state  your  pres- 
ent position  and  previous  occupation  ? 

Mr.  Magnusson.  My  occupation— I  supix)se  I  would  call  myself 
an  economist,  interested  in  labor  problems  particularly.  I  happen  to 
be  employed  in  the  Bureau  of  Labor  Statistics,  but,  of  course,  on  this 
occasion  1  do  not  represent  the  Bureau  of  Labor  Statistics. 

Mr.  Lauck.  You  wei-e  trained  for  your  work  as  an  economist  and 
statistician  where? 

Mr.  Magnusson.  Most  of  the  years  in  the  Bureau  of  Labor  Sta- 
tistics, except  one  year  with  the  Commission  on  Industrial  Relations 
and  for  a  brief  period  with  the  National  War  Labor  Board. 

Mr.  Lauck.  Before  that  you  received  academic  training  in  statistics 
and  political  economy,  I  suppose  ? 

Mr.  Magnusson.  Yes;  the  usual  college  training  in  economics, 
statistics,  and  so  forth. 

Mr.  Lauck.  How  long  have  you  been  in  this  line  of  work? 

Mr.  Magnusson.  I  have  been  nine  years  in  the  Government  service 
and  doing  practically  this  line  of  work  of  economics  and  labor  in- 
vestigations. 

Mr.  Lauck.  You  have  an  exhibit,  have  you  not,  or  rather  we  have 
an  exhibit  which  was  prepared  by  the  Bureau  of  Applied  Economics 
under  your  general  supervision  ? 

Mr.  Magnusson.  Yes;  this  is  a  study  or  compilation  of  wage  data 
in  various  industries  in  the  United  States.  I  will  explain  briefly 
what  is  the  nature  of  the  compilation. 

Mr.  Lauck.  Yes. 

Mr.  Magnusson.  It  is  based  very  largely  on  data  that  is  gathered 
by  various  official  bodies,  principally  the  Bureau  of  Labor  Statistics, 
and  presented  m  its  Monthly  Labor  Review.  Occasionally  the  sta- 
tistics were  secured  directly  from  the  unions  which  were  represented 
in  the  occupations  in  question,  and  the  marine  occupations,  of  course, 
were  secured  from  the  United  States  Shipping  Board. 
^  I  may  say  it  is  merely  an  attempt  to  present  impartially  the  exist- 
ing data  in  summarized  form  as  to  wage  rates  and  earnings  in  the 
different  industries  in  this  country—a  compilation  of  wage  rates  in 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT.    1833 

American  industry.  They  have  been  arranged  here  in  this  little  book- 
let in  alphabetical  order  beginning,  for  instance,  with  the  statement 
of  present  earnings  in  the  army  and  continuing  on  through  until— 
It  so  happens,  street-railway  employees  are  the  last  named.  I  am 
sure  It  IS  impartial  and,  to  the  best  of  my  knowledge  and  belief,  I 
think  it  is  correct,  as  nearly  as  can  be  obtained  from  authoritative 
sources. 

Mr.  Lauck.  How  was  the  data  obtained? 

Mr.  Magnusson.  As  indicated  here— largely  from  the  Monthly 
Labor  Eeview  of  the  Bureau  of  Labor  Statistics,  it  having  gathered 
the  matter  originally. 

Mr.  Lauck.  Also  a  study  of  union  rates  of  wages? 

Mr.  Magnusson.  Also  a  study  of  union  rates  of  wages  from  the 
union  records  themselves. 

Mr.  Lauck.  And  you  have  covered  the  principal  basic  industries 
fis  well  as  the  leading  skilled  trades  and  the  metal  trades  and  ship- 
yards and  arsenals? 

Mr.  Magnusson.  I  think  we  have  everything  in  here  on  which 
there  is  anything  available,  indiscriminately. 

Mr.  Lauck.  That  is  brought  practically  up  to  date,  is  it  not? 

Mr.  Magnusson.  I  think — I  do  not  include  any  teachers'  pay  rolls 
here,  and  I  think  such  data  are  available  in  the  Bureau  of  Educa- 
tion, but  I  think  it  is  practically  everything  that  can  be  gotten  on 
the  subject.     That  is,  that  appears  in  printed  form  and  is  available. 

Mr.  Lauck.  I  asked  you  to  prepare  a  statement,  showing  on  the 
basis  of  an  eight-hour  day,  what  would  be  the  daily  earnings  in 
these  occupations  in  1914  and  1919  and  the  relative  increase  since 
1914. 

Mr.  Magnusson.  Taken  from  this,  about  100  of  the  principal  oc- 
cupations, and  of  the  wage  rates  there  presented,  assuming  that  a 
man  works  eight  hours  a  day  in  1914  and  1919  you  can  find  out  very 
readily  what  his  daily  earnings  have  been.  These  I  have  arranged 
in  a  table  according  to  the  mount  of  earnings  in  1919,  beginning 
with  the  highest  daily  earnings  down  to  the  lowest  daily  earnings  in 
1919.     I  find  there ^ 

The  Chairman.  AVhat  page  is  that? 

Mr.  Magnusson.  It  is  not  anywhere  in  there.  It  is  a  special  ex- 
hibit ;  a  kind  of  summary.  It  is  not  in  the  booklet.  When  I  refer 
to  the  booklet  I  call  attention  to  various  pages. 

The  Chairman.  Are  you  going  to  read  all  those  figures? 

Mr.  Magnusson.  No;  just  some  examples.  The  table  will  be 
submitted. 

Mr.  Lauck.  I  am  going  to  submit  the  tables  to-morrow  in  connec- 
tion with  our  brief. 

Mr.  Magnusson.  For  instance,  beginning  here  with  rollers  in 
sheet  mills  and  iron  and  steel  works,  their  daily  earnings  in  1919 
were  $20.60.  In  1914  they  were  $11.45,  an  increase  of  approximately 
80  per  cent.  Beginning  with  these,  the  highest  wage  earners,  I 
went  down  to  the  lowest  wage  earners. 

The  Chairman.  What  page  are  you  on? 

Mr.  Magnusson.  This  is  not  on "^  any  page.  It  is  a  summary  of 
the  exhibit  which  will  be  submitted  to-morrow. 


L  ^  I 


iP^r 


I 


m 


1834    PROCEEDI^STGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Lauck.  If  the  commission  would  like  it,  I  can  give  you  a  copy 
of  the  brief  we  are  going  to  submit  to-moiTow  and  you  can  be  look- 
ing over  this  table. 

The  Chairman.  No;  just  go  ahead. 

Mr.  Magnussox.  I  was  citing  these  few  examples.  The  lowest 
paid  are  the  trapper  boys  in  bituminous  coal  mines  in  the  Hocking 
V  alloy  district,  Avhich  in  1919  earned  $2.65  on  an  eight-hour  day. 
That  represents  an  increase  of  approximately  101  per  cent  over  their 
earnings  in  1914.     That  is  the  highest  and  the  lowest. 

In  that  list  I  may  point  out,  while  I  am  here — next  to  the  last 
are  motonnen  and  conductors  on  street  railways,  earning  $3.38  per 
day  and  42  cents  an  hour  as  against  $2.27  in  1914,  an  increase  of  ap- 
proximately 49  per  cent.  And  then  the  other  intervening  occupa- 
tions show  varying  rates. 

Mr,  IxcVucK,  Suppose  you  read  on  up  above  the  motormen  and  con- 
ductors. 

Mr.  Magnussox.  Conmion  laborers  in  iron  and  steel. 

Mr,  Lauck.  Will  you  explain  how  that  rate  of  42J  cents  in  1919 
was  arrived  at  for  motonnen  and  conductors? 

Mr.  Magxusson.  We  have  here  on  this  book  which  you  hold,  on 
page  51,  a  statement  of  the  maxinmm  hourly  rates  of  wages  of  motor- 
men  and  conductors  in  the  cities  named  there  in  the  left-hand  column. 

If  you  will  notice  those  are  the  maximum  rates.  It  takes  the 
motorman  about  2  yeai^,  as  I  undei'stand  it,  to  get  to  that  maximum, 
as  a  rule,  and  in  some  cases  10  years.  *'But  that  is  the  highest  they 
can  earn.    These  are  wage  scales  in  the  cities  named. 

By  adding  up  all  those  items  and  dividing  by  the  number  of  items, 
you  get  the  average  wage  scale  for  all  the  cities,  which  comes  to 
about  42^  cents. 

Mr.  Lauck.  How  many  cities  are  there?  One  hundred  and  twenty, 
are  tliere  not? 

Mr.  Magxushox.  Tliey  are  not  counted  here,  but  I  think  there  are 
something  over  100  cities  there,  principal  cities. 

Mr,  Lauck.  And  they  include  the  large  cities? 

Mr.  Magxussox.  They  include  the  large  ci'ies;  among  others  New 
York,  where  the  highest  earnings  are  paid  of  79  cents  per  hour  for 
motormen  on  the  elevated. 

Mr.  Lauck.  It  has  the  Boston  rate  of  GO  cents  per  hour,  has  it  not  ? 

Mr.  Magxussox.  The  Boston  elevated  and  surface  lines  have  60 
cents  per  hour. 

Mr.  Warrex-^.  Isn't  that  a  misprint  as  to  Boston,  for  the  motormen 
on  the  elevated  line  ?    I  think  they  get  62  or  62J. 

Mr.  Magxussox.  This  is  as  recent  as  we  could  get  it. 

Mr.  Warrex.  It  was  established  at  the  same  time  as  the  60.  I 
happen  to  remeniber  it.  I  was  down  here  at  the  time.  There  was  a 
strike,  and  after  the  strike  it  was  60  cents  for  the  surface  and  62 
cents  for  the  elevated.  I  judged  it  was  just  a  misprint,  probably. 
That  was  in  July. 

Mr.  Magxussox.  We  just  got  this  from  the  printer  this  morning. 

Mr.  Warrex.  I  think  you  might  check  that  i^hen. 

Ml'.  Ma(}xussox.  I  will  look  it  up. 

Mi*.  Warrex.  I  think  you  will  find  that  it  is  wrong. 

Mr.  Magxussox.  Surface  lines  in  Brooklyn  get  62  cents  an  hour, 
for  instance. 


fw 


PCOCEEDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIS'.    1835 


Tlie  lowest  there  anywhere  is  29  cents  per  hour, 

Mr.  Lauck.  You  have  a  rate  of  28  cents  an  hour  in  Galveston,  Tex., 
but  the  showing  for  all  the  rates,  the  high  and  low  averaged,  is  42  J 
cents  an  hour  for  approximately  100  cities,  representing  the  large 
and  the  small  together  ? 

Mr.  Magxussox.  Yes. 

Mr.  Lauck.  You  are  not  acquainted  with  the  rate  that  Mr.  Stur- 
gis  showed  this  morning? 

Mr.  Magxussox.  I  did  not  hear  that.    I  don't  know  what  that  was. 

Mr.  IjAuck.  I  think  his  rate  was  41  cents,  approximately,  or  41.04 
average  for  400  and  some  locals  out  there? 

Mr.  M.\gxussox\  As  I  say,  that  42J  cents  would  not  represent  the 
earnings  of  any  particular  motorman.  It  is  a  general  average,  as 
nearly  as  I  can  get  to  it.  They  would  earn  one  side  or  the  other 
of  that. 

Its  principal  value  is  in  that  it  makes  possible  comparison  with 
these  other  occupations  that  I  have  here,  which  are  treated  in  the 
same  Avay  and  show  where  the  motormen,  as  a  whole,  stand  among 
the  other  occupations. 

Mr.  Lauck.  For  instance,  your  bituminous-coal-mining  business, 
the  track  layers,  cagers,  or  drivers — any  occupation  in  the  coal  mines 
is  based  on  what  ?    The  general  bituminous  scale  ? 

Mr.  Magxussox.  Yes.  Coal  mining  you  will  find  on  pages  23  and 
24.    Most  of  the  rates  there  are  daily  rates. 

You  can  very  readily  see,  by  dividing  by  8,  that  you  will  get  a  con- 
siderably higher  rate  than  42|  cents,  except  in  the  case  of  trappers 
at  $2.65  a  day. 

In  the  anthracite  region,  page  23,  the  common  laborers  are  getting 
a  maximum  of  46  cents. 

The  contract  miners  are  getting,  by  computation,  as  you  will  see, 
64  to  69,  and  approximately  85  cents  per  hour. 

The  Chairmax.  Have  you  a  table  here  showing  the  wages  in  the 
railroad  service — steam  railroads? 

Mr.  Magxuss<^x.  We  have  got  the  railroad  shopmen,  some  of  them 
here  on  page  37.  Machinists  in  the  railroad  shops,  72  cents  in  1919. 
Blacksmiths,  the  same.  Boilermakers,  the  same,  of  course.  That  is 
fixed  by  a  general  order  of  the  Railroad  Administration;  compared 
with  the  rates  of  68  cents  in  1918. 

Ml*.  Lauciv-  They  are  at  present  on  an  8-liour  day,  too ;  are  they 

not? 

Mr.  ^L\gxussox.  Yes. 

Commissioner  Gadsdex.  Have  you  worked  out  any  general  aver- 
ages based  on  this  ? 

Mr.  Magxussox.  For  all? 

Commissioner  Gadsdex.  Yes. 

Mr.  Magxussox.  Except  this  general  table  that  we  have  here,  list 
of  oc  cujmtions,  in  the  oixler  of  their  daily  earnings. 

Commissioner  Gadsdex.  Whait  pi\ge  is  that? 

Mr.  MA(ixussox.  That  is  in  this  exhibit  that  is  going  to  be  sub- 
mitted.   It  is  a  sunnnary  table  of  everything  in  here. 

Mr.  Lai  CK.  Just  read  us  from  the  bottom.  The  point  we  want  to 
establish  is  that,  on  the  basis  of  an  8-hour  day,  in  1919,  considering 
the  average  for  motoimen  and  conductors  for  the  whole  country, 


i 


!    i  1 


V 


•I 


1836    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

they  are  the  lowest  paid  employees  of  these  100  occupational  groups 
tliat  we  have  ? 

Mr.  Magnusson.  Eeading  up,  beginning  with  motormen  and  con- 
ductors, we  found  that  their  earnings  were  $3.38  on  an  8-hour  basis ; 
common  laborers  in  iron  and  steel,  $3.48 ;  laborers  in  the  navy  yards, 
$3.56.  Greasers  and  couplers  in  the  bituminous  coal  mining,  Hock- 
ing Valley  District,  $3.(54;  laborers  in  the  arsenals  of  the  (lovern- 
ment,  $3.68  per  day;  in  the  shipyards  of  San  Francisco,  laborers, 
$4.16;  hod  carriers  and  masons'  attendants  in  the  building  trades, 
$4.29 ;  anthracite-coal-mining  laborers,  $4.68 ;  the  same  for  carpenters 
in  that  industry;  longshoremen,  coastwise,  $4.74;  tracklayers,  help- 
ers, dumpers,  trimmers,  in  the  bituminous  coal  region,  Hocking 
Valley,  $4.75. 

Commissioner  Gadsden.  Have  you  got  any  other  utilities  in  there — 
besides  street  railroads — any  other  regulated  industry — telephone, 
water,  gas,  or  electric? 

Mr.  SIagnusson.  We  have  not.  I  tried  to  secure  those  but  no  one 
seemed  to  have  any  compilation  on  them. 

Connnissioner  Gadsden.  It  would  be  a  helpful  comparison ;  would 
it  not  ? 

Mr.  Magnusson.  Yes, 

Commissioner  Gadsden.  Those  comparisons  are  comparing  em- 
ployees in  a  i*egulated  industry  whose  income  is  fixed  by  law  with 
wages  paid  to  employees  in  industry  unregulated? 

Mr.  Magnusson.  Yes.  There  is  just  this  one  instance  that  I  can 
cite. 

Conmiissioner  Gadsden.  It  would  be  helpful  to  us  if  you  would 
give  us  a  comparison  of  street-railway  employees  and  employees  in 
other  public  utilities. 

Mr.  Magnusson.  I  can  only  give  you  this  interesting  instance.  Up 
in  New  York,  in  the  Consolidated  Gas  Co.,  they  are  paying  their 
ashmen  68  cents  per  hour.  That  is  just  an  example  up  tnere  m  New 
York ;  but  I  have  no  general  information. 

Commissioner  Gadsden.  New  York  would  not  be  a  fair  comparison 
as  a  scale. 

Mr.  Magnusson.  They  paid  their  motormen  up  there  in  New 
York  79  cents.  I  just  read  that  a  little  while  ago.  Motormen  on  the 
elevated  and  the  Brooklyn  Rapid  Transit  are  getting  79  cents,  and  on 
the  surface  lines  62  cents.  As  I  say,  by  comparison  with  ashmen  in 
the  Consolidated  Gas  Co.,  they  are  getting  68  cents  per  hour. 

Electricians  are  included.  In  the  shipyards  of  Delaware,  for  in- 
stance, they  are  making  $6.40  a  day. 

The  Chajkman.  That  book  is  going  to  be  put  in  evidence;  it  is 
going  to  be  filed,  is  it  not? 

Mr.  Magnusson.  That  book  will  be  filed  and  this  other  one  also 
will  be  filed. 

No  studies  have  been  made  of  the  other  utilities.  We  have  no  in- 
formation on  it  except  what  is  in  the  record  of  particular  com- 
i:>anies. 

Commissioner  Mahon.  You  made  I'eference  to  trappers  in  the 
mines.    They  are  boys,  are  they  not? 

Mr.  Magnusson.  Yes;  they  are  just  underpaid  boys. 

Commissioner  Mahon.  They  are  just  boys? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1837 

Mr.  Magnusson.  Yes. 

I  made  a  list  of  the  occupations,  which,  since  1914,  as  I  run  through 
this  list,  have  increased  their  wages  100  per  cent  or  higher.  That 
may  be  useful  in  connection  with  the  street  railways,  in  which  it 
appeal's  that  the  ordinary  average  increase  appears  to  have  been  in 
the  neighborhocrd  of  50  or  60  per  cent  at  the  highest. 

The  following  occupations  have  had  increases  of  100  per  cent  or 
over,  such  as  privates  in  the  musicians  in  the  Army;  machinists' 
helpers;  oilers;  machine  operators  at  Government  arsenals:  brick- 
layers; carpentei-s;  painters;  plumbers  in  Charleston,  S.  C. ;  also 
plumbers  in  Baltimore,  and  so  forth ;  steamfitters  in  Boston,  Man- 
chester, Providence  and  Baltimore;  firemen  and  machinery  repair- 
men; inside  and  outside  laborers  in  the  anthracite  coal  mmes  have 
had  wages  increased  over  100  per  cent;  the  various  kinds  of  dredge 
workers  on  the  Great  Lakes;  farm  labor  in  Delaware;  the  firemen 
on  ferry  boats  in  New  York;  and  practically  all  workers  on  the 
nonpropelled  boats  in  New  York  Harbor ;  practically  all  occupations 
and  departments  in  the  steel  industry;  longshoremen  in  Philadel- 
phia, Baltimore,  and  Norfolk;  the  coastwise  longshoremen  in  Bos- 
ton, Philadelphia,  Baltimore,  and  Jacksonville;  and  practically  ail 
occuptions  in  the  marine  have  had  increases  of  over  100  per  cent 
since  1914. 

Mr.  Lauck.  The  general  conclusions  that  you  make  from  this 
comparison  and  the  approximately  100  occupations  is  then,  as  I 
gather,  Mr.  Magnusson,  that  of  these  100  occupations  the  daily  earn- 
ings on  an  eight-hour  basis  of  motormen  and  conductors  in  1919  are 
practically  the  lowest,  with  the  exception  of  trapper  boys  in  tho 
mines,  who  are  below  the  age  of  maturity,  are  they  not  ? 

Mr.  Magnusson.  Yes. 

Mr.  Lauck.  And  also  that,  with  the  exception  of  the  printing 
trades,  which  did  not  feel  the  pressure  of  the  w  ar  particularly,  and 
the  building  trades  w^here  they  secured  increased  earnings  largely 
from  overtime,  that  the  rate  of  increase  of  48  per  cent  to  motormen 
and  conductors  was  practically  the  lowest  rate  of  increase  of  any 
class  of  industrial  w  orkers ;  was  it  not  ? 

Mr.  Magnusson.  Yes;  outside  of  those  you  mentioned,  the  lino- 
type operators  and  compositors  and  a  few  building  trades,  that  is 
the  case;  particularly  bricklayers  in  the  building  trades.  In  the 
case  of  carpenters  most  of  them  w^ent  into  the  shipyards  and  drew 
the  shipyard  wages. 

Mr.  Lauck.  That  is  all  the  questions  I  have  to  ask. 

Mr.  Warren.  May  I  ask  a  few  questions,  Mr.  Chairman? 

The  Chairman.  Certainly. 

Mr.  Warren.  On  this  schedule,  as  I  understand,  the  average  rate 
is  obtained  by  adding  all  these  1919  rates  up  and  then  by  dividing 
by  the  number  of  names  appearing  in  the  left-hand  column? 

Mr.  Magnusson.  Not  by  the  number  of  cities,  but  by  the  number 
of  items  entered  there,  scaled.  You  see,  under  Boston  there  are 
four  scaled,  and  the  same  under  New  York. 

Mr.  Warren.  Take,  for  instance,  as  you  run  down  the  list — I  see 
Bridgeport,  Conn.,  45  cents.    Did  that  count  once? 

Mr.  Magnusson.  Yes. 

Mr.  Warren.  Then  Hai-tford,  Conn.    Did  that  count  again? 


1838    PKOCEEDINGS  OF  FEDEBAL  EMICTEIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1839 


Mr.  Maonusson.  Yes. 
Mr.  Wabren.  And  so  chq? 

Mr.  Magxusson.  Yes.  ^r    .1     a  .1     i^- 

Mr.  Warren.  And  I  notice  in  that  list  for  the  North  Atlantic 
States  that  there  are  12  cities,  all  of  which  are  on  the  Bay  State  Co.? 

Mr.  Magnusson.  Yes.  ^      ^        r^ 

Mr.  Warren.  And  with  all  of  which,  together,  the  Bay  State  Co 
represents  a  much  smaller  number  of  men  than  the  Boston  Elevated  \ 

Mr.  Maonusson.  Surely.    It  is  an  unweighted  average,  of  course. 

Mr.  Warren.  But  I  mean  that  one  company  would  count  12  times 
as  against  tlie  Boston  Elevated  once  ? 

Mr.  Magnusson.  Yes.  r^       -  1  j 

Mr.  Warren.  And  the  same  with  the  Connecticut  Co.;  it  would 
cx)unt  six  times— Hartfoixl,  New  Haven,  Bridgeport,  and  so  on  ? 

Mr.  Magnusson.  Yes. 

Mr.  Warren.  I  just  wanted  to  make  sure  that  that  is  the  way  you 

figured  it.  '  ..  •  #    1 

Mr.  Magnusson.  Yes.  It  is  very  rough.  Tliat,  of  course,  if  the 
company  had  a  low  average  there,  would  tend  to  increase  the  aver- 
age. ^         .  ,  , 

•Mr.  Warren.  Suppose,  for  the  12  Bay  State  items  there,  each 
of  which  counted  once,  you  had  put  the  new  rate  which  is  fixed  by 
the  War  Labor  Board,  which,  I  understand,  is  51  cents;  it  would 
make  quite  a  difference  in  the  result,  would  it  not? 

Mr.  Ma«nus8on.  51  cents. 

Mr.  Warren.  Instead  of  45? 

Mr.  Magnusson.  Bridgeport,  Ccmn.,  has  been  raised  to  51? 

Mr.  Warren.  No.  Not  Bridgeport,  but  the  Bay  State  cities,  be- 
ginning with  Brockton,  Chelsea,  Fall  River,  Gloucester,  Haverhill, 
Lowelh  Lvnn,  Quincy,  etc.  ? 

Mr.  Ma<5Nusson.  Yes;  that  being  raised  to  51  might  make  some 

difference.  .  „   « 

Mr.  Lauck.  But  it  would  not  cliange  it  materially  ? 

Mr.  Magnusson.  It  would  not  change  it  materially,  because  that 
is  only  one  out  of  all  these  others. 

Mr.  Warren.  It  is  12. 

Mr,  Magnusson.  Those  12  cities  there  are  at  that  Bay  State  rate. 

Mr.  Warren.  It  is  all  one  company,  you  understand. 

Mr.  Magnusson.  Yes. 

Mr.  Warren.  So  those  12  cities  are  all  one  company- 
Mr.  Magnusson.  Yes. 

Mr.  Warren.  And  the  six  Connecticut  cities  are  all  one  company. 

Mr.  Magnusson.  Yes;  I  do  not  think  it  would  raise  it  very  ma- 
terially.   I  would  have  to  add  it  up  to  see. 

Mr.  Warren.  Tlien  Springfield,  you  have  $3.87.  That,  I  hapi)en 
to  know,  was  raised  to  $5.13,  because  I  was  on  the  arbitration  board; 
and  the  same  in  Worce^er — it  was  raised  to  57. 

Mr.  Magnusson.  You  miderstand  these  changes  are  taking  place 
very  rapidlv.     While  vou  are  printing  you  can  not  keep  track  of  it. 

Mr.  W.'VfiREN.  That  ^  is  just  what  1  want  the  commission  not  to 
overlook,  that  these  changes  ai-e  taking  place  very  rapidly. 

Mr.  Ma(;nusson.  Most  of  these  wei-c  pretty  late  for  all  tlie  other 
occupations.  The  only  industry  tliat  has  been  changing  die  most 
rapidly  has.  i)erhaps,  been  the  street-railroad  industry. 


Mr.  Warren.  Yes.  Most  of  their  agreements  ran  out  about  the 
1st  of  June. 

Mr.  Magnusson.  Yes. 

Mr.  Warren.  And  either  through  the  War  Labor  Board  arbitra- 
tions or  separate  arbitrations  they  liave  been  adjusted  during  the 
summer,  and  some  are  still  pending. 

Mr.  Magnusson.  Yes. 

Commissioner  Saveet.  It  would  not  be  very  difficult,  would  it, 
Mr.  Warren,  to  correct  those  inaccuracies  in  that  table  ? 

Mr.  Warren.  I  do  not  think  it  would. 

Commissioner  Swi:et.  And  bring  them  down  to  date? 

Mr.  Warren.  I  do  not  think  it  would.  I  can  correct,  in  a  sort  of 
unofficial  way,  a  great  many  of  them,  from  my  own  acquaintance 
with  the  figures.  Of  course,  it  would  be  possible  to  lump  them. 
Take  those  12  Bay  State  cities,  each  appearing  at  45;  it  is  all  one 
company. 

Commissioner  Sweet.  Yes. 

Mr.  Warren.  And  it  is  a  company,  as  I  i-emember  it,  of  about 
one-third  of  the  size  of  the  Boston  Elevated,  whether  in  employees 
or  mileage  or  earnings  or  anything  else. 

Mr.  Magnusson.  There  is  this  to  be  said  about  that :  Even  if  you 
do  get  those  up  to  date,  the  errors  in  this  table  the  other  way  are 
equally  as  great  as  the  erroi-s  in  the  direction  you  have  pointed 
out,  because  these  include  the  unionized  cities  with  the  higher  wage 
scales,  and  do  not  include  the  hundreds  of  other  cities  wliich  are  not 
organized,  which  have  not  the-se  union  wage  scales  nearly  as  high; 
so  that  the  errors  would  probably  be  equal  both  ways. 

Mr.  Warren.  The  number  oi  nonunionized  cities — that  is,  not 
Amalgamated  cities — Philadelphia,  for  instance  ?     Is  that  in  here  ? 

Mr.  Magnusson.  It  is  not  in  here. 

Mr.  Warren.  That  was  testified  to  yesterday  as  58  cents.  How  is 
Milwaukee?     Is  that  in  here? 

Mr.  Magnusson.  Milwaukee  is  not  in  here. 

Mr.  Warren.  I  think  that  is  not  an  Amalgamated  city,  although 
they  have  a  union  of  their  own.    That  has  gone  up  to  a  high  rate,  too. 

Mr.  Lauck.  Did  you  hear  Mr.  SturgLs's  testimony  this  morning, 
Mr.  Magnusson? 

Mr.  Magnusson.  I  did  not 

Mr.  Lauck.  He  gave  the  returns  of  over  200  cities,  and  at  a  lower 
rate  than  you  show,  based  upon  the  scales  of  the  Amalgamated  Asso- 
ciation. 

Mr.  Warren.  That  was  as  of  January  1, 1  believe? 

Mr.  Lauck.  As  of  January  1 ;  yes. 

Mr.  Warren.  He  was  going  over  and  correct  it  and  bring  it  down 
to  date. 

Mr.  Magnusson.  I  tried  to  correct  this  and  bring  it  down  to  date, 
but  we  could  not  get  replies  in  tune,  so  that  I  had  to  depend  on  the 
reports  of  tha  Amalgamated  Association. 

Mr.  Warren.  I  think  it  has  been  going  up  so  fast  that  if  you 
make  a  stop  at  any  time,  by  the  time  you  set  it  in  print,  vou  will 
find  that  it  is  not  iip  to  date.    Isn't  that  so?^ 

Mr.  Magnusson.  I  want  to  point  out  that  there  are  probably  as 
many  cities  omitted  here  at  low  rates  as  there  are  cities  omitted  at 
high  rates ;  so  that  the  tables'  errors  probably  balance  both  ways. 


II 


1840    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

yo!f  wiKT"'  ^  *'''"''  ^^^  '"'■^*  "*'"''  '*'*'■*  ^''^y  """^'y  e°"''  "'P' 

Mr.  Maonussox.  Most  of  them  are  here,  the  larger  cities— outside 
of  Philade  ph,a  and  Milwaukee.  Duluth,'for  instance,  I  hVper  to 
know  about  IS  not  on  this  group  here,  but  the  rates  aJ-e  very  much 
lower  than  the  Amalgamated  Association  rates  for  cities  of  similar 

Mr.  Laucij.  The  statement  is  being  made  by  Mr.  Warren,  Mr 
trackTthem  "■"*"'  ^'^  ^'''"^  "P  "^  **'*  "'^*  ^""  «=*"  ""*  '^^'p 

n.  Jni%'^n"H"^.  V'%''-*'*  testimony  we  had  was  that  there  were  20 
?oi  a     t2  .  '"'*^  increased  their  rates  since  the  9th  of  Januarv 

1J18.    It  seems  to  me  that  those  statements  ought  not  to  go  into  the' 

S  ofTh.aJ  kiS"'"  '^'""^'^  '"*""'*  ^'''''  '°  ''''''  "  S-"«I  «tate! 

ofTh«t*iHnrf^  that  we  have  received  does  not  indicate  anything 
of  that  kind  at  all— that  increases  ai-e  being  made  in  the  prfncioal 
cities;  but  Mr.  Sturgis  indicated  for  over  200  cities,  in  jZuary 
the  rate  was  41.04  per  hour,  based  upon  the  actual  scales.  ^' 

Ihen,  the  best  testimony  that  we  had  this  morning,  including  the 
statemeiit  of  the  secretary  of  this  board,  who  was  foraierly  secretary 
of  the  War  Labor  Boar<5,  just  the  general  statement  was  that  S 
Zl^     i^^'tr'^  "'""i":  ""^^  **'■•  St"'gi«'s  statement  was  That 

ci^aLSir J:rnrno\'8*" ''  ""*  ^^^  '^^^  ^--p--  ^^-^  >-•  ■- 

crelL;  Mn  Wk?"^""  ^''^  ^''"  ^''  "'^  information  about  the  in- 
Mr  Lauck.  Mr  Sturgis's  exhibit  this  morning  was  based  upon  the 

actual  scales  of  the  Amalgamated  Association*^in  printed  form  as 

cr,ntamed  in  their  records.    They  e.xtended  to  Jan./ary,  as  I  under! 

stood,  of  this  year,  or  December  of  last  year. 
The  Chairman.  Do  you  want  us  to  take  it  as  a  fact  that  thern 

j"  uiarf  l,lTl8T  "'"'  "  "'^^'^  '"^"^^"^  '''''  ^-"  -'^^^  ^^ 

Mr  Lauck  No;  it  is  not  my  object  to  establish  the  fact,  but  I 
want  to  protest  against  the  statement  that  street-car  wages  are  Jing 
up  so  rapidly  that  we  can  not  tabulate  them;  because  I  do  not  think 
that  that  IS  m  accordance  with  the  facts.  I  think  that  there  have 
been  some  increases  since  January,  1918,  but  I  think  there  have  been 
comparatively  few  m  number  as  compared  with  the  industiV  afa 

The  Chairman    Of  the  thousand  street-car  companies  you  spoke 
tionf ""  "^^""^  ^''  "'""^'''  ""^  ^^'  AmalgamatJ  Associa- 

Mr.  Lauck.  I  could  not  answer  that. 

The  Chairman.  Can  you  answer  that,  Mr.  Mahon? 
^.^Commissioner  Mahon.  I  could  not  give  you  the  exact  informa- 

The  Chairman    Have  you  got  figures  which  will  show  that? 

Mr.  Mahon.  What  is  that? 

The  Chairman.  The  companies  or  the  number  of  companies,  in 
winch  increases  have  been  made  since  January,  1918 

Commissioner  Mahon.  Mr.  Chairman,  I  have  wired  to  our  office 
this  evening,  asking  them  to  tabulate  and  forward  that  information 


PROCEEDINGS  OF  FEDERAL  ELECTEIC  RAILWAYS  COMMISSION.    1841 

to  me  at  once.  It  will  take  a  few  minutes  for  them  to  do  it.  We 
have  our  records  of  each  raise  in  wages,  or  any  changes  in  wages 
that  come  in,  and  of  course,  it  is  tabulated  upon  our  records,  and  we 
print  them  once  a  year,  under  our  laws,  and  forward  them  to  all  our 
organizations,  and  then  correct  them  from  that  time  on  during  the 
year,  as  they  may  be  needed  in  different  cases. 

The  Chairman.  Will  the  information  we  get  from  your  office  be 
up  to  date? 

Commissioner  Mahon.  It  will  be  up  to  date,  right  up  to  the  day 
it  is  sent  out,  which  I  presume  will  be  to-morrow  morning.  I  wired 
them  this  evening  and  asked  them  to  send  it  to  me. 

The  Chairman.  Will  that  supply  the  information  you  are  asking 
for,  Mr.  Lauck? 

Mr.  Lauck.  Yes;  that  will  be  perfectly  satisfactory. 

Commissioner  Mahon.  I  hope  when  we  get  it  that  Mr.  Warren  will 
communicate  it  to  all  the  companies  and  have  them  all  come  up  to 
date  on  it.     I  have  that  hope. 

Mr.  Lauck.  That  is  all. 

The  Chairman.  It  is  practically  our  usual  hour  of  adjournment, 
and  it  is  hardly  worth  while  to  put  on  another  witness  this  evening. 

Mr.  Lauck.  We  have  one  more  witness,  Mr.  Chairman,  who  will 
be  here  the  first  thing  in  the  morning. 

The  Chairman.  Very  well.  We  will  adjourn  until  10  o'clock  to- 
morrow morning. 

(Whereupon,  at  10  o'clock  p.  m.  an  adjournment  was  taken  until 
to-morrow,  October  2,  1919,  at  10  o'clock  a.  m.) 


Washington,  D.  C,  October  2,  1919 — 10  a.  m. 
Met  pursuant  to  adjournment. 
Present:  Parties  as  before. 
The  Chairman.  You  may  proceed,  Mr.  Lauck. 
Mr.  Lauck.  I  will  call  Mr.  Jones. 


STATEMENT  OF  MK.  STILES  P.  JONES. 

Mr.  Lauck.  Will  you  give  your  full  name  to  the  reporter,  Mr. 
Jones  ? 

Mr.  Jones.  Stiles  P.  Jones. 

The  Chairman.  What  is  your  address,  Mr.  Jones? 

Mr.  Jones.  My  home  is  Minneapolis,  Minn. 

Mr.  Lauck.  Will  you  state  for  the  commission,  Mr.  Jones,  what 
your  experience  has  been  in  the  street-railway  industry?  You  have 
been  a  student  of  the  street-railway  problem  for  some  time. 

Mr.  Jones.  My  profession  is  that  of  a  newspaper  worker  and 
editor— reporter  and  editor.  My  special  field  is  Government  affairs 
of  the  municipalities  and  State.  That  was  my  work  for  15  years, 
up  to  1903.  At  that  time  I  became  the  executive  secretary  of  a 
movement  in  Minneapolis  known  as  the  Municipal  Voters'  League 
whose  work  was  to  revise  the  conduct  of  city  and  State  government! 

I  ^as  with  that  organization  for  11  years,  until  the  beginning  of 

160643°— 20— VOL  2 54 


It 


1842    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


184S 


My  work  in  that  connection  brought  me  in  contact  with  public 
Dtilitie-s  through  their  relations  with  the  municipality  and  public. 

I  took  a  great  interest  in  that  subject,  and  during  those  11  years, 
made  a  very  extensive  study  of  the  public-utility  problem,  with 
especial  reference  to  its  I'elation  to  city  and  State  government. 

That  study  took  me  all  over  the  iTnited  States,  the  northern  part 
of  the  United  States,  and  in  most  of  the  cities  of  that  district.  My 
studies  covered  tlie  fields  of  operation,  of  service  standards,  of 
franchises,  of  regulation,  and,  to  some  extent,  that  of  the  financial 
management  of  the  companies. 

Early  in  11)15,  with  the  imminence  of  the  street-railway  problem 
in  Minneapolis,  I  became  the  excH^utive  secretary  of  an  organization 
known  as  the  Pul)lic  Franchise  League,  whose  purpose  was  to  study 
thajt  proposition. 

That  organization  later  merged  into  a  larger  and  more  compre- 
hensive organization  known  as  the  Central  Franchise  Committee, 
a  committee  of  50  representing  every  civic  body  in  the  community. 

I  was  the  executive  secretary  of  that  organization  and  directed, 
with  its  executive  committee,  the  move  for  a  just  settlement  of  the 
street-railway  t^uestion  in  Minneapolis. 

I  analyzetl  the  various  valuations  made,  made  a  study  of  all  the 
court  decisions,  the  work  of  the  public-service  commissions  in  that 
connection,  and  all  the  other  tasks  connected  with  such  a  movement. 

At  the  siime  time,  1917, 1  was  employed  by  the  city  of  Minneapolis 
to  write  the  franchise.  That  franchise  was  the  l)asis  of  the  fran- 
chise that  has  now  l)een  submitted  to  the  voters  of  Minneapolis  for 
their  ratification.  This  new  franchise  is  my  franchise,  reconstructed 
into  a  service-at-cost  franchise. 

During  the  vear,  up  to  June  1  of  this  year,  I  was  an  employee  of 
the  National  \Var  Labor  Board  as  an  administrator  of  awards. 

I  think  that  covers  my  Avork  in  this  line. 

Mr.  Lauck.  Mr.  Jones,  during  the  past  two  months  you  have  l3een 
engaged,  with  the  assistance  of  other  persons,  in  preparing  a  general 
exhibit  as  to  financial  management  of  street  railways  in  the  past, 
have  vou  not  ? 

Mr.  Jones.  In  the  past  two  months  I  have  been  engaged  in  an  in- 
tensive study  of  the  financial  management  of  street  railways. 

Mr.  Lauck.  Wliat  has  been  the  object  of  that  stud}^ ;  to  afford  illus- 
trative examples  from  tlie  past  history  of  the  companies? 

Mr.  JoxKS.  A  great  deal  has  been  said  upon  tlie  question  of  over- 
capitalization of  street-railroad  companies.  It  seemetl  wLse  to  have 
something  more  than  a  general  statement,  no  matter  how  well  recog- 
nized that  might  be;  to  have  something  concrete  to  put  before  this 
committee  as  to  instances  of  this  overcapitalization. 

Mr.  Latchv.  You  have  prepared  an  exliibit,  have  you?  Have  you 
a  copy  of  that  exhibit  with  you? 

Mr.  Jones.  I  have.    I  have  my  own  copy. 

Mr.  Lauck.  Will  you  tell  us  what  is  the  title  of  that  exhibit  and 
explain  it  in  a  general  way  as  to  the  contents  ?  Indicate  the  extent 
to  which  it  has  gone  and  the  number  of  cities  you  cover  in  your  study. 

Mr.  Jones.  This  is  a  study  of  the  financial  mismanagement  of 
street  railways  presented  by  the  Amalgamated  Association  of  Street 
and  Electric  E  ail  way  Employees  of  America. 


Mr.  Lauck.  What  cities,  in  general,  have  you  covered? 

Mr.  Jones.  This  covers  some  18  or  20  cities,  with  one  or  two  excep- 
tions, cities  of  the  North.  Those  cities  are  representative  cities, 
they  have  not  been  picked  out  as  instances  of  notorious  overcapitaliza- 
tion. 

This  method  has  been  used  in  selecting  those  cities:  To  find  cities 
whei-e  it  was  possible  to  draw  fair  conclusions  as  to  the  overcapitali- 
zation through  some  comparative  basis  like  valuations  by  the  courts, 
by  the  public-service  commissions,  by  arbitration,  or  by  mutual 
agreement,  or  some  other  fair  method  by  which  comparisons  could 
justly  be  made. 

Mr.  Lauck.  You  consider  these  cities  representative  and  typical  of 
the  country  as  a  whole  ? 

Mr.  Jones.  These  cities  are  fairly  representative  of  the  situation 
in  the  United  States,  so  far  as  I  have  knowledge. 

Mr.  Lauck.  Probably  the  gi'eatest  economy  of  time  would  be 
secured  by  either  going  over  each  city  or  perhaps  it  would  be  better 
to  read  your  general  conclusions  from  this,  or  state  them,  and  then, 
if  the  commission  wishes,  we  can  take  up  each  city  and  explain  the 
situation  as  to  each  city. 

Mr.  Jones.  I  have  prepared  a  short  statement  which  gives  the  gen- 
eral and  concrete  methods  of  overcapitalization,  and  my  own  con- 
clusions; and  with  the  approval  of  the  commission,  I  will  read  that 
as  a  foundation  for  what  may  follow.     It  is  not  a  long  statement. 

The  present  unfortunate  predicament  of  the  street-railway  industry 
in  the  United  States  is  one,  in  large  part,  of  its  own  making,  created 
primarily  by  past  financial  mismanagement  over  which  the  public 
had  no  control  and  for  which  in  this  issue  it  can  not  justly  be  held 
responsible. 

A  study  of  the  financial  history  of  many  representative  companies 
discloses  an  amazing  story  of  financial  manipulation  clear  through 
the  life  of  the  properties,  the  results  of  which  have  been  to  load  them 
down  with  a  staggering  burden  of  overcapitalization  to  constitute  a 
permanent  charge  against  operating  revenue.  Tlie  ingenuity  of  the 
financial  management  in  creating  new  sources  of  capitalization  has 
been  without  limit.  Nothing  has  been  overlooked  upon  which  to 
hang  new  issues  of  securities. 

The  inevitable  result  is  seen  in  the  present  undermining  of  the 
financial  structure  of  street-railway  investments  in  this  country. 
The  credit  of  the  industry  is  so  impaired  that  it  can  no  longer 
finance  its  own  enterprises  on  possible  terms.  It  is  facing  collapse 
through  its  own  devices. 

The  methods  and  agencies  by  which  this  unfortunate  situation  has 
been  brought  about  frame  a  sordid  background  of  ruthless  exploita- 
tion.  of  a  great  public-serving  industry  to  make  financial  killings 
for  manipulating  insiders.  Unwarranted  promoters'  rewai'ds,  ex- 
cess consti-uction  costs,  consolidations,  mergers,  reorganizations, 
leases,  stock  bonuses,  have  all  been  made  the  medium  for  capital 
inflation.  Fi-ancliise  values,  excess  earnings,  prospective  future  earn- 
ing capacity,  discounts  on  securities,  even  operating  deficits,  have 
been  capitalized  to  further  add  to  the  burden.  Every  operating  im- 
provement, the  increased  efficiency  of  employees,  the  growth  and  de- 
velopment of  the  community  a^d  of  industry  have  been,  to  a  large 


'i:'i 


i 

■ 

! 


'*;. 


1844    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


extent,  used  as  a  means  to  absorb  fictitious  issues.  And,  finally,  let 
us  not  forget  the  ingenious  device  of  the  holding  company,  to  still 
further  complicate  a  before  complex  organization  situation  and  serve 
as  another  means  to  pyramid  capitalization  and  exact  additional 
toll  of  the  public. 

Besides  destroying  the  financial  credit  of  the  industry,  the  results 
of  such  practices  are  seen  in  other  ways  affecting  public  interests, 
as  follows: 

1.  Impaired  service:  To  meet  the  excess  exactments  of  capital, 
service  has  had  to  suffer. 

2.  Impaired  operating  efficiency :  The  effort  to  protect  the  integ- 
rity of  these  false  values  has  absorbed  the  effoiis  and  resources  of 
the  companies  to  such  an  extent  as  to  make  it  impossible  for  them 
to  fulfill  adequately  their  primary  function  as  public-serving  insti- 
tutions. Prior  recognition  of  the  interests  of  the  investor  has  made 
it  necessary  to  keep  down  wages  and  labor  and  to  postpone  expendi- 
tures calculated  to  improve  operation  efficiency. 

3.  Maintenance  has  been  robbed  to  meet  fixed  charges  and  pay 
dividends :  The  interest  of  capital  has  been  put  ahead  of  the  up- 
keep of  the  physical  proi)erty,  with  the  result  of  diminished  oper- 
ating efficiency  and  the  piling  up  of  an  enormous  load  of  deferred 
maintenance,  in  the  aggregate,  to  constitute  another  ultimate  bur- 
den upon  the  public. 

4.  The  public  attitude  toward  many  individual  companies  and 
the  industry  in  general  has  been  affected  to  such  a  point  that  amica- 
ble settlements,  franchises,  fares,  and  otherwise,  between  the  com- 
panies and  the  communities  are,  in  many  cases,  well-nigh  impossible, 
owing  to  the  present  state  of  the  public  mind.  This  is  pefhaps  the 
most  discouraging  aspect  of  the  present  situation,  as  well  as  the  most 
serious  indictment  of  the  past  methods  and  policies  of  the  industry. 

Now,  what  is  the  background  and  what  is  the  cause  of  this  atti- 
tude on  the  part  of  the  public?  I  have  spent  a  great  deal  of  time  in 
probing  the  public  through  the  country  in  pa>st  years  to  learn  its 
attitude  toward  the  street  railways.  It  is  an  interesting  and,  in  a 
way,  an  amazing  story.  I  think  that  it  is  of  great  interest  to  this 
commission  that  it  know  something  of  the  state  of  the  public  mind. 
Perhaps  in  the  testimony  that  has  been  heard  here  that  point  has 
not  been  stressed  enough.    It  is  of  vital  importance. 

Why  this  attitude  on  the  part  of  the  public  ? 

(a)  The  public  believes  generally  that  street-railway  companies 
are  grossly  overcapitalized  and  that  it  is  carr}  ing  the  burden  in 
higher  fares  than  necessary  or  inferior  service. 

(b)  Refusal  of  the  companies  to  lower  fares  in  other  days  when 
the  going  was  good. 

(c)  Attitude  of  the  companies  in  this  crisis  toward  their  public 
contracts. 

(d)  Arbitrary  attitude  of  the  companies  toward  the  public. 

(e)  Political  activity  of  the  companies. 

Mr.  Lauck.  Will  you  take  up  individual  cases  and  briefly  state 
the  history  in  representative  communities? 

Mr.  Jones.  There  has  been  a  good  deal  of  testimony  before  this 
commission  regarding  the  street-railway  situation  in  New  York. 
Apparently  it  is  as  acute  there,  if  not  more  so,  than  in  most  other 
cities. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1845 

The  study  of  the  development  of  the  transportation  industry  in 
New  York  City  is  a  long  one  and  a  sordid  one.  There  is  not  the 
time  here  to  go  into  it.  Apparently,  in  New  York  they  reached  the 
climax  of  human  ingenuity  in  devising  schemes  of  exploiting  the 
public  through  the  public  utilities. 

I  have  included  in  the  brief  which  is  before  the  commission  the 
story  of  the  development. 

The  more  important  part  of  the  development  of  the  street-railway 
industry  in  New  York,  as  reported  by  Burton  Kendrick,  a  magazine 
writer  of  a  decade  ago,  widely  known  through  the  country,  is  con- 
tained in  three  numbers  of  McClure's  Magazine  for  1907.  Mr.  Ken- 
drick's  charges  and  statements,  so  far  as  I  have  been  able  to  ascertain 
have  never  been  challenged.  McClure's  Magazine  was  reputable,  and 
any  judgments  against  that  concern  undoubtedly  could  have  been 
met.    So  I  think  we  may  assume  that  those  statements  are  cori^ct 

We  have  in  New  York  the  first  instance  that  I  have  run  into  in  the 
street-railway  industry  of  construction  through  the  means  of  the  now 
famous  cost-plus  system. 

One  instance  of  how  that  worked  out  in  New  York  is  the  Thirtv- 
fourth  Street  crosstown  line.  The  estimated  cost  of  that  improve- 
ment was  $150,000  a  mile ;  the  actual  cost,  under  the  cost-plus  svstem 
was  $1,067,000  a  mile.  With  that  statement  I  will  dismiss  New  York! 
One  of  the  most  noted  street-railway  contests  in  the  country  to-dav 
IS  that  involving  the  Public  Service  Co.  of  New  Jersey.  I  will  refer 
briefly  to  the  financial  situation  which  is  largely  the  basis  of  the 
present  troubles  there,  and  which  is  making  the  settlement  of  the 
fare  question  extremely  difficult. 

We  have  no  official  valuation  of  the  properties  of  the  Public  Serv- 
ice  Co.  of  New  Jersey  I  suppose  ultimately  the  public-service 
commission  is  to  undertake  this,  but  it  happens  that  the  municipali- 
ties  of  New  Jersey  combined  in  an  attempt  to  head  off  the  movement 
lor  excess  fares  over  the  lines  of  the  system. 

This  league  has  employed  eminent  men  to  conduct  this  campaign 
for  them  One  of  those  is  a  certified  public  accountant  by  the 
name  of  Mark  Wolf.  He  has  made  an  extensive  investigation  of  the 
hnances  of  the  company,  and  has  reported  officially  to  the  League  of 

tion  of  the  concern  to  the  amount  of  $157,000,000.  Mr.  Wolf  made 
an  examination  only  of  $54,749,500  of  the  aggregate  of  the  securities 
ot  the  company.  In  that  amount  he  found  an  inflation  of  $82,067  754 
or  a  percentage  of  53  per  cent.  '      ' 

Mr.  Lauck.  That  was  the  percentage  of  overcapitalization? 

Mr.  Jones  That  was  percentage  of  inflation-53  per  cent.  He  did 
not  work  out  the  other  percentage,  and  I  have  not. 

Commissioner  Gadsden.  Is  that  the  Public  Service  Co.  or  the  Pub- 
iic  Service  Railway  ? 

Mr.  Jones.  The  Public  Service  Railway  Co.,  I  should  have  said. 

Commissioner  Gadsden.  Railway  company  ? 

Mr.  Jones.  Yes. 

Mr.  Lauck.  Will  you  take  up  the  next  company,  Mr.  Jones? 

Mr.  Jones.  I  have  just  a  little  to  add  to  Mr.  Wolf's  statement 
This  capitalization  of  $157,000,000  represents  $200,000  per  mile 
Now,  in  each  case  I  have  included  here  the  capitalization  per  mile* 


1846    PKOCEEDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


i 


As  you  gentlemen  know,  that  by  itself  is  not  a  fair  basis  of  compari- 
son, because  the  condition  is  so  different,  the  character  of  construc- 
tion, the  amount  of  modern  paving  and  the  character  of  that  paving, 
the  amount  of  power  facilities  in  the  city — there  are  n^nj'  factors 
contributing  to  this  capitalization  per  mile,  and  it  is  difficult  and 
not  always  fair  to  make  these  comparisons.  But  they  are  of  value 
in  connection  with  other  facts  in  that  connection. 

Now,  Mr.  Wolf  says  that  during  the  mergers  and  consolidations 
effected  to  bring  about  the  present  Public  Service  Railway  Co.  as 
much  as  $25  of  the  stock  of  one  company  was  exchanged  for  $1  of  the 
stock  of  another  company.  In  one  case,  $22  in  bonds  was  exchanged 
for  every  $1  of  stock.  He  says  that  the  net  results  of  exchanges  in 
one  consolidation  was  that  $10,721,800  was  added  to  the  capitaliza- 
tion of  the  original  companies.  He  shows  in  another  case  that  there 
was  a  grand  total  of  inflation  of  both  stocks  and  bonds  in  connection 
with  another  series  of  consolidations  of  $29,250,200. 

Mr.  Lauctc.  That  is  included  in  your  exhibit,  is  it? 

Mr.  Jones.  It  is  all  included  in  my  exhibit. 

Mr.  Warken.  AVould  you  give  the  pa^^e? 

Mr.  Jones.  Again,  gomg  a  little  furtlier  in  Mr.  Wolfs  diagnosis, 
he  refers  to  the  rentals.  He  says  the  annual  rentals  of  the  I^ublic 
Service  Raihvay  Co.  are  excessive  to  the  extent  of  the  interest  on  the 
watered  bonds  and  guaranteed  dividends  on  watered  stock  which 
form  the  basis  for  rentals.  The  totiil  annual  fixed  charges  he  found 
to  be  $5,210^000  and  says,  "  An  investigation  of  about  85  per  cent  of 
the  securities  of  the  underlying  companies  which  form  the  basis  for 
rental  discloses  approximately  $1,201,000  excess  annual  rental.  In 
addition  the  annual  interest  on  bonds  which  ai*e  not  the  basis  for 
rental  was  found  excessive  to  the  extent  of  approximately  $550,000 
per  annum,  the  two  items  together  aggregating  $1,840,000  annual  fixed 
charges  ascei-tained  to  be  excessive.  In  addition  the  Public  Service 
Railway  Co.  expects  to  eani  a  4  per  cent  dividend  on  its  $50,000,000 
stock  outstanding.  Of  this  stock  approximately  $30,000,000  repre- 
sents no  iuA'estment.-' 

Commissioner  (tai>sden.  Mr.  Jones,  was  that  report  the  result  of 
that  investigation  given  to  the  Public  Service  Commission  of  New 
Jersey?    Was  that  a  part  of  their  recent  hearings? 

Mr.  Jones.  It  is  a  part  of  the  exhibits;  yes. 

Commissioner  (jadsden.  And  after  heanng  that  report 

Mr.  Jones.  I  should  have  said  that  all  these  facts  were  used  in  the 
hearings  befoi-e  the  New  Jersey  PubHc  Service  Commission. 

Commissioner  Gadsden.  After  a  full  hearing  the  commissioners 
of  New  Jersey  put  in  the  recent  zone  fare,  did  they  ? 

Mr.  Jones.  Yes. 

Commissioner  Gadsden.  So  that  they  had  the  benefit  of  that  in- 
vestigation befoi-e  them? 

Mr.  Jones.  They  had  the  benefit  of  all  those  facts. 

Commissioner  Gadsden.  And  after  having  that,  the  commission 
rendered  its  judgment? 

Mr.  Jones.  I  understand  so. 

Mr.  Lauck.  In  that  connection,  Mr.  Jones,  it  is  not  our  purpose, 
I  think  as  you  understand  and  I  might  explain  to  the  commission — 
ill  submitting  the  financial  matter  as  bearing  upon  fares,  we  con- 
sider it  largely  a  pjjst  episode.    But  as  indicating,  where  there  has 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1847 


been  financial  difficulty,  that  it  has  been  due  to  financial  misman- 
agement in  the  past  and  that  a  continuation  of  this  method  would 
lead  to  the  absorption  of  further  operating  revenues  which  would 
be  a  distinct  disadvantage  to  labor.  I  mean,  we  are  not  primarily 
concerned  with  the  fares  asked  for. 

Commissoner  Gadsden.  Is  not  the  inevitable  effect,  Mr.  Lauck,  of 
testimony  of  this  kind,  as  we  say,  going  into  the  history  of  the  past, 
to  undermine  the  whole  structure  of  electric-railway  rates  in  this 
country  to-day?    Is  not  that  going  to  be  the  net  result  of  it? 

Mr.  Lauck.  I  think  that  that  is  something  that  has  already  been 
done  and  this  evidence  would  have  no  effect  upon  it.  It  is  my  \>cr- 
sonal  opinion  that  the  past  financial  mismanagement  has  so  im- 
)>aired  the  credit  now  that  the  public  will  insist  that  there  be  some 
basis  of  procedure  on  the  basis  of  fair  valuation  or  some  reorgani- 
zation of  the  finances.  I  do  not  think  anything  that  we  could  sub- 
mit here  would  further  add  to  what  has  been  done  in  that  regard. 

The  Chairman.  Proceed,  Mr.  Jones. 

Mr.  Jones.  The  next  case  is  that  of  Chicago 

Mr.  Warren.  Before  you  leave  the  Public  Service  Co.,  did  you 
state  the  mileage  of  the  company? 

Mr.  Jones.  I  think  it  is  in  the  brief. 

Mr.  Warren.  I  do  not  find  it  in  the  brief,  that  is  all. 

Mr.  Jones.  Well,  I  can  state  it.    It  is  very  close  to  800  miles. 

1  will  refer  here  very  briefly  to  the  Chicago  railways'  situation 
prior  to  the  organization  of  1907  and  the  present  situation  in  that 
city.  They  are  entirely  different  pro}X)sitions,  but  related  to  this 
present  situation. 

In  1901,  the  Chicago  Civic  Federation  made  a  thoroughgoing  in- 
vestigation of  the  Chicago  street  railways.  It  found  at  that  time 
a  capitalization  of  $118,000,0(K)  and  the  federation's  report  declared 
that  $72,000,000  of  this  represented  nothing  more  substantial  than 
water. 

The  man  in  charge  of  that  investigation,  I  might  add  here,  was 
Dr.  Milo  K.  Maltbie,  now  of  New  York,  for  many  years  a  member 
of  the  Xew  York  City  Public  Service  Commission  and  one  of  the 
most 

Commissioner  Meeker.  The  New  York  State  Public  Service  Com- 
mission ? 

Mr.  Jones.  I  mean  by  that,  the  down-State — ^the  New  York  City 
part  of  that  commission;  not  the  up-State — and  one  of  the  most 
eminent  authorities  we  have  in  this  line  in  the  country. 

In  1907  the  city  of  Chieag-o  effected  a  settlement  with  the  two 
surface  lines  then  controlling  the  industry,  on  the  basis  of  a  valua- 
tion of  $55,000,000.  I  think  it  is  generally  acknowledge  that  that 
valuation  was  about  $15,000,000  in  excess  of  the  physical  value  ot 
the  proj^erty.  Under  the  contract  of  1907,  capitalization  has  nothing 
to  do  with  the  street-railway  situation  in  Chicago.  The  companies 
are  guaranteed  their  capital  investment,  which  was  that  original 
$55,(X)O,000  plus  all  additions  to  capital,  and  that  capital  has  been,  so 
far  as  we  know,  honestly  expended  and  wisely  administered. 

The  present  capital  investment  of  the  Chicago  surface  lines  is 
$15(>,000,000  plus. 

The  question  of  an  increase  in  fai-es  in  Chicago  has  been  be- 
fore  


' 


I 


iW 


nil 


1848    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Lauck.  I  tliink  it  would  be  better,  and  it  would  save  time 
]f  you  would  not  go  into  the  fare  question,  but  just  confine  yourself 
to  the  question  of  overcapitalization. 

Mr.  Jones.  Yes.  I  am  just  laying  the  foundation.  In  connec- 
tion with  an  application  for  a  fare  increase  in  Chicago,  the  Illinois 
1  ublic  hervice  Commission  has  been  appealed  to  by  the  city  to 
eliminate  a  part  of  this  capital  investment  in  case  an  increase  in 
fares  were  granted.  Inasmuch  as  the  company  was  asking  for  the 
abrogation  of  its  contract,  they  insisted,  therefore,  that  the  city 
had  a  right  to  ask  for  a  rate  of  fare  based  on  the  just  value  of  the 
property. 

The  commission  made  an  investigation  and  eliminated  $44,100,756 
from  the  company's  capital  investment  of  $150,481,859,  showin<» 
that  even  to-day,  in  Chicago,  the  company  is  carrying  an  excess 
burden  of  capital  investment. 

Mr.  Lauck.  Of  about  30  per  cent. 

Mr.  Jones.  Now,  as  to  Pittsburgh:  The  financial  and  operatincr 
conditions  in  Pittsburgh  are  complicated  and  confused.  There  ap- 
pears to  have  been  no  real  comprehensive  survey  made  of  the  Pitts- 
burgh financial  management  in  the  past.  The  main  recourse  we  have 
IS  the  data  prepared  by  Mr.  E.  K.  Morse,  who  was  city  transit  com- 
missioner, and  reported  to  the  city  council  in  December,  1917 

He  reports  at  that  time  a  total  capitalization  of  $142,067,900  for 
a  part  of  the  system  and  $18,812,500  for  the  rest,  a  total  of  $160  - 
882,400,  or  a  capitalization  per  mile  of  track  of  $271,000.  ' 

Now,  there  has  been  no  valuation  of  the  Pittsburgh  railways  prior 
1o  Augiist  of  this  year,  when  a  commission  appointed  18 'months 
before  by  the  Pennsylvania  Public  Service  Commission  to  make  a 
valuation  of  the  property  reported  its  findings  to  the  commission. 
I  his  commission  was  made  up  of  two  men  representin^r  the  city 
and  two  men  representing  the  company,  all  engineering  experts 
ihe  two  men  representing  the  city  reported  the  fair  value  of  the 
property  for  rate-making  purposes  to  be  $48,000,000.  The  com- 
pany s  representatives  found  the  propertv  to  be  worth  from  $60  - 
000,000  to  $65,000,000.  On  the  basis  of  a  comparison  of  the  aver- 
age  of  these  two  reports,  with  the  total  capitalization  as  reported  by 
Mr.  Morse,  there  is  an  inflation  of  66  per  cent. 

Mr.  Lauck.  How   are   the   Pittsburgh   companies   operated?     Is 
there  not  a  holding  company  or  two  holding  companies? 

Mr.  Jones.  There  are  consolidations  and  holding  companies  and 
leases  and  everything  else. 

Mr.  Lauck.  There  are  two  holding  companies  and  then  another 
operating  company,  are  there  not? 

Mr.  Jones.  Yes.    Mr.  Bion  J.  Arnold 

Commissioner  Mahon.  Did  you  say  there  are  a  number  of  oper- 
ating companies  in  Pittsburgh  ? 

Mr.  Jones.  No;  at  present  there  is  only  one  operating  companv 

Commissioner  Gadsden.  With  reference  to  Pittsburgh,  do  you 
happen  to  know  whether  it  is  earning  a  fair  return  on  even 
$48,000,000?  ^ 

Mr.  Jones.  I  have  not  gone  into  that.  All  I  know  of  that  is  what 
this  commission  reported.  It  reported  in  substance— I  would  not 
care  to  quote  what  the  commission  said  except  that  it  would  require 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1849 

a  higher  fare  than  5  cents— I  think  7  cents  in  one  case  and  8  cents 
in  the  other  case— to  carry  these  valuations  reported  by  the  two  sets 
of  experts  I  think  it  was  7  cents  and  8  cents  that  would  be  neces- 
sary on  those  bases  to  carry  the  property  and  pay  a  fair  rate  of 
return. 

Commissioner  Sweet.  Was  there   any   arbitration  or  method  of 
compromise  between  the  $48,000,000  and  the  $60,000,000  estimates? 
Mr.  Jones.  No. 

Commissioner  Sweet.  They  stand  there  as  two  independent  esti- 
mates? 

Mr.  Jones.  The  representatives  of  each  party  reported  independ- 

Commissioner  Sweet.  And  they  never  got  together  by  any  form 
of  compromise  or  arbitration? 

Mr.  Jones.  No.  That  is^  of  course,  very  recent,  and  I  suppose 
that  is  up  to  the  public-service  commission  to  decide. 

The  Chairman.  Have  you  a  copy  of  the  report  made  by  the  com- 
mission ? 

Mr.  Jones.  I  have  nothing  more  than  a  brief  and  report.  I  have 
been  unable  thus  far  to  get  the  complete  report. 

The  Chairman.  We  will  have  a  copy  of  the  report  filed  with  us. 

Mr.  Jones.  Presumably,  you  will;  yes.  I  should  say  that  in  1910 
liion  J.  Arnold,  of  Chicago,  following  a  survey  of  the  propertv  for 
i3!  ^ity  expressed  the  opinion  that  it  could  be  reproduced  for  about 
$05,000,000,  or  around  $100,000  per  mile. 

Commissioner  Sweet.  Are  you  now  returning  to  Chicago « 

Mr.  Jones.  No;  this  is  Pittsburgh.  The  judgment  of  the  value  of 
the  property  held  by  Mr.  Arnold  you  can  see  very  closely  coincides 
with  that  of  the  commission. 

Mr.  Lauck.  This  report  of  the  transit  commissioner  is  available 
and  you  can  submit  it  to  the  board,  if  the  chairman  so  desires,  can 
you  not?  ' 

Mr.  Jones.  It  is  not  available.  I  secured  that  at  New  York  with 
a  great  deal  of  difficulty  and  was  not  even  allowed  to  take  it  awav 
r.Tth  me.  "^ 

Mr.  Warren.  Which  report  is  that,  Mr.  Lauck? 

Mr.  Lauck.  The  report  referred  to  by  the  chairman.    The  former 
secretary  of  the  commission  just  told  me  that  it  was  available,  and 
1  think  we  can  get  one.    I  think  probably  you  did  not  tap  the  source 
Jnit,  anyhow,  that  is  a  minor  point. 

Mr.  Jones.  St.  Louis  has  been  for  several  years  a  focus  of  a  great 
deal  of  street-railway  agitation  of  one  kind  and  another.  In  1911 
and  1912  the  St.  Louis  Public  Service  Commission— that  was  the 
city  commission,  later  legislated  out  of  existence  by  the  State  com- 
mission—made a  valuation  of  the  companv's  property  in  the  city 
and  found  the  same  to  be  $37,638,667.  The  commission  reported  the 
capitalization  as  shown  by  the  committee's  books  to  be  $101,380  200 
divided  as  follows:  Capital  stock,  $41,900,300;  bonds,  $59,480,000  ' 
cr^o  ^?  ^^^^^^  ^^  capitalization  over  fair  value  or  the  inflation  was 
51^63,741,632,  or  62  per  cent.  The  capitalization  per  mile  of  track 
was  $222,000.  The  value  per  mile  of  track  on  the  basis  of  the  com- 
mission valuation  is  $81,645,  which  the  commission  declared  to  be 
very  liberal,  especially  when  considering  the  fact  that  110  miles  of 


1850    PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


li 


track  was  suburban  construction  and  that  the  company  buys  approxi- 
mately 45  per  cent  of  its  power.  The  commission  commented  very 
caustically  ujjon  tlie  methods  of  the  company  in  handling  its  finan- 
cial affairs  and  the  news^mpers,  the  St.  I^uis  Civic  League,  and 
other  organizations  later  got  into  the  game  and  did  the  same. 

In  1917,  James  E.  Allison,  of  St.  I^onis,  who  was  the  engineer 
member  of  the  St.  Louis  Public  Serv  ice  Commission  and  who  was  in 
charge  of  the  valuation  of  1911-12,  made  another  appraisal  of  the 
property  as  of  December,  1917,  on  behalf  of  the  city.  At  that  time 
he  found  the  actual  cost  of  the  property  to  be  $48,784,491. 

The  Chairaian.  The  actual  original  cost  ? 

Mr.  Jones.  The  actual  cost  of  the  propei-ty,  meaning  tlie  book 
value  or  the  cost  as  ascertained  from  a  study  of  the  books,  is  my 
understanding.  Tliore  is  much  interesting  material  in  that  St.  Louis 
situation  which  we  will  pass  over  here  for  lack  of  time. 

Now,  as  to  Baltimore,  this  is  a  short  story : 

The  capitalization  of  the  United  Railways  &  Electric  Co.  of  Balti- 
more in  1019  as  reported  by  the  company  was  $85,246,200,  a  capi- 
talization per  mile  of  $205,400. 

Now,  no  valuation  of  the  Baltimore  company  has  ever  been  made  and 
probabljr  never  will  be  made,  owing  to  the  fact  that  the  public-service 
commission  statute  requires  the  commission  to  recognize  the  mort- 
gage indebtedness  of  the  company  in  valuing  the  propei-ty  for  rate- 
making.  And  the  bonded  indebtedness  alone  is  held  to  be  very  much 
in  excess  of  tlie  actual  value  of  the  property. 

The  "percentage  of  the  capitalization  of  the  company  in  the  form 
of  funded  debt  is  very  high,  76  |)er  cent. 

In  a  brief  filed  with  the  court  of  appeals  in  behalf  of  the  city  of 
Baltimore  in  1919  a  statement  was  made  that  the  common  stock,  then 
in  excess  of  this  $8,000,000,  was  almost  wholly  if  not  wholly  water. 
The  following  bit  of  history  contained  in  a  circular  issued  in  1906 
by  Hamilton  &  Co.,  investment  bankers  of  Baltimore,  Washington, 
New  York,  and  other  places,  is  cited  in  the  city's  brief  as  possibly  ex- 
plaining in  some  nieasmx*  why  this  was  so. 

Hamilton  &  Co.  said : 

Wo  sjiw  the  Baltimore  Tniction  Co.  wttli  its  $5,0»)0,000  of  capital  stock  which 
sold  at  nearly  nominal  tijaires  jrrow  to  :  ich  an  extent  that  it  was  able  to  pay 
a  diviclend  on  this  stock.  We  saw  it«  J^j,tMH>,UOO  of  capital  stock  made  .i;iO,000,(XH> 
by  the  consolidation  of  tlie  city  and  suburban  ct)nii>auies,  and  we  saw  tin's 
company  pay  dividends  on  $l(>,(>m),000  capital  stock.  Not  only  so,  but  we  saw 
this  stock  witli  a  par  value  of  $25  taken  into  tl>e  consolidation  which  forms 
the  present  United  Railways  &  Klectric  Co.  at  $37.50  per  share  in  cash.  Of 
course,  it  mast  l>e  admitted  that  there  was  a  large  overcapitalization  wJien 
the  United  Kailwa.ys  was  formed,  but  »>  great  has  been  the  iiK-rease  in  the 
earnings  of  the  United  Railways  that  the  company  has  outlived  its  overcapitali- 
zation and  will  shortly  be  on  a  basis  as  it  can  sjifely  pay  dividends  on  its  stock. 

The  Xortheast  Baltimoi-e  Improvement  Association  in  1014  made 
an  investigation  and  reported  its  conclusion  that  there  was 
$16^700,000  of  overcapitalization  on  the  basis  of  the  value  of  stocks 
and  bonds  at  that  time. 

Tlie  Indianapolis  Street  Railway  Co. :  Here  is  a  long  story  and  an 
official  story  which  we  will  have  to  boil  down.  Tliis  story  is  all  told 
practically  by  the  Indiana  Public  Service  Commission  itself. 

The  capititlization  of  the  company  is  $25^00,000,  or  $177,300  per 
mile.     In  December,  1918,  the  Indiana  Public  Service  Commission, 


li 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1851 


following  an  investigation  of  the  company's  financial  history  and 
pro])erty,  found  that  the  propertv  was  worth  not  to  exceed  $15,000,000, 
or  $106,400  i>er  mile.  This  shows  an  inflation  of  $10,000,000,  or  40 
per  cent.  This  investigation  was  made  on  the  basis  of  an  applica- 
tion of  the  company  for  an  increased  fare. 

Now,  there  were  several  interesting  results  of  that  investiga- 
tion  

Mr.  Lauck.  I  would  not  go  into  that,  because  we  just  want  to 
establish  the  general  character  of  the  inflation. 

Mr.  Jones.  The  main  thing  wliich  is  of  interest  to  this  commis- 
sion and  the  public  is  this,  that  the  commission  in  the  end  coerced 
the  company  into  reorganizing  its  finances  in  various  ways,  by 
which  it  cut  down  its  fixed  charges  to  the  extent  of  $420,000.  In  ad- 
dition to  that,  the  conmiission  compelled  the  company  to  put  in 
effect  some  scliemos  of  more  efficient  operations  and  economies  and 
the  result  of  that  was  that  the  company  came  into  the  commission 
and  said  it  was  satisfied  under  the  new  conditions  that  it  coidd  con- 
tinue to  operate  upon  a  o-cent  fare. 

That  is  the  final  word  from  Indianapolis. 

Mr.  Lauck.  Have  you  any  general  index  of  overcapitalization, 
like  a  comparison  with  the  Massachusetts 

Commissioner  Gadsden.  What  company  was  that?  I  missed  the 
name  of  that  company. 

Mr.  Jones.  That  is  the  Indianapolis  Street  Eailway  Co. 

Mr.  Lauck.  I  thought  we  had  a  number  of  representative  in- 
stances, and  if  you  could  give  us  them  as  to  the  general  extent,  or 
])robably  the  commission  could • 

Mr.  Jones.  I  ha\'e,  in  conclusion,  a  few  lines,  as  I  have  in  the 
beginning,  something  referring  to  that. 

San  Francisco  is  a  short  storv.  There  is  a  capitalization  of 
$79,100,000,  representing  $290,800  per  mile  of  track.  There  has 
been  no  official  valuation  of  the  San  Francisco  company.  There  is 
IDossible,  however,  a  comparison  and  an  interesting  one.  The  city 
owns  and  operates  58  miles  of  street  railwav,  which  has  cost  it  a 
total  as  of  June  30,  1918,  of  $6,499,480.  This  is  a  cost  per  mile  of 
track  of  $110,500,  as  compared  with  a  capitalization  i>er  mile  of 
track  of  $290,800  on  the  basis  of  the  capitalization  of  the  property. 
On  the  basis  of  comparison  the  United  Railways  Co.  is  overcapital- 
ized 62  per  cent. 

Mr.  Warren.  How  much  did  you  say  the  Municipal  was  a  mile  ^ 

Mr.  Jones.  $110,500. 

Commissioner  Sweet.  Did  the  city  build  that  track  or  was  it  pur- 
chased? 

Mr.  Jones.  The  city  built  the  track  under  the  direction  of  the  city 
engineer. 

Commissioner  Sweet.  That  was  the  actual  cost? 

Mr.  Jones.  That  was  the  actual  cost.  The  Rhode  Island  Co.,  of 
Providence,  has  a  long,  involved  story.  The  commission  has  heai^ 
much  and  I  will  give  this  very  shortly. 

The  special  committee  for  the  investigation  of  the  affairs  of  the 
company,  appointed  by  the  Rhode  Island  Legislature  of  1917,  re- 
ported in  March,  1918,  that  the  total  value  of  the  property  owned 
and  controlled  by  the  company  was  $29,000,000,  equivalent  to  $80,000 
per  mile. 


m 


1852    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  What  city  was  that  ? 

Mr.  Jones.  That  was  the  Rhode  Island  Co.,  of  Providence. 

This  represents  an  inflation  of  42  per  cent  on  the  basis  of  the  com- 
pany s  capitalization. 

As  to  the  involved  and  interesting  stories  back  of  all  that,  I  think 
the  commission  is  not  interested. 

Mr.  Lauck.  You  have  cited  a  number  of  typical  instances.  I 
thon^lit  we  might  save  time  if  you  made  some  general  statement,  as 
you  have  on  your  comparison  of  the  Massachusetts  mileage,  the  ex- 
hibit being  in  such  good  form  for  the  commission  to  read,  unless  the 
commission  wishes  to  go  into  the  detailed  instances  further. 

The  Chairman.  Does  the  exhibit  which  you  have  filed  here,  Mr. 
Jone^,  contain  in  more  elaborate  form  all  of  the  testimony  you  have 
given  as  to  the  particular  lines? 

Mr.  Jones.  Yes. 

There  is  one  error  in  that  exhibit,  in  connection  with  Oakland 
Terminal  Street  Railway  Co.  I  state  there  that  the  inflation  of  capi- 
talization was  70  per  cent.  That  was  a  typographical  or  some  other 
error.    It  should  be  40  per  cent. 

The  total  capitalization  of  all  the  street-railway  properties  in  the 
United  States,  as  shown  bv  the  census  report  in"^  1912,  was  $4,708  - 
568,141,  or  $104,930  per  mile.  ^  ^  ^      , 

The  only  basis  of  comparison  we  can  use  is  this  official  report  of  the 
situation  m  Massachusetts,  where  the  composition  of  street-railway 
companies  has  been  more  or  less  hedged  in  by  restrictions  of  the  law. 
The  capitalization  per  mile  in  Massachusetts  in  1912  was  $57,786* 
as  against  the  average  of  $104,930  per  mile  for  the  rest  of  the  United 
States. 

There  are  statemei^ts  coming  from  the  Public  Service  Commission 
of  Massachusetts  which  show  that  in  many  cases  there  was  overcapi- 
talization in  that  State. 

Mr.  Lauck.  That  is,  that  is  a  conservative  figure,  because  it  repre- 
sents capitalization  through  previous  consolidation  there,  is  it  not? 

Mr.  Jones.  Largely  through  consolidations  and  the  exchange  of 
strong  stock  for  weak  stock  and  excess  construction  costs. 

Mr.  Lauck.  So  that  it  is  a  very  conservative  figure,  because  it  does 
include  the  element  of  water  itself,  and  as  compared  with  the  coun- 
try as  a  whole  it  represents  what  percentage,  you  might  say,  of  ex- 
cess in  Massachusetts  over  the  country  as  a  whole  ? 

Mr.  Jones.  The  excess  in  Massachusetts  is  about  20  per  cent  ac- 
cording to  the  census  statement. 

Mr.  Warren.  Excess  of  what? 
Mr.  Jones.  Excess  of  valuation. 
Mr.  Warren.  In  Massachusetts? 
Mr.  Jones.  Yes. 

Mr.  Warren.  What  do  you  base  that  on? 

Mr.  Jones.  I  think  that  is  the  statement  of  the  figures  of  the 
commission.    I  may  be  wrong  on  that. 
Mr.  Warren.  I  think  you  are,  Mr.  Jones. 

Mr.  Jones.  But  the  figures  speak  for  themselves  at  any  rate ;  they 
are  official. 

Mr.  Lauck.  You  are  talking  about  Massachusetts  itself.  But  com- 
paring Massachusetts,  its  percentage  of  inflation,  with  the  country 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1853 

as  a  whole  you  have  for  the  country  as  a  whole  a  large  excess  per 
mile  over  Massachusetts,  have  you  not? 

Mr.  Jones.  Very  large. 

Mr.  Lauck.  $57,000  as  compared  with  $104,000  per  mile  ? 

Mr.  Jones.  Yes. 

Mr.  Lauck.  What  is  the  significance  of  all  of  this  overcapitaliza- 
tion, to  whatever  extent  and  from  whatever  cause  it  may  arise  in  the 
past,  as  bearing  on  the  question  of  the  emplo3^ees  of  the  company? 

Mr.  Jones.  Overcapitalization,  of  course,  has  intimate  relation 
with  many  of  the  aspects  of  the  street-railway  situation,  but  espe- 
cially toward  that  of  labor. 

With  excess  capitalization,  the  interest  of  the  investor  always  in 
mind,  the  question  of  credit  uppermost  at  all  times,  with  the  abso- 
lute necessity  of  squeezing  out  revenue  sufficient  to  keep  up  credit 
and  to  pay  dividends  on  this  capitalization  as  a  means  to  keep  up 
credit,  labor,  of  course,  has  suffered  during  all  times. 

Mr.  Lauck.  In  other  words,  the  operating  results  being  hypothe- 
cated, so  to  speak,  by  fictitious  issues  of  capital,  if  that  capital  is  to 
be  maintained  in  its  market  values,  that  means  an  absorption  of 
i-evenue  which  would  otherwise  be  available  for  the  payment  of 
increased  compensation,  does  it  not? 

Mr.  Jones.  Exactly. 

Commissioner  Gadsden.  I  would  like  to  ask  Mr.  Jones  just  on  that 
line— These  charts  which  you  have  introduced,  Mr.  Jones,  show  that 
the  capitalizations  in  Maine  and  Massachusetts  are  the  lowest  in 
the  country.  Following  the  question  that  Mr.  Lauck  asked  you,  I 
would  like  to  ask  you  this:  Have  the  railway  employees  in  Maine 
and  Massachusetts,  the  States  where  the  capitalization  was  within 
speaking  distance,  at  least,  of  the  value,  fared  any  better  than  the 
employees  elsewhere  in  the  United  States  ? 

Mr.  Jomis.  I  can  not  answer  that,  Mr.  Commissioner.  Tliat  is 
not  my  field  of  investigation  in  the  street-railway  industry. 

Commissioner  Gadsden.  Supposing  that  it  should  appear,  as  it 
does  appear,  that  the  street-railway  employees  of  Massachusetts  en- 
joyed the  same  rate  per  hour  as  those  of  New  York  or  Chicago, 
where  the  capitalization  was  very  much  in  excess,  would  not  that 
affect  the  soundness  of  your  answer  to  Mr.  Lauck  ? 

Mr.  Jones.  I  would  not  want  to  answer  that,  sir.  As  I  say,  I 
have  made  no  study  into  the  actual  industrial  part  of  the  street-rail- 
way question.  I  am  not  competent  to  answer  that.  I  am  answering 
this  question  of  Mr.  Lauck's  on  the  basis  of  a  correct  theory  and 
common  sense,  not  from  intimate  knowledge. 

Commissioner  Gadsden.  I  am  not  trying  to  take  issue  with  you 
but  I  am  trying  to  elaborate  that  thought.  That  thought  on  your 
part  is  that  if  the  capitalizations  had  been  proper,  we  will  say,  then 
the  employee  would  have  benefited  and  would  have  received  a  higher 
wage  scale  than  he  has  received,  which  would  seem  to  be  sound. 

Now,  I  call  your  attention  to  the  fact  that,  in  the  two  States  of 
Mame  and  Massachusetts,  where  the  capitalization  is  admittedly 
sound,  we  will  say,  that  has  not  resulted.  As  a  fact,  I  tell  you  that 
it  has  been  testified  before  this  commission  that  those  em plovees  have 
not  benefited.  ^ 


m 


Hi 


1854    PROCEEDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Now,  I  ask  you,  does  not  that  affect  the  soundness  of  that  conchi- 
sion? 

Mr.  Jones.  I  would  not  want  to  say  that  it  did  or  that  it  did  not. 
1  am  not  competent  to  answer  that.    I  have  merely  my  own  idea. 

Mr.  Lauck.  You  can  answer  that  hypothetically,  can  you  not,  Mr. 
Jones,  in  the  same  way  that  you  answered  the  other  question?  I 
do  not  want  to  be  put  in  the  position  of  answering  it  myself,  but • 

Commissioner  Gadsden.  1  ou  answer  it,  Mr.  Lauck. 

Mr.  Lauck.  I  think  you  have  to  assume  other  conditions.  That  is. 
the  point  Mr.  Jones  and  I  were  making  was  that  if  you  did  not  have 
the  overcapitalization,  the  earnings  which  were  produced  would  ha 
evidently  available,  either  for  the  benefit  of  the  public  or  for  the 
benefit  of  the  worker  on  the  railroad;  if  the  worker  had  sufficient 
organization  to,  so  to  speak,  through  negotiation  with  the  manage- 
ment, get  his  share,  it  would  be  evident  that  there  was  a  share  coming 
to  him,  and  he  would  get  it. 

Evidently  in  Maine — I  do  not  know  the  condition  of  the  Amalga- 
mated Association  in  Maine,  but  it  may  be  that  they  are  not  strongly 
organized  there,  and  have  not  been  able  to  get  what  is  coming  to 
them.  But  in  lioston  they  have  got  it,  through  strong  organization, 
and  in  Chicago,  despite  the  fact  of  overcapitalization,  which  has  re- 
sulted, as  we  all  know,  in  certain  conditions  in  Boston  from  the  stand- 
point of  the  public  which  otherwise  would  not  have  resulted. 

Commissioner  Gadsden.  Another  question  on  that  line  I  would  like 
to  ask 

Mr.  Warren.  Pardon  me  just  a  moment.  You  did  not  mean  there 
was  overcapitalization  in  Boston,  did  you,  Mr.  Lauck? 

jMr.  Lauck.  I  really  do  not  know. 

Mr.  Warren.  I  did  not  understand  Mr.  Jones  to  testify  that  there 
was  any  overcapitalization  in  the  Boston  company. 

^[r.  Jones.  Xo;  I  spoke  merely  of  Massachusetts.  ^ 

Mr.  Lauck.  Massachusetts,  the  Bay  State,  I  think  he  has  in  mind. 

Mr.  Warren.  I  think  when  you  put  your  finger  on  the  Bay  State 
you  put  it  on  the  only  case  in  Massachusetts  of  that  kind. 

Mr.  Jones.  I  have  a  statement  here,  concretely,  of  the  Bay  State 
situation.  I  think  that  is  the  Bay  State  case — that  is  where  the  20 
per  cent  was. 

Mr.  Warren.  Yes;  I  think  you  are  quite  right. 

Commissioner  Be.vll.  Did  I  understand  you,  a  few  minutes  ago,  to 
say  that  in  San  Francisco  the  capitalization  of  the  private  company 
was  something  like  $200,000  a  mile,  and  the  Municipal  Eailway,  built 
by  the  city,  about  $80,000  or  $100,000? 

Commissioner  Sweet.  $110,000. 

Commissioner  Beall.  $110,000  ? 

Commissioner  Sweet.  Yes. 

Commissioner  Beall.  I  wanted  to  ask  you  this:  Do  you  know 
whether  the  capitalization  of  the  private  company  is  partly  due  to 
the  fact  of  the  destruction  of  a  large  part  of  their  property  in  the 
earthquake  'i  Didn't  they  have  to  replace  a  large  part  of  their  prop- 
erty on  account  of  its  being  destroyed,  and  did  not  that  very  mate- 
rially affect  their  present  capitalization? 

Mr.  Jones.  I  think  you  are  right  on  that. 

Commissioner  Beall.  I  do  not  remember,  but  was  not  the  city 
railway  built  after  that  ? 


PBOCEEDI]J7GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK.    1855 

Mr.  Jones.  Yes. 

Commissioner  Be.^ll.  I  do  not  think  they  went  through  that? 

Mr.  JoNESv  Xo. 

The  Chairman.  What  does  the  witness  know  about  that? 

Commissioner  Beall.  Do  you  Ivnow  if  that  is  true?  Does  not 
tliat  accotrnt,  at  least  partly 

Mr.  Jones.  I  know  that  is  true  with  the  Municipal  Kailway — 
thmi  it  was  built  subsequent  to  the  earthquake. 

Commissioner  Meeker.  In  its  entirety? 

Mr.  Jones.  Yes. 

The  Chairman.  Do  you  know  how  much  additional  capitaliza- 
tion was  made  by  the  old  comi^my  on  account  of  the  earthquake? 

Mr.  Jones.  I  do  not. 

Commissioner  Beall.  Is  it  not  true  that  for  just  one  thing  alone — 
I  do  not  remember  yet,  and  I  do  not  state  this  as  a  fact,,  but  I  think — 
just  for  equipment  and  a  few  other  things,  at  tlie  request  of  the  city, 
they  spent  $5,000,000,  }ust  in  one  sum,  for  one  thing,  just  to  replace 
things  that  were  gone  ?    Tliey  had  no  other  way  of  doing  it. 

Mr.  Jones.  I  did  iwt  state  the  worst  situation  in  San  Francisco. 

Commissioner  Beall.  What  is  that? 

Mr.  Jones.  I  did  not  state  the  Avorst  phase  of  the  capitalization 
story  in  San  Francisco. 

In  1913  Mr.  Bion  Arnold,  who  made  a  survey  of  that  situation,  re- 
l>orte€l  a  capitalization  as  of  March,  1913,  to'be  $85^000,600.  That 
was  equal  to  a  capitalization  of  $34>0,000  a  mile  at  that  time.  In  this 
other  case  it  was  $200,000  a  mile. 

Commissioner  Beall.  As  I  say,  what  I  did  not  know  was — and  I 
thought,  perhaps,  having  studied  it,  you  might  remember — is  it  not 
tnie  that  a  large  part  of  that  capitalization  is  due  to  rebuilding  the 
property  on  account  of  the  earthquake  ? 

Mr.  Jones.  I  think  there  is  no  question  about  that. 

Commissioner  Beali..  I  think  it  accounts  for  some  of  the  difference 
between  that  and  the  cost  to  the  city. 

Commissioner  Mahon.  Do  you  know  that  to  be  a  fact  that  you  are 
speaking  of,  Mr.  Jones,  or  is  tliat  just  your  notion  of  it? 

Mr.  Jones.  I  have  been,  quite  a  good  many  years  ago,  quite  famil- 
iar with  the  San  Francisco  situation.  I  have  not  refreshed  my 
memory  in  the  last  six  or  seven  years,  but  my  recollection  is  there  was 
a  large  expenditure  following  tlie  earthquate  for  rehabilitation. 

Commissioner  Mahon.  Do  you  know  that,  following  the  earth- 
quake, the  company  secured  the  rigKt  to  put  the  trolley  on,  instead 
of  the  cable,  at  a  big  saving  to  the  company?  Do  you  remember 
that  ?    Are  yon  familiar  with  that  ? 

Mr.  Jones.  I  could  not  answer  that.  Biit  of  course  tlie  develop- 
ment of  the  trolley  has  come  in  San  Francisco  out  of  the  cable. 

Commissioner  Mahon.  I  happen  to  be  familiar  with  the  whole 
thing,  Mr.  Jones,  and  the  questions  you  are  answering  there  I  wanted 
to  get  into  the  record  correctly  for  the  benefit  of  the  commission. 
Yon  said  that  you  thouglit  thiU  was  true.  Now^,  I  ask  if  you  were 
familiar  with  the  fact? 
Mr.  Jones.  I  am  not  familiar  with  it,  no. 

The  Cn^URitAN.  If  yo«  are  familiar  with  tliat  fact,  Mr.  Mahon, 
will  you  please  state  it  for  the  record  ? 


1856    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Mation.  Just  prior  to  the  earthquake  the  company 
v^eve  attempting  to  do  away  with  the  cable  roads  and  put  on  their 
trolley  lines.  The  matter  was  up  before  the  council,  and  when  the 
earthquake  came  on,  then  followed  the  reconstri>ction,  and  the  com- 
pany secured,  through  the  council,  the  right  to  put  on  their  trolley 
lines  instead  of  cable  lines,  which  we  all  know  are  very  much  more 
costly  in  construction  and  operation. 

Out  of  that  grew  the  bribery  cases  for  which  Abe  Rouf  did  time 
in  San  Quentin  Prison,  and  on  account  of  which  Mayor  Smith  was 
thrown  out  of  office,  and  all  of  that  corruption  came  to  a  head  at  that 
time  and  grew  out  of  the  accusations  of  briberies  in  connection  with 
the  San  Francisco  electric  railways  as  handled  by  Mr.  Patrick  Cal- 
houn and  his  people— the  trial  of  Mr.  Calhoun  and  all  of  that 
followed  that  reconstruction  period. 

The  municipal  lines  of  San  Francisco  were  constructed  by  the 
city  purchasing  what  was  known  as  the  Geary  Street  property. 
Geary  Street  was  a  separate  company,  independent  of  the  San  Fran- 
cisco Railways  Co.  In  fact,  there  were  two  independent  companies, 
California  Street  and  Geary  Street.  There  were  some  connections 
between  California  and  the  old  company,  but  they  were  separate 
companies. 

The  city  purchased  the  Geary  Street  road  as  it  was  then  in  opera- 
tion, a  cable  road,  took  it  over,  took  the  cables  out,  tore  up  the 
entire  system,  the  tracks  and  all,  and  rebuilt  the  present  electric 
road.  That  was  the  foundation  for  the  present  municipal  road  that 
has  since  been  extended  out  to  Golden  Gate  Park  and  in  other  di- 
rections in  the  city. 

That  is  my  recollection  of  the  story  of  that  situation. 

Mr.  Lauck.  That  is  all,  unless  some  members  of  the  commission 
have  some  questions. 

Mr.  Jones.  I  might  add,  in  conclusion,  that  the  exhibit  contains 
the  following  other  cities:  lx>s  Angeles,  Denver,  Philadelphia, 
Cleveland,  Oakland,  Calif.,  New  Orleans,  Washington,  Lincoln, 
Nebr.,  Milwaukee,  Scranton,  Pa.,  and  the  Bay  State  Co.  of  Massa- 
chusetts. 

The  Chairman.  And  those  statements  affecting  all  of  those  com- 
panies are  in  your  exhibit? 

Mr.  Jones.  Yes. 

The  Chairman.  Does  that  conclude  your  formal  testimony? 

Mr.  Jones.  Yes. 

Mr.  Lauck.  If  the  commission  will  permit,  I  would  like  to  take 
the  stand  and  go  briefly  over  our  case. 

The  Chairman.  The  commission  has  some  questions  to  ask  Mr. 
Jones  on  cross-examination  before  that. 

If  I  am  able  to  view  your  testimony  correctly,  Mr.  Jones,  it 
relates  entirely  to  the  overcapitalization. 

Mr.  Jones.  Yes,  sir. 

The  Chairman.  And  from  your  study  of  the  street-railway  situ- 
ation have  you  found  that  that  is  a  general  tendency  among  the 
companies  throughout  the  country? 

Mr.  Jones.  I  have. 

The  Chairman.  Do  you  know  of  any  exceptions  to  the  general 

rule? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1857 

Mr.  Jones.  There  are  exceptions  in  degree. 

The  Chairman.  What  do  you  mean  by  that? 

Mr.  Jones.  That  is,  in  degree  of  overcapitalization. 

The  Chairman.  Do  you  mean  that  there  are  no  companies  that 
have  not  been  overcapitalized  ? 

Mr.  Jones.  I  know  of  no  instance  where  there  has  not  been  some 
overcapitalization.  Now,  there  may  be,  but  they  have  not  come  to 
my  knowledge  and  within  my  studies. 

The  Chairman.  How  general  has  been  your  investigation? 

Mr.  Jones.  My  investigation  has  been  general  of  the  financial 
situation  up  to  this  particular  study,  and  at  this  time  I  would  not 
care  to  go  outside  of  this  particular  investigation. 

The  Chairman.  My  question  deals  wholly  with  the  question  of 
overcapitalization. 

Mr.  Jones.  Yes. 

The  Chairman.  How  do  you  proceed  to  make  such  an  investi- 
gation ? 

Mr.  Jones.  I  can  answer  that  by  saying  how  I  made  this  in- 
vestigation. 

The  Chairman.  Very  well. 

Mr.  Jones.  I  went  to  New  York  and  secured  first  the  loan  of  the 
complete  library  of  Dr.  D.  F.  Wilcox  and  worked  in  his  library  for 
some  three  or  tour  weeks.  In  addition  to  that,  I  went  through  the 
material  in  the  library  of  the  Public  Service  Commission  of  New 
York,  the  Municipal  Reference  Library,  at  the  office  of  the  Ameri- 
can City.  In  addition  to  that,  I  made  a  study  into  the  material  in 
the  Municipal  Reference  Library  in  Baltimore,  and  then  I  drew  on 
the  facts  contained  in  Moody's  Manual  to  check  up.  In  this  material 
which  I  went  over  were  reports  of  investigations  going  back  as  far 
as  1900,  and  even  further  back,  and  many  others  more  recent.  I  also 
went  into  the  reports  of  the  State  public-service  commissions  wher- 
ever any  such  report  was  available  dealing  with  the  financial  situa- 
tion. Then  I  made  a  study  of  all  valuations— the  official  valuations 
tliat  have  been  made  on  street-railway  companies  in  recent  years*  all 
agreements  by  arbitration ;  valuations  made  under  the  direction  of 
cities,  and  any  other  material  bearing  on  the  subject. 

The  Chairman.  How  many  companies  did  you  study? 

Mr.  Jones.  Approximately  20  companies. 

The  Chairman.  Do  you  know  how  many  companies  there  are  in 
the  country? 

Mr.  Jones.  I  could  not  answer  it  offhand. 

The  Chairman.  I  think  it  has  been  reported  here  that  there  are 

some  1,200. 

Mr  Jones.  I  think  I  explained,  Mr.  Elmquist,  at  the  start,  that 
i  took  only  those  companies  where  it  was  possible  to  draw  fair  con- 
clusions on  the  basis  of  official  valuations.  I  kept  away  from  those 
cities  where  there  might  be  obvious  cases  of  flagrant  overcapitaliza- 
tion, where  there  w^as  an  absence  of  some  means  of  checkin<y  that 
capital  investment.  ^ 

The  Chairman.  Now,  if  you  had  confined  your  studies  to  20  com- 
panies, is  It  fair  for  you  to  say  that,  generally  speaking,  the  street 
railways  of  the  country  are  overcapitalized? 

1G0643''— 20— VOL  2 55 


u  : 


1858    PROCEEDISTGS  OF  PEDEUAL  ELECTRIC  lUILWAYS  COMMISSION". 

Mr.  Jones.  I  think  those  companies  are  representative.  There  are 
two  that  I  did  not  bring  in  for  lack  of  time.  One  was  Portland, 
Oreg.,  where  there  has  been  a  valuation  by  the  State  commission,  and 
the  other  instance  is  in  Cincinnati,  where  there  was  an  agreement. 

Commissioner  (tadsden.  Have  you  the  fibres  of  the  Portland 
I'oad  with  you  ? 

Mr.  JoxEs.  I  have  not  them  wuth  me ;  no. 

Conmiissioner  (tadsden.  Because  I  have  them  here  as  reported 
previously  in  this  investigiition  to  the  commission.  Tlie  Portland 
Raihoad,  with  10C,9  miles,  the  valuation  fixed  by  Sloan,  Huddle, 
Fucstil  4&  Freeman,  employed  by  the  State,  $G,2G*2,9GG,  exclusive  of 
the  going  value 

Mi\  Jones.  That  is  Portland,  Me.,  Mr.  Gadsden. 

Commissioner  Gadsden.  Yes. 

Mr.  Jones.  I  was  speaking  about  Portland,  Oreg.  I  think  my 
study  covei-ed  every  city  in  tiie  United  States  with  the  exception  ol 
Cincinnati  and  Portland,  where  the  official  valuation  has  been  put 
out  or  anjlhing  approximating  an  official  valuation. 

The  Chairman.  From  that  study  have  you  found  that  tlie  official 
valuations  exceed  or  are  less  than  the  capitaligation  ? 

Mr.  Jones.  In  every  study  which  I  have  made  the  official  valua- 
tions as  made  arc  less  than  the  capitalization  of  the  companies. 
Thei^  is  one  case  whidi  I  hjive 

The  Chairman.  Have  you  ascertained  whether  there  has  been  a 
tendency  in  recent  years  to  oveixjapitali&e  these  plants? 

Mr.  Jones.  I  liave  not  made  anv  studv  of  tliat.  I  am  not  com- 
IX'tent  to  answer  tliat  question. 

The  Chairman.  Do  you  believe,  then,  tliat  this  subject  of  over- 
capitalization represents  r^thei*  ancient  history-  in  tJie  street-car 
world  ?- 

Mr.  Jones,  I  tliink  probably  that  is  so,  but  I  am  not  prepared  to 
answer  it  absokitelv. 

Tlie  Chai«man,  Has  this  overcapitalization  been  brought  out  moi'e 
effectively  in  mergers  and  consolidations  tlian  by  any  other  method  ? 

Mr.  Jones.  I  could  not  answer  that.  I  have  made  no  comparative 
study  of  the  results  by  each  n>ethod  of  overcapitalization. 

The  CiiAiBMAN.  Are  ji3u  aWe  to  say  whether  overeapitalis&ation 
has  resulted  in  greater  buixlens  to  the  public  through  fares  paid? 

Mr.  Jones.  I  can  not  answer  that  absolutely. 

The  Chairman.  Are  you  able  to  say  that  through  overcapitaliza- 
tion promoters  or  others  have  been  abk  to  re^ip  krge  profits? 

Mr.  Jones.  I  tliinlv  the  aecords  will  show  that  abundantly. 

The  Chairman.  AYliat  has  been  the  i)rime  motive  for  this  over- 
c>apitalization  ? 

Mr.  Jones.  To  get  rieh  quick  (m  tlve  part  of  certain  insiders.  The 
street-railway  industry  of  the  United  States  imfo'rtimately  has  been 
domimited  not  by  motives  of  public  service  but  by  motiws  of  private 
profit.  In  othei-  words,  sti'eet -railroad  companies  have  been  ms.de 
the  medium  of  amassing  large  profits  for  certain  in&iders  in  the 
business.     The  public-seizing  motive  has  l^een  subordinated. 

The  Chairman,  Are  you  able  to  state  wliether  the  promoters  t>r 
those  who  engaged  in  overcapitalization  hold  the  s^K^ck  to  any  great 
extent  ? 


PBOCliiEDIK<JS  OF  FEDEEAL  ELECTRIC  EAILWAYS  COMMISSION,    1859 

!Mi\  JoNKS.  I  can  not  answer  tliat.  I  tliink  a  more  intimate  study 
will  show  that  in  large  numbers  of  cases  they  got  the  profits  and 
got  out  and  loaded  tl^  burden  upon  the  so-called  imiocent  inve^or. 
I  think  that  is  an  axiom  of  the  financial  history  of  street  railways, 
and  well  understood. 

The  Chairman.  Does  the  public  generally  know  when  a  property 
is  overcapitalized  ? 

Mr.  eloNEs.  I  do  not  think  they  know  it  so  much  as  they  instinct  it. 

Tlie  Chairman.  Then  what  is  the  effect  of  that  knowledge  upon 
their  state  of  mind  ? 

Mr.  Jones.  It  is  to  create  suspicion,  distinist,  and  antagonism,  and 
partieuiai-ly  to  make  it  impossible  for  the  public  to  cooperate  whole- 
heartedly with  tlie  companies  to  make  their  management  successful. 
And  tliat  affects  employees  as  well  as  the  general  public. 

The  Chairman.  How  does  that  affect  tlie  employees,  Mr.  Jones? 

Mr.  Jones.  It  affects  the  employees  a  good  deal  as  it  affects  the 
l)ublic.  The  employees  are  only  a  part  of  the  public.  Tlieir  psv- 
chology  is  the  same  as  the  general  public.  The  methods  of  the  maii- 
agemeiits  have  been  such  as  not  to  draw  out  the  best  that  is  in  the 
meiL,  with  exceptions  as  to  companies ;  not  to  invite  tlieir  cooperative 
interests  in  the  operation  and  success  of  the  property,  but  to  use 
them  to  the  limit  for  tlie  purposes  of  making  profits  to  the  investor. 
Now,  I  think  employees  generally  recognize  that. 

Tlic  Chaijjman.  I  presimie  the  men  feel  that  if  the  public  knew  just 
wliat  the  value  of  the  plant  is  that  there  will  be  no  trouble  in  hav- 
ing a  riite  fixed  which  would  bring  in  a  fair  return  upon  that  prop- 
erty and  also  a  fail'  w^age  to  the  employeea 

Mr.  Jones.  I  can  not  answer  that  question,  Mr.  Cliairman. 

The  Chairman.  There  are  a  great  many  of  the  States  whose  laws 
provide  for  the  regulation  of  capitalization.  Have  you  found  in 
your  studies  that  any  of  these  companies  have  been  permitted  to 
issue  watered  stock  since  the  commissions  undertook-  to  regulate  their 
socm-ities  ? 

Mr.  Jones.  Mr.  Cliairman,  that  is  a  special  study.  Statements 
have  been  made  on  both  sides  of  that  question  covering  the  last 
two  or  three  years,  and  I  have  not  made  a  special  investigation  of 
that  pliase  of  the  subject  and  am  not  competent  to  answer  it. 

The  Chaieman.  In  the  study  of  this  particular  subject,  have  you 
readied  a  conclusion  as  to  the  proper  inethod  of  controllin<r  *^tho 
capital  issues  oi  these  c^ompanies?  *^ 

Mi\  Jones.  I  liave  not 

The  Chaihman.  But  you  beliieve  tliey  sliould  he  subject  to  strict 
regulation,  do  you  ? 

Mr.  Jones.  Assuredly,  Mr.  Chairman,  you  ai-e  now,  I  think,  en- 
cjoaching  somewliat  upon  my  personal  ideas,  and  I  have  ideas  on 
that  subject  based  on  cx>nsidei*able  thought  and  study,  but  I  woidd 
fiot  <iare  to  express  them  here,  because  they  are  not  a  part  of  this 
caae. 

The  Chaijjman.  I  was  trying  to  confine  my  cross-examination, 
Mi*.  Jones,  sti'ictly  to  your  testimony  this  morning  and  having  in 
mmd  the  relationship  whicli  you  occupy,  and  I  will  not  attempt 
^o  go  be^-ond  that.  I  understand  tliat  you  aire  wiUii^  to  appear  be- 
fore this  commission  and  present  such  general  view^  as  you  have 
upon  the  Avhole  subject? 


I 


i 


1860    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Jones.  If  the  chainnan  thinks  they  would  be  of  any  vahie  to 
the  commission,  I  would  be  pleased  to  do  it. 

The  Chairman.  You  may  hold  yourself  in  readiness  for  that,  Mr. 
Jones.  Well,  do  you  feel  tliat  the  subject  which  you  have  discussed 
here  this  morning  is  of  vital  importance  to  the  employees  of  the 
companies  or,  to  put  the  question  in  another  way,  do  you  believe 
tlie  correct  solution  of  this  question  of  capitalization  is  of  vital  im- 
portance to  the  employees? 

Mr.  Jones.  I  tlunk  it  is  of  prime  importance  to  both  employees 
and  the  public. 

Commissioner  Sweet.  I  notice  on  page  178  you  give  the  statement 
of  Mr.  Ignatius  with  regard  to  overcapitalization  or  watered  stock. 
I  want  to  ask  you  whether  you  know  of  any  other  form  of  over- 
capitalization besides  those  mentioned  here  by  Mr.  Ignatius. 

Mr.  Jones.  I  tliink  I  have  answered  that,  Mr.  Sweet,  in  my  origi- 
nal statement  which  I  made  to  the  board.  I  have  covered  various 
forms  or  methods  of  overcapitalization  which,  I  think,  Mr.  Igna- 
tius has  not  referred  to. 

Commissioner  Sweet.  Take  the  case  of  the  San  Francisco  com- 
pany, mentioned  by  Mr.  Mahon,  starting  as  a  cable  road.  Suppose 
a  road  that  started  as  a  cable  road  in  a  hilly  city,  legitimately^  and 
properly,  had  no  watered  stock,  every  clolhir  that  was  issued  in  the 
form  of  stock  was  legitimately  put  into  the  enterprise,  and  it  was 
afterwards  found  that  the  electric  system  would  be  more  economical 
and  preferable,  and  it  was  changed  over  at  considerable  expense; 
the  actual  money  invested  would  be  materially  larger,  would  it  not, 
than  if  it  had  been  built  as  an  electric  road  on  the  start? 

Mr.  Jones.  Yes,  sir. 

Commissioner  Sweet.  Would  that,  in  your  opinion,  be  a  case  of 
overcapitalization  ? 

Mr.  Jones.  Of  course,  there  is  involved,  Mr.  Sweet,  an  aspect  of 
valuation  on  which  very  able  men  disagree;  that  is,  the  question  of 
how  to  handle  superseded  property  in  capital  investment.  I  should 
not  want  to  discuss  that  question  except  as  an  individual  and  from 
my  own  personal  point  of  view.  It  has  not  been  a  part  of  my  pres- 
ent stucW. 

The  Chairman.  You  will  discuss  that  subject  later  on? 

Mr.  Jones.  That  calls  for  a  personal  opinion.  I  have  tried  here 
to  present  the  facts  of  overcapitalization.  .  That  has  been  the  main 
purpose  of  this  study — to  present  the  facts  of  overcapitalization  and 
not  go  into  the  theories  or  what  constitutes  proper  capital  invest- 
ment or  what  are  the  proper  methods  of  valuing  properties. 

Commissioner  Meeker.  May  I  ask  a  question  there.  Mr.  Sweet? 
You  stated  certain  facts  as  to  the  capitalization  of  the  San  Francisco 
street-railway  lines.  How  can  we  interpret  those  facts  unless  we 
have  all  the  information  available  as  to  why  the  capitalization  is 
$290,000  per  mile  in  the  case  of  the  privately  owned  companies  as 
against  $110,000  for  the  publicly  owned  lines?  It  seems  to  me,  Mr. 
Sweet  is  pursuing  an  absolutely  correct  line  of  questioning.  It  is 
not  a  matter  of  personal  opinion,  but  a  matter  of  furnishing  us  with 
the  facts. 

Mr.  Jones.  I  can  answer  that  question  in  some  of  these  cases  by 
the  financial  statements  from  the  public-service  commissions.    They 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1861 

give  their  reasons  very  strongly  in  some  cases  why  they  believe  the 
concerns  are  overcapitalized  and  how  it  was  done.  I  would  be  elad 
to  go  into  any  case  of  that  sort  if  desired. 

Commissioner  Sweet.  Mr.  Jones,  the  point  I  have  in  mind  is  this: 
I  think  you  have  given  the  impression  that  where  there  was  a  dif- 
ference between  the  actual  valuation  of  the  property  as  made  by  a 
public-service  commission,  for  instance,  or  in  some  proper  way 
where  that  was  very  much  less  than  the  capitalization  of  the  com- 
^^^"^^i"^!,^  ^^^^  ^^^^  ^^^'®  already  given  the  impression  that  there 
was  dishonesty  or  some  sort  of  conduct  that  was  reprehensible,  at 
least  on  the  part  of  the  corporations  necess.-irily.  Now,  what  I 'am 
asking  you  is  whether  there  may  not  be  a  material  difference  in 
the  actual  valuation  of  a  railroad  property  and  its  capitalization 
without  dishonesty  and  without  injustice  to  the  public. 

Mr.  Jones.  There  may  be  such  cases 

Commissioner  Sweet.  Or  the  employees. 

Mr.  Jones.  There  may  be.  I  have  specific  instances  here  and 
Qificial  statements  of  the  reverse.  There  may  be  cases  where  they 
should  not  be  criticized  on  that  score,  where  there  may  be  good 
reasons  for  apparent  overcapitalization. 

Commissioner  Sweet.  As  a  matter  of  general  information-— and 
I  think  the  public  are  fully  advised  on  that  point— a  great  many 
corporations  issued  stock  and  gave  it  away  with  the  bonds  that  they 
soid  and  the  incorporators  took  the  common  stock  and  sold  it  where 
they  could  and,  as  you  have  said,  got  out  from  under  and  got  it  in 
the  hands  of  individuals  who  might  be  considered  as  innocent  pur- 
chasers. At  the  same  time  it  is  also  true,  I  think,  that  in  most  of 
these  cases  that  you  have  cited  there  is  also  another  element  which 
might  be  called  overcapitalization  that  does  not  involve  dishonesty 
and  when  you  take  your  method  of  comparing  actual  valuations  with 
capitalizations,  that  you  do  not  make,  and  in  your  evidence  given 
to  us  you  have  not  made,  a  distinction  between  the  overcapitaliza- 
tion so-called— between  that  which  is  legitimate  and  that  which  is 
not  legitimate,  have  you  ? 

Mr.  Jones.  In  many  of  those  cases  the  responsibility  would  be 
upon  the  valuation  officials.  If  there  was  any  merit  in  those  claims 
of^the  company,  they  would  have  been  recogiiized  by  the  appraising 

Commissioner  Sweet.  You  have  not  told  us  how  these  valuations 
are  made.  Are  not  most  of  them  or  many  of  them  made  on  the 
pliysical  valuation  of  the  properties  as  they  stand  ? 

Mr.  Jones.  In  cases  where  there  were  official  valuations  thev  were 
made  just  as  all  valuations  are  made 

Commissioner  Sweet.  They  are  not  all  made  alike,  are  they « 

Mr  JoN^.  No ;  in  accordance  with  certain  rules  which  have  been 
Jaid  down  by  the  courts,  m  accordance  with  the  individual  practice 
of  the  commission  and  m  accordance  with  the  judgment  of  the 
individual  engineer.  There  are  no  two  valuations  in  the  country 
that  are  alike.  The  same  details  as  to  principles  have  not  been 
followed   m  any  two  valuations  so  far  as   I  have  been   able  to 

Commissioner  Meeker.  Is  it  worth  while  trying  to  arrive  at  the 
value  of  a  property  by  the  method  of  valuation  ? 


m 


1&62    PROCEEDINGS  OF  FKDEKAL  ELECTRIC  RAILWAYS  COMMISSION". 

Mr.  Jones.  I  do  not  get  that  point,  Mi*.  Meeker. 

Commissioner  IMj-ieker.  You  stajte  that  no  two  valuations  are 
alike 

Mr.  Jones.  Absolutely  alike — in  the  method  of  reaching  the  valu- 
ations. 

Commissioner  Meeker.  You  think  that  they  are, on  the  whole,  trust- 
worthy ? 

Mr.  Jones.  Yes;  but  they  repi'esent  varying  judgments  of  men. 
One  set  of  appraisers  will  eniphasize  one  set  of  principles,  another 
*sct  of  appraisers  will  emphasize  other  principles  and  make  one  prin- 
cij)le  dominant  and  another  suboixlinate. 

Commissioner  Meeker.  Pai'don  me,  Mr.  Sweet,  I  did  not  want  to 
inten-upt  your  questioning. 

(\)mmissioner  Sweet.  Unless  you  knew  tlte  basis  of  valuation  it 
woukl  not  be,  would  it,  a  fair  comparison  upon  which  to  base  a 
charge  of  dishonesty  ?  In  other  words,  if  there  is  dishonesty,  shoukl 
it  not  be  shown  in  some  other  way  ? 

Mr.  Jones.  I  do  not  like  to  use  the  tenn  "  dishonesty." 

Commissioner  Sweet.  I  am  speaking  of  considering  watere(Q 
stock,  the  issuance  of  stock  for  which  there  lias  not  be^n  value  paid — 
^dishonest — putting  it  in  that  form. 

Mr.  Jones.  I  think  we  may  assume  that  tlie  official  valuations  that 
have  been  made  have  been  fairly  and  honestly  made,  and  tliat  they 
rej:)resent  approximately  the  value  of  the  proj)erty, 

Connnissionor  Sweet.  Present  value? 

Mr.  Jones.  The  value  at  that  time  of  that  pix)perty« 

Commissioner  Sweet.  At  the  time  it  was  valued? 

Mr.  Jones,  By  one  metliod  and  anotlier.  Either  reproduction- 
ro:4  ujethod  oi"  the  historical  method. 

I  think  we  have  a  right  to  assume  that  those  valuations  are  ap- 
proximately correct,  in  most  cases,  and  tltat  we,  \ievc,  can  tnke  those 
valuations  as  a  proiJei*  basis  of  tlie  value  of  those  properties. 

Commissionei'  Sweet.  And  if  the  capitalization  of  tlwj  company 
is  very  much  in  excess  of  the  valuation  that  is  found  in  the  way  you 
speak  of,  does  tJiat  necessai'ily  prove  tliat  tliere  was  water  in  the 
stock?  .  ^ 

Ml'.  Jones.  I  think  that  gives  one  the  right  to  the  strong  iiifeit^nce 
that  there  have  been  some  unfair  methods  in  the  past. 

Commissioner  Sweet.  We  know  that  in  many  cAses  there  have 
been  unfair  methods  such  jsm  you  speak  of,  and  yet  tlie  question  that 
I  am  asking  3^ou  bears  upon  tlie  point  as  to  whether  tiie  kind  of  evi- 
dence yoii  liave  been  giving  us  necessarily  proves  tlie  point  that  you 
are  nuiking;  in  other  words,  whether  it  wouM  not  be  possible,  by 
leason  of  transfers  fiom  tlie  cable  sysfceai  to  nn  electric  system,  or 
othet^  foijais  of  obsolest^ence — to  use  a  term  that  is  often  used  in  this 
connection — whether  it  would  not  be  i)ossiWe  that  th«  difference 
be<tw«en  capitalization  and  valuation  migitt  exist  without  any 
watei^d  stock  at  all  i 

Mi-.  Jones.  From  my  knowledge  of  valuations  of  street  railways, 
I  slioukl  say  that  the  intaagibies,  the  intangible  values,  have  been 
adequately  recognized  in  practically  every  case  and  tbat  the  item  of 
snperseded  propeity,  of  wkick  you  are  now  sj^eaking,  has  been  given 
proper  recognition. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1863 

Commissioner  Sweet.  Then  it  is  your  conclusion,  is  it,  that  if  there 
is  a  difference  between  valuation  and  capitalization,  it  proves  that 
there  has  been  watered  stock? 

Mr.  Jones.  There  is  an  inference  there  that  something  is  wrong 
in  the  financial  management  of  that  companv  in  the  past.  Just  an 
mstance,  speaking  of  the  San  Francisco  situation— Mr.  Arnold 'calls 
attention  to  this — here  is  another  mooted  question  in  the  valuation 
field  :^  He  refers  to  the  fact  that  bonds  held  in  reserve  to  the  amount 
of  $5,409,000  for  future  additions,  betterments,  and  acquisitions, 
were  sold  at  price  approximating  73  per  cent,  and  the  discounts 
capitalized  as  a  charge  to  betterments. 

That  opens  up  another  theory  of  valuation  as  to  where  you  will 
l>lace— to  what  account  you  will  charge— the  discount.  There  is  a 
very  large  discount,  an  unusually  large  discount.  Xow,  shall  future 
generations  of  car  riders  carry  that  burden  ? 

Commissioner  Gadsden.  Where  would  you  charge  it — discount  on 
bonds  ? 

Mr.  Jones.  I  would  charge  it  to  operation— I  think  I  would  not 
want  to  go  into  that— that  is  a  i>ersonal  matter.  That  comes  out 
of  my  own  personal  study.    It  is  not  a  part  of  this  study. 

Commissioner  Gadsden.  My  question  is  perfectly  fair,  I  submit. 
You  have  introduced  the  question.  Xow,  what  is  going  to  be  done 
with  the  discount  to  a  bond  ?  Are  you  going  to  capitalize  it,  or 
charge  it  to  the  present  car  rider? 

^Ir.  Jones.  You  have  one  theory;  I  may  have  another;  the  next 
man  may  have  another. 

Commissioner  Gadsden.  Your  theory  is  all  right.  Let  us  know 
what  it  is.    Would  you  charge  it  to  the  present  car  rider? 

Mr.  Jones.  Well,*^!  do  not  know  that  my  theory  on  that  is  made 
up.  I  think  I  am  not  prepared  to  answer  that.  1  would  want  to 
give  it  moi-e  thought,  to  give  an  absolute  answer. 

Commissioner  Gadsden.  Well,  I  will  waive  that. 

Commissioner  Sweet.  AVithout  giving  any  personal  opinion  of 
the  point  that  you  object  to  expressing  an  opinion  on,  you  will  admit 
this,  will  3^ou  not,  that  that  is  another  element  which  might  create 
and  in  many  cases  probably  does  create,  a  difference  between  capi- 
talization and  valuation? 

Mr.  Jones.  Yes. 

Commissioner  Sweet.  That  does  not  necessarily  indicate  even 
dishonesty  or  a  condition  that  is  unfair  to  the  public? 

Mr.  Jones.  I  think  in  every  case  the  question  of  discount  has  been 
given  full  consideration  by  the  appraisers  of  the  properties. 

Commissioner  Sweet.  Do  you  mean  to  say  by  that  that  you  think 
the  historical  method  of  valuation  has  been  followed  in  everv  in- 
stance ?  •  "^ 

Mr.  Jones.  Xo;  in  the  reproduction  of  the  properties,  the  matter 
of  discounts  has  been  given  consideration. 

Commissioner  Sweet.  Well,  is  the  reproduction  method  adopted 
in  all  cases  of  valuation  ? 

Mr.  Jones.  Xo.  ^  There  is  only  one  means  of  arriving  at  valuation. 

Commissioner  Sweet.  Are  there  not  valuations  made  in  which  re- 
production is  entirely  ignored? 

Mr.  Jones.  I  think  so. 


1864    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  Are  there  not  valuations  in  which  the  his- 
tory of  the  company  and  its  capitalization,  the  sale  of  its  bonds  and 
all  that  sort  of  thing  has  been  ignored? 

Mr.  Jones.  I  can  not  answer  that.  As  to  the  other  question,  I 
think  the  system  in  Massachusetts  has  been  to  get  at  the  value  of  the 
properties  through  investigation  of  the  books. 

Coirmiissioner  Sweet.  Have  you  included  in  your  investigation  of 
this  subject  the  Philadelphia  Rapid  Transit  Co.? 

Mr.  Jones.  Yes. 

Commissioner  Sweet.  Do  you  find  watered  stock  there? 

Mr.  Jones.  The  basic  trouble  in  Philadelphia  is  the  onerous  terms 
of  the  underlying  leases.  There  is  almost  an  atrocious  situation 
there,  of  enormous  rental  burdens,  which  the  present  generation  are 
carrying,  and  can  not  get  out  from  under;  burdens  running  all  the 
way  from  12  to  72  per  cent  return  upon  the  actual  capital  invested 
in  the  original  properties.  Then,  on  top  of  that,  the  Philadelphia 
( ompany  had  $30,000,000  of  common  stock,  on  which  it  is  now  pay- 
ing 5  per  cent  return. 

Commissioner  Sweet.  That  $30,000,000  was  actually  paid  in,  was 
it  not? 

Mr.  Jones.  I  understand  that  was  all  paid  in. 

Commissioner  Sweet.  And  what  you  object  to  there,  from  the 
viewpoint  of  the  public  is  that  the  Pliiladelphia  Rapid  Transit  Co., 
in  leasing  small  Imes  that  now  enter  into  its  system,  is  paying  too 
liigh  a  rental? 

Mr.  Jones.  It  was  improvident  action.  It  took  over  a  burden 
which  should  not  have  been  loaded  upon  the  company. 

Commissioner  Sweet.  That  you  do  not  ascribe  to  the  present  man- 
agement ? 

Mr.  Jones.  No,  sir. 

Commissioner  Sweet.  Which  is  good,  is  it  not? 

Mr.  Jones.  From  my  knowledge  of  the  Philadelphia  company,  the 
present  management,  the  management  since  1911,  is  of  a  very  high 
grade. 

Commissioner  Beaix.  Is  any  of  the  overcapitalization  that  you  re- 
fer to  due,  in  your  opinion,  to  what  might  be  termed  the  cost  of 
money  ?  I  mean  by  that,  I  think  we  all  realize  that  if  you  are  build- 
ing a  railroad  or  a  factory  or  whatever  it  may  be,  and  have  not 
yourself  all  the  funds  required,  you  have  to  borrow  money,  just  the 
same  as  you  buy,  beg,  or  steal  any  material  entering  into  the  con- 
struction; and  that  varies  in  its  cost  with  the  time  and  with  the 
security  that  you  can  give;  and,  as  a  man  of  large  experience,  and 
coming  from  the  West  which,  up  to  recent  years  at  least,  had  to  build 
up,  and  where  rates  of  interest  were  higher,  and  it  was  harder  to  get 
investors  to  go  at  that  time — I  remember  30  years  ago  when  it  was 
very,  very  hard  to  get  money  for  street  railways  or  anything  else,  in 
the  far  West — suppose  you  were  building  in  the  West  to-day,  in  a 
small  community,  a  road  that  would  cost  $1,000,000  and  it  was  not 
an  old  community,  and  there  was  risk  about  it,  and  you  found  that 
you  could  get  that  $1,000,000  if  you  issued  a  million  dollars  in 
bonds,  but  in  order  to  get  it,  you  also  had  to  give  away  half  a 
million  dollars  worth  of  stock  to  the  people  who  bought  those  bonds. 
Would  you  consider  that  diskonest  ?    Would  you  think  it  was  better 


I         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1865 

to  build  that  road  and  give  employment  to  perhaps  several  hundred 
men  to  operate  it,  and  construct  it,  or  would  you  feel  that  it  was 
better  for  the  country  and  for  labor  to  wait  until  that  town  had 
grown  to  such  a  size  that  you  could  borrow  that  money  without  giv- 
ing any  bonus  for  it?  ./  & 

In  other  words,  is  any  of  this  overcapitalization  that  you  refer  to 
due  to  earlier  times,  where,  in  order  to  secure  money  for  something 
that  was  not  absolutely  sure,  in  which  it  .was  hard  to  tempt  men  tS 
put  their  money,  more  had  to  be  given  in  the  way  of  security  than 
ordinarily  would  be  the  case? 

Which  was  better— to  wait  until  you  could  get  that  money  at  a 
reasonable  rate,  or  to  go  ahead  and  give  employment  to  hundreds  of 
men  and  develop  the  country  in  that  section?  Has  not  that  entered 
J  1  J.^  ^i"  .^.  ^^^'^^  ^^  ^^^^  country.  Isn't  it  true  that  a  ffood 
deal  of  that  had  to  be  done  ?  Now,  was  it  wrong  ?  I  know  men  hold 
diilerent  opinions  on  that^  but 

Mr.  Jones.  I  have  lived  in  Massachusetts,  too,  and  I  have  seen  it 
develop  there.  The  story  of  Massachusetts  perhaps  is  the  best  an- 
swer. 

Commissioner  Beall.  In  some  of  the  eastern  sections  it  was 
equally  true  in  the  earlier  days.  I  remember  when  people  did  not 
believe  an  electric  railway  could  be  successfully  operated      As  a 

"'lir^^'i'?  ^^''*'  ^^^  ^P^  ""V^^  ^W  ^^^*  "'^"^J-    ^^^y  were  not  a  success. 

Would  you  consider  that  dishonest,  if,  in  order  to  give  employ- 
ment to  labor  and  make  a  big  public  improvement  to  do  something 
that  would  develop  business  and  population  and  prosperity,  suppose 
you  do  give  more  stock  than  the  money  that  you  actually  take  in « 
.Suppose  you  have  to  give  a  bonus  for  your  money?    Is  that  wronor? 

Mr.  Jones.  I  could  not  answer  that  question  without  taking  into 
account  the  motives  of  the  men  who  were  responsible  for  the  in 
ception  of  the  movement.  Their  motives,  in  these  cases,  within  my 
knowledge,  were  that  they  were  engaged  in  a  speculative  enterprise 
for  the  purpose  of  making  money,  and  that  the  public-serving  motive 
was  not  the  dominant  motive. 

Now,  if  it  was,  you  could  say  that  their  action  was  improvident 
If  it  was  otherwise,  then  the  risk  is  all  upon  them.  It  was  a 
speculative  enterprise  for  the.  purpose  of  making  money  and  if 
they  took  desperate  chances  I  do  not  see  how  they  should  expect 
to  load  all  that  burden  upon  the  public— that  is,  the  mistakes  of 
judgment  and  everything  else  involved— that  it  should  be  a  burden 
upon  the  public  forever.  That  is  my  view  of  it,  that  that  should 
iiuL  ue  so.  • 

Cominissioner  Beall.  Then  you  think  it  would  be  better,  instead 
of  paying  the  bonus  for  money,  where  it  was  necessary,  to  let  the 
public  go  without  street-railway  facilities,  or  whatever  it  is  for 
many  years,  until  the  town  or  the  community  was  so  big  or  until 
that  method  of  transportation  was  so  well  established 'in  other 
parts  of  the  world  that  there  could  be  no  question  as  to  its  success? 

ti/^"t  ^       ^^  ^^  ^^^  ^^'"^y  *^  ^"^^^  ^P  ^^^  country « 

Mr.  Jones.  You  confine  your  point  to  just  one  phase  of  this— 

Where  they  were  trying  to  build   up  the  country.     That  is  one 

mstance;   there jire   Drobably   many   instances,  on  the   other  side, 

Where  well-established  companies  have  put  out,  down  to  the  present 


Is 

.  t  . 

i.  i 


1866    PROCEEDINGS  OF  I'EDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

time,  securities  with  more  or  less  discounts  which  they  have  sought 
to  charge  to  capital  investment.  Those  discounts,  in  many  of  those 
cases,  unquestionably  were  due  to  no  fault  on  the  part  of  the 
l)ublic.  They  were  due  to  the  past  financial  mismanagement  of  the 
comi)anies.  In  other  words,  tliey  had  impaired  their  own  credit 
by  their  overcapitalization  and  other  methods  of  financeering  by 
v»'hich  they  were  unable  to  put  out  their  securities  at  par. 

Commissioner  Beall.  You  do  not  think  that  was  true  in  every 
case,  do  you — that  that  was  the  reason? 

Mr.  Jones.  Xo  ;  I  do  not  think  it  is  true  in  every  case ;  but  there 
are  large  numbers  of  cases.  I  think  that  is  the  dominant  situation 
of  the  companies,  that  they  have  impaired  their  own  credit  througli 
the  past  financial  management  and  seeking  through  the  charge  of 
discounts  to  capital  investment  to  make  the  public  carry  it  in  the 
future. 

Commissioner  Beall.  I  take  it  from  what  you  siiy  that  you  would 
rather  see  a  community  wait  until  it  could  borrow  money  at  low 
rates  for  the  development  of  a  street  railway,  or  whatever'it  might 
bo,  rather  than  pay  a  bonus  for  it  and  immediately  give  employ- 
ment to  labor  and  give  the  facilities  to  a  town  that  would  help 
build  it  up.  Because  you  realize  that  under  a  good  many  condi- 
tions you  can  not  borrow  money  without  paying  a  bonus  for  it. 
^'ou  can  not  do  it.    It  is  impossiliile. 

Mr.  eJoxEs.  That  is  one  of  the  defects  of  private  management  of 
pu«)lic  utilities. 

Commissioner  Beall.  A  city  has  to  do  the  same  thing.  I  remem- 
ber the  day  when  our  Western  cities,  even  of  large  size,  had  to  pay 
very  high  rates  for  their  money  for  public  improvements  or  anv- 
thing  else,  and  it  was  very  hard  for  them  to  get  it. 

Now,  would  it  have  been  better  for  those  cities  to  have  waited 
and  done  without  tliose  public  improvements  until  they  had  grown 
to  such  size  as  they  could  get  them  on  the  same  basis  as  cities  in 
the  East?    Do  you  think  that  Avould  have  been  a  good  thing? 

Mr.  Jones.  I  could  not  answer  that  without  knowledge  of  the 
local  situation  in  each  case.  Many  of  these  roads  were  built  where 
there  was  no  necessity  for  it,  and  where  now  in  some  of  those  cases 
the  rails  are  being  taken  \\y>  and  the  property  junked. 

Commissioner  Beall.  Well,  there  was  no  necessity  at  the  time  for 
the  building  of  the  Union  Pacific  Kailway,  but  don't  you  think  it 
helped  the  growth  of  the  West  and  the  development  of  the  country 
doing  it  ?  Don't  you  think  it  quickened  it  by  20  years  ?  Don't  you 
think  the  growth  of  your  own  town  of  Minneapolis  and  its  adjoin- 
ing connnunity  of  St.  Paul  has  been  greatly  helped  by  the  street 
railway  and  other  similar  developments  there  during  the  past  20 
yeai-s?  Don't  you  think  it  has  brought  people  and  wealth  and  busi- 
ness to  vour  town? 

Mr.  Jones.  I  have  rather  peculiar  economic  views  as  to  the  de- 
velopment of  cities. 

Commissioner  Beall.  Your  views  are  very  interesting  to  us,  Mr. 
Jones,  because  you  have  had  the  experience;' you  have  been  a  public 
mjin— you  have  managed  newspapers,  and  you  have  come  in  touch 
with  public  sentiment. 


PROCEEDINGS  OF  FEDERAL  ELFX^TRIC  RAILWAYS  COMMISSION.    1867 

Mr.  Jones.  Economically,  socially,  I  do  not  believe  in  large  cities ; 
I  do  not  like  to  see  them  develop,  so  that  it  is  pretty  hard  for  me 
to  g€t  on  the  same  basis  of  reasoning  that  you  are. 

Commissioner  Beall.  I  follow  you. 

Mr.  Jones.  I  am  opposed  to  every  artificial  means  that  will  de- 
velop large  cities. 

I  might,  in  this  connection,  call  attention  to  a  modern  inst<ance 
riglit  along  the  line  of  what  Mr,  Beall  is  speaking  of:  The  Minne- 
apolis franchise  which  is  now  before  the  people  for  referendum 
contains  a  pix)vision  that  when  tlie  city  has  the  legal  power  to  so  do, 
it  may  loan  the  company  money  for  additions,  betterments,  audi 
exi>enses,  or  it  may  guarantee  the  securities  of  the  company. 

Now,  the  purpose  of  that  is  obviously  to  reduce  the  cost  of  new 
capital  for  the  future  development  of  the  proi>ei'ty.  I  think,  so  far 
as  my  own  knowledge  goes,  that  is  a  new  ideia  'in  a  public-utility 
fianchise. 

Commissioner  Gadsden.  Have  they  had  a  valuation  in  Minne- 
apolis recently  as  the  result  of  these  investigations  and  this  new 
franchise  ? 

Mr.  Jones.  We  have  had  some  four  or  five  valuations — so-called 
valuations;  a  valuation  by  the  c^npany's  engineers;  a  valuation  by 
tlie  city  engineer;  a  check  on  the  valuation  of  the  city  engineer 
made  by  Mr.  Charles  L.  Pillsbury,  who  directed  the  valuation  of  the 
physical  part  of  the  Washington  pix^perties,  street-i-ailway  proper- 
ties; and  then  a  valuation,  rather  suj^erficial,  made  by  a  Milwaukee 
|2?entieman,  at  the  instance  of  the  mayor;  and  finally  an  agreement 
en  valuation  between  the  city  council  and  the  Miiineapolis  Street 
Kailway  Co. 

Commissioner  Gadsden.  How  did  those  valuations  compare  with 
tlie  capitalization  of  those  companies,  tlie  Twin  Cities  Co.  ? 

Mr.  Jones.  I  did  not  use  that  instance,  because  it  is  not  possible 
to  asoeitam  the  capitalization  of  tl^  Minneapolis  Street  Railway  Co 
It  IS  a  part  of  the  Twin  Cities  Rapid  Transit  Co.,  and  there  is  no 
allocation  of  capitalization. 

Commissioner  Gadsden.  It  is  possible  to  approximate  it,  thoudu 
IS  it  not?  '  te  •» 

Mr.  Jones.  Xo;  I  can  not   approximate  capitalization,     I  can 
allocate  the  values  of  the  system,  but  I  can  not  approximate  the 
capitalization,  because  I  have  no  knowledge  of  it 
•   ^!"""ssioner  Gadsden.  \y\i%t  was  the  valuation  per  mile  of  track 
in  Minneapolis? 

Mr.  Jones.  By  which  valuation  ? 

Commissioner  Gadsden.  The  one  made  at  the  request  oi  the  mavor, 
say?  *      ' 

Mr.  Jones.  You  mn^  recollect  that  that  mavor  was  a  Sociiilist 
mayor  and  his  interest  was  to  get  the  lowest  possible  valuation. 
Commissionei-  Gadsden.  Let  us  take  that  and  tlien  go  up. 
Mr.  JONF.S.  His  valuation  was  abmit  $15,000,000  as  I  i-ecollect. 
Commissioner  Gadsden.  How  much  Avas  that  per  mile  of  track  ^ 
Mr.  JoN^.  Two  hundred  miles  of  ti-ack,  $75,000  a  mile,  tliat  would 
be  it,  would  it  not? 
Commissioner  Gadsben.  What  was  tike  higiiest  valuation! 


l! 


1868    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     ^ 

Mr.  Jones.  The  company's  valuation  was  about  $35,000,000.  The 
city  engineer's  vahiation  was  $2(),000,()00,  Mr.  Pillsbury's  valuation 
was  $2,^,000,000,  approximately,  and  the  agreement  as  to  valuation, 
as  of  January  1,  1919,  was  $25,000,000. 

Commissioner  Gadsden.  For  how  many  miles  of  track? 

Mr.  Jones.  Two  hundred  miles  of  track. 

Commissioner  Gadsden.  That  is  $120,000  a  mile? 

Mr.  Jones.  Yes;  but  there  are  other  considerations.  The  power 
plant  of  the  whole  Twin  Cities  Rapid  Transit  system  is  located  in 
Minneapolis  and  is  a  part  of  the  valuation.  On  a  comparative  basis 
probably  about  $1,000,000  should  be  deducted  for  the  value  repre- 
senting the  value  of  the  power  plant  representing  the  other  parts 
or  the  system.  ^ 

Commissioner  Gadsden.  $1,000,000? 

Mr.  Jones.  Yes. 

Commissioner  Gadsden.  You  still  have  approximately  $120,000  a 


Mr.  Jones.  About  $115,000  per  mile. 
Commissioner  Gadsden.  Yes. 


m 


Mr.  Jones.  Another  thing  you  must  consider  is  the  extraordinary 
physical  condition  of  the  properties  of  the  Minneapolis  property. 
Cr>mmissioner  Gadsden.  That  is  one  good  piece  of  property,  is  it 

not?  I       ir       J, 

Mr.  Jones.  I  do  not  think  there  is  any  better  in  the  United  States. 

Commissioner  Gadsden.  That  is  one  good  street  railway  ? 

Mr.  Jones.  Whatever  the  defects  of  management,  whatever  the 
defects  of  the  company's  attitude  towards  the  public,  its  religion  up 
to  two  years  ago,  at  least,  was  to  keep  that  propeity  in  the  highest 
physical  condition.  ^     r      j  ^ 

Commissioner  Gadsden.  So  that  they  are  not  all  bad?  There  are 
some  good  ones  ? 

The  Chairman.  Have  you  seen  that  property  during  the  last 
year  ?  ° 

Mr.  Jones.  I  have  not  been  there  for  a  year  and  a  half  to  make 
any  investigation  of  it. 

Commissioner  Gadsden.  Now%  Mr.  Jones,  going  back  to  the  ques- 
tion of  the  relation  between  valuation  and  capitalization,  there  was 
introduced  before  this  commission  by  the  railway  association  a  state- 
ment, or  exhibit  of  26  railways  showing  the  capitalization  in  one 
column  and  the  valuations  in  another.  That  statement  I  have  here 
and  it  shows  that  the  ratio  of  capitalization  to  valuation  of  those  26 
companies  was  110  per  cent.  In  other  words,  on  the  basis  of  these 
figures,  the  overcapitalization,  if  you  choose  to  call  it  such,  was  only 
10  per  cent.  I  want  to  call  your  attention  to  some  of  those  com- 
panies, and  ask  you  whether  you  have  had  occasion  to  look  into  any 
of  them.  For  instance,  the  Georgia  Railway  &  Electric  Co  re- 
ported here  as  229.7  miles,  valuation  fixed  by  the  Georgia  Railroad 
Commission  in  August,  1918,  at  $25,000,000;  its  capitalization  is 
$24,441,600. 

The  Denver  Traction  Co.,  284.32  miles;  the  public-utility  commis- 
sion, December  31,  1917,  before  these  high  prices,  fixed  a  valuation 
of  $23,674,000—1  will  read  round  numbers  only— whereas  the  capi- 
talization was  $26,000,000.  *^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION      1869 

Now,  the  Chicago,  North  Shore  &  Milwaukee  Railroad- 


Mr.  Jones.  Just  a  minute.     On  the  Denver  situation,  Mr.  Gads- 
den, my  figures  as  to  capitalization  show  a  total  of  $29,799,375. 
Commissioner  Gadsden.  What  is  your  valuation? 
Mr.  Jones.  The  valuation  by  the  commission  in  1918  is  $22,316,- 
'300. 

Commissioner  Gadsden.  This  is  December  31,  1917;  $23,674,000, 
and  a  capitalization  of  $26,000,000. 

Have  3'ou  got  the  Georgia  Railway  there? 

Mr.  Jones.  No. 

Commissioner  Gadsden.  We  have  had  that  testified  to.  Have  you 
got  the  Chicago,  North  Shore  &  Milwaukee? 

Mr.  Jones.  No  ;  that  is  an  interurban  line.  I  did  not  go  into  any 
of  the  interurbans. 

Commissioner  Gadsden.  The  testimony  before  us  on  that  railroad 
was  that  it  was  172  miles,  and  the  valuation  as  of  April  30,  1919, 
based  on  a  valuation  by  Walker  &  Cressler,  and  subsequent  capital 
expenditures— the  valuation  was  $13,500,000  odd,  as  against  a  capi- 
talization of  $12;922,000. 

Mr.  Jones.  I  should  w^ant  to  know  w^ho  made  the  valuations, 
whether  they  w^ere  official  valuations  or  made  by  engineers  of  the 
company. 

Commissioner  Gadsden.  I  am  giving  these  in  the  same  way  as  the 
others.     I  am  only  giving  the  testimony. 

Here  is  one  that  bears  out,  somewhat,  your  position ;  The  East  St. 
Louis  Railway  Co.  of  36  miles,  valuation  fixed  by  the  Public  Utility 
Commission  of  Illinois,  $1,500,000  as  against  a  capitalization  of 
$3,800,000.  ^ 

Here  is  the  Portland  Railroad  of  Maine,  unit  fixed  by  Sloan,  Hud- 
dle, Feustil  &  Freeman,  $6,262,000,  exclusive  of  going  value  and  non- 
physical  property ;  the  capitalization  is  $5,500,000. 

I  am  going  through  all  of  these,  but  I  w^ant  to  call  your  attention 
to  the  fact  that  there  has  been  introduced  before  this  commission  a 
statement  of  36  roads  giving  that  information  as  to  the  valuation 
and  capitalization;  and  the  variances  between  the  values  and  capi- 
talization. It  is  only  10  per  cent  on  those,  in  most  cases,  arrived  at 
prior  to  the  great  increase  in  prices  or  values  of  the  last  18  months. 

Mr.  Jones.  Does  that  list  include  lines  which  I  have  here  of 
cities 

Commissioner  Gadsden.  You  have  the  list  right  before  you.  No- 
it  does  not  include  New  York-  ' 


Mr.  Jones.  Or  Philadelphia? 
Commissioner  Gadsden.  No. 


Mr.  Jones.  Or  San  Francisco  ? 

Commissioner  Gadsden.  No. 

Mr.  Jones.  Or  Indianapolis? 

Commissioner  Gadsden.  No.  It  is  open  to  the  same  criticism  as 
yours— that  it  seems  to  have  picked  the  high  cities.  That  is  just  the 
point  I  want  to  bring  out— that  you  have  presented  here  the  hio^h 
spots  and  the  bad  ones,  and  here  is  a  statement  prepared  frcTm 
another  viewpoint  which  picks  the  low  spots  and  the  good  ones 

Mr.  Jones.  In  all  those  cases  were  those  valuations  officially  made 
by  a  public-service  commission? 


Hill 


1870    PECMDEEDIlirGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION', 

Commissioner  Gadsden.  Is  it  not  the  fact  that  some  were  made 
by  engineers  and  some  by  officials 

Mr.  Jones.  I  included  in  my  list  every  city  where  within  my 
knowledge  there  was  an  official  valuation  except  Portland,  Oreg. 

C^ommissioner  Gadsden.  Well,  now  I  will  read  to  you  another 
one.    How  about  Cincinnati  ?    Have  you  that  on  your  list  ? 

Mr.  Jones.  The  Cincinnati  situation  is  peculiar,  if  you  know 

Commissioner  Gadsden.  Let  me  read  you  about  Cincinnati 

Mr.  Jones.  It  is  a  situation  all  by  itself  which  I  rather  avoided. 
There  was  a  valuation  by  agreement;  there  were  different  valua- 
tions made  whicli  I  w(Mild  like  to  quote  you  if  you  want  to  know 
them.  A  valuation  made  by  the  company  of  $56,000,000,  a  valua- 
tion made  by  the  public-service  commission  of  the  State  of  $24,000,- 
000,  and  a  valuation  made  by  the  city  of  $12,000,000.  Now,  there 
were  the  original  valuations  of  the  Cinciainati  property. 

Commissioner  Gadsden.  I  will  read  you  this  and  I  would  be  glad 
if  you  would  check  it  up,  because  I  think  it  illustrates  the  situa- 
tion. Tlie  memorandum  that  I  have  before  me  is  that  the  Cincin- 
nati Traction  Co.  has  22G  miles  of  lines;  tlie  valuation  of  the  pub- 
lic-utilities commission  April  1,  1914,  with  subseq^uent  replacements 
up  to  December  31,  191C,  allowed  by  the  city  tar  the  serviee-at- 
cost  plan,  was  $31,847,000,  and  the  capitalization  is  $31,088,000;  that 
is  as  of  December  31,  1918, 

Mr.  Jones.  Tliat  $31,000,000  you  say  was  made  by  the  State  com- 
mission? 

Commissioner  Gadsden.  Valuation  by  the  public-utilities  commis- 
sion April  1,  1914. 

Mr.  Jones.  $31,000,000? 

Mr.  (jADsiiEN.  $31,847,000;  and  the  capitalization  is  $31,088,000. 

Mr.  Jones.  Tlie  State  valuation  was  $31,000,000?  I  do  not  know 
where  you  got  that. 

Commissionei*  Gadsden.  As  a  matter  of  fact,  tliat  valuation  has 
been  testified,  has  been  accepted  by  the  city  of  Cincinnati  as  the 
basis  of  the  service-at-oost  pla,n  upon  wliich  the  present  rates  are 
being  fixed. 

Ikfi.  Jones.  My  recx)llection  of  the  agreement  was  that  it  was  prac- 
tically $25,000^000.  I  would  have  to  refresh  my  memory.  [Mem- 
orandimi  was  here  handed  tlie  witness.] 

The  Chairman.  Have  you  some  data  there? 

Mr.  Warren.  What  is  the  date  of  yours,  Mr,  Jones?  TMs  adds 
the  subsequent  expenditures  to  December  Sl^  191G. 

Mr.  Jones.  Those  three  valuations  within  my  memory  were  made 
between  1916  and  1917.  I  have  no  intimate  late  information  of  the 
Cincinnati  situation. 

The  Chairman.  Dr.  Meeker,  or  Mi*,  Mahon,  have  you  juiy  ques- 
tions? " 

Mr,  Jones,  I  should  saj  in  the  Cincinnati  situation  there  was 
Involved — very  important  factors  were  intangibles,  the  matter  of 
superseded  property  and  the  matter  of  tlie  going  value  and  other 
things.  There  was  the  crux  of  tlie  situation.  That  was  tlie  test 
between  the  city  and  the  compamy  and  tlie  State  puMic-Besi'viee  com- 
mission— tlie  question  of  wlietker  those  enormous  intangibles  as  they 
were  should  be  allowed  in  the  valuations. 


PEOCEH>ii!iros  OF  federal  electetc  railways  COMMISSIOlSr,  1871 

CV>mmissioner  Meeker.  I  have  just  one  question,  Mr.  Chairman, 
that  occurs  to  me.  After  these  discrepancies — and  I  would  say 
enormous  discrepancies — in  valuations  readied  by  different  experts, 
you  still  have  faitli  that  through  the  method  of  valuation  you  can 
fjrrive  at  something  that  we  can  accept  as  the  basis  of  fares  or  the 
basis  of  any  other  public  policy  in  relation  to  street-railway  control  ? 

'Mr,  Jones,  If  tliose  valuations  are  official,  made  by  State  public- 
service  commissions  or  through  some  such  arrangement  as  was  made 
in  Pittsburgh,  where  there  is  fair  representation  of  both  points  of 
view.  Now,  there  are  honest  differences  of  view  and  methods  of 
valuation;  and  where  the  engineers  employed  are  reasonably  public 
serving,  where  their  point  oi  view  is  fairly  correct,  I  think  you  can 
arrive  at  an  approximately  just  valuation.  I  think  the  facts  will 
show  that  in  nearly  every  case  tJiere  have  been  recognition  of  intangi- 
bles or  superseded  properties  which,  in  the  judgment  of  many  men, 
should  be  eliminated.  But  approximatel3'  those  valuations  may  be 
said  to  be  just  in  many  cases. 

Commissioner  ^Ieeker.  With  reference  to  the  question  which  was 
asked  some  time  back  with  regard  to  the  relationship  of  the  wage  of 
employees  on  the  street-railway  companies  to  overcapitalization — is 
there  any  relation  between  wage  and  overcapitalization  ? 

Mr.  Jones.  I  think  there  is  the  same  i-elation  there  that  tliere  is 
Ixitween  the  public  and  the  company.  If  a  eompany  is  hard  up,  in 
liard  lines,  somebody  is  going  to  be  huit.  The  fii'st  recourse  of  street- 
railway  companies  generally  through  the  country,  during  the  hard 
tianes  as  they  come  under  stress,  is  to  reduce  wages  and  reduce  service. 
Both  employees  and  the  public  get  pinched.  That  is  the  common 
recourse,  Now,  I  say  tliat  does  show  an  intimate  relation  between 
wages  and  capitalization,  if  those  hard  times  are  in  a  measure  or 
wholly  responsible  for  tlie  companies^  financial  stress. 

Commissioner  Meeker.  I  do  not.  wish  to  ask  this  question  in  refer- 
ence to  wages,  because  30U  have  stated  tliat  you  have  not  made  anj 
special  study  of  that  wage  problena. 

Mr.  Jones.  I  am  not  a  student  of  the  wage  problem;  no. 

Commissionei-  Meeker.  But  let  me  aslf  you  this:  Do  you  think 
cajntalization  of  street-railway  properties,  as  of  otliei'  properties,  is 
arrived  at  rather  from  the  income  end  than  from  the  investment  end? 
Is  tlie  capitalization  of  the  street-railway  companies,  in  other  words, 
tlie  capitalization  of  income  earning  powei*  ? 

Mr.  Jones.  As  I  have  stated  in  my  original  statement,  the  present 
earning  capacity  of  street  railways  "has  in  many  cases  been  capital- 
ized, and  also  prospective  f utune  earning  capacity.  Those  are  both 
a  iiart  of  the  system  of  overcapitalization. 

Commissioner  Meeker.  So  there  is  only  a  very  indirect  relation  be- 
tween wages  and  overcapitalization.  What  I  mean  by  that  is  this : 
Wages,  of  course,  is  a  part  of  tiie  cost  of  production  of  the  item, 
tiansportation.  The  only  way  that  wages  come  into  the  problem  of 
capitalization  is  if  wages  can  be  reduced  sufficiently  tliere  will  be  a 
laiger  net  income  to  be  capitalized, 

Mr.  JoNESu  Tliat  is  correct,  and  also  if  labor  can  be  speeded  up  to 
a  larger  production  there  is  a  method  of  capitalization. 

Commissioner  ^Iixker,  It  is  one  of  verv  uidirect  relation,  and  our 
testunony  here,  I  think,  shows  that  diff^-ences  in  wage  scales  have 


1872    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

had  little,  if  any,  relation  to  the  question  of  overcapitalization.    That 
is  all  I  have  to  ask. 

Mr.  Jones.  I  would  like,  Mr.  Chairman,  to  correct  a  statement  I 
made  with  regard  to  valuations.  I  have  said  that  in  many  cases  the 
valuation  officials  have  reached  approximately  just  results.  I  think 
I  should  like  to  modify  that  by  saying  they  have  reached  such  ji^st 
re.'ults  so  far  as  the  physical  values  of  the  properties  are  concerned. 
There  are  many  cases  in  which,  in  my  own  judgment,  I  feel  an  excess 
allowance  has  been  made  for  the  so-called  intangibles,  but  so  far 
as  the  physical  values  of  the  properties  are  concerned,  I  think  the 
valuations  in  general  are  on  a  fair  basis. 

The  Chairman.  I  think  it  is  pretty  generally  understood 

CommivSsioner  Mahon.  When  you  say  valuations  in  general,  do 
you  mean  those  made  by  State  authorities  ? 

Mr.  Jones.  Official  valuations. 

The  Chairman.  I  think  it  is  pretty  well  understood  that  the 
methods  that  are  employed  in  getting\at  the  quantities — the  land 
prices,  the  land  values  and  unit  prices  and  things  of  that  kind — are 
pretty  commonly  exercised  by  all  of  the  regulating  commissions  as 
well  as  the  Federal  Government.  There  is  not  an  agreement  among 
them,  however,  as  to  either  the  inclusion  or  the  value  which  should 
be  attached  to  the  so-called  intangibles. 

^  Mr.  Jones.  That  is  where  the  wide  distinctions  come  in  valuations. 
Engineers  pretty  generally  agree,  or  approximately  agree,  on  the 
physical  values  of  the  properties. 

Mr.  Warren.  May  I  ask  Mr.  Jones  a  few  questions  about  Massa- 
chusetts? Are  you  familiar  with  the  laws  of  Massachusetts  under 
which  securities  are  issued?    Have  you  given  any  study  to  that? 

Mr.  Jones.  Yes.  I  have  made  no  intimate  study,  but  I  am,  in  gen- 
eral, familiar  with  those. 

Mr.  Warren.  And,  in  general,  you  know  that  the  securities  have 
been  issued  over  a  long  period  of  years  only  after  investigation  by 
the  commission  and  approval  of  the  amounts? 

Mr.  Jones.  Yes. 

Mr.  Warren.  That  is  the  reason,  I  suppose,  that  you  took  the 
Massachusetts  capitalization  as  your  base  ? 

Mr.  Jones.  Yes. 

Mr.  Warren.  Is  it  not  a  fact,  however,  that  in  Massachusetts  there 
is  a  verv  large  amount  of  what  might  be  called  rural  or  country 
mileage? 

Mr.  Jones.  Yes;  that  is  correct. 

Mr.  Warren.  And  that  is  usually  built  in  the  highways  and  not  on 
private  rights  of  way? 

Mr.  Jones.  Yes. 

Mr.  Warren.  So  that  in  the  Massachusetts  figures,  speaking  gen- 
erally, there  would  be  included  much  less  cost  of  right  of  way  than  in 
some  other  States  where  the  interurbans  have  been  built  on  their  own 
right  of  way  ? 

Mr.  Jones.  Conditions  in  Massachusetts  would  be  different  in  some 
cases  and  ver}^  similar  in  other  cases  to  other  States,  I  think — that  is, 
as  to  the  relation  of  the  interurban  structure. 

Mr.  Warren.  Then,  is  not  another  thing  worthy  of  comment,  that 
in  New  York  the  capitalization  includes  the  cost,  whatever  the  proper 


proceedings  of  federal  electric  railways  COMMISSION.    1873 

cost  may  have  been,  of  the  elevated  structures  and  a  large  part  of  the 
cost  of  the  subways  ? 

Mr.  Jones.  Yes. 

Mr.  Warren.  In  Massachusetts  the  subways  are  built  by  the  public 
so  that  their  cost  is  not  reflected  in  the  street  railway  capitalizations' 

Mr.  Jones.  I  have  sought  in  this  study  and  these  comparisons  to 
keep  away  from  elevated  and  subway  construction  in  cities  where 
they  have  had  that  to  any  appreciable  extent,  because  it  would  not 
be  possible  to  make  a  fair  comparison.  I  have  not  used  the  com- 
parison as  to  capitalization  per  mile  in  the  Washington  cases,  because 
tliere  is  such  a  large  proportion  of  underground  construction,  which 
IS  much  more  expensive,  and  therefore  I  have  not  used  that  com- 
parison at  all. 

Mr.  Warken.  You  mean  in  Washington  City? 

Mr.  Jones.  In  Washington  City. 

Mr.  Warren.  But  in  New  York  you  necessarily  had  to  use  it,  did 
you  not  f    It  IS  necessarily  included. 

Mr.  Jones.  I  have  made  no  comparison  of  New  York  capitaliza- 
tion. I  have  merely  included  the  story  of  the  past  financial  construc- 
tion and  management  of  the  propeities  without  any  comparison  of 
capitalization.  ^ 

Mr  Warren.  But  you  made  a  comparison  of  Massachusetts  capi- 
talization per  mile  with  the  capitalization  in  the  country  ffenerallv? 
Mr.  Jones.  Yes.  *^ 

Mr.  Warren.  And  New  York  represents  about  one-fifth  of  the 
total  capitalization  of  the  country,  does  it  not? 

Mr.  Jones.  I  could  not  answer  that. 

Mr.  Warren  Just  one  other  thing,  as  to  the  bearing  of  capitali- 
zation on  the  plight  of  the  street  railways.  I  judge  from  what  you 
have  said  that  you  would  agree  in  a  general  way  that  the  capitaliza- 
tion of  Massachusetts  has  been  held  down  pretty  strictly 

Mr.  Jones.  Yes.  ^       j  j- 

Mr  Warren  What  would  be  the  impression  that  you  would  ^et 
from  the  fact,  if  it  is  a  fact,  that  every  operating  company  in  Masia- 
chusetts  with  the  single  exception  of  one  company  which  operates 
only  1  mile  of  track  with  a  5-cent  fare,  has  either  increased  in  fare 
with  the  approval  of  the  public-service  commission  or  has  pending 
before  that  commission  a  petition  for  authority  to  increase  its  fare « 

Mr.  Jones.  There  are  vanous  ways  to  answer  that,  Mr  Warren 
it  would  require  in  each  case,  I  think,  a  study  of  the  property  and 
ot  Its  business.  As  I  said  before,  many  of  those  companies -were 
improvidently  established  and  never  should  have  been  and  could  not 

V?^  T?/^^^^^^^  ^^^^^  ^^y  system,  because  the  business  is  not  there 

Mr.  Warren.  Some  of  them  have  already  been  eliminated. 

Mr.  Jones.  Yes ;  and  then  there  are  other  factors,  of  course,  which 
might  enter  into  the  situation  there. 

Mr.  Warren.  But  you  have  in  iMassachusetts  almost  every  kind 
of  company  from  the  metropolitan  company  in  the  city  and  suburbs 
ot  over  a  million  people  down  to  the  kind  of  a  company  you  last 
referred  to  that  ought  never  to  have  been  built.    That  is  all. 

Mr.  Lauck.  Were  you  going  to  answer  Mr.  Warren's  question,  or 
aid  you  think  you  did  not  have  the  facts  upon  which  to  base  an 
answer  ? 


160C43°— 20— VOL  2- 


-56 


1874    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOKT. 

Mr.  Jones.  I  have  not  an  intimate  knowledge  of  the  Massachusetts 
situation.  I  onW  used  that  material  which  I  did  because  it  was 
included  in  the  United  States  census  reports.  The  only  material  I 
have  used  here  concretely  is  the  Bay  State  case,  because  a  fair  com- 
parison was  possible  there. 

Mr.  Warren.  But  you  are  not  familiar  with  the  statement  of  the 
c^Mnmission  a  few  years  ago  in  discussing  the  street-railway  situa- 
tion, where  they  said  that  Massachusetts  was  free  from  the  diffi- 
culties resulting  from  any  overcapitalization,  speaking  generally? 

Mr.  Jones.  1  have  read,  I  think,  everything  that  has  been  put  out 
by  the  Massachusetts  commission  and  I  presume  I  have  seen  it. 

Mr.  Warren.  But  you  do  not  happen  to  recollect  it? 

Mr.  Jones.  I  do  not  recollect  it ;  no. 

Mr.  Lauck.  As  to  the  relation  of  the  employees  of  the  industry 
to  the  industry,  in  connection  with  some  of  your  statements,  I  would 
like  to  ask  you  some  questions.  The  street-railway  industry  is  like 
any  other  industry,  is  it  not  ?  The  factors  that  are  producing  traffic 
units  are  labor  and  capital,  are  they  not  ? 

Mr.  Jones.  Yes. 

Mr.  Laf€k.  And  these  units  of  capital  are  invested,  and  a  cer- 
tain amount  of  labor  is  put  in,  and  certain  earnings  result.  You 
huve  made  a  statement  imder  questioning  that  the  tendency  has  been 
in  the  corporation  management  of  the  public  utility  corporations 
to  capitalize  the  earning  capacity.  As  I  understood  it,  that  has 
been  your  explanation  and^ 

Mr.  Jones.  I  stated  that  that  has  been  one  of  the  methods  of  the 
companies  to  augment  their  capital  investment. 

Mr.  Lauck.  In  other  words^  then,  if  capital  and  labor  are  pro- 
ducing jointly  revenues,  and  those  revenues  are  capitalized,  you  men 
have  a  situation  where  eitlier  capital  or  labor  or  where  labor  has  not 
evidenced  of  what  would  be  their  earnings  if  this  captial  had  not 
been  issued,  have  3'ou  not  ? 

ionimissioner  Meeker.  Mav  I  interrupt  there,  Mr.  Lauck?  Mr. 
Jones  very  properly  correcte<l  the  question  that  I  put  to  him ;  I  did 
not  include  in  my  question  the  capitalization,  of  hoped-for  earnings. 
Mr.  Jones  included  that  in  his  reply  and  that  should  be  considered, 
I  think^  in  the  question  you  are  now  propounding. 

Mr.  Lauck.  Yes. 

Mr.  Jones.  For  the  purpose  of  reenforcing  that  opinion  I  read 
the  circular  froin  Hamilton  &  Co.,  investment  orokers,  of  Baltimore. 

>h".  Lauck.  Well,  the  reasoning  from  that  opinion  that  I  wanted 
to  get  at  is  this:  That  if  capitalization — putting  aside  valuations 
and  not  considering  th^n  at  all — if  the  practice  or  the  public-utility 
corporations  has  been  to  capitalize  earning  power,  irrespective  of 
how  those  securities  were  distributed,  either  being  given  in  stock 
dividend  or  stock  bonus,  or  they  may  have  been  sold  for  cash  by 
the  original  holders,  anyhow  the  tendency  would  be,  as  time  went 
on  and  the  passage  of  those  securities  from  the  hands  of  the  original 
holders  to  other  holdei*s,  to  the  innocent  investor,  so  to  speak,  or  the 
so-called  widow  and  orphan  or  savings  banks,  that  the  eaiwngs 
which  should  have  accrued  to  the  benefit  of  the  public  or  to  the  em- 
ployees in  the  industry  have  practically  been  hypothecated,  have  they 
not,  to  the  payment  of  interest  and  dividends  and  charges  on  the 
securities  issued? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAIInWAYS  COMMISSION.    1875 

Mr.  Jones.  Those  are  the  facts.  As  I  stated,  always  the  prior  in- 
terest of  capital;  and  tlie  public  and  employees  having  to  be  sub- 
ordinated. 

Mr.  Lauck.  Then  if  you  add  to  that  the  further  practice  in  public- 
utility  finance  or  corporation  finance  of  throwing  out  securities  ahead 
of  earnings,  so  to  speak,  you  have  something  out  ahead  absorbing 
all  increases  in  earnings,  have  you  not,  of  the  property  fix)m  the 
actual  increments  of  labor  and  capital  invested  in  the  property? 

Mr.  Jones.  That  would  be  the  logical  result,  I  should  say. 

Mr.  Lauck.  So  from  the  standpoint  of  the  public  there  would 
be  no  hope  of  increased  facilities,  and  from  the  standpoint  of  tlie 
employee  there  would  be  no  hope  of  either  one,  unless  they  could  by 
some  means  take  away  from  the  security  holders  their  interest  in 
these  securities  which  they  may  have  acquired  for  the  purposes  of 
investment,  or  in  the  savings  banks,  etc.  ? 

Mr.  Jones.  Yes. 

Commissioner  Gadsixen.  Does  not  the  employee  get  his  money  first 
before  the  return  is  paid  on  the  investment  ? 

Mr.  Lauck.  He  gets  his  money  first,  but  the  point  we  would  like 
to  establish  is:  He  is  not  getting  an  adequate  participation  and  he 
is  prevented  from  getting  an  adequate  participation  by  having  what 
should  be  his  equitable  shai'e  in  the  i^evenue  hypothecated  and  ab- 
sorbed by  these  methods  of  corporation  finance. 

Mr.  Warren.  That  would  not  be  true  if  all  of  the  securities  were 
issued  under  strict  public  supervision,  would  it,  Mr,  Jones,  and 
limited  to  the  official  determination  of  the  amount  required? 

Mr.  Jones.  It  would  not  be,  if  there  was  honest  and  intelligent 
supervision. 

Mr.  Warren.  Yes. 

Mr.  Lauck.  In  other  words,  if  the  public-utility  corporations  of 
the  States  and  municipalities,  following  out  Mr.  Warren's  question, 
w^erc  authorized  only  to  issue  securities  on  the  actual  investment  of 
capital  in  the  property,  then  the  interests  of  all  would  be  protected, 
would  they  not? 

Mr.  Jones.  I  should  say  so. 
*  Mr.  Lauck.  So  far  as  the  future  is  concerned ;  and  then  we  would 
only  l)e  concerned  with  the  j>ast.     Is  that  correct? 

Mr.  Jones.  That  is  correct. 

Mr.  Warren.  If  you  had  a  company  like  the  Boston  Elevated, 
which  has  been  organized  and  all  its  securities  issued  since  the  super- 
vision was  applicable  and  it  still  was  unable  to  earn  its  necessary 
income  to  pay  capital  and  pay  labor,  it  would  be  a  question  whether 
it  did  not  really  ne^d  more  income,  would  it  not? 

Mr.  Jones.  There  is  a  special  situation  all  by  itself,  Mr.  Warren. 
The  Boston 

Mr.  Lauck.  Well,  you  can  answer  it  hypothetically,  Mr.  Jones. 

Mr.  Warren.  Take  some  other  company,  like  the  Springfield 
Street  Railway  Co.,  which  is  not  complicated  with  subways  or  ele- 
vated or  franchise  limitations  and  the  capital  of  which  has  been 
verified  by  the  commission  a  number  of  times. 

Mr.  Jones.  In  the  Springfield  case  there  come  in  the  other  factors 
of  operation,  operating  methods. 

Mr.  Warren.  You  mean  management? 


1876    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Jones.  Management. 

Mr.  Warren.  Of  course,  it  may  be  that  all  the  street  railways  of 
Massachusetts  have  bad  management. 

Mr.  Jones.  I  am  referring  particularly  to  Springfield,  inasmuch 
as  you  made  that  statement. 

Sir.  Warren.  Well,  take  Worcester. 

Mr.  Jones.  I  could  not  answer  in  that  case.  I  know  nothing  about 
the  Worcester  situation. 

Mr.  Lauck.  You  can  answer  that  hypothetically,  can  you  not? 
As  I  get  his  question,  it  is  that  supposing  the  capitalization  repre- 
sented actual  investnient  and  suppose  that  all  future  securities  were 
to  be  under  the  auspices  of  the  public-service  commission,  represent- 
ing actual  capital  investment,  and  the  company  was  properly  man- 
aged according  to  the  inspection  of  the  proper  public  authorities; 
then  if  it  could  not  earn  a  return,  of  course  it  would  be  entitled 
to  increased  fares  or  charge  increased  rates,  would  it  not? 

Mr.  Jones.  Theoretically  and  on  principle  it  would  be.  There 
comes  the  question  whether  they  would  get  the  increased  revenue, 
which  is  another  story. 

Commissioner  Gadsden.  But  not  in  practice,  you  think? 

Mr.  Lauck.  W^ell,  that  is  hypothetical.  Getting  back  to  the  actual 
facts,  I  was  interested — do  you  know  anything  ak)ut  the  methods  of 
corporations  financed  in  the  past  in  relation  to  the  banking  groups, 
you  might  say? 

Mr.  Jones.  I  have  no  knowledge  on  that  subject. 

Mr.  Lauck.  You  do  not  know  anything  about  the  financing  of 
the  Union  Pacific? 

Mr.  Jones.  No. 

Mr.  Lauck.  Well,  putting  aside  valuations  again — eliminate  them 
from  your  mind  now  and  consider  the  past  history  of  these  corpora- 
tions, which  you  have  been  speaking  of;  what  have  been  the  general 
methods  by  which  overcapitalization  has  been  brought  about?  You 
mentioned  several  methods.  You  mentioned  manipulation  of  stock 
from  the  inside,  I  recollect  was  one,  and  which  you  spoke  of  as  stock 
bonuses  and  stock  distributions. 

Mr.  Jones.  I  think  the  main  sources  have  been  through  additions 
in  capital  investment  made  possible  during  the  consolidations  and 
mergers,  through  the  organization  of  holding  companies,  through 
the  charging  of  discounts  of  capital  investment  and  stock  and  bond 
bonuses,  stock  bonuses  largely.  I  should  say  those  were  the  main 
causes. 

Mr.  Lauck.  These  stock  bonuses,  mergers,  and  consolidations, 
payment  of  discounts  on  securities  issued,  and  so  forth. 

Mr.  Jones.  And  the  exchanging  of  the  stock,  strong  stocks  for 
Aveak  stocks. 

Mr.  Lauck.  That  would  be  mergers  and  reorganizations,  would  it 
not? 

Mr.  .Tones    That  would  be  in  part  mergers. 

Mr.  Lauck.  Take  the  question  of  the  western  cities,  in  which  Mr. 
Beall  was  asking  your  opinion :  Do  you  think  that  was  so  much  a 
question,  in  issuing  those  securities,  of  taking  a  risk  as  it  was  our 
method  of  flotation  of  corporation  eecurities  at  that  time  ?  Do  you 
think  the  difficulty  was  in  the  method  of  investment  banking  or  con- 
trol pf  security  distribution  or  in  the  risk  of  the  company? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1877 

Mr.  Jones.  I  think  I  could  not  answer  that  intelligently.  I  have 
not  an  intimate  knowledge  of  that  phase  of  the  subject. 

Mr.  Lauck.  Have  you  any  knowledge  of  the  building  of  these 
so-called  western  enterprises  where  through  the  aid  of  money  or 
banking  or  extension  of  credit  communities  were  developed? 

Mr.  Jones.  I  have  not. 

Mr.  Lauck.  You  do  not  know  about  the  element  of  risk  involved,, 
then  ? 

Mr.  Jones.  Xo;  I  do  not.  I  am  familiar  with  the  method  of  the 
organization  of  the  property  in  my  own  city,  its  inception,  and  how 
it  was  developed,  but  not  outside  of  that  intimately. 

Mr.  Lauck.  You  are  not  acquainted  with  the  building  of  the  rail- 
roads even  in  the  West  ?  As  I  understand,  you  do  not  know  anything 
about  the  financing  of  the  Union  Pacific  ? 

Mr.  Jones.  I  am  not  anything  more  than  a  superficial  passing 
student  of  the  railway  question. 

Mr.  Lauck.  Well,  I  can  not  ask  you  the  questions,  then,  that  I 
wanted  as  to  them.  But  aside  from  all  valuations  which  have  been 
a  means  of  determining  or  attempting  to  determine  actual  invested 
values,  you  might  say  the  means  by  which  the  excess  securities  have 
been  floated  have  been  from  the  methods  in  the  past  of  corporatioa 
finance  themselves,  have  they  not? 

Mr.  Jones.  Yes. 

Mr.  Lauck.  Have  you  had  any  occasion  to  look  into  any  mergers 
or  consolidations,  as  to  how  they  were  brought  about  or  how  they 
were  worked  out  in  the  way  of  their  relation  to  the  flotation  of  the 
securities  or  the  underwriting  commissions  charged  or  the  relation 
of  the  banker  to  the  consolidation  or  underwriting  syndicate  ? 

Mr.  Jones.  I  think  there  were  some  instances  of  that  in  one  or 
more  cases  which  I  studied,  but  I  have  not  any  intimate  knowledge 
of  the  facts. 

The  Chairman.  We  will  stand  adjourned  until  2.15  p.  m. 

(Whereupon,  at  1  p.  m.,  a  recess  was  taken  until  2.15  p.  m.) 

AFTER  RECESS. 

STATEMENT  OF  MR.  W.  JETT  LAUCK. 

I'he  Chairman.  Mr.  Lauck,  please  give  your  name  and  position. 

Mr.  Lauck.  W.  J.  Lauck.  I  have  no  official  position.  I  am  rep-^ 
resenting  the  Amalgamated  Association.  I  would  like  to  run  over, 
briefly,  our  case  in  an  informal  way,  and  to  be  interrupted  at  any 
time  that  the  commissioners  might  deem  it  wise  to  interrupt  me 
in  bringing  up  any  of  the  points. 

I  w^ant  briefly  to  summarize  the  points  that  have  been  made,  and 
then,  if  the  commission  will  bear  with  me,  read  our  constructive 
suggestion  at  the  end  of  our  brief. 

Before  going  into  that,  however,  there  has  been  a  point  brought  up 
in  connection  with  the  hearings  in  the  past  which  I  was  asked  to 
explain  to  the  commission  relative  to  the  system  of  collective  bar- 
gaining which  is  now  in  vogue  in  the  Philadelphia  Rapid  Tran- 
sit Co. 

I  have  been  told  that  it  has  been  stated  before  tlie  commission  that 
the  National  War  Labor  Board  indorsed  this  plan.     I  wanted  to 


1  * 


m 

m 


1878    PROCEEDINGS  OF  ITiDEBAL  ELECTRIC  RAILWAYS  COMMISSION. 

correct  that  impression.  The  National  War  Labor  Board  followed 
the  policy  of  never  indorsing  any  plan  of  collective  bargaining.  As 
a  matter  of  fact,  the  board  itself  could  not  agree  on  a  plan.  We  had 
the  principle  that  employees  should  be  given  the  right  of  collective 
bargaining,  but  did  not  include  the  right  of  union  recognition,  of  , 
course.  Then  the  board  made  a  great  many  awards  covering  this  * 
principle,  which  the  employees  of  various  kinds  of  establishments, 
utilities,  and  so  on,  would  claim  are  right  under  our  constitution,  so 
to  speak,  and  wherever  it  w  tis  possible  we  tried  to  have  the  employer 
and  the  employee  agree  as  to  some  kind  of  a  committee  system  that 
tliey  would  adopt;  failing  tliat,  it  became  necessary  for  us  to  in- 
stall the  system,  and  in  a  great  many  cases — like  in  the  Bridgeport 
munitions  factories  and  the  Bethlehem  Steel  Works  and  other  in- 
dustrial plants — we  had  to  install  a  system,  but  we  did  it  in  a  very 
skeletonlike  way,  laying  down  the  committee  system,  practically, 
and  witlidrawing  as  soon  as  they  could  get  togetlier  themselves. 

The  Philadelphia  plan  came  about  by  the  fact  that  we  had  had 
a  contix)versy  before  us  from  the  employees  of  the  Philadelphia 
Itapid  Transit,  or  a  certain  section  of  those  employees,  and  finally 
Mr.  Mitten,  after  that  case  had  been  pending  for  some  time  and  had 
been  finally  adjudicated,  or  jurisdiction  denied,  practically — ^he  de- 
cided that  he  wanted  to  be  in  accord  with  the  principles  of  the  War 
Labor  Board  and  also  with  the  standard  of  compensation  of  the 
Wai-  Labor  Board  as  it  would  be  in  other  companies ;  so  he  formu- 
lated a  plan  himself  of  collective  bargaining,  which  he  submitted  to 
the  board  for  its  approval,  and  the  board  passed  the  following  order, 
you  might  say,  at  that  time — that  was  on  November  8,  1918.  The 
secretary  explained  the  status  of  this  case  and  read  the  following 
reply  he  had  drafted,  and  it  was  approved  by  the  meeting  and  was 
ordered  sent  out: 

"  The  National  War  Labor  Board  views  with  great  Interest  the  portion  of  the 
cooperative  plan  of  the  Philadelphia  Rapid  Transit  Co.  which  deals  with  col- 
lective bargaining,  and  regards  the  general  intent  and  spirit  of  its  provisions 
as  entirely  in  accord  with  Its  own  principles  as  outlined  in  the  proclamation 
of  the  President  of  the  United  States.  The  details  of  the  plan,  however,  such  - 
as  the  number  and  size  of  committee  and  similar  items,  should  be  made  a 
matter  of  mutual  agreement  between  the  company  and  its  employees.  Mutual 
agreement  at  the  outset  with  regard  to  the  plan  to  be  followed  is  even  more 
essential  than  mutual  agreement  upon  any  particular  adjustment  which  may 
follow  in  due  course  In  the  operation  of  the  plan. 

"The  National  War  Labor  Board  is  glad  to  cooperate  in  the  carrying  out 
of  the  initial  elections  which  may  be  held  in  accordance  with  such  rautually- 
agreed-upon  plan  of  collective  bargaining,  and  the  secretary  of  the  board  will 
designate  an  examiner  to  supervise  such  elections  if  requested." 

That  request  was  made  and  the  examiner  was  sent  to  see  that  the 
elections  were  carried  out  in  an  impartial  w^y  without  any  influence 
from  one  side  or  the  other. 

So  that  the  board  there  followed  its  usual  policy  of  trying  to  get 
the  parties  in  interest  to  agree,  and  if  they  could  agree,  to  say  that 
that  was  acceptable  to  the  board,  and  then  went  a  step  further  and 
said  it  was  in  accordance  with  their  principles,  but  never  formally 
indorsed  that  plan  or  any  other  plan  of  collective  bargaining  which 
had  been  adopted  by  any  utility  or  industrial  corporation  or  any 
other  form  of  industrial  establishment. 

The  Chairman.  In  this  pamphlet  there  appears  a  letter  dated 
November  4,  1918,  written  to  Hon.  William  H.  Taft  and  Frank  P, 


PROCEEDINGS  OF  FEMRAL  ELECTRIC  RAILWAYS  COMMISSION.    1879 

Walsh,  by  T.  E.  Mitten,  president  of  the  Philadelphia  company,  in 
which  he  included  a  copy  of  their  plan  and  invited  the  criticism  of 
the  board. 

Mr.  Lauck.  Yes. 

The  Chairman.  The  board  answered  in  this  letter  of  Noveml)er 
9,  wliich  has  been  read  into  this  record. 

Mr.  Lauck.  Yes. 

The  Chairman.  Would  you  consider  the  answer  of  your  board 
as  an  objection  to  the  plan  which  they  had  ? 

Mr.  Lauck.  Oh,  not  at  all ;  no,  sir. 

Ihe  Chairman.  If  you  were  the  president  of  that  company  would 
you  accept  that  letter  as  an  approval  of  the  plan? 

Mr.  Lauck.  As  being  in  accordance  witli  the  principles  of  the 
board,  yes;  but  not  an  indorsement. 

The  C'hairman.  The  principles  of  the  board  were  for  collective 
bargaining  ? 

Mr.  Lauck.  Yes. 

The  Chairman.  But  not  prescribing  any  particular  way  in  which 
that  coltective  bargainings  should  be  made.*^  That  is  it? 

Mr.  Lauck.  Yes. 

Ihe  Chairman.  So,,  then,  the  principle  of  collective  bargaifiing 
as  applied  in  the  Philadelphia  plan  was  approved  by  your  board, 
was  it  not  ? 

Mr.  Lauck.  Not  so  much  as  applied  in  the  plan,  but  in  the  fact 
that  the  officials  and  the  employees  had  agreed  to  meet  together  and 
determine  upon  their  industrial  ix?la.tions  and  conditions— that  that 
was  in  accordance  with  the  principles  of  the  board,  and  any  way 
that  they  agreed  to  do  that  would  have  been  satisfactory  to  the 
board. 

The  Ch.urman.  But  in  the  letter  of  Mr.  Mitten  he  invited  crit- 
icisms of  the  plan,  did  he  not  ? 

Mr.  Lauck.  Yes;  the  board  never  read  the  plan,  as  a  matter  of 
fact,  or  considered  it. 

The  Chairman.  Is  that  so? 

Mr.  Lauck.  Yes. 

The  CliAiRMAN.  Then  you  did  not  criticize  any  feature  of  the 
plan  ? 

Mr.  Lauck.  No. 

The  Chairman.  But  you  approved,  in  general,  the  plan  without 
having  read  it? 

Mr.  Lauck.  Approved  the  principle  of  collective  bargaining. 

The  Chairman.  But  you  did  send  some  one  up  there  to  supervise 
the  elections  ? 

Mr.  Lauck.  Yes;  the  idea  there  being  that  having  evolved  a  plan 
under  which  the  employees  would  have  had  representation  in  the 
control  of  conditions  and  relations,  they  wanted  to  hold  an  election 
under  impartial  auspices,  and  the  board  was  glad  to  send  an  ex- 
aminer to  see  that  the  elections  were  carried  out  in  an  impartial 
way — ^to  act  as  an  election  judge,  so  to  speak. 

The  Chairman.  Has  this  companj^  fully  discussed  with  members 
of  the  War  Labor  Board  the  plan  which  it  has  ? 

Mr.  Lauck.  I  think  it  was  never  discussed  with  the  board ;  no,  sir. 
Our  former  examiner  became  connected  with  this  company  and  their 
advisor  on  industrial  relations. 


I    i 


1880    PROCEEDINGS  OF  lEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Who  was  that  examiner? 

Mr.  Lauck.  Mr.  John  R.  Caskie,  a  very  estimable  man  and  a  very 
able  man ;  and  he  came  down  later  to  discuss  the  plan  with  the  boardf* 
but  the  board,  without  any  reflection  on  the  plan,  did  not  have  time 
to  discuss  it  and  did  not  think  it  would  be  worth  while  discussing 
It,  because  they  never  could  come  to  an  agreement  on  any  plan  of 
their  own,  and  were  not  much  more  likely  to  agree  on  this;  so  that 
there  was  never  any  discussion  of  tlie  plan. 

The  Chairman.  You  want  us  to  understand,  then,  that  the  board,  as 
such,  has  never  acted  for  or  against  a  particular  plan  which  thev 
had?  X  x-  J 

Mr.  Lauck.  They  never  have  indorsed  it.  I  understood  the  state- 
ment had  been  made  that  we  had  indorsed  this  plan  of  collective 
bargaining 

The  Chairman.  I  believe  that  statement  was  made  by  Mr.  Joyce^ 
speaking  for  the  company,  and  he  inserted  in  the  record  these 
letters. 


as 

the  omciajs  ot  tne  company,      ^     v.w*x«v.v* 

plan  evidently  for  the  purpose  of  preventing  unionization,  on  the 
ground  that  it  was  approved  officially  by  the  War  Labor  Board, 
which  was  refuted  by  the  board  at  that  time. 

Your  own  secretary,  Mr.  Ogburn,  who  had  charge  of  all  those 
cases,  can  give  you  the  details  as  to  that;  but  that  is  just  my  per- 
sonal recollection  that  I  have  of  the  question. 

Commissioner  Mahon.  Mr.  Lauck,  since  the  date  of  that  letter 
published  there^  are  there  not  letters  to  Mr.  Taft,  as  chairman  of 
the  board,  where  they  sought  to  have  him  indorse  that,  and  he 
refused  ? 

'  Mr.  Lauck.  I  think  so,  undoubtedly.  I  have  not  looked  up  that 
correspondence,  because  it  is  in  a  basement  or  somewhere  m  the 
Department  of  Labor; -but  my  personal  recollection  is  that  that  is 
absolutely  correct,  and  also  came  up  as  a  vital  issue  in  this  New 
Jersey  case. 

The  Chairman.  Would  it  not  be  better  if  you  could  put  those 
letters  in  the  record  ? 

Mr.  Lauck.  I  shall  be  very  glad  to  do  that.  I  have  not  had  the 
opportunity — the  sessions  have  been  so  continuous  here — but  I  can 
get  those  by  to-morrow,  I  think. 

The  Chairman.  It  will  be  better  to  comment  on  the  letter  after  it 
is  in  the  record. 

Mr.  Lauck.  But  I  think  there  is  no  doubt  about  that.  The  effort 
was  made  to  have  the  board  indorse  it,  but  the  board  did  neither 
indorse  it  nor  take  any  action  against  it,  except  in  the  one  case  I 
refer  to,  where  it  was  evidently  being  used  as  a  means  of  collective 
bargaining,  in  lieu  of  unionization,  and  the  board  had  to  take  action 
that  it  would  not  approve. 

The  Chairman.  You  will  kindly  insert  in  the  record,  then,  the 
letter  from  Mr.  Mitten  to  Mr.  Taft,  awd  his  reply  ? 

Mr.  Lauck.  Yes. 

Commissioner  Mahon.  I  wanted  to  know  if  the  representatives 
of  labor  on  that  board  ever  did  indorse  that  plan  or  give  it  any 
consideration  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1881 

Mr.  Lauck.  Not  at  all.  It  never  was  discussed  by  the  board  at 
all.  As  a  matter  of  fact,  it  is  not  violating  any  confidences  of  the 
board,  because  that  is  well  known,  to  say  that  the  labor  and  em- 
ployer members  of  the  board  could  never  agree  as  to  the  practical 
application  of  collective  bargaining,  because,  of  coui-se,  the  employee 
members  were  committed  to  the  principle  of  unionization  and  con- 
sidered these  schemes  of  collective  bargaining  as  worthless  becanse 
they  were  not  based  on  labor  organization.  On  the  other  hand,  the 
employers— a  majority  of  them— favored  the  principle  of  collective 
bargaining  as  a  substitute  for  unionization,  because  it  would  be 
confined  to  their  own  establishments  and  eliminate  the  officials  of 
the  union;  and  the  only  way  we  could  ever  agree  was  through  an 
agreement  between  the  joint  chairmen  which  the  staff  followed; 
and  that  agreement,  as  to  Philadelphia,  of  these  principles  and 
those  applications  of  the  principles  was  practically  put  into  the 
effect  because  neither  side  could  agree  as  to  any  change*  so  that 
we  were  able  to  go  forward  under  those  conditions. 

The  Chairman.  Did  not  the  members. of  the  board  look  upon  this 
Philadelphia  plan  as  a  union? 

Mr.  Lauck.  Not  at  all,  I  think. 

The  Chairman.  Where  you  get  all  the  men  organized  into  a 
society  that  gives  them  many  benefits  and  privileges,  what  would 
you  call  it  if  it  is  not  a  union  of  the  men  ? 

Mr.  Lauck.  You  might  call  it  a  local  union;  but  in  the  accepted 
term  of  unionism  it  wQuld  be  called  by  the  labor  representative  a 
company  union,  you  might  say.  On  the  part  of  the  employers,  they 
would  consider  it  a  union.  But  from  the  strict  standpoint  of  unions 
or  labor  organizations,  it  would  not  be  considered  as  such,  because, 
having  no  national  or  other  affiliations,  it  would  be  considered  an 
organization  of  employees,  but  not  a  union  in  the  accepted  sense  of 
the  term. 

Commissioner  Mahon.  It  would  be  considered  by  labor  as  being 
completely  under  company  direction? 

Mr.  Lauck.  Yes. 

The  Chairman.  That  is  not  so  at  Philadelphia,  is  it?  •  ; 

Commissioner  Mahon.     We  think  so ;  that  is  our  opinion. 

Mr.  Lauck.  They  would  consider  it  as  what  they  would  term,  in  a 
colloquial  sense,  a  company  union.  All  of  them  are  known  by  that 
name. 

As  a  matter  of  fact,  it  is  perfectly  evident,  I  think,  to  any  disin- 
terested student  of  the  question,  that  any  form  of  collective  bargain- 
ing that  is  not  based  on  unions  is  futile.  I  think  some  employers 
have  reached  that  opinion,  and  I  think  a  great  many  officers  in  the 
street-railway  industry  have.  This  is  the  only  case  I  know  of  where 
there  is  a  union  of  this  kind,  practically,  in  a  street-railway  in- 
dustry probably,  with  the  exception  of,  as  I  recall,  the  Twin  Cities 
Co.,  in  Minneapolis.  I  do  not  know  whether  they  have  a  local 
organization  or  not,  but  the  general  spirit  of  the  street-railway  in- 
dustry has  been,  so  far  as  my  observation  went,  Avith  the  cases  we  had 
before  the  board,  to  recognize  unionism,  and  I  think  it  is  recognized 
by  the  great  many  employers,  especialy  the  far-sighted  ones— that 
these  systems  can  not  stand.  It  is  evident  on  the  face  of  it  that  they 
can  not  stafid,  because  with  a  committee  system  of  this  kind  and 
the  pressure  from  below  urging  the  committees  to  present  certain 


t 


1882    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

things  to  the  management,  if  they  do  present  them,  they  become 
imne  or  less  marked  men  with  the  management  and  are  apt  to  incur 
displeasnie  or  to  suffer  in  their  working  relations  and  conditions, 
and  that  a  great  many  committee  systems  have  failed  just  for  that 
reason— on  account  of  the  grinding  of  the  upper  millstone,  and  the 
pressui-e  from  l)elow,  the  conmiitteemen  i-esi^ned.  I  rememter  Gen. 
Tripp,  of  the  Westinghouse  Co.,  telling  me  his  committee  svsteui  had 
failed.  It  is  only  in  companies  like  the  Standard  Oil  Co.,  where 
t|M-y  sort  of  anticipi^e  trouble,  or  possibly  in  the  Philadephia  sec- 
tion, where  you  have  a  man  in  charge  who  is  far-sighted  and  an- 
ticipates what  may  l)e  the  trouble. 

The  Chaikmax.  You  have  made  quite  a  study  of  this  problem, 
have  you  not,  Mr.  Lanck? 

Mr.  LvrcK.  I  have  had  quite  a  lot  of  observation  of  it. 

The  Chairmax.  Can  the  company  control  its  emplovees  when  they 
have  the  right  to  elect  their  own  representatives  by  a  secret- bill  lot 
system  ? 

Mr.  I^\LrK.  They  can  notconti-ol  their  employees  at  all.  I  do  not 
thnik  they  can  do  that,  but  I  think  there  is  not  so  much  danger  from 
the  employer  or  the  company  controlling  its  emplovees  under  a  sys- 
tem of  that  kind,  but  from  the  fact  that  the  employ'ees  can  not  nulke 
any  mipression  on  the  company,  as  they  have  no  basis  of  action.  If 
the  company  refused  to  accede  any  reasonable  request,  tliey  have  not 
the  basis  of  strength  in  the  organization  to  force  the  company  in  the 
way  they  would  if  they  had  a  national  affiliation,  with  the  financial 
i^esources  of  the  national  association,  and  all  the  strength  which 
would  come  from  the  affiliated  bodies  in  other  establishments  of  the 
same  kmd. 

The  Chairman.  They  have  the  right  to  strike  if  thev  choose? 

Mr.  Lafck.  They  could  strike,  but  the  strike  woulfl'  be  futile 
because  they  would  not  have  any  means  of  support  beyond  their  own 
local  funds  and  wonld  not  have  the  co.'>peration  of  other  meml)ers  in 
their  craft  engaged  in  similar  work  in  other  industries— say  in  a 
street-railway  industry  in  other  localities:  so  that  the  chances \voukl 
be  very  much  against  them  as  compared  with  the  usual  unions,  which 
in  the  event  of  an  authorise*!  strike,  would  have  the  sup|>ort  of  the 
natKmal  organization,  not  (mly  as  to  advice  but  as  to  financial  re- 
sources—strike benefits.  That  principle  has  been  recognized  officially 
by  the  Government  of  Great  Britain  in  the  so-called  Whitley  Coun- 
cils and  which  are  being  advocated  under  Government  auspices  at 
the  present  time  on  the  basis  alone  of  unionization.  That  is,  it  has 
been  conceded  by  the  British  (jovernment  that  there  can  r.ot  be  any 
effective  collective  bargaining  unless  it  is  based  on  the  unioniza- 
tion of  the  employees.  It  is  a  matter  of  debate  as  yet  in  this  country 
and  in  Canada.  '  *^ 

I  would  like  briefly  to  review  the  main  points  or  some  of  the  main- 
points  that  have  been  made  in  the  pi^esentation  of  our  evidence 
through  the  section  4  und  then  read  to  the  commission  section  5, 
which  is  very  brief. 

I  might  say  that  the  main  point  the  employees  have  had  in  mind  in 
presenting  this  case  has  been  to  protect  themselves  against  the  gen- 
eral claini  which  is  more  or  less  popular  at  the  present  time 
and  which  seems  to  have  an  almost   universal   acceptance,  that 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1883 

the  increased  cost  of  living  is  due  to  what  is  sometimes  termed  the 
exactions  of  labor,  or  due  to  the  increases  in  rates  of  pay  that  have 
been  sfecured  by  labor  during  the  war  and  at  other  times.  That  is 
the  tendency,  as  everyone  knows  is  very  prevalent,  to  attribute  higher 
prices  to  the  exaction  of  employees  in  the  various  industries.  And  it 
has  been  thought,  in  connection  with  the  work  of  this  commission, 
that  the  employees  should  expose  the  fallacy  of  that,  otherwise  the 
financial  difficulties  such  as  they  are  with  which  the  street-railway 
industry  is  at  present  confronted,  might  be  attributed  and  have 
been  to  some  extent  in  the  course  of  the  proceedings  before  the  com- 
mission. We  claim  that  there  is  no  greater  fallacy  than  that  cur- 
rent at  the  present  time,  not  only  in  general  but  as  applied  to  the 
street-railway  industry. 

For  instance,  you  know  how  it  is  in  the  case  of  shoes.  The  Federal 
1  rade  Commission  has  recently  made  a  report  as  to  the  production 
of  shoes  and  that  report  shows  that,  for  instance,  a  pair  of  shoes 
that  was  $6.50  or  $7  before  the  war  and  now  is  $12.50,  that  the 
du;ect  manufacturing  cost  of  those  slioes  was  about  73  cents  per  . 
pair,  and  that  dnring  the  war  employees  in  the  shoe  factories  got  ' 
about  80  per  cent  or  something  like  that  increase  in  wages,  which 
the  report  shows  amounts  to  about  43  cents  i:>er  pair  of  shoes,  mak- 
ing the  total  labor  manufacturing  cost  of  a  pair  of  shoes  of  this 
land,  as  I  recall  it,  about  $1.12  or  $1.15.  And  yet  all  of  us  who 
have  had  experience  in  buying  shoes  know  that  the  retail  dealer 
immediately  says  that  this  increased  price  is  due  to  the  increased 
cost  of  labor,  that  the  laborers  in  the  shoe  factories  have  been  get- 
ting mcreases  and  his  own  employees  have  had  their  salaries  in- 
creased ;  therefore  he  has  had  to  put  up  the  price  of  shoes  all  along 
the  line,  whereas  the  price  of  shoes,  so  far  as  labor  is  concerned,  has 
only  been  affected  to  the  extent  of  43  cents  a  pair  on  a  $12  pair  of 
shoes,  and  then  the  price  has  been  increased  $5  or  $6  a  pair  in  their 
cost. 

The  same  thing  is  true  of  steel  rails.  The  Bureau  of  Corporations 
m  1910  made  a  study  of  the  cost  of  production  of  steel  rails  At 
•  that  time  they  ascertained,  I  think,  the  labor  cost  in  a  ton  of  steel 
rails  was  $3.20,  if  I  remember  correctly.  Now,  the  price  of  rails  has 
gone  from  about  $28  or  $32  a  ton  up  to  $57  a  ton.  Labor  has  got 
about  100  per  cent  increase  in  wages.  100  per  cent  increase  in  wales 
would  be  about  $3.20,  if  you  doubled  the  labor  cost ;  yet  the  state- 
ment is  commonly  made  that  the  increased  cost  of  steel  products  is 
due  to  the  tremendous  rates  of  pay  to  labor  in  the  steel  industry 

Commissioner  Gadsdex.  I  am  interested  in  that,  Mr.  Lauck  \s 
I  understand  that  proposition  it  is  not  confined  to  the  charge  Take 
the  case  of  shoes,  for  instance,  that  all  the  incretuse  is  due  to  the 
increases  m  the  wage  of  the  men  engaged  in  the  shoe  factory,  but 
that  the  mcreased  cost  of  the  leather  as  it  is  bought  at  wholesale  is 
argely  made  up  of  the  accumulated  accretions  of  the  wages  of  men 
back  to  the  live  stock.  Will  you  follow  that  through?  What  else 
will 

Mr.  Lauck.  In  this  labor  cost  I  have  not  the  documents  here  from 
the  steel  industry;  but  I  think  that  includes  the  labor  cost  from  the 
Messaba  and  Vermilion  Ranges  and  also  the  limestone  and  coal 
labor,  as  well  as  the  steel  labor  in  this  ton  of  rail;  and  it  would 
include  all  this  accumulated  labor  cost. 


V  ■ 


i  I 


! ;  I 


Hi 


1884     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

In  shoes,  that  was  the  direct  manufacturing  cost  I  was  speaking 
of;  and  I  think  there  the  increased  cost  was  pretty  well  understood 
not  to  be  the  accumulated  labor  in  the  leather,  but  it  is  alleged*  to  be 
the  control  of  the  hide  and  leather  supply  and  the  tanning  industry 
by  a  certain  group  of  industrial  interests,  the  packers.  I  do  not 
know  about  the  accumulated  labor  costs  thei-e,  but  that  is  the  con- 
tention—that they  have  put  up  the  price  of  leather  to  such  an 
extent,  due  to  the  scarcity,  that  not  the  labor  in  the  leather  or  in 
the  hide  is  responsible,  but  it  is  the  artificial  price  due  to  the  great 
scarcity  of  hides  and  the  increased  cost  of  leather  entering  into  a 
pair  of  shoes.  But  I  am  cei-tain  that  the  accumulated  figure  for  the 
Bureau  of  Corporations  included  the  accumulated  labor  cost  in  a  ton 
of  steel  rails,  and  of  course  in  the  case  of  the  steel  industry  at  the 
present  time— take  the  United  States  Steel  Corporation,  and  this 
figure  was  based  on  the  United  States  Steel  Corporation— there  has 
been  no  increase  practically  beyond  that  to  them.  Thev  still  have 
the  same  ore  beds  and  the  same  railroads.  They  might*^  have  more 
transportation  cost  or  more  labor  cost  on  their  boats  across  the  Lakes, 
but  if  that  is  included  in  their  100  per  cent  increase  to  labor,  they 
still  have  all  the  raw  materials,  and  there  could  not  be  any  further 
increase  there  except,  you  might  say,  these  raw  materials  have  en- 
hanced in  value  due  to  market  prices. 

Commissioner  Gadsden.  I  am  not  taking  issue  with  you,  but  I 

want  to  develop  this  fact.    Take  this  street-railroad  situation 

Mr.  Lauck.  I  see  what  is  in  your  mind. 

Commissioner  Gadsden.  Our  increases  are  due  in  large  part  to 
increases  in  direct  labor.     These  have  been  fully  testified  to. 
Mr.  Lauck.  Yes. 

Commissioner  Gadsden.  The  next  very  important  item  is  the  in- 
crease in  the  price  of  coal.  That  is  made  up,  as  I  understand  it, 
almost  entirely  of  increases  in  labor,  or  transportation,  which  is 
another  form  of  labor.  For  instance,  the  freight  rate  on  coal  has 
been  increased,  we  will  say,  30  cents  a  ton.  Now,  we  all  know  the 
Government  claims  that  they  need  that  extra  money  to  pay  the  in- 
creased labor,  so  I  take  it  that  that  30  cents  is  for  labor.  So  I  have 
been  under  the  impression  that  if  it  is  properly  analyzed — I  do  not 
mean  exceptional  cases  where  the  raw  materials  are  monopolized; 
but  if  properly  analyzed,  I  mean— all  of  these  increases  could  be 
traced  ultimately  to  labor.     Now,  I  would  like  to  hear  you  on  that. 

Mr.  Lauck.  Well,  I  have  not  the  data  to  go  into  it  extensively, 
because  there  has  been  no  data  collected  on  that.  That  is  the  popu- 
lar impression ;  but,  so  far  as  my  observation  would  go  and  my  know- 
edge  of  cost  of  production  in  investigations,  I  should  say  that  idea 
was  fallacious.  I  do  not  think  that  prices  now  are  due,  or  have  any 
relation,  to  labor  costs.  I  think  thev  are  due  to  scarcity  of  supply 
and  that  the  labor  cost  would  not  be  a  determining  factor  in  the 
prices.  It  might  be  true  of  coal,  for  the  reason  that  coal  has  been 
moi;e  or  less  controlled  and  related  to  the  actual  cost  of  production 
during  the  war;  and,  as  I  understand,  there  has  not  been  any  in- 
crease much  in  the  price  of  coal  since  the  war,  and,  of  course,  the 
increased  labor  cost  would  affect  it;  but  I  think  that  the  relation  of 
the  ratio  of  labor  cost  to  selling  price  is  not  a  determining  factor. 

You  take  the  steam-transportation  industry.    I  am  certain  if  you 
would  analyze  that  as  to  the  labor  cost  per  ton-mile,  you  would  find 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1885 

that  the  labor— we  found  prior  to  the  war  that  there  had  been  an 
actual  decrease  in  operating  labor  cost  per  ton-mile,  due  to  heavy 
tram  loading,  heavy  car  loading,  and  to  better  transportation  facili- 
ties, heavier  traffic  power,  and  therefore  increases  in  wages  were  met 
by  increases  in  car  loading  and  train  loading,  which  practically  made 
the  ton-mile  cost  less  in  terms  of  labor.  But,  of  course,  you  have  not 
that  opportunity  on  the  street  railways  unless  vou  have  a  situation 
like  Philadelphia.  Philadelphia  impresses  meVs  not  such  a— I  do 
not  want  to  cast  any  reflections  on  Philadelphia— but  not  so  much 
an  example  of  great  managerial  ability,  although  it  has  been  finely 
managed  as  far  as  I  know,  but  they  had  the  people  there  to  ride 
and  the  people  were  in  the  cars,  and  therefore  you  got  a  heavy  car- 
load, due  to  the  presence  of  the  people.  Other  companies  may  not 
have  the  people  to  put  in  the  cars.  So  you  reduce  vour  cost  per 
unit  of  traffic,  and  it  costs  you  less  to  handle  a  passenger;  therefore 
you  can  do  business  on  a  smaller  fare  or  at  a  less  cost. 

I  think  it  was  due  to  the  fact  that  there  was  such  an  abnormally 
large  number  of  people  in  Philadelphia  during  the  war,  and   in 
the  environs  of  Philadelphia,  and  it  illustrates  exactly  what  hap- 
pens on  the  steam  railroads,  where  under  normal  conditions  we 
can  weight  and  put  cars  in  a  train  and  have  heavy  train  loadino- 
and  get  the  greatest  efficiency  in  terms  of  their  labor  and  mate*^ 
rials,  which  they  could  not  do,  of  course,  during  the  war,  their  idea 
being  to  get  the  things  over  the  road  without  regard  to  cost,  and  we 
have  an  abnormal  situation,  and  I  think  that  is  true  of  a  great  many 
street-railway  companies,  although  we  have  shown  that  the  increased 
cost  for  motormen  and  conductors,  just  restricted  to  that  element  of 
labor,  has  only  been  0.37  cents  per  revenue  passenger.     Very  prob- 
ably the  cars  were  not  loaded  to  their -capacity.     If  you  had  the 
people,  just  assuming  something  which  does  not  exist,  especially  on 
your  sparsely  settled  suburban  lines,  you  would  have  had  the  facili- 
ties to  probably  show  a  decreased  labor  cost  in  the  light  of  even  the 
increased  wages. 

But  the  general  point  of  view  which  we  wish  to  put  before  the 
commission  is  that  the  idea  tliat  labor  has  been  responsible  for 
increased  operating  costs,  representing  the  motormen  and  conduc- 
tors, and  not  speaking  of  labor  in  general,  it  has  not  been  a  deter- 
mining  factor,  in  view  of  the  fact  that  the  labor  costs  in  terms  of 
motormen  and  conductors  for  all  the  street-railway  systems  in  the 
United  States  contsidered  as  one  one  system  has  only  been  1  4  cents 
per  revenue  passenger;  that  you  could  have  quite  large  increases 
of  wages  for  those  classes  of  employees  without  very  extremely 
affecting  your  labor  cost  as  restricted  to  them.  ^ 

But  the  general  idea  that  I  wish  to  submit  was  that  it  seems  unfair 
to  employees  to  impart  the  notion  that  is  absurd  and  utterly  falla- 
cious from  an  economic  standpoint— if  the  conditions  were  analyzed 
from  the  standpoint  of  the  present  high  cost  of  living— that  the 
high  prices  have  been  due  to  the  increased  labor  cost.  So  far  as  the 
.data  goes,  it  shows  that  the  proportion  of  labor  cost  to  selling  ijrice 
is  not  such  a  ratio  as  would  justify  assertions  of  that  kind,  and  that 
the  attempt  to  reduce  the  cost  of  living  on  that  basis  of  withholdino" 
the  wage  increases  is  a  fallacious  point  of  view,  and  that  nothing  can 
be  done  until  you  absolutely  control  the  supply  of  commodities  and 
regulate  the  price  and  distribution  of  them. 


Jim 


1886    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Gadsden.  I  did  not  mean  to  interrupt  you,  but  I 
wanted  to  bring  that  out  as  you  went  along. 

Mr.  Lauck.  I  just  wanted  to  bring  that  out  as  a  general  point  and 
give  it  practical  application  in  the  light  of  Mr.  Sturgis's  testimony, 
the  main  object  of  which,  as  he  so  clearly  pointed  out^ — and  it  is  not 
worth  while  for  me  to  repeat— was  that  the  contention  of  the  em- 
ployees, meaning  by  employees  always  motormen  and  conductors,  or 
the  Amalgamated  Association— is  that  the  wage  increases  secured 
by  them  during  and  prior  to  the  war  have  not  l)een  such  a  factor  in 
operating  costs  as  would  lead  to  the  unjustifiable  claim  that  the  in- 
creased operating  costs  of  tlie  street  railways  have  been  due  to  wage 
increases  to  these  employees.  I  think  that  is  clearly  brought  out  in 
his  analysis  of  the  operating  performance  of  the  railroad  as  set  forth 
by  him,  and  it  is  the  main  point  that  we  want  to  establish  in  that 
connection. 

We  realize  that  the  statement  is  made  that  the  data  that  has  been 
pre^iented  as  to  the  financial  practices  of  street-railway  corporations 
m  the  past  has  been  criticized  on  the  ground  that  this  is  academic 
and  ancient  history  and  has  no  bearing  upon  the  present.    We  wish 
to  take  issue  with  that.    We  think  this  has  a  very  great  significance 
at  the  present  time  and,  as  a  matter  fact,  is  of  paramount  significance 
in  the  considemtion  of  the  attitude  of  the  employees  toward  the  in- 
dustry.    In  this  way:  That  we  consider  that  we  do  not  wish  to 
charge  the  present  managements  with  responshibility  for  these  prac- 
tices and  the  evils  which  have  developed  from  them,  but  we  consider 
that  they  are  the  victims  of  it  along  with  the  employees,  and  both 
the  employees  and  the  management  and  the  pubhc  are  all  victims 
of  these  past  systems  of  corporation  finance  which  the  street-railway 
industry  is  suffering  fix)m  «t  the  present  time.    (>  in  other  words, 
the  practice  which  has  charactertized  past  years  of  capitalizing  in- 
come that  has  been  developed  as  the  result  of  the  development  of 
urban  communities  or  the  application  of  new  equipment  or  the  in- 
creased efficiency  of  employees.     Because    with    the   extension    of 
capitalization  in  this  way  the  tendency  has  been  that  when  other 
items  of  operating  cost  have  increased,  such  as  materials  and  sup- 
plies and  all  the  elements  going  into  operating  expenses  and  main- 
tenance and  repair  of  equipment  which  has  b^n  installed  by  man- 
agements for  the  purpose  of  securing  economies  in  operation — that 
with  the  increase  in  the  operating  ratio  and  these  securities  out- 
standing which  have  been  issued  without  any  commensurate  invest- 
ment values  in  the  property  and  were  really  a  drain  upon  operating 
,  revenues,  that  the  margin  of  safety  l)etween  the  amount  of  revenue 
left  after  fixed  charges  were  paid  and  remaining  to  meet  new  capital 
issues  have  been  gradually  and  gradually  declining  until  it  is  prac- 
tically nil  at  the  present  time,  and  therefore  the  stVeet-railway  man- 
agers have  not  had  an  opportunity  or  have  had  no  basis  upon  which 
to  secure  new  financing,  and  which  is  a  direct  outgrowth  of  these 
previous  practices. 

We  think  employees  have  a  very  vital  interest  in  that,  as  Mr., 
Jones  pointed  out  this  morning,  or  as  came  out  in  the  course  of  his' 
testimony.    That  if  the  capital  investment  in  the  properties  repre- 
sented an  actual  commitment  of  capital  the  returns  would  then  be 
related  to  the  actual  capital  investment  and  it  would  be  evident  both 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1887 

to  the  employees,  the  managem^it,  and  the  public  as  to  the  legitimate 
retm^n  in  the  case  of  this  industry,  and  the  employees  would  have  a 
better  opportunity  not  only  to  dem^mstrate  their  equitable  participa- 
tion in  the  earnings  of  these  properties  but  also  to  secure  such  par- 
ticipation ;  while  if  the  past  system  of  corporate  management  would 
continue  that  there  would  be  no  hope  for  the  employee,  there  would 
be  no  hope  for  the  public,  and  there  would  be  no  hope  for  the  present 
management,  because  they  would  all  be  the  victims  of  the  finan<i*ler 
or  of  the  interests  which  were  floating  these  securities  or  had  finan- 
cial control  of  the  property. 

I  think  that  is  conceded  by  the  testimony  of  the  men  who  are 
intimately  connected  with  the  industry  and  who  are  pra<^ti<'al  men  in 
the  industry,  I  mean  as  to  overcapitalization  and  the  evil  effects  of  it. 

For  instance,  Mr.  Guy  E.  Tripp,  or  formei'ly  Gen.  Tripp  during 
the  war^  chairman  of  the  board  of  the  Westinghouse  Electric  Co.,  in 
his  testimony  before  this  commission,  in  discussing  the  results  of 
processes  of  overcapitalization  said:  "Yes,  large  fortunes  were 
made;  ♦  *  *  thev  were  made,  liowever,  out  of  capitalizing  the 
fiiture  and  selling  the  securities,  and  not  out  of  the  5-cent  fare 
rider.  *  *  *  Hopes  were  capitalized,  and  hopes  were  sold,  and 
the  investors  have  lost  money." 

The  same  way,  Mr.  Henry  G.  Bradlee,  of  Stone  &  Webster,  said: 
*^The  practice,"— speaking  then  of  the  practice  of  issuing  bonus 
stock — "  grew  up,  and  there  was  a  time  when  it  was  practically  im- 
I)ossible  to  finance  a  new  corporation  without  following  that  prac- 
tice. I  think  the  public-utility  people  recognized,  periiaps  not  at  tlie 
start,  but  many  years  ago,  the  fallacy  of  that  method  of  financing." 

Commissioner  Gadsden.  Right  there,  Mr.  Lauck,  I  would  like  to 
have  your  views — admitting  all  of  that  for  the  sake  of  the  argu- 
ment—as to  what  practical  bearing  that  has  upon  the  situation  since 
presented  to  this  commission  that  the  industry  is  now  suffering  from 
practically  a  deficit  in  operating  revenue. 

Mr.  Lauck.  It  has  this  bearing — I  will  cmne  around  to  that  later. 

Commissioner  Gadsden.  I  do  not  want  to  interrupt  you. 

Mr.  Lauck.  If  you  will  remind  me  when  I  come  to  it^ — I  think  it 
has  a  very  practical  bearing  because  it  invokes  the  readjustment  of 
the  relations  of  the  public  to  the  industry  and  the  industry  to  the 
public. 

Commissioner  Gadsden.  Yes. 

Mr.  Lauck.  Our  general  conclusions,  as  I  stated  in  anticipation 
of  our  testimony,  as  to  labor  and  the  present  financial  plight  of 
street  railways,  is  that  we  consider  that  the  extraordinary  gains  in 
revenue^  etc.,  arising  from  different  methods  of  operation,  from  un- 
earned increments  and  mechanical  equipment,  as  well  as  from  mana- 
gerial ability  and  labor  efficiency  in  the  past^  have  to  a  large  extent 
been  absorbed  by  these  processes  of  corporation  financing  or  ficti- 
tious capitalization,  or  in  other  companies  have  been  actually  dis- 
sipated by  improper  and  misguided  financial  mismanagement;  and 
our  conclusion  is  that  the  present  deplorable  financial  condition  in 
which  the  stre^-railway  companies  find  themselves  has  not  been 
due  to  an  advance  in  operating  costs  in  arising  from  increasing 
outlays  to  labor,  but  has  primarily  arisen  from  past  mismanage- 
ment of  the  finances  of  these  utilities  in  the  way  I  have  just  indi- 


ifti 


1883    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I 

cated— that  the  present  managements,  having  inherited  the  results 
of  past  mismanagement  in  the  times  of  increasing  operating  costs— 
the  costs  of  materials  and  supplies,  etc.— have  seen  their  margin  of 
safety  disappear  and  their  credit  disappear,  and  the  company  is 
placed  on  the  verge  of  insolvency  due  to  these  past  financial  mal- 
practices. 

Payments  to  employees  of  the  industry  have  not  only  had  no  effect 
upon  the  present  finances  of  the  companies,  but,  as  a  matter  of  fact, 
the  employees  have  not  had  an  equitable  participation  in  the  results 
of  their  own  labor.  Their  past  productive  efficiency  has  been  ab- 
sorbed by  this  fictitious  capitalization;  and  if  the  past  methods  were 
to  be  continued  into  the  future,  the  fruits  of  the  labor  of  employees 
as  yet  unborn— generations  yet  to  come  to  work  upon  the  railroads- 
would  still  have  their  efficiency  absorbed  and  would  not  have  a 
chance  for  a  fair  participation  in  the  revenues  of  this  industry.  And 
unless  the  present  basis  of  financial  management  and  control  is 
changed,  the  future  is  without  hope,  as  we  claim,  to  the  employees 
or  to  the  general  public  or  even  to  the  practical  managements  of  the 
companies  themselves,  who  have  faced  actual  problems  with  which 
they  are  confronted  at  the  present  time,  of  operation  and  making 
the  companies  go  as  financial  concerns. 

Those  are  our  two  main  negative  conclusions,  I  jnight  say,  that 
have  been  developed  by  Mr.  Sturgis's  testimony  and  by  the  testi- 
mony of  Mr.  Jones:  That  we  consider  that  labor  has  not  been  re- 
sponsible for  increased  operating  costs  in  the  terms  of  motormen 
and  conductoi-s,  and  that  we  consider  that  the  present  financial  diffi- 
culties of  the  railroads  are  primarily  due  to  past  financial  misman- 
agement. And  we  agree  very  likely,  on  the  question  of  bringing  up 
the  history  of  these  past  managements  of  financing  these  corpora- 
tions, with  ex-President  Taft,  who,  I  believe,  testified  before  this 
commission  that  they  were  not  of  any  significance  except  it  became 
necessary  to  take  judicial  notice  of  them;  and  we  think  from  our  own 
standpoint  it  is  necessary  for  the  commission,  in  relation  to  the 
employees,  to  take  "judicial  notice"  of  those  facts,  in  order  that 
the  employees  may  have  an  opportunity  of  equitable  participation 
in  the  future  in  any  recommendation  which  the  commission  may 
make. 

The  second  main  point  brought  out  jointly  by  Mr.  Sturgis's  and 
Prof.  Ogburn's  testimony  that  we  would  like  to  submit  to  the  com- 
mission for  consideration  is  that  we  consider  that  the  actual  rates  of 
pay  of  the  street-railway  employees  j^rior  to  the  war  were  inade- 
quate, that  they  had  not  received  an  increase  in  wages  during  the 
war  corresponding  to  the  increased  cost  of  living,  but  if  they  had 
secured  an  increase  corresponding  to  the  increased  cost  of  living, 
that  this  increase  would  simply  have  been  a  means  of  perpetuating 
inadequacies  and  insufficient  wages  that  existed  prior  to  the  war, 
and  that  if  the  rights  of  the  employees  in  the  industry  are  to  be 
properly  considered  by  the  commission,  that  there  will  have  to  be  an 
entirely  new  adjustment  and  the  employees  given  a  living  wage. 

We  claim  that  the  wages  now  are  not  only  inadequate,  but  are  not 
sufficient  to  maintain  a  proper  standard  even  of  subsistence  and  that 
they  fall  far  below  the  minimum  standard  of  comfort  which  was 
outlined  by  Prof.  Ogburn. 


PROCEEDIlyrGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1889 

We  contend  that  the  commission,  in  its  recommendation.. if  they 
are  going  to  follow  the  principle  of  making  wages  correspond  to  the 
increased  cost  of  living  will  have  to  take  notice  of  the  point  w h  c h 
was  raised  by  Mr.  Gadsen  yesterday-the  fact  that  the  com  panes 
must  anticipate  further  increases  in  wages  in  their  operating  ex- 
perience in  the  future  But  we  wish  to  contend  further  that  the  com- 
mission should  consider  and  create  in  its  recommendations  the  prin- 
ciple of  n  living  wage  to  the  employees— not  any  definite  amount  as 
o  what  that  wage  should  be,  but  it  should  accept  this  principle  as  a 
basis  of  recommendation  for  the  rehabilitation  of  the  companies 

I  do  not  know  whether  it  is  worth  while  for  me  to  review  (he  ques- 
tion as  to  the  inadequacy  of  the  wage  rates,  which  were  brought  out 
so  clearly  by  Mr.  Sturgis.  The  conclusion' of  Mr.  Sturgis  wL  that 
bv  January,  1919,  wage  rates  had  increased  48  per  cent,  while  the  cost 
of  living  had  gone  up  72  per  cent.  He  also  Lde  another  pofn^^ 
hat  connection  which  I  would  like  to  again  emphasize  to  the  com 
mission,  which  is  the  disclaiming  of  the  more  or  less  popular  po^nt 

Idustrt  i'^.r'^  Y"'  H^^^'  ^ri^  P"^  '^'^  street-railwav  financ  a 
industry  on  the  rocks,  so  to  speak,  by  its  decisions;  that  an  examina- 
tion of  the  facts,  as  set  forth  by  Mr.  Sturgis,  clearly  indLted  that 
their  decisions  were  moderate,  and  in  a  grett  many  iLtances^d^^^^^ 

[hejc^^^^^^^^^^  '^'^  "''^'^'^  '''''  "^  ^^^'"^^  during^he  period  whkt 
Speaking  about  the  theory  of  wages— on  page  55  of  the  brief  vou 
will  find  we  have  set  forth  there  our  position.  We  ckL  on  th^s 
na  ter  of  a  hying  wage  tliat  the  whole  tlieorv  of  wages  as  Advocated 
n'f  ^^V'^'^'rl'''^'  ^^^  H^'  P"^^^^  «Pi"i«^  ^""^t  be  changed  in  L  light 
wir^o?  V  ^''''r'^'''^^  "^*"  developing;  that  the  old  theory  of  wags 
^as  that  rates  of  pay  were  determined  by  laws  of  supply  and  de- 

rthe~±,' /''  '^;t  '^  '"*!f  "^  P^-^  ^^  ^^^^"^^^  «^^«"ld  correspond 
Hbor  nnH  ff  "'''^.^'^'' u "  ^^'^  '"PP^^  ^^  ^^^^^^  ^^^  the  demand  for 
fn,  [; W  I  ^''y^^'^'S  happened  disadvantageously  to  the  demand 
foi  labor,  of  course,  the  wage  rates  were  reduced,  or  if  anything 
SXrr'^  "'^f-^-ble  to  industry  the  workman  was  the  Sua! 
S         V'^  ''''^^  ^^^  *^^t  ^^'^  ^^^b^^'^^  practically  could  find  any 

creased  tlfe  ^vlu  ^.TT^'  "''""/  ^'^'  ."  ^^^^  «^  pestilence  that  de- 

^nTo.  1^      ^^^^il«We  labor  supply  or  that  shut  off  the  immigration, 

sudi  as  happened  in  this  country  during  the  war.  feiamon, 

Ihat  wage  theory,  so  to  speak,  which  has  been  the  practical  b'lsis 

so  tar  as  the  workman  was  concerned,  and  if  to  be  continued  in 
£rt  cTnTo?  h"'^"  '  Plf  osophy  of  despair  for  t^  workman 
vo?"  f  •         ^  ^^^  ^"JP^'  "'^^^^  tl^^se  conditions,  to  properly  ad- 
upon  him.''''''  ''^''""'^'  "'^^'^^  ""'  '^'  ^'^^^^^'^  ^f  thos^^  d^ependent 

o.J^'r^^i^-  change  in  this  idea  as  to  the  determination  of  wa^es  was 
embodied  in  the  Clayton  Act,  enacted  in  1918,  in  which  it  waf^taTed 
^lat  labor  was  not  a  commodity  or  an  article  of  commerce     In ^o£ 

T~iT''^"''?^  *^'"^"'  ""  ?"^^^^^^  principle,  the  determination 
of  wage  rates  is  not  a  matter  to  be  determined  on  the  basis  of  supply 
and  demand  like  you  would  fix  the  price  of  wheat  or  fix  the  S  • 
of  coal  or  of  steel,  but  it  recognizes  the  humane  aspects  of  the  situ! 
1C0C43''— 2a-voL  2 57 


IN 


1890    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

ation— that  labor  is  a  hiiHiaii  being,  and  that  tliere  are  other  con- 
siderations rather  than  the  hard  and  fixed  and  more  or  less  im- 
mutable laws  of  supply  and  demand  to  determine  a  workman's 
wage. 

It  might  be  said  then  that  the  attitude  of  economists  of  the  past 
generation,  as  well  as  the  practices  of  industry  itself,  to  a  consider- 
able extent,  as  to  the  procedure  to  be  followed  in  fixing  wages,  may 
now  l)e  said  to  have  leceiveii  the  unqualified  condemnation  of  the 
civilized  world. 

That  is,  the  practical  application  of  this  new  principle  in  prevent- 
ing the  free  play  of  economic  forces  of  supply  and  demand  in  fixing 
wages,  consists  in  this — to  put  it  definitely  and  concretely :  That  the 
wage  earner  is  entitled  to  a  living  wage,  and  that  there  are  consider- 
ations of  public  policy,  as  well  as  of  humanity,  that  should  determine 
the  fixing  of  the  amount  of  wage  which  a  workman  should  receive. 

The  acceptance  of  that  idea  and  the  contention  along  tliat  line 
has  proceeded  to  such  an  extent  that  the  living  wage  is  defended  not 
only  on  grounds  of  human  and  social  well-being,  but  also  on  the 
purely  selfish  ground  that  it  yields  the  maximum  output  from  labor 
itself.  In  other  words,  the  more  intelligent  employer  of  labor  hjis 
conceded  that  a  living-wage  standai-d  is  the  most  economic  and 
yields  the  best  results  from  the  standpoint  of  revenue. 

This  principle  was  recognized  by  the  proclamation  of  the  Presi- 
dent, following  the  agreement  of  capital  and  labor  in  working  out 
the  principles  of  the  National  AVar  Lalxu*  Board  and  bcn-ame  the 
settled  policy  of  that  board  during  the  war  so  far  as  the  enunciation 
of  the  principle  was  concerned. 

This  Labor  Conference  Board,  which  preceded  the  National  War 
Labor  Board,  was  made  up  of  representatives  of  industry  and  labor, 
agreed  upon  the  following  principks  as  to  the  living  wage: 

1.  The  rlfrlit  of  all  workers,  Includiiiir  common  labor,  to  a  living  wage  is 
hereby  deelared. 

12.  In  fixing  wages,  mlninuim  rates  of  pay  shall  be  establlslu^l,  wbiclj  will 
Insure  the  sul)sistenee  of  the  worker  and  his  family  in  health  and  reasonable 
comfort. 

This  principle  was  accepted  and  proclaimed  by  the  President  as 
a  i)art  of  the  Government's  policy  to  be  followed  by  all  wage  adjust- 
ment boards  during  the  war. 

Later,  since  the  armistice,  it  may  be  said  to  have  received  the 
unqualified  endorsement  of  the  entire  civilized  world,  in  view  of  the 
fact  that  in  the  labor  provisions  of  the  peace  treaty  two  of  the  prin- 
ciples established  are  as  follows — and  at  page  85  of  the  brief  you 
will  find  the  principles  of  the  peace  treaty  reproduced.  Tlie  first 
section,  in  its  principles,  is: 

The  guiding  principle  ;»l>ove  enunciatt»d.  that  labor  should  not  be  regarded 
merely  as  a  oonnnodity  or  article  of  commerce. 

'A.  The  payment  to  the  employed  of  a  wage  adequate  to  maintain  a  reason- 
able standard  of  life  as  this  is  understood  in  their  time  and  country. 

Another  remarkable  development  in  this  connection  has  been  that 
almost  without  exception  all  the  religious  or  ecclesiastical  organiza- 
tions of  the  country  and  of  Great  Britain  and  Europe  have  given 
their  sanction  to  this  same  principle;  and  they  not  only  give  their 
sanction  but  are  practically  carrying  on  educational  propaganda 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1891 

and  practical  measures,  have  collected  funds  and  are  -ngaged  in  the 
work  of  giving  widespread  consideration  to  this  principle  and 
attempting  to  realize  its  practical  application  in  some  way. 

So  that  it  might  be  sa'id  that  to  demand  a  living  wage  for  the 
employees  of  the  street  railways  as  a  condition  to  any  reports  bv 
the  board  is  a  very  sound  position,  not  only  from  the  standpoint 
of  public  policy  of  this  Government,  the  standpoint  of  the  public 
policy  as  announced  by  all  the  leading  industrial  and  commercial 
nations  of  the  world  in  the  peace  treaty,  but  it  has  received  the 
universal  sanction  of  the  churches  of  all  denominations,  botli 
Protestant  and  Catholic  churches;  it  has  the  sanction  of  the  lead- 
ing employers  of  labor  in  this  country;  as  set  forth  in  the  principle 
enunciated  and  followed  by  the  National  War  Labor  Board,  it  iii 
the  fundamental  economic  and  political  right  to  which  lalior  is 
entitled  by  every  ethical  and  moral  consideration.  And  to  deny 
the  motor  men  and  conductors  the  principle  of  a  living  wage,  it 
seems  to  me,  in  the  face  of  these  announced  policies  and  practices 
of  our  own  Government,  and  the  face  of  the  guaranties  of  all 
civilized  nations  in  the  peace  treaty,  would  be  more  than  equivalent 
to  and  more  serious  than  the  denial  of  free  speech,  the  denial  of  the 
right  of  assembly  or  religious  freedom,  or  any  other  civic  right  or 
liberty.  In  other  words,  as  we  shall  claim  later,  we  claim  this  now 
as  a  fundamental,  economic  right  to  labor  which  should  be  em- 
bodied in  the  recommendations  of  this  board  for  the  financial  re- 
habilitation of  the  industry. 

Before  going  concretely  into  that,  however,  I  would  like  to  ask 
the  board  to  turn  to  page  59  of  the  brief.  I  refer  there  to  the  <'en- 
eral  title,  "  Inadequacy  of  prewar  rates."  ^ 

The  average  annual  earnings,  as  taken  by  Mr.  Sturgis  from  the 
Census  Bureau,  have  been  set  forth. 

In  1914,  you  will  see,  right  under  the  first  paragraph,  $861  per 
annum.  As  developed  by  Prof.  Ogburn's  te^^timony  of  yesterday, 
according  to  the  standards  kiid  down  by  Prof.  Chapin  and  other 
authorities  at  that  time,  which  you  will  find  quoted  on  the  next 
page,  an  income  of  $900  or  over  probably  permits  the  maintenance 

of  a  normal  standard  so  far  as  the  physical  man  is  concerned that 

is,  to  provide  for  the  man's  physicaf  subsistence  and  shelter  and 
clothing,  but  not  for  any  degree  of  comfort  beyond  that,  or  prob- 
ably not  for  a  healthful  standard  of  living;  because  you  will  find 
on  page  61,  in  the  table  there,  the  results  of  in\'«stigation,  also  re- 
ferred to  by  Prof.  Ogburn  in  his  testimony,  in  which  it  is  indicated 
that  incomes  of  families  of  between  $900  and  $999  show  that  22 
per  cent  of  the  391  families  were  underfed,  and  other  proportions 
were  underclothed,  overcrowded,  etc. 

So  that  we  claim  that,  on  the  basis  of  earnings  of  emplovees  of 
this  industry,  as  compared  with  these  standards— minimum' stand- 
ards of  subsistence— they  were  actually  below  the  subsistence  level 
prior  to  the  war;  and  we  claim,  further,  in  the  next  section  of  the 
brief,  which  is  set  forth  in  the  third  paragraph  on  page  6.3  that 
the  average  rates  of  pay  and  earnings  of  conductors  and  motormen 
prior  to  the  war  were  inadequate  on  a  bare-subsistence  level,  and 
were  not  sufficient  to  support  an  average  family  in  health  and' with 
any  degree  of  comfort. 


Hi 


i  ■  * 


1892     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

It  has^  also  been  shown  that  the  prices  of  the  cost  of  livin<r  in- 
cmised  faster  during  the  war  period  than  the  rates  of  emplove^'es. 

Ihe  conclusion  is  therefore  plain,  assuming  the  premise  that  the 
real  wage  of  street-railroad  employees  is  at  the  present  time  even 
more  inadequate  or  nioi«e  subnormal  than  prior  to  the  war,  and  an 
advance  in  rates  equaling  the  entire  increase  in  the  cost  of  livincr 
would  still  maintain  the  prewar  inadequacies,  and  what  is  needed  is 
a  living  wage,  in  order  to  meet  a  living  standard  as  set  forth  in  gen- 
eral terms  by  Prof.  Ogburn,  which  would  maintain  the  phylical 
needs  of  an  employee  and  of  his  family  in  a  healthy  way,  and  provide 
at  least  to  a  minimum  degree  comfort  and  opportunity  for  social 
economic,  and  general  political  well-being  of  the  head  6f  the  house- 
hold and  of  his  family. 

In  that  connection,^I  have  enibodied  in  the  brief,  at  pages  65  and 
tollowing,  some  comparisons  which  it  might  be  of  interest  to  the 
boam  to  note. 

Reference  Avas  made  yesterday  to  the  study  which  had  been  made 
under  the  old  Bureau  of  Labor,  or  Bureau  of  Labor  Statistics,  in  1901 
as  to  the  cost  of  living  of  more  than  25,000  families  at  that  time.  In 
the  cliscussion  of  weights  that  went  into  the  budget,  we  have  taken 
out  of  that  2o  440  families  about  25  families-or  the  bureau  did,  at 
that  time— and  studied  them  intensively;  and  in  the  table  at  the  foot 
1  P^^'L^/^'.  ^'J^<^  leading  facts  as  to  those  families  are  shown  on  the 
basis  of  their  status  in  the  year  1900. 

Then,  on  page  67,  we  have  taken  those  same  families  at  the  cost  of 
living  in  1900  of  $^69  for  these  2,567  families. 

Applying  the  increases  in  relative  weights  in  the  cost  of  living, 
from  that  time  to  the  present  date,  we  have  shown  for  the  year  1911 

101 1  'L^a-  ^?oi'/^^  '^.^  ^-^^  ^¥  ^"  1^^'  ^^  ^^'«"1^^  i-equire  $923  in 
1911,  $979  in  1914  $1,401  m  1917,  and  $1,653  in  1919  to  maintain  the 
same  standard  of  living  that  they  had  in  1900. 

Other  groups  of  income  for  families  are  shown  in  the^next  two 
tables. 

(liorTn'^-^  l^n?V\^'*''."P  ""^  families  with  an  income  of  $800  and  under 
$J00;  m  1914  having  an  income  of  $999,  they  would  require  $1,737 
to  maintain  that  same  standard  of  living  at  the  present  time 

bo,  on  the  next  page  you  will  find  the  comparisons  of  families  ^of 
other  mconie  groups,  $900  to  $1,000,  $1,000  and  under  $1,100,  show- 
ing, to  maintain  the  standards  prior  to  the  war,  what  would  be  neces- 
sary m  the  way  of  a  wage  at  the  present  time. 

I  am  not  pointing  these  out  with  the  purpose  in  mind  that  the  com- 
mission xyill  ever  recommend  a  definite  wage,  but  to  illustrate  what 
the  imnciple  of  a  living  wage  would  require  at  the  present  time  to 
maintain,  in  adequate  form,  family  life. 

I  would  like  to  ask  the  attention  of  the  commission  to  page  69  in 
which  there  is  set  forth  the  Seattle  street-railway  employees^ budget, 
which  was  spoken  of  last  evening  by  Prof.  Ogburn  and  which  re- 
ceived  the  practical  sanction  and  application  by  the  arbitration  board 
of  which  Dr.  Suzzalo,  president  of  the  University  of  AVashinffton, 
^js  the  head.  That  was  in  December,  1917,  and  provided  for  rates 
of  pay  of  the  employees  there,  motormen  and  conductors,  to  be  based 
upon  an  annual  budget  of  $1,505. 

That  budget,  applying  the  increased  cost  of  living  since  December, 
1917,  would  now  amount  to  somewhat  over  $1,900  per  annum. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.-  1893 

Then  the  Piexotto  budget,  prepared  by  Dr.  Jessica  B.  Piexotto  of 
the  University  of  California,  practically  at  the  same  time,  the  total 
of  which  IS  shown  under  page  70,  in  October,  1917,  amounted 'to 
$1,4^6,  supposed  to  be  a  budget  of  comfort  and  health  for  the  work- 
ers in  Oakland,  Calif.  That,  if  you  applied  the  increased  cost  of 
living  to  that  since  that  time,  would  amount  to  over  $1,900. 

Then  I  have  set  forth  on  pages  71,  72,  73,  and  74,  the  budget  of 
minimum  comfort  and  reasonable  minimum  comfort  and  health  for 
a  family  of  five  as  discussed  by  Prof.  Ogburn  last  evening,  which 
shows  a  total  cost  at  the  present  time  of  $1,941. 

On  page  71  is  given  the  budget  as  originally  drawn  by  him  in 
June,  1918,  and  as  submitted  to  the  War  Labor  Board  and  after- 
wards submitted  in  the  packers'  arbitration  in  Chicago  to  which 
have  been  applied  the  increased  cost  of  living  of  the  different  items 
since  that  time,  making  a  total  of  $1,941  at  the  present  time. 

You  will  see  on  the  bottom  of  page  71  also  the  quantities  of  food 
and  on  the  succeeding  pages  the  amounts  of  clothing,  and  so  on, 
that  are  allowed  for  these  different  items. 

Prof.  Ogburn  pointed  out  himself  that  this  was  a  budget  of  mini- 
mum comfort  and  was  sufficient  merely  to  keep  the  apprehension  of 
want  from  the  door.  In  other  words*  it  provided  for  the  physical 
welfare  of  the  family  and  the  health  life  and  gave  a  minimum 
amount  of  clothing  and  some  recreation,  and  provided  also  for  the 
insurance  of  the  head  of  the  family  and  an  annual  saving  of  $100. 
So  it  should  be  considered,  it  seems  to  me,  as  a  most  conservative 
estimate  of  what  the  minimum  requirements  should  be  at  the  present 
time. 

The  general  conclusion  that  we  have  come  to,  speaking  of  monev 
rates  of  pay  or  annual  incomes,  has  been  that  what  would  be  neces"- 
sary  to  properly  sustain  the  family  of  a  motorman  or  conductor,  the 
average  family,  at  the  present  time  would  be  approximately  $2,000 
per  annum,  which  w^ould  provide  simply  for  the  physical  require- 
ments and  subsistence  and  healthy  life  and  also  yield  some  minimum 
measure  of  comfort,  recreation,  and  provide  for  a  small  annual 
saving. 

That  completes  the  review  of  our  testimony ;  and  if  the  commis- 
sion would  bear  with  me  I  would  like  to  go  into  the  succeeding  three 
or  four  or  five  pages  with  more  detail,  in  which  our  constructive 
recommendations  are  set  forward. 

We  have  summed  up  the  constructive  problem  before  the  commis- 
sion as  involving  three  main  features : 

First,  the  railroads  claim  that  they  are  financially  impoverished 
and  are  in  a  deplorable  plight,  according  to  their  own  testimony 
and  under  the  stress  of  this  emergency  the  commission  is  therefore' 
faced  with  the  duty  of  devising  measures  to  put  the  electric-railway- 
transportation  industry  upon  a  sound  financial  basis.  This  means 
in  the  light  of  the  interests  of  the  employee,  that  the  industry  must 
be  put  upon  a  sound  basis  of  capitalization.  We  are  not  recom- 
mending any  specific  basis,  but  we  think  the  principle  should  bo 
followed  of  a  sound  capitalization  and  a  sound  method  of  corpora- 
tion finance  in  the  future  which  would  prevent  the  absorption  of 
earnings  of  employees  or  other  earnings,  along  some  line  that  may 
liave  been  suggested  or  such  as  the  public  regulation  of  security  is- 
sues and  consolidations  and  reorganizations,  and  so  on. 


>■*■ 

I,: 

1 

I 

■i 


1894-  pnocKKmxGS  of  federal  electric  railways  commission-. 

In  the  second  place,  it  seems  to  lis 

Commissioner  (^AnsoKN.  Do  you  want  to  \ye  questioned  now  or 

it  ?s  nil 'rilt"  \"h  '""•'  '"^*,*<"-.'l"^^i"n  "^^  afterwards,  I  guess:  l.ut 
It  IS  all  ripht.  I  here  is  a  limitation  on  my  presenting  mv  point  of 
Mew.  and  Mr.  Ma  .on  is  going  to  sul.mit  it  on  the  broader  aspect. 

i  ommissioner  (iadsden.  (io  ahead. 

Mr.  Lm  ,-K.  In  the  second  place,  it  impressed  us  that  the  financial 
leorgani/ation  of  the  industry  involves  a  rea.ljustraent  of  the  rela- 
tions between  the  |)ul)lic  and  the  electric  railways. 

J  hird,  a  readjustment  of  relations  as  Mween  the  public  and  the 
companies  and  the  employees.  «■■"  ui,. 

Now.  constructive  proposal's  which  we  wish  to  put  forward  arc 
^.roe  practically.  There  are  a  great  many  constructive  proposals 
which  have  been  places!  before  the  commission,  and  in  order  that  there 
might  l)e  a  badv-grouiul  for  discussion  I  have  cla-ssified  them  on  pages 

,ef.  re;PP  ll  fh  ^^  "  ^"T  «""*  *'^'"""^''^  ^^'^  testimony  and  made  the 
leTorence  to  the  pages  there. 

We^ think  that  any  measures  for  immediat*  relief  should  he  condi- 

^Zu  h}'Z  ■'''■}'  *-',5'\'''  r<'"""*'"^«t*""«  «*  tl'e  commission 
7C1Z'  "*'"''"",'^  't^might  devolve  to  the  detriment  of  the  public  or 
the  employees.   In  other  words,  if  there  were  temporary  relief  it  mi.dit 

ho'n  iblic   In:,  ^r'  ""^'^  *'r  -"-"P*"-"*  or  the  employees''or 
V  o„W  hi"  '*  Tf""  *'"'*  ^^^  evidence  tends  to  show  that  there 

mission.  •'"•"l''^^«  constructive  program  outlined  by  the  com- 

The  paramountjntercst  in  the  entire  situation  seems  to  us  to  bo 

and 'Jhe  .'inh/''"'*-     ^y  P"''!''^  i^  dependent  on  the  stn,et  rail  va vs 
and  the  public  can  not  permit  them  to  cea.se  operations.    And  be- 
cause the  transportation  facilities  are  too  vital  y  bound  up  "n     ho 
daily  life  and  activities  and  work  of  the  public,  and  if  the  stiiet  i- 
ways  or  the  public  utilities  are  in  a  deplorable  c"ndi\yn  from  U^^^^^^ 
ever  cause  it  may  be.  we  think  it  is  incumlx^nt  upon  the  pulX  to  act 

tZinteilV'^-'if"*  "■'"  PP'^fi^-«".V  i^habilitate  them  and  car"  tt 
the  interests  of  all  concerned. 

The  present  situation  has  only  stimulated  and  brought  into,  the 
foreground  the  significant  relation  between  the  street  n.ilw«"-s  and 
the  general  public.     The  realization  of  this  truth,  it  seeu.sTo  us  has 

plexitT  of  modern  life,  and  the  relations  of  street  railways  to  tl.Jt 

he  effic'"  ^'"'*  I'  '''"V"-  ''"'•'''■  '«  """""btedly  w  11  n^^o  pay  for 
the  efficient  oiK-ra  ion  of  street  railways  on  the  basis  of  fust  guLn- 
t  es  to  capital  and  labor     Our  point  of  view  is  that  the  pro^  em  of 
the  commission  is  to  consider  all  facts  and  constructivj  proZab 
and  to  lecommend-with  these  just  guaranties  to  labor  and  caoital 
imSjr"  •"■"■*""'  "'''"""  "*  --•g--«*i-  and  oj^^at^oVor/he 
Now    as  repirds  the  fundamental  nVhts  of  capital    wp  fhint  fK«f 
capital  has  the  right  to  demand  that^its  invZStJnsS? 
has  been  actuallv  and  prudently  made  and  honestly  administered 
should  l^  not  only  conserved,  but,  if  the  public  shoi^  Zuirfa^^^^ 
Ztui\       ^^'"  P^^P^^'ty   that  it  should  reiinbui-se  the  owneTfor  the 
actual  va  lies  as  prudently  and  honestly  invested,  or,  on  the  other 
hand,  If  the  pubfic  should  only  operate' and  not  kcqiirr  the  prop- 


^PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1895 

erties  outright,  that  capital  should  receive  a  reasonable  and  fair 
rate  of  return.     It  seems  to  us  that  the  value  of  the  actual  invest- 
ment in  whatever  way  it  may  be  computed— we  are  not  holding  to 
the  basis  of  valuation;  it  might  be  some  other  method.     In  other 
words,  thQ  problem  is  to  ascertain  the  investment  value— the  value  of 
the  actual  investment  and  proprietary  rights  of  capital  or  the  owners 
or  investors  in  the  street-railway  property  can  be  rightfully  ascer- 
tained.     Furthermoi-e.  the  actual  rate  of  return  which  may  be  guar- 
anteed on   these  values  by  the  public  can   be  readily  ascertained. 
J  here  is  no  practical  obstacle  m  the  way,  in  short,  to  the  public  satis- 
fying all  the  just  claims  of  capital,  or  the  owners  or  investors  in  the 
street  railway  industry,  should  the  commission  recommend  that  the 
public  by  any  method  take  the  responsibilities  for  its  paramount  in- 
terest in  this  industry;  I  do  not  mean  by  ownei-ship  or  operation, 
but  if  the  public  has  to  act,  all  the  facts  are  available  or  can  be  avail- 
able in  time  for  the  public  to  ascertain  what  are  the  right.s  of  capital 
and  what  fair  rat«  of  retura  capital  should  receive. 
.      Our  further  point  of  view  as  to  the  rights  of  labor  is  that  the  em- 
ployees have  as  direct  and  more  vital  interest  in  the  prosperitv  of 
the  industry  than  even  the  investors  of  capital.     Should  street  rail- 
ways become  insolvent,  tlie  owners  of  capital  might  suffer  a  heavy 
pecuniary  loss.    The  employees,  on  the  other  hand,  would  lose  their 
immediate  means  of  livelihood.     Furthermore,    many    of    the    em- 
ployee.s  have  spent  a  number  of  years,  or  a  lifetime,  in  the  service  of 
the  industry.    They  have  devoted  their  working  years  to  the  acquisi- 
tion of  training  and  experience  which  they  coukfnot  sell  as  advanta- 
geously in  other  lines  of  industrial  activity,  and  they  may  be  said 
tlierefore,  to  have  a  vested  interest  in  their  positions  on  the  street 
railways  which  is  even  more  valuable  and  vital  to  them  than  the 
vested  interest  which  capital  has  or  the  owners  and  investors  have  in 
the  property. 

The  employees  are,  therefore,  anxious  to  have  the  industn-  reha- 
biiitated  and  made  prosperous.  They  are  desirous  of  having  the  pub- 
lic protected.  They  insist,  however— and  too  great  an  enipliasis  can 
not  b^  put  upon  their  contention— that  the  reconstructive  policy  un- 
deitaken  inust  be  based  upon,  and  accept  as  a  fundamental  prelimi- 
nary, the  rights  of  labor  as  accepted  bv  all  civilized  and  leadincr  in- 
dustrial nations  m  the  treaty  of  peace  with  Germany,  and  the  prin- 
ciples which  have  been  accepted  and  proclaimed  bv  our  own  Govern- 
ment as  those  which  should  govern  the  relations  between  employers 
and  employees.  i     j     « 

These  principles  are  set  forth  in  the  treaty  of  peace  and  are  briefly 
as  lollows:  "  "^ 

First,  that  the  guiding  principle  which  should  be  the  concernin<^ 
principle  in  the  relation  of  capital  to  labor  i^-or  in  the  relations  be*^ 
tween  capital  and  labor— that  labor  is  not  a  commodity. 

Second,  that  they  have  the  right  of  association  or  the  ri^ht  of  col- 
lective bargjiming.  We  claim  that  right  should  be  based  on  union 
recognition. 

Third,  the  payment  of  a  living  wage. 
Fourth,  the  adoption  of  an  8-hour  day. 
baH^  D^'  ^^^®  acceptance  of  a  weekly  rest  period,  preferably  the  Sab- 


■1 1 


189l3    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK. 

Sixth,  tlie  abolition  of  child  labor  and  the  imposition  of  such  re- 
strictions on  woman  and  child  labor  as  will  assure  their  proper  phys- 
ical development. 

Seventh,  the  principle  that  men  and  women  should  receive  equal 
pa}^  for  equal  work. 

Those  constitute  the  seven  principles  as  embodied  in  the  peace 
treaty  winch  we  claim  should  be  accepted  by  this  commission  in  any 
recommendations  which  it  may  make  for  the  rehabilitation  of  the 
property. 

Commissioner  Wehle.  Those  principles  are  embodied  in  the  pro- 
posed covenant  for  the  League  of  Nations? 

Air.  Lauck.  Yes. 

Commissioner  Wehle.  Rather  than  in  the  peace  treaty? 

Mr.  LArtK.  Yes;  in  the  League  of  Nations;  and  the  Internationar 
Labor  Conference  meets  here  this  month  to  discuss  the  interpretation 
and  application  of  some  of  these  principles  at  the  present  time 

Commissioner  Wehle.  Will  you  wish  to  correct  the  record  on  that 
P^^ri^'         Lauck,  about  where  those  provisions  are  to  be  found? 

Mr.  Lauck.  Well,  they  are  found— not  anv  further  than  I  have 
been  corrected  by  you.  I  was  using  the  term  looselv.  It  is  embodied 
m  the  proposed  League  of  Nations,  which  is  a  part  of  the  proposed 
treaty— at  least,  thus  far  it  is  a  part  of  the  peace  treaty. 

These  same  principles  have  been  embodied  in  the  principles  or 
constitution  of  the  National  War  Labor  Board,  which  are  repro- 
duced on  pages  86  and  87  and  which  were  a  part  of  our  policy  during 
the  war  in  adjusting  relations  between  employers  and  employees. 

Aow,  we  have  set  forth  our  interpretation  of  these  principles  on 
pages  88  and  89. 

In  order  that  there  may  be  no  rfiisunderstanding  as  to  the  attitude 
of  tlie  employees  of  the  street  railways,  the  principles  which  the  em- 
ployees insist  shall  be  embodied  in  any  recommendations  by  the  com- 
mission  .as  to  a  constructive  program 'for  the  street-railway  industry 
may  be  briefly  summarized  and  further  explained.  They  are- as 
lollows :  *^ 

First,  the  right  to  organize,  or  union  recognition. 

The  time  has  passed  when  collective  bariraining  can  or  should  be 
interpreted  m  any  other  way  than  as  to  mean  the  recognition  of 
trade  unions  or  labor  organizations.  As  urged  by  the  motormen 
and  conductors  or  by  the  employees,  it  means  uriion  recognition. 
J  hey  do  not  contemplate,  neither  will  they  accept  committee  systems 
promoted  and  installed  on  the  initiative  of  street-railway  officials 
lor  the  reason  that  they  know  that  any  such  systems  of  collective 
bargaining  do  not  really  safeguard  the  interests  of  labor,  and  can 
not,  therefore,  i)ermanently  endure  or  be  permanently  effective 

J  hey  demand  the  recognition  of  the  rights  of  the  employees  to 
organize  into  labor  unions  and  to  deal  with  the  companies  with  ac- 
cre(  ited  representatives.  This  does  not  necessarily  mean  the  adoption 
of  the  closed-shop  principle,  but  it  does  mean  that  the  street-railway 
managements  shall  conduct  all  negotiations  as  to  wages,  working 
conditions,  and  relations  with  a  recognized  labor  organization.  In 
localities  where  the  employees  of  the  companies  are  not  already 
organized  into  unions,  it  shall  be  the  duty  of  the  railway  managers 
not  to  discourage  the  employees  to  form  labor  organizations  as  a 
means  of  dealing  with  the  management. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1897 

Our  point  of  view  is  that  the  principle  as  to  union  recognition  is 
no  longer  a  debatable  issue.  It  has  been  sanctioned  by  the  society 
of  civilization.  Furthermore,  it  is  absolutely  essential  to  that  form 
of  cooperation  between  street-railroad  management  and  employees 
which  will  lead  to  efficientj  economical,  and  stable  operations,  and, 
as  a  consequence,  is  to  the  highest  degree  of  real  service  to  the  public. 
Second,  we  request  or  insist  that  the  commission  in  making  its 
recommendations  shall  accept  as  the  second  principle  the  establish- 
ment, on  the  basis  of  a  national  standard,  of  a  living  Avage  for  the 
employees  in  the  industry. 

This,  to  our  minds,  is  also  no  longer  a  controversial  issue.  As  in 
the  case  of  union  recognition,  it  has  been  accepted  by  the  enlightened 
opinion  of  the  civilized  world.  It  is  not  only  essential  to  the  general 
well-being  of  the  employees,  but  it  is  equally' essential  to  the  rehabili- 
tation of  the  industry,  for  it  is  one  of  the  necessary  conditions  to  the 
enlightened  cooperation  and  participation  of  the  employees  in  mak- 
ing the  industry  a  success  from  every  standpoint. 

It  also  means  a  great  advantage  to  the  localities  in  which  street 
railways  are  located,  for  it  would  lead  to  an  elevation  of  the  stand- 
ards of  CIVIC  life  and  public  conduct  among  street-railway  employees. 
Testimony  has  been  submitted  during  the  course  of  the  proceed- 
ings of  the  commission  to  show  that,  in  order  to  maintain  a  mini- 
mum standard  of  health  and  a  reasonable  degree  of  comfort,  the 
earnings  of  street-railway  employees  should  amount  to  an  average 
of  at  least  $2,000  annually.  It  is  not  our  intention,  however,  to  re- 
quest the  commission  to  recommend  any  definite  amount  as  a  basis 
for  a  living  wage;  but  what  we  request  is  that  the  commission  shall 
accept  the  principle  of  a  living  wage  in  its  recommendations  and 
embody  this  principle  in  its  recommendations,  leaving  the  adjust- 
ment—we know  it.  IS  not  part  of  the  duty  of  the  commission  to  fix 
the  wage  m  this  industry— leaving  the  adjustment  of  the  actual 
amount  to  whatever  means  of  adjusting  such  matters  as  may  be 
recommended  by  the  commission  or  to  the  negotiations  between  the 
labor  organizations  and  the  managers  in  the  industry. 

Commissioner  Wehle.  I  have  been  unfortunate  enough  to  be  ab- 
sent from  some  of  these  hearings  in  the  last  day  or  two.  Have  you 
anywhere  reduced  to  another  form  the  result  of  an  average  com- 
pensation to  platform  employees  of  $2,000?  That  is,  to  this  form- 
to  what  extent  would  that  enter  into  the  cost  of  operating  a  car  per 
•  mile  per  day,  that  increase  from  the  average  present  platform  wage 
to  the  proposed  one  which  you  have  in  mind  which  would  come  to 
$2,000  per  year;  have  you  figures  on  that? 

Mr.  Lauck.  We  have  not  figured  that,  but  I  could  tell  you  roughly 
about  what  it  would  be.  We  are  also  asking,  in  the  next  section, 
for  an  8-hour  day;  so,  assuming  an  8-hour  day,  it  would  require 
about  75  cents  per  hour  to  the  platform  employee,  or  $6  a  day  wage 

Now,  I  think 

Commissioner  Wehle.  You  mean  an  8-hour  working-day,  or  an 
8-hour  day  used  for  computation? 

Mr.  Lauck.  An  8-hour  actual  workday.  We  are  not  askin^  for 
a  basic  8-hour  day,  but  an  actual  8-hour  clay.  ^ 

The  Chairman.  Had  you  finished  your  general  statement? 
Mr.  Lauck.  No. 


■fsf 


1898    PKOCEEWNGS  OF  FEDERAL  ELECTBIC  RAILWAYS  COMMISSION. 

n.nti^ii)''""'''"-  ^^''"  y**"  '<■*  ^•■-  Lanek  finish  his  general  stnte- 
ment  before  you  cross-examine  him,  Commissioner  ^fe™ 
(  ommissioner  Wehle.  Yes.  >teiiie. 

-Mr    Lauck.  The  only  remaining  point  which  I  had  to  discncc 
was  the  S-hour  workday,  ^vhich  we  consider  also  from  the  sS 

r,  cHnn  *'f  ;'"''1"-V.r  '''  »"  ^^«"tia'  preliminary T  any  recon 
s  luction  of  street-railway  property.    Thfs  standard  is  embod  ed    n 
the  principles  of  the  League  of  Nations  labor  provision  aTd  has  also 
as  1  have  pointed  out  in  the  brief,  been  approved  by  the  public  nol 

eniment    L  l"l'"'"'"r"*  '"  ''•"  f'^'  ^'ork^indertaLn  by    he  (fov-" 
ei  nment.  and  has  also  received  the  direct  approval  of  President 
Wilson: -and  we^  believe  that  it  is  a  mea.sure  w^ich  4   not  ^^v  o, 
economic  grounds  of  production,  but  also  on  the  lar^r  "roumls  of 

S'th^  wS/"''""  "^'''"'"'  ^='"'^*'''™'i  ^y  '^'  enligfcd  opinion 

th=:;tiSl;;ta;^:ig;i£n^ 

Z,tth;?eUe  ^''-'-^^  ""  ''^  S«bbath  ^:\;renLS 
So  those  three  principles,  the  eight-hour  day,  the  livimr  watro 
an,    the  right  to  orpvniw-^r  union  recognition-wo  cons  dfr  basfc' 

The  Chairman  Mr.  Lauck,  Mr.  Babcock,  mayor  of  Pitt^^buro-h  k 
here,  and  desires  to  make  a  brief  statement 'and  return  Woi  Id  you 
object  to  having  him  step  in  at  this  time!  v^ouuijou 

Mr.  T.AXTK.  Not  at  all. 

The  Chairman.  Mr.  Babcock. 

STATEMENT  OF  MK.  E.  V.  BABCOCK. 
Mr  Babcock.  Gentlemen:  T  have  a  paper  which  I  prepared  smd 

r  i  iSr  who^hThad'';:'^  "'"■  fy  -'>-'-'  o--  spS-;^t?„t 

in  J«ic  1  ^  ^*:?  '■^"^^^  ^^  <>'"■  transportation  affairs  for 

10  years  has  accompanied  me  here  and  has  the  details  of  alT  our 
transportation  niatters  on  his  finger  tips  up  to  the  moment  and 
any  questions  which  you  would  like  to  put  to  him  con^n  A  any 
matters  pertaining  to  our  affairs.  I  would  be  ver^'  glad  to  ha  ^  von 
put  to  him.  If  you  feel  that  you  want  them  answered  "       • 

r...  K  I  f  ^.'■'■'■'"l'^''^-P''S*nger-transportation  problem  in  Pittsbur<rh 
probably  IS  more  complicated  than  in  any  other  large  Ameic?,, 
city.  This  ,s  brought  about  largely  by  the  temporarv^hamcter  of 
the  intercorporate  relations,  nnS  lA-  tlie  naturafdifficulties  arising 
tnlci^r,  XTSs  °*  *'^  '^""*'^'  -^   '^'^  .reat''.!L?r  of 

and   stock  ownership   arrangements   resultin<r   in   thri   mSnal 
groups  of  underlying  companies,  two  of  which  are  onTrat^     nnLr 
short-term   operatin^r  a^^reement' by  the  PittsLr^Xi^ 
These  acrreements  n.ay  lx>  terminated  on  three  monris' no   ce  s^o  tl^^^^^ 
the  unification  is  not  a  permanent  or  stable  agreement   and  bTcase 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1899 

Of  various  issues  of  underlying  bonds  of  the  original  street-railway 
companies,  there  is  always  a  possibility  of  dissolution  of  the  three 
mnin  units. 

This  arrangement  is  unquestionably  unsatisfactory,  both  from  the 
point  ot  view  of  policy  of  deyelopment  and  of  financial  arranire- 
ments  It  has  created  an  atmosphere  of  uncertainty  of  development 
which  frequently  makes  it  imi^ossible  to  arrange  the  most  economical 
operating  conditions,  both  with  respect  to  routing,  and  more  vvr- 
ticularly  with  respect  to  location  of  facilities  for  shops,  car-barns, 
o|H'ration  of  unnecessary  track  and  preservation  of  pure  franchise 
truck,  etc. 

It  would  seem  to  be  a  fundamental  requisite  in  the  situation  that 
there  should  be  a  single  corporation  with  actual  ownership  and  con- 
trol of  all  the  physical  pmperty  of  the  railway  system.  Until  this 
IS  clone  we  can  not  expect  to  eliminate  needless  duplication  of  track 
or  secure  adequate  routing  arrangements  in  the  Pittsburgh  district. 
Ihe  existing  grades  and  variations  in  levels  in  the  Pittsburgli  dis- 
trict and  the  narrow  streets  also  materially  complicate  tlie  i)roblems 
In  addition  to  this,  there  are,  in  Allegheny  County,  57  separate  mu- 
nicipalities served  by  the  Pittsburgh  Railways  Co.;  all  with  different 
municipal  governments  and  each  with  its  own  municipal  ordinances 
it  must  be  recognized  that  transportation  is  fundamentally  a  local 
problem ;  and  yet  with  such  a  large  number  of  separate  municipali- 
ties it  is  practically  impossible,  under  existing  legislation  for  all 
of  these  municipalities  to  act  in  concert  in  handling  the  prol.lem 

That  street-railway  companies  need  and  are  entitled  to  adequate 
revenue  would  seem  to  be  a  self-evident  proposition.     The  funda- 
mental difficulty  arises  in  ascertaining  how  revenues  *=hall  be  fur- 
nished.    Experience  has  demonstrated  that  increases  in  fare  do  not 
produce  equivalent  increases  in  returns,  although  the  sign.s  in  t^iis 
direction  are  more  hopeful  to-day  than  they  were   in   Pitt'^buro-h 
some  months  ago.     There  is,  however,  a  larger  problem  in  tliis  sTt- 
uation  than  can  be  included  in  a  mere  statement  of  financial  needs 
It  should  be  the  aim  of  public  officials  to  keep  fares  as  low  as  may 
be  reasonably  possible  in  order  to  secure  a  large  riding  habit  amon'«- 
the  people,  the  messengers  of  prosperity.     Transportation  is  not  only 
essential  for  business,  but  is  a  necessity  for  social  life  and  all  the 
ramifications  of  the  activities  of  a  great  city,  including  amusement 
and  recreation      It  seems  to  be  pretty  definitely  established  that  a 
high  riding  habit  is  a  good  index  of  the  general  business  and  social 
activities  of  the  community  and  an  indication  of  the  general  prooress 
and  spirit  of  the  citizens  thereof.  i     ^ 

It  is,  of  course,  the  natural  desire  of  the  financial  interests  in  con- 
trol of  the  railways  company  to  increase  the  fares  and,  if  necessary 
reduce  the  .service  to  a  point  where  they  may  pay  operating  exi^enses 
and  make  reasonable  returns  upon  the  capital  invested.  These  con- 
siderations, if  pushed  too  far,  necessarily  react  against  the  success 
of  such  a  plan,  and  not  only  result  in  the  failure  to  secure  adequate 
returns,  but  become  a  serious  obstacle  in  the  pathway  of  municipal 
prosperity.  ^  .  i 

Public  officials  must,  therefore,  make  every  effort  to  keep  unit 
fares  as  low  as  possible  and  keep  up  proper  Vnd  adequate  service. 
Assistance  can  be  rendered  m  this  direction  by  making  the  whole 
situation  known  to  the  public  and  making  them  conscious  of  the 


1900    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

part  which  they  must  phiy  in  the  situation,  thereby  creating  a  public 
psychology  which  will  be  friendly  and  not  detrimental  to  the  real 
needs  of  the  situation.  This  element  would  undoubtedly  go  a  long 
way  in  increasing  the  riding  habit  and  in  generally  supporting  and 
helping  the  traction  companies  to  answer  their  problem.  Munici- 
palities should  also  consider  the  possible  susj^ension  or  elimination 
of  numerous  municipal  charges,  which  are  really  indirect  taxes  upon 
the  car  riders;  and  m  the  present  crisis  it  may  be  advisable,  at  least 
temporarily,  to  relieve  the  car  riders  of  these  forms  of  indirect  taxes. 

So  far  as  reasonably  possible,  definite  assurance  should  be  given 
of  a  fair  return  on  the  capital  actually  and  fairly  invested  in  tho 
property,  so  that  new  capital  may  be  mvited  and  may  understand 
that  it  will  be  fairly  treated.  Street  railways,  like  all  other  living 
and  growing  enterprises,  have  a  constantly  increasing  need  for  more 
money.  They  must  therefore  always  be  in  a  position  to  attract 
new  capital  to  meet  the  growing  necessities  of  the  business,  both 
from  the  point  of  view  of  necessary  extensions  and  from  the  point 
of  view  of  keeping  the  property  apace  w^ith  the  development  of  the 
mechanical  arts.  The  public  will  thereby  benefit  by  a  lower  rate  of 
interest  both  in  return  on  the  existing  investment  and  on  future  in- 
vestments if  capital  is  given  reasonable  assurance  of  definite  returns. 

Cities  not  only  compete  with  other  industries  for  capital  in  these 
matters,  but  they  compete  with  each  other;  and  naturally  those  cities 
that  give  assurance  of  fair  treatment  and  reasonable  return,  will  have 
the  first  call  on  the  moneys,  which  may  be  available  for  street-rail- 
wav  purposes. 

There  is  no  panacea  for  the  transportation  ills  of  the  present  day. 
Regulation  by  public-service  commissions,  service-at-cost  plans,  or 
municipal  ownership  will  not  usher  in  the  day  of  the  milleniiun  in 
this  i-espect.  The  transportation  problems  Avill  always  be  one  of 
the  great,  if  not  the  greatest,  problems  of  our  municipal  life  and 
must  be  handled  in  the  same  manner  that  all  other  great  industrial 
and  commercial  enterprises  have  been  worked  out  in  the  past.  Jt 
is  obvious  that  the  State  public-service  commissions,  while  satisfac- 
tory for  other  forms  of  public  utilities,  can  never  completely  solve 
the  large  local  problems  of  transportation  in  our  great  cities.  'Trans- 
portation uses  the  local  highwaj^s  and  must  necessarily  conform  to 
all  local  developments.  It  is  brought  into  daily  touch  with  the 
life  of  the  city  in  such  a  way  that  there  must  be  the  closest  harmony 
and  cooperation  between  the  local  street-railway  company  and  the 
municipal  authorities.  This  inevitably  points  to  some  operating  ar- 
rangement whereby  the  local  municipal  authorities  shall  be  placed 
in  a  position  to  exercise  a  large  amount  of  control,  giving  the  city 
government  a  voice  as  to  proper  standards  for  transportation  serv- 
ice and  operating  conditions. 

The  use  of  the  service-at-cost  plan,  which  is  now  strenuously 
proposed  in  behalf  of  the  street  railway  companies,  has  many  "ele- 
ments to  commend  it  to  favorable  consideration.  It,  however,  pos- 
sesses one  element  which  may  prove  that  it  is  not  the  final  solution 
to  the  difficulties— namely,  that  it  robs  the  operating  company  of 
the  incentive  to  secure  the  best  operating  economies  and  keep  down 
the  cost  of  the  service.  Various  expedients  by  w^ay  of  adopting  an- 
nual budgets  and  by  giving  the  local  municipal  representatives  a 
voice  in  the  fixing  of  the  budget  have  been  suggested,  and  on  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1901 

other  hand,  incentives  have  been  suggested  to  reward  good  man- 
agement by  operating  bonuses  and  by  dividing  excess  profits;  but 
all  of  these  plans  are  quite  unsatisfactory  and  give  no  assurance 
that  they  will  accomplish  the  desired  results.  Yet  it  may  be  that  na 
better  plan  can  be  evolved  to  carry  the  business  across  from  the 
unregulated  age  to  the  present  regulated  age  than  that  of  serv- 
ice at  cost  with  arrangements  providing  for  possible  municipal  own- 
ership under  reasonable  conditions  of  purchase.  If  a  service-at- 
cost  plan  could  be  developed  whereby  good  judgment  could  be  fairly 
rewarded,  then  no  serious  objection  could  be  raised  to  the  plan 

Iheoretically  it  seems  that  the  best  possible  arrangement  to  meet 
the  situation  would  be  to  have  municipal  ownership  with  private 
operation.  I  have  said  theoretically,  because  of  numerous  practical 
dilhculties  which  present  themselves  in  such  a  program.  It  may  be 
plainly  demonstrated,  however,  that  such  a  plan,  if  definitely  stabil- 
ized and  assured,  has  very  great  advantages  over  anv  other  arrancre- 
ment  and  eliminates  all  of  the  controversial  atmosphere  which  now 
exists  between  private  capital  and  the  public.  It  would  permit  of 
hnancing  on  much  lower  interest  rates  than  financing  by  private 
interests.  It  would  give  the  municipality  complete  control  of  its 
own  development  and  place  in  its  hands  the  key  to  its  own  destiny. 
Coupled  with  private  operation  it  would  produce  all  of  the  advan- 
tages of  private,  as  contrasted  with  municipal  or  public  operation 
with  Its  associated  political  entanglements,  and  if  combined  with 
a  plan  whereby,  at  fixed  periods,  say  every  10  years,  the  operation 
of  the  system  was  let  to  the  best  bidder,  it  would  insure  good  serv- 
ice at  reasonable -cost. 

Under  such  a  plan  and  with  proper  municipal  control  established 
standards  of  service  would  be  possible  and  we  would  still  have  incen- 
tives for  effective  and  economical  operation,  and  good  manao-ement 
Avould  have  its  opportunity  to  be  adequately  rewarded.  Thfs  plan 
may  be  criticized  as  being  Utopian,  yet  at  the  same  time,  it  does 
not  rob  the  enterprise  of  incentives  for  good  business  management 
w;hich  are  likely  to  be  found  in  a  service-at-cost  plan  or  in  a  mu- 
nicipally operated  system. 

Speaking  for  the  great  industrial  district  of  Pittsburgh,  I  can 
assure  the  commission  that  we  are  giving  careful  consideration  to 
the  pi-oblem  which  is  presented  thei-e.  We  have  gone  into  this 
matter  thoroughly,  and  at  a  considerable  expense  have  presented 
to  the  public-service  commission  evidence  relating  to  all  matters 
affecting  the  fair  value  of  the  property  and  all  questions  relating 
to  routmg,  transfers,  and  service  generally.  We  hope  to  receive  a 
decision  from  the  commission  as  to  the  fair  value  of  the  properties 
shortly.  With  this  matter  definitely  determined  and  behind  us 
we  have  every  reason  to  believe  that  some  substantial,  definite,  and 
satisfactory  progress  will  be  made  along  the  lines  heretofore  in- 
dicated. 

I  feel  sure  that  the  people  of  the  Pittsburgh  district  will  be  will- 
ing to  pay  a  fair  price  for  adequate  street-railway  transportation 
when  the  matter  has  been  fully  presented  to  them  and  the  ghosts 
of  watered  stock  and  of  high  finance  of  past  davs  have  been  laid. 
I  he  essential  problem  is  one  of  public  education  and  of  establish- 
ing the  business  upon  sound  and  just  financial  values  with  com- 
plete harmony  between  the  municipal  and  company  representatives, 


1902    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   ^' 

4ind  the  right  in  the  city  to  conti-ol  its  streets  and  its  own  de\eIop- 
nient. 

I  did  not  know  just  exactly  what  I  was  expected  to  say  or  do  hero. 
I  prepai-ed  this  statement,  which  is  rather  historical  of  what  we  have 
done  and  what  we  aspired  to  do,  and  what  we  ai-e  ideally  doing 
right  now  to  settle  our  transportation  problems.  It  is  the  biggest 
one  in  our  city,  and  I  suppose  it  is  of  every  city. 

We  have  had  our  troubles,  very  serious  troubles.  We  went  through 
n  stnke  last  month,  and  if  you  want  to  know  about  that,  you  are 
welcome  to  its  history. 

The  Chairman.  Is  that  settled? 

Mr.  Babcock.  Yes. 

The  Chairman.  On  what  basis? 

Mr.  Babcock.  Our  men  asked  for  an  increase  of  12  cents  per 
hour  and  went  out,  and  were  out  for  a  couple  of  days,  and  entered 
mto  an  agreement  with  the  receivers  of  the  street-railway  company 
to  appeal  their  case  to  the  War  Board  for  settlement.  That  was 
in  May.  That  was  a  signed  and  sealed  agreement,  and  the  War 
Board  heard  their  case  and  rendered  a  verdict  giving  them  6  cents 
per  hour,  or  54  cents  maximum  wage. 

The  men  were  dissatisfied  with  that  and  left  their  jobs  again. 
J  hey  were  out  a  couple  of  weeks,  during  which  time  great  effoi-t 
was  made  on  my  part  to  harmonize  their  differences  and  get  the 
receivers  and  the  men  together,  and  get  the  men  back  to  work;  and 
the  men  finally  acknowledged  the  error  of  their  ways— that  they 
had  violated  an  agreement  which  was  a  positive,  signed  agreement 
and  they  went  back  to  work  at  the  end  of  two  weeks. 

Mr.  Mahon  here  was  instrumental  in  helping  us  to  solve  that 
problem;  and  it  was  satisfactorily  and  happily  settled-  because 
strike  breakers  were  introduced,  and  it  incensed  the  men  and  part 
ol  the  pubJic,  and  we  had  before  us  a  long-drawn-out  strife. 

I  had  a  good  deal  to  do  with  the  settlement  of  both  of  these  walk- 
outs or  strikes.  I  consider  that  the  strike  was  well  handled  There 
was  no  material  disorder.  We  had  one  little  rumpus,  but  it  did 
not  destroy  any  property  or  hurt  anybody.  As  I  said  before,  it  was 
happily  settled,  and  the  men  went  back  to  work,  and  are  there  now 
and  I  think  satisfied.  ' 

The  Chairman.  During  the  two  weeks  were  the  cars  completely 
tied  up?  f        J 

Mr.  Babcock.  Yes. 

The  Chairman.  What  means  of  locomotion  was  furnished  the 
people  ? 

Mr.  Babcock.  They  resorted  to  trucks,  automobiles,  and  walked 
and  many  of  tlie  people  did  not  get  to  their  offices  at  all.     There  was 
gi-eat  confusion  and  congestion.     They  managed  any  old  way  they 
could.  '  ^ 

The  Chair^ian.  From  the  experience  you  had  in  the  strike  and 
other  studies  which  you  have  made  have  you  reache<l  any  conclusion 
as  to  whether  or  not  a  street-car  system  is  necessary  for  a  city  ? 

Mr.  Babcckk.  As  far  as  I  am  concerned,  our  city  would  not  be 
wortli  a  5-cent  piece  if  we  did  not  have  a  transportation  system. 

The  Chairman.  Is  there  any  other  means  of  locomotion  that  can 
enpply  the  service  furnished  by  street-cars? 

Mr.  Babcock.  No,  sir. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   1903 

The  Chairman.  Then,  as  far  as  Pittsburgh  is  concerned,  it  is  an 
essential  part  of  the  social  system? 

Mr.  Babcock.  Absolutely. 

The  Chairman.  The  public-service  commission  has  before  it  a 
recommendation  made  by  a  board  of  engineers  as  to  the  value  of  thci 
property  ? 

Mr.  Babcock.  Yes,  sir. 

JJ^^ ^"'^^'^^'^^ •  ^^^  -^^^  ^^"^^^  ^^^^  recommendation  was  made? 
Mr.  Babcock.  By  the  board? 

The  Chairman.  Yes. 

Mr.  Babcock.  The  board  did  not  agree.  Representatives  of  tlie 
city  and  the  representatives  of  the  transportation  company  did  not 
agree  and  appealed  to  the  public-service  commission  and  then  they 
heard  the  cjise,  but  have  not  rendered  a  verdict  as  yet. 

The  Chairman.  What  is  the  difference  between ^the  representatives 
of  the  company  and  of  the  public  on  that? 

Mr.  Babcock.  What  is  the  difference  between  the  representatives 
of  the  two  sides? 

The  Chairman.  Yes. 

Mr.  Babcock.  The  city's  valuation  was  $48,000,000  and  the  street- 
car company's  valuation  was  $70,000,000. 

The  Chairman.  What  is  the  capitalization? 

Mi\  Babcock.  You  will  have  to  get  those  technical  figures  from 
Mr.  Robinson. 

The  Chairman.  Can  you  give  that  to  us.  Mr.  Robinson? 

Mr.  Robinson.  It  is  very  difficult  to  state,  because  of  the  fact  that 
a  good  many  interests  are  tied  toirether.  The  total  amount  of  out- 
standing stock  is  approximately  $11)0.000,000.  A  good  deal  of  tliat 
is  duplication  of  stock-interest  control.  Tlie  actual  amount  which 
they  claim  :s  not  duplicated  in  any  way  is  about  $120,000,000. 

The  Chairman.  In  fixing  this  value  did  thev  follow  the  ordinary 
method  of  taking  an  inventory  of  the  property  and  attemptino-  to 
place  a  valu<^  on  all  of  its  different  units?  "^ 

Mr.  Robinson.  We  would  be  very  glad  to  file  with  the  board 
printed  copies  of  their  report. 

The  Chairman.  We  asked  our  secretary  to  send  for  it.  If  vou 
will  see  that  that  is  done,  it  will  relieve  him  of  that. 

Commissioner  Gadsden.  There  were  four  distinct  methods  of  valu- 
ation, were  there  not,  which  the  engineers  were  to  follow? 

Mr.  Robinson.  They  took  seven  bases  of  consideration.  They 
took  historical  cost  as  one  basis.  They  took  six  bases  of  reproduction 
cost. 

First,  the  basis  which  was  the  prices  of  materials  at  the  time  the 
particular  article  in  question  was  put  into  the  system,  which,  in 
a  sense,  w^as  a  check  against  basis  No.  1,  to  ascertain  historical 
costs. 

Basis  No.  3  was  a  reproduction  on  the  fair,  normal  prices  pre- 
vailing a  10-year  period  ending  1915. 

Basis  3-B  was  a  basis  of  estimating  what  the  trend  of  the  curve 
of  prices  would  be — that  is,  taking  the  curve  of  prices  without  the 
influence  of  the  war  conditions,  to  ascertain,  if  possible,  what  pric^ 
would  have  been  in  1918,  at  the  time  of  the  appraisal  if  there  had 
been  no  war  to  disturb  the  normal  situation.  That  was  based  uj^on 
a  20-year  average,  running  back  from  1915  or  1916,  and  showed,  I 


Mi 


m 


M 


i 


1904    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

believe,  approximately  an  increase  of  3  or  4  per  cent  each  year. 
That  actual  percentage  was  about  10  per  cent  higher  than  the 
average  of  1906  to  1915. 

Basis  3-C  was  based  upon  a  5-year  period,  beginning  in  1914  and 
ending  in  1918,  which  gave  you  approximately  three  years,  or  a  little 
more  of  full  war  prices,  you  might  say,  or  rather  prices  very  ma- 
terially affected  by  the  war,  and  then  the  prices  of  1914-1915,  1915 
being  partially  arfected  by  the  war. 

Basis  3-D  was  a  basis  for  the  five  years  commencing  in  1918  up 
to  1922  which,  of  course,  included  at  the  time  it  was  made  a  year 
and  a  half,  because  that  was  checked  up  to  July  of  1919,  and  gave 
you  a  year  and  a  half  of  actual  prices,  estimating  the  period  beyond ; 
and  therefore,  in  that  sense,  was  rather  a  prophecy  with  respect  to 
that  feature. 

Basis  4  was  the  basis  of  the  prices  at  the  extreme  peak  of  war 
prices,  which  obtained  to  April  1,  1918,  and  was  the  best  estimate 
that  they  could  make  at  the  time  of  what  it  would  have  cost  under, 
you  might  say,  the  maximum  conditions  of  cost  during  the  war 
period. 

All  of  those  bases  were  considered,  and  the  matter  was  referred  to 
the  public-service  comniission  to  decide,  the  board  having  agreed 
upon  these  bases  to  decide  w^hat  was  the  fair  value  of  the  prop- 
erty. 

The  Chairman.  You  will  supply  us  witl^  those  recommenda- 
tions ? 

Mr.  Robinson.  Yes. 

The  Chairman.  Mr.  Mayor,  have  you  reached  a  conclusion  as 
to  whether  street-car  companies  should  be  relieved  of  paving  re- 
quirements ? 

Mr.  Babcock.  Our  United  States  court  reached  it  for  us  and 
relieved  the  receivers  from  that  responsibility.  In  specific  cases, 
as  far  as  our  immediate  development  is  concerned,  we  w^ill  have  to 
proceed  along  that  line,  doing  our  own  paving. 

The  Chairman.  As  a  matter  of  permanent  policy,  should  or 
should  not  street-car  companies  be  relieved  of  that  cost? 

Mr.  Babcock.  The  city  has  always  been  relieved  of  it  in  the 
past.  It  is  rather  a  new  proposition  for  us.  I  do  not  think  it  has 
a  great  deal  of  significance  either  way ;  because  the  car  rider  has  to 
pay  for  it. 

The  Chairman.  It  becomes  a  question  of  municipal  policy? 

Mr.  Babcock.  Yes.  If  you  take  off  the  car  rider,  and  some  fair 
method  is  worked  out,  it  ]ust  saves  them  that  much;  they  have  to 
pay  it  one  way  or  another — by  taxation  or  by  the  fare  they  pay. 

'the  Chairman.  Has  the  public  expressed  its  feeling  in  any  way 
upon  that  question? 

Mr.  Babcock.  No.  The  only  way  that  the  public  has  had  a  chance 
to  get  in  this  year  on  our  transportation  affairs  was  the  submission 
to  them  in  our  general-improvement  program,  which  was  ratified  by 
the  people  on  July  8  of  a  sufficient  amount  to  take  our  downtown 
street-cars  off  the  track  and  put  them  underground  in  the  downtown 
loop. 

Our  purpose  is  to  build  it  and  lease  it  to  the  railway  company  or 
to  some  other  successor  of  theirs.  They  are  in  such  a  chaotic  con- 
dition now  that  we  do  not  know  what  we  are  up  against. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1905 

The  Chairman.  You  say  the  paving  is  not  a  matter  of  very  great 
significance.  What  is  your  own  opinion  upon  that  question? 
Should  it  or  should  it  not  be  charged  against  the  company  ? 

Mr.  Babcock.  We  have  been  used  to  the  railway  company's  doing 
it.  It  kind  of  slipped  in  as  an  actual  condition.  Now  that  we  are 
faced  with  another  proposition,  it  does  not  look  like  a  very  serious 
proposition  to  change  to  the  other  method.  I  do  not  Imow  that  I 
have  a  fixed  opinion  on  that— as  to  which  would  eventually  be  the 
better.  ^ 

The  Chairman.  Does  the  city  require  the  company  to  sprinkle  the 
streets  or  any  part  of  them? 

Mr.  Babcock.  No. 

The  Chairman.  That  charge  is  borne  by  the  city? 

Mr.  Babcock.  That  charge  for  sprinkling  the  street  is  borne  by 
the  railway  company,  and  in  the  past  they  have  paid  a  certain 
amount  for  cleaning  their  portion  of  the  streets.  That,  under  this 
lec eivership,  has  been  repudiated— that  agreement. 

The  Chairman.  As  a  matter  of  permanent  policy,  should  the  rail- 
way company  be  charged  with  the  cost  of  sprinkling  those  streets? 

Mr.  Babcock.  Tlmt  is  a  very  debatable  question.     I  don't  know. 

TiT    T^^^^^^^^T  ^^  ^^  ^^^  ^^^^  ^  express  an  opinion  upon  that? 
Mr.  Babcock.  No;  I  do  not  care  to.     I  do  not  have  a  fixed  opinion. 

or,  ij  x^^^?^"^^-.  ^^^®  y^"  ^^y  ^^^^  ^^^^  tbe  franchise  charge? 
hhould  that  be  an  inflexible  charge,  fixed  by  ordinance  or  by  law,  or 
should  it  be  subject  to  change,  according  to  the  operating  conditions? 
Mr.  Babcock.  Will  you  answer  that,  Mr.  Kobinson  ?  > 
Mr  Kobinson.  I  would  assume  that  what  the  chairman  means  is 
whether  or  not  there  should  be  a  fixed,  definite  fare  prescribed  in 
the  franchise,  or  whether  the  matter  should  be  left  open  to  necessi- 
ties,  economic  and  financial. 

.u^u-  P^'^^^^^-,  I  should  say  that  it  should  be  left  open.  I  think 
the  history  of  the  last  year  or  two— what  we  have  gone  through— 
would  make  it  almost  necessary  to  leave  it  open  and  not  to  ^x  it. 

1  he  Chairman.  It  has  been  reported  to  us 

Mr.  Babcock.  You  have  to  arrive  at  some  fair,  decent  practice  by 
some  method,  however,  before  you  get  there. 

The  Chairmani  Oh,  certainly.  It  has  been  reported  to  us  that 
your  street-car  company  is  subject  to  the  regulation  of  the  public- 
service  commission  of  the  State,  and  that  the  municipal  authorities 
have  practically  no  control.     Is  that  so? 

Mr.  Babcock.  What  do  you  say  about  that,  Mr.  Eobinson  ? 
ves  ^*  ^^^^'®^^-  ^^^^  question  is  a  little  bit  difficult  to  answer  by 

The  facts  are  that  under  certain  franchises  given  to  the  under- 
lying companies  of  the  Pittsburgh  Railways  Co.  questions  relating 
to  whether  or  not,  for  instance  the  fixed  fare  was  a  permanent  con- 
dition of  the  franchise,  where  the  public-service  commission  had  been 
created  by  an  act  of  the  legislature,  have  been  passed  upon  by  the 
public-service  commission  and  also  by  the  superior  court  and  are 

tConnffJ^,!-'^  '"^"^r  '''"''i '  ^f,  ^^  ^^^^^^"^  ^^  ^^^  *^^^  provision  of 

W^    f     .^T  "^Jl! ''^  provides  that  no  street-railway  company  shall 

he  rfir.'^'^  without  the  consent  of  the  local  authorities  has^ given 

the  right  to  prescribe  the  conditions,  the  public-service  commission 

160643''— 20— VOL  2 58 


1906    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

and  the  superior  court  having  decided  that,  under  the  public-service 
law  of  Pennsylvania,  the  public-service  commission  under  the  theory 
ot  police  power  can  set  aside  a  term  of  an  ordinance  which  in  their 
judgment  would  make  it  impossible  for  the  company  adequately  to 
perform  its  public  functions,  ^         ^         ^ 

^^  The  Chaikman.  That  raises  the  question  as  to  whether  that  word 

^?I^^^^^     ^^""^^  ^^  ^^^^  municipality  the  complete  control  over  rates. 

Mr.  RoBiNsoxV.  Exactly,  and  also  control  over  value  factors  which 
might  affect  service  or  rates;  control  over  rates  being,  of  course 
taken  m  the  theory  that  it  affects  service. 

The  Chairman.  Now,  Mr.  Mayor,  do  you  believe  that  the  public 
as  well  as  the  companies  will  be  better  protected  by  exclusive  regu- 
lation over  the  rates,  the  accounting,  the  extensions  of  new  lines, 
and  service  conditions  generally,  left  entirely  with  the  State  commis- 
sion ? 

Mr.  Babcock.  Do  I  believe  the  public  will* be  l)etter  served  by 
th^e  things  being  left  with  the  public-service  commission? 

The  Chairman.  Yes. 

Mr.  Babcock.  No.  I  think  that  the  numiciixil  authorities  ought 
to  have  a  hand  in  the  game  tiiere  somewhere. 

The  Chairman.  Just  what  part  should  the  municipal  autliorities 
play  'i  ^ 

Let  me  put  it  in  this  way:  Should  the  municipal  authorities  have 
anything  to  say  as  to  the  rates  of  fare  to  be  charged*? 

Mr.  Babcock.  I  think   they  should ;  yes. 

The  Chai^>£an.  To  the  exclusion  of  the  State  commission? 

Mr.  Babcock.  No;  the  State  commission  always  aj:>peared  to  me 
as  being  a  good  governor  to  t\m  engine.     If  we  could  not  agree  on 
a  rate  between  the  transix)rtation  company  and  the  civic  authorities 
they  might  help  out.  ' 

The  Chairman.  Then  I  take  it  that  you  feel  that  the  municipal 
authorities  should  jmss  on  the  question  of  rates  first  and  then  either 
party  might  appeal  to  the  State  commission  and  try  it  out  ther&? 

Mr.  Babccxjk.  That  is  the  way  we  have  done  it;  that  is  the  way  I 
am  educated. 

The  Chairman.  Do  you  believe  in  the  principle? 

Mr.  Babcock.  It  has  worked  out  all  right. 

The  Chairman.  Do  you  brieve  the  same  principle  should  apply 
to  the  questions  of  extensions  of  new  lines? 

Mr.  Babcock.  I  do  not  know  why  the  municipal  authorities  should 
not  have  the  control  of  that  situation,  too. 

The  Chairman.  Subject  to  an  appeal  to  a  State  commission « 

Mr.  Babco<:;k.  Yes ;  along  the  same  lines.  They  know  what  they 
want,  and  they  know  what  they  ought  to  have ;  and  if  they  are  at- 
tending to  their  business,  they  know  it  better  than  the  public-service 
conunission. 

The  Chairman.  Then,  generally  speaking,  you  believe  that  all 
these  questions  affecting  the  rates  and  the  service  and  accounting 
should  be  left  with  the  municipal  authorities  subject  to  the  right  ot 
appeal  by  either  party  to  a  State  commission,  which  shall  be  per- 
mitted to  pass  upon  the  question  ? 

Mr.  Babcock.  Well,  I  would  answe^  your  question  directly,  yes. 
But  it  should  be  by  fair  dealing  all  the  way  through. 

The  Chairman.  Oh,  certainly. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1907 

Mr.  Babcock.  The  capital  invested  should  be  ti^eated  fairly,  and 
labor  should  be  treated  fairly,  and  everything  else,  as  a  basic  principle 
to  start  on. 

The  Chairman.  I  presume  all  of  us  have  to  concede  that  regulation 
means  the  utmost  fairness  to  capital  and  employees  and  to  the  public. 

Mr.  Babcock.  Yes. 

The  Chairman.  You  made  some  reference  to  the  cost-of-service 
plan  and  thought  that  would  work  out  all  right  in  Pittsburgh? 

Mr.  Babcock.  With  one  objection  that  is  in  that  paper  there.  I 
would  like  to  have  INfr.  Robinson  speak  for  me  on  that  point. 

Commissioner  Sweet.  I  understood  you  to  make  the  point  that  it 
took  away  incentive. 

Mr.  Babcock.  Yes. 

Commissioner  Sweet.  But  I  think  in  your  paper  you  outlined  a 
plan  by  wluch  incentive  might  be  provided  for  upon  the  management 
in  connection  with  a  cost-of-service  plan,  didn't  you? 

Mr.  Babcock.  If  that  incentive  was  preserved,  I  do  not  see  very 
much  objection  to  that  plan. 

Commissioner  Sweet.  You  would  rather  favor  it? 

Mr.  Babcock.  Yes. 

J}^^^^""^^^^^^^'  How  are  you  going  to  provide  for  that  incentive? 
Mr.  Babcock.  How  did  we  figure  that  out,  Mr.  Robinson? 
Mr.  Robinson.  As  I  understand,  answering  your  inquiry,  in  dis- 
cussing this  with  the  mayor,  our  idea  is  this:  That  up  to  the  present 
time,  so  far  as  we  had  any  knowledge,  thei^  had  l)een  no  plan  evolved 
which  occurred  to  us  to  be  satisfactory  in  the  way  of  meeting  that 
particular  and  rather  serious  objection". 

We  are  reasonably  familiar  with  the  plan  that  has  been  adopted 
m  Montreal,  where  they  have  an  operating  bonus,  I  believe  That 
however,  is  dependent  entirely,  if  it  is  analyzed,  on  a  point  where 
it  becomes  a  question  of  individual  judgment  as  to  whether  or  not 
the  c-ompany  has  met  a  definite  budget  or  not,  and  leaves  it  practically 
in  the  control  of  an  individual  commissioner  or  commissioners  to 
decide  that  question,  and  that  lays  itself  open  to  complications  which 
seem  to  us  not  to  meet  the  situation. 

The  Cincinnati  arrangement,  while  in  a  sense  fairly  meeting  the 
problem  m  the  sense  that  it  divides  certain  excess  profits,  neverthe- 
less, m  a  situation  where  there  is  a  very  rapid  change  in  the  general 
economic  and  financial  conditions,  entirely  fails  to  meet  the  situa- 
tion, because,  being  predicated  upon  certain  assumptions  that  a  cer- 
tain rate  of  fare,  a  certain  amount  of  return,  certain  costs,  e^..  are 
the  ba^es  of  judgment,  if  those  bases  are  violently  changed  by  war 
conditions,  or  by  any  economic  or  other  conditions*,  or  by  mechanical 
art  developments  which  might  be  incident  to  the  one-man  car  or 
otherwise,  then  the  whole  arrangement  is  immediately  distorted,  and 
the  thing  you  were  trying  to  do,  which  was  to  reward  good  manage- 
ment, may,  after  all,  prove  a  punishment  for  an  economic  condition 
over  which  they  have  no  control,  or  may  prove  a  gift  because  of  fac- 
tors over  which  they  have  no  control. 

Those  things  I  merely  suggest  because,  so  far  as  the  mayor  and 
myself  understand,  they  have  not  been  met. 

The  Chahiman.  Speaking  by  and  large  and  as  a  permanent  policy, 
would  the  people  of  Pittsburgh,  as  well  as  the  industry,  be  better  off 
under  a  cost-of-service  plan,  pix)perly  safeguarded  so  as  to  encourage 


1908    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

initiative,  or  under  some  other  form  of  regulation  by  which  the  munic- 
ipality has  control  of  rates,  extensions,  accounting  service,  subject  to 
appeal  to  the  State  commission  ? 

Mr.  Babcock.  I  do  not  know. 

The  Chairman.  You  have  no  opinion  upon  that  question? 

Mr.  Babcock.  Not  one  sufficiently  fixed  to  give  you. 

The  Chairman.  That  is  all  I  have  to  ask. 

Mr.  Babcock.  I  have  been  mayor  for  a  year  and  a  half,  and  I  am 
not  a  traction  expert.  I  have  done  the  best  I  could  with  it,  from  a 
layman's  standpoint. 

Mr.  Robinson  ha&  been  handling  a  sort  of  a  contest  with  the  street- 
railway  company  for  10  years  past  in  representing  the  city,  and  he 
ought  to  know  those  things  better  than  I  do,  and  he  does  know  them 
better  than  I  do. 

The  Chairman.  Have  you  reached  any  opinion  as  to  the  best 
method  to  work  out  tlie  social  problem  as  between  the  company  and 
its  employees? 

Mr.  Babcock.  No.  Have  we  given  that  element  of  it  very  much 
study,  Mr.  Robinson? 

Mr.  Robinson.  I  do  not  think  that  particular  question  has  com© 
to  the  front  very  seriously  in  Pittsburgh,  as  far  as  I  know. 

The  other  aspect  of  the  question  that  is  involved  in  your  sug- 
gestion, I  take  it,  Mr.  Chairman,  is  whether  or  not  we  nave  con- 
sidered the  social  and  the  general  community  factoid  involved  in 
transportation  oyer  and  above  the  questions  of  fare.  The  housing 
question  in  relation  to  that  sort  of  thing,  of  course,  has  been  given 
a  good  deal  of  thought. 

The  Chairman.  You  now  have  the  zoning  system  there? 

Mr.  Robinson.  No  ;  that  has  been  abolished. 

The  Chairman.  When  was  it  abolished? 

Mr.  Robinson.  The  1st  of  August.  We  never  did  have  the  zon- 
ing system  in  any  true  sense  of  the  word.  W^e  had  a  preference, 
but  never  a  zoning  system. 

The  Chairman.  And  the  territorial  preference  has  been  abol- 
ished ? 

Mr.  Robinson.  The  1st  of  August. 

The  Chairman.  What  was  the  objection  to  that,  if  any  ? 

Mr.  Robinson.  To  the  territorial  arrangement? 

The  Chairman.  Yes. 

Mr.  Robinson.  I  should  say  the  fii-st  and  most  important  is  psy- 
chological. The  public  at  large  resented  tlie  idea  that  certain  people 
in  certain  sections  could  get  a  ride  to  longer  distances  for  5  cents 
than  they  could  ride  for  7  cents,  and  there  was  always  in  the  public 
mind  a  feeling  of  comparison.  If  you  wanted  to  go  to  any  of  the 
satellite  centers  of  Pittsburgh,  which  were  outside  of  that  inside 
zone,  you  had  to  pay  7  cents,  without  regard  to  whether  you  were 
riding  one  block,  six  blocks,  or  a  mile.  If  you  wanted  to  go  to  any 
of  them  inside  of  the  preferential  zone,  which  was  2  miles,  around 
the  business  district,  you  could  ride  for  5  cents. 

You  could  even  ride  across  that  district  on  a  transfer  which  might 
be  3  miles ;  whereas,  if  you  wanted  to  go  from  thQ  Highland  Park 
section  to  East  Liberty,  which  is  a  satellite  center  out  of  Pittsburgh 
of  a  mile,  you  would  have  to  pay  7  cents.  That  apparent  discrim- 
ination  was  one  of  the  things,  I  think,  that  defeated  the  plan. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1909 

The  Chairman.  Did  the  system  add  to  the  revenues  of  the  com- 
pany? 

Mr.  Robinson.  That  particular  plan,  which  resulted  in  an  average 
fare  of  6J  cents,  as  against  a  previous  fare  of  a  little  less  than  5  cents, 
increased  the  total  revenues  about  15  or  16  per  cent. 

The  Chairman.  And  as  the  policy  continued,  did  the  riding  habit 
increase  ? 

Mr.  Robinson.  There  were  so  many  disturbances  of  the  factor — 
war  and  the  readjustment  immediately  following  the  armistice— 
that  it  was  rather  difficult  to  say,  although  the  general  impression 
was  that  a  number  of  the  first  disturbing  factors  were  correctino- 
themselves.  ^ 

For  instance,  in  the  early  days  with  the  5-cent  and  7-cent  zones,  it 
was  discovered  that  all  the  calculations  as  to  the  percentage  oi 
people  riding  for  5  cents  and  7  cents  were  disturbed  by  the  move- 
ment of  the  people  who  were  walking  short  distances  in  to  the  5-cent 
zone.  There  was  a  much  larger  percentage  of  5-cent  passengers  than 
reckoned  upon  and  a  consider!  bly  less  percentage  of  the  7-cent  pas- 
sengers.    That  factor,  however,  was  gradually  correcting  itself. 

The  Chairman.  How  did  tlie  company  view  the  change  in  their 
system  ? 

Mr.  Robinson.  You  mean  from  the  point  of  view  of  operating 
difficulties? 

The  Chairman.  No.  Did  they  favor  or  oppose  the  change  from 
the  territorial  system  to  the  flat  fare? 

Mr.  Robinson.  They  made  the  change  themselves  on  their  own 
motion. 

The  Chairman.  They  did  ? 

Mr.  Robinson.  Yes.  It  is  now  7J  cents  by  ticket— four  tickets  for 
30  rents,  or  10  cents  cash. 

There  is  a  decided  discrimination  against  the  cash  rider,  the 
casual  rider,  to  the  extent  of  2^  cents;  they  made  it;  and  in  that 
connection  I  can  give  yoy  some  very  recent  statistics  offered  at  a 
hearing  last  week  before  the  public-service  commission,  which  indi- 
cates that  the  gross  revenues  of  the  company  will  be  increased  35 
and  possibly  40  per  cent  over  the  revenues  under  the  5-cent  fare. 

The  Chairman.  Will  you  supply  us  with  those  data  ? 

Mr.  Robinson.  Yes.  It  is  really  quite  close  to  the  theoretical  in- 
crease of  50  per  cent. 

Of  course,  there  is  another  corrective  factor  in  there  which  we 
can  not  entirely  estimate,  and  that  is  that  in  1917  they  were  charg- 
ing a  5-cent  fare  and  in  1919  they  were  charging  a  7i-cent  fare. 

Pittsburgh  has  grown  considerably  in  that  time,  and  the  normal 
curve  of  growth  would  indicate  at  least  3  per  cent,  so  that  instead 
of  an  increase  of  50  per  cent,  there  should  have  been  at  least  56  per 
cent,  against  a  maximum  of  40;  so  that  there  is  a  16  per  cent  fall- 
ing off,  we  will  say. 

The  Chairman.  What  per  cent  of  the  riders  use  the  books? 

Mr.  Robinson.  Almost  all.  The  10-cent  riders,  I  think,  were  about 
5  or  6  per  cent. 

The  Chairman.  Practically  a  negligible  factor? 

Mr.  Robinson.  Yes.  Coupled  with  that,  I  should  also  explain 
that  there  is  a  transfer  privilege  that  goes  with  the  10-cent  fare 
which  still  preserves,  in  part,  that  old  preferential  zone  area,  be- 


f 


1910     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

cause  in  that  area  those  persons  who  start  within  the  nwix  can 
transfer  within  the  area  for  10  cents  and  do  not  have  to  pav  two 
7  J -cent  fares. 

What  percentaire  of  that  particular  ridins;  makes  up  the  10  cent 
fare  I  do  not  know,  but  it  is  re^isonable  to  ar^ie  that  a  considerable 
])art  of  the  10-cent  fare  is  of  that  type  and  that,  therefore,  the  per- 
centage of  pei-sons  actually  paying  the  full  10-cent  fare  is  very  much 
]t^s  than  56  per  cent. 

The  Chairmax.  Do  yon  believe  the  company  would  be  able  to 
miiintain  itself  on  the  present  fare  and  pay  its  fixed  charges? 

Mr.  RoBixsoN.  I  can  answer  that  in  this  way :  The  estimates  made 
by  tlie  representatives  of  the  city  and  boroughs  on  the  conference 
in  the  valuation  Wfore  the  public-sei'vice  commission  estimated  the 
total  cost  of  operating  the  company  for  the  next  yetir,  and  included 
in  that  the  depreciation  reserve  of  about  $1,000^000,  that  had  not 
heretofore  been  materially  allowed  for;  and  they  have  also  estimated, 
predicated  upon  figures  now  available  for  the  period  beginning  the 
1st  of  August  and  running  up  to  the  22d  of  September,  taking  out 
the  12  days  when  the  strike  wtxa  on — they  have  estimated  the  returns 
predicated  upon  that  assumption,  and  upon  the  allowances  that 
should  be  made  and  upon  the  estimate  of  all  the  costs  of  operation, 
which  allow  for  all  the  War  Labor  Board's  increases,  and  which  also 
take  into  account  all  the  judgments  that  they  have  with  respect  to 
probable  costs,  there  would  be  on  that  showing  a  small  deficit,  which 
will  run  between  a  half  and  three-quarters  of  $1,000,000;  but  at  a 
maximum  it  would  not  run  more  than  $900,000. 

As  you  can  readily  appreciate,  an  estimate  which  is  predicated 
upon  one  month  and  22  days,  less  12  days  for  the  strike,  and  follow- 
ing a  strike  period  for  7  or  8  days,  is  not  a  final  figure  to  determine 
the  question  of  next  year's  revenue  upon;  and  it  is  reasonable  to 
assume  that  the  strike  situation  did  materially  reduce  the  income, 
and  that  for  a  period  following  the  strike  the  riding  habit  was  sub- 
normal; so  that,  if  you  make  allowances -f or  that,  it  is  a  fair  and 
reasonable  assumption  that  the  present  fare  may  meet  the  situation; 
subject,  however,  to  this  one  other  factor  that  perhaps  you  may  have 
heard  already,  or  know  of :  The  city  of  Pittsburgh,  as  the  mayor  indi- 
cated, has  a  very  large  program  for  municipal  improvements,  which 
involves  the  expenditure  of  some  $22,000,000,  and  which  involves  the 
widening  and  changes  in  the  grades  of  streets  on  which  the  cars  are 
located,  which  means  that  the  company  must  make  very  substantial 
contributions  by  way  of  the  realignment  of  track,  and  no  allowance 
has  been  made  in  the  calculations  for  their  share  of  that  part  of  the 
w^ork. 

The  Chairman.  Has  the  amount  of  capitalization  of  that  prop- 
erty had  any  influence  upon  the  public  relations  to  the  company  ? 

Mr.  RoiJiNsoN.  Undoubtedly. 

The  Chairman.  What  effect  will  the  valuation  by  the  commission 
of  this  property  have  in  settling  the  fare  jis  well  as  the  wage  problem 
there  ? 

Mr.  Babcock.  I  think  it  will  affect  the  riding  habit  very  much. 
It  will  take  away  the  incensed  feeling  the  public  has  had  against  the 
railways  company  on  account  of  a  supposed  overcapitalization. 

The  Chairman.  Then,  as  soon  as  the  people  know  that  that  prop- 
erty has  been  valued  by  an  impaitial  tribunal,  they  will  be  willing 


PROCEEDmoS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1911 

to  pay  a  fare  that  will  yield  a  reasonable  return  on  the  capital  in- 
vested, pay  the  operating  costs,  and  so  forth  ? 

Mr.  Babcock.  I  think  so. 

The  Chairman.  Then,  is  not  that  one  of  the  prime  things  to  do 
in  all  these  street-railway  problems— to  determine  the  value  of  tlie 
property  first? 

Mr.  Barcock.  We  have  considered  that  to  be  our  prime  duty.  We 
will  speak  for  ourselves  on  that. 

The  Chairman.  That  is  all. 

Mr.  Babcock.  That  certainly  is  a  point  that  we  have  been  work- 
ing to — courageously  working  to;  and  it  is  a  great  obstacle. 

Commissioner  Wehle.  Have  the  officials  of  the  city  of  Pittsburgh 
formed  any  definite  policy  with  i-eference  to  the  zone  fares  from  a 
center  ? 

Mr.  Babcock.  No.  The  company  put  in  these  regulations  and  was 
suffering  in  every  kind  of  way  and  was  rendering  inadequate  service, 
and  for  a  year  has  not  paid  any  dividends  to  its  stockholders  and 
interest  on  its  bonds  and  was  struggling  along,  and  we  did  not  object 
to  their  establishing  a  new  rate  and  an  increased  rate  of  fare,  and 
it  had  not  been  brought  out. 

Conmiissioner  Wehu..  I  think  perhaps  you  misunderstood  my 
question,  Mr.  Mayor.  What  are  your  views  about  the  advisability 
from  a  social  or  community  point  of  view  of  establishing  zone  fares  ? 

Mr.  Babcxxjk.  I  am  opposed  to  them. 

Commissioner  Wehle.  Why  ? 

Mr.  Babcock.  I  think  they  build  up  certain  communities.  We  are 
a  great  community  of  communities.  If  you  have  that  zone  fare  in 
there  you  are  going  to  build  some  little  town  up  in  here  and  some 
little  town  in  there,  where  if  we  have  a  flat  fare  we  will  mix  them  up 
and  they  will  be  carried  in  between  as  well  as  in  these  spots. 

Commissioner  Wehle.  When  I  say  a  zone  fai-e  I  mean  zone  fare  as 
ordinarily  understood;  say  that  the  center  of  Pittsburgh  has  a  cen- 
tral zone  and  then  the  establishment  of  a  new  zone,  say  2  miles  from 
the  center  of  the  town,  with  an  additional  fare  to  be  paid  in  order  to 
reach  a  point  from  the  center  of  the  city  in  the  further  zone. 

Mr.  Babcock.  I  would  rather  have  a  practical  flat  fare  that  will 
carry  them  over  the  whole  city  and  an  extra  price  for  the  transfer, 
or  something  like  that. 

Commissioner  Mahon.  How  long  do  you  think  that  flat  fare  ought 
to  extend,  Mr.  Mayor? 

Mr.  Babcock.  Well,  5  or  8  miles — a  distance  to  take  in  the  major 
portion  of  our  district.  For  a  12  or  15-mile  haul,  which  you  know 
they  can  not  cover,  they  ought  to  have  some  other  regulation  to  cover 
it,  which  they  have  now.  But  I  am  impressed  that  a  flat  rate  whioh 
covers  the  major  portion  of  the  distance  is  better  for  the  community 
than  subdividing  it  and  having  a  rate  which  will  have  the  tendency 
to  keep  somebody  out  in  East  Liberty  from  going  to  town  or  some- 
body from  some  other  little  borough  from  going  to  town,  and  they 
will  stay  at  home,  which  will  be  against  our  best  interests.  We  have 
a  wonderful  center  in  Pittsburgh,  perhaps  different  than  any  other 
city.  We  have  the  topography  of  the  district  to  contend  with,  and 
everything  is  centered  in  one  place.  That  part  of  the  city  pays  the 
taxes,  too.    You  can  not  rob  that  part  to  build  up  something  else. 


1912    PKOCEEDIXGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

«tn^r^i"r^' V "■  ^'^^™'*-  I. «»s  interested  in  another  thing  in  your 
«nv  of  i^l'  T^  "'"*  '•'"  servic*.at-cost  would  rob  the  f  peratin^ 

Mr.  Babcock.  Explain  that,  Mr.  Eobinson. 

Mr  KoBiNsoN  Oiir  thought  was  this,  that  if  the  management  is 
definitely  assured  of  receiving  a  certain  rate  of  return  no  more  and 
no  less,  and  It  is  practically  guaranteed  by  the  plan,  i?'mak^  no  dff 

tionfn/'''*''7  i^  '"?  ''*"  "••  P'^'^y^  ''"d  that  uAder  tho^  condl 
.  t  ons  necessarily  they  have  no  particular  incentive  in  trvine  to  keen 
the  costs  down.    If,  for  instance,  one-man  cars  would  b^fev^lS 
as  ft  practical  operating  arrangement  in  Pittsburgh  the  mana~t 
would  not  nece^anly  have  a  great  deal  of  interlt  in  puttinf  t^oL 
in.    Or  if  experiments  were  necessary  to  determine  in  certain  thin^T 
they  might  say,  "Well,  we  will  not^'eonardize  "he  security  we  are 
in.    A^c  would  rather  not  experiment."    Whereas,  if  they  hJdTn  in! 
centive  to  gain  a  reward  by  those  things  they  w^uld  be^mi^ch  more 
oflhat  kind''^"""'"'  ""^  '"^  '^'"^  °"'  and^eroute  and  do  thT^ 
The  trouble  with  the  cost-of -service  plan,  it  seems  to  me,  it  offers 
no  check  against  manj;  forces  which  naturally  tend  to  very  nrach  in! 
cre,vse  the  cost  of  service,  because  the  company,  having  n^dTect   n- 
terest  in  those  costs,  necessarily  would  not  ti^  to  keep  them  down 
They  might,  for  instance,  increase  their  pay  rolls  vefV  m^erian v' 
because  It  would  mean  nothing  to  the  operating  management  and  if 
course,  the  pressure  to  increase  those  is^^constant.    ItlsX  inherent 
danger  which  attaches  to  a  system  which  more  or  less  guarante^  the 
returns  without  providing  any  incentive  to  keep  the  c^  dow^ 

(  ommissioner  Mahon.  You  would  have  the  s^me  control  over 'that 
that  you  have  now,  would  you  not  ?  ^^ 

Mr.  Robinson.  Well,  no:  because  at  the  present  time  under  our 
as  we  call  it  re^ru lated-and  yet,  in  a  sense,  it  is  not  very  much  reZ.' 

wnrdrrthfn'wV*  '""  '"™.'*-'  '*  ^^"i^  ^^P*^t  t«  •*<^«^«  c^rtaiX- 
^ aids.    I  think  the  same  criticism  might,  to  a  certain  extent,  be  made 

of  commission  regulation-that  it  decides  a  definite  return  shall  be 

made  upon  money  and  a  certain  amount  of  investment  shall  be  al! 

lowed  for-and  I  think  that  the  same  thing  that  attaches  to  the  co^. 

of-service  plan  in  a  way  also  attaches  to  commission  regulation 

t  ommissioner  Mahon.  You  have  proposed  municipal  ownersl.in  of 
the  nroperty  as  the  solution,  have  you  not  ?  ownership  of 

Mr.  BoBiNsoN.  AVe  suggest  that. 

Commissioner  Mahon.  How  are  you  going  to  regulate  that,  then 
thht  are"?   *'  '"  '        ''  "*"'''  "^""^^  ^^  "  "'""icipaliti^' 

Mr.  BoBiNsoN.  Our  theory  was  that  we  would  create  what  is  known 
as  a  metropolitan  district;  and  there  was  introduced  at  thTkst 
legislature  of  Pennsylvania  an  amendment  to  the  constitution  of 

teili^ra-en^i^^rr^unTc^SSe'sr  '"''''  ""'"^  '^"^  ^"-^^  ^y^ 
ide^i*"'  •^'"'™^°''-  ^""^  "*  ^"-    ^  <i°  not  understand  it  is  the  mayor's 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1913 

Mr    Babcock.  That   would   cover  McKeesport  and '  Homestead 

c^^k^rf"^  WMV-  '^f'''^  ?!  ^^  '""•^^-     You  could  not  do  thTt    You' 
could  go  to  AVilkinsburg-that  would  be  8  miles;  call  that  the  limit 

burihV    ''  '         '"''■"'  ""  '^'  "*^^^-    ^'^  y""  ^^'nili^r  with  Plt^s 

Commissioner  Mahon.  Somewhat;  yes 

Mr.  Babcock.  It  would  be  halfway  out  there.    You  could  not  r>os- 
sibly  ride  a  15-mile  haul  with  a  Tfcent  fare.  ^ 

$500  0oJto''«onnL'''t"''*  ^'^  "'"*  "^'"""^^^  °*  ^'-  Robinson's  of 
!^.)uu,uuu  to  ^yoO.OOO  after  paving  a  return 

Mr.  Robinson.  A  return  of  7  per  cent  on  $48,000,000,  which  was  the 
estimate  of  the  engineers  for  the  city.  The  compkny 'en  JneeTs  esti- 
mated a  7  per  cent  return  on  $70,000,000,  the  additional  amo^t!  with 
rmilliontnd  fhaTf.""^'  *''^  ^^'*'  ''''  depreciation,  etc.,  of  about 

Mr.  Warren.  Did  that  include  a  return  on  the  $48,000,000? 

Mr.  Robinson.  Yes ;  7  per  cent  on  $48,000,000. 

Mr.  Warren.  In  addition  to  all  the  other  costs? 

Mr.  KoBiNsoN.  Yes. 

The  Chairman.  I  am  not  sure  that  the  record  shows  the  name  of 
your  associate,  Mr.  Mayor. 

Mr  Babcock.  Mr  Charles  K.  Rohinson,  special  city  solicitor, 
night    ^   ''''''''^'';  ^^  ^  "^^'^^  '^^^  «^««^^  adjourned  until  8  o'clock  to- 
^  (Whereupon,  at  5.05  p.  m.,  an  adjournment  was  taken  untH  8 

EVENING   SESSION, 

* 

pie?.'  takeirsZanJ?""  ""'  ''  '''^''-    ""''■  ^«^'--'  -»1  you 
STATEMENT  OF  MB.  CHARLES  K.  EOBINSON. 

The  Chairman  I  am  informed,  Mr.  Robinson,  that  you  have 
made  quite  a  study  of  the  cost-of-service  plan;  and  the  commi<"sion 
would  be  very  pleased  to  have  the  benefit  of  your  investLdTand  T 
will  ask  you  to  make  it  as  brief  as  you  can;  and  if  vou  wfeh  to  sun 
plement  your  remarks  by  a  written  statement  to  li  fiW  wiSiX 
commission  later,  you  may  do  so. 

Mr.  Robinson.  Only  as  an  incident  to  the  study  of  the  Pittsburgh 
problem;  m  that  connection  I  have  made  some  study  of  the  cc«t-o? 
service  schemes  that  have  been  in  force  in  Cleveland,  Cincinnati  and 
have  discussed  It  with  a  number  of  the  men  who  have  beenWentified 
cf  ,r  *'hu''^''^T  °f.t'>e,  Montreal  plan,  besides,  of  cou^erraving 
the  subject  ^  '"  "''  ''"""  "*"*  ^  ^"'^"^  ''^^  '^'  literature  on 

To  begin  with  I  take  it  that  it  is  an  absolute  prerequisite  of  the 
cost-of-scrvice  scheme  that  you  should  have  a  valuatZ,  and  that 
valuation  should  be  one  that  fairly  reflects  the  investment  that  hoc 
been  put  into  the  property.  In  other  words,  I  hlnk  it  would  be  f 
fundamental  mistake  to  start  a  cost-of-service  scheme  without  havfnff 
the.  valua  ion,  because  you  would  immediately  start  wUh  the  sus 
picicns,  at  least,  probably  well  grounded  in  m\ny  cls^   that  ther* 


« 


IS 


'l\ 


, 


1914    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

was  excessive  valuation,  and  you  would  rob  it  of  one  of  the  elements 
that  you  are  most  anxious  to  secure,  which  is  the  general  favor  and 
approval  of  the  public ;  and  you  would  not  escape  from  the  criticism 
which  is  now  heaped  upon  the  companies  because  of  the  overcapitali- 
zation of  the  past. 

That  element  in  the  situation  seems  to  me  to  be  fundamental. 

Commissioner  Wehle.  How  would  you  make  (hat  valuation? 
Uj)on  what  principle  would  you  make  your  valuation  ? 

Mr.  Robinson.  As  a  representative  of  the  public  interest,  having 
appeared  as  an  attorney  advocating  certain  jjropositions.  I  suppose 
Fx>meone  might  say  I  was  influenced  by  the  fact  I  have  taken  sides. 

C'onnnissioner  Wehle.  Well,  you  represent  the  public. 

Mr.  KoBixsoN.  I  have  personally,  of  course,  always  put  the  em- 
phasis upon  the  actual  investment  in  the  pi*operties  and  upon  those 
ba  es  of  reproduction  which  are  based  upon  the  normal  situations 
undistiirbed  by  excessive  war  prices,  subject  only  to  the  exception 
that,  where  money  actually  spent  during  the  war  pediod  has  been  put 
in  the  increased  costs,  due  allowance,  of  course,  should  be  made  for  the 
actual  expenditures,  keeping  in  mind  Jill  the  time,  of  wurse,  the  in- 
vestment or  cost.  Be'-ause,  after  all,  when  you  use  the  words  "serv- 
ice at  cost "  there  seems  to  be  no  logic  in  the  situation  unless  you  say 
that  it  means  cost  to  the  investor  or  cost  to  the  capitalist  as  well  as 
cost  to  the  public.  There  is  no  more  reason  why  cost  should  be  ap- 
plied as  against  the  public  than  why  it  should  be  applied  in  a  sense 
against  the  investor;  and  that  situation  appeals  to  me  personally  for 
another  reason  at  the  present  time.  In  the  past  the  companies  have 
accepted  franchises  with  many  conditions  which  attach  to  the  ques- 
tion of  fares  and  attach  to  the  condition  of  these  obligations  relating 
to  paving  and  vario^is  municipal  charges. 

They  now  appear  before  the  public  and  make  the  contention,  prop- 
erly, that  they  are  public  servants  and  the  performance  of  those  con- 
ditions is  no  longer  possible.  They  will  continue  to  perform  their 
IMibhc  duties,  and  they  say,  in  the  name  of  the  public  that  they  are 
serving,  that  they  should  be  relieved  of  those  things,  and  it  seems 
to  me  in  the  situation  which  has  arisen  that  there  is  a  moral  and 
ethical  responsibility  on  the  part  of  the  companies  to  ask  only  that 
they  should  be  allowed  to  receive  a  return  upon  a  fair  estimate  of 
cost. 

Now,  I  do  not  necessarily  mean  that  that  means  the  cost  in  a  pure 
naked  sense  of  actual  investment.  You  may  have  to  consider  the 
cost  of  the  business  as  well  as  the  investment.  Those  are  two 
aspects  of  the  situation. 

Commissioner  Wehle.  What  do  you  mean  by  the  cost  of  the  busi- 
neijs? 

Mr.  Robinson.  I  mean  by  that  that  the  company  may  have  gone 
through  a  period  when  it  sustained  very  great  losses  for  which  it 
may  not  have  been  responsible ;  it  may  or*^may  not  have  been  depend- 
ing on  the  wisdom  and  judgment  of  the  enterprise.  But  I  mean  to 
use  that  expression,  and  I  use  that  by  way  of  illustration  only,  to 
suggest  that  sometimes  merely  only  the  cost  of  the  actual  present 
company  is  not  always  iustice  to  the  company.  I  had  in  mind,  in 
referring  to  that,  a  broader  aspect  than  merely  the  cost  of  the  physi- 
cal property,  even  with  an  allowance  made  for  reasonable  overheads, 
and  so  forth. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1915 

And  now,  with  respect  to  the  element  of  the  service-at-cost  plan, 
which  deals  with  the  question  which  was  discussed  this  afternoon 
by  the  mayor,  as  to  the  failure  of  the  service-at-cost  plan,  as  such, 
to  lay  the  door  open  for  incentive  in  the  way  of  keeping  the  cost 
down  and  developing  operating  economies,  I  have  given  some 
thought  to  that  question,  and  while  I  did  not  formulate  the  sugges- 
tion necessarily  as  indicating  my  final  judgment  or  as  one  which 
would  entirely  meet  the  situation,  it  has  seemed  to  me  that  a  plan 
which  would  have  this  aspect  to  it,  that  this  arrangement  would' 
come  nearer  meeting  it  than  a  number  of  the  plans  that  are  now  in 
force. 

Under  the  cost-of -service  plan,  which  in  a  sense  is  a  guaranty 
of  return,  I  take  it  that  capital  should  receive  a  less  return  than  it 
would  under  a  theory  where  the  commission  merely  said.  "  You  are 
entitled  to  receive  a  certain  amount,  and  fight  your  way  through 
the  wall  of  opposition  of  the  general  public,"  and  where  they  would 
not  be  relieved  of  any  local  burdens  which  I  assume  should  go  with 
the  cost-of-service  plan,  and  therefore  with  that  reasonable  assur- 
ance  of  return  there  would  be  a  lower  rate  of  return.      It    has 
occurred  to  me  if  you  could  work  out  a  plan— and  this  is  the  way  it 
occurred  to  me  to  work  it  out>— to   produce    some   incentives    for 
economies  of  operation  and  keeping  the  costs  down— for  instance, 
we  will  say  that  at  the  present  time  under  a  cost-of-service  pUn  as 
estimated  upon  the  budget  system,  that  an  8-cent  fare  would  pro- 
duce the  proper  return  and  give  the  necessary  return  to  capital  and 
provide    the    necessary    depreciation  returns  and  take  care  of  the 
increased  costs,  and  so  forth.     Now,  we  will  say,  just  by  way  of 
illustration,  because  it  may  or  may  not  be  reasonable,  that  a  G  per 
cent  return  upon  the  determined  fair  value  was  a  fair  return  under 
that  basis,  adopting  the  Cleveland  arrangement  as  it  exists  in  the 
moment— now,  supposing,  we  will  say,  that  by  reason  of  various 
developments  in  the  mechanical  arts,  certain  expenditures  could  be 
made  which  would  give  reasonable  assurance  that  they  could  cut 
the  fare  down  to  7  cents.    We  would  like  to  have  it  down  to  7  cents 
of  course,  and  at  the  same  time  something  ought  to  be  done  to' 
encourage  them  to  do  that. 

My  thought  was  that,  in  that  case,  it  could  be  provided  that  the 
return,  instead  of  being  6  per  cent,  would  be  increased  bv  some 
millage  or  some  per  cent.  And  my  suggestion  was  that,  by  "way  of 
illustration,  to  say  it  would  be  4  mills  for  each  cent  reduction  in 
tare.  The  company  would  then  receive  B.-t  per  cent  i-eturn  and  for  a 
reduction  to  6  cents  it  would  receive  6.8  per  cent.  It  would  probably 
be  advisable  under  such  a  plan  to  provide  that  there  should  be  a 
maximuin.  If  it  was  figured  on  a  basis  of  going  to  5  cents,  for  in- 
stance, it  would  under  that  arrangement  go  a  little  above  7  cents. 
Perhaps  7  cents  would  be  a  fair  maximum,  perhaps  not.  That  de- 
pends on  other  factors. 

The  Chairman.  Would  there  be  any  danger  of  the  company's 
sacrificing  maintenance  and  repairs  for  the  purpose  of  irettin^  a 
higher  return  ?  r-     i  s         ^ 

Mr.  Robinson.  Yes;  but  I  am  assumincf,  of  coui-se,  on  that  point 
that  the  budget  controls  that,  and  if  the  budget  is  not  spent,  of  course, 
that  IS  another  factor  in  the  situation.    And  I  take  it  that  all  these 
plans  must  call  for  the  presence  of  a  local  commission  in  whom  we 


m 


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1916    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

"Would  have  to  place  a  ^eat  deal  of  responsibility,  and,  of  course,  it 
would  be  its  responsibility  to  see  that  certain  standards  of  service 
vere  maintained  and  that  certain  expenditures  allowed  for  were 
made.  And  if  those  expenditures  were  not  made,  I  take  it  nothing 
would  come  out  of  that  as  an  element  of  return.  That  is,  you  could 
not  possibly,  by  robbing  your  budget  in  the  way  of  expenditures, 
make  up  additional  earnings  which  would  enable  you  to  produce  a 
lower  fare. 

Commissioner  Meeker.  Would  you  give  to  the  commissioner  of 
street  i*ailways  power  to  deal  with  the  employees  to  settle  upon  wages 
and  conditions  of  labor  and  houi-s  of  labor? 

Mr.  Robinson.  That  is  a  question  that  I  have  discussed  with  Mr. 
Sanders,  of  Cleveland.  I  know  his  position.  He  thinks  that  the 
Cleveland  arrangement  is  deficient  in  not  making  the  provision. 

The  Chairman.  Does  he  believe  in  having  the  city  negotiate  Avith 
labor  on  wages? 

Mr.  Robinson.  Yes,  sir. 

Commissioner  Gadsden.  Yes;  he  so  testified  before  us. 

Mr.  Robinson.  My  own  position,  frankly — although  I  do  not  say 
I  have  thought  it  through— is  that  I  should  be  inclined  to  think  Mr. 
Sanders  was  right  about  it.  His  arguments  rather  convinced  me, 
and  I  might  say,  that  in  the  negotiations  that  we  have  had  in  Pitts- 
burgh on  this  very  question  between  the  representatives  of  the  public 
and  the  company  that  question  has  arisen. 

The  Chairman.  Is  the  cost-of-sei^ice  plan  a  live  issue  in  Pitts- 
burgh ? 

Mr.  Robinson.  Very  much  a  live  issue.  Negotiations  are  under 
way  now  that  may  follow  the  valuation  looking  in  that  direction,  and 
that  is  one  reason  why,  frankly,  we  are  gropmg  around  to  find  the 
possible  difficulties  of  sei*\  ice  at  cost,  and  the  shortcomings  of  it,  and 
to  possibly  find  whether  or  not  there  is  any  practical  way  to  improve 
on  any  of  the  things  that  have  been  done.  •  That  is  really  the  present 
study  that  we  are  making. 

Commissioner  Gadsden.  Going  back  to  your  incentive,  how  does 
your  suggestion  differ  in  principle  from  the  provision  in  the  Cin- 
cinnati ordinance? 

Mr.  Robinson.  It  does  not  differ  at  all  in  the  principles  that  un- 
derlie the  Cincinnati  arrangement,  but  I  like  it  a  little  better,  per- 
sonally. I  think  it  works  out  more  practically.  And  then  if  you 
analyze  the  Cincinnati  arrangement  through,  you  get  into  a  tangle  of 
arrangements  which,  to  my  mind,  causes  a  great  deal  of  confusion — 
and  I  can  not  quite  see  my  waj^  through  with  it.  As  I  understand 
the  Cincinnati  arrangement,  with  their  barometer  fund  they  have  a 
certain  minimum  and  maximum.  It  is  difficult  to  see  how  you  are 
going  to  apply  the  principles  of  the  barometer  fund  and  still  make  a 
distribution  of  the  excess  earnings,  because  your  excess  earnings  are 
cut  off  immediately  by  the  barometer  fund  under  certain  conditions, 
and  automatically  you  readjust  the  fare.  And  this  other  plan* 
simply  provides  that  the  fares  can  go  on  down,  down,  and  down,  and 
so  forth,  without  disturbing  this  barometer  arrangement  at  all.  The 
only  effect  is  that  you  put  under  the  barometer'  arrangement,  so  to 
speak,  the  increased  amount  of  return  without  disturbing  the 
barometer  situation,  whereas  they  do  under  their  plan. 


PROCEEDINGS  OF  FF.DERAL  ELECTRIC  RAILWAYS  COMMISSION.    1917 

Commissioner  Gadsden.  Have  you  considered  any  of  the  sugges- 
tions made  by  some  witnesses  before  the  commission,  as  to  a  stimulus 
to  incentive,  giving  a  reward  to  the  officers  and  employees,  on  the 
theory  that  the  capital  invested  did  not  need  a  stimulus ;  the  stock- 
holders were  not  the  ones  to  take  an  active  part  in  working  out 
economies,  but  the  economies  if  worked  out  at  all  were  put  into  effect 
by  the  officers  and  employees  of  the  company?  One  witness  sug- 
gested that  the  rate  of  return,  whatever  it  is,  6  per  cent,  or  whatever 
is  necessary  to  attract  money,  be  allowed,  and  then  hold  out  an  in- 
centive to  the  people  who  actually  bring  about  the  economy.  Have 
you  ever  thought  of  that  ? 

Mr.  Robinson.  Yes,  sir,  to  some  extent;  and  I  personally  have 
rather  been  inclined  to  put  the  emphasis  on  the  management  in  the 
way  of  return  than  I  have  upon  capital.  I  think  in  the  past  we 
have  entirely  failed  to  differentiate  between  the  success  of  manage- 
ment and  the  success  of  capital.  I  think  we  have  constantly  put  the 
emphasis  upon  the  idea  that  if  we  kept  on  increasing  the  return  to 
capital,  we  will  get  these  things  we  are  looking  for,  which  I  do 
not  think  will  follow  at  all. 

Commissioner  Meeker.  Why  do  you  advocate,  then,  an  increase  of 
return  upon  capital  investment  with  a  decrease  in  fare? 

Mr.  Robinson.  Simply  for  the  reason  that  I  want  the  effect  of 
making  it  worth  their  while  to  do  the  thing  I  am  asking  for.-  I  will 
gn^e  you  what  I  consider  a  rather  concrete  illustration  of  just  where 
that  situation  arose.  Some  time  ago  a  question  came  up  of  building 
a  very  large  new  electric  central  power  station  for  Pittsburgh,  and 
one  of  the  questions  that  arose  was  this— and  I  cite  it  merely  by  way 
of  illustration :  We  can  build  a  plant  to-day  for  $8,000,000  that  will 
produce  a  kilowatt-hour  energy  for  a  certain  amount  of  consumption 
h  or  $10,000,000,  or  $2,000,000  more,  we  can  put  in  certain  economies 
which  will  result  m  cutting  that  cost  down,  we  will  say  10,  15  or  20 
per  cent,  whatever  it  was.  Now,  I  say  capital  would  not  expend 
that  extra  $2,000,000  to  produce  that  economy,  unless  they  had  some 
reward  for  it,  against  the  $8,000,000,  because  under  the  commission 
regulations  they  get  7  or  8  per  cent,  or  whatever  it  might  be,  on  the 
$8,000,000,  and  would  have  no  special  incentive  to  put  the  other 
money  in  unless  they  got  some  benefit  from  it. 

Now,  I  believe  under  those  conditions  that  capital  would  be  in- 
clined to  do  the  thing  that  would  be  best  forthe  interest  of  the  whole 
community  by  effecting  these  economies  if  they  received  some  addi- 
tional reward  for  it.  That  is  one  reason  I  have  in  that  line.  I  do 
not  mean  to  say  that  the  expenditure  of  capital  is  not  a  factor  in  the 
question  of  the  economies  of  the  situation,  because  I  believe  that  it  is  • 
but  what  I  meant  to  say  was  that  I  thought  that  a  very  much  exag- 
gerated sense  of  the  importance  it  plays  in  the  problem  in  the  past 
had  been  given,  and  that  management  had  not  been  given  its  due 
share  of  reward  and  consideration.  As  a  matter  of  fact,  the  very 
thought  that  has  been  suggested  here  was  one  of  the  things  that  led 
us  to  the  conclusion  that  an  arrangement  by  which  the  city  owned 
the  property,  made  a  contract  under  a  competitive  system  with 
outside  management  was  one  of  the  very  things  that  induced  us  to 
believe  that  it  was  the  management  that  shoujd  be  rewarded,  because 
our  thought  was  that  they  would  not  put  in  the  capital  under  those 
conditions  and  that  we  would  furnish  the  equipment  and  everything 


>fi 


If 


1918    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

and  the  management,  by  bidding  for  it,  would  be  able  to  pivduce  tlie 
full  benefits  of  good  management  divorced  from  this  rather  com- 
plioated  question  of  capital. 

Commissioner  Meeker.  You  have  just  said  that  that  part  of 
management  which  hag  to  do  with  dealing  with  labor  would  better 
be  loft  with  the  director  or  the  street-railway  company  oiiicial. 
After  you  take  the  labor  management  out  of  the  field  of  private 
management,  what  is  there  left  for  the  private  managers  to  achieve 
in  the  way  of  economies  and  greater  efficiency  and  service? 

Mr.  KoBiNSON.  Are  you  speaking  only  now  of  the  bare  question 
of  the  wage  of  labor  ? 

Commissioner  Meeker.  I  specifically  asked  j^ou  if  you  thought 
that  the  problems  regarding  labor  should  be  dealt  with  by  the  di- 
rector of  street  railways — wages,  hours,  and  conditions  of  labor,  and 
your  answer  was,  as  I  understood  it,  yes. 

Mr.  Robinson.  I  said  I  had  not  thought  tliat  question  through 
finally,  but  my  impression  was  that  it  would  be  better  if  he  did  have 
u  voice  in  the  matter.    Under  the  cost-of -service  plan 

Commissioner  Meeker.  Just  what  do  you  mean  by  voice  in  the 
matter? 

Mr.  Robinson.  I  mean  by  that  he  should  be  really  the  one  to  de- 
termine the  question. 

Commissioner  Meeker.  Well,  then,  that  would  take  any  econo- 
mies, so  far  as  the  good  will  of  the* workers  is  concerned,  out  of  the 
field  of  private  management.  It  would  be  the  function  of  the  direc- 
tor of  the  street  railways,  would  it  not,  to  effect  economies  possible 
to  be  achieved  in  the  field  of  labor?  Now,  what  is  there  left  for  the 
management? 

Mr.  Robinson.  Of  course,  you  understand  that  the  cost  of  labor 
would  go  in  and  l)e  part  of  the  budget  arrangement,  and  of  course 
there  is  no  doubt  that  a  plan  such  as  we  are  suggesting  here  which 
attempted  to  reward  management  would  be  contrary,  in  the  sense 
of  principle,  to  the  suggestion  that  you  are  making  now,  because 
you  could  not  very  well  put  the  man  in  a  position  where  you  said, 
"  I  will  reward  you  for  your  good  management,"  and  then  say,  "  1 
will  control  the  important  factors  of  what  your  management  is  go- 
ing to  cost."  You  can  not  think  consistently  along  those  lines. 
I  understand  that.  But  as  I  said  before,  I  was  really  thinking 
more  particularly  of  what  I  regarded  personally  as  probably  the 
best  solution  of  the  situation,  which,  as  the  mayor  stated,  was 
(lovernment  or  municipal  ownership  coupled  with  the  competitive 
sj^stem  of  private  management. 

Now,  there  are  unquestionably  many  other  factors  that  enter  into 
the  question  of  good  management  because  of  the  question  of  the  rate 
of  wages  which  still  would  remain  in  the  problem.  While  I  appre- 
ciate that  that  is  a  tremendous  element  in  the  question  of  your  ability 
to  reduce  fares,  the  question  of  your  routing  of  cars  and  of  the  re- 
spective number  of  platform  men,  with  respect  to  the  number  of 
passengers  carried  per  car,  and  all  these  other  factors  that  enter  into 

those  things 

(Commissioner   Wehle.  The   question   of   purchasing   equipment 

and 

Mr.  Robinson.  Everything  that  relates  to  the  question. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1919 

Commissioner  Wehle.  And  all  the  engineering  problems  tliat 
have  to  do  with  the  property  are  necessarily  factors  in  the  matter, 
too,  are  they  not  ? 

Mr.  Robinson.  No  question  at  all  that  any  street- railwav  company 
that  I  have  personally  given  any  thought  to  could  eliminate  some  of 
Its  traclaige,  for  instance,  advantageously  to  itself  and  probably  tx> 
the  i)ublic  in  many  cases. 

Commissioner  Meeker.  Just  a  moment,  to  return  to  the  statement 
you  made  with  regard  to  routing  your  cars,  your  time  schedules, 
your  run  schedules,  and  the  size  and  equipment  of  your  cars,  etc. : 
Do  you  regard  those  as  independent  of  the  labor  force— the  em- 
ployees that  run  the  cars  and  that  have  to  conduct  transportation 
jK'cording  to  the  schedules  of  runs  which  are  made? 

Mr.  RoiiiNsoN.  I  was  looking  at  them  in  the  sense  that  they  were 
not  primarily  concerned  with  the  rate  of  wage,  which  was  the  ques- 
tion over  which 

Coimnissioner  Meeker.  Of  course,  labor  is  more  than  a  rate  of 
wage,  and  I  should  have  specified  all  along  in  my  inquiries  not 
merely  wages  but  lK)urs  and  conditions  of  labor.  It  has  to  do  witli 
all  that  which  secures  or  fails  to  secure  the  good  will  of  the  men  in 
the  company. 

Mr.  Robinson.  That  is  to  say— as  I  get  the  drift  of  your  sugges- 
tion. It  IS  that  if  you  ai-e  trying  to  build  up  a  scheme  whereby  you 
are  going  to  reward  management  and  then  pass  the  entire  control 
of  all  the  things  that  effect  economies  over  to  a  commissioner,  you 
have  got  yourself  into  a  contradictory  position.     That  is  the  idea? 

Commissioner  Meeker.  That  is  not  exactly  it.  It  does  seem  to 
me,  though— I  do  not  wish  to  express  a  personal  opinion,  but  it 
does  seem  to  m€^— the  labor  question  is  a  big  question,  especially  in 
a  business  like  the  street-railway  business. 

Mr.  Robinson.  Unquestionably. 

Commissioner  Meeker.  Now,  if  you  mean  that  the  director  of 
street  railways  should  have  charge  oip  the  labor  problems  in  the  busi- 
ness, then  it  seems  to  me  you  are  handing  over  to  the  public  admin- 
istration the  biggest  chance  you  have  to  effect  economies  and  to 
increase  the  efficiency  of  your  service  and  have  left  only  the  minor 
problems  to  be  dealt  with  by  the  private  management. 

Commissioner  Wehle.  Dr.  Meeker,  I  wonder  whether  the  witness 
under^ands,  when  you  say  dii-ector  of  street  railways,  that  vou 
are  talking  about  a  public  official? 

Commissioner  Meeker.  Yes. 

Commissioner  Wehle.  I  am  not  sure  that  lie  does. 
viru:  ^^""^^f^^'  J  ^hink  I  understood  what  he  had  in  mind  there. 
V\  hat  I  had  m  mind  when  I  said  yes  in  answer  to  that  question  was 
simply  this.  In  a  great  crisis  where  a  serious  strike  situation  con- 
fronted the  street-i-ailway  company  and  the  wages  being  paid  in  that 
city  was  out  of  line  with  the  wages  being  paid  in  some  other  com- 
munity, that,  in  a  sense,  it  ought  to  be  up  to  the  director  to  say 
wliether  or  not  m  his  judgment  the  community  would  rather  pay 
some  increased  return  to  the  company  in  order  to  meet  this  demand 
than  to  go  through  a  long  pi-otracted  period  of  strikes.  Now,  that 
IS  about  where  I  would  try  to  put  the  situation  if  I  could.  I  would 
not  put  him  m  charge  of  labor  in  the  ordinary  situation  at  all :  but 
1  am  just  thinking  of  that  phase  of  the  situation  when  I  made  that 


m 


1920    PROCEEDINGS  OF  PEDEKAL  ELECTRIC- RAILWAYS  COMMISSION. 

answer.  1  did  not  mean  by  that  that  he  should  attempt  to  fix 
wages  in  the  ordinary  sense  of  the  word,  but  I  meant  that  if  it  could 
be  arranged  that  when  that  crisis  happened  and  responsibility  in  a 
way  could  be  cast  upon  him — because  I  believe,  with  the  training 
and  education  and  his  knowledge  of  the  subject  which  would  be 
incident  to  his  position,  that  he  would  probably  be  the  best  person 
in  the  city  to  answer  that  question  for  the  city. 

Commissioner  Meeker.  Would  you  give  the  like  authority  in  de- 
termining hours  of  labor? 

Mr.  Robinson.  I  have  not  been  thinking  of  that  aspect  of  it  at  all. 

Commissioner  Meeker.  And  conditions  of  labor? 

Mr.  Robinson.  I  was  not  thinking  of  that  in  that  relationship. 

Commissioner  Wehle.  Those  are  just  different  ways  of  reckoning 
costs  anyway,  are  they  not,  Dr.  Meeker  ? 

Commissioner  Meeker.  No. 

Commissioner  Wehle.  The  cost  of  labor  is,  of  course,  more  on  a 
street  railway  if  the  employees  all  have  shorter  hours,  I  mean,  as  a 
prima  facie  proposition. 

Mr.  Robinson.  Perhaps  I  can  sum  it  up  just  in  a  few  words — not 
to  take  up  too  much  of  your  time — as  to  what  my  mind  has  revolved 
on  in  respect  to  this  thing:  I  regard  the  cost-of-service  scheme  as  a 
new  suggestion,  not  completely  or  fully  tried  out,  which  has  many 
good  elements  about  it.  It  certainly  has,  based  upon  proper  value, 
the  indispensable  quality  of  justness  and  fairness  about  it;  and  I 
therefore  have  suggested  that  the  doorway  should  be  left  open,  in 
my  opinion,  for  a  possible  step  thereafter  in  the  way  of  municipal 
purchase  or  public  ownership  and  private  operation,  if  it  should  de- 
velop that  the  service-at-cost  plan  with  all  the  suggestions  and  all 
the  improvements  which  we  may  be  able  to  think  of  or  add  to  it — if  it 
is  demonstrated  that  it  has  not  turned  out  to  be  the  success  we  hope 
it  will  be. 

The  Chairman.  Have  you  made  a  trip  to  Cincinnati  and  Cleve- 
land ? 

Mr.  Robinson.  Yes. 

The  Chairman.  Have  you  talked  with  the  managers  as  well  as  the 
public? 

Mr.  Robinson.  I  have  usually  talked  to  both  sides,  if  I  could. 

The  Chairman.  How  was  this  system  regarded  in  Cincinnati  ? 

Mr.  Robinson.  I  am  really  in  not  such  a  good  position  to  talk 
about  it  there  as  I  am  in  Cleveland.  I  talked  to  Mr.  Stanley  who 
was  before  the  commission,  I  believe. 

The  Chairman.  Yes. 

Mr.  Robinson.  And  I  think  he  thought  very  well  of  it.  He  com- 
plained about  the  one  element  that  has  been  mentioned  here — that 
there  was  no  reward. 

Commssioner  Wehle.  Is  this  Cleveland  or  Cincinnati  that  you  are 
talking  about  now  ? 

^Ir.  Robinson.  I  am  talking  about  Cleveland.  I  have  not  talked 
with  the  operating  officials  at  Cincinnati.  I  tried  to  see  some  of  them, 
but  I  did  not  succeed. 

Commissioner  Wehle.  At  Cincinnati,  what  impression  did  you  get 
about  the  way  the  plan  was  regarded  by  the  city,  by  the  public  ? 

Mr.  Robinson.  I  always  had  the  impression  that  I  got  from  cer- 
tain sources — I  do  not  recall  definitely  where  they  were — that  per- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1921 

haps  the  mistake  made  in  Cincinnati  was  that  they  did  not  have  a 
valuation  before  they  put  the  arrangement  on ;  and  while  there  was 
a  feeling  in  some  quarters  that  perhaps  the  valuation  was  high,  the 
reasons  I  always  heard  assigned  for  that  were  that  Cincinnati  was 
largely  a  home  investment,  made  up  very  largely  of  people  of  moder- 
ate means,  or  not  great  wealth,  that  had  invested  in  the  local  traction 
company ;  and  that,  for  that  reason,  there  was  a  feeling  that  they  had 
better  allow  the  value  to  stand.  That  situation  does  not  apply  so 
much  in  other  cities  perhaps. 

Commissioner  Mahon.  Did  you  find  this  there:  That  there  had 
been  a  State  valuation  some  time  before  and  that  they  based  this 
upon  that  ? 

Mr.  Robinson.  As  I  understood,  that  was  a  valuation,  you  might 
say,  stopped  in  the  process;  that  it  had  never  gone  through  to  a 
final  finish.  It  was  a  case  where  valuations  had  progressed  up  to 
a  certain  point,  and  the  parties  sort  of  accepted  it. 

Commissioner  Mahon.  The  valuation  was  made,  but  it  was  de- 
clared unconstitutional,  and  a  new  charter  had  to  be  secured.    That  * 
did  not  change  the  valuation,  however,  did  it? 

Mr.  Robinson.  No;  I  am  only  stating  impressions  that  I  got 
from  Mr.  Culkins.  He  left  me  with  the  impression  that  those  in- 
vestigations had  not  been  regarded,  in  his  judgment  at  least,  as 
final,  and  that  they  might  have  been  contested.  That  was  the 
impression  that  I  had. 

The  Chairman.  Have  you  anything  further  to  add  on  the  cost-of- 
service  plan? 

Commissioner  Wehle.  I  should  like  to  ask  Mr.  Robinson  a 
question. 

The  Chairman.  Certainly. 

Mr.  Robinson.  I  do  not  recall  anvthing. 

Commissioner  Wehle.  With  reference  to  the  cost-of-service  plan 
at  Cincinnati,  what  impressions  did  you  get  as  to  the  merits  of  the 
barometer  plan,  as  you  call  it,  on  this  particular  feature:  That  if 
<he  amount  of  money  in  the  reserve  fund  drops  to  $250,000,  the 
company's  right  to  charge  a  half  cent  more  of  fare  to  the  car  rider 
automatically  comes  into  existence?  Does  that  strike  you  as  being 
a  practical  arrangement  for  the  effecting  of  economies  ? 

Mr.  Robinson.  Well,  as  I  understand  the  cost-of-service  plan,  the* 
barometer  feature  is  indispensable — that  is,  you  can  not  rely  upon 
some  one  else's  judgment.    It  is  a  question  of  mathematics.    I  think 
that  in  that  respect  the  Cincinnati  plan  is  not  open  to  any  Special 
criticism. 

Whether  or  not  the  reserves  ought  to  be  larger  and  the  margins 
greater  in  that  respect,  of  course,  are  practical  details  of  the  plan. 

There  are  two  objections  that  I  have,  primaril.y,  to  the  Cincin- 
nati plan.  One  is  that,  as  I  said  before,  it  attempts  to  fit  the  fare 
situation  onto  the  existing  arrangements,  without  leaving  the  door 
open  for  serious  economic  and  financial  disturbances  which  may 
altogether  alter  what  the  parties  had  in  their  mind  when  they 
made  the  arrangement. 

The  second  is  that  the  Cincinnati  plan  does  what  most  plans  in 
the  past  have  done — it  locks  the  whole  arrangement  into  a  flat-fare 

160043*'— 20— VOL  2 59 


1922    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

aiTangement  absolutely,  and  that,  I  think, -is  unwise.  I  think  pro- 
vision should  be  made  for  such  adjustment  of  the  fare  as  experience 
}uid  practice  may  develop  to  be  the  best  for  the  community  and  the 
best  for  the  company. 

Conunis^ioner  Wehle.  Is  there  not  a  tendency  when  you  have  a 
figure  which  when  reached  will  entitle  the  company  automatical Iv 
to  raise  its  fai"e  by  half  a  cent — is  there  not  a  tendency  then  for  tht, 
company  to  allow  the  costs  to  ^o  up  to  a  point  which  will  reduce 
tlieir  reserve  fund  to  that  point? 

Mr.  KoBiNsoN.  The  way  the  Cincinnati  plan  stands  in  that  re- 
spect— I  can  see  what  you  have  reference  to — does  throw  it  open  to 
tliat  objection  and,  to  my  mind,  is  an  additional  argument  for  my 
su<rgestion  as  compared  with  the  Cincinnati  arrangement;  tliat  is 
to  say,  under  the  Cincinnati  arrangement,  they  have  a  provision  l>y 
which  the  excess  over  a  certain  amount  is  distributed  on  the  l)asis 
of — 20  per  cent,  I  think  it  is — when  it  is  down  to  0  cents,  and  an 
iiicreased  amount  so  on  down  the  line.  The  confusion  in  the  situa- 
tion, to  my  mind,  arises  from  the  fact  that  this  arrangement,  of 
course,  only  takes  effect  while  the  fund  is  moving  between  those 
two  markers,  so  to  speak.  It  is  one  of  those  cases  where  you  have 
two  principles,  as  has  been  suggested  before,  which  more  or  less 
run  counter  to  each  other;  because  that  fund  automatically  cuts 
the  whole  arrangement  of  fares,  and  makes  another  fare  come  into 
oi)eration,  and  upon  that  fare  coming  into  operation,  of  coui-se, 
the  amount  of  return  is  changed,  as  to  whether  tlie  company  gets 
20  per  cent  or  30  per  cent,  or  whatever  it  may  be. 

1  have  never,  in  my  mind,  been  clearly  able  to  set  down  on  paper 
and  work  out  the  whole  effect  of  the  movement  of  this  fund  under 
the  Cincinnati  plan,  and  also  incorporate  into  it  what  they  regard 
as  their  special  feature  which  they  say  they  copied  from  Chicago, 
and  this  distribution  of  the  excess.  It  is  hard  to  get  those  two  prin- 
ciples working  together. 

If  you  had  a  certain  definite  situation  in  which,  over  and  above 
all  those  things,  you  paid  them  a  certain  amount  of  excess  profit, 
it  would  be  all  right;  but  under  this  plan,  the  moment  the  profits 
get  to  a  certain  point,  so  that  the  reserve  reaches  a  certain  amount, 
automatically  the  whole  arrangement  is  changed. 

Commissioner  Gadsen.  I  imagine  it  is  largely  illusory,  anyhow. 

Mr.  Robinson.  I  think  it  is  under  the  Cincinnati  plan  largely 
illusory. 

Commissioner  Gadsdkn.  It  does  not  rest  until  the  fare  goes  down  ? 

Mr.  EoBiNsoN.  And  the  moment  it  gets  there  you  have  to  change  it. 

Commissioner  Gadhimcn.  But  it  listens  well  ? 

Mr.  Robinson.  That  is  it  exactly.  That  is  what  I  think  about  the 
Cincinnati  plan.  I  think,  if  you  analyze  it,  that  it  is  very  largely 
illusory  and  does  not  produce  what  you  started  out  to  do. 

Commissioner  Wehle.  In  order  to  bring  about  an  incentive  to 
efficiency,  you  would  substitute  a  plan  whereby  there  is  a  standard 
relation  between  a  certain  return  on  the  capital  and  a  certain  rate, 
and  then  when  the  rate  goes  down,  half  a  cent,  say,  you  would 
then  allow  the  return  on  the  capital  to  go  up  one-fifth  of  1  j)er 
cent? 

Mr.  Robinson.  Something  like  that. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1923 
Commissioner  Wehle.  And  vice  versa,  if  the  rate  has  to  go  up- 


Mr.  Robinson.  No;  I  would  not  change  the  return,  because  I 
Avould  assume  that  that  was  a  fair  return  on  which  money  could  be 
jittracted;  and  it  must  be  up  to  a  point  sufficient  to  attract  the 
money. 

Commissioner  Wehle.  You  would  not  have  the  principle  work 
in  the  opposite  direction? 

Mr.  Robinson.  Not  at  all. 

Commissioner  Wehle.  You  would  only  have  it  work  up  in  order 
to  bring  an  incentive  to  economy? 

Mr.  Robinson.  That  is  all;  and  you  would  have  to  make  those 
amounts  dependent  on  what  you  thought  were  reasonable  margins 
of  operation  and  what  you  thought  might  reasonably  accomplish 
the  thing  you  were  trying  to  do. 

Commissioner  Wehle.  You  would  not  have  that  added  require- 
ment dependent  on  a  reserve  fund  dropping  down,  because  that  is 
an  incentive  really  to  inefficiency,  rather  than  to  efficiency? 

Mr.  Robinson.  As  I  say,  1  do  not  think  the  Cincinnati  arrange- 
ments go  hand  and  hand  with  that  idea,  although  they  have  tried 
to  work  it  out.    I  never  could  see  it. 

Commissioner  Wehle.  Because,  if  you  had  the  reserve  fund  at 
the  figure  of,  say,  $350,000,  it  might  induce  the  company  under 
given  conditions,  to  deliberately,  as  a  matter  of  theory,  add  so  much 
to  its  operating  expenses,-  as  to  cause  that  fund  to  drop  down  to 
$250,(K)0,  in  order  that  they  might  get  the  right  to  raise  the  fare 
up  another  half  cent,  and  get  a  new  deal,  as  it  were  ? 

Mr.  Robinson.  All  those  things,  of  course,  mi^ht  work  out  if 
you  were  close  to  your  margin.     There  is  no  question  about  that. 

Commissioner  Wehle.  But  by  your  plan  you  would  get  the  same 
ideal  i-esult  that  is  aimed  at  in  the  Cincinnati  plan,  without  getting 
that  dangerous  feature  as  an  incident  to  it ;  isn't  that  true  ? 

Mr.  Robinson.  I  think  I  do.  Also,  as  I  say,  I  think  I  give  them 
a  real  reward  instead  of  an  illusory  one. 

The  Chairman.  Will  you  have  the  record  show  how  long  you 
have  represented  the  city  as  solicitor? 

Mr.  Robinson.  I  represented  the  city  of  Pittsburgh  in  the  caj^ac- 
ity  of  first  assistant  city  solicitor  for  about  five  years,  and  for  the 
last  two  and  a  half  years  have  been  in  the  capacity  of  special  coun- 
sel for  the  city  in  the  matter  of  public  utility  litigation. 

The  Chairman.  For  how  many  years  have  you  been  making  a 
study  of  the  street-car  problem. 

Mr.  Robinson.  I  should  say,  in  all,  about  seven  years,  and  inten- 
sively for  about  two  years. 

Commissioner  Wehle.  What  were  you  going  to  say  about  the 
Cleveland  plan? 

Mr.  Robinson.  All  I  said  was  that  I  understood  from  Mr.  Stan- 
ley that  he  was  friendly  to  it,  and  that  he  thought  that  it  was  as 
sound  as  anything  that  had  been  devised  in  this  country.  He  did 
not  like  the  feature  that  I  have  referred  to — that  no  reward  was 
offered  for  efficiency.  As  you  know,  lately  he  has  objected  that 
the  rate  of  return  was  not  sufficient  to  attract  new  capital,  and 
not  fair  to  the  old  capital,  too. 

The  Chaholvn.  Have  you  made  a  study  of  the  advisability  of 
assessing  improvements  for  new  construction  ? 


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1924    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Robinson.  I  liave  given  considerable  thought  to  that  andy 
personally,  I  am  very  heartily  in  favor  of  it.  I  do  not  think  any- 
one  can  fissail  the  theory  of  it. 

The  difficulty  with  it  has  always  broken  down  either  from  con- 
stitutional objections  in  this  country  or  from  the  practical  diffi- 
culties. Those  things,  of  course,  could  be  overcome  by  legislation 
which  met  the  constitutional  requirements  in  the  matter  of  special 
assessments  and  taxation^  and  by  working  out  some  plan  which 
would  practically  determme  the  increments  of  value  which  came 
from  these  developments. 

Of  course,  in  the  past  there  was  often  a  community  of  interest 
between  the  lot-development  schemes  and  the  street-railway  com- 
pany, and  it  frequently  happened  that  street-railway  companies 
were  carried  at  very  considerable  losses  in  the  early  periods  in  thesa 
outlying  sections  in  order  to  develop  them. 

Our  American  city  conditions,  and  the  necessity  of  developing^ 
the  city,  was  an  incident  of  the  situation,  and  I  suppose  people  were 
satisfied  that  that  arrangement  should  continue. 

The  Chairman.  In  the  case  of  existing  plants,  would  you  permit 
a  company  to  make  extensions  at  its  own  cost  ? 

Mr.  Robinson.  Personally,  I  should  very  much  favor  that  all 
extensions  should  carry  with  them  the  same  principle  of  assess- 
ments that  we  have  in  Pennsylvania,  that  goes  with  our  street  im- 
provements, only  I  would  extend  the  scope  of  it. 

In  that  connection,  I  may  say  that  in  the  study  I  made  of  the 
problem,  I  prepared  for  the  city  of  Pittsburgh  and  submitted  to  the 
last  legislature  a  draft  of  certain  amendments  to  the  constitution, 
which  not  only  provide  for  a  metropolitan  district  in  Allegheny 
County  to  handle  the  transportation  problem  primarily  but  also 
to  be  applied  to  other  problems,  such  as  water  and  storage;  and 
m  that  connection  I  incorporated  in  the  amendment  the  provision 
that  the  boards  of  viewers  could  determine  the  increments  of  value 
coming  from  the  extensions  of  street  railway  or  subway  develop- 
ments, and  could  assess  the  land  either  a  part  or  all  of  the  amount 
of  these  increments  of  value. 

The  Chairman.  Did  you  prepare  an  argument  in  support  of  that 
bill  ? 

Mr.  Robinson.  I  did  not  prepare  any  formal  arguments.  I  simply 
presented  it  to  certain  senators  and  representatives  and  had  it  in- 
troduced in  the  legislature.  I  do  not  think  it  passed,  as  a  matter  of 
fact,  because  there  was  a  great  deal  of  local  opposition  among  the 
57  boroughs  against  the  idea  of  a  metropolitan  district,  and  they 
thought  that  its  design  was  to  destroy  their  separate  local  govern- 
ments, which  was  not  the  purpose  at  all. 

It  also  suffered  in  another  direction,  which  is  not  a  part  of  this 
record,  and  that  is,  there  was  another  metropolitan  bill  in  at  the  time 
which  was  designed  for  an  entirely  different  purpose,  which  was  ob- 
jected to  m  certain  quarters,  and  they  both  received  criticism,  of 
course,  one  more  or  less  getting  the  criticism  of  the  other. 

1  he  Chairman.  Will  you  furnish  us  with  a  copy  of  that  bill,  Mr. 
Robinson  ? 

Mr.  Robinson.  Yes;  I  shall  be  glad  to  do  it.  It  is  a  very  short 
bill,  as  far  this  feature  of  it  is  concerned,  and  merely  provides  that 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1925 

these  viewers  may  assess,  as  I  say,  the  increments  of  value  which  at- 
tached to  it. 

In  this  connection,  I  might  suggest  that  two  ways  have  been  con- 
sidered for  making  these  assessments :  One  is  by  board  of  views  pre- 
liminary to  the  actual  building  of  the  extension,  which  appeals  to 
me  as  being  rather  unfair  and  as  putting  a  burden  upon  these  viewers 
which  no  one  could  answer,  and  that  is  what  is  the  reasonably  ex- 
pected enhancement  of  value  as  a  result  of  this  iniprovement. 

The  other  waits  for  a  reasonable  time  after  the  improvement  and^ 
having  made  a  very  careful  assessment  of  what  they  regard  as  the 
probable  zone  of  influence,  they  make  another  assessment  in  the  light 
of  actual  transactions,  and  in  the  light  of  the  actual  sales  and  tho 
information  which  is  then  available,  and  determine  from  that  what 
the  effect  of  the  influence  of  the  development  has  been.  And  I  un- 
derstand in  applying  that  they  also  go  outside  of  the  zone  of  influ- 
ence, at  points  that  are  unquestionably  too  remote  to  be  affected  by 
it,  Jind  determine  whether  they  also  have  received  increments  of 
value  which  they  would  attribute  to  natural  community  develop- 
ments; and  they  subtract  those  from  these  other  increments  and  if 
there  is  a  difference  or  excess,  they  directly  attach  that  as  coming 
from  the  extension  of  the  street  railway,  and  from  that  they  are  able 
to  determine  what  contribution  should  be  made  by  the  zone  of  in- 
fluence. 

The  Chairman.  So  that  in  the  last  plan  the  company  would  sup- 
ply the  money  in  the  first  instance  ? 

Mr.  Robinson.  The  company  would  supply  the  money  in  the  first 
instance,  and  it  amortizes  it  by  these  assessments. 

The  Chairman.  Yes. 

Mr.  Robinson.  To  that  extent  it  becomes  an  amortized  fund  which 
is  no  longer  a  subject  for  return. 

The  Chairman.  Is  such  a  plan  in  effect  anywhere? 

Mr.  Robinson.  I  have  heard  of  such  a  plan  being  in  effect  in  for- 
eign countries.  I  could  not  testify  personally  as  to  that.  I  have 
understood  that  this  latter  plan  was  m  effect  in  one  or  two  foreign 
countries. 

The  Chairman.  Do  you  know  what  countries?  * 

Mr.  Robinson.  That  is  just  a  bare  recollection.  I  think  Denmark^ 
for  one,  and  Japan  for  another.     I  am  not  sure  about  that. 

Commissioner  Weiile.  Can  you  furnish  a  statement  of  that  for 
the  information  of  the  commission? 

Mr.  Robinson.  As  to  what? 

Commissioner  Wehle.  As  to  whether  that  plan  has  been  adopted 
in  any  other  countries  for  paying  for  public  improvements  on  the 
assessment  plan? 

Mr.  Robinson.  I  do  recall,  I  think,  that  in  New  York  State  at  one 
time  they  attempted  to  adopt  this  so-called  zone-territorial  matter 
that  I  referred  to,  more  particularly,  I  think,  in  connection  with 
street  developments  than  in  connection  with  this.  I  think  it  was 
declared  unconstitutional,  if  I  remember  right. 

The  Chairman.  It  is  a  very  common  method  in  drainage  assess- 
ments and  things  like  that. 

Mr.  Robinson.  I  think  they  tried  it  in  Denver  once,  but  not  par- 
ticularly on  this  matter.    I  do  not  recall  with  what  success. 


1926    PROCEEDINGS  OF  TEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Wehle.  There  is  a  provision  in  the  public-service 
law  of  New  York  now  under  which  assessments  can  be  made  for  spe- 
cial benefits  received  by  property  holders,  is  there  not? 

Mr.  Robinson.  Well,  most  every  State  has  what  is  known  as  spe- 
cial betterments  acts,  or  special  benefits  acts,  whereby  street  im- 
l^rovements  are  assessed  very  likely  against  abutting  owners. 

Commissioner  Wehle.  But  the  provision  I  speak  6i  in  the  public- 
j-ervice  law  of  New  York  hi\s  ref<3rence  not  to  ordinary  street  im- 
])r()vements  but  to  railway  improvements? 

Mr.  KoBiNsoN.  I  do  not  recall,  personally. 

Commissioner  Wehlk.  Transportation  improvements, 

Mr.  KoBiNsoN.  I  do  not  recai'. 

The  subject  of  the  plan  has  been  one  that  has  been  discussed  a 
^n-eat  deal  by  text  Avriters.  Personally,  I  think  that  is  a  source  from 
which  industries— all  the  industries  affected,  at  least— a  share  of 
that  increment  of  value  could  be  applied  to  amortize  the  cost  of 
street-railway  extensions. 

The  Chairman.  Wo  thank  you  very  much  for  your  additional  in- 
formation, Mr.  Kobinson. 

Mr.  Robinson.  You  are  cert^iinly  very  welcome.  I  only  wish  that 
you  could  throw  some  light  on  my  Pittsburgh  problem,  and  I  hope 
when  your  report  comes  out  I  will  get  some  light  on  it. 

]VIr.  AA'auren.  Did  you  give  any  consideration  to  Mr.  Stanley's 
conclusion  that  the  fixed  return  had  proved  insufficient  to  get  new 
money,  and  that  he  ought  to  have  a  larger  return?  Have  y()u  con- 
sidered that  in  connection  with  the  cost -of -service  plan — the  ques- 
tion of  new  capital? 

Mr.  Robinson.  My  own  idea  about  that,  frankly,  was  this:  My 
own  idea  is  that  you  sliould  fix  a  definite  return  of^so  many  dollars 
to  the  existing  cai^ital,  and  that  then  the  new  capital,  instead  of 
being  locked  agjiinst  a  fixed  return,  should  be  given  that  return 
which  is  found  to  be  necessary  at  various  stages  to  get  the  money, 
under  favorable  conditions;  that  is,  without  paying  discounts  and- 
so  on.  That  is  to  say,  I  do  not  believe  that,  if  I  were  trying  a  service- 
at-cost  plan,  I  would  follow  the  Cleveland  plan  in  saying  that  all 
money  would  get  <>  per  cent  and  all  new  money  shall  get  6  per  cent. 
I  think  the  public  should  just  as  well  have  to  pay  for  the  reasonable 
cost  of  money  as  it  would  for  the  reasonable  cost  of  the  other  fac- 
tors involved  in  it. 

Then,  I  suppose  after  I  have  sjiid  that,  you  will  say:  "Why 
don't  you  go  back  and  take  care  of  the  old  capital  which,  in  a  sense 
has  as  much  right  to  be  treated  fairly  as  the  other?  "  And  perhaps 
that  would  follow,  too.  I  don't  know.  But,  for  the  present,  I 
should  say  the  thing  to  do  was  to  make  a  fair  arrangement  with  ex- 
isting capital  and  leave  the  door  open  to  get  new  capital  at  whatever 
the  market  prices  would  fairly  be. 

Commissioner  Wehle.  If  your  cost-of-service  plan,  as  you  have 
just  been  discussing  it,  gives  an  incentive  to  efficiency,  by  allowing 
the  company  to^nake  a  higher  rate  of  return  on  its  invested  capital, 
does  not  that  feature,  in  itself,  act  as  an  incentive  to  new  invast- 
ment  of  capital  ? 

Mr.  Robinson.  It  always  makes  the  possibility  of  getting  perhaps 
1  per  cent  more  than  the  arrangement  provides  for  as  a  minimum. 


PROCEEDINGS  OF  FEDERAL^ELECTRIC  RAILWAYS  COMMISSION.    1927 

Tj  always  leaves  that  possibility  open;  and  I  suppose  to  that  extent 
V  ould  make  it  more  attractive  than  if  the  possibility  were  not  there. 
Commissioner  Gadsden.  One  of  the  objections,  it  seems  to  me,  to 
differentiating  between  the  old  and  the  new  capital — practical  ob- 
jections- 


Mr.  Robinson.  I  can  see  practical  objections- 


Commissioner  Gadsden.  One  that  occurs  to  me  is  that  the  new 
money  would  necessarily  have  to  be  represented  by  junior  securities. 
You  would  have  to  have  the  two  classes  of  securities.  You  could  not 
pay  a  different  rate  of  interest  on  common  stock,  for  instance,  there- 
I'ore  the  new  money  would  have  to  come  in  as  a  junior  security,  the 
other  one  being  already  in  existence. 

Mr.  Robinson.  Well,  on  that  theory,  ordinarily  junior  securities 
do  carry  higher  rates  of  return  than  senior  securities. 

Commissioner  Gadsden.  It  would  be  very  difficult  to  finance  it  on 
a  junior  security? 

Mr.  Robinson.  That  might  be. 

Mr.  Warren.  Suppose  you  gave  a  lump  sum,  instead  of  a  rate.  I 
understood  you  would  give  a  certain  amount  of  money  as  a  return 
on  the  fixed  capital  ? 

Mr.  Robinson.  That  was  my  thought,  in  present  operation. 

Mr.  Warren.  If  you  needed  more  money,  you  would  give  a  certain 
amount  of  money  on  that? 

Mr.  Robinson.  Exactly. 

Mr.  Warren.  If  you  followed  out  the  Massachusetts  law  and,  I 
supix)se,  the  law  of  many  other  States,  you  would  capitalize  through 
stock  and  offer  the  stock  to  the  existing  stockholders,  and  they  would 
get  the  benefit  of  the  increased  return  if  they  took  their  i^ro  rata 
share? 

Mr.  Robinson.  That  would  work  out  if  you  could  keep  within  the 
Bame  family  of  owners. 

It  was  my  thought,  as  I  said,  to  make  a  definite,  fixed  sum  to 
represent  the  annual  return  ujx>n  the  existing  investment  and  then 
to  pay  new  money  its  fair  cost  at  the  time  which  you  found  it  neces- 
sary to  get  it. 

(Witness  excused.) 

STATEMENT  OF  W.  JETT  LAUCK— Eesumed. 

The  Chairman.  Mr.  Lauck,  we  are  to  undei*stand  that  the  argu- 
ment and  brief  presented  by  you  this  afternoon  is  the  view  of  the 
Amalgamated  Federation  ? 

Mr.  Lauck.  So  far  as  it  goes ;  yes. 

The  Chairman.  All  of  the  recommendations  therein  contained 
have  been  ai>proved  by  the  federation  ? 

Mr.  Lauck.  Yes. 

The  Chairman.  You  are  acquainted  with  the  reason  for  the  ap- 
pointment of  this  commission? 

Mr.  Lauck.  Yes,  sir. 

The  Chairman.  You  have  read  the  letters  to  the  President  and  his 
letter  in  reply? 

Mr.  Lauck.  Yes,  sir;  I  am  familiar  with  the  general  idea. 


I 


1928    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Evidently  we  were  appointed  upon  a  belief  of  the 

1  resident  that  there  was  a  critical  condition  facing  the  street-railway 

industry,  and  we  were  asked  to  investigate  and  report  upon  that  ques- 
tion. Mr  r  -1 

Mr.  Lauck.  Yes,  sir. 

The  Chairman.  You  have  also  made  a  study  of  the  question  with 
a  view  to  assisting  this  commission  to  make  certain  conclusions  ? 
Mr.  Lauck.  Yes,  sir. 

The  Chairman.  You  have  stressed  very  pointedly  the  financial 
mismanagement  of  these  companies? 

Mr.  Lauck.  Yes. 
,       The  Chairman.  What  particular  point  do  you  desire  to  make  by 
that  part  of  your  argument  ? 

Mr.  Lauck.  The  point  we  had  specifically  in  mind  was,  in  the  first 
place—or,  rather,  speaking  generally— that  the  past  financial  mis- 
management of  these  companies  has  a  very  vital  significance  at  the 
present  time,  and  that  there  must  be  some  form  of  adjustment  to  get 
It  on  a  proi)er  basis  in  order  to  protect  the  interests  of  the  employees 
as  well  as  the  public,  and  that  your  recommendation  should  cover  the 
prevention  of  similar  methods  in  the  future  on  the  ground  that,  as 
employees,  we  do  not  wish  to  see  the  productive  efficien(?\'  of  the  in- 
dustry absorbed  by  illegitimate  capital  issues. 

The  Chairman.  Does  your  organization  consider  that  the  indus- 
try as  a  whole  is  facing  a  critical  condition  ? 

Mr.  Lauck.  We  have  accepted,  without  question,  the  attitude  of 
the  companies  that  they  are  in  a  very  critical  condition,  and  need 
immediate  relief  as  a  whole. 

The  Chairman.  I  take  it  with  that  thought  in  mind,  you  have 
made  certain  constructive  suggestions? 

Mr.  Lauck.  Yes. 

The  Chairman.  Among  those  constructive  suggestions  is  the  in- 
troduction of  the  budget  system  ? 

Mr.  Lauck.  We  call  that  a  living  wage. 

The  Chairman.  Would  the  introduction  of  a  living  wao-e  tend  to 
increase  the  present  cost  of  production  ?  When  I  say  of  *""  produc- 
tion," I  mean  production  of  service. 

Mr.  Lauck.  Yes.  I  think  it  would  add  very  greatly  to  the  cost  of 
production,  but  our  idea  was  this :  That  the  public  interests,  espe- 
cially m  the  light  of  the  financial  condition  of  the  railways,  is  para- 
mount, irrespective  of  that  even,  you  might  say. 

If  the  railways  are  going  to  continue  under  private  operation,  as 
they  have  before,  and  with  governmental  regulation,  they  would  need 
financial  assistance  from  the  public.  If  there  is  going  to  be  some 
other  means  of  rehabilitation— whatever  the  board  or  the  commission 
m  Its  Avisdom  may  recommend— that  it  will  need  financial  assistance 
from  the  public  or  the  sanction  of  the  public. 

The  Chairman.  Do  you  believe  that  the  imposition  of  a  budget 
system  would  result  m  increasing  the  rates  of  these  companies  gen- 
erally or  requiring  a  subsidy  by  public  appropriation? 

Mr.  Lauck.  It  would  depend  entirely  on  how  you  recommend  the 
street  railways  shall  be  operated. 

The  Chairman.  We  are  assuming  that  the  street-railway  compa- 
nies are  being  privately  operated. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1929 

Mr.  Lauck.  Well,  if  you  assume  that  they  will  be  privately  op- 
erated in  the  future 

The  Chairman.  We  are  dealing  with  the  present  conditions,  Mr. 
Lauck.    Here  is  a  situation  confronting  the  industry. 

Mr.  Lauck.  Yes. 

The  Chairman.  You  and  we  are  making  a  study  of  that  situation. 
Mr.  Lauck.  Yes. 

The  Chairman.  One  of  your  recommendations  is  the  budget  sys- 
tem, and  you  say  that  will  increase  the  operating  cost? 

Mr.  Lauck.  Yes.  Our  attitude  there  would  be  this:  That  if  wo 
continue,  the  public  would  then  have  to  decide  as  to  the  equitable 
capital  investment  on  some  basis  in  the  industry,  and  give 
an  equitable  return  to  capital;  and,  second,  that  if  our  principle 
is  correct  as  to  a  living  wage,  as  a  matter  of  public  policy,  irre- 
spective of  any  increased  cost  in  operation,  our  attitude  would  be 
that  that  would  be  a  secondary  matter  of  dollars  and  cents;  but  the 
principle  being  established,  the  public,  having  accepted  this  princi- 
ple, would  be  perfectly  willing,  I  think,  to  pay  for  it. 

The  Chairman.  But  in  its  ultimate  result  the  budget  system  would, 
in  your  opinion,  increase  the  burden  to  the  public,  either  through 
higher  rates  or  appropriation? 

Mr.  Lauck.  Undoubtedly;  yes,  sir. 

The  Chairman.  Now  then,  if  we  were  to  recommend  the  budget 
system,  which  of  the  three  which  were  discussed  by  Prof.  Ogburn 
last  night  should  be  the  one? 

Mr.  Lauck.  The  last  should  be  the  minimum  one,  we  think.  If 
you  recommend  a  specific  budget,  it  should  be  the  minimum  stand- 
ard health  and  comfort  and  not  the  subsistence  budget. 

The  Chairman.  Do  you  recall  what  that  budget  is? 

Mr.  Lauck.  We  estimate  that  now,  at  present  prices,  at  $2,000 
per  annum,  or  about  80  cents  per  hour  for  street-railway  employees. 

The  Chairman.  Introducing  that  budget  into  the  service  would 
add  how  much  money? 

Mr.  Lauck.  How  much  in  the  aggregate? 

The  Chairman.  Yes. 

Mr.  Lauck.  I  have  not  estimated  that  at  all. 

The  Chairman.  Could  you  do  that? 

Mr.  Lauck.  We  could  do  that;  yes,  sir. 

The  Chairman.  Will  you  supply  the  record  with  that,  please? 

Mr.  Lauck.  Yes. 

Commissioner  Wehle.  You  could  reduce  that  to  the  added  cost 
per  average  passenger-mile  ? 

Mr.  Lauck.  That  could  be  done;  yes. 

Commissioner  Wehle.  What  is  the  average  cost  in  this  country 
to-day— the  average  cost  per  mile  per  passenger  of  the  platform 
service  ? 

Mr.  Lauck.  They  express  it  as  average  cost  per  revenue  passenger 
carried,  irrespective  of  the  distance. 

Commissioner  Wehle.  Yes. 

Mr.  Lauck.  Mr.  Sturgis  testified  to  that  being  1.4  cents,  I  think* 
That  is  my  recollection. 


1930    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOl!^. 

The  Chairman.  Then  you  will  submit  a  calculation  showing  the 
approximate  increase  in  the  la||or  account  and  also 

Mr.  Lauck.  Yes.  I  would  Hkb  to  say  there  also  that,  while  I  can 
see  full  well  why  you  wish  that  information  and  it  is  vital,  we  would 
like  to  impress  upon  the  commission  that  we  are  not  looking  upon 
the  matter  in  terms  of  dollars  and  cents,  but  as  a  principle  which  we 
think  should  stand  on  its  merit  as  a  matter  of  principle  and  not  as 
a  matter  of  money. 

The  Chairman.  I  am  not  asking  those  questions  as  indicating  that 
I  am  hostile  to  the  principle,  but  for  information. 

Mr.  Lauck.  Yes,  I  understand;  but  we  think  if  the  principle  is 
correct  it  ought  to  be  adoi)ted  iires|>ective  of  cost. 

The  Chairman.  Now,  if  this  budget  of  $2,000  were  adopted,  would 
there  be  any  possible  way  by  which  that  could  be  reduced  if  the  cost 
of  living  should  be  substantially  reduced'!? 

Mr.  Lauck.  It  woidd  fluctuate  with  the  cost  of  living;  yes,  sir. 

The  Chairman.  So  you  believe  that  the  budget  should  fluctuate 
with  the  cost  of  living? 

Mr.  Lauck.  If  the  cost  of  living  is  i-educed,  the  cost  of  the  budget 
would  go  down;  yes,  sir. 

I'ho  C'hairman.  Do  you  believe  that  vour  or<Tanization  would  be 
perfectly  willing  to  consider  a  reduction  in  the  budget  if  the  cost 
of  living  should  go  down? 

Mr.  Lauck.  Well,  I  have  never  consulted  with  the  organization, 
but  judging  from  wluit  I  know  of  organizations  of  this  kind,  it  would 
have  to  be  understood,  if  you  recommended  a  specific  budget,  that  it 
was  flexible  with  the  cost  of  living  in  the  beginning,  otherwise  if  the 
wage  rate  was  established,  I  think  it  would  l)e  impossible  to  reduce  it. 

The  Chairman.  You  have%submitteil  a  tabulation  showing  a  com- 
parison of  wages  between  street-car  cMnployees  and  other  lines  of  in- 
dustry ? 

Mr.  Lauck.  Yes* 

The  Chairman.  Do  you  think  that  any  particular  significance  can 
be  drawn  from  a  comparison  between  a  regulated  industry  and  in- 
dustries that  are  not  regulated  ? 

Air.  Lauck.  Yes;  I  think  it  has  no  bearing  whether  it  is  regulated 
or  unregulated.  Tlie  street-raili*oad  industry  certainly  has  not  L»een 
regulated  as  to  wages,  for  the  reason,  so  far  as  my  observation  goes, 
that  they  never  have  b.een  contingent  upon  regulation. 

The  Chairman.  I  do  not  think  they  have  as  to  wages,  but  they 
have  as  to  charges.  They  have  always  been  confronted  with  the 
amount  of  money  they  have  been  able  to  get  for  the  service. 

Mr.  Lauck.  Yes;  but  I  do  not  think  that  principle  has  ever  been 
accepted  by  any  coui't  or  by  the  boards:  The  principle  that  was  es- 
tablished by  the  War  Labor  Board — that,  irrespective  of  the  financial 
conditions  of  the  street  railway,  a  rate  of  wages  which  was  equitable 
should  be  paid,  even  if  it  put  the  railroad  into  the  hands  of  receivers, 
which  was  practically  the  case  on  some  railroads  for  which  we  es- 
tablished wages — was  adopted,  and  the  coui-ts  have  also  held,  that 
even  if  a  public  utility  is  in  the  hands  of  the  receiver,  it  has  no  bear- 
ing upon  the  matter  of  an  equitable  wage.  Tliat  is  why  I  wish  to  em- 
phasize so  much  our  principle  that  the  financial  effect  is  secondary. 
The  principle  is  important. 


PROCEEDINGS  OF  FEDERAL  ELECTBIC  RAILWAYS  COMMISSION.    1931 

The  Chairman.  Well,  you  have  a  comparison  here  between  service 
in  the  street-car  line  and  with  the  shipping  industry  and  the  steel 
works  and  other  plants  that  have  been  manufacturing  war  supplies 
and  materials 

Mr.  Lauck.  Yes, 

The  Chairman.  Under  the  stress  of  the  most  urgent  necessity. 
The  prices  charged  for  that  product  were  unlimited  and  could  go  as 
high  as  the  ceiling,  but  that  was  not  true  as  to  many  of  the  street-car 
ccmipanies. 

Mr.  Lauck.  No;  that  was  not  true,  except  that  I  think  a  pretty 
good  case  could  be  established  in  the  way  of  the  street-railway  com- 
panies, that  they  received  very  considerable  amounts  of  financial 
relief  during  the  war.  I  know  that  the  Shipping  Board  extended 
sums  of  money  to  the  street  railway  industry  in  order  to  relieve  the 
housing  situation,  and  the  Housing  Corporation  did  the  same  thing 
and 

The  Chairman  (interposing).  Do  you  know  of  any  street-car 
company  that  got  relief  unless  they  had  built  new  tracks  into  the 
shipyards  or  munition  plants  or  war  industries? 

Mr.  Lauck.  I  do  not  know  specifically  enough  to  know;  no. 

The  Chairman.  I  take  it  that  is  not  so. 

Commissioner  Meeker.  Just  for  the  record;  Mr.  Chairman,  ought 
you  not  amend  the  statement  that  you  made  a  moment  ago,  that  the 
prices  of  the  commodities  produced  by  the  companies  or  the  manu- 
facturing establishments  you  mentioned  were  unlimited?  Because 
the  Government  did  enter  upon  a  price-regulation  policy,  and  most 
essential  articles  for  the  prosecution  of  the  war  were  subject  to  rigid 
price  regulations.     I  think  that  should  go  in  the  record. 

The  Chairman.  Was  that  so  as  to  food  products? 

Commissioner  Meeker.  Oh,  yes. 

The  Chairman.  As  to  steel  products? 

Commissioner  Meeker.  Food  products. 

The  Chairman.  As  to  powder  and  shells? 

Commissioner  Meeker.  As  to  steel  products;  yes. 

Mr.  Lauck.  It  was  true  as  regards  coal  and  certainly  true  as 
regards  the  steel  products  and  food  products  and  ammunition  and 
ordnance. 

Commissioner  Meeker.  Complaint  was  made,  to  be  sure,  that  the 
prices  fixed  by  the  (lovernment— they  were  practically  fixed — were 
fixed  too  high,  and  also  complaints  that  they  were  too  low,  but  they 
were  fixed,  and  the  prices  charged  were  not  unlimited. 

The  Chairman.  Well,  accepting  the  suggestion  made  by  Dr. 
Meeker,  I  still  submit  that  the  c  omparison  may  be  open  to  criticism. 

Mr.  Lauck.  I  think  that  you  could  further  say  there  in  behalf  of 
your  own  contention  that  where  wage  adjustments  were  made  under 
these  contracts  due  notice  was  made  by  the  Procurement  Depart- 
ment and  compensating  relief  given  to  the  manufacturing  industry, 
but  the  same  thing  was  attempted  in  the  way  of  the  street-railway 
industry,  but  did  not  succeed  during  the  war.  As  I  understand  it, 
this  is  really  a  further  development  of  the  effort  that  was  made 
during  the  war  to  give  relief  to  the  street-railway  industries. 

The  Chairman.  jTou  have  offered,  on  pages  82  to  90  of  your  brief, 
certain  constructive  suggestions? 


1932    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Lauck.  Yes. 

The  Chairman.  You  also  discussed  certain  of  the  fundamental 
questions  that  are  being  considered.  On  page  82  you  state  that  there 
are  two  sorts  of  questions—those  for  immediate  financial  relief  and 
^hose  for  a  permanent  policy.  Now,  under  the  first  you  have: 
(a)  Flat  increases  in  existing  rates  of  fare;  (b)  the  change  to  a 
zone  system  of  fare  charges;  (c)  freedom  from  taxation  by  munici- 
palities and  States;  (d)  the  elimination  of  franchise  requirements  as 
to  paving  streets  and  other  expenditures. 

Has  your  organization  taken  action  upon  any  of  the  four  items 
mentioned  under  that  head? 

Mr.  Lauck.  No;  that  part  of  the  discussion  is  reserved  for  Mr. 
Mahon,  who  is  acquainted  with  the  policy  and  attitude  of  the  organi- 
zation, and  I  am  simply  speaking  of  the  purely  labor  aspect. 

The  Chairman.  Then  you  prefer  to  have  him  answer  those  ques- 
tions ? 

Mr.  Lauck.  Yes. 

The  Chairman.  Take  under  the  second  group,  changes  in  perma- 
nent policy  advocated  : 

/   (^)^<^?*:^f -service  plans;  (b)  Municipal  ownership  and  operation; 

(c)  Municipal  ownership  but  actual  operation  under  the  separate 

auspices  of  a  publicly  constituted  body. 
Do  you  care  to  discuss  those  questions  ? 

Mr.  Lauck.  No.     Mr.  Mahon  represents  the  organization  reallv 
as  to  its  policies  and  he  will  answer  that. 

Commissioner  Meeker.  May  I  ask  a  question  there  ?  Do  you  think 
that  the  service-at-cost  plans  that  have  come  under  your  notice  over- 
emphasize the  importance  of  an  automatic  adjustment  of  fare  and  of 
the  valuation  of  the  properties  concerned  so  as  to  distract  attention 
from  the  questions  of  management  and  labor,  which,  in  my  opinion 
are  very  much  more  important  than  these  other  questions  t  ' 

Mr.  Lauck.  Yes ;  I  had  gotten  that  distinct  impression,  especially 
with  relation  to  the  reflection  of  financial  mismanagement  upon  oper- 
ating efficiency,  that  there  is  a  great  deal  for  managerial  ability  in 
the  street-railway  industry  and  for  securing  the  proper  cooperation 
of  labor  on  the  proper  development  of  industrial  relations  according 
to  the  principles  that  we  are  setting  forth  here.  I- think  you  could 
greatly  increase  the  productivity  of  the  industry  by  having  living 
wages  and  proper  hours  and  the  acceptance  of  these  principles  which 
would  lead  over  to  the  cooperation  of  labor  with  the  management  in 
the  industry. 

Commissioner  Meeker.  And  you  estimated,  or  I  understood  that 
you  estimated,  yesterday,  in  some  of  your  statements,  that  it  would 
require  an  increase  of  18  per  cent  in  order  to  bring  the  wages  of  street- 
railway  operatives  up  to  the  proper  standard  of  health  and  comfort. 

Mr.  Lauck.  No  ;  that  was  an  increase  of  six 

Commissioner  Meeker.  No  matter  what  the  per  cent  was,  that  does 
not  matter;  it  would  require  a  considerable  increase? 

Mr.  Lauck.  Yes. 

Commissioner  Meeker.  To  bring  them  up  to  that  point.  Suppose 
for  the  sake  of  specificness  we  say  12  per  cent :  Would  that  mean  a 
proportionate  increase  in  the  cost  of  producing  transportation  on 
street  railways?     Do  I  make  myself  clear? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1933 

Mr.  Lauck.  Assuming  that  the  operating  management  would  not 
absorb  that  by  increased  efficiency  or  by  development  of  lower  cost, 
it  would  require  just  a  proportionate  increase  in  the  labor  cost  and 
not  in  the  total  cost. 

Commissioner  Meeker.  Would  it  increase  the  labor  cost  propor- 
tionately, in  your  judgment?     You  see  the  drift  of  my  question  ? 

Mr.  Lauck.  Yes.  If  operating  management  conditions  would  re- 
main as  they  are,  it  would. 

Commissioner  Meeker.  Don't  you  think  that  a  well-fed,  thoroughly 
healthy  and  contented  man  will  operate  a  street-car  more  effici- 
ently  

Mr.  Lauck.  Oh,  yes.  I  did  not  get  your  question.  I  think  it  would 
result  in  much  greater  cooperation  and  reduction  in  labor  costs  from 
the  cooperation  of  the  employees  and  the  elimination  of  waste. 

Commissioner  Meeker.  What  you  mean,  then,  is  that  in  the  labor 
cost  of  operation  it  would  not  be  a  proportionate  cost  ? 

Mr.  Lauck.  No.  I  think  it  would  be  a  desire  to  serve  the  public 
and  the  company  which  would  eliminate  some  of  the  costs  now  that 
occur  under  the  more  unfavorable  conditions  which  employees  have 
to  work  under,  wages  and  hours. 

Commissioner  Gadsden.  I  do  not  want  to  make  too  much  of  a  point 
of  that,  but  let  us  take  a  specific  case  now.  Take  the  case  of  a  con- 
ductor who  is  changed  from  budget  1  to  budget  2.  Can  you  suggest 
to  the  commission  offhand  how  his  usefulness  to  the  company  would 
be  materially  improved?  He  is  presumably  collecting  all  the  fares 
on  the  car  and  ringing  them  all  up.  Now,  what,  substantially,  other 
than  an  atmospheric — I  admit  that  there  is  something  in  the  atmos- 
pheric part  of  it — ^but  leaving  that  out,  how  would  his  efficiency  be 
improved  ? 

Commissioner  Meeker.  Pardon  me  but,  Mr.  Gadsden,  are  you  not 
leaving  out  one  very  important  gain  that  would  follow  a  recogni- 
tion of  the  principle  that  Mr.  Lauck  has  advocated  ? 

Commissioner  Gadsden.  I  am  asking  for  information,  because  I  do 
not  know. 

Mr.  Lauck.  I  think  his  attitude  would  be  entirely  different 
as  you  say,  both  to  the  operating  company  and  to  the  public, 
and  he  would  probably  cooperate  with  the  motorman  in  saving  fuel, 
bringing  about  all  the  economies  that  the  management  would  try  to 
introduce  as  a  means  of  offsetting  these  increased  labor  costs.  I 
think  that  is  true  where  you — I  happen  to  know  of  two  companies 
from  my  own  observation.  One  of  them  recognizes  the  union  and 
has  the  spirit  of  cooperation  on  the  part  of  the  employees  to  their 
treatment  of  the  employees,  and  it  is  one  of  the  best  companies 
from  the  standpoint  of  the  service  to  the  public ;  it  pays  dividends 
and  is  very  satisfactory  from  the  standpoint  of  the  public  service. 
Another  company  operating  in  the  same  city  which  refuses  to  recog- 
nize the  union  has  a  far  inferior  class  of  employees;  they  are  not 
at  all  courteous  to  the  public;  they  do  not  seem  to  have  a  bit  of 
regard  for  the  proper  operation  of  the  railroad;  the  cars  seem  to 
run  sort  of  helter-skelter  or  in  groups  and  the  employees  are  oblivi- 
ous to  the  protests  of  passengers,  and  I  think  recently  it  became  so 
great-^the  difference — that  there  have  been  even  public  protests 
against  this  one  company.  I  do  not  like  to  mention  the  names  of  the 
companies,  because  I  do  not  want  to  make  invidious  comparison. 


19.^4    PHOCEEDTNGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commi^ioner  Gadsi>en.  You  are  ninning  in  on  me  some  outside 
f actors.  1  here  was  only  one  variant  in  my  question.  All  other  con- 
ditions were  the  same  and  the  variant  was  an  increase  from  bud<ret 

ilV     T^'*^^  ^*  ^^^  company  was  still  organized  and  still  uni<vnized. 

Mr.  UujcK.  You  ha<l  it  oi^anized  and  unionized  at  first? 

Commissioner  Gadsden.  Yes;  it  is  all  unionized  and  we  are  nil 
a  happy  family. 

Mr.  LAUcK.Yes. 

Commissioner  Gadsden.  Now,  we  are  able  to  increase  from  hudiret 
1  to  butliret  2 '^ 

Commissioner  Maiion.  Do  you  mean  in  speaking  of  that  increas- 
ing trom  No.  1  to  No.  ii  that  you  are  establishing  proper  conditions 
ot  lal>or,  the  eight-hour  day,  and  proper  feeding  and  clothing  of  a 
man  as  compared  with  the  conditions  now  ? 

Commissioner  Gadsden.  Yes. 

Commissioner  Mahon.  It  is  not  necessarv  to  go  to  the  street-rail- 
way conditions  or  to  speculate.  There  are  proofs  from  everv  industry 
both  m  the  I  nited  States  and  in  England  where  they  have  adopted 
the  eight-hour  day  that  those  conditions  with  the  improvements  of 
the  men  are  there  and  the  reports  of  our  counselor  some  years 
ago  from  England  of  the  a<Joption  of  the  eight-hour  day  in  the 
iron  industry  showed  that  they  produml  as  much  in  the'  8  hours 
as  in  the  10. 

Commissioner  Gadsden.  Yes;  I  agree  to  that,  Imt  I  am  askinir— 
m  an  industry  like  ours  now— I  appreciate  where  a  man  is  doincr 
piece-work  or  is  engaged  in  manufacturing  work,  his  efficiency  wifi 
almost  dii^tly  respond,  we  will  say,  to  an  increase  in  his  earning 
capacity  and  his  living  conditions.  But  I  submit,  while  theoretically 
It  is  true  practically  it  is  difficult  to  find  out  in  an  industry  like 
ours  the  direct  beneficial  result. 

Commissioner  Meeker.  How  about  lost  time? 

The  Chairman.  The  Chair  would  like  to  suggest  that  a  discussion 
among  tlie  commissioners  should  be  reserve<l  for  executive  session-. 
W  e  are  now  conducting  the  hearing  and  ought  to  address  the  wit- 
ness. 

Mr  Lauck.  I  think  Mr.  Gadsden  is  limiting  the  discussion  very 
specifically  there  to  the  conductor.  If  we  make  it  more  general  so 
as  to  include  the  motorman  and  all  employees,  I  would  unhesi- 
Uitingly  say  yes.  because  tl>e  general  effect  would  be  the  same  as  has 
been  mentioned  in  other  industries. 

Commissioner  Mahon.  That  is  what  he  is  interested  in 
Commissioner  Meeker.  How  about  lost  time?    Is  there  not  econ- 
omy in  a  man  reporting  every  day  or  practically  every  day  instead 
of  being  laid  up  by  illness  ?  ^  j       j  ^ 

Mr.  Lauck.  Undoubtedly,  yes.     It  is  hard  to  measure  the  effect 
however,  when  it  is  confined  specifically  to  one  occupation,  but  as' 
a  whole  I  think  the  effect  would,  along  with  proper  managerial 
ability,  absorb  the  increased  cost. 

The  Chairman.  With  this  temporary  interruption  the  Chair  will 
attempt  to  continue  his  cross-examination. 

Commissioner  Mahon.  Mr.  Chairman,  you  made  a  mistake  in 
asking  a  question  of  Mr.  Lauck  which  I  think  possibly  is  subject 
to  correction.  That  is,  that  no  capital  has  been  advanced  to  any 
cocapany  only  those  that  built  more  track  during  the  war 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1935 

The  Chairman.  It  was  my  thought  that  the  Government  had  only 
extended  its  capital  aid  to  companies  which  had  built  lines  to  war 
iiKhistries  or  sliipyards.  If  I  am  mistaken,  I  would  like  to  be  cor- 
rected. 

Commissioner  Mahon.  Well,  I  do  not  know.  I  simply  had  my 
doubts.  You  may  be  correct,  but  I  simply  wanted  to  ask  if  that 
is  what  you  had  said. 

The  Chairman.  That  is  what  I  had  in  mind. 

Mr.  Lauck.  There  has  been  another  variation  in  that  in  this 
way — that  the  Emergency  Fleet  Corporation  has  paid  fares,  or  parts 
of  fares,  of  industrial  workers,  probably — I  know  that  is  true 
around  Philadelphia — to  relieve  the  housing  situation  in  certain 
sections  and  has  paid  a  certain  amount  i)er  capita  to  each  man 
carried,  in  addition  to  the  regular  fare. 

Commissioner  Wehle.  Can  I  correct  you  a  little  bit  more,  if  you 
will  excuse  me? 

The  Chairman.  Yes. 

Commissioner  Wkhle.  I  think  Mr.  Commissioner  Mahon  is  en- 
titled to  have  the  correction  which  lie  suggested.  The  War  Finance 
Corix>ration,  a  branch  really,  in  effect,  of  the  Treasury  Department, 
has  loaned  money  to  some  public  utilities  during  the  war,  in  pur- 
suance of  its  power  to  make  advances  to  going  concerns  whose 
oi)erations  were  necessary  or  contributory  to  the  prosecution  of  the 
war;  those  advances  were  made  not  on  account  of,  or  in  order  to 
assist  in,  the  construction  of  the  shipyards  or  munition  plants,  but 
in  order  to  assist  those  companies  which  received  tlie  benefit  of  those 
loans  in  maintaining  their  service  in  communities — maintaining  the 
existing  service  in  communities  in  which  there  were  munition  plants 
aiitl  other  activities  going  on  which  were  directly  involved  with  the 
Government's  war-production  program. 

The  Chairman.  Was  that  relief  extended  upon  condition  that 
the  money  would  be  repaid  ? 

Commissioner  Wehle.  Oh,  yes;  those  were  loans  on  veiy  good 
security. 

Commissioner  INLvhon.  Will  the  chairman  permit  a  question 
there? 

The  Chairman.  Yes. 

Commissioner  Mahon.  Was  there  not  also  money  loaned  at  that 
time  for  fear  of  panic  conditions,  that  kept  certain  companies  going  ? 

Commissioner  Wehle.  That  was  no  part  of  the  statutory  duty  of 
the  Government  or  of  the  War  Finance  Corporation  to  make  loans 
for  the  purpose  of  stabilizing  the  money  market  or  anything  of  that 
sort.  The  showing  had  to  be  made  and  had  to  be  definitely  estab- 
lished that  the  operaticms  of  the  public-service  company  in  (jjuctJtion 
which  was  making  this  application  for  the  loan  were  so  essential 
to  tlie  successful  prosecution  of  the  war  that  a  failure  of  the  service 
or  a  crippling  of  the  service  of  that  company  would  seriously 
prejudice  the  Government's  war-making  functions  and  activities. 

Commissioner  Mahon.  Was  that  the  situation  in  Bixx)klyn? 

Commissioner  W^ehle.  It  was. 

The  Chairman.  Mr.  Lauck,  your  organization  has  united  in  mak- 
ing thi*ee  specific  i-ecommendations. 
Air.  Lauck.  Yes. 


i 


1936    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

^Jch  ^"f^Ki-T""*'.*''^."^^'  to  organize,  or  union  recognition; 
second,  tlie  estabhshment  of  a  standaid  of  living;  and,  tliird    the 
eight-hour  workday.    AVe  have  discussed  tlie  standard  of  iS 
Mr.  JLauck.  Yes.  ^* 

The  Chairman.  Are  there  about  1,200  companies  in  the  country? 
here        ^^^"^^  '^  '  ^""''^  understood  from  the  discussion 

The  Chairman.  How  many  of  those  are  organized? 

Mr.  Lauck.  I  realljr  do  not  know.     I  do  not  know  how  many  com- 
panies are  under  the  jurisdiction  of  the  Amalgamated  Association. 

ine  Chairman.  Do  you  know  if  many  companies  have  what  is 
Known  as  company  organizations  ? 

Mr.  Lauck.  The  only  one  that  has  come  under  my  personal  ob- 
servation has  been  Philadelphia.  ^ 
tion^^  Chairman.  Would  you  regard  that  as  a  company  organiza- 

Mr  Lauck.  Yes:  using  the  term  in  the  way  I  assume  you  mean 
It  without  any  reflection  on  the  company,  it  is  a  local  system  of 
collective  bargaining.  "^ 

The  Chairman.  Yes.  Are  there  many  companies  that  are  not 
organized  at  all? 

Mr.  Lauck  I  really  do  not  know.  I  have  never  looked  into  the 
question  of  the  extent  to  which  the  industry  is  organized  but  I 
suppose  that  could  be  furnished  to  the  commission  if  you  would  like 
to  have  It.  I  do  not  know  to  what  extent  the  industry  is  covered 
Vu  ^  ^"i^lgamated  Association  or  other  organizations 
The  Chairman.  Assuming  for  the  purpose  of  this  question  that 
the  evidence  presented  m  favor  of  the  Philadelphia  plan  shows  that 
It  has  resulted  m  developing  a  fine  spirit  of  cooperation  between 
the  men  and  the  company  and  improved  service  and  increased  wages 
and  also  a  return  upon  the  capital  investment;  would  you  expect  this 
commissi4>n  to  make  a  recommendation  which  would  destrov  that 
form  of  organization  there? 

^J^\^^J^S^'J  t]i}nk  that  form  of  organization  has  no  bearing  upon 
the  situation  in  Philadelphia,  in  the  first  place,  beyond  indicating 
that  if  you  had  a  better  form  of  organization  and  more  of  a  spirit 
of  cooperation  which  unionization  would  bring  that  you  would  have 
either  better  results  than  you  would  even  under  the' local  organiza- 
tion m  Philadelphia. 

The  Chairman.  But  in  some  way  you  avoid  a  direct  answer  to  my 
question.  Just  for  the  purpose  of  the  question,  I  assumed  those  facts 
to  exist.  JXow,  if  that  be  true,  would  you  ask  us  to  recommend  that 
it  be  done  away  with  ? 

Mr.  Lauck  Undoubtedly.  I  think  that  the  Philadelphia  form  of 
organization  from  the  standpoint  of  the  employees  can  not  result  in 
permanent  good  to  the  employees  unless  through  the  enlightened 
policy  of^  the  company  itself.  I  think  it  means,  in  fact,  the  same 
thing  as  the  Standard  Oil  plan.  If  it  is  pursued  under  an  enliirht- 
ened  paternalistic  policy  it  may  work  for  a  time.  But  when  there 
comes  a  time  when  the  employees  attempt  to  secure  something  from 
the  company,  I  think  the  whole  organization  will  go  to  pi^es  I 
think  It  IS  not  effective  at  all  from  the  standpoint  of  the  employees. 

ine  chairman.  Ihen,  your  answer  to  my  question  is  "yes"  i 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1937 

Mr.  Lauck.  Yes. 

^    The  Chairman.  On  the  theory  that  it  does  not  create  a  permanent 
improvement  ? 

Mr.  Lauck.  I  think  it  indicates  that  on  the  face  of  it— yes.  It  has 
no  bargaining  strength.  That  has  been  recognized  by  the  British 
Government  m  its  system  of  collective  bargaining,  which  is  based 
upon  unionization. 

The  Chairman.  You  also  recommend  the  eight-hour  workdav.  Is 
the  eight-hour  workday  quite  generally  observed  in  the  industry? 

Mr.  Lauck.  I  think  the  average  workday  is  about  9J  hours.  That 
is  what  I  have  learned  from  the  testimony  before  the  commission.  I 
do  not  know  from  the  results  of  any  investigation  or  study. 

The  Chairman.  Would  the  adoption  of  an  eight-hour  workday 
substantially  increase  the  wage  account  of  the  industry  as  a  whole? 

Mr.  Lauck.  Other  things  remaining  the  same,  it  would ;  yes.  You 
would  have  to  give  a  higher  daily  wage,  a  shorter  period*  of  work. 
Of  course,  we  would  contend  there-  that  that  would  be  offset  by  in- 
creased productivity  on  the  part  of  the  employees,  so  that  it  would 
not  be  a  proportionate  increase  in  cost.  Other  things  remaining  the 
same,  it  would  be,  however. 

The  Chairman.  Do  you  think  the  increased  productivitv  would  in 
a"y  wft.v  reduce  the  present  operating  costs  to  the  companies? 

Mr.  Lauck.  It  seems  to  me  that  the  company,  if  it  has  proper 
nrianagerial  ability  in  the  way  of  developing  efficiency  in  operation— 
that  Its  success  is  dependent  largely  upon  the  density  of  traffic  which 
It  can  develop  and  the  handling  of  that  traffic  by  the  most  economical 
equipment. 

The  Chairman.  Have  you  in  mind  the  admission  you  made  early 
m  your  cross-examination  that  the  industry  is  facing  a  critical  con- 
dition? How  will  the  adoption  of  these  three  recommendations  of 
yours  relieve  that  situation? 

Mr.  Lauck.  Financially? 

The  Chairman.  Yes. 

Mr.  Lauck.  As  I  understand  the  question,  assuming  the  assump- 
tion which  I  made,  that  the  condition  exists— we  have  accepted  the 
contention  that  the  industry  is  facing  financial  disaster  as  a  whole, 
unless  some  aid  is  extended 

The  Chairman.  Yes. 

Mr.  Lauck.  Your  question  is,  to  what  extent  will  these  three  prin- 
ciples  aid  m  rehabilitating  the  companies? 

The  Chairman.  Yes. 

^h  L^^^k.  Unless  accompanied  with  other  measures  of  aid.  they 
Mould  be  of  but  minor  assistance,  if  any  assistance  at  all. 

The  Chairman.  What  would  be  the  other  measures  of  aid  ? 

Mr.  Lauck.  As  stated  in  the  beginning  of  the  constructive  recom- 
mendations, it  seems  to  me  that  there  must  be  a  reorganization  both 
m  the  attitude  of  the  public  to  the  industry  and  in  the  public  to 
the  employees  and  the  industry. 

I  am  assuming,  in  making  these  recommendations,  as  regards  the 

living  wage  and  the  eight-hour  day  and  the  union  recognition— I  am 

assuming  recommendations  for  the  financial  rehabilitation  of  the 

industries,  but  wish  these  included  as  essential  parts  of  your  finan- 

160643"— 20— VOL  2 60 


1988    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

rial  recommendations,  and  proper  provision  made  financially  for 
putting  these  into  effect. 

I  am  assuming  that  you  are  going  to  make  recommendation  on 
some  basis  to  put  the  industry  in  a  sound  position  financially. 

The  Chairman.  Would  one  or  all  of  these  recommendations  of 
youi*s  be  of  any  assistance  to  the  company  pending  the  permanent 
solution  of  the  question? 

Mr.  Lauck.  I  think  they  would  all  have  a  good  effect  in  devel- 
oping the  cooperation  between  the  employees  and  the  management 
in  securing  better  operating  results,  but,  of  course,  would  be  met, 
unless  the  company  had  the  proper  financial  assistance  in  the  way 
of  getting  equipment  and  proper  facilities  and  carrying  on  a  long- 
time financial  policy— they  might  add  furtlier  to  the  b«rdeas  of 
the  company  immediately.  But  I  am  assuming  that  you  are  going 
to  financially  rehabili  »  the  companies,  and  then  along  with  that 
wo  wish  to  insist  that  you  include  these  principles. 

The  Chairman.  Are  your  recommendations  contingent  upon  the 
financial  rehabilitation  of  the  companies? 

Mr.  Lauck.  Undoubtedly;  yes,  sir.  That  is,  if  they  need  re- 
hnhihtation,  which  we  assume  from  their  testimony  that  they  do. 

The  Chairman.  Yes.    I  have  no  further  cross-examination. 

(Commissioner  Sweet.  Have  you  any  objection,  Mr.  Lauck,  to  the 
Phihidelphia  plan,  except  what  you  have  mentioned?  I  mean  with 
regard  to  labor,  what  you  call  the  local  system  of  organization? 

Mr.  Lauck.  Yes.  I  think,  as  I  say,  it  is  fundamentallv  unsound, 
from  both  the  employees'  standpoint  and  the  public's  standpoint ;  be- 
cause at  any  real  test  the  employees,  through  that  plan,  will  not  be 
able  to  pi-otect  their  own  interests. 

C  ommissioner  Sweet.  The  difference  between  the  two,  if  I  un- 
deistand  you  aright,  is  that  in  case  of  trouble  at  Philadelphia  under 
that  plan  the  employees  could  not  get  outside  aid  they  would  have 
to  depend'upon  themselves? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  And  they  would  be  more  likely  to  be  de- 
feated in  a  strike  or  in  any  contention? 

Mr.  I^vucK.  I  think  so,  yes. 

Commissioner  Sweet.  You  used  the  word  "  paternalistic  ''? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  Do  you  use  that  in  an  offensive  sense  ?  Do 
you  think  there  is  anything  wrong  in  the  attitude  of  the  company 
toward  the  men  in  Philadelphia? 

Mr.  Lauck.  Not  in  an  offensive  sense,  except  that  I  think  any  idea 
of  paternalism  in  industry  is  offensive  to  the  spirit  of  self  reliance 
which  IS  a  fundamental  characteristic  of  an  American— that  lie 
does  not  want  paternalism.  He  wants  a  proper  opportunity  and 
means  for  working  out  his  own  interests  in  a  fair  and  just  way.  He 
docs  not  want  anything  given  to  him,  or  any  paternalistic  care. 

Commissioner  Sweet.  Do  you  nndei-stand,  in  the  Philadelphia 
!Ra))id  Transit  Co.,  that  that  condition  exists — that  more  is  given 
to  the  men  than  should  be  given  to  them  ? 

Mr.  Lauck.  Not  at  all.  I  use  that  in  the  sense  that  I  think— to  be 
perfectly  frank  about  the  matter,  so  that  there  will  be  no  misunder- 
standmg— I  think  the  Philadelphia  plan  is  an  outgrowth  of  peculiar 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1^39 

conditions  in  Philadelphia,  of  course ;  but  looking  at  it  in  its  broader 
aspects,  it  is  perfectly  evident  to  a  considerable  portion  of  the  em- 
ployers, both  in  the  street-railway  industry  and  in  other  industries, 
that  the  tendency  toward  collective  bargaining  is  almost  inevitable, 
and  that  certain  employers  have  deceived  themselves,  I  think,  like  in 
the  Philadelphia  plan,  by  attempting  to  evade  unionism  by  these 
systems  of  collective  bargaining  like  the  Philadelphia  plan,  tlie 
Standaixi  Oil  plan,  the  Bethlehem  Steel  Co.  plan,  the  Procter  & 
Gamble  arrangement;  in  other  words,  this  system  of  collective 
bargaining  has  gotten  to  be  almost  th€  vogue  in  industry,  on  the  part 
of  the  employer  who  does  not  want  to  deal  with  the  union,  and  is 
attempting,  to  use  a  slang  phrase,  to  "  beat  the  union  to  it,"  and  ^t 
his  system  of  collective  bargaining  established  and  evade  unionism 
in  that  way ;  because  he  thinks  he  can  not  get  as  good  results  from 
imionism  as  he  can  from  a  system  of  this  kind.  So  he  has  an  outward 
appearance  of  dealing  with  his  employees  without  recognizing  the 
union. 

Anyone  that  looks  into  the  question  knows  that  the  employees, 
under  a  situation  of  that  kind — foi-  instance,  take  the  experience  dur- 
ing the  war:  We  established  these  systems  of  collective  bargaining; 
our  principles  did  not  provide  for  the  establishment  of  unionism ; 
and  when  we  withdrew  our  examiners,  where  the  spirit  that  I  s]^ak 
of  was  not  present,  the  whole  thing  collapsed  like  a  deck  of  cards. 

Conmiissioner  Wehle.  When  you  say  "  we  *'  you  mean  the  National 
War  Labor  Board? 

Mr.  Lauck.  The  War  Labor  Board. 

Commissioner  Wehle.  The  National  War  Labor  Board  ? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  You  have  heard  the  testimony,  have  you? 
You  are  familiar,  at  any  rate,  with  the  Philadelphia  plan  and  the 
way  it  is  working? 

Mr.  Lauck.  Yes.    I  have  heaixl  a  great  deal  about  it. 

Commissioner  Sweet.  You  were  not  here  to  hear  Mr.  Joyce? 

Mr.  Lauck.  I  did  not  hear  his  testimony ;  no. 

Commissioner  Sweet.  One  of  the  reasons  assigned  for  the  success 
of  that  company  by  Mr.  Joyce  was  tliat  the  employees  are  workino" 
hand  in  hand  with  the  company  itself  in  building  up  business,  goin? 
out  after  business — that  a  sort  of  salesmanship  idea  has  been  culti^ 
vated  ? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  And  that  there  is  a  good  feeling,  a  sort  of 
fellowship  between  the  employer  and  employee. 

Are  there  any  union  members,  any  of  the  Amalgamated  employees, 
who  are  members  of  that  organization  in  the  Philadelphia  system 
or  is  it  entirely  an  ununionized  organization?  ' 

Mr.  L.VUCK.  I  do  not  know  specifically,  but  my  impression  is  that 
the  Amalgamated  has  not  a  local  in  Philadephia.  However,  I  read 
Mr.  Mitten's  statement  to  the  conunission  about  tlie  happy  familv 
the  picnics,  and  all  like  that  in  Philadelphia,  and  I  think  it  ex' 
emplifies  the  fact  that  they  would  be  a  happier  family,  and  that  there 
would  be  more  ccopei-ation  if  you  had  unionization  instead  of  this 
plan.  I  think  it  would  even  develop  a  greater  spirit  of  cooper- 
ation. 


1940    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

Commissioner  Sweet.  What  unionized  railroad  company  in  the 
United  States  can  you  mention  that  is  producing  as  good  results, 
or  where  the  men  are  doing  any  better  than  they  are  at  Philadel- 
phia? 

Mr.  Lauck.  I  am  not  sufficiently  acquainted  with  the  street-rail- 
way situation  to  answer  that,  except  in  saying  that  I  think  the  play- 
ing-up  of  the  Philadelphia  plan  and  the  good  operating  results  from 
Philadelphia,  has  been  over-emphasized.  I  think  that  the  situation 
in  Philadelphia,  judging  from  its  war-time  condition,  has  been  due 
to  the  fact  that  there  are  so  many  people  there  that  they  get  them 
in  the  cars,  and  I  think  it  would  have  come  about  under  any  con- 
ditions, practically.  I  do  not  wish  to  detract  from  the  managerial 
efficiency  in  Philadelphia,  but  I  think  there  were  ideal  conditions 
there  for  the  development  of  a  low-cost  system  of  operation.  That 
is,  you  had  heavy  density  on  the  cars  and  the  presence  of  people  to 
fill  the  cars,  and  if  you  had  that  in  any  other  community,  you  would 
have  had  practically  the  same  result. 

Commissioner  Sweet.  The  evidence  that  was  presented  to  us,  if 
I  remember  right,  indicated  a  continuing  good  condition  since  the 
war. 

Mr.  Lauck.  Yes;  you  have  practically  the  same  conditions  there 
since  the  war. 

Commissioner  Sweet.  And  the  public  apparently  is  being  better 
and  better  served  even  since  the  war  was  over,  and  reductions  are 
being  made  in  regard  to  transfers  and  that  sort  of  thing. 

Now,  I  will  repeat  the  question:  What  unionized  railroad  com- 
pany is  showing  as  good  results  as  regards  the  Republic  and  as  re- 
gards the  employers  and  as  regards  the  employees  as  the  Philadel- 
phia company? 

Mr.  Lauck.  I  would  have  to  repeat  my  answer  that  I  am  not 
sufficiently  familiar  with  the  industry  to  make  a  comparison.  The 
only  way  I  could  answer  that  would  be  hypothetically,  that  per- 
manently, assuming  the  conditions  you  have  in  Philadelphia,  under 
your  present  system  of  local  collective  bargaining,  as  a  perma- 
nent policy  if  you  had  a  union  there,  you  would  get  better  results 
in  the  long  run,  if  it  is  due  to  collective  bargaining  that  he  is  getting 
the  results ;  because  I  think  inevitably  it  will  not  work  out  as  well 
as  it  would  if  he  had  a  union  of  his  employees,  connected  with  an 
international  or  a  national  organization. 

Commissioner  Sweet.  Is  not  your  entire  theory  based  upon  the 
idea  that  the  companies  are  greedy,  or  seeking  to  impose  upon  the 
employees,  are  not  really  public  spirited,  not  willing  that  the  em- 
ployees should  have  a  living  wage,  and  one  of  animosity  and  an- 
tagonism? And  is  not  the  fighting  quality  in  the  Amalgamated 
Association  the  one  that  you  really  stress  as  its  strong  point? 

Mr.  Lauck.  Not  at  all.  I  think  there  has  been  a  clash  of  economic 
forces  between  the  trade  union  and  the  employer,  because  of  the 
fact  that  the  employee  has  not — not  only  in  the  street  railway  in- 
dustry, but  practically  in  any  industry  in  this  country — ^had  a  proper 
participation  in  the  output  of  the  industry. 

My  idea  was  to  eliminate  that  by  taking  these  principles  which 
have  been  adopted  by  the  enlightened  opinion  of  the  world,  as  the 
proper  principles  for  bringing  about  industrial  peace,  and  if  you 
adopt  them  you  will  eliminate  that  and  secure  cooperation.    The 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1041 


essential  condition  to  any  proper  operation,  to  proper  productivity, 
to  proper  solution  of  the  labor  problem,  is  the  spirit  of  cooperation, 
which  must  be  based  upon  justice  and  equity  to  both  parties;  and 
if  you  will  accept  the  principles  which  the  most  enlightened  opinion 
of  industrial  and  commercial  nations  has  sanctioned,  I  think  you 
will  eliminate  the  antagonism  and  secure  cooperation. 

Commissioner  Sweet.  If  you  had  the  proper  cooperation  and  real 
spirit  of  fellowship  and  good  will  on  both  sides,  and  a  desire  to 
cooperate  and  make  the  industry  what  it  ought  to  be  for  the  public, 
then  this  ability  to  call  upon  other  branches  of  the  union  for  help 
in  case  of  a  strike  would  be  absolutely  superfluous,  would  it  not^ 
There  would  be  no  strikes,  would  there? 

Mr.  Lauck.  Well,  there  would  not  be  any  strikes  if  you  could  have 
the  assurance  that  the  employees  would  be  protected  without  an 
organization.  I  think  the  assurance  of  protection  of  the  interests 
of  the  employees  and  against  strikes  would  be  the  existence  of  the 
organization. 

Commissioner  Sweet.  That  the  very  frame  of  mind,  the  attitude 
you  are  taking  now,  that  a  local  organization  such  as  that  at  Phila- 
delphia that  is  getting  along,  apparently,  very  well  from  every  stand- 
point— from  the  standpoint  of  the  men,  from  the  standpoint  of  the 
company,  and  from  the  standpoint  of  th^  public;  that  is  the  evi- 
dence— don't  you  think,  that  when  you  pronounce  adversely  to  that 
kind  of  an  organization  and  put  it  purely  upon  the  ground  that  it 
has  not  the  ability  to  fight  that  the  Amalgamated  organization  has 
because  of  its  various  locals — don't  you  think  that  you  are  somewhat 
in  the  attitude  of  the  various  nations  before  the  war — ^that  you  are 
all  the  while  building  up,  taxing  the  people  for  a  big  army  and  a 
big  navy  and  that  sort  of  thing,  with  the  idea  of  being  ready  to 
fight,  and  that  that  idea  is  so  prominent  in  the  mind,  that  it  leaas  to 
fights  unnecessarily  ? 

Mr.  Lauck.  I  think  my  attitude  is  exactly  the  opposite:  That  I 
know  from  industrial  experience  that  the  principle  there  is  unsound. 
That  is  my  opinion. 

Now,  as  to  the  attitude :  We  are  now  living  in  a  condition,  indus- 
trially, corresponding  to  the  period  preceding  the  League  of  Na- 
tions; that  is,  labor  has  to  have  its  armor  on,  and  capital  has  to 
have  its  armor  on.    There  is  splendid  evidence  of  that  everywhere. 

The  League  of  Nations  was  established  to  bring  about  peace  on 
earth,  politically  speaking,  if  possible;  and  to  minimize  the  danger 
of  war  they  incorporated  in  the  League  of  Nations,  realizing  that 
it  was  essential  to  stability  of  production,  the  prevention  of  indus- 
trial warfare  and  the  dislocations  of  industry,  principles  which  they 
thought  would  eliminate  industrial  warfare.  My  attitude  is  that  if 
you  accept  those  principles,  you  will  be  in  the  same  position  indus- 
trially as  the  nations  of  the  earth  are  in  politically,  who  have  accepted 
the  League  of  Nations. 

Commissioner  Sweet.  If  those  principles  were  accepted,  then  the 
ability  to  call  upon  other  locals  to  help  in  case  of  a  strike  would  be 
entirely  unnecessary,  would  it  not? 

Mr.  Lauck.  Practically,  if  they  were  accepted. 

Commissioner  Sweet.  Very  well,  then.  Your  argument  against 
the  Philadelphia  organization  or  system  would  entirely  fall  to  the 
ground,  would  it  not  ? 


11M2    PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Lauck.  I  can  not  see  that  at  all;  no,  sir. 

Commissioner  Sweet.  The  local  organization,  if  it  is  working  all 
right,  and  if  there  is  that  spirit  of  cooperation  that  the  League  of 
Nations  and  the  idea  of  peace  and  the  reduction  of  armaments  and 
that  sort  of  thing,  the  spirit  of  good  will  is  coming  into  existence — 
then  there  is  no  need  of  these  provisions  for  fights,  and  battles  are 
to  be  discarded  and  laid  aside  ? 

Mr.  Lauck.  The  force  of  the  League  of  Nations  fundamentally 
does  not  depend  on  the  existence  of  good  will,  but  depends  upon  the 
mobilized  strength  of  the  nations  constituting  the  League  of  Nations. 

Commissioner  Sweet.  Let  me  ask  you  this  question :  If  the  Phila- 
delphia management  should  continue  as  it  is  now,  and  has  been  in 
the  recent  past,  do  you  see  any  reason  why  the  operators,  the  em- 
ployees of  that  company,  need  to  have  any  help  from  outside  ? 

Mr.  Lauck.  I  distinctly  ^ated  that  it  would  only  be  successful 
imdor  a  policy  of  that  kind. 

Commissioner  Sweet.  Then  answer  this  question:  Why,  in  the 
rehabilitation  of  the  street-railroad  companies  of  the  country,  recog- 
nizing the  fact  that  they  must  lay  their  cards  on  the  table,  let  the 
people  know  exactly  where  they  stand,  squeeze  out  all  the  water,  and 
only  ask  for  a  proj^er  return  upon  actually  invested  capital — if  that 
is  all  to  be  done  and  the  companies  themselves  from  this  time  on — no 
matter  how  badly  they  may  have  misbehaved  heretofore — from  this 
time  on  are  going  to  behave  as  to  the  public  and  as  to  their  employees 
and  give  a  square  deal  all  around,  then,  is  there  any  need  on  the  part 
of  the  men  who  work  for  these  companies  to  be  able  to  call  in  outside 
capital,  so  to  speak,  or  help  for  strikes?    Will  there  be  any  strikes? 

Mr.  Lauck.  If  we  havu  this  condition  that  you  describe,  I  do  not 
see  how  a  strike  could  be  possible,  because  you  assume  that  every- 
thing will  be  done  properly  by  the  company. 

Commissioner  Sweet.  In  that  kind  of  a  case,  then,  local  organiza- 
tions such  as  they  have  in  the  Philadelphia  company  would  be  just 
as  good  as  the  general  organizations  ? 

Mr.  Lauck.  If  vou  had  the  conditions,  yes,  sir ;  but  I  do  not  think 
you  can  assume  that  unless  you  lay  down  the  conditions  either  by 
law  or  by  stipulation  on  the  part  of  the  public  to  the  company — 
that  we  can  assume  we  will  have  those  conditions.  That  is,  the 
Philadelphia  plan,  if  it  is  true  that  the  Philadelphia  management — 
which  I  think  has  adopted  a  policy  of  enliglitenment,  of  anticipating 
trouble  and  establishing  the  going  rates  of  wages  and  hours  and  se- 
curing cooperation  of  their  employees — if  that  is  established  univer- 
sally under  some  sort  of  a  sanction,  that  is  exactly  what  we  are  ask- 
ing for  under  tliese  principles  and  would  render  unnecessary  any 
further  action;  but  we  are  asking  to  be  assured  that  that  will  be 
done  in  the  rehabilitation  of  these  properties  as  a  matter  of  public 
policy. 

Commissioner  Sweet.  I  do  not  want  you  to  misunderstand  me. 
The  questions  I  have  asked  you  were  not  asked  with  any  idea  in 
my  mind  that  the  unions  are  wrong  or  that  your  organization  is 
wrong.  I  have  not  that  in  mind.  You  have  your  organization  and 
you  have  a  perfect  right  to  it.  I  believe  in  organization.  I  think 
that  a  great  deal  of  good  can  be  accomplished  by  it,  and  I  think 
oftentimes  without  strikes;  but  I  am  directing  my  questions  to  you 
with  this  in  mind: 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1943 

You  ask  us  here  in  our  final  report  to  say  that  there  should  be 
unions— to  make  that  a  part  of  our  report.  Now,  in  the  face  of  such 
an  example  as  we  have  there  in  Philadelphia,  and  in  the  face  of  what 
we  hope — I  think  we  do ;  I  am  expressing  my  own  view,  at  least  what 
I  hope,  and  what  I  believe  is  going  to  be  the  future  of  the  street- 
railroad  industry' — I  could  not  consistently  say  that  we  would  be 
justified  in  urging  or  recommending  even  that  there  should  be  a 
unionization  of  all  labor  on  street  railroads.  I  think  we  would 
be  going  altogether  too  far  to  do  that. 

Commissioner  Mahon.  You  could  not  say  that? 
Commissioner  Sweet.  No. 

Commissioner  Mahon.  I  am  glad  to  get  tliat  expression  of  opinion. 

Commissioner  Sweet.  I  think  that  in  view  of  the  fact  that  the  best 
example,  or  one  of  the  best  examples  of  a  prosperous  street-rail- 
road company  in  the  whole  United  States,  and  one  that  Mr.  Lauck 
himself  does  not  find  a  parallel  to  in  all  the  unionized  centers  or 
street-railroad  companies — that  for  us  to  say  that  the  very  best,  or 
one  of  the  very  best,  systems  presented  to  us  is  no  good,  and  brush 
that  aside  and  say  that  that  company  and  all  other  companies  ought 
to  unionize — I  don't  think  we  would  be  justified  in  doing  that. 
^  Commissioner  Mahon.  I  would  like  to  ask,  at  this  point,  Mr. 
(^hairman,  this  question:  I  was  always  of  the  opinion  that  commis- 
sions, like  courts,  heard  all  the  evidence  before  they  made  up  their 
decisions.  That  has  always  been  my  opinion.  The  commissioner  has 
delivered  himself  here  to-night — delivered  his  opinion  upon  a  case  of 
which  ho  has  not  heard  all  the  facts  in  evidence  here.  I  want  to  ask 
if  that  is  the  procedure.    I  say  I  am  pleased  to  know  his  expression. 

I  have  been  appointed  upon  this  commission,  I  presume,  because  I 
represent  not  only  the  street-railway  men,  but  the  trade  unions  of  this 
country;  and  if  that  is  the  position  of  the  commissioner,  before  even 
evidence  can  be  presented,  I  want  to  know  it,  in  fairness  to  the  vast 
army  of  men  and  women  that  I  represent,  so  that  I  can  express  my- 
self, not  only  to  this  commission,  but  to  the  public,  and  to  those  I 
represent. 

Connnissioner  Sweet.  What  do  you  think  you  have  been  doing  the 
last  two  days,  if  you  have  not  been  presenting  evidence  ? 

Commissioner  Mahon.  I  say  to  you  this,  Commissioner:  That  the 
evidence  on  the  Philadelphia  case — it  is  not  the  time  for  me  to 
present  evidence  or  argument  on  that  case — it  is  an  organization  that 
has  reorganized  since  the  war.  It  failed  in  its  first  attempt,  its  first 
lines  of  cooperation.  The  wages,  as  testified  here,  that  are  paid  the 
men  in  Philadelphia  are  the  wages  established  by  the  Amalgamated 
men  in  four  cities  of  this  country. 

The  Chairman.  Mr.  Mahon,  you  have  addressed  a  question  to  me, 
and  I  will  answer  it. 

The  Chair  assumes  that  Mr.  Sweet  expressed  an  opinion  based 
upon  the  evidence  thus  far  presented. 

Proceed  with  the  cross-examination. 

Mr.  Lauck.  I  would  like  to  take  exception  to  what  Mr.  Sweet 
deduced 

Commissioner  Wehle.  I  would  like  to  ask 

The  Chairman.  Just  a  minute.  Commissioner  Sweet  has  a  right 
to  cross-examine  the  witness  until  he  has  finished.  Have  you  any 
further  questions,  Mr.  Sweet? 

Commissioner  Sweet.  Yes. 


1944    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

V 

Commissioner  Mahon.  I  want  to  know  if  he  has  the  right  to  pre- 
judge the  case. 

The   Chairman.  Do  you   wish  to  ask  any  more  questions,  Mr. 
Sweet? 

Commissioner  Sweet.  Yes ;  I  do. 

The  Chairman.  Proceed  with  your  cross-examination. 

Commissioner  Sweet.  I  w  ant  to  saj^  this  to  the  witness :  In  asking 
tlie  questions  that  I  have  and  expressing  an  opinion  which  perhaps, 
I  ought  not  to  have  expressed — Mr.  Mahon  has  not  been  here  all  the 
time — but  there  has  been  from  time  to  time  a  little  more  freedom  in 
this  commission  in  the  way  of  expression  of  views  from  the  commis- 
sion than  there  is  in  the  ordinary  court,  and  the  questions  that  I 
asked  with  regard  to  the  Philadelphia  company  and  that  plan  and 
your  comparison  of  that  plan  with  others,  were  with  a  view  of  draw- 
ing out  from  yourself,  as  a  representative  of  the  organization  coming 
before  us  with  your  constructive  plan  and  asking  us  to  make  a  recom- 
mendation in  our  report  that  there  should  be  a  general  unionizing  of 
all  labor  of  this  kind — I  perhaps  w^as  somewhat  injudicious  in  ex- 
pressing my  view  upon  that  point  somewhat  prematurely;  but  the 
reason  why  I  did  was  because  it  seemed  to  me  that  you  were,  in  a 
sense,  making  an  admission  that  you  could  not  name  a  unionized 
company  that  was  showing  any  better  results  than  the  Philadelphia 
company,  and,  therefore,  I  thought  upon  that  basis  that  it  might  be 
almost  self-evident. 

However,  if  there  is  to  be  further  evidence  introduced,  I  admit 
(hat  it  is  my  proper  duty  to  hold  any  opinion  until  that  is  intro- 
duced and  everything  is  before  us,  so  I  withdraw  any  statement  I 
made  with  regard  to  an  expression  of  opinion,  although  I  think  1 
was  careful  to  say  that  it  was  my  personal  opinion — was  I  not? 
Did  I  not  express  it  that  way?  Didn't  I  say  that  it  was  just  my 
personal  view  ? 

Mr.  Lauck.  I  think  so. 

There  is  one  point,  Mr.  Sweet,  that  I  think  you  drew  a  deduction 
from  something  that  was  said  that  I  could  not  show  as  good  an 
example  for  the  Amalpmated  as  Philadelphia,  and  that  that 
demonstrated  the  superiority  of  Philadelphia  over  the  Amalga- 
mated, when,  as  a  matter  of  tact^  I  stated  that  I  was  not  sufficiently 
acquainted  with  practical  conditions  to  answer  that,  and  was  argu- 
ing from  a  theoretical  standpoint  for  unionism  and  did  not  know 
of  the  concrete  cases. 

Commissioner  Sweet.  Is  not  this  brief  that  is  presented  to  us 
your  brief? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  The  request  that  we  shall  make  tliat  find- 
ing is  your  request  ? 

Mr.  Lauck.  It  is  the  request  of  the  Amalgamated  Association; 

Commissioner  Sweet.  And  you  represent  the  Amalgamated  Asso- 
ciation in  making  that  request? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  That  is  what  I  assumed. 

•Mr.  Lauck.  But  as  to  concrete  local  instances  of  cooperation  be- 
tween the  employees  and  employers  in  this  industry,  I  am  not  com- 
petent to  speak,  because  I  have  not  the  first-hand  knowledge  of 


I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1C45 

specific  cases  where  the  union  is  cooperating  or  where  a  svstem  of 
collective  bargaining  outside  of  the  union  is  cooperating,  and  there- 
fore I  can  not  make  any  statement  upon  which  you  could  base  a 
deduction  as  to  the  superiority  of  the  Philadelphia  plan  over  a 
union  plan. 

Commissioner  Sweet.  I  would  like  to  ask  you  a  question  along 
this  line:  You  do  not  question — you  have  not  questioned  the  cor- 
rectness of  the  statement  made  by  the  companies  that  their  financial 
condition  is  very  bad  ? 

Mr.  Lauck.  No,  sir. 

Commissioner  Sweet.  It  is  a  matter  of  general  information 
throughout  the  public,  is  it  not — among  the  employees  of  these 
companies,  and  of  your  own  knowledge,  and  generally,  that  they 
are  unable,  as  a  general  proposition,  now,  to  borrow  any  money — 
that  the  companies  are  unable  to  borrow  any  money  ? 

Mr.  Lauck.  Yes ;  I  have  heard  that  for  the  pa,st  year. 

Commissioner  Sweet.  You  do  not  think,  yourself,  that  a  prudent 
investor  now  would  buy  bonds  or  invest  in  the  stock  of  these  com- 
panies, do  you  ? 

Mr.  Lauck.  Not  as  a  general  proposition. 

Commissioner  Sweet.  Only  here  and  there  will  you  find  one  that 
is  even  doing  fairly  well.  You  know,  as  a  matter  of  fact,  that  many 
of  them  are  now  in  the  hands  of  receivers  ? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  And  others  are  likely  to  go  into  the  hands 
of  receivers,  and  that  they  are  not  meeting  their  obligations? 

Ml'.  Lauck.  Yes. 

Commissioner  Sweet.  I  want  to  ask  you  whether  you  do  not  think 
that  the  rehabilitation  of  the  companies  is  a  matter  of  just  as  much 
importance  to  the  general  public  and  to  the  employees  as  it  is  to 
the  people  who  are  managing  these  companies — the  companies  them- 
selves ? 

Mr.  Lauck.  Yes.  I  have  stated,  I  think,  that  the  public  interest 
is  paramount,  and  the  employees  have  even  a  more  vital  interest 
than  the  capitalists  in  the  matter. 

Commissioner  Sweet.  The  employees  are  a  pait  of  the  public,  are 
they  not? 

JSilr.  Lauck.  Yes.  * 

Commissioner  Sweet.  And  they  have  the  added  relationship  to 
the  company  of  being  employees  of  the  companies ;  so  that  they 
and  their  families,  if  these  railroads  were  discontinued,  would  suffer 
in  common  with  the  general  public  in  not  having  the  facilities  of  the 
railroads  and,  in  addition  to  that,  would  be  thrown  out  of  a  job; 
isn't  that  true  ? 

Mr.  Lauck.  I  mentioned  that  when  discussing  the  situation. 

Commissioner  Sweet.  So  that  nobody  could  be  any  more  inter- 
ested in  having  this  rehabilitation  made,  so  as  to  keep  the  com- 
panies in  operation,  than  the  employees  ? 

Mr.  Lauck.  They  are  vitally  concerned. 

Commissioner  Sweet.  Vitally  interested? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  Now,  then,  it  is  not  your  purpose  in  any- 
thing you  have  done  or  said  here,  or  in  the  evidence  you  have  in- 


Well,  there  should  be  some  figure  fixed? 


1946    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

troduced,  to  obstruct  in  any  sense  or  in  any  way  in  the  slightest 
decree  the  rehabilitation  of  these  companies,  is  it  ? 

Mr.  Lauck.  We  want  to  facilitate  that ;  yes,  sir. 

Commissioner  Sweet.  You  do  not  lay  any  stress  upon  the  past 
misdeeds  of  the  companies  as  any  reason  why  they  ought  not  to  be 
rehabilitated  ? 

Mr.  Lauck.  Not  at  all. 

Commissioner  Sweet.  Upon  a  proper  basis? 

Mr.  Lauck.  No,  sir. 

Commissioner  Sweet.  And  if  I  understand  you  correctly,  your 
idea  is  that  there  sliould  be  found  a  correct  means  of  valuation. 
Is  that  right? 

Mr.  Lauck.  I  have  not  expressed  any  opinion  as  to  that— that 
there  should  be  a  correct  means  of  determining  the  fair  investment 
values  in  the  property. 

Commissioner  Sweet. 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  Upon  whicli  a  return  should  be  paid? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  And  after  that  is  arrived  at  there  ought 
to  be  a  general  agreement  with  the  public  that  it  is  a  proper,  honor- 
able, and  correct  basis,  ought  there  not  ? 

Mr.  Lauck.  Yes. 

Commissioner  Swket.  You  do  not  question  for  a  minute  that  the 
success  of  whatever  may  be  done  depends  very  largely  upon  the 
acquiescence  and  good  will  of  the  general  public,  do  you? 

Mr.  Lauck.  I  think  that  that  is  the  paramount  consideration. 

Commissioner  Sweet.  So  that  the  valuation,  whatever  basis  it 
is  made  on,  should  be  one  that  the  public  considers  just  and  fair? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  That  would  be  the  first  step.  Then  the 
next  step  would  be  to  make  some  sort  of  i)rovision  by  which  a  rea? 
Konable  return  could  be  made  Ui>on  that  valuation  with  a  view  of 
getting  whatever  new  capital  may  be  necessary  to  rehabilitate  these 
companies  and  put  them  on  their  feet  and  make  any  repairs  or  new 
construction  or  improvements  necessary,  and  so  forth.  Is  not 
that  so? 

Mr.  Lauck.  Yes ;  always  bearing  in  mind  as  an  essential  condi- 
tion to  that  the  adoption  of  this  ix)licy  as  to  the  employees  which 
they  contend  is  strengthened  by  public  opinion. 

Commissioner  Sweet.  Certainly.  And  then  in  addition  to  that 
your  contention  is  that  the  employees  of  the  various  companies 
ought  to  receive  a  living  and  proper,  fair  wage,  which  in  your 
judgment  would  be  somewhere  in  the  vicinity  of  $8  a  day? 

Mr.  Lauck.  $6  a  day. 

Commission  Sweet.  $C  a  day? 

Mr.  Lauck.  I  might  say  there,  if  I  might  interrupt  a  moment,  that 
I  specifically  stated  we  were  not  disking  this  commission  to  recom- 
mend any  definite  wage,  but  we  are  interested  in  the  principle 

Commissioner  Sweet.  I  understand. 

Mr.  Lauck.  Yes ;  whicli  would  involve,  of  course- 


Commissioner  Sweet.  But  the  figure  you  have  given  us  is  some- 
thing like  $6  a  day  ? 


I^OCEEMNGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1947 

Mr.  Lauck.  Yes,  sir. 

Commissioner  Sweet.  Just  one  question  more.  Let  me  ask  you 
now  in  all  fairness — and  we  are  all  of  us  trying  to  get  at  the  same 
result,  and  there  is  no  need  of  any  friction  here  or  ill  feeling — gIo 
you  think  it  would  be  wise  for  this  commission  to  load  its  i-eport 
with  any  recommendation  which  would  so  antagonize  the  general 
community  or  interfere  in  any  way  with  the  rehabilitation  of  these 
companies?  Do  you  think  it  would  be  for  the  interest  of  labor  or 
for  the  general  public  for  us  to  do  that? 

Mr.  Lauck.  Not  antagonize  the  general  public;  no,  sir. 

Commissioner  Sweet.  Or  that  would  lead  to  conditions  or  create 
feelings  or  sentiments  that  would  prevent  the  rehabilitation  of  the 
companies  or  militate  against  their  rehabilitation?  Do  you  think 
it  would  be  wise  ? 

Mr.  Lauck.  I  think  you  would  fail  in  your  duty  if  you  did  that 

Commissioner  Sweet.  Yes^ 

Mr.  Lauck.  But  I  think  yo«  will  not — the  inference  from  your 
question  is  that  you  will  antagonize  your  recommendation  by  includ- 
ing a  policy  as  to  labor  or  recognition  of  principles  which  have  been 
rec(^nized  ofhcially  by  this  Government  and  proclaimed  by  the 
President  of  the  United  States  and  embodied  in  the  League  of  Na- 
tions. I  think  you  will  be  .only  storing  up  trouble  for  the  future. 
You  will  be  derelict  in  your  public  duties  if  you  do  not  include  them' 
I  think 

The  Chairman.  We  will  stand  adjourned  mitil  10  o'clock  to- 
mori-ow  morning. 

(Wliereupon,  at  10  p.  m.^  an  adjournment  was  taken  until  Friday 
October  3, 1^19,  at  10  a.  m,)  ^' 


Washington,  D.  C,  October  S,  1919— JO  a.  m. 
Present:  Parties  as  before. 
Met  pursuant  to  adjournment. 
The  Chairman.  Mr.  Lauck,  will  you  resume  the  stand,  please? 

STATEMENT  OF  ME.  W.  JETT  lAUCK—Continued. 

Tlie  Chairman.  Last  night,  Mr.  Lauck,  we  were  considering  the 
comfort  budget  of  $2,000  a  year,  which  you  advocate. 
Mr.  Lauck.  Yes,  sir. 

The  Chairman.  That,  as  I  understand,  is  based  upon  a  family  of 
five? 

Mr.  Lauck.  Yes,  sir. 

The  Chairman.  Is  it  your  thought  that  that  budget  should  pre- 
scribe the  minimum  wage  to  be  paid  to  all  classes  of  labor,  sino-le  as 
well  as  married?  ^ 

Mr.  Lauck.  Yes,  sir.  The  idea  there  was,  as  Pi-of.  Ogbum  ex- 
plained, I  believe,  that  a  man  who  was  of  maturity  should  have  an 
opportunity  to  prepare  or  anticipate  marriage  and  to  be  married  at 
an  early  age,  and  also  this  budget  in  the  early  period  of  his  married 
life  would  enable  him  to  acquire  the  necessary  household  furnish- 
ings and  meet  the  expenses  incident  to  that;  the  general  theory  beint^ 
that  as  the  children  got  older  he  would  have  a  heavier  measure  of 


li 


1948    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

expense,  and  if  he  had  a  surplus  in  the  beginning  it  would  enable  him 
to  get  across  the  more  difficult  period  later  on  in  his  life. 

The  Chairman.  And  this  would  be  based  upon  an  eight-hour  day? 

Mr.  Lauck.  Yes,  sir. 

The  Chairman.  On  that  basis  what  would  the  wage  amount  to  per 
hour? 

Mr.  Lauck.  On  an  actual  eight-hour  day  for  which  we  are  con- 
tending and  a  living  wage  according  to  present  costs  of  living  it 
would  amount  to  approximately  between  75  and  80  cents  per  hour. 

The  Chairman.  Well,  it  is  about  80  cents  per  hour? 

Mr.  Lauck.  Eighty  cents  per  hour.  It  involves  also  the  additional 
principle  of  one  day's  rest  in  seven,  which  is  guaranteed  365  days 
a  year  instead  of  825. 

The  Chairman.  So  that  the  average  wage  for  all  classes  of  em- 
ployees, married  or  single,  would  be  80  cents  an  hour,  or  $6.40  a  day  ? 

Mr.  Lauck.  Yes,  sir ;  on  the  basis  of  living  costs. 

The  Chairman.  Would  you  have  the  wage  apply  to  organized  as 
well  as  unorganized  labor  in  the  railroad  service? 

Mr.  Lauck.  We  are  speaking  in  this  case  of  motormen  and  con- 
ductors, but  that  ought  to  be  the  wage  applicable  to  any  man  or 
woman  of  mature  years;  of  course,  a  man  primarily,  but  the  con- 
ception of  a  living  wage  should  apply  ta  any  class  of  employees  who 
are  mature  and  adult,  you  might  say,  in  the  employ  of  the  company. 

The  Chairman.  Should  the  same  wage  be  paid  to  women  as  to 
men  for  the  same  class  of  work? 

Mr.  Lauck.  Yes;  that  is  a  supplemental  principle  which  is  gener- 
ally acknowledged  and  has  been  during  the  war  and  has  been  em- 
bodied in  the  peace  treaty  also,  of  equal  pay  for  women  as  for  men. 

The  Chairman.  What  is  the  mature  age  that  you  speak  of? 

Mr.  Lauck.  Well,  the  standards  that  have  been  applied  have 
varied  within  a  compass  of  three  years,  and  in  some  decisions  it  has 
been  placed  at  18  years.  The  usual  practice  is  to  place  it  at  21 
years,  however. 

The  Chairman.  If  you  established  a  wage  at  a  minimum  of  80 
cents  an  hour  for  all  classes  of  service  will  you  thereafter  observe 
the  same  relationship  in  the  wage  list  as  you  now  have? 

Mr.  Lauck.  I  think  between  the  different  occupations  varying 
according  to  skill  or  responsibility  or  educational  qualifications  or 
technical,  whatever  it  may  be,  that  the  same  differentials  should  be 
maintained. 

The  Chairman.  What  does  that  wage  amount  to  per  month  ? 

Mr.  Lauck.  I  have  not  computed  that.  We  have  not  gone  into 
the  costs  so  much  because  we  were — it  would  be  $166.66  a  month, 
roughly. 

Tlie  Chairman.  Does  the  record  show  at  what  age  a  man  must  be 
before  he  is  considered  mature  and  entitled  to  this  wage? 

Mr.  Lauck.  I  have  heard  no  testimony  to  that  effect,  but  the  usual 
practice,  so  far  as  my  knowledge  goes,  in  determining  who  is  an 
adult  so  far  as  the  awards  during  the  war,  was  usually  21  years. 

The  Chairman.  What  wages  would  be  allowed  minors? 

Mr.  Lauck.  Usually  where  the  principle  of  a  minimum  rate  has 
been  established,  like  in  the  street-railway  industry  and  some  of  the 
War  Labor  Board  awards  during  the  war,  in  connection  with  com- 
mon labor,  that  was  usually  left — ^there  are  a  great  many  below  21 


proceedings  of  federal  electric  railways  commission.  1949 

who  are  not  only  below  that  age  but  there  are  certain  persons  in 
the  employ  of  the  company  who  are  more  or  less  superannuated  and 
have  given  long  years  of  faithful  service  and  are  probably  disquali- 
fied in  certain  respects  through  age  and  infirmity,  and  that  was  left 
for  mutual  agreement  between  the  organizations  and  the  company 
to  work  out  a  scale  which  would  be  equitable  to  the  company  and  to 
the  employees. 

The  Chairman.  What  is  the  lowest  class  of  labor  in  the  railroad 
service  ? 

Mr.  Lauck.  Usually  the  term  is  applied  to  common  labor,  that  is, 
the  physical 

The  Chairman.  What  does  common  labor  get? 

Mr.  Lauck.  I  do  not  know  in  general  what  it  gets  now.  The  rate 
established  during  the  war  would  range  from  40  to  42^  cents. 

The  Chairman.  Then  if  common  labor  was  getting  40  cents  dur- 
ing the  war  it  would  be  entitled  to  an  increase  of  100  per  cent  ? 

Mr.  Lauck.  Yes,  sir. 

The  Chairman.  Did  they  have  women  that  washed  the  cars  and 
cleaned  the  cars  ? 

Mr.  Lauck.  I  am  not  acquainted  with  the  practical  details  of  the 
industry,  but  I  suppose  they  had  car  cleaners  of  that  type.  The 
steam  railroads  did,  I  know,  during  the  war. 

The  Chairman.  Where  a  common  laborer  gets  40  cents,  what  does 
the  conductor  get  ? 

Mr.  Lauck.  Well ;  there  was  not  a  sufficient  differential  established 
during  the  war  in  favor  of  the  conductors  or  motormen. 

The  Chairman.  You  say  not  a  sufficient  one? 

Mr.  Lauck.  No,  sir ;  due  to  this  fact,  that  there  was  no  exact  de- 
termination of  the  living  wage  during  the  war,  on  the  ground  that 
the  war,  being  an  interregnum,  it  was  considered  better  to  provide  for 
a  subsistence  wage  and  leave  the  question  of  a  living  wage  to  later 
consideration.  But  attempts  were  made  to  take  care  of  the  unskilled 
workman  by  giving  him  at  least  a  subsistence  wage  or  make  a  com- 
promise on  a  subsistence  wage.  The  result  of  that  was  that  usually 
some  minimum  rate  was  established  to  cover  all  these  classes  of  un- 
skilled workmen  and  that  usually  ranged  around  40  to  42  cents.  In 
the  meantime,  however,  through  past  effort  or  precedent  in  the  in- 
dustry, the  motormen  had  certain  levels  established;  they  might 
have  been  35  or  43  cents ;  and  the  usual  award  was  to  add  a  few  cents 
on  to  those,  say,  3, 4,  or  5  cents ;  so  proportionately  he  got  a  much  less 
increase  than  his  differential  over  the  unskilled  man.  and  his  differen- 
tial over  the  unskilled  man  was  greatly  lessened  on  that  account. 

The  Chairman.  I  understand,  but  what  differential  is  there  in 
favor  of  the  conductor  where  the  common  laborer  gets  40  cents? 
What  is  a  conductor's  wage? 

Mr.  Lauck.  The  testimony  has  shown  here  the  conductor's  aver- 
age now,  if  I  recall  correctly 

The  Chairman.  I  do  not  want  the  average  wage.  You  say  the 
National  War  Labor  Board  established  a  minimum  of  40  cents  an 
hour  for  common  labor? 

Mr.  Lauck.  Yes. 

The  Chairman.  When  they  fixed  that  wage  of  40  cents  an  hour, 
what  did  that  fix  for  the  conductor  ? 


1%0    PROCEEDINGS  OF  FEI^RAL  ELECTRICT  RAILWAYS  C05fMISSI01!C, 

Mr.  Lauck.  It  depencled  entirely  on  the  locality.  They  accepted 
the  scales  that  were  already  in  effect.  That  is,  there  might  have 
been  some  localities  wltere  there  was  a  comparatively  low  scale  for 
conductors  and  mc^ormen,  say  35  cents  an  hour,  and  larger  cities 
where  they  would  be  43  cents,  and  sometimes  even  larger.  They 
accepted  those  scales  as  they  stood  and  added  a  certain  increase  on 
the  basis  of  those  scales,  but  sometimes  the  award  was  made  broadly 
inclnsiye;  that  is,  I  remember  in  the  ease  of  New  Orleans  they  had 
a  comparatively  low  rate  for  conductors  and  motormen  and  a  lower 
rate  for  skilled  labor,  and  the  provision  was  inserted  in  the  award 
that  no  rates  should  be  less  than  42  cents,  which  gave  quite  a  large 
increase  to  all  classes  of  employees. 

The  Chair3ian.  Can  you  indicate  approximately  the  difference  in 
the  wages  of  conductoi-s  and  common  labor,  assuming  the  common 
labor  is  getting  40  cents  an  hour  under  your  allowance  i 

Mr.  Lauck.  You  mean  as  a  general  rule? 

The  Chairman.  Yes. 

Mr.  Lauck.  The  average  rate  for  conductors  and  motormen  is 
shown,  although  that  is  disputed  on  the  ground  that  there  have  been 
more  recent  increases.  There  is  a  ccwiftict  of  opinion  as  to  how  ex- 
tensive the  increases  have  been,  and  I  believe  that  data  is  to  be  sub- 
mitted on  that  later. 

The  average  rate,  as  submitted  by  Mr.  Sturgis  in  his  testimony, 
based  upon  the  returns  of  the  local  Amalgamated  Association,  was 
40.04  cents  an  hour  for  motormen  and  conductors,  while  the  rate,  as 
taken  from  the  Bureau  of  Labor  Statistics'  study  of  union  scales  of 
pay,  was  4i^J  cents  an  hour;  so  that  you  might  say  it  ranges  very 
little,  if  any,  above  the  rate  of  common  labor. 

Commissioner  Mfeker.  May  I  ask  a  question  tliere  ? 

The  Chairman.  Certainly. 

Commissioner  Meiker.  Going  back  to  New  Orleans :  Was  the  rate 
established  for  motormen  and  conductors  in  that  award?  * 

Mr.  I^uck.  Yes.  • 

Commisvsioner  Meeker.  What  was  that  rate  ? 

Mr.  Lafck.  I  do  not  know  whether  I  can  definitely  recall  that  or 
not.  There  was  a  comparatively  low  rate  in  New  Orleans  and,  as  I 
recall  it,  it  was  brought  up  to  the  minimum  rate  which  was  then 
established  by  the  board ;  and  I  think  it  was  established  along  about 
43  ct^nts.    Probably  Mr.  Mahon  i-ecalls  that,  or  Mr.  Gadsden. 

Commissioner  Gadsi>en.  I  think  the  basis  of  the  award  was  on  the 
basis  of  the  sectHid  class  of  railways,  commencing  with  43  cents ;  and 
then,  at  a  latter  hearing  all  of  the  southern  cities  were  reduced  to  40 
cents  and  New  Orleans  left  at  43. 

Mr.  Lauck-  My  recollection  is  that  it  was  about  33  cents;  but  it 
rej)i-esented  a  very  considerable  increase  over  the  previous  rate. 

Commissioner  Gai^den.  I  think  their  rate  was  28  cents. 

Mr.  Lauck.  Twenty-eight  cents  or  something  like  that.  That  was 
largely  on  the  basis  of  applying  this  minimum,  not  only  to  common 
labor  but  to  eveiy  class  of  employees. 

The  Chairman.  In  your  judgment,  Mr.  Lauck,  should  there  be  a 
difference  between  the  wages  of  a  conductor  and  tlie  common  laborer? 

Mr.  L^vucK.  Just  my  general  opinion  is,  undoubtedly  so:  yes. 
Tliero  should  be  a  differential,  because  there  is  moi*e  i-esponsibility. 

The  (Chairman.  What  should  that  differential  be? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1951 

Mr.  Lauck.  I  should  think  that  should  be  determined  by  the  prac- 
tice and  precedents  in  the  industry.  I  would  not  care  to  express  an 
opinion  on  that. 

The  Chairman.  Should  it  be  a  considerable  amount? 

Mr.  Lauck.  Not  that  I  would  hesitate,  if  I  knew,  to  say,  Mr. 
Chairman,  but  I  could  not  say  what  the  differential  should  be.  I 
know  there  has  been,  in  some  localities,  a  considerable  differential. 
I  may  be  wrong  about  this,  but  in  the  larger  cities  I  should  think  it 
was  not  as  nmch  as  it  should  be ;  possibly  not  over  25  j^er  cent.  In 
some  of  the  smaller  cities  it  has  ranged  above  that,  I  think,  on  ac- 
count of  the  low  prices  probably  of  Negro  labor  in  the  South. 

The  Chairman.  What  is  the  highest-priced  labor  in  the  railroad 
service  ? 

Mr.  Lauck.  I  don't  know. 

The  Chairman.  I  was  wondering  if  the  shopmen  or  skilled  me- 
chanics got  more  money  than  the  motormen  ? 

Mr.  Lauck.  I  could  answer  that.  Yes;  they  do  get  a  great  deal 
more.  That  was  worked  out  during  the  war,  due  to  the  fact  that 
their  rates  were  generally  standardized,  and  there  was  a  great  in- 
crease in  their  rates  in  a  great  many  of  the  railroad  shops,  for  the 
reason  that  otherwise  they  would  have  gone  to  the  shipyards  and 
munition  factories. 

The  Chairman.  If  common  labor  is  fixed  at  80  cents  an  hour,  do 
you  believe  the  same  relationship  should  exist  between  skilled  labor 
and  common  labor? 

Mr.  Lauck.  I  think  it  would  inevitably  come. 

Mr.  Warren.  You  mean  40  cents,  do  you  not.  Mr.  Chairman? 
You  said  80  cents. 

The  Chairman.  Under  this  standard  scale  ^hicli  they  propose 
common  labor  will  be  80  cents  an  iKMir. 

Mr.  Warren.  Oh,  yes ;  excuse  me. 

The  Chairman.  Then  if  common  labor  is  increased  100  per  cent 
under  the  proposition,  would  that  mean  that  skilled  labor  would  also 
bo  increased  100  per  cent  to  preserve  the  relationship? 

Mr.  Lauck.  No.  I  tliink  that  in  practical  effect  the  motormen  and 
conductors  will  be  highly  gratified  to  receive  a  living  wage,  and  the 
tendency  would  be  further  to  widen  the  differential  astime  went 
on;  but  I  think  that  they  would  feel  that  their  fundamental  request 
for  at  least  a  living  wage  would  be  satisfying  for  a  time  at  least,  be- 
cause their  wages  are  now  so  inadequate  on  a  comparative  basis. 

The  Chairman.  Then  you  believe  that  the  stenographers  and  the 
clerks  and  all  the  employees  in  the  street-railroad  service  of  mature 
age  should  have  at  least  $166  a  month  for  an  eight-hour  day  ? 

Mr.  Lauck.  I  think  that  is  a  fundamental  industrial  right  which 
they  should  have,  and  I  think  that  the  opinion  of  the  world,  the  uni- 
versally enlightened  opinion  of  the  world,  would  support  that ;  that, 
growing  out  of  the  war,  has  come  the  conclusion  on  the  part  of  a 
large  part  of  the  public,  as  well  as  on  the  part  of  the  workers,  .that  if 
w'Q  are  going  to  have  any  measure  of  economic  democracy  at  all,  the 
f undan^ntal,  inalienable,  you  might  say  self-evident — to  use  a  prin- 
ciple of  the  Declaration  of  Independence — right  of  the  worker  is  to  a 
living  wage;  and  if  an  industry  does  not  pay  a  living  wage  it  is 
parasitic  and  should  be  eliminated;  in  other  words,  that  industry. 


1952    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

exists  for  the  common  good  and  not  for  the  deterioration  of  the 
working  classes. 

The  Chairman.  If  such  a  standard  of  wages  should  be  adopted  in 
the  street-car  service,  would  it  naturally  influence  a  similar  plan  in 
the  steam-railroad  world  ? 

Mr.  Lauck.  To  anticipate  the  reply,  I  think  it  should  be  of  uni- 
versal application  in  all  industry. 

The  Chairman.  In  all  industries? 

Mr.  Lauck.  Yes. 

The  Chairman.  Organized  as  well  as  unorganized  ? 

Mr.  Lauck.  Oh,  yes. 

The  Chairman.  And  that  would  affect  the  school-teachers  and  the 
preachers  and  the  farmers;  labor  on  the  farm  and  labor  upon  the 
streets;  white,  colored,  yellow,  and  every  form  of  labor? 

Mr.  Lauck.  Every  form  of  labor,  we  are  contending,  has  an  in- 
alienable right,  just  like  the  political  right  of  free  speech  or  political 
assembly,  to  a  living  wage  in  industry. 

We  do  not  accept  the  conclusion,  however,  that  by  the  establish- 
ment of  this  wage  you  are  going  to  proportionately  raise  prices.  We 
w^ill  go  along  with  this  conclusion,  as  we  have  as  regards  the 
methods  of  corporation  finance,  that  if  you  had  an  equitable  distribu- 
tion of  the  output  of  industry  on  a  basis  of — as  I  understand  this 
commission  is  considering — considering  industry  from  the  stand- 
point of  justice  to  the  interests  of  capital,  the  public,  and  labor,  that 
it  will  not  necessarily  increase  to  a  commensurate  extent  the  cost  of 
production,  the  price  of  the  service. 

The  Chairman.  But  if  the  Government  should  recommend  this 
living  standard,  and  it  should  be  adopted  in  the  street-railway  serv- 
ice, it  would  naturally  have  the  effect  of  working  in  to  almost  all 
other  lines  of  work,  would  it  not? 

Mr.  Lauck.  Oh,  yes;  it  should,  I  think. 

The  Chairman.  So  that  the  natural  result  would  be  a  very  large 
increase  in  the  wage  account  throughout  the  country? 

Mr.  Lauck.  Yes. 

The  Chairman.  Would  not  that  also  have  a  very  marked  in- 
fluence upon  the  increase  in  the  cost  of  living? 

Mr.  Lauck.  No;  I  think  that  is  a  fallacious  point  of  view,  that  by 
increasing  wages  you  increase  the  cost  of  living.  We  were  discussing 
yesterday  that  the  proportion  of  labor  costs  to  total  costs  does  not  jus- 
tify a  conclusion  of  that  kind ;  that  the  selling  price  is  due  to  the  arbi- 
trary determination  of  prices,  you  mi^ht  say.  That  is,  in  the  prob- 
lem which  is  before  the  commission,  if  the  public  interest  is  to  be 
paramount,  if  you  are  considering  the  problem  from  the  public-in- 
terest standpoint,  as  you  are  in  the  street-railway  industry,  if  the 
point  has  been  conceded  that  there  must  be  public  assistance,  and  the 
public  interest  is  paramount,  then  our  contention  would  be  that  the 
earnings  of  this  industry  not  being  diverted,  as  is  usually  the  case  in 
industrial  corporations,  or  not  being  subject  to  artificial  fixation  of 
prices,  the  earnings  would  be  sufficient  to  grant  a  fair  return  to  capi- 
tal and  a  reasonable  return,  reimbusing  them  for  the  investment,  and 
to  pay  these  living  wages  to  labor,  without  a  commensurate  increase 
in  the  cost  of  service,  although  probably  there  would  be  an  increase 
at  first  in  the  cost. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1953 

The  C21AIBMAN.  What  do  you  regard  as  a  fairly  typical  street-car 
line  in  this  country?    Just  name  us  one. 

Mr.  Lauck.  I  hope  you  do  not  think,  Mr.  Chairman,  that  I  am  un- 
willing to  say,  but  I  really  do  not  know.  I  am  not  acquainted  with 
the  technic  of  the  industry. 

The  Chairman.  Can  you  take  the  Cleveland  company  as  fairly 
typical  ? 

Mr.  Lauck.  It  would  all  be  a  matter  of  general  impression  with 
me. 

The  Chairman.  Have  you  got  in  your  possession,  or  can  you  get, 
the  complete  wage  account  of  the  Cleveland  company  ? . 

Mr.  Lauck.  That  is,  the  rates  of  pay  ? 

The  Chairman.  Yes. 

Mr.  Lauck.  I  think  so.  That  company  has  given  us  some  infor- 
mation to  use  in  connection  with  our  exhibits. 

The  Chairman.  Will  you  take  the  wage  list  of  the  Cleveland  com- 
pany and  apply  to  that  the  present  wages  and  the  wages  that  would 
govern  if  the  $2,000  standard  scale  were  adopted,  showing  the  per- 
centage of  increase  in  each  class  of  labor,  observing  the  same  rela- 
tionship between  the  classes  of  labor  which  now  exist?  And  file  that 
so  that  we  can  make  it  a  part  of  the  record  ? 

Mr.  Lauck.  I  understand  it  is  a  vital  consideration — ^the  money 
part  of  it ;  but  we  have  not  put  in  any  testimony  along  those  lines, 
because  we  think  that  if  the  principles  are  correct,  and  the  public 
approves  them,  as  we  think  they  do,  we  think  the  public  is  perfectly 
willing  to  pay  the  cost,  and  anyhow  we  are  standing  on  the  merits 
of  the  principle,  regardless  of  any  cost. 

The  Chairman.  You  would  not  expect  this  commission  to  pass  on 
that  question,  however,  without  loiowing  what  the  effect  would  be  on 
the  industry  and  the  public? 

Mr.  Lauck.  I  think  the  commission  would  want  to  know;  but  I 
think  if  the  principles  are  right,  that  the  question  of  right  and  justice 
supersedes  any  question  of  money. 

The  Chairman.  When  you  work  out  that  scale  for  Cleveland,  will 
you,  at  the  same  time,  show  what  the  effect  would  be  upon  the  rate 
per  passenger  and  per  car-mile,  and  show  what,  under  the  Cleveland 
plan,  would  have  to  be  the  rate  of  fare  under  the  new  adjustment? 

Mr.  Lauck.  That  is,  assuming  the  same  methods  of  management 
and  distribution  of  the  revenue  of  the  industry  ? 

The  Chairman.  Yes. 

Mr.  Lauck.  And  allowing  for  no  improvement? 

Commissioner  Mahon.  Haven't  you  shown  that,  practically  where 
you  show  in  your  evidence  what  it  would  have  cost  to  have  brought 
the  men  up  to  the  standard  of  wage  that  they  should  have  had  ? 

Mr.  Lauck.  That  is  easily  deducible  frgm  our  evidence  as  to  the 
cost  per  revenue  passenger  for  motormen  and  conductors,  which  is 
1.4  cents. 

The  Chairman.  I  think  the  commission  would  like  to  have  the 
exact  figures  and  a  correct  analysis  made. 

Commissioner  Wehle.  Furthermore,  Mr.  Lauck,  I  think  that  what 
the  chairman  wishes  to  have  is  a  computation  based  not  only  on  such 
a  wage  or  salafy  being  paid  to  the  platform  men,  but  to  all  of  the 

160043°— 20 61 


1954    PBOCEEDINOS  OF  FEDEHAL  electric  railways  COMMISSIOIT. 

mature  workei^  in  the  employ  of  the  industry,  whether  clerical  or 
manual. 

Mr.  Lauck.  I  understood  that ;  he  wanted  tlie  existing  differentials 
reflected.  I  would  like  to  say,  however,  that  our  point  of  view  is  we 
would  be  glad  to  furnish  this,  but  we  do  not  consider  that  financial 
considerations  should  militate  against  these  principles.  If  they  are 
right  we  think  they  ought  to  be  adopted. 

The  Chairman.  In  your  consideration  of  this  subject  has  it  oc- 
curred to  you  that  the  adoption  of  this  standard  scale  might  so 
greatly  increase  the  carfare  as  to  largely  reduce  the  riding  habit, 
and  thus  in  the  long  run  to  accompli^i  a  very  great  injury  to  men 
employed  in  the  service? 

Mr.  Lauck.  I  do  not  see  how  that  could  work  out.  I  think  that 
is  not  a  sound  conclusion,  for  tlie  reason  that  we  ai'e  assuming 

The  Chairman.  I  have  not  suggested  it  as  a  conclusion,  but  I 
have  asked  for  your  opinion. 

Mr.  Lauck.  Yes.  I  did  not  mean  that  as  a  criticism,  but  I  was  just 
grabbing  at  the  idea.  Our  idea  is  that  the  public  interest  is  pre- 
dominant and  the  public  is  going  to  protect  fully  and  guarantee  the 
rights  of  capital.  We  think  that  labor  has  certain  fundamental 
rights,  like  capital  has  the  right  to  a  fair  return,  and  labor  has  the 
right  to  a  living  wage.  We  think  the  public  1ms  accepted  that  prin- 
ciple, and  we  know  it  is  the  policy  of  some  of  the  leading  nations  of 
the  world  already  in  a  practical  way.  We  believe  whatever  the  cost 
of  that  may  be  to  the  public,  whatever  it  might  be,  that  the  public  is 
willing  to  pay  for  that.  And  if  it  would  result  in  an  excessive  fare, 
the  public  might  meet  that  in  the  way  of  car  riding  by  remission  of 
taxes  or  by  granting  of  some  form  of  financial  relief  or  otherwise  to 
the  company. 

The  Chairman.  Well,  the  evidence  presented  here  seems  to  indi- 
cate that  in  all  cases  where  fares  are  increased  that  competition  from 
jitney  service  and  other  sources  is  stimulated.  Xow,  if  the  fare 
through  the  adoption  of  your  plan  should  be  largely  increjused, 
would  it  not  have  a  tendency  to  greatly  increase  the  amount  of  auto- 
mobiles used  in  jitney  service? 

Mr.  Lauck.  I  think  so ;  but  I  do  not  think  it  would  have  any  sig- 
nificance, for  this  reason,  that  the  public  supports  hospitals  and  the 
patients  do  not  pay  for  the  cost  of  the  maintenance  of  those  hos- 
pitals, but  the  public  has  decided  that  the  well-being  of  the  com- 
munity demands  that  certain  institutions  of  this  kind  be  maintained, 
hosi)itals  and  siniilar  institutions.  Their  receipts  are  less  than  their 
expenditui'es  and  the  public  meets  the  deficit.     The  public 

Tlie  Chairman.  Then  you  meet  the  situation  by  saying  that  a 
street-car  fare  should  be  one  to  encourage  the  riding  habit  and  the 
public  should  p^  the  deficit  out  of  taxation  ? 

Mr.  Lauck.  Well,  my  point  of  view  is  that  the  public  will  consider 
that;  if  it  thinks  it  is  better  for  the  people  to  ride  and  they  will  not 
ride  at  a  higher  fare,  that  the  public  will  take  proi:>er  measures  to 
give  the  financial  assistance  necessary  to  let  them  ride. 

The  Chairman.  If  you  were  going  to  fix  this  minimum  wage  at 
$166  a  month,  might  it  not  result  in  a  very  large  percentage  of  the 
single  men  in  vour  service,  and  also  a  great  many  married  men  in 
your  service  ridmg  in  flivers  instead  of  on  the  street-cars? 

Mr.  Lauck.  Well • 


PROCEEDINGS  OP  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1955 

The  Chairman.  Would  not  that  apply  to  all  other  classes  of 
labor?  -^ 

Mr.  Lauck.  The  rate  of  pay? 

The  Chairman.  The  rate  of  pay  they  are  given — so  much  money 
that  they  would  have  to  spend  it  for  something,  so  they  would  buy 
automobiles  and  other  things  and  thus  not  ride  on  a  street-car  ? 

Mr.  Lauck.  Well,  I  do  not  think  that  would  be  a  crime  if  they  did 
anything  of  that  kind. 

The  Chairman.  But  what  becomes  of  the  street-car  and  what 
becomes  of  the  opportunity  for  your  men  to  work  in  that  service? 

Mr.  Lauck.  In  other  Words,  if  I  get  your  question,  it  is:  If  we 
increase  the  wages  to  such  an  extent  for  a  living  wage,  that  every- 
body will  have  so  much  money  they  will  buy  an  automobile,  aiid 
therefore  there  will  not  be  any  need  for  the  street-railway  industry. 
I  think  that  is  not  a  sound  conclusion,  because  we  have  not  provided 
in  our  budget  for  anything  beyond  minimum  comfort,  and  they 
"^ould  not  have  the  funds  even  to  buy  a  Ford. 

The  Chairman.  That  is  all,  Mr.  Lauck. 

Commissioner  Mahon.  Mr.  Lauck,  you  do  not  believe  that  labor 
should  pay  a  sacrifice  to  keep  street-cars  going,  do  you  ? 

Mr.  Lauck.  No,  sir.  I  think  there  is  a  great  deal  too  much  tend- 
ency— ^that  is  what  I  was  attempting  to  bring  out — to  lay  stress 
upon  the  sacred  ri^ht  of  capital  to  a  fair  return.  We  do  not  dispute 
that,  of  course.  That  has  been  brought  up  to  a  condition  of  social 
usage,  and  so  forth. 

( commissioner  Meeker.  It  is  part  of  the  Constitution,  too. 

Mr.  Lauck.  It  is  part  of  the  Constitution,  but  we  think  now  under 
this  new  development,  under  the  war,  that  we  are  going  to  have 
industrial  democracy  in  the  right  sense  of  the  word ;  that  there  are 
certain  rights  of  labor,  and  one  of  those  is  the  right  to  a  living  wage 
irrespective  of  what  the  cost  may  be  or  what  the  effect  may  be,  and 
we  believe  the  public  will  afford  it. 

Commissioner  Mahon.  You  do  not  believe  that,  if  modern  inven- 
tions come  along  and  displace  the  street  railw^ay  by  something  that 
is  more  convenient  and  beneficial  to  the  public,  labor  should  sacrifice 
in  the  way  of  a  low  wage  to  conserve  low  fares  and  keep  this  indus- 
try, do  you  ? 

Mr.  Lauck.  Absolutely  not;  and  I  do  not  think  the  public  would 
expect  labor  to  do  that. 

Commissioner  Gadsden.  Mr.  Lauck,  if  I  get  vour  position  cor- 
rectly, it  is  that  this  standard  of  living  that  you  have  described  is  a 
standard  which  you  think  the  public  should  work  toward? 

Mr.  Lauck.  Yes,  sir. 

Mr.  Gadsden.  Not  necessarily  that  it  is  going  to  be  adopted  to- 
morrow or  the  next  day  or  next  month,  but  you  think  it  ought  to  be 
kept  in  view  and  adjustments  made  from  time  to  time  in  the  hopes 
of  reaching  that  standard  at  a  proper  time.  Is  that  about  your 
thought  ? 

Mr.  Lauck.  Well,  I  would  not  make  it  quite  that  indefinite. 
I  should  think  it  ought  to  be  immediately,  so  far  as  realizable  and 
put  into  effect.  I  have  distinctly  brought  out  the  point  of  view,  in 
speaking  and  in  our  brief,  that  we  wish  the  commission  to  recom- 
mend or  sanction  this  principle,  and  the  definite  amount  would  be 


1956    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

•n-orked  out  between  the  organizations  and  the  company  or  any 
adjustment  agencies  that  would  be  created  as  the  result  of  your 
recommendations  or  other  agencies.    We  think  that 

Commissioner  Gadsdex.  What  I  had  in  mind  was  this,  that  if  the 
standards  which  you  are  advocating  were  put  into  effect  immediately 
or  in  the  near  futui^  they  would  anticipate,  perhaps,  by  a  great  many 
years  the  adjustments  of  the  relations  between  the  companies  and  the 
public,  because  we  can  hardly  suppose  that  the  relations  between  the 
companies  and  the  public  can  be  w^orked  out  in  a  year  or  two  years — 
in  a  long  time.  Now,  if  these  readjustments  of  the  labor  standards 
are  put  into  effect  in  advance  of  that,  do  jou  not  think  that  you  are 
going  to  precipitate  a  much  greater  crisis  in  the  industry  than  you 
have  to-day  ? 

Mr.  Lauck.  I  think  if  you  arbitrarily  and  immediately  apply  them 
it  would  lead  to  a  great  dislocation  and  the  utter  collapse,  perhaps, 
of  the  industry. 

Commissioner  Gadsden.  And  probably  defeat  its  purpose,  because 
some  roads  would  have  to  go  out  of  business  and  labor  would  lose 
its  employment. 

Mr.  Lauck.  But  the  point  is  this :  We  have  assumed  that  the  com- 
mission would  recommend  a  permanent  policy  to  rehabilitate  the 
street  railways  and  to  work  out  these  relations*  with  the  public  and, 
as  a  part  of  that  policy,  there  should  be  the  sanction  of  these  prin- 
ciples, and  as  this  was  worked  out  these  principles  would  be  put  into 
effect. 

Commissioner  Gadsden.  Well,  that  is  what  I  asked  you  at  first. 

Mr.  Lauck.  Yes. 

Commissioner  Mahon.  Mr.  Lauck,  turning  back  to  Uie  Philadel- 
phia plan  as  spoken  of  yesterday,  do  you  believe  that  hanging  a  sign 
out  on  a  car  and  saying,  "  Come,  ride  with  me,"  is  going  to  brmg 
riders  to  the  railroad  service  ? 

Mr.  Lauck.  I  certainly  do  not:  no,  sir.  It  depends  a  good  deal 
on  the  car,  and  the  service,  and  the  desire  for  riding,  and  the  need 
for  riding. 

Commissioner  Mahon.  Do  you  believe  that  the  demands  of  labor 
will  be  met  by  giving  us  a  picnic  once  or  twice  a  year  at  Willow 
Grove  ? 

Mr.  Lauck.  No;  I  think  those  picnics  are  a  palliative  for  the  de- 
mands of  labor. 

Commissioner  Mahon.  You  have  made  quite  a  study  of  the  indus- 
trial conditions  of  the  world.  Do  you  not  consider  that  the  Phila- 
delphia plan  is  merely  what  we  call  in  the  industrial  world  corpora- 
tion "  feudalism  "  ? 

Mr.  Lauck.  Yes;  I  described  it  last  night  as  paternalism.  I  think 
another  good  word  w  ould  be  "  feudalism."  It  is  the  idea  that  the 
management  in  an  enlightened  way  is  doing  good  for  the  employees 
and  thus  bringing  about  the  cooperation  of  the  employees,  and*^the 
employees  are  accepting  what  the  management  in  its  great  wisdom 
may  think  is  the  proper  thing  for  the  employee. 

Commissioner  Mahon.  And  they  are  forced  to  accept  that  if  they 
remain  in  that  service? 

Mr.  Lauck.  Yes.  If  they  should  protest  I  think  the  whole  system 
would  go  to  pieces.    It  is  like  in  the  cotton  mills  in  the  South  a  good 


^i 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1957 

deal,  the  welfare  work  and  other  institutions  all  over  the  country; 
the  same  principles  apply. 

Commissioner  Mahon.  You  were  describing  the  labor  movement 
here  m  answer  to  some  questions  which  were  asked  you.  You  stated 
that  the  formation  of  the  local  union— or  left  that  'impression— was 
merely  a  matter  of  having  cooperation  in  the  case  of  industrial 
trouble.  I  want  to  ask  you  if  the  correct  view  or  the  position  and 
policy  of  labor  is  not  that  of  internationalism  rather  than  national- 
ism ni  the  form  of  wage  conditions? 

Mr.  Lauck.  Most  all  of  our  organizations,  so  far  as  I  know,  are 
organized  on  international  lines;  that  is,  so  far  as  Canada  and  the 
United  States  are  concerned,  and  affiliations  with  other  organiza- 
tions in  other  countries  tlirough  federations. 

Commissioner  Mahon.  The  idea  is  that  the  trades  shall  in  an 
international  manner  protect  and  advance  their  interests.  Is  not 
tliat  the  policy? 

Mr.  Lauck.  I  think  so.  It  is  more  and  more  developing  in  that 
connection  and  becoming  stronger  all  the  time. 

Commissioner  Mahon.  And  that  the  men  engaged  in  anv  par- 
ticular line  of  business  as  workmen  feel  that  their  interest  and  the 
interest  of  that  occupation  is  one  that  they  should  generally  pro- 
mote and  advance  for  the  welfare  not  only  of  the  emplover  but  all 
the  men  and  women  engaged  in  that  line  of  work  ? 

Mr.  Lauck.  To  establish  standards  w  hich  will  be  labor  standards 
you  might  say,  of  work  and  compensation  which  will  be  of  general 
application  iiationally  and  as  the  peace  treaty  puts  it,  internation- 
ally, due  regard  being  had  for  the  different  habits  of  different  people 

Commissioner  Mahon.  In  your  investigation  of  the  international 
trade  unions,  what  do  you  find  in  the  way  of  developing  these  in 
the  way  of  benefits,  and  so  on  ?  Do  you  find  that  it  is  more  than 
merely  that  of  assisting  them  in  striking? 

Mr.  Lauck.  Oh,  undoubtedly  it  extends  not  only  to  the  range  of 
compensation  and  labor  standards  but  to  c^ll  forms  of  activity  look- 
ing to  the  protection  of  the  individual  and  his  health,  happiness,  and 
recreation  and  his  educational  opportunities  and  provision  for  old 
age  and  death  and  all  forms  of  social  amelioration,  you  might  say  • 
also  political  in  a  certain  sense.  * 

Commissioner  Mahon.  Do  you  happen  to  know  wliat  are  some  of 
the  main  demands  of  the  American  Federation  of  Labor  in  the  way 
of  legislation  or  education,  and  all  those  things? 

Mr.  Lauck.  So  far  as  I  know,  they  are  advocating  measures  for 
vocational  education,  improving  of  the  efficiency  and  skill  of  the 
workers 

Commissioner  Mahon.  For  free  schools? 

Mr.  Lauck.  For  free  schools,  payment  of  increased  salaries  to 
teachers,  and  for  a  general  increase  of  the  appropriations  for  edu- 
cation which  have  been  very  inadequate  in  this  country. 

Commissioner  Mahon.  The  men  isolated  in  a  local  organization 
of  any  kind,  can  they  do  much  or  take  much  part  in  that  general 
Avork  for  which  labor  is  struggling? 

Mr.  Lauck.  No;  their  labor  would  be  ineffective,  just  as  all  or- 
ganizations to  be  effective,  capital  and  social  and  all  forms,  must 
be  organized  on  as  w  ide  a  basis  as  possible  in  order  to  be  as  effective 
as  possible.    That  is  the  underlying  concept  of  the  labor  movement. 


'if 


1958    PBOCEEDINGS  OF  FBMJRAL  ELECTRIC  RAILWAYS  COMMISSIOfT. 

Commissioner  Mahon.  Thnt  is  all. 

Mr.  Lauck.  They  would  be  ineffective  locally,  I  might  say. 
Commissioner  Wehle.  One  of  the  prreat  aims  that  seem  to'  lie  be- 
fore the  economic  world  is  the  greater  eflfectualization  of  manage- 
ment and  of  labor,  is  it  not? 
Mr.  Lauck.  Yes. 

Commissioner  Wehle.  We  have  seen  in  connection  with  the  Phila- 
delphia plan,  so  called,  that  the  management  in  Philadelphia  has 
brought  about  a  greater  productiveness  of  the  platform  labor  in 
the  industry,  or  at  least  that  is  what  has  been  suggested  and  main- 
tained by  Mr.  Joyce,  who  appeared  for  the  Philadelphia  Rapid 
Transit  Co.  Is  there  at  present,  to  your  knowledge,  any  well- 
defined  movement,  or  any  movement  at  all,  among  the  members  or 
leaders  among  the  Amalgamated  Association  of  Street  Railway  Em- 
ployees to  bring  about  a  greater  efficiency  and  greater  productive- 
ness of  the  employees  of  the  company  who  are  unionized? 

Mr.  Lauck.  I  do  not  think  there  is  any  actual  concrete  program 
on  by  the  Amalgamated  in  that  sense,  and  I  do  not  thmk  that 
there  is  any  on  in  Philadelphia  on  the  part  of  the  employees,  but  I 
do  think  if  you  would  adopt  an  enlightened  policy  of  industrial 
statesmanship  as  applied  to  the  street  railways,  where  it  was  evi- 
dent that  the  employees  and  capital  as  the  result  of  their  joint 
efforts  for  productiveness  would  have  an  equitable  pai-ticipation  in 
the  output  of  the  industry,  that  it  would  accelemte  that  to  a  re- 
markable extent  and  you  would  have  the  closest  cooperation  in  that 
way  from  both  factors.  We  do  not  think,  or  I  do  not  think,  that 
unless  you  do  adopt  these  principles,  the  industry  is  assuming  it 
is  going  to  be  conducted  for  the  common  good;  unless  you  apply 
that  to  labor  and  capital,  and  especially  to  labor,  you  can  not 
expect  any  cooj^eration  in  producing,  because  you  remove  the  ele- 
ment which  would  bring  about  cooperation. 

Commissioner  Wehle.  Among  the  employees  of  completely  union' 
ized  traction  companies  have  you  discovei'ed  any  movement  among 
the  union  nien  themselves  to  undertake  to  bring  about  a  greater 
effectualization  of  their  eflForts  for  the  company  wliere  the  unions 
have  complete  control  and  where  they  have  that  control  with  the 
full  cooperation  of  the  companies  themselves? 

Mr.  Lauck.  I  am  not  sufficiently  acquainted  with  the  industry  to 
answer  that  dogmatically,  but  answering  it  in  general,  I  would  say 
no ;  because  I  do  not  think  the  incentive  has  been  placed  there.  But 
I  think  it  will  be  under  the  principles  that  we  are  advocating. 

Commissioner  Wehle.  Is  it  your  opinion  that,  in  general,  in  or- 
ganized labor  the  workers  should  be  brought  to  take  an  interest 
in  their  own  productiveness? 
Mr.  Lauck.  Undoubtedly. 

Commissioner  Wehle.  How  would  you  propose  to  bring  that 
about  ? 

Mr.  Lauck.  Fundamentally,  I  would  bring  it  about  by  exactly 
■what  we  are  advocating  here — a  basic  equitaWe  participation  in  the 
output  of  the  industry  and  the  granting  of  proper  hours  and  proper 
-conditions  of  work. 

Coiumissioner  Weiile.  Now,  assuming  that  you  have  the  equi- 
table basis  and  propei-  hours  and  conditions  of  work  and  have  those 


,        FROCEEDIXOS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION,    1959 

fundamental  conditions  that  you  ^y  are  a  prerequisite  to  bringing 
about  the  state  of  mind,  what,  then,  would  you  say  as  to  the  methods 
or  proper  polict\'  or  the  principles  that  should  be  adopted  by  or- 
ganized labor  with  reference  to  the  effectiveness  of  its  own  efforts? 

Mr.  Lauck.  I  think  there  should  be  the  fullest  cooperation  on  the 
part  of  organized  labor  and  every  effort  on  the  part  of  the  mana- 
gerial end  of  the  business  to  reduce  costs  or  increase  output  per 
dollar  of  outlay  for  labor  and  the  fullest  cooperation.  I  thmk  you 
would  have  it.  But  you  have  a  situation  now  where  the  coopera- 
tion of  labor  will  result  in  the  absorption  of  its  efficiency,  and  they 
do  not  think  they  have  a  show  to  get  it. 

Commissioner  Wehle.  I  am  not  discussing  that.  Assuming  that 
you  have  the  state  of  mind  through  the  conditions  that  you  are 
urging  upon  us,  how  w^ould  you  proceed  to  obtain  tliat  effectualiza- 
tion of  labor? 

Mr.  Lauck.  Just  stating  the  general  principle,  by  developing  the 
highest  decree  of  cooperation  between  labor  and  the  management. 

Commissioner  Wehle.  How  do  you  propose  that  that  snail  be 
done  ? 

Mr.  Lauck.  Do  you  mean  by  machinery  or 

Commissioner  Wehle.  Well,  yes;  call  it  machinery,  if  you  will, 
but  what  kind  of  leadership,  not  in  general  terms,  but  actually— 
how  are  you  going  to  produce  among  the  workers  through  tlicir 
leaders  a  real  interest  in  delivering  a  fair  day's  work  for  a  fair 
day's  pay  ? 

Mr.  Lauck.  By  giving  a  fair  day's  pay  to  start  with 

Commissioner  Wehle.  We  have  assumed  that,  so  do  not  let  us 
go  over  that  ground  again. 

Mr.  Lauck.  Weil,  you  have  it,  then.  I  do  not  think  there  is  any- 
thing else  to  discuss. 

Commissioner  Wehle.  It  has  been  maintained,  you  know,  that 
if  you  have  a  group  of  workers  who  collectively  bargain  for  j>osi- 
tion,  and  get  a  uniform  wage  irrespective  of  the  individual  per- 
formance of' any  one  man  in  the  group,  you  do  not  get  the  effi- 
ciency to  which  the  public  is  entitled  in  order  to  get  service  and  get 
goods  and  get  commodities,  or  whatever  the  production  in  ques- 
tion is,  at  t!ie  lowest  cost  practicable  to  the  public. 

Mr.  Lauck.  Well 

Commissioner  Wehle.  Now,  wait  a  minute.  Of  course,  in  stat- 
ing that  point  of  view  I  am  assuming  that  the  union  has  attained 
to  what  it  wants — ^that  is,  the  hours,  wages,  and  conditions  to  which 
it  theoretically  is  entitled;  and  since  you  have  come  hwere  and  given 
us  so  much  helpful  data  and  have  given  us  so  clearly  your  ideas  on 
this  subject,  it  seems  to  me  we  can  well  ask  .you  to  go  mto  that  funda- 
mental, sharp  question  which,  after  all,  does  confront  the  unions 
as  well  as  the  public,  in  the  last  analysis,  on  account  of  the  close 
pressure  of  economic  necessity  upon  all  of  the  nations  of  the  world 
to-day  and  the  greater  difficulty  of  producing  the  g(Kxis  which  the 
world  needs  for  consumption. 

Mr.  Lauck.  My  answer  to  that  would  be  that  I  would  assume 
that  the  management  would  lay  down,  through  agreement  with 
labor,  certain  qualifications  which  the  holders  of  the  job,  so  to 
speak,  must  meet,  and  that  the  management  would  be  responsible 


1960    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

to  tlie  public  in  that  respect;  that  they  would  see  that  the  proper 
amount  of  productivity  should  be  attained  by  labor,  or  through 
agreement  with  labor,  for  the  work  that  they  were  to  perform,  and 
that  if  the  work  is  not  performed,  the  management  would  elimi- 
nate those  workers. 

Commissioner  Wehle.  Tlien  your  suggestion  is  that  under  per- 
fected system  of  unionization  arid  of  cooperation  between  the  union 
and  the  management,  the  individual  member  of  the  union  should 
not,  merely  by  belonging  to  the  union  and  being  an  employee  of 
the  company,  i-eceive  the  uniform  wage  that  all  other  employees 
receive  in  the  same  grade  of  work,  but  that  he  may  be  dismissed 
for  incompetency  to  perform  that  work,  or  that  he  may  perhaps 
be  graded  down  and  receive  less  than  the  better  workei-s  in  the 
union  who  perform  a  higher  degree  of  service.     Is  that  it? 

Mr.  Lauck.  Not  exactly.  I  would  say  that  he  should  not  be 
graded  down.  It  would  be  incumbent  upon  the  union,  in  admitting 
men  to  its  membership— it  would  agree  with  the  company,  neces- 
sarily, regarding  the  qualifications  which  went  with  the  job;  and 
the  union  would  have,  of  course,  in  its  standards  for  membership, 
to  have  only  members  who  could  meet  the  requirements;  otherwise, 
the  union  would  be  guilty  of  bad  faith. 

Commissioner  Mahon.  They  require  that  now,  do  they  not? 
Mr.  Lauck.  I  think  all  of  them  i-equire  that  now. 
Commissioner  Wehle.  Do  unions  at  tliis  time  strictly  require  a 
high  standard  of  efficiency  of  workmanship  in  their  membership  ? 

Mr.  Lauck.  I  think  so ;  undoubtedly  they  have  standards.  I  know 
most  all  other  trades  have,  and  I  am  certain  the  Amalgamated  has, 
that  a  man,  to  be  a  conductor  or  motorman,  must  meet  the  tests  of  the 
management,  even  at  the  present  time.  That  is,  there  could  not  be 
an  arbitrary  leveling  up ;  of  taking  a  man  into  the  union  and  ipso 
facto  he  would  get  a  motorman's  pay,  because  the  whole  thnig 
would  be  based  upon  bad  faith  on  that  assumption. 

Commissioner  Wehle.  Do  you  know  of  any  instances  where  the 
union  officials  inspect  the  workmanship  or  performance  of  their  own 
members  and  bring  about  the  dismissal  of  their  own  members  from 
emi)loyment,  for  inefficiency? 

Mr.  Lauck.  I  do  not  know  of  specific  cases  at  all,  but  I  know  that 
trade  unions  have  certain  specific  requirements  based  upon  the  re- 
quirements of  the  trade,  and  a  man  is  supposed  to  meet  those  re- 
quirements when  he  is  a  member  of  the  union. 

Commissioner  Wehle.  Do  you  know  whether  such  requirements 
are  actually  used  before  men  are  allowed  to  join  the  Amalgamated 
Association  of  Street  and  Electric  Railway  Employees? 

Mr.  Lauck.  I  do  not  know  what  the  entrance  requirements  of  the 
Amalgamated  are.  I  suppose  that  after  a  man  has  met  the  require- 
ments of  the  company  as  to  being  able  to  be  a  motorman  or  conduc- 
tor, he  is  qualified  for  membership.  I  do  not  really  know.  You  will 
have  to  ask  Mr.  Mahon  about  that. 

Commissioner  Wehle.  Perhaps  Mr.  Mahon  could  answer  that 
question.   Could  you  Mr.  Mahon  ? 

Commissioner  ^Hahon.  What  is  that? 

Commissioner  Wehle.  The  employment  by  a  street-railway-com- 
pany of  men  as  platform  operators.  Does  that,  in  itself,  qualify 
such  a  man  for  membership  in  the  Amalgamated? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1  96.1 

Commissioner  Mahon.  No,  sir.  The  agreements  of  our  associa- 
tion with  the  companies— some  of  them  vary  as  to  the  length  of 
tmie,  but  there  are  either  60  or  90  days. 

A  man  coming  into  the  service  is  on  probation  for  either  60  or 
90  days.  At  the  end  of  that  period,  if  he  is  passed  upon  by  the 
company  as  bemg  competent,  he  then  is  accepted  by  our  organiza- 
tion ;  but  they  first  pass  upon  his  competency,  with  a  period  which 
varies,  as  I  say,  in  different  contracts,  some  60  and  some  90  days. 

I  am  more  familiar  with  my  own  home  city,  Detroit,  and 'there 
we  have  a  period  of  90  days.  If,  at  the  end  of  90  days,  the  foreman 
is  not  yet  satisfied  with  the  man  he  may  ask  the  committeeman  at 
that  barn  to  give  him  a  longer  time,  and  then  a  longer  time  is 
granted;  but  the  period  is  there  90  days  in  which  the  man  is  on 
probation. 

Then  if  found  competent  by  the  company  and  accepted,  he  be- 
comes a  member  of  the  organization  and  comes  under  the  terms  of 
the  contract.  The  contract  provides  that  our  men  shall  work,  the 
work  they  shall  do ;  and  if  they  violate  that  they  are  subject  to 
discipline,  discharge,  suspension,  and  so  on. 

The  matter  of  the  union  investigating  and  disciplining— that  is  not 
their  work;  that  is  on  the  other  side;  the  management  looks  after 
that,  that  is  their  end  of  it,  to  see  that  the  work  is  carried  outr 

Commissioner  Wehle.  But  what  I  am  looking  after  in  my  ques- 
tions to  Mr.  Lauck,  Mr.  Commissioner,  is  some  equivalent  under  a 
condition  of  unionization,  to  that  degree  of  cooperation  which  Com- 
missioner Sweet  has  been  dwelling  upon  in  connection  with  the 
Philadelphia  situation,  or  in  connection  with  what  he  conceives 
to  be  the  Philadelphia  situation,  if  you  please. 

Commissioner  Mahon.  Let  me  answer  you.  Commissioner,  just  on 
a  point  there.    You  have  asked  as  to  the  condition  of  the  men  in 
this  service.     Of  course,  Philadelphia  has  an  extraordinary  set  of 
men  that  no  other  company  in  the  world  has  in  their  employment 
from  evidence  that  has  been  submitted  here.  ' 

Of  course,  I  will  eliminate  them  from  anything  that  I  may  speak 
of.  But  in  the  street-railway  business  the  company  aims  to  pick  and 
select  the  best  men ;  and  hundreds  of  men  come  in  that  do  not  remain 
in  the  service,  that  are  not  competent,  and  pass  out  of  the  service 

During  the  war  this  industry,  like  all  other  industries,  has  been 
up  against  the  question  of  labor.  We  had  out  of  our  organization 
possibly  12,000  or  15,000  men  in  the  war,  so  that  they  had  to  take 
anything  m  the  way  of  labor  to  meet  the  situation. 

Now,  however,  that  we  are  dropping  back  to  normal,  that  is  being 
eliminated  and  getting  back;  and  they  have  no  doubt  the  best  set 
of  men  because  they  are  all,  as  we  say,  "  hand-picked  "—carefully 
selected  for  the  occupation,  and  if  they  do  not  qualify  they  ffet  out 
of  it.  ^  J         .   6  v 

Commissioner  Wehle.  Mr.  Lauck,  then  your  conclusion  is  that 
generally  speaking,  the  unions  have  ahead  of  them  in  this  country 
as  a  part  of  their  future  program  and  as  they  gain— or  if  they 
gam— more  and  more  of  the  ground  for  which  they  are  seeking  eco- 
nomically, the  task  of  stimulating  among  their  own  workers  a  desire 
for  greater  production  and,  to  use  j^our  phrase  of  "paternalism" 
that  that  impulse  must  come  and  should  come  from  the  leaders  of 


1962     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

ihi-  unions  who  do  their  bargaining  for  them  rather  than  and  in 
preference  to  coming  from  the  management  which  is  in  a  sense  on 
tlie  other  side  of  the  table? 

Mr.  L.vucK,  Yes.  And  that  when  the  workers  feel  that  they  have 
their  fundamental  rights  satisfied  they  will  very  quickly  and  auto- 
matically and  spontaneously  respond  to  that  impulse. 

Commissioner  Wehle.  f>o  you  think  or  not  that  tlwit  thought 
that  we  have  just  been  discussing  is  one  that  should  at  this  time  re- 
ceive the  attention  of  union  leaders? 

Mr.  Lauck.  Of  course,  out  of  the  war  has  come  the  demand  for 
collective  bargaining,  and  a  great  many  employers  hesitate  to  recog- 
nize the  union,  because  they  look  upon  tlie  union  with  distrust  be- 
cause they  fear  it  will  restrict  production. 

Commissioner  Wehle.  They  fear  it  will  standardize  mediocrity, 
do  they  not? 

Mr.  Lauck.  They  fear  that  and  they  fear  that  there  will  l>e  re- 
strictions on  output;  and  no  doubt  the  attitude  of  the  employer 
like  in  the  big  industrial  corix>rations  like  the  Bethlehem  Steel*  or 
the  General  Electric,  where  they  have  a  system  of  collective  bargain- 
ing, is  that  they  think  they  can  get  a  greater  measure  of  return  from 
cooperation  and  the  elimination  of  the  trade-union  leader.  I  think 
that  they  are  sowing  the  wind  and  going  to  reap  the  whirlwind,  be- 
cause temporarily  the  condition  may  be  better,  but  [permanently,  on 
i\  basis  of  broad  constructive  policy,  I  think  the  more  farsighted 
employer  and  the  one  Avho  has  the  keener  insight  into  present-day 
tendencies,  is  realizing  that  these  schemes  are  simply  passing  and 
that  the  way  to  build  soundly  and  for  the  future  is  by  recognizin**- 
the  union  and  building  on  that  basis.  *^ 

Cornmissioner  Wehle.  Does  it  seem  to  you  that  the  contention  of 
unicmism  to-day  would  be  received  more  readily  by  capital  and  the 
management  if  they  were  accompanied  by  a  constructive  movement 
among  the  union  leaders  to  efFectualize  the  labor  of  the  members 'of 
the  union? 

Mr.  Lauck.  Yes;  I  think  that  would  be  true  if  the  unions  also 
would  be  assured  of  their  fundamental  rights  from  capital. 

I  think  it  is  due  to  the  conflict  between  the  two  and  the  mutual 
feeling  of  distrust  for  each  other,  which  ought  to  be  eliminated  by 
nnitual  agreement  as  to  fundamental  rights. 

Commissioner  Wehi^.  But  do  you  think  that  some  of  the  distrust 
on  the  part  of  the  management  and  capital  would  disappear  if  the 
contentions  of  unionism  to-day  were  accompanied  by  such  a  cx)n- 
structive  movement  looking  to  a  greater  effectualization  of  union 
lal)or  ? 

Mr.  Lauck.  I  think  so.  But  I  will  illustrate  how  it  does  not  meet 
with  the  i«six)nse  that  it  should.  As  vou  are  well  aware,  Mr.  Com- 
missioner, during  the  war,  in  the  effort  to  get  production  it  was 
almost  impossible  at  first  to  increase  production  under  piece  rates 
for  the  reason  that  labor  had  found  that  when  it  dul  increase 
pioduction  under  piece  rates  the  piece  rates  were  cut.  That  is  not  a 
inatter  of  theory ;  that  is  a  well-known,  established  fact,  especially  in 
the  shipyards  and  munition  plants. 

Then  the  Government  intervened  and  said,  "Now,  if  labor  in- 
creases Its  j)roduction,  the  piece  rate  should  not  be  cut."  The  agree- 
ment was  reached  that  the  piece  rate  should  not  be  cut,  thus  assuring 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1963 

to  labor  further  participation  in  the  results  of  its  work,  instead  of 
its  being  absorbed  by  the  capital  factor  in  the  industry ;  and  the  re- 
sult of  it  was  a  100  or  200  per  cent  increase  in  the  production  on  the 
part  of  labor  and  capital  in  building  ships.  That  is  a  matter  of 
record.  And  you  had  there  the  fullest  cooperation,  because  of  the 
recognition  of  this  right;  and  it  was  mutually  advantageous  to  the 
employer  and  employee,  because  the  employers'  profits  increased  and 
labor's  compensation  increased ;  and  the  Government  got  more  ships 
or  more  munitions,  as  the  case  might  be. 

Then,  on  the  other  hand,  for  instance,  two  weeks  ago  in  Canada, 
when  the  industrial  conference  wa^>  called  by  the  Dominion  Govern- 
ment for  the  purpose  of  working  out  this  industrial  bill  of  rights 
in  Canada — which  the  President  has  called  for  next  week  here— and 
the  same  hours  we  are  discussing,  to  give  them  an  official  sanction, 
if  possible,  through  the  agreement  of  capital  and  labor.  The  plea  of 
the  manufacturer  in  Canada  was  that  we  can  not  adopt  these  because 
we  must  produce,  we  must  get  all  we  can ;  and  the  reply  of  labor  was 
that  we  are  willing  to  produce,  but  we  are  not  willing  to  produce  for 
the  manufacturer;  we  are  willing  to  produce  for  Canada:  we  will 
produce  for  the  good  of  the  people  of  the  world,  but  we  will  not 
produce  for  the  capital  factor  in  industry.  That  meant  that  there 
must  be  some  agreement,  that  both  factors  were  to  be  productive,  the 
rights  of  each  and  the  participation  of  each  must  be  equitable. 

Commissioner  Wehle.  My  question  to  you — and  I  would  like  to 
get  an  answer  on  it,  really 

Mr.  Lauck.  I  was  not  seeking  to  evade  your  question  at  all. 

Commissioner  Wehle.  You  have  not  answered  my  question  vet, 
Mr.  Lauck.  ^  m  j     , 

I  have  said,  assuming  that  all  the  conditions  that  lalx^r  is  asking 
for  are  met — that  is,  asking  for  as  you  state  them — that  is,  that  there 
shall  be  a  fair  wage,  fair  conditions,  fair  hours  for  labor,  and  a  fair 
return  for  capital—assuming  that  those  are  met,  first,  is  it  desirable 
that  union  leaders  should  devote  themselves  to  bringing  about  a 
gi-eater  effectualization  of  union  labor?  Now,  can  you  answer  that? 
I  do  not  want  you  to  answer  it  yes  or  no  unless  you  feel  that  you  can. 

Mr.  Lauck.  It  is  a  very  general  question,  of  course.  I  think  it 
would  be  incumbent — if  I  may  answer  it  in  this  way — I  do  not  seek 
to  evade  it,  because  I  think  it  is  one  of  the  fundamental  responsi- 
bilities of  labor  that  they  should  cooperate  to  the  fullest  extent 
in  obaining  maximum  production  under  the  conditions  which 
I  have  outlined — I  think  it  would  be  incumbent  upon  the  rank 
and  file  of  labor  and  upon  the  leadership  and  all  connected  with 
labor  to  obtain  the  maximum  pioduction;  I  think  they  would,  be- 
cause they  would  realize  that  if  they  did  obtain  it  they  would  have 
an  equitable  participation  in  it  or  their  rights  would  be  protected; 
but  I  do  not  think  they  will,  under  the  present,  as  long  as  they 
do  not  have  the  rights;  and  I  do  not  think  they  will,  under  the 
Philadelphia  plan,  permanently,  because  I  think  it  will  fall  of  its 
own  weight. 

Commissioner  Wehle.  You  say  that  you  do  not  think  that  union 
labor  will  interest  itself  in  a  higher  degi-ee  of  productiveness  until 
it  gets  all  that  it  is  asking  for 

Mr.  Lauck.  I  did  not  say  that • 


H 


1964     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

Commissioner  Wehle.  Wait  a  minute.  I  do  not  want  to  mis- 
quote you.     Strike  that  out 

Mr.  Lauck.  Until  it  gets  its  fundamental  riglits. 

Commissioner  Wehle.  I  will  make  my  question  read  that  way, 
then — until  it  gets  its  fundamental  rights. 

I  want  to  ask  you  whether  from  your  information  and  from  your 
observation  of  the  industrial  struggle  it  would  be  to  the  interest  of 
union  labor  to-day,  when  it  is  standing  out  for  the  conditions  which 
it  believes  are  essential  to  human  happiness — ^the  assurance  that 
human  labor  is  working  on  this  problem  of  the  effectualization  of 
labor. 

Commissioner  Mahon.  Does  the  gentleman  assume  that  it  is  not? 

Commissioner  Wehle.  Well,  Mr.  Lauck  has  said,  as  I  understood 
him,  that  it  is  not  doing  that  to  the  extent  that  it  might. 

Mr.  Lauck.  I  say  that  it  is  not  attaining  the  maximum  coopera- 
tion that  you  would  get;  that  there  is  a  conflict  now.  The  siime 
situation  would  be  true  of  a  man  who  did  not  have  the  right  of  free 
speech  under  his  government.  You  could  not  expect  him  to  be  en- 
thusiastic about  the  government — like  an  autocratic  government. 

If  capital  was  being  subjected  to  demagogic  legislation,  and  being 
deprived  of  its  profits  without  due  process  of  law,  or  to  class  taxa- 
tion, under  oUr  Government,  you  could  not  expect  the  cooperation  of 
capital. 

While  we  have  cooperation  now  between  capital  and  labor,  we  will 
never  reach  the  maximum  of  that  or  the  real  basic  possibilities  in  it, 
until  we  have  an  extension  of  the  same  rights  to  industry  as  we  have 
politically. 

Commissioner  Wehle.  Let  me  turn  the  figure  just  for  a  moment. 
?  Do  you  think  that  if  the  American  Electric  Railway  Association 
were  to  come  to  this  commission  and  say,  or  to  come  to  the  public 
and  say  that  the  American  Electric  Railway  Association  has  gradu- 
ally become  awakened  to  the  fact  that  management  of  the  street- 
railway  companies  has  been  inefficient,  and  it  is  addressing  itself 
now  throughout  its  entire  membership  to  bringing  about  a  higher 
degree  of  efficiency  in  management,  so  as  to  give  the  public  the  great- 
est benefit  possible  of  the  etfoi-ts  of  capital  and  labor  in  the  industry ; 
supposing  that  that  were  done  by  the  American  Electric  Railway 
Association,  together  with  a  constructive  plan  for  bringing  about 
such  a  management  in  the  future  of  all  electric-railway  properties  in 
cities:  Does  it  not  seem  to  you,  then,  that  the  public,  examining  that 
plan  and  studying  it  might  be  a  good  deal  more  apt  to  make  con- 
cessions that  it  would  otherwise  be  unwilling  to  make  ? 
Mr.  Lauck.  Undoubtedly,  yes. 
'  Commissioner  Wehle.  Do  you  think  that  the  American  Electric 
Railway  Association  membership  would  be  justified  in  saying,  "No* 
we  will  make  no  assurances  to  you  of  that  sort  at  all ;  you  nmst  first 
give  us  the  ideal  conditions  we  are  seeking  for,  and  then  we  will  ad- 
dress  our  minds  to  the  subject  of  effectualization  of  management? 

Mr.  Lauck.  I  do  not  think  that  the  American  Electric  Railway 
Association — and  I  am  certain  the  employees  have  not — have  taken 
any  such  attitude.  If  that  is  your  understanding  of  the  attitude  of 
the  employees  in  setting  forth  these  principles  you  have  entirely 
misconstrued  it. 


.      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1965 

Commissioner  Wehle.  No,  it  is  not.  I  do  not  know  whether  you 
know— of  course,  you  do,  personally,  I  believe— that  I  believe  in  the 
union  prmciple  and  have  done  a  good  deal  to  forward  it  at  times, 
and  have  been  associated  with  you  personally  in  some  of  those  activi- 
ties. 

Mr.  Lauck.  I  should  have  said  the  commission.  I  did  not  mean 
to  say  you,  personally.  I  feared,  from  your  question,  that  the  com- 
mission possibly  had  misunderstood  the  attitude. 

Commissioner  Wehle.  But  it  seems  to  me  in  connection  with  this 
very  valuable  material  that  you  are  putting  in  here,  it  would  be 
really  a  thing  of  value  to  have  from  you  some  statement  on  this  sub- 
ject, a  frank  statement  on  the  question  of  the  effectiveness  of  labor. 

Mr.  Lauck.  I  have  only  stated  so  far  that  I  think  it  would  realize 
the  maximum  effectiveness.  I  think  I  could  probablv  make  it  more 
explicit  on  the  other  side  by  saying  that  the  management  and  the 
public  would  have  every  right  to  expect  and  demand  and  insist  that 
there  should  be  the  fullest  measure  of  production  and  cooperation 
from  labor.  Would  that  answer  it?  That  it  would  be  an  essential 
duty  and  responsibility  on  labor,  with  the  realization  of  its  rights. 
I  did  not  entirely  gi-asp  your  question  at  the  beginning.  But  I 
think  it  would  be  an  absolute  duty  of  labor  to  fulfill  its  obligations  by 
realizing  maximum  production. 

The  Chairman.  Just  one  or  two  questions:  We  now  have  a  steel 
strike,  and  the  organization  which  has  called  the  strike  there  is  a 
member  of  the  American  Federation  of  Labor? 

Mr.  Lauck.  Yes. 

The  Chairman.  Under  your  rules  and  practices  have  vou  the  right 
to  call  the  street-railway  employees  out  in  a  sympathetic  strike? 

Mr.  Lauck.  Mr.  Mahon  will  have  to  answer 'that. 

Commissioner  Mahon.  What  is  the  question  ? 

The  Chairman.  I  asked  if,  under  your  rules  and  regulations,  you 
have  the  right  to  call  out  the  street-railway  employees  of  the  United 
States  in  sympathy  with  the  steel  strike  ? 

Commisisoner  Mahon.  Absolutely  no.  The  American  Federation 
of  Labor  is  only  a  federation  of  international  and  national  organiza- 
tions that  federated  together  to  promote  organization  and  to  promote 
their  interests  in  securing  legislation  and  work  of  that  kind. 

The  autonomy  of  each  trade  is  within  that  trade  itself.  The  presi- 
dent of  the  American  Federation  of  Labor  could  no  more  say  to  my 

organization  that  its  policies  on  anything  were  wrong  or  were  right 

the  executive  council  of  the  American  Federation  of  Labor  has  noth- 
ing to  say  on  that :  they  might  advise  us— but  it  has  nothing  to  say 
within  the  policy  of  the  street-railway  men,  or  any  other  international 
union  affiliated  with  the  American  Federation  of  Labor.  We.  in 
convention,  make  our  own  laws  and  rules,  and  carry  them  out,  and 
live  up  to  them;  and  this  is  the  principle  of  complete  autonomy  of 
each  trade  that  is  guaranteed  to  that  trade  in  the  prosecution  of  its 
own  business. 

The  Chairman.  Then  your  answer  to  my  question  is  no? 

Commissioner  Mahon.  In  the  steel  strike  it  would  be  no,  or  in  any 
other. 

The  only  way  that  the  street-car  men  could  get  into  the  steel  strike 
would  be  by  themselves  to  go  in  and  cooperate  with  the  steel  men. 
The  federation  could  not  order  them. 


m 


1966    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  Chairman.  Is  there  anything  under  the  rules  or  regulations 
of  your  organization  which  would  prevent  the  street-car  employees 
from  going  out  in  a  sympathetic  strike  to  help  the  steel  strike? 

Commissioner  Mahon.  That  could  prevent  tliem  ? 

The  Chairman.  Yes. 

Commissioner  Mahon.  Not  any  more  so  than  in  any  other  organ- 
ized or  unorganized  set  of  men  deciding  to  go  out. 

Of  course,  we  have  our  laws,  and  m  compliance  with  our  laws 
that  would  be  a  very  hard  tiling  for  our  men  to  do.  We  have  our 
contracts  with  the  diffei*ent  companies  which  provide  for  arlutra- 
tion  and  all  of  those  conditions  before  suspension ;  and  it  would  be  a 
very  hard  thing  to  do. 

Of  course,  the  men  might  go  out  with  them,  but  it  would  be  verv 
hard,  on  the  laws.  The  only  way  that  that  could  be  done  would  be 
by  the  international  organization,  through  its  executive  council,  call- 
ing together  their  council  and  then  deciding  to  violate  their  own 
laws  and  repudiate  their  own  contracts.  That  is  really  the  only 
wey  it  could  be  done. 

Commissioner  Sweet.  I  wanted  to  ask  you  one  or  two  questions, 
Mr.  Lauck.  Do  you  know  whether  the  matter  of  increasing  com- 
pensation in  proportion  to  the  earning  capacity  of  a  sti^et-railroad 
company  has  been  considered  ? 

Mr.  Lauck.  The  actual  revenues  or  the  net  income? 

Commissioner  Sweet.  Whether  an  incentive  to  greater  produc- 
tivity has  ever  been  suggested  as  a  means  to  be  brought  about, 
greater  productivity  and  effort  on  the  part  of  the  men,  in  giving 
them  a  share  in  the  net  earnings  ? 

Mr.  Lauck.  I  do  not  know  of  any  practical  application  of  that; 
no,  sir.    There  may  be. 

Commissioner  Sweet.  I  am  si)eaking  now  of  this  particular  indus- 
try. 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  Of  course,  it  is  discussed;  I  do  not  know 
to  what  extent  it  is  practiced,  but  I  was  wondering  whether  it  had 
ever  been  discussed  in  this  industry. 

Mr.  Lauck.  I  do  not  know  of  any  specific  cases.  There  have 
been,  as  you  know,  profit-sharing  schemes  in  other  industries,  and 
the  attitude  of  labor  in  general  toward  the  usual  profit-sharing 
scheme  is  that  it  is  too  indefinite  and  long  deferred  and  has  the  in- 
tervention of  the  management  which  may  disturb  the  profit.  But 
the  best  idea  I  know  of  in  that  connection  is  one  that  is  being  con- 
sidered by  a  very  large  metalliferous  cx>rporation — I  have  forgotten 
the  name  of  it-^the  Metals  Co.,  or  something.  But  this  idea  has 
been  advocated,  and  I  think  it  is  practicable.  They  had  it  in  Great 
Britain  during  the  war  in  the  terms  of  boards  of  production.  That 
is,  they  had,  in  addition  to  the  usual  labor  adjustment  boards  to 
settle  matters  of  discipline,  and  so  forth — in  the  units  of  the  plant 
they  had,  corresponding  to  the  different  divisions  of  production,  a 
joint  board  on  production,  and  the  idea  was  that  the  management 
and  employees  would  cooperate  to  the  fullest  extent  in  reducing 
costs  and  getting  maximum  production;  and  there  was  an  ascer- 
tainment of  the  labor  cost  of  production — at  recurring  periods,  two 
weeks  or  a  month,  and  for  every  dollar  or  for  every  degree  of  re- 
duction in  the  labor  C50st  there  was  an  immediate  participation  to  a 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1967 

certain  per  cent  on  the  part  of  labor  in  the  increase  in  the  output. 
1  hat  had  a  direct  stimulating  effect  and  was  immediately  realizable 
and  seemed  to  be  the  most  practical  scheme  that  could'  be  worked 
out;  and  it  was  a  matter  of  mutual  working  and  striving  toward 
this  end,  which  must  be  the  end  of  all  the  factors  in  industry,  of 
course,  both  labor  and  capital. 

Commissioner  Sweet.  Laying  aside  other  industries,  is  it  a  fact 
that  the  productivity—meaning  by  that  term  the  success  to  a  cer- 
tain extent  of  a  street-railroad  company — can  be  influenced  for  good 
or  ill  by  the  conduct  of  motormen  and  conductors  ? 
Mr.  Lauck,  Oh,  absolutely ;  I  should  think  so. 
Commissioner  Sweet.  Could  a  motorman  or  a  conductor  without 
being  dishonest  or  breaking  any  rules  that  would  necessitate  his 
discharge — is  there  a  range  in  connection  with  courtesy  and  efforts 
to  get  business,  and  all  that  sort  of  thing,  within  which  by  extra 
effort  on  his  part  he  could  help  the  business  ? 
Mr.  Lauck.  Undoubtedly,  to  a  very  great  extent. 
Conmiissioner  Sweet.  Do  you  think  it  would  be  a  good  plan  to 
give  him  the  benefit  of  some  degree  of  benefits  of  that  kind  and 
make  it  an  object  for  him  to  do  it  ? 

Mr.  Lauck.  I  think  so.  I  think  it  would  stimulate  his  interest 
and  productivity.  In  other  words,  he  would  have  the  welfare  of  the 
institution  at  heart  and  would  strive,  as  is  claimed  in  Philadelphia, 

for  instanct,  that 

Cominissioner  Sweet.  Then,  I  take  it  that  your  position,  Mr. 
Lauck,  is  that  a  man  who  occupies  one  of  these  positions  as  motor- 
man  or  conductor  on  a  street-railroad  company  ought  to  receive  a 
living  wage  anyway. 
Mr.  Lauck.  Yes. 

Commissioner  Sweet.  One  that  would  provide  ordinary  proper 
comfort  ? 

Mr.  Lauck.  Yes. 

Commissioner  Sweet.  And  that  it  might  also  have  a  stimulating 
effect  and  be  of  some  value  to  let  him  participate  in  what,  over  and 
above  that,  might  be  acquired  due,  partly  at  least,  to  his  extra  efforts 
in  the  direction  of  courtesy  and  business  ability  ? 

Mr.  Lauck.  Yes;  and  undoubtedly  it  would  be  very  advantageous 
to  the  industry  and  to  the  public,  and  if  you  could  work  that  out  so 
it  could  be  a  joint  effort  on  the  part  of  the  management  and  sub- 
ordinates and  bring  about  the  best  results,  it  would  be  the  ideal  con- 
dition to  attain. 

^    Commissioner  Sweet.  That  would  help  along  the  spirit  and  in- 
crease the  spirit  of  cooperation. 
Mr.  Lauck.  Undoubtedly;  yes. 
Commissioner  Sweet.  That  is  all. 
The  Chairman.  That  is  all,  Mr.  Lauck. 

Mr.  Lauck.  May  I  just  say  one  woi^  in  conclusion?  We  are  ad- 
vocating these  principles  as  a  part  of  the  industrial  bill  of  rights, 
so  to  speak,  which  is  a  part  of  the  new  idea  of  democracy  in  indus- 
try. Of  course,  as  we  are  all  aware,  out  of  the  war  has  come  an 
entirely  different  attitude  toward  industry,  the  idea  being  more  and 
more  prevalent  that  industry  is  a  social  institution  and  must  work 
for  the  common  good.    That  both  labor  and  capital  in  their  rights 


1968    PROCEEDINGS*  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

must  be  protected,  but  that  the  public  interest  must  be  paramount. 
So  it  has  occurred  to  us  in  the  consideration  of  this  body  that  here 
you  have  a  situation  where  the  public  interest  is  manifestly  pre- 
dominant and  where  there  should  be  a  recognition  of  these  prin- 
ciples in  working  out  a  constructive  program.  And  we  have  re- 
frained from  asking  specifically  for  the  establishment  of  any  rates 
of  pay  by  the  commission,  putting  in  the  data  as  illustrating  what 
should  be  a  living  wage,  but  we  ask  that  the  commission  recognize 
these  principles,  and  then  they  can  be  worked  out  by  the  manage- 
ment and  the  emplo^'ees  in  the  way  that  seems  wise  and  best  to 
them,  and  in  the  way  that  will  prevent  dislocations  or  undue  inter- 
ference with  the  proper  development  of  tlie  industry. 

But  we  think  that  labor  has  a  right  to  the  recognition  of  these 
principles  which  were  in  the  War  Labor  Board  and  the  peace  treaty, 
and  we  earnestly  request  the  commission  to  consider  them,  and  ir- 
respective of  the  immediate  financial  effect,  leaving  it  to  the  good 
judgment  of  the  management  and  employees  to  apply  them  in  the 
best  way  possible;  and  we  are  perfectly  content  to  have  the  em- 
ployees clotlied  with  the  responsibility  of  cooperating  to  the  fullest 
extent  and  making  them  in  every  way  fully  responsible.  We  are 
fearful,  on  the  other  hand,  of  failure  to  recognize  these  principles, 
as  we  all  know  the  tendency  now  is  in  industry,  and  especially  on 
public  utilities,  if  we  do  not  have  the  fair  measure  of  economic 
rights  on  the  part  of  employees,  the  tendency  will  be  to  drive  the 
conservative  leaders  into  more  radical  proposals.  And  maybe  that 
has  the  tendency,  as  in  the  steam  railroad,  to  the  advocacy  of  schemes 
which  are  really  the  autocracy  of  labor,  which  We  do  not  think  is 
any  better  than  the  autocracy  of  capital.  But  the  autocracy  of  in- 
dustry ought  to  be  in  the  public ;  not  in  capital  or  labor,  but  in  the 
public;  and  with  just  guarantees  to  both  capital  and  labor. 

The  Chairman.  Does  that  complete  the  case  for  the  Amalga- 
mated Association? 

Mr.  Lauck.  That  completes  our  case,  except  for  the  requests  that 
you  have  made  for  submission  of  certain  exhibits,  and  we  had  an- 
other exhibit  which  we  wished  to  submit  as  to  the  hazard  of  the 
industry  and  which  will  require  a  day  or  two  to  prepare.  And  if  it 
is  the  pleasure  of  the  commission,  we  would  like  to  submit  them 
for  its  consideration  later. 

The  Chairman.  Yes. 

Commissioner  Mahon.  Mr.  Chairman,  it  had  been  expected  that 
I  would  go  on  the  stand  and  explain  the  entire  position  of  the  or- 
ganization. But  I  do  not  feel,  acting  as  a  commissioner,  that  I 
should  go  on  the  stand  and  give  testimony  in  the  case.  However, 
there  are  some  matters,  for  instance,  like  the  questions  asked  by 
Commissioner  Sweet  in  the  early  opening  of  the  case  regarding  the 
health  conditions  and  other  matters  pertaining  to  the  organization 
that  I  think  we  should  prepare  and  I  will  have  Mr.  Lauck  prepare 
them  in  a  statement  to  be  placed  before  us,  so  as  to  show  the  con- 
ditions of  the  occupation  as  to  the  health  of  the  men  that  follow  it. 
And  as  to  the  policy  of  the  organization,  so  far  as  its  benefits  go 
and  so  on,  we  will  have  Mr.  Lauck  prepare  that  and  submit  it  to  you. 

With  that  I  do  not  feel,  as  I  said,  like  going  on  the  stand.  I  only 
wish  that  I  was  not  a  commissioner  at  this  time  that  I  might  ex- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1969 

plain  fully  to  this  commission  the  position  of  this  organization  and 
my  own  views  and  experiences  in  connection  with  the  street-railway 
business. 

I  started  in  it  in  the  days  of  horse  cars  and  have  followed  its 
growth  for  over  30  years.  I  have  been  engaged  in  this  business  first 
as  a  driver  of  a  horse  car;  from  that  to  an  electric  car;  from  that 
to  an  ^.fficial  of  the  international  organization,  a  position  I  have  held 
now  for  some  26  years. 

In  dealing  with  the  question  following  its  growth  from  the  horse 
car  through  the  various  periods  of,  first,  electric  systems  of  cities, 
and  then  the  mterurban  connections  that  have  followed  that,  i 
Jiave  followed  the  growth  of  the  business.  I  have  personally  "known 
a  great  number  of  the  men  who  have  been  the  promoters,  some  of 
them  that  have  passed  away,  many  of  them  that  are  out  of  the  busi- 
ness, and  the  men  that  are  in  it  to-day.  Some  of  these  people  I 
have  had  my  disagreements,  economically,  with;  a  great  many  of 
them  personally  are  good  friends  of  mine;  some  of  them  did  not 
like  me  so  well ;  but  with  the  great  majority  that  have  been  inter- 
ested  in  the  promotion  of  the  business  I  have  always  been  upon 
talking  terms.  While  we  disagreed  economically,  we  did  talk  and 
discuss  the  conditions  of  the  occupation  and  of  the  business.  Not 
only  have  I  given  some  study  to  it  in  this  country  but  I  have 
studied  it  as  a  representative  of  the  American  Federation  of  Labor 
in  Europe,  having  twice  been  on  the  other  side  as  a  representative 
of  labor,  once  going  especially  to  investigate  the  conditions  of  the 
railroads  there. 

And,  as  I  say,  I  regret  that  I  am  not  in  a  position  that  I  might 
pive  to  this  commission  the  information  for  what  it  is  worth.  It 
IS  30  years  of  experience.  But  I  do  not  feel  that,  acting  as  a  com- 
missioner here  upon  this  matter,  I  should  testify  before  this  com- 
mission. However,  if  there  are  any  points  that  the  commission  want 
me  to  prepare  or  submit,  I  will  be  pleased  to  do  so;  but  I  will 
refrain  from  being  a  witness  on  account  of  the  explanation  iust 
made.  "* 

^  The  Chairman.  I  think  it  is  peculiarly  fortunate,  Mr.  Mahon, 
that  the  commission  has  you  as  one  of  its  associates.  Your  experi- 
ence and  judgment  should  be  very  helpful  in  working  out  a  solution 
of  this  problem. . 

Mr.  Ogburn,  who  is  you  next  witness? 

Mr.  Ogburn.  I  believe  this  concludes  the  program  put  on  by  the 
labor  side.  Mr.  Warren  has  some  witnesses  that  he  desires  to  bring 
before  you  to  clear  up  certain  matters,  I  believe.  If  Mr.  Warren 
is  ready,  I  assume  we  can  proceed  with  his  witnesses. 

Mr.  Warren.  Mr.  Chairman,  I  want  to  put  in  some  exhibits  bear- 
ing on  an  inquiry  of  Commissioner  Wehle  in  regard  to  the  activities 
of  the  American  Electric  Railway  Association  and  its  study  of 
practical  means  of  efficiency. 

Before  putting  those  in,  however,  which  I  shall  simply  file  with 
the  commission  with  an  explanatory  word,  I  want  to  call  again  Mr. 
Mortimer^  who  testified  at  one  of  the  earlier  hearings,  to  discuss* 
somewhat  the  comparative-costs  figures  of  a  number  of  companies 
which  have  been  frequently  referred  t®  here,  particularly  the  Cleve- 
land and  the  Philadelphia  companies,  in  comparison  with  one  or 
two  other  companies. 

160643"— 20— VOL  2 62 


1970     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COHMrSSfO^. 

Mr.  Mortimer  was  chairman  of  one  of  the  committees — ^the  com- 
niittee  on  the  comparative  cost  of  street-l'ailway  service — rosiiltiiicj 
in  one  of  the  exhibits  which  I  am  going  to  put  in  hiter;  and  ho  has 
made  some  study  of  these  particular  features,  and  1  should  like  to 
ask  liim  to  take  tlie  stand  again. 

ADDITIONAL  STAT£M£KI  OF  MK.  JAM£S  D.  MORTIMER. 

Mr.  Warren.  You  are  pi-esident  of  the  Milwaukee  Street  Rail- 
wav  Co.? 

Mr.  MoirnMBR.  Pi^esident  of  the  Milwaukee  Electric  Railway  & 
Light  "Co. 

The  Chairman.  The  record  shows  his  qualifications. 

Mr.  Warken.  Have  you  made  a  study  of  the  cost  of  street-rail- 
%'i\y  transportation'^ 

Mr.  Mortimer.  For  some  years  past  I  have  either  be^n  engaged 
myself  or  have  been  directing  studies  of  the  cost  of  electric-railwa}'- 
tiansportrttion  service.  For  two  yenrs  I  was  chairman  of  the  com- 
mittee on  cost  of  service  for  the  American  Electric  Railway  Asso- 
ciation, and  that  led  to  the  formation  of  the  bui*eau  of  fare  research 
of  the  Amerit^an  Electric  Railway  Association  and  the  selection  of 
Ml'.  F.  W.  Doolittle  as  director  of  the  bureau  of  faie  research. 
Under  the  direction  of  our  committee  on  the  cost  of  passenger- 
transportation  service  there  was  prepared  a  book  known  as  "The 
Cost  of  Urban  Passenger  Transportation  Service,''  published  in 
the  latter  part  of  the  year  1915  and  distributed  to  member  com- 
panies in  the  early  part  of  the  year  19^16.  It  was  distributed  as  one 
of  the  contpilations  of  the  association. 

That  book  examined  into  the  economic  status  of  the  industry,  the 
details  of  all  ojjerating  ex;penses,  the  psychological  factors  as  a  Meet- 
ing riding  and  satisfaction  with  service;  conducted  two  psychologi- 
oai  surveys  on  the  attitude  of  the  public  toward  car  service,  one 
in  Cleveland  and  ohe  in  Milwaukee.  It  made  detailed  studies  of 
the  method  of  collecting  fares,  of  apportionment  of  the  costs  of 
sevice  as  between  flat  rates  and  zone  systems. 

It  fii-st  outlined  in  1915  substantially  the  groundwork  of  the 
zone  system  under  which  the  Public  Service  Railway  is  now  operat- 
ing, and  since  that  time  Mr.  Doolittle  has  kept  up  .with  the  studies 
of  the  Cleveland  situation.  The  book  went  mto  great  detail  as  to 
the  factors  that  would  affect  either  the  cost  of  service  or  the  net 
returns  that  were  derived  from  the  investment  of  a  given  amount  of 
capital.  In  that  book  is  fii-st  shown  that  instead  of  the  strap- 
hangers paying  dividends  they  cost  the  street-i'ailway  company 
the  most  money ;  in  other  words,  that  the  cost  of  service  during  tlie 
rush  hour  is  much  greater  than  the  cost  of  service  during  the  non- 
rush  hours,  and  instead  of  the  strap-hangers  paying  dividends  they 
cost  the  railway  company  money.  That  is,  the  rate  of  return  may 
be  i-educed  from  6  per  cent  during  the  nonrush  hours  down  to  2 
per  cent  during  the  rush  hours. 

These  investigations  led  to  the  development  of  the  formula,  or 
the  application  of  the  formula,  or  the  correlation  of  the  different 
formulas  used  by  diffei^nt  regulating  commissions  in  compilting 
tiie  cost  of  service. 


PROCEEDINGS  OP  FEDERAL  ELEOTRIC  RAILWAYS  COMMISSIOI^.    1971 

Naturally  enough  our  investigations  disclosed  that  there  were  wide 
differences  and  fundamental  conditions  affecting  all  railways;  that 
there  were  no  criteria  as  to  what  were  reasonable  rates  of  fare. 
They  necessarily  depended  upon  local  conditions,  the  speed  at  which 
cars  were  operated,  the  extent  to  which  cars  carried  standing  pas- 
sengers during  the  rush  hours,  wage  rates,  cost  of  power,  and  the 
satisfaction  that  might  be  expressed  by  the  management  as  to  a 
given  rate  of  fare  depending  upon  a  lot  of  circumstances,  one  of  tho 
first  of  which  was  how  they  were  keeping  their  books  and  whether 
they  were  looking  for  anything  in  the  future. 

Now,  there  has  been  a  good  deal  said  here,  or  the  inference  was 
suggested  that  the  success  of  the  5-cent  fare  in  Philadelphia  and 
the  3-cent-transfer  charge  for  a  limited  number  of  transfei^  was  due 
to  the  cooperative  plan.  The  so-called  success  of  the  Cleveland 
situation  has  been  laid  to  the  cost  of  service  or  type  of  franchise 
under  which  it  is  being  operated. 

The  analysis  which  I  propose  to  show  you  of  the  comparative 
earnings  and  relative  rates  of  return  that  are  being  earned  in  three 
typical  properties  extending  in  range  from  about  $5,000,000  operat- 
mg  revenue,  through  Cleveland's  $12,000,000  up  to  Philadelphia's 
$31,000,000,  show  there  is  no  more  relation  between  the  particular 
type  of  management  in  any  one  place  or  the  franchise  than  there 
might  be  between  the  fact  that  there  is  a  5-cent  fare  in  Philadelphia 
because  in  years  gone  by  it  was  largely  a  Quaker  city  or  that  the 
rate  of  return  in  Milwaukee  is  at  the  rate  of  2^  per  cent  per  annum 
because  they  make  beer  in  large  quantities  there,  or  that  the  num- 
ber of  automobiles  manufactured  in  Cleveland  is  large  in  volume. 

Now,  taking  up  the  so-called  Tayler  franchise  in  Cleveland.  That 
franchise  was  granted  for  a  period  of  25  years  along  toward  the  lat- 
ter  part  of  the  year  1910.  It  purported  to'  effect  a  settlement  between 
the  citizens  of  the  community  and  the  previous  electric  railways 
under  which  the  city  was  to  obtain  the  best  possible  service  at  the 
lowest  possible  price.  The  car  riders  were  presumed  to  obtain  the 
service  at  cost,  and  it  has  more  recently  come  to  be  known  as  a 
cost-of-service  franchise.  I  intend  to  show  that  the  Cleveland  fran- 
chise is  a  less-than-cost-of-serv^ice  franchise. 

One  of  the  fimdamental  objections  to  the  Cleveland  franchise  lies 
in  the  fact  that  the  franchise  does  not  require  that  any  reserve  for 
future  replacements  be  accrued  out  of  current  earnings  thereby 
requiring  that  the  replacements  of  the  physical  property  be  taken 
care  of  either  through  charges  through  current  operating  expenvSes 
or  by  suspending  them  for  1  year,  2  yeai^,  4  years  and  charging 
them  up  through  the  earnings  of  the  subsequent  years.  In  other 
words,  according  to  the  Johnson-Goff  appraisal,  the  Cleveland  Rail- 
way started  out  with  estimated  accrued  depreciation,  the  liability 
to  affect  future  replacements  of  about  $7,500,000.  The  capital  was 
stated  at  something  like  $19,000,000  net,  but  that  was  represented  by 
property  having  a  value  of  $26,000,000.  It  was  depreciated,  in  other 
words,  30  per  cent. 

Commissioner  Wehle.  The  value  as  of  what  date? 

Mr.  Mortimer.  The  value  as  of  December  31,  1909,  or  some  such 
period  as  that.  It  was  brought  up  to  date  of  settlement.  It  was  an 
appraisal  made  during  1908,  and  brought  up  to  the  close  of  the  year, 


1972    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

1909,  or  the  date  of  settlement,  by  using  the  capital  expense  from 
the  date  of  the  appraisal  to  date  of  settlement. 

Commissioner  Wehle.  Your  point  is  that  the  valuation  on  the 
basis  on  which  the  rate  was  be^m,  as  it  was,  was  a  valuation  which 
was  30  per  cent  under  the  valuation  based  on  present  cost  of  re- 
production ? 

Mr.  Mortimer.  And  based  upon  the  amount  of  money  that  had 
pone  into 'the  property,  into  the  physical  property,  in  other  words, 
taldng  into  account  just  the  investment  of  cash  and  the  physical 
property,  the  security  holders  suffered  a  shrinkage  of  30  per  cent — a 
sacrifice  of  30  per  c€nt  of  the  cash  that  had  been  invested.  Since 
that  time  capital  expenditures  have  been  added,  and  all  the  money 
for  those  capital  expenditures  must  come  from  the  sale  of  new 
securities.  The  company  has  no  surplus  e4irnings  of  any  kind  what- 
soever with  which  to  create  additions  to  its  plant  and  property 
account. 

Commissioner  Wehle.  If  they  used  the  expedient  of  taxing  land 
value  for  the  cost  of  extensions,  that  statement  of  yours  would  not 
be  necessary,  would  it? 

Mr.  Mortimer.  Every  electric  railway  will  require  very  substan- 
tial expenditures  over  and  above  the  cost  of  the  railway,  the  rails  and 
the  roadbed  and  the  overhead  trolley,  the  cost  of  which  might  be 
assessed  against  the  abutting  property  or  that  the  property  that 
would  be  improved  by  the  railway  extension. 

A  single  track,  we  will  say,  under  normal  prices,  in  a  paved  street, 
may  cost  $32,000  a  mile,  but  adding  sufficient  cars,  power  facilities, 
car-storage  facilities,  repair  shops,  etc.,  in  order  to  provide  for  that, 
adds  a  good  deal  more  to  the  capital  value  than  the  mere  cost  of 
the  track  and  overhead  trolley;  so  that  there  would  be  the  general 
item  that  would  have  to  be  otherwise  provided  for  than  by  direct 
assessment.  If  you  attempted  to  assess  directly  the  cost  of  electric- 
railway  facilities  against  abutting  property,  it  would  require"  a 
relatively  large  fund  to  finance  it,  or  the  use  of  some  kind  of  im- 
provement bonds,  or  there  would  be  no  electric  railways  extended. 

The  principal  hazard  and  the  one  that  influences  the  cost  of  service 
primarily  in  Cleveland  is  the  absence  of  any  depreciation  reserve. 

As  I  say,  the  replacements  have  been  rather  heavy  and  abandon- 
ments of  existing  property—- a  typical  example  is  the  abandonment 
of  the  Cedar  Avenue  power  station  along  in  the  year  1915  or  1916. 
It  was  carried  on  the  books  under  the  Johnson-Goff  appraisal,  as 
I  recall,  at  a  figure  of  $720,000  or  $750,000.  To  have  written  that 
off  in  one  year  would  have  very  largely  increased  the  rates  of  fare 
under  the  cost-of-service  plan,  the  ordinance  under  which  the  Cleve- 
land railway  is  operating;  and  so  it  was  asked  to  be  suspended, 
taken  out  of  plant  and  property  account,  and  carried  as  a  current 
asset,  as  subject  to  a  write-off;  and,  by  ordinance  or  resolution  of 
the  common  council  of  Cleveland,  it  was  written  off  at  the  rate  of 
$20,000  a  month,  $240,000  a  year,  requiring  something  like  three 
years  odd  in  order  to  take  care  of  it. 

There  has  not  been  a  year  in  the  history  of  the  Cleveland  Electric 
Railway,  with  possibly  the  exception  of  the  first  year,  since  it  began 
to  operate,  but  what  it  has  been  carrying  a  substantial  suspense 
account,  created  by  the  abandonment  of  property  no  longer  useful. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT.    197a 

The  suspense  account,  for  example,  as  of  the  end  of  July— July 
^h  }^^r^~^^  $1,140,000.  It  has  gone  up  to  something  higher  than 
that.  The  suspense  accounts  prior  to  that  increase  in  fares  to  5  cents 
aggregated  $2,200,000.  In  other  words,  if  an  accountant  were  making 
a  critical  examination  of  the  balance  sheet,  he  would  say  that  the 
company  was  busted  to  the  extent  of  $2,200,000. 

Another  serious  defect  in  the  Cleveland  franchise  is  this:  The 
franchise  period  is  divided,  for  the  purposes  of  this  discussion,  into 
two  periods :  One,  the  first  15-year  period,  and  the  other  the  next 
10-vear  period. 

the  city  has  the  right  to  purchase  the  property  but  is  not  obli- 
gated to  purchase  the  property ;  and  the  method  of  purchasing  it  and 
the  price  at  which  it  should  be  purchased— the  determination  of  the 
price  at  which  it  shall  be  purchased— are  set  forth  in  the  ordinance. 

If  the  city  does  not  indicate  its  intention  either  of  purchasing  the 
property  or  giving  to  the  company  another  10  years'  extension  so 
as  to  make  the  overall  period  of  the  franchise  35  years,  instead  of 
25  years,  at  the  end  of  the  first  15-year  period,  then  the  company  has 
the  right  to  go  to  the  highest  rates  of  fare  prescribed  in  the  fran- 
chise, and  the  service-at-cost  plan  becomes  inoperative. 

The  service-at-cost  theory  applies  during  the  first  17  years,  so  far 
as  it  IS  possible  to  do  so  within  the  limits  of  rates  prescribed  in  the 
franchise,  and  will  continue  during  the  next  10-year  period,  if  the 
city  extends  the  franchise  beyond  1935  or  indicates  its  intention  of 
purchasing  the  property. 

From  the  standpoint  of  the  people  who  put  their  money  into  the 
Cleveland  railway,  there  is  no  method  of  determining  now  whether 
the  city  is  going  to  purchase  the  property  in  1935  or  whether  the 
compaiw  will  get  an  extension  of  its  franchise  beyond  1935. 

The  Chairman.  In  either  case  your  money  is  protected,  is  it  not? 

Mr.  Mortimer.  I  am  just  coming  to  that  point.  In  my  opin- 
ion^- no. 

There  is  no  depreciation  reserve  created  against  the  accruing  liabil- 
ity to  effect  future  replacements. 

From  the  standpoint  of  purchase  and  sale  of  the  property,  the 
property,  presumably,  at  the  end  of  the  year  1935  will  be  in,  roughly, 
the  same  per  cent  condition  that  it  was  as  of  December  31,  1909. 
In  other  words,  there  will  be  a  30  per  cent  depreciation  on  the  value 
of  the  property,  and  the  same  holders  may,  with  an  expiring  fran- 
chise, have  to  settle  with  the  municipality  on  the  same  basis  that 
they  had  to  when  the  present  franchise  was  entered  into;  in  other 
words,  they  may  have  to  take  70  cents  on  the  dollar  for  their  invest- 
ment in  the  property. 

That  is  one  of  the  very  serious  hazards  of  the  Cleveland  fran- 
chise. 

If  the  municipality  had  agreed  to  purchase  the  property  at  the 
end  of  1935,  or  if  the  company  had  a  price  put  to  the  city  on  the 
basis  of  the  capital  value,  then  that  hazard  would  be  eliminated. 
I  hat  hazard  introduces  factors  in  the  cost  of  service  in  these  re- 
spects :  First,  the  return  in  the  face  of  this  hazard  ought  to  be  higher 
than  current  interest  rates.  This  6  per  cent  is  only  a  current  interest 
rate,  and  it  does  not  adequately  measure  the  hazards  of  an  electric- 


1974     PROCEEDINGS  OF  FEDERAX,  EL»ECTRlC  RAILWAYS  COMMISSION. 

railway  investment,  even  under  regulation — even  under  continuous 
ro^ilation  by  State  commission. 

The  second  hazard  in  the  investment  is  this:  If  the  company  is 
going  to  hav«  to  settle  with  the  municipality  on  the  basis  of  70  cents 
on  the  dollar  at  the  end  of  1935,  so  the  city  can  get  a  new  deal  and 
provide  for  some  other  k4nd  of  cost-of-service  plan,  the  difference, 
j)ix)blematical  as  it  may  be,  should  now  be  written  off,  or  a  reserve 
should  be  created  to  write  it  off  to  anticipate  that  hazard.  At  least, 
that  would  be  the  conr^^MvatiA-e  method  of  approacJiing  it,  if  it  were 
possible  to  include  such  costs  in  the  cost  of  service  under  the  Cleve- 
land plan. 

The  fact  that  the  6  j>er  cent  return  is  too  low  is  indicated  pretty 
effectively  by  the  comimny's  inability  to  do  any  further  financing  by 
the  sale  of  its  capit^il  stock  carrying  6  per  cent  interest  at  par.  You 
will  note  I  use  th^  term  ^'  interest.'  The  company  does  not  pay  divi- 
dends on  its  capital  stock.  It  pays  interest,  and  that  interest  is  set  up 
on  its  books  as  a  charge,  as  an  accruing  liability,  in*espective  of 
whether  any  dividends  are  e«ri>ed  or  surplus  is  made  for  the  i>ayment 
of  a  return  upon  tlte  ca])ital  stock. 

In  making  an  analysis  of  the  cx)^  of  serv^ice  under  the  Cleveland 
Kail  way  plan,  and  in  order  to  make  it  com^Mirative  with  the  cost  of 
analysis  of  otsher  companies,  it  is  essentinl  that  we  intix>duce  these 
factors  which  tbe  couits  have  said  were  necessary,  which  the  regu- 
lating commissions  have  almost  inviiriably  held  to  be  proper  elements 
of  the  cost  of  service,  namely :  Adequate  reserves  to  insure  future  re- 
pi«cenwnts  of  physical  prop«erty,  and  when  those  reserves  are  in- 
cluded, it  appears  that  the  service  was  never  rendered  in  Cleveland 
on  the  basis  of  a  3-cei%t  fare^  but  more  frequently  at  a  considerably 
higher  fignre. 

If  I  may  refer  to  this  for  a  moment — however,  I  will  not  take  tlie 
time  to  feid  it  now — but  the  cost  of  service  fluctuated  from  3.42  to 
4.13  during  the  time  that  they  were  collecting  a  3-cent  fare,  ancl 
cliarged  1  cent  for  a  transfer,  if  these  efements  of  costs  are  included. 

Conmiissioner  AVeiili:.  If  you  include  the  30  per  cesnt? 

Mr.  MoRTTMKR.  No;  I  think  I  had  better  rena  that  Mr.  DooHttle, 
on  p«ge  434,  shows,  table  155,  tiie  cost  of  service  as  it  appeared  on  the 
b<v>ks  for  the  year  ending  Februarx^  28.  It^ll,  was  3.63;  1912,  3.50 
cents  per  revenue  passenger;  1913,  i3,29^  nn  average  for  the  thi'ee 
years  of  3.37. 

f  f  we  include  these  elements  of  cost  in  «uldition  to  those  of  cur- 
rent, ordinary  operating  ex^^nses,  cast  after  providing  for  insur- 
ance reserve  and  accident  reserve,  ordinary  maintenance  and  depre- 
ciation, 8  per  cent  return  on  capital  value,  the  amortization  for  a  50 
per  cent  loss  in  car  value,  figured  on  a  4  per  cent  sinking  fund  basis, 
the  rates  of  fare  go  up  to  4.43,  4.32,  and  4.13  cents  jjer  passenger;  an 
average  of  4.29. 

Mr.   Warren.  That  is,   for  the  same  three  yeai*s? 

Mr.  Mortimer.  For  the  same  three  years. 

The  cost-of -service  plan  ifi  Cleveland  has  been  very  advantageous 
in  helping  in  the  reduction  of  operation  expenses.  The  most  effective 
cooperation  between  the  city  officials  and  the  o|>erators  of  the  prop- 
erty has  theivJjy  been  obtained. 

Conunissioner  Meeker.  May  I  interrupt  you  with  a  question? 


PROCEEDINGS  OF  FEDERAL  ELECtRIC  RAILWAYS  COMMISSION.    1&75 

Mr.  Mortimer.  Certainly. 

Commissioner  Meekf^.  It  puzzles  me  a  little  as  to  how  the  com- 
pany can  get  away  with  a  3-cent  fare  if  it  had  not  made  the  proper 
reserves  for  depreciation,  replacement,  and  so  forth. 

Mr.  Mortimer.  It  is  not  permitted  to  make  these  reserves  under 
the  terms  of  the  franchise. 

To  give  you  an  illustration  of  that:  The  company  started  out  with 
an  accrued  d,epreciation  on  its  property  of,  in  round  figures,  seven 
and  a  half  million  dollars.  The  accnied  depreciation  on  its  property 
to-day  isj  in  round  figiUH^s,  $12,000,000. 

C/ommissioner  Meeker.  That  is,  the  plant  is  continually  wearing 
out? 

Mr.  Mortimer.  Yes. 

Commissioner  Meeker.  And  it  is  not  being  replaced? 

Mr.  Mortimer.  No;  I  do  not  mean  that.  Its  liability  to  effect 
future  replacements  has  increased  from  seven  and  a  half  million 
dollars  at  the  end  of  the  year  1909  to  $12,000,000  at  the  end  of  the 
year  1918.  That  is,  the  liability  of  the  company  to  effect  future  re- 
placements of  its  physical  property,  assuming  that  it  is  to  continue  in 
operation.  That  is,  the  liability  over  and  above  the  amount  of  re- 
placements. 

Commissioner  Meeker.  The  period  of  recokonins:  has  not  yet  come, 
but  it  hangs  off  in  the  future? 

Mr.  Mortimer.  It  is  exactly  the  same  problem  as  confronts  assess- 
ment life-insurance  companies.  There  is  no  one  of  us  that  would 
care  particularly  to  buy  any  large  quantity  of  insurance,  life  insur- 
W?(ie,  in  an  assessment  life-insurance  company. 

If  any  of  us  wanted  to  buy  insurance  we  wmild  go  to  a  legal  reserve 
company,  a  company  that  created  a  reserve  against  the  accruing  lia- 
bility because  of  future  deaths.  We  have  that  exact,  same  problem  in 
pix)viding  for  the  replacement  of  physical  property.  The  courts  have 
all  held  it.  They  have  supported  it.  It  is  the  universal  theorv  of  pro- 
viding for  maintenance  and  depreciation  adopted  by  regulating  com- 
missions in  the  determination  of  rates. 

Commissioner  Meeker.  Is  my  understanding  correct,  that  the  day 
of  i^ckoning  has  not  yet  come,  but  it  will  eventually  come,  and  the 
company  will  either  have  to  get  more  liberal  terms,  or  be  forced  into 
bankniptcy-^ither  the  company  or  the  city?     I  don't  know  which. 

Mr.  Mortiiuer.  The  day  of  reckoning  for  the  companv  would  come 
if  the  property  was  cun^ently  n>aintained— the  dav  of  reckoning  for 
the  company  would  come  at  the  end  of  its  franchise,  if  it  had  not 
procured  a  I'enewal  of  the  franchise.  It  might  have  to  suffer  on 
iregotiations  with  a  substantial  loss  in  its  invested  capital. 

Commissioner  Wehle.  Has  that  point  ever  been  made  to  the  citv 
6f  Cleveland  ?  * 

Mr.  Mortimer.  I  do  not  know  whether  it  has  been  made  to  the  city 
of  Cleveland  or  not.  It  is  not  unknown  to  the  electric-rail wav  in- 
dustry. It  was  first  pointed  out  in  October,.  1913,  at  the  convention  of 
the  American  Electric  Kailway  Association,  in  a  paper  by  Mr.  Duffy. 
At  that  time  he  had  acted  as  arbitrator  in  the  Cleveland  case,  con- 
templating additional  maintenance  allowances:  and  the  conclusions 
at  that  time,  and  which  have  never  been  invalidated  by  subsequent 
investigation,  were  briefly  these : 


1976    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Fii-st,  the  service  is  inadequate  and  unsatisfactory,  measured  from 
the  standards  of  service  preserved  either  in  Chicago  by  the  board  of 
supervising  engineers,  or  by  the  more  severe  standards  of  the  Rail- 
road Commission  of  Wisconsin. 

Second,  because  there  is  no  surphis  created  for  insurance  reserve, 
accident  i*eserve,  maintenance,  depreciation,  renewal,  to  say  nothing 
of  the  amortization  reserve. 

Commissioner  Beall.  To  make  this  a  little  clearer  to  Dr.  Meeker, 
if  I  understand  it :  For  instance,  if  you  had  a  car  that  you  bought  a 
couple  of  years  ago  that  cost  $10,000,  and  to-day  it  is  only  worth 
$7,000;  and  we  will  say  in  5  or  7  years  it  would  be  junk,  the  Cleve- 
land company  has  made  no  provision  against  that. 

Mr.  Mortimer.  No;  it  has  made  no  provision. 

Commissioner  Beaix.  It  is  not  replacing  it  either  with  other  prop- 
erty or  with  cash  reserve;  so  that  when  that  car  is  worn  out,  it  is 
faced  with  another  investment  of  $10,000. 

^Ir.  Mortimer.  The  point  I  want  to  make  is  this:  That  it  is  not 
adding  anything  to  the  property 

Commissioner  Beall.  In  place  of  it  or  in  cash  ? 

IMr.  Mortimer.  To  take  care  of  this  accuring  liability 

Commissioner  Beall.  Which  goes  on  all  the  time  ? 

Mr.  Mortimer.  The  theory  of  the  ordinance  is  that  at  the  end  of 
the  10-year  period,  sav,  when  your  cars  required  abandonment,  re- 
moval from  plant-ancl-property  account,  it  would  be  taken  out  of 
plant-and-property  account. 

If  the  removal  of  that  from  plant-and-property  account  and  its 
writing  off  through  maintenance  expense  would  not  overdraw  the 
maintenance  reserve,  then  it  would  be  written  off  through  main- 
tenance expenses-;  but  if,  on  the  other  hand,  there  were  a  sufficient 
number  of  cars  that  were  abandoned  at  one  time,  they  could  not  be 
written  off  through  maintenance  reserve  without  increasing  the  rate, 
of  fare,  under  the  theory  of  the  ordinance. 

So,  in  order  to  keep  the  fare  more  nearly  uniform,  to  take  care  of 
these  fluctuations,  they  would  explain  this  relatively  large  amount  to 
the  council  and  determine  the  rate  at  which  it  was  written  off;  in 
other  words,  the  rate  at  which  this  false  asset  was  to  be  written  off 
through  maintenance  expenses. 

Commissioner  Meeker.  Do  I  understand  that  the  service-at-cost 
plan  in  Cleveland  operates  at  approximately  a  5-cent  fare,  because 
It  does  not  operate  on  a  5-cent  fare  in  reality  ?  That  is,  it  is  not  tak- 
ing care  of  replacements? 

Mr.  Mortimer.  During  the  year  1918  the  Cleveland  Electric  Rail- 
way did  not  earn  6  per  cent  upon  the  capital  value.  It  paid  its  6  per 
cent  dividend.  Charges  to  maintenance  expenses  were  liberal,  more 
liberal  than  they  were  in  either  the  Milwaukee  company,  which  I 
represent,  or  the  Philadelphia  Rapid  Transit  Co.,  and  the  charges  to 
expense  because  of  property  that  was  written  off  during  that  year, 
were  liberal;  but  if  you  added  in  the  costs  for  the  year  1918,  these 
charges  that  had  to  be  amortized  and,  in  addition,  set  up  the  accru- 
ing liability  because  of  future  abandonments  of  property,  then  the 
return  would  have  been  less  than  6.2  per  cent ;  the  figure  which  I  show 
is  considerably  less. 

The  Chairman.  Let  me  see  if  I  understand. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    197T 

At  the  time  the  contract  was  made,  you  say  the  property  was  con-^ 
sidered  as  depreciated  30  per  cent? 

Mr.  Mortimer.  That  is  correct. 

The  Chairman.  Your  idea  is  that  a  depreciation  fund  ought  to  be 
maintained  during  the  period  of  the  contract  that  will  take  up  that 
30  per  cent  ? 

Mr.  Mortimer.  I  think  the  proper  way 

The  Chairman.  Can  you  answer  that  yes  or  no,  Mr.  Mortimer? 

Mr.  Mortimer.  I  could  not  say  exactly  about  taking  it  up. 

The  Chairman.  Your  desire  is,  at  the  end  of  the  contract,  that  the 
property  shall  be  100  per  cent  instead  of  70  per  cent  efficient  or  valu- 
able, and  that  100  per  cent  is  to  be  taken  care  of  through  additional 
plant  as  well  as  a  depreciation  reserve? 

Commissioner  Beaix.  I  think  you  meant,  did  you  not,  Mr.  Morti- 
mer, that  it  would  not  be  70  per  cent,  but  it  would  be  30  per  cent 
less  than  tjie  70  per  cent  at  the  end  of  the  35  years? 

Mr.  Mortimer.  No;  I  did  not  mean  that,  Mr.  Commissioner.  I 
meant  that  if  replacements  were  made  at  about  the  same  rate  that 
they  have  been  made  in  the  past,  that  if  the  property  did  not  have 
any  longer  or  shorter  anticipated  lives  than  the  property  that  ex- 
isted as  of  December  31,  1909,  then  the  company  should  have  on  its 
books  at  the  end  of  its  franchise  period  a  liability  equivalent  to  30 
per  cent  of  the  property  value  at  that  time. 

Now,  if  the  liability  as  of  December  31,  1909,  was  $7,350,000— 
namely,  30  per  cent  of  the  property  value  at  that  time — then  the  in- 
creased liability  would  be  the  amount  equivalent  to  30  per  cent  of 
the  capital  additions  during  the  period  December  1,  1909  to  1935. 

Commissioner  Sweet.  Is  the  $7,000,000,  30  per  cent  or  70  per  cent? 

Mr.  Mortimer.  The  $7,000,000  is  30  per  cent.  The  $19,000,000  is 
70  per  cent. 

The  Chairman.  Do  you  mean  no  depreciation  reserve  was  set  aside 
bv  the  Cleveland  contract? 

Mr.  Mortimer.  No  depreciation  was  set  aside  under  the  Cleveland 
contract. 

Commissioner  Weiile.  Does  not  the  public-service  law  of  the  State 
of  Ohio  require  that  some  sort  of  depreciation  reserve  shall  be  made 
each  year? 

Mr.  Mortimer.  In  respect  to  street-railway  matters  in  Ohio  the 
municipalities  have  home  rule  and  have  the  right  of  contract  under 
terms  that  are  not  subject  to  review  of  the  Public  Utilities  Com- 
mission of  Ohio. 

Commissioner  Mahon.  The  contracts  are  subject  to  a  referendum 
vote  of  the  cities? 

Mr.  Mortimer.  Yes;  that  is  right. 

Commissioner  Wehle.  Who  is  Mr.  Duffy,  who  brought  out  these 
facts  at  a  meeting  of  the  association,  as  you  say  ? 

Mr.  Mortimer.  Mr.  Duffy  at  that  time  was  president  and  comp- 
troller of  the  Milwaukee  Electric  Railway  &  Light  Co.  He  had 
written  several  papers  and  had  made  some  study  of  the  cost  of 
service,  and  for  that  reason  he  was  asked  by  Mr.  Stanley  to  come 
down  to  represent  the  Cleveland  railway  in  this  arbitration  with 
the  city.  At  that  time  the  company  was  asking  for  increased  allow- 
ance for  maintenance  of  expenses,  there  had  been  an  overdraft  in 


1978    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

the  maintenance  reserve;  the  company  had  spent  more  money  for 
maintenance  than  it  had  actually  been  allowed  to  collect  from  the 
car  riders;  with  the  result  that  for  that  account  it  also  carried  a 
susi>ense  item  which  had  to  \k^  written  off  in  subsequent  years. 

Commissioner  Wehle.  Are  the  cai*s  of  the  Cleveland  company  in 
very  bad  condition — dilapidated  condition? 

Mr.  MoRTiMEK.  No;  the  cat's  of  the  Cleveland  company  are  riot. 

Commissioner  Wehle.  They  have  been  running  for  10  years  now, 
since  the  franchise  went  into  operation  ? 

Mr.  Mortimer.  There  have  been  a  mibstantial  number  of  cars 
added  to  the  Cleveland  sjTstem.  It  has  a  very  modern  system  of 
ix)lling  stock. 

Commissioner  Wehl^  Have  they  not  been  maintaining  those 
oars  ? 

Mr.  Mortimer.  The  cars  have  been  maintained. 

Mr.  Wehle.  How  al>out  the  power  houses  and  tracks? 

Mr.  Mortimer.  The  power  houses  have  been  abandoned. 

Commissioner  WehIjB.  Why? 

Mr.  Mortimer.  Because  they  coidd  buy  power  cheaper  than  they 
cotdd  make  it. 

Commissioner  Wehle.  So  they  did  not  have  to  maintain  the  power 
houses  ? 

Mr.  Mortimer.  No. 

Commissioner  Wehle.  How  about  the  tracks?  Are  they  in  a  bad 
state  of  repair? 

Mr.  Mortimer.  I  would  not  say  that  the  stal«  of  the  tracks  was 
sHbnormal.  They  hax'e  probably  spent  about  all  the  money  they 
could  economically  spend  in  the  maintenance  of  the  track  for  cur- 
rent repairs. 

Commissioner  Weih^e.  If  they  have  not  been  setting  aside  money 
for  maintenance,  how  do  you  account  for  the  track  and  the  cars 
being  in  good  condition? 

Mr.  Mortimer.  I  did  not  say  that  during  the  last  few  years  they 
had  not  been  setting  aside  money  for  maintenance.  I  said  they  had 
not  been  setting  aside  money  to  effect  future  replacements  of  the 
pro|>erty.  There  is  decided  difference  between  providing  for  cur- 
rent maintenance  and  the  replacement  of  large  elements  of  ph3'sical 
property. 

Commissioner  Wrhlk.  Does  that  include  car  replacement? 

Mr.  Mortimer.  The  replace^ient  of  cars  would  be  a  proper  charge 
against  the  depreciation  reserve,  if  they  had  it. 

Commissioner  Wehle.  But  you  say  they  have  bought  an  ample 
supply  of  new  cars. 

Mr.  Mortimer.  Ves. 

Commissioner  AVsHiiE.  Where  did  they  get  the  money  for  that? 

Mr.  Mortimer.  They  sold  bonds  and  the  capital  stock. 

Mr.  Warren.  It  was  a  capital  expenditure? 

Ml".  Mor.nMER.  It  m  as  a  capital  expenditure.  It  was  not  a  replaoe- 
meiit  exi)ense,  excejyt  to  the  extent  they  may  have  abandoned  some 
snmller-tA^/e  cars. 

Commissioner  Wehle.  How  about  tracks?  Have  they  extended 
anV  tracks? 

Xlr»  MoRriMEs.  They  have. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1979 

Commissioner  Wehle.  How  have  they  done  that? 

iVIr.  Mortimer.  They  have  provided  that  money  by  the  sale  of 
capital  stock  mostly. 

Commi.ssioner  Wehle.  Have  they  replaced  any  track  in  the  last 
10  years? 

Mr.  ^loRTiMER.  They  have. 

Commissioner  Wehle.  How  have  they  done  that? 

Mr.  Mortimer.  If  the  amount  was  relatively  small  it  was  charged 
to  current  maintenance.  If  the  amount  was  relatively  large,  as  in 
most  years  it  has  been,  it  was  suspended,  and  the  company  went  to 
the  common  council  and  procured  an  increase  in  its  maintenance 
allowance. 

Commissioner  Wehle.  Oh !  So  really  they  have  dropped  the  re- 
placement item,  and  have  extended  the  definition  of  maintenance  to 
include  replacement? 

Mr.  Mortimer.  That  is  correct. 

Mr.  Wehle.  Have  you  any  objection  to  the  philosophy  of  that? 

Mr.  Mortimer.  I  certainlv  have. 

Commissioner  Wehle.  What  is  that?  Isn't  it  just  as  broad  as  it 
is  long? 

Mr.  Mortimer.  No;  it  is  not.  There  is  a  distinct  difference  be- 
tween the  two.  Replacements  may  be  paid  for  either  at  the  time 
that  they  are  incurred,  or  they  may  be  paid  for  by  the  car  rider 
at  the  time  that  the  liability  to  effect  these  replacements  is  accruing. 

The  first  method  is  best  likened  to  the  payment  of  death  benefits 
by  an  assessment  life-insurance  company.  The  second  plan  can  be 
best  likened  to  the  ac(a*ual  of  the  legal  reserves  of  a  life-insurance 
company. 

Commissioner  Wehle.  The  fact  remains,  however,  that  whetlier 
you  call  it  a  depreciation  fund,  or  whether  you  call  it  a  maintenance 
fund,  out  of  which  all  the  replacements  come,  or  whether  you  call 
it  a  replacement  fund,  the  cash  money  that  goes  into  the  replace- 
ment comes  out  of  earnings  in  some  way  or  other? 

Mr.  Mortimer.  Comes  out  of  earnings  at  the  time  that  the  re- 
placement is  made. 

Commissioner  Wehije.  You  object  to  the  use  of  the  funds  at  the 
time  they  were  used  for  the  purpose  of  replacement,  although  they 
have  also  come  out  of  earnings,  just  as  they  would  have  if  that  had 
been  set  to  the  credit  of  a  replacement  fund,  instead  of  a  mainte- 
nance fund? 

Mr.  Mortimer.  I  object  to  the 

Mr.  Warren.  Could  it  be  stated  this  way,  that  if  the  reserve  is 
set  up,  the  car  rider  who  gets  the  benefit  pays  for  it,  and  if  it  is 
paid  out  of  maintenance  through  a  suspense  account  the  future  rider 
pays  for  it? 

Mr.  Mortimer.  That  is  anottier  way  of  conveying  the  same  idea. 
I  was  going  to  say  that  my  objection  to  the  plan  of  providing  for 
replacements  through  current  maintenance— that  is,  current  operat- 
ing expenses — was  an  objection  directed  at  tlie  time  rather  than  so 
much  to  the  method.  Eventually  the  money  c<Mnes  trcmi  the  same 
source,  out  of  the  car  riders. 

Commissioner  Wehle.  Then  Mr.  Duffy^s  criticism  does  not  really 
question  the  sufficiency  of  the  earnings  of  the  Cleveland  company 


J. 


I 


Hi 


1980     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOl^.  j 

to  take  care  of  replacements,  but  questions  the  financial  method 
3n  wliich  the  replacements  are  made.    Is  not  that  true? 

Mr.  Mortimer.  No  ;  it  goes  more  fundamentally  than  that 

Commissioner  Wehle.  Of  course,  I  am  not  in  the  least  bit  oppos- 
ing :Mr.  Duffy's  view.  I  am  only  trying  to  get  you  to  elucidate 
it  more. 

Mr.  Mortimer.  This  happens  to  be  my  view,  because  I  wrote 
the  conclusions  to  Mr.  Duffy's  paper.  It  is  both  a  question  of  earn- 
ings, the  sufficiency  of  earning  to  provide  for  this  accruing  liabil- 
ity, and  it  is  also  a  question  of  financial  method. 

Mr.  Wehle.  It  is  somewhat  like  the  question  as  to  whether  or 
not,  when  you  are  building  a  sewer  which  is  going  to  stand  the 
community  for  60  years  and  is  extended  to  outlying  districts  of 
a  city,  whether  that  should  be  paid  for  now  out  of  a  short  term 
of  taxation  to  take  care  of  that  improvement  or  whether  it  should 
be  paid  for  out  of  bonds  which  would  make  the  future  generations 
Avhich  receive  some  of  the  benefits  of  the  sewer  pay  for  its  construe- 
tion.    It  is  a  question  somewhat  like  that ;  is  it  not  ? 

Mr.  Mortimer.  Yes ;  it  is  a  question  of  imposing  the  burden  upon 
those  that  are  gaining  the  advantage  of  it  dunng  the  time  that 
they  are  possessed  of  such  advantage. 

Commissioner  Wehle.  But  if,  instead  of  calling  this  a  mainte- 
nance fund  and  paying  for  these  replacements  out  of  a  maintenance 
fund,  from  year  to  year,  you  did  place  the  money  in  a  reserve  ac- 
count for  betterments  or  other  replacements,  would  you  not  get 
the  same  net  result?  The  money  is  either  spent  as  is  the  case  at 
present  in  Cleveland,  as  the  interest  was  from  year  to  year  almost 
m  these  replacements,  or  it  is  set  aside  and  hel3  and  used  in  more 
of  a  lunip  sum  to  effect  large  replacements.  Is  there  any  real  dif- 
ference in  principle  there? 

Mr.  Mortimer.  Yes;  there  is  a  fundamental  difference  in  prin- 
ciple in  this  respect,  that  in  a  street-railw^ay  property  serving  any 
one  of  our  urban  communities  growing  in  population  and  in  capital 
investment,  the  charges  that  have  to  be  provided  for  to  set  aside 
these  insurance  replacements  reserves  will  be  larger  than  the  charges 
for  current  maintenance,  taken  over  an  average  of  two  or  three 
years;  so  that  you  eliminate  extreme  fluctuations. 

The  problem  is  identical  with  the  insurance  problem  which  I 
have  indicated. 

Commissioner  Wehle.  For  how  long  a  time  has  it  been  provided 
by  contract  that  the  street  railways  of  Cleveland  are  to  purchase 
their  power? 

Mr.  Mortimer.  I  think  that  contract  was  entered  into  in  1916. 
It  may  have  been  1915.    I  am  not  certain  as  to  the  date. 

Commissioner  Wehle.  And  over  how  long  a  period  is  the  serv- 
ice to  continue  ? 

Mr.  Mortimer.  I  do  not  know  as  to  that,  but  my  only  impressions 
concerning  that  contract  are  that  it  was  procured  under  very  severe 
comi>etitive  conditions,  and  the  Cleveland  Illuminating  Co.  is  sell- 
ing that  power  to  the  Cleveland  Railway  Co.  at  less  than  cost  to  the 
Cleveland  Illuminating  Co. 

Commissioner  Wehle.  It  is  a  very  long-term  contract? 

Mr.  Mortimer.  I  could  not  say  as  to  that 


proceedings  of  federal  electric  railways  commission.  1081 

Commissioner  Wehle.  If  it  were  a  very  long-term  contract  with 
price  adjustments  in  it,  or  something  of  that  kind,  so  that  the  large 
element  of  power  equipment  were  eliminated  out  of  the  business 
arrangements  of  the  company  would  not  there  be  a  peculiarly  strong 
reason  there  for  abandoning  the  system  of  setting  aside  a  special 
fund  for  betterments— the  old-style  of  bookkeeping  or  auditing  that 
you  have  just  been  advocating? 

Mr.  Mortimer.  You  mean  to  create  a  replacement  reserve — would 
there  be  more  reason  to  abandon  the  replacement  reserve? 

Commissioner  Wehle.  Yes. 

Mr.  Mortimer.  Not  at  all. 

Commissioner  Wehle.  Why? 

Mr.  Mortimer.  If  the  replacement  reserve  is  not  created  upon  the 
books  of  the  corporation,  you  are  not  making  a  correct  statement  of 
the  company's  assets  and  liabilities. 

Commissioner  Wehle.  But  if  the  money  that  would  ordinarily  ga 
into  the  replacement  reserve  goes  into  the  maintenance  fund,  and  all 
the  items  which  you  are  going  to  have  to  replace  from  time  to  time 
are  relatively  small  items,  involving  such  things  as  track,  wire,  cars, 
and  so  forth,  which  can  be  replaced  in  relatively  small  amounts  and 
not  m  immensely  large  units,  does  not  the  reason  for  the  old  type  of 
bookkeeping  to  a  certain  extent  cease  to  apply? 

Mr.  Mortimer.  Not  at  all,  Mr.  Commissioner.  All  the  elimina- 
tion of  the  power  plant  does  is  to  cut  down  the  possibility  of  ex- 
treme fluctuations.  In  no  way  is  the  liability  to  effect  future  replace- 
ments reduced  by  the  abandonment  of  the  power  plant,  except  to  the 
continuation  of  the  power  plant. 

Comniissioner  Gadsden.  I  think  it  might  help  clarifv  the  situation 
to  say  that  the  only  effect  of  abandoning  the  power  plant  would  be 
to  precipitate  the  necessity  of  charging  off  the  power  house,  would 
it  not? 

Mr.  Mortimer.  Yes. 

?r^"^?i^^^^^"^^  Gadsden.  It  would  simply  increase  that  situation. 
Mr.  Mortimer.  Yes. 

Commissioner  Beall.  Under  the  method  of  a  depreciation  reserve 
it  means  that  the  property  is  always  either  maintained  on  the  origi- 
nal basis  or  you  have  cash  for  the  difference.  If,  in  other  words  in 
1935,  when  the  franchise  expired,  a  large  amount  of  your  track  or 
power  house  or  a  large  amount  of  equipment  of  whatever  it  mi<rht 
be  had  to  be  renewed  under  the  depreciation  reserve,  vou  would 
either  have  cash  for  that  or  you  would  have  substituted  property  of 
another  kind  which  made  up  that  value.  But  on  the  basis  of  Cleve- 
land to-day  you  might  come  up  in  1935  with  two  or  three  or  four  or 
maybe  seven  or  eight  or  ten  million  dollars  for  various  things  which 
you  did  not  have,  and  under  the  deferred  maintenance  pkn  it  might 
be  three  or  four  or  five  years  longer  before  you  could  make  that  up 
out  of  earnings.  That  is  the  difference.  In  one  way  you  always 
have  it,  and  in  the  other  you  may  have  it  or  may  not  have'^it. 

Commissioner  Wehle.  It  is  a  matter  of  bookkeeping. 

Commissioner  Beall.  It  is  not.  It  is  either  there  or  it  is  not 
there. 

Mr.  Mortimer.  It  is  not  a  matter  of  bookkeeping.  It  is  a  matter 
of  solvency. 


1982     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOTT. 

The  Chairman.  Let  me  aslc  two  or  three  questions,  and  1  think 
fre  can  clear  this  thing  up.  We  will  apply  the  questions  to  a  car. 
What  fund  do  you  char^  the  ordinary  repairs  to  a  carl 

Mr.  Mott'TiMER.  The  repairs  to  a  car  wdl  have  to  be  divided  int^ 
two  parts.  I  am  speaking  now  with  reference  to  the  practice  which 
I  advocate  and  carry  through.  If  it  is  a  repair  to  steps,  doors,  any 
of  the  operating  mechanisms,  such  as  motors  or  controllers,  trucks 
or  wheels,  the  i*epaii'  is  chargeti  to  maintenance  expense. 

The  Chairman.  If  the  car  becomes  entirely  out  of  repair  and 
must  be  replaced  by  a  new  car,  to  what  account  would  you  charge 
the  cost  of  that  new^  car? 

Mr.  Mortimer.  I  would  take  the  original  cost  of  the  old  car  out 
of  plant  and  property  account  and  charge  the  original  cost  of  the 
old  car  to  depreciation  reserve  or  replacement  reserve  and  the  new 
car  w^ould  be  charged  to  capital  account,  thus  maintaining  the  capi- 
tal account  in  line  with  the  original  cost  of  the  elements  of  property. 

Commissioner  Gadsden.  Supposing  when  that  car  was  worn  out 
you  had  not  built  up  this  reserve,  what  would  you  do?  That  is  one 
of  the  greatest  questions.  Is  it  not  a  question  that  you  pay  as  you 
go,  pav  as  you  enter,  or  whether  you  postiK)ne  it  for  a  day  of 
reckoning  ? 

Mr.  Mortimer.  That  is  correct.  I  think  that  is  a  fairly  good 
distinction  between  the  two  principles.  One  is  pay  as  you  enter  and 
the  other  is  pay  as  you  leave. 

Mr.  Gadsden.  Yes. 

Mr.  Mortimer.  And  if  you  should  run  into  a  condition  that  is 
likely  to  confront  the  Cleveland  railway  in  1935,  judging  the  future 
by  the  pa^t,  they  would  have  considerable  difficulty  in  paying  as 
they  leave. 

Commissioner  Wehle.  But  my  question  that  I  began  this  long 
colloquy  with  w^as  whether  the  various  items  of  property  of  the 
company  had  been  maintained  in  condition;  and  the  answers  which 
I  got  were  that  they  are  in  good  condition — the  cars  are  in  good 
condition,  the  tracks  are  in  good  condition,  etc. ;  therefore,  it  seems 
to  me  that  as  a  practical  matter,  this  franchise  having  operated  for 
10  yeai^  with  the  pay-as-you-leave  system,  it  seems  to  have  operated 
about  as  well  as  tne  pay-as-you-enter  sjrstem  would  have  operated, 
and  that  really  it  does  come  down  to  a  matter  of  bookkeeping.  In 
other  words,  that  the  proof  of  the  pudding  having  been  in  the 
eating,  the  eating  seems  to  have  been  all  right  and  the  pudding 
seems  to  have  proved  all  right. 

Mr.  Mortimer.  For  the  car  riders  who  have  ridden  during  the 
last  nine  years,  the  scheme  has  worked  best  for  them.  The  corn- 
pan  v  has,  how^ever,  secui-ed  a  liability  to  effect  future  replacements 
of  four  and  a  half  million  dollars  in  excess  of  what  it  started  out 
with,  besides  having  a  sus|x»nse  account  of  $1,140,000  a«  of  July  31. 
Its  total  deficits  measured  from  this  standpoint  are  now  $8,5<X),000, 
in  round  figures,  accrued 

Commissioner  Wehle.  But  if  all  these  items  of  property  that  we 
have  discussed  are  in  good  condition,  to  what  does  this  discrepancy 
refer — this  discrepancy  in  maintenance? 

Mr.  Mortimer.  The  question  of  good  condition  is  a  matter  of 
opinion.     It  can  not  be  measured  accurately. 


proceedings  of  federal  electric  railways  C0MMTSSI01!ir.    1983 

Mr.  Warren.  Could  you  illustrate  it  by  the  purchase  of  an  auto- 
mobile, which  lasts  about  four  years  and  is  kej^t  in  perfect  repair 
each  year,  and  yet  at  the  end  of  four  years  a  man  has  to  buy  a 
new  one?  Are  not  the  two  accounts  something  like  what  you  lay 
aside  to  replace  the  automobile  at  the  end  of  four  years  as  distinct 
from  wiiat  you  spend  on  it  each  year  in  keeping  it  in  good  condition? 
Mr.  Mortimer.  Yes;  I  think  thei-e  is  a  similarity  there. 
Commissioner  Wehle.  I  see  the  idea,  Mr.  Warren,  but  I  am  some- 
what puzzled  and  I  do  not  know  whether  any  of  the  other  com- 
missioners are  or  not;  if  they  are  not,  perhaps  they  can  explain  it 
to  hie  in  confidence,  but  I  still  do  not  see  to  what  this  large  dis- 
ci^epancy  is  referable.  I  would  like  to  have  you  explain  it  if  you 
can.  The  discrepancy,  as  I  understand,  is  iri  your  funds  replace- 
ment. 

Mr.  MoR'riMER.  That  is  connect;  they  have  no  replacements. 

^Commissioner  Wehle.  Replacement  of  what? 

Mr.  Mortimer.  Of  the  present  property,  which  measures  the  lia- 
bility of  the  prasent-day  property  to  effect  future  replacements. 

Commissioner  Wehle.  But  the  existing  property,  as  I  understand, 
is  in  good  condition. 

Mr.  Mortimer.  Oh;  it  is  in  good  condition  for  the  purpose  of 
running  cai-s  over  it,  but  that  does  not  in  any  way  reduce  tne  liability 
of  the  company  to  l-eplace  that  property  at  some  future  date.  The 
question  of  good  condition  is  a  factor  entirely  separate  from  the 
dfactor  of  financial  rep}a<5ement. 

Commissioner  Wmnite.  Your  idea  is  then,  is  it  not,  that  the  com- 
panies which  may  come  to  own  these  properties  at  the  end  of  the 
period  of  the  contract  are  running  the  risk  all  the  time  lest  the 
properties  will  not  be  kept  in  good  condition,  and  that  although  the 
properties  are  in  good  condition  at  the  present  time,  yet  in  the  period 
intervening  between  the  present  and  the  expiration  of  the  contract 
between  the  companies  and  the  city,  there  are  many  possibilities,  and 
that  there  has  not  been  such  a  resei-ve  as  according  to  the  bookkeep- 
ing standards  of  public-service  companies  heretofore  would  suffi- 
ciently protect  the  company? 

Mr.  Mortimer.  Mr.  Coirtmissioner,  it  is  not  so  much  a  question  of 
operating  condition  or,  as  you  say,  good  condition;  it  is  a  question  of 
protecting  themselves  against  second-hand  value  at  the  end  of  their 
franchise  period. 

Mr.  Warren.  They  would  have  to  do  it  if  there  was  no  end  to  the 
franchise,  W'ould  they  not? 

Mr.  Mortimer.  Yes. 

Mr.  Warren.  Under  an  indeterminate  franchise. 

Mr.  Mortimer.  Under  an  indeterminate  franchise  it  would  be  re* 
quired,  .because  all  indeterminate  franchises  carry  with  them  some 
right  on  the  part  of  the  State  or  municipality  to  purchase  or  con- 
demn the  property,  and  they  always  have  to  look  out  for  the  con* 
ditions  that  may  obtarin  at  the  time  of  condemnation.  And  testimony 
of  engineers  that  the  property  was  in  100  per  cent  condition  would 
not  absolve  the  company  fi*om  having  to  meet  th«  liability  for  the 
8eoond-hand  value  of  the  projierty. 

Commissioner  Wehle.  What  would  be  the  answer  of  some  pro*» 
tagonist  of  the  existing  system  in  Cleveland?     We  unfortunately 


I 


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1984    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1985 


are  closing  up  our  hearings  very  soon,  and  it  would  not  be  possible 
to  bring  Mr.  Peter  Witt  or  any  of  these  gentlemen  here  in  time  prob- 
ably to  complete  the  record  on  this  particular  rather  controversial 
point  that  has  arisen.  As  trustee  for  the  whole  situation  how  would 
you— and  taking  the  position  that  Mr.  Witt  might  take,  or  one  on  the 
other  side  of  this  question,  or  one  of  the  other  Cleveland  gentlemen 
or  perhaps  Secretary  Baker — what  would  be  the  answer  to  your  point 
that  you  have  made? 

Mr.  Mortimer.  Just  the  answer  that  you  gave;  the  argument  or 
the  way  in  which  you  directed  the  questions  to  me  is  the  viewpoint. 
It  is  typical  of,  say,  the  Boston  Elevated  Railway.  The  Boston  Ele- 
vated Eailway,  as  I  understand,  in  the  days  when  it  was  paying 
dividends  and  its  stock  was  selling  in  excess  of  par,  reached  the  con- 
clusion that  a  depreciation  or  reserve  of  $1,000,000  was  adequate  and 
thereupon  declared  dividends  up  to  the  amount  available  after  pro- 
viding a  reserve  of  $1,000,000.  This  was  not  an  annual  reserve. 
They  said,  "We  will  take  care  of  current  maintenance  and  replace- 
ment through  operating  expenses.  We  will  always  try  to  maintain 
our  reserve  at  $1,000,000.  And  I  think  they  did  maintain  it  at 
$1,000,000.  But  the  character  of  rolling  stock  and  the  condition  of 
maintenance  of  the  physical  properties  of  the  Boston  Elevated  is  in- 
dicative of  properties  that  take  that  viewpoint,  that  they  can  pro- 
vide for  modernization  of  their  equipment,  write  off  obsolete  prop- 
erty and  plants  through  current-maintenance  expenses.  They  do  not 
do  it.  Now,  that  is  one  of  the  fundamental  things  that  is  wrong  with 
the  electric-railway  business.  It  is  one  of  the  tl»rings  that  is  wrong 
with  the  Massachusetts  electric-railway  situation. 

Commissioner  Wehle.  That  they  have  never  charged  off  to  de- 
preciation enough  and  never  have  set  up  depreciation  funds  in  the 
whole  history  of  the  industry  ? 

Mr.  Mortimer.  Generally  the  electric  railways  of  Massachusetts 
have  not  created  depreciation  reserves;  neither  did  they  appropriate 
nor  spend  out  of  earnings  sufficient  money  to  keep  their  properties 
in  modern  condition. 

Commissioner  Mahon.  Has  not  that  been  the  fault  of  the  entire 
country,  not  only  Massachusetts  but  of  the  entire  industry,  that  it 
never  created  a  depreciation  fund  sufficient? 

Mr.  Mortimer.  I  think,  Mr.  Commissioner,  that  that  is  a  funda- 
mental defect  in  the  business.  There  are  some  exceptions  to  the 
rule. 

Commissioner  Mahon.  That  could  not  occur  either  in  Great  Brit- 
ain or  Canada  could  it? 

Mr.  Mortimer.  In  Great  Britain  and  in  Canada  I  think  it  has 
been  the  practice  to  view  this  depreciation  reserve  as  somewhat  more 
compulsory. 

Commissioner  Mahon.  They  are  required  by  law  to  do  it,  are  they 
not? 

Mr.  Mortimer.  Not  in  British  Columbia,  which  is  the  only  part  of 
Canada  with  which  I  am  familiar.  Many  of  the  board  of  trade  or- 
dinances or  so-called  franchises  or  rules  under  which  the  tramways 
in  England  operate  do  require  the  setting  up  of  reserves  of  this 
kind. 


-  Commissioner  Mahon.  If  that  had  been  required  by  the  laws  in 
the  early  days  we  would  have  avoided  much  of  this  trouble  we  are 
in  now  in  the  street-railway  world,  would  we  not? 

Mr.  Mortimer.  We  would  not  have  avoided  the  necessity  of  in- 
creasing rates.  We  would  have  avoided  the  condition  that  left  so 
many  electric  railways  with  their  credit  very  badly  impaired  and 
without  ability  to  finance  the  necessary  changes  in  equipment  that 
are  bound  to  come  as  a  result  of  this  period  of  stress. 

Commissioner  Mahon.  Then  going  back  to  Cleveland,  I  can  not 
recollect,  but  there  is  a  fund  for  depreciation  in  the  Cleveland  road. 
I  do  not  know  what  they  call  it. 

Mr.  Mortimer.  They  call  it  a  maintenance  and  depreciation  fund. 
It  is  provided  for  by  certain  credits  to  the  fund  as  specified  or  agreed 
or  ordinance  rate  per  car-mile  operated.  The  maintenance  expendi- 
tures are  charged,  actual  expenditures  for  maintenance  involving 
disbursements  of  money  for  material  and  labor,  against  this  mainte- 
nance and  depreciation  fund.  It  was  the  theory  of  the  ordinance  that 
there  would  be  some  reserve  created  first  to  take  care  of  fluctuations 
in  the  amounts  expended  for  maintenance  or  the  charges  against  the 
fund  because  of  property  abandoned  and  also  to  maintain  the  com- 
pany solvent,  but  the  expenditures  for  maintenance  have  been  very 
much  larger  than  were  contemplated. 

Commissioner  Mahon.  What  was  the  position?  You  spoke  of 
Mr.  Duffy's  paper  which  has  led  up  to  this  discussion.  At  that 
time  there  was  an  arbitration.  I  think  that  was  over  the  question 
of  the  power  house  that  that  arose,  I  am  not  sure.  But  you  spoke  of 
that.  There  was  an  arbitration  in  which  there  were  several  en- 
gineers, and  there  were  two  values  given.  I  think  Mr.  Duffy  repre- 
sented one  view  and  possibly  Mr.  Dupont,  or  whoever  was  on  the 
other  side  of  that  question,  the  other.  W^hat  was  the  view  of  the 
other  side? 

Mr.  Mortimer.  There  were  two  questions  to  be  arbitrated  at  that 
time.  One  was  the  increase  in  the  maintenance  allowance,  because 
there  had  been  an  overdraft  in  the  maintenance  resen^e;  and  the 
other  was  an  increase  in  the  operation  per  car-mile  out  of  which  the 
company  paid  the  platform  and  other  wage  expenses  other  than 
maintenance.  Mr.  Duffy  represented  the  company  and  the  late  Mr. 
Dupont  represented  the  city.  Judge  Killetts,  as  1  recall  it,  was  the 
third  arbitrator.  As  to  who  appeared  before  the  body  I  do  not  know, 
nor  what  were  Mayor  Baker's  contentions  at  the  time  I  do  not  rec- 
ollect; but  all  I  recollect  is  the  result.  There  was  an  increase  in 
the  maintenance  allowance  and  there  was  an  increase  in  the  oper- 
ating allowance  awarded  by  the  third  arbitrator.  Judge  Killetts. 

Commissioner  Sweet.  If  a  city  like  Pittsburgh,  for  instance, 
wished  to  adopt  the  Cleveland  plan,  would  there  be  any  difficulty  in 
making  an  amendment  to  the  ordinance  so  as  to  provide  for  a  reserve 
such  as  you  speak  of? 

Mr.  Mortimer.  None  whatever. 

Commissioner  Sweet.  So  that  the  Cleveland  plan  could  be  adopted 
by  any  city  that  wished  to  adopt  it  and  avoid  the  objection  you  have 
raised  by  such  an  amendment.    That  is  true,  is  it  not  ? 

Mr.  Mortimer.  That  is  correct ;  yes. 


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1986    PROCEE^DIN<5S  OF  FEDKRAL  ELECTRIC  RAILWAYS  COMMISvSION'. 

Commissioner  Sweet.  Now^,  if  I  understood  you  correctly,  I  think 
yo«  said  that  the  betternients,  the  iiiipix)vements  to  the  road,  new 
rails,  new  cars,  and  that  sort  of  thing,  that  kept  the  Cleveland  system 
in  pretty  jijood  condition  had  been  paid  for  by  the  sale  of  stock  ? 

Mr.  Mortimer.  I  said  that  addition  to  the  property  that  increased 
the  vwlne  of  tlie  propert^y  and  was  paid  for  principally  by  the  sale 
of  capital  stock. 

Mr.  Warren.  That  is  proj!)er,  is  it  not? 

Mr.  Mortimer.  Yes. 

Commissioner  Sweet.  That  is  entirely  proper,  because  they  have 
the  additional  property  to  sliow  for  it. 

Mr.  Mortimer.  Xhat  is  correct. 

Commissioner  Sweet.  But  you  did  not  make  the  statement  thnt 
these  improvements,  the  purchase  of  new  cars  to  take  tlie  place  of  old 
ones  or  replacements  ha\  e  been  paid  for  out  of  the  sale  ot  stock. 

Mr.  Mortimer.  No;  I  do  not  mean  to  say  there  had  been  any  error 
in  proper  bookkeejiing  in  tlie  matter  of  replacements. 

Commissioner  Sweet.  Aside  from  bookkeeping,  I  want  to  know 
what  has  paid  for  these  new  cai-s  and  r«,ils,  etc.,  that  have  kept  the 
system  in  good  condition.    Is  that  from  the  earnings  of  the  company  ? 

Mr.  Mortimer.  Any  property  that  was  abandoned  was  taken  out 
of  plant  and  property  account  and  charged  to  this  maintenance  and 
depreciation  reserve  or  was  suspended  and  subsequently  written  off 
the  rough  expenses. 

Commissioner  Sweet.  Has  the  car  rider  paid  for  new  cai^  to  take 
the  place  of  old  cars  that  were  worn  out  nnder  the  Cleveland  system, 
or  has  the  money  been  borrowed  by  the  sale  of  stock — that  is  the  same 
thing  practically — to  pay  for  new  cai^  to  take  the  place  of  old  ones? 
Under  the  Cleveland  plan^  how  have  they  got  the  money  to  buy  new 
cars  to  take  the  place  of  old  ones  ? 

Mr.  Mortimer.  It  has  come  from  operating  expenses  and  that  in 
tum  from  tl>e  car  rider. 

Coinmissioner  Sweet.  So  the  car  rider,  under  tlve  systein' which  has 
been  in  vogue,  has  actvially  paid  for  tlie  new  rails,  etc.,  to  keep  the 
system  up,  and  the  car  rider  has  already  paid  for  that? 

Commissioner  Beall.  Yes;  but  he  has  not  paid  it  for  the  accrned 
depreciation. 

Commissioner  Sweet.  Hold  on  just  a  minute.  I>o  you  want  to  take 
him  up  now  ? 

The  Chairman.  Go  oii^  Mr.  Swet^t. 

Commissioner  Sweet.  Now,  if  a  resjerve  such  as  he  suggests  would 
have  been  required,  t\w  cai*  rider  would  haxe  \jeen  obliged  to  pay 
something  more  in  order  to  create  that  rej^rve.    Is  that  correct? 

Mr.  Mortoier.  On  the  average:  yes.  The  car  rider  with  a  grow- 
ing property  would  have  been  required  to  pay,  Wause  the  value  of 
the  property  is  increasing  from  ye^irto  year  by  snccessive  increments. 

Commissioner  Sweet.  In  order  to  create  that  fund,  the  fare  would 
have  to  be  somewhat  larger  than  it  has  been,  so  that  the  money  de- 
rived from  that  increase  of  fare  couhl  be  set  aside  as  a  reserve  fund 
to  take  care  of  future  depreciation? 

Mr.  MoRiiMER.  That  is  correct;  yes. 

Commissioner  Sweet.  Therefore^  your  contention  is,  if  I  under- 
stand you  aright,  that  the  fare  has  been  lower  than  it  should  have 
been,  lower  than  it  would  have  been,  under  a  proper  system? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMTSSTON.    1987 

Mr.  Mortimer.  That  is  correct. 

Commissioner  Sweet.  And  that  the  Cleveland  system  would  not 
have  made  the  showing  it  has  with  regard  to  fares  if  this  fund  had 
been  created,  because  it  would  have  been  necessary  to  charge  a  larger 
fare  in  order  to  create  that  fund.     Is  that  correct  ? 

Mr.  MoRiTMER.  That  is  correct;  and  in  addition  to  that  a  part  of 
the  interest  that  the  company  has  been  paying  from  year  to  year  has 
in  part  been  paid  out  of  capital. 

The  Chairman.  The  commission  will  stand  adjourned  until  2.15. 

(Whereupon,  at  1  p.  m.,  a  recess  was  taken  until  2.15  p.  m.) 


AFTER  recess. 


The  Chairman.  You  may  proceed,  Mr.  Mortimer. 

STATEMENT  OF  MR.  JAMES  D.  MORTIMER— Continued. 

Mr.  Mortimer.  It  is  difficult  for  either  the  public  or  regulating 
commissions  or  shareholders  or  managements  to  distinguish  between 
the  success  of  one  corporation  as  compared  witli  another,  without 
taking  into  account  the  so-called  standards  of  service. 

The  standards  of  service  are,  in  large  part,  psychological.  They 
have  an  important  psychological  asi>ect.  A  comfortable  standard 
is  something  like  a  comfortable  wage — it  dejjends  upon  what  the 
people  ai-e  taught  to  think.  It  is  not  capable  of  universal  determi- 
nation. The  standard  of  comfort  in  one  city  may  l>e  entirely  differ- 
ent than  the  standard  of  comfoi-t  in  another  city.  The  standard 
street-car  comfort  I  am  referring  to. 

We  made  a  traffic  survey  in  1915  in  the  city  of  Cleveland,  and 
these  were  noticeable  characteristics  of  the  operation  of  street-cars 
there  as  conti-asted  with  some  other  places: 

The  rush-hour  traffic  was  very  i:)eaky  and  the  cars  were  very  heavily 
loaded.  That  that  is  a  fact  is  supported  further  by  the  large  number 
of  5-hour  runs  that  they  evidently  have  on  their  schedules,  as  testified 
to  by  Mr.  Rea,  of  the  Amalgamated  Association. 

We  also  found  that  the  traffic  during  rush  hours  called  for  a  gf>od 
many  standing  passengei's;  in  other  words,  thei*e  were  standing  pas- 
sengers during  the  nonrush  houi-s  when  most  of  the  standards  of 
service  require  that  there  shall  be  a  surplus  of  seats. 

As  I  undei-stand  it,  the  schedules  in  Cleveland  are  not  designed 
with  res^iect  to  the  number-  of  passengers  that  may  be  passing  on 
cars  at  a  given  point  at  a  given  time,  but  are  rather  determineil 
from  outside  observations  and  some  idea  as  to  what  the  traffic  will 
stand  in  the  way  of  service.  When  I  say  what  the  traffic  will  stand 
in  the  way  of  service,  I  mean  what  a  given  rate  of  fare  will  stand 
in  the  way  of  service. 

To  see  what  that  really  meant  in  the  way  of  dollars,  Mr.  Dool it- 
tie  applied  to  the  traffic  service  in  the  car  riding  of  Cleveland  tho 
standard  of  service  that  had  been  prescribed  by  the  Wisconsin  Rail- 
road Commission  appertaining  to  Wisconsin.  Wisconsin  standards 
called  for  67  seats  per  100  passengers  during  rush  houi-s,  during 
a  15-minute  period,  and  133  seats  per  100  passengei^  during  non- 
rush  hours.     In  otlier  words,  a  surplus  of  33  seats;  so  as  to  take 


i 


i 


1?88    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 

care  of  variations  in  the  rate  at  which  the  people  might  flock  to 
the  cars,  or  abnormalities  in  schedule. 

If  the  Cleveland  railway  had  been  required  to  adopt  the  standards 
of  service  required  by  the  Wisconsin  Railroad  Commission,  it  would 
have  added  $477,000  a  year  to  its  operating  expenses,  which,  at  the 
then  capital  value,  would  have  reduced  the  return  about  1  per  cent. 
That  is  an  approximate  measure  of  the  influence  of  standards  of 
service. 

In  order  to  give  you  that  same  view  from  another  standpoint,  I 
call  your  attention  to  some  computations  contained  in  Mr.  Doolit- 
tle's  book. 

He  takes  a  hypothetical  electrical  railway,  containing  the  normal 
ratio  of  plant  value  to  operating  revenues  and  the  normal  distribu- 
tion of  operating  expenses,  including  an  allowance  for  deprecia- 
tion— that  is,  replacement  insurance — and  on  that  ratio  of  value 
the  return,  with  a  normal  distribution  of  traffic  and  apportionment 
of  service,  was  5.23  per  cent. 

It  ordinarily  seems  a  relatively  small  thing  to  city  officials  and 
regulating  autnorities  to  order  a  10  per  cent  increase  in  service.  An 
increase  of  10  per  cent  in  service  during  rush  hours  would  have 
reduced  this  return  from  5.23  down  to  4.37 — not  quite  1  full  per  cent. 

So,  when  we  speak  about  street-car  service  being  satisfactory  in  one 
city  or  satisfactory  in  another,  we  are  introducing  an  indeterminate 
element,  an  element  of  which,  usually,  the  managers  have  no  quan- 
titative measurement;  the  public  has  no  quantitative  measurement 
of  it;  and  an  increase  or  decrease  in  the  ratio  of  standing  to  seated 
passengers  will  increase  the  returns  or  decrease  the  returns  in  sub- 
stantial quantity. 

That,  however,  does  not  mean  to  say  that  it  is  the  standing  pas- 
sengers that  pay  the  dividends,  because  it  is  interesting  to  note  that 
in  the  normal  distribution  of  traffic  in  a  city  other  than  Cleveland, 
with  an  average  return  during  the  24-hour  period  of  5.23  per  cent, 
taking  the  system  as  a  whole,  and  then  apportioning  the  cost  dur- 
ing the  different  hours  of  service,  we  find  that  the  highest  rate  of 
return  is  made  between  the  hours  of  6  and  7  in  the  morning,  or  at 
the  rate  of  7.53  per  cent  per  annum;  and  the  return  between  5  and 
6  at  night  is  4.01,  and  between  6  and  7  at  night  is  3.77.  Service 
between  12  and  5  o'clock  in  the  morning  yields  a  negative  return  of 
4.14  per  cent  per  annum. 

To  show  the  influence  of  peaky  traffic  upon  the  rate  of  return, 
imagine  all  this  traffic  spread  out  into  24  hours  so  that  it  could  be 
handled  uniformly.  If  all  that  traffic  were  handled  uniformly,  this 
return  of  5.23  per  cent  goes  up  to  10  per  cent  return. 

So  that  as  between  a  peaky  traffic  and  a  uniform  traffic,  with  the 
same  capital  investment  and  the  same  car  service,  there  is  a  wide 
opportunity  for  variation  in  the  rate  of  return,  because  increased 
operating  expenses  imposed  upon  the  company  in  handling  the 
larger  number  of  cars,  and  all  that  sort  of  thing,  and  the  increased 
wages  given  for  short-hour  service  during  the  rush-hour  period. 

I  have  mentioned  briefly  that  the  rate  of  return  now  being 
earned  upon  Cleveland  is  not  regarded  by  the  management  as  suffi- 
cient. It  is  insufficient  from  the  viewpoint  of  the  management,  evi- 
dently because  the  capital  stock  which  carries  6  per  cent  interest 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1989' 

is  selling  at  less  than  par,  and  it  is  impossible  for  the  company  to 
procure  any  additional  capital  from  its  shareholders  by  selling 
stock  at  par  when  carrying  only  6  per  cent  interest. 

The  Chairman.  What  is  the  present  market  price  ? 

Mr.  Mortimer.  The  last  figure  I  had  on  it,  it  was  93;  93  per 
cent  of  par.  Whether  it  is  higher  or  lower  than  that  I  don't  know ; 
but  at  the  present  moment  my  information  is  that  it  is  under  par. 

Commissioner  Wehle.  That  was  before  the  suggestion  of  increas- 
ing the  return,  was  it  not  ? 

Mr.  Mortimer.  Yes,  sir;  that  was  before  that  time.  Whether  the 
suggested  increase  of  return  and  the  arbitration  following  the 
strike  has  attached  some  speculative  value  to  the  stock  I  am  unable 
to  say. 

I  will  give  to  the  'commissioners  a  set  of  tables  which  will  com- 
pare some  of  the  traffic  factors  in  the  three  cities  that  have,  in 
some  respects,  been  most  prominently  before  the  commission. 

I  include  the  Milwaukee  Electric  Kailway  &  Light  Co.,  the  rail- 
way department  of  the  Milwaukee  Electric  Kailway  &  Light  Co., 
because  we  know  a  great  deal  about  the  Milwaukee  Railway  &  Light 
Co.  There  are  no  problems  of  undetermined  valuation;  there  are 
no  problems  of  the  amount  to  be  allowed  for  depreciation;  and  it 
is  a  company  which  has  endeavored  over  a  long  period  of  years 
to  accumulate  a  depreciation  reserve  sufficient  to  provide  for  the 
replacement  of  elements  of  physical  property  as  they  are  aban- 
doned from  time  to  time. 

The  Milwaukee  company  has  not  been  free  from  the  vicissitudes  of 
electric-railway  operation. 

The  Chairman.  You  discussed  that  quite  fully  at  your  last  ap- 
pearance. 

Mr.  Mortimer.  Yes,  sir. 

Mr.  Warren.  The  Milwaukee  is  also  at  present  operating  on  a 
5-cent  fare? 

Mr.  Mortimer.  Yes.  I  want  to  mention  that — that  here  are  three 
companies  where  the  base  fare  is  5  cents: 

Cleveland,  operating  at  a  5-cent  fare  plus  1  cent  for  transfer, 
without  rebate,  as  I  understand ;  Philadelphia,  operating  most  of  its 
service  at  5  cents,  but  during  the  year  1918  earning  average  receipts 
per  revenue  passenger  of  5.6  cents;  and  Milwaukee,  operating  at  a 
straight  5-cent  fare  with  free  transfers. 

The  population  per  mile  of  track  served  is  practically  the  same 
so  far  as  Milwaukee  and  Cleveland  are  concerned,  namely,  around 
2,360  people  per  mile  of  track.  The  population  served  in  Phila- 
delphia is  2,808. 

The  average  riders  per  capita  of  population  served  during  the 
year  1918  were  highest  in  Cleveland,  at  337,  next  highest  in  Phila- 
delphia, and  lowest  in  Milwaukee.  The  last  figure  gives  the  receipts 
per  capita  of  population  served  and  shows  the  largest  earnings  per 
capita. 

I  will  say  in  passing  that  it  is  the  general  experience  that  the  earn- 
ings per  capita  increase  with  the  number  of  people. 

Some  foreign  investigations  tended  to  suggest  that  the  rides  per 
capita  increased  as  the  square  of  the  population  up  to  500,000  popu- 
lation, as  the  first  power;  that  is,  directly  proportional  to  the  popu- 
lation. 


1990     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


So  that  the  hi^Hier  receipts  in  Philadelphia  than  obtained  in  Cleve- 
land or  Milwaukee  are  dne  to  two  things:  First,  the  larger  number 
of  riders  per  capita,  and,  second,  tlie  higher  rates  of  fare  per  ride. 

The  next  sheet  shows  certain  general  statistics  such  as  the  invest 
ment  in  property  and  plant  per'  dollar  of  opemting  revenues.  This 
property  and  plant  is  the  cash  cost  of  the  physical  property  of  the 
Cleveland  Railway.  It  amounts  to  $3.30  per  dollar  of  operating 
revenues.  There  is  practically  little  power-plant  investment  con- 
tained m  that,  because  of  the  fact  that  the  company  is  buying  its 
power  and  the  power-plant  investment  has  been  taken  out,  and  that 
portion  of  it  which  has  not  yet  been  written  off  through  operating 
expenses  is  in  process. 

The  Milwaukee  Electric  Eailway  &  Light  Co.  shows  $2.98  valua- 
tion of  the  physical  property  per  dollar  ot  grosfe  receipts.  That  does 
not  include  any  power-plant  or  substation  equipment  of  any  kind, 
because  it  has  been  necessary  for  us  to  take  out  our  entire  *  in  vest- 
ment in  our  so-called  utility,  and  carry  it  as  a  separate  utility,  for 
the  purpose  of  apportioning  the  cost  of  pi-oducing  power  between 
the  railway  at  one  end  and  the  electric-light-and-power  utility  on 
the  other. 

There  ai*e  no  available  data  appertaining  to  the  investment  in  plant 
of  the  Philadelphia  company,  but  in  the  subsequent  computations  we 
will  have  to  approximate  them. 

The  per  cent  of  operating  pay  rolls  to  operating  revenues  in  the 
case  of  the  Philadelphia  company  was  42  per  c«nt.  In  Cleveland 
these  data  are  not  given  in  the  reports,  and  we  were  unable  to  obtain 
it  recently,  because  of  their  pressure  of  work  in  the  arbitration  on 
the  rate  of  return.    In  the  Milwaukee  company  the  percentage  was 

The  next  item  is  impoi-tant.  The  amount  of  oi>erating  revenues 
expended  on  the  maintenance  of  th  physical  property:  Cleveland 
shows  the  highest,  with  19.15  per  cent  of  the  operating  revenues  ex- 
pended on  current,  ordinary  maintenance.  That  item  does  not  in- 
clude the  amounts  that  are  being  charged  because  of  amortization  of 
defunct  equipment.  That  is  a  separate  charge,  as  will  be  shown 
in  the  income  account  analysis. 

Milwaukee  expended  16.89  per  cent  of  the  operating  revenues  on 
maintenance,  and  I  know  that  during  1918  our  maintenance  expenses 
were  subnormal.  I  feel  that  we  ought  to  have  expended  nearer  20 
per  cent  during  that  period  on  current  maintenance.  The  rasults 
for  the  current  year  will  show  larger  expenditures. 

In  Philadelphia  there  was  expended  14.25  per  cent  of  the  operating 
revenues  on  current  maintenance  out  of  a  total  appropriation  for 
maintenance  and  replacements  of  15  per  cent  of  the  operating  reve- 
nue. The  company  carried  to  the  credit  of  its  depreciation  or  re- 
newal reserve  about  $319,000,  or  three-quarters  of  1  per  cent  of  the 
operating  rei^enues. 

The  next  sheet  shows  the  relative  earning  power  of  each  mile  of 
track,  of  the  average  mile  of  track;  they  range  from  $29,700,000  for 
Milwaukee,  up  to  $50,369. 

Our  car-hour  figures  for  Cleveland  may  contain  some  small  pos- 
sible error,  because  the  data  are  not  included  in  their  annual  report. 
The  figures  ai^  not  kept  compiled  monthly  in  the  system  of  account- 
ing, and  we  have  approximated  from  the  scheduled  speed. 


■::i 


PROCEEDINGfS  OF  FEDERAL  m^BCTRIC  RAILWAYS  COMMISSION.    1991 


Cleveland  had  the  highest  earnings  per  car-hour  of  $3.49,  Philadel- 
I>hia  followed  closely  with  $3^.27,  and  Milwaukee  earned  $2.90. 

Cleveland  had  tiie  second-highest  earnings  per  car-mile.  Its 
earnings  per  car-hour  were  high,  because  it  has  a  higher  mileage 
llian  either  of  the  other  two  companies.  The  data  will  show  that 
Milwaukee  and  Philadelphia  operated  a  little  under  9  miles  per 
hour,  whereas  Cleveland  fan  about  10^  miles  per  hour;  and  that 
additional  lOJ  miles  is  a  very  important  factor  in  increasing  the 
return  or  in  reducing  expenses. 

The  revenue  per  passenger  was  4.42  cents  in  Cleveland,  4.66  in 
Milwaukee,  and  4.61  in  Philadelphia. 

The  next  sheet  is  of  importance  primarily  in  showing  the  per- 
centage of  transfer  passengers.  In  Cleveland  the  percentage  of 
free-transfer  passengers  to  revenue  passengers  was  37,  only  3  per 
cent  less  than  what  it  was  in  Milwaukee. 

In  Philadelphia  it  was  24  per  cent.  In  other  words,  the  free- 
transfer  facilities,  as  has  been  previously  explained  to  this  com- 
mission, are  not  as  extensive,  or  at  least  do  not  attract  as  large  a  pro- 
jwrtion  of  the  total  traffic  as  they  do  in  most  cities. 

The  next  sheet  shows  some  of  the  data  upon  whicli  the  previous 
tables  have  been  compiled.  The  principle,  however,  is  contained  in 
the  last  two  lines,  where  the  measure  of  service  given  to  the  city  is 
measured  in  car-miles  per  annum,  per  capita  of  population  served, 
showing  that  the  Cleveland  railway  operates  45  car-miles,  the  Phila* 
delnhia  company  49,  and  the  Milwaukee  company  39. 

The  •far-miles  per  capita,  according  to  statiiics^  invariably  in- 
crease with  the  size  of  the  city,  because  of  the  distribution  of  popu- 
lation: and  the  amount  of  riding  which  a  wider  distribution  of 
l>o]>ulation  in  cities  induces. 

The  character  of  the  loading  of  cars,  and  the  apportionment  of 
service  to  the  riding,  and  in  some  respects  some  measure  of  skill  is 
sliown  by  the  last  line. 

In  Cleveland  they  carry  7.47  revenue  passengers  per  car-mil«. 
That  figure  is  obtained  by  taking  the  total  revenue  passengers  and 
dividing  by  the  total  car-mileage:  In  Philadelphia  6.38  and  in  Mil- 
waukee 6.88  revenue  passengers  per  car-mile. 

The  next  title  shows  the  income  account.  It  appears  that  the 
Milwaukee  company  has  operating  revenues  of  about  40  per  cent 
of  those  of  Cleveland,  and  the  Cleveland  company  operating  reve- 
nues of  about  40  per  cent  of  those  of  Philadelphia, 

The  principal  item  of  interest  as  we  go  down  the  line  is  the  rela- 
tively large  amount  that  is  charged  in  the  case  of  the  Milwaukee 
railway  utility  for  power  compared  with'  that  in  Cleveland  and  in 
Philadelphia. 

The  rjitio  between  the  amount  paid  by  the  Cleveland  company  to 
that  paid  by  the  Philadelphia  company  is  in  appi-oximate  propor- 
tion to  their  relative  share  as  measured  by  their  earnillgfe. 

The  amount  charged  in  the  case  of  the  Milwaukee  company  is 
due  to  the  fact  that  there  is  included  in  that  item  the  entire  return 
on  the  entire. investment  in  car  facilities  apportioned  to  tlie  railway 
in  transmission  and  distribution  facilities.  In  other  words,  it  as- 
sumes that  the  railway  has  no  power  facilities  whatsoever.  Of 
coui-se,  that  is  not  true  in  Philadelphia.     While  Philadelphia  buys 


' 


1992    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOIT. 

some  portion  of  its  power,  it  also  generates  some  portion  of  its  power, 
and  there  are  included  in  the  Milwaukee  power  costs  a  certam  fig- 
ure for  return  and  replacement  allowance  upon  the  investment  m 
power  facilities,  which  would  be  carried  in  some  other  item  ordi- 
narily in  respect  to  the  other  companies. 

Using  these  computations,  the  return  earned  by  the  railway  utility 
of  Milwaukee  was  2.66;  that  earned  by  Cleveland,  5.20.  there  is 
no  figure  included  for  Philadelphia,  because  I  leave  that  to  sub- 
sequent analysis. 

The  next  table  merely  shows  total  operating  expenses  and  operat- 
ing expenses  per  car-mile. 

Philadelphia  shows  total  operating  expenses  of  23.90  cents;  Cleve- 
land, 27.73  cents;  and  Milwaukee,  29.77. 

The  higher  Cleveland  figures  ai*e  primarily  because  of  the  allow- 
ance for  depreciation.  The  higher  Milwaukee  figures  are  partially 
because  of  the  allowance  for  depreciation  and  partly  because  of  the 
increased  power  cost. 

Philadelphia  expended  2.02  cents  per  car-mile  for  maintenance  of 
way  and  structures;  Cleveland,  3.03  cents;  Milwaukee,  2.25  cents. 
Per   mile   of   track,    Philadelphia   expended   $2,814;    Cleveland, 
$3.263 ;  and  Milwaukee,  $2,163.    ^  '  ^  '       '  ' 

Milwaukee  expenditures  were  subnormal  last  year. 
The  maintenance:  Philadelphia,  2.68  cents  per  car-mile;  Cleve- 
land, 3.21 ;  Milwaukee,  3.16. 

Mr.  Warren.  Maintenance  of  equipment  you  mean? 
Mr.  Mortimer.  Maintenance  of  equipment ;  yes.    And  when  main- 
tenance of  equipment  is  measured  per  car  owned,  about  $800  per 
car  for  Philadelphia ;  $63  for  Cleveland ;  and  $910  for  Milwaukee. 
It  next  shows  power  expense— $5.75  per  thousand  passengers  in 
Philadelphia,  $4.39  in  Cleveland,  and  $7.85  in  Milwaukee. 

The  next  table  shows  the  cost  of  conducting  transportation.  The 
item  is  not  of  particular  interest,  except  that  you  can  apply  to  its 
computations  for  showing  the  effect  in  the  costs  per  passenger  of 
increase  in  wages. 

The  last  sheet  shows  the  general  and  miscellaneous  expenses  and 
depreciation  allowances  and  taxes.  It  is  interesting  to  know  that 
the  taxes  and  depreciation  allow^ances  to  operating  revenue  all  hover 
around  the  same  point,  ranging  from  5.84  per  cent  to  6.01  per  cent 
Depreciation  computations:  Philadelphia,  1.03  per  cent  of  operating 
revenue;  Cleveland,  6.03;  and  Milwaukee,  7.55. 

(leneral  miscellaneous  expenses  in  per  cent  to  operatin<r  revenue 
were  lowest  in  Philadelphia,  7.01,  and  highest  in  Cleveland  at  11  13 
per  cent. 

Turning  back  to  the  sheet  marked  traffic  statistics,  I  direct  the 
commission's  attention  to  that  figure  revenue  car-miles  per  revenue 
car-hour:  Philadelphia,  8.95;  Cleveland,  10.43;  and  Milwaukee  8  98 

Now,  to  slTow  you  what  the  influence  is,  suppose  the  Milwaukee 
company  could  have  operated  the  same  schedule— that  is,  obtained 
the  same  number  of  car-miles  per  car-hour  as  obtained  in  Cleve- 
/^r  1 '^'^^l  ^^^"*"®,*^^*  ^t«  power  cost  per  mile  was  the  same  as 
C  leveland  s,  then  the  saving  of  expenses  to  the  Milwaukee  company 
bv  reason  of  that  would  have  been  $246,000  per  year  on  platform 
lauor,  and  ^3o6,000  a  year  on  power,  a  total  of  $602,000.     That 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    199^ 

$602,000  is  equivalent  to  3.76  per  cent  return  upon  the  railway-utility 
I  capital,  and  if  that  were  added  to  the  2.66  shown  in  the  other  figures 
the  return  of  the  railway  utility  would  have  been  increased  to  6.42 
per  cent,  which  I  assume  would  be  an  approximately  reasonable 
return  under  present  conditions,  and  that  would  have  been  the  result 
that  would  have  been  obtainable  at  the  5-cent  fare  and  under  the 
conditions  under  which  we  operate. 

Mr.  Warren.  That  would  have  been  effected  materially  by  in- 
creasing  the  schedule  to  the  Cleveland  schedule  ? 

Mr.  Mortimer.  The  influence  of  increasing  the  schedule  speed  to 
the  Cleveland  schedule  would  have  added  IJ  per  cent  return;  IJ 
per  ceixt  return  is  a  measure  of  the  cooperation  that  the  city  of  Cleve- 
land gives  in  the  operation  of  the  street-railway  service — keeping^ 
the  teams  off  the  tracks,  arresting  any  teamster  who  in  any  way  in-^ 
terfered  with  street-railway  service,  and  in  other  ways  preventing 
complaint  being  made  because  of  fast  street-car  service,  and  so  forth. 
Now,  I  have  indicated  that  the  Cleveland  Railway  balance  sheet 
IS  defective  because  of  the  absence  of  setting  up  any  depreciation 
reserve  or  any  adequate  reserve.    There  should  be  recorded  on  the 
books  of  the  Cleveland  company  its  plant-and-property  account  at 
about  $40,000,000  instead  of  $32,000,000,  with  corresponding  increase 
of  about  $8,000,000  for  accrued  depreciation  at  the  time  of  the 
Johnson-Goff  appraisal,  and  in  addition  about  $1,000,000  more  for 
that  accrued  since  that  time  over  and  above  for  replacements  which 
have  been  made,  so  therefore  a  reserve  liability,  in  round  figures, 
of  twelve  to  twelve  and  a  half  million  dollars,  if  the  property  be 
taken  at  a  30  per  cent  condition.     I  think  probably  a  30  per  cent 
deduction  for  depreciation  in  1909  was  high,  but  it  was  a  trade  that 
was  made  and  one  that  the  Cleveland  railway  has  to  struggle  under. 
And  the  Tayler  ordinance  contemplates  that  the  property  will  be 
maintained  in  the  same  percentage  condition  as  was  found  in  the  so- 
called  Johnson-Goff  appraisal. 

The  Milwaukee  company  has  recorded  on  its  books  appropriations 
for  depreciation  reserve  which  was  slightly  in  excess  of  the  estimated 
liability  as  found  by  the  commission  in  its  appraisal  of  January  1,. 
1914,  brought  up  through  successive  periods  such  as  I  have  indicated. 

Aow,  an  examination  of  the  Philadelphia  balance  sheet,  however 
shows  a  depreciation  liability  of  about  $1,200,000,  or  an  amount  oi 
1  per  cent  or  less  of  the  cost  of  the  physical  property  measured 
from  any  conservative  standpoint. 

If  it  be  assumed  that  the  fair  value  of  the  railway  property  of  the 
Philadelphia  company  is  four  times  the  gross  earnings,  that  would 
call  for,  we  Avill  say,  a  minimum  valuation  of  $120,000,000.  It  is 
generally  found  that,  in  recent  appraisals  where  property  has  been 
fairly  well  maintained,  the  liability  to  effect  future  replacements 
IS  measured  by  about  15  per  cent  of  the  original  cost.  Now,  15  per 
cent  of  $120,000,000  is  $18,000,000,  and  $18,000,000  would  be  the  fair 
measure  of  the  present  liability  of  the  Philadelphia  company  to  effect 
future  replacements  over  and  above  expenditures  made  for  current 
maintenance. 

It  has  a  reserve  of  about  $1,200,000,  so  that  there  is  a  deficit  in  its 
depreciation  reserve  of  $16,800,000,  in  round  figures. 

That  there  is  some  justification  for  figuring  adequate  reserves  in 
the  case  of  the  Philadelphia  company  must  be  considered  in  the  light 


tt 


1994    PHOCEEDINGS  OT  FEDERAL  ELECTKIC  BATLWAYS  COMMISSTOIT. 

of  the  leases  und«r  which  the  Philadelphia  company  operates.  I 
think  this  lease  is  probably  tjjpical :  Section  21  of  the  Union  Traction 
Co.  kase  to  the  Philadelphia  Rapid  Transit  Co.,  which  refers  to 
maintenance  and  replaoeniont  and  the  condition  of  the  property 
when  it  shall  be  turned  back  to  the  Union  Traction  Co.,  which  I  will 
read  for  the  record,  bec4iuse  I  do  not  believe  that  it  is  otherwise  in : 

It  is  th«?  true  intent  and  meaning  of  this  a*n*eement  that  the  railway  system 
herein  dewii^ed  by  the  VT\Um  Traction  (\\  siiall  he  at  all  times  kept  in  the  same 
general  good  repair  and  condition  in  wliich  the  same  now  Is  or  will  be  upon 
tlie  -completion  of  the  conteniplat^d  improveinent,  and  fully  equipiied  with  the 
best  and  most  improved  equipment  for  operating  the  same.  Rapid  Transit  Co. 
shall,  at  the  expiration  or  other  termination  of  the  lease,  render  to  the  ITnioh 
Co.  all  the  proix^rty  and  premises  in  the  same  good  order  and  condition  in 
which  they  now  are,  with  the  streets  upon  which  the  various  lines  of  railway 
are  lai<l  pave<l  in  the  s*ime  goo<l  condition. 

Bnt  that  is  not  all : 

The  1>nnsit  Oo.  accepts  the  premises  as  being  In  all  respects  fully  equipped 
in  a  modf^i  manner  as  a  first-class  street-railway  system  with  all  the  proper 
and  nect^ssary  railways,  machinery,  etc.,  and  the  Transit  Co.  shall  on  tlie 
determination  of  the  lease  deliver  to  the  Union  Co.  the  entire  system  fully 
equipped  and  in  a  thoroughly  first-class  manner  in  all  respects,  with  all  im- 
piovemcnts  which  may  be  then  in  general  use  on  similar  first-class  street  rail- 
H-;\ys  of  like  extent,  and  in  case  the  Union  Co.  shall  object  as  to  the  clas*s  of 
property  that  is  being  turned  over  or  any  part  of  it  as  not  being  in  first-class 
con<lition  or  that  they  are  not  eqiiiwed  as  provided  for  or  intended  to  be  pro- 
vided for  bv  the  lease,  then  any  question  of  dispute  shall  be  determines!  by 
arbitrators, 'and  if  said  arbitrators  find  in  favor  of  the  Union  Co.  an  award 
shall  be  matle  in  favor  of  the  ITnion  for  such  an  amount  of  money  as  shall 
©nflble  the  Union  to  property  equip  such  system  in  accordance  with  the  true 
intent  and  meaning  thereof. 

Those  piovisions  contain  a  very  heavy  contingent  liability,  because 
the  cost  to  the  Philadelphia  company  of  settling  under  these  leases 
may  vary  over  a  substantial  range  depending  upon  the  extent  to 
which  the  art  may  have  changed  previously  to  the  termination  of  the 

leases. 

Now,  if  we  take  the  income  account  of  the  Philadelphia  Rapid 
Transit  Oo.  for  the  year  1918  and  reconstruct  it  by  making  a  depre- 
ciation allowance  of,  say,  2^  per  cent  on  $120,000,000  property  value, 
'  $3,000,000  per  anum,  we  would  have  substantialy  a  further  deduc- 
tion of  $8,000,000,  or  more  accurately,  $2,700,000  from  the  net  income 
of  the  Philadelphia  company,  in  order  to  place  it  upon  tine  mme 
basis  of  comparison  as  we  have  made  the  analyses  of  costs  of  Mil- 
waukee and  Cleveland.  If  that  $2,700,000  is  deducted  from  the  n^ 
income,  thev  would  have  had  net  earnings  insufficient  to  pay  the  in- 
terest and  rentals  by  about  $1,000,000  a  >"ear  and  instead  of  earning 
a  dividend  of  5  per  cent  on  the  capital  stock,  they  would  have  in- 
curred a  deficit  or  about  4  j^er  cent  on  the  capital  stock. 

Now,  it  may  be  objected  that  the  valuation  of  $120,000,000  is  a 
purely  gratuitous  offering  on  my  part.  But  that  was  placed  at  a 
minimum  figure  for  the  purpose  of  minimizing  the  computations  to 
be  made  from  depreciation. 

Now,  if  the  property  be  valued,  we  will  say,  at  $152,000,000,  which 
is  considerably  in  excess  of  the  net  par  value  of  all  the  se^^rities  out- 
standing, including  the  stock  and  bonds  of  the  Philadelphia  Rapid 
Transit  Co.,  that  is  an  amount  equivalent  to  ^  times  the  gross 
earnings,  then  the  allowance  for  depreciatioii  becomes  $3,800,000^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1995 

instead  of  $3,000,000.  The  deficit  is  more  largely  increased  and  the 
rate  of  return  on  the  $152,000,000  becomes  5  per  cent  instead  of  the 
former  7  per  cent  return  on  $120,000,000.  These  returns  have  been 
com])uted  on  the  basis  of  maintenance  expenditures  of  14 J  per  cent 
for  the  year  1918.  Cleveland  expended  20  per  cent;  and  Milwaukee 
exi)ended  nearly  17  per  cent  for  maintenance ;  and  we  underexpended. 

If  Philadelpnia  current-maintenance  expenses  were  increased  by, 
roughly,  5  per  cent,  there  would  have  been  an  increase  in  operating 
expenses  of  about  one  and  a  half  million  dollars  or  some  figure  com- 
parable with  what  can  properly  be  saved  by  our  rerouting  and  the 
elimination  of  duplicate  service  and  things  like  that  in  the  operation 
of  the  Philadelphia  railway. 

Now,  it  is  interesting  to  note  that.  I  do  not  believe  that  there  is 
anyone  that  feels  that  a  5-cent  cash  fare  is  adequate  for  the  operation 
of  the  Philadelphia  street-railway  system,  if  measured  from  the 
standards  ^yith  which  the  cost  of  service  is  usually  approached.  The 
actual  receipts  were  5.6  cents  per  revenue  passenger.  If  there  be 
added  to  the  cost  of  service  the  minimum  amount  of  depreciation, 
namely,  $3,000,000,  or  $2,700,000  rather,  and  the  amount  required  to 
])ay  the  dividend  upon  the  capital  stock  of  the  Philadelphia  Rapid 
Transit  Co.,  all  of  which  has  been  paid  in,  evidently,  the  cost  per 
passenger,  instead  of  being  5.6  cents,  goes  up  to  6.25  cents  per  revenue 
passenger.  And  if  the  maintenance  expenses  were  further  increased 
by  an  additional  5  per  cent  of  the  operating  revenue,  the  cost  per  pas- 
senger would  go  up  to  6.55  cents  per  revenue  passenger,  thus  obtain- 
ing figures  with  which  we  are  generally  familiar  in  the  study  of 
electric-railway  costs  in  1918  conditions. 

That  is  all  my  direct  testimony,  Mr.  Warren. 

Commissioner  Beall.  Mr.  Mortimer,  can  you  tell  us  anything 
about  the  distribution  of  population  in  Philadelphia,  compared  to 
certain  other  cities?  Is  it  not  a  little  more  favorable  for  the  loading 
of  street-railway  cars? 

Mr.  Mortimer.  Well,  it  is  generally  i*ecognized  that  Philadelphia 
has  a  peculiar  distribution  of  population.  I  fii-st  heard  about  that 
in  1907,  when  it  was  said  that  all  the  people  who  worked  down  town 
lived  outside  and  all  the  people  who  lived  down  town  worked  out- 
side; so  that  it  resulted  in  rather  favorable  conditions  from  a  traffic 
standpoint.  It  gave  loaded  cars  both  ways.  That  is  evidently  still 
the  condition.  Philadelphia's  remarkable  industrial  development 
in  the  last  four  or  five  years — people  who  have  seen  the  service  and 
watched  it  carefully  say  that  the  rush-hour  cars  are  loaded  both 
ways;  in  other  words,  the  amount  of  empty-car  mileage  which  has 
to  be  made  is  at  a  minimum,  due  to  the  2>eculiar  relative  distribution 
of  population  and  industries. 

The  Chairman.  The  point  of  your  statement  is  that  even  under  a 
cost-of-service  plan  you  nave  to  maintain  a  proper  depreciation  fund. 

Mr.  Mortimer.  That  is  my  view — that  that  is  necessary. 

The  Chairman.  And  that  if  Philadelphia  had  maintained  the 
proper  depreciation  fund  they  would  not  be  able  to  charge  a  5-cent 
fare.    Is  that  it  ? 

Mr.  Mortimer.  And  their  operating  expenses  were  the  same  as  they 
are  now,  yes;  and  assuming  that  the  values  would  fall  within  the 
range  that  I  have  indicated  on  appraisal. 


I 


f 


1996    PROCEEDINGS  OF  FEDERAL  ELECTRIC  tl'AlLWAYS  COMMISSION. 

The  Chairman.  In  sj)ite  of  that  assumption,  however,  the  Phila- 
delphia plant  is  well  maintained  and  they  are  paying  dividends  upon 
the  stock  and  they  are  operating  at  a  5-cent  charge,  and  they  have 
announced  that  on  the  1st  of  January  they  will  cut  out  the  pay  trans- 
fer ;  so  is  not  that  an  example  of  where  facts  seem  to  be  a  little  more 
decisive  than  figures? 

Mr.  Mortimer.  It  is  well  known  that  it  is  possible  to  pay  dividends 
even  though  they  are  not  earned. 

The  Chairman.  Certainly. 

Mr.  Mortimer.  Yes. 

The  Chairman.  That  is  all. 

Commissioner  Sweet.  Is  the  riding  greater  in  Philadelphia  and 
Cleveland  than  it  is  in  Milwaukee  ? 

Mr.  Mortimer.  Yes ;  it  shows  up  larger. 

Commissioner  Sweet.  It  shows  on  this  first  page,  does  it  not? 

Mr.  Mortimer.  Yes;  the  so-called  riding  habit^riders  per  capita 
of  population — is  316  in  Philadelphia,  337  in  Cleveland,  and  268  in 
Milwaukee. 

Commissioner  Mahon.  Is  it  not  true  that  the  denser  the  popula- 
tion the  greater  is  the  riding  habit  ? 

Mr.  Mortimer.  That  is  the  universal  experience. 

Commissioner  Sweet.  Is  it  not  possible  that  there  is  added  to  that 
the  element  of  somewhat  greater  good  will  on  the  part  of  the  general 
public? 

Mr.  Mortimer.  I  think  probably  that  has  some  influence  upon  the 
general  attitude  of  the  public  and  their  inclination  to  ride,  but  it  is 
a  factor  that  is  exceedingly  difficult  to  measure. 

Commissioner  Sweet.  In  your  statement  you  referred  to  certain 
things  that  were  done  in  Cleveland,  such  as  the  keeping  of  the  track 
clear,  etc.  That  would  result  in  material  increase  in  net  profit  in 
Milwaukee  if  you  had  the  same  thing  there? 

Mr.  MoRTi3kiER.  Yes. 

Commissioner  Sweet.  Is  that  the  result  of  a  better  understanding 
and  feeling  generally  on  the  part  of  the  population  toward  the  street- 
railway  company  in  Cleveland? 

Mr.  Mortimer.  The  viewpoint  is  different.  The  people  in  Cleve- 
land have  been  led  to  believe  that  they  are  getting  the  best  street- 
railway  service  in  the  United  States  at  its  cost.  That  has  been  taught 
to  them  ever  since  the  year  1909.  It  is  part  of  the  gospel  of  every 
city  administration,  be  they  one  party  or  another  party.  Anything 
that  in  any  way  tends  to  increase  costs  which,  in  turn,  might  result 
in  an  increase  in  a  rate  of  fare  is  frowned  upon  by  municipal  officials 
and  by  the  public  generally.  On  the  other  hand,  in  Milwaukee  the 
city  officials  and  certain  politicians  have  preferred  to  say  that  the 
Milwaukee  company  was  a  company  that  was  making  exorbitant 
profits,  that  it  had  anywhere  from  $5,000,000  to  $7,000,000  of  money 
earned  out  of  the  business  that  belonged  to  the  public  and  that  it 
never  did  need  any  increase  in  fare  to  pay  any  increase  in  wages  or 
other  increases  in  operating  expenses.  In  other  words,  we  have  had 
opposition  from  the  city  administration  because  of  the  difference  in 
the  scheme  under  which  the  two  things  operate.  And  last,  but  not 
least,  the  company  suffers  from  participation  in  politics  in  the  early 
days,  prior  to  its  consolidation.  Controlling  one  group  of  railways 
they  were  prominent  in  the  Democratic  councils  of  the  State  and 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    199T 

another  group  of  railways  w^ere  prominent  in  the  Republican  coun- 
cils of  the  State,  with  the  result  that  the  public  came  to  believe  that 
whoever  was  elected— it  did  not  make  any  difference  because  the 
street  railway  had  them  both. 

And  those  things  are  extremely  difficult  to  live  down.  There  was  a 
great  cry  sent  up  at  the  time  the  1900  franchise  was  granted.  That 
>yas  a  franchise  which  provided  for  a  5-cent  cash  fare  and  commuta- 
tion tickets,  6  for  a  quarter,  or  30  for  a  dollar  for  34  years.  The  city 
undertook  to  cause  a  reduction  in  that  rate  of  fare  asking  for  a  3-cent 
fare  in  1906,  and  the  company  was  one  of  the  first  of  the  companies, 
if  not  the  first,  in  fact,  to  contest  the  right  of  regulation  by  the  rail- 
road commission,  to  modify  a  franchise  rate  of  fare;  and  that  was 
carried  up  to  the  Supreme  Court  of  the  United  States  and  it  went 
through  the  railroad  commission  and  through  the  Supreme  Court  of 
Wisconsin  under  favorable  conditions — that  is,  to  the  public.  It  was 
decided  on  a  point  which  was  comparatively  limited ;  in  other  words, 
the  court  practically  reversed  itself  and  held  that  the  public  service 
commission  has  the  right  to  regulate  the  fare.  Tliere  is  a  law  which 
goes  into  effect  on  January  1,  1920,  taking  away  the  so-called  deter- 
mined franchise  and  substituting  undetermined  permits  in  lieu 
thereof,  and  I  suppose  even  after  the  1900  franchise  is  converted 
into  an  indeterminate  permit  there  will  still  be  talk  about  the  1900 
franchise  steal. 

Commissioner  Sweet.  In  Milwaukee  the  old-time  conditions  prevail 
rather  than  the  new  cooperative  ideas? 

Mr.  Mortimer.  Yes;  there  is  absolutely  no  cooperation  between  the 
mayor,  the  common  council,  or  the  city  attorney's  office  with  the  man- 
agement of  the  street  railway  or  with  the  railroad  commission. 

Commissioner  Sweet.  Now,  there  is  a  good  deal  of  psychology  in 
this  matter  of  car  riding,  is  there  not?  And  the  acceptance  by*  the 
public  of  certain  inconveniences,  etc.,  without  complaint— that  is 
psychological  largely,  is  it  not  ? 

Mr.  Mortimer.  Yes;  I  think  that  fatigue  and  all  the  mental  re- 
actions that  occur  in  waiting  for  a  street-car,  in  boarding  a  crowded 
car,  or  getting  into  a  cold  one  are  very  important.  They  are  mental 
reactions 

Commissioner  Sweet.  The  somewhat  more  modern  and  better  con- 
dition from  the  psychological  standpoint  in  Cleveland  is  ascribed 
to  the  Work  done  by  Tom  Johnson  and  the  education  of  the  people? 

Mr.  Mortimer.  I  think  the  psychology  there  is  primarily  the  psy- 
chology of  fear — fear  when  the  rate  of  fare  was  3  cents  that  they 
were  going  to  lose  the  3-cent  fare  and  that  it  would  be  increased. 
It  was  only  because  of  those  circumstances  that  they  were  able  to 
put  through  the  skip  stop.  Cleveland  has  the  most  general  applica- 
tion, and  was  the  first  company  to  have  a  general  application,  of 
the  skip-stop  system.  And  it  is  rather  interesting  to  note  that  at 
first  it  was  not  believed  by  the  management  that  this  scheduled  speed 
could  be  maintained.  Xo  other  street  railway  was  operating  at  that 
speed,  but  the  street-railway  commissioner  said,  "  Put  it  in  and  if 
they  can  not  run  it"— so  the  story  goes— "fire  them."  And  the 
service  was  put  in.  Probably  some  adjustments  w^ere  required,  but 
Cleveland  is  maintaining  the  highest  schedule  speed  of  any  surface 
railroad  in  the  country  to-day. 


1998    PEOCEEDINGS  OF  FEMRAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Swket.  And  there  was  what  we  tmll  the  Tom  John- 
son canipaijrn,  was  there  not,  in  street  railroads? 

Mr.  Mortimer.  Yes ;  that  ran  over  a  long  period  of  time. 
Commissioner  Sweet.  That  was  a  campaign  of  education,  was  it 

Mr.  Mortimer.  It  wa.s  e«hieation  to  the  low  rate  of  fare. 

Commissioner  Swket.  Yes;  but  it  was  an  effort  on  the  part  ot  lorn 
Johnson  and  Mavor  Baker-or  City  Attorney  Baker,  as  he  was 
then— and  othei-sto  bring  tlie  people  into  connection,  intellectual 
connection,  with  the  whole  subject.  In  other  words,  to  have  just 
as  complete  knowledge  of  the  subject  spread  abroad  among  the 
people  HH  possible.    "W as  not  that  it? 

Mr.  Mortimer.  Well,  I  do  not  know  whether  those  were  the 
motives  or  not.  I  did  not  live  in  Clevelan<l.  I^^iking  back  at  it 
over  a  period  of  years  and  reading  all  the  reports  on  it,  it  appears 
to  have  been  an  imijortant  political  issue,  and  the——- 

Commissioner  Sweet.  Well,  we  have  had  a  number  of  Cleveland 
people  here  and  esim-ially  Secretary  Baker,  and  that  is  his  expla- 
nation of  it.  largely.  ^    ^i    » 

Mr.  Mortimer.  Yes:  I  would  not  dispute  that.  ,    .,    . 

(Commissioner  Sweet.  Now,  what  1  wantetl  to  know  was  whethei 
in  the  reorganization  and  rehabilitation  perwl  that  must  be  ahead  of 
us  you  do  not  think  that  this  work  of  education  by  bnnjj.ng  the 
public  to  a  different  franK-  of  mind  fmm  tl«  frame  of  "nnd  you 
have  in  Milwaukee,  so  that  politicians  can  not  use  that  as  a  football 
to  get  into  office-4on't  you  think  that,  for  tlK>  good  of  the  public, 
the  companies,  and  the  employees,  this  campaign  of  education  has  got 
to  be  c^nductwl  to  greater  or  less  extent.  Hn<l  the  better  or  more  com- 
pete knowledge  on  the  part  of  the  public  of  what  the  coinpan.es  are 
what  they  have,  what  they  are  doing,  what  they  propose  to  do-that 
tt^  whole  subject  has  got  to  be  approache<l  fmm  the  standpomt  of 
ir^rT  complete   knowledge   by   a   gie»t   deal   than   has  heretofore 

*''^Mr' Mortimer.  Well.  Mr.  Commissioner,  I  would  say  that  that 
,»'fts  generally  true,  but  I  want  to  call  your  attention  to  certain  ex- 
mentions  that^you  ;un  across  in  almost  any  undertaking.,  ^^o"  will, 
Zl^L  any'situation.  encounter  .some  irrepressible  spirit  who  de- 
dines  tTaccept  official,  certified  facts  as  facts.  He  perfers  to  com- 
pute his  own  facts,  to  justify  his  own  conclusions;  and  if  that 
man  s  .lesirous  of  continuing  in  office  or  of  attaining  a  higher 
ami  there  k  no  amount  of  publication  of  facts  or  publicity  that 
wilfshut  him  up.  He  will  have  certain  listeners  because  he^  takes 
The  Sion  that  he  is  trying  to  protect  the  rank  and  file  ot  poor 
i^nk  a-rainst  the  depreciations  of  vicious  cori>orations  and  nggre- 
Sn  of  Japital:  and  he  will  neceasarily  have  certain  followers; 
fnd  even  a  small  minority  is  sufficient  to  encourage  him.  One^or 
two  or  three  individuals  of  that  kind  may  rai^.«  P^eat  deal  of  dif- 
fiTulty  for  any  public  utility,  and  most  of  the  difficulties  come  from 

that  particular  cnrse.  .  ,      ..^ 

Commissioner  Sweet.  What  you  were  sayin-  bears  upon  the  dif- 
ficulty of  bringing  about  the  condition  that  I  described.    But  you  do 
not  question  the  desirability  of  it  ?    .,.,,,.,,       ^t  ,  j      .„. 
Mr.  MoKTiMER.  Not  at  all.    That  is  highly  desirable     But  I  want 
to  say  this,  Mr.  Commissioner,  that  there  are  probably  very  few 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    1999 


people  in  Milwaukee  who  can  read  English  but  who  know  the  ap- 
proximate value  of  the  railway-utility  property  of  our  company, 
what  rate  of  return  is  being  earned  on  it,  and  all  that  sort  of  thing; 
because  we  have  never  hesitated  to  publish  that  information.  We 
have  put  out  a  great  deal  of  publicity  material,  through  paid  ad- 
vertising, and  for  the  size  of  the  town  have  probably  spent  more 
money  than  most  other  cities;  but  we  have  enough  good  will  in  the 
comniunity  to  be  able  to  go  out  and  sell  $3,000,000  of  7  per  c«nt 
5-year  notes  at  par  in  a  period  of  0  months  over  the  counter;  so 
(hat  there  are  lots  of  people  that  have  confidence  in  us,  because 
})ractically  all  of  this  money  came  from  the  very  small  investor — 
the  investor  who  is  not  ordinarily  reached  by  the  investment  banker; 
we  were  not  in  any  way  competing  in  the  field  of  the  investment 
banker.  So  that  we  have  a  lot  of  ^ood  will.  But,  as  you  find  in 
most  communities,  there  are  certain  irrepressible  spirits 

Mr.  Warren.  There  is  no  doubt  that  if  the  same  amount  of  co- 
operation could  be  produced  in  other  cities  as  has  been  produced 
in  Cleveland,  it  would  be  possible  to  give  service  at  much  less  cost 
than  otherwise  it  would  come  to? 

Mr.  Mortimer.  There  is  little  doubt  about  that. 

Mr.  Warren.  And  so  far  as  the  matter  of  depreciation — setting 
up  depreciation  in  Cleveland — is  concerned,  there  is  nothing  in  the 
Cleveland  plan  to  prevent  the  inclusion  of  a  proper  depreciation  re- 
serve if  the  ordinance  or  contract  had  been  drawn  to  provide  that? 

Mr.  Mortimer.  That  is  correct. 

Commissioner  Gadsden.  As  a  matter  of  fact,  is  it  not  true  that 
Mr.  Nash,  in  his  recommendations,  specifically  includes  depreciation 
reserves  in  his  treatise  on  the  service-at-cost  plan  as  one  of  the 
suggestions  for  improvements  of  the  Cleveland  plan? 

Mr.  Mortimer.  I  am  not  entirely  familiar  with  Mr.  Nash's  recom- 
mendations, but  it  was  entirely  proper  that  he  should  include  it. 

Commissioner  Sweet.  Is  your  company  unionized? 

Mr.  Mortimer.  Yes :  unionized  in  the  form  of  an  industrial  union, 
as  distinguished  from 

Commissioner  Sweet.  Is  it  the  Amalgamated? 

Mr.  MoRTi^iER.  No.  We  have  no  local  of  the  Amalgamated  Asso- 
ciation in  Milwaukee.  The  company  has  a  general  labor  contract 
with  the  Employees'  Mutual  Benefit  Association,  which  gives  to 
that  association  all  the  powers  of  collective  bargaining  that  would 
pertain  to  any  contract  with  the  Amalgamated  Association,  and 
while  it  presumably  is  designed  to  avoid  a  strike,  it  has  not  been 
effective  in  preventing  a  strike.  We  had  a  strike  of  the  employees 
on  JanuarS^  1  of  this  vear. 

The  union  embraces  all  crafts  and  all  the  employees  of  the  Mil- 
waukee Electric  Railway  &  Light  Co.  and  its  associate  companies, 
such  as  the  Wisconsin  Gas  &  Electric  Co.,  the  Wells  Power  Co., 
operating  in  the  southeastern  section  of  Wisconsin.  The  parent 
chapter  has  also  issued  charters  to  other  companies  in  which  the 
same  interests  are  financially  interested.  So  that  whatever  advan- 
tage that  interstate  support  may  be,  they  have  this  support. 

Our  view  of  that  angle  of  the  business  is  relatively  simple. 

In  the  administration  of  a  public  utility  there  never  ought  to  l^e 
any  opportunity  for  any  substantial  dispute  between  the  employer 
and  the  employee  affecting  hours,  wages,  or  working  conditions. 


I 


2000    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

That  ought  to  be  the  case  where  State  regulation  administers  rates 
and  service  and  controls  security  issues,  or  under  a  cost-of -service 
plan. 

State  regulation  is  only  another  expression  for  cost  of  service, 
our  so-called  cost-of-service  plan  being  automatic  rate  regulation. 

The  employee  is,  of  coui*se,  entitled  to  adequate  compensation;  and 
that  can  be  measured  from  a  number  of  different  viewpoints.  I 
thmk  that  most  public-utility  operator,  if  they  could  see  their  way 
of  collecting  the  revenues  from  the  public,  would  be  favorable  toward 
very  closely  approximating  the  standards  which  have  been  submitted 
to  this  commission  by  the  representatives  of  the  Amalgamated  Asso- 
ciation. Fundamentally,  in  public  utilities,  the  question  of  wages, 
hours,  and  working  conditions  is  a  public  problem.  The  way  the 
law  stands  in  Wisconsin  at  the  present  time  it  ought  to  be  practically 
impossible  to  have  a  strike  if  both  parties  will  follow  the  procedure 
that  is  laid  down. 

As  a  part  of  the  governor's  reconstruction  plan,  he  created  the 
board  of  conciliation,  consisting  of  three  men,  selected  in  the  usual 
way— one  representing  the  employers,  one  representing  the  em- 
plovees,  and  one  representing  the  public. 

Commissioner  Sweet.  How  was  that  last  one  selected  or  ap- 
pointed ? 

Mr.  Mortimer.  These  men  are  nominated  by  the  governor  and 
confirmed  by  the  senate;  but  they  are  chosen  from  these  respective 
groups. 

Mr.  Warren.  It  is  a  permanent  board,  is  it? 

Mr.  Mortimer.  Yes;  it  is  a  permanent  board. 

The  Chairman.  Is  it  on  a  salary  ? 

Mr.  Mortimer.  They  are  presumed  to  get  a  salary— not  a  salary, 
but  a  meager  per  diem  rate  of  $5.  The  administration  this  year 
was  very  economical. 

With  rcvspect  to  ordinary  industrial  disputes,  other  than  public 
service  corporations,  the  board  of  conciliation  may  assume  juris- 
diction upon  the  request  of  either  party.  That  takes  the  place  of 
the  former  arbitration  provision  under  the  Wisconsin  industrial 
comniission  law,  which  permitted  arbitration  by  the  industrial  com- 
niis>sion  only  with  the  consent  of  both  parties. 

With  respect  to  public-service  corporations,  however,  the  law  re- 
quires that  the  board  of  conciliation  take  jurisdiction,  and  then  it 
shall  make  its  findings  and  immediately  certify  them  to  the  railroad 
commission.  The  railroad  commissijon  reviews  such  findings,  and 
modifies  or  confirms  them  and  makes  its  determination.  If  it  finds 
that  the  public-service  corporation  can  pay  the  increased  wages  and 
earn  a  reasonable  return,  then  it  shall  order  such  wages  effective,  and 
that  order  is  binding  upon  the  public-service  corporation. 

If  it  finds  that  the  public-service  corporation  is  unable  to  pay 
these  increased  wages  without  causing  it  to  earn  less  than  a  reason- 
able return,  then  the  railroad  commission  shall,  by  order,  fix  such 
rates  or  charges  as  shall  permit  the  corporation  to  earn  the  increased 
wages  and  produce  a  reasonable  return. 

That  is  intended  to  avoid  industrial  disputes  among  public-service 
corporations. 

Commissioner  Sweet.  Yet  you  say  you  had  a  strike  recently. 
Mr.  Mortimer.  Yes.    This  law  was  the  outgrowth  of  that  strike. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2001 

Commissioner  Sweet.  Oh!  This  has  been  adopted  since?  As 
far  as  you  are  concerned,  speaking  for  the  company  that  you  repre- 
sent, it  is  a  matter  of  comparative  indifference,  I  take  it,  from  what 
you  say,  as  to  what  the  wages  may  be.  You  are  a  sort  of  go-between ; 
you  collect  the  fares  from  the  general  public  and  turn  over  a  certain 
portion  to  the  employees? 

Mr.  Mortimer.  ^\  e  have  another  important  function,  of  course, 
and  that  is  to  see  that  labor 

Commissioner  Sweet.  I  do  not  mean  to  say  that  that  is  everything 
you  have  to  do. 

Mr.  Mortimer.  I  probably  interrupted  you. 

Commissioner  Sweet.  That  is  one  thing  you  have  to  do  ? 

Mr.  Mortimer.  Yes. 

Commissioner  Sw^eet.  What  I  had  in  mind  to  convey  was  that,  in 
a  sense,  you  are  the  representatives  of  the  public,  from  the  stand- 
point that  you  take  the  money  that  they  contribute  to  you,  and  out 
of  that  you  pay  the  wages  of  your  employees  ? 

Mr.  JdoRTiMER.  Yes.    We  are  a  joint  agent,  in  other  words. 

Commissioner  Sweet.  If  more  money  were  contributed  by  the 
public,  you  would  not  object  to  turning  over  more  money  to  the 
employees  as  wages? 

Commissioner  Mahon.  I  thought  you  w^ere  going  to  say  that  he 
would  not  object  to  taking  the  extra  money. 

Commissioner  Sweet.  I  am  assuming  now  that  Mr.  Mortimer  is 
an  honest  man  and  would  very  gladly  turn  over  all  that  the  public 
expected  him  to  turn  over  to  the  employees. 

Now,  Mr.  Mortimer,  the  street-car  has  often  been  called  the  poor 
man's  carriage,  has  it  not? 

Mr.  Mortimer.  Correct. 

Commissioner  Sweet.  Of  course,  I  suppose  you  have  no  means 
of  knowing  the  proportions  of  the  different  kinds  of  people  who 
ride  on  the  street-cars,  but  a  great  many  of  them  are  people  of  very 
moderate  means  ? 

Mr.  Mortimer.  That  is  correct. 

Commissioner  Sweet.  Many  of  them  laboring  people? 

Mr.  Mortimer.  That  is  correct. 

Commissioner  Sweet.  So  that  a  very  large  increase  in  fare  in  order 
to  increase  wages  might  possibly  be  a  burden  upon  some  of  those 
people  whose  standard  of  living  is  not  any  too  high  now  ?  Isn't  that 
true? 

Mr.  Mortimer.  I  think  that  burden  would  be  psychological  rather 
than  actual. 

Commissioner  Sweet.  Well,  take  a  man  with  a  wife  and  three 
children,  living  at  a  distance,  we  will  say,  from  school,  so  that  some 
of  the  children,  at  least,  have  to  pay  railroad  fare  to  go  to  school, 
and  the  man,  perhaps,  to  go  to  his  work,  and  the  wife  to  go  to  the 
center  of  the  city  for  shopping,  and  so  forth.  Would  not  that  be 
quite  a  burden  ? 

Mr.  Mortimer.  The  per  capita  expenditures  are  relatively  small 
fo»  traveling  of  that  kind.  It  is  a  very  small  proportion  of  the 
total  workingman's  family  budget,  and  the  increase  in  an  absolute 
amount,  we  will  say,  of  100  per  cent,  would  not  affect  seriously  the 
net  earning  power  of  the  workman. 

160043°— 20— VOL  2 G4 


' 


I 

I 

I   : 
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:  i 


2002    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


I 


Commissioner  Sweet.  Do  yoii  agree  with  the  item  of  $60  put  in 
the  budpret  furnished  us  here  yesterday  by  Mr.  Lauck  for  street- 
raih-oad  fares  ?    I  think  it  was  $60,  was  it  not  ? 

Mr.  Mortimer.  Yes.  Well,  that  would  he  $12  per  capita ;  and  that 
falls  within  the  ranpe  of  receipts  in  a  city  of  400,000  or  500,000 
population.  It  would  be  loss  than  that  ordinarily,  in  a  city  of 
smaller  population. 

Commissioner  Sweet.  Are  there  not  a  great  many  street-car  riders 
to  whom  that  would  be  something  of  a  burden  ? 

Mr.  Mortimer.  AVell,  I  think  burdens  of  that  kind  have  an  ele- 
ment of  psychology  in  them.  If  the  service  were  improved,  by  any 
means — if  they  could  get  a  faster,  swifter  ride,  and  less  probability 
of  being  required  to  stand,  there  would  be  less  objection  to  it.  We 
are  dealing  with  a  rather  intangible  factor,  and  it  is  hard  to  express 
a  measured  opinion  on  it. 

Commissioner  Sweet.  That  is  all. 

Commissioner  Mahon.  Mr.  Mortimer,  the  railroads  of  Milwaukee 
are  under  State  regulation — the  Wisconsin  railroads? 

Mr.  MoirriMER.  That  is  correct. 

Commissioner  Mahon.  I  know  they  changed  the  laws  very  often 
up  there. 

Mr.  Mortimer.  Yes;  the  railroad  commission  has  jurisdiction  over 
all  rates  and  service  of  all  utilities  in  the  State.  The  former  fran- 
chise contracts  are  subject  to  review  by  the  commission. 

Commissioner  Mahox.  And  they  can  fix  the  rate  of  fare  in  any 
municipality? 

Mr.  Mortimer.  The  railroad  administration  can;  yes. 

(Witness  excused.) 

The  Chairman.  Have  you  anybody  else  to  present  to  us,  Mr. 
W^nrren? 

Mr.  W\\RREN.  I  have  nolwdy  else.  , 

The  Chairman.  Mr.  Ogbum,  have  you  anything  to  present? 

Mr.  Warren.  I  have  some  exhibits,  Mr.  Chairman,  that  I  wanted 
to  put  in.    I  am  sorrj^  that  Mr.  Wehle  is  not  here. 

The  Chairman.  Can  you  put  those  exhibits  in  after  the  witnesses 
have  finished? 

Mr.  Warren.  Yes;  I  can.  1  did  not  know  there  were  any  more 
witnesses. 

The  Chairman.  Have  you  another  witness,  Mr.  Ogbum? 

Mr.  Ogburn.  Mr.  Joyce,  testifying  on  Monday,  was  asked  for  cer- 
tain data  by  one  or  two  of  the  members  of  the  commission.  He  did 
not,  at  that  time,  have  the  data,  but  he  has  gone  to  Philadelphia 
and  brought  it,  and  would  like  to  present  it  to  you.  He  tells  me 
that  he  can  do  it  in  about  10  or  15  minutes. 

The  Chairman.  We  shall  Ije  glad  to  hear  you,  Mr.  Joyce. 

ADDITIONAL  STATEMENT  OF  ME.  C.  J.  JOYCE. 

Mr.  Joyce.  I  was  examined  regarding  the  hours  of  labor  and  work- 
ing hours  of  motormen  and  conductors,  and  the  ability  of  the  Phila- 
delj)hia  Rapid  Transit  Co.  to  continue  the  5-cent  fare  despite  the 
increase  in  wages  paid  August  7. 

AVc  have  prepared,  and  I  have  had  Mr.  Mitten  submit  as  an 
official  document  from  him,  a  letter  addressed  to  the  commission 


I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  Ct)MMISSION.    2003 

upon  those  two  subjects,  and  I  have  brought  with  me  also  other 
data  that  seems  pertinent  to  my  testimony  of  last  Monday. 

This  letter  is  addressed  to  Mr.  Elmquist,  and  with  your  permis- 
sion I  will  read  it : 

Agreeable  to  Mr.  Joyce's  promise  to  supply  additional  information  relative 
to  working-  hours  of  motormen  and  conductors,  and  also  our  ability  to  continue 
the  ;")-cent  fare,  the  following  data  is  submitted: 

Workinj;  hours  of  motormen  and  conductors.  Philadelphia's  surface  lines 
have  no  three-piece  runs. 

Tlie  system  comprises  2,473  rejrular  runs,  of  which  1,323,  equaling  53.5  per 
cent,  are  straight  runs,  and  1,150,  equaling  46.5  per  cent,  are  two-piece  runs. 

The  average  over-ail  time  per  run  is  11  hours,  33  minutes. 

The  average  pay  time  is  9  hours,  30  minutes. 

The  average  lost  time  is  2  houi*s,  3  minutes. 

The  pay  time  is  dividetl  as  follows : 


1 


Hours 
per  day. 

Number 
ofnins. 

Percent- 
age. 

8-9 
9-10 

10-n 

11-12 

611 

1,285 

530 

47 

24.7 

51.9 

21.4 

2.0 

»9.5 

2,473 

100.0 

1  Average. 

Ninety-seven  per  cent  of  all  car-operating  time  is  worked  as  a  part  of 
regular  runs,  leaving  only  3  per  cent  to  be  assigned  as  trippers.  The  aver- 
age pay  time  on  regular  runs  is  9.5  hours,  requiring  307  days'  work  per  annum 
to  earn  the  system  average  for  motormen  and  conductors  of  $1,690  i>er  year 

According  to  the  figures  taken  from  Wednesday's  testimony  for  Detroit  in 
1917,  therein  stated  to  he  slightly  impi-oved  for  1919,  the  comparison  of  over- 
all time  at  Detroit  and  Philadelphia  is  as  follows,  the  average  pay  time  of 
both  cities  being  9.5  hours: 


Detroit. 

Philadelphia. 

Completed  within — 

Number 
of  runs. 

Per  cent. 

Number 
of  runs. 

Per  rent. 

13  hours 

865 

195 

147 

77 

51 

46 

1 

62.5 

14.2 

10.6 

5.7 

3.7 

33 

1,808 

513 

135 

17 

73.1 

20.7 

5.5 

.7 

U  hoars i!!!lIII 

15  hours 

labours 

17  hours ...'.'..'.'..'...... 

1^  hours 

•>-•>••>.• 

I'J  hours 

•■'- •• 

Totil 

1,382 

100.0 

2,473 

100  0 

Continuance  of  the  5-cent  fare:  The  wage  increase  of  August  7,  approxi- 
nmting  $2,500,000  per  annum,  was  in  full  effec-t  during  the  entire  month  of  Sep- 
tember. Operating  results  for  September  are  significant,  showing  as  tliey  do 
that  the  proportionate  amount  of  all  yearly  charges  and  5  per  cenf  dividend  has 
boon  earned,  with  a  continued  5-cent  fare — operation  ratio  (excluding  taxes) 
61.55  per  cent. 

Cooperative  effort,  with  a  force  of  well-trained  employees,  of  which  85  per 
cent  receive  the  maximum  rate  and  55  per  cent  are  more  than  5  years  in  the 
service,  is  here  found  adequate  to  overcome  obstacles  seemingly  insurmountable 
ol|;evvhere. 

'  T.  E.  Mitten,  President. 

I  wish  to  present  a  table  of  earnings  and  wage  scale,  comparing 
1910  with  1919,  for  the  cities  of  Philadelphia,  Detroit,  and  Cleveland, 


IH 


2l)04    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWaYS  COMMISSION. 


• 


I 


showing  the  trainmen  in  Phihidelphia,  1910,  7,424;  in  1919,  6,204;  a 
decrease  of  15.6  per  cent. 

In  Detroit,  trainmen,  1910, 1,883;  1919,  2,900;  an  increase  of  54  per 
cent. 

Cleveland,  trainmen,  1910,  2,083;  1919,  2,745;  an  inci^ase  of  3.7  per 
cent. 

The  average  rate  per  hour  paid  trainmen  in  Philadelphia  in  1910 
was  23  cents;  in  1919,  57.65  cents;  an  increase  of  151  per  cent. 

Detroit,  1910,  27  cents;  1919,  57.5  cents;  an  increase  of  113  per  cent. 

Cleveland,  1910,  28  cents;  1919,  59  cents;  an  increase  of  110.71  per 
cent. 

Gross  earnings  per  trainman:  Philadelphia,  1910,  $2,590;  1919, 
$5,508;  an  increase  of  112.6  per  cent.  Detroit,  1910,  $3,311;  1919, 
$5,345;  an  increase  of  61.4  per  cent.  Cleveland:  1910,  $2,867;  1919, 
$5,442 ;  an  increase  of  90  per  cent. 

Average  pay  per  day  (this  is  for  trainmen)  :  Philadelphia,  1919, 
$5.51;  Detroit,  1919,  $5'.10;  Cleveland,  1919,  $5. 

Average  rate  of  fares:  Philadelphia,  1910,  4.13  cents;  1919,  3.98 
cents;  a  decrease  of  3.6  per  cent;  Detroit,  1910,  4.09  cents;  1919,  5 
cents;  an  increase  of  22.3  per  cent.  Cleveland,  1910,  2.63  cents;  1919, 
3  91  cents;  an  increase  of  48.7  per  cent. 

Passengers  carried  per  trainman:  Philadelphia,  1910,  62,711;  1919, 
13S,383;  an  increase  of  120.7  per  cent.  Detroit,  1910,  82,114;  1919, 
106,896;  an  increase  of  30.1  per  cent;  Cleveland,  1910,  109,020;  1919, 
139.197 :  an  increase  of  27.6  per  cent. 

The  Philadelphia  figures  are  actual;  the  Detroit  and  Cleveland 
figures  are  derived  from  the  best  sources  available. 

T  have  here  a  report  made  to  the  real-estate  board  of  the  city  of 
Phihidelphia  by  a  specially  appointed  expert  on  valuations  of  real 
estate,  and  the  report  of  the  board  based  upon  the  report  of  their  ex- 
perts, confirming  what  I  said  to  the  commission  on  Monday,  that  in* 
West  Philadelphia  real-estate  assessments  have  doubled  since  the 
construction  of  the  Market  Street  elevated,. showing  an  increase  of 
$113,000,000. 

The  figure  I  gave  on  Monday  was  $130,000,000,  and  it  was  my  recol- 
lection that  this  figure  actually  was  in  the  report ;  but  I  did  not  men- 
tion that  property  east  of  the  Schuykill,  which  is  served  by  the  sub- 
way, increased  inthe  same  period  $38,000,000.  bringing  a  total  increase 
in  propertv  in  West  Philadelphia  and  on  Market  Street,  east  of  the 
subway,  to  $150,000,000. 

Conimissioner  Sweet.  You  do  not  claim  all  that  increase  is  due  to 
the  railway,  do  you  ? 

Mr.  Joyce.  Not  all  of  it ;  no,  sir.  It  was  offered  by  the  real-estate 
board  as  an  argument  for  hurrying  the  work  on  the  Frankford  ele- 
vated, which  has  not  yet  been  placed  in  operation. 

I  was  asked  the  number  of  transfer  passengers  received  by  the 
elevated,  and  transferring  from  the  elevated,  and  my  answer  to  that 
is  as  follows : 

Transfer  passengers  received  by  the  elevated  for  the  first  6  months 
of  1919,  $7,011,429.  '; 

A  transfer  is  permitted  from  the  elevated  to  the  subway-surfa^ 
cars,  which  we  have  no  means  of  estimating  or  counting.  People  go 
freely  from  the  platforms  of  the  elevated  to  the  platforms  of  the 
surface  lines  underground,  and  we  do  not  count. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2005 


Exchange  tickets  are  not  issued  by  the  elevated  and  are  received  by 
it  only  at  stations  east  of  Fifteenth  Street;  that  is,  east  of  the  city 
hall,  practically,  in  order  to  carry  passengers  to  Thirteenth  Street, 
where  they  change  to  the  subway— where  they  are  supposed  to  change 
to  the  subway  surface — but  we  have  no  control  over  them,  so  they 
may  continue  on  the  subway  elevated,  out  to  the  end  of  the  elevated. 

This  transfer  is  without  the  use  of  tickets,  and  it  is  not  included  in 
the  above  transfer  figures;  2,197,477  exchanges  received. 

Commissioner  Mahon.  How  many  miles  of  elevated  are  there  in 
Philadelphia? 

Mr.  Joyce.  Roughly,  5  miles,  from  the  Schuykill  River  west. 

In  my  testimony  the  other  day  I  gave  a  figure  different  from  that, 
but  it  was  the  single-track  mileage  that  I  had  giVen. 

Commissioner  Mahon.  How  many  miles  of  underground? 

Mr.  Joyce.  About  3  miles. 

Commissioner  Beall.  In  your  statement  that  you  just  read  there 
seems  to  be  a  very  marked  falling  off  in  the  number  of  men  em- 
ployed between  1910  and  1919,  despite  the  increase  in  earnings,  etc. 
What  was  the  cause  for  that  ? 

Mr.  Joyce.  That  was  due  to  the  Mitten  management's  taking  ad- 
vantage of- unified  operation  in  Philadelphia,  which,  prior  to  the  in- 
commg  of  the  Mitten  management,  had  not  been  fuly  taken  advan- 
tage of. 

Conmiissioner  Beali>.  What  do  you  mean  by  unified  management? 

Mr.  Joyce.  For  example,  the  number  of  routes  on  the  system  wheii 
Mr.  Mitten  came  to  Philadelphia  was  92.  He  rerouted  the  cars  and 
now  we  have  72  routes  on  the  system.  ' 

Commissioner  Beall.  Were  there  not  other  practical  reasons  that 
contributed  to  that  ?  For  instancer,  in  1910,  did  you  not  have  a  com- 
paratively  small  number  of  large  double-truck  cars? 

Mr.  Joyce.  We  had  an  increase  in  the  seating  capacity  of  the  car. 
I  do  not  know  that  the  number  of  double-truck  cars  was  materially 
changed,  but  there  was  a  large  increase  in  the  seating  capacity  due 
to  an  arrangement  of  the  seats.  ' 

Conmiissioner  Beall.  As  a  matter  of  fact,  is  not  that  decrease  in 
your  trainmen  due  more  to  cars  with  a  larger  capacity  than  it  is  to 
any  improvement  in  the  operations  ? 

Mr.  Joyce.  The  improvement  is  assigned  principally  to  the  rout- 
ing of  the  cars. 

Commissioner  Beall.  Well,  how  many  double-truck  cars  did  you 
have  in  1910,  approximately? 

Mr.  Joyce.  I  can  not  answer;  I  have  not  the  information. 
Commissioner  Beall.  Can  you  get  those  figures  for  us  ? 
Mr.  Joyce.  Certainly. 

Commissioner  Beall.  I  would  like  to  know  how  many  cars  of  that 
sort  you  had  in  1910  ? 

Mr.  Joyce.  We  would  be  glad  to  furnish  that. 

Commissioner  Beall.  With  the  seating  capacity,  and  the  same 
thing  to-day. 

Mr.  Joyce.  We  would  be  glad  to  supply  that. 

I  was  asked  the  longest  5-cent  ride   in  Philadelphia,  and  mv 
answer  is  27.32  miles,  round  trip.     That  is  the  longest  5-cent  route 
not  the  longest  5-cent  ride.    The  longest  5-cent  ride  is  14.2  miles.   * 


■ 


if 


II 


I 


2006    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Commissioner  Bealx..  Did  you  say  what  the  average  ride  was? 

Mr.  Joyce.  That  is  the  average  that  a  man  can  take 

Commissioner  Bkall.  But  have  you  the  actual? 

Mr.  eToYCE.  No;  I  have  not. 

Commissioner  Beall.  Are  not  your  rides  in  Philadelphia  shorter 
than  they  are  in  most  cities  of  a  similar  population?  Is  not  your 
distribution  very  much  better  than  othei*s? 

Mr.  Joyce.  We  believe  we  get  a  great  many  short  riders,  but  how 
to  measure  the  nimiber 

Commissioner  Beall.  I  appreciate  you  can  not  do  it  actually,  in 
figures;  but  as  a  street-railroad  man,  am  I  correct  or  incorrect  in 
my  understanding  that  Philadelphia  has  a  very  mucli  more  favor- 
able distribution  oi  population  from  a  street-railway  standpoint 
than  the  other  cities  of  comparatively  the  same  size? 

Mr.  Joyce.  Well,  I  can  best  answer  you  by  giving  you  some  statis- 
tics tlMit  I  have  available  wliich  perhaps  would  at  least  bear  ujwn 
that  subject.  The  passengers  j>er  mile  of  track — would  that  be  indi- 
cative? 

Commissioner  Beall.  I  do  not  know  that  it  would,  necessarily. 

!Mr.  Joyce.  Density  of  iM)pulation.     Would  that  be  ? 

Commissioner  Beall.  Not  necessarily.  It  is  liow  they  are  dis- 
tributed and  the  way  they  ride.  For  instance,  we  understand  that 
you  have  very  few  empty  cars  even  in  the  rush  hours,  and  that  you 
haul  the  people  both  ways.  Philadelphia  is  not  like  New  York,  for 
instance.  Those  people  do  not  live  in  the  north  and  all  go  to  the 
soutli  to  do  business.  Your  factories  and  your  centers  of  employ- 
ment are  scattered  all  over  the  city  and  people  live  around  and  you 
have  a  constant  business,  as  I  understand,  to  and  fro,  which  is  dif- 
ferent from  most  of  our  cities,  where  the  traffic  all  goes  one  way  at 
ttated  hours  of  the  day. 

Mr.  Joyce.  I  hardly  know  how  to  give  you  an  answer  on  that  that; 
would 

Commissioner  Beall.  I  know  it  has  impressed  me  that  way  from 
just  seeing  the  city,  and  I  am  trying  to  get  information  whether  that 
is  correct  or  not. 

Mr.  Joyce.  Yes.  Well,  taking  Philadelphia  as  it  lies,  we  have 
had  traffic  counters  on  the  streets,  and  we  have  observed  that  a  great 
many  of  the  workers  live  within  walking  distance  of  their  work. 
Philadelphia  has  a  large  textile-mill  activity,  and  the  people  live 
pretty  close  to  those  textile  mills. 

Commissioner  Beall.  Well,  from  your  knowledge  of  Philadel- 
pliia  and  the  property,  is  it  or  is  it  not  youi*  opinion  that  compared 
with  other  large  cities  of  this  country  you  have  a  more  favorable 
distirbution  of  population — from  your  viewpoint  as  a  street-railway 
man? 

Mr.  Joyce.  I  am  familiar  witli  Cleveland,  Chicago 

Commissioner  Beall.  Well,  Chicago  is  more  in  your  class.  Cleve- 
Luid  is  a  verv  much  smaller  citv. 

Mr.  Joyce.  Boston,  New  York,  Baltimore.  I  would  say  that  Phila- 
delphia would  compare  reasonably  with  all  of  those  cities. 

Commissioner  Beali^.  You  do  not  think  your  population  is  any 
better  distributed  from  a  street-railway  standpoint? 

Mr.  Joyce.  I  would  say  not — than  those  cities.  I  specifically  ex- 
cepted Pittsburgh  here  the  other  day  on  the  stand,  because  I  am 


PRQjCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2007 

pretty  familiar  with  Pittsburgh,  and  I  would  not  compare  Philadel- 
phia with  Pittsburgh.  But  the  other  cities  I  have  mentioned  are 
fairly  comparable.  The  density  of  population  per  square  mile  is: 
New  York,  44,000;  Brooklyn,  21.000;  Boston,  12.000;  Chicago,  12,000; 
Pliiladelphia,  9,500. 

The  population  per  mile  of  track  is:  New  York,  5,585;  Brooklvn, 
3,191;  Boston,  2,545;  Chicago,  3,814;  Philadelphia,  2,940, 

We  had  some  figures  made  to  show  the  average  earnings  of  our 
extra  men  per  week,  which  I 

Conmiissioner  Beali^  What  is  that,  trippers  ? 

Mr.  Joyce.  p]xtra  men,  whether  they  are  operating  trippers  or 
regiilar  runs  in  the  off-time.  The  average  obtained  from  taking  a 
typical  barn  and  a  certain  number  of  men  was  $26.35  a  week.  That 
is  taken  for  the  last  two  weeks  in  August. 

Mr.  Warrex.  What  was  that,  the  average  ? 

Mr.  Joyce.  The  average;  yes,  sir. 

Commissioner  Mahox,  What  guaranty  do  your  extra  men  have? 
What  weekly  guaranty  ? 

Mr.  Joyce.  I  am  not  able  to  answer  that  I  do  not  know.  In  fact, 
I  do  not  know  if  there  is  any  guaranty. 

I  have  a  memorandum  here  regarding  the  letters  received  by  the 
Kai)id  Transit  Co.  from  the  War  Labor  Board  in  the  approval  of 
the  Philadelphia  j^lan,  and  if  there  is  any  doubt  of  the  authenticity 
of  tliose  lettei-s,  I  have  the  original  letters  ready  to  submit  them. 

That  is  all  the  information  I  have  ready  now. 

The  Chairman.  Is  not  the  Philadelphia  company  maintaining  a 
depreciation  fund? 

Mr.  Joyce.  It  has  been  its  policy  since  Mr.  Mitten  came  to  Phila- 
delphia to  apportion  15  per  cent  of  the  gross  revenue  for  maintenance 
and  depreciation,  and  the  balances  in  tliat  fund  are  the  balances  of 
that  appropriation. 

The  Chairmax.  Then  you  would  include  depreciation  and  main- 
tenance in  one  account? 

Mr.  Joyce.  Yes. 

The  Chairmax.  How  much  of  that  15  per  cent  is  actually  used  for 
maintenance? 

Mr.  Joyce.  I  can  not  answer  that,  I  am  not  sufficiently  familiar 
w^ith  the  operation  of  that  fund  to  l>e  able  to  give  yon  detailed  data 
on  tlmt,  but  I  shall  be  glad  to  supply  that  data. 

Tlie  Chairmax.  What  surplus  have  you  in  that  fund  now? 

Ml-.  Joyce.  I  believe  something  over  a  million  dollars.  The  opera- 
tion of  a  depreciation  fund,  as  I  explained  here  on  Monday  on  the 
stand,  is  a  matter  that  you  can  hardly  make  comparison  on^  unless 
you  know  exactly  under  what  rules  the  depreciation  fund  is  kept, 
and  how  the  renewals  ai-e  charged,  whether  any  renewals  are  charged 
against  oj^erations. 

For  example — I  think  I  gave  this  example  on  Monday — that  if 
you  keep  a  depreciation  fund,  and  you  have  an  extraordinary  re- 
newal you  would  charge  a  i>ortion  of  that  renewal  or  |)erhaps  all  of 
it  against  the  depi'eciation  fund.  You  would  charge  little  or  none 
of  it  to  cnri-ent  operations.  You  would  that  month,  or  that  year, 
make  a  certain  appropriation  for  depreciation.  If  you  did  not  have 
a  fund,  the  appropriation  for  depreciation  would  be  taken  up  by  a 


iN 


2008    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


charge  against  income  for  the  renewal.  So  that — take  a  period  of 
20  years — tlie  charjies  for  depreciation  found  on  the  books  of  a  coni- 
j)any  tliat  kept  such  a  fund  would  be  found  against  operating  ex- 
))enses  on  the  books  of  a  company  that  did  not  keep  such  a  fund;  so 
that  to  compare  the  operating  expenses  of  the  two  companies  is 
delusive. 

The  Chairman.  It  has  been  testified  here  that,  if  Philadelphia 
maintained  a  proper  depreciation  account,  its  cost  per  passenger 
would  be  6.1  cents.    Was  not  that  it,  Mr.  Mortimer? 

Mr.  MoRTniER.  That  is  correct,  to  produce  the  present  dividend. 

The  Chairman.  What  have  you  to  say  as  to  that? 

Mr.  Joyce.  My  answer  to  the  last  question  practically  answers 
that  question,  that  to  determine  to  what  extent  operating  expenses 
would  be  affected  by  a  charge  for  depreciation  in  1918,  you  would 
have  to  determine  to  what  extent  operating  expenses  would  be  saved 
by  charging  the  renewals  made  in  1918  against  a  renewal  fund  that 
had  been  created  in  prior  years,  so  that  to  make  that  kind  of  a  com- 
parison is  a  pure  fallacy. 

Mr.  AVarren.  Mr.  Joyce,  do  I  understand  you  that  it  is  Mr.  Mit- 
ten's opinion  that  15  per  cent  is  enough  of  gross  to  take  care  of  both 
maintenance  and  depreciation? 

Mr.  Joyce.  That  was  at  that  time. 

Mr.  Warren.  And  is  still  ? 

Mr.  Joyce.  I  am  not  sure  about  what  his  opinion  is  to-day,  but  I 
would  a!^sinne  that  he  has  not  changed  it. 

Mr.  Warrex.  That  is  what  the  company  is  charging  to-day? 

Mr.  Joyce.  Yes. 

Mr.  Warren.  You  have  not  any  of  the  figures  for  September,  I 
suppose,  showing  the  gross  and  operating  expense? 

Mr.  Joyce.  I  have;  ves,  sir 

Mr.  Warren.  Well,  let  me  ask  vou  another  question  which  will 
save  you,  perhaps,  looking  for  it.  t)id  the  gross  increase  sufficiently 
to  take  up  the  increased  wages  for  September? 

Mr.  Joyce.  Yes.  I  have  the  figures  here  if  you  will  wait  a 
moment.  Comparing  1919  with  1918,  the  month  of  September,  1919, 
gross  earnings  were  $3,070,000 ;  1918,  $2,728,000. 

Mr.  Warren.  Can  you  compare  them  for  August  of  this  year? 

Mr.  Joyce.  I  have  not  the  August  figures  here.  The  surplus  in 
1919  is  $185,000  compared  with  $237,621  in  1918,  and  our  surplus 
required  to  pay  our  5  per  cent  dividend,  is  $125,000  per  month. 

Commissioner  Beall.  Mr.  Joyce,  have  you  any  figures  showing 
what  other  companies  are  paying — that  is,  a  large  number  of  them — 
for  maintenance  and  depreciation,  what  the  proportion  is  to  gross? 

Mr.  Joyce.  I  have  not ;  no,  sir. 

Commissioner  Beall.  Are  you  familiar  with  what  the  large  en- 
gineering firms  of  the  country  have  recommended  in  that  respect — 
firms  like  Stone  &  Webster,  who  are  possibly  the  largest? 

Mr.  Joyce.  I  am  not. 

Commissioner  Beall.  I  believe  they  have  stated  at  numerous  times 
that  it  should  be  at  least  20  per  cent  at  the  very  minimum,  and 
some  comj^anies  charge  more  than  that.  You  have  not  any  knowledge 
on  that? 

Mr.  Joyce.  No. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2009 

Commissioner  Beall.  You  have  not  looked  that  up? 

Mr.  Joyce.  I  have  not  any  knowledge  upon  it. 

Mr.  Warren.  Did  you  hear  Mr.  Beeler's  testimony  ? 

Mr.  Joyce.  I  did  not. 

Mr.  Warren.  You  are  not  familiar  with  his  estimate  of  8  per  cent 
for  deprecuition  and  15  to  20  per  cent  for  maintenance? 

Mr.  Joyce.  I  am  not;  no,  sir. 

The  Chairman.  Who  is  your  next  witness? 

Mr.  Ogburn.  With  the  consent  of  the  commission  and  with  the 
permission  of  the  next  witness  for  just  a  moment,  there  is  one  thing 
I  would  hke  to  bring  to  the  attention  of  the  commission  at  this 
Jjoint.  I  think  it  will  only  take  one  or  two  minutes,  but  I  consider 
It  desirable  now,  since  you  are  on  the  subject  of  Philadelphia. 

This  commission  has  received  a  communication  from  the  United 
Business  Men's  Association  of  Philadelphia.  Accompanyino'  that 
communication  have  been  a  number  of  requests  urging  that'' it  be 
brought  to  your  attention,  and  in  view  of  the  nature  of  the  com- 
munication and  the  number  of  requests  which  have  accompanied  it 
I  think  it  worth  while  to  interrupt  this  proceeding,  if  the  other  wit- 
ness is  agreeable,  to  call  your  attention  to  certain  statements  in  this 
communication.  The  United  Business  Men's  Association  of  Phila- 
delphia is  composed  approximately  of  25,000  members,  according 
to  their  own  statement.  It  is  an  organization  whose  actions  art 
nlways  heard  on  civic  questions  and  whose  views  have  been  larcrely 
indorsed  by  the  press.  Among  the  many  problems  they  have  studied 
is  that  of  the  transit  situation,  particularly  as  applied  to  the  city  of 
Philadelphia. 

There  was  pending  last  year  a  most  important  lease  between  the 
present  operators  of  the  electric  lines  of  Philadelphia  and  the  city 
in  regard  to  some  high-speed  lines  that  were  being  built  and  to  be 
built.  This  association  gave  considerable  study  and  analysis  of  tlio 
situation  and  presented  their  views  before  the  Public  Service  Com- 
mission of  Pennsylvania,  which  latter  body  rendered  a  unanimous 
decision  favorable  to  the  views  of  the  United  Business  Men's  Asso- 
ciation, according  to  their  own  statement. 

They  have  a  special  committee  on  transportation,  which  is  com- 
posed of  lawyers,  engineers,  and  business  men. 
This  communication  is  as  follows : 

To  the  Federal  Electric  Railways  Comviisfdon. 

Gentlemen  :  The  United  Business  Men's  Association  of  Philadelphia,  which 
IS  conii)oseil  of  business  and  professional  men  from  all  parts  of  Philadelnhia 
and  not  linancially  interested  in  street  railways  in  any  manner,  but  desirous 
of  presentnig  before  your  honorable  body  certain  facts  for  the  protection  of 
the  public  in  the  matter  of  street  railways,  begs  to  present  to  you  the  foUow- 
ing  facts: 

Various  witnesses  representing  street  railways  have  appeare<l  before  vou 
and  testihed  to  Mhat  is  calleil  the  enormous  operating  expense  at  the  present 
time  of  the  street  railways.  We  are  reliably  informed  that  there  is  includecl 
In  these  statements  of  the  cost  of  oi)eration  the  rentals  paid  to  underlvinc 
companies.  These  rentals,  created  years  ago  by  leases  execute<l  by  street 
railways  to  operating  companies,   in  many  cases  represent  little  real  value 

^^'J?  u^y.  '"  "^'^'■'^'  .''''^'*^'  ^'''""^  exce^^sive  and  far  beyond  any  contribution 
which  these  underlying  companies  are  now  contributing  to  the  public  service. 
The  cry  of  higher  fares  is  not  so  much  to  give  the  companies  intel^t  on 
actual  capital  invested  and  to  pay  t<,r  higher  wages  and  cost  of  material 
as  it  is  a  cry  for  the  i>erpetuation  of  these  excessive  rentals  under  the  guise 
of  increased  expense  of  oi>eration.     We  believe  that  before  any  rate  of  fare 


I 


2010    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMAUSSIOIT. 

should  1)0  fixed  tliese  rentals  sliouM  be  invostlgntoa  and  nil  excessive  ones 
reduced  and  all  wntered  stock  absolutely  eliminated.  Both  the  Supreuie  Court 
oi  the  United  States  and  the  supreme  court  of  nearly  every  State  and  the 
jmblic-service  commissions  of  most  of  the  St^te.s  have  emphatically  declared 
th:it  fares  can  not  be  collected  from  the  public  to  iwiy  excessive  compensation 
for  capital  furni^lied  or  to  pay  dividends  (m  watered  stock. 

A  distinguished  witness  fnmi  one  of  our  larjjest  cities  has  already  testilied 
before  your  honondde  Inxly  that  in  this  Hty  tlie  car  fares  were  raised  1(K) 
per  cent,  and  the  increase  in  revenue  only  14  per  cent.  In  PhiUidelphia  the 
oiHM-atinu'  conipanv  in  1918  made  $12,000,000  n<'t  profit  on  oi>eratinj?  a  unified 
tJVsteiu  on  a  r>-cent  fare,  carrying  over  700,000,000  passengers;  $10,000,000  of 
tids  .$12,0(H),000  net  profit  were  immetliately  paid  to  underlying  companies,  who 
contribute  nothing  but  franchises  ol)taine(l  years  ago  and  very  little  equip- 
ment to  the  service.  The  major  i>ortion  of  the  cost  of  equipment,  openition, 
]uid  mainteiumce  of  this  car  system  was  contnbuted  by  the  operation  com- 
pany, yet  this  company  r<x?eives  but  two-twelfths  of  the  net  profit,  while  the 
4lead  c^>nipanies  wlio  supply  no  new  cars,  no  new  rails,  ami  pay  no  inci-eas(Ml 
wa;:es  of  anv  kin<l,  rectMve  ten-twelfths  thereof.  This  is,  in  our  opinion,  the 
cnix  of  thepi-oixisition.  Correct  the  evils  of  the  und«Miying  companies  and 
fares  can  then  l>e  adjusted  on  a  basis  that  would  be  square  to  the  public 
nn<l  nununerative  to  tiie  operating  comiwiuy. 

Tlie  injustice  to  the  public  arising  from  the  present  financial  arrangements 
of  the  electric  stivet  railways  of  Philadelphia  is  shown  in  the  following 
stjJtements: 

Vho  avenige  receipt  i>ei-  passenger  for  the  past  22  years  in  IMiiladelphia  has 
been  approximately  41  cents.  In  spite  of  its  big  earning  iw>wer  the  stix'et- 
railway  system  of  Philadelphia  has  l>een  unable  to  .serve  the  public  ade- 
quately owing  to  want  of  extensions  and  proper  number  of  cars.  The  amount 
of  rentals  pai<l  out  to  the  underlying  c-omiwxnies  during  the  i>ast  25  years 
lias  l>een  great  enough  to  pay  6  per  cent  oii  the  money  invested  in  the  capital 
stixk  of  sjiid  companies  and  in  addition  return  to  them  the  entire  money 
invested  by  them.  This  money,  in  addition  to  returning  to  these  companies 
their  investment  with  interest  at  6  per  cent,  would  be  enough  to  build  a  prin- 
cipal iMirt  of  the  proposetl  subway  and  elevated  high-speed  system  at  the  <'ost 
providtMl  for  the  siune  hi  1913.  One  of  these  underlying  comimnies  receives 
;4S  rental  22.1)  ix*r  cent  yearly  on  the  money  paid  in,  and  in  ad<lition  has  hatl 
its  original  investment  returned  to  it  everj-  two  years.  Another  company 
receives  21.0  iK»r  cent  yearly  and  has  ha<l  its  original  capital  returned  to  it 
eveiy  two  >ears.  Another,  0..!  per  cent  with  tlie  same  resHlt.  Another  recreivos 
2."»  i»er  wnr  on  tiie  capital  paid  in,  ami  every  three  years  in  addition  receives 
back  its  original  iuveiitmeut.  Ajiotlier  coaipany  receives  its  original  invest- 
ment back  every  four  years,  and  in  addition  0  i>er  cent  pt^r  annum  on  tin; 
original  investetl  capital.  This  vicious  game  has  been  going  on  foi-  over  35 
years,  and  under  the  present  lense-s  it  is  to  continue  for  999  years  less  about 

..e  hereby  re<piest  your  honwable  body  to  investigate  this  phase  of  this 
question  which  is  of  importance  to  the  Government  of  tlie  rnit<xl  States  as 
well  as  to  all  Inhabitants  thereof.  The  (luestion  Is  both  ijolitlcal,  economical, 
an<!  social.  Its  settlement  on  a  just  basis  can  not  longer  be  evaded  or  i>ost- 
jToned. 

liespectfuUy  submittetl  by  the  United  Business  Men>  Association  of  Phil- 
adelphia. 

Eow.  A.  NorPEL, 

Prc9id€nt, 

C.  OSCAK   BK.\S!J':Y, 

Chairman,  f^pccial  Committee  on  Transit  aud  Comitsel. 

81DNFA'  M.  Cartek, 
Chairman,  Ti-anniiortation  CommUtcc. 
Joseph  F.  Lewis, 
Elevtriiti]  IJnffin^^cr  for  Committee, 

Attest : 

CHAnuss  H.  von  Fagen, 

Secretary. 

T\\e  CiiAiKMAx.  Mr.  Ogbiirn,  who  k  your  next  witness? 

Mr.  OiBURx.  Tho  next  witness  is  to  <j:ive  some  snpplemental  testi- 
mony, he  also  having  testified  at  11  prior  liearing:  Mr.  Marion 
Jackson,  who  represents  Mayor  Key,  of  Athmta. 


PROCEEMXGS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION.    2011 


Mr.  Jackson  is  an  advocate  of  municipal  ownership  and  Avill  sup- 
plement his  prior  testimony  briefly  in  regard  to  that  phase  of  the 
subject. 

I  might  state  here,  in  order  that  Mr.  Jackson  will  know  before 
he  begms  his  testimony,  that  we  are  having  certain  comparative 
studies  made  in  municipal  ownership.  The  most  recent  example  of 
municipal  ownership  of  electric  railways  in  this  country  is  in 
Seattle;  and  at  my  request,  Dr.  Stephen  J.  Miller,  who  is  tl\e  di- 
rector of  the  school  of  business  administration  of  the  University 
of  Washington,  a  man  thoroughly  qualified  to  make  an  impartial 
and  scientific  study,  is  making  a  comparative  study  of  the  opera- 
tion of  the  Seattle  lines  imder  the  city  operation  since  April  1,  ;\s 
compared  with  private  operation  prior  to  that  time;  and  we  ougiit 
to  have  the  results  of  that  study  before  us  this  week  or  anyway 
next  week. 

Commissioner  Gadsden.  What  is  his  name? 

Mr.  Ogburx.  Dr.  Miller,  who  is  the  director  of  tlie  school  of 
business  administration  of  the  University  of  Washington. 

Furthermore,  Mr.  Bell,  who  is  tlie  minister  of  the  department  of 
railways  and  canals  of  Canada,  together  with  the  Dominion  statisti- 
cian, Mr.  R.  H.  Coates,  promises  to  supply  us  with  a  comparative 
study  of  the  operation  of  the  municipal  railways  in  Canada  as  com- 
pared with  private  operaticwi. 

The  Chaibmax.  Did  you  not  also  have  a  telegram  from  Denver 
whidi  you  wislied  to  read  into  the  record  ? 

Mr.  OoBURN.  Yes.  This  telegram,  as  it  perhaps  needs  attention 
IM)W,  had  best  be  brought  to  your  notice.  This  is  signed  by  W.  H. 
Dickson,  chairman  of  the  cami>aign  committee  on  the  service-at- 
cost  proposed  ordinance,  addressed  to  tlie  Federal  Electrie  Ilail- 
wavs  Commission : 

Loarniiii:  tliat  your  coniniission  may  adjouni  on  the  3d  or  4th  of  this  month, 
and  in  view  of  important  letter  i*elatin<»  to  the  tramway  problem  in  nenver 
•  mailed  you  on  September  30th  by  the  tramway  adjustment  connnittoe  of  lifty- 
Jive  apiiointed  by  the  mayor  of  Denver,  and  in  view  of  the  importance  of  the 
matter.  I  am  teleirraphing  your  commission  herewith  verbatim  the  contents  oi 
our  letter: 

"  Dkak  Siks:  Your  honorable  l)ody.  whose  appointment  and  activities  in  in- 
vestigating the  electric  raihvays  hare  been  repe)rted  to  limited  extent  in  the 
daily  press,  may  not  be  aware  that  the  city  of  Denver  appointeil  a  committee 
of  tifty-tive  representatives— business,  professional,  and  labor  men — to  study, 
investigate,  and  recomniend  local  solution  of  tlie  same  problem  in  behalf  of 
the  city  of  Denver. 

"  Wliile  the  scoi>e  of  your  investigation  is,  of  coiu-se,  broader  than  that  of 
the  I>enver  couunlttee,  the  purpose  of  botli  Ls  nevertheless  the  same,  mimely, 
to  find  and  sujigest  a  solution  of  the  traction  question. 

"That  the  problem  is  natioBal  and  not  local  was  soon  realized  by  (he 
Denver  committee.  aiMl  in  addition  to  a  mass  of  data  relatinj?  more  particularly 
to  the  IXMiver  situation,  a  substantial  amount  of  information  concerning  the 
national  phase  of  the  problem  was  also  accunuilatod.  We  shall  be  very  glad 
to  place  at  your  disixxsal  all  of  the  data  which  we  have  accumulated  in'^the 
course  of  our  investig*ations. 

•*  The  Denver  Committee  of  Fifty-live  was  appointed  on  Januarv  2.^,  1919.  by 
Mayor  W.  F.  R.  Mills.  The  method  of  apiHKutment,  the  personnel,  a:»d  the 
organizations  represented  are  set  forth  in  the  rei.K»rt  of  the  committee  lilt>d 
with  the  mayor,  dated  May  28,  1919,  and  copy  of  which  we  have  pleasun-  in 
sending  you  herewith.  The  report  has  crystallized  in  an  ordinance  whi,h  Is  to 
be  submitted  to  the  people  of  Denver  at  a  special  nmuicipal  election  to  be  held 
on  October  22,  1919,  and  we  have  the  hoirm-  to  also  inclose  herewith  c«»pv  of 
the  proposed  ordinance  together  with  some  incidental  literature  in  behalf  of  it 
issued  and  distributed  by  the  committee. 


i 


2012     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


"  In  view  of  the  foreRoinjj;  we  venture  to  ask  your  good  offices  and  help  in 
the  solution  of  the  Denver  problem.  If  after  a  review  of  the  inclosed  exhibits 
jour  honorable  body  ai^rees  with  our  committee  that  the  ordinance  we  have 
Bubmitted  embodying  the  servlce-at-cost  plan  should  be  approved  by  the  people 
of  Denver  at  the  coming  election,  will  you  not,  in  conformity  with  your  expres- 
sions above  set  forth:  (1)  Schedule  a  meeting  of  your  commission  in  Denver 
on  a  date  substantially  prior  to  October  22,  or  (2)  if  that  be  impossible,  can 
you  not  arrange  to  send  one  or  more  of  your  members  or  representatives  to 
I>enver  with  the  view  to  helpful  results,  and  (3)  give  such  expression  in  ap- 
proval of  this  measure  prepare<l  by  the  Denver  Committee  of  Fifty-five  that  we 
may  use  it  publicly  In  the  campaign  leading  to  the  election. 

*'  Respectfully  submitted. 
"  Tramway  Adjustment  CoMMirrEE  of  Fiprv-FivE, 
**  By  W.  H,  Dickson,  Chainnnn  Campaiffn  Committee.''* 

With  the  letter  were  included  copies  of  our  committee  report,  the  ordinance 
and  two  pamphlets.  In  behalf  of  our  committee  I  again  venture  to  urge  that 
you  will  act  favorably  upon  one  or  more  of  the  three  suggestions  made  to  you 
in  the  latter  and  as  repeated  in  this  telegram. 

\V.  H.  Dickson, 
Chairman  Campaign  Committee. 

Mr.  Ogburn  I  will  say  that  prior  to  receiving  this  telegram  I  had 
already  obtained  a  copy  of  the  ordinance  and  a  copy  of  the  report  of 
the  committee  of  fifty-five. 

Tho  Chairman.  How  many  witnesses  have  you  remaining  for  to- 
dfiy  ? 

Mr.  OoBURx.  Mr.  Marion  Jackson,  of  Atlanta,  and  Mr.  Stiles  P. 
Jones,  who  testified  on  yesterday,  ancl  who  was  questioned  by  one  of 
the  commissioners  and  Mr.  Warren  relative  to  a  statement  prepared 
by  the  Electric  Railway  Association  showing  the  relation  of  the  valu- 
ation of  the  2G  companies  to  the  securities  of  2G  companies.  Mr. 
Jones,  since  he  was  cross-examined  in  regard  to  this  tabulation  and 
was  not  able  to  answer  one  or  two  questions  in  regard  to  it  because  of 
his  unfamiliarity  with  it,  wanted  to  make  a  brief  explanation  be- 
fore the  commission  on  that  point. 

The  Chairman.  So  that  we  have  only  two  other  witnesses  for  to- 
day ? 

Mr.  Ogburn.  Yes. 

The  Chairman.  Proceed,  Mr.  Jones. 

ADDITIONAL  STATEMENT  OF  MB.  STILES  P.  JONES. 

Mr.  Jones.  You  remember  that  this  exhibit,  being  a  comparison  of 
valuation  and  capitalization  of  2G  electric  railways,  based  upon  let- 
ters to  the  American  Electric  Railway  Association  and  records  of 
valuation  in  fare  cases,  prepared  by  or  for  the  American  Electric 
Railway  Association,  was  submitted  to  me  near  the  conclusion  of  my 
testimony.  I  did  not  even  have  the  opportunity  to  glance  it  over. 
Otherwise  I  should  have  felt  that  certain  statements  in  the  exhibit 
should  be  answered. 

Since  then  I  have  given  more  study  to  it.  And  it  seems  to  me  still 
more  that  the  statement  should  not  go  into  the  record  in  its  present 
form,  unexplained  and  unanswered.  It  does  injustice  to  both  sides. 
I  will  explain  as  I  go  on. 

The  Capital  Traction  Co.,  Washington,  D.  C. :  This  is  the  valua- 
tion based  on  accepted  values,  July  1,  1914,  brought  up  to  March 
1,  1919,  by  the  company:  $25,311,1*84. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2013 

As  the  commission  probably  all  know,  the  District  Public  Service 
Commission  reported  on  September  6  the  valuation  of  both  of  the 
Washington  properties.  It  reported  the  value  of  the  Capital  Trac- 
tion Co.  to  be  $14,270,000. 

c^S'^i^^^^^J^^^^^^  ^^^^^'  ^^^^^^  ^^  supervising  engineers,  Chicago, 
Jj>157,90o,000,  purporting  to  be  the  valuation  of  the  property.  That 
was  not  the  valuation  of  the  property.  That  was  the  capital  in- 
vestment  under  the  contract  of  1907,  and  had  no  reference  to  valua- 
tions whatever. 

In  the  early  part  of  this  year,  as  shown  in  my  exhibit,  the  Illinois 
1  ublic  Service  Commission  found  a  value  of  the  property  for  rate- 
making  purposes  of  $113,000,000. 

Detroit  United  Railway  Co. :  The  statement  here,  value  based  on 
valuation  of  Eailroad  Commission  and  subsequent  capital  expendi- 
tures to  December  31,  1918,  $65,496,377. 

In  1916,  Prof.  Bemis  made  a  valuation  of  the  property  for  the 
city  and  found  a  value  of  $20,000,000,  of  which  he  stated  publicly, 
in  his  report,  $2,000,000  was  practically  a  gift. 

In  July  of  this  year  the  company  came  to  an  agreement  with  the 
city  as  to  the  price  of  the  property  for  municipal  purchase.  That 
price  was  $31,.500,000.  That  was  contained  in  a  proposition  which 
went  before  the  voters  and  was  voted  down,  in  part,  according  to 
my  understanding,  because  it  was  regarded  as  excessive. 

Mr.  Warren.  May  I  interrupt  you  there  just  for  a  moment,  Mr. 
Jones?     Were  not  those  valuations  on  different  properties?     Was 
not  the  city  valuation  to  which  you  last  referred  the  city  property 
and  the  valuation  there  on  the  entire  property  of  the  company  ?      ' 

Mr.  Jones.  I  will  explain  that  by  itself,  when  I  get  through  with 
the  other  things. 

Mr.  W^ARREN.  All  right.  I  just  wanted  to  call  your  attention 
to  it. 

Mr.  Jones.  United  Railways  Co.  of  St.  Louis :  The  statement  here 
is:  Value  agreed  upon  by  the  city  and  company  represents  com- 
promise of  conflicting  valuations,  January  1,  19 18, '$60,000,000.  That 
is  correct,  but  it  should  be  understood  that  that  is  merely  a  tentative 
valuation,  which  was  protested  vigorously  by  elements  in  the  pub- 
lic, and  that  there  is  now  pending  an  official  valuation  by  the  Mis- 
souri State  Public  Service  Commission. 

In  that  connection,  Mr.  James  E.  Allison,  who  since  1915  has 
represented  the  companies  as  a  valuation  appraiser,  valued  the 
property  representing  its  cost  in  1917  at  $48,000,000,  and  that  was 
the  undepreciated  value;  there  was  no  allowance  for  depreciation 
whatever. 

Metropolitan  Street  Railway  Co.,  Kansas  City :  Statement  here  is 
that  B.  J.  Arnold,  appointed  by  the  court,  made  valuation  February 
1912,  of  $35,000,000.  •^' 

The  Arnold  valuation  was  made  for  the  receivers,  the  receivers 
of  course,  representing  the  property  interest. 

Mr.  Arnold's  valuation  was  one  of  the  most  ingenious  valuations 
I  have  ever  seen,  in  the  results  in  bringing  out  intangible  values. 

My  recollection  of  that  valuation  is  that  about  one-third  of  the 
amount,  a  little  more,  represented  purely  intangibles.  The  ao-ree- 
ment,  however,  entered  into  between  the  city  and  the  company  "con- 


2014    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tallied  in  the  franchise  of  1914  was  $25,049,000;  and  that  was  so  gen- 
erally i^ecognized  as  being  excessive  that  $6,300,000  of  it,  it  w^as  pro- 
vided, should  be  amortized  out  of  the  surplus  earnings,  the  combined 
surplus  earnings  to  go  to  the  company  and  the  city. 

There  is  one  more,  I  think. 

Portland  Railway,  Light  &  Power  Co.,  Portland,  Greg. :  The  state- 
ment here  is,  valujition  by  the  public-service  commission,  June  30, 
1915,  $46,051,174. 

The  trouble  here  is  that  the  Portland  Railway,  Light  &  Power  Co. 
is  a  combination  of 'city  and  interurban  lines,  and  of  electric  proper- 
ties.   Apparently  they  are  all  included. 

The  report  gives  the  miles  of  single  track  as  185.  On  this  basis 
there. would  be  a  valuation  value  of  $250,000  per  mile  and  a  capitali- 
zation value  of  $e323,000  per  mile. 

You  see,  the  mistake  there  was  in  taking  the  mileage  evidently 
within  the  city  limits  and  using  the  valuation  and  capitalization  of 
the  combined  properties. 

The  State  public-service  commission,  on  July  31, 1919,  reported  the 
value  of  the  property  of  the  street-railway  company,  presumably  in 
the  city,  at  $18,698,500  for  rate-making  purposes,  which  would  be  at 
the  rate  of  about  $100,000  per  mile. 

The  same  mistake  that  was  made  in  the  Portland  case  has  been  made 
in  other  ciises,  of  including  the  combined  properties,  not  only  street- 
railway  but  electric  also,  and  in  one  case  gas. 

For  instance,  here  is  the  Geoi-gia  Railway  &  Electric  Co.,  Atlanta, 
(xa.,  valuation  by  the  Georgia  Railroad  Commission,  August,  1918, 
of  $25,000,000.  That  is  a  combination  street-railway,  gas,  and  elec- 
tric property,  with  lines  both  in  and  out  of  the  city. 

My  inference  is  that  that  valuation  and  the  capitaliziition  include 

the  combined  properties. 

I  think  there  is  one  more  of  the  same  type.  No;  there  are  ]ust  the 
two — the  Portland  Railway  Co.  is  the  other  concern.  So  here  wo 
have  figures  mixing  in  both  street-railway  and  electric  properties 
with  combined  valuations  and  capitalizations,  and  Ihe  final  figures 
purporting  to  represent  the  value  and  capitalization  per  mile  of  sin- 
gle track  of  street-railway  companies  only. 

So  the  compilations  are  an  injustice  to  both  sides  of  the  contro- 
versy in  that  respect. 

Those  are  the  facts  which  I  desire  to  produce  at  this  time. 

Mr.  Warren.  I  should  like  to  have  permission,  Mr.  Chairman,  to 
have  our  statistician  look  that  over,  in  the  light  of  Mr.  Jones's  criti- 
cism, and  file  an  amplified  and  conected  schedule  if  he  agrees  that 
there  are  errors  in  it. 

The  Chairman.  That  will  be  your  privilege. 

Mr.  Warren.  It  was  gotten  up  with  the  best  sources  of  informa- 
tion we  had  at  the  time. 

(Witness  excused.) 

ADDITIONAL  STATEMENT  OF  ME.  MAEION  M.  JACKSON. 

Mr.  Jackson.  Mr.  Chairman  and  gentlemen  of  the  commission,  the 
additional  matters  which  Mr.  Key  desires  me  to  offer  to  the  commis- 
sion are  those  which  wore  called  to  our  attention  niore  directly  since 
my  presence  before  the  commission  before,  and  they  applied  specifi- 


PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2015 

• 

cally  more  to  the  condition  generally  over  the  country  and  the  rela- 
tions of  these  various  companies  resulting  in  one  of  the  situations 
from  which  we  are  suffering  there  at  Atlanta,  but  I  believe  our  situa- 
tion at  Atlanta  is  better  than  a  majority  of  the  cities. 

We  start  out  with  this  proposition :  That  the  public  has  been  led 
to  believe  that  the  stock  and  securities  of  these  companies  are  in  the 
hands  of  widows  and  orphans,  bankers,  and  insurance  companies, 
and  that  the  call  for  action  to  raise  the  rates  throughout  the  country 
generally  is  to  save  these  investors  and  these  companies,  in  particu- 
lar, back  of  it. 

We  find  with  reference  to  the  situation  there  in  Atlanta,  for  ex- 
ample, that  in  advertisements  selling  the  securities  of  the  Georgia 
Railway  &  Power  Co.  those  advertisements  state  that  the  United  Gas 
Improvement  Co.  of  Philadelphia,  under  the  heading  "Manage- 
ment "—the  United  Gas  Improvement  Co.  of  Philadelphia  has  rep- 
resentation on  the  board  of  directors  of  both  the  Georgia  Railway 
&  Electric  Co.  and  the  Georgia  Railway  &  Power  Co.  You  will  re- 
call, from  my  evidence  here  before,  the*  Georgia  Railwav  &  Electric 
Co.  is  leased  to  the  Georgia  Railway  &  Power  Co. 

The  United  Gas  Improvement  Co.  has  stock  in  both  corpora- 
tions. I  think  that  the  time  they  possibly  came  in  was  when  the 
company  acquiied  the  Atlanta  Gas  Light *^ Co.,  back  in  about  1903. 

The  United  Gas  Improvement  Co.  is  interested  in  68  public 
utilities  throughout  this  country. 

In  their  financial  statement,  as  .iriven  in  Moody's  manual  for  1918, 
it  shows  that  their  undivided  profits  that  year,  after  paying  the  divi- 
dends on  their  stock— that  the  undivided  profits  of  that  company  in 
that  year  were  $35,637,936.  The  undivided  profits  had  increased  in 
the  last  years  something  like  $8,465,835,  approximately. 

It  does  not  look  like  the  company  is  suffering  from  its  investments 
in  public  utilities. 

You  see,  that  company's  ownership  of  stock  in  the  Georgia  Rail- 
way &  Power  Co.  and  the  Georgia  Railwav  &  Electric  Co.  'is  touch- 
ing the  life  of  48  different  towns  and  cities  in  the  State  of  Georgia. 

We  pass  from  that  to  other  towns  in  the  State  of  Georgia,  and  we 
find  that  the  Stone  &  Webster  organization  conies  in. 

Tlie  Stone  &  Webster  organization  controls  something  like  66  of 
these  companies.  One  of  them  in  the  State  of  Georgia  there  touches 
eight  towns  in  the  Stiite  and  two  in  the  State  of  Alabama. 

We  come  to  this  proposition  here  that  in  my  evidence  before  I 
mentioned  to  the  commission :  That  we  think  tliat  the  public  is  en- 
titled to  some  of  the  benefits  w^hich  accrue  to  the  owners  of  electric 
properties  when  their  electric  properties  operate  both  the  lighting 
systems  and  the  street  railways ;  it  is  a  joint  property.  And  I  verily 
believe  that  an  investigation  of  that  end  of  the  subject  would  de- 
velop the  fact  that  if  the  people  were  getting  the  i-eal  benefit  of  the 
cost  of  producing  electric  current  and  selling  it  to  the  public,  you 
could,  instead  of  increasing  your  car  fares,  I  think  you  could  carry 
most  of  the  public  for  nothing  in  a  great  many  of  the  cities. 

That  may  be  an  extreme  statement,  but  I  come  across  this  situa- 
tion :  For  instance,  in  the  city  of  Columbus,  where  the  Stone  &  Web- 
ster people  control  the  electric-light  situation,  the  gas  situation,  and 
the  street  railway:  The  maximum  rate  for  current  in  the  city  of 
Columbus  is  11.1  cents  per  kilowatt  hour.    In  the  citv  of  Windsor, 


V\ 


'  M 


i 


2016    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

in  Canada,  the  cost  of  current,  where  they  have  the  service  of  the 
Hydro-Electric  Power  Conunission  of  Ontario— and  Windsor  is  a 
city  of  the  same  size,  approximately,  as  the  city  of  Columbus — the 
cost  of  current  is  4.9  cents  for  homes  and  3.9  cents  for  lighting  places 
of  business. 

Commissioner  Maiion.  Ygu  are  speaking  of  Columbus,  Ga.? 
Mr.  JacKvSon.  Yes. 

Commissioner  Beall.  May  I  interrupt  you  for  a  moment?  I 
suppose  you  arc  familiar  with  the  fact  that  there  has  been  a  great 
deal  of  controvei-sy  in  Canada  for  a  number  of  years;  a  great  many 
people  claim  that  the  Hydro-Electric  Commission  there  does  not 
correctly  report  its  earnings. 

Mr.  Ja(kson.  Yes. 

Commissioner  Beall.  And  that  they  have  always  refused  to  give  a 
real  statement,  so  that  you  can  not  tell  really  what  all  the  exj^enses 
liave  been. 

Mr.  Jackson.  But  I  find  that  their  books  have  been  audited  a 
good  many  times,  and  that  at  the  very  time  that  the  street  railroads 
and  electric-light  companies  are  before  the  commissions  of  the  United 
Statesappealing  for  increased  rates,  Sir  Adam  Beck,  chairman  of 
tlie  Hydro-Elecfrric  Power  Commission,  was  testifying  here  in  Wash- 
ington and  giving  the  facts  with  regard  to  those  cities  and  towns  up 
there,  ^yhere  instead  of  the  rate  going  up,  the  rate  has  been  steadily 
decreasing— to  keep  the  towns  from  paying  themselves  out  of  debt 
too  soon. 

Commissioner  Beaix.  They  have  never  allowed  a  real  audit  to  be 
niade  of  their  books.     There  is  a  great  controversy  about  that. 

Mr.  Jackson.  I  understand  there  is  controversy 

Commissioner  Beall.  You  also  understand  that  he  has  municipal 
and  provincial  aid? 

Mr.  Jackson.  Yes.  It  is  the  cooperation  of  the  cities  together— • 
the  towns  anc'  cities. 

Now,  I  turn  to  Savannah — the  city  of  Savannah,  where  the  Stone 
&  Webster  people  again  control  allof  those  interests.  And  I  find 
that  the  city  of  Savannah  is  paying  the  maximum  rate  there  of 
10  cents  for  lighting  houses  and  9  cents  for  lighting  places  of  busi- 
ness, while  the  city  of  Hamilton,  another  one  of  those  cities  up  there, 
is  paying  the  rate  of  3.7  for  lighting  houses  and  1.9  for  lighting 
places  oi  business.  The  city  of  Hamilton  is  saving,  by  its  reduction 
in  rate — their  rates  were  approximately  the  rates  we  are  charged  be- 
fore they  began  municipal  ownership — they  are  saving  there,  in  the 
city  of  Hamilton,  in  one  year,  $250,058.16. 

Connnissioner  Beall.  Are  you  quoting  now.  in  Hamilton,  from 
the  city's  or  from  the  company's  business?  Because  the  city  does 
practically  no  business  in  Hamilton,  except  lighting  the  streets. 

^Ir.  Jackson.  The  current  goes  in  from  the  Hydro-Electric  Power 
Commissior  to  the  city  and  is  sold  to  the  homes. 

Commissioner  Beall.  Oh,  only  for  a  small  pai-t. 

Mr.  Jackson.  I  beg  your  pardon,  sir.     It  is  sold  direct. 

Commissioner  Beall.  That  is  only  a  small  part.  Most  of  the 
business  in  Hamilton  is  done  by  the  private  companies. 

Mr.  Jackson.  I  think  you  will  find  that,  up  there — if  you  take 
the  city  of  Toronto,  for  instance 

Commissioner  Beall.  That  is  a  different  comoany. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2017 

Mr.  Jackson.  Toronto  has  the  private  company  and  also  the 
Hydro-Electric  Commission. 

Commissioner  Beall.  I  have  personal  knowledge  of  Hamilton. 
That  is  the  only  reason  I  spoke  on  that. 

Mr.  Jackson.  The  number  of  the  patrons  of  the  company  I  do 
not  remember  in  Hamilton,  but  I  can  give  the  number  of  customers 
of  the  company  in  Toronto — something  like  37,000. 

Commissioner  Beall.  You  have  not  got  those  figures  for  Hamil- 
ton, have  you? 

Mr.  Jackson.  No. 

Commissioner  Beall.  That  would  show  quite  a  difference. 

Mr.  Jackson.  But  that  was  the  amount  that  was  saved  in  bills 
by  the  people  of  the  city  of  Hamilton.  Just  run  that  out  in  fig- 
ures and  calculate — run  that  over  a  period  of  30  years,  the  usual 
life  of  a  bond,  and  you  will  find  that  the  city  of  Hamilton  is  saving, 
by  doing  its  own  business,  a  sum  of  approximately  $16,000,000, 
which  is  enough  to  pay  for  the  stock  of  all  the  companies  operated 
in  Savannah  by  the  Stone  &  Webster  people  and  leave  a  margin  over 
and  above  that  of  eight  million  and  odd  dollars. 

Facts  like  those  are  the  things  which  keep  the  spirits  which  Mr. 
Mortimer  referred  to  in  every  community  uneasy  and  stirring  around 
to  get  at  what  is  wrong  with  the  local  situation  with  regard  to  the 
public  utility. 

Now,  I  go  over  to  the  city  of  Athens,  which  is  controlled  now 
by  another  company.  The  street-railway  and  light  and  power  situ- 
ation in  the  city  of  Athens,  Ga.,  is  controlled  by  the  City  Service  Co. 

I  note  from  the  last  Moody's  Manual,  1919,  that  the  Service  Co. 
is  operating  in  something  like  110  different  cities  in  this  country; 
that  it  is  paying  a  dividend  annually  of  6  per  cent  in  cash  and  9 
per  cent  in  common  stock,  and  that  it  is  the  determination  of  the 
company  to  increase  their  stock  dividend  each  year  by  3  per  cent 
so  long  as  the  present  prosperity  continues. 

Commissioner  Beali^  Are  you  speaking  of  the  City  Service  Co.? 

Mr.  Jackson.  Yes. 

Commissioner  Beall.  Their  revenue  is  derived  principally  from 
oil. 

Mr.  Jackson.  I  will  get  to  that.  I  will  state  with  regard  to  that 
that  their  statements  show  that  the  major  part  of  their  earnings 
come  from  oil  and  gas.  But  it  is  all  a  part  of  the  same  public- 
utility  problem  in  the  city. 

I  note  also  that  the  City  Service  Co.  stock  is  selling  at  over 
480 ;  and  that  this  watered  stock  is  coming  out  in  the  form  of  stock 
dividends  each  year  to  increase  the  burden  which  rests  upon  the 
public. 

We  go  to  another  city  in  Georgia,  Macon,  and  you  can  receive 
the  same  story  there — another  holding  company. 

We  will  pass  out  of  Georgia,  though — out  of  the  question  purely 
of  municipal  ownei*ship.  And  these  are  the  facts  which  we  wish 
to  urge— and  I  have  no  doubt  that  it  has  already  occurred  to  this 
commission  to  investigate — but  these  are  the  facts  which  come  before 
us  now,  in  a  way,  in  connection  with  our  problem  here,  that  is 
startling. 


1G0643*'— 20— VOL  2- 


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2018    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

We  cross  over  into  Alabama,  and  we  come  to  the  Alabama  Power 
Co.  The  president  of  the  Alabama  Power  Co.  is  a  resident  of 
London,  England.  The  Alabama  Power  Co.  controls  the  lock  and 
dam  known  as  Lock  and  Dam  No.  12  in  the  Coosa  River,  which 
WHS  supposed  to  bring  down  the  rates  in  Alabama,  and  it  did  bring 
them  down.  I  recall  tlie  city  of  Gadsden,  where  the  rate  was  IG 
cents  per  kilowatt  hour,  and  it  was  reduced  to  12.  But  12  cents 
l^r  kilowatt  hour,  brought  from  the  same  kind  of  source  of  power 
they  are  using  up  here  in  Canada,  is  still  about  five  times  what  the 
peoj)le  in  Canada  are  paying  for  their  current. 

The  Alabama  Power  Co.  controls  these  companies:  The  Alabama 
Electric  Car,  the  AVetumpka  Power  Co.,  Alabama  Power  &  Elec- 
tric Co.,  Alabama  Power  Development  Co.,  Anniston  Gas  &  Elec- 
tric Co.,  Huntsville  Railwav  &  Power  Co.,  Decatur  Light,  PoAver  i?c 
Fuel  Co.,  Etowah  Light  &  Power  Co.,  the  Pell  City  Light  & 
Power  Co. 

It  also  owns  the  entire  capital  stock  of  the  Interstate  Power  Co., 
the  Alabama  Interstate  Power  Co.,  the  Birmingham,  Montgomery  & 
Gulf  Power  Co.,  the  Alabama  Power  Co.,  the  Alabama  Power  & 
Liglit  Co.,  the  Muscle  Shoals  Hydroelectric  Power  Co. 

This  company,  which  owns  all  of  these  companies,  is  in  turn  owned 
by  another  company  known  as  the  Alabama  Traction,  Light  & 
Power  Co. 

The  Alabama  Traction,  Light  &  Power  Co.  is  incorporated  in 
Canada,  but  doing  business  in  Alabama  and  owning  these  companies 
which  own  one  right  on  top  of  the  other. 

Its  capital  stock  is  $30,000,000.  Its  bonded  debt  $13,000,000.  Its 
president  also  is  a  resident  of  the  city  of  London,  England. 

At  the  time  that  the  Government  started  to  put  in  this  plant  for 
getting  nitrate  at  Muscle  Shoals  the  consent  of  this  foreign-owned 
corporation  had  to  be  gotten  for  the  use  of  a  part  of  the  property. 

We  come  to  this:  The  Alabama  Power  C-o.  sells  current  to 
tlio  Birmingham  Railway,  Light  &  Power  Co.  The  Birmingham 
Railway,  Light  &  Power  Co.  has  recently  gone  into  the  hands  of  a 
i-eceiver. 


"he  question  is :  How  much  did  the  cost  of  its  current  have  to  do 
with  landing  it  in  the  hands  of  the  receiver? 

Commissioner  Gadsden.  What  did  they  charge  for  it? 

Mr.  Jacksox.  I  have  not  that ;  I  can  not  get  that. 

Commissioner  Gadsden.  Then  how  does  that  help  us? 

Mr.  Jackson.  I  wanted  you  to  see  this  situation  now : 

The  Birmingham  Railway,  Light  &  Power  Co.— in  that  case  you 
again  are  up  against  a  mass  of  tliese  holding  companies— the  bill 
for  the  receiver,  to  put  the  Birmingham  Railway,  Light  &  Power 
Co.  in  the  hands  of  a  i-eceiver,  was  filed  by  the  holding  company, 
the  American  Cities  Co.,  which  owns  that  company. 

Commissioner  Beall.  I  can  answer  your  question,  Mr.  Commis- 
sioner. I  can  not  give  you  tlie  exact  figures,  but  the  Birmingham 
Railway,  Light  &  Power  Co.  buys  its  power  from  the  Alabama 
I^)wer  Co.  l)ecause  it  was  able  to  get  a  much  cheaper  piice  than  it 
could  manufacture  it  for  itself. 

Commissioner  Gadsdf.n.  That  is  what  I  wanted  the  witness  to  say. 

Conmiissioner  Beall.  I  have  personal  kuowlalgc  of  the  situation. 


PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2019 

Commissioner  Gadsden.  You  have  made  an  exhaustive  inquiry 
into  this  matter,  Mr.  Jackson,  and  that  is  the  reason  I  asked  you 
that  question. 

Commissioner  Beall.  I  had  nothing  to  do  with  the  receivership. 

Mr.  Jackson.  I  could  not  get  the  books  of  the  company.  They 
arc  not  open  to  me. 

Commissioner  Gadsden.  But  you  are  making  an  insinuation  that 
they  are  charging  an  excessive  price.  Is  that  fair  without  having 
made  an  investigation  into  this  matter? 

Mr.  Jackson.  I  am  showing  you  where  I  know  the  facts  that  they 
are  charging  an  excessive  price. 

Commissioner  Gadsden.  For  current? 

Mr.  Jackson.  Yes. 

Commissioner  Gadsden.  In  Birmingham? 

Mr.  Jackson.  For  instance,  in  the  city  of  Gadsden  the  rate  is 
12  cents. 

Commissioner  Gadsden.  That  is  to  the  public? 

Mr.  Jackson.  That  is  to  the  public. 

Commissioner  Gadsden.  You  ai-e  insinuating  that  the  Birming- 
ham Railway,  Light  &  Power  Co. — and  we  are  investigating  rail- 
ways here,  and  not  lighting  companies — went  into  the  hands  of  a 
receiver  because  they  were  buying  their  power  at  an  excessive  price, 
and  I  ask  you:  Did  you  take  any  steps  to  find  out  what  was  tho 
price  of  current  paid  by  the  railroad? 

Mr.  Jackson.  Xo;  I  did  not. 

One  of  the  purposes  of  my  coming  back  here  is  to  ask  that  this 
commission  go  into  this  price  of  current  all  over  this  country.  I 
am  going  into  this  as  other  cities,  where  I  will  show  you  the  price 
of  current.  I  can  show  you  the  connection  with  the  street  railway, 
but  I  can  not,  because  it  w^ould  have  been  impossible  for  me  to 
get  the  information — if  I  had  gone  to  the  companies,  my  request 
would  have  been  refused,  and  it  would  have  been  impossible  in  tho 
time  I  liad  at  my  disposal  to  do  that — I  am  just  giving  you  the 
picture  as  it  comes  to  me  in  investigating  these  conditions. " 

I  find  that  the  Birmingham  Railway,  Light  &  Power  Co.,  while 
it  buys  its  current  from  the  Alabama  Power  Co. — that  the  Birming- 
ham Railway,  Light  &  Power  Co.  is  owned  by  the  ^Vmerican  Citi^ 


&  Light  Co. 

Now,  three  of  those  companies  have  been  put  into  the  hands  of  a 
receiver  in  the  last  12  months  on  petition  filed  in  the  holding  com- 
pany itself,  by  the  American  Cities  Co. — Memphis,  New  Orleans, 
and  the  city  of  Birmingham. 

Commissioner  Wehle.  Is  it  your  suggestion,  Mr.  Jaclison,  that 
this  commission  ascertain  at  what  price  the  traction  company  at 
Binningham  does  purchase  its  current? 

Mr.  Jackson.  I  am  making  this  suggestion,  Mr.  Commissioner, 
that  the  solution  of  the  problem  which  is  before  you  gentlemen  here 
is  largely  involved  in  the  question  of  the  price  that  these  compa- 
nies pay  for  the  current,  and  then  the  price  which  they  get  whero 
they  manufacture  the  current. 


i 


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2020    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

In  Other  words,  in  the  majority  of  these  cases,  as  I  see  it,  elec-* 
tricity  IS  a  by-product.  It  is  not  like  a  mule  that  ate  up  hay  and 
gave  nothing  m  return  except  a  valuable  piece  of  advertising  mat- 
ter, which  the  companies  are  using  now  to  evade  the  question  of  . 
paving  the  pavements  between  the  tracks— but  tlie  generator  of  cur- 
rent produces  a  by-product,  just  exactly  like  the  manufacturer  of 
gas  in  producing  coke  and  coal-tar  products  produces  a  by-product 
that  the  public  is  entitled  to  the  benefit  of  in  reducing  the  cost  of 
service.  '^ 

I  ani  asking  that  this  be  investigated,  not  only  in  Birmingham  but 
m  each  city  in  this  country  where  this  situation  prevails,  as  look- 
mg  to  the  solution  of  the  problem  as  a  whole. 

Now,  I  come  across  this,  and  again  I  am  dealing  largely  in  suspi- 
cions—necessarily so :  I  find  that  among  the  25  subsidiary  companies 
owned  by  the  United  Gas  &  Electric  Corporation,  which  in  turn 
owns  the  American  Cities  Co.,  another  company  holding  the  other 

^f^ZL^'^r''^  *i^^  companies  have  a  total  capitalization  of 
$81,000,000  of  capital  stock  and  $51,000,000  of  preferred  stock:  that 
they  have  another  company  there,  which  is  known  as  the  United 
Cjas  &  Electric  Engineering  Corporation.  The  United  Gas  &  Elec- 
tric Engineering  Corporation  was  organized  in  1913  to  act  as  con- 
sulting, contracting,  and  operating  engineers,  and  is  purchasing 
agent  for  the  subsidiaries  of  the  United  Gas  &  Electric  CorporatioS 
and  the  American  Cities  Co. 

It  has  entered  into  contracts  with  the  companies  named  for  this 
purpose.  In  other  words,  we  want  the  wheel  within  the  wheel  ex- 
ammed. 

Commissioner  Wehle.  Who  owns  the  stock  in  the  United  Gas  & 
Improvement  Co.  ? 

Mr.  Jackson.  The  United  Gas  &  Electric  Engineering  Co  ? 

Commissioner  Wehle.  Yes ;  that  is  what  I  meant. 
.u^^/t  Jackson.  According  to  Poors  Manual,  that  stock  belongs  to 
the  United  Gas  &  Electric  Corporation,  and  the  United  Gas  &  Elec- 
tric Corporation  owns  the  American  Cities  Corporation,  and  the 
American  Cities  Corporation  owns  the  Birmingham  Eailwav,  Lio^ht 
&  Power  Co.,  which  is  in  the  hands  of  a  receiver.  *^ 

Commissioner  Wehle.  The  American  Cities  Co.  also,  as  I  under- 
stand, controls  the  companies  which  operate  these  various  power 
plants  m  Alabama?  ^ 

Mr.  Jackson.  No  ;  that  is  another  group  of  holding  companies  In 
other  words— I  have  passed  from  that— they  only  touch  with  the 
Ahibama  Power  Co. 

In  other  words,  I  am  trying  to  give  you  gentlemen  a  picture  of  the 
thing  which  makes  us  uneasy. 

Commissioner  Mahon.  The  only  place  that  power  is  furnished 
to  them  from  the  one  referred  to  is  at  Birmingham,  is  it  not« 

Mr.  Jackson.  The  only  street  railway  that  I  touch  specifically. 

Commissioner  Mahon.  Yes. 

The  CHAiR3fAN.  The  hour  of  adjournment  has  arrived,  Mr.  Jack- 
son    How  much  longer  will  it  take  you  to  complete  your  statement? 

Mr.  Jackson.  I  should  like  to  get  this  whole  statement  before  vou 
gentlemen,  if  I  could.  "^ 

The  Chairman.  Is  it  in  tabular  form,  so  that  you  could  file  it? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2021 

;        Mr.  Jackson.  Xot  so  that  I  could  file  it,  sir.    I  am  saving  you  as 

much  of  this  as  I  can. 
'        The  Chairman.  How  much  longer  would  it  take  you  to  complete 
your  statement  ? 

Mr.  jACKgoN.  Fifteen  or  twenty  minutes  longer,  I  think. 
The  Chairman.  We  will  adjourn  at  this  point  until  8  o'clock  to- 
night. 

(Whereupon,  at  5  o'clock  p.  m.,  an  adjournment  was  taken  until 
8  p.  m.) 

EVENING    SESSION. 

STATEMENT  OF  MR.  MARION  JACKSON— Continued. 

The  Chairman.  You  may  proceed,  Mr.  Jackson. 

Mr.  Jackson.  I  think  the  point  where  I  left  off  was  with  refer- 
once  to  the  receivership  of  the  Birmingham  Railway,  Light  &  Power 
Co.  and  the  New  Orleans  company,  the  Memphis  company,  and  the 
holding  company,  filing  the  petition  for  the  receiver  and  the  inter- 
working  engineer  and  contracting  company,  as  to  its  connection. 

I  want  to  go  from  there  to  San  Francisco  and  go  back  to  the  time 
of  the  finding  of  the  grand  jury  there,  when  they  published  their 
report  on  the  causes  for  corruption  in  the  city  of  San  Francisco,  in 
which  the  United  Railroads  was  involved,  and  also  the  question  of 
gas  entered  into  it. 

You  will  recall  there  was  one  item  there  whether  the  question  of 
the  rate  for  gas  was  involved,  where  the  board  had  been  elected  on 
the  phitform  of  reducing  the  cost  to  75  cents  and  a  bribe  of  $20,000, 
according  to  this  report  of  the  grand  jury,  was  given  and  the  gas  rate 
was  retained,  resulting  in  a  saving  of  $600,000  a  year  in  the  com- 
pany's income  on  gas.  I  find  that  the  company  controlling  the  gas 
situation  had  a  present  there.  That  $600,000  a  year,  which  was  made 
at  a  cost  of  $20,000  to  certain  public  officials,  who  served  in  the  peni- 
tontiarv  for  it.  The  $600,000  a  year  will  in  30  years'  time,  with 
interest  compounded  at  5  per  cent,  amount  to  something  over  $39,- 
000,000-  made  by  an  investment  of  $20,000  in  public  officials. 

I  find  that  the  Pacific  Gas  Sc  Electric  Co.  was  incorporated  on 
October  10,  1905,  as  a  holding  company  to  acquire  the  capital  stock 
of  the  San  Francisco  Giis  &  Electric  Co.  and  the  California  Gas  & 
Electric  Corporation.  It  furnishes  gas  to  53  cities,  electricity  to  176, 
and  water  to  19  cities.  Its  authorized  capital  stock  is  $100,000,000. 
Its  bonded  debt  outstanding  December  31,  1917,  was  $79,000,000,  ii? 
round  numbers.  In  1911  the  company  declared  a  stock  dividend  of 
50  per  cent.  The  profits  of  the  company  may  be  gathered  from  the 
fact  that  while  only  $34,000,000,  in  round  numbei-s,  of  common  stock 
and  $24,000,000  of  preferred  stock  had  been  issued  up  to  1917,  the 
company's  surplus  and  reserves  at  that  time  had  grown  to  $11,261.- 
759.  e>  ^     , 

Commissioner  Gadsden.  Where  does  that  company  operate? 
Mr.  Jackson.  In  San  Francisco  and  173  places  around  it. 
Mr.  Warren.  What  company  was  it? 
Mr.  Jackson.  The  Pacific  Gas  &  Electric  Co. 
The  gross  earnings  of  the  company  ran  from  $12,667,000  in  1908 
to  $20,321,728  in  1917,  in  which  year  the  net  earnings  of  the  com- 


i 


2022    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

pany  were  $8,717,037.  After  the  payment  of  a  dividend  on  pre- 
ferred stock  of  $4,471,105  and  $1,281,372  on  common  stock,  a  surplus 
remained  for  the  year  of  $1,G78,G02. 

That  is  one  of  the  public  utilities  out  there  in  San  Francisco. 
The  one  that  I  am  particularly  interested  in  out  there,  though,  is  the 
United  Railways  Investment  Co.,  which  was  incorporated  February 
15.  1902,  under  the  laws  of  New  Jersey  as  the  United  Railways  In- 
vestment Co.  of  San  Francisco.  It  later  dropped  the  name  of  San 
Francisco  and  was  then  simply  the  United  Railways  Investment  Co. 

The  president  of  both  the* 'United  Railways  Investment  Co.  and 
the  United  Railroads  of  San  Francisco  was  the  same  man,  a  former 
citizen  of  Atlanta,  Mr.  Pat  Calhoun. 

I  find  that  the  California  Railroad  Commission  on  May  17,  1915, 
issued  a  general  order  directing  the  dividends  be  not  paid  on 
$5,000,000  of  7  per  cent  cumulative  first  preferred  stock,  in  the 
absence  of  any  plan  of  restitution  of  the  $1,096,000  withdrawn  from 
the  treasury  by  the  former  president  in  connection  with  the  invest- 
ment in  stock  of  the  Solano  Farms  Co. 

The  United  Railroads  of  San  Francisco  is  controlled  by  the  Cali- 
fornia Railway  &  Power  Co.  The  California  Railway  &  Power  Co. 
has  a  capital  of  $40,000,000  common  and  $2,800,000  first  preferred 
stock  and  $6,874,400  of  preferred  stock. 

This  company,  in  addition  to  the  United  Railroads,  controls  the 
companies  doing  the  electric  and  gas  business  in  the  towns  of  Monte- 
rey, Solenos,  and  Pacific  Grove.  It  controls  the  Sierra  &  San  Fran- 
cisco Power  Co.,  which  sells  current  to  the  United  Railroads  of  San 
Francisco  at  7.5  cents  per  kilowatt  hour. 

The  California  Railway  &  Power  Co.  is  controlled  in  turn  by  the 
Ignited  Railways  Investnient  Co.,  with  a  capital  stock  of  $36,400,000 
and  a  bonded  debt  of  $18,293,000. 

The  United  Railway  Investment  Co.  also  controls  the  Railroads- 
c<c  Power  Development  Co.,  with  an  authorized  capital  stock  of 
$6,000,000.  And  then  we  come  back  across  the  continent — and  the 
Philadelphia  company  with  an  authorized  capital  stock  of  $44,900,000 
of  common  stock,  $2,033,400  of  5  per  cent  noncumulative  preferred 
stock,  and  $25,000,000  of  6  per  cent  cumulative  preferred  stock. 

Its  bonded  debt  and  stock  of  March  31,  1918,  was  $40,649,000. 
Among  other  companies,  the  Philadelphia  company  owns  the  entire 
capital  stock  of  the  Pittsburgh  Railways  Co. 

The  bonded  debt  and  notes  of  the  United  Railways  and  Investment 
Co.  were  $21,056,000  in  December,  1912.  In  1917,  it  had  been  re- 
duced to  $18,293,000.  The  company's  surplus  was  $4,256,542  in  1912. 
It  had  been  increased  to  $7,055,715  in  1917.  In  other  words,  a 
decreasing  bonded  debt  and  increasing  surplus  would  look  as  if 
they  were  getting  money  from  somewhere. 

But  the  Pittsburgh  street  railways  are  all  in  the  hands  of  a 
receiver. 

We  come  back  across  the  continent  again  and  come  to  another 
place,  Chicago.  An  interesting  thing  comes  out  with  regard  to 
Chicago  Railways  Co.,  that  after  Mr.  Yerkes  retired  from  the  con- 
trol, he  Avas  reported  to  have  carried  with  him  some  $10,000,000  in 
profits;  the  street  railways  at  the  time  they  went  into  the  hands 
of  a   receiver  out   there"  had   securities   outstanding   aggregating 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2023 

$110,000,000.  According  to  Moody's  Manual,  when  the  Chicago 
Street  Railways  Co.  bought  those  properties  out  there  and  took  them 
in,  the  value  of  the  property  taken  over  by  the  company  at  the 
receiver's  sale  was  $29,000,000,  although  there  had  been  outstanding 
against  it  securities  of  $110,000,000. 

Since  that  date  additions  have  been  made  running  the  cost  up — 
up  to  December  31, 1917— to  the  amount  of  $89,529,413,  against  which 
was  a  bonded  debt  of  $97,727,591.  As  we  all  know,  Chicago  has 
voted  repeatedly  in  favor  of  municipal  ownership.  It  has  not  gotten 
it  yet.  I  believe  the  last  announcement  is  that  they  expect  to  have 
it  within  the  next  3  years. 

Commissioner  Wehle.  Is  that  for  all  the  railway  systems,  street 
and  elevated? 

Mr.  Jackson.  I  could  not. state  that,  but  they  expect  to  have  all 
of  it. 

Commissioner  Wehle.  And  their  rapid  transit  ? 

Mr.  Jackson.  But  I  saw  an  announcement  recently  that  the  out- 
look was  that  within  the  next  3  years  they  would  take  over  that 
property. 

The  Chairman.  Does  the  proposition  involve  the  taking  over  of 
all  the  street  railways  in  Chicago,  Mr.  Mortimer? 

Mr.  Mortimer.  It  does,  and  the  unification  of  the  street  and  ele- 
vated lines. 

The  Chairman.  Proceed,  Mr.  Jackson. 

Mr.  Jackson.  The  interesting  thing  in  regard  to  Chicago  which 
comes  in  in  connection  with  the  cost  of  current  and  electricity  in  con- 
nection with  these  properties  is  that  the  city  of  Chicago  is  a  wonder- 
ful example  of  what  a  city  can  do  with  its  own  plant,  in  what  it  has 
done  from  the  building  of  the  drainage  canal,  where  it  is  generating 
electricity,  according  to  the  twentieth  annual  report  of  their  depart- 
ment out  there,  for  the  city  for  the  purpose  of  lighting  its  streets  at 
a  cost  of  $15  per  horsepower  or  approximately  one-half  cent  per 
kilowatt-hour. 

Mr.  Gardner  S.  Williams,  consulting  engineer  of  Ann  Arbor  and 
Chicago,  i*eported  to  the  trustees  of  the  sanitary  department  that  the 
cost  of  generation  in  1915  was  a  little  over  0.6  of  a  cent  per  kilowatt- 
hour  to  generate  the  current.  Notwithstanding  this  living  illus- 
tration of  the  cheapness  of  the  production  of  electric  current,  private 
ownership  is  so  strongly  entrenched  in  Chicago  that  the  bufk  of  the 
electric-lighting  and  power  business  in  the  city  is  controlled  by  the 
Commonwealth  Edison  Co.,  which  charges  a  maximum  rate  to  the 
l)eople  of  Chicago  of  9  cents  per  kilowatt-hour  for  current  If  the 
city,  in  its  municipal  plant  can  generate  current  at  less  than  one-half 
cent  per  kilowatt-hour,  the  profit  in  selling  current  at  almost  18  times 
that  amount,  or  9  cents  per  kilowatt-hour,  may  be  imagined.  Also 
it  explains  why  the  dividend  by  the  Commonwealth  Edison  Co.  was 
only  $1,372,045  in  1908,  $3,067,352  in  1918.  In  this  last  year 
$1,009,725  was  added  to  the  company's  surplus,  making  its  surplus, 
after  the  payment  of  dividends,  $6,824,990,  having  risen  to  this 
amount  from  the  sum  of  $485,668  in  1908. 

Dividends  of  8  per  cent  per  annum  have  been  paid  since  November 
3,  1913.  The  month  before  the  beginning  of  the  first  8  per  cent  divi- 
dends, a  stock  dividend  of  10  per  cent,  or  $3,695,000,  was  paid  to  the 
stockholders. 


hi 


2024    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Henry  A.  Blair,  chairman  of  the  board,  and  president  of  the 
Chicago  Railway  Co.,  according  to  Moody's  Manual,  is  also  a 
member  of  the  board  of  directoi^  of  the  Commonwealth  Edison  Co. 
The  Commonwealth  Edison  Co.,  under  contracts  running  from  5  to 
25  years,  furnishes  electric  energy  amounting  to  300,000  horsepower 
to  the  street  railways  and  elevated  railways  of  Chicago.  No  small 
part  of  the  raise  in  car  fares  recently  proposed  in  that  city  will 
therefore  necessarily  go  to  further  increase  the  surplus  and  divi- 
dends of  the  Commonwealth  Edison  Co. 

Commissioner  Mahox.  May  I  ask  you  a  question  there?  Do  you 
know  what  they  are  paying  for  that  power? 

Mr.  Jackson.  No,  sir.  As  I  stated  in  the  beginning,  I  have  no 
way  of  getting  at  terms  of  these  contracts  but — — 

Commissioner  Mahon.  Do  you  know  that  the  published  statement 
is,  and  the  company's  reports  show,  that  it  is  much  cheaper  to  get 
their  power — they  are  getting  their  power  much  cheaper  from  the 
Edison  Co.  than  they  could  generate  it  or  make  it  themselves? 

Mr.  Jackson.  I  have  no  doubt  that  it  can  be  easily  shown  on  paper 
that  that  is  correct. 

Commissioner  Mahon.  Do  you  know  that  there  is  a  contract  there 
for  that  power  and  that  during  the  entire  war  period  it  was  not 
raised  ? 

Mr.  Jackson.  No. 

Commissioner  Mahon.  Have  you  any  record  of  that? 

Mr.  Jackson.  No  ;  I  have  no  record  of  that.  What  I  am  calling  to 
the  attention  of  the  commission,  and  what  I  think  should  be  brought 
to  the  attention  of  the  public  also,  is  the  fact  that  the  earnings  of 
these  electric  companies,  some  of  them,  as  in  the  case  of  Atlanta, 
acting  absolutely  together,  and  in  other  cases  where  the  boards  of 
directoi-s  are  connected  in  this  way,  that  those  companies — now.  for 
instance,  the  city  of  Chicago — the  rate  that  the  city  of  Chicago  is 
paying  for  electricity  is  higher  than  the  city  of  Toronto  is  paying. 

Commissioner  Mahon.  But  you  are  not  giving  us  any  figures,  you 
ere  not  giving  us  any  information;  only  a  declaration  as  to  what  the 
Commonwealth  Edison  Co.  is  doing  in  Chicago.  You  are  not  show-^ 
ing  us  how  much  of  that  goes  to  the  increased  rate  of  fare  in  Chicago, 
and  from  my  knowledge  of  that  I  know  that  so  far  not  anything  has. 

Mr.  Jackson.  Nothing,  because  the  fares  have  only  recently  been 
increased,  but 

Commissioner  Mahon.  Yes.  And  because  of  contracts  which  were 
made  with  those  people  prior  to  the  war-time  conditions  they  have 
carried  it  through. 

Mr.  Jackson.  That  is  no  doubt  correct,  but  what  I  am  speaking  of 
is  this:  A  contract  being  made  between  these  companies,  with  the 
connection  on  the  board  of  directors,  and  showing  the  enormous 
profits  which  have  been  made  by  these  companies  in  the  past  out  of 
those  contracts.     I  do  not  mean  to  say 

Commissioner  Mahon.  That  is,  at  the  contract  price  ? 

Mr.  Jackson.  Exactly.  What  I  want  to  get  at  and  what  I  think 
is  one  of  the  solutions  of  this  problem  is  the  cost  of  current  to  these 
companies.  I  do  not  mean  to  intimate  that  the  contract  has  been 
raised  since  the  proposed  raise  in  fares,  but  what  I  am  suggesting 
is  that  the  solution  of  this  problem  is  that,  instead  of  raising  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   2025 

price  of  car  rides,  you  cut  the  price  that  you  are  paA'ing  for  current, 
and  in  addition  to  cutting  the  price  that  you  pay  for  current,  you 
also  give  to  these  electi-ic  companies,  situated  as  the  majority  of 
them  ai"e,  where  thev  are  interrelated,  the  profits  which  they  are 
making  by  the  sale  of  their  by-product. 

Commissioner  Mahon.  Can  you  give  us  any  idea,  for  instance,  in 
the  Chicago  case,  what  that  power  ought  to  be  furnished  for  to  the 
street-railway  company  ? 

Mr.  Jackson.  For  instance,  in  Chicago,  where  the  maximum  rate 
for  current  is  9  cents,  the  maximum  rate  for  current  in  Toronto  is 
approximately  2^  cents  per  kilowatt-hour. 

Commissioner  Mahon.  But  how  much  does  the  railway  company 
pay  there? 

Mr.  Jackson.  I  could  not  say  because  I  do  not  know.  But  there  is 
that  margin  of  piH^fit  there,  and  you  see  the  electric  companies  all 
over  the  country  going  up  in  their  profits  and  yet  this  cry  goes  out 
with  regard  to  the  street  railways. 

Commissioner  Beall.  Have  you  given  any  consideration  to  the  fact 
that  some  of  these  companies  you  are  speaking  of,  this  last,  for  in- 
stance, Chicago,  get  this  current  by  use  of  coal,  and  in  the  Toronto 
situation  it  is  from  water  power,  and  it  makes  all  the  difference  in 
the  world  ?     You  ought  to  know  those  things. 

Mr.  Jackson.  I  recall,  for  example,  that  the  city  of  Cleveland, 
where  the  municipal  plant  sells  current  at  3  cents  per  kilowatt-hour, 
tliey  genei*ate  it  by  coal. 

Commissioner  Beall.  Yes;  and  they  sold  it  originally  at  a  loss. 

Mr.  Jackson.  They  are  making  money  at  it  at  present,  however. 
»   Commissioner  Beall.  They  did  finally. 

Mr.  Jackson.  The  municipal  plant  is  paying  its  way  there,  I  think. 

Commissioner  Beall.  They  are  also  buying  current  from  a  private 
company. 

Mr.  Jackson.  They  have  not  got  the  facilities  for  supplying  all 
the  demands.  But  you  go  out  to  Seattle,  and  you  strike  a  mimicipal 
])hint  there 

Commissioner  Beall.  Well,  that  is  a  water-power  plant,  you 
know. 

Mr.  Jackson.  Yes.  But  Chicago  and  its  drainage  canal,  as  I 
called  attention  before  you  came  in,  is  generating  current  which  it 
delivers  to  the  city  to  light  its  streets  at  0.5  of  a  cent  per  kilowatt 
hour,  and,  according  to  engineers,  the  cost  for  the  generation  of  it 
is  a  little  over  0.6  possibly. 

Commissioner  Beall.  I  think  the  possibilities  are  very  limited, 
are  they  not,  on  the  canal  ?     I  think  that  is  what  the  trouble  is. 

Mr.  Jackson.  I  could  not  say  with  reference  to  that. 

Commissioner  Mahon.  You  do  not  know  what  the  cost  is  to  the 
Commonwealth  Edison  Co.? 

Mr.  Jackson.  No.  The  only  way  in  which  I  can  get  at  that  is 
the  way  in  which  their  surplus  and  dividends  have  been  increasing. 
In  other  words,  they  are  coining  money.  They  are  not  needing  any 
assistance  from  commissions  or  anyone  else  to  show  them  how  to  meet 
their  bills  and  also  pay  their  dividends.  They  are  having  no  diffi- 
culty. 

Commissioner  Gadsden.  Are  you  saying  that  from  your  own  per- 
sonal knowledge  or  just  inference? 


2026    PKOCEEDINGS  OF  FEDEKAL  ELECTRIC  BAILWAYS  COMMISSION. 

Mr.  Jackson.  No;  I  am  saying  that  from  the  published  figures 
in  Moody's  Manual,  from  which  the  majority  of  these  figures  are 
taken. 

(\)mmis6ioner  Mahon.  You  know  those  companies  abandoned  their 
power  houses  and  purchased  their  power  theix;  by  contract  from  the 
tdison. 

Mr.  Jackson.  I  did  not  catch  that. 

Commissioner  Maiion.  They  abandoned  their  own  power  houses 
and  purchased  their  power  from  the  Edison  Co. 

Mr.  Jacksox.  Now,  I  was  struck  right  along  on  that  point.  And 
I  saw  in  one  of  the  electric  magazines  that  in  the  contract  by  which 
Seattle  took  over  its  nmnicipal  street  railways,  they  paid  the  Stone  & 
Webster  ])eople  out — because  the  Stone  &  Webster  people  also  oper- 
ate out  there — $15,000,000  in  bonds,  and  in  addition  to  that,  al- 
though Seattle  has  its  own  plant,  they  contracted  to  take  the  current 
from  the  Stone  &  Webster  people  at  a  rate  of  1  cent  per  kilowatt 
hour.  Well,  that  is  higher  than  the  iTnited  Railroi\ds  is  paying  to 
its  interallied  company  in  San  Francisco,  It  is  higher  than  the 
Atlanta  company  is  paying  to  the  Georgia  Railway  and  Power  Co., 
which  is  its  company,  and  yet,  notwithstanding  that  higher  rate 
which  Seattle  is  i>aying,  Seattle  is  earning  its  way,  according  to  ISiIr. 
Murfine,  on  the  5-cent  fare.     They  aie  Iwiving  no  difficulty. 

Commissioner  Mahon.  Wliat  does  the  Seattle  municipal  plant 
make  power  for? 

Mr.  Jackson.  My  recollection  is  that  the  rate  of  fai-e — ^the  maxi- 
mmn  rate  of  Seattle  is  5J  cents  per  kilowatt-hour. 

You  go  to  Los  Angeles  and  the  rate  is  5  cents,  another  municipal 
plant.  You  come  to  Cleveland,  and  it  is  3  cents.  You  cross  over — 
and  I  was  coming  to  one  of  the  most  interesting  pictures,  to  me,  in 
regard  to  the  price  of  service — go  back  to  the  city  of  Windsor  again, 
that  little  town  in  Canada  of  25,000  inhabitants,  directly  across  the 
Detroit  River  from  the  city  of  Detroit  In  the  city  of  Windsor 
the  rate  for  lighting  for  plac-es  of  business  is  3.0  cents  per  kilowatt 
hoin\  and  dii*ectly  across  the  river  in  Detroit,  a  city  of  half  a  million 
inhabitants,  the  rate  is  10  cents  per  kilowatt  hour,  ver^^  nearly  thlee 
times  tliat  much 

Commissioner  Mvhon.  Detroit  has  its  own  municipal  plant. 

Mr.  Jackson.  Detroit  has.     It  also  has  a  privately  owned  plant. 

Commissioner  Mahon.  Well,  us  a  city,  it  has  its  own  plant,  and 
produces  all  its  own  light. 

Mr.  Jackson.  For  its  streets. 

Commissioner  Mahon.  Yes. 

Mr.  Jackson.  But  not  for  conmiercial  lighting. 

Commissioner  Wehlk.  What  is  the  cost  to  the  city  of  Detioit  for 
proihicing  its  cnrrent.  Commissioner  Mahon? 

Commissioner  Mahon.  I  am  not  familiar  with  tlte  latest  figui-es 
on  that. 

(\»mmissioner  Wehle.  Tiuit  might  be  interesting. 

(^iiunnissioner  Bkaij..  Th-at  is  from  water  power,  is  it  not,  in 
Windsor? 

Mr.  Jackson.  Yes;  it  is  a  part  of  the  hydroelectric-power  system. 

Commissioner  Beall.  And  Detroit  is  a  steam  station. 

'ill'.  Jackson.  Well,  what  I  am  gettiuc:  at  is  that  they  are  directly 
opi)osite.     For  instance,  the  first  city  tliat  I  compaix^d  to  Windsor 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2027 

also  gets  it  from  water  power ;  that  is  down  in  Columbus,  Ga.,  Avhere 
it  is  11.1  cents.  When  we  mention  Windsor,  down  in  Georgia,  be- 
iore  the  i*ailroad  commission,  we  are  met  with  the  proposal  that  it 
is  too  far  away;  that  conditions  vary  so  in  the  different  sections  that 
it  is  an  unfair  comparison. 

Commissioner  Beall.  They  do,  because 

Mr.  Jackson.  Unquestionabh\ 

Commissioner  Beall.  Because  your  Canadian  powers  are  verj^ 
high  head,  and  your  southern  powers  are  mostly  from  rivers  with 
a  low  head. 

Mr.  Jackson.  But  we  come  back  to  this  situation:  One  is  on  one 
side  of  the  Detroit  River  and  the  other  on  the  other;  directly  op- 
l>osite  each  other ;  and  -we  find  the  one  which  is  doing  its  own  work 
across  there  is  getting  it  at  3.9,  while  Detroit  is  paying  10  cents 

Commissioner  Wehle.  Is  there  a  water  power  near  Detroit  from 
which  power  could  ]>e  purchased  sufficient  to  supply  the  city? 

Mr.  Jackson.  Well,  I  am  not  enough  familiar  with  the  geography 
there  to  say  whether  there  is ;  but  I  should  say  that  there  was,  from 
the  fact  that  Windsor,  which  is  directly  across  the  river,  gets  it. 

Commissioner  Mahon.  Do  you  know^  where  Windsor  gets  its 
power  from? 

]\Ir.  Jackson.  Yes. 

Commissioner  Maiion.  Where? 

Mr.  Jackson.  From  Niagara  Falls. 

Commissioner  Mahon.  And  where  does  Detroit  get  its  power 
from  ? 

Mr.  Jackson.  I  am  coming  to  that  a  little  bit  further  on,  where 
I  compare  Buffalo  and  Toronto.  Buffalo  and  Toronto  get  their 
power  from  exactly  the  same  source — Niagara  Falls — and  Buffalo 
JLi  20  miles  from  the  Falls,  while  Toronto  is  80  miles;  and  the  samo 
difference  applies  there. 

The  capital  stock  of  the  Detroit  Edison  Co.  is  $25,691,000..  This 
is  the  course  its  dividends  have  taken :  It  paid  dividends  at  4  per 
cent  per  annum  from  July  15,  1908,  to  April,  1910,  at  which  time 
the  rate  was  mised  to  G  per  cent.  The  rate  w  as  raised  to  T  \>er 
cent  in  January,  1911,  which  was  maintained  until  1915.  Since 
that  time  the  stock  has  been  paying  an  annual  dividend  of  8  ]>er 
cent.  The  gross  revenue  of  its  constituent  companies  increased 
from  $1,788,000  in  1908  to  $12,279,920  in  1917.  Their  net  earnings 
jumped  from  $682,731  in  1908  to  $3,664,410  in  1917. 

The  Detroit  company  controls  the  St.  Clair  Edison  Co.,  the  Wash- 
penaw  Light  &  Power  Co.,  the  Delray  Terminal  Railway  Co.,  the 
Edison  Illuminating  Co.,  and  Peninsula  Electric  Light  Co. ;  the  De- 
troit Edison  Co.  being  itself  controlled  by  the  North  American  Co., 
which  conti-ols,  or  is  interested  in,  the  Wisconsin  Edison  Co.,  the 
I^nion  Electric  Light  &  Power  Co.,  the  St.  Louis  County  Gas  Co., 
the  Ignited  Railways  Co.,  and  the  West  Kentucky  Coal  Co.,  and 
other  companies  in  addition  to  the  Detroit  Edison  Co.  Its  capital 
stock  is  $29,793,3(K).  Its  undivided  profits,  after  payment  of  divi- 
dends sinct^the  year  1909,  amount  to  $3,353,742,  after  deducting  a 
reserve  to  cover  depreciation  of  securities  of  $4,000,000. 

AMien  the  rates  in  Toronto,  Ontario,  are  compared  with  those  in  a 
city  like  Atlanta,  Ga.,  the  objection  is  made  as  to  the  difference  in 


2028    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

locality.  Buffalo  and  Toronto  get  their  current  from  the  same 
source,  as  I  riist  stated,  Niagrara  Falls,  Buffalo  being  only  20  miles 
away,  while  Toronto  is  84  miles.  Notwithstanding,  the  H^dro-Elec- 
tric  Power  Commission,  publicly  owned,  supplies  current  in  Toronto 
at  one-half  the  rate  charged  in  Buffalo.  The  Buffalo  General  Elec- 
tric Co.  supplies  the  city  of  Buffalo.  This  company  is  the  consolida- 
tion of  other  companies.  The  surplus  of  the  Buffalo  General  Electric 
Co.  in  1908  was  $121,680.  By  1917  it  had  become  $931,814,  after  pay- 
ing dividends  amounting  to  more  than  $2,700,000  upon  its  capital 
stock,  which  amounts  to  $5,545,700. 

Tlie  gross  earnings  of  the  company  increased  from  $1,213,130  in 
1011  to  $4,209,719  in  1917. 

Now,  I  come  down,  Mr.  Chairman  and  gentlemen,  to  what  to  me  is 
one  of  the  most  striking  things  in  connection  with  tne  situation.  We 
get  back  to  Boston  and  also  back  to  the  Atlanta  situation.  At  the 
time  of  the  organization  of  the  Georgia  Bailway  &  Electric  Co.  the 
Old  Colony  Trust  Co.  figured  largely  in  it.  Mr.  Gordon  Abbott,  at 
that  time  vice  president  of  the  Old  Colony  Trust  Co.,  was  also 
largely  interested  in  the  organization  of  the  roads  down  in  Atlanta, 
taking  a  part  in  the  settlement  of  the  row  that  went  on  there  be- 
tween the  Hurt  interest  and  the  Atkinson  interest,  and  leading  up 
to  the  present  situation. 

Mr.  Gordon  Abbott,  that  is,  the  Old  Colony  Trust  Co.,  is  at  the 
present  time  depository  and  transfer  agent  for  the  Georgia  Railway 
&  Power  Co. 

The  Chairman.  At  the  last  hearing  did  you  not  fully  discuss  the 
Georgia  Railway  Light  &  Power  Co.? 

Mr.  Jackson.  Yes. 

The  Chairman.  Are  you  giving  any  new  information  in  regard 
to  that  ? 

Mr.  Jackson.  I  want  to  sh;;w  the  connection  of  the  people,  that  is 
all.  Mr.  Abbott  is  also  president  of  the  United  Electric  Securities 
Co.,  which  was  incorporated  in  Maine  to  buy  mortgage  bonds  of 
corporations  operating  electric-light,  power,  and  railway  plants. 
Its  capital  stock  is  $5()0,000  common  stock  with  a  par  value  of  $50 
each,  and  $1,000,0(X)  of  7  per  cent  cumulative  preferred  stock,  with 
a  par  a  alue  of  $100  each.  Dividends  upon  the  preferred  stock  have 
been  paid  annually  since  the  organization  of  the  company.  A  divi- 
dend of  25  per  cent  per  annum  was  paid  upon  the  common  stock 
from  1909  to  1915,  inclusive.  In  1916  the  dividend  was  20  per  cent. 
In  1917  no  dividend  was  paid,  but  the  surplus  jumped  from  $651,563 
to  $2,199,324. 

The  net  income  of  the  United  Electric  Securities  Co.  for  1917  was 
$2,149,583,  or  more  than  four  times  the  par  value  of  its  total  com- 
mon stock,  or  at  least  that  of  its  preferred  stock.  Its  stockholders 
had  received  in  dividends,  $2,740,000,  and  after  deducting  $1^37,- 
280  to  cover  decrease  in  book  value  of  assets,  the  surplus  still  re- 
maining in  1917  was  $2,199,324. 

Right  there,  when  it  comes  to  the  question  of  the  bonds  which 
was  issued  to  cover  the  developments  of  a  plant  such  as  that  in 
Atlanta,  for  instance,  at  the  last  rate  hearing,  there  was  a  contract 
of  $5,000,000  that  was  specified  for  the  development  of  certain 
properties  in  which  the  statement  was  made  that  the  contract  has 


^/ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2029 

been  passed  up  and  that  the  company  had  been  able  to  finance 
$3,500,000  of  it,  but  that  they  had  to  get  the  $1,500,000  from  the 
rates  to  go  into  permanent  improvements,  for  the  reason  that  under 
their  contract  with  their  bondholders  they  have  to  put  up  one-fourth 
of  all  improvements  from  money  not  raised  by  bonds,  and  in  addi- 
tion to  tliat,  the  difference  between  par  of  the  bond  and  the  amount 
that  it  sold  for. 

For  instance,  the  street-railway  companies  in  Atlanta  and  the 
power  company  are  planning  in  all  an  issue  of  $50,000,000  of  bonds. 
The  loss  of  selling  those  bonds  at  from  80  to  85,  as  I  understand  the 
majority  of  the  bonds  have  been  sold  at,  is  $150  to  $200  on  each  bond. 
If  there  is  a  $150  loss,  it  amounts  on  the  whole  thing  to  $7,500,000.  If 
there  is  a  $200  loss  on  the  bond,  there  is  $10,000,000  loss,  which  has 
to  come  out  of  the  fare  in  these  properties;  and  the  trading  com- 
panies, it  seems  to  me,  are  the  explanation  of  where  that  $200  each 
goes  in  in  these  various  bond  arrangements. 

I  pass  from  the  securities  company  to  the  United  Electric  Securi- 
ties Co. — that  is  only  one  of  these  companies — the  United  Electric 
Securities  Co.  The  net  income  in  1917  was  $2,149,583,  or  more  than 
four  times  the  par  value — no,  I  am  repeating  myself  there. 

Mr.  Warren.  Before  you  leave  that,  you  did  not  mention  the 
amount  of  debt  which  the  United  Electric  Securities  Co.  had  out- 
standing, did  you? 

Mr.  Jackson.  No  ;  I  did  not  go  into  that. 

Mr.  Warren.  Well,  they  issued  a  large  number  of  debenture  bonds. 
I  have  no  interest  in  the  company,  but  I  know  the  bonds  are  fre- 
quently offered  for  sale  in  Boston  and  most  of  that  money  which 
you  referred  to  as  income  on  the  capital  stock  simply  comes  in  as 
interest  on  the  bonds  owned  and  goes  out  as  interest  on  the  bonds 
issued  with  which  to  raise  the  money  originally  on  the  property. 

Mr.  Jackson.  But  it  results  in  an  earning  to  the  company  of  25 
per  cent  on  its  common  stock ;  that  is,  in  the  report. 

Mr.  Warren.  But  it  does  not  amount  to  200  per  cent  or  anything 
like  that. 

Mr.  Jackson.  No.  For  instance  where  the  common  stock  is 
$500,000  and  the  net  income  during  the  period  was  $2,149,000  it  came 
pretty  near  being. 

Mr.  Warren.  I  do  not  think  that  is  net  income,  and  if  you  will 
go  back  to  Moody's  Manual  and  look  up  the  whole  thing  you  will 
find  several  millions  of  those  debentures  outstanding  because  they 
are  sold  in  Boston  right  along. 

Mr.  Jackson.  The  Electrical  Securities  Corporation  is  authorized 
by  its  charter  to  acquire  bonds  of  electric  railways  and  electric-light 
and  power  companies  controlled  by  the  General  Electric  Co.  The 
common  stock  of  its  capital  stock  was  originally  $2,000,000.  This 
was  increased  by  a  stock  dividend  of  $500,000  to  $2,500,000. 

Dividends  upon  the  preferred  stock  have  been  paid  regularly  from 
1906  to  date.  Dividends  of  8  per  cent  per  annum  have  been  paid 
on  the  common  stock.  After  the  payment  of  these  dividends  a  sur- 
plus of  $1,570,700  remained.  In  the  nine  years  from  1908  to  1917, 
inclusive,  the  company  has  had  available  for  dividends  a  sum  of 
$4,456,459. 

In  other  words,  in  those  nine  yeai'S,  the  company  earned  more  l;han 
125  per  cent  upon  its  capital  stock. 


20^0    PfiOCEEDINGS  or  FEDERAL  ELdBCTBIC  RAILWAYS  COMMISSION- 


Another  company  cc«itrolled  by  die  General  Electric  Co.  is  the 
Electric  Bond  &  Share  Co.  It  is  autiK)riz€d  to  deal  in  these  securi- 
ties in  the  same  way.  This  company  acts  as  a  fiscal  agent  for  the 
Anterican  Power  &  Light  Co.,  the  American  (xas  &  Electric  Co.,  tlve 
CHix)lina  Power  &  Light  Co.,  the  Utah  Securities  Co.,  tlie  National 
Securities  Corpomtion,  and  the  Lehigh  Power  Securities  Co.  The 
company  was  inaugurated  in  1905.  It  had  outstanding  in  1917  $8,- 
500,000  of  common  stock  and  $8,458,000  preferred  stock. 

A  dividend  of  5  per  cent  per  annum  was  paid  upon  the  pi'ef erred 
stock  from  the  date  of  oiganization  up  to  1911,  wlien  the  dividend 
was  inci^ea^^  to  G  j>er  cent,  which  has  been  paid  regularly  since  that 
date.  On  the  common  stock,  quarterl3"  dividends  at  the  rate  of  8 
\yer  cent  per  annum  have  been  paid  since  1909,  to  date.  In  addition, 
an  extra  cash  dividend  of  $1,500,000  was  paid  on  the  <x)mmon  stock 
January  14,  1913.  Anotlier  extra  cash  dividend  of  $1,000,000  was 
paid  on  October  31,  191G. 

Commissioner  Wehde.  Is  this  a  traction  company? 

Mr.  Jackson.  Xo;  this  is  a  companj^  organized  to  deal  in  the 
securities  of  these  cofnpanies. 

Commissioner  Oadsden,  Is  not  that  information  all  available  ia 
P<K>r's  l^lanual? 

Ml'.  Jacksox,  I  do  iK>t  think  it  is  available  in  Poor's  Manual. 

Commissioner  Gadsden.  Then  it  is  available  in  Moody's? 

Mr.  Jackson.  Yes. 

C^Miimissioner  (tai>sden.  It  is  public  property? 

Mr.  Jackson.  Yes.  * 

Commisisioner  Gadsden.  It  is  available? 

Mr,  Jackson.  Ye^.    But  I  have  not  seen  it  put  out. 

Commissioner  Gadsden.  It  is  not  new  matter? 

Mr.  Ja<:kson.  Xoi^  of  this  is  new  matter,  but  I  do  not  think  it 
lias  been  bitwight  out.  I  hav«  talked  to  a  good  many  with  regard  to 
it  who  have  been  absolutely  unfamiliar  with  tliese  facts.  I  have 
been  looking  into  the  matter  myself  for  n  good  many  yeai-s,  and  I 
had  no  inforumtion  with  regard  to  the  increase  in  the  electric  end 
of  this  company  and  tiie  earnings  of  these  comimnies  which  de^i  in 
tiip  i^>ecurities  of  these  companies.  In  other  woi-ds,  the  business,  as  it 
stvms  to  me,  is  just  eaten  up  by  wheels  within  wheels. 

Jn  making  tliese  statements,  I  wish  alwaj's  to  say  that  I  mean  no 
i'etk»ction  on  the  gentlemen  wlao  are  intei'est^  in  tlieae  companies; 
liecause  very  probably  if  I  had  the  opportunity  and  t]w  brains,  I 
Avould  do  the  same  thing.  The  fact  remains,  however,  tliat  the  pub- 
lic has  to  pay  the  bill ;  and  the  fact  also  remains  that  at  tlie  present 
time,  when  this  wave  is  going  over  tlie  oountiy  foi*  incieased  fares, 
increased  vaAes  on  sti'eet  railways — the  fact  remains  that  these  elec- 
tric compiinies  and  tliese  holdings  companies  all  show  aii  upwaixi 
tc-nlencv  in  tlieir  surplus  and  other  tilings. 

The  Chairman.  The  commission  is  verv  anxious  to  ^o  into  ex- 
ecniive  session  at  9  o'clock,  Mr.  JacJkson.  It  is  now  15  minutes  to  9. 
jy<i  you  think  you  can  finish  in  that  time? 

Mr.  Jackson.  I  shall  be  through  in  about  5  or  10  minutes. 

Commissi<Mier  Mahon.  Did  yon  speak  oi  tlie  Carolina  com|>any? 

Mr.  Jackson.  Xo.    The  Southern  Power  Co.  you  mean? 
Commissioner  Mahon.  You  used  the  name  Carolina  just  a  moment 
ago. 


PnO€EEDi:C^GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2031 


Mr.  Jackson.  No. 

Commissioner  Beall.  He  means  the  Carolina  Power  &  Light  Co. 

Mr.  Jackson.  I  did  not  speak  of  that. 

Commissioner  Mahon.  You  did. 

Commissioner  Beall.  The  Carolina  Power  &  Light  Co. 

Mr.  Warren.  You  spoke  of  the  Carolina  Power  &  Light  Co.,  and 
you  said  it  was  controlled  by  the  American  Power  &  Light  Co. 

Commissioner  Mahon.  Tell  us  what  that  is. 

Mr.  Jackson.  I  do  not  recall  speaking  of  the  Carolina  Power  & 
Light  Co.  I  was  simply  giving  a  list  of  the  companies  that  are  con- 
trolled by  the  American  Power  &  Light  Co.  I  could  give  no  informa- 
tion with  regard  to  that  company,  because  I  have  none.  I  do 
not  even  know  where  it  is  incorporated.  What  I  am  giving  you, 
though,  is  a  picture  of  the  holding  company  with  its  mass  of  com- 
panies underneath. 

Commissioner  Mahon.  You  do  not  know  the  connections? 

Mr.  Jackson.  Xo.  The  only  thing  I  know  is  that  it  is  one  of  the 
subsidiaries  of  the  American  Power  &  Light  Co.,  which  controls 
tlie  Detroit  situation  through  its  control  of  the  Detroit  Edison. 

Commissioner  Mahon.  How  could  I  find  who  were  the  officers  of 
that  Carolina  company? 

Mr.  Jackson.  I  have  no  doubt  you  could  find  that  in  Moody's  or 
Poor's  Manual. 

I  just  wish  to  call  attention  to  this  further  situation  Avith  regard 
to  the  situation  in  Boston  and  Atlanta,  and  then  I  am  through ;  and 
that  is  with  regard  to  the  Edison  Illuminating  Co. 

Mr.  Warren.  Of  Boston  ? 

Mr.  Jackson.  Yes;  the  Edison  Illuminating  Co.,  which  controls 
the  electric-light  and  power  business  in  Boston  and  40  other  towns 
and  cities. 

My  information  is  that  the  law  of  Massachusetts — if  I  am  incor- 
rect in  this  I  hope  Mr.  Warren  will  correct  me — that  Massachusetts 
has  a  law  which  I  believe  is  unique,  and  that  is  that  it  forbids  a 
municipal  power  plant  to  sell  electricity  to  a  street  railway. 

Mr.  Warren.  No.  It  is  the  other  way.  A  street  railway  can  not 
sell  power.    We  all  buy  power  more  or  less 

Mr.  Jackson.  From  the  municipally  owned  plants? 

Mr.  Warijen.  Oh,  from  the  municipally  owned  plants  ? 

Mr.  Jackson.  Yes;  I  have  not  struck  a  similar  law  in  any  other 
State. 

The  Chairman.  What  is  the  fact,  Mr.  Warren? 

Mr.  Warren.  I  do  not  know.  There  are  very  few  mimicipally 
owned  plants  in  Massachusetts. 

Mr.  Jackson.  There  are  some  few,  however,  in  Massachusetts. 

Mr.  Warren.  There  are  a  few. 

Mr.  Jackson.  That  are  doing  well.  My  information  is  that  the 
law  of  Massachusetts  forbids  a  muncipally  operated  power  plant 
from  selling  power  to  the  railways.  That  law  may  have  been  re- 
pealed. It  was  a  law  at  one  time,  and  I  do  not  believe  it  has  been 
rej)ealed. 

The  Edison  Illuminating  Co.  contiols  the  entire  electric-light  and 
power  business  in  Boston  and  40  other  cities. 

It  began  paying  8  pc  cent  dividends  in  1900.  This  increased  to 
0}  x^er  cent  in  1901. 


'2032    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.  % 

In  1902  it  jumped  to  10  per  cent,  where  it  continued  until  1910, 
when  it  became  12  per  cent  per  annum,  where  it  has  remained. 

In  addition  an  extra  dividend  of  1  per  cent  was  paid  in  February, 
1901. 

An  extra  dividend  of  1  per  cent  was  also  paid  August  1,  1907  to 
1909,  and  one-half  of  1  per  cent  on  May  2, 1910. 

The  capital  stock,  originally  $20,480,000,  was  increased  to  $22,- 
528,000  June  30,  1915. 

Its  gross  earnings  were  $9,235,778  in  1917,  against  $4,239,000  in 
1907  and  1908. 

The  company  in  10  years'  time  has  paid  out  approximately  the 
$20,000,000  in  dividends. 

Commissioner  Wehle.  Has  it  increased  the  service  during  that 
time? 

Mr.  Jackson.  Yes. 

Commissioner  Weiile.  Has  it  acquired  new  plants  and  served  new 
cities  since  that  time? 

Mr.  Jackson.  I  expect  it  has  been  growing. 

In  1908  the  dividends  were  $1,690,000.  In  1917  they  were  $2,703,- 
0()0,  in  which  year  a  surplus  was  eaf-ned  of  $916,000. 

In  the  published  balance  sheet  of  June  30,  1917 — this  is  the  inter- 
esting thing  to  me — in  the  company's  liabilities  is  listed  an  item  of 
$17,919,158,  premiums  on  stock,  which  indicates,  if  my  inference  is 
correct,  the  company's  true  surplus. 

The  company's  assets  in  1905  were  $20,132,536.  In  1917  they  had 
grown  to  $56,403,000.  The  company  sells  electricity  at  10  cents  per 
kilowatt  hour. 

Mr.  Warren.  Mr.  Jackson,  before  you  go  into  those  statistics,  do 
you  know  how  that  premium  is  accounted  for  under  the  Massa- 
chusetts law? 

Mr.  Jackson.  No. 

Mr.  Warren.  I  will  tell  you,  and  it  will  give  you  a  different  view 
of  that  company. 

All  stock  of  public  utilities  in  Massachusetts  has  to  be  issued  at 
i^latively  its  actual  value,  either  at  prices  fixed — in  the  case  of  that 
company  by  the  gas  and  electric  light  commission — or  by  prices  ap- 
proved by  them. 

That  premium  means  that  for  the  $20,000,000  stock  thei-e  has  been 
paid  in  thirty  million-odd  dollars  into  the  treasury  of  the  company. 
That  makes  the  present  12  per  cent  dividend  a  little  over  6  per  cent. 
I  have  some  of  that  stock  in  a  trust  estate,  and  the  last  stock  I  sub- 
scribed for  as  a  stockholder  I  think  I  paid  $215  per  share  for  to  the 
treasurer  of  the  company. 

So  that  while  apparently  I  am  getting  a  12  per  cent  dividend,  I 
am  merely  getting  on  that  stock  less  than  6  per  cent. 

Mr.  Jackson.  That  is  actually  a  surplus,  though,  is  it  not,  in  the 


com  pan  V 


« 


Mr.  Warren.  No  ;  it  is  not.    It  is  represented  by  the  propei-ty. 

Our  law  takes  from  the  stockholder  any  benefits  called  an  un- 
earned increment. 

If  the  company  is  prosperous,  so  that  the  stock  sells  at  more  than 
par,  the  stockholder,  while  he  can  subscribe  for  the  new  stock,  has 
to  subscribe  for  it  at  an  upset  price. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2033 

Mr.  Jackson.  Was  not  the  original  capitalization  of  the  company 
something  like  $20,000,000? 

Mr.  Warren.  I  guess  it  was  $2,000,000.  I  don't  know.  It  started, 
like  all  the  companies,  very  small.  You  can  see  the  $17,000,000  paid 
in  was  somewhere  around  $200  a  share.  That  has  been  paid  in  for  a 
very  long  period  of  time. 

Mr.  Jackson.  You  would  not  say  that  was  an  accumulation  of 
earnings? 

Mr.  Warrex.  Not  at  all.  That  is  cash  paid  in.  The  same  thing  is 
true  of  many  of  our  street  railways.  The  little  Springfield  railway, 
which  I  i-epresent,  with  about  four  and  a  half  million  dollars  capital 
has  paid  in  $800,000  in  premiums.  The  Boston  Elevated  stock  rep- 
resents about  $112  a  share  paid  into  the  treasury. 

So  that  you  have  to  be  very  careful  with  the  Massachusetts  public 
utilities  in  figuring  their  capital  stock,  because  of  that  premium  law. 

Mr.  Jackson.  The  company  is  selling  electricity  there  at  10  cents, 
which  is  2  cents  more  than  we  pay  in  Atlanta  and  about  3  times  what 
is  being  paid  over  in  Toronto. 

Commissioner  Wehle.  How  does  the  cost  of  coal  compare  between 
Boston  and  Atlanta? 

Mr.  Jackson.  We  have  not  the  coal  proposition  in  Atlanta.  It  is 
an  electric-light  plant. 

Mr.  AVarrex.  Ours  is  all  coal ;  and  the  freight  rate  by  water  dur- 
ing the  war  was  $3.50  a  ton,  as  I  know  to  my  sorrow,  because  I  was 
witli  the  Fuel  Administration  and  tried  to  get  it  reduced  for  New 
England,  and  could  not. 

Mr.  Jackson.  But  in  spite  of  all  those  conditions,  the  financial 
condition  of  the  company  improves ;  its  dividends  grow. 

Mr.  Warren.  It  pays  about  6  per  cent  on  the  investment. 

Mr.  Jackson.  And  the  dividends  have  been  doubled — for  instance, 
the  dividends  that  were  paid — the  dividends  that  were  paid  back  in 
1008  were  $1,390,000,  and  in  1917  they  are  approximately  twice  that 
amount. 

Mr.  Warren.  What  were  they  paid  on  in  1908? 

Mr.  Jackson.  In  1908  the  capital  stock  of  the  company  was  $20,- 
175,336.  My  recollection  is — I  am  speaking  from  memory,  now.  I 
have  not  the  figures  before  me — but  my  recollection  is  that  the 
premium  on  the  stock  there  was  approximately  $5,(100,000. 

Mr.  Warren.  You  ought  to  figure  your  dividend  rate  on  the  two. 
Do  you  see? 

Mr.  Jackson.  That  would  make  some  difference  there. 

Commissioner  Gadsden.  That  is  the  danger,  Mr.  Jackson,  that  I 
was  trying  to  call  your  attention  to  some  time  befoi-e,  of  using 
figures  out  of  a  book. 

Mr.  Jackson.  Let  me  call  your  attention  to  this,  gentlemen,  and 
with  this  I  am  through. 

To  come  back  to  the  comparison  of  the  Ontario  situation  with  th^ 
situation  in  (Georgia ,  where  we  have  the  water-power  proposition, 
and  where  we  have  the  reports  of  engineers  to  the  effect  that  we  could 
develop  our  systems  in  Georgia  at  less  expense  than  they  have  been 
developed  in  Ontario;  and  yet  the  average  rate  now  in  Toronto  is 
24  cents  per  kilowatt-hour,  while  in  Georgia  it  is  S  cents — in  Atlanta^ 
running  all  the  way  up  to  12  cents  in  these  various  cities. 

160043°— 20— VOL  2 66 


2034     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  difference — what  Ontario  has  saved  by  the  institution  of  her 
public  ownership  of  her  electric-light  plants  would,  with  interest  at 
r>  per  cent  compounded,  in  30  years'  time,  in  the  State  of  Georgia, 
for  45  towns,  amount  to  something  like  $180,000,000.  That  is  simply 
the  difference  in  the  rate;  and  the  rate  in  Toronto,  the  rate  in  On- 
tario, is  figured  on  a  basis  so  that  at  the  expiration  of  30  years  they 
will  not  pnly  have  enjoyed  this  reduction  in  the  rate,  but  they  will 
have  j)aid  into  their  fund  for  depreciation,  the  amount  which  the> 
have  invested  in  their  plant,  so  that  they  will  have  on  hand  enough 
to  duplicate  their  entire  system ;  making  the  saving  in  the  municipal 
plants  of  Ontario,  as  compared  with  the  privately  owned  plants  of 
(xeorgia,  something  like  $28(>,000,000  in  30  yeai-s'  time. 

The  Chairman.  What  conclusion  do  you  reach  from  this  presenta- 
tion? 

Mr.  Jackson.  I  come  to  this  conclusion,  Mr.  Chairman,  and  that  is 
that  the  public  at  present  ai*e  not  getting  the  Ix^nefits  of  the  profits 
which  can  be  made  from  the  sale  of  current;  that  ultimately  public 
ownership  is  the  only  solution  of  it,  because  of  these  intercompany 
relationships  that  you  can  not  get  away  from  so  long  as  private  own- 
ership continues;  and  this  additional  fact :  We  are  paying,  at  present, 
in  (leorgia,  $801,000  a  year  in  dividends  on  the  stock  of  the  Georgia 
Kailway  &  Electric  Co.,  Avhich  represented  originally  a  cash  invest- 
ment, if  my  information  is  connect,  of  approximately  $000,000.  The 
dividends  that  are  paid  out  each  year  represent  more  than  the  cash 
that  went  into  the  stock.  That  is  on  the  electric  company,  the  Elec- 
tric Light  &  Railway  Co.;  that  company  is  leased  to  the  Georgia 
Railway  &  Power  Co.  The  Georgia  Railway  &  Power  Co.  has 
$27,000,000  of  stock  which  they  ho|)e  to  have  dividends  on,  leventu- 
allv.  I  think  the  first  preferred  calls  for  0  per  cent  dividend.  That 
is  $2,000,000. 

Commissioner  Wehijc.  Cumulative  ? 

Mr.  Jackson.  Yes;  that  is  my  recollection. 

Commissioner  Wi:hle.  You  ai*e  not  sure? 

Mr.  Jackson.  There  is  $10,000,000  preferred  siock,  which  calls 
for  4  i^er  cent  dividends.  Then,  underneath  that,  there  is  $15,000,000 
of  common  stock. 

Now,  those  i>eople  expect  dividends  on  that  stock,  ultimately. 

Commissioner  Wkiile.  Has  thtit  stock  all  been  issued? 

Mr.  Jackson.  That  stock  has  all  been  issued.  They  are  working 
toward  dividends.  These  rate  raises  which  they  are  asking  for  have 
dividends  finally  in  view. 

When  they  get  to  paying  the  dividend  whicli  is  called  for  by  their 
preferreil  stock,  and  get  their  dividends  to  0  per  cent  on  their  com- 
mon stock,  the  people  of  Georgia  will  be  paying  out  to  that  one  com- 
pany in  dividends  $2, 200,000-odd  each  year  on  securities  that  do  not 
represent  one  red  cent  of  real  money. 

I  think  the  best  thing  that  Col.  Roosevelt  ever  said,  among  the 
many  good  things  that  he  said,  was  shortly  after  he  came  out  of  tlie 
oanebrakc  on  one  of  his  notable  bear  hunts  down  there.  He  said  that 
the  situation  of  the  man  with  watered  stock  in  his  hands  was  very 
much  like  that  of  the  man  with  a  counterfeit  dollar.  We  sympathize, 
with  the  man  with  the  counterfeit  dollar,  but  our  sympathy  does  not 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2035 

make  his  dollar  good.  And  no  solution  of  this  problem  whicli  goes 
to  the  making  of  these  millions  and  millions  and  millions  of  watered 
securities  that  are  laced  over  this  country  will,  for  one  minute,  hold 
water. 

Commissioner  Beall.  Do  you  know  that  the  Canadian  people  did 
not  tell  you,  apparently,  that  all  the  cities  that  the  Hydro-P^lectric 
commission  furnishes  with  power  issue  their  own  bonds  to  pay  for 
the  transmission  lines? 

Mr.  Jackson.  Yes,  each  one  of  them;  and  the  remarkable  thing 
about  it  is,  Mr.  Commissioner,  that  Sir  Adam  Beck  gave  his  evidence 
here  in  a  pamphlet  that  was  given  before  the  Water  Power  Commit- 
tee of  Congress  that  during  the  whole  course  of  the  war,  in  the  years 
1917,  1910,  1915,  1911,  and  1913 — each  one  of  those  years — the  rate 
Avas  reduced  in  the  majority  of  the  cities  of  Canada,  because  they 
found  that  they  were  taking  in  money  too  fast,  and  some  of  the 
villages  had  already  wiped  out  their  debts. 

Commissioner  Beaix.  But  did  he  tell  you  they  issued  other  bonds 
in  place  of  them,  which  they  are  still  doing?  It  is  quite  a  problem 
us  to  how  they  are  going  to  market  them. 

Mr.  Jackson.  They  are  issuing  bonds  to  develop  as  they  go  ahead. 
In  other  words,  you  have  to  issue  the  bonds 

Commissioner  Beall.  But  he  did  not  tell  you  that  when  the  bonds 
mature  they  issue  others  to  pay  them  ? 

Mr.  Jackson.  The  difference  is  this — I  do  not  know  how  it  is  with 
the  securities  of  Canada,  but  I  know  that  the  securities  of  Atlanta, 
when  they  are  sold,  are  sold  at  par.  There  is  not  a  loss  of  $150  to 
$200  on  each  bond  sold. 

Commissioner  Beall.  I  can  tell  you  that  most  of  the  Canadian  se- 
curities which  you  refer  to  have  been  sold  at  quite  a  good  deal  be- 
low par. 

Mr.  Jackson.  That  mav  be  true  in  Canada.  It  is  not  true  on  this 
side  of  the  line.  We  want  a  plant  Avhich  will  cut  out  that  loss.  Wc 
want  a  plant  which  will  cut  out  the  dividends  on  watered  securities. 

Mr.  Chairman,  just  leave  this  figure  in  your  mind,  and  I  am 
through:  This  $801,000  in  dividends  on  the  Georgia  Railway  & 
Electric  Co.,  which  was  the  company  that  originally  controlled  the 
situation  in  Georgia,  in  Atlanta — in  30  years'  time  this  payment 
amounts,  with  interest  on  it  at  5  per  cent,  to  $53,000,000  in  dividends 
on  watered  securities  that  the  people  of  Atlanta  and  Georgia  will  be 
called  on  to  pay. 

That  $53,000,000  would  buy  the  entire  stock  of  the  Georgia  Rail- 
way &  Power  Co.,  the  Georgia  Railway  &  Electric  Co.,  and  leave 
money  in  the  treasury  of  the  city  of  Atlanta,  if  they  would  issue 
bonds  on  that  proposition.  That  is  simply  on  the  savings  of  the 
dividends  which  are  now  being  paid;  and  those  dividends  are  being 
charged  up  now,  as  a  fixed  charge  against  the  city  of  Atlanta  under 
one  of  these  leases,  leased  to  the  Georgia  Railway  &  Power  Co.  And 
the  only  solution,  as  we  see  it,  is  in  municipal  ownership,  and  the 
cure,  in  the  meantime,  is  an  examination  of  these  contracts  l>etween 
these  companies  and  an  elimination  of  the  many  companies  that  are 
dealing  in  these  securities. 

I  thank  you  gentlemen  for  your  patience. 


2036    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Mr.  Warren.  May  I  just  put  in  these  documents  for  the  commis- 
sion at  this  time  ?    It  will  take  a  very  short  time. 

The  Chairman.  Yes. 

Mr.  Warren.  I  want  especially  to  call  these  to  the  attention  of 
Commissioner  AVehle,  because  he  asked  if  the  American  Electric 
Kailway  Association  did  anything  to  call  to  the  attention  of  its  mem- 
bers the  improvements  in  the  art  and  possible  economies  and  the 
lesnlts  of  various  inventions.  I  want  to  show  that  the  association  is 
active  along  this  line. 

I  wish  to  put  in  first  the  advance  reports  to  the  1919  convention. 
These  reports  cover  the  report  of  the  committee  on  zone  system,  the 
committee  on  valuations,  the  committee  on  power  distribution,  report 
of  the  joint  committee  on  specifications  for  electric-light,  power-sup- 
ply and  trolley  lines  crossing  steam  and  electric  railroads,  also  tne 
committee  on  power  generation,  the  committee  on  buildings  and 
structures,  committee  on  way  matters,  committee  on  ecj^uipment,  com- 
mittee on  standards,  committee  on  code  of  traffic  principles,  joint  use 
of  track  and  terminal  facilities,  one-man-car  operation,  collection  and 
legistration  of  fares. 

Those  are  advance  reports  in  order  that  the  members  may  post 
themselves  on  the  reports,  and  be  prepared  for  the  discussion  of  the 
subjects  in  the  various  sections  of  the  association — the  association 
holding  its  meeting  very  much  as  the  Bar  Association  does,  Mr. 
Chairman;  both  a  general  meeting  and  a  meeting  of  engineering, 
accounting,  traffic,  and  other  departments  of  the  industry. 

The  Chairman.  They  may  be  filed,  but  not  printed. 

Commissioner  Sweet.  Mr.  Wehle  is  supposed  to  read  them  all 
though  ? 

Mr.  Wehle;  Before  I  begin  to  read  them — ^your  filing  of  these 
documents  is  in  response  to  a  question  that  I  asked  several  weeks  ago, 
is  it  not? 

Mr.  Warren.  You  asked  it  of  someone  early  this  week,  as  to 
whether  the  Electric  Railway  Association  did  cover  any  of  this  sort 
of  work. 

Commissioner  Wehle.  Several  weeks  ago,  in  a  hearing  in  July,  I 
think,  I  recollect  an  inquiry  as  to  whether  or  not  the  American  Elec- 
tric Railway  Association  was  officially  taking  cognizance  of  the 
socially  and  economically  pernicious  results  of  the  issuance  of  stock 
on  fictitious  valuations,  or  the  selling  of  stock  at  great  discounts  at 
the  treasury,  and  whether  or  not  they  were  taking  steps  in  such  States 
as  laws  did  not  exist  effectually  checking  such  abuses,  to  have  them 
checked  voluntarily  by  cooperation  between  the  electric-railway 
managers  and  the  banker. 

Mr.  Warren.  I  had  forgotten  that  question. 

Commissioner  Wehle.  That  was  the  chief  purpose  of  the  question. 

Mr.  Warren.  This  question  you  addressed  to  somebody  in  connec- 
tion with  economies  in  operation  this  week. 

Commissioner  Wehle.  Yes. 

Mr.  Warren.  But  as  to  the  other  question,  in  answer  to  that  I 
should  like  to  put  in  the  Code  of  Principles,  which  I  will  not  take 
the  time  to  read,  of  the  convention,  adopted  at  its  annual  convention 
in  1914,  in  which  it  recommended  the  State  control,  the  commission 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2037 

control,  of  public  utilities.    That  is  in  the  yearbook  of  the  American 
Electric  Railway  Association,  1914-15. 
The  Chairman.  At  what  page? 

Mr.  Warren.  At  the  very  beginning,  after  the  table  of  contents. 

Then  I  want  to  put  in  also  a  copy  of  the  Engineering  Manual, 
which  is  a  loose-leaf  manual  supplied  to  all-  of  the  member  com- 
panies, containing  the  matter  on  various  subjects  sent  to  the  mem- 
bers from  time  to  time  during  the  course  of  the  year,  together  with 
a  binder  so  that  it  may  be  kept  in  permanent  form. 

I  also  want  to  put  in  as  a  sample  the  proceedings  of  the  associa- 
tion at  its  annual  convention  covering  the  report  not  only  of  tho 
general  meetings,  again  like  the  general  meetings  of  the  bar  associa- 
tion, but  the  specific  reports  of  the  various  department— accounting, 
engineering,  traffic,  etc. 

I  also  want  to  put  in  Prof.  Doolittle's  book,  which  is  the  result  of 
a  study  ordered  by  the  association,  printed  by  the  association,  and 
distributed  to  all  of  its  members.  Incidentally,  one  member  wanted 
to  know  what  tjie  association  was  doing  putting  out  books  of  loga- 
rithms; but  I  think  others  got  more  benefit  from  the  book  than  that. 

Here  is  a  typical  bulletin:  "Present  situation  on  skip-stops." 
Those  are  issued  frequently  on  subjects  of  interest. 

Finally,  I  want  to  introduce  copies  of  Aera  for  a  year,  which  is 
a  magazine  published  by  the  association  and  sent  to  the  members, 
containing  the  latest  information  and  suggestions  of  policy  and  other 
matters  relating  to  the  industry. 

Commissioner  Wehle.  Those  will  be  very  useful,  I  am  sure. 

Mr.  Warren.  I,  at  least,  do  not  want  the  commission  to  think  that 
our  activities  are  confined  only  to  attending  hearings. 

This  last  report  is  a  report  of  the  committee  on  social  relations. 

The  Chairman.  Does  that  conclude  your  testimony? 

Mr.  Warren.  Yes;  that  is  all. 

The  Chairman.  Mr.  Ogburn,  have  you  anything  that  you  desire 
to  present  to  us  before  we  go  into  executive  session  ? 

Mr.  Ogburn.  Yes.  There  are  two  or  three  matters,  Mr.  Chair- 
man. 

The  Chairman.  How  long  will  it  take  to  present  them  ? 

Mr.  Ogburn.  I  think  it  will  take  only  four  or  five  minutes. 

The  Chairman.  Is  it  something  that  we  may  simply  order  printed 
in  the  record? 

Mr.  Ogburn.  Yes. 

The  Chairman.  You  will  please  have  it  done  that  way  then. 

Mr.  Ogburn.  The  first  is  a  letter  from  Stone  &  Webster,  addressed 
to  you  as  chairman.  I  believe  you  first  thought  that  should  be  read 
to  the  commission.  I  can  have  it  copied  into  the  record  and  furnish 
copies  to  each  member. 

The  Chairman.  If  you  please. 

The  letter  is  as  follows : 

,r       ^  ^  ^  October  1,  1919. 

Hon.  Charles  E.  Elmquist, 

Chairman  Federal  Electric  Railways  Commission, 

Washington,  D.  C. 
Dear  Sir:  I  am  taking  the  liberty  of  preseutinjr  to  vou  certain  figures  re- 
cently prepared,  whicli  I  liope  may  be  of  interest  and  use  to  your  commission  in 
connection  witli  the  investigation  which  you  are  maliiug  of  the  street-railway 
situation. 


2038    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  idea  seems  to  be  prevalent  in  many  quarters  tbat  the  street  railway  lias 
seen  its  day  of  greatest  usefulness  and  that  the  automobile  is  gradually  driving 
it  out  of  business  and  constantly  decreasing  the  public  demand  for  street-rnil- 
way  service.  Hearing  this  point  of  view  frequently  expressed,  we  attempted 
rcH-ently  to  see  what  the  real  facts  were  with  reference  to  the  particular  prop- 
erties which  we  operate. 

The  automobile  as  a  competitor  has  come  into  existence  practically  within 
the  hist  decade.  We  therefore  had  figures  prepared  showing  the  iwpulation 
of  the  various  cities  in  which  we  are  interested  in  June,  1919,  and  in  June, 
190J>,  and  calculated  the  earnings  per  capita  for  the  12  months  ending  on  these 
dates.  I  inclose  herewith  a  sheet  on  which  these  tigures  are  tabulated.  From 
this  sheet  you  will  see  that  there  has  been  an  average  increase  in  population  in 
these  various  cities  during  the  10-year  period  of  42.8  per  cent,  and  the  street 
railways  have  not  only  gaineil  in  gross  earnings  in  proix)rtiou  to  the  incresjse 
in  popidation  but  have  actually  made  an  additional  average  increase  in  earnings 
I>er  capita  of  26.9  per  cent. 

Tins  result  was  such  a  surprise  to  us  that  we  were  inclined  to  question  tlio 
Mccuracv  of  the  tigures,  and  have  attempted  to  check  them  up  in  various  ways. 
It  occurred  to  us  that  possibly  the  increase  in  earnings  per  capita  had  occurred 
.ihn«.st  entirelv  during  the  flrst  5  years  of  the  10-year  periml,  when  the  growlli 
<»f  the  automobile  industry  Imd  been  slow  and  there  might  be  no  increase  per 
cjn)ita  during  the  more  recent  years.  We  therefore  had  figures  prepared  of 
passenger  earnings  per  capita  for  the  12  months  ending  June  30.  1914,  and 
these  are  given  on  a  separate  sheet,  which  is  also  inclosed.  You  will  see  froi.i 
this  tliat  the  average  earnings  per  capita  in  1909  was  .$.").32:  in  1914,  .$6.14;  anil 
in  1919.  .s;6.75.  The  gain  was  somewhat  greater  during  the  tirst  half  of  the 
decade  than  during  the  last  half,  but  during  the  last  half  jitney  comi>etition  de- 
veloped, as  di.stinguished  from  the  private  automobile,  and  this  has  affected 
the  showing  of  a  number  of  the  companies.  Take,  for  example,  the  Houston 
Klectric  Co. :  the  earnings  i^er  capita  increased  during  the  tii-st  live  years  from 
S;S90  to  .$11.71,  and  during  the  second  tive  years  decrea.**ed  from  .$11.71  to 
.•^10.46.  During  the  latter  period  active  jitney  competition  develoi>ed,  and  there 
pre  still  in  operation  in  this  city  approximately  ir»0  jitney  cars.  If  these  were 
dlsrontinutMl  and  the  street  railway  was  nffecte<l  only  by  the  private  automobile, 
ihere  woidd  undoubtedly  have  been  a  material  increa.se  in  earnings  i>er  cai»ita 
during  the  second  live-year  ixiriod. 

Another  possible  error  is  in  the  e.stimated  population.  AVe  attempt  each 
year  to  estimate  the  popuhttion  served  by  our  various  proj^erties.  This  estimate 
is  ill  each  case  based  on  all  the  information  wliicli  we  ai*e  able  to  obtain  Im-ally, 
but  between  regular  census  perio<ls  is  necessarily  luireliable.  Kach  10  years 
v,ben  the  United  States  census  is  taken,  we  correct  our  ligures  in  accordance 
with  tlie  census  report.  We  tind  that  in  nearly  all  cases  the  United  States  cen- 
fnis  gives  a  sonanvhat  lower  p<»pulation  figure  than  is  obtained  from  local. esti- 
mates, so  our  population  figures  are  usually  reduced  slightly  at  10-year  inter- 
vals when  the  Unite<l  States  cen.sus  figures  are  publlslied.  In  making  up  the 
figures  on  the  inclose<l  sheet  we  have  correcte<l  tlie  iK)pulation  foi*  1909  to  ac- 
c-onl  with  tlie  census  figures  taken  by  the  Federal  Government  in  1910,  this 
r<»sulting  in  a  slight  reduction  in  practically  all  of  the  cities  over  the  figures 
which  we  actually  estimated  in  the  year  1909,  and  in  several  cases  in  quite  a 
material  reiluction.  The  1919  population  figures  are  base<l  on  the  lo<;al  esti- 
mates; tlieiv  is  every  reason  to  supi>ose  that  these  estimates  are  too  high  rather 
tlian  too  low  and  will  be  reduced  wlien  the  Unitel  States  cen.sus  is  taken  in 
1!>20.  This  means  that  the  comparison  of  earnings  per  capita  is  conservative 
ai'd  that  the  actual  increase  in  earnings  per  capita  is  probably  greatf^r  nither 
than  less  th:>n  that  indicted  by  the  figures. 

Ar.other  source*  of  error  is  Increases  in  rate  of  fare.  Some  of  the  companies 
have*  increased  their  rate  of  fare  during  tlie  past  year,  and  a  benefit  from  tliis 
increase  has  been  obtained  through  part  of  the  year  ending  June  30.  1919.  To 
correct  for  this  we  ha<l  further  figures  prepare<l  eliminating  the  question  of  in- 
come and  allowing  the  actual  number  of  pay  passengers  carried.  I  also  inclose 
copies  of  these  figures,  from  which  you  will  see  that  the  average  number  of 
rides  per  capita  has  increased  during  the  decade  from  108.0  to  13.1.0  or  24.3  per 

cent. 

If  the.se  figures  are  a  fair  indication  of  what  has  taken  place  in  other  cities 
(and  I  know  of  no  reason  why  they  should  not  be),  tlie  street  railway  is  by  no 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2089 

means  a  dying  institution,  nor  has  it  been  seriously  affected  by  the  introduction 
of  tlie  private  automobile;  on  the  contrary,  the  demand  for  service  is  mate- 
rially greater  than  it  has  ever  been  before  and  is  still  growing  at  a  rapid  rate. 
It  would  appear  that  something  has  l>eeii  and  is  stimulating  the  street-rail- 
way business ;  possibly  the  automobile  itself  lias  helped  in  this  direction.  Peo- 
ple may  be  acquiring  to  a  greater  extent  than  ever  before  the  riding  habit,  and 
may  be  more  and  more  included  to  move  about  and  spend  less  time  in  tlieir  own 
lionies  or  with  tlieir  immediate  neighbors.  Tlie  moving  picture  is  probably  also 
a  factor  in  the  situation.  But  whatever  may  be  the  cause,  the  fact  seems  pretty 
clear  that  the  demand  for  tran.sportation  service  is  still  growing  apace. 

This  fact,  I  tliink,  is  pretty  generally  misunderstood;  in  fact,  I  am  free  to 
confess  that  we  ourselves  were  surprised  to  see  the  extent  of  the  increased  dc^ 
niaiid  for  service. 

Some  little  time  ago  we  were  attempting  to  work  out  in  the  city  of  Dallas  a 
new  street-railway  franchise  and  in  our  negotiation.s  were  told  by  the  mayor  of 
the  city  that  we  were  not  justified  in  attempting  to  obtain  protection  necessary 
to  enable  us  to  earn  a  fair  return  on  our  investment.  It  was,  he  said,  our  mis- 
fortune that  we  were  in  a  business  whicli  had  seen  its  best  days,  but  that  thi.s 
was  not  a  matter  for  which  the  public  was  responsible,  and  that  we  should  sim- 
ply look  happy  and  take  our  loss  as  anyone  else  would  do  who  had  made  a  bad 
venture.  If  the  inclosed  figures  correctly  represent  the  situation,  this  point  of 
view  is  absolutely  wrong.  The  industry  is  booming  and  not  going  backwards  in 
its  demands  for  service,  and  our  only  difficulty  is  that  we  are  prevented  from 
readjusting  our  income  to  adetpiately  meet  increased  costs  of  labor  and  mate- 
rial.s. 

Take  this  group  of  properties  of  ours ;  they  are  on  the  average  doing  more 
business  per  mile  of  track,  more  business  i>er  car-mile  and  more  business 
ix»r  capita  than  they  were  10  years  ago.  The  public  needs  the  servic-e,  demands 
it  in  greater  volume  than  ever  before,  is  calling  on  us  constantly  for  extensions 
of  track  and  increased  operation  of  cars;  and  with  all  these  conditions  which 
in  ordinary  times  would  make  for  abnormal  prosperity  the  companies  are 
witliout  credit  and  are  unable  to  borrow  money  or  sell  securities  to  reason- 
ably meet  the  public  demand.  The  one  sole  trouble  is  increased  cost  of  labor 
and  material  and  inability  to  promptly  readjust  the  rate  of  fare.  With  an  in- 
creased rate  of  fare  commensurate  with  the  increased  cost  of  labor  and  ma- 
terials, the  entire  situation  would,  in  my  judgment,  lie  cured.  I  recognize 
fully  the  fact  that  riding  will  decrease  temporarily  with  an  increased  rate  of 
fare,  but  I  have  been  studying  the  effect  ot  fare  increases  for  several  years, 
and  during  the  past  year  have  followed  the  results  of  such  increases'  very 
closely.  The  more  information  I  obtain,  tlie  more  strongly  am  I  satisfied  that 
the  decrease  in  riding  is  a  purely  temporary  effect  wliicir  will  last  only  for  a 
limitetl  period  in  most  cases.  There  are  a  few  street  railways,  usually  subur- 
ban or  interburan  lines,  which  have  been  built  in  territory  having  insuflicient 
ijopulatlon  to  support  the  service.  Such  roads  should  have  never  been  built 
and  the  difficulties  can  not  be  cured  through  an  increase  in  fare.  But  these 
represent  only  a  very  limitetl  number  of  cases  out  of  tlie  total.  In  most  cas<»« 
there  would  appear  to  be  a  constantly  increasing  demand  for  street-railway 
Si'i-vice  and  the  only  thing  needed  to  enable  the  roads  to  meet  this  demaml  is 
an  increased  fare  commensurate  with  increased  cost  of  labor  and  materials. 

Hoping  that  these  figures  may  be  of  interest  to  you  and  your  committee,  I 
remain. 

Very  truly  yours* 

Henky  G.  Bkadlee. 


■  £ 


2040    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

memorandum. 

Stone  &  \Veb8ter,  Management  Division, 

Boston,  Mass.,  September  5,  1919. 
H.  G.  Bradlee,  Esq.: 

Ill  accordance  with  your  request  we  give,  herewith,  tal)iilation  showing  com- 
parison of  railway  population  serve<l  and  passenger  earnings  per  capita  at  the 
1  prevent  time  and  10  years  ago,  covering  those  of  our  companies  for  which  we 
have  information  for  both  dates : 


Companies. 


Baton  Roiipc 

Cape  Breton 

Columbus  Railroad 

El  I'aso  Electric  Railway  Co.. 

fSnlveston  Electric  Co 

HoTiphton  Traction  Co 

Houston  Electric  Co 

Jacksonville  Traction  Co 

Key  West  Electric  Co 

Northern  Texas  Traction  Co. . 

I'aducah  Traction  Co 

Vcnsacola  Electric  Co 

I'oncc  Railway  &  Lighting  Co. 

r.  S.  E.  Rallwav,  Inter 

I'd.  Sd.  Int.  (Everett) 

r.  S.  T.  L.  &  p.  (Bellingham). 

Savannah  Electric  Co 

Tacoma  Railway  &  Power  Co. 
Tampa  Electric  Co 


Estimated  population 
served  by  railway  de- 
partment, vear  ending 
June  30— 


1909 


Average 

Per  cent  increase. 


I4,r;00 
27,000 
S.'i.OOO 
SO, 500 
37,.'iOO 
73,400 
91,600 
59.000 
19,200 

171,000 
24,200 
26,000 
34,700 

324, 000 
27,100 
23,200 
71,000 
90.000 
48,900 


6.5,700 


1919 


21,700 
29,600 
40,750 

100.700 
40,  r>oo 
68,000 

161,. 500 
95,000 
22,a50 

262,300 
26,.')00 
36,600 
40,200 

463,. VK) 
36,000 
30,500 
88,500 

112.400 
70,000 


93,  .500 
42.3 


Passenger  earnings  per 

capita,  year  ending 

June. 


1909 


1.66 
2.82 
3.36 
5.73 
8.03 
4.01 
8.90 
7.18 
3.61 
7.01 
4.39 
5.64 
1.13 
1.92 
6.10 
6.65 
5.49 
9.87 
7.61 


5.32 


1919 


3.91 
4.82 
6.00 
6.79 

11.13 
4.32 

10.46 
9.80 
4.  .59 
9.55 
&.0 
7.7 
1.36 
2.07 

15.88 
6.85 
8.25 

12.48 
9.20 


26.9 


>  Decrease. 

The  following  is  a  list  of  companies  which  have  made  increases  in  city 
fares  during  tills  period,  witli  tlie  datt^s  and  amount  of  increase: 


Corapan^ 


(i.ilveston.. 

Paducih... 
liollingham 
Ti;coma 


Date  of  in- 
crease. 


Oct. 

June 

July 

Nov. 

July 


1,1918 
6, 1919 
1, 1918 
4, 19IK 
8, 1918 


Increase 
(cents). 


5  to  6 

6  to  5 
to  7 
to  6 
to  7 


5 
5 
5 


The  Cape  Breton,  Northern  Texas,  Pensacola,  and  Everett  companies  include 
interurhau  lines,  wliidi  affects  somewhat  the  comparison  of  number  of  passen- 
gers per  capita  with  passenger  earnings  per  capita. 

MEMORANDUM. 

Stone  &  Webster,  ArANACEMENT  Division, 

Boston,  Mass.,  September  10,  1919. 
n.  G.  Br.\dt.ee,  Esq.: 

Siu>i>lementing  our  memorandum  of  September  5,  we  give  herewith  figures 
for  the  .**ame  com]»anies,^  showing  number  of  passengers  carried,  not  including 
transfers,  per  capita.    As  a  matter  of  interest  we  also  show,  by  companies,  the 

» Excluding  P.  S.  E.  Railway. 


^ 


I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2C41 

percentage  increase  in  these  figures  for  the  10-year  period  compared  with  the 
l)ercentage  in  pas.<;enger  earnings  per  capita: 


Companies. 


Baton  Rouge 

Cape  Breton 

Columbus  Railroad 

El  Paso  Electric  Railway 

Galveston 

Hough <on  Traction 

Houston 

Jackson  vil  le. . . : 

Key  West 

Northern  Texas 

Paducah 

Pensacola 

I'once 

I'd.  Sd.  Int.  (Everett) 

P.  S.  T.  L.  &  P.  (Bellingham) 

Savannah 

Tacoma 

1am  pa 

Avefape 

Per  cent  increa.se 


Numl^er  of 

passengers 

Percentage  increase  vear 

carried,  not  including 

ending  June  30,  1919, 

transfers, 

per  capita. 

over  vear 

ending  Juna 

year  ending  June  30— 

30, 1909. 

Number 

Passenger 

1909 

1919 

passengers 

earnings 

carried  per 

per  capita. 

capita. 

33.5 

79.8 

138. 3 

135w4 

57.3 

92.4 

61.3 

71.0 

71.2 

104.0 

46.1 

48.8 

118.5 

120.8 

1.9 

1.0 

160.0 

208.2 

30.1 

38.6 

80.6 

86.5 

7.3 

7.7 

186.0 

215.0 

15.6 

17.5 

147.5 

19a  0 

34.2 

36.5 

73.1 

92.9 

27  1 

27.1 

99.8 

128.0 

28.3 

36.3 

90.8 

77.5 

M4.7 

15.9 

103.8 

160.0 

54.2 

37.4 

24.7 

27.5 

11.3 

20.3 

99.7 

110.0 

10.3 

13.6 

156.0 

l,^3.0 

>16.8 

3.1 

114.8 

169.0 

47.3 

50.3 

20o.O 

22.3.0 

8.3 

26.5 

115.0 

118. 5 

21.6 

20.8 

108.6 
24.3 

13.5.0 

*  Decrease, 

Passenger 
eaining:s 

per  capita. 

Baton  Rouge 2.75 

Cape  Breton ~~~ ~ 3  («^ 

Columbus  Itailroad I I I__II_Z    4^29 

El  Paso  Electric  Railway  Co I I_III    6.68 

Galveston  Electric  Co ~_ ~  n  30 

Houghton  Traction  Co I ~ 417 

Houston  Electric  Co II 11.71 

.Tack.sonville  Traction  Co I_I_I 9  70 

Key  West  Electric  Co " I    3^12 

Northern  Texas  Traction  Co I I_~I~    9  16 

Paducah  Traction  Co 533 

Pensacola  Electric  Co IIIII"  '  5  04 

Ponce  Railway  &  Light  Co ~     144 

P.  kS.  E.  Railway  Inter I ~     i'24 

Pd.  Sd.  Int.  (Everett) I  _         570 

V.  S.  T.  L.  &  P.  Co I_I_IIII_I_.II"     601 

Savannah  Electric  Co ~    I__II    6  79 

Tacoma  Railway  &  Power  Co I_I I.III 9  52 

Tampa  Electric  Co I I II_III    g.OS 

Average ^.14 

Mr.  Ogburn.  We  invited  to  appear  before  us  Mr.  Lawson  Purdy, 
who  was  prevented  from  testifying  but  who  has  written  that  he 
would  send  a  statement  to  be  submitted  to  the  commission  dealing 
with  the  subject  of  special  tax  assessments  to  finance  extensions  of 
street  railways.  Mr.  Purdy,  as  you  know,  is  quite  qualified  to  dis- 
cuss that  subject. 

At  the  suggestion  of  Commissioner  Bcall  we  are  making  a  digest 
of  the  franchise  of  the  city  of  Montreal.    Commissioner  Beall  fur- 


2042     PROCEEDIN'GS  OF  FEDEBAL  ELECTRIC  RAILWAYS  COMMISSION. 

iiislied  copies  of  that  franchise,  which  has  certain  featui*cs  possibly 
bettor  than  the  Cleveland  service-at-cost  plan  franchise. 

There  was  invited  to  appear  before  the  commission  this  week  Mr. 
Kussell  Robinson,  who  is  a  manager  of  a  small  line  running  from 
Keene,  N.  H.,  to  Marlboro,  Mass.  Commissioner  AVehle  had  a  talk 
Avith  him,  and  at  his  suggestion  we  invited  him  to  attend,  but  wo 
learn  that  his  health  prevents  his  attendance.  He  has  received  i^er- 
mission  tp  submit  a  statement  that  will  show  his  experience  in 
inci-easing  his  fare  from  5  cents  to  8  cents  and  then  reducing  it  to 
4  cents,  xhe  reduction  to  4  cents  resulted  in  operation  at  a  profit, 
H»s  I  understand.  Whether  he  changed  the  zones  or  not  I  do  not 
know. 

The  receiver  of  the  Birmingham  company  has  sent  in  a  full  state- 
ment of  the  operations  under  his  receivership  to  submit  here. 

Also  the  counsel  for  the  Jacksonville  (Fla.)  Ti*action  Co.  has  sent 
in  a  full  statement. 

The  mayor  of  Camden,  N.  J.,  has  had  the  city  solicitor  of  Cam^ 
den  to  submit  to  you  a  statement  relative  to  the  operations  of  the 
new  zone  fare  in  Camden.  This  statement  is  so  very  interesting  that 
I  think  I  should  have  copies  of  it  made  and  furnished  to  each  of  the 
comn>issioners.  It  not  only  criticizes  the  particular  plan  that  was 
put  into  effect,  but  it  offers  some  very  pertinent  constructive  sugges- 
tions for  a  better  zone  fare.  They  take  the  view  that  they  are  not 
opix)sed  to  a  zone  fare,  but  to  this  particular  one. 

The  statement  is  as  follows: 

Camden,  X.  J.,  October  /,  101'.). 
Fkdekal  Electkic  Kailways  Commission, 

Washinffton.  7).  C. 

Gkntlemkn  :  Koplyinj;  to  the  recent  coiumniiic-ation  of  your  cxociitive  rhtc- 
tary,  acUlrcsseil  to  Hon.  (■.  H.  Ellis,  mayor  of  Camden,  allow  mo  to  say  that 
the  zone  plan  of  colloiting  fares  in  New  Jersey  s<^ms  to  be  a  complete  failure. 
Of  course,  wo  can  only  siieak  with  certainty  for  the  city  of  Camden  and 
vicinity.  The  fact  that  l>oth  political  parties  in  this  State  condemned  the  sys- 
tem in  their  resi>ective  platforms. simply  expresses  public  sentiment. 

We  do  not  want  to  l»e  understood  as  sayinj?  that  a  zone  system  is  not 
thtH)i^etically  a  proi>er  .system,  or  that  a  pr<HK»r  zone  plan  could  not  bo  made 
su<tvs.sful.  What  we  do  unhesitatingly  say  is  that  the  zone  plan  ii)nu.iairated 
liero  is  a  complete  failure.  Our  ex{>erien<'e  is  that  within  the  limits  of  the 
city. of  Camden,  i)ossibly  a  3-mile  limit  from  our  ferry  terminal,  which  is  the 
piteway  of  the  city,  the  present  system  has  <ause<l  an  average  delay  of  12 
to  1")  uiinutes  in  tlu*  headway  of  the  various  cju*  lines.  The  ddef  delay  is 
in  the  makin;;  of  chanjje  on  the  pay-as-you-enter  plan.  If  the  nickel  fare  had 
been  a  part  of  the  .system,  of  coui-se,  the  nuikinj;  of  change  would  have  l)een 
expeditiHl.  l>ut  the  chamber  *)f  commerce  her<'  an<l  the  city  officials  Iiave 
re(x>nnuended  two  propositions  whi<-h  might  be  used  in  connection  with  a 
pr<»iH'r  zoning  sj'stem : 

First.  At  tlie  lieavy  loading  i¥>ints,  the  main  one  of  which  is  our  Penn- 
sylvania Ferry,  there  should  be  two  or  more  ticket-selling  booths,  to  i)ermit 
pas.«<engers  to  secure  tickets  in  advance  of  entering  the  cars,  so  that  all  they 
would  luive  to  do  would  be  to  hand  the  ticket  to  the  conductor  or  drop  it  in 
a  slot.  This  would  tend  to  a  speedy  loading  of  every  car.  We,  however, 
ma<le  .*<i>ecial  note  that  it  would  1m»  of  no  avail  to  optMi  up  such  ticjcet  booths 
wnless  strip  tickets  were  sold  at  a  reduced  rate  over  the 
instante,  if  the  normal  fare  were  G  cents,  six  strip  tickets 
25  cents,  or  some  similar  reduction.  This  would  furnish 
l^sjssengers  to  buy  in  advance  of  entering. 

We  have  studied  the  lu'oblem  somewhat  and  have  inquired  of  railroad 
offi<ials  who  Iiave  had  considerable  experience  in  dealing  with  traffic  conditions 
of  this  kind ;  and  the  consensus  of  opinion  was  tliat  transportation  companies 
would  gain  in  a  number  of  directions  on  the  sale  of  strip  tickets. 


normal  fare.  For 
sliould  be  .sold  for 
an  inducement  to 


. 


* 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2043 

((/)  They  gain  by  selling  tickets  at  wholesale,  the  overhead  cost  of  selling 
being  thus  reduced. 

(b)  Tliey  gain  the  use  of  the  money,  because  many  of  the  tickets  will  be 
a  week  or  more  in  being  used. 

(c)  Many  tickets  will  be  lost  or  destroyed. 

(d)  It  encourages  the  riding  liabit.  A  passenger  doesn't  think  he  is  spend- 
ing money  when  he  is  dropping  in  a  ticket.  He  will  therefore  ride  more 
frequently. 

There  may  be  other  recommendations  for  sucli  tickets,  but  this  is  sufficient 
to  give  our  ideas  on  the  matter. 

Second.  Wc  recommended  commutation  tickets  for  the  suburbs.  Our  prob- 
lem here  is  not  only  to  supply  the  residents  of  the  city,  but  we  have  5  or  G 
thriving  suburbs,  all  of  which  have  steam-railroad  connections. 

When  the  present  zoning  .system  was  put  in  operation  it  was  found  tliat 
starting  Avith  the  3-cent  fare,  the  increase  at  the  distance  of  about  14  miles, 
im  n  2  cents  a  mile  increase,  ran  up  to  about  30  cents,  while  the  steam-railroad 
company,  for  a  similar  distance,  was  selling  a  commutation  ticket  for  about 
lo  or  IG  cents,  including  2J  cents  for  ferriage  to  Philadelphia;  so  that  when 
it  was  found  that  nearly  all  the  suburbr,  had  the  same  steam-railroad  rates, 
almost  half  what  the  new  trolley  zone  rates  were,  the  suburbanites  immedi- 
ately forsook  the  trolleys  and  bought  commutation  tickets  on  the  steam  railroad.s. 

Third.  It  might  have  been  thought  that  the  3-cent  riders  would  have  hailed 
such  a  system  wit^i  joy.  The  contrary  seems  to  have  been  the  practical 
result.  So  much  for  theory  against  fact.  Some  of  the  3-cent  riders  boycotted 
the  trolleys  out  of  sympathy,  refused  to  ride  because  they  would  rather  pay  a 
nickel  than  wait  for  change,  but  most  of  the  riders  in  the  3-cent  zone  \vould 
naturally  walk. 

From  a  practical  standpoint,  we  sb.ould  say  that  there  is  not  nuich  travel  in 
in  3-cent  zone  of  1  mile,  except  in  large  cities  where  the  population  is  con- 
centrated.    Wh;itever  the  reason,  even  the  3-cent  zone  has  not  been  popular. 

(Jenerally  siieaking,  we  think  the  main  cause  for  the  failure  of  the  system 
within  the  city  limits  was  because  of  the  many  objectionable  features  attend- 
ing its  inauguration. 

Aside  from  those  enumerated,  so-called  pull  pens  were  provided — that  is, 
shed  structures  surrounded  by  fences,  with  turnstiles  for  entrance  and  exit. 
For  some  reason  or  other,  the  people  were  against  the  use  of  these  i)ens  and 
re.«ented  theL'  installation. 

We  think  also  the  conductors  and  motormen  objected  to  the  delays  and  other 
complications  of  the  system.  We  have  heard  that  it  was  claimed  on  behalf  of 
the  company  that  .some  employees  objected  because  the  system  pi*evented 
peculations.  On  the  other  hand,  some  of  the  employees  said  that  it  furnislied 
si»ecial  inducements  and  special  opportunities  for  peculations. 

Our  ferry  company  liandles,  at  the  Pennsylvania  Terminal,  over  30,000,000 
people  annually.  That's  as  many  as  the  Broad  Street  Station,  Philadelphia. 
It  is  the  gateway  for  all  south  Jersey.  A  large  number  of  these  passengers 
go  through  the  two  ferry  entrances,  one  on  the  south  side  and  the  other  on  the 
north  side  of  the  street.  Tliere  is  a  ticket-selling  bootli  about  15  feet  east  of 
each  ticket  collector.  Most  people  have  purchased  tickets  in  advance,  and  they 
simply  tear  one  ott'  and  drop  into  receptacles  without  stopping  for  hardly 
a  fraction  of  a  second,  so  that  there  is  no  congestion  even  in  tlie  busiest 
lioui*s.  There  is  no  making  of  change  except  at  the  ticket-selling  booths, 
and  the  selling  of  tickets  is  distributed  over  a  longer  period  of  time  because 
all  i^eople  do  not  run  out  of  tickets  at  the  same  moment.  This  teods  to  avoid 
congestion  even  at  the  ticket-selling  booths  at  the  heavy  loading  hours.  Such 
a  sy.stem,  in  our  opinion,  would  be  ideal  for  the  local  trolley  company. 

We  should  be  glad  to  furnish  any  further  information 
that  this  will  give  you  all  that  is  desired,  I  am, 
Yours,  very  truly, 

Edwin  G.  C.  Bleakly,  City  Counsel, 

The  Chairman.  We  also  received  a  letter  from  Mr.  O.  O.  Calder- 
head,  rate  expert  of  the  Washington  Commission,  which  deals  with 
the  question  of  jitney  competition.  I  believe  we  should  liavc  that 
made  a  part  of  the  record,  as  it  is  a  very  interesting  document. 

Mr.  CKiiUKN.  Mr.  William  P.  Burr,  corporation  counsel  of  New 
York,  representing  Mayor  Hylan,  has  sent  a  communication  ask- 


Trusting,  howevei-. 


2044     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION". 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2045 


ing  that  it  be  put  into  the  record  for  the  purpose  of  bringing  the 
testimony  which  he  gave  on  August  14  up  to  date.  In  other  words, 
tliere  have  been  recent  liappenings  in  New  York  during  the  pant 
six  weeks  of  such  moment  that  his  te.stimony,  given  in  the  midst 
of  those  liappenings,  remains  incomplete  unless  this  statement  is 
put  in.    This  is  a  brief  summary  of  those  happenings: 

New  York,  September  25,  1919. 
Mr.  Charlton  Ogburn, 

Executive  Seeretarn  Federal  EJeetric  Railway  a  Commission, 

929-930   Southern   Biiildirw,   WashiiKjton,   D.   C. 

Dear  Sir:  .7  bej?  to  acknowledjre  the  receipt  of  your  letter  of  September  20, 
1919,  requestUig  that  the  tiuancial  data  in  regard  to  the  railway  companies 
in  this  city  j?iven  by  me  in  my  testimony  before  tlie  eonnnission  on  Aufjust 
14  be  elieclved  up,  and  also  requesting  a  brief  statement  of  the  developments 
in  tlie  traction  situation  since  sucli  testimony  was  given. 

In  reply  I  would  say  tliat  the  figures  as  to  tlie  cjipital  stoelc,  earnings, 
dividends,  etc.,  of  the  milways  in  this  city  as  contained  in  the  minutes  of  tlui 
meeting  of  the  eonnnission  held  August  14,  pages  3790-3898,  are  substantially 
correct. 

In  regard  to  the  developments  in  the  traction  situation  since  my  testimony 
was  given,  I  would  refer  to  the  following: 

A  few  days  after  I  appeared  before  the  comniis>ion,  on  August  17,  to  be 
exact,  the  elevated  and  subway  railways  operated  by  the  Intcrborough  Rapid 
TranSit  Co.  were  tied  up  by  a  strike  of  the  employees,  who  demande<i  a  50 
l>er  cent  increase  in  wages  and  various  other  concessions.  There  is  evidence 
on  which  to  base  the  allegation  that  this  strike  of  the  employees  was  part 
of  the  campaign  now  being  \yaged  by  the  railway  companies  lor  an  increase 
in  their  nite  of  fare.  On  the  request  of  the  mayor  of  this  city,  the  extraor- 
dinary grand  jury  of  New  York  County  has  been  conducting  an  investigation 
into  this  matter,  which  investigation  has,  I  believe,  not  yet  been  concluded. 
The  strike  lasted  for  two  days,  as  you  no  doubt  have  learned  from  the  press 
has  been  settletl  through  the  intervention  of  the  mayor  and  other  public  offi- 
cials of  this  city,  on  the  basis  of  an  immediate  increase  of  25  per  cent  in 
waiges  and  arbitration  on  the  question  of  an  additional  increase  and  other 
points  contendeil  for  by  the  employees. 

On  August  20  the  receiver  of  the  New  York  Railways  Co.,  Mr.  Job  Hedges, 
with  the  con.sent  of  the  Federal  court,  voluntarily  increased  the  wages  of  the 
€?mpl<>yees  of  the  system  over  which  he  has  control  15  per  cent,  which  was  in 
addition  to  the  10  i>er  cent  increase  granted  a  few  days  previously. 

On  Augu.st  28,  notwithstanding  his  statement  made  to  your  commission  that 
liis  v>ower  to  grant  fare  increases  in  the  city  was  restricted  by  reason  of  the 
franchise  contracts  under  which  the  railway  companies  were  operating.  Com- 
missioner Nixon  authorized  the  New  York  &  North  Shore  Traction  Co.,  operating 
in  the  Borough  of  Queens,  to  put  into  effect  a  zone  fare  running  from  6  cents  in 
tiome  cases  to  11  cents  in  others.  The  franchise  under  which  this  company 
oi)erates,  and  which  was  granted  by  the  city  under  constitutional  authority, 
expressly  prohibits  the  company  from  charging  more  than  a  5-cent  fare  within 
the  city  limits.  The  mayor  of  this  city  innuetliately  challenged  the  power  of 
the  conmiission  to  grant  this  increase,  and  legal  proceedings  are  about  to  be 
lnstitute<l  to  have  this  order  reviewed  l>y  the  courts. 

Sii<)rtly  aTter  (Jonnnissiouer  Nixon  nmde  the  order  In  the  North  Shore  case, 
the  Maidiattan  &  Queens  Traction  Corporation,  encouragetl  no  doubt  by  the 
jH)sition  which  the  commission  took  in  that  case,  applleil  for  an  increase  of  its 
fare.  The  commission  ordered  a  hearing  on  that  application.  As  this  company 
was  also  restricted  to  a  5-cent  fare  by  its  fi*anchise  and  it  was  plainly  the  in- 
tention of  the  commission  to  attempt  to  release  the  company  from  its  fare  ob- 
ligation, as  it  had  the  North  Shore  Traction  Co.,  the  city  inmietliately  took 
legal  steps  to  prohibit  the  commission  from  proceeding  further  with  the  case. 
An  order  to  show  cause  was  obtained  in  the  supreme  court  which  stayed  the 
eonnnission  pending  a  determination  as  to  its  power  to  abrogate  the  franchise 
contract.  The  city  relies  on  the  Quinby  case,  which  I  referred  to  in  my  testi- 
mony before  your  commission,  as  ample  authority  for  the  court's  Interference 
with  this  attempt  on  the  part  of  the  public-service  eonnnission  to  act  beyond 
its  jurisdiction.    Practically  all  the  railway  companies  operating  in  the  metro 


i 


politnn  district  have  joined  in  the  attempt  to  invalidate  the  city's  contract 
rights  and  have  aske<l  leave  to  file  briefs  in  this  case. 

The  failure  of  the  surface-railway  companies  up  to  this  time  to  escape  the 
obligations  of  their  franchise  contracts  with  the  city's  consent  has  prompted 
them  to  take  another  step  deserving  of  nothing  but  public  condemnation. 
Through  its  i-eceiver  and  with  the  consent  of  the  Federal  Court  the  New  York 
Railways  Co.  has  abandoned  oi>eration  of  four  important  cross-town  liue.s. 
The  Third  Avenue  Railroad  Co.,  which  is  not  in  a  receiver's  hands,  had  pre- 
viously shown  the  way  by  the  abandonment  of  three  lines,  one  of  which  was  a 
very  important  line  connecting  the  Borough  of  Queens  with  the  midsection  of 
the  Borough  of  Manhattan.  In  no  case,  however,  have  the  companies  taken 
any  .steps  or  shown  any  intent  to  surrender  the  franchises  for  the  various 
routes  which  they  have  abandoned,  and  it  is  evidently  their  purpose  to  retain 
the  franchises  until  such  time  a.s  it  may  be  their  pleasure  to  resume  opera- 
tions. The  city  will  take  immediate  steps,  however,  to  frustrate  this  illegal 
purpose. 

Meanwhile  measures  have  already  been  taken  by  the  city  for  giving  transit 
service  to  the  traveling  public  which  has  been  ignored  and  inconvenienced  by 
the  railway  companies.  Bus  service  has  already  been  installed  on  a  number  of 
cross  town  routes,  which,  while  temporary  in  its  character  is  giving  adequate 
and,  in  many  cases,  better  service  than  the  railway  companies  have  given  by 
nieans  of  the  storage-battery  cars  which  they  previously  operated.  It  is  be- 
lieved that  the  success  of  this  experiment  in  urban  transit  points  the  way  to 
a  permanent  solution  of  the  problem  which  now  confronts  the  city  by  reason 
of  the  breakdown  of  the  surface-railway  .system. 

On  September  22,  1019,  the  city  applied  to  the  public-service  commission  for 
a  rehearing  on  the  order  which  the  commission  issued  on  July  17,  1919,  per- 
mitting the  surface-railway  companies  in  the  Brooklyn  Rapid  Transit  svstem 
to  impose  a  tranfer  charge  of  2  cents.  This  order  was  granted  by  the  coinmi.s- 
sion  without  any  adequate  proof  as  to  the  value  of  the  company's  properties 
or  the  necessity  for  imposing  this  additional  burden  on  the  public.  As  I 
stated  in  my  testimony  before  your  eonnnission,  the  revenue  of  the  surface 
railways  of  tlie  Brooklyn  Rapid  Transit  .system  was  considerably  more  than 
a  7  per  cent  return  on  the  fair  value  of  the  properties  estimated  at  $50,000,0(X) 
between  1013  and  1018.  For  the  year  ending  June  30,  1919,  its  i-evenue,  while 
considerably  lower  than  for  the  previous  six  years,  showed  a  profit  of  3.2  per 
cent.  Notwithstanding  this  splendid  showing  even  during  the  war  period, 
the  eonnnission,  without  investigating  fairly  and  impartiallv  into  these  ques- 
tions, permitted  the  company  to  increase  its  fares.  Not  onlv  that,  but  the 
eonnnission  ignored  the  rights  of  the  city  and  of  the  public  under  the  existing 
franchise  contracts,  no  attempt  at  all  having  been  made  by  the  commission  to 
examine  into  this  mattter  or  to  ascertain  whether  its  order  would  impair  the 
obligations  of  these  contracts. 

Yesterday  the  Federal  court,  acting  through  Judge  Mayer,  separated  the 
Ninth  Avenue  Railroad  from  the  New  York  Railways  system  and  directed  its 
return  to  its  original  owners.  The  court  also  authorized  the  discontinuance 
of  the  transfer  privilege  between  the  Eighth  Avenue  Railroad  line  and  the  lines 
of  the  New  York  Railways  system.  It  will  be  remembered  that  some  time  ago 
the  Eighth  Avenue  line  was  severed  from  the  New  York  Railways  system,  but 
Judge  Mayer  permitted  it  only  on  condition  that  transfers  would  be  exchanged 
between  the  two  systems.  This  direction  on  the  part  of  Judge  Mayer  was  in- 
tended to  carry  out  the  purpose  aimed  at  by  Connuissioner  Nixon  when  he  per- 
mitted the  lines  of  tlie  New  York  Railways  system  to  charge  for  transfers. 
This  purpose,  as  stated  by  Mr.  Nixon,  was  to  "preserve  the  svstem,"  and  so 
insure  to  the  public  transfer  privileges  between  all  lines  of  the  New  York  Rail- 
ways system  for  a  maximum  of  7  cents.  The  action  of  Judge  Mayer  yester- 
day, however,  contradicts  Commissioner  Nixon's  stated  purpose  and  eliminates 
whatever  excuse  there  may  originally  have  been  for  the  additional  transfer 
charge. 

It  is  believed  that  the  above  is  a  fairly  comprehensive  statement  of  what  has 
occurred  in  this  city  since  August  14.     If  you  desire  any  further  information 
In  regard  to  the  matters  above  outlined  or  any  other- questions  affecting  the 
traction  situation  in  this  city,  I  will  be  glad  to  furnish  it. 
Very  truly,  yours, 

William  P.  Burr,  Corporation  Counsel. 


2046    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

And  Commissioner  Nixon  is  also  su]:>mitting  a  statement  of  his 
side  of  those  happenings. 

The  Chairman.  They  may  be  filed. 

Mr.  Ogburn.  One  other  matter.  A  good  deal  of  attention  has 
been  given,  or  at  least  several  references  have  been  made  bv  wit- 
nesses, to  the  operation  of  the  tramways  of  Great  Britain!  Mr. 
VV  alter  Jackson  and  Mr.  Wilcox  particularly  referred  to  the  success 
of  the  zone  fare  on  the  tramways  in  Glasgow  and  other  cities.  Mr. 
Uilcox  prefaced  his  testimony  by  the  statement  that  Sir  Eric  Geddes 
had  made  the  statement  that  the  tramways  in  Great  Britain  were 
earning  7  per  cent  net  on  their  investment. 

The  matter  interested  me  to  the  extent  of  tr^^ing  to  find  out  more 
about  It,  and  I  have  prepared  a  statement  dealing  with  the  situation 
111  Great  Britain,  and  I  would  like  to  make  copies  of  this  and  sub- 
mit it  to  the  commissioners. 

The  pertinent  fact  is  that  the  tramwavs  of  Great  Britain  are  earn- 
^Tpi    P^^  ^^"^  ^^  *^^®^^  e^<^"'e  investment  instead  of  7  per  cent. 

Ti/r     r^ " "^^^^^^^ •  -^^Z^"  w»^t  that  as  part  of  the  record? 

Mr.  Ogburn.  Yes.  They  are  asking  almost  universallv  for  an  in- 
crease  m  fare  and  they  are  expressing  uniform  dissatisfaction  with 
the  zone  fare  and  expressing  their  preference  for  the  American  plan 
and  saying  that  the  zone  fare,  among  other  things,  causes  congestion 
in  cities;  and  the  fact  is,  they  go  quite  extremely  into  the  situation. 

The  statement  is  as  follows  : 

STUDY  AND  DIGEST  OF  DISCUSSION  AND  PAPERS  RF:.U)  AT  MEETING  OF  TRAMWAYS  AND 
LIGHT  RAILWAY  COMPANIES   OF  THE   UNITED  KINGDOM. 

There  are  two  criticisms  wliicli  apply  prenerally  to  tramwavs  in  the  United 
iCfrlZU^^p^nni^^^'  ^^'^  ^^  ^"'^'^"''^  ""''  adequate  financiar  return  to  their 
ZZm^Z^JfT.^'  ""^"-"^  ^^^'^^  ^^'^^'  ^^'"  **'  ^'''^  ^^'^  community  all  the 
benefits  of  which  they  are  capable.  It  is  an  example  of  cau.se  and  effect-what 
happens  when  a  comnnmity  is  working  a  stran^lthoM  on  an  indusVrr. 

Ihese  criticisms  apply  in  ijreater  and  lesser  measure  alike  to  the  tram- 
ways  owned  by  municipalities  and  to  tho.se  owneil  hv  companies  These  fail- 
ures are  the  result  of  faulty  legislation  to  a  large*  extent.     This  legislative 

]lT}''f^'  '''^'^^'  r '^^^  ^^'?*^''^"^  ^'''''"^  "J^«"  ^'""^i^^^^y  «"'^  nmnicipal  tramways! 
but  both  are  affected;  and  the  remedies  have  not  so  far  been  within  the  power 
ot  anybody  but  Parliament  itself.  The  controlling  bodies  have  a  considerable 
responsibility  for  tJie  failures  of  the  tramways  and  have  it  within  their  power 
to  bring  about  better  re.sult.s.  p^^^i 

All  iiisumciently  remunerated  industry  can  not  provide  the  community  with 
the  full  service  of  which  it  is  capable  under  more  encouraging  conditions  A 
prosperous  industiT  can  accumulate  funds  available  for  the  improvement  and 
extension  of  its  activities  or  can  attract  the  neces.sarv  capital  for  such  pur- 
l)oses  A  stan-ed  industry  can  not  do  this.  Municipal  cori)orations  can  ob- 
tain loans  upon  favorable  terms  because  they  olfer  to  investors  the  security 
of  the  rates,  but  they  are  naturally  loth  to  increase  municipal  indebtedness 
for  the  extension  of  services  which  are  not  likely  to  be  remunerative  unless 
such  services  are  obligatory.  Tramway  companies  can  not  obtain  capital  for 
extensions  unleas  they  show  that  their  existing  enterprise  is  giving  a  rea- 
S€>nable  return. 

In  a  starvetl  industry  the  management  and  all  those  in  re.sponsible  posi- 
tions are  always  conscious  of  a  pinched  feeling  and  this  makes  them  averse 
to  trj-ing  changes  which  they  know  will  have  temporarily  adver.se  effect  on 
the  net  i-ewipts,  although  they  believe  that  they  would  eventually  give  good 
result.s.  Not  only  do  the  management  and  those  in  re.si>onsible  iK>sltlons  fe<^l 
the  pinch;  It  reacts  on  all  the  employees.  It  is  impossible  for  a  harassed 
industry  to  make  its  conditions  (»f  service  as  attractive  as  tho.se  of  a  pros- 
peious   industry.     The   tramways   have   been   unable   to  make   improvements 


PROCEEDINGS  OF  FEDERAL  ELECTEIC  RAILWAYS  COMMISSION*.    2047 

which  may  take  some  years  to  become  remunerative.    One  can  not  expect  a 
starved  industry  to  venture  on  these  improvements. 

While  a  number  of, the  municipal  tramway  systems  show  good  financial  re- 
turns, they  are  nevertheless  starved,  because  the  bulk  of  their  net  receipts 
are  appropriated  in  aid  of  the  rates,  instead  of  being  utilized  in  the  improve- 
ment of  the  service. 

Mr.  McElroy,  in  his  report  on  the  Manchester  tramways,  showed  that  the 
•  extensive   improvements   recommended   could  be   financed   from   the   tramway 
net  receipts  if  the  city  council  would  refrain  from  appropriating  £100,000  i>er 
annum  for  the  benefit  of  the  borough  fund. 

For  a  service  to  be  remunerative  the  sums  charged  for  it  must  cover  the 
whole  of  the  cost,  including  capital  charges,  and  provide  a  reasonable  margin. 
The  charges  made  for  the  service  ought  to  be  equitable ;  that  is,  each  pas.sen- 
ger  should  pay  his  fair  share  of  each  of  the  items  of  cost  involved  in  carrying 
him.  In  transport  service  .some  of  these  items  of  the  cost  of  service  are  pro- 
[Kjrtional  to  the  distance  a  pa.ssenger  is  carried.  Some  of  them  are  more 
nearly  repre-sented  by  a  fixed  amount  per  i)assenger.  If,  therefore,  one  can 
a.scertain  what  these  costs  amount  to  per  passenger  in  any  given  case,  the 
result  gives  a  sum  which  must  be  exceeded  by  the  fares  charged  for  the 
shortest  journey.  The  fares  for  long  journeys  should  be  increa.sed  over  this 
minimum  in  proportion  to  the  distance.?. 

The  result  of  such  a  .scheme  of  fares  is  that  every  passenger  pays  his  fair 
share,  and  that  the  longer  journeys  are  relatively  cheaper  than  the  short  ones; 
also  that  the  traveling  exi^enses  consequent  upon  living  at  a  greater  distance 
from  the  place  of  employment  are  less  than  proportionate  to  the  greater  dis- 
tance. This  last  effect  would  be  of  immense  importance  in  making  tramways 
of  greater  service  to  the  community. 

Taking  "standing  charges"  to  include  all  the  costs  of  having  the  system 
equipped  and  ready  to  meet  the  traffic,  and  the  "  running  costs  "  as  those  pro- 
l)ortionate  to  the  passenger-miles,  a  figure  can  be  distinguished  for  standing 
4-harges  which  can,  with  entire  fairness,  hc:  spread  equally  over  the  whole 
number  of  passengers.  Taking  all  tramways  collectively,  a  far  larger  number 
of  passengers  are  carried  at  minimum  fare  than  at  any  others.  The  board  of 
trade's  reiwrt  for  the  year  1913-14  shows  that  the  average  receipts  per  pas- 
senger were  l,10.jd.,  providing  that  the  iuiml>er  of  pa.ssengers  at  1  penny  (the 
minimum  fare  on  the  majority  of  .systems)  is  far  in  excess  of  those  at  higher 
fares.  In  Glasgow  during  the  year  ]  918-19  the  minimum  fare  of  one-half  penny 
was  i)aid  by  G3  per  cent  of  the  total  numlx'r  of  pas.sengers. 

(There  followeil  a  table  of  tramway  expenses  for  the  vear  191.3-14.) 

From  the  l>oard  of  trade  rejwrt  for  1913-14,  it  is  seen  that  the  net  yield  on 
the  capital  invested  was  only  3.03  i)er  <'i-nt.  This  proves  that  the  tramway  in- 
dustry in  the  United  Kingdom  is  a  starved  industry,  because  3.03  per  cent 
l>rofit  is  not  sufticient  to  attnict  capital  or  to  justify  its  expenditure,  nor  does 
it  provide  a  mai*gin  for  enterprise  in  improvements  and  extensions. 

The  figures  show  that  the  average  receipts  per  passenger  were  1.05d.  of 
which  standing  charges  al)sorbe<l  0.;j44d.  and  the  running  costs  1.561d.  From 
this  it  follows  that  the  basic  or  fixed  charge  per  pti.s.senger  to  which  running 
exiienses  proportional  to  th(^  length  of  journey  have  to  be  added  should  exceed 
0.544tl.  at  prewar  rates,  or,  in  other  words,  every  passenger  in  1913-14  .should 
have  paid  0.544d.  plus  an  amount  varied  according  to  the  distance  traveleil 
This  fare,  however,  would  have  provided  a  yield  of  only  3.03  per  cent  on  the 
cai)ital.  A  moderate  yield  is  6  per  cent.  To  secure  this  the  standing  charge 
would  have  to  be  0.777d.,  to  which  must  b«  addetl  the  running  costs.  This 
allows  only  for  4  per  cent  depreciation,  and  as  depreciation  has  to  provide  for 
replacement  of  eciuipment,  it  will  be  greatly  increased  by  the  rise  in  labor  and 
materials.  Taxation  is  also  unlikely  to  revert  to  prewar  levels  in  any  near 
future,  so  that  this  figure  for  depreciation  would  hardly  cover  present-day  costs. 
In  1913-14  the  average  distance  each  passenger  was  curried  for  the  average 
fare  of  l.lOSd.  was  2  miles.  This  would  make  a  running  cost  of  0.281d.  per 
passenger-mile.  At  postwar  prices  of  labor  and  material,  this  cost  will  l>e 
doubled. 

These  figures  give  a  fair  average  for  the  tramways  in  the  United  Kingdom 
under  ix)stwar  conditions,  bas^etl  on  an  aiialy.sis  of  tlieir  own  acct»unt.s.  Greater 
Ixmdon  is,  of  course,  a  particular  case,  in  which  special  factors  have  to  be 
considered. 

This  is  considered  a  sound  method  of  settling  fares  and  it  will  tend  to  niise 
the  tramway  industry,  legislation  permitting,  from  the  position  of  being  starved 


2048     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

to  one  in  whicli  it  will  be  moderately  prosperous,  and,  therefore,  able  to  attract 
and  to  expend  capital  in  improvements  and  extensions.  This  will  meet  the 
first  criticism  against  the  tramway  Industry ;  that  is,  tluft  they  fail  to  produce 
an  adequate  financial  return  to  their  proprietors.  It  will  also  enable  the 
tramways  to  meet  the  second  criticism  that  they  fail  to  give  the  community  the 
benefits  of  which  they  are  capable. 

Of  the  failures  to  benefit  the  community  as  much  as  they  should,  the  most 
important  is  that  tramways  have  not  brought  about  that  spreading  of  the 
population  of  large  and  crowde<l  industrial  centers  in  which  they  clearly  can 
assist.  The  practice  of  giving  very  low  fares  for  short  distances  encourages 
people  to  continue  to  live  at  distances  witliin  the  radius  of  the  minimum  fares 
and  also  militates  against  reasonable  financial  returns.  The  system  of  stand- 
ing charges  and  running  costs  makes  the  fare  le.ss  per  mile  for  long  distances 
than  for  short  or^es.  That  is,  a  man  living  2  miles  from  his  work  would  not 
pay  twice  as  nuich  in  fare  as  one  living  a  mile  away. 

It  is  obvious  that  successive  rings  or  zones  at  distances  of  1  mile,  2  miles, 
etc.,  from  a  given  center  have  areas  proportionate  to  their  distance.  Taking 
the  zones  as  a  mile  wide,  that  lying  between  1  and  2  miles  radial  distance  will 
have  an  area  of  nearly  9i  square  miles  and  that  between  2  and  3  miles  will 
have  an  area  of  15}  miles,  etc. 

With  these  increases  of  living  room  it  is  probable  that  rents  will  decrease 
with  increasing  distance  from  the  center  more  rapidly  than  the  annual  exi)en- 
diture  on  fares  increaseci.  There  will  be  more  room  to  live,  more  garden  and 
park  space,  more  sunlight  and  fresh  air.  The  importance  of  providing  the 
poorer  classes  witli  these  improvements  in  their  living  conditions  is  well  under- 
stood, but  it  has  not  been  sufficiently  recognized  that  a  rapid  and  economical 
means  of  traveling  over  the  greater  distances  between  house  and  work  is  es- 
sential to  this  puri>ose  and  that  it  is  best  afforded  by  tramways  up  to  at  least 
6  or  7  miles  from  the  industrial  centers. 

It  is  at  least  partly  due  to  the  effect  of  low  fares  that  the  central  districts 
of  some  of  the  large  cities,  such  as  Glasgow,  have  not  been  relieved  of  their 
overcrowded  slums  to  anything  like  the  extent  which  miglit  have  l)een  exi)ected 
from  the  operation  of  the  very  efficient  tramways  there.  The  low-fare  svstem 
charges  the  short-distance  passenger  less  and  the  long-distance  passenger  more 
than  liis  fair  share  of  the  standing  charges.  It  is,  therefore,  a  direct  handicap 
upon  the  spreading  of  the  overcrowded  population.  It  is  not  because  Glasgow 
has  not  made  tramway  extensions  to  long  distances  from  the  center.  It  has 
done  so  in  a  few  directions,  although  only  seven  of  these  "spurs"  go  beyond 
3  miles  from  the  central  districts.  The  reasons  for  mentioning  Glasgow  are 
that  the  corporation  there  has  made  a  si>ecial  feature  of  halfpenny  fares,  keep- 
ing them  in  operation  through  the  war,  and  that  14  per  cent  of  tiie  i)opulation 
are  repute<l  to  live  in  one-roomed  liouses.  If  the  corporation  had  perceived  the 
relation  of  tramway  fares  to  overcrowding,  there  can  l>e  little  doubt  that  it 
would  have  arranged  them  to  encourage  the  spreading  of  the  population 
rattier  than  to  discourage  it. 

Most  people  realize  that  minimum-fare  passengers  crowd  the  cars  and  that 
this  has  a  tendency  to  drive  away  those  wishing  to  travel  longer  distances 
and  to  encourage  competitive  services. 

There  are  two  obvious  difliculties  against  setting  up  a  rational  fare  sy.stem. 
The  first  is  that  tramway  fares  are  generally  limited  to  a  maximuni  of  1 
lienny  per  mile,  and  any  soun<l  system— at  present  costs— must  charge  more 
than  a  penny  for  the  first  mile. 

The  community  should  no  longer  be  subject  to  the  council  in  the  matter  of 
fares  and  improve<l  transport  facilities. 

The  working  classes  have  been  misled  into  the  idea  that  the  halfi>ennv  fare 
Is  an  advantage  to  them,  but  as  a  matter  of  fact  the  conditions  whk-h  it 
lielps  to  foster  are  the  very  woi*st  in  all  respects  for  them.selves  and  their 
children.  There  is  strong  evidence  that  labor  unrest  comes  from  this  over- 
crowding. What  labor  needs  above  all  things  is  to  improve  its  living  condi- 
tions, and  one  of  the  most  effective  means  to  that  end  is  to  spread  the  houses 
outside  the  industrial  areas  in  bright  and  pleasant  surroundings  where  the 
workingman  and  his  family  can  enjoy  their  leisure  time.  To  make  this 
jK>ssible,  the  lowest  possible  fares  for  the  longer  distances  and  ample  trans- 
port  facilities  for  tho.se  districts  are  essential.  Both  these  conditions  will  be 
favoretl  by  abolishing  nonpaying  short-distance  fares,  graduating  all  fares  to 
include  a)i  enterprising  spirit  in  the  management 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2C49 

Traveling  facilities  could  be  greatly  improved  in  many  cases  by  connecting 
up  neighboring  tramways  and  instituting  through  running.  There  are  many 
cases  where  the  use  of  tramways  has  been  greatly  increased  by  such  arrange- 
ments, clearly  showing  that  adjacent  but  separate  tramways  do  not  serve  the 
best  interests  of  the  public. 

A  campaign  of  education  and  propaganda  among  the  authorities  concerned 
in  favor  of  sound  fare  tables  and  a  more  tolerant  spirit  is  urgently  necessary, 
and  the  tramway  interests  should  take  up  this  work  energetically. 

Inasmuch  as  the  system  of  fares  advocated  will  raise  the  fare  above  the 
statutory  limit  of  1  penny  per  mile  for  the  first  mile,  it  may  be  necessary  for 
the  Government  and  Parliament  to  take  action.  The  present'  Government 
proposes,  however,  to  include  in  the  powers  of  the  Ministry  of  Ways  and  CJom- 
munications  tltat  of  regulating  tramway-  fares  among  otliers,  so  that  if  that 
bill  becomes  law  in  thjit  respect,  the  desired  alteration  will  be  by  administrative 
action.  At  any  rate  the  industry  will  know  "  what  door  to  knock  at,"  and  with 
such  a  good  case  in  the  interests  of  all  concerned  it  should  not  be  so  very 
difficult  to  ameliorate  the  conditions. 

The  second  difficulty  al)out  the  application  of  rational  ideas  to  tables  of 
fares  is  the  matter  of  coinage.  The  following  table  gives  the  figures  for 
distances  from  1  to  5  miles: 


Distance. 

Fares. 

Nearest 

coin 

value. 

1  mile 

* 

Pence. 
1.32 
1.87 
2.42 
2.97 
3.52 

Pence. 
IJori 

1* 

2  miles ." 

3  miles 

4  miles..... 

Smiles 

3i 

For  the  first  2  miles  the  nearest  coins  include  farthings,  and,  even  so,  the 
difference  between  the  theoretical  fare  and  the  nearest  coin  is  a  somewhat 
larger  percentage  of  the  total.  Farthings  are  not  popular.  An  attempt  to 
rationalize  tramway  fares  by  the  use  of  them  was  made  some  years  ago  on 
a  number  of  systems  and,  after  patient  trial,  was  withdrawn.  The  penny 
has  too  small  a  value  for  the  minimum  fare,  because  the  standing  charges 
item  alone  is  nearly  0.8d  and  the  length  of  ride  which  c<mkl  be  given  for 
the  0.2d  balance  is  too  small  for  a  stage.  Therefore  the  minimum  fare  must 
exceed  1  penny,  and  it  should  be  a  single  coin. 

The  solution  of  this  difficulty  would  be  the  adoption  of  the  decimal  sys- 
tem of  coinage  as  approved  by  the  associated  chamber  of  commerce,  the 
institute  of  hankers,  and  numerous  other  bodies.  This  system  divides 
the  pound  into  1,000  mills,  and  includes  the  provision  of  a  5-mill  nickel 
coin  of  the  value  of  10  to  a  shilling.  This  is  equivalent  to  1.2d  and  would 
suit  a  rational  system  of  fares  very  well.  The  value  is  a  little  lower  for  the 
mile  distance  as  set  out  above,  but  that  table  is  only  an  illustration  based 
on  collective  figures.  The  actual  length  of  the  stages  will  in  every  case  have 
to  be  adjusted  to  the  circumstances  and  costs  of  the  particular  system.  There 
is  no  need  to  keep  to  even  miles  in  making  this  adjustment.  There  would 
be  no  more  difficuty  in  fitting  the  stages  to  the  coins  of  a  decimal  system 
than  to  the  halfpennies  and  pennies  now  in  use.  Five  mills  is  a  better  start- 
ing point  than  a  penny  or  the  nearly  equivalent  4  mills.  The  rational  adjust- 
ment of  fares  which  will  put  tramways  on  a  sound  financial  basis  and  enable 
them  to  play  the  part  they  should  in  improving  social  conditions  will  be 
greatly  facilitated  by  the  introduction  of  a  decimal  system  of  coinage. 

The  power  of  the  tramway  to  give  frequent  service  is  not  so  generally  recog- 
nized or  utilized  as  it  would  be  under  more  encouraging  conditions.  Fre- 
quency of  service  has  an  extraordinary  power  of  developing  traffic.  The  aim 
of  the  tramway  manager  is  to  run  every  car-mile  on  every  route  which  will 
pick  up  anything  in  excess  of  its  standing  charges  and  bare  cost  ot  running. 
This  object  can  not  be  attained  by  calculating  from  the  number  of  people 
^served  and  the  minimum  service  which  can  suffice  them.  To  attain  the  object 
calls  for  a  continuous  study  of  the  habits  and  tendencies  of  the  population, 

160043°- 20— VOL  2 67 


2050    PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


tneir  working  hours,  shopping  hours,  and  places  and  times  of  recreation,  en- 
tertainment, and  any  other  factors  tending  to  induce  them  to  travel  This 
means  adapting  not  merely  the  daily  normal  service,  but  adding  more  cars 
at  .suitable  hours  in  accordance  with  the  local  circumstances.  The  forma- 
tion of  the  traveling  habit  in  the  people  living  along  any  route,  and  the  attrac- 
tion to  living  on  that  route  of  people  who  have  the  traveling  habit  or  travel 
ing  needs.  Is  fostered  by  the  appeal  of  a  good  service  more  effectively  than 
l)y  any  other  means.  It  is  better  to  have  a  car  making  only  a  small  net 
revenue  per  mile  than  to  be  standing  Idle  in  the  sheil.  An  enterprising  man- 
ager will  keep  his  services  rather  a  little  better  than  apparent  necessities 
than  a  Uttle  below  them.  Experience  shows  that  this  policy  pays.  In  some 
instances  a  route  which  has  not  paid  during  the  dull  hours  of  the  day  with 
a  poor  service  has  res[>onded  so  well  to  a  more  frequent  service  during  those 
liours  that  it  has  paid  continuously. 

The  following  is  a  summai*y  of  the  points  made: 

1.  Tramways  are  not  so  successful  financiaUy  as  they  should  be,  and  for 
that  reason  not  able  to  do  all  that  they  might  for  the  communities  they  serve. 

•-.One  reason  for  the  lack  of  tinancial  success  is  that  fares  are  not  graded 
so  that  every  passenger  pays  his  fair  share  of  standing  charges  as  well  as 
the  cost  of  carrying  him ;  the  fares  chiefly  in  default  are  the  short-distance 
1  a  res. 

R.  Generally,  the  minimum  fare  should  be  rather  over  Id.,  because  the 
standing  charges  alone  approach  closely  to  that  amount.  Rational  gradini; 
\MlI  elieapen  long  journeys  and  encourage  that  spreading  of  population  and 
relief  of  congestion,  which  is  one  of  the  principal  social  advances  to  which 
tr.iniways  can  contribute,  and  at  the  same  time  give  them  tlie  necessary  finan- 
cial strength  to  make  the  extensions  and  improvements  nee<le(l. 

4.  The  opposition  to  Increasing  the  lowest  fares  is  partly  ascribable  to  short- 
siirhtedness  on  the  pjirt  of  the  authorities  concerned.  It  should  be  combatted 
by  an  educational  propaganda  wherever  it  exists. 

.->.  Rational  grading  of  fares  will  be  greatly  assisted  by  the  adoption  of 
decimal  coinage  with  a  5-mill  piece  (1.2d.)  as  the  practical  unit  for  small  trans- 
actions. 

0.  Frequent  service  is  the  best  educating  influence  toward  the  formation  of 
tlie  riding  habit  among  the  public. 

One  of  the  most  pressing  problems  facing  the  tramway  operators  is  that  of 
finance.  Finance  includes  almo.st  all  things,  labor,  materials,  fares  rene>vals— 
in  tact,  everything  tliat  goes  to  make  the  tramway  machine  efficient  and  Jit 
to  give  that  public  service  it  is  designed  to  afford.  A  way  must  be  found 
to  adjust  fares  so  that  tramway  revenues  shall  be  suflicient  to  enable  oper- 
ators to  pay  wages,  purchase  materials  for  daily  use,  and  to  leave  a  mar-in 
to  pay  a  fair  return  on  the  capital  invested  and  also  accumulate  a  renewil 
or  reserve  fund  to  replace  the  wasting  assets  at  the  end  of  tlieir  lives  The 
revenue  of  a  tramway  can  be  increased  in. two  ways:  First,  by  charging  each 
passenger  a  higher  fare,  and,  secondly,  by  carrying  a  greater  numl)er  of  pas- 
sengers. ' 

Tlie  man  in  the  street  has  readjusted  his  idea  of  values  as  regards  clothin" 
food,  amusements,  etc.;  but  when  travel  is  concernetl.  he  seems  to  take 
a  different  view  and  demands  his  post-war  privileges  at  prewar  prices 
Perhaps  the  consumer  should  not  be  blamed  for  this.  The  difficulty  is 
to  And  a  way  of  making  the  Government  department  see  reason  and 
to  grant  relief  before  the  undertakings  of  the  tramwavs  get  into  a  state  of 
disrepair  and  inefficiency.  The  companies  must  have  sufficient  income  and 
the  only  way  to  obtain  revenue  is  to  charge  each  passenger  the  sum  it  'costs 
to  carry  him  the  distance  he  travels.  The  cost  is.  of  courts  made  up  of 
working  expenses,  depreciation,  and  capital  charges.  There  is  an  economic  limit 
to  fares  chargeable  (m  a  tramway,  and  as  soon  as  that  limit  is  exceeded  away 
gt>es  the  business.  ' 

It  is  advisable  that  the  company  have  the  power  to  charge  higher  fares  on 
Sundays,  bank  holidays,  gala  days,  and  special  occasions,  because  higher  wages 
have  to  be  paid  on  tho.  e  days.  It  costs  more  to  give  service  on  those  days, 
and  the  companies  are  entitled  to  a  higher  fare.  The  great  bulk  of  tralfic 
on  those  days  is  purely  pleasure,  as  distinguished  from  commercial  traffic  so 
B  higher  fare  would  not  be  in  restraint  of  trade. 

There  should  not  be  workmen's  fares.  The  so-called  working  clas-es  are 
now  drawing  more  pay  than  the  middle  classes,  or  even  many  professional 
men,  and  are  not  entitled  to  special  rates.  A  chnnge  can  not  be  expected  how- 
ever, while  vote-catching  politicians  rule  the  destinies  of  the  country      ' 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2051 


It  has  been  mentioned  that  tramway  revenues  could  be  increased  by  carry- 
ing more  passengers.  The  published  records  of  the  majority  of  tramways  show 
thnt  the  systems  are  full  to  capacity  and  that  it  is  a  vain  hope  to  look  for 
relief  from  additional  passengers.  This  may  be  untrue  of  some  systems,  but 
it  is  true  of  the  majority. 

Wages  and  conditions  of  employment  in  the  tramway  Industry  have  kept 
pace  or  even  outstripped  the  demand  made  upon  other  industries,  and  the 
only  difference  is  that  while  the  increased  charges  necessitated  by  the  altera- 
tion of  conditions  and  increase  of  wages  are  passed  on  by  the  trader  or  manu- 
facturer, and  the  tramway  companies  are  called  upon  to  carry  the  burdens 
themselves. 

As  regards  material,  the  condition  is  chaotic.  The  companies  are  paying 
the  prices  asked  by  the  manufacturers.  If  a  way  could  be  found  t*  standard- 
ize the  bulk  of  the  daily  stores,  and  to  buy  on  a  cooperative  basis,  it  would 
help  solve  the  problem.  Each  tramway  can  not  continue  to  have  its  own 
designs,  but  should  put  aside  its  preferences  and  prejudices  and  go  with  the 
crowd  and  help  bulk  production  and  diminished  cost.  Encourage  brains  and 
Inventiveness  by  setting  up  a  standing  committee  to  consider  and  decide  upon 
suggested  improvements  to  standardized  articles,  but  keep  them  standardized, 
embodying  all  the  improvements  that  are  discovered  from  time  to  time.  An 
organization  should  be  formed  to  collect  data  of  all  materials  in  use  on  the 
tramways  and  to  place  bulk  orders  with  manufacturers.  By  bulk  ordering 
the  company  would  benefit  by  quality,  workmanship,  and  price,  and  the 
manufacturers  by  increased  output  and  economy  of  production. 

In  1900  and  subsequent  years  when  electric  tramways  were  being  installed 
at  a  rapid  rate,  renewal  funds  were  calculated  and  set  aside  on  the  basis 
of  prices  then  prevailing.  The  funds  have  accumulated,-  and  now,  when 
renewals  beckon  the  companies  are  astounded  to  find  that  the  cash  available 
Is  about  150  per  cent  less  than  will  be  required  to  renew  the  wasting  assets 
at  prices  now  current.  The  only  solution  of  this  problem  is  to  "  earmark  '* 
every  possible  penny  for  renewals,  and  any  balance  will  have  to  come  out  of 
revenue.  Another  disagreeable  item  in  connection  with  renewal  funds  or 
reserve  is  that  they  are  invested  in  securities,  and  most  securities  have  depre- 
ciated so  that  the  tramway  companies  will  get  back  less  than  they  put  in. 

Another  problem  confronting  the  tramways  Is  that  of  rolling  stock.  The 
type  of  cars  at  present  in  use  in  the  United  Kingdom  is  the  ugly,  unwieldly 
double-deck  tramcar.  The  only  thing  to  be  said  in  favor  of  this  car  is  the 
seating  capacity.  Many  objections  can  be  raised,  such  as  excessive  weight, 
time  taken  in  loading  and  unloding,  difficulty  of  fare  collection,  etc.  Excessive 
weight  not  only  means  large  maintenance  cost  of  cars,  but  it  also  carries  with 
It  heavy  maintenance  cost  of  track,  and  as  these  are  the  two  chief  items 
in  the  repair  bill  of  a  tramway  undertaking,  they  are  very  important  and 
should  be  considered.  Cars  fitted  with  roof  covers  "are  the  acme  of  ugli- 
ness," and  they  are  ungodly  current  gluttons  and  voracious  enemies  of  rails. 
Is  it  too  late  to  make  a  change,  if  a  change  is  desirable. 

One  thing  certain  is  that  the  design  of  cars  should  be  simplified;  a  freer 
use  should  be  made  of  steel  and  malleable  iron  and  the  use  of  wooden  corner 
posts  and  intermediate  pillars  should  be  stopped.  All  brasswork,  gold  leaf, 
and  fancy  stuff  of  that  description  should  be  eliminated.  The  plainer  the 
interior  of  a  car  can  be  made  the  better  from  the  upkeep  point  of  view  and 
also  the  health  of  the  passengers.  * 

Car  equipment  should  give  ample  clearances  in  order  to  get  the  best  out  of 
the  tires  and  gear  cases.  The  present  springing  of  cars  also  should  be  im- 
proved. 

Another  problem  is  the  maintenance  of  roads.  The  upkeep  of  the  paving 
between  tramway  tracks  and  on  the  13-inch  margin  has  become  a  terrible  tax 
on  all  tramways,  due  to  present  traffic  conditions,  such  as  the  abnormal 
growth  of  heavy  motor  traffic.  The  tramways  ought  not  to  have  to  bear  the 
entire  cost  of  maintaining  road  surfaces  which  they  do  not  use. 

Another  problem  is  that  of  motor  omnibuses.  Motor  omnibuses  In  pro- 
vincial towns  compete  successfully  with  tramcars  for  handling  dense  rushes 
of  traffic,  but  in  the  future  tramway  tracks  will  not  be  laid  into  suburban 
and  country  districts  serving  comparatively  sparse  populations,  and  in  such 
districts  the  motor  omnibus  is  und<mbtedly  the  vehicle  of  the  future.  The 
question  of  road  maintenance,  or  rather  of  road  adaptation  and  maintenance, 
is  throttling  the  motor-omnibus  business  at  present,  and  until  this  question  is 
settled  on  a  national  basis,  the  motor  omnibus  will  not  take  its  riglitful  place 


2052    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

ns  a  passenper-cjirrylng  vehicle.  Most  exorbitant  demands  have  been  made 
by  road  authorities  on  omnibus  owners  and  operators  and  something  will  have 
to  be  done  to  settle  this  question.  Everyone  should  pay  alike  for  road  main- 
tenance. It  is  mast  unfair  to  compel  passenjrer-carrying  vehicles  to  contiibute 
an«l  leave  trade  vehicles  of  double  the  weight  and  of  equal  speed  absolutely 
free  of  all  charges. 

There  is  also  the  problem  of  housing.  That  Is,  in  some  localities  there  are 
town-planning  schemes  being  considered  by  local  authorities.  Extension  of  tram- 
ways at  the  present-day  prices  are  unthinkable  unless  assistance  Is  afforded 
by  the  authorities,  and  even  then.  In  the  present  unsettled  state  of  affairs  In 
the  traffic  world,  it  is  a  questicm  of  whether  any  company  is  warranted  in 
sinking  money  to  meet  demands  which,  in  all  llklihood,  can  not  yield  an  ade- 
quate return  for  some  years  on  the  capital  it  will  be  necessary  to  expend. 

In  the  past,  tramways  have  been  constructed  and  services  nm  In  districts 
that  were  not  really  ripe  for  development  at  the  time  the  tramways  were  laid, 
but  In  the  hope  and  expectation  of  future  profits,  services  In  excess  of  public 
requirements  have  been  run  to  induce  traffic;  and  now  when  the  period  of 
patient  waiting  is  beginning  K)  be  rewarded,  companies  are  faced  with  excessive 
charges  in  all  directions  and  their  meager  profits  seem  likely  to  disappear  en- 
tirely. At  present  it  is  quite  impossible  for  any  company  to  put  down  new 
lines  unless  assured  of  an  immediate  return. 

It  Is  also  a  prol)lem  how  to  provide  useful  and  remunerative  employment 
for  disabled  demobilized  men  and  spare  hands.  On  some  svstenis  the  task  of 
finding  suitable  work  for  disabled  men  has  proved  very  serious.  Many  under- 
takings have  a  serious  problem  to  solve  regarding  spare  men,  particularly 
places  catering  for  a  seasonal  traffic  or  where  the  traffic  is  irregular  and 
fluctuating.  If  public  demands  are  to  be  met,  the  cars  must  be  run  regularly 
and  on  time,  and  to  insure  that  this  is  done  there  must  be  available  a  per- 
centage of  men  to  understudy  those  who  may  be  sick  or  idle  or  who  have  missed 
their  duty  because  of  other  reasons. 

The  tendency  of  the  day  is  for  unskilled  labor  to  demand  and  obtain  the 
same  rates  of  pay  as  skilled  labor ;  and  if  this  is  to  continue,  what  will  the 
result  be  in  the  future?  This  will  lead  to  a  denuding  of  the  county  of  skilled 
craftsmen.  There  is  no  incentive  for  any  youth  to  stick  to  a  particular  trade 
and  to  make  himself  an  efficient  and  capable  craftsman. 

Some  effective  steps  must  be  taken  to  flatten  the  peak  loads.  It  means  a 
great  deal  on  a  busy  system  to  spread  the  peak-load  rush  over  a  wider  period 
and  there  are  great  advantages  to  the  public.  A  better  distribution  of  traffic 
means  improved  facilities  for  the  public  and  is  also  a  marked  saving  in  the 
wear  and  tear  of  rolling  stock,  economy  in  the  generation  of  electric  energy, 
and  to  some  extent  diminution  of  split  turns.  A  further  effort  should  be  made 
to  stagger  hours. 

It  is  no  exaggeration  to  refer  to  tramway  undertakings  as  a  starved  indus- 
try, even  the  reference  is  to  prewar  finances.  Sir  Eric  Geddes,  in  introducing 
the  ways  and  communications  bill,  stated  that  both  municipal  and  company 
tnimways  produced  a  gross  profit  of  7  per  cent.  Allowing  4  per  cent  for  de- 
preciation, Mr.  Magden  gave  the  average  net  jield  on  the  capital  invested  In 
tramways  as  8  per  cent.  As  he  observed,  the  result  proves  tramways  to  be  a 
star^'ed  industry,  for  a  return  of  3  per  cent  is  not  sufficient  to  attract'  capital  or 
to  justify  its  expenditure,  nor  does  it  provide  a  margin  for  enterprise  in  im- 
provements and  extension^.  By  increasing  short-distance  fares,  in  order  to 
meet  the  100  per  cent  increase  on  items  affected  by  postwar  prices,  Mr.  Magden 
estimated  that  a  yield  of  fi  per  cent  would  be  produced.  The  further  dispersal 
of  population  from  crowded  industrial  centers  would  not  be  the  least  bene- 
ficial effeet.  Methods  were  suggested  for  overcoming  two  hindrances  that  op- 
erate against  setting  up  this  rational  fare  system.  The  first  obstacle  is  that 
fares  are  generally  limited  to  a  maximum  of  one  penny  per  mile,  while  at  pres- 
ent costs  there  must  be  a  charge  of  more  than  one  penny.  This  may  entail 
action  on  the  part  of  the  Government  and  Parliament,  but  as  the  transport  bill 
Includes  a  provision  for  regulating  tramway  fares  among  others,  the  desired  ad- 
vantage would  be  by  administrative  action.  It  would  be  a  great  advantage  If 
such  action  would  override  the  numerous  provisions  in  si)ecial  acts  and  orders, 
and  agreements  between  companies  and  local  authorities  setting  out  scales  of 
fares  or  maximum  fares,  which  have  often  been  wrung  from  the  companies. 

For  the  purpose  of  educating  the  local  authorities  and.  If  need  be,  the  legis- 
lators, a  plan  is  proposed  that  has  proved  successfid  In  the  United  States; 
to  wit,  a  campaign  of  publicity.    The  same  remark  is  applicable  to  London  as 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2053 

far  as  omnibus  fares  are  concerned,  for,  apart  from  the  Members  of  Parliament 
who  have  an  eye  to  a  gem>ral  election  in  the  near  future,  complaints  have  not 
been  heard.  On  the  contrary,  passengers  consider  themselves  fortunate  to  have 
so  rapid  and  so  cheap  a  service.  Mr.  Dalrymple  predicted  that  even  two  or  three 
years  hence  everj^  undertaking  would  require  a  much  larger  revenue  from  fares 
to  meet  the  expenditure.  None  of  the  managers  who  discussed  Mr.  Magden's 
paper  objected  to  the  author's  main  conclusions.  To  a  large  extent,  the  demands 
of  labor  are  responsible  for  the  present  situation.  On  peace  dav  in  London  the 
receipts  of  one  company  were  about  £14,000,  while  the  cost  of  labor  alone  with 
double  pay  for  the  day  was  £18,000.  If  a  public  holiday  is  to  be  made  an  occa- 
sion for  holding  tramways  to  ransom,  the  balance  will  have  to  be  properly  ad- 
justed by  making  an  extra  charge  for  those  occasions.  This  was  suggested  by 
Mr.  England.  ]Mr.  England  was  even  more  insistent  than  was  Mr  Magden  in 
urging  the  need  for  a  publicity  effort,  and  it  is  to  be  hoped  that  the  two  tram- 
ways organizations  will  not  permit  the  matter  to  drop. 

Discussions.— Mr.  C.  J.  Spencer,  manager  of  the  London  &  Suburban  Traction 
Co.  (Ltd.),  stated  that  the  shortening  of  the  zones,  as  was  done  in  London,  was 
not  enough.  When  a  zone  was  shortened,  the  burden  was  placed  unequally  on 
.  the  shoulders  of  the  passengers.  About  50  to  60  per  cent  paid  no  increase  at 
all.  On  the  other  hand,  the  lo»g-distance  passenger  had  to  pav  100  per  cent 
more,  and  he  naturally  objected.  Mr.  Spencer  thought  that  ^the  tramways 
could  not  continue  to  operate  successfully  at  the  present  rates.  He  believed 
that  the  right  method  was  to  have  full  publicity. 

Mr.  A.  L.  C.  Fell,  mjniager  of  the  London  County  Council  Tramwavs,  said 
that  he  was  a  believer  in  giving  the  long-distance  rider  a  cheap  fare.  He 
thought  that  it  was  most  unfair  that  the  tramway  should  have  to  pay  for  all 
the  improvements  on  a  street  simply  because  the  tramwav  used  that  street 
when  every  other  vehicle  was  allowed  to  use  that  street  free  of  cost  The 
tramways  were  called  on  to  maintain  the  paving  of  half  the  street  which  thev 
did  not  wear  out. 

Mr.  Dah-yraple,  general  manager  of  the  Glasgow  Corporation  Tramways 
stated  that  several  years  ago  the  Glasgow  corporation  doubled  the  zone  where 
id.  was  paid  and  the  the  gross  revenue  increased  tremendously.  The  cost 
was  somewhat  higher,  but  the  company  was  able  to  meet  expenses.  He  sjiid 
that  the  corporation  had  only  had  a  balance  of  £14,000  without  anv  sinking  fund 
and  that  although  all  indebtedness  had  been  wiped  out,  there  was  no  fund  to 
keep  the  undertaking  thoroughly  up-to-date.  He  said  it  was  his  opinion  that  the 
fares  must  be  raised  in  order  that  the  company  should  be  able  to  provide  the 
most  efficient  service. 

Mr.  Stanley,  manager  of  the  New  St.  Helens  &  District  Tramways  Co    (Ltd  ) 
said  that  something  must  be  done  to  avoid  the  difficultv  caused 'by  the  short- 
distance  rider  overcrowding  the  car  for  the  long-distance  rider.    He  thought 
less  frequent  stops  should  be  adopted. 

Mr.  H.  R.  Hogg,  chairman  of  the  Sunderland  District  Electric  Trataway 
(Ltd.),  said  that  the  people  didn't  need  to  be  educated,  but  that  the  Government 
should  be  asked  to  allow  the  increase  in  fare. 

Mr.  McElroy,  general  manager  of  the  Manchester  Coriwration  Tramways 
stated  that  in  Manchester  they  were  meeting  the  increased  expenses  in  a  way 
that  was  not  beneficial  to  the  tramway  public.  They  were  overcrowdin"-  the 
cars,  giving  less  comfortable  travel.  He  thought  that  the  present  apparent 
prosperity  in  their  company  would  not  be  long-lived  and  that  before  long  the 
people  would  demand  more  convenient  means  of  travel,  and  this  could  be 
provided  only  if  higher  fares  were  charged. 

In  recommending  that  municipal  tramways  be  excluded  from  the  ways  and 
communiactions  bill,  Sir  Eric  Geddes  stated  that  "these  undertakings  are 
earning  7  per  cent  on  their  capital."  The  only  sense  in  which  this  statement 
could  be  substantiated  is  by  taking  the  balance  between  gross  receipts  and 
expenditure.  When  the  necessary  reductions  have  been  made  to  meet  all 
liabilities,  it  is  doubtful  whether  the  average  return  spread  over  the  whole  of 
the  undertakings  reaches  3  per  cent.  Many  individual  undertakings  are  found  to 
earn  sufficient  to  provide  for  renewals,  while  some  municipal  authorities  are 
forced  to  levy  a  rate  to  meet  deficiencies.  Company  undertakings,  which  are  not 
handicapped  by  having  to  provide  an  annuai  installment  for  the  repayment  of 
their  capital— their  dividends  fall  far  short  of  the  aggregate  earnings  attributed 
by  the  minister  to  tramway  enterprises.  The  board  of  trade's  report  shows  why 
privately  owned  lines  do  not  appear  to  show  such  good  results  as  some  munici- 
pal tramways.    This  report  shows  that  some  hindrances  also  beset  municipal 


'9^w 


2054    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

undertakings.  The  task  of  removing  these  undesirable  conditions  can  not  be 
siiccesfully  carried  through  without  resort  to  Parliament,  but  as  company 
tramways  are  to  come  under  the  new  ministry,  it  may  be  assumed  that  the 
latter  body  will  undertake  the  initiation  of  this  item  in  the  reconstruction 
program.  In  the  matter  of  extension  of  a  rural  and  interurban  character, 
which  will  be  made  urgent  by  housing  and  agricultural  needs,  the  new  ministry 
can  help  considerably.  It  would  be  wiser  for  the  municipal  railways  to  be 
controlled  in  the  same  manner  as  are  the  privately  owned  railways.  Tramways 
would  gain  from  a  coordination  of  railway  and  tramway  interests. 

In  the  negotiations  between  the  tramway  workers  ^nd  operators  it  is 
noticed  that  the  employees  recognize  that  the  working  exi)enditure  can  not 
be  increased  without  further  calls  upon  the  passengers  who  keep  the  under- 
taking going.  It  was  agreed  that  if  the  undertakings  were  not  permitted  to 
raise  their  fares,  the  agreement  could  be  terminated  at  one  month's  notice. 

I  might  say  one  of  the  commissioners,  Mr.  Mahon,  has  written 
an  article  making  a  comparative  study  of  the  operations  in  Great 
Britain  and  American  cities,  particularly  drawing  the  distinction 
between  Glasgow,  Cleveland,  Buffalo,  Detroit,  and  Cincinnati.  We 
have  a  copy  of  it,  and  I  think  we  should  make  that  a  part  of  the 
record,  if  Commissioner  Mahon  does  not  object. 

The  Chairman.  Have  you  any  objections  to  that,  Mr.  Mahon? 

Commissioner  Mahon.  No.  .  • 

The  Chairman.  It  will  be  so  understood. 

Mr.  Warren.  You  will  put  this  into  the  record  also? 

Mr.  OfJBiRN.  Yes. 

Mr.  Warren.  I  should  like,, if  it  is  proper,  to  have  the  Code  of 
Principles  of  the  association  put  into  the  record.    It  is  not  long. 

The  Chairman.  Will  you  see  that  that  is  done,  Mr.  Ogburn? 

Mr.  Ogburn.  Yes. 

The  Code  of  Principles  is  as  follows: 

CODE  OF  PRINCIPLES  ADOPTED  BY  THE  AMERICAN  ETJJCTRIC  RAILWAY  ASSOCIATION 
AT  ITS  THIRTY-THIRD  ANNUAL  CONVENTION  HELD  IN  ATLANTIC  CITY,  N.  J., 
OCTOBER    12  TO   16,    1914. 

1.  The  first  obligation  of  public  utilities  engaged  in  transportation  is  serv- 
ice to  the  public. 

The  first  essential  of  service  is  safety. 

Quality  of  service  must  primarily  depend  upon  the  money  received  in  fares. 
For  this  reason  it  is  necessary  that  the  rate  of  fare  should  be  sufficient  to 
permit  the  companies  to  meet  the  reasonable  demands  of  patrons  and  to 
yield  a  fair  return  on  a  fair  capitalization. 

2.  Ululated  private  ownership  and  operation  of  electric  railways  is  more 
conducive  to  good  service  and  the  public  welfare  than  government  owner- 
Bhip  and  operation,  because  the  latter  are  incompatible  with  administrative 
initiative,  economy,  and  efficiency,  and  with  the  proper  development  of  cities 
through  the  extension  of  transportation  lines.  The  interests  of  the  public 
are  fully  protected  by  the  authority  given  to  regulatory  bodies. 

3.  In  the  interest  of  the  public  and  good  service,  local  transportation 
should  be  a  monopoly  and  should  be  subject  to  regulation  and  protection  by 
the  State  rather  than  by  local  authorities. 

4.  Short-term  franchises  are  detrimental  to  civic  welfare  and  growth,  be- 
cause they  ultimately  check  the  extension  of  facilities  and  discourage  good 

service. 

5.  In  order  to  render  good  service,  electric  railways  must  be  allowed  to 
earn  a  fair  return  on  a  fair  capitalization,  and  the  foundation  for  this  result 
will  be  obtained  if  the  issuance  and  sale  of  s^urities  representing  such  fair 
capitalization  shall  be  legally  authorized  on  such  terms  as  will  produce  the 
requisite  funds. 

G.  Securities  which  have  been  Issued  in  ;  cordance  with  the  law  as  it  has 
been  Interpreted  in  the  past  should  be  valid  obligations  on  which  an  electric 
railway  is  entitled  to  a  fair  return. 


PEOCEEDINGS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSIOiq-.   2055 

7.  The  relation  of  adequate  wages  to  efficient  operation  should  always  be 
recognized,  but  electric  railways,  being  public  servants  regulated  by  public 
authorities,  should  be  protected  against  excessive  demands  of  labor  and 
strikes. 

8.  The  principle  of  ownership  of  securities  of  local  companies  by  centralized 
holding  companies  is  economically  sound,  for  the  reason  that  the  securities  of 
the  latter  have  protection  against  the  varying  business  conditions  of  a  single 
locality  or  company  and  because  money  for  construction  and  improvements 
can  thus  be  more  readily  obtained. 

9.  In  the  appraisal  of  an  electric  railway  for  the  purpose  of  determining 
reasonable  rates,  all  methods  of  valuation  should  have  due  consideration. 

10.  Full  and  frank  publicity  should  be  the  policy  of  all  transportation  com- 
panies to  the  end  that  proper  information  may  be  available  to  the  investor 
and  the  public 

The  Chairman.  We  will  now  stand  adjourned  until  10  o'clock 
to-morrow  morning. 

(Whereupon,  at  9.30  p.  m.,  an  adjournment  was  taken  to  Satur- 
day, October  4, 1919,  at  10  a.  m.) 


MVH-  03«2o 


ocrism 


« 


^9m  W.^.H^.'^^RSITY  LIBRARIES 


0044268432 


I 


JUL  2  5  192C 


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LIBRARY 


School  of  Business 


PROCEEDINGS  OF 

The  FEDERAL  ELECTRIC 
RAILWAYS  COMMISSION 


Held    in  WASHINGTON,  D.  C,  during  the    months 
of    July,    August,    September,    and    October,    1919 


together  with 


: 


Final  Report  of  the 

Commission  to  the 

President 


m  THREE  VOLUMES 

VOL.  3 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICB 

1920 


1 


(B 


Un3^ 


.i 


1  ' 


PROCEEDINGS 


OF 


FEDERAL  ELECTRIC  RAILWAYS  COMMISSION 


Washington,  D.  C,  October  i.  1019 — 10  a.  m. 

Present:  Parties  as  before. 

The  Chairman.  Commissioner  Eastman,  will  you  take  the  chair, 
please  ? 

STATEMENT  OF  COMMISSIONER  JOSEPH  B.  EASTMAN. 

Mr.  Eastman.  Shall  I  proceed  now,  Mr.  Chairman? 

The  Chairman.  Yes. 

Mr.  Eastman.  Mr.  Chairman  and  gentlemen  of  the  commission, 
I  am  very  glad  to  respond  to  the  invitation  to  appear  before  this 
commission,  although  I  should  not  have  sought  the  opportunity  my- 
self, and  I  am  glad  to  appear  because  I  realize  how  difficult  is 
the  question  you  have  to  deaj  with,  and  if  I  can  be  of  any  help  in 
aiding  you  to  solve  that  question  I  want  to  do  it.  My  chief  fear  is 
that  I  shall  not  be  of  much  help,  because,  although  I  have  spent  a 
good  deal  of  time  in  the  study  and  consideration  of  this  street-rail- 
way question,  I  never  felt  satisfied  that  I  had  really  arrived  at  any 
satisfactory  solution  of  it. 

I  think  I  ought  to  state  before  I  begin  tluit  I  am  here  solely  as  an 
individual  and  not  as  a  member  of  the  Interstate  Commerce  Com- 
mission. I  have  not  talked  the  matter  over  with  my  colleagues  at 
all ;  they  know  nothing  whatever  of  what  I  am  going  to  say,  and  they 
are  not  in  any  way  responsible  for  the  views  I  am  going  to  express. 
The  blame  is  wholly  my  own. 

Whatever  qualifications  I  possess  to  discuss  this  question  come 
from  experience  as  a  member  of  the  Public  Service  Commission  of 
Massachusetts.  I  was  on  that  commission  from  the  fall  of  1914 
until  the  end  of  last  year,  and  during  that  time  we  dealt  almost 
exclusively  wdth  the  street-railway  problem.  I  am  somewhat  handi- 
capped in  speaking  to  you  this  morning  because  of  the  fact  that  my 
experience  is  confined  almost  exclusively  to  Massjichusetts  and  you 
are  considering  the  entire  country.  I  have  some  fragmentary  knowl- 
edge of  the  situation  in  other  parts  of  the  country.  Also  I  ara 
handicapi)ed  that  since  the  beginning  of  the  year  I  have  given  little 

2055A 


2056    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

thought  to  the  situation  even  in  Massachusetts,  being  rather  fully 
occupied  with  my  duties  on  the  Interstate  Commerce  Commission. 
I  am  not  familiar,  for  instance,  with  the  statistics  of  the  street-rail- 
way operations  in  that  State  since  the  beginning  of  this  year. 

1  should  have  liked  to  have  been  able  to  prepare  a  careful  state- 
ment on  the  subject,  because  that  is  the  kind  of  a  statement  that  it 
deserves,  but  I  have  been  unable  to  do  that;  I  have  not  had  time; 
and  so  I  must  content  myself  with  certain  notes  which  I  have  made 
and  the  discussion  of  those  topics  in  a  rather  random  and  cursory 
manner. 

Now,  I  think  I  ought  to  begin  by  setting  forth  briefly  the  situa- 
tion in  Massachusetts,  because  it  differs,  I  think,  in  a  good  many 
respects  from  the  situation  in  other  States.  That  whole  matter,  the 
history  of  the  street-railway  situation  in  Massachusetts,  was  dis- 
cussed at  great  length  by  Frederick  J.  McLeod,  chairman  of  the 
public-service  commission,  when  he  appeared  before  the  special  street- 
railw\ay-investigation  commission  of  Massachusetts  in  November, 
1917.  That  statement  of  his  was  afterwards  published,  and  I  think 
it  is  accurate  and  it  describes  the  situation  fairly,  and  if  you  are 
interested  it  is  well  worth  your  perusal. 

But,  briefly,  there  are  certain  sources  of  weakness  in  the  Massa- 
chusetts situation.  In  the  first  place,  more  street-railway  mileag:e 
was  constructed  there  in  proportion  not  only  to  territory  but  also  in 
proportion  to  the  population  than  in  other  States.  The  last  time 
I  saw  the  figures  the  discrepancy  was  rather  striking.  And  natu- 
rally enough,  much  of  that  mileage  was  in  the  country  and  of  a 
rather  inferior  type.  We  have  no  genuine  interurban  lines  in  Mas- 
sachusetts, although  we  have  plenty  of  cities  which  would  support 
lines  of  that  character.  The  country  lines  are  constructed  as  a  rule 
not  on  private  right  of  Avay  but  aloijg  the  highways,  just  as  the 
street  railways  are  constructed  in  the  city.  And  that  results  in 
slow  speed  and  operation,  which  enhances  the  cost  and  at  the  same 
time  discourages  the  traffic.     To  illustrate  that  fact 

The  Chairman.  Under  the  law  are  they  permitted  to  occupy  the 
streets  as  telegraph  and  telephone  companies  are? 

Mr.  Eastman.  Yes. 

The  Chairman.  Without  paying  for  it? 

Mr.  Eastman.  Yes.  They  were  given  locations  in  the  street 
through  the  agency  of  the  cities  and  towns  acting  for  the  Common- 
wealth. The  locations  there  are  revocable  locations  which  do  not 
confer  any  perpetual  right.  They  can  be  revoked  at  any  time  by  the 
local  authorities  after  one  year's  time,  provided  the  public-service 
commission  certifies  that  that  is  consistent  with  the  public  interest. 
Orit^inally  there  was  not  even  that  proviso;  the  locations  could  be 
revoked  at  any  time  and  without  granting  any  compensation  to  the 

companies.  .  i         .  i  . 

The  Chairman.  So  the  companies  can  be  protected  against  arbi- 
trary action  taken  by  municipalities? 

Mr.  Eastman.  Yes;  they  can  under  the  law  as  it  has  existed  for 

some  years.  . 

Now,  to  illustrate  what  I  mean  m  regard  to  these  country  lines, 
take  the  case  of  the  Bay  State  Street  Railway  Co.— I  believe  now 
called  the  Eastern  Massachusetts,  since  its  reorganization :  That  op- 
erates all  over  eastern  Massachusetts  and  extends  from  Newport, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2057 

R.  I.,  on  the  south  to  Xashua,  X.  H.,  on  the  north  and  has  a  mileage 
of  very  nearly  1,000  miles  of  track.  And  although  it  has  a  good  many 
urban  systems  in  populous-city  centers,  it  also  spreads  all  over  the 
country  districts.  And  notwithstanding  that  fact,  in  1914-15  when 
we  had  that  company  before  us,  the  average  number  of  car-miles  per 
car-hour  was  only  8.4,  as  I  recall  it,  which  is  a  figure  which  you  would 
not  expect  in  a  distinctively  urban  system. 

Now,  many  of  these  country  lines  which  were  constructed  in  that 
way  never  had  a  chance  of  success  and  probably  ought  never  to 
have  been  built.  Many  of  them  were  practically  insolvent  from  the 
start  and  others  would  have  reached  that  condition  if  they  had  been 
allowed  to  continue  in  an  independent  way.  But  instead  of  that — 
and  this  is  the  second  point  in  which  our  situation  is  weak — the}^  were 
taken  under  the  wing  of  the  stronger  city  company  and  extensive 
consolidations  were  brought  upon  a  share-for-share  basis. 

The  Chairman.  Before  you  go  into  that  consolidation  can  you  tell 
th€  commission  why  these  lines  were  built  which  never  had  a  chance 
to  succeed  ? 

Mr.  Eastman.  Well,  they  were  built,  I  suppose,  because  of  the 
desire  of  the  country  districts  to  have  lines  and  because  of  the  hope 
that  they  would  succeed ;  and  also  because  of  the  profit  which  accrued 
in  their  construction  to  promoters  of  those  lines. 

The  Chairman.  Did  the  municipalities  contribute  to  the  construc- 
tion of  these  roads? 

Mr.  Eastman.  They  did  not  contribute  except  in  this  way,  that  I 
think  in  a  good  many  cases  subscriptions  were  made  to  the  stock  by 
individuals  in  those  towns  who  hoped  to  secure  benefits  from  the 
building  of  the  lines. 

The  Chairman.  But  there  was  no  public  aid  or  donations? 

Mr.  Eastman.  There  was  no  public  aid  or  donations.  As  I  was 
saying,  many  of  these  weaker  lines  were  consolidated  with  the  strong 
lines  upon  this  share-for-share  basis.  That  was  regarded  as  proper 
in  Massachusetts,  because  it  did  not  result  in  any  increase  in  the  ag- 
gregate stock  and  bonds  outstanding.  In  other  words,  it  resulted 
in  no  inflation,  in  the  ordinary  sense.  But  it  did  have  the  result 
in  spreading  the  earnings  of  the  strong  lines  out  over  these  weaker 
systems  which  could  not  have  existed  without  the  help  of  the  stronger 
lines  and  upon  an  independent  basis.  And  that  has  resulted  in 
greatly  weakening  many  of  the  city  properties.  There  are  very  few 
distinctively  city  properties  in  Massachusetts.  The  Eastern  Massa- 
chusetts Co.,  for  instance,  operates  in  such  populous  cities  as  Lrowell, 
Lawrence,  Haverhill,  Lynn,  Brockton,  Fall  River,  Salem,  Beverly, 
and  others  that  I  might  name.  But  at  the  same  time,  it  spreads  out 
all  over  the  country  districts,  and  the  earnings  of  the  city  lines  are 
diluted  in  that  way  to  support  the  lines  which  could  not  exist  or 
thrive  upon  an  independent  basis. 

That  is  also  true  of  the  lines  in  Springfield,  which  extend  con- 
siderable distances  to  the  west,  east,  and  south  of  the  city,  out  into  the 
country  districts.  It  is  equally  true  of  the  Worcester  company, 
which  has  extensive  country  lines. 

About  the  only  company  outside  of  the  Boston  company  of  which 
that  is  not  true  is  the  one  located  in  New  Bedford,  the  IJnion  Co., 
which  is  the  sole  exception  to  the  Massachusetts  companies  in  the 


2058     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOHT. 

matter  of  prosperity.  The  Union  Co.,  which  has  confined  itself 
largely  within  the  city  borders  and  has  not  entered  into  entangling 
alliances  with  outside  properties  and  has  been  managed  by  local 
men  and  owned  bv  local  capital  in  very  large  degree,  has  been  much 
more  successful  than  the  others,  and  up  to  the  present  time  has  been 
able  to  preserve  the  5-cent  fare,  although  it  is  now  petitioning,  I 
think,  for  an  increase  before  the  public-service  commission. 

Mr.  Warren.  It  has  also  reduced  its  dividend,  Mr.  Eastman. 

Mr.  Eastman.  It  has'< 

Mr.  Warren.  Yes. 

Mr.  Eastman.  Its  dividend  for  many  years  was  8  per  cent,  al- 
though under  the  Massachusetts  law  much  new  stock  was  issued  at  a 
premium,  the  premium  going  as  high  as  $50  a  share. 

In  the  third  place,  a  factor  of  weakness,  I  think,  wa^  the  control 
of  the  companies  in  many  instances  by  holding  companies  organized 
in  the  form  of  voluntary  associations  or,  to  use  a  more  technical 
term,  express  trusts.  Although  the  stock  and  bonds  of  the  street- 
railway  companies  themselves  were  issued  under  public  supervision, 
these  voluntary  associations  which  coralled  all  their  stock  were  sub- 
ject to  no  regulation  whatever  and  issued  shares  upon  an  inflated 
basis  and  that  had  the  result  of  accentuating  the  desire  to  draw  every 
possible  drop  of  income  out  of  the  underlying  companies  that  could 
be  secured  in  order  to  support  earnings  upon  the  inflated  shares  of 
these  voluntary  associations. 

In  the  fourth  place,  our  street-railway  companies  are  entirely  sepa- 
rate and  distinct  from  lighting  and  power  property.  They  are  not 
merged  with  those  properties  and  operated  under  one  management, 
as  is  the  case  in  many  other  parts  of  the  country.  I  think  it  is  true, 
so  far  as  I  have  knowledge,  that  in  many  cases  the  superior  earnings 
of  the  lighting  and  power  properties  have  been  able  to  support  the 
street  railway  companies  which  were  united  with  them,  but  we  have 
not  had  that  element  of  strength  in  Massachusetts  and  our  street 
railways  have  had  to  go  it  alone. 

The  Chairman.  Does  the  law  prevent  such  consolidations? 

Mr.  Eastman.  Well,  it  does  not  i)ermit  it.  There  is  no  law  au- 
thorizing such  consolidations.  It  has,  in  some  cases,  been  brought 
about  indirectly  through  the  medium  of  these  holding  companies, 
but  there  is  no  actual  merger  of  the  property. 

Now,  in  the  fifth  place— and  this  is  true  not  only  m  Massachusetts 
but  in  all  other  parts  of  the  country— there  has  been  the  ordinary 
failure  to  care  for  depreciation ;  the  need  of  caring  for  that  was  not 
recognized,  and  depreciation  was  not  cared  for.  t    i.  •  i 

In  the  sixth  place,  in  Massachusetts  the  cost  of  coal  is,  I  think, 
higher  than  it  is  in  most  other  parts  of  the  countrv  because  we  have 
to  bring  our  coal  from  rather  lemote  districts.  The  country  itself 
is  hilly,  so  that  it  is  much  more  difficult  to  construct  a  first-class  high- 
speed interurban  line  than  it  is  in  the  Middle  West  or  many  other 
parts  of  the  country ;  and  our  cities  are  old  and  laid  out  m  many 
cases  with  narrow,  crooked  streets,  which  also  adds  to  the  cost  of 

In  the  case  of  Boston  there  is  a  further  source  of  weakness  which 
lies  in  the  enormous  investment  in  rapid-transit  structures,  sub- 
Ways,  tunnels,  and  elevated  lines  which  have  been  constructed  in 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2059 

B(;oton  to  a  much  greater  extent  than  in  any  other  city  except  New 
York,  and  I  think  in  proportion  to  the  population  the  expenditure 
has  perhaps  been  as  gi-eat  in  Boston  as  it  has  in  New  York.  There 
was  an  unusual  necessity  for  such  structures  in  Boston  because  of  the 
layout  of  the  city  and  the  absolute  need  for  constructing  under- 
ground highways  in  the  congested  central  district — congested  by 
physical  condition— in  order  that  traffic  might  be  carried  through 
there  at  a  reasonable  rate  of  speed  and  in  reasonable  quantity. 

As  I  recall  it,  about  $35,000,000  has  been  invested  by  the  city  of 
Boston  m  subways  and  tunnels.  That  does  not  include  the  amount 
expended  by  the  company  on  the  Cambridge  subway,  which  cost 
about  $9,000,000,  and  in  addition  to  that  there  is  a  very  large  ex- 
penditure in  elevated  lines. 

In  the  last  place,  I  might  mention  that  a  source  of  weakness  in 
Massachusetts  has  been  the  pioneer  in  the  construction  of  good  roads, 
and  well-constructed  highways  exist  all  over  the  State,  which  has 
made  automobile  competition  relatively  easy. 

Now,  as  counter  to  that,  there  have  been  certain  sources  of 
strength,  and  the  chief  source  of  strength  has  been  the  supervision 
over  capitalization.  The  securities  of  the  companies  have  very 
largely  been  issued  under  the  regulation  of  the  public-service  com- 
mission or  its  predecessor,  the  board  of  railroad  commissioners,  and 
that  lias  resulted  in  a  much  less  capitalization  per  mile  than  in 
other  parts  of  the  country. 

Another  allied  source  of  strength  was  the  fact  that  there  was  a 
plentiful  supply  of  local  capital  which  could  be  secured  for  invest- 
ment in  these  railways,  and  I  think  they  were  practically  all  con- 
structed by  thut  local  capital  and  the  inve^stment  of  that  local  capital 
was  encouraged  by  favorable  tax  laws.  In  other  words,  the  stock 
of  these  companies  was  not  subject  to  taxation,  and  for  that  reason, 
it  became  a  popular  investment  for  the  trust  estates  and  similar  in- 
vestors in  Massachusetts  who  are  obliged  by  law  to  disclose  their 
holdings  and  hence  have  the  need  of  investing  in  tax-free  securities. 
That  resulted  in  the  acquisition  and  purchase  of  street-railway  stock 
in  many  cases  upon  a  l)ond  basis.  The  security  or  stock  of  the 
Boston  Elevated,  for  instance,  was  bought  by  investors  on  about  the 
same  rate  of  return  very  largely  which  they  might  have  secured  in 
investing  in  bonds,  and  it  is  very  widely  held. 

That,  in  a  sense,  it  has  developed  into  a  sort  of  weakness,  is 
rather  a  paradox.  At  the  same  time  I  think  it  is  true.  In  other 
parts  of  the  country  the  exploitation  which  took  place  resulted  in 
early  smash.  That  came  about  in  Cleveland,  that  came  about  in 
Chicago,  and  I  think  in  other  large  cities,  and  they  had  to  begin 
all  over  again  about  the  year  1907,  and  they  started  in  on  a  de- 
preciated basis  and  proceeded  to  rehabilitate  the  property  and  they 
have  since  had  the  advantage  of  that  rehabilitation. 

Now,  in  Massachusetts,  the  fact  that  the  securities  were  regulated 
and  the  capitalization  was  relatively  low  resulted  in  prolong! n<r  the 
life  of  the  companies  until  they  began  to  receive  the  full  effects  of 
accrued  depreciation,  and  they  are  suffering  from  that  now.  If  you 
go  back  10  or  12  years,  Massachusetts  was,  I  think,  )-oceiving  as  good 
street-railway  service  as  any  part  of  the  country.  We  used  to  boast 
of  the  street-railway  service  we  received  at  that  time  and  we  were 


2060     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 


proud  of  the  service  whicli  was  being  given  in  Boston  in  comparison 
vv  ith  the  service  which  was  bein^  given  in  many  other  hirge  cities. 
But  at  the  present  time  the  faihire  to  take  cai-e  of  depreciation, 
added  to  the  other  elements  and  factors  which  have  entered  into  the 
situation  in  recent  years,  has  resulted  in  a  very  weak  and  undesirable 

situation.  ... 

Coming  to  regulation,  until  1913  the  radroad  commission  in 
Massachusetts  had  no  mandatory  powers.  It  only  had  the  power 
to  recommend,  and  for  that  reason  the  street-railway  companies 
were  free— if  they  wanted  to  do  so,  and  except  to  the  extent  that 
they  felt  bound  by  agreements  with  the  local  authorities— to  raise 
their  fares  and  could  do  so  without  the  permission  of  any  State 
commission.  Notwithstanding  that  fact,  and  notwithstanding  the 
fact  that  now  underlies  the  situation,  they  were  always  in  a  pre- 
carious condition.  They  did  not,  as  a  rule,  increase  their  fares.  They 
were  rather  optimistic  of  the  future.  They  kept  hoping  that  the 
increase  of  traffic  would  pull  them  out  of  their  difficulties  and  it  did 
look  at  one  time  as  though  it  might,  because  traffic  was  increasing 
rapidly ;  population  was  increasing  and  traffic  was  increasing  along 
with  it.  Of  course,  the  development  of  the  automobile  has  had  a 
tendency  to  change  that  situation.  But  for  some  reason  or  other 
they  did  not  increase  their  fares  during  the  period  in  which  they 
were  at  entire  liberty  to  do  so,  except  in  a  few  cases.  There  were 
certain  companies  beginning  about  1905  which  changed  from  a  5-cent 
unit  of  fare  to  a  6-cent  unit  of  fare,  and  after  they  had  done  it  the 
railroad  commission  considered  their  situation  upon  complaint  and 
said  they  were  justified  in  making  that  increase. 

Xow,  in  1913  the  railroad  commission  was  reorganized  into  the 
public-service  commission  and  given  full  power  over  rates,  sub- 
stantially the  same  powers  that  the  Interstate  Commerce  Commis- 
sion possesses  over  railroad  rates.  And  about  1914  the  movement 
for  general  increases  in  fares  began  in  Massachusetts.  The  first 
case  or  the  leading  case,  under  the  public-service  commission,  was 
that'  of  the  Middlesex  &  Boston ;  and  in  that  case  the  commission 
laid  down  a  rule  which,  I  think,  was  entirely  fair  and  reasonable, 
but  at  the  same  time,  it  was  more  favorable  to  the  companies  than 
the  commission  might  have  laid  down  relying  upon  the  precedents 
of  the  courts.  In  other  words,  instead  of  taking  the  basis  of  repro- 
duction cost  less  depreciation,  the  commission  took  the  basis  of  the 
amount  of  money  honestly  and  prudently  invested  in  the  property 
which  it  was  ordinarily  able  to  ascertain  very  easily  because  of  the 
fact  that  the  securities  had  in  most  cases  been  issued  almost  alto- 
gether under  public  supervision. 

The  commission  held  that  the  companies  were  entitled  to  a  fair 
return  upon  the  amount  of  money  which  they  had  put  into  the 
properties  honestly  and  prudently,  and  did  not  deduct  from  that 
sum  anything  on  account  of  depreciation,  unless  it  felt  that  the 
failure  to  take  care  of  depreciation  was  due  to  inexcusable  misman- 
ao'ement.  There  have  been  cases  in  which  the  commission  said  that 
companies  were  entitled  to  a  somewhat  lower  return.  It  usually 
approached  the  matter  in  that  way,  because  of  the  thought  that  they 
had  paid  dividends  which  they  ought  not  to  have  paid  under  the 
circumstances.  And  I  might  say  in  passing  at  this  time,  that  not- 
withstanding the  adoption  of  that  rule,  which  always  seemed  to  me 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2061 

eminently  fair  to  the  companies,  the  commission  was  generally  re- 
garded as  hostile  and  oppressive.  That  was  the  very  general  feel- 
ing throughout  Massachusetts  in  regard  to  the  public-service  com- 
mission. And  I  may  further  say,  parenthetically,  that  the  experience 
that  I  had  on  that  commission  did  not  tend  to  enhance  my  opinion 
as  to  the  intelligence  of  investors  in  general.  In  many  cases  they 
bought  securities  Avithout  any  real  knowledge  of  what  they  were 
buying  and  when  the  results  of  that  ioWj  became  apparent,  they  were 
very  ready  to  seize  upon  the  reason  that  the  public-service  commis- 
sion was  to  blame  for  their  evil  situation  and 

The  CuAiRMi^N.  In  this  Middlesex  case  did  the  company  ask  for 
a  return  upon  the  cost  of  reproduction  new  less  de[)reciation  rather 
than  investment? 

Mr.  Eastman.  They  did  not. 

The  Chairman.  Upon  what  did  they  ask  for  a  return  ? 
Mr.  Eastman.  They  asked  for  a  return  upon  their  outstanding 
securities  which  were  issued  under  public  regulations. 
Commissioner  Sweet.  And  they  got  that,  substantially? 
Mr.  Eastman.  Yes;  that  is,  we  tried  to  give  it  to  them.    They  did 
not  get  it,  because  the  fares  did  not  produce  that  amount.     But 
that  was — and  I  may  say  that  the  discussion  of  what  returns  the 
company  should  receive  became  very  largel}^  academic  in  Massa- 
chusetts. 

Commissioner  Sweet.  The.y  got  the  ruling  from  the  commisssion 
that  they  wanted  in  that  respect? 

Mr.  Eastman.  Yes;  because  notwithstanding  the  increase  which 
we  gave  them — and  there  were  repeated  increases — they  still  failed 
to  secui-e  anything  like  what  under  our  rule  we  said  they  were  en- 
titled to  receive,  in  most  cases. 

The  Chairman.  Then  the  cost  of  reproduction  less  depreciation 
was  not  a  factor  in  that  case  on  either  side? 

Mr.  Eastman.  It  Avas  a  factor.  It  was  urged  by  the  remonstrants. 
I  was  not  on  the  commission  at  that  time,  but  as  I  recall  it,  it  was 
urged  by  the  remonstrants  that  the  returns  should  have  been  based 
on  the  cost  of  reproduction  less  depreciation. 

The  Chairman.  Did  they  say  that  \yould  be  more  or  less  than  the 
caj^italization? 

Mr.  Eastman.  AVell,  no  valuation  was  made,  but  at  that  time  I 
have  no  doubt  whatever  that  the  reproduction  less  depreciation  would 
have  resulted  in  a  less  amount  than  the  outstanding  capitalization. 

Speaking  again  of  the  situation  of  investors,  we  were  constantly 
confronted  by  this  situation:  We  asked  companies,  "Now,  why  did 
you  continue  dividend  payments  when  you  knew  that  dividends  were 
not  really  earned,  taking  into  the  consideration  the  necessity  of  main- 
taining the  property  and  taking  care  of  depreciation?"  Those  divi- 
dends, I  might  say,  in  most  cases  were  small  and  not  large.  And  the 
answer  we  almost  always  received  was  this:  It  was  necessary  to  con- 
tinue dividends  in  order  to  maintain  the  credit  of  the  proi)erties. 
That  means,  in  other  words,  that  investors  looked  at  the  thing  in  the 
most  superficial  way,  that  so  long  as  the  company  is  paying  dividends 
they  are  satisfied  that  it  is  all  right  without  making  anv  endeavor 
to  find  out  the  real  facts  and  whether  or  not  it  is  earning  the  divi- 
dends which  it  is  paying.     I  consider  a  statement  of  that  sort,  as 


2062     PROCEEDIKGS  OF  FEDElS^iL  ELECTKIC  BAILWAYS  COMMISSION'. 

a  whole,  a  reflection  on  the  intelligence  of  investors.  And  I  nii^T^^t 
sav  also  that  in  the  Bav  State  case  we  were  actually  confronted  by 
the  claim  that  depreciation  was  a  newly  discovered  science,  that 
nobody  knew  anything  about  depreciation  until  a  few  years  ago 
when  that  theory  was  developed,  although  as  a  matter  of  fact,  if  yon 
will  examine  the  laws  of  Massachusetts  you  will  find  that  the  earliest 
law  applying  to  the  capitalization  of  street  railways,  which  was 
passed  away  back  in  1874,  was  based  directly  upon  the  theory  of  de- 
preciation. In  other  words,  it  was  provided  that  the  commission 
should  not  allow  increases  in  st(X'k  if  it  found  that  the  value  of  the 
property  was  impaired.  That  law  was  afterwards,  I  am  sorry  to 
say,  emasculated.  But  depreciation  is  not  a  new  science,  but  has 
been  recognized  for  many  years,  as  you  know. 

Now,  beginning  in  1014  there  has  been  a  flood  of  increases  in  rates 
in  Massachusetts  and  they  have  been  of  every  imaginable  variety. 
We  have  had  increases  from  5  to  6  and  7  and  8  cents,  horizontal  in- 
creases in  the  fare;  we  h?ne  had  city  zone  systems  where  the  ride 
which  you  could  make  for  5  cents  w^as  cut  down  and  a  larger  sum 
charged  for  the  longer  rides.  We  have  had  the  introduction  of  mile- 
age system  w^here  you  took  a  country  line  and  divided  it  into  zones, 
about  one  mile  in  'length,  and  charged  a  certain  rate,  varying  from 
2  up  to  8  cents  per  mile,  and  the  passenger  received  a  ticket  when  he 
boarded  the  car  showing  just  where  he  w^as  going  to  get  off  and  paid 
in  proportion  to  his  ride.  And  we  have  also  had  various  schemes  of 
reduced-rate  tickets  to  encourage  the  regular  customer,  and  those 
tickets  have  been  of  paper  and  of  metal,  and  we  have  even  tried  the 
experiment  on  off-peak  tickets:  that  is  to  say,  a  lower  fare  during 
the  time  when  the  peak-load  is  not  on. 

Now,  none  of  those  experiments,  T  am  sorry  to  say,  have  been  suc- 
cessful in  producing  the  revenue  which  it  was  desiied  to  produce. 
And  I  can  not  say  that  anyone  of  them  has  been  much  more  success- 
ful than  another*!  You  take  the  zone  systems.  At  the  first  I  was 
verv  favorably  impressed  by  the  argument  in  favor  of  a  zone  sys- 
tem': in  other  words,  by  the  desirability  of  cutting  down  the  fare  to 
a  rate  no  higher  than  5  cents  in  the  strictly  settled  portions  of  the 
system  where  vou  might  expect  to  encourage  short-haul  riders.  But 
I  can  perhaps'describe  the  situation  best  to  you  by  telling  you  what 
happened  in  the  case  of  certain  zone  systems  of  that  sort  which  were 

established.  ,       -      .  i  t  i     i    i 

In  the  case  of  the  city  of  Holyoke,  for  instancy,  we  established  the 
zone  system  w^hich  preserved  the  5-cent  fare  in  a  central  district 
which  had  a  radius,  I  think,  of  about  2^  miles,  and  beyond  that  the 
fares  were  made  higher  by  the  use  of  tickets  grading  up,  I  think,  to 
10  cents.  Well,  now,  the  desired  revenue  was  not  produced  by  that 
system ;  and  when  you  came  to  consider  changing  it  you  were  either 
confronted  by  the  problem  of  reducing  the  central  zone,  which  was 
practically  impossible,  or  bv  throwing  all  the  added  increase  upon  the 
outlying  sections:  and  of  course  the  main  portion  of  the  travel  and 
the  business  being  in  the  central  district,  it  meant  a  very  heavy  burden 
upon  them  and  created  a  great  deal  of  alarm. 

In  the  case  of  Holyoke.  the  people  apparently  preferred  to  have  a 
horizontal  increase  in  fare,  and  we  extended  the  central  district  some- 
what, but  not  out  to  the  old  boundaries,  and  allowed  the  company  to 
establish  a  7-cent  fare  within  that  central  district. 


PROCEEDIIfGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2063 


In  the  case  of  Springfield,  practically  the  same  thing  hapj^ened. 
The  zone  there  was  about  3^  miles  in  radius,  and  the  5-cent  fare  was 
preserved.  That  zone  was  made  necessary  by  the  physical  condi- 
tions practically,  and  when  that  tariff  failed  to  produce  the  revenue 
desired,  it  became  necessary  to  consider  changes,  and  a  6-cent  fare 
was  permitted  in  that  central  district. 

So,  in  the  case  of  a  zone  system,  if  it  does  not  produce  the  revenue 
desired,  you  are  almost  inevitably  confrontied  by  the  necessity  of 
either  reducing  the  central  area  beyond  possible  limits,  or  of  increas- 
ing the  fare  in  that  central  area,  and  thus  doing  away  with  the  ad- 
vantage of  a  5-cent  fare. 

In  the  case  of  the  Bay  State  Co.,  their  cities  were  more  compact, 
and  they  finally  reduced  the  central  area,  in  the  endeavor  to  preserve 
a  low  fare  in  those  districts,  to  a  radius  of  about  1^  miles.  That 
did  not  produce  results.  Now,  they  have  a  10-cent  fai'e,  spread  over 
a  larger  area,  and  still  they  are  not  getting  the  results. 

The  situation  became  so  bad  that  in  1917  it  was  considered  by  a 
street-railway  investigating  commission  appointed  by  the  governor 
and  the  legislature,  and  at  that  time  it  seemed  to  be  the  rather  gen- 
eral idea  that  the  trouble  with  the  situation  was  that  the  public- 
service  commission  had  not  responded  readily  enough  to  the  de- 
mands for  increased  fares,  and  that  there  was  delay  in  granting  the 
increases ;  that  the  companies  were  hampered ;  and  that  if  they  could 
have  an  automatic  system,  by  which  thej'^  could  raise  rates  automati- 
cally on  the  cost-of -service  plan,  that  would  be  a  solution  of  the 
difficulty. 

That  plan  was  adopted  by  the  legislature,  and  strangely  enough.  I 
think — perhaps  I  am  wrong  in  this — but  I  think  that  the  owners 
of  the  properties  were  persuaded  at  the  time  that  that  system  would 
result  in  higher  fares  and  better  revenues,  while  the  public  had  the 
impression  that  it  would  resiUt  in  lower  fares.  In  other  words,  they 
both  held  the  commission  to  blame — the  public,  because  we  granted 
the  fares  too  rapidly,  and  the  owners  of  the  companies,  because  we 
had  not  granted  them  fast  enough. 

That  general  service-at-cost  plan  was  adopted  to  enable  the  com- 
pany to  have  its  capital  investment  determined,  and  to  raise  rates 
automatically  to  produce  a  return  of  6  per  cent  upon  that  amount,  it 
being  required  to  contribute  a  certain  amount  of  money  to  be  used 
as  a  reserve  fund,  and  the  fluctuations  in  rates  being  determined  by 
the  movement  of  that  fund;  when  it  fell  below  a  certain  point,  fares 
were  to  go  up,  and  when  it  rose  above  a  certain  point,  fares  were  to 
go  down. 

At  the  same  time  special  plans  were  adopted  for  the  Boston  Ele- 
vated Co.  and  for  the  Bay  State  Co.  The  Boston  Elevated  was  put 
under  the  control  of  public  trustees  appointed  by  the  governor  for 
the  period  of  10  3^ears  and  possibly  longer,  and  a  service-at-cost  plan 
was  adopted  for  that  company,  and  the  rate  of  return  was  made  u]^)n 
the  stock  of  the  company  5  per  cent  for  two  years,  5^  per  cent  for 
two,  and  6  per  cent  after  that  time. 

In  the  case  of  the  Bay  State  Co.,  that  company  was  also  placed  un- 
der public  trustees;  but  there  was  no  guaranty  of  the  amount  w^hich 
it  should  receive  upon  its  stock,  but  it  was  given  the  benefit  of  the 
credit  of  the  Commonwealth  for  an  issue  of  securities,  I  think,  of 


2064     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

about  $4,000,000,  in  order  that  it  might  have  funds  for  rehabilita- 
tion purposes,  but  the  same  service-at-cost  scheme  was  apphed.  In 
(hilt  act  the  Bay  State  Co.  was  reorganized,  the  securities  being  some- 

what  reduced. 

None  of  those  schemes  have  yet  succeeded  in  solving  the  difficulty, 
and  at  the  present  time  another  commission  is  sitting  to  consider  the 
situation  in  Massachusetts  and  attempt  to  find  a  remedy. 

Without  going  into  anv  more  details  in  regard  to  the  situation  in 
Massachusetts,  1  come  to  the  problem  by  which  this  commission  is 

I  do  not  know  exactlv  what  vou  have  been  asked  to  do.  i  speak 
at  a  disadvantage  for  that  reason.  It  seems  to  me,  however,  that 
the  street-railway  problem  is  essentially  a  local  one,  rather  than  a 
national  one.  Any  direct  action  which  is  taken  must  be  taken  either 
bv  the  States  or  by  the  cities.  ,1,1. 

^I  assume  that  a  Federal  commission  of  this  sort  only  helps  by 
advice;  in  other  words,  by  diagnosing  the  disease,  making  the 
situation  just  as  clear  as  it  can,  and  suggesting  possible  i;emedies. 
It  has  the  advantage  over  local  authorities  of  a  broader  view,  em- 
bracing the  entire  action,  unbiased  by  any  local  viewpoints  or  preju- 
dices, and  the  further  advantage  that  it  is  made  up  of  men  who 
command  public  confidence,  and  whose  statement  of  the  situation 
will,  I  think,  be  received  with  respect. 

Attempting  to  think  what  I  should  do  if  I  were  a  member  of 
this  commission,  I  have  arrived  at  this  tentative  conclusion:  I  think 
I  should  want,  first  of  all,  to  lay  a  groundwork  by  describmg  the 
general  situation  as  clearly  as  I  could. 

I  should  wish  to  start  off  by  making  clear  the  importance  of  street- 
railway  transportation.  I  do  not  need  to  enlarge  upon  that.  \ou 
realize  how  important  it  is  to  the  development,  particularly  of  urban 
communities,  and  while  it  may  be  that  some  substitute  will  be  de- 
veloped in  time,  we  know  that  at  the  present  time  there  is  no  such 
substitute  and  that  the  street  railways  are  the  only  machinery  which 
can  be  relied  upon  to  secure  the  movement  of  urban  populations 
which  is  absolutely  necessary  to  their  health  and  growth. 

So  I  think  I  should  enlarge  upon  and  describe  the  importance  of 
street-railway  transportation. 

Then  I  think  I  should  state  frankly  the  past  evils  from  which 
manv  of  the  companies  still  suffer.  1  do  not  think  it  is  desirable 
in  any  way  to  gloss  those  over.  There  is  no  doubt  that  overcapi- 
talization has  taken  place  in  many  cases;  there  have  been  extortion- 
ate rentals;  bad  financial  policy;  mismanagement  in  various  re- 
spects. In  some  cases  the  history  of  the  street  railways  in  this  coun- 
trv  has  been  absolutely  disreputable,  as  we  all  know.  Tliose  facts 
ought  to  be  frankly  stated.  At  the  same  time,  I  think  you  ought 
to  make  clear  that  not  all  companies  have  been  guilty  of  those  pra(!- 
tices  in  the  past,  and  that  some  of  them  have  done  penance  by  reor- 
ganization, getting  down  to  basic  facts. 

I  would  go  on  from  that  point  and  show  that  a  more  important 
causceven  than  these  past  practices,  a  more  important  cause  for  the 
present  plight  in  which  the  companies  find  themselves  is  the  vast 
increase  in  expense  which  has  taken  place  in  recent  years ;  the  in- 
crease in  wages,  in  the  cost  of  coal,  in  the  cost  of  basic  material. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2065 


You  have  those  facts.  I  need  not  enlarge  upon  them.  I  think  you 
can  present  that  situation  very  clearly  by  making  comparisons  with 
the  rise  which  has  taken  place  in  the  same  period  in  the  cost  of 
commodities  in  common  use.  Just  before  I  left  Massachusetts,  last 
Iiebruary,  I  remember  talking  to  a  woman  who  was  criticizing  the 
street  railways  very  severely  for  arlopting  a  10-cent  fare,  and  very 
shortly  afterwards  in  the  conversation  she  mentioned  the  fact,  with- 
out an  equal  amount  of  complaint,  that  she  was  paying  three  times 
the  price  for  canned  goods  that  she  used  to  pay.  That  is  the  situa- 
tion all  along  the  line,  and  it  ought  to  be  made  clear — the  rise  which 
has  taken  place  in  the  item  of  expense  in  these  street  railways  as 
compared  with  the  rise  which  has  taken  place  in  the  cost  of  com- 
modities in  common  use. 

Then,  I  think  you  should  point  out  the  absolute  necessity,  if  the 
systems  are  to  do  what  they  ought  to  do,  of  making  a  larger  pro- 
vision for  depreciation  than  has  been  made  in  the  past.  The  more  I 
study  the  situation  of  public  utilities  the  more  I  am  convinced  of  the 
necessity  for  adequate  depreciation  funds. 

The  Chairman.  Should  that  be  permissive  or  required  ? 

Mr.  Eastman.  I  am  inclined  to  think  that  it  ought  to  be  required. 
The  requirement  might  take  a  flexible  form;  in  other  words,  I  am 
not  at  all  sure  that  a  commission  could  lay  down  a  uniform  rule 
which  should  be  applied  to  all  companies  under  all  situations.  The 
rate  of  depreciation  in  some  properties  is  much  more  rapid  than  it  is 
in  others,  and  I  think  you  have  to  have  a  study  of  the  situation  in 
each  particular  case,  and  that  probably  no  uniform  and  inflexible 
rule  be  laid  down. 

The  Chairman.  I  think  that  is  true. 

Would  you  have  the  law  require  utilities  to  provide  for  deprecia- 
tion and  have  that  approved  by  some  regulating  commission,  or  would 
you  in  lieu  thereof  require  the  commission  to  make  an  investigation 
of  the  amount  of  depreciation  for  each  utility  and  prescribe  it  ? 

Mr.  Eastman.  I  think,  in  the  case  of  a  State  regulating  body, 
where  the  companies  are  comparatively  small  in  number,  probably 
the  best  rule  would  be  to  require  the  commission  to  investigate  the 
circumstances  of  each  company  and  lay  down  a  rule  for  that  com- 
pany, but  I  am  not  dogmatic  upon  that  point  at  all.  I  think  the 
question  of  depreciation  is  an  exceedingly  difficult  question,  and  my 
own  mind  has  not,  I  shall  have  to  admit,  come  to  rest  finally  in  regard 
to  all  phases  of  that  question. 

The  Chairman.  Of  course,  it  opens  up  a  very  large  practical  ques- 
tion. If  depreciation  should  be  required  for  street-railway  com- 
panies, the  same  rules  should  apply  to  electric,  water,  and  gas  com- 
panies perhaps? 

Mr.  Eastman.  Yes. 

The  Chairman.  And  if  the  commission  were  required  to  investi- 
gate and  report  upon  all  of  those  utilities  it  would  be  almost  an 
insuperable  task  ? 

Mr.  Eastman.  Yes. 

The  Chairman.  So  that  perhaps  it  would  be  better,  if  you  were 
poing  to  so  have  the  companies  make  a  depreciation  charge,  to  have 
it  approved  by  the  public  authority  ? 


i 


i   J 


2066     PEOCEEDmGS  OF  FEDER.VL  ELECTRIC  llAILWAYS  COMMISSION. 

Mr.  Eastiman.  Yes.  There  ai^  various  ways  in  which  the  prob- 
lem might  be  approached,  but  I  am  inclinixl  to  think  that  there  ought 
to  be  some  public  supervision  over  that  phase  of  the  problem.  I  am 
not  quite  sure  what  form  it  ought  to  take.  ,         i  • 

Tlie  necessity  for  depreciation  lies  in  this,  among  other  thmgs:  It 
is  not  sufficient  merely  to  keep  the  property  that  you  have_in  good 
condition,  because,  primarily,  of  the  changes  m  the  art.  The  hrst 
thing  you  know  somebody  makes  an  improvement  in  a  car  or  m  an 
electrical-developing  machinery,  etc.,  and  if  you  could  have  the  ad- 
vantage of  those  improvements  you  could  improve  your  service  and 
at  the  same  time  conduct  it  at  less  cost,  and  the  only  way  m  which 
you  can  be  in  a  position  to  take  advantage  of  the  development  of  the 
art  is  to  have  a  depreciation  fund,  so  that  you  can  replace  your  prop- 
erty when  you  need  and  ought  to  replace  it  in  the  public  interest; 
and  the  results,  I  think,  to  the  public  will  be  better,  because  instead 
of  having  old,  antiquated  and  obsolete  equipment  they  will  have  new 
and  modern  equipment,  which  will  give  them  better  service  and  also 

give  it  at  less  cost.  ,      i     xv. 

I  should  want  to  point  out  further  to  the  public,  very  clearly,  the 
inroads  which  have  been  made  by  automobile  competition.  There  is 
no  doubt  whatever  that  that  has  been  a  very  important  factor  in  de- 
creasing the  revenue  of  street-railway  companies  all  over  the  country, 
and  particularly  in  the  country  districts,  although  it  has  also  operated 
in  the  cities.  No  one  can  see  the  number  of  automobiles  which  oper- 
ate here  in  the  city  of  Washington,  for  instance,  without  realizing 
the  effect  which  that  must  have  upon  street-railway  revenues. 

Commissioner  Mahon.  Was  there  ever  any  estimate  of  that  made 
in  Massachusetts,  Mr.  Eastman— in  Boston  or  any  of  those  cities? 

Mr.  Eastman.  No;  only  in  a  very  indirect  way,  by  showing  the 
increase  in  the  number  of  automobiles  per  capita,  as  I  recall  it. 
Isn't  it  true  that  that  is  the  only  way  in  which  the  matter  has  been 
approached,  Mr.  Warren?  ^     .      ^,,        .    ,  i 

Mr.  Warren.  We  had  an  estimate  m  Springfield  as  to  how  much 
the  jitneys  have  taken  from  the  Springfield  Street  Railway,  assum- 
ing that  the  jitney  passengers  would  ride  in  the  cars  if  they  did  not 
ride  in  the  jitneys.  The  estimates  vary  from  $200,000  to  $300,000  a 
year,  because  of  the  varying  number  of  the  jitneys.  Wheji  the 
weather  is  bad  they  do  not  run,  and  when  the  weather  is  good  they 
do  run ;  so  that  it  is  a  little  difficult  to  estimate ;  but  from  $500  to 
$1,000  a  day  is  the  estimate  of  the  street-railway  officials. 

Commissioner  Mahon.  I  saw  a  statement  published  in  the  Boston 
papei-s  at  one  time,  and  I  wondered  whether  that  was  authentic,  or 
whether  it  was  just  an  estimate  setting  forth  the  effect  upon  the  city 
of  Boston  of  the  automobile  upon  the  owners  and  those  who  mci 
dentally  rode  with  them,  showing  the  effect  of  the  automobile;  and 
also  of  the  automobile  picking  up  certain  passengers  every  day.  I 
lost  the  aiiicle.  I  had  clipped  it,  and  in  some  way  lost  it.  I  wondered 
if  Mr.  Eastman  knew  anything  about  it,  or  if  there  was  any  mvesti- 
ffation  made  of  that  by  tiie  State  commission.  ,1^1 

Mr  Eastman:  There  was  never  any  investigation  made  by  the 
commission,  and  I  think  it  would  be  a  pretty  difficult  one  to  make. 
I  do  not  know  just  how  you  could  go  al)out  it,  except  to  show  the 
increase  which  has  taken  place  in  the  number  of  automobiles  owned 
in  the  State. 


PEOCEEDINGS  OF  FEDEKAL  ELECTEIC  RAILWAYS  COMMISSION.    2067 


Mr.  Warren.  That  was  about  1  to  16  people,  I  think. 

Mr.  Eastman.  It  is  growing  all  the  time. 

Now,  having  laid  that  foundation,  I  think  the  next  thing  thixt  I 
should  want  to  do  is  to  make  clear,  both  to  the  owners  and  managers 
of  the  companies  and  to  their  employees,  and  also  to  the  public  the 
very  broad  opportunities  which  exist  for  improving  service  in  ways 
that  will  result  in  substantial  economy  and  also  add  to  traffic  and 
revenue. 

I  think  there  are  very  great  opportunities,  or  at  least,  very  sub- 
stantial opportunities  which  exist  in  that  respect.  We  went  into  that 
in  Massachusetts  to  a  considerable  extent.  We  employed  experts  to 
examine  into  the  operations  of  tlie  properties  and  suggest  ways  and 
means  by  which  they  could  be  improved.  I  believe  that  yoii  have 
had  evidence  upon  all  those  matters.  I  can  summarize  at  the  present 
time  simply  by  saying  that  they  consist,  first,  of  means  of  conserving 
labor  by  increasing  the  mileage  of  the  cars  per  hour  in  various  ways, 
such  as  the  skip-stop  plan,  improved  motors,  better  acceleration  and 
deceleration,  decrease  in  the  number  of  layovers,  and  all  those 
various  means  of  making  the  car  do  more  work  in  a  given  hour,  and 
thus  conserving  labor. 

Second,  by  the  introduction  of  trailers,  which  are  really  one-man 
cars,  and  conserve  labor  in  that  way:  by  the  introduction  of  one-man 
cars  of  proper  type,  which  we  laid'  a  great  deal  of  emphasis  upon  in 
the  Public  Service  Commission  of  Massiichusetts ;  and  by  properly 
located  and  equipped  car  houses  and  shops.  Those  are  all  means  of 
conserving  labor.  Then  you  have  means  of  conserving  power,  by 
lighter  cars,  by  adequate  feeders,  and  by  various  power-measuring 
devices,  which  helps  the  motorman  to  use  power  more  economically. 

Then  you  have  means  of  conserving  property — and  these,  I  think, 
are  very  important — by  proper  maintenance"  of  tracks  and  cars. 
So  long  as  you  have  properties  where  the  cars  are  bumping  along 
over  poor  joints  and  poor  rails,  and  where  the  cars  themselves  are 
in  poor  condition,  you  not  only  increase  the  expense  of  operation 
and  the  necessity  for  repairs,  but,  at  the  same  time,  you  decrease  the 
respect  for  property  on  the  part  of  the  public.  Nobody  can  be 
very  friendly  to  a  property  which  is  giving  poor  service  and  does 
not  look  as  though  it  were  in  good  condition — that  looks  as  though 
it  were  nearing  the  end  of  its  existence. 

In  the  final  place,  there  are  means  of  conserving  revenue,  such  as 
various  fare-registration  devices,  fare  boxes,  and  reduction  in  the 
misuse  of  transfers. 

Then,  in  addition  to  the  means  of  conserving  expense,  you  have 
the  means  of  attracting  traffic  and  revenue  by  giving  good  service, 
with  attractive  and  efficient  equipment,  by  courteous  treatment  of 
the  public  on  the  part  of  the  employees,  by  the  development  of  sub- 
sidiary services,  such  as  freight  and  express  traffic  and,  possibly, 
the  sale  of  power. 

All  of  these  matters,  I  have  no  doubt,  have  been  gone  into  before 
this  commission.    I  think  you  ought  to  la,y  stress  upon  them. 

In  this  connection,  I  think  I  should  point  out  to  the  owners  and 
managers  the  need  for  enterprise  in  these  directions.  Wlien  they 
are  faced  by  the  necessity  of  getting  greater  net  revenue  the  tendency 
is  to  rely  too  much  upon  increasing  fares  and  to  forget  or  neglect, 


n 


2068    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

for  the  time  being,  these  other  means  of  improving  their  situation. 
^\e  found  that  to  be  the  case  in  Massachusetts. 

In  the  next  place,  I  think  you  ought  to  point  out  very  clearly 
to  the  employees  the  great  need  for  cooperation  and  moderation. 
They  are  working  for  a  sick  industry.  It  is  absolutely  essential 
that  the  situation  should  be  worked  out  and  that  that  sickness  should 
be  cured ;  and  no  one  has  a  greater  interest  in  the  recovery  of  the 
patient  than  they  have*.  It  is  in  the  employees'  interest,  just  as  much 
as  it  is  in  the  public  interest,  that  every  possible  means  ^lould  be 
adopted  of  saving  expense  and  attracting  revenue  and  traffic  to  the 
company ;  and  they  can  do  that.  I  need  only  point  out  the  im- 
portance of  such  things  as  patient  and  courteous  treatment  of  the 
public  and  aiso  the  proper  handling  of  equipment. 

I  want  to  say  this,  also :  I  believe  very  thoroughly  in  recognizing 
and  dealing  with  organizations  of  the  men.  I  think  that  that  can 
be  utilized  to  great  advantage  through  committees  which  deal  with 
such  matters  as  service,  safety  of  operation  and  efficiency  of  opera- 
tion and  discipline ;  and  I  also  think,  in  many  cases,  it  would  be  an 
advantage  to  give  them  direct  representation  upon  the  management. 
I  think  you  also  ought  to  point  out  to  them  that  the  situation  is 
very  delicate,  and  that  it  may  endanger  their  own  best  interests,  as 
well  as  the  interests  of  the  public,  and  alienate  public  sympathy  at 
this  time  if,  in  this  crisis  of  the  industry,  they  are  guilty  of  hot- 
headed, intemperate,  or  extreme  action.  In  other  words,  they  must 
realize,  as  I  said  before,  that  they  are  working  for  a  sick  industry, 
and  cooperate  along  with  the  public  and  the  owners  of  the  property 
to  help  cure  that  sickness  and  put  the  industry  upon  a  basis  where 
it  will  really  do  what  it  ought  to  do.  If  they  do  not  do  that  they 
are  very  likely  not  only  to  injure  the  interests  of  the  public  but  at 
the  same  time  to  injure* their  own. 

In  the  same  connection,  I  think  you  ought  to  point  out  to  the 
public  the  need  for  cooperation  upon  their  part.  A  great  many  of 
these  means  of  reducing  expense  which  I  have  suggested  depend 
upon  the  cooperation  of  the  public— in  the  loading  and  the  unload- 
ing of  the  cars,  for  instance;  in  the  suffering  of  minor  inconveniences 
for  the  sake  of  getting  larger  benefits,  for  instance;  in  acceding  to 
the  establishment  of  skip-stops,  which  results  in  a  minor  way  to 
the  disadvantage  of  some  of  the  travelers,  but,  on  the  whole,  im- 
proves the  service  for  the  entire  public — and  in  that  connection  I 
can  point  out  also  the  need  for  proper  traffic  regulations,  keeping  the 
ordinary  vehicular  traffic  ofT  the  car  tracks,  in  order  that  the  com- 
panies may  operate  upon  the  best  kind  of  schedule. 

In  the  same  connection,  you  ought  to  point  out  to  them  the  great 
danger  of  encouraging  jitney  competition,  because  if  they  are  going 
to  encourage  a  rival,  competing  form  of  industry,  it  may  be  so 
much  the  more  difficult  for  this  essential  industry  to  get  on  its  feet 

again.    So  much  for  that.  .  ,    .     .      , 

Coming  to  the  final  point— I  really  think  it  is  the  vital  point: 
You  ought  to  make  clear  the  essential  need  of  adjusting  conditions 
so  that  necessary  supplies  of  capital  can  be  secured.  It  is  abso- 
lutely vital  to  many  of  the  improvements  which  I  have  suggested 
that  capital  should  be  available,  so  that  the  improved  equipment 
and  apparatus  can  be  bought,  and,  apart  from  those  improvements, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2069 

it  is  equally  vital,  so  far  as  the  extensions  and  developments  of  the 
properties  in  the  future  are  concerned.  No  property  can  go  on 
operating  in  a  growing  city  unless  it  has  the  ready  means  of  secur- 
ing needed  capital. 

There  are  only  two  possible  policies  that  I  can  see  of  accomplish- 
ing that  end.  One  is  to  support,  strengthen,  and  use  the  credit  of 
the  private  corporation.     The  other  is  to  rely  upon  public  credit. 

If  private  credit  is  used,  it  is  obvious  that  the  companies  must 
be  placed  in  a  position  to  market  their  common  stock.  You  can 
not  depend  for  any  length  of  time  upon  the  issuance  of  bonds.  If 
you  increase  the  debt  of  the  company  out  of  proportion  to  its  capital 
stock,  you  soon  get  to  a  time  when  its  credit  automatically  ends 
and  new  issues  of  capital  stock  are  necessary  to  support  its  credit, 
so  that  it  is  absolutely  necessary,  if  you  are  going  to  depend  upon 
private  credit,  to  place  the  companies  in  a  position  where  they  can 
market  common  stock. 

I  am  not  familiar  with  the  situation  in  other  parts  of  the  country 
than  Massachusetts.  There  may  be  situations — I  think  there  are^ 
where  you  can  depend  upon  private  credit.  Apparently  the  Cleve- 
land situation  is  one  of  those,  although  I  noticed  in  yesterday 
morning's  paper  that  they  are  saying  that  they  have  got  to  have 
7  per  cent  instead  of  6  per  cent  upon  their  stock  up  there,  and 
their  expert,  Mr.  Mortimer  E.  Cooley,  says  that  in  other  cities  than 
Cleveland  it  would  require  8  to  10  per  cent  stock  to  finance  the 
street-car  companies. 

There  may  be,  however,  situations  like  Cleveland,  where,  with- 
out any  change  in  conditions,  you  can  go  on  and  depend  upon  private 
credit.  In  most  other  cases,  or  in  a  great  many  other  cases,  if  you 
are  going  to  depend  upon  private  credit,  I  think  it  will  be  neces- 
sary to  reorganize  the  properties,  to  get  them  on  the  same  basis  as 
the  Cleveland  property.  I  do  not  see  how  you  are  going  to  depend 
upon  private  credit  in  the  case  of  an  overcapitalized  company 
under  present  conditions.  You  could  not  expect  the  public,  cer- 
tainly to  make  good  their  watered  stock  or  the  results  of  inexcusably 
bad  management  in  the  past. 

So,  if  you  depend  upon  private  credit  in  those  cases,  jou  are 
faced  by  the  necessity  for  some  form  of  reorganization,  I  think; 
and  even  then  you  may  not  accomplish  what  you  want  to  accom- 
plish, because  the  results  of  these  increases  in  fares  have  shown 
they  do  not  always  produce  the  results  that  they  are  expected  to 
produce.  The  earriings  are  not  high  enough  to  support  the  credit 
of  even  a  conservatively  capitalized  company,  in  many  cases,  and, 
even  if  the  earnings  were  better,  I  am  still  afraid  that  the  credit 
would  be  poor,  because  street  railways  have  apparentlv  ceased  to 
be  an  attractive  field  for  private  investment.  The  investors  are 
afraid  of  street-railway  securities.  They  are  afraid  because  of  their 
experience  in  the  past,  and  I  think  they  are  also  afraid  because  of 
their  fear  of  what  may  possibly  happen  in  the  future.  They  are  in 
doubt,  for  instance,  in  regard  to  the  possibilities  of  automobile  com- 
petition and  labor  complications. 

If  you  do  not  depend  upon  private  credit,  the  only  alternative 
that  you  have  is  some  form  of  public  ownership. 

1G0643**— 20— VOL  3 2 


\ 


2070    PROCEEDLSTGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  regret  very  much  that  the  discussion  of  the  question  of  publi 
ownership  has  so  often  been  enshrouded  in  a  veil  of  pi-ejudice-- 
prejudice  on  both  sides. 

It  seems  to  me  that  too  often  one  side  regards  public  ownership 
{IS  an  unmitigated  evil,  and  foreininner  of  socialism,  bolshevism,  and 
various  other  evil  things  that  may  happen,  and,  on  the  other  side,  it 
IS  regarded  as  a  cureall,  or  panacea  for  all  the  ills  of  humanity. 
Between  two  opposing  points  of  view  of  that  sort,  of  course,  we 
can  have  no  sane  discussion  of  the  question. 

It  seems  to  me  that  in  the  present  instance  the  question  ought  to 
be  approached  in  this  way :  Hei-e  is  an  industry  which  is  essential 
and  vital  to  the  development  and  growth  of  the  community.  It  is 
performing  a  public  function  which  has  got  to  be  performed.  Now, 
if  the  industry  has  ceased  to  be  a  field  for  private  investment,  ob- 
viously the  only  alternative  that  you  have  is  some  form  of  public 
ownership ;  and  instead  of  denouncing  that  jpossible  remedy  and  dis- 
missing it  as  the  breeder  of  all  sorts  of  evils,  you  ought,  instead,  to 
attempt  to  analyze  the  dangers  which  may  possibly  inhere  in  it 
and  attempt  to  find  some  remedy  for  those  dangers.  ' 

I  am  by  no  means  convinced  that  it  is  impossible  to  find  such  reme- 
dies. I  am  stating  that  mildly.  I  am  of  the  opinion  that  they  can 
be  founds  and  I  am  of  that  opinion  because  of  this  saving  factor: 
That  street-railway  service  is  so  important  to  every  element  in  the 
community,  not  only  to  the  general  public  but  also  to  the  business 
interests;  it  is  essential  that  it  should  be  operated  efficiently  and 
economically,  even  more  essential  to  the  community  at  large  than  it 
IS  to  the  owners  of  securities  in  the  private  corporations,  because 
they  can  often  get  their  return  by  increasing  rates  rather  than  by 
efficient  and  economical  operation. 

Under  those  circumstances  there  are  various  safeguards  in  the 
situation.  One  is  voluntary  action  on  the  part  of  public-spirited 
citizens.  I  can  cite  as  illustrating  that  the  case  of  the  public  schools 
It  is  essential  to  the  welfare  of  the  community  that  the  public 
schools,  for  instance,  should  be  kept  out  of  politics ;  and  in  Boston 
a  group  of  public-spirited  men  got  together  and  formed  a  Public 
bchool  Association,  and  they  proceeded  to  follow  those  schools  fol- 
low theni  in  the  elections,  and  follow  them  outside  of  the  elections- 
and  I  think  it  is  the  general  opinion  that  they  have  been  quite  suc- 
cessful in  keeping  the  schools  out  of  politics.  In  fact,  the  chief  com- 
plaint, so  far  as  I  know,  in  regard  to  the  Boston  schools,  is  that 
they  have  come  too  largely  into  the  control  of  what  the  ordinary 
voter  regards  as  a  high-brow  and  that  they  are  devoted  too  much 
to  fads  and  fancies.  That  is  the  ordinary  criticism  which  is  made  of 
them. 

The  same  thing  is  true  of  the  fire  departments.  It  is  easential 
to  the  business  interests  of  the  community  that  the  fire  departments 
should  be  efficiently  conducted,  and  that  when  a  fire  occurs  they 
should  be  able  to  dispose  of  it  in  an  efficient  way.  I  think  we  will 
all  agree  that  our  fire  departments  in  the  cities  are,  on  the  whole 
very  efficiently  handled,  and  that  thev  do  the  service  which  they 
are  called  upon  to  furnish.  I  think  that  voluntary  action  of  that 
sort  can  be  a  great  safeguard;  but  apart  from  that,  you  have  the 
possibility  of  introducing  directly  into  the  management  representa- 


PROCEEDIJS^GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2071 

tives  of  the  various  elements  in  the  community  who  are  interested 
in  good  service. 

Public  ownership  does  not  neces'sarily  mean  public  operation,  if 
you  do  not  want  to  have  public  operation.  Personally  I  do  not  fear 
it.  But  if  you  have  public  ownership  it  is  entirely  within  your  power 
to  say  that  you  will  delegate  your  management  to  certain  groups  of 
citizens  who  are  not  under  the  control  of  politics.  You  may  say  that 
the  management  shall  be  in  the  hands  of  chambers  of  commerce  or 
improvement  associations  or  labor  unions  or  various  other  repre- 
sentatives of  the  community.  There  are  all  sorts  of  possibilities, 
in  other  words,  which  ought  to  be  considered  and  given  constructive 
thought  which  bear  upon  the  possibility  of  avoiding  the  dangers 
which  are  believed  to  be  inherent  in  some  form  of  public  operation. 

And  in  that  connection  I  think  I  ought  to  say  this :  That  if  public 
ownei^hip  is  to  be  adopted  in  any  community  I  think  it  is  essential 
that  the  public  should  not  be  misled  by  any  glamour  or  false  hopes 
in  regard  to  what  may  happen.  In  other  words,  they  should  not 
be  given  the  impression  that  a  raillenium  is  going  to  take  place 
if  they  receive  public  ownership,  but  that  a  situation  will  be  cre- 
ated where  good  service  and  good  management  can  only  be  brought 
about  by  vigilance  and  cooperation  on  the  part  of  all  the  members 
of  the  general  public  as  well  as  particular  elements  in  that  com- 
munity. 

And  I  think  also  it  is  highly  desirable  if  public  ownership  is  to 
be  adopted  in  any  particular  case  that  it  should  be  supported,  or 
the  exi^eriment  should  be  undertaken  after  a  vote  of  the  public, 
so  that  they  will  be  behind  it  from  the  start,  and  can  not  say  that  here 
are  some  interested  parties  who  have  been  trying  to  put  over  on  us 
some  experiment  and  we  do  not  like  it  and  are  not  going  to  support 
it  or  cooperate  in  it. 

If  you  get  them  directly  behind  the  experiment  at  the  start  by  a 
vote,  the  chances  of  success  are  very  much  greater. 

Commissioner  Wehle.  I  am  compelled  to  leave  for  a  little  while 
on  account  of  an  important  engagement,  a  meeting  at  the  Treasury 
Department,  and  I  hope  you  will  excuse  me.  I  hope  to  be  back 
here  before  you  conclude  your  testimony. 

Mr.  Eastman.  Yes.  1  am  almost  through.  The  final  thing  I 
was  going  to  suggest  is  that  there  is  anotlier  advantage,  or  possible 
advantage,  in  some  form  of  public  ownership  apart  from  the  question 
of  credit,  and  that  is  vou  are  not  entirely  dependent,  as  you  are  in 
the  case  of  private  credit,  upon  the  earnings  of  the  property.  In  the 
case  of  private  credit  you  are  absolutely  dependent  and  have  got  to 
make  the  earnings  in  some  way  sufficient  to  support  the  credit,  and  if 
you  can  not  do  that  your  problem  is  simpler. 

Now,  in  the  case  of  public  ownership,  you  are  not  under  that  same 
necessity.  As  a  general  rule,  I  think,  it  is  eminently  sound  policy 
to  make  such  properties  under  public  control  pay  their  own  way 
out  of  their  own  resources,  but  you  may  be  faced,  in  the  case  of  street 
railways,  by  a  situation  where  it  is  in  the  public's  interest  to  carry  at 
least  a  part  of  the  expenses  in  another  way.  In  other  words,  if  you 
find  your  fares  going  up  to  a  point  where  they  are  decreasing  the 
utility  of  the  properties  and  also  endangering  the  public  welfare  by 
concentrating  the  population  in  the  thickly  settled  centers  and  by 


2072     PROCEEDIl^GS  OF  FEDEKAL  ELECTRIC  RAILWAYS  COMMISSION. 

cutting  down  service  and  cutting  down  revenues  at  the  same  time,  it 
may  be  very  well  that  it  will  be  to  the  interest  of  all  concerned  that  a 
part  of  that  expense  should  be  carried  with  tax  levy. 

I  am  not  dogmatic  about  that.  The  matter  was  discussed  and 
the  possibilities  in  that  connection  were  discussed  rather  fully  in  the 
lai-t  annual  report  of  the  Public  Service  Commission  of  Massachu- 
setts, and  I  have  no  settled  and  positive  conclusions  upon  that  subject. 

The  Chairman.  Can  you  call  attention  to  the  part  or  page  of  the 
report  'i 

Mr.  Eastman.  It  starts  on  page  22,  in  Roman  type,  and  ends  on 
page  48.  As  I  say,  I  am  not  dogmatic  about  that,  but  it  is  a  possibility 
that  deserves  very  serious  consideration.  It  is  a  good  deal  like  the  case 
of  the  old  highways  in  Massachusetts.  There  was  a  time  in  the  first 
part  of  the  century  where  companies  were  chartered,  and  a  great  many 
of  them,  to  build  toll  roads  throughout  Massachusetts;  and  begin- 
nmg  at  Boston  as  the  center  of  the  hub  they  extended  out  in  great 
lines  to  various  populous  cities  in  the  eastern  part  of  the  State,  and 
they  were  built  by  private  capital,  and  they  charged  a  toll  for  the 
right  to  use  those  highways.  But  the  experiment  was  unsuccessful 
and  could  not  be  supported  in  that  way,  and  they  were  finally  taken 
over  by  the  entire  community,  and  they  are  now  operated  without 
any  revenue  of  their  own  at  all,  and  entirely  by  the  tax  levy. 

That  is  not  what  I  am  suggesting  here.  1  am  suggesting  that  it  may 
be  advisable  in  this  case  to  secure  the  best  net  results  to  all  concerned 
that  a  i^art  of  the  cost  should  be  bas^d  upon  the  tax  levy,  and  you  can 
do  that  under  public  ownership  and  can  not  do  it  under  any  form  of 
private  ownership. 

I  think  that  is  all  I  have  to  say.  I  regret  that  I  can  not  go  into  it 
any  more  thoroughly. 

Mr.  Warren.  Before  you  begin  to  question  Mr.  Eastman  I  want 
to  say  a  word  about  the  Springfield  system  of  fares,  as  I  think  it  will 
interest  Mr.  Eastman.  The  system  which  was  put  in  there,  and  under 
approval  of  our  public-service  commission,  when  Mr.  Eastman  Avas 
on  the  commission,  did  result  in  a  very  satisfactory  increase  of  fares, 
but  it  only  had  about  a  month  to  operate  before  wages  were  increased' 
about  25  per  cent  under  an  arbitration  award.  Then  it  became  neces- 
sary, I  think  while  Mr.  Eastman  was  still  there,  to  ask  for  a  further 
increase  in  rates,  which  was  made,  and  that  produced  a  very  satisfac- 
tory increase  in  revenue,  and  that  has  been  operating  up  to  the  present 
time. 

There  has  recently  been  another  arbitration  award  with  a  32  per 
cent  increase  in  wages,  and  there  is  now  pending  a  third  application 
for  an  increase  in  rates. 

I  mention  this  because  I  was  very  much  interested  in  the  outcome 
as  Mr.  Eastman  probably  remembers,  and  I  felt  it  might  solve  the 
problem  for  that  company,  and  apparently  it  has.    Whether  we  can 
raise  again  and  get  the  necessary  net  revenue,  of  course,  is  a  puzzle 
but  it  has ' 

Mr.  Eastman.  It  was  necessary  to  abandon  the  5-cent  unit? 

Mr.  Warren.  Oh,  yes ;  we  had  to  abandon  the  5-cent  unit.  We  had 
to  go  to  6  cents,  and  now  we  are  proposing  to  go  to  7. 

Mr.  Eastman.  And  when  you  say  the  results  are  satisfactory,  you 
do  not  mean  that  you  are  earning  what  you  think  you  ought  to  earn 
in  that  property,  do  you  i 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2073 

Mr.  Warren.  We  would  like  to  earn  more,  but  I  think  we  were 
earning  enough  on  the  6-cent  rate  to  have  paid  a  dividend  if  we  had 
not  been  embarrassed  by  the  credit  situation.  We  found  if  we  paid  a 
dividend,  which  we  should  have  liked  to  do  to  restore  our  credit  with 
security  holders,  that  our  banks  which  held  our  short-term  paper 
would  have  objected  and  called  upon  us  to  pay  the  short-term  paper 
That  was  a  dilemma  which  was  a  very  serious  one. 

The  Chairman.  How  was  the  stock  exchanged  when  these  con- 
solidations were  made  between  the  strong  and  weak  line  ? 

Mr.  Eastman.  It  was  exchanged  on  a  share-for-share  basis.  Some- 
times in  a  single  case— I  can  illustrate  perhaps  the  process  by  one 
company.  The  Holyoke  company  was  connected  with  a  small  line 
called  the  Amherst  &  Sunderland,  which  operated  out  in  the  country 
districts,  built  originally  by  the  farmers.  Now,  the  men  who  held 
the  stock  of  the  Holyoke  company  went  out  and  bought  the  stock  of 
that  Amherst  &  Sunderland  Co.,  which  had  no  hope  of  success,  I 
think,  at  about  50  cents  on  the  dollar  or  less. 

At  the  time  when  they  were  buying  it  the  Holvoke  stock  was  worth 
between  $150  and  $200  per  share.  And  they  proceeded  to  exchange 
each  one  of  these  shares  of  Amherst  &  Sunderland  stock  for  a  share 
of  Holyoke  stock. 

Now,  in  other  cases  the  process  Avas  not  quite  so  simple  as  that. 
In  the  case  of  the  Bay  State  consolidation  a  great  many  different 
companies  were  acquired,  and  through  the  medium  of  a  holding  com- 
pany then,  the  name  of  one  of  them  was  changed  and  they  were  all 
consolidated  with  that  upon  a  share-for-share  basis. 

In  other  words,  for  an  outstanding  share  in  one  of  the  companies 
the  holder  received  a  share  of  this  company  with  its  name  changed 

The  Chairman.  Where  the  stock  of  the  weaker  lines  was  ex- 
changed for  the  stock  of  the  Holyoke  system,  selling  for  $150,  what 
did  the  Holyoke  stock  sell  for  after  the  consolidation? 

Mr.  Eastman.  Well,  immediately  after,  at  about  the  same  price. 

The  Chairman.  One  hundred  and  fifty  dollars? 

Mr.  Eastman.  Yes.  Of  course,  this  was  not  a  large  line,  and  com- 
pared to  the  Holyoke  company  it  represented  a  very  small  increase 
in  capitalization;  but  it  had  the  effect  of  impairing  the  financial 
strength  of  that  company  as  times  grew  worse  and,  to  an  extent,  is 
one  of  the  reasons  for  the  later  difficulties  of  the  Holyoke  company. 

Now,  that  particular  company,  I  think,  only  acquired  one  or  two 
lines  of  that  character  But  in  the  case  of  other  companies  there 
were  many  more  of  those  mergers  or  consolidations. 

The  Chairman.  Did  that  consolidation  enable  the  purchaser  of  the 
cheap  stock  to  sell  it  at  an  increase  of  200  per  cent? 

Mr.  Eastman.  Yes;  it  did.  I  have  not  figured  out  the  percentage, 
but  It  certainly  enabled  him  to  make  a  substantial  profit  on  the 
transaction. 

The  Chairman.  My  percentage  was  simply  based  upon  the  figures 
you  presented. 

Mr.  Eastman.  Yes. 

The  Chairman.  Was  that  a  common  method  of  consolidation  in 
that  State? 

Mr.  Eastman.  The  share-for-share  basis? 

The  Chairman.  Yes. 

Mr.  Eastman.  Practically  all  were  were  made  on  that  basis. 


2074    PfiOCJiJiDLSGS  OF  FJiDEllAL  ELECTJilC  RAILWAYS  COMMISSION". 

The  Chairbian.  Did  that  develop  the  feeling  in  the  cominunity 
that  these  consolidations  were  being  made  simply  for  promotion  or 
speculation  purposes? 

Mr.  EA8T3IAN.  Not  at  the  time  they  were  made.  In  fact,  there 
were  hearings  at  the  time  they  were  made  and  no  public  objection, 
in  most  instances,  were  offered  to  the  merger.  I  ought  to  say  this: 
It  was  thought  at  the  time  when  many  of  them  were  brought  about 
that  the  consolidation  would  result  in  economies,  improved  service, 
and  lower  fares 

The  Chairman.  I  w^as  coming  to  that. 

Mr.  Eastman.  And  to  a  certain  extent  it  did  result  in  lower  fares. 
Some  of  the  people  on  these*  lines  were  given  more  advantageous 
fares  when  they  were  linkeil  up  with  the  larger  company  than  they 
had  before. 

So  far  as  the  economies  are  concerned,  I  do  not  think  they  worked 
out.  I  think  the  Union  Co.,  which  stayed  by  itself  and  is  a  small 
company,  has  been  able  to  operate  more  economically  than  the  Bay 
State,  which  spread  all  over  eastern  Massachusetts. 

The  Chairman.  Broadly  speaking,  was  that  consolidation  in  the 
interests  of  the  public  ? 

Mr.  Eastman.  looking  back  on  the  situation,  I  should  say  that 
it  was  not.  I  do  not  know  that  I  would  have  the  foresight  to  say 
that  at  the  time  those  were  made;  I  was  not  around  at  that  time; 
but  looking  back,  with  my  present  knowledge,  I  should  say  not. 

The  Chairman.  Is  your  answer  based  upon  the  thought  that 
smaller  companies  would  have  been  able  to  nieet  the  pi^esent  operating 
conditions  with  greater  economy  and  simplicity  than  a  larger  or- 
ganization? 

Mr.  Eastman.  Well,  what  would  have  happened  to  the  smaller 
companies  is  what  happened  to  some  of  them  who  were  not  taken  in 
with  some  stronger  company:  They  would  have  gone  into  the  re- 
ceiver's hands  and  been  reorganized  and  either  opei-ated  independ- 
ently on  a  shrunken  basis  or  been  bought  over  by  some  stronger 
company  at  a  depreciated  value. 

The  Chairman.  You  have  had  quite  a  little  experience  with  the 
zone  system;  and  your  testimony  show^s  that  your  zones  have  been 
narrowed  and  extended  and  expanded,  and  in  some  cases  abandoned, 
1  believe.  Generally  speaking,  do  you  believe  that  a  zone  system  is 
a  proper  system? 

'Mr.  Eastman.  Well,  that  is  a  very  difficult  question.  As  I  say, 
I  at  first  was  very  much  attracted  by  the  theory  of  the  zone  system! 
It  seemed  to  me  it  made  the  rider  pay  in  proportion  to  what  he 
got,  and  it  also  enabled  the  company  to  atti^act  the  short-distance 
rider.  And  if  you  had  originally  started  on  that  basis,  I  think  in 
all  probability  it  would  be  a  proper  system  to  adopt  in  this  country, 
just  as  they  have  done  in  Great  Britain,  for  example. 

But  when  a  community  has  grown  up  on  the  other  basis,  it  un- 
doubtedly causes  a  serious  dislocation  m  many  case^  by  suddenly 
changing  the  system  from  a  flat- fare  system  to  a  zone  system,  so 
that  some  people  will  still  retain  their  5-cent  fare  and  others  will 
have  to  pay  a  much  higher  fare.  And  it  was  my  experience  that 
the  introduction  of  the  zone  system  caused  more  irritation  on  the 
whole  than  a  flat  increase  in  fare. 


PEOCEEDINGS  OF  FEDERAL  ELECTPJC  RAILWAYS  COMMISSION.    2075 

The  Chairman.  Did  that  imtation  continue  for  a  long  time? 

Mr.  Eastman.  Well,  of  course,  a  good  many  of  the  things,  rela- 
tively speaking,  have  not  l)een  in  operation  very  long. 

The  Chairman.  Has  the  system  been  in  operation  long  enough 
to  enable  you  to  form  a  judgment  as  to  whether  it  tends  to  decen- 
tralize a  community  or  scatter  industries  over  larger  areas? 

Mr.  Eastman.  No  ;  I  do  not  think  that  I  have  any  very  positive 
information  on  that  subject.  I  suggested  to  the  Commission  of  Mas- 
sachusetts w^hich  is  now  investigating  the  street-railway  situation 
that  they  should  endeavor  to  collect  all  the  direct  and  positive  in- 
fonnation  that  they  could  in  regard  to  the  effect  of  the  higher  fares. 
I  saw  in  one  of  the  Boston  papers  the  other  day  that  the  10-cent  fare 
there  is  causing  a  great  demand  for  tenements  and  lodging  within 
walking  distance  of  the  central  districts  and  that  the  demand  is 
much  greater  than  the  supply.  I  was  told  in  some  of  the  cases  of  the 
Bay  State  cities— and  I  think  it  was  Lynn— that  an  mvestigation 
was  made  after  the  establishment  of  the  zone  system,  and  it  was 
found  that  houses  and  apartments  could  be  easily  secured  outside 
the  central  district,  but  that  wdthin  the  central  district  the  demand 
was  much  greater  than  the  supply  there,  showing  the  tendency  of 
population  to  move  inward. 

Mr.  Warren.  Where  was  that? 

Mr.  Eastman.  Lynn.  But  I  do  not  think  the  experience  has  been 
sufficient  at  the  present  time  to  do  anything  more  than  to  raise  the 
possibility  of  danger  in  that  respect.  In  other  words,  it  is  no  positive 
proof. 

The  Chairman.  Do  you  regard  a  zone  fare  as  still  in  the  experi- 
mental stage  in  this  country  ? 

Mr.  Eastman.  I  should  say  so. 

The  Chairman.  You  were  discussing  the  holding  companies,  and 
you  mentioned  that  as  one  of  the  weaknesses  of  the  Massachusetts 
system.  To  what  extent  is  a  holding  company  a  weakness  in  the 
system  of  ©iteration  ? 

Mr.  Eastman.  Well,  I  think  it  is  a  weakness  in  this  way — where 
tlie  securities  of  the  holding  company  are  issued  on  an  inflated  basis, 
as  they  were  in  Massachusetts,  that  two  things  result : 

In  the  fii-st  place,  there  is  a  tendency  to  draw^  from  the  underlying 
companies  every  possible  cent  which  you  can,  in  order  to  make  a 
showing  on  these  inflated;  and,  outside  of  that,  there  was  in  Massa- 
chusetts a  very  deep-seated  tendency  to  misfead  investors.  For  in- 
stance, I  have  known  of  investors  who  bought  preferred  shares  of 
the  Massachusetts  Electric  Co.,  wdiich  was  the  holding  company 
which  controlled  the  Bay  State,  and  thev  were  under  the  impression 
that  they  were  buying  [jreferi-ed  stock  of  the  street-railway  company, 
V,  hereas  the  preferred  shares  of  that  holding  company  were  no  better 
than  the  common  stock  in  the  underlying  company.  Now,  when  thev 
are  disillusionized  by  their  exi>erience,  that  all  tends  to  injure  the 
ci^it  of  street-railway  companies. 

The  Chairman.  Have  you  reached  a  conclusion  as  to  whether  street- 
car fares  ought  to  be  fixed  by  a  franchise  or  open  to  change  to  meet 
operating  conditions  ? 

Mr.  Eastman.  I  think  they  ought  to  be  open  to  change.  I  think 
any  contracts— and  I  am  sure  I  am  on  i*ecord  on  this  before  mv 


2076    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

present  experience— that  any  contract  with  a  public  utility  is  bound 
to  be  a  one-sided  contract.  If  that  fare  or  the  charge,  or  whatever 
it  may  be,  proves  hieh  and  advantageous  to  the  public  utility  the 
l)ublic  will  never  be  able  to  secure  any  reduction.  In  other  words,  the 
utility  will  insist  upon  the  advantage  of  that  contract. 

Now,  when  the  situation  is  reversed  and  the  fare  or  charge  be- 
comes too  low  to  properly  support  the  company,  the  public  is  faced 
by  the  alternative  of  either  insisting  upon  its  contract  or  having 
poor  service  or  releasing  the  company  from  its  contract. 

The  Chairman.  With  reference  to  the  regulation  of  these  cor- 
pori^tions,  have  you  an  opinion  as  to  whether  that  should  be  by  the 
niunicipality  or  by  the  State,  or  whether  there  should  be  some  form 
of  cooperation  between  the  two? 

Mr.  Eastman.  Now  you  are  touching  upon  a  question  which  I 
thmk  has  been  a  much  more  prominent  question  in  other  parts  of 
the  country  than  it  has  in  Massachusetts.  Our  companies,  almost  all 
of  them,  spread  beyond— I  think  all  of  them  spread  beyond  the 
bounds  of  any  one  municipality.  They  operate,  usually,  in  a  con- 
siderable number  of  different  municipalities.  In  such  a  case  as 
that  it  IS  obvious  that  the  State  has  got  to  be  the  regulating  fac- 
tor, and  you  can  not  depend  upon  local  control.  But  there  may  be 
situations  in  other  parts  of  the  country,  I  do  not  know,  where 
companies  are  wholly  city  companies,  operating  within  city  limits, 
and  where  the  city  can  deal  with  the  situation  quite  as  we'll  as  the 
State  can. 

The  Chairman.  Well,  take  your  own  State,  where  a  company 
spreads  over  a  good  many  communities,  should  there  be  any  control 
by  the  municipalities  and,  if  so,  what,  as  to  service  of  places  of  stops 
and  the  speed  and  extensions  of  line  ? 

Mr.  Eastmhn.  Well,  as  a  matter  of  fact,  there  has  been  no  con- 
trol over  those  matters  in  Massachusetts,  except  so  far  as  they  at- 
tempted to  exercise  it  when  they  granted  locations,  and,  for  the 
most  part,  the  courts  have  decided  in  Massacliusetts  that  those 
obligations  were  not  binding  as  against  the  State,  since  the  munici- 
pality was  acting  merely  as  the  agent  of  the  State. 

The  Chairman.  Is  "here  a  demand  for  home  rule  in  your  State? 
Mr.  Eastman.  There  has  been  a  demand  for  home  rule  in  the 
case  of  a  company  like  the  Bay  State.  One  of  the  most  difficult 
questions  with  which  we  had  to  deal  in  considering  the  affairs  of 
that  company  \^  as  in  deciding  whether  we  ought  to  base  the  fares 
upon  the  results  of  operation  of  the  system  as  a  whole  or  upon  the 
results  of  operation  in  some  one  community. 

The  people  of  Brockton  or  Lynn,  for  instance,  would  say :  "  Now, 
the  figures  show  that  our  service  is  making  a  prettty  good  return 
to  the  company,  and  if  we  were  all  that  there  was  to  the  system, 
it  would  not  be  necessary  to  increase  the  fares.  Now,  under  those 
circumstances  it  is  not  fair  that  we  should  be  penalized  merely  be- 
cause the  company  has  taken  over  a  lot  of  other  properties  which 
can  not  support  themselves."  And  there  has  been  a  feeling  in  Mas- 
sachusetts that  instead  of  regarding  the  company  as  a  unit,  each 
particular  unit  ought  to  be  given  the  advantage  of  their  own  favora- 
ble conditions.  I  believe  the  trustees  of  the  Bay  State  at  the  present 
time  are  trying  to  do  that  to  some  degree,  and  they  are  also  giving 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    20'i7 

the  local  communities  a  voice  in  the  management  of  the  propertA^— I 
mean  in  the  service  which  is  being  afforded.  .  . 

The  Chairman.  Is  the  demand  for  home  rule  growing  or  diminish- 
ing m  your  State  ^ 

Mr  Eastman.  At  the  time  when  I  left  there  I  should  not  say 
that  there  was  any  great  demand  for  home  rule.  There  may  be  now, 
but  1  doubt  it,  except  in  the  respect  which  I  have  suggested,  that  they 
thmk  fares  ought  to  be  based  upon  local  conditions. 

The  Chairman.  You  commented  somewhat  upon  public  owner- 
ship of  these  properties.  When  you  refer  to  public  ownership  of 
such  a  system  as  the  Bay  State,  do  vou  mean  that  that  should  be  by 
the  State  or  by  the  municipalities? 

Mr.  Eastman.  Oh,  it  would  have  to  be  by  the  State  in  that  case. 

I  he  Chairman.  So  there  would  be  no  such  thing  as  municipal 
ownership  of  the  Bay  State  plant  ?  . 

Mr.  Eastman.  It  would  not  be  possible. 

The  Chairman.  Would  it  be  practicable  to  apply  municipal  owner- 
ship to  any  system  which  spreads  through  several  communities  ? 

Mr.  Eastman.  I  should  not  think  it  would  be. 

The  Chairman.  Then  it  would  mean  that  the  State  would  be  re- 
quired to  take  over  a  property  that  may  be  serving  but  a  small 
part  of  the  State  ?  . 

Mr.  Eastman.  Yes ;  but  the  State  can  arrange  matters  so  that  the 
beneht  or  burden  will  fall  upon  the  particular  municipalities  that 
ai^  interested.  As  a  matter  of  fact,  that  was  done  in  Massachusetts 
when  the  Metropolitan  Water  and  Sewer  Board  was  formed.  For 
instance,  the  Metropolitan  Water  and  Sewer  Service  supplies  a  num- 
ber of  communities  surrounding  Boston,  including  Boston;  and  in 
some  manner  which  I  can  not  tell  you  the  details  of,  it  is  so  arranged 
that  the  burden  of  that  system  falls  pro  rata  upon  those  municipali- 
ties and  not  on  the  State  as  a  whole. 

The  Chairman.  From  your  study  of  this  situation,  have  vou 
reached  the  conclusion  that  either  municipal  or  State  ownershin 
presents  the  real  solution  of  the  problem? 

Mr.  Eastman.  I  think,  as  I  said  already,  there  may  be  cases  where 
you  can  work  the  situation  out  satisfactorily  without  it,  and  if 
affairs  are  going  along  in  a  satisfactory  way  I  see  no  occasion  to 
change  them.  In  Cleveland  for  instance,  the  people  are  apparently 
satished  with  what  they  have,  and  the  experiment  which  they  under- 
took has  developed  satisfactorily.  Under  those  conditions  I  see  no 
reason  to  change. 

The  Chairman.  There  have  been  but  two  exi^eriments  of  municipal 
ownership  of  street-railway  plants  in  this  country,  have  there  not« 

Mr.  Eastman.  I  believe  there  have. 

The  Chairman.  Do  you  believe  the  exi)eriments  have  been  con- 
tinued over  long  enough  period  and  are  sufficiently  numerous  to  jus- 
tity  this  commission  m  recommending  municipal  ownership  as  the 
solution  s  ^ 

Mr.  Eastman.  If  you  are  going  to  base  it  on  the  results  of  expe- 
i.ence,  1  do  not  thmk  you  have  sufficient  evidence  in  this  country  to 
justify  a  recommendation.  My  only  suggestion  would  be  that  if  you 
advocate  it  that  you  base  it  upon  the  ground  that  that  is  the  only 
way  of  meeting  the  situation  which  has  got  to  be  met,  and  that  the 


2078    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 


'•I 


thing  for  the  public  and  those  interested  to  do  is  to  ^et  together  and 
see  that  that  pkn  is  successful,  and  I  believe  that  they  can  make  it 
successful. 

The  Chairman.  Have  you  made  a  study  of  what  is  known  as  the 
wst-of-service  plan  as  they  have  it  in  Cleveland  or  in  Cincinnati^ 

Mr.  Eastman.  To  some  extent.  We  have  the  general  service-at- 
coHt  plan  in  Massachusetts. 

The  Chairman.  What  do  you  think  of  that  plan? 

Mr.  Eastman.  I  think  under  certain  circumstances  it  may  work 
very  satisfactorily.  It  apparently  has  worked  well  in  Cleveianci. 
and  I  believe  it  has  Avorkeil  well  in  Dallas,  and  possibly  in  Des 
JNIoines  and  certain  other  places. 

I  think  it  is  liable  to  work  well  where  it  is  tlie  result  of  mutual 
agreement  between  the  local  i)eople  and  the  owners  of  the  property, 
and  is  not  forced  upon  them  by  some  agency  like  a  State  govern- 
ment. In  other  words,  where  it  is  the  result  of  a  mutual  feeling 
and  a  meeting  of  minds  of  those  most  vitally  interested,  and  it  is 
also  likely  to  l>e  successful  where  the  fares  vary  around  5  cents. 
AVhen  you  get  to  a  situation  where  the  cost  of  service  leads  to  fares 
higher  than  5  cents,  you  are  running  into  great  danger,  because  it  is 
very  apt,  if  you  base  it  upon  a  flexible  nde— you  keep  fares  mount- 
ing up  indefinitely  without  any  real  advantage  to  anyone.  One  of 
the  difficulties  in  raising  fai-es  is  that  once  you  ha\  e  them  raised  it 
is  almost  impossible  to  reduce  them,  if  they  do  not  produce  the  re- 
sults desired. 

The  Chairman.  Do  you  believe  that  a  municipality  or  a  State 
shouhl  subsidize,  through  taxation,  a  privately  operated  and  pri- 
vately owned  corporation? 

Mr.  Eastman.  1  should  not  recommend  that. 

The  Chairman.  What  is  the  objection  to  it? 

Mr.  Eastman.  I  think  that  that  is  a  very  dangerous  principle  and 
an  undesirable  one.  If  the  State  is  going  to  lend  its  resources  to  the 
aid  of  any  industry,  it  should  have  complete  control  over  the  situa- 
tion. If  it  does  not,  it  runs  the  risk  that  it  will  have  to  meet  deficits 
wiiich  may  be  due  to  the  bad  management,  or  worse,  of  men  over 
whose  appointment  and  conduct  in  office  it  has  no  control. 

The  Chairman.  I  have  no  further  questions. 

Mr.  Beaslet.  I  would  like  to  ask  a  question  of  this  very  intelligent 
witness. 

The  Chairman.  What  is  your  name? 

Mr.  Beasley.  C.  Oscar  Beasley. 

The  Chairman.  Where  are  you  from  ? 

Mr.  Beasley.  From  Philadelphia.  I  would  like  to  know  if  Phila- 
delphia could  get  a  little  light  from  this  very  intelligent  witness  on 
one  point. 

The  Chairman.  Whom  do  you  represent! 

Mr.  Beasley.  I  represent  the  United  Business  Men's  Association, 
of  Philadelphia,  an  association  of  citizens. 

The  Chairman.  I  would  prefer  to  ask  Mr.  Eastman  if  he  wishes  to 
^  answer  any  questions. 

Mr.  Eastman.  I  have  no  objection,  if  I  can  answer  them. 

The  Chairman.  I  have  to  leave  for  a  few  minutes,  and  I  will  ask 
Mr.  Sweet  to  take  the  chair. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2079 

Commissioner  S^\'eet.  I  understand  you  wish  to  ask  one  question. 

now  ? 

Mr.  Beasley.  I  want  to  ask  what  thev  did  with  excessive  rentals 
to  an  underlying  company,  in  the  forni  of  leases,  if  they  had  any 
such  situation  there. 

Commissioner  Sw^eet.  Yes.  I  believe  they  had.  You  may  answer 
that,  if  you  like,  Mr.  Commissioner. 

Mr.  Eastman.  We  had  only  one  situation  which  resembled  that. 
Most  of  the  mergers  of  properties,  combinations  of  proi>erties,  Avere 
brought  about  in  Massachusetts  through  direct  consolidation,  so  far 
as  street-railway  companies  are  concerned. 

The  only  important  case  of  a  lease  that  I  knoAv  of  is  where  the 
Boston  Elevated  Railway  Co.  leased  the  West  End  Street  Railway 
Co.  That  property  was  leased  upon  terms  Avhich  Avere  approved, 
after  a  good  deal  of  public  discussion,  by  the  board  of  railroad  com- 
missioners. It  Avas  leased  upon  the  basis  of  dividends  which  Avould 
now  seem  high.  The  preferred  stock,  of  which  there  is  a  compara- 
tively small  amount  outstanding,  Avas  i)ermitted  to  pay  8  per  cent 
dividends.  The  coaimon  stoik  Avas  permitted  to  pay  7  per  cent  divi- 
dends. In  reality,  hoAvever.  those  dividends  are  not^so  high  as  Avould 
appear  from  that  mere  statement,  because  since  the  lease  Avas  made  in 
i8Dr,  a  great  deal  of  additional  \A'est  End  stock  has  been  issued,  and 
under  the  State  laAv  it  has  been  is-^iK-d  at  the  market  value;  in  other 
words,  in  some  cases,  I  think,  it  Avas  issued  on  a  3-and-a-fraction 
per  cent  basis,  and  those  premiums  Avhich  Avere  paid  in  on  the  issue 
of  new  stock. ha A-e  tended  to  cause  the  7  i>er  cent  dividend  in  reality  to 
be  a  considerably  loAver  percentage  upon  the  actual  monev  contrib- 
uted at  the  time  of  the  issuance  of  the  stock. 

Commissioner  Sweet.  Are  you  Avilliiig.  Mr.  Eastman,  to  express 
an  opmion  on  a  case  such  as  they  have  in  Philadelphia  ? 

Mr.  Beasley.  Seventy -one  per  cent  some  of  our  companies  get 

Commissioner  Saveet.  The  situation  there  is  different  from  any- 
thing, I  think,  that  could  have  existed  in  Massachusetts. 

The  Philadelphia  Rapid  Transit  Co.  has  been  shoAvn  by  evidence 
presented  to  us  to  l)e  noAv  leasing  a  great  manv  .small  lines  at  a  rental 
price  that  is  far  beyond  anything  that  is  reasonable,  that  is  based 
upon  Avatered  stock  of  these  small  companies,  and  contracts  that 
Avere  made  for  a  long  period  at  prices  that  are  aAvav  out  of  sight. 

Now,  the  public  object,  naturally,  to  paving-  returns  uj^on  that 
sort  of  thing  and  ha^e  protested  against  it'.  Can  \o\\  sugf^est  anv 
means  of  relief,  anything  that  ought,  under  the  circumstan'ces,  to  be 
done  ? 

Mr.  Eastman.  That  brings  up  what  I  think  is  one  of  the  most 
difficult  problems  m  public  regulation.  Supposing  a  State  commis- 
sion has  before  It  a  company,  and  after  invest iirating  its  affairs 
it  finds  out  that  its  stock  is  w\atered,  or  that  it  has  made  a  lot  of  im- 
proA^dent  leases,  such  as  you  have  described.  It  is  perfectly  justi- 
fied—in fact,  it  ought  to  say  that  the  public  should  not  be  required  to 
pay  a  fare  Avhich  is  higher  than  it  otherwise  Avould  be  on  account 
of  this  exploitation  Avhich  has  taken  place  in  the  past.  But  the 
minute  you  do  that  you  can  not  avoid  having  an  effect  on  the  credit 
of  the  company.  The  minute  you  make  allowances  for  a  situation 
of  that  sort,  you  impair  the  credit  of  the  company. 


. !'. 


2080    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


n 


The  only  answer  to  it  is  that  in  such  cases  there  must  be  a  reor- 
granization,  in  order  to  jihice  the  affairs  of  the  company  on  a  satis- 
factory basis.  Just  how  you  can  bring  about  such  a  reorganization 
1  don't  know ;  but  that  is  one  of  the  dilemmas  of  public  regulation. 

Commissioner  Sweet.  This  is  all  by  contract  relation  between  the 
company,  the  lessor  and  the  lessee,  and  the  public  are  getting  the 
worst  of  it. 

Mr.  Beasley.  That  is  what  I  came  here  to  try  to  talk  to 

Conunissioner  Sweet.  And  now  the  question  is  how  the  public  is 
going  to  get  any  substantial  remedy. 

Mr.  Eastman.  Sometimes  the  company  can  maintain  its  credit  by 
various  devices,  even  where  the  return  it  is  allowed  is  not  sufficient  to 
produce  a  yield  upon  its  common  stock.  They  can  issue  preferred 
stock  of  various  descriptions;  they  can  issue  convertible  debentures, 
etc. ;  but  those  are  really  temporizing  with  the  situation ;  and  1  be- 
lieve the  credit  of  no  company  will  ultimately  be  sound  unless  it  is  in 
a  position  to  pay  a  return  on  its  conmion  stock. 

Commissioner  Sweet.  You  do  not,  of  course,  recommend  that  a 
company  fail  to  keep  its  contract?  That  is,  this  present  company, 
the  Philadelphia  Rapid  Transit  Co. — in  most  respects  that  company 
is  doing  wonderfully  well  apparently ;  but  here  is  this  great  burden, 
and  the  question  seems  to  me  to  be  a  very  difficult  one  as  to  how  to 
get  out  from  under  it. 

Mr.  Eastman.  I  think  a  commission  which  is  under  the  duty  of 
prescribing  just  and  reasonable  fares  should  take  into  consideration  a 
situation  of  that  kind,  and  should  make  the  necessary  allowances  so 
that  no  burden  will  be  imposed  upon  the  public. 

The  results  of  that  may  be  unfavorable  so  far  as  the  (juestion  of 
credit  is  concerned,  but  I  do  not  see  any  escape  from  it. 

Commissioner  Sweet.  Of  course,  you  may  not  be  familiar  any  more 
than  I  am  with  the  laws  of  Pennsylvania  in  all  respects,  but  ordi- 
narily would  you  think  that  the  public-service  commission  could  in 
any  way  exercise  control  over  this  leasing  of  tliese  small  companies 
that  own  the  little  properties  and  lease  them? 

Mr.  Eastman.  You  mean  whether  it  could  disturb  those  leases 
now? 

Commissioner  Sweet.  Yes. 

Mr.  Eastman.  And  set  them  aside  ? 

Commissioner  Sweet.  Yes.  They  are  not  operating  them,  you  see. 
The  public-service  commission  would  have  no  jurisdiction  over  a 
question  of  that  kind,  would  it  ? 

Mr.  Eastman.  I  should  not  think  it  would  have  any  authority  to 
disturb  those  leases,  but  it  can  saj  that,  if  the  company  has  seen  fit 
to  make  a  lease  at  a  rental  which  is  exorbitant,  more  than  it  ought  to 
pay,  its  stockholders  shall  bear  the  burden  and  not  the  public. 

Mr.  Beasley.  That  is  punishing  the  innocent  for  the  sake  of  the 
guilty? 

Mr.  Eastman.  The  public  are  innocent,  too. 

Commissioner  Sweet.  May  there  not  be  a  remedy,  Mr.  Eastman,  in 
some  practical  way — that  is,  not  by  legislation,  but  by  building 
parallel  lines,  or  something  of  that  kind  that  would — no;  that  would 
not  do.    I  give  it  up. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2081 

■ni^-V'i^'T^^^''^^*  ^  ^^  ^^^  know.  You  may  have  gi^ound  there  in 
1  hihidelphia  for  setting  aside  some  of  the  leases  on  the  ground  of 
traud.    I  do  not  know  anything  about  that  local  situation. 

Commissioner  Sweet.  I  think  we  will  have  to  pass  beyond  that.  I 
beJieve^that  is  all  that  we  can  say  that  will  help  you,  Mr.  Beasley. 

Mr.  Beasley.  I  have  something  to  suggest,  in  addition  to  what  was 
said. 

Commissioner  Sweet.  We  will  listen  to  that  if  you  want  to  ffive  it 
to  us  later  on.  ^  & 

Xow  Mr.  Eastman,  I  want  to  ask  a  few  questions  about  public 
ownerslnp.  It  seems  to  me  that  is  a  very  important  part  of  the 
problem  before  us.  ^^        ^  t- 

You  have  stated  that  it  is  your  view  that  the  companies  are  in 
such  shape,  many  of  them,  in  the  United  States  at  the  present  time, 
that  it  is  going  to  be  a  matter  of  exceedingly  great  difficulty  to  re- 
store their  credit,  and  that  without  restored  credit  betterments  in 
conditions  can  hardly  be  expected ;  they  must  be  able  to  get  in  new 
lunds  m  order  to  keep  up  their  present  systems  and  extend  them  as 
the  needs  of  the  various  communities  require.  If  they  can  not 
as  you  say,  sell  their  stock—if  that  is  not  marketable— of  course  there 
IS  a  limit,  as  you  have  stated,  to  the  amount  of  bonds  that  can  be 
disposed  of;  but  if  they  can  not  sell  stock  or  bonds  they  practically 
are  out  of  busmess,  are  they  not,  as  far  as  permanent  organizatioTis 
tor  the  beneht  of  the  communities  are  concerned?  I  think  you 
have  stated,  as  your  idea,  that  the  only  recourse  then  is  to  public 
ownership  and  operation  or  public  ownership  and  private  operation 
.Now,  would  you  liken  the  street  railroad  in  its  relation  to  the  public 
somewhat  to  the  water  supply  of  a  city  ?  I  think  you  did  make  some 
alhision  to  that.    I  did  not  quite  understand  it. 

Mr.  Eastman.  They  both  perform  a  public  function,  and  they 
both  are  monopolistic  in  character.  There  was  a  time  when  private 
water  companies  were  very  common  in  Massachusetts.  They  are 
in  some  parts  of  the  country  now.  In  Massachusetts  they  have  prac- 
tically all  been  taken  over  by  the  cities. 

Commissioner  Sweep.  As*^you  view  it,  they  would  be  similar  in 
another  respect,  and  that  is  that  an  income  is  expected  to  be  obtained 
by  the  municipality  from  each? 
Mr.  Eastman.  As  a  rule  that  is  so ;  yes. 

Commissioner  Sweet.  Two  witnesses,  at  least,  have  been  before  the 
commission  to  urge  that  the  municipalities  should  own  street  rail- 
roads and  charge  nothing  whatever  for  the  service— let  everybody 
ride  free.    Would  you  recommend  a  plan  of  that  kind  ? 

Mr.  Eastman.  I  do  not  recommend  that.  I  think  you  can  make 
a  rather  plausible  argument  in  favor  of  it,  but  I  do  not  recommend 
It  at  the  present  time.  No,  sir;  I  think  it  is  desirable  that  you  should 
get  all  that  you  can  get  from  the  riders  on  the  cars,  consistent  with 
the  best  interests  of  the  entire  community. 

Commissioner  Sweet.  Is  the  theory  upon  which  you  would  so 
in  regard  to  water  supply  and  street-railroad  service,  that  it  should 
be  on  something  of  a  cooperative  basis,  in  the  sense  that  the  city 
should  not  make  any  profit  whatever,  and  should  attend  to  the  duties 
of  ownership  or  operation,  as  the  case  may  be,  in  either  case  at  mere 
cost  ? 


I 


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M 


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i; 


2082    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Mr.  Eastman.  You  include  in  cost  the  interest  upon  what  it  has 
to  pay  for  the  properties  ? 

Commissioner  Sweet.  Certainly^    In  either  case. 

Mr.  Eastman.  I  will  say  this :  That  if  the  situation  should  change 
so  that  a  5-cent  fare  would  produce  a  profit,  it  mi^ht  well  be  good 
policy  for  the  city  to  retain  whatever  profit  it  could  make  on  that 
fare,  or  it  might  decide  to  reduce  the  fare.  It  could  do  either  one 
in  a  perfectly  consistent  way. 

Commissioner  Sw^eet.  Speaking  generally,  however,  would  yon 
consider  that  either  in  the  case  of  water  or  ot  street-railroad  service 
the  city  ought  to  char;re  any  more  than  the  actual  cost  ? 

Mr.  Eastman.  No  ;  I  should  not  say  so. 

Commissioner  Sweet.  If  it  did,  it  would  be  imposing  upon  the 
water  user  in  the  one  oase  or  the  car  rider  in  the  other  an  obliga- 
tion that  ought  to  be  borne  by  the  whole  community,  would  it  not? 

Mr.  Eastman.  It  would  be  taxing  them  indirectly. 

Commissioner  Sweet.  That  is  what  it  would  amount  to.  There  is 
a  very  decided  distinction  in  either  case  of  that  kind  between  the 
people  who  contribute,  particularly  in  the  case  of  water  suply,  to  the 
upkeep  of  the  water  system  and  the  community  as  a  whole,  is  there 

not? 

Mr.  Eastman.  I  should  think  so. 

Commissioner  Sw^eet.  For  instance,  take  the  case  of  water  used  in 
parks  or  cemeteries  for  the  general  good  of  the  whole  public.  Would 
you  not  think  that  a  proper  arrangement  in  a  city  would  be  for  the 
commission  that  has  charge  of  the  parks  and  cemeteries  to  pay  to  the 
board  of  public  works,  for  instance,  if  that  furnishes  the  water,  the 
same  as  if  the  parks  and  cemeteries  were  a  private  customer?  So 
that  that  cost  might  be  spread  over  the  entire  couununity,  and  the 
price  charged  by  the  board  of  public  worki^  to  the  water  consumers 
might  be  such  as  would  be  consistent  with  the  service  ? 

Mr.  Eastman.  I  think  that  is  largely  a  question  of  expediency. 
The  cost  has  got  to  be  n^et  in  some  way. 

Commissioner  Sweet.  Does  it  not  alj50  involve  the  question  of  fair- 
ness? Take  the  matter  of  fire  hydrants:  Don't  you  think  that  for 
fire  service  the  entire  conmiunity  which  is  benefited  by  it  ought  to 
pay  it  by  taxation,  rather  than  that  part  of  the  community  that  we 
may  call  the  customers  of  the  water  system? — because  .they  are  not 
necessarily  all  customers.    Isn't  that  true  ? 

Mr.  Eastman.  I  should  think  so. 

Commissioner  Sweet.  Ix)oking  at  it  as  a  matter  of  justice  between 
one  part  of  the  community  and  another,  is  not  the  same  kind  of  a 
question  involved  in  the  paving  between  the  tracks  of  street  rail- 
roads, as  practiced  at  the  present  time?  Are  we  not  exacting  from 
the  car  rider  a  service  that  ought  to  be  performed  by  the  entire 

community  ? 

Mr.  Eastman.  I  think  you  are.  There  is  something  to  be  said  on 
the  other  side  of  that  question,  because  while  the  situation  is  not 
now  as  it  was  when  the  practice  originated — that  is  to  say,  it  origi- 
nated at  a  time  when  horse  cars  used  to  wear  down  the  pavement — 
at  the  same  time,  I  think  it  is  true  that  the  presence  of  street-railway 
tracks  in  the  street  increases  the  expense  of  paving.  The  paving  is 
more  apt  to  wear  out  quicker  in  streets  where  there  are  street-railway 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2083 


tracks  than  when  they  are  absent.  So  that  the  presence  of  the  strcet- 
iiulnay  tracks  in  the  street  does  impose  some  extra  burden  upon  the 
])aviT>g  cost.  It  is  very  difficult  to  measure  that,  and  under  present 
conditions,  faced  by  the  plight  of  the  street  railways  at  the  present 
time,  I  think  it  is  entirely  desirable  that  that  expense  should  be  met 
by  the  entire  comnumity,  rather  than  by  the  car  riders. 

Counnissioner  Sweet.  But,  in  any  case,  would  you  not  consider  it  a 
matter  of  justice,  as  between  that  part  of  the  community,  the  riding 
part  of  the  comnumity,  and  the  balance  of  the  community,  or  the  com- 
uiunity  as  a  whole,  if  the  street-railroad  company — which,  of  course, 
has  no  funds  except  what  it  gets  from  the  street-railroad  riders — 
should  not  be  required  to  take  care  of  that  extra  expense  that  you 
have  alluded  to  by  reason  of  the  car  tracks  being  there,  and  not  require 
them,  as  has  been  done  in  the  past  and  is  being  done  generally  now, 
to  pay  the  entire  cost  of  paving  between  the  tracks,  and  for  a  short 
distance  on  each  side  of  the  tracks,  under  present  conditions? 

Mr.  Eastman.  I  think  that  is  a  sound  conclusion. 

Commissioner  Sweet.  That,  you  think,  ought  to  be  done  anyway 
without  any  regard  to  what  other  remedies  might  be  recommended 
by  this  commission? 

Mr.  Eastman.  Yes. 

Commissioner  Sweet.  I  think  you  have  stated  quite  fully  your 
views  with  regard  to  what  the  commission  might  do  to  render  a 
definite  public  service.  Do  vou  not  think,  Mr.  Eastman,  that  con- 
siderable service  has  already  1been  rendered  to  the  public  by  the  pub- 
licity that  has  been  given  to  the  hearings  that  have  taken  place, 
and  the  better  general  information  of  the  American  public  now 
upon  the  street-railway  problem  than  it  had  before  these  hearings 
commenced  ? 

Mr.  Eastman.  I  have  no  doubt  that  that  has  occurred. 

Commissioner  Sweet.  At  the  basis  of  all  this  whole  problem  is 
the  education  of  the  people — a  proper  understanding  of  the  situation 
and  getting  away  from  prejudices  that  have  been  created  as  you  have 
mentioned,  and  others,  perhaps  justly,  by  wrongdoing  on  the  part 
of  the  railroad  corporations  in  the  past — ^to  get  away  from  that 
and  start  out  on  a  new  deal,  so  to  speak. 

Mr.  Eastman.  I  think  it  is;  and  I  think  that  is  a  fmiction  which 
this  commission  can  perform. 

Commissioner  Sweet.  The  very  basis  of  whatever  good  we  might 
be  able  to  accomplish. 

Now,  with  regard  to  public  ownership.  You  stated  that  you 
thought  that  if  done  at  all  in  a  community,  it  ought  to  be  by  vote 
of  the  people,  so  as  to  insure  popular  support;  that  a  referendum 
vote  should  be  taken  upon  the  question.  Have  jou  anything  to 
suggest  with  regard  to  the  practical  proceeding  after  a  Vote  were 
taken  that  would  be  favorable  to  public  ownership? 

Mr.  Eastman.  No.  I  think  perhaps  the  most  difficult  question 
of  all  involved  in  public  ownerehip  is  tlie  question  of  the  price  to 
pay  for  the  properties;  and  I  am  inclined  to  think,  offhand,  that 
it  would  be  advisable  before  any  vote  was  taken  by  the  community 
to  have  negotiations  and  reach,  if  possible,  an  agreement  as  to  the 
price  to  be  paid;  and  then  let  the  voters  vote  on  that  precise 
question. 


II 


H 


im 


2084     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Commissioner  Sweet.  That  was  done  in  Detroit,  you  know. 

Mr.  Eastman.  I  did  not  know ;  no,  sir. 

Commissioner  Sweet.  It  was;  and  Detroit  voted  it  down,  as  I 
understand  it,  Mr.  Mahon,  because  the  people  were  not  satisfied 
with  the  price.     Isn't  that  true? 

Commissioner  Maiion.  I  think  so.  That  was  the  real  reason  that 
they  were  dissatisfied — the  price. 

Commissioner  Sweet.  How  would  this  do,  Mr.  Eastman :  To  estab- 
lish a  tribunal  for  the  determination  of  the  value  of  the  property 
before  the  vote  is  taken,  so  that  the  people  may  be  satisfied  that  they 
are  going  to  be  fairly  represented  and  let  the  determination  of  the 
price  come  after  the  vote  is  taken? 

Mr.  Eastman.  I  think  all  those  matters  are  matters  which  would 
have  to  be  worked  out  by  the  communities  which  have  got  to  take 
the  direct  action  in  the  end.  Personally,  I  should  prefer  definite 
negotiations,  and  a  definite  proposition  before  the  public  when  they 
voted,  rather  than  to  leave  it  entirely  uncertain  what  might  have  to 
be  paid  for  the  properties  in  the  end. 

Commissioner  Sweet.  Do  you  think  that  this  commission,  in  its 
recommendations,  ought  to  go  into  so  much  detail  as  that? 

Mr.  Eastman.  I  should  not  think  so.  If  I  may  express  any 
opinion  about  it  at  all,  I  think  that  it  would  be  desirable  to  confine 
yourselves  to  the  principles  of  the  situation  rather  than  to  any  de- 
tailed working  out  of  these  principles. 

Commissioner  Sweet.  If  the  plan  of  municipal  ownership  and 
private  operation  were  adopted,  how  would  you  arrange  for  the 
private  operation?    On  the  bidding  plan,  or  in  what  way? 

Mr.  Eastman.  There  are  various  possibilities  in  that  direction. 
For  instance,  I  think  Senator  Lenroot  introduced  a  bill  providing, 
in  effect,  for  the  public  acquisition  of  the  railroads  of  the  country 
and  their  management  by  a  board  of  directors  appointed  by  the 
President,  representing  certain  interests,  out  of  men  nominated  by 
those  interests;  in  other  words,  the  men  would  be  taken  from  lists 
submitted  by  the  farmers,  we  will  say,  the  labor  interests,  the  busi- 
ness interests,  and  so  on,  and  the  President  would  have  a  choice  from 
that  list  but  would  be  confined  to  the  men  that  they  offered  for  his 
choice.  That  is  one  way  in  which  you  might  elect  to  place  publicly 
owned  properties  under  private  management.  You  could  do  it  in 
the  way  you  suggest,  by  turning  it  over  to  an  operating  company 
upon  bids,  and  so  on. 

Commissioner  Sweet.  What  objections  do  you  see  to  handling  the 
street  railroads  as  most  cities  now  do  their  water  system,  by  their 
own  operation  ? 

Mr.  Eastman.  So  far  as  cities  are  concerned,  as  I  say,  I  doubt 
whether  a  city  could  do  it,  except  in  a  case  where  the  property  was 
operating  mostly  with  in  the  confines  of  that  city. 

Commissioner  Sweet.  Recognizing  the  distinction  there,  I  will 
change  the  question  to  apply  to  public  ownership,  regardless  of 
whether  it  is  by  the  city  or  by  the  State. 

Mr.  Eastman.  I  have  no  great  fear  of  the  results  in  the  long  run 
of  public  management  of  these  properties;  that  is,  direct  public 
management  such  as  you  speak  of.  I  think  it  is  attended,  as  any 
form  of  operation  is,  by  certain  dangers;  but  I  believe  that  all  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2085 

elements  of  the  community  have  so  vital  an  interest  in  an  economical 
and  efficient  management  that,  in  the  long  run,  you  will  secure  it. 
You  may  have  unfortunate  experiences.  I  do  not  say  that  you  will 
not.  I  think  the  best  results  can  only  be  obtained  by  vigilance  and 
cooperation.  It  is  my  opinion,  however,  that  in  the  long  run  that 
can  be  secured. 

Commissioner  Sweet.  The  city  can  hire  a  general  manager  of  the 
same  ability,  practically— perhaps  the  same  man— who  would  be 
the  general  manager  for  a  private  corporation,  the  same  as  it  hires 
a  general  manager  for  its  board  of  public  works  or  for  its  school 
system. 

You  made  a  comparison  between  the  public  interest  in  the  schools 
and  the  removal  of  politics  from  the  boards  of  education,  and  the 
[)ossibility  of  doing  the  same  with  regard  to  the  handling  of  rail- 
roads. 

Mr.  Eastman.  You  take  the  question  of  politics — and  I  have  no 
doubt  that  attempts  would  be  made  to  inject  politics  into  the  public 
operation  of  the  street-railway  system,  but  I  have  a  very  firm  con- 
viction that  the  voters  would  not  want  politics  in  the  management 
of  that  system,  and  that  any  administration  which  was  guilty  of  that 
practice  in  the  long  run  would  rue  it. 

(Commissioner  Mahon.  You  say  would  rue  it  ? 

Mr.  Eastman.  Yes. 

Commissioner  Sweet.  The  people  do  not  want  politics  in  such 
services  ? 

Commissioner  Mahon.  Do  you  know  anything  of  the  history  of 
tlie  Canadian  cities  where  they  have  municipal  ownership  which  has 
now  been  working  for  some  time  ? 

Mr.  Eastman.  No;  I  have  not  investigated  carefullv  into  those. 

Commissioner  Mahon.  The  history  of  those  cities  shows  that  so 
far  they  have  been  unable  to  divorce  them  from  the  political  situa- 
tion. It  is  a  very  confused  condition.  One  year  there  will  be  an 
administration  that  is,  for  instance,  favorable  to  treating  with  labor 
as  an  organized  body  in  making  the  contracts,  and  the  next  year  you 
may  find  a  body  absolutely  opposed  to  that.  That  is  a  condition  that 
has  continued  throughout  some  of  those  municipalities  and,  as  far 
as  I  know,  all  of  them. 

Commissioner  Sweet.  In  the  State  of  Michigan,  Mr.  Eastman, 
the  boards  of  education  are  elected  at  a  separate  election.  Perhaps 
in  some  States  they  are  apopinted  rather  than  elected. 

Commissioner  Mahon.  It  does  not  divorce  them  from  politics, 
though. 

Commissioner  Sweet.  It  does  from  national  politics.  So  far  as 
my  observation  goes,  and  I  have  been  a  member  of  the  board  of 
education  of  Grand  Rapids  at  different  times,  I  have  never  seen  any 
national  politics  on  the  board  of  education.  In  Massachusetts  are 
they  elected  or  appointed  ? 

Commissioner  Mahon.  How  about  local  j^olitics? 

Commissioner  Sweet.  No  ;  not  exactly  that.  There  have  been  evils, 
but  not  that. 

Commissioner  Mahon.  We  have  had  some  awful  messes  in  Detroit. 

Mr.  Warren.  And  local  politics  are  apt  to  be  worse  than  national 
politics. 

100643^—20— VOL  3 3 


I  (I 

Kill 


2086    PROCKEDINGS  0¥  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


r^ 


Coniniissioner  Sweet.  Are  they  appointed  or  elected  in  Massa- 
chusetts? 

Mr.  Eastman.  They  are  elected. 

Commissioner  Sweet.  At  a  genei'al  or  special  election? 

Mr.  Eastman.  At  a  general  election.  Women  are  voted  for  on  the 
school  board  in  Boston  and  I  think  throughout  the  State. 

Commissioner  Sweet.  They  are  in  our  State.  Have  the  boards  of 
education  been  satisfactory  that  have  been  elected  in  that  way? 

Mr.  Eastman.  My  knowledge  is  limited  on  that.  I  do  know  tliat 
it  is  generally  regaixied  that  in  Boston  the  public-school  association 
has  been,  on  the  whole,  fairly  successful  in  keeping  the  schools  out 
of  politics.    Do  you  not  think  that  is  true,  Mr.  Warren? 

Mr.  Warren.  I  should  go  further  than  that.  I  think  it  is  gen- 
erally true  throughout  the  State.    There  may  be  exceptional  cases. 

Commissioner  Sweet.  How  would  the  results  obtained  by  your 
board  of  education  compare  with  the  management  of  your  water 
system  ?    That  is  done  by  the  city  government,  is  it  not  ? 

Mr.  Eastman.  Yes. 

Commissioner  Sweet.  And  they  are  more  political  from  the  na- 
tional standpoint  than  the  boards  of  education  undoubtedly,  are  they 
not? 

Mr.  Eastman.  I  should  say  they  were.  My  knowledge  of  the  city 
water  system  is  not  great,  however. 

Commissioner  Sweet.  Do  you  get  satisfactory  results  in  the  man- 
agement of  your  water  system  generally  ? 

Mr.  Eastman.  I  think  the  water  supplies  of  the  cities  in  Massa- 
chusetts are  very  good.  They  have  a  good  water  supply,  free  from 
impurities. 

Commissioner  Sweet.  Is  there  complaint  as  to  the  business  man- 
agement, whether  they  are  managed  capably  and  economically  ? 

Mr.  P^astman.  That  has  not  come  to  my  attention. 

Commissioner  Sweet.  That  perhaps  is  going  more  into  detail  than 
is  necessary  for  our  present  purpose.  But  one  way  or  another  your 
idea  would  be  that  the  street  railroads  could  be  managed  by  the 
public,  the  State,  or  the  municipality,  as  the  case  might  be,  satisfac- 
torily ?    That  is,  I  am  speaking  now  of  operation. 

Mi-.  Eastman.  Yes.  Coming  to  what  Mr.  Mahon  has  said,  I  think 
it  is  true  that  you  will  have  that  danger  that  politics  would  get  into 
the  situation.  I  think  it  is  probably  more  likely  to  occur  in  case  of 
municipalities  than  it  would  in  the  case  of  a  larger  unit  of  the  State, 
such  as  the  State  or  the  Nation,  but  I  believe  it  can  be  avoided  by 
voluntary  action  of  public-spirited  citizens  and  also  by  considering 
plans  for  direct  representation  upon  the  mantigement'by  men  who 
are  not  politically  appointed.  In  other  words,  I  do  not  think  that  is 
a  necessary  and  inevitable  evil  that  can  not  be  worked  out  if  the 
public  gives  sufficient  constructive  thought  to  it. 

Commissioner  Mahon.  That  would  have  to  be  worked  out,  would 
it  not.  at  the  very  start,  or  demoralized  conditions  would  follow? 
Say  you  were  municipalizing  the  system,  you  would  have  to  lay 
down  the  policy  of  the  nonpolitical  management  of  it  at  that  time  or 
else  the  trouble  would  be  there,  would  it  not? 

Mr.  Eastman.  Yes;  it  would  be  very  desirable  to  lay  down  that 
policy  at  the  start;  but  even  if  you  started  wrong  it  does  not  say 
you  could  not  make  improvements  as  you  went  along. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIQjBr.    2087 

Commissioner  Mahon.  Xo. 

Commissioner  Sweet.  What  has  been  the  tendency  of  lat«  years 
with  regard  to  politics  in  city  government?  Has  there  been  an  in- 
crease or  decrease? 

Mr.  Eastman.  My  opinion  would  be  that  city  governments  have 
improved  a  great  deal. 

Commissioner  Sweet.  There  is  a  great  deal  less  national  politics 
in  city  governments  than  there  was  10  or  15  years  ago  ? 

Mr.  Eastman.  Yes.  I  do  not  claim  to  be  an  expert  on  that 
question,  but  I  think,  looking  back  to  the  time  when  Lincoln  Steffens 
wrote  The  Shame  of  the  Cities,  that  the  situation  in  city  government 
has  very  greatly  improved  since  that  day. 

Commissioner  Sweet.  Is  it  not  a  fact  that  in  all  commission-gov- 
erned cities  a  nonpartisan  method  of  electing  the  commissioners  is 
resorted  to? 

Mr.  Eastman.  I  think  that  is  true.  I  have  no  special  knowledge 
on  that. 

Commissioner  Sweet.  And  I  will  say  in  my  own  city.  Grand 
Rapids,  Mich.,  a  nonpartisan  method  of  electing  city  officials  was 
adopted  before  the  commission  form  of  government  was  adopted, 
so  that  city  officials  were  elected  without  regard  to  their  national 
party  connections. 

Commissioner  Mahon.  That  may  be  true  with  Grand  Rapids,  but 
it  is  not  true  in  Detroit  where  we  have  a  nonpartisan  election  of  the 
mayor.  I  have  not  seen  very  much  difference  there.  A  Democrat 
was  run  and  a  Republican  was  run,  and  the  organizations  were  in 
battle. 

Commissioner  Sw^eet.  I  have  finished. 

Commissioner  Mahon.  You  have  no  doubt  made  quite  a  study  of 
this  subject.  It  has  been  brought  up  here  several  times  that  the  city 
should  operate  the  street-cars  free  of  charge.  Do  you  believe  the 
matter  of  transportation  should  be  placed  in  the  same  class  that  you 
would  things  like  water,  or  is  not  transportation  more  a  matter  of 
the  individual  rather  than  making  it  that  of  the  community?  What 
is  your  opinion,  Mr.  Eastman,  from  your  study  of  that? 

Mr.  Eastman.  I  think  it  is  a  combination  of  both.  Of  course, 
directly  and  immediately,  the  street  railways  are  a  benefit  to  the' 
people  who  ride  in  them,  but  beyond  that  immediate  benefit  they  are 
undoubtedly  a  benefit  to  others  of  the  community  who  never  ride  in 
them  at  all,  such  as  real-estate  owners,  business  men,  and  so  on.  We 
would  be  much  worse  off  if  there  were  no  street  railways.  You  may 
say  that  that  is  true  of  almost  any  public  utility,  and  of  course  it  is, 
but  I  think  it  is  true  in  a  very  great  degree  of  street  railways. 

Commissioner  Mahon.  I  am  not  an  expert  upon  that  matter,  but  I 
find  this,  that  in  bearing  the  share  of  burdens  in  the  municipality, 
the  taxes  fall,  of  course,  upon  all  property  and  upon  the  poor  man 
more  so  than  they  do  upon  the  real-estate  dealers  and  fellows  of  that 
kind.  I  find  they  are  usually  able  to  evade  that  form  of  taxation 
while,  as  you  say,  they  are  getting  the  benefits  of  it.  But  would  it 
not  fall  upon  men  who  may  never  use  the  cars  at  all— the  taxation 
burdens? 

Mr.  Eastman.  Yes :  I  think  it  would.  T  think  the  question  of  plac- 
ing part  of  the  burden  upon  the  taxpayer  is  simply  a  question  of  ex- 


'^i 


2088     PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2089 


pedienc}'.  I  would  not  suggest  doing  it  unless  you  felt,  all  things 
considered,  you  could  get  better  net  results  in  that  way. 

Commissioner  Sweet.  There  is  a  social  phase  of  this  question,  is 
there  not,  that  the  whole  community  has  an  interest  in,  and  a  very 
deep  interest  perhaps,  and  sanitary  questions  may  be  involved  to 
some  extent  in  the  diffusion  of  population?    That  is  true,  is  it  not? 

Mr.  Eastman.  I  should  think  so. 

Commissioner  Sweet.  And  moral  questions  may  come  in,  questions 
of  morality  or  immorality  that  are  involved,  to  some  extent,  in  it,  and 
the  ability  to  reach  churches  and  places  where  lectures  are  given  and 
that  sort  of  thing  has  a  bearing  upon  the  educational  as  well  as  the 
moral  uplift  of  the  comnninity;  so  in  a  sense,  the  same  reasons  that 
indvce  us  to  spend  large  amounts  of  money  for  hospitals,  churches, 
schools  and  that  sort  of  thing  would  justify  us,  to  some  extent  at 
least,  in  making  the  matter  of  street-railroad  transportation  a  public 
obligation;  would  they  not? 

Mr.  Eastman.  Yes;  I  think  it  is  a  question  of  expediency. 

Commissioner  Sweet.  Yes.  Taking  all  these  things  into  considera- 
tion, of  course.  And  the  question  as  between  a  zone  system  and  a 
flat-fare  system  is  also  involved  in  the  social  problems  that  are  con- 
nected with  the  street-railroad  problems? 

Mr.  Eastman.  Yes.  And  I  think  that  I  ouglit  to  say  perhaps  I 
have  given  too  unfavorable  an  impression  of  the  experiments  in 
Massachusetts.  They  were  made,  in  many  respects,  under  unfavorable 
conditions,  due  to  weather  conditions,  due  to  the  influenza  epidemic 
that  occurred  at  one  time,  during  the  absence  of  the  young  men  at  the 
front,  and  so  on;  so  that  it  was  exceedingly  difficult  to  draw  conclu- 
sions that  you  were  sure  of.  And  if  they  deal  in  some  of  those  ex- 
periments in  raising  fares,  applied  over  a  long  period  of  time,  they 
would  produce  better  results  than  apparently  they  have  up  to  date. 

Commissioner  Sweet.  Mr.  Warren,  do  you  want  to  ask  any  ques- 
tions? 

Mr.  Warren.  I  do  not  think  so.  I  would  just  like  to  ask  Mr, 
Eastman  about  that  Middlesex  &  Boston  case.  There  was  a  state- 
ment in  that  report,  as  I  recall  it,  to  the  effect  that  the  dividends 
paid  by  the  company  had  been  so  small  that  whatever  depreciation 
had  occurred,  the  public  rather  than  the  company  had  gotten  the 
benefit  of  it.    Was  there  not  something  like  that  in  there? 

Mr.  Eastman.  There  was  something  to  the  effect  that  the  divi- 
dends of  that  company  had  never  exceeded  4  per  cent,  as  I  recall  it. 

Commissioner  Sweet.  Mr.  Ogburn,  who  is  your  next  witness? 

Mr.  Ogburn.  Mr.  Maltbie  is  the  next  witness. 

STATEMENT  OF  MR.  MILO  E.  MALTBIE. 

The  Chairman.  You  may  proceed.  Dr.  Maltbie. 

Mr.  Maltbie.  Mr.  Chairman  and  gentlemen,  I  wish  to  say  first, 
before  beginning  what  few  remarks  1  have  to  make,  that  I  have  had 
practically  no  time  to  systematize  my  thoughts  on  this  question, 
having  been  exceedingly  busy  for  many  months  and  only  having  had 
a  few  moments  on  the  train  coming  down  yesterday  afternoon  to 
put  together  what  may  be  called  some  rather  cursory  views  on  this 
situation. 


Not  that  these  are  in  the  order  of  importance  at  all,  but  merely 
to  mention  the  first  thing  that  occurred  to  me,  it  seems  to  me  that 
possibly  the  most  important  unfortunate  factor  in  the  situation  as 
it  exists  to-day  is  the  lack  of  confidence  in  the  statements  of  and 
positions  that  are  being  taken  by  the  public-utility  companies  and, 
in  some  instances,  an  utter  lack  of  confidence  in  the  motives  and  the 
purposes  of  the  public  officials  who  are  upon  the  other  side  of  the 
question. 

Of  course,  post-mortems  are  of  no  particular  interest  unless  they 
get  us  somewhere  in  this  situation.  And  I  r^fer  to  these  facts  and 
others  that  I  shall  mention  not  from  any  desire  to  hold  a  post- 
mortem but  because  they  may  point  the  direction  in  which  relief 
may  be  secured  ih  this  situation,  and  that  is  the  only  purpose  I  have 
in  mind. 

Going  back,  however,  a  few  years,  Avhen  the  street  railways  were 
in  rather  thriving  condition  and  before  public  regulation  and  control 
had  become  an  active  force  in  most  States  in  the  United  States,  the 
relationship  between  the  municipalities  and  the  street-railway  com- 
panies was  regulated  by  the  contract  provision  and,  of  course,  occa- 
sional regulation  by  the  legislatures.  At  that  time  the  efforts  of  the 
public  were  aimed  at  lower  fares,  because  of  the  large  profits  that 
were  being  reported  by  the  company;  and  in  their  efforts  to  secure 
lower  fares  they  were  backed  only  by  the  police  povver  of  the  State, 
because  the  franchises,  in  most  instances,  provided  for  no  adjustment 
of  fares  themselves.  They  were  met,  at  that  time,  in  many  places, 
by  the  statement  that  the  companies  had  the  right  to  these  large 
earnings;  that  they  had  made  a  franchise  contract  with  the  public 
authorities;  that  under  the  terms  of  that  franchise  contract  they 
had  been  able  to  secure  large  profits,  and  that  they  were  entitled  to 
these  profits  as  a  matter  of  contract  right. 

Now  the  situation,  of  course,  has  entirely  changed,  but  there  still 
persists  a  feeling  and  a  recollection  of  the  tinue  when  the  companies 
were  pleading  a  matter  of  law  as  a  justification  for  their  insistence 
that  they  should  continue  these  large  profits  and  that  rates  should 
not  be  reduced.  Of  course,  at  the  present  time  the  feature  in  the 
situation  that  is  being  emphasized  is  that  that  is  equitable,  or  that 
equity  requires  that  the  fares  should  be  revised  and  that  thc}^  should 
be  increased. 

Well,  of  course,  it  is  very  well  to  talk  about  law  continuously 
and  that  is  understandable.  It  is  also  understandable  to  talk  about 
equity  continuously.  But  when  anyone  takes  the  position  of  talk- 
ing law  at  one  time  and  equity  at  another,  it  is  but  natural  that  the 
feeling  of  lack  of  confidence  and  that  the  feeling  of  distrust  should 
develop.  And  that  is  the  situation  in  a  number  of  cities  at  the 
present  time,  where  they  were  met  comparatively  a  few  years  ago 
by  a  refusal  to  have  a  revision  of  conditions  because  the  provisions 
in  the  contract  protected  them;  and  now  the  public  having  the 
franchise  provisions  to  protect  them,  of  course  turn  around  and 
plead  the  question  of  law. 

Now,  another  factor  which  has  led  to  this  lack  of  confidence  upon 
both  sides  is  the  large  values  that  are  claimed  either  in  franchise 
readjustments  or  in  rate  cases.  And  I  wish  to  refer  to  instances — 
not  by  name,  because  I  take  it  30U  are  not  interested  in  discussing 


2090    PROOEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  CX>M MISSION.    2091 


dfc 


the  virtues  or  misdeeds  of  any  one  city  or  any  one  individual;  it 
ip  a  question  of  an  issue  here,  it  is  a  question  of  a  principle  involved ; 
and  1  shall  not,  unless  you  ask  me  to,  refer  to  the  names  of  any  city 
or  any  company  except  in  one  or  two  instances — ^but  I  have  in  mind 
a  case  where  the  public  utility  in  a  dispute  over  rates,  through  ex- 
perts which  it  employed,  asked  through  certain  experts  for  a  return 
upon  over  $50,000,000  and  through  other  experts  a  return  upon  over 
$70,000,000,  and  an  investigation  made  as  to  the  actual  cost  of  the 
property  being  made,  consisting  of  one  representing  the  company, 
one  representing  the  complainant  in  the  case,  and  a  third  repre- 
sentin<^  the  commission  agreed  upon  a  cost  of  the  property  of  about 
$25,000,000,  omitting  overhead  expenses  and  omitting  any  considera- 
tion of  depreciation. 

Now,  you  can  allow  whatever  you  want  for  those  factors;  you 
can  add  if  you  wish  20  per  cent  for  overhead,  just  pulling  a  figure 
out  of  the  air,  and  you  get  $30,000,000.  You  can  deduct  accrued 
depreciation,  it  you  want  to,  of  10  or  15  per  cent,  again  pulling  a 
figure  out  of  the  air,  and  you  will  get  less  than  $30,000,000.  But 
here  the  company  was  asking  in  that  case  for  a  return  upon  $40,- 
000,(X)0  through  certain  experts  and  a  return  upon  $70,000,000 
through  other  experts. 

The  Chairman.  Perhaps  the  experts  got  their  wires  crossed. 

Mr.  IVIaltme.  Well,  I  think  it  was  worse  than  having  wires 
crossed  in  that  case.  1  do  not  think  they  had  any  basis  upon  which 
to  put  those  large  figures,  as  shown  by  an  investigation  through  men 
representing  the  company  itself  of  what  was  the  actual  cost  of  the 
property. 

Now,  I  have  in  mind  another  case  where  companies  are  asking 
itow,  or  have  been  just  recently,  for  a  return  upon  value  based  upon 
trend  of  prices,  where  the  engineers  have  built  up  a  curve  and  taken 
the  prices  which  materials  and  labor  demanded  and  got  during  the 
last  year  or  two,  and  then  have  projected  that  trend  curve  into  the 
future  and  found  a  price  which  admittedly  the  company  did  not 
pay,  which  is  in  excess  of  what  the  company  did  pay,  and  then  have 
multiplied  those  land  figures  by  3 — which  was  condemned  some  time 
ago  by  Justice  Hughes  in  the  Minnesota  rate  case — and  are  asking 
the  cities  in  that  case  to  approve  an  increase  in  fare  upon  the  basis 
of  that  figure. 

Now,  I  do  not  think  it  is  surprising  if  utilities  take  that  position 
that  the  public  authorities  do  not  have  very  much  confidence  in 
their  claims.  But  whether  it  is  surprising  or  whether  it  is  not, 
\\hether  it  is  justified  or  whether  it  is  not,  the  fact  remains  that 
they  do  not  have  confidence  in  the  claims  of  the  companies  upon  that 
point. 

Another  thing  which  seems  to  me — and  I  refer  to  these  because 
I  think  they  have  got  to  be  cured;  I  think  if  we  are  going  to  deal 
in  equity  we  have  got  to  deal  in  equity,  and  if  we  are  going  to  deal 
in  law  we  have  got  to  deal  in  law;  but  we  can  not  mix  the  two 
things — sometimes  dealing  in  law  and  sometimes  dealing  in  equit^y; 
and  as  between  the  two,  my  own  preference,  of  course,  is  for  an  equi- 
table decision,  whatever  the  conditions  may  be,  basing  the  results  upon 
conditions  that  exist  at  that  time;  as  to  values,  if  we  are  going  to 
make  progress  there.  I  think  we  have  got  to  have  a  modification  of 
the  extreme  claims  that  are  made  for  extreme  values. 


In  the  third  place,  it  has  frequently  happened  that  companies  have 
le fused  to  allow  public  authorities  to  ascertain  the  facts.  They  have 
closed  their  books,  refused  to  allow  access  to  them.  They  even  re- 
fuse to  let  them  examine  their  property,  such  as  their  power  plants, 
where  they  can  close  the  door.  Now,  what  is  the  result  of  that? 
The  result  of  that  is  to  breed  suspicion,  and  a  man  can  always  im- 
agine, when  he  is  shut  out  from  looking  at  a  thing,  more  than  is 
ever  there ;  and  that  is  what  he  usually  does. 

It  has  been  my  experience,  and  was  my  experience  as  a  member 
of  the  public-service  commission  in  New  York  that  whenever  that 
question  arose,  to  urge  upon  the  company,  and  perhaps,  if  neces- 
sary, to  compel  the  company,  to  open  its  books  and  its  property  and 
its  records  and  allow  the  complainants  to  investigate  them,  and  where 
that  has  been  done  it  has  also  been  my  experience  that  the  feeling 
of  distrust  and  suspicion  and  opposition  has  been  allayed;  and  I 
do  not  know  of  a  single  exception  to  that  rule. 

The  Chairman.  At  this  point  we  will  adjourn  until  2  o'clock. 

(Whereupon,  at  1  p.  m.,  a  recess  was  taken  until  2  p.  m.) 

AFTERNOON    SESSION. 

STATEMENT  OF  MB.  MILO  £.  MALTBIE--Gontinued. 

Mr.  Maltbie.  In  connection  with  what  I  was  saying  before  the 
recess,  there  are  two  things  that  should  be  added  on  that  subject: 
One  is  that  what  I  have  said  regarding  picking  out  certain  illus- 
trations, of  course,  does  not  apply  to  all  utility  companies.  There 
are  instances  which  have  come  to  my  personal  knowledge  of  com- 
panies that,  whenever  requested  and  whenever  the  question  of  a 
revision  of  rates  or  a  consideration  of  their  service  were  up,  made 
a  frank  and  full  disclosure  of  all  of  their  facts,  allowed  an  exami- 
nation of  their  books  and  an  examination  of  their  property,  and 
have  held  nothing  back;  and  the  result,  of  course,  in  that  case  has 
been  advantageous  to  them  as  well  as  to  the  public. 

The  second  thing  is  that  which,  of  course,  naturally  follows  from 
what  has  been  said,  that  where  such  conditions  exist,  and  where 
they  get  the  publicity  that  is  usually  given  to  any  delinquency^  upon 
the  part  of  a  private  corporation,  every  corporation  has  to  suffer; 
and  as  a  result,  to-day,  the  securities  of  many  corporations  have  feit 
the  distrust  and  suspicion  that  is  attached  to  their  corporations  in 
other  cities. 

I  wish  to  refer  next  to  the  financial  situation  and  make  certain 
remarks  in  relation  thereto.  Of  course,  the  street-railway  compa- 
nies at  the  present  time  are  laboring,  among  other  things,  under  a 
great  disadvantage  in  any  attempt  to  secure  new  capital  for  equip- 
ment which  could  be  operated,  possibly,  at  less  expense  to  the  com- 
pany and  greater  advantage  to  the  public.  One  of  the  things  to 
which  I  wish  to  call  your  attention  as  an  explanation  of  that  situa- 
tion, and  something  which  prevents  adjustments  being  made  that 
ought  to  be  made,  is  the  fact  that  in  many  instances  the  companies 
have  been  overcapitalized;  that  is,  they  are  capitalized  for  a  par 
value  of  stocks  and  bonds  very  greatly  in  excess  of  either  the  cost 
of  the  proi)erty  as  it  stands  to-day,  or  the  value  of  the  property. 


2092     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Of  course,  in  such  instances  it  is  difficult  to  raise  money,  because  those 
who  are  asked  to  accept  the  new  securities  fear  that  when  their  rates 
come  before  a  public  body  for  review,  a  public-service  commission^ 
for  example,  the  value  or  the  property  will  be  found  at  less  than 
the  par  value  of  the  securities,  and  that  some  of  the  securities — of 
course,  the  junior  securities — will  be  placed  in  such  a  position  that 
they  do  not  get — not  a  fair  return,  but  do  not  get  an  amount  ap- 
j)reciably  toward  a  fair  return,  and  consequently,  there  being  no 
one  to  take  the  securities,  there  not  being  earnings  sufficient  to  pro- 
vide funds  for  their  paying  fixed  charges  and  to  purchase  the  prop- 
erty that  is  needed,  there  is  no  way  of  securing  funds  which  might 
})e  used  to  advantage  in  the  operation  of  the  company,  and  the  com- 
panies are  compelled  to  go  on  with  rolling  stock,  for  example,  which 
is  not  well  adapted  to  the  conditions  that  exist  to-day. 

Reference  was  made  by  Mr.  Eastman  to  the  question  of  deprecia- 
tion, and  1  will  say  just  a  word  or  two  upon  that  point. 

It  has  been  the  law  in  many  States  for  years  that  dividends  could 
not  be  declared  unless  earnea.  Some  of  the  States  have  recognized 
clej)reciation  in  the  law,  and  other  States  have  not  referred  to  it 
specifically.  Of  course,  it  is  a  matter  of  common  knowledge  that  in 
the  past,  say  20  years  ago,  many  of  the  companies  paid  no  attention 
to  depreciation,  expecting  that  the  growth  of  the  business  and  tlie 
increases  in  earnings  resulting  therefrom  would  be  sufficient  to  take 
care  of  replacements  and  renewals  when  it  became  necessary  to  make 
them ;  and,  of  course,  for  a  considerable  time  their  expectations  were 
justified.  That  is  exactly  what  happened;  and  they  did  not  find 
themselves  in  a  critical  situation. 

Sooner  or  later,  however,  that  condition  is  bound  to  catch  up  with 
a  company,  and  put  it  in  a  position  like  the  street  railways  were  in 
in  New  York  City  about  10  years  ago,  when  they  went  through  re- 
organization, in  1907  and  the  years  following,  where  the  lack  of 
]>rovision  for  depreciation  meant  that  the  property  had  a  service 
value  far  below  the  cost  of  the  property  and  where,  when  it  be- 
came necessary  to  make  provision  for  renewals  and  replacements, 
there  were  not  sufficient  sums  available,  and  the  public  authorities 
would  not  let  them  issue  securities  for  the  replacement  of  property. 
Many  companies  to-day  are  in  that  situation;  not  all,  but  many  of 
them  are  in  the  situation  where  they  have  not  adecjuate  deprecia- 
tion reserves,  and  where,  in  order  to  meet  that  delinquency^  it  is 
necessary  to  resort  to  other  methods,  which,  of  course,  makes  it  par- 
ticularly difficult  to  secure  money  from  any  financial  house  which 
has  an  examination  made  of  the  property  before  approving  any  con- 
siderable amount  of  security. 

I  think  the  principal  thing  that  has  happened  of  an  unfortunate 
character,  so  far  as  utilities  are  concerned,  in  this  regard,  is  that 
the  investor,  the  small  investor  particularly,  has  become  increasinglv 
afraid  of  utility  securities.  Of  course,  that  applies  to  street  rail- 
ways at  the  present  time  more  than  it  does  to  other  utilities,  with 
the  possible  exception  of  railroads. 

If  3'ou  will  pardon  a  personal  experience,  to  illustrate  how  it 
comes:  When  the  surface  lines  in  Manhattan  were  going  through 
reorganization  in  1907  to  1912,  and  I  was  a  member  of  the  public- 
service  commission,  and  the  matter  was  under  our  supervision — at 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2093 

least  we  thought  it  was  until  the  court  decided  otherwise — one  of  the 
most  trying  things  which  we  had  to  do  at  that  time  was  to  listen  to 
the  tales  of  small  investors  who  had  put  their  savings,  accumulated 
through  several  years,  into  the  securities  of  the  old  Metropolitan 
Street  Railway  Co.  They  had  done  it,  of  course,  without  any  knowl- 
edge of  the  situation,  as  far  as  they  themselves  were  concerned. 
They  were  not  in  a  position  to  analyze  the  statements.  They  were 
not  in  a  position  to  find  out  the  facts.  They  determined  it  on  the 
advice  of  perhaps  some  friend  or  some  one  on  whose  judgment  they 
relied;  but  the  fact  of  the  matter  was  that  after  a  few  years  they 
found  themselves  in  a  position  where  their  securities  were  worthless, 
where  they  were  unable  to  provide  the  money  which  was  required 
under  the  reorganization  plan  in  order  to  take  up  the  new  securities, 
and  were  compelled  to  sacrifice  what  they  had  paid. 

The  small  investor,  particularly,  is  helpless  in  a  reorganization  of 
that  sort;  not  because  the  opportunity  is  not  given  to  him  under  the 
new  plan,  but  because  he  ver}^  frequently  has  not  the  funds  to  pro- 
tect what  money  he  has  put  in,  so  that  he  has  to  take  the  loss,  whether 
he  wants  to  or  not.  Of  course,  that  leaves  him  with  a  distrust  and 
a  dislike  for  utility  securities.  Gradually  the  small  investor  has  been 
made  to  feel  that  these  securities  are  not  the  kind  that  he  ought  to 
invest  in. 

It  seems  to  me  that  whatever  utility  speculation  ma}^  have  in  other 
lines  of  activity,  it  is  most  unfortunate,  from  the  public  point  of 
view,  that  utility  securities  should  be  speculative  in  any  sense. 

The  best  thing  that  can  happen,  so  far  as  I  can  see  it,  from  the 
security  point  of  view  is  to  have  these  securities  of  an  investment 
character  and  not  of  a  speculative  character. 

Of  course,  the  immediate  result  is  that  money  can  be  secured  at  a 
lower  rate  of  interest  if  they  are  real  investment  securities  than  if 
you  have  to  depend  upon  speculative  capital,  because  investment 
securities  will  always  demand  a  higher  rate,  and  won't  come  in  unless 
it  gets  it. 

The  most  important  thing,  it  seems  to  me.  to  be  kept  in  mind  in 
framing  any  new  plan  to  be  considered  in  the  situation  as  it  now 
exists,  is  that  there  must  be  some  provision  made,  in  any  plan,  which 
will  furnish  an  inducement  for  efficiency.  In  other  words,  if  any 
plan,  whether  it  be  a  limited-term  franchise  or  an  indeterminate 
franchise,  or  a  cost-of-service  franchise,  or  no  franchise  at  all,  with 
just  a  local  consent  to  operate,  subject  to  regulation  in  every  in- 
stance— unless  some  provision  is  made  whereby  inefficiency  will  be 
punished  or  suffer  some  loss  and  efficiency  will  be  rewarded  where 
it  exists,  the  tendency  will  be  toward  stagnation,  and  public  regula- 
tion and  control  has  to  labor  with  this  problem  as  well  as  anything 
else,  because  the  tendency  will  be,  of  course,  to  meet  the  demands.  If 
it  does  not  make  any  difference  to  the  operators  of  a  company  whether 
they  pay  high  prices  for  materials  or  not,  the  tendency  wilt  be  not  to 
give  that  subject  any  particular  attention.  They  will  pay  the  high 
prices.  If  there  is  no  reward  for  purchasing  materials  when  prices 
are  low,,  and  no  punishment  for  purchasing  materials  when  prices 
are  high,  the  inevitable  result  will  be  to  purchase  in  more  or  less  of 
a  haphazard  way  and  to  pay  high  prices. 

In  the  same  way,  if  there  is  no  incentive  to  efficiency,  politics  is 
apt  to  come  into  the  situation,  in  not  the  way  which  is  usually  re- 


I 


^     I 


201*4    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

f erred  to,  but  in  a  different  way,  which  is  just  as  effective,  as  far  as 
tliat  is  concerned,  in  bringing  bad  results  as  it  is  in  the  old-fashioned 
way.  ^t  if  control  and  management  does  not  get  its  reward  or  its 
punishment,  as  the  case  may  be,  th«  political  parties  will  be  apt  to 
use  a  private  corporation  as  a  means  for  locating  their  henchmen. 

In  a  certain  city  there  are  two  cor^x^rations,  and  it  has  been  known 
for  a  number  of  years  tliat  one  corporation  takes  care  of  the  voters 
in  one  political  party,  and  another  corporation  takes  care  of  the 
voters  in  another  political  party. 

The  Chairman.  That  is  a  combination  in  restraint  of  trade,  is  it 

not? 

Commissicmer  Gadsden.  No.  That  is  bipartisan — strictly  in  ac- 
cordance with  the  statutes. 

Mr.  Maltbie.  Equality  of  treatment.  Strangely  enough,  perhaps, 
that  developed  under  a  provision  in  the  franchise,  or  in  the  grant, 
that  whatever  profits  were  left  over  and  above  a  certain  rate  of  return 
should  go  to  the  city ;  and  I  do  not  think  it  is  strange  at  all  that  under 
that  arran^.ment  there  have  not  been  any  profits  going  to  the  city. 

Commissioner  Wehle.  They  went  to  the  city  in  a  diffei-ent  form? 

Mr.  Maltbie.  Well,  on  the  assumption  that  the  city  is  entirely 
represented  by  the  Republicans  and  Democrats  in  that  case,  and  no 
one  else  has  a  chance,  I  think  that  is  true. 

Commissioner  Wehi^.  Rather  an  unfortunate  form  ? 

Mr.  Maltbie.  Certainly  satisfactory  for  those  involved.  That  has 
a  relation  to  the  cost -of -service  franchise.  If  the  cost-of-service 
franchise  is  s<;  drawn  that,  no  matter  what  happens,  the  company 
operating  the  utility  is  allowed  to  deduct  from  tlie  income  the  op- 
erating expenses  actually  paid,  and  there  is  no  control  over  them,  it 
seems  to  me  that  whether  the  result  comes  about  immediately,  sooner 
or  later  the  great  temptation  will  be  upon  the  part  of  the  manage- 
ment not  to  consider  how  efficiently  that  company  can  be  operated 
from  the  point  of  view  of  what  payments  are  made,  but  under 
pressure  they  will  allow  the  cost  of  operation  to  go  up.  Of  course, 
that  is  bad  for  the  public,  because  if  the  cost  of  operation  goes  up, 
under  the  cost-of-service  franchise,  the  rates  have  got  to  go  up,  and 
as  there  are  illustrations  without  number,  if  the  rates  of  fare  go  up, 
it  may  not  result  in  the  net  income  going  up.  In  other  words,  the 
cost-of-service  franchise,  from  this  point  of  view,  if  not  from  all 
points  of  view,  has  many  of  the  disadvantages  of  the  construction 
contract  on  the  basis  of  cost-plus:  and  unless  this  point  is  taken  care 
of  in  some  effective  way,  it  is,  in  my  mind,  a  most  serious  criticism 
of  the  cost-of-service  franchise  arrangement. 

Turning  now  for  the  moment  to  what  suggestions  might  be  made 
and  what  matters  might  be  considered,  in  view  of  the  street-railway 
situation  as  it  is  to-day.  the  thing  we  have  got  to  face :  it  is  not  neces- 
sary, in  view  of  what  Mr.  Eastman  has  said — and  that  is  the  only 
testimonv  that  I  have  heard  or  read  which  has  been  presented  to 
you — it  IS  uni  ecessary  to  say  much  about  the  difficulty  of  getting  a 
nigher  net  income  out  of  an  increase  in  fares. 

General  experience,  I  think,  is  that  the  increase  of  fares  has  been 
disappointing,  to  put  it  mildly.  Of  course,  in  some  instances  the 
net  is  not  as  much  under  the  increased  fare  as  it  was  before;  and 
unless  vou  can  increase  the  net  over  what  it  would  have  been  at 


PROCBEDOGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   2095 

the  lower  fare,  of  coui*se  there  is  a  great  public  disadvantage  in  a 
higher  fare  and  no  utility  advantage. 

\Miat  I  would  like  to  emphasize  are  two  points  in  this  connection: 

In  the  first  place,  that  every  effort  should  be  made  to  increase  the 
service  rendered  rather  than  to  increase  the  cost.  What  I  mean 
by  that  is  illustrated  by  certain  of  the  interurban  lines,  particularly 
in  the  Middle  West  and  the  West — they  have  done  much  more  of 
it  than  they  have  in  the  East — and  that  is  in  the  development  of 
the  handling  of  commodities,  as  distinguished  from  the  handling  of 
jiassengers. 

Of  course  everybody  knows  that  for  the  middle  hours  of  the 
night  the  street-railway  lines  are  not  used  to  their  maximum  ca- 
pacity. They  have  not  been,  and  never  are.  Apparently  there  is 
no  business  than  can  be  developed  that  will  use  them  to  the  maxi- 
mum during  the  night.  It  is  possible,  however,  and  it  has  been 
done  in  some  instances,  to  develop  the  handling  of  property,  as 
(listinguished  from  persons,  at  those  hours;  and  there  is  not  the  ob- 
jection to  it  through  rural  districts  that  there  is  in  the  city  some- 
times. But  the  objection  even  in  the  cities  is  not  great,  and  in  a 
situation  such  as  exists  at  the  present  time  it  ought  not  to  prevent 
the  handling  of  property,  whether  in  large  carload  lots  or  in  pack- 
age lots,  the  handling  of  garden  produce,  over  the  tracks  of  the 
utility  companies. 

Many  companies  do  not  have  the  right,  under  their  franchise, 
to  do  that  sort  of  business,  and  it  would  require  a  new  grant  to  give 
it  to  them.  In  this  situation,  however,  there  will  not  be  the  hos- 
tility to  the  granting  of  that  right  that  there  was  20  years  ago, 
when  they  were  in  a  more  thriving  condition. 

The  Chairman.  Is  it  not  also  true,  Mr.  Maltbie,  that  a  great 
many  cities  under  their  charter  provision  have  not  got  the  power 
to  permit  street-car  companies  to  haul  anything  but  passengers  upon 
the  tracks? 

Mr.  Maltbie.  That  may  be  so.  I  don't  know  that  I  could  say 
that  is  the  general  rule.  There  may  be  some  instances.  I  was 
rather  of  the  opinion  that  the  cities  had  the  right  to  grant  those 
franchises  if  they  wanted  to.  They  have  not  done  it  in  very  large 
luimbers.  Some  of  the  old  franchises  provided  for  that,  but  the 
more  recent  franchises  did  not  include  it.  because  thev  did  not 
want  it  done  at  that  time.  The  situation  has  changed  now',  however, 
the  companies  are  not  in  so  good  a  condition,  and  it  is  a  question 
of  what  can  be  done. 

I  started  to  say  that  I  am  not  sure  but  what  this  suggestion  is 
too  late  to  be  acted  upon  in  some  localities,  because  of  the  develop- 
ment of  the  motor  truck  for  the  delivery  of  garden  produce,  for 
example,  and  packages  has  developed  in  some  communities,  and  the 
system  has  been  established,  and  people  are  accustomed  to  it;  so  that 
it  would  be  very  difficult  for  a  street-railway  company  now  to  get 
the  business  which  it  might  have  got,  and  which  they  did  <ret,  in 
some  instances,  10  or  15  years  ago.  ^ 

On  this  question  of  getting  a  larger  net  income,  it  seems  to  me 
that  in  many  instances  the  possibilitv  of  keeping  or  developing  the 
shovt-haul  traffic  has  rather  been  overlooked. 

AVliatever  may  be  the  circumstances  in  other  cities,  in  my  opinion 
It  IS  true  in  the  Borough  of  Manhattan,  N.  Y.,  that  the  future  of 


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2096    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

the  surface  lines — the  financial  future  of  the  surface  lines — is  likely 
to  be  better  if  a  short-haul  traffic,  even  at  a  lower  rate  than  5  cents, 
is  developed.  To  what  extent  it  might  be  possible  to  do  the  same 
thing  in  other  cities,  I  am  unable  to  say ;  but  our  conditions  in  Man- 
hattan are  such  that  the  short-haul  traffic,  even  at  a  lower  rate, 
could  be  made  more  remunerative  than  the  present  traffic  at  the  5- 
cent  fare. 

You  are  familiar,  doubtless,  with  the  situation,  and  I  will  just 
cover  it  in  a  few  words.  We  have  there  in  nearly  every  big  thorough- 
fare north  and  south,  except  the  two  that  go  east  of  Central  Park 
and  west  of  Central  Park,  rapid-transit  lines.  We  have  the  elevated 
and  we  have  the  subways. 

Now,  anyone  who  wishes  a  long-distance  haul  can  be  carried  more 
cheaply  on  the  subway  or  elevated  road  than  he  can  be  carried  on 
the  surface  lines.  Furthermore,  he  can  be  carried  more  rapidly  on 
those  lines  than  the  surface,  so  that  not  only  should  he  be  carried 
there  but  he  will  be  carried  there,  because  he  will  go  there.  And 
under  equality  of  conditions  as  to  fare  he  will  ttdte  the  subways  or 
the  elevated  rather  than  the  surface  lines. 

The  Chairman.  Why  do  you  say  they  can  be  hauled  more  cheaply 
on  the  elevated  or  subway  ? 

Mr.  Maltbie.  Because  they  carry  them  in  such  quantities  and  at 
rapid  rates  of  speed. 

The  Chairman.  You  mean  more  cheaply  to  tlie  company  rather 
than  to  the  passengers? 

Mr.  Maltbie.  Yes ;  more  cheaply  to  the  company. 

Now,  of  course,  a  subway  or  elevated  road  is  not  well  adapted  to 
short-haul  business.  A  person  will  go  on  the  surface  lines,  other 
things  being  equal,  rather  than  on  the  subway  or  elevated,  provided 
there  is  sufficient  frequency  of  service.  But  the  thing  that  attracts 
him  on  the  surface  line  is  the  ease  of  getting  on  and  off  the  car  with- 
out having  to  go  up  or  down  stairs,  the  quickness  with  which  he  will 
be  able  to  take  a  cnr  or  get  one  going  by,  and  the  convenience  of  step- 
ping on  a  car  and  stepping  off  a  car  at  his  point  of  origin  and  his 
point  of  destination. 

Now%  for  experience  in  this  line  we  have  to  go  abroad,  and  I  am 
not  sure  but  what  that  situation  has  been  called  to  your  attention. 
But  in  the  experience  of  the  English  cities  it  has  been  repeatedly 
shown  that  by  the  development  of  a  low  fare  and  short-haul  service — 
that  is,  a  low  fare  for  a  short  ride — they  have  been  able  to  increase 
their  net  income ;  that  is,  they  have  been  able  to  increase  their  gross 
receipts  without  the  corresponding  increase  in  operating  expenses. 

Now,  I  am  aware  that  that  has  been  developed  under  a  zone  system 
of  fares,  which  is  a  question,  at  least,  as  to  the  advisability  of  adop- 
tion in  this  country;  but  there  are  certain  lines  in  New  York,  the 
cross-town  lines  particularly,  where  a  short-line  service — that  is,  a 
car  running  between  terminals  not  far  apart — at  a  fare  of  2  or  3 
cents,  would,  in  my  opinion,  attract  a  considerable  amount  of  traffic 
which  is  now  walking  because  the  people  will  not  pay  the  5-cent 
fare  for  the  short  ride  which  they  wish  to  take. 

The  Chairman.  In  the  Manhattan  district  would  it  be  practicable 
to  maintain  a  lower  fare  on  the  surface  lines  than  prevails  upon  the 
elevated  or  subway  ? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILW^AYS  COMMISSION.    2097 


Mr.  Maltbie.  No ;  and  I  am  glad  you  referred  to  that.  I  intended 
to  cover  that,  but  it  slipped  my  mind.  Of  course,  that  is  the  diffi- 
cultv  of  the  situation  now  in  New  York — namelv,  that  with  the 
5-cent  fare  fixed  in  the  subway  contracts  and  the  elevated  contracts 
piactically,  as  far  as  that  is  concerned,  if  they  should  increase  the 
fare  to  7  cents,  we  will  say,  on  the  surface  lines,  people  would  not 
use  them  imlcss  they  were  more  or  less  compelled  to  use  them;  they 
would  go  to  the  subway  or  tlie  elevated,  and  the  surface  lines  would 
lose.  And  the  managers  know  it  and  have  recognized  it,  and  con- 
so(]uently,  of  course,  what  they  are  striving  to  obtain  is  an  increased 
fare  on  all  lines;  otherwise,  instead  of  getting  more  net  income, 
they  will  have  less  net  income. 

That  is  almost  inseparably  tied  up  with  the  provision  of  more 
frequent  service.  New  York  has  gone  to  large  cars.  About  the 
only  small  cars  that  are  operating  there  are  the  storage-battery  cars, 
and  they  have  been  operated  upon  certain  lines  under  traffic  condi- 
tions which  are  very  severe,  so  that  they  have  made  rather  poor  time; 
and  many  ktive  construed  that  as  a  demonstration  that  the  small 
car,  the  one-man  car,  could  not  be  operated  successfully  in  New 
York.  There  are  other  engineers  who  have  an  entirely  different 
opinion,  and  who  believe  that  the  one-man  car,  the  small  car  with 
frequent  oi^eration,  would  be  a  success  in  New  York.  Of  course, 
there  you  come  back,  even  if  that  were  admitted,  to  the  question 
of  where  they  are  going  to  get  the  money  to  buy  those  cars — and  if 
you  have  not  any  money  in  your  pocket  it  does  not  make  any 
difference  how  cheap  food  is.  But  the  short-haul  business  will  not 
go  to  surface  lines  if  you  have  to  wait  on  a  corner  a  considerable 
time  before  the  car  comes  along;  it  will  go  to  the  subway;  it  is  so 
much  quicker  in  the  final  result  than  to  stand  there  and  wait  for  a 
car;  and  hunum  nature  is  such  that  even  with  a  split  watch  you 
could  not  prove  to  anybody  that  they  would  gain  by  w^aiting. 
They  will  not  wait.  You  need  not  put  it  in  the  record,  but  you  know 
a  New  York  man  is  a  man  that  gets  mad  if  he  loses  a  place  in  a 
revolving  door. 

Now,  another  point  I  wish  to  suggest  for  your  consideration  is 
the  recommendation  that  certain  charges  imposed  upon  street- 
railway  companies  be  reduced.  Reference  has  been  made  to  the  pav- 
ing matter.  I  think  Mr.  Sweet  particularly  called  attention  to  that 
when  Mr.  Eastman  was  on  the  stand.  It  seems  to  me  that  certain, 
probably  many,  of  the  charges  which  have  been  imposed  upon  street- 
railway  companies  in  the  past  might  well  be  modified,  perhaps  tem- 
porarily, until  we  see  what  happens  imder  the  present  circumstances. 
Of  course,  those  charges  arose  in  a  time  when  companies  were  very 
profitable  and  when  it  seemed  the  only  way  in  which  the  public 
could  get  a  share  of  the  large  profits  that  were  reported  to  exist; 
so  they  resorted  to  the  power  of  taxation  and  utilized  it  to  the  full 
and  piled  up  taxes  in  various  forms,  taxes  and  fees,  over  what  the 
company  had  been  paying. 

Now,  whether  that  was  proper  or  not  is  wholly  aside  from  the 
question  at  issue.  The  situation  is  now  that  those  charges  obtain; 
that  in  many  instances,  in  view  of  the  conditions  that  exist,  they 
are  not  justified  at  the  present  time  and,  in  my  opinion,  might  be 
modified.     If  conditions  change  and  they  should  be  imposed  again 


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2098    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

at  some  future  time,  that  is  a  matter  to  be  taken  care  of  then.    But, 
so  far  as  the  present  is  concerned,  they  might  be  modified. 

In  the  case  of  paving,  let  me  suggest  this  for  your  coasideration : 
The  maximum  burden  which,  under  the  circumstances,  a  company 
should  be  i-equired  to  stand  is  the  added  cost  of  maintaining  the 
pavement  which  the  existence  of  the  rails  imposed  upon  the  public. 
In  my  opinion,  it  does  not  seem  to  l>e  fair  to  relieve  the  company 
of  all  paving  charges  whatever,  because  wliere  there  are  rails  in  the 
street  the  paving  will  not  last  as  long  as  in  streets  where  there  are 
no  rails.  The  mere  fact  of  the  paving  being  broken  by  a  rail,  and 
that  there  has  to  be  a  joint  between  the  paving  and  the  steel  rail, 
generally  upon  a  very  rigid  bed,  means  that  that  paving  is  going  to 
decay  and  break  down  sooner  than  if  there  were  no  rails  in  the 
street 

A  modification  of  the  franchise-tax  law  might  be  desirable,  pro- 
vided the  modification  can  be  done  without  becoming  unconstitu- 
tional, because  it  does  not  seem  to  me  to  be  fair  to  modify  all  of 
the  franchise  taxes  for  all  of  the  companies;  but  the  street-railway 
companies  are  in  such  condition  as  they  are  at  the  present  time,  and 
something  ought  to  be  done  for  them  now.  But  the  lawyers  are 
usually  so  ingenious  that  the  constitutional  requirements  can  still  be 
met  and  the  result  obtained. 

As  to  the  change  which  Mr.  Eastman  referred  to — that  is,  the 
skip-stop  and  all  those  other  things— I  shall  not  say  anything,  to 
save  your  time,  except  that  I  agree  with  what  he  said  regarding 
the  things  that  can  be  done  to  improve  the  situation,  by  those  vari- 
ous methods,  provided  you  start  out  upon  a  basis  of  confidence  with 
the  public.  Now,  the  skip-stop  proposition  has  broken  down  in 
some  cities  and  has  aroused  tremendous  opposition,  because  it  was 
not  put  in  properly  and  it  has  been  damned  in  those  cities,  so  that 
it  will  be  exceedingly  difficult  for  anybody  to  put  it  in  effect;  and 
it  had  to  be  repealed,  because  the  public  disliked  it;  it  was  not  put 
in  properly  and  they  got  a  hostility  to  it  which  was  not  justified  by 
the  fact.  They  did  not  understand  the  purpose  of  it.  It  was  made 
rigid  without  a  modification  in  view  of  the  conditions  that  existed, 
and,  I  think,  unfortunately  so.  So  a  great  many  of  these  things 
have  their  practical  effect,  depending  upon  the  first  point  that  I 
mentioned — namely,  that  there  shall  be  developed  somehow  a  feeling 
of  confidence  and  trust  between  the  parties  at  issue,  and  if  that  is  not 
developed,  a  great  many  of  the  things  that  are  being  suggested 
and  which  are  probably  wise  w^ill  never  reap  the  results  desired. 
As  to  the  relation  between  labor,  I  here  again  will  shorten  my 
remarks  by  saying  that  I  agree  with  what  Mr.  Eastman  has  said.  I 
can  not  understand  the  attitude  of  a  utilitjr  company  which  refuses 
to  deal  with  the  duly  selected  representatives  of  any  considerable 
body  of  workingmen.  I  can  not  see  any  reason  why  a  company 
should  refuse  to  do  that  any  more  than  that  the  laboringmen  might 
turn  around  and  refuse  to  deal  with  the  representatives  of  the 
stockholders.  To  my  mind,  it  seems  just  as  proper  for  the  laboring- 
men  to  go  to  California  or  Boston  or  New  Orleans  to  get  a  man 
to  represent  them  as  it  is  for  the  stockholders  to  go  to  Panama  or 
Canada  or  England  to  get  a  manager  for  their  proposition. 

I  think  something  has  been  said  regarding  the  special-assessment 
idea 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2099 

Commissioner  Wehle.  Or  even  Detroit,  Mr.  Maltbie. 

Mr.  Maltbie.  I  see  no  difference  between  Panama  and  Detroit. 

Mr.  Warren.  They  might  get  better  knowledge  in  Detroit  than 
in  Panama  of  this  particular  industry. 

Mr.  Maltbie.  From  what  I  know  of  the  men  coming  from  both 
j)laces  I  entirely  agree.  . 

Whether  there  is  anything  in  the  special-assessment  idea  which 
Avill  immediately  help  out  in  this  situation,  I  am  not  entirely  sure, 
but  if  I  may  suggest  it,  it  seems  to  me  it  would  be  wise  for  you  to 
call  attention  to  this  method  of  building  extensions. 

Now,  I  know  that  is  not  the  thing  that  sti^t-railway  men  art- 
talking  about  at  the  present  time  very  much.  It  is  more  a  desire 
to  make  a  return  on  what  they  have  got  rather  than  to  make  a  lot 
more  of  what  they  do  not  like.  But  that  is  particularly  apropos, 
if  there  is  going  to  be  municipal  ownership  of  the  street-railway 
lines  with  private  operation  or  if  there  is  going  to  be  municipal 
ownership  and  municipal  operation. 

Of  course,  the  fundamental  idea  is  that  the  special-assessment  idea 
which  has  been  applied  to  sewers  and,  in  some  cases,  to  water  works 
and  laying  out  of  streets,  and  so  forth,  should  be  applied  to  the  build- 
ing of  new  lines;  and  the  justification  of  it  is,  in  my  opinion,  par- 
ticularly strong  in  the  case  of  a  transportation  line,  because  there  is 
not  anything  that  will  develop  the  value  of  property,  if  the  lines  are 
properly  selected— there  is  not  anything  that  will  develop  the  value 
of  the  property  so  much  as  the  transportation  system.  I  do  not  know 
whether  your  attention  has  been  called  to  a  report  issued  by  the  City 
Club  of  New  York  a  number  of  years  ago.  I  am  going  to  leave  a  copv 
of  this  report  with  you,  if  you  have  not  a  copy,  and  content  myself 
now  with  just  giving  you  a  few  statements  made  in  this  report  which 
show  the  importance  of  this  factor. 

This  investigation  was  a  very  careful  investigation  made,  as  I  said, 
by  the  City  Club  of  New  York  soon  after  the  original  subway  of  New- 
York  was  opened,  which  operated  originally,  as  you  will  recall,  from 
the  post  office  or  the  city  hall  up  Fourth  Avenue,  across  Forty-second 
Street,  up  Broadway  to  the  northern  end  of  Manhattan  Island,  an- 
other branch  going  over  into  the  Bronx  above  the  Harlem  River. 
They  show  here  that  the  aggregate  rise  in  the  land  on  the  west  side 
from  One  hundred  and  thirty-fifth  Street  to  Spuyten  Duyvil,  which 
is  approximately  4  miles,  was  $69,300,000.  Now,  that  is  the  land,  as 
I  recall,  in  the  area  which  is  a  narrow  area,  and  which  is  practically 
all  of  it  tributary  to  this  line. 

Now,  they  deducted  from  that  amount  over  $20,000,000  as  being 
the  normal  rise  in  the  price  of  land.  That  is,  they  took  the  aggregate 
rise  and  then  they  deducted  what  they  considered  would  have  been 
the  rise  in  the  value  in  that  land  if  there  had  been  no  subway  built 
there  whatever;  which  left  $49,200,000  as  the  rise  in  the  value  of  that 
land  due  to  the  subway  alone. 

Then  they  took  simply  the  land  from  north  of  the  Harlem  River  to 
Two  hundred  and  thirtieth  Street  in  the  Bronx;  and  they  found  there 
an  aggregate  increase  in  the  value  of  land,  limiting  it  this  time  to  a 
half-mile,  as  I  recall  it,  on  each  side  of  the  line,  because  that  is  a  large 
territory  and  it  would  not  have  been  fair  to  have  taken  the  increase 
in  the  value  of  all  the  land  in  the  Bronx,  as  it  was  not  all  tributary 


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2100    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

to  this  line — they  found,  in  that  case,  a  total  inci-ease  of  $41,845,000. 
And  there  again  they  deducted  what  they  estimated  to  be  the  normal 
rise  of  the  land — that  is,  this  would  have  been  the  rise  if  this  subway 
had  not  been  built — and  found  that  there  was  remaining  $31,000,000. 

Conunissioner  Mahon.  That  is  from  the  river  to  where,  did  you 
say  ? 

Mr.  Maltbie.  Two  hundred  and  thirtieth  Street,  as  I  recall.  I 
think  that  is  about  4  miles.  Now,  these  were  the  outlying  lines  of 
the  system,  and  they  began  at  a  point  about  7  or  8  miles  from  the 
city  hall. 

Now,  the  entire  cost  of  the  subways  is  in  this  report.  As  I  recall  it, 
it  was  something  between  35  to  40  million  dollars.  That  is.  from 
the  city  hall  to  tiie  ends  of  the  lines.  So  if  they  had  assessed  the  en- 
tii-e  cost  of  that  subway — the  entire  cost — upon  the  property  up  in  this 
<listrict,  the  landowners  could  have  paid  for  it  and  then  liad  a  nice 
fat  profit  left  besides.  I  do  not  mean  to  say  that  that  would  happen 
in  every  instance,  but  it  is  an  illustration  of  the  great  increase  in 
the  value  of  land  due  to  the  construction  of  rapid-transit  lines. 

Conunissioner  Mahox.  Now,  there  are  many  cases  in  a  plot  so  large 
as  that  where  similar  results  could  be  shown  in  manv  cities. 

Mr.  Maltbie.  No  doubt.  Of  course,  you  can  go  to  the  other 
extreme:  You  can  build  so  manv  transit  lines  that  vou  would  not 
put  up  any  value  appreciably.  You  can  overdo  it,  like  a  good 
many  other  good  things.  Of  course,  you  all  recall  that  when  the 
railroads  were  built  in  the  West  many  of  them  were  built  not  on  the 
same  plan  but  under  a  plan  which  recognized  the  same  ideas.  These 
towns  voluntarily  issued  bonds  to  provide  money  to  buy  the  lines. 
Why?  Because  in  those  rural  communities  they  foresaw  the  value 
of  their  farms  would  go  up,  so  they  could  issue  these  bonds  and  pay 
for  them  and  still  have  a  profit  left.  There  were  some  unfortunate 
instances  where  they  tried  to  evade  payment  of  those  bonds  after- 
wards, but  the  idea  was  recognized  nevertheless. 

Commissioner  Gadsden.  And  also  some  lx)nds  were  issued  and  the 
roads  were  never  built. 

Mr.  Maltbie.  Yes;  six  of  one  and  half  a  dozen  of  the  other  perhaps. 

Commissioner  Wehle.  In  such  a  system  as  you  have  suggested, 
Mr.  Maltbie,  the  assessment  of  the  accretion  in  value  would  take 
place  some  time  after  the  construction  of  the  improvement ;  it  would 
not  be  a  prospective  appraisal;  it  would  be  a  retrospective  appraisal. 

Mr.  Maltbie.  Well,  I  am  not  so  sure  that  I  would  agree  that  that 
is  wise.  There  is  an  automatic  regulative  feature  in  that  idea  of 
special  assessment  that  is  a  pretty  gooil  thing;  and  it  comes  right 
down  to  this  proposition:  If  you  want  that  line  will  you  pay  for 
it.  Now,  if  they  do  not  want  that  line  to  the  extent  of  being  willing 
to  put  themselves  down  to  pay  for  it  before  they  build  the  line,  there 
is  a  question  whether  it  ought  to  be  built ;  and  that  really  is  the  test 
of  how  much  they  believe  that  line  ought  to  be  built.  That  is,  will 
you  contribute  the  money  to  build  it?  And  if  they  say  they  want 
the  line  but  are  not  willing  to  provide  the  money,  they  do  not  really 
want  it  very  much. 

Commissioner  Wehle.  I  think,  fully  accepting  your  idea  that  the 
community  or  that  part  of  the  community  which  is  to  benefit  from 
the  construction  should  shoulder  the  burden  and  should  evince  a 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2101 

willingness  to  do  so  before  the  line  is  constructed,  I  am  only  going 
to  tlie  technical  side  of  it  and  the  business  side  of  it,  and  I  asked  you 
whether  the  carrying  out  of  your  plan  would  not  entail  the  final 
fixation  of  the  assessment  at  a  considerable  time  after  the  construc- 
tion of  the  improvement  itself. 

Mr.  Maltbie.  That  would  have  to  be  done  afterwards — in  practice, 
T  mean. 

Commissioner  Wehle.  So  that  the  liabilitj-  of  the  land  would  be- 
come fixed  by  the  statute  somewhat  as  a  lien  upon  the  land  of  an  in- 
determinate amount  which  would  become  fixed  at  the  time  of  final 

appraisal? 

Mr.  Maltbie.  Final  determination  of  the  cost  of  the  line  and  an  ap- 
portionment of  the  benefit  conferred;  because  the  law,  I  think,  in 
practically  every  State  is  that  the  amount  of  assessment  levied  may 
not  exceed  the  amount  of  benefit  conferred.  If  it  does,  then  the  act 
is  illegal ;  that  is,  the  action  of  the  authorities  fixing  the  amount  of 
special  assessment  is  illegal,  because  it  has  exceeded  the  amount  of 
benefit  conferred. 

Commissioner  Wehle.  Then  would  you,  or  would  you  not,  make 
the  assessment  payable  in  part  paA^ments  or  installments? 

Mr.  Maltbie.  I  cei-taily  should  provide  for  that  system  under  any 
plan,  and  I  think  in  practice  it  is  the  one  that  would  be  followed; 
otherwise  it  would  impose  such  a  large  amount  quickly  and  suddenly 
upon  the  owners  of  the  property  that  many  of  them  could  not  pay  it, 
and  they  would  have  to  lose  their  property,  which  of  course  would  be 
unfair  and  damn  the  scheme  eternally. 

The  Chair  MAX.  I  understood  you  were  discussing  the  general 
principle  rather  than  the  detail  of  how  it  would  be  put  into  effect. 

Mr.  [Maltbie.  Yes;  but  Mr.  AYehle  has  referred  to  a  point  which 
is  pretty  important  when  it  comes  to  the  carrying  out  of  the  plan, 
because  if  you  can  not  make  it  practicable,  I  do  not  care  how 
beautiful  it  is  in  theory,  it  will  not  go  into  operation. 

Commissioner  AVehle.  Do  you  not  think  such  a  plan  as  that 
could  be  put  into  operation  also  when  the  public  utility  is  under 
j)roper  regulation  in  a  case  where  you  have  private  ownership  and 
private  operation? 

Mr.  Maltbie.  Well,  there  is  a  sentimental  factor  there  which  is 
pretty  important,  even  though  it  may  be  sentiment.  Property 
owners  or  people  generally  do  not  like  to  contribute  to  something  the 
ownership  of  which  is  going  to  pass  to  a  private  corporation.  Now, 
if  you  could  keep  the  ownership  of  that  line  in  the  municipality,  or 
something  of  that  sort,  you  might  meet  that  objection.  But  whether 
it  works  out  well  or  not,  there  is  that  feeling  that  they  do  not  like  to 
contribute  to  something  which  is  going  to  be  turned  over  to  a  private 
corporation. 

Commissioner  Wehle.  Well,  if  you  made  it  clear  that  the  title  to 
the  improvement  remained  in  the  city  and  that  the  full  right  to  use 
and  operate  over  the  improvement  was  in  the  street-railway  company 
under  regulation,  do  you  not  think  that  by  a  campaign  of  education 
in  which  yo:i  would  specially  emphasize  the  fact  that  this  arrange- 
ment enables  the  car  rider  to  ride  much  more  cheaply  than  he  other- 
wise would,  that  such  a  plan  as  that  could  be  put  into  use  even  where 
you  have  private  ownership  and  private  operation? 

1  GOCJa**— 20— VOL  3 4 


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2102     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION'. 

Mr.  Maltbie.  I  think  it  is  possible  to  work  out  a  plant  which  would 
cover  that  iK)int  as  well.  Of  course,  you  know  many  gas  and  electric 
companies  have  done  very  much  the  same  thing  with  land  companies 
where  they  own  large  tracts  of  land.  They  have  made  the  land  com- 
panies pay  for  the  pipes  and  the  wires,  although  the  private  com- 
pany has  kept  the  ownership  and  control  of  them.  But,  of  course, 
th-.it  is  dealing  with  a  few  men  of  large  business  interests  and  not 
with  a  multitude  of  taxpayers  and  voters. 

Now,  there  is  one  other  feature  as  to  the  cost-of-service  franchise 
that  I  would  like  to  call  to  your  attention,  and  that  is  this :  That 
a  result  of  the  adoption  of  the  plan  is  to  make  the  relation  between 
the  city  and  the  company  one  of  contract  and  not  one  of  the  police 
power.  Of  course,  the  basis  for  the  regulative  power  which  exists 
in  the  legislature  and  which  may  be  delegated  to  an  administrative 
body  is  the  sovereign  power  of  the  State.  And  of  course,  historically 
it  goes  away  back  to  the  old  inn  cases  in  England;  and  that  power, 
as  I  undei-stand  it,  can  not  be  irretrievably  delegated  to  someone  else ; 
it  can  not  be  contracted  away,  but  always  remains  in  the  State  in 
some  form,  either  the  legislature  or  the  courts  or  an  administrative 

bodv. 

N*ow,  if  you  substitute  for  regulation  a  contract  or  a  paper — we  will 
not  call  it  a  contract  for  the  moment — a  paper  which  attempts  to 
specify  all  of  the  things  that  are  usually  covered  by  regulatory  orders 
or  by  statutes,  you  have  substituted  a  contract  for  a  sovereign  power, 
or  for  the  police  power,  and  it  makes  and  establishes  a  more  or  less 
ironclad  unchangeable  paper  which  has  practically  all  of  the  quali- 
ties of  the  contract,  or  else  what  is  attempted  to  be  covered  in  many 
cities  by  a  cost-of-service  plan. 

Now,  the  trouble  with  a  contract  to  cover  all  these  points  is,  in 
the  first  place,  that  it  becomes  entirely  out  of  date.  We  have  seen 
that  happen  again  and  again.  And  one  of  the  difficulties  of  the 
present  situation  is  that  the  contracts  that  have  been  made  in  past 
years  are  not  applicable  to  the  conditions  that  exist,  and  while  they 
might  and  perhaps  did  do  very  well  for  the  time  and  for  some  time 
after  they  were  made,  they  have  become  inapplicable  to  the  condi- 
tions which  exist  at  the  present  time,  and  consequently  break  down 
in  some  provision  or  another. 

Mr.  Eastman  referred  to  the  fact  that  when  you  have  a  contract 
as  a  statement  of  the  relations  between  the  public  on  the  one  side  and 
the  private  corporation  upon  the  other,  the  general  result  is  that  that 
contract  is  modified  when  the  company  wants  it  modified  and  not 
when  the  city  wants  it  modified.  It  it  is  a  contract,  you  have  to  get 
the  assent  of  both  parties  and  if  the  company  does  not  want  to 
modify  it  there  is  no  way  under  heaven  that  you  can  compel  them  to 
modify  it,  if  it  is  a  contract.  Whereas,  under  reflation,  if  a  public- 
service  commission  makes  a  mistake — and  not  bem^  a  member  of  one 
now  I  am  willing  to  admit  they  make  mistakes — if  a  public-service 
commission  makes  a  contract,  because  their  orders  are  not  contracts, 
it  can  be  repealed  or  modified  or  changed  at  any  time.  But  if  you 
get  a  contract  drawn  up  between  a  private  company  and  a  munici- 
pality that  can  not  be  modified  except  with  the  consent  of  both  par- 
ties, and  if  the  municipal  authority  makes  a  mistake,  the  shrewdness 
of  the  management  of  most  utilitie43,  human  nature  being  the  same 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2103 

the  world  over,  will  lead  them  to  take  advantage  of  that,  whereas,  if 
(lie  city  wants  that  contract  changed,  it  is  not  so  easy  to  get  it  done. 
Whether  a  cost-of-service  contract  can  be  worked  out  which  will 
protect  all  of  these  points  I  am  not  at  present  prepared  to  say.  But 
reference  has  been  made  to  the  Cleveland  franchise;  and  for  the 
puriK)ses  of  the  record,  I  think  your  attention  ought  to  be  called  to 
the  fact  that  at  the  present  time  there  is  proceeding  in  Cleveland  an 
arbitration  to  determine  whether  the  rate  of  return  shall  be  niised 
to  7  per  cent  or  not.  Now,  there  probably  is  not  any  more  important 
thing  in  a  cost-of-service  franchise  than  the  rate  of  return.  And 
if  a  company  and  a  city  makes  a  contract  that  the  security  holders 
that  have  put  in  their  monev  are  entitled  to  a  6  per  cent  return  on  the 
money  they  have  put  in,  and  then  in  less  than  6  months  you  proceed 
to  arbitrate  the  question  of  whether  they  shall  have  more  or  not,  you 
are  going  to  the  very  vitals  of  the  contract.  And  if  you  can  arbi- 
trate the  rate  of  return  in  a  cost-of -service  franchise,  I  do  not  know 
what  there  is  in  the  franchise  that  can  not  be  arbitrated.  Well,  if 
vou  can  arbitrate  the  whole  thing  and  every  provision  in  it,  it 
simply  means  this :  That  you  make  a  contract,  or  what  is  called  a 
contract,  and  then  you  leave  it  to  three  persons  to  be  chosen  at  some 
other  time  to  decide  every  provision  in  that  contract.  Now,  that  is 
not  regulation,  because  those  arbitrators  are  not  regularly  elected 
i)ublic  authorities.  They  are  persons  who  are  chosen  outside.  And 
if  vou  are  going  to  leave  every  provision  in  a  contract  to  be  arbi- 
trated in  that  way,  it  is  not  a  contract  any  more,  except  as  there  may 
be  some  restricting  clauses  to  the  extent  of  what  may  be  arbitrated. 
Whether  6  per  cent  is  right  cr  not  I  do  not  undertake  to  say  at  this 
time,  in  the  Cleveland  situation,  but  merely  to  point  out  that  the  basis 
for  the  claim  that  they  should  have  7  per  cent  instead  of  G  per  c^nt, 
is  that  conditions  have  caused  6  per  cent  not  to  be  a  fair  rate  of  re- 
tiii  ii,  and  that,  in  fairness,  they  ought  to  have  7  per  cent. 

Well,  that  is  an  illustration  of  what  I  said  a  few  moments  ago, 
namely,  that  a  fixed  contract  which  undertakes  to  provide  all  of  these 
things  is  a  thing  that  may  become  very  ill  adapted  to  the  conditions 
which  exist  in  later  years.  Personally,  I  do  not  believe  the  success 
or  failure  of  these  cost-of-service  franchises  can  be  determined  by 
one  year  or  two  years'  or  five  years'  experience.  When  we  have 
l)een'through  these  war-time  conditions,  and  the  conditions  that  are 
going  to  obtain  in  the  next  few  years,  we  will  have  a  pretty  definite 
idea  whether  those  franchises  are  good  or  whether  they  ar2  not  good. 
The  question  is  going  to  come  as  to  whether  they  are  suited  to  the 
conditions  that  change  from  time  to  time  or  whether  they  are  not. 

If  the  cost-of-service  franchise  is  to  be  adopted  by  any  city,  It 
means  that  certain  points  become  tremendously  important;  that  is, 
if  tht5  cost-of-service  :"  anchise  is  to  b  a  contract,  they  become  im- 
portant. And  the  important  thing  is  the  question  of  valuation. 
Whether  these  franchises  are  going  to  be  accepted  or  not  has,  in  many 
instances— in  the  case  of  Detroit,  for  example— turned  on  the  ques- 
tion of  whether  the  people  are  satisfied  with  the  valuation  or  not. 
They  are  not  going  to  be  satisfied  with  the  valuation  unless  they  have 
confidence  in  the  men  who  made  that  valuation.  The  man  on  the 
street  can  not  value  a  street-railway  system.  He  does  not  know 
whether  the  values  are  right  or  not,  whether  the  proper  allowances 


I 


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2104     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2105 


have  been  made  or  nT)t.  He  has  got  somebody's  say  so,  and  he  is 
going  to  vote  in  favor  of  that  proposition  or  against  it  very  largely 
npon  whetlier  he  believes  that  the  amount  which  has  been  fixed  and 
the  terms  of  the  franchise  are  acceptable  to  persons  in  whom  he  has 
confidence.  I  take  it  that  that  was  one  of  the  troubles  in  the  Detroit 
situation.  I  know  it  has  been  in  other  cases— namely,  that  the  people 
did  not  liave  confidence  in  the  values  which  they  did  not  know  any- 
thing about;  they  did  not  have  confidence  in  the  vahies  which  had 
been  fixed.  They  tliought  that  they  were  too  high,  because  certain 
f  ersons  in  whom  they  had  more  confidence  asserted  they  were  too 
high ;  and  consequently  they  voted  down  the  franchise. 

The  Chairman.  Was  the  value  one  of  the  pmminent  elements  in 
r)nsideration  in  Detroit,  Mr.  Mahon? 

Mr.  Mahon.  Yes;  I  think  it  was  the  most  prominent  element  in 
t,  just  as  Mr.  Maltbie  said. 

We  have  had,  of  course,  a  peculiar  condition,  an  overcrowded  con- 
dition; and  from  the  condition  of  the  service  they  weighed  up  the 
value.  As  Mr.  Maltbie  has  said,  the  man  on  the  street  did  not 
know  anything  about  the  value;  but  they  weighed  up  the  valua- 
tion of  the  property  from  the  bad  service — that  it  was  not  worth 
the  amount  asked.  That  is  my  opinion  as  to  how  they  formed 
their  opinion. 

The  Chairman.  If  the  people  of  Detroit  had  confidence  in  the  value 
that  was  established,  do  you  think  the  vote  would  have  been  different? 

Gamtoissioner  Mahon.  I  think  it  would  have  been  a  different 
vote;:  yes.  We  had  twice  voted  in  the  past  for  municipal  ownership 
in  Detroit,  and  we  have  twice  voted  not  to  have  municipal  ownership. 
That  is  within  the  last  20  jears. 

Mr.  Maltbie.  When  they  came  to  the  medicine  they  had  to  take, 
they  voted  against  it  ? 

Commissioner  Mahon.  Yes. 

Commissioner  Sweet.  Wliat  is  your  judgment,  Mr.  Maltbie,  with 
regard  to  the  advisability  of  taking  a  vote  on  a  question  of  this  kind 
before  the  value  of  the  property  is  actually  fixed,  but  after  the  sys- 
tem or  plan  for  arriving  at  it  has  been  fixed  ? 

Mr.  Maltbie.  There  are  two  things  about  that — what  my  own 
judgment  is  and  my  guess  as  to  what  the  peoph  would  do. 

My  own  judgment  is  that  I  would  not  vote  on  that  proposition 
in  favor  of  it  until  I  knew  what  1  was  going  to  buy.  I  am  not  for 
buying  a  pig  in  a  poke  very  much.  I  am  not  particularly  keen— as 
a  voter  now — in  that  situation  to  leave  it  to  somebody  else  to  fix  after- 
wards; and  as  my  guess  as  to  what  the  people  would  do  in  such  a 
situation,  it  is  that  they  would  look  at  it  in  that  way  and  that  they 
would  say:  "You  tellus  what  we  have  got  to  pay,  and  we  will 
talk  to  you ;  but  that  is  too  important  a  thing  to  leave  out  of  con- 
sideration and  to  leave  to  three  men  or  to  some  other  body  to  fix." 
Of  course,  Mr.  Sweet,  it  would  considerably  depend  upon  the  con- 
fidence they  had  in  those  men  who  were  going  to  hx  it. 

Commissioner  Sweet.  You  have  already  said  that  that  is  an  es- 
sential condition  anyway. 

Mr.  Maltbie.  Yes.  If  the  men  were  not  named,  I  do  not  believe 
they  would  vote  for  it;  and  if  the  men  were  named,  it  would  de- 
pend upon  whether  they  had  confidence  in  them  or  not. 


The  CHAiiniAN.  Do  not  let  us  distract  you,*Mr.  Maltbie,  from  your 
general  ])rescntation. 

Mr.  Maltbie.  I  am  through,  Mr.  Chairman,  unless  there  are  some 
({uestions  that  you  want  to  ask. 

The  Chairman.  Mr.  Maltbie,  your  presentation  has  been  so  com- 
plete that  the  commission  does  not  care  to  cross-examine  you. 

(Witness  excused.) 

STATEMENT  OF  MK.  EDWARD  W.  BEMIS. 

Mr.  Bemis.  Gentlemen,  I  have  come  before  3'ou  at  your  invitation, 
and  I  am  sorry  that  I  could  not  have  accepted  the  invitation  to 
come  earlier,  before  3'our  closing  hours.  What  I  shall  have  to  say, 
however,  will  be  very  brief.  It  will  not  be,  of  course,  an  attempt  to 
cover  the  whole  street-railway  situation,  which  lias  been  so  ad- 
mirably covered  by  many  others.  My  only  effort  will  be  to  cover 
a  few  points  that  perhaps,  in  my  judgment,  maj  need  emphasiz- 
ing. Even  those  may  have  been  emphasized  sufficiently  by  previous 
witnesses  without  my  knowledge,  as  I  have  not  had  the  opportunity 
to  read  most  of  the  testimony  or  to  hear  it,  although  I  have  read 
many  synopses  of  it. 

It  has  been  my  privilege  in  the  past  to  study  these  utility  ques- 
tions for  many  years  and  to  make  a  number  of  street-railway  ap- 
praisals, such  as  Detroit.  I  valued  the  franchises  in  1899  and  the 
entire  property  about  1915,  and  I  valued  the  properties  at  IMlas, 
here  in  AVashington,  in  Peoria,  and  am  now  nearly  through  with 
the  valuations  in  P^rie  of  the  street  railways,  and  am  helping  cities 
in  many  other  parts  of  the  country  in  connection  with  street-rail- 
way valuations  and  adjustments  of  rates;  but  the  principles  are  very 
much  the  same  in  other  utilities. 

The  first  point  I  would  like  to  make  is  that  each  street  railway 
must  be  considered  separately.  Conditions  vastly  differ.  I  do  not 
think  we  can  make  these  sweeping  generalizations  very  fully,  but 
since  the  street-railway  companies  have  sought,  before  this  commis- 
sion and  elsewhere,  to  generalize  and  to  excite  universal  public 
sympathy  for  all  railw^ay  companies,  it  becomes  necessary  to  con- 
sider some  of  the  broader  aspects  of  the  question,  recognizing  that 
they  will  net  apply  to  man}^  companies  and  never  can  take  the  place 
of  local  studies. 

The  great  question  before  the  country,  with  regard  to  these  matters 
in  general,  has  been  whether  they  have  been  getting  and  are  getting 
a  fair  return.  The  problem  has  not  been  so  much  w4iat  constituted  a 
fair  return  in  the  shape  of  a  percentage — that  figure  running  anywhere, 
usually,  from  6  to  7  per  cent,  as  to  the  whole  property,  recognizing  that 
part  of  it  is  usually  in  5  per  cent  bonds — ^Init  the  test  has  been  the 
valuation  on  which  the  return  is  to  be  estimated. 

There  are  two  tests,  it  seems  to  me,  and  practically  only  two  tests, 
of  a  fair  return.  There  are  variations  of  those  two  tests,  but  there 
are  fundamentally  only  two;  and  the  great  problem  before  the  coun- 
try is  the  war  between  those  two  tests.  One  is  the  reproduction  valu- 
ation, and  the  other  the  historical  valuation. 

The  reproduction  theory  is  the  estimated  cost  of  the  reproduction 
new.  to-day,  on  the  basis  either  of  existing  prices  or  the  prices  of 


if 


2106     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2107 


two  or  three  years  just  past,  either  with  or  without  depreciation 
from  all  causes,  physical  obsolescence  and  inadequacy. 

There  is  a  minor  conflict  as  to  the  application  of  the  reproduction 
theory,  whether  depreciation  shall  be  taken  off  or  not.  But  the 
fundamental  proposition  is  the  estimated  cost  of  reproduction  on 
prices  that  exist  to-day  and  have  existe<l  for  two  or  three  years,  and 
may,  to  a  large  degree,  exist  for  the  next  two  or  three  years. 

The  great  opposing  test  is  whether  a  company  is  earning  a  fair 
return  on  the  actual  cost  of  the  property  now  in  use,  less  deprecia- 
tion, and  with  due  regard  to  the  history  of  the  investment.  If  a 
company  has  not  earned  enough  in  the  past  to  take  care  of  deprecia- 
tion, an  allowance  under  this  theory  must  be  made  for  it  in  souk' 
fomi.  If  a  company  has  not  earned  enough  to  take  care  of  deprecia- 
tion, that  does  not  prevent  depreciation  having  occurred.  Depre- 
ciation is  not  a  factor  of  profit;  it  is  a  result  of  physical  and 
functional  causes;  but  the  ability  of  the  company  to  take  care  of 
depreciation  through  its  earnings  may  greatly  affect  our  treatment 
of  it  in  a  rate  case,  and  may  cause  us  to  set  up  a  counterbalancing 
figui-e  in  the  shape  of  a  going  value  or  something  of  that  kind  if 
the  company  has  not  been  able  to  take  care  of  depreciation. 

(^n  the  other  hand,  if  the  company  has  earned  much  more  than  a 
fair  rate  of  return  on  the  actual  investment,  weight  must  be  given, 
under  this  theory,  to  that  fact.  I  do  not  say  how  much  weight,  but 
some  weight  will  have  to  be  given  to  it,  I  believe. 

Tender  the  first  theory,  which  I  call  the  reproduction  theory,  the 
companies  do  make  large  claims,  and  they  can  properly  make  large 
claims,  because  the  results,  honestly,  carefully  applied,  will  result 
in  much  larger  figures  than  the  historical  cost.  To  be  sure,  I  believe 
they  are  exaggerated  in  the  minds  of  many  engineers  by  fanciful 
estimates,  extremely  large  overhead  charges  allowed,  and  develop- 
ment charges:  but  still,  under  any  application  of  the  theory  there 
will  be  a  very  large  valuation  secured  by  that  method. 

Under  the  second,  which  for  short  I  will  call  the  historical  theory, 
which  is  adopted  to  a  large  degree  by  some  State  public-service 
commissions,  notably,  in  Massachusetts,  New  Hampshire,  Indiana, 
and  Illinois,  a  valuation  is  reached  which  is  usually  much  below  the 
outstanding  securities — not  necessarily  in  Massachusetts,  because 
there  they  have  kept  down  the  issuance  of  securities;  but  in  other 
States  that  usually  is  the  case. 

Tliis  theory,  however,  in  my  judgment,  is  not  only  a  popular  theory 
among  the  great  mass  of  citi/.ens,  but  I  believe  it  is  an  equitable 
theory.  It  is  the  theory  that  had  been  largely  controlling  in  the 
United  States  Supreme  Court  until  the  Nebraska  rate  case,  when  the 
mistaken  effort  was  made  by  the  attorneys  for  Nebraska  to  introduce 
the  reproduction  theory,  because  it  was  thought  the  public  would 
gain  somewhat  by  that  theory  in  the  valuation  of  the  Pacific  rail- 
roads which  had  been  built  under  war  prices:  and  the  courts  very 
largely  swung  around  afterwards  to  that  theory.  But  they  have  now 
split  with  it  in  three  vital  respects,  and  the  Supreme  Court  now  has 
no  definite  theory. 

The  three  respects  in  which  they  have  broken  from  the  reproduc- 
tion theory  are,  first,  with  respect  to  paving  over  mains  and  con- 
duits.   That  is  no  longer  allowed  by  most  courts,  if  the  paving  was 


l>nt  there  after  the  mains  or  conduits  were  laid;  but  it  is  an  absolute 
logical  split  from  the  reproduction  theory  not  to  allow  it. 

Again,  there  has  been  a  split  from  that  theory  with  respect  to  the 
matter  of  land.  In  the  Minnesota  rate  cases,  Justice  Hughes  em- 
phasized a  position  which*  is  neither  the  historical  theory  nor  the 
reproduction  theory,  but  takes  the  value  of  the  adjacent  land  at  the 
time  of  valuation,  and  refuses  to  put  on  any  costs  of  acquisition, 
any  overhead,  such  as  interest  on  the  land  while  the  railroad  is  be- 
ing built,  or  engineering  or  any  other  charges,  although  they  are 
always  incurred  both  in  the  historical  theory  and  in  the  reproduc- 
tion theory ;  but  the  Supreme  Court,  perhaps  thinking  that  even 
applying  that  value  of  adjoining  land  you  got  something  nearer 
to  justice  than  if  you  took  the  reproduction  theory  and  thou  added 
the  overheads  on  that,  adopted  a  theory  which  has  no  logic  in  it,  as 
I  can  see  it,  but  nevertheless  is  interesting  because  it  is  a  break  from 
the  reproduction  theory. 

The  third  break  has  been  in  the  case  of  going  value.  The  re- 
production theory  of  going  value  is  based  on  the  cost  of  reproducing 
the  business.  The  courts  have  split  from  that,  and  have  taken 
the  historical,  early  losses  not  made  up  by  later  gains,  as  in  the 
Kings  County  gas  case  and  in  the  Des  Moines  gas  case. 

Commissioner  Weiile.  Will  you  give  a  citation  to  those  cases? 
In  what  courts  were  those  cases? 

Mr.  Bemis.  The  New  York  Court  of  Appeals  in  the  Kings  County 
gas  case,  and  the  United  States  Supreme  Court  in  the  Des  Moines 
gas  case.  Therefore  there  are  very  imix>rtant  respects  in  which 
the  Supreme  Court  has  divorced  itself  from  the  reproduction  theory 
w^hich  it  held  pretty  strongly  in  the  case  of  Consolidated  Gas  in 
1900.  At  the  same  time,  the  court  still  seems  to  have  leaned  more 
toward  the  reproduction  theory  in  some  of  its  general  expressions 
than  toward  the  historical  theory;  but  I  think  many  of  our  strong 
State  commissions  are  turning  strongly  toward  the  historical  theor}' 
which  has  always  been  held  in  Massachusetts  and  is  very  strongly 
emphasized  in  many  States  besides  the  few  that  I  have  referred  to. 

The  historical  theory  often  bears  down  heavily  upon  investors, 
and  that  is  its  weakest  point;  but  the  number  of  really  innocent  in- 
vestors in  such  securities  must  be  rapidly  diminishing,  and  the 
valuations  are  not  being  made  suddenly — ^the  matter  has  been  under 
discussion  for  many  years;  and  as  it  reaches  more  and  more  concrete 
form  I  think  the  market  is  doing  as  it  has  been  doing  very  largely 
in  the  past — adapting  itself  to  that  situation.  I  doubt,  for  ex- 
ample, to-day,  whether  the  railroad  securities  of  the  United  States 
are  selling  in  the  market  at  any  more  or  at  much  more  than  the 
cost  of  the  property  now  in  use  less  depreciation.  I  doubt  it  very 
mu^i. 

The  nominal  value  of  those  securities,  the  par  value,  is  somewhere, 
I  understand,  in  the  neighborhood  of  nineteen  billion  dollars;  the 
market  value  is  hardly  over  twelve  billion — eleven  or  twelve  billion 
dollars. 

So  when  there  is  a  great  outcry  against  the  injustice  of  the  his- 
torical theory,  it  is  quite  likely  that  you  will  find,  on  exhaustive 
investigation,  that  the  market  is  about  on  that  basis  to-day;  and  I 
think  it  is  likely  to  be  so  in  the  case  of  the  street  railways. 


21G8    PROCEBPINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


Hdre  is  a  conclusion  from  tlie  historical  theory  that  interests  nie 
very  much :  From  the  United  States  census  volume  for  Street  Kail- 
Avays  for  1912  and  from  a  summary  of  the  1917  volume,  not  yet  out. 
on  pages  46  to  51,  and  of  the  Aera  for  August,  1919,  it  appears  that 
the  United  States  census  has  divided  the  railways  into  four  classes — 
elevated  and  subway  and  classes  A,  B,  and  C. 

Class  A  includes  railways  having  a  gross  operating  income  of 
$1,000,000  or  more  per  vear  and  includes  about  100  companies. 

Class  B  includes  those  having  from  $250,000  to  $1,000,000  per  year 
of  gross  income  and  includes  about  150  companies. 

Class  C  includes  about  TOO  small  companies  of  less  than  $250,000 
per  3^ear  of  gross  income. 

It  further  appears  that  the  nonoperating  revenue  available  for 
interest  and  dividend  in  1908  w^as  $192,615,567  in  all  of  these  com- 
panies, or  8.41  per  cent  of  the  amount  of  $228,898,968  in  the  calendar 
vear  1917. 

Applying  this  percentage  to  the  net  operating  revenues  for  1917, 
as  reportecl  on  page  50  of  the  August  Aera,  this  result  will  follow: 

In  1917  the  elevated  and  subway  roads  had  a  net  oj^erating  revenue 
available  for  interest  and  dividends  and  surplus  per  mile  of  track  of 
$51,485 ;  and  1918,  taking  8.41  per  cent  of  it,  $43,299.  Class  A  of  the 
surface  lines  in  1917,  $7,893  per  mile  of  track;  1918,  $6,638.  Class 
B,  $3,461  in  1917,  $2,911  in  1918.  Class  C,  $1,877  in  1917  and  $1,579 
in  1918. 

This  estimated  revenue  may  be  capitalized,  for  purposes  of  dis- 
cussion, :Ht  6  per  cent,  and  then  that  would  mean  that  the  net  revenue 
rei>orted  in  the  Aera  for  these  classes  of  property,  adjusted  as 
above — woidd  mean  that  the  elevated  and  subway  roads  in  1918  are 
earning  6  per  cent  on  $721,150  per  mile  of  single  track;  that  the 
class  A  roads  are  earning  6  per  cent  on  $110,633  per  mile  of  track, 
and  that  is,  remember,  all  roads  of  over  $1,000,000  a  year  of  gross, 
meaning  roads  possibly  of  50  miles  and  upward;  class  B,  earning 
6  per  cent  on  $48,517  per  mile;  class  C,  the  very  small  roads,  6 
per  cent  on  $26,317  per  mile  of  track. 

It  is  impossible  to  make  sweeping  assertions.  I  do  not  want  to  be 
undei'stood  as  making  them.  But  my  experience  in  appraisals  of 
surface  lines,  mostly  of  class  A  and  class  B,  has  been  that  the  above 
amounts  are  as  much  as  the  cost  of  the  properties  now  in  use  less 
depreciation.  In  other  words,  the  average  class-A  road  has  not  cost, 
less  depreciation,  on  the  average,  as  much  as  $110,000  a  mile;  and 
class  B  not  far  from  $48,500  a  mile. 

Some  other  appraisals,  such  as  those  in  Pittsburgh,  largely  tend 
to  bear  out  the  same  assertions,  and  appraisals  that  I  might  refer 
to  elsewhere  that  I  had  nothing  to  do  with.  In  other  words,  the 
companies  are  still  earning  6  per  cent,  on  the  average,  on  the  fair 
value,  according  to  the  historical  theory. 

There  are,  of  course,  many  exceptions  to  this  •  so  that  I  do  not  say 
that  in  each  class  there  are  not  exceptions;  and  you  notice  I  am  not 
saying  they  are  earning  that  on  their  securities — a  very  different 
proposition. 

We  are  really  face  to  face  then  with  the  question,  which  is  very 
much  in  evidence:  How  far  the  cost  of  the  properties  now  in  use. 
less  depreciation,  due  regard  being  had  to  the  past  profits  of  tha 
company,  as  to  how  to  treat  that  depreciation,  shall  have  weight. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2109 


I  believe  the  great  difficulty  that  the  street  railways  are  having  is 
because  the  popular  belief,  which  seems  to  me  to  be  pretty  well 
In.ttressed  by  the  fact,  is  that  as  a  whole — I  do  not  mean  in  indi- 
vidual cases,  but  as  a  whole — they  are  earning  to-day  on  the  fair 
value,  according  to  the  historical  theory,  probably  as  much  as  6  per 
cent. 

There  are  three  classes  of  railways  in  each  of  the  great  classes.  A, 
B.  and  C:  Those  not  wisel}^  or  prudently  built,  such  as  appears  to 
have  been  the  case  with  many  of  the  Massachusetts  roads,  as  Mr. 
McLeod  has  told  you;  and  I  suppose  Mr.  Eastman,  although  I  did 
not  hear  his  testimony,  where  the  roads  were  overbuilt  as  compared 
with  the  population  and  area:  and  where  interurban  roads  were 
built,  not  for  fast  running,  as  in  New  York  and  elsewiiere,  but  along 
ordinary  roads  and  with  ordinary  city  methods. 

Then  there  is  a  second  class  of  roads,  once  profitable,  but  incapable 
at  any  fare  of  becoming  self-sustaining,  due  in  part  to  competition 
with  other  means  of  transportation,  such  as  may  be  true — I  do  not 
say  positively  that  it  is,  but  it  may  be  true — of  some  of  the  surface 
lines  in  New  York  City  that  are  competing  with  the  subway  and 
elevated  roads  that  have  gone  into  operation  so  extensively  within 
the  past  year,  for  there  has  been  practically  a  doubling  of  that  sub- 
way and  elevated  system  there  in  the  last  two  or  three  years,  at  least. 

Then  the  jitneys,  of  course,  and  automobiles,  as  you  have  heard, 
have  made  these  roads  impossible  of  self-support,  and  I  believe  some 
of  them  would  be  impossible  of  self-support  on  any  fare  that  might 
be  allowed,  because  beyond  a  certain  point  traffic  is  driven  ©if  aiid 
higher  fares  will  not  bring  any  more  earnings. 

Then  there  is  the  majority  of  our  larger  roads — I  am  not  so  sure 
about  the  various  small  ones,  but  there  is  a  majority  of  our  larger 
roads — which  have,  during  the  past  hve  years,  during  the  entire  past 
history,  and  probably  even  this  year  since  March,  been  earning  a 
fair  return  on  their  investment ;  that  is,  using  investment  in  the  his- 
torical  sense. 

P^ven  these  roads  did  not  come  out  as  well  as  that  probably  last 
year  or  during  the  year  ending  with  March  1;  the  influenza  and 
other  troubles,  the  absence  of  so  many  efficient  men  in  the  Army, 
causing  greater  inefficiency  of  operation,  handicapped  even  many 
of  the  better  roads  for  a  while.  But  conditions  have  been  very 
rapidly  improving  since  March,  as  I  have  discovered  in  many  parts 
of  the  country.  The  recent  big  increase  in  wages  this  summer  may 
counterbalance  that;  I  am  not  sure,  I  have  not  seen  enough  of  the 
records  since  July  to  know ;  it  is  too  recent  to  determine.  But  from 
March  to  the  1st  of  August,  at  least,  there  has  been  quite  a  re- 
markable jump  upward  in  the  necessary  operating  revenue  of  many 
of  our  large  systems. 

Now,  facing  this  situation,  we  might  consider  what  the  public  can 
do  with  regard  to  these  three  classes  of  property.  Take  particularly, 
first,  the  properties  that  are  not  earning  fair  return  and  perhaps 
never  can  earn  a  fair  return.  Now,  if  those  roads  are  needed  from  a 
social  standpoint,  in  order  to  get  people  to  work  or  to  transact  the 
ordinary  business  of  life  as  highways  are,  and  some  ferries,  the 
j)ublic  may  have  to  buy  them  just  as  it  has  bought  toll  roads.  And 
then  the  question  conies  up,  on  what  basis  it  should  pay  for  them. 


1^ 


2110     PROCEEDINGS  OE  EEDEKAL  ELECTRIC  RAILWAYS  COMMISSION. 

I  l*ave  l)een  very  iiiucli  impressed  with  the  tendency,  not  exactly 
decidedly  expressed,  but  the  leaning,  at  least,  of  the  last  annual  re- 
lM>rt  of  the  Massachusetts  Public  Service  Commission  toward  a  liberal 
capitalization  of  their  recent  and  prospective  earnings  rather  than 
any  attempt  to  value  their  physical  pi-operty;  in  other  words,  tak- 
ing account  of  what  they  are  earning  and  what  they  can  earn  under 
any  reasonable  rates  of  fai-e,  if  they  are  willing  to  sell  and  operate 
them  for  the  public  good. 

Connnissioner  Wehle.  On  that  basis,  owners  of  the  propertieis 
would  not  get  very  much,  would  they? 

Mr.  Bemis.  It  would  be  a  question  of  how  liberally  you  capitalized. 
You  might  capitalize  on  such  a  rate  of  return  and  it  would  give  theui 
two-thirds  or  three-quarters  of  their  investment;  you  can,  if  you 
want,  give  theui  their  entire  investment.  But  the  question  will  be 
whether  the  couununity  is  obliged  to  make  good  all  the  results  of 
inipro\ement  in  the  art.  If  any  great  invention  displaced  them,  as 
the  stagecoach  was  displaced  by  the  railroad,  whether  we  ai*e  under 
any  obligation  to  recompense  for  those  large  risks  is  a  mooted  ques- 
tion. I  think  we  should  go  part  of  the  way  in  that  direction,  but  I 
am  rather  inclined  to  think  we  should  not  go  the  full  distance. 

Commissioner  Weiile.  But  if  there  have  not  been  any  net  earnings, 
how  would  you  capitalize  net  earnings? 

Mr.  Bemis.  There  have  been  net  earnings  or  there  may  have  been 
net  earnings,  but  not  6  per  cent;  there  may  have  been  3  per  cent. 
Or  if  there  have  not  been  any  earnings,  then  the  question  will  arise  in 
each  conmiunitv — it  has  to  be  settled  locally  on  the  condition  of  that 
prf)perty — I  thmk  something  should  be  paid  for  these  properties  even 
if  they  are  not  earning.  But  it  may  be  that  the  roads,  as  is  appar- 
ently the  case  in  New^  York  City,  prefer  to  go  out  of  business  en- 
tirely; then  the  only  thing  for  the  city  to  do  is  to  start  buses,  or 
something  of  that  kind,  it  seems  to  me,  as  they  are  doing  there. 

The  Chairman.  Would  you  favor  having  the  public  subsidize  the 
weak  line  which  performs  a  necessary  public  service  under  private 
control  ? 

Mr.  Bemis.  I  was  just  coming  to  that ;  that  imder  city  purchase,  of 
course,  cities  after  buying  would  have  to  subsidize;  they  would  have 
to  support.  The  idea  would  be  that  they  would  buy  them  because 
they  were  important  to  preserve.  Now,  subsidizing  in  private  hands 
has  the  difficulties  that  Dr.  Maltbie  has  pointed  out :  The  sensitiveness 
of  the  public  toward  subsidizing  steamship  lines  or  railroads  or  city 
utilitie«<  which  they  do  not  own.  I  doubt  if  it  is  going  to  be  practical 
or  feasible  to  do  that.  It  is  possible.  T  know  there  w  as  a  proposition 
in  Des  Moines  lately,  and  I  have  been  assisting  Gen.  Myers  in  Des 
Moines  in  regard  to  some  mattei^,  although  I  did  not  particularly 
take  that  up,  where  the  city  was  proposing  that  they  would  have  a 
service-at-cost  plan,  and  when  the  equalizing  fund  fell  below  a  certain 
sum.  taxation  should  make  up  the  balance  and  bring  it  back,  but  the 
fare  should  never  rise  above  5  cents.  That  was  voted  down,  how- 
ever, by  a  very  large  majority  two  weeks  ago,  in  Des  Moines. 

There  seems  to  be  a  great  clisposition  to  oppose  subsidizing  in  any 
form  privately  managed  facilities.  We  saw  that  in  Congress  a  great 
deal  in  connection  with  the  steamship  subsidies,  but  it  still  seems 
to  prevail. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2111 


Companies  should  be  forced,  as  so  many  witnesses  have  suggested, 
to  greater  economies  in  the  use  of  one-man  cars,  economy  in  the  use 
of  electricity,  skip-stops,  honest  collection  of  fares,  and  various  other 
matters  that  might  be  referred  to.  I  think  that  a  lower  fai'e  than  5 
1  cuts  for  short  rides,  which  I  urged  in  Xew  York  City  recently  before 
Commissioner  Nixon,  would  be  a  very  profitable  thing  for  the  com- 
[)anies. 

Commissioner  Wehle.  All  lines,  surface  and  rapid  ti*ansit? 

Mr.  Bemis.  No;  surface  lines.  They  have  to  compete  and  gen- 
erally expect  traffic  for  short  distances,  shoit  hauls.  I  think  that 
keeping  the  present  fare — I  am  not  exactly  committed  to  a  zone 
system,  but  I  think  something  less  than  5  cents  might  be  worth  while 
for  very  short  rides  in  our  big  city. 

Tender  municipal  ownership,  the  paving  charges  could  l>e  shifted, 
as  has  been  suggested,  and  even  extensions  could  l^e  built,  in  part  at 
least,  if  not  wholly,  by  special  assessments  of  abutting  property. 
That  again  is  a  very  difficult  matter  to  do  in  the  case  of  a  privately 
owned  railway. 

Most  of  our  largest  street-railway  systems,  if  not  largely  oAercap- 
italized,  can  go  on  successfully,  I  believe,  under  their  present  fares, 
T)  cents  or  7  cents,  as  the  case  may  be ;  but  if  largely  overcapitalized 
they  apparently  have  to  face  bankruptcy  or  voluntary  readjustment 
of  their  interest  and  rentals.  I  do  not  believe,  in  the  present  state 
of  the  public  mind,  there  is  going  to  be  any  method  adopted  that  in 
the  generality  of  cases  will  sustain  a  capitalization  very  much  in 
excess  of  what  can  be  shown  to  be  the  cost  of  the  property  now  in 
use  with  or  without  depreciation  according  to  the  ability  of  the  com- 
pany in  the  past  to  handle  it.  And  in  fact,  the  movement  is  being 
made  even  in  New  York  by  the  commissioner  of  public  service  to 
force  readjustments  of  rentals.  And  in  many  other  cases  that  will 
have  to  come. 

Fundamental  in  any  system  of  regulation  or  ownership  is  the  de- 
termination of  the  cost  of  these  properties  now  in  use  less  depre- 
ciation from  all  causes.  I  have  always  believed  in  municipal  owner- 
ship and  operation  of  public  utilities,  but  I  dread  its  coming  at  an 
exorbitant  valuation.  I  had  occasion  to  appraise  the  street  rail- 
ways of  Detroit  three  or  four  years  ago  and  fixed  the  figure  at 
about  $-20,000,000.  The  commission  thought  it  a  fair  figure  at  the 
time.  It  was  based,  of  course,  on  the  lower  prices  then  prevailing 
and  on  the  stud,y  of  the  investment.  But  in  order  to  avoid  the  cost 
of  financing,  they  made  a  proposition  to  the  company  that  they 
would  assume  the  outstanding  bonds  on  the  whole  system,  which 
were,  in  the  thought  of  the  commission,  about  $23,000,000,  and  then 
the  company  would  have  the  interurban  roads  free  of  debt.  It  was 
raising  the'^pric^  from  $20,000,000  to  $23,000,000  in  order  to  take 
it  over  immediately  with  the  assumption  of  the  5  per  cent  lx)nds. 
The  company  said  that  if  the  commission  would  pay  for,  or  take 
over,  the  bonds  in  the  treasury  as  well  as  the  bonds  in  the  hands  of 
the  general  public,  which  meant  $1,900,000  more,  or  about  $25,- 
000,000,  they  woidd  sell.  The  commission  refused  that  proposition 
and  instead  proposed  to  leave  it  to  a  local  court  subject  only  to  ap- 
peal to  the  State  court  to  decide  the  price ;  and  that  was  voted  dow  n. 

Now.  two  or  three  years  passed  and  the  city,  for  the  same  property, 
with  perhaps  a  million  or  two  of  extensions — but  justified  in  their 


2112     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

opinion,  I  suppose,  that  it  would  cost  more  to  duplicate— agreetl 
with -the  company  to  pay  them  $31,500,000  which  had  been  ap- 
praised at  $20,000,000,  and  which  the  citv  had  agreed  with  the  com- 
pany to  buy  either  at  $233,000,000  or  at  $25,000,000;  and  the  people 
voted  it  down. 

Now,  I  think  that  vote  was  largely  due  to  the  distrust  of  any  valu- 
ation based  upon  the  reproduction  theory  or  on  any  theory  other 
than  one  based  on  the  investment;  which  was  so  strongly  emphasized 
in  theory  in  the  famous  decisions  of  the  Public  Service  Commission 
of  the  Second  District  of  New  York,  in  the  Buffalo  Gas  Co.  case, 
and  in  the  electric  case  at  Buifah)— the  Cataract  Electric  case,  which 
were  written  by  Mr.  Stevens  when  he  was  the  chairman  of  that  com- 
mission, although  since  then,  I  understand,  he  has  changed  his  posi- 
tion on  the  subject.  But  the  position  he  took  was  that  what  the 
courts,  particularly  tlie  United  States  Supreme  Court,  were  aiming 
at  was  a  fair  amount  of  property;  that  it  is  not  historical  cost,  it  is 
not  the  reproduction  cost,  but  it  is  some  standard  of  equity.  But 
that  standard,  I  believe  as  he  did  in  tliose  two  cases,  and  as  several 
of  our  State  commissions  are  holding,  will  lean  more  nearly  toward 
the  investment  than  it  will  toward  the  reproduction  theory. 

Commissioner  Mahon.  Mr.  Chairman,  I  have  to  get  away  to  at- 
tend an  important  engagement.  I  regret  to  interfere  with  Prof. 
Bemis  at  this  time 

Mi\  Bemis.  I  am  practically  through. 

Commissioner  Maiiox.  And  I  should  like  to  hear  what  he  has  to 
say,  but  I  have  to  get  away.  I  have  been  requested  by  the  commis- 
sion to  get  the  wage  from  our  office,  and  that  wage  has  come,  and  I 
have  turned  it  over  to  Mr.  Lauck  this  morning  with  instructions 
that  he  prepare  it  as  requested  by  the  commission  and  submit  it.  So 
tliAt  is  in  the  hands  of  Mr.  Lauck  now.  I  \yant  to  let  you  know  that 
I  liave  carried  out  my  part  of  the  obligation.  I  regret  to  have  to 
go  at  this  time. 

Mr.  Bemis.  Mr.  Mahon,  I  have  never  talked  over  the  Detroit  street- 
railway  situation  with  you,  but  I  feel  sure  you  will  agree  with  what 
I  have  said. 

Commissioner  Mahon.  I  agree  with  all  you  have  said,  so  far, 
Professor,  in  that  situation,  and  I  think  what  you  stated  as  to  the 
valuation  is  what  defeated  it. 

Mr.  Warren.  That  valuation  was  on  the  lines  in  the  city.  Prof. 

Bemis? 

Mr.  Bemis.  Yes;  and  then  a  short  zone  called  the  one-fare  zone. 

Mr.  Warren.  But  not  on  the  whole  systeni? 

Mr.  Bemis.  No.  One-third  of  the  valuation  and  more  than  half 
the  mileage,  I  think,  was  outside  the  city,  but  we  did  not  value  that — 
at  least,  I  mean  I  did  not  value  it.  The  state  commission  did  at 
another  time  under  Prof.  Cooley. 

There  are  a  few  random  notes  that  I  made  as  I  sat  here  this  after- 
noon. One  is  that  we  hear  a  great  deal  about  the  service-at-cost 
plan,  and  I  had  the  jjrivilege  of  assisting  Mayor  Johnson  and  Mr. 
Baker  in  introducing  that  in  Cleveland  and  assisting  Mayor  Lindsley, 
now  commander  of  the  American  Legion,  when  he  was  mayor  of 
Dallas,  in  introducing  it  there,  although  in  Dallas  they  introduced 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2113 

higher  rates  of  return  and  somewhat  higher  figures  otherwise  than  I 
h?ul  advised.  But  I  find  serious  difficulties  with  a  service-at-cost 
j)]an,  although  it  looks  so  good  in  theory. 

The  Chairman.  In  both  cases  you  mentioned,  had  you  supported 
the  service-at-cost  plan? 

Mr.  Bemis.  Yes.  The  plan,  as  I  think,  works  out  pretty  well  in 
Cleveland.  I  think  not  so  well  in  Dallas,  where  the  valuations  that 
were  finally  accepted,  I  believe,  were  somewhat  higher  than  origi- 
nally planned. 

The  great  difficulty  with  the  service-at-cost  plan  is  in  getting  a 
good  valuation  to  start  with.  The  public  are  not  yet  sufficiently 
educated  on  the  subject  of  valuation  to  know  just  what  it  means,  and 
there  is  a  great  danger  of  fastening  on  the  public  a  valuation  that 
will  be  too  high  and  which  will  be  very  difficult  to  get  away  from. 

There  is  also  danger  that  a  service-at-cost  plan  will  require 
a  fare  higher  than  the  social  welfare  of  the  community  may  demand 
and  which  could  only  be  gotten  around  by  subsidizing  the  road  or 
by  direct  municipal  purchase  and  operation.  But  you  are  tied  almost 
to  a  higher  fare  under  a  service-at-cost  plan  w^hile  it  lasts,  as  in 
Boston  to-day.  I  think  very  often  we  are  in  a  situation,  or  would 
be  under  public  management,  such  as  Director  Hines  called  to  the 
attention  of  the  Government  not  long  ago  when  he  thought  a  rise 
of  freight  and  passenger  charges,  particularly  of  freight  charges, 
of  the  railroad,  to-day,  $300,0(X),000,  would  mean  an  increase  of 
charges  to  the  public  of  several  times  that,  as  the  charges  were 
passed  along.  He  thought  it  might  be  better  to  have  taxation  bear 
that  burden  than  to  raise  the  fares.  He  made  that  in  an  official 
communication  to  Congress,  you  may  remember. 

But  the  service-at-cost  plan  ties  one  down  rather  closely  to  a  fare 
Avhich  might,  if  things  keep  on  as  they  have,  become  too  high  in  some 
cases,  although  maybe  not  in  all. 

I  think,  too,  that  the  service-at-cost  plan  requires,  as  in  Cleveland 
it  has  secured,  a  home  rule  different  from  regulation  by  State  com- 
mission. I  think  it  needs  to  be  closely  in  touch  with  the  people  and 
then  it  has  its  best  chance  of  success,  because  it  then  tends  to 
produce  that  cooperation  which  there  has  been  in  Cleveland  between 
the  city  and  the  railway  in  effecting  many  economies  and  preventing 
many  costly  attacks  on  the  road — in  excessive  pavement  charges  or 
excessive  awards  by  juries  in  damage  cases,  and  many  other  ways; 
permits  for  turnouts  and  curves  and  so  on,  which  really  are  very 
beneficial  often  to  the  company,  and  which  the  city  can  give  without 
much  cost  if  it  feels  in  a  friendly  attitude.  But  there  are  these 
difficulties  of  high  valuation  and  fixed  fare — a  fare,  I  mean,  fixed 
as  to  its  base. 

And,  of  course,  our  cities  are  hesitant  for  another  reason.  It  seems 
to  them  to  forfeit  the  benefits  of  the  franchises  which  they  are  now 
enjoying.  The  moment  the  shoe  pinches — that  is  where  the  com- 
panies are  suffering  from  their  rigid  adherence  to  the  franchise  when 
they  w^ere  gaining.  When  they  were  making  a  good  deal  of  money 
from  the  franchise  they  were  enjoying,  they  would  not  listen  to  a 
modification,  and  now  they  are  suffering  the  penalty  that  the  cities 
feel  that  they  should  not  make  concessions  which  the  companies 


I 


p 


2114     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

had  refused  to  make  years  ago.  That  may  not  be  quite  a  proper 
position  to  take,  but  it  is  a  very  natural  one. 

Of  course,  we  still  have  to  face  the  question,  if  the  cities  adhere 
to  that,  of  how  the  companies  are  going  to  get  any  money  for  ex- 
tensions, which  is,  after  all,  the  greatest  problem  i>erhaps  before 
even  our  larger  and  better  companies,  which  are  earning,  it  may  be, 
a  fair  return  on  the  actual  investment  but  have  capitalized  so  mucli 
bevond  that. 

t  do  not  know  of  any  plan  for  issuing  any  underlying  securities 
that  would  precede  the  present  bonds  and  enable  companies  to  finance 
extensions  where  they  are,  as  is  often  the  case,  bonded  up  to  the  full 
value  of  the  property  and  sometimes  more.  Bonds  have  even  been 
issued  to  buy  stock  in  consolidations. 

That  difficulty  is  going  to  force  the  roads  either  into  reorganiza- 
tions or  city  purchases.  There  may  be  some  better  method  found, 
or  some  other  method,  but  I  do  not  see  just  how  it  can  be  found  un- 
less the  roads  are  so  very  prosperous  that  they  can  float  more  securi- 
ties without  reorganization. 

I  have  not  observed  until  lately  much  trend  towards  municipal 
ownership  of  street  railways  in  this  country;  but  if  the  Seattle  ex- 
periment, which  apparently  was  undertaken  with  a  very  high  valua- 
tion, and  the  San  Francisco  experiment,  succeed  as  they  seem  to  be 
doing,  they  will  undoubtedly  be  followed  by  Toronto  in  a  very  short 
time;  their  franchise  runs  out  very  soon.  And  very  likely  we  will 
find  other  experiments  on  a  large  scale;  and  a  few  of  those  will  have 
a  very  large  influence,  if  well  managed,  as  the  Glasgow  experiment 
has  had  in  England  and  Scotland.  The  trend  of  thought  is  along 
that  direction,  and  I  notice  among  the  large  investors,  too,  just  as 
we  have  observed  it  in  the  case  of  steam  railroads,  being  driven  to 
it  by  the  inability  to  earn  under  any  system  of  financing  which  may 
be  practicable. 

I  am  inclined  to  think  that  street-railway  operation  by  cities  will 
succeed  better  than  operation  of  gas,  because  it  is  under  the  public 
eye  so  completely  that  the  poor  service  would  be  more  readily  de- 
tected. 

At  the  same  time  I  have  not  been  urging  municipal  ownership  of 
late  years,  but  have  felt  that  it  would  gradually  come  as  the  public 
becomes  ready  for  it  and  appreciates  the  conditions  of  making  it  a 
success,  and  I  think  it  is  being  driven  ahead  rapidly  now  by  the 
financial  situation. 

I  believe  that  the  street  railways  do  well  to  treat,  as  I  think  they 
are  generally  doing,  with  organized  labor  as  was  mentioned  by  Dr. 
Maltbie, 

Reference  was  made  by  him  to  the  fact  that  there  should  be  awards 
for  efficiency,  and  I  think  there  should  be,  but  I  think  they  should  go 
to  the  management  and  to  the  labor  force  rather  than  to  capital. 
That  some  scheme  under  which  some  share  in  profits,  as  a  dividend 
on  wages  and  salaries,  would  be  more  effective  than  a  larger  dividend 
on  capital  directly. 

Taking  up  that  6  per  cent  rate  in  Cleveland,  many  do  not  know 
that  it  is  not  6  per  cent  on  all  the  valuations;  it  is  whatever  interest 
is  paid  and  o  per  cent  on  the  stock.  The  bonds  are  only  5  per  cent 
bonds.    They  are  perhaps  one-fourth  of  the  valuation — a  very  small 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2115 

proportion  as  compared  with  most  cities;  but  still  a  very  material 
element  is  the  5  per  cent  bond  there,  and  that  6  per  cent  stock  has 
been  quoted  right  along  at  par,  it  has  been  selling  all  the  way  from 
90  to  110,  and  the  last  I  saw  of  it,  a  month  ago,  it  was  102. 

Mr.  Warren.  I  think  that  was  after  the  7  per  cent  return  was  re- 
ferred to  arbitration.  My  impression  is  it  was  testified  to  here,  or 
that  Col.  Alexander  told  me  in  conversation,  that  the  stock  had 
been  selling  below  par  but,  after  the  city  agreed  to  arbitrate  the 
question  of  a  possibly  higher  return,  the  stock  went  above  par. 

Mr.  Bemis.  I  know  two  vears  ago,  or  a  year  and  a  half,  it  was 
selling  at  97  to  98,  which  was  the  lowest  I  saw  it  go.  Before  that  it 
had  been  selling  above  par. 

I  understand  someone  here  has  brought  up  the  point  as  to  whether 
the  Cleveland  experiment  allowed  enough  for  depreciation.  The 
situation  is  this :  The  road  was  valued  at  a  certain  price,  which  was 
after  deducting  depreciation,  somewhere  in  the  neighborhood  of  70 
per  cent  of  the  estimated  cost  new. 

Let  us  take  now  a  typical  illustration,  and  see  how  their  deprecia- 
tion worked  out  on  track. 

Suppose  a  piece  of  track  cost,  when  it  was  new,  or  was  estimated 
to  have  had  a  reproduction  value  new  in  1909— at  that  time  there  was 
not  a  great  difference  between  the  two,  prices  not  having  risen  as 
thev  have  lately — let  us  assume  that  that  track  was  estimated 
in  the  Tayler  valuation  to  have  cost,  or  to  be  worth  new  $10,000,  but 
they  valued  it  at  $7,000  because  of  the  depreciation.  Now,  it  has 
come  along  to  a  time  when  it  has  no  value  above  scrap.     The  $7,000 


ordinary  acc-ounting  principles  it  is  probable,  and  it  was  the  intention 
of  some  of  us  who  helped  to  draw  the  ordinance,  that  when  the 
$7,000  property  was  scrapped,  they  should  take  out  of  the  deprecia- 
tion reserve  $7,000,  and  the  remaining  part  of  the  $20,000,  $13,000, 
should  come  out  of  capital  as  additional  investment ;  but  it  was  ruled 
some  years  ago  that  the  wording  of  the  franchise  was  more  favor- 
able to  the  company  and  that  they  should  consider,  not  the  $7,000, 
but  the  $10,000,  the  reproduction  cost  new.  So  for  years  they  have 
been  taking  out  property  appraised,  in  my  illustration,  at  $7,000  and, 
until  the  war,  putting  in  property  costing  $10,000,  and  paying  for 
the  whole  $10,000  out  of  the  depreciation  reserve.  Now,  however, 
that  prices  have  risen,  they  are  taking  the  whole  $20,000  out  of  the 
depreciation  reserve,  and  thereby  are  getting  a  property  which  has, 
on  the  actual-cost  basis,  a  value  very  much  greater  than  the  Tayler 
valuation,  or  the  original  cost  new  of  the  original  property.  So,  to 
that  extent,  the  depreciation  is,  you  might  say,  being  more  than  made 
good  on  the  old  track.  But  then  there  is  new  track,  and  there  is  new 
property,  where  it  is  not  being  made  good,  because  it  does  not  begin 
to  require  renewal  at  the  start,  after  extensions  are  required,  and 
there  are  no  renewals  there,  and  they  are  not  accumulating  deprecia- 
tion reserve  to  take  care  of  that.  How  far  the  one  balances  the  other 
it  is  hard  to  say.  In  one  respect  the  company  is  gaining  and  in 
another  respect  the  company  is  losing. 


2116     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Then  they  do  not  accumuhite  a  reserve  to  take  care  of  removals 
of  the  power  phmt,  but  when  any  power  plant  is  discarded,  they 
create  a  special  reserve  to  wipe  it  off  m  3  to  5  years,  and  they  are  do- 
ing that  out  of  the  earnings  as  well  as  the — what  was  originally  5 
cents  is  now  6  cents  or  more  per  car-mile  for  regular  maintenance: 
so  that  it  is  rather  difficult  to  say  that  the  company  is  failing  to 
l)reserye  its  property  out  of  its  various  renewals.  I  am  inclined  to 
think  it  is  breaking  even,  if  not  doing  better;  but  I  realize  there  is 
room  for  discussion  on  that  point.  But  it  is  not  quite  correct  to  say 
that  it  is  self-evident  that  the  company  is  running  down.  I  think 
it  is  quite  as  easy  to  maintain  that  the  company  is  being  improved 
out  (jf  these  various  reserves. 

Commissioner  Sweet.  That  point  was  made  by  Mr.  Mortimer, 
president  of  the  Milwaukee  company;  but  it  occurred  to  me,  Prof. 
Bemis,  when  ho  was  making  his  discussion,  that  there  might  be  a 
psychological  benefit  in  the  plan  of  Cleveland  as  he  described  it, 
even  if  they  were  not  putting  aside  a  sufficient  reserve,  in  accustoming 
the  people  to  rather  low  fares  on  the  start. 

Mr.  Bemis.  Yes. 

Commissioner  Sweet.  And  that  that  had  an  educational  value 
which  would,  in  the  long  run,  tend  to  popularize  the  system  and  keep 
the  people  contented  with  what  they  were  getting.  Do  you  think 
that  there  is  anything  in  that  ? 

Mr.  Bemis.  Yes.  It  did  have  that  influence,  and  it  greatly  ce- 
mented the  feeling  of  good  will. 

Conunissioner  Sweet.  That  is  it  exactly.    . 

Mr.  Bemis.  But  if  that  valuation  had  been  a  high  one,  there  w^ould 
have  been  great  sensitiveness  on  the  subject,  and  I  think  those 
good  results  would  not  have  followed;  but  the  valuation  being  not 
as  low  as  Johnson  wanted,  but  a  good  deal  lower  than  the  securities 
or  what  then  would  be  given  to  it  on  a  reproduction  theorv  with 
present  prices,  the  people  have  rested  satisfied  and  felt  that  it  was 
not  such  a  very  bad  situation,  and  I  think  the  company  is  pretty 
well  satisfied,  too. 

Commissioner  Sweet.  Is  the  historical  method  of  valuation  that 
you  seem  to  favor,  based  upon  the  actual  cost  at  the  time  the  various 
items  were  bought? 

Mr.  Bemis.  Yes;  and  estimated  where  it  can  not  be  found  on  the 
books. 

Commissioner  Sweet.  So  that  in  a  company  that  had  no  other 
stock  there  would  be  substantially  an  agreement  between  the  stock 
issues  or  securities  of  various  kinds  and  the  physical  valuation  of 
the  property  ? 

Mr.  Bemis.  Yes;  if  it  had  been  honestly  and  wisely  invested,  there 
would  be  no  discrepancy.  Of  course,  there  might  have  been  a  failure 
to  keep  the  property  up.  The  property  might  not  have  earned 
sufficient  to  keep  it  up,  or  it  might  have  earned  an  ample  amount 
and  yet  paid  out  not  only  a  fair  dividend,  but  extra  amounts  which 
should  have  gone  into  renewals  and  extensions  to  meet  depreciation, 
so  that  when  you  come  to  study  depreciation,  you  might  find  that 
there  was  a  gap,  as  I  think  is  the  case  to-day  in  some  of  the  Massa- 
chusetts companies,  between  their  stock  and  bonds  and  the  cost  less 
depreciation.     In  some  instances,  I  think— in  Boston,  for  example— 


PROCEEDINGS  OF  FEDERAL  ELKCTIUC  RAILWAYS  COMMISSION.    2117 

they  could  have  cared  for  that.  They  earned  sufficient  in  the  past 
to  do  it.  In  some  of  the  country  companies  m  the  smaller  towns 
in  Massachusetts  they  could  not.  ^   ^      '^^  i      j 

Commissioner  Sweet.  Suppose  a  company  started  with  overhead 
wires  and  later  determined  to  change,  perhaps  at  the  requirenient  of 
the  citv,  some  city  ordinance,  and  had  the  system  as  we  have  it  here 
in  Washington,  necessitating  considerable  loss.    How   would  you 

figure  that?  ,.  ,       ,  i-,-  4. 

Mr  Bemis.  It  should  be  taken  according  to  local  conditions  not 
too  drasticallv,  over  a  period  of  years.  If  it  had  just  occurred,  1 
do  not  think  it  should  all  be  written  off ;  but  if  they  had  had  several 
vears  in  which  to  amortize  it,  they  should  have  been  expected  to  do 
that.     The  old  horse-car  lines  should  have  been  amortized  long  ago, 

for  examole 

Commissioner  Sweet.  Yes;  and  some  of  the  cable  roads  that  were 
changed  into  electric  roads  and  went  through  this  process? 

Mr.  Bemis.  Yes.  .  u  i      i 

I  think  there  may  be  made  a  distinction  between  a  wholesale 
change  due  to  a  very  sudden  change  in  the  art,  such  as  might  occur 
if  we  electrified  the  railroad  terminals  of  New  \ork  City  or  ot 
Washington,  and  those  gradual  displacements  that  come  from  ordi- 
nary improvements  in  the  art.  Those  should  be  taken  care  of  as 
they   come   along;   but   any   revolutionary   change   could   be  easily 

spread  over  a  series  of  years.                            ^       ,     x-  •   i  ^ 

Commissioner  Sw^eet.  Bv   your  system   of  valuation  you  miglit 

vary  considerably  from  the  physical  value  of  the  property  at  the 
time? 

Mr.  Bemis.  Yes.  ,     .       ^  .1  •        ^u  i. 

Commissioner   S>yEET.  Upon   the  basis  of  the   prices   that   were 

actually  paid  for  material  and  labor?  ^ 

Mr  Bemis.  Certainly.  In  other  words,  you  can  not  have  a  hard 
and  fast  rule.  You  have  got  to  study  each  local  situation.  I  be- 
lieve, however,  that  anything  that  departs  very  far  from  the  actual 
cost  of  these  properties,  as  shown  by  their  books,  or  by  estimates 
where  the  books  are  missing,  together  with  a  study  of  their  history 
as  financial  institutions— their  investment  history— anything  that 
departs  far  from  that  is  not  going  to  carry  with  the  American 

Commissioner  Sw^eet.  What  would  you  do  in  reference  to  the 
sto :k  and  bonds  issued  by  a  company  that  is  considerably  over- 
capitalized, even  though  there  may  have  been  water  in  it,  as  we 
say«  At  the  present  time  do  you  think  it  is  necessary  for  a  company 
of  that  kind  to  go  through  the  hands  of  a  receiver  and  be  reorgan- 
ized before  it  can  ^et  on  a  proper  basis?  Or  is  there  any  other  way 
you  know  of  to  adjust  it? 

'  Mr.  Bemis.  If  the  gap  is  not  large,  it  can  probably  get  along.  It 
there  is  any  very  large  gap.  I  do  not  see  how  they  can  get  along  on 
any  alternative  scheme,  unless  the  public  is  willing  to  subsidize 
them.  It  would  be  very  difficult  to  get  the  voters  to  do  that,  unless 
it  could  be  shown  that  there  was  some  special  local  condition  which 
the  company  could  not  avoid — some  very  bad  sledding,  very  hard 
luck,  or  something  of  that  kind:  it  may  have  had  some  terrible 
washouts  or  destruction  of  property,  which  they  could  not  replace 
160643*— 20— VOL  3 5 


1 


I 


2118     PKOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

> 

except  by  more  sto-k  and  bond  issues.  There  are  such  cases,  more 
particularly  with  steam  railroads,  that  is. 

Commissioner  Sweet.  Assuming  that  there  may  be  many  cases 
where  it  would  be  necessary  for  the  public  to  buy,'^on  some  basis  of 
valuation  that  would  be  mutually  satisfactory /  perhaps,  and  own 
the  roads,  the  street  railways  in  cities— have  you  any  objection  to 
the  plan:  do  you  see  any  objection  to  the  plan  of  havinff  the  munici- 
pality own  the  railroad  and  ha>e  it  privately  operated? 

Mr.  Bemis.  The  greatest  objection,  I  think,  is  the  historical  one, 
that  that  experiment  was  tried  extensively  in  Great  Britain  for 
years,  and  always  gave  way,  ultimately,  to  complete  private  opera- 
tion. 

Commissioner  Sweet.  To  public  operation,  you  mean? 

Mr.  Bemis.  I  meant  to  public  operation.'  The  experience  of 
Great  Britain  has  led  me  to  believe  that  that  would  be  the  situation 
anywhere  else.  You  speak  of  a  theory  which  was  very  prevalent  in 
Great  Britain  for  years,  but  it  i>:ivc  way  to  complete' public  opera- 
tion. The  difficulties  are  in  carrying  on  a  proper  contract,  and  there 
is  a  hitch  always  between  the  owner  and  the  operator. 

Commissioner  Sa^t«:et.  Have  you  any  data,  or  can  vou  give  us  any 
information  as  to  the  i-elatiie'eific  ien(  v  and  satisfaction  of  results 
between  the  privately  owned  and  operated  railroads  in  England  and 
the  publicly  owned  and  operated  roads  of  England? 

Mr.  Bemis.  Well,  it  is  very  difficult  to  make  comparisons  save 
this:  The  National  Civic  Federation,  of  which  my  friend  Mr. 
Maltbie  and  I  were  members  and  on  the  executive  committee  some 
years  ago.  had  (ugineering  and  accounting  investigations  made; 
there  was  a  large  fund  raised,  raised  mostly  by  the  public  utilities 
themselves,  and  they  liad  an  equal  lepreseiitation  in  the  investiga- 
tion :  and  that  rei)ort  indicated  that  when  vou  took  any  particular 
case  you  might  draw  very  conflicting  conclu'sions ;  but  very  remark- 
able was  it  that  the  entire  conmiission  of  about  21  members  with 
one  di&senting  vote— that  of  Mr.  ^y^hon  Clark,  of  the  United  Gas 
Improvement  Co.— agreed  on  the  proposition  that  the  most 
effective  wea]>on  in  the  hands  of  a  citv  was  the  right  of  municipal 
ownership,  rather  than  any  attempt  at  regulation.  They  did  not 
go  so  far  as  to  say  a  city  should  have  municipal  ownership,  but  that 
there  should  be.  under  proper  safeguards  of  voting  and  control  of 

bond    issues,    State    supervision    of    accounting    and    so   on there 

should  be  the  right  of  a  city  to  j)un])ase.  construct,  and  operate  at 
will :  that  that  right  was  the  bc.^t  clu!)  we  had  found  over  it. 

Melville  Ingalls  was  chairman  of  tliat  commission,  and  we  had 
some  very  strong  private-utility  men  on  it,  like  Mr.  Edgar,  head  of 
the  Boston  Edison:  Mi".  Clark.- of  the  General  Electric;  as  well  as 
now  President  (Joodenow  of  the  Jolins  Hopkins;  Walter  Fisher 
ex-Secretary  of  the  Interior:  and  some  others;  so  that  we  had  a' 
pretty  well-balanced  commission;  and  all  but  one  agreed  to  that 
proposition. 

The  best  you  can  say  is  this:  That  the  trend  in  England  has  been 
toward  municipal  purchase  and  operation. 

Now,  you  have  either  got  to  say  that  that  was  a  foolish  move  or 
that  it  was  a  well-considered  move;  but  that  it  has  taken  place  with- 
out any  apparent  move  in  the  other  direction  makes  me  believe  that 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2119 

the  general  judgment  of  the  business  interests  of  England,  which 
hugely  control  those  cities,  favored  it.  I  have  been  through  those 
cities  a  great  many  times,  investigating  them,  and  there  seemed  to  be 
a  general  feeling  that  they  were  doing  a  wise  thing. 

Commissioner  Sweet.  They  do  not  have  quite  as  much  politics  in 
British  cities  as  we  have  here,  do  they? 

Mr.  Bemis.  No. 

Commissioner  Sweet.  I  think  that  is  all. 

The  Chairman.  Just  one  or  two  questions.         _         .      i     .  • 

You  have  been  on  the  advisory  board  of  the  division  of  valuations 
for  a  number  of  years? 

A/f",.  "RpiifTs     x^es 

Tlie  Chairman.  And  have  had  a  gi-eat  deal  of  experience  in  assist- 
ing in  the  valuation  of  steam  railroads,  as  well  as  in  valuing  street- 
car and  other  properties? 

IVTi*  Bfmts    Y^es 

The  Chairman.  You  are  entirely  familiar  with  the  report  of  the 
commission  in  what  is  known  as  the  Texas  Midland  and  the  Winston- 
Salem  cases  ? 

Mr.  Bemis.  Well,  I  have  read  them.  I  would  not  say  that  I  could 
pass  a  very  good  examination  on  them  now.    It  is  a  year  or  so  since 

I  read  them.  ,  ,      i  .  .,      ii  ^i. 

The  Chairman.  I  do  not  intend  to  go  into  the  details  of  them. 

From  your  experience  in  valuing  stenm  as  well  as  electric  railways, 
are  you  of  the  opinion  that  the  same  general  principles  of  valuation 
apply  to  both  ? 

Mr.  Bemis.  Yes.  i         i    j 

The  Chairman.  Do  you  also  believe  that  the  same  general  methods 
in  getting  at  the  quantities  and  the  unit  prices— the  land  values  and 
contingent  and  other  values — may  be  followed. 

Mr.  Bemis.  Yes. 

The  Chairman.  Do  you  believe  that  the  findings  of  the  Interstate 
Commerce  Commission  in  the  Texas  Midland  case  would  be  of  assist- 
ance to  the  public  as  well  as  the  utilities  in  determining  the  value  of 
these  street-railway  properties?  .    .      ,  ^  „        ,  ^, 

Mr.  Bemis.  Yes ;  but  I  think  the  commission  has  not  tollowecl  the 
intention  of  the  framers  of  the  valuation  act  with  respect  to  estimat- 
ing original  costs  where  the  records  were  defective. 

The  Chairman.  I  understand  your  views  upon  that.  Of  course, 
they  are  valuing  the  steam  railroads  according  to  the  act  of  Con- 
gress, and  there  may  be  some  differences  of  opinion  as  to  the  inter- 
pretation of  that  act. 

Mr.  Bemis.  Yes.  x      m       ^ 

The  Chairman.  And,  of  course,  in  valuing  street-railroad  prop- 
erties, either  for  purchase  or  rate-making  purposes,  the  States  are 
not  governed  by  an  act  defining  their  duties  ? 

Mr.  Bemis.  No. 

The  Chairman.  Or  designating  what  particular  elements  should 

be  found? 

Mr.  Bemis.  No. 

The  Chairman.  Just  to  come  back  again  to  the  question :  Do  you 
hi^lieve  that  the  principles  or  findings  announced  by  the  Interstate 
Commerce  Commission  in  the  Texas  Midland  and  Winston-Salem 


1 

I 


i^ 


2120    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAH^WAYS  COMMISSIOH; 

castas  would  be  helpful  in  the  determination  of  values  of  street-car 
properties  ? 

Mr.  Bemis.  Yes.  I  would  not  thereby  commit  myself — that  is 
why  I  mentioned  what  I  did  a  moment  ago — that  I  necessarily  in- 
dorse everything  that  was  in  those  decisions. 

The  Chairman.  I  am  not  asking  you  to  do  that. 

Mr.  Bemis.  But  I  think  that  the  decisions  would  be  very  helpful 
and,  in  the  main,  I  would  indorse  them. 

The  Chairman.  What  would  you  think  of  the  advisability  of  this 
commission,  in  its  report,  attachmg  a  copy  of  the  findings  in  one  of 
those  cases  and  simply  recommending  thiit  the  same  be  considered 
by  the  public  and  the  utilities  in  determining  the'value  of  street- 
railway  properties? 

Mr.  Bemis.  I  think  it  would  be  very  wise  to  introduce  it  with  the 
statement  that  you  do  not  necessarily,  yourself,  indorse  it  all,  but 
that  youput  it  in  as  a  valuable  contribution  to  the  subject. 

The  Chairman.  Do  vou  believe  that  this  commission,  in  the 
investigation  which  has  been  made,  would  be  justified  in  attempting 
to  determine  the  precise  method  of  valuation  or  the  exact  principles 
that  should  be  applied? 

Mr.  Bemis.  I  think  it  would  be  proper  for  the  commission  to 
express  its  leaning  toward  some  theory,  if  it  so  felt;  that  is,  if  it  has 
a  judgment  upon  the  relative  emphasis  to  be  placed  upon  conflicting 
points  of  theory,  it  is  well  enough  to  express  it.  I  do  not  know  that 
that  answers  your  question. 

The  Chairman.  I  can  answer  that  by  saying  that  we  have  taken 
very  little  evidence  on  valuation.  It  is  such  a  tremendously  large 
field  and  inv^olves  so  many  considerations  that  we  thouglit  that  we 
might  have  to  be  in  session  for  many  months  if  we  were  to  attempt 
to  determine  the  principles  to  be  applied  in  valuation  proceedings. 

Now,  just  one  other  question:  You  have  made  some  reference  to 
municipal  ownership.  Do  you  believe  that  that  is  the  real  solution 
to  the  electric-railway  problem? 

Mr.  Bemis.  I  think  it  is  the  ultimate  solution.  I  would  not  push 
the  thin^  forward  until  the  people  are  ready  for  it.  I  think  it  will 
come  of  its  own  accord  as  time  develops.  I  would  have  legislation, 
however,  so  changed,  and  constitutional  provisions  so  changed  that 
cities  can  finance  the  purchase  or  construction  of  such  proj^erties 
when  they  want  to. 

The  Chairman.  This  moining  Commissioner  Eastman  referi-ed  to 
the  Bay  State  system  and  stated  that  it  operated  through  a  great 
many  cities  and  villages.  lender  those  circumstances  how  could 
municipal  ownership  be  applied? 

Mr.  Bemts.  By  such  methods  as  you  see  applied  in  Chicago,  in  the 
sanitary  district:  in  Portland,  Me.,  in  the  Portland  water  district; 
and  many  such  cases — by  creating  a  special  district  or  street-railway' 
territory  that  nnxy  be  c^^nsidered  a  system. 

It  might,  of  coui*se,  be  a  very  large  unit;  in  some  States  it  miglit 
possibly  be  so  large  as  to  almost  be  half  of  a  State;  but  in  many 
cases  it  would  not  l)e  more  than  a  county. 

The  Chairman.  Where  a  property  operates  through  a  large  terri- 
tory, and  through  many  cities  and  villages,  would  you  think  that 
ownership  should  be  by  the  State,  rather  than  by  that  territory  which 
you  mentioned? 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2121 

Mr.  Bemis.  I  think  that  it  should.  The  general  principle  should 
prevail  that  it  should  come  as  close  home  to  the  patrons  of  the  road 
as  possible.  I  imagine  you  can  create  a  district  much  smaller  than 
the  State.  You  could  better  divide  a  State  into  a  few  districts  than 
to  have  the  State  run  it  all. 

Of  course,  in  a  great  many  States,  especially  in  the  West,  the  dis- 
trict need  not  be  very  much  larger  than  the  city:  and  the  interurban 
roads  would  be  a  different  proposition. 

The  Chairman.  Do  you  believe  that,  from  the  experience  that  has 
been  gained  in  municipal  operation  of  electric-railway  lines  in  this 
country,  this  commission  is  justified  in  recommending  that  munici- 
pal or  territorial  ownership  is  the  solution  of  this  problem? 

Mr.  Bemis.  Well,  I  should,  if  I  were  answering  that  frankly— as 
I  am  trying  to — I  should  say  that  I  would  ad\  ise  you  to  present  the 
matter  as  something  that  you  believe  worthy  of  serious  considera- 
tion, and  that  it  will  occupy  a  larger  and  larger  place  in  the  future, 
and  should  not  be  turned  down;  but  you  are  not  prepared,  at  this 
time,  to  do  more  than  that. 

The  Chairman.  That  would  be  your  recommendation? 

Mr.  Bemis.  Yes.  I  should  imply  a  favorable  attitude  without 
directly  recommending  it.  I  would  say  that  it  has  great  possibilities, 
as  the  people  learn  how  to  run  those  things. 

The  Chairman.  That  is  all. 

Commissioner  Wehle.  Would  you  say  that  the  Texas  Midland 
decision  was  the  best  existing  expression  of  the  historical  theory  in 

valuation? 

Mr.  Bemis.  No;  but  there  have  been  one  or  two  decisions  of  the 
Interstate  Commerce  Commission  that  have  been  made  as  final 
decisions:  The  Texas  Midland  and  tlie  Winston- Salem  Southbound. 
So  they  have  much  of  value  in  many  iespe( ts.  I  do  not  consider 
them,  however,  as  ideal  illustrations,  by  any  means,  of  the  historical 
method,  because  the  commission  has  not  in  the  Texas  Midland  com- 
mitted itself  to  the  reproduction  theory,  and  there  are  certain  gaps 

in  it. 

In  the  Winston-Salem  Southbound,  they  were  able  to  get  the 
actual  costs  pretty  ( ompletely.  Tliey  have  always  taken  the  ground 
that  they  would  not  estimate  where  they  did  not  find  the  cost  on  the 
boolcs,  and  I  think  that  prevents  their  reports  from  even  setting  up 
the  historical  costs  completely ;  but  they  got  a  good  deal  of  it. 

Commissioner  Wehle.  In  the  Winston-Salem  case,  would  you  say 
there  was  a  decision  which  did  express  the  historical  theory  of  valua- 
tion satisfactorily? 

Mr.  Bemis.  No;  I  should  say  it  came  nearer  to  it  than  the  other, 
the  Texas  Midland.  But  they  both  are  very  good  in  certain  other 
respects.  They  give  a  very  reasonable  theory  of  depreciation  and 
of  overheads.  It  is  the  most  reasonable  adaptation  of  the  reproduc- 
tion theory  that  has  been  made. 

Mr.  Warren.  May  I  interrupt  just  a  moment,  Mr.  Chairman?  I 
linve  to  leave  to  take  a  train. 

I  should  like  to  submit,  and  I  Avill  send  them  to  Mr.  Ogburn  as 
oon  as  they  are  ready,  an  abstract  of  recommendations  of  various 
investigating  commissions  and  other  bodies  which  have  been  con- 
sidering the  street-railway  problem  in  various  parts  of  the  country, 


II 


M 


2122     PROCEEDINGS  OF  FEDERAL  ET.E(  TRTC  RAILWAYS  COMMTSSIOIT. 

and  whicli  Mr.  Hills,  my  associate,  has  been  preparing  but  was  not 
quite  able  to  aet  it  finished  to-day.  We  thought  it  might  be  of  use. 
It  is  merely  an  abstract  of  the  recommendations. 

The  Chairman.  We  shall  be  very  glad  to  have  that. 

Mr.  Warken.  I  should  like  also  to  submit  through  Mr.  Ogburn. 
if  I  may,  some  wage  scales.  T  have  in  mind,  particularly,  the  one 
recently  approved  by  Judge  Mayer  in  New  York  for  the  New  York 
surface  raihyays,  because  I  thought,  in  connection  with  the  testimonv 
which  went  in  yesterday,  it  might  be  of  service  to  the  commission  in 
seeing  what  would  be  the  i^snlt  of  applying  a  minimum  wage  to  the 
lowest-paid  people  and  carrying  it  on  up  through  the  company. 

The  Chairman.  Tliat  is  very  helpfnl. 

Mr.  Warren.  And  on  the  qne^ticm  of  wages,  as  thei^e  are  a  num- 
ber of  pretty  large  roads,  like  Philadelphia  and  Milwaukee  and 
New  Bedford,  and.  I  think.  New  Yoi-k,  which  are  not  members  of 
the  Amalgamated  Assm-iation.  I  should  like  the  privilege,  if  I  can 
ascertain  the  facts,  and  I  think  I  can.  of  submitting  recent  scales  of 
wages  adopted  in  such  cities  as  T  may  learn. 

Finally.  T  should  like  the  privilege  of  filing  a  brief,  if  we  can 
get  one  ready  before  the  conmiission  makes  its  report. 

The  Chairman.  How  much  time  would  you  like.  Mr.  Wari*en? 

Mr.  Warren.  I  do  not  want  to  ask  for  any  time,  because  T  should 
not  want  to  seem  to  ask  the  commission  to  delay  its  report.  T  should 
much  rather  have  the  report  than  to  have  it  delayed  for  the  brief. 

The  Chairman.  Of  course,  we  will  try  to  expedite  our  conclusions 
as  quickly  as  possible,  and  the  sooner  you  get  it  in  the  bef  ter. 

Mr.  Warren.  We  '^liall  <rot  it  in  just  as  soon  as  we  can;  but  we 
want  to  make  it  a  sort  of  abstract  of  the  hearings,  which  seem  to  us 
to  have  been  very  valuable,  so  that  it  could  be  used  by  the  members 
of  the  commission  in  their  work. 

The  Ch.atrman.  Very  well. 

Mr.  Warren.  As  T  understood,  the  question  of  valuation  is  not 
goin^  to  be  passed  upon  in  any  definite  wav  by  the  commission,  as 
we  did  not  introduce  evidence  on  it.  Personally,  I  want  to  thank  the 
commission  again  for  their  unifonn  courte>^y  and  patience  to  us  of 
the  street-railway  industry-  in  the  very  grent  amount  of  time  we  have 
taken. 

Commissoner  Wehle.  Excuse  me.  just  a  moment,  but  before  you 
leave,  lest  there  be  any  misunderstanding  on  the  question  of  ex- 
pressions by  the  commission  in  its  report  on  the  question  of  valua- 
tion. I  think  before  Mr.  Warren  leaves  T  should  like  to  hear  what 
the  chairman  has  to  say  about  it;  because  although  we  did  not  go 
into  the  discu^'^ion  of  valuation  here,  it  was  my  understanding  that 
reference  might  be  made  to  any  previous  investigiition. 

Mr.  Warren.  We  should  welcome  that. 

Commissioner  Wehle.  And  that  recommendations  might  he  made 
by  the  commission. 

The  Chairman.  The  Chair  believes  that  this  commission  is  not 
in  a  position,  from  this  record,  to  undertake  to  make  a  definite  pro- 
nouncement upon  the  kind  of  a  valuation  which  should  be  made  or 
the  principles  which  should  apply.  Just  in  what  form  our  recom- 
mendation should  be  mjide  upon  that  subject — and  of  course,  one 
must  be  made— is  a  matter  for  us  to  dispose  of  in  our  executive  ses- 
sions. 


proceedings  of  federal  electric  railways  commission.  2123 


Mr.  Warren.  Of  course,  the  more  fully  you  set  out  the  different 
i'orms  of  valuation,  I  think  the  more  valuable  the  report  would  be. 

Commissioner  Wehle.  What  is  your  observation,  Mr.  Bemis,  with 
refei-ence  to  the  purchase  of  power  by  traction  companies? 

Mr.  Bemis.  In  some  cases  they  purchase  from  the  electric-light 
companies,  which  they  often  own ;  sometimes,  however,  they  purchase 
from  independent  companies.  Of  course,  in  Canada  the  Hydro- 
Electric  Commission  of  Ontario  is  selling  power  quite  extensively 
to  street  railways  and  to  municipalities.  That  is  an  enterprise  of 
very  great  significance. 

Commissioner  Wehlb.  In  cases  where  you  fijid  the  traction  com- 
pany purchasing  from  a  power  company  which  is  owned  by  the  same 
mterests  as  control  the  traction  company,  what  general  conditions, 
if  any,  have  you  observed  with  reference  to  prices? 

Mr.  Bemis.  I  have  not  come  across  any  particularly  extravagant 
charges  of  that  character.  That  is  going  on  to-day  in  Des  Moines, 
and  I  have  been  investigating  that  lately.  But  the  charges  did  not 
seem  excessive.  There  is  a  large  purchase  of  power  in  Chicago  by 
the  elevated  roads  from  the  Commonwealth  Edison.  The  two  mter- 
ests are  practically  controlled  by  Mr.  Insull,  but  the  price  is  low. 

I  think  there  is  more  abuse  from  holding  companies.  The  theory 
of  the  holding  company  was  that  the  various  members  of  it  could 
compare  notes  as  to  etf(ieney;  that  the  central  office  would  gather 
data  and  force  each  company  to  greater  economies  by  showing  what 
other  companies  of  the  syndicate  were  doing.  But  under  the  scheme 
of  publicity  of  accounts  enforced  by  State  commissions  we  are  get- 
ting that  without  the  syndicate  or  the  holding  company,  while  the 
holding  company  is  very  apt  to  take  a  very  considerable  amount  of 
money  for  a  central  New  York  office,  which  I  find  is  rather  difficult 
to  justify. 

Commissioner  Wehle.  What  recommendations,  if  any,  would  you 
make  on  those  two  points  ? 

Mr.  Bemis.  On  what? 

Commissioner  Wehle.  What  recommendations,  if  any,  would  you 
suggest  should  be  made  by  the  commission  on  those  two  points  which 
you  have  just  discussed? 

Mr.  Bemis.  I  do  not  think  on  power  you  can  make  any  recom- 
mendation except  that  in  all  cases  where  it  occurs  there  should  be 
very  careful  investigations  by  the  city's  agents,  engineers,  and  ac- 
countants, as  there  is  always  a  possibility  of  abuse.  But  there  is  a 
great  possibility  of  economy  in  uniting  the  electric-light  load,  power 
load,  and  street  railway  together. 

When  it  comes  to  the  other  matter  of  holding  companies,  I  think 
you  might  express  a  good  deal  of  doubt  and  suspicion  as  to  their 
value,  that  whatever  value  they  had  was  largely  taken  away  by  the 
development  of  publicity  of  accounts  in  the  various  States.  About 
the  only  great  advantage  they  seem  to  have  now,  they  may  help  in 
financing  somewhat,  but  I  think  they  should  be  looked  on  with  a  good 
deal  of  doubt,  and  I  find  that  quite  a  common  view  now  even  among 
accountants  and  engineers  who  are  working  very  largely  in  the  com- 
panies themselves. 

Commissioner  Wehle.  You  think  that  each  company  should  be  a 
unit  and  should  not  be  controlled  by  a  holding  company  ? 


2124     PROCEEDINGS  OF  FEDERAL  ELErTRTC  TIATLWAYS  COMMISSION. 

Mr  Bemis.  I  think  it  is  better  so,  generally  speaking.  Of  conrro 
I  do  believe  m  the  union  of  all  the  traffic  transportation  of  a  city  in 
one  company,  if  possible;  but  I  think  there  a  complete  amalgama- 
tion IS  probably  better  than  a  holding  company. 

Conimissioner  Weiile.  But  you  were  speaking  primarily,  I  take 
It,  of  holding  companies  which  hold  the  traction  interests  in  several 
cities  ? 

Mr.  Bemis.  Yes;  I  was. 

Commissioner  Wehle.  You  do  not  notice  that  these  holding  com- 
panies eflectuate  Jiny  economies  in  either  operation  or  purchasing  of 
supplies  or  management,  do  you  ? 

Mr.  Bemis.  I  do  not  thinli:  they  effectuate  economies  sufficient  to 
warrant  the  charges  they  make  for  it. 

Commissioner  Weiile.  And  do  vou  find  that  the  charges  thev 
make  for  what  they  do  are  a  great  drain  on  the  industrv  and  an  in- 
justice to  the  taxpayer  and  car  rider,  do  you  ? 

Mr.  Bemis.  Well',  I  would  say  a  material  drain;  I  do  not  know 
what  adjective  to  use.     I  do  not  consider  it  startling  or  enormous 
but  I  consider  it  a  material  drain  and  a  drain  of  importance,  always' 
to  he  taken  into  consideration. 

The  Chairman.  Mr.  Bemis.  we  ai-e  verv  much  obliged  to  you. 

Ml'.  Bemts.  I  have  enjoyed  it  very  much,  1  assure  you. 

The  (;haihmax.  I  wish  the  record  to  show  that  Mr.  Stiles  P.  Jones 
is  authorized  to  submit  a  memorandum  containing  his  views  as  to 
the  solution  of  this  problem  and  that  that  will  be  made  a  part  of  the 
record. 

Mr.  OcjBURN.  Mr.  Lawson  Purdy,  in  accordance  with  the  state- 
ment I  made  last  night,  has  sent  a  very  interesting  statement  deal- 
ing with  the  matter  of  paying  for  extensions  bv  assessments  on 
propert)^  owners,  which  I  trust  we  can  have  read  iiito  the  record 

The  Chairman.  That  mav  )>e  done. 

The  statement  is  as  follows: 

PAYING     FOR      KLECTKICAL      KAILWAY      EXTENSTONR      BY      ASSESSMENT     OP     PROPERTY 

BENEFmO). 

(By  LawKon  I'urdy.) 

The  prohlem. —mectriQa]   railwa^vs  are  ui>eratinK  at  greatlv   increased  cost 
for  wages  and  materials.     Any  new  conslrnetioii  will  also  he 'made  at  "reativ 
increased   cost.     When   extensions  are  made  or   new   railways  built    this  in 
crease  in  original  coHt  is  a  hurden  until  the  total  cost  is  amortize<l'     it  is  u 
hurden  that  must  be  met  o\U  of  fares. 

It  is  charged  that  in  tlie  past  extensions  of  electrical  railroads  have  often 
l>een  built  where  they  were  not  needed  for  the  benefit  of  persons  financially 
interested  in  the  railroad,  who  owiied  land  tliat  would  be  ♦-nhaneed  in  valut 
by  the  building  of  the  railroad.  In  any  event,  the  building  of  the  railroad 
does  enhance  the  value  of  some  land,  and  the  persons  who  receive  that 
financial  benefit  have  not  been  those  who  have  contributed  to  the  building  of 
the  road.  It  is  generally  true  of  the  building  «»f  an  ele<-trtcal  railway  as  in 
the  building  of  any  otlier  highway,  street,  or  road,  that  if  It  does  not  enhance 
the  value  of  land  by  at  least  as  much  as  it  costs  it  should  not  be  built. 

Cost  of  electric-railway  cutcnsions  should  be  a.sscsHc.d  upon  land  bent  Med  — 
For  more  than  100  years  the  principle  of  paying  for  streets  and  street  im- 
provements by  assessment  of  the  property  benefited  has  been  applied  to 
greater  or  less  degree  in  the  United  States.  For  a  number  of  vears  past  its 
apphcation  has  been  almosr  unlvi-rsal.  Special  asses.sinonts  have'ln-en  impo^^^M 
on  property  benefited  to  acquire  land  for  streets,  parks,  and  public  places  to 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2125 

improve  and  even,  in  some  ca.ses,  to  maintain  streets,  parks,  and  public  places. 
Special  assessments  amount  to  nearly  8  per  cent  of  the  aggregate  revenue  of 
all  cities  of  over  30.000  population  In  the  United  States.  In  some  cities  special 
assessments  amount  to  over  one-fifth  the  total  revenue. 

This  method  of  paying  for  certain  public  improvements  has  not  only  tlio 
advantage  of  obtaining  the  money,  and  obtaining  it  from  those  who  receive  the 
financial  benefit,  but  it  has  an  added  advantage.  Real-estate  owners  are 
prone  to  demand  public  improvements  that  they  think  will  benefit  their  prop- 
wty  even  thtough  such  improvements  are  premature.  If  .such  owners  know 
that  they  must  pay  for  these  i)nblic  improvements  they  are  less  likely  to  de- 
mand them  in  advance  of  real  need. 

This  principle  of  obtaining  money  from  those  whose  property  is  benefited 
has  been  applied  to  the  building  of  street  railroads  even  though  the  rail- 
roads were  privately  owned.  In  many  cases  it  has  been  held  by  the  United 
States  Supreme  Court  that  it  was  not  contrary  to  the  Constitution  of  the 
United  States  for  cities  to  give  money  to  railroad  corporations  for  the  building 
of  railroads  near  the  city  (Oelpeke  r.  .Dubtique,  1  Wall..  220).  It  seems  that 
the  only  objection  on  constitutional  grounds  to  using  public  money  to  build  rail- 
roads, either  steam  or  electric,  would  b<>  that  such  use  of  money  is  not  a  public 
use,  and  It  has  been  held  many  times  that  the  assistance  of  steam-railroad  cor- 
porations to  build  railroads  is  a  public  use.  It  seems  certain  that  it  would 
be  held  that  to  build  an  electric  railroad  where  it  actually  can  be  shown  that 
the  building  of  the  railroad  enhances  the  value  of  the  land  and  serves  the  com- 
munity, such  expenditure  would  be  for  a  public  use. 

Great  Britain  Is  confronting  the  same  situation  that  we  have  in  the  United 
States.  In  1918,  on  behalf  of  the  ministry  of  reconstruction,  a  committee  pre- 
sented its  second  report  dealing  with  the  acquisition  of  land  for  public  ptir- 
l)oses.  In  the  course  of  that  report,  after  reciting  that  railways  are  most  es- 
sential In  encouraging  and  promoting  industry  and  development,  it  is  stated 
that  new  railway  enterprises  have  not  beei^.  entered  uixai.  but  that  if  the  com- 
panies "  could  secure  .some  portion  of  the  increased  value  created  by  their 
uiulertakings,  they  would  need  no  further  incentive  to  initiat*^  extensions." 
The  committee  states  that  "  the  principle  of  betterment  applicable  in  cases  of 
undertakings  promoted  by  the  state  or  local  authorities  should  also  be  appli- 
cable In  cases  of  private  undertakings  authorized  in  the  public  interest.*'  The 
committee  recommends  only  that  in  the  caso  of  private  promoters  they  should 
not  receive  more  than  the  actual  cost  of  the  construction  of  the  undertaking. 

Any  such  aid  to  i>rivate  corijorations  must  depend  upon  the  exercise  of  ade- 
quate rnte-making  power. 

Among  the  advantages  of  paying  for  electrical  railways  by  assessment, 
whetlior  owned  and  operated  by  public  authority  or  by  private*  corporations, 
will  be  that  extensions  will  not  be  constructed  unless  they  are  actually  needed. 
They  can  be  constructed,  however,  if  the  operating  reventje  is  sufl^cient  to  meet 
operating  expenses  and  maintenance,  while  the  extensions  could  not  be  built 
If  the  revenue  had  to  be  sufficient  not  only  for  operating  expen.ses  and  main- 
tenance but  also  to  pay  interest  and  installments  upon  the  original  co.st. 

By  pursuing  the  policy,  wherever  practicable,  of  building  electric  railways 
by  special  assessments  le^iecl  upon  the  property  benefited,  capital  will  steadily 
be  diminished  until  ultimately  we  may  hope  that  the  entire  capital  will  be 
amortized  and  the  railways  thereafter  can  be  run  for  rates  sudicient  and  only 
sufficient  to  pay  operating  expenses  and  maintenance. 

The  difficulties  presented  by  the  pn>blem  of  levying  assessments  in  propor- 
tion to  the  benefit  conferred  by  the  building  of  an  electrical-railway  exten- 
sion are  no  greater  than  the  difficulties  met  with  every  day  by  city  authorities 
in  Imposing  assessments  on  property  benefited  by  public  Improvements  habit- 
ually paid  for  by  such  assessments.  Through  long  experience,  methods  have 
been  devised  for  meeting  a  gieat  variety  of  such  problems.  Local  streets  are 
ordinarily  paid  for  in  full  by  the  property  immetliately  fronting  on  such 
streets.  So  are  local  sewers.  Trunk  sewers  are  paid  for  by  all  the  property 
which  will  drain  Into  the  trunk.  Trunk  thoroughfares  are  paid  for,  as  nearly 
as  may  be,  by  all  land  to  be  served  by  the  particular  main  thoroughfare. 
Parks  are  sometimes  paid  for  by  assessment  and  even  maintained  by  assess- 
ment. To  determine  the  area  of  benefit  is  work  for  an  experienced  and  in- 
telligent man  who  studies  the  local  conditions.  There  are  no  difiiculties  in 
laying  assessments  to  pay  for  street  railways  that  can  not  readily  be  over- 
come by  conjpeteut  public  officials. 


2126     PROCBEDINGS  OF  FEDERAL  FXECTRTC  BAH.WAYS  COMTSCTSSTOIT. 

Tills  plan  Is  not  offered  as  a  solution  of  the  existing  dlfflcnltles  due  to  tlio 
depreciated  dollar.  If  It  Is  possible  to  continue  to  operate  ♦;^^trlc  railways  at 
all,  this  plan  if  adopted  will  permit  of  such  extension  of  their  ^.»i<;»""^,  »8J""-^ 
hv  nee<led,  and  promises  a  continual  betterment  of  their  financial  condition.        , 

Mr.  Ogburn.  Also  the  book  from  the  city  dub  on  the  same  sub- 
ject.   Mr.  Wehle  suggests  that  it  might  be  well  to  have  that  read 

into  the  record  also.  .,    .,    ^        ui       9 

The  Chairman.  Does  the  pamphlet  deal  only  with  that  problem? 

Mr.  OoBURN.  Only  with  that  problem. 

The  Chairman,  that  may  be  made  a  part  of  the  record  then. 

The  pamphlet  is  as  follows:  ^r      ^ 

^      ^  The  City  Club  of  New  York, 

55  Wdt  Forty-fourth  Street,  October  9.  1908. 

Thb  Board  of  Estimate  and  Apportionment 

AND  THE  Public  Sekvkk  (Jommission: 

Dear  Sirs:  The  City  Club  resDect fully  sub.nUs  ^^>\  >'7^:;„^"f ?f ?"^?^.J^^ 
result  of  inquiries  made  through  its  trnnslt  buroMU  with  relatioti  to  the  fe.isi 
bilitv  of  iiieoth^    the  cost  of  future  subway  extensions  by  means  of  assessments 

"Vhe  ^iTy^u'SentlT^'nmls  more  rapld-translt  roads.  Private  capital  s^ms 
dis^nolincS^,  aTresent  at  least,  to  finance  the  work  of  Y'^'^-^'^Jt.  um! 
borrowing  power  is  utterly  Inadequate  to  cover  the  need,  and  will  be  until 
rXf  mav  be  icured  through  tbo  slow  process  of  constitutional  amendnient 
J?  the  ne^^arrilnls  aVr^^^^      built,  it  seems  self-evident  that  other  methods 

""TL^^lub'f inve^^^^^  show  that  in  the  outlying  fi^tricts  reached  by  the 

present  subway,  and  to  some  degree  the  uearer  sections,  ^b^^.  \«i"f  ,«^^^^/^« 
property  served  has  Increased  to  an  extraordinary  degree  This  added  value 
would  have  paid  for  the  cost  of  the  work  several  times  over.  While  the  city 
as  a  whole  haTbeneflted  greatly,  the  scale  of  local  benefit  is  "«  ";a"y  much 
CTeater  In  our  judgment,  it  would  not  only  le  helpful  as  a  solution  of  the 
problem  brtt  far  more  equitable  to  charge  a  proportion  of  the  cost  of  con- 
Btructing  a   rapid-transit   line   to  the   property   most   benefited   by   such  con- 

*^  The  Argument  is  elaborated,  and  the  exact  results  of  the  club's  investigation 
given  in  the  accompanying  memorandum.  We  trust  that  this  may  have  your 
Ixaminatlon!  and  that  if  the  plan  comnu  nds  itself  to  your  judgment  the  future 
policy  of  the  dtv  may  be  shaped  accordingly. 

very  respectfully  yours,  ^^^^^  ^^^^^ 

Chairman,  Transit  Committee. 
Henry    C.    Wright. 

Bureau  Director. 

BUILDING    OP   rapid-transit    LINES   IN    NEW    YORK    CITY    BY    ASSESSMENT    UPON 

PROPERTY    BENEFITED. 

For  many  years  the  city  has  deemed  It  just  to  assess  upon  abutting  property 
the  cost  of  opening  streets  and  building  sewers.  The  theory  of  such  a  tax  upon 
property  Is  that  it  receives  almost  the  exclusive  benefit  from  the  construction 
of  Tstreet  sewer  adjacent  to  it.  The  question  naturally  arises :  Does  not  a 
transit  line,  bv  the  benefit  that  it  confers,  fall  in  the  same  class  as  new  streets 
and  sewers?  '  If  a  street-railroad  or  rapid-transit  line  be  extended  Into  an 
undeveloped  territory,  is  It  not  built  primarily  for  the  purpose  «f /"rnlshlng 
transit  facilities  to  future  residents  In  that  section?  People  will  buy  this 
property  primarily  because  It  has  good  transit  facilities,  and  the  value  placed 
upon  it  is  largely  based  upon  its  accessibility.  This  being  true  and  universally 
admitted,  why  should  not  the  property  thus  enhanced  In  value  by  the  extension 
to  it  of  a  transit  line  pay  for  the  construction  of  such  line,  to  the  extent  that 
the  increased  value  warrants  It,  instead  of  receiving  such  Increased  value  as 
a  present  from  the  city?  This  principle,  In  a  modified  and  unofficial  form,  is 
operated  In  Berlin.    The  assessment  is  not  collected  by  the  city,  but  the  street- 


FROCBEDINGS  OF  FEDERAL  ELECTKIC  RAILWAYS  COMMISSION.    2127 


car  company  when  extending  a  line  to  outlying  territory  requires  the  owners 
of  the  property  benefited  to  guarantee  to  the  company  a  certain  return  upon 
the  cost  of  such  extension. 

To  throw  light  upon  the  above  question,  the  City  Club  has  been  making  some 
T>ainstaking  investigations,  extending  over  several  months,  of  the  rise  in  value 
of  land  along  the  present  subway.  The  method  of  arriving  at  these  values  was 
as  follows :  Assessment  values,  as  given  by  the  department  of  taxes  and  as- 
sessments, were  taken  for  the  year  of  1900  on  vacant  lots  on  a  basis  of  60 
per  cent  of  full  value  for  the  district  from  Seventy-ninth  to  the  Spuyten 
Duyvil ;  65  per  cent  between  Central  Park  and  Harlem  River,  and  GO  per  cent 
in  the  Bronx.  These  were  comparetl  with  the  assessment  values  of  1907  on  a 
90  per  cent  basis  for  all  these  districts,  and  in  each  case  the  full  value  was  ob- 
tained by  raising  the  assessment  figures  to  100  per  cent.  In  the  districts 
which  were  largely  built  up,  all  vacant  lots  were  lis-ted.  Where  there  were 
few  buildings,  as  in  the  extreme  northern  portion  of  Manhattan,  a  sufficient 
number  of  such  lots  were  taken  to  show  the  general  land  values,  and  from 
there  was  figured  the  total  value  for  this  direct.  To  ascertain  the  proportion 
of  the  increase  in  land  value  attributable  to  the  building  of  the  subway,  it 
was  necessary  to  deduct  from  the  total  rise  what  might  be  termed  a  normal 
rise,  or  the  Increase  that  would  have  taken  place  through  the  natural  growth 
of  the  city  without  the  added  stimulus  of  a  new  transit  line.  The  only  basis 
of  arriving  at  a  judgment  of  what  such  a  normal  rise  probably  was  is  to  as- 
certain the  rise  for  a  period  of  equal  length  under  normal  conditions.  Accord- 
ingly the  Increase  in  value  of  the  same  land  during  the  preceding  seven  years, 
from  1893  to  1900,  was  determined.  It  was  found  that  values  rose  during  this 
period  of  seven  years  on  an  average  of  about  50  per  cent  in  the  district  on 
the  west  side  below  One  hundred  and  thirty-fifth  Street,  and  on  an  average  of 
alKnit  43  per  cent  from  this  point  northward  to  the  Spuyten  Duyvil.  These 
percentages  then  may  be  taken  in  these  districts  as  the  best  basis  ascertainable 
for  a  judgment  as  to  the  normal  rise  for  a  period  of  this  length,  and  it  sub- 
tracts from  the  rise  which  took  place  along  the  subway  from  lOtX)  to  1907, 
and  should  indicate  tin'  effect  of  the  subway  on  land  values  durini;  the  latter 
period. 

By.  applying  this  method  it  was  discovered  that  the  land  from  Seventv-nlnth 
up  to  One  hundredth  Street  and  between  Central  Park  and  North  River  had  in- 
creased, on  an  average,  about  45  per  cent,  which  is  about  the  expected  normal 
rise.  In  the  district  along  the  Lenox  Avenue  line  south  of  the  Harlem  River 
the  average  increase  was  about  43  per  cent,  which  would  indicate  the  land  had 
not  Increased  in  value  due  to  the  building  of  the  subway.  The  explanation  of 
this  unexpected  condition  is  no  doubt  that  an  elevated  road  already  existed 
which  gave  fair  service  to  these  districts,  so  that  the  additional  facilities  had 
little  effect  on  land  value,  except  in  the  immediate  viclnty  of  the  subway  sta- 
tions. 

The  rise  In  land  value  along  the  Broadway  branch  from  One  hundred  and  tenth 
to  One  hundred  and  twentieth  Street  was  much  more  noticeable,  avera^ng 
about  70  per  cent,  but  the  locating  of  Columbia  University  at  this  point  affected 
values  to  an  extent  that  makes  it  quite  impossible  to  arrive  at  any  reliable 
conclusions  as  to  the  i)rop«>rtion  of  rise  that  should  be  attributed  to  the  snhw;iy 

The  situation  from  One  hundred  and  thirty-fifth  Street  northward,  however^ 
is  entirely  different.  Between  One  hundred  and  thirty-fifth  Street,' One  hun- 
dred and  fifty-fifth  Street,  Convent  Avenue,  and  North  River  the  land  In- 
creased In  value  between  1900  and  1907  about  $17,825,000.  Although  the  ele- 
vated road  paralleled  this  district,  yet  owing  to  the  topography  of  the  road  it 
was  of  little  service,  so  the  subway  added  very  materiallv  to  the  transit  facili- 
ties of  the  locality. 

The  district  between  the  Harlem  and  North  Rivers  from  One  hundred  and 
fifty-fifth  to  One  hundred  and  seventy-eighth  Streets  increased  in  value  about 
$22,450,000;  from  One  hundred  and  seventy -eighth  to  Dyckman  Street  the 
increase  was  al>out  S19.925.000:  from  Dyckman  Street  to  the  Spuyten  Duyvil 
the  increase  was  about  $13,100,000.  The  aggregate  rise  In  this  land  fronl 
One  hundred  and  thirty-fifth  Street  to  Spuyten  Duyvil  was  about  $69  300  000 
If  an  estimated  normal  rise  of  $20,100,000,  based  upon  the  rise  of  the  previous 
seven  years  be  subtnicted  from  this,  it  leaves  a  rise  of  about  $49^00,000,  ap- 
imrently  due  to  the  building  of  the  subway,  which  Is  104  per  cent  increase  on 
♦^he  value  of  1900. 


2128     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        j 

The  rise  in  land  values  of  the  Bronx  is  likewise  very  noticeable.  Taking: 
a  district  along  the  subway  extending  In  wldtli  about  a  half  mile  on  either 
side,  the  increase  in  land  values  was  somewhat  as  follows:  From  the  Harleni 
River  to  Willis  and  Third  Avenues,  the  rise  was  about  $9,200,000;  from  tliai 
point  to  Prospect  Avenue,  about  $22,100,000;  from  the  latter  polut  to  Bronx 
Park,  about  $18,500,000.  The  aggregate  rise  In  land  valuer  for  this  district 
from  the  Harlem  River  to  the  Bronx  Park  was  about  44,800,000.  Subtracting 
from  this  an  aggregate  normal  rise  of  $13,500,000,  it  leaves  an  increase  of 
$31,300,000,  due  to  the  building  of  the  subway. 

Since  this  property  has  been  so  enhanced  in  value  by  the  building  of  the 
subway  by  the  city,  could  it  not  have  contrlbute<l  largely  toward  the  expense 
of  constructing  the  line  and  yet  have  reaped  a  good  increase  in  addition  to 
such  assessment?  As  previously  stated,  the  aggregate  rise  in  land  value  above* 
One  hundred  and  thirty-fifth  Street  in  Manhattan  caused  by  the  subway  was 
$49,2(K),C)00.  The  cost  of  building  the  subway  from  this  point  to  Two  hundred 
and  thirtieth  Street  was  $7,375,000,  or  but  15  per  cent  of  the  actual  rise 
caused  by  the  new  line.  The  property  owners  could  have  paid  the  entire  cost 
of  this  portion  of  the  line  and  yet  have  had  a  net  profit  on  their  land  of  89 
per  cent,  or  an  aggregate  of  $41,825,000  for  the  district. 

In  the  Bronx  the  situation  was  in  most  respects  similar.  TRe  aggregate  In 
crease  In  land  value  (of  a  district  extending  about  a  half-mile  either  side 
of  the  subway),  due  to  the  building  of  the  subway,  and  In  excess  of  a  normal 
rise  of  $13,500,000,  was  about  $31,300,(M)0.  The  cost  of  the  line  from  One 
hundred  and  forty-third  Street  to  Bronx  Park  was  about  $5,700,000.  Had 
the  property  which  was  benefited  borne  this  expense  through  the  form  of  an 
assessment,  after  paying  such  assessment,  there  would  Iiave  remained  an 
aggregate  profit  of  $25,600,000  In  excess  of  the  normal  iis»^  in  value  since 
19(X).  This  would  be  a  profit  of  77  per  cent  on  that  property  caused  by  the 
increased  transit  facilities  of  the  subway. 

It  will  be  noted  that  the  aggregate  rise  in  land  value  In  Manhattan  from 
One  hundred  and  thirty-fifth  Street  to  the  Spuyten  Duyvll.  and  In  the  Bronx, 
due  to  the  building  of  the  subway,  was  $80,500,000.  Tlie  cost  of  the  entire 
subway  from  the  Battery  to  the  Spuyten  Duyvll  and  the  West  Farms  branch 
to  Bronx  Park  was  but  $43,000,000.  The  property  benefited,  in  the  districts 
above  noted,  could  have  paid  this  entire  cost,  and  yet  have  had  a  net  profit, 
due  solely  to  its  construction  and  oi>eration,  of  over  $37,500,000.  Had  It  paid 
onlv  for  the  portion  running  through  Its  own  territory,  there  would  have  re- 
mained a  profit  of  over  $67,425,000.  In  view  of  this  fact,  would  it  not  be 
reasonable  to  require  property  benefited  In  outlying  districts  to  pay  for  the 
cost  of  a  rapid-transit  line  built  to  serve  it? 

The  data  gatheretl  from  the  influence  on  land  values  of  existing  subway  may 
be  applied  to  provisional  rapid-transit  lines.  Its  application  to  the  Fourth 
Avenue  line  in  Brooklyn,  contracts  for  which  are  under  consideration,  would 
indicate  that  the  land  along  this  proposed  line  might  not  greatly  rise  in 
value,  owing  to  the  fact  th;it  it  parallels,  Mt  a  distance  of  one  block,  an 
existing  rapid-transit  line.  This  assumption  is  based  upon  the  fact  that  the 
building  of  the  subway  jittVcted  but  \i'ry  liiilc  the  value  of  land  west  and 
north  of  Central  Park,  owing  to  the  ijroximlty  of  an  elevated  road  which 
gave  reasouiihly  good  service.  The  r>osslbllities  of  an  assessment  plan  may  be 
best  brought  oiit  by  projecting  a  provisional  Hue  through  territory  largely  un- 
occupied. The  proposed  extension  of  a  rapid-transit  line  through  Jerome 
Avenue  in  the  Bronx,  if  built  as  a  reinforced-concrete  elevated  structure,  in 
order  to  make  it  hoiseless,  could  be  constructed  for  about  $2,550,000,  and. 
judging  by  the  effect  on  land  vahies  caused  by  the  existing  subway  In  tht» 
Bronx,  where  the  conditions  were  very  similar,  neither  territory  being  within 
easy  reach  of  a  rapid-transit  line,  such  a  new  line  would  increa.se  land  values 
ill  tlie  Jerome  Avenue  district  fully  $41,550,000.  If  the  property  holders  were 
to  pay  for  the  cost  of  this  new  line,  after  having  paid  such  assessment,  they 
would  still  have  a  profit  of  90  per  cent  on  their  land  as  valued  in  1907. 

If,  on  the  completion  of  the  Blackwell's  Island  Bridge,  an  elevated  road 
were  to  be  constructed  of  reinforced  concrete  to  connect  with  It  and  to  extend 
out  Jackson  Avenue  to  Flushing,  with  a  branch  leaving  this  main  line  at 
l^eBevoIse  Avenue  and  following  that  avenue  to  the  vicinity  of  Berrie's 
Ishnid,  such  a  line  would  be  about  9  miles  long  and  would  cost  about  $4,500,000. 
It  would  .serve  approximately  9  square  miles  of  largely  unoccupied  territory, 
the  aggregate  value  of  which  at  i)rcsent  Is  not  Ie.ss  than  $57,480,000.  On  the 
basis  of  the  rise  in  value  caused  by  the  subway  line  In  the  Bronx,  the  aggre- 


FROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.   2129 

;^ate  rise  of  this  land  In  Queens  would  he  $r>4.ti00,000.  In  other  words,  the 
landholders  in  this  district  could  afford  to  pay  for  such  new  rapid-transit 
line  and  yet  enjoy  an  aggregate  profit  of  $50,100,000,  or  a  profit  of  87  per  cent 
uix)n  the  present  value  of  their  land. 

This  plan  would  largely  solve  the  problem  that  confronts  the  public-service 
commission  in  attempting  to  decide  between  factions,  each  contending  for  a 
line  in  its  particular  section.  The  sincerity  of  speculators  and  real-estate 
adventurers  would  quickly  be  te.sted  by  the  requirement  that  their  i)etitions  be 
accompanied  by  an  assurance  of  a  willingness  to  be  assessed  for  the  cost  of 
the  desired  line. 

Since  territory  now  served  by  a  rapid-transit  line  does  not  greatly  rise  in 
value,  due  to  an  additional  rapid-transit  line,  it  would  probably  be  unjust  to 
assess  property  adjacent  to  a  new  line  In  such  districts.  That  is,  a  subway 
extending  from  the  lower  part  of  Manhattan  to  the  Harlem  River,  or  extending 
eastward  under  the  East  River  and  through  the  congested  portions  of  Brooklyn 
could  not  justly  be  assessed  wholly  upon  adjacent  property.  Such  portions  of 
new  subways,  if  built  by  the  city,  would  probably  have  to  be  paid  for  wholly, 
or  in  part  at  least,  by  general  taxation.  It  is  very  evident  that  property  in 
the  vicinity  of  a  rapid-transit  line  does  not  benefit  equally;  unsettled  outlying 
territories  would  benefit  most;  territory  in  the  vicinity  of  express  stations 
would  rise  in  value  more  than  that  adjacent  to  local  stations.  There  are  many 
conditioning  factors  to  be  considered  in  any  attempt  to  lay  an  assessment  upon 
property  for  the  building  of  rapid-transit  lines.  These  factors,  however,  are 
approximately  ascertainable,  and  any  judicious  commission  would  be  in  a 
position  to  secure  the  facts  as  connected  with  the  present  subway,  and  through 
them  would  be  able  to  lay  an  equitable  assessment  upon  land  accf>rding  to  the 
prospective  benefit  that  it  would  secure.  The  legislative  action  conferring  on 
Ihe  city  the  power  needed  to  carry  out  this  plan  and  providing  for  a  better 
system  of  assessment  and  land  condemnation  could,  no  doubt,  easily  be  passed. 

The  Chairman.  Who  is  your  next  witness? 

Mr.  Ogburn.  The  next  witness  is  Mr.  C.  Oscar  Beaslej:  who,  ac- 
cording to  this  telegram  we  haA^e  received  from  the  chairman  of 
the  Transportation  Committee  of  the  United  Business  Men's  Asso- 
ciation of  Philadelphia,  comes  to  represent  them. 

STATEMENT  OF  ME.  C.  OSCAR  BEASLEY. 

The  Chairman.  Mr.  Beasley,  the  commission  trusts  you  will  con- 
fine your  testimony  to  20  minutes.  We  will  adjourn  at  5  o'clock. 
The  reason  for  saying  that  is  that  we  have  been  in  session  con- 
stantly from  morning  until  half-past  10  each  night  during  the 
entire  week. 

Mr.  Beasley.  I  appreciate  that,  and  I  regret  very  much  it  is  the 
case,  especially  with  regard  to  our  city.  We  have  observed  that 
nearly  all  the  officials  and  the  financiers  and  others  affiliated  with  the 
traction  intei^ests  have  testified  at  great  length,  but  there  has  been 
omitted  the  real  sufferings  and  problems  which  we  have  in  Phila- 
delphia. 

The  Chairman.  Right  there  let  me  say  to  you,  so  that  it  will  re- 
move the  impression  in  your  mind  or  anybody  else's,  that  this  com- 
mission has  tried  in  every  way  to  get  the  public  side  of  this  question 
here.  We  have  had  before  us  the  most  eminent  men  that  this 
country  can  produce  on  the  public  as  well  as  the  private  side  of  this 
question. 

Mr.  Beasley.  Well,  I  represent  the  United  Business  Men's  league — 
T  am  a  member  of  it — not  as  a  lawyer  at  all.  but  as  a  citizen  repre- 
senting the  United  Business  Men's  League  of  Philadelphia,  which  ' 


2130     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION 

composed  of  75  neighborhood  and  improvement  associations  and  busi- 
ness associations  containing  21,000  members  that  are  organized  all 
over  the  city  of  Philadelphia,  for  the  sole  purpose  of  disinterestedly, 
conscientiously,  and  patriotically  studying  these  municipal  ques- 
tions, not  only  with  a  view  of  their  sohition  for  us,  but  possibly 
assisting  other  communities  to  do  the  same.  And  it  is  with  that 
voice  that  I  appear  before  you  to-day.  We  are  not  connected  in 
any  way,  directly  or  indirectly,  with  any  traction  interest,  and  we  are 
acting,  and  have  been  acting'  for  the  last  three  years,  in  this  matter 
solely  from  the  standpoint  of  citizens,  and  we  are  engaged  now  in  a 
concrete  fight  before  the  public-service  commission  and  before  the 
courts  to  try  to  solve  many  of  these  very  problems  which  have  been 
testified  to  to-day  so  ably  and  so  interestingly  by  these  experts  who 
have  been  here  and  others  who  are  familiar  with  them. 

In  the  first  place.  I  would  like  to  say  that  we  are  faced  with  a 
condition  in  Philadelphia  as  regards  our  local  transportation  which 
might  be  described  as  a  continuous  performance  of  incomplete 
efficiency.  The  present  system  is  carrying  700,000,000  passengers 
per  annum  in  a  $400,000,000  plant.  They  have  not  bought  a  single 
new  car  since  1913;  and  while  the  passengers  have  increased  66  per 
cent,  with  the  exception  of  a  few  cars  furnished  by  the  Government 
for  war  purposes,  there  have  been  no  additions  to  the  system. 
While  the  passengers  have  increased  66  per  cent,  the  service  has 

decreased  3  per  cent. 

In  the  last  two  years  it  has  greatly  improved  b\  reason  of  the  fact 
that  the  officials  of  the  Philadelphia  Eapid  Transit  Co.,  the  operating 
company,  have  changed  their  policy.  Instead  of  antagonizing  the 
public,  they  have  now  pursued  a  policy  of  cooperating  with  the 
public,  if  any  complaint  is  made  they  send  their  head  men  down 
to  the  locality  and  talk  with  the  people.'and  they  change  their  routes, 
and  so  on,  and  have  greatly  helped  the  service.  But  they  have  not 
built  a  single  mile  of  new  railroad,  although  the  population  has  in- 
creased at  the  rate  of  75.000  per  year  during  the  last  eight  years. 
There  has  not  been  a  mile  of  iiew  track  built.  '  The  city  has  been 
prevented  from  building  its  high-speed  lines  by  reason  largely  of 
the  determination  of  the  large  traction  interests  to  see  to  it  tliat  we 
have  no  improvement  in  Philadelphia  unless  we  consent  to  the  per- 
petuation without  further  resistance  of  the  frightful  rentals  on  the 
watered  stock  and  other  securities  of  the  underlying  companies.  That 
part  of  their  stock  which  is  paid  in  is  drawing  an  excessive  and 
outrageous  percentage,  running  from  8  per  cent,  30  per  cent,  41 
per  cent  to  71  per  cent  per  annum,  under  a  lease  to  run  for  999 

years. 

Commissioner  Wehle.  What  do  those  percentages  refer  to? 

Mr.  Beasley.  The  amount  paid  in  on  the  stock. 

Commissioner  W^ehle.  You  mean  the  dividend  on  the  stock? 

Mr.  Beasley.  The  dividends  are  net.  The  operating  company 
pays  all  taxes  in  additicm  to  that,  which  may  be  levied  on  that  under- 
lying stock. 

Commiasioner  Wehle.  Those  are  dividends  you  say  which  are 
made  out  of  the  rentals? 

Mr.  Beasley.  Yes,  sir.  The  company  sends  a  check  to  the  under- 
lying company  and  they  distribute  that  check  as  dividends.    They 


PBOCBEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.    2131 

hold  their  annual  meetings,  elect  their  directors,  keep  their  corpora- 
tion going,  buy  no  new  car's,  are  at  no  expense  of  maintenance  or 
upkeep,  and  yet  they  draw^  a  major  portion  of  the  proceeds. 

We  have  the  reports  here  which  I  intended  to  show  to  you,  but  I 
will  only  refer  to  them  briefly  and  I  would  ask  the  privilege  of  filing 
a  little  brief  going  into  the  matter  a  little  moi*e  extensively,  if  you 
will  permit  me. 

The  Chairman.  Yes. 

Mr.  Beasley.  Because  there  are  things  here  which  I  feel  you 
should  have  before  you. 

The  Chairman.  You  may  do  so. 

Commissioner  Wehle.  Will  those  be  authenticated  figures? 

Mr.  Beasley.  Yes;  I  have  them  all  here  now.  the  reports  of  our 
transit  commissioner,  the  reports  of  the  company  itself,  the  reports 
of  our  public-service  commission,  the  resports  of  our  supreme  court, 
and  the  reports  of  our  superior  court,  with  the  view  of  sliowing  you 
clearly  and  distinctly  the  situation  we  are  in  and  how  we  are  trying 
to  solve  the  problem,  but  now  I  can  only  in  the  most  cursory  way 
refer  to  them. 

The  practical  difficulties  are  that  we  are  fixed  with  those  rentals 
now  and  the  company  can  do  nothing;  the}"  can  not  buy  a  new  car, 
they  can  not  make  any  extensions,  they  can  do  nothing  for  a  popula- 
tion of  2,000,000  people.  They  are  now  receiving  $35,000,000  a 
year  gross  receipts.  In  1910  their  gross  revenues  were  $*20,000.000. 
They  have  nearly  doubled  since  1910.  Last  year  the  operating  com- 
pany made  $12,000,000  net  profit;  after  paying  all  the  war  taxes  and 
all  the  increased  wages  and  the  increased  cost  of  betterments  and 
repairs,  they  made  $12,000,000  net  on  a  5-cent  fare,  a  feat  that  is  not 
equaled  in  this  country  to-day.  and  out  of  that  $10,000,000  of  net 
profit  they  were  compelled  to  pay  $10,000,000  off  the  reel  to  the  under- 
lying companies  as  rentals,  simply  for  the  franchise.  Those  com- 
panies were  given  that  franchise  then,  a  monopoly  upon  our  high- 
ways, for  nothing — not  a  cent  was  charged  them  for  it,  with  the  ex- 
ception of  a  paving  charge  which  was  afterward.s  repealed  prac- 
tically ;  and  they  are  receiving  ten-twelfths  of  the  net  revenue.  That 
ten- twelfths  prevents  the  operating  company  from  performing  an 
efficient  service,  prevents  us  from  getting  any  extensions,  is  turning 
our  city  into  an  apartment-house  city,  a  cliff-dwelling  city,  is  build- 
ing up  slums  in  our  town,  is  punishing  our  laboring  population  with 
the  overcrowding  of  cars  to  a  degree  which  is  painful  to  contem- 
plate— all  in  order  that  these  underlying  companies  may  absorb  ten- 
twelfths  of  the  intelligence,  of  the  ability  and  courage  and  money  of 
the  operating  company. 

I  hold  no  brief  for  the  company.  I  have  fought  them  for  20 
years,  and  I  rejoice  to  say  that  many  of  the  criticisms  which  my 
clients  and  myself  have  made  have  been  recognized  as  sound.  The 
operating  company  has  $30,000,000  paid  in,  upon  which  it  gets  5  per 
cent  dividends  annually.  Getting  only  5  per  cent,  it  has  assumed 
all  the  bonds  of  the  comi)any,  to  whom  they  pay  71  per  cent  divi- 
dends— assumed  all  their  bonds  and  assumed  all  their  taxes.  Those 
stockholders  are  the  only  stockholders,  so  far  as  I  know,  in  the  United 
States  who  escaped  the  Federal  income  tax.  That  Federal  income 
tax  that  was  levied  upon  them  as  individual  stockholders  was  paid 


21o2    PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

by  the  operating  company,  so  that  they  are  drawing  those  enormous 
dividends  fi-ee  of  any  tax  whatever. 

Commissioner  Wehle.  These  leases— are  they  long-term  leases? 

Mr.  Beaslet.  Nine  hundred  and  ninety-nine  years. 

Commissioner  Wehlk.  Have  you  anjr  way,  as  a  lawyer,  that  you 
could  suggest  for  remedying  the  situation  ? 

Mr.  Beasley.  Yes;  that  is  what  I  had  intended  to  present  if  I 
had  had  the  opportunity  to  present  it  to  you. 

Commissioner  Wehle.  Could  you  outline  that? 

Mr.  Beasley.  Yes;  I  will  try. 

The  most  eminent  attorneys  of  our  city  were  employed  some  25 
or  30  years  ago  for  the  purpose  of  drawing  these  leases,  for  the  pur- 
pose of  making  them  impregnable  to  any  future  law. 

A  year  ago,  when  I  appeared  before  the  Ways  and  Means  Com- 
mittee here  m  Washington  asking  them  to  tax  these  underlying  com- 
panies, one  of  these  distinguished  lawyers  sent  down  a  brief  that 
those  leases  were  in  the  nature  of  ground  rents,  a  positive,  absolute, 
personal,  vested  right  in  the  streets  of  Philadelphia,  and  that  has 
been  the  theory  that  they  have  tai  ^zht  our  supreme  court  and  that 
is  the  theory  upon  which  those  leases  were  drawn — that  they  were 
contracts;  that  they  were  protected  by  the  contract  clause  of  the  Fed- 
eral Constitution ;  that  they  were  prote(  ted  from  amendment  by  the 
contract  clause  of  our  State  constitution. 

On  that  theory  millions  were  invested  in  them  by  estate.s,  widow  s, 
and  orphans,  as  they  are  called,  altliough  many  of  them  have  grad- 
ually sold  them  out  now.  Tlierc  is  no  niarket  for  them  now  on 
account  of  the  legal  attacks  that  have  been  made  upon  them  and  the 
decision  of  our  courts  since;  b\it  T  am  speaking  about  the  inception. 

The  first  ray  of  light  that  we  had  was  a  decision  of  the  United 
States  Suprenie  Con  it  in  the  Northern  Utilities  case,  and  that  said 
this: 

We  can  not  recognize  a  vested  right  to  do  a  manifest  wrong. 

That  was  the  first  break  in  the  contract  clause  of  our  Federal  Con- 
stitution— that  no  forms  lould  mask  fraud;  that  no  manner  of  con- 
tract, inter  se^  could  deprive  the  Commonwealth  of  its  police  power 
to  protect  the  public  from  wrong. 

The  next  move  that  was  made  was  a  decision  by  our  supreme  court 
about  12  years  ago  in  the  Ridge  Avenue  case,  that  no  one  legislature 
could  authorize  a  contract  that  could  bind  a  future  legislature. 
These  leases  were  made  under  authorization  of  acts  of  the  assembly, 
and  they  claimed,  therefore,  that  they  had  the  sanctity  of  the  Com- 
monwealth and  the  approval  of  the  Commcmwealth,  and  that  the 
Commonwealth  had  caused  them  to  nuike  the  leases  and  therefore 
must  stand  by  them. 

But  the  supreme  court  swept  that  away  by  saying  one  legislature 
could  not  bind  another  legislature,  otherwise  we  would  have  a  feudal 
system  such  as  William  the  Conqueror  imposed. 

That  decision  having  been  made,  that  one  legislature  could  not 
bind  another  legislature,  knocked  out  the  peg  (m  which  the  vested 
rights  hung — the  act  of  the  assembly. 

The  next  move  toward  getting  rid  of  the  contracts  was  the  enuncia- 
tion by  our  supreme  court  of  the  doctrine  that  the  highways  belonged 
to  the  Commonwealth  and  that  it  is  not  possible  by  private  con- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2133 

tract  to  oust  the  Commonwealth,  either  in  its  ownership  or  its  juris- 
diction over  the  highways,  and  that  all  these  so-called  charters, 
instead  of  being  vested  rights,  were  simply  licenses  from  the  Com- 
monwealth to  use  the  highways  for  public  purposes. 

Commissioner  Weiile.  What  case  was  that  in?  What  is  the 
citation? 

Mr.  Beasley.  I  can  give  you  that.  I  have  a  memorandum  of  it 
here  somewhere. 

The  Chairman.  You  have  that  in  your  brief?  You  will  quote 
these  citations  in  vour  brief,  will  vou  not? 

Mr.  Beasley.  Yes.  I  might  just  state  one  of  them  here,  if  I  can 
find  it  readily. 

Commissioner  AVeiile.  Never  mind  about  that  now.  Do  not  let 
us  take  up  any  of  your  very  limited  time  with  that. 

Mr.  Beasley.  We  have  got  decisions  from  our  supreme  court  that 
nobody  can  get  a  vested  right  in  the  highways  by  contract  between 
themselves  or  with  the  municipality. 

That  decision  has  been  handed  down  about  a  month  ago,  that  con- 
tracts can  not  bind  the  Commonwealth. 

AVe  have  had  on  file  for  a  year  a  suit  against  these  underlying  com- 
panies— I  have  it  here,  and  I  will  file  it  with  the  brief;  a  complaint 
we  made  against  the  underlying  comj^anies,  asking  the  public-service 
commission  to  revise  these  leases. 

The  only  direct  decision  upon  the  subject  was  the  decision  of  the 
Supreme  Court  of  Oklahoma  about  six  months  ago. 

The  gas  company  in  Guthrie,  Okla.,  leased  some  natural  gas  from 
a  company  outside  of  the  city,  to  distribute  the  natural  gas  through 
the  gas  company's  mains.  The  distributing  company  found  out  their 
leases  were  too  high,  that  they  were  losing  money,  and  they  peti- 
tioned the  public-service  conmiission  to  reduce  the  amount  that 
they  were  paying  under  this  lease.  The  public-service  commis- 
sion did  it.  It  was  appealed  to  the  Supreme  Court  of  Oklahoma, 
and  they  said  that  the  contract  was  not  binding,  that  that  lease  was 
not  binding  as  against  the  public-service  commission;  that  it  was  a 
public  matter,  for  the  benefit  of  the  Commonwealth,  and  that  they 
could  vary  the  lease.  I  have  a  number  of  other  decisions  from  the 
Supreme  Coui-t  of  the  I^'nited  States  along  the  same  lines. 

Now,  practically,  Ave  have  tried  to  carry  out  municipal  ownership 
in  Philadelphia  in  this  way:  AVe  passed  an  amendment  to  our  con- 
stitution in  1913,  giving  cities  the  right  to  build  Avith  their  own 
money,  and  construct  high-speed  lines  and  lease  them  if  they  saw^  fit 
or  run  them  if  they  saw  fit. 

That  was  passed,  and  under  the  constitutional  amendment  we  ap- 
propriated by  vote  of  the  people  $07,000,000  in  1014,  but  the  war 
coming  on,  this  lies  dormant,  Avith  the  exception  of  $7,000,000  with 
which  they  haA e  nearly  constructed  the  Frankford  Elevated  in  Phila- 
delphia, about  7  miles  of  elevated  structure. 

The  city  made  a  lease  of  those  high-speed  lines  to  the  P.  R.  T. 
Co.,  the  Philadelphia  Rapid  Transit  Co.,  but  Ave  opposed  that,  be- 
cause it  provided  that  these  Avatered  stock  rentals,  at  $10,000,000  a 
year,  should  be  perpetuated  forever,  to  be  paid  for  out  of  public 
taxation.  We  opposed  that,  and  the  public-serA'ice  commission  lis- 
tened to  our  appeal,  and  notw  ithstanding  the  fact  that  the  mayor  and 

1C0643*'— 20— VOL  3 6 


2134     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

the  city  council  had  made  the  lease  and  favored  it,  the  United  Business 
Men's  Association  succeeded  in  having  it  rejected.  So  now  we  liavc 
a  clean  bill  of  health,  so  far  as  that  is  concerned. 

However,  what  we  want  to  do  is  to  get  rid  of  this  watered  stock, 
and  bring  into  play  all  the  powers  of  the  Commonwealth,  of  the 
attorney  general  and  of  the  public-service  commission  to  reduce  tho.s^' 
rentals.  If  they  were  reduced  to  $5,000,000  a  year,  ^ey  would  still 
get  a  very  large  percentage  on  the  money  invested;  and  by  making 
a  lease  to  the  city  and  making  a  unified  system  of  the  cityVlines  and 
the  present  lines  of  the  operating  company,  the  city  would  have  a 
unified  system  and  these  securities  would  become  practically  a  city 
bond,  because  they  would  be  backed  up  by  i?100,000,000  of  the  city*s 
fresh  capital,  linked  with  the  new  high-speed  lines. 

The  Chairman.  Are  we  to  understand,  then,  that  your  solution 
involves  the  regulating  of  the  rental  by  the  public-service  com- 
mission ? 

Mr.  Beasley.  Absolutely. 

The  CuAiR^iAX.  And  the  unification  of  lines? 

Mr.  Beasley.  Yes.  With  municipal  ownershii)  under  a  lease  ap- 
proved by  the  public-service  commission,  which  can  be  changed  at 
any  time. 

I  want  to  say  that  I  ha\e  listenet^l  with  very  great  interest  to  much 
of  the  testimony  here  to-ilay,  and  I  hoix*  that 'this  great  national  com- 
mission, which  is  the  first  I)road,  overseeing  commission  that  we  have 
had  on  this  subject,  will  speak  with  particularity  and  courage  on 
these  problems,  and  not  leave  them  balancing  and  sec-sawing  as  the}- 
are  now. 

The  people  of  the  United  States  will  no  longer  tolerate  the  ex- 
ploitation of  themselves  by  cai)italists  t>f  preceding  genei-ations  who 
made  these  contracts  without  the  supervision  of  any  public-service 
commission  or  of  any  public  uithority. 

The  Chair;man.  Your  time  ha^  now  expired,  Mr.  Beasley.  We 
thank  you  for  your  statement. 

Mr.  Beasley.  May  I  file  these  paper  books  with  my  brief,  contain- 
in^r  a  complete  history  of  these  cases  with  all  of  the  authorities? 

The  Chair3ian.  Yes.    We  shall  be  glad  to  have  you  do  that. 

The  commission  stands  adjourned. 

(Whereupon,  at  5  o'clock  p.  m.  the  commission  adjourned.) 


i 


STnOf  ARY  OF  WILCOX  REPORT  TO  FEDERAI  ELECTRIC  RAIL- 
WAYS COMMISSION. 

I.  The  street  railway  is  an  essential  public  industry,  as  shown 
(a)  by  Its  magnitude;  (b)  by  its  relation  to  the  public  streets;  (c)  by 
the  fact  of  public  regulation;  and  (d)  by  the  present  appeal  for 
public  help. 

II.  The  witnesses  for  the  electric  railways,  those  for  the  State 
commissions  and  the  municipalities  and  those  for  the  general  public 
agree  in  the  main  that  the  street  railway  as  an  industry  is  in  a 
desperate  financial  condition.  They  also  agree  that  a  fundamental 
requisite  for  relief  is  the  restoration  of  its  credit,  so  that  the  new 
capital  for  continued  expansion  of  transportation  facilities  will  be 
induced  to  flow  into  the  business. 

III.  Labor  is  universally  recognized  as  a  vital  factor  in  the  strc^t- 
i-ailway  business,  but  the  tendency  is  to  treat  the  labor  problem 
primarily  as  a  problem  of  operating  expense  and  efficiency,  and  to 
give  little  or  no  consideration  to  the  human  elements  in*^it.  The 
employing  companies  are  interested  in  not  paving  more  for  labor 
than  they  have  to  pay,  just  the  same  as  thev  are  Interested  in  keeping*- 
other  expenses  down.  With  them  it  is  a  question  of  financial  results' 
and  they  sometimes  fail  to  grasp  the  full  value  of  loyalty  and  intelli- 
gent cooperation  on  the  part  of  the  men.  From  the  public  point  of 
view  quality  of  service  and  continuity  of  operation  are  of  primary 
importance.  All  these  things  depend  in  a  great  measure  upon  the 
will  of  the  workers,  and  require  conditions  of  emplo^^ment  that  Avill 
attract  competent  and  reliable  men  and  that  will  prevent  industrial 
dissatisfaction  and  disputes,  which  lead  to  deterioration  or  inter- 
ruption of  service. 

IV.  A   fundamental   conception   of   the   street-railway   problem 
therefore,  will  include  as  coordinate  requirements  the  need  for  credit 
with  which  to  get  capital,  and  the  need  for  an  effective  spirit  of 
cooperation  with  which  to  enlist  the  continued  and  efficient  suppoi-t 
of  labor.  ^  ^ 

V.  Under  noi-mal  conditions  and  conservative  management  credit 
would  be  an  easy  matter  for  the  street  railways  because  of  (a)  their 
steady,  assured,  and  rapidly  increasing  revenue;  (b)  the  conspicuous 
location  of  their  property  and  activities;  (c)  their  small  need  for 
working  capital;  (d)  the  fact  that  a  depreciation  reserve  would  1)- 
a\  ailable  to  provide  a  portion  of  the  funds  needed  for  additions  and 
improvements;  and  (e)  the  fact  that  refunding  operations  could  be 
carried  through  as  a  matter  of  course,  although  the  rate  of  interest 
])aid  might  be  either  greater  or  less,  as  the  condition  of  the  market 
demanded. 

VI.  The  testimony  put  forward  on  behalf  of  the  electric  railways 
with  respect  to  the  amount  of  new  capital  required  each  year  in  the 
industry  was  inexact  and  inconclusive.  From  the  point  of  view  of 
exaggeration  the  inexactness  was  partly  due  to  a  confusion  of  the 
needs  of  the  electric  railway  with  the  needs  of  all  utilities  taken 
together,  partly  due  to  the  use  of  capitalization  figui-es,  and  partly 

2135 


f . 


2136      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

due  to  the  adoption  of  a  yearly  average  for  the  entire  period  from 
1902  to  1917.  Moreover,  no  consideration  was  given  to  the  reduc- 
tion of  the  demands  for  new  capital  on  account  of  the  ahandonment 
of  lines  and  tlie  slowing  down  of  traffic  development  under  increased 
fares.  On  the  other  hand,  from  the  point  of  view  of  conservatism, 
little  or  no  consideration  seems  to  have  been  given  to  the  fact  that 
under  present  price  conditions  a  much  greater  amount  of  capital  is 
required  to  perform  a  given  amount  of  work,  nor  to  the  fact  that  in 
an  era  of  high  prices  new  capital  is  required  in  the  process  of  making 
replacements,  e\en  where  no  extension  or  enlargement  of  facilities 
takes  place. 

VII.  As  a  matter  of  fact,  the  amount  of  new  capital  required  in 
the  electric-railway  business  at  the  present  time  is  not  even  approxi- 
mately shown  by  the  evidence.  Nevertheless,  it  is  clear  from  the 
testimony  that  the  restoration  of  credit  is  essential  to  the  full  per- 
formance of  the  function  of  the  street  railway,  (1)  because  of  the 
increasing  demands  of  i)oj)ulation  and  traffic,  requiring  extensions 
and  additions  from  time  to  time;  (2)  because  of  the  continuing 
adjustment  of  the  capital  account  to  the  higher  price  level,  and 
(3)  because  of  the  run-down  condition  of  many  properties  which 
demand  immediate  rehabilitation,  for  which  no  reserves  have  been 
accumulated.  Even  though  rehabilitation  be  not  considered  a  proper 
capital  charge,  it  can  be  effected  under  existing  conditions  only 
through  the  use  of  new  capital  to  take  the  place  of  invested  capital 
that  has  been  destroyed  or  lost. 

VIII.  Upon  the  assumption  that  street-railway  credit  is  gone,  our 
search  for  a  remedy  must  begin  with  an  analysis  of  the  fundamental 
and  immediate  causes  for  its  disappearance.  Why,  in  any  industry 
so  favorably  situated  from  the  pomt  of  view  of"  credit,  has  credit 
been  lost?  The  causes  for  its  disappearance  must  be  sought  in  the 
financial  policies  which  have  been  folloAved  by  the  industry  itself,  or 
in  the  attitude  of  the  public  toward  it  in  the  process  of  regulation, 
or  in  changed  economic  conditions. 

IX.  From  the  point  of  view  of  the  financial  policies  of  the  industry 
as  they  affect  credit,  the  first  thing  that  demands  attention  is  the 
almost  universal  practice  of  initial  overcapitalization,  particularly  in 
the  early  years  of  electrification.  The  bad  ultimate  effects  of  over- 
capitalization have  been  accentuated  in  many  cases  by  the  process  of 
converting  stock  into  guaranteed  securities  either  through  the  issu- 
ance of  bonds  or  through  the  assumption  of  rental  charges  in  con- 
nection with  the  consolidation  of  properties,  so  that  as  time  has  gone 
on  a  greater  proportion  of  the  return  upon  the  investment  has  taken 
the  form  of  fixed  charges.  This  policy  has  tended  to  reduce  the 
"  margin  of  safety  "  upon  which  private  companies  have  to  depend 
for  new  capital  and  to  destroy  the  financial  flexibility  necessary  for 
the  preservation  of  solvency  in  a  period  of  distress. 

X.  Not  only  by  initial  overcapitalization  and  the  assumption  of 
excessive  fixed  charges  have  the  electric-railway  companies  pursued 
an  unsound  financial  policy,  but  also  by  the  fact  that  seldom,  except 
through  duress  in  the  case  of  receiverships  and  reorganizations,  have 
they  written  off  any  of  the  excess  capital  originally  issued.  Their 
policy,  with  few  exceptions  has  been  to  swell  the  capital  account  and 
to  perpetuate  in  it  any  items  representing  intangible  values  or  "  capi- 
talized hopes"  that  have  once  gotten  into  it. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2137 

XI.  The  companies  have  pursued  an  unsound  financial  policy  in 
still  another  respect.  Not  only  have  they  been  overcapitalized  at 
the  beginning  and  have  subsequently  refused  or  neglected  to  write 
off  their  excess  capitalization,  but  they  have  also  generally  neglected 
to  build  up  a  depreciation  reserve  equal  to  the  difference  between 
the  legitimate  investment  in  the  plant  when  new  and  its  condition 
when  it  has  worn  down  to  the  normally  depreciated  condition  of  an 
old  but  efficient  operating  property.  Thus  by  the  process  of  wear 
and  tear  even  the  legitimate  initial  capitalization  has  become  inflated 
to  the  extent  of  the  normal  accrued  depreciation  not  represented  by 
de])reciation  reserves. 

XII.  Still  further,  the  companies  in  many  cases  have  pursued  a 
policy  of  artificially  maintaining  credit  by  paying  dividends  when 
ordinary  maintenance  and  essential  replacements  Avere  neglected  or 
deferred.  Avith  the  result  that  the  physical  property,  representing  the 
capitalizjtlion,  has  been  further  impaired  and  is  now  in  a  condition 
where  a  complete  general  rehabilitation  is  necessary  if  adequate 
service  is  to  be  given. 

XIII.  In  many  localities  the  electric  railways  have  been  overbuilt 
from  the  point  of  view  of  an  industry  expected  to  be  financially  self- 
sustaining.     This   overbuilding  has   resulted   from   several   causes: 

(1)  The  construction  of  competing  lines  in  the  same  community; 

(2)  the  i)remature  extension  of  lines  for  the  special  benefit  of  tracts 
of  real  estate  in  which  the  companies  or  the  men  who  controlled 
< heir  policies  were  directly  interested;  (3)  the  construction  of  new 
lines  in  thin  territory  as  a  result  of  the  ambition  of  unscrupulous  or 
overoptimistic  promoters  to  get  rich  quickly  through  the  exploita- 
tion of  the  gullibility  of  the  investing  public ;  (4)  the  use  of  progres- 
sively heavier  cars  and  heavier  track  construction  in  the  equipment, 
extension,  and  rebuilding  of  lines.  While  these  causes  of  overbuild- 
ing have  their  origin  for  the  most  part  in  policies  for  which  the  com- 
panies themselves  have  been  responsible,  the  local  authorities  have 
often  "  made  the  motion  "  or  "  seconded  '^  it  as  a  result  of  their  con- 
ception of  public  needs  or  personal  advantage. 

XIV.  As  a  result  of  overcapitalization  and  its  attendant  evils, 
based  upon  the  idea  that  the  street  railway  was  a  fruitful  field  for 
speculative  investment,  the  street-railway  industry  fell  into  the  con- 
trol largely  of  investment  bankers  whose  profits  were  dependent  upon 
the  volume  of  securities  turned  out  and  a  frequent  turnover  in  the 
companies'  financial  arrangements.  These  policies  led  to  absentee 
ownership  of  street-railway  securities  and  the  formation  of  holding 
companies  for  the  inflation  and  exploitation  of  street-railway  credit. 
The  sound  principle  of  simple  corporate  organization,  direct  financial 
responsibility,  and  community  ownership  of  community  enterprises 
was  entirely  lost  sight  of,  so  that  the  underlying  support  of  local 
pride  and  local  interest  in  the  successful  construction  and  operation 
of  transportation  facilities  responsive  to  local  needs  was  lost.  Thus 
the  companies  themselves  abandoned  and  alienated  the  most  sub- 
stantial source  of  ultimate  credit  for  a  public  utility. 

XV.  From  the  point  of  view  of  public  relationsand  the  responsi- 
bility of  the  public  through  its  governmental  agencies  for  conditions 
that  have  helped  to  destroy  the  credit  of  the  street  railways,  the  first 
thing  to  be  mentioned  is  the  fixed  5-cent  fare  which  in  the  earlier 
days  was  generally  made  a  condition  of  street-railway  franchises. 


I 


iv ' 


2138      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMxMISSION. 

The  fixed  fare,  which  had  no  particidar  relation  to  the  necessary 
cost  of  service,  and  certainly  provided  no  flexibility  for  the  adjust- 
ment of  the  fares  to  the  chan<res  in  the  cost  of  service,  either  np  or 
down,  was  the  corner  stone  of  speculation  in  the  industry  at  a  tiine 
when  a  guaranteed  5-cent  fare  over  a  long  period  or  in  perpetuity 
was  supposed  to  represent  an  opportunity  for  enormous  profit.     In 
ui'ban  areas  the  fixed  fare  was  a  tem]>tation  to  speculation  and  ovcr- 
•apitalization.     It  aided  and  abetted  the  street-railway  companies 
n  the  adoption  and  pursuit  of  the  unsound  financial  policies  above 
lescribed. 

XVI.  As  a  result  of  the  arl)itrarv  and  corrupt  methods  often 
pursued  by  street-railway  promoters  in  securing  franchises  with  the 
r)-cent  fare  provision  in  them,  and  on  account  of  the  enormous  over- 
caj)italization  which  street-railway  promoters  indulged  in,  the 
public  was  led  to  believe  that  the  street  railways,  out  of  their  use  of 
public  property  as  rights  of  way,  Avere  exploiting  the  pul)lic  and 
reaping  unreasonable  rewards.  The  public,  claiming  the  rights  of 
partnership,  invoked  the  taxing  power  as  a  means  of  diverting  to  the 
public  treasury  a  portion  of  the  earnings  of  the  business,  and  in 
communities  where  new  franchises  or  renewals  of  old  franchises  were 
sought,  the  granting  of  these  '"  favors "  was  made  the  occasion  for 
loading  upon  the  comi>anies  financial  burdens  and  obligations  which 
it  was  thought  would  in  some  measure  be  compensatory  for  the 
value  of  the  privileges  granted. 

XVII.  But  the  public  was  not  satisfied  to  use  the  taxing  power 
alone.  It  demanded  adequate  service  as  well  as  a  share  in  the  profits. 
As  the  franchises  granted  were  in  most  cases  irrevocable,  and  as  the 
street  railways  could  not  \ye  subjected  to  effective  comi)etition,  the 
public  laid  hold  of  the  jwlice  power  as  a  weapon  for  enforcing  the 
obligations  of  monopoly  and  compelling  the  companies  to  extend 
and  improve  their  service.  Thus  the  companies  found  that,  though 
limited  to  the  r>-cent  fare,  they  were  not  free  to  scamp  the  service  at 
will  in  order  to  swell  their  profits,  but  could  be  compelled  to  enlarge 
and  improve  it  indefinitely,  at  least  so  long  as  they  were  financially 
able  to  do  so,  and  largely  without  regard  to  the  amount  of  profits 
left  for  the  investors. 

XVIII.  The  public  also,  as  a  result  of  its  observation  of  the  evils 
of  overcapitalization  and  speculation  in  public  utilities,  including  the 
electric  railways,  created  the  public-service  commissions  and  con- 
ferred upon  them  authority  to  regulate  new  issues  of  securities  and 
prohibited  the  issuance  of  securities  not  representing  new  cash  put 
into  the  business  for  capital  purposes.  At  the  same  time  the  com- 
missions were  not  authorized  to  reorganize  the  companies  and  cut 
down  the  capitalization  already  outstanding.  Thus  the  public  re- 
quired a  new  and  more  conservative  method  of  financing  with  respect 
to  capital  additions,  without  a  reconstruction  of  the  existing  financial 
base.  The  companies,  therefore,  no  longer  had  the  advantages,  pre- 
carious and  unsound  though  they  were,  of  the  old  methods  of  finan- 
cing, while  at  the  same  time  they  were  unable  to  issue  new  securities 
uix)n  a  basis  indejx^ndent  of  the  inflated  securities  already  out.  The 
'*  margin  of  safety,*'  within  the  limits  of  a  reasonable  return  upon  the 
investment,  was  in  many  cases  noticeably  decreased  as  a  result  of 
this  incomplete  and  imperfect  form  of  public  regulation. 


J 


I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2139 

XIX.  The  causes  for  the  decline  of  street-railway  credit  thus  far 
enumerated  have  arisen  out  of  the  financial  policies  adopted  by  the 
street  railways  themselves  or  out  of  the  policies  of  regulation  adopted 
by  the  public,  and  so  far  as  these  ix>licies  were  unsound  those  re- 
sponsible for  their  adoption  and  continuance  must  share  the  respon- 
sibility for  the  present  condition  of  street -railway  credit.  Still 
another  set  of  causes  can  be  found  by  an  analysis  of  economic 
conditions. 

XX.  For  a  long  time  the  public  tried  to  secure  the  benefit  of 
competition  in  the  street-railway  business,  not  recognizing  that  it 
was  a  monopoly  by  nature.  But  with  the  appeal  to  the  police 
power  to  compel  improved  service,  the  public  recognized  in  a  more 
or  less  formal  and  legal  way  the  existence  of  monopoly  as  a  necessary 
fact.  Just  as  this  recognition  was  becoming  general,  the  develop- 
ment of  the  automobile  brought  into  the  field  for  the  first  time  an 
effective  and  dangerous  competitor  of  the  street  railwaj^s.  In  other 
words,  when  the  public  got  around  to  recognize  the '^existence  of 
monopoly  in  local  transportation  service  the  development  of  the 
automobile  partially  reestablished  the  condition  of  competition 
which,  in  theory,  had  just  been  discarded.  In  many  communities 
it  has  been  fully  recognized  that  the  two  methods  of  local  transpor- 
tation can  not  survive  on  a  self-sustaining  basis  as  competitors. 
The  inroads  made  by  this  new  form  of  transportation  upon  the  actual 
traffic  and  revenues  of  street  railways  in  many  communities  and 
the  resulting  uncertainty  as  to  the  future  of  the  electric  railway 
reacted  seriously  upon  the  credit  of  the  industry. 

XXI.  In  the  old  days  the  profits  of  street-railway  operation  were 
dependent  in  large  measure  upon  low  wages,  long  hours,  and  unsatis- 
factory conditions  of  work  for  the  employees.  Gradually,  as  time 
went  on,  the  employees,  in  part  as  a  result  of  general  public  favor, 
became  more  and  more  organized  and  were  in  a  position  to  demand 
higher  wages,  shorter  hours,  and  more  expensive  protection  and 
privileges  from  their  employers. 

This  tendency,  of  course^  has  been  greatly  accentuated  since  the 
begmning  of  the  war  and  as  one  of  the  results  of  war  conditions. 
Nevertheless  the  tendency  existed  before  the  war,  and  the  uncer- 
tainty of  the  labor  element  in  its  relation  to  the  management  was  a 
factor  of  increasing  importance  in  disturbing  the  hopes  of  those  who 
had  gone  into  the  street-railway  business  as  speculators  and  had 
capitalized  the  future.  Disappointed  hopes  in  the  industry,  even 
when  such  hopes  w^ere  at  the  beginning  illegitimate  or  unwarranted, 
had  a  tendency  to  restrict  the  credit  of  the  industry  and  to  cool  the 
ardor  of  new  investors  to  go  into  it. 

XXII.  All  these  forces  conspiring  together  to  impair  street-rail- 
way credit  would  have  effectively  destroyed  it  long  before  the  war 
if  it  had  not  been  made  so  nearly  indestructible  by  the  character  of 
the  industry  itself  and  by  the  enormous  development  of  the  demand 
for  urban  transportation.  It  is  by  no  means  surprising  that  the 
great  war  put  the  finishing  touches  on  the  job.  The  fundamental 
basis  of  credit  at  all  times  is  security  for  the  investment  and  its  pres- 
ent and  prospective  net  earning  power.  Any  sudden  great  expan- 
sion in  the  cost  of  service  that  is  not  accomianied  by  a  corresix^nd- 
ing  increase  in  revenues  must  adversely  affect  the  present  earning 
power  of  the  investment,  and  if  the  prospect  is  for  the  permanence 


4 
'it 


2140      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

or  lonp  continuance  of  these  adverse  conditions,  then  they  result  in 
reducing  the  ultimate  security  and  the  pros[^ctivc  earning  power  of 
the  investment.  The  effect  of  the  war  upon  general  economic  con- 
ditions has  been  to  increase  the  cost  of  materials  entering  into  street- 
railway  construction,  maintenance,  and  operation  probably  to  an 
even  greater  extent  than  wages  have  increased.  It  is  now  generally 
expected  that  because  of  world-wide  economic  changes,  the  high 
price  of  materials,  the  high  cost  of  living,  and  the  consequent  i-ela- 
tively  high  wages  will  continue  for  a  considerable  period,  at  least  for 
a  period  longer  than  the  companies  can  hope  to  survive  and  perform 
their  functions  without  the  use  of  credit. 

XXIII.  Having  admitted  the  necessity  for  credit  in  the  street- 
railway  business  and  having  analyzed  the  causes  that  have  led  to  its 
disappearance,  we  come  to  a  discussion  of  the  question:  How  can 
credit  be  restored?  A  variety  of  remedies  have  been  proposed  by 
witnesses  speaking  on  behalf  of  the  electric  railways,  on  behalf  of 
the  regulating  commissions,  or  on  behalf  of  the  general  public.  It 
is  agreed  Avith  practical  unanimity  that  the  electric  railways  have 
come  to  be  es*sentially  public  agencies  and  that  the  function  of  local 
transportation  is  so  Vital  to  the  welfare  of  every  urban  community 
as  to  make  it  a  community  problem.  It  is  generally  agreed  that  if 
credit  can  not  be  restored  under  private  ownei*ship  and  oi">eration  it 
IS  inevitable  that  public  ownership  and  public  operation,  one  or  both, 
will  have  to  come.  The  fear  expressed  by  many  of  the  witnesses 
that  the  results  obtainable  from  public  ownership  and  operation 
would  be  unsatisfactory  from  the  point  of  view  of  economy  and  effi- 
ciency was  not  strong  enough  to  make  these  witnesses  admit  that 
they  would  prefer  to  have  the  electric  railways  disappear  rather  than 
be  owned  and  operated  by  governmental  bodies  as  a  public  function. 

XXIV.  The  testimony  reflected  the  fundamental  divergence  in  the 
economic  theories  and  points  of  view  of  the  witnesses.  Many  ex- 
l)iessed  confidence  that  under  public  ownership  the  street  railways 
would  not  be  economically  and  efficiently  operated  and  viewed  with 
strong  aversion  the  possible  ultimate  necessity  for  the  adoption  of 
public  ownership  as  a  general  policy.  Other  witnesses,  taking  the 
point  of  view  that  local  transportatioia  is  an  essential  public  function, 
expressed  the  belief  that  public  ownership  is  not  only  inevitable, 
because  of  the  inherent  difficulties  of  continuing  private  ownership 
and  the  practical  impossibility  of  restoring  private  credit  in  the  busi- 
ness, but  also  because  public'ownership  and  operation  is  inherently 
loo-ical  and  desirable  with  respect  to  such  a  function  as  local  trans- 

port  at  ion. 

XXV.  There  is  a  general  agreement  that  the  public  relations  of 
the  electric-railway  industry  prior  to  the  war  and  before  the  present 
acute  crisis  arose  were  unsatisfactory ;  that,  in  fact,  the  electric-rail- 
way industry  got  started  wrong;  that  it  got  "in  bad"  with  the  pub- 
lic •  that  the  cooperation  of  the  public  is  essential  to  the  full  perform- 
ance of  electric-railway  service  upon  a  sound  financial  basis;  and 
that  to  restore  the  credit  of  the  companies  and  to  enable  them  to 
function,  an  entirely  new  deal  is  required. 

XXVI.  The  first  requisite  for  the  restoration  of  credit  in  the  view, 
of  the  witnesses  for  the  electric  railways,  is  a  readjustment  of  the 
relation  between  revenues  and  expenses  so  as  to  increase  the  margin 


I 


I 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     2141 

available  for  return  on  capital.  Obviously  this  can  be  accomplished 
only  (1)  by  an  increase  in  revenues  or  (2)  by  a  decrease  in  expenses. 

XXVII.  The  electric-railway  companies  propose  to  increase  their 
revenues  first  by  increasing  the  unit  fares.     In  this  w^ay  they  hope 

(1)  to  escape  from  the  principle  of  the  fixed  fare,  as  embodied  in  the 
5-cent  limitation,  and  (2)  to  secure  an  immediate  increase  in  earnings. 

XXVIII.  The  proposal  to  increase  unit  fares  raises  two  vitnl 
points:  (1)  The  effect  of  straight  fare  increases  upon  revenues,  and 

(2)  the  effect  of  straight  fare  increases  upon  the  usefulness  of  the 
street  railway  as  a  public  utility.  As  a  remedy,  fare  increases  are 
useless  unless  they  provide  additional  revenue,  and  in  fact  they  may 
injure  credit  if  they  indicate  the  inability  of  the  electric  railways  to 
earn  the  full  cost  of  service  at  any  fare  that  may  be  charged.  From 
the  public  point  of  view,  fare  increases  are  a  failure  if  they  result  ii.  a 
serious  and  progressive  curtailment  of  the  use  of  street-railway 
fetrvice. 

XXIX.  As  an  alternative  to  straiglit  fare  increases  the  adoption 
of  a  zone  system  or  distance  tariff  is  put  forward  by  some  of  the 
witnesses  as  a  means  for  raising  more  revenue  through  (1)  the  cul- 
tivation of  short-haul  traffic,  and  (2)  the  establishment  of  charges 
for  long  rides  proportional  to  the  cost  of  the  service  rendered.  This 
proposal  raises  a  fundamental  question  as  to  the  relative  effects  of 
the  uniform  fare  policy  and  the  zone-fare  policy  upon  the  distribution 
iA  population  and  business  and  upon  the  development  of  realty  values. 

XXX.  Another  proposed  measure  for  increasing  the  margin  avail- 
able for  return  on  capital  is  the  removal  of  special  tax  burdens  and 
franchise  obligations  from  the  electric  railways,  leaving  them  either 
upon  tlie  same  basis  as  other  industries  or  giving  them  special  exemp- 
tions on  account  of  the  importance  of  the  function  they  perform  and 
their  peculiar  relations  to  the  public  and  the  public  streets.  This  pro- 
pcil  raises  certain  grave  questions:  (1)  The  sufficiency  of  the  relief 
that  could  be  granted  in  this  way;  (2)  the  legal  and  financial  diffi- 
culties, from  the  point  of  view  of  the  governmental  bodies,  in  the 
way  of  giving  up  these  sources  of  revenue;  and  (3)  the  political  diffi- 
culty of  relieving  a  public  utility  from  these  burdens  or  of  granting 
it  special  exemptions  while  it  remains  in  private  hands. 

XXXI.  Still  another  means  proposed  for  increasing  the  margin 
available  for  return  upon  capital  is  the  adoption  of  operating  econo- 
mies such  as  (1)  a  rearrangement  of  car  schedules  for  the  elimination 
of  duplicating  or  unnecessary  service,  excessive  layovers,  etc.;  (2)  a 
rerouting  of  cars  for  the  elimination  of  useless  or  dead  car  mileage 
and  the  avoidance  of  street  congestion  and  delays;  (3)  the  skip  stop 
for  increasing  speed  tud  increasing  power  consumption;  (4)  the 
training  and  sui>ervision  of  motormen  in  the  saving  of  powder;  (5)  the 
use  of  light  one-man  safety  cars  as  a  means  of  decreasing  platform 
expense,  power  consumption,  accident  expense,  and  track  and  car 
maintenance;  (6^  the  elimination  of  collusive  contracts  for  the  pur- 
chase of  materials  and  supplies  or  power;  and  (7)  the  abandonment 
of  electricity  as  a  motive  power  and  the  use  of  irasoline  or  alcohol  in 
is  place  along  the  lines  promised  b--  Henry  Ford. 

.vA^\II.  It  is  also  proposed  on  behalf  of  the  electric  railways  that 
iitney  competition  be  curtailed  or  abolished,  and  that  the  street 
railway  be  given  protection  as  a  legalized  monopoly  in  the  rendering 
c:  local  transportation  service.    This  proposal  raises  (1)  the  question 


2142      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

as  to  whether  or  not  automobile  buses  may  under  certain  conditions 
be  more  economical  and  efficient  as  a  means  of  transportation  than 
the  electric  railways  are,  and  (2)  the  question  as  to  how  far  the  public 
may  properly  go  in  restricting  comp^etition  in  order  to  give  the  elec- 
tric railways  under  private  ownership  and  operation  a  monopoly. 

XXXIII.  Another  suggested  method  of  enlarging  electric-railway 
income  is  by  the  establishment  of  cooi>erative  relations  between  the 
management  and  the  ejnployees.  In  this  way  it  is  contended  that 
the  interest  of  the  employees  can  l>e  enlisted  in  efficiency  and  economy 
and  in  the  sale  of  transportation  service,  and  the  losses  through 
•  knocking  down  "  of  fares  and  through  strikes  minimized  or  entirely 

done  away  with. 

XXXI V.  The  serious  objection  to  high  fares  or,  in  the  alternative, 
the  abandonment  of  electric-railway  service  altogether  in  certain 
communities  has  led  to  the  suggestion  that  the  revenues  of  the  street 
railways  be  supplemented  out  of  taxation,  on  the  ground  that  busi- 
ness men  and  property  owners  receive  great  benefits  from  electric- 
railway  service  even  where  they  never  ride  on  the  street  cars.  It  is 
the  idea  that  these  subsidies  from  taxation  should  be  made  to  pre- 
vent the  abandomnent  of  unprofitable  lines  or  to  keep  the  fares  down 
to  a  reasonable  level  on  lines  that  could  be  made  self-supporting  with 
^ligh  fares.  On  account  of  constitutional  difficulties  in  the  way  of 
subsidizing  private  enterprise,  and  on  account  of  inherent  objections 
to  such  a  policy,  this  plan  may  not  be  practicable  in  some  jurisdic- 
tions except  under  public  ownership  or  public  management. 

XXXV.  As  a  means  of  getting  the  electric-railway  business  upon 
a  conservative. basis,  the  abandonment  of  duplicating  and  unprofit- 
able lines  is  suggested.  This  plan  involves  the  difficulties  and 
disadvantages  inherent  in  a  plan  for  taking  away  transit  facilities 
from  communities  or  portions  of  communities  whose  development 
and  present  social  and  industrial  arrangements  are  largely  depend- 
ent on  them.  It  also  raises  a  question  as  to  where  the  line  is  to  be 
drawn  with  respect  to  street-railway  extensions.  To  what  extent 
do  the  obligations  of  monopoly  within  a  given  transportation  area 
require  a  symmetrical  and  complete  development  of  transportation 
service,  with  little  or  no  regard  to  the  profitableness  of  individual 
lines? 

XXXyi.  On  the  part  of  the  public  the  suggestion  is  made  that 
capital  in  the  electric-railway  industry  has  received  too  great  a 
return  in  the  past,  and  that  the  restoration  of  street-railway  credit 
requires  among  other  things  a  complete  reorganization  of  the  finan- 
cial structure  of  the  companies  and  the  scaling  down  of  their  fixed 
charges  to  a  conservative  basis.  It  is  urged  that  bankruptcy  in 
many  cases  may  be  absolutely  necessary  as  a  condition  precedent  to 
the  restoration  of  credit  on  a  sound  basis. 

XXXVII.  The  witnesses  generally  recognize  the  improbability 
that  the  credit  of  the  electric  railways  can  be  completely  restored  by 
any  one  of  the  measures  heretofore  mentioned,  taken  by  itself,  and 
tliat  even  a  combination  of  as  many  of  them  as  are  compatible  with 
one  another  may  not  be  effective  for  this  purpose.  A  fundamental 
readjustment  of  the  relations  between  the  electric  railways  and  the 
public  is  regarded  as  essential. 

XXXVIII.  There  is  general  agreement  that  the  first  fundamental 
step  in  such  a  readjustment  in  each  particular  case  is  the  determina- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       2143 

tion  of  the  amount  of  the  investment  upon  which  the  electric  railway 
should  be  permitted  to  earn  a  return.  This  raises  a  multitude  of 
different  questions  as  to  the  correct  principles  of  valuation,  as  to 
which  there  are  radical  differences  of  opinion.  In  general,  the  c  om- 
panies  claim  value  on  the  basis  of  reproduction  cost  of  the  physical 
property  at  the  time  of  the  determination  without  any  deduction 
on  account  of  depreciation,  and  with  large  additions  for  intangibles 
to  cover  superseded  property  and  past  deficiencies  below  a  liberal 
rate  of  return  from  the  beginning  of  the  enterprise.  In  the  repro- 
duction cost,  they  include  liberal  structural  overheads,  together  with 
big  allowances  for  such  items  as  i:>romoter\s  remuneration,  brokerage 
and  preliminary  expenses  in  the  organization  and  development  of 
the  project.  Specifically,  they  maintain  that  the  purchasing  power 
of  the  dollar  having  decreased  under  war  conditions,  the  valuation 
should  be  made  on  the  basis  of  the  "last-minute''  prices.  If  the 
historical  cost  method  is  used  as  an  alternative  to  the  reproduction 
cost  method  of  fixing  present  value,  the  companies  would  include 
every  dollar  that  has  gone  into  the  enterprise  from  the  beginning, 
regardless  of  the  present  condition  of  the  property,  plus  the  capital- 
ized services  of  promoters  and  bankers  and  deficiencies  below  a 
liberal  return  from  the  beginning  of  the  enterprise,  cumulated  at 
compound  interest.  The  public,  on  the  other  hand,  inclines  toward 
the  amount  of  capital  actually  and  prudently  invested  in  existing 
useful  property,  less  accrued  depreciation,  as  the  proper  measure  of 
the  capital  to  be  recognized  as  the  basis  for  the  proposed  new  relation- 
ship between  the  communities  and  the  companies.  Here  is  the  big 
problem  to  be  solved  before  any  fundamental  readjustment  of  the 
status  of  the  electric  railway  industry  can  be  effected. 

XXXIX.  The  next  step  in  the  proposed  readjustment  is  the  de- 
termination of  the  rate  of  return  to  be  allowed  upon  the  recognized 
investment.  It  is  generally  admitted  that  under  private  manage- 
ment the  rate  of  return  must  be  sufficient  in  connection  with  the 
security  offered  to  induce  investors  to  put  new^  capital  into  the 
electric-railway  industry  as  it  is  required  from  time  to  time.  Here 
we  are  confronted  with  several  specific  problems:  (1)  Shall  the  rate 
of  return  be  fixed  for  a  long  period  of  years  or  shall  it  be  flexible  so 
as  to  adjust  itself  to  changing  market  conditions?  (2)  Shall  the 
same  rate  be  allowed  upon  the  capital  already  in  the  industry  as 
may  be  required  to  induce  new  capital  to  flow'  into  it?  (3)  Shall 
the  rate  of  return  be  definitely  limited  and  guaranteed,  or  shall  a 
leeway  be  left  for  the  encouragement  of  economical  management? 
(4)  Is  a  rate  of  return  that  will  induce  private  capital  to  flow  into 
the  street-railway  industry  at  the  present  time  so  high  as  to  be  pro- 
hibitive? The  rate  of  return  applied  to  the  valuation  determines 
the  compensation  of  capital,  so  that  the  two  factors  must  be  con- 
sidered together  in  the  determination  of  the  basis  for  the  final  result 

XL.  One  suggestion  is  that  the  new  deal  between  the  public  and 
the  electric  railways  shall  merely  be  the  removal  of  contractual 
restrictions  and  the  transfer  of  all  remaining  local  j)owers  of  regula- 
tion to  the  State  commissions  so  that  they  can  take  full  responsi- 
bility on  behalf  of  the  public  for  so  regulating  the  industry  as  to  keep 
it  solvent  and  efficient.     This  plan  is  met  by  certain  objections: 

(1)  That  electric-railway  transportation  is  primarily  a  local  function ; 

(2)  that  under  private  management  financial  success  is  impossible 


2144       rBOC'EEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

witlioiit  the  ^(X)(l  Avill  and  co<)i>eration  of  the  people  who  ride  and 
tlio  local  authorities  in  control  of  the  streets;  (:^)  that  each  munici- 
pality, as  a  matter  of  ri^dit  and  of  pood  public  policy,  should  deter- 
mine* the  amount  and  character  of  the  local  transportation  service 
to  be  rendered  and  the  way  it  is  to  be  paid  for:  and  (4)  that  ex- 
clusive State  regulation  may  interfere  with  the  development  of  a 
policy  of  ultimate  munici}>al  ownership  based  upon  contractual 
relations  between  the  municipalities  and  the  companies.  Another 
objection  to  exclusive  State  regulation  may  be  that  it  falls  short  of 
meeting  the  present  situation  where  a  <ruaranty  of  earning  power  or, 
at  least,  of  j)ower  to  pay  tlio  allowed  return  on  cai)ital  is  essential  to 
the  restoration  of  electric-railway  credit. 

XLl.  The  inherent  limitations  upon  the  security  of  the  invest- 
ment and  the  uncertainty  that  the  comj)anies  will  earn  a  fair  return 
without  a  guaranty  have  given  great  impetus  to  the  service-at-cost 
plan  based  upon  contracts  with  the  municipalities  or  the  States, 
under  which  the  companies  will  be  practically  guaranteed  a  fixed 
return  upon  their  investment,  either  through  a  flexible  system  of 
fares,  or  through  a  fixed  fare  sup]dementeel  by  public  subsidies  or 
otherwise.  It  is  recognized  that  the  service-at-cost  plan  as  exempli- 
fied in  the  Cleveland  street-railwav  settlement  of  10  years  ago  has 
worked  greatly  to  the  advantage  of  the  company  in  the  preservation 
of  its  credit,  and  has  been  more  beneficial  to  the  public  than  any 
other  plan  thus  far  tried  in  this  country  over  a  considerable  period 
of  time  on  an  important  scale  under  private  ownership.  The  service- 
at-cost  ])lan,  with  all  its  proven  merits  in  the  Cleveland  case,  has  not 
worked  so  well  elsewhere.  Its  success  seems  to  depend  upon  cer- 
tain factors  which  are  largely  peculiar  to  Cleveland:  (1)  A  conserva- 
tive initial  valuation  and  a  relatively  low  rate  of  return  on  the 
investment:  (2)  an  unusual  degree  of  local  pride  and  confidence  in 
the  justness  of  the  settlement,  making  public  and  official  coopera- 
tion with  the  company  possible  and  elective:  (3)  a  policy  with  re- 
spect to  replacements  that  prevents  the  inflation  of  the  capital  ac- 
count in  a  period  of  rising  prices:  (4)  a  relatively  low  fare  to  start 
with,  so  that,  when  costs  increase,  the  fares  will  not  become  excessive. 
A  general  objection  to  the  service-at-cost  plan  is  that  it  is  calculated 
to  weaken  the  motive  for  efficiency  and  economy  in  operation  under 
private  management  and  to  i)ut  upon  the  public  regulatory  authori- 
ties the  responsibility  for  enforcing  these  street-railway  virtues  by 
indirect  means  to  the  same  extent  as  they  Avould  be  called  upon  to 
enforce  them  directly  under  public  management.  Another  objec- 
tion is  that,  even  under  so  good  a  service-at-cost  plan  as  the  one  in 
force  in  Cleveland,  it  has  }>een  deemed  necessary  to  increase  the  rate 
of  return  upon  capital  to  7  per  cent.  Moreover,  the  Cleveland  plan, 
after  iDeing  modified  from  time  to  time  in  f«avor  of  the  company,  is 
iend\n<r  more  and  more  toward  a  perj^etuation  of  private  manage- 
ment and  a  weakening  of  public  control,  which  is  everywhere  becom- 
ing more  and  more  vital  to  the  public  welfare.  It  is  to  be  noted 
also  that  the  service-at-cost  plan  substitutes  a  semiautomatic  con- 
trol of  rates  for  the  continuous  power  of  regulation  by  State  com- 
missions, and  establishes  local  control  of  service,  so  that  under  this 
plan  the  necessary  functions  of  the  State  commissions  w^ith  respect 
to  street  railways  are  reduced  nearly  to  the  vanishing  point. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2145 

XLII.  The  final  solution  advocated  by  many  of  the  witnesses,  and 
admitted  by  the  rest  as  the  ultimate  alternative,  in  case  their  par- 
ticular plans  do  not  succeed,  is  public  ownership  and  operation  by 
the  mimicipalities,  by  the  States,  or  by  specially  created  transporta- 
tion districts.  It  is  admitted  that  public  ownership  and  operation, 
under  adequate  constitutional  and  statutory  provisions,  would  be 
able  to  provide  the  credit  necessary  to  enable  the  electric  railways  to 
continue  functioning. 

XLIII.  We  now  come  to  the  question  of  labor.  During  the  war 
the  supply  of  labor  was  short  in  the  street-railway  business,  as  in 
many  other  industries.  It  can  not  be  said,  however,  that  there  has 
ever  been  for  a  j^rolonged  period  any  particular  difficulty  in  securing 
men  to  operate  street  railways.  The  condition  at  the  present  time 
is  that  the  wages  paid  are  nominally  much  higher  than  they  were 
before  the  war,  and  that  during  1919  there  was  an  epidemic  of  strikes, 
resulting  in  great  losses  of  revenue  and  generally  in  radical  advances 
in  wages,  sometimes  with  a  provision  for 'back  pay.  While  the 
National  War  Labor  Board  was  in  existence  there  was  a  national 
agency  to  A\iiich  both  parties  could  apj^eal  for  the  arbitration  of  wage 
questions.  Now  that  the  War  Labor  Board  has  gone  out  of  exist- 
ence, no  such  agency  will  be  present  to  meet  the  problems  that  arise 
as  the  contracts  between  the  local  divisions  of  the  Amalgamated 
Association  and  the  employing  companies  expire  from  time  to  time. 
The  industry  is  more  thoroughly  unionized  than  it  ever  was  before, 
and  the  men  are  in  a  stronger  position  by  reason  of  the  fact  that  a 
strike  is  not  relatively  so  serious  a  matter  from  the  public  point  of 
view  as  it  used  to  be  before  the  advent  of  the  automobile.  At  the  pres- 
ent time  a  pretty  good  sized  city  can  get  along  for  a  few  days  without 
street-railway  service,  and  the  interruption  of  this  service  is  less  likely 
to  stimulate  the  social  disorders  that  in  former  times  almost  univer- 
sally attended  a  street  railway  strike.  It  is  perhaps  increasingly 
difficult  for  the  companies  to  ''  break  *'  strikes.  If  the  cost  of  living 
goes  on  climbing,  or  even  continues  at  its  present  high  level,  it  is  to 
be  expected  that  as  their  yearly  contracts  expire  many  of  the  unions 
will  demand  further  increases  in  wages,  and  that  this  will  drive  the 
companies  that  are  not  already  in  bankruptcy  closer  to  the  verge 
of  it,  if  the  men's  demands  are  granted.  This  may  follow,  irrespec- 
tive of  any  fare  increases,  because  it  is  not  yet  certain  that  during  the 
l)resent  era  of  high  prices,  the  street-railway  industry  as  a  whole  can  ■ 
be  made  to  pay  the  full  cost  of  service  that  is  involved  in  higher 
wages  along  with  the  high  prices  paid  for  materials  and  money. 
From  the  point  of  view  of  the  labor  problem,  therefore,  the  present 
condition  of  the  street-railw^ay  industry  contains  the  seeds  of  trouble 
not  only  for  the  people  financially  interested  in  the  industry,  but  also 
for  the  general  public.  For  the  latter  there  is  the  double  danger  of 
increasing  cost  of  service  on  the  one  hand,  and  of  paralysis  of  service 
through  industrial  conflicts  on  the  other. 

XLIV.  Perhaps  the  major  cause  of  the  labor  difficulty,  aside  from 
the  general  increase  in  labor  costs,  is  the  fact  that  heretofore  in  the 
relations  between  the  public  and  the  companies  as  fixed  in  the  fran- 
chises, the  employees  have  been  for  the  most  part  ignored.  The  com- 
panies have  undertaken  for  a  consideration  to  perform  a  public  func- 
tion and  to  deliver  service,  and  the  public  has  had  no  direct  relation 


2146      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

with  the  men,  leaving  them  to  be  employed  and  discharged  by  the 
companies  without  any  public  interference.  But  the  recognized  ne- 
cessity for  continuous  service  has  brought  things,  during  the  war 
periocl,  to  a  pass  where  it  is  seen  to  be  essential  that  the  employees 
of  the  street-railway  companies  acquire  a  full  sense  of  public  respon- 
sibility and  get  away  from  the  position  of  mere  wage  earners  in  pri- 
vate employment,  with  no  concern  as  to  the  relations  between  their 
employers  and  the  general  public. 

XLV.  One  of  the  remedies  proix>sed  is  the  establishment  of  public 
tribunals  through  which  wages  and  the  hours  and  conditions  of  labor 
may  be  fixed  by  public  authority,  coupled  with  the  enactment  of  laws 
to  prohibit  and  j^enalize  strikes  in  the  street-railway  field.  This 
remedy  is  generally  opposed  by  organized  labor,  which  regards  ''the 
right  to  strike,"  even  in  industries  where  continuity  of  operation  is 
essential  to  public  convenience,  as  their  indefeasible  ultimate 
guaranty  of  adequate  wages  and  satisfactory  conditions  of  work. 

XLVt.  Another  i-emedy  is  based  on  the  right  claimed  by  the 
Amalgamated  Association  of  Sti-eet  and  Electric  Railway  Employees 
to  the  universal  recognition  of  the  union,  a  living  wage,  and  the 
eight-hour  day,  with  the  relations  between  the  companies  and  the 
employees  determined  by  contracts  annually  i*enewed,  with  arbitra- 
tion of  any  differences  by  special  boards  of  arbitration  established 
from  time  to  time  in  the  local  communities,  and  with  the  men  reserv- 
ing the  right  to  strike  in  case  the  companies  refuse  to  grant  their 
fundamental  demands  or  refuse  to  submit  to  arbitration  any  differ- 
ences that  may  arise,  or  refuse  to  abide  by  the  results  of  an  arbitra- 
tion. 

XL VII.  Another  remedy  proposed  is  to  give  the  employees  the 
right  to  participate*  in  the  management.  This  would  change  in  part 
the  present  relationship  between  the  men  and  their  employers.  Those 
who  propose  this  plan  advocate  it  on  the  theory  that  participation 
in  management  would  <j:ive  the  men  an  interest  in  efficiency,  economy, 
and  continuity  of  service,  and  a  sense  of  responsibility  both  to  the 
public  and  to  the  investors  which,  as  mere  employees,  they  can 

not  feel. 

XL VIII.  Another  remedy  proposed  for  the  labor  problem  in  the 
electric  railway  industry  is  j)ublic  ownership  and  oi>eration,  under 
which  the  employees  would  become  civil  servants  and  have  all  the 
advantages  and  be  subject  to  all  the  restrictions  which  inhere  in 
that  rehitionship. 

XLIX.  The  sti^eet-railway  problem  as  a  whole  can  not  be  solved 
merely  by  the  solution  of  the  problem  of  credit  and  it  can  not  ])e 
solved  merely  by  the  solution  of  the  labor  problem.  Each  reacts 
upon  the  other.  Both  must  be  included  in  a  coordinate  way  in  the 
final  solution,  and  any  solution  arrived  at  must  meet  the  fundamental 
i-equirement  that  the  street  railways  exist  primarily  for  service  rather 
than  for  profits,  since  they  have  become  a  public  function  absolutely 
essential  to  the  jmblic  welfare  and  for  which  the  community  itself 
must  assume  the  ultimate  and  final  responsibility  for  self-help. 

L.  In  seeking  a  solution  of  the  electric-railway  i)roblem  the  only 
possible  choices  are  these:  (1)  To  abandon  the  theory  of  public 
interest  in  the  industry  and  abrogate  the  practice  of  public  regula- 
tion with  respect  to  it,  leaving  the  electric  railways  to  work  out 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     2147 

^  their  own  salvation  as  a  private  speculative  business  enterprise; 
(2)  to  continue  and  perfect  the  theory  and  practice  of  public  regula- 
tion by  the  complete  elimination  of  contractual  relations,  at  least 
so  far  as  they  relate  to  the  value  of  the  property,  the  rate  of  return 
to  capital,  the  extent  and  quality  of  service  to  be  rendered  and  the 
compensation  therefor;  (3)  to  establish  a  more  intimate  contractual 
relation  between  the  companies  and  the  public  than  has  heretofore 
existed,  based  upon  some  form  of  the  service-at-cost  plan,  with 
service  controlled  under  most  conditions  by  the  municipalities,  and 
fares  regulated  more  or  less  automatically  without  the  intervention 
of  State  commissions;  or  (4)  public  operation  or  ]x)th  public  opera- 
tion and  public  ownership. 

LI.  Quite  a  number  of  witnesses  complained  of  the  bad  effects  of 
public  regulation  as  it  has  heretofore  been  practiced,  and  it  wrs 
even  suggested  that  all  restrictions  be  removed  from  the  electric 
railways  in  order  that  they  might  battle  to  the  death  with  their 
new  competitor,  the  automobile.  The  idea  was  that  only  by  such 
removal  of  restrictions  can  the  ultimate  relative  merits  of  the  electric 
railway  and  the  gasoline  motor  car  be  tested  out.  The  overwhelming 
weight  of  testimony,  however,  was  clearly  adverse  to  such  a  ix)licy. 
To  most  of  the  witnesses  it  would  be  unthinkable  that  the  public 
should  "  wash  its  hands  of  "  the  electric  railwaj^s  and  relegate  them 
into  the  position  of  a  jiurely  private  industry. 

LII.  The  policy  of  complete  and  exclusive  State  regulation,  freed 
from  the  limitations  imposed  by  municipal  contracts,  could  liardly 
be  carried  out  to  its  logical  conclusion  except  on  the  assumption 
that  the  municipalities  have  no  special  local  interest  in  electric  rail- 
way service,  and  that  the  present  status  of  private  ownership  and 
operation  is  to  be  continued  indefinitely.  Moreover,  State  regula- 
tion, as  it  has  thus  far  been  developed,  holds  out  no  adequate  assur- 
ance that  it  will  be  able  to  restore  and  maintain  the  credit  of  the 
electric  railways,  or  that  it  will  be  able  to  preserve  continuity  of 
service  through  a  solution  of  the  labor  problem.  At  best,  ^tate 
regulation  gives  the  industry  an  opportunity  to  earn  a  fair  return 
upon  the  investment  if  the"^  industry  can  be  made  self-sustaining 
from  the  rates.  Public  regulation  can  give  no  guaranty,  and  in  an 
emergency  like  the  present  one  is  compelled  gradually  to  with- 
draw the  hand  of  control  and  permit  the  companies  to  do  what- 
ever seems  necessary  to  enable  them  to  work  out  of  their  financial 
difficulties. 

LIII.  A  contractual  relationship  fixing  the  investment  value  of 
the  property,  and  the  allowed  rate  of  return  to  the  investors,  with 
provisions  assuring  to  the  companies  that  their  investment  will  be 
protected  and  their  annual  return  upon  it  earned  or  paid,  might  have 
the  effect  of  restoring  the  companies'  credit  and  of  enabling  them  to  go 
on  in  the  perfomance  of  their  function.  This  solution  of  the  problem 
involves  the  elimination  of  the  element  of  risk  and  of  chance  for 
reward,  which  lie  at  the  very  foundation  of  private  initiative,  the 
service-at-cost  plan  is  preeminently  suited  to  public  enterprise  in 
which  the  idea  of  profit  is  entirely  absent.  When  it  takes  the  form 
of  a  contract  between  the  municipality  or  the  State  and  the  electric 
railway,  it  is  designed  as  a  means  to  avoid  the  necessity  of  public 
ownership  and  operation,  on  the  theory  that  private  ownership  and 


■  '1 


m 


m 


2148      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

operation  are  better.  It  is  admitted  on  all  sides  that  most  serious 
evils  have  resulted  from  the  treatment  of  the  electric  railways  as  a 
speculative  industry,  and  that  both  from  the  public  point  of  view  and 
from  the  point  of  view  of  the  investors,  ultimate  salvation  lies  in 
security.  The  fundamental  purpose  of  the  service-at-cost  plan  is  to 
remove  the  speculative  element,  but  in  doing  so  it  removes  the  very 
condition  which  is  put  forward  as  the  chief  reason  for  a  continuation 
of  private  management  in  the  case  of  an  industry  which  is  univer- 
sally recognized  to  have  become  a  public  function. 

LIV.  The  character  of  the  electric-railway  industry,  the  impossi- 
bility of  leaving  it  to  be  carried  on  as  a  private  business,  the  failure 
of  public  regulation  to  solve  the  problem  advantageously  either  for 
the  electric-railway  companies  or  for  the  public,  the  inherent  limita- 
tions of  the  service-at-cost  plan,  the  impracticability  of  dealing 
effectively  with  the  labor  problem  under  private  management,  and 
the  fact  that  the  cost  of  capital  without  the  support  of  public  credit 
has  become  prohibitive,  all  point  to  the  conclusion  that,  with  respect 
to  local  transportation,  public  ownership  and  operation  are  an  ulti- 
mate necessity.  A  program  of  public  ownership  and  operation  will 
not  be  easily  carried  out.  A  careful  and  prolonged  consideration 
of  the  problem  reveals  no  easy  solution  of  it.  It  is  clear,  however, 
that  the  industry  can  not  be  put  upon  its  feet  and  the  public  interests 
served  except  through  the  adoption  of  a  definite,  comprehensive,  and 
constructive  policy.  No  such  policy  has  been  suggested  that  does 
not  have  ultimate  public  ownership  as  its  goal.  It  is,  perhaps, 
unfortunate  that  the  prejudice  of  controlling  public  opinion  against 
public  ownership  of  public  utilities,  and  the  immense  vested  interests 
in  the  electric  railways  and  other  utilities,  have  during  the  past 
erected  legal,  contractual,  and  financial  barriers  in  the  way  of  the 
adoption  of  this  policy.  Even  in  a  crisis  these  barriers  can  not  be 
overcome  without  great  difRculty.  In  the  present  state  of  the  laws 
governing  municipal  action,  and  in  the  present  state  of  municipal 
finances,  it  is  quite  obvious  that  public  ownership  of  the  electric 
railways  as  a  general  program  can  not  be  effected  short  of  a  consider- 
able period  of  years,  unless  it  is  brought  about  by  a  compelling 
emergency  that  brooks  no  delay.  Whatever  temporary  measures 
may  be  recommended  or  adopted  for  immediate  relief,  it  is  essential 
that  such  measures  shall  not  in  any  way  interfere  with  the  adoption 
of  a  program  looking  to  the  permanent  solution  of  the  problem,  and 
that  there  should  be  no  postponement  of  the  initial  steps  in  the  work 
that  will  take  the  longest.  For  this  reason,  a  declaration  should 
now  be  made  of  the  ultimate  necessity  of  public  ownership  and 
operation,  and  public  attention  should  now  be  directed  toward  the 
specific  problem  of  legal,  financial,  and  administrative  preparation 
for  it.  It  seems  clear  that,  no  matter  how  soon  the  program  is 
initiated,  the  necessity  for  its  application  w^ill  arrive  before  the  com- 
munities are  fully  prepared. 


ARGUMENT  AND  BRIEF 

SUBMITTED  TO  THE  FEDERAL  ELECTRIC  RAILWAYS 
COMMISSION  ON  BEHALF  OF  THE  COMMITTEE  OF  ONE 
HUNDRED   ACTING  FOR   THE   AMERICAN   ELECTRIC 

RAILWAY  ASSOCIATION. 


BENTLEY  W.  WARREN,  Counsel. 


NOVEMBER  22,  1919. 


EDWIN  GRUHL. 


A.  S.  HILLS. 


HARLOW  0.  CLARK. 


160643°— 20— VOL  3- 


2149 


TABLE  OF  CONTENTS. 


Page. 

Foreword 2153 

Introductory    Statement 2151' 

Argument  and  Brief  : 

(A)  Purpose  in  Appointment  of  Commission 2155 

(B)  Is  Electric  Railway  Service  Essential? 215G 

(G)  Transportation    Service    on    Tracks    Essential    in    American 

Cities 2157 

(D)  Through  What  Agency  Should  it  be  Conducted? 2158 

(1)  Municipal  or  Public  Ownership  and  Operation 2158 

(2)  Municipal  or  Public  Ownership  and  Private  Operation 2158 

(3)  Private  Ownership  and  Municipal  or  Public  Operation 2150 

(4)  Private  Ownership  and  Private  Operation l*151) 

(E)  On    What    Terms    May    Private    Capital    and    Enterprise    be 

Obtained 21fK) 

(F)  How  Can  Interest  of  Both  Public  and  Utility  be  Protected 2102 

I.  Historical  Development  of  Street  Railway  Industry 21G.*» 

(A)  The  Horse  Car  Period— 1850-1890 216:? 

(B)  Episode  of  the  Cable  System— 1873-1898 21G5 

(C)  Lack   of   Scientific   Consideration   of   Relations   Between   Com- 

panies and  the  Public 21G0 

(1)   Varieties  of  Street  Railway  Franchises 2160 

(a)  The  License  Form  of  Franchise 216G 

(b)  The  Permanent  or  Perpetual  Franchise 2100 

(c)  The  Fixed  Term  Franchise 2100 

(d)  The  Indeterminate  Permit 2107 

(D)  Bargain  System  Between  Public  Officers  and  Utilities ^"  21GS 

(E)  Application  of  Electricity  to  Street  Railway  Operation 2100 

(1)  Mistaken  Optimism  Concerning  Possible  Profits 2100 

(2)  Effect  of  Expense  Resulting  From  Rapid  Development 2170 

(3)  Effect   of   Inadequacy    of   Hoi-se   Railroad   Equipment   for 

Electric  Traction 2170 

(4)  Effect  of  Expenses  of  Compliance  with  Legislative  Require- 

ments   2171 

(F)  Unification  into  Complete  Systems  of  Small  Units 2171 

(G)  Holding  Companies 2173 

(H)  Increased  Cost  of  Electric  Railway  Construction,  Irrespective 

of  Obsolescence 2174 

(I)    Increased  Cost  of  Material  and  Labor 2174 

(J)    Increase  in  Taxation 2175 

(K)  Extension  in  Lines  and  Expansion  of  Systems 2170 

(L)   Development  of  Use  of  Automobiles  and  Jitneys 2177 

(M)   State  Regulation  and  Its  Effect ^_1 2177 

II.  Pkesent  Condition  of  the  Industry 2170 

(A)  Lack  of  Credit . 2180 

(B)  Deterioration  in  Service 2181 

(C)  Receiverships -  2181 

(D)  Disintegration  of  Unified  Systems 2181 

(E)  Abandonment  of  Lines : 

III.  Causes  of  Present  Conditions 2182 

(A)  Inflexible  Fares 2182 

(B)  Increase<l  Cost  of  Labor 2183 

(C)  Increased  Cost  of  Materials  and  Supplies 2184 

(D)  Increase  in  Taxes  and  Imposts 2185 

(E)  Decline  in  Purchasing  Power  of  Fare  Received 2186 

(F)  Use  of  Private  Automobiles ___  2186 

(G)  Jitney  Competition 2187 

2151 


2152      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


III.  Causes  of  Present  Conditions — Continued.  Page. 

(H)  Longer  Average  Haul  <3wing  to  Spread  of  Population 218.S 

(I)  Increased  Use  of  Fre^  Transfers 2I88 

(J)  More  Stringent   Service   Requirements _  _  "    *>isO 

(K)  Increase  of  Traffic  at  Peak  Hours __  2189 

(L)  Street  Congestion "~    2189 

(M)  Unreinunerative  Extensions "_      "~     "__"  II  2190 

(N)  Public's  Belief  That  High  Cost  of  Livhig  Does  Not  Affect  Street 

Railways _  2190 

(O)  Point  of  View  That  Industry  Will  Continue" Anvway II..II  2191 

IV.    FUNDAMENTAI^   UNDERLYING   SOLFTION  OF  PROBLEM  I 

(A)  The  Establishment  and  Maintenance  of  Credit 2191 

(1)  Restoration  of  Contidence  of  the  Investor __"  "  2192 

(2)  Adequate    Revenue 2194 

(3)  Adeqirate  Reserves IIIIIII        III  2196 

(4)  Public  Co-operation III_III_IIII     _  2198 

(B)  Methods  of  Adjusting  Revenues  to  Meet  Exi>ensesIIIII__'I  I~"  2198 

(1)  Increase  in  Revenue _        "  2199 

(a)  Increase  in  Flat  Rate ll.l.l.l  2199 

(b)  Zone  System  of  Fares II~"I"II  J'Ol 

(c)  Transfer    Charges llllLJllJi.  2203 

(d)  Introduction  of  Electric  Railway  ExpressIIIIIIIIIII__I  2204 

(e)  Elimination  of  Dead  Heads  and  Other  Free  Service      ~  2'*04 

(2)  Decrease  in  Cost  of  Operation ""H  2204 

(a)  Elimination  of  Non-profitable  Lines ~I~_  2205 

(b)  Elimination  of  Special  Taxes _  _"  2205 

(c)  Elimination  of  Imposts HI  _'  2->oi3 

(3)  Economies  Through  Public  Co-operation.         "  "    _~  2207 

(a)  Operating  Economies I III'II"  _I~  '  2*>08 

First,  One-man  Cars I_IIIIIIIIII__~I  2^08 

Second,  Turn-backs II_~  ~  ~I~I~  2*>08 

Third,  Skip-stops IIIIIIIIIIIIIIIII~~~II  2*08 

Fourth,  Re-routing I_IIIII  "I    II  2209 

Fifth,  Loading  Devices 1-Z1..1ZZ  I  I  2209 

tiixth.  Trailer  Operation l-"~_~~~~~  2*^09 

tSeventh,   Honest   Collection   of   Fares   and    Fare   Register- 
ing Devices _  0209 

Eighth,   Double-deck  Cars _  '"  2209 

I^inth,  Lighter  Cars II-IIIIII_~_  II  *>209 

Tenth,  Keeping  Street  Car  Tracks  Clear  of  Traffic_-_I_'  2209 
FlcLcnth,  Elimination  of  Street  Congestion  Due  to  Parking 

of  Motor  Cars  on  Curb 2'>09 

Ticclfth,   Assistance  in    Staggering    School  'and"~Shoppinff 

Hours _  _  _  2«^>Qn 

(b)  Regulation  of  Vehicular  TrafficII__IIIIII.        I  "  2^9 

(c)  Prompt  Action  by  Public  Authorities—       II  2^10 

(C)  Plans  for  Regulating  Relations  Between  Communities  andpri" 

vately  Oi>erated  Public  Utilities __        _  2210 

(1)  The  Indeterminate  Franchise """  ~  J^IO 

(2)  Regulation  Through  Comi>etition IIIIII'I'I        _  2210 

(3)  State  or  Local  Regulation 2211 

(4)  Service  at  Cost  Plans _  '  2*>i.) 

(5)  Profit  Sharing  Plans 2*>l^ 

(6)  Public  Subsidies _  oZ-i'l 

(D)  Public  Ownership IIIIIIIIIII  "1  ~Z'  2214 

Identification  of  Witnesses IIIIIIII 2215 


FOREWORD. 


Earliest  Judicial  Statement  of  Service  at  Cost  Principles,  1860: 

Object  of  grant  is  the  public  accommodation  of  travelers.  In  its  exercise, 
grantees  provide  and  keep  up  a  public  easement;  grantees  are  entitled,  f»r 
their  out'ay  of  capital,  to  reasonable  certainty  of  compensation. 

"  Since  horse  railroads  are  becoming  frequent  in  and  about  Boston,  and 
are  likely  to  become  common  in  other  parts  of  the  Commonwealth,  it  is 
very  important  that  the  rights  and  duties  of  all  persons  in  the  community, 
having  any  relations  with  them,  should  be  distinctly  known  and  under- 
stood, in  order  to  accomplish  all  the  benefits,  and,  as  far  as  practicable, 
avoid  the  inconveniences,  arising  from  their  use.  This  is  important  to  pro- 
prietors and  grantees  of  the  franchise,  who  expend  their  capital  in  provid- 
iufi  a  puUic  accommodation,  on  the  faith  of  enjoping,  with  reasonable  cer- 
tainty, the  compensation  in  tolls  and  fares,  which  the  law  assures  to  them; 
to  all  mayors,  aldermen,  selectmen,  commissioners  or  surveyors  specially 
appointed  by  law  for  the  care  and  superintendence  of  streets  and  high- 
ways; to  all  persons,  for  whose  accommodation  in  the  carriage  of  their 
persons  and  property  these  ways  are  especially  designe<l;  and  to  all  per- 
sons, having  occasion  to  use  the  ways  through  or  across  which  these  horse 
railroad  cars  may  have  occasion  to  pass     *     *     *. 

"  We  understand  that  a  horse  railroad  ami  cars  are  a  modem  inven- 
tion, designetl  for  the  carriage  of  passengers,  and.  though  not  moving  with 
the  speed  of  steam  cars,  yet  with  the  average  speed  of  coaches,  omnibuses 
and  all  carriages  designed  for  the  conveyance  of  persons. 

*'  The  accommodation  of  travellers,  of  all  who  have  occasion  to  use  them, 
at  certain  rates  of  fare,  is  the  leading  object  and  public  benefit,  for  which 
these  special  modes  of  using  the  highway  are  granted,  and  not  the  profit  of 
the  proprietors.  The  profit  to  the  proprietors  is  a  mere  mode  of  compen- 
sating them  for  their  outlay  of  capital  in  providing  and  keeping  up  this 
public  easement." 

Massachusetts  Supreme  Judicial  Court  per  Shaw,  C.  J.,  in  Commo»r 
wealth  vs.  Temple,  14  Gray,  CO  (the  italics  are  ours). 

INTRODUCTORY  STATEMENT.      . 

» 

Reason  for  the  Appearance  of  The  American  Electric  Railway  Association 
Before  the  Commission  and  its  Qualifications  to  Represent  the  Electric 
Railway  Industry. 

The  American  Electric  Railway  Association  appears  in  the  investigation 
being  conducted  by  your  Commmission  as  the  representative  of  member  com- 
panies operating  more  than  eighty  per  cent,  of  the  total  electric  railway  mile- 
age of  the  Unite<l  States,  and  of  an  additional  number  of  non-member  com- 
panies who  have  assisted  in  the  collection,  preparation  and  presentation  of  the 
festimony   offered   for   your   consideration. 

The  As.sociation  was  organized  as  the  American  Street  Railway  Association 
in  the  city  of  Boston  in  1882  and,  as  set  forth  in  its  constitution,  has  for  its 
objects : 

The  discussion  and  recommendation  of  methods  of  construction,  manage- 
ment and  oi^eration. 

The  promotion  of  the  co-operative  spirit  between  its  members. 

The  encouragement  of  friendly  relations  between  the  public  and  the 
railways. 

The  acquisition  of  experimental,  scientific  and  statistical  knowledge 
relating  to  construction,  equipment  and  operation,  and  its  dissemination 
among  member  companies. 

The  safeguarding  of  the  interests  of  electric  railways. 

2153 


'.il 


I 


2154      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

These  objects  are  sought  to  be  accomplished  through  a  parent  organization, 
which  deals  with  matters  of  policy,  relations  with  the  public  and  the  broader 
ancV  more  general  objects  of  the  organization,  and  which  maintains  sui>er- 
vision  over  the  activities  of  four  affiliated  associations,  each  of  which  deals 
with  matters  of  particular  interest  to  an  important  department  of  electric  rail- 
way oiieration.  These  affiliate<l  associations  are:  The  Accountants  AssociJi- 
tion,  the  Engineering  Association,  the  Claims  Association  and  the  Transporta- 
tion and  Traffic  Association. 

Tlie  Association  is  a  voluntary  association.  It  has  four  classes  of  members, 
t.  c,  Company  Members,  consisting  of  electric  railway  companies,  and  manu- 
facturing companies  dealing  in  electric  railway  supplies  and  apparatus;  Mem- 
bers, consisting  of  individuals,  copartnerships  and  corporations,  identified  with 
electric  railway  interests,  and  other  persons,  who  in  the  opinion  of  the  Execu- 
tive Committee  it  is  desirable  should  be  connected  with  the  Association ;  Com- 
pany Section  Members,  consisting  of  the  members  of  Company  Sections  of  the 
Association,  and  Foreign  Membei*s,  consisting  of  electric  railway  companies. 
oi>eratlng  in  countries  other  than  the  United  States,  its  possessions,  Canada 
and  Mexico.  Member  Companies  and  Foreign  Members,  alone  of  the  member- 
ship have  the  right  to  vote.  Company  and  foreign  membership  in  the  Americnn 
Association  carries  with  it  membershii)  in  all  of  the  affiliated  associations. 

A  brief  recital  of  some  of  the  accomplishments  of  the  Association  will  indi- 
cate that  the  electric  railway  industry  of  this  country,  as  represented  by  the 
Association  h.as  not  been  lacking,  either  in  foresight,  or  in  effort  to  adjust 
itself  to  the  evolution  and  development  of  local  transportation,  both  as  it 
affects  the  relations  of  the  public  and  the  companies,  and  as  it  affects  the 
system  of  charges  and  the  practical  operation  of  the  properties. 

From  its  inception  the  Association  has  realized  the  importance  of  adjust- 
ing its  relations  with  the  public  on  a  basis  of  equity  and  justice.  In  1809, 
eight  years  before  the  organization  of  the  public  service  conunissions  of  Wis- 
consin and  New  York,  which  marked  the  beginning  of  aggressive  and  compre- 
hensive State  regidation,  control  of  electric  niilways  by  State  Commission 
was  advocated  upon  the  floor  of  the  Association's  Convention.  Since  1906  the 
Association  has  had  a  Committee  on  I»ublic  Relations,  which  has  devoted  its 
attention  to  the  task  of  readjustment. 

The  continuing  i>olicy  of  this  Committee*  was  crj'Stallizetl  into  one  of  the 
planks  of  the  Code  of  IM-inciples  adopted  at  the  1914  Convention  of  the  Asso- 
ciation, which  declared  that  "full  and  frank  publicity  should  be  the  policy 
of  all  transportation  companies,  to  the  end  that  proi>er  information  may  be 
available  to  the  investor  and  the  public."  In  1912,  some  of  the  officers*  and 
leaders  of  the  Association,  made  a  six  weeks'  tour  of  the  country,  speaking 
before  the  civic  organiatioiis  in  nearly  all  of  the  leading  cities,  presenting  the 
facts  of  the  electric  railwny  problem  and  urging  public  co-operation  in  its  solu- 
tion. Upon  the  enlranct-  of  the  United  States  into  the  war,  the  Association 
organized  an  electric  railway  War  IJoard  with  offices  in  Washington  and  placed 
the  entire  resources  of  the  industry  at  the  Comuiand  of  the  National  Govern- 
ment. 

A  glance  at  the  index  to  the  Proceedings  of  the  American  Association,  cover- 
ing the  entire  period  of  its  existence  shows  tliat  it  has  been  alive  to  the  various 
factors  that  have  influenced  electric  railway  development,  both  physical  and 
those  bearing  upon  its  relationship  to  the  public  and  its  employes.*  In  1911, 
was  started  a  study  of  the  correct  principles  underlying  charges  for  electric 
railway  service,  which  culminated  in  the  Cost  of  Urban  Passenger  Transporta- 
tion Service,  the  most  comprehensive  and  thorough  study  of  the  fare  situation 
now  in  existence,  prepared  by  Mr.  F.  W.  Doolittle  under  the  direction  of  the 
Committee  on  the  Cost  of  Passenger  Transportation  Service.  Relations  with 
employes,  embracing  the  various  phases  of  so-called  welfare  work  and  profit 
sharing,  as  well  as  workmen's  compensation  laws  have  been  made  the  subject 
of  reports.  Valuation,  franchises,  financing,  governmental  regulation  and  the 
various  plans  and  suggestions  as  to  nmnicipal  control  have  been  studied.  In 
these  matters  of  general  policy,  the  Association  has  kept  in  advance  of  the  trend 
of  the  times  and  has  led  and  not  followed  in  the  work  of  readjustment. 

In  the  practical  details  of  operation  and  management,  as  it  relates  both  to 
economy  and  efficiency,  the  affiliatetl  Associations  have  performed  a  valuable 
service  both  to  the  industry  and  to  the  public. 

The  Standard  Classification  of  Accounts  for  electric  raihvaj's,  which  Is  the 
basis  for  practically  all  electric  railway  accounting,  is  the  joint  work  of  the 


I 


' 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     2155 

Interstate  Commerce  Commission  and  a  committee  of  the  Accountants'  Asso- 
ciation. 

The  standard  codes  of  rules  for  both  urban  and  interurban  operation,  in 
effect,  with  local  modifications,  on  practically  all  electric  railways,  are  the  work 
of  the  Transportation  and  Traffic  Association. 

The  Engineering  Association  has  created  and  is  creating  standards  for  appa- 
ratus and  material  used  in  electric  railway  operation,  which  have  a  marked 
influence  on  both  costs  and  efficiency. 

At  the  recent  Convention  of  the  Association,  technical  reports  were  presented 
upon  valuation,  service  at  cost,  zone  systems,  methods  of  fare  collection,  one- 
man  cars,  and  code  of  traffic  principles.  All  these  reports  are  available  for  all 
electric  railway  companies,  public  service  commissions,  municipal  authorities 
and  the  public  itself.  This  wide  range  of  subjects  shows  that  this  organization 
is  fulfilling  its  function  and  that  the  industry  as  represented  by  it  is  not  remiss 
in  its  undoubted  duty  of  applying  to  electric  railway  oi)eration,  the  best  thought, 
and  the  most  careful  management  and  foresight. 

The  industry  as  represented  by  the  American  Electric  Railway  Association, 
is  before  your  Commission,  not  liecaitse  it  has  failed  to  properly  conduct  the 
public  service  which  it  has  undertaken  to  i>erform,  but  because,  it  is  faced  with 
conditions  over  which  it  has  no  control,  and  which  can  be  remedied  only  with 
the  assistance  and  co-operation  of  the  public,  whose  representatives  you  are. 

ARGUMENT  AND  BRIEF. 

(A)    Purpose   in    Appointment    of   Federal    Electric    Railways    Commission. 

To  insure  in  the  public  interest  a  continuance  of  an  essential  service  to  the 
communities  of  the  country. 

Tills  Commission  was  appointed  by  the  President  of  the  United  States  in 
response  to  a  communication  from  the  Secretaries  of  Commerce  and  Lal.or. 
urging  the  creation  of  a  Commission  to  investigate  the  entire  electric  railway 
problem.    In  their  letter  of  May  15, 1919,  the  Secretaries  said  : 

Dear  Mr.  President :  The  Electric  Railway  problem,  to  which  your  atten- 
tion has  been  called  on  several  occasions,  has  recently  assumed  such  serious 
national  proportions  as  to  warrant  the  prompt  attention  of  tlie  Federal 
Government.  Already  fifty  or  more  urban  systems,  representing  a  consid- 
erable percentage  of  the  total  electric  railway  mileage  of  the  countrv,  are 
in  the  hands  of  receivers.    *    «    « 

Other  large  systems  are  (»n  the  verge  of  insolvency,  for  the  industrv  as  a 
whole  is  virtually  bankrupt.  The  continued  shrinkage  in  the  value  of  hun- 
dreds of  millions  of  electric  railway  securities  held  by  savings  banks,  na- 
tional banks,  life  insurance  companies  and  by  the  public  at  large,  threatens 
to  embarrass  the  nation's  financial  operations.  Furthermore,  the  with- 
drawal of  this  industry's  buying  power,  which  is  said  to  rank  third  in 
magnitude,  involves  the  unsettlemeut  of  collateral  industries,  naturally  en- 
tailing labor  dislocation  that  will  affect  hundreds  of  thousands  of  em- 
ployes.   *    *    * 

What  the  solution  is,  nmy,  we  believe,  be  evolved  by  a  thorough  investi- 
gation of  general  franchise  and  operating  conditions  in  their  relation  to 
rates,  including  service-at-cost  plans,  state  and  municipal  taxation,  local 
paving  requirements,  and  internal  economies  that  may  be  effected. 

We,  therefore,  propose  and  recommend  the  appointment  by  you  of  a 
Federal  Board  or  Commission,  whose  duty  it  shall  be  to  studv  and  report 
upon  the  entire  problem,  in  order  that  the  State  and  Municipa*l  authorities 
and  others  concerned  may  have  the  benefit  of  full  information  and  of  any 
conclusions  or  recommendations  that  may  be  formulated.     *     *     * 

The  purpose  which  prompted  this  letter  from  two  high  officials  of  the  Cabinet, 
and  the  action  of  the  President  in  appointing  your  Commission,  was  evidently 
to  insure,  in  the  public  interest,  a  continuance  of  an  essential  service  to  the 
communites  of  the  country. 

Both  the  recommendation  for  such  a  Commission,  and  its  appointment,  as- 
sume the  necessity,  and  therefore  the  essential  character,  of  the  service  ren- 
dered by  this  industry.  It  is  a  matter  of  general  knowledge  that  the  public 
entertains  the  same  opinion.  Nevertheless,  a  Conuni.ssion  of  the  importance  of 
the  Federal  Electric  Railways  Commission,  whose  hearings  have  occupied  such 


i3 


I 


r: 


2156     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

prominence  before  the  public,  and  whose  recomniendations  are  liliely  to  be  of 
fnr  reaching  conse<nu»nce,  must  independently  determine  this  basic  i)oint. 
I'nlt  ss  the  service  rendere<l  by  this  industry  is  really  essential,  it  is  unnecessary 
to  investigate  either  the  causes,  or  to  search  for  remedies  for  the  desperate 
tinanciai  and  operating  conditions  of  the  companies  performing  it,  so  graphi- 
cally summarize<l  in  the  letter  to  the  President,  and  ampliiied  by  witness  after 
witness  apiK'aring  before  the  Commission. 

(B)  Is  the  Service  Now  Being  Performed  by  the  Electric  Railways  Really 

Essential? 

Th<*  |)ubli<*  service,  at  present  ren<lered  by  electric  railways,  is  the  transporta- 
tion of  persons  within  our  cities,  and  between  those  cities  and  relatively  net\rby 
suliurl)*;,  closely  bound  by  business  and  swial  ties  to  the  urban  activities  and 
population.  The  maintenance  and  continuous  improvement  and  exi>tinsion  of 
this  service  of  transportation — by  some  melius — is  obviously  essential.  The 
continuance  of  our  present  urban  method  of  life  and  business  activity  is 
unthinkable  without  some  cheap,  convenient  and  reliable  form  of  city  and 
suburban  transportation  available  to  all  the  people. 

Tlie  social  noeds  for  such  street  transportation,  and  the  indispensable  neces- 
sity at  that  time  of  street  railways  (then  operated  by  horses)  to  furnish  it, 
\  (^re  clearly  recognized  by  a  Massachusetts  Commission  of  which  Isaac  F. 
UtMllield  was  Chairman,  which  subnutted  its  report  in  1865  to  the  Massaehu- 
'■<tts  Legislature.    The  Couunission  in  that  report  said: 

From  the  testimony  before  us,  and  from  all  we  know  or  can  learn  in 
regard  to  street  railways,  we  entertain  no  doubt  thej'  must  be  regarded,  as 
an  indisi^ensable  necessity,  the  call  for  which  will  be  likely  to  increase 
rather  than  diminish,  in  the  future;  and  that,  if  properly  managed,  they 
may  be  made  remunerative  at  very  low  rates  of  fare.  The  investments, 
tluM-efore.  in  such  enterprises  may  justly  claim,  on  the  i)art  of  the  General 
Court,  the  inauguration,  or  the  continuance,  of  such  a  policy  In  regard  to 
tliem  as  shall  render  them  as  secure  and  permanent,  as  the  nature  of  the 
pro|)erty  will  fairly  admit. 

House  Document  No.  15,  Mass.  Ceneral  Court  of  1865. 

Attenti<m  is  also  called  to  the  citation  in  the  historical  review  of  the  street 
railway  industry  in  a  Inter  part  of  tliis  brief,  froiiT  the  report  in  1898  of  an- 
other Massacluisetts  Commission,  of  which  the  late  ('harles  Francis  Alams 
was  Chairman.  \Ve  quote  as  follows  from  other  parts  of  this  last  mentioned 
re|M»rt,  bearing  especially  upon  the  point  now  under  consideration : 

The  Committee  has  no  disposition  to  apiiear  to  exaggerate  the  iiuportance 
of  street  railway  developutents,  and  the  interest  felt  in  them;  but  as  the 
investigation  proceeded  it  became  apparent  that  not  only  was  the  whole 
civilized  world  at  work  on  improved  municipal  transportation,  but  every 
consideriil)le  town  in  both  hemispheres  is  acquiring  exi)erience  of  more 
or  less  general  value  in  regard  to  it,  while  at  the  same  time  seeking  to 
learn  the  results  of  experience  elsewhere.  *  *  ♦  As  a  public  agency 
the  electric  street  railway  is  now  fast  revolutionizing  the  character  of 
urban  lile,  spreading  it  over  a  wi<ler  area  and  subjecting  it  to  new  In- 
fluences; while  entailing,  in  such  items  as  paving,  sewerage  and  police,  a 
vastly  increased  municipal  expense.     *     ♦     * 

As  tlie  modern  nmnicipalities  exi>anded,  the  demand  for  better  facilities 
of  urban,  or,  a?  it  would  be  termed  in  Europe,  intra-nniral,  transportation, 
made  itself  increasingly  felt. 

No  more  convincing  proof  of  the  community  need  for  street  transportation 
of  the  public  could  be  found  than  that  furnished  by  the  tremendous  expansion 
of  electric  railway  lines  in  this  country,  'l^he  census  ligures  show  that  in  1890, 
the  year  in  which  the  introduction  of  electricity  began  on  a  substantial  basis, 
there  were  in  the  United  States,  8,123  miles  of  single  track.  Twenty-seven 
years  later,  or  in  1917,  the  last  census  year  available,  this  single  track  mileage 
had  increased  to  44,835  miles.  This  is  an  increase  of  500  i>er  cent.  As  else- 
where pointed  out,  the  single  system  serving  Boston  and  its  suburbs,  more  than 
doubled  its  mileage  in  the  thirty  years  between  1888  and  1918.  To  eliminate, 
either  suddenly  or  gradually,  from  such  connnunities  the  facilities  furnishe<l 
by  street  railways,  without  supplying  an  adequate  substitute  system  of  street 
transportation,  would  be  a  national  calannty.     The  consequent  and  necessary 


\ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     2157 

congestion  of  population,  the  abandonment  of  suburban  homes,  the  siicrifice  of 
••r  and  sunshine,  the  increase  in  vice  and  disease,  would  stagger  contemplation. 

(C)  This  Service  of  Street  Transportation  Cannot  be  Successfully  Performed 
in  American  Cities  Under  the  Prevailing  Conditions  Therein  Except  by 
Some  Method  Involving  the  Use  of  Tracks. 

This  service  of  street  tansportation  has  now  for  about  twenty-five  years  been 
furnished  by  the  electric  railways.  It  consists  of  two  main  features;  first  and 
most  fundamental,  a  fixed  and  permanent  system  of  tramway  tracks — laid  for 
tlie  most  part  in  public  streets — with  the  wheels  of  the  passenger- vehicles 
:idapte<l  to  the  rails  of  the  tracks;  second,  and  of  relatively  lesser  iniportance, 
tli!^  use  of  electricity,  generated  in  central  iK>wer  stations,  transmitted  through 
systems  of  wires  to  electric  motors  attached  to  the  cars,  and  furnishing  their 
liMJlive  iM>wer. 

This  feature  of  the  fixed  railway  is  called  fundamental,  because  it  has  sur- 
vived all  changes  of  motive  power  in  street  railway  transi)ortation  during  the 
last  three-quarters  of  a  century.  Introduced  about  1850  for  improving  the 
earlier  horse-drawn  onmibus  service  by  the  use  of  "  horse-cars " — its  tracks 
constituted  the  chief  difference  between  horse-car  facilities  in  our  cities  and 
the  stages  or  omnibuses  for  which  those  horsecars  were  rapidly  .substituted. 
Housed-in  or  "  dinnmy  "  steam  loconrotives,  cable  cars,  storage  battery  cars, 
electric  trolley  cars,  gasoline  cars,  have  all  adopted  and  continued  the  street 
tracks  as  the  best  nieans  for  their  passage  rlirough  the  streets,  with  the 
greatest  comfort  and  least  delay  to  their  own  users,  and  with  the  least  danger 
ni'd  'nconvenlence  to  other  users  of  the  streets. 

When  public  transportation  through  the  streets  is  an  acknowledged  and 
ui^questioned  necessity  of  url)an  and  suburban  life,  the  question  may  be  raised 
and  nnist  be  con.sidere<l  and  answered  by  this  Commissiem  at  the  threshold  of 
its  investigation.  Is  the  street  rail  way  an  essential  agency  in  furnishing  this 
esst»ntial  public  necessity? 

Tlie  term  street  railway  instead  of  electric  railway  is  here  used  advisedly — 
for  it  emphasizes  the  distinction  between  the  rail  way  feature,  and  the  electric 
motive  poner  feature,  of  the  utility.  The  electric  street  railway,  in  its  broader 
sense  of  transportation  of  passengers  in  vehicles  moving  over  rails,  may  be 
supplanted  by  some  other  agency  only  if  there  is  an  equally  or  more  adequate 
method  of  using  the  streets  for  this  purpose,  than  by  maintaining  the  fixed 
tracks,  as  well  as  a  cheaper,  and  equally  reliable,  motive  power  to  take  the  pla<-e 
of  electricity. 

So  long  as  it  is  agreed  that  the  street  raihcat/ — by  whatever  motive  power 
operated — is  essential,  the  whole  problem  of  the  electric  street  railway,  ad- 
dressed to  this  Commission  is  a  vital  one.  It  nnist  be  considered  and,  if 
l>oss;bIe,  its  solution  nnist  he  reached.  The  question  of  electricity  as  its 
motive  power  is  an  incidental  question  and  falls  into  the  class  of  other 
incidental  questions,  like  that  of  public  or  private  ownership  and  operati<m, 
the  imposition  upon  car  riders  of  taxes  for  the  relief  of  the  general  tax  levy, 
the  system  of  fares  to  be  adopted,  public  iwlicy  respecting  various  kinds  of 
francfiise  and  tenure  for  privately  owned  street  railways,  the  recovery  of  street 
railway  credit,  and  otlier  similar  questions  which  have  been  discusse<l  by  vari- 
ous witnesses  appearing  before  the  Commission. 

That  tracks  in  the  streets,  that  is  street  railways,  are  essential,  appears  not 
only  from  the  experience  of  seventy-five  years,  in  which  the  tracks  have  been 
retained  for  use  with  every  new  form  of  motive  power,  but  equally  from  the 
testimony  of  substantially  every  witness  before  the  Commission.  Not  one  of 
the  114  experts,  publicists,  public  officers  or  traction  men,  has  seriously  pro- 
posed a  return  to  the  independently  operate<l  stages  or  omnibuses  of  pre-horse- 
car  days,  moving  at  will  over  the  entire  surface  of  the  street,  taking  their 
chances  among  other  vehicles,  and  making  a  hopelessly  unmanageable  addition 
to  the  already  over-congested  traffic. 

Every  advocate  of  puhlic  ownership  of  street  railways  is  a  witness  to  their 
necessity.  Not  only  would  such  ownership  be  improper,  if  not  absolutely  unlaw- 
ful in  most  of  our  States,  but  the  advocates  of  it  would  be  unfaithful  to  the 
public  welfare,  unless  the  facilities  so  to  be  owned  constitute  a  public  necessity. 
Among  the  array  of  economic  and  transportation  exiierts,  and  of  public  oflicials, 
the  most  suggestive,  jierhaps,  in  this  connection,  is  Mayor  Couzens  of  Detroit. 
Himself  one  of  the  fortunate  beneficiaries  of  that  Aladdin  lamp  creator  of 
fortunes,  the  Ford  Motor  Company,  possessing  unusual  knowledge  of  the  extent 


2158     PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

and  iw.ssiblllties  of  the  use  of  jitneys  and  other  self-propelled  vehicles  for  street 
transiwrtation,  as  well  as  of  the  plans  of  his  late  associate,  Henry  Ford,  for 
l)roducing  a  jrasollne  street  railway  car,  he  advocates  before  this  Commission, 
as  he  had  already  repeatedly  iirj^eil  in  the  City  of  Detroit,  the  municipal  own- 
ership and  operation  of  all  the  electric  railways  in  that  city.  Other  witnesses 
similarly  advocated  some  form  of  public  ownership  of  the  system  of  public 
transportation,  but  no  one  of  these  spokesmen  for  public  ownership  su|?pested 
seeking  a  sulistltute  for  the  street  railway  as  a  means  for  conducting  such 
transix)rtation. 

Henry  Ford  is  experimenting  with  a  gasoline-driven  motor  to  take  the  plate 
of  electricity  as  a  motive  power  for  street  cars.  Although  his  Ford  car  has  been 
the  favorite  vehicle  in  the  so-called  "jitney  competition,"  its  inventor  and 
manufacturer  proposes,  not  an  enlarged  and  improved  type  of  that  automobile 
moving  at  large  over  the  streets,  but  a  vehicle,  which  like  the  horse  car,  cable 
car,  and  electric  car,  shall  itself  also  be  operated  upon  the  street  railway  track. 
In  other  words,  he  hoi)es  to  improve,  as  have  his  numerous  predecessors,  the 
motive  power  upon  the  street  railway— but  has  no  idea  of  eliminating  the 
railway  itself. 

The  experience  of  seventy-five  years,  the  unanimous  opinion  of  the  expert 
witnesses  and  of  those  who  are  students  of  transportation  problems,  and 
the  assumption  of  the  necessity  for  tracks  by  inventors  seeking,  like  Henry 
Ford,  to  improve  the  methods  of  street  transportation  of  the  public,  alike 
demonstrate  the  fundamental  and  permanently  essential  feature  of  the  RAIL 
way — and  to  the  present  time,  of  the  ELECTRIC  railway — to  any  adequate, 
reliable  and  satisfactory  system  for  transporting  the  maximum  number  of 
people  through  the  streets  of  our  cities  with  the  least  interference  with  the 
use  of  these  streets  for  other  purposes  of  public  ways. 

(D)     Admitting  That  This  Public  Service  is  Essential,  Through  What  Agency 

Should  It  Be  Conducted? 

Any  one  of  the  four  following  courses  is  possible : 

(1)  Municipal,  or  public,  ownership  and  operation. 

(2)  Municipal,  or  public,  ownership  and  private  oi>eration. 

(3)  Private  ownership  and  nmnlcipal,  or  public,  oiieration. 

(4)  Private  ownership  and  private  operation. 

To  the  present  time  the  electric  railways  in  the  United  States,  completely 
serving  its  cities,  its  suburban  and  interurban  territory,  and  excelling  in  extent, 
in  excellence  of  service  and  in  provision  for  accelerating  connnunity  growth 
those  of  any  other  country  in  the  world,  are  the  result  of  private  enterprise, 
individual  courage  and  individual  genius. 

They  have  been  possible  only  l)ecaust^  of  the  opportunity  which  has  been 
given  to  private  initiative.  The  development  from  the  horse-drawn  'bus  of 
the  early  American  city  to  the  present  expensive  systems  is  a  result,  not  of 
community  foresight  or  of  comnuniity  enterprfse.  It  has  been  due  solely  to 
that  genius  for  organization  and  that  continual  striving  for  improvement 
which  marks  the  development  of  American  industry  in  all  lines,  under  this 
national  policy.  , 

(1)  Municipal,  or  Public,  Ownership  and  Operation. 

This  method  of  conducting  this  public  service  is  such  a  recent  innovation 
in  the  Unitetl  States  that  it  must  be  still  looked  upon  as  an  experiment.  With 
the  exception  of  a  comparatively  small  municipal  street  railway  in  San  Fran- 
cisco and  the  recent  purchase  by  the  City  of  Seattle  of  its  system,  we  regall  wo 
instances  of  nnmiclpal  ownership  and  operation.  Certainly  there  are  no  others 
in  important  cities  of  the  country,  and  of  these  two  one  is  so  small  and  the 
other  so  recent  as  to  furnish  no  evidence,  of  real  value,  to  other  communities. 

(2)   Municipal,  or  Public,  Ownershu*  and  Pkivatk  Operation. 

This  method,  as  applied  to  an  entire  railway  system,  has  not  been  tried  in 
the  United  States.  It  exists  in  Bo.ston  with  respect  to  the  subways  and  tunnels, 
all  of  which,  excepting  the  subway  to  Cambridge,  are  owned  by  the  Citv  and 
leased  to  the  privately  owned  Boston  Elevated  Railway  Company  or  its  lessee, 
the  West   End   Street   Railway.    The   theory  of  such   public  ownership   and 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.     2159 

private  operation  of  a  street  railway  was  a  favorite  one  of  the  late  Charles 
Francis  Adams,  when  he  was  Chairman  of  the  Massachusetts  Railway  Com- 
mission. Several  times  he  publicly  urged  the  purcha.se  of  existing  tracks  by 
the  municiimlity  In  which  they  existed,  and  the  municipal  construction  of  such 
additional  tracks  as  might  be  needed.  He  rested  his  theory  upon  the  analogy 
between  the  tracks  as  a  si^ecial  and  improved  form  of  pavement,  and  the  other 
pavement  in  the  street,  all  of  which,  as  a  part  of  the  .street  itself,  he  urged 
should  belong  to  the  public  and  be  maintained  by  It.  New  York  City  also  fur- 
nishes an  example  of  publicly  owned  subways  operated  by  a  private  operating 
company.  Both  in  Boston  and  New  York  the  tracks  and  other  equipment, 
necessary  to  the  oiieration  of  a  railway  in  the  subway,  are  the  property  of  \\\9 
private  company. 

(3)    Private  Ownership  and  Municipal,  ok  Public  Operation. 

This  also  is  a  very  modern  method  of  furnishing  street  railway  transportation. 
It  has  recently  been  introduced  on  two  important  systems  in  Massachusetts, 
in  each  case  under  the  provisions  of  a  special  Act  of  the  Legislature.  These  two 
systems  are  those  respectively  of  the  Boston  Elevated  and  the  Eastern  Ma.s- 
sachusetts  (formerly  the  Bay  State).  In  each  case  the  system  is  administered 
by  five  public  Trustees  appointed  by  the  Governor  of  the  Commonwealth  for 
long  terms.  The  public  operation  of  the  Eastern  Massachusetts  began  only  on 
.Tune  1,  1919.  Its  history  and  condition  were  described  to  the  Commission  by 
Mr.  Homer  Loring,  Chairman  of  Its  Board  of  Trustees.  The  most  interesting 
single  result  thus  far,  has  been  the  drastic  and  prospectively  successful  method 
of  dealing  with  jitney  competition.  Apparently  believing  that  such  competition 
cannot  take  the  place  of  street  railway  service  but  may  seriously  impair  its 
profitable  continuance,  the  Trustees  have  called  upon  various  communities  to 
choose  between  an  abandonment  of  the  street  railway  service  and  the  elimination 
of  the  jitney  competition.  Whether  the  public  would  so  critically  and  willingly 
have  faced  this  alteniatlve  if  presented  by  a  company  under  private  manage- 
ment is  an  interesting  question.  That  the  Trustees  of  the  Boston  Elevated 
have  increased  the  flat  fare  from  five  cents  to  ten  cents  does  not  reflect  upon  this 
method  of  operation.  Their  action  has  been  justified  by  the  results,  for  the 
system  Is  now  meeting  its  entire  cost  of  service.  The  need  of  increased  fares 
was  generally  recognized  before  the  enactment  of  the  special  legislation  and 
was  one  of  the  impelling  causes  to  the  substitution  of  public  for  private  opera- 
tion. Of  the  five  Trustees  originally  appointed  in  June,  1918,  only  two  are  now 
members  of  the  Board.  Mr.  M.  C.  Brush,  who  was  President  of  the  Company 
luitil  the  public  control  began  and  who  was  generally  regarded  as  a  successful 
street  railway  operator,  at  once  resigned.  His  successor,  J.  H.  Neal,  has  re- 
cently resigned.  Both  have  left  the  street  railway  Industry.  C.  D.  Emmons, 
who  was  appointed  General  Manager  by  the  Trustees,  resigned  to  accept  the 
Presidency  of  the  street  railway  system  In  Baltimore.  All  these  changes  in  the 
personnelhave  occurred  in  less  than  a  year  and  a  half. 

(4)   Private  Ownership  and  Private  Operation. 

This  is  the  method  luider  which,  with  the  exception  of  the  few  instances  Just 
mentioned — and  in  New  York,  even  the  first  subway  was  built  by  private  capi- 
tal— the  entire  street  transportation  industry  of  the  United  States  has  been 
developed  and  under  which  it  is  still  largely  maintained. 

Whether  private  ownership  and  operation  or  public  ownership  and  operation, 
either  complete  or  partial,  should  be  substituted  for  it,  is  manifestly  a  question 
of  public  policy  and  one  on  which  those  at  present  engaged  In  the  Industry  can- 
not properly  express  any  official  opinion.  Many  careful  students  and  patriotic 
citizens  believe  that  the  time  is  ripe  for  some  change  in  the  method  heretofore 
followed.  Others  equally  thoughtful  and  devoted  to  the  notion  of  what  they 
believe  to  be  the  best  public  interests  violently  oppose  such  a  change.  Under  a 
democratic  government  such  as  is  enjoyed  in  this  country  the  public  will  de- 
cide between  the  two  schools  of  thought,  whenever  a  majority  Is  convinced  of 
the  merits  of  the  plan  advocated  by  the  one  school  or  the  other. 

It  seems  proper,  however,  that  those  particularly  familiar  with  the  present 
serious  condition  of  the  industry  should  call  to  the  attention  of  the  Commis- 
sion certain  features  of  the  situation  having  an  immediate  and  material  ini- 


2160      PROCEEDINGS  OF  FEDERAL  ELECTRIC!  RAILWAYS  COMMISSION. 

liortance  in  the  consideration  of  this  question.  Speaking  generally,  either  State 
or  niuniciiml  ownership  cannot  be  effected  without  appreciable  delay.  This 
moans  in  the  present  desperate  situation  of  the  street'  railways  serious  conse- 
quences in  the  way  of  further  contraction  and  deterioration  of  service.  Too 
many  companies  are  already  in  the  hands  of  receivers,  and  too  many  ai*e 
threatened  by  a  like  fate,  for  the  public  to  l>e  subjected  to  such  consequences. 

No  form  of  public  ownership  is  practical  until  a  real  majority  of  that  gov- 
ernmental division,  which  it  is  proiK>sed  shall  undertake  it,  has  bei'ome  con- 
v:nco<l  of  its  desirability.  It  was  not  apparent  from  the  testimony  before  the 
Commission  that  such  a  conviction  had  been  reached  in  any  large  number  of 
insi antes.  Even  after  a  receptive  state  of  mind  may  have  been  developed 
in  the  public,  there  was  general  agreement  even  among  those  witnesses  advo- 
cating public  ownership  that  legislation  would  be  necessary  to  authorize  eveu 
State  ownership,  and  that  in  substantially  all  cases  legislation  and  in  many 
cases  constitutional  amendments  would  also  he  necessary  to  authorize  muntct- 
jxilitics  to  take  over  existing  railways.  In  the  latter  case,  action  by  the  munici- 
pal it  es  themselves  would  also  be  re(|uired,  and  we  believe  that  no  case  was 
called  to  the  attention  of  the  Commission  of  any  municipality  linancially  able, 
or  which  could  be  nw\de  tinancially  able  without  further  legislation,  to  meet 
t}ie  heavy  initial  cost  either  to  take  over  an  existing  railway  system  or  build  a 
new  one  in  its  place.  The  removal  of  all  these  legal  and  financial  obstacles 
to  the  substitution  of  public  for  private  ownership  would  necessarily,  in  nearly 
every  case,  be  a  matter  not  of  months,  but  of  years.  So  far,  therefore,  as 
C'.mcems  remeclying  the  situation  pointed  out  by  the  Secretaries  of  Commerce 
and  Labor  in  their  conununicatlon  to  the  President,  it  is  obvious  that  any  sug- 
j.estion  for  any  form  of  public  ownership  of  street  railways,  however  attractive 
it  may  be,  is  today  academic.  The  public  needs  an  inuneiliate  improvement 
and  extension  of  service.  The  companies,  before  they  can  render  such  service, 
ne<»d  a  restoration  of  credit,  wliich  practically  none  of  them  now  enjoys.  That 
creilit  cannot  be  restored  without  sufficient  additional  revenue  to  justify  it 
and  without  such  evidence  of  public  intention  to  permit  a  continuance  of  the 
additional  revenue  as  will  induce  investors  again  to  risk  their  capital  in  this 
industry.  Such  immediate  attention  to  insuring  increased  revenue,  and  satisfy- 
ing investors  of  the  permanent  safety  of  their  capital  through  a  condition  of  such 
flexibility  of  rates  as  will  not  again  jeopardize  the  revenue,  need  in  no  way 
militate  against  the  ultimate  realization  of  the  object  of  those  who  advocate 
some  form  of  public  ownership.  That  public  ownership  can  begin  as  well  at 
one  tinje  as  at  another,  providetl,  that  in  as.suring  sufficient  revenue  and  suffi- 
cient protection  to  capital,  some  proper  basis  is  adoptetl  for  a  subsequent  pur- 
chase of  the  privately  owned  proi>erties.  Indeed,  unless  this  is  done,  it  is  diffi- 
cult to  conceive  any  possible  way  in  which  the  confidence  of  investors  can  be 
revived,  or  the  additional  capital,  absolutely  necessary  to  continue  the  satis- 
factory operation  of  our  electric  railways,  can  be  obtained. 

It  necessarily  follows,  therefore,  that  for  several  years  private  capital  and 
private  management  must  in  the  main  be  relied  upon  to  provide  this  public 
service.  From  the  trend  of  public  opinion  as  voiced  in  the  hearings  before 
the  (i)ommission.  and  gathered  from  the  expressions  of  the  public  press,  it 
seems  ])rol'able  that  there  is  a  general  public  preference  for  a  continuance 
of  that  method  of  furnishing  this  service  which  has  hitherto  introduced  and 
developed  it  with  such  extraordinary  advantage  to  the  public  in  the  extent 
of  tracks  and  character  and  reliability  of  service. 

(E)  If  Private  Capital  and  Private  Enterprise  are  Essential  to  the  Successful 
Conduct  of  the  Business,  on  What  Terms  May  They  be  Obtained? 

Of  almost  equal  importance  is  a  variation  of  this  question,  liow  can  such 
capital  and  private  enterprise,  already  enlisted  in  this  business  be  retained? 
So  far  as  capital  is  concerned,  that  already  invested  cannot,  it  is  true,  be 
recovered  and  devoted  to  more  attractive  undertakings.  For  the  public,  how- 
ever, this  is  but  poor  consolation.  Without  additional  capital  the  requisite 
continuance  and  development  of  service  is  impossible.  As  concerns  a  retention 
of  private  initiative  and  enterprise  in  the  conduct  of  the  business,  quite  apart 
from  obtaining  them  for  the  future,  the  case  is  far  different.  Unless  the 
conduct  of  the  business  is  placeil  upon  a  satisfactory  basis  in  its  relation  to 
the  conununities  for  whose  accommodation  it  is  conducted,  both  these  features, 
initiative  and  enterprise,  so  essential  to  its  success,  will  be  lost. 


PROCEEDIiNGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2161 

Present  investors,  once  convinced  of  the  hopelessness  of  receiving  fair  treat- 
ment, although  unable  to  withdraw  their  existing  investment,  ^vill  cease  to 
interest  themselves  in  its  management,  and  will  direct  their  attention  to 
some  more  stable  and  attractive  form  of  industry.  The  individuals  responsible 
for  the  active  management  of  the  business,  and  upon  whose  devotion,  enthu- 
siasm, and  ability,  the  successful  results  of  that  management  must  always 
largely  depend,  will  seek  other  employment  promising  better  appi*eciation  and 
reward  for  their  efforts.  They  are  not  tied  to  this  business  as  are  the  in- 
vestors. Not  only  need  they  make  no  further  contribution  of  their  vitality 
ami  ability  to  a  business  refusing  to  recognize  what  they  do,  but  they  may 
withdraw  all  the  valuable  features,  business  experience  and  executive  ability, 
of  their  past  contribution  and  dispose  of  them  elsewhere.  Attention  has 
already  been  called  to  the  loss  of  personnel  in  the  Boston  Elevated,  which 
may  have  been  merely  a  coincidence,  but  may  also  indicate  such  a  tendency 
as  might  be  expected  among  active  men  finding  that  they  were  connected  with 
a  water-logged  enterprise. 

Private  capital  and  private  enterprise,  can  neither  be  permanently  retained, 
nor  can  the  additional  capital  absolutely  necessary  to  success,  be  obtained, 
unless  the  reward  received  is  sufficient  to  attract  the  initiative  of  investors 
and  managers  essential  to  the  development  of  the  industry — and  to  attract 
that  initiative  in  competition  with  all  other  industries  seeking  that  same  capital 
and  that  same  managerial  ability. 

Transportation,  constantly  expanding  in  extent,  quickly  taking  up  and  in- 
corporating every  mechanical  improvement  and  device,  always  on  the  watch 
and  eager  to  adopt  every  new  idea,  promising  greater  efficiency  and  more 
complete  public  accommodation,  will  cease  to  be  obtainable — indeed  can  be 
no  longer  expected — if  such  reward  to  capital  and  initiative  is  restricted  to 
a  mere  investment  return.  Such  a  return  has,  in  the  past,  been  regarded 
by  the  public,  and  treated  by  regulating  administrations,  both  local  and  State, 
as  sufficient.  The  industry,  too,  in  many  cases,  accepted  and  acted  upon  the 
same  mistaken  idea.  This  joint  mis-conception  accounts  in  large  measure 
for  the  present  plight  in  which  this  industry  and  the  public  find  them- 
selves— toward  which  even  under  a  continuance  of  the  more  normal  condi- 
tions, preceding  the  war,  they  were  surely  drifting. 

The  sudden  outbreak  of  the  war  revealed  the  true  situation.  The  investors 
at  any  rate,  have  been  disillusioned.  The  public  also  realize  the  false  basis 
of  their  relation  to  the  industry.  The  former  will  surely  never  again  embrace 
the  idea  that  investments  in  public  transportation  are  to  be  regarded  as 
approximating  those  in  public  securities.  They  have  seen  the  moderate 
returns  upon  such  investments  entirely  suspended,  while  industries  in  com- 
parison with  this  one,  regarded  as  hazardous,  have  increased  their  previously 
larger  returns  and  steadily  risen  in  market  value. 

Attention  has  been  concentrated  on  the  causes  for  this  debacle.  Fixed  and 
unchangeable  maximum  rates  of  fare,  permanent  burdens  of  contributions  to 
the  public  for  t^  levies  without  benefit  either  to  the  industry  or  its  patrons, 
additional  burdens  without  ability  to  secure  additional  revenue  to  meet  them, 
fixed  term  franchises  without  provision  either  for  return  of  investment  at  their 
end  or  its  amortization  during  their  life,  one  hundred  per  cent,  increases  in 
wages  and  supplies,  or  a  halving  in  the  value  of  the  fixed  fares,  according  to 
the  view^  one  takes  of  high  prices  or  depreciated  value  of  money,  without  public 
recognition  of  their  effect  upon  the  industry,  authority,  as  in  New  York,  for 
regulatory  Commissions  to  order  more  service  and  equipment  without  authority 
to  permit  the  companies  to  secure  more  revenue — all  these  errors  in  the  treat- 
ment of  the  industry  call  for  attention  and  correction.  That  many  of  them 
are  a  result  of  over-optimisni  on  the  part  of  the  pioneers  in  the  industry  is 
true.  They  were  too  ready,  because  too  ignorant  of  what  the  future  might 
develop,  to  accept  terms^'of  franchises  which  were  illogical  and  have  proved 
incapable  of  longer  performance.  That  the  public  was  equally  misled — often 
perhaps  by  the  very  enthusiasm  of  the  industry  itself — and  sought  to  obtain 
the  greatest  possible  consideration  for  their  grants,  is  also  true.  These  explana- 
tions do  not,  however,  change  the  result.  The  investors  will  no  longer  invest, 
and  the  public  can  no  longer  obtain  the  necessary  service,  until  the  relations 
between  them  are  changed.  No  change,  it  may  safely  be  predicted,  will  be 
effective  which  does  not  assure  freedom  not  only  from  a  repetition  of  the 
recent  experience  of  the  industry,  but  also  from  the  present  unsatisfactory 
transportation  situation  both  as  respects  the  investors  and  the  Public. 


t'\ 


2162      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

(F)  Assuming  that  the  Use  of  Prirate  Capital  and  Private  Enterprise  is  the 
Most  Efficient  and  Economical  Manner,  or  for  the  Present  at  any  Rate  is 
the  Only  Practical  Method  of  Securing  Local  Transportation  for  Com- 
munities, how  Should  the  Interest  Both  of  the  Public  and  of  the  Utility  be 
Protected  and  What  Are  the  Principles  to  be  Recognized  in  Readjusting  the 
Relations  Between  Them? 

Altliough  the  opinion  of  Chief  Justice  Shaw,  in  the  case  of  the  Comnion- 
wealth  against  Temple,— cited  in  the  foreword  to  this  brief,— was  written 
sixty  years  ago,  it  substantially  states  the  fundamental  principles  governinir 
the  correct  answer  to  this  question. 

That  opinion  defines.  (1)  Tlie  Nature  of  the  Industrj,— to  provide  and  koof) 
ui)  a  public  easement;  (2)  Its  Object,  the  acconnnodation  of  travelers;  and, 
(3)  A  Profit  to  those  ivho  provide  the  capital  for  this  object,  relying  upon  the 
law's  assurance  of  enjoying,  with  reasonable  certainty,  compensation  in  tolls 
and  fares. 

(1)  This  public  easement,  entrusted  to  an  electric  railway  company  to  fur- 
nish and  maintain,  is  inlierent  in  the  sovereign  power  of  the  State  and  is  dele- 
tmed  by  it  and  subject  to  resumption  at  its  pleasure.  It  is  an  important  func- 
tion of  the  State  to  provide  for  the  safe  and  convenient  movement  of  its  citizens 
from  place  to  place.  To  a  great  extent  the  easement  delegated  to  and  exer- 
cisetl  by  the  railway  is  a  development  of  the  public  highway  itself  in  which 
the  tracks  are  laid.  It  is  merely  an  improved  method  of  using  a  highway  either 
in  connection  with  other  uses,  in  the  case  of  streets,  or  exclusively,  in  the  case 
of  private  rights  of  way.  acquired  either  by  purchase  or  by  eminent  domain. 
Its  most  universal  recognition  is  in  the  construction  and  maintenance  of  the 
imblic  highways,  in  which  the  tracks  are  laid.  Being  thus  a  iwirt  of  the  public 
easement,  it  follows  that  the  exercise  of  this  public  easement  must  at  all 
times  be  subject  to  regulation  and  control  by  the  State  (or  its  governmental 
subdivisions,  under  delegation  from  the  State)  through  the  iwlice  iiower. 
L'nless,  therefore,  the  Public  has  impaired,  through  improvident  contracts,  the 
right  to  use  this  iwwer,  assuming  such  impairment  to  be  legally  possible,  the 
essential  rights  of  the  public  in  regard  to  the  industry  are  always  safeguarded 
by  the  law  and  need  no  special  consideration. 

(2)  The  main  object  and  public  benefit,  for  wliich  these  special  modes  of 
using  the  highway  are  gnintetl,  is  the  accommodation  of  travelers.  This  prin- 
ciple must  at  all  times  be  kept  in  mind,  and  all  wise  methods  of  dealing  with  the 
industry  should  be  directed  to  realizing  this  object.  Many  illogical  terms,  for- 
eign and  often  antagonistic  to  the  real  public  object  of  these  utilities,  have 
been  imposed  merely  because  public  authorities  luive  not  regardetl  that  object. 
Efforts  have  been  made  to  bargain  and  trade  with  the  utility,  as  if  it  was  not 
conducting  a  public  easement  for  the  benefit  of  travelers.  Connnunities  have 
sought  to  make  of  these  utilities  sources  of  municipal  revenue,  to  add  to  their 
character  of  public  agents  in  performing  a  public  service  that  of  collectors  of 
a  great  variety  of  indirect  taxes  laid  upon  the  car-riders, — noL  for  the  benefit 
of  the  car-riders  but  for  the  i-elief  of  other  taxpayers.  Not  ^nly  have  thes<' 
indirect  taxes  hampered  the  industry  but  the  rigid  form  of  their  imposition 
lias  been  an  increasing  oJ>stacle  to  its  development.  As  conditions  of  the  indus- 
try or  the  requirements  of  the  public  change,  calling  for  more  or  different 
service,  it  is  obvious  that  the  relations  between  the  public  and  the  utility  should 
be  sufficiently  flexible  to  respond  to  the  new  situation.  Evidently,  therefore, 
any  rigidity  of  terms  in  the  grants  embodying  them,  preventing  a  prompt  and' 
effective  response  to  constantly  changing  conditions,  should  be  avoided. 

(3)  The  proprietors  of  the  franchise  should  receive  with  reasonable  cer- 
tainty, their  profit,  in  the  form  of  compensation  through  tolls  and  fares,  for 
their  outlay  of  capital  in  laying  out  and  providing  for  this  public  easement. 
In  practice  this  principle,  so  fundamental  to  a  continuance  of  this  public  service 
by  the  outlay  of  private  capital,  has  been  very  generally  disregarded  in  the 
franchise  bargaining  and  trading.  The  failure  to  recognize  it  has  destroyed 
the  confidence  of  Investors  in  securities  which  experience  has  shown,  have  no 
reasonable  certainty  of  profit.  Its  neglect  has  caused  most  of  the  present  difli- 
culties  of  the  industry.  Various  phases  of  the  application  of  the  principle  are 
discussed  in  a  subsequent  part  of  this  Brief  (p.  90)  to  which  the  attention  of 
the  Commission  is  particularly  invited.  Stated  in  more  modern  language,  Chief 
Justice  Shaw's  principle  calls  for  the  maintenance,  unimpaired,  of  the  principal 
or  capital  investment  of  the  utility,  and  of  a  sufficient  return  upon  it  to  compen- 
sate   the    investors    for    contributing    it.      Both    results    must    be    effected 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2163 

through  adequate  tolls  or  fares.  The  folly  of  attempting  to  fix  those 
in  advance  and  for  all  time  is  demonstrated  by  the  experience  of  recent 
years.  In  an  industry,  of  which  more  than  half  the  operating  expenses  is  the 
wages  of  hibor,  it  is  clear  that  revenue  must  fluctuate  as  wages  go  up  or  down ; 
if  revenue,  then  also  tolls  and  fares  from  which  alone  that  revenue  is  derive<l. 
The  wages  in  Boston,  in  less  than  two  years,  have  so  increased  as  to  cost  more 
per  passenger  than  the  entire  fare  paid  by  a  passenger  before  the  public  trustees 
Increased  that  fare.  The  labor  program  of  a  minimum  annual  wage  of  $2,00<) 
for  the  lowest  paid  street  railway  employe,  and  a  continuance  of  the  present 
differential  between  the  various  classes  of  employes,  if  applied  to  the  industry 
in  the  census  year  1917,  would  have  absorbed  its  entire  gross  receipts. 

What  constitutes  a  capital  investment  is  not  easy  to  determine.  In  Massa- 
chusetts, where  all  capital  issues  have  been  supervised  and  approved  by  a 
Commission,  the  actual  investment  as  shown  by  the  Commission's  records  is 
taken  as  the  investment  cost.  Even  though  substantial  accrued  depreciation  is 
manifest,  the  Commission  has  rightly  held  in  several  recent  decisions  that  such 
depreciation  should  be  made  up  by  the  public  through  rates  of  fare  adequate 
for  that  purpose.  The  only  exceptions  recognizetl  by  that  Commission  are 
two, — one,  where  a  utility  is  shown  to  have  l>een  guilty  of  such  culpable  or 
incompetent  management  as  to  constitute  negligence  for  which  the  investor  and 
not  the  public  should  suffer; — tlie  other,  where  the  depreciation  is  the  result  of 
paying  unduly  excessive  dividends.  In  many  jurisdictions  the  evidence  of 
actual  investment  is  not  available  and  resort  has  l)een  had  to  some  form  of 
valuation  to  determine  the  probable  investment  cost.  Many  different  opinions 
as  to  the  method  of  reaching  such  a  valuation  exist.  As  this  matter  stands 
at  present  the  method  to  be  pursued  in  any  particular  instance  is  to  be  decided 
either  by  the  law  in  the  i>articular  jurisdiction  in  which  the  utility  exists,  or 
in  the  absence  of  legal  direction,  by  such  method  as  may  l>e  reached  by  agree- 
ment. It  may,  however,  be  properly  pointed  out  that  if  the  evidence  before  the 
Commission  as  to  the  prol>able  indefinite  continuance  for  many  years  of  the 
present  high  level  of  prices  is  con-ecr,  and  we  recall  no  witness'  who  seriously 
questioned  its  correctiiess,  any  valuation  hereafter  undertaken  should  recog- 
ni;:e  the  new  level  of  prices.  This  follows  from  the  puri>ose  for  which  such 
valuations  are  made, — they  are  made  to  determine  the  value  to  the  community 
of  the  property  devote<l  to  providing  the  community  with  transportation. 
Whatever  the  property  may  have  cost,  it  is  obvious  that  it  cannot  now  be 
replacetl  at  such  figures. 

The  Committee  of  One  Hundred  was  prepared  to  inti*oduce  considerable 
evidence  on  the  question  of  valuation  and  the  principle  that  should  govern  it. 
This  evidence  was  not  introduced  because  of  the  riding  of  the  Commission 
that  it  was  inexpedient  for  it  to  undertake  to  deal  with  such  a  controversial 
subject  in  the  limited  time  at  its  disi)osal.  Attention  is  called  to  this  ruling 
by  the  Commission  which  was  reiterated  toward  the  close  of  the  public  hear- 
ings (Record  for  Octol)er  4th,  page  6156).  For  the  same  reason  it  seems  un- 
profitable to  discuss  in  this  brief  these  principles  as  it  is  assumetl  that  the  Com- 
mission will  not  include  among  its  recommendations,  any  recommendation  as 
to  the  method  or  principles  which  should  govern  the  valuation  of  a  property  of 
a  railway  utility. 


I. 

HISTORICAL   DEVELOPMENT    OF   THE   STREET   RAILWAY 

INDUSTRY. 


The  business  of  transporting  the  public  through  the  streets  of  our  cities  has 
been  a  logical  development  since  the  latter  part  of  the  first  half  of  the  last 
century.  That  development  has  been  continuous.  Its  successive  steps,  although 
of  varying  importance,  might  easily  have  been  predicted,  from  time  to  time, 
by  students  of  city  needs  and  of  inventive  progress. 

(A)  The  Horse  Car  Period— 1850-1890. 

It  began  with  the  introduction  and  use  of  stages  or  omnibuses  drawn  by 
horses — an  obvious  adaptation  of  the  then  universal  system  of  land  travel, 
wherever  a  country  was  sufficiently  civilized  to  possess  practicable  roads  con- 
necting its  different  parts.  These  omnibuses — ^because  of  the  better  construc- 
tion of  city  streets— weue  soon  built  with  a  greater  carrying  capacity,  and  were 


2164      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

designed  to  permit  quicker  ingress  and  egress  to  meet  the  requirements,  of  pais- 
sengers  riding  only  sliort  distiinces,  than  the  lumbering  coaches  traveling  long 
stages  through  the  country.  This  earliest  form  of  urban  travel  was,  never- 
theless, extremely  primitive.  It  neither  invited  nor  developed  any  marked 
riding  habit.  It  contributed  little  to  the  growtli  of  the  cities  or  the  develop- 
ment of  their  suburbs.  It  did  facilitate  to  some  extent,  necessary  travel, 
within  a  city,  for  }>ersons  to  whom  the  time  retpiired  for  walking,  or  th  •  cost 
of  hiring  a  special  vehicle,  was  prohibitive. 

As  late  as  1849,  it  appears  in  the  report  of  the  famous  trial  of  Professor 
Webster  of  the  Harvard  Medical  School  for  the  murder  of  Dr.  Parkman  that 
the  accused  returned  from  the  Medical  School  in  Boston  to  his  home  in  Cam- 
bridge in  "the  hourly''  onmibus  between  those  two  cities — across  the  Cliarles 
River  from  each  other  and  with  a  distance  of  less  than  three  miles  between 
their  city  halls.  According  to  the  police  officer  who  took  the  accused  to  the  jail, 
they  "  conversed  al>out  the  contemplated  railroad  to  Cambridge."  Six  years 
later.  March  26,  ISAG,  horse  cars  began  running  at  relatively  frequent  intervals 
over  this  route,  and  today  Cambridge,  like  the  other  suburbs  of  Boston,  and 
the  many  suburbs  of  other  American  cities,  is  i)ractically  a  part  of  the  larger 
city.  It  has  been  made  so  by  the  street  railways — and  the  community  of 
interest  of  these  various  cities  with  their  suburbs  has  been  nu\de  closer  with 
each  successive  step  in  the  railway  devel(>pment. 

The  invention  of  the  steam  locomotive  and  the  ccmstruction  of  railroads  to 
utilize  to  the  maximum  its  tractive  power,  i)ointe<l  the  way  to  the  earliest  and 
by  far  the  greatest  improvement  in  city  transportation.  If  the  efficiency  of  the 
locomotive  could  l>e  so  much  increased  by  drawing  the  long  distance  stnge 
coach  over  tracks,  why  might  not  the  same  result  follow  the  adoption  of  tho 
same  device  in  the  streets?  Applications  for  charters  for  horse-railroads  soon 
appeared,  and  less  than  twenty  years  after  the  steam  railroads  began  opera- 
lion,  the  construction  of  street  railway  tracks  began  in  various  cities,  and  the 
horse  drawn  omnibuses  began  to  disapiiear  before  the  horse  drawn  cars  upon 
those  tracks.  The  early  horse  car  was  merely  an  improvement  of  the  omnibus. 
Hut  the  details  of  the  improvement — for  the  most  part  due  to  its  running  on 
tracks — were  so  attractive  to  the  public,  that  the  horse  car  largely  supplanted 
the  onmibus  bumping  over  the  pavements,  as  a  common  carric  of  passengers. 
The  public  liked  the  greater  smoothness  of  the  rails,  the  greater  ease  and 
quickness  of  entering  and  leaving,  and  the  more  reliable  sche<lules.  To  the 
owners  the  reduced  wear  and  tear  upon  their  vehicles,  and  the  greater  capacity 
of  their  horses,  were  matters  of  no  small  concern. 

Tlie  street  railway  system  of  the  country,  with  horses  supplying  the  motive 
power,  began  about  1850.  While  of  small  proportions,  compared  with  the 
pres*»j;t  electric  railway  industry,  it  proved  of  great  convenience  to  the  public 
aiul  constitute*!  a  marked  advance  over  the  omnibuses  which  it  superseded. 
The  operating  companies  were  usually  small,  each  controlling  only  a  few  miles 
of  track  making  uj)  relatively  short  lines.  Frequently  the  street  railway  sys- 
tem of  a  City  belonged  to  several  independent  companies  operating  their  re- 
spt^ctive  lines  from  the  business  centre  to  the  outlying  sections  or  to  the  neafer 
suburbs.  The  lines  were  built  without  regard  to  any  general  plan  for  furnish- 
ing a  comprehensive  scheme  of  transportation,  and  many  of  the  later  ones 
were  projected  to  compete  with  earlier  companies,  involving  a  considerable 
amount  of  unnecessary  and  wasteful  duplication  of  tracks. 

In  an  explanation  of  the  need  of  the  present  Ameriran  Electric  Railway 
Association,  which  was  organized  in  1882  as  the  American  Street  Railway  Asso- 
ciation, the  following  statistics  were  given  to  show  the  magnitude  of  the 
industry.  They  furnish  an  interesting  basis  as  well  for  comparison  with  the 
great  development  of  the  electric  railways  of  to-day     •     ♦     ♦. 

There  are  now  organized  and  doing  business  in  this  country  and  Canada 
four  hundred  and  fifteen  street  railways.  These  companies  employ  an 
army  of  about  3r»,000  men.  They  run  18,000  cars,  which,  with  the  horses 
attached,  would  make  a  solid  line  of  cars  reaching  from  Boston  to  Albany. 
More  than  100,000  horses  are  in  daily  use,  and  calculating  that  the  aver- 
age life  of  a  horse  in  street  railway  service  is  four  years,  it  makes  the 
consumption  of  horses  25,000  per  year,  a  fact  of  much  importance  to  the 
farmers  of  the  country  east,  west,  north  and  south.  To  feed  this  vast  num- 
ber of  horses  retjuires  annually  l.'iO.OOO  tons  of  hay  and  11,000,000  bushels 
of  grain. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2165 

These  companies  own   and  operate  over  3,000  miles  of  track— nearly 
enough  to  span  the  country  from  Boston  to  San  Francisco.     The  whole 
number  of  passengers  carried  annually  is  over  1.212,400,000  or  a  number 
nearly  pqual  to  the  entire  population  of  the  globe.    The  amount  of  capital 
invested  in  these  railways  exceeds  $150,000,000  with  absolutely  no  secur- 
ity but  the  faithful  and  satisfactory  service  rendered  the  traveling  public 
by  the  companies  themselves. 
Those  were  the  horse  railwav  statistics  of  1882.     The  1917  Census  reports 
1  307  electric  railwav  companies.  294,826  employes,  102,603  electric  cars  (each 
of    more    than    twice    the    capacity    of    the    horse-car),    a    consumption    of 
12187  850  831   kilowatt  hours   of   electricity   generated   or   purchased,    44.83.3 
mi'les  '  of '  track,     14,.506,914,.573     passengers,     and     an     invested     capital     of 

$5  53*^  223  818 
'  Labor  and  its  compensation,  which  has  proved  in  recent  years  a  prolific 
source  of  difficulty  in  street  railway  operations,  and,  more  than  any  other  one 
feature  of  such  operation,  probably  more  than  all  others,  has  brought  many 
companies  to  bankruptcy  through  the  higher  wages  made  necessary  by  the 
increased  cost  of  living  and  the  diminishing  value  of  the  currency,  was  not  a 
serious  operating  or  financial  problem  in  the  horse-car  period.  While  the 
hours  were  long,  the  work  arduous,  and  the  pay  low.  the  jobs  were  popular 
and  applicants  for  them  numerous.  As  recently  as  1880,  the  pay  of  a  con- 
ductor or  driver,  on  what  later  became  the  Bay  State  Street  Railway  of  Massa- 
chusetts, was  $1.75  a  day.  For  this  daily  wage,  on  a  typical  line  of  that 
companv  the  emploves  made  seven  round  trips  of  an  hour  and  thirty  minutes 
each  This  day's  work  was  not  finished  until  about  fourteen  hours  after  it  be- 
gan Under  winter  snow  conditions,  in  the  Northern  cities,  the  driver  guided 
four  horses  through  the  traffic,  the  platforms  were  entirely  open,  and  the  cars 
themselves  were,  on  most  lines,  unheated.  As  :Mr.  P.  J.  O'Brien,  one  of  the 
present  vice-presidents  of  the  Amalgamated  Association  of  Street  and  Electric 
Railway  Emploves,  who  had  experience  in  Springfield,  ]Mass.,  as  a  motorman, 
testified  in  a  hearing  l)efore  the  Massachusetts  Railroad  Commission :  "  I  think 
tliose  were  barbarous  days,"  an  opinion  which  was  fortified  by  the  testimony 
of  .John  W.  Powers,  a  former  horse  car  driver  who  in  response  to  the  question, 
"  Was  it  hard  work  driving  horse  cars  in  those  days?",  answered,  "  Yes,  sir,  it 
was  •  the  weather  was  severe.  Before  they  built  the  Stafford  road  barn,  I  had 
a  string  of  eight  horses  and  had  to  exchange  the  horses  standing  in  the  street. 
In  winter  time  we  had  to  have  four,  and  we  had  to  breathe  and  blow  in  those 
snaps.  Everything  was  frozen  up.  *  *  *  I  would  rather  run  an  air  brake 
car  than  drive  a  horse  car." 

(B)  Episode  of  the  Cable  System— 1873-1898. 

In  San  Francisco,  where  the  stiff  grades  made  such  an  expedient  particularly 
attractive,  the  moving  cable  system  of  propelling  cars  was  first  introduced  in 
1873.  Before  this,  and  indeed  sporadically  after  the  first  construction  of  tracks 
in  the  streets,  trial  had  been  made  of  what  were  known  as  dummy-engine  cars, 
cH)nsisting  of  steam  locomotives  boxed  in  so  as  not  to  frighten  horses.  These 
never  attained  much  popularity  and  were  never  extensively  used.  The  Redfield 
Commission's  report  to  the  Massachusetts  Legislature  in  1865  mentions  its 
inspection  and  trial  of  such  engines  in  Philadelphia,  New  York  and  Hoboken, 
and  expressed  some  confidence  in  their  later  general  substitution  for  horses. 

The  moving  cable  when  more  extensively  developeil  some  years  after  the 
first  short  line  in  San  Francisco,  gave  real  promise  of  revolutionizing  the  city 
street  railway  business,  so  far  as  motive  power  was  concerned.  The  scheme 
consisted  of  an  endless  cable  continually  moving  through  an  underground  con- 
duit and  drawn  over  huge  drums  at  a  power  station.  Cars  were  propelled  by 
grips,  operated  by  the  gripman  of  a  oar,  tightened  upon  the  moving  cable.  The 
car  was  stopped  by  loosing  the  grip  and  applying  the  brakes  in  the  ordinary 
way  This  innovation  permitted  the  use  of  larger  cars.  It  required  con- 
siderable skill  on  the  part  of  the  gripman  to  avoid  disagreeable  jolts  in  start- 
ing the  car,  as  the  cable  was  always  moving  at  full  speed.  Installation  of  the 
cable  system  was  very  expensive.  It  added  to  the  cost  of  the  tracks  themselves, 
the  construction  of  the  conduit,  the  cables,  and  the  power  station;  and  the 
cable  required  frequent  renewal  from  its  continual  "picking  up"  and  release 
by  the  car  grips, 

160643**— 20~voL  3 8 


2166      PBOCEEDINGS  OF  lEDEBAL  ELECTRIC  RAILWAYS  COMMISSION. 

Those  companies  which  adopted  the  cable  sj-stem,  in  their  wish — prompted 
doubtless  by  the  hope  of  profit  also — to  give  their  patrons  the  best  and  latest 
form  of  traction,  soon  found  that  this  large  additional  investment  had  been 
rendered  useless  by  the  application  of  electricity  as  a  motive  power.  The 
latter  was  speedily  found  to  be  as  reliable  as  the  cable,  more  flexible  in  permit- 
ting a  wide  range  of  speed,  and  more  economical.  Fortunately  for  the  Indus 
try — and  for  the  public  which  necessarily  supports  it,  and  must  finally  foot 
tlH»  cost  of  promising?  experiments  undertaken  for  the  public  benefit — this  dis- 
covery and  application  of  electric  motive  i>ower  was  made  before  the  cable 
had  larsrely  supplanted  the  horses.  New  York,  Pittsburgh,  Cincinnati,  Wasli 
ington,  Sail  Francisco,  Denver  and  Chicago  were  the  principal  cities  in  which, 
to  a  greater  or  less  extent  the  cable  had  been  installed.  In  Denver,  it  is  a 
tradition  in  the  industry  that  a  cable  installation  costing  some  $5,000,OlM)  had 
been  cpmpleted  less  than  two  years  before  the  superiority  of  electricity  was 
<lemonst rated.  The  cable  e(iuipment  was  scrapped  and  the  investment  in  it 
rendere<l  useless. 

(C)  Lack  of  Scientific  Consideration  of  Relations  Between  Companies  and 

the  Public. 

The  rights  or  "  franchises  "  granted  to  companies,  to  construct  and  operato 
their  street  railways  were  of  various  kinds.  In  many  jurisdictions  there  existed 
an  extraordinary  obtuseness  to  the  public  object  to  be  accomplished,  and  to  the 
projier  means  to  accomplish  it,  in  authorizing  this  new  and  improve<l  utiliza- 
tion of  the  public  ways.  Reference  has  already  l>een  made  to  the  luminous 
opinion  of  Chief  Justice  Shaw  of  the  ]Massachusetts  Supreme  Court,  in  Com- 
monwealth r«.  Temple,  14  Gray.  60.  After  the  lapse  of  nearly  sixty  years, 
little  can  be  added  to  what  he  then  laid  down  as  to  the  object  of  permitting 
these  railways,  and  the  principles  which  should  be  applied  to  their  operatioji 
and  control.  Unfortunately,  that  decision  was  not  known  to  the  public  au- 
thorities in  most  cases  called  u\kh\  to  act,  and  even  in  Massachusetts,  its  plaiji 
common  sense  was  often  disregarded. 

(1)  Varieties  of  Street  Railway  Franchises. 
Four  general  views  of  street  railway  franchises  may  easily  be  distinguished. 

(a)  The  License  Form  of  Franchise. 

This  prevails  in  Massachusetts,  where  the  right  to  lay  down  tracks  is  called 
a  location,  is  granted  by  the  local  city  or  town  authorities,  for  an  unlimited 
period,  confers  no  property  right,  but  like  all  licenses  is  revocable  by  the 
grantor  (held  in  Massachusetts  to  be  the  Commonwealth  acting  through  sub- 
ordinate governmental  agencies  usually  selectmen  of  towns  and  boards  ot 
aldermen  of  cities)  and  subject  to  suri*ender  by  the  grantee.  Its  chief  defect 
is  a  lack  of  security  for  the  investment,  now  amounting  in  Massachusetts  alone, 
to  some  $225,000,000,  in  case  of  revocation ;  and  its  chief  merits  are  the  absenc-.^ 
of  any  possible  claim  for  property  value  in  the  franchise  itself  in  case  of  revo- 
cation, and  in  its  susceptibility  to  legislative  regulation  and  control  in  the 
light  of  subsequent  experience  and  change  of  public  policj'.  It  is  an  imiwssible 
form  of  franchise  in  any  jurisdiction  in  which  investors  cannot,  with  practical 
certainty,  rely  upon  the  good  faith  of  the  public. 

(b)  The  Permanent  or  Perpetual  Franchise. 

The  best  known  example  of  this  type  are  the  older  New  York  City  surface 
franchises,  held  in  People  vs.  O'Brien.  Ill  N.  Y.,  1,  to  constitute  property  of 
the  grantees  which  cannot  be  taken  from  them  except  upon  payment  of  dam- 
ages as  in  the  cfise  of  any  other  proi^erty.  This  kind  of  franchise  affords  ample 
pi-otection  to  capital,  unless  accompanied  by  fare  provisions  which,  like  the 
character  of  the  franchise  itself — unchangeable  against  the  objection  of  its 
owner — are  absolute  and  unyielding  to  altvred  conditions,  without  the  consent 
of  the  public  authorities. 

(c)  The  Fixed  Term  Franchiae. 

This  is  the  form  of  franchise  generally  adopted,  sometimes  even  prcscribe<l 
by  constitutional  provisions,  outside  of  New  England  and  some  other  states. 
It  contains  all  tlie  defects  of  the  perpetual  franchise  as  against  the  public, 
and  all  the  defects  of  the  revocable-license  franchise  as  against  the  investor. 
During  the  fixed  term,  the  former  is  practically  powerless,  at  law,  to  secure 
concessions  in  rates  or  improvements  in  service,  and  at  the  termination  of  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2167 

term  the  investor  is  equally  at  the  mercy  of  the  public  authorities  as  to  recog- 
nition of  his  investment.  In  tlieory,  this  form  of  franchise  is  analogous  to  a 
lease,  involving  the  right  of  the  lessee  to  make  a  large  investment  upon  leased 
premises  (in  this  case  the  public  highways)  and  therefore  to  collect  sufficient 
rentals  during  the  term  to  amortize  that  investment,  as  well  as  to  pay  an 
adequate  return  uix>n  it,  during  the  term  of  the  lease.  If  the  analogy  were 
complete,  the  improvements  (in  this  ca.se  the  railway)  would  then  become, 
without  compensation  therefor,  the  property  of  the  lessor.  In  practice,  how- 
ever, neither  party  has  acted  upon  this  theory  or  incorporated  in  the  franchise 
the  terms  which  the  theory  would  obviously  suggest. 

No  term  franchise  in  an  American  city  has  ever  come  to  our  attention  in 
which  the  maximum  charges  permitted  could  by  any  iwssibility  pay  a  reasonable 
return  upon  the  investment  and  amortize  any  substantial  part  of  the  invest- 
ment. On  the  contrary,  the  stipulated  rates  have  always  contemplated  an 
enterprise,  not  terminating  with  the  fixed  term  of  the  franchise,  but  continuing 
indefinitely  beyond  it,  and  furnishing,  so  far  as  the  public  authorities  could 
foresee,  only  a  reasonable  return  on  the  investment  itself.  No  provision  has 
been  made  for  amortization.  Indeed,  Mr.  Mote,  Secretary  of  the  Indiana  Pub- 
lic Service  Commission,  commented  severely  on  a  sinking  fund  requirement  of 
a  mortgage  on  the  Indianapolis  Street  Railway,  and  showed  considerable  pride 
in  the  Commission's  insistence,  in  connection  with  re-organization  of  the  utility, 
that  this  sinking  fund  should  be  invested  in  proiK?rty  useful  for  the  street  rail- 
way.    This  action  completely  negatived  the  theory  of  the  term  franchise. 

Similarly  the  grantees  of  such  franchises  have  always  ignored  the  theory. 
They  have'  issued  bonds  without  sinking  fund  provisions,  or  containing  entirely 
inadequate  provisions  often  maturing  at  or  shortly  before  the  end  of  the  fixed 
term.  They  have  made  additions  to  the  property,  increased  the  service  in  re- 
Rl>onse  to  public  demands  or  the  growth  of  the  city,  and  generally  handled  their 
property  in  exactly  the  same  way  as  if  they  held  either  a  perpetual  franchise, 
or  an  indeterminate  permit 

Only  in  recent  years,  has  the  illogical  nature  of  this  franchise,  and  of  their 
conduct  under  it,  been  brought  home  to  the  parties  to  it.  With  the  proximate 
approach  of  the  franchise's  termination,  agitation  has  arisen  in  some  communi- 
ties for  a  renewal  only  on  new  and  far  more  onerous  terms ;  with  insistence,  as 
an  alternative  to  the  acceptance  of  such  terms,  that  the  property  of  the  utility 
had  only  scrap  value  and  might  be  purchased  on  that  basis.  Fortunately  for 
the  investors,  they  are  able,  with  equal  reason,  to  insist,  in  view  of  their  right 
to  remove  the  property,  even  though  at  the  sacrifice  of  spending  mo.st  of  its 
scrap  value  to  effect  such  removal,  that  the  community  should  pay  iwt  that 
scrap  value,  but  what  it  would  cost  the  community  to  lay  do\\Ti  a  new  railway 
system  after  such  removal. 

These  counter  views,  each  of  equal  technical  force,  produce  a  deadlock  such 
as  at  the  present  time  exists  in  Detroit,  Toledo,  and  some  other  localities. 
The  utility  makes  few  improvements,  the  public  receives  poor  service.  The 
investors  in  the  particular  utility  property  are  panic  stricken.  Street  railway 
investments  generally,  even  where  better  franchise  conditions  exist,  are  dis- 
credited. No  one  benefits,  and  many  interests  are  injured.  Such  franchises 
would  be  greatly  improved  in  cases  where,  l)y  reason  either  of  local  prejudice 
or  constitutional  provisions,  some  form  of  indeterminate  permit  cannot  be 
adopted,  if  there  were  inserted  a  requirement  either  for  their  renewal  upon 
reasonable  terms,  satisfactory  to  the  parties  or  to  be  prescribed  by  some  inde- 
l>endent  tribunal,  such  as  a  State  Commission,  or  for  the  purchase,  at  the 
termination  of  the  franchise,  of  the  grantee's  property  upon  equitable  terms 
set  out  in  the  franchise  itself.  In  no  other  way,  after  some  recent  experiences 
with  such  franchises,  can  reasonably  prudent  investors  be  expected  again  to 
lisk  their  money  in  enterprises  dependent  upon  such  illogical  tenure. 

(d)  The  Indeterminate  Permit. 

This  form  of  franchise  has  been  most  thoroughly  developed  in  recent  legisla- 
tion in  Wisconsin.  It  possesses  the  advantage  of  the  Massachusetts  license- 
franchise  in  having  no  fixed  term.  It,  therefore,  encourages  improvement  and 
development  of  the  utility  by  the  grantee  of  the  franchise.  At  the  same  time, 
it  reserves  to  the  public  the  power  at  any  time  to  take  over  the  enterprise  upon 
a  stipulated  basis.  It  thus  protects  both  the  investment  against  confiscation 
and  the  public  against  extortion  or  paying  compensation  for  the  franchise  itself. 
Even  the  Mas.sachusetts  revocable  license-franchise  seemed  to  recognize  in  a 
vague  way  the  features  of  the  interdeterminate  permit.    Notwithstanding  the 


ti 


m 


V 


2168       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

power  to  revoke  the  location  without  compensation,  the  earlier  lejcislative 
8pe<'ial  charters  reserved  to  the  municipalities  a  right  to  purchase — usually  at 
the  actual  investment  with  a  spt^citied  rate  of  return  from  its  date,  after 
creditinjr  actual  dividends  received.  The  power  to  purchase  has  never  been 
exercised,  and  the  power  to  revoke  has  been  confined  to  special  and  limited 
instances  where  the  traffic  or  other  street  conditions  plainly  justified  it,  even 
in  the  opinion  of  the  franchise  owners  themselves.  Resort  to  the  revocation 
power  for  the  purpose  of  terminating  a  street  railway  company's  right  to 
conduct  its  business  of  a  common  carrier  has  never  been  made  in  Massachusetts 
or  passed  ui>on  l)y  the  courts  of  that  State. 

While  the  most  scientific,  and  the  best  adapted  to  establish  and  maintain  the 
l.roper  relations  between  the  grantees  of  a  street  railway  franchise  and  the 
public,  whom  those  grantees  should  serve,  the  indeterminate  permit  has  been 
develoix^d  so  recently  as  never  to  have  played  any  important  part  in  the  history 
of  the  street  railway  industry.  Its  earlier  adoption  would  have  preventecl 
many  conflicts  and  misunderstandings ;  but  its  chief  claim  to  consideration,  just 
now,  is  its  possibility  of  proving  a  remedy  for  the  present  unfortunate  fran- 
chise situation  in  many  jurisdictions. 

(D)  Imposition  of  Terms,  and  General  Indulgence  in  Bargains  between 
Utilities  and  Public  Officers,  in  Disregard  of  Legitimate  Purpose  of  Trans- 
portation by  Railways  in  the  Street. 

While  the  fundamental  principles  of  diflferent  forms  of  street  railway  fran- 
chises, just  described,  are  easily  distinguished,  their  application  has  been  most 
haphazard  and  confused.  It  is  amazing,  in  any  review  of  the  history  of  the 
street  railway  industry  of  America,  that  an  investment  of  between  $.5,000,000,000 
and  .$6,000,000,000  should  have  been  made  in  the  easy  going  fashion  here  evi- 
denced. Like  Topsy,  this  industry  has  "just  growed."  The  story  is,  at  any 
rate,  a  pleasing  testimony, — in  these  days  of  strange  and  radical  suggestions 
that  neither  the  public  nor  individuals  need  longer  consider  distinction  between 
mcum  ct  tuum, — to  the  faith  of  the  two  generations,  preceding  the  present  one, 
in  the  sense  of  fair  play  possessed  by  the  public  generally.  In  no  other  way 
can  such  an  investment,  upon  such  a  shadowy  and  unstable  tenure,  be  explained. 
It  remains  to  be  seen,  however,  whether,  after  all,  that  faith  was  not  justified, 
and  whether  those  earlier  investors  were  not  as  safe  in  trusting  to  that  sense 
of  fair  play,  as  the  ordinary  business  man  is  in  accepting  his  associate's  word 
as  equal  to  his  hand.  Should  the  public  take  advantage  of  this  faith  of  hun- 
dreds of  thousands  of  investors  in  their  fellow  citizens'  sense  of  justice,  to 
confiscate  any  sul>«tantial  part  of  this  vast  investment,  it  may  well  be  ques- 
tioned whether  other  more  formally  or  technically  protectetl  investments  will 
long  be  safe  against  the  same  result. 

The  horse-car  days  of  the  industry  illustrated  a  loose  tendency  in  dealing 
with  franchises,  which  reached  its  full  development  with  electric  traction. 
While  legislatures  granted  charters,  or  authorized  franchise-contracts  by 
municipalities,  and  usually  prescribed  more  or  less  specific  terms  and  restric- 
tions upon  the  grantees,  they  often,  perhaps  usually,  authorized  the  imposition 
of  such  terms  or  restrictions,  or  of  additional  and  even  inconsistent  terms  and 
restrictions,  by  the  municipalities  within  whose  limits  the  railways  were  to  be 
constructed  and  oiierated.  This  was  particularly  true  of  states  in  which  the 
limited-term  francliises  were  customary.  It  was  not,  however,  confined  to 
those  states.  It  is  not  unusual  to  find  a  general  statute  pre.scribing  a  portion 
of  a  street  to  be  maintained  by  a  street  railway  company,  and  a  practice,  in 
granting  municipal  franchises  or  locations  in  the  same  state,  to  require  the  main- 
tenance of  a  greater  portion  of  the  same  street.  All  sorts  of  obligations  were 
imposed,  even  in  very  early  days,  upon  the  horse  railroads.  The  idea  seems 
never  to  have  entered  the  heads  of  municipal  authorities  that  such  obligations 
were  actually  burdens  and  indirect  taxes  laid  upon  the  car  riders.  Nor  did 
they  any  more  appreciate  that  rate  limitations,  ostensibly  imposed  for  the 
benefit  of  the  car  riders,  might  easily  become  limitations  upon  the  service  and 
facilities  to  be  enjoyetl  by  the  car  riders  themselves. 

Companies  have  been  required,  under  such  grants  by  municipal  authorities, 
to  pave  and  maintain,  not  only  the  space  occupied  by  their  tracks,  but  the 
entire  width  of  the  street  between  the  sidewalks,  to  make  substantial  con- 
tributions to  the  upkeep  of  bridges,  to  pay  tolls  to  the  municipality  for  each 
car,  or  for  each  passenger  in  a  car,  passing  over  a  bridge  or  public  ferry,  to 
pay  a  special  license  fee  on  each  car  operated,  to  pay  the  salaries  of  traflSc 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2169 

policemen,  to  water  and  in  more  recent  years  to  oil,  the  highways,  to  light  them 
with  electricity,  to  contribute  heavily  to  the  elimination  of  grade  crossings  of 
steam  railroads,  to  carry  various  public  employes,  like  policemen,  firemen, 
letter  carriers,  free,  and  school  children  and  so-called  workmen  (often  mean- 
ing everybody  choosing  to  ride  between  certain  hours)  at  half,  or  some  other 
reduced,  rates,  to  maintain  certain  schedules  regardless  of  what  experience 
might  show  to  be  adequate,  and  to  carry  passengers  at  certain  rates  of  fare 
for  all  time. 

(E)  Application  of  Electric  System  of  Motive  Power  to  Street  Railways. 

It  was  not  until  the  discovery  that  electricity  could  be  successfully  used  as  a 
motive  power  for  operating  street  cars,  that  the  disposition  to  exploit  the  car 
rider  for  the  relief  of  the  general  tax  payers  and  as  a  source  of  public  revenue, 
direct  and  indirect,  reached  its  full  development.  As  pointed  out  elsewhere  in 
this  brief,  the  significant  feature  in  the  introduction  of  each  new  kind  of  motive 
power  for  street  cars  has  been  the  retention  of  the  tracks  in  the  streets  as  an 
essential  part  of  any  street  transportation  system.  The  cable  car  was  operated 
upon  such  tracks  as  unquestioningly  as  were  the  horse  cars.  This  was  equally 
true  of  the  electric  car.  The  latter  made  its  first  commercial  appearance  for 
the  carriage  of  passengers  in  the  city  of  Richmond  early  in  1888.  The  experi- 
ment quickly  proved  a  success,  and  was  followed  by  the  construction  of  a  short 
line  in  Revere,  Mas.sachusetts,  later  in  that  same  year.  Soon  the  substitution 
of  the  electric  motor  for  horses  on  existing  railways,  and  the  construction  of 
new  electric  railways  in  hundreds  of  localities  previously  without  any  street 
railways  at  all,  became  general.  By  1902,  within  fourteen  years  after  the  com- 
pletion of  the  Richmond  line,  the  single  track  mileage  of  street  railways  in 
this  country  had  increased  from  8,123  as  given  in  1890,  to  22,.576  miles.  All  but 
about  one  per  cent,  of  the  old  horse  railways  had  been  converted  into  electric 
railways,  the  total  investment  had  already  risen  from  $1.50,(XM3,000,  when  the 
American  Street  Railway  Association  was  organized  in  1882,  to  $2,308,282,099 
in  1902. 

(1)  Mistaken  Optimism  in  Profits  of  Electricity  as  a  ^Motive  Power. 

Managers  of  existing  street  railways  and  the  public  alike  made  the  almost 
fatal  error  of  thinking  that  the  new  system  of  motive  power  contained  the  pos- 
sibilities of  a  gold  mine.  The  promoters  of  new  companies,  free  from  the  cau- 
tion and  restraining  influences  of  actual  experience  in  street  transportation, 
were  even  more  optimistic  in  their  dreams  of  incalculable  profits.  The  whole 
situation  seemed  one  of  amazing  simplicity  and  certainty.  In  place  of  two 
horses  (and  under  snow  conditions  four  horses),  requiring  the  substitution  of 
a  new  team  at  the  end  of  four  years,  and  eating  nearly  as  much  value  of 
feed  every  year  as  their  original  cost,  it  was  necessary  only  to  place  under  the 
old  horse  car  a  permanent  electric  motor,  to  build  a  power  station  and  to 
erect  an  overhead  wire  system  consisting  of  wooden  poles  and  a  few  wires, 
in  order  to  move  more  cars  at  a  higher  speed,  and  carrying  more  passengers 
in  a  more  comfortable  and  attractive  manner.  The  huge  stables,  the  army  of 
stablemen,  the  constant  purchases  of  feed,  the  relay  stables,  the  danger  of 
epizootics,  could  all  be  eliminated.    A  veritable  El  Dorado  had  been  attained. 

If  the  prospect  intoxicated  the  old,  and  blinded  the  new,  adventurers  in  the 
street  railway  industry,  it  equally  excited  the  cupidity  of  the  public  officials. 
The  former  were  willing  to  accept  almost  any  terms  and  requirements,  and 
the  latter  knew  no  limits  in  imposing  such  requirements,  either  to  permit  the 
adoption  of  the  now  nrotive  power  upon  the  existing  horse  railroads,  or  to 
authorize  the  construction  of  new  railways.  In  addition  to  the  more  strictly 
maintenance  or  operating  exactions,  of  which  examples  have  already  been 
given,  frequently  imposed  during  the  horse-railway  period,  there  now  ai)i)eared 
a  new  crop  of  such  burdens  placed  upon  the  car  riders  in  the  form  of  fixed 
charges  consequent  upon  construction  requirements.  Grantees  of  franchises 
were  obliged  to  widen  highways,  to  change  their  grades,  to  build  cross  walks, 
and  sometimes  sidewalks  with  curbings,  to  install  improved  street  drainage  for 
surface  water,  to  strengthen  or  even  entirely  rebuild  bridges  over  railroads 
and  streams,  to  provide  jwles  of  sufficient  height  and  capacity  for  the  free 
attachment  of  municipal  wires  of  various  kinds,  to  re-surface  with  improved 
and  more  expensive  forms  of  paving  or  surface  material  entire  highways 
through  which  tracks  had  been  or  were  to  be  laid,  to  defray  the  cost  of 


) ' 


'     4 


' 


2170      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

eliminating  grade  crossings  of  steam  railroads,  and  in  numerous  other  way? 
greatly  to  add  to  tlie  cost  of  the  railway  construction  by  outlavs  for  munici- 
pal purposes. 

Oftentimes  these  expenditures,  although  reflected  in  the  balance  sheet  items 
of  cost  of  roadway  or  overhead  equipment,  became  at  later  dates  undiscover- 
able  and  led  to  all  sorts  of  charges  of  "watered  stock."  Unless,  ns  was  not 
often  the  case,  a  careful  record  of  these  items  was  kept,  an  exiwrt,  calleJ 
upon. to  appraise  a  Company's  property  would  not  suspect  that  the  highway  had 
i>een  cut  or  filled  by  the  Company,  or  that  a  substantial  portion  of  its  i)rosonl 
width  had  been  paid  for  with  the  proceeds  of  the  Company's  issues  of  stock 
or  bonds  Books  were  not  kept,  in  those  early  days  of  electric  railways,  in 
anticipation  of  verifying  and  explaining  every  cost  item  entered  in  the  con- 
struction accounts.  With  the  deaths  or  removals  of  officials  familiar  with 
the  facts  such  verification  or  explanation  has  now  in  many  cases  become  im- 
possible. Many  a  company  has  sufteml  from  the  charge  of  padded  construc- 
tion accounts  because  the  expert's  estimates  of  the  replacement  cost  of  th<^ 
railway  naturally  does  not  include,  what  there  is  now  no  one  to  inform  him 
was  included  in  those  accounts,  the  cost  of  various  highway  improvements 
paid  for  by  the  company. 

The  requirements  were  often  so  blindly  descril)ed,  that  an  insiiection  of  the 
franchise  terms  furnishes  little  help  to  the  expert.  A  favorite  form  of  lan- 
j,'uage  was  that  the  highway,  curbs,  gutters,  and  other  details  should  b<>  left 
Dy  the  Company  in  a  condition  satisfactory  to  the  aldermen,  city  engineer,  or 
municipal  officials.  The  writer  recalls  one  instance  where  such  officials  forbade 
a  new  company  to  begin  oiieration,  aiid  enforced  their  prohibition  by  plant- 
ing a  heavy  post,  guarded  by  a  town  constable,  between  the  rails,  because  the 
Company  had  not  built  a  new  sidewalk  and  stone  gutter  on  the  side  of  the 
street  opposite  to  the  side  on  which  the  track  was  laid.  Nothing  in  the  fran- 
chise would  disclose  the  exiienditure  of  the  several  thousand  dollars  in  fact 
expt^nded  by  this  particular  company  to  satisfy  the  officials  of  this  particular 
iminicipality. 

(2)  Effect  of  Unforeseen  Expense  Resultino  ihom  Rapid  Progress  in  tiik 

Art  of  Electric  Tr.\ction. 

The  first  disillusionment  of  the  electric  railway  pioneers  came  with  the  rapid 
Lo^^r.!^^'^?'^"^;^  "'  *''^  "^^  ^^  ^''^'  electric  industry.  They  speedily  found  that  the 
Jh3,yt)0  electric  equipment  of  a  car,  although  still  mechanically  as  efficient  a& 
when  Installed,  must  be  replaced  by  a  later,  better  equipment,"  costing  half  as 
much,  but  incomparably  superior  in  reliability,  flexibility  and  power.  And  this 
process  was  going  on  constantly,  not  only  in  car  equipments,  but  in  power 
stations,  wire  systems,  bonding  of  tracks,  and  all  the  other  appliances  makino- 
up  the  electric  railway;  and  it  has  continued  to  go  on  down  to  this  very 
day.  The  improvements  in  the  Art  have  followed  one  another  so  rapidly  Uiat 
it  has  been  necessary  to  discard  and  scrap,  over  and  over  again,  costlv 'eriuip- 
ment,  long  before  the  expiration  of  its  life,  in  order  to  substitute,  'for  the 
public  convenience,  and  often  in  response*  to  insistent  public  demand  equip- 
ment better  adapted  to  give  the  public  the  service  It  required.  Rates  of  fare 
rigidly  fixed  by  franchise  contracts  in  many  eases,  did  not  either  contemplate 
or  permit  the  amortization  of  the  cost  of  such  rapid  changes,  and  a  large 
part  of  that  cost  was  necessarily  added  to  the  original  investment.  This  of 
course,  increased  fixed  charges,  and  constantly  reduced  the  margin  of  net' in- 
come between  gross  revenue  a!id  operating  expenses  available  for  a  return 
upon  the  original  investment. 

• 

(3)  Effect  of  Inadequ.vcy  of  Fobmer  Hobse  Railroad  and  Equipment  for 

Electric  Traction. 

Another  discovery  soon  made  was  the  diffei-ence  iu  the  wear  upon  tracks 
between  drawing  a  light  vehicle  over  the  rails,  and  propelling  a  vehicle' 
heavier,  even  at  the  outset,  by  the  added  weight  of  the  motors,  over  those 
same  rails  by  traction.  The  light  horse  car  rails  soon  proved  utterly  inade- 
quate for  the  electric  cars.  Heavier  rails  had  to  \)e  substituted.  Even  those 
heavier  rails  were  found  to  have  a  definite  and  not  long  life.  The  almost 
endless  length  of  life  of  the  tracks  with  horse  drawn  cars,  where  rails  had 
been  used  for  thirty  years  or  longer  ;    i  still  remained  in  gootl  condition,  dis 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2171 

apiieared  under  the  new  method  of  traction.  Similarly  the  light  car,  drawn 
l)y  horses,  or  even  by  cable  soon  proved  unsuitable  when  the  motive  power 
was  applied  to  the  tracks,  by  friction,  through  motors  under  and  attached  to 
the  car  itself.  It  was  found  that  both  the  tracks  and  the  cars  must  be 
replaced  by  entirely  new  and  heavier  units.  With  the  heavier  cars,  greater 
iwwer  house  capacity  was  needed. 

(4)  Added  Expense  of  Compliance  with  Legislative  Requirements. 

To  all  these  mechanical  and  equipment  sources  of  unexpected  increase  in 
expense,  both  in  investment  and  operation,  were  added  from  time  to  time  leg- 
islative requirements.  The  electric  railways  were  obliged  to  heat  their  cars 
with  electricity.  This  alone  added  about  30%  to  the  consumption  of  electric 
power  per  car,  rcxiuiring  still  further  power  house  capacity.  They  were  re- 
quired to  vestibule  the  cars  to  protect  motormen  and  conductors  from  the 
weather;  to  provide  a  certain  percentage  of  seating  capacity  in  rush  hours; 
hours  of  labor  of  trainmen  were  reiiuced  by  statute  in  some  states,  resuy;ing 
in  similar  reductions  by  agreement  in  others;  the  rules  of  law  applicable  to 
claiiiiS  for  damages  by  members  of  the  general  public,  and  then  bv  employes, 
were  changed  in  such  ways  as  to  permit  recovery  of  heavier  verdicts  against 
conunon  carriers.  With  the  introduction  of  Commission  regulation,  the  rail- 
way companies  were  called  upon  to  provide  larger  and  better  cans  more  fre- 
quent headway,  waiting  rooms  for  passengers,  a  greater  number  of  cars,  more 
substantial  track  construction,  and  in  various  other  ways  to  make  unexpected 
Capital  investments.  Not  infrequently  public  officials,  in  charge  of  building 
State  highways,  would  follow  up  a  street  railway  for  mile  after  mile  and  re- 
quire it  to  shift  its  track  from  one  part  of  the  highway  to  another,  to  change 
its  grade»  and  to  provide  for  the  surface  and  sub-surface  drainage. 

(F)  Necessity,   Methods,   Advantages   and   Risks   of   Unification   of   Small 

Operating  Units. 

The  introduction  of  the  new  motive  power  disclosed  almost  immediately  the 
desirability  of  unifying  the  control  of  the  various  previously  independent  lines 
in  each  city.  Except  in  the  matter  of  needless  duplication  o*f  tracks,  horse  rail- 
ways could  be  operated  with  as  satisfactory  financial  results  in  small  units  as 
in  large  ones;  in  some  respects,  indeed,  with  even  better  results.  Each  com- 
pany put  into  elfect  its  own  stipulated  rates  of  fare,  and  undertook  to  furnish 
transportation,  at  those  rates,  only  upon  its  own  lines.  Moreover,  the  horse 
railway,  in  the  main  was  confined  to  already  developed  territory.  The  length 
of  time  required  in  making  trips  militated  against  the  probable  success  of  ex- 
tending tracks  many  miles  from  the  populous  centre.  The  electric  motive 
power,  however,  required  the  employment  of  trained  engineers  and  larger  over- 
head expense  to  utilize  successfully  the  new  mechanical  and  scientific  appli- 
ances necessary  in  electric  traction.  Larger  power  stations,  even  in  the  early 
days  when  the  generating  units  were  small,  involved  many  operating  economies. 
Properly  located  stations  could  .serve  equally  well  the  lines  or  portions  of  lines 
of  two  or  more  independent  companies. 

The  desired  unification,  however,  was  not  always  easily  obtainable.  Notwith- 
standing the  optimism  of  promoters  and  of  many  street  railway  managers,  it 
was  found  that  the  investors  in  the  old  and  financially  established  horse  rail- 
road companies  were  reluctant  to  provide  the  capital  even  for  the  initial  change 
from  the  old  to  the  new  motive  power.  Without  control  of  the  existing  railway 
lines  in  a  city,  the  adoption  of  this  new  motive  power  and  the  extension  of 
lines  for  greater  distances,  which  almost  always  formeil  a  part  of  the  plan  of 
supplying  a  more  complete  system  of  public  transportation,  was  impossible. 
As  old  investors  were  generally  unwilling  either  themselves  to  provide  the 
needed  additional  capital,  or  to  place  their  existing  investment  at  the  risk  of  the 
new  experiment,  equally  with  the  new  capital  furnished  by  others,  it  was 
often  found  that  the  desired  unification  could  be  effected  only  by  placing  the 
old  investors  on  some  preferred  basis  of  security. 

This  result  was  accomplished  in  Boston,  for  example,  where  five  independent 
companies  were  acquired  in  1888  by  the  new  West  End  Railway  Company, 
organized  for  oi^eration  by  electricity,  by  the  issue  of  an  8%  preferred  stock 
of  an  aggregate  par  value  equal  to  the  then  issued  stock  of  the  five  merged 
companies.  Under  the  strict  capitalization  laws  of  Massachusetts,  no  bonus 
common  stock  could  be  i.ssued,  but  .somewhat  the  .same  advantage  as  that  in- 


2172      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

volved  in  bonus  stock  was  secureil  to  those  more  ventiiresouie  persons  willing 
to  invest  in  the  full  paid  common  stock  of  the  operating  company,  by  l^o^lng 
out  to  them  the  prospect  of  large  dividends.  In  Its  tirst  four  years  (1889- 
1892),  during  which  the  electrification  of  the  old  horse  railroads  had  been 
larjrelv  completed,  dividends  of  10%  per  annum  were  paid  upon  the  common 
stock ;  but  in  1893,  the  unforeseen  increases  in  cost,  earlier  referred  to  in  this 
brief,  were  becoming  manifest,  and  the  conmion  dividend  was  reiluced  to  9/o. 
In  1894  it  fell  to  Ti'/f ,  in  1895  to  6i</c,  and  in  the  two  following  years,  until  its 
lease  to  the  Boston  Elevated  Railway  Company  in  1898,  t      rate  was  7Vo. 

The  same  reluctance  of  the  investors  in  the  older  form  of  transiwrtation  to 
undertake  the  risks  of  the  new  one,  and  the  consequent  need  of  seeking  capital 
aimofig  a  different  class  of  investors,  was  apparent  in  connection  with  the  Bos- 
ton Elevated  undertaking.  The  project,  in  reality,  involved  improving  the 
street  transportation  svstem  in  Boston  by  adding  to  it  an  elevated  railway,  a 
tunnel  un<ler  the  harboV,  and  other  rapid  transit  facilities.  The  success  of  this 
pr<»ject,  however,  dei)ended  again  upon  a  unified  control.  This  was  effected, 
not  ^y  menrer,  as  in  the  earlier  instance  just  cited,  but  by  r.  lease  of  the  \\est 
End  propertv  t<i  the  new  Elevate<l  Company.  Under  the  terms  of  the  lease,  the 
West  End  common  stock  receivetl  a  guaranteed  dividend  of  77c.  This  time  the 
hope  of  larger  returns  was  indulged  in  by  the  subscribers  to  the  Boston  Ele- 
vated full  paid  stock.  Those  hopes  were  never  realized.  The  highest  rate  of 
dividend  ever  paid  by  that  Company,  during  its  twenty  years  of  operation,  prior 
to  public  control,  was  6%  on  the  par  value  and  averaged,  during  that  period, 
only  about  4.587%  upon  the  Elevated  common  stockholders'  actual  Investment 

in  the  proptn-ty.  .     ,  i    ..   *  n 

The  experience  of  these  Boston  companies  has  been  cited  somewhat  tuiiy 
btx-ause,  in  Massachusetts,  the  public  supervision  of  the  issue  of  securities  has 
been  such  as  to  preclude  possibility  of  the  issue  of  stock  except  for  at  least  full 
par  value.  The  experience  of  the  Company  has  fully  justified  the  conservatism, 
first  of  the  investors  in  the  old  horse  railroads  in  permitting  others  to  take  the 
risk  of  furnishing  tb.e  public  with  the  transportation  facilities  made  possible  by 
the  use  of  electrlcltv.  and  again,  of  the  latter  investors,  after  their  disapi)oint- 
ing  exi>erience  with  the  financial  results  of  the  new  system,  in  iiermlttlng  still 
another  new  set  of  investors  to  take  the  risk  of  providing  the  capital  for  the 
improved  facilities  furnished  by  the  addition  of  Elevated  and  Subway  lines  of 
railway  It  is  a  fact  that  today,  of  the  three  classes  of  stock  of  the  Boston  rail- 
wav  svstem  the  best  Is  that  representing  the  old  horse  railroad  Investment,  now 
selling  at  about  102%  of  its  par  value.  The  next  best  is  that  representing  the 
investment  to  electrify  those  railways,  selling  at  about  88%  of  par,  and  the 
poorest  Is  that  representing  the  investment  to  provide  Elevated  and  Subway 
lines  making  of  the  Boston  system  physically,  the  best  system  or  any  city  of  Its 
size  in  the  world,  but  selling  at  only  about  OT'/c  of  its  par  value. 

The  Boston  hlstorv  illustrates  two  of  the  methods  of  unification  frequently 
employ *^d— mergers  and  leases.  In  nearly  every  large  city  It  will  be  found  that 
similar  unification  was  necessary  and  was  brought  about  by  one  ((f  these  methods, 
in  jurisdictions  where  the  la\AS  permitted  the  issue  of  securities  with  greater 
freedom  different  classes  of  stock  were  often  Issued  In  order  to  raise  the  capital 
necessarV  to  acci»mplish  the  purchase  of  existing  lines,  and  to  furnish  the  funds 
for  electrification  and  extension.  In  this  way  there  came  about  the  existence  of 
so-c'illcd  "bonus-stock."'  This  usually  accompanied  some  preferred  security, 
either  imnds  or  preferretl  stock,  entitling  the  holder  to  a  relatively  low  return 
of  5  or  ()  %  leaving  the  bonus  or  coinin«»n  stock  to  receive,  as  a  dividend,  what- 
ever divisible  income  might  be  realized  above  the  prior  fixed  return  on  the  under- 
Ivin"  securities  In  the  last  analysis,  this  l)onus  stock  represented  in  a  separate 
security"  the  same  speculative  possibility  which  api^ealed  to  a  certain  class  of 
investors  in  the  full  paid  common  stock,  first  of  the  West  End  Railway,  and 
later  of  the  Boston  Elevated  Railway,  already  pointed  out,  and  for  a  short  time 
actuallv  realizetl  bv  the  holders  of  the  West  End  common  stock.  The  latter 
hoped  for,  and  during  four  years  actually  received,  a  10%  dividend  on  their  .$100 
investment.  Their  return  would  have  been  no  greater  If  they  had  received  two 
share*!  one  entitling  them  to  a  6%  dividend,  and  the  other  to  whatever  remained 
over  and  above  that.  If  that  method  of  Issuing  securities  could  have  been 
adcq.ted  in  Massachusetts,  and  had  been,  the  persons,  who  took  the  risk  and 
furnished  the  capital  to  electrify  the  old  horse  railroads,  would  have  received, 
excepting  in  the  first  four  years  0%  on  their  preferred  stock,  and  1%  per  annum 
nn  their  common  stock.  Generally  speaking,  it  will  be  found  that  the  only 
people  who  have  ever  made  a  profit  out  of  the  bonus  stock  issued  In  various  parts 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2173 


of  the  countrj-  on  street  railways,  were  those  who  first  received  It  and  disposed 
of  it  to  other  people  during  the  few  early  years  following  electrification  when, 
as  in  Boston,  it  looked  as  if  the  profits  were  going  to  be  substantial,  and  befor* 
the  constantly  increasing  costs  were  foreseen  or  understood. 

(G)  Holding  Companies. 

In  many  cases  resort  waH!  had,  in  order  to  finance  the  rapid  electrification 
and  expansion  of  street  railways,  to  holding  companies.  In  some  instances, 
the  holding  company  was  confined  to  the  control  of  a  single  system.  Oftener, 
however,  It  controlled  several  systems  operating  in  different  localities.  In 
either  case.  It  usually  held,  in  Its  treasury,  at  least  enough  of  the  securities  of 
each  underlying  or  operating  company  to  constitute  a  voting  control.  Through 
the  sale  of  its  Qwn  securities  to  the  public,  It  financed  the  constantly  growing 
need  of  the  subsidiary  companies  for  additional  capital.  At  times,  much  criti- 
cism has  been  directed  against  these  holding  companies.  This  criticism  has  too 
little  basis  In  fact,  to  justify  much  space  In  answering  it.  The  econojnic  pur- 
pose and  the  legal  effect  of  such  holding  companies,  whether  in  the  form  of 
unincorporated  associations,  or  as  chartered  corporations,  were  well  stated 
respectively  in  the  following  citations: 

The  detd  api  e.irs  to  me  to  be  merely  a  trust  deed  of  propeity  tor  investment, 
the  inves;ment  being  spread  over  a  number  of  different  securities,  so  as  to  en- 
able ijersons  who  choose  to  invest  their  money  in  this  way  to  avail  them- 
selves of  that'  which,  I  believe,  is  one  of  the  most  certain  things  in  the 
world :  viz.,  what  is  called  the  doctrine  of  averages ;  that  Is  to  say,  that  if 
a  large  number  of  different  independent  securities  of  a  hazardous  descrip- 
tion are  held  together,  the  loss  upon  some  will  be  compensated  by  the  gain 
on  the  others,  so  that  a  tolerably  uniform  average  rate  of  Interest  will  be 
obtained.  The  object  and  the  legitimate  object  of  the  persons  who  were 
Invited  to  join  in  this  company  was  to  have  an  Investment  of  their  money 
under  such  circumstances  that  they  might  look  to  have  a  high  dividend, 
with  a  very  considerable  security  for  the  capital  which  they  were  invest- 
ing in  it.  i  can  see  nothing  like  an  attempt  at  evading  the  act  or  at  doing 
anything  but  making  Investments  upon  a  large  scale,  so  as  to  obtain  the 
benefit  of  the  doctrine  of  averages. 

Smith  vs.  Anderson,  L.  R.,'15  Ch.  D.,  247.      • 
The  Massachusetts  street  railway  corporations,  in  which  the  association 
own  shares,  issue  no  stock  or  bonds  and  effect  no  consolidations  except 
under  the  supervision  of  this  Board,  and  upon  actual  exhibit  of  corporate 
property  and  sworn  statement  of  corporate  financial  condition.     *     *     * 

The  association  as  sucb  is  not  recognized  by  the  Board,  and  the  trustees 
who  hold  the  stocks  for  it  receive  no  other  consideration  than  any  other 
stockholder  or  group  of  stockholders  in  connection  with  the  action  of  the 
Board  In  enforcing  the  statures  relating  to  street  railways,  their  operation 
and  management. 

Mass.  R.  R.  Commission,  Annual  Report,  Jan.,  1902,  p.  57. 

The  holding  company  plan  facilitated  a  practical  unification  of  independent 
companies  without  the  delay  involveel  in  legal  consolitlation.  By  its  acquisition 
of  stock  control  of  the  old  companies  under  a  common  ownership,  followed  by  the 
proper  corporate  action  of  each  independent  unit,  general  electrification  of  all 
lines  could  be  more  promptly  begun. 

The  fact  was  clearly  demonstrated  also,  probably  for  the  reason  stated  In 
the  opinion  of  Smith  vs.  Anderson,  cited  above,  that  the  proposed  electrification 
and  expansion,  as  well  as  the  cost  of  subsequent  development,  could  be  more 
easily  financed  through  the  holding  company.  The  latter  usually  issued  its 
own  'securities  to  the  public,  using  the  proceeds  to  acquire  the  securities  issued 
by  the  different  subsidiary  or  controlled  companies.  Many  an  originally  small 
proi^erty,  which  would  have  found  It  Impossible  to  raise  the  necesssary  money 
for  such  an  object  was,  through  the  means  of  the  wider  credit  and  better  or- 
ganization of  the  holding  company,  changed  from  horse  railway  to  electric 
traction,  and  made  a  useful  part  of  a  comprehensive  transportation  system. 
Since  the  period  of  greatly  Increased  operating  costs,  beginning  with  the  Euro- 
pean War,  this  advantage  of  the  holding  company  has  been  of  incalculable 
benefit  to  the  maintenance  of  street  railway  service  in  many  localities.  The 
credit  of  the  holding  companies  has  been  placed  under  the  operating  companies, 
and  it  has  been  found  possible  to  meet,  to  some  extent,  the  capital  requirements 
of  the  latter  long  after  their  own  Independent  credit  had  disappeared.     Un- 


2174 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


(loubtedly,  this  has  been  due  in  part  to  the  divei-siflecl  assets  of  the  holding 
company.  It  not  only  avoided  having  all  its  transportation  eggs  in  one  basket, 
but  it  generally  also  avoided  confining  all  its  eggs  to  the  single  transportation 
variety.  AVhen,  almost  without  exception,  the  transportation  companies  were 
making  a  hopeless  financial  showing,  the  hoMing  company  itself  could  make 
a  reasonably  satisfactory  statement  of  profits  through  the  earnings  upon  its 
other  classes  of  investments  like  gas,  light  and  power,  heat  and  water — utilities 
in  wliich  the  labor  item  was  of  nuich  less  importance,  and  in  which  better  con- 
ditions of  tenure  and  greater  fiexibility  of  rates  prevaiUxl,  than  in  the  case  of 
street  railways. 

One  effect,  almost  always  immediate,  of  this  unification  of  small  independent 
railway  units,  was  of  great  benefit  to  the  riding  public — and  correspondingly 
of  financial  disadvantage  to  the  investors.  The  merged  or  leased  lines  were 
treated  as  a  single  system — most  liberal  systems  of  transfer  from  one  line  to 
another  were  introduced — cars  were  rerouted  without  reference  to  the  original 
independent  ownership  of  the  tracks  includcnl  in  the  new  rules.  As  a  result, 
inun.v  two-fare  collections  for  a  ride  over  tlio  lines  of  two  formerly  .separate 
companies  were  reduced  to  one,  and  the  aggregate  earnings  of  the  old  com- 
Pfuiies  were  materially  lessened.  This  burden  upon  the  single  consolidated 
company  has  become  more  and  more  pronounced  as  lines  of  the  former  .separate 
companies  have  been  extendetl  further  and  further  from  the  centre,  thus 
doubly  increasing  the  maximum  ride  on  the  unified  .sj*stem  over  what  woubl 
have  been  possible,  if  the  merged  operating  units  had  retailed  their  original 
character. 

(H)  kicreased  Cost  of  Construction  for  Electric  Operation — Irrespective  of 

Obsolescence  Due  to  Progress  of  the  Art. 

Attention  has  already  been  called  to  the  unforeseen  increases  both  in  capitali- 
zation and  in  cost  of  operation,  resulting  from  the  progress  in  the  art  of  electric 
transportation.  This  brought  the  companies  not  only  face  to  face  with  obso- 
le.scence — the  need  of  replacing  much  equipment  before  it  was  worn  out  with 
other  equipment  better  adapted  to  public  service — but  it  also  required  the  re- 
newal of  many  items,  even  if  used  until  they  were  actually  worn  out,  with 
similar  items,  but  of  more  substantial  construction  and  material,  and  repre- 
senting much  heavier  cost.  The  single  item  of  track  construction  will  illus- 
trate this  point.  The  old  horse  railway  track  consisted  of  flat  or  strap  rails 
fastened  to  longitudinal  stringers  buried  in  the  street.  The  pavement  between 
the  rails  was  of  cobblestones  or,  at  best,  of  granite  blocks  not  more  than  six 
inches  deep,  laid  and  tamped  in  sand.  Repairs,  which  were  seldom  required, 
as  the  light  hor.se  ears  drawn  over  this  track  created  little  damage  to  it,  were 
easily  and  cheaply  effected.  Contrast  with  this,  the  cost  involved,  and  the  more 
skillful  and  better  paid  labor  required,  in  the  construction,  repair  and  mainte- 
nance, of  the  modern  electric  railway  track  in  our  cities.  The  old  iron  rail, 
weighing  from  twenty-five  to  forty-five  pounds  per  yard  has  been  replaced 
with  heavy  nine-inch  girder  to  tee  steel  rail,  weighing  from  ninety  to  one 
hundred  and  thirty  pounds  per  yard,  laid  upon  eigiit-foot  cross  ties,  two  feet 
on  centres,  imbedded  in  a  concrete  foundation,  and  paved  between  the  rails 
with  grouted  block  pavement,  asphalt,  vitrified  brick,  wooden  block,  or  such 
other  form  of  expensive  surface  material  as  recent  development  in  highway 
construction  and  the  judgment  of  municipal  authorities  may  have  dictated. 

The  equipment  for  carrying  the  electric  current  is,  of  course,  entirely  addi- 
tional to  the  construction  requirements  for  horse  railway  operation.  But 
the  cost  of  this  equipment  itself  has  l)een  greatly  increased  since  electrification 
began.  Companies  have  been  called  upon  to  replace  wood(?n  poles  with  iron 
ones.  In  many  localities,  they  have  been  required  to  place  underground  their 
feed  wires,  carrying  the  electricity  from  the  power  station  to  be  fed  into  the 
trolley  wire.  This  change  has  involved  the  expense  of  building  and  maintain- 
ing underground  conduits.  In  the  cities  of  New  York  and  Washington,  they 
have  even  been  requireil  to  place  the  trolley  wire  itself  underground  at  a  tremen- 
dous initial  construction  cost,  and  a  continuing  large  maintenance  cost. 

(I)  Increase  in  Operating  Costs  Due  to  Increased  Cost  of  Material  and  Labor. 

Another  tendency,  the  increase  in  cost  of  labor  and  materials,  working  at 
an  accelerating  rate,  and  reaching,  under  the  influence  of  the  war,  almost 
paralyzing  proportions,  has  contributed   to  the  disappointment  of  street  rail- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       2175 

way  Investors.  This  burden  to  the  industry  has  become  so  heavy  as  now  to 
threaten  the  public  with  the  serious  impairment  and,  in  many  cases,  with  the 
entire  loss  of  this  important  public  service.  Evidence  submitted  to  the  Federal 
Commission  showed  that  60  companies  had  dismantled  and  junked  7G3  miles 
of  track;  that  38  companies,  owning  257  miles,  had  been  abandoned;  that  02 
companies,  oi)erating  5,912  miles,  were  in  the  hands  of  receivers  on  May  31, 
1919,  and  that  the  mileage  in  the  hands  of  receivers,  or  abandoned  or  disman- 
tled, represented  almost  16%  of  the  total  mileage  in  the  country.  Among  the 
companies  being  operated  by  receivers  w^ere  those  serving  most  important 
connnunities  including  New  I'ork  City,  Brooklyn,  Pittsburgh,  New  Orleans. 
I*rovidence. 

The  increase  in  the  cost  of  labor  alone  is  sufficient  to  ruin  the  industry, 
unless  corresponding  increase  in  revenue  can  be  obtained. 

The  increased  cost  of  materials  and  supplies  extensively  used  in  this  in- 
dustry, such  as  coal,  copper  wire,  steel,  lumber,  etc.,  is  too  well  known  to  need 
elaboration.  Even  in  the  aggregate,  however,  the  effect  upon  the  industry  of 
this  increase  in  the  cost  of  supplies  and  material  becomes  almost  negligible 
in  comparison  with  the  effect  of  the  increased  cost  of  labor. 

Under  normal,  pre-war  conditions,  the  payroll  of  a  street  railway  absorbed 
nearly  50%  of  its  gross  receipts.  In  1912,  the  average  maximum  wage  for 
trainmen  was  27c  an  liour.  At  the  present  time  this  average  has  about  doubled. 
In  the  larger  cities  and  on  the  more  important  systems  like  Chicago,  Detroit, 
Cievelaud,  New  I'ork,  Philadelphia  and  Boston,  it  has  more  than  doubled. 

These  tendencies  had  already  been  noted  before  the  War.  See  Asso- 
ciation's publication  in  1910 :  "  Cost  of  Urban  Transix>rtation  Service," 
Doolittle,  Chapter  4.  The  tendency  is  likewise  shown  in  exhibits  sub- 
mitted by  Welsh,  Chart  C-134— Cost  of  Labor  (327)  ;  Chart  130— Cost  of 
Materials  (345). 

Figures  made  public  by  the  Boston  Elevated  Railway,  whose  maximum  wage 
rate  has  been  increased  to  00c  an  hour,  and  which  is  now  operated  by  the 
Commonwealth  of  Massachusetts  through  a  board  of  public  trustees,  showed 
that  the  cost  of  wages  per  revenue  passenger  in  December,  1917,  was  2.21  cents 
which,  in  August,  1919,  had  increased  to  5.75  cents.  That  company,  until  the 
public  control  began  on  July  1,  1918,  was  one  of  those  limited  by  charter  pro- 
visions to  a  miximum  fare  of  five  cents.  Under  public  control  the  fare  has 
been  raised  to  ten  cents  and  it  is  said  to  be  now  meeting  its  entire  cost  of 
service.  It  is  not  difficult  to  see  what  would  have  been  its  fate  if  the  five 
cent  fare  restriction  had  been  retained,  or  what  is  likely  to  be  the  fate  of  many 
other  companies  burdened  with  the  same  fare  restriction.s,  imposed  at  a  time 
when  no  one  anticipated  the  possibility  of  a  payroll  involving  a  greater  expense 
per  passenger  than  the  entire  maximum  fare  which  the  company  was  permitted 
to  collect  from  the  passenger. 

See  also  Chart  C-133,  Wages  of  Trainmen,  Welsh  (327-344). 

In  1902,  acc<:»rding  to  the  census  figures  (Sturgis,— Exhibit, — Analysis  of 
Electric  Railway  Oi>erating  Costs  and  Cost  of  Living  as  related  to  wascs 
of  Conductors  and  Motormen  and  for  Trainmen  (16), — wages  of  Conduc- 
tors and  INIotormen  amouut(^d  to  $000  per  year.  They  had  increasetl  to 
$934  per  year  in  1917,  according  to  the  Census  figures  for  that  year.  They 
have,  of  course,  very  materially  increased  since,  under  the  rulings  of  the 
War  liabor  Board, — amounting  to  $1,200  per  annum,  with  wages  of  41^  per 
hour.  Mr.  Lauck,  Attorney  and  Expert  for  the  Amalgamated  Association 
of  Street  and  Electric  Railway  Employes. — 5637-9, — estimates  that  i 
proper  minimum  comfort  wage  should  aggregate  $2,000  a  year,  or  approxi- 
mately 76^  per  hour. 

Is  it  not  apparent  that  any  street  railway,  faced  with  such  unexpected  and 
staggering  increased  costs,  if  denied  the  usual  relief  open  to  every  other  busi- 
ness of.  making  a  corresponding  inci-ease  in  the  cost  of  its  commodity,  must 
skimp  and  cut  its  service,  neglect  its  proper  maintenance  and  provision  for 
depreciation,  and  even  then,  finally  add  its  mileage  to  the  nearly  6,000  miles 
of  other  companies  already  being  operated  by  receivers? 

(J)  Increase  in  Taxation.  « 

Taxation  has  proved  an  increasing  burden  to  the  street  railways  since  the 
introduction  of  electricity  as  a  motive  ix)wer.    Quite  apart  from  the  financial 


f,  [ 


2176         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

hiinlen  rosiiltiiifr  from  variouj<  methods  of  indirect  taxation  already  mentioned, 
]H<o  street  maintenance,  stretH  widenini;,  and  the  performance  of  other  \\,'orVi 
in  l\ind  upon  tlie  liii;li\va.vs,  it  appeared  in  evidence  submitted  to  the  Federal 
Commission  tliat  the  taxes  paid  by  this  industrj'  In  1918  represented  about 
one-half  cent  for  each  revenue  passenger.  Census  figures  are  not  available  re- 
specting taxation  of  the  industry  as  a  whole  prior  to  tlie  electrification  period. 
Such  figures  are,  however,  available  for  Massachusetts  and  nuiy  probably  be 
taken  as  typical  of  the  industry  generally.  In  1888,  the  total  income  of  all 
the  companies  in  that  State  was  $6,860,504.  The  net  income  above  operation 
was  $1,287,826,  from  which  taxes  amounting  to  $190,474  were  deducted.  The 
total  operating  re\cnues  of  all  the  companies  for  the  year  ending  June  30, 
1914,  the  last  pre-war  year,  was  $39,703,706,  while  the  net  operating  revenue 
was  $18,038,486.  The  taxes  were  .$2,461,321.  In  1888,  therefore,  taxes 
amountetl  to  2.7790  of  the  total  operating  revenues,  and  14.75%  of  the  net 
operating  revenues,  while  in  1914,  taxes  amounted  to  6.19%  of  the  total  operat- 
ing revenues,  and  18.85%  of  the  net  operating  revenues. 

(K)  Extensions  of  Lines  and  Expansion  of  Systems. 

No  review  of  the  history  of  this  industry  would  be  complete  which  failed 
to  call  attention  to  the  great  extension  of  lines,  which  began  with  the  intro- 
duction of  electric  motive  power,  and  continued  uninterruptedly  from  that  time 
until  the  outbreak  of  the  great  War.  Here  again  reliable  statistics  are  not 
available  for  the  entire  country.  ^Massachusetts  figure.s,  however,  gave  as  of 
September  30,  1888,  a  total  mileage  of  561.8  miles  of  single  track  which,  on 
December  31,  1918,  had  increase  d  to  3,095.7  miles  of  .single  track.  These  figures, 
of  cour.se,  include  the  mileage  of  new  companies.  On  the  earlier  date,  the 
West  End  Street  Railway  owned  230.8  miles  of  single  track  which,  thirty  years 
later,  had  been  increased  to  428.25  miles.  To  this -last  figure  should  be  added 
the  ()0.48  miles  of  surface  and  rapid  transit  track  owned  by  the  Boston  Elevated, 
and  constituting  one  system  with  the  West  End,  making  the  total  in  1918, 


488.73  miles. 

This  expansion  of 
contributing  element 
some  and  threatened 


mileage  of  the  various  companies  has  proved  a  large 
i  the  financial  embarrassment  which  has  overtaken 
all,  at  the  same  time  that  it  has  proved  a  benefit  of 
almost  inestinjable  value  to  the  comnmnities  served  by  the  expanding  com- 
panies. Its  elTect  upon  the  net  oi>erating  revenues  was  not,  for  a  long  time, 
foreseen.  In  cities  like  Boston  with  a  flat  five-cent  rate,  ahd  this  rate  pre- 
vailed in  most  of  the  larger  cities,  this  extension  of  lines  produced  a  situation 
where  finally  the  company  was  carrying  so  many  long-haul  passengers  at  a 
loss  on  each  one  as  to  have  ultimately  forced  the  company  into  the  non-dividend 
paying  ela.ss,  even  withcait  the  other  adverse  conditions  already  mentioned. 

When  an  extension  was  first  built  into  sparsely  settled  *  suburban  terri- 
tory, the  additional  financial  l)urden  amounted  to  little  more  than  the  fixed 
charge  on  the  construction  cost  of  the  line.  A  very  slight  addition  to  rolling 
stock  sufllced  to  carry  the  few  pas.sengers,  and  an  infrequent  schedule  and 
a  consequent  low  platform  labor  cost  .served  all  the  requirements  of  traflSc. 
As  population  increased,  however,  upon  such  a  line,  both  the  investment  in 
r<»inng  stock,  and  the  operating  costs,  assumed  substantial  proportions.  Worse 
tlian  this  in  the  financial  results  to  the  company,  these  extended  lines,  making 
available  large  areas  of  cheap  outlying  land,  brought  about  a  shifting  of  iiopu- 
lation  from  the  congested  sections  of  the  city  near  the  centre  which  had  con- 
tributed vast  numbers  of  short-haul  passengers,  and  steadily  changed  these 
profitable  passengers  into  unprofitable  suburban  residents. 

Of  the  benefit,  however,  to  the  community  of  the.se  extensions,  and  their 
elTect,  perhaps  no  better  statement  can  be  made  than  that  contained  in  the 
report  of  Charles  Francis  Adams'  Special  Commission  to  the  Massachusetts 
I..egislature  in  1898,  only  ten  years  after  the  introduction  of  electric  motive 
power. 

While  the  connnittee  was  conducting  its  investigation  in  Great  Britain 
a  .sanitary  congress,  at  which  some  800  delegates  were  present,  was  held 
in  Leeds,  one  of  the  cities  above  referred  to.  The  eminent  medical  authority 
who  preslde<l  over  the  sessions  of  this  .congress  referred  in  his  opening 
address  to  the  distribution  of  urban  ix)pulation  over  a  wider  area  as  one 
of  the  most  crying  needs  of  the  day.  In  regard  to  it  he  used  the  follow- 
ing   language :  *'  What    is    urgently    nee<led    in    Great    Britain    today    is, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2177 

firstly,  drastic  and  radical  legislation,  by  which  local  bodies  may  be  able 
to  acquire  land  compulsorily,  on  paying  full  compensation,  for  building 
workmen's  houses,  and  then  quick  and  cheap  early  traveling,  rendering 
it  possible  for  city  workmen  to  live  in  the  surrounding  country." 

So  far  as  the  work  here  referred  to  is  concerned,  that  of  distributing 
urban  population  over  a  wider  area,  with  all  the  results,  direct  and 
indirect,  therein  implied,  a  most  superficial  examination  will  suffice  to 
.show  that  Massachusetts  is  far  in  advance  of  any  portion  of  Europe. 
This  has,  too,  in  large  degree  been  brought  about  *in  an  extraordinarily 
short  time,  not  by  "drastic,  radical  legislation,"  such  as  that  contem'- 
plated  in  Great  Britain,  but  through  the  rapid  and  energetic  expansion 
of  the  street  railway  .system,  seen  in  the  comparative  statistics  just  given. 
That  in  effecting  this  expansion  much  costly  experimenting,  not  always 
successful,  has  been  paid  for,  is  undeniable;  but  it  remains  to  be  proved 
that  the  work,  though  done  through  private  corporations,  either  cost 
them,  or  through  them  cost  the  community,  more  than  from  a  public  point 
of  view  it  was  worth,  or  a  portion  even  of  what  it  would  cost  if  done 
in  the  way  suggested  at  the  Leeds  Sanitary  Congress.  This  is  the  other 
side  of  the  account ;  and  that  the  work  in*  Massachusetts  represented  by 
the  items  which  appear  on  this  side  was  done  in  response  to  a  public 
deniand,  at  once  outspoken  and  urgent,  is  matter  of  common  knowledge. 

(L)  Effect  of  Development  of  Use  of  Automobiles  and  of  So-called  Jitneys. 

In  the  year  1912  the  street  railway  industry  began  to  feel  the  effects  of 
the  increasing  use  of  automobiles.  The  privately  owned  automobile  directly 
affects  street  railway  travel  to  a  considerable,  although  unascertainable,  ex- 
tent by  its  use  by  its  owner  and  members  of  his  family  on  many  occasions 
when  otherwise  they  would  have  used  the  electric  railway.  Frequently,  also, 
friends  of  the  owner,  and  even  comparative  strangers,  are  picked  up  in  pri- 
vately owned  automobiles.  That  the  aggregate  loss  of  traffic  to  street  failways 
thus  occasioned  must  be  substantial  is  evident  from  the  large  number,  approxi- 
mately 6,000,000,  of  motor  vehicles  estimated  to  be  now  in  use  in  this  country. 
As  shown  in  Mr.  Storrs'  statement  before  the  Commission,  the  number  of  such 
vehicles,  including  trucks.  In  the  single  state  of  Massachusetts  was,  in  1910, 
only  31,360,  which,  on  December  31,  1918,  had  increased  to  160,486  automo- 
biles and  33,011  trucks,  a  total  of  both  kinds  of  vehicles  of  193,497,  exclusive 
of  12,862  motorcycles.  The  registration  of  automobiles  alone  in  Massachusetts 
to  November  13,  of  this  year  has  been  over  175,000,  of  trucks  over  40,000,  and 
of  motorcycles  over  13,000. 

The  iliore  serious  effect,  however,  upon  the  electric  railway  industry  of  the 
automobile  has  been  its  use,  and  still  more  the  manner  of  that  use,  as  a  com- 
mon carrier  of  passengers  in  competition  with  street  cars.  This  competition 
began  about  1912,  and  was  at  first  entirely  unregulated.  Even  today  in  some 
places  it  continues  without  regulation  of  any  kind,  and  in  many  places  with  only 
partial  and  rather  ineffective  regulation.  In  no  instance,  so  far  as  we  know,  has 
this  so-called  jitney  carriage  of  passengers  been  subjected  to  obligations  as  to 
payment  of  taxes,  maintenance  of  highways,  character  and  extent  of  service,  and 
liability  for  accidents,  under  which  the  electric  railway  business  has  to  be  con- 
ducted. The  portion  of  the  street  paved  and  maintained  by  the  electric  rail- 
way, and  in  winter  cleared  of  snow  at  its  own  expense,  is  taken  advantage  of 
by  the  jitney  competitor,  without  compensation  either  to  the  company  or  the 
municipality,  and  often  to  the  serious  injury  of  the  street  railway  by  interfer- 
ing with  the  prompt  and  regular  movement  of  its  cars. 

The  jitneys  prefer  to  confine  themselves  almost  exclusively  to  the  short-haul 
traitic.  In  Mr.  Storrs'  statement  to  the  Commission,  it  appears  that  in  the 
city  of  Bridgeport,  Connecticut,  the  jitneys  carry  about  50i%  of  the  passen- 
gers riding  within  li  miles  of  the  centre,  almost  69%  of  the  passengers  riding 
between  li  and  2  miles  from  the  centre,  less  than  45%  of  those  riding  between 
2,  but  less  than  2J  miles  from  the  centre,  and  none  riding  more  than  2|  miles 
from  the  centre  of  the  city. 

(M)  Rise  of  State  Regulation — Adverse   Effects  of  Dual  Regulation  both 

by  States  and  Municipalities. 

Between  1900  and  1910,  a  movement  became  general  in  many  of  the  states 
for  regulation  and  supervision  of  public  utilities  by  State  Conrmissions.     A 


2178        PROCEEDINGS  OF  FEDERAI.  ELECTRIC  RAILWAYS  COMMISSION. 

few  states  had  earlier  establlslietl  such  CH)muiission8.  Even  in  those  cases, 
h()we\-er,  there  was  pretty  generally,  durinc:  the  period  mentioned,  an  extc  n- 
sion  of  the  iwwers  and  jurisdictions  of  these  supervising  bodies.  Great  hoi)es 
were  entertained  on  the  part  of  the  public,  and  these  hopes  were  sliared  to  a 
considerable  extent  by  those  interested  in  the  utilities  themselves,  of  the  bene 
ficial  results  to  follow  from  the  system  of  comprehensive  supervision  and  regii- 
hition.  Generally  si^eaking,  although  the  jurisdiction  conferred  was  never  ex 
acily  the  same  in  anv  two  states,  Uicse  Commissions  were  given  power  to  regu- 
htte  rates,  to  prescribe  the  character  and  extent  of  service,  to  supervise  and 
determine  the  manner  of  keeping  accounts,  to  permit  or  prevent  consolidation, 
mergers  and  leases,  to  approve  the  purposes  and -amounts  of  issues  of  securi- 
ties, to  make  valuations  of  properties,  and  in  many  other  respects  to  supervise 
and  control  the  corporate  activities  and  the  manner  of  conducting  the  par- 
ticular utilltv  business  for  which  a  company  had  been  chartered,  bo  far  as 
we  have  knowledge,  no  such  Commission  has  .sought  or  l>een  given  any  au- 
thority over  wages  paid  by  a  utility,  or  any  iwwer  to  arbitrate  the  amount 
of  such  wages  in  case  of  a  disagreement  between  the  utility  management  and 

its  employes.  ,     .      ,.     .  xi         i  ^i„ 

The  creation  of  these  Commissions  has  undoubtedly  been,  upon  the  whole, 
l>eneficial  both  to  the  public  and  to  the  industry.  There  is  no  doubt  that  m 
nu\nv  cases  over  the  entire  country  their  decisions  have  tended  to  allay  public 
suspicion  and  distrust  in  the  integrity  of  the  existing  financial  structure  of  a 
utility  or  to  establish  a  new  and  authoritative  financial  basis  as  a  result  of 
valuaVion  proceedings.  In  meeting  the  need  for  increasetl  revenues,  their  de- 
cisions have  also  oftentimes  satisfied  the  public  as  to  the  reasonableness  of  tiie 
proposed  rates,  which  otherwise  would  have  met  far  greater  public  opposition. 
They  have,  in  many  cases,  furnishe<l  what  almost  every  American  demands 
and' what,  if  he  obtams,  often  satisfies  him— "  his  day  in  court." 

That  the  high  hopes  entertained  of  the  benefits  to  follow  the  creation  of  these 
Commissions  have  been  only  measurably  realized  has  been  due  to  two  mam 
causes  -In  the  first  place,  either  from  the  unwillingness  of  the  Legislature,  or 
carelessness  in  enacting  the  legislation,  the  Commission  was  not  given  suflicient 
authority  to  constitute  it  a  full  and  final  tribunal  in  determining  matters  ap- 
parently placed  within  its  jurisdiction.  In  some  states,  doubtless,  constituional 
provisions  prevened  such  authority.  Whatever  the  cause,  however,  the  result 
has  in  manv  instances,  discredited  the  work  and  greatly  impaired  the  useful- 
ness of  Uie  Commission.  It  often  finds  itself  confrontetl  with  local  franchise 
conditions  contained  in  franchise  contracts  entered  into  by  municipalities, 
fixing,  for  the  term  of  the  franchise,  rates  of  fare  and  other  details  of  the 
business  of  the  utilitv  which  it  is  without  power  to  modify.  Tlie  present  situa- 
tion in  New  York  Citv  is  a  conspicuous  example  of  such  a  failure  of  the  plan 
contemplated  in  public  service  regulation.  Although  it  is  a  notorious  fact  not 
only  to  everv  expert  and  student  of  electric  railway  and  rapid  transit  trans- 
iwrtation,  but  also  to  most  members  of  the  public  itself  in  that  city,  that  the 
five  cent  maximum  fare  established  years  ago  is  no  longer  adequate,  the  Public 
Service  Commissioner  is  iwwerless  to  authorize  the  action  necessary  to  save 
the  utilities  from  probable  receiverships,  and  the  municipal  oflTicials  refuse  to 
give  their  necessarv  co-operation.  While  perhaps  the  most  conspicuous  case, 
that  of  New  York.  Is  by  no  means  unique,  many  companies  are  striving  to  con- 
tinue to  furnish  transportation  with  a  grossly  inadequate  revenue,  and  the 
public  is  receiving  onlv  inadequate  and  unsatisfactory  service,  because  the 
State  Commission  cannot,  and  the  local  authorities  irill  not,  take  the  respo'j- 
sibilitv  of  permitting  higher  fares. 

The  effect  of  this  lack  of  complete  autliority  is  noticeable  also  in  cases  rf 
franchises  which  liave  already  reached,  or  are  rapidly  approaching  their  expi- 
ration dates.  State  regulation  of  rates  and  service  is  a  mockery  both  of  the 
utilitv  and  the  public  served  by  it  if  the  Commission  has  no  authority  relative 
to  extending  or  renewing  a  term  franchise,  or  to  the  terms  upon  which  such 
extension  or  renewal  may  be  made.  Without  this  authority,  even  if  the  Com- 
mission lias  been  given  authority  to  disregard  the  franchise  rates  of  fare,  it 
can  take  no  well  considered  position.  Is  it  to  fix  rates  on  the  basis  of  a  rea- 
sonable return  upon  the  investment  or  value  of  the  property,  and  assumin;; 
that  the  utility  is  to  continue  indefinitely  to  render  the  service  for  which  it 
was  organized,  or  is  it  to  fix  much  higher  rates  in  order  to  amortize  the  invest - 
ment  during  the  life  of  the  franchise  upon  the  theory  that  it  will  not  be 
renewed?  A  Commissioner  with  the  wisdom  of  Solomon  could  not  fix  a  fair 
rate  in  the  face  of  such  a  dilemma. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2179 

While  the  cause  just  stated  is  by  far  the  more  serious  one,  there  is  another 
which  has  prevented  State  regulation  from  giving  complete  satisfaction.  So 
far  as  the  public  transportation  utilities  are  concerned,  the  effect  of  increased 
costs  and  other  features  of  the  industry,  with  the  almost  revolutionary  results 
of  the  War  upon  it,  have  brought  about  a  situation  and  required  a  line  of 
action  on  the  part  of  Commissions  which  had  not  been  in  the  least  anticipatetl. 
The  general  expectation  of  the  public  was  that  the  main  function  of  these 
Commissions,  with  respect  to  rates,  was  going  to  be  to  reduce  them  from 
time  to  time.  This  did  not  prove  to  be  the  case  and  even  before  the  European 
War  broke  out,  it  was  becoming  increasingly  apparent  that  in  many  cases  rates 
of  fare  ought  to  be  ralsetl  and  not  lowered,  although  comparatively  few  people 
then  realized  how  generally  this  was  true.  Great  courage  is  required  in  a 
Commissioner  to  increase  rates  upon  such  a  universally  used  utility  as  an  electric 
railway.  Apart  from  the  courage  require<l,  care  and  time  are  necessary  to 
satisfy  the  public  of  the  justice  of  the  Commissioner's  action.  If  the  normal, 
pre-war  conditions  liad  continued,  it  is  probable  that  the  time,  necessary  to 
satisfy  first  the  Conmiission,  and  then  to  enable  the  Commission  to  satisfy 
the  public,  of  the  need  and  of  the  amount  of  proposed  increases  in  fares  could, 
in  many  cases,  have  been  taken  without  irrei)arable  injury  to  the  utility  from 
the  consequent  delay  in  receiving  relief.  Under  the  conditions  produced 
by  the  W'ar,  however,  these  delays  have  createtl  a  cumulative  financial  in- 
justice to  the  utilities.  In  the  matter  of  labor  cohipensation  alone,  with  yearly 
increases  of  previously  unheard  of  i)ercentages,  usually  retroactive  and  fol- 
lowing one  another  at  short  periods,  the  relief,  even  when  It  could  be  and  was 
granted  by  the  Commissions,  was  usually  months  too  late  to  meet  the  addi- 
tional wage  demands  upon  revenues.  The  race  between  wages  and  fares  was 
as  unequal  and,  for  the  utility,  as  hopeless  as  one  between  a  high  powered 
automobile  and  a  hobbled  horse, 

II. 

PRESENT  CONDITION  OF  THE  INDITSTRY. 

While  there  are  differences  of  opinion  as  to  the  cause,  almost  every  witness 
before  the  Commission  concluded  that  the  industry  is  in  a  deplorable  state. 

"  Financially,*  the  most  acute  problem  that  we  have  internally  at  this 
time"  (Ferguson,  1664). 

Present  crisis  one  of  having  a  street  railroad  at  all  (Bullock,  1835). 

"At  the  present  time  the  electric  railway  industry  has  reachecl  a  serioiLS 
stage"  (Edison,  2430). 

Industry  "  in  extreme  danger  of  complete  collapse  and  dissolution " 
(Tripp,  191). 

Generally  .speaking,  the  electric  i*ailways  of  the  countr>'  are  dead  broke 
(Mote,  3172). 

"We  find  that  a  street  railway  situation  similar  to  that  in  Denver  is 
confronting  practically  every  city  in  the  United  States.  In  a  way  we  have 
been  called  upon  to  solve  a  problem  that  is  not  merely  a  local  one,  but  a 
serious,  national  condition"  (Report  of  the  General  Committee  of  Fifty- 
five,  known  as  the  Tramway  Adjustment  Committee,  appointed  by  the 
Major  of  Denver,  Colo.,  adopted  May  28,  1919,  5.— Cited  in  Exhibit— Elec- 
tric Railways — Recommendations  made  by  Investigating  Committees  and 
Commissions,  18). 

"  The  serious  condition  which  confronts  the  managers  of  the  utility,  the 
investors  in  its  securities,  and  its  patrons  is  not  peculiar  to  Rhode  island 
or  confined  to  the  utility  in  question.  The  same  condition  exists,  in  greater 
or  less  degree,  with  respect  to  similar  properties  throughout  the  country  " 
(Report  of  the  Special  Ck)mmission  for  the  Investigation  of  the  Affairs  of 
The  Rhode  Island  Company,  March.  1918,  24.— Cited  in  Exhibit— Electric 
Railways — Recommendations  made  by  Investigating  Committees  and  Com- 
missions, 19). 

"A  smuming  up  of  the  evidence  presented  to  tliLs  Commission  shows  that 
with  the  exception  of  the  12.8  miles  of  street  railway  in  the  state  out  of  a 
total  of  828  miles  all  of  the  lines  are  either  in  the  hands  of  receivers  or 
are  insolvent  and  must  have  their  service  to  the  public  either  partially  or 
completely  discontinued  and  portions  of  their  lines  abandoned  and  sold  for 
junk  unless  substantial  temporary   relief  is  furnished  through  adequate 


2180        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

legislation  by  the  General  Assembly  of  1919  "  (Report  of  the  Street  Railway 
Investigation  Commission  of  Connecticut,  April  1,  1919,  18.— Cited  in  Ex- 
hibit—Electric Railways— Recommendations  made  by  Investigating  Com- 
mittees and  Commissions,  19). 

(A)  Lack  of  Credit. 

The  testimony  of  operators,  publicists,  bankers,  and  manufacturers  is  that 
lack  of  credit  is^  the  fundamental  fact  underlying  the  present  crisis. 

"  The  earnings  are  not  high  enough  to  support  the  credit  of  even  a  con- 
servatively capitalizeil  company,  in  many  cases,  and  even  if  the  earnings 
were  better,  I  am  still  afraid  that  the  credit  would  be  poor,  because  street 
railways  have  apparently  ceased  to  be  an  attractive  field  for  private  invest- 
ment. The  investors  are  afraid  of  street  railway  securities.  They  are 
afraid  because  of  their  experience  in  the  past,  and  I  think  they  are  also 
afraid  because  of  their  fear  of  what  may  possibly  happen  in  the  future  " 
(Eastman,  G007). 

"  The  credit  of  the  industry  is  so  impaired  that  it  can  no  longer  finance 
its  own  enterprises  on  possible  terms"  (Jones,  5352). 

"Credit  is  already  strained  beyond  the  elastic  limit"  (Doherty,  1169). 

Credit  of  electric  railways  is  in  very  poor  condition  (Barry,  1106). 

Credit  of  electric  railways  seriously  impaired  (Sisson,  914). 

"Generally  speaking  there  is  no  market  for  street  railways  securities 
to-day"  (Stuart,  569). 

"No  more  capital  can  be  obtained  except  in  special  cases'*    (Edison, 

2430). 

"  Earning  power  being  curtailed  to  such  an  extent  as  to  destroy  the  ability 
of  the  Companies  to  obtain  money  or  even  maintain  the  integrity  of  their 
present  securities"   (Insull,  2544). 
These  credit  conditions  have  resulted  in  an  enormous  shrinkage  in  security 
values, 

"  Taking  all  the  street  railway  bond  issues  of  the  country,  the  shrinkage 
has  been  about  25  per  cent,  and  considering  all  stock  issues  of  the  country 
the  shrinkage  has  been  about  75  per  cent.  ♦  *  *  It  amounts  to  over  a 
billion  dollars  and  of  course  a  great  deal  of  these  securities  are  held  by 
the  banks  and  trust  companies  and  insurance  companies  and  the  mass  of 
the  people"  (Babson,  3111). 
which,  because  of  the  Investment  of  trust  funds  in  electric  railways  securities, 
makes  the  problem 

"  Of  nation-wide  business  importance — capable  of  having  a  wide  spread 
and  disastrous  effect  on  business"  (Sisson,  924). 

Lack  of  credit  has  been  a  hindrance  to  the  more  general  adoption  of  the 
service-at-cost  plan  in  Massachusetts  (Nash,  1894)— has  been  a  hindrance  to 
extensions  and  the  purchase  of  needed  equipment  (Mortimer,  2335;  Henry, 
2024)— including  such  operating  economies  as  the  introduction  of  the  one-man 
car  (Bullock,  1876;  Kellogg,  2138;  Newman,  1625;  Barry,  1121-1127-1149). 

An  overwhelming  mass  of  figures  supports  these  conclusions. 

According  to  the  Census  returns  for  the  year  1917  (2709),  out  of  income  of 
all  sources  $730,108,040  gross  income  available  for  fixed  charges  amounted  to 
$231,756,691  on  a  total  investment  per  books  of  $5,136,441,599  or  less  than 
4i%.  Operating  expenses  of  $452,594,654  include  only  $6,836,836  for  Deprecia- 
tion of  retired  equipment,  $6,800,348  for  Depreciation  of  ways  and  structures 
and  $2,276,295  for  Depreciation  of  power  plant  buildings  and  equipment,  a 
total  of  $15,913,479  or  only  2.2%  of  income  from  all  sources,  whereas,  according 
to  competent  testimony,  the  amount  reserved  for  Depreciation  should  be  at 
the  order  of  8  to  107o  of  gross  income  (Beeler,  4844).  The  operating  expenses 
of  $452,594,654  moreover  include  $313,748,577  for  labor  (Welsh,  323),  repre- 
senting wages  of  $1,065  per  annum  for  each  of  the  294,826  employes.  See  also 
Exhibit  Sturgis  analysis  of  Electric  Railway  Operating  Costs  and  the  Cost  of 
Living  as  related  to  wages  of  Conductors,  Motormen,  etc.  (13-18).  They  do  not 
include  the  full  force  of  the  War  Labor  Board  awards  (Welsh,  327-344),  nor 
a  minimum  return  for  labor  which  should  amount  to  .$2,000  per  annum  (Lauck, 
5637-9).  These  two  factors  alone,  the  necessity  of  replacements  and  demands 
of  labor  are  ruining  the  industry.    Too  little  attention  has  been  paid  to  the 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2181 

feature  of  depreciation  (Cook,  4815;  Beeler,  4884).  Resulting  increases  in 
opersiting  expenses  have  decreased  the  ratio  of  operating  expenses  to  operating 
revenues  from  63.8%  to  72.13%  in  1918  (Welsh  Chart  C-100,  267).  This  ratio 
has  been  further  increased  for  the  four  months  ending  April  30,  1919,  76.43% 
(Welsh  Chart  O-120,  288-291).  These  facts  are  corroborated  by  the  careful 
study  made  by  Erickson  based  on  an  analysis  of  the  operating  results  of 
thirty-five  roads  (2796-2803)  from  which  he  concludes  "for  several  years  in 
the  past  street  railways  have  not  as  a  rule  been  earning  a  fair  living"  (2814). 
They  are  also  corroborated  by  results  in  Massachusetts  under  careful  public 
regulation  (188,  2887). 

(B)  Deterioration  in  Service. 

Deterioration  in  service  rapidly  follows  lack  of  credit. 

"  The  deterioration  of  the  proi)erties  and  service  of  our  street  railways 
company  is  due  to  deferred  maintenance  and  that  in  turn  is  due  in  part  -t 
least  to  deferred  increases  of  rates"  (MacLeod,  4191). 

"  The  only  way  in  which  you  can  be  in  position  to  take  advantage  of  the 
development  of  the  art  is  to  have  a  depreciation  fund  so  that  you  can  re- 
place your  property  when  jou  need  and  ought  to  replace  it  in  the  public 
interest;  and  the  results  I  think  to  the  public  will  be  better,  because,  in- 
stead of  having  old,  antiquated  and  obsolete  equipment,  they  will  have  new 
and  modern  equipment  which  will  give  them  better  service  and  also  give 
it  at  less  cost"  (Eastman,  5997). 

The  great  questions  before  the  railways  today  are  getting  new  money, 
and  adopting  a  comprehensive  policy  providing  for  a  rehabilitation  of  the 
properties  other  than  making  repairs  (Beeler,  4885). 

• 

(C)  Receiverships. 

Sixty-two  companies  having  a  mileage  of  5,932  were  in  Receivers'  hands  as 
at  May  31,  1919  (Welsh,  Chart  C-146,  240-245).  All  except  12.8  miles  of  the 
street  railways  in  Connecticut  are  insolvent  (Higgins,  3225).  Fifteen  per  cent. 
of  the  electric  railway  mileage  in  Pennsylvania  is  affected  by  receivership 
(Ainey,  4076). 

The  detailed  testimony  of  Receivers  before  the  Commission  (Fagan,  1735) 
and  (George.  841,  as  to  Pittsburgh),  (Hedges,  1487,  as  to  New  York  City), 
(Loring,  4779,  as  to  Boston),  (Bliss,  3394,  as  to  Rhode  Island),  indicates  the 
question  is  not  one  of  return  on  capital  investment  but  of  meeting  actual  oper- 
ating expenses. 

(D)  Disintegration  of  Unified  Systems. 

The  breaking  up  of  unified  systems  into  component  parts,  with  resulting  dis- 
organization of  traffic  and  loss  of  the  transfer  privilege  has  already  taken  place 
in  New  York.  To  have  two  competitive  electric  railways  in  the  heart  of  the 
City  such  as  in  Washington,  has  been  found  to  be  a  serious  evil  (Kutz,  3037). 

(E)  Abandonment  of  Lines. 

Welsh  submits  a  list  of  sixty  companies  of  electric  railways  that  have  been 
dismantled  and  sold  as  junk  as  at  June  7,  1919,  totaling  769  miles  (247)  and 
a  list  of  thirty-eight  companies  tha-  have  abandoned  service,  totaling  257  miles 
(251-254).  This  with  the  mileage  of  the  sixty-two  railways  in  the  hands  of 
Receivers,  totaling  5,912  miles  (255-258),  represents  approximately  one-sixth 
of  the  mileage  of  the  country  (245). 

160643*— 20— VOL  3 -9 


It 


2182        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

III. 

CAUSES  OF  PRESENT  CONDITIONS. 

The  causes  of  the  present  crisis  in  the  electric  railway  industry  have  been  set 
forth  at  length  by  the  numerous  witnesses  appearing  before  the  Commission. 
These  causes  cover  a  wide  range,  and  may  be  listed  as  follows: 

A — Inflexible  fares 
B — Increased  cost  of  labor 
C — Increased  cost  of  materials  and  supplies 
D — Increase  in  taxes  and  imposts 
E — Decline  in  purchasing  power  of  fare  received 
F — Use  of  private  automobiles 
G — Jitney  competition 

H — Longer  average  haul  owing  to  spread  of  population 
I — Increased  use  of  free  transfers 
J-r-More  stringent  service  requirements 
K — Increase  of  traffic  at  peak  hours 
I.r — Street  congestion 
M — Unremunerative  extensions 

js'_P„l)lic's  belief  that  high  cost  of  living  does  not  affect  street  railways 
O— l»oint  of  view  that  industry  will  be  continued  anyway. 
In  addition  to  these  causes,  a  few  witnesses  have  laid  stress  upon  factors 
that  have,  In  their  opinion,  contributed  to  the  pi*esent  conditions  of  the  indus- 

tr>%  namely: 

Over-capitalization 

Payment  of  excessive  rentals 

Over-consolidation 

Failure  to  provide  adequate  replacement  reserves. 

(A)  Inflexible  Fares. 

Almost  without  exception  the  testimony  of  witnesses  appearing  before  the 
Commission  has  affirmed  the  fact  that  inflexible  fares  have  been  a  leading 
cause  of  the  present  conditions  of  the  electric  railway  industry.  It  is  only 
from  rates  collected  that  the  income  of  the  electric  railway  is  derived.  There 
is  no  other  source  of  revenue.  Accordingly,  if  expenses  are  increased,  revenues 
must  be  increased  by  advancing  rates.  The  inability  of  the  electric  railways 
promptly  to  readjust  their  income  to  meet  rising  costs,  has  brought  about  a  large 
measure  of  the  calamity  which  now  confronts  them.  Flexible  rates,  imme- 
diately responsive  to  unfavorable  and  uncontrollable  conditions,  are  the  only 
safeguard  of  the  companies,  the  investors,  the  employees,  and  the  public. 

Inflexible  fares  have  been  one  of  the  big  causes  of  present  difficulties 

(\\*ilcox.  3557). 

The  principal  cause— and  all  other  causes  are  minor  in  importance— was 
the  decreased  purchasing  power  of  the  dollar,  coupled  witli  the  fact  that 
fares  had  been  fixed  eitlier  by  franchise  requirements  or  by  the  popular 
impression  that  the  fare  was  standard  forever  at  five  cents  (Tripp,  441, 
461,  194). 

Impairment  of  street  railway  credit  structure  has  been  brought  about 
through  increased  operating  costs  coupled  with  a  fixed  unit  fare  (Sls.son, 

914-15).  ,  .  .. 

The  fundamental  error  i  the  establishment  of -our  system  of  street  rail- 
ways, was  the  fixed  five-cent  fare  or  a  fixed  fare,  because  in  all  cases,  it 
was  not  five  cents  (W.  J.  Clark,  678). 

Kates  of  fare  should  at  all  times  be  responsive  to  current  conditions 
(Alney,  4103). 

Inflation  of  our  currency  and  credit  has  been  the  fundamental  cause 
of  this  increased  cost  of  living,  while  the  fixed  fares  have  not  gone  up 
correspondingly  (Jenks,  2651-2655-2660). 

In  other  cities  than  Cleveland  they  have  adjustetl  their  operations  to  a 
fixed  rate  of  fare  and  could  not  make  readjustments  as  the  increase  went 
on  in  their  operating  expenses.  Their  catastrophles  and  calamities  have 
been  precipitated  until  they  all  came  at  one  time  (Baker,  2988,  3020,  2987). 

Electric  railways  are  financially  impotent,  owing  to  their  having  been 
prevented  from  increasing  their  rates  to  a  sufficient  extent  to  cover  iu- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2183 

creased  costs  of  operation  and  reasonable  return  on  capital  already  invested. 
This  condition  applies  to  many  companies  throughout  the  entire  country 
and  is  mainly  responsible  for  the  unsettled  condition  of  the  electric  railway 
industry  to-day  (Hurley.  587). 

See  also  Babson,  3074-^3090;  Babcock,  5539-5504-5521;  Sidlo,  4629;  D.  C. 
Jackson,  4167-4169^128,  4179;  Cooke,  4940;  Burr,  3823;  Nixon,  3722-3724, 
3735-3738;  Pardee,  180-182;  Loring,  4804;  MacLeod,  4180;  Higgins,  3228; 
Sprague,  2147 ;  Kutz,  3046. 

(B)  Increased  Cost  of  Labor. 

One  of  the  most  important  causes  of  the  present  crisis  in  the  electric  railway 
industry  has  been  the  gi-eat  advance  in  the  cost  of  labor.  The  scarcity  of 
man-power  precipitated  by  the  entrance  of  the  United  States  into  the  world 
conflict  in  1917,  coupled  with  the  awards  of  the  National  War  Labor  Board, 
cast  upon  the  industry  a  burden  of  increased  cost,  which,  with  inflexible  rates, 
it  could  not  carry.  As  a  result  a  considerable  percentage  of  the.  entire  electric 
railway  mileage  of  the  country  was  thrown  into  the  hands  of  receivers,  or 
brought  to  the  verge  of  bankruptcy. 

As  iK)inted  out  by  W.  Jett  Lauck  (5590-1,  5654,  5656,  5657),  the  principle 
that  was  established  by  the  National  War  Labor  Board  that,  irrespective  of 
the  financial  conditions  of  the  .street  railways,  a  rate  of  wages  which  was 
equitable  should  be  paid,  even  if  it  put  tlie  railways  into  the  hands  of  re- 
ceivers— which  was  practically  the  case  on  some  railways  for  which  wages  were 
established — was  adopted,  and  the  Courts  have  held  that  even  if  a  public 
utility  is  in  the  hands  of  a  receiver  it  has  no  bearing  upon  the  matter  of  an 
equitable  wage. 

The  most  notable  element  in  tlie  operating  expense  is  the  item  of  con- 
ducting transportation.  It  is  not  only  the  largest  item,  but  the  one  in  which 
there  has  been  a  proportionate  increase  during  the  census  years  and  also 
in  the  vear  1918.  The  principal  element  in  tbat  is  trainmen's  wages 
( Welsh,  *304). 

A  factor  which  has  contributeil  largely  to  the  difficulties  of  the  situa- 
tion has  been  the  wage  awards  of  the  National  War  Labor  Board.  Prob- 
ably one-half  of  the  gross  operating  expenses  of  a  railroad  consists  of  direct 
labor  costs,  which  are  constantly  increasing  (Sisson,  920,  921,  930,  931). 

The  one  sole  trouble  is  increased  costs  of  labor  and  material  and  the 
inability  to  promptly  readjust  the  rate  of  fare  (Bradlee,  589). 

Conditions  have  been  very  rapidly  improving  since  ISIarch,  I  have  dis- 
covered in  many  parts  of  the  countrj-.  The  recent  big  increase  in  wages 
this  summer  may  counterbalance  that;  I  am  not  sure.  Electrical  railways 
are  operating  at  greatly  increased  costs  for  wages  and  materials.  Any  new 
construction  will  also  be  made  at  greatly  Increased  cost.  When  extensions 
are  made  or  new  railways  built,  this  increase  in  original  cost  is  a  burden 
until  the  total  cost  is  amortized.  It  is  a  burden  that  must  be  met  out  of 
fares  (Bemis,  6120,  6163). 

War  aggravated  the  situation  and  brought  it  to  a  head  by  causing  in- 
creases in  wages,  cost  of  fuel  and  materials  (Pardee,  183,  185). 

This  chart  shows  that,  comparing  1919  with  1906,  there  has  been  an  in- 
crease in  wage  rates  of  about  93  per  cent.,  the  most  rapid  increase  having 
occurre<l  from  1918  to  1919  (Welsh,  328). 

Conditions  which  created  the  bad  situation  before  the  war,  and  especially 
during  the  war,  are  still  with  us.  Prices  of  labor  and  material  are  not 
declining  greatly,  nor  are  they  likely  to  fall  much  as  long  as  our  supply  of 
money  and  cre<lit  remains  as  great  as  is  now  the  case  (Erickson.  2^13, 
2814-5,  2810-15,  2801). 

As  to  increased  costs  of  labor  and  materials — well,  leaving  out  of 
account  any  possible  economies  that  may  be  involved,  and  that  would  be 
on  the  other  side  of  it,  I  think  it  is  perfectly  obvious  that  practically  all 
operating  costs  have  increased  in  the  street  railroad  business  since  the 
beginning  of  the  war.  Coal  and  wages  are  the  two  principal  items 
( Baker,  3023,  2963-4,  3022 ) . 

The  present  level  of  wages  will  continue  for  some  time — some  years. 
I  do  not  see  any  signs  of  decrea.ses  in  wages.  It  seems  to  me  that  rom- 
modities  are  bound  to  remain  high  (Ferguson,  1676-7). 


2184         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

A  super-essential  business — the  street  railway — is  literally  begging  for 
the  right  to  live.  The  immeillate  reason  is  that  the  margin  between  in- 
come and  outgo  has  l>een  wiped  out  by  the  rise  in  costs  of  materials,  labor, 
taxes  and   interest    (Beeler,   4838,   4864,   4901). 

Conditions  are  getting  worse — wages  are  rising  and  costs  of  materials 
and  supplies  have  not  begun  to  decline  (Bullock,  1837). 

Increased  fares  have  as  a  rule  only  partially  offset  increased  wage  and 
material  costs  (D.  C.  Jackson,  4125). 

War  prices  and  war  wages  are  important  causes  of  present  conditions 
(Wilcox.  3576). 

To  the  same  effect  see  Sturgis,  5209,  5201,  5171,  5156;  Sanders,  4263; 
Shoup,  1729-31;  Babson,  3075,  3093;  Mortimer,  2266,  2258,  2190-2195; 
Lambert,  1134:  Loring.  4820;  Clayton,  766;  Creed,  2.592-3;  Joyce, 
4413-31,  5794-6,  4590;  Westinghouse,  2697;  Cooley,  784-5;  Conway, 
2728-32,  2741 ;  Schaddellee,  2489 ;  Tingley,  1069 ;  Ainey,  4082 ;  Fagan, 
1762-5,  1770-1;  Mote,  3179,  3211,  3193-6;  Nixon,  3718,  3787-8; 
Couzens,  ,3316 ;  C.eorge,  873 ;  Bliss,  Wm.  C,  3419-21,  3438,  3459 ;  Hall, 
3876;  Higgins,  3242;  lusull,  2545-6. 

(C)  Increased  Cost  of  Materials  and  Supplies. 

The  abnormal  increases  in  the  price  of  materials  and  supplies  have  affected 
the  electric  railway  industry  just  as  they  have  affectetl  all  other  industries; 
that  is  to  say  the  **  high  cost  of  living  "  has  reduced  the  purchasing  power  of 
the  electric  railway  dollar  in  the  same  proportion  that  it  has  reduced  the  pur- 
chasing |x>wer  of  the  dollar  of  the  individual.  This  fact  has  been  another  cause 
of  the  present  electric  railway  crisis,  because  the  high  prices  paid  have  not  been 
readily  reflected  in  a  higher  price  to  the  consumer  of  electric  railway  service; 
that  is,  the  car  rider.  In  every  other  industry  the  finished  product,  often  of 
inferior  quality,  has  been  promptly  marketed  at  a  price  sutflciently  advanced  to 
absorb  the  increased  cost  of  manufacture.  The  electric  railways,  with  rates  of 
fare  fixed  by  public  authority,  are  the  striking  exception  to  this  rule  of  economic 
neces.sity,  and,  widespread  receiverships  are  the  result. 

Witnesses  api)earing  before  the  Conunission  have  not  only  attributed  the  pres- 
ent c<mdition  of  the  industry  in  large  part  to  the  high  cost  of  materials  and 
supplies,  but  have  also  stated  their  belief  that  high  prices  will  remain  for  an 
indefinite  i^eriod. 

War  prices  and  war  wages  are  important  causes  of  present  conditions 
(Wilcox,  3.576). 

High  prices  are  a  cause  of  present  conditions.  Prices  have  been  steadily 
rising.     Since  1915  they  have  more  than  doubled  ( Erickson,- 2797-8 ;  3904). 

The  price  level  today  is  substantially  double  what  it  was  before  the  war 
and  is  likely  to  remain  as  it  is  to-day  (Fisher,  3842). 

Among  tlie  causes  of  present  conditions  are  the  vast  increases  in  the  cost 
of  coal,  labor  and  materials  (Liistman,  5993-4). 

AVages  and  materials,  generally  si>eaking,  I  think,  have  doubled  and  more 
than  doubled  in  the  last  four  years  (Ferguson,  1669). 

Increased  exi>enses  are  the  result  of  the  decreased  purchasing  power  of 
currency  all  over  the  world,  a  condition  which  is  more  or  less  permanent 
(Tripp,  448). 

**  *  ♦  •  at  the  same  time  the  railway  companies  are  drifting  into 
bankruptcv,  caused  by  the  condition  of  war  wages  aiLd  cost  of  materials  " 
(D.  C.  Jackson,  4124). 

There  is  no  indication  of  lower  prices  (for  electric  railway  supplies)  in 
the  near  future ;  on  the  contrary  there  are  unmistakable  signs  of  a  stiffen- 
ing of  prices  in  many  lines  (Englund,  1197). 

"  I  think  you  will  find  still  higher  costs  of  materials  and  higher  costs  of 
labor.  I  think  we  will  have  to  reckon  with  them  for  an  indefinite  period 
of  time"    (Sisson,  931). 

It  is  the  opinion  of  the  trade  generally  that  there  will  not  be  a  marked  re- 
duction in  prices;  instead  of  going  down,  they  will  be  likely  to  go  up 
(Barry,  1109). 

To  the  same  effect  see  Erickson,  2108,  2813;  George,  873;  Insull, 
2545;  Shoup,  1729-31;  Bullock.  1837;  Fagan,  1762;  Ferguson,  1676; 
Baker,  3023;  Babson,  3075;  Heuling,  1140;  Mortimer,  2258-2266; 
Sisson,  915;   Tingley,  1069;   Schaddellee,  2489;  Beeler,  4838,  4901, 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2185 

4890;  Pardee,  183-5;  Mote,  3164-5;  Clayton,  766;  Brad'ee,  5898; 
Bemis,  6163;  Westinghouse,  2697;  Lauck,  5484;  Creed,  2552-3;  Con- 
way, 2726-7;  Barry,  1095;  W.  C.  Bliss,  3467-8,  3476;  Henry,  2040; 
Lambert,  1130;  Taft,  151;  Loring,  4820;  Fisher,  3840,  3908,  3859-74; 
Ainey,  4082;  Sprague,  2178;  Rosenwald,  2676;  Ryan,  2677;  D.  P. 
Kingsley,  2678;  D<mglas,  2679;  Hepburn,  2679;  Armour,  2681;  For- 
gan,  2683;  Schiflf,  2684;  W^arren,  2687. 

(D)  Increases  in  Taxes  and  Imposts. 

One  of  the  flsigrant  public  abuses  of  the  electric  railways,  which  is  regnnled 
as  a  cause  of  [)resent  conditions,  is  the  imposition  of  increasingly  heavy  taxes 
and  imposts.  The  taxation  of  i)ublic  service  corporations  has  for  a  generation 
been  a  favorite  source  of  revenue  of  federal,  state  and  municipal  governments. 
Since  1912  the  taxes  paid  by  electric  railways  have  increased  from  $85,000,000 
to  $50,000,000.  In  addition  to  general  property  taxes,  electric  railway  com- 
panies are  obliged  to  pay  coriwnite  franchise  taxes,  gross  revenue  taxes,  com- 
mutation or  excise  taxes,  compensation  taxes,  license  fees  for  cars  and  numer- 
ous other  sorts  of  taxation  in  the  different  connnunities. 

ImiKjsts  of  many  varieties  have  also  been  hea[)ed  upon  the  industry  with 
constantly  augmenting  severity.  These  imposts  include  the  paving  of  streets 
between  and  outside  the  rails,  contributions  to  the  construction  cost  of  bridges, 
viaducts  and  other  forms  of  highway  designed  for  general  public  use.  the  pay- 
ment of  salaries  of  traffic  officers,  the  removal  of  snow  from  the  streets, 
sprinkling  and  cleaning  of  streets. 

It  is  the  general  opinion  of  the  witnesses  who  have  appeared  before  the  Com- 
mission that  many  of  these  direct  and  indirect  taxes  should  be  abated  for  the 
relief  of  the  car-rider,  upon  whose  shoulders  the  burden  ultimately  falls. 

"  The  public  ♦  *  *  not  only  takes  no  interest  in  lightening  the  bur- 
dens of  those  who  are  responsible  for  the  operation  of  these  properties, 
but  seems  actually  anxious  to  precipitate  the  final  stages  of  what  may 
easily  develop  into  a  national  tragedy"  (Cooke,  4910). 

Federal  taxation  is  too  great  a  burden  {W.  C.  Bliss,  3458). 

Street  railways  should  be  relieved  of  taxes  and  other  burdens  (Babson. 
3072-3). 

The  franchise  tax  law  might  be  modified  so  that  some  companies  could  be 
relieved    (^laltbie,  6087). 

The  elimination  of  the  47c  gross  earnings  tax  would  probably  make  a  5c 
fare  possible  in  Washington    (Kutz,  3039). 

Trolley  companies  should  be  relieved  of  the  burden  of  taxation,  as  much, 
if  not  more,  than  endowed  colleges  or  other  institutions  of  learning  (Hie- 
gins,  3228). 

Municipalities  should  consider  the  possib'.e  suspension  or  elimination  of 
numerous  numicipal  charges  which  are  really  indirect  taxes  upon  the  car- 
riders    (Babcock.   5505). 

State  and  municipal  taxation  in  Rhode  Island  totals  12^%  of  the  gross 
receipts   of    the   Rhode   Island   Company,   and   the   Public   Utilities  Com- 
mission has  recommended  that  all  of  these  taxes,  except  the  propertv  tax 
and  the  franchise  tax  assessed  by  the  State,  be  eliminateil   (C.  W.  Bliss 
3482). 

If  the  city  does  not  want  municipal  ownership  and  operation,  relieve ' 
the  companies  of  some  of  the  municipal  charges,  like  taxes,  special  percent 
ages  on  gross  revenue,  paving  burdens,  etc.,  provided  the  connnunity  is  to 
benefit  in  fares  and  improved  service  (Couzens,  3304-3392). 

Special  franchise  or  license  taxes  should  be  done  away  with,  as  in  many 
cases  the  franchises  are  liabilities  and  not  assets  (Beeler,  4842.) 

If  the  proposed  wage  scale  results  in  an  excessive  fare,  the  public  might 
meet  that  by  remission  of  taxes  or  by  granting  some  form  of  financial 
relief  (Lauck,  5657).    To  the  same  effect  see  Creed,  2553-7;  Storrs,  1269. 

With  reference  to  paving  and  other  imposts,  the  following  views  were  ex- 
pressed : 

It  is  an  injustice  to  place  upon  the  car  riders  the  burden  of  paving 
streets  which  ;ne  actually  usetl  more  by  the  owners  of  automobiles.  This 
condition  ought  to  be  corrected  everywhere.     (Beeler,  4899). 


n 


■  \ 

i 


'. 


2186        PROCEEDINGS  OF  TBDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

A  street  railway  monopoly  no  longer  exists,  now  that  the  automobile  is 
in  the  field.  States  and  cities  should  not  shackle  the  railways  until  they 
again  become  a  monopoly.  There  is  absolutely  no  moral  or  economic  or 
physical  reason  for  the  i)aving  co.st  (Babson,  3079-80). 

A  street  railway  company  should  not  bear  all  the  burden  of  paving.  In 
horse  car  days,  it  was  justified,  but  not  now  (Baker,  297G-7). 

In  view  of  the  present  plight  of  street  railways,  it  is  entirely  desirtihU' 
that  paving  expense  should  be  met  by  the  entire  community,  rather  than 
by  the  car-riders,  even  though  the  presence  of  car  tracks  in  the  streets 
increases  the  paving  costs  and  upkeep  (Eastman,  6044). 

The  burdens  of  street  paving,  maintaining  highways,  bridges,  etc.,  should 
be  removed   (Higgins,  3231.) 

I*aving  charges  should  be  taxed  upon  the  community  as  a  whole  (Nixon, 

3767-8.  ,      , 

Paving  taxes  should  be  abolishetl ;   they  are  out  of  date   (McFarland, 

3954).  .       , 

To  the  same  effect  see  Loring,  4778 :  Joyce,  4422 ;  Storrs,  1269 ;  Creed, 
2553-57;  Mote,  3180:  Babcock,  5518;  Bemls,  6125;  Cooke,  4935-6; 
Maltbie,  6086 ;  D.  C.  Jackson,  4151 ;  Ainey,  4084,  4105-6 ;  Z.  W.  Bliss. 
3485 ;  W.  C.  Bliss,  3414,  3452 ;  Hanson,  3293. 

(E)  Decline  in  Purchasing  Power  of  Fare  Received. 

The  decline  in  the  purchasing  power  of  the  fare  received  has  been  noted  by 
mnnv  witnesses.  While  this  is,  of  course,  represented  by  increased  prices  paid 
for  labor  and  materials,  it  has  been  so  frequently  emphasized,  that  it  is  here 
given  a  special  heading.  The  investigations  of  the  United  States  Department 
of  Labor  show  that  the  value  of  the  dollar  is  today  approximately  50c,  as 
measured  bv  the  standards  prevailing  prior  to  the  European  War  (352). 

Secretary*  Baker  (2963-4)  subscril>etl  to  this  statement  with  reference  to  the 
causes  of  the  present  electric  railway  crisis: 

It  is  undoubtedly  true  that  the  income  of  the  street  railways  are  not 
sufficient,  as  a  general  rule,  to  pay  their  expenses— even  their  oix>rating 
expenses— and  that  labor,  which  constitutes  over  50%  of  their  expenses, 
as  a  rule,  is  demanding  and  receiving  very  high  wages,  in  some  ca^es 
double  the  wages  of  normal  times,  and  that  all  materials  are  exceed- 
ingly expensive  as  compared  with  pre-war  prices;  and  that  the  mckcl  of 
today  has  not  the  purchasing  power  of  the  niekel  of  four  or  five  years  ana, 
and  that  in  itself  would  cause  one  to  look  for  trouble  in  an  industry  with 
no  ability  on  its  own  iiart  to  materially  incroa.se. its  income. 
Other  witnesses  commented  upon  the  declining  purchasing  ix>wer  of  ou. 
currency  as  follows : 

The  purchasing  power  of  the  nickel  has  been  very  much  reduced  in  the 
last  few  years  (W.  J.  Claric,  429). 

With  the  average  purchasing  power  of  the  dollar  decreased  generally 
about  50%  since  1914,  it  is  impossible  for  the  2^c  to  buy  5c  worth  of 
transportation;  that  is  the  sum  and  substance  of  the  whole  situation  (Sis- 
son,  914).  ,      . 

The  reduced  purchasing  power  of  the  dollar  has  created  this  situation 

(Clark,  699). 

The  nickel  of  1887  was  an  entirely  different  nickel  from  the  one  we 
have  todav,  as  far  as  purchasing  power  is  concerned    (Sprague,  2143- 

2180). 

To  the  same  effect  .see  Fisher,  3840,  3908;  Taft,  4-81;  Tripp,  448. 

(F)  Use  of  Private  Automobiles. 

The  advent  of  the  automobile  and  the  rapid  extension  in  the  use  of  the 
privately  owned  motor  car,  are  given  as  other  causes  of  the  present  conditions 
of  the  electric  railways  of  the  country.  In  the  opinion  of  many  witnesses,  the 
introduction  of  the  automobile  and  the  jitney  changed  the  fundamental  char- 
act  of  the  electrle  railway  industry  from  one  of  natural  monopoly  to  one  <»f 
competitive  business. 

Some  witnesses  i-egard  the  extensive  use  of  the  automobile  as  the  chief 
factor  in  the  electric  railway  crisis,  while  others  place  the  motor  propel le<l 
A-ehicle  among  the  most  important  factors  that  have  led  to  the  present  situation. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  CK)MMISSION.        2187 


It  is  the  automobile  and  not  tlie  war  and  iiigiier  costs  that  has  put  tJie 
electric  railways  where  they  are.  The  real  difficulty  with  the  street  rail- 
way situation  came  with  the  automobile,  although  labor  and  high  costs  of 
materials  are  factors.  In  Massachusetts,  there  are  le^s  than  5,000  street 
cars  and  186,000  automobiles  (Bab.son,  3075,  3094). 

The  automobile  and  the  jitney  are  responsible  to  some  extent  for  tlie 
present  situation,  but  they  are  not  the  sole  culprits  (Tripp,  474). 

The  privately  owned  automobile  is  one  cau.se  of  the  present  situatioii 
(W.  C.  Bliiis,  3454). 

Automobiles  and  jitneys  have  materially  affected  street  railway  reve- 
nues, private  automobiles  especially  in  rural  and  suburban  sections  (Hig- 
gins, 3226). 

lender  the  competition  of  the  automobile,  there  are  certain  mileages  of 
track  in  Pennsylvania  that  serve  no  longer  a  real  public  use  (Ainey,  4074). 

The  advent  of  the  automobile  was  not  foreseen,  and  the  peak  of  Its 
eflfe<:;t  on  electric  railway  traffic  has  not  yet  been  reached  (Mote,  3172). 

There  is  no  doubt  whatever  that  automobile  competition  has  been  a 
very  imi>ortant  factor  in  decreasing  the  revenue  of  the  street  railway  com- 
panies all  over  the  country,  and  particularly  in  the  country  districts,  al- 
though it  has  also  oiierated  in  the  cities  (Eastman,  5998). 

The  rapid  development  of  the  automobile  business  has  had  a  tremen- 
dous effect  ui)on  the  earnings  of  the  electric  railways  throughout  the 
country  (Storrs,  1232). 

Since  the  introduction  of  the  automobile  and  the  jil^^y*  tlie  electric 
railway  has  changed  fix)m  a  monopoly  to  a  business  (W.  Jackson,  4040). 

To  the  .same  effect  see  Connell,  4019;  Schaddelee,  2480;  Joyce, 
4.>4S;  Slwup,  1729-31. 

(G)  Jitney  Competition. 

The  most  aggravated  form  of  automolnle  competition  is  found  in  the  so- 
called  jitney  or  motor  bus  which  ha.s  made  large  inroads  into  the  revenues  of 
the  electric  railways  in  almost  every  part  of  the  country,  and  is  not  only  an 
imr»ortant  cause  of  the  present  crisis,  but  presents  perhaps  the  greatest  ele- 
ment of  uncertainty  in  the  future  tlevelopment  of  the  electric  railway  in- 
dustry. 

Witnesses  api)earing  J)efore  the  Commission  have  without  exception  given  tlie 
jitney  a  prominent  place  in  the  electric  railway  problem.  What  has  been  statetl 
above  (see  III  [A]  [6])  with  reference  to  the  use  of  private  automobiles  and 
tlieir  effect  upon  tlie. transformation  of  the  electric  railway  industry  from  a 
monopoly  to  a  business,  may  be  repeated  here  with  even  greater  emphasis.  It 
has  been  pointed  out  by  witnesses  that  tlie  jitneys  should  be  regtilated  and  their 
operating  requirements  made  no  less  onerous  than  those  imposed  upon  the  street 
ctirs  with  which  they  are  in  active  competition  (Beeler,  4858)  ;  tliat  higher  .street 
railway  fares  have  been  stimulate<l  by  the  jitney  development  (Loring,  4791)  ; 
that  the  construction  of  good  roads  and  hi^ways  has  made  tiiis  form  of  com- 
petition eas>'  and  that  in  the  city  of  Springfield,  Mass.,  the  jitneys  take  from 
$200,000  to  $300,000  annually  from  the  street  railway  <Ea.straan,  5978,  5999)  ; 
that  the  amount  of  money  which  the  jitneys  have  taken  away  from  the  Bay 
State  ComiMiny  in  ]Massachusetts,  is  more  than  $2,000,000  annually,  and  that 
the  jitneys  are  the  greatest  proi>leiii  iji  that  state ;  that  tiie  jitney  and  the  street 
railway  cannot  live  in  the  same  community,  because  comi>etition  between  them  is 
wholl}'  unfair  and  unreasonable  (Ixjring,  4791-93) ;  that  while  the  future  of  the 
automobile  and  street  railway  is  uncertain,  the  street  railway  should  be  protected 
in  its  rights  during  the  ti'ansition  (Higgin.*?,  3231)  ;  that  jitney  competition  takes 
about  $12,000,000  annually  from  the  electric  railroad  systems  in  New  York  and  is 
one  of  the  causes  of  the  present  situation  (Wilcox,  3576,  3742)  ;  that  jitney  com- 
l)otition  is  a  very  serious  item  in  New  Jersey,  although  the  jitneys  are  subject 
to  certain  regulations  (Gillen,  3491,  3497)  ;  that  public  safety  and  the  unfair  com- 
petition between  the  jitney  and  the  electric  railways  are  grounds  for  city 
action  (Mote,  3219). 

Ill  addition  to  the  passenger  carrying  jitney,  witnesses  have  referred  to  the 
enci-ojicliment  upon  electric  I'ailway  revenues  b.v  the  motor-truck  use<l  for  the 
transportation  of  freight  and  to  the  motor-bus  used  for  the  transpoitation  of 
passengers  in  considerable  numbers.  These  trucks  and  buses  are  also  factors  in 
the  present  crisis  (Shoup,  1729-31 ;  Mote,  3173,  :{220 ;  Wilcox,  3014, 3743-50, 3619; 
C.  Ogburn.  5945;  Bauer,  4761;  Pardee,  185-6;  D.  C.  Jackson,  41.51). 


2188        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

It  is  entirely  wronj;  in  principle  to  allow  n  jitney  or  bus  service  to  come  in  and 
by  means  of  unfair  competition  render  a  service  inoi>erative  that  they  cannot 
replace  themselves  (Beeler,  4898). 

The  jitney  or  motor  bus  would  not  l>e  an  adequate  substitute  for  the  street -car 
service  (Mote,  3220).  The  motor  bus  should  be  installed  where  practicable,  to 
feed  the  street-car  lines,  not  to  comi^ete  with  them.  The  motor  bus  is  not  ade- 
quate except  in  cities  of  less  than  100,000  (Wilcox,  3614,  3619).  Motor  buses 
can  jrlve  better  service  in  certain  places  <  Babson,  3102).  In  suburban  an<l  country 
districts  with  comparatively  sparse  populntions,  the  motor  bus  is  undoubtedly  the 
vehicle  of  the  future  (C.  Ogburn,  .■394.">). 

(H)  Longer  Average  Haul  Owing  to  Spread  of  Population. 

Still  another  cause  of  the  present  conditions  of  the  electric  railway  industry  is 
the  longer  average  haul  that  the  companies  are  giving  in  their  efforts  to  keep 
up  with  the  rapid  spread  of  the  population.  Recent  developments  toward  more 
healthful  living  conditions  in  and  near  our  urban  centers  have  brouj;ht  about  a 
wider  distribution  of  the  people  in  outlying  districts.  While  the  automobile  has 
been  a  factor  in  this  growth,  the  street  car  which  has  been  termed  the  "  poor 
man's  automobile  "  has  set  the  pace  for  this  expansion.  The  result  has  been  an 
increasing  length  of  the  average  haul,  and  an  Increase  in  the  number  of  un- 
profitable passengers.  Short  haul  traffic,  which  is  the  profitable  portion  of  elec- 
tric railway  transportation,  has  thus  been  called  upon  to  bear  a  greater  and 
greater  burden.  With  jitney  competition  in  the  short  haul  areas,  and  a  greater 
development  of  long  haul  traffic,  without  a  simultaneous  adaptation  of  the 
amount  of  fare  to  the  length  of  haul,  the  electric  railways  have  been  obliged  t«» 
carry  a  burden  that  has  contributed  to  the  present  crisis.  Various  witnesses 
have  emphasized  this  point  before  the  Commission. 

Five  cents  in  New  York  <'arriers  passengers  as  much  as  20  miles,  and 
passengers  are  sometimes  handle<l  three  thnes  between  Brooklyn  and  New 
York    (Nixon,  372.J-3733K 

It  is  noted  throughout  the  country  tnat  more  transportation  is  given 
for  the  original  fare,  whatever  that  may  be,  than  the  utility  can  afford  to 
su])ply   (Storrs,  1264). 

One  of  the  factors  in  the  present  situation  is  the  gradual  increase  that 
has  been  made  in  the  length  of  haul  of  street  railways  (Mortimer,  2266). 

Too  long  rides  for  fares  less  than  cost  are  sometimes  provided  (Ainey, 
4074). 

Our  present  street  railway  service  is  an  outgrowth  of  horse  car  service, 
which,  naturally,  dealt  alone  with  the  short  haul,  and  the  electric  rail- 
way fares  were  chosen  and  fixed  by  habit  on  the  basis  of  the  horse  car 
service.  A  considerable  part  of  tlK?  street  railway  difficulties  is  due  to 
their  effort  to  satisfy  the  needs  of  the  long  haul  at  the  expense  of  the  needs 
of  the  short  haul   (D.  C.  Jackson,  4144,  4163,  4165). 

As  lK»tween  the  car  rider  and  the  investor,  the  car  rider  has  up  to  the 
present  had  nnich  the  better  of  the  bargain.  A  generous  policy  should  be 
held  toward  the  companies  where  there  is  reasonable  evidence  that  the 
financial  condition  of  the  properties  is  due  to  the  fact  that  the  railways 
have  been  giving  the  public  more  than  the  railways  themselves  have  been 
getting,  and  the  public  has  profited  by  having  the  opiwrtimity  of  riding 
relatively  long  distances  for  a  very  short  fare    (MacLeod,  4214-5,  4191). 

The  rapid  increase  in  population  is  one  of  the  causes  of  the  present  situa- 
tion   (Gillen,  3493). 

See  also  Erickson,  2801 ;  .Toyce.  4516 ;  Beeler,  4838-9. 


(I)  Increased  Use  of  Free  Transfers. 

Another  factor  in  the  present  situation  has  been  the  increased  use  of 
transfers,  with  the  result  that  the  length  of  haul  is  very  often  out  of  all 
I>ortion  to  the  cost  of  the  transportation  furnished.  An  objection  to  the 
transfer  in  addition  to  the  frequently  excessive  length  of  ride  which  it 
vides,  is  the  ease  with  which  it  can  be  fraudulently  used,  go  that  many 
sons  ride  without  the  payment  of  any  fare. 

Secretary  Baker,  2925-2936,  expressed  his  views  of  the  free  transfer 
follows : 


free 
pro- 
free 
pro- 
per- 

as 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2189 

"  I  believe  that  the  literally  free  transfer  is  probably  the  worst  prac- 
tice, the  worst  difficulty  that  the  street  railroads  have  to  deal  with.  The 
prol)lem  does  not  affect  only  street  railroads,  but  it  affects  the  riding  public. 
The  man  wlio  uses  a  fraudulent  transfer  does  not  hurt  the  street  railroad 
as  much  as  he  hurts  the  other  passengers  who  have  to  pay  for  carrying 
him." 

A  further  burden  upon  the  electric  railways  resulting  from  the  use  of  free 
transfers,  is  tlie  added  cost  of  re-handling  passengers.  Commissioner  Nixon 
in  his  testimony  (3725)  referred  to  handling  passengers  three  times  between 
Brooklyn  and  New  York.  Another  witness  stated  that  the  free  transfer  should 
be  retained  where  a  flat  rate  is  in  force,  but  that  no  transfer  should  l)e  given 
where  ti  zone  system  with  a  low  initial  fare  is  in  operation   (Wilcox,  3637-40). 

(J)  More  Stringent  Service  Requirements. 

The  jurisdiction  of  state  public  service  comniissioiis  and  municipal  authori- 
ties over  the  service  furnished  by  electric  railways  has  resulted  in  many  in- 
stances in  burdensome  requirements,  which  the  rates  charged  have  not  justified. 
Frequent  public  demands  for  modern  equipment  and  the  extension  of  electric 
railway  service  have  thus  ad<led  to  the  difficulties  which  the  industry  is  now 
experiencing. 

Owing  to  the  increases  in  the  length  of  lines  and  to  the  demands  for 
better  service,  the  electric  railwav  situation  has  been  growing  worse  since 
1910  (Erickson,  2801). 

The  electric  railways  have  been  called  upon  to  ntake  heavy  investments 
in  rolling  stock  and  to  provide  metal  cars  for  wooden  cars  in  furtherance 
of  the  public  safety.  They  have  also  been  required  to  replace  smaller  cars 
with  larger  and  heavier  ones,  and  to  introduce  various  devices  for  the 
comfort  of  the  passengers   ( Healings.  1137,  1140,  1141). 

Some  extensions  of  lines  are  now  being  required  in  Indianapolis.  The 
coiiij>any  Inis  been  obliged  to  put  on  pay-as-you-enter  cars  and  to  buy 
additional  cars  for  lines  with  congested  traffic.  The  Commission  can 
i'(quire  companies  to  do  anything  that  is  reasonable  in  the  wav  of  service 
(Mote,  3221). 

Numerous  changes  in  equipment  of  the  street  railways  have  been  recom- 
mended by  the  Public  T'tilities  Conunission  of  Rhode  Island  (W.  C.  Bliss, 
3414)   (See  also  Storrs,  1250). 

(K)  Increase  of  Traffic  at  Peak  Hours. 

A<i  a  part  of  the  urban  transjxirtation  problem  have  come  the  so-called  "  rush 
hours,"  during  which  the  elect^-ic  railway  companies  are  obliged  to  use  their 
niaximum  power  and  equipment,  to  provide  a  sufficient  ninuber  of  trainmen 
and  to  furnish  additional  cars  and  auxiliary  facilities  in  order  that  reasonably 
a<lc(iuate  service  may  be  supplied.  This  has  resulted  in  added  expense  to  the 
coii!})anies,  and  has  led  to  serious  efforts,  thus  far  without  success,  to  overcome 
the  <lifiiculties  of  the  peak  hour. 

The  more  penky  the  traffic,  the  higher  the  cost  of  operation.  An  increase 
or  decrease  in  the  ratio  of  standing  to  seated  passengers  will  increase  the 
returns  or  decrease  the  returns  in  substantial  quantity  (Mortimer,  5751-2). 

See  also,  conclusions  on  cost  of  rush  Inrnr  service,  referred  to  by  witness 
Mortimer,  in  Association's  publication :  "  Cost  of  Urban  Passenger  Trans- 
j)oi'tation  Service,*'  Doolittle,  Chap.  14,  fthoiring  that  an  incrcafie  of  10% 
in  service  Onring  rush  hours,  tcoufd  reduce  the  return  nearly  one  per  cent, 
while  a  uniform  distribution  of  traffic  during  the  2't  hours  would  increase 
return  from  five  to  ten  per  cent. 

As  to  the  staggering  of  hours  of  business,  so  as  to  enable  the  rush  hour 
traffic  to  be  spread  over  a  longer  ix^riod  and  provide  better  use  of  equip- 
ment, see  Beeler,  4855,  Ole  Hanson,  3203). 

(L)  Street  Congestion. 

The  growth  of  the  automobile  industry  has  added  greatly  to  the  always 
pres<'nt   difficulties  of  the  electric   railways   on   account  of  street   congestion. 


I! 


ul 


11 


2190         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Stopping  and  starting  cars  increase  i>ower  consumption,  retard  operating: 
schedules,  and  result  in  greater  exi>ense  to  the  companies  and  in  public  dij^satis- 
faetion  on  account  of  delays.  In  our  larger  and  rapidly  growinpr  citie.-', 
habitual  street  congestion  has  led  to  the  enormous  investment  whicli  now  exists 
In  subways  and  elevated  structures,  through  tlie  use  of  which  rapid  trans- 
portation can  be  furnished. 

This  problem  has  been  presented  to  the  Conunlssion  l>y  a  number  of  wit- 
nesses, and  is  given  as  anotl^er  cause  of  the  present  conditions  confrontin.i; 
the  electric  railway  industry  : 

There  is  a  verj-  direct  relation  lK»twecn  .speed  and  operating  expen.se. 
The  way  spetnl  Is  nuule  is  by  bettor  lucelerntion  and  faster  braldiig 
eliminating  the  stops  and  delays,  and  that  all  has  a  tendency  to  reiluce 
the  operating  ratio,  for  tlie  reason  that  your  wages  are  paid  on  tlie  Iiourly 
l)asis.  Practically  all  the  income  of  a  railway  goes  out  on  a  time  basis 
and  the  receipts  come  in  on  a  mileage  basis.  The  more  miles  you  get 
out  of  a  street  ear,  the  less  tlie  operating  ratio,  and  the  less  the  ratio  of 
fixed  charges  and  everything  else  (Beeler,  4904). 

The  correction  of  street  congestion  is  in  the  hands  of  the  various  numici- 
pallties  and  their  co-operation  in  all  matters  pertaining  to  the  faster  opera- 
tion of  the  ears  should  be  secured.  Traffic  officers  should  always  give 
precedence  to  street  cars  over  all  other  classes  of  traffic,  and  the  police 
should  assist  in  keeping  the  tracks  clear  of  trucks  and  other  vehicles 
(Beeler,  4856-4879,  4905). 

The  municipalities  should  keep  the  streets  free,  so  tliat  the  traffic  will  not 
block  the  cars  (Wilcox,  3667). 

The  City  of  Cleveland  co-operates  witli  the  railway  company  In  keeping 
vehicles  off  the  tracks   (Baker.  3012). 

I  think  vou  ought  to  point  out  to  the  pul)lic  the  need  for  co-oi>eration  on 
their  part'in  loading  and  unloading  cars,  agreeing  to  skip-stops  and  proper 
traffic  regulations  (Eastman,  G004).    See  also  Creeil,  2553-7. 

(M)  Unremunerative  Extensions. 

As  a  part  of  the  service  requiivments  impose<l  upon  electric  railways,  have 
been  numerous  extensions  of  their  lines  into  unprofitable  territorj-.  The  mainte- 
nnnco  of  these  uni-emunerative  extensions  is  another  cause  of  the  present  situa- 
tion. Tliis  phase  ol*  the  question  was  quite  fully  developed  before  the  Com- 
mission. 

Extensions  into  rural  sections  devcloi>  those  sections,  but  the  volume  of 
traffic  now  received  is  not  sufficient  to  pay  operating  expense  (Higgins, 

3226). 

The  cause  of  the  trouble  in  Pittsburgh  is  historical.  The  operating  prob- 
lem is  difficult  and  extensions  have  l^eefi  somewhat  oveHniilt  (George, 
895-0). 

Had  we  not  developed  beyond  the  area  of  dense  population,  we  should  not 
have  reached  the  difficulties  we  have  (Storrs,  12(>0). 

The  operation  of  suburban  extensions  by  urban  companies  with  similar 
methods  of  operation,  has  been  a  severe  drain  on  the  urban  systems 
(MacLeod,  4182-4). 

To  the  same  effect  see  Erickson,  2108;  Mortimer,  2206;  Joyce,  4532; 
Eastman.  5970;  Couzens,  3366. 

(N)  Publie's    Belief  That   High    Cost   of    Living    Does   Not    Affect   Street 

Railways. 

Ample  testimony  has  l)een  jiresented  before  the  Commission  to  prove  beyond 
the  i>eradventure  of  a  doubt  that  the  electric  railways  are  as  much  affected 
by  the  higli  cost  of  living  as  any  other  industry,  or  as  any  individual.  Tht 
tables  of  increased  prices  of  equipment  and  supplies  used  by  the  electric  railways 
and  the  statistics  of  comparative  wage  scales  prior  to  the  war  and  since  the 
awards  of  the  National  War  Labor  Board,  leave  nothing  further  to  be  .said  in 
supiwrt  of  the  fact  that  the  electric  railways  are  sharing  the  burdens  of  the 
general  increases  in  living  costs. 


PROCEEDINGS  OF  TEDEEAL  ELECTRIC  RAILWAYS  COMMISSION.        2191 

(O)  Point  of  View  that  Industry  Will  Continue  Anyway. 

In  refutation  of  the  poimlar  idea  that  the  electric  railways  will  be  continued 
anyway,  it  is  necessary  to  point  only  to  the  number  of  miles  of  electric  railway 
lines  that  have  been  junked,  abandoned,  or  discontinued  during  the  last  few 
years.  Nor  does  it  require  an  undue  stretch  of  the  imagination  to  forecast  the 
inability  of  the  electric  railways  to  continue  to  function  unless  their  credit  and 
borrowing  power  are  restored.  It  is  perhaps  the  thoughtless  nidifference  of 
the  public  to  the  true  situation,  rather  than  any  premeditated  hostility  to  the 
industry,  that  is  resiwnsible  for  some  measure  of  the  street  railway  difficulties 

today.       .  ^    .^  ' 

See  Welsh,  240,  relating  to  Chart  C-146. 

Other  References  to  Present  Conditions. 

Some  testimonv  has  been  presented  to  the  Commission  to  the  effect  that  the 
cau.ses  of  the  present  condition  of  the  industry  are  to  be  found  in  over-capitali- 
zation holding  company  organization,  over-consolidation,  payment  of  excessive 
rentals  for  franchise  rights,  and  the  failure  to  provide  adequate  deprecmtion. 

The  issues  involved  in  the  present  investigation  are  merely  confused  by  re- 
sorting to  arguments  in  suiiport  of  these  alleged  causes.  The  industry  is  faced 
with  the  problem  of  securing  sufficient  revenue  to  meet  its  operating  charges, 
including  a  fair  return  upon  a  fair  valuation  of  its  i^roperty.  In  many  instances 
the  companies  are  not  earning  enough  to  pay  operating  expenses,  regardless  of 
anv  return  upon  the  investment.  As  to  the  question  of  over-capitalization,  it 
is  significant  to  note  that  in  Iilassachusetts  where  the  State  hiw  limits  the 
issues  of  securities  to  the  value  of  the  property,  the  electric  railway  situation 
is  quite  as  acute  as  in  any  part  of  the  country.  „,        .     ,.   ., 

It  has  been  recommended  and  advocated  by  the  American  Electric  Railway 
Association  that  the  basis  of  i>ermanent  adjustment  of  the  electric  railway 
problem  be  upon  a  fair  valuation  of  the  property  (Warren,  801).  This  is  also 
the  basis  of  the  various  service-at-cost  plans  advocated  by  a  number  of  wit- 
nesses It  is  apparent  that  all  questions  of  watered  stock,  excessive  rentals, 
consolidation  and  bad  financial  management  may  be  entirely  disregarded  in  a 
solution  of  the  problem  based  upon  a  fair  valution  of  the  property. 

Present  conditions  are  not  necessarily  due  to  high  finance  but  to  general 
economic  conditions  (MacLeod,  4241). 

The  in-esent  condition  of  the  electric  railways  has  not  l)een  brought 
about  by  watered  stock,  and  there  is  no  water  in  public  utility  securities 
now.  This  country  would  not  have  been  built  up  and  there  never  wouhl 
have  been  our  present  system  of  railways  and  public  utilities  if  the  accepted 
financial  practice  of  issuing  bonus  stock  had  not  been  pretty  general 
throughout  the  days  of  promotion  and  creation   (Sisson,  986.  947-8). 


If 


4 


With  further  reference  to  the  causes  of  present  eonditions,  the  Commission's 
attention  is  called  to  an  exhibit  filed  by  the  Association—"  Electric  Railways — 
Recommendations  Made  by  Investigating  Committees  and  Ommi.ssions '* 
(16-20). 

IV. 
FUNDAMENTALS    UNDERLYING    SOLUTION    OF    THE    PROBLEM. 

(A)  The  Establishment  and  Maintenance  of  Credit. 

The  credit  of  the  electric  railway  industry  must  be  established  if  private 
capital  is  to  be  used  in  this  public  service.  Credit  is  based  upon  the  con- 
fidence of  the  investor  in  the  enterprise. 

The  restoration  and  maintenance  of  the  credit  of  the  electric  railway  industry 
is  ftine  qua  non  to  the  employment  of  iirivate  capital  in  the  public  service. 
"  Public  regulation  involves  public  protection  of  ci*edit  "  (Sisson,  p.  7Cu)). 

See  also  Jeuks,  2651 ;  Conway,  2761  :  Loring,  4807,  4815,  4808 :  Hurley. 
587;  Stuart,  487,  567,  568;  lusull,  2544;  Jones,  5352;  Babcock. 
5505-6 ;  Eastman,  6005 ;  Maltbie,  6072. 


If 


2192        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

ISIany  niethotls  of  rediiclntr  oxi>rnsos  ntul  of  as's'ossinpr  cost,  both  upon  the  users 
of  the  service  and  tlie  jreneral  public  liave  been  suggeste<l  Ity  witnesses  appear- 
ing before  the  Commission,  rndoubtetlly,  many  economies  can  be  inaugurated 
and  it  is  iwssible  that  a  more  equitable  system  of  charges  can  be  instnlleil. 
These  reforms  play  an  imi>ortant  part  in  the  solution  of  the  problem  before  you. 
They  are  not,  liowever,  fundamental,  and  their  importance  is  secondary  to  the 
establishment  of  such  basic  relations  between  connnunities  and  private  capital 
as  will  afford  such  security  to  investment  as  will  attract  the  new  money  needed 
for  the  <levelopment  of  the  ser\ice  in  pace  with  civic  requirements. 

Frederick  J.  MacI^Mid,  Chairman  of  the  Massachusetts  l»ublic  Service  Com- 
mission, who  is  opposed  in  principle  to  public  ownersliip  and  operation,  con- 
siders the  matter  of  credit  so  imiK>rtant  that  he  inclines  towards  public  owner- 
ship b<vause  he  doubts  the  possil)ility  of  restoring  private  credit.  "  It  is  this 
f)hase  of  the  situation  that  has  made  me  pessimistic  as  to  ^he  <mtlook  for  per- 
manently sustaining  these  proi)erties  entirely  through  private  control"  (Mac- 
I^xl,  423).  His  doubt  is  shared  by  Homer  Loring,  Chairman  of  the  State 
Trustees,  operating  the  Eastern  Massachusetts  Street  Ilailway  Co.,  who,  in 
si>ite  of  his  pre.iu<lice  against  public  ownership  declares  that  **  the  necessity 
of  restoring  credit  is  the  most  important  argument  in  favor  of  public  owner- 
ship '   (Loring,  4803). 

(1)  Kkstobatiox  of  Confipknck  of  the  Invkstor. 

The  confidence  of  the  investor  in  electric  railway  investment  has  been 
destroyed,  not  because  of  a  temporary  depression  in  the  business,  but  by 
reason  of  the  fact  that  the  conditions  surrounding  the  investment  have  been 
and  are  now  such  as  to  prohibit  assurance  of  either  its  safety  or  adequate 
return. 

"  Stret't  railway  credit,  in  my  opinion,  can  never  be  restored  inider  the  pre.s- 
Dit  system  of  relationship  between  the  municipalities  and  the  companies.  It  is 
necessary  to  have  credit  on  a  basis  that  is  good  not  for  two  or  three  years,  but 
for  long  periods  *  ♦  *  there  must  be  a  basis  of  relationship  which  will 
rea.sonably  assure  the  investor  that  for  the  period  for  which  they  are  to  use  his 
money,  there  is  a  reasonable  assurance  that  he  will  receive  a  return,  and  that 
he  will  be  i)rotwte(l  against  unf«»reseon  and  unusual  things,  such  as  this  war 
Jias  brought  about"  (Tripp,  4.'>3). 

See  also  Taft.  11.  27:  Tripp,  4.-)S,  480:  Stuart,  r>fi8 :  Hurley,  r.SO:  Tavlor, 
838:  Hertron,  1543;  Newman,  IGll ;  Cooley,  765;  Creed,  2507;  Mac- 
Leoil,  423r>. 

Tlie  mere  adjustment  of  fares,  or  even  a  return  of  prosperity  to  the  com- 
panies, will  not  prove  sufficient,  as  long  as  the  conditions  surrounding  the 
loaning  of  the  capital  and  its  return  are  unsatisfactory. 

I^cal  transportation  cannot  be  properly  carried  on,\mless  there  is  a  flow  of 
new  capital  into  the  industry.  "A  public  service  company,  like  an  individual, 
or  like  any  private  business,  cannot  stand  still.  It  has  either  to  go  forward  or 
go  backward.  If  it  goes  ahead  it  nee<ls  more  money ;  it  needs  more  capital  ail 
tlie  time"  i Stuart,  579). 

.  See  also  Stuart,  .^50;   Bradlee,  55)7,  613,  614;   Culkins,  1361;   George. 
i»07 ;  Sisson,  934. 

Owing  to  the  suspension  of  betterments,  extensions  and  improvementfT.  caused 
first  by  the  inability  to  secure  new  money  and  second,  by  the  war-time  policy 
of  the  National  (iovernment  in  i>rohibiting  all  new  construction,  except  that 
necessary  to  the  prosecution  of  the  war,  there  is  at  the  present  time  and  will 
he  for  some  years  to  come,  necessity  for  betterments,  extensions  and  improve- 
ments, in  excess  of  the  normal.  '*  We  have,  in  one  sense,  been  living  on  our  fat, 
we  have  been  calling  on  our  power  plants,  our  tracks,  our  cars,  to  carry  more 
than  their  normal  amount  of  load,  and  we  have  taken  chances  of  breakdowns 
and  interruptions  to  service  which,  in  normal  times,  we  should  not  do.  That 
means  that  these  properties,  at  the  present  time,  are  below  par,  that  they  are 
not  developed  to  the  extent  that  they  should  be  normally  to  handle  the  volume 
of  business  which  they  now  transact.  To  meet  that  situation  and  to  adequately 
serve  the  public  we  must  not  only  meet  future  extensions  but  we  must  make  up 
for  what  we  have  failed  to  spend  in  the  last  four  years  so  that  the  demand 
for  additional  capital  during  the  next  four  years,  if  we  are  to  adequately  serve 
the  public,  must  be  above  normal  to  offset  tlie  four  years  which  are  below 


»» 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       2193 

(Bradlee.  607);  and  again,  "*  ♦  *  fuH  improvements  have  not  been  made 
since  1914  and  1915.  They  (35  t.vplcal  companies)  have  skimped  wherever 
they  could  *  ♦  *.  There  are  a  great  many  deferred  maintenance  charges  to 
be  taken  care  of  as  soon  as  they  get  on  their  feet  again  "  (Erickson,  2800). 

In  addition,  the  introduction  of  many  improvements  in  service,  involving 
economy  in  operation  and  increase  in  traflfic,  involves  additional  capital  ex- 
penditures. "  The  great  questions  before  the  railways  to-day  are :  getting  new 
money,  and  adopting  a  comprehensive  policy  providing  for  rehabilitation  of 
the  properties  other  than  making  repairs.  ♦  *  *  The  successful  companies 
to-day  are  those  that  have  rehabilitated  in  the  past  few"  years"  (Beeler,  4884). 

"  If  the  industry  were  one  of  expanding  revenues  that  could  command  plenty 
of  capital,  I  have  no  doubt  economies  could  be  effected  by  extensive  reconstruc- 
tion programs,  but  capital  cannot  be  had  under  present  conditions"  (Bullock, 
1877). 

For  statement  as  to  lack  of  credit  to  finance  purchase  of  improved 
apparatus  and  equipment  see  Barry,  1120,  1121;  Heulings,  1149. 

This  need  for  new  capital  affects  not  only  the  industry  as  a  whole,  but  each 
individual  enterprise.  It  appears  from  the  statement  of  Mr.  H.  G.  Bradlee 
(508),  that  for  a  typical  group  of  public  utilities,  the  new  capital  requirements, 
over  a  range  of  years,  has  been  four  dollars  of  investment  for  each  one  dollar 
of  increased  gross  revenue. 

The  ability  of  electric  railways  to  meet  increased  cost  of  service  caused  by 
higher  price.s,  longer  rides,  the  inauguration  and  extension  of  transfer  privi- 
leges, more  stringent  service  requirements  and  improvements  in  comforts  and 
conveniences,  witliout  excessive  increases  in  fare,  has  been  due  to  the  possi- 
bility of  raising  new  capital,  whicli  permitted  the  introduction  of  improved 
apparatus,  materials  and  methods. 

What  the  public  requires  from  private  enterprise  enlisted  in  public  service, 
is,  first,  capita',  and  second,  initiative  and  managerial  service.  The  price 
which  must  be  paid  for  these  is  dependent  upon  credit,  and  credit  varies, 
first,  with  the  degree  of  assurance  of  the  integrity  of  the  investment,  and 
second,  with  the  degree  of  assurance  of  the  return  upon  the  investment. 

See  discussion  of  effect  of  State  guarantees  upon  cost  of  capital,  Nash, 
19G2 ;  See  also  Foss,  2334. 

Two  factors  control  this  assurance, — the  legal  protection  afforded  and  the 
public  attitude  towards  the  investment.  They  are  interdependent  and  both 
are  essential. 

By  integrity  of  investment  is  meant  its  return  undiminished  to  the  investor 
at  tile  end  of  the  period  of  its  public  use.  This  integrity  is  assured  in  the  first 
instance  by  the  contract,  agieement,  franchise,  or  statutory  iaw  under  which 
private  enterprise  undertakes  to  perform  public  service.  The  crux  of  the  pro- 
tection so  afforded  as  it  affects  integrity  of  investment  is  term  or  period. 

Since  local  transportation  is  a  continuing  need  of  communities,  and  there  is 
not  now%  or  in  the  calculable  future,  any  prospect  of  transportation  on  rails  be- 
ing supplanted,  the  public  use  of  the  investment  will  terminate  only  when  the 
communities  themselves  shall  supply  the  investment,  or  shall  contract  with 
persons  other  than  the  original  investors  for  its  supply. 

The  term  of  the  legal  authority  under  which  private  enterprise  performs  local 
transi)ortation  service,  should  therefore  be  limited  by  one  or  other  of  these  con- 
tingencies and  by  nothing  else,  and  the  Investment  required  should  be  protected 
by  provision  for  its  return,  undiminished,  to  the  investor,  upon  the  occurrence  of 
either  contingency. 

When  the  limit  of  legal  authority  is  fixed  by  specified  lapse  of  time,  and  no 
l^rovision  is  made  for  the  return  of  investment,  it  can  be  protected  only  through 
the  amortization  during  the  life  of  the  authority,  of  the  difference  between  the 
original  investment  and  the  estimated  scrap  value  at  the  expiration  of  the  term. 
Such  amortization  is  not  jiossible,  except  through  the  fares  received.  The 
shorter  the  term,  the  larger  the  annual  contributions  from  fares.  Such  amorti- 
zation has  been  impossible  under  any  rate  of  fare  that  has  prevailed  in  the 
industry.  '*  No  rates  of  fare  have  ever  been  allowed  which  will  amortize  the 
value  of  physical  proi^erty  to  its  scrap  value  within  the  life  of  the  determinate 
franchise"  (Mortimer,  2341).  It  may  be  assumed  that  to  provide  for  amorti- 
zation under  term  authority  would  entail  a  rate  of  fare  so  high  as  to  dis- 
courage the  use  of  the  service  and  prevent  the  utility  from  performing  its 
complete  function. 


If 


2194        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

This  principle  of  tlie  amortization  of  investment  necessary  for  its  protection 
under  a  term  franchise  is  recognized  in  the  Tayler  ordinance  under  wliieh  tlie 
Cleveland  Railway  Company  is  operated,  as  is  the  effect  of  such  amortization 
upon  the  rate  of  fare.  Here  it  is  provided  thav  if  the  grant,  which  has  a  life  of 
twenty-five  years,  be  not  renewed  by  the  city  before  the  expiration  of  the  first 
ton  years  of  its  life,  the  highest  rate  of  fare  permitted  in  the  sdiedule  shall  go 
into  effect,  in  order  that  the  surplus  above  tlie  cost  of  service  shall  provide  for 
;nn«rtization  of  investment  (Stanley,  1684).  Delos  F.  Wilcox  favor.s  amortiica- 
tion  under  service  at  cost  plans  (361K),  3G91). 

An  authority  to  perform  service,  limited  only  by  purchase  amply  protects  the 
community  from  the  failure  of  the  enterpri.se  to  provide  proper  service,  since 
it  makes  it  possible  to  oust  the  derelict  i)erformers  in  the  only  two  ways  which 
insure  continuance  of  service,  t .  c,  by  the  taking  over  of  the  service  by  the  public. 
or  by  the  autliorizod  agents  of  the  public.  Such  an  arrangement  pi'events  the 
liiatus  in  the  development  of  electric  railway  systems,  that  almost  invariably 
accompanies  the  approaching  end  of  term  franchises,  guards  against  deteriora- 
tion of  service  during  tlio  same  period  and  prevents  the  costly  disturbance  of  the 
relations  between  conunimities  and  utilities  that  accomi>any  the  approach  an<l 
the  conduct  of  negotiations  for  franchise  renewals,  and  insofar  as  it  insures  the 
return  undiminished,  of  the  original  investment  it  bulwarks  the  ci"edit  of  the 
utility.  "  I  think  the  indeterminate  franchise  with  the  right  to  the  city  of  acquisi- 
tion and  proper  regulation  is  the  only  scientitio  form  of  franchise  "  (Baker,  2982). 

Tills  principle  of  protection  of  investment  and  of  public  interest  as 
enil)odied  in  tlie  indeterminate  permit  has  also  !)een  endorsed  before 
the  Commission  by  Tripp,  542 ;  Stuart,  573 :  Bradlee,  622 :  Nash,  1346; 
Culkins,  1377;  Drainer.  1452:  Doherty,  1178;  Bertron.  1570;  Newman. 
lOOf);  Heml,  1802:  Cree<l.  2557:  ITiggins,  3228;  Wilcox,  3690,  3(591 
and  Sanders,  4264.    See  also  Exhibit  filed  by  Erifksnn.  2886. 

A  second  necessary  assurance  of  the  integrity  of  the  investment  to  be  pro- 
vided for  by  law  is  that  any  part  of  the  investment  represented  by  property 
worn  out  becoming  obsolete,  or  being  superceded  in  the  public  service,  shaF. 
be  made  good  by  the  public. 

This  means  in  practice  (hat  the  property  shall  at  all  times  be  ninintained 
through  the  contributions  ol"  the  i)ul)lic  in  as  i)erfect  a  condition  as  is  consistent 
Willi  eftlcient  and  economical  operation  and  that  in  addition,  there  shall  be  re- 
sen-ed  from  eamings  such  an  amount  as  will  at  all  times  equal  the  difference 
l)etwcen  the  value  of  the  physical  property  and  the  investment.  "  So  I  say,  it  is 
a  religious  duty  to  put  into  this  depreciation  fund  as  much  money  as  is  neces- 
sary to  maintain  the  integrity  of  the  property"  (Cooley.  772). 

Se<?  als^>  Wilcox,  350i]:  Tripp,  528:  Co(dey,  761).  812;  Sisson,  850.  f>93, 
1014:  Newnnan,  1592;  Na.slu  18S9,  19(X),  1927,  1975;  Creetl,  2564; 
Bauer.  4723;  Beeler,  48a9.  4844;  Eastman,  5977,  5093,  5994. 

The  correct  niaiiitenance  of  an  electric  railway  proi»erty  moans  to  tlie  public 
safe,  convenient  and  economical  .service.  Tlie  accumulation  of  an  adequate 
dei>reciation  reserve,  insures  tbe  full  cost  of  the  .servitv  being  borne  by  tlio.sc 
who  receive  it  and  its  not  being  left  as  a  charge  against  future  patrons. 

(2)  Adequate  IJevknue 

The  cost  of  securing  private  enterpri.se,  which  includes  both  capital  and 
managerial  ability  for  the  public  service  is  dei)endent  in  a  large  measure  upon 
the  degree  to  which  its  comtK^nsation  is  assured.  If  the  return  be  actually 
guaranteeil  by  communities,  the  credit  of  which  is  good,  the  cost  will  be  lower 
than  if  it  were  not  guaninteeil ;  if  the  return  be  assured  by  some  deternrine<l 
method  of  adjusting  revenues  to  meet  expenses,  it  will  be  lower  than  if 
there  were  no  assurance,  if  such  adjustment  be  automatic  and  not  left  to  the 
determination  of  any  indivi<luals  or  set  of  individuals,  it  will  be  lower  than 
if  it  wert?  not  automatic.  It  will  further  be  effected  by  assurance  of  con- 
tinuity by  iirovision  against  tlie  occurience  of  periods  during  which  return  is 
re<luced  or  ceases. 

See  Bertron,  1549 ;  Cooley,  754 ;  Sis.son,  1006. 

This  assurance  can  bo  i>rovided  in  varying  degree  by  public  subsidies,  or  by 
llexibillty  of  fares,  or  by  With.  "  The  basis  of  coinix'nsation  must  be  determined 
so  as  to  provide  an  assured  reasonable  return  and  a  rate  of  fare  so  flexible 
as  to  readily  and  automatically  adjust  itself  to  the  cost  of  iiroviding  the  service  " 
(Pardee,  187). 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2195 

The  testimony  of  witnesses  appearing  before  the  Commission  practically  all 
trends  to  the  establishment  of  the  fact  tliat  there  exists  at  present  certain 
situations  in  which  service  cannot  be  given  at  any  rates  which  permit  the 
utility  to  support  itself.  "I  doubt  whether  there  is  any  system  of  transporta- 
tion in  a  community  of  15,000,  or  20,000  people  which  would  be  self-.supporting 
.lust  as  a  commercial  enterprise"   (Bradlee,  G43). 

Whether,  under  such  circumstances,  street  railway 'service  should  be  pro- 
vided at  all,  is  a  question  of  social  resj[)onsibility  and  .social  .service,  which 
need  not  here  be  discussed.  It  is  evident,  however,  that  if  it  is  to  be  provide<l 
with  private  capital,  .something  more  than  assurance  of  return  through  an 
automatic  and  flexible  .<-ystem  of  fares  is  essential, — that  there  nmst  in  addi- 
tion be  provided  a  method  of  making  up  deficits  by  contributions  from  the 
public  treasury.  In  other  words  that  there  must  be  a  guarantee  by  the  com- 
munities of  an  income  suflicient,  not  only  to  pay  the  cost  of  operation,  but 
also  the  return  upon  the  investment. 

It  is,  of  course,  impossible  to  definitely  define  or  classify  tlio.se  communities 
in  which  electric  railway  service  cannot  be  made  self-supporting.  It  is  cer- 
tain, however,  that  as  the  risk  of  such  a  condition  increases,  the  as.surance  of 
return  decreases,  and  that  in  consequence,  the  cost  of  private  enterprise  in  .such 
undertakings  will  similarly  increase. 

Here,  then,  we  encounter  the  principle  that  must  govern  the  flow  of  private 
capital  and  enterprise  into  local  tran.sportation  utilities.  The  terms  upon 
which  new  capital  may  be  attracted  into  public  utility  investment  are  con- 
trolled by  the  investor.  Money  for  this  purpose  is  obtained  in  competition 
with  other  industries,  and  will  be  secured  only  if  the  conditions  surrounding 
its  investment  in  the  public  service  are  more  attractive  than  those  obtaining 
elsewhere. 

"  You  can  make  a  trade  with  a  man  who  already  has  his  money  invested,  but 
you  cannot  make  a  trade  of  that  kind  with  a  man  who  is  going  to  invest  his 
money  next  year  and  the  year  after.  That  man  will  look  at  the  situation  in 
the  street  railwav  field  and  compare  it  with  the  situation  in  other  lines  of 
industry"  (Bradlee,  615). 

See  al.so  Stuart,  581 ;  Na.sh,  1060;  Erickson,  2813,  2818. 

The  impossibility  of  fixing  in  advance  and  for  any  con.siderable  length  of 
time,  terms  which  will  be  attractive  as  again.st  those  provided  by  other  invest- 
ment is  at  once  apparent.  The  iieeil  for  flexibility  in  the  agreements  l)etween 
private  enterprise  and  the  communities  is  plainly  indicated.  "  *  *  *  most 
of  the  trouble  in  street  railway  franchises  has  grown  out  of  too  much  rigidity 
all  along  the  line  not  only  in  rates  of  fare,  but  in  terms  and  conditions  "  (Cul- 
kins, 1359). 

"The  cost  of  money  is  affecte<l  by  conditions  which  affect  all  other  cost.s. 
The  law  of  supiily  and  demand  affects  it  primarily.  •  *  *  *  there  will  be  a 
long  period  of  tight  money  in  which  the  demand  for  capital  will  exceed  its 
supply"  (Sis.son,  912).  To  provide  for  anything  but  a  flexible  system  of 
determining  return  upon  new  money,  is  to  run  the  risk  of  causing  a  drought 
of  new  capital  with  disastrous  results  to  the  communities. 

The  investor  being  the  final  judge  of  the  rate  at  which  he  will  loan  his  funds 
for  the  public  service,  such  rate  should,  in  the  legal  authority,  be  allowed  to  be 
determined  by  the  cost  of  money  at  the  time  it  is  needeil. 

See  also  Bertron,  1544. 

In  the  case  of  electric  railwa.vs,  ability  to  pay  return  dei^ends  uiion  the  ability 
to  collect  revenues — in  other  words,  ui)on  fares,  .so  that  the  flexibility  of  re- 
turn is  primarily  a  question  of  the  flexibility  of  fares. 

The  entire  question  of  fares  is  a  question  of  cost.  Since  costs  will  vary 
as  conditions  of  operation  vary,  both  in  reference  to  time  and  to  the  location 
of  the  property,  the  attempt  to  fix  a  universal  car  fare,  for  all  character  of 
service,  or  for  like  service,  under  dissimilar  conditions,  is  not  economically 
possible,  and  was,  from  its  inauguration  doomed  to  ultimate  failure.  James  O. 
C^rr,  former  Pul)lic  Service  Commissioner  for  the  Second  District  of  New 
York,  and  for  years  a  student  of  electric  railway  conditions,  gave  imqualified 
endorsement  to  this  statement:  "from  the  inception  of  the  electric  street  rail- 
way, there  has  been  a  cou.stautly  iucreashig  service  without  proportionate  in- 
crease of  remuneration"  (24(50).  Chairman  Aiuey,  of  the  Pennsylvania  Com- 
mission, stated  that  "  because  of  varying  conditions  applicable  to  different 
roads,  we  may  have  five,  six,  .seven,  eight,  nine  or  ten  cent  fares,  each  reason- 


2196 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


nbly  and  severally  yielding  adequate  return  "  (4035).  Secretary  of  War  Baker, 
whose  familiarity  with  the  Cleveland  situation,  is  recognized  declared  that  *'  the 
highest  point  to  which  fares  could  be  raised  would  undoubtedly  be  different  in 
different  communities,  but  there  should  be  no  mystery  about  it"  (2973).  Botli 
Secretary  Baker  (2042,  3023,  3024)  and  Street  Railroad  Conunissioner  Sanders 
(4250-4251-4252)  gave  reasons  for  Cleveland's  low  fares,  some  of  which  were 
entirc»ly  unconnected  witTi  the  agreement  under  which  the  property  is  operated 
and  relate  to  geographical  location  and  traffic  characteristics. 

Director  of  Street  Kailroads  Culkins,  of  Cincinnati,  stated  that  because 
transportation  characteristics  in  Cleveland  and  Detroit  are  <lifferent  from  those 
which  prevail  in  Cincinnati,  the  service  in  Cincinnati  was  bound  to  cost  more 
(1425). 

In  Cleveland  itself,  where  fares  are  determined  solely  on  the  cost  of  service, 
there  have  been  eight  different  rates  of  fare  in  as  many  years  (Stanley,  16S5). 
The  necessity  of  flexibility  in  the  matter  of  fares  is  thus  clearly  demonstrated. 

See  also  Mortimer,  5702 ;  Eastman,  5977. 

The  far-reaching  changes  in  conditions  surrounding  electric  railway  ojiera- 
tion  were  emphasized  time  and  time  again  in  the  testimony  talcen  by  the 
Commission.  This  process  of  change  has  been  constantly  taking  place  and 
found  its  culmination  in  the  upheaval  causvd  by  the  war.  It  has  constantly 
tlemanded  gradual  readjustment,  which  the  industry  was,  because  of  the 
rigid  terms  under  which  it  operated,  unable  to  make.  This  rigidity  applie<l 
not  only  to  rate  of  fare,  the  evils  of  which  liave  been  noted  l)y  so  many  wit- 
nesses (Wilcox,  3557).  It  applied  equally  to  operating  nu\tters  as  exempli- 
lied  in  restrictive  orders,  francliise  provisions  and  laws,  and  to  rate  of  return. 
Because  it  restricted  the  full  exercise  of  initiative  and  enterprise  and  because 
it  made  it  impossible  to  bring  price  and  cost  into  correct  relation,  it  is  tlie 
principal  cause  of  the  present  state  of  the  industry. 

The  credit  of  the  electric  railways  cannot  be  established  and  maintained 
upon  a  stable  basis  unless,  in  the  control  exercised  by  public  authorities  over 
their  affairs,  there  be  such  flexibility  as  will  permit  of  the  highest  degree  of 
managerial  ability,  and  the  adjustment  of  price  to  cost,  both  through  the 
automatic  regulation  of  fares  and  the  adoption  of  all  proper  operating 
methods  and  practices.  «*  ♦  ♦  ♦  Every  electric  railway  company  should 
l>e  freely  accordetl  the  right  to  establish  su«'h  rates  as  are  neoessary  to  meet 
o|>erating  costs,  including  maintenance  and  depreciation  an<l  a  reasonable 
return  upon  the  capital  invested.  If  tliey  are  to  be  denietl  this  right,  it  is 
perfectly  clear  that  no  additional  capital  can  be  safely  invested  in  electric 
railway  se<-urit'es"  (Hurley,  .589). 

See,  also,  Taylor,  838:  Jenks,  2004:  Baker  (quoting  Tom  L.  .Tohnson). 
2900:  Kutz,  3(>40:  Nixon,  2735-2738:  Cooke.  4940:  Culkins,  1309; 
Jackson,  4128,  4129 ;  Babcock,  5507 ;  Eastman,  0024. 

Tlje  importance  of  a  wide  degree  of  latitude  in  the  matter  of  the  adjust- 
ment of  fares  to  meet  new  conditions  cause<l  by  higher  price  levels,  should  be 
recognized.  The  problem  of  fares  is  the  i)roblem  of  finding  a  rate,  or  rates, 
wliich  will  produce  at  the  same  time  the  maximum  of  riding  and  the  maxi- 
mum of  revenue.  This  has  not  yet  been  found  and  its  discovery  can  come  only 
fron)  exi)erimentation.  "This  industry,  in  other  words,  has  to  organize  it- 
self, and  in  tliat  process  of  reorganization,  it  has  to  have  a  chance  to  thresh 
around,  to  try  a  lot  of  ex  perl  men  s  just  as  is  bein.,'  done  everywhere — put  in  a 
rate  and  if  it  does  not  M'ork,  take  it  out  and  put  another  in,  because  it  is  only 
by  these  experiments  that  we  are  ever  going  to  get  the  information  which  i.s 
necessary  to  work  out  a  solution"   (Conway.  2783). 

See,  also.  Mortimer.  2a37,  2339;  Conway,  27.53;  Baker,  2974;  Babson, 
3072,  3073 ;  Loring,  4804,  4781 ;  Nash,  1919. 

(3)  Adkqi'ate  Reserves. 

The  cost  of  money  used  by  public  utilities  will  decrease  as  the  likelihood 
of  lapses  in  the  payment  of  return  decreases.  Halford  Erickson,  former  Chair- 
man of  the  Wisconsin  Railroad  Commission  and  an  economist  of  note,  testi- 
fied that  "  the  cost  of  capital  in  the  utility  field  is  measured  not  by  the  in- 
couie  basis  upon  which  the  securities  are  selling,  but  ♦  *  ♦  by  what  you 
nnist  have  in  the  way  of  net  earnings  behind  the  securities  in  order  that  they 
may  sell  on  a  normal  basis"  (2804). 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2197 

Careful  investors  in  bonds  make  it  a  rule  to  require  earnings,  after  the  pay- 
ment of  operating  expenses  and  taxes,  of  twice  the  amount  of  the  fixed  charges, 
in  order  that  their  bonds  may  be  protected. 

This  protection  from  lapse  in  payment  can  be  afforded  by  a  combination  of 
two  methods,  first  the  ju-ovision  for  the  automatic  fixing  of  fares  to  meet 
costs,  and  the  accumulation  of  such  a  surplus  or  reserve  as  will  permit  the 
payment  of  return  during  this  period  of  readjustment.  The  general  endorse- 
ment of  the  State  Connnission  form  of  regulation  by  witnesses  before  the 
Conn«iis-si(>n  referred  to  on  page  136  of  this  brief,  is  in  many  instances  quali- 
fied by  the  objection  arising  from  delays  in  Commission  decisions. 

See  Nash,  1344;  Hedges,  1.529;  Mortimer,  2190,  2203,  2209;  Foss,  2304; 
(^lackenbush,  2359,  2360,  2.301,  2363;  Sisson.  922,  1012;  Tingley, 
1080;  Henrv,  1295:  Carr,  2447;  Schaddelee,  2473,  2476,  2494,  2499; 
H.  C.  Clark,  2613;  .Tenks,  2660;  Conway,  2756;  Erickson,  2881. 

Wliatever  may  be  the  cause  of  such  delays  and  however  unavoidable  they  may 
l>e,  they  result  in  a  loss  of  income  to  the  companies  during  the  period  between 
application  for  increased  rates  and  the  time  at  which  they  may  be  granted.  In 
an  iniiustry  the  returns  in  which  are  limited,  this  acts  to  deprive  the  investor 
of  his  just  return  during  greater  or  lesser  periods  and  so  adds  to  the  cost  of 
capital  and  lessens  the  industry's  credit. 

For  the  establishment  of  credit  on  a  basis  which  will  attract  capital  at  Its 
lowest  costs,  fares  nuist  be  automatically  regulated  so  as  to  do  away  with 
such  delays,  and  there  must  be  further  protection  afforded  by  a  sufficient  reserve 
fund  to  take  up  the  slack  and  insure  continuity  of  return.  As  Professor  Cooley 
so  well  defined  them  (812)  such  reserves  are  in  reality  "surge"  tanks,  which 
insure  an  even  flow  of  return  and  prevent  violent  agitation  in  the  financial 
affairs  of  public  utilities. 

In  the  private  operation  of  public  utilities,  the  communities  seek  not  only 
private  funds,  but  that  initiative,  enterprise  and  vigilance  in  guarding  the 
interests,  of  the  undertaking,  which  experience  shows  is  present  in  greater 
degree  than  under  direct  public  oi)eration.  It  is  these  qualities  that  determine 
the  success  or  failure  of  purely  private  undertakings.  They  have  a  distinct 
and  concrete  value,  and  if  eidisted  in  the  public  service,  must  be  given  a  reward. 
They  attach  to  the  investment  and  cannot  be  satisfactorily  or  profitably  de- 
tache<l  therefrom.  In  private  business  their  usefulness  and  their  degree  of 
efficiency  may  be  deduced  from  the  annual  balance  sheet  of  the  business.  Their 
reward  is  then  determined  by  the  statement  of  profit  and  loss,  and  if  they  are  to 
be  enlisted  in  the  public  service,  their  reward  must  be  similarly  determined. 
Being  necessary  to  the  successful  conduct  of  public  utilities  conducted  by  private 
enterjirise,  provision  for  their  remuneration  must  be  made  in  the  rate  of  return 
since  they  should  be  an  accompaniment  of  investment. 

The  problem  presented  is  to  secure  a  measure  by  which  their  reward  shall 
be  determinetl.  Undoubtedly  this  is  to  be  found  in  efficiency  of  operation. 
It  is  not,  however,  apparent  that  at  the  present  time  efficiency  of  operation 
can  be  determined  by  the  rate  of  fare  in  effect,  nor  by  the  cost  of  operation. 
If  the  costs  of  operation  and  conditions  of  operation  were  stabilized,  so  as  to 
permit  the  setting  up  of  standards,  not  for  tlie  industry,  which  will  always  be 
imiK)ssible  but  for  particular  properties,  it  might  be  possible  to  base  reward  on 
cither  rate  of  fare  or  cost  of  operation.  At  the  present  time  there  is  no  prosi)ect 
that  standards  of  this  kind  can  be  created.  It,  therefore,  seems  evident  that 
the  reward  nuist  be  given  by  an  addition  to  the  return  over  and  above  what  the 
actual  cost  of  the  needed  money  may  be  if  it  Mere  not  to  be  accompanied  by  the 
initiative,  enterprise  and  vigilance  which  is  sought. 

Practically,  this  may  be  arrived  at  by  a  proper  division  in  the  nature  of  the 
securities  authorized  as  between  secured  debt  and  shares.  The  secured  debt 
may  be  assured  a  fixed  return  while  the  shares  may  be  assured  a  fixed  return 
and  permitted  a  higher  return,  the  limit  of  such  higher  return  to  be  agreed 
uix)n. 

See  H.  C.  Clark,  2.590 ;  Robinson,  5540,  5549,  5569 ;  Maltbie,  6074. 

From  the  principles  governing  the  attraction  of  new  capital  into  the 
industry,  may  be  deduced  those  which  should  govern  the  investment  already 
made  in  electric  railway  properties  "  *  *  *  rates  should  be  determined  not 
by  ancient  history  but  by  wliat  is  devoted  to  the  public  use"  (Quackenbush, 
2413). 


160643**— 20— VOL  3- 


10 


i 


I'  •■ 


I, 


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2198         PROCEEDINGS  OF  FEDERAI.  ELECTRU'  RAILWAYS  COMMISSION. 

The  ascertainment  of  investment  by  metbods  governed  by  the  right  of  the 
investor  to  receive  baclv  his  investment  undiminished,  at  tlie  expiration  of  the 
period  of  public  use,  and  his  entitlement  to  a  fah*  return  for  its  use  in  the  public 
service  during  the  period  of  its  investment,  muiit  be  the  foundation  of  readjust- 
ment. This  determination  having  l)een  made,  the  investment  foun«l  must  i>'.» 
accorded  the  same  treatment  as  is  necessary  to  attract  new  capital  to  the 
business. 

(4)    I'URnc  CO-OPEK AXIOM. 

Legal  protection  of  electric  railway  investment  is  inadequate  unless  there 
be  recognition  by  both  the  private  enterprise  and  the  public  of  the  mutual 
obligations  underlying  satisfactory  relations  between  the  two  parties  at 
interest.  This  is  equally  important  to  hotli  the  public  and  to  tlie  utilii; . 
Spt^aking  from  the  public  standpoint.  Secretary  Baker  said  to  your  Connnission  : 
"No  street  railway  settlement  ciui  be  successful  which  is  not  understood  in  its 
details  and  approved  l)y  the  people"  (2927).  Speaking  from  the  investors' 
standpoint,  Francis  H.  Sfsson,  vice-president  of  one  of  the  largest  banks  in  thf 
coimtry,  declared  that  "It  is  certain  that  unless  there  is  a  widespread  change 
in  public  attitude  towai*ds  public  utilities,  the  security  buyer  will  not  Imzard  his 
money  in  such  ventures"  (913).  "There  has  got  to  be  a  basic  principle  under- 
lying the  relation  between  a  community  which  is  sen'ed  by  an  electric  railway 
and  those  who  are  interestc'd  in  this  property,  and  that  has  got  to  l^e  simply  one 
of  fair  dealing,"  is  the  statement  of  Frank  .T.  Sprague  (21.">1). 

The  success  of  sucli  modern  systems  of  relations  as  were  descril)ed  )>efore  the 
ConmiLssion  was  ascribed  to  the  co-operation  that  prevailed  l^etween  the  public 
and  the  utility.  *'  ( Vmttdence  between  the  i^eoplo  and  the  company  is  the  key- 
note of  our  success,"  said  President  John  J.  Stanley-,  describing  the  Cleveland 
situation  (1695).  "A  considerable  proportion  of  the  success  of  the  company  can 
be  attributed  to  the  good  will  of  the  public,"  said  C.  J.  Joyce,  in  behalf  of 
President  T.  E.  :Mitten,  of  the  Philadelphia  Rapid  Transit  Company  (4.5.'>1). 
W.  C.  Culbins  spoke  similarly  for  the  Cincinnati  plan,  while  Secretary  Baker 
summed  up  the  direct  eflFect  of  public  co-operation  on  operating  costs  m  these 
words :  "  In  the  rehabilitation  of  property  and  in  making  of  extensions  and  new 
additions  to  street  railway  properties  and  in  the  purchase  of  equipment  the 
throwing  away  of  equipment  before  it  is  really  ol>solete  when  it  has  simply 
ceased  to  be  pleasant  as  a  matter  of  taste,  and  all  that  sort  of  thing,  that  all 
that  is  wasteful  adds  to  the  general  burden  which  in  the  last  analvsis  gets  back 
to  the  car  rider"  (2981). 

See  also  Culkins,  1392,  1402;  Hetlges,  1523;  Newman,  ir,09:  Stanlev. 
1689 ;  Nash,  1891-1892 ;  Head,  1794 ;  Schaddellee,  2491 ;  Baker,  293S, 
2966;  Kutz,  5054;  Iliggins.  3229;  Ainey,  4044;  Walsh,  4303,  4304, 
4305 ;  Loring,  4824 ;  Beeler,  4858 ;  Cooke,  4911 ;  Babeock,  5505. 

The  degree  of  co-operation  necessary  for  the  successful  private  operation  of 
electric  railways  must  be  based. 

First — uiK)n  such  degree  of  public  control  and  regulation  as  will  permit 
of  public  sui^ervision  over  the  affairs  of  tlie  utility,  and, 

Second — upon  complete  and  continuing  publicity  as  to  these  affairs. 

It  is  necessarj-,  in  the  first  place,  to  establish  in  .the  public  mind  the  proper 
concept  of  the  nature  of  public  seA'ice  performetl  by  private  enterprise,  and,  in 
the  second  place,  to  keep  that  concept  clear.  This  concei)t  seems  to  be  that  the 
service  being  used  by  the  public,  all  of  its  costs  are  paid  for  by  the  public,  and 
that  of  these  costs  the  investors  are  receiving  no  more  than  is  necessary  to 
secure  for  the  public  the  capital  which  they  furnish  and  the  service  which  they 
perform. 

The  establishment  and  maintenance  of  this  relationship  between  private  en- 
tei"T>rise.  and  the  public  is  the  duty  of  the  public  authorities,  aud  will  depend 
in  a  large  measure  upon  their  devotion  to  their  duty  and  their  faithfulness  to 
their  oaths  of  oflice. 

(B)  Methods  of  Adjusting  Revenues  to  Meet  Expenses. 

If  the  electric  railway  is  to  be  kept  going  and  growing  it  is  obvious  that  tlie 
revenues  must  equal  the  full  cost  of  service,  including  the  nccessiiry  cost  or 
return  on  money  invested.  Both  ends  must  meet ;  either  revenues  nmst  be 
increased  or  expenses  reduced.    Both  methods  require  the  permission  and  co- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2199 

operation  of  the  public.  The  possibilities  and  limitations  of  such  methods  form 
the  practical  aspect  of  the  problem  which  exists  irrespective  of  whatever 
agency — private  or  public — may  render  the  service. 

(1)  Increase  in  Revenue. 

The  desirable  kind  of  increase  in  revenue  comes  from  increased  patronage 
rather  than  increased  fares,  as  it  is  the  volume  of  revenue  that  must  meet  the 
volume  of  cost  of  service.  The  methwls  discussed  before  the  Commission  and 
the  experiences  under  each  method  may  be  sunnnarized  under  suitable  headings. 

(a)  Increase  in  Flat  Rate, 

An  increase  in  the  existing  unit  rate  of  fare  is  the  obvious  method  of  provid- ' 
ing  relief  promptly.     It  was  so  reconnnended  as  the  immediate  solution  by  a 
large  number  of  witnesses. 

Taft,  G;  Tripp,  542;  Hurley.  588;  Bradlee,  036;  Cooley.  810,  820-1; 
George,  871,  873;  Sisson,  1013;  Tingley.  1092;  Barry,  1128;  Storrs, 
1294,  1295;  Hedges,  141)5,  1533;  Bertron.  1544;  Newman,  1001; 
Ferguson,  1673 ;  Shoup,  1731 ;  Fngau,  1752  ;  Bullock.  1833 ;  Foss,  2309- 
2323,  2324;  Mortimer.  2356-2357;  Quackenlmsh,  2388-2389;  Carr, 
2444 ;  Schaddelee,  24SO,  2515 ;  Insull,  2544 ;  Creed,  2.5.57,  2.560,  2562 ; 
Clarke,  2.589,  2641 ;  McKinley,  2707 ;  Conway,  2756,  2776,  2779.  2788 ; 
Babson,  3119-3131;  Higglns,'3227 ;  McFarland,  3910; 

but  recognized  as  not  providing  a  permanent  solution  to  the  problem. 

"  Permission  to  increase  the  fare  on  the  basis  of  the  present  relationship 
is  entirely  inadequate.  That  does  not  solve  the  problem.  The  problem  is 
one  which  requires  a  sound  basis  upon  which  to  rest,  but  which  iiermits  of 
different  solutions  in  different  localities"  (Tripp.  458).  (See  also  475  and 
488.) 

Increase  in  fares  "  should  be  recognized  as  a  temporary  expedient 
pending  a  valuation  of  properties  and  the  granting  of  a  fair  return  on  that 
valuation  by  some  elastic,  easily  adjustable,  automatic  system,  and  that  is 
what  I  think  should  be  striven  for"  (Bertron,  1.544). 

"  Present  conditions  are  such  that  emergency  relief  has  to  be  granted, 

*  *  *  we  will  have  to  go  through  a  two  year  exi)erimental  period.  We 
may  have  to  change  from  a  flat  form  of  fares  to  a  distance  tariff  plan. 
In  any  event,  if  we  are  going  to  commercialize  the  business  we  have  to  be 
placed  in  a  position  where  v*e  can  manufacture  our  product,  namely,  seat 
miles,  at  the  lowest  possible  cost,  and  then  be  accorded  the  necessary  free- 
dom to  sell  those  seat  miles  to  our  customers"  (Mortimer,  2336,  2337). 

"A  simple  remedy"  (in  the  present  emergency),  "is  to  increase  your 
flat  unit  of  fare,  and  that,  I  think,  is  what  the  industry  will  have  to  do. 

*  *  *  Whether  tliat  will  solve  the  question  is  a  far  more  serious  matter  " 
(Conway,  2776). 

"The  only  solution  is  to  raise  rates  of  fare  to  a  point  where  street  rail- 
ways can  live  and  until  some  scheme  of  premiumizing  good  management 
and  economical  operation  can  be  devised"   (Doherty,  1162). 

"I  woidd  recommend  an  increase  in  fare  *  *  *  to  fix  them  up  so 
they  can  keep  on  serving  the  public.  That  will  give  ample  time  to  make 
investigation  of  the  actual  neeils  of  the  different  companies.  An  increase 
in  fare  alone  would  be  in  the  nature  of  a  palliative"  (Cooley,  810,  811). 
(See  also  reconunendations  of  Secretary  Baker,  3001,  3;  and  Wilcox,  3-551.) 

A  sunnnary  of  the  cities  in  which  fares  have  been  increased,  revised  to 
August  0,  1919,  showing  the  name  of  city,  poinilation,  company  operating  and 
date  of  increase,  tiled  as  an  exhibit  by  the  Association  (4379)  shows 

Cities  in  Avlilch  fares  Number 

were  iiicre.ised  to —  of  cities. 

10c 39 

9c 1 

Sc 13 

7c 99 

6c ISO 

5c.   (reduced  tickets  abolished) 50 

382 


2200        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Where  fares  liave  already  been  increased  a  corresponding  increase  in  revenue 
has  not  developed. 

Taft,  12;  Tripp,  475;  Clark,  718;  Cooley,  817;  Fox,  3153;  MacLeod, 
4193. 

In  any  increase  in  unit  price  there  is  a  point  where  the  law  of  diminishing 
returns  will  sot  in  and  there  will  be  a  loss  of  car  riders  (Taylor,  839;  Culklns, 
1372;  Ingram,  3271).  This  definite  practical  limitation  is  defined  by  Conway 
as  follows: 

,  Ten  per  cent  revenue  increase  in  raise  in  fare  from  5c.  to  6c.  instead  of 

theoretical  20%  (2763).    15%-25%  revenue  increase  in  raise  in  fare  from 
5c.  to  7c.  (2766). 

Storrs  states  that  with  an  increased  fare  over  and  above  six  cents  there  is  an 
increasing  loss  in  patronage  (1326).  Secretary  Baker  does  not  believe  that  a 
mininmm  rate  of  fare  nnich  over  five  cents  is  economically  justifiable  because 
the  point  of  maximum  return  is  then  exceeded  (2989-3006).  Roger  Babson 
concludes  with  reference  to  the  Bay  State  experience  that  ten  cents  is  the 
l><»int  of  saturation  (3124).  (ieneralizatiou  In  such  estimates  is  admittedly 
difficult. 

Storrs,  1249;  Culkins,  1401;  Conway,  2767. 

While  the  hearings  were  in  progress  the  Association  gathered  together  data, 
at  the  request  of  the  Commission,  as  to  the  effect  of  increased  rates  of  fare  on 
passenger  revenues.  A  detailed  tabulation  of  all  returns  receivetl  from  member 
conjpanies,  to  August  9,  1919,  125  in  number,  was  submitted  as  an  Exhibit 
(4379).  This  Exhibit  shows  the  monthly  increase  in  revenue  as  compared 
with  the  corresjionding  month  of  the  previous  year.  Tlie  returns  generally 
corroborate  the  testimony  of  several  witnesses  that  the  Fall  and  Winter  of 
1918-1919  were  abnormal  due  to  the  influenza  epidemic,  population  displace- 
ment because  of  the  war  and  heatless  holidays.  Of  the  total,  74  comparisons 
relate  entirely  to  urban  business.  The  remainder  are  returns  of  either  inter- 
urban  or  co-mingled  urban  and  interuban  business.  Of  the  urban  companies, 
33  disclose  increases  in  revenues  conunensurate  with  increases  in  the  rate  of 
fare.  Of  these  22  are  companies  where  the  fare  has  been  increased  from  five 
cents  to  six  cents;  nine  where  the  fare  has  been  increased  to  five  cents  by  the 
elimination  of  tickets;  one  where  the  five  cent  fare  has  been  retained  but  an 
extra  fare  charged  in  an  outer  zone;  and  one  where  the  five  cent  fare  has 
been  retained  but  a  two  cent  charge  made  for  transfer.  There  were  no  in- 
stances where  an  increase  in  rate  of  fare  over  six  cents  has  resulted  in  a  corre- 
spondingly large  increase  in  revenue. 

For  detailed  accounts  of  the  experience  with  increased  fares  in  many 
cities  see  Ford,  1020,  1027,  1033;  Tingley.  1051,  10.54-7,  1058-64. 
1067-9,  1091;  Culkins,  1375-5;  Pellissier,  1475-8,  1479-81;  Hedges, 
1507-1509;  Bertron,  1542-3;  Stanley,  1689;  Fagan,  1750-3;  Henrv, 
2051,  2054,  2060,  2077-9;  Foss,  2292-3;  Creed,  2551-6,  2572;  Conway, 
2763-2784;  Babson,  3124. 

INIany  of  the  witnesses  before  the  Commission,  however,  expressed  the 
opinion  that  loss  of  patronage  results  from  public  resentment  and  voiced  the 
belief  that  after  antagonism  wears  away,  patronage  would  not  suffer. 

Bradlee,  636;  George,  882;  Sisson,  925;  Doherty,  1158-60;  Storrs, 
1326;  Newman,  1632;  Schaddelee,  2514;  Ford,  1033-4,  1041;  Pellis- 
sier, 1477-8. 

Other  disadvantages  cited  by  witnesses  are  that  high  fares  encourage  walk- 
ing and  a  considerable  portion  of  short  distance  riders  are  driven  away. 

Tripp,  475;  Storrs,  1295;  Conway,  2769;  Beeler,  4869; 
that  jitney  comi)etition  is  encouraged 

Storrs,  1301-1317;  Pellissier,  1481;  Conway,  2770;  Bauer,  4747; 

and  that  there  is  an  absence  of  convenience  riding 

Conway,  2773. 

A  comprehensive  summary  of  both  advantages  and  disadvantages  of  the 
increase  in  flat  rate  method  is  contained  in  the  Legislative  Report  on  the  Rhode 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2201 

Island   Company  cited  in   the  Exhibit — Electric   Railways — Recommendations 
made  by  Investigating  Committees  and  Connnissions  (35)  : 

"  The  principal  advantages  of  the  flat  increase  method  are :  Ease  of 
collection  of  fare,  both  passenger  and  conductor  readily  understanding 
the  principle  involved ;  all  passengers  are  treated  alike ;  no  cliange  is  made 
in  the  method  of  identifying  passengers ;  existing  fare  limits  are  not  dis- 
•  turbed ;  it  has  no  tendency  to  restrict  the  spread  of  population  to  outlying 
districts,  and  it  does  not  tend  to  encourage  congestion. 

"  The  principal  disadvantages  are :  increased  fare  of  all  riders  alike, 
exaggerates  discrimination  against  short-haul  passengers,  tends  to  decrease 
short  riding  with  con.sequent  loss  of  the  most  profitable  business,  tends  to 
increase  jitney  competition ;  advance  over  present  rate  could  not  be  less 
than  209^  ;  tends  to  discourage  extension  and  expansion  by  the  utility, 
requires  making  change  for  all  passengers  or  a  ticket  system. 

"  It  is  the  opinion  of  your  Commission  that  a  flat  increase  in  the  present 
fares  would  not  prove  satisfactory,  that  it  would  exaggerate  the  present 
inequalities  and  would  not  relieve  the  situation  to  any  great  extent.  The 
five-cent  fare  limit  in  most  cases  admits  of  a  length  of  ride  entirely  beyond 
what  The  Company  can  afford  to  furnish,  and  even  if  the  fare  were  raised 
to  six  cents  there  would  still  be  a  considerable  number  of  passengers  car- 
ried at  a  loss"  (Report  of  the  Si>ecial  Commission  for  the  Investigation 
of  the  Affairs  of  The  Rhode  Island  Co.,  March,  1918,  page  55). 

The  Association  through  its  President  and  Chairman  of  the  Committee  of 
One  Hundred,  has  defined  a  proper  scheme  of  fares  as  flexible  and  readily  and 
automatically  adjusted  to  the  co.st  of  service 

Pardee,  187; 

and  elastic,  subject  to  prompt  readjustment  to  meet  changed  conditions  of 
finance  or  operation 

Tripp,  478,  488. 

(b)  Zone  System  of  Fares. 

The  Exhibit  introduced  by  the  Association  giving  a  summary  of  the  cities  in 
which  fares  have  been  increased,  to  date  of  August  9,  1919,  discloses  some  form 

of  zone  fare  in  the  following  number  of  cities : 

Number  of 
Cities. 
Citizens  in  which  fai:es  were  increased  by  Zone  Plan  of — 

(a)  Firi't  Zone  1  mile  3c.;   each  additional  zone  of  1  mile  2c.;  no 

transfers 17 

(b)  First  Zone  2  miles  5c. ;  next  zone  1%  miles  5c. ;  each  additional  zone 

of  1%  miles  5c. ;  Ic.  charge  for  transfer 5 

(c)  First  Zone  5c.;  outside  zones  2c.  or  2i/^c 6 

(d)  6c.  Zones ^ 3 

(e)  5c.  outside  city  limits  zone  charge . 3 

34 

The  concensus  of  opinion  of  witnesses  before  the  commission  was  that  a 
flat  rate  charge  for  short  and  long  haul  is  unjust  and  that  a  zone  system  is  proper 
from  the  standpoint  of  equity  as  Secretary  Baker  phrases  it.  "  *  *  *  I  think 
it  would  be  very  much  wiser  to  make  the  people  who  ride  14  miles  pay  10  cents 

than  everybody  who  rides  half  a  block  of  the  14  miles  pay  seven  cents  "  (3008). 
Taft,  11,  12;  Tripp,  476-478,  500;  Cooley,  820;  Sisson,  926,  934,  936-40; 
Ford,  10.35;  Doherty,  1162;  Storrs,  1313;  Shoup,  1732;  Sprague,  2155," 
2179;  Mortimer,  2336,  2357;  McKinley,  2706;  Conway,  2776-2780; 
Kutz,  3040 ;  Babson,  3124 ;  Wilcox,  3610,  3646-49 ;  Ainey,  4067 ;  Nixon, 
3748;  D.  C.  Jackson,  4171;  Walter  Jackson,  4668;  Beeler,  4888-94; 
Eastman,  6021-3. 

The  zone  system  is  accused  of  leading  to  centralization  or  congestion  of  popu- 
lation and  reduction  in  suburban  values 

Clark,  679;  George,  899;  Babson,  3125;  Nixon,  3779-80;  Walsh,  4312; 
Bauer,  4744. 

but  this  argument  is  denied  as  contrary  to  fact. 

Sisson,  936-40 ;  Ford,  1022-6 ;  Storrs,  1321-2 ;  Mortimer,  2269 ;  Walter 
Jackson,  4670-80. 


2202        PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 

In  fact  in  Rhode  Ishiud  the  effect  of  tlie  zone  system  has  beeu  to  decentralize 
business  and  boom  the  outlymg  towns  even  at  a  time  when  traffic  was  fallbig 
off  (Bliss,  W.  C,  3440-44).  The  economics  of  the  situation  are  well  stated  by 
^secretary  Baker. 

"The  immediate  effect  undoubtedly  would  Im)  to  cause  people  to  move 
in  the  tenements  in  the  cheap  fare  district.  The  next  effect  of  it,  liowever, 
is  to  decrease  the  rental  value  of  outlying  lands  and  then  people  find  they  can 
rent  for  as  much  les*;  out  there  tlian  they  could  downtown  as  the  difference 
in  the  cost  of  the  stn^t  railroad  fare,  si>  that  the  effect  of  it  is  to  disperse 
the  ix)pulation"  (3019). 

Another  disadvantajre  feared  is  that  of  popular  opposition. 

Oooley,  820;  Kutz,  3031;  Eastman.  (5023. 

This  led  to  the  abolition  of  the  territorial  preference  plan  in  Tlttsburgh, — 
(Babcock,  5r»29)  :  and  puldic  demand  for  modification  of  tlie  zone  fare  collectnui 
l)lan  In  Camden  (Bleakly.  5910). 

There  seems  to  be  no  question  that  unlike  the  flat  fare  the  zone  system 
stimulates  .short  distance  riding.  Beeler  (4888)  points  out  that  where  six  to 
eight  passengers  per  car  mile  are  carrietl  in  this  country,  fifteen  to  twenty  are 
carried  in  I^ondoii.  In  fact,  i*eports  from  Great  Britain  submitted  by  Secretary 
Oginirn  complain  that  the  short  haul  minimum  fare  passengers  liave  a  tendency 
to  drive  away  those  desiring  to  ride  longer  distances  (5923,  5933). 

"  There  are  many  different  kinds  of  zone  fares.  It  may  be  that  the  mothods 
employe*]  by  some  companies  are  not  as  equitable  to  the  public  as  they  might 
be  but  the  zone  system  and  the  measured  service  principle  are  uuiversially  recog- 
nized abroad  and  seem  to  be  giving  the  very  best  satisfaction  there  on  lines 
that  are  doing  a  much  greater  volume  of  business  than  the  lines  are  in  this 
country"  (Beeler,  4894). 

DifFiculties  abroad  appear  to  aris'e  from  di.sproi>ortionately  small  initial  half 
penny  zones  according  to  the  report  submitted  by  Secretary  Ogburn.  This  wa;; 
tho  difliculty  found  by  the  Special  Commission  for  the  Investigation  of  the 
Affairs  of  the  Rhode  Island  Company,  March,  1918,  (55). 

"The  zone  sy.stem  proper,  that  is,  a  continuous  series  of  short  lengths 
of  track  approximately  equal  to  each  otlier  with  a  small  unil  fare  for  each 
length  or  zone  is  not  in  u.se  in  this  country  on  any  urban  or  interurban 
electric  railway.  This  system  does  not  lend  itself  readily  to  the  condi- 
tions existing  in  the  United  States.  A  modification  of  this  system,  how- 
ever, cons'isting  of  a  flat  lire  cent  fare  for  a  comparatively  large  thickly 
settled  area  with  zones  outside  of  this  ai*ea  of  approximately  the  same 
length  with  a  unit  fare  based  on  mileage  is  somewhat  extensively  used  on 
interurl)an  roads.  The  zone  system  without  modification  is  in  tlie  opinion 
of  your  Commission  entirely  unsuited  to  the  conditions  existing  in  Rhode 
Island,  and  therefore  will  not  be  considered  further. 

"A  modification  of  the  zone  system  as  al>ove  outlintnl  appears  to  offer 
the  best  method  of  solving  the  fare  problem  in  the  present  case. 

"The  principal  advantages  of  this  modified  system  are:  The  charge  ap- 
proximates service  received,  reduces  discrimination  against  siiort  rides, 
has  considerable  flexibility,  rtnUices  numl>er  of  passengers  carried  at  a  loss. 
affiK'ts  only  a  part  of  the  passengers  and  does  not  lend  to  reduce  tlie  numlM?r 
of  short  rides. 

"The  principal  disadvantages  are:  Difficulty  of  identification  of  passen- 
gers  and  in  the  collection  of  fares ;  tendency  to  prevent  spreading  of  popula- 
tion beyond  five  cent  fare  limit  and  consequent  congestion ;  inconvenience  to 
l)as.sengers  required  to  pay  several  fares,  and  entirely  new  system  of 
fare  and  fare  collection  with  which  both  the  public  and  conductors  are 
not  familiar. 

"  It  is  tlie  opinion  of  your  Conunission  that  a  modification  of  the  zone 
system  along  the  lines  above  referred  to  will  produce  the  l>est  results  and 
operate  more  .iustly  to  all  concerned  than  either  of  the  systems  without 
modification.  It  is  also  the  oi)inion  of  your  Commission  tliat  no  bad  socio- 
logical effects  will  follow  the  api^lication  of  the  proix>sed  system;  that  incon- 
,  venience  due  to  the  change  will  be  reduced  to  a  nnnimum  and  that  the 
charge  for  tran.sjwrtation  will  l)e  as  nearly  proi)ortionate  to  the  cost  of 
the  service  rendered  as  is  practicable  " — Cited  in  Exhibit.  Electric  Rail- 
ways— Reconnnendations  ma<k^  by  Investigating  Committees  and  Com- 
missions (71). 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        22G3 


Tlie  same  conclusion  was  reachetl  by  the  Connecticut  Investigation  Commis- 
sion April  1,  1919  (28). 

"  It  is  the  conviction  of  this  Commission,  and  it  therefore  suggests,  that 
a  carefully  worked  ont  zoning  «>ystem,  adapted  to  the  varying  local  con- 
ditions, but  using  the  nickel  as  the  unit  of  fares  for  each  such  zone  would 
prove  from  a  practical  and  psjclwlogical  standpoint  a  just  and  satisfac- 
tory means  of  Increasing  revenue,  reducing  loss,  decreasing  discontent  and 
would  impose  upon  the  car  rider  only  the  just  requirement  of  paying  in 
proportion  to  what  lie  receives  in  senice." 

Tliere  is  practically  unanimity  among  those  witnesses  wlio  favor  recognition 
of  the  factor  of  distance  in  transiiortation  service  for  this  type  of  zone  system. 
As  Secretary  Baker  states: 

"I  have  never  been  able  to  get  the  difficulties  of  the  zone-system— I 
think  if  you  start  with  the  5-cent  fare,  if  that  is  the  necessary  fare,  and 
yon  charge  another  cent  for  riding  an  additional  mile  beyond  the  profitable 
limit,  it  is  perfectly  unobjectionable. 

"Divide  the  territory  not  necessarily  into  two  3-cent  zones,  but  into  a  five 
and  a  one,  or  a  five  and  a  two  "  (3017-18). 

Retaining  a  five-cent  central  zone  for  such  an  area  as  five  c-ents  will  buy  trans- 
portation is  also  recommended  by  the  following  witnesses : 

Sisson,  1001 ;  Storrs,  1248 ;  Pierce,  2520 ;  D.  C.  Jackson,  4174-5 ;  Beeler, 

4887. 
Wilcox,  3640^9,   recommends  a  lower  minimum  fare  than  5c.  for  a 

shorter  ride. 

Opinions  differ  as  to  what  local  conditions  make  a  zone  system  plan  feasible. 
Walter  Jackson  states  that  "  ideal  places  for  the  zone  system  beginning  with  a 
rate  to  attract  present  walkers  are  such  cities  as  Boston,*  Providence,  New  York. 
Philadelphia.  Cities  that  are  not  of  that  type  are  San  Diego  and  East  St.  Louis  " 
(4670).  The  zone  system  is  not  recommended  for  Pittsbnrgh  by  Receivers 
Fagan  (1754)  and  George  (842-G)  ;  for  New  York  by  Commissioner  Nixon 
(3748-9),  or  for  Boston  by  Senator  Walsh  (4314). 

(c)   Transfer  Charges. 

According  to  the  tabulation  summarizing  the  cities  in  which  fares  have  been 
increased  to  date,  August  9,  1919,  charges  for  transfers  are  being  made  in  the 
following  number  of  cities : 
Cities  in  which  fares  were  iftcreasecl  by  charge  for  transfer: 

Number 
of  cities. 

(a)  Ic.  transfer  and  Gc.  fare .3 

(b)  Ic.  transfer  and  5c.  fare i 

(c)  2c.  transfer  and  5c.  fare 5 


9 

A  three-cent  charge  is  made  for  some  transfers  in  Philadelphia,  the  number  of 
three-cent  exchange  points  being  580,  the  number  of  free  transfer  points  320 
(Joyce,  4511).  A  two-cent  charge  lor  transfer  is  in  effect  in  Brooklvn,  New 
York,  where  franchises  do  not  prevent  it  (Nixon;  3721). 

In  Commissioner  Nixon's  opinion  transfers  in  New  York  should  be  universal 
and  free  (374G).  This  is  also  the  opinion  of  Mayor  Couzens  of  Detroit  (3326). 
Secretary  Mote,  of  the  Indiana-  Commission,  states  a  preference  for  a  six-cent 
fare  rather  than  an  extra  charge  for  transfers.  The  claim  is  made  that  such  a 
cliarge  is  unfair  in  that  it  makes  tlie  cost  of  transportation  dispi'oix)rtionately 
high  for  a  large  portion  of  the  city's  iwpulation  who  liave  to  change  lines  but 
ride  a  less  distance  than  many  others,  in  the  report  of  the  General  Committee  of 
Fifty-five,  known  as  the  Tramway  Adjustment  Committee,  appointed  by  the 
Mayor  of  Denver.  Colo.,  adopted  3Iay  28.  1919  (15). 

Secretary  Baker  on  the  other  hand  states  emphatically  : 

"  I  believe  that  the  literally  free  ti-ansfer  is  probably  the  worst  practice, 
the  worst  difficulty  that  the  street  railroads  have  to  deal  with.  The  problem 
does  not  affect  only  street  railroads,  but  it  affects  the  riding  public.  The 
UKin  who  uses  a  fraudulent  transfer  does  not  hurt  the  street  railroad  as 
mnch  as  he  hurts  the  other  passengers  who  have  to  pav  for  carrving  him  " 
(2925). 


2204        PROCEEDJNUS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  penny  transfer  fs  perfectly  satlsfnctorv  to  the  i)eople.    "  The  Coni- 
par.y  iierfonns  an  extra  service  for  the  man  wlio  rides  on  two  of  its  cars 
rather  tlian  one.    It  stops  for  him  tAvice  instead  of  once ;  identities  liim  twice  • 
all  of  its  accident  liazanls  are  multii)lied  by  his  l)eina:  on  cars  twice  instead 
of  once.    It  provides  extra  service  for  him,  so  that  tlie  discrimination  be- 
tween tlie  transfer  and  nontransfer  is  a  sonnd  discrimination  "  (2951,  2952). 
Both  sides  of  tlie  question  are  stated  1»y  tiie  Rhode  Island  Special  Commission. 
"There  is  considerable  difference  of  opinion  as  to  the  advls;U)ility  of  a 
charge  for  transfers,  some  claimlnjr  that  the  frw  transfer  unduly  extends 
the  lenf?th  of  ride  for  the  original  fare,  and  als^)  that  even  if  the  ride  Is 
comparatively  sh.>rt  an  extra  stop  and  start  are  required  as  well  as  twice 
the  equipment  used  by  a  i)assenjrer  in  a  continuous  ride.     On  the  other 
hand.  If  a  charge  is  made  for  transfers,  there  is  immtMliatelv  a  demand  for 
through  service  whicb  may  be  perfectly  just,  but  which  if'  ?ranteil  would  - 
seriously  interfere  with  economical  or  convenient  routing.    A  free  transfer 
tends  to  equalize  ^ne  charge  between  different  sections* within  the  transfer 
limits,  encourages  the  spreading  out  of  the  population  and  does  not  en- 
courage congestion.    There  is  no  general  rule  which  mav  be  applied  to  all 
cases;  each  transfer  question  must  be  determined  accordhig  to  the  peculiar 
circumstances  relating  to  it  "-Report  of  the  Special  Commission  for      e 
Investigation  of  the  Affairs  of  Tlie  Rhode  Island  Company,  March,  1918  (55). 
Questioning  of  witnesses  as  to  the  effect  of  charges  for  transfers  brou-ht  out 
the  following  information  :  A  charge  of  one  cent  for  transfer  with  r^Sate  d  1 
not  work  well  in  Indianapolis   (Mote,  3218).    A  one  cent  charge  for  transfer 
will   usually  yield  from   three  per  cent,   to  five  per  cent.  addUional  reve^iuP 
(Heeler,  4869).    The  effect  of  a  two  cent  charge  for  a  trnnsierT^e^TT^^ 
rH,''"f"w'^*^,'^"?  ^^'^"J<^  ^"^'^rt  much  traffic  to  rapid  transit  lines  (Hedges 
loOC).    In  A\ashington  a  two  cent  charge  for  transfer  within  and  between  com' 
panics  resulted  in  a  25  per  cent,  deduction  in  the  use  of  transfers  (Kut^ScSo). 
{i\)  Introduction  of  Electric  Railway  Express. 

Increase  in  the  usefulness  of  present  investment  to  the  development  of  ex- 
press and  freight  traffic  is  one  of  the  suggestions  or  remedies  Tdvocat^  bv 
Commissioner  Eastman  (6001-2).  Needless  to  say,  this  proposal  will  rS^ii ire 
prompt  co-operation   of  municipal  authorities.     Such  a   recommendation   was 

"'''*^''  ^?\^^.%^^l^^  ^^"^'^^•">'  Investigation  Commission  of  MaSu^t"  fZ 
riiary  1,  1918  (Senate  No.  300).  « ^^aciiuseus,  j^tD- 

"  This  Commission  recommends  that  the  auHiority  to  grant  permits  to 
street  railways  to  become  common  carriers  of  newspapers,  baggage  express 
matter  and  freiglit,  now  vested  in  tlie  local  authorities,  shall  bS  transferr^i 
to  the  Public  Service  Commission."  transferred 

See  also  Exhibit— -  Freight  Haulage  on  Electric  Railwavs  A  B  CoIp" 
See  also  Exhibit  "Memorandum-Freight  Haulage  on  Electric  Railways 
Col.  Josei.h  C.  Bonner,"  in  general  answer  to  the  Commis.sion's  inouirv  in 
Questionnaire  No  168:  "  In  what  manner  can  general  freight  haulage  on 
electric  railways  be  conducted  to  supply  the  new  revenues  that  will  succor 
the  present  financial  distress  of  such  railroads  and  dispose  sntisfactorHv  nt 
the  same  time  the  question  of  having  an  equitable  and  satisfying  rate  of 
fare  that  covers  every  angle  and  interest?"  which  contains  some  startling 
figures  on  tlie  possibilities  of  electric  freight.  startling 

(e)  Elimination  of  Dead  Heads  and  Other  Free  Service. 

Suggestion  for  the  elimination  of  non-paying  passengers  contained  In  th*. 
recommendations  made  by  the  General  Committee  of  Fifty-five,  known  as  t  e 
Tramway  Adjustment  Committee  appointed  by  the  Mavor  of  Denver  Col  ivfnv 
28  1919  (cited  in  Exhibit-Electric  Railways-Recommendations  nmJeVi^ 
vestigating  Committees  and  Commissions,  p.  4).  ^ 

Free  service  is  prohibited  by  many  general  regulatory  statutes     The  obliM 

sZi%s^atLT'  '""^  '^'''*'''  ^''""'"'"'  ^'  ^'""''^'^  ^"  franchises  antedating 
(2)  Decrease  in  Cost  or  Operation. 

Being  a  regulated  industry  the  electric  railway  is  much  restricted  in  it^ 
scope  of  operation  and  the  economy  with  which  it  may  render  service  its 
routes  and  minimum  headway  are  usually  fixed  by  franchise.  Its  schedules  and 
tyi.e  of  operation  are  usually  fixed  by  ordinance  or  regulation.    In  some  juris- 


^ 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2205 

dictions  every  detail  of  service,  including  car  design,  is  under  specific  regula- 
tion. Much  of  its  service  is  standby.  It  must  supply  service  when  needed; 
it  cannot  postpone  delivery.  Most  of  its  cost  of  oi^eration  is  for  labor,  which 
it  must  pay  by  the  hour  and  by  the  day.  The  criticism  and  commendation 
of  efliciency  of  management  before  this  Commission  has  accordingly  been  in 
very  general  terms.  To  be  sure,  there  Is  room  for  scientific  management  in 
the  shops  and  in  the  office.  The  detailed  operating  expense  statement  for  the 
industry  (2709)  shows  how  small  a  iiart  of  total  cost  these  expenses  comprise. 
Regard  for  safety  and  honesty  will  also  yield  returns  but  these  also  fall  in  a 
minor  category.  By  far  the  greater  part  of  the  cost  of  operation  of  a  street 
railway  is  now  beyond  the  control  of  the  management. 

How,  then,  may  operating  cost  be  reduceil?  Certainly  little  opportunity  lies 
in  the  direction  of  a  minimum  standard  of  comfort  for  labor,  with  its  claims  of 
a  $2,0(X)  annual  minimum  wage.  It  must  lie  in  the  elimination  of  every  burden 
and  restriction  that  is  foreign  to  the  business. 

(a)  Elimination  of  Non-Profitahlc  Lines. 

It  is  generally  recognized  that  the  operation  of  suburban  extensions  by  urban 
companies  and  similar  methods  of  oi)eration  have  a  severe  strain  upon  urban 
systems  (MacLeod  4182-4).  Crosstown  lines  are  in  the  same  position.  They 
are  a  public  convenience  rather  than  self-sustaining  parts  of  the  transportation 
system. 

Heeler  suggests  (4849)  the  discontinuance  of  such  non-e«:sential  non-paying 
lines,  especially  those  closely  paralleled  by  other  service,  stating  that  they  may 
be  profitably  abandoned  or  run  as  shuttle  lines  with  one-man  cars.  Loring 
(4779)  points  out  that  the  cyscontinuance  of  lines  is  a  feature  of  growing  im- 
l)ortanc*e.  Secretary  Baker  (2996)  suggests  "If  the  railway  cannot  earn 
enough,  discontinue  the  lines.  If  two  lines  make  only  enough  to  supp<n-t  one, 
operate  one  and  discontinue  the  other,  upon  agreement  with  the  people  as  to 
which." 

It  is  only  by  an  abandonment  of  lines  and  discontinuance  of  service  that  it  is 
l)ossibie  to  ascertain  the  measure  of  the  social  service  rendered. 

Abandonment  of  non-paying  lines  has  been  authorized  in  recent  decisions 
of  public  service  commissions.  Red  Belt  Line  Railway  Corporation,  New 
York  Public  Service  Commission,  First  District,  P.  U.  R.  1919D-56;  re 
Exeter,  Hampton  &  Amesbury  St.  Ry.,  New  Hampshire  Public  Service  Com- 
mission, P.  U.  R.  1919B-251 ;  re  Denver  &  Interurban  Railroad  Company, 
Colorado  Public  XJtilities  Commission,  P.  U.  R.  1919A°435;  re  Fresno  Inter- 
urban Railway  Company,  California  Railroad  Commission,  P.  U.  R. 
1919B-684. 

It  should  be  noted  that  the  argument  for  the  retention  of  such  service  proceeds 
on  social  rather  than  economic  lines. 

The  report  of  the  Street  Railway  Investigation  Commission  of  Connecticut, 
April  1,  1919,  pages  26-7,  points  out  that  "  If  these  non-paying  lines  are 
abandoned,  factories  and  tobacco  plantations  already  established  would  in 
many  cases  have  to  be  given  up  and  the  residents  along  the  lines  would  face 
loss  in  value  of  property  and  increase  in  co.s-t  of  obtaining  the  necessary  help 
and  supplies.  To  permit  such  a  catastrophe  seiems  to  this  Commission  un- 
justifiable. ♦  ♦  *  In  such  cases  the  Commission  believes  that  before  such 
abandonment  the  towns  most  vitally  interested  should  be  given  the  opportunity 
to  purchase  and  operate  such  lines  before  operation  is  stopped."  (Cited  iii 
Exhibit — Electric  Railways — Recommendations  made  by  Investigating  Com- 
mittees and  Commissions,  p.  27.) 

The  Public  Utilities  Commission  of  Connecticut  in  City  of  Hartford  "  Six 
Cent  Fare  Case  "  March,  1918.  points  out  "  It  is  unquestionably  true  that  in  tin. 
street  railway  development  of  Connecticut,  certain  remote  and  isolated  lines  an.? 
extensions  were  built  which  are  not  and  never  have  been  self-supporting,  Im 
which  are  connecte<l  with  and  form  a  part  of  the  respondent's  present  system, 
♦  ♦  ♦  the  abandonment  *  *  ♦  would  be  a  very  serious  Ijss  to  the*  terri- 
tory thus  servetl,  and  a  step  backward  in  the  general  development  of  the  Stat*'." 
(Docket  No.  2565,  p.  25— Citetl  in  Exhibit— Electric  Railways— Recommenda- 
tions made  by  Investigating  Committees  and  Commissions,  p.  29.) 

(b)  Elimination  of  Special  Taxes. 

Attention  is  particularly  directed  to  the  testimony  and  report  of  Professor 
Bullock  (1811  to  1887)  on  the  taxation  of  street  railways.    Professor  Bullock 


2206         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

eoiKlutles  that  the  theory  that  pubUc  service  corporations  are  in  possession  of  a 
valuable  franchise  from  which  they  derive  large  profits  and  ought  therefore  to  be 
especially  taxed,  is  untenable  as  affecting  regulated  public  utHiUes.  This  con- 
clusion conforms  to  that  of  the  Conunittee  of  the  National  Tax  Association 
n  here  utilities  are  limited  to  a  reasonable  return  upon  the  capital  investment 
nny  special  taxes  upon  them  are  shifted  to  the  public  and  are  a  mere  indirect 
method  of  taxation.  Professor  Bullock  concludes  that  street  railways  oui^ht  to 
b;'  taxed  like  similar  enterprises  under  normal  conditions  (1828)  but  if  a  serious 
emergency  exists  which  cannot  be  effectively  remedied  in  other  ways  relief  from 
tax  burdens  is  desirable.  "  Gross  receipt  taxes  or  auy  other  kind  of  tax  thai 
other  property  does  not  pay  "     *     *     ♦     is  a  "departure  fmm  the  principle  of 

equal  taxation-  *  *  *  "  which  is  not  consistent  with  the  theorv  of  cqiin I 
taxation      (1829). 

The  total  payments  for  taxes  and  other  contributions  amounted  in  1917  to  8  67 
per  cent,  of  the  gross  earnings.  Professor  Bullock  states  "  This  percentage  would 
be  moderate  In  the  case  of  a  business  where  the  gross  receipts,  or  annual  turn- 
over, amounted  to  two  or  three  times  the  capital  investment ;  but  it  is  exceedinglv 
heavy  in  an  indnstr>-  where  Uiere  is  a  capital  investment  amounting  to  several 
dollars  for  every  dollar  of  annual  gross  receipts."    Taxes  both  in  amount  and  in 

J't'o^ "n  ?oo^?l^o^o4!'^''^'l"^^  ^'*''  various  census  periotls  are  shown  by  Welsh, 
Chart  C-122  (3i>2-3o8)  to  have  steadily  risen.  The  per  cent,  of  oiierating  ex- 
penses paiel  for  taxes  in  1917  amounted  to  10.11';K  Z.  W.  Bliss,  Tax  Commis- 
sioner for  Khode  Island,  states  that  taxes  of  the  Rhode  Island  companies  total 
12*  per  cent,  of  the  gros.s  receipts  ami  that  the  Public  Utilities  Commission  has 
recommended  that  all  of  these  taxes  excepting  the  pronertv  tax  asse^^^ed  bv  the 
►State,  should  be  eliminated  (3482).  i     i      .       -   a^  t^>^i  oy  me 

There  is  almost  complete  unanimity  among  the  witnesses  that  special  franchise 
or  license  taxes  should  be  done  away  with.  Babson  (3084)  points  out  that  taxa- 
tion of  monopolies  is  proper  but  in  street  railways  the  monopolv  is  gone  He 
I'o^o'o  v"^'i^^^  ^'^^  removal  of  '•  restrictions,  taxes  and  various  forms- ()f  persecution  " 
(3083).  Beeler  (4842)  points  out  tliat  franchises  are  liabilitit^  and  not  assets 
llie  abolition  of  the  franchise  tax  was  recommended  bv  the  Public  Utilities  Com- 
mission of  Rhode  Island  (W.  C.  Bliss.  3414,  3452).  Kutz  points  out  (3039)  that 
the  elimination  of  the  four  per  cent,  gross  earnings  tax  will  probably  make  a 
tive  cent  fare  possible  in  Washington.  Couzens  (334S-9)  sees  no  objection  to 
relieving  the  companies  "  of  some  of  the  mvmicipal  charges  like  taxes  special 
percentages  on  gross  revenue,  paving  burdens,  etc.,  providc<l  the  communitv  is  to 
benefit  in  fares  and  improved  service.'  Higgins  (3228)  states  that  trolley  com- 
panies should  be  relieved  of  the  burden  of  taxation,  as  much,  if  not  more  than 
endowed  colleges  and  other  institutions  of  learning.  Many  of  the  advocates  of 
municipal  ownership  recommend  the  abolition  of  ordinary 'taxes  and  the  coiitri 
button  through  taxation  of  any  deficits  incurre<l  in  operation. 

(c)  Elimination  of  Imposts. 

Under  this  heading  may  be  classified  payments  by  street  railways  for  navin'' 
snow  removal,  street  cleaning,  bridge  tolls  and  contribution  towards  the  cost  of 
construction  of  public  highways,  bridges,  etc. 

It  is  generally  conceded  that  the  burden  of  living  is  a  relic  of  horse-car  days. 
A  strett  railway  company  should  not  bear  all  the  burden  of  pa\ing  In 
the  horse-car  days,  it  was  justified,  but  not  now.  It  should  rest  on  abutting 
owners  or  the  whole  community,  and  not  on  the  car  riders.  A  street  rail- 
way put  into  any  street  verj-  greatly  enhances  the  value  of  the  property 
and  I  think  that  enhancement  ought  to  bear  the  burden  (Secretarv  Baker 
297G ) .  *  ' 

^Paving  cljan,'es  should  be  taxed  to  the  community  as  a  whole  (Nixon, 
u  i  u7— o ) . 

Paving  taxes  should  be  abolished.    They  are  out  of  date  (MacFarland, 

iJ9i>4/  . 

Paving  requirements  should  be  modified  (Z.  ^y.  Bliss,  3485). 

In  some  Instances  the  charging  of  paving  costs  against  the  railwaj-s  is  a 
burden  which  in  the  public  interest  should  be  lifted  (Ainey,  4084-4105-6) 

It  is  an  injustice  to  place  upon  the  car  riders  the  burden  of  paving  streets 
which  are  actually  used  more  by  the  owners  of  automobiles  (Beeler,  4899) 

In  Pittsburgh  the  court  has  relieved  the  receivers  of  the  railway  company 
from  the  responsibility  of  paving  charges  and  the  obligation  of  sprinkling 
and  cleaning  portions  of  streets  lias  been  repudiated  (Babcock,  5518). 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2207 

"  Municiaplities  should  consider  the  possible  suspension  or  elimination  of 
numerous  municipal  burdens  which  are  really  indirect  taxes  upon  the  car 
riders  "  ( Babcock,  5505 ) . 

In  view  of  the  present  plight  of  street  railways,  it  is  entirely  desirable  that 
paving  expense  should  be  met  by  the  entire  community,  rather  than  by  the 
car  riders,  even  though  the  presence  of  car  tmcks  in  streets  increases  the 
paving  cost  and  uiikeep  (Eastman,  G044). 

The  maximum  burden  that  the  companies  should  have  to  iiay,  is  the  addeil 
cost  of  maintaining  the  paving  due  to  the  presence  of  the  rails.  Company 
should  not  be  relieved  of  all  paving  charges  (Maltbie.  G087). 

The  burdens  of  street  paving,  maintaining  highways,  bridges,  etc.,  should 
be  removed  (Higgins,  3231). 

"  There  is  absolutely  no  moral  or  economic  or  physical  reason  for  the 
paving  costs"  (Babson,  3076). 

To  make  a  street  railwav  pay  for  paving  is  an  old  fogy  way  of  accom- 
plishing the  purpose,  but  to  state  that  all  such  things  are  to  be  wiped  out 
without  an  equivalent  of  some  kind  would  be  most  unfortunate  (Cooke, 
4935-G). 

"  Under  municipal  ownership,  the  paving  charges  could  be  shifted,  as  has 
been  suggested,  and  even  extensions  could  be  built,  in  part  at  least,  if  not 
wholly,  by  special  assessments  of  abutting  property.  That,  again  is  a  very 
difficult  matter  to  do  in  the  case  of  a  privately  owned  railway"  (Bemis, 
0125). 

Not  only  is  there  subsiantial  argument  for  the  relief  of  i)aving  charges,  but 
several  of  the  witnesses  are  strongly  in  favor  of  assessing  all  the  cost  of  street 
railway  extensions  against  abutting  property  owners.  Lawson  Purdy,  Tax 
Expert  of  New  York,  points  out  (6164-7)  that  "for  more  than  100  years  the 
principle  of  paying  for  streets  and  street  improvements  by  assessment  of  the 
property  benefited  has  been  applieil  to  greater  or  less  degree  in  the  United 
States  " ;  that  "  the  same  principle  has  been  applied  to  the  building  of  steam 
railroads  even  though  the  railroads  were  privately  owned  "  ;  that  the  advantages 
of  so  paying  for  extensions  of  electric  railways  would  be  that  extensions  would 
not  be  constructed  unless  they  were  actually  nei-ded ;  and  that  by  pursuing  the 
policy  wherever  practicable  of  building  electric  raihvaj's  by  special  assessments 
levied  ui^on  the  property  benefited,  capital  would  steadily  be  diminished  until 
ultimately  the  entire  capital  would  be  amortized  and  the  railways  thereafter 
can  be  run  for  rates  suflicient  to  pay  operating  expenses  and  mainteiinnces. 
The  City  Club  of  New  York  in  a  submitted  pamplilet  (6169)  recommends  meet- 
ing the  future  cost  of  subway  extensions  by  means  of  assessments  on  the  prop- 
erty benefiteil.  IMaltbie  points  out  (6090)  that  special  assessments  for  the 
building  of  extensions  of  electric  railways  is  an  idea  worthy  of  attention  and 
that  there  is  nothing  that  will  develop  the  value  of  property  so  much  as  the 
transportation  sj-stem.  Kutz  (306-1)  believes  that  "all  pipes  and  conduits  and 
everything  in  the  streets  should  be  owned  by  the  city  and-  leased  only  by  the 
utilities  that  need  them."  V/alter  Jackson  (4680)  believes  that  the  right  policy 
exists  in  Cleveland  where  the  realty  people  pay  for  the  railway  extensions. 

The  admonition  of  Secretary  Baker  is  particularly  timely  (2980)  :  "I  think 
if  your  commission  were  to  point  out  the  fact  that  in  the  rehabilitation  of 
property  and  in  the  making  of  extensions  and  new  additions  to  street  railroad 
properties  and  the  purchase  of  equipment,  throwing  away  equipment  before  it 
was  really  obsolete,  when  it  simply  has  ceased  to  be  pleasant  as  a  matter  of 
taste  and  all  that  sort  of  thing,  that  all  of  that  is  wasteful  and  adds  to  the 
general  burden  which  in  the  last  analysis  gets  back  to  the  car  rider— now  that 
sort  of  counsel  of  prudence  to  economy  in  reconstruction  and  rehabilitation 
and  use  of  equipment  and  maintenance  of  property  would.  I  think,  be  a  very 
helpful  thing  to  say  to  a  grejit  many  communities  of  this  country." 

(3)  Economies  thuough  Puhlic  Co-operation. 

It  was  tlie  consensus  of  opinion  of  those  who  testified  uix)n  the  success  of  the 
traction  situation  in  Cleveland,  that  this  was  occasioned  through  the  fullest 
co-operation  of  the  City  ofliciais,  public  and  the  traction  utility.  Judge  Fielder 
Sanders  pointed  out  that  the  success  of  the  Cleveland  plan  was  due  in  addition 
to  the  exemption  from  bridge  taxes,  paving  taxes,  etc.,  to  the  development 
of  the  skip-stop,  fast  schedules  and  proper  equipment  (4250-2).  Secretary 
Baker  ix)int€*d  out  that  the  City  of  Cleveland  co-operates  with  the  railway  com- 
l)!niy  in  keeping  vehicles  olT  the  track  and  in  the  introduction  of  alternate  stops 
and  of  trailer  cars   (3012).     Dr.  Bemis  pointed  out  that  "co-operation  which 


^ 


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2208        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

tlKM-e  l.ns  he^n  in  Cleveland  between  the  City  and  the  raihvav  has  effected  many 
vononnes  and  prevented  many  costly  attacks  on  the  road,  in  excessive  mve^^^^^^^ 

nerS  fo/tntr^'r  ""''r''  '''  ^"^^^^^  '"  '''^"'«^^  ^-^^^^  «»^1  .mi«y  o^he?^;" 

?Tt'    \    tu     ^"^^*^"ts  and  curves  and  so  on,  which  really  are  very  beneficia 

ften  to  the  company,  and  which  the  city  can  give  without  much  cost  if  it  fee  s 

Ut  .if  ^  attitude"  (6131).    Mortimer  pointed  out  that  Clevehmd  was^he 

<n^/]lLl?       T  ^^^^1  •'^'^iP-^top  generally,  and  today  maintains  the  highest 

rw  n/r-'  '"'^""^^  ^^^^^'^.  '"•^'^''«>'  "^  ^^'^  ^'^""^'•y  (''7TG-7).     The  Exhibit- 
(o.st  of  Passenger  Transport  a  twn  Nc/r/cc— Doolittle.  introduced  bv  the  Asso- 

■ ; ,    nf'  {i''^'  /"  ^^'T^'  "■*',  ^'  ^^^'  «  ^^'^^^1  «f  the  changes  in  routing,  terndna. 
tion  of  1  nes    n  center  of  the  city,  designated  stops,  increased  scheil  de  si>eed 

e<.reased  accident  hazard,  control  of  traffic,  short  routing,  etc.,  in  C levS' 
which  bave  re.sulte<l  "largely  during  the  administration  of  Cominissio^'er  1^ 
ill:  n  ^  ^\^f\^/»t  co-operation  between  the  City  Counsel,  the  public  and 
the  rai  way,  which  s  unique  in  American  cities  and  goes  far  to  explain  the 
unusually  low  costs  in  the  conduct  of  the  traction  business  in  Cleveland" 
(a)   Operating  eeonomics. 

m,li?nHH^T''"^'r^  economies  requiring  the  sanction  and  cooperation  of  public 
authorities,  have  bet^n  suggested.    These  may  be  enumerated  as  follows: 

First,  One-Man  Cars. 

Those   have  been   strongly   recommended   by   various  witnesses  as  a   device 

Eastman,  6000;  Fox,  3158.  *  '  '*"'^' 

The  use  of  one-man  cars  is  also  recommended  in  the  report  of  Dr  AH«r« 
Shortt,  British  Columbia  Elec.  Ry.,  November  5.  1917  (Vln  and  ^e  rtport 
of  the  Special  Commission  for  the  Investigation  of  the  Affairs  of  The  Se 
Island  Company.  March.  1918- (Engineer's  Rei>ort,  28).  both  of  vvhich  ^e 
cited  in  the  Exhibit-Electric  Railways-Kecommendations  made  bv  Inves^^^^ 
gating  Committees  and  Commissions  (54).     The  latter  report  Zcludes: 

"One-man  cars  for  city  service  are  now  in  use  by  more  than  75  systems 
in  the  United  States.    Cars  operated  by  one  man  have  been  used  fo?  manv 
years  where  short  stub  lines  were  oi>erate<l  in  connection  with  other     nes 
1  he  new  development,  however,  is  for  cars  to  give  more  fr^„e„rserW^' 

?avSir*  """  '*'"'''''''  '^'^'""  ''''   """^  '''''''   ''^"^^  miditions  a7e 
"  The  public  has  been  accustomed  for  so  many  years  to  seeing  two  men 
in  charge  of  a  street  car  that  its  first  impression  is  to  deem  W  San  onSra 

ion  unsiife.    As  a  matter  of  fact,  one-man  operation  has  iiroved  niore^?e 
than  two  men  operation  where  the  boarding  of  and  alighting  from  Srs 

akes  plac^  on   the  rear  platform   out  of   the   vision   of  lie^  motorman 

*     })ith  a  sharing  of  a  part  of  the  saving  bv  granting  increaseri 

wages  to  the  single  operator  entluisiastic  co-operation  iVas  beSn  met  with 

fnan  employes     (>„  systems  where  iM.tli  one  man  ami  two  n^n  Tera  ion 

nuis!"  :''rj''''^  ^«  *^  ^^'^^^"^^  »»^^t  '^^  rights  to  the  one  n^an  oSIlon 

-We  believe  that  the  conditions  on  The  Rhode  Island  Company  warrnnf 
the  introduction  of  one  man  service  on  a  considerable  number  of  lines." 
Second,  Turn-Backs. 

««".nnnv\?lL''V^  '1''^'  turii-back  scrvice  will  permit  the  accommodation  of  twice 
as  many  people  during  the  rush  as  where  all  cars  are  run  through  irresn^tive 
of  the  length  of  line  '  (Beeler,  48-18).  ""oufeu  ii respective 

TJnifL  Skip-Stops. 

1  un!.?''''"^^?"  1'^.,"''^  skip-stop  insures  a  quicker  journey  and  more  comfortable 
4855  gT  ""  """'"^      "^  ^^"'^•'^  *^  "  considerable  saving  in  power  (Be^ier! 

Skip-stops  have  been  recommended  by 

^"q'JITv^^-?^-'   -I^J;^^'  ^^^'   '^^'"*«'   6124:   Maltbie.  6088:   Hanson 
6^ii ;  Eastman,  6000 ;  and  where  service  is  frequent  by  Wilcox,  3667.' 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2209 

See  also  approval  in  following  reports: 

Report  of  Robert  P.  Woods,  City's  Member,  Board  of  Control,  Kansas 
City  Railways  Company,  Fourth  Year  ending  July  7,  1918,  176-7. 

Report  of  the  Special  Commi*<sion  for  the  Investigation  of  the  Affairs 
of  the  Rhode  Island  Co.,  March,  1918,  Engineer's  Report,  25. 

Report  of  Dr,  Adam  Sliortt,  British  Columbia  Elec.  Ry.,  November 
5,  1917,  41-42. 

Street  Railways  in  the  District  of  Columbia — 65th  Congress — 2d  Ses- 
sion, Senate  Document  No.  197,  IVIarch  8,  1918,  p.  a3-66.  Cited  in 
Exhibit — Electric  Railways — Recommemlations  made  by  Investigat- 
ing Committees  and  Commissions  (67-8). 

Fourth,  Rerouting. 

It  is  of  the  utmost  importance  that  the  lines  provide  the  shortest,  quickest 
and  most  convenient  routes.  Through-routing  to  prevent  over-lapping  service 
reduces  expense  and  congestion  (Beeler,  4848). 

Rerouting  has  been  recommended  by  the  Public  Utilities  Commission  of  Rhode 
Island  (W.  C.  Bliss,  3414)  and  by  the  Street  Railway  Investigation  Commission 
of  Massachusetts,  February  1,  1918  (48-54— Cited  in  Exhibit— i:iectric  Rail- 
ways—Recommendations made  by  Investigating  Committees  and  Commissions 
(22-23). 

Fifth,  Loading  Devices. 

These  have  been  recommended  by  Walter  Jackson,  4646 ;  Joyce,  4487. 

^iJ'th,  Trailer  Operation. 

The  trailer  is  also  a  one-man  car  and  it  is  light  and  does  not  add  a  great  deal 
to  the  peak  load  on  the  power  station  and  on  lines  where  travel  is  very  heavy 
and  stops  fairly  long  apart,  the  trailer  operation  is  ideal  (Beeler,  4907-8). 

fieventh,  Honest  Collection  of  Fares  and  Fare  Registering  Devices. 

These  are  recommended  by  Eastman,  6001 ;  Bemis.  6124. 
Eighth,  Double  Deck  Cars. 

These  are  recommended  by  Walter  Jackson,  472.5. 
Ninth,  Lighter  Cars. 

These  are  recommended  by  Wilcox,  3619 ;  Eastman,  6(X)0. 
Tenth,  Keeping  Street  Car  Tracks  Cleared  of  Traffic. 

This  is  recommended  by  Wilcox,  3667 ;  Eastman,  6004 ;  Beeler,  4857. 

IJJeventh,  Elimination  of  Street  Congestion  Due  to  Parking  of  Motor  Cars  on 
Curb. 

This  is  recommended  by  Ole  Hanson,  3293. 

Tirclfth,  Assistance  in  Staggering  School  and  Shopping  Hours. 

This  is  recommended  by  Ole  Hanson,  3293.  . 
(b)   Regulation  of  Vehicular  Traffic. 

It  is  likewise  tlie  concensus  of  opinion  that  regulation  of  motor  bus  competi- 
tion is  ifi-oper,  that  operating  requirements  should  be  no  less  onerous  than  those 
impose<l  on  street  railways. 

Mote,   3219-20;    Babson,   3115;    Higgins,   3227;   Ainey,   4074;    Beeler, 
4857-8. 
See  also 

Report  of  the  Street  Railway  Investigation  Commission  of  Connecticut 
April  1,  1919,  24-25. 

Report  of  the  Street  Railway  Investigation  Commission  of  Massachu- 
setts, February  1,  1918  (48-54).  Cited  in  Exhibit— Electric  Rail- 
ways—Recommendations made  by  Investigating  Committees  and 
Connnissions  (22-23). 

and  that  there  is  a  field  for  the  motor  bus  in  furnishing  service  supplementary 
to  the  street  railway. 

Walter  Jackson,  4725 ;  Wilcox,  3614 ;  D.  C.  Jackson,  4147. 


2210        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

See  also 

Report  of  the  Street  Railway  Investigation  Commission  of  Massaclui- 
setts,  Februai-y  1,  1918  (48-54).  Cited  in  Exhibit— Electric  Rail- 
ways— Recommendations  made  by  Investigating  Committees  and 
Commissions  (22-23). 

Wilcox  points  out  (3616)  that  under  municipal  ownership  jitney  competition 
should  be  proliibitetl. 

(c)  Prompt  Action  hy  PnhUc  Authorities. 

Such  a  practical  program  of  rehabilitation  is  only  possible  by  prompt  public 
cooperation.  Homer  Loring  (4804)  states  "unless  the  Commissions  are  urged 
to  be  broad  minded  about  permitting  experimenting  in  fares,  I  do  not  see  liow 
the  Companies  are  going  to  find  the  real  road  to  their  siilvatlon."  There  has 
been  complaint  that  the  action  of  regulating  officials  has  been  needlessly  slow 
and  that  prompt  action  is  essential. 

Higgins,  3229;  Sisson.  1012;  Nash,  1344;  Mortimer,  2269;  Quacken- 
bnsh,  2359;  Schaddelee.  2476;  Henry,  1995-6. 

Henry  L.  Doherty  (1109)  states  "We  have  not  been  hurt  so  much  by  Pub- 
lic rtillty  Commissions  even  where  they  have  shown  their  teeth,  *  *  ♦  but 
we  have  often  been  intensely  hurt  by  delay."  Conway  points  out  that  delays 
may  be  obviated  whore  regulatory  laws  such  as  those  existing  in  Pennsylvania 
and  Connecticut  permit  electric  railvvajs  to  initiate  rates  of  fares,  giving 
Counuission  fidl  power  of  review  (2752). 

(C>  Plans  for  Regrvlating  the  Relations  Between  Communities  and  Privately 

Operated  Local  Transportation  Utilities. 

A  number  of  specific  plans  for  the  maintenance  of  correct  relations  between 
local  transportation  utilities  and  the  public  were  discussed  by  witnesses  before 
the  Commission.     Those  which  related  to  privately  operated  utilities  were: 

1 — The  indeterminate  franchise. 
2 — Regulation  through  competition. 
8 — State  control  and  regulation. 
4 — C^ommunity  control  and  regulation. 
5 — "  Service-at-cost  "  agreements. 
6 — Public  participation  in  profits. 
7 — Public  subsidies  or  guarantees, 

(1     The  Ixdeteemtxate  Franchise. 

If  private  enterprise  is  to  continue  in  public  service  these  various  plans  and 
theories  must  be  considered  in  the  light  of  the  principles  governing  the 
establishment  and  maintenance  of  credit,  as  discussed  under  IV.  (A)  (page 
90  and  following),  both  as  they  affect  the  legal  protection  of  the  investment 
end  the  public  attitude  towards  it. 

As  previously  stated,  the  foundation  stone  of  (he  relations  between  thb 
comnmnities  and  the  companies  must  be  the  legal  authority  imder  which  they 
are  permitted  to  conduct  business.  Since  in  practically  all  States  the  localities 
alone  have  the  power  to  pennit  the  use  of  highways  by  electric  railways,  this 
primary  authority  is  the  franchise,  grant  or  agreement  containing  the  requi- 
site permit. 

The  "  Indeterminate  "  franchise  or  permit,  provides  for  the  termination  of 
i\.2  authority  solely  upon  the  purchase  by  the  community,  or  by  a  grantee  of 
the  community.  It  ha?  been  previously  discussed  in  tlils  brief  (p.  36)  and 
was  generally  approved  by  all  witnesses.  It  is  unnecessai-y  to  here  discuss  it 
further. 

^2)  Regulation  Through  Competition. 

The  principal  reason  for  the  public  control  and  regulation  of  public  utilities 
is  their  monopolistic  character.  Competition  which  regulates  both  price  and 
quality  in  other  kinds  of  business  has  until  recently  been  considered,  theoreti- 
cally, to  have  been  absent  so  far  as  city  transportation  service  was  concerned. 
Practically,  this,  of  course,  has  never  been  entirely  true,  first,  because  it  has 
always  been  possible  for  a  large  proportion  of  the  patrons  of  street  railway 
service  to  walk,  and  second,  because  the  competition  of  other  forms  of  trans- 
portation (horse  drawn  vehicles,  'buses,  hacks,  in  some  cases  steam  roads)  has 


PROCEEDINGS  OF  FEDEIIAL  ELECTRIC  RAILWAYS  COMMISSION.        2211 

not  been  eliminated.     latterly,  owing  to  the  development  of  motor  transport, 
competition  of  an  exceedingly  strenuous  character  has  been  encountered. 

This  comiTetitlon  has  led  to  the  suggestion  that  the  control  of  rates  and 
service  exercised  over  street  railway  systems  be  entirely  removed  and  that 
these  utilities  be  allowed  entire  freedom  of  action,  so  that  there  may  be  a  test 
of  the  comiwirative  merits  of  transiwrtation  on  rails  and  transportation  on 
tires,— the  fittest  to  survive  (Babson,  3072-3073).  It  may  be  pointed  out  in 
connection  with  this  proposal,  that  it  is  the  almost  universal  testimony  that 
both  systems  cannot  exist  at  the  same  time, — that  one  or  the  other  must 
eventually  perish.  If  this  is  true,  the  survivor  would  either  be  left  possessed 
of  an  unregulated  monoiwly,  or  would  once  more  be  subjected  to  the  same 
regulation  that  now  exists,  but  with  an  additional  burden  of  debt  caused  by 
the  cost  of  waging  the  competitive  war  proposed,  which  debt  would  be  unrep- 
resented in  the  actual  property  devoted  to  the  public  service,  but  upon  which 
it  would  be  necessary,  in  order  to  maintain  the  company's  credit,  and  con- 
sequently its  service,  to  allow  a  return.  Unrestricted  competition  has  enor- 
mously increased  the  cost  of  steam  railroad  service.  It  would  eventually 
enormously  increase  the  cost  of  street  railway  transportation.  It  is  to  be 
presumed  that  a  method  so  revolutionary  as  that  proposed  by  Mr.  Babson,  will 
not,  if  for  no  other  reason  than  the  unlikelihood  of  its  general  adoption,  be 
recounnended  by  the  Connnission. 

(3)  State  ok  Local  Regulation. 

Authority  to  regulate  local  transportation  service,  is  a  part  of  the  police 
power  whicli  resides  in  the  State  alone.  For  a  political  subdivision  of  the 
State  to  exercise  any  part  of  this  power  requires  express  delegation  by  the 
State,  acting  through  its  sovereign  legislature.  Such  delegation  has  in  many 
instances  been  made,  and  may,  in  all  instances  readily  be  made,  so  that  the 
question  to  be  decided  by  this  Commission  in  framing  its  recommendations,  is 
largely  one  of  expediency. 
The  arguments  for  State  and  local  regulation  may  be  thus  summarized: 
For  State  Control. — Theoretically  that  it  is  removed  from  the  influence  of 
community  prejudice,  and  is  certain  to  be  exercised  from  a  more  judicial  stand- 
point and  with  greater  equity  to  both  the  communities  and  the  companies; 
practically,  it  is  in  most  instances  more  economical  and  more  efllcient,  since  the 
State  can  create  a  better  and  more  comprehensive  organization  for  regulation 
at  less  cost.  State  control  obviates  the  conflict  of  authority  between  communi- 
ties that  is  bound  to  obtain  when  utilities  operate  beyond  the  limits  of  a  single 
municipality.  It  makes  unnecessary  the  erection  of  mctroiwlitan  or  public 
utility  districts  in  order  to  secure  uniform  regulation. 

The  theory  of  State  regulation  was  subscribed  to  by  the  following  wit- 
nesses-^Trlpp.  195,  with  reservations  536 ;  Stuart,  572 ;  Storrs,  1290 ; 
W.  J.  Clark,  715;  George,  876;  Warren,  for  the  American  Electric 
Railway  Association,  891;  Sisson,  968;  Ford,  1037;  Tingley,  1079; 
Mortimer,  2208,  2255;  Carr,  2441;  Creetl,  2564;  H.  C.  Clark,  2607; 
Jenks,  2719;  Conway,  2786;  Erlckson,  2807,  2829;  Mote,  3197;  Hig- 
gins, 3238 :  Hall,  4000 ;  Eastman,  6025. 
For  Local  Control. — Theoretlcall.v,  that  "  the  electric  railway  problem  is  of 
purely  local  concern,"  Baker   (2958),  and  that  the  public  which  receives  and 
pays  for  the  service  should  be  permitted  to  control  and  regulate  it;  that  the 
cooperation  between  the  communities  and  the  companies,  which  is  universally 
admitted  to  be  necessary  to  the  most  economical  and  efficient  operation,  can 
only  be  secured  if  the  public  interest  'n  matters  of  management  and  operation 
is  kept  alive  by  participation  in  the  control  of  the  company  affairs  and  cannot 
be  secured  if  control  and  regulation  is  removed  to  a  non-local  commission ;  that 
public  demands  for  unnecessary  service,  extensions  and  improvements  can  be 
kept  at  a  minimum  only  by  the  public's  intimate  knowledge  of  the  effect  of 
such  demands  upon  the  rate  of  fare,  such  as  conies  from  local  control,  and 
that  public  assent  to  economical  operating  practices  and  methods  may  only  be 
secured  In  the  same  way.     Practically  that  a  regulating  organizatiou  devoting 
itself  exclusively  to  one  property  Is  bound  to  be  more  efficient  than  a  regulating 
organization  the  interest  of  which  is  scattered  among  a  large  number  of  prop- 
erties. 

The  tlieory  of   local   regulation   was   subscribed  to  by   the   following 


witnesses:  Stanley,  1703;  Culkins,  136; 
3332-3335 ;  Sidlo,  4029 ;  Rabcock,  5508. 


Baker,  2947,  295S;  Couzens, 


'  1 


i 


I' 


2212         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

The  possibility  of  rombininff  the  best  features  of  State  and  local  regulation 
through  a  division  of  powers  and  duties  was  suu^ested  bv  several  witnesses 
Such  a  system  already  exists  in  Rhode  Island,  where,  as  explainetl  by  Chairman 
Uilliani  C.  Bliss,  of  the  Rhode  Island  Connuission,  the  municipalities  have 
primary  rej?ulati<m  of  franchises,  rules  and  rejndations,  routing  of  cars  et 
cetera ;  the  comi)anies  being  given  the  right  of  appeal  to  the  State  Connnission. 
Mr.  Rliss  declared  himself  to  be  in  favor  of  such  a  system  stating  his  belief 
that  "it  is  desirable  to  have  local  or  municipal  control  In  the  first  instance 
especially  in  order  to  offset  loial  opix)sition  "  (3403-3410). 

John  A.  Beeler,  another  witness,  suggested  that  the  State  Commission  might 

control  rates,  service  and   accounting,   leaving  a   degree  of  control   with   the 

municipalities  and  expressed  his  belief  that  there  would  be  no  difference  in 

elTectiveness  between  such  a  plan  and  regulation  under  service  at  cost  (4886). 

See  also  Taft,  47. 

That  the  answer  to  the  question  of  State  or  local  regulation  depends  upon  the 
size  of  the  community  as  it  affects  ability  to  provide  the  necessary  machinery 
of  regulation  is  the  opinion  of  Mr.  Morris  L.  Cooke,  who  .said :  "*I  believe  in 
building  up  a  strong  State  Commission,  but  where  a  citv  is  large  enough  to 
retain  adequate  technical  advice,  a  good  many  matters  in  connection  with  the 
regulation  of  local  utilities  ought  to  be  in  the  hands  of  municipal  authorities  " 

(4)   SfnivicE  AT  Cost  Plans. 

That  service  should  be  provided  at  cost,  is  not  a  new  principle  in  the  regida- 
tion  of  public  utilities  It  is  back  of  all  Public  Service  Commission  regulation 
and  expresses  the  reaction  froni  the  original  contractual  relations  between 
utilities  and  communities,  under  which  fares  were  fixed  and  limited  while 
return  was  not.  The  application  of  the  term  "  service  at  cost "  to  recent  work- 
ing agreements  between  electric  railways  and  communities,  does  not  clearly 
describe  such  agreements.  They  are,  in  effect,  devices  for  automatically  and 
quickly  adjusting  price  to  cost  and  embody  a  theory  that  is  to-day  almost 
universally  subscribed  to  by  both  the  public  and  the  utilities. 

It  is,  therefore,  not  so  much  the  principle  back  of  such  plans    as  it  is  the 
method  provided  for  carrying  that  principle  out,  that  concerns  the  Commission 
in  its  consideration  of  this  phase  of  the  traction  problem.    Among  the  witnesses 
before  the  Commission  there  was  no  dissent  as  to  the  service  at  cost  princinle 
Such  objections  as  were  put  forward  were  aimed  at  the  methods  nrovided  for 
making  the  principle  effective.  *   "wueu  lur 

Some  of  the  objections  raised  to  service  at  cost  plans  described  to  the  Com- 
missitm  were: 

No  sufficient  guarantee  of  the  integrity  of  the  property  (Mortimer  '>'>'>fi 
5703,  and  following)  ;  Tingley,  1082;  referring  to  Cleveland  Plan 

No  sufficient  provision  for  flexibility  in  rate  of  return  (Mortimer   2256) 

"Lack  of  stimulus  to  the  operators  to  operate  economically"  rBflker 
2928),  referring  to  Cleveland  Plan.  ^      l«aker, 

Failure  to  separate  renewals  and  maintenance  into  separate  fnnrt«! 
(Baker,  2930)  ;  referring  to  Cleveland  Plan.  ^^-parate    lunds 

Insufficient  ixjwer  to  compel  extension  of  lines  (Sanders  42*13-49^ ^  . 
referring  to  Cleveland  Plan.  '  t^oc^-^-oo;  , 

Lack  of  power  to  control  labor  situation  and  so  prevent  strikes  (Sanders 

4253-4258)  ;  referrhig  to  Cleveland  Plan.  I  banders, 

Limiting  of  fares  to  be  charged  (Head,  1893)  ;  referring  to  Dallas  Plan. 

Some  of  these  defects  occur  in  particular  plans,  and  do  not  exist  in  others 
Thus,  while  there  is  no  stimulus  to  economy,  such  as  Mr.  Secretary  Baker  con- 
siders desirable,  in  the  Cleveland  Plan,  some  provision  for  this  is  made  both 
m  the  Cincinnati  and  Montreal  plans  (see  pamphlet  "  Recent  Developments 
in  Service  at  Cost  Franch'ses  for  Utilities  "-Nash,  filed  with  Commission? 
which  permit  of  further  improvement  and  amplification.  So  also  the  complaint 
as  to  lack  of  flexibility  in  rate  of  return,  has  to  an  extent  been  taken  care  of  in 
the  \oungstown  plan.  This  is  true  also  of  complaints  as  to  the  separation  of 
renewals  and  maintenance  funds,  the  limiting  of  rates  of  fare,  and  the  nower  to 
compel  extension  of  lines.  pv*vci  lu 

It  is  to  be  supiwsed  thafthe  Commission,  should  it  favor  service  at  cost  will 
not  attempt  to  outline  in  detail  any  particular  form  of  agreement   but  tliat  It 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2213 

will  render  its  opinion  as  to  the  practicability  of  embodying  in  such  an  agree- 
ment, or  in  the  statute  law,  provisions  which  will  carry  into  effect  the  service 
at  cost  principle.  There  is  nothing  in  the  testimony  which  the  Commission 
has  taken  to  indicate  that  it  is  impracticable  to  accomplish  such  an  object. 

The  communities  desire  from  the  companies  senrice;  the  companies  desire 
from  the  communities  an  assurance  or  guarantee  of  the  integrity  of  their 
investment  and  of  an  equitable  and  continuing  rate  of  return.  With  this  as 
a  basis  and  with  the  experience  under  the  plans  already  effective,  it  would 
seem  entirely  possible  that  the  details  of  a  plan  to  secure  to  each  party  at 
interest  its  reasonable  demands,  could  be  readily  worked  out.  The  statement 
of  Mr.  Secretary  Baker  confirms  this  belief.  "  Get  the  Council  and  the  Board 
of  Directoi-s  in  the  same  room  with  all  of  the  facts  and  all  the  figures  and  let 
everybody  in  the  community  understand  wliat  they  are,"  he  advised.  "  I  be- 
lieve that  any  community  in  America,  will  pay  cheerfully  and  willingly  what- 
ever rate  of  fare  is  necessary  to  carry  people  on  their  street  railroads  and 
to  maintain  good  service  in  their  communities,  if  they  are  sure  they  are  paying 
only  proper  operating  expenses,  proper  maintenance  and  a  proper  return  on 
capital"  (2966). 

The  principle  embodied  in  the  service  at  cost  plan  was  subscribed  to  by 
the  following  witnesses :  Taft,  15 ;  Tripp,  466 ;  Bradlee,  623 ;  Nash, 
1343 ;  Culkins,  1421 ;  Draper.  1450 ;  Cooley,  819 ;  Sisson,  967 ;  Bertron, 
1566;  Stanley,  1700;  Head,  1793;  Bullock,  1870;  H.  C.  Clark,  2612; 
Newman,  1591 ;  Higgins,  3231 ;  Wilcox,  3609,  3628,  3631 ;  Nixon,  3778 ; 
McFarland,  3952 ;  Eastman,  6030 ;  Maltbie,  6076 ;  D.  C.  Jackson,  4134, 
4135;  Sanders,  4246,  4247;  Sidlo,  4629;  Beeler,  4882;  Cooke,  4926; 
Bemis,  6129. 

(5)  Profit  Sharing  Plans. 

It  is  the  modem  theory  of  public  utility  service  that  it  should  be  furnished 
to  its  patrons  at  the  lowest  cost  consistent  with  proper  service.  This  theory 
eliminates  any  idea  of  profits  in  the  usual  acceptance  of  the  term.  It  limits 
the  return  to  the  owners  to  the  lowest  rate  at  which  private  capital  and  private 
entei*prise  may  be  secured.  For  the  community  to  put  into  its  treasury  to  be 
used  for  any  purpose  not  connected  with  the  operation  of  the  railway,  any  part 
of  the  revenues,  except  general  taxes  paid  by  all  business,  earned  by  the  rail- 
way, must  mulct  the  car  rider  for  the  benefit  of  the  tax  payer.  It  is  indirect  tax- 
ation, and  should  be  so  considered  whether  it  is  collected  in  the  form  of 
special  taxes  and  imposts,  not  levied  against  ordinary  business,  or  whether  it  is 
appropriated  from  surplus  receipts.  The  fairness  or  wisdom  of  this  method  of 
securing  municipal  revenue,  involves,  as  has  before  been  pointed  out,  considera- 
tion of  social  relations  which  is  outside  the  province  of  this  brief. 

It  should,  however,  be  emphasized  that  this  enforced  contribution  has  an 
appreciable  effect  upon  rates  of  fare  and  so  tends  to  discourage  the  use  of  electric 
railway  service  with  its  attendant  evils.  The  effect  of  the  elimination  of  special 
taxes  upon  operation  is  discussed  elsewhere  in  the  brief  and  it  is  suflicient  to 
point  out  at  this  time,  that  the  retention  by  communities  of  any  part  of  the  sur- 
plus earnings  of  electric  railways,  must,  under  a  system  of  fares  adjusted  to 
revenue  have  a  similar  effect. 

There  is  nothing,  however,  in  the  theory  of  service  at  cost  that  interdicts  a 
division  of  surplus  as  between  the  operators  of  the  service  and  the  users  of  the 
service.  For  the  former  such  division  should  be  regarded,  not  as  a  division  of 
profits,  but  as  reward  for  the  enterprise  which  has  been  before  defined  as  a  com- 
bination of  initiative  and  vigilance.  For  the  latter  it  is  a  reduction  in  rates  of 
fare,  to  which,  under  service  at  cost,  he  is  entitled.  It  is  this  theory  of  profit 
sharing  which  received  the  endorsement  of  many  witnesses  before  the  Commis- 
sion, and  which,  under  IV,  has,  in  this  brief,  been  urged  as  one  of  the  bases  of 
credit  imder  private  ownership  and  operation. 

See  Taft,  20 ;  Tripp,  467 ;  Cooley,  816 ;  Sisson,  955,  957 ;  Doherty,  1169 ; 
Mortimer,  2262;  Head,  1807  and  before;  Jenks,  2662;  Baker,  2933; 
Babson,  3099. 

(6)  Public  Subsidies. 

The  question  of  the  subsidization  of  local  transportation  service  under  private 
ownership  and  operation  is  a  question  as  to  the  extent  to  which  the  service  per- 
formed benefits  the  community  as  a  whole.  There  is  a  wide  range  of  opinion 
among  the  witnesses  before  the  Committee.    On  the  one  hand,  Mr.  Ralph  Bauer 


160643°— 20— VOL  3- 


11 


■m 

If  < 


2214        PROCEEDINGS  OF  FEDERAL  ELECTiUC  RAILWAYS  COMMISSION. 

declared  that  beennse  of  the  '"^  treiMeiado«»  benefits  accruing  from  the  inter- 
coniimmloation  afforded  "  riders  should  be  carried  free,  the  communities  assum- 
ing the  cost  of  the  senice  (4T42-474S),  while,  on  the  other  hand,  Mr.  Secretary 
Bnlver  stated  that  in  bis  oplnkm  it  was  proi>er  neither  to  provide  free  ser^'ice  nor 
to  n»eet  deficits  in  income  from  operation  (2993-2994). 

The  concensus  of  opinionv  liowever,  seems  to  favor  a  half-way  position,  namely, 
that  where  ami  when  the  cost  of  the  service  i>rovi4eil  in  the  most  economical 
mannei'  is  greater  tlmn  the  amount  possible  to  collect  from  fares,  and  the  social 
need  for  the  service  is  such  as  to  demand  its  contmuance  under  such  circum- 
stances, the  deficit  in  the  cost  of  the  service  should  be  made  up  by  taxation. 

See  Storrs,  1226,  1285;  Nash,  1353;  W.  J.  Clark,  Co3;  Taylor,  839;  Bul- 
lock, 1837 ;  Foss.  2293.  22^,  2306,  2308 ;  H.  C.  Clark,  2622 ;  Conway. 
2785 ;  Bradlee,  643 ;  Bal>son,  3008 ;  Ingram.  3271 ;  Couzens,  3314,  3348 ; 
W.  C.  Blfss,  3*14,  3465.  3467 ;  Burr,  3831 ;  MacLeod,  4222,  4223 ;  Walsh, 
4271 ;  Walter  Jadvson,  4637 ;  Loring,  4809. 

(D>  PitbKc  Ownership. 

It  is  Boi  the  purpose  of  the  Committee  of  'ne  Hundreil  to  present  arguments 
for  or  against  the  public  ownersltip  and  operation  of  public  utilities.  It  regards 
public  ownership  and  operation  as  entirely  possible  and  subscribes  to  the  belief 
tlwt  in  the  settlement  of  the  present  problem  the  basis  of  the  protection  of  the 
public  shouW  be  the  established  right  to,  at  any  time,  and  with  the  minimum  of 
distnH)anee  to  the  service,  take  orcr  existing  utilities  and  operate  them  (See 
di.scussion  of  "  authority  to  do  business,"  p.    ). 

A  discussion  of  the  comparative  merits  of  public  and  private  ownership  must 
at  this  time  be  largely  academic,  for  the  reason  that  the  testimonv  presented  to 
the  Commission  showed  that  the  obstacles  in  the  way  of  the  adoption  of  public 
ownership  were  such  as  to  Indicate  for  most  communities  a  delay  in  the  read- 
justment of  conditions  whi^  would  speH  ruin  for  the  industry  and  for  the 
service. 

There  are  two  phases  of  tire  pniblic  o^Tnersbrp  situation  which  have  a  direct 
bearing  upon  Its  application  as  a  remefly  to  eorrert  tl>e  conditions  which 
called  the  Coeimission  into  being. 

The  ftrst  is  the  legal  and  financial  difficulties  to  public  o^-nersiiip.  (It  was 
testlftof)  that  in  New  York  State  at  least  three  years  wouhl  be  required  before 
tl>e  ameBdments  to  the  Constitution  necessary  to  i^ermit  public  ownership 
could  be  enacted  [Quackenbosh,  2380]). 

The  second  is  the  state  of  the  public  mind.  In  this  connection  the  actual 
experience  of  the  City  of  Detroit  is  of  partietniar  interest.  Frederick  F. 
Ingram,  a  witness  before  the  Commission,  testifietl  (.'^261  antl  follovriug) 
that  alth€»ogh  the  general  principle  of  public  ownersiup  rtf  the  city's  street 
railway  system  was  »doptetl  by  the  city,  througli  the  votes  of  its  citizens,  in 
1910,  aad  frequent  attempts  had  been  made  to  p«t  the  plan  into  effect,  ever>' 
ptnii  so  far  presented  had  Xreen  voted  €lwrn  by  tlie  electorate.  Tliia,  as  an 
indication  of  tlte  public  attitude,  is  illarainating.  It  is  emplutsized  by  the 
widely  divergent  vie^ss  on  the  safest  expressed  by  tUe  witnesses  before  the 
Commission.  There  is  no  alignment  which  followed  the  connection  of  the  wit- 
nesses with  the  existing  utility  coniixrnies.  Those  who  favoretl  public  owner- 
ship can  be  classified  as  fo^lo^Ts: 

Public  Utility  Men— Bertron,  1545. 

PubUcists— Foss,  2285;  Ingram,  3265;  WUcox,  3577.  3586;  McFarland 

3915,  3916>  3917 ;  M.  IL  Jackson.  ^^15,  431C :  Bauer,  4768 
PuWic  Officials— Couzens,  3305;  Burr.  3793;  Saimders,  4265. 

Those  not  in  faror  of  piibHc  ownership  may  he  thus  classiied : 

Public  Utility  Men— Hedges,  1514;  Sisson.  OH;  Storrs,   1333;  New-    * 

man,  1588;  Pierce,  252a 
Publicists- Cooley,  833:  DeBerard,  2528.  2539:  Jenks.  2656:  Conwav 

2785;  Sidlo,  4G22.  ^' 

Public  Officers,   or  Former  Public  Officers— Taft,  12;   Culkins,  1378 

1403;  Carr,  2465;  Kutz,  3045;  Higgins,  3228;  Loring,  4813. 

Ill  addition  to  tlwee  who  directJy  favoretl  or  opposed  public  ownerd^ip  ami 
operation,  certain  witnesses  gave  it  «|«alifi<»d  assent.  These  aiav  be  classi- 
Ired  as  follows : 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2215 

Public  Officers — Nixon,  3728  (the  ultimate,  not  the  present,  solution)  ; 

MacLeod,  4226  (as  a  means  of  establishing  credit) ;  Babcock,  5508 

(public   ownership,   but  private   operation)  ;   Eastman,   6007,   6028 

(does  not  fear  it,  but  sees  no  reas<Mi  for  change). 
Publicists — Hall,  4006   (only  as  a  preventive  of  "high  finance"  and 

"stock    jobbing");    Walsh,    4307,    4309    (for    the    same    reason); 

Cooke.  4912  (as  a  last  resort)  ;  Bemis,  6126  (but  would  not  have 

Commission  recommend  it). 

It  may  be  assumed  that  this  divergence  of  opmion  among  the  witnesses 
fairly  reflects  the  present  state  of  public  opinion  throughout  the  United  States. 
If  this  be  so,  then  it  is  evident  that  an  extensive  and  long-drawn-out  cam- 
paign of  education  is  necessar>'  before  the  people  of  the  United  States  can 
be  brought  into  such  an  attitude  towards  public  ownership  as  will  make  it  a 
workable  solution  of  the  traction  problem.  The  business  of  the  Commission 
and  of  the  Committee  of  One  Hundred  is  with  the  immediate  crisis  that  con- 
fronts the  industry  and  threatens  collapse  of  service.  The  ills  of  the  situa- 
tion cannot  be  corrected  by  public  ownership.  Private  ownership  and  man- 
agement must  continue  for  some  time  and,  with  provisions  for  readily  and 
equitably  changing  to  public  owTiership  and  operation,  should  it  later  be  de- 
sirable, the  recommendations  of  the  Commission  must  necessarily  deal  with 
utilities,  financed  with  private  capital  and  managed  by  private  enterprise. 

IDENTIFICATION  OF  WITNESSES, 

A. 

AixEY,  William  D.  B.,  Chairman,  Public  Service  Commission  of  Pennsylvania. 
Armour,  J.  Ocden,  Armcwr  &  Company,  Chicago,  III. 

R 

Baker,  Newton  D..  Secretary  of  War.  Former  Mayor  of  Cleveland;  City  So- 
licitor under  Mayor  Johnson;  active  in  settlement  of  Cleveland  situation 
under  Tayler  grant. 

Babcock.  E.  V.,  IMayor  of  Pittsburg. 

Babson,  Rogeb,  Statistician,  Economist,  former  Director  Information  and  Etlnca- 
tlonal  Service  U.  S.  Dept.  LalMW, 

Barry,  John  G.,  Sales  Manager,  General  Electric  C5. 

Bauer,  R.  S..  Student  of  electric  railways  matters,  Lynn,  Mass. 

Beasley,  C.  Oscar,  Representing  the  United  Business  Men's  League  of  Phila- 
delphia. 

Beeler,  John  A.,  Fonner  General  Manager  Denver  Tramway  Co..  Electric  Rail- 
way and  Traffic  expert. 

Bemis,  Edward  W.,  Economist,  Rate  Exi>ert. 

Bertron,  Samuel  R.,  Member  of  firm  of  Berti-on,  Griscom  &  Co.,  New  York — 
Bankers  interested  in  public  utility  securities. 

Bleakly,  Edwin  G.  C,  City  Counsel,  Camden,  N.  J. 

Bliss,  William  C,  Cliairman,  Public  Utilities  (Commission  of  Rhode  Island- 

Bliss,  Zenas  W.,  Chairman,  Tax  Commission  of  Rhode  Island. 

liRADLEE,  H.  G.,  President,  Stone  and  Webster  Management  Corporation  in 
charge  of  the  management  of  many  street  railways  and  other  public 
utilities. 

Bullock,  Charles  J.,  Former  President  National  Tax  Association,  Advisor  on 
taxation  to  Massachusetts  Legislature;  Professor  of  Economics,  Harvard 
University. 

Burr,  William  P..  Coi-poration  Counsel,  New  York  City. 

C. 

Carr,  James  O.,  Former  member  Public  Service  Commission  for  the  Second 
District  of  New  Yotk  State,  previously  with  the  General  Electric  Company, 
and  a  manager  of  utilities. 

Clark,  Harlow  C.,  Editor  Aera,  American  Electric  Railway  Association,  stu- 
dent of  electric  railway  economics. 


2216        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Clark,  William  J.,  With  the  General  KlecUic  Company  for  32  years,  pioneer 
in  electric  railway  industry;  member  Committee  of 'National  Civic  Federa- 
tion appointed  to  study  municipal  ownership  abroad. 

Clayton,  \\\,  Vice-President,  San  Diego  Electric  llailwav  Co.,  San  Diego,  Cal 

CooLEY,  Mortimer  E.,  Dean  College  of  Engineering  and  Architecture  University 
of  Michigan,  Valuation  authority ;  Past  President  American  Society  of 
Mechanical  Engineers. 

Conway,  Thomas,  Jr..  Frofossor  of  Finance,  Wharton  School  of  Finance,  Uni- 
versity of  Pennsylvania ;  Economist ;  Advisor  to  electric  railway  companies 
in  the  matter  of  fare  increases. 

Con  NELL,  Alexander  T.,  Mayor  of  Scranton,  Pa. 

Cookf;  Morris  Llewellyn,  Director  Public  Utilities  Bureau;  B^ormer  Director 
Public  Worlvs,  City  of  Philadelphia;  Made  investigation  of  Philadelphia 
situation  which  led  to  formation  of  City  Transit  Commission. 

CouzENs.  James,  Mayor  of  Detroit,  Mich. 

Creed,  W.  E.,  Counsel,  San  Francisco-Oakland  Terminal  Railwav,  Oakland,  Cal 

CuLKiNs,  W.  C,  Director  of  Street  Kailroads,  Cincinnati,  O*^  Former  City 
Treasurer,  former  Secretary  Chamber  of  Commerce,  Newspaper  man. 

Cummin,  Gaylord  C,  Representative,  Institute  for  Public  Service;  former 
City  Engineer,  Dayton,  O. ;  former  City  Manager,  Jackson,  Mich..  Grand 
Rapids,  Mich. 

D. 

De  Berard,  Frederick,  Director  of  Research,  Merchants'  Association  of  New 

lork  City,  Publicist. 
Delbridge,  C.  L.,  Secretary,  Citizens  Referendum  League,  St.  Louis,  Mo. 
Doherty,  Henry  L.,  President  Henry  L.  Doherty  Company,  and  Cities  S»^rvice 

Co.,  operators  of  public  utilities. 
Draper,  Walter  H.,  Vice  President,  Cincinnati  Traction  Co.,  Cincinnati,  O. 

E. 

Englvnd,  a.  H.,  Vice  President,  Electric  Service  Supplies  Co.  dealers  in  electric 
railway  supplies  and  equipment. 

Eastman,  Joseph  B.,  Member  Interstate  Commerce  Commission;  former  Mem- 
ber Massachusetts  Public  Service  Commission. 

Edison,  Thomas,  Inventor. 

Erickson,  Halford,  Member  Hag^nah  &  Erickson,  Public  Utility  Engineers 
Chicago,  111.,  former  Clmirman  Wisconsin  Railroad  Commission,  Economist! 

F. 

Fagan,  Charles  IL,  Receiver,  Pittsburgh  Railways  Co..  Lawyer. 
Ferguson,  Cabey,  Business  Agent,  Detroit  Division,  A.  A.  of  S.  and  ERA 
Ferguson,  Homer  L.,  President,  Chamber  of  Commerce  of  the  United  'states 
President,  Newport  News  Shipbuilding  and  Dry  Dock  Co.,  Newport  News* 
Va.  ' 

Fisher,  Irving,  Professor  of  Economics,  Tale  University  monetary  authority 
Ford,  A.  H.,  Vice  President  and  General  Manager,  Cumberland  Countv  Power 

and  Light  Co.,  Portland,  Me. 
FoRGAN,  James  B.,  President,  First  National  Bank.  Chicago,  111. 
Foss,  Eugene  N.,  Former  Governor  of  Massachusetts ;  Manufacturer. 
Fox,  John  P.,  Transit  Expert ;  Student. 

G. 

George,  William  D.,  Receiver  Pittsburg  Railways  Co.,  engaged  In  real  estate 

business. 
Gillen,  Charles  P.,  Mayor  of  Newark,  N.  J. 

H. 

Hall,  Thomas  L.,  Chairman  Nebraska  State  Railway  Commission 
Hanson,  Oui:,  Mayor  of  Seattle,  Wash. 

Hedges,  Job  E.,  Receiver,  New  York  Railways  Co.,  Lawyer ;  Publicist. 
Head,  W.  B.,  Vice  President,  The  Dallas  Railway  Co.,  Dallas,  Texas. 
Hetburn,  a.  Barton,  President,  Chase  National  Bank,  N.  Y.  City. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2217 


Henry,  Charles  L.,  President,  Indianapolis  and  Cincinnati  Traction  Co.,  In- 
dianapolis, Ind.,  pioneer  in  interuiban  electric  railway  construction  and  op- 
eration, former  President,  American  Electric  Railway  Association ;  lawyer 
and  former  Member  of  Congress. 

Heulings,  William  H„  Jr.,  Vice  President,  J.  G.  Brill  Company,  Manufacturers 
of  cars. 

Higgins,  Richard  T.,  Chairman,  Connecticut  Public  Utilities  Commission. 

Hurley,  Edward  H.,  Chairman,  United  States  Shipping  Board. 

I. 

Ingram,  F.  F.,  Manufacturer,  former  member.  Electric  Light  Commission,  De- 
troit, Mich. 

Insull,  Samuel,  Prominent  public  utility  financier  and  operator.  Trustee  Chi- 
cago Elevated  Railroads,  President  Middle  West  Utilities  Co.,  President, 
American  Public  Service  Co.,  Chicago,  111. 

J. 

Jackson,  Dugald  C,  Professor  of  Electrical  Engineering,  Massachusetts  Insti- 
tute of  Technology,  electric  railway  expert ;  Author  with  David  J.  McGrath 
of  Street  Railway  Fares. 

Jackson,  M.  M.,  Lawyer,  appeared  as  representative  of  James  L.  Key,  Mayor 
of  Atlanta. 

Jackson,  Walter,  Writer  on  Electric  Railway  Subjects;  made  for  Electrie 
Raihcay  Journal,  investigation  of  fare  systems  in  Great  Britain  and  Ireland. 

JENKS,  Jeremiah  W.,  Economist,  publicist;  Advisor  to  United  States  Govern- 
ment ;  Financial  advisor  to  Chinese  Republic. 

Jones,  Stiles  P.,  Newspaper  writer,  former  Secretary,  Municipal  Voters  League 
of  Minneapolis ;  Expert  for  A.  A.  of  S.  and  E.  R.  E. 

.Joyce,  C.  J.,  Formerly  connected  with  Pennsylvania  State  Public  Service  Com- 
mission. Representing  T.  E.  Mitten,  President,  Philadelphia  Rapid  Transit 
Co. 

K. 

Kelix)gg,  Charles  \\\,  Engineer,  connected  with  Stone  and  Webster,  Chairman 
Committee  on  One  Man  Cars,  American  Electric  Railway  Transportation 
and  Traffic  Association. 

Kingsley,  Darwin  P.,  President,  New  York  Life  Insurance  Co. 

Kutz,  Lieut.  Col.  Chas.  W.,  Army  Officer,  Chairman  Public  Utilities  Commis- 
sion of  District  of  Columbia. 

L. 

Lambert,  Myles  B.,  Assistant  Manager  Railway  Dept.  Westlnghouse  Electric 
and  Mfg.  Company. 

Lauck,  W.  Jett,  Economist,  Advisor  to  Amalgamated  Association  of  Street  and 
Electric  Ry.  Employees,  Former  Secretary  National  War  Labor  Board. 

Loring,  Homer,  Chairman,  Board  of  State  Trustees,  Operating  Eastern  Mas- 
sachusetts Street  Railway  Co.,  has  previously  made  exhaustive  investiga- 
tion of  street  railway  affairs. 

M. 

MacLeod,  Frederick  J.,  Chairman,  Massachusetts  Public  Service  Commission. 

MacFabland,  Greenville  S.,  Lawyer,  Boston.  . 

McKinley,  William  B.,  President,  Illinois  Traction  System,  Member  of  Con- 
gress. 

Magnussen,  Leifur,  Economist,  Bureau  of  Labor  Statistics  United  States  De- 
partment of  Labor. 

Maltbie,  Mn.o  R.,  Economist,  franchise  expert;  former  member  New  York 
Public  Service  Commission  First  District. 

Mortimer,  J.  D.,  President,  The  North  American  Co.,  operators  of  electric 
railways. 

Mote,  Carl  H.,  Secretary,  Indiana  Public  Service  Commission. 


Iv 


"f 


2218         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

N. 

Nash.  Lvther  R.,  Engineer  and  Writer,  member  of  Staff  of  Stone  and  Webster 
for  24  years.  Student  of  Service  at  Coat  plans,  and  autlior  of  Some  Recent 
Developments  m  SeriHce  at  Cost  Franchises  lor  Utilities 

Newman,  J.  K.,  Banker.  Engineer,  Public  Utility  operator.  Associated  at  one 
time  or  another  with  numerou.s  street  railway  properties  including  those  in 
New  Orleans,  St.  Louis  and  Birmingham. 

Nixox,  Lewis,  Commissioner  in  charge  of  regulation,  First  District  Public 
Service  Commission,  New  York. 

O. 

Ogburx,  Charlton  AV.,  Executive  Secretary.  Federal  Electric  Railways  Commis- 
sion. 

Oor.T'RN,  Wn.LTAM,  Professor  of  Economics,  Columbia  University. 

P. 

Pardee,  J   H.,  President.  American  Electric  Railway  Association;  President,  J. 

G.  White  Management  Corporation. 
Pelossier,   Louis,  President,  Holyoke  Street  Railway  Co..  Holvoke    Mass  • 

t>T.oS5"S**^  Manager,  Northampton  Street  Railway  Co.,  Northampton,  klass 

Pierce,  Hbnby  J.,  Former  President.  International  Railway  Co.,  Buffalo.  Ne%^ 

\ork;  Neitherlands  Tramways  Cori>oration,  The  Hague,  Holland 
PiRDY,  Lawson.  Tax  expert,  former  CommLssionpr  of  Taxes,  New  I'ork  City. 

<^ 

^^'^NW  ^vnrb'  r-f?'  ^"  ^'T™*  '^"^'•»^>-  Intert>oi-oogh  Rapid  Transit  Co., 
New  York  City,  Former  Coiporation  Coun.sel  of  Buffalo,  N.  Y. 

R. 

Rhea,  William  M.,  Financial  Secretary,  Division  2rKS,  A.  A.  of  S.  and  ERE 
Robinson.  Charles  K..  Special  City  Solicitor.  Pittsburgh 
RosENWALD,  Julius,  President.  Sears,  Roebuck  &  Co 
Ryan,  John  D..  President,  Anaconda  Copper  Co. 

Sanders,  Fielder,  Stre<-f  Railway  Commissioner,  Cleveland   O 

Schadelee,  Richard,  Vice-President  and  General  Manager,  United  Light  and 

inf  Shc  i^anways  '"'^^     '"''•'  ^^*"'"^'  "'  manyVblic  utilit?;s^incfud- 
ScHUF,  Jacob  H.,  Kuhn,  I^eb  and  Co..  Bankers,  New  York  Citr 
Shoup.  Paul,  President,  Pacific  Electric  Railway  Co..  Los  Aiigeles   Cal 
SiDLo,  THOMAS  L.,  Lawyer,  Cleveland,  O.,  former  law  pamier  l^^iai^  B^k^r 

student  of  electric  railway  situation.  parinei  ^secretarj  Baker, 

S1S.S0N,  Francis  IL,  Vice-President,  Guaranty  Trust  Co.,  New  York  Citv 
Smith,  George  W.,  Actuary,  Association  of  Life  Insui-anee  ^esidenti 
^PRAGUE,  Frank  J  ,  Inventor  and  pioneer  in  electric  railway  construction-  built 
fim  commercially  successful  electric  railway ;  inventor  multiple  imii  con 

Academr     '         '  '''"'''   ^"'^'    ^'"^""'^   United    States   Naval 

Stanley,  John  J.,  President,  Cleveland  Railwav  Co     Clevelind    n  •  /«^«.^ 

President  American  Electric  Railway  Association  '.  ^'*''^^'^"^'  ^- '  '«'"™«' 

t^i'nH.^^T.^'   l'.»-^«W^t,   Halsey,    Stuart    &   Co.,   investment   bankers, 
handling  electric  railwav  securities.  v.»imtuc   oaoKers, 

Storrs,  L.  S     President,  The  Connecticut  Comixiny,  New  Haven    Conn     on- 
erating  street  railways  in  practically  all  large  ConnecUcut  cit  es.  ^ 

STi-RGis,  ARTHUR,  Elcctrical  Engineer,  Expert  for  A.  A.  of  S  and  ^R.  E. 

T. 

'"^'^cZ^^:^oZ-zi7ri^x^i »'  ""^  ^""^  «'^^-=  ^»™-r  jo-t 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2219 

Taylor,  A.  Merritt,  President,  Philadelphia  and  Westchester  Traction  Co 
former  Transit  Commissioner  of  City  of  Philadelphia,  recently  Manager 
Division  Passenger  Transportation  &  Housing,  U.  S.  Shipping  Board 

Thompson,  J.  S.,  Vice-President,  American  Brakeshoe  and  Foundry  Co  manu- 
facturers of  brake  shoes. 

TiNGLEY,  C.  L.  S.,  Vice-President.  American  Railways  Co.,  Philadelphia,  which 
controls  many  public  utilities.  ,  >^     «-" 

Tripp,  Guy  E.,  Chairman,  Committee  of  One  Hundred,  American  Electric  Rail- 
way Association;  Chairman,  Board  of  Directors.  Westinghouse  Electric  and 
Mfg.  Co.;  recently  Brigatlier  General  in  Ordnance  Department,  United 
States  Army ;  formerly  engineer.  Stone  and  Webster ;  officer  of  many  street 
railways;  Director  of  Interborough  Rapid  Transit  Co.;  has  participated  in 
the  reorganization  of  several  electric  railway  systems. 

W. 

Walsh,  John  J.,  State  Senator,  Massachusetts. 

Warren  Bentley  W.,  Counsel,  Committee  of  One  Hundred.  American  Electric 
Railway  Association.  ^rumc 

Welsh,  James  W.,  Special  Engineer,  American  Electric  Railway  Association  • 
formerly  engineer  with  Pittsburgli  Railways  Co. ;  transportation  engineer 
Emergency  Fleet  Corporation.  '^  &  "cci, 

WESTINGHOUSE,  H.  H.,  President,  Westinghouse  Traction  Brake  Co. :  President 
Westinghouse  Air  Brake  Co. 

^^''''n^w  Vo^^Cu'  ^''^^"''^"^"  Expert;  former  Water  Supply  Commissioner  for 


fi'      i 


f  :■ 


TABLES  AND  CHARTS  PRESENTED  BY  THE  AMERICAN  ELECTRIC 

RAILWAY  ASSOCIATION  AND  REFERRED  TO  IN  THE 

TESTIMONY  OF  J.  W.  WELSH,  VOLUME  I. 


(American  Electric  Railway  Association,  oflTice  of  the  secretary,  8  West  Fortieth  Street,  New  York,  N.  Y., 

June  27, 1919.] 

Statement  of  income  accounts  and  operating  expensts  of  345  companies.     Income  account 
for  12  months  ending  Dec.  31, 1918,  compared  with  the  12  inonths  ending  Dec.  31, 1917. 


Items  follow  Standard  Classification  of 
Accounts,  Interstate  Commerce  Commission. 


12  months 

ended 

Dec,  31,1918. 


12  months 

ended 

Dec,  31, 1917. 


Railway  operating  revenues  (201) 

Railway  operating  expenses  (213) 

Net  operating  revenue 

Net  revenue  from  auxiliary  operations  (202 

minus  214) 

Taxes  railway  operation  (215) , 

Operating  income 

Nonoperating  income  (203  to  212) 

Gross  income  or  loss , 

Deductions  from  gross  income  (216  to  225) 

Net  income  or  loss , 

Total  car  mileage  operated 

Total  passengers  carried 

Total  m iles  of  single  track 

O  F crating  ratio 


$590,710,837 
{426,082,146 
$164,628,691 

$16,917,673 

$38,669,011 

$142,877,353 

$14,487,720 

$157,365,073 

$146,652,347 

$10,712,726 

1,654,319,023 

11,969,256,764 

32,570.21 

72,13  per  cent. 


$554,674,718 
1361,315,721 
$193,358,997 

$15,563,861 

$35,750,567 

$173, 172, 291 

$11,001,832 

$184, 174, 123 

$142,373,728 

$41,800,395 

1,722,369,093 

12,187,434,043 

32,476.64 

65.14  per  cent. 


Increase  or  decrease, 
1918  over  1917. 


Amount. 


$38,036,119 

$64,766,425 

1  $28,730,306 

$1,353,812 

$2,918,444 

>  $30,294,938 

$3,48.5,888 

1  $26,809,0.50 

$4,278,619 

»  $31,087,669 

'68,050,070 

1218,177,279 

93.57 


Percent 


6.50 

17.93 

U4.86 

&70 
8.16 

U7,49 
31.68 

»14.56 
3.01 

»74.37 

»3.95 

1.79 

0.29 


1  Decrease. 
(American  Electric  Railway  AssDciation,  8  West  Fortieth  Street,  New  York  City,  July  8, 1919.| 
Chart  C-101. — Growth  oj  electric  railways.     (Based  on  United  States  census  reports.) 


Year 

Source. 

Miles  of 
line. 

Miles  of 
single  track. 

Number 
of  em- 
ployees. 

Nnmbw 

of 

passenger 

cars. 

18S0 

(•) 

(») 
(«) 

5,783.47 
16,645.34 
25,547,19 
30,437.86 
32,547.58 

8, 123. 02 
22,576.99 
34,381,51 
41,064,82 
44,83.5.37 
44,949.50 

70,764 
140, 769 
221,429 
282,461 
294,826 

32,505 
60,290 
70,016 
76,162 
79,914 

1902 

1S07 

1912 

1917 

1918 - 

'  United  States  census  reports,  1912,  Table  4,  page  184.  'Data  sheet  No.  186  (estimated), 

*  Advance  report,  Table  5. 

Average  per  cent  increase  per  year  over  previous  census. 


Year. 

Miles 

of 

line. 

Miles 

of 
single 
track. 

Number 
of  em- 
ployees. 

Number 

of 

passenger 

cars. 

1902 

15.6 

la? 

3.8 
1.4 

14.8 

ia5 

3.9 
1.8 
0.3 

8.2 

11.4 

5.5 

a9 

7  1 

1907 

3  2 

1912...; 

1  8 

1917 

1  0 

1918 

2221 


WBPBB 


2222       PROCEEDIls'GS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

[American  Electric  Railway  Association,  S  West  Fortieth  Street,  New  York  City,  July  8, 1910.1 
(Chart  C-102.— Electric  Railway  traffic.     {Based  on  United  States  Census  Reports.) 


Revenue  car  miles 

Average  percent  increase  ixjr  year  over  prior  census 

Riding  habit 

Average  per  cent  increase  over  prior  census 

Total  passengers  carried 

Average  per  cent  Increase  per  year  over  prior  census . 

Revenue  i)assenj^ers 

A  veragc  per  cent  increase  per  year  over  prior  census . 

Revenue  passengers  per  car  mile 

Average  per  cent  increase  per  year  over  prior  census . 


1890 


» 383,178, 085 
V32 


••2,023,010,202 
•V2*023,'oio»2^ 


1902 


1907 


« 1,144, 430, 466 

16.5 

«61 

90l6 

^5,836,615,296 
15.7 

M,  774, 211, 904 

11.3 

>4.2d 


■' 


•1,017,731,300 

8.3 

«85 

39.3 

•9,533,080,766 

i2.7 

•7,441, 114, 608 

11.2 

•4.70 

2.1 


Revenue  car  miles 

A  verage  per  cent  increase  per  year  over  prior  census ! 

Riding  habit 

Average  per  cent  increase  over  prior  census 


1912 


1917 


•1,921,620,074 

3.7 

«100 

17.6 


Total  passengers  carried •    '12,135,341, 716 

Average  percent  increase  per  year  overpriorccnsus.' 

Revenue  passengers 

A  verage  pit  cent  increase  per  year  over  prior  census . 

Revenue  passengers  per  car  mile 

Average  per  cent  increase  per  year  over  prior  census . 


5.4 

•9,545,554,667 

5.6 

•5.06 

L5 


•2,139,801,530 
2.2 
109 
9.0 

•14,506,914,573 
3.9 

•11,304,660,462 

3.6 

•&41 

1.4 


1918 


•2,051,355,560 
»a4.1 

0) 


•14,243,415,830 

«,»11,107,8W,347 
•a  1.7 


» U.  S.  C,  1907,  pare  33,  text. 

«U.  S.  C,  1912,  Table  1;>6,  page  293. 

•Advance  Report,  Table  5. 

*V.  S.  Census  Reports,  Advance  Report,  Table  11. 

'  Transfer  and  free  passenger ;  not  noted. 

*<»  Decrease. 

•  U.  S.  C,  1902,  Table  1,  page  6. 

'  U.  S.  C,  1912,  Table  156,  page  292. 

» Data  Sheet  No.  186  (est.). 

f  J^olL™^'*^**  ^^  o  ^®'"  ^*j"*  ^^  ^^^'^l  Pa'5sengcrs  as  estimated  by  American  Electric  Railway  Association 
yeaJs  19n?m2,  and  1W7.  '""''"""^  passengers  (78  per  cent)  found  to  be  practically  consSut  for 

lAmerican  ElectricRaihvay  Association,  8  West  Fortieth  Street,  New  York  City.] 

Chart  C-103.— /«co»ie  accounts  0/ electric  railways.    {Based  on   United  States  Census 

Reports.) 


Net  operating  revenue 

Deductions  from  income 

Net  income 

Taxes 

Net  revemjc  auxiliary  opera- 
tions  


1903 


1  $105,241,420 
1  64, 518, 154 
>  30, 596. 977 
» 13. 078, 899 


i9o: 


r 


- 1155, 755, 655 

U18,339,114 

<  40,340,288 

♦19,755,602 

2  11,122, 951 


1912 


1917 


=  $217,295,588 

♦149,806,307 

♦68,139,889 

♦35,027,985 

=  17,319,7«0 


=  $228,893,968 

♦175,3a->,761 

♦56,450,930 

♦45,756,695 

'28,331,470 


1918 


•$192,615,567 

•180,382,390 

'20,183,413 

» 49, 49^,  334 

*  30, 790,16.5 


1  tnlted  States  Census  Report  1912,  Table  5,  p.  186. 

2  Advance  Report  Table  5,  less  Advance  Report  Table 

•  Data  sheet  No.  188  (estimated). 

♦  Advance  Report  Table  5. 


162. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2223 

lAmcrlcan  Electric  Railway  Association,  8  West  FOTtieth  Street,  New  Ywk  City,  July  9,  1919.] 
Chart  C-107 .—Riding  habit.     {Based  on  United  States  Census  Reports.) 


Increase 

in 

Revenue 

revenue 

passen- 

Number of 

passen- 

gers per 
inhaoi- 

revenue  passen- 

gers per 
inhabi- 

Sourco. 

gers  carried. 

tant. 

tant  over 

prior 

census. 

1890                     

32 

61 

85 

100 

109 

2  106 

2,023,010,202 
4,774,211,904 
7,441,114,508 
9,545,554,667 
11,304,660,462 
•11,107,804,347 

0) 

1902        

29 
24 
15 
9 
♦3 

('> 

1907                 

(») 

1912                      

0) 

1Q17                           

(») 

1918        

» Advance  Report  Table  11.  „         ,  . 

« Number  of  revenue  passengers  1918  (above)  divided  by  estimated  population  of  United  States  July  1 
1918. 
» Data  sheet  No.  18S  (estimated). 
♦  Revenue  passengers  per  inhabitant  1917  less  1918  (above). 

[American  Electric  Railways  Asscciaticn,  8  West  Fortieth  Street,  New  York  City.] 

Chabt  C-110. — Operating  revenues  and  expenses.    {Based  on   United  States    Censut 

Reports.) 


Taxes. ...........■.■•• 

Railway      operating 

revenue 

Railway       operating 

expense 

Net  operating  revenue . 
Operating  ratio 


1890 


» $3,308,190 

•90,617,211 

162,011,185 
i»528,006,026 

768.4 


1902 


1907 


2  $13, 078, 899  •$19,755,602 


1912 


•$35,027,965 


!  247, 553, 999  3  400, 896, 034  •  535, 996, 122 

i  I   - 

!  140, 123, 844 1 «  245, 140, 379  ;«  318,  700,534 

107,430,155  155,755,655;  217,295,588 


2. 8  (Base.) 
56.6 
2»  2  (Base.) 


3. 8  (Base.)  j  »»«(Base.) 

61.1  59.5 

»,  6  (Base.)     h  « (Base.) 


1917 


•$45,756,695 

•650,149,806 

6  421.250,838 

228,898,968 

»»6(iiase.) 

64.9 
».  6  (Base.) 


1918 


♦$49,496,334 

♦691,131,682 

♦498,516,115 
♦192,615,567 

♦72.13 


» United  States  Census,  1902,  page  11,  table  6. 

•  United  States  Census,  1912,  page  186,  table  5. 

•  Advance  report,  table  5. 

•  Estimate  of  1918  Census  for  345  companies,  data  sheet  186. 

•  United  States  Census,  1902,  page  10,  text  receipt  and  expenditures. 

•  Advance  report,  table  162. 

» United  States  Census,  1912,  page  6,  table  1. 
8  United  States  Census,  1912,  page  311,  table  162. 

[American  Electric  Railways  Association,  8  West  Fortieth  Street,  New  York  City.J 

Chart  C-111. — Revenues  and  expenses  of  electric  railways.     {Based  on   United  States 

Census  Reports.) 


Railway  operating  revenue . 
Railway  operating  expense. 

Net  operating  revenue 

Taxes 


Cents  per  car  mile. 


1902 


121.63 

•» » 12. 25 

»»»9.38 

1/2  1.20 


1907 


1,2  24.78 
I,  5  15.15 

1.2.5  9.63 
1.21.22 


1912 


1,2  27.89 

1,5  16.51 

1,2,8  11.30 

1.2  1.82 


1917 


2,  •30.39 

•>»19.69 

2,  3,  5  10. 70 

•,•2.14 


1918 


♦33.69 

♦24.28 

♦9.39 

♦2.41 


Note.— The  above  figures  are  based  on  the  following  sources: 
1  United  States  Census,  1912,  page  186,  table  5. 
•Advance  report,  table  5. 
'United  States  Census,  1912,  page  311,  table  162. 
♦Estimate  of  1918  Census  for  345  companies,  data  sheet  186. 
•Advance  Report,  table  162. 
'United  States  Census,  Typed  Advance  Summary,  released  April  21. 


1919 


it 


4\ 


2224       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

lAraerlcan  Electric  Railway  Assorjiation,  8  West  Fortieth  Street,  New  York  Clty.| 

Chart  G-\20.~ Income  accounts  in  cents  per  car  mile  of  electric  railways  based  on  average 
of  monthly  reports  to  American  Electric  Railway  Association. 


191G 

1917 

1918 

1919,  Jan. 
to  Apr. 

Operating  revenue 

29.43 
17.66 
11.77 

30.87 
30.06 
10.81 

34.00 

24.50 

9.50 

2.45 

7.05 

72.08 

37.63 

28.76 

8.87 

2.49 

6.38 

76.43 

Operat  ing  expenses 

Net  operating  revenue 

Taxes 

Operafin?  income 

Operating  ratio 

60.01 

64.98 

1919  estimated  on  basis  of  4  months. 

lAmerican  Electric  Railway  Asso.iation,  S  West  Fortieth  Street.  New  York  City.) 

Chart  C -122.— Tares  of  electric  railways.     (Based  on  United  States  Census  Reports.) 

iChart  No.  122,  I'nited  States  Census  Table  113,  p.  254, 1912.) 


Item. 


1902 


1907 


1912 


1917 


Taxe.s  (total) I  $13. 078, 899     $19, 775, 602  $35, 027, 965  $45, 756, 695 

On  real  and  personal  property ;    $',,  h;J5,  542  j    $ ),  4(>4, 616  $15, 65.S,  2J9  $21  804  619 

On  eammn;s,  capital,  and  other ,   '    —"">•"-• -  -.^'.,  .,  — .  .    >?<   ."» 

Per  cent  of  operating  expenses , 


$7, 243, 357 
9.19 


110, 3 10^9.%  ;  $l9,'369,'72t> 

T  0*7  I         in  cc 


7.8 


10.55 


$i.{,  952, 076 
10.11 


1918 


$49,496,334 


9.93 


(American  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City.) 

Chart  No.  l2Q.~Nct  operating  revenue  per  mile  of  track  by  classes  of  electric  railways 

(Based  on  United  States  Census  reports.) 


. 

Net  operating  revenue  per  mile  of  track. 

" 

Elevated 

and 
subway. 

Class  A. 

Class  B. 

Class  C. 

1902 

$9,025 
8,032 
8,S92 
7,893 

$3,408 
3,053 
3,420 
3,461 

$1,443 

1907 

$42,879 
53,?27 
51,485 

1912 

1,712 

1    ooe 

1917 

1,835 

1      C>«T*T 

1,877 

Subway  and  elevated: 

1902. 

1907 

1912 

1917 

Class  A,  1917 

Class  B,  1917 

Class  C,  1917 


Net  operating 
revenue. 


Miles  of  track 


$18,745,029  (90) 
28,625,860  (90) 
36,867,482  (90) 

205,743,098  (85) 
35,507,354  (85) 
15,979,986  (85) 


437.16  (153) 

532.80  (153) 

716.08  (153) 

26.065  (53) 

10.259  (53) 

8.512  (53) 


Net 

operating 

revenue 

per  mile  of 

track. 


$42,879 

53,727 

51,485 

7,893 

3,461 

1,877 


PROCEEDINGS  OF  FEDERAL  ELECTRIC   RAILWAYS  COMMISSION.       2225 


[American  Electric  Railways  Association,  8  West  Fortieth  Street,  New  York  City  .J 

Chart  No.  129.— Net  income  per  mile  of  track,  by  classes  of  electric  railways. 

United  States  Census  reports.) 

NET  INCOME  PER  MILE  OF  TRACK. 


(Based  on 


1€02 

1C07 

1912 

1917 

Elevated  and  subway 

$12,969 

1,780 

858 

520 

$17,326 

2,508 

1,132 

373 

$16,843 

1,821 

MS 

Class  A 

$2,575 

1,134 

364 

Class  B 

Class  C 

277 

.     . 

NET  INCOME  (TABLE  f5— 1912  AND  1917  CENSUS). 


Elevated  and  subway \ 

Class  A I  $21,666,551 

Class  B I      5,566,046 

Class  C !      3,364,380 


$5,669,738 

27,707,790 

7,207,076 

5,426,420 


$9,231,121 

.53,442,502 

10,927,455 

3,769,932 


$12,060,843 

47,466,872 

6,623,496 

2,360,562 


MILES  OF  TRACK  (TABLES  53  AND  153—1917  AND  1912) 


Elevated  and  subway. 

Class  A 

Class  B 

Class  C 


437. 16 

15,564.34 

8,396.00 

10,443.22 


532,80 

21,305.99 

9,652.09 

10, 106. 74 


716.08 

26,064.85 

10,268.75 

8,511.77 


'ft  r 


[American  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City.) 

Surplus  of  electric  railways,  dollars  per  mile  of  track,  by  class. 

(United  States  Census  Report  ior  1012,  page  237,  chart  85,  page  216  chart  53  report  of  1917,  chart  85,  cfaart 

53,  chart  30,  chart  153.) 

VALUES  PLOTTED  ON  CHART. 


Surplus  per  mile  of  track 

Surplus  per  mile  of  elevated  and  subway. 

Surplus  per  mile  of  Class  A 

Surplus  per  mile  of  Class  B 

Surplus  per  mile  of  Class  C 


1902 


$651 


1,128 
656 
216 


1907 


$403 

3,799 

442 

391 

355 


1912 


$401 

1,316 

629 

271 

45 


BASIS  ON  WHICH  FIGURES  ON  CHART  ARE  DERIVED. 


Surplus 

Surplus  elevated  and  subway. 

Surplus  ("lass  A 

Surplus  Class  B 

Surplus  Class  C 


Miles  of  track , 

Miles  of  elevated  and  subway. 

Miles  of  Class  A 

Miles  of  Class  B , 

Miles  of  Class  C , 


$14,714,867 


9,492,215 

3,223,867 
1,998,785 

22,576.99 


8,414.31 

4,909.88 
9,252.80 


$13,885,554 
1,660,85.8 
6,887,970 
3,285,763 
3,711,821 

34,403.56 

437.16 

15,564.34 

8,396.00 

10,443.22 


$16,489,772 

701,485 

13,408,414 

2,617,943 

463,415 

41,064.82 

532.80 

21,305.99 

9,652.09 

10, 106. 74 


1917 


$180 

2,756 

364 

M 


$8,113,495 

1,974,142 

9,502,032 

659,329 

729, 2(« 

44,835.37 

716  08 

26,064.85 

10,258.75 

8,511.77 


VI 


m 


i^# 


M 


2226       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

[American  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City.) 

Chart  C-132. — Paving  and ' '  other  imposts  "  and  taxes /or  all  electric  railways  of  the  United 
States,  based  on  replies  from  214  companies  (D.  S.  182)  and  Census  Reports. 


1912 


Taxes '  $3,5,027,965 

Paving  and  other  imposts '  (15,058,414) 

Total 40,086,370 

Gross  earnings 585,930,517 

Taxes  of  per  cent  of  gross  earnings '  5. 98 

Paving  and  other  imposts  per  cent  of  gross 

earnings *  2.57 


1913 


(133,780,938) 
(21,372,414) 


1914 


(Wl,  139,955) 
(21,536,481) 


60,153,352 
(640,857,949) 
6.05 

3.33 


62,676,436 
(047,350,574) 
6.36 

3.32 


1913 


($40,761,586) 
(20,442,519) 


61,204,105 
(636,719,681) 
6.40 

3.21 


Taxes 

Paving  and  other  imposts 

Total 

Gross  earnings 

Taxes  of  per  cent  of  gross  earnings 

Paving  and  other  imposts  per  cent  of  gross  earnings 


1916 


($43,633,934) 
(18,472,989) 


62.106.923 
(688,968,612) 
6.33 
2.68 


1917 


$45,756,695 
(17,522,593) 


1913 


($49,496,334) 
(16,065,000) 


63,279.288 
(730,108,040) 
6.27 
2.40 


65,561,334 
(765,000,000) 
6.47 
2.10 


lAmertean  Electric  Railway  Association,  8  West  Fortfeth  Street,  New  York  City.l 

Chart  C-133. — Trainmen's  wages. 

(Based  on  wages  paid  hy  approximately  60  companies  having  over  100  miles  of  track  each.  Values  given 
show  per  cent  increase  in  wages  for  each  year  over  wages  paid  in  1905  as  reported  by  companies  to  Ameri- 
can Electric  Railway  Association.) 


Year. 

Rate 
I)er  hour. 

Per  cent. 

Year. 

Rate 
per  hour . 

Per  cent. 

1906 

23.03 
24.11 
24.75 
24.57 
25.85 
26.10 
26.89 

100.00 
104.69 
107.47 
106.69 
112.24 
113.33 
116.76 

1913 

27.74 
28.14 
28.62 
29.25 
31.57 
33.92 
44.43 

120.45 

1907 

1914 

122.23 

1908 

1915 

124  27 

1909 

1916 

127  01 

1910 

1917 

137  08 

1911 

1918 

147  29 

1912 

1919 

192.92 

Note. — The  rate  per  hour  is  the  average  rate  of  all '  ompanies  reporting  based  on  that  paid  to  men  oldest 
in  the  service. 

American  Electric  Raflway  Association,  8  West  Fortieth  Street,  New  York  City.) 

Chart  No.  134. — Cost  of  labor.    Ratio  of  salaries  and  wages  to  railway  operating  expense. 

{Based  on  United  States  Census  reports.) 


Railway 
operating 
expense. 

Salaries  and 
wages. 

Percent 
salaries 

and 
wagej 

is  of 

railway 

operating 

expenses. 

1917 

7421,250,838 
318,700,534 
245,140,379 
140,123,844 
^-98,516,115 

(267,240,362 

200,890,939 

150,991,099 

88,210,165 

313,748,577 

03.^ 

1912 

63  0 

1907 

61.6 

1902 

63.0 

1918 

62.9 

!?ource  of  information:  Tables  5  and  162  of  the  1917  Advance  Reports  and  the  1912  book  of  tho  Census 
Bureau. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.      2227 

[American  Electric  Railway  iVssociation,  8  West  Fortieth  Street,  New  York  City.] 

Chart  136. — Cost  of  materials.    Detailed  figures  showing  total  deductions  for  obtaining 

cost  of  materials  and  supplies. 


i 


1917 
1912 
1907 
1902 


Railway 
operating 
expense. 


$452,591,654 
332,896,356 
251,309,252 
142,312,597 


Total  deduc- 
tions. 


$347,981,239 
257,624,800 
184,283,834 
103,501,364 


Cost  Of 

materials  and 

supplies. 


$104,613,415 
75,271,556 
67,025,418 
38,811,232 


Salaries  and 
wages. 


Purchased 
power. 


$267,240,362      i  $37, 757, 963 
200,890,939  24,696,647 

150,991,099  12,342,258 


88,210,165 


3,871,518 


1917 
1912 
1907 


Insurance. 


$3,101,407 
3,151,576 
3,137,071 
2,080,875 


Injuries  and 
damages 
(three- 
fourths  of 
total). 


Total  rents 

(tracks, 

facilities, 

and 

equipment). 


$17,807,473 

15,530,970 

13,632,229 

7,046,659 


$7,152,823 
4,873,359 
3,342,615 

I  1,796,766 


Stationery 

and 
minting. 


I  $1,284,000 

1,105,422 

838,582 

496,381 


Deprecia- 
tion Of 
ways  and 
structures. 


$6,800,348 
3,705,511 


Deprecia- 
tion of 
equip- 
ment. 


$8,836,863 
3,670,376 


'  See  notes  for  each  respective  item  on  sheet  accompanying  this. 
jAmerican  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City.) 
Chart  136.— Cost  of  materials.     (Based  on  United  States  Census  Reports.) 


• 

Cost  of  materials 
and  sulkies. 

Ratio  of  cost:   Increase  in 
of  materials  j  cost  of  mate- 
and  supplies  rialsand sup- 
to  operating  ■    plies  over 
expense.       prior  census. 

1917 

$104,613,415- 
75,271,556 
67,025,418 
38,811,232 

Per  cent. 
23.12 
22.61 
26.67 
27.28 

Per  cent. 

3&9 
12.3 
72.7 

1912 

1907 

1902 

Note.— Above  informatioi}  collected  from  census  figures  as  follows: 

1.  Operating  expense  figures  from  Table  2, 1917,  and  Table  5, 1912. 

2.  Cost  of  materials  and  supplies  consider  as  that  portion  of  the  operating  expense  remaining  after 
deduction  of  following  items: 

(o)  Salaries  and  wages,  Table  2,.  1917,  and  Table  5, 1912. 

(6)  Purchased  power,  Tabic  104.  1912,  and  Advance  Sheet  for  1917  corresponding  to  Table  163  for  1912 
Figure  used  for  1917  is  difference  between  "Power  purchased  and  exchanged"  and  credit  entry  for  same 
item.    This  apparently  taken  into  account  for  other  years  in  Table  104  in  1912  book. 

(c)  Insurance,  same  source  as  item  (&). 

(d)  Injuries  and  damages,  same  source  as  item  (6),  used  three-fourths  of  amounts  given  as  representing 
other  items  than  materials  and  supplies. 

(<•)  Total  rents,  same  source  as  item  (6)  except  year  1902  where  for  "rent  of  equipment"  (which  was 
not  reported  separately)  0.288  per  cent  of  total  operating  expense  was  used  which  was  percentage  for  1907 
given  m  1912  book.    (1907  book  figures  differ.) 

(/)  Stationery  and  printing.  Table  104, 1912,  except  for  year  1917  where  this  item  was  probably  included 
in  general  expenses  under  general  and  miscellaneous.  Therefore  estimated  for  1917  as  2  per  cent  of  general 
and  miscellaneous,  which  was  percentage  for  all  other  years. 

(ff)  Depreciation  of  ways  and  structures,  same  as  item  (6)  except  no  data  for  1907  or  1902. 

til)  Depreciation  of  equipment,  same  as  item  (p)  except  no  data  for  1907  or  1902. 


H 


B 


2228       PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

lAmerican  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City  .J 
Chart  l^.—Ecorumiies  in  operation. 


Year. 


1890 
1902 
1907 
1912 
1917 
1918 


Revenue 
car  miles 
per  passen- 
ger car. 


J  11,788 
>  18,982 
•23,105 
•25,231 
•26,776 
<  26, 241 


Revenue 

car  miles 

per  mile  of 

track. 


i 47, 172 
•50,701 
•47,053 
•46,796 
•  47, 728 
M4,930 


Revenue 
passent^ers 
per  passen- 
ger car 


» 62, 203 

» 79, 1S7 

•106,277 

•125,332 

•141,460 

« 142,048 


»  Unite<l  States  Census,  1902,  page  6,  Table  1. 

«  United  States  Census.  1912,  page  186,  Table  5. 

»  Advance  report,  Table  5. 

<  Estimate  of  capital,  etc.,  1918,  based  on  Data  Sheet  191,  American  Electric  Railway  Association. 

(American  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City.    July  8,  1919.] 

Chaut  C-141.— Increase  in  me  of  automobiles  in  Massachusetts.     {Report  of  special  com- 

mission  on  motor  vehicles.) 


m 


Year. 


1903. 
1904. 
1905. 
1906. 
1907. 
190H. 
1909. 
1910. 
1911. 
1912. 
1913. 
1914. 
1915  » 
1916. 
1917. 
1918. 


Autos. 


3,241 

3,772 

4,889 

6,572 

7,733 

18,066 

23,971 

31,360 

38,907 

50, 132 

62,660 

77,246 

90,580 

118,615 

147,310 

160,486 


Trucks. 


Autos 

and 

trucks. 


Motor 
cycles. 


12,053 
18,194 
26,964 
33,011 


I    102,633 

I     136,-809 

174,275 

193,497 


1, 

I: 

3, 

10, 

11, 
12, 


502 
489 
533 
665 
832 
922 
394 
358 
638 
034 
127 
161 
520 
713 
065 
862 


Source  of  information. 


Report  of  Special  Commission  on  Motor 
Vehicles,  January,  1919,  page  109. 
Special  commission  designated  under 
provisions  of  chapter  72  o^  the  Re- 
solves of  1918. 


1  This  is  the  first  year  trucks  were  registered  separately  from  pleasure  cars. 
lAraorican  Electric  Railway  Associaticm,  8  West  Fortieth  Street,  New  York  City. 

Chart  143. — Growth  in  the  extent  of  receiverships.     {As  reported  in  the  Electric  Railway 

Journal  for  Jan.  4,  1919.) 


Year. 

Single 
track. 

Year. 

Single 
trade. 

1909 

MilM. 
558 
697 
519 
374 
343 

1914 

Milu. 
362 
1,152 
359 

1    177 

1910 

1915 

1911 

1916 

1912 

1917 

1913 

1918 

x,in 

2,106 

Values  lor  miles  of  track  arc  cumulative  each  year,  including  amounts  for  previous  years. 


PROCEEDINGS  OF   FEDERAL  ELECTRIC   RAILWAYS   COMMISSION.       2229 

[American  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City.) 

Chart  144. — Total  cost  of  service  compared  with  operating  revenues.    {Based  on  United 

States  Census  Report.) 

(References:  United  States  Census  of  1912,  page  308,  Table  161;  page  236,  Table  84;  page  250,  Table  111; 
page  318,  Table  164.    United  States  Census  of  1917,  Photostat  print  No.  160.] 


Operating  revenue 

Operating  expenses 

Taxes 

Operating  expenses  plus  taxes 

Cost:  Construction  of  road  and  equipment 

6  per  cent  of  cost  of  construction  of  road  and  equipment 

7  per  cent  of  cost  of  construction  of  road  and  equipment 

8  per  cent  of  cost  of  construction  of  road  and  equipment 

Operating  expenses,  including  taxes  plus  6  per  cent  on  con- 
struction of  road  and  equipment 

Operating  expenses,  including  taxes  plus  7  per  cent  on  con- 
struction of  road  and  equipment 

,  Operating  expenses,  including  taxes  plus  8  per  cent  on  con- 
struction of  road  and  equipment 

Deficit  for  6  per  cent  returns  on  construction  of  road  and 
equipment 

Deficit  for  7  per  cent  rettums  on  construction  of  road  and 
cqui  pment 

Deficit  for  8  per  cent  returns  on  construction  of  roads  and 
equipment 


1902 


$247,553,999 
143,312,597 
13,078,899 
155,391,496 
2,167,634,077 
130,058,045 
151,734,385 
173,410,726 

285,449,541 

207,125,881 

328,802,222 

37,895,542 

59,571,882 

81,248,223 


1907 


1912 


$418,187,858 
251,309,252 
19,755,602 
271,064,854 
3,637,668,708 
218.260,122 
254;  636, 809 
291,013,496 

489,324,876 

525,701,663 

562,078,350 

71,137,118 

107,513,805 

143,890,492 


$567,511,704 
332,896,356 
35,027,965 
367,924,321 
4,596,653,292 
275, 793, 798 
321,759,430 
367,725,063 

643,718,119 

689,683,751 

735,649,384 

76,206,415 

122,172,047 

168,137,680 


1917 


1918 


Operating  revenue . 
Operating  expenses . 
Taxes , 


Operating  expenses  plus  taxes 

Cost  of  construction  of  road  and  equipment 

6  per  cent  of  cost  of  construction  of  road  and  equipment 

7  per  cent  of  cost  of  construction  of  road  and  equipment 

8  per  cent  of  cost  of  construction  of  road  and  equipment 

Operating  expenses,  including  taxes  plus  6  per  cent  on  construction  of 

road  and  equipment 

Operating  expenses,  including  taxes  plus  7  per  cent  on  construction  of 

road  and  equipment 

Operating  expenses,  including  taxes  plus  8  per  cent  on  construction  of 

road  and  equipment 

Deficit  for  6  per  cent  returns  on  construction  of  road  and  equipment 

Deficit  for  7  per  cent  returns  on  construction  of  road  and  equipment 

Deficit  for  8  per  cent  returns  on  <  onstruction  of  road  and  equipment 


$709,825,092 
452,594,654 
45,756,695 
498,351,349 
5,136,441,599 
308, 164, 496 
359,550.911 
4 10, 915; 328 

806,515,845 

857,902,260 

909,266,677 

96,690,753 

148,077,168 

199,441,575 


$691,131,682 

1535,463,060 

49,496,3;M 

584,959,394 

2  4,979,574,674 

298,774,480 

348,570,227 

398,365,974 

883,733,874 

933,529,621 

983,325,368 
19i,602,192 
242,397,939 
292,193,686 


»  Estimated  from  1918  estimate  (345  companies,  D.  S.  No.  186)  of  railway  operating  expenses,  increasing 
latter  in  same  ratio  as  ratio  of  similar  figures  in  1917. 

•  Road  and  equipment  estimated  as  same  percentage  of  total  capitalization  (1918  estimate,  D.  S.  No. 
191)  as  same  figure  bore  to  total  capitalization  m  1917. 

[American  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City.] 

Chart  C-145. — Power  generated  and  capacity  of  generating  and  subsidiary  equipment. 

{Based  on  United  States  Census  Report  of  1912.) 

[Page  19G,  Table  17.1 


Kilowatt  capacity  (kw.) 

Subsidiary  equipment  (kw.) 
Power  generated  (kw.) 


1902 


898,362 

160,053 

2,261,484,397 


1907 


1,723,416 

942,232 

4,759,130,100 


1912 


2,508,006 

1,G37,2()0 

6,052,699,008 


1917 


2,924,779 

2,339,333 

7,240,502,789 


160G43°— 20— vol3- 


12 


4 

n 


r 


4 


.^•f 


2230        PROCEEDINGS   OF   FEDERAL,  ELECTRIC   RAILWAYS   COMMISSION. 

[American  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City.J 

Chart  C-146. — Number  of  receiverships,  abandonments,  and  lines  junked.    (In  efect  08 

of  May  31  f  1919 ^  baaed  on  electric  railway  journals. ) 


Receiverships 

Lines  dismantled  and  junked. 
Abandonments 


Number  of 
companies. 


62 
61 
38 


Single 
track. 


Miles. 
5,912 
791 
2.57 


[American  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City.) 
Growth  of  automobile  industry — Total  number  of  vehicles  in  the  United  States. 


Dec.  31, 1914.. 
Dec.  31, 1915.. 
Dec.  31, 19ir... 
Dec.  31, 1917.. 
Dec.  1,1918... 
Dec.  31, 191S,  total 
motor  vehicles... 


Passenger 
cars. 


1,574,431 
2. 240, 229 
3. 243,  (.31 
4,«v43,  ISl 
5,352,350 


Com- 
mercial 
cars. 


130,907 
205,435 
.301,321 
4I2,47H 
593,092 


Total 

motor 

vehicles. 


1,711,338 
2,445,(>'<4 
3,54t,9r,2 
5, 08.1,  g;*'.) 
5,945,442 


Population. 


6,146,017 


98,781,324 
100,399,318 
102,017.312 
10:3.(«5..30!i 
105,253,300 


Num-  j  Num- 
ber of  I  her  of 
persons  families 

per     I     per 

pleasure  plonsure 

car.    !    car. 


Remarks. 


Figures  based  on  sep- 
arate registrations  of 
commercial  cars  in 
16  States  and  esti- 
mates of  number  of 
commercial  cars  by 
secretaricjs  of  States 
in  5  States. 


Source  of  information:  "  Facts  and  Fiprures  by  and  for  the  Automobile  Industrv,"  published  by  National 
Automobile  Chamber  of  Commerce,  April,  1919. 

[American  Electric  Railway  Association,  8  West  Fortieth  Street,  New  York  City.] 

,   Chart  C-154. — Net  income  of  operating  elcrtric  railvays,  including  1918  estimate  of 

dividends  and  surplus. 


% 

1902 

1907 

1912      * 

1917 

1918 

Capital  stock 

Net  income 

1  5982,969,070 
<. 30, 596, 977 
M5, 882, 110 
<  14,714,867 

«3.11 

2  ?1, 543, 269, 002 

2  40,340,286 

«  26, 4.54, 732 

a  13,885,554 

»2.61 

2  $1,9.57,300. 149 
*  68, 139, 889 
'51,650,117 
8  16,489,772 

»2.64 

» $2,006,151,013 

«5(i,  4.50, 930 

2  48,337,435 

2  8,113,495 

7  2.81 

3  $2,003,662,251 

5  0{\   \91\  411 

Dividends 

Surplus 

Rate  of  return,  net 
income  on  capital 
slock 

8  32,600,000 
8  8  12,416,587 

1  01 

»  United  States  census,  1612,  p.  186,  Table  5. 

2  Advance  Report,  Table  5. 

«  Datasheet  191. 

<  Uuitc'i  St'Ucs  Census,  1912,  p.  302,  Table  158. 

6  Datasheet  18t>. 

«  Based  on  United  States  census,  1912,  p.  223,  Table  59. 

1  Based  on  Advance  Report,  Table  5. 

8  Deficit. 


k 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS   COMMISSION.       2231 


/9/7 


ifis 


Cioo 


11 


h 


^ 


INTENTIONAL  SECOND  EXPOSURE 


2230       PROCEEDINGS   OF   FEDERAL  ELECTRIC   RAILWAYS   COMMISSION. 

[American  Electric  Railway  AR«?ocia1ion,  S  West  Fortieth  Street,  New  York  City.] 

Chart  0-140. — Number  of  receiverships^  abandonments,  and  lines  junked.    (In  effect  as 

of  May  Sly  1919,  based  on  electric  railway  journals. ) 


Rerciversliips 

Lines  (lismantled  and  junked. 
Abandonments 


Number  of 
companies. 


02 
Gl 

38 


Single 
track. 


Milfs. 
5,912 
791 
257 


f  AmiMican  Electric;  Railway  Association,  8  West  Fori  id  h  >^treet,  New  York  City.) 
Gronth  of  onlomohile  industnj — Total  numhr  of  vehicles  in  the  United  Stntes. 


Passenger 
cars. 


Dec.  31, 1014 

Dec.  31,  1915 

l)c..:^l,  init. 

Dcc.:n,  i:>!7. 
Dec.  1,  i'J\-< 
IK.'.'M,  101 -,  .'wii  , 
motoi'  vehicle-"?. . . ! . . 


1,571. 1.31 

2,240,229 

4,ti4:{,1Sl 
5,352,350 


Com- 

mcrc-ial 
cars. 


i:i!i,'.>,»7 
205,435 
3!)!.  321 
412, 47S 
593,092 


Total 

motor 

A'chi'Ios. 

Population. 

1 

1.711,338 
2,4-t>,M4 
3  541,9'.2 
5, 085,  it:.'.) 
5,1>45,442 

0,110,017 


9S,7S1.324 
100,399.311 
102.017.312 
1()3.*..35.30'.". 
105,253.300 


Num-     Xum- 

b,er  of  !  ber  of 

pers-ons  fanu'lies 

per         per 

plea<nro  pl"i-iirr 

car.         i-av. 


Remarks. 


t!2 

44  i 
31  i 
22 
19  1 


10  Fipurc.'?  bnsed  on  r^>p- 

11  I  arale  registrations  of 
commercial  cars  in 
10  Slates  and  esti- 
mates of  number  of 
conimc  M  ial  cars  by 
secretaries  of  States 
in  5  States. 


8 
0 
5 


•t-  1  !  urmation:  "Fartsand  rieures  by  nndfor  the  Ant'>"^-''''i''-  Industry,"  pulilished  by  National 
A;;;  m'>bile  Chamber  oi  Commerce,  April,  1919. 


f  ViiKiii;:  "  i-.l(ei.iio  llailway  Association,  8  We.-i  i 


et,  New  York  City.] 


CiiAivr  <'-151. — Net  income  of  opcraiinq  chrlnc  rallaa;/^,  inclufJing   1918  estimate  of 

dividends  and  surplus. 


C,.,.  :  ..stock 

Net  incurtio 

Divi- leads 

Surplus 

Kate  of  relura,  net 
incouio  on  capital 


v.xv^ 


1  ?9S2, 90,9, 070 
4  30,  .5%,  97  7 
115,^82,110 
»  14,714,8()7 


»3.11 


1907 


:<1, 54.3, 209, 002 

•■!40,340,2.S!» 

2  2<i,  4ri4, 732 

-  13,885,554 


»2.61 


1012 


I9i; 


?  1, 9.57, 300. 149 
2C.S,  139,KS9 
2  51,(^50,117 
2  lb, 489, 772 


i2.('A 


2  $2,000,151,013 

2  54>,  4.50, 930 

2  4S,337,4:J5 

2  8,113,195 


»2.81 


1918 


3  «2, 003, 002, 2,51 

i  20,183,413 

3  32,(>(H),tK)0 

»  8  12,410,587 


1  01 


1  Uni!cd  States  censur?,  ir>i2,  p.  ISO,  Table  5. 

2  .\dvanco  Report,  Table  5. 

3  Data  Pheet  191. 

«  United  Stit.^s  Census,  1912,  p.  302,  Table  15^. 

6  DataSlu'ct  18!>. 

c  I'.Hsed  on  United  States  census.  1912,  p.  22:^  Table  59. 

7  Based  on  Advance  Report,  Table  5. 

8  Deficit. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COM]MISSION.       2231 


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PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS   COMMISSION.       2251 


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2250        PKOCEEDINGS  or  FEDERAL  ELECTRIC  llAiLWAYS   COMMISSION-. 


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PROCEEDIXCS  OF  FEDERAL  ELECTRIC  RAILV\^AYS   COIMMISSION.       2251 


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2252         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


In  his  contract  with  the  Commission  for  tho  investigation  of  the 
electric-railway  industry  the  Executive  Secretary  obtained  much  of 
the  information  used  by  the  Commission  by  means  of  a  comprehensive 
Questionnaire  consisting  of  174  questions,  sent  to  every  city  in  the 
United  States  where  there  is  an  electric-railwajr  company,  either 
city  or  interurban,  and  addressed  to  the  electric  railways  themselves, 
to  the  mayors  of  the  cities,  chambers,  of  commerce,  and  boards  of 
trade,  central  labor  unions,  and  also  to  all  of  the  State  public  utiUty 
commissions. 

This  questionnaire  brought  forth  a  vast  amount  of  information 
relating  to  financial  data  for  10  years  back,  wages,  fares,  taxes, 
franchise  conditions,  traffic  figures,  details  of  operation,  theories  of 
regulation,  and  history  of  public  relationships. 

Mr.  Ogburn  analyzed  and  tabulated  the  data  produced  by  this 
questionnaire  and  submitted  it  in  condensed  form  to  the  members  of 
the  Commission  for  their  use  in  the  formulation  of  tlieir  report. 

QUESTIONNAIRE  ON  ELECTRIC  RAILWAY  SITUATION. 

Federal  Electric  Railways  Commission, 

Washington,  D,  C. 

Dear  Sirs  :  The  Federal  Electric  Railways  Commission,  appointed  by  the  President 
of  tlie  I'nited  States  to  investigato  the  condition  of  the  electric-rail\\-ay  industry  of 
America,  asks  you  to  aid  it  in  obtaining  the  data  necessary  for  compiling  a  report  to 
the  President. 

The  commission  is  conducting  this  investigation  with  an  appropriation  of  only 
$10,000.  The  commissioners  are  ser\TLng  without  compensation.  In  order  to  perform 
their  work  they  must  seek  the  aid  of  those  who  are  interested.  Already  a  fine  public 
spirit  has  actuated  many  leading  citizens  of  America  to  come  to  Washington  at  their 
own  expense  and  testify  before  the  commission,  giving  it  the  benefit  of  their  xiews. 
We  believe  that  this  same  public  spirit  can  be  appealed  to  in  order  to  obtain  more 
detailed  information  relative  to  the  transportation  questions  in  each  community. 
The  commission  is  not  making  a  study  of  any  local  traction  problem  per  se,  and  of 
course  makes  no  recommendation  relative  to  any  locality*^  but  it  does  wish  to  make  a 
study  of  each  electric  railway,  urban  and  interurban,  in  the  United  States  and  its 
relation  to  the  communities  served,  because  of  the  bearing  each  local  situation  has  on 
the  problem,  and  because  a  report  to  the  President  would  be  incomplete  without  such 
a  study. 

May  we  not  ask,  therefore,  that  you  supply  us  with  as  much  information  as  possible 
concerning  the  street  rail^^  ays  in  your  city  and  vicinity?  We  have  asked  a  number 
of  questions  in  order  to  direct  your  attention  to  the  lines  of  inc|uii y  -we  are  making, 
and  we  should  appreciate  very  greatly  your  answering  categorically  each  question, 
following  for  your  answers  the  numbering  used  in  the  questionnaire,  and  adding  to 
your  answers  any  information  dealing  wim  any  phase  of  the  subject  v  hich  you  tlunk 
ought  to  be  brought  to  the  attention  of  the  commission.  ^  If  you  are  unable  to  answer 
all,  answer  as  many  questions  as  possible.  This  questionnaiie  is  being  sent  to  the 
public-utilities  commissions,  the  mayors,  the  chambers  of  commerce,  the  central  labor 
unions,  and  the  railw^ays  in  every  city  where  there  is  an  electric  railway. 

Will  you  try  to  have  your  answer  mailed  to  us  within  a  week  after  the  receipt  of 
this  questionnaire?  The  commission  must  complete  its  report  during  the  month  of 
October.    It  is  therefore  necessary  to  have  this  data  as  promptly  as  possible. 

Appreciating  your  kindness  and  cooperation, 
Very  truly,  yours, 

Charles  E.  Elmquist,  Chairmen. 
Charlton  Ogburn,  Executive  Secretary. 

2253 


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2254         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 
Questionnaire  on  Electric  Railway  Situation. 

NoTE.-The  followinK  questions  are  base<l  upon  the  assumption  that  there  Is  one  V"^^,^?  ^''^^PSTj^ii^IJ 
system  in  your  city.  I Ahere  are  two  or  more  such  systems,  separate  and  distinct,  will  you  treat  each 
system  separately  In  your  answers? 

I,  organization  and  capitalization. 

1.  What  is  the  name  of  the  electric  railway  serving  your  community?  If  more  than 
one,  give  names  of  all,  including  surface  lines,  elevated  lines,  and  subway  lines. 

2'  Is  the  svstem  made  up  of  several  companies  consolidated  into  one? 

3  Will  you  state  briefly  (a)  the  development  of  the  street-railway  svstem  in  your 
community,  giving  the  names  of  the  companies  going  to  make  it  up,  when  organized 
and  when  electrified  (if  originally  steam  or  horse  cars);  (6)  what  consolidations  were 
effected  and  by  whom,  and  the  dates  of  such  consolidations;  (c)  the  securities  out- 
standing on  the  underlying  companies;  (d)  the  securities  outstanding  on  the  holding 
companies;  (e)  whether  underlvmg  companies  were  sold  to  present  companies  and  at 
what  purchase  price  or  whether  leased  and  at  what  annual  rental:  (/)  the  original  cost 
of  the  separate  and  combined  systems? 

4.  What  is  the  number  of  communities  served?  ...    .  •   '    u 

5.  If  the  railway  is  one  single  company— not  made  up  of  consolidations— give  the 
amount  of  outstanding  stock  and  bonds  and  classes  thereof. 

6  Was  the  construction  work  of  any  of  this  system  done  by  separate  contracting 
companies?  If  so,  were  the  owners  of  the  street  railway  iinancially  interested  m  such 
contracting  company? 

7.  In  whom  does  the  stock  control  of  the  system  rest?  .  .     ,.  , 

8.  Has  the  public-utility  commission  of  your  State  or  the  municipality  ever  made 
an  appraisal  of  the  value  of  the  transportation  system  of  your  city?  Has  there  been 
an  agreed  valuation  as  in  Cleveland,  Seattle,  etc.?  What  relation  does  that  total 
\-aluation  bear  to  the  total  securities  outstanding? 


9.  What  is  the  amount,  if  any,  of  watered  stock  in  your  system?     How  can  this  be 

shown? 

10.  At  what  discount,  if  any.  were  the  bonds  sold?  At  what  discount  was  the  stock 
eold?     Whsit  stock,  if  anv,  was  given  as  a  bonus  with  the  bonds? 

n.  When  was  tho  last' stock  issued,  and  the  price  at  which  sold? 

12.  If  a  holding  company,  as  lessee,  leased  the  lines  which  are  owned  by  other  com- 
panies, what  is  the  basis  of  the  rentals  paid?  What  income  on  the  appraised  value  o! 
the  lines  is  represented  by  these  rentals? 

II.  operation. 

XoTK.— Questions  13  to  16  are  asked  only  of  the  railways  themselves. 

* 

13.  Will  you  give  the  last  annual  statement  of  the  total  operating  expenses,  gross 
revenue,  and  the  net  income,  showing  allowances  for  depreciation,  taxes,  interest, 
dividends,  and  surplus?     Will  vou  give  same  figures  for  past  10  years? 

14.  What  is  the  total  mileage 'of  the  system?  What  is  the  number  of  revenue  pas- 
sengers per  car- mile?     What  is  the  total  population  served?     Wliat  is  the  total  area 

of  the  city?  ,  •         <  •      • 

15.  Does  the  corapanv  sell  electric  power?  If  so,  what  proportion  of  its  income  is 
derived  therefrom.  andVhat  proportion  of  its  total  expenditures  is  incurred  therein? 

16.  Does  the  company  sell  gas?  If  so,  what  proportion  of  its  income  is  derived 
therefrom,  and  what  proportion  of  its  total  expenditures  is  incurred  therein? 

17.  If  the  company  has  a  power  department,  at  what  rate  per  kilowatt-hour  is  power 
furnished  its  transportation  department? 

18.  What  sums  annually  have  been  set  aside  and  expended  for  past  10  years  for  main- 
tenance, depreciation,  and  obsolescence? 

19.  Is  the  service  regulated  by  a  State  commission  or  by  the  municipality?  Are 
ther^i  complaints  about  ovorcrow-ding  of  cars,  infrequency  of  headway,  etc.,  or  is  the 
service  generally  satisfactory? 

20.  V^at  ©cououiied  of  operation  have  been  installed  within  the  past  several  years? 


III.  fares. 


2i,  WTiiit  ii  the  pre?«'ti^,  ri(  ^  •  f  i^r^f 
22.  I.s  th  i  iiivj  lixed  bv  frcinciiiso? 


PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION.        2255 

23.  Has  the  State  commission  authority  to  establish  maximum  fares? 

24.  What  changes,  if  any,  have  occurred  in  the  rate  of  fare,  and  when? 

25.  Has  the  comp>any  sought  to  increase  its  fare  since  the  beginnine:  of  the  European 
war  in  1914? 

26.  What  reasons  were  given  for  making  the  request  for  an  increased  fare? 

27.  How  did  the  public  look  ujwn  the  application  for  increased  fares? 

28.  If  the  fare  has  been  increased,  what  has  been  the  effect  on  the  traflTic? 

29.  What  effect  has  an  increased  fare  had  upon  the  operating  re  Avenues  of  the  com- 
pany? 

30.  If  there  has  been  a  fare  increase,  by  what  authority  was  it  allowed?  (If  by  the 
decision  of  a  State  commission  or  of  a  court,  please  give  exact  reference,  and  if  possi- 
ble an  abstract  of  the  decision.) 

31.  Was  the  increase  in  fare  based  upon  a  valuation  of  the  proj)erty? 

32.  WTiat  methods  must  be  pursued  in  your  State  to  effect  a  change  of  fare? 

33.  Has  there  been  a  case  where  either  the  court  or  tho  State  public-utility  commis- 
sion has  upheld  it  or  has  set  aside  a  franchise  or  a  legislative  enactment  under  which 
the  rate  of  fare  was  fixed?     If  so,  please  give  reference  or  copy  of  decision. 

34.  Is  a  zone  fa.re  charged  either  within  the  city  or  on  suburban  or  interurban  lines? 
If  so,  what  is  the  zone  fare  and  the  length  of  the  zones,  and  when  inaugurated? 

35.  If  a  zone-fare  plan  has  been  recently  inaugurated,  has  such  a  system  had  any 
noticeable  effect  on  suburban  development? 

36.  If  there  has  been  a  change  in  the  rate  of  zone  fare,  please  give  the  present  rate 
and  the  former  rate,  the  present  length  of  zone  and  the  former  length  of  zone. 

37.  What  is  the  method  of  collecting  and  auditing  zone  fares? 

38.  Should  the  street-car  rider  pay  the  same  fare  regardless  of  the  distance  he  rides? 
Please  give  reasons  for  your  answer. 

39.  Should  fares  be  fixed  by  the  franchise  for  a  definite  term  or  be  subject  to  adjust- 
ment to  meet  changing  needs  and  conditions? 

40.  How  many  transfer  points  are  on  the  system?  Give  the  number  where  transfers 
are  issued  free,  and  the  number  where  transfers  are  chained  for,  and  the  charge  made. 

41.  Does  the  company  issue  a  transfer  on  a  transfer?    Is  it  free  or  for  what  charge? 

42.  If  there  is  more  than  one  company,  are  free  transfers  issued  from  the  lines  of 
one  company  to  thase  of  another?    If  not,  what  charge  is  made? 

IV.    WAGES, 
Note. — Questions  43  to  54  inclusive  are  asked  only  of  the  railways. 

43.  \^'hat  is  the  rate  of  wage  per  hour  now  paid  to  the  motormen  and  conductors? 

44.  Give  approximately  the  average  rate  of  wage  per  hour  now  paid  to  employees 
other  than  motormen  and  conductors  in  the  various  claadfications. 

45.  What  is  the  average  daily  wage  of  the  various  classifications  of  miscellaneous 
employees? 

46.  What  is  the  average  daily  wage  of  motormen  and  conductors? 

47.  What  was  the  hourly  rate  of  wage  paid  to  motormen  and  conductors  in  1914? 

48.  By  what  average  percentage  have  the  wages  of  miscellaneous  einplovees  been 
increased  since  1914? 

49.  What  is  the  total  annual  pay  roll  of  the  company? 

50.  What  percentage  of  the  fare  goes  to  labor  at  present? 

51.  What  was  it  in  1914? 

52.  Was  the  present  wage  scale  fixed  by  the  National  War  Labor  Board? 

53.  What  rate  is  paid  for  overtime?    What  is  the  percentage  of  overtime  worked? 

54.  Has  the  increase  in  wages  kept  pace  with  or  exceeded  the  increase  in  the  cost 
of  living? 

Note.— Increase  in  cost  of  living:  is  estimated  by  the  Bureau  of  Labor  Statistics,  Department  of  Labor, 
at  an  average  of  from  75  to  SO  per  cent  since  Jan.  1,  1915. 

55.  Are  the  employees  organized  into  a  local  of  the  Amalgamated  Association  of 
Street  and  Electric  Railway  Employees  of  America? 

56.  Does  the  company  recognize  and  deal  with  its  organized  employees? 

57.  If  the  company  has  a  contract  with  its  employees,  do  both  sides  live  up  to  the 
contract? 

58.  Is  there  a  proper  spirit  of  cooperation  between  the  company  and  its  employees? 


Ill 


I 


2256      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK, 

V.   TAXES. 
Note,— Questions  59  to  64  are  asked  only  of  the  railway  comi)aiiies  themselves. 

59.  Give  annual  State  tax  paid  by  the  system  for  the  past  10  years.  On  what  basis 
was  the  tax  estimated? 

60.  Give  the  annual  taxes  paid  to  the  city  for  the  past  10  years.  Separate  into 
various  kinds. 

61.  What  Federal  taxes  are  paid? 

62.  Please  lipt  the  other  State,  county,  or  municipal  requirements  for  (a)  paving 
and  extend  of  this  requirement — whether  between  tracks  only,  or  outside  of  tracks 
also,  and  if  the  latter,  state  number  of  feet  of  paving  required;  (b)  bridge  assessments 
of  tolls;  (c)  cleaning  streets;  (d)  snow  and  ice  removal  from  surface  other  than  tracks; 
(e)  free  transportation  of  public  employees. 

63.  How  do  total  taxes  paid  by  the  company  compare  with  the  total  taxes  paid  by 
Other  businesses  and  by  owners  of  real  estate? 

64.  Is  the  street  railway  taxed  on  the  basis  on  which  other  interests  are  taxed? 

65.  la  the  tixatioii  of  the  street  railway  based  upon  income  or  money  invested,  or 
both? 

66.  What  should  be  the  basis,  in  your  opinion,  on  which  the  street  railway  is  taxed 
by  the  municipality? 

67.  To  what  extent  should  the  State  tax  the  street  railway? 

68.  To  what  extent  should  a  company  not  earning  any  return  at  all  upon  the  in- 
vestment be  taxed? 

69.  To  what  extent  should  a  company  not  earning  anything  on  the  investment 
above  interest  on  bonds  ])e  taxed? 

70.  Would  you  favor  remitting  company's  taxes  to  make  up  an  operating  deficit? 

VI.    FIIANCHISES. 

71.  Please  iuniisli  us  with  a  copy  of  the  fjanchiee  imder  which  the  street  railway 
Operates  or  give  the  substance  of  such  fmnchise. 

72.  Where  is  the  power  to  grant  franchises  lodged? 

73.  What  are  the  requirements  as  to  approval  of  franchise  by  the  people?  (a)  WTien 
the  present  grants  were  made?    (6)  At  the  present  time? 

74.  When  do  the  present  franchise  or  franchises  expire  and  when  were  they  granted? 

75.  What  are  the  provisions  regarding  forfeiture? 
7G.  What  are  the  provisions  for  renev/al? 

77.  Is  the  right  to  purchase  reserved  by  the  municipality?  At  what  intervals? 
Upon  what  terms? 

78.  What  basis  of  value  for  purchase  by  municipality  should  be  used  where  the 
.  franchise  has  expired? 

79.  Is  the  exclusive  right  of  operation  within  prescribed  territory  conferred? 

80.  Is  the  company  under  this  franchise  protected  from  competition? 

81.  Are  there  any  restrictions  ujwn  the  acquisitions  of  competing  companies? 

82.  How  may  routes  and  lines  be  changed? 

83.  If  adjacent  territory  is  annexed  by  the  city,  is  the  franchise  automatically 
extended  to  cover  this  territory? 

84.  Can  extensions  of  lines  be  compelled  by  the  city  or  State  commission?  Is  a 
new  franchise  required  for  each  extension? 

85.  If  the  fare  is  fixed  by  the  franchise,  does  it  extend  to  new  lines  built  in  terri- 
tory annexed  by  the  city  after  franchise  was  granted? 

80.  Are  there  any  restrictions  in  the  franchise  upon  the  rate  of  retiun  on  tlie  <;om- 
pany's  investment  or  value? 

87.  What  control,  if  anv,  is  exercised  over  issuance  of  securities? 

88.  What  provisions,  if  any,  are  there  relative  to  the  sharing  of  profits  with  the 
municipality? 

89.  Is  a  franchise  tax  required? 

90.  How  is  rate  of  fare  fixed? 

91.  If  the  fmnchise  provides  for  what  is  known  as  the  service-at-cost  plan,  please 
give  details,  what  charges  are  allowed  in  making  up  items  of  cost,  the  order  thereof, 
and  a  statement  as  full  as  possible  of  the  plan  of  such  Service-at-cost  franchise. 

92.  How  may  fares  be  changed  under  sucn  service-at-co.'?t  plan? 

93.  Should  such  contract  establish  a  maximum  and  minimum  charge?  Should  it 
establish  a  certain  return  on  investment  or  value  which  is  not  subject  to  change  dur- 
ing life  of  contract,  or  should  the  question  be  opened  at  stated  periods? 

94.  Do  you  favor  a  service-at-cost  plan?    Give  reasons  for  your  answer. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2257 

95.  Do  you  favor  a  franchise  for  a  term  of  years,  or  an  indeterminate  franchise? 
If  you  favor  an  indeterminate  franchise,  what  general  conditions  should  be  incor- 
porated as  to  rates,  regulations,  purchase,  amendments,  etc.  ? 

Vn.    ECONOMIE.S    OP   OPERATION. 
Note.— Questions  96  to  108  and  questions  110  to  114  are  asked  only  of  the  railways  themselves. 

96.  Is  the  "skip-stop"  plan  in  force  on  any  part  of  the  system? 

97.  WTiat  was  the  average  distance  on  a  typical  route  between  stops  before  the 
change  to  the  skip-stop  plan?    What  is  it  now? 

98.  What  percentage  of  stops  has  been  eliminated? 

99.  Why  was  the  skip-stop  plan  inaugurated  and  when? 
TOO.  Is  the  pu))lic  content  with  the  skip-stop  plan? 

101.  Has  the  company  abandoned  the  skip-stop  plan? 

102.  What  benefits  were  obtained  fi'om  the  skip-stop  plan? 

103.  What  economies  in  shop  operations  have  been  put  into  effect? 

104.  Has  the  companv  one-man  cars  in  operation?    If  so,  how  many? 

105.  What  is  the  total  number  of  cars  operated? 

106.  WTiat  is  the  average  weight  of  the  ordinary  cars  oi>  the  system? 

107.  What  is  the  average  weight  of  the  one-man  cars? 

108.  Were  the  one-man  cars  converted  from  the  former  type  or  are  they  of  the 
Bimey  or  other  safety  type? 

109.  What  benefits  have  been  derived  from  the  operation  of  one-man  cars  and  has 
the  public  been  satisfied  with  their  use?  Have  the  trainmen  been  satisfied  with 
their  use?    . 

110.  Does  the  operator  of  a  one-man  car  receive  a  higher  wage  than  the  regular 
motorman  and  conductor,  and  if  so,  how  much? 

111.  WTiat  is  the  consumption  of  power  per  car-mile  with  the  Birney  car  as  com- 
pared with  other  tvpes? 

112.  Have  schedules  been  increased  on  lines  using  one-man  cars?  If  so,  to  what 
extent? 

113.  How  have  earnings  been  affected  by  the  use  of  one-man  oars? 

114.  What  is  the  estimated  life  of  the  light  one-man  car? 

115.  How  have  accidents  been  affected  by  the  use  of  one-man  ears? 

116.  How  are  fares  collected  and  audited  on  one-man  cars? 

117.  Do  you  favor  an  extension  of  the  use  of  one-man  cars? 

118.  What  other  economies  of  operation  have  been  put  into  effect  or  are  being  con- 
sidered?   Have  damage  claims  been  reduced  in  recent  years? 

VIII.    INTERURBAN   LINES. 

119.  Give  the  names  of  any  interurban  lines  entering  your  city,  and  compare  the 
service  rendered  by  such  lines  Avith  service  rendered  by  steam  lines. 

120.  Compare  the  service  of  interurban  lines  with  the  service  rendered  by  auto- 
mobiles ancl  auto  trucks. 

121.  Does  such  an  interurban  line  have  to  meet  automobile  competition  and  if  so 
to  what  extent,  both  in  passenger  and  freight? 

122.  What  is  the  fare  charged  on  the  interurban  line? 

123.  What  is  the  fare  charged  by  automobiles,  automobile  trucks,  and  steam  lines? 

124.  What  is  the  total  mileage  of  the  interurban  line  and  the  total  population 
served? 

125.  What  size  and  type  of  car  is  used? 

126.  Are  trains  with  more  than  one  car  operated? 

127.  Are  sleeping  cars  carried? 

128.  What  wa^es  are  paid  the  trainmen? 

129.  How  do  these  wages  compare  with  the  wages  paid  on  steam  lines? 

130.  Are  these  interurban  lines  owned  or  affiliated  with  any  steam  line? 

131.  Are  they  used  as  a  feeder  for  any  steam  line? 

132.  Do  they  carry  baggage,  express,  and  freight  on  city  streets? 

133.  Do  any  of  these  interurban  lines  run  into  or  through  two  or  more  States? 

IX.   GENERAL. 

134.  What  is  the  financial  condition  of  the  street-railway  system  in  your  city? 

135.  How  has  this  been  shown? 

136.  Is  the  financial  condition  of  this  system  such  that  an  impairment  of  service  or 
abandonment  is  threatened?  How  would  such  impairment  of  service  or  abandon- 
ment affect  the  social  and  business  life  of  the  community? 


M 


III 


II 


I 


2258 


PROCEEDINGS  OF  FEDERAL.  ELECTRIC  RAILWAYS  COMMISSION. 


137.  If,  by  reason  of  the  financial  condition  of  the  street-railway  system  in  your 
city,  the  public  is  threatened  with  an  impairment  or  abandonment  of  service,  and 
the  owners  with  a  loss  of  earidngs  upon  the  investment,  what  solution  of  the  problem 
do  you  advise? 

138.  What  shrinkage,  if  any,  has  there  been  in  the  market  value  of  the  stocks  of  the 
company  since  the  maximum  market  value  was  reached?  Of  the  bonds  of  the 
company? 

139.  Is  the  company  in  the  hands  of  a  receiver? 

140.  If  so,  what  occasioned  the  aj^pointment  of  a  receiver? 

141.  What  is  the  total  mileage  being  operated  by  the  receiver? 

142.  Has  the  operation  of  any  lines  been  abandoned?     If  so,  what  mileage? 

143.  What  are  the  annual  capital  requirements  of  the  company? 

144.  Where  does  the  company  obtain  the  funds  for  these  requirements? 

145.  wiiat  interest  does  the  company  have  to  pay  for  borrowed  money?  (a)  On 
bonds?    (6)  On  short-term  notes ?^ 

146.  Develop  kind  and  extent  of  competition,  where  it  exists,  and  whether  it  is 
growing  or  decreasing.     What  effect  did  increase  of  fare  have  upon  it? 

147.  Can  jitney  or  other  form  of  conversance  be  a  real  substitute  for  street-car? 

148.  Is  the  loss  of  earnin^'s  by  the  company  attributable  to  automobile  or  ''jitney" 
competition?  If  so,  are  jitneys  subject  to  the  same  regulation  that  is  imposed  upon 
the  street-railway  companies?  If  not,  to  what  extent  are  jitneys  regulated  and  by 
what  authority? 

149.  Ilas  the  system  unprofitable  lines  and  extensions? 

150.  Should  such  lines  be  discontinued  or  the  service  thereon  reduced? 

151.  Should  car  riders  pay  an  increased  fare  on  profitable  lines  to  help  support 
unprofitable  lines? 

152.  Do  the  company  and  its  employees  cooperate  sufficiently,  in  your  opinion, 
in  the  prevention  of  strikes  and  disruption  of  service  to  the  public? 

153.  Is  the  attitude  of  the  public  toward  the  company  antaironistic? 

154.  If  so,  for  what  reason? 

155.  Is  it  due  to  a  belief  that  the  public  has  been  accorded  unfair  treatment  through 
poor  service,  overcrowding  of  cars,  etc.,  or  is  it  due  to  a  belief  that  the  company  is 
earning  large  amounts  of  money  to  which  it  is  not  entitled? 

156.  Has  it  been  due  to  any  participation  which  the  company  has  taken  in  the 
politics  of  the  community? 

157.  Is  it  due  to  a  belief  that  the  company  has  paid  dividends  on  largfe  amounts 
of  watered  stock? 

158.  Should  the  car  rider  bear  the  entire  cost  of  the  service  rendered  by  the  com- 
pany or  does  the  public  generally  derix-e  sufficient  l)enefit  from  the  presence  of  the 
street-railway  company  in  the  city  to  bear  part  of  this  cost? 

159.  Do  you  fa^■or  remitting  taxes  and  assessments,  including  items  for  paving, 
removal  of  snow  and  ice,  etc.,  if  necessary  to  maintain  a  low  fare? 

160.  Is  there  a  trend  of  sentiment  in  your  community  toward  municipal  ownership? 

161.  IIow  strong  is  this  sentiment? 

162.  Do  you  favor  municipal  ownership  and  operation  of  the  transportation  system 
in  your  city  or  private  ownership  and  operation? 

163.  Give  reasons  for  your  answer. 

164.  If  you  favor  municipal  ownership  and  operation,  do  you  think  it  should  be 
extended  to  sul)urban  lines  outside  the  corporate  limits? 

165.  \Vhat  should  be  the  relationship  of  the  community  to  the  street  railway  and 
of  the  street  railway  to  the  community  f 

166.  To  what  extent  should  the  State  regulate  the  service,  operation,  extensions, 
abandonments,  rates,  accounting,  and  expenditure  of  municipally  or  privately  owned 
lines?    Give  reasons  for  your  answer. 

167.  To  what  extent  should  the  Federal  Government  regulate  the  service,  oper- 
ation, extension,  abandonment,  rates,  accounting,  and  expenditures  of  street-railway 
companies?     Give  reasons  for  your  answer. 

168.  What  do  you  consider  to  be  an  ideal  system  for  the  regulation  of  the  com- 
panies? Should  it  be  (a)  exclusively  b>r  the  municipality;  (6)  exclusively  by  the 
State;  (c)  cooperation  between  the  municipality  and  the  State? 

Example:  City  to  control  service,  operation,  extensions,  abandonment,  rates, 
accounting,  and  expenditure,  subject  to  an  appeal  taken  by  interested  parties  to 
the  State  commission,  either  party  reserving  the  right  to  appeal  from  the  commission 
to  a  court. 

Exam-pie:  City  and  State  to  have  precisely  the  same  jurisdiction  to  investigate  and 
determine  question  upon  complaint  or  upon  their  own  motion,  but  with  the  knowledge 
that  an  appeal  can  he  taken  from  any  action  of  the  municipality  to  the  State  com- 
mission. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2259 


169.  To  what  extent  and  under  what  conditions  should  the  State  commission  fix 
the  value  of  the  property? 

170.  Where  an  electnc-railway  company  operates  between  two  or  more  munici- 
palities, should  the  State  commission  have  any  different  power  than  over  a  company 
which  operates  exclusively  within  a  municipality? 

171.  To  what  extent  should  the  municipality  regulate  the  lines  which  extend 
beyond  its  domain?  To  what  extent  should  the  State  regulate  the  lines  which  extend 
beyond  its  domain?    • 

172.  Is  it  good  public  policy  to  have  several  municipalities  and  the  State  com- 
mission exercising  jurisdiction  over  one  company? 

Example:  In  New  Jersey  a  single  company  operates  in  and  between  146  mimici- 
palities. 

173.  Do  you  believe  that  the  cost  of  securing  expert  service  over  (luestion  of  oper- 
ation,, rates,  and  accounting  is  so  large  that  small  municipalities  should  be  able  to 
secure  lietter  and  more  intelligent  regulation  by  the  State  commission? 

174.  If  the  street-railway  company  is  operating  under  difficulties  in  your  munici- 
pality, please  give  the  cause  and  suggest  the  remedy.    Go  into  detail. 


EEPORT  OF  THE  FEDEEAL  ELECTRIC  RAILWAYS  COMMISSION 

The  President  of  the  United  States. 

Sir:  The  Federal  Electric  Railways  Commission  begs  leave  to 
present  the  following  report. 

This  Commission  was  appointed  by  you  in  response  to  a  suggestion 

outlining  the  need  of  such  a  commission  in  the  following  letter  from 

two  members  of  your  Cabinet,  the  Secretary  of  Commerce  and  the 

Secretary  of  Labor: 

Washington,  D.  C,  May  15,  1919. 

Dear  Mr.  President:  The  electric-railway  problem  to  which  your  attention  has 
been  called  on  several  occasions  has  recently  assumed  such  serious  national  propor- 
tions as  to  warrant  the  prompt  attention  of  the  Federal  Government.  Already  50  or 
more  urban  systems,  representing  a  considerable  percentage  of  the  total  electric- 
railway  mileage  of  the  country,  are  in  the  hands  of  recei^ers.  The  communities 
affected  are  among  the  most  important — New  York,  Pro^'idence,  Buffalo,  New 
Orleans,  Denver,  St.  Louis,  Birmingham,  Montgomery,  Pittflburgh,  Memphis,  Fort 
Wayne,  Des  Moines,  St.  Paul,  Spokane,  Chattanooga. 

Other  large  systems  are  on  the  verge  of  insolvency,  for  the  industry  as  a  whole  is 
v-irtually  bankrupt.  The  continued  shrinkage  in  the  value  of  hundreds  of  millions 
of  electric-railway  securities  held  by  savings  banks,  national  banks,  life-insurance 
companies,  and  by  the  public  at  large  threatens  to  embarrass  the  Nation's  financial 
operations.  Furthermore,  the  withdrawal  of  this  industry's  buying  power,  which 
is  said  to  rank  third  in  magnitude,  involves  the  unsettlement  of  collateral  industries, 
naturally  entailing  labor  dislocation  that  will  affect  hundreds  of  thousands  of 
ernployees. 

The  return  to  normal  conditions  is  being  hampered  and  the  efforts  of  the  Govern- 
ment to  avert  strained  conditions  in  finance,  labor,  and  commerce  are  being  less 
fruitful  of  satisfactory  results  than  should  be  expected,  if  some  solution  of  the  electric- 
railway  problem  were  in  ^dew. 

What  the  solution  is  may,  we  believe,  be  evolved  by  a  thorough  investigation  of 
general  franchise  and  operating  conditions  in  their  relation  to  rates,  including  service- 
at-cost  plans,  State  and  municipal  taxation,  local  paving  requirements,  and  internal 
economies  that  may  be  effected. 

We  therefore  propose  and  recommend  the  appointment  by  you  of  a  Federal  board 
or  commission,  whose  duty  it  shall  be  to  study  and  report  upon  the  entire  problem, 
in  order  that  the  State  and  municipal  authorities  and  others  concerned  may  have  the 
benefit  of  full  information  and  of  any  conclusions  or  recommendations  that  may  be 
formulated.  Such  a  study  will,  in  our  opinion,  exert  a  helpful  and  constructive 
force  in  this  critical  period  of  the  industry's  existence  and  will  aid  in  the  rea^ljust- 
ment.  If  you  would  make  such  an  appointment  before  June  30  your  contingency 
fund  could  be  used  to  defray  the  expenses,  which  would  be  about  $10,000. 

The  National  Association  of  State  Commissioners  has  always  invited  Federal  aid 
in  this  matter  and  the  recent  conference  of  governors  and  mayors  adopted  a  resolu- 
tion recommending  Federal  consideration  of  the  problem  of  preventing  the  financial 
disaster  threatening  this  industry.  ^ 

We  propoee  that  such  a  commission  shall  be  made  up  of  one  representative  of  each 
of  the  following  groups:  Treasury  Department  or  War  Finance  Corporation,  Depart- 
ment of  Commerce,  Department  of  Labor,  National  Association  of  State  Commis- 
sioners, American  Cities  League  of  Mayors,  Amalgamated  Association  of  Street  and 
Electric  Railway  Employees,  American  Electric  Railway  Association,  Investment 
Bankers'  Association  of  America. 

We  respectfully  urge  your  authorization  for  such  a  commission,  to  be  followed  by 
your  formal  proclamation  upon  the  selection  of  the  personnel. 
Cordially,  yours, 

William  C.  Redfield, 

Secretary  of  Commerce, 
W.  B.  Wilson, 

Secretary  of  Labor, 

2260 


i! 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2261 


The  Commission  appointed  by  you  on  the  31st  day  of  May,  1919, 
consisted  of  the  following  members,  who  were  to  serve  and  have  served 
thereon  without  compensation: 

Charles  E.  Elmquist,  president  and  general  solicitor  of  the  National 
Association  of  Railway  and  Utilities  Commissioners. 

Edwin  F.  Sweet,  Assistant  Secretary  of  Commerce,  representing 
tlie  Department  of  Commerce. 

Philip  H.  Gadsden,  representing  the  American  Electric  Railway 
Association. 

Royal  Meeker,  Commissioner  of  Labor  Statistics,  Department  of 
Labor,  representing  that  department. 

Louis  B.  Wehle,  General  Counsel  of  the  War  Finance  Corporation, 
ro])resenting  the  Treasury  Department. 

Charles  W.  Beall,  of  Harris,  Forbes  &  Co.,  New  York,  bankers, 
representing  the  Investment  Bankers'  Association  of  America. 

William  D.  Mahon,  president  of  Amalgamated  Association  of 
Street  and  Electric  Railway  Employees  of  America,  representing 
tliat  association. 

George  L.  Baker,  mayor  of  Portland,  Oreg.,  representing  the 
American  Cities  League  of  Maj^ors. 

The  Commission  met  on  June  4,  1919,  in  Washington,  D.  C,  and 
organized  by  electing  Charles  E.  Elmquist  as  chairman  and  Edwin 
F.  Sweet  as  vice  chairman,  and  subsequently  appointed  Charlton 
Ogburn  as  its  executive  secretary.  At  its  first  meeting  the  Com- 
mission announced  that  it  w*ould  attempt  to  determine  the  general 
principles  which  should  govern  the  regulation,  operation,  and  service 
of  electric  railways,  but  that  the  Commission  was  without  authority 
to  hear  and  determine  specific  local  controversies,  and  that  it  would 
not  undertake  in  any  way  to  encroach  upon  the  functions  of  State 
conunissions  or  of  municipal  authorities;  that  the  purpose  of  the 
Commission  was  rather  to  investigate  and  study  the  condition  of  the 
electric  railway  industry,  including  franchises,  rates,  taxation,  and 
assessments,  economies  of  operation,  public  relations,  regulation,- etc. 

The  Commission  gathered  its  testimony  mainly  in  two  ways: 
First,  by  public  hearings,  at  which  95  witnesses  testified  in  person 
and  21  others  sent  prepared  statements;  second,  by  a  series  of  ques- 
tionnaires sent  to  every  city  in  which  there  is  a  street  or  interurban 
railway,  addressed  to  the  electric  railways,  the  mayoi-s,  chambers  of 
commerce,  and  the  central  labor  unions,  and  also  to  all  of  the  State 
public  utility  commissions. 

The  fii-st  public  hearing  was  held  in  New  York  on  June  19,  1919. 
The  next  hearing  was  held  in  Washington  on  July  15,  lasting  two 
weeks,  during  which  time  the  witnesses  on  behalf  of  the  electric  rail- 
ways presented  evidence  under  the  direction  of  the  committee  of 
one  hundred  of  the  American  Electric  Railway  Association.  The 
next  hearing  was  in  Washington  beginning  August  11,  and  lasted 
one  week,  testimony  being  offered  on  behalf  of  the  public,  chiefly  by 
representatives  of  the  municipalities  and  all  State  public  utility 
commissions.  At  the  last  hearing  held  in  Washington,  beginning 
September  29,  and  lasting  one  week,  testimony  was  offered  by 
further  witnesses  representing  the  public  and  by  witnesses  on  behalf 
of  labor,  represented  by  the  Amalgamated  Association  of  Street  and 
Electric  Railway  Employees  of  America.    All  of  these  hearings  ran 


160643**— 20— VOL  3- 


■14 


i 


2262         PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

through  day  and  night  sessions,  beginning  at  10  a.  m.  and  usually 
continuing  until  10  or  11  p.  m.,  and  totalmg  one  month. 

Among  the  witnesses  were  ex-President  William  H.  Taft,  Secretary 
of  War  Newton  D.  Baker,  leading  bankei^,  railway  managers,  econ- 
omists, mayors,  public  utility  experts,  and  State  public  utility 
conunissioners. 

The  testimony  taken  embraces  6,195  pages  of  typewritten  tran- 
script. 

Three  separate  cjuestionnaires  were  later  sent  out.  The  first  was 
general,  dealing  with  all  phases  of  the  situation.  The  last  two  were 
special,  seeking  traffic  figm-cs,  month  by  month,  for  the  past  three 
years — that  is,  as  to  the  number  of  revenue  passengers,  amount  of 
passenger  revenue,  fare  charges,  and  any  occurrences  affecting  traffic, 
such  as  strikes,  inQuenza  epidemic,  and  the  like. 
^  j  At  the  conclusion  of  the  final  public  hearing  the  Commission  en- 
"^  gaged  the  services  of  Dr.  Delos  F.  Wilcox  to  aid  in  analyzing  the 
testimony  gathered  and  to  make  suggestions  to  the  Commission  with 
reference  to  its  report.  Dr.  Wilcox  made  a  very  comprehensive 
analysis  of  the  evidence,  containing  823  pages  of  matter.  The  Com- 
mission regrets  that  it  can  not  pubush  this  analysis  with  the  proceed- 
ings, since  it  represents  a  complete  and  masterful  study  of  the  whole 
electric  rail wav  problem.  Printed  with  the  evidence,  however,  is  a 
summary  of  tlie  Wilcox  report,  pre))ared  by  him.  The  answers  to 
the  cjuestionnaires  resulted  in  bringing  to  the  attention  of  the  Com- 
mission a  great  mass  of  information.  All  the  evidence,  exhibits, 
analysis  of  Dr.  Wilcox,  and  tabulated  summaries  of  information 
found  in  the  answers  to  the  questionnaires  have  been  considered  by 
this  Commission. 

The  final  meeting  of  the  Commission  was  held  in  Washington  July 
22  to  27,  1920,  inclusive,  for  the  purpose  of  formulating  this  report. 

Owing  to  the  divergent  representation  of  its  personnel,  this  unani- 
mous report  of  the  Commission  necessarily  represents  decided  con- 


cessions by  some  of  its  individual  members. 

A  complete  report  of  the  testimon}^  will  be  printed,  together  with 
this  report,  and  will  be  placed  in  the  Congressional  Library  in  Wash- 
ington and  other  le^iding  libraries  in  the  country,  with  all  regulatory 
commissions,  and  with  the  mayors  of  the  leading  cities  of  the  United 
States. 

For  convenience,  we  wish,  before  proceeding  to  our  discussion,  to 
state  our  principal  conclusions  and  recommendations,  which  are  as 
follows: 

Seci'ion  I. 
CONCLUSIONS  AND  RECOMMENDATIONS. 

I.  The  electric  railway  furnishing  transportation  upon  rails  is  an 
essential  public  utility  -and  should  have  the  sympathetic  understand- 
ing and  cooperation  of  the  public  if  it  is  to  continue  to  perform  a 
useful  public  service. 

II.  The  electric  railway  has  been  and  will  continue  to  be  a  public 
utility,  subject  to  public  control  as  to  the  extent  and  character  of 
the  service  it  renders  and  as  to  the  rates  it  charges  for  such  service. 


PROCEEDINGS  OE  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2263 


III.  It  is  of  the  highest  importance  that  both  the  total  cost  of  the 
service  and  the  cost  to  the  individuals  who  use  it  shall  be  kept  as  low 
as  possible  without  injustice  to  those  who  take  part  in  producing  it. 

IV.  The  electric  railway  industry  as  it  now  exists  is  without  finan-  / 
cial  credit  and  is  not  properly  performing  its  pubHc  function,  .^ 

V.  This  condition  is  the  result  of  early  financial  mismanagement 
and  economic  causes  accentuated  by  existing  high-price  levels  of 
labor  and  materials,  and  of  the  failure  of  the  uniform  unit  fare  of 
5  cents  prescribed  either  by  statute  or  by  local  franchise  ordinances 
or  contracts  to  provide  the  necessary  revenues  to  pay  operating  costs 
and  to  maintain  ihe  property  upon  a  reasonable  basis.  - 

VI.  The  mdustry  can  be  restored  to  a  normal  basis  only  by  the 
introduction  of  economies  in  operation,  improving  tlie  tracks,  equip- 
ment, and  service,  and  assuring  a  reasonable  return  upon  the  fair 
value  of  its  property  used  in  the  public  service  when  honestly  and 
efficiently  managed. 

VII.  The  electric  railways  must  expand  to  meet  the  growing  needs 
of  their  communities ;  therefore,  the  first  essential  is  to  restore  credit 
in  order  to  obtain  necessary  new  capital  for  the  extension  and  im- 
provement of  service. 

VIII.  Restoration  of  credit  involves  a  readjustment  of  relations 
which  will  remove  public  antagonism,  provide  public  cooperation, 
and  insure  to  the  investor  the  integrity  of  his  investment  and  a  fair 
rate  of  return  thereon. 

IX.  Effective  public  cooperation  should  be  exercised  by  eliminat- 
ing, in  so  far  as  it  is  practicable,  special  assessments  for  sprinkling, 
paving,  and  for  the  construction  and  maintenance  of  bridges  whi(m 
are  used  by  the  public  for  highway  purposes, 

X.  Extensions  into  new  territory  resulting  in  special  benefits  to 
the  property  in  that  vicinity  should  be  paid  for  by  assessments 
on  such  property-  in  proportion  to  the  benefits  received,  and  the 
amount  of  such  assessment  should  not  be  added  to  the  physical 
value  of  the  corporate  property.  .^ 

XI.  The  great  increase  in  the  use  of  private  automobiles,   the  : 
jitney,  and  motor  busses  has  introduced  a  serious  although  not  a  \ 
fatal,  competition  to  the  electric  railway.    These  forms  of  pubHc 
motor  conveyance  when  operated  as  public  carriers  should  properly 
be  subject  to  equivalent  r^ulatory  provisions.  ^ 

XII.  The  full  cooperation  of  labor  is  essential  to  the  highest 
prosperity  and  the  usefulness  of  the  industry.  The  employees 
engaged  in  this  occupation  should  have  a  living  wage  and  humane 
hours  of  labor  and  working  conditions.  They  should  have  the  right 
to  deal  collectively  with  their  employers,  through  committees  or 
representatives  of  their  own  sela;tion.  All  labor  disputes  should  be 
settled  voluntarily  or  by  arbitration,  and  .the  award  of  such  a  board 
should  be  final  and  binding  upon  both  parties.  It  is  intolerable  that 
the  transportation  semce  of  a  city  should  be  subject  to  occasional 
paralysis,  whether  by  strikes  or  by  lockouts. 

XIII.  A  private  industrv^  should  not  be  subsidized  by  public 
funds  unless  at  is  inaperativeiy  necessary  for  tlie  preservation  of  an 
essential  service,  and  then  only  as  m\  emergency  measure, 

XIV.  Unless  the  usefulness  of  the  electaic  railways  is  to  l>e  sacri- 
ficed public  control  must  be  flexible  enough  to  enable  liiem  to  secure 


I 


2264 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


sufficient  revenues  to  pay  the  entire  cost  of  the  service  rendered, 
including  the  necessary  cost  of  both  capital  and  labor. 

-^  XV.  There  can  be  ho  satisfactory  sokition  of  the  electric-railway 
problem  which  does  not  include  the  fair  valuation  of  the  property 
employed  in  the  pubHe  service,  and  where  that  is  done  the  companies 

i    should  voluntarily  reduce  any  excessive  capitalization  to  the  basis  of 

i^such  value. 

XVI.  There  is  no  insuperable  objection  to  a  lai^e,  wide-open  city 
having  exclusive  jurisdiction  over  the  rates  and  services  ot  public 
utilities.  •  . 

XVII.  The  necessity  for  scientific  and  successful  regulation  of 
systems,  whether  large  or  small,  and  especially  those  which  operate 
through  several  cities  and  villages  and  in  rural  territory,  leads  to  the 
conclusion  that  local  regulation  should  generally  be  subject  to  the 
superior  authority  of  the  State,  whether  as  a  matter  of  original 
jurisdiction  or  through  the  medium  of  appeal. 

XVIII.  Cost-of-service  contracts  are  m  the  experimental  stage, 
but  where  tried  they  seem  to  have  secured  a  fair  return  upon  capital, 
established  credit,  and  eifected  reasonably  satisfactory  public  service. 
Such  contracts  may  safely  be  entered  into  where  the  public  right 
eventually  to  acquire  the  property  is  safeguarded. 

XIX.  The  right  of  the  public  to  own  and  operate  public  utilities 
should  be  recognized,  and  legal  obstacles  in  the  way  of  its  exercise 

■  should  be  removed. 

XX.  While  eventually  it  might  become  expedient  for  the  public  to 
own  and  operate  electric  railways,  there  is  nothino;  in  the  experience 
thus  far  obtained  in  this  country  that  will  justify  the  assertion  that  it 
will  result  in  better  or  cheaper  service  than  privately  operated  utili- 
ties could  afford  if  properly  regulated. 

XXI.  Public  ownership  and  operation  of  local  transportation  sys- 
tems, whether  or  not  it  be  considered  ultimately  desirable,  is  now, 
because  of  constitutional  and  statutory  prohibitions,  financial  and 
legal  obstacles,  the  present  degree  of  responsibility  of  our  local  gov- 
ernments, and  the  state  of  public  opinion,  practicable  in  so  few 
instances,  that  private  ownership  and  operation  must  as  a  general 
rule  be  continued  for  an  extended  period. 

XXII.  If  the  reforms  incident  to  public  regulation  which  we  sug- 
gest in  this  report  should  not  result  in  making  private  ownership 
satisfactory  to  the  public,  such  reforms  should  at  least  enable  public 
ownership  to  be  established  upon  a  just  and  equitable  basis. 

Sectiox  II. 

THE  STREET  RAILWAY  IS  AN  ESSENTIAL  INDUSTRY. 

The  electric  railway  industry  at  present  is  a  factor  of  essential 
importance  in  the  urban  life  and,  to  a  scarcely  less  extent,  in  inter- 
urban  relations  of  the  country. 

Tbe  experience  of  75  years,  the  unanimous  opinion  of  expert  wit- 
nesses, and  of  those  who  are  students  of  transportation  problems,  and 
the  assumption  of  the  necessity  for  tracks  by  inventors  working  to 
improve  the  methods  of  street  transportation  alike  demonstrate  the 
fundamental  and  permanently  essential  nature  of  the  railway — and 
to  the  present  time  of  the  electric  railway — as  the  most  nearly  ade- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2265 

quate,  reliable,  and  satisfactory  system  available  for  transporting  the 
maximum  number  of  people  through  the  streets  of  our  cities  with  the 
least  interference  with  the  use  of  these  streets  for  other  purposes  of 
public  ways. 

The  Bureau  of  Census  Reports  for  the  year  1917  show  the  net  capi- 
talization as  of  December  31,  1917,  to  be  $4,869,962,096,  which  makes 
this  industry  one-fourth  as  important  as  the  steam  railroads  of  the 
country  in  point  of  capitalization.  The  total  mileage  in  1917  was 
44,835.  The  net  capitalization  per  mile  of  track  is  $109,065.  The 
total  revenue  for  1917  from  railway  operations  was  approximately 
$650,000,000.  These  statistics  do  not  include  the  electrified  por- 
tions of  steam  railroads  engaged  in  suburban  service.  Approxi- 
mately 40  per  cent  of  the  mileage  is  suburban  in  character. 

The  number  of  people  with  whom  the  electric  railways  come  into 
daily  contact  is  shown  by  the  fact  that  in  the  year  1917  they  carried 
a  total  of  11,304,660,462  revenue  passengers  and  3,202,254,111  trans- 
fer and  free  passengers,  as  compared  with  a  total  of  1,066,638,474 
revenue  passengers  carried  by  the  steam  roads. 

In  spite  of  the  immense  development  of  the  automobile  industiy 
the  demand  for  electric  railway  transportation  has  increased  at  a 
rapid  rate.  It  is  estimated  that  on  December  31,  1917,  there  were 
4,643,481  passenger  automobiles  and  that  two-thirds  of  the  develop- 
ment of  that  industry  was  subsequent  to  1912,  but  the  number  of 
revenue  passengers  carried  by  the  electric  railways  was  approxi- 
mately 1,800,000,000  more  in  1917  than  in  1912.  During,  the  year 
ended  June  30,  1919,  the  total  number  of  revenue  passengers  carried 
by  the  local  transportation  lines  of  New  York  City  was  2,079,942,604, 
as  compared  with  1,402,417,642  carried  during  the  year  ended  June 
30,  1909,  an  increase  of  more  than  46  per  cent  in  10  years.  On  the 
basis  of  the  estimated  population  served  the  number  of  revenue  rides 
per  capita  in  New  York  City  in  1909  was  304  and  in  1919,  370— an 
increase  of  nearly  22  per  cent  in  the  riding  habit. 

In  this  connection  Mr.  Henry  G.  Bradlee,  president  of  the  Stone 
&  Webster  Corporation,  stated  in  a  letter  dated  October  1,  1919,  as 
follows: 

It  would  appear  that  something  has  been  and  is  still  stimulating  the  street  railway 
lusiness;  possibly  the  automobiles  themselves  have  helped  in  this  direction.  People 
may  be  acquiring  to  a  greater  extent  than  ever  before  the  riding  habit  and  may  be 
more  and  more  inclined  to  move  about  and  spend  less  time  in  their  own  home  or  with 
their  own  neighbors.  The  moving  picture  is  probably  also  a  factor  in  the  situation, 
but  whatever  may  be  the  cause,  the  facts  seem  pretty  clear  that  the  demand  for  trans- 
portation service  is  still  growing  apace.  This  fact,  I  think,  is  generally  not  under- 
stood; in  fact,  I  am  free  to  confess  that  we  ourselves  were  surprised  to  see  the  extent 
of  the  increased  demand  for  6er\dce. 

In  1917  the  number  of  employees  was  294,826,  and  it  is  estimated 
that  the  total  number  of  people  who  were  directly  and-  conveniently 
accessible  to  electric  railway  service  is  about  80,000,000  at  the  present 
time.  The  electric  railways  have  overflowed  municipal  boundaries 
and  now  include  a  network  of  interurban  lines  in  many  portions  of 
the  country,  but  the  fact  still  remains  that  the  industry  is  primarily 
a  street  railway  with  its  principal  function  the  transportation  of 
passengers  within  the  hmits  of  municipalities. 

While  the  electric  railway  industry  is  essentially  local,  it  has  cer- 
tain national  characteristics.  Its  difficulties  can  not  be  regarded 
simply  as  the  isolated  problem  of  a  local  system  repeated  hundreds 


11 


2266        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

of  times  all  over  the  country  in  varied  forms  and  degrees,  each 
problem  being  independent  of  all  the  others.  On  the  contrary, 
although  a  local  traction  system  may  be  separated  by  hundreds  of 
miles  from  its  nearest  neighbor,  it  is  in  other  ways  mseparably  con- 
nected with  all  of  the  others.  As  a  purchaser  m  the  equipment 
markets  of  other  States  it  competes  with  other  companies.  Its 
demands  for  labor  and  its  scales  of  wages  are  necessarily  felt  at  once 
by  traction  systems  everywhere.  In  procuring  its  capital  its  officers 
have  been  generally  compelled  to  market  its  securities  to  a  large 
extent  in  other  States,  among  investors  who  are  particularly  inter- 
ested in  such  classes  of  investment.  The  close  industrial  and  finan- 
cial interdependence  of  the  hundreds  of  physically  unrelated  local 
traction  systems,  the  millions  of  dollars  of  capital  placed  by  thousands 
of  investors  in  plants  which  manufacture  electric  traction  equipment, 
and  the  Rve  billions  of  electric  traction  bonds  and  stocks  to  be  found 
scattered  all  over  the  country  in  banks,  insurance  company  reserves, 
and  in  private  investment,  translate  the  many  local  problems  into 
a  national  problem. 

Section  III. 

FINANCIAL  CONDITION  OF  THE  ELECTRIC  RAILWAY  INDUSTRY, 

The  investigation  demonstrates  that  the  financial  condition  of  the 
electric  railwav  industry  is  acute,  and  that  to  a  very  great  extent  it 
is  not  properly  perforniing  its  public  functions. 
'  The  record  m  this  case  shows  that  on  May  31,  1919,  there  were  62 
companies,  having  a  mileage  of  5,912,  in  receivership,  that  60  com- 
panies had  dismantled  and  junked  altogether  534  miles  of  railway, 
and  that  38  companies  together  had  abandoned  257  miles  of  track. 
Since  that  date  and  up  to  July  1,  1920,  there  have  been  56  additional 
companies,  having  a  mileage  of  1,908,  which  have  been  thrown  into 

receivershiT). 

The  capitalization  of  the  industry,  according  to  the  1917  census 
report,  is  represented  by  $3,058,377,167  in  bonds  and  $2,473,846,651 
of  stock.  For  the  year  1917  the  net  income  of  operating  companies 
was  $56,450,930,  representing  an  average  rate  of  return  of  2.81  per 
cent  upon  the  capital  stock.  In  1918  the  evidence  shows  the  net 
income  was  reduced  to  $20,183,413,  which  represents  a  return  of  only 
1  per  cent.  As  a  whole,  there  has  been  some  improvement  in  the 
industry  since  the  commencement  of  these  hearing,  due  to  the 
fact  that  there  has  been  an  increase  in  the  car-riding  habit  since 
demobilization,  and  in  a  great  many  instances  the  fare  has  been 
increased  beyond  5  cents.  In  spite  of  this  slight  improvement, 
however,  the  condition  of  the  industry  at  the  present  time  is  serious. 
A  great  many  companies  are  unable  properly  to  maintain  their  track 
ana  equipment  and  to  perform  efficient  public  service,  to  secure 
funds  with  which  to  purchase  new  equipment,  to  build  necessary 
improvements  and  extensions,  or  to  refund  maturing  obligations. 

A  large  number  of  factors  have  contributed  to  the  present  plight 
of  the  electric  railway  industry.     These  may  be  mentioned: 

(a)  They  were  not  conservatively  financed  in  their  early  yeai*s, 
and  have  not  since  made  good  their  overcapitalization,  except  to  a 
limited  extent,  otherwise  than  through  the  process  of  bankruptcy 
and  reorganization.     In  the  early  days  the  promoter  of  electric- 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION-.      2267 

railway  properties  believed  that  long-term  franchises  with  a  5-cent 
fare  would  be  permanentlv  profitable.  Large  sums  of  money  were 
required  to  develop  the  business.  In  many  cases  the  promoters 
issued  bonus  stock  to  represent  their  hopes  and  expectations.  This 
bonus  stock  did  not  represent  money,  service,  or  property,  and  added 
nothing  to  the  value  of  the  plant.  As. a  result  of  tins  practice,  there 
are  many  cases  where  the  existing  capitalization  exceeds  the  invest- 
ment in  the  plant  or  the  value  thereof. 

(6)  Neglect  to  amortize  this  excess  capitalization. 

(c)  Failure  to  amortize  the  normal  accrued  depreciation. 

(d)  Payment  of  unearned  dividends  and  neglect  of  ordinary  main- 
tenance. 

(e)  Oyerbuilding  into  unprofitable  territory  or  to  promote  real- 
estate  enterprises,  involved  sometimes  with  political  improprieties. 

(/)  A  uniform  5-cent  fare,  which  established  a  constant  rate  to 
apply  during  variable  cost  periods.  This  contract  fare  has  been  a  fj 
source  of  irritation,  resulting  in  litigation.  During  normal  times  • 
many  communities  sought  to  have  the  fare  reduced  below  the  con- 
tract price.  The  companies  insisted  upon  adhering  to  the  contract, 
and  they  were  sustained  by  the  courts.  During  the  recent  high-cast 
period  many  companies  have  applied  for  an  increase  in  fare  to  enable 
them  to  meet  operating  expenses  and  fixed  charges.  In  many  cases 
communities  undertook  to  prevent  the  increase  beyond  the  contract 
rate.  Under  the  decisions  of  the  Supreme  Court  of  the  United  States 
and  of  the  highest  courts  of  a  number  of  States,  it  is  now  established 
that  a  franchise  provision  naming  a  certain  rate  of  faro  creates  no 
vested  ri^ht  in  any  car  rider  but  that  such  fare  can  be  properly 
changed  by  appropriate  legislation  and  substituted  by  a  hicrher 
charge.  *  '^ 

As  indicative  of  the  fact  that  the  5-cent  fare  has  not  been  adequate 
during  the  war  period,  we  need  only  to  call  attention  to  the  fact  that  on 
July  1,  1920,  increased  fares  have  been  allowed  in  over  500  selected 
cities;  10-cent  fares  have  been  allowed  in  69;  9-cent  fares  in  two  cities ; 
8-cent  in  30  cities ;  7-cent  with  1-cent  charge  for  transfers  in  26  cities ; 
7-cent  zones  in  6  cities;  7-cent  in  145  cities;  6-cent  zones,  with  2-cent . 
transfer  charge,  in  10  cities ;  6-cent  for  two  zones,  with  2-cent  per  zone 
thereafter,  in  13  cities;  6  cents  for  each  two  zones  in  4  cities;  6  cents 
cash  fare  in  some  cases  in  149  cities:  5-cent  zones  and  elimination 
of  reduced  rate  ticket  in  50  cities. 

Boston  has  a  10-cent  fare.  Chicago,  Washington,  Cincinnati, 
Kansas  City,  Youngstown,  and  other  large  cities  are  on  an  8-cent 
basis. 

It  would  seem  that  so  long  as  the  railways  depend  upon  earning 
power,  and  earning  power  depends  upon  passenger  revenue,  the  fixed 
uniform  fare  is  a  broken  reed  for  the  industry  or  for  the  community 
to  lean  upon.     Perhaps  the  general  sentiment  of  the  electric  railwaj^s  /^ 
is  best  expressed  by  the  evidence  of  Gen.  Guy  Tripp  before  this  Com-  ' 
mission,  as  follows: 

We  were  all  living  in  a  fool's  paradise  in  the  street  railway  business  when  we  sud- 
denly woke  up— when  the  war  woke  us  up— to  find  that  no  business  which  can  riot 
increase  its  revenues  under  any  conditions  can  live  or  is  sound. 

Conversely,  it  may  be  said  that  no  community  should  bind  itself 
by  contract  or  otherwise  to  continue,  after  normal  conditions  have 
been  restored,  a  rate  which  might  be  found  reasonable  during  this 
abnormal  period. 


J    • 


I' 


2268      PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

(g)  Limited  franchises  which  impair  credit  and  toward  the  expi- 
ration of  the  franchise  result  in  neglect  of  the  mamtenance  of  the 

property.  ,      .  .     , 

(h)  Special  taxation  and  franchise  obligations,  liavm^  particular 
reference  to  street  paving,  street  sprinkling,  construction  and  main- 
tenance of  bridges  used  by  the  general  public,  general  taxation,  etc. 

The  American  Electric  Railway  Association  introduced  a  chart 
which  showed  that  the  total  amount  of  taxes  levied  against  the 
properties  in  1917  amounted  to  $45,756,695,  of  which  taxes  on  real 
and^  personal  property  was  $21,804,619,  and  on  earnings,  capital, 
and  other  taxes  $23,952,076,  representing  10.11  per  cent  of  the 
operating  expenses.  In  1902  the  ratio  of  taxes  to  operating  expenses 
was  9.19  per  cent.  It  is  thus  seen  that  there  is  only  a  small  increase 
in  the  ratio  of  expense  for  this  item  since  last  year. 

For  the  period  from  1913  to  1918  the  expenditures  for  all  taxes, 
including  paving  and  other  imposts,  has  ranged  from  $60,000,000  to 
$65,000,000,  corresponding  to  10  per  cent  of  the  operatinij;  revenues. 
The  ratio  varies  very  materially  among  the  different  plants. 

The  evidence  on  behalf  of  the  companies  therefore  shows  that  on 
the  basis  of  the  5-cent  fare  the  taxes  represent  about  one-half  of  a 
cent  in  the  nickel  which  the  car  rider  has  been  paying,  and  that 
they  thus  contribute  materially  to  the  necessity  for  fare  increases. 
The  argument  has  been  made  with  considerable  force  that  the  car 
rider  slTould  be  required  to  pay  for  service  alone;  that  he  should  not, 
through  his  car  faro,  be  required  to  pay  for  supporting  the  city's 
schoofs,  its  almshouses  and  other  city  institutions.  It  is  contended 
that  the  companv  should  be  reouired  to  pay  in  taxes  to  the  city  only 
such  an  aijio.unt'as  would  reimburse  the  city  for  its  actual  cost  due 
to  the  presence  of  the  street  railway;  and  that  such  a  plan  of  taxation 
alone  would  be  consistent  with  the  idea  that  the  car  fare  should  be 
based  upon  the  real  cost  of  rendering  the  actual  service  of  transpjrta- 

Although  there  is  much  force  in  this  idea,  and  it  should  be  borne 
in  mind  by  all  who  are  interested  in  street  railway  problems,  we  do 
not  think  the  time  is  ripe  for  recommending  its  general  adoption. 
The  heavy  taxation  to  which  the  companies  are  now  subject  came 
into  being  during  the  period  of  their  prosperity  and  at  a  time  when 
they  were  still  essentially  private  concerns,  relatively  free  from 
regulation.  It  was  natural  that  their  properties  should  be  taxed  in 
no  less  degree  than  the  properties  of  other  private  corporations. 

When  a  company  comes  to  subject  itself  to  such  a  comprehensive 
ret^ulation  as  renders  its  property  in  effect  a  public  instrumentality, 
then  tax  exemption  begins  to  be  in  order  This  course  has  indeed 
been  followed  m  Cleveland,  where  as  an  incident  to  the  passing  of 
the  properties  under  the  Tayler  plan  of  municipal  regulation  they 
came  to  be  exempted  in  large  measure 'from  taxation.  To  the 
extent  that  it  may  become  possible  in  any  community  under  similar 
conditions  to  exempt  street  railway  property  from  taxation,  the 
rider's  car  fare  will  come  more  nearly  to  represent  the  actual  cost 
of  rendering  the  service  of  transportation — in  itself  a  desirable 
result.     But  it  would  seem  that  the  status  of  the  company  as  a 

Eublic  agency  should  be  well  assured  before  such  exemption  should 
e  attempted. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2209 

(i)  Avtomohile  and  jitney  competition. — For  several  years  prior  to 
the  war,  and  to  an  increasing  extent  throughout  the  war  period  and 
up  to  the  present  time,  the  automobile  has  proven  to  be  a  serious 
competitor  of  the  electric  railways  rendering  local  transportation 
service.  Jitneys  and  automobile  buses  operating  as  common 
carriers  have  been  able  in  some  cases,  through  the  absence  of  sufli- 
cient  public  regulation,  to  engage  in  unfair  and  destructive  competi- 
tion with  the  electric  railways  for  the  most  profitable  part  of  urban 
passenger  traffic.  Strong  as  this  competition  has  been,  however, 
the  electric  railway  industry  as  a  whole  has  shown  a  very  substantial 
increase  in  the  riding  habit.  The  operation  of  jitney  buses  as  com- 
mon carriers  is  much  more  restricted  than  the  operation  of  private 
autoiftobiles,  but  the  jitneys  have  had  a  definite  and  intensive  effect 
upon  the  street  railway  situation  in  particular  communities,  for  the 
reason  that  they  have  engaged  in  direct  and  in  some  respects  destruc- 
tive competition  with  the  street  cars  as  public  carriers.  The  experi- 
ence of  numerous  communities,  even  before  the  extraordinary 
conditions  growing  out  of  the  war,  made  it  clear  that  unrestricted 
jitney  operation,  though  more  or  less  temporary  and  precarious  in 
character,  threatens  the  service,  credit  and  solvency  of  the  street 
railways. 

( j  )  Ilolding  companies  and  banJcer  control. — About  75  per  cent  of 
the  public  utilities  of  the  country  are  held,  in  whole  or  in  part,  by 
so-called  ''holding  companies,"  which  are  responsible  for  their  oper- 
ation. This  financing  is  done  in  large  part  through  the  securities  of 
the  parent  company,  which  securities  are  supported  by  the  securities 
of  the  various  operating  companies.  This  frequently  gives  an  ele- 
ment of  strength  to  the  securities  of  the  parent  company  which  a 
single  localized  operating  company  could  not  in  all  cases  present. 
If  it  were  not  for  the  supporting  strength  of  these  parent  companies, 
many  of  the  individual  operating  companies  would  have  gone  under 
before  January  1,  1918. 

Through  these  holding  companies  the  electric  railways  threaten  to 
become  a  banker-controlled  industry.  Those  who  have  the  ultimate 
say  in  matters  of  street  railway  policy  from  the  point  of  view  of 
investors  have  been  dependent  for  their  profits  and  their  power  upon 
the  volume  of  securities  outstanding  and  the  frequency  with  which 
these  securities  have  been  exchanged  or  refunded.  Holding  com- 
panies in  many  instances  have  been  responsible  for  overcapitaliza- 
tion and  have  insisted  upon  drawing  from  the  underlying  companies 
every  possible  cent  that  could  be  secured  in  order  to  make  a  showing 
on  these  inflated  securities.  Hon.  Joseph  B.  Eastman,  at  present  a 
member  of  the  Interstate  Commerce  Commission,  discussed  the 
question  as  follows: 

In  the  third  place  a  factor  of  weakness,  I  think,  was  the  control  of  the  companies 
in  many  instances  by  holding  companies  organized  in  the  form  of  voluntary  associa- 
tions, or,  to  use  a  more  technical  term,  express  trusts.  Although  the  stock  and  bonds 
of  the  street  railway  companies  themselves  were  issued  under  public  supervision, 
these  voluntary  associations  which  corralled  all  their  stock  were  subject  to  no  regula- 
tion whatever  and  issued  shares  upon  an  inflated  basis,  and  that  had  the  result  of 
accentuating  the  desire  to  draw  every  possible  drop  of  income  out  of  the  underlying 
companies  that  could  be  secured  in  order  to  support  earnings  upon  the  inflated  shares 
of  these  voluntary  associations. 

Through  this  system  of  financing  and  management  the  utilities 
have   been   largely  controlled   by   persons   living   distant   from  the 


I 


2270        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

community  affected  by  a  particular  electric  railway,  whose  prime 
consideration  has  been  to  secure  a  return  upon  the  property.  This 
"absentee"  management  and  control  has  not  been  successful  in 
bringing  about  the  proper  spirit  of  cooperation  between  the  local 
managers,  employees,  and  the  public.  Since  the  electric  railway 
companies  come  into  immediate  daily  contact  with  large  numbers 
of  people,  it  is  of  the  utmost  importance  that  the  industry  should 
gain  and  hold  the  respect,  confidence,  and  good  will  of  its  patrons. 
If  the  local  public  should  invest  its  money  in  the  stock  and  bonds  of 
its  local  utilities  there  would  be  an  improvement  in  the  relations 
now  existing  between  the  corporation  and  the  public. 

(Ic)  Use  of  regulatory  power  to  compel  more  and  better  service. — 
Tlirough  the  exercise  of  this  power  the  companies  have  been  required 
in  many  instances  to  improve  their  standards  of  service  and  equip- 
ment ;  to  equip  cars  with  vestibules  for  the  protection  of  the  motor- 
men;  and  to  give  better  heating,  lighting,  and  ventilation  for  the 
comfort  and  convenience  of  the  passengers.  They  have  also  been 
obliged  to  install  safet}"  devices  and  make  stops  at  frequent  intervals. 
The  exercise  of  the  regulatory  power  of  States  and  municipalities  has 
undoubtedly  added  to  the  cost  of  the  service. 

(l)  Underlying  companies  and  leased  lines. — Consolidations  have 
been  brought  about  through  the  unification  of  a  number  of  separate 
corporations  which  owned  and  maintained  lines  of  track  within  the 
same  city.  In  many  cases  consolidations  were  made  upon  the  con- 
dition that  these  companies  should  be  guaranteed  a  certain  rate  of 
return  or  fixed  sum,  which  represented  a  hi^h  percentage  yield  upon 
the  investment.  The  returns  thus  secured  have  been  a  frequent 
source  of  irritation,  induced  by  a  feeling  that  these  underlying 
companies  are  being  paid  more  than  a  reasonable  return  upon  the 
value  of  their  pix)perty.  Your  Commission  believes  that  excessive 
payments  to  the  underlying  companies  by  the  operating  company 
have  greatly  diminished  the  net  operating  revenue,  and  that  there 
can  be  no  satisfactory  solution  of  the  street  railway  problem  in  such 
communities  imtil  the  system  has  been  valued  as  a  whole,  and  the 
accounts  so  kept  that  the  public  may  know  that  the  rate  of  fare 
paid  yields  no  more  than  fair  return  upon  the  value  of  such  property. 

(m)  Increasing  demands  of  labor. — The  wages  of  street-railway 

'  labor  prior  to  the  war  were  generally  insufficient  from  the  viewpoint 

of  a  living  wage,  and  the  increases  in  wages  that  have  taken  place 

since  the  begiiming  of  the  v/ar  period  have  not  on  the  average  been 

as  great  as  tne  increase  in  the  cost  of  living. 

At  the  time  of  our  entry  into  the  war,  the  average  wages  of  motor- 
men  and  conductors  for  companies  of  100  miles  and  over  were  ap- 
proximatety  31.5  cents  per  hour.  Since  the  war  there  has.  been  a 
rapid  increase  in  the  wages  of  employees.  The  National  War  Labor 
Board  by  its  awards  in  the  year  1916  established  the  normal  wages 
for  this  class  of  service  in  different  cities,  varying  from  38  to  48  cents 
per  hour,  increasing  wages  23  J  per  cent.  The  awards  of  the  board 
mark  the  begimiing  of  the  rapialv  increasing  wages  in  this  class  of 
employment.  An  exhibit  filed  by  the  Amalgamated  Association 
of  Street  and  Electric  Railway  Employees  of  America  shows  the 
wages  for  conductors  in  the  principal  cities  of  the  United  States  and 
Canada  as  of  January  1,  1920.  For  convenience  the  exhibit  is 
published  as  an  exhibit  attached  to  this  report. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2271 

Since  that  date,  new  contracts  have  been  agreed  to  v.hich  sub- 
stantially increase  the  wages  in  a  number  of  cities. 

(n)  TJie  war  and  the  dollar.'- — The  conditions  which  have  been  hero 
enumerated  tended  to  break  down  the  credit  and  stability  of  the 
electric-railway  industry.  The  increases  in  prices  of  labor  and 
materials  entering  into  the  construction,  maintenance,  and  operation 
of  electric  railways  during  the  war  period  have  corresponcfed  with 
the  increases  in  the  prices  of  general  commodities  and  in  the  wages 
of  labor  in  all  industries.  Operating  costs  became  so  high  that  in 
many  cases  the  revenues  were  not  sufficient  to  pay  even  the  current 
expenses  of  operation.  Material  and  equipment  prices  reached 
abnormal  heights.  The  increase  over  1915  in  railway  motors  and 
car  equipment  show  87  per  cent;  locomotives,  87  per  cent;  rotaiy 
converters,  75  per  cent;  transformers,  70  per  cent;  switchboards, 
100  per  cent;  motor  generator  sets  95  per  cent;  turbines,  100  per 
cent;  pig  iron,  106  per  cent;  steel  plates,  141  per  cent;  copper,  58  per 
cent;  steel  castings,  220  per  cent;  coke,  35  per  cent;  coal,  approxi- 
mately, 100  per  cent;  asbestos  material  (which  is  largely  used),  560 
per  cent;  other  insulating  materials,  125  per  cent;  magnetic  sheet 
steel,  280  per  cent;  labor  from  85  per  cent  to  90  per  cent. 

(o)  Cost  of  new  money. — Tlie  destruction  of  capital  incident  to  the 
World  War  and  the  unprecedented  demand  of  the  Government  and 
industries  for  money,  resulted  in  largely  increasing  the  interest  rate 
for  loans.  More  attractive  loans  are  now  absorbing  money  available 
for  investment,  leaving  the  electric  railways  where,  even  with  credit 
restored,  they  would  have  to  compete  in  the  money  market  with 
prosperous  and  unregulated  enterprises. 

These  factors,  and  more  particularly  the  increase  in  wages,  fuel, 
material,  and  supplies,  during  and  since  the  war  period,  have  brought 
the  electric  railway  industry  to  the  point  where  m  many  instances  it 
may  be  forced  to  abandon  public  service,  and,  in  most  cases,  to  a 
point  where  it  will  be  unable  to  secure  new  capital  to  enable  it  to 
refund  maturing  obligations,  secure  new  equipment,  and  to  make  • 
necessary  extensions  and  improvements  unless  some  solution  of  the 
situation  can  be  found. 

Section  IV. 

EMERGENCY  RELIEF. 

The  evidence  in  this  case  shows  that  the  State  regulating  commis- 
sion and  in  a  large  number  of  cases  the  local  tribmials  have  recog- 
nized that  it  has  been  necessary  to  grant  emergency  relief  to  secure 
to  the  communities  the  service  of  the  electric  railways. 

With  commendable  initiative  and  ofttimes  against  a  hostile  pub- 
lic sentiment,  the  regulating  officers  have  granted  temporary 
increases  in  the  fares  ^vithout  undertaking  to  determine  the  value 
of  the  plants  or  make  a  long  and  exhaustive  investigation.  Very 
little,  if  any,  criticism  was  made  to  us  against  State  regulating  com- 
missions for  their  treatment  of  these  utilities  during  the  war  period. 
The  most  serious  difficulties  were  met  with  in  communities  where 
the  charge  w^as  fixed  by  franchises,  and  the  State  authorities  were 
without  jurisdiction  to  rc^ulato  fares.  During  a  war  or  other  abnor- 
mal periods  it  would  seem  to  be  the  duty  of  the  State  and  municipal 


: 


2272        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

oflficors  to  deal  promptly  with  petitions  for  increased  fares  and  to 
afford  such  relief  as  will  enable  the  street  railway  to  serve  the  public 
and  maintain  its  track  and  equipment  in  proper  operating  condition. 
The  public  always  pays  for  a  run-down  plant,  either  throuo:h  inferior 
service  or  higher  charges.  The  first  essential  is  service  to  the  public. 
Due  recognition  of  this  fact  will  secure  to  the  investor  a  safe  return 
upon  his  investment  and  to  the  public  uninterrupted  operation. 

Section  V. 

CREDIT  AND  COOPERATION  ARE  THE  COORDINATE  NEEDS  OF  THE 

ELECTRIC  RAILWAY. 

It  is  clear  from  this  record  that  the  two  serious  needs  in  the  electric 
railway  situation  to-day  are  its  need  of  credit  and  its  need  of  coop- 
eration between  the  public  and  the  utility. 

Credit  will  enable  the  electric  railways  to  rehabilitate  themselves, 
to  adjust  their  capital  accounts,  and  to  meet  the  prices  of  normal 
replacements  which  are  now  upon  higher  price  levels.  The  coopera- 
tion of  labor  will  enable  them  to  render  continuous  and  popular 
service,  to  effect  operating  economies,  and  to  get  into  their  treasuries 
the  full  amount  ot  revenue  collected  from  the  riding  public.  First- 
class  credit  and  the  full  cooperation  of  their  employees,  if  properly 
utilized  in  rendering  adequate  public  service,  would  give  the  electric 
railways  a  well-nigh  impregnable  position  in  their  relations  to  the 
public  and  tend  to  disarm  and  overcome  the  prevailing  antagonism 
against  them.  With  capital  and  labor  performing  their  respective 
parts  freely  and  well,  restrictive  regulation  would  be  unpopular,  and 
the  demand  for  the  substitution  of  public  ownership  and  operation 
for  private  management  would  shrink  into  relative  insignificance. 
The  test  of  private  ownership  and  management  lies  in  the  solution 
of  these  two  problems  of  credit  and  cooperation.  These  problems 
must  be  solved,  and  if  no  solution  is  practicable  under  present  owner- 
ship and  control,  then  the  only  coui*se  open  is  the  complete  transfor- 
mation of  the  electric  railway  industry  into  a  governmental  business. 
Each  member  of  this  Commission  believes  that  credit  can  be  secured 
and  private  operation  maintained  under  public  supervision. 

Unless  the  confidence  of  the  investor  in  the  securities  of  the  com- 
panies furnishing  this  essential  public  service  be  restored  the  public 
itself  must  in  some  way  assume  the  burden  of  supplying  the  funds 
necessary  for  their  continuance.  To  a  degree  unknown  to  private 
business  enterprises,  which  to  a  certain  extent  are  able  to  finance 
capital  expenditures  from  earnings,  the  electric  railways  are  depend- 
ent upon  new  investment — new  capital — for  the  extension,  improve- 
ment, and  betterment  of  the  service  which  they  perform.  Commu- 
nities need  and  are  constantly  demanding  additional  local  transpor- 
tation facilities.  They  require  large  sums  of  money,  which  can  only 
come  from  those  with  savings  to  invest.  When  the  flow  of  new 
capital  ceases,  when  the  confidence  of  the  investor  in  the  ability  of 
the  enterprise  to  safeguard  the  integrity  of  the  investment  and  to 
insure  a  fair  return  thereon  ceases,  new  capital  is  unobtainable  and 
the  utility  can  no  longer  serve  the  purpose  for  which  it  was  created. 

This  condition  is  now  present.  Lack  of  confidence  in  electric 
railway  investment  exists  to-day  to  a  degree  which  has  caused  a 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2273 

partial  paralysis,  is  working  havoc  with  the  finances  of  the  companies, 
and  is  depriving  the  public  of  the  service  to  an  alarming  extent. 
•  For  rehabilitation  and  improvements  and  extensions  which  are 
vitally  needed  to  meet  the  requirements  of  every  growing  commu- 
nity new  capital  at  once  and  in  large  amounts  is  imperatively 
required,  and  until  the  force  of  circumstances  convinces  those  with 
capital  at  their  disposal  that  investment  in  electric  railway  securi- 
ties affords  safety  and  a  fair  return  it  can  not  be  obtained. 

So  far  as  the  requirements  in  normal  times  are  concerned,  certain 
characteristics  of  the  electric  railways  and  certain  conditions  under 
which  thev  operate  tend  to  make  their  credit  almost  unlimited.  In 
the  first  place^  they  have  enjoyed  a  monopolar  of  the  most  convenient 
form  of  local  transportation  dui-ing  a  period  of  rapid  industrial 
development  and  of  rapid  increase  in  urban  population.  They  have 
a  continuous  and  immediate  market  for  their  ''goods."  They  sell 
transportation  as  it  is  produced.  While  electric  railway  traffic 
fluctuates  somewhat  from  year  to  year,  according  to  the  number  of 
passengers  and  the  prosperity  that  prevails,  and  fluctuates  somewhat 
from  season  to  season,  from  week  to  week,  and  from  day  to  day,  these 
fluctuations  are  relatively  unimportant.  The  business  of  trans- 
portation goes  on  every  day  in  the  year.  Under  normal  conditions 
the  credit  of  the  electric-railway  business  is  its  relatively  small  need 
for  "fluid"  or  working  capital.  In  this  respect  it  occupies  a  position 
more  independent  than  that  of  any  other  utility  or  any  other  private 
industry.  It  does  a  cash  business.  Almost  100  per  cent  of  its  reve- 
nues are  collected  in  advance,  through  the  sale  of  tickets  or  at  the  time 
the  service  is  rendered,  from  the  collection  of  fares  in  the  cai-s.  Money 
flows  into  its  coffers  day  by  day  in  a  relatively  even  stream.  Before 
it  pays  the  wages  of  its  employees,  the  salaries  of  its  oflftcers,  the 
claims  resulting  from  injuries  and  damages,  the  rentals  for  the  use 
of  property,  the  interest  and  dividends  on  its  investment,  or  its  taxes, 
it  has  already  collected  from  its  patrons  in  cash  full  compensation  for 
the  seryice  rendered.     It  does  not  send  out  bills. 

The  increase  in  revenues  of  the  electric  railways  is  a  product  of 
three  lines  of  expansion.  These  are  the  increase  in  urban  population, 
the  increase  in  the  riding  habit,  and  the  increase  in  the  rate  of  fare! 
The  gross  operating  revenues  of  the  electric  lailways  grew  from 
$247,000,000  in  1902  into  1630,000,000  in  1917— an  increase  of  163 
per  cent.  For  a  number  of  years,  particularly  during  the  first  decade 
of  the  century,  there  was  a  strong  tendency  toward  fare  reductions 
in  man V  urban  communities,  but  the  evidence  shows  that  for  the  coun- 
try at  large  the  total  amount  of  electric  railway  operating  revenues 
increased  by  a  much  greater  per  cent  than  the  number  of  revenue 
passengers  during  the  15  years  ended  with  1917.  Since  the  latter 
date  there  has  been  a  strong  upward  tendency  in  street  railway  fares. 
Statistics  covering  75  per  cent  of  the  electric  railway  traffic  of  the 
country  indicate  an  increase  of  nearly  14  per  cent  in  the  average  fare 
paid  from  1917  to  1919,  and  an  increase  of  about  22  per  cent  in 
passenger  earnings  during  this  two-year  period. 

Without  a  doubt  the  enjoyment  oy  the  electric-railway  industry 
of  a  steady  inflow  of  revenue  of  rapidly  increasing  volume,  assured  by 
the  most  fundamental  conditions  of  modern  life  and  the  strongly 
developed  habits  of  the  people,  is  extremely  favorable  to  credit.  In 
what  other  industry  could  investment  be  made  with  greater  assurance 


2274        PfiOCEEDINGS  OF  FEDERAL  ELECrRIC  RAILWAYS  COftlMISSION. 

of  security  and  continued  earning  power?  The  tradis  for  the  most 
part  are  in  the  public  sUeets  where  everybody  can  see  them.  Tho 
operation  of  the  cars  is  most  conspicuous.  It  would  be  hard  to  find 
another  industry  where  tlie  investment  is  completdy  visible  to  all 
and  so  freely  oDserved  hj  the  entire  population.  If  publicity  of 
o]>eration  is  &  guaranty  against  the  waste  and  disappearance  of  capitd . 
then  the  position  of  the  electric  railway,  where  everybody  can  OfhservA-; 
it  every  day,  is  surely  conducive  to  the  development  and  retention 
of  credit.  From  this  viewpoint  how  different  is  a  street-railway 
investment  from  an  investaient  in  mining  stock  or  in  the  fruit  laiuls 
of  the  far  West,  or  even  in  manufacturing  enterprises  in  one's  homo 
city  ?  The  capital  stock  of  eJectri^*  railway's  does  not  require  to  ho 
refunded,  and  under  sound  financial  and  regulating  policies  the  pro- 
}K>rtioii  of  stocks  to  bonds  outstanding  womd  undoubtedly  be  much 
giciiter  than  is  shown  to  have  been  the  case.  Under  such  conditions 
refunding  difficiUties  woidd  be  about  negligible. 

The  record  is  not  cleai'  as  to  the  amount  of  new  money  which  may 
be  required  [y-ear  by  year,  but  a  verv  conservative  estimate  places  the 
figures  at  between  $175,000,000  and  S200y000,000  i>er  aimum,  to  be 
used  in  replacements,  ix?funding  obligations,  extensions,  and  improve- 
ments. 

For  the  puipose  of  restoring  credit,  it  seems  to  be  tlie  gejieral 
impression  of  all  witnesses  that  the  first  necessity  is  for  the  industry 
to  put  into  effect  such  economies  of  operation  as  will  enable  it  to 
give  good  service  at  the  lowest  cost.  Generally  speaking,  this  can 
be  done  by  tJie  elimination  of  deadheads  and  other  free  service,  the 
abandonment  of  nonprofitable  lines,  and,  where  practicable,  tlie 
substitution  of  one-man  cars  for  heavier  equi|)ment,  the  modification 
of  special  taxes  or  provisions  for  paving,  snow  removal,  street  closing, 
tolls,  contributions  toward  tlie  cost  of  public  highways,  bridges,  etc, 
reduction  of  such  rentals  and  power  rates  as  may  on  investigation 
prove  excessive,  the  cooperation  with  the  public  in  developing  fas  tea* 
schedules  and  installing  skip  stoj^s  at  convenient  places,  rei'outing  of 
cars,  the  use  of  trailer  cars,  keeping  street  car  tracks  clear  of  traffic 
and  other  congestion,  due  to  parking  of  motor  cars  on  eurbs,  and  the 
regulation  of  veliicular  traffic.  Much  can  also  be  done  toward 
reduction  in  the  cost  of  operation  by  developing  the  proper  spirit  of 
cooperation  with  employees.  All  of  the  matters  herein  suggested 
properly  come  under  the  head  of  good  mana^ment  and  regiuation 
and  in  some  cases  would  entail  legislation,  but  in  our  judgment  they 
do  not  wholly  solve  the  street  cai*  problem,  or  invite  necNoed  capital 
into  the  industiy.  During  the  |)ast  two  years  efforts  have  been  made 
to  meet  the  difficulty  by  increasing  fares.  In  many  cases  tliis  has 
helped  to  tide  them  over  a  difficult  ]>eriod,  but  it  has  not  stimulated 
the  confidence  of  the  investor  in  the  integiity  of  the  industry.  New 
capital  is  not  flowing  in  that  direction. 

An  effort  has  also  been  made  in  a  number  of  eommuiiities  to 
increase  tlie  short-haul  riding  habit  as  well  as  the  revenues  by  the 
introduction  of  the  zone  system  for  fares.  This  system  has  proven 
generally  successful  in  some  of  the  European  countries,  but  it  has 
met  witJi  varying  success  in  the  United  States.  Fundamentally  the 
theoiy  of  the  zone  system  is  logical.  It  is  that  a  passenger  \mys  for 
what  he  gets.  Under  the  present  fiat  fare  eharge,  the  short-haul 
rider  is  paying  far  a  service  given  to  the  long-haul  rider. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSIOK".        2275 

The  original  failure  of  the  electric  railways  to  vary  their  rates  of 
fare  for  transportation  service,  based  upon  the  length  of  the  ride,  as 
services  in  all  other  lines  of  business  are  sold,  is,  in  our  judgment,  one 
of  the  contributing  factors  to  their  present  financial  condition.  The 
electric-railway  industry  is  the  only  public  utility  which,  as  an 
industry,  has  consistently  adhered  to  a  flat  basis.  Steam  and 
suburban  roads  charge  on  a  distance  basis.  Gas,  power,  electric,  and 
water  power  companies,  generally,  make  their  rates  upon  a  measured 
basis,  subject  to  a  minimum  charge  per  month  ana  the  telephone 
company  grade  all  toll  messages  on  a  mileage  basis,  while  observing 
in  most  cases  a  flat  rate  per  month  for  local  service.  Whether  or  not 
under  present  conditions  it  would  be  to  the  interest  of  a  community 
to  introduce  a  zone  system  of  fares,  instead  of  the  present  flat  fare 
system,  is  a  question  which  we  think  should  be  decided  by  the  com- 
munity itself,  having  reference  to  the  social  problems  involved. 

Section  VI. . 

LABOR  ON  STREET  RAILWAYS. 

The  labor  policies  of  the  electric  street  railways  will  in  the  future 
be  of  great  importance  as  an  element  in  the  restoration  and  the 
permanent  maintenance  of  their  credit.  The  full  cooperation  of 
labor  is  essential  to  the  highest  prosperit}'  and  usefulness  of  the 
industry.  This  is  particularly  true  because  in  the  case  of  the  street 
railways  the  employees  who  immediately  handle  the  service  come 
into  direct  contact  with  the  people  who  consume  that  service. 

The  evidence  before  this  C^ommission  shows  that  in  the  past  the 
suspension  of  service,  due  either  to  strikes  or  lockouts,  has  been 
costly  to  both  the  employees  and  to  the  operating  company,  but  the 
loss  occasioned  to  those  two  groups  has  been  secondary  to  tlie  damage 
wrought  to  the  pubhc  interest.  The  conditions  wliich  recurrently 
bring  about  such  interruptions  of  service  should  be  treated  at  their 
roots.  The  employees  engaged  in  this  occupation  should  have  a 
living  wa^c  and  humane  hours  of  labor  and  working  conditions. 
They  should  have  the  right  to  deal  coUectivelj^  with  their  employers 
through  committees  or  representatives  of  their  own  selection.  In  all 
contracts  and  working  agreements  made  between  them  and  the 
employing  companies  there  should  be  arbitration  provisions  under 
which  all  labor  disputes  which  can  not  be  voluntarily  settled  shall 
be  submitted  to  boards  of  arbitration  composed  of  disinterested 
persons.  The  award  of  such  a  board  of  arbitration  should  be  final 
and  binding  upon  both  parties  to  the  controversy;  for  it  is  intolerable 
that  the  transportation  service  of  a  city  should  be  subject  to  occa- 
sional paralysis,  whether  bv  strikes  or  by  lockouts.  It  would  seem 
that  public  authorities  could  well  interest  themselves  in  the  formula- 
tion of  such  plans  and  rules  for  the  arbitration  of  labor  disputes 
under  these  contracts  as  will  secure  justice  to  both  parties  and  as 
will  assure  continuity  of  service  in  so  far  as  that  ma}^  be  possible  of 
achievement. 

But  the  fiifl  cooperation  of  labor  in  the  street-railway  industry  will 
not  have  been  brought  about  alone  by  the  recognition  of  the  right  of 
collective  bargaining  which  we  have  just  been  urging.  Such  recog- 
nition is  but  a  foundation  for  full  cooperation.  The  actual  work  of 
insuring  it  must  come  from  the  employees  themselves  to  whom  the 


2276        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

right  of  collective  bargaining  is  thus  given.  For  that  right  carries 
with  it  a  duty.  It  would  seem  to  be  the  duty  of  the  organization 
which  bargains  for  the  individual  worker  to  interest  itself  actively 
and  unremittingly  in  his  delivering  to  the  company  his  best  strength 

and  intelligence. 

This  Commission  thinks  that  where  the  street-railway  worker  has 
the  right  of  collective  bargaining  the  public  has  the  right  to  expect 
that  tlie  organization  or  association  representing  him  will  not  only 
procure  his  wage,  but  will  also  continuously  stimulate  his  whole- 
hearted constructive  cooperation  with  the  company  and  liis  effective 
service  to  the  public. 

Section  VII. 

VALUATION. 

It  is  the  law  that  utilities  are  entitled  to  a  fair  return  upon  the 
value  of  their  property  used  in  public  service  at  the  time  of  the 
inquiry.  The  methods  for  finding  fair  value  are  in  dispute.  No 
permanent  solution  of  the  electric  railway  question  can  be  found  in 
the  absence  of  a  finding  of  value  for  rate-making  purposes.  This 
applies  to  commission  form  of  regulation,  cost-of-service  contracts, 
or  public  ownership  and  operation.  The  public  should  know  what 
it  is  paving  for,  and  this  question  can  not  be  settled  without  knowing 
what  tne  property  is  worth. 

Although  some  evidence  was  introduced  before  this  Commission  on 
the  subject  of  valuation,  the  Commission  discouraged  the  intro- 
duction of  testimony  upon  this  question  mainly  because  such  testi- 
mony, no  matter  over  how  many  weeks  or  months  it  might  be 
extended,  would  have  been  but  a  fragmentary  duplication  of  materia! 
already  available  in  the  official  records  of  the  Interstate  Commerce 
Commission.  Pursuant  to  an  amendment  of  the  Act  to  Regulate 
Commerce,  approved  March  1,  1913,  which  amendment  is  known  as 
the  Valuation  Act,  the  Interstate  Commerce  Commission  has  during  the 
past  seven  years  been  engaged  in  valuing  the  steam  railroads,  tele- 

fraph,  and  long-distance  telephone  companies  in  the  United  States, 
n  connection  with  this  work  it  has  carried  on  a  most  extensive 
investigation  into  the  subject  of  valuation  for  rate-making  purposes, 
in  the  course  of  which  investigation  the  carriers  have  been  represented 
by  a  conference  committee  of  50,  assisted  by  able  lawyers,  account- 
ants, and  engineers,  while  the  public  has  been  represented  by  the 
State  public  utility  commissioners,  their  counsel,  and  by  the  General 
Counsel  of  the  Interstate  Commerce  Commission.  Every  theory  and 
principle  of  valuation  has  been  fully  and  ably  discussed,  argued,  and 

Driefed.  ^         .    .  »     •       i 

On  July  31,  1918,  the  Interstate  Commerce  Commission  submitted 
its  report  in  Valuation  Docket  No.  2,  Texas  Midland  Railway.  This 
report  contains  a  full  discussion  of  the  different  theories  of  valuation 
considered,  the  method  employed  by  the  Commission  in  assembling 
all  the  essential  data,  and  discussion  of  the  requirements  of  the 
Valuation  Act,  and  the  findings  of  the  Commission  irpon  most  of  the 
disputed  questions.  Subsequent  decisions  were  made  in  the  case  of 
the  Winston-Salem  Southbound,  Alabama,  Birmingham  &  Atlantic, 
and  Kansas  City  Southern  Railroads.  We  are  informed  that  deci- 
sions affecting  many  of  the  other  railroads  will  be  made  during  the 
present  3^ear. 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2277 

The  first  requirement  of  the  Valuation  Act  is  for  finding  of  original 
cost.  The  Commission  is  reporting  original  cost  as  fully  as  it  possibly 
can  be  obtained  from  the  best  available  evidence  in  each  particular 
case.  In  its  valuation  proceedings  it  has  been  earnestly  contended 
that  the  cost  of  reproduction  new  as  of  the  date  of  inquiry  should 
})e  taken  to  be  the  value  of  the  property.  Others  have  contended 
with  equal  earnestness  that  the  value  of  the  property  should  be 
limited  to  the  original  cost,  as  this  item  represents  the  money  which 
has  been  actually  invested  by  the  stockholders  and  bondholders  in 
the  property.  The  rapid  increase  in  the  cost  of  labor,  supplies,  and 
material  during  and  subsequent  to  the  war  period  seems  to  have 
served  as  a  peculiarly  vivid  indication  that  the  original  cost  is  a 
primary  factor  in  finding  value  for  rate-making  purposes. 

In  our  opinion,  the  decisions  of  the  Interstate  Commerce  Commis- 
sion, based  upon  long  experience  and  investigation,  will  in  large 
measure  settle  the  standards  of  valuation.  For  this  reason  we  suggest 
that  municipalities  and  States  which  may  be  engaged,  by  arbitration 
or  otherwise,  in  fixing  the  values  of  electric  railways,  should  familiar- 
ize themselves  with  the  practice,  experience,  and  decisions  of  the 
Interstate  Commerce  Commission  in  these  valuation  cases. 

The  valuation,  when  once  fixed  as  the  basis  for  the  financial  return 
of  the  company,  should  logically  come  to  affect  the  amount  of  capitali- 
zation. No  matter  what  may  be  the  plan  of  operation  or  of  public 
regulation  under  which  the  company  is  working,  if  its  financial  credit 
IS  to  be  strengthened  through  just  and  stable  arrangements  with  a 
friendly  public,  it  should,  in  the  judgment  of  this  Commission, 
voluntarily  reduce  any  excessive  capitalization  to  conform  to  such 
valuation  as  may  have  been  determined  upon. 

Section  VIII. 

PRESERVATION  OF  RECORDS. 

We  would  particularly  urge  public  officials  and  oflficers  of  the 
electric  railways  to  cooperate  seriously  in  the  protection  and  preser- 
vation of  all  corporate,  financial,  and  cost  records. 

Service-at-cost  plans  have  been  recently  rejected  by  popular  vote, 
largely  on  the  issue  of  valuation,  in  Chicago,  Denver,  and  Minne^ 
apohs.  The  public,  justly  or  unjustly,  has  become  so  suspicious 
of  the  electric-railway  companies  that  it  may  be  expected  to  reject 
any  service-at-cost  or  public  ownership  question  submitted  to  pop- 
ular vote,  no  matter  how  fairiy  the  plan  may  be  formulated,  if  it 
IS  not  thoroughly  convinced  that  the  capital  item  has  been  fairly 
and  honestly  arrived  at.  The  failure  of  a  company  to  preserve  its 
records  may  in  the  end  hurt  its  stockholders  more  than  it  may  the 
public. 

Section  IX. 

AUTOMOBILE,  JITNEY,  AND  MOTOR  BUS. 

The  automobile  and  jitney  bus  are  facts.  Jitney  competition 
began  about  1912,  and  was  at  first  entirely  unregulated.  Even  to- 
day m  some  places  it  continues  without  regulation  of  any  kind,  and 
in  many  places  with  only  partial  and  inefficient  regulation.  In 
no  instance,  so  far  as  this  record  shows,  has  this  so-called  jitney 

160643—20 15 


1 


2278        PBOCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION, 

carriage  of  passengers  been  subjected  to  obligations  as  to  the  payment 
of  taxes,  maintenance  of  highways,  character  and  extent  of  service, 
and  financial  responsibility  for  accidents  mider  which  the  electric 
railway  business  is  being  conducted.  The  portion  of  the  street  paved 
and  maintained  by  the  electric  railway,  ana  in  winter  cleared  oi  snow 
at  its  own  expense,  is  taken  advantage  of  by  the  jitney  competitor 
without  compensation  either  to  the  company  or  to  the  munici- 
pality, and  often  to  the  serious  injury  of  the  street  railway  by  inter- 
lering  with  the  prompt  and  regular  movements  of  its  cars.  Tlie 
jitneys  prefer  to  confine  themselves  almost  exclusively  to  the  short- 
haul  traffic.  It  appears  that  in  the  city  of  Bridgeport  the  jitneys 
carry  about  50  per  cent  of  the  passengers  riding  within  IJ  miles  of 
the  center  of  the  city;  almost  69  per  cent  of  the  passengers  riding 
between  li  and  2  miles  from  the  center;  a  fraction  less  than  45  per 
cent  of  those  riding  between  2  and  22  miles  from  the  center;  and 
none  riding  more  tnan  2J  miles  from  the  center  of  the  city. 

The  question  from  the  f>oint  of  view  of  the  street-railway  service 
is,  What,  if  anything,  is  to  be  done  about  them  ?  The  public,  through 
its  governmental  agencies,  would  not  concern  itself  with  the  eflfecta 
of  tiiis  competition  if  it  were  not  that  local  transportation  is  recog- 
nized to  be  an  essential  public  service.  So  far  as  private  automobiles 
are  concerned,  although  they  midoubtedly  have  tneir  effect  upon  the 
extent  to  which  people  make  use  of  the  street  cars,  they  are  even 
now  less  important  than  human  legs  as  competitors  of  the  electric 
railways,  and  it  is  not  deemed  to  be  consonant  with  the  theory  of 
American  institutions  and  government  that  the  free  movement  of 
private  citizens  by  their  own  means  of  locomotion  should  be  re- 
stricted in  order  to  compel  them  to  make  use  of  public  vehicles, 
whether  the  latter  be  operated  by  private  agencies  or  directly  by 
the  Government.  All  that  could  be  properly  done  in  this  direction 
would  be  to  compel  the  private  vehicle  using  the  public  highways 
to  pay  license  fees  or  taxes  proportionate  to  the  burdens  they  place 
upon  the  highways,  as  compared  with  the  burden  placed  upon  tlie 
hi^ways  by  the  street  cars. 

While  there  is  some  diversity  of  opinion  as  to  the  permanency  of 
the  electric  railway  industry,  in  view  of  the  improvements  which  are 
being  made  in  the  use  of  gasoline  and  electric  power  machines,  the 
opinion  appears  to  be  nearly  unanimous  that  the  electric  railway 
operating  on  tracks  is  the  most  efiicient  means  of  furnishing  local  trans- 
portation service  in  the  urban  centers.  The  future  of  the  gasoline 
public  conveyance  in  urban  transportation  is  entirelv  unreckonable. 
Great  strides  have  been  made  and  greater  strides  will  doubtless  yet 
be  made  in  its  use.  Local  public  authority  would  indeed  be  exer- 
cising a  dangerous  power  in  unduly  restrictmg  the  use  of  new  inven- 
tions for  public  transportation  at  a  time  when  in  nearly  every  large 
city  the  physical  task,  even  for  an  electric  railway  well  equipped,  of 
carrying  the  public  in  decent  comfort  is  becoming  so  formidable 
If  jitneys  and  automobile  buses  acting  as  common  carriers  were 
subject  to  regulation  by  State  commissions  and  were  required  to 
procure  a  certificate  of  public  convenience  and  necessity  before 
establishing  a  route  or  undertaking  to  render  public  service,  the 
motor  vehicles  would  be  prevented  from  entering  into  active  com- 
petition with  street  car  service  unless  the  latter  is  shown  to  be  wholly 
inadequate. 

That  street-railway  service  and  jitney  service  can  not  permanently 
exist  and  pay  their  own  waj'  in  competition  with  each  other  undor 


PBOCEEDtBTGS  OF  FEI^RAL  ELECTRIC  RAILWAYS  COMMISSION.        2279 

any  ordinary  urban  conditions  seems  to  be  v/ell  established  by 
experience  and  by  the  conditions  inherent  in  local  transportation 
service,  but  the  belief  is  general  that  the  motor  bus  may  property 
be  used  to  supplement  the  service  rendered  by  the  street  cars.  The 
motor  bus  may  be  used  to  render  a  sort  of  supplementary  service, 
such  as  the  service  now  rendered  on  Fifth  Avenue  and  certain  other 
high-grade  residential  streets  in  Kew  York  City  by  the  Fifth  Avenue 
Coach  Co.,  or  the  buses  may  be  operated  on  other  independent  routes 
merely  as  feeders  to  the  street  railway  system  to  take  care  of  traffic 
in  partially  developed  territory  in  advance  of  the  time  when  street 
railway  tracks  can  oe  laid  with  reasonable  assurance  that  the  invest- 
ment will  be  self-sustaining. 

Undoubtedly,  the  whole  matter  of  the  control  or  abolishment  of 
jitney  competition  may  be  summed  up  in  a  few  words.  All  trans- 
portation service  is  for  the  public.  Jitneys  and  automobile  buses 
can  not  be  repressed  merely  for  the  sake  of  compelling  people  to 
ride  on  the  street  cars,  particularly  if  the  car  fares  are  higher  than  the 
jitney  fares  and  the  car  service  less  convenient  than  the  jitney  serv- 
ice. However,  it  is  clearly  in  the  pubKc  interest  that  all  common 
carriers  engaged  in  local  transportation  service  should  be  required 
to  render  adequate  and  safe  service,  and  that  local  transportation 
faciUties  should  be  developed  in  the  most  economical  and  effective 
way  from  the  point  of  view  of  the  communit}^  Unnecessary  and 
destructive  competition  ought  not  to  be  permitted,  and  the  com- 
munity at  large  should  conserve  the  established  facility  that  still 
is  and  promises  to  continue  for  an  indefinite  period  tlie  principal 
means  of  local  transportation.  Tlie  problem  in  a  considerable 
measure  is  a  local  one,  but  in  every  case  it  should  be  solved  with 
intelligent  regard  to  the  permanent  interests  and  obligations  of  the 
community.  If  the  street  railways  are  to  be  allowed  the  benefits  of 
even  a  qualified  monopoly,  they  should  be  required  to  fulfill  their 
obligations.  They  must  render  service  that  is  adequate  and  con- 
venient at  rates  that  are  attractive.  The  commimity  can  afford 
to  go  a  long  way  to  preserve  street-railway  service,  and  the  efficient 
regulation  of  jitney  and  motor  bus  competition  will  aid  considerably 
in  restoring  the  confidence  of  investors  in  the  future  of  the  electric- 
railway  industry  and  in  increasing  their  gross  and  net  revenues. 

Section  X. 
DEPRECIATION. 

The  electric  railways  should  adopt  the  policy  of  setting  aside  a 
depreciation  fund  with  which  to  take  care  of  replacements  and  thus 
preserve  the  integrity  of  their  investment.  It  would  have  a  very 
wholesome  effect  upon  credit.  Such  has  not  been  the  practice  in 
the  past.  Deferred  maintenance  has  accumulated  to  an  alarming 
extent  during  the  vv  ar  period. 

Generally  speaking,  regulating  commissions  have  the  power  to 
prescribe  methods  of  accounting  and  to  establish  the  amount  of  the 
depreciation  fund.  Tliis  practice  slrould  be  observed,  and  its  adop- 
tion will  improve  the  situation  of  the  industry  and  be  greatly  in  the 
interest  of  the  public  welfare. 


2280        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Section  XI. 

EXTENSIONS  SHOULD  BE  PAID  FOR  BY  ASSESSMENTS  ON  OUTLYING 

PROPERTY  BENEFITED. 

Your  Commission  would  urge  that  in  every  community,  where  and 
to  such  extent  as  may  be  practicable,  consideration  be  given  to  the 
advisability  of  requiring  extensions  and  rapid  transit  systems  of 
subway  and  elevated  to  be  paid  for,  not  out  of  new  capital  invested 
through  the  medium  of  bonds  or  stock,  which  means  for  all  time  an 
added  burden  upon  the  car  rider,  but  from  special  taxes  assessed 
against  the  owners  of  property  in  the  district  the  value  of  which 
is  enhanced  by  such  extensions. 

This  would  not  be  a  new  principle;  it  would  be  merely  the  applica- 
tion of  an  old  principle.  The  American  property  owner  has  been 
accustomed  to  contributing  out  of  the  increase  in  value  of  his  property 
to  the  cost  of  building  streets  and  other  pubHc  improvements.  The 
principle  is  peculiarly  applicable  to  improvements  of  city  transporta- 
tion systems,  because  ot  the  enormous  increases  in  real  estate  values 
created  when  new  extensions  open  up  new  territory  or  when  the 
creation  of  rapid-transit  facilities  make  outlying  territory  more  avail- 
able. 

The  City  Club  of  New  York,  in  1908,  a  few  years  after  the  extension 
of  the  New  York  subway  from  One  hundred  and  thirty-fifth  to  Two 
hundred  and  thirtieth  Streets,  in  Manhattan,  had  been  Duilt  at  a  cost 
of  $7,375,000,  made  an  authoritative  study  of  new  real  estate  values 
created  by  that  extension  in  the  district  lying  between  One  hundred 
and  thirty-fifth  and  Two  hundred  ancf  thirtieth  Streets.  After 
deducting  $20,000,000  as  a  liberal  estimate,  based  upon  studies  of 
parallel  situations,  of  the  natural  increase  in  property  values  in  that 
district  which  would  have  taken  place  without  the  subway  extension, 
it  was  found  that  the  increase  in  values  clearly  brought  about  by  the 
subway  extensions  was  $49,200,000,  an  amount  upward  of  seven 
times  the  cost  of  the  improvements.  The  property  in  the  district 
enjoyed  an  increase  in  value  of  104  per  cent.  If,  by  assessment,  it 
had  borne  the  entire  cost  of  the  extension  in  the  district,  it  would 
have  still  retained  a  new  profit  on  the  value  of  the  land  of  89  per  cent, 
or  an  aggregate  of  $41,825,000  for  the  district.  The  Manhattan 
extension  just  referred  to,  together  with  The  Bronx  extension  beyond 
One  hundred  and  thirty-fiftn  Street,  cost  $13,075,000.  These  two 
extensions  directly  created,  in  a  limited  area  lying  near  those  exten- 
sions, new  land  values  solely  due  to  the  extensions  of  $80,500,000. 
Let  it  be  borne  in  mind  that  the  cost  of  the  entire  subway  system  from 
the  Battery  to  Two  hundred  and  thirtieth  Street  in  Manhattan  and 
to  Bronx  Park  was  about  $43,000,000. 

In  Philadelphia  recent  estimates  of  improvements  in  land  values 
expected  from  rapid-transit  projects  in  contemplation  have  been 
equally  enlightening.  Similar  results  would  be  certainly  obtained 
in  many  other  cities  by  studies  similar  to  that  made  by  the  City 
Club  of  New  York. 

Is  it  not  in  accordance  with  the  laws  of  economic  justice,  then, 
that  the  landowner,  as  such,  should  share  his  benefit  of  increased 
land  value  with  the  public  ?  Instead  of  the  cost,  $7,375,000,  of  the 
Manhattan  extension  being  borne  by  the  owners  of  the  land  in  the 
newly  served  territory,  it  was  capitalized  and  translated  into  an  an- 
nual charge  of  $350,000  or  more,  a  burden  which  had  to  be  borne  out 


i 


PROGEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2281 


of  the  car  fares  and  which  to-day  helps  to  intensify  the  financial 
predicament  in  which  the  company  finds  itself.  If  the  pubhc  pays 
out  of  its  fares  for  the  cost  of  maintaining  and  operating  the  line  wiiich 
will  bring  the  outlying  landowners  such  enrichment,  should  the  latter 
not  share  with  the  public  out  of  that  enrichment,  depending  upon 
the  degree  in  which  he  is  benefited,  by  paying  for  or  by  helping  to 
pay  for  the  initial  cost  of  construction  of  the  line  ?  That  such  a  solu- 
tion is  just  is  rather  significantly  shown  by  the  fact  that  in  a  number 
of  cities  landowners  in  outlying  districts  nave  offered  spontaneously 
to  contribute  large  sums  to  the  company  to  assist  it  in  constructing 
certain  extensions.  The  present  predicament  of  the  street-railway 
companies  is  in  many  places  partly  due  to  overbuilding,  a  fault 
traceable  to  political  or  business  pressures  exerted  by  speculators  in 
suburban  lands  who  had  little  or  no  financial  responsibility  in  con- 
nection with  the  street-railway  extensions  which  they  caused  to  be 
built  for  their  immediate  benefit.  This  action  of  the  suburban  land- 
owners of  certain  cities,  on  the  other  hand,  is  a  significant  expression 
of  enlightened  self-interest  and  a  sound,  constructive  recognition  of  a 
fundamental  principle  of  justice.  The  establishment  of  that  principle 
by  law,  whether  by  changes  in  city  ordinances,  State  statutes,  or 
State  constitutions,  should,  in  our  opinion,  not  be  delayed.  This 
thought  is  especially  recommended  to  the  attention  of  a  number  of 
communities  which  are  now  facing  the  necessity  of  extensions  or 
rapid-transit  improvements. 

Three  points  m  this  connection  should  be  briefly  touched  upon: 

First.  The  amount  of  the  assessment  on  any  owner  would  proba- 
bly have  to  become  fixed  by  an  appraisal  sometime  after  the  con- 
struction of  the  improvement,  and  the  owner  should  be  given  the 
option  of  paying  his  assessment  in  installments  over  a  course  of  years. 
Consequently  the  actual  first  financing  of  the  extension  might  have 
to  be  by  the  city. 

Second.  It  will  doubtless  be  urged  by  some  that  such  a  system  for 
building  extensions  would  lead  to  municipal  ownership.  On  the  con- 
trary, it  seems  to  us  that  if  properly  administered  it  could,  by  reduc- 
ing the  acuteness  of  the  fare  question,  serve  with  much  force  to  offset 
the  pressure  for  municipal  ownership. 

Third.  As  to  the  problems  incident  to  allowing  a  private  company, 
for  a  nominal  rent  and  in  return  for  undertakings  as  to  repair  and 
maintenance,  to  take  over  or  use  public  property,  similar  problems 
incident  to  similar  arrangements  have  already  been  ably  and  effec- 
tively handled  in  Boston  and  a  number  of  other  cities  under  State  or 
municipal  regulation  in  connection  with  subways  and  other  structures. 

If  objection  to  the  employment  of  such  principle  in  constructing 
extensions  be  made  upon  the  ground  that  pul)lic  officers  and  land- 
owners along  the  line  of  the  proposed  extension  are  thus  given  the 
power  to  veto  such  extension,  let  it  be  remembered  that  the  problem 
of  extensions  is  not  only  a  serious  financial  problem,  but  is  also  essen- 
tially and  finally  a  long-range  social  problem.  The  development  of  a 
city's  street  railways  should  be  guided  primarily  not  by  the  fortuitous 
financial  expediencies  of  a  small  group  of  bankers  or  real  estate 
operators.  It  should  be  guided  by  the  loresight  and  vision  of  those 
wno  are  officially  responsible  for  planning  the  city's  growth  and  life, 
in  terms  of  its  water  supply,  its  lignt,  its  streets,  its  sewers,  it-s  schools, 
its  parks,  its  playgrounds,  its  civic  centers,  its  night  a;musements, 


i 


2282      PBOCEEDmcs  of  federal  electric  railways  commission. 

its  community  life,  its  libraries,  its  hospitals.  It  should  be  guided 
l)y  those  whoso  public  duty  it  is  to  be  mterested  in  the  health  and 
happiness  of  the  average  city  toiler  and  his  family  of  growing 
chfldren. 

The  call  for  municipal  ownership  to-day  does  not  all  emanate  from 
dissatisfaction  with  the  service  in  a  narrow  sense  as  riding  facilities. 
It  is  largely  an  expression  of  feeling  on  the  part  of  many  that  the 
street  railway,  instead  of  helping  to  make  conditions  bearable,  is 
contributing  to  making  them  unbearable;  that  it  is  not,  with  the  func- 
tions and  powers  which  it  exercises,  accomplishing  what  it  might 
accomplish  to  reduce  the  abnormalities  of  city  life.  While  areas  within 
the  city  remain  undeveloped  and  unserved  by  adequate  transporta- 
tion, toiling  thousands  find  themselves  dragged  out  miles  farther,  not 
to  green  lawns  and  spaces,  but  to  a  repetition  of  the  same  ugly  con- 
gestion that  they  laiow  in  the  city.  The  time  will  come  when 
employers  and  educators  will  be  forced  to  take  cognizance  of  the 
impairment  in  working  efficiency  caused  by  such  inconveniences  as 
are  suffered  by  the  traveling  public  to-day.  The  time  is  approach- 
ing when  cities  will  find  it  necessary  to  extend  their  street  railways 
not  on  the  basis  of  new  property  values  or  the  earning  of  any  single 
lino  of  rails,  but  on  the  basis,  primarily,  of  what  win  be  most  con- 
sistent with  the  public  health  and  public  economy. 

These  motives  are  strongly  at  work  underneath  our  situation 
to-day.  The  public's  control  over  stock  issues,  service,  routes,  ex- 
tensions, etc.,  is  needed  to-day  not  only  in  order  that  as  part  of  a 
plan  for  restoring  the  credit  of  the  street  railways  the  commmiity's 
interest  may  be  protected  bv  the  guarantee  of  efficient  management, 
but  also  because  the  city  of  to-day  is  taking  a  more  conscious,  con- 
structive interest  in  the  city  of  to-morrow.  That  interest  can  be 
recognized  and  cared  for  under  private  operation  if  the  public  au- 
thorities have  the  suggested  controls.  If  such  controls  do  not  come 
into  effective  existence,  then  one  of  the  strongest  forces  making  for 
municipal  ownership  will  continue  to  exert  an  increasing  influence. 

Your  Commission  trusts  that  this  principle  of  paying  whollj;  or  in 
part  for  the  construction  of  extensions  out  of  special  taxation  of 
benefited  property  will  be  seriously  studied  and  adopted  where  pos- 
sible. It  seems  fundamentally  sound.  While  its  adoption  presents 
legal  difficulties,  as  has  the  adoption  of  many  another  newly  recog- 
nized industrial-economic  relation,  it  holds  great  promise  for  reduc- 
ing the  financial  problems  incident  to  public  transportation. 

Section  XII. 

RATE  OF  RETURN. 

It  is  an  axiom  that  property  devoted  to  the  public  use  should 
secure  a  fair  rate  of  return.  Where  money  is  represented  by  bonds 
the  return  is  a  part  of  the  contract  and  is  not  changed  during  the  life 
of  the  contract.  Where  capital  is  represented  by  stock,  the  rate  of 
return  may  vary  according  to  the  operating  or  financial  conditions, 
and  naturally  it  should  compare  favorably  with  the  income  upon 
other  classes  of  investment.  The  undisputed  testimony  proves  that 
the  rate  must  be  certain  as  well  as  reasonable  to  attract  capital  and 
that  the  absence  of  either  of  these  essentials  will  frighten  the  investor 
away.     It  may  be  a  lamentable  fact,  but  it  is  nevertheless  true,  that 


PHOCEEDLCTGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.         2283 

most  of  the  electric  railways  arc  obliged  to  go  to  markets  outside  of 
their  territory  to  secure  new  capital;  and  imder  existing  circum- 
stances the  investor  is  no  longer  willing  to  place  his  money  in  specu- 
lative properties.  The  experience  during  the  war  period  has  taught 
investors  that  a  fixed  franchise  fare  fails  to  meet  the  requirements  of 
the  industry  and  there  is  no  dissent  from  the  suggestion  that  such  a 
fixed  fare  is  a  relic  of  a  bygone  age.  There  are  certain  conspicuous 
examples  of  an  adherence  to  a  contract  fare  which  may  be  referred 
to,  but  they  do  not  affect  our  conclusion  that  the  rate  of  fare  must 
be  subject  to  prompt  revision  according  to  the  needs  of  the  par- 
ticular property. 

Section  XIII. 

REGULATION  OF  PUBLIC  UTILITIES. 

The  foundation  stone  of  the  relations  between  communities  and 
the  companies  must  be  the  local  authority  under  which  they  are  per- 
mitted to  conduct  business.  Since  practically  in  all  States  the  local 
government  alone  has  the  power  to  permit  the  use  of  highways  by 
electric  railways,  the  primary  authority  is  the  franchise  grant  or 
agreement  containing  the  permit.  Franchises  are  of  varying  terms 
and  conditions.  Until  recently  the  franchises  were  generally  limited 
to  a  certain  number  of  years,  but  now  it  seems  to  be  the  settled  con- 
viction that  such  contracts  are  inherently  imperfect.  A  reserve  fund 
set  aside  during  the  term  to  take  care  of  the  property  at  the  expira- 
tion of  the  franchise  would  result  in  increased  charges  for  services; 
and,  upon  the  other  hand,  the  failure  to  take  care  of  the  investment 
in  this  v/ay  leaves  the  company  at  the  will  and  caprice  of  the  public. 
Instances  have  been  referred  to  in  this  record  where  the  railways  arc 
having  difficulty  in  securing  new  franchises,  while  in  some  commimities 
there  seems  to  be  a  disposition  to  take  over  the  property  for  junk 
values.  Under  these  conditions  it  is  natural  for  the  company  to 
neglect  maintenance  and  give  poor  service.  From  the  evidence  it 
appears  that  there  will  be  difficulty  hereafter  in  securing  new  capital 
for  properties  that  are  governed  by  such  franchises. 

The  undisputed  testimony  favors  an  indeterminate  franchise  by 
which  the  company  is  permitted  to  operate  subject  to  the  right  of  the 
public  to  take  over  the  property  by  paying  its  value  or  agreed  price. 
Such  contracts  protect  both  the  investment  against  confiscation  and 
the  public  against  extortion  by  providing  for  payment  of  just  com- 
pensation for  the  use  of  the  property.  The  indeterminate  franchise 
has  been  most  thoroughly  developed  in  the  State  of  Wisconsin,  and 
it  has  been  recognized  in  the  District  of  Columbia,  and  the  States  of 
Indiana  and  Massachusetts.  Its  earlier  adoption  by  other  States 
and  conmiunities  would  have  prevented  many  conflicts  and  misunder- 
standings. We  believe  that  this  form  of  franchise  should  receive  the 
favorable  consideration  of  the  public. 

Prior  to  1907  the  regulation  of  electric  railways  was  principally 
confined  to  the  municipalities.  The  history  of  this  industry  is 
replete  with  examples  where  municipal  corruption  has  resulted  from 
this  control.  The  street  railway  is,  however,  essentially  a  local  insti- 
tution and  it  can  not  permanently  prosper  unless  it  has  the  confi- 
dence and  cooperation  of  the  public  which  it  serves. 

Since  1907  many  States  have  taken  over  the  control  and  regulation 
of  this  service  and  the  communities  within  those  States  have  been 


2284 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


deprived  of  all  jurisdiction.  While  the  evidence  shows  that  exclu- 
sive State  control  is  preferable  to  exclusive  municipal  control,  yet 
there  appears  to  be  a  happy  middle  ground  by  which  the  municipali- 
ties may  exercise  control  of  the  things  that  are  peculiarly  within  their 
province,  and  the  State  retain  jurisdiction  over  all  other  matters  and 
also  exercise  supervision  over  the  action  of  the  local  tribunals.  No 
general  rule  would  fit  all  cases. 

We  have  street  railways  which  do  not  extend  beyond  the  limits  of 
a  city,  others  where  two  or  more  systems  operate  in  the  same  city, 
while  frequently  a  single  company  operates  in,  through,  and  between 
a  large  number  of  cities  and  villages.  In  New  Jersey  one  system 
serves  practically  the  whole  State,  and  the  same  condition  exists  in 
Or>nnecticut.  Manifestly  no  rule  of  thumb  can  apply  to  these 
different  conditions,  "fhe  tendency  is  to  extend  the  mileage  and 
service  of  street  railways  and  to  unite  different  companies  under  one 
management,  and  as  our  cities  and  villages  grow  and  the  rural 
country  becomes  more  populous  and  prosperous  these  electric  rail- 
ways will  extend  their  lines  to  meet  the  growing  demands.  Under 
such  conditions  safety,  efficiency,  and  economy  will  be  promoted  by 
extending  to  a  superior  regulatory  board  the  control  of  the  practices, 
rules,  regulations,  security  issues,  the  system  of  accounts,  and  the 
charges  to  be  paid  for  the  service. 

Effective  local  control  is  well-nigh  impossible  where  a  single  com- 
pany spreads  out  over  an  entire  section  ol  the  State  and  this  condition 
even  constitutes  a  serious  obstacle  to  municipal  ownership.  Where 
the  street  railway  company  operates  wholly  within  one  city  there 
can  be  no  insuperable  objection  to  exclusive  municipal  control,  when 
the  people  are  ready  and  willing  to  exercise  it.  Secretary  Baker 
testified  upon  this  point  as  follows: 

Because  I  think  the  responsibility  for  the  management  of  its  own  affairs  is  the 
greatest  educational  influence  that  the  city  of  Cleveland  has.  The  fact  that  the  people 
of  the  city  had  studied  and  grasped  and  solved  an  intricate  and  complicated  problem 
like  the  street-railway  problem  has  made  them  a  more  self-conscious  and  a  stronger, 
more  virile  people  than  they  were  before  that  problem  was  put  up  to  them;  and  I 
should  be  very  sorry  indeed  to  see  the  re3ponsibility  for  their  own  affairs  in  as  intimate 
and  important  matter  as  street-railway  service  taken  away  and  transferred  to  a  State 
agency. 

Cleveland  has  made  a  more  extensive  study  of  the  electric  railway 
problem  than  any  other  city  in  the  country.  Intelligent  regulation 
can  not  be  secured  without  the  assistance  of  expert  operative,  statis- 
tical, and  engineering  departments,  and  these  are  expensive  items  in 
any  municipal  budget. 

In  some  respects  uniformity  is  not  only  desirable  but  essential. 
This  applies  to  the  control  of  security  issues,  to  accounting,  the  study 
and  determination  of  depreciation  and  the  control  of  such  funds, 
fixing  reasonable  maintenance  standards  and  their  enforcement,  and 
the  methods  and  principles  to  be  employed  in  valuing  properties, 
either  for  rate  making,  capitalization,  condemnation,  or  purchase. 
In  a  general  way,  the  rules  and  principles  which  may  be  applied  to 
the  electric  railway  industry  wiU  be  found  available  for  other  utilities, 
such  as  telephone,  electric  light,  heating,  power,  and  gas  and  water 
companies.  In  our  judgment  the  State  public  service  commissions 
should  determme  finally  these  matters,  subject,  of  course,  to  an 
appeal  to  the  courts  where  they  err  in  judgment  or  transgress  the  law. 


k 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.        2285 

Rogidation  by  municipalities  should  be  subject  to  an  appeal  to  the 
State  public  ser\nce  commission,  thus  bringing  to  bear  upon  the  mn«- 
tion  involved  the  judgment  of  a  body  of  men  somewhat  aloof  from 
local  influences.  This  would  place  the  final  authority  in  the  State 
and  surely  the  communities,  wnich  are  but  subdivisions  of  the  State, 
should  prefer  to  submit  their  cause  to  a  State  tribunal  in  preference 
to  a  court,  which  rarely,  if  ever,  has  any  regulating  experience. 

Theoretically,  State  control  is  removed  from  the  influence  of  com- 
munity prejudices.  It  certainly  exercises  its  functions  with  a  more 
judicial  attitude,  and  with  greater  equity  to  both  the  communities 
and  the  conipanies ;  probably  it  is  in  most  instances  more  economical 
and  more  efficient,  since  the  State  can  create  a  better  and  more  com-, 
prehensive  organization  for  regulation  at  less  cost.  State  control 
obviates  conflict  of  authority  between  communities  that  is  bound  to 
obtain  when  utilities  operate  beyond  the  limits  of  a  single  munici- 
pality. It  makes  unnecessary  the  erection  of  metropolitan  or  public 
utility  districts  in  order  to  secure  uniform  reflation,  and  it  also 
results  in  a  large  saving  to  single  communities  which  would  otherwise 
be  obliged  to  maintain  its  expert  departments  to  perform  this  service. 

The  possibility  of  combining  the  best  features  of  State  and  local 
regulation  through  a  division  of  powers  and  duties  was  suggested  by 
several  witnesses  and  has  been  carefully  considered  by  this  Ccimmis- 
sion.  It  would  seem  to  be  desirable  to  leave  to  the  comniunities,  at 
least  in  the  first  instance,  the  determination  of  such  questions  as  the 
assignments  of  streets  upon  which  the  railways  may  operate,  ques- 
tions involving  speed,  stops,  schedules,  rerouting  of  cars,  and  service 
during  peak  hours  and  otherwise,  the  extension  of  tracks,  rate  of  fare, 
and  the  securing  of  certain  statistical  information  where  such  informa- 
tion does  not  directly  interfere  with  the  accounting  rules  which  have 
been  prescribed  by  the  State.  Under  these  conditions  the  cities 
would  be  compelled  to  take  a  direct  interest  in  the  transportation 
business,  leading  to  a  more  wholesome  cooperation  between  the  public 
and  the  railways.  We  believe  this  principle  is  worth  trying,  becaase 
it  places  the  initial  regulating  responsibility  upon  the  community, 
thus  leaving  the  way  open  for  sympathetic  understanding  and  coop- 
eration between  the  public  and  trie  industry,  without  \yhich  the 
industry  can  not  survive,  and  yet  places  the  final  responsibility  upon 
the  State,  which  is  best  equipped  to  determine  the  questions  involved 
in  a  sane,  consistent,  and  impartial  manner. 

In  a  number  of  States  commissions  now  have  complete  authority 
over  all  questions.  There  should  be  no  change  if  the  people  are  satis- 
fied with  that  policy.  It  has  unquestionably  worked  well  in  most  of 
these  States.  We  do,  however,  desire  to  emphasize  our  belief  that 
any  form  of  regulation  will  fail  of  its  purpose  if  it  does  not  secure 
public  cooperation  in  the  conduct  of  the  utility.  Onr  study  of  con- 
ditions as  they  exist  in  the  principal  cities  of  the  country  has  shown 
that  unless  the  public  is  in  sympathy  with  the  purposes  of  the  nian- 
agement  and  lends  assistance  in  their  achievement,  neither  efficient 
nor  economical  service  is  possible.  Cooperation  can  not  be  obtained 
unless  the  public  be  informed  as  to  all  phases  of  the  electric  railway 
problem — financial,  economical,  and  operating — and  will  not  be  con- 
tinued unless  the  process  and  information  is  continued.  This 
psychological  factor  involves  a  continuing  task  of  undoubted  magni- 
tude, but  whatever  the  regulatory  authority  may  be,  and  however 


2286        PROCEEDINGS  OF  FEDERAL,  ELECTRIC  RAILWAYS  COMMISSION. 

great  the  difficulties,  the  duty  involved  must  be  performed  if  the  rela- 
tions of  the  public  and  these  highly  essential  utilities  are  to  be  main- 
tained upon  a  basis  that  will  insure  proper  service. 

The  electric  railway  problems  admit  of  a  satisfactory  solution  once 
the  elements  that  compose  them  are  made  known  and  the  process  of 
ordinary  economic  and  business  common  sense  are  applied.  The  duty 
of  both  the  public  authorities  and  those  who  control  the  electric  rail- 
way enterprises  of  the  country  is  plainly  indicated.  The  time  has 
come  for  a  permanent  and  satisfactory' settlement  of  the  traction 
question.  The  interests  of  both  the  puolic  and  the  companies  lie  so 
exactly  parallel  in  almost  every  respect  that  there  ought  not  to  be 
any  serious  difficulty  in  arriving  at  a  solution  if  both  parties  approach 
the  subject  in  a  proper  spirit. 

Section  XIV. 

SER\aCE-AT-COST  PLANS. 

The  electric  railways  have  responded  to  the  improvements  in  the 
arts  and  sciences,  and  it  may  also  be  said  that  the  science  of  regula- 
tion has  fairly  kept  pace  with  the  requirements  of  public  service  and 
the  growth  of  the  industry.  Franchises  have  been  the  result  of 
experiment.  The  contract  fare  established  an  unsound  rate  basis, 
and  in  some  instances  commissions  were  slow  to  reach  conclusions 
in  rate  cases.  Investors  lost  confidence  in  the  electric-railwaj^  busi- 
ness. It  was  thought  that  a  contract  must  be  evolved  which  would 
meet  all  the  requirements  of  the  industry  as  well  as  of  the  public. 
Thus  came  the  cost-of-service  contract.  It  has  worked  well  in  Cleve- 
land during  the  most  difficult  period  in  the  liistory  of  the  industry. 
It  seems  to  have  worked  fairly  well  in  the  other  cities  where  it  has 
been  tried  out,  and  to  justify  the  following  statement  made  by 
Secretary  Baker: 

I  believe  that  any  community  in  America  will  pay  cheerfully  and  williDgly  what- 
ever rate  of  fare  is  necessary  to  carry  the  people  on  their  street  mil  roads,  and  to  main- 
tain good  service  in  their  communities,  if  they  are  Fure  that  they  are  paying  only 
proper  operating  expcnsce,  proper  maintenance,  and  a  proper  return  on  capital. 

Practically  all  of  the  witnesses  for  the  electric-railway  industry 
favored  service-at-cost  franchises.  That  service  should  be  provided 
at  cost  is  not  a  new  principle  in  the  regulation  of  public  utilities. 
It  is  back  of  all  public  service  commission  regulation,  and  expresses 
the  reaction  from  the  original  contractual  relations  between  utilities 
and  communities,  under  which  fares  were  fixed  and  limited,  while 
return  was  not.  The  application  of  the  term  ''service  at  cost*'  in 
recent  working  agreements  between  the  electric  railways  and  the 
cities  of  Cleveland,  Cincinnati,  Dallas,  Montreal,  and  to  a  limit<?d 
extent  the  city  of  Boston,  does  not  clearly  describe  such  agreements. 
They  are,  in  effect,  devices  for  automatically  and  quickly  adjust- 
ing price  to  cost.  It  is,  therefore,  not  so  much  the  principle  back 
of  such  plans  as  it  is  the  method  provided  for  carrying  that  principle 
out  that  concerns  the  Commission  in  this  phase  of  the  traction  prob- 
lem. Without  going  into  unnecessary  detail,  it  will  suffice  to  stato 
that  the  main  features  of  the  contract  are: 

(a)  Fair  valuation  of  the  property. 

(h)  Capitalization  to  conform  thereto. 

(c)  Agreed  return  upon  capital. 


I 


f 


PROCEEDINGS  OF  FEDERAL  EI.£CTRIC  RAILWAYS  COMMISSION.       2287 

(d)  Public  control  of  capital  issues,  and,  to  a  certain  extent,  over 

expenditures. 

\e)  Public  supervision  over  management,  operation,  and  service. 

(/)  Automatic  changes  of  rates,  to  meet  fluctuating  economic 
conditions,  and  to  insure  a  proper  return  on  the  value. 

(g)  Private  operation,  subject  to  the  right  of  the  municipality  to 
purchase  the  property  at  its  value,  or  upon  an  agreed  price. 

(h)  Reduction  of  taxes  and  assessments. 

The  service-at-cost  contract  is  still  in  its  experimental  stage,  and 
naturally  a  number  of  criticisms  have  been  made  of  it.  These  have 
been  considered,  but  with  the  limited  experience  under  this  contract 
we  believe  that  the  criticisms  are  more  theoretical  than  real.  If 
these  defects  prove  to  be  substantial  and  result  in  unduly  increasing 
the  cost  of  service,  they  can  be  removed  by  improved  regulation, 
but  if  they  can  not  finally  be  avoided,  then  it  would  seem  that  the 
public  has  ample  protection  in  the  contract's  purchase  provisions. 

Generally  speaking,  the  main  criticism  of  this  form  of  contract  is 
that  it  tends  toward  inefficiency  and  uneconomic  operation;  that  it 
contains  no  provision  for  the  control  of  strikes,  or  uninterrupted 
service;  and  tJiat  labor  and  management  may  cooperatively  increase 
the  cost  of  operation  to  the  point  where  the  public  may  be  unduly 
burdened. 

From  the  point  of  view  of  credit  restoration,  the  outstanding 
advantage  of  this  contract  is  that  rates  are  autoniatically  adjusted 
to  meet  changing  operating  conditions.  We  are  inclined  to  think 
that  the  assurance  of  an  automatic  adjustment  of  fare  will  do  more 
than  anything  else  to  restore  the  confidence  of  the  investor  in  these 
properties.  Public  confidence  w^ll  be  inmieasurably  strenghtened 
through  the  valuation  of  the  properties,  because  the  figure  that  is 
established  constitutes  the  basis  of  the  return  to  the  investor,  and 
fixes  at  least  the  minimum  price  w^liich  the  public  will  be  obliged  to 
pay  if,  at  some  future  time,  it  should  decide  to  purchase  and  operate 
the  property.  When  the  value  is  thus  fixed,  there  can  be  no  further 
dispute  as  to  capitalization  or  excessive  profits,  because  the  people 
will  know  just  what  they  are  paying  for.  The  controlUng  element  in 
its  favor  is  the  restoration  oi  public  confidence  in  the  corporation, 
due  to  the  removal  of  those  elements  of  friction  which  have  so  fre- 
quently engaged  the  attention  of  the  public.  It  might  also  be  said 
tnat  to  a  certain  extent  it  removes  tlie  railways  from  the  idea  of 
speculative  gain,  and  places  them  upon  a  common-sense  business 
basis  where  the  people  pay  for  the  service  they  get,  and  where  the 
opportunity  for  large  profits  no  longer  exists,  since  economies  and 
lower  operating  costs  are  reflected  in  reduced  charges  for  service. 
When  the  contract  is  once  established,  the  opportunity  for  municipal 
corruption  is  reduced  to  the  mininium. 

We  strongly  recommend  the  principles  of  the  service-at-cost  con- 
tract, not  as  the  only  solution,  but  as  one  means  of  solving  a  veiy 
difficult  problem. 

In  cases  where  the  electric  railways  operate  in  more  than  one 
municipality  and  between  different  municipalities,  such  service-at- 
cost  contracts  can  properly,  in  our  judgment,  be  made  only  with  the 
public-service  commission,  and  in  such  cases  the  provisions  of  the 
contract  should  apply  in  any  particular  community  to  the  system  as 
a  whole  rather  than  to  its  individual  parts. 


i    U 


2288        PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 

Section  XV. 
PUBLIC  OWNERSHIP  AND  OPERATION. 

It  is  urged  by  many  that  public  regulation  of  the  street  railways  has 
failed,  and  that  the  properties  shoind  be  taken  over  by  the  munici- 
palities or  the  State.  Dr.  Delos  F.  Wilcox  concluded  his  able  and 
niteresting  analysis  of  the  testimony  given  in  this  connection  with 
that  suggestion.  Some  members  of  the  Commission  individually 
feel  that  eventually  municipal  ownership  might  prove  generally 
desirable  and  that  there  may,  perhaps,  be  communities  in  the  United 
States  in  which  on  account  of  the  responsibility  of  the  local  govern- 
ment and  the  acuteness  of  the  present  conditions,  municipal  owner- 
ship should  be  resorted  to.  The  experience  of  Boston,  San  Francisco, 
and  Seattle  are  being  watched  with  great  interest,  but  they  have  not 
continued  long  enough  to  justify  any  conclusion  as  to  the  relative 
merits  of  public  as  against  private  operation.  The  Commission  is 
unanimous  on  this  pomt:  Tliat  there  has  not  been  sufficient  experi- 
ence with  public  ownership  and  operation  of  street  railways  in  this 
country  to  enable  us  to  recommend  it  as  a  permanent  solution  of  this 
problem.  In  some  of  the  foreign  countries  it  has  apparently  worked 
well.  We  do  not  believe  under  present  conditions  that  this  method 
of  operation  would  be  successful  in  most  of  the  cities  of  the  United 
States  to-day. 

Aside  from  the  serious  question  whether  municipalities  as  at  pres- 
ent organized  can  operate  electric  railways  as  efficiently  and  satis- 
factorily as  private  enterprises,  our  conviction  upon  this  subject  is 
based  upon  the  great  political  difficulties  which  would  have  to  be 
overcome,  such  as  constitutional  amendment,  legislation,  and  the 
fiscal  burdens  incident  to  the  purchase  by  cities  of  great  public 
utilities,  and  upon  the  further  fact  that  in  many  sections  of  the 
country  the  lines  of  the  railway  extend  through  many  cities  and 
villages  and  into  rural  territory.  It  is  assumed,  however,  that  these 
latter  difficulties  could  be  mastered  by  a  community  thoroughly 
awakened  to  the  necessity  for  such  a  change. 

We  are  certain  that  much  can  be  accomplished  by  private  initiative, 
stimulated  and  aided  by  thorough  public  regulation;  that  the  final 
solution  coukl,  in  rnany  communities,  be  found  under  private  man- 
agement, and  that  in  any  event,  the  reforms  which  have  been  urged 
by  the  Conmiission  should  be  instituted,  since  those  reforms  would 
serve  to  place  the  relations  between  the  street  railway  and  the  public 
upon  a  more  just  and  equitable  basis. 

Conclusion. 

We  have  conceived  the  scope  of  this  inquiry  to  be  to  ascertain, 
first,  the  actual  financial  and  service  conditions  of  the  electric  rail- 
ways of  the  United  States  at  the  present  time;  second,  the  causes 
which  have  contributed  to  such  conditions;  third,  what  readjust- 
ments of  the  relations  between  the  electric  railways  and  the  commu- 
nities which  they  serve  must  be  brought  about  in  order  to  restore  the 
confidence  of  the  public  and  to  put  the  companies  upon  such  a  finan- 
cial basis  for  the  future  as  will  enable  them  to  render  contiimous  and 
efficient  service  to  their  respective  communities. 

We  have  not  entered  into  a  minute  discussion  of  the  different 
franchise  provisions  throughout  the  country,  nor  have  we  under- 


i 


n 


PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION.       2289 

taken  to  suggest  any  details  which  should  be  incorporated  into  any 
new  contract,  but  have  preferred  to  confine  ourselves  to  suggesting 
the  broad  outlines  of  such  new  relations. 

The  Commission  is  not  pessimistic  as  to  the  future.  The  electric- 
railway  problem  admits  of  a  satisfactory  solution,  once  the  elements 
that  compose  it  are  made  known  and  the  principles  of  ordinary 
economic  and  business  common  sense  are  applied. 

The  duty  both  of  the  public  authorities  and  of  those  who  control 
the  electric-railway  enterprises  of  the  country  is  plainly  indicated. 
The  time  has  come  for  stable  and  satisfactory  settlements  of  traction 

difficulties.  .  ,        .     .  , 

The  Commission  can  go  no  further  than  to  point  out  the  principles 
upon  which  readjustment  should  be  based.  The  task  is  really 
that  of  the  State  and  local  authorities  upon  the  one  hand,  and  of  the 
companies  upon  the  other.  Failure  to  rehabilitate  the  industry  and 
the  service  is  possible  only  if  those  upon  whom  the  responsibility 
rests  fail  to  undertake  the  work  or  pursue  it  in  a  spirit  that  makes 
settlement  possible. 

Respectfully  submitted  this  28th  day  of  July,  1920. 

Charles  E.  Elmquist,  Chairman, 

Edwin  F.  Sweet,  Vice  Chairman. 

P.  H.  Gadsden. 

W.  D.  Mahon. 

Royal  Meeker. 

C.  W.  Beall. 

Louis  B.  Wehle. 

George  L.  Baker* 


INDEX-DIGEST 


TO 


TRANSCRIPT  OF  PROCEEDINGS  OF  FEDERAL  ELECTRIC  RAILWAYS  COMMISSION. 


JULY  15,  1919,  TO  OCTOBER  4,  1919. 


Al  andanmcnt  by  electric  railways  oi:  ^^^. 

Extension?,  impro\'idcntly  built,  advisability  of 'Soti 

Bay  State  Street  Railway  Co. ,  by  public  trustees  of 1640, 1 600 

Effect  upon  property  values ^•^- 

New  York  City,  in,  criticized f^ 

Statistics  of «5»»« 

Unprofitable,  refusal  to  permit,  criticized ««^ 

Service —  ,  ,  ^       .  ,nrr 

Conditions  under  which  should  be  undertaken io^;^ 

Legality  of,  by  receiver  in  Massachusetts  upheld A^A"  ^^  tik 

Unremunerative,  as  measure  of  emergency  relief  favored ^^,  'J^f'  ^i^ 

Subsidies,  desirability  of  public  to  avoid  necessity  of 346,  44o,  447 

See  also  Subsidies.  .  „ 

Accident  prevention,  control  of  electric-railway  employees  over,  appreciable . .       >  b.) 

Accounting,  electric-railway:    .    .  8Q«  iooa  1040 

Control  of,  by  State  commissions  favored »<».  a— »»  ^-^ 

Cost  keepings  „„     ^^^.^ 

Lack  of,  by  electric  raUways  deplored. ib»4,  ibjvi 

Model  svBtem  of,  on  Pennsylvania  Central |b^4,  ibJJ 

Need  of;  for  efficient  management i/Ji  ino  007 

Aera,  use  of,  as  an  exhibit loi),iUL,  JZ/ 

Agreements,  see  Contracts;  franchises. 

Amey,  WUliam  D.  B.,  statement  of ^^ 

Air  brakes,  increase  in  price  of -.■-.; 7^0 

Aircraft,  possible  competitor  of  electric  railways. -  -       /'><* 

Albany,  N.  Y.,  electric-railway  situation  in,  satisfactory  following  increase  m 

(ajg i^o4 

Altoona&  Logan  Valiey  Electric  Railway" Co..... ------- -----•-.--:      '^'^^ 

Amal«-amated  Association  of  Street  &  Electric  Railway  Employees  of  America: 

C^ontract  of,  with  electric  railways,  written  favored  by  and  adliered  to.   .       1766 
Contracts  with  electric  railways,  arlntration  of  wage  disputes  provided 

for  in :-•---;■-:--■.,- , 

Evidence  submitted  by,  in  presenting  labor  side  of  electric-railway  prob- 

lem,  outline  of - |^:;J: 

Jurisdiction  of.  in  electric-railway  industry,  extent  of . . -  -  -  -  -  •  -  -     i5*.>i» 

Labor  proeram  urged  by,  for  inclusion  in  recommemiations  ol  J^ederai 
LaDor  P^^^^^^./^ii^^y^  Commission. .  1896, 1897, 1928, 1936, 1937, 1938, 1950 

Problem  of  electric  railways,  main  features  of,  as  seen  by -  -       ]  893 

Productivity  and  efficiency  of  memljers,  efforts  of,  to  increase 19-J»,  1  •"><^ 

Strikes,  not  subject  to  caU  by  American  Federation  of  Labor  m  case  of 

sympathetic - y{    "["]■'         ^**'* 

Solution  of  electric-railwav  problem,  suggestions  put  forward  by,  Icadiirj; 

toward ^^'^^ 

American  Electric  Railway  Association:  .      . 

Activities  of,  in  calling  attention  of  members  to  possible  economiftf  m  oj^- 

ation  and  improvements  in  art lob2,  kbbt ,    -U,iu 

Attitude  of,  toward  possible  undesirable  financial  practices  occurring  in 

the  industry .-- .--- :; '     "^'•"^ 

Banking  control  of,  alleged,  and  of  other  public-utility  a^ociations,  crtti- 

cized : ^^^ 

2291 


2292 


INDEX-DIGEST. 


Page. 


929 


American  Electric  Railway  Association— Continued. 

Bureau  of  fare  research  of,  studies  in  cost  of  electric-railway  service  con- 
ducted by jg7Q 

Evidence  submitted  by,  to  Federal  Electric  Railways  Commiskon  in 

presenting  railway  side  of  question 623 

Charts,  statistical,  etc.,  on [         79  73 

Exhibit  comparing  value  and  capitalization  of  26  companies.' ','.'/,] '1505,  2012 

rnnciples,  code  of ,  issued  by 2036,2054 

Cntiasmof 1690 

American  Railways  Co.,  effect  of  fare  increases  oii "revenues  oVsubsidiaries  of! !      365 
Amortization  of: 

Capital  out  of  earnings,  a  condition  upon  which  depends  approval  of  inde- 
terminate permit 2268 

Capital  account  of  electric  railways,  desirabiiiVv  of.'  pointed  out.'.'.'.'.'.'."'     1229 
Debt  of  electnc  railway  in  Detroit,  failure  to  effect,  prior  to  expiration  of 

franchise  criticized 1145  hq^ 

Discount  on  securities,  favored '  1230 

Investment  in  electric  railways  in  United  Stated— 

Benefit  to  municipalities  "from j269 

Effort  to  effect,  lack  of,  even  under  public  regulation *'* 1204 

Fares,  effect  upon,  in  Glasgow i2«)3 

Purchase  price  under  service-at-cost  franchise,  provision  ior. '..'..'. 1240 

Secunties,  under  short-term  franchise,  should  be  provided  for  940 

See  also  Depreciation ;  Obsolescence;  Sinking  fund. 
Arbitration,  compulsory,  of: 

Labor  disputes  in  electric-railway  field 783, 1290, 1297, 1298, 1299, 1588. 1765 

ii>ee  also  Collective  bargaining;  Labor. 
Serv-ice-at-cost  franchise  in  Cleveland,  disputes  under 1004  1006  1026 

See  also  Cost  of  service.  '         ' 

Armour,  J.  Ogden,  statement  of 

Assessment  of  property  benefited  by  electric  railways  to  pav  for* 

<  'ost  of  construction  of ,      '      ^  ly-^^  9126 

Extensions  and  improvements  made  by— ' 

Advwated      ..     15()2, 1677, 1923,  2099,  2124 

Insufficient  to  pav  entirely  for 1970 

Methods  of  levying,  outuned :.!::::::::::;::;::::'i92o, 2100 

6e€  also  I^nd  values;  Real  estate. 
Association  of  Life  Insurance  Presidents,  statement  of  actuarv  of  499 

Atlanta,  Ga.:  ■    ^      ^^ 

Capitalization ,  excessive,  of  public  utilities  in .  charged 1482, 1488, 1492   1500 

Dividends,  payment  of,  by  utility  on,  though  no  reserve  for  depreciation ' 

set  up  criticized ^aqa 

Electric-railway  situation  in ".!.!..!!!!.!.! 1481 

Leases  made  by  operating  companv  in,  criticized .   . 1457 

Municipal  ownership  of  public  utilities  in,  advocated HQg  1500 

Results  of  operation  of  electric  railway  in  *  1489 

Valuation  of  pubUc  utilities  in ].:.*:.':;;;;;;;  'i483,*i492, 1506 

cice  also  Georgia.  ' 

Australia,  zone  system  of  fares  in  use  by  electric  railways  in 1601  lfi02 

Automobile:  *  *i  ^w^ 

Competition  of,  with  electric  railways 423, 462, 464, 936 

Cause  of  present  electnc-railway  situation  §5 

^p,  ,  ,       ,  ,.    139, 159, 609, 1054,  i05<),i66i,ii68,'ii86,*  1229,2059 

^ffect  of,  upon  electric  railways 424, 1089,  U08, 2066 

iS^ot  dnving  electnc  railway  out  of  business 2038  2039 

Of  private  cars  least  responsible  for  present  electric-railway  troubles    860  993 

Paving,  failure  to  pay  for  use  of,  by isg'  425 

Stimulant,  possible  of  electric-railway  traffic  through  acquisition  by  public    ' 

of  desire  for  speed ^     g^jn  onqo 

Substitute,  possible,  for  electric  railway—    ' 

^^i?"f; .-.v 144,585,759,1129 

Thought  possible 1121,1127,1625,1628,1633 

I  se  of,  on  electnc-railway  track,  possibility  of 217 

Sec  also  Gasoline;  Jitney ;  Motor  vehicle. 

Babcock,  E.  V.,  statement  of loqq 

Babson,  R.  W.,  statement  of [ \?^^ 

Baker,  Newton  D.,  statement  of 995 


INDEX-DIGEST. 


2293 


147 


Balance  sheet  of  electric  railways,  see  Statistics.  p    t.i    .  •     n         * 

Baltimore,  Md.,  overcapitalization  of  Umted  Railways  &  Electnc  Co.,  of, 

alleged ^^^ 

Banker  control  of —  .  „„  ,^„(j 

Electric  railways  condemned ^«^^'  }» J^ 

Public-utility  associations  condemned ^"^^ 

See  also  Finance.  , 

Bankruptcy  of  electric  railways,  tendency  toward,  because  of  decreased  pur- 
chasing power  of  nickel  and  fixed  fare 

See  also  Finance;  Receivership;  Reorganization. 

Barry,  J.  G.,  statement  of ^99 

Bauer,  R.  S.,  statement  of ^^^^ 

Bay  State  Street  Railway  Co.,  Massachusetts: 

Capitalization,  excessive,  of,  alleged JSSo  ir?T 

Condition  of ,  discussed ;•■-.--•. i;;A  tSIi  9n«i 

Cost  of  service,  regulation  of  fares  on  basis  of 164U,  lb4i,  zub^ 

Errors  and  evils  incident  to  growth  and  development  of Ibz^,  ibz^,  ib6L 

Fares™" 

Unsatisfactory  results  from  changes  in  rates  of 1642, 1650, 1657 

Ten-cent  rate  of,  less  satisfactory  results  from  than  from  7  cents ..    1448 

Jitney  competition  with,  greatest  problem  of yv'  '  JcIq 

One-man  cars,  use  of,  by,  to  increase  frequency  of  service  rendered  ... ...     164» 

Public  trustees,  operation  of,  by 1^4^  lb^»,  f^^ 

Abandonment  of  lines  by y-----  J^f^' }^^ 

Depreciation,  accumulation  of  reserve  for,  by 1641,  I64j,  ibM 

Districts,  operation  through  medium  of 1640, 1641 

Fares~~~ 

Experimentation  of,  with  monthly  and  other  reduced -rate  tickets.     1647 

Regulation  of,  on  service-at-cost  basis 1640, 1641,  2063 

Public,  confidence  of,  being  regained  by - -  -  16^4,  lb5» 

Subsidies,  provision  for  public,  to  avoid  abandonment  of  unprohtable 

lines  by        - 1640, 1641, 1651, 1652 

Workingcapitalfurnidiedto,  by  State --  1640,1654 

Weakness  of,   in   necessity   of  urban  divisions   supporting  unprofitable 

country  lines 20o(>,  20o7,  ^6 

Zone  system,  unsatisfactory  results  from  use  of ,  by 1627, 2062, 2063 

Beasley,  O.  C,  statement  of ^jf^ 

Beeler,  J.  A.,  statement  of y»J? J 

Bemi8,E.W.,  statement  of yw-'^'li'l^ 

Berkshire  Street  Railway  Co.,  Massachusetts,  statement  of  President  L.  b. 

Storrs - 

Berlin,  Germany,  results'  of  electric-railway  operation  in 1074 

Bertron,  S.  G.,  statement  of ^oa 

Billing  through  and  interline  of  express  matter 4v5U 

Birmingham  Railway,  Light  &  Power  Co.,  Alabama,  cause  of  receivership  of, 

questioned 2018 

Birnev  safety  car,  see  One-man  car. 

Bleakley,  E.  G.  C,  statement  of f/^f 

Bliss,  WilUamC,  statement  of 1166 

Bliss,  Z.W.,  statement  of -•--••--• u in<Q 

Block  signals,  installation  of,  ordered  on  Indiana  mterurbans i^^^y 

Blue  Hill  Street  Railway  Co.,  Massachusetts,  situation  with  regard  to 210 

Boards  of  directors  of  electric  railways,  see  Management. 
Bonds  of  electric  railways,  see  Secunties  of  electric  railways. 
Bonus  stock,  issuance  of,  see  Securities  of  electric  railways. 

Boston  gas  plan  or  London  sliding  scale  of  rate  of  return  and  rates 106i 

Boston  Elevated  Railway  Co.,  Massachusetts: 

Cause  of  present  financial  difficulties  of,  overstimulation  of  rapid-transit 

development. 1453, 1455,  20d8,  20d9 

Cost  of  service,  see  Boston  Elevated,  public  trustee  control  of.         .  .  .     , 
Depreciation,  failure  to  provide  an  adequate  reserve  for,  m  past,  criticized .     U83 

Fare  situation **'^® 

Ten-cent  rate  of—  „ 

Not  a  solution  of  the  situation uaa  u«q 

Results  from,  disappointing -  •♦60,  .m6 

Results  from,  exceedingly  satisfactory 1644,  lb45 

160643''— 20— VOL  3 16 


t 


2294 


INDEX-DIGEST. 


Boston  Elevated  Railway  Co.,  Massachusetts — Continued. 

Labor  employed  by —  P^K®- 

Cost  of  platform,  effect  u|)on,  of  reduction  in  number  of  working  hours 

per  day  from  9  to  8 1775, 1776 

Proportion  ot*  operating  expenses  paid  to 1506 

Localities  served  by 1033 

Public  trustees,  operation  of,  by,  described  or  discuaaed 344, 

350,  352, 1055, 1355, 1442, 1453,  2063 

Coat-of-servico  feature  not  favored 1026, 1055, 1063, 1073 

Depreciation,  amount  set  aside  by,  for,  not  considered  excessive 1684 

Efficiency  and  economy,  lack  of,  in  operation  by 1625 

Maintenance,  tremendously  increased  expenditures  for,  by 1356, 1443 

Results  of  operation  under 1506. 1649, 1651 

Rehabilitation  program  of.  criticized  as  not  safe-guarding  interests  of 

public 1444,1453 

Subsidies,  provision  for  tomporarv,  public  to  make  up  possible  deficits..     1442 

Rentals  paid  by  to  West  End  Ry.  i'o.^ 2079 

Return,  method  adopted  by,  to  safeguard  after  expiration  of  period  of 

public  control 1468 

Ride,  increase  in  length  of,  possible  for  one  fare  on  lines  of •  844, 852 

Situation  with  regard  to.  unsatisfactory 1220, 1355 

Transfers,  early  charge  for,  by 844 

Zone  8}'stem,  adoption  of,  by,  opposed 1467 

See  also  ^raasachusetts. 

Bradlee,  H.  G..  ^atement  of 201,  2037 

Bridge  tolls  or  tax.  see 

Bridgeport,  Conn.,  analysis  of  jitney  competition  with  electric  railway  in 427 

See  also  Connecticut. 
Brooklyn  Rapid  Transit  Co.,  New  York: 

Capitalization,  excessive,  of,  claimed 1305, 1318 

Dividends,  distribution  of  large  and  nonaccumulation  of  surplus  by  con- 
demned    1278, 1282 

Labor  troubles  of 1278,'1287, 1317 

liOases  of  underlying  companies,  unprofitable  terms  of,  condemned 1316 

Profits  made  by,  since  1913,  estimate  of 1305, 1318 

Transfers,  rehearing  of  order  permitting  charge  for 2045 

See  also  New  York. 
Budget,  family,  see  Cost  of  living;  Standard  of  Iving. 
Buffalo,  N.  Y.,  situation  with  regard  to  increase  in  electric-railway  fares  in. . .  541, 1313 

Bullock,  C.  J.,  statement  of 637 

Burdens,  illogical,  imposed  uj)on  electric  railways,  elimination  of,  se£  Imposts; 
Paving;  Taxation. 

Burr,  William  P.,  statement  of 1303,  2044 

Bus,  motor,  see  Automobile;  Jitney;  Motor  bus. 

Business,  relation  of  Government  to 919 

California,  electric-railway  situation  in 262, 608, 884 

See  also  San  Francisco. 
Camden,  N.  J.,  see  New  Jersey;  Public  Service  Railway. 
Canada,  see  Hydroelectric  development. 
Capital : 

Account,  necessity  of  keeping  down 1021 

Additional,  needed  by  electric  railways — 

Ability  to  obtain  the  crucial  cjuestion 1454, 1678,  2114 

Beyond  amount  which  can  be  obtained  locally 537 

Conditions  under  which  may  be  obtained 539,  542,  975, 2068 

Cost-of-service  plan 328,345,348 

Fares,  flexibility  of 65,200 

Investment,  safety  of 897,1245,1438 

Public  ownership 209, 1454,  2069,  2114 

See  also  Public  ownership. 

Return,  certainty  of  a  fair 65, 

209,  348,  656,  859,  863,  897,  915,  956, 1245, 1438, 1900 

Constantly  required  and  essential 188, 

197,  202,  206,  207,  225,  313,  656,  956, 1454, 1900 

Difficultv  of  obtaining 81, 193, 842,  978, 1454, 1678, 2114 

Inability  to  attract,  causes  for 808, 882, 925,  939, 2091, 2114 

Lack  of,  cause  of  uneconomical  conditions  in  industry 81,  658, 1451 


if 


INDEX-DIGEST. 


2295 


Pa?e. 


Capital — Continued. 

Cost  of,  to  electric  railways 315,  545,  971,  975,  977 

Cheap,  benefit  of,  through  determination  and  security  of  investment. . . .     1 229 

Determined  by  factors  more  or  less  independent  of  price  levels 1334, 1335 

Factors  affectmg -^l^ 

How  measured - .-  -.-      ^^l 

Under  private  ownership  and  existing  conditions  practically  prohibi- 
tive      12r'3 

Under  public  ownership,  ability  to  obtain  on  better  terms,  an  argu- 
ment for 806,1049,1157 

See  also  Public  ownership. 

Under  serviee-at-cost  franchise 328,345,348,675,684,781,1245,  I5S8 

See  also  Cost  of  service. 
Expenditures,  authorization  of,  by  regulatory  commissions  recommended.       781 
Federal  Flectric  Railways  Commission  should  maVe  clear  essential  need  of 

adjusting  conditions  so  that  necessary  supplies  of  can  be  secured .    2068 

Integrity  of,  lack  of,  under  some  service-at-cost  franchises 780 

Loans  of  municipal,  to  public  utilities  provided  for  under  municipal-guar- 
anty law  of  Wisconsin - - 782 

Rights  of  invested,  fundamental,  as  seen  from  la])or  point  of  \'iew 1894 

Turnover  of,  slow  in  electric-raihrav  industrv  as  compared  with  mercantile 

field 1421 

Value,  reduction  of  through  construction  of  electric-railway  improvements 

by  assessing  property  benefited 1562 

See  also  Credit;  Money;  Return. 
Capital  Traction  Co.,  Washington,  D   C,  see  Washington,  D.  C. 
Capitalization:      .  ,  ^,^  ^^_  „^g 

i'onus  stock,  issuance  of ^^^^  ^'^'^  ^^^ 

Cleveland  Railway  Co.,  of— 

Farly  excessive,  of,  a  problem yim,  nyy 

Present  sound •. 1^08, 1010 

Reduction  in  prior  to  adoption  of  service-at-cost  franchise  by 1 000 

Comparison  of  value  of  26  electric  railways  as  fixed  by  valuation. .....  1505,  2012 

Control  of,  by  regulatory  commissions  favored 1112, 1113, 1226, 1240,  2059 

See  also  Regulation;  Securities 

Discount  on  securities,  inclusion  of,  as  part  of  permanent 172, 1205, 1863, 1866 

Excessive  or  overcapitalization  of  electric  railways.  ■■■-■•  137, 141, 199,  540  562 

Absorption  of.  through  careful  management,  possibility  of 1695 

Absorption  of  past  productive  efliciency  of  emi>loye8s  by,  changed .  1731. 1887 
Absorption  of  gains  in  revenue  by,  believed  detrimental  to  interests  of 

employees  and  public  and  claimed 1731, 1847, 1853, 1874, 1886 

Basis  of,  the  fixed  5-cent  fare 1222 

Cause  of  present  electric-railwav  difficulties — 

Claimed 920, 109  j,  1199, 1203, 1213, 1263,  2107,  2109,  2111 

Denied ^41 

Cause  of  inabilitv  to  obtain  new  capital •  2091,  2114 

Cause  of  public  prejudice  against  electric  railways  because  of  belief  in 

existence  of 154,  304,  908, 1401, 1844, 1859,  1910 

Cause  of  public  unwilliness  to  pay  increased  fares  because  of  belief  in 

existence  of 1017,1386.1406.1412 

Claimed  or  hinted  at 1203, 1205, 

1214, 1221, 1689, 1714, 1842, 1843, 1852, 1856, 1872,  2064 

Atlanta,  Ga.,  of  utilities  in 1482, 1488, 1492, 1500 

Bay  SUte  Street  Railwav  Co.,  Massachusetts 1642,  18">2, 18o4 

Brooklyn  Rapid  Transit  Co. .  New  York * 1305, 1  :U8 

('hicago  surface  lines 1^'*' 

Danbury  &  Bethel  Street  Railway,  Connecticut 1  HO 

Detroit  United  Railway,  Michigan 1141 

Indiana,  mc^t  of  electric  raihva/s  in 1086, 1088,  J096 

Indianapolis  Street  Railwav  Co.,  Indiana 1850 

Lincoln.  Nebr ' 1360 

New  Orleans,  La ^^6 

New  York  Railwavs  Co.,  New  York 1304,1318 

Omaha,  Nebr 136^ 

Philadelphia  Rapid  Transit  Co. ,  of  underlying  companies  of lon6. 

^  ^  1579, 1581, 2130 

Pittsburgh  Railways  Co.,  Pennsylvania 620,  623, 1848 


2296 


INDEX-DIGEST, 


Capitalization — Continued. 

Excessive  or  overcapitalization  of  electric  railways — Continued. 

Claimed  or  hinted  at — Continued.  ^*ag«- 

Public  Service  Railway  Co.,  New  Jersey 1215,1845 

Rhode  Island  Co.,  Rhode  Island 1851 

Scranton  Railway  Co 1214,1378 

United  Railroads  of  San  Francisco,  Calif 1851, 1854 

United  Railways  &  Electric  Co  of  Baltimore,  Md 1850 

United  Railways  Company  of  St.  Louis,  Mo. .  1708, 1722, 1725, 1728, 1849 

Denied 813 

Interborough  Rapid  Transit  Co.,  New  York 826 

Massachusetts,  electric  railways  in . .  *. 647,  660, 1437 

Elimination  of — 

Difficulty  of  effecting 1204,1263,1267 

How  effected  in  Indiana 1086, 1087 

Only  through  public  purchase 1264 

Not  necessarily  indicated  by  decrease  in  net  per  dollar  of  income 

since  1902 1790 

Recommended  in  connection  with  sorvice-at-cost  plans 558, 573 

Urged 575, 577,  805,  806, 1389, 1390, 1928,  2010,  2111 

Evil  effects  of 1886,1928 

Justified 141,257 

Methods  and  forms  of 1843, 1860, 1871, 1876 

Motive  for,  in  desire  of  insiders  to  get  rich  quick 1858   - 

Origin  of,  possible 1864 

Pennsylvania,  situation  with  regard  to,  of  electric  railways  in 1400 

Questioned,  propriety  of  basing  claims  of  existence  of,  upon  differences 
between    capitalization    and    valuations,    even    where   latter 

official 1861, 1868 

Relation  between  and  wages  of  electric-railway  employees  asserted  to 

exist 1871,1886,1887 

Return,  fair,  objection  to  payment  of,  on,  even  where  stock  held  by 

innocent  investor 1391, 1406, 1412 

Solution  of  electric-railway  problem,  relation  to — 

Always  confronts  in  any  attempt  at 1 213 

Makes  difficult  reaching  of 1219 

Methods  of  disposing  in  reaching 1694 

No  one  which  will  perpetuate,  will  be  stable.' 2034 

Reduction  thought  necessary  to  a 2111, 2117 

Value,  must  know  true .••:••    1^^ 

Valuation,  physical,  as  means  of  eliminating  prejudice  existing 

because  01  belief  in  excessive 1401 

Of  earnings-^ 

As  basis  of  purchase .••••.• ^^^^ 

By  early  promoter  of  electric  railways 564 

Of  earning  power  of  franchises,  criticized 1008, 1248 

Increase  in,  due  to  pav^ing  and  other  municipal  requirements 909 

Investment  out  of  earnings,  propriety  of 272,  333, 338, 342 

Ratio  of  taxes  to  net,  for  census  years 932 

Renewals  and  replacements  no  longer  possible 559, 561 

Statistics  of,  for  year  1890,  location  of 228 

Solution,  importance  of  correct,  to  employees  and  public 1860 

Value  of  electric  railways  does  not  at  present  equal 333 

See  also  Capital;  Finance;  Investment;  Receivership;  Reorganization; 

Valuation. 
Cars,  electric-railway: 

Building  of,  upon  basis  of  intensive  use  for  a  few  years,  advocate 1600 

Causes  of  changes  in .' 296 

Double-deck,  advisability  of  use  of 465, 933-934 

Equipment,  superiority  of,  in  Cleveland 1008 

Investment  in,  causes  for  heavy 396 

Obsolescence  of 396, 397 

One-man  tvpe,  8ee  One-man  car. 

P-A-Y-Etype 396,1089,1118. 

Price  of,  causes  for  increaee  in 397 

Seating  capacity,  use  of,  with  larger  but  not  greater  weight  by  Philadelphia 

Rapid  Transit  Co 1577 


INDEX-DIGEST. 


2297 


f 


Cars,  electric  railway-Continued.                                        -,-  -    a  ir;QQ_f^' 

Size  of,  use  of  large  in  past  on  an  infrequent  headway  criticized 1599-1 1)00 

Standardization  of  —  ^m  iaaa  iR7ft 

Advoated -.-; - 400,1666,1676 

Hindered  by  requirements  of  local  authorities 4Ul 

Trailers,  use  of,  advocated .•---•••. :/. v     ^"^' 

Trust  certificates,  use  of,  by  General  Electnc  Co.  m  selling  new  eqmp- 

ment 400,  ,590,  d»l 

Causes  of  present  unsatisfactory  condition  of  electric  railway's. .  63,  65,  860,  1074, 
^  ^  1191,  1194,  1221,  1222,  1266,  1395,  1429,  1438,  1590,  1662,  1675 

Capital,  need  of  additional,  see  Capital. 
Capitalization,  excessive,  see  Capitalization. 
Cost  of  labor,  increased— 

Not  the  cause ^^^^'^l.k 


The  cause. 


949 


Coat  of  operation,  increased  (labor,  materials,  etc.) 64, 199, 315, 321, 530,  538, 

^  '  555,  568,  586,  608,  943,  969,  973, 974, 1186, 1191, 1195, 

1229, 1284, 1304, 1416, 1420, 1456, 1590, 1662, 2039,  2064 

Credit  situation,  see  Credit.  .    . 

Depreciation,  failure  to  provide  for,  see  Depreciation. 

Extensions  unwise       .   ' •  -  •  -  -  309, 433, 437,  784, 1108, 1435, 2056 

Faree,inabilitv  to  increase  rates  of  .  63, 147, 199, 315, 538, 919, 1204, 1222, 1285, 2039 

Financed,  ^ds^nagement  of . .  - .  920, 1203, 1213, 1304, 1390, 1731, 1843, 1887, 2064 
See  also  Finances  of  electric  railways. 

Fixed  charges,  high -■%•: r*-"     ^"'^ 

Franchises,  provisions  of,  see  Fares;  Franchises. 

In  various  localities — 

California,  increased  costs wi» 

Chicago  elevated  railways,  increased  costs -■'      88^ 

Massachusetts,  overbuilding  of  lines 143o,  -05b 

New  York  City ^^?oQ  fi20 

Pittsbureh  Pa  **^'*'  ^^^ 

Rhode  Island  Col,*  Rhode  island 1175,1181,1186,1192 

San  Francieco-Oakland  Terminal  Railways,  California 884 

Money,  depreciation  in  purchasing  power  of . .  -  143, 147, 316, 763, 1323, 1330, 1335 
Motor-vehicle  competition,  publicly  and  privately  owned,  see  Automobile; 
Jitney;  Motor  vehicle. 

National  War  Labor  Board,  wage  awards  of 318, 1188 

Denied ^^°^ 

PubUc.  hostiiity  of no:'aalHik^a^^ 

Ride,  increase  Si  length  of Am'RS.'ftgf  ?iKt 

Taxation,  increased wS,  88o,  1186, 1188, 1191 

War,  conditions  never  satisfactory  and  merely  ^^^"^^Yuimuuuio  1690 

Census  of  street  railways  for  1890,  location  of ......      228 

Central  Electric  Railway  Association,  map  of  territory  covered  by,  referred  to.      59b 
Charts  submitted  by  American  Electric  Railway  Association,  see  Amencan 
Electric  Railway  Association. 

Capitalization  of  electric-railway  franchises  in,  condemned 1248 

Contract  with  city,  attempt  of  electric  railways  to  amend. - .  -    1^^5 

Current,  electric,  propriety  of  rate  paid  by  electric  railways  for 2022, 2024 

Motor-bus  operation  in,  not  profitable 161b,  lbl7 

Plan  of  solution  of  electric-railway  problem ^w 

Chicago  Elevated  Railways,  Illinois,  situation  with  regard  to So-^ 

Chicago  surface  lines,  Illinois: 

Overcapitalization  of iS,' 

Value  of., ^^^ 

"^^Cwt-of-service  plan  of  electric-railway  operation  in  use  in,  discussed .  344, 472, 4^ 

Adoption  of,  history  of.... -- ^^^'^'t^ 

Approved,  if  certain  amendments  made ouo,ouo 

Budget  plan  of  determining  expenses •      474 

Capital,  inability  to  induce  new -  -  •  491. 49Z 

Control,  municipal  over  company  imder 470, 4»u,  4»d 


2298 


INDEX-DIGEST. 


Cincinnati,  Ohio— Continued.  .       r,     ^i       j 

Cost-of-service  plan  of  electric-railway  operation  in  use  in — Continued.         i^»g®- 

Depreciation,  provision  for 482 

Employees,  efticiency  of - 483, 509 

Essentials  of 473 

Faros,  effect  of  increa«'  in,  on  revenues 477, 488,  511 

Incentive  to  efficient  operation  under 474, 494. 1916. 1021 

Municipal  ownership,  sentiment  for 479 

Public  sentiment  toward 478, 484, 487, 491, 496,  511 

Regulation  by  State  commission,  powers  of,  imder 482.  486 

Reserve  fund,  operation  of 493, 494 

Return  on  stock  under 493,  504,  511 

Securities,  issuance  of,  undtM* 482 

Value  of  property  upon  which  plan  based 487, 1920 

Wairas  paid  employees 483 

Jitney  comi>etition  with  electric  railway  in,  lack  of 491 

Cities  in  ihe  United  States: 

Com}mrieon  with  European  cities  in  facilities  afforded  by  elect  ri*;  railways  436, 1262 

Physical  characterititi(«  of,  different  from  those  of  European  cities 1421, 1422 

Superior  development  of  area  of,  made  possible  by  electric  railway  ex- 
tensions   436,  438 

Citv  Club  of  New  York,  N.  Y.,  report  of,  upon  advisability  of  i-apid  transit  con- 
struction, by  assesisment  of  propertv  benefited 2099, 2126, 2129 

(lark,  II.  C,  statement  of." '. 791 

Clark,  William  J.,  statement  of 135,228 

Clayton,  William,  statement  of -, 262 

Cleveland,  Ohio,  cost-of-service  plan  of  electric  railway  operation  in  use  in: 

Adopti6n  of,  events  leading  up  to 995 

Applicability  of,  to  other  localities 1290, 1985, 1999 

Approved.;. 1007,1062,1073,1261 

Arbitration  of  disputes  under 1004, 1006,  1026 

Changes  in,  desired  by  company 596, 1461 

Control,  mimicipal,  over  company '^•^^'  ^>^1'  1^^^ 

(^ooperation  with  company  of  pulilic  and  city  officials. .  51)6, 1032,  Uil;(),  1997-1999 

(riticiismof - 376,377,1971,1974,1986,1993 

Defects  of 1460,1462 

Depreciation,  lack  of  requirement  for  reserve  out  of  current  earnings. .    1971, 

1972, 1974, 1977, 1986, 1993 

Extensions,  irability  to  force  needed ^'*1!P'  ^^^*^ 

Investment,  lack  of  security  of 1973, 1975 

Incentive  to  efficient  operation,  lack  of.  602, 1004, 1005.  1015, 1920J923, 1926 

Labor  difliculties,  inability  of  city  to  prevent  and  control 1460, 1462 

Deficit,  operating,  tinder 593 

Depreciation  reserve  under — 

Adequacy  of 1971, 1972, 1975,  1977, 1985, 1993,  21 15 

Details  o{..... 5«K),  1000 

Discussion  of 590, 1276 

Emplovees — 

Attitude  of,  tovrsLTd 1760, 1763 

Efficiency  (^f ,  under 599 

Extensions  under r,!>5.  606,  1008, 1460, 1463 

Fares  under — 

Effect  of  increased,  in  riding - <>03, 1759 

Low,  made  possible  by  concessions  of  city  and  reduction  in  capitali- 
zation  : ' 607,1759 

Reduction  in  recent 1458 

Features,  essential,  of  plan 590,599,600,1000,1007 

Franchise 592 

Capitalization  of,  unexpired 1008, 1248 

Length  (*f  term  of,  practioally  an  indeterminate 1022, 1464 

Provisions  of  changed 597 

Incentive  to  efficient  operation,  lack  of 602, 

608, 1004, 1005, 1015, 1920, 1923, 1926 

Investment,  security  of,  under,  questioned 1245, 1973, 1975 

Maintenance  and  depreciation  fund,  oi>eration  of 601, 1985 

Management,  extravagant,  impossible 600, 601 

Municipal  ownership,  relation  to 1011, 1464 

Popularity  of 905,1003 


I 


INDEX-DIGEST. 


2299 


Cleveland,  Ohio— Continued.  ^^. 

Purchase  by  city  provided  for ^"" 

Regulation  by  State  commission,  place  of,  in  scheme oy& 

Return,  sufficiency  of  present  rate  of ---     J*,^/» 

neiurn,  buiul  «     y      f  ^^^  ^^^  ^^^^  ^^46, 1461, 1973, 1989,  2103,  2114 

Schedules,  control  of,  by  city  and  effect  upon  working  conditions  of  train- 

men 1/60,1/65 

^'^^Bein^  rendered  at  less  than  cost -  -  -  -  •  1971, 1974, 1986, 1993 

Standards  of,  comparatively  lower  than  in  Wisconsin -  -  -     1987 

Solution  of  present  electric  railway  problem,  favored  as ll..>0, 1^ J9 

Speed,  high  schedule  of  electric  railway  cars  under lb8o,  I9yi,  lyyj 

Success  of  plan — 

Affirmed 14^59 

Causes  of - ^"""^' 

1007  on, 1357, 1458, 1459, 1464, 1679, 1685, 1687, 1753, 1754,  2116 

Questioned i"7i 

Taxation,  special,  such  as  paving,  etc.,  elimination  of 606, 14^9, 1464 

Traffic,  density  of '  S^^MoOQ 

Valuation ^  '^'  ^""^ 

Goff-Johnson  appraisal -  -  -  ;-;•:;-:::-- : : ; .  1,,?2 

Low  initial...... 1008,  l3o7,  Ho9, 1464, 21 16 

Taylor  appraisal - ;.-     \^^ 

Wages," of  electric-railway  trainmen,  adjustmerit  of.  under l/bl,  ivbD 

See  also  Cleveland  Railvvay  Co.;  (  ost  of  service. 
Cleveland  Railway  Co.,  tie veland,  Ohio:  ,  ,•  i^     u        i^n  i7ca 

Efforts  of,  to  force  concessions  from  city  during  recent  laoor  dirrculty . .  1461,  i7bb 

Fares,  comparison  of  rates  of,  in  effect  in  1914  and  1919 1758 

Improvements,  made  by,  how  paid  for - 1978, 198a 

Labor  employed  by — 

Turnover,  large,  claimed -■ ;  *  Y -'i*  • " 

Wages  of  electric-railwav  trainmen,  comparisons  of,  with  those  paid  in 

Detroit  and  Philadelphia 2003 

Rates  paid ;-io  ^Ito' U'S 

Working  conditions  of  electric-railwav  trainmen 174^,  17o2, 1/53, 1/54 

Maintenance  allowance,  conclusions  of  ('.  N.  Duffy  in  arbitration  regard- 


ing  


1975, 1985 


Securities  of,  local  ownersliip  of,  and  its  value ■  -  •  -  -  .;^95,  lo87 

Statistics,  operating  and  traffic,  comparison  of,  with  Milwaukee  and  Phila- 
delphia  1989 

See  also  Cleveland,  Ohio. 

Cost  of,  increased  as  cause  of  difficulties  of  Rhode  Island  Co.,  Rhode 

Island 1191,1195 

Price  of,  in  Indiana  comparatively  low 1096, 1103 

Coinage,  revision  of,  as  an  aid  to  electric  railways 325, 1032,  1d90 

Collection  of  fares: 

British  method  of,  not  favored ; : 1"^^ 

Faulty,  had  considerable  effect  on  electric-railway  revenue  m  Indianapo 

lis,  Ind - -     111^ 

Loss  in,  importance  of  reducing  to  a  minimum 1258, 1261 

Mechanical  de\  ices  for,  none  used  in  Philadelphia,  Pa 1558 

Rooke  fare  register,  merits  of 1261 

Zone  system,  with — 
Difficulties  of — 

Encountered  by  Public  Service  Railway  Co.  of  New  Jersey  m 

introducing.: 1610,1612,1619,2042 

Partly  responsible  for  nonintroduction  of,  in  large  cities  in  United 

States 1432 

Method  of—  ^  _„^^ 

Adopted  by  Public  Service  Railway  Co.  of  New  Jersey 1119 

Used  in  Great  Britain 1610 

See  also  Fares;  Zone  system. 
Collective  bargaining:  ..  , on-  10.70 

Advocated  as  method  of  avoiding  strikes  in  public-utility  field 129/,  lo73 

Method  of,  adopted  by  Philadelphia  Rapid  Transit  Co.,  Pennsylvania 1521, 

Indorsement  of,  by  National  War  Labor  Board 1514, 1520, 1524,  1877 


f 


2300 


INDEX-DIGEST, 


=-} 


Collective  bargaining — Continued. 

Through  union  labor  auepices —  l*ag«- 

Desirability  of 1938 

Other  BVBtems  futile 1880-1881, 1 936, 1938, 1956, 19G2, 1999 

Prinri]me,  one  urged  for  inclusion  in  any  recommendations  of  the  Fed- 
eral Electric  Railvvays  Commission 1896, 1935 

See  also  Amalgamated  Association;  Arbitration;  Labor. 
Competition  between  electric  railways  operating  in  same  city  undesirable  ....   1038, 

1041,1044,1051,1206 
Competition  with  electric  railways: 

Favored  as  means  of  public  protection. ;  •  •  • : 1^^ 

Increased  and  encouraged  by  increase  in  electric-railway  rates  of  fare 1205 

Lack  of,  former,  a  demoralizing  tendency 1590 

Opposed  to 1229, 1242 

iStfifa/iio  Automobile;  Jitney;  Monopoly;  Motor  vehicle;  Necessity;  for  elec- 
tric-railway service;  Steam  railroads;  Substitutes  for  electric 
railways. 

Condemnation  of  electric-railway  property,  process 1238-1239, 1281 

Public  ownership  thrcuigh '. 1140, 1143, 1238 

Use  of,  to  force  necessary  consolidations 1235 

Set  uUo  Purchase  of  electric  railways  by  public. 

Condition  of  oleetric'railway  industrv,  present  unsatiafactorv 63,' 

66, 67, 86,  \%  8-12, 847, 882, 978,  i088, 1662, 1731, 1843, 1887 

Conllscation  of  electric  railways,  what  constitutes 1141, 1163 

Congestion  of  population,  Wf  Population;  lone  system  of  fares. 

Congestion  of  tmnsportatitm,  great  in  New  York  City,  but  unproHtable —  1299, 1301 

Connneticut; 

Electrie-milway  nituation  in 1107 

Faree,  right  of  electric  milwaya  to  initiate  changes  in 952, 1109, 1116 

Jitney  competition  with  electric  railwa>-a  in 427, 428, 959, 1108-09, 1114 

Sh  aUo  Jitneyi. 
Connecticut  Co.,  (-onnecticut; 

Cost  of  i^rvice  of  MitMcliun^ttii,  application  of  to  a  possibility 1117 

Exprfim  matter,  carrying  of,  by 429 

Jitney  competition  with,  effect  of,  upon  fwnlts  from  incrcaM  fare* 958 

8^  ako  Jitney. 

One-man  cars,  use  of.  by  nalisfactory 401, 1115 

Situation  with  i-egard  to 422,1107,1110,1111 

Connell.  A.  T..  statement  of 1377 

Consoliuation  of  electric  railways : 

Evils  resulting  from 1221 ,  1435, 2057, 2073 

In  any  one  city,  of  all  operating  there,  dt^irable 1296 

New  York  City,  operating  in,  favored 1077, 1079, 1284, 1290 

Construction,  cost  of  electric  railway,  nrc  Cost  of. 

Construction  of  electric-railway  lines  through  assessment  of  properly  benefited, 

see  Assessment. 
Contingencies,  see  Valuation. 
Contingencies,  reserve  for: 

Advocated 888 

Provision  for,  in  New  York  law 834 

Contracts: 

Between  electric  railways  and  municipalities,  control  of  State  regulatory 

commissions  over 1224, 1228, 1392 

Between  electric  railways  and  Amalgamated  Association  of  Street  &  Elec- 
tric Railway  employees,  see  Amalgamated  Association. 
Evil  effects  of  monetary  inflation  on  all  involved  in  any  form  of,  including 

electric  railways 1319,1330,1334 

See  also  Franchises. 
Contributions,  public,  to  electric  railways,  see  Subsidies. 
Control,  public,  of  electric  railways,  see  Regulation. 

Conway,  T.,  jr.,  statement  of 941 

Cooke,  M.  L.,  statement  of 1687 

Cooley,  Mortimer  E.,  statement  of 247 

Cooperation  of  public  with  electric  railways,  see  Public. 

Cooperative  plan  adopted  by  Philadelphia  Rapid  Transit  Co.,  Pennsylvania,  in 
solving  its  labor  problem,  see  Philadelphia  Rapid  Transit  Co. 


INDEX-DIGEST.  2301 

Corruption:  ^^■ 

Of  public  officials  by  public  utilities 154, 

242,  244, 450, 854, 1010, 1030, 1346, 1709, 1723 

In  public  utility  industry,  conduct  of 792,  798,  799 

See  also  Capitalization;  Finance;  Management. 
Cost  accounting,  see  Accounting. 
Cost  of  capital,  see  Capital. 

Cost  of  cars,  electric-railway,  causes  for  increase  in 397 

See  also  Cars. 

Cost  of  construction,  electric-railway,  increase  in,  discussed 439 

Cost  of  development  and  promotion,  see  Valuation. 

Cost  of  equipment,  early  electric-railway,  high  and  cause  of  seemingly  exces- 
sive capitalization 141 

Cost  of  Labor,  see  Labor. 
Cost  of  living: 

Analysis  of,  and  of  cost  of  electric-railway  operation  as  related  to  wages  of 

electric-railway  trainmen 1768 

Increase  in,  during  war  and  since —  , 

Cause  of  increased  cost  of  labor,  not  the 1872, 1885, 1952 

Discussed 1796,1799,1800,1801 

Family  budget,  effect  upon  of 1801 

More  rapid  than  increase  in  wages  of  electric-railway  trainmen 1790, 1791 

Taken  care  of  by  increase  in  wages 1194 

Public  ownersliip  and  operation  of  transportation  agencies  will  tend  to 

reduce 1344 

Studiee  in  made  by  T'^nited  States  Bureau  of  T^abor  Statistics  described. . .     1796 
Set  also  liabor;  Standard  of  living;  Wages, 
Cobt  of  operation  of  electric  luilvsavf: 

Aratysia  of  present,  on  txTaical  road 1662,1672 

Anal>'sis  of,  and  of  coet  of  living  as  related  to  wages  of  electjric  railway 

trainmen 1768 

Set  aim  Wages. 

(\)8t  of  platform  labor  not  a  determining  factor  in 1882, 1952 

Ste  aim  l4ibor. 

Increasefi  in.  in  recent  \*eftr8 64, 

104. 209, 602. 752, 797, 943, 1036, 1385. 1539 
Oane^  of  prefer  t  deplorable  condition  of  electric  railways,  see  V%\wm* 

Fares,  increase  in  rates  of,  necessity  of  to  meet 582, 1156, 1390 

See  also  Fares.  ' 

Public  fails  to  realise  extent  of 947 

Set  also  Public. 

sun  rising ^ 714,781,969,974 

Sffa^^oCoets;  Piires. 

TiOW  per  passenger,  claimed 1704, 1711 

Re^iuction  in,  ixxpsibilitice  of, 
Claimed,  through — 

Economii^,  further 1592 

See  also  Economy. 

Public  cooperation. .*. 1898 

See  also  Public. 

Doubted 161,1290 

Schedule  speed,  effect  of  higher,  in  diminishing,  in  Cleveland 1990, 1992 

Coet  of  service  of  electric  railways: 

During  rush  hours  much  greater  than  during  nonnish  hours 803, 1970. 1998 

Importance  of  it  being  kept  as  low  as  poseible 914 

Per  ride  per  pagsenger,  increase  in 968, 974 

Studies  in,  by  bureau  of  fare  research  of  the  American  Electric  Railway 

As£Ociation 1970 

Coet  of  service  franchise,  electric  railway: 
Advantages  of— 

Automatic  adjustment  of  fares * 467. 471,  663,  685 

See  also  Cost  of  service,  fares. 

-    Credit,  restoration  of 598, 1566 

See  also  Credit. 
Return,  certainty  of 598, 689-70, 915 


f 


2302 


INDEX-DIGEST. 


INDEX-DIGEST, 


2303 


Cost  of  service  franchise,  electric  railway— Continued.  ku^i^ 

A  TiTtTovefl  or  favored  ,.............««.•••••••••••••••  a  «'»>  ^  *  -^  > 

Approveu  .  — --g  -<J8,  905. 1240, 1357, 1416, 1419, 1587, 1900, 1906, 1912 

Arbitration  of  fairness  of  provisions  of,  after  adoption  of  plan  not  favwed . .     2102 
Automatic  adjuptment  of  fares  under,  delay  incident  to  putting  into  effect- .      990 
See  also  Coat  of  service,  fares. 

Barometer  fund,  a  fundamental  feature W>^.  l»^l 

Budget  method  favored - "**^ 

Capital  value  or  rate  base,  fte£  Cost  of  service,  value. 

Cities  in  which  being  considered •      »46    , 

Control-sur)enision  imder taI 

EesentiaUeature  of loi^'ilAo'i^ft?  oml 

Extent  of 1247,1462,1587,2094 

Ix)cal,  favored APoali 

Local  with  Stat«  combined a-A*;«t2  i  .S2 

State,  favored 467,  598,  664,  675-6, 985, 1228, 1240, 1247, 1420 

Cost,  elements  of,  univ  er^^allv  recognized 665 

Defects  and  disadvantfiges  of,  dif  cuseed •  -  •     328 

350,756,1006,1147,1460,2102.2103,2112,2113 

Denver,  Colo.,  considered  for " * 'AA^  ?9ii 

Di^annroved      1055, 1062, 1073, 1109, 1112, 1516, 1572, 1625, 1692 

Di£cK£ed  . v  164,334,1913,1920 

Efficiency  and  economy  under,  possible  methods  of  developing 1698 

Extensions,  construction  of  under 1460, 1462 

Fares,  under—  .     .       .      o^  . 

Automatic  regulation  of,  under  versus  regulation  by  State  commis- 
sions   ^^6,  406,  467, 

472,  563.  663.  670,  685,  780,  898.  905-6,  984,  988.  990, 1270 

Maximum  and  minimum  rates  of  should  not  be  rigid 598,  673 

Prohibitive,  likelihood  of  being  established  considered  a  disadvan- 
tage.     .- 781,1109,1112,2113 

Rates  of,  should  depend  upon  local  conditiora 692 

Features  essential  of ayn  it- 

Automatic  adjustment  of  rate  of  fare ^  -  o7U,  o»a 

See  also  Cost-of-service,  fares. 

Barometer  fund 662, 1021 

Indeterminate  franchise  term • -^  13^6 

Purchase  by  municipality,  right  of 513,665, 1247, 12/0 

Supervision,  public - 664 

Value.  caT)ital,  or  purchase  price  to  be  determined  at  time  plan  becomes 

effective.  .7 .68,  665,  670. 1094, 1240, 1248, 1913.  2103,  2112,  2116 

Franchise,  form  of,  under 1^3, 468,  671 

Incentive  to  efficient  operation  under -  -     4/4, 

494,  498,  501.  602,  631,  1003,  1005.  1014.  10(53,  1147, 1148.  12a6.  1463 
1602,  1698.  HKX),  1006,  1912.  1914,  1016.  1918,  1919, 1923,  1926,1932 

Kansas  City  plan,  contrasted  with -  •  • .- */•/••       ^^^^ 

Labor,  control  l)v  municipalities  of  wages  and  working  conditions  of  elec- 
tric railway,  favortnl 1458, 1915, 1918, 1910 

Mod ificat ions  of  iiroposed •       600 

Maintenance  and  replacement  fund,  provision  tor obb,  bt)7 

AfortLnige  bonds,  financing  through,  made  unnecessary  by. 15S7 

Municipal  operation  favored  as  cure  for  defects  of  private  under 1464 

New  lirunswick  plan  described •  • 1063, 1073 

Philadelphia.  Pa.,  provision  for,  in  rapid-transit  franchise  of,  discussed. . .       4/0 

Pittsburgh.  Pa.,  being  considered  for ^301 

Public  ownership,  relation  between,  and '>00. 

511, 1010, 1152,  1156-1157. 1234, 1247, 1256 

Public  sentiment  toward 487, 664. 1006. 1460.  2078 

Purchase  by  city   - 

A mort  ization  of  price  favored t i  .V  r«jj  poi 

.\n  essential  fuafure  of lol?  ill-rn 

Provision  for - 1^47, 1-70 

Return,  ttdotiuacy  of  rate  of.  under,  and  desirability  of  a  fixed  rate  of 328, 

*       *  345.  348,  672,  67'..  6^0.  6H1.  12U>,  1418.  1419, 1463, 1588. 1926 

Salaries  of  exocutivofl  undor.  limitation  upon 196 

Socurit  ie.s,  relative  value  of  various,  under . • •  •  •  •  •      1^8 

Service,  where  conunnnitv  is  to  control  (luantity  and  quality  of.  under,  it 

should  pay  ltd  costs  tiu-ough  whatever  rate  of  fare  necessary. . . .     l&tt/ 


Cost  of  serA-ice  franchise,  electric  railway —Continued.  Page. 

Sliding  scale  of  rates  and  return,  desirability  of 669, 

686, 1463, 1915, 1916-1917, 1922 
Solution  of  electric-railway  problem,  a  means  of..  156,  279,  280,  281,  311,  689, 1677 

Taxation,  elunination  of  special - 470,  657,  908,  909,  912, 1015 

Value  of  property,  importance  of  a  fair,  as  basis  of 468, 

665,670,1094,1240,1248,1913,2103.2112,2116 

Value,  capital,  how  fixed 468 

See  also  Capital;  Capitalization;  Cincinnati;  Cleveland;  Dallas;  Franchise; 
Massachusetts;  Montreal;  Solution. 
Cost  of  supplies  used  by  electric  railways,  see  Supplies. 
"Costof  urban  passenger  transportation  service,"  by  F.  W.  Doolittle,  referred 

to : 1070,1974,1087 

Cost-plus  basis  of  electric-milway  operation 404 

Costs,  permanency  of  present  high,  se-e  Prices. 

Couzens,  James,  statement  of 1134 

Credit  inflation  j^rimary  cause  of  upheaval  of  prices  during  war 1328 

Credit  of  electric  railways: 

Car-trust  certificates,  use  of,  by  General  Electric  Co 390,  391,  400 

Causes  for  impairment  of 315,  538, 543, 1843, 1846, 1866 

Command  of,  by l-^l- 153 

Lack  of,  by,  at  present 389,  538,  543, 1650. 1656, 1843, 1846, 1866 

Disadvantages  of 664,  707,  709, 1451 

Loss  of,  fear  of  the  disclosure  of  unsatisfactory  finances  kept  electric  rail- 
ways in  Massach usetts  from  asking  for  increased  fares  in  past .  1437, 1446 

Need  of,  essential 193,  583 

Obsolescence,  less  likelihood  of,  in  future  electric-railway  development 

should  invite 2162 

Reestablishment  of,  possible  means  of  effecting,  through— 

C 'Ost  of  service  franchise. 211,  507 

See  aho  Cost  of  service. 

Public  control  and  operation  through  trustees 1651, 1653 

Public  ownership Hoi.  1454. 1651,  2060,  2081 

See  also  Public  ownership. 

Reorganization  of  finances 574,  575,  577,  2081 

See  also  Finances. 

Revenue,  additional 829,  860 

See  also  Fares;  Revenue. 

Reserves,  necessity  of.  to  maintain 889 

Stability  of,  effect  upon,  of  public  right  to  purcliase  under  indeterminate 

franchise ^^7 

See  also  Purchase. 

Use  of  private  in  endeavoring  to  obtain  additional  capital  needed 2068 

Sec  also  i&pitsil;  Capitalization:  iii.ance.*. 
Credit,  utilization  of,  to  make  pt>8t=ible  public  ownei-ship  and  oi:>eration  of^ 

electric  railways 1237. 1247 

Creed,  W.  E.,  statement  of 883 

Culkins,  W.  C,  statement  of 471 

Current,  electric:  ^_ 

Direct  versus  alternating,  use  of 143,  7»8 

Price  paid  for  bv  certain  electric  railwavs  for  power  bought  largelv  in- 
volved in  solution  of  their  pniblem 2019.  2024,  2030 

Rates,  high  in  United  States  as  com})ared  with  low  in  Canada  under  hydro-^ 

electric  development 2015. 2033 

See  also  Hvdroelectric. 
Dallas  Rail\^'ay  Co.\  Texas,  cost-of-service  plan  of  electric-railway  operation  in 

use  m ^]^^ 

Adoption  of,  history  of 628 

Control  by  municipality 630 

Cooperation  of  cit>;  with  company 6.31 

Cost  of  operation ,  increased  a  drawback  to  success 6-32 

Eamin^p.  disposition  of 630 

Extensions,  need  of 632 

Fare,  maximum  fixed,  considered  a  defect 631, 6:^3 

Franchise,  indeterminate 634 

Incentive  to  efficient  operation,  the  London  sliding  scale  used 631 

Jitney  competition  eliminated  by  city 634 


t 


2304 


INDEX-DIGEST. 


INDEX-DIGEST. 


2305 


Dallas  Railway  Co.,  Texas,  in  use  in— Continued.  I*«B«- 

Purchase  by  city  provided  for 634 

Retumj  rate  of  varies  with  rate  of  fare 631 

Securities,  issuance  of  not  controlled 630 

Value  of  property,  compromise  as  result  of  valuation 629 

Banbury  &  Bethel  Street  Railway  Co.,  Massachusetts,  abandonment  of  service 

by  receiver  of  permitted 437 

De  Rerard,  F.,  statement  of , -  - -.-  •      875 

Deficits  of  privately  operated  electric  railways,  desirability  of  public  subsidies 

to  cover 464 

See  also  Subsidies. 

Delbridge,  C.  L.,  statement  of 1703 

Denver,  Colo.,  service-at-cost  ordinance  proposed  for  electric  railway  m 2011 

Density  of  traffic,  see  Traffic. 
Depreciation: 

Allowance  for  by  electric  railways 106, 175, 263, 265 

Adequate,  urged 200, 263, 558,  559, 888, 1507, 1576, 1664, 1674-1675, 2065 

Change  indue  to  change  in  regulatory  commission  personal  undesir- 
able       774 

Compulsory — 

More  so  in  Great  Britain  than  in  United  States 1984 

Advocated  for  United  States  and  with  public  supervision  of. .  565, 2065 

Inadequate  in  p»8t 1204,1437,1438,1689 

Inadequacy  of,  in  past  a  cause  of  present  weakness  of  industry 1984, 

^  2058,2059,2092 

Boston  Elevated  Railway  Co.,  Massachusetts,  provision  for,  by  public 

tnistees  operating,  not  considered  excessive 1684 

Bay  State  Street  Railway  Co.,  Massachusetts,  must  be  changed  by  public 

trustees  operating 1641, 1642, 1654 

Cost-of-service  francnise,  provision  for,  under—* 

Cincinnati  plan 482 

Cleveland  plan,  sufficiency  of  under — 

Criticized 1971,1972,1974,1977,1985,1993 

Defended :•.•:••••    2115 

Inadequacy  of,  under  some,  to  care  for  future  replacements  criticized.      780 
Reserve  for  existing  renewals  but  not  for  theoretical  depreciation  or 

unforeseen  obsolescence  recommended 667, 677, 692 

Detroit  United  Railway  Co.,  Michigan,  recent  increases  in  allowance  for,  by    1142 
Earnings,  provision  for,   out  of  current  required  under  indeterminate 

n-anchise ; 1983 

Earnings  of  electric  railways,  past  insufficient  to  permit  provision  for 1675 

Federal  Electric  Railways  Commission  should  point  out  necessity  of  elec- 
tric railways  making  larger  provision  for 2065 

Method  of  caring  for,  proper 810 

Necessity  for,  explained 2065 

Obsolescence,  through 137, 141,  228,  394 

Philadelphia  Railroad  Co.,  Pennsylvania,  sufficiency  of  allowance  for, 
made  by — 

Criticized 1993 

Defended 2007 

Reserve  for — 

Creation  of,  ordered  in  Lincoln,  Nebr.,  by  regulatory  commission 1366 

Establishment  of,  not  favored 1721 

San  Francisco,  Calif.,  discussion  ef,  by  city  engineer  and  argument  against 

reduction  of  allowance  for,  by  municipal  railway 1507 

Valuation — 

Allowance  for,  in - 2105 

Ignoring  of  functional,  in,  wrong 936 

Rate  of,  used  in  Milwaukee  cases 767 

See  also  Obsolescence;  Valuation. 
Depreciation  of  money,  see  Money. 
Des  Moines,  Iowa,  proposed  public  subsidy  to  privately  controlled  electric 

railway  in,  defeated  by  voters 2110 

Detroit,  Mich.: 

Automobile  as  substitute  for  electric  railway  favored  in 1121, 1127 

Electric-railway  situation  in 1120, 1135 

Electric-railway  transportation  not  believed  absolutely  essential  for..  1131, 1127 


Detroit,  Mich.— Continued.  ^^ge. 

Motor-bus  operation  in,  contemplated 1620 

Municipal  ownership  of  electric  railway  in 1275 

Favored  and  reasons  therefor 1120, 1121, 1124, 1133, 1143, 1153 

Methods  of  obtaining,  possible,  discussed 1139-1141, 1143, 1162 

Nonadoption  of  and  reasons  therefor 1129, 1136, 1163,  2111 

Regulation  of  public  utilities  in,  home  rule  in  matter  of,  favored 1120, 

^  *  -  1144,1146,1149 

See  also  Detroit  United  Railway  Co.,  Michigan. 
Detroit  United  Railway  Co.,  Detroit,  Mich.: 

Amortization  of  debt  before  expiration  of  franchise  should  have  been  pro- 
vided for t.  1145,1164 

Capitalization,  feeling  that  there  is  excessive,  of 1141 

Depreciation  fund,  recent  increase  in,  by,  objected  to ' 1142 

Express  and  freight,  carrying  of,  by,  on  city  lines  objected  to 1122 

A  convenience 1123 

Fares,  abrogation  of  low,  opposed * 1121, 1138 

Franchises  of — 

Essential,  have  expired 1128 

Proposals  defeated 1135 

Situation  with  regard  to 1139 

Interurban  lines  of,  relative  profitability  of,  as  against  city  lines.  1122, 1139, 1159 
Hours  of  labor  of  platform  men  employed  by  and  compensation  therefor. .    1735, 

1738-1739, 1743, 1745-1746,  2003 

Public,  reasons  for  hostility  of,  to — 1141-1152 

Revenue,  arbitration  of  need  of  additional,  by 1141-1142 

Transfers,  charge  for,  by,  opposed 1142 

Value  of,  as  result  of  various  valuations  discussed 2013 

See  also  Detroit,  Mich. 
Development  costs,  see  Valuation. 

Development  of  electric  railways,  see  History  of;  Growth  of. 
Directors  of  electric  railways,  representation  of  employees  and  public  on  boards 

of,  see  Management. 
Discontinuance  of  service  by  electric  railways,  see  Abandonment  of;  Service. 
Discounts  on  securities,  see  Securities. 
Distribution  of  securities  of  electric  railway,  see  Securities. 
District  of  Columbia,  see  Washington,  D.  C. 

Districts,  establishment  of  public  utility,  for  purposes  of  ownership  and  oper- 
ation: 
Bay  State  Street  Railway,  Massachusetts,  operated  through  medium  of . . .     1640 
Favored  to  permit  public  ownership  where  purely  municipal  impracti- 
cable  802, 1231, 1237, 1247, 1265, 1631, 1635,  2076,  2120 

Pittsburgh  Railways  Co.,  Pennsylvania,  public  ownership  of,  through 

medium  of ,  for  Pittsburgh ^ 1912,1924 

Dividends,  public  control  over  amount  to  be  distnbuted  favored 1282 

Doherty,  H.  L.,  statement  of 402 

Doolittle,  F.  W.,  studies  of,  in  cost  of  urban  passenger  transportation  service. .   1970, 

1974, 1987 
Double-deck  cars,  see  Cars. 

Douglas,  W.  L.,  statement  of 929 

Draper,  Walter  A.,  statement  of 498 

Duluth,  Minn.,  use  of  double-deck  cars  in 934 

Earnings  of  electric  railways: 

Investment  out  of 166,272,275,333,338,342,973 

Must  be  sufficient  to  yield  reasonable  returns 975 

Original,  honest  investment,  fair  basis  for 161 

Percentage  increase  in,  on  Stone  &  Webster  properties 204 

See  also  Income  revenues. 
Eastern  Massachusetts    Railway  Co.,  see  Bay  State    Street    Railway  Co., 
Massachusetts. 

Eastman,  Joseph  B.,  statement  of 2055 

Economy  in  electric  railway  operation: 

Capital,  lack  of  cause  of  uneconomical  conditions  in  the  industry.. .  81, 658, 1451 

Cost-of-service  plan  in  connection  with 512, 1459 

See  also  Cost  of  service. 

Discussed 123 

See  also  Economy,  possible  means  of. 


i 


2306 


INDKX-DIUKST. 


Ewnomy  in  ^lortrlc  ruitwrtv  opomtion  -routimiod.  ^  '■••• 

Faras,  all  noesiblo  moaiw  of.  slumld  U  wxhAuated  before  attemnUng  to 

inrreaw 12R6, 1318, 1668,1673,2067 

Greater—  «,,^ 

Need  f>f  urffod  ..  ,.....................••••••••••••••••••••• iiuj 

No  further  p(>w^il)lc ^JLl^',^?"*;^!!? 

Important  of,  pointod  out 1396,  lb(>4, 1(>74 

Incetitivo  t«>waM—  .    . 

DfPtroyrd  by  v^'himH  uttiiudo  of  m^gulatory  ctunitiiwsioiis o«J 

Return,  nooti  of  allowing  sufliiMrnt .  a^  ono 897 

Lark  of,  beliof  in  oxist^-m-o  of •.:••••  1^""*'  ^'^^^^^  ]  J*,^; 

Publir  Bupport,  nerofwity  of.  to  nmko  introduction  of  p«)H8ibIo i-mI 

Possible  mUm  of,  disiMrssed \m\  1 115, 1 179, 1 187, 1259, 1592, 16(>4-1674 

Alt<>matinu;  current,  possible  use  of 1^3 


>mating 

Equipment,  stand ardi /.at ion  of 

Gasoline  versus  elertri(  ity 

See  also  (iasjdine. 
Intercorporate  comnlexitioH.  expensive,  elimination  of. 

of 


Am 
217 

139.'> 
1593 


One-man  car.  use 

*Se€  a /«o  One-man  car. 

Philadelphia  R.  T.  (\).,  means  adopted  by,  of  promoting 153ft,  lo38,  1d39 

See  also  Philadelphia  R.  T.  Co. 

Power  in,  use  of ,. 215,239,1593.1607,2067 

See  also  Power. 
See  also  Efficiency;  Improvements  in  the  art;  Incentive;  Management; 
Skip-stop;  Traffic  regulation,  etc. 

Edison,  Thomas  A.,  statement  of , ; -  -  -  -  •       84- 

Education  of  public,  need  of,  as  an  aid  to  solution  of  electnc-railway  problem, 

see  Public. 
Efficiency  of: 

Capital  employed  bv  electric  railways,  increase  m,  since  1902 lij^y 

Electric-railway  industry,  increase  in 17S2 

Electric-railwav  trainmen,  increase  in 1515. 1  >34. 

'     1731, 1776, 1781-1782, 1846, 1853, 1887, 1928, 1957-1959, 19(>0, 1964 
See  also  Labor. 
Operation  of  electric  railways— 

Basis  of  anv  successful  proaram  for  rehabilitation  of  electric  railways. .   1693, 
•^  1697 

Cost-of-8er\ice  plan,  under,  through  giving  municipalities  a  share  in 

operating  control 1 1^2 

See  also  Cost  of  service. 

Incentive  toward,  need  of 923, 1003, 1005, 1014, 2093 

See  also  Incentive. 

Initiative  for.  should  rest  with  electric  railways 1 395 

Necessity  of  greater .' -•  -  -  1674, 1688, 1732 

Public  ownership  under,  will  be  just  as  good  as  under  private 792 

Receivership  imder 196 

See  also  Economy;  Improvement  in  art;  Management. 
Efficiency  and  economy  of  operation  of  electric  railways: 

American  Electric  Railway  Association,  activities  of,  in  furthering 1561, 

1567, 2036 
Federal  Electric  Railways  Commission  should  point  out  to  owners  and 

managers  need  of  enterprise  in  these  directions 2067 

Importance  of 1398,  loJK) 

Methods  of  increasing,  possible -. -^^^7 

Philadelphia  Rapid  Transit  Co.,  means  adopted  by,  for  promoting  (co- 
operative plan) 1396 

See  also  Philadelphia  Rapid  Transit  Co..  Pennsylvania. 
Public  confidence  need  of,  to  make  introduction  of  methods  of,  successful.     2098 
See  also  Public. 

Reward  for,  should  go  to  management  and  labor  rather  than  to  capital 2114 

Sharing  of  results  of.  Avith  employees  of  Philadelphia  Rapid  Transit  Co. 

under  cooperative  plan 1518, 1533 

See  also  Philadelphia  Rapid  Transit  Co. 
See  also  Economy;  Efficiency;  Improvements  in  the  art;  Incentive,  Man- 
agement. 
Eight-hour  day,  introduction  of,  in  the  electric-railway  industry,  m^  Labor; 
Working  conditions. 


INDUX^mUEST, 


2307 


Electric  railways?  '^ 

Bv  no  moans  a  dying  institution 2a'^T.2t^38 

Facilitios  affordoH  bv,  to  cities,  sef  Cities. 

Futun^of ! 759.1(K»9 

Growth  and  development  of,  see  Qrowtii  and  development, 

Ilistjorv  of.  see  History  of. 

ImporUnce  of,  in  any  community.  B*f  Necessity  for  electric-railway  aemce. 

Problem  of.  see  Prol>lem;  Sohition :  Small,  statement  on  behalf  ot 882 

Responsibility  of,  to  employt^s  and  public,  need  of  keener 786 

Situation  with  regard  to  present- 
Critical,  pointed  out  and  discussed 581 . 

645.  653. 852.  898. 969.  973. 990. 1 107-1 108. 1 116, 1660 
See  also  Condition  ot  electric  railways;  Finances  of  electric  railways. 
Electric  Service  Supplies  Co..  statement  and  tables  filed  by  A.  H.  England..       116 
Electrification  of  street  railways  in  United  States: 

Occasion  of  high  finance 1203. 121 1 

Resulted  in  extension  of  length  of  ride  for  5-cent  fare 843, 852 

Employees  of  electric  railways: 

.  Allocation  of,  between  railway  and  power  departments 72 

Number  of,  lar^r  in  proportion  to  income  than  in  any  other  public  utility . .        72 

Statistics  of.  discussion  of * 71 

See  also  Labor. 
Engineering,  subordination  of  member  of  profession  to  financial  interests  in 

public  utility  field  criticized 1690 

English  tramway  conditions,  see  Great  Britain. 

England,  A.  H.,  statement  of 416 

Equipment,  modern,  standardized  rolling  stock  essential  to  electric  railways..     166S 
See  also  Cars. 

Erickson,  Halford,  statement  of 867 

Expenses,  operating,  of  electric  railways,  see  Cost  of  operation;  Operating  ex- 
penses. 
Express  and  freight,  carrying  of,  by  electric  railways: 

Connecticut  Co. ,  Connecticut 429 

Detroit  United  Railway  Co.,  Michigan,  by — 

Convenience,  even  if  not  cheaper  method 1123 

Switching  of,  in  public  streets  bj',  resented 1122 

Interurbans — 

Business  done  by  and  benefit  to  community  from 702 

Hostile  attitude  toward,  of  American  Railway  Express  Co.  complained 

of 705,  727 

Revenue,  possibilities  of  increasing  through 465,  718, 1564, 2095 

Extensions  of  electric  railway  lines: 

Assessment  of  property  benefited  to  pay  for,  see  Assessment. 
Cause  of  present  deplorable  condition  of  electric  railways,  unwise  as,  see 
Causes. 

Cities  in  LTnited  States,  made  possible  superior  development  of 436, 4.38 

Cleveland,  Ohio,  prudently  made  in 1008 

See  also  Cleveland. 
Contracted  for  by  municipalities  with  public  utilities  under  municipal- 
guaranty  Law  of  Wisconsin 782 

Control  of  construction  of 306,  336 

Local  control,  with  right  of  appeal  to  State  commission 1098, 1228 

State  commission  control 435, 447,  783 

Early  made  upon  initiative  of  electric  railways 854 

Earnings,  out  of 275 

See  also  Earnings. 

Effect  of  complying  with  requests  for 433 

Lack  of  a  hindrance  to  further  growth  of  cities 709 

Motor-bus  operation  of  needed,  suggested 1614 

Municipal  ownership  of  roadbed  to  permit  more  easy  and  quick  construc- 
tion of ,  needed 1040,1043,1045,1048 

Population,  relation  between  congestion  of. 

See  also  Population, 
Real  estate,  development  of  speculative  ventures  in,  through  construction 

of  unnecessary 347, 1008, 1206, 1212, 1358, 1622 

Facilities,  comparison  of,  afforded  to  American  and  European  cities  by  electric 

railways 436 

See  also  Cities. 


I 


3308 


lKl>SX-WttK*iT, 


¥m\[\y  budget,  m  i\mi  ot  U\iiigj  Stttiulnrtl  ©f  living. 
Automatic  ..Iju.^^^^^^^^^^^^ 

IWifl  of,  Bomc  ffttr  pwiK)rtii)U  to  mtsiw  mx^Wrx^i U^;*lrtft^  l\\\ 

i  apitftli»itttion,  rt^lfttion  of  t<)»  *»*.»»»»»»»*»».»»*********»»  ^ » * » *  *^^)  ^'"^^  ^*^^ 
(Se««<#o(^pitftH5'Atton. 

(^htttiBf^B  in,  right  of  olcctric  milwi^yi  to- 

Experiment  with ^  '       '  ^>  qar  i  ino 

IniSte ^ 962,966,1109 

Collection  of,  itt  Collection. 

Coflt-of-servioe  plan,  under,  set  Coat  of  service. 

Decrease  in,  effect  of,  upon  riding , .• :  •  •      ^"^ 

Depreciation,  desirability  of  rate-fixing  poUcy  making  adequate  provision      ^^ 

Federal  Electric  Railways  Commission,  attitude  of,  on  question,  see  Federal 
Electric  Hailwaye  Commiseion. 

Fixed  rates  of —  ,  099 

Basis  of  overcapitalization /.-••;•. i*m  i kq 

Effect  of,  upon  electric-railway  credit  and  income Uoo 

Originally  considered  a  great  asset J;^^* 

Solution,  not  the  ultimate.; ^'^^ 

Dangers  of,  in  connection  with  real  estate  development. .......  1206, 1212 

Policy  in  United  States  has  been  for  such  fare  with  free  tra^sfera.  •  1206, 1249 
Population,  relation  to  distribution  of 231,  IJOt),  1J»»,  ijy4, 140» 

Retention  of —  -^q« 

Not  favored        ^"^^ 

Subsidies,  through  public »02, 1026, 146(i,  1468, 1469, 1470 

See  also  Subsidies. 

Rapid  transit  lines,  favored  for ^-^^^ 

Zone  system  a«  an  alternative,  ne  Zone  system.  ..  ..  „,o  «Qft  onr;  qqa 

Pl«9>YihlA  rates  of  favored bo,  bo,  6io,  »»o,  woo,  »W), 

flexible  rates  01,  lavoreu. .,  ^^^^^  ^^^  ^^^^  ^^^3, 1442,  UH,  1905, 2075 

Franchises,  limitations  in,  upon 541, 724, 837, 842, 1108, 1222, 1248, 1417 

See  also  Causes;  Franchise. 
Haul,  length  of,  relation  to  «<•<•  Haul.  009  qi a  o«;o 

Imposts  and  burdens,  elimination  of  to  keep  down  rates 882,  910, 952 

See  also  Imposts. 
Increase  in  rates  of —  ^^ 

Coinage,  relation  of,  to ;Ai  *^oo  oJa 

Delays  incidental  to  obtaining 7Ui,  iZ6,  ms 

Economies  in  operation  rather  than 1256, 1318, 1568, 1673, 2067 

Effects,  social  and  economic  of.. o«i  Sq  q«? 

Effectiveness  of,  factors  controlling. itSt'o^q  '000 

Favored  as  measure  of  relief,  even  if  only  temporary  one iw,  zia,  z»z, 

302,  304,  351,  609,  645,  797,  804,  860,  872,  882,  897,  900,  915,  936,  947, 
990  991, 1029, 1053, 1055, 1064,  1070,  1108,  1156,  1334,  1340,  1390,  1648 

Granted  by  regulatory  bodies ...  361,  899, 927, 946, 1437, 1439, 1445, 1504 

Haul,  effect  of  length  of  upon  results  from  . . ... .......... . .  957, 1644, 1648 

Inability  to  obtain  as  cause  of  present  deplorable  electnc-railway    situation, 

see  Causes. 
Jitney  competition— 

Effect  of  upon  results  to  be  obtained  from 958, 959, 1114 

Stimulated  by 426,  451,  516, 959, 1186, 1243, 1255, 1644 

Limitations  of . . .  .^ 955, 1019, 1094, 1102, 1123, 1182, 1190 

Methods  of  and  results  to  be  obtained  therefrom 1673 

Power  to  grant,  see  Regulation. 

T^nnARsilR  for   recent  ........................       vio 

Public  attitude  toward. ".V.V. *.!.*!.* .*.*!!...   357,376,449,451,488,515,519,536, 

557,  558,  560,  594,  654,  663,  724,  798,  868,  873,  888,  919, 
1016, 1083, 1184, 1386, 1406, 1412, 1416, 1417, 1667, 1759 
See  also  Public,  attitude  of. 


lieduwii  r^ie*  to  fr^iK^nt  ©r  <dl!lf-»^k  vmt^  m  e^w^u^tt  with i^u 

l«l^  1«47 

!Vtw,^«i«te^ti«¥t..   ^T.»5!^,llHl«44a6'I^M«7S 

}^t i.Hf'Actorv,  cousidemi T20,  :27»  87l»  1094, 1644.  UA^ 

84x^^ttt  mt«. 4yi.966 

»St»ven-wnt  rate. ................. **»»!.*.......» »..».»»»......  967,959 

Ten-cent  rate^  ....„.......»<....................„........  668, 9ri0. 9f>2, 

1220, 1440, 1447, 1626, 164v^,  1644, 1648, 1660,  ICF.0. 1909 

lTnRUi«factorv,  considered 433,  467, 960, 962, 1082, 1089,1 1 76, 

1178,  1182,'  1220,  H39, 1441,  1447, 1448, 1625, 1643, 1660,  20(2.  20<  9.  2094 

Revenue,  effect  upon,  of 354,  35(),  359,  365-367, 

370-371, 432, 460, 477, 515, 639, 1504, 1657, 1909 

Doubtful,  couRidercd 432,  4.33, 612, 615-616,  809, 1899 

Fluctuations  in,  not  wholly  due  to  readjustment  of  fares 14,39 

(leneralization  regarding,  dangerous 957 

Limitations  and  possibilities  of 956, 1019, 1094, 1102, 1123, 1182, 1190 

Satisfactory,  considered 319,322,380,403,816 

Unsatisfactory,  considered 1600, 1642, 1G50, 1656 

See  also  Revenues. 

Riding  habit,  effect  upon,  of 159,  216,  246,  290,  350,  354, 

350,  359, 365, 403,  432,  460, 603,  C54, 664 
Dimintiticn  of,  as  a  result  of — 

Follows 612,615,794,809, 

1380, 1397, 1431, 1441, 1634, 1642-1643, 1650, 1056-1657 

Less  noticeable  when  increase  automatic 664 

Menace,  a  serious,  to  company  and  community 1397, 1450 

Nature  of,  temporary 2039 

None  results 379,884 

Short-haul  traffic  particularly  affected 516, 959, 1208, 1600, 1673 

Solution,  not  one,  of  the  present  electric-railway  problem 153, 159, 941, 

961, 1071, 1181, 1182, 1190, 1220, 1235, 1439, 1441, 1448, 1534 

Suburban  communities,  growth  of,  not  influenced  by 785 

Transfers,  charge  for,  not  favored  as  against  increase  in  flat  rate 526, 

1039,1100,1105 
Zone  8>stem,  establishment  of,  rather  than  an  increase  in  flat  rate  of, 

favored 1031,1034 

See  also  Zone  system. 

Intenirbans,  rates  of,  charged  by 700, 1086 

Low  rates  of — 

Abn^:ation  of,  in  Detroit  resented  bv  public 1120 

Essential .-.'. 495,910,1410 

Initial,  as  means  of  stimulating  short-haul  and  off-peak  traffic 1081, 

1084, 1204, 1207, 1210, 1240, 1251, 1564,  2095,  2110 

Success  of 1080 

Lowering  of  rates  of — 

Favored 1079, 1080 

Former  refusal  of  electric  railways  to  consent  to,  because  of  franchise 

provisions  reacting  against  them  now 2089 

Results  from,  in  Keene,  N.  H 2041 

Mileage  system  of,  for  cities  not  favored  for  United  States 1431, 1432 

Nominal,  under  public  ownership 1123, 1125 

See  also  Free  electric-railway  service. 
Rates  of — 

Two-cent  prr  mile  fare  low,  repeal  of,  in  Indiana  and  Michigan —  870, 1086 
Three-cent  fare — 

Cleveland,  history  of,  in 995 

Detroit,  increased  to  5  cents 1141 

Public  Service  Railway,  initial  fare  under  zone  system 1119 

Five-cent  fare — 

Adequacy  of  present 562, 1024, 1030, 1095, 1096, 1138 

Cleveland,  reasons  for,  in 1007 

Philadelphia,  reasons  for,  in 1394, 1396, 1553, 1559, 1567, 2003 

History  of,  in  New  York  State -      853 

Profitableness  of,  early,  not  as  great  as  thought 561, 

569,  607, 1437, 1445-6 

160G43"'— 20— vol3 17 


li 


2310 


INDEX-DIGEST, 


Fares,  electric-railway — Continued. 
Rates  of — Continued. 

Five-cent  fare — Continued.  ^*aK«. 

Retention  of,  favored 802,  873-4, 1466, 1468-9, 1470, 1679, 1680 

See  also  Subsidies. 

Value  of,  present  diminished 1334 

Six-cent  fare — 

Chicago,  insufficient  to  offset  increased  cost  of  operation 882 

Grand  Ilapids,  how  obtained  in 868 

Resul  ts  from 433,  956 

Seven-cent  fare,  results  from 957, 959 

Ten-cent  fare- 
Results  from 658, 960, 

9()2-  3, 1220, 1236, 1440, 1447, 1626, 1643, 1644, 1648, 1650, 1681, 1909 

Where  charged 951 

Reasonableness  of,  depends  on  local  conditions 1971, 1989 

Reduced  rates  of,  to  frequent  users  or  t^)  attract  off-peak  traffic  favored 937, 

1397, 1613, 1647 
Situation  with  regard  to,  in  various  lo<  alilies,  see  under  each  locality. 
Sliding  scale  of,  scr  Fares,  automatic  adjustment  of. 

Stability  of,  schemes  to  maintain 888, 1257 

Steam  railroad,  low  suburban,  competition  of,  with 715 

.  Subsidies,  public,  rather  than  too  high  a  rate  of 1231, 1240, 1247, 1449 

See  also  Subsidies. 

Wages  of  employees,  relation  to,  of 1953 

Zone  system  of,  see  Zone  system. 

See  aim  C(^t  of  service;  Franchise  regulation;  Relief;  Solution;  Tickets; 
Transfers;  Zone  system,  etc. 
Federal  Electric  Railways  Commission: 

Aid  of,  sought  in  putting  into  effect  a  cost-ofnBerv  ice  franchise  for  Denver, 

Colo 2011 

Appointment  of,  reasons  for 63,  68 

Assessment  of  property  benefite<l  to  pa\  for  electric-railway  extensions, 

should  call  attention  to  this  method 2099 

Capitalization,  advisability  of  investigating,  of  individual  companies 180 

Costs,  can  perform  signal  service  in  getting  public  to  underatand  extent  to 

which,  have  increased 947 

Depreciation,  should  point  out  necessity  of  ele<'tric  railway's  making  larger 

provision  for ' 2065 

Electric-railway  problem,  suggested  presentation  of,  by 2064 

Electric-railway  situation,  should  call  attention  of  public  to  seriousness  of.     557, 

882,  898, 1398, 1660 

Fares,  recommendation  by,  urging  increase  in,  favored 882, 888 

Not  favored 1266 

Finances  of  electric  railways,  mismanagement  of — 

Recommendations  of,  should  cover  prevention  of  future 1928 

Report  of,  should  not  gloss  over  past 2064 

Franchises,  desirability  of  it  recommending  a  standard  form  of,  for  electric 

railways 182 

Functions  of,  discussed 176, 180 

Educational,  largely  so 1174 

Evolve  plan  for  temporary  and   then  permanent  relief  to  electric 

railways 408 

Recommend  public  ownerahip 801, 1358 

Tell  regulatory  bodies  to  aid  public  utilities  and  do  it  quickly 836 

Labor,  electric-railway — 

Living  wage  to  electric-railway  employees,  should  consider  and  create 

in  its  recommendations  principle  of 1889, 1890, 1928 

Principles  affecting  rights  of,  urged  for  incluedon  in  any  recommen- 
dations of,   leading    toward    rehabilitation  of  electric-railway 

industry 1895,1896,1898,1928,1935 

Unionization  of,  not  justified  in  recommending 1942 

Motor- vehicle  competition,   should   point  out  effect  of,   upon  electric 

railways 2066,  2068 

Public- 
Antagonism  of,  to  electric  railways,  greatest  obstacle  to  putting  into 

effective  operation  constructive  suggestions  it  may  make 1688 


INDEX-DIGEST. 


2311 


Pag*. 


654 
2068 

1266 


Federal  Electric  Railway  Commission — Continued. 
Public— Continued. 

Relations  between,  and  electric  railways  should  recommend  plan 

for  readjusting - ^82 

Sentiment  of,  toward  public  utilities,  should  attempt  to  make  more 

favorable 63,  532,  898 

Public  ownership  of  electric  railways- 
Should  favor  without  directly  recommending 21^1 

Should  not  make  report  whi(  h  could  be  used  as  an  argument  against.     1499 

Should  recommend  as  only  means  of  solution 801,  13  ")8 

Studv  of  its  workings  in  United  States  and  Canada  being  made  for. .     2010 
Receivership,  should  call  attention  to  fact  that  in  many  instances  it  is  not 

in  interest  of  public  or  investors  to  prevent 1266 

Recommendations  of,  see  Federal  Electric  Railway  Commission,  labor. 
Solution  of  present  electric-railway  problem- 
Recommendations  of,  will  prove  helpful  in  arriving  at .....-..-...-  -     1293 
Should  recommend,  with  just  guaranties  to  labor  and  capital  in  mind, 

a  practical  scheme  of 1894, 1937 

Statements  made  before,  se£  State^ments. 

Taxation,  should  recommend  elimination  of  unequal 

Traffic  regulation,  should  point  out  need  of  proper ~ 

Troubles,  present,  of  electric  railways,  should  call  attention  to  fact  that 

they  are  in  past  result  of  old  causes  which  still  survive 

Valuation,  advisability  of  it  calling  attention  to  principles  of,  used  by 

Interstate  Commerce  Commission  in  Texas-Midland  cases. .  2120,  2121 
Federal  Government,  intervention  of,  in  matters  of  wages,  prices,  taxes,  etc., 
as  cause  of  increased  cost  of  operation  of  Rhode  Island  Co., 

Rhode  Island 1191,1194 

Ferguson,  Carey,  statement  of 17,33 

Ferguson,  H.  L.,  statement  of A"^  i?  o 

Fifth  Avenue  Bus  Co. ,  New  York 1286, 1618 

See  also  New  York  City. 
Finances  of  electric  railways: 
Basis  of — 

Reorganization  which  will  place  on  sound,  only  means  of  overcoming 

hostility  of  public  to  roads 1222 

Rotten  in  United  States  while  financial  policy  of  British  tramways 

conservative  and  constructive 1203 

Condition  of,  present  unsatisfactory — 

Due  to  past  mismanagement  of 1731, 1843,  1887 

Never  very  good -^ ^^^ 

Not  due  to  increased  exactions  of  electric-railway  labor 1731, 

1882, 1885, 1887,  1889 

See  also  Condition  of  electric  railways;  Causes;  Electric-railway  situa- 
tion. 

Holding  company  control,  effect  upon  of  considered  undesirable 2014,  2030 

See  also  llolding  companies. 
Intercorporate  complexities,  expensive,  a  difficulty  which  confronts  some 

electric  railways  and  which  condemned ; .     1395 

Lincoln,  Nebr.,  manipulation  of  in  connection  with  development  of  electric- 
railway  system  in  pointed  out 1360, 1368, 1371 

Management  of,  past  faulty — 

Cause  of  present  unsatisfactory  financial  condition  of  electnc  rail- 

wayB 920, 1203, 12 13, 1303, 1390, 1732,  1735, 1887,  2064 

Credit  of  electric  railways,  has  impaired 1843, 1866 

Discussion  of  .«.,.,,«•»•••»•••••••••••••••••••••"•••••••••••"     xo4^ 

Effects,  evil,  ofVpo'in'ted  out :-.-.  1844,1878,  1923 

Federal  Electric  Railways  Commission  should  not  in  its  report  gloss 

over : : 2064 

Necessity  of  employment  by  electric  railways  of  more  efficient  methods 

of. 1674,1887,1928 

Massachusetts,  stability  of,  in,  impaired  by  overproduction 1435 

National  War  Labor  Board,  wage  awards  of,  not  cause  of  impairment  of. . .     1889 
Rehabilitation  of,  labor  policy  recommended  by  Amalgamated  Association 

contingent  upon 1938, 1956 

Reorganization  of,  as  means  of  restoring  credit 574, 575, 577,  2069 

See  also  Reorganization. 


2312 


INDEX-DIGEST. 


» 


t 


Fin  nces  of  clootric  railway? — Continued.  Page. 

Weakness  in,  where  exiptfl  effecte  of  increased  ooete,  etc.,  meet  heavily  felt.  1390 
iSVr- rt ?ao  Capital;  Capitalization;  Credit,  etc. 
Financing: 

Method  of,  lued  by  city  of  Seattle  in  purchasing  electric  railway '12M> 

Mort«?age  indebtcdner s,  through,  condemned ] 587 

Necessary  to  obtain  public  ownership  of  public  utilities 805, 808, 1237, 1247 

See  also  Public  ownership. 

Problem  of  electric  railways  one  of,  and  of  management 1678 

Profit!^  in  electric-railway  industry  made  through 1688 

iSt-c  rt/«o  Capital;  Capitalization;  Credit,  etc. 

Hnhcr,  Irving,  fitatement  of 1319 

Fixed  charges,  high,  of  electric  railways  in  United  States  as  compared  with 

Europe 1074 

Ford,  A.  II.,  statement  of 353 

Forest  City  Railroad  Co. ,  Cleveland,  Ohio,  referred  to 993 

See  also  Cleveland. 

Forgan,  J.  B.,  statement  of • 930 

Fops,  E.  N .,  statement  of 791 

Fox,  .T.  P.,  statement  of 1073 

Franc  hise,  electric-railway: 

Asset,  no  longer  one  but  now  a  liability 1248 

( 'alifornia,  situation  with  regard  to,  in 886 

Capitalization  of 1008, 1248 

Incinnati,  Ohio. 
Cleveland,  Ohio. 


1128, 1139 


Dallas,  Tex.,  cost  of  service,  type  of,  in,  see  Dallas,  Tex. 
Detroit,  Mich.,  situation  with  regard  to,  in.. 
See  also  Detroit,  Mich. 

Form  of,  desirability  of  standard 182, 443, 1014 

Early  difficulties  in  obtaining 864 

See  also  Corruption. 
Expired,  situation  where  expiration  of,  has  occurred  but  electric  railway 

still  operating,  discussed 1248 

Indeterminate,  see  Franchise,  term  of. 

I  ndiana,  situation  with  regard  to,  in,  discussed 1092 

Kansas  City  Railway  Co. ,  type  of,  granted  to,  discussed 190 

Limitations  in,  upon — 

Methods  of  doing  business  by  interurbans  complained  of 711 

Rates  of  fare — 

CauFe  of  present  unsatisfactory  condition  of  electric  railways 1222 

See  also  Causes;  Fares. 

Eliniination  of  favored 541, 1108 

Modification  of  existirg  to  permit  increaees  in — 

Favored 723,  837, 842 

Opposed 1248 

Power  of  regulatory  bodies  to  modify  existing,  see  R^ulation. 

New  York,  N.  Y.,  situation  with  regard  to,  in 532, 1282, 1313, 1315 

Old  system  of.  between  electric  railways  and  municipalities  unsatisfactoiy .        68 
Philadelphia  Rapid  TraneitiCo.,  Pa.,  provisions  of,  under  which,  operates.   1542, 

1543, 1546 
Provitions  of — 

Electric  railways  and  cities  equally  at  fault  in  introducing  into, 

inflexible,  drastic,  and  impracticable 1416, 1417 

Moral  effect  of  relieving  electric  laihvays  from,  would  be  bad 1091 

See  also  Imix)8ts;  raving;  Taxation. 
Taxation  of — 

In  California,  a  burden  upon  electric  railways. 884, 885, 894 

Value  of,  for  purposes  of 160 

Term  of,  length  of — 

Indeterminate  form — 

Cleveland,  Ohio,  device  adopted  in,  to  obtain  practically  such  a 

form 1022,1464 

Depreciation  reeerv  e  out  of  current  earnings  required  by 1983 

Favored 183,  195,  410,  468,479,  506, 

553,  563,  671,  886,  898,  907,  917,  924,  1022,  1092,  1108,  1268 


INDEX-DIGEST. 


2313 


Franchise,  electric-railway — Continued. 
Term  of,  length  of — Cfon tinned. 

Indeterminate  form— Continued.  ^^S*^ 

Approval  qualified 1022. 1268 

Purchase  by  municipality  usually  provided  for  under.  . . .  195,  468, 1022 
limited  form  — 

Approved 924,926,939 

Disapproved " -H?  907 

Perpv?tual  form,  opposed 924 

5'fc  a/so  Contracts;  Fares;  Ordinances;  Regulation. 
Free  electric-railway  Fer\ice.  rendering  of  by  publicly  owned  and  operated 

roads  sucsregted  and  discusesd 1 161, 

1626,  1628,  1631,  1635,  1706,  1711.  1714,  1716,  1726,  2081,  2087 
Freight,  carrying  of,  ))y  ele<„'tric  railways,  see  Express  and  freight. 
Future  of.  electric-railway  industry,  discussed 723, 1059 

Gpi^lire: 

(^ar  operated  by,  passible  use  of,  on  street-railway  tracks MH 

Electricity  veiBus  relative  economy  for  transportation  piuposes  of  the  two.      638 
Engine  operated  by,  reasons  for  belief  in  superiority  of,  over  electric-rail- 
way car • 1G25;  1G28, 1033 

See  also  Automobile;  Jitney;  Motor  vehicle. 

General  Electric  Co.,  electric  i-aihvay  supplies  sold  by: 

Amount  of,  prior,  during,  and  after  \a ar 384 

Prices  of,  incirease  in  — - 380 

Profits  on,  prior  and  during  war 383 

George,  W.  D.,  statement  of - -89 

Current,  electric,  high  rates  for,  in  criticized 2015, 2033 

Hydroelectric  development  in ,  poor  a^  comjmred  with  Canada 1 494 

Georgia  Ilail\\ay  &  Electric  Co.,  valuation  of 2014 

Georgia  Railway  &  Power  C^.,  overcapitalization  of 2034,  2035 

See  also  Atlanta,  Ga. 

Germany,  efficiencv  of  public  operation  of  railroaas  in 1345;  1347 

Gillen,  Charles  P.,  statement  of 1198 

Glafgow,  see  Great  Britain. 

Government,  relation  of,  ti  buf^iness 918 

Grand  Rapids,  Mich.,  electric-railway  situation  in,  which  resulted  in  the  charg- 
ing of  a  6-cent  fare 868 

Great  Britain,  electric  tramways  in: 

Comparifon  of  ^;^ith  American  systems 230,  4.36 

Depreciation  reserves,  setting  up  of,  by 1 204, 1984 

Farea,  charged  by 1^30 

Collection  of,  British  method  not  favored 1025 

Increase  in 12'o3. 2046, 2050, 2053 

Tickets,  use  of  unlimited-ride,  on  London  underground 1613 

Zone  system  in  use  in  by 1205, 1251, 1601 

Collection  of  fares  under 1610 

Concessions  to  suburbanites  under 1602 

Congestion  of  population  as  result  of,  claimed 2046, 2047 

Denied..-. 1604 

Increased  fares,  experience  with,  ufider 809 

Low  initial  fares  under,  development  of  short-haul  traffic  through . .   1204, 

1207, 1210, 1251. 1601,  2096 

Financial  policy  of,  conservative,  constructive 1202, 1 203, 1204, 1210 

Glasgow — 

Congestion  of  population  in,  no  connection  between  and  zone  system 

of  fares 1604 

Fares,  decrease  in,  has  resulted  each  time  in  increased  revenues 1263 

Financial  success  of  electrified  system  in 1203. 1263 

Investment,  amortization  of  in  completed ;  -     1263 

Municipal  tramway  statistics,  comparison  of,  with  those  of  Public 

Service  Railway  Co.  of  New  Jersey 1206 

Investment,  reasons  for  low  capital ^    230 

Motor  buses,  use  of  by 1242, 1615, 1617 

Public  ownership  of — 

Comparison  of,  with  privately  owned  roads -  1614, 21 18 

Employees,  relative  treatment  of,  under,  as  compared  with  private 

ownership 1351 


2314 


INDEX-DIGEST. 


Great  Britain,  electric  railways  in — Continued. 

Public  ownership  of — Continued.  Page. 

Predominates 1262 

Profitability  of  roads  under 2046,  2047, 2052,  20  )3 

Results  of  satisfactory 1202,1203, 1495, 1497 

Trend  towards 21 18 

Situation  with  regard  to 2046-2054 

Track  mileage,  smaller  in  British  cities  as  compared  with  American,  ex- 
plained      12G2 

Traffic,  development  of,  through  low  fares 1204, 1207, 1210, 1251, 1601,  2096 

Wages  paid  tramway  labor 1211 

Growth  and  development  of  electric  railwavs 70. 

80. 135.  228,  313,  433, 439,  554,  562,  750,  843,  852, 935,  973 
See  also  History  of  electric  railways. 
Guaranteed  return,  see  Cost  of  service;  Return. 

Hall,  Thomas  L.,  statement  of 1359 

Hampton  Roads,  electric-railway  situation  in,  considered 581 

Hansen,  Die,  dtatement  of 1131 

Haul,  length  of: 

Effect  of,  upon  results  obtained  from  increased  fares 957. 1644, 1648 

Fovored  for  flat  fare 1911, 1912 

Increase  in 784,  785,  843, 852, 879, 936, 969, 970, 974 

Long  and  unprofituble  left  to  electric  railways  by  jitneys 427 

Relation  of  to  rate  oi  fare .* 159 

Short,  see  Traffic. 

Zone  sustem,  relation  of ,  to 320, 323. 875 

Bee  also  FsLTea;  Riding  Habit;  Traffic;  Zone  system. 

Head,  W.  B. ,  statement  of ' 626 

Headway,  shorter,  as  method  of  increasing  traffic 1607, 1670, 1676 

Hedges,  Job.  E.,  statement  of 519 

Henry^  Charles  L 696 

Hepburn,  A .  B.,  statement  of 929 

Heulingfl,  Wm.  H.,  jr.,  statement  of 395 

Hiffgins,  Richard  T. ,  statement  of 1107 

History  of  electric  railways 697,  765, 1423 

Atlanta,  Ga 1481 

Bay  State,  Street,  Railway  Co.,  Massachusetts 1622 

Cleveland,  Ohio.,  se£  Cleveland,  Ohio. 

Detroit,  Mich 1135 

Lincoln,  Nebr 1359 

Massachusetts 1435 

New  York  City 1303 

New  York  State 853 

Philadelphia.  Pa 1513,1548 

See  also  Growth  and  development  of  electric  railways. 
Holding  company  control  of  public  utilities  condemned  and  elimination  of 

urged.  1204, 1270, 1313,  1395, 1446, 1843,  2014,  2030,  2036,  2058,  2075,  2123 

Holyoke  Street  Railway  Co. ,  Massachusetts 514,  2073 

See  also  Massachusetts. 
Home  rule  of  public  utilities,  strong  sentiment  throughout  the  country  in  favor 

of % 903 

See  also  Regulation. 
Hours  of  labor  of  electric-railway  trainmen,  see  Labor;  Working  conditions. 

Huntington  case,  decision  of  New  York  Public  Service  Commission  in 845 

Hurley,  E.  N.,  statement  of 199 

Hydroelectric  development 2§7, 1494,  26i5,  2034 

Illinois  Public  Utilities  Commission,  failure  of,  to  grant  electric-railways  in- 
creases in  rates  of  fare,  criticized 858,  864 

Imposts  and  burdens  upon  electric  railways: 

Elimination,  permanent  or  temporary,  of  illc^cal,  ui^ed 454 

609,  882,  887, 910, 952, 1053, 1069, 1108, 1109, 1398, 1403, 1915,  2097 

Reasons  for,  original j 1223 

See  also  Paving;  Taxation. 
Improvements,  electric  railway: 

Assessments  of  property  benefited  to  pay  for,  see  Assessment. 

Retarded  during  war  period 205 

Su  also  Extensions. 


I 


INDEX-DIGEST. 


2315 


Improvements  in  the  art  of  electric  railways:  ^^s®- 

Maximum  nearly  reached ^ 756 

Necessity  of  making  all  possible,  to  keep  up  with  rising  cost  of  operation. .     1592 
See  also  Economy;  Efficiency,  etc. 

Incentive  to  economical  and  efficient  electric-railway  operation: 
Cost-of -service  plan,  under,  se£  Cost  of  service. 

Destroyed  by  present  attitude  of  regulatorj'^  commissions 862 

London  sliding  scale,  as  one 404.  631,  669,  686, 1063 

Need  of 923,1003,1005,1014,2093 

Principle  of,  better  than  London  sliding  scale 669,  686 

Return,  siifficiency  of.  as  one 897, 923 

Should  go  to  management  and  labor  rather  than  to  capital 1463. 

•      1916,1918-1919,2114 

Income  account  of  electric  railways:: 

Comparison  of,  for  1917  and  1918 92 

Discussion  of 123 

Income  of  electric  railways,  net: 

Discussion  of ; 127 

Effect  upon,  of  increases  in  wages  of  electric-railway  trainmen,  almost  none.     1784 

Per  mile  of  track 131 

See  also  Earnings;  Revenues  of  electric  railways. 

Indeterminate  franchise,  see  Franchise. 

Index  numbers,  use  of,  discussed 1320, 1321, 1337 

Indiana,  electric-railway  situation  in 1086 

Automobile  competition 1089, 1105 

Capitalization,  excessive 1086, 1088, 1096 

Cars,  increase  in  revenue  through  installation  of  P.-A.-Y.-E.  type 1118 

Economies  suggested • 1^90 

Fares — 

Increasos  in  rates  of,  on  interurbans 1086 

Rates  of ,  charged 1095,1096 

Results  from  increases. 1089, 1094 

Franchise  situation 1092 

Labor  situation  in,  good 1091,1097,1104 

Management,  poor;  condemned 1089 

One-man  cars,  use  of,  approved 1118 

Public  Service  Commission  of — 

Limitation  upon  power  of,  to  fix  rates,  none 1095 

Work  of,  defended 1088 

Receivership  of  electric  railways,  only  one  in  State 1095 

Relief,  emergency,  provision  for  granting 1092 

Taxation,  relief  from,  not  favored 1091 

Transfei-s,  charge  for,  not  favored HOC 

Wrecks,  disastrous  effect  of,  upon  interurbans 1089 

Zone  system,  use  of,  not  favored 1100, 1102 

Indianaporis  Street  Railway  Co. ,  Indiana,  overcapitalization  of 1850 

Industrial  disputes  in  electric  railway  industry,  See  Arbitration;  Collective 
bargaining;  Labor;  Strikes. 

Industrial  securities,  see  Securities. 

Inflation  of  currency  and  credit  as  cause  of  increase  in  price  level 919, 1323, 1328 

See  also  Money. 

Ingram,  V.  F.,  statement  of 1119 

Insull,  Samuel,  statement  of 881 

Insurance: 

Extent  of  inve35tment  by  life  companies  in  securities  of  electric  railways. .      421 
Savings  in,  affected  by  Philadelphia  Rapid  Transit  Co  in  matters  of  fire 1539 

Interborough  Rapid  Transit  Co.,  New  York,  N.  Y.:    * 

Dividends  earned  by,  since  1904 13^6 

Fare,  increase  in,  denial  of,  to 819,  826,  828,  835 

History  and  present  condition  of -  -      822 

Interborough-Consolidated  Co.,  the  holding  company  of,  finances  of,  dis- 

cus.'^ed 831 

Manhattan  Elevated  situation 1284 

Profitability  of 1311,  '316 

Receivership  of,  threatened,  discussed 827, 830, 1279 

Statement  with  regard  to,  of  G.  E.  Tripp 132 

Strike  of  employees  of,  alleged  to  be  part  of  campaign  for  increased  fares. .    2044 
See  also  New  York. 


2316 


INDEX-DIGEST. 


H=  > 


■■•> 


IntercDrporate  complexities,  exp3nsive,  condemned 1395 

Intcrmittoncy  of  einployment,  meth<xls  of  avoiding 1701 

Intoratate  Commerce  Commission,  principles  of  valuation  adopted  by  in  Texas- 
Midland  case  applicable  to  electric  railways ^ 2119, 2121 

Intorurban,  electric  railways: 

Benefits  derived  by  public  from 699,  702,  708,  711 

(.Condition,  dilHcultiea,  and  usefulness  of , 396,  1099 

Control  by  re^datory  commissions  over « 699, 724 

Costs  of  operation  of,  increasing 714 

Credit,  lack  of,  by,  a  hindrance 707 

Depreciation ,  earnings  of,  insufficient  to  care  for 721 

Fares,  increases  in  rtites  of — 

Allowed  by  commissions 700,  '086 

Delay  incidental  to  obtaining 701 

Effect  of 717, 720, 727, 1089, 1094 

Franchise  limitations  frequently  a  hindrance 711 

Freight  business  done  by 702 

History  of 697 

Importance  of 699, 702,  708 

Massachusetts,  lines  in  merely  appendages  to  city  systems 1436 

Methods,  operating  of 698 

Motor-truck  competition  with 706,  712,  714 

Municipal  restrictions  on 706 

Origin  of,  in  Argentina 229 

Possibilities  of 717 

Railroad  Administration,  attitude  of,  toward 705, 727, 728 

Statistics  of 699 

Steam-railroad  competition  with 715 

See  also  Indiana. 
Investment  in  electric  railwavs: 

Additional,  constantly  needed 202,  206,  207 

Sec  also  C&pitsil. 
Amortization  of,  no  effect  toward  being  made  even  under  public  regu- 
lation      1204 

Determination  of 162, J64, 172, 174, 177, 178, 405 

See  also  Valuation. 

Earnings  out  of 166, 272,  275,  333,  338,  342 

Increase  in,  per  passenger 971, 1423, 1425 

Integrity  of,  necessity  and  means  of  securing  permanent 1229 

Relation  between  and  earnings • 973 

Rolling  stock,  causes  for  heavy,  in 395 

Security  of — 

Command  of,  low,  fixed  rate  of  return  through 1229 

Lack  of  examination  of,  by  average  investor  commented  upon 1446, 

1453, 1455 

Should  be  nonspemlative..... 1228, 1229 

Investor  in  electric-railway  securities,  small;  largest  holder  and  greatest  sufferer 
at  present  time 155, 185, 189 

J.  G.  Brill  Co.,  amount  of  business  done  by,  with  electric  railways 399 

Jackson,  D.  C.,  statement  of 1416 

Jackson,  Marion  M. ,  statement  of 1481,  2014 

Jackson,  Walter ^ 1589 

Jenks,  J.  W 918,939 

Jitney  bus:  ^ 

Advantages  of,  over  electric  railways 1425 

Competition  of,  -with  electric  railwaj's .••-•-. ^^^'  ®^^ 

Cause  of  present  unsatisfactory  electric-railway  situation. 65, 

139, 159,  G08, 1054, 1056, 1061, 1108, 1186, 1228,  2058 

Effect  of,  injurious 426,  714,  723,  781, 1243, 1255, 1644 

Elimination  of — 

Attempts  at,  denounced 1714 

Possible  only  through  good  electric-railway  service  at  a  low  fare. .   1242, 

1398, 1429, 1591,  ir92 

Trged 966 

Fares,  electric-railway,  effect  of,  upon  results  from  increases  in 958, 959 

See  also  Fares. 


I>5DEX-DIGEST. 


2317 


t 


Jitney  bus — Continued. 

Oom petition  of,  with  electric  railways — Continued.  P&ge. 

Favored  as  means  of  protecting  public  interest 1053 

Federal  Electric  Railways  Commission  should  point  out  great  danger 

of  encouraging 2068 

In  various  localities — 

Bay  State  Street  Railway  Co.,  Massachusetts  greatest  problem  of.    1644, 

1660 

California,  cause  of  trouble  in 608 

Cincinnati,  Ohio,  unsuccessful  in 491 

<  leveland,  Ohio,  none  in 1008 

(Connecticut 427,  428,  959, 1108, 1 109, 1 114 

Dallas,  Tex . ,  eliminated  in,  under  co8t-of-8er\dce  franchise 634 

Indiana,  not  under  State  commission  regiUation  in 1105 

Kenosha,   Wis.,   serious  effect  of.  on   electric  railway  in,  until 

eliminated 781 

Newark,  N.  J.,  injurious  effect  of,  on  electric  railway  in 1198  1199, 

1201, 1243, 1255 

New  York  City 1286, 1289, 1302 

Philadelphia.  Pa. ,  prac  ticallv  none 1558 

Pittsburgh.  Pa '. 313 

Rhode  Island,  regulation  of,  in.  urged 1187 

One-man  car  as  means  of  fightirg 570,  730,  738, 1594, 1685 

Public  ownership  of  electric  railways,  would  probably  be  prohibited 

under 1242 

Regulation  of — 

Advocated 428,  714,  723, 867, 1064, 1 108, 1109, 1114, 1187, 1398, 1428 

Frequently  ineffective 426 

Useless  unless  supported  by  public  sentiment 1277 

Stimulated  by  increases  in  electnc-railwav  fare 426, 

'  451,  516. 959, 1186, 1243, 1255, 1644 

Success  of,  reasons  for.  apparent 223,  226,  427, 428 

Statistics  of  traffic  carried  by,  as  compared  with  that  carried  by  electric 

railways 428 

Substitute  for  electric  railway — 

Not  a  one. .  -  .428, 1083, 1106, 1423. 1424, 1426, 1  '27, 1625, 1628, 1633, 1634, 1647 

Thought  possible  under  certain  conditions 1058, 1059 

See  aUo  Automobile;  Gasoline;  Motor  vehicle. 

Johnson,  Tom 995 

See  also  Cleveland. 
Joint  light,  power,  and  electric-railwav  operation,  public  entitled  to  some  of 

benefits  of *. 2015,2019,2030,2034 

Jones,  Stiles  P.,  statement  of 1841,2012 

Joyce,  C.  J.,  statement  of 1513,  2002 

Junk,  electric  railways  sold  for 84,  87 

Kansas  City,  Mo. ,  resolution  of  Central  liabor  Union  of,  regarding  nonrecognition 

by  Kansas  City  Railways  Co.  of  union  labor 1384 

Kansas  City  Railways  Co.,  Missouri: 

Capitalization  of  unexpired  franchises  of,  condemned 1248 

Situation  with  regard  to 187 

Value  of,  as  determined  by  Arnold  appraisal  questioned 2014 

Keene,  N.  H.,  results  from  reduction  in  fare 2041 

Kellogg,  Charles  W.,  statement  of 729 

Kenosha;  Wis,,  electric-railway  situation  in,  discussed 781, 814 

Kingsley,  Darwin  P.,  statement  of 929 

Kutz,  Charles  W.,  statement  of 1037 

Labor,  electric-railway: 

Accident  prevention,  control  over,  of,  appreciable 789 

Arbitration  of  disputes,  see  Arbitration. 

Capitalization,  excessive,  effect  of,  upon 1853, 1859, 1874, 1886 

See  also  Capitalization. 
Collective  bargaining,  see  Collective  bargaining. 

Compensation  of,  inadequate,  prior  to  war 917 

Control  of  wages  and  working  conditions  of,  a  public  function 1232, 

1272, 1460, 1915, 1918-1919,  2000 
Cooperation,  need  of,  between  employees  and  companies 1940, 2067 


2318 


INDEX-DIGEST. 


I >' <  i? 


,     U' 


Labor,  electric-railway — Continued. 
Cost  of — 

Increase  in —  ^®8«- 

C-ause  of  present  deplorable  electric-railway  situation 1887 

See  also  Causes. 

Importance  of 260 

Proportionately  has  not  advanced  as  much  as  other  costs 173 1 

Situation  with  regard  to 64, 65, 107, 108,  269, 

321, 588-589, 608-609, 610, 624, 633, 658, 714,  767, 769, 863, 884, 943, 1457 

Prices,  relation  to,  of 382, 386, 398, 421, 928-931, 1915, 1922, 1952 

Proportion  to  total  operating  cost 64, 65, 109,  568,  943, 1192, 150G 

Renuction  of — 

Means  of,  suggested 1600,  2067 

Possibility  of,  unlikely 199, 394 

Relative,  in  Cireat  Britain  and  United  States 1210 

Stability  of,  importance  of 949 

See  also  Costs. 

Demands  of,  controlling  factor  in  electric-railway  situation 948 

Disputes  of,  with  electric  railwavs — 

Compulsory  settlement  of.  ." 783,  1290, 1297-1298,  1299, 1588, 1765 

Method  of  !<ettling  adopted  in  Wisconsin ♦. 2000 

Strike  as  method  of  settling  not  favored 1186, 

1194, 1198, 1272,  1290, 1297,  1299 
See  also  Collective  bargaining. 
Efficiency  of,  see  Labor,  trainmen. 

Eight-hour  day  in  the  electric-railway  industry 954, 1739, 1897, 1936 

Initiative  of,  practically  not  utilized 1700 

Intermittency  of  employment,  methods  of  avoiding 1701 

Kenosha,  Wis.,  strike  in.* 781 

Management  participation  in  of 788, 1015, 1027, 1700, 2068 

See  also  Management. 
Milwaukee  Electric  Railways  &  Light  Co.,  relations  of,  with  ita  employees 

(Mutual  Benefit  Association ) 775, 1999 

National  War  Labor  Board,  awards  of,  set  National  War  Labor  Board. 

One-man  cars,  objections  of,  to  introduction  and  use  of,  refuted 1598 

Philadelphia  Rapid  Transit  ('o.,  relations  of,  with  employees  (cooperative 

plan) '. 1513 

See  also  Philadelphia  Rapid  Transit  Co. 

Problem  of 786, 1588, 1695, 1699 

Public  ownership  will  promote  better  relations  between  and  management.    1350 

Public  sentiment  as  a  controlling  agency  over 1298, 1474 

Productivity  of,  see  Labor,  trainmen. 

Prolit  sharing  in  electric-railway  industry 787, 1588, 1966, 1967 

Rights  of,  outlined 1895-6, 1898, 1928, 1935, 1941 

Situation  vnih  regard  to 1091, 1097, 1113, 1278, 1287, 1289 

^   Strikes,  see  Labor,  disputes  of  with  electric  railways. 
Traiimien — 

Efficiencv  of 1515, 

'1534, 1731, 1776, 1781, 1782, 1846, 1853, 1887, 1928, 1957, 1959-60, 1964 

Injurious  effects  of  work  of 2035 

Skilled  occupation,  whether  work  of,  is 1742 

Statistics,  comparative  of 1776, 1780, 1781 

Turnover  of 389, 950, 1519, 1550, 1570, 1702, 1757 

Type  of,  importance  of  attracting  efficient  and  courteous 1971 

Unionization  of — 

Concepts,  underlying,  of  the  organized-labor  movement 1956 

Extent  of  under  Amalgamated  Association  auspices 1935 

Recognition  of  organized. . .  1232, 1272,  1317, 1527, 1533, 1535, 1942,  2068,  2098 
See  also  Arbitration;  Amalgamated  Association;  Collective  bargaining; 
Cost  of  living;  Employees;  Standard  of  living;  Statistics;  Wages; 
Working  conditions. 
Labor  statistics,  studies  of  United  States  Bureau  of,  in  the  cost  of  living.  ^ . . . .    1796 
See  also  Cost  of  living. 

Lambert,  M.  B.,  statement  of 893 

Land  values: 

Assessment  of  those  benefited  to  pay  for  electric-railway  improvements, 
see  Assessment. 


f 


INDEX-DIGEST. 


2319 


Land  values— Continued.  ^^^e. 

Taxation  of  those  benefited  to  make  up  deficits  in  electric-railway  operation 

produced  by  nominal  fares  under  public  ownership 1 1 23, 

1125, 1138, 1156 

See  also  Real  estate. 

Lauck,  W.J. ,  statement  of 1731,1877,1927 

Layovers,  importance  of  eliminating  excessive 1 665 

League  of  Nations,  rights  of  labor  as  embodied  in  proposed  covenant  for. ..  1895, 1977 
Leases  made  by  electric  railways  with  underlying  companies,  onerous: 

Atlanta,  Ga 1487 

T)is(ni8r?ed  and  criticized 1395,  2009,  2078 

New  York  Railways  Co.,  New  York 1^9, 

167, 1282, 1285, 1306, 1309, 1311,2111 

Philadelphia  Rapid  Transit  Co.,  Pennsylvania 1864, 2079, 2130, 2131 

Pittsburgh  Railways  Co.,  Pennsylvania 1898 

Public  Service  Railway  Co.,  New  Jersey 1846 

Legislation,  additional  needed  to — 

Make  possible  entering  into  cost-of-service  contracts  with  right  of  purchase 

by  municipality 1240, 1 247 

Make  possible  public  ownership  and  operation  of  electric  railways 1237 

Obtain  increases  in  fares 1070 

Obtain  public  utility  condemnation  law •• 1238 

Lincoln,  Nebr.,  electric-railway  situation  in,  discussed 135y,  1365, 1371 

Lines,  electric-railway,  unprofitable,  public  support  of . .  -  346, 347 

Living  wage,  see  Wages. 

Load  factor  of  electric  railways 81, 1423 

See  also  Traffic. 
Load,  peak,  see  Traffic. 

Lpcal  ownership  of  stock  of  electric  railways  favored y     1587 

See  also  Securities. 

Local  public  improvement  costs,  electric  railways  should  be  relieved  from 320'« 

London  sliding  scale 404,631,669,686,1063 

Loring,  Homer,  statement  of 1639 

Lynn,  Mass.,  congestion  of  population  in,  due  to  adoption  of  zone  system  of 

fares  by  electric  railway  serving i 1627 

See  also  Bay  State  Street  Railway  Co.,  Massachusetts. 

MacFarland.  G.'  S.,  statement  of 1341 

McKinley,  William  B.,  statement  of .* 934 

MacLeod",  F.  J.,  statement 1435 

Maine: 

Fare  increases  on  various  electric  railways  in 361 

Public  Utilities  Commission  of,  power  of 3G0 

Portland  Street  Railway  Co.,  situation  with  regard  to 363 

Maintenance  of  electric-railway  property : 

Amount  which  should  be  set  aside  ifor 269, 270, 1684 

Importance  of  proper 20(j7 

Lack  of,  by  electric  railways  in  Massachusetts 646,  ()53 

Magnuson.  L.,  statement  of 1832 

Maltbie,  Milo  R.,  statement  of 2088 

Management  of  electric  railways: 

In  Connecticut,  approved 1150 

Efficiency  of — 

Capitalization,  possibility  of  absorbing  excessive,  through  careful 1C95 

Cost  keeping,  impossible  without 1693,  WM* 

Defended 320,1567,1*    > 

Incentive  toward,  see  Incentive. 

Lack  of 123,920,1406,1!?' 

Question  of  ,  not  one  of  personal  opinion 1 

Static,  must  not  be,  to  maintain l'-.^^ 

Faulty  of  finances,  see  Capitalization;  Finances. 

Indiana,  poor,  in,  condemned 10S9 

Participation  of  employees  and  pubUc  in 158, 788, 916, 1015, 102^,  1700, 20;..-< 

Philadelphia  Rapid  Transit  Co.,  Pennsylvania,  an  illustration  of  efficient, 

considered 1394, 1396, 1< 'H 

Pittsburgh  Railways  Co.,  Pennsylvania,  efficiency  of,  defended 300, 309 

Questioned 611,  <  20 

Problem  of  electric  railways,  one  of lo7c^ 


2320 


INDEX-DIGEST. 


•:^i 


Management  of  electric  railways -Continued.  ^^^ 

Rhode  Island  Co.,  Rhode  Island,  approved il»A 

Sec  also  Px'onomy;  Efficiency. 

Massachusetts,  electric  railways  in:  cak  'tqa  ^AA^ 

Abandonment  of  electric  railways  in b4&,  7J4,  I44i 

Assessments    per    $1,000    valuation    needed    to    keep    electnc    railways 

insolvent -•-  ^^^'tJ? 

Bhie  Hill  Street  Railway  Co.,  situation  with  regard  to.. . . .  ■;■-■'•'•:■'    ^f^a 

Capitalization,  sound,  of  electric  railways  in 646, 1437, 185J,  IK/ A  ^uoy 

("ausos  of  present  unsatisfactoi-y  condition  of 1435, 14&(>,  «IK)(>--U(^ 

Condition  of,  unsatisfactor\',  discussed 'rr^'Xk^n  in  A 

^         053,793-794,801,1423,1435,1438,1465,2056,20^0 

Consolidation  of  city  with  suburban  lines  unfortunate 143(),  2057,  2073 

Cost-of -service  plan  adopted  by  legislature  of— 

Bav  Stat«  Street  Railway  Co.  and  Boston  Elevated  Co..  as  apphed  to 

•      with  public-trustee  feature. .  793, 10p5, 1062, 1073, 1G40-1641, 1661,  2063 

Credit,  lack  of,  by  electric  railways  reason  for  nonadoption  of 604 

Condemned  as  a  failure •  •  •     J^^ 

Described  and  discussed r^  r^ 

Favored  by  newspapers "04,  hOb 

Jurisdiction  under,  State  commission  has  sole ^^ 

Return,  guaranty  of  by  St^te  "".^\^'--.-  - •  * '• ' ' T ' '  i V.V U'^«'iq«V9(^^S^Ao 
Depreciation  reserves,  failure  to  provide,  in  the  past. .  1437, 1438, 1983,  ^{xv-JJtu 
Development   of   street,    electric,    and    subway    transportation,    pioneer 

State  in - - •-•     J^^^ 

Extensions,  construction  of,  to  develop  real-estate  ventures  condemned. . .     lOJ-i 

(^ntrol  over,  State  commission  has  unlimited •       514 

Pive-cent  rate  of —  ^  ^  ,   .  ,•     ^ 

Argument  for  preservat  ion  of  basic,  through  State  subHidies  to  coyer 

possible  deticits 1465-1 466,  H68-1469, 1470 

Frofitableness,  lack  of,  even  in  past 1436-1437, 144o-1446 

Increase  in~*~ 

Electnc  railways  formerly  unwilling  to  ask  for,  for  fear  of  injur- 

ing  credit ^^'^'^  ^"^^ 

Granted  to  almost  every  electric  railway  in 1437, 1439, 1445 

Movement  for,  begun  in  1914 ^^^ 

Public  attitude  toward ::k';::r;yAo  oX?o 

Results  from,  unsatisfactory 1439-1440, 1441, 1448,  20b^ 

"Fifty-fifty  "  bill  providing  public  subsidies •  -  -     A6&Z 

Holding  company  control  of  roads  in  criticized -0^»'  -"^^ 

labor,  increased  cost  of j^^' 

Lynn,  situation  with  regard  to. Ao^'on^a  onAft 

Molor-vehicle  competition  with ^^^^  ^"^»»  ^"<>*> 

See  also  Automobile;  Jitney;  Motor  vehicle.  ^ 

Norl hampton  St reet  Railway  Co. ,  fare  situation •  -      o-'* 

Overbuilding  of  linos,  particularly  in  country  districts,  a  source  of  weak- 

nessof 1435,2056 

Power  plants,  municipal,  law  forbidding  sale  of  current  by,  to  electric 

railways - 

Public  operation  of,  through  lease  in 

Public  ownership  of.  in—                                                .  .     ,  on7« 

Form  of,  would  have  to  be  State  rather  than  municipal Jn/JS? 

Predicted ' 

Public  pun  hase'of,' provision  for,  at  end  of  period  of  public-trustee  control .     1656 

Public  trustees,  operation  by,  of— 

Bay  State  Street  Railway  Co.  and  Boston  Elevated 144^ 

See  also  Bay  State  and  Boston  Elevated.  ,^,.  , ,,,  ^.^o  oa«a  oa7a 

Regulation  of,  public 1054,1414,1472,2060,2076 

Revenue  of,  distribution  of,  by  sources ^^^ 

Securities,  position  of,  in ; :••--- • i I'V     viaii 

Special  ( ommission  on  electric-railway  situation,  discussion  of,  report  of .  -    1465 

Springfield  Street  Railway  Co, .....^ a«  iAh  q2? 

Btatistirs,  fmam  ial  and  operating,  of -  -  -  -  -  -  -  •  -  ;- -  -  ^'*'^%""'?1^^ 

Bubsidios'.  public  provision  .or ''^.t^Z'm^X^lioA^a^ 

Union  Street  Railway  Co.,  ability  of,  to  operate  on  5-cent  fare 2057, 2073 


INDEX-DIGEST. 


2321 


2031 
1452 


r 


Massachusetts,  electric  railways  in — Continued. 

Zone  system  of  fares  in  u.se  in,  by —  J*^?*- 

Bay  State  Street  Railway  Co 2062 

Failure  of,  to  produce  results  desired 2062,  2088 

Holyoke 2062 

Springfield 1440,  20{>2,  2072 

See  aho  Bay  State  Street  Railway  Co. ;  Boston  Elevated. 
Materials,  increase  in  cost  of,  as  cause  of  present  deplorable  condition  of  elec- 
tric railways,  see  Causes;  Costs;  Prices;  Supplies. 
Merchants  Association  of  New  York,  opposed  to  public  ownership  of  public 

utilities 876 

Michigan,  repeal  of  intenirban  2-cent  per  mile  fare,  law  of 869 

Mileage  system  of  fares  probably  not  aesirable  for  American  cities 1431, 1432 

See  also  Fares,  Zone  system. 
Milwaukee  Electric  Railway  <&  Light  Co.,  Wis.: 

City  offitials,  hostile  attitude  of,  toward 1996 

Cost  of  operation,  saving  in,  that  could  be  effected  through  adoption  of 

higher  schedule  speed  by 1990, 1992 

Depreciation,  rate  of,  used  by 767 

Fares,  efforts  to  obtain  increased 767, 768,  769 

labor — 

Cost  of  increased 767 

Relations  of,  with  company  (Mutual  Benefit  Association) 1999 

Strike  of  employees 769 

Wages,  control  of,  by  Wisconsin  Railroad  Commission 

Publicity  campaign  of •  -      771 

Regulation,  experimental  ground  for,  of  electric  railways  in  Wisconsin 

and  United  States 765 

Statistics,  operating - 777, 779 

Comparison  of,  with  similar  data  for  Cleveland  and  Philadelphia 1989 

Zone  system  of  fares  in  use  by 766, 1608 

See  also  Wisconsin. 
Minimum  wage,  see  Cost  of  living;  Standard  of  living;  Wages. 
Minneapolis,  Minn.: 

Cars,  use  of  double-deck,  in 933 

Valuation  of  electric  railway  in 1867 

Mitten,  T.  E.,  statement  of 1513,2002 

Money: 

Cost  of,  present  increase  in  and  probability  of  its  retention 1418 

See  also  Capital. 
Inflation  of,  due  to  war — 

Cause  of  increase  in  pricje  level 1323 

Evils  of 1330 

Purchasing  power  of,  depreciation  in — 

Cause  of  present  deplorable  electric -railwav  situation,  one 143, 

147, 149, 316,  763, 1323, 1330, 1335 

Discussed 1319 

Importance  of 1337 

Return,  effect  upon 173, 271, 1332, 1334 

Stability  of — 

Importance  of 1336, 1337, 1 340 

Index  numbers,  use  of,  to  obtain 1337 

Monopoly: 

Difficulty  faced  by  electric  railways  because  of  necessity  of  changing  point 

of  view  from  that  of  one  to  that  of  a  business 1590 

Electric  railway,  few  in  a  positive  sense  enjoy 955, 1055, 1056 

Regulation  of,  in  public-utility  field,  favored 1051, 1054, 1055 

Taxation  of,  favored 1058 

Transportation  systems  in  each  community  favored 1899 

See  also  Competition. 

Montreal,  Canada,  cost-of -service  franchise  adopted  in 1256, 1270 

Fares,  under — 

Limitation  on  rates  of,  none 1256 

Stability  of,  provision  for 1257 

Incentive  to  eflicient  operation  under,  an  advance  on  others 1257 

Mortimer,  J.  D.,  statement  of 764, 1966 

Mote,  C.  H.,  statement  of 1086,1118 


2322 


INDEX-DIGEST. 


Motor  vehicles: 

Bus  operation—  Page. 

Chicago,  not  considered  profitable  in 1616, 1617 

Detroit,  contemplated  in 1620 

Electric  railways,  use  by;  of  buses  as  feeders  favored 1241, 1592, 1614 

New  York  City,  in 1286,1618,2045 

One-man  car  favored  as  against 1685 

Tramways  in  Great  Britain,  by • 1637 

Regulation  of,  to  place  on  same  basis  with  electric  railways  favored 444. 

451,  454,  460,  714,  72S 

Statistics  of 423,  424,  44:i 

Substitute  for  electric  railways — 

Favored  as 1625, 1628, 163:i 

Not  favored 445.  464. 1243, 1451, 1616, 1620, 1673, 1674 

Truck  operation  in  competition  with  electric  railways 429,  706, 712 

iS^f  aZso  Automobile:  Competition;  Gasoline:  Jitney. 

Multiple  unit  system  of  train  control * 753 

Municipal  development,  relation  of  electric-railway  transportation  to 1230-1231 , 

1237-1265 

Municipal-guaranty  law  of  Wisconsin 782 

Municipal  ownership  of  electric  railwavs: 

Advantages  of .' 209,  540, 1157 

Argument  for 821 

Capital,  alnlitv  to  obtain  new,  needed  and  at  a  lower  rate  of  interest  an 

argument  for 209,  540, 1157 

Cost-of-service  plan  of  operation  as  against 500, 1010, 1152, 1156, 1157 

See  also  C'ost-of-Service. 

Deficits,  jjosaible,  to  be  met  by  taxation 1138,  1155-1156, 1161 

Delay  incident  to  adoption,  sec  Municipal  ownership,  feasibility  of. 
Detroit,  Mich.,  situation  with  regard  to,  in..  1120,  1121,  1124,  1126,  1127,  1120, 

1135, 1136-1137, 1143, 1157, 1274,  2111 

Discussed 233, 235 

District  ownership  for  Pittsburgh,  Pa 1912, 1924 

See  also  Distncts. 

Fare,  nominal,  under  suggested 1123, 1124 

Favored .1 540,  548,  830, 1135, 1152, 1158, 1237 

Feasibility  of,  from  legal  jjoint  of  view  doubted 556,  781, 1281 

Great  Britain,  succc^ss  of,  in 1202, 1203, 1262 

Issue,'  a  dead 233,  235 

Method  of  obtaining  through  condemnation 1140, 1143, 1238 

Mistake  to  have,  wnere  not  wanted  or  understood  by  community 1006 

Movement  for,  effect  of  guaranteed  return  upon * 463 

New  York,  N.  Y.,  situation  in 528,  1281, 1291, 1304, 1316, 1318 

•  Objections  to, 

Discounted 548 

Discussed 549,  885, 1153 

Oppo.sed 874,  921, 1044, 1586 

Philadelphia,  Pa.,  situation  in 2133,  2134 

Private  operation  under,  favored 1049, 1900, 1912, 1918 

See  also  Private  operation  of  electric  railwa\P. 

Purchase  by  municipality  under  indeterminate  franchise 195,  M\S 

See  also  Purchase. 

Regulation,  powers  of,  State  commissions  under 1240 

Roadbed  only,  of 1040, 1043, 1045, 1048, 1052 

San  Francisco,  Calif.,  success  of  city  lines  in 1159, 1203, 1507 

Seattle,  Wash.,  events  leading  up  to  and  results  of  operation,  etc. .  1131, 1133, 1238 

Sentiment  for 1275, 1404, 1464, 1498, 1500 

Solution  of  present  electric-railway  problem — 

Favored  as '287, 1138, 1158,  llCl,  1481, 1493, 1498, 1500, 2120 

Not  favored  as 68, 155 

State  ownership  as  against 802, 1108 

See  also  Districts. 

Ultimately  will  come 1281,1289,1291 

United  States,  in 341, 946 

See  also  Private  operation  and  ownership;  Public  operation  and  ownership. 

Municipal  Traction  Co 999 

See  also  Cleveland. 


f 


INDEX-DIGEST. 


2323 


Page. 

Municipalities,  hostile  attitude  of,  toward  electric-wdlway  fare  increase 848 

See  also  CHties. 

Nash,  Luther  R.,  statement  of ; 466, 662 

National  Civic  Federation,  report  of  committee  of,  on  success  of  public  owner- 
ship and  operation  of  public  utilities  in  Great  Britain 2118 

National  Electric  Light  Association: 

Alleged  banking  control  of,  and  of  other  public-utility  associations  criticized    1689 

Individual  membership  requirements  of,  criticized 1691 

National  War  Labor  Board: 

Detroit  United  Railways  Co.,  rates  of  wages  paid  electric-railway  trainmen 

by,  under  award  of 1745, 1746 

Philadelphia  Rapid  Transit  Co.,  indorsement  of  cooperative  plan  of,  by. .    1514, 
*^  1520, 1524, 1877 

Principle  of  an  equitable  wage  irrespective  of  financial  ability  of  electric 

railways  to  pay,  established  by 1930 

Wage  awards  of,  affecting  electric  railway  employees — 

Cause  of  present  electric-railway  difficulties 318, 1188, 1192 

Denied 1889 

Discussed 1792 

Effects  of , 944,945,1773 

Scales  of  wages  established  by 1 512 

Summary  of -.--••. ^^^ 

Necessity  for  transportation  service  rendered  by  electric  railways: 


Questioned -. 1120,1121,1127 

See  also  Automobile;  Gasoline;  Jitney:  Motor  vehicle. 
Nebraska: 

Municipal  ownership,  sentiment  for,  in 1376 

Wages  of  utility  employees.  State  commission  can  control 1372 

See  also  Lincoln,  Nebr. ;  Omaha,  Nebr. 
Newark,  N.  J. ,  electric-railway  situation  in,  discu^ed 1198 

See  also  New  Jersey;  Public  Ser^ice  Railway. 

New  Brunswick  cost-of-service  plan - 1063, 1073 

New  Hampshire,  law  of  exempting  public  utilities  from  taxation 883 

New  Jersey:  .         ., 

Overconsolidation  of  electric  railway  lines  in,  evils  of 1221 

Public  Utility  Commission  of,  methods  and  personnel  of 377 

See  also  Newark  N.  J.;  Public  Service  Railway  Co. 

New  Orleans,  La. ,  electric-railway  situation  in,  discussed 565 

Newport  News,  see  Hampton  Roads. 
New  York,  N.  Y.,  city  of: 

Abandonment  of  lines  by  electric  railways  in 1283,  2045 

Amortization  of  investment  in  subways,  benefit  to  from 1269 

Assessment  of  property  benefited  to  pay  for  rapid  transit  extensions  advo- 
cated......  ..:.. 2099,2126 

Capitalization,  excessive  of  surface  lines  in 1263 

Causes  of  present  difficulty  of  electric  railways  in 1263, 1284, 1303 

Condemnation  of  electric-railway  property  in,    use  of  process  of  dis- 
cussed    1235, 1281 

Consolidation  of  electric  railways  in,  necessity  of 524, 

527, 1077, 1079, 1235, 1290, 12^>6 

Cost  of  construction  of  electric  railways  in,  high 169 

Cost  of  ser\'ice,  use  of  Cleveland  plan  for,  with  modification  favored 12w0 

Electric-railway  situation  in 819, 1234, 1277, 1312,  2044 

Fares,  electric  railway,  in — 

Eight-cent  rate  of  for  all  roads  operating  in  city  urged 828, 835 

Five-cent  rate — 

Retention  of,  favored 1312 

Sufficiency  of,  under  normal  conditions  affirmed 1288 

Flat  rate  of,  necessity  for  retaining 1287, 1294, 1297, 1299, 1301 

Flexible  rate  of,  favored 1283, 1284 

Increased — 

Denial  of,  bv  city  authorities 826, 827 

Difficulty  of  granting  to  one  and  not  to  all  other  companies  oper- 
atingin 1285,12)0  1?  12,2096 


I 


2324 


INDEX-DIGEST. 


New  York,  N.  Y.,  city  of— Continued. 

Fare^,  electric  railway,  in — Continued. 

Increased — Continued.  page. 

Effect  of,  probable 335 

Power  to  grant,  questioned  and  discussed 335, 829.  i3i3,  isis,  2044 

Solution  of  electric-railway  difliculties  in,  a  means  of,  doubted..   1235, 

-  ^  ^  ,  1318,1618 

Lower  rate  of  than  5  cents  for  short  ride  advocated  as  means  of  traffic 

stimulation...  2095,2110 

Situation  with  regard  to gjg 

Zone  system  of,  advisability  of  introduction  of ! !  i299  1618 

Franchise,  situation  with  regard  to  modification  of '  839 

„.  ,         ,            •  ,.        .                                           1279, 1282, 1288,  i299,*i3i3, 1315 
History  of  surface  lines  m 1303 


tially 1282  1285 

Manhattan  Elevated,  situation  with  regard  to '..'..'.'.'.. '  1284 

Metropolitan  Street  Railway  Co.,  losses  sustained  by  small  investors  through 

reorganization  of 2092 

Motor-bus  operation  in       .' ."  "1*286,' i289,"  1302,* ieis,  2045 

Municipal  ownership  of  electric  railways,  city  authorities  favor 830, 

1304  131fi  I^IR 
New  York  &  North  Shore  Traction  Co.,  attempt  by  to  adopt  zone  system  ' 

of  fare  in  violation  of  franchise 2044 

One-man  cars,  possible  use  of,  in 2097 

Population,  necessity  of  preventingand  reducing  congestion  of .  877, 1287, 1294  1315 

Pubhc,  exploitation  of  through  public  utilities '  1344 

Rapid  transit,  in — 

Assessment  of  property  benefited  to  pay  for 2099  2126 

See  also  Assessment.  ' 

Dual  system  contracts  criticized 1234  1279 

Fares,  flat  rate  of,  favored  for .......!!.!! '  1241 

History  and  present  condition  of 822  877 

Real  estate,  effect  upon  of 2099  2126 

See  also  Rapid  transit.  ' 

Receivership  of  electric  railways  in,  danger  of 147, 519, 827, 830, 1277  1279 

Regulation,  conflict  between  local  and  State  bodies  regarding  power  to 

grant  fare  increases  to  electric  railways  in 335 

e       J     r>       1  *•  .817, 818, 821, 828,  m3,'i3i5, 2044 

See  also  Regulation. 

Ride,  increase  in  length  of,  possible  for  one  fare  in 879  1287 

Solution  of  electric-railway  difliculties  in *  524 

n,„  ,•    ,,  ,.   .,  .   ,.  .   ?27, 529, 1236, 1282,  i284;i285,*i292, 1312 

1  axation  of  electric  railways  m,  elimination  of,  not  a  solution 1292 

Traffic — 

Development  of  short-haul  by  electric  railways  in  through  adoption 

of  a  less  than  5  <  ent  fare 2095  2110 

Movement  of,  by  electric  railways  the  great  problem . . '. [ 1289 

Transfers,  electric  railway — 

Charge  for,  granted  to  electric  railways 520  1279 

Universal,  free,  favored '  1287 

Valuation,  necessity  of  a  definite  and  unquestioned,  of  electric  railways  in      1282 

1286  1291  1306  1318 
Se^also  Brooklyn  Rapid  Transit  Co.,   New  York;  Interborough  Rapid 
Transit  Co.,  New  York;  New  York  Railways  Co.,  New  York;  New  York 
State  of.  ' 

New  York  Railways  Co.,  New  York: 

Capitalization,  excessive,  of,  claimed 1304, 1318 

Cars,  use  of  double-deck,  by 934 

Fares,  iiicrease  in — 

Desired,  rather,  than  a  charge  for  transfers 526, 527,  529 

Effect  of,  upon  revenues  and  riding,  probable '  526*  836 

Franchise,  uniform,  a  solution  of  difliculties  of '         '528 

Historyof ,  .  ^^47 


i 


INDEX-DIGEST.  2326 

New  York  Railway  Co.,  New  York — Continued. 

Leases  of  underlying  companies  of —  ^  Page. 

Modification  of,  providing  for  a  reduction  of  rentals  paid,  etc 1282, 

1285, 1309, 1311 

Nature  of,  perpetual 1309 

Rentals  paid  under,  excessive 167, 521,  524, 1306, 1310 

Municipal  ownership  of 529 

Profits  of,  since  1913,  estimated 1304, 1318 

Public  attitude  toward 521,527 

Receivership  of 147,  519 

Situation  with  regard  to : 147,819,820,1303,1312 

Statistics,  operating,  of 1309 

Transfers — 

Charge  for :..  520,1279 

Discontinuance  of  certain , 2045 

Valuation  of 833 

Wages  paid  employees,  increase  in 524 

See  also  Brooklyn  Rapid  Transit  Co.,  New  York;  Interborough  Rapid 
Transit  Co.,  New  York;  New  York,  State  of. 
New  York,  State  of: 

Public  Service  Commission  of,  right  of  to  modify  existing  electric-railway 

franchises  and  increase  fares 839,  844 

Special  Committee  to  obtain  additional  revenue  for  electric  railways  in, 

work  of 942 

Surplus,  Stat-e  law  providing  for  accumulation  of 834 

See  also  Brooklyn  Rapid  Transit  Co.;  Interborough  Rapid  Transit  Co., 
New  York,  N.  Y.;  New  York  Railways  Co.,  New  York. 

Newman,  J.  K.,  statement  of 553 

Nixon,  Lewis,  statement  of .......     1277 

Northampton  Street  Railway  Co.,  Massachusetts,  electric  railway  situation  in. .      514 
Obsolescence,  electric  railway: 

Allowance  for,  should  be  included  in  value  for  return 873 

Cause,  possible,  of  differences  between  capitalization  and  valuation. . .     1862 

Discussed 137, 141, 175, 177, 228,  266,  667,  678,  692,  752 

Failure  to  provide  for,  criticized 1689 

Future  a  very  much  less  factor  in  railroad  development 758,  763 

Reserve  for,  should  not  be  based  on  physical  life  of  equipment 394 

See  also  Depreciation. 

Obsolescence  of  the  electric  railway,  claimed 1625, 1628, 1633 

Obsolescence  of  electric-railway  cars 396,  397 

Ogburn,  Charlton,  analysis  of  electric  railway  situation  in  Great  Britain  made 

by 2046 

Ogburn,  William  F.,  statement  of 5220 

Omaha,  Nebr.,  electric  railways  in: 

Capitalization,  excessive,  of,  charged 1369 

Electric  railway  situation  in 1369 

Fare  increase  granted  to 1371 

Valuation  of,  contested 1369 

One-man  or  safety  car,  use  of,  by  electric  railways: 

Accident  reduction  with 738, 1595 

Advantages  of 747,1594,1671,1672 

Approved  and  favored 462,  609, 658,  695,  706,  750,  937, 1115, 1118, 1593,  2067 

Birney  type  of 730,  739 

Cause  of  electric-railway  car  obsolescence 397 

Cities,  size  of,  in  which  operated  to  greatest  advantage 734, 882 

Collection  of  fares,  difficulties  in  connection  with 736 

Companies  manufacturing 748 

Congested  districts,  in 695,  734, 1259, 1261, 1684, 1686 

Discussed 730 

Duplication  of  equipment  with 732,  746 

Economies  of 731 

Employees',  attitude  of,  toward 735, 749, 1118 

Essential  features  of 730 

Failure  to  more  widely  introduce  and  use,  reasons  for — 

Capital,  lack  of 658,749 

Refuted 1597,1599 

Interurbans,  utilization  by,  discounted 745 


160643**— 20— VOL  3- 


-18 


2326 


nJDEX-DIGEST. 


One-man  or  safety  car,  use  of,  by  electric  railways — Continued.  Page- 
Jitney  competition,  as  a  means  of  fighting...*., 670, 730, 738, 1594, 1685 

Obstacles  to  utilization  of 170,  373, 512 

Opposition  to,  in  Kenosha,  Wis 781 

Public  attitude  toward 736 

Results  irom  use  of,  in  Terre  Haute,  Ind . ,  satisfactory,  discussed 1594 

Rush-hour  traffic,  use  of,  in  connection  with 695,  732, 1684, 1686 

Standardization  of,  as  means  of  reducing  cost  of ...^.,., 400 

Statistics  of,  use  of 731 

Traffic  development  through  frequent  service  with 1600, 1649, 1672 

Zone  system  of  fares,  use  of,  in  connection  with 574,  695,  703, 1612, 1650 

Operation,  See  Cost  of;  Economy;  Efficiency,  etc. 

Operating  expenses  of  electric  railways,  by  detailed  accounts,  for  1917 938 

See  aUo  Cost  of  operation. 

Operating  ratio  of  electric  railways,  comparison  of , 93, 95, 1787 

Ordinances,  See  Contracts;  Franchises. 

Over-building  of  electric  railways  in  United  States  due  to  influence  of  q)ecula- 

tive  real-eatate  interests,  condemned 1206, 1212 

See  also  Real  Estate. 

Over-capitalization,  see  Capitalization. 

Over-con«olidation,  see  Consolidation. 

Pardee,  J.  H.,  statement  of 62, 882 

Paving  obligation  imposed  upon  electric  railways: 

Cleveland,  Ohio,  none  in,  under  cost-of -service  franchise.*. 606 

Cost  of,  paid  by  car  riders 425,1409,1516 

Discussion  of 119^  644 

Justice  of — 

Defended 911,912,1040,1381 

Denied,  considered  a  burden 440, 

657,  799,  937, 1049, 1054, 1056, 1197, 1292, 1295, 1358, 1683 
Municipal  ownership  of  roadbed  with  private  operation  of  railwav  as 

method  of  obviating  difticidty 1040, 1043, 1045, 1048, 1050, 1052 

Relief  of,  from 153^ 

157,  158,  284,  444,  571,  609,  644,  652,  707,  712,  816,  87^^74,*  884,  894^ 
941,  1020,  1021,  1054,  1056,  1173,  1179,  1186,  1292,  1296,  1358,  1516 

Favored  with  qualifications 1091, 1402, 1696,  2082,  2098 

Granted  by  Federal  court  to  Pittsburgh  Railway  Co 611, 1904 

Not  favored 1381 

Not  a  solution  of  electric-railway  problem 153 

Statistics  of 425 

Texas,  required  by  State  law  in ,,[      627 

See  also  Imposts;  Taxation. 
Pay-as-you-enter  cars,  use  of,  by  electric  railways  as  means  of  increasing 

revenues 396, 1089, 1115, 1118 

See  also  Cars. 
Peak-load  traffic,  see  Traffic. 

Pelliaaier,  L.,  statement  of 514 

Pennsylvania : 

Capitalization,  excessive,  of  electric  railways  in.  situation  with  regard  to..    1400 
Fares,  electric-railway — 

Changes  in,  right  of  companies  to  initiate 952,  965 

Increase  in,  situation  with  regard  to 1399 

Municipal  ownership,  no  pronounced  sentiment ,  for  in 1404 

Operating  condition  of  electric  railways  in,  good 1400 

Public  Service  Commission  of,  methods,  personnel,  and  powere  of 377. 

1392, 1401, 1905 

Receiverships  of  electric  railways  in,  small  number  of 1393, 1399 

iS««aZ«)PhibBidelphia;  Pittsbiu^h;  Scranton. 

Ptennsylvania  Central,  model  cost-accounting  system  developed  by 1693, 1699 

Philadelphia,  Pa.: 

Electric-railway  situation  in. .- 1513, 1548,  2129 

RiBtary  of  electric  railways  in 1513, 1548 

Municipal  ownership  of  unified  electric-railway  lines  in,  favored 2134 

Rapid-transit  situation  in 470, 1547, 1562,  2133 

Real  estate  values,  enormous  increase  in,  due  to  rapid-transit  development .  1548, 
_  .    ^  1562,2004 

United  Business  Men's  League  of,  aims  of  and  work  of 2129 

See  also  Pennsylvania;  Philadelphia  Rapid  Transit  Co. 


IXDEX-DIGEST. 


23:27 


1 


f 


Philadelphia  Rapid  Transit  Co. 


muKnuiim  ivopxu  ixoriioiu  V.V/.,  xa.!  icaa   inAa 

Audit  of  accounts  of,  yearly,  by -city , 1»44,  l&4b 

Capital,  new  invested  by,  iBextensions  and  improvements  since  1910 1541 

Capitalization,  excessive,  of  underlying  compamee  of—  . 

Absorbed  in  past  through  <}areful  management 1695 

Existence  of ,  suspected 1556,1578-1579,1581,2130 

Cars,  type  of,  used J^^ 

City  autboritiee,  relations  with - JJlo 

Collections  of  fares,  no  mechanical  devices  used  as  employees  trusted 1558 

Cooperative  plan  adopted  by — 

Amendment  of  in  1918 lb2Q,lbb2 

Benefits  from,  felt  in  all  departments 1554 

■Cause  of  ability  to  operate  at  present  on  5-cent  fare  doubted 1971 

See  also  Philadelphia  Rapid  Transit  Co.,  fares. 

Collective  bargaining  feature  of 1521, 1533, 1551 

Criticized  from  labor  point  of  view 1877, 1880. 1936. 1938. 1956 

Details  of - 1521,1522,1551,1558 

Indorsement  of  by  National  War  Labor  Board- 
Claimed .... .. 1514,1520,1524 

Denied ^^77 

Origin  and  history  of 1527,1529,1533,1535 

Profit  sharing  under 15^8, 1533 

Results  satisfactory,  secured  imder , 1513. 3518, 1527, 1533 

Turnover  of  labor,  small  under 1519, 1550, 1570 

Wages,  adjustment  of,  under 1394. 1398, 1525, 1552, 1574 

Cost  of  operation,  increase  in 1541 

Depreciation  and  maintenance  allowance  ci,  sufficiency  of — 

Criticized 1990,1993,1994 

Defended ^^^^' ?2SI 

Economies,  operating,  means  of  promoting,  adopted  by 1536 

Extensions,  alleged  failure  to  build  and  buy  new  cars  criticized. 2130 

Fares — 

Ability  to  operate  successfully  on  present  rates  of,  discussed 1394, 

1396,  1554,  1559,  1567.  1G79, 1885,  1939. 1956. 1971. 1994.  2003, 2131 

Increase  in  present  rates  of,  not  sought 1568 

Rates  of  present,  5  cents  cash,  some  free  transfers  and  some  3-cent 

transfers 1517. 1542, 1544, 1553,  1554 

Fire  insurance,  savings  effected  in  matters  of 1539 

Franchifle  of,  provisions  of 1542,1543, 1546 

History  of..-.  -. « 1513,1549 

Jitnev  competition  with,  practically  none -     1558 

Frei^t  and  express  business  done  by,  compai»ti\  ely  insis-nificant 1564 

Labor — 

Extra  men,  average  earnings  of - - 2007 

Hours  of  labor  of  trainmen,  comparison  of  with  Detroit  data 2003 

Strike  of  trainmen,  failure  of  attempts  to  cause -  -  -     1520 

Solution  of  problem  of,  satisfactory 1513, 1519, 1527 

Wages  paid  by,  to  trainmen — 

Comparison  of,  with  data  for  Cleveland  and  Detroit 2057 

Rates  of,  for  1910  and  1919  compared , 1541 

Leases  of  underlying  companies,  of,  see  Philadelphia  Rapid  Transit  Co., 

underlying. 
Management  of,  Stotesbiu-y-Mitten — 

Ability  of,  to  operate  successfully  at  present  on  5  cent  fare,  discussed .    1394, 
1396, 1554, 1559, 1567. 1679, 1885. 1939, 1956, 1971, 1994, 2003, 2131 

Cost  of,  not  increased  in  proportion  to  increase  in  other  costs 1541 

Efficiency  of,  praised 1679, 1693 

Events  leading  up  to - 15^ 

Relations  between,  and  employees  and  public,  cordial 1532 

Results  of,  satisfactory — 

Cause  of ,  in  confidence  between  employees  and  managements.  1515, 1534 

Discussed  and  outlined 1513, 1518. 1533. 1535, 1569, 1658, 1660 

Not   necessarily   obtainable   elsewhere   through  application   of 

same  methods 1566 

Success  of,  questioned 1885, 1939, 1943, 1971, 1989, 1990, 1991, 1996 

Newspaper  support  of •  •  •    1531 


I  I 


I 


2328 


INDEX-DIGEST. 


Philadelphia  Rapid  Transit  Co.,  Pa. — Continued.  page. 

Population,    alleged   favorable  distribution  of  from,  operating  point  of 

view 1995,2005 

Public,  policy  of  cooperation  with 2130 

Publicity,  methods  of,  adopted  by 1531 

Purchase  by  city,  right  of,  reserved  in  1907  franchise  effective  at  its 

expiration I544 

Rapid -transit  lines,  municipally  owned,  lease  of  to,  opposed i547, 2133 

Rehabilitation  of,  by  Stotesbury-Mitten  management 1518, 1533, 1535 

Rerouting  of  cars,  satisfactory  results  from 1536 

Ride,  length  of  possible,  for  5-cent  fare 2005 

Safety-first  campaign  of I539 

Skif)-stop,  use  of,  by | . . .     1533 

Statistics,  operating  of — 

Comparison  of,  with  data  for  Cleveland  and  Milwaukee 1989 

Income  accounts 1516, 1541 

Traffic,   development  of,   by   through   publicity   and   salesmanship   by 

employees 1514, 1532, 1534, 1559, 1569 

Trainmen,  reasons  for  decrease  in  number  of 1967, 1969 

Transfere — 

(^harge  for,  discussed 1412, 1544. 1553, 1567 

Free  facilities  extended  by,  not  as  extensive  as  in  Cleveland   or 

Milwaukee I99I 

Statistics  of * , 2004 

Underlying  companies  of — 

Capitalization,  excessive,  of 1556, 1578, 1579, 1581, 1588, 2130 

Leases  of,  providing  for  high  rentals,  etc.,  condemned.   1864-1865, 2130,  2131 

Relief,  possible  legal,  from  onerous  terms  of  leases  of 2079,  2131 

Value  of  present,  exceeds  capitalization,  claimed 158o!  1583 

See  also  Pennsylvania;  Philadelphia. 

Pierce,  Henry  J.,  statement  of 872 

Pittsburgh  Railways  Co. ,  Pennsylvania: 

Capitalization,  excessive,  of 620, 1848, 1910 

Cars,  use  of  double-deck,  by 932 

Causes  of  present  difficulties  of — 

Cost  of  operation,  increased 619 

Extensions,  overbuilding  of ] ! ! ! !  I      309 

City  officials,  attitude  of,  toward !!!!!!!!!!]!!!!!]!!!]'      622 

Cost-df-service  plan  of  operation  considered  for 361, 1916 

Economies,  operating,  under  receivership  of ] '   300 

Fares — 

Changes  in,  right  of  Pennsylvania  Public  Service  Commission  to  make, 

irrespective  of  franchise  proWsions.  being  tested  in  the  courts..     j9«l5 

Five-cent  fare,  not  permitted  by  topographical  conditions  of  city 1559 

Increase  in — 

Further  needed 615  6I6 

Public  attitude  toward ..........'  619 

Results  from '296,*6i2,'6i7, 1909 

Ui^ed  as  a  permanent  solution  of  problem 302, 304 

Rates  of,  charged 289  310 

Sufficiency  of  present  10-cent  rate  of . . , i910  1913 

Zone  system,  use  of  modified —  ' 

Discussed 612. 617 

Results  from,  imsatisfactory 1404^1908 

Imposts,  such  as  paving,  upon \\\\  294, 612  624 

Jitney  competition  with !.!!....'..     '  313 

Labor,  employed  bj'^ — 

Costs  of,  increased 6I4 

Troubles       .'.!!.*!."  .*.'.*.*.'.'!!!! '614, 1902 

Wages  paid  to,  rates  of 293 

Management,  efficiency  of .*!.*.'.'.*.*!  611  620 

Municipal  ownership  of,  through  establishment  of  a  metropoiitan  district 

for  purpose 1912  1924 

Paving  requirements,  relief  from,  granted  by  Federal  court '  1905 

Public,  opposition  of,  toward 1910 

Regulation  of,  local  versus  State 302 

Situation  with  regard  to *.!!!*.' 289,' eio,*  1*391, 1898 

Statistics,  operating,  of 291  6U 


INDEX-DIGEST. 


2329 


Pittsburgh  Railways  Co.,  Pennsylvania — Continued. 

Solution  of  difficulties  of—  Page. 

Fares,  increased 301, 304 

Service,  abandonment  of 303 

Taxes  paid  by 293 

Underlying  companies  of — 

History  of  and  terms  upon  which  operated 296 

Temporary  character  of  leases  of  and  evils  therefrom 618, 1898 

Unified  svstem  with  single  corporation  favored 624, 1898 

Valuation  of.  Importance  of  a  fair 299,  620,  021, 1902, 1910 

See  also  Pennsylvania. 
Population : 

Cone:estion  of — 

Fare,  effect  of  flat  rate  of ,  upon 231,1206,1288,1294 

See,  also  Zone  system  of  fares. 

New  York  City,  efforts  to  remedy  in 877, 1288, 1294 

Prevented  by  electric  railways 437, 445, 458,  576 

Prevention  of,  discussed 877, 1315, 1486 

Density  of,  in  various  United  States  cities  compared 2006 

Distribution  of,  alleged  favorable  from  electric  railway  point  of  view,  in 

Philadelphia 1995,  2005 

Increase  in,  of  that  served  by  subsidiaries  of  Stone  &  Webster 2038?  2040 

Urban,  per  mile  of  track,  in  Great  Britain  and  United  States 436 

Portland  Railway,  Light  &  Power  Co.,  Oregon,  valuation  of 2013 

Portland  Street  Railway  Co.,  Maine,  situation  with  regard  to 354, 363 

Power  I 

Generation  of,  by  electric  railways 80, 91, 224, 225,  931, 1667 

Houses,  growth  in  size  and  importance  of 935 

Purchase  of,  by  electric  railways 91, 108-109,  215,  239,  931,  2123 

Sale  of,  by  electric  railways  for  light  and  power  purposes,  various  phases  of.       72, 

82,  704, 932, 1481 

Stations,  cost  and  efficiency  of 237 

Use  of,  by  electric  railways,  possible  economies  in 215, 1593. 1596, 1667, 2067 

Preferential  and  companies  in  dual-system  contracts  in  New  York  City,  public 

criticism  of -. 1279 

See  also  New  York,  N.  Y. 
Preliminary  expenses,  consideration  of,  in  valuation.    See  Valuation. 
Prices: 

Behavior  of,  before  and  after  various  wars,  discussed l.'>21 

Increased  as  cause  of  present  deplorable  electric  railway  situation.     See 

Causes. 
Level  of — 

Capital,   interest  upon,   determined  by  factors  more  or  less  inde- 
pendent of 1334, 1335 

Constantly  changing 1321, 1323 

Increase  in,  extent  of 1320 

Measure  of,  index  numbers  as 127 

Present  high — 

Causes  of 1323, 1328, 1882, 1885, 1916 

Decrease  in,  not  a  solution  of  electric-railway  problem 1061 

Effect  of,  upon  electric  railways 65, 1086 

Permanence  of,  will  continue  for  some  time  to  come.  - .' 65, 

301, 417,  421, 530,  646,  863,  927-931,  934, 953, 1290, 1323, 1340 

iTpheaval  of,  due  to  credit  inflation 1328 

Wholesale,  of  commodities  as  reported  by  United  States  Bureau  of  Labor 

Statistics 116 

Private  operation  of  electric  railways: 

Condemned  and  abuses  of  pointed  out 1234, 1342, 1344, 1356 

Discussed  under  municipal  or  public  ownership 799, 

924, 1048, 1900, 1912, 2084,  2117 
Private  ownership  of  electric  railways: 

Failure  of 791,800,1234,1481 

Private  operation  and  disadvantages  of  under  Cleveland  cost-of-service 

plan 1460, 1462, 1464 

Public  operation  and — 

Experimented  with  in  Massachusetts 344, 1442, 1452, 1625, 1640, 1659 

Favored 1353,1358,1464,1650,1651,1653 

See  also  Bay  State  Street  Railway  Co.;  Boston  Elevated;  Massa- 
chusetts. 


1*  J 


2330 


ISI^DEX-DIGEST. 


Problem  of  electric  railways,  present :  I*h:p 

Complicated  by  factors  absent  in  European  cities 1421, 1422 

Features  of,  main,  as  seen  by  Amalgamated  Association  of  Street  &  Electric 

Railway  Employees 1803 

Federal  Electric  Railways  ('ommission^  suggested  presentation  by,  of...    2C64 
See  also  Federal  Electric  Railways  Commission. 

Finances  and  management,  one  of 167." 

Ix)cal  one,  essentially  a 1006, 1013, 1567, 1577, 1649, 2064, 21(»5 

Psychological  one,  to  an  extent,  a 1386, 140 J 

Several,  not  one 1385,1388,1401 

Social  one 1135, 1137. 1155, 1161, 1352, 1627, 1631, 1681 

Solution  of,  obstacles  to 1688 

See  also  Rehei;  Remedies;  Solution. 

Statement  of,  necessity  of  clear,  defmite  and  simple 1387-1388, 1406 

Outline  of 1229,1454,1893,2105 

Vital  one  in  every  municipality,  a 1047 

World-wide  one,  a 1319,1330,1335 

Proceedings  of: 

July  15,  1919 62-145 

July  16,  1919 145-227 

July  17,  1919 228-314 

July  18,  1919 314-416 

July  21,  1919 416-514 

July  22,  1919 514-637 

Jjily23,  1919 i 637-764 

July  24,  1919 764-881 

July  25,  J919 , 881-995 

August  11,  1919 995-1085 

August  12,  1919 1086-1171 

August  13,  1919 1179-1277 

August  14,  1919 ;.  1277-1384 

August  15,  1919 1384-1513 

September  29,  1919 1513-1621 

September  30,  1919 1621-1731 

October  1,  1919 1731-1841 

October  2,  1919 1841-1947 

October  3,  1919 1947-2055 

October  4,  1919........ .- 2055-2134 

Productivity  of  electric-railway  trainmen 1515, 

1534, 1731, 1776, 1781-1782, 1846, 1853,  l887, 1928, 1957, 1959, 1960, 1964 
See  also  Labor. 
Profit,  electric-railway  industry  should  be  conducted  primarily  for  service 

rather  than  for 1228,1230,1294 

Profit  sharing  by  electric  railways,  with — 

Labor 787,1588,1966-1967 

Municipalities.- 280,331,332,782,923,1234 

Profits  of  electric  railways: 

Early  excessive,  claimed 1705, 1711 

Denied 1704 

Made  through  financing 1688 

Public  belief  in  enormous,  how  reached 555 

Profits  of  promotion  of  electric  railways 199, 719 

Promotion  costs  and  profits,  see  Profits;  Valuation. 

Property  values,  assessment  of  increased  to  pay  for  electric  railway  improve- 
ments, tee  Assessment. 
See  oho  Ijand  Values;  Real  Estate. 
Providence,  R.  I.,  see  Rhode  Island. 

Psychological  factors  entering  electric  railway  operation 1987, 1997 

PubUc: 

Antagonism  of,  toward  electric  railways — 

Method  of  overcoming 1222 

Obstacle  to  solution  of  problem 1222, 1688. 1859 

Reanons  for.  154, 199, 240, 495, 854, 1152, 1199, 1222, 1688, 1692, 1844, 1859, 1910 
Approval  of,  necessary  to  success  of  any  electric-railway  settlement  plan. .     1003 
Attitude  of,  toward  increased  fares: 
Favorable — 

Essential  to  success 357,449,451,560,888,1397 

Eaciats : 616,518,724,868 

Methods  uised  to  obtain •••« •« 367 


INDEX-DIGEST, 


2331 


r 


Public — Continued.  • 

Attitude  of,  toward  increased  fares— Continued.  *^S«- 

Immaterial,  so  far  as  results  are  concerned 515 

Opposition  toward,  increases 654,  798, 873, 1184, 1416^  1657 

Less  with  automatic  method 376,  594,  663, 1759 

Not  likely  because  of  desire  not  to  physically  inconvenience 

itself •- 536 

Reasons  for ..-  1083,1386,1406,1412 

Reduced  to  a  minimum  by  a  knowledge  of  facts  involved 488. 

557, 558,  560,  888,  919, 1016, 1759 

Benefits  derived  by,  from  electric  railways ;  -, 753 

Characteristics  of  'American,   j)er8onal  and  psychological,  an  additional 
source  of  difficulty  in  reaching  a  solution  of  electric-railway 

problem ; 1422 

Conclusions  of,  as  to  the  enormous  profitableness  of  electric  railways,  how 

reached ^^ 

C<mfidence  of,  in  electric  railway  industry — 

Lack  of,  reasons  for 2088 

Methods  of  r^?aining 304 

Necessity  for 2098 

Cooperation  of,  with  electric  railways — 

Discussed ^^ 

Essential  to  their  well-being 64,65,411,527,687,863,1047, 

1116, 1388, 1392, 1459, 1460, 1464, 1530, 1569, 1668, 1996-1998 

Interurbana  have  it 725 

Methods  adopted  by  Philadelphia  Rapid  Transit  Co.  to  secure 1531 

Need  of.  Federal  Electric  Railways  Commission  should  point  out 2068 

Education  of,  necessity  of,  to  meet  present  unfortunate  electric-railway 

situation 63,322,453,1007,1017,1029,1658 

Failure  of,  to  realize  extent  of  increase  in  cost  of  electric  railway  operation.       947 
Federal  Electric  Railway  Commission ;  facts  presented  by,  will  be  believed .       557 

See  also  Federal  Electric  Railways  Commission. 
Impression  held  by,  regarding  existence  of  overcapitalization  in  electric 

railway  industry,  importance  of  dispelling 405 

Interest  of,  in  electric  railway  situation  paramount 63, 687, 837, 1894, 1954 

Interests  of,  injured  by  absorption  of  electric  railway  revenue  through 

overcapitalization 1180, 1191 

Joint  lieht,  power,  and  electric  railway  operation,  entitled  to  some  of  bene- 

fitsoL. 2018,2019,2030,2034 

Misled  by  self-appointed  advisors • 849 

Opposition  of,  to  electric  railways,  reasons  for— 

Detroit  United  Railway  Co 1152 

Pittsburgh  Railways  Co ^ 1910 

Public  Service  Railway  Co --•■    ^^^^ 

Realization  by,  of  present  electric  railway  situation,  importance  of  bring- 
ing about 327 ,  1660 

Relations  of,  with — 

Electric  railways - l^ 

Basis  of,  never  economic  and  satisfactory 64 

Importance  of  satisfactory 157, 200, 1397 

Means  of  obtaining  satisfactory  cost-of-service  plan 211, 664 

Plan  for  readjusting  should  be  recommended  by  Federal  Electric 

Railways  Commission - 882 

Employees  of  electric  railwavs,  importance  of  cordial 1671 

Representation  of,  in  the  manag^ent  of  electric  ^^J^y^^^^^^^'i^^iAi^^  mi 

Return  on  watered  stock  now  held  by  innocent  investors,  payment  of, 

by,  not  favored -  -     1393 

Satisfaction  of,  with  Cleveland  cost-of-ser\ice  franchise 905, 1003 

Sentiment  of—                                     ,.,..,         ,  ,           j        • 
Controlling  agency  upon  demands  of  electnc-railway  labor  and  main- 
tenance by  it  of  contracts -  12^8, 1474 

Effect  upon,  of  conclusions  and  recommendationfl  of  Federal  Electnc 

Railways  Conunission 63,  898 

Jitney  regulation,  useless  unless  supported  by 1^4 J 


2332 


INDEX-DIGEST. 


♦  -f  ■. 


^n 


•4 


^^ 


■% 


*f,  ■  I 


Public—Continued.  , 

Sentiment  of — Continued. 

Toward  electric  railways —  Page. 

Cost-of-service  plan 478,  484, 487,  490,  491 

Imi>ortance  of  favorable 632-533, 1470, 165(),  1658 

Public  ownership  of,  favorable 1273 

Public  contributions  to  electric  railways,  see  Subsidies. 

Public  control  of  electric  railways,  see  Regrulation. 

Public  functions,  should  not  be  performe<l  for  private  profit 1342 

Public  officials,  corruption  of  by  public  utilities 154 

^  ,  ,.  ,.  ,     ,        .         ..  242, 244, 450, 8.54, 1016, 1030,  i346,"i769, 1723 

rublic  operation  of  electnc  railways  under  private  ownership,  see  Private 

ownership  of  electric  railways. 
Public  ownership  of  electric  railways: 

Advantages  of 793,798,1244,1345,1348,1350,1376,2071 

Argument  for 791,  808, 1233, 1364, 1345, 1346-1347, 1495, 

^     .    -      ,  .,.  ,      .  1497, 1629,  1 633, 2014, 2017, 2033, 2035,  2077 

Capital,  ability  to  obtain  new  needed,  and  at  a  lower  rate  of  interest  an 

argument  for 209,539,805,1048,1157,1233, 

^     .,  ,.       .  ,.     .  1451, 1454, 1478, 1651, 20(>9, 2081, 2084,  2114 

Capitalization,  excessive,  elimination  of  only  through  purchase  for 1264 

Condemnation  as  method  of  obtaining ' 1140,  I143, 1238 

Cost-of-service  plan  of  electric-railway  operation  as  against '  479 

c       J     n    .    t         .  488, 563,i234, 1247 

See  also  Cost  of  service. 

Credit,  electric  railway,  relation  of  to,  see  Credit. 

Delay  incidental  to  adoption 800, 805  824 

Discussion  of : 2114 

District  ownership  where  purely  municipal  impracticable .  ...!!!..!.  802 

„   ,       ,  .  1237,1247,1631,1635,2076,2120 

^mployees,  relative  treatment  of  under,  as  against  private 1350 

Fares,  sufficient  to  pay  for  service  at  cost,  favored  under 2082 

Favored 791,  799,  800,  801 ,  830, 1233, 1237, 1247, 1264, 1265 

^         1     .  .        M                .              1342,1346,2014,2017,2033,2035,2077,2109,2111 
rree  electnc-railway  service  under hqi 

^      ,^..       .        .  .,  1626, 1629, 1631, 1706,  i7ii,*i7i4,i726,' 2081, 2087 

ureat  Uritain,  situation  with  regard  to  in 21I8 

See  also  Great  Britain. 

*   Inevitable.  .  1265,1281,1289,1291,1478 

Jitneys,  would  probably  be  not  permitted  to  operate  under 1242 

Kenosha,  Wis. ,  considered  for 782 

Legislation,  additional,  necessary  to  bring  about !!!!!!!!!!!  ^ !  i !!! !     1237 

Methods  of  financing  used  in  Seattle  to  bring  al)out 1238 

Objections  to — 

Discounted 791,  794, 120)2, 1344,  2070,  2084, 2086 

Discussed...  336,339,855,880,1108 

Obstacles  to  Its  adoption—  ,       ,       ,       ,     vo 

Financial 8O5 

Legal. 806, 1353 

Question  of  price,  determination 2083 

2Pf^^ .• 336, 463,  876, 964,  i652,'i688,*i698, 2077 

Pnvate  operation  under 799, 924, 1234, 1356, 2071, 2084, 2117 

See  also  Private  operation. 
Purchase,  through,  see  Purchase  of  electric  railwavs. 
Recommendation  for,  insufficient  evidence  in  Uiiited  States  upon  which 

to  base 2077 

Referendum,  public,  favored  prior  to  adoption  of .*!!!!!  2071, 2083 

Solution  of  electric  railway  problem 1229, 2070, 2077'  2084 

Favored  as 791,801,1233,1353,1358,1451, 

1454,1688,1698,2014,2017,2033,2035 
Opposed 315 

Sentiment  toward,  in  United  States  believed  favorable ........,[.'.    1273 

State  operation,  cities  in  which 945 

State  ownership  as  against  municipal ,,',  's02  2076 

See  also  Districts.  -  . . .        , 

Steam  railroad  situation  in  United  States  not  a  fair  test  of 827,  842 

Valuation,  exorbitant,  fear  of  it  being  used  as  basis  of 2111 

See  also  Municipal  ownership;  Private  ownership. 


r 


INDEX-DIGEST. 


2333 


Public  Service  Railway  Co.,  Newark,  N.  J.:  Pag«- 

Capitalization,  excessive 1199,1214,1845 

Fares- 
Increase  in,  effect  of,  upon  revenues  and  riding 426, 957, 1243, 1255, 1634 

Zone  system  of,  providing  for  3  cents  initial  rate  adopted  by — 

Collection  difficulties  encountered  with 1610, 1612, 1619 

Discussion  of 962, 1119, 1198, 1252, 1608,  1619 

Failure  of,  causes  of 1608,2042 

Jitney  competition  with — 

Discussed 1198,1199,1201 

Increase  in,  following  increase  in  electric-railway  fares 426, 1243,  1255 

Injurious  effect  of,  upon  electric-railway  revenues 1243, 1255 

Public  attitude  toward,  hostile,  due  to  poor  service  furnished 1199 

Situation  with  regard  to,  in  city  of  Newark 1198 

Statistics,  operating  of,  comparison  of,  with  similar  data  for  Glasgow  Munici- 
pal Tramways 1206 

Underlying  companies  of,  payment  of  excessive  rentals  to 1846 

Valuation  of -  - 1202,1215 

Public  support  of  electric  railways,  see  Subsidies. 

Public-trustee  plan  of  electric  railways  operation  in  use  in  Massachusetts,  see 
Bay  State  Street  Railway  Co.;  Boston  Elevated  Railway  Co.; 
Massachusetts, 

Public  utility,  what  constitutes 1352 

Publicity: 

Full,  importance  of,  oji  part  of  electric  railways  in  meeting  present  unsatis- 
factory situation 1018, 1185, 1387, 1406, 1412, 1997,  2090 

Methods  of,  employed  by  Philadelphia   Rapid  Transit  Co 1514, 

1531, 1532, 1534, 1569 

Propaganda  of  public-utility  interests,  alleged,  criticized 1689 

Puget  Sound  Traction,  Light  &  Power  Co.,  Seattle,  Wash.,  purchase  of  electric 

lines  from,  by  city  of  Seattle 1131 

See  also  Seattle. 
Purchase  of  electric  railways  by  public: 

Advocated  and  reasons  for 1629, 1633 

Contracts,  provision  for,  in — 

Approval  of,  by  State  commissions  favored 1240, 1247 

New,  favored 1698 

Cost-of-service  franchise,  under — 

Essential  feature  of 468.  513,  599,  634,  665, 1240, 1247, 1270 

Provision  for,  in  Cleveland  franchise  criticized 1972 

Earning,  capitalization  of,  as  basis  of _  2109 

Financing  of ...... : 805, 1238 

Franchise,  under — 

Expired 1249 

Indeterminate,  provision  for,  usually  coupled  with 195,  468, 1022 

Legislation  necessary  to  make  possible 1238 

Opposed  because  of  excessive  capitalization,  etc 1714, 1726 

Massachusetts,  provision  for,  at  end  of  period  of  public-trustee  control  of 

certain  electric  railways  in 1656 

Price  or  fair  value  as  basis  of: 

Amortization  of,  favored -  -  -     1240 

Determination  of 181,  468,  665,  898,  907, 1249,  2083 

Stability  of  electric  railways,  effect  upon,  of  right  to 907 

Termsoif 1451,2109 

See  also  Condemnation;  Valuation. 
Purchasing  power  of  money,  see  Money. 

Purdv,  Lawaon,  statement  of 2124 

Quackenbush,  J.  L.,  statement  of ^. 817 

Quimby  case,  decision  of  New  York  Court  of  Appeals  in 1313 

Quincy,  Mass.,  see  Bay  State  Street  Railway  Co. 

Railroad  competition,  steam 715,  887,  891,  893, 1086, 1099, 1176 

Rann  case,  decision  of  New  York  Court  of  Appeals  in 1313 

Rapid-transit  lines: 

Boston,  Mass.,  situation  with  regard  to,  in 1453, 1455, 2058 

Construction  of,  through  assessment  of  property  benefited 2126 

See  also  Assessment. 


I 


2834 


INDEX-DIGEST. 


Rapid-transit  lines — Continued.  page. 

Earnings  and  finances  of,  discussed , 129  131  132 

Fare,  uniform  flat  rate  of,  favored  for '!!!!!! '..     1241 

Freight  and  express,  transportation  of,  by,  at  night  oonfiider«d.  .*.*. 1564 

New  York,  N.  Y.j  situation  with  regard  to,  in 822, 877, 1234,  i279,  2126 

Overbuilding  of,  m  Boston  a  source  of  weakness  of  electric  railway  in 1453, 

1455  2058 

Philadelphia,  Pa.,  situation  with  regard  to,  in 470, 1647-8, 1562*,  2133 

Real-eatate  values,  increase  in,  as  a  result  of  construction  of *1548 

,,  .      ,,         I    .  .       .,  T.  1562,2664,'2699,212G 

Kate  of  fare,  electnc  railway,  see  Fares. 

Rate  of  return,  see  Return. 

Ratio,  operating  of  electric  railways,  increase  in 93  95  1787 

Rea,  William  M.,  statement  of *  * " '     '  2743 

Reading  Transit  &  Light  Co.,  Reading,  Pa.,  situation  with  regard  to!  * ..V.V.*  *    1074 
Real  estate: 

Assessment  of,  benefited,  to  pay  for  electric-railway  improvements    see 

Assessment.  ' 
Development  of  speculative  ventures  in,  through  construction  of  electric- 
Value  of— "^^^^^^  extensions 348, 1008, 1206, 1212, 1359, 1622 

Effect  upon,  probable,  of  change  in  United  States  from  flat  rate  of 

electric-railway  fares  to  a  zone  system i603 

Increase  in,  due  to  advent  of  electric-railway  lines,  surface  and  rapid 

r         ^^*. .--•.-/•/ 438.911,1548.1562.2004,2099,2126 

Kebate  slips,  use  of,  m  connection  with  fare  changes  initialed  by  electric  rail- 
ways   952 

Receiverships  of  rfectric  railways: 

Connecticut,  large  proportion  of  electric  railways  in,  under 1107  1110 

Control  of,  by  State  regulatory  commissions \ '  i267 

Durability  of,  as  a  method  of  financial  reorganization.....!....  1263,1266  1695 

Efficiency  of  operation  under igg  542 

Indiana,  only  one  electric  railway  in,  under 1095 

New  York  City,  danger  of,  in iij,  5i9,"  827,' 830,' 1277, 1279 

Pennsylvania,  small  proportion  of  electric  railways  in,  under. .  1393  1399 

Pittsburgh,  Pa.,  situation  with  regard  to,  in 300  610 

Rhode  Island,  situation  with  regard  to,  in ....,,..,  il67  1175 

Statistics  of go  04 

Referendum  votes  on  electric-railway  settiementa,  desirabiiity  of. ........ '. . '.   1023 

1029  2071  2083 
Regulation  of  electric  railways,  public,  by  State  commissions  or  otherwise  ' 

Accounting  of,  favored. 898,1226,1240 

Bonds,  selling  qualities  of,  effect  upon,  of \^q 

Capital  expenditures,  authorization  of,  favored !!!!!!!!!!!!!! 781 

Capitalization,  control  over,  favored ....'. 1112  1113 

See  also  Securities.  ' 

Cause  of  present  electric-railway  difficulties 63, 1054, 1222  1224  ISgs 

Commission,  State  regulatory—  ,         ,     *.- 

Criticized.  817,859,861,862 

.  Delays  incident  to  work  of 375 

376,  407,  467,  m\  723, "772," 784,*  818,  847! 
P,  -      ,    ,  848,  850,  858,  864,  867,  900,  922, 1088,1104 

Defended ! . . .  850 

Methods  of  work,  personnel,  etc. — 

California g^Q 

Maine !!!!!!!!!!!!!!!!!!!      360 

Pennsylvania !!!!!!!!!!!!!!!!       377 

^  Rhode  Island !.!.!!!!!!! 1168 

Political  influences  affecting !!!!!..!!.....'    851  855  866 

Contracts  with  municipalities,  approval  of,  by  State  commissions! '  1224. 1228  1392 
Coat-of-eervice  franchise —  ' 
Contracts  providing  for,  should  be  subject  to  approval  by  State  com- 
missions   J240  1247 

Fares,  adjustment  of,  under,  automatic  vs.  State  commission  control         '  467 
5««i.o  Fares  &07. 563, 780, 905. 906, 1270 


INDEX-DIGEST. 


2335 


i 


Regulations  of  electric  railways,  etc. — Continued. 

Cost-of -service  franchise — C/ontinued.  Pag*- 

Regulation,  public,  under,  place  of  Stet«  commissions  in  scheme 467, 

469, 482, 486, 664, 675,  780, 1228, 1240, 1420 

See  also  Cost  of  service. 

Defects  of  present  system  of 351 

Defense  of 855 

Difficulties  incident  to 978 

Districts,  public  utility,  establishment  of  for  purposes 1231, 1237, 1265 

Dividends,  of 14SH 

Effective,  prerequisites  to 817, 1374, 1401 

Elimination  of,  mvored 1055, 1056 

Extensions,  construction  of,  control  over 306,  783,  109S 

Failiu-e  of 67,  791, 800, 859, 861, 1053, 1061, 1233 

Fares — 

Adjustment  of,  automatic  versus  State  commission 467 , 

507,  563,  780, 905, 906, 984, 988, 990, 1044, 1270 

Changes  in  power  of  companies  to  initiate 892,  952.  965, 1109 

Increase  in,  power  of  State  commissions  to  order  irrespective  of  fran- 
chise provisions 199, 351, 405, 515, 798, 828,  839, 844, 

846,  884, 885, 864, 1070, 1095, 1112, 1227, 1313, 1315, 1392,  1905,  2044 

Favored 68, 307,  773, 855, 1414 

Finances,  of  reorganization  of 892, 1267 

Form  of  control,  State  versus  local — 

Discussed 181,  243, 244, 664, 675, 901, 903, 1009, 1013, 1222, 1414,  2076 

Joint  State  and  local  control 469,  901, 

916,  987, 1013,  1098, 1 144, 1149, 1169, 1171, 1172, 1225, 1228, 1900, 1906 

Local  control 902, 1012, 1120, 1144, 1149, 1170, 1227, 1292 

State  control 194,  302,  335,  564.  888,  902.  903,  941, 965,  978, 981 ,  982,  985, 

986,  1097, 1104, 1108, 1112, 1172, 1173, 1226, 1240, 1375, 1420, 1472, 1698 

Hazards  of 773 

History  of 765 

Holding  companies,  of 1204 

Interurbans,  of 699,  706,  724 

Jitneys,  of 714,  723,  1064, 1068, 1242 

See  alsj  Jitneys. 
Labor  disputes  in  electric-railway  industry,  control  over,  in  Wisconsin  ....       783 

Leases  of  underlving  companies,  control  over 1282, 1285 

Legislation  providing  for,  worthless  without  enforcement 982, 986 

Massachusetts,  situation  with  regard  to,  in 1468, 1473,  2060,  2063 

See  also  Massachusetts. 

Monopolies,  favored 1054, 1055 

New  York,  situation  with  regard  to.  in 335, 817 

See  also  New  York. 

Public  ownership  versus  State  c'ommission  control 855, 

1233, 1234, 1264, 1265, 1500, 1688, 1698 

Publicly  owned  roads,  State  commission  control  over 1240 

Relief,  emergency,  provision  for,  under 840, 842, 1092 

Return,  rate  of,  control  over  determination  of 781, 1244 

Securities,  issuance  of 221, 307, 574, 891,  892 

See  also  Securities. 

Service  rendered,  of 846,  898 

Substitutes  for,  jitney  competition  as  a 1053 

Valuations,  function  of,  making  control  over,  who  should  have 904, 

1009, 1227, 1240 

Wages  of  employees,  control  over 625, 770, 1181, 1186, 1232, 1272, 2000 

Wisconsin,  municipal  guarantee  law  of 782" 

See  aho  topics  mentioned  above  as  thev  appear  in  the  index. 

Rehabilitation  of  electric  railways,  cost  of,  should  be  kept  down 1021 

Relief  to  electric  railways; 

Delays  incident  to  granting,  injurious 850 

See  alto  R^ulation. 
Emergency — 

Facilities  for  affording,  manyStates  have 847 

Franchise  provisions,  irrespective  of,  in  Indiana 1092 

Dividends,  would  not  be  used  to  pay 848 


)! 


aen^a 


i 


2336 


INDEX-DIGEST. 


Relief  to  electric  railways — Continued.  PaR«' 

Financial,  extended  by  Government  agencies  during  war  as  war  measure^  1930, 

1934 

Immediate,  advocated  and  discussed 408, 531, 535,  540, 542, 847, 849, 

882,  884, 886,  888, 895, 897,  898, 900,  915,  990, 991, 1057, 1107, 1108, 1894 
M^wures  of,  suggested  and  discusped — 

Economies  in  operation,  further 895, 1256 

Fares,  increase  in 404, 535, 540, 

542,  882,  886,  888, 895, 897,  900,  915,  990, 991, 1029, 1069, 1179, 1191, 1256 

Subsidies,  public 1191 

Taxation,  direct  and  indirect,  elimination  or  remission  of 816, 

883, 1057, 1069, 1899, 1904 

Transfers,  charge  for 1279 

Suggestions  for — 

Applicable  to  small  as  well  as  to  large  roads 882 

Lack  of  equitable  or  confidence-inspiring  method  of  putting  into  effect, 

deplored 1692 

Temporary 847, 1029, 1107 

See  also  Problem;  Solution. 
Remedies  for  preeent  electric-railway  situation,  see  Relief;  Solution. 

Renewals  and  replacement,  capitalization  of,  no  longer  possible 559, 562 

See  aho  Depreciation, 
Rentals,  excessive,  paid  by  electric  railways  to  leased  companies,  see  Leases. 
Reorganization  of  electric-railway  finances: 

Control  of,  by  regulatory  commissions  advocated 892, 1267 

Discussion  of  various  phases  of 219, 1074, 1077, 1086, 1357,  2064,  2079,  2093 

Favored 574, 575, 577, 1266, 2069, 2114 

See  also  Capitalization*  Finances,  etc. 
Replacements,  see  Renewals. 
Requirements,  local,  see  Imposts;  Paving;  Taxation. 


Return,  rate  of,  paid  by  electric  railways: 
"  "  ty  to  earn  any,  at  present  doubt 
Basis  for,  what  constitutes 161, 164, 221, 227, 333, 338, 342, 468 


Ability  to  earn  any,  at  present  doubted 847 


Calculation  of,  needed,  method  of 924 

Certainty  of  a  fair,  in  order  to  attract  new  capital,  etc.,  importance  of 65, 

209, 656,  897,  914, 1229, 1245, 1900 

Ademiacy  of,  past  and  present 128, 140, 2105, 2108 

Discussed  and  importance  of,  pointed  out 65, 

202,  209, 656,  859, 863, 897,  956,  978, 1438, 1900 

^Tiat  constitutes 192, 197, 328, 

334,  348, 349,  772, 873, 975, 1229, 1244, 1245, 1586, 1973, 1988, 2114 

Cleveland  Railway  Co.,  Cleveland,  Ohio,  situation  with  regard  to 1229, 

1245,1973,1988,2114 
Coet -of -service  franchise,  under: 

Adequacy  of 328, 345, 348, 1229, 1245, 1973, 1988, 2114 

Capital  value  as  basis  for 468 

Certainty  of,  greater 915 

Fixed  rate  of,  desirability  of  both  for  old  and  new  capital 672, 

680,  681,  781, 1005, 1014, 1463, 1588, 1926 

Guaranty  of 328,334,345, 348, 689, 1246, 1247 

Variations  in,  as  an  incentive  to  efficiencv  of  operation 474, 

494, 498, 501, 1005, 1014 

Elasticity  of 279, 1229, 1418 

Factors  affecting 272, 677, 1229, 1334, 1335, 1340, 1970, 1988 

Guaranty  of 328, 334, 345, 348, 350, 352, 463, 689,  782, 1246, 1247 

Money,  depreciation  in  purchasing  power  of,  effect  of,  upon. .  173, 271, 1332, 1334 

Permanency  of,  when  fixed  by  regulatory  bodies 774,  781 

Public  ownership,  lower  rate  of,  probable  under 806, 1048 

Watered  stock,  payment  of  return  on  opposed 1391 

See  also  Capitalization;  Valuation,  etc. 
Revenue,  electric  railway: 

Absorption  of,  through  fictitious  capitalization  or  improper  management 

condemned 1731,1846,1853,1874,1886 

Adequate,  need  of,  imperative 524, 829, 860, 884, 886, 955, 1342, 1384, 1899 

Coet-of -service  francliise.  defect  of,  in  inability  to  collect  sufficient,  under 

any  eystem  oi  fares  that  can  be  devosed 781 


■■ 


INDEX-DIGEST. 


2337 


Revenue,  electric  railway— Continued.  ^*** 

Express  and  freight,  carrying  of,  as  a  poeeible  source  of 405,718,1564,2095 

Fares,  effect  of  increase  in,  upon,  see  Faree. 

Flexibility  in,  need  of • - 1229 

Fluctuations  in,  causes  of 1439 

Increase  in — 

Efforts  to  obtain  as  a  stimulant  to  jitney  competition 426 

Methods  of  obtaining,  possible — 

Economies  in  o][>eration. 1568 

Express  and  freight,  carrying  of 465,  718, 1564, 2095 

Fare  increases,  see  Fares. 

Riding,  stimulation  of 15C8, 1669, 1676,  2095 

Zone  system  of  fares 1109, 1600 

Need  of,  immediate 829,  860,  884,  886,  888, 1342, 1384 

Insufficiency  of,  as  cause  of  present  electric-railway  difficulties 1438 

Losses  in,  due  to  poor  fare  collection  methods 1218 

Operating — 

Comparison  of,  with  wages  of  electric-railway  trainmen  per  car  mile, 

etc ! 1783 

Net,  per  mile  of  track ^ 129 

Per  capita,  increase  in,  of  Stone  and  Webster  companies 2038,  2040 

Sources  of,  distribution  by 431 

Sec  also  Earnings;  Income;  Relief;  Solution,  etc. 
Rhode  Island: 

Electric-railway  situation  in 1166, 1171, 1174 

Public  Utilities  Commission  of,  the  work,  personnel,  etc 1168 

Regulation,  joint  local  and  State  in 1169, 1172 

Special  commission  to  investigate  Rhode  Island  Co.,  report  and  recommen- 
dations of,  discussed 1166, 1168, 1173 

Taxation,  system  of  in  criticised 1195, 1196 

See  also  Rhode  Island  Co. 
Rhode  Island  Co.,  R.  I.: 

Capitalization  of,  excessive 1151 

Causes  of  difficulties 1175, 1181, 1186, 1188, 1191-1192, 1194 

Cost  of  operation  of,  increase 1191, 1194 

Economies  in  operation  urged  upon 1179, 1187 

Farcfl 

Charged  by 1167,1176 

Increase  in — 

Not  a  solution 1181 

Recommended 1179, 1186 

Results  from,  unsatisfactory 1175, 1178, 1182 

Zone  system  of,  adopted  by 1174, 1176 

Effects  of,  social,  etc 1183, 1185 

Results  from,  financial 1181-1182 

Jitney  and  automobile  competition  with 1186 

Management  of,  approved 1181 

National  War  Labor  Board,  awards  of 1188, 1192 

Paving  obligations  imposed  upon 1197 

Receivership  of 1167, 1175 

Situation  with  regard  to 1166, 1171, 1174 

Solution  of  problems  of,  fare  increase  not  a 1181 

Steam  railroad  competition  with 1176 

Taxation  of,  relief  from  favored 1179, 1186, 1196, 1197 

Transfers,  charge  for  by 1182 

Wages  paid  by,  to  employees,  situation  with  regard  to 1175, 

1181, 1188, 1192, 1193 
Richmond,  Va.,  development  of  first  commercially  successful  electric  railway 

in  United  States  in 752 

Ride,  electric-railway: 

Cost  of,  per  passenger,  increase  in 968, 974 

Length  of,  see  Haul,  length  of. 
Riding  habit,  electric-railway: 

Automobile  as  a  stimulant  of 860, 2038 

Discouragement  of,  by  high  fares  deplored •. 1657 

Discussion  of......;. . . .......... ^ ; 73. 76, 77, 78 


2338 


INDEX-DIGEST. 


Page. 
869 


Riding  habit,  electric  railway— Continued. 
Faree — 

Decreased,  effect  of,  upon 

Increased,  effect  of,  upon,  see  Fares. 

Influences  other  than,  a£fecting 860, 957, 2038 

Low,  effect  of  upon 1899 

Zone  system  of,  effect  of  upon 1600 

Increase  in — 

Affecting  Stone  &  Webster  Co 2040 

Claimed  for 673, 1790 

Methods  of  obtaining,  possible 1569, 1595, 1600, 1658, 1670, 1672, 1676 

Possibilitiee  of,  during  nonpeak  hours  ovOTlooked 1592 

Philadelphia  Rapid  Transit  Co.  has  benefited  from 1559 

Sign  of,  public  approbation  of  service  rendered 1595 

Roadbed,  electric-railway: 

Public  ownership  of,  with  private  operation,  favored 1040, 

1043, 1045, 1048, 1050, 10  2 

Taxation  of,  local,  ^ould  be  abolished 1042 

Robinson,  Charles,  statement  of 1913 

Rolling  stock,  electric-railway,  see  Cars. 

Rooke  faro  register,  merits  of 1261 

Roeenwald,  J.,  statement  of 928 

Routing  of  electric-railway  cars: 

Importance  of  proper 1665 

Rerouting — 

Philadelphia  Rapid  Transit  Co.,  by  satisfactory  results  from 1536 

Providence,  R.  I.,  urged  for 1179, 1187 

Rush-hour  traffic,  electric-railway,  see  Traffic. 

Ryan,  J.  D.,  statement  of 928 

Safety: 

Campaigns  to  promote,  use  of,  by  Philadelphia  Rapid  Transit  Co 1539 

Car,  see  One-man  car. 

Control  over,  by  electric-railway  employees 789 

St.  Louis,  Mo.: 

Electric-railway  situation  in 555, 563-564, 1709, 1715, 1722, 1724 

Free  electric-railway  service  proposed  for 1716 

Municipally  owned  and  operatea  electric  railway  in 1718 

Public  officials,  corruption  of,  by  traction  interests  alleged 1715 

Referendum  petition  for  repeal  of  extension  of  electric  railway  franchise 

in,  destruction  of. 

See  also  United  Railways  Co.  of  St.  Louis,  Mo, 

Salaries  of  electric-railway  executives,   limitation  upon,  under  cost-of- 

service  franchise 196 

See  also  Wages. 
Salesman^ip,  use  of,  by  trainmen  of  Philadelphia  Rapid  Transit  Co.  to  culti- 
vate riding 1514, 1532, 1534 

San  Diego  Electric  Railway  Co.,  San  Diego,  Calif.,  situation  with  regard  to. . . .      262 
Sftn  Francisco,  Calif. : 

Holding-company  control  of  public  utilities  in 2021 

Municipal  Railway  of — 

Depreciation  allowance,  discussion  of  by  city  ei^neer,  and  argument 

against  its  reduction 1607-1508 

Experiment  in  municipal  ownership  and  operation  of  electric  railways, 

first  important  in  United  States 1203 

Fare,  ability  of,  to  operate  on  a  5-ceut  rate  of 1507 

Motor  busses,  use  of,  by,  as  feeders. 1242 

Origin  of 1856 

Results  of 1159 

United  Railroads  of,  overcapitalization  of 1851, 1854 

San  Francisco-Oakland  Terminal  Railways,  Calif.,  situation  with  re^uxi  to...      884 

Sanders,  Fielder,  statement  of 1457 

Schaddelee,  R. ,  statement  of 857 

Schedule  speed,  electric  railway,  discussion  of 1668, 1676, 1686, 1990, 1992 

Schedules,  electric  railway,  importance  of  correct 1664, 1676 

Schenectady  Railway  Co.,  Schenectady,  N.  Y.,  extension  of  length  of  ride  on, 

possible  for  a  5-cent  fare 843, 852 

Schiff,  J.  H 930 


1717 


r 


UfDEX-DIGESI. 


2339 


Scranton  Railway  Co.,  Scranton,  Pa.:  **»Kc- 

Capitalization  of,  excessive. 1213, 1377, 1378 

Fares  charged  by,  increase  in 1379 

Return  upon  capital  paid  by  since  1906 1378 

Situation  with  regard  to 365,1377,1379 

Valuation  of 1383 

Scrap  value,  valuation  term 230 

Seattle.  Wash.: 

Electric-r^lway  situation  in .-•••:*     ^^^^ 

Minimum  comfort  budget  used  in  electric-railway  arbitration  proceedings  in     1826 
Municipal  ownership  of  electric  railways  in — 

Events  leading  up  to 1131 

Fare,  rate  of,  charged  under 1497 

Financing  of 1238 

Ordinance  providing  for 1133 

Results  of  operation  under 1133 

Securities  of  electric  railways: 

Bonds,  mortgage,  elimination  of  favored 1587 

Bonus  stock,  issuance  of 219, 327,  338 

Character  of 677 

Discount  on 171,1230,1862,1866 

Distribution  of.  extent  of  .  .185, 190,  201,  212,  319,  320,  346. 421,  537,  544, 1505, 2014 

Di\ddends  on ,  public  control  over  amount  distributed ,  favored 1282 

Franchises,  short-term,  effect  <rf  upon  — 925, 939 

Issuance  of,  control  of  regulatory  commissions  over 221, 

307,  574,  888,  891,  1204, 1226, 1240 

Local  ownership  of,  feivored 1587 

Market  for,  lack  of 543, 545, 1067,  2092 

Money,  depreciation  of,  effect  of  on 1332, 1334 

Mortgage  bonds,  elimination  of  favored 1587 

Readjustment  of 219,  574,  575,  577 

Return  on 328,345,348,493,504,1418 

Se^  also  Return. 

Sale  of.  conditions  upon  which  can  be  effected 186,  345,  975 

Speculation  in,  condemned 793,  2093 

Stock- 
Bonus,  issuance  of 219, 327, 338 

Common,  treatment  of  holdej^  of 578 

Value  of — 

Relative,  of  senior  and  junior  issues  under  cost  of  service 198 

Shrinlragein 152,316,1066 

"Watering"  of,  should  stop 304 

Yield  on.  statistics  of 317 

iS>««  afeo  Capitalization;  Finance;  Reorganization;  etc. 
Service,  electric-railway: 

Abandonment  of,  see  Abandonment. 

At  cost,  not  favored 889 

See  also  Cost  of  service;  Cost -of -service  franchise. 
Continued,  should  be  guaranteed  and  industrial  disputes  in  the  industry 

settled  without  strikes 1229, 1232 

Control  of,  local  favored 1007, 1227, 1587 

See  also  Regulation. 
Cost  of,  tee  Cost  of  service. 
Economies,  possible,  in,  see  Ectmomies. 
Efficiency  of,  sec  Efficiency. 

Extensions  in,  retarded  during  war 205 

Free,  rendering  of  by  publicly  owned  and  operated  roads "'161, 

1626, 1629, 1631, 1635, 1706, 1711, 1714, 1716, 1726, 2081,  2087 

Frequency  of,  importance  of 784, 1607, 2096 

Good,  importance  of ,  etc 916, 1059, 1072, 1384, 1404, 1592 

Improvements  in 1594, 1664,  2067 

Inaoility  to  furnish 63 

Increase  in  that  rendered  without  proportional  increase  in  fare 843, 852,  853 

Poor,  cause  of  public  resentment 1199 

Profitableness  of  should  not  control  quality  and  quantity  of 1228, 1230, 1294 

Reduction  in  as  means  of  relief  to  roads  opposed 1070 

R^ulation  of  by  regulatory  bodies '. 1068 

See  also  Re^gulation. 


2340 


INDEX-DIGEST. 


Service,  electric-railway — Continued.  Page. 

Rush-hour,  cost  of  greater 803,1970, 1988 

Standards  of,  discussed 1987 

Tremendous,  given  New  York  City 1294, 1302 

Shanghai,  China,  results  from  lowered  fares  in,  satisfactory 1080 

Shoup,  Paul,  statement  of GOS 

Sidlo,  Thomas  L.,  statement  of 1585 

Signals,  block,  installation  of  ordered  on  Indiana  interurbans 1089 

Sinking  fund,  desirability  of  establishment  of  by  electric  railways 1582 

See  also  Amortization. 

Sinking-fund  charges,  unreasonable,  prohibited  in  Indiana 1087 

Sisflon,  F.  H.,  statement  of 314 

Skip-stop  method  of  electric-railway  operation 1259, 1376, 1538, 1668, 2067,  2098 

Sliding  scale  of  fares,  see  Fares. 

Small  electric  railways,  statement  on  behalf  of 882 

Smith,  George  W.,  statenient  of 421 

Solution  of  present  electric-railway  problem: 

Abandonment  of  unprofitable  lines  as  a  means  of 437,  449,  816 

Automatically  adjustable  system  of  operation  as  a  means  of 539,  541,  780J  897 

See  also  Cost  of  Service;  Fares. 
Capitalization,  excessive,  an  obstacle  to,  see  Capitalization. 

Competition,  regulation  of  as  a  means  of 449,  721,  723, 1108, 1117 

Cooperation    between  public    utilities   and  regulatory  bodies    essential 

to 687,760,863 

Cost-of-serv'ice  plan  of  operation  as  a  means  of — 

Favored 156,404,495,496, 

505,  506,  548,  557,  558,  503,  598,  603,  688,  760,  985, 1237, 1270, 1290, 1299 

Opposed 279,280,282,328 

Discussed 155, 164, 281 

Districts,  public  utility,  establishment  of,  for  purposes  of  ownership  and 

operation  as  a 1231, 1238, 1265 

Economies  in  operation,  further,  as  a 404. 1318, 1451, 1664, 1673 

Education,  popular,  as  a  means  of 533, 1007, 1185 

Efficiency  in  operation 1516, 1693. 1697,  2093 

Essentials  to  a 687,  760,  863, 1185, 1516, 1586, 1664, 1910 

European  operating  methods,  not  a 1422 

Fare — 

Decrease  in,  as  a 1079, 1080 

Fixed  rate  of,  elimination  of.  as  a 153, 406, 507, 723 

Increase  in,  as  a — 

Doubted 357,449, 

451, 941.  961, 1181, 1190, 1220, 1318, 1439, 1441, 1448, 1514. 1561, 1625 

Favored * 199, 278, 301, 304, 319, 

322.  379,  527,  529,  535,  539,  542,  587,  609,  645, 828,  835, 872,  919,  936, 
954,961-962,1053,1064,1108,  1117,  1334,  1340,  1648,  1673,  2039 

Public  support  necessary  to  make  effective 357,  449,  451, 1220 

Temporary  expedient  only 351,  404,  540, 587,  804,  860 

Stability  of,  creation  of  reserve  to  produce,  as  a 888 

Zone  system  of,  see  Solution;  Zone  system. 
Federal  Electric  Railways  Commission,  relation  of,  to,  see  Federal  Electric 
Railways  Commission. 

Finances,  reorganization  of,  as  a 557, 1078, 1894, 1937 

Franchise,  short,  mutually  advantageous  and  easily  changeable,  necessity 

of,  to  a , 1696 

Imposts,  elimination  of,  see  Solution,  taxation. 

Investment,  assurance  of  security  of,  and  a  return  on,  as  a  means  of 209 

Jitney  competition  as  an  aid  to  a 1053, 1055, 1064 

Labor  question,  solution  of,  necessity  of,  to  a 950 

Legislative  enactments  not  based  on  economic  laws  not  a 1449 

Methods  of  arriving  at,  discussed 1589, 1674 

Money,  stability  of,  essential  to  a 1336, 1337, 1340 

Municipal  ownership,  see  Solution,  public  ownership. 

Obstacles  to 1688 

See  also  Capitalization,  excessive. 

One-man  car,-  use  of ,  as  a 609, 749, 936 

Permanent,  basis  of,  what  constitutes 1016, 1228 

Power,  cost  of,  relation  of,  to. 239, 2019, 2024, 2030 


^ 


INDEX-DIGEST. 


2341 


Solution  of  present  electric-railway  problem — Continued.  Page. 

Profit-sharing  with  municipalities  asa 281, 331 

Public  ownership  as  a — 

Alternative,  an 1^5. 209,  286, 874, 964 

Doubted 315,556,874,964 

Favored 540,  548,  791. 801, 1123, 1125, 1138, 1140, 1143, 1 152, 

1155-1156, 1161, 1233, 1237, 1264-1265. 1304, 1318, 1353, 1451, 1454, 
1481, 1494, 1498, 1500, 1626, 1629, 1631, 1635, 1688, 1698, 1706, 1711, 
1714, 1726, 1900, 1912, 1918, 1920,  2014,  2017,  2033,  2035,  2109,  2120 

Public  sentiment,  favorable,  importance  of,  in  reaching  a 357, 

449,  451, 507.  533,  687,  863, 1007, 1220 

Publicity,  full,  importance  of,  in  reaching  a 539, 1185, 1997 

Regulation  by  State  commissions  with  local  cooperation  not  considered 

one. 1144, 1146, 1149 

Return,  stability  of,  as  an  aid  to 781 

Revenue,  increase  in,  necessary  to  reach  a.  530,  560,  688,  764,  829, 1342, 1534, 1561 

Social  one 1135, 1137, 1157, 1161, 1623, 1631 

Service  rendered,  decrease  in,  as  a 433, 437, 860 

Subsidies,  public,  as  a  means  of 438, 

449,  646,  653, 1123, 1125, 1138, 1155, 1161, 1449, 1465 
Suggestions  leading  toward  a,  constructive,  lack  of,  on  part  of  electric  rail- 
ways, criticized 1386, 1406 

Taxation,  direct  and  indirect,  relief  from,  as  a 284,  609,  643, 

646, 652-653,  721,  723,  816, 873, 875-876, 1117, 1150, 1156, 1292, 1673 

Transfers,  charge  for,  not  a ■- 526 

Uniform,  none  possible 808, 1006, 1013, 1385, 1388, 1401 

Value,  determination  of  a  fair,  necessity  of ,  to  a 408, 1586, 1910 

Wages  of  employees,  control  over,  by  regulatory  bodies  determining  rates  of 

fare,  necessity  of,  to  a 1181, 1186 

Zone  system  of  fares,  introduction  of,  as  a  means  of 320, 

323,  456, 574, 609,  816,  873,  936, 962, 1237 
See  also  Condition  of  electric  railways:  Electric-railway  situation;  Problem 
of  electric  i-ailways;  Relief  to  electric  railways.    Also  the  various 
topics  discussed  above  under  the  general  heading  "  Solution. " 

Speculation,  securities  of  public  utilities  must  cease  to  be  the  object  of 793,  2093 

Speed  of  electric  railway  cars,  discussed 1668, 1676, 1685, 1990, 1992 

Sprague,  Frank  J.,  statement  of 750, 1083 

Springfield  Street  Railway  Co.,  Springfield,  Mass.,  situation  with  regard  to 1074 

See  also  Massachusetts. 
Standard  of  living: 

Carfare,  expenditure  for.  in  per  cent  of  total  expenditures  in  family 

budget 1802, 1810 

Inadequacy  of,  in  prewar  days  elf imed 1803 

Income,  relation  between,  and  amount  of  food  bought 1822 

Levels  of,  various,  discussed " 1810 

"Bare  subsistence "  budget,  or  minimum  wage 1803, 

1808, 1811, 1826, 1829-1830 

"Minimum  comfort  budget" 1812-1813,1825-1826,1827,1830 

Living  wage  to  electric-railway  employees  and  to  others,  theory  of,  argued .     1889 
See  also  Cost  of  living;  Labor;  Wages. 

Standardization  of  electric-railway  equipment 400 

Stanley,  John  J.,  statement  of 589 

Statements  of  witnesses  appearing  before  the  Federal  Electric  Railways  Com- 
mission, in  order  of  appearance: 

Pardee,  John  H 62-66 

Warren,  Bentley  W 6&-67 

Tripp,  Guy  E 67-70 

Welsh,  James  W 70-135 

Clark,  William  J 135-145 

Tripp,  Guy  E 146-184 

Stuart,  H.  L : 184-199 

Hurley,  E.  N : 199-200 

Warren,  Bentley  W 200-201 

Bradlee,  Heniy  G 201-227 

Clark,  William  J 228-247 

Cooley,  Mortimer  E 247-262 

Clayton  W 262-263 


160643''— 20— VOL  3- 


19 


2342 


IND£X-DIG£SX« 


t 


Statementa  of  witnesses,  etc. — Continued.  P»e§. 

Cooley,  Mortimer  E 263-288 

Taylor,  A.  Merritt 28ft-289 

George,  William  D : 28&-314 

SisBon,  Francis  H 314-353 

Ford,  A.  H 853^64 

Tingley,  C.  L.  S 364-380 

Barrv,  JohnG 380-393 

Lambert,  M.  B 393-395 

ITeuUngs,  William  H.,  jr 395-402 

Doherty,  Henry  L 402-416 

Englund,  A.  II. 41^-420 

Thompson,  J.  S 420-421 

Smith,  George  W 421 

Storrs,  L.  S 422-466 

Nash,  L.  R 46^-471 

Culkins,  W.  C 471-498 

Draper,  Walter  A 498-513 

Pellissier,  Louis 514-519 

Hedges,  Job  E 519-537 

Bertron,  S.  R 537-553 

Newman,  J.  K 553-580 

Ferguson,  Homer  L 580-589 

SUnley,  John  J 589-608 

Shoup,  Paul 608-609 

Fagan,  Charles  A 610-626 

Head,  William  B 626-637 

Bullock,  Charles  J 637-662 

Nash,  L.  R 662-696 

Henry,  Charles  L 696-729 

Kellogg,  Charles  W 729-750 

Spra^e,  F.J 760-764 

Mortimer,  J.  D 764-790 

Foes,  Eugene  N 791-805 

Quackenbush,  James  L 817-842 

Edison,  Thomas  A 842-843 

Carr,  James  O 843-857 

Schaddellee,  Richard 857-872 

Pierce,  Henry  J , 872-875 

I)e  Berard,  Frederick 875-881 

I nsull,  Samuel 881-882 

Pardee,  John  H 882-883 

Creed,  W.  E 883-896 

Clark,  H.  C 896-918 

Jenks,  J.  W 918-926 

Rosenwald,  Julius 928 

Ryan,  John  D , 928 

Kingsley,  Darwin  P 928-929 

Douglas,  W.  L 929 

Hepburn,  A.  Barton 929 

Armour,  J.  Ogden 929-930 

For^:an,  James  B 930 

Schiff.  Jacob  H 930 

Wf^stinghouse.  H.  H 934 

McKinley.  Wm.  B j  934-937 

Jenks,  J.  W 939-941 

Conway,  Thos.,  jr 941-967 

Erickson,  Hal  ford 967-995 

Baker,  Newton  D 995-1037 

Kutz.  Chaa.  W 1037-1053 

Babson,  Roger  W 1053-1073 

Fox,  John  P 1073-1086 

Mote,  Carl  H 1086-1107 

Higgins,  Richard  T 1107-1118 

Mote,  CarlH 1118-1120 

Ingram,  F.  F 1120-1131 

Hansen,  Ole 1131-1134 


■HAiOi 


ODEX-IMJBEST. 


234a 


Statements  of  witnesses,  etc.— Continued.  nQ4_^^A 

Coiizens,  James - »•-•  JJxJ'JJS? 

Bliss,  Wm.C... .....-«. JJS?"}J?o 

Bliss,  ZenasW J}^H1?S 

Gillen,  Charles  P ^^^^02 

Wilcox.  Delos  F J202-1277 

Nixon. Lewis... ^. ...^ HIoio?n 

Burr,  Wm.P -. 1303-1319 

Fisher,  Irving .. }?l?~}?5i 

MacFarland,  G.  S i?!^^S2 

HaU,Tho6.L>.. -  1359-1377 

ConneU.A.T.... HI!i??? 

Ainey,  Wm.D.B J??t"i!l? 

Jackson.  D.C l^ltl^ll 

MacLeod,  Fred  J ..» Jf!^J!5? 

Sanders,  Fielder }!5!"if2? 

Walsh,  J.  J V^\frh 

Jack8<wi,M.  M 1481-1504 

Joye^.J JtJfitf^ 

Sidlo,  Thomas  L : J?S~J^S? 

Jackson,  Walter 15^?$?i 

Bauer,  R.  S \f3r\lf. 

Lorin^.H 1639-1661 

Beeler.  John  A JS^HSSI 

Cooke  M.L \fl-\l^^ 

Delbridge,  C.  L M^Mfo 

LaudvW.J HttHS 

Ferguson.  Carey ^' ^}™ 

Rea>m.M.... Mt'MT:. 

Stiu^is,  Arthiu- HSI"H2« 

Ogburn,Wm.F 1795-1832 

Magnusson.  Leifur 1832-1841 

JoMs  S  P  .•       1841-1877 

feVi;;;;::;:::.:-;;;.: i877-i898 

^bcock  E  V  1898-1913 

Robinson,  Charles  k .-  1913-1927 

Lauck  W  J         1927-1969 

Mortimer,  J.  D • 1970-2002 

Joyce,  C.J 2002-2008 

United  Business  Men's  Association  of  Philadelphia 2009-2010 

Jones  S  P  2012-2014 

Ja(!k8i)n,  M.  M - 2014-2035 

Bradlee,H.G 2037-2041 

Bleakley,  E.  G.  G 2042-2043 

Burr,  William  P 2043-2045 

Ogbiun,  Charlton 2046-2054 

ELtmai,J.B 205^2088 

Maltbie,  Milo  R : 2088-2105 

Bemis.E.W 2105-2124 

Purdy   Lawson 2124-2126 

Beasley,O.C 2129-2134 

Statistics: 

Abandonment  of  ekctric  railway  lines. 84-»i 

Bonds,  electric  railway  and  industrial,  yields  on ., 317 

Emp#yees  of  electric  railways 71 

Fare  increases  by  electric  railways 927, 946, 1504 

Financial  and  operating  of  electric  railways — 

Glasgow  Municipal  Tramways  compared  with  Public  Service  Railway 

Co.  of  New  Jersey —  * 1206 

Milwaukee  Electric  RkUway  &  Light  Co.,  under  commission  regula- 
tion  .' 777 

Massachusetts  electric  railways 200, 992 

New  York  Railwa>-8  Co 1309 

Riiladelphia  Rapid  Transit  Co... -• 1541 

Comparison  of.  with  Cleveland  and  Milwaukee  data 1989. 2003 

Texas  electric  railways 209, 633 

Growth  of  electric  i*ailways 70, 80 


2344 


IJS^DEX-DIGEST. 


Statistics — Continued.  p^ 

Intemrban  electric  railways ^^' 

Jitney  competition  with  I»ubHc  Service  Ry.'  bo.'of  N^w  Ji'r^C;  *.' 124^ 

Motor  vehicles ^ *ioa_^  fl'i 

Operating  of  electric  railways—  * =  ^^'^ 

Balance  sheet  for ^-„  -„„ 

Income  accounts .*  .*  * "J^'  ;^' 

Net  income 197  ifi 

Operating  expenses ^^'•"'•'^^'.'.I'.'.'.'.'.'.l'.'.'.'.]'.]'. 104  Qq« 

Operating  ratio tklt 

Operating  revenues  and  expenses a^'cq 

Operating  revenue  net.  per  mile  of  track i o^ 

Fewer,  generated  and  purchased  by  electric  railways...'*.!"*.* go'fll  qqi 

Pnces,  wholesale,  of  commodities ou,  »i,  yd  i 

Receiverships  of  electric  railways ] o«  o/i5 

Return,  rat«  of,  for  various  census  yeare loc 

Securities,  electrical  railway,  distribution  of . .  1  i^? 

Supplies  and  materials  used  by  electric  railways *  Hi " 380" 388 " 3Q^  * ^07  ii  a 

Tax^  paid  by  electric  railwa/s .^ .  '^^'  m'  119  6^9'  mq  qJS 

Traffic  of  electric  railways. ^^'  ^^^'  ^^^'     jk^l 

Wages  paid  electric  railVay  employees.....'.*.*.*.'.'.*.] iii'im'l^i'iTfis  Vmo 

See  also  topic*  mentioned  above  as  they  appear  in  the  index  '         '         '  ^^^^ 

Meam  railroad  competition  with  electric  railways.      715  887  891  S^n  insfi  inoa  iT7i» 

Stimulus  to  efficient  electric  railway  operation, ^^i  incentive.      '       '     ^^'  ^^^'  ^^^^ 

R*^^  'fH??'!''.'^^^'^*^'  ^'  Capitalization;  Finance;  Securities. 

btone  &  Webster    operating  and  other  statistics  of  electric  railway,  railway 

subsidiaries  of •^'  p-L  9^17 

Stops  made  by  electric  railway  cars,  see  Skip-stop     ' 

Storr8,L.S..  statement  of 

^*LaW°  ^^^^""^  "^"^^^^  industry,  ^frA^bi'trati'onrCoil'eVtiv^bar^kining; 

Stuart,  H.  L. ,  statement  of 

Sturgis,  A . ,  statement  of ......'.'.[ i  ;5^ 

Subsidies,  public,  to  electric  railways:     ' 

Abandonment,  to  avoid ^a  aak  aa't 

See  also  Subsidies,  unprofitable  lines .' '       '  ^^^ 

ly'^n^^^^'f^^^^^  ::;;:;:;; ^'«'  1240.  i246, 1247 

Desirability  of  should  more  effideiit  'meknVof  trins^mtion  be  foiled  * ' "    ^tlt 

Fares,  extremely  high,  to  avoid ^  655  tor 

802, 1026, 1138, 1155, 1161, 123i,'i240,'i247,*i449;i466; 

Massachusetts,  provision  for,  in,  as  an  aid  to  railways. . .  ^ *^^'  ^^^^'  fJq 

T>  .        ,  ,  689, 10o2, 1441-2,1452, 1466, 11 68^76' 1640*1  fi^l  ift<i 

Privately  owned  and  operated,  desirability  of  doubted.' 46^964;  1590'2080  2?W 
Pubhcly  owned  and  operated,  favored  to. . . . . .  .  '        '       "'  IqI" 

Relief,  as  a  n,^.,re  T:""':  "''' "'''  "^'  '^'^''^'^-''^^^i^^  f}" 
Unprofitable  lines,  eooially  desirable  to  mainfiu.'op;mi'onof ' "  '  219 

S«  aUo  Taxation,  etc.  ^'"^  ^'^'  ^'  ^"^e.  ^^o'Ml,  1654 

Substitutes  for  electric  railwaj-s 750  iioi  li*>7  iien 

See  also  Automobile;  Competition;  Gasoline;  Jitney; 'Motor' vehicle;  Nec«.  ' 
o  .  .  ^}^y.  'or  electric-railway  service;  Steam  railroads, 

buperyision,  public,  of  electric  railways,  see  Regulation.  m 

bupplies  used  by  electric  railways: 

Amount  sold  prior  to  and  during  war  period 384  ^Q^ 

■       P^fi JL  'nifT^^  •  •  •  W  -. "^'  380,  382,*  386,*  393,'  398,'4i6, 420,'  421 

Frofits  on,  prior  to  and  during  war >       .       ,       ,       ,i^v,^i 

TaSti^n^f^"""^*^'^"  °^'  ^^  ®^®^^"^'  railways  and  ite  division .*.'.'*. '.'.'. "i67,' 834, 1282 
Electric  railways — 

Di^^fonT:::::::::: '''■''^•'^■'"'•-">''^^^^^^. 


INDEX-DIGEST, 


2345 


♦ 


Taxation  of— Continued, 

Electric  railways— Continued,  ^^e®- 

Federal  Electric  Railways  Commission,  recommendations  by,  that 

unequal,  be  done  away  with,  suggested 654 

Franchise,  of 161,  470, 473, 497,  642,  650, 1182, 1186 

Heavy,  nature  of 640,649,656,884,894,008 

Income,  of  net  instead  of  gross,  favored  where  there  are  two  competing 

electric  railways  in  a  city 1052 

Kinds  of,  enumerated 638,  647 

Methods  of,  existing 61^8,  047 

New  Hampshire  law  relating  to  exemption  from 660, 883 

Principles  which  should  govern 641, 649 

Reasons  for 650,1028,1223 

Relief  from,  temporary  or  permanent- 
Discussed.... 284,  571,  651, 653,  660, 1050, 1053 

Difficulties  encountered  in  attempting 654,  721, 1223 

Favored 609,643, 

651,653,721,723,873,882,898,908,951,1053, 

1055,  1057,  1064,  1108,  1117, 1150, 1156, 1173, 
1179,  1186,  1188, 1267,  1292,  1663,  1899,  1904 

Opposed,  except  as  a  last  resort 1091 

Solution  of  present  electric-railway  situation,  not  a 153, 652, 1292 

Rhode  Island ,  system  of,  in,  discussed  and  reforms  urged 1195 

Roadbed  of,  opposed 1042 

Special,  such  as  bridge  tax,  paving  tax,  etc.,  discussed 325, 441, 

^  444,606,607,611,639,644,647,650,657,721, 

898,908,  1173,  1196,  1223,  1267,  1459,  1663 

Statistics  of ,  discussed 96,97,117,119,639,649,932 

See  also  Imposts;  Paving. 

Monopolies,  of,  favored •  -  •  •  •  •     1^^^ 

Properly  benefited  by  elwtric-railway  improvements,  of,  to  pay  for  them, 
see  Assessment. 

Public,  support  of  electric  railways,  under  public  ownership  through 794, 

798,803, 1626, 1623, 1631, 1632, 1635, 1706, 1711, 1714, 1726 

Publicly  owned  utilities :  -  -      660 

Tayler,  R.  W,,  judge  of  Federal  court  of  Cleveland,  referred  to  in  connection 

with  Cleveland  cost-of-service  franchise 1000 

Taylor,  A.  M.,  statement  of 288 

Tendency  of  electric  railways  since  1914  discussed 147 

Terre  Haute,  Ind,,  successful  results  obtained  from  use  of  one-man  cars  in. . ..     1629 
Testimony  before  Federal  Electric  Railways  Commission,  see  Statements. 

Thompson,  J.  S.,  statement  of ; 420 

Tickets,  sale  by  electric  railways  of  commutation  and  strips  of,  advocated 2042 

See  also  Fares, 

Tingley,  C.  L.  S.,  statement  of 364 

Tol^o,  Ohio,  electric-railway  situation  in,  discussed -  -  -      405 

Track,  electric-railway  in  Detroit,   disposition  of,  on  lines  whose  franchises 

haveexpired 1140,1143,1162 

Track  and  roadway,  improvement  in  type  of,  since  early  days 935 

Traffic: 

Congestion  of,  in  large  cities  a  reason  for  undesirability  of  jitney  bus  as  a 

substitute  for  electric  railway. .  ^ 1426-1427 

Electric  railway,  passenger— 

Density  of 1008,1430 

Development  of — 

Discussed 2067 

Great  Britain,  in 1204,1207,1210,1251 

Frequent  service,  as  a  means  of 1675, 2084 

Low  fares  as  a  means  of 1079-1081, 

1204, 1207, 1210, 1240, 1251, 1613, 1675, 2095, 2110 

Zone  system  01  fares,  as  a  means  of 1608 

Fares,  effect  of  changes  in,  upon 1441, 1657 

See  also  Blares. 

Load  factor 3™? 

New  York  City •. 1289,1299,1301 


a  1 


2a4e 


USDi^-lAiiH^T^ 


wl 


TrafPc— Continued. 

Electric  railway,  passenger— Continued. 

Peak-load  type  of—  Page 

Diminution  of,  possibilitiee of ». iq{ 

Expensive  to  carry ^,     ••••• ^^ 

Short'-haiUtv^  Jrfl!"^**  '^^  ^*'^  ^^'"  "^^'l^-'- "  *i679,*id86.'i68i,*i240, 1613 

Development  of  through  low  fares  and  frequent  service 1675 

Disrmwed  '2^72096,2116 

Studies  of,  as  basis  for  rerouting  of  cars,  etc " 1436  14Q7 

Regulation  of.  importance  of  proper "  885 '  l  fifiA  i  «7fi'  9ftAa 

^66  a/so  Riding  habit.  ,-»»&,  IbWJ,  1676, 2068 

Trailers,  use  of,  advocated  as  means  of  reducing  labor  cost  9ft«7 

^^^fl&oCars.  '^^'"' 

Traasfersy  electric  railway: 

Abolition  of,  recommended , o7„ 

Abuses  in  connection  with  use  of io.^a 

Charge  for-  ^^50 

Boston,  formerly  made  in f^. 

Cleveland,  with  rebate  feature  in ' * ^^^2  1011 

Fare  mcrease  favored  as  against 526"i639.'ii66.*iid5. 1279!  1287 

New  l^ork  City,  situation  with  regard  to,  in 151, 526, 819 

Philadelphia,  situation  with  regard  "to",  "in/.  .'.V 1412,*  1518,'  1542,'  1544, 1553'.  1567 

Rebates  in  connection  with mno  io?A 

Rhode  Island  Co.,  by .;: 1182 

Washington,  D.  C,  situation  with  regard  to.  in  .* Tooq 

mstoit^'of     ^'^ :::::•.:;;:  •i6(ii;ii49,i25l 

originof.:::::::::::::::::::::::::::::;;;:;:::::::;::; jss 

Zone  system  of  fares,  necessity  in  connection  with toaq 

i>ee  oho  Fa.Tcs.  

Ttansportation  areas  or  districts  as  a  means  of  public  ownerdiip  and  operation 
__.       ^   ^      of  electric  railways,  «cc  Districts. 

Tripp,  G.  E.,  statement  of o^  ,00  , ,« 

Turnover  of  labor,  see  Labor.  '  ^^^'  ^'^^ 

Trustees,  public,  operation  of  electric  railway  by,  see  Bay  State  Street  Railway 

TT  •      o.       ^;^<*ton  Elevated;  Massachusetts;  Public  operation. 

Union  street  Railway  Co..  New  Bedford.  Mass.,  ability  of.  to  operate  on  a  5-cent 

United  Business  Men'^  A^'iktion  of"  Phi"i;d"eii^'ii;  Pi.";8ti'te"m;nt'oY/. '. '. '.  .^^^'  20ol 
United  Railroads  of  ban  Francisco,  Calif.,  capitalization  of,  excessive.. .       1851  1854 

Jbef'  also  San  Francisco.  ' 

United  Railways  Co.  of  St.  Louis,  Mo.: 

Capitalization,  excessive,  of 1708,1722  1724  1728  1R4Q 

viTui  0?  ^'^  '^^'"^  ^ ^^'^^  ^^  ^ '  ^^'  1^22;  1724;  1725 

*Sf6ff/soSt  LouYs.'Mo.* ^^^^ 

United  StetesBiu^u  of  Labor  Statistics,  studies  of  cost  of  living  bv  iioa 

UnprohtaUemes  electric  railway,  puUicsupportof.toavoidab5idoiiiient.\**3^ 
-Se^  awo  Subsidies.  ^rz\f,<ni 

Valuation  of  electric  railways: 

Basis  of — 

Discussed 

Factors  involvij-"^'^^'*^^^'^^^'^^''^*^^^^^^^ 

Bonus  stock,  return  upon 000 

Depreciation,  functional nog 

Development  costs 200,  251,  253V255,'257,'266,*26i,*267,*673,  577 

±.arnin^,  improvements  and  extensions  out  of 274 

Franchises,  allowance  for cqi 

Mo  ney ,  cos  t  of -  i  i  i ! ! ! . . ! . !  .*  I ! ! ! ! !  II I  * 259 

Obsolescence,  allowance  for okk'oA^  fi7Q 

Promotion  profits iSbb,^d,873 

Historical  method ..IIIIIIIII'832,"2l65;2iil,2116 


INDEX-DIGEST. 


2347 


Valuation  of  electric  railways — Continued. 
Basis  of — Continued 

Localities,  used  in  various —  Page. 

Cleveland,  Ohio 691,1000,1459 

Kansas  City  Railways  case 190 

Lincoln,  Nebr 1368,1371 

Massachusetts 660,2060 

Milwaukee,  Wis 765,766,815 

Minneapolis,  Minn 1867 

New  York,  N.  Y 833,1304,1318 

Omaha,  Nebr 1369 

Pittsburgh,  Pa 1903 

Public  Ser\dce  Railway  Co.  of  New  Jersey 1200, 1215, 1219 

Reproduction  method  of 255, 573,  577, 815, 1516, 2105, 2111, 2116 

Capitalization,  relation  of ,  to 333, 1504, 1858, 1861-1862, 2012 

Conservative,  would  wipe  out  marginal  interest  now  in  control 1219 

Control  of  process  of ,  State  versus  local 806,1009,1227,1240 

Cost  of  service,  in  connection  with 468, 486, 665, 1094, 1469, 1913, 2103 

Delays  incident  to 407 

Discussed 161,249,252 

Excessive,  claims  of 1692,1694,2089,2105,2108 

Factors  involved,  see  Valuation,  basis  of. 

Fare  changes,  necessitv  of  determination  of  value  as  a  basis  of 407-408, 

849,  864, 1086, 1098, 1105, 1110, 1111, 1401 
Interstate  Commerce  Commission,  principles  adopted  by,  in  the  Texas- 
Midland  case,  applicability  of,  to  electric  railways.. .  1264, 2119, 2121 
Methods  of,  see  Valuation,  basis  of. 

Money,  effect  of  depreciated  purchasing  power  of,  on  value 271 

Necessity  of  and  importance  of  a  fair,  pointed  out.- 222, 

539,  541,  781,  898,  903,  1009,  1218,  1282,  1286,  1291, 
1306, 1318, 1374, 1401,  1483,  1492,  1506, 1586, 1910,  2111 
Principles  of,  see  Valuation,  basis  of. 

Public  ownership,  importance  of  a  fair  value  as  basis  of 2111 

Purchase  of  electric  railwavs  by  public,  relation  of,  to. .  181, 1248-1249, 1264, 1714 

*'Scra^  value" 230 

Shifting  of  value  through  change  in  r^ulatory  commission  personnel 

criticized 773 

SeeaUo  Capitalization;  Regulation. 
Wages  paid  to  labor  in  electric-railway  industry: 

Ability  of  electric-railway  companies  to  pay  not  considered  a  determining 

factor  in  establishing  rates  of 1930, 1952, 1955 

Adjustment  of,  methods  used  in — 

Cleveland,  Ohio 1761, 1765 

Philadelphia,  Pa 1394, 1396, 1524, 1552, 1574 

Analysis  of  cost  of  olectric-railway  operation  and  cost  of  living  as  related  to .     1768 

Capitalization,  excessive,  of  electric  railways,  relation  between  and 1871, 1886 

Cost  of  operation,  wages  of  trainmen  not  a  determining  factor  in 1787, 

1882, 1885, 1952 

Factors  affecting T 786, 1930 

Great  Britain,  rates  of,  paid  electric-railway  labor  in,  as  compared  witJi 

prevailing  rates  in  United  States 1211 

High  rates  of,  in  other  industries  than  electric-railway  industry,  effect  of 

upon  prices 928 

Increase  in — 

Cause  of  present  electric-railway  difficulties 1175, 1181, 1186, 1192, 1194 

Comparison  with  increases  in  cost  of  li\ing 1194, 1768, 1790-1791 

Demands  for,  made  by  electric-railway  trainmen  in  1919 1504 

Discussed 104,105,107,269,935,944,945 

Effect  of,  on — 

Labor  cost  of  electric  railways 1782 

Net  income  of  electric  railways 1784 

Granted  in  Indiana  from  results  of  increased  fares 1091, 1097, 1101 

Occupational  groups  in  United  States  which  have  had  a  100  per  cent 

increase  since  1914 1837 

Recent  numerous  increases  denied 1838 

Smallness  of,  claimed 1787, 1788, 1834, 1^37 

Indiana,  lower  rates  of,  in,  than  elsewhere 1097, 1101, 1104 


Il^ 


2348 


INDEX-DIGEST. 


Wages  paid  to  labor  in  electric-railway  industry— Continued. 

Living  wage—  Page. 

Effects,  possible,  of  adoption  of  theory  of,  by  electric  railways....  1052, 1953 

Efficiency  of  labor,  possible  incJ-eased,  reeulting  from 1933 

Fluctuation  of,  with  cost  of  living,  desirability  of ['    1930 

Inadequacy  of  past  and  present  wage  rates 1826,1*836, 1888, 1891 

Lrged  for  adoption  on  electric  railways 1889-1890 

,^  ,     .  1896, 1928-1929, 1930, 1933*  1961-1952, 1955 

Whatconstatutes..  1827,1892,1893,1929,1947 

See  also  Standard  of  living. 

Minimum  wage,  see  Standard  of  living;  Wages,  living. 

National  War  Labor  Board,  awards  of,  increasing  rates  of  wages  in  electric- 
railway  industry  discussed Ill  152 

,,  -,  ,  ^.,  ,  ,  ,.  318, 613, 944-945, 1188, 1512, 1746, 1792,' 1889 
g ew  York  Citv,  lower  scale  of,  m ,  as  compared  with  other  cities  explained . .  1302 
Rates  of,  paid  by  electric  railways m  1193 

^       ,  ,.       ,,    ^  1504, 1541, 1832, 1834, 1835, 1837, lM8Vl950>003, 2007 

Kegulation  of,  by  State  commissions  favored 625, 1181, 1186, 1372, 1462 

Welsh,  John  J.,  statement  of 1465 

Warren,  B.  W. ,  statement  of 55  20O 

Washington,  State  of,  «e€  Seattle.  ' 

Washin^n,  D.  C: 

Capital  Traction  Co. ,  krituation  with  regard  to 1037, 1679  2012 

Electric-railway  situation  in 1037, 1679,'  1680 

Transfers,  charge  for,  in 1033, 1039 

Washington  Railway  &  Electric  Co.,  situation  with  regard  to. . . ..... '  1037 

Zone  system  of  fares,  unpopularity  of  proposal  to  establish  in . . .  1039, 1042, 1051 
Water  power  development,  see  ilydroelectric  development. 
"Watered  '  stock,  see  Capitalization. 
Welfare  work  done  by  Cooperative  Welfare  Association  of  Philadelphia  Rapid 

Transit  Co 1522  1558 

Welsh,  James  W.,  statement  of '..'.....'..,.,  '     69 

Westinghouse,  H.  H.,  statement  of .'...'.'.'.'.'.'.'.'.'.'.'.      934 

Westinghouse  Electric  &  Manufacturing  Co.,  increase  in  prices  of  electric 

railway  supplies  sold  by 393 

Wilcox,  Delos  F.,  statement  of !!!!!!!!!!!!!     1202 

Wilkiiisburg  case,  decision  of  Pennsylvania  Public  Service  Commission  in . . '. '.  1392 
Wilmington  &  Philadelphia  Traction  Co.,  Delaware,  situation  with  regard  to..  367 
Wisconsin : 

Industrial  disputes  in  public  utility  field ,  method  of  settling  adopted  in 2000 

Municipal-guaranty  law  of 7g2 

Regulation  of  electric  railways  in !!!ii!  765 

See  also  Milwaukee,  Wis. 
Working  conditions  of  labor  in  electric  railway  industrj': 

Arduousness  of  without  corresponding  compensation  claimed 1734, 

Cleveland,  Ohio,  of  electric  railway  trainmen  in — 

Extra  men,  condition  of 1752, 1754 

Hours  of  labor  and  compensation  therefor 1749,'  1753 

Schedules,  control  of,  by  street  railway  commissioner  and  difficulties 

therefrom 1757, 1760, 1763, 1765 

Detroit,  Mich.,  of  electric-railway  trainmen  in,  hours  of  labor  and  com- 
pensation therefor 1735, 1739, 1743, 1745, 1746 

Eight-hour  day,  demand  for,  on  part  of  electric  railway  trainmen,  etc 954, 

1739^  1775, 1776, 1897, 1936 
Philadelphia  Rapid  Transit  Co.,  hours  of  labor  of  electric  railway  trainmen 

employed  by,  as  compared  with  Detroit  conditions 2003 

See  also  Labor;  Wages^  etc. 
Zone  svstem  of  electric-railway  fares: 

Collection  of  fares  under,  see  Collection  of  fares. 

Discussed 324,347,404,456,1109,1183 

Effect  of  on — 

Industry,  tendency  to  decentralize 1183, 1300, 1911 

Population,  distribution  of,  see  Zone  system,  population. 

Revenues,  means  of  increasing 1109,1600 


INDEX-DIGEST. 

Zone  system  of  electric-railway  fares— Continued. 
Experience  with,  in  various  localitiea 


2349 


Page. 


Australia 1601 

Bay  State  Street  Railway  Co.,  Mass 1649 

Cincinnati,  Ohio,  considered  for 496 

Great  Britain 809,1205,1251,1601 

Massachusetts 1440, 1649, 2062,  2088 

Milwaukee,  Wis 766 

New  York  City,  considered  for 1287, 1294, 1297, 1299 

Pittsburgh,  Pa 289,  617, 1908 

Portland,  Me 355 

Public  Service  Railway  Co.  of  N.  J.. . .  1119, 1198, 1252, 1608, 1619, 2042,  2043 

Rhode  Island  Co.,  Rhode  Island 1174, 1176, 1181, 1182 

Springfield,  Mass 1440 

Fares,  rates  of,  under — 

Basis  of... 1396 

Increase  in  through  shortening  lensth  of  zones 515, 517, 873, 875 

Increased,  in  Great  Britain ,  experience  with 809 

Low  initial  rates  of,  advisability  of 1119, 

1198, 1205, 1240, 1251-2, 1431, 1601, 1608, 1612, 1619, 2043 

Suburban  territorjs  in 785,1602,1683 

Favored,  though  with  some  qualifications 159, 

282,  320,  323,  574,  609,  755,  764,  816,  936,  961-2,  1025, 
1031, 1035, 1C42, 1051, 1072, 1100, 1102, 1160, 1240, 1241, 1287, 
1288, 1294, 1297, 1299, 1404, 1431, 1612, 1618, 1682,  2074, 2075 

Mileage  system  of  fares  probably  not  desirable  for  American  cities 1431, 1432 

One-man  cars,  use  of,  in  connection  with.    See  One-man  cars. 

Objections  to 231,301,310,325,456, 

617, 1025, 1035, 1072, 1100, 1102, 1432, 1467, 1479, 1627, 1908,  2042 
Population,  congestion  of,  resulting  from  introduction  and  use  of — 

Claimed 232,  301, 310, 311, 325, 456, 1025, 1035, 1100, 1467, 1479, 1627 

Denied. 459,  785, 1160, 1206, 1433, 1601 

Public  attitude  toward 168,1039,1042,1051 

Real  estate  values,  effect  upon,  of 1603 

Revenues,  increase  in,  as  result  of  adoption  of 1109, 1600 

Solution  of  present  electric  railway  problem,  a  means  of 282,  962, 1682 

Success  of,  prerequisites  to . . 1607 

Transfers,  use  of,  in  connection  with 1249 

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